Australian casino operator Echo Entertainment saw an 81.3% decline in full year profit, clearing just $42.2m in the 12 months ending June 30 compared to $226m in the previous fiscal year. Blame for the downturn is being assigned to a lower VIP win rate at its Sydney casino, The Star, plus a “soft consumer environment” at its three casinos in Queensland. Revenue was up a mere 0.2% to $1.6b, while earnings fell 39% to $217.9m (earnings at The Star fell more than 50%). Just as rival Aussie operator Crown Ltd. saw profits soar on an increased VIP win rate, Echo’s dip came as a result of its VIP win falling from 1.97% last year to 1.39% this year.
The downward profit spiral was further accelerated by $74.1m in one-off expenses, including a $30m writedown required by the collapse of junket operator SilkStar Global Marketing in March. On a smaller note, there was also a $192k termination payment to former Star boss Sid Vaikunta, who was sacked in spectacularly public fashion in February for conduct unbecoming in the workplace. Vaikunta’s ouster also prompted a lengthy inquiry that required a lot of legal overtime. Regardless, Echo CEO Larry Mullin professed confidence that shareholders would see “sustained revenue growth at The Star in FY13 driven by the new product and expansions.”
TATTS MOVES HQ, PREPARES TO SUE VICTORIA
Gambling outfit Tatts Group has announced it’s upping sticks and moving its head office and 110 jobs from Melbourne, Victoria to Brisbane, Queensland, just days before Tatts and fellow gambling outfit Tabcorp lose their duopoly over the 27,500 video poker machines in Victoria. The two companies were caught off guard in 2008 when Victoria’s then Labour government announced it would allow pubs and clubs to cash in on the pokie prize when the current deals with Tatts and Tabcorp expired on Aug. 16, 2012.
Both Tatts and Tabcorp believe this decision violated exclusivity clauses in their 1994 contracts with the state, and each has vowed to file suit against the state shortly after Thursday’s expiration date. Tabcorp is seeking $687m for what it claims is a refund of the license fee it paid Victoria in 1994, while Tatts is proceeding with a straight compensation claim for $590m. Deutsche Bank analysts put Tabcorp’s chance of prevailing in its suit between 50% and 75%. If both claims were successful, the $1.3b blow to Victoria’s finances would be sufficient to wipe out its forecast surpluses for the next three years.
NO ONE LOOKS GOOD IN STRIPES
The state government in New South Wales has become the first to propose harsh new laws to combat fixing in racing and sports, but other states are expected to follow NSW’s lead post-haste. Under the terms of the Crimes Amendment (Cheating at Gambling) Bill 2012, offenders will face penalties ranging up to 10 years in stripes (or dodgy arrow pattern, as evidenced below). The reforms were the recommendation of a 2011 Law Reform Commission report that followed a 2010 rugby league match involving Canterbury and North Queensland. The legislation will target such actions as deliberate underperformance by an athlete/jockey, withdrawal from a contest and intentional misapplication of the rules by referees/officials. The use of insider info or a bookie taking wagers on an event he/she knows to be fixed will also result in close confinement with the refined gentlemen in the Aussie prison system…