Australian casino operator Echo Entertainment wants to expand its flagship Sydney gaming joint The Star in order to prepare for competition from archrival Crown Resorts. The Star’s Sydney casino monopoly doesn’t officially expire until 2019, but since Crown plans to open its new Asian VIP-focused casino in Sydney’s Barangaroo district the second the calendar flips over, Echo isn’t letting the grass grow under its feet.
Fairfax Media reported that Echo has filed an application with Sydney city council for a $13.7m extension to The Star that would convert one floor into five new VIP gaming rooms, as well as enlarge one existing VIP room. Echo apparently wants to solidify its position as the cushiest place for Asian high-rollers to park their posteriors before Packer’s new kid in town catches everyone’s fancy.
Echo gave investors a thrill last week by teasing that its upcoming fiscal full-year results would be ahead of analysts’ expectations. Echo says it’s on pace to report earnings of between $430m-$435m for the 12 months ending June 30, around $20m more than public bean-counters had expected. Normalized net profit is expected to come in between $150m-$153m, a significant boost over fiscal 2013 and the company’s best performance since the pre-global meltdown results of fiscal 2008. Official results will be released on Aug. 13.
Echo is crediting much of the improvement to its bottom line on aggressive cost cutting enacted by former CEO John Redmond, who sought to trim $60m from Echo’s expenditure. Echo says the revenue trends enjoyed in the quarter ending March 31 have “continued to prevail to date,” with normalized group revenue up 10.2% in the five months ending in May. Operations in both Sydney and Queensland showed revenue growth during the period, although Echo cautioned that the VIP rebate business was an inherently volatile beast, meaning there’s always the possibility of all its good work being undone in the last month of the earning season by a high-roller with a hot hand.
