Australian casino company Crown Resorts Ltd reported net profit of AUD201.8 million (US$157.5 million) for its fiscal year first half, down 47.2 percent year-on-year. The result was pulled back by writedowns on international projects, including in Sri Lanka, and a slide in earnings from Macau casino operator Melco Crown Entertainment Ltd (MCE).
Weak market conditions in Macau “adversely impacted MCE’s performance,” Crown said in last week’s filing. As a result, Crown’s share of MCE’s reported net profit fell by 42.2 percent year-on-year to AUD85.3 million.
Crown, controlled by Australian billionaire James Packer, also said that it had written down its investment in casino operator Cannery Casino Resorts LLC in the United States. The writedowns – identified as ‘significant items’ –, amounting to AUD61.3 million, included also costs associated with a proposed project in Sri Lanka, which has now been discontinued, the casino operator added.
Excluding the significant items and variances in win rates, normalised net profit rose 2.3 percent year-on-year to AUD322.4 million, the company said.
Crown said main floor gaming revenue at its Australian properties reached AUD784.2 million, up by 3.5 percent from a year earlier. VIP programme play turnover hit AUD37.1 billion for the six months ended December 31, an increase of 61.4 percent from the prior-year period.
“The highlight of the result was a stellar VIP performance with Melbourne revenue rising 86 percent year-on-year,” said analyst Matthew Ryan of JP Morgan Securities Australia Ltd.
“Crown Melbourne VIP turnover of AUD30.3 billion during the half showed the company had a significant turnaround in the December quarter and showed Crown is not currently losing share to competitors in the region,” he said in a note.
The investment bank however downgraded its recommendation on Crown from overweight to neutral.
“We now see the shares as fairly priced, factoring in both the better domestic EBIT [earnings before interest and taxes] growth outlook and the uncertainty that remains around a Macau GGR [gross gaming revenue] recovery,” Mr Ryan said.
Crown’s chief executive Rowen Craigie told analysts that the deal with the Victorian government that slashed tax rates on VIP gambling would allow Crown to spend more on sales and marketing efforts and better incentives to VIPs.
Mr Craigie, whose contract was extended for a further three years, said the deterioration in the Macau market had continued into 2015. GGR in Macau has declined for eight consecutive months, but Crown remains confident on the market.
“We remain very bullish about the prospects of China over the medium to long term: the expansion of the middle class, the general freeing-up of the ability of the Chinese to travel,” Mr Craigie was quoted as saying by local media.
Crown has a 34.3-percent stake in Melco Crown Entertainment. The latter company held a grand opening for its first casino resort outside of Macau earlier this month – the City of Dreams Manila, in the Philippines.
Mr Craigie said it was “reasonable” to assume that other regional markets were benefiting from the downturn in Macau. “You don’t want to over-emphasise that but clearly those more distant destinations have benefited,” he said at the analyst briefing.
Australia market rival Echo Entertainment Group Ltd has also said VIP gambling in its casinos hit a record in the six months to December 31. Echo said turnover from VIP gamblers nearly doubled to an all-time high of AUD23 billion.
Crown last week confirmed it would appoint Robert Rankin as a director of the company. Mr Rankin heads Mr Packer’s investment vehicle Consolidated Press Holdings Ltd. Crown’s board declared an interim dividend of AUD0.18 per share, to be paid on April 10.
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