An independent auditors report into beleaguered Australian casino operator Crown Resorts has indicated material uncertainty around the companys ability to continue as a going concern.
The KPMG report, which was attached to Crowns 2021 Annual Report, published Thursday, said it had concluded there exists material uncertainty related to going concern based on the potential impacts resulting from COVID-19 we well as ongoing legal and regulatory matters that threaten the operators casino licenses in Victoria, Perth and New South Wales.
Crown is currently awaiting the findings of Royal Commissions around its suitability to retain licenses for Crown Melbourne and Crown Perth, while talks are ongoing in NSW after the regulator found Crown unsuitable to hold a license for Crown Sydney in February.
In particular, KPMG made it clear that uncertainty exists based on a thorough examination of Crowns financial accounts, including data used by the company for forward projections and planned levels of operating and capital expenditures for consistency of relationships and trends to the Groups historical results, 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.
Notably absent from Crowns Annual Report is any impairment on the value of its three casino licenses, although the company has placed an impairment estimate on each as part of a sensitivity analysis.
In case of cancellation of its Crown Melbourne casino licence, Crown said it would expect an impairment of the Crown Melbourne licence of AU$490.2 million, the casino management agreement asset of AU$108 million and prepaid casino tax asset of AU$43.9 million.
Cancellation of the Crown Perth casino licence would result in impairment of AU$440.4 million and the Crown Sydney license not being issued would result in an impairment of AU$100.0 million, plus probable impairment to the property, plant and equipment. Total impairment of those assets would come to around AU$1.18 billion.
Crowns 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 organisational structures, enhanced capability and increased resourcing across a number of key areas, including Crowns Financial Crime, Compliance and Responsible Gaming functions.
In addition, we have implemented other changes to Crowns 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 organisation, and Crowns 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 Crowns reputation and build the trust of our communities, regulators and governments, and investors as a responsible operator of outstanding quality integrated resorts.
The findings of Victorias Royal Commission into the suitability of Crown Melbourne are due to be handed down by 15 October.