Tabcorp results hit by Sun Bets, Tatts & money laundering charges

Tabcorp results hit by Sun Bets, Tatts & money laundering charges

Thursday, February 2, 2017 Posted by Andy McCarron
Exceptional costs dragging down balance sheet

The cost of the merger with Tatts, the start up costs of the UK Sun Bets sportsbook and an ongoing battle against money laundering charges have hit profits at Australian operator TabCorp.

The cost of these items saw first-half net profit fall 28 per cent to AU$58.9 million. However without the impact of these one off items, underlying rose 5 per cent to AU$102.7 million.

Tabcorp managing director and CEO David Attenborough commented: “The first half of the 2017 financial year has been an important period for Tabcorp. We have continued to invest in a number of initiatives that strengthen our business, improve the customer offer and position us for growth. We have a clear vision to become the world’s most respected gambling-led entertainment business and to continue delivering growing returns for our shareholders.

“All three Tabcorp businesses grew revenues in the half. Statutory Net Profit After Tax, however, was impacted by a number of significant items including costs relating to our proposed combination with Tatts Group and the AUSTRAC civil proceedings, as well as start-up results for the new UK business, Sun Bets.”

The most expensive of these is the AUSTRAC proceedings which have been rumbling on since July 2015 when the Australian Transaction Reports and Analysis Centre commenced civil proceedings against Tabcorp Holdings Limited, Tab Limited and Tabcorp Wagering (Vic) Pty Ltd alleging certain breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.

The company continues to fight some of the allegations, but has revealed it will not contest them all. The hearing is scheduled to commence in June 2017 and the parties participated in Court ordered mediation in December 2016. Tabcorp has spent AU$20m on this in the first half of the year.

Almost equally expensive at $17.9m, but with much more of a potential upside is the joint venture in the UK Sun Bets. The operation had acquired 85,000 customers by the end of 2016 but it will be a while before an ROI is achieved.

According to Tabcorp results: “Sun Bets revenues were $1.5 million and the business recorded an EBITDA loss of $21.3 million. The second half focus is continued product development and customer acquisition. The 2H17 result is expected to be an EBITDA loss of approximately $15 million.”

Meanwhile Tabcorp’s proposed combination with Tatts Group is progressing through the regulatory, industry and other approvals required and close engagement with external stakeholders and the Australian Competition and Consumer Commission is ongoing. Completion is expected in mid-2017 following Tatts shareholder, regulatory and other approvals.

Totally Gaming says: The cost of setting up Sun Bets has certainly contributed to a bump in the road for Tabcorp but the firm is playing the long game with that initiative. While it certainly has potential as an operation in its own right, it also gives Tabcorp a flagship brand in the heart of Europe with which to promote its b2b capabilities.

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