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Tabcorp legal costs rise in fight against money-laundering allegations
By Lucy Battersby and John Stensholt
Tabcorp has spent almost $20 million in pre-tax income on legal fees for its case against the government's financial intelligence agency, it revealed in its full-year results on Thursday.
Tabcorp is accused of breaching Australian anti-money laundering laws by failing to report suspicious transactions.
Tabcorp CEO David Attenborough says the company has "raised the bar" on compliance in the past year. Credit: Wayne Taylor
AUSTRAC has alleged that Tabcorp contravened its reporting obligations on 236 occasions, which had the potential to facilitate large-scale money laundering by crime syndicates or compromise the integrity of the financial system.
Tabcorp's annual report confirms it spent $19.4 million in pre-tax money last financial year preparing for civil proceedings which will not be heard in the Federal Court in New South Wales until June next year. But it says this will be partially offset by income-tax benefits of $11.8 million, which will reduce the bill to $13.6 million.
Fairfax Media understands Tabcorp faces a theoretical maximum fine of $4.2 billion, but a fine this high is unlikely. Tabcorp has a market capitalisation of about $4.02 billion.
"Tabcorp potentially faces a penalty of up to $18 million per contravention pleaded by AUSTRAC," an AUSTRAC spokesman said. "In determining any penalty to be awarded, a court will take into account a range of factors, including whether any of the contraventions arise out of the same or similar conduct."
Tabcorp has "raised the bar" on compliance in the past year and has 40 people working under a new chief risk officer, chief executive David Attenborough said on Thursday.
In its full-year results Tabcorp also revealed its digital-betting business has recorded strong growth, but the company's full-year profit was hit by the cost of defending legal proceedings and its new United Kingdom joint venture Sun Bets.
"We enhanced our strategic position and delivered improved financial performance in 2015-16, resulting in a 20 per cent lift in dividend per share. Our investment was focused on strengthening our business and positioning for future growth," Mr Attenborough said. Dividends have increased from 16 cents to 24 cents per share, he added.
The wagering giant's net profit after tax fell 49 per cent to $169.7 million from $334.5 million a year ago. Tabcorp reported significant items of $16.2 million, post tax. The tally of $185.9 million bettered analysts' consensus estimate for a full-year profit of $183 million.
Shares closed 2¢ lower at $4.82, with a final dividend of 12¢ payable on September 20.
Full-year revenue edged up 2 per cent to $2.189 billion in the year ended June 30 from the previous year's $2.156 billion.
Other significant items during the year include $14.4 million spent acquiring a business called Sun Bets in the UK, a joint venture with News Corporation.
Meanwhile the company will launch a new app design for its mobile smartphone digital app, in time for the popular spring horse racing carnival. Mobile bets now account for 65 per cent of digital turnover.
"We will continue to invest in growth initiatives that can differentiate our businesses and create value for shareholders," Mr Attenborough said.
Earlier this week, Tabcorp announced it would acquire ASX-listed gaming technology group INTECQ for $128 million, a move it said would strengthen its gaming services division and $20 million to underlying earnings.
Tabcorp's existing gaming services division recorded a slight fall in earnings before interest and tax to $41 million, while its keno business increased EBIT 6.7 per cent to $47.5 million.
Mr Attenborough also said Tabcorp welcomed proposed regulatory changes, including bans on unlicensed offshore operators taking bets from Australians, credit betting and betting advertising during live sport on television.
"We share the community's concern that there is too much sports betting advertising and are supportive of measures to reduce it," he said.
Tabcorp's annual report also reveals bets on greyhound racing in NSW was worth up to 5 per cent of annual wagering turnover.
The NSW government recently announced plans to ban the sport because of mass greyhound killings and systemic animal cruelty. Tabcorp expects NSW punters who used to bet on greyhounds will instead spend their money on greyhounds in other states, horses, or its animated racing game called Trackside.
Mr Attenborough said greyhound racing groups in other states needed to ensure they did not get banned too.
"Australia is really highly regulated in this sector," he told BusinessDay. "These industries are very highly regulated, they are well funded. We paid returns to the racing industry of $786 million. There is a real focus on the welfare of the animal and these industries are well aware that they need to make sure they get this right."