Crown Resorts’ profit falls as high-roller business weakens
James Packer-backed Crown still confident about its Barangaroo project, despite an alarming drop in high-roller turnover.
The James Packer-backed Crown Resorts says it remains confident in the business case for its $2.2 billion Barangaroo development in Sydney, despite an alarming slump in VIP turnover at its Australian casino properties which slashed half year net profits by 27 per cent to $174.9 million.
VIP turnover at Crown fell 12.2 per cent to $19.9 billion in the half, dragged down by a soft November and December period. By comparison the VIP result for the final months of 2017 was bolstered by big house wins against a small number of high rollers.
At Crown’s flagship casino in Melbourne, turnover from foreign VIP gamblers in the last half was down 11.2 per cent to $17.3 billion. In Perth it was down 18.5 per cent to $2.6 billion.
Main floor gaming revenue increased by 0.9 per cent, with modest revenue growth in Melbourne offset by continued softness in Perth.
But executive chairman John Alexander stressed the business case for the Crown Sydney project at Barangaroo, which is due to open in the first half of 2021, would be underpinned by both local and foreign VIPs.
“Two years is a huge amount of time in this particular business. The important thing to understand about Barangaroo is that it is not a property based solely on international VIPs. If
anything, since we did the business case we believe the local VIP market is growing,’’ he said.
Casinos across the Asian region, including in Macau and Singapore, have been hit by softening economic growth in China and ongoing concerns about a trade war between China and the United States which has cut the spending of Chinese gamblers.
After 19 of its staff were arrested in China at the end of 2016, Crown has moved its Chinese base to Hong Kong and is now relying largely on junket operators who charge significant commissions for its VIP business.
Crown chief financial officer Ken Barton said the company had experienced a “reasonable” number of visitors from China in the six months to December 31, “but their spend is down.”
He also said the company had “reasonable bookings” for the important Chinese New Year period in the second half of January, but that the trend of the previous two months was continuing with strong visitation numbers and weaker spending.
Mr Alexander added: “Chinese people, like Australians, are suddenly feeling a bit poorer than they were.”
But Mr Barton said Crown was heartened by the bigger picture in VIP gaming, which he said would underpin the Crown Sydney development.
“We look at longer term trends. It is still a very substantial VIP market across the region. Are we going to see bumps maybe every two, four, six and 12 months, yes, but the fundamental premise of Chinese gamblers being attracted to high-end properties is still true,’’ he said.
Crown said its Crown Sydney project remained on budget and on schedule. The company is banking on apartment sales of around $800 million at the project to reduce Crown’s equity contribution to $1.4 billion.
Mr Alexander said the sales of apartments at the project were “in line with expectations”, defying the sharp downturn in the Sydney housing market over the past year.
“Trophy properties still have buyers at very inflated prices,’’ he said, noting buyers were coming from both locally and offshore.
“The (weaker) Australian dollar has helped us,’’ he said.
Crown’s “normalised” net profit, which removes the volatility of high-roller win rates, rose than one per cent to $194.1 million, missing analyst forecasts.
The company maintained its interim dividend of 30 cents per share, delivering 47 per cent shareholder James Packer a payout of $93 million.
However Crown shares were trading more than five per cent lower in early afternoon trading following the weaker-than-expected result.
R.M. Williams digs heels in over Adelaide rental dispute
R.M. Williams is facing a legal stoush in its spiritual home of Adelaide with its former landlord taking it to court for about $200,000 in disputed rent and other costs.
Gupta’s woes spread to NSW as coal workers stood down
Workers at Tahmoor Coal in NSW have been stood down on full pay and production curtailed, as rumours swirl that Sanjeev Gupta’s debt worries have spread beyond Whyalla.