Crown Resorts is the latest Australian casino to report a significant reduction in revenue. The company published its half-year results last week and the figures make miserable reading.
Recent scandals surrounding Chinese VIPs and US-China trade sanction have all seriously impacted on Crown’s half-year financial performance.
Normalised revenue stood at $1.46 billion, which seems like a fantastic figure until you consider this is 5.3% less year-on-year. This reduction in revenue resulted in normalised net profit plummet 11.0% to $172.7 million.
Australian casinos use normalised results and actual results in their financial reports. Actual results reflect revenues and expenses at actual win rates. Normalised results are adjusted to exclude the impact of variance from the theoretical win rate on VIP program play. These normalised figures remove lucky or unlucky streaks from the casino’s high-stakes customers who wager billions of dollars.
Normalised Revenue, EBITDA, and Profit All Plummet
Every key financial indicator showed a reduction of between 5.3% and 14.1%. Conversely, its actual results show increases of between 4.1% and 27.5% across the board.
Normalised net profit fell 11.0% to $172.7 million with normalised EBIDTA falling 9.0% to $381.3. EBIDTA is a key indicator to the overall financial health of a company.
|Indicator||Normalised results ($M)||Movement (%)||Actual results ($M)||Movement (%)|
|Earnings Before Interest, Tax & Significant Items||239.2||(14.1%)||304.7||21.2%|
|Profit before Tax and Significant Items||240.8||(10.7%)||306.3||26.2%|
|Profit after tax & before significant items||167.1||(10.4%)||213.2||27.5%|
|Net profit after tax before significant items||173.2||(10.5%)||219.3||25.7%|
|Net profit attributable to parent before significant items||172.7||(11.0%)||218.8||25.1%|
VIP Revenue Rises Despite Huge Reduction in Turnover
Crown found itself in the headlines for all the wrong reasons in regards to its Chinese VIPs. This section of customers wagers billions of dollars every year and casinos go out of their way to accommodate them. Crown Resorts is willing to overstep the mark to ensure Chinese VIPs can play its games if resorts are to be believed.
A whistleblower accused Crown of using underhand tactics to sneak well-heeled VIPs through Australian customs. The Australian press reported Crown’s employees are instructed to turn a blind eye to illegal activities by VIPs.
VIP turnover fell by an astonishing 34.2% to $13.1 billion. The casino ran well against these big bettors, however, and experienced a9.0% increase in VIP revenue. This is why normalised financial figures are important because Crown can’t and won’t always win such huge sums of money from its super-rich customers.
Will Chinese VIPs Return to Crown Properties?
The scandals surrounding Crown and its Chinese VIPs made its casinos less attractive to uber-rich businessmen. Chinese businessmen don’t like their private lives plastered all over the press and it appears they voted with their feet. Furthermore, these VIPs are spending less on the gaming floor when they do actually visit the casinos.
Ongoing trade sanctions between the United States and China have also had a major effect. Restrictions in trade have hit some of China’s elite hard and they are no longer willing to spend vast sums of money on leisure activities.
Furthermore, the coronavirus is hitting the Australian tourism industry like a sledgehammer. Chinese residents are prevented from freely travelling abroad in the hope that it halts the spread of the deadly virus.
The virus outbreak only started at the beginning of 2020, therefore, its effects aren’t seen in these financial figures. But officials estimate the outbreak is costing Australian casinos $1 billion per month in lost revenue.
Crown isn’t the only Australian casino suffering from a lack of VIP because The Star Entertainment Group is struggling.
The Star recently reported revenue from its VIPs stood at $42.4 billion for the year. It made $572.4 million from VIPs but its win rate was only 0.76%, far less than the expected 1.35%.