Endeavour seeks to get ahead of Victoria’s pokie reforms after $1bn hit to market value

The hotel and pokie operator will cut opening hours for pub machines in response to sweeping Victorian reforms that spooked investors and saw $1bn wiped from its market value.

Endeavour Group will slash the opening hours for its pub poker machines in an attempt to get ahead of sweeping reforms from the Victorian government, after it lost more than $1bn from its market value earlier this week.

The company, which was spun out of Woolworths in 2021 and also owns Dan Murphy’s, will close its pokie venues from 4am to 10am by August 31 – 10 months earlier than the timeline flagged by the Andrews government.

Endeavour chief executive Steve Donohue said the group also supports the launch of $100 cash load limits and slower spin rates on the machines. But he called for greater co-ordination between states and territories to introduce national reform to minimise problem gambling and boost anti-money laundering activities.

His comments come after Endeavour’s biggest shareholder Bruce Mathieson said on Monday that Premier Daniel Andrews was seeking to change the terms of pokie leases midway through contracts.

It is hoped that the company taking a more proactive approach to gambling reform will reduce uncertainty, which has not only spooked Endeavour’s share price but the broader hotel market, given its reliance on pokie revenue.

“It’s taken us a couple of days to digest the announcement and think about what the best thing to do is being a national operator,” Mr Donohue said.

“In the case of opening hours, for example, the proposed times are aligned with those already operating in NSW, with standard operating hours in NSW and South Australia.

“We just think there’s an opportunity to go again on what are the most effective measures that we can all implement for the best outcomes.”

After its shares fell 10 per cent on Monday – blasting more than $1bn from its market capitalisation – Endeavour traded 0.3 per cent higher on Thursday but was down 5.6 per cent for the week.

E&P analyst Phillip Kimber said the share price fall suggests that about 20 per cent could be wiped off Endeavour’s pokie revenue.

The Victorian government is seeking to minimise problem gambling through sweeping reforms.

“Adjusting the hotel earnings to get the current share price requires about $130m lower hotel earnings (EBITDA/EBIT). Based on the sensitivity analysis … this implies about 20 per cent reduction in EGM (electronic gaming machine) revenue across the group,” Mr Kimber wrote in a note to investors.

“In our view, EDV’s share price is now factoring in relatively bearish outcome for

EGM reforms.”

Victoria is Endeavour’s biggest pokie market, with about 4700 machines. Mr Kimber said every 1 per cent decline in pokie revenue resulted in $8.6m in lost sales for the group.

While the Victorian government’s announcement caught the industry somewhat by surprise, pokie reform has been emerging as one of the biggest issues in the gaming sector, forming a centrepiece of former NSW premier Dominic Perrottet’s re-election campaign earlier this year.

He ultimately lost in a significant swing to the ALP, with NSW Premier Chris Minns opting for a cashless gaming trial instead of permanent reform. But given Victoria’s stronger stance, some in the industry believe it will prompt NSW – which is one of the world’s biggest pokies markets with more than 100,000 machines, almost the combined tally in Australia’s other states and territories – to take tougher action.

Mr Kimber said the most material of the Victorian government’s proposed changes was mandatory pre-commitment limits via what is known as carded play.

“The other initiatives are likely to have a smaller impact eg load up limits are coming down into line with Qld and SA, Endeavour already has 3 second spin rates etc.”

But Mr Donohue said Endeavour’s hotels already offered carded play and voluntary pre-commitment on all its poker machines nationally and has “long demonstrated its willingness to conduct trials, including the proposed NSW Digital Wallet trial”.

“We have now written to state governments to seek a more co-ordinated and collaborative approach to these matters and to ensure knowledge is shared across all states and territories when it comes to important proposals for digital, carded or cashless solutions, and facial recognition technology

“There are a number of initiatives either being trialled or proposed in different jurisdictions, and we believe this represents an opportunity to take the lessons from each to help co-ordinate a national approach that strengthens harm minimisation and anti-money laundering initiatives in hotels Australia-wide.

“As part of this, we will continue to explore international examples and emerging technologies to guide the development of the most effective tools to continue to minimise harm and address risks associated with money laundering.”