Tabcorp enlargement struggles test investor patience

Australia ASX-listed gambling group Tabcorp Holdings Plc has posted an underwhelming corporate performance, publishing its half-year 2019 trading results (six-month period ending 31 December 2019).

Despite recording a 4% increase in corporate revenues to AUS 2.9 billion, Tabcorp results detailed a number of concerns for investors as it delivered a further quarter trading performance below market expectations.

Tabcorp’s group performance was sustained by the continued growth of its enlarged keno and lotteries division, which reported a 12% increase in revenues to AUS 1.58 billion.

Despite absorbing Tatts Group assets, the ASX group has recorded declines across its ‘Wagering & Media’ and ‘Gaming Services’ divisions.

The trading update saw Tabcorp governance warn that costs attributed to transforming Tatts’s UBET wagering assets to its flagship TAB brand have increased by 40% – now projected at AUS $135 million (previously AUS $95m).

“This was a challenging half for our Wagering & Media business,” said Tabcorp Group CEO David Attenborough. “TAB is competing well while also transforming in a soft market.”

Of further investor concern related to the performance decline across core metrics, Tabcorp’s ‘Gaming Services’ division has been placed under a strategic review. “We are reviewing this business to improve performance and realise its full potential,” Attenborough acknowledged.

Branding the division’s performance as ‘unsatisfactory’, Tabcorp governance will undertake a review of the unit seeking to improve capital efficiencies.

In its trading overview, it underlined that the group has entered its ‘final phase of integrations’ for improving ‘expected EBITDA benefits’ to AUS $100 million (previously AUS $90m).

Tabcorp H1 2020 performance overview 

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