Crown Resorts expects to report full-year losses due to impact of covid

The Australian land-based casino operator Crown Resorts expects to report a major decline in earnings for the 2021 fiscal year due to the impact of the coronavirus pandemic.

Crown’s facilities have been closed for intermittent periods over the past 18 months as Australia’s states introduced measures and restrictions to curb the spread of the virus.

Crown to report losses for the year

In a trading update this morning, Crown Resorts revealed it expects to report full-year losses as a result of the coronavirus pandemic.

For the 12 month period ending 30 June 2021, Crown said that theoretical earnings before interest, tax, depreciation, and amortisation (EBITDA) before closure costs but before significant items are forecasted to be between AU$240m (£130.4m/US$180.4m) and $250m.

This means the operator expects its EBITDA to halve from the $503.8m posted in 2020.

The operator’s theoretical EBITDA after closure costs but before significant items is expected to be somewhere between $90m and $100m for the year.

Crown also explained that theoretical results have been adjusted to exclude the impact of variance from theoretical win rate on VIP program play at its casinos in Melbourne and Perth as well as Crown Aspinall’s casinos.

Additional costs incurred during the period are a result of spending while the operator’s casinos were closed due to lockdowns. This spending includes expenditure such as paying staff salaries while they were unable to work.

Crown’s facilities have been closed for intermittent periods over the past 18 months. Although the facilities have been able to operate, they have been forced to comply with strict operating measures such as social distancing protocols and capacity limits.

Looking elsewhere in the update, Crown predicts a statutory loss after tax for the full year. However, this figure is subject to review by the board, management, and external auditors.

Net debt for the year, which excludes working capital cash, is expected to be $900m. 

This includes a $450m project finance facility introduced last year to support the construction of Crown Sydney having been repaid from settlements to date from apartment sales at the location.

Crown expects to publish its full figures for the 2021 fiscal year on 30 August.

Looking forward

In addition to providing an update, Crown also provided a short look for its 2022 financial year and noted that several factors could impact performance.

According to the operator, the ongoing impact of the coronavirus pandemic as well as travel restrictions, such as the closure of Australia’s international borders, are likely to impact financial performance.

Crown also noted that ongoing regulatory processes could harm its financial performance further down the line.

Higher corporate spending related to regulatory cases, which includes spending on legal and consulting, could have a further impact on finances.

In May Crown Melbourne was hit with a $22.5m fine as part of measures outlined by the New South Wales Independent Liquor and Gaming Authority (IGLA).

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

Potential takeover on the horizon

Crown has also received several takeover bids from companies in the gambling space.

In March, the private equity giant Blackstone Group made an $8.02bn offer to acquire the remaining shares in Crown. Blackstone already owns 9.99% of the business after acquiring a stake from Melco in April 2020.

The offer was then increased to $12.35 per share in cash for each share in crown up from its previous offer of $11.85. However, Crown rejected the offer claiming it undervalued the operation.

Star Entertainment Group proposed a merger with the business to create an operation worth approximately $12bn. Crown has since requested more details to help make a decision. Last month, the investment management firm Oaktree Capital put forward a $3.1bn funding proposal but the operator has yet to reach a view on the offer.