UPDATE 2-Redmond quits Echo as Australian casino battle heats up

Wed Feb 5, 2014 12:48am EST

Related Topics

* H1 underlying profit up 1.3 pct to A$71.5 million

* CEO John Redmond to leave in May after 15 months in job

* Shares plunge 8 pct to record low of A$2.13 (Recasts with quotes, Genting interest)

By Maggie Lu Yueyang

SYDNEY, Feb 5 (Reuters) - Echo Entertainment Group Ltd chief executive John Redmond announced his retirement on Wednesday just over a year into the job, leaving the Australian casino operator to fend for itself in a turf war against Crown Resorts Ltd.

Redmond called it quits as Echo beat expectations with a slight uptick in first-half underlying net profit, and the veteran U.S. casino executive said he was leaving the company in "much better shape" than it was when he took the helm in January last year.

But investors sent Echo shares sharply down to a record low after they had already lost 34 percent on Redmond's watch, compared with a 52 percent gain for Australian billionaire James Packer's Crown over the same period.

Echo has come off second best so far in the fight against Crown for new casino licences on Australia's eastern seaboard, as the country aims to boost its slice of the $34 billion Asian gaming market from its current one percent.

Echo Chairman John O'Neill said in a statement that Redmond, 55, the former president and CEO of MGM Grand Resorts, had "established solid foundations" for future growth and had retired for personal reasons.

Redmond will be replaced in May by Matt Bekier, the chief financial officer and executive director who has been with Echo since it was carved out of Tabcorp Holdings Ltd in 2011.

O'Neill said there had been "no disputation whatsoever between the board and John" when he was quizzed about Redmond's departure during a media briefing.

CLSA gaming analyst Sacha Krien said however that the surprise move raised questions about Echo's future.

"It's not great for investor sentiment, the market will be asking why he's leaving if operations were about to turn around," he told Reuters.

Echo shares plunged as much as 8 percent to A$2.13 in afternoon trade, their lowest since the company's June 2011 listing.

The company earlier said underlying net profit in the six months to the end of December, excluding significant items, rose 1.3 percent to A$71.5 million ($63.60 million), slightly above five analysts' forecasts of A$65.9 million.

Net profit was A$46.1 million compared with A$66.5 million the previous year, hit by one-off expenses and a lower win rate in the VIP business.

ASIAN GAMBLERS

Echo, which counts Southeast Asia's biggest gaming group Genting Bhd among its major shareholders, has come under mounting pressure since it lost a campaign last year to retain its exclusive casino licence in Sydney.

Lawmakers agreed to grant a second gaming licence to Crown, which is planning to open a high-roller facility targeting wealthy Chinese gamblers on Sydney Harbour in 2019.

The fight has now shifted north to the Queensland state capital Brisbane, a gateway for tourists to destinations like the Gold Coast and the Great Barrier Reef. Echo has the sole casino licences in Brisbane and the Gold Coast.

Crown announced plans to build a new A$1.5 billion casino, hotel and retail complex in Brisbane after the Queensland government said it would seek expressions of interest for a second casino development in the city, one of three new licences it has said it will put out to tender for the state.

Echo responded by promising to invest A$1.5 billion to transform its Treasury Casino and hotel in central Brisbane and its Jupiters casino on the nearby Gold Coast into two integrated resorts.

The company sold its Jupiters Townsville hotel complex in northern Queensland last month to Colonial Leisure Group for A$70 million to concentrate on the Brisbane market.

Malaysia's Genting sees Echo as a vehicle to grow its footprint in Australia and is waiting for regulatory approval to increase its stake above 10 percent.

Even so, analysts are watching for any signs that Genting will go it alone in Brisbane, a move that would be seen as a blow for Echo.

"It would suggest Genting is no longer interested in owning Echo outright, a clear negative for investors in Echo," CLSA's Krien said.

Genting representatives were unavailable to comment. ($1 = 1.1242 Australian dollars) (Additional reporting by Farah Master in Hong Kong; Editing by Stephen Coates)

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