Tabcorp hits pokies levy lift

Gaming giant Tabcorp Holdings Ltd has slammed a Victorian Government decision to lift the annual levy on electronic gaming machines.

Tabcorp said the decision would affect profits and was being implemented at a bad time for the industry.

The company said today that it was disappointed the government had lifted the levy on each gaming machine to USD 4,333 from USD 3,033.

Tabcorp said the higher levy on its 13,750 gaming machines was worth another USD 17.87 million to the Victorian Government, which would now collect a total of USD 59.58 million from Tabcorp.

Tabcorp acting chief executive Elmer Funke Kupper said the levy increase would hurt Tabcorp’s 230,000 shareholders.

He said the increase came at a time when the gaming sector was bracing for the introduction of a total ban on smoking in clubs and hotels in Victoria from July 1.

When the government introduced smoking bans in the gaming machine areas of clubs and hotels in September 2002, gaming company revenues fell significantly.

A Tabcorp spokesman said the company was surprised by the increase, adding that the government had not consulted it over the size of the increase or its timing.

The increased levy would knock off USD 9.4 million, or about 1.7 per cent, from Tabcorp’s annual net profit after tax, he added.

The government last lifted the levy to USD 3,033, from USD 1,533, in April 2005.

CommSec gaming analyst Craig Shepherd said the increase in the gaming levy highlighted the risk to revenues in sectors controlled by governments.

He said it also showed the degree of certainty that companies would demand when bidding for future gaming machine licences in Victoria.

The gaming licences held by Tabcorp and rival Tattersall’s Ltd expire in 2012.

„What exactly will the (potential) bidders be buying? What’s the levy going to be post-2012,“ Mr Shepherd said.

Victorian Treasurer John Brumby said today that the increased levy applying to three electronic gaming machine operators – Tabcorp, Tattersall’s and Melbourne’s Crown Casino, which is owned by Publishing and Broadcasting Ltd – would bring in a total of USD 130 million per year.

Revenue raised from the levy goes to the Hospital and Charities Fund and is funnelled to Victoria’s hospitals.

Mr Brumby said the State Government had considered the profits of the gaming companies and the needs of the hospital system.

„The (gaming machine) operators have benefited from the restricted access to the gaming machine market, and this levy strikes the right balance between investors, business operators and the community,“ Mr Brumby said.

The treasurer said the Bracks Government would not impose another levy increase during its current term, and that the increase would have no impact upon players.

There are 30,000 gaming machines licensed to the three operators: Tabcorp has 13,750; Tattersall’s 13,750; and Crown 2,500.

Tabcorp shares closed 15 cents lower at USD 16.84 today. Tattersall’s was down five cents at USD 5.17, and Publishing and Broadcasting shed seven cents at USD 19.82.