Perhaps unsurprisingly, Crown Resorts Ltd (ASX: CWN) has today reported a net loss for the first half of FY21 of $120.9 million. In early afternoon trade, the Crown share price has edged higher by 0.7% to $9.76.
It has not been smooth sailing for Australia’s largest casino operator, who last week was faced with the damning findings of its ILGA (Independent Liquor and Gaming Authority) inquiry.
The ILGA report concluded that without undergoing significant change, Crown would not be a suitable operator of its Crown Sydney development in Barangaroo.
The numbers
Due to COVID-19 closures across its casinos and resorts, statutory revenue for the first half was down a significant 62.1% to $581 million.
This translated into a 155.4% fall in net profit after tax (NPAT) compared to the prior comparable period (pcp), which saw the group reporting a loss of $120.9 million.
However, while declining 99% on the pcp, Crown managed to deliver positive EBITDA of $4.4 million. This was possible due to positive EBITDA contributions of $162.9 million and $23.2 million from Crown Perth and Crown digital, respectively.
Due to the state of Crown’s financials and operating environment, the group did not declare an interim dividend.
Managements comments
Crown’s Chief Financial Officer, Alan McGregor, provided some colour on first-half operations, commenting:
“Crown’s first half results reflect the severe impact on operations from the COVID-19 pandemic. In particular, Crown Melbourne was closed for most of the half.
“Crown Perth re-opened with restrictions towards the end of June 2020 and has traded above expectations despite ongoing COVID-19 restrictions, and limited marketing and promotional activity. The main gaming floor started strongly, with performance moderating across the half,” he added.
As for developments at Crown Sydney, Mr McGregor said: “Crown Sydney opened in a restricted capacity in late December and, while gaming operations are yet to commence, the non-gaming elements have seen encouraging property visitation. The overall contribution from the property continues to be impacted by the limited scale of operations.”
Fresh executive chair
Earlier this week, Ken Barton resigned from his role of CEO and Managing Director, with Helen Coonan assuming the role of Crown’s Executive Chair.
Within Crown’s half-year result announcement, Helen Coonan said: “I want to be clear I do not see myself as Executive Chairman for an extended tenure. We have already commenced a global search for a new CEO.”
Helen also commented on the ILGA inquiry facing Crown, saying: “Despite the uncomfortable reading at times, Crown has welcomed the Commissioner’s report of the NSW Independent Liquor and Gaming Authority Inquiry. We see it as an opportunity for a complete and comprehensive corporate re-set”.
Is this a buying opportunity?
Crown has been beaten down by COVID-19 closures and questions surrounding its governance procedures. I don’t think it’s ‘game over’ for Crown, however, there are clear issues it must address to move forward.
With dividends scrapped for the first half, I think it’s worth asking when they will return. If COVID-19-related restrictions at Crown’s casinos are more relaxed in the second half, I think Crown has a good chance of returning to profitability. However, this does not guarantee Crown will pay a dividend.
Personally, I would wait until Crown provides further guidance on expected full-year results before buying shares.
In the meantime, why not check out Jaz’s 3 ASX dividend share ideas.
