STRONG online growth, resilient wagering performance and record lotteries earnings have lifted Tatts Group's (ASX: TTS) half-year profit 14.6 per cent.

NPAT for the period was $139.8 million generated from revenues of $1.51 billion, up 1.2 per cent from the prior corresponding period.

The division which saw the most growth was online sales, up 18.4 per cent for lotteries to now deliver 10.8 per cent of total lotteries sales.

Wagering's digital sales also grew in the double digits (12.9 per cent), with this part of the business now generating almost one-quarter of sales from digital.

Physical wagering sales in Queensland declined by 2.6 per cent, although at a slower rate than the 5.6 per cent decline endured in the first half of fiscal year 2014.

CEO and managing director Robbie Cooke (pictured above) says a compensation windfall and changes to the group's online business delivered a big pay-off over the period.

"Record lotteries earnings, despite lower jackpot levels, and the momentum in our online sales are the standouts in our performance this half," says Cooke.

"Clearly, capturing the benefit of our cash position following the pokies compensation win and leveraging the interest rate cycle were particularly significant contributors to today's result."

In Queensland, TTS was required to make legislative and contractual amendments owing to a new wagering structure effective June 2014.

Cooke says despite the "volatile period in Queensland and unexpected election outcome", he doesn't expect the change in government to make any difference to corporate activity. 

He says the group's wagering division is readying itself for the imminent UBET launch, noting a "significant step-up in promotional activity" ahead of a competitive landscape backdrop.

This has already been accounted for with an increase in marketing headcount from "half a person to 10" from the previous reporting period.

The first UBET retail outlet (renders pictured) is expected to open in beta phase in April with the vision of creating a "completely seamless customer experience across all touch points".

Looking forward to other physical opportunities, TTS intends to expand its convenience store network.

The company has pulled out from 7-Eleven outlets but currently sells lottery tickets through the Coles Express network.

"We firmly believe the convenience channel presents a strong opportunity to grow the lottery category," says Cooke.

"Ninety per cent of our sales are still from bricks and mortar and the majority are newsagents.

"We are very careful though with retail distribution as there are very different propositions in terms of how product is sold and promoted."

Cooke says there were improved revenue outcomes for Saturday lotto and growth in the Monday/Wednesday game, but this was offset by fewer jackpots from Powerball and Oz Lotto.

First division jackpot pools averaged $26.9 million, down 6 per cent on the prior period.

TTS has declared an interim dividend of 9c per share. This represents a 12.5 per cent lift on the prior period.



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