Packer Accelerates Crown Makeover as CEO Leaves, IPO ScrappedBy and
First-half profit before items falls 9.1% amid China crackdown
Crown scraps proposed listing of some of company’s hotels
Billionaire James Packer accelerated his restructure of Crown Resorts Ltd., replacing the chief executive officer and scrapping a hotels listing as the casino operator seeks to recover from a gambling crackdown in China.
John Alexander, who’s worked for the Packer family for almost two decades and was named Crown chairman last month, will also take over the CEO role from Rowen Craigie next week, the company said Thursday. The concentration of power reflects Crown’s tighter focus on its Australian operations, after a group of employees were detained on the Chinese mainland in October for alleged gambling-related crimes.
Crown shares soared in Sydney as it announced a special dividend and pushed on with a A$500 million ($384 million) stock buyback. That overrode investor concern about a slump in high-roller gambling stemming from Crown’s crisis in China, said William O’Loughlin, an investment analyst at Rivkin Securities Pty in Sydney.
“If they’re willing to pay that, then they’re happy with their cash position,” O’Loughlin said. “That buys a little bit of confidence. The decline in VIP revenue was probably well anticipated by the market.’’
Packer, whose investment company owns 48 percent of Crown, returned to the board last month and has made resolving the situation in China his top priority. The company has already scrapped a spinoff of overseas assets and sold more than half its stake in Macau casino operator Melco Crown Entertainment Ltd. as it now focuses on its hotels and casinos in Australia.
Crown scrapped a proposed initial public offering of a trust holding the company’s Australian hotels partly because it raised capital instead from the sale of Melco Crown shares.
The stock jumped 8.2 percent to A$12.32 at 2:46 p.m. in Sydney as Crown announced a special dividend of 83 Australian cents a share. The stock climbed to the highest level since the China detentions, which raised concern of a renewed clampdown on overseas casino operators that woo Chinese citizens offshore to gamble.
Crown joined Australian rival Star Entertainment Group Ltd. in freezing its Chinese business until it grasps the scope of the Chinese clampdown. There’s been no clarity on the employees being held and Crown has stopped marketing in the country, Alexander said.
“Frankly we look at that as a pause rather than a retreat,” he told reporters in Melbourne. “We are waiting for clarity on China and the details behind that, but no intention to retreat from where we stand in the market.”
Alexander said there were now 14 Crown employees being held in China after one was released. Crown, which initially said 18 had been detained, didn’t explain the discrepancy.
Amid the crackdown, Crown is pushing ahead with a A$2 billion luxury hotel and casino on Sydney’s waterfront -- a six-star resort that’s due to be completed in 2021 and will focus on high-roller gamblers. Crown is confident the project will be profitable, partly because it would be attractive to local gamers, too, Alexander said.
Mainland China represents less than half of Crown’s VIP customer base, Alexander said. The other half is sprinkled between Singapore, Malaysia, Indonesia, Hong Kong and other parts of North Asia, he said.
Earnings at Crown before significant items fell 9.1 percent to A$191.3 million in the six months ended Dec. 31 as revenue at Crown’s Australian resorts declined. Turnover from the VIP program dropped 45 percent to A$19.6 billion.
Star, which runs Sydney’s only licensed casino, last week said total bets from Star’s international VIP clients slumped 27 percent in November and December in the wake of the Crown detentions.