Chief Executive Officer's message “ Tabcorp will step up by tony3x

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									Chief Executive Officer’s message
 T
“ abcorpwillstepupits                                                                  For many businesses, 2009 was a
                                                                                             difficult year with the challenges
                                                                                                                                   subsequently raised $434 million
                                                                                                                                   of new five-year debt. in addition,
                                                                                                                                                                            atlantic City in the usa and brings
                                                                                                                                                                            more than 20 years of hands-on
 investmentprogramsoit                                                                   of the global economic crisis
                                                                                             and tough trading conditions in
                                                                                                                                   the company implemented a new
                                                                                                                                   dividend policy that targets a more
                                                                                                                                                                            casino experience to the group.
                                                                                                                                                                            larry will lead the division and
 arrivesin2012inthebest                                                                australia. it was no different for    sustainable dividend pay-out ratio       oversee the $575 million expansion
                                                                                             tabcorp. early in the year, we had    of 70% to 80% of earnings. these         of star City casino.
 possibleshape.”                                                                            to respond to rapidly changing        initiatives allow the company to
                                                                                             economic and financial market         commit to its capital investment         During the year, the Queensland
                                                                                             conditions, while ensuring that       program, while maintaining a             Government announced an
                                                                                             the company remains well placed       strong balance sheet.                    increase in tabcorp’s gaming taxes
                                                                                             for when economic conditions                                                   from 1 July 2009. the impact of this
                                                                                             improve.                              our earnings supported a full year       increase will be approximately
                                                                                                                                   dividend of 65 cents per share,          $30 million per annum before tax
                                                                                             the operational discipline we         including a final dividend of 30 cents   from the 2010 financial year.
                                                                                             established in recent years allowed   per share. this dividend was lower
                                                                                             us to weather the storm well.         than the previous year, following the    in Wagering, eBit was $251.7 million,
                                                                                             tabcorp reported a net profit after   implementation of the company’s          down 1.6%. revenues increased by
                                                                                             tax of $521.7 million, up from a      capital management initiatives.          7.8%. Following a strong first half,
                                                                                             reported net loss of $164.6 million                                            the Wagering business experienced
                                                                                             the previous year. on a normalised    Our businesses                           much tougher trading conditions in
                                                                                             basis net profit after tax was        Below, i briefly discuss the earnings    the second half, with lower revenue
                                                                                             $496.2 million, up 1.2%.              for each of the divisions, measured      growth, margin compression and
                                                                                                                                   in normalised earnings Before            additional race fields payments to
                                                                                             the company generated positive        interest and tax (eBit).                 the racing industry.
                                                     2009            2008        Change      growth in normalised revenues, up
    For the year ended 30 June                         $m              $m            %       5.6%. each of our three divisions     in Casinos, eBit was $328.1 million,     expenses grew by 5.1% driven
                                                                                             reported revenue growth for the       down 11.0%. the Casinos division         by higher marketing costs and
    Normalised and before non-recurring items
                                                                                             year. expense growth was 5.6%.        delivered full year revenue growth       the start up of luxbet.com.
      revenue                                       4,170.7        3,951.0            5.6                                                                                   these investments are designed
                                                                                             operational expenses in our           of 2.6%, with second half growth
      operating expenses                          (1,072.9)       (1,016.2)           5.6    existing businesses grew by 4.3%,     of 5.1%. all four casino properties      to strengthen tabcorp’s position
      earnings before interest, tax,                                                         and the growth above this level       grew revenues in the second half.        in an increasingly competitive
      depreciation and amortisation                                                          was driven by our investment in       expenses were up 6.8%. labour            market place.
      (eBitDa)                                      1,036.1         1,037.9          (0.2)   luxbet.com, the new northern          and marketing expenses increased
      earnings before interest and                                                           territory bookmaking business.        as the business improved customer        Distributions to the racing
      tax (eBit)1                                    858.9           870.0           (1.3)                                         service to support higher revenue        industry grew to record levels, with
                                                                                             tabcorp implemented important         growth.                                  the Victorian industry receiving
      net profit after tax1                          496.2           490.3             1.2
                                                                                             capital management initiatives                                                 $321 million, up 6.9%, and the
    Reported earnings                                                                        during the year. the company          in the second half of the year,          new south Wales industry
      net profit after tax1                            521.7          516.3           1.0    raised $387 million of new equity     mr larry mullin joined the company       receiving $237 million, up 10.8%.
                                                                                             through an institutional placement    as Chief executive of the Casinos
1     prior period comparatives adjusted to include Victorian licence amortisation
                                                                                             and share purchase plan, and          division. larry joined us from



4       taBCorp holDinGs limiteD
During the year, the racing            wagering market, would allow          wagering, keno and gaming               i look forward to working with our
industries in each state announced     operators to compete on level         monitoring licences in Victoria.        people to make the company and
that they would implement new          terms and would provide the                                                   each of our teams as successful as
race fields arrangements and           necessary funding to the racing       at the same time, the company           they can be.
charge product fees to wagering        industry. Getting the rules right     will significantly step up its
operators for the betting              nationally will require strong        capital investment program in the
conducted on their racing product.     leadership from the state and         Casinos business, which will make
the additional race fields charges     commonwealth governments.             it a larger part of the company’s
had a material impact on tabcorp,                                            earnings in two to three years time.
reducing eBit by $20 million           in Gaming, eBit was $277.1 million,
in 2009.                               up 13.9%. revenues from the           these are important decisions
                                       Victorian Gaming business grew        and investments that will define        Elmer Funke Kupper
Despite the strong growth in           5.0%, and market share increased      the shape and long term future of       managing Director and
distributions and the payment of       to 52.6%. revenues from Keno grew     the company. our strong balance         Chief executive officer
new race fields charges, tabcorp       13.5% as the business expanded        sheet puts us in a solid position to    6 august 2009
believes that the racing industry      distribution in new south Wales       commit to key investments with
will face a funding challenge in       hotels. expenses were down 1.6%.      confidence.
the years to come as a result of the
rapid deregulation of the wagering     During the year, the Gaming           Our people
market. this deregulation occurs       division launched tabcorp Gaming      tabcorp is a people business with
on a state by state basis, which       solutions. tabcorp Gaming             most of our 11,000 staff serving
does not allow for the regulations     solutions is a new business that      customers in our casinos, our
that apply across australia to be      can assist clubs and hotels in        retail venues, at the track or in our
aligned. operators in states with      Victoria with the management of       call centres. others provide vital
favourable regulatory conditions       their gaming operations under the     support to our front line staff,
have a significant advantage and       new industry structure that will      making sure that they have what
can now freely target customers        operate from 2012. the launch of      they need to serve customers and
anywhere in australia.                 tabcorp Gaming solutions enables      grow the business.
                                       tabcorp to test market demand for
the only way to address this           a new gaming services offer that      During the year, we made the
imbalance is to recognise that         utilises tabcorp’s extensive gaming   difficult decision to implement a
racing and wagering are national       experience.                           salary freeze for the 2010 financial
activities, not state-based                                                  year for staff with salaries above
activities. this means putting         Looking forward                       $70,000. pay rises for staff
in place a national tax rate and       2010 will be an important year        with salaries below this level
industry funding regime that           for tabcorp. a number of critical     were capped at 1.5%. it was the
applies equally to all operators.      regulatory matters will be resolved   right thing to do in the current
tabcorp has made a number              in the wagering business, and         environment, and aims to maintain
of practical recommendations           the company will face important       customer service levels and
that would create a competitive        decisions in relation to the 2012     employment as best we can.




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