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Crown Resorts share price higher after first half results release

The Crown Resorts Ltd (ASX: CWN) share price has edged higher on Wednesday following the release of its half year results.

In morning trade the casino and resorts operator’s shares are up almost 1% to $11.90.

What happened in the first half?

For the six months ended December 31, Crown Resorts reported normalised EBITDA of $381.3 million. This was a decline of 9% on the prior corresponding period. The company’s normalised net profit after tax (NPAT) also declined. It was down 11% to $172.7 million.

Things were more positive on a reported basis, with EBITDA up 14% to $446.8 million and NPAT (pre-significant items) up 25.1% to $218.8 million.

The reported result does not exclude the impact of any variance from theoretical win rate on VIP program play. Crown use a theoretical win rate to remove the inherent volatility in VIP gaming revenue. For this reason, as better as its reported results were, it believes the normalised results are the relevant measure of viewing the overall performance of the business.

The Crown Resorts board declared a 25% franked interim dividend of 30 cents per share. This was consistent with last year’s interim dividend.

How did its segments perform?

The main drag on its normalised results in the first half was the key Crown Melbourne segment. It posted a 14.7% decline in EBITDA to $268.7 million. Lower table games and VIP program play revenues weighed on its normalised result. This offset solid growth in gaming machines revenue.

Also posting a decline was the smaller Crown Aspinalls business. It reported a 42.2% decline in normalised EBITDA to $3.6 million.

The Crown Digital business was a strong performer during the half. It reported an 87.5% increase in normalised EBITDA to $14.1 million. Although it reported a 4.6% decline in revenue, a 16.5% reduction in expenses underpinned the strong earnings growth.

This was supported by a 3.6% lift in Crown Perth normalised EBITDA to $121.7 million. Crown Perth benefited from solid gaming machines revenue growth and increases in VIP program play and non-gaming revenues.

Crown Resorts’ chief executive officer, Ken Barton, said: “Crown’s 2020 first half result reflected mixed trading conditions across our various businesses. Crown Melbourne’s main floor gaming and non-gaming revenues were broadly flat on the prior year, with gaming machines revenue up 4.4%, whilst table games revenue was down 2.5%. Crown Perth’s local performance was encouraging, with main floor gaming revenue up 2.2% and non-gaming revenue up 5.7% on the prior year. This reflects the success of recent marketing initiatives and continued strong visitation to the property, however we are continuing to see softness in table games, particularly at the premium end.”

“VIP program play turnover at our Australian resorts was down 34.2% on the prior year, with the business impacted by a continuation of softer market conditions, exacerbated by recent negative publicity. However, during the period we benefited from an above theoretical win rate on VIP program play turnover, with actual VIP program play revenue up 9.2% on the prior year,“ he added.

Coronavirus update.

Crown has been closely monitoring the novel coronavirus outbreak and continues to follow guidelines from relevant health authorities.

It advised that it has been experiencing softer trading conditions as a result of travel restrictions and general community uncertainty in response to the outbreak. This was particularly the case over the Lunar New Year period. No guidance was provided for the full year.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Crown Resorts Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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