Tabcorp Holdings Limited · ASX:TAH
Tabcorp — H1 2006/07 Earnings Presentation
48 slides from Tabcorp's earnings presentation, Feb 21, 2007
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 21 February 2007 To: Australian Stock Exchange Companies Announcements Platform
Slide 2: 2006/07 Half Year Results Presentation
2006/07 Half Year _Results Presentation | Wednesday 21 February. 2007 . . _ &* Tabcorp the bigger better game
Slide 3: 2006/07 Half Year Results agenda
> Matthew Slatter # H1 2006/07 key results >» Matt Bekier # H1 2006/07 financial performance review > Matthew Slatter * Focus for H2 2006/07 # 2006/07 Half Year Results
Slide 4: Half Year 2006/07 results - key numbers
Half Year 2006/07 results - key numbers Actual’ Change Normalised’? G68 $m 6 months to on Gmonthsto of 31 Dec 06 pep (% SsiDec06 _cpla) Net operating revenue 1,969.5 2.3% 1,091.9 / Net operating expenses 508.1 11.3% 6087. yan EBITDA 518.1 (72%) | B882 a) PBIT 446.0 (8.5%) 4001 Ge PAT - pre NRI 256.2
Slide 5: Earnings and dividends per share
del a Pet eh ll onna f ic | per st 60 50, 53.5 53.5 50.7 S15 44 50 4 38.8 Earnings per share (c) ics } y So Dividends per share (c) 10 HE 02/03 BT 03/04 HT 04/05 HY 06/08 H1 06/07 Ht 02/03 Ht 03/04 H1 04/05 Ht 05/06 +1 06/07 Financial years Financial years Payout Ratio: 85% 69% 75% 82% 91% Notes: 1
Slide 6: Revenue growth by division
$ million, percent growth Normalised growth 1.7% Actual variance (2.4%) Normalised growth 3.7% 1997.9 Actual growth 2.3% y 2005/06 1H Wagering Gaming Casiros international Elirninations 2006/07 1H # 2006/07 Half Year Results
Slide 7: Operating expenses analysis
Operating expenses’ analysis * * * * ie li ii (ot 8 ir lll ! 520 15.8 508.1 800 480 & a 98 460 456.7 440 Deo 08 Broadcast Tab integration Technical Revenue RB One-Ofs Other Dee 08 Rights (2) Systems Services (IT) Equalisation 6) rea Migration (3) 4) Provision (5) 4 Pre non-recurring items whish are
Slide 8: H1 2006/07 key features
H1 2006/07 key features » Casinos « Smoking bans » IRB # Gold Coast performance « Endeavour Room refurbishment » Wagering # Strong revenue turnaround » TAB synergy update « NSW retail revitalisation « TVN update per latest terms » Gaming » Major efficiency projects # 2006/07 Half Year Results
Slide 9: EGM performance and impact of smoking bans
EGM performance and impact of smoking bans > Downturn in revenues experienced upon introduction Victoria’ of smoking bans: (12.6%) Smoking Smoking vs Bans Star Bans Gold PCP NSW City Gid Coast Brisbane Tville Total 2H 06 | 50% (6%) | 66.7% (038%) G4t%) (.9%)) (4.0%) 1H 07 75% (2.2%) | 100.0% (109%)
Slide 10: IRB performance
IRB performance & * * > Revenue up $20.2m or 229.2% at theoretical (theo) rates > Actual revenue down $6.6m or 50.6% due to below theo win rates 2,969 in 1HO7 and above theo in the prior 2,681 year 1,999 2,000 » Star City proving very attractive to international customers, with 87% of turnover for t
Slide 11: Gold Coast performance
Gold Coast performance >» $53m in renovations of Gold Coast ae property completed November 2006 = delivered on time and on budget Compared to PCP Movement Variance > Momentum building since completion of : MGF As 10.9% renovations PGR A 64.6% . . EGMs v 4.2% > MGF revenue driven by strong drop, with
Slide 12: Star City Endeavour Room renovation
>» Renovation of $18.5m to make substantial improvements to Star City’s premium gaming experience » Objective is to drive increased rebate and PGR play visitation and offer more attractive EGM experience to premium players >» Highlights: = Renovation of existing Endeavour Room » 4 additional inner-s
Slide 13: Wagering revenue trend
41D panne anne nnn __._......L_ Wagering 110 peice eee eee Oe ----------- os ee I eee 406 pete ene ee ---j---------------- 104 | --------------------------rdF--- OO edd tae 402 | ------------ LS ST tana ee eee 98 | ------------------------------------ > 96 5 94 + 92 Jul-04 Oct-04 Jan-05 Apr-05 Jubos
Slide 14: Flexi-betting and new exotic bet types
» Flexi-betting and First 4 “exotic” bet types and new Internet betting system introduced as part of Wagering Migration in Sept 06 > Plays to Tabcorp leadership in product innovation = Flexi more than 40% of First 4, Trifecta and Quaddie » First 4 at more than 4% market share = Win/place pools conti
Slide 15: TAB integration synergy update
Tab integration synergy update >» Telephone betting call centres consolidated » Common bet types implemented » Wagering IT systems consolidation completed » Net synergies for FY 2006/07 reduced to $29.1m due to higher implementation costs >» Synergy target $34.9m — remains unchanged » NSW retail out
Slide 16: NSW retail revitalisation
NSW retail revitalisation » Current growth in NSW is lagging » Racing product performance » Retail network quality A $50 million investment in v = New agencies and upgrades « Self-Service technology Venues Vv « Standards (eg facilities, opening hours) » New incentive program * Footprint optimisation
Slide 17: TVN update
TVN update >» Heads of Agreement and Term Sheet signed May 2006 « Interim arrangements implemented » ACCC declined to give clearance for proposed long term arrangements >» MoU entered February 2007 containing extended interim arrangements to February 2008 # Long term arrangements subject to ACCC aut
Slide 18: Victorian gaming and Keno operating revenue
» Operating revenue up 1.6% ' ‘ i 9 * Victorian gaming up 2.8%, Change ow: 31Dec06 to PCP up 4.1% in 2 Qtr 07 Revenue 494.7 2.8% * Keno down 7.7% (down 0.3% when Market share 51.2% OF% EGMs at period end 13,725 0.8% adjusted for hold rate variance) Total venues 266 2 . . . . Venues upgraded for smok
Slide 19: Major Efficiency Programs
Major Efficiency Programs $m P&L impact in period Initiative 4H07? 2H 07 FY 08 FY 09 Shared Services » Expected benefits 0 0 4 9 * Implementation costs" (15) (2) (3) (1) Streamlining and Devolution of Technical Services and Corporate » Expected benefits CG 4 12 12 * Implementation costs (16) (1) ()
Slide 20: Additional efficiency projects
Additional efficiency projects Initiative Nature of the Opportunity Status Tech Services Optimisation * Simplification of infrastructure and applications to drive dramatically lower opex and capex * Evaluation of outsourcing options Procurement ° Design work underway ° RFP in March * Tabcorp purchas
Slide 21: # 2006/07 Half Year Results
# 2006/07 Half Year Results
Slide 22: Financial performance
Financial performance & * * * Actual Normalised $m 6 months to Change 6 months to Change 31 Dec 06' on pep 31 Dec 06'7 on pep Net operating revenue 4,969.5 23% 4,994.9 B.P% Other revenue® 20.0 (2.8%) 20.0 (2.5%) Taxes on gambling (536.1) 24% (538.4) 3.0% Operating commissions (227.0) 3.2% (227.0) 3.
Slide 23: Financial performance key ratios
Financial performance key ratios Actual Normalised months to Change 6monthsto Change 31.Dec06' = on pep 31. Dec 06? on pep Net profit after tax ($m) - Before non-recurring items 256.2 (9.6%) 270.3 (3.6%) - After non-recurring items 224.4 (24 5%} 238.3 (15.8%) Earnings per share (cents) - Before non-
Slide 24: Balance sheet
Balance sheet eS * * As at As at Change $m 31 Dec 06 20 Jun 06! on pop Current assets 284.6 278.6 2.26 Licences / management agreements 1,225.5 1,230.1 (0.4%) Goodwill / other intangibles 3,684.4 3,676.5 0.2% Property, plant & equipment 1,448.2 1,442.3 0.4% Other non current assets 55.5 444 25.1% To
Slide 25: Australian Business — financial data
Australian Business — financial data 2 Actual $m 6monthsto 6 months to Change 31Dec06' 31 Dec os’? on pep Operating revenue’ 1,326.4 4.6% Other revenue 17.1 2.9% Revenue from ordinary activities 1,343.5 4.6 %o R.L, taxes & op. commissions (844.7) (812.1) 4.0% Other operating expenses (183.3) (153.2)
Slide 26: Australian Business — revenue by product
Australian Business — revenue by product * NSW Change Vic Change Total Change $m 1H 07' onpep 1H07' onpep 1H O07 on pop Net operating revenue Wagering & Media Thoroughbred Harness Greyhound fo Racing 5.2% Trackside’ 3.3% Sportsbetting 28.5 61.1% | 60.4% Media 3.6% Other 0.9%. Total Wagering 6.9% Gam
Slide 27: Wagering and Gaming - financial data
Wagering and Gaming - financial data Wagering Gaming Actual Actual $m 6 months to Change 6 months to Change 31 Dec 06' on pep 31 Dec 06' on pep Operating revenue’ 776.5 6.9% 549.9 1.6% Other revenue 6.3 4.3% 10.9 7% Revenue from ordinary activities 782.8 6.8% 560.8 1.7% R.L, taxes & op. commissions
Slide 28: Casinos — financial data
Casinos — financial data eS * * ee Actual Normalised $m 6 months to Change 6 months to Change 31 Dec 06' onpep | 31 Dec 06"? on pep Revenue from ordinary activities 646.9 (2.5%) 669.3 1.5% Taxes & operator commissions (120.7) (2.2%) (123.0) 0.1% Other operating expenses (320.9) 8.8% (320.9) 8.8% Dep
Slide 29: Casinos revenue detail
Actual Actual $m 6monthsto 6 months to Change 31 Dec 06 34 Dec 05 On pcp Net operating revenue Table games Gross rebate play at theoretical 67.1 16.0 > 100% Rebate (38.1) (2.2) > 100% Above/below theoretical (22.4) 4.5 <100%) Net rebate tables 6.6 13.3 (50.6%) Non rebate tables 275.9 276.8 (0.3%) To
Slide 30: International — financial data
International — financial data eS * * ee * Actual $m 6 months to 6 months to Change 31 Dec 06' 31 Dec 08! on pep Revenue from ordinary activities 1.2 0.8 45.3% Other operating expenses (3.5) (6.4) (42.1%) Depreciation & amortisation (0.4) (0.2) 68.8% EBIT (2.7) (5.5) (50.7%) Notes: 1 Excludes nor-re
Slide 31: China terminal pilot completed
» Pilot completed = About 300 terminals installed across 28 provinces = Terminal performance sufficient to justify further roll out » Strong China team largely built up in Beijing > Rollout of next 1,800 terminals underway = Produced in China to TAH specifications = Focus on building critical mass i
Slide 32: # 2006/07 Half Year Results
# 2006/07 Half Year Results
Slide 33: Revenue Update
Revenue Update HNN Casines (12.3%) [Bl os%) Br B Gaming Tt 47% . if Wagering Pe a ‘ Represents the period from tst Jan to 17th Feb # 2006/07 Half Year Results
Slide 34: Focus Going Forward
Focus Going Forward x » For the next 18 months — 2 years, the focus will be on improving the performance of the existing businesses = Great set of assets with fantastic cash flows —~ but not at optimum performance = Performance will be driven through continued investment in our businesses and by red
Slide 35: # 2006/07 Half Year Results
# 2006/07 Half Year Results
Slide 36: Appendix contents page
Appendix contents page — Non recurring items Cash flow Reconciliation of prior period segment results Reconciliation of 2005/06 comparatives - profit and loss Reconciliation of 2005/06 comparatives - balance sheet Casinos revenue by state Wagering — Revised TVN Agreement Feb 07 Capital expenditure o
Slide 37: Non-recurring items
1. Non-recurring items & * * * $m Wagering Gaming Casino Int'nal Unalloc Total 6 months to 31 December 2006 Restructure/integration costs’ (20.3) (9.6) (12.6) (0.0) (0.1) (42.6) UniTAB bid cost’ (0.5) (0.5) (0.6) 0.0 (0.2) (1.9) Split picture resolution - implementation costs® (1.3) ~ ~ ~ ~ (1.3) To
Slide 38: Cashflow
2. Cashflow Actual $m 6 months to 6 months to Change 31 Dec 06 ot Dec 05 on pcp Net operating flows 501.5 550.6 (8.9%) Net interest payments (78.6) (77.8) 1.0% income tax paid (117.6) (100.9) 16.6% Payments for PP&E (85.7) 93.2) 8.0%) Net operating cash flows 219.6 278.7 (24.2%) Sale of assets / bus
Slide 39: Reconciliation of prior period segment results
$m Wagering International Half Year ended 31 Dec 2005 (previous) Product Media Eliminations| Wagering Operating revenue G8S.7 3.0 56.9 C74) 726.5 Other revenue 6.6 - (0.1) 65 Revenue from ordinary activities aod. 3.0 56.8 era 733.1 R.1., taxes & op. commissions (444.2) 0.0 (2.4) (443.6) Other operat
Slide 40: Reconciliation of 2005/06 comparatives - profit and loss
4. Reconciliation of 2005/06 comparatives - profit and loss Normalised Revised tax Normalised $m 4H 06 consolidations Acdaption of 1H 06 as reported’? benefit* 1.35%win rate’ restated’? Net revenue from ordinary activities? 1,940.4 44 1,941.4 Total operating expenses 1,458.1) (1,458.1) EBIT 482.3 14
Slide 41: Reconciliation of 2005/06 comparatives — balance sheet
5. Reconciliation of 2005/06 comparatives — balance sheet Balance Sheet * Deferred Balance Sheet $m 1H 06 Software CIP Tax Asset at 1H 06 as reported’ Reallocation® Reallocation’ restated Current assets 278.6 278.6 Licences / management agreements 4,230.4 1,230.1 Goodwill / other intangibles 3,611.4
Slide 42: Casinos revenue by state
6. Casinos revenue by state & * * * Actual Actual $m Gmonvhs te Gmorths to Change a1 Dect6' 24 Dee 05° on pe NSW Gross rebate play at theoretical 58.0 - Rebate 33.3 - Abovelbelow theoretical 2 - Net rebate play 6.5 - Table games PGR 56.5 66.2 MGF 131.7 127.2 EGMs & other garning 106.8 407.4 Non-gami
Slide 43: Wagering — Revised TVN Agreement Feb 07
7. Wagering — Revised TVN Agreement Feb 07 Announced May 06 May 06 Feb 07 Feb 07 Interim / Final Proposed Long Term Interien Interim Proposed Long Term Period / ACCC Not approved May 06 to Jan 07 Feb 07 to Jan 087 Subject to approval $m / year $m / year $m / year $m / year Broadcast Rights to TVN (2
Slide 44: Capital expenditure
8. Capital expenditure Actual $m 6 months to 6 months to Change 31 Dec 06 31 Dec 05 on pep Australian Business 39.2 54.5 (28.0)% Casinos Ba.4 23.2 43.8% International 5.3 1.0 > 100% Corporate 13.4 14.5 BAYT Total 91.0 93.2 2A Major 2006/07 projects Casinos Gold Coast refurbishment 16.0 Wagering migr
Slide 45: Net interest expense — discounting on provisions
9. Net interest expense — discounting on provisions x * * * * * * > Tabcorp acquired Jupiters Limited in November 2003 > Aprovision of $115.9m was made for the management agreements for the Brisbane and Gold Coast casinos being the present value of the liability acquired » The management agreements
Slide 46: Tabcorp Group — debt key features
10. Tabcorp Group — debt key features Debt structure & maturity profile 600 500 400 300 $ millions. 200 100 2007 2008 2009 2010 2041 2012 2013 2014 2015 2016 2017 2018 2019 2020 wi Bank Debt jm Medium Term Notes mj US Private Placement » Average debt maturity is 5.3 years at 31 December 2006 » Avera
Slide 47: Fixed rate swaps & fixed interest medium term notes
Fixed rate swaps & fixed interest medium term notes 2,000 $ milion 1,060 500 Dec-06 Amounts at period end » 84.8% gross debt at fixed interest rates at 31 December 2006 » Average cost of fixed rate swaps and fixed interest medium term notes is 5.7% excluding the borrowing margin on medium term notes
Slide 48: Tabcorp brands closing slide
Pa in tab spSrtsbet mo convention and exhibition centee E TABAREL sicy CHANNEL By TOT? AM _ &* Tabcorp the bigger better game