What: Leading lotteries and wagering company Tatts Group Limited (ASX: TTS) posted its full year results today, but the market seems to have been less impressed and has sent the stock down close to 4% by lunchtime on Thursday.
So What: On an absolute basis it is arguably hard to fault Tatts' results, here are the highlights:
- Revenue up 1.8% to $2.92 billion
- Underlying profits jumped 12.9% to $255.8 million
- Total dividends for the year increased 22.2% to 16.5 cent per share (cps)
- The lotteries business saw revenues rise 2.8% to $1.98 billion, with operating leverage helping the division produce a 5.9% rise in earnings before interest and tax to $287.5 million
- Online sales growth was strong with lotteries and wagering seeing lifts of 20.9% and 12.5% respectively. Online sales revenue as a percentage of total sales for lotteries and wagering now represent 11.1% and 25.7% respectively
On a disappointing note, the Wagering division reported a 1.5% fall in revenue to $632.9 million, with increased competition from bookmakers largely to blame.
Now What: While in absolute terms, Tatts' profit growth appears credible, on a relative basis to the market's expectations (according to a report in the Australian Financial Review) Tatts failed to meet consensus earnings – that is the likely explanation for the drop in the company's share price today.
Taking a long-term view however, the defensive nature of the group's assets remain appealing, so shareholders would appear to have little to be concerned about.
Shareholders are set to receive a fully franked 7.5 cps dividend on October 5 with the shares trading ex-dividend on September 1. With the stock trading on a fully franked yield of 4.3% this should provide support for the current price level.
