Why casino giant Federal Group could be $25 million worse off
A new gaming policy to be introduced by the Tasmanian state government could see Federal Group lose its monopoly.
The proposed policy would see control of machines transferred to pubs and clubs. It would also see individual licences issued to venues.
Despite the hit, Federal Group, which operates tourism, hospitality, retail and freight assets, but is primarily known for its Casino and gaming assets, is yet to decide whether it will sell any of its 12 pubs to counter the new policy.
While, the Tasmanian government projects Federal Group to be $25 million worse off due to a 3 per cent increase in the Community Support levy and an extra 8.3 per cent tax on pokies in pubs and 7.3 per cent on club, the tax on casino pokies will fall by close to 12 per cent.
The hit to Federal Group’s bottom line will also be offset by forecast capital growth in its pubs.
According to economist John Lawrence, “If they [pubs] can get a licence for 20 years, that means that they’ve got a nice capital gain that they can cash in.
“At the licence level, each pub becomes a separate asset, which then can be sold on.”
Federal Group believes it will take a $20 million revenue hit.
“This annual loss is entirely different to theoretical capital values,” a Federal Group spokesperson said.
“It is irrefutable that the Federal Group will be substantially worse off as a result of the proposed gaming legislation.”
Federal Group is the owner of 12 pubs including Brooker Inn in Lutana, the Elwick Hotel in Glenorchy and Hotel Valern at Moonah.
It is unclear, what the privately owned company will do with these assets at this stage.
The government is unapologetic about its new policy, believing it will create jobs in hospitality, support problem gamblers and put more money into the state government’s coffers to be spent on essential services.
It is interesting that both Federal Group and the Tasmanian Hospitality Association endorsed the individual licence model.
The pair released a joint submission to a parliamentary inquiry in 2017 noting, “The proposed model would redistribute (electronic gaming machine) revenue from Network Gaming to hotels and clubs.
“This would result in a significant increase in the capital value of hotels and clubs by an average of over $1.5 million.”
Federal Group is currently reviewing the newly proposed legislation.
Irit Jackson, 13th July 2021
