* Tabcorp H1 underlying profit down A$82 mln vs A$89 mln anlysts
* Wagering pre-tax profit down 11.6 pct
* Company faces intense competition from British online operators
* Shares in biggest decline in five years (Recasts, adds shares, fund manager quote)
By Byron Kaye
SYDNEY, Feb 8 (Reuters) - Australian horse-race gambling house Tabcorp Holdings Ltd on Thursday posted a larger than expected dip in half-yearly profit as it struggled with fierce competition online, triggering its biggest daily share price fall in five years.
The profit decline reflects the tough market conditions which motivated the Sydney-listed bookmaker to diversify by buying lottery operator Tatts Group for $4.7 billion. That deal closed in December and Tabcorp counted 18 days of its contribution in its interim result.
Excluding one-off items like the cost of buying Tatts, Tabcorp said net profit fell by a fifth to A$82 million ($64.1 million) for the six months end-December, missing the average analyst forecast of A$89 million, according to Thomson Reuters I/B/E/S.
Gabriel Radzyminski, founder of Sandon Capital which holds Tabcorp shares, said online bookmakers had “changed consumer behaviour to the point where there’s little value in physical betting operations”.
“This reflects why Tabcorp wanted to buy (Tatts) so much, because it gave them that lotteries business and strong, stable earnings contribution,” Radzyminski said.
British-owned Paddy Power Betfair, Ladbrokes, William Hill and Bet365 have obtained Australian gambling licences in recent years, heaping pressure on Tabcorp.
Tabcorp shares fell as much as 7 percent by mid-session, their biggest intraday decline since 2012 and making the company the biggest loser in an otherwise flat S&P/ASX 200 index.
The company’s wagering unit, responsible for three-quarters of sales, grew revenue just 1.4 percent, while the division’s pre-tax profit fell 11.6 percent.
“This was pleasing in a highly competitive wagering market in which competitors aggressively pursued customer acquisition ahead of regulatory change,” Tabcorp Chief Executive Officer David Attenborough said in a statement.
“The wagering business has made strategic investments in digital commissions and venue partnerships.”
Including significant items, Tabcorp’s statutory net profit fell 58 percent.
One-off costs included a A$49 million “onerous contract provision” and a A$4.3 million impairment charge for Sun Bets, a loss-making British online betting joint venture with News Corp . Tabcorp said Sun Bets’s performance was “unsatisfactory” and that the unit was under review.
Tabcorp cut its interim dividend to 11 cents per share, from 13 cents a year earlier. ($1 = 1.2788 Australian dollars) (Reporting by Byron Kaye in SYDNEY and Ambar Warrick in BENGALURU; Editing by Stephen Coates)