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Tabcorp Ltd FY19 Results Mostly Neutral

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

Tabcorp Holdings Ltd (ASX:TAH) is an Australian diversified gambling entertainment group. Tabcorp owns brands that include the Lott, Keno, TAB, Sky Racing and MAX. Tabcorp has a market capitalisation of A$8.8 billion.

What are the results from Tabcorp FY19?

Today (Wednesday 14 August 2019) Tabcorp released its FY19 annual results. The main points are as follows:

  • Revenue for FY19 is A$5,482.2 million, up by 8.7 per cent from FY18 (compared pro-forma previous corresponding period).
  • EBITDA (before significant items) for FY19 is A$1,064.7 million, up 7.6 per cent from FY18 (compared pro-forma previous corresponding period).
  • NPAT (before significant items) for FY19 is A$397.6 million, up 42.5 per cent compared with reported FY18 NPAT.
  • The final dividend is 11 cents per share (fully franked). This makes the total dividend for FY19 22 cents per share, an increase of 4.8 per cent. This represents a pay-out ratio of 100 per cent of NPAT (before significant items).

Specific results on company operations (versus pro-forma previous corresponding period) are as follows:

  • EBIT for Lotteries and Keno for FY19 is A$425 million, up 36.9 per cent from FY18.
  • EBIT for Wagering and Media for FY19 is A$272 million, down 11.5 per cent from FY18.
  • EBIT for Gaming Services for FY19 is A$67 million, down 23.5 per cent from FY18.
  • Group EBIT for FY19 is A$760 million, up 9.3 per cent from FY18

What were the drivers of this result?

The main driver of the FY19 result for Tabcorp was the record performance of the Lotteries and Keno business. Lotteries and Keno revenue was A$2,865 million, up 22.8 per cent (compared Pro-forma previous corresponding period). This outcome resulted from Tabcorp’s continued game innovation and up weighted investment in technology and data-led capacity. In particular, “digital turnover was up a record 73.5 per cent” and “digital momentum is continuing.”

In addition, Tabcorp’s management stated that “the integration of Tabcorp and Tatts is ahead of schedule and delivering benefits for shareholders”. In particular, Tabcorp achieved A$64 million in EBITDA from cost savings and business improvements in FY19, compared with revised guidance of A$55 million.

Tabcorp’s other operations (Wagering and Media and Gaming Services) experienced small falls in revenue in FY19.

What is the outlook for Tabcorp?

Tabcorp's management does not provide any specific guidance for FY20. However, Tabcorp notes that the integration of Tabcorp and Tatts “is on track, with most activities to be completed by the end of FY20”. Also, Tabcorp indicates that the FY20 dividend pay-out ratio target is “100 per cent of adjusted NPAT”.

What is the market reaction?

The market reaction to Tabcorp FY19 results is neutral, with the share price remaining broadly unchanged at around A$4.36. Tabcorp has a P/E ratio in the low twenties and an annual dividend yield of around 5 per cent (fully franked).




This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978) (“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

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ASR has no position in any of the stocks mentioned.


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