Horse Crisis Continues

Sydney, Aug 28, 2007 (ABN Newswire) - The equine influenza outbreak that has stopped racing and horse transport across Australia saw the share prices of Tabcorp, Tattersall's and Centrebet lowered yesterday as investors fretted about the impact of the still developing crisis on the $15 billion a year wagering industry.

Tabcorp shares slumped to a 10-month low after the Melbourne-based company said yesterday morning in a statement that the weekend racing ban had cost it $65 million in lost turnover, a figure it said may rise to $150 million if racing doesn't resume this week.

That is looking increasingly likely, with a decision now not expected until Thursday at the earliest. But reports last night suggested that trackwork would start in Melbourne and Brisbane later today or tomorrow.And racing might resume in Melbourne at the weekend.

Tabcorp shares fell 1.3% or 20c to $15.63 at the close of trading on the ASX yesterday, the lowest since October 10 last year. The shares have been under pressure for months because of poor returns from wagering, especially in NSW. Those problems were exposed in last Thursday's 2007 profit statement. They hit an intra day low of $15.10 yesterday morning.

Shares in Tattersall's, the second-largest gaming company, fell 14c or 2.8% to $4.81. They hit a low of $4.70 during the day. And Centrebet International shares dropped 4.7%, or 9c to $1.81, after the online bookmaker said the racing ban may cut net income by $400,000.

More than $290 million off the value of major gaming companies, Tabcorp, Tattersall's and Centrebet.

(The All Ords and the ASX 200 were up 1.6% yesterday).

With the bans lasting for at least a week, but seemingly longer in NSW (which is the biggest betting market in the country), Tabcorp shares are likely to come under pressure the longer the crisis continues. Tattersall's is likely to be less affected because of its wagering operations in minor states like Queensland and South Australia.

That $15 billion figure doesn't include the multi-million dollar breeding and horse trading industry, or the millions of dollars in prize money, wages and salaries.

EI could be at 81 sites in NSW and Queensland and according to news reports the Federal Minister for Agriculture, Peter McGauran, expects that figure to climb.

The presence of the virus has been confirmed at Randwick Racecourse and stables at Centennial Park in Sydney (they are within two kilometres of each other).

There are a further eight "danger sites'' and another 71 "suspect'' sites.

A national standstill on all horse transport will continue until 1pm Friday, when it may be lifted in western states but it's likely to remain as an open-ended ban in NSW and Queensland.

Reports last night said that lifting the ban on racing will be considered on Thursday, and races may begin in areas like Darwin at the weekend.

While compensation has not been discussed yet, 80% of the multi-billion dollar bill will be paid by the industry, the Federal Government will pay 10%, and the remaining 10% will come from the states.

The Spring breeding program has been thrown into confusion here and may not happen: starting it in late September or October might be too late and would see a crop of late foals born next year, but that might be preferable to very few foals next year and yearlings in 2009.

Tabcorp, Australia's biggest owner of betting shops, earned $253.7 million before interest and tax from wagering in the 12 months to the end of June, around 28% of earnings.

Tattersall's stands to lose $2 million a week in earnings before interest, tax, depreciation and amortization if the ban on racing is extended, the Melbourne-based company said in a statement to the ASX yesterday.

Tabcorp said in its statement yesterday that its wagering division was being negatively impacted by the racing bans, which have been put into effect to limit the spread of horse flu.

It said the cancellation of thoroughbred and harness race meetings over the weekend had resulted in a loss in wagering turnover of $65 million for the company.

"Based on its experience to date, if Australian racing were not to resume until next weekend, Tabcorp expects that the loss in turnover will be in the order of $150 million," it said.

"This will translate to an adverse impact on Tabcorp's group earnings of approximately $5 million after tax.

"There is a risk that the suspension of racing will be extended for a prolonged period.

"If this were to occur, the weekly loss of turnover and earnings would increase as Spring racing is impacted from September."

Tattersall's said its UNiTAB wagering business was continuing to monitor the impact of the current horse flu situation on its TAB operations in Queensland, the Northern Territory and South Australia.

Tabcorp also said it was working with its racing partners in Australia and overseas to provide the best possible racing product on Sky Channel, and that it had increased the number of New Zealand races being broadcast. (Lots of greyhound meetings are being broadcast, some of which have never been seen on TV.)

Centrebet said it was hard to quantify the impact of the racing bans on its business, but if the bans last a month, there would be a negative impact on its fiscal 2008 net profit of about $400,000.

"This is on the basis that all horse and harness races are cancelled and not postponed, which is a possibility being considered by the authorities," it added.

Centrebet said the impact would be mitigated by a potential increase in New Zealand and international horse race betting, and an increase in sports betting due to the non-availability of horse race and horse trotting betting.

"It is also anticipated that additional greyhound race meetings will be convened while the restrictions are in place, assisting in mitigating the impact," it added.

Centrebet also maintained its guidance for double digit net profit growth of between 10% cent to 15% cent in 2007/08, after reporting a profit of $11.8 million for fiscal 2006/07.

But Tabcorp said there was no discernible increase in sports betting on the weekend, and greyhounds are not expected to attract a sharp rise in turnover because of the specialised nature of each punting activity.

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