GuocoLeisure Ltd’s Latest Earnings: What Investors Should Know

GuocoLeisure Ltd (SGX: B16) had released its fiscal first-quarter earnings (for the quarter ended 30 September 2015) last Friday.

The company can be considered to be a mini-conglomerate given that it owns and manages hotels and casinos in addition to having an interest in the production of oil & gas. Here’s what you need to know about the company’s latest results.

Financial highlights

Total revenue for the quarter was down 2% year-on-year to US$115.1 million. But, the bottom-line performance was way better – GuocoLeisure’s profit for the quarter had rocketed by 90% to US$31.3 million from a year ago.

The huge increase in profit can be attributed to two main factors:

  1. A spike in “other operating income” from US$0.2 million a year ago to US$13.4 million, “mainly due to a one-off compensation received from the cessation of management 19 regional Thistle Hotels owned by a third party.”
  2. A sizeable reduction in finance costs from U$8.3 million to US$3.2 million; GuocoLeisure had managed to save on interest costs as it managed to refinance some of its loans at better rates.

On the cash flow front for the quarter, GuocoLeisure had churned out US$50.1 million in operating cash flow and spent US$6.0 million on capital expenditures. This gives the company a strong free cash flow of U$44.1 million, up significantly from the figure of US$12.2 million seen a year ago (operating cash flow of US$26.2 million and capex of US$14 million).

The firm’s balance sheet had also improved over the past three months, with its net debt position of US$307.4 million as of 30 June 2015 declining to US$251.2 million as of 30 September 2015.

Business highlights

GuocoLeisure’s top-line performance this quarter suffered as a result of lower oil & gas royalty income. The low price of oil & gas had led to a decline in oil production. Meanwhile, the depreciating Australian dollar (against the US dollar) had also created some headwind for GuocoLeisure’s oil & gas interests. These factors more than offset higher gaming revenue and stable hotel revenue from the company.

Operationally, GuocoLeisure’s hotels had achieved a higher revenue per available room (RevPAR), but the British pound (GuocoLeisure’s hotels business is mostly located in the United Kingdom) had fallen in relation to the US dollar.

Going forward, GuocoLeisure expects its hotel division to continue growing its RevPAR, though a stronger US dollar against the pound “continues to weigh down on hotel revenues in USD terms.” The company is also slated to launch a second hotel under its new Amba Hotels brand at the end of this year.

As for the oil & gas business, the company also commented that “oil & gas prices are not expected to recover in the coming year.”

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo doesn’t own shares in any companies mentioned.