Hong Kong-listed International Entertainment Corp (IEC) has issued a profit warning for the fiscal year ending June 30, 2024, anticipating a substantial loss of at least HK$135 million (US$17.3 million). This marks a dramatic shift from the HK$18.3 million (US$1.7 million) profit recorded in the previous fiscal year. The downturn is largely attributed to IEC’s recent acquisition of the casino at Manila’s New Coast Hotel and the ongoing transition of the hotel into a fully integrated resort.
Impact of Casino Takeover on Financial Performance
The primary driver of IEC’s expected financial loss is the recent takeover of the New Coast Hotel casino from PAGCOR, effective May 2024. This acquisition has resulted in significant operational and investment costs. IEC has reported a dramatic increase in general and administrative expenses, rising by approximately HK$126.8 million (US$16.3 million) compared to the previous year. This surge includes one-time expenditures of HK$40.9 million (US$5.2 million) related to the establishment and operation of the casino, as well as the development of the integrated resort.
Increased Financial Burden
In addition to the operational costs, IEC has experienced a rise in interest expenses on bank borrowings, totaling HK$37.4 million (US$4.8 million) for the year. These higher costs are a direct consequence of the financing needed for the casino operations and related developments. Furthermore, IEC has faced an increased net foreign exchange loss, further compounding the financial strain.
Revenue Performance and Shortfall
Despite a 7.4% year-on-year increase in revenue from gaming operations, which reached HK$15.3 million, this growth has not been sufficient to counterbalance the substantial losses incurred. The revenue boost is attributed to the period following the acquisition of the casino, but since IEC only fully assumed control in May, the revenue generated does not cover a full year’s worth of operations.
Optimistic Future Outlook
Looking ahead, IEC remains hopeful about the future, buoyed by the provisional casino license granted in September 2023. This license is viewed as a significant milestone that is expected to enhance IEC’s earning potential and operational capabilities in the casino sector. The company anticipates that the license will allow it to manage and operate casino activities independently, positioning it for better financial performance in the future.
Anticipated Full-Year Results
IEC is set to release its comprehensive financial results for the year ending June 30, 2024, later this month. These results will provide a detailed account of the company’s financial health and offer insights into the effectiveness of its strategic investments and operational changes.
This structured overview of IEC’s financial situation illustrates the complexities of integrating a new casino operation and the significant impact it has had on the company’s performance. The upcoming results will be crucial for understanding how well IEC is navigating these challenges and positioning itself for future success.