Australians don’t seem to be gambling as much, judging by the interim results of Echo Entertainment (EGP) on Wednesday and its former stablemate, Tabcorp (TAH), yesterday.
Echo revealed a weak profit amid lower revenues and winnings from its casinos, especially high rollers.
Tabcorp yesterday revealed a weak profit, amid a fall in wagering revenues in Victoria and NSW, which remains the core of the company’s operations.
But there was a big lift in its fixed odds betting and that could be taking attracting punters away from basic retail wagering in Victoria and NSW, while rival online betting companies would have to be having an impact.
No mention was made of the rival online betting companies and how Tabcorp is battling to match their services and advertising .
Echo maintained a steady dividend at 4c a share, but Tabcorp chopped its payout from 11c a share to 8c a share (the same level as the final for 2012-13).
That spreads the pain of the weak performance to shareholders and is a real sign of the pressure the company is under – and a recognition that the intense competition isn’t going ease any time soon.
TAH 1Y – Tabcorp’s weak result leaves investors unimpressed
The falls in turnover in Tabcorp’s NSW and Victorian wagering businesses offset much of the growth experienced in the company’s digital, media and premium gaming services in the half year.
Net profit edged up 2.3% to $74.6 million in the first half.
Total group revenue increased 1% to just over $1 billion, underpinned by growth in fixed odds revenue, up 24.3% to $243.2 million.
Digital wagering turnover was up 15.6% and a full six month contribution from Tabcorp’s premium gaming service TGS .
However, retail turnover for Victoria fell 7.1% and NSW dipped 2.5%.
Could the wagering public be switching to fix odds betting, thereby cannibalising the retail wagering business?
The company reported an 8.5% lift in pre-tax earnings from its media and international business to $34.9 million, while gaming services earnings were up 32% $33.7 million. But earnings from the Keno business fell 1.6% to $36.1 million.
Tabcorp chief executive David Attenborough said in yesterday’s statement that the company had performed well.
"In the context of a relatively subdued retail environment, we achieved overall earnings growth, supported by good cost control," he said.
Mr Attenborough said the company was focused on lifting returns and driving productivity growth during the current second half of the financial year.
The result left the market less than happy and the shares eased 2c to $3.35, in yesterday’s much stronger market, which tells us what investors really thought about what was a lacklustre result.
The key takeaway from the result is a question – just how much is Tabcorp’s retail betting business being damaged by a) the company’s fixed odds and online businesses – are they taking customers from the stronghold of TAB shops that still form the heart of the business and, b) how much business is being lost to rival online operators? These mostly foreign-controlled operators look like they are carving business off Tabcorp’s basic business model.
