Punt on pokies proves a big winner for Woolworths

BETTER known for selling bread and milk, supermarket operator Woolworths is rapidly emerging as one of the world’s biggest poker machine operators.

With 11,700 machines in operation across Australia Woolworths pubs and gambling venture, ALH, runs more poker machines than six of the largest casinos in Las Vegas combined.

And what it earns from its gaming arm has changed significantly in recent months.

According to one industry estimate, Woolworths is now on track to earn more than $200 million a year from gaming.

This means its gambling earnings will nearly match that of Australia’s fourth largest listed gaming operator, the Tabcorp spin-off Echo Entertainment.

The earnings boost has been triggered by changes to Victoria’s poker machine licence system in August, which smashed the monopoly of gambling giants Tabcorp and Tatts.

What was not known at the time is that the largest single beneficiary is Woolworths.

Woolworths’ ALH arm now

operates more than one-third of the poker machines in Victoria’s pubs – 4677 machines – which is about the maximum allowed under current licensing arrangements.

Last month Woolworths shareholders rejected a proposal by GetUp! and poker machine reformers for a $1 bet limit across the company. A 2010 Productivity Commission report on problem gambling suggested $1 bets as a way to help reduce problem gambling.

According to the investment bank Citi, Woolworths’ pubs and gaming group ALH generated $140 million in earnings before interest and tax last year. The new licence model in Victoria means it will generate an additional $72 million in annual earnings.

”Profitability … should increase dramatically as per the new arrangements,” a Citi analyst, Craig Woolford, said. ”Although tax rates are increasing, the biggest benefit goes to ALH [Woolworths].”

The big change is that the $2.6 billion spent annually on 27,500-odd poker machines in Victorian pubs and clubs will no longer be split between three parties.

Tatts and Tabcorp have been removed from the equation and the spoils are now split between the state government and the pubs and clubs which act as owner-operators of the machines on their premises.

Woolworths has committed to spending more than $164.3 million on poker machine entitlements and a further $26.2 million on new machines. Indeed, Woolworths now operates 16 per cent of the poker machines in Victoria when the 2500 operated by Crown Casino are included in the statewide figures.

”The $164.3 million amount is in effect paying for the [gaming machines] that we already have,” a Woolworths spokesperson said.

”The transition means that we now have to buy machines and maintain them.”

The Baillieu government expects to receive $1.12 billion from taxes on poker machines this financial year, but it faces more than $1 billion in legal claims from Tatts and Tabcorp over the decision not to compensate them for the loss of their licences.

The original release of this article first appeared on the website of Hangzhou Night Net.


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