Tatts profits hammered by merger and impairment costs

Tatts profits hammered by merger and impairment costs

Tuesday, September 25, 2018 Posted by News Team
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$149m in UBET impairment charges sees profit fall more than 80% year-on-year

Australia’s Tatts Group has seen its net profits fall sharply as a result of costs and impairment charges related to its acquisition by Tabcorp Holdings. 

The business saw revenue for the year ended June 30th increase marginally, up 3.6% year-on-year to AU$2.9bn. 

The vast majority of this came from its lotteries business, which reported a 4.9% increase in revenue to $2.1bn. The division benefitted from a favourable jackpot sequence in the first half of the year, while digital sales were up 27.8%, comprising 16.8% of all lottery sales. 

Tatts’ lottery business has more than 2.9m registered digital customers, with the operator looking to encourage further growth through the launch of new digital point of sale displays in more than 1,000 outlets during the year. It also benefitted from changes to its Powerball game made in April 2018, which increased prize frequency and opportunities for bigger jackpots. 

The lottery division’s performance should be able to continue into Tatts’ 2019 financial year, with its new Victorian Public Lottery licence coming into force from July 1st. 

Wagering revenue, meanwhile, fell marginally year-on-year to $530.0m. Totalisator revenue fell 6.5% to $262.8m, though this was partially offset by a 5.6% increase in fixed odds racing revenue to $233.3m, and an 11.6% increase in fixed odds sports revenue to $33.9m. 

Digital turnover was up 12.9%, aided by a successful FIFA World Cup and new products such as Tappy, UBET’s cash-based betting product. 

The wagering division is set to be strengthened by the addition of Tabcorp’s systems and processes, which are currently being integrated into UBET’s operations. Tabcorp is also set to launch its TAB wagering brand into states where UBET is permitted following the Spring Racing Carnival in Tatts’ 2019 financial year.

Gaming services revenue grew 2.1%, Tatts reported, with the increase driven by growth in value-added services for its Max venue management division and Ticket In, Ticket Out tools. The gaming division also successfully launched the Centralised Monitoring System for gaming machines in New South Wales. This roll-out began on December 1st, 2017, and provides a platform for future venue services opportunities, Tatts said.

The operator reported a 3.4% year-on-year increase in taxes, levies, commissions and fees to $1.9bn, with operating expenses rising 14% to $473.6m.

Tatts was hit by increases in merger-related costs, up 26.6% to $42.3m, and $149m in impairment charges relating to the UBET business. This saw the operator’s profit after tax plumment, down 83.6% to $36.2m, compared to $221.2m in its 2017 financial year.

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