Donaco International Ltd, an Australia-listed boutique operator of casinos in Indochina, announced on Friday it is looking for financing to help support the firm’s payment obligations and working capital needs.
Donaco’s flagship venue, the Star Vegas Resort and Club, is near Cambodia’s border with Thailand. Its Aristo International Hotel and associated casino are near Vietnam’s border with China. According to the firm, business at the latter property has been negatively impacted by the Covid-19 virus outbreak first reported on mainland China.
“The board is aware that the liquidity of the company may tighten from the closure of the border crossing between China and Vietnam in January due to the outbreak of Covid-19,” said Donaco’s recently-appointed chairman, Mel Ashton, in comments included in the company’s results announcement for the six months ended December 31.
He added: “Donaco is seeking to access financing to support payment obligations and working capital requirements of the company.”
Donaco reported on Friday a net loss after tax of AUD1.5 million (US$985,000) for the six months ended December 31, compared to a net loss after tax of AUD36.8 million in the prior-year period. Last year’s results included a US$4.0 million non-cash impairment charge on the value of the Star Vegas casino licence related to a online gaming license cancellation, the firm said.
The group recorded reported earnings before interest, taxation, depreciation and amortisation (EBITDA) of AUD13.8 million, up by 7.0 percent in year-on-year terms. Group-wide revenue stood at AUD40.9 million, up by 3.0 percent from the prior-year period, with almost 75 percent of it coming from the Star Vegas property. Net gaming revenues at Star Vegas were down by 18.3-percent year-on-year to THB531.5 million (US$16.8 million); at Aristo (pictured), gaming revenue jumped by 42.1 percent for the reporting period, to RMB27.0 million (US$3.9 million).
Mr Aston said in his Friday comments that a priority for Donaco’s board for the near term would be “to maintain and further tighten the control of operational and corporate expenses, to improve efficiencies across the business and also to bring the conditions around contracts with third party vendors on to more commercial terms.”
Earlier this month, Donaco had already announced lay-offs and unpaid leave for staff in February at its Aristo International Hotel, due to the negative impact of the novel coronavirus.
“The impact of Covid-19 during February has been significant on the Aristo, as visitation has dropped significantly with travel from China being curtailed,” stated Donaco’s chief executive, Paul Arbuckle, in comments also included in the firm’s results announcement.
Mr Arbuckle said the firm had reported a month-on-month decline of 75 percent in daily patronage at the Aristo property during February, as a result of the partial closure to the border crossing.
He added: “We expect these conditions to continue until travel restrictions are removed and will tightly manage expenses at the venue throughout this period. The impact is far less noticeable at Star Vegas, although we will also take a cautious approach at that venue and keep a tight rein on expenditure.”
Donaco’s CEO said the firm was being “cautious” about the impact of Covid-19 on its results for the January to June period. “We will tightly manage our expenses over this period until normal border operations are restored [in Vietnam]”.
Donaco said earlier this month it was suspending — for two months — all litigation between the company and the former owners of its Star Vegas property. The two parties have agreed to use the two-month period for settlement negotiations. In Friday’s announcement, Donaco’s management said it would also prioritise such negotiation.
Legal wrangling between Donaco and the trio of former Thai partners has been a constant for the past years. The three sold the Star Vegas in Poipet to Donaco for US$360 million in 2015. The agreement between the parties included a non-compete clause, which Donaco says has been breached. The parties have attempted a number of resolution methods, including proceedings in several jurisdictions.
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”The situation we are facing with the Covid-19 pandemic is unprecedented and we’ve unfortunately had to take some drastic measures with our staff, including redundancies and pay cuts”
Chairman of Australia-listed casino operator Donaco International