Tatts lottery operations ran out of luck during the last six months, with a run of poor lotto jackpots that ate into the company’s bottom line.

Tatts’ profits down due to lottery jackpot drought, but Tabcorp merger is moving forward

Tatts’ CEO Robbie Cooke said that the performance of his company’s lottery arm was down a drought of big jackpots. The company has also been “distracted” by the proposed merger with Tabcorp, he said. (Image: Courier Mail)

Business can be a lottery sometimes, especially if the lottery is your business, and Tatts said this week that a string of underwhelming jackpots had contributed to a 16.5 percent fall in profits.

Lottery operators rely on monster jackpots because they provide publicity and attract extra customers who don’t buy tickets religiously every week. This, in turn, creates a snowball effect of more big jackpots.

But the snowball failed to materialize in the first half of the year. Tatts said this week its OzLotto, TattsLotto, and Powerball brands generated just 15 jackpots above $15 million, totalling $345 million.

That’s in comparison with a record 24 jackpots above $15 million during the corresponding period last year, which paid out $730 million. Neither were there any jackpots larger than $50 million, compared with five that big in 2015.

Betting Business Also Down

“There’s no side-stepping it, it has been a tough half,” Tatts’ chief executive Robbie Cooke said this week. “It was always going to be a huge ask to match [last year’s] jackpot run and the outstanding revenue it delivered.

“But the lotteries business is a good business, it is well resourced and has world-class digital performance,” he added.

Revenue for the lottery vertical decreased 8.2 per cent, or $91 million, to $1.03 billion, while Tatt’s Ubet betting business was also down, falling 2.5 per cent, while earnings were down 15.2 percent.

Total half-year profit after tax fell 16.5 per cent to $122.8 million, which included $10.4 million in costs related to the merger deal with Tabcorp.

Pre-Merger Anxiety

Cooke told the Sydney Morning Herald this week that the merger has been proving a distraction from the company’s day-to-day operations.

“Faced with this, we have done all that is possible to keep our team focused on those initiatives in our playbook ,which are viewed as critical for our business success,” he said. 

The proposed merger moved one step closer today, as Tabcorp agreed to pay $45 million to authorities to settle allegations of historical anti-money laundering (AML) violations.      

The payment wipes the slate clean for Tabcorp, which is crucial, as outstanding charges of AML could provide a potential regulatory barrier to the merger.   

Tabcorp managing director David Attenborough said in a filing to the Securities Exchange Commission on Thursday that his company was now “firmly committed to being the industry leader in regulatory compliance across all of our operations.”