South 32, Telstra, Tatts Group and Star Entertainment Group - First Impressions from reporting

Bell Potter

South 32: Reported Net profit US$620m as compared to net loss US$1.75bn in pcp (which included impairment charges US$1.7bn) | Underlying EBITDA up 96% to US$1064m, EBITDA margin 36.7%. (Higher prices for the majority commodities offset lower volumes, giving rise to an increase in sales revenue of US$240m | Operating unit costs declined by 10% to US$131/t of ore processed in H1 FY17 as the impact of a stronger Australian dollar was more than offset by lower labour and contractor costs and a decline in haulage rates. | Outook: “Guidance for FY17 capital expenditure, including equity accounted investments, remains unchanged at approximately US$450M(15) as the spend profile is skewed to H2 FY17 for a number of projects. Exploration expenditure of approximately US$16M is expected within our existing footprint, including US$4M for our equity accounted investments. FY 17 guidance: Worsley Alumina 3,965kt, Brazil Alumina 1,320kt, SOUTH AFRICA ENERGYCOAL –DOMESTIC COAL 17000kt, export Coal 13850kt, Australian Manganese 3,120kwmt.”

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Telstra: Added 200,000 domestic retail mobile services, 90,000 retail fixed broadband customers, 124,000 bundles, 292,000 nbn connections and 322,000 Telstra TV devices. | Divisional Revenue: Total Fixed Rev down 4.7% to $3257m, Total mobile revenue down 8.7% to $5043m, Data & IP down 4.2% to $1374m, Network applications and Services up 18% to $1475, Global Connectivity down 2.6% to $699m, Media down 2.2% to $1623m. | Net operating cash flow down 14% to $3162m. | Outlook: TLS has maintained its FY17 guidance for mid-high single digit total income growth, but now expects this to be at the lower end of that range. Remaining guidance is unchanged: Low-mid single digit EBITDA growth, 18% capex/sales and FCF of $3.5-4.0bn.

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Tatts Group: Tatts Lotteries Revenue down 8.2% to $1018m, EBIT down 10.7% to $147.1m, EBIT margin 14.4% as compared to 14.9% in pcp (Lotteries is now powering 13.5% of its sales online). | Wagering: Revenue down 2.5% to $317.8, EBIT down 15.2% to $57.9m, EBIT margin 18.2% as compared to 21% in pcp. | Gaming: Max revenue up 1.5% to $60.5m, EBIT up 0.3% to $26.6m. MaxTech revenue down 23.4% to $39.6m, EBIT down 40.9% to $1.2m. | Net operating cash flow down 2% to $200.2m. | Outlook:No quantitative guidance provided.

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Star Entertainment Group: International VIP Rebate business front money up 4.4% on pcp, turnover down 11.9% following the impact from Crown Resorts detentions and high actual win rate of 1.62%. | Net operating cash flow up 79% to $231.2m. | Outlook: Trading levels in early 2H FY2017 are exhibiting satisfactory growth on pcp, with improving momentum as capital projects continue to progress and more capacity becomes available. Capital expenditure in 1H FY2017 was $216 million, with expectations in the range of $375 million to $425 million for the full year, excluding around $120 million in equity contributions to DBC for the Queen’s Wharf development, in line with prior guidance.”

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