Australia’s Tabcorp Holdings Limited has today released half year results to 31 December 2009. A normalized net profit after tax of A$264 million was up 0.8% for the period, reported net profit after tax down 2% to A$257.9 million. Normalised net revenue was $2,190.5 million, up 2.6%, driven by good performances in Wagering and at Star City casino, but held back by soft trading in the Queensland casinos. Gaming division revenue was flat and expenses were up 2.9%.

Chairman John Story said: “Overall, this is a sound result in variable economic conditions and a difficult regulatory environment. The company is progressing initiatives and investments in each of the operating divisions that are showing promise and provide a good foundation for growth in the coming years.”

Earnings at Star City in New South Wales increased on the back of 5.2% revenue growth. Gaming revenues grew strongly as the business expanded its product offering and leveraged its investment in technology. The redevelopment of Star City casino is said to be progressing to plan. In the first half, the casino opened a new Sports Theatre and dedicated Poker Room and in the coming weeks, a new Baccarat area and noodle restaurant will be opened.

The strong performance in New South Wales was more than offset by a reduction in earnings in Queensland where the business faced a contracting gaming market. Revenues were down 1%, despite Tabcorp’s three properties gaining market share. The results in Queensland were further impacted by an increase in gaming taxes of A$13 million.

In the Wagering division revenues were up 4.6% with growth in all lines of business and channels other than phone betting. Revenue was strong in fixed odds betting, up 23.3%, which was assisted by very solid online turnover growth (including Luxbet.com), up 37.8%. Retail wagering turnover grew by 2.5%.

During the half the company expanded fixed odds coverage of racing in Victoria and New South Wales, launched a loyalty program in its New South Wales business and entered into a partnership with Australia Post that will give account holders access to their accounts nationwide. In addition, Tabcorp announced the expansion of Sky Racing from one channel to three channels, offering customers more choice and a dedicated thoroughbred racing channel.

In the first half of the financial year, race fields payments increased by $6 million compared to the first half of 2009. This increase is consistent with Tabcorp’s previous estimate that the annual cost of the new fees is approximately $30 million.

The gaming market in Victoria experienced much tougher conditions, following several years of strong growth. Revenues from the Victorian gaming business fell by 1.1%, while market share increased to 53.2%. Revenues from Keno grew by 4.6% following the successful expansion into hotels in New South Wales.

Chief Executive Officer Elmer Funke Kupper said that the company had responded well to the uncertain economic conditions without compromising its long term investment program. “We adjusted our short term plans to ensure that the company delivers acceptable financial results and improves its market position in its key businesses. We were encouraged by the performance of Star City casino and our wagering division. Our overall casino result has been affected by a weak Queensland market and higher gaming taxes. At the same time, we continued with our investment programs in Casinos and Wagering. These programs are on track and are starting to have a positive impact on our performance.”

He added, “We expect conditions to remain somewhat uncertain for the remainder of the 2010 financial year as government stimulus measures are wound down and higher interest rates affect discretionary income. In this environment, we will maintain our current focus on operational performance and deliver the key investment programs we have under way. 2010 is an important year for the company, particularly in wagering. Greater clarity will emerge in the regulatory environment and we expect that the Victorian Government will award the post-2012 Victorian wagering licence. These events will allow us to chart the future direction of the company with greater clarity.” (E-02.04.10)

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