Leading wagering, gaming and keno game group Tabcorp Holdings Limited (ASX: TAH) has reported an 8.5% lift in underlying net profit after tax (NPAT) for the 12 months ending 30 June 2016.

Here are the key results

  • Revenue up 1.5% to $2.2 billion
  • Underlying NPAT grew 8.5% to $185.9 million
  • Underlying earnings per share increased 3.1% to 22.4 cents per share (cps)
  • A final dividend of 12 cps was declared. The shares will trade ex-dividend on August 10; payment is scheduled for September 20.
  • Coupled with the interim dividend of 12 cps, the full year dividend increased by 20%. The stock is currently yielding 4.9% fully franked.

Here are the main drivers of Tabcorp’s growth

  • Tabcorp experienced improved wagering momentum in the second half with digital wagering a standout performer. Digital experienced 15% growth in the second half
  • Active TAB customers grew 6% and TAB turnover increased 2.8%
  • Gaming services was the strongest performing division by revenue growth at 7.6%. Tabcorp now has nearly 9,000 electronic gaming machines (EGM) under contract in Victoria and a further 800 EGMs in NSW
  • Keno returned to growth with Victoria’s 20% growth the highlight. Keno achieved the highest earnings growth rate across Tabcorp’s three divisions and the Keno’s NSW license was extended to 2050

Foolish takeaway

The growth prospects for Tabcorp in financial year 2017 appear positive.

The group has launched a new online wagering and gaming business in the UK called Sun Bets. Meanwhile, the recently announced proposal to acquire Intecq Ltd (ASX: ITQ) looks like a sound move.

Tabcorp’s results bode well for other listed gambling companies which are due to report shortly.

Investors looking for exposure to this sector may be interested in taking a look at Star Entertainment Group Ltd (ASX: SGR) and Crown Resorts Ltd (ASX: CWN). These two casino stocks should not only benefit from growth in domestic demand, but they should also benefit from exposure to growing inbound tourist demand for gambling and entertainment services.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.