Crown hit by poor economic conditions
The James Packer-controlled Crown will focus on controlling costs in its Australian portfolio of hotels and casinos as weak consumer sentiment took a toll last year, particularly on its Melbourne gaming operations.
While the company's full-year profit of $396 million exceeded expectations -- bolstering its share price 8 per cent in early trading -- it was 23 per cent lower than the previous year after it booked a $69.6m loss on the disposal of its investment in Echo Entertainment Group.
Crown boss Rowan Craigie yesterday described the result as "mixed", saying operations were being hit by subdued economic conditions.
At Crown Melbourne, main gaming floor revenue -- which comprises half the complex's turnover -- rose less than 1 per cent to $1 billion, compared with 9.7 per cent growth at Crown Perth. But in Perth revenue growth from the VIP segment was weaker than expected at 3.3 per cent.
Mr Craigie said across the business, products and services geared towards the premium end of the market were doing better than those catering to the mass market.
That applied at restaurants, gaming and retail outlets, he said.
"As a general proposition, the high end is doing better than the low end," he said. "That's not surprising when you think of the broader economy."
Mr Craigie said Crown's immediate focus was on optimising the performance of its Australian business, which included paying close attention to opportunities to further rein in costs. It was also keen to see Melco Crown Entertainment, in which it holds 33.7 per cent equity interest, develop its pipeline of projects.
Melco Crown recently reported strong earnings growth, lifting Crown's share of normalised net profit to an equity-accounted profit of $152.3m. Mr Craigie said this had been achieved despite an overall subdued performance in the Macau VIP market.
He said the company's development pipeline was making progress, with its Studio City resort due to open in mid-2015 and plans for its first casino outside Macau, in The Philippines, also on track.
"The Macau market over the long term will grow more than the Australian market, which is relatively mature," Mr Craigie said.
Despite this, Crown is continuing to invest in its local operations. By 2016, it will have spent $2.7bn on capital expenditure projects, with the bulk of the proceeds from now to be allocated to Crown Perth, including the development of a new Crown Towers hotel and multi-storey car park.
The company has recently entered the final stages of negotiating with the NSW government to build a new $1.3bn six-star resort and VIP-only casino in Sydney.
It is also participating in the Queensland government's review of future casino developments.
"The more options that Australia can give the Chinese high-roller, the better -- it's about critical mass," Mr Craigie said,
"If Australia is going to compete against Las Vegas and Singapore and Macau, it needs to have multiple high-quality offerings," he said.
Mr Craigie confirmed that the group had the financial capacity to pursue its plans, with more than $1.1bn of undrawn funds available.
Crown shares closed at a record high yesterday of $14.34, up 76c.
Source: The Australian, 24 August 2013
