Junket woes cause Donaco to post FY18H1 net loss

Headaches caused by a former Thai junket impacted the earnings of Australia-listed Donaco International in the first half of the 2018 fiscal year.

As detailed in a previous announcement from the company, the group’s results were hit last year by an impairment charge of $143 million at Star Vegas, due to a former junket vendor breaching its non-compete clauses and operating a casino in a nearby location.

Lim said the breaches impacted its VIP business at Star Vegas, which saw its turnover decline to THB 18.1 billion (US$575.9 million), down from TBH50.8 billion in the prior year period.

The business was also affected by subdued domestic demand in Thailand, said Lim, due to the royal mourning period and strict military government regime.

That being said, Lim noted that the company has been actively working to restore its VIP business, and made strong inroads this year by signing new junkets and opening new junket halls. The company has also taken legal action to have the vendor cease its illegal operations and to provide the company with financial compensation.

Donaco reported a net loss after tax of A$133.8 million (US$104.5 million), compared to A$14.8 million in the previous corresponding period. Group EBITDA fell to A$19.4 million from A$33.3 million, while group revenue fell to A$43.9 million from A$59 million due to lower turnover from Star Vegas.

Donaco’s other casino – Aristo International Hotel also saw lower operational performance with revenue and EBITDA down 13 and 23 percent, respectively.

The overall decline was due in part to a lower VIP win rate, as well as reduced casino visitation in the period, due to the cancellation of a marketing initiative that was not meeting its objectives.

Donaco however says it has implemented initiatives to control operating costs and increase property utilization.