Tabcorp outshines market expectations despite net profit halving

The betting giant’s share price barely moved after it reported an expected jump in underlying earnings.

Tabcorp chief executive David Attenborough said the company’s core wagering business lifted its performance through the year, with turnover growth improving from a rate of 1.9 per cent in the first-half to 3.8 per cent in the six months to June 30.

Wagering giant Tabcorp has topped market expectations despite reporting a 49 per cent slump in net profit due to a challenging comparison with a result in the prior year that was aided by a one-time tax benefit.

The ASX-listed company said statutory net profit weakened 49.3 per cent to $169.7m as it was hit by charges of $16.2m, as against last year’s $163.2m boost from a one-off tax benefit.

Despite the fall, the company managed to edge out analyst expectations for a more significant drop to $161.2m.

The update was met with a muted response on markets as Tabcorp shares traded flat at $4.85, against a broader market rise of 0.4 per cent at 12pm (AEST).

The reaction followed comments from analysts that welcomed the meeting of expectations, while noting it was not a standout result.

“Tabcorp’s FY16 result was in line with our expectations and momentum into FY17 will accelerate with the acquisition of Intecq and also the launch of SunBets in the UK,” Macquarie said in a note as it maintained its ‘outperform’ rating.

The group’s underlying earnings, which remove the impact of significant items, jumped 8.4 per cent to $185.9m.

This number also outshone forecasts, with analysts projecting underlying earnings of $182.6m.

Its sales result of $2.19bn broadly matched expectations, while its pre-tax earnings of $515.8m fell just shy of market forecasts for $523.2m.

Tabcorp chief executive David Attenborough said the company’s core wagering business, which is dominated by the TAB, lifted its performance through the year with turnover growth improving from a rate of 1.9 per cent in the first-half to 3.8 per cent in the six months to June 30.

“Our Wagering and Media business grew in FY16, benefiting from TAB’s multi-channel distribution model and the integration with the Sky media business,” he said.

“Momentum improved across the year, with trends in the second half stronger than the first half.”

Tabcorp’s boss also weighed on the prospect of additional regulation in the sector, saying his group would support changes to advertising policies.

“We share the community’s concern that there is too much sports betting advertising and are supportive of measures to reduce it,” Mr Attenborough said.

Tabcorp retained a target to achieve a 14 per cent return on invested capital in FY2017.

The wagering giant delivered a final dividend of 12c a share, bringing dividends for the full-year up to 24c. The group is targeting a result of at least 24c next year.