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Australia – Crown ‘turns a corner’ with first half casino revenues up 34 per cent

By - 17 February 2022

Australian casino operator Crown Resorts has ‘turned a corner’ with first half revenues of $778.6m, up 34 per cent on last year’s figures.

The operator, who has recently agreed to a takeover deal by Blackstone, saw its EBITDA generate a loss of $47.5m, down from a profit of $4.4m.

Crown Melbourne generated revenue of $265m compared to $97.1m in the pcp, with main floor gaming revenue of $187.6m (up $133.9m) and non-gaming revenue of $77.4m (up $37.7m). Given continued international border restrictions, there was no international VIP program play revenue in the period.

Overall hotel occupancy across Crown Melbourne’s three hotels was approximately 23 per cent, with Crown Towers
hotel occupancy 28 per cent, Crown Metropol hotel occupancy 21 per cent and Crown Promenade hotel occupancy 21 per cent. At Crown Perth, revenue came in at $402.9m, down 1.5 per cent on the pcp, with main floor gaming revenue of $236.5m,down 14.1 per cent, and non-gaming revenue of $166.4m, up 24.7 per cent.

Crown’s Managing Director and Chief Executive Officer, Steve McCann, said: “Crown’s first half performance reflects the continued challenging operating conditions as a result of COVID19 as well as the impact of ongoing regulatory matters. While we do not underestimate current headwinds facing Crown, there is growing confidence we have turned
the corner. All three of our domestic resorts are back open, with a vaccination strategy to combat COVID-19
providing a pathway forward for our staff, the business and the wider community.

“Importantly, we continue to build momentum on our company-wide reforms, accelerating work on our
remediation plan and making significant advances across multiple regulatory processes. Not only are we building a stronger business, we are working well with the regulators with a priority to deliver a safe and responsible world-class gaming operation.

“In Victoria, we are working in a collaborative and constructive manner with the Special Manager and his office, as well as the new regulator, the VGCCC, to ensure that we build a safe and responsible gaming environment at Crown Melbourne as we seek to re-establish our suitability to hold a casino licence in Victoria.

“Hearings of the Perth Casino Royal Commission have now concluded. We await the final report, which is due to be provided to the Western Australian Government in early March, and remain committed to working collaboratively with the Government and the regulator on any findings and recommendations that follow.

“At Crown Sydney, we have been encouraged by the demand for our first-class restaurants and hotel when non-gaming operations have been open. We remain in constructive discussions with both ILGA and the independent monitor as we work towards the opening of gaming. Whilst no official opening date has been confirmed by the regulator, we are targeting to be in a position to announce the opening of the gaming floor shortly.

“Crown has world-class assets with a global reputation for premium service and talented people, and our comprehensive reform program will help build a stronger, more sustainable business. The Blackstone transaction that was announced on Monday reinforces the underlying value and attractiveness of our business and assets. We believe it is a good outcome for shareholders and welcome news for our people, customers and stakeholders.”

Crown’s Chief Financial Officer, Alan McGregor, said: “Crown Melbourne was closed for a large part of the first half. Operations recommenced in October 2021, with improving trends in the business towards the end of the reporting period as restrictions eased. Similarly, Crown Sydney faced significant disruption from COVID-19 during the half. Whilst open, we have continued to see impressive average room rates and encouraging demand for our food and beverage venues, however operational constraints and limited domestic and international travel continue to weigh on overall
financial performance.

“Conversely, Crown Perth delivered a solid result, with stable performance following a short-term closure to
begin the half. On an underlying basis, EBITDA was down around 20% as the business cycled the strong
performance in the prior year. Our significant investment in resourcing and remediation continues, which is reflected by the current annual cost of our Financial Crime, Risk, Compliance and Responsible Gaming teams across Melbourne and Perth being almost $30m higher than the equivalent cost in the 2019 financial year. We also reported a material increase in corporate costs during the half, which was primarily driven by legal and consulting costs associated with the various regulatory processes, particularly the Victorian Royal Commission and Perth Casino Royal Commission.

“Unfortunately, the emergence of the Omicron variant and the resulting significant increase in COVID-19 case numbers across both Victoria and New South Wales has had an impact on our trading performance to begin the calendar year, with reduced patronage and a number of staff required to isolate. We are also seeing subdued performance in Perth, with increased uncertainty from COVID-19 and the recent imposition of new restrictions significantly impacting patronage to the property.

“Whilst these near-term challenges are currently impacting business performance, we remain confident in the long-term outlook for the business as we embed the reforms contained in our remediation plan and normal consumer patterns return as society learns to live with the virus.”

Non-gaming operations progressively commenced trading at Crown Sydney from late December 2020. During
the period, Crown Sydney faced significant disruption as a result of COVID-19, and was closed for 102
days12. Non-gaming operations re-opened to fully vaccinated guests and staff on 11 October 2021, with
operations showing improving trends.

Gaming areas are yet to commence operation as Crown continues to work through the consultation process with the casino’s regulator, the Independent Liquor and Gaming Authority (ILGA). Crown is in frequent discussions with ILGA and the independent monitor, and while no official opening date has been confirmed by the regulator, Crown is targeting to be in a position to announce the opening of the gaming floor shortly. Opening is expected to occur on a staged basis given current staffing levels, with further recruitment for gaming-related roles required ahead of a full commencement of gaming operations.

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