The nice way to gamble
1H23 RESULT
Need To Know
- EBITDA $409.4m ahead of market $378m
- Lotteries and Keno immune to COVID-19
- Interim dividend 8cps plus 1cps special, payment 23 March. Payout ratio increased
The Lottery Corporation has proven to be immune to COVID-19 as turnover and revenue continued to grow throughout the last few years. Earnings surprised the market so the sheen may return to gambling’s least vilified platform.
Result. 1H23 revenue $1,920m +7.7% on last year and ahead of consensus at $1,861m. Lotteries revenue growth was +6.5% with good performance from Powerball and contributions from Instant Scratch-its and Lucky Lotteries.
Lotteries year-on-year revenue trends have been volatile so far in 2H23 due to high draw comparables in Powerball from last year. These trends usually normalise in time.
Consensus EBITDA for FY23 is approximately $730m.
Lotteries digital penetration has been stable at 38% even though digital sales have been going up. There has been a big increase in the number of active registered customers to just over 4.3m in a total customer base of 8.5m.
TLC has increased its dividend payout ratio policy to 80-100% of full year net profit (was 70-90%) and has introduced a dividend reinvestment plan.
Target leverage range is now 3.0-4.0x (was 3.5-4.0x). Leverage (net debt to EBITDA) at 31 December 2022 was 2.6x.
Investment View
Low key is how TLC likes to operate, although its products are anything but when a jackpot is accumulating. This is a well-oiled machine with great margins and dependable revenue growth over time.
Lotteries does not attract the same regulatory scrutiny as other forms of gambling and yet it pays substantial fees and commissions. The business is capex-light and very defensive as demonstrated by its steady performance over the last few years.
A higher payout ratio and a capital management framework indicates the Board is keen to reward shareholders.
Figure 1: 1H23 RESULT
Stock Overview
Share Price
Company Overview
TLC is Australia’s largest operator of Lottery and Keno games with over 740 employees. Lottery operations fall under ‘The Lott’ umbrella brand, spanning all states except WA. TLC has an exclusive retail lottery distribution network of 3,863 outlets.
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