Packer will be parched as Crown’s dividend drought likely to drag on

Whether James Packer is exercising any influence over Crown Resorts will be put to the test on Thursday when the casino giant releases its half year result - more particularly when it announces its dividend.

Packer’s 37 per cent stake in Crown is his largest investment and the dividend it yields is his major source of income.

The billionaire is renowned for his extravagant lifestyle and would not be enjoying the dividend drought.

The billionaire is renowned for his extravagant lifestyle and would not be enjoying the dividend drought. Credit: Getty/Nick Moir

In the second half of the 2020 financial year, Crown didn’t declare a dividend. Like other COVID-ravaged businesses it was hoarding its capital having lost about $60 million in the six-month period despite receiving more than $100 million from Jobkeeper.

Crown did pay a dividend in the previous six months in the period to December 2019. While Crown had made healthy profits during this pre-COVID period, the actual dividend was paid in April 2020 - at a time when the first wave of the pandemic was decimating its cash flow and its Melbourne facility was mostly closed.

Other companies took a different approach and cancelled their payments to shareholders.

In theory at least this will be the first result under the new Crown regime - one where the board is independent of any influence from Packer who won’t even have a representative on the board.

The market is expecting Crown to report a loss of around $130 million for the half to December 2020 and isn’t looking for a dividend to be declared.

Crown’s Sydney rival, The Star’s earnings will also suffer from COVID however not to the same degree as its facilities were open (albeit with social distancing restrictions) for most of the June to December period.

Investors will also be keen to hear about the state of Crown’s balance sheet which was fortified last year after it did a deal with financiers to secure $1 billion of additional debt facilities.

It also entered the calendar year 2020 in a robust financial position. This removes the threat of any near term need for the company to dip into the equity markets - a move that would not suit Packer.

Crown will now need to rely heavily on selling the remaining apartments at Barangaroo - progress on which should be updated on Thursday.

In the meantime, the market has taken the view that the result for the six months to December 2020 is largely irrelevant given the interruptions to trading.

Rather investors are looking for evidence that Crown is working towards becoming suitable to hold a licence in NSW. But this will be largely up to the NSW regulator to determine.

One minor sticking point may be Harold Mitchell’s continued membership of the Crown board. Despite calls for his resignation, the well-known former advertising tsar has refused to budge.

Harold Mitchell’s heels are dug in at Crown.Credit: Eddie Jim

He is apparently of the opinion that he was viewed more favourably by Patricia Bergin’s Commission of Inquiry than other Crown directors including Andrew Demetriou and the then-chief executive Ken Barton.

Given Bergin’s excoriating assessment of Demetriou and Barton this is not a tall bar.

In Mitchell’s case, Bergin recommended that he step down if a civil penalty or declaration was made against him regarding breaches he made as a director of Tennis Australia.

Despite all this intense pressure Mitchell is determined to work out the remainder of the financial year and leave at the annual general meeting.

Philip Crawford, the chairman of the NSW regulator, has called on Mitchell to “depart now”, while the Victorian casino regulator is investigating his suitability to remain on the Crown board.

Despite all this intense pressure Mitchell is determined to work out the remainder of the financial year and leave at the annual general meeting. If Mitchell is relying on Crown shareholders for support, he may find a dry well.

Packer has already indicated that he is steering clear of this mess. Despite Mitchell’s previously cosy relationship with Packer, it would not be in his interest to support Mitchell if regulators were concerned.

The same can be said for Crown’s chairman Helen Coonan and other directors who are busy working on operation clean-up. They have remained remarkably silent on the issue. And independent shareholders want to remove impediments that would risk Crown’s licence in any jurisdiction.

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