MGM Eyes Major Financial Goals For 2021

MGM Resorts, one of the Las Vegas greats of the casino industry, has big things in store and the time is nigh for them to take the first step towards realization, as the operator leviathan heralds huge restructuring with the key aim of increasing earnings in two years’ time.

Specifically, the company’s leadership seeks to enlarge the operating gross profit by another $300 million (at least) through centralisation of some business functions and investment in technology – all in the name of maximizing profitability.

As the plan is currently being laid out and should be in full swing during next year, the programme is officially known as MGM 2020.

Upping the Ante

The annual objective for 2020 is to have the revenue before interest, tax and amortization increased by $200 million by the year’s end and then add another $100 million by the end of 2021…

…or, as Jim Murren , chairman and CEO discusses, MGM 2020 intends to transform the way company operates and to “leverage the most effective operational architecture.”

He adds: “Today, we are taking the next step in our evolution as an organisation. We are building on the strong foundation that we have solidified over the past few years, to deepen our efficiencies and achieve sustained growth and margin enhancement.”

Several years back saw the operator constantly re-adjust functions across the company and focus on developing operational expertise. These initiatives will serve as a springboard to inflate profitability and liquidity. Executives estimate that approximately 50% of $200 million in additional profits will be created through layoffs. 25% will come from displacing some functions to different business segments. Revenue optimization is supposed to account for the remaining quarter of profits.

A Five-Year Plan

In August 2015, MGM came up with the Profit Growth Plan which was the “spiritual” source of MGM 2020 – its organic extension. Murren mentioned that business success already surpassed the original objectives of that plan.

By investing in technology, the operator means and intends to “reallocate a portion of its annual capital expenditure budget to a number of technology projects” but also to invest in digital, data and loyalty programmes.

Murren rounded off the story of this scheme by saying: “We had a solid finish to the year in 2018, and as we look to 2019 and beyond, we remain confident in the ramp of our newly opened properties MGM COTAI, MGM Springfield, Park MGM and NoMad Las Vegas.”

Weird Stuff in NY

He also commented on MGM’s pursuit of integrated resort opportunity in Japan, as well as entries to markets of Ohio and New York

…and the latter is especially interesting, for several reasons. Firstly, New York is lagging behind other states with their own sports betting legislation, causing operators to miss out on the enormous opportunity that a massive market such as this one presents.

Secondly, the announced purchase of Empire City Casino, that was due to be finalized last week, was put on hold when members of the NY Gambling Commission missed out on the scheduled meeting and were forced to postpone the acquisition until further notice.

Source:

“MGM launches efficiency drive to achieve 2020 vision”, igamingbusiness.com, January 4, 2019.

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