LTRCF (LTRCF) Q4 2026 Earnings Report, Transcript and Summary

Good morning, and thank you for joining today's call on The Lottery Corporation's FY 2026 Financial Results. I am Wayne Pickup, the company's MD and CEO, and I am joined by our CFO, Adam Newman. We will walk through the investor presentation lodged with the ASX this morning, then open the line for questions. Since I joined The Lottery Corporation 9 months ago now, you may have heard me say that it operates from a position of strength with a privileged market position and strong fundamentals. But while that is true, we need to position the business for the next chapter of growth to evolve from being a lottery operator to a digitally-led entertainment platform. To achieve that, we have refreshed the strategy and implemented a new operating model. New teams are in place, and we are moving at pace to execute. We are preserving what has been successful over many, many years, but modernizing it for how Australians want to play and engage today as customers move online and demand more. That creates a clear opportunity, underpinned by a simple vision, to be the place where Australia comes to play. Looking back on the first year, 3 things stand out. Firstly, the core is strong. That is the benefit of strong infrastructure-like foundations through our long licenses, operational scale, and well-known brands. Secondly, FY '26 was a really soft year for big jackpots, a one in 45 year outcome. A good one for our customers as more Australians won $1 million prizes. But it was the first time in 5 years that Powerball didn't jackpot to $100 million. Oz Lotto, our other jackpot game, didn't get to $50 million for the first time in 9 years. As you know, the math tells you jackpot runs even out over time. The momentum in pricing, base game participation, and digital share matters more to the long-term trajectory than what happens in any single period. So when we evaluate our business, we see through the variations and think that is the right way to look at it. Thirdly, we are executing the new strategy well. Structural changes to our cost base are giving us room to invest in areas where we can get better returns, like digital, AI, product, and the customer experience in retail. Slide 4 outlines the investment case. Let's be clear, this is a great business that has trusted partnerships with governments to sell products that Australians love. Our license-backed market positions would be the envy of lottery operators around the world. Our scale is significant. That enables investment and provides the liquidity to fund the prizes that customers want. It has delivered steady turnover growth and reliable returns over many years. But more growth sits inside our existing customer base, in addition to new customers we attract. We will pull the structural levers to accelerate that growth over the medium to long term, beyond the 4% historical turnover growth rate. Slide 5 shows how we will turn strategy into shareholder value. What is common to these initiatives is our intention to modernize the business and be more focused on entertainment, not just jackpots. We want people to come back more often, be engaged more often, and not just participate when there are large jackpots. So we need to fill the entertainment portfolio with more reasons to come back and engage, and really build on these in-between moments. This will grow our base of known customers playing more often. What we are targeting is to combine accelerated revenue growth, expanded margins, and strong cash generation to deliver compounding earnings. We have the ingredients in this business to deliver it. Now it is about execution. Turning to the year in detail on slides 7 and 8. If you wanted just one example of how resilient and reliable this business is, it is the fact we have held the dividend at $0.165. That also reflects our confidence in the business' health and growth outlook. The Victorian license extension to 2068 supports that growth outlook in 3 ways. It secures our position as the national lottery operator. It is materially reduced the business' risk profile. Our next major renewal is New South Wales in 2050. It keeps us part of the Victorian community as we have been for decades and supports a vibrant news agent and lottery agent network. The Victorian license was always a bit of an outlier, historically granted on 10-year terms, but the extension brings it broadly in line with other licenses. New South Wales and South Australia have 40-year terms, and Queensland runs for 65 years. We had a very good year in terms of execution. Slide 8 outlines several initiatives. The biggest pieces were the strategy refresh and new operating model. At an operational level, both Lotteries and Keno delivered initiatives to strengthen the customer proposition. Now, I will hand over to Adam for the group results in more detail.

Good morning. Thanks, Wayne. Good morning, everyone, and thank you for joining us. FY '26 jackpot offers ran 21% down versus the PCP. Despite that, the group delivered a resilient result, confirming the strength of our overall business model. Group revenue reached $3.6 billion. A diversified portfolio cushioned short-term jackpot swings. OpEx fell, and EBITDA before significant items was $736 million, down just 1.8%. Net interest expense rose 4% or $5 million, and this was driven by higher debt levels. We remain materially insulated from rate movements, given around 75% of our debt is fixed or hedged against foreign exchange movements, and we earn significant interest income on our cash balances. Following the Victorian license renewal, interest expense will rise materially in FY '27. Net profit after tax, pre-significant items declined 6% and as Wayne mentioned, directors held the full year dividend at $0.165 per share. Significant items, $58 million after tax are set out in appendix 1, and these mainly are comprised the ACT license impairment plus reorganization costs. Moving to slide #10, our EBITDA result reflects the underlying strength of our overall portfolio. Jackpot turnover adversely impacted EBITDA by $88 million versus the PCP. Factors we control offset most of that impact, limiting the year-on-year EBITDA decline to $13 million. Strong pricing changes to our 2 biggest games, including excellent price retention from the late FY '25 Saturday Lotto change and 8 months of the Powerball price increase. Our base games were resilient with continued momentum in Instant Scratch-Its and Lucky Lotteries. Keno delivered another record year with retail visitation and in-venue improvements sustaining growth. Lower OpEx reflecting ongoing discipline and overall focus. In summary, these elements enabled the business to manage the jackpot volatility with diversification across our game portfolio, channels, and customer segments providing earnings stability. Moving on to slide #11, there are a few key points on this slide. OpEx came in at $296 million, below last year. That reflects disciplined cost management, including the benefit of optimization activities, which remove structural costs from the business. This was accompanied by actions taken in a low jackpot environment with advertising and promotion, and incentives approximately $10 million lower. We are expecting OpEx in FY '27 to be between $305 million and $315 million, subject to jackpot outcomes. FY '27 will benefit from labor savings tied to the recent operating model changes. We will reinvest some of these savings to drive long-term top-line growth. Secondly, the dividend. As Wayne Pickup said, we manage the business for the long term and look through jackpot variability. Holding the full-year dividend reflects the board's confidence in the business. From FY '27, we will move to a payout ratio that is based upon net profit after tax, pre-significant items, and adding back license amortization after tax. This is a more cash-based measure that fully reflects our cash generative nature and supports the consistent, reliable dividends that are a critical element of our capital management framework. Leverage and interest. Since demerger, we have held the leverage near the bottom of our 3 to 4x target range, thereby preserving capacity for the Victorian license extension. Now the Victorian license has been renewed, leverage is likely to increase above the long-term target range. Reported leverage was 3.1x at the 30th of June 2026. Adding in the cost of the Victorian license and normalizing for jackpots, adjusted leverage was 4.2x. However, we expect to de-lever over time and return to the target range, supported by both earnings growth and free cash generation. The new debt will also materially increase interest expense in FY '27. Our average interest rate is currently 5.8%, and new debt is expected to be at higher rates given where base rates are now and likely margins for tenors of anywhere up to 10 years. Finally, Standard & Poor's reaffirmed our BBB+ credit rating after the license extension, reflecting the structural de-risking scheme that it provides. So to summarize, our balance sheet and strong credit rating that is fully debt fund the Victorian license. And in a year of unfavorable jackpots, we held the dividend and showed the cost and capital discipline you would expect for us -- from us as we focus on delivering long-term value for our shareholders. Thank you, and back to Wayne.

Thanks, Adam. Now let's turn to the segments, starting with lotteries on Slide 13. As the chart shows, the lean jackpot run for Powerball and Oz Lotto was estimated to have had an $80 million impact on VC versus model expectations despite that, what I think is important to take away from the slide is that where we control the levers, we performed well. our pricing strategy and reduced OpEx is clear evidence of that. Slide 14. As you'd expect, fewer larger jackpots reduced overall customer numbers and turnover. I want to touch on the key distinction between retained and new or reactivated customers here. There are 2 cohorts that behave differently. Retained customers are the most valuable group. They typically spend around 5x more than new or reactivated customers. This cohort remains quite resilient and has grown over time, compounding at about 3% a year since FY '22 and moving within a very narrow band throughout. This points to a structurally healthy core, even through softer jackpot periods. New and reactivated customers, on the other hand, swing more with the jackpot cycle. Customer is a hero metric. How many we have, how engaged they are, and what they are worth to us. We have set ourselves a very simple target, more customers playing our games more often. More than 4 million Australians play our games each year who aren't registered today. We're very focused on this opportunity. Some of the recent initiatives the team's implemented have cut friction and make it easier for customers to sign up, for us to reach them. In terms of channel, we continue to benefit from the shift to digital, with digital share growing 90 basis points. That's notable given jackpots, which skew stronger to digital, had lower turnover this year. Slide 15. Looking at our base games, a really pleasing performance, up 5.6% on the past year. Saturday Lotto was very strong as were instant scratches, which grew almost 8%. That's referenced in Appendix 3, which sets out the turnover performance of each game. We have renewed momentum in Instant scratches. It's a great category. It's retail only, and the team have done an excellent job in extending the product's appeal, and we see even more opportunity for improvement across the ticket range. We touched on how we intend to do that on Slide 18. Slide 16 now. These charts really speak for themselves when it comes to the softness of the offers in both jackpot games. Oz Lotto was especially soft against a tough FY '25 comp. More than half its draws sat at the $3 million, $4 million or $8 million level where the offer is naturally less attractive than higher levels. We're addressing Oz Lotto directly and more on that shortly. Slide 17 is new and shows exactly where the unfavorability occurred. By coverage, we mean how many of the draws possible combinations are covered by tickets sold and allowing for the fact that some players have the same numbers. To illustrate, take the Oz Lotto draws between $15 million and $40 million, where the average coverage was just 27%. This means there should theoretically be a winner only 27% of the time. The actual rate was double that, 54% or 13 of 24 draws had winners. A similar story for Powerball. As a result, we didn't reach the very large offers, $100 million plus for Powerball or $50 million plus for Oz Lotto, where turnover grows the fastest. As we've said, this is variability and we expect it rather to even out over time. In fact, since the business listing, the aggregate variation over those 5 years nets out at zero. In other words, outcomes tend to regress to the mean over time. Now, if we turn to slide 18. One of the things this business has done really well over time and is a key strategic differentiator for us is optimization through price. It's a proven and repeatable playbook where we change a game subscription price and lift prizes at the same time. Our recent Lotto and Powerball are working as planned. Coming up, Set for Life relaunches next month, subject to regulatory approvals. It's already a strong product and we're going to make it even stronger. We're now going to give winners an extra $200,000 up front and a further $20,000 in Division 2. It's tested well and a $0.10 price increase will support that next evolution for that game. Oz Lotto will be next. We're targeting a price and matrix change with launch planned for the second half of calendar 2027, subject to all regulatory approvals. Oz Lotto plays an important part in the portfolio as 1 of 2 weekly jackpot games. This duality increases the likely frequency of large jackpots and our ability to stretch the customer proposition. So following the successful Powerball changes, we see a timely and compelling opportunity to optimize AZ. Now if we turn to Keno on Slides 19 and 20, the growth story continues against the prior year that had a really strong Keno classic jackpot run. Pubs and clubs continue to experience good visitation. We've sought to gain share of wallet by making the Keno in-venue experience more visible and more engaging. As for online, as many of you are aware, legislation was introduced in federal parliament by the government to ban online Keno products as part of broader gambling reform. Parliament's currently considering the bill. The full year impact of discontinuing online Keno for us would be circa $25 million of EBITDA based on FY '26. Our response is to double down on Keno in-venue Licensed venues. We have a long-standing relationships with venues, and we're well and truly embedded in the Eastern Seaboard pub and club ecosystem. Now if we bring it together, let's recap our strategy on Slide 22. Here's the logic and what sits behind the 3 clear pillars. Pillar 1 is about strengthening what we have. that's renewing and growing what we already do well, the core lottery and Keno offer. Any adjacent opportunities would be looked at selectively only where our licenses and brands can compete. We're not chasing markets where we lack a clear edge or aren't sustainable. Pillar 2 answers where new growth comes from. That's digital. That's where younger adult Australians where we have the most room to grow and where margins are attractive. We want to create digital experiences that customers want to return to and play, not just transact with -- and Pillar 3 is about delivering the first 2 by modernizing our operations, maintaining our expense and capital discipline and building trust. Four capabilities support these pillars and make the strategy executable. Slide 23 lists this year's priorities. In Lotteries, it's investing in product and marketing to drive participation and know more of our customers. It's also about continuing to invest in retail and that critical connection between the retailer and customer. In digital, we have a strong pipeline of initiatives backed by a new team. One of our biggest opportunities is social play, turning a solo experience into something people want to share. Syndicates, digital gifting, et cetera, there's a lot we can build here. There's 2 features about to go live on The Lott app in line with being more about entertainment. The first is The Reveal. It turns checking the results on the app into a more dynamic event rather than a transactional type of notification that says whether you have won a prize or not. The second is PlayPick, which can make number selection far more engaging. Rather than tapping numbers on a grid or letting a quick pick decide, customers can pick their numbers through quick interactive games. The idea is picking your numbers should feel playful and entertaining, not just functional. We are investing confidently in Keno, rebuilding it around licensed venues to make it more entertaining and deliver really simple social play. One example is our plan BYOD model, a customer-led digital solution that gives customers more choices in how they play Keno within a pub or a club. We also expect it to expand our reach into new venues. So lots of upside from that initiative alone. As for what we've seen so far in FY '27, jackpots have been off to a slow start, but the underlying health of the business remains strong. We haven't seen anything in the past 7 weeks that changes our expectations for the business or our approach to managing it. So in conclusion, on Slide 24, the financial performance in FY '26 was resilient, where we control the levers we performed very well. The Victorian license extension in 2068 strengthens our infrastructure like characteristics further. Our new operating model gives us 3 verticals with clear ownership and accountability and an in-flight road map and clear indicators to track progress. On final note, I would like to thank our team for their hard work in contributing to this result. I will now open up the line for questions.

[Operator Instructions] Your first question comes from Rohan Sundram with MST Financial.

Just the one question, Wayne. I take on board your comments, but how would you describe the consumer environment at present? I appreciate the underlyings look quite solid. I ask with regards to the 4% reduction in retained customers. Just wondering, is there a luck or a jackpot aspect to that, or how much of that would you actually attribute to macro and how hard you have to work?

It is a good question, Rohan. We have not seen anything in the data, in our data anyway, that would give us cause for concern. Some of those retained customers, obviously they are not completely jackpot immune. One of the things that gives us confidence in current trading performance is the smaller games. When we look at Instant Scratch-Its, in particular, they are still doing very well. As you guys probably know, lotteries are traditionally resilient through consumer downturns, economic downturns. We have not seen anything in our data, but we are obviously cognizant of it, where I'm out visiting retailers. It's tough out there in general. But nothing of concern in what we're seeing coming through. We would just like a few more jackpots, Rohan. That's all.

The next question comes from David Fabris with Macquarie.

Just wanted to focus on costs, actually. You've done a great job on costs and appreciate the guidance. I'm just curious, does the FY '27 guidance have the full run rate of the recent cost initiatives? Will some of that flow into FY '28? And then in addition to that, should we expect any net benefits from AI flowing through? I guess I'm trying to figure out whether that, call it $300 million to $350 million range, is the kind of zone we should be thinking about beyond '27 with some of those moving parts.

Hi, David. It's Adam here. Thanks for your question. Yes, so with regards to the op model changes, they've sort of benefited a little bit in this year. We'll have benefits flowing into next year and a bit basically flowing back into FY '28 as well. They're taken into account with the overall range. Effectively, we've talked about it before. We talked about the investor day, that some of those savings get reinvested back into the business. It's not just the op model, we've obviously had a program of optimization looking at other costs or opportunities within the business over a period of time as well. That's all kind of reflected in that overall range that we've provided there to you. Don't want to get into looking out beyond FY '27 at this point. You probably just need to take into account that the range also reflects the fact that not only have we removed structural costs out of the business, but we did have some jackpot-related actions that we took for this year that are called out there, between advertising and promotion and incentives that, in a model where you go back to mean reversion, they'll come back into the picture as well.

Yes. Got it. Okay. Whilst I've got you, Adam, just on the Vic license payment, are you able to give us any indicative range to consider for the debt cost? Obviously, you've suggested it's going to be above that average of 5.8% currently, but any range might be helpful, because obviously that's going to have an impact on our net interest costs in our forecasting.

Yes. Thanks, Dave. Yes, another good question. At the moment, it's a bit dependent upon markets and timing of take out of the existing facilities within that. So we're not really giving a range other than saying given where base rates have moved and for tenors for periods over and above, up to that 10 years, it'll be north of the 5.8%. Sorry, I can't be any more specific at this point.

No, understood. Just my final question, just on Keno. Appreciate you have reiterated the $25 million EBITDA impact from exiting the online business. You have got the refresh of the retail products and offering going on, like the new terminals and BYOD. In the coming years, do you think that these initiatives can cover that impact, or should we be thinking about Keno being below the adjusted run rate once you take out online Keno?

Look, I think it is too early to say, David Fabris. We are going to be launching or trialing rather, BYOD in Victoria in November. We will provide updates as we go. As I have said in the past, we have now got a focused team on Keno. Just improving the visibility and the product presence in venue, we think will do a lot. We have got great relationships with clubs and pubs around the country. We will provide more data as we can in terms of how those initiatives are rolling out. I would not want to go beyond that at this stage.

The next question comes from Justin Barratt with CLSA.

Wayne, in your FY '27 key priorities for Lottery, you talk about the review or extension of draw times for Powerball, Oz Lotto, and Saturday Lotto. I was just wondering if you could expand on that point a little bit for us, please.

Well, they're currently 7:30, and we're looking to push them out by about 1.5 hour. So 9:00. It's not much more complicated than giving people another 90 minutes to get their ticket. And so we've heard from customers that they didn't get into the draw because they're, I know from my, picking the kids up from water polo or something, or rushing around or trying to get dinner ready. It's really just listening to customers and giving them another 90 minutes to buy a Powerball, Oz Lotto ticket. Yes. And it seems to be something that customers want and a bit of a no-brainer.

Yes, fantastic. Thanks for that. I really appreciate slide 17 of your pack today, around these mid-level draws. I guess my question in relation to that area is that, my understanding is that at those mid-level draws, it does have an impact on your prize reserve fund. So I just wanted to ask, I guess, in relation to Powerball and Oz Lotto, has that impacted or has this jackpot run impacted your prize reserve fund across FY '26 and therefore, again, I appreciate it's around the edges, but I guess impacted your ability to potentially accelerate jackpots next year?

We've been prudent with the prize reserve fund. We haven't got aggressive with sequencing. The PRF balances are robust and sort of average over the long period. We've taken a very prudent approach. We've got no concerns around the prize reserve funds. In fact, over the coming months, we may look at deploying. Some of those PRF balances may be different to how we've done it in the past as well. There's a few levers that we have, but the business has handled what has been a statistically awful period very well. We've taken a very measured approach. We're focused on execution, and we've really controlled the things that we can control. The direct response to your question is that we've got no issues with the PRFs, and that's partly because we haven't been overly aggressive in terms of the way we've looked at sequencing.

The next question comes from Adrian Lemme with Citi.

I was just hoping you could talk to the progression of likes for Powerball since the price increase. From what we can tell, the retention was extremely high in the first few months, but then it's faded, say, in the last 6 months. Are you able to sort of talk to that progression and where you might see the exit rate, please?

Yes. As you probably heard me say before, we don't want to bookend. You can bookend this business in different periods. First and foremost, we look at it over the medium to long term. Quite frankly, we need some runs on Powerball to really see how the changes have played out. We are assuming that the statistical gods will shine in our favor at some point and we'll get some $100 million runs. Over the past few months, there have been weeks where Oz Lotto or even Saturday Lotto, at some points, have outweighed the Powerball jackpot. So you see that trade down slightly. As you would expect, we have a cohort of customers that just choose the biggest jackpot prize on offer during the week. But yes, over the 9 months, the data that we're giving you is over the 9-month -- roughly 9-month period, any sort of softness that we've seen in the past few months has typically been on a week-by-week basis has typically been because OZ Superdraw have outweighed Powerball.

Can I just ask a quick follow-up on the Oz Lotto side? Because it does seem it was maybe down double digit in the second half on the likes, and I do understand it's a tough comp. But obviously, there'd be a lot of registered players who would be playing both Powerball and Oz Lotto. So I was wondering if you've done any analysis to see whether maybe those players are pulling back a bit on Oz Lotto since the Powerball price increase. Are they kind of managing to a budget given that price increase, please?

Haven't seen that in the data.

The next question comes from Andre Fromyhr with UBS.

Maybe a question for Wayne on slide 23, FY '27 key priorities. There's a reference to reviewing the retailer commission structure. I am curious to understand if there is any particular pain points that you are seeking to address there at the moment. Is the scope as broad as just changing percentages or is it something different to that?

Thanks, Andre. It is broader than that. We are in a dialogue with retailers and their respective associations at the moment on it. I do not want to go into too much detail, but just think of it as reflective of strategy. We want to ensure that we are all rowing in the same direction. For instance, Andre, we have got a stated objective of getting more registered players. We want people to register if they win. We want to be able to find them. We want to be able to pay the prizes. We want to be able to notify someone that their favorite retailer has just sold hopefully an $100 million Powerball prize. A lot of our strategy, as you know, is around having direct relationships with our customers. In the broadest possible sense, we just want to make sure our commercial arrangements with our retail partners are commensurate with that.

Okay. If I could just stay on that slide, wondering if you could provide a status update on the Greenfield app with the launch for first half '28. That is conceivably a year away. Just curious to understand where you're up to and what the risks are around, especially the timing.

Well, Yes, we're working on it. With the digital program, we're attempting to chew gum and walk at the same time. You're going to see a number of drops under the current infrastructure that we have in place. Next month, in fact, you'll see, and we showed you some of these at the Investor Day, the PlayPick and Draw Reveal. They'll be launched next month. Second half of the year under the current digital app, there'll be social play, digital gifting, and autoplay. What we don't want to do, Andre, is just go out and build the same thing that we have today. A lot of the work at the moment with the team is around looking at what the app ought to be. A lot of people are getting excited because they think they can build an app in 2 weeks with AI. What we want to build is something that people want to use and come back and engage with. The other thing is, when we build it needs to be AI-ready, and have all of those necessary tools embedded in it. On the app, we will do it well, we will do it efficiently. And I think probably around this time next year, we'll be close to launching it. And we're not stopping doing everything else, right? In the meantime, we've got, I think, a very sensible and commercially aggressive list of improvements with the current infrastructure that we have in place today. You may have already, and I know you're a big lotto player, Andre, but you may have already seen some improvements in the app UX already. And this is the benefit of the op model change. We have a very excited, pumped-up, energetic digital team, and we want to create certainly the best app for this product in Australia.

The next question comes from Kai Erman with Jefferies.

Just one from me regarding products. You have obviously flagged the upcoming Oz Lotto changes you are working through and done some work on Instant Scratch-Its to date, which you are seeing success with. Do you see any other opportunities in the portfolio to refresh or improve products or potentially any new product ideas that could fit within your existing portfolio going forward?

The short answer is yes. We are not in a position to sort of get into them today. Again, based on the OP model changes we have made, we have a lotteries team now. They are focused in terms of what else. I think I would like to be able to present a roadmap that goes beyond just the next 12 months, so to speak. There is opportunity to do more with what we have got. As you have probably heard me speak about before, we sort of try to compartmentalize them into 3 things is, how do we improve the experience of the products we have today, right? That is the examples with some of the digital changes, that are going to work great for retail players as well. The Draw Reveal and things like that. Moving into changes to existing products. Then MPD. Our focus at this stage is on those sort of first 2 buckets. MPD will follow at some point in the future.

That makes sense. Maybe just on the digital penetration piece. You obviously saw pretty strong outcome there this period, despite the sort of weaker jackpots. How much of that do you think is driven by some of your recent initiatives you're doing in digital? With more initiatives to come, do you have a sort of view on how high that could get to in the next couple of years?

I think what you've seen through FY '26 is largely organic. I think it's just a preference shift. I think at the end of this current financial year, you'll get a better sense of changes that we're making and the impact on those. Where it gets to is where it gets to. We're not pushing people one direction or another. A large part of what we do is marketers and the biggest job of a marketer is to listen, and to listen to customers. We'll just try to understand our customers as well as we can and respond. There is naturally a digital preference that goes along with that.

The next question comes from Mark Wilson with RBC.

Wayne, just with online Keno. Just wondering what your approach is up to the point where you've got to exit that business and will there be any sort of major restructuring redundancy costs as a result of exiting that business?

No. We've factored it in already. I think the current round of restructuring was cognizant of this. We presumed this change. It's also reflected in our investment in that online channel over recent months as well.

Great. You just run it as per normal up until the end of December?

Yes. The parliament, I know it's imminent now, but we'll just sort of get through the parliamentary process. Then the working assumption is that we shut it off at or before when we're told to.

Yes. Then just on the opportunities to reinvest in the business, whether it be OpEx or CapEx, what are the key items that you are focusing on?

They center around the customer experience. One thing that we're doing, just in general terms, very general terms, just improving the customer experience. We take this vision of where Australia comes to play very seriously. We take the mission of giving people more reasons to come back beyond waiting for a jackpot very, very seriously. We've rolled out digital signage. We're actually trialing a different type of digital signage in stores, in the coming months. Clearly, the app and the digital assets that we have are an essential part of that reinvestment, both in terms of online play as well as the app being a really, really strong compendium for in-store play as well.

The next question comes from Matt Ryan with Barrenjoey.

I saw that base games were up almost 6%, which is a bit more than we'd normally expect. Just keen on your thoughts on what's driving that.

It's a good question, Matt. It reinforces the strength of the franchise that we see. While we haven't had the headline jackpot numbers, people are still. It gives us confidence, right, in the core franchise. And people still want to engage, spend $15, $20 a week, and play The Lottery Corporation. There have been some intentional, a lot, intentional work around the Instant Scratch-Its range. I think you've heard me talk about before that I think there's runway there to do more. While a lot of the air time is taken up by Oz Lotto and Powerball and Lucky Lotteries, there's an awful lot of people in the business that work on these base games. Think about them very hard and work with our retailer outlets. We've got cross-sell going through the digital channels now on them. There's lots of small things that we can do to make the boat go faster. And I think you see that reflected. And to the point earlier, from the earlier question, this is what also gives us confidence in the underlying strength of the franchise through what is undeniably some volatile consumer sentiment moments.

Great. Then maybe just a question on the next 12 months. I think you highlighted maybe marketing costs came down a little bit in the past 12 months, presumably on the poorer jackpots. Are there any other costs that might come back with a more jackpot normal environment?

I think it would mainly be advertising and promotions. Adam, I don't think there is anything else of materiality.

Yes. All I would add to that, Matt, that we did call out there is a benefit from not only A&P from jackpot related, but incentives were impacted as a consequence of the jackpot outcomes as well. So both of those items factor into the guidance that we have given for FY '27 OpEx.

Do those incentives fall in the advertising and promotion line?

No.

Staff used to refer to....

Their employment costs.

Yes.

The next question comes from Charles Strong with Jarden.

I was just wondering, is there a particular cadence you're working to on game refreshes? Just noting that Set for Life to come in September and Oz Lotto in the first half '28.

The short answer is no. The longer answer is that we would like it to be not one a year. Some of the restrictions we have around the regulatory environment we operate in, the legacy tech that we operate. One thing that we haven't spoken a lot about in the past is we're in the second year of a CapEx program. Clearly, I've spoken a lot about the digital assets, but we're replacing all our terminals. All of those terminals have software on them. We've upgraded our data center as a lot of our infrastructure. So there's a lot of plumbing in the background that we don't talk a lot about. A lot of people in the business do a heck of a lot of work on. So we've got some things that restrict us. But I wouldn't read too much into once a year. We would like to be making changes more often than that going forward.

The next question comes from Sam Bradshaw with Evans & Partners.

Just wondering if you can give a comment on how you think you're positioned for the ongoing gambling reforms beyond online Keno, which I suppose you've already touched on. And if you have a strategy to capture some of the spend from adjacent lottery categories that's expected to be shut off.

Yes. As I said earlier, this is going through a parliamentary process. I've sort of put my views in the public domain. What we've certainly looked for is, we favor highly regulated, consistent markets. Okay? And the company, since me joining, we've been very consistent about that. It's in the last throes, we think, of the parliamentary process, and I'm not going to comment on it much further than that. The second part of your question, we're not factoring in anything at this stage in terms of a shift in expenditure other than we've taken a very conservative approach to it, I think. We've flagged the online Keno, which is clear, and we haven't made any other assumptions beyond that.

And then maybe just a little bit following on. There was a one-off cost for The Lottery Corporation's product development that was flagged due to the future viability, given the emerging reforms. Were you able to kind of tell us what those product developments were?

As you'd expect from any company, we have had a number of things, a number of product ideas that have been worked on. When I started, we've obviously reset strategy. At the same time, we've looked at where we think the sort of the tides are moving in terms of gambling policy in Australia. We're not going to continue with some of those initiatives. That's as far as I'm going to go.

There are no further questions at this time. I will now hand it back to Wayne Pickup for closing remarks.

Well, look, it's been a tough year in terms of what we were dealt with, but I think solid results. I know the team. It is really about what we are focused on is about the future. We have got a team that is very engaged, and very focused about execution. And thank you for your time today, and I will look forward to catching up in the future.