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Isle of Capri running to stand still


With high debt interest payments more than wiping out its profits, Isle of Capri needs to generate more revenues rather than simply retain what it has and hammer down the costs. It will have that opportunity at least with the award of a new licence in Missouri.


newhorizons ISLE OF CAPRI CASINOS


Having been on the watch list a few years ago after its ill-fated adventures abroad, Isle of Capri’s retrenchment and uninhibited cost cutting has helped it to get through the tough times - so far at least.


Its second quarter and


first half gaming and net rev- enues were about flat. In Q2 the 15 venues, all but one full casinos, generated GGR of $254m (E189.5m) ahead 1.2 per cent of last year. In H1 GGR was completely flat at $513.8m (E383.3m). Net revenues told a similar story with Q2 flat at $246.6m (E184m), and H1 just one per cent softer at $498.6m (E371.9m).


As has been its intention in the last two years, the company pushed down its costs, achieving a 2.5 per cent reduction in Q2 alone and 2.6 per cent in H1. However,


the interest


charges on its $1.25bn (E932.5m) debt are continu- ing to put a significant strain on the bottom line. Last year’s


modest second


quarter profit of $1.6m (E1.2m) turned over to a $1m (E746,000) loss, while for the first half, last year’s $2.5m (E1.9m) net profit became a $3.7m (E2.7m) loss in 2010. President and CEO Vir- ginia McDowell said: “We have posted improved oper- ating results on a year-over- year basis because of a solid operating plan… I want to thank all our team members for saying focused an improve out business as we bump along the bottom of this economic cycle.” CFO Dale Black added: “While we have recently seen positive signs in certain economic indicators and hope this positive news will


James Perry, chairman of Isle of Capri, is hoping to build on the company’s success in obtaining the last Missouri licence by winning the last Pennsylvania resort licence


continue, we believe that discretionary consumer spending could continued to lag these trends.” Having contracted some- what, the company is now, despite its debt, taking steps now to expand it once again. “We are excited that out


efforts to pursue prudent development opportunities have delivered positive results,” said chairman James Perry. “[Recently] the Mis- souri Gaming Commission


announced that our pro- posal, Isle Casino Cape Girardeau, has been selected for prioritisation for the 13th and final gaming licence in the state…We anticipate opening [the venue] by the end of 2012.”


He continued: “In Penn-


sylvania, the Gaming Board has indicated that it will [soon] announce its selec- tion for the final resort casino licence… We are con- fident that we have submit- ted a proposal together with Nemacolin Woodlands Resort that will provide maximum benefits to the Commonwealth in terms of both tourism impact and new tax revenue.”


Profits warning from Aristocrat


USblues ARISTOCRAT TECHNOLOGIES


Australian slot manufacturer Aris- tocrat said in a trading statement in November that it expects to report an operating profit after tax in the range of A$50-A$60m (E37- E45m) in the year to the end of December, much less than the


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A$85m (E63m) previously pre- dicted.


The company said that the key


factors were, “a further contrac- tion in the US market, particularly in the third quarter, with year-to- date demand down more than 15 per cent on 2009.” It said the situation was driven by continued weak economic con-


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ditions, highly constrained capital spending by operators and a sig- nificant reduction in new open- ings.


It also blamed weak earnings in


the Australian market in the second half, due to the limited availability of new product to match demand and continued poor earnings in Japan. All was compounded by the


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relative strengthening of the Aus- tralian dollar. It concluded: “[We] expect that


growth momentum in key jurisdic- tions is unlikely to build materially before 2012…Aristocrat will con- tinue to focus on positioning the business to take full advantage of opportunities as market condi- tions improve.”


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January 2011 • businessnews 71


Not time for IPO Harrah’s private equity owners withdrew their partial IPO plans in November after it became apparent they wouldn’t achieve the price they had either hoped for or expected. Investors are believed to have been shy of the offer because of vast amount of debt being carried by the company and the still less-than-vigorous state of the casino gaming sector.


Manufacturers’ stock index tips downwards


bumpingalong AGEM INDEX


While modest stock price gains were witnessed in the majority of global gaming suppliers during November, the AGEM Index tipped downward as a result of neg- ative movement on a few manufacturers whose stocks are traded on exchanges outside the US.


The index of 17 global gaming suppliers declined by 3.45 points, or 3.48 per cent, to 95.75. For more than six months, the index has hovered within a tight range, struggling to return to its 100- plus point levels, which were observed for nearly a year prior to the current slump. Compared to a year ago, the index remains down 8.6 per cent.


The latest operating


results from global gaming suppliers reflect a continuing uncertainty and lower levels of demand for products and services. Suppliers such IGT recently wrote that demand has been “negatively affected by global macroeconomic factors” and Bally said it con-


tinues to operate “in a chal- lenging economic environ- ment”. These trends are likely to continue in the near term. Bally added 1.06 points to the index in November, with a stock price increase of 8.56 percent and Konami posted a 6.27-per cent gain in its stock valuation, contributing 0.92 points to the index. However, Lottomatica with its stock price dropping 21.08 per cent, saw 3.16 points taken from the index. Aristo- crat’s 25.93-per cent decline in stock price took another 2.12 points away.


In the US, still overall the


world’s biggest gaming market, some new-builds are being considered or announced, including a state-owned casino in Wichita, Kansas and the last resort licence for Pennsylva- nia. The New Jersey legisla- ture has passed a bill permitting boutique casinos to be built in Atlantic, which if signed by the Governor could create a new kind of market there. Missouri has


announced that Isle of Capri has won the last licence there.


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