Impairment charges pummel Donaco International Limited amidst annual losses
Asian casino operator Donaco International Limited have found themselves in troubled waters.
Their recently released financial results for the twelve months to the end of June show an annual loss that widened by 55.8% year-on-year to hit nearly $130.88 million. The cause was $134.99 million in non-cash impairment charges.
A report obtained from GGRAsia, reveals that the Sydney-listed firm used an official filing to detail the impairment charges. These included a $125.86 million setback linked to the value of the casino license for its Star Vegas Resort and Club property. This followed an attempt by the owner of the Cambodian venue to terminate its 50-year lease. The matter currently remains the subject of litigation.
Profits through the floor
Despite the impairment penalties, Donaco’s underlying net profit after tax, for the twelve-month period had reached approximately $6.19 million. However, this represented a year-on-year decline of 49.7%.
Overall annual revenues had plummeted by 6.8% to hit approximately $58.21 million, while its earnings before interest, tax, depreciation, and amortization were 30.2% lower at around $19.96 million.
Donaco cited rising competition in the Cambodian casino market as the cause of an overall annual reduction in revenues for its Star Vegas Resort and Club. The revenues fell by a little over 2.8% year-on-year to slightly above $43.64 million. The venue’s net gaming revenues also shrank by 9.9%.
To add to the firm’s woes, unfavourable junket deals, linked to previous management team members, had negatively impacted their facility located in the border town of Poipet. Donaco hopes that a process of renegotiating some of these arrangements will yield favourable results.
Seemingly defiant of the growing adversity at its doorstep, Donaco’s Star Vegas Resort and Club improved on the previous year’s visitor numbers. The venue recorded an impressive VIP turnover swell of 76% ‘due to the full-year impact of junkets brought in to replace those poached by the Thai vendor in the fiscal year 2018’ according to the report.
Bouncing back in Vietnam:
According to Donaco, “a weak start to the year’ at their gaming operation inside northern Vietnam’s Aristo International Hotel set their VIP business back 54%. This, in turn, led to an annual drop in 0/revenues by 16.6% year-on-year to around $14.57 million
Fortune shifted in the firm’s favour, with the enterprise recovering in the second half of the year as they posted a full-year win rate that was 0.18 percentage points higher than the previous twelve-month period at 2.09%.
Changing faces as heads roll:
GGRAsia further reported that Donaco subsequently used a second filing to report significant operational and management changes. The recent appointment of Paul Arbuckle as its new Chief Executive Office stands out as the most prominent. A desire for a ‘fresh start’ inspired the removal from its board in July of two founding members. Joey Lim Keong Yew and Ben Lim Keong Hoe, the grandsons of Genting Malaysia Berhad and founder Lim Goh Tong were obliged to vacate their posts for the sake of the organization’s future.
A humbling renewal:
In poignant fashion, Donaco International Limited used this presentation as a means to lay them bare. Reflecting on their most recent full-year results, they admitted that a ‘lack of effective management and leadership under [the] former executive team’ had lead to this catastrophic freefall in the company’s fortunes.
The firm was happy to share that the newly appointed senior leadership had made ‘an immediate positive impact’, with their July results from both operations showing significant improvement.