Tabcorp Holdings Limited ACN 063 780 709 9 February 2012 To: Australian Securities Exchange Companies Announcements Platform 20 Bridge Street Sydney NSW 2000 5 Bowen Crescent Melbourne Australia 3004 GPO Box 1943R Melbourne Australia 3001 Telephone 61 3 9868 2100 Facsimile 61 3 9868 2300 Website www.tabcorp.com.au RESULTS FOR ANNOUNCEMENT TO THE MARKET TABCORP RESULTS FOR THE HALF YEAR ENDED 31 DECEMBER 2011 In accordance with the ASX Listing Rule 4.2A, the following information in respect of the half year ended 31 December 2010 is transmitted for lodgement: 1. Media Release; and 2. Directors Report and Financial Report. The Company has announced an interim dividend of 13 cents per share fully franked at the company tax rate of 30% to be paid on 26 March 2012. The dividend record date for the purpose of entitlement to the interim dividend will be 20 February 2012. The ex-dividend date is 14 February 2012. The price at which shares will be issued under the DRP for the interim dividend is the daily volume weighted average market price of Tabcorp shares sold in the ordinary course of trading on the Australian Securities Exchange over a period of ten business days beginning on the second business day after the dividend record date less a 2.5% discount. To participate in the DRP at the interim dividend, DRP elections must be received by Tabcorp s share registry (Link Market Services Limited) by the end of the record date. Information regarding the DRP can be found on the company s website at www.tabcorp.com.au. The information contained in this announcement should be read in conjunction with Tabcorp s most recent annual financial report. Kerry Willcock Executive General Manager Corporate, Legal and Regulatory Enc.
9 February 2012 Tabcorp 2012 half year results Highlights Net Profit After Tax (NPAT) from continuing operations $189.3 million, up 14.1% compared to the prior corresponding period. This reflects strong underlying earnings growth and lower interest expense following the demerger. 1 Earnings Before Interest and Tax (EBIT) from continuing operations $316.9 million, up 5.6% o Revenues up 2.8% o Variable contribution up 5.7% o Expenses up 4.6% Earnings per share from continuing operations 26.9 cents, up 3.5% Dividend 13 cents per share, in line with 50% NPAT target payout ratio Agreements with Victorian Government and Racing Industry executed for the new Victorian Wagering and Betting Licence in December 2011 Investment plans in place for launch of the Victorian Keno Licence in April 2012, new Victorian Wagering and Betting Licence in August 2012, expansion of NSW wagering retail offer and launch of the Tabcorp Gaming Solutions business Operational stand-outs included fixed odds revenue growth of 39.5%, NSW retail sales up 6.6% and Trackside revenues up 95.3% Multi-channel strategy embraced by customers and delivering for shareholders Group performance overview Tabcorp Holdings Limited today reported NPAT from continuing operations of $189.3 million, up 14.1% for the half year to 31 December 2011. The continuing operations are the Wagering, Media and International, Victorian Gaming and Keno businesses. Earnings Before Interest and Tax from continuing operations were $316.9 million, up 5.6%. Earnings per share from continuing operations were 26.9 cents, up 3.5%. Revenues were $1,573.5 million, up 2.8%. All four businesses delivered positive revenue growth, with the strongest growth recorded in Keno. 1 Prior year NPAT of $265.5 million included $99.6 million from discontinued operations, resulting in 1H11 NPAT from continuing operations of $165.9 million. The 1H11 result included interest expense of $71.1 million, which reflected the higher debt levels prior to the demerger of the Casinos business, compared with $42.6 million in the current period. 1
Expenses were up 4.6%, driven by expansion initiatives in Wagering and Keno. Tabcorp declared a half year dividend of 13 cents per share, which will be fully franked and payable on 26 March 2012 to shareholders registered at 20 February 2012. The first half dividend is in line with a target payout ratio of 50% of NPAT foreshadowed in previous market announcements. Tabcorp Chairman Paula Dwyer said: All four Tabcorp businesses grew revenue and earnings in the first half of 2012. This momentum across our core operations is particularly notable given the challenging business conditions being experienced across the broader Australian retail environment. Tabcorp s first half growth reflects the strength of the company s customer brands, the resilience of the business and its defensive earnings profile. The investment plans we have in place to support the launch of the Victorian Keno Licence and the new Victorian Wagering and Betting Licence, the further expansion of NSW s retail wagering offer, and the start of Tabcorp Gaming Solutions provides a strong pipeline of growth initiatives for the group. Today s result further validates the rationale for Tabcorp s demerger of Echo Entertainment Group in 2011, with the various businesses having a clearer focus in each of their respective markets. The financial results demonstrate that our strategies and investment plans are focused on our customers and industry stakeholders and have been well executed. Chief Executive Officer, David Attenborough said: The first half saw all four Tabcorp businesses continue to yield positive revenue and earnings results. The expansion of product in the NSW retail network and continued strong growth in fixed odds underpinned the Wagering business sound performance. Australian wagering customers continue to demonstrate a preference for our market-leading brands, products and channels. Continued investment in our Keno business has translated into strong revenue and earnings performance. Gaming revenues and earnings were also up as we continue to maximise earnings through to licence expiry in August. It was also encouraging to see the Media and International business continue to grow, which in turn delivered improved contributions to the racing industry. Individual business performance Measured in EBIT, the individual business results for the half year to 31 December 2011 were: Wagering: EBIT $132.8 million, up 6.2%. Wagering revenues grew 2.8% to $849.4 million. Variable contribution (revenue, minus government taxes and levies) grew by 6.5% to $306.8 million. This growth was predominantly driven by Trackside and fixed odds, with Tabcorp well positioned to capture the market trend towards fixed odds betting at the expense of traditional totalisator betting. 2
Operating expenses in Wagering increased by 5.3%, largely attributable to technology costs associated with expansion initiatives such as the animated racing game Trackside and fixed odds in NSW retail. Revenues from fixed odds betting, which attract lower tax rates and fees than totalisator betting, grew 39.5% to $152.3 million. Totalisator revenues declined 5.5% in Victoria and 7.2% in NSW, as demand migrates towards fixed odds products. Both the NSW and Victorian retail TAB businesses recorded turnover growth in the half year, with retail sales in NSW up 6.6% to $2.0 billion on the back of an expanded fixed odds offer and the introduction of Trackside. Trackside revenues were $41.8 million, up 95.3%, while the Northern Territorybased bookmaking business, Luxbet, grew revenues by 28.1% to $12.3 million. Tabcorp continues to lead the wagering market in the conversion to digital, multi-channel offerings for customers, including the streaming of races on ipads launched in 2011. The TAB Sportsbet App, which was the first in the world to offer totalisator betting, has been downloaded by more than 400,000 users across iphone, ipad and Android devices. Contributions to the Australian racing industry from Wagering were $317.6 million. This comprised contributions of $126.3 million in NSW, up 1.4%, $173.0 million in Victoria, down 0.5%, and $18.3 million in race fields fees, up 8.3%. In December 2011, Tabcorp Wagering and its subsidiaries entered into arrangements with the Victorian Racing Industry that will govern the formal relationship between Tabcorp Wagering and the Victorian Racing Industry for the new Victorian Wagering and Betting Licence. Tabcorp paid the $410 million licence fee for the Victorian Wagering and Betting Licence to the Victorian Government in January 2012. Media and International: EBIT $28.7 million, up 7.1%. Revenues from Tabcorp s Media and International operations, encompassing racing broadcaster Sky Racing, grew 5.7% to $94.5 million. Expenses grew 4.4%. The international totalisator gateway, Premier Gateway International (PGI), was launched in July. PGI is based on the Isle of Man and is jointly owned by Tabcorp and South Africa s Phumelela Gold International. A global gateway, such as PGI, expedites and facilitates co-mingling of totalisator pools giving totalisator systems connecting to the gateway access to systems around the world that are already linked. Contributions to the Australian racing industry from broadcast rights and international business were $25.6 million, up 8.0%. 3
Victorian Gaming: EBIT $129.1 million, up 3.5%. Revenues grew 1.0% to $562.0 million. Expenses declined 6.7% as Tabcorp manages the transition to the expiry of the Gaming licence in August 2012. Post-August 2012, Tabcorp will operate Tabcorp Gaming Solutions (TGS) a gaming services provider, set up to help hotels and clubs manage their gaming offer. TGS has continued to enter into contracts with venues, with more than 8,000 machines now signed up. The expected EBITDA from Tabcorp Gaming Solutions is approximately $50 million per year from August 2012. Keno: EBIT $26.3 million, up 11.0%. Keno continues to be an attractive growth business for Tabcorp. Revenues for the first half grew 10.3% to $92.4 million. Expenses were up 9.3% to $18.8 million, driven by preparation for the new Victorian Keno licence, which commences in April 2012, and increased advertising and promotional activity. There are now 720 venues in the NSW hotel Keno network, following an expansion program. The ongoing growth of Keno in NSW and Queensland provides Tabcorp with the platform to replicate these successful models in Victoria when it is launched in April 2012. Capital management Following the award of the Victorian Wagering and Betting Licence, Tabcorp entered into an agreement to underwrite its dividend reinvestment plan participation to 50 per cent for its FY12 interim dividend. Now that the licence has been issued and the payment of $410 million has been made, refinancing of FY13 maturities is targeted for the second half of the 2012 financial year. This may include hybrid securities. The Gross Debt to EBITDA ratio was 1.4 times, prior to the Victorian Wagering and Betting Licence payment of $410 million. Tabcorp outlook Mr Attenborough said that the broad revenue and earnings trends experienced by Tabcorp in the first half of the 2012 financial year were expected to continue in the second half. Tabcorp has a high quality portfolio of assets and a loyal franchise of hundreds of thousands of customers. Each of our businesses is performing well in its respective markets despite the economic uncertainty and challenges experienced by retailers, Mr Attenborough said. We have strong and secure growth drivers across the business this year including new Wagering and Keno licences to operate in Victoria, an expansion of our retail offering in NSW and the launch of the new Tabcorp Gaming Solutions business. 4
The granting of the new Victorian Wagering and Betting Licence has provided investment certainty. As part of this, we are deploying a TAB self-service kiosk roll-out to smaller hotels and clubs. In coming months, our wagering account customers will be able to transact with us more easily through a new online wagering platform. We expect a continued trend towards fixed odds betting, and Tabcorp is ideally placed to lead this market. For more information: Financial analysts: Damien Johnston, Chief Financial Officer, 03 9868 2195 Media: Nicholas Tzaferis, GM Group Corporate Affairs, 03 9868 2529 5
Tabcorp half year results to 31 December 2011 Financial results from continuing operations Revenue $1,573.5 million, up 2.8% Earnings Before Interest and Tax (EBIT) $316.9 million, up 5.6% Net Profit After Tax (NPAT) $189.3 million, up 14.1% Earnings Per Share (EPS) 26.9 cents, up 3.5% Dividend per share, fully franked Dividend 13 cents Payout Ratio (% of NPAT) 49.0% Segment EBIT Wagering: $132.8 million, up 6.2% Media and International: $28.7 million, up 7.1% Victorian Gaming: $129.1 million, up 3.5% Keno: $26.3 million, up 11.0% Stakeholder benefits Taxes on gambling paid incl gaming levy $582.3 million, down 0.1% Income generated for racing industry $343.2 million, up 1.2% VIC: $173.0 million, down 0.5% NSW: $126.3 million, up 1.4% Race fields fees $18.3 million, up 8.3% Broadcast rights and international business $25.6 million, up 8.0% Contribution to State community benefit funds $40.9 million, up 0.4% Income taxes paid and payable $85.0 million, up 34.4% 6
TABCORP HOLDINGS LIMITED AND CONTROLLED ENTITIES DIRECTORS REPORT AND FINANCIAL REPORT FOR THE HALF YEAR ENDED 31 DECEMBER 2011 A.B.N. 66 063 780 709 ASX CODE: TAH
Contents Company directory...1 Directors report...2 1. Principal activities...2 2. Financial results...2 3. Earnings per share...2 4. Dividends...2 5. Review of operations...3 6. Significant changes in the state of affairs...4 7. Rounding of amounts...4 8. Auditor s independence declaration...4 Financial report...7 Income statement...7 Balance sheet...8 Statement of cash flows...9 Statement of changes in equity...10 Notes to the financial statements...11 Directors declaration...14 Independent review report...15 Tabcorp Holdings Limited and its controlled entities
Company directory Directors The Directors of Tabcorp Holdings Limited ( the Company ) at the date of this report and at any time during the half year (except as otherwise stated) are: Current: Paula Dwyer David Attenborough Jane Hemstritch Justin Milne Zygmunt Switkowski Pending: Elmer Funke Kupper Steven Gregg Chairman and Non Executive Director Managing Director and Chief Executive Officer Non Executive Director Non Executive Director Non Executive Director Non Executive Director subject to the receipt of all necessary regulatory approvals Non Executive Director subject to the receipt of all necessary regulatory approvals Company Secretary Kerry Willcock Registered office 5 Bowen Crescent Melbourne, VIC 3004, Australia Telephone: 03 9868 2100 Website: www.tabcorp.com.au Share registry Link Market Services Limited Level 9, 333 Collins Street Melbourne, VIC 3000, Australia Telephone: 1300 665 661 (local call cost within Australia) Telephone: 02 8280 7418 Website: www.linkmarketservices.com.au Auditor Ernst & Young Corporate information The Company is a company limited by shares that is incorporated and domiciled in Australia. Stock exchange listings The Company s securities are quoted on the Australian Securities Exchange (ASX) under the codes: TAH for ordinary shares; and TAHHA for Tabcorp Bonds. Currency References to currency are in Australian dollars unless otherwise stated. Tabcorp Holdings Limited and its controlled entities 1
Directors report for the half year ended 31 December 2011 Directors report The Directors of Tabcorp Holdings Limited submit their report for the consolidated entity comprising the Company and its controlled entities (collectively referred to as the Tabcorp Group ) in respect of the half year ended 31 December 2011. 1. Principal activities The principal activities of the Tabcorp Group during the half year comprised the provision of leisure and entertainment services (particularly in relation to gambling). The Demerger of Echo Entertainment Group Limited from Tabcorp, which was implemented on 15 June 2011 (Demerger), resulted in Tabcorp retaining its wagering, media and international, Victorian gaming and keno businesses while Echo Entertainment Group Limited now holds the casinos business previously held by Tabcorp. Other than in respect of the discontinued casinos business resultant from the Demerger, the Tabcorp Group s principal activities remain unchanged from the previous financial year to 30 June 2011. 2. Financial results The financial results of the Tabcorp Group for the prior corresponding half year to 31 December 2010 include the operations of the casinos business, which was demerged in June 2011. The financial results of the Tabcorp Group for the half year to 31 December 2011, and comparisons to the prior corresponding period to 31 December 2010, relate to the continuing operations of its wagering, media and international, gaming and keno businesses, unless otherwise stated. Profit after income tax was $189.3 million, which was 14.1% above the previous corresponding period. Earnings before interest and tax (EBIT) of $316.9 million, which was 5.6% above the previous corresponding period. Revenue was $1,573.5 million, which was 2.8% above the previous corresponding period. The financial results reported for the prior corresponding period, before the Demerger was implemented, were profit after income tax of $265.5 million, EBIT of $444.8 million and revenue of $2,257.6 million. 3. Earnings per share Basic earnings per share for the period were 26.9 cents, up 3.5% with regard to the Tabcorp Group s continuing businesses in the previous corresponding period. Diluted earnings per share for the period were 26.8 cents, up 3.5% with regard to the Tabcorp Group s continuing businesses in the previous corresponding period. Earnings per share reported for the prior corresponding period before the Demerger was implemented were basic earnings per share of 41.6 cents and diluted earnings per share of 41.5 cents. 4. Dividends An interim dividend of 13 cents per ordinary share has been declared. The dividend will be fully franked and payable on 26 March 2012 to shareholders registered at 20 February 2012. The ex-dividend date is 14 February 2012. The following dividends have been paid, declared or recommended by the Company since the end of the previous corresponding period: 2012 interim dividend Interim fully franked dividend for 2012 of 13 cents per share on ordinary shares as announced on 9 February 2012 with a record date of 20 February 2012 and payable on 26 March 2012. 2011 final dividend * Final fully franked dividend for 2011 of 19 cents per share on ordinary shares as announced on 16 August 2011 with a record date of 25 August 2011 and payable on 23 September 2011. 2011 interim dividend * Interim fully franked dividend for 2011 of 24 cents per share on ordinary shares as announced on 3 February 2011 with a record date of 14 February 2011 and payable on 21 March 2011. * - based on earnings inclusive of the casinos business prior to Demerger. Further information regarding dividends may be found in note 2 of the financial statements. Tabcorp Holdings Limited and its controlled entities 2 $m 92.7 130.7 164.4
Directors report for the half year ended 31 December 2011 5. Review of operations The Tabcorp Group s structure, post Demerger, comprises the following four continuing businesses: Wagering; Media and international; Victorian gaming; and Keno. The activities and results for these continuing businesses are discussed below. 5.1. Wagering business The Tabcorp Group conducts wagering activities in Victoria and New South Wales (NSW) through a network of agencies, hotels and clubs, and provides on-course totalizators at thoroughbred, harness and greyhound metropolitan and country race meetings. In addition, totalizator and fixed odds betting is offered on sporting events. The business also operates LUXBET.COM, offering a racing, sport and novelty product bookmaking service by telephone and online based in the Northern Territory. The Wagering business achieved EBIT of $132.8 million, which was 6.2% above the previous corresponding period. The business s revenue increased by 2.8% to $849.4 million. 5.2. Media and international business The Tabcorp Group has specialist television and radio operations focused on the racing industry and other sporting activities, which include Sky Racing, Sky Sports Radio and other domestic and international broadcasting services. The Media and international business achieved EBIT of $28.7 million, which was 7.1% above the previous corresponding period. The business s operating revenue increased by 5.7% to $94.5 million. 5.3. Victorian gaming business In Victoria, the Tabcorp Group owns and operates electronic gaming machines (EGMs) in licensed hotels and clubs under the Tabaret brand. The Victorian gaming business achieved EBIT of $129.1 million, which was 3.5% above the previous corresponding period. The business s operating revenue increased by 1.0% to $562.0 million. 5.4. Keno business The Tabcorp Group operates Keno in New South Wales and Queensland, and Club Keno through a joint venture arrangement in Victoria. The Keno business achieved EBIT of $26.3 million, which was 11.0% above the previous corresponding period. The business s operating revenue increased by 10.3% to $92.4 million. Tabcorp Holdings Limited and its controlled entities 3
Directors report for the half year ended 31 December 2011 6. Significant changes in the state of affairs The following events, which may be considered to be significant changes in the state of affairs of the Tabcorp Group, occurred since the commencement of the half year. 6.1. Victorian Wagering and Betting Licence Tabcorp announced on 19 July 2011 that it had been advised that the Victorian Government intended to award the new Victorian Wagering and Betting Licence (Licence) to Tabcorp Wagering (Vic) Pty Ltd, a wholly owned subsidiary of Tabcorp. The Licence was issued on 19 December 2011. The documents governing the formal relationship between Tabcorp Wagering (Vic) Pty Ltd and the Victorian Racing Industry were executed on 21 December 2011. The Licence period is 12 years and will commence in August 2012. At the discretion of the responsible minister, the Licence may be extended for a further period of up to two years. Tabcorp paid the $410 million Licence fee to the Victorian Government in January 2012. 6.2. Changes to the Board of Directors Elmer Funke Kupper and Steven Gregg have been appointed as additional Non Executive Directors, subject to the receipt of all necessary regulatory approvals. 6.3. Other significant changes in the state of affairs There were no significant changes in the state of affairs of the Tabcorp Group that occurred since the commencement of the half year other than as set out in this Directors report. 7. Rounding of amounts Tabcorp Holdings Limited is a company of the kind specified in Australian Securities and Investments Commission Class Order 98/0100. In accordance with that Class Order, amounts in the financial report and the Directors report have been rounded to the nearest hundred thousand dollars unless specifically stated to be otherwise. 8. Auditor s independence declaration Attached is a copy of the auditor's independence declaration provided under section 307C of the Corporations Act 2001 in relation to the review for the half year ended 31 December 2011. This auditor's independence declaration forms part of this Directors report. Tabcorp Holdings Limited and its controlled entities 4
Income statement For the half year ended 31 December 2011 December December 2011 2010 $m $m Revenue 1,573.5 1,530.7 Other income 8.0 18.5 Government taxes and levies (464.0) (464.7) Commissions and fees (520.6) (509.1) Employment costs (76.8) (82.9) Depreciation and amortisation (66.2) (60.0) Property costs (19.1) (19.1) Advertising and promotions (17.1) (15.6) Professional and contract services (5.2) (6.0) Other expenses (95.6) (91.6) Profit before income tax expense and net finance costs 316.9 300.2 Finance income 3.3 5.3 Finance costs (45.9) (76.4) Profit from continuing operations before income tax expense 274.3 229.1 Income tax expense (85.0) (63.2) Profit from continuing operations after income tax 189.3 165.9 Discontinued operations Profit from discontinued operations net of demerger transaction costs and tax - 99.6 Net profit after tax 189.3 265.5 Other comprehensive income Change in fair value of cash flow hedges taken to equity (25.1) 3.5 Income tax expense on items of other comprehensive income 7.5 (1.1) Other comprehensive income for the period, net of income tax (17.6) 2.4 Total comprehensive income for the period 171.7 267.9 Earnings per share: From continuing operations Basic earnings per share 26.9 26.0 Diluted earnings per share 26.8 25.9 Total attributable to shareholders of Tabcorp Basic earnings per share 26.9 41.6 Diluted earnings per share 26.8 41.5 The above income statement should be read in conjunction with the accompanying notes. Tabcorp Holdings Limited and its controlled entities 7
Balance sheet As at 31 December 2011 December June 2011 2011 $m $m Current assets Cash and cash equivalents 163.2 147.1 Receivables 106.4 80.1 Inventories 6.9 9.4 Other 17.1 14.3 Total current assets 293.6 250.9 Non current assets Property, plant and equipment 292.2 280.5 Intangible assets - licences 832.1 430.2 Intangible assets - other 1,800.9 1,805.7 Other receivables 54.5 56.8 Other 13.3 14.4 Total non current assets 2,993.0 2,587.6 TOTAL ASSETS 3,286.6 2,838.5 Current liabilities Payables 793.1 367.7 Interest bearing liabilities 450.0 449.8 Current tax liabilities 36.6 59.5 Provisions 45.4 65.9 Derivative financial instruments 8.3 3.7 Other 10.8 5.4 Total current liabilities 1,344.2 952.0 Non current liabilities Payables - 75.0 Interest bearing liabilities 516.7 515.2 Deferred tax liabilities 68.2 63.3 Provisions 6.0 6.2 Derivative financial instruments 34.6 15.1 Other 0.3 0.8 Total non current liabilities 625.8 675.6 TOTAL LIABILITIES 1,970.0 1,627.6 NET ASSETS 1,316.6 1,210.9 Equity Issued capital 2,037.5 1,973.0 Accumulated losses Reserves (33.3) (91.9) (687.6) (670.2) TOTAL EQUITY 1,316.6 1,210.9 The above balance sheet should be read in conjunction with the accompanying notes. Tabcorp Holdings Limited and its controlled entities 8
Cash flow statement For the half year ended 31 December 2011 December December 2011 2010 $m $m Cash flows from operating activities Net cash receipts in the course of operations 1,603.9 2,258.6 Payments to suppliers, service providers and employees (820.3) (1,235.4) Payment of government levies, betting taxes and GST (397.7) (561.8) Interest revenue received 3.2 4.0 Finance costs paid (46.2) (80.5) Income tax paid (94.8) (104.1) Net cash flows from operating activities 248.1 280.8 Cash flows from investing activities Payment for property, plant and equipment and intangibles (142.6) (255.2) Proceeds from sale of property, plant and equipment and intangibles - 0.7 Loan repayments received from customers 0.5 - Loans advanced to customers (2.1) (47.2) Net cash flows used in investing activities (144.2) (301.7) Cash flows from financing activities Proceeds from issue of shares - 427.7 Payment of transaction costs for share issue - (12.7) Payment of transaction costs for capital reduction (0.8) - Payment of transaction costs for demerger (21.0) (4.5) Net proceeds/(repayments) of short term borrowings 450.0 (135.0) Repayment of long term borrowings (450.0) - Dividends paid (65.2) (128.7) Payment for on-market share buy back (0.8) (1.0) Proceeds from sale of treasury shares - 0.1 Net cash flows from/(used in) financing activities (87.8) 145.9 Net increase in cash held 16.1 125.0 Cash at beginning of period 147.1 261.9 Cash at end of period 163.2 386.9 The above cash flow statement should be read in conjunction with the accompanying notes. The cash flow statement includes the cash flows of the Echo Entertainment Group in the prior period, refer note 7. Tabcorp Holdings Limited and its controlled entities 9
Statement of changes in equity For the half year ended 31 December 2011 Share Capital Net unrealised Employee gains/ equity Ordinary Treasury Accumulated (losses) benefit Demerger Total shares shares (i) losses reserve (ii) reserve (iii) reserve (iv) equity $m $m $m $m $m $m $m 2011 Balance at 1 July 2011 1,973.0 - (91.9) (0.3) - (669.9) 1,210.9 Profit for the period - - 189.3 - - - 189.3 Other comprehensive income - - - (17.6) - - (17.6) Total comprehensive income for the period - - 189.3 (17.6) - - 171.7 Dividends paid - - (130.7) - - - (130.7) Dividend reinvestment plan 65.7 - - - - - 65.7 Transaction costs for capital reduction (0.6) - - - - - (0.6) Restricted shares issued - (0.8) - - - - (0.8) Share based payments expense - 0.2 - - 0.2-0.4 Balance at 31 December 2011 2,038.1 (0.6) (33.3) (17.9) 0.2 (669.9) 1,316.6 2010 Balance at 1 July 2010 3,737.6 (3.7) (310.0) 23.1 7.7-3,454.7 Profit for the period - - 265.5 - - - 265.5 Other comprehensive income - - - 2.4 - - 2.4 Total comprehensive income for the period - - 265.5 2.4 - - 267.9 Dividends paid - - (153.2) - - - (153.2) Ordinary shares issued (v) 427.7 - - - - - 427.7 Transaction costs (8.9) - - - - - (8.9) Dividend reinvestment plan 24.6 - - - - - 24.6 Transfers 2.1 - - - (2.1) - - Restricted shares issued - (1.0) - - - - (1.0) Share based payments expense - 0.9 - - 1.8-2.7 Disposal of shares - 0.1 - - - - 0.1 Balance at 31 December 2010 4,183.1 (3.7) (197.7) 25.5 7.4-4,014.6 (i) Comprises the balance of limited recourse loans provided to employees in employee share plans (loans ceased being granted in 2003), and the unvested portion of Restricted Shares issued to executives as an incentive, on appointment or for retention. (ii) Records fair value changes on the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge. (iii) Records the movement of equity benefits provided to executives and employees as part of their remuneration. (iv) Arose on the demerger of the Echo Entertainment Group, being the difference between the fair value of the Echo Entertainment Group shares, the amount allocated as a capital reduction and any transfers to retained earnings. (v) Comprises issue of 68.4 million shares. The above statement of changes in equity should be read in conjunction with the accompanying notes. Tabcorp Holdings Limited and its controlled entities 10
Notes to the financial statements For the half year ended 31 December 2011 1. Significant accounting policies Tabcorp Holdings Limited ('the Company') is a company domiciled in Australia. The condensed consolidated half year financial report of the Company for the six months ended 31 December 2011 comprises the Company and its subsidiaries (collectively referred to as 'the Group') and the Group's interest in joint ventures. The condensed consolidated half year financial report was authorised for issue by the directors on 9 February 2012. (a) Statement of compliance This general purpose condensed financial report for the half year ended 31 December 2011 has been prepared in accordance with AASB134 'Interim Financial Reporting' and the Corporations Act 2001. This half year financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2011 and any public announcements made by the Company during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001. The accounting policies used are consistent with those applied in the 30 June 2011 financial report. (b) Basis of preparation The financial report is presented in Australian dollars. The financial report is prepared on the historical cost basis, except for derivative financial instruments and pension assets that have been measured at fair value. The carrying value of recognised assets and liabilities that are hedged with fair value hedges are adjusted to record changes in the fair values attributable to the risks that are being hedged. 2. Dividends December December 2011 2010 $m $m Dividends declared and paid during the half year on ordinary shares: Final dividend for 2011 of 19.0 cents per share (2010: 25.0 cents per share) 130.7 153.2 Dividends declared after balance date Since the end of the half year, the directors declared the following dividend: Interim dividend for 2012-13.0 cents per share (2011: 24.0 cents per share) 92.7 164.4 The financial effect of this dividend has not been brought to account in the financial statements and will be recognised in subsequent financial reports (refer to note 6). Dividends on ordinary shares are fully franked at a tax rate of 30%. 3. Victorian Wagering and Betting Licence During the period the Group was awarded the Victorian Wagering and Betting Licence, which commences in August 2012. The licence fee and associated costs totalling $418 million have been recognised as a non current asset (Intangible assets - licences) at 31 December 2011. The payable to the Victorian Government is disclosed as a liability (Payables). The licence fee of $410 million was paid to the Victorian Government in January 2012. The licence will be amortised on a straight line basis over the life of the licence from August 2012 until expiry in 2024. 4. Segment information The Group's operating segments have been determined based on the internal management reporting structure and the nature of products and services provided by the Group. They reflect the business level at which financial information is provided to management for decision making regarding resource allocation and performance assessment. The Group has four reportable segments: Wagering Media & International Victorian Gaming Keno Totalisator and fixed odds betting activities. National and international broadcasting of racing and sporting events. Electronic gaming machine operations in licensed hotels and clubs within Victoria. Keno operations in licensed clubs and hotels within Victoria, NSW and Queensland. Media & International was created as a separate operating segment at 30 June 2011. Previously Media & International was included in the Wagering operating segment. The prior period has been restated accordingly. The 31 December 2010 financial statements included the Star City and Queensland Casino segments. These segments were demerged from the Group effective June 2011. Information about discontinued operations is provided in note 7. Tabcorp Holdings Limited and its controlled entities 11
Notes to the financial statements For the half year ended 31 December 2011 4. Segment information (continued) Media & Wagering International Victorian Gaming Keno Total $m $m $m $m $m 2011 Revenue - external 849.4 69.7 562.0 92.4 1,573.5 Revenue - intersegment - 24.8 - - 24.8 Segment revenue 849.4 94.5 562.0 92.4 1,598.3 Segment profit before interest and tax 132.8 28.7 129.1 26.3 316.9 2010 Revenue - external 825.9 64.8 556.2 83.8 1,530.7 Revenue - intersegment - 24.6 - - 24.6 Segment revenue 825.9 89.4 556.2 83.8 1,555.3 Segment profit before interest and tax 125.1 26.8 124.7 23.7 300.3 Reconciliation of reportable segment revenue and profit December December 2011 2010 $m $m (a) Revenue Segment revenue 1,598.3 1,555.3 Intersegment sales elimination (24.8) (24.6) Consolidated revenue 1,573.5 1,530.7 (b) Profit before interest and tax Segment profit before interest and tax 316.9 300.3 Unallocated items: - finance income 3.3 5.3 - finance costs (45.9) (76.4) - other expenses - (0.1) Profit from continuing operations before income tax expense 274.3 229.1 5. Contingent liabilities Since the last annual reporting date, there have been no material changes in contingent liabilities. 6. Subsequent events Dividends Since 31 December 2011, the directors have declared a dividend of 13.0 cents per ordinary share. The total amount of the dividend is $92.7 million. This has not been provided for in the 31 December 2011 financial statements (refer to note 2). Tabcorp Holdings Limited and its controlled entities 12
Notes to the financial statements For the half year ended 31 December 2011 7. Discontinued operations and business demerged The Echo Entertainment Group was demerged in June 2011 and is reported as a discontinued operation. The Echo Entertainment Group operates The Star in Sydney, Jupiters Hotel and Casino on the Gold Coast, Treasury Casino and Hotel in Brisbane and Jupiters Townsville. The results of the discontinued operations for the prior period are presented below: December 2010 $m Revenue 729.5 Expenses (580.3) Profit before income tax expense 149.2 Income tax expense on operating activities of discontinued operations (45.2) Profit from discontinued operations, net of tax 104.0 Transaction costs relating to demerger of Echo Entertainment Group (4.5) Income tax benefit 0.1 Net transaction costs on demerger of Echo Entertainment Group (4.4) Profit from discontinued operations net of transaction costs and tax 99.6 Earnings per share from discontinued operations: Basic earnings per share 16.3 Diluted earnings per share 16.3 The cash flows from the discontinued operations contained in the Group cash flow statement are: Net cash inflow from operating activities 152.4 Net cash outflow from investing activities (207.2) Net cash inflow from financing activities 34.7 Net cash outflow (20.1) Tabcorp Holdings Limited and its controlled entities 13