The Lotteries Corp (TLC), Australia’s largest lottery operator, released their full-year results for 2025 this morning, which were ahead of market expectations and demonstrated that the house always wins. The HNW portfolio has a 3% weighting to TLC.

Key Points

  • Profits Down: TLC earnings decreased by 12% to $366 million, driven by poor timing for jackpots during the Black Friday weekend and the End-of-year jackpot being pushed into January. Revenue was down slightly by 6%, demonstrating that consumers are willing to continue playing lotteries and keno despite rising cost-of-living pressures.
  • Statistical Anomaly: This year was a weaker year for larger jackpots, with Powerball not having a jackpot greater than $100 million. This compares to last year, which saw two jackpots of $150 million and a jackpot of $200 million.  Whilst lower jackpots can occur in any given year, over the long term, statistically, there will be years with a higher number of jackpots. Hundred million dollar jackpots attract greater publicity and more entries, plus TLC get to keep the interest on the pot until the winner is drawn.
  • Robust Balance Sheet: TLC’s balance sheet remains robust, with a leverage ratio of 2.9 times below the target range of 3-4x earnings. This leaves TLC management with the flexibility to return excess capital to shareholders.
  • Dividend: TLC announced a dividend of 16.5 cents per share, up 3% from last year, despite low jackpots during the year, which is a pleasing outcome.
  • Outlook: TLC management did not provide specific guidance for the business but stated that they have applied to increase the Powerball subscription price by 17% to $1.40 per game, which will drive higher revenue in the second half of the year.
  • Why is the stock up? Over 2025, TLC has been able to increase its digital penetration among customers, with 42% of sales now online, up from 33% in 2021 (See Below). Digital sales are a much higher-margin product, with shareholders pocketing the 20% margin that would normally be paid to newsagencies to distribute lottery tickets.

Portfolio Strategy: TLC, Australia’s most stable gaming company, holds the monopoly licence to run lotteries in all Australian states except WA. TLC’s lotteries business, which holds long-duration licences (average expiry: 2042), provides investors with stable and defensive earnings, making it a very attractive potential takeover target. The increasing digital penetration of lotteries and keno played on smartphones enhances TLC’s profit margin, as revenue leakage to newsagents and clubs is reduced. Additionally, the high % of government taxes creates an incentive for the state to prevent competition.

TLC finished up +7% to $5.66