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Tatts Group Ordered to Pay Back AU$541m to Victorian Government
By Brodey Sheppard - March 14, 2016
Australian betting operator Tatts Group will be forced to return AU$540 million it won from the Victorian government after the High Court determined that state had not violated the operator’s pokie machine monopoly.
In the latest slots news, the High Court of Australia ruled against Tatts Group, as well as rival Tabcorp Holdings in their long-running pokies war with the Victorian government. The case was based on an original monopoly deal that the Kennett Coalition government gave Tatts and Tabcorp way back in 1994. This original deal allowed Tatts and Tabcorp to operate the state’s pokie machines outside of Crown Melbourne casino. In 2008, the Labor Brumby government decided to move the management of 27,500 pokie machines to venue operators, instead of Tatts and Tabcorp.
Tatts and Tabcorp sued the state of Victoria arguing that they were owed compensation for the transfer of management of the 27,500 pokie machines. The Victorian Supreme Court voted in favour of Tatts in 2014 and awarded the company a total of AU$541 in damages for the slot machines. Tabcorp was chasing AU$687 million in lost revenues as well, but lost when the state court dismissed the appeal based on restrictive language in the contract.
However, the High Court recently found that Tatts was not entitled to payment by the Victorian government for the slot machine games because a new gaming operator’s licence was never issued.
Tim Palas, the state treasurer of Victoria declared that the High Court’s decision was a “great outcome.” There is no higher court in Australia to which Tatts can appeal to, and so the curtain has finally fallen on this long-running high-stakes drama. The decision is final: Tatts is to return AU$541 million to the Victorian government.
Tatts did not recognise the AU$541 million as income in its financial accounts, so it will be able to return the amount in cash. The amount, however, incurred taxes worth AU$18.6 million that will also have to be paid back, along with Victoria’s legal costs.
Despite this, Tatts Group claims that its ability to pay dividends will not be affected and it will continue to offer the newest slots games and best pokie bonuses for their players. In a statement, the company says, “Following repayment to the State, the group's net debt to EBITDA ratio is still comfortably serviceable considering the group's cash flow, profitability and future opportunities."
“The decision is not expected to affect Tatts' ability to continue its stated dividend policy of maintaining a high annual dividend payout ratio.”
Investment bank Macquarie Research supported the claim of Tatts Group’s stability. Sam Dobson, an analyst at Macquarie said, “While net debt to EBITDA metrics will be impacted, they are certainly manageable within Tatts' current capital position, without the need for any additional capital.” Therefore, Tatts players can rest assured that Tatts will continue to operate their best pokies for the year.