Echo Entertainment Chief Executive John Redmond has resigned after a little more than a year on the job in the wake of second-half results showing that profits at the embattled Australian casino operator had fallen more than 30%.
The drop in net profit to A$46.1 million was largely due to a $15.5 million one-off cost from restructuring some of the company’s financial arrangements late last year. Excluding that the company made $71.5 million, an increase of 1.3% year on year. But it came through extensive cost-cutting, which saw operating expenses down 4.5 per cent.
Gross revenue dropped 7.3% to $901 million, which the company attributed to weak consumer sentiment. Gross revenue from VIP gambling was down 9%. Pre-tax earnings at The Star casino in Sydney, the company’s flagship, were down 5.7% to $90 million.
It’s been a tough year all the way around for Echo and Mr Redmond. The American stepped in last October, succeeding another American, Larry Mullin, who resigned amidst an aggressive bid by rival James Packer to take control of the company at the same time that Mr Packer’s Crown Resorts was seeking approval for a competing casino in Sydney, where Echo had held an exclusive license. Mr Mullin quit not long after Mr Packer engineered the ouster of Chairman John O’Neill’s predecessor, John Story, and Mr Redmond came in just as Mr Packer secured the tacit support of New South Wales Premier Barry O’Farrell for his $1.3 billion Crown Sydney across Darling Harbour from The Star. Mr Packer was awarded the license last June after Echo’s counter offer to invest in a major expansion at The Star was dismissed by a panel Mr O’Farrell had appointed to decide the issue of a second license in Australia’s largest city.
In Queensland, where pre-tax earnings fell nearly 30% in the half-year, Echo similarly is having to defend its historical dominance of the market against potential rivals following a decision by the government there to open up the state to at least three more casinos. Echo is pitching the state on a new destination-scale resort to replace its aging Treasury Casino in Brisbane, where Crown is lobbying heavily for one of the licenses. Overseas developers also have expressed interest, and it’s possible Echo’s Jupiters Gold Coast will lose its monopoly in that market as well.
On the plus side, the company has managed to get $70 million for its Jupiters Townsville casino on Queensland’s northern coast in a sale to hospitality company Colonial Leisure Group, and Mr Redmond described the start of the new financial year as “encouraging,” with revenue up across all properties in January, although he declined to give figures.
Mr O’Neill said Mr Redmond will return to the United States following a three-month transition period in which CFO Matt Bekier will take over the reins.
Mr Bekier, a former CFO of Tabcorp, moved to Echo following its creation in 2011 in a spinoff of the betting giant’s casino assets.
“Matt knows the company and the Australian market exceptionally well and has been working closely with John in re-establishing a path towards profitable growth,” Mr O’Neill said. “The board is confident that Matt is the right person to lead the group forward.”
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