Tabcorp profit hit by costs of Tatts merger, legal battles

Wagering giant Tabcorp’s half-year profit is down 28.1pc due to its pursuit of Tatts, and legal battles.

Tabcorp CEO David Attenborough. Pic: David Geraghty

Wagering giant Tabcorp’s half-year profit has taken a hit, falling 28.1 per cent, on the back of the cost of pursuing Tatts and fighting a legal case brought against it.

The Australian-listed company (TAH) today reported net profit after tax was $58.9 million for the first half of fiscal 2017, while earnings per share was 7.1c, which was down 28.3 per cent.

Tabcorp shares fell 4 per cent to a six-week low of $4.56 following the news.

CLSA analyst Sacha Krien said the result was “messy” and missed his forecasts. He said Tabcorp had disappointing growth in wagering and higher than expected significant items.

Earlier, the company said while the result showed revenue growth in each of its businesses, its profit was impacted by costs associated with its Tatts (TTS) takeover, the Sun Bets joint venture in the UK and fighting a legal case launched by Australia’s financial intelligence agency.

The significant items registered by Tabcorp in its results totalled $43.8m. Almost half went towards civil proceedings, which were launched by the Australian Transaction Reports and Analysis Centre (AUSTRAC).

The joint venture with News UK to create Sun Bets incurred costs of $17.9m, while Tabcorp’s move on Tatts had a $9.1m price tag, which it said was partly offset by a net gain of $7.3m on a related cash-settled equity swap.

Tabcorp said today it was progressing the regulatory, industry and other approvals required to finalise the Tatts deal, adding engagement with the competition watchdog was also ongoing.

“Completion is expected in mid-2017 following Tatts shareholder, regulatory and other approvals,” the company said.

Chief executive David Attenborough said the first half of the 2017 financial year had been an important period for Tabcorp.

“Wagering and media continued to respond to the highly competitive environment and TAB had a record-breaking spring racing carnival,” he said.

“We launched key initiatives, which support our multichannel strategy and reward our venue partners, such as a new digital commissions model.”

The new digital commission model sees clubs, hotels and TAB agents paid a commission when a customer bets through TAB’s digital platforms in their venue. The venue partners also receive commission on out-of-venue digital activity conducted by account customers signed up in their venue.

Tabcorp highlighted in its results that it recorded a 13.8 per cent increase in digital turnover. Tabcorp also said Sun Bets had 85,000 customers at the end of last year.

The company flagged that its target was to achieve 14 per cent return on invested capital in 2017, excluding the impact of significant items.

“In the second half we are focused on driving business performance and progressing the proposed combination with Tatts Group,” Mr Attenborough said.

“The combined group will have a suite of long-dated licences and an expected strong investment grade balance sheet. This will provide more capacity to invest, innovate and compete in an evolving global marketplace.”