Crown Resorts is on notice that its casino operations in New South Wales, Victoria and Western Australia may not survive as a single entity.
Earlier this month, the company’s auditor indicated that multiple money-laundering probes and the impact of the Covid-19 pandemic have made for “material” uncertainty over its ability to continue as “a going concern.”
In a lengthy report, the auditor, KPMG, warned that the Australian Transaction Reports and Analysis Centre (AUSTRAC) is “very likely” to begin civil proceedings against Crown casinos in Melbourne and Perth. “If it does so, it is likely that Crown Melbourne and Crown Perth will be required to pay significant civil penalties.” Moreover, the cancelation of one or more of its state gaming licenses could trigger defaults on some of its debts. Its bonds are also at risk of having to be repaid if its credit rating falls below investment grade, KPMG added.
“The conditions disclosed … indicate a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern,” the auditor said in the report cited by Reuters.
Crown is currently awaiting the findings of royal commissions around its suitability to retain licenses in Melbourne and Perth. At the same time, talks are ongoing in NSW after the regulator found Crown unsuitable to hold a license for Crown Sydney in February.
KPMG said the uncertainty is exacerbated “particularly in light of recent loss-making operations impacted by Covid-19.”
The assessment took into account the “potential for further/future impacts to the Group, an estimated rate of recovery, and expectations of a return to historical levels of trading activity,” as well as the “forecast financial impact of uncertain future events, including Covid-19 and, where possible, potential outcomes of the legal and regulatory matters and implications for adherence to covenants and conditions.”
Crown’s annual report also outlined the recent development of a “comprehensive Remediation Plan” addressing failings in governance, compliance, responsible gaming and the management of financial crime risk uncovered during recent inquiries in NSW and Victoria.
“We have already made significant progress in implementing reforms,” the company said in a statement signed by directors Jane Halton, Toni Korsanos, Nigel Morrison and Bruce Carter.
“We have revised organizational structures, enhanced capability and increased resourcing across a number of key areas, including Crown’s Financial Crime, Compliance and Responsible Gaming functions.
“In addition, we have implemented other changes to Crown’s business practices, such as the introduction of the Significant Player Review process, which has resulted in the exit of a number of customer relationships, ceased dealing with all junket operations, restructured the VIP international business (including closing all offshore offices) and terminated the information sharing agreements that were in place with [major shareholder] CPH. There is also a substantial culture reform program underway.
“The significantly renewed board and leadership team are committed to setting the standard expected across the organization, and Crown’s employees have embraced the change with engagement, energy and commitment.
“We will continue to work hard to implement these reforms as we seek to repair Crown’s reputation and build the trust of our communities, regulators and governments, and investors as a responsible operator of outstanding quality integrated resorts.”
