DESPITE posting a decline in full-year profit, Tatts Group (ASX: TTS) is betting on a strong start to FY15.
Profit on a statutory basis for the year ended June 30 was down 19 per cent to $200.4 million, compared to $247.3 million in the previous year.
The wagering, lottery and gaming business recorded a 7.8 per cent increase in profit before tax from continuing operations, with the comparative result distorted by a one-off $16.2 million tax benefit in FY13.
The same year Tatts was also “cruelled” with what it calls an “illogical” $42.6 million health-benefit levy charged by the Victorian treasurer for the final 46 days of its discontinued pokies business.
This one-off cost had a significant impact on the company’s bottom-line result, it says.
Group revenue fell 2.8 per cent to $2.86 billion, compared to $2.95 billion in the previous corresponding period.
Managing director and CEO Robbie Cooke says in spite of the result, FY14 marks a landmark year for the company.
“Outperforming the group’s FY13 result was never going to be an easy task,” Cooke says.
“Given the exceptional run of lotto jackpots in that year, coupled with the investment ramp-up this year in our wagering operation – an essential step to repositioning our business for future success.
“Against that backdrop, I am pleased with the result achieved in the reporting period, which saw the positive combination of record lotteries earnings, online migration and lower funding costs drive our performance.”
Tatts secured an exclusive 30-year wagering franchise with the Queensland Government in June, expected to generate $4.5 billion in the state’s racing industry.
During the same week, Tatts was awarded $540.5 million in compensation for its long running pokies license case with the Victorian Government – subject to an appeal process.
Cooke says securing the long-term rights in Queensland will give Tatts a competitive edge against out-of-state agencies.
“Significantly, the new arrangements provide for lower wagering tax outcomes and retain the right to offset race field fees against product fees.
“Enabling us for the first time to fight back against the swarm of competitors aggressively targeting Queenslanders, siphoning revenue away from both the Queensland racing industry and state coffers.”
Tatts launched a number of key initiatives during the year, positioning the company for growth in FY15.
For the lotteries division this includes multi-jurisdictional scratch-it tickets, Monday Lotto in Queensland, new South Australian website and exploring convenience fuel stores as a retail channel in Victoria.
Lotteries revenue was down 4.3 per cent at $1.92 billion, with the wagering side of the business also experiencing a drop of two percent to $642.3 million.
A 24-7 fixed price betting service on all racing codes and wider range of sports was launched to combat the decline, as well as a rewards program and enhanced self-service terminals.
Tatts’ gaming division proved to be a highlight for the company, contributing revenue growth amid waning lottery and wagering sales.
The company’s UK-based segment Talarius posted positive growth for the first time since 2008, with a 32.8 per cent rise in revenue to $103.6 million.
Maxgaming also boosted revenue for the first time since 2010, lifting 0.9 per cent to $114.2 million.
Cooke says the company’s renewed focus on marketing strategies, will also lure customers away from competitors.
“Our new wagering website and brand will launch in the year, which will attract a lift in marketing spend,” Cooke says.
“This spend will be offset to an extent, by the reduced wagering tax in our core Queensland market.
“Our focus remains on repositioning our wagering business for growth and capturing the sales momentum considered to be available in our markets.”
The board declared a final dividend of 5.5 cents per share to be paid on October 6.
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