Tabcorp Holdings Limited (TAH) Earnings Call Transcript & Summary

Good morning, everybody. My name is Bruce Akhurst and I'm the Executive Chairman of Tabcorp Holdings Limited. And on behalf of my fellow directors, I welcome you to Tabcorp's 2024 Annual General Meeting. We're very pleased to be holding this year's AGM here in Sydney. New South Wales is an important part of our business and almost 1/3 of our shareholders are based here. On behalf of the company, I acknowledge the Gadigal people of the Eora Nation, the traditional custodians on the land on which we meet today, and I pay my respects to their Elders, past and present. I also acknowledge the traditional custodians of the land on which each attendee of today's meeting is situated, and pay my respects to their Elders, past and present. I've been informed that a quorum of shareholders is present, and so I declare the 2024 AGM open. I'd like to begin by introducing our Board of Directors. Joining us today on stage are my fellow directors, Karen Stocks, Justin Milne, Janette Kendall, Raelene Murphy, Brett Chenoweth and David Gallop. Also on stage is our Managing Director and Chief Executive Officer Elect, Gillon McLachlan and Company Secretary, Chris Murphy. In the audience, are members of our executive leadership team; and Michael Collins, the Lead Audit Partner at our external audit firm, Ernst & Young. Before we move to the formal business of the meeting, I'd like to outline some procedural and technical matters for the conduct of today's meeting. We're holding this meeting in person and also using an online meeting platform. In both cases, shareholders can watch the presentation, ask questions and vote during the meeting. We published our notice of meeting on our website and the ASX and there's an online meeting guide on our website. We've also published the formal speeches and presentations to be delivered today, and a recording of this meeting will be available on Tabcorp's website after the meeting. Voting on all resolutions today will be conducted via a poll, and I appoint Daniel Reid of Tabcorp share registry Link Market Services as a returning officer for the conduct of the poll. Shareholders and proxy holders who are present in the room and entitled to vote would have received a yellow admission card, which sets out the resolutions and acts as your ballot paper. You may record your vote by placing a mark in the box either For or Against the resolution. The shareholders using the online meeting platform, you can vote by using the get a voting card button and follow the instructions. I now declare the poll open for all resolutions so you may commence voting. Votes may be cast at any time during the meeting, and you may change your votes at any time until the poll is closed. And I intend to close the poll approximately 5 minutes after the conclusion of the meeting. Details of the proxies received prior to the meeting on each resolution will be shown in the presentation slides after the discussion of that item. I am holding open proxies in my capacity as Chair of the meeting, and I intend to vote all available proxies in favor of Resolutions 2, 3 and 4 and against the Spill Meeting resolution if it proceeds. The final results of the poll will be lodged with the ASX as soon as possible after the meeting. Only eligible shareholders and proxy holders can ask questions and vote at the AGM. There will be an opportunity to ask questions regarding each agenda item during the meeting. For those present in the room today, any questions you may have should be directed to me by going to the nearest microphone. Please give your name to our microphone attendant who will introduce you when I call for your question, and you may then ask a question. If you have more than one question, please ask all of your questions and then resume your seat. If you were using the online meeting platform, then you can submit questions by clicking the "Ask a question" button and following the instructions. Questions can be submitted online now. and you don't need to wait until a particular agenda item to ask your question. We arranged for a telephone line to be available today to enable shareholders attending online to ask verbal questions. And I'm informed by Chris that no shareholders have opted to use that option. After introducing each resolution, I'll respond the questions already received relevant to that resolution. And then I'll ask for any questions from those present in the room and then any received through the online meeting platform. May I please ask, could you limit the number of questions being asked and keep your questions as brief and to the point as possible and relevant to the resolutions. If you have questions not related to the items of business, then please speak to the company's Secretary, Chris, after today's meeting. For any technical assistance while using the online platform, please refer to the online meeting guide on our website or phone the share registry on the number shown at the top of the screen. So I'd like to now formally address the meeting. Tabcorp continued its transformation at pace in FY '24. We were awarded the new exclusive Victorian Wagering and Betting license, securing the company's future in the State next 20 years. We increased our speed to market, placing more new digital wagering products than our competitors, improving our digital competitiveness and leading to Tabcorp outperforming our biggest competitor at a turnover and revenue level. We upgraded 31 high-performing TAB retail venues across New South Wales, Victoria and Queensland with an immediate response from customers with these venues outperforming other venues in our network. We continued our progress on transforming the company into a simpler, leaner organization through our Genesis program, delivering $25 million in savings before tax during the year. We successfully transitioned our Gaming Services business, into a high integrity services company and commenced operations under the new Tasmanian monitoring license from the first of July 2023. And we announced the appointment of Gillon McLachlan, one of Australia's leading Chief Executives as Tabcorp's new Managing Director and Chief Executive Officer to lead the company into the execution phase of our growth journey. The foundations laid during the demerger 2 years ago have created a strong platform for Tabcorp to grow in the years ahead as the market returns to growth. Our investments and strategic decisions over this period have all been about setting the company up to unlock value for shareholders in the medium and long term. These decisions will ensure that Tabcorp of tomorrow is even stronger than the Tabcorp of today. Turning now to our financial performance for the year. Our overall financial results were impacted by a softer wagering market and trading environment due to continued inflationary pressures and sustained higher interest rates as well as a tightening regulatory environment. The group recorded revenue of $2.34 billion, down 3.9% on the prior year, primarily reflecting the softer wagering market conditions and the sale of eBET and the MAX Performance Solutions in Gaming Services. Group EBITDA before significant items was $317.7 million, down 18.7% on the prior year. Pleasingly, Wagering turnover and net revenue performed well relative to our major competitors, driven by improved digital competitiveness and a unique omni-channel offer. Digital Wagering revenue was down 2.2% over the year and flat in the second half. Cash Wagering revenue increased by 5.3% in the second half of the year, outperforming the Digital Market and highlighting the value in our Retail business, particularly as people return to pubs and clubs post COVID and in a higher inflationary environment that makes more cost effective entertainment appealing. The Group reported a net loss after tax of $1.36 billion after incurring non-cash impairment charges totaling $1.38 billion after tax relating to our Wagering business and other significant items totaling $11.3 million after tax. The impairment of the full year related predominantly to our New South Wales and South Australian wagering assets, highlighting the urgent need for structural reform and a level playing field in those states for which we continue to strongly advocate. Despite a softer trading environment, we remain committed to delivering sustainable returns for shareholders and announced an unfranked final dividend of $0.03 per share with dividends payable for the full year totaling $0.13 per share partially franked. This represents a payout ratio of 93% of net profit after tax before significant items and equity accounted loss. The unfranked nature of the final dividend reflects the material impact of $126 million of tax refunds received during the year following the settlement and finalization of several tax matters with the Australian Tax Office. In the near term, the Group is unlikely to be in a position to frank dividends. As I mentioned, in December, we were successfully awarded the new exclusive 20-year Victorian Wagering and Betting License. This contemporary license is a prototype for the future and better reflects the changed wagering ecosystem operate in. It creates a level playing field in Victoria for wagering taxes and fees and includes no joint venture obligations with the Victorian Racing Industry. This frees our company up to be more strategic in our investments within the state. The new license will ensure retail exclusivity and provides a step change in the scale and quality of the Group's earnings. Indicatively, based on the FY '24 operating environment, group EBITDA would have been $115 million higher on a full year pro-forma basis had the new terms of the license been in operation. The Victorian Government's decision to award the new license to Tabcorp is a vote of confidence in our ability to provide a safe, enjoyable and innovative environment experience for Victorian customers while ensuring the long-term sustainability of the State's racing industry. Winning the Victorian license also continued our strong momentum in achieving structural reform across the country. We now have level playing fields in Victoria, Queensland, Tasmania and the ACT while we're participating in a review process by the New South Wales Government to consider reforms in the wagering tax regime and industry funding model in New South Wales. If implemented, these changes could enable Tabcorp to finally compete on a level playing field with foreign owned competitors who are licensed only in the Northern Territory. So, to our core Wagering business. TAB's digital competitiveness continues to improve. We released more digital products and features for customers than our competitors during the year, and we've just released our 22nd update to the new TAB App since it was launched in the spring of 2022. Our speed to market is faster than it has ever been. And we've closed product gaps to our competitors, and we're now leading in some areas with our innovative product offering. That's a marked change on the Tabcorp a few years ago. What's most important is that customers are responding to our new offering. Our performance compared to that of our competitors highlights that customers are responding to our new TAB app, products and features. TAB has an unrivaled retail network, which remains a core part of our business. As I mentioned earlier, our Retail offering is being revitalized through upgrades to selected Next-Gen venues to drive performance and leverage the potential of our unique integrated wagering ecosystem. Our TAB Retail business performed strongly during the year, driven by these upgrades, along with effective in venue offers, including Sky Racing making TAB offers available on screen and greater socialization in pubs and clubs. This highlights the value in winning licenses like Victoria. To experience growth in cash wagering in a softer economic environment is a testament to our improved retail offering. And I'd like to call out a few stats in the Retail area. In our Next-Gen venues, turnover was 19% higher than average. Cash turnover was 18% higher, and digital in-venue actives increased 12% on a rolling 12-month basis. Now that we can see the upgrades to venues are working, we'll continue our focus on rejuvenating the retail network. During the year, we completed the transition of Gaming Services to integrity Services with the sale of the MPS business and the new Tasmanian Electronic Gaming Machine Monitoring License Commencement. This is now a focused high-quality Integrity Services business with attractive economics and a strong reputation with governments and regulators. We see significant value and opportunity in this business providing regulatory technology to governments as the regulatory environment continues to evolve. While we're moving at pace to execute on our transformation to unlock value for our shareholders, nothing we do will be at the expense of the safety of our customers. The long-term sustainability of our business and our industry is heavily relied on the way we care for our customers and our community. This is why our commitment to being an industry leader in customer and community care is so important. We demonstrate this commitment by aiming to put our customers first in everything we do and advocating for a well-regulated and responsible industry. During the year, we launched our new Safer Gambling Strategy underpinned by our Player Safety Promise. Our new strategy aims to elevate safer gambling within our organization and ensure that caring for our customers is at the heart of everything we do always. Delivering on our Safer Gambling Strategy will be a multi-year journey, and we've made strong progress already, including investments in our customer safety team and technology to identify changes in customers' behavior faster so we can help customers that may be at risk of experiencing problems. This will continue to be a focus in FY '25 and beyond. I want to acknowledge the concern of shareholders with some aspects of our remuneration practices in the 2023 financial year, which resulted in Tabcorp receiving a first strike on our Remuneration Report at last year's AGM. The Chair of our People and Remuneration Committee, David Gallop will address the meeting later when we get to the resolution of this year's Remuneration Report to talk to the main areas of feedback from shareholders and our response to them. As a Board, we were disappointed in the outcome at last year's AGM on the Remuneration Report. As the Board takes it obligations around remuneration very seriously. In setting remuneration arrangements for the company and determining executive's incentive outcomes, the Board's focus is always on balancing the interest of shareholders while maintaining an appropriate performance-based remuneration framework that motivates, incentivizes and retains our executive talent, and enables them to execute on our transformation strategy. The Board has listened to and thought about the feedback of shareholders, and thank you for the feedback. We believe we've taken appropriate measures to address the issues raised, as reflected in both the remuneration outcomes for FY '24 and in remuneration arrangements looking forward. I also want to acknowledge the company's share price. The current value of the share price is not lost on the board. It's certainly not where we want it to be. And shareholders have every right to be disappointed in that outcome. We're certainly disappointed as directors and fellow shareholders. There are a combination of factors which have led to this and I'm confident the company is better positioned today to add value. We have built strong foundations, better products, and we're operating much more competitively in a number of states. As Gill will describe shortly, the company will continue to work very hard to be even better and more successful, which in the end, benefit all of us as shareholders. The company will continue its relentless focus on cost efficiency and growth to unlock the value we know lies within this great Australian company. As you know, today is my final address as your Chairman. At the conclusion of today's meeting, I'll hand over the Chairmanship to Brett Chenoweth. The company is in excellent hands with Brett, who is one of Australia's leading executives and directors with a wealth of experience in the entertainment, media and sports industries. The perfect fit for Tabcorp. My role has always been to ensure the smooth demerger and separation from the Lottery Corporation before overseeing the foundations of a new Tabcorp. I am personally proud of what we've achieved since demerger. There's no doubt, we're a faster, simpler and more responsive organization today than we were pre-demerger. We've achieved structural reforms in Victoria and Queensland that will create a generational change in wagering. Our App is the most competitive it's ever been, and we've secured the services of one of the best CEOs in the country in Gillon McLachlan. With those foundations laid, we're set up to deliver an exciting future for our customers, the racing and sports industries and most importantly, you, our shareholders. So now is a good time to transition to a new leadership team. I also want to acknowledge the retirement of Justin Milne, who's been a Tabcorp Director for over a decade. Justin's service, advice and contribution as a Director and Chairman of the Technology Committee has been significant. He's been a wonderful colleague and at all times, given 100% for the advantage of Tabcorp. Thank you very much, Justin. The wagering market has been challenging, but it's historically resilient, and I'm confident in the company's long-term growth prospects. I'd like to thank my Board colleagues, our executive leadership team and our people for their commitment and support over my time as Chairman of Tabcorp. Together, Brett and Gill will be a great team, and I'm incredibly optimistic about the future of Tabcorp. Finally, I'd like to thank you, our shareholders for your interest and support over the years. I look forward to joining him in the audience next year as a shareholder and celebrating the success of Tabcorp. I'll now invite our Managing Director and CEO, Gillon McLachlan, to address the meeting. Thank you.

Thank you, Bruce. Good morning, ladies and gentlemen, and it's a privilege to be able to address shareholders at my first Tabcorp Annual General Meeting. While I've only been with Tabcorp a short while, I see clearly a business with enormous opportunity. In joining Tabcorp I was drawn to the challenge of creating a world-class wagering and sports entertainment experience for our customers that is centered around a group assets that only Tabcorp has. Assets that have growing value in an increasing -- will grow value in an increasingly regulated market. The foundation of the business is strong. We're not beginning from a standing start. As Bruce mentioned, we have a vastly improved digital experience, a revitalized retail footprint and a world-class media offering. All of which have significant growth opportunities that need to work more closely together to realize their full potential. I congratulate the Board and management the work they've done. My job is to further simplify the business to be more cost-effective, agile and unlock the opportunities that lies within this outstanding asset base. And we're moving quickly. Our culture and ways of working are changing. People are coming back into the office, and we're focused on accountability and speed of decision-making. Teams are more productive when they work together. This is about working and winning together. We've already started. On Saturday, we won our own race in Bella Nipotina, the horse, our racing, trading and form experts with some unwarranted advice for me chose to represent TAB and won the TAB Everest. It was fabulous. It was more than a race though. On Saturday, we saw the best of what TAB can be, right across our venues and at the track our team excelled with a first-class whole of business execution. Randwick was a sea of green as our digital, retail and on course activations and sponsorship teams connected to create the ultimate entertainment end-to-end experience with Australian Turf Club. And you'll see continued change in this business, and the people will change as the plan evolves. I've got a clear focus on people, capability and execution. A key focus will be bringing in additional wagering capability and experience at the senior leadership levels. Wagering is the foundation of our company. I look forward to informing the market of change in structure in the coming weeks. I also want to stress to shareholders that reducing cost and ensuring we have the right operating model is a top priority for me. Our Genesis cost program will continue in FY '25, and we are targeting further savings this financial year. In addition, I'm working with the team on a detailed review of our entire operating cost base as well as our capital spend to identify and execute on further opportunities to reduce our cost base. I'm focused with my team on making Tabcorp a fitter organization. That requires a reset of team, culture and cadence around the organization. An organization that can do more with less because we are simpler and more focused organization. I want to acknowledge that much work has been done in reducing headcount, management layers and outsourcing transactional work. But I'm clear, more can done -- more can be done and will be and my team will do that with me. This time next year, i am confident that we will be a more simple, cost-effective united organization. There are also a number of key strategic matters that need to be addressed. The New South Wales review process is underway. It will be difficult, but I'm personally participating in this process as we seek to deliver a level playing field in which we can compete more fairly and more evenly. This is very important. The Tote remains an incredibly valuable offering for TAB. We support a national tote. I support a national tote. A national tote increases liquidity and provides more options for customers. It can also deliver a stronger result for our racing partners. I'm committed to working with all racing bodies and regulators to do all we can to make a national tote a reality. Our assets hold the key to our growth. I recognize our digital offering is vastly improved. I thank the team for that. We've improved our speed to market and will continue to innovate and transform the way customers use our digital products. I see significant value in our unique retail business. People are back in the pubs, I'm back in the pub. As Bruce has alluded, cash betting outperformed digital in FY '24 and working closely with the team to continue to leverage our retail footprint. The media business is exciting. This is a long-term growth opportunity for TAB. Sky is a highly attractive business with unrivaled breadth of domestic and international broadcast rights, and a global distribution footprint that we will take a hands-on approach unlocking further value going forward. With the pivot of Gaming Service to an integrity Services model, this is now a high-quality business that continues to perform strongly. I see the opportunity for this business to increase further in value as the regulatory environment continues to tighten, and this is important. I know there's also mixed news about going forward, and I'll take the time to examine the opportunities ahead before we determine a final path. But there is growth there and opportunity there for Tabcorp. Customer care is very important to the Board and to me. TAB is a great Australian legacy brand, overwhelmingly owned by Australian shareholders, many in this room, who rightly expect to put customer safety at the front of every decision we make. We also acknowledge the expectations of regulators and the community in this space. That's why we're committed to being a leader in customer and community care. We want to offer the complete entertainment experience for customers. It needs to be done as a safe way for individuals and for the community. And we will do that. I'm also committed to maintain an open, honest and transparent relationship with our regulators to play a vital role in our ecosystem. Finally, I would like to acknowledge Bruce, our Chairman for your service and contribution to Tabcorp over a long period of time as Director and Chairman. Your leadership through the demerger and rebirth of a new Tabcorp has been vital. Also I've seen firsthand, Bruce, your personal commitment to the organization, to your Board, to the individuals and your values, and I thank you for your service. I want to similarly thank Justin. I think, been 13 years, services underwriting Australian community life and I want to thank both of them for their counsel and their contribution over a long period of time. So I end where i started. Tabcorp is a company of real opportunity with significant value ready to be unlocked for shareholders. I also know the time for talking is over and needs to be done. There is no doubt, there are challenges in a softer market, but the wagering sector has long-term resilience and Tabcorp is very well positioned to capitalize with our unique asset base, and that we've done with our first class team of people. We have new cadence and focus on execution to grow leaner and more effective organization while delivering the ultimate entertainment experience for our customers. Our assets are key to achieving that. I look forward to updating all of you on our progress going forward. Thank you very much.

Thanks very much, Gill. We now come to the formal business of today's meeting. The Notice of Meeting has been published and made available to shareholders, and I'll take it as read. Each of the resolutions to be put to the meeting will be moved in the order set out the Notice of Meeting. At the end of each item of business, I'll respond to the questions. I encourage you to now submit online any questions you may have for any item of business. May I please ask to keep your questions relevant to the agenda items. Item 1 is the Financial Report and Other Reports. The first item on the agenda is to receive and consider the Financial Report and the reports of directors and of the auditor in respect of the year ended 30 June 2024. These reports were approved by the Board and were included as part of the annual report released on the 28th of August 2024, are also published on our website and the ASX. While this item is not subject to a vote, in a moment, I'll respond to questions from shareholders regarding the financial report and the reports of directors and auditor and the performance of the company over the past year. Ernst & Young is the company's external auditor. Michael Collins, the partner of Ernst & Young who has signed the audit report is present today and available to answer questions which should be restricted to audit matters. The resolution is now open for discussion. I'll ask Chris, the company secretary to read out any questions received prior to the meeting in relation to this item.

Thank you, Chair. We received a question on this item from shareholder, [ Mrs. Salwati ], who asks, would the company consider a buyback offer for shareholders with very small shareholdings, which are inefficient to administer dividends and send legal documents?

Thank you very much for your question, Mrs. Salwati. Tabcorp regularly reviews its capital management options, including the appropriateness of share buybacks. We acknowledge that there are shareholders who have smaller shareholdings following the demerger and the recent share price decline. We'll continue to review our options. And if the decision is made to proceed with any capital management program, we'll announce it to the ASX. We'll now turn to any questions in the venue here. Are there any questions on this item that anyone would like to raise.

Chairman, I would like to introduce Lewis Gomes from the ASA.

Good morning, Mr. Chairman, and good morning, other shareholders. My name is Lewis Gomes. I'm representing the Australian Shareholders' Association and today I'll hold proxies from 184 shareholders accounting for 1.8 million shares. Before I ask my questions, firstly, Mr. Akhurst to you. Thanks for your leadership over the last few years and seeing the demerger through. We all know it's been a difficult journey for all of us, you as well as us as shareholders. But we thank you for your perseverance and for sticking to the challenges.

Thank you never much, Mr. Gomes.

My question is on two interrelated matters, and I'll ask both questions first, if I may. The company has advised that the TAB '25 performance digits will not be met. We now have a new CEO Elect, who presumably, will be working on a new strategy to recover Tabcorp's former glory, and we've heard some of that already. When are we likely to hear and what this strategy may be? That's the first question. The related question, we all know the challenges today in the advertising of sports betting -- these are my words, where are online [indiscernible] companies like Sportsbet can and do spend substantial budgets on advertisements that most people find intensely irritating and almost moronic in terms of their voiceovers. How will Tabcorp respond to these challenges and can it raise the tenor and appeal of its own advertising to support a new refresh strategy that restores value that shareholders know exists for Tabcorp?

Very good questions. Thanks, Mr. Gomes. In terms of Gill's program and being overseen by the Board and the strategy, I think Gill's given some indications of his thinking at this point and highlighted a number of areas such as cost control and the activity he's got underway there. I think there's also -- he's spoken about the tote and there's a number of other items he's mentioned in his address this morning. These items will continue to be advised if you like, to shareholders and the public as we go forward. So I would -- my answer to that would be just watch this space, there's not a particular date -- but some big things are going to be announced, it will be more and more as we go forward. And regarding advertising, look, I think we all find our competitors advertising intensely annoying and intrusive. And for some time, Tabcorp's been advocating for certainly less advertising on free-to-air TV, for example. That's been our position that we've been trying to take a responsible middle course on this. The government's got a review underway, and we've made submissions to that. In the end -- will be happy to comply with whatever the advertising restrictions and new rules are that the government decides to announce. In terms of our own advertising, hopefully, you've seen a revamp and a fresh approach that will continue. Every dollar, every advertising campaigns looked at very closely, and we're always trying to improve and engage our customers with our products. Are there any other questions in the room?

Chairman, I would like to introduce David Kingston.

[indiscernible] I'd like to make a few comments and then follow up with a couple of questions. Welcome, Gill, 133,000 shareholders, only a few in the room today. What a baptism of fire? I appreciate you've inherited a lot of legacies, so good luck with the turnaround. I'm sure you will deliver a much better result than the 4-time premiership coach, Alastair Clarkson, who, as you know, went to North Melbourne and grabbed the wooden spoon. Life will be much better under Gill I'm sure. Look, I appreciate the challenges, but let's just look at the facts. TAB has destroyed a lot of shareholder value, which is unacceptable. It was demerged 2.5 years ago from lotteries. Lottery shares are up slightly. TAB shares have dropped over 50%. And Chair, that's a loss of shareholders' value of $1 billion, a lot of money. We can talk about the industry and the challenges, but in contrast, Sportsbet's owner, Flutter, has risen 35% in the last year. I appreciate its assets are not identical, but done properly, this industry can do well. Even Ladbrokes and Neds underperforming owner Entain, it's only fallen 20% in the last year. DraftKings has shut the lights out, but slightly different business. Unfortunately, at the moment, TAB is the black sheep of the Wagering family. Hopefully that can change. It's also sad to look back when the demerger was being considered, that the UK group Entain made a conditional offer of $3.5 billion for TAB. I appreciate it was conditional but the TAB Board did not progress that offer. What's now the situation is that the current enterprise value of TAB to compare like-for-like, you got to add the market cap and the debt is below $2 billion. So $3.5 billion rejected or not progressed, current value $2 billion, very disappointing. Everyone is going to have their own opinions, but my view, TAB has been a sleepy incumbent. It's had the long-term wagering incumbency and significantly protected by its retail franchise. In my opinion, it's been reactive and complacent. The TAB brand is tired, not withstanding Everest, which was a great success. I agree with that and a lot of young people. And it's well acknowledged that the TAB brand is not particularly appealing to the younger punters. Indeed, TAB had initial discussions in 2023 to buy PointsBet, which does have greater appeal to younger punters. Clearly, TAB has been thrashed in digital by market leader, Sportsbet. It's even been matched by the combined Entain brands of Neds and Ladbrokes. A newcomer PointsBet is nearly half of TAB in Digital. Yes, TAB dominates retail with over 4,000 outlets, albeit that comes at a large capital expense and much higher operating costs to run retail outlets. For example, the recent $600 million payment for the Victorian License. One of my issues is looking at strategy for TAB. The entire Board should be looking at whether retail assets are a Dinosaur. Given their costs and the ongoing digital growth, we all know a lot of people going to pubs -- there might be a Pub Tab, but they don't bid on TAB. They'll bet on Sportsbet or one of the competitors. So are retail assets a Dinosaur. Let's move to another point, the kitchen sink. Gill you haven't disappointed, a lot of new chief executives make significant write-downs and downplay earnings. At the half year, there was a $644 million after tax impairment. Now that's increased to $1.37 billion, big impairment. Let's look at the Group revenue in FY '24. A nasty pincer movement here. Revenue down 3.9%; Group OpEx up 6.3%. Now with that pincer movement, of course, there's an 18.7% fall in EBITDA. Revenue down, costs up, EBITDA's smacked. Even worse, Chair, '24 EBIT of the main business Wagering and Media is down 39.5% to $70.3 million. Let's turn to FY '25. The outlook continues to be weak. Gill has advised the key TAB '25 targets won't be met. My biggest concern is TAB's digital share is in the low 20s, massively under Sportsbet and way on target the TAB put forward of 30%. Also concerned about the huge CapEx. In FY '23, $195 million spent, FY '24, $160 million spent. FY '25 apparently it's going to be around about $140 million. This is a high-cost business. Net debt because of the Victorian License acquisition has jumped to a fairly substantial $860 million, allowing for the increased EBITDA from the VIC license, net debt-to-EBITDA target of less than 2.5, it's getting tight. Sadly, investors are skeptical. So the market value of TAB at the moment is $1 billion. That's actually below the shareholders value -- shareholder funds of $1.246 billion, notwithstanding the massive write-downs. So even with all those write-downs, the market is valuing it below your shareholders' funds. What does shareholders want? Actually want free cash flow. Like the parsimonious dividend for the last year of $0.013 is pretty offensive given the nature of this company. It's been a chronic underperformer, TAB. Board changes underway. Gill has acknowledged that the TAB is only part of a way through the turnaround. That turnaround has been going for several years. TAB really needs to stand up and deliver urgently. Operating costs and CapEx must be tightened. Digital market share must be lifted. The feeble dividend, $0.03 must be lifted. And in my opinion, different people have different views. There's no synergy with Gaming Services. It should be sold, albeit I think Macquarie Bank's assessment of $610 million seems optimistic to me. Let's cut to the future. Can TAB finally deliver proper shareholder value? The good news is, TAB, it's a long way from a Kodak moment. It's salvageable. Unlike the malaise of fellow gambling company, Star Entertainment, whose biggest problem was its massive overspend on CapEx in the past 5 years. TAB still has a strong balance sheet, particularly if it sells Gaming Service. I accept there are regulatory issues and subdued consumer spend, but a substantial part of TAB's issues, in my opinion, are self-inflicted, in particular, the failure of the incumbent party to achieve a proper share of the digital market. TAB has a huge EBITDA. That's the opportunity, adding the impact of the new Victorian License to FY EBITDA of $317 million means the TAB FY '25 EBITDA will probably be above $400 million. Now that's a lot of EBITDA. But the problem is so much of TAB's EBITDA is burned on CapEx and amortization of technology and licenses. The shareholders want some free cash flow, and they want a proper dividend. Getting to the questions. The big, big, big question for Gill is can you finally convert a substantial portion of the huge EBITDA to free cash flow and dividend? I'm glad Gill mentioned culture because it's critical. Critical in sport and critical in business. Do you think you can generate a sharper, more competitive culture at TAB? So it's financial performance can lift? In my opinion, I'm sure people on the Board will disagree. TAB has being complacent and reactive. As the Aussie brand, can it close the gap in digital on the U.K. owned Sportsbet? My second question is, when will the huge CapEx on the business reduce? Can you provide a breakdown of the expected FY '25 CapEx of $140 million after the huge CapEx in the prior 2 year?

Thank you. Thank you for your comments. And obviously, you've put a lot of thought into that, and we appreciate it. I don't think we'd agree with all of your points -- I can't recall them all there was a lot there. And some we definitely agree with. We obviously want shareholder growth. We obviously want dividends to improve. We're obviously trying to be more competitive in the market. So there's a lot of common outcomes that we would agree with, but some of your analysis maybe not so much. I'll ask Gill, if you'd like to make any responses to the two questions that were asked?

Thanks, Chairman. Thank you, Mr. Kingston to your summary. I think I concur with the Chairman, a lot of which we agree with. And some I don't know, and I don't know today's through forum, but the notes I made is around agility and energy, winning in digital. I think the Retail network, I believe, is incredibly important to us. It's an asset in the regulated market that will actually be something becomes -- I hope a strength rather than a burden. But I know I'm working with a group of people who want to start winning and want to be more agile and respond to the challenges of the market and take this great brand and delivering for shareholders. And so my simple message is I acknowledge the feedback. There will be -- things we agree with, things we don't, but a broad sentiment of taking a group of significant assets and a great brand with the talented group of people and delivering for shareholders is why I'm here and there is part cultural and part unlocking value, part beating the market, and that's what we intend to do. And I hope in a year's time, we'll be having a different conversation.

Are there any other questions in the room?

Yes, Chairman, I would like to introduce Charlie Kingston.

Just a question on the debt levels of the company and the chance of an equity raise, which I suppose has been weighing on the company. There's been rumors out there that you may need to raise equity, which clearly, at the current price would be highly dilutive and very expensive. And you are in a bit of a mind where the more the market worries about that, the lower the stock goes and therefore more expensive it becomes? So it's a tough situation to be in, but I would just like to get your thoughts on the chances -- there's been speculation that you may sell off a division to repay some of that debt. There are -- if you can level the playing field with New South Wales, there may be further payments, large payments to achieve that outcome. But yes, the market cap today, I think it's a bit over $1 billion. You've got over $800 million of net debt. So it does seem pretty uncomfortable. But we've all seen it before, whereby we've already had the debt clearing impairments with the new CEO, but lots of new CEOs come in, as you know, and clearly the decks with a large equity raise given they've inherited a lot of issues, which certainly is the case here in Tabcorp in my view, but I'd just like to get your thoughts on the chance of an equity raise, what other levers can you pull? And how can you reduce debt going forward? Absent those two levers.

Thank you for the question. We consider the balance sheet structure all the time. We're comfortable with the settings as they sit as they are now. We're not contemplating. We're not about to announce a capital raise. We don't need capital to run the business as we are now. What's ahead in the future, we don't know. But according to our plans and what we are foreseeing, we're not intending to come out with our hand out and say can you please give us some capital. If some amazing opportunities arise, which create additional profit which we don't have at this moment, which require capital. We think about that then. But there's no proposal where there's no papers that we consider nothing like that at the present time. What -- you asked about New South Wales and people often say, you're going to have to raise money for New South Wales. We're in a process with the New South Wales government where they're looking at how they can create a sustainable industry here as Victoria and Queensland has done, which would be great. The problem we've had with the impairments is fundamentally around the New South Wales business being unprofitable in the current settings because we're paying all the tax and fees and our competitors aren't. That's fundamentally what the problem is. We've got a level playing field now in Victoria, which was one of the strategic objectives we set out 2 years ago when we demerged and also at Queensland. We are now in the process with New South Wales to see if we can get somewhere with them, too. What's the end of that process? We don't know yet because the process is still underway. So there's no proposals to put money in or how much money or any of that yet, that's ahead of us. Is that clear enough?

Yes. I think.

I think you know all we know.

Yes. Okay. And then just another question, maybe for Mr. Milne, given you've been here since 2011. Just noting that Tatts and Tabcorp merged 2017. Obviously, the Board at the time recommended that, thought that would be a good outcome for shareholders and not completely apples for apples, but the demerger happened in 2022, which basically reversed that deal which is recommended by directors again. Clearly, based on the share price of Tabcorp today, it certainly hasn't worked. But maybe just, Justin, if you could provide some comments given you have overseen all those transactions, there's been a lot of work done, but Tabcorp shareholders, I don't think there are any better or probably worse as a result, but any lessons for the new Board and the new team as to why that all went wrong and any thoughts, please?

Well, the reason that it all went wrong to use your words is the unfair regulatory environment that the business operates under. I mean, you have to understand that many of the things that we've talked about today, for example, the excessive advertising and irritating advertising of our competitors, that's funded by the tax that they don't pay. So our competitors have traditionally made, I think -- it's about 15% margin, I'm guessing at that number over us. Now we thought when we came to demerge the companies that we could get a more rapid leveling of the playing field as we go in, and we're making progress, but we clearly haven't been fast enough on it. I think that when we do have a level playing field in Australia and harmonized regulation across all the states, I think you'll see a big difference. And I think that the power and value of a brand like Tabcorp and the value of our experience in the game, we'll already start to come to the fore. But we've absolutely -- and it's not a thing that we've made enough of a big deal about, in my view, but we've absolutely had to play this game with one boot on one foot, and one arm tied behind our back. Now we're leveling that up. With the wisdom of hindsight, that's true we've lost value through that demerger, but it seemed like a good idea at the time. And net-net, I don't know if you were still -- if you're still a shareholder in both companies, you're probably about right. But the other thing, of course, is that this imbalance in the regulatory environment in Australia has led to, frankly, our competitors irritating the hell out of customers and the general population. And so the view of gambling by the general population is in a decline at this moment. It will incline again because if you look at history, humans have gambled since the Babylonians. So -- and during that 10,000 odd years, gambling has inclines and declines. At the moment, this popularity is in a slight decline, and so the market has been slightly depressed, but I've got no doubt it will come back. So that's a bit of a long-winded answer. But I mean the net-net of it is that for Tabcorp -- Tabcorp has to spend its energy on achieving a level playing field, and it is.

The other point I'd add is that the Wagering business would have been within the combined business anyway. So all the things about leveling the playing field and everything else have to be done. And I think bringing it out from the merger with the lottery company -- not only do you then consolidate all of the horseracing codes, if you like, in the one organization, but the focus on improving that business, the real laser-like focus, which has stopped the market decline that was going on for years because it was shielded by the lottery company. I think that's been a very significant change, which will lead to shareholder growth in the future. Thank you for your question. Are there any others here in the room? Are there any others online, Chris?

Chair. We've received one question from shareholder, Henry K. who asks what is going to be done to prevent under 18s from being in TAB outlets as they need to understand the rules. Please take action.

I couldn't agree more. We have our Player Safety Commitment that we're investing a lot of money in. You've got to realize that we operate through about 4,000 retail outlets across Australia. A lot of them are pubs and clubs and agencies and different sort of formats. There is absolutely no way we want any underage children or people of that nature coming into our venues and using our products. We do not want that. And we've got all sorts of training standards, checks, audits, processes to try and prevent that from happening. And by and large, we're successful. There have been a couple of instances -- but if you think about the probably millions of transactions that go on every year, they're on a single hand and probably from a -- we've had people putting on false mustaches and dressing up and pretending to be adults, that sort of thing to avoid being seen as a child. But that's definitely something that we take incredibly seriously. We think it's fundamentally important to our continuity in the industry, our brand promise that we don't have children in our agencies, and it will continue to be high order priority focus for the company. Any others?

No further questions at this time.

Okay. As there's no more questions. That concludes this item of business, and we'll move on to the next item. Item 2 is the reelection of Janette Kendall as a Director. Item 2 of the agenda relates to Janette Kendall being re-elected as a Director of the company. She's been a Non-executive Director of Tabcorp since 2021. Janette retires in accordance with the constitution and being eligible, she's offered herself for re-election. The Directors consider Janette to be independent. Janette is Chairman of Tabcorp's Nomination Committee and a member of the Audit Committee, the People and Remuneration Committee and the Technology Committee. The Board, with Janette abstaining, unanimously supports the re-election of Janette Kendall as a Director of the company and recommends the shareholders vote in favor of this resolution. I'd like to invite Janette to address the meeting. Janette? Do you want to come here?

Thanks, Bruce. Good morning, ladies and gentlemen and fellow shareholders. Thank you for the opportunity to address our AGM. It's actually a privilege to serve as one of your directors and to seek your approval today as I continue as your Board representative. As Bruce mentioned, I've been on the Board of Tabcorp since 2021 and currently serve as Chair of the Nomination Committee and Member of the Audit, People and Rem and Technology Committees. I'm an experienced company Director with the depth of experience in governance, strategy and risk management, having served on a number of public, private and not-for-profit boards for over 20 years. I'm Also a fellow of the Australian Institute of Company Directors. My past executive experience was in the gambling, retail, hospitality and media industries, working both in Australia and overseas. And as a result of that, I bring to the Board a depth of industry experience and understanding together with a rich comer perspective. I also have a deep understanding and firsthand experience in digital transformation, having worked with a number of organizations facing digital disruption since the mid-1990s. As a Director, one of my core responsibilities is ensuring that we are not only pursuing growth, but doing so in a manner that's aligned with long-term value creation and sustainability. This requires a strong emphasis on risk management, and I understand the importance of building a strong culture with a focus on good governance and proactive risk management to protect our company's reputation and deliver long-term sustainable value for our shareholders. I have been and will continue to be deeply committed to maintaining this focus, particularly as new risks emerge and our operating environment evolves. I'm committed to working hard and in the best interest of shareholders, supporting initiatives that drive innovation, operational efficiency and value creation at Tabcorp. Thank you in advance for your support.

Thank you very much, Janette. And I can attest to everybody here that we're very fortunate to have Janette on the board with the experience she brings and definitely very, very hard work and available. As there are no questions on this item received prior to the meeting. We'll see if there's any questions here in the room. Are there any questions?

David Kingston, K Capital. Look, Janette, you've got a fantastic experience. So I'm sure you're a brilliant director, so well done. But I've got two questions for you. Given your extensive marketing experience and also your experience with gaming companies, do you think the brand is tired? Do you think TAB should be buying a second more youth-oriented brand such as PointsBet, which was considered a year or so ago. With the genesis of TAB, as most people would know, is the Totalisator Agency Board, which is pretty dreary and boring. Thank God it's now TAB. But it does tend to empathize a bit more with the older generation. Racing is making a big effort to bring in a lot younger people, very successful at the Everest. The future is in digital and in the younger people who are taking over. Do you think TAB can ever be an effective competitor and optimize the $2 billion of enterprise value TAB itself as a brand? Clearly, there have been multiple brands in the market. Clearly, Entain has two brands, Flutter really only have the one main brand, but Sportsbet is a fairly useful oriented brand and young and appealing to a lot of people. So that's my first question, I'm interested in your thoughts, do you think TAB needs a second brand?

Do you want to ask all your questions? Mr. Kingston?

The second one, Janette, to indicate how diversified you are, with your experience in digital transformation. So you cover it all, you cover the marketing side, you cover the technology side. I'm concerned that a lot of the huge CapEx being spent by this company over many years is just being capitalized. There's a great debate amongst companies as to whether you capitalize or expense R&M and digital transformation costs. I don't know the split of the CapEx that's been incurred in the last 3 years, but I read it out before, it's huge. And apparently, there's another $140 million this year. Are you as a digital transformation person, are you concerned that the company is capitalizing that rather than expensing it, bearing in mind some R&D software expense, digitalization has many years of life? Some has a short life. So I'd just be interested in your thoughts whether the accounting practice of capitalizing so much is appropriate.

Janette, do you want to address the first question?

Yes, I shall. Thank you for your question. And certainly, from my background and understanding and experience with brands, the question is very valid around the perception of the TAB brand and the growth potential of that brand with its existing customers and new customers. And whilst it's not in the detailed presentations today, the detail is there in terms of looking at the current appeal of the brand and as part of the transformation, how there's been a concerted effort to really engage with the younger audience. And the data is showing that we really are engaging and attracting a younger audience. So I think that's really, first question to ask is will the brand stretch an appeal to next gen? And I have to say from the data that I'm seeing in our customer acquisition, it absolutely is. And there's been two parts to that. One is the strategy that's been put in place to reposition the TAB brand and refresh it, both with a focus on wagering and sports. And that's an important part of the marketing strategy to attract new customers. Younger customers are coming in, betting on both wagering and sport, but sports is certainly been a way to engage them. And then I think secondly, the other key piece of that is the investment in digital. And as we said earlier in the presentation, the journey that we've been on in the redevelopment of the TAB App, that definitely when I joined the Board was a neglected asset in the business. It's not now. The redevelopment and relaunch of the TAB App is at parity. You heard also reference to new product that's come to market as well and rapid product releases that are engaging our existing customers and also attracting new customers. We have spent a lot of time considering your question on multi-brand strategy, and we believe that we have an iconic Australian brand that we're seeing with new strategies that we can unlock that brand, reposition it and appeal to a broader audience. That's not to say we don't look at and consider second brand strategies. But as shareholders, I'm sure you'd appreciate, we put a strong lens on the investment and cost to do that as well and look at that in the context of the returns, and we really believe there is further value and appeal to attract more and more customers to the TAB brand.

Mr. Kingston, on the second point, I don't know whether Janette wants to add anything, but my comment would be that we're very aware of the debates around capitalization and expensing technology costs, which I think is the essence of what you're talking about. We -- it's all audited. We comply with the auditing standards and take advice from the experts as to how -- what the right accounting treatment is for those items. Behind all of that, as Gill says, there's going to be -- there is a very detailed review on every dollar that's being spent on CapEx and every dollar that's being spent on OpEx. That's an ongoing very intense #1 priority of the company that Gill is undertaking right now. Anything else you wanted to add?

Yes. Nothing further to add on that. Thanks, Bruce.

If I could just add one aspect, Chair.

Yes.

This is a very, very unusual company, whereby the EBITDA last year was $317 million, and the group EBIT is only $97 million. Now most companies have that debate about whether your capitalize or expense R&D, digital transformation. And also TAB has a lot of licenses, which need to be amortized. But it's very unusual to have a major company Chair that has such a disconnect between EBITDA and EBIT, which to me begs the question as to whether you are expensing enough of your R&D and digitalization. Look, we all know that accounting is a black art. It's not a science. You've got the standards, but within those standards, companies have got a huge amount of flexibility. But I've got a lot of experience in companies. I can't recall off the cuff any other company that has such a disparity between EBITDA and EBIT. And to me, it raises the question that maybe you're being too optimistic in capitalizing too much of your R&D, but just to comment.

All right. No, thank you. I appreciate the comment, and I'm happy to talk to you afterwards. I don't know that it's specifically relevant to Janette's reelection. Are there any questions online, Chris?

There are no questions online, Chair.

Okay. Well, there's no more questions online and there are no more questions, so we finalize discussion of the item. The proxy votes received prior to the meeting in relation to this resolution are shown on the slide. I now move that Janette Kendall be reelected as a director of the company. Please cast your votes by filling out the yellow ballot paper or online using the Get a Voting Card button. So you can see from that slide, it seems that the proxies received that this resolution will pass comfortably. Congratulations, Janette. We'll now move on to the next item of business, the adoption of the remuneration report. Item 3 of the agenda is the adoption of the company's remuneration report in respect to the financial year ended 30 June 2024. The remuneration report is set out in Tabcorp's 2024 annual report. The report contains details of Tabcorp's approach to remuneration, including the outcomes for the most recent financial year and changes made to the remuneration framework. It also contains the Board's response to receiving a first strike at last year's AGM in relation to the previous year's rem report. I'd like to now invite David Gallop, who's the Chairman of our People and Remuneration Committee, to address the meeting and speak further to the first strike and our response.

Thanks very much, Bruce. Good to have a tall guy's microphone, Gill. Good morning, everyone. Tabcorp's remuneration philosophy is to attract, motivate and retain the best talent by rewarding them for delivering the business strategy and through creating long-term value for shareholders. We do this through a market-competitive, performance-linked and shareholder-aligned remuneration framework. The Board's objective, as always, has been to balance strong and sustainable financial performance with nonfinancial measures that reward the right behaviors by our people. Following the first strike on the remuneration report at last year's AGM, the Board has engaged extensively with shareholders and proxy advisers to further understand their concerns, and we thank those who took the time to engage with us. The main areas of feedback we received related to decisions we made concerning the size of the FY '23 short-term incentive or STI awarded to the former MD and CEO. The level of fixed remuneration paid to the MD and CEO as well as the level of Director and Chairman fees set post the demerger of our former Lotteries & Keno business in 2022. The Board acknowledges the feedback on the quantum of the former MD and CEO's FY '23 STI award, and we will remain mindful of this when determining STI awards for executives in future years. In respect to the former MD and CEO's fixed annual remuneration, this was considered appropriate by the Board given his level of industry experience and the complex, highly regulated nature of the gambling industry. The annual remuneration has remained the same for our newly appointed MD & CEO, Gillon McLachlan. The Board viewed this to be appropriate, considering a range of factors, including benchmark data and the need to secure a suitably qualified and experienced CEO with the right attributes to lead our organization and deliver the execution of its strategy within a challenging market. The overwhelming feedback we received from investors following the announcement of Gill's appointment has confirmed this view. The Board has also made some changes to our remuneration arrangements to apply in FY '25. The Chairman fee has been reduced from $493,300 to $400,000 per annum, resulting in a total reduction of 31% from the pre-demerger fee. We've also modified the STI plan to remove the group EBIT hurdle and to direct focus onto a balanced score -- balanced group scorecard with up-weighted financial measures, representing 60% of the scorecard. Turning now to remuneration outcomes for executives in respect to the financial year 2024. The Board determined not to award any STIs to executives or any other eligible employees for FY '24. While the executive and management team worked hard and made progress against key strategic and customer measures in a year where financial targets were not achieved against a backdrop of challenging market and economic conditions, the Board considered appropriate not to award any STIs. There were no LTI offers due to vest during the year. In relation to the 2 LTI plans that were are on foot during the year, I'd like to assure shareholders that in determining an investing outcomes for these plans in future years, the Board is very conscious to ensure that management is rewarded for delivering underlying business performance and not any favorable outcomes caused by the impairments recognized by the company during FY '24. Finally, it was company policy not to award a general base pay increase to the extended senior leadership team during FY '24. We believe these decisions highlight the strong link in our remuneration framework between business performance, remuneration outcomes for executives and the experience and expectation of our shareholders. I'll now hand back to the Chairman, but finish by noting my personal thanks to Bruce for his enormous effort for the company and also to Justin. Both Bruce and Justin will be missed. Thank you.

Thanks very much, David. The Board unanimously recommends that shareholders vote in favor of this resolution to adopt the 2024 remuneration report. The vote on this resolution is advisory only and does not bind the directors or the company. I'll now ask the Company Secretary to read out any questions received prior to the meeting in relation to this item. Chris?

Chairman, we received a question on this item from shareholder, [ Mr. Brooke ] who asks, how do you think it's fair to increase executive salaries and benefits when you pay a final dividend of $0.03 per share unfranked to shareholders?

Yes. Thanks very much for your question, [ Mr. Brooke ]. The dividends paid in respect of the last financial year are reflective of the company's financial performance. As noted earlier, the total dividends in respect to the financial year represented a payout ratio of 93% of net profit after tax before significant items and equity accounted loss. The unfranked nature of the final dividend also reflected the material impact of the tax refunds received by the company during the year. We acknowledge the final dividend is lower than in prior years, and we're focused on executing our strategy to deliver improved financial performance for the company and in turn, improved returns to all of us, the shareholders. As David mentioned earlier, as financial targets for FY '24 were not achieved, the Board determined not to award any STIs to executives. It was also the company policy not to award general base salary increases for the extended leadership team in FY '24. Okay. Any live questions here in the room?

Chairman, I would like to introduce Lewis Gomes from ASA. Mr. Gomes?

Thanks again, Mr. Chairman. We've heard obviously that Tabcorp suffered the first strike last year, and we've heard from Mr. Gallop as two changes made since then through shareholder consultation and no doubt, internal discussions. And we certainly applaud some of those actions such as no STI and no LTI for FY '24 and also holding base salaries constant. However, the ASA still has several difficulties with the current remuneration plan. Firstly, the general levels of remuneration are still well above those applicable to a company of Tabcorp's now shrunken size. We understand the company needs to attract and retain key personnel in a challenged industry, particularly at CEO level. But remuneration levels are a little changed from the former Tabcorp, which was a much larger company now. Mr. McLachlan has spoken to that. And we would hope that we might see some changes there going forward. We do note, Mr. Chairman, that the Chairman's remuneration was significantly reduced. So we certainly acknowledge that. Mr. Gallop also referred to the removal of the financial hurdle for the STI, and we're a little puzzled as to why that was done. Most ASX companies have a financial hurdle before STI is awarded. With EBIT reducing, and we've heard from Mr. Kingston about the issues there, we're curious as to why that metric was -- sorry, why the hurdle was removed. We think it's an important hurdle to maintain. And finally, with the LTI, there's only one metric, return on invested capital, which for most investors has little, if any, alignment with their experience as shareholders. Again, we've heard Mr. Kingston talk about the capital investment of the company. And trying to measure return on that invested capital, I think, would be pretty challenging even for the best accountants. Most ASX companies have 2 LTI metrics, commonly total shareholder return and earnings per share growth, both of which are readily understood by shareholders and are usually clearly presented in annual reports and hence, very transparent. ROIC has some application for capital-intensive companies, but I don't believe Tabcorp is a capital-intensive company or it should not be. If it were an infrastructure trust with lots of roads or pipelines or airports, that could well be an appropriate metric. But that's not where we are. So while we're very supportive of the turnaround efforts that the Board and executive are seeking to make with Tabcorp, we feel we cannot support the remuneration report as it is, and therefore, we'll be voting undirected proxies against it. Thank you.

Thanks very much, Mr. Gomes. I might ask -- let me just address the LTI question, and David might want to talk about the hurdle because that's been something that we've discussed with shareholders and proxy advisers generally. The ROI focus, if you like, on the LTI was specifically adopted, you might recall, because we had big license capital expenditures to make. And we wanted to make sure that the shareholders' funds were going to be spent appropriately. We weren't going to be overpaying for licenses, for example. We're talking hundreds and hundreds of millions of dollars. So we really did want to focus management's attention on that. And I can tell you that the experience has been a couple of other big opportunities we had, one in New Zealand and another one in Western Australia, did not go ahead because the return on the capital that would have had to have been deployed there wouldn't have justified those investments. So it's really been trying to get the management team, and we think we have focused on making sure that the CapEx is well spent rather than not and not confusing the metric for having too many elements to it. And I think that is an alignment between what shareholders are doing and what management is setting out to do. Whether that metric remains the most relevant going forward is obviously something that the Board and the Rem Committee, in particular, will always consider. But that was our -- that was the thesis, and that's why we did, and we're quite pleased that, that has worked out well in terms of the prices we paid for licenses and the licenses and things we haven't bought. On the STI hurdle, David, do you want to just talk about the change? You can just do it there if you pull your mic down towards you.

Yes. Thanks for the question. Look, I think we did look seriously at whether to retain the hurdle. It was obviously the hurdle that became contentious and led to part of the reason that we got a strike. We looked at it with PwC and with consultation across our shareholder and proxy groups. We feel that the change is a simpler way of looking at the reward to our executives and their team. We think that lifting the scorecard financial percentage to 60% but taking away the contentiousness of the hurdle, whereby certain items can either lead to us making the hurdle or not making the hurdle, as has happened in the last couple of results. We just felt that by and large, these hurdles are not meant to be incredibly high. They're supposed to be a base mark that the team get to. And as I said, with the advice that we got, we feel that we've come up with a simpler framework.

Yes. If I could just emphasize that we want you to understand that the financial metrics for the STI have been increased to 60%. So there's a much higher focus, if you like, on the profitability in the year for the STI to be awarded. Are there any other questions? Come forward.

Charlie Kingston again. Just I suppose on the previous question, I think that was there. I think having some sort of an LTI target aligned to the per share metrics would be fair, maybe the TSR. And to be honest, if I was having the targets, I'd probably push for that given the current depressed share price. It's a pretty nice starting point. So -- but I think anything aligned to the actual share price and EPS would be appropriate, but that's just a comment. But just a question on the minimum shareholding of the directors. I think, correct me if I'm wrong, but it's 1x the annual salary. And notwithstanding the recent purchases by directors, I think everyone's shareholding apart from yourself, Mr. Chair, is circa half the value of their annual salary. And given, again, whether the share price is trading highly depressed. I'd just like to ask the Board if we can expect to see everyone hovering up some stock to get back to that minimum level in coming weeks or maybe even exceeding those minimum shareholding levels? Because I think that would go a long way to reassuring the market that there isn't actually going to be some potential nasty dilution going forward if demonstrates the market that you're going to at least hit those minimums and potentially exceed it.

Yes. No, thanks for the observation, Mr. Kingston. And we agree that having share ownership by the Board and executives for that matter is highly desirable. That's why we've got that policy. And I think you'll expect to see the directors comply with the policy. Exactly what they're going to do over the next couple of weeks, I can't speak for them. But I know all of them are very committed and want to own more shares. Are there any other questions in the room? I'll ask Company Secretary, Chris, if there are any questions by the online meeting platform. Chris?

There are no questions on this item online.

Okay. Well, there are no more questions. We've now finalized discussion on this item. The proxy votes received prior to the meeting in relation to this resolution as shown on the slide. I now move the remuneration report of the company for the year ended 30 June 2024 be adopted. Please cast your votes by filling out the yellow ballot paper or online using the Get a Voting Card button. I'm advised that based on the proxies received and the votes held on the floor of the meeting and online, the resolution to adopt the remuneration report will be passed by more than 75% of the votes being cast in favor of the resolution. Therefore, a second strike will not occur, and it's unnecessary to proceed with the conditional Spill Meeting Resolution at Item 5 of the Notice of Meeting. So we'll now move to the next item of business, which is the grant of options to MD and CEO-elect, Gill. Item 4 is the proposed grant of options to MD and CEO-elect, Gillon McLachlan, under Tabcorp's long-term incentive plan. The Board considers a grant of options as part of the FY '25 long-term incentive plan to be appropriate on the basis that option plans are generally considered to be a suitable mechanism to incentivize management where share price growth is targeted. An option plan aligns with shareholder interests as management is incentivized to deliver sustainable share price growth over the medium term. And given Tabcorp's strategy to pursue growth, options are considered a more appropriate instrument relative to performance rights, and the grant of options will be subject to a performance measure with appropriately challenging targets that align to the company's strategic objectives. If shareholder approval is obtained, the options will be subject to a performance measure based on the achievement of a return on invested capital performance condition measured over 3 financial years. The ROIC performance condition was chosen as an appropriate measure because it focuses management on achieving targeted returns on Tabcorp's invested capital and ultimately delivering healthy shareholder returns. The Board recommends that shareholders vote in favor of this resolution. We'll now take any questions, starting first with questions from the audience.

Chairman, I would like to introduce Lewis Gomes.

Yes, Mr. Gomes.

Thank you, Mr. Chairman and shareholders, for putting up with me.

It's a pleasure.

I'll be banging on again and probably going to be seriously outvoted as I was on Item 3. But the LTI plan is based on the award of options using the Black and Scholes formula, which in simple terms provides executives with many times the number of share rights that would be provided under a conventional face value approach. For example, if we go to Page 89 of the annual report, one can see that for the FY '24 options, the then CEO was granted 23 million options added at the LTI limit of $3 million, whereas a face value methodology would have granted only 3.36 million rights. I think that's almost a factor of 7. To my knowledge, only one other major ASX company incorporates options into its LTI award. The vast majority is face value, which is well understood by shareholders, is very transparent and avoids the excessive generosity to executive that options can provide. Now we welcome Mr. McLachlan's taking on the CEO role. We don't know whether he was motivated by the options. I suspect it was more motivated by the challenge. Would he have come across under a conventional LTI framework? We don't know and I wouldn't be impudent enough to ask. But while we welcome him and wish him all the best in turning the company around, we think the options system is fundamentally biased against shareholders and therefore, we can't support it. Thank you.

Thanks, Mr. Gomes. We note the comments you make, and it hasn't been our experience with our other shareholders and proxy advisers. I mean if Mr. McLachlan is lucky enough to deliver the results and have a wonderful outcome on the options, we will have also done very well. So that's what we're trying to achieve here. I don't think I can take it any further. Is there any other questions in the room? Are there any online questions, Chris?

No, Chairman, there are no questions on this item online.

Well, as there's no more questions, we have finalized discussion on this item. The proxy votes received prior to the meeting in relation to the resolution are shown on the slide, 98.5% in favor. I now move that approval be given, for all purposes, to grant options to Gillon McLachlan under the Tabcorp long-term performance plan and on the terms summarized in the explanatory notes. Please cast your votes by filling out the yellow ballot paper or online using the Get a Voting Card button. So you can see that from the proxies received, the resolution is going to pass very comfortably. As I mentioned earlier, since the second strike has not occurred, it's unnecessary to proceed with the Spill Motion Resolution at Item 5 of the agenda. That concludes the formal business of the meeting. If you haven't already done so, please complete your ballot papers or submit your votes by using the online meeting platform. For those in the venue, please hand your completed ballot papers to the registry staff when you leave the room. Rather than delay the close of the meeting, the poll will close in approximately 5 minutes' time to enable shareholders to finalize and cast their votes. The results of the poll will be advised to the ASX as soon as possible this afternoon. Now before we close the meeting, I'd like to invite Brett Chenoweth to come up to address the meeting as the incoming Chairman. Over to you, Brett.

Thank you, Bruce, and thank you, everyone, for attending today. Firstly, I'd like to say that, look, I'm honored to accept the appointment of Chairman of Tabcorp. This is a major Australian company heritage brand as we've heard about today, so I'm very honored to do that and to represent the Board and shareholders. Bruce, to you, Bruce has been the Chair for the last 2 years. I've worked with him since the demerger. It's been an excellent experience. He's been a wonderful Chair for this company. Particularly, some of the big items that we've addressed around the Victorian license around the demerger itself, attracting Gill to this business. Bruce has been driving those decisions and been a force of nature, frankly, and specifically in the last 6 months stepping up as Executive Chair. So from the Board's perspective and me personally, I want to thank Bruce for everything he's done and wish him all the very best in his retirement, Bruce.

Thank you.

And similarly, Justin, Justin, who's with us for another couple of months, but Justin has been on this Board for I think we heard 13 years today and has been, again, exemplary director for the company. Justin is a fiercely independent, ferociously smart Executive and Board Director, and he has challenged us and challenged the team and done everything a director should do to progress this company. So Justin, to you also, thank you so much for everything. It's been a pleasure working with you. And again, we look forward to wishing you all the best in your retirement also. So thank you. In terms of the Board, we are as one, we've worked together now for the last couple of years. We are aligned to the remarks that Gill made today, the remarks that Bruce made today. This Board is here to generate long-term sustainable profit growth. We are focused on that. That will ultimately turn up in the share price, but that profit growth focus is really, really important and is the sole focus of the Board. We know and we heard from Gill, we've got a bunch of strategic pillars of assets here that are second to none. We've got a Wagering and Tote business that's excellent. We've got a media set of assets here, both domestically and internationally, which we can do more with. We've got a retail and digital presence here, so an omnichannel presence that differentiates us from all of our competitors. And we've got an integrity services business that's robust and has real opportunity over the next couple of years. So we've got a set of assets that can continue to drive growth and revenue growth in particular in this business. But importantly, and Gill mentioned this, too, we need absolute operational excellence in this business. We expect that. We know shareholders expect that. And then again, that turns up in a number of ways. Gill mentioned cost control today, cost efficiency, removing the friction, making this business simpler and easy to operate and manage is a core focus operationally, attracting the right leadership, making sure we make the right investments in technology, all of those operational issues are super important to driving that long-term profitable growth. And as a Board, we are focused on that. So look, you'll hear more from me as we progress. I don't want to take up any more time today, but I just want to say again that I'm really proud to be serving on this Board with these directors. I'm really proud to be appointed Chairman, and I want to wish you all the best for the day. Thank you so much.

Thanks very much, Brett. And thanks, ladies and gentlemen, for joining us today. As this is my last AGM as Chairman, I'd like to thank you shareholders for your support of the company and the engagement with the Board over my term as a Director, in particular, the last couple of years while I've been Chairman. Thank you very much, and I declare the meeting closed.