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FY15 Tatts Group Annual Report

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FY15 Tatts Group Annual Report THRILLS TATTS GROUP LIMITED ANNUAL REPORT 2015 ABN 19 108 686 040 15 Contents 6 CHAIRMAN’S LETTER The thrill is what drives us. 10 MANAGING DIRECTOR’S REPORT 28 SUSTAINABILITY REPORT 34 BOARD OF DIRECTORS In FY15 our business renewal has 38 EXECUTIVE TEAM 42 TRACK RECORD stepped up a gear, delivering a 43 DIRECTORS’ REPORT transformative approach to digital, 65 ANNUAL FINANCIAL REPORT innovative new brands such as UBET and game-changing technology. We are innovating the way we do business to bring thrills that benefit our customers, our shareholders and our teams. This year we’ve highlighted 15 of FY15’s ‘thrills’, each one taking us a step closer to becoming the world’s best gambling group. TATTS GROUP ANNUAL REPORT 2015 1 Thrill #1 REVENUE UP 1.8% TO SURGE IN PROFITS $ Despite fierce competition, fewer lottery jackpots, and an ongoing business renewal program, Tatts Group achieved a 25.7% surge in statutory profit after tax. 2.92 BILLION NPAT (CONTINUING OPERATIONS) UP12.9% 12.9% TO TO EBITDA UP 1.8% $ M TO $507.4 255.8 MILLION NPAT (STATUTORY) UP 25.7% UP 25.7% TO EBIT UP 1.4% TO $252.0 $420.3M MILLION RECORD RESULTS FOR LOTTERIES, MAXGAMING & TALARIUS LIVE RACING Thrill #2 Thrill #3 VISION LEAGUE OF UNLEASHING BEST LEGENDS EXPERT NEWS IN CLASS AND VIEWS UBET UBET APP FAST AND INTUITIVE We launched UBET on 30 April 2015, our exciting DIGITAL new assault on retail and digital wagering, placing the customer in the driver’s seat. As the largest non-casino gambling business in Australia, we are determined to become the market leader in the wagering space. Thrill #4 TRANSFORMING WAGERING TECHNOLOGY UBET+ rewards customers in cash, based on their spend with us across retail, digital, and phone. A class-leading loyalty program to connect with our customers, in an environment where brand loyalty is rare. Thrill #5 REINVIGORATING Our new UBET stores are a dramatic change from the old TAB, bringing to life the concept billed as ‘your home arena’. We can now offer a RETAIL true omni-channel wagering experience, with the seamless convergence of digital, retail and telephone betting in the WAGERING new stores and on-course. The 2015 financial year has been a very OPERATIONAL PERFORMANCE successful year. We produced a strong At a Group level, we achieved revenue financial result with net profit after tax growth of 1.8% to $2.92 billion, despite lifting 25.7% (12.9% on a continuing the challenge posed by an extremely operations basis). competitive wagering environment as This strong outcome was achieved while well as fewer lottery jackpots reaching maintaining our investment and focus on the influential $15 million or more level. the business renewal program we began This revenue growth, combined with some two years ago. prudent cost control, saw us deliver In looking back over the year, it is worth improved operating margins across remarking on a number of significant our portfolio of businesses, resulting in operational achievements: the strong increases in net profit after tax previously mentioned, and a 23.4% • The digital and online initiatives we increase in earnings per share. have implemented are performing exceedingly well, gaining significant INCREASED RETURNS momentum in the year. Our online TO SHAREHOLDERS sales for wagering were up by 12.5%, and lotteries were up by 20.9%. Consistent with the increased net profit and earnings per share, and our • Our Wagering operation successfully commitment to high dividend payout launched the UBET brand—now live ratios, your Board has determined a final in-market, and the repositioning of dividend of 7.5 cents per share (last year the business is in full swing. While still 5.5 cents). early days, we have seen some very positive signs from the new branding This takes the total dividend paid for and retailing initiatives implemented the 2015 financial year to 16.5 cents per thus far. share, an increase of 22.2% over 2014. This represents a 95.1% payout of our • Our Lotteries team was focused on statutory profits, and is the ninth year1 new product innovation, with Lucky LETTER since listing in 2005 that the dividend Lotteries launched in Queensland, payout ratio has exceeded 90%. Victoria, Tasmania and the Northern Territory, while the new Set for Life game achieved regulatory clearance. CHAIRMAN’S We are excited about the potential for Set for Life, which launched on 3 August 2015, our first new draw lottery game since 1996. The Managing Director’s report on page 10, discusses these highlights in more detail. 1. On a continuing operations basis. 6 TATTS GROUP ANNUAL REPORT 2015 7 PEOPLE We have also continued to make LOOKING FORWARD significant charitable contributions The business renewal program we Following the launch of UBET on to a range of programs, with these commenced in FY13 was designed 30 April 2015, our wagering strategy contributions covered in greater detail CHAIRMAN’S LETTER to challenge and update some of in FY16 has four key elements: in our Sustainability Report on page 28. our accepted ways of operating to • focus on building the new better position all our businesses for In FY15 we paid a total of $1.32 billion brand nationally; future success. to state governments (excluding corporate taxes) and industry partners • refurbish and renew our retail footprint; As expected, this resulted in some in the form of lottery taxes, wagering significant changes in business processes • continually improve our digital offerings; taxes, wagering product fees and and focus, as well as adjustments to team race information fees, with the most • continually innovate our products structures and personnel. Change can significant of these contributions being: and technology. sometimes be a difficult and emotional • Queensland $367.1 million issue, and I would like to acknowledge 2 the positive way the entire Tatts team • New South Wales $327.1 million has embraced the changes made. • Victoria $387.3 million THIS IS THE NINTH YEAR Through this renewal program, which is We continue to monitor our ongoing, we have already achieved an environmental impact, and although SINCE LISTING THAT THE extraordinary amount of success in a we will always have a low carbon short period of time, and this, once again, emissions footprint due to the nature DIVIDEND PAYOUT RATIO is credit to the outstanding efforts of the of our businesses, we have made further dedicated and engaged team at Tatts. positive strides in FY15 to decrease HAS EXCEEDED 90%. this small footprint even further. In discussing our team, I am pleased to report on the success achieved Again, more detailed reporting on our Our renewal activities will accelerate in so far under our diversity program. environmental impact is provided in FY16 to focus in on lotteries, with: our Sustainability Report on page 28. We have implemented a number of • the launch of a new website and apps; specific programs that aim to place POKIES COMPENSATION • the refresh of our lotteries’ retail image; and the best possible talent in roles as they LITIGATION • the development of a network-wide, omni- become available, and have focused channel customer experience. on removing any impediments to the The legal action to enforce our We will also continue to actively seek TOTAL SHAREHOLDER RETURN ‘best and brightest’ applying for these contractual rights following the expiry of out acquisition opportunities that FOR FY15 FROM A COMBINATION roles, irrespective of gender. I am happy our Victorian gaming operator’s licence offer our business a step-up in scale, to report that, under this approach, we in FY13 continues. After successfully OF DIVIDENDS AND SHARE PRICE geography and/or product range have seen the representation of women defending the appeal by the State of within the wagering, lottery and/or GROWTH WAS 20.7%. in our senior leadership team lift to Victoria to the Victorian Supreme 1 gaming domains. Our approach remains now make up 50% of this important Court in FY14, the High Court of disciplined, with a strategic focus management group (vs last year: 27%). Australia granted the State special leave on only those opportunities that will to appeal that decision. There can be no We are continuing our dividend SUSTAINABILITY deliver commercially attractive returns, certainty when that appeal will be heard, reinvestment plan (DRP) this year. With and which are capable of seamless Tatts has a well-developed sustainability but we are hopeful that this matter will the strength of our balance sheet and integration, or which will benefit from program and vision, which we have be finally concluded during the current overall financial position, your Board has our proven operational capabilities. refined over the 100+ years we have financial year. decided to discontinue the 1.5% discount operated. It recognises that our licences Your Directors and I look forward to previously offered with the DRP. If we are ultimately successful, your and authorities to operate are privileges welcoming you to the Tatts Group Board will consider appropriate capital Total Shareholder Return (TSR) for granted by governments, and proudly Annual General Meeting on Friday, management options in the best FY15 from a combination of dividends highlights our significant contributions 30 October 2015 at the iconic Brisbane interests of shareholders. Meanwhile, and share price growth was 20.7%. to both the communities in which we City Hall, and, as always, if you are although the compensation of $451.2 This performance again outpaces the operate and to the industry partners unable to join us on the day, you can million, plus interest of $89.3 million, has broader ASX200, which achieved a upon whom we rely. listen to the proceedings online at been received from the State of Victoria, TSR of 7.8% over the same period.
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