Record lottery & wagering revenues for Tatts as online growth continues

Australia’s Tatts Group has reported an 11 per cent increase in revenues from continuing operations to AUD$2,948.8m for the year ended June 30th, following record performances from its lottery and wagering businesses, both of which benefited from strong online growth.

Including results from Tatts’ now discontinued Victorian pokies business, total revenues were down 20 per cent to $3,115.9m.

FY 2012/13 Revenues

Revenues from lotteries increased by 14 per cent to $2,008.6m following a continuing strong run of jackpots as well as contributions from SA Lotteries. There were 39 jackpots at or above $15m during the year, compared with 22 in the prior year period.

Tatts said it was an “exceptionally strong performance” at all levels in its lotteries operations, which was all the more convincing due to the strong growth achieved in the previous year.

The company’s continued investment in the Tatts.com website is also starting to deliver results, with online lotteries sales climbing 35 per cent year-on-year (excluding SA Lotteries) and now representing more than 8 per cent of all lotteries sales.

The lotteries business generated EBITDA of $294.6m for the year, with the company on course to achieve its EBITDA target of $300m in its next financial year, which was set at the time of the acquisition of SA Lotteries.

Meanwhile, Tatts’ wagering business also achieved record results during the year, posting revenue growth of 5 per cent to $655.7m, benefiting from a full year’s contribution from Tote Tasmania.

Wagering sales from fixed price betting increased by 16 per cent year-on-year, exceeding the $1bn mark for the first time. Tatts said this reflected the growing appetite from some customers for its fixed odds offering over its pari-mutuel product, which saw sales decline by 2 per cent.

“Innovation in our wagering offering will be critical to our continuing success,” said Tatts in a statement Thursday. “In recognition of this we are engaged in a program to better position the group to outperform – included in this is a brand revitalisation program that will seek to align our brands in retail, online and traditional media.”

The company said that its current retail and online wagering platforms are undergoing development to continue to position Tatts to compete with the current “best of breed platforms offered globally.”

Tatts’ online wagering channel saw sales increase by 22 per cent compared to last year, with more than 20 per cent of wagering sales now being delivered online.

Tatts’ managing director Robbie Cooke said: “FY13 was an outstanding year for Tatts with our continuing operations performing ahead of expectations. When looking back to February at the time of our half-year results, we were cautioning against simply extrapolating our 6-month performance and growth rates.

“Back then we saw a real challenge in duplicating the exceptional run of jackpots achieved, and in beating the lift from our first year’s contribution from Tote Tasmania, which we were about to cycle over in March 2013 on the acquisition anniversary. The reality has been much stronger than our expectations in February, with our second-half result not disappointing in the slightest.”

Tatts’ other gaming solutions businesses also performed well during the year, with revenues from Bytecraft Systems increasing 12 per cent to $116.0m and Talarius revenues up by 13 per cent to $78.0. This offset a 1 per cent drop in revenues from Maxgaming to $113.2m.

Maxgaming, Bytecraft and Talarius have all been brought under the control of one chief operating officer to drive a sharing of skills, knowledge and technology across the three related operations.

“It is expected that this approach will, over time, result in operating officiencies and more strategic decision making,” said Tatts.

The discontinued Victorian pokies business generated revenues of $190.7m during its 46 days of operations this year, compared to $1,245.1m last year.

Statutory outgoings amounted to $1,982,1m during the year, an increase of 9 per cent year-on-year, including government share of $1.376.4m and product and program fees of $191.5m.

Other operating expenses rose 13 per cent to $478.6m, with staff costs rising 11 per cent to $196.9m, and marketing and promotions expenses up 21 per cent to $45.9m.

Tatts recorded a profit from continuing operations of $227.4m, an increase of 41 per cent versus a year ago. Including discontinued profit of $19.9, the company generated total profit of $247.3m for the year, 22 per cent year-on-year.

Tatts has approved a final dividend of 7.5 cents per share, reflecting the first dividend payment without any contribution from pokies. The final dividend takes the full year dividend to 15.5 cents, representing a payout ratio of 95 per cent on profit from continuing operations.

Tatts said that trading at the start of the new financial year had been positive overall, with July “comfortably outperforming” the corresponding period last year.

“Overall we consider the outlook for the group in FY14 to be positive, whilst remaining ever vigilant to consumer sentiment and competitor activities,” said the company.

As at June 30th the company held cash and cash equivalents of $355.7m compared to $290.1m a year ago.

Shares in Tatts Group Limited (Co. Data) (ASX:TTS) gained 1.26 per cent earlier today to close at $3.21 per share in Sydney.