Crown revenue grows but net loss widens in H1 ahead of Blackstone deal

| By Marese O'Hagan
Crown Resorts has reported revenue of AU$780.9m (£413.0m/€494.9m/$563.3m) in its half-year results for the six-month period ended December 31 2021, up by 34.4% from H1 of the previous year, but losses grew ahead of its acquisition by Blackstone.

Crown’s overall theoretical revenue, which is adjusted to exclude variance in win rate for VIP play by assuming an average win rate instead, was slightly lower at AU$778.6m. This was a rise of 34.0% year-on-year.

A majority of the revenue was generated by Crown Perth, amounting to $402.9m – a 1.5% decrease year-on-year. Most of this was made up of wagering and non-gaming revenue, at $166.4m. Main floor machine revenue totalled AU$157.2m, while main floor tables generated AU$79.3m.

This was partly due to the fact that Crown Perth was closed the least amount of time during the novel coronavirus (Covid-19) lockdowns, being shut only from 1 July 2021 to 5 July 2021.

For Crown Melbourne, which was closed for 96 days in the half-year, revenue came to AU$265.0m. This was a year-on-year rise of 172.9%. Main floor table revenue added up to AU$115.2m. Wagering and non-gaming revenue was AU$77.4m and main floor machine revenue totalled AU$72.4m.

Crown Sydney made AU$36.1m, all of which was generated from non-gambling means, as it has not yet received permission to open its casino. This was a significant increase of AU$35.2m from H1 2021. The venue was closed for 102 days in the half-year.

Crown Aspinalls in London, which is the only Crown venue with VIP revenue, brought in AU$7.9m. VIP play accounted for AU$7.4m of this, while wagering and non-gaming made up the remaining AU$500,000.

As Crown Aspinalls was the only venue to generate VIP revenue, it was the only site affected by the difference between theoretical and actual revenue. Its theoretical revenue was AU$5.6m.

Wagering and online revenue came to AU$69.5m in revenue, a decrease of 12.7% year-on-year.

In total across the group, wagering and non-gaming accounted for AU$349.9m of the overall revenue. Main floor machines generated AU$229.5m and main floor tables made AU$194.5m. VIP programme play made up AU$5.1m. Intersegment adjustments led to the elimination of AU$900,000.

The earnings before interest, tax, depreciation and amortisation (EBITDA) before closure costs and other significant items costs was recorded at AU$28.8m. These closure costs came to AU$113.1m, with income from other significant items generating AU$39.1m. As a result, the business made a loss of AU$45.2m before interest, tax, depreciation and amortisation.

Depreciation and amortisation expenses hit AU$115.1m and asset impairment costs were AU$31.8m. This left a loss before interest and tax of AU$232.1m.

After considering theoretical adjustments, income tax benefits, equity accounted shares and net interest, the overall net loss for the half-year came to AU$196.3m. This was $75.9m more than the amount lost in H1 of 2020-21.

“Crown’s first-half performance reflects the continued challenging operating conditions as a result of Covid-19 as well as the impact of ongoing regulatory matters,” said Steve McCann, who became managing director and chief executive of Crown during H1.

“Importantly, we continue to build momentum on our company-wide reforms, accelerating work on our remediation plan and making significant advances across multiple regulatory processes. Not only are we building a stronger business, we are working well with the regulators with a priority to deliver a safe and responsible world-class gaming operation.”

Earlier this week Crown accepted a takeover bid of AU$8.9bn from investment management group Blackstone Inc after its board unanimously accepted the proposal. This came almost a year after Blacktone’s initial bid of $8.02bn and is an increase of over $845m on that sum.

As part of the acquisition Blackstone will pay $13.10 in cash per share, an estimated premium of 32% from the closing share price on 18 November 2021, Crown’s final day of trading before Blackstone’s proposal.

In October last year Crown resorts was found to be “unsuitable” to operate Crown Melbourne in in Victoria following an investigation by the state’s Royal Commission. However Crown did not lose its licence, due to the potential economic repercussions for Victoria.

As a result of this Crown must adhere to special measures, including adhering to 33 recommendations made by the commission.

“In Victoria, we are working in a collaborative and constructive manner with the special manager and his office, as well as the new regulator, the Victoria Gambling and Casino Control Commission, to ensure that we build a safe and responsible gaming environment at Crown Melbourne as we seek to re-establish our suitability to hold a casino licence in Victoria,” continued McCann.

This investigation came as a result of the Bergin Inquiry in New South Wales, which was launched in August 2019. The inquiry assessed Crown’s eligibility to receive a casino licence in Sydney, ultimately deeming it “unsuitable”. However, it said it may still be permitted to operate the casino following implementation of its reforms.

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