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Tabcorp lifts underlying half-year profit, pays 12.5c dividend

Nicholas Grove  |  02 Feb 2017Text size  Decrease  Increase  |  

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Tabcorp Holdings' (ASX: TAH) net profit before one-off items for the first half of fiscal 2017 rose 5.3 per cent to $102.7 million after each of the company's three divisions managed to grow revenues.

Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) rose 1.7 per cent to $270.4 million, while earnings per share (EPS) before one-offs rose 5.1 per cent to 12.3 cents a share.

Including items relating to M&A activity, the start-up of a UK business, and legal proceedings, statutory net profit was down 28.1 per cent to $58.9 million, Tabcorp said in a statement to the ASX.

Tabcorp declared an interim dividend of 12.5 cents a share, fully franked, to be paid on 15 March 2017 to shareholders on record as at 8 February 2017.

Tabcorp said its dividend reinvestment plan will operate in respect of this interim dividend, with no discount or underwriting applicable.

By division, Wagering and Media saw total revenues grow 1.4 per cent to $987.0 million in the half year, primarily driven by a record-breaking Spring Racing Carnival as well as growth in domestic and digital media revenue, Tabcorp said.

Gaming Services revenues, which included one month of trading from INTECQ which was acquired in December, were up 13.8 per cent to $60.2 million.

Keno revenues were $112.1 million, up 2.2 per cent, Tabcorp said.

Tabcorp managing director and CEO, David Attenborough, said the company is "well placed to continue to deliver attractive returns to our shareholders, as well as the many stakeholders and partners who share in the revenues generated by our businesses".

In October 2016, Tabcorp made a proposal to acquire Tatts Group (ASX: TTS), and on Thursday said completion of the deal is expected in mid-2017 following shareholder, regulatory and other approvals.

Morningstar equity analyst Ravi Reddy believes the Tabcorp-Tatts combination makes strategic sense for both companies, given the earnings diversification benefits and material synergies on offer.

"The synergies and strategic merits of this transaction stem largely from combining both companies' wagering operations," Reddy said in a note.

"In our view, the combination is a tacit recognition of the structural challenges facing traditional forms of wagering from digital competition, and the combined business should be in a much better position to combat this threat."

Reddy said while Tabcorp's half-year result met his expectations, its core wagering and media division is "showing some signs of weakness".

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Nicholas Grove is a Morningstar journalist.

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