Lack of VIPs Turnover Severely Hit Crown Resorts Profits
Full-year profits in Crown Resorts Limited have slumped 4.7 percent to $368.6 million, with a vast reduction in VIPs turnover blamed.
Crown Resorts published its 2019 Full Year Results to the Australian Stock Exchange on Wednesday. Investors were unhappy to say the least with the company reporting a huge drop normalised profit. The 12 months to June 30th saw revenue from Crown’s Australian operations fall 5.4 percent to $2,954.8 million.
Main floor gaming revenue in Australia actually rose by a nominal 0.5 percent to $1,689.3 million. VIP program play turnover, however, fell through the floor. Figures were down a massive 26.1 percent to $38.0 billion compared to the same reporting period last year.
All the normalised key financial indicators saw reductions of between 4.1 and 9.9 percent compared to last year. The actual results read even worse when it comes to net profit attributed to parent. This figure plummeted by 28.1 percent to $401.8 million from $558.9 percent last year.
Lack of Chinese VIPs to Blame
John Alexander, Executive Chairman of Crown Resorts, attempted to address the issues in a statement to the stock market.
Alexander said, “Crown’s Australia operations’ full-year result reflected subdued market conditions. Total normalised revenue across Crown’s Australian resorts decreased by 5.4% on the prior comparable period. This decline was primarily due to the reduction in VIP program play revenue in Australia, which was down 26.1%. Main floor gaming revenue increased by 0.5%, with modest revenue growth in Melbourne offset by continued softness in Perth, particularly for table games business.”
He continued, “During the 2019 financial year, Crown again made a major contribution to the Australian economy through its role in tourism, employment, training and its corporate responsibility programs. Crown’s contributions risk being overshadowed by recent media reporting which has unfairly sought to tarnish Crown’s reputation.”
Crown Hounded in the Press
The media reports Alexander mentioned relate to a recent raft of allegations aimed at Crown Resorts. A joint investigation by 60 Minutes, The Age and The Sydney Morning Herald claimed Crown Resorts was involved with junket operators and has links to triad organisations in Hong Kong.
Other allegations include border official being pressured into fast-tracking visa applications for Chinese VIPs. It was even reported the cousin of China’s President Ming Chai was given a visa with little to no scrutiny. Crown Resorts vehemently denied the alleged offences while the Chinese government reacted angrily.
Security staff initially refused entry to Australian NBA star Ben Simmons at its Melbourne property. Simmons had returned to Melbourne during the NBA off-season and visited Crown Melbourne. The prominent star turned to social media when security staff requested identification from Simmons and his black friends, yet allegedly allowed his white pass.
New South Wales’ Independent Liquor and Gaming Authority is investigating Crown Resorts. It was the proposed sale of $1.75 billion worth of shares by James Packer to Melco Resorts and Entertainment that came under the spotlight. Melco’s CEO Lawrence Ho was a director at a blacklisted company at the time of the sale. Ho is the son of casino mogul Stanley Ho. Stanley Ho has ties to Chinese organised crime.
Star Entertainment Also Feels the Pinch
It is not only Crown Resorts that is feeling the pinch when it comes to well-heeled Chinese VIPs. Star Entertainment Group, owners of The Star Sydney, The Star Gold Coast and Treasury Casino & Hotel has also suffered this year.
Star Entertainment Group’s latest financial figures also saw a drastic reduction in VIP revenue. International VIPs generated $42.4 billion for Star Entertainment last year, a 30.7 percent drop on the previous reporting period.
The current US-China trade relations are in the midst of a slump, while the Chinese economy has softened. These factors are contributing to Chinese VIPs curbing their spending when they visit Australian casinos.
Shares in Crown Resorts are now trading at $11.50 per share, more than 18 percent less than a year ago.