FY20 Results Commentary and Presentation
Sydney, Sep 1, 2020 AEST (ABN Newswire) - Donaco International Limited (
ASX:DNA) (UGS:FRA) has announced its results for the financial year ended 30 June 2020 (FY20).
Donaco posted a strong result for 1H FY20, with EBITDA of A$13.8 million (1H FY19: A$12.9 million), on the back of operational improvements at both Aristo International Hotel (Aristo) and DNA Star Vegas (Star Vegas). However, the full year financial results were significantly impacted by the onset of the COVID-19 pandemic during the second half of the fiscal year and the subsequent restrictions on casino operations and border closures. As stated previously, the closure of both casinos for an extended period of time has had a material impact on Donaco's operations. FY20 revenue was A$53.49m (FY19 A$86.3 million) and EBITDA of A$10.34 million (FY19: A$29.6 million).
Aristo in Vietnam has been allowed to open since 8 May 2020 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 also currently closed. 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 rate of approx. 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% improvement on the prior corresponding period. FY19's result was primarily due to a non-cash impairment charge of the Star Vegas casino license 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 a A$14.41 million entitlement offer in July 2020 and in conjunction with the implementation of prudent cost control measures 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."
Financial and Operational Performance
DNA Star Vegas
DNA Star Vegas in Poipet, Cambodia has been temporarily closed since 1 April 2020 in adherence to the Cambodian Government mandating the temporary closure of all casinos. On 29 July 2020, Donaco confirmed that the Cambodian Government lifted the temporary closure of casinos, contingent on receiving approval from the Ministry of Health (MOH) and implementing certain preventive measures against COVID-19. The MOH has not yet confirmed when it will visit Star Vegas to assess approval, however the Company anticipates for the casino to remain closed as the border with Thailand, where most of the casino's patrons originate from is also currently closed. Local management will have discretion to tailor operations to local conditions.
The closure caused a significant decrease in average daily visitations in FY20 compared to the prior corresponding period, which cascaded through to VIP turnover decreasing by 66% relative to FY19. This subsequently resulted in net revenue and EBITDA declining by 45% and 63% compared to the prior corresponding period. However, operating expenses declined by 33% from FY19 as the Company proactively implemented cost reduction measures to minimise the COVID-19 financial impact.
Aristo International Hotel
The Aristo International Hotel in Lao Cai, Vietnam was temporarily closed from 1 April 2020 in adherence to the Vietnamese Government mandating the temporary closure of all casinos. On 8 May 2020 the Vietnamese Government lifted the temporary closure of casinos, however Aristo operated through the rest of FY20 on a limited basis as the border with China where most of its patrons originate from remains closed. Aristo will continue to adapt to border changes with local management having the discretion to tailor operations to local conditions.
The closure and limited resumption of operations had an adverse effect on financial and operational performance similar to that of Star Vegas. Average daily visitations in FY20 decreased by 40% visitors relative to FY19. Compared to the fiscal year prior, VIP turnover declined by 28%, net revenue by 37% and EBITDA by 54%. As with Star Vegas, the management team implemented robust cost reduction measures which saw operating expenses decrease by 19% from FY19.
The COVID-19 impact on the FY20 result was mitigated by some extent as Aristo delivered a strong result for the first half of the fiscal year, with net gaming revenue up 42% and EBITDA up 71% compared to the prior corresponding period.
The Board is pleased to report that in FY20 Aristo remained cash flow positive from operations, thanks to the first half performance.
To view the full corporate activity, please visit:
https://abnnewswire.net/lnk/KGH0B6O4
To view the Preliminary Final Report, please visit:
https://abnnewswire.net/lnk/7E1RG85P
To view the Results Presentation, please visit:
https://abnnewswire.net/lnk/OEGK073Y
About Donaco International Ltd
Donaco International Limited (ASX:DNA) operates leisure, entertainment and associated technology businesses across the Asia Pacific region.
Donaco's largest business is the Star Vegas Resort & Club, a successful casino and hotel complex in Poipet, Cambodia, on the border with Thailand. Star Vegas was established in 1999, and is the largest and highest quality of the Poipet casino hotels. The property has more than 100 gaming tables, more than 1400 slot machines, and 385 hotel rooms.
Donaco's flagship business is the Aristo International Hotel, a successful boutique casino in northern Vietnam, located on the border with Yunnan Province, China. Established in 2002, the property has recently been expanded to a brand new five star resort complex with 400 hotel rooms. Donaco is a pioneer casino operator in Vietnam, and owns a 95% interest in the business, in a joint venture with the Government of Vietnam.
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