Reef Casino Trust reported a 23.9% decline in half-year net profit due to higher regulatory and transaction costs, while announcing a recommended takeover bid at $3.72 per unit. The Trust declared a reduced distribution of 6.63 cents per unit.
- 23.9% drop in half-year net and distributable profit
- 6.63 cents per unit distribution declared, down from 8.71 cents
- Takeover bid agreed with Iris Cairns Property Pty Ltd at $3.72 per unit
- Regulatory costs and transaction expenses weigh on earnings
- Trust maintains strong balance sheet with $100.957 million in assets
Profit Decline Despite Stable Casino Revenues
Reef Casino Trust has reported a notable 23.9% decline in net profit for the half year ended 30 June 2025, falling to $1.65 million from $2.17 million in the prior corresponding period. This drop comes despite the Reef Hotel Casino complex generating slightly higher total revenues compared to last year. The key drag on earnings was an increase in regulatory costs, including a casino supervisory levy and expenses related to meeting new compliance requirements.
The Trust’s distributable profit, a non-IFRS measure used to determine unitholder distributions, also fell by the same margin to $3.3 million. Reflecting this, the board declared a distribution of 6.63 cents per unit, down from 8.71 cents a year earlier, continuing the policy of distributing 100% of distributable profit.
Takeover Bid and Board Recommendation
In a significant development, Reef Casino Trust executed a Takeover Bid Implementation Agreement with Iris Cairns Property Pty Ltd, proposing an off-market cash takeover at $3.72 per unit. The offer, valued at approximately $185.3 million in aggregate, has the backing of the Trust’s two major unitholders, Casinos Austria International and Accor. The board, including the Independent Board Committee, unanimously recommends unitholders accept the offer, subject to no superior proposals and regulatory approvals.
The takeover process is underway with Iris expected to lodge its Bidder’s Statement in August 2025 and dispatch it to unitholders in September, alongside the Trust’s Target’s Statement and an Independent Expert’s Report. The Trust has also received alternative proposals from an entity associated with Morris Group, which remain under consideration.
Operational and Regulatory Challenges
Operationally, the Reef Hotel Casino complex saw a mixed performance. While visitation remained steady with strong local and domestic support, international tourism has yet to fully recover to pre-pandemic levels. Electronic gaming revenues held firm, and table gaming revenues increased by 6.8%, though premium play declined due to fewer high-value players.
Costs rose notably due to new regulatory requirements stemming from the Casino Control and Other Legislation Amendment Act 2024 (Qld), which introduced higher supervisory levies and compliance costs. These factors, combined with transaction-related expenses linked to the takeover bid, reduced the rental income paid to the Trust.
Financial Position and Outlook
The Trust’s financial position remains robust, with total assets of $100.957 million and an undrawn debt facility of $12.999 million. Capital expenditure was carefully managed, focusing on gaming machines, technology upgrades, and property maintenance to sustain the complex’s appeal.
Looking ahead, the Trust anticipates ongoing challenges from inflationary pressures, regulatory changes, and the uncertain pace of international tourism recovery. However, increased airline capacity and cruise ship arrivals to Cairns offer potential growth opportunities. The Trust and its operator remain committed to maintaining a low-risk approach while exploring ways to enhance the complex’s profitability.
Bottom Line?
As Reef Casino Trust navigates regulatory headwinds and a pivotal takeover bid, investors will watch closely how these factors shape its next chapter.
Questions in the middle?
- Will the takeover bid by Iris Cairns Property Pty Ltd successfully complete amid regulatory scrutiny?
- How will ongoing regulatory costs and compliance requirements impact future profitability?
- What effect will the slow recovery of international tourism and online gambling trends have on the Trust’s rental income?