Crown Resorts flags lockdown, royal commission hits

Covid lockdowns and the cost of inquiries in three states have Crown Resorts staring down the barrel of a full-year loss.

Crown’s casino in Melbourne is currently the focus of a royal commission. Picture: Penny Stephens

Intensifying regulatory scrutiny and the cost of a corporate and cultural overhaul are combining with the lingering impacts of Covid-19 to hit Crown Resorts’ earnings, with the casino giant flagging a loss for the full financial year.

In a trading update on Monday the James Packer-backed group said earnings across its casinos in Australia and its casino in the UK were hit by rolling Covid-19 lockdowns and social distancing requirements.

“Crown’s results for the 2021 financial year were significantly impacted by the Covid-19 pandemic, with Crown’s properties closed for various periods of time and Covid-19 related operating restrictions applying throughout the period, including capacity limits and physical distancing protocols,” the company told the ASX.

For the 2021 financial year, the Crown said it expected to report theoretical earnings before interest, tax, depreciation and amortisation (EBITDA) before closure costs and significant items of between $240m and $250m, and theoretical EBITDA after closure costs and before significant items of between $90m and $100m.

That is sharply lower than Crown’s reported EBITDA of $504.6m in the 2020 financial year, which was also affected by the pandemic, and $849.7m in the year before.

Crown also said it expected to report a statutory loss after tax for the year, subject to final review by the board and external auditors.

In the 2020 financial year Crown recorded a net profit after tax of $79.5m, with its earnings hit by the initial and more severe Covid-19 lockdowns in that period.

In the trading update Crown outlined a number of other non-Covid-19 factors affecting its upcoming result, all of which have sprung from the royal commissions into the company in Victoria and Wesern Australia, and a costly reform program to regain its suspended casino licence in NSW following the findings of the Bergin Inquiry.

The company is also facing enforced investigations from financial crime regulator Austrac.

“The outcome of those regulatory processes may potentially impact Crown’s financial performance,” the company said.

“Crown also expects to incur increased corporate costs throughout the 2022 financial year, including legal, consulting and associated costs, while these regulatory and any resulting processes continue.”

As part of a bid to regain its NSW licence and prevent regulatory action elsewhere, Crown has been boosting resources and capabilities across key areas like the anti-money laundering and counter terrorism financing department and the responsible gaming department.

Crown said around 70 full-time employees were being recruited in these areas, adding further to the company’s cost base.

But revenue will also take a hit at the same time, with increased focus on money-laundering risk has also encouraged Crown to review and then sever its association with many domestic high rollers.

“Crown’s ongoing review of its top-end local players is resulting in the exit of a number of customer relationships,” the company said.

One bright spot in the trading update was an improvement in its debt profile due to the sale of luxury apartments at the Crown Sydney complex.

Crown’s net debt is expected to tick up only slightly from $891.5m to approximately $900m at the end of the 2021 financial year. Meanwhile a $450m project finance facility put in place to support the construction of Crown Sydney has been completely repaid.

Crown shares closed down 1.7 per cent on Monday, at $11.72.