Reporting Season: Tabcorp just shy of consensus forecasts

By Trevor Hoey. Published at Aug 8, 2018, in Features

Name: Tabcorp Holdings Limited (ASX:TAH)

Market Capitalisation: $9 billion

last Closing Price: $4.50

Tabcorp Holdings (ASX:TAH) has delivered an underlying net profit after tax of $246.2 million for the 2018 financial year, falling short of consensus forecasts of circa $250 million.

However, the company declared a final dividend of 10 cents bringing the full year dividend to 21 cents, in line with consensus forecasts.

This implies a yield of circa 4.6 per cent relative to yesterday’s closing price $4.50.

Integrating Tatts business

Fiscal 2018 was a watershed year for Tabcorp, as it combined with Tatts, creating a world-class, diversified gambling entertainment group with an attractive portfolio of market-leading brands across wagering, media, lotteries, Keno and gaming services.

Management said that the integration of the two businesses was on track, with initial business improvements and cost initiatives implemented.

Tabcorp has taken decisions to underpin $50 million of EBITDA synergies and business improvements in fiscal 2019, and management noted that the group is on target to deliver at least $130 million in fiscal 2021.

Those considering this stock shouldn’t make assumptions regarding future earnings, nor should they base investment decisions on performances to date. Those considering this stock should seek independent financial advice.

Transition to digital products

In keeping with industry trends, Tabcorp accelerated digitalisation across the company in fiscal 2018, launching new products and implementing new licences.

The company’s lotteries and Keno division was the star performer in fiscal 2018, delivering EBIT growth of nearly 13 per cent, as well as achieving margin improvement.

The group delivered a positive second half performance, and management said that it is well positioned for profitable growth and sustainable returns to shareholders.

Tabcorp referred to a number of changes that have been introduced in the gambling sector, many of which aim to make the industry more sustainable.

The introduction of point of consumption taxes, the prohibition of synthetic lottery products, advertising restrictions and improved consumer protection measures are creating a fairer playing field.

Tabcorp believes it is very well placed to perform in this improved environment.

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