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'Unsatisfactory' UK Arm Weighs On Tabcorp

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Tabcorp shares fell nearly 7% yesterday after releasing a less than stellar first half result.

Australia’s biggest gambling company revealed a large profit drop in its first financial results since sealing its $11 billion drawn out merger with rival Tatts Group last year.

Net profit plunged 58% to $24.6 million for the six months to December 31 as it was hit by significant items including merger expenses and costs related to the “unsatisfactory” performance of its UK digital betting start-up, Sun Bets, a joint venture with News Corp (which has already been previously warned of by the company).

Without those charges, earnings fell a less than impressive 20%. The shares closed down 6.8% at $4.76.

The one off items (after tax) were $57.4 million- that includes Tatts Group acquisition related costs $59.3m, Sun Bets onerous contract provision $49.0m, Sun Bets impairment $3.2m, Luxbet closure costs $12.4m, loss on Odyssey divestment $6.3m, partly offset by the net gain on the cash-settled equity swap $72.8 million (that was a share deal Tabcorp done as part of the structure of the bid).

Sun Bets recorded a loss of $22.5 million for the six-months to the end of December and Tabcorp said, explaining the joint venture “remains under review”. That was after losses of nearly $50 million in the year to June 30 last.

Revenue was up nearly 19% to $1.4 billion, with a 16% rise in wagering turnover and “strong customer acquisition”, the wagering giant said, declaring a fully franked interim dividend of 11 cents a share, down from 12.5 cents for the same period of 2016-17, on capital expanded in the offer.

Thursday’s half-year results are the first to be handed down since the Tabcorp-Tatts merger was finalised in December, and comes as the new company starts the tough task of merging two similar business across Australia - the overlap will mean job will be lost among the thousands of employees across wagering, lotteries, media and gaming services divisions.

The merged entity runs the powerful Tatts lotteries business, digital betting services and retail betting licences in every Australian state and territory except Western Australia.

The job cuts are promised in the size of the cost cuts promised by Tabcorp - $130 million by 2020. To make that figure jobs will have to go.

Tabcorp CEO David Attenborough said the December half was an important period for the company, and reflected a period of "reshaping the Tabcorp business for sustainable growth".

"This includes implementing the combination with Tatts, exiting Luxbet and Odyssey Gaming Services, and our ongoing investments in areas such as our digital capability, customer acquisition and the risk management and compliance framework," he said.

Tabcorp also said it was “well-placed” in the online wagering market to compete with online rivals, such as Sportsbet, CrownBet, Ladbrokes and Bet365, which face new taxes and expanding government regulations.

"The combination positions us well to invest, innovate and compete in a rapidly evolving environment," Mr Attenborough said.

Tabcorp on Thursday reinforced its commitment to achieving at least $130 million in savings by 2020 as a result of the integration of both companies. Investors will be looking for quick delivery on those cost cuts and a bit more if Tabcorp is to keep favour with the market.

View More Articles By Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.



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