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Crown profits down amid declining high-roller revenue

Glenn Freeman  |  23 Feb 2017Text size  Decrease  Increase  |  

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Casino operator Crown Resorts has announced declines across the business for 1H17, as net profit and revenue fell 9 per cent and 12 per cent, respectively.


Casino operator Crown Resorts (ASX: CWN) has announced declines across the business for the first half of fiscal 2017 (1H17), as net profits after tax and revenue fell 9 per cent and 12 per cent, respectively.

Crown reported normalised NPAT--adjusted for variances in VIP win rates, gaming taxes, commissions and other expenses--of $191 million for the half-year to 31 December 2016, down from $210 million a year earlier.

Normalised revenue of $1.4 billion for its Australian resorts business was down from $1.8 billion in 1H16.

Across the company, earnings before interest, taxes, depreciation and amortisation (EBITDA) of $402 million for 1H17 were down 5 per cent on the same period in FY16.

Management attributed much of the blame for the year-on-year decline to reduced VIP revenues from its Australian casinos, down more than 45 per cent for the period. Main floor gaming revenue of $854 million was down just under 1 per cent.

"Crown's Australian operations' first half-result reflected difficult trading conditions," said executive chairman, John Alexander.

Crown Melbourne and Crown Perth delivered normalised EBITDA of $303 million and $135 million for the half, respectively--a decline of just under 14 per cent and a modest 4 per cent gain on the previous corresponding period. Again, these falls are attributed primarily to falling VIP revenue.

In its offshore operations, Crown Resorts' sell-down of its stake in Melco Crown also continued during 1H17, with further divestments at the end of 2016 reducing its total holding to 11.2 per cent.

"We see the reduced exposure to Melco Crown as a positive, as it reduces exposure to the volatile Macau gaming market, and an uncertainty around Chinese policies towards gaming," Morningstar equity analyst Ravi Reddy said in December 2016.

He also noted the "side benefits" of lower gearing and reduced development risk.

In addition, Crown Resorts group managing director Rowen Craigie announced he would step down from his role at the end of February, largely in response to Crown's significantly reduced interests in Melco Crown.

According to management, Craigie's responsibilities will be assumed by the executive chairman, John Alexander, under "a simplified organisation structure reflecting the changed focus of Crown's business".

Crown previously announced its intention to put some of the proceeds from the Melco sell-down towards debt reduction and capital management initiatives. In line with this, it has announced a $500-million on-market share buyback, an interim dividend, and a special dividend.

In addition to an interim dividend of 30 cents a share, Crown shareholders will receive a special 83-cent dividend--which will be paid together with the interim dividend.

Crown's share price was $12.29 in late afternoon trade on 23 February, up 7.8 per cent.

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Glenn Freeman is Morningstar's senior editor.

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