Crown (ASX:CWN) share price outperforms despite auditor concerns

The Crown share price has outperformed the ASX 200 following the release of its annual report, including a worrying warning from its auditor

The Crown Resorts Ltd (ASX: CWN) share price has outperformed the S&P/ASX 200 Index (ASX: XJO) today, despite the company's auditor's concerns over "material uncertainty".

KPMG was charged with auditing Crown's annual report and outlined its trepidation within it. The auditor's partner, Rachel Milum, stated it considered the uncertainty surrounding Crown's ongoing legal and regulatory issues to be "fundamental to readers of the group's financial report".

Milum also commented, "a material uncertainty exists that may cast significant doubt on the group's ability to continue as a going concern and, therefore, whether it will realise its assets and discharge its liabilities in the normal course of business".

Despite KPMG's concerns, the Crown share price performed better than the broader market today.

While it was down 1.51% to $9.76 at the close of trading, the ASX 200 dropped a significant 1.9%.

Let's take a closer look at how Crown performed over the 2021 financial year (FY21).

Man in hat at casino table with cards and chips looking disappointed

Image source: Getty Images

Crown share price slips on $261 million loss

Here are the key metrics for the gaming and entertainment group in FY21:

  • Statutory revenue of $1,536 million;
  • Earnings before interest, tax, depreciation, and amortisation (EBITDA) of $114.1 million;
  • After-tax loss of $261.6 million;
  • No dividend.

Crown has stated it's maintained a sound financial position with a well-invested asset base, significant tangible asset backing, and a low level of gearing in FY21.

However, due to the ongoing impacts of COVID-19 and the uncertainty associated with regulatory processes, Crown has engaged its lenders.

Its lenders have provided it with a package of amendments to its financing arrangements.

Crown also plans to sell apartments at Crown Sydney. It believes the sales will allow it to continue navigating its challenges.

As of 30 June 2021, Crown had $1,283 million of debt and $390 million of cash.

What happened in FY21 for Crown?

Here's what drove the Crown share price in FY21:

The biggest news from Crown this year was likely the Bergin Report. The report found Crown unsuitable to run its Bangaroo Casino in Sydney.

The report also led to the Victorian Royal Commission into the suitability of Crown to hold a Victorian casino licence.

Crown's former chair, Helen Coonan, and the former CEO of its Melbourne business, Xavier Walsh, both stepped down as a result of the commission.

Those interested can find the latest on the Victorian Royal Commission here.

Crown Melbourne was also closed for 160 days of FY21 as Melbourne battled its second wave of COVID-19.

When Crown Melbourne was open, it faced restrictions. These included capacity limits, restrictions on products, and physical distancing requirements.  

However, Crown Perth performed well during FY21. Crown Perth re-opened in late June 2020 and stayed open for the whole first half of FY21 before a series of short-term lockdowns hit in the second half.

Crown Perth's gaming operations were closed for 27 days of FY21.

Finally, Crown Sydney opened to the public in late December 2020 for the first time. However, gaming operations haven't began at the complex due to Crown's ongoing consultation with the NSW Independent Liquor & Gaming Authority on its suitability to run the operation.

What did management say?

Crown's interim chair Jane Halton AO PSM issued a statement alongside Crown's non-executive directors, Toni Korsanos, Nigel Morrison, and Bruce Carter, commenting on the year that's been for Crown and its share price. They said:

The 2021 financial year stands out as one of the most challenging in our history with unprecedented impacts on business operations from the COVID-19 pandemic and intense public and regulatory scrutiny.

Against the backdrop of a global pandemic, Crown continues to face additional uncertainty from ongoing regulatory investigations. Crown has apologised for the failings identified through these various regulatory processes and we are committed to doing everything in our power to redress them and earn back confidence and trust.

Our financial results for the year ended 30 June 2021 reflect the severe impact on operations from the COVID-19 pandemic.

What's next for Crown?

Here's what those interested in the Crown share price might want to keep an eye on in FY22:

The company is waiting to see the outcomes of the Victorian Royal Commission and the Perth Casino Royal Commission. They'll be released on 15 October 2021 and 4 March 2022 respectively.

Additionally, it will be waiting to see if it can indeed run Sydney's Barangaroo Casino.

Crown is also committing to continuing to work to repair its internal culture and the public's opinion of its business in FY22.

Finally, Crown Melbourne and Crown Perth are both under investigation by AUSTRAC which is looking into potential non-compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act.

It likely comes as no surprise that Crown hasn't provided guidance for FY22. Although, it did state it expects to get $500 million from the sale of Crown Sydney apartments during FY22.

Crown share price snapshot

Today's fall included, the Crown share price is currently 1.4% lower than it was at the start of 2021. However, it is 6% higher than it was this time last year.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Consumer Staples & Discretionary Shares

Woman using her laptop with her feet up.
Consumer Staples & Discretionary Shares

Why I'd buy and hold Woolworths and Wesfarmers shares for 10 years

I like businesses with strong customer relationships, and I think these two ASX retail giants have plenty going for them.

Read more »

Couple checking out shoes to buy at a shop.
Consumer Staples & Discretionary Shares

Buy, hold, sell: Super Retail, Baby Bunting, Wesfarmers shares

It's a tough environment for retailers amid drastically low consumer confidence, falling home values, and rising interest rates.

Read more »

Woman buying diary product and reading food label in grocery store.
Consumer Staples & Discretionary Shares

Coles share price sinks 12%: Should I buy the dip?

Sales are still growing, but the outlook has become more challenging. I look at whether the sharp share price decline…

Read more »

A judge bangs down the gavel.
Consumer Staples & Discretionary Shares

Star Entertainment hit with $260 million fine: Can it survive?

The Federal Court handed down the fine earlier today.

Read more »

A woman gives a side eye look with her lips pursed as though she might be saying ooh at something she's hearing or learning for the first time.
Consumer Staples & Discretionary Shares

Down 24%: Is this a rare buying opportunity in 1 of Australia's top shares?

This ASX stock has caught my attention recently.

Read more »

A woman sits on sofa pondering a question.
Consumer Staples & Discretionary Shares

Temple & Webster +30%, Nick Scali -15%: Why did sector correlation go out the window last week?

Two ASX furniture retailers, two very different share price reactions. What happened?

Read more »

Smiling man with a full trolley looking at an aisle in the supermarket while holding his phone.
Consumer Staples & Discretionary Shares

Should I buy Coles shares before its Q1 results?

The business is performing well, but the shares aren't cheap. Here's what I'm considering before Friday's announcement.

Read more »

Woman using smartphone to check product details while shopping in a grocery store aisle.
Consumer Staples & Discretionary Shares

Are Woolworths shares worth buying before Wednesday's big update?

The shares are not cheap, so I think tomorrow’s sales update will be particularly important.

Read more »