Tabcorp’s profit cut by 28 per cent, sending shares lower

Wagering giant Tabcorp has announced a poorer than expected first-half profit result, which in turn, has sent shares down.

The company’s profit fell 28 per cent to $58.9 million but it wasn’t all doom and gloom, with underlying earnings rising five per cent to $102.7 million, a figure that is slightly ahead of expectations.

Legal bills made up $20 million of the variance as the company fights charges that it breached both anti-money laundering and counter-terrorism laws.

Furthermore, close to $18 million was spent on the UK SunBet joint venture with Rupert Murdoch’s News Corporation plus $4.1 million was spent on the purchase of gaming technology business (INTECQ).

Tabcorp is also in the middle on a bid for rival gambling business Tatts, with that merger to create Australia’s biggest gambling company.

It spent $9 million in the first half of 2016-17 on the costs associated with that merger, which is yet to receive regulatory approval but has the nod of approval from both boards.

Richard Attenborough, Tabcorp’s chief executive, said that despite the latest results, the company would continue to invest in growth.

Mr Attenborough said “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.”

Tabcorp expects to complete the deal for the acquisition of Tatts, subject to the approvals and a vote by Tatts shareholders, by the middle of the year. It is currently working through regulatory approvals with the racing industry and the ACCC.

A record spring carnival result saw the core wagering business of the company benefit, with the division’s bottom line up by 1.4 per cent to $987 million.

At the same time, Tabcorp managed to grow its digital business, with betting turnover up almost 14 per cen, in the very competitive mobile phone market.

The company’s board are aiming for a total payout to shareholders this year of 90 per cent of net profits. The interim dividend was edged up to 12.5 cents per share.

However, investors were lees-than impressed with the result as Tabcorp shares tumbled from Wednesday’s close of $4.75 to $4.51 by close on Thursday.