Tabcorp Full Year Result: TAH held back by almost $200m in one-off costs

Tabcorp has delivered a worse than expected $20.8m net loss for the year. The gaming group’s bottom line was mainly impacted by almost $200 million in significant items (one-off costs).

Tabcorp (TAH) has delivered a worse than expected $20.8 million net loss for the year. The gaming group’s bottom line was mainly impacted by almost $200 million in significant items (one-off costs). These costs were linked to its proposed merger with Tatts Group, legal costs (AUSTRAC money laundering civil proceedings) and a loss from its Sun Bets business in the UK.

Tabcorp will pay investors a fully franked $0.125 final dividend on 18 September 2017. It will trade ex-dividend on 11 August. This takes total payments for the year to $0.25; a $0.01 improvement on FY16.

TAH shares have improved regardless of the miss for a few reasons. Firstly, TAH had pre-announced most of its results in a June update. Secondly, when not including the substantial one-off items, underlying profit (profit before significant items) was at the top end of the company’s guidance ($173m-$180m) and slightly above analyst expectations ($175.1m).

The company was pleased with the performance of its core businesses. Earnings improved in its Gaming Services and Keno unit. However, Wagering & Media (its biggest division) went backwards. Its wagering & media business (TAB), which accounts for 70% of earnings, posted an 8.4% slide in its underlying profit to $350 million. The result was held back by the impact of a loss from Luxbet (its online betting business based in NT) and a 14.6% decline in Trackside revenues (its animated racing game). It will introduce new initiatives in FY18 for its Trackside division and is undergoing a strategic review of Luxbet. It has secured rights for continued broadcast on Sky Racing.

TAH’s second biggest earner, Gaming Services (includes more than 9,000 poker machines) posted a 17% lift in profits to $82.1 million and a 34.2% jump in revenues thanks partly to seven months of Intecq trading (a gaming tech company it bought for $128m in 2016) and is being successfully integrated into the group. Not including Intecq’s contribution, revenue was up a more modest 7.8% and was boosted by a number of new venues in NSW such as Panthers Group from February 2017.

Keno has enjoyed strong performances in NSW, Victoria and ACT, helping to partially offset weakness in Queensland. Sun Bets – the UK start-up – posted a $46.2 million loss over the year and was a drag on the result. It expects to be better positioned for a stronger performance in FY18.

Looking ahead, TAH’s merger with Tatts (TTS) will be a priority over the coming year. While TAH said it expects the combination to be completed by the end of 2017, a vote on the $11 billion merger has been delayed until October 2017.

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