RECORD turnover from VIP punters and a major win against arch rival James Packer have marked a big year for Echo Entertainment Group (ASX:EGP) which has seen net profit surge 59.3 per cent to $169 million.
The result for the year to June 30 was driven by improved earnings across all three properties in the casino group - The Star in Sydney, Brisbane's Treasury Casino and Jupiters on the Gold Coast.
The result was also buoyed by an $8 million pre-tax profit recorded on the sale of Jupiters Townsville.
Group revenue rose 18.5 per cent to $2.14 billion, driven by the domestic gaming businesses, while normalised revenue which takes into account theoretical win rates against high rollers was up 20.6 per cent to $2.33 billion.
The win rate against high rollers may have been down on the previous year, but Echo posted record turnover in that segment of its business as premium punters ploughed $46.2 billion onto tables and into slots, up 53.5 per cent on the previous year's gaming turnover.
International VIP rebate business customer front money also was the highest on record, up 64.3 per cent to $3.66 billion.
Normalised gross revenue from the VIP rebate business across the group was up 53 per cent to $661.8 million.
It was a big year all round for Echo, which is facing the looming threat of James Packer's Barangaroo development eating into its key Sydney market, highlighted by the Queensland Government awarding the $2 billion Queen's Wharf redevelopment to the group.
While Crown Resorts' (ASX:CWN) incursion into Sydney has forced Echo to work on a new master-plan for The Star, Brisbane is now ripe for the taking for Echo, and chairman John O'Neill appears pleased.
"This exciting partnership with the Queensland Government to develop and operate arguably the most significant new place-making project in the history of the Brisbane CBD is an important strategic step for Echo and secures the company's position in the Brisbane market for the long term," O'Neill says.
"We look forward to progressing the development of this truly once-in-a-generation opportunity and delivering on the substantial economic and other benefits it will present for Queensland, Echo and its consortium partners."
However, Echo may not have such a sweet run on the Gold Coast, where it has committed $345 million to the redevelopment and refurbishment of its ageing Jupiters property.
The Gold Coast casino market is about to get hotter with the state government this month giving the nod to former cruise terminal proponent ASF Consortium to develop a master plan for a new integrated resort and casino on The Spit next to Sea World.
In the current year, Echo plans to spend between $100 million and $125 million on Jupiters, which will include its ongoing renovations of hotel rooms, additional VIP salons, stage one of the main gaming floor refurbishment and the start of the new six-star hotel. The hotel is expected to be completed in time for the 2018 Commonwealth Games on the Gold Coast.
From a divisional perspective, The Star contributed $1.54 billion in revenue to Echo's results, up 20.7 per cent from FY14. EBITDA was up just 2.9 per cent at $267.7 million.
Domestic gross gaming revenue was up 17.7 per cent, with growth at tables and slots up 20.1 per cent and 13 per cent respectively.
The Star's electronic gaming machine market share also hit a record high in the third quarter of FY15, reaching 9.2 per cent.
In Queensland, gross revenue at Treasury and Jupiters rose 15.5 per cent to $716.5 million. EBITDA was up 47.1 per cent to $186.9 million.
Non-gaming revenue was impacted at Jupiters by construction works and from the sale of Jupiters Townsville.
Depreciation and amortisation expenses were up 12.4 per cent to $164 million, buoyed by the continued capital spending program by the group in Sydney and on the Gold Coast. Operating expenses of $926 million were up 6.8 per cent.
Group earnings per share have surged from 12.9 c to 20.5c, and Echo is paying a final dividend of 6c, bringing the full-year payout to 11c a share.
Echo managing director and CEO Matt Bekier sees further growth in the current year, building on momentum emerging in FY15.
"The financial year is off to a reasonable start," he says, although he warns that macro-economic conditions and the level of debt and provisions could impact future earnings.
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