Tabcorp Holdings earnings results

CommSec CommSec

 

14 August 2019

Results 

Full Year 2019

Full Year 2018

Change

Revenue ($m)

5,482.2

3,757.3

+46%

Bloomberg Consensus ($m)

5,416.0

 

 

Profit before Significant Items ($m)

397.6

279.1

+42.5%

Bloomberg Consensus ($m)

396.9

 

 

Significant Items ($m)

25.3

127.0

-80.1%

Net Profit (Loss) after Tax ($m)

362.5

28.7

>100%

Final Dividend ($)

0.11

0.10

+10%

Tabcorp Holdings (TAH) profits lift on record Lotteries result

Results

  • Gambling group Tabcorp (TAH) reported results for its first full year of combined operations following its merger with rival Tatts Group. Net profit before significant items improved by 42.5% to $397.6m which was largely in-line with Bloomberg consensus (nine brokers surveyed). Revenue growth of 46% was a touch below market expectations. Morningstar estimates that TAH now has a close to 60% market share in the gambling space. 

Drivers

  • Tabcorp’s (TAH) earnings were helped most by its Lotteries & Keno business, which was boosted by the addition of Tatts’ near monopoly in this space and was held back by its Wagering & Media division, which is going through a period of transition and significant investment.  
  • Its Lotteries & Keno unit generated a record 28.9% lift in EBITDA to $509m and is now the company’s biggest earner (almost 50% of EBITDA). It attributed the improvement to continued game innovation, increased investment in technology and a very favourable year for large jackpots, which added an additional $30m to profits. Jackpots over $15m are considered to drive interest in lotteries and there were 35 such jackpots over the year (vs 28 in 2018). Importantly there were 14 jackpots over $50m (vs just 4 last year). This helped lift revenue in its Oz Lotto, Powerball and Lucky Lotteries games, while simultaneously increasing the number of active registered players by 22.2% to 3.3m. This strong result was more than enough to offset the more challenged areas of the business.
  • Wagering & Media underlying earnings were sluggish, slipping by 7.9% to $416m as it navigates a period of integration with the Tatts business and investment aimed at maintaining customer numbers in a highly competitive market. Turnover in the ex-UBET business (Tatts’ former bookmaking unit) was down 9.5% (QLD, TAS, SA and NT), largely as a result of the legacy offering. TAH said that the transition of UBET to the full TAB offering is progressing well and is on track for completion in FY20.

Dividend

  • TAH announced a small increase in its final dividend and is scheduled to pay eligible investors $0.11 per share on 20 September. It will trade ex-dividend (the key date that determines who receives the payment) on 21 August. Its near 5% dividend yield has been attractive to some in the low interest rate environment.

Outlook

  • No specific guidance was provided for the year ahead, however in coming years it expects to invest in the digitalisation of its wagering business, fully migrate its UBET systems to the TAB platform, to continue focusing on reducing costs and increasing product innovation.

Share price

  • TAH shares have come under some selling pressure as performance of its Wagering division underwhelmed. The gambling group has substantially underperformed the ASX 200 this year, lifting by just 1.5% so far in 2019 while the broader market has surged by more than 16%.

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