Star owner bets on Qld growth plan
The operator, which has been in discussions with the Newman government on developing its Treasury casino site, said expanding its Brisbane and Gold Coast venues was a key focus for this current financial year.
Echo reported an underlying profit of $126.9 million for the year to June 30, down 15.5 per cent from a year earlier.
This was adjusted from a statutory profit of $83.5 million to reflect changes in the way it calculates the win rate of games in its VIP segment.
The company said it was affected by subdued trading conditions in Queensland, with revenue from its poker machine business sliding below expectations. It said redevelopment of the Brisbane and Gold Coast sites would help boost the value of its assets.
"While recent trading has been challenging in Queensland, we remain committed, positive and engaged on the underlying potential of these new assets and share the Newman government's vision for tourism," chief executive John Redmond said.
"We continue to work collaboratively with the government to help develop those plans."
Echo is facing a fight for revenue with James Packer as a slowing economy weighs on gambling spending, driving gaming tax revenue down in the three months ended March from the previous quarter.
The company's shares have slumped since July 4, when Crown moved a step closer to winning approval for a rival casino in Sydney's Barangaroo, adjacent to Echo's Star complex, hitting a record low closing price of $2.53 on August 7.
Mr Redmond told analysts in a briefing the company was focused on how to compete with the new Crown development.
"We will be spending time this year dealing with what we are going to do with our business here, the Star, to address what the environment is going to be like post-2019," he said. The company posted a final dividend of 2¢ a share, fully franked.
"Competition is set to intensify in Sydney," Mark Bryan, an analyst at Bank of America's Merrill Lynch unit in Sydney, wrote in a note to clients on July 29.
There were "headwinds in domestic gaming" as a result of weakness in Australia's consumer sector, he said.
Frequently Asked Questions about this Article…
Echo Entertainment reported an underlying profit of $126.9 million for the year to June 30, down 15.5% from a year earlier. That figure was adjusted from a statutory profit of $83.5 million to reflect a change in how the company calculates the win rate of games in its VIP segment.
Echo says expanding and redeveloping its Brisbane and Gold Coast sites is a key focus for the current financial year. Management believes the redevelopments will help boost the value of its assets and is working with the Newman government on plans for the Treasury casino site.
The company reported subdued trading conditions in Queensland, with revenue from its poker machine business sliding below expectations. A slowing economy has weighed on gambling spending and gaming tax revenue, which has impacted Echo’s top line.
Echo’s shares slumped after July 4 when Crown moved closer to approval for a rival casino at Barangaroo, next to Echo’s Star complex. The stock hit a record low closing price of $2.53 on August 7. Management has said it is focused on how to compete with the new Crown development.
Yes. The company posted a final dividend of 2 cents a share, and it was fully franked.
The difference was driven by an adjustment in the method Echo uses to calculate the win rate of games in its VIP segment. That accounting change increased the underlying profit relative to the statutory result.
Analysts, including Mark Bryan at Bank of America Merrill Lynch in Sydney, expect competition to intensify in Sydney. He also noted headwinds in domestic gaming linked to weakness in Australia’s consumer sector, which is pressuring operators like Echo.
Investors should note Echo’s commitment to reinvest in Queensland venues to lift asset value, while also facing near-term challenges: subdued trading in Queensland, sliding poker machine revenue, pressure from a slowing economy, and rising competition from Crown’s planned Barangaroo casino. Management says it will spend time this year planning how to position the Star business for the post-2019 environment.
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