A wary reception from investors to the first-half results from gambling and wagering giant Tabcorp (TAH).
They were hit hard by millions of dollars in surprise costs from money laundering investigations into the company, its betting push into the United Kingdom with News Corp and its pending merger with Tatts Group (TTS).
The company revealed that net profit after tax but before significant items for the six months ended December 31 rose 5.3% to $102.7 million from $97.5 million in the year -earlier period; the result was in line with forecasts.
But statutory net profit fell 28.1% to $58.9 million after $43.8 million worth of significant items, including $20 million of legal costs related to the Austrac money laundering claims, $17.9 million spent on the Sun Bets venture with News in the UK, $9.1 million on its mooted merger with Tatts and a further $4.1 million on the $128 million purchase of gaming technology company INTECQ.
Despite that, interim divided was lifted half a cent (which is better than no change at all) to 12.5 cents a share.
As a result of all of this, investors sold down the shares by 5% to $4.50 – they touched a low of $4.48. The December (first half) of a financial year, is usually Tabcorp’s best, with the spring racing carnivals in Sydney and especially Melbourne. The gaming giant’s revenue rose 2% to $1.16 billion in the six months to December 31.
That was helped the company’s growing digital business which saw digital turnover on its TAB app rise 13.8% in the six months.
"Wagering and media continued to respond to the highly competitive environment and TAB had a record-breaking Spring Racing Carnival," chief executive David Attenborough said.
He said Tabcorp’s proposed merger with Tatts was in progress, with the group going through the process of various regulatory approvals including negotiating with the Australian Competition and Consumer Commission.
"In the second half we are focused on driving business performance and progressing the proposed combination with Tatts Group.
"The combined group will have a suite of long-dated licences and an expected strong investment grade balance sheet. This will provide more capacity to invest, innovate and compete in an evolving global marketplace."
The Tatts board in December rejected an opportunistic takeover proposal from a consortium including private equity giant KKR and Australian investment bank Macquarie Group. The group has not ruled out making a new offer.
