Posting its first loss since listing fourteen years ago, Australian gaming group Tabcorp Holdings yesterday reported a net loss after tax of $A164.6 million (US$146.8 million), including a charge against the Victorian licences and impairment of wagering goodwill. Normalised earnings (net profit after tax before non-recurring items) for the year to 30 June 2008 were in line with the 2007 result and consistent with guidance given at the beginning of the year, notwithstanding the effect of equine influenza.

Reported net loss after tax reflected three significant balance sheet adjustments: a charge of $A487.7 million against the value of the Victorian wagering and gaming licences, reflecting the Victorian Government’s view that Tabcorp is not entitled to a licence fee refund; a write down of $A194 million in the carrying value of the company’s wagering business, reflecting the challenges faced by this business in recent years and the changes in the competitive environment; and a write off of $A25.8 million after tax against assets that will be made redundant as part of the expansion of Star City casino.

Chairman John Story said: “The operational performance of the Group was in line with that of the previous year. In light of the challenges that it has faced, including smoking bans, higher gaming taxes and the outbreak of equine influenza, this was a creditable outcome. The decisions taken by the Victorian Government in April 2008 have a material impact on the Group. As a consequence, the Board has determined to take a provision for the value of the licence refund. We believe this to be prudent, but it should in no way be seen as a change in our strong resolve to pursue our legal entitlement to the refund.”

The four Tabcorp casino properties experienced tougher trading conditions in the second half, in addition to the impact of smoking bans in New South Wales. These factors impacted on revenues from Electronic Gaming Machines and the Main Gaming Floor with revenues down 2.4% and 1.2% respectively. At the premium end, revenues from the domestic Private Gaming Rooms increased by 8.7% assisted by above average win rates. Revenues from the International Rebate Business were down 28.3% on the previous year, driven by the absence of a few large players. An above theoretical win rate of 1.8% added $A26 million to the company’s reported profit after tax.

The Tabcorp Board has approved an investment of $A475 million to expand Star City casino following a new agreement on exclusivity and product concessions with the New South Wales State Government. The expansion will turn Star City into the leading entertainment destination in New South Wales. The project includes a new five-star hotel tower, a reorientation of the property towards Sydney harbour, a significant expansion of the number of restaurants, bars and retail shops, and an expansion of the Main Gaming Floor. The Star City expansion project is expected to commence in early 2009 and be complete in 2011.

Following the outbreak of equine influenza racing turnover recovered gradually during the second half after racing resumed in December 2007. Sportsbetting continued to perform well with revenues up 15.9% on the previous year. The Gaming division increased revenues by 4.8% despite the introduction of full indoor smoking bans in Victoria. Gaming market share in Victoria continued to increase, averaging 52% in the second half but revenue growth did not translate into higher earnings as a result of the higher Gaming Machine Levy imposed by the Victorian Government.

Chief Executive Officer Elmer Funke Kupper said, “2008 was operationally a much better year for the company. We simplified the business, increased the focus on each of the operating divisions, reduced the size of our head office and exited our China Keno businesses. Following significant issues in the previous year, our technology performance improved significantly, particularly during Spring Carnival in Victoria and Autumn Carnival in New South Wales.“

He added, “In the second half, we have seen that higher interest rates and higher living expenses are starting to affect discretionary spending, particularly in our casinos business. The operational improvements we put in place during the 2008 financial year put us in a stronger position to weather an economic downturn. In 2009, we will increase our capital investment program, particularly in the casinos division. In the medium term, these investments are critical so we can give our customers the best possible gambling entertainment experience and secure the revenue performance of our businesses.” (E-08.08.08)

© Copyright 2008 CasinoCompendium



>>> return to archives
>>> return to frontpage