Nothing I write here should be a surprise to anyone but I thought for the benefit of those who weren't able to get along to the AGM that I'd post my observations.
The first quarter FY14 trading update:
"Positive start to FY14 - 23% lift in after tax profits from continuing operations".
"Positive as to the outlook for Q2 - challenge of cycling over the exceptional run of lottery jackpots in October and November 2012".
"Intention to lift marketing and product development activities in our wagering operations in Q2 and beyond". (I read this to mean increased costs. There was also talk of bringing branding into line across the company. That is; online platforms, shop fronts etc which will cost money - but they believe will increase revenues long term through brand "awareness")
Some of the other topics of interest:
Bytecraft which had a FY13 EBIT loss of $3m is expected to return to profit in FY14. The loss has been attributed to contract setup costs for a major new contract (Telstra pay phones) and restructuring charges following the exit from a number of expired contracts. The new contract was responsible for the majority of the good lift in revenue for the group in FY13 and now expect to turn a profit.
The Vic pokies compensation case of course got an airing. And I really wanted to be at the meeting to get a feeling for how the board felt about this. The one thing you could definitely take from them is that none of them expect a quick resolution. In fact I think they expect it to run through the full range of courts. A question did come from the floor about what the company would do with any funds won from the proceedings. Chairman Harry Boon said that it wasn't something they had discussed but he continued to emphasise that TTS have a policy of high div payouts and cash back to shareholders. As an aside; If you are also a WOW shareholder you may or may not know that their Hotels arm picked up a lot of the Vic Pokies licenses cheaply when they were sold off again. (Some "might" argue that the Vic tax payers would have got a better deal by reselling them to TTS &/or TABCORP).
In the final FY13 report there was a lovely table showing the DIv payout ratios since FY08 and I was a mildly miffed that they showed all of them as a percentage of Statutory NPAT except FY13 that they showed as percentage of NPAT from continuing operations. That is, without the profit from Vic Pokies which contributed $34.8m before it came to an end during FY13. If they had of stayed with the percentage from all operations formula the POR is more like 87.5% (ish.. from memory). About 8 mths ago I predicted a payout of 8c/share and it came in at 7.5/share. Now, that I got it wrong doesn't annoy me in the slightest. Because the money is still in the company. And I'm suggesting that it may have been ever better used by staying in the company as the debt did rise with the acquisition of SA Lotteries. It is the fact that they didn't just come out and say that, and that the POR was 87.5% that has me miffed. At the AGM the Chairman continued to trumpet that the payout ratio continues to be over 90%. The only reason I can come up with for this bit of statistical "deception" is that they didn't want to be bothered with the heat they would receive from the shareholders who are all about yield (I have self-funded retirees in mind). Anyway that's my rant for tonight. I like my companies to just tell it how it is and to under promise and hopefully over deliver. I did bring this up with Neale O'Connell after the meeting and had an interesting chat with him about the Vic Pokies situation as well.
Having said that; I haven't found too much fault with the management of TTS / Qld TAB over the years. I bought into the Qld TAB float in 1999 on the basis that Australians love a punt and that it was going to be hard to go wrong with a TAB - where they have small overheads and only payout to punters 85c in the dollar. (You will not convince me that floating this was good for tax payers - apart from the ones who are also shareholders). The one major debacle in the company history (VIc Pokies) was not of there making. The Talarius UK venture has not been their finest decision. But I'll give them that one. You can't get them all right. The Chairman did claim at the meeting that Talarius is well positioned for any up tick in the UK economy.
When I look through my spreadsheet at Divs over the years that original decision really does still holds up and management continue to find ways to lift profit by well over double figures. How many other companies can match that?
In all I got the feeling the "new" CEO is focused and the team are happy. Didn't grab my phone to buy more shares but left happy to be a shareholder.
I hope you found this post of interest and/or assistance. Cheers alnby
TTS Price at posting:
$3.14 Sentiment: Hold Disclosure: Held
