Crown Resorts down $1.5BN, however confidence in the future is high

Crown Resort released its annual result this week, which highlighted the torrid year the casino operator has had.

Revenue was down 31.3 per cent to $1.537 billion, with Crown recording a net loss of $262 million. 

New chairman Ziggy Switkowski has a mountain of work ahead of him if he is to turn the company’s fortunes around.

However, the business veteran comes in on the back foot, with Ray Finkelstein QC, set to deliver his conclusions from Victoria’s royal commission on 15 October. 

The findings will determine whether Crown should have a licence to operate its casino business in Melbourne. 

The Victorian findings will be followed by a Perth royal commission in March next year and come after its Sydney operations were found to be unfit to hold a casino licence.

Exacerbating Crown’s problems are communication issues between Crown management and Crown’s 37per cent shareholder James Packer’s CPH. 

With a licence to operate in Melbourne at stake, communication between the two companies is vital.

Yet, when asked how much communication was taking place, incoming CEO Steve McCann had a short response: “Zero”.

So toxic is the relationship, that CPH now communicates with Crown through its advisors with calls for meetings rejected. 

Crown trending down, but McCann works towards upside

Aside from regulatory issues, Crown’s performance has been hindered by COVID lockdowns, which have cruelled its cashflow.

There has also been the cost burden of its legal fees which have translated into shareholders losing hundreds of millions of dollars: $112 million in legal, consulting, compliance and insurance fees have been wasted, with a similar amount to hit Crown and its shareholders in 2022.

Melbourne operations could be in for a torrid time in the next financial year, Finkelstein Signalling that it won’t be enough for Crown just to right a few wrongs. 

McCann is already addressing the issues and is looking to get his 700 strong staff back to work in a peak environment.

“My intention is that the entire organisation culturally takes a view around customer care, patron care, employee care which includes responsible gaming, so my expectation is that all 700 of those people will have that mindset and that’s a significant shift,” McCann said. 

“It’s an environment where a very experienced level head is very important addition to our board,” McCann said of Switkowski’s appointment. 

“We are a public company. We’ve got to meet our community, government and regulatory obligations but we’ve got to do that with an eye on how do you maximise shareholder value. It takes a fair bit of commercial acumen to bring those things together.”

McCann is confident he can turn Crown’s performance around by repositioning the the premium international market to replace junkets. 

Post COVID, he believes pent up demand from tourism will drive it forward. 

McCann is determined to keep potential acquirers at bay, while also setting a standard that is very high and that our competitors will need to meet.” 

Right now, the immediate concern is the Melbourne licence, a decision on which is not far away.

Irit Jackson, 1^st September 2021