Takeover Odds Lengthen As Unitab Chief Exits

Sydney Morning Herald

Saturday February 18, 2006

Colin Kruger

UNiTAB chief Dick McIlwain confirmed yesterday he will step down in October after 17 years in charge of the Queensland gaming and wagering operator, fuelling speculation that further consolidation in the industry may be some way off.

Aside from that, it was business as usual for UNiTAB, which beat consensus expectations with a 25 per cent increase in first-half profit to $41.1 million.

Recent gaming acquisitions helped fuel the earnings growth, and a 19 per cent increase in revenues to $315.5 million, while the company's traditional wagering revenues remained flat year-on-year because of tighter consumer purse strings and the split of race broadcast rights between two channels.

UNiTAB shares were up 3.4 per cent on Friday, gaining 43c to close at $13.00, thanks to the strong result and a higher than expected 31c per share dividend, which will be paid on April 7.

Mr McIlwain's earlier than expected retirement raised questions about the pace of industry consolidation. He had the option of extending his contract by a year and previously indicated his willingness to remain at the helm if UNiTAB was involved in any corporate activity.

Hunter Green's Charlie Green said the early departure was a surprise given talk of a tie-up between UNiTAB and Tattersall's, or Sky City Entertainment, and might be a sign that the "takeover sizzle" had gone.

Uncertainty over the renewal of Tabcorp and Tattersall's gaming monopoly in Victoria might also be a factor. "I don't think UNiTAB could get together with Tattersall's while the licensing situation is uncertain," Mr Green said.

But Mr McIlwain said that people should not read too much into the timing of his departure: Consolidation would happen "whether I'm here, or not", he told the Herald on Friday. "I think in terms of where the business is, it's a good time to step down," he said.

The main blot on UNiTAB's result was the 1 per cent growth in wagering turnover, with the split vision fingered as a culprit.

"We would have been 2 to 3 per cent better off if the system remained as it were last year," Mr McIlwain said.

He indicated that the company expects a better performance from both the gaming and wagering businesses in the current half year.

Goldman Sachs JBWere said the quality of the result was excellent but it did not expect much outperformance from this point given the share price was already trading at high earnings multiples.

The board indicated it would appoint an internal successor to Mr McIlwain and said it was "well advanced" in its search for a replacement. The new CEO is expected to be named no later than May.

© 2006 Sydney Morning Herald

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