Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased by 13.8% to nearly $4 billion, showcasing strong financial performance.
- Active registered customer numbers grew by 500,000, reaching 4.75 million.
- Significant increase in jackpot game turnover by 26.7%, demonstrating the strength of the lottery business.
- Retail turnover grew by 6.6%, indicating robust performance in physical sales channels.
- Declared a special dividend of $0.025 per share in addition to a full-year ordinary dividend of $0.16 per share, reflecting strong shareholder returns.
Negative Points
- Base games experienced a decline of 2% to 4% on a like-for-like basis, indicating some areas of weakness.
- Group OpEx increased by $29 million, driven by separation costs and rising employment expenses.
- Depreciation and amortization rose by 10%, primarily due to separation spend.
- Keno online turnover decreased by 2.4%, impacted by online competition in Victoria.
- Inflation pressures, particularly in technology costs, are expected to continue affecting the cost base.
Q & A Highlights
Q: My first question was just on the OpEx. So we understand that there's guidance of an incremental $12 million from the incremental separation costs. We then right to then assume some further underlying inflation? I'm guessing 3% to 4% on top of that, or do you think you can offset it with any cost saves please?
A: Hi, Adrian, it's Adam here. You're correct. I'd take out [$300 million] that we had for this year that the final step-up, which is the run rate impact of that finalization of separation and then take some inflation from there. I did point out that 50% of our costs are people, and we have a 4% pay increase for FY25.
Q: And my second question was about the Saturday lotto. I just understand it might be early days, but are you able to give any further detail on what these game changes will be and when we might see them implemented, please?
A: Sure. Likely to involve a price increase and potentially some change to division one, unlikely to involve a change to the matrix of the game. But as you say, still early days. And we're still exploring the nature of that change on it and looking at the timing of implementation.
Q: Just a question on the strategy. On slide 23, you talked to new rate revenue segments. Can you give us a bit of a sense of your appetite here? Is that around digital instance or other gaming adjacencies?
A: Thanks, Bradley. I'll answer that. In the first, instance, we will unpack all of that further at Investor Day as I said, but digital instance are banned in Australia under the Interactive Gambling Act. So it's definitely not something that we're looking at. Really is more around other opportunities for revenue growth. It could be other types of products. I'm really not speculating on what it is. I think importantly, as we've always said, we are focused on our business and driving the performance of our domestic business in Australia whilst we look for other potential opportunities for earnings.
Q: And just one more if I can. Maybe one for Adam, on the cash conversion. Looked a little bit lower versus FY23. Can you give us a bit of a breakdown as to what's driving that?
A: Yeah. Hi, Bradley. This is a very cash generative business, effectively cash conversion ebbs and flows a little bit. And it's driven by the timing and the size of draws as you approach the reporting periods in particular being December and June and then what happened in the prior reporting period as well. We've got a large jackpot in the last couple of weeks of a month with the reporting period. You do get a buildup of payables and government taxes associated with that and they unwind in the next period. Then, of course, if you roll forward to the next year. And if you haven't got a simpler jackpot coming up, that affects your cash conversion. We typically work off the fact that in any given year cash conversion is going to be close to 100%.
Q: Can we maybe understand whether there's going to be anything material to Set for Life or Powerball? I mean, I recall that big Powerball change we saw maybe four or five years ago. I'm just trying to understand what kind of innovation we could see over that the next three years, if possible.
A: Hi, David. We've obviously indicated that we're doing Saturday next. And as we've spoken about before, we're constantly looking at the portfolio of products and addressing a change in a game within the portfolio where we think it's going to have the best results and in responding to whatever is happening in the portfolio at the time. In Powerball, that change has been an incredible success. It's still delivering. It just delivered a one in seven year event with the $200 million. So we're saying that Set for Life and Powerball would like -- Set for Life or Powerball would likely be the next game that we would look at after Saturday. But I really can't give you any flavor for what that would be. All of these changes, we do extensive research on them before we decide on what the actual change will be and certainly before we implemented as well. So we've got a long way to go yet before we are able to make any -- and be able to provide any further detail information on those changes.
Q: Just thinking about leverage and cut management. Obviously, you sitting below the target range currently. I mean, I guess we can expect the odd special dividend dependent on jackpot activity. But is there any consideration to move the dividend policy to adjust the cash earnings. So you've got that $35 million of noncash license amortization Agios, is there consideration to move to a [COVID NPAT] payout ratio?
A: Hi, David. Adam here. We're constantly evolving and looking at a framework that I talked about before, and nothing's off the table. But at the moment, that's not a consideration. I think the first port of call that we'll get through is the Victorian license and when that renewal may arise. And that will kind of shake out whether there'll be any further changes with regards to the dividend framework that we've currently got at the moment.
Q: So just wanted to you to begin with -- I take on board your comments earlier around the federal government's review into the offshore lottery providers in online casino. But how would you describe the response that you've seen thus far? Is it pleasing? Is that in line with what you were hoping to see from the government initially?
A: We welcome that review by the federal government, including the review into online Keno. We acknowledge that online Keno, in particular, has a higher risk profile, certainly, than lotteries, which has a very low home profile. And I think if the government's going to review the industry and the impact on Australians from the gambling industry, then it makes sense that for unmatched lottery products is included in that. So we welcome the review. We will obviously be making a submission and cooperate with government and discussions.
Q: And one for Adam. Adam, I take on board your comments around the 4% increase in labor cost (inaudible). On the other portion of your cost, the other 50%, how would you describe the inflation pressures at present?
A: This is probably a little bit more than your typical run-of-the-mill inflation in technology costs. And other than that, I think wage inflation and inflation for the other parts of the cost base are probably running in a similar line.
Q: My earlier question’s been answered, but just to clarify. And then in your prepared remarks, you said that there was a $250 million benefit from the above trend jackpot, but in the written materials, it's saying $500 million
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
