PBL finds jewel in Crown

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A strong operating profit recorded in 2001 from the Publishing and Broadcasting Limited-controlled Crown Ltd reveals the extent of the bargain Mr Kerry Packer made when he paid $1.55 billion for the Melbourne casino in 1998.

 

The $1.2 billion-a-year monopoly business is worth up to three times more than what Mr Packer paid in December 1998, as shown by the casino’s 2001 full accounts, which were released on Friday.

 

The takeover bid was struck at an historic top-line price-earnings multiple of 14, and using that multiple for the $300.2 million EBITDA the casino made in 2001, Crown is now worth $4.23 billion.

 

Even against a more conservative benchmark of a 1998-99 price-earnings multiple of 7.75, the casino is now worth $2.33 billion, putting Mr Packer $780 million ahead.

 

The head of Crown, Mr Ian Johnson, who was paid $811,000 for the year, said Crown “was trading extremely well”, with development plans for the mandatory second tower almost finished.

 

Tenders are being accepted for construction of the tower and its foundations have commenced. It is expected to cost $150 million and must be finished by November 2003.

 

The accounts show the casino made a net profit of $237.1 million from $183.7 million previously, while revenue rose to $1.17 billion from $1.06 billion.

 

They also show a 13 per cent increase in Togel  gaming revenue to $923.6 million, but a 1.5 per cent decline in food and beverage revenues to $120.3 million, which the group has blamed on the new consumption tax. Hotel revenue rose 16.3 per cent to $41.4 million.

 

The accounts reveal the casino is being audited by the tax office over the deductability of mandatory payments made to the Victorian Government.

 

Mr Johnson said, however, that the outcome of the investigation would not have an impact on the future accounts.

 

The casino is generating a steady gross margin of 18.6 per cent and an EBITDA margin of 26 per cent. Its contribution to PBL EBIT has increased 20 per cent to 42 per cent and it comprises about 30 per cent of group assets employed.