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Crown expects statutory full-year loss amid Covid-19 impact

| By Robert Fletcher
Australian land-based casino operator Crown Resorts expects to report a sharp decline in earnings for its 2021 financial year, due to the impact of novel coronavirus (Covid-19) on the business.

For the 12 months to 30 June 2021, Crown said theoretical earnings before interest, tax, depreciation and amortisation (EBITDA) before closure costs but before significant items is forecast to amount to between AUD$240m (£130.4m/€152.2m/US$180.4m) and $250m. This means it is expected to halve, compared to $503.8m in the previous year.

Theoretical EBITDA after closure costs, but before significant items, is expected to come in at between $90m and $100m for the financial year.

Crown noted that theoretical results have been adjusted to exclude the impact of variance from theoretical win rate on VIP program play at its Melbourne, Perth and Crown Aspinalls casinos. The theoretical win rate is the expected hold percentage on VIP program play over time. 

The additional costs incurred during the year relate to spend while Crown’s gaming facilities were closed as a result of government-enforced Covid-19 rules, such as paying staff salaries while they were not working.

Crown’s properties have been closed for intermittent periods over the past 18 months as states in Australia sought to slow the spread of Covid-19. While the facilities were able to open, they have been faced with strict operating measures such as capacity limits and social distancing protocols.

Aside from a decline in EBITDA, Crown also said it expects to report a statutory loss after tax for the full year, though this result remains subject to review by the board and management, as well as external auditors as part of normal year end processes.

Net debt for the year, excluding working capital cash, is expected to amount to $900m by the end of the financial year, with a $450m project finance facility put in place last year to support the construction of Crown Sydney having been repaid from settlements to date from apartment sales at the site.

Crown intends to publish the full results for its 2021 financial year on 30 August.

Meanwhile, Crown also provided a short outlook for its 2022 financial year, noting that a number of factors are expected to impact its financial performance.

These include the ongoing impact of Covid-19-related closures and operating restrictions, as well as travel restrictions such as the closure of Australia’s international borders. Crown also said its ongoing review of top-end local players is resulting in the exit of a number of customer relationships, and this too could impact performance.

In addition, Crown noted the potential impact of ongoing regulatory processes, saying the outcome of these could harm its financial performance. Higher corporate spending related to these cases, including legal, consulting and associated costs, could also impact financial results.

In May, Crown Melbourne was ordered to pay a total of $22.5m as part of measures set out by the New South Wales Independent Liquor and Gaming Authority (IGLA).

Crown must pay $12.5m towards the inquiry, and also pay an annual Casino Supervisory Levy of $5.0m in both FY2021 and FY2022, after the regulator found Crown “unsuitable” to operate a casino in the Barangaroo district of Sydney in February. 

The operator may pay a further levy in FY2023, but this is “subject to further consultation”.

Crown is also currently the subject of a number of takeover bids from several parties.

Private equity giant Blackstone Group in March put forward an offer of $8.02bn to acquire the remaining shares in Crown, having already acquired 9.99% of the business in April 2020 with the purchase of a stake from Melco.

Blackstone then increased its offer to $12.35 in cash for each Crown share, up 4% increase on the previous offer of $11.85 per share submitted, but Crown rejected this proposal, saying the offer undervalued its business

Australian land-based operator Star Entertainment Group also put forward a proposal to merge with Crown and create a combined operation worth approximately $12.00bn. Crown has requested more information on the offer before it makes a decision.

In addition, alternative investment management business Oaktree Capital Management last month put forward a funding proposal worth $3.1bn. Crown’s board has not yet formed a view on the proposal.

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