Donaco announces financial year results amid pandemic

by Charlotte Lee Last Updated
Donaco doesn?t plan to sell properties despite financial challenges 

Australian casino operator Donaco International posted a strong first half financial year result, however its full year results were significantly impacted by the COVID-19 pandemic.

Yahoo Finance reports Donaco International posted an EBITDA of A$13.8 million in the first half of the financial year, compared to A$12.9 million last year, on the back of improvements at both Aristo International Hotel and DNA Star Vegas.

The closure of both casinos for an extended period of time has had a material impact on Donaco’s operations.

FY20 revenue was A$53.49 million, compared to A$86.3 million last year.

Aristo in Vietnam has been allowed to open since May 8, and is operating on a limited basis from time-to-time, as the border with China, where most of its patrons originate from is currently closed.

Aristo will continue to adapt to border changes with local management having the discretion to tailor operations to local conditions.

Star Vegas in Cambodia is anticipated to remain mostly closed, as the border with Thailand, where most of the casino’s patrons originate from is currently closed as well.

Local management will also have discretion to tailor operations to local conditions.

The two casinos are ready to ramp up to higher patron capacity when the situation ameliorates which will likely occur when borders reopen, and once cross border travel flows recommence.

As a result, Donaco has proactively implemented cost control strategies at both casinos, maintaining a monthly cash burn of approximately US$800,000 to US$900,000 while the operations are at limited operating capacity.

Donaco recorded a statutory net loss after tax of A$58.95 million in FY20, a 70 per cent improvement on the prior corresponding period.

FY19’s result was primarily due to non-cash impairment charge of the Star Vegas casino licence following from COVID-19 related reduction in earning capacity.

In March 2020, all legal matters relating to the Thai Vendors were resolved in an outcome that provides a stable platform for business continuity and long-term growth at Star Vegas.

During the year, Donaco was also pleased to receive support from its principal lender Mega Bank with the deferral of all principal payments and waiver granted on all June covenants to December 2020.

The company successfully completed an A$14.41 million entitlement offer in July 2020 and in conjunction with the implementation of prudent cost control measure at its operations, Donaco bolstered its cash position to A$26.7 million post FY20.

Non-executive chairman Mel Ashton said: “COVID-19 has presented significant challenges for Donaco, as it has for the vast majority of businesses which have a large customer base of international travellers, and this is reflected in our FY20 results.”

“However, we have pragmatically reduced our operating costs substantially, and have received the support of our primary lender being able to strengthen our balance sheet. This has enabled us to maximise the preservation of shareholder value during this challenging and volatile period. Our two casinos are set to operate on a limited basis for at least the short term, until the situation is normalised.”

“Additionally, the strong underlying earnings result for the first half of FY20 provides the refreshed and stabilised board with confidence that Donaco is pivoted for stabilisation of the business and is ready to reopen once the COVID-19 situation improves and once cross border travel flows recommence.”

Mega Bank defers Donaco’s multi-million dollar payment

Casino and hotel company Donaco International has welcomed the deferral of a payment owed to its principal lender.

Market Herald reported in June that the company’s main lender, Mega International Commercial Bank Company was owed US$5.5 million by June 15.

However, the bank has agreed to defer the principal payment until December 31, 2020.

The lender also agreed to waive all the Facility Agreement’s covenants for June 2020 until the same date.

This includes the financial covenant about the Donaco Hong Kong 2020 Interest Coverage Ratio and Debt to EBITDA.

It also includes the covenant that Donaco’s aggregate amount of cash and cash equivalent investments should stay above A$20 million after June 30, 2020.

In its announcement, the company expressed gratitude for the financial respite during a period of widespread hardship.

The COVID-19 pandemic has seriously impacted the company through its casino and hotel businesses.

“Donaco welcomes this support from Mega Bank, and extends thanks for the consideration given in supporting Donaco.

“The company continues to be impacted by COVID-19 related travel restrictions and subsequent reduced patronage at Star Vegas and Aristo,” the announcement said.

Donaco is continuing to consider options which would allow the company to survive the current economic uncertainty.

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