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Caesars hit by losses despite revenue growth in first half

News | Uncategorised

Caesars Entertainment has reported a net loss of $532m for the first half of 2019, despite also experiencing a year-on-year increase in net revenue.

The US casino giant generated revenue of $4.34bn during the six months to June 30, up from $4.09bn in the corresponding period last year.

Caesars’ casino operations remained by far the biggest source of income during the first half, with revenue rising from $2.04bn last year to $2.21bn – driven by its operations in the Las Vegas market

There was also revenue growth across all areas of Caesars’ business, with food and beverage revenue climbing from $774m to $805m and rooms revenue from $755m to $793m.

However, Caesars reported an increase in operating expenses in the first half, as it spent a total of $3.83bn during the period. Direct casino costs were up from $1.13bn to $1.25bn, while property, general, administrative and other expenses jumped from $883m to $927m.

Caesars also noted an additional charge of $50m in relation to the impairment of intangible assets, although it did see depreciation and amortisation costs drop from $548m to $488m.

Income from operations increased from $407m to $509m, but higher losses in certain areas of the business meant net loss jumped from just $5m in the first half of last year to $532m. Loss before tax also rocketed from $28m to $622m.

The results have been revealed after Caesars’ new chief executive, Tony Rodio, hailed a solid performance by the business during the second quarter of the year.

During the three months to June 30, revenue was up 4.9% to $2.22bn – ahead of the first quarter – with Las Vegas revenue up 1.0% to $1.00bn and other US revenue climbing 8.4% to $1.06bn.

Las Vegas net income climbed 12.2% to $184m while Caesars’ other operations in the US improved from a loss of $9m to an income of $16m. However, with its other operations seeing net loss widen from $126m to $515m, total net loss for the quarter stood at $315m for the quarter, compared to net income of $29m last year.

“Caesars delivered solid financial results in the second quarter driven by the contribution from Centaur and strength from our Las Vegas hotel and food and beverage businesses,” Rodio said.

“Our Las Vegas performance was the result of strong group and leisure demand, which produced an all-time quarterly record for hotel cash revenue and occupancy for the second consecutive quarter. These results were partially offset by competitive pressures in Atlantic City and other parts of our regional portfolio, as well as unfavourable hold predominately at Caesars Palace.”

At the end of the first half, Caesars Entertainment Corporation announced that it had agreed to merge with Eldorado Resorts, in a move that will create a new market leader in the US gambling sector.

The deal is valued at approximately $17.3bn, with Eldorado to acquire all of the outstanding shares in Caesars for a value of $12.75 per share, consisting of $8.40 per share in cash, and 0.0899 shares of Eldorado common stock.

“As we work toward successful completion of the proposed merger with Eldorado Resorts, the management team and I remain focused on improving the company’s operations and financial profile through incremental revenue opportunities and operating efficiencies,” Rodio said.

“I’m confident that the proposed transaction will create an industry leading platform poised to succeed in our dynamic industry.”