Donaco International Limited / 2017 Annual Report Donaco International Limited / 2017 Annual Report 12 13 entity intends to pay out 10–30% of net profit after tax as dividends to shareholders, with the intention to provide regular half-yearly dividend payments, subject to the consolidated entity’s then current working capital requirements and growth plans. Shareholders should note that the payment of dividends is not guaranteed. Review of operations and financial results Result highlights Underlying NPAT of $54.6 million in line with $54.6 million in FY16, with strong second half-year recovery at Star Vegas and continuing growth at Aristo. The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the ‘consolidated entity’) consisting of Donaco International Limited (referred to hereafter as the ‘Company’ or ‘parent entity’) and the entities it controlled at the end of, or during, the year ended 30 June 2017. Directors The following persons were directors of Donaco International Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Stuart James McGregor – Chairman Joey Lim Keong Yew Benedict Paul Reichel Benjamin Lim Keong Hoe Robert Andrew Hines Ham Techatut Sukjaroenkraisri Paul Porntat Amatavivadhana (resigned 3 July 2017). Principal activities During the financial year the principal continuing activities of the consolidated entity consisted of the operation of leisure and hospitality businesses across the Asia-Pacific region. This included: • operation of a hotel and casino in northern Vietnam • operation of a hotel and casino in Cambodia. Dividends A dividend of $8,246,843 (1 cent per ordinary share) was paid on 19 October 2016. The dividend was 100% conduit foreign income and was unfranked. Subsequent to the reporting date, the consolidated entity has declared an ordinary dividend of 0.5 cents per share, amounting to $4,156,057. The dividend is 100% conduit foreign income and is unfranked. On 29 August 2017, the consolidated entity announce a new dividend policy, which stated that the consolidated Directors’ Report Directors’ Report 2017 2016 $ million $ million • Statutory NPAT: – Both venues performed consistently with market guidance provided 31.0 78.7 • Contribution of non-recurring items in NPAT result (23.6) 24.1 • Underlying NPAT: 54.6 54.6 • Group revenue: 136.4 143.4 – Star Vegas revenue, impacted by mourning period for the late King of Thailand 110.2 120.1 – Aristo revenue, growth from mass market focus and slot machines 26.2 23.2 • Group Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) 65.3 55.5 • Underlying Group EBITDA 84.4 87.9 • Strong balance sheet with: – Cash 66.0 78.2 – Borrowings 108.4 151.8 – Net debt 42.4 73.6 – Net debt to equity ratio 8.7% 15.4% – New debt facility signed and completed with Mega Bank Reported NPAT was $31.0 million, which included non-recurring items totalling negative $23.6 million. In contrast, FY16 included non-recurring items totalling positive $24.1 million. The non-recurring items in FY17 were due to the final $19.0 million management fee expense payable to the Star Vegas vendor (vs $20.5 million in FY16). In addition, there was positive non-cash warrant revaluation income of $1.1 million (vs $2.6 million in FY16); a net foreign exchange loss of $1.1 million (vs none in FY16); and amortisation and other costs associated with a working capital facility, totalling negative $4.6 million (vs negative $1.4 million in FY16). The working capital facility has now been repaid and fully amortised, and no further expense will be incurred in future periods. In FY16 there was also a valuation uplift of $55.2 million for Star Vegas, offset by $11.8 million of merger and aquisition fees, which did not recur in this period. Excluding the non-recurring items, underlying NPAT for the Group was $54.6 million, in line with $54.6 million in FY16. Venue performances Star Vegas FY17/compared to FY16 • Net gaming revenue down 8.2% to THB2,747.6 million • Non-gaming revenue up 31.7% to THB149.3 million • EBITDA down 6.3% to THB2,107.9 million • Property level NPAT down 7.3% to THB1,465.7 million • VIP gross win rate 3.54%. Star Vegas performed consistently with the market guidance provided, and recorded an EBITDA of USD60.5 million. The business produced a strong June half performance assisted by the high win rate achieved on junket play, and the seasonal benefits which feature in the June half. Overall, for the full 12 month period, the EBITDA at Star Vegas declined by 6.3% in local currency terms to THB2,107.9 million, due to weaker consumer sentiment and economic conditions in Thailand, following the passing away of the late King.