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UPDATE 2-Profit leap for Australia's Echo marred by short-term spending spree
August 12, 2015 / 12:19 AM / 2 years ago

UPDATE 2-Profit leap for Australia's Echo marred by short-term spending spree

* NPAT rises 59 pct

* 2015/16 off to a reasonable start

* Spending plans drive shares lower (Recasts throughout)

By Byron Kaye and Jane Wardell

SYDNEY, Aug 12 (Reuters) - Echo Entertainment Group Ltd posted a 59 percent leap in annual net profit on Wednesday but concerns that a busy renovation schedule could bite into the next year’s earnings sent its shares down by as much as five percent.

Australia’s second largest casino firm by market value scored a win against local rival Crown Resorts Ltd last month by getting permission to build a new casino in Brisbane, tapping a wave of Chinese high rollers driven out of their traditional hub Macau by a government crackdown.

These Chinese gamblers helped Echo book a A$169.3 million ($123.7 million) profit for the year ended June 30.

Chief Executive Matt Bekier, however, struck a more sombre note, saying revamps of Echo’s flagship casino on Sydney harbour and at another on the Gold Coast would hit revenues in fiscal 2016, a year he said had only got off to a “reasonable” start with gross revenue showing only “moderate” growth in July.

In 2014/15, revenue rose 18.5 percent to A$2.14 billion.

“If you’ve got part of the gaming floor under construction that does affect the business, but it’s not a recurring issue,” said Danial Moradi, equity strategist at Lonsec Stockbroking.

Echo is banking on its Brisbane development to lure wealthy Chinese gamblers away from the Macau and Singapore. It already gets about 30 percent of its Sydney revenue from Chinese gamers, and has said it expects Brisbane would receive about the same.

The involvement of Hong Kong firm Chow Tai Fook in the project gives Echo a pip Melbourne-based Crown in the battle for these high-spending Chinese visitors who form the world’s biggest and biggest-spending outbound tourism market.

Crown is due to report its annual earnings on Thursday.

$1 = 1.3682 Australian dollars Reporting By Byron Kaye and Jane Wardell; Editing by Richard Pullin and Miral Fahmy

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