Online bookies put squeeze on Tatts, Tabcorp

Tatts reported strong growth in earnings on Thursday but flagged its wagering business would need further investment as competition with corporate bookmakers intensifies.

Earlier, Tatts' wagering rival, Tabcorp, pushed the case for regulation of the sector to counter the unfair advantage corporate bookmakers enjoyed in states and territories that have loose regulation and more favourable tax regimes.

Tatts reported that first-quarter earnings after tax from its continuing operations were up 23 per cent year on year.

Chief executive Robbie Cooke said the group also had a "positive" outlook for the second quarter but said it would not mirror the strong first quarter as the company would be cycling tough comparable figures from the previous December quarter when it enjoyed an exceptional run of lottery jackpots.

"Our intention is to lift our marketing, both traditional and online, and product development activities in our wagering operations ... as part of our strategy for re-energising our wagering franchise. This investment is being made to drive future growth," Mr Cooke said.

Some analysts predict a harsh future for traditional tote operators such as Tabcorp and Tatts due to the change in channel and product mix, along with the arrival of sophisticated digital competition.

Tabcorp joined the list of companies reporting soft consumer conditions at its AGM on Thursday. It told investors that group revenue was up 3.1 per cent to $503.9 million for the three months to September 30, in line with its trading performance in the second half of last year. Wagering revenue growth of 5.4 per cent came on the back of "continued strong growth in fixed odds and digital wagering".

But Tabcorp said the "softer retail consumer environment negatively impacted on the performance of its Keno business, which barely grew for the first quarter [and] the retail-only Trackside product, which grew 2.2 per cent".

Tabcorp chairwoman Paula Dwyer said that less rigorous conditions for corporate bookmakers in the Northern Territory, compared with those for wagering operators such as Tabcorp in Victoria and NSW, were adversely affecting the racing industry and the community.

In the 2012 financial year, wagering taxes collected in the NT amounted to $2 million despite turnover of more than $5.7 billion.

In comparison, Tabcorp paid $292 million in state wagering taxes in NSW and Victoria on a turnover of $10.8 billion, a proportion 77 times greater.