Aug. 7 (Bloomberg) -- Tabcorp Holdings Ltd., Australia's biggest gaming company, jumped the most in five months in Sydney trading after maintaining dividend payouts amid writedowns to its slot-machine and betting-shop units.

Tabcorp rose 6.6 percent to close at A$9.17, the biggest increase since Feb. 21. The advance trimmed this year's loss to 38 percent, compared with a 21 percent decline for Australia's benchmark S&P/ASX 200 Index.

The gaming operator, which paid dividends of 94 cents a share, expects to maintain the payout in the next fiscal year even as it boosts spending on Star City casino in Sydney by 58 percent to lure gamblers. The Melbourne-based company announced A$707.5 million ($644 million) million in charges today, resulting in the first loss in its 14-year history.

``What really matters is the dividend being maintained in the light of the writedowns,'' said Craig Shepherd, an analyst at Commonwealth Securities Ltd. in Melbourne. ``We like the higher capital expenditure on Star City because that is needed to release the value in that business.''

The stock has slumped 36 percent since April, when the Victorian government decided Tabcorp and Tatts Group Ltd. would lose their duopoly for the state's 27,500 slot machines from 2012, allowing pubs and clubs to bid for their own licenses.

Possible Refund

Chief Executive Officer Elmer Funke Kupper, 43 and a year into the role, has seen the value of his slot-machine unit slump after the decision. Tabcorp is suing the government for compensation and estimates it may be due a refund of as much as A$680 million.

``The decisions taken by the Victorian government in April 2008 have a material impact on the group,'' Chairman John Story said in a statement.

Full-year earnings before one-time items were A$516.9 million, compared with the A$512 million average of nine analyst estimates compiled by Bloomberg. After items, the company had a full-year net loss of A$164.6 million, its first loss since the Victorian government sold the company in August 1994 through an initial share sale that raised A$625 million.

Tabcorp wrote off A$487.7 million of its slot-machine and wagering business to reflect the new arrangements after 2012 and the government's opposition to a refund. The rest of the betting business took a writedown of A$194 million because of increased competition and new regulations, and Tabcorp took a A$25.8 million charge against Star City, Sydney's only casino, as part of its expansion program.

Dividend Payment

``We distributed a dividend of 94 cents per share to shareholders,'' Funke Kupper told reporters on a conference call today. ``Our current projections indicate that this payment per share can be maintained.''

Full-year earnings before interest and tax from Tabcorp's four casinos fell 4.5 percent to A$368.8 million as the introduction of smoking bans in Sydney led gamblers to curb their visits or gamble less.

``We expected casinos to do better than this,'' Funke Kupper said.

Tabcorp will spend A$475 million refurbishing Star City, more than a February forecast of A$300 million, by adding restaurants and a new 300-room hotel. Last year, the company agreed to pay an extra A$100 million to the New South Wales state to maintain its exclusive license in Australia's largest city.

Betting-shop earnings rose 4.2 percent to A$264.4 million. Wagering was affected by the nation's first outbreak of horse flu 12 months ago, which led to the cancellation of some races and restrictions on horse movements.

Horse Flu

The outbreak cut earnings in the second half by A$1 million, after reducing profit by A$16 million in the first six months, Tabcorp said. In June, the Australian government said the nation is now free of horse flu.

Earnings from slots fell 0.3 percent to A$261.4 million as smoking bans were extended to all indoor areas of pubs and clubs and government taxes on machines were raised.

The cost of default protection on Tabcorp's debt fell and it was the only company in the Markit iTraxx Australia Series 9 credit-default swap index to post a decline.

Contracts tied to the company, which fall as perceptions of credit quality improve, declined 2 basis points to 101 at 3 p.m. in Sydney, Citigroup Inc. prices show. The benchmark index gained 6 basis points to 140, meaning it costs $140,000 to protect $10 million of debt from default for 5 years.

Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements.

To contact the reporter on this story: Robert Fenner in Melbourne rfenner@bloomberg.net

Last Updated: August 7, 2008 03:51 EDT