Tabcorp profit falls on Tatts merger costs, Sun Bets suckiness

TAGs: Australia, sun bets, Tabcorp, Tatts Group

tabcorp-sun-bets-suckinessAustralian betting operator Tabcorp Holdings saw its net profits fall nearly 60% in the final earnings report before its official merger with rival Tatts Group.

On Wednesday, Tabcorp reported revenue of A$1.37b (US$1.07b) in the six months ending December 31, 2017, a year-on-year improvement of 18.7% over its previous fiscal H1. But net profit after tax (NPAT) before significant items fell 20% to A$82m and statutory NPAT was down 58.2% to just A$24.6m.

The significant items contributing to that profit plunge included A$57.4m in Tatts acquisition costs, A$49m from an “onerous contract provision” in the failing UK-facing Sun Bets joint venture plus another $3.2m in Sun Bets impairment charges, A$12.4m stemming from the closure of the underperforming Luxbet online betting arm and A$6.3m from the divestment of the Odyssey video poker machine monitoring business.

The above inglorious parade of red ink would have pushed Tabcorp into a net loss for the period were it not for a A$72.8m net gain on a cash-settled equity swap.

Tabcorp’s mainstay Wagering & Media division saw revenue nudge up 1.4% to a hair over A$1b. Digital turnover was up 16.5% to A$2.55b – 71% of which was done via mobile apps – while retail betting fell 3.3% to just under A$3.2b. Tote wagering dipped 5.5% during the period while fixed-odds race betting shot up 16%, although tote bets still represent 60% of all race wagering.

Tabcorp CEO David Attenborough said he was pleased with the wagering division’s performance in a “highly competitive” market, in which competitors “aggressively pursued customer acquisition ahead of regulatory change.”

Keno revenue was flat at A$112m due to an “unfavorable jackpot sequence,” while the Gaming Services division improved 38.4% to A$83.3m thanks to a full half contribution from the Intecq business.

Sun Bets saw turnover rise 63.5% to A$158.3m as the site’s customer ranks grew 54% to 131k. Revenue more than doubled to A$3.7m but the site still lost A$22.5m during the half. The site enhanced its sportsbook and casino offering and implemented new marketing and CRM strategies but the company admits that “these initiatives have not gained traction.”

Tabcorp’s H1 results include a mere 18 days’ contribution from the Tatts lottery and betting operations following the official merger in mid-December. Nonetheless, Tatts contributed revenue of A$176.3m and earnings of A$27.3m during this period. Tatts plans to issue its final standalone H1 report in March.

However, had the two companies already been fused into one (Tattscorp?), their H1 revenue would have totaled a hefty A$2.67b, with earnings of A$485.4m. But Sun Bets still would have sucked donkeys.


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