They say the house always wins, but for Australia’s two casino and resorts operators Crown Resorts (ASX: CWN) and The Star Entertainment Group (ASX: SGR) the first half has flipped that script with both reporting worsening losses.
For Crown, which recently had its board agree to a $8.9 billion takeover deal from US investment firm Blackstone, its loss worsened by 62.4 per cent to $196.3 million.
The Star meanwhile reported a $74.2 million loss, down from a $49.7 million profit in 1H21, on the same day as announcing an expected April release for sales of apartments in its Queen's Wharf Tower in Brisbane.
Both attribute these results to the impact of COVID-19, which meant casinos were under tight restrictions for much of the six months to 31 December 2021, leaving many hotel rooms empty.
“Crown’s first half performance reflects the continued challenging operating conditions as a result of COVID- 19 as well as the impact of ongoing regulatory matters,” Crown managing director and CEO Steve McCann conceded.
“While we do not underestimate current headwinds facing Crown, there is growing confidence we have turned the corner. All three of our domestic resorts are back open, with a vaccination strategy to combat COVID-19 providing a pathway forward for our staff, the business and the wider community.
“Importantly, we continue to build momentum on our company-wide reforms, accelerating work on our remediation plan and making significant advances across multiple regulatory processes. Not only are we building a stronger business, we are working well with the regulators with a priority to deliver a safe and responsible world-class gaming operation.”
While losses worsened for Crown, statutory revenue improved by 34 per cent to $778.6 million, but $79.2 million of closure costs incurred at its Perth, Melbourne and Sydney properties took their toll.
“Crown Melbourne was closed for a large part of the first half. Operations recommenced in October 2021, with improving trends in the business towards the end of the reporting period as restrictions eased,” Crown CFO Alan McGregor said.
“Similarly, Crown Sydney faced significant disruption from COVID-19 during the half. Whilst open, we have continued to see impressive average room rates and encouraging demand for our food and beverage venues, however operational constraints and limited domestic and international travel continue to weigh on overall financial performance.
“Conversely, Crown Perth delivered a solid result, with stable performance following a short-term closure to begin the half. On an underlying basis, EBITDA was down around 20 per cent as the business cycled the strong performance in the prior year.”
McGregor notes the emergence of Omicron has had an impact on Crown’s trading performance over the beginning of the 2022 calendar year, with reduced patronage and a number of staff required to isolate.
“We are also seeing subdued performance in Perth, with increased uncertainty from COVID-19 and the recent imposition of new restrictions significantly impacting patronage to the property,” the CFO said.
“Whilst these near-term challenges are currently impacting business performance, we remain confident in the long-term outlook for the business as we embed the reforms contained in our remediation plan and normal consumer patterns return as society learns to live with the virus.”
The Star also said COVID-19 related property shutdowns, operating restrictions and border closures materially impacted revenues and earnings, with revenue down to $577.1 million in the half from $741.4 million the half prior.
However, the company notes that upon reopening on 11 October 2021 The Star Sydney recorded strong revenue growth - up 29 per cent on the prior corresponding period.
Queensland Casinos’ revenue was stable on the prior corresponding period when open, despite border closures and COVID restrictions, and group non-gaming revenue was up 10 per cent.
The Star chairman John O’Neill said the group continued to execute its strategy well in context of the COVID-19 challenges.
“The fundamental earnings prospects for The Star’s domestic business remain attractive. They are underpinned by valuable long-term licences in compelling locations while the transformation of our properties into globally competitive integrated resorts is nearing completion,” O’Neill said.
“The Star remains committed to maintaining a balance sheet that positions the Group for the post COVID-19 recovery.
“The Board has not declared an interim dividend for 1H FY2022 given the continuing impacts of COVID-19 on the business and, consistent with the December 2021 covenant waiver, cash dividends cannot be paid until gearing is below 2.5 times.”
Early 2H22 trading has continued to be impacted by COVID-19 and the Omicron variant according to The Star, especially on visitation rates and the supply of products and services - with the company noting the impact peaked in mid-January and has progressively eased.
In the period from 1 January 2022 to 13 February, group revenue rose by 7 per cent.
“The past year has demonstrated how resilient our business is and how quickly customers return when the properties are allowed to open and operate under varying forms of restrictions,” The Star managing director Matt Bekier said.
“This gives us great confidence as vaccination levels increase and a return to normality approaches.
“We would like to thank all of our guests and dedicated employees who have remained with us through these difficult times.”
Shares in SGR are down 0.27 per cent to $3.69 per share at 10.52am AEDT.
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