Casino group, Echo Entertainment Group (EGP) has beaten earnings expectations for the year to June 30, but that didn’t stop investors from giving the stock a gentle mark down yesterday.
Echo told the ASX that full-year normalised net profit jumped 52% to $219 million after high-roller punters and local customers returned to Sydney’s revamped Star casino, in higher numbers (and losses), lifting second half performance.
(Normalised figures attempt to remove the volatility associated with fluctuations in spending by high-rolling gamblers over time.)
The market had forecast a 30% improvement in profit to $205 million from $158.2 million in 2013-14,according to a consensus forecast.
Normalised earnings before interest, tax, depreciation and amortisation (EBITDA) also beat forecasts, up 24% to $521 million ( the market had forecast $501 million).
Earnings before interest and tax rose 30% to $357 million, from $273 million for the same period last year.
Echo operates The Star casino in Sydney and Jupiters Hotel and Casino on the Gold Coast and from 2022 will run the $2 billion Queen’s Wharf casino resort in Brisbane.
EGP 1Y – Echo lifts normalised FY profit by 52%
Echo CEO Matt Bekier said yesterday, “It’s a very strong result from The Star”. Speaking on an earnings call yesterday, he said, "We are seeing the benefit of our investment programme starting to come through”.
But he cautioned that financial 2016 revenue and earnings could be disrupted by ongoing capital investment programmes for both The Star and its Jupiters Hotel and Casino on the Gold Coast.
“Gross revenue, excluding International VIP Rebate business is showing more moderate growth on the prior corresponding period in July as comparables become more difficult," said Mr Bekier.
"The financial year is off to a reasonable start with FY2016 continuing to benefit from momentum built up over FY2015."
Perhaps that’s why Echo shares fell 2.3% yesterday to close at $4.98
Earlier they had been off 3.5%.
A final dividend of 6 cents a share takes the full year payout to 11 cents a share, up 37.5% on the 2013-14 payout. That’s a payout ratio of 53.6%.
