News Corp releases its 2017-18 first quarter results late next week and high on the agenda for analysts will be multi-million dollar losses from its move into the competitive UK gambling market with Sun Bets, a joint venture with Tabcorp – which last week cast doubt on the longevity of the joint venture after continuing weak performance.
In fact Tabcorp’s chair, Paula Dwyer all but said at its AGM late last week when she made clear that her company will quit the venture if business doesn’t improve quickly.
If that happens it will be yet another example where a media company like the Murdoch’s UK print flagship has moved into a business sector in competition with some of its biggest advertisers – in this case the UK gaming market which is dominated by the likes f Ladbrokes, William Hill and Paddy Power (which owns Sportsbet in Australia) and Betfair.
In June, when the Australian Competition Tribunal gave its now flawed first OK to the merger with Tatts, Tacorp let slip in a trading update that Sun Bets would lose a larger than expected $46 million in 2017, more than double the first estimate a year ago of $20 million when the online gambling joint venture with News UK was first announced.
Sun Bets had revenue of $1.5 million and the business recorded an EBITDA loss of $21.3 million in the six months to December 31, 2016. For the year to June 30 this year Sun Bets reported an operating loss of $47.6 million and assets impairment of $20.7 million.
So its no wonder that last Friday saw Ms Dwyer tell the Tabcorp annual meeting that the Sin Bets business had not delivered according to plan and had been “reset for growth, or earmarked for exit.”
“If performance does not improve to meet forecast expectations, we will give serious consideration to exercising our contractual right to exit operations from 31 December 2019,” Ms Dwyer said on Friday – a comment which is bad news for News and The Sun.
Not helping Tabcorp is the continuing slide in the sales of The Sun – in the year to September they have lost nearly 10% of its sales to average around 1.544 million.
Her comments means Sun Bet’s performance hasn’t improved, and with Tabcorp still determined on its $11 billion merger with Tatts, the UK joint venture will be punted to cut cash outgoings and keep management focused on the bigger deal back home.
A decision from the Australian Competition Tribunal is expected soon.
News shares dipped 0.2% to $18.25 yesterday while Tabcorp shares rose 1.1% to $4.50.
