Tabcorp earnings results

CommSec CommSec

 

13 February 2019

Results ($m)

Half Year 2019

 Half Year 2018

Change

Revenue

2,787.4

1,338.1

+108.3%

Bloomberg Consensus

2,806.0

 

 

Profit before Significant Items

210.6

102.6

+105.3%

Significant Items

18.3

5.1

+258.8%

Net Profit after Tax

182.5

24.6

+641.9%

Bloomberg Consensus

213.0

 

 

Interim Dividend ($)

0.11

0.11

Unch

Tabcorp (TAH) profits surge on merger with rival Tatts Group

 

Results

  • Tabcorp (TAH) more than doubled revenue to $2.7bn and posted a seven-fold increase in net profit to $182.5m over the six months to 31 December 2018. Despite the strong lift in earnings, the gaming group’s bottom line fell short of market expectations. The $18.3m in significant items was associated with costs linked to the Tatts combination. 

Drivers

  • The very substantial lift in profits and revenues was mainly thanks to its merger with rival Tatts which it acquired in 2017. This was the first half its results have reflected the combined performance of the merged group. The focus continues to be on creating cost synergies across the integrated organisation. It is set to deliver $55m in synergies over FY19 (previously targeted $50m). 
  • Earnings were boosted by its Lotteries division and held back by a softer result in the Wagering business. Its plan to increase the frequency of Powerball jackpots (including the $100m in August 2018) helped lift the number of active registered players up 13% to 2.98m and ultimately pushed Lotteries revenues up almost 20%.
  • Revenues across its Wagering & Media unit fell by 3.8% to $1.2bn, partly on a lift in promotional activity to grow its customer base. While TAB turnover edged higher, UBET (Tatts’ bookmaking business) revenues declined by 7.3% ahead of its migration to the TAB brand. 

Dividend

  • TAH will pay eligible investors an $0.11 per share interim dividend on 13 March. It will trade ex-dividend on Monday 18 February. Assuming a similar final dividend, TAH has a dividend yield around 4.5%. 

Outlook

  • No guidance was provided for the full year. However TAH says it will continue to focus on delivering benefits from the Tatts integration.

Share price

  • TAH slumped due to the result falling short of market hopes, driving its shares to one-month lows. Its shares have improved by 7% Year-to-Date.

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