Crown half year profit cops double hit from VIPs and coronavirus

The coronavirus outbreak and big slump in VIP gambling have double-teamed Crown and sent its profit tumbling.

Crown Resorts new Chair Helen Coonan with new CEO Ken Barton in the Crystal Club at Crown, Melbourne. Picture: David Geraghty.

High-rollers are tightening their belts at Crown Resorts, with the casino group posting a 34.2 per cent slump on its VIP program play turnover as it battles soft market conditions and feels the brunt of travel restrictions from the deadly coronavirus.

Revenue from Crown’s Australian VIP program plummeted to $13.1bn for the six months to December 31, while main floor gaming revenue was flat at $872.9m.

Crown chief executive Ken Barton, who was appointed last month, also cited negative publicity from the upcoming NSW Independent Liquor and Gaming Authority inquiry as also weighing on high-roller turnover.

“The business (has been) impacted by a continuation of softer market conditions, exacerbated by recent negative publicity,” Mr Barton said.

“However, during the period we benefited from an above theoretical win rate on VIP program play turnover, with actual VIP program play revenue up 9.2 per cent on the prior year.”

Mr Barton said travel restrictions from the coronavirus had also hit the group and it was continuing to closely monitor the outbreak of the virus, which has killed more than 1700 people and infected tens of thousands more.

“Crown has recently experienced softer trading conditions as a result of travel restrictions and general community uncertainty in response to the Covid-19 (coronavirus), particularly over the lunar new year period.”

Underlying earnings before interest, taxes, depreciation, and amortisation for Crown’s Australian resorts performance declined 9.7 per cent to $390.4m.

Morgan Stanley analysts Elise Kennedy and Andrew McLeod said “a weaker Asian macro backdrop makes outperformance in VIP challenging for domestic casinos”, including Crown.

“The domestic mass market remains relatively soft as domestic consumer spending and sentiment remain fragile,” the pair wrote in a note to investors.

Overall, Crown Resort’s underlying net profit declined 11 per cent to $172.7m.

Mr Barton was appointed as chief executive in January after John Alexander stepped back from running the casino business. Mr Alexander’s role was split, with Helen Coonan appointed as chair and Ken Barton as chief executive ahead of the NSW inquiry, which starts next week.

Mr Barton said Crown was fully co-operating with the inquiry, the first hearing of which is scheduled for February 24 and will focus on the “vulnerabilities of casinos to money laundering”.

“We operate in one of the most highly regulated industries and Crown is committed to improving our processes and systems in every respect.

“We look forward to working with regulators on any recommendations that may follow.”

Crown will pay an interim dividend of 30c a share on April 3.