Tabcorp Intends To Pursue Case Against Brumby Government for Cancelled Poker Machine License

On August 6th, 2008, Tabcorp has improved their ante in its legal battle against the Brumby Government, seeking a $680 million payout for being stripped for their poker machine license before its expiration on 2012. Significant writedowns coming from the State Government's decision in April to dismissed its duopoly with Tatts over 27,500 poker machines have forced Tabcorp to incur their first loss in fourteen years. Tabcorp reported yesterday that they have incurred a net loss of $164 million for the year to June 30th, compared with the profit of $450.4 million last year.

Tabcorp's full year earnings-before their losses-were at $517 million, which was bigger than most analysts predicted. Investors, pushed by the plans for expansion and Tabcorp's ability to cut back on expenses, improved Tabcorp's share price by 6.4% to $9.15. But the gambling group's share price still drop almost by forty percent since the Government allowed pubs and clubs to bid for individual poker license.

Aside from that, Chief Executive Elmer Funke announced plans to improve its compensation claim against the state government for earnings worth $597 million to $680 million. He said that the lawsuit was just a technical disagreement that should not have any effects with future licensing talks with the government.

Tabcorp said that they are still in a good place to maintain and even improve their earnings in the face of the sluggish economy and the smoking ban and equinine influenza outbreak in NSW. Tabcorp acted to nullify their potential losses from the decision of Premier John Brumby in mid-April, writing down $487.7 million for 2007-2008 and stating plans for a loss of $26.5 million annually for the next 4 years.

Premier Brumby has been firm the Government's legal advice was the payout could not be enforced-which makes it more likely that the legal battle will take place before the Supreme Court. But Tabcorp's decision to pursue the writedowns will give it a better balance sheet.

August 21, 2008
William Atkins