No deal: James Packer-backed Crown keeps dividend suspension as losses deepen

Steve McCann says Crown has turned a corner after battling Covid shutdowns and border bans but uncertainly continues to shroud the James Packer-backed company.

Crown Resorts CEO Steve McCann says the gaming company has turned a corner, but refrains from reinstating a dividend. Picture Richard Dobson

Victoria is pressing ahead to become the first state to force gamblers to limit their losses on poker machines — but only at one venue, Crown’s flagship Melbourne casino, sparking criticism from the James Packer-backed group’s chief executive.

Steven McCann says the “mandatory precommitment” rule from the Daniel Andrews-led Labor government will be ineffective if not applied across the entire gaming industry.

His comments come as the group tumbled deeper into the red, reporting a $196.3m loss in the six months to December 31 as it battled stop-start shutdowns and Australia’s border ban continued to shut out cashed-up Chinese gamblers and other high-rollers.

“The objective of mandatory precommitment is to provide a more responsible gaming environment and also to reduce the risk of money laundering, and if that is confined to one destination then clearly it will divert that activity elsewhere,” Mr McCann said.

The pokies loss rule was one of the raft of recommendations from the Victorian royal commission into Crown to tackle problem gambling following revelations the company facilitated money laundering and other organised crime, and did not pay millions of dollars in taxes.

But Crown has almost 2700 poker machines – less than 9 per cent of Victoria’s total. “So from our perspective, it’s very important that it’s an industry-wide initiative,” Mr McCann said.

He said it was difficult to gauge how the rule would affect Crown Melbourne’s earnings.

“We’re continuing to discuss with the government the way that the second tranche of legislation will be implemented,” he said. “They’ve asked for input and consultation from various parties. So that’s work in progress.”

Crown, which has agreed to sell its casinos in Melbourne, Sydney and Perth to US private equity giant Blackstone for $8.9bn, is yet to reinstate its dividend after suspending it mid last year.

But Mr McCann is confident the group has “turned a corner” after being battered by forced government shutdowns to limit the spread of Covid-19 and losing all its international VIP revenue from international border closures.

With Australia set to fully re-open to overseas tourists later this month, Mr McCann is optimistic about the return of cashed-up gamblers. But it will take time to rebuild its VIP business after it ditched junket operators amid NSW’s explosive Bergin inquiry.

“The VIP business will be a different business to what it has been historically, given we are no longer dealing with junkets,” Mr McCann said.

“We will be looking to convert the typical high-roller customer to a mass premium customer. That will take some ramping up and we’ll be doing that on a staged basis. Obviously from the time that borders open, we expect to have significant inbound inquiries from some of our international customers.”

Crown’s overall half-year loss deepened 62.4 per cent to $196.3m. The company also paid $20m of a $125m class action settlement, which is subject to Federal Court approval, during the period.

Meanwhile, revenue jumped 34 per cent to $778.6m. Crown’s new $2.2bn casino in Barangaroo is yet to open its gaming floors as the company continues to work with the regulator to regain its suitability to hold a NSW casino ­licence.

Jarden analyst Ben Brownette said while Crown Melbourne delivered a “very strong revenue result” – almost tripling to $265m – it was offset by higher-than-expected closure costs, which totalled $94.5m. This limited earnings gains, with Crown Melbourne reporting an EBITDA loss of $79.6m, versus $87.8m in the previous corresponding period.

Mr Brownette said “Perth appears in line at the revenue level, although weaker margin on costs (and) digital (was) also softer than consensus”.

Crucially, he said there “appears some risk to the scheme timetable” with Blackstone.

“Conditions, including but not limited to a material adverse change, the event Crown Melbourne’s licence is cancelled within the two-year supervision period, and in the event the NSW Independent Liquor & Gaming Authority makes a decision Crown Sydney is not suitable to hold a ­casino licence and/or takes action to prohibit Crown Sydney from conducting gaming operations beyond December 31, remain,” he said.

Crown’s share price fell 0.7 per cent on Thursday to $12.47 – 63c below Blackstone’s offer price of $13.10 a share. Shareholders are expected to vote on the deal – which is subject to regulatory ­approval – after March.

Credit Suisse analyst Larry Gandler asked Mr McCann if the timeline was “too aggressive”.

“I’m not sure if that was the position of Crown’s board or Blackstone. What’s the rush?” Mr Gandler said.

But Mr McCann – who has a change of control clause in his employment contract, meaning he is in line for an immediate payout of up to $9m, including $5m worth of long-term performance rights that vest if Blackstone emerges as owner – said the scheme followed a “relatively normal timeline”.

“Every scheme varies,” he said.

“Probably the biggest outstanding condition is to get regulatory approval in all jurisdictions. A lot of work has been done, we understand, in that regard. But that approval hasn’t yet been formalised, so they need to work through that with the regulators and that will be something that we will not be in control of.

“But the broader timeline is a relatively standard timeline.”