The Tabcorp Holdings Limited (ASX: TAH) share price was amongst the worst performers on the ASX 200 on Wednesday.
The gambling and entertainment company's shares finished the day 5.5% lower at $4.31.
Why did the Tabcorp share price tumble lower?
Investors were hitting the sell button on Wednesday after Tabcorp released its half year results.
For the six months ended December 31, Tabcorp posted a 4.4% increase in revenue to $2,913.9 million. This was the result of a 12.4% increase in Lotteries & Keno revenue, which was partially offset by a 3.7% decline in Wager & Media revenue and a 4.4% decline in Gaming Services revenue.
Management was pleased with its top line growth given the fact it is operating in an environment of soft discretionary spending.
Tabcorp's EBITDA came in 2.1% higher than the prior corresponding period at $596.5 million. Once again, strong growth in the Lotteries & Keno segment was offset by declines in its other two segments.
And on the bottom line, lower interest and tax expense led to net profit after tax growth of 2.9% to $213.5 million.
Tabcorp's managing director and CEO, David Attenborough, said: "Tabcorp's diversified group of businesses delivered a solid overall result in the first half of FY20. We grew group revenues by 4.4% in an environment of soft discretionary spending, while undertaking significant integration activity. We also welcomed another 300,000 active registered customers during the period."
Mr Attenborough was especially pleased with the performance of the Lotteries & Keno segment. Noting that digital turnover was up almost 40% with retail up over 5%. He believes this is "evidence of how favourably customers and retail partners are responding to our integrated omni-channel strategy."
The chief executive advised that the Wagering & Media business had a challenging half. But was pleased that TAB was competing well while also transforming in a soft market. Mr Attenborough notes that the ex-UBET business does not yet have the broader set of products or services to win customers in a highly competitive environment. But management "remain excited by the opportunity for this business once fully integrated."
And finally, the chief executive acknowledged that the Gaming Services segment's performance was unsatisfactory. He advised that the company is reviewing the business in order to improve its performance and realise its full potential.
Integration.
Another disappointment today was the company's update on the Tabcorp-Tatts integration.
Although the integration remains on track to deliver between $130 million and $145 million of EBITDA synergies and business improvements in FY 2021, its implementation costs have increased materially.
Total implementation costs are now expected to be $135 million (pre tax) versus the previous guidance of $95 million (pre tax). Management advised that the $40 million increase reflects the deployment of additional resources to manage the increased complexity and associated risk to ensure the successful migration of UBET customers to the TAB platform.
