Crown sees $141M loss in 2021 H2 amid pandemic restrictions, legal expenses costs

Casino giant Crown Resorts announced on Thursday a third consecutive half-yearly loss amid pandemic-related restrictions which continue to hurt its operations. For H1 2022, Australia’s biggest operator posted a net loss of A$196.3 million ($141.2 million) for the six months ended Dec. 31, compared with a loss of A$120.9 million a year earlier.

The company further posted an EBITDA loss of A$47.5 million ($34.1 million), down from a profit of $4.4 million in the prior comparable period. Closure costs for Crown Melbourne, Crown Perth and Crown Sydney amounting to $79.2 million ($57 million) were faced during the period, as the properties shut down due to Government direction.

“Crown’s first-half performance reflects the continued challenging operating conditions as a result of COVID19 as well as the impact of ongoing regulatory matters,” admitted Crown’s Managing Director and Chief Executive Officer, Steve McCann.

However, McCann says that while the operator does not underestimate current headwinds faced, “there is growing confidence” the industry is turning the corner. All three of Crown’s domestic resorts are back open, with a vaccination strategy against Covid-19 in place for both staff and the wider community.

Crown Casino Melbourne

“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,” added the CEO. “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.”

The operator claims that, in Victoria, the business is working “in a collaborative and constructive manner” with a government-appointed Special Manager and the Victorian Gambling and Casino Control Commission. The manager was appointed to oversee all operations after a Royal Commission found the business engaged in illegal conduct.

The decision to appoint a supervisor was taken after the Royal Commission found that removing Crown’s license would be highly hurtful to the Victorian economy and third parties. In a filing with the ASX, officials for the company pledged to build a safe and responsible gaming environment at Crown Melbourne as the business seeks “to re-establish suitability” to hold a license.

Crown also issued an update on hearings with the Perth Casino Royal Commission, which have now concluded. The gaming giant now awaits a final report, which is due to be provided to the Western Australian Government “in early March.”

Crown CEO Steve McCann

“At Crown Sydney, we have been encouraged by the demand for our first-class restaurants and hotel when non-gaming operations have been open,” explained McCann. The Sydney venue opened in December 2020 but without gaming offerings amid governance failures detected by the Independent Liquor & Gaming Authority (ILGA).

Since then, the company has been holding discussions with the regulator as it works towards the opening of gaming. Whilst no official opening date has been confirmed yet by the ILGA, Crown is aiming to announce the debut of the gaming floor “shortly.”

“Crown has world-class assets with a global reputation for premium service and talented people, and our comprehensive reform program will help build a stronger, more sustainable business,” the company describes itself in H1’s report. It comes amid news earlier this month that Crown’s board has shown unanimous support for a Blackstone $6.3 billion buyout offer.

According to the Australian operator, the deal “reinforces the underlying value and attractiveness” of its business and assets. The report, again, highlights the transaction would be “a good outcome for shareholders,” an argument also leveraged upon announcement of the buyout offer on Monday.

Crown Sydney

While Crown Melbourne was closed for a large part of the first half and Crown Sydney also faced significant disruption from Covid-19 during the period, the company says that, upon recommencing of operations in late 2021, the venues have experienced “improving trends” as restrictions eased.

In particular, Crown Sydney posted “impressive average room rates” and “encouraging demand” for food and beverage. However, certain operational constraints and limited domestic and international travel continue to weigh on overall financial performance.

As expected, material costs driven by legal expenses associated with the company’s various regulatory processes also took a toll on Crown’s finances, along with the impact on trading performance amid the emergence of the Omicron variant in the country, which led to reduced patronage during the period.

“Whilst these near-term challenges are currently impacting business performance, we remain confident in the long-term outlook for the business as we embed the reforms contained in our remediation plan and normal consumer patterns return as society learns to live with the virus,” said Crown’s Chief Financial Officer, Alan McGregor.

Crown is not the only Australian operator taking a hit from Covid. Also this week, Star Entertainment Group posted a net loss of A$74 million ($53.2 million), down from a profit of A$64.2 million the prior period, amid pandemic-related measures including property shutdowns, operating restrictions and border closures.