Crown Resorts sees fewer VIP gamblers but robs them blind


crown-resorts-casinos-fewer-vip-gamblersAustralian casino operator Crown Resorts is counting its lucky stars after it played extremely lucky with its extremely thin crop of Asian VIP gamblers in the first half of its fiscal year.

On Wednesday, Crown announced that its domestic casinos had generated ‘normalized’ revenue of AU$1.46b (US$975.5m) in the second half of 2019, down 5.2% from the same period in 2018. Normalized earnings fell 9.7% to AU$390.4m while net profit after tax slipped 11% to AU$172.7m.

‘Normalized’ figures smooth out the occasionally wild variance in VIP gambling activity, a tactic preferred by Aussie gaming companies because it often papers over significant setbacks. In this case, Crown’s statutory results were actually more impressive, but live by the normal, die by the normal.

All Asia-Pacific casino operators have been suffering as a result of the sector-wide VIP gambling slowdown, but Crown’s situation is particularly acute given the public relations nightmare it’s endured ever since last summer’s 60 Minutes exposé and the potential threat this poses to Crown’s Sydney casino license.

Crown’s overall VIP gambling turnover was down 34.2% to AU$13.1b in H1 but its flagship Crown Melbourne property reported a VIP win rate of 2.3%, more than twice the H1 2019 rate of 1.02% and nearly a full point higher than the theoretical 1.35% rate.

As a result, while Melbourne’s VIP turnover was down by nearly two-fifths, its VIP win was up more than one-third to AU$239.6m. And while ‘main floor’ gaming revenue was flat at AU$630.8m, the Melbourne property’s earnings rose nearly 23% to AU$333.5m.

By contrast, Crown Perth’s VIP revenue fell by three-quarters to AU$14.6m while its ‘main floor’ revenue nudged up 2.2% to AU$242m. Perth’s earnings fell 12.5% to AU$120.4m.

The UK-based Crown Aspinalls – or, as it’s likely known in the CFO’s office, Crown Rounding Error – reported total revenue up 6.7% to AU$34.2m but earnings nearly doubled to AU$5.6m in tandem with the VIP win rate.

Crown Digital, which consists of the Betfair Australasia online betting exchange and US-based social gaming operation DGN Games, saw its revenue slip 4.6% to AU$62.8m but a double-digit decrease in DGN’s expenses pushed earnings up 87.5% to AU$14.1m.

Crown CEO Ken Barton said Crown had “recently experienced softer trading conditions” due to the coronavirus crisis, “particularly over the Lunar New Year period.” The company offered no further specifics, saying only that it was heeding the guidance of relevant health authorities.

Barton also didn’t offer much insight into some of Crown’s current controversies, including the New South Wales gambling regulator’s investigation into whether Melco Resorts & Entertainment is suitable to own a significant stake in the company. Barton said only that Crown was “cooperating fully in relation to the various regulatory inquiries underway.”

As for Crown Sydney, assuming the NSW inquiry doesn’t result in Crown losing its license, the plan is for the tower to “open progressively from December 2020, with grand opening celebrations planned for early in 2021.”