Costs eat into Crown profits

Costs eat into Crown profits - 19th February 2015


Gaming Casinos Markets Business Entertainment

Shares in James Packer's Crown casino group have soared by more than seven per cent despite a slump in first half profit.

Crown suffered a 47 per cent fall in first half profit after being hit by asset impairment charges and hefty costs from its abandoned Sri Lanka resort.

Crown's net profit fell to $201.75 million in the half year to December 31, from $382.45 million a year earlier.

The result was weighed down by $61.3 million in significant items linked to a writedown in Crown's investment in the US-based Cannery and costs from its now abandoned plan for a $US350 million casino resort in Sri Lanka.

Crown's earnings were also hit by a sharp fall in earnings from its Melco Crown Entertainment business in Macau, where weak market conditions adversely affected all casino operators.

The group's normalised net profit - which strips out VIP win rates, significant items and opening costs from Melco Crown in Macau - rose 2.3 per cent to $322.4 million.

Statutory revenues rose 9.2 per cent to $1.7 billion while its normalised result was up 17.2 per cent at $1.72 billion.

Chief executive Rowen Craigie said gross gaming revenues across the Macau market fell 30.4 per cent in the six-month period.

"The deterioration in the Macau market has continued into the second half," he said in a statement.

However, he described as satisfactory the performance of Crown's Australian gaming businesses given the subdued level of consumer sentiment.

Normalised earnings at Crown Melbourne rose by 26.1 per cent and by 7.7 per cent at Crown Perth.

Main floor gaming revenue rose 3.5 per cent at both casinos.

Mr Craigie said there had been strong growth in the VIP program play turnover towards the end of the first half, with record monthly turnover in November and December in Melbourne.

Crown's shares were up by $1.02, or 7.05 per cent, at $15.48 at 1109 AEDT.

OptionsXpress market analyst Ben Le Brun said investors had expected a disappointing result from Crown's Macau business.

"It looks as if a number of other parts of businesses have picked up the slack and it's come in better than expected," he said.

Meanwhile, Crown has extended Mr Craigie's contract to November 2018.

Crown said it had reduced his severance pay entitlement from 24 months base salary to 12 months.