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ECHO Entertainment Group (EGP) has reported a staggering 80 per cent drop in net profit after tax (NPAT) for the 2012 financial year.
The casino operator blamed reduced outlays by mainstream punters, combined with increased winning by high rollers. It cited difficult operating conditions after negative media coverage over alleged drug use and sexual harassment at The Star Casino and Hotel in Sydney.
It also booked a $30 million write-down after the collapse of an Asian-based high roller junket operator.
EGP confirms its NPAT for fiscal 2012 was $42.2 million, significantly below its $226 million NPAT for FY11 when EGP was still part of Tabcorp.
Revenue was up by just 0.2 per cent to $1.6 billion in the same period, reflecting current challenging conditions for the gaming industry. There was also a 0.58 per cent jump in house losses at EGP’s VIP business to 1.39 per cent.
The company operates Treasury Casino and Hotel in Brisbane, Jupiter’s Hotel and Casino in Broadbeach, Jupiter’s Townsville Hotel and Casino and The Star.
A recent expansion and renovation of The Star incurred $37.8 million in pre-opening expenses.
The unrelated financial collapse of VIP junket operator SilkStar Global Marketing, which delivered overseas-based big gamblers to Australian casinos, brought $30.3 million in write-downs.
EGP CEO Larry Mullins (pictured) took a swipe at media reports earlier this year of The Star managing director Sid Vaikunta’s sacking over the alleged sexual harassment of a co-worker, and subsequent investigation into the casino’s suitability to hold a licence.
“The second half of FY12 was a challenging period for The Star,” he says.
“The removal of the managing director from December, announcement of the section 143 Casino Control Act 1992 (NSW) inquiry – and subsequent sustained negative media campaign – [all] adversely impacted operations in the third quarter.”
The company also faces a potential fine for giving late notice of Vaikunta’s departure to the Independent Liquor and Gaming Authority.
Mullins predicts EGP will trade in-line with general market conditions during FY13.
“Earnings will benefit from some of the general corporate and property specific cost optimisation initiatives implemented from 2H12,” he says.
“We remain excited about the development of our Queensland properties and are working with the Queensland Government to maximise those opportunities.”
EGP shares declined slightly to $4.09 per unit.
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