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REPORTING SEASON: Echo Entertainment Group (EGP)

Brought to you by CommSec

 

Figure 1: Echo Entertainment Group 12 month chart

 

Casino operator Echo Entertainment (EGP) posted a lower than expected half year profit of $46.1m, prompting the resignation of Chief Executive John Redmond.

The fall in profit was blamed on a lower win rate in VIP (its international business – Echo generates ~20% of its revenue from tourists), weak results from private gaming together with additional levies in NSW and QLD.

Sydney’s The Star continues to be the main contributor to earnings (~70% of profits) despite a 6.5% slump in revenue this half due to a conservative consumer.

Its QLD casinos underperformed, with an 8.7% slide in income.

To manage the softer revenue environment, EGP introduced a cost reduction program last year.

It expects this initiative to save the group more than $60m.

EGP sold its Townsville Casino for $70m last month to Colonial Leisure and aims at using the $8m (post transaction costs) to better stgelop remaining assets.

Its primary competitor, Crown (CWN) has ~60% share of VIP and its upcoming Barangaroo stgelopment will be a challenge for The Star.

Strategically, Echo is focused on improving performance at all its casinos-spending $345m at its Gold Coast assets and continuing with the stgelopment process of Queen’s Wharf in Brisbane.

A 4c/share fully franked interim dividend will be paid to eligible investors on 14 March.

 

You can see all of CommSec’s reporting season analysis by clicking here.

Steven Daghlian, Market Analyst,