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REPORTING SEASON: Tatts Group Ltd (TTS)

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Figure 1: Tatts Group Ltd 12 month chart

 

Tatts Group (TTS) fell short of expectations

·         Gaming company Tatts Group (TTS) reported a weaker than expected FY14 Net Profit After Tax of $200.4m. The result was impacted negatively by a $42.6m health benefit levy charged by the Victorian government and was soft compared to the previous year following a $16.2m tax benefit in FY13. Underlying profit, which strips out one-off items rose 7.3%

·         Its Lotteries unit was its most profitable, adding $271.5m to EBIT. This marked a modest 0.8% rise due to a lack of significant lotto jackpots over the year. There were 39 jackpots at or above $15m in FY13 including the $112m Oz Lotto jackpot on Melbourne Cup day. Online sales accounted for 9.4% of lotteries sales (8.2% in FY13). TTS is behind Oz Lotto & Powerball ($70m jackpot tonight)

·         Wagering earnings slumped by 7.4% to $144.1m. TTS has secured retail exclusivity for QLD Racing and Sports until 2044. Online bets generated 22.9% of the unit’s total sales (20.2% in FY13). TTS considers itself on track to grow this business following the establishment of a new operating framework. While Gaming income improved, it still only contributed $51.3m to EBIT.

·         Looking ahead, TTS plans on launching a new wagering website and rolling out its next generation store format in QLD. It plans on implementing a new sports betting platform called ‘nexgen’. TTS intends on rolling out a new retail channel in convenience fuel outlets for its lotteries business. TTS increased its dividend payout ratio, sharing 95.9% of its profits with investors in 2014. A $0.055/share final dividend will be paid on 6 October. TTS has a 4.5% dividend yield. Its shares slumped following the result; however have surged by 14.5% over the past two months following a favourable court ruling against the State of Victoria worth $451m at the end of June

 

You can see all of CommSec’s reporting season analysis by clicking here.

Steven Daghlian, Market Analyst,