Tabcorp Holdings Limited yesterday announced a normalised net profit after tax of $262.0 million for the half year to 31 December 2008, in line with the previous year. Normalised net operating revenue was up 6.4% but expenses were also up by 4.9% that includes a bad debt provision for $11.5 million following a casino client bouncing a cheque. The rise in operating revenue was attributed to the recovery from Equine Influenza in wagering and continued positive growth in gaming. Casino revenue was flat for the half year.

Normalised earnings included an additional amortisation charge against the value of Tabcorp’s Victorian wagering and gaming licences of $13 million. Chairman John Story said: “The results were positive in light of a tougher economic environment and the additional licence amortisation charge in Victoria. The Board has adjusted the dividend policy for the company. This change recognises the reality of the current financial markets, supports the ongoing investment in our existing businesses, and ensures that shareholders benefit from an appropriate distribution of earnings in the form of dividends.”

Tabcorp’s casino division faced tough market conditions but continued to hold its market position. Electronic gaming machine revenue was down slightly but Main Gaming Floor revenue rose with the increase in multi-terminal gaming machines. This week Tabcorp received approval in New South Wales for a $475 million expansion and refurbishment of the Star City casino in Sydney. An increase in taxation by the Queensland government is expected to cost Tabcorp around $30 million a year.

Chief Executive Officer Elmer Funke Kupper said that the company had responded well to the tougher environment. “Wagering and Gaming performed well. Both divisions grew revenues in each of their main product and customer segments and controlled expenses. The Casinos division performance was below expectations, particularly in New South Wales, where pressure on consumer spending offset growth in visitation and stable market share.”

He added, “The result confirms the need to push ahead with the redevelopment of Star City casino. Larry Mullin will join the company as Chief Executive of the Casinos Division next month, subject to regulatory approval, and will assume responsibility for the redevelopment effort. Having had responsibility for the development phase of the Borgata Casino in Atlantic City, Larry is ideally placed to oversee the Star City redevelopment.” Funke Kupper said that Tabcorp was well placed to manage through the tough economic conditions and volatile financial markets.

Australia’s biggest gambling company is to sell as much as A$450 million (US$300 million) of new stock to bolster its balance sheet. The shares will be sold at a 15% discount to institutions on yesterday’s closing price. Shares have been suspended pending the sale. The capital will help complete the $475 million Star City expansion and pay the New South Wales $100 million licence fee. Tabcorp has also reduced its dividend to between 70% and 80% of normalised Group earnings each financial year. Previously the company had been paying out over 90%, something Funke Kupper described as being “the wrong number in the current environment.” (E-01.29.09)

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