Waterhouse VC is a fund for wholesale investors, specialising in global publicly listed and private businesses related to wagering and gaming.

Since inception in August 2019, Waterhouse VC has achieved a gross total return of +2,953% (+107% annualised), as at 30th April 2024, assuming the reinvestment of all distributions.

Aussie Aussie Aussie

The NSW TAB (Totalisator Agency Board) was formed in 1964 after the Victorian TAB in 1961, which legalised off-course totalisator betting in Australia. Tabcorp was listed on the ASX by the Government of Victoria in 1994. In 1999, Tabcorp acquired Star City Holdings (subsequently demerged in 2011 to form The Star Entertainment Group) and in 2000, Tabcorp purchased Structured Data Systems, which developed wagering, Keno systems, and animated games.

Today, Tabcorp has 805,000 active digital customers and over 4000 TAB venues. The company has an overall Australian wagering market share of 34.6% and digital market share of 24.5% (Tabcorp Holdings). In FY2023, TAB reported revenue of A$2.43 billion and net profit after tax of A$84.3 million.

Over the past 12 months, Tabcorp’s valuation has fallen 40% to A$1.52 billion, with revenue down 5.1% in the first half of the financial year, increased competition and tighter win margins. Flutter’s Sportsbet continues to dominate the Australian online wagering industry, with 45% digital market share and 1.1 million active customers (Australian Financial Review).

*Sportsbet’s online market share. Source: Australian Financial Review*

In March, Tabcorp announced that Adam Rytenskild had resigned as CEO and managing director. Following the resignation, Tabcorp Chairman Bruce Akhurst has assumed additional responsibilities while the search for a permanent successor is underway. A well-experienced industry leader with a history of product innovation, effective marketing and cost management could stimulate Tabcorp’s growth.

Tabcorp’s executive search made us reflect on some of the great leaders in the industry, including Cormac Barry, Sam Swanell and Breon Corcoran.

Cormac Barry

Cormac has over 25 years of experience in online B2C, online B2B, and retail across various sectors. In the wagering industry, Cormac began his career at Paddy Power as Head of Online in 2000. During his nine years there, he played a key role in developing and expanding Paddypower.com, which became the model for Flutter's global growth (Paddy Power Betfair rebranded as Flutter Entertainment in March 2019).

Paddy Power acquired a 51% stake in Sportsbet in May 2009 and gained full ownership in March 2011. Cormac transitioned to Sportsbet in 2009 and was appointed CEO in 2011. At that time, Sportsbet had revenue of A$204 million and EBITDA of A$43 million (21% EBITDA margin). Over the next seven years, he transformed Sportsbet from a startup into Australia's leading online wagering brand. He pioneered highly effective digital marketing strategies, increasing Sportsbet’s overall advertising spend from A$40 million in 2013 to A$156 million in 2018. Sportsbet’s advertising spend with Google and Facebook increased 8x over the 5 year period from 2013 to 2018.

*Sportsbet’s advertising spend with Google and Facebook over the 5 year period from 2013 to 2018. Source: ABC News.*

Under Cormac’s leadership, Sportsbet also innovated on product, becoming the first Australian operator to introduce 'Same Game Multis' in 2016 (known as parlays in the US or accumulators in the UK). This innovation gave Sportsbet an almost two-year lead over its competitors. Today, Flutter’s expertise in risk management and trading continues to provide a competitive edge in multis. Multis are a higher margin product, contributing to Sportsbet’s margin expansion throughout Cormac’s tenure.

By the time Cormac left in 2018, Sportsbet's revenue had grown nearly four-fold to A$766 million and EBITDA six-fold to A$262 million (34% EBITDA margin).

Sam Swanell

Sam founded Pointsbet in 2015, building the business into a major operator in Australia and taking on the largest global operators in the US when the market opened up in 2018. He ultimately sold the US business to Fanatics in 2023 for US$225 million (around A$336 million). Today, the Australian business has around 5% market share (Australian Financial Review) and is valued at A$150 million.

Sam started his wagering career at Tote Tasmania, directing all revenue channels. I met Sam nearly 20 years ago and was immediately impressed, hiring him as the COO of the TomWaterhouse brand in 2009. At TomWaterhouse, Sam was instrumental in rapidly growing the business. In an interview with Gambling Insider, Sam said, “The Waterhouse brand was everywhere and we did some innovative things in terms of integrations”.

Drawing on his experience at Tote Tasmania and TomWaterhouse, Sam launched Pointsbet and immediately differentiated the brand on product, with a novel spread betting model (‘points betting’) that gives customers a greater reward if the margin of victory in a game is larger and vice versa.

“I think it really does come down to understanding the market, understanding the consumer and finding a niche.” - Sam Swanell (speaking to Gambling Insider)

*Shaq dancing with The Inspired Unemployed for a Pointsbet advertisement. Source: Instagram.*

Sam’s ability to quickly gain market share in Australia’s highly competitive environment is an incredible feat and someone with an entrepreneurial approach like him could reinvigorate Tabcorp through technological and product improvements.

Breon Corcoran

Corcoran drove huge success at Paddy Power, Betfair, and then the combined Paddy Power Betfair (leaving before the company’s rebrand to Flutter Entertainment). Corcoran spent 11 years at Paddy Power and was COO for the last 1.5 years. He was then CEO of Betfair for nearly 4 years. In February 2016, Corcoran was instrumental in the £7 billion merger between Betfair and Paddy Power. He was then appointed as CEO of Paddy Power Betfair in 2016, a position that he held for 2 years. After leaving the company, Corcoran was the CEO of WorldRemit for 4 years until January this year when he was appointed as CEO of £3 billion trading platform, IG Group.

“He is a proven leader of high performing teams within multinational organisations, with an ability to deliver results for all stakeholders.” - Mike McTighe, IG Group Chair.

While the specific leaders discussed above are not available for the role, finding the right leader for an organisation is the Chairman's most crucial responsibility. If Tabcorp can appoint the right CEO, it has a huge opportunity to leverage its over 800,000 customers and one of the strongest brands in Australia.

Media

We recently spoke with a variety of B2B and B2C wagering companies about their journey to acquire their first customers. If you would like to learn more, our insights are discussed here.

We are honoured to be shortlisted for the “Investment Partner of the Year” award at the upcoming EGR B2B Awards.

For wholesale investors interested in following wagering and gaming industry news and trends, please follow our updates on Twitter (@waterhousevc) or through our website at WaterhouseVC.com.

All the best,

Tom

DISCLAIMER AND IMPORTANT NOTES

Please note the above information in relation to NSW TAB, Victoria TAB, Tabcorp, The Star Entertainment Group, Sportsbet, Paddy Power, Betfair, Pointsbet Holdings, Fanatics, World Remit, IG Group and Flutter Entertainment is based on publicly available information in relation to the company and should not be considered nor construed as financial product advice. The Fund currently has a position in Flutter Entertainment Plc. The information provided in this document is general information only and does not constitute investment or other advice. Readers should consult and rely on professional investment advice specific to their individual circumstances.

Not for Release or Distribution in the United States of America

This material may not be released or distributed in the United States. This material does not constitute an offer to sell, or a solicitation of an offer to buy, any securities in the United States or any other jurisdiction in which such an offer would be illegal. The units in the Fund have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the U.S. Securities Act) or the securities laws of any state or other jurisdiction of the United States. Accordingly, the units in the Fund may not be offered or sold in the United States unless they are offered and sold, directly or indirectly, in transactions exempt from, or not subject to, the registration requirements of the U.S. Securities Act and any other applicable United States state securities laws.

Financial Regulatory Oversight and Administration

Waterhouse VC is an Australian Unit Trust denominated in AUD and available to wholesale institutional investors worldwide with a minimum of AUD 1,000,000 or USD / EUR / GBP / JPY / CHF equivalent. This material has been prepared by Waterhouse VC Pty Ltd (ABN 48 635 494 861) (‘Waterhouse VC’, ‘Trustee’, ‘us’ or ‘we’) as the Trustee of the Waterhouse VC Fund (the ‘Fund’). The Trustee is a corporate authorised representative (CAR 1278656) of Sandford Capital Pty Limited (ABN 82 600 590 887) (AFSL 461981) (Sandford Capital) and appoints Sandford Capital as its AFS licensed intermediary under s911A(2)(b) of the Corporations Act 2001 (Cth) to arrange for the offer to issue, vary or dispose of units in the Fund.

Performance

Past performance of Waterhouse VC is not a reliable indicator of future performance. Waterhouse VC Pty Ltd does not guarantee the performance of any strategy or the return of an investor’s capital or any specific rate of return. No allowance has been made for taxation, where applicable. We encourage you to think of investing as a long-term pursuit.

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