Equine influenza and a smoking ban in New South Wales impacted on Tabcorp Holdings’ normalised net operating revenue but the strong revenue performance of the Gaming Division gave the company a net profit after tax of A$273.4 million for the half year, up 22% on the previous period. Reported expenses were down 0.7% due to the group’s expense management programmes, the sale of international businesses and the absence of ‘operational surprises.’

Chairman John Story said: “This is a good outcome for the company. Management met our immediate objective of addressing the operational performance of each of the lines of business. Given the impact of external factors, revenue performance was satisfactory. Particularly pleasing were the control of operational expenditure and the absence of the cost surprises and non-recurring items that have characterised recent results. This result confirms that operationally we are on track, with further work still to be done."

In the six months to 31 December 2007, each of Tabcorp’s three divisions recorded improved cost control while revenue performance was mixed. The three Queensland casinos recovered from last year’s smoking bans with Electronic Gaming Machine (EGM) revenue up 7.3% and main gaming floor revenue up 6.9%. At Star City, EGM revenue declined 9.7% as a result of smoking bans. In the premium business, the casinos grew domestic Private Gaming Room revenue by 7.9%, assisted by higher win rates. The International Rebate Business recorded lower turnover, driven by the absence of a small number of large players during the half.

During the first half, Tabcorp announced that it had reached in-principle agreement with the New South Wales Government to extend Star City’s exclusivity rights for a further 12 years and provide a number of product concessions. Tabcorp confirmed that the agreement would support a substantial investment in the redevelopment and expansion of Star City. The plans for the redevelopment will be finalised in the coming months.

According to Chief Executive Officer Elmer Funke Kupper, Equine Influenza would be largely contained to the first half. “The racing industries and governments in both Victoria and New South Wales have dealt with the EI outbreak effectively, allowing racing to resume earlier than we initially thought possible. We therefore expect that the impact of EI in the second half will be modest.” He added that Tabcorp’s priorities for the next 12 months remain unchanged.

“We will concentrate on the performance of our core operations and at the same time increase investment in these businesses to support future revenue growth. This will include the redevelopment of Star City Casino, the expansion of Keno in New South Wales and continued investment in our Wagering retail network.”

Looking to the future, Mr Funke Kupper said that the general economic environment is more likely to provide tougher trading conditions going forward. “There is a slowdown under way in the US economy and there is a prospect of further interest rate rises in Australia. So far, we have not seen a significant impact on the Australian consumer, but it is something we monitor closely. Tabcorp will benefit from the recovery from smoking bans and Equine Influenza during the 2009 financial year.” (E-02.21.08)

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