Crown Resorts : 2022 Half Year Results - Presentation Slides

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Crown Resorts Limited

2022 Half Year Results Presentation

17 February 2022

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Blackstone Transaction1

• On 14 February 2022, Crown announced that it had entered into a scheme implementation deed with a company on behalf of funds managed and advised by Blackstone Inc., and its affiliates (together, Blackstone), under which Blackstone will acquire all of the shares in Crown by way of a scheme of arrangement (Scheme) at a price of $13.10 cash per share (Blackstone Transaction)
• The price of $13.10 cash per share:
• • Values Crown's equity at approximately $8.9 billion and represents an increase in equity value of more than $845 million to the price of $11.85 cash per share initially offered by Blackstone in March 2021; and
  • Represents a premium of c.32% to the closing price of Crown shares on 18 November 2021 of $9.90 (being the last trading day prior to Crown receiving an acquisition proposal from Blackstone at a price of $12.50)
• The Blackstone Transaction is subject to various conditions including:
• • The Independent Expert concluding (and continuing to conclude) that the Scheme is in the best interests of Crown shareholders
  • Approval from the Foreign Investment Review Board (FIRB)
  • Approval from Crown's various gaming regulatory authorities and counterparties to Framework Agreements
  • Certain agreed Gaming Regulatory Events in respect of Crown's key licences in Victoria, Western Australia and New South Wales having not occurred
  • No Material Adverse Change having occurred
  • Approval from Crown's shareholders
• Full details of the conditions to the Scheme and other agreed terms are set out in the scheme implementation deed, a copy of which was attached to Crown's announcement on 14 February 2022
• The Crown Board unanimously recommends that shareholders vote in favour of the Blackstone Transaction in the absence of a superior proposal, and subject to an independent expert concluding (and continuing to conclude) that the Scheme is in the best interests of Crown shareholders
• Subject to the expected timing of regulatory approvals, the Scheme Meeting is expected to be held in the second quarter of calendar year 2022

1. Unless otherwise defined, capitalised terms on this slide have the meaning given to them in the scheme implementation deed, a copy of which was attached to Crown's announcement on 14 February 2022.

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Crown Resorts Limited - 2022 Half Year Results Presentation

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Crown Resorts Limited Results Summary1

• 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

1. This presentation 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 slide 15 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.

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Crown Resorts Limited - 2022 Half Year Results Presentation

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Crown Resorts Limited Results Overview

• 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
• Crown Melbourne was closed for 96 days in 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's non-gaming operations were closed for 102 days in the period. The business showed improving trends upon re-opening, however operational constraints and limited domestic and international travel continue to weigh on overall financial performance. Whilst no official opening date has been confirmed in relation to the opening of gaming in Sydney, Crown is targeting to be in a position to announce the opening of the gaming floor shortly
• 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
• Crown is carrying an inflated cost base, with corporate costs approximately $50 million higher than the pcp, primarily relating to higher legal and consulting fees associated with various regulatory processes. Corporate costs are expected to be lower in the second half following the conclusion of the Victorian Royal Commission and evidentiary hearings of the Perth Casino Royal Commission
• Significant investment in resourcing and remediation is continuing, with the current cost of the Financial Crime, Risk, Compliance and Responsible Gaming teams across Melbourne and Perth almost $30 million higher than the equivalent cost in F19
• Trading performance to begin the calendar year has been subdued, with the emergence of the Omicron variant impacting patronage and operational capacities in Melbourne and Sydney. Perth has been similarly affected, with increased uncertainty from COVID-19 and the recent imposition of new restrictions impacting patronage to the property
• Crown is focused on selling all remaining Crown Sydney apartments by 30 June 2022, with receipt of the final approximately $275 million in expected settlement proceeds subject to timing of the sales
• At 31 December 2021, Crown's net debt position was approximately $950 million (excluding working capital cash), and total liquidity was approximately $700 million
• Based on Crown's performance against the applicable financial ratios for the six months ended 31 December 2021, a 'Mandatory Deferral Event' now exists in relation to the Crown Subordinated Notes II

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Crown Resorts Limited - 2022 Half Year Results Presentation

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Crown Resorts Limited Group Result

1. During 1H F22, Crown's equity accounted result was comprised of its net equity accounted share of NPAT from Nobu and Chill Gaming. Previously Crown also equity accounted its result of Aspers (which was classified as held for sale during 1H F22).