Australian Tabcorp profit falls as it eyes VIP Asian gamblers

The firm noted a fall in sales at Tabcorp's Queensland casino operations accelerated in the second half, as did weakness in gaming, with spending hurt by the loss of government cash stimulus and higher interest rates.

"While recent trading shows improved activity levels, it is too early to be confident that all markets will return to growth this year," said Tabcorp Chief Executive Elmer Funke Kupper. "This will depend on an improvement in economic activity and discretionary spending," he added.

Tabcorp reported net profit fell 10 % to us$ 430.3 million in the year to June, from us$ 477 million a year ago. Analysts had on average expected a fall to us$ 432.8 million. Shares in Tabcorp fell 2 % to us$ 6.19 after the announcement, compared with a 0.7 % rise .AXJO in the broad market. The company announced it will spend an additional us$ 260 million on its Star City casino in Sydney, ramping up the earlier budget of us$ 525 million.

The redevelopment, due to be completed in 2012, includes us$ 146 million allocated to attract international VIPs to Sydney with luxury hotel suites, expanded private gaming room facilities and two private aircraft to bring VIP guests from across the Asian region.

Tabcorp also spent us$ 91.4 million on a licence from the New South Wales government, taking Star City costs close to us$ to us$ 914.3 million. "Our investment in world class VIP customer facilities, restaurants and entertainment will ensure that we grow both the market and our position in the market," said Tabcorp head of casinos Larry Mullin.

The VIP market in Asia was expected to show continued strong growth in the next 3-5 years. On Tuesday, shares in Macau casino operators rose after gambling revenue in the enclave rose 70.4 % in July from a year earlier, signalling sustained growth in the world's largest gambling market. Star City's earnings before interest, tax, amortisation and depreciation rose 10 % to us$ 200 million in fiscal 2010.

Tabcorp is trying to fill a looming hole in its earnings from 2012, when it is due to lose its duopoly on gaming machines in the Australian state of Victoria. Tabcorp, Tatts Group and British bookmaker Ladbrokes are competing for a new 12-year wagering and betting licence in Victoria.