Crown and Star Post Large Half Year Losses

Crown Resorts, Star Entertainment, and SkyCity Group all posted significant half year losses to their respective shareholders this week.

The continued uncertainty regarding the ongoing COVID-19 pandemic is having a profound effect on company balance sheets. Both Crown Resorts and Star Entertainment published their half year financial results. Both posted significant half year losses.

Crown’s half year losses tip the scales at $196.3 million; it lost $120.9 million during the previous reporting period. The company’s management put the cost of closures at a staggering $79.2 million net of tax. This is because Government COVID guidelines dictated the closure of Crown Melbourne and Crown Sydney during the period.

Alan McGregor is the Chief Financial Officer for Crown. He pointed to massively increased costs as the main reason for the half year losses.

“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 o the reporting period as restrictions eased.”

“Our significant investment in resourcing and remediation continues, which is reflected by the current annual cost of out Financial Crime, Risk, Compliance and Responsible Gaming teams across Melbourne and Perth being almost $30 million 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.”

Star Entertainment Reveals $73.7 Million Half Year Losses

Star Entertainment, Crown’s biggest rivals in the Australian casino industry, also posted half year losses. Star’s half year losses weigh in at $73.7 million. Again, the company pointed the finger of blame squarely in COVID-19’s direction.

“Group performance continued to be significantly impacted by COVID-19 in the current reporting period. The Sydney property was closed from June 26 to October 11, while the Queensland properties were both closed for up to 12 days during the reporting period.”

The statement goes on to describe how social distancing measures and border closures had a negative effect on the casino’s revenue streams.

Managing Director and Chief Executive Officer, Matt Bekier is optimistic for the future despite the large half year losses.

“This past year has demonstrated how resilient our business is and how quickly customers return when the properties are allowed to open and operate under varying forms of restrictions. This gives us great confidence as vaccination levels increase and a return to normality approaches. We would like to thank all of our guests and dedicated employees who have remained with us through these difficult times.”

Will Continued Losses Put Blackstone Off Crown Takeover?

Crown’s continued losses must worry Blackstone Group who Crown agreed to sell to this week. Crown accepted Blackstone’s $8.9 billion offer, which is subject to regulatory approval.

However, Blackstone knows Crown essentially has a licence to print money. Indeed, this is the case for casinos worldwide. Put aside these half year losses and Crown makes gigantic sums of annual profit.

Crown posted a $79.5 million loss last year, which is remarkable considering the COVID-19 pandemic. However, it made $402 million profit in 2019, and $558.9 million in 2018. That is more than $960 million in two years. It is easy to see why Blackstone is so keen on taking over Australia’s biggest casino group.

Losses Posted in New Zealand

It is not only Australia that has suffered during the pandemic because New Zealand has too. SkyCity Entertainment Group published its financial records, revealing half year losses of NZ$33.7 million ($31.38 million). The company made NZ$77.9 million ($72.55 million) profit during the same period last year.

SkyCity Auckland remained closed for 107 days in the six months up to December 31, 2021. That is a third of the year. SkyCity Hamilton (65 days), Queenstown (22 days), and Adelaide (eight days) also closed.

However, the group’s online casino enjoyed significant growth and now boasts 10,000 active weekly users.