The business has a huge potential for recovery, as long as some key factors that bring it down are resolved. These are putting in place internal changes that address and resolve all of the company’s regulatory failings, as well as a sustained improvement in operational conditions. If these requirements are met, the company’s outlook is still relatively positive.
Crown Reported Large Losses
Blackstone’s Crown Resorts released its results for the financial year up to June 30, and one of the highlights was a reported loss of almost a billion Australian dollars – AU$945 million (approx. $633 million), to be precise. Reports cite a spokesperson saying that this was mostly because of challenging operational conditions, however, there’s also information that Crown’s regulatory costs are in the realm of around AU$617 million (approximately $413 million).
The $633 million loss was an almost four-fold increase compared to the last comparative period when it was sitting at AU$261.3 million ($175 million). Additional increases in the negative columns were also observed in Crown’s staffing expenditures, where the company spent AU$145 million ($97.1 million) for additional responsible gaming staff, as well as lawyer and consultancy fees, which are attributable here as well.
Another factor was the company’s increase in total expenses, which grew to AU$3.09 billion ($2.07 billion), up from AU$1.98 billion ($1.33 billion) in the financial year 2021. The closure of Crown’s Sydney operation means there was also one less income stream to compensate for that.
Overall, the net loss of the company was AU$1.24 billion ($830 million), however, due to the lack of profits, the AU$296.3 million ($198.4 million) difference to the reported loss of AU$945 million (approx. $633 million) came in the form of income tax benefits.
Regulatory, Operational Hurdles
The total of AU$617 million (approximately $413 million) of regulatory expenses in Crown’s report included all the fines that have already been incurred or are expected. The number is rather high, however, given the fact that Crown has been under scrutiny by two royal commissions and an inquiry in its Victoria, West Australia (WA), and New South Wales (NSW) operations, this is mostly to be expected.
The company’s Melbourne and Perth businesses were operational during the financial year but its Sydney casino wasn’t in 2022. This translated into Crown Melbourne’s revenue increasing to AU$923.8 million ($619.9 million), and Perth’s revenue remaining relatively steady, dropping slightly from AU$740.9 million ($497.2 million) to AU$731.7 million ($491.4 million).
While these businesses were all ultimately allowed to remain open, it was only under increased scrutiny, and in some instances – massive fines.
Crown Melbourne received the record AU$120 million fine ($77 million at the time) after an investigation into Crown’s operations, as well as some regulatory changes that have most likely incurred a sum in the company’s expenses column.
This was the first report of financial that the company has released since its Blackstone acquisition in June. However, since operational conditions challenges are mostly expected to be resolved, and these regulatory expenses aren’t a decisive factor to change the outlook of the company, as long as all regulatory failures are addressed and operations continue.
The Crown Sydney opened its high-roller VIP casino at Barangaroo tower in August, and its successful launch is reportedly already being felt by competitors, so that bodes well for the company’s outlook for the next period.
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