The company, half-owned by billionaire James Packer, has cancelled plans to develop new casinos from Las Vegas to Macau since Chinese authorities arrested 19 of its staff members for gambling crimes in October last year.
It also stopped marketing its Australian casinos to mainland Chinese high-rollers, effectively walking away from its most lucrative customers at a time when Chinese VIPs are fuelling a boom in casino revenue in Macau.
Australian VIP turnover plunged 49% due to ”difficult trading conditions”, it said. Turnover from wealthy VIP gamblers accounted for 17% of Crown’s total gaming revenue, down from 27% the previous year.
Normalised net profit before one-off items was A$343.1 million (US$272.9 million) for the year to June 30, down from A$406.2 million the prior year and below the A$369.1 million average forecast of 10 analysts polled by Thomson Reuters I/B/E/S.
Casino companies say ”normalised” profit is a more reliable performance marker because it strips out win rate irregularities.
DON’T MENTION CHINA
Asked on an analyst call about the link between the China arrests and the VIP gambling downturn, Crown CEO John Alexander said ”we don’t intend to make any more comments about China” until the company had finished a review of its business model.
Crown shares were down 3.2% by 0356 GMT, while the broader market was flat.
“It’s that VIP turover. It’s unlikely it’s growing in full year 2018,” said Danial Moradi, market strategist at Lonsec Research. “The big positive is the balance sheet and the fact that they’re reducing risk by divesting overseas operations... but it’s a low-growth operation.”
Including one-off items, like the sale of a major stake in a Macau casino joint venture with Melco Resorts & Entertainment Ltd, profit rose 96.7% to A$1.87 billion.
Crown said normalised pre-tax profit at its Australian flagship casino, in Australia’s second-biggest city Melbourne, fell 12.5% due to the slump in VIP turnover.
The company has pinned its growth hopes on a roughly A$2 billion luxury casino on the Sydney waterfront, due to open in 2021. It did not offer any earnings guidance on Friday. - Reuters