Crown Resorts : announces 2022 Half Year Results

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ASX / MEDIA RELEASE FOR IMMEDIATE RELEASE 17 February 2022

CROWN ANNOUNCES 2022 HALF YEAR RESULTS

MELBOURNE: Crown Resorts Limited (ASX: CWN) (Crown) today announced its results for the half year ended 31 December 2021:

• Summary of performance1:
• • Statutory revenue of $778.6 million, up 34.0% on the prior comparable period (pcp)
  • Reported NPAT attributable to the parent a loss of $196.3 million, which compared to a loss of $120.9 million in the pcp
  • Reported EBITDA a loss of $47.5 million, down from a profit of $4.4 million in the pcp
  • Theoretical2 NPAT attributable to the parent before Closure Costs3 and Significant Items4 a loss of $112.5 million, down from a loss of $17.9 million in the pcp
  • Theoretical EBITDA before Closure Costs and Significant Items of $28.8 million, down 79.6% on the pcp
  • Closure Costs3 of $79.2 million (net of tax), which includes costs incurred at Crown Melbourne, Crown Perth and Crown Sydney whilst the properties were closed due to Government direction5
  • Net Significant Items expense of $2.7 million (net of tax) relating to Crown Sydney pre-opening costs, contribution towards class action settlement, restructuring costs, and goodwill impairment on DGN, partly offset by the profit on disposal of Crown Sydney apartments and other non-current assets6
  • No interim dividend declared

Crown's Managing Director and Chief Executive Officer, Steve McCann, said:

"Crown's first half performance reflects the continued challenging operating conditions as a result of COVID- 19 as well as the impact of ongoing regulatory matters.

"While we do not underestimate current headwinds facing Crown, there is growing confidence we have turned the corner. All three of our domestic resorts are back open, with a vaccination strategy to combat COVID-19 providing a pathway forward for our staff, the business and the wider community.

"Importantly, we continue to build momentum on our company-wide reforms, accelerating work on our remediation plan and making significant advances across multiple regulatory processes. Not only are we

1. This announcement includes certain non-IFRS measures, including theoretical results, EBITDA, Significant Items and Closure Costs, which are used internally by management to assess the performance of the business. Non-IFRS measures and recent trading results have not been subject to audit or review.
2. Theoretical results have been adjusted to exclude the impact of any variance from theoretical win rate on VIP program play. The theoretical win rate is the expected hold percentage on VIP program play over time. The theoretical result gives rise to adjustments to VIP program play revenue, operating expenses and income tax expense. Crown believes that theoretical results are the relevant measure of viewing performance of the business as it removes the inherent volatility in VIP gaming revenue.
3. Costs incurred at Crown's properties whilst the properties were closed due to Government direction (Closure Costs). Refer to note 3 to the financial statements contained in the Appendix 4D released on the same date as this announcement for further information.
4. Transactions that are not in the ordinary course of business or are material and unexpected due to their size and nature. Refer to note 4(e) to the financial statements contained in the Appendix 4D released on the same date as this announcement for further information.
5. Closure Costs of $58.1 million (net of tax) were recorded in the pcp relating to Crown Melbourne and Crown Aspinalls.
6. Net Significant Items expense of $42.0 million (net of tax) were recorded in the pcp relating to Crown Sydney pre-opening costs, one- off allowance for expected credit losses and a reassessment of DGN contingent consideration.

Crown Resorts Limited ABN 39 125 709 953

Level 3, Crown Towers, 8 Whiteman Street, Southbank VIC 3006

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building a stronger business, we are working well with the regulators with a priority to deliver a safe and responsible world-class gaming operation.

"In Victoria, we are working in a collaborative and constructive manner with the Special Manager and his office, as well as the new regulator, the VGCCC, to ensure that we build a safe and responsible gaming environment at Crown Melbourne as we seek to re-establish our suitability to hold a casino licence in Victoria.

"Hearings of the Perth Casino Royal Commission have now concluded. We await the final report, which is due to be provided to the Western Australian Government in early March, and remain committed to working collaboratively with the Government and the regulator on any findings and recommendations that follow.

"At Crown Sydney, we have been encouraged by the demand for our first-class restaurants and hotel when non-gaming operations have been open. We remain in constructive discussions with both ILGA and the independent monitor as we work towards the opening of gaming. Whilst no official opening date has been confirmed by the regulator, we are targeting to be in a position to announce the opening of the gaming floor shortly.

"Crown has world-class assets with a global reputation for premium service and talented people, and our comprehensive reform program will help build a stronger, more sustainable business. The Blackstone transaction that was announced on Monday reinforces the underlying value and attractiveness of our business and assets. We believe it is a good outcome for shareholders and welcome news for our people, customers and stakeholders."

Crown's Chief Financial Officer, Alan McGregor, said:

"Crown Melbourne was closed for a large part of the first half. Operations recommenced in October 2021, with improving trends in the business towards the end of the reporting period as restrictions eased.

"Similarly, Crown Sydney faced significant disruption from COVID-19 during the half. Whilst open, we have continued to see impressive average room rates and encouraging demand for our food and beverage venues, however operational constraints and limited domestic and international travel continue to weigh on overall financial performance.

"Conversely, Crown Perth delivered a solid result, with stable performance following a short-term closure to begin the half. On an underlying basis, EBITDA was down around 20% as the business cycled the strong performance in the prior year.

"Our significant investment in resourcing and remediation continues, which is reflected by the current annual cost of our Financial Crime, Risk, Compliance and Responsible Gaming teams across Melbourne and Perth being almost $30 million higher than the equivalent cost in the 2019 financial year. We also reported a material increase in corporate costs during the half, which was primarily driven by legal and consulting costs associated with the various regulatory processes, particularly the Victorian Royal Commission and Perth Casino Royal Commission.

"Unfortunately, the emergence of the Omicron variant and the resulting significant increase in COVID-19 case numbers across both Victoria and New South Wales has had an impact on our trading performance to begin the calendar year, with reduced patronage and a number of staff required to isolate. We are also seeing subdued performance in Perth, with increased uncertainty from COVID-19 and the recent imposition of new restrictions significantly impacting patronage to the property.

"Whilst these near-term challenges are currently impacting business performance, we remain confident in the long-term outlook for the business as we embed the reforms contained in our remediation plan and normal consumer patterns return as society learns to live with the virus."

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2022 HALF YEAR FINANCIAL RESULTS

Detailed information on each reporting segment relating to the half year ended 31 December 2021 is provided below.

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CROWN MELBOURNE

Operating Conditions

Crown Melbourne continued to face significant disruption as a result of the COVID-19 pandemic, with gaming operations closed for 96 days during the half7. This compared to the pcp where gaming operations were closed for 134 days.

Operating restrictions were progressively lifted from mid-October for fully vaccinated patrons and staff. Whilst open, various operating restrictions applied, including patron capacity and density limits, restrictions on available gaming product and physical distancing protocols.

Financial Performance

Revenue of $265.0 million compared to $97.1 million in the pcp, with main floor gaming revenue of $187.6 million (up $133.9 million) and non-gaming revenue of $77.4 million (up $37.7 million).

Given continued international border restrictions, there was no international VIP program play revenue in the period8.

Overall hotel occupancy across Crown Melbourne's three hotels was approximately 23%, with Crown Towers hotel occupancy 28%, Crown Metropol hotel occupancy 21% and Crown Promenade hotel occupancy 21%.

Theoretical EBITDA before Closure Costs and Significant Items was $7.1 million, compared to $5.8 million in the pcp9.

Closure Costs of $94.5 million were recorded during the period, whilst a net gain from Significant Items of $7.8 million related to the profit on disposal of other non-current assets (comprising an aircraft and a parcel of land), partly offset by restructuring costs.

Reported EBITDA was a loss of $79.6 million, compared to a loss of $87.8 million in the pcp.

CROWN PERTH

Operating Conditions

Shortly before the end of the 2021 financial year, Crown Perth was required to close its gaming operations in response to Western Australian Government restrictions due to COVID-1910. On 6 July 2021, Crown Perth recommenced trading of gaming and non-gaming operations at a reduced capacity, whilst from 12 July 2021, Crown Perth recommenced trading of all gaming and non-gaming operations, with restrictions transitioning to pre-COVID-19 conditions.

Financial Performance

Revenue of $402.9 million was down 1.5% on the pcp, with main floor gaming revenue of $236.5 million, down 14.1%, and non-gaming revenue of $166.4 million, up 24.7%.

There was no VIP program play revenue in the period as Crown no longer offers VIP program play at Crown Perth.

Overall hotel occupancy across Crown Perth's three hotels was approximately 73%, with Crown Towers hotel occupancy 77%, Crown Metropol hotel occupancy 75% and Crown Promenade hotel occupancy 61%.

1. During the first half, Crown Melbourne's gaming operations were closed for the periods 16 July to 27 July 2021 and 6 August to 28 October 2021.
2. From 1 July 2021, interstate VIP program play revenue is included in main floor revenue, and no longer adjusted for any variance from theoretical win rate.
3. The pcp included $15.7 million in payroll subsidies under the Commonwealth Government's JobKeeper scheme.
4. During the first half, Crown Perth's gaming operations were closed for the period 1 July to 5 July 2021.

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Theoretical EBITDA before Closure Costs and Significant Items was $109.6 million, down 32.6% on the pcp. Excluding the impact of JobKeeper payroll subsidies in the pcp11, EBITDA before Closure Costs and Significant Items was down 20.6%.

Closure Costs of $3.8 million were recorded during the period.

Reported EBITDA was $105.8 million, down 34.8% on the pcp.

The operating margin (before Closure Costs and Significant Items) decreased from 33.7% to 27.2% (excluding the impact of JobKeeper payroll subsidies received in the prior period). The decrease in margin reflected the normalisation of operating conditions, as well as increased costs and business mix.

CROWN SYDNEY

Operating Update

Non-gaming operations progressively commenced trading at Crown Sydney from late December 2020. During the period, Crown Sydney faced significant disruption as a result of COVID-19, and was closed for 102 days12. Non-gaming operations re-opened to fully vaccinated guests and staff on 11 October 2021, with operations showing improving trends.

Gaming areas are yet to commence operation as Crown continues to work through the consultation process with the casino's regulator, the Independent Liquor and Gaming Authority (ILGA). Crown is in frequent discussions with ILGA and the independent monitor, and while no official opening date has been confirmed by the regulator, Crown is targeting to be in a position to announce the opening of the gaming floor shortly. Opening is expected to occur on a staged basis given current staffing levels, with further recruitment for gaming-related roles required ahead of a full commencement of gaming operations.

Sales of the Crown Sydney apartments continue to progress, with almost $1.2 billion in gross sales and pre- sale commitments (inclusive of GST) to date. Based on current progress, Crown is focused on selling all remaining apartments by 30 June 2022. As at 31 December 2021, approximately $975 million in sale proceeds (net of GST) had been received (including deposits previously released), with receipt of the final approximately $275 million in expected settlement proceeds (net of GST) subject to timing of the sales.

Only limited spend remains on the total project cost of approximately $2.2 billion. The expected net project cost following completion of all apartment sales, net of tax attributable to the gain on sale of apartments, remains approximately $1.1 billion.

Financial Performance

Non-gaming revenue was $36.1 million, compared to $0.9 million in the pcp.

Hotel occupancy was 17% during the period. Upon re-opening in October 2021, hotel occupancy showed improving trends, averaging nearly 40%, with higher occupancy on weekends and strong average room rates.

EBITDA before Closure Costs and Significant Items was a loss of $4.3 million compared with a loss of $0.7 million in the pcp.

Closure Costs of $14.8 million were recorded during the period, whilst there was a net gain from Significant Items of $54.8 million related to the profit on disposal of Crown Sydney apartments, partly offset by pre- opening costs13.

Reported EBITDA was $35.7 million, compared to a loss of $26.0 million in the pcp.

1. The pcp included $24.7 million in payroll subsidies under the Commonwealth Government's JobKeeper scheme.
2. During the first half, Crown Sydney was closed for the period 1 July to 10 October 2021.
3. Gaming relating costs (including an appropriate allocation of Support Departments) that continue to be incurred prior to the commencement of gaming operations.

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CROWN ASPINALLS

Operating Conditions

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Crown Aspinalls continued to face challenging operating conditions during the period as a result of COVID-19. The property was required to close for certain periods of time due to operational constraints, and when open, performance was impacted by subdued international travel, staff shortages and reduced operating hours.

Financial Performance

Theoretical EBITDA before Closure Costs and Significant Items was a loss of $3.2 million, compared to a loss of $5.3 million in the pcp.

There were no Closure Costs or Significant Items during the period, as the periods of closure were not due to Government direction.

Reported EBITDA was a loss of $5.5 million, compared to a loss of $23.0 million in the pcp. The reported EBITDA result takes into account the variance from the theoretical VIP program play result which had a negative EBITDA impact of $2.3 million. This compares to a positive EBITDA impact of $0.6 million in the pcp.

CROWN DIGITAL

Revenue from Crown's wagering and online social gaming operations was $69.5 million, down 12.7% on the pcp, whilst EBITDA of $14.3 million was down 38.4% on the pcp.

Revenues across both Betfair and DGN were lower as both businesses cycled strong performance in the pcp. Expenses did not decline to the same extent as both businesses continue to invest to drive longer term growth, resulting in an overall decline in margin.

CORPORATE COSTS

During the period, corporate costs before Significant Items were $94.7 million, $50.5 million higher than the pcp.

The increase in corporate costs primarily related to higher legal and consulting fees associated with various regulatory inquiries. With the conclusion of the Victorian Royal Commission and evidentiary hearings of the Perth Casino Royal Commission during the period, corporate costs are expected to be lower in the second half. Crown now expects full year corporate costs to be around $150 million14.

On 29 October 2021, Crown announced it had reached an agreement to settle the shareholder class action commenced against it on 4 December 2017 in the Federal Court of Australia, referenced as Zantran Pty Limited v Crown Resorts Limited. The expected total settlement amount is $125 million, inclusive of interest and costs. Crown contributed $20 million towards the settlement amount during the period, which has been recorded as a significant item. Crown is considering its legal rights of recovery for this contribution. The settlement of this Proceeding is subject to Federal Court approval and other conditions and is scheduled for an approval hearing on 28 April 2022.

EQUITY ACCOUNTED INVESTMENTS

Crown's equity accounted result is comprised of its net equity accounted share of profit from Nobu, offset by the net equity accounted shares of losses from Chill Gaming15. Crown's net equity accounted share of NPAT across these investments was a gain of $7.3 million, primarily driven by the improved performance of Nobu during the half.

1. Excluding costs associated with the Blackstone proposal.
2. As Aspers was classified as held for sale during the period, Crown did not equity account its results.

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