Gambling group Tabcorp (TAH) has lifted its full year profit 3%, despite a slide in revenue, but is forecasting a small lift in dividends in the 2015 financial year.
That forecast for a higher dividend won’t flow at first from higher earnings, but a higher proportion of profits to be paid out to shareholders in the 2014-15 years.
In some respects it’s Tabcorp trying to reassure investors that the company remains on track, despite sluggish revenue growth.
But the news helped Tabcorp shares rise 3.2% to $3.56 yesterday.
TAH YTD – Tabcorp records small lift in FY profit
Tabcorp made a net profit of $129.9 million for the 12 months to June 30, up from $126.6 million a year ago.
The result was cut by a $19.5 million "health benefit" State Government levy related to its previous operation of gaming machines in Victoria.
Taking that levy into account (which Tabcorp is fighting in court), the company said underlying profit rose 7.4% to $149.4 million (from $139.1 million in 2012-13) was in line with market consensus of $146.8 million.
But revenue was down 4% to $2.04 billion.
Earnings before interest and tax from continuing operations was flat at $321.7 million on the EBIT in the prior year of $322.1 million.
The board declared a final dividend of 8¢, which was steady on last year’s payout and is to be paid on September 24.
With an 8c a share interim, the full year payout of 16c a share was steady on 2012-13.
That’s an 81% payout ratio of net after tax profit from continuing operations.
The company said that it had decided to lift that "target" ratio to a 90% ratio for the 2014-15 financial year.
Chief executive David Attenborough said the company was well positioned to grow profits across its divisions in 2014-15.
“The Group’s performance in FY14 demonstrates the benefits of being diversified across four businesses, with market-leading brands and a unique multi-product, multi- channel distribution model,” said Managing Director and CEO David Attenborough.
Looking to the coming year, he said in the statement:
“Tabcorp is well placed to drive profitable growth through its diversified portfolio of businesses. This portfolio has been strengthened with the recent agreement to acquire ACTTAB. ACTTAB will give Tabcorp new and attractive long-term licences.
“In Wagering, we are focused on the customer experience. We will continue to integrate our retail and digital offerings, expand our products and complete the ACTTAB transaction.
“The priority for the Media and International business is to continue to enhance the viewer experience and expand co-mingling and the export of Australasian racing.
“Now that TGS has entered the NSW market, the business is well placed to demonstrate the value it can generate for licensed venues and increase sign-ups.
“Finally, our Keno business has a clear growth agenda based on product expansion and the pooling of jackpots between NSW and Victoria.
“We are well positioned to drive future performance, maintain expense discipline and, following the integration of ACTTAB, achieve a Return on Invested Capital of 14%.”
Tabcorp last week struck a long-term deal with the ACT to purchase ACTTAB for $105.5 million.The territory government is to issue Tabcorp with a 50-year exclusive totalisator licence as part of the deal.
Tabcorp said its wagering division, which contributes 77% of revenue and 55% of earnings before interest and tax, grew slowly, rising 1.1% to $1.6 billion.
Totalisator revenue fell 6.3% to $1.3 billion, fixed odds revenue rose 37% to $323 million. Total bets placed with Tabcorp in the 2014 financial year hit $11.9 billion with digital betting rising 18.2% to $2.9 billion.
Outside of wagering, Tabcorp’s media business, which includes Sky Racing channel (broadcast into pubs, clubs and TAB outlets) saw a 6.2% rise in revenue to $220.4 million.
Tabcorp’s Keno division saw an 0.7% dip in revenue to $203.9 million for the year to June.
