Tabcorp Holdings Limited · ASX:TAH
Tabcorp — H1 2006 Earnings Presentation
46 slides from Tabcorp's earnings presentation, Feb 23, 2006
Slide 1: Tabcorp Half Year Results Presentation ASX cover letter
Tabcorp Holdings Limited vic T: t ACN 083 780 708 a co r Pp § Bowen Crescent * Melbourne Australia 3004 GPO Box 1943R, Melbourne Australia 3004 Telephone 61 3 9868 2100 Facsimile 61 3 9868 2300 Website www.tabcorp.com.au 23 February 2006 To: Australian Stock Exchange Companies Announcements Platform
Slide 2: 2006 Interim Results Presentation
2006 Interim Results Presentation Matthew Slatter Chief Executive Officer . . _ &% Tabcorp the bigger better game
Slide 3: Agenda
Agenda » Matthew Slatter = Overview » Matt Bekier =» Financial Performance > Matthew Slatter » Revenue update and focus for 2H 2006 &s Tabcorp t . : ‘ ; ’ x Half Year Results
Slide 4: 1H results — key numbers
1H 06 results — key numbers x * * >» NPAT pre non-recurring items up 12.8% to $283.2m >» Normalised NPAT growth pre non-recurring items up 7.9% to $279.7m » EPS pre non-recurring items growth of 10.0% to 54.0 cents. Up 5.2% ona normalised basis to 53.3 cents >» DPS up 10.0% to 44.0 cents per share &
Slide 5: DPS & EPS growth
DPS & EPS growth 5 yr CAGR — 12.0% 5 yr CAGR ~ 14.6% 60.0 5 81.4% 540 45.0 Payout Ratio 22.8% ' ; 494 46 51.5% : 50.0 4 458 400 18.8% : 4% 1% : 36.04 95.1% S404 z g < wo 5 FA a “a 25.0 ® 3004 g e 0 é En E2004 = 15.0 & a 10.0 10.05 50 o0 0.0 4 r r T T 2008 2003 2004 2004 2005 2005 2008 Interim Final
Slide 6: Operating revenue summary by division
Operating revenue! summary by division Ss a x * * * Actual growth 2.2% (1.1% on a normalised basis) to $1,925.4m 1,950 26.2 (4.8) om 8) 4,925.4 m5 (0.7%) warn 26.9 (13.4%) (14.5%) 9.4% 1,900 21% 1,884.4 @— Normalised growth 1.1% 5 Actual growth 4.2% 1,856 1,800 T T 1H05 Actual Casinos Gaming Wagerin
Slide 7: EBIT underlying growth by division
EBIT' underlying growth by division Actual growth 6.1% (2.4% on a normalised basis) to $487.3m Total growth of $10rn (7.4%) without Increase In EGM levy 500 ¥ « 18 24 (2.6) 4873 245 ‘sonmmnsunsues CORES, rs 15% 11.0% (100%) 47s 1% 4594 40% s 4 ge 450 ae Normalised growth 4.0% Actual growth 13.3% 425
Slide 8: Split racing picture
Split racing picture >» Racing vision split between Sky Channel and TVN since 4 May 2005 » Detrimental impact on NSW and Victorian wagering revenue » Proposals currently being evaluated to resolve disruptive impact: = Wagering racing channel for retail network and Pay TV (Sky Channel) = Showcase tho
Slide 9: Casinos — EGMs & smoking bans update
Casinos — EGMs & smoking bans update * > Expansion of smoking bans » Qld casinos 66.6% smoke-free 1 Oct 2005 » NSW 50% smoke-free 1 July 2005 Non rebate tables up 4.6% More significant impact on EGMs as tables already smoke-free due to stand-back policy EGM growth: Qld -0.9%; NSW -1.3% Performance d
Slide 10: Casinos — table games
Casinos — table games x * * x > Strong performance across all casinos with Gating NGE PGR table revenue up 11.7% Revenue Revenue . . . Star City Down 3.0% Up 18.2% > Private Gaming Rooms were up 16.2% with Gold Coast Up 1.3% Up 19.6% Star City up 18.2% Treasury Up 8.5% Up 4.9% Townsville Up 4.6% No
Slide 11: Gaming
Gaming * x >» Operating revenue up 5.1% » Victorian gaming up 4.5% » Keno up 9.6% >» EBIT growth of 1.7% impacted by increase in Victorian EGM levy = Normalising for this increase growth would have been 7.4% >» Solid customer service results, with loyalty database members growing from 519,000 to 647
Slide 12: International
International * > x x * * * x % International Division operating revenue $4.1m for 1H06, EBIT pre non- recurring items -$2.6m Revenue derived from sales of gaming-related technologies to international and domestic customers China Technical Cooperation Agreement signed July 2005 and 1st stage (Keno c
Slide 13: Tab integration synergy update
Tab integration synergy update » Operational integration remains on track for completion in September 40.0 2006 >» NSW Government announced on 23 December that pooling would 40.0 not be approved # Impairment charge of $6.8m recognised to fully provide for the write-off of software relating to poolin
Slide 14: The Tabcorp journey moves into a new phase
The Tabcorp journey moves into a new phase * x * * GROWTH 2006 — 2011 - Leverage scale and diversity - Drive aggressive domestic growth - Develop an international presence i) &s Tabcorp t . : ‘ ; ’ x Half Year Results
Slide 15: New executives appointed
New executives appointed * a ae Objective — to drive next growth phase » Elmer Funke Kupper - Chief Executive Australian Business » Expertise in integrating customer experience across businesses # Strong brand manager « Experienced banker with significant consumer and network operation experience in
Slide 16: Managerial experience
Managerial experience * * * x >» Unparalleled experience >» 104 General Managers » Over 600yrs industry experience with Tabcorp Average Service (Yrs) » Avg 5.9yrs industry experience with Tabcorp » 49% GM’s employed at Tabcorp for over 5yrs >» Many having held senior appoiniments in other industries
Slide 17: Casinos
Casinos « Project to be complete by May 2006 * Update provided at FY 2006 Fully leveraged scale -Customer base -Diversity of products -Distubution channels -Capabiities “Cost base Project deliverables by May -Alignment of key business processes where there is value -Develop initiatives with specific
Slide 18: Cross-sell & up-sell opportunity
Cross-sell & up-sell opportunity * x » Tabcorp has identified market opportunities by key customer segment e.g. =» 48% of Wagering customers also participate in Gaming = 79% of table players also participate in Gaming » 44% of table players also participate in Wagering =» 20% of Wagering & 44% of ta
Slide 19: &s Tabcorp it . : : , ‘ x
&s Tabcorp it . : : , ‘ x Half Year Results
Slide 20: Financial performance
Financial performance * x * * Actual Actual Normalised $m 6monthsto Gmonthstoe Change 6 months to 31Dec05' 31Mec04' onpep | 31 Dec 05'* Net operating revenue 4,925.4 1,884.4 2.2% 1,919.6 Other revenue’ 20.5 20.5 O4% 20.5 Taxes on gambling (523.4) (505.0) 3.6% (522.7) Operating commissions (220.0) (2
Slide 21: Financial performance cont'd
Financial performance cont'd * x * * * Actual Actual Normalised G months to G months to Change | 6 months to 31DecO5 31Dec04 enpep | 31 Dec 05" Net profit after tax ($m) - Before non-recurring items 283.2 254.4 12.8% 249.7 - After non-recurring items 292.4 259.2 12.8% 288.9 Earnings per share (cents
Slide 22: Tabcorp group — financial data
Tabcorp group — financial data * x * AS at AS at AS at $m 31 Dee 05 30 June 05 31 Dec 04 Current assets $21.2 29.6 360.1 Licences / management agreements 1234.7 39, 1,490.3 Goodwill / other intangibles 3,580.6 3,644.9 3,373.6 Property, plant & equipment 4460.4 1,442.8 1,522.4 Other non current asset
Slide 23: Key ratios
Key ratios * x Actual Actual Normalised 6 months to 6 months to Change | 6 months to 31Dec05 31Dec04 onpep | 31 Dec 08° Capital expenditure (m) 93.2 50.3 85.3% 93.2 Gross debt / EBITDA’ (x) 2.2 25 (14.6)% 2.2 Net debt / Equity’ (%) 62.9% 74.8% _ (11.9)% 62.9% ROE 7% 16.3% 15.5% 0.8% 16.1% Notes: 1 R
Slide 24: Casinos — financial data
Casinos — financial data * x * * Actual Normalised $m 6 months to Gmonthsto Change | 6 months to 31 Dec 05! 31 Dec 04! 31 Dec 08!” Revenue from ordinary activities 663.8 634.9 4.5% 686.2 Taxes & operator cornmissions (123.5) (119.6) 3.2% (122.8) Other operating expenses (295.4) (292.7) 0.8% (295.1)
Slide 25: Casinos — financial data cont'd
Casinos — financial data cont'd * x * * * Actual $m 6 months to 6 months to Change 34 Dec 05! 31 Dec 04! Net operating revenue Table games Gross rebate play at theoretical 23.3 (27 5)% Above/below theoretical C44) (> 100)% Rebate (14.1 S4.7)% Rebate tables (5.0) > 100% Non rebate tables 264.7 4.6% T
Slide 26: Gaming & Network Games — financial data
Gaming & Network Games — financial data * x x x * * x Actual $m 6 months to 6 months to Change 31 Dec 05! 31 Dec 04! Revenue from ordinary activities 550.9 523.6 5.2% Taxes & operator commissions (366.5) (344.2) PA%G Other operating expenses (34.7) (32.5) 6.6% Depreciation & amortisation 11.6 13.0 1
Slide 27: Gaming & Network Games — financial data cont'd
Gaming & Network Games — financial data cont’d Actual $m 6 months to 6 months to Change 31 Bec 08 31 Dec od Net operating revenue Victorian network Hotels 312.4 303.6 2.9% Clubs 166.9 156.8 FP Total Victorian gaming 484.3 460.4 4.5% Keno 5a.8 54.3 9.6% Total net operating revenue 540.8 514.7 5.4% Ot
Slide 28: Wagering — financial data
Wagering — financial data * Actual $m 6 months to & months to Change 31 Dec 05!” 31 Dec 04!” Operating revenue - Victoria 254.4 249.5 20% Operating revenue - NSW 429.3 439.0 (2.2)% Other revenue 6.6 6.0 9.2% Revenue from ordinary activities 690.3 604.5 (O.6)% R.1., taxes & op. commissions (441.2) (4
Slide 29: Wagering — financial data cont'd
Wagering — financial data cont'd * * NSW Change - Total Change $m iHos' 1H 06 Net operating revenue Racing Thoroughbred 280.8 (2.49% 4635 (1.3% Harness 52.3 (3.8)% 85.9 (2.4)% Greyhound 69.1 (B.8)% 405.8 (.5)% Total racing 401.8 (2.6)% 635.2 (1.8)% Sportsbetting VT 6.1% | 24& 6.7% Trackside - mo B2
Slide 30: Media — financial data
Media — financial data Ss a x s Actual $m 6 months to 6 months to Change 31 Bes 08 31 Dec 04 Revenue from ordinary activities Sky Channel 444 52.7 O6.3)% Sky International Racing 76 7.2 5.6% 2KY & Others 5.2 5.9 C1.9)% Total 56.9 65.8 (15.51% R.1., taxes & operating commissions (2A) (2.8) (12.4)% Ot
Slide 31: International — financial data
International — financial data * x * * * Actual $m 6 months to 6 months to Change 31 Bec 05" 31 Dec 04" Net Operating Revenue Product & Technical Sales 44 4.6 (11.5)% Taxes & operator commissions - - - Other operating expenses (6.5) (4.7) 38.4% Depreciation & amortisation 0.2 04 »(100)% EBIT (2.6) 0
Slide 32: &s Tabcorp t . . , ‘ * x
&s Tabcorp t . . , ‘ * x Half Year Results
Slide 33: Revenue update
Revenue update * x x » Overall solid start to H2 2006 »Strong growth at casinos impacted by above theoretical win rate in IRB play »Gaming continues to grow ata steady rate » Wagering still affected by split picture and adversely impacted in January by extreme heat which caused several race abandonm
Slide 34: Focus for FY2006
Focus for FY2006 Substantially complete Tab integration Engage in 2007 Star City tax and exclusive licence review Embark on process for 2012 License renewal Complete Project Align Development of international opportunities Vv VW VW WV WW W Achieve FY 2006 normalised EPS growth of 2-4% &s Tabcorp t .
Slide 35: &s Tabcorp it . : : , ‘ x
&s Tabcorp it . : : , ‘ x Half Year Results
Slide 36: Appendix contents page
Appendix contents page x * * 1. Non recurring items 2. Group cash flow 3. Casino division geographic revenue split 4. Segment earnings 5. Prior year comparatives reconciliation 6. AIFRS re-stated financial performance 7. AIFRS re-stated financial position 8. Tabcorp debi key features 9. Tabcorp debt
Slide 37: Non-recurring items
Non-recurring items * * x * $m Wagering G&NG Casinos Media int'nal Unalloc Total 6 months to 31 Dec 2005 Restructure/integration costs‘ (8.4) (0.4) (Q.2) (2.0) (0.0) 0.0 Asset sales and valuations’ - 64 India claim release and provisioning’ - 3.7 Singapore integrated resort bid costs‘ - (6.4) Goodwi
Slide 38: Group cash flow
Group cash flow * Actual $m 6 morrths to 6 months to Change 31 Dec 2005 34 Dec 2004 Net operating flows excl interest/tax 550.6 546.9 OF % Net interest payments (77.8) (91.3) (14.8)% Income tax paid (100.9) (17.2) (13.9)% Payments for PP&E 93.2 50.3 85.3% Net operating cash flows 278.7 288.4 (3.3)%
Slide 39: Casinos — financial data cont'd
Casinos — financial data cont'd * x * * * Actual $m 6 months to 6 months to Change 31 Dec 05" 31 Dec 04" NSW Table games PGR 66.2 56.0 18.2% MGF 127.2 184.4 (3.09% EGMs & other gaming 107.4 108.5 (1.3)% Non-gaming 46.0 48.6 (L2y% Total NSW 346.5 344.2 1.3% QLD Rebate piay At theoretical 16.8 23.3 (2
Slide 40: Segment earnings
Segment earnings * x $m Wagering G&NG Casinos Media Int'nal Unalloc Total 6 months to 31 Dec 2005 Operating revenue 683.7 540.8 660.0 56.9 44 (20.1) 1,925.4 Other revenue” 66 40.4 3.8 0.6 6.0 6.4 20.6 Total revenue 690.3 550.9 663.9 56.8 44 (20.0) 1,945.9 EBIT' 122.7 136.2 209.2 24.7 (2.8) 60 4873 6
Slide 41: Prior year comparatives reconciliation
Prior year comparatives reconciliatio x x * x * * $m Wagering G&NG Casinos Media Int'nal Unalloc Total EBIT' 6 months to 31 Dec 2004 Prior year presentation 419.0 135.0 186.0 20.8 - ~ 460.8 Reclassify International operations - (0.4) - - O.4 - - AGAAP & AIFRS adjustmenis O4 (0.3) O2 (14) - (0.2) (1.
Slide 42: AIFRS re-stated financial performance
AIFRS re-stated financial performance * * * AGAAP ALPRS AIFRS adj $m Gmonths to Adjustments Other 12 months to 31 Dec 04 31 Dec 04 adj? 31 Dec 04" Net operating revenue 1,884.4 - - 1,884.4 Other revenue* 207 14 (8.2) 20.6 Other operating expenses (1,875.7) (0,2) 74 C1 368.7) Depreciation & amortisat
Slide 43: AIFRS re-stated financial position
AIFRS re-stated financial position * * * * AGAAP ALFRS AIFRS as at Adjustments as at $m 30 Jun 05 30 Jur 05 30 Jun 05 Current assets 328.4 4 20 Licenses / management agreements 1,201.3 38.4 1,239.4 Goodwill / other intangibles 3,306.8 336.4 3,644.9 Property, plant & equipment 1,505.5 (62.7) 1442.8 O
Slide 44: Group — debt key features
Tabcorp * * 700 600 §00 400 $ millions 200 + 400 + 300 4 Group — debt key features * * * 2006 2007 2008 2009 2010 20711 2012 2013 2014 2015 2016 2017 2018 2019 2020 w Bank Debt 2 Medium Term Notes gUS Private Placement « Average debt maturity is 5.9 years at 31 December 2005 + Average interest rate
Slide 45: Tabcorp Group — debt key features
Tabcorp Group — debt key features * x * * * 2,800 5 2,000 + 4,500 4 $ million 4,000 4 500 4 2008 Amounts at period end * 86.3% gross debt at fixed interest rates at 31 December 2005 » Average cost of fixed rate swaps and fixed interest medium term notes is 5.7% excluding the borrowing margin on medi
Slide 46: Tabcorp brands
Pa in tab spSrtsbet mo convention and exhibition centee E TABAREL sicy CHANNEL By TOT? AM _ &* Tabcorp the bigger better game