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Tabcorp profits down -

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Tabcorp profits down

The World Today - Thursday, 29 January , 2009 12:26:00

Reporter: Peter Ryan

ELIZABETH JACKSON: Australia's biggest gambling company Tabcorp has become the latest victim of the
increasingly turbulent economic times.

The company says its half-year profit has fallen almost four per cent as tighter household budgets
and new Government taxes bite deep into gambling revenue.

It's all part of a global economic landscape that's becoming more gloomy by the day.

I'm joined in the studio now by our business editor Peter Ryan.

First to these raw numbers Peter. How badly is Tabcorp faring?

PETER RYAN: Well Elizabeth, the result was bad enough for Tabcorp to bring its half-year results
forward by a week this morning. I suppose getting on the front foot with bad news ahead of the
official reporting season which gets underway next week.

But looking at those raw numbers, net half profit is down 3.7 per cent on this time last year;
$20-million lower at $263-million. The dividend remains steady at 35 cents a share, a good result
in an environment where dividends are under a lot of pressure as companies trim back.

Even so, the company's chairman John Story says this is a positive result in light of the much
tougher economic environment.

ELIZABETH JACKSON: So what are the key factors then behind this slide in profit?

PETER RYAN: Well Elizabeth we know that tighter household budgets and the looming prospect of more
unemployment means gamblers are taking a much closer look at how much they're prepared to lose at
the casino, racetrack, pub or TAB.

And for example Tabcorp says revenues from electronic gaming machines or pokies were down
marginally at its outlets so fewer people at the pokies, although revenue on the main gaming floors
appears to be on the rise slightly with an increase in multi-terminal machines that seem to be
attractive to gamblers.

But the bigger problem worrying Tabcorp is one of government relations, new charges levied by the
gaming industry and also gaming taxes in its Queensland casino. So to stem some of those losses
Tabcorp has been very busy over the past week or so raising capital, announcing a $300-million
institutional placement. And for that reason the company has been in a trading halt for the past
week.

But whatever way you look at it, Tabcorp shares are now in a trading halt at $6.79 a share, have
more than halved compared with this time last year.

ELIZABETH JACKSON: Peter, just turning briefly to the United States where the US House of
Representatives has just passed Barack Obama's revamped stimulus package, what else can they do in
addition to what was already announced last year?

PETER RYAN: Well I think that Barack Obama is looking at buying up many more toxic assets that
really are or have infected the balance sheets of America's big-name banks, or what were big-name
banks, taking a much more aggressive stance on regulation, tighter regulation, and also looking at
what sort of lifelines can be thrown out to US consumers who are currently in something of a freeze
when it comes to finance for new cars and certainly finance for homes.

But this trillion-dollar package is Barack Obama's blueprint to lift the US economy out of
recession and he'll also be looking at tax cuts and other measures. But importantly this is just
the start. It's only passed the House of Representatives and no Republicans voted for the House
plan. It now needs to go to the US Senate where Republicans are certain to demand more tax cuts and
less spending.

And it does come at a time in US history when we've seen 2.6-million jobs*(see editor's note) shed
over the last year and almost daily layoffs - this week from the likes of Caterpillar, Home Depot
and just today Starbucks which is losing 6,700 staff over the next couple of months.

ELIZABETH JACKSON: So the sentiments expressed in that package, have they flowed through to
Australia today?

PETER RYAN: Well as has been the case over the past year or so, the Australian share market has
little guidance apart from what's happened on Wall Street and so Australian shares rose around 1.2
per cent today based on some optimism in relation to the Obama rescue package in the hope that
Barack Obama's economic team might have a few clues about solving the economic crisis. And that's
been jumped on investors and it adds to yesterday's three per cent rise.

But as always, fund managers remain very sceptical about the market's ability to sustain the brief
rally. They believe shares might appear to be good value, but as we've seen with this crisis it's
almost certain there's more bad news not too far away.

ELIZABETH JACKSON: Thanks for that. That's Peter Ryan, our business editor.

*Editor's note: This transcript has been amended on 29.01.09 to insert a correct reference to
2.6-million jobs which was misspoken as 2.6-million dollars by the reporter during a live
interview.