Casinos operator Echo Entertainment Group says any potential proposal from rival Crown or Malaysian gambling group Genting must recognise the value of Echo’s “good, long-term licences” in NSW and Queensland.
Echo chief executive Larry Mullin on Wednesday said the appearance of billionaire James Packer’s Crown and Genting on its share register showed just how valuable its licences were considered.
“This in itself should be the clearest sign that Echo holds a valuable portfolio of licences,” Mr Mullin said.
“And our investment program sets this business up to realise the growth potential and embedded value of those licences.”
Mr Mullin said Echo’s board was open to any proposal that could maximise value for all of its shareholders.
He said Echo’s gambling licences were good, long-term licences, and their value had to be recognised in any proposal.
Furthermore, Echo had spent $870 million redeveloping its main asset, The Star casino in Sydney, including a $100 million payment to the NSW government for exclusivity.
“We remain optimistic about the outlook for this company,” Mr Mullin said.
He added that Echo was only at the start of its transformation of The Star and was optimistic about the future of its Queensland assets – the Treasury casino in Brisbane, and Jupiters Gold Coast and Jupiters Townsville.
The company in December 2010 announced a proposed $625 million investment program for its Queensland casinos.
Echo said trading conditions in Queensland were tough.
Echo on Wednesday booked a net profit for the 2011/12 financial year of $42.2 million, down 81.3 per cent on the prior year’s net profit of $226.0 million.
However, the company said the statutory profit figure was not comparable to the prior year’s figure because at that time Echo was part of gambling group Tabcorp Holdings.
Echo demerged from Tabcorp in June 2011.
Echo said its earnings in 2011/12 had been affected by a raft of one-off significant items, lower win rates in the company’s high-rolling VIP business, higher expenses associated with the relaunching of its Sydney casino as The Star and soft consumer sentiment.
Mr Mullin described the 2011/12 financial year as a transitional one for Echo, with the second half particularly challenging for The Star.
Earnings before interest and tax (EBIT) at The Star, which was hit by controversy earlier in the year with an inquiry into allegations of harassment of senior staff, fell by more than 50 per cent to $111.3 million.
The Star’s third quarter trading had been hit by a soft consumer environment, the departure of the casino’s managing director, and negative media exposure, Echo said.
Echo said it expected sustained revenue growth at the Sydney casino in 2012/13, driven by new products and expansions.
Mr Mullin said the group’s Queensland casinos, which had a small lift in revenues in 2012, were expected to trade in line with general market conditions, with earnings to benefit from cost cuts.
Echo said that in the first six weeks of the 2012/13 financial year, revenue at The Star was up 14.1 per cent, but revenue in Queensland was down 5.6 per cent.
Shares in Echo were 11 cents lower at $4.07 on Wednesday.
Morningstar analyst Michael Wu said Echo’s net profit may have been below some market expectations and the trading outlook for Queensland was weak.
