Tabcorp records wagering revenue growth
09 Aug 2012 | Tabcorp Tabcorp Holdings Limited on Thursday announced NPAT from continuing operations of $340.0 million, up 12.7%1, for the year to 30 June 2012. The result reflects underlying earnings growth and lower interest expense following the demerger.
EBIT from Tabcorp’s continuing operations was $591.7 million, up 5.2%2, supported by strong EBIT growth from the Wagering business, up 10.0%2, and the Media and International business, up 8.1%. EBIT from Gaming, up 1.1%, and Keno, down 1.0%, incorporated start-up costs associated with the launch of the new TGS and Victorian Keno businesses respectively.
1 Prior year NPAT of $534.8 million included $591.2 million profit from discontinued operations and impairment of $358.0 million, resulting in FY11 NPAT from continuing operations of $301.6 million.
FY11 result included interest expense of $134.4 million, which reflected the higher debt levels prior to the demerger of the Casinos business, compared with $94.7 million in the current period.
2 Prior year comparative from continuing operations excludes impairment of $358.0 million.
Tabcorp declared a final dividend of 11 cents per share, fully franked and payable on 26 September 2012 to shareholders registered at 22 August 2012. The full year dividend is 24 cents, constituting a dividend payout ratio of 50.9% of NPAT, in line with previous guidance.
Tabcorp Chairman Paula Dwyer said FY12 was a successful year for Tabcorp, with the company recording solid revenue and profit growth, despite challenging market conditions.
“Tabcorp’s earnings performance in FY12 is the culmination of our management of regulatory change, the targeting of investments in the right areas and the focus on innovation and new technologies,” Ms Dwyer said.
“The required refinancing activities have been completed and we are ready for the transition to the new gambling industry structure in Victoria. We will move to a new Victorian Wagering and Betting Licence and also launch our new gaming services business, Tabcorp Gaming Solutions, later this month.”
Business performance – continuing operations
Measured in EBIT, the divisional results for the year to 30 June 2012 were:
• Wagering: EBIT $242.2 million, up 10.0% 3.
Wagering is the largest of Tabcorp’s four businesses and the revenue trends the business experienced in 1H12 continued into the second half. This translated into revenue growth of 4.4% for FY12. Wagering revenues for the year to 30 June 2012 were $1,637.4 million.
Operating expenses were $279.8 million, up 6.2%, driven by investment in technology to expand Trackside, fixed odds and self service terminals, as well as increased costs for sponsorship and promotional activities due to competition.
The growth in fixed odds revenues continued to outperform, increasing 41.5% in FY12 to $321.4 million, offsetting a decline in totalisator revenues. Revenues from Trackside were $82.3 million, up 65.6%, driven by the game’s expansion in NSW and continued growth in Victoria where it has been long established.
Wagering turnover increased in both the NSW and Victorian retail distribution channels, despite the challenging market conditions. NSW turnover, aided by fixed odds racing and a full year of Trackside, was up 6.5% to $3,911.0 million.
Retail wagering turnover grew 0.9% in Victoria to $3,047.8 million. During FY12, Tabcorp added 186 new retail outlets to its network as part of the company’s retail investment strategy.
Telephone betting turnover was down 6.8% to $825.6 million, as customers continued to shift to more convenient online technology. Online turnover achieved growth of 14.5% to $2,159.2 million. New account openings were up 21% on the prior corresponding period and the number of downloads of the TAB Sportsbet iPhone, iPad and Android apps has exceeded 550,000.
3 Prior year comparative excludes impairment of $358.0 million.
Tabcorp’s Northern Territory-based bookmaking business Luxbet realised revenue growth of 34.8% to $27.9 million through improved yield and strong second half turnover.
Contributions to the Australian racing industry from Wagering were $600.8 million. This was comprised of $324.2 million in contributions in Victoria, up 0.6% and $238.6 million in contributions in NSW, up $1.0%. In addition to these racing industry distributions, race field fees nationally were $38 million in FY12.
In December 2011, Tabcorp was awarded the new, 12-year Victorian Wagering and Betting Licence. Transition activities for the new licence arrangements, which commence on 16 August 2012, are on track.
• Media and International: EBIT $57.1 million, up 8.1%.
Tabcorp’s Media and International business grew FY12 revenues by 6.1% to $190.2 million. The growth was due to increased subscription revenues and the increased export of Australian and New Zealand racing, which is now distributed to 31 partner countries.
Operating expenses were $113.4 million, up 4.6%, driven by outside broadcast television production, rights fees and digital investments.
Tabcorp retained South Australian and Tasmanian thoroughbred media rights in FY12. Returns to the Australian racing industry through broadcast rights fees and international business contributions totaled $51.9 million in FY12, up 6.6%.
• Gaming: EBIT $244.1 million, up 1.1%.
The Gaming business’ focus in FY12 was on preparation for the transition to the new gaming industry structure in Victoria. Gaming revenues were up 0.1% to $1,078.9 million and operating expenses were well controlled at $35.4 million, down 3.5%.
Under the new post-August 2012 structure, Tabcorp will transition out of its existing Tabaret business and launch a new business, Tabcorp Gaming Solutions (TGS). TGS will assist clubs and pubs in managing their gaming offer to patrons. TGS has now contracted more than 8,500 electronic gaming machines and is expected to contribute approximately $55 million in EBITDA
per annum from August 2012. TGS’ Diamond Rewards loyalty program has been launched with more than 100 venues live.
• Keno: EBIT $48.3 million, down 1.0%.
Keno grew revenues by 8.0% to $183.1 million, while operating expenses grew 12.9% to $38.6 million. The growth in expenses is largely attributable to start-up costs of approximately $4 million for the new Victorian Keno business, which commenced in April 2012. Victorian Keno is now live in more than 600 venues.
Tabcorp’s NSW and Queensland Keno businesses performed strongly with Queensland revenues up 6.9% and NSW revenues up 7.6%. As part of the NSW Keno hotel expansion program, 74 hotels were added to the network.
Managing Director and Chief Executive Officer David Attenborough said: “Tabcorp achieved its key operational targets across all four businesses, delivering strong earnings growth despite the challenging trading conditions.
“Our Wagering business benefited from our continued investment in a multi-channel strategy across online, mobile and retail, delivering to our customers a full range of fixed odds and totalisator products – everywhere, every time.
“The Sky media business expanded vision distribution online and internationally, while enhancing vision quality through further investment in the latest outside broadcast technology.
“Keno is a growing and an important part of our business and following the launch of the Victorian licence in April, it operates in more than 3,400 venues along the eastern seaboard.
“Our operating expenses, which included start-up expenses associated with the new Victorian Keno and Tabcorp Gaming Solutions businesses, were well-managed in FY12.”
The Dow Jones Sustainability Index once again recognised Tabcorp Holdings Limited as the overall global leader in the gambling industry and a world leader in the promotion of responsible gambling in its 2011 ratings.
Funding
During the year, Tabcorp completed the refinancing of its debt facilities by:
• raising A$250 million through the offer of Tabcorp Subordinated Notes;
• raising A$210 million equivalent from the US Private Placement (USPP) market;
• extending the maturity date of A$400 million of its syndicated bank facility from
June 2013 to June 2015.
The company’s sources of funding are now diversified across bank facilities, retail bonds, institutional bonds and the USPP market. Tabcorp’s FY13 average interest rate is expected to be approximately 8.25% p.a.
Outlook
Tabcorp’s continuing businesses have started the year with good momentum and will benefit from a number of valuable growth opportunities in FY13, such as the new Victorian Keno business and TGS.
“We will continue to execute on our growth strategies in FY13 and use our market leading capabilities to ensure Tabcorp’s customers have access to the most compelling gambling entertainment products in the market,” Mr Attenborough said.
Tabcorp intends to target a dividend payout ratio of 80% of NPAT in FY13, excluding the expected write-off of Victorian Gaming goodwill in 1H13.
Tabcorp 2012 full year results|
Highlights
• Net Profit After Tax (NPAT) from continuing operations, $340.0 million, up
12.7%1
• Earnings Before Interest and Tax (EBIT) from continuing operations $591.7
million, up 5.2%2
o Revenues up 3.1%
o Variable contribution up 5.4%
o Operating expenses up 5.2%
• Earnings Per Share from continuing operations 47.6 cents, up 4.6%2, following
capital management activities
• Full year dividend of 24 cents per share, including final dividend of 11 cents per
share. Pay out ratio 50.9% of NPAT
• Awarded new Victorian Wagering and Betting Licence – set for smooth transition
on 16 August 2012
• Successfully launched new Victorian Keno business in April 2012, with more than
600 venues now live
• Tabcorp Gaming Solutions (TGS) sign-ups exceed 8,500 EGMs
• Strong revenue growth continued in fixed odds, Trackside and Luxbet. Retail
wagering and online turnover also grew
• FY13 debt maturities refinanced
Tabcorp full year results to 30 June 2012
• Reported
− Revenues $3,038.5 million, up 3.1%
− Operating expenses $416.1 million, up 5.2%
− EBITDA $725.2 million, up 5.6%4
− EBIT $591.7 million, up 5.2%4
− Net profit after tax from continuing operations $340.0 million, up 12.7%5
− Earnings per share (EPS) from continuing operations 47.6 cents, up 4.6%4
• Dividend per share, fully franked
− Dividend 24 cents
− NPAT payout ratio 50.9%
• Segment EBIT
− Wagering $242.2 million, up 10%4
− Media & International $57.1 million, up 8.1%
− Gaming $244.1 million, up 1.1%
− Keno $48.3 million, down 1.0%
Stakeholder benefits
• Taxes on gambling paid incl. gaming levy $1,121.9 million, up 0.6%
• Income generated for racing industry $652.7 million, up 1.7%
− VIC $324.2 million, up 0.6%
− NSW $238.6 million, up 1.0%
− Race field fees $38.0 million, up 10.0%
− Broadcast rights & international contributions $51.9 million, up 6.6%
• Contribution to State community benefit funds $78.7 million, up 0.5%6
• Income taxes paid and payable $157.0 million, up 24.1%
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4 Prior year comparative from continuing operations excludes impairment of $358.0 million.
5 Prior year NPAT of $534.8 million included $591.2 million profit from discontinued operations and impairment of $358.0 million, resulting in FY11 NPAT from continuing operations of $301.6 million.
FY11 result included interest expense of $134.4 million, which reflected the higher debt levels prior to the demerger of the Casinos business, compared with $94.7 million in the current period.
6 Prior year contribution to State community benefits funds of $91.5 million included $13.2 million from the demerged Casino business.