Crown Resorts Decisions Amidst The Pandemic

One of the ways to track a gambling business through the coronavirus pandemic is to follow one company, to look at the way it handles the rough times.

Crown Resorts is a well-known company in Australia and even in the gambling and resort business worldwide. It’s an ideal specimen.

Initial Reactions

When the number of COVID-19 cases in Australia began to increase in March, Crown instructed its casinos institute the same protocol as nearly every other casino.

Let’s look at the timeline of the past few weeks as told by press releases:

• March 16: Crown Melbourne would deactivate every second gaming machine and electronic table game, distance seats at table games, prohibit standing players, restrict players at table games, provide hand sanitizer, strengthen cleaning measures.
• March 17: Above social distancing measures applied to Crown Perth as well.
• March 19: Above policies amended to restrict restaurants, bars, conferences to 100 persons.
• March 20: Paused trading. Soon after, halted trading.
• March 23: Resumed trading but closed all gaming at Melbourne and Perth casinos, restricted restaurants to takeaway or delivery only, hotel to operate at reduced capacity

The aforementioned pause and halt in trading happened when stock prices plummeted during that initial week of changes and then the closures. The price on March 2 was $10.24, but by March 20, it sunk to $5.90.

Making Business Moves

Earlier in March, on the business side of Crown, Ken Barton took over as Director. And soon after, Crown appointed Alan McGregor took on the role of Chief Financial Officer.

As Crown began implementing its coronavirus response measures, the company also made a $1.5 million payment on a loan.

On April 1, Crown updated shareholders regarding interim dividends, specifically one declared on February 19 on ordinary shares of $0.30 per share to be franked to 25%. The Board decided to defer that payment from April 3 to April 17, and the dividend will be unfranked.

As of March 31, Crown’s share price on the Australian Securities Exchange rebounded a bit, hitting a high point of $7.98. It has since settled on $7.49.

Market Reactions

Back on March 24, when Crown stood down thousands upon thousands of workers, Moody’s Investor Service placed Crown Resorts Limited (CWN) on a review for downgrade. What was already a moderate credit risk was to be reviewed for a further downgrade from Baa2.

On April 1, Fitch Ratings asserted that Crown Resorts has the “cushion to manage coronavirus shutdown.” Its analysts believe that the low net debt position as of December 31 and the highly variable cost structure provides the company with the necessary room to absorb the effects of the facility shutdowns over the past several weeks.

Fitch understands that Crown’s ability to generate revenue from its operations will be directly and severely restricted for the indefinite future. It could be one month or many months before its properties can reopen, and it is now known how business will rebound.

Many await the measures that Crown is expected to reveal to minimize the harm amidst the current and future restrictions. Fitch, in particular, believes that Crown will implement extraordinary measures, like suspending its dividend and preserving cash.

Employees Out on a Limb

The Guardian reported that Crown stood down 10,000 workers on March 23, according to the United Workers Union. The UWU also estimated that another 10,000 could be out of work when smaller operations began to shutter. And subsequent reports that the total came to nearly 18,500 people.

The initial reports indicated that UWU ensured employees would be paid for another two weeks based on average hours worked. And casual payments would be $1,000.

The Australian government then announced on March 30 that it will provide fortnightly payments to workers who lost their jobs. This will benefit Crown if former employees use less of their annual leave due to the government subsidies.

Employees are just starting to feel the impact of their unemployment or will in the coming weeks. Crown’s response to those employees will affect the company’s image and possibly the trust of its shareholders, who must inevitably – and hopefully, for the sake of the workers – balance humanity and stock value.