Dolphin Cove ends 2020 with heavy losses, weak cashflowWednesday, April 21, 2021
BY DAVID ROSE
After what was the worst year in the modern tourism and hospitality industry, Dolphin Cove Limited (DCL) reported a 71 per cent decline in revenues to US$4.28 million ($620.3 million) which was compounded by a net loss of US$1.1 million ($163.7 million) for the period ending December 31, 2020, compared to a net profit of US$1.61 million in the prior financial year (FY).
The DCL group, which provides dolphin programmes across its various tourist attractions, was severely impacted by the coronavirus pandemic which saw it report a quarter of no revenue, have several delays in processing reports to the Jamaica Stock Exchange (JSE) and shareholders plus focus on capital management in an uncertain time. Even with the reopening of the borders, DCL has had to manage capacity at its facilities which has also been impacted by the absence of cruise ship arrivals to the island.
As a result of the reduced traffic to Jamaica, DCL's core programme revenue dropped by 87 per cent to US$2.24 million while its ancillary service revenue from its facilities and adventure tours declined by 70 per cent to US$2.04 million. The last major event to reduce tourism revenue for the group was the state of emergency in St James during the 2018 and 2019 FY.
Unlike other companies which could have reduced several areas for cost of sales, DCL expenses only dropped by 56 per cent to US$782,081 since the dolphin's and other facilities still incur costs whether open or not.
Because of this decline in business, DCL only added US$55,146 worth of new dolphins while retiring US$220,000 worth of older dolphins during the year. However, this resulted in DCL recording a US81,190 loss on disposal expense based on the valuation measurement.
Total expenses declined by only 51 per cent to US$5.1 million which was driven by items such as the separation of non-critical staff and salary reduction for all staff members, reducing non-critical overheads and director fees plus the suspension of the rental charge for properties at certain locations. Despite this critical reduction in expenditure, DCL recorded an operating loss of US$1.32 million versus an operating profit of US$2.55 million in the prior FY.
After a drop in net financing costs, DCL's loss before taxation came to US$1.43 million. Although DCL received a US$305,219 tax credit because of the losses associated with FY 2020, the company's Junior Market tax break expired which means they'll be subject to the 25 per cent tax rate when things improve. DCL limited hasn't generated an accounting profit since the first quarter of 2020.
DCL's overall asset base shrunk by eight per cent to US$30.36 million ($4.4 billion) as the company cut its receivables balance in half while its cash position dropped from US$1.53 million to US$381,395. Dolphin Cove's cash flow from operations has been negative since the pandemic began with its net cash position standing at US$14,804 compared to the US1.39 million in the prior year.
Total liabilities dropped by 17 per cent to US$3.7 million which included a massive reduction in its accounts payable but increase in its bank overdraft position to US$366,591, which included a US $1 million credit facility from Sagicor Bank. Shareholder's equity declined by seven per cent to US$26.66 million ($3.87 billion) for the 2020 FY.
With non-essential expenditures cut, DCL might get another hit should Reserve Investments Limited decide not to exercise the option to build a hotel at Lucea property. The company had received US $100,000 for the option with an extra US $100k payable if the option was to be extended. The audited notes stated that, “Management and directors believe that the option is not likely to be exercised within twelve months of the reporting date.”
“The group is optimistic that a solution to the virus will be available soon and restore confidence in travel during the usual busy tourist season and beyond. The governments in the countries of operations and worldwide tourism institutions are committed to restoring the capacity of the tourism industry in the shortest possible time, while ensuring the safety protocols. The group is prepared for what it believes will be a full recovery of the tourism industry in the near future. With the easing of travel restrictions and bans beginning June 2020, the group has seen some increased demand for products and services in the first few months of the new financial year 2021,” stated the audited company notes on the COVID-19 impact.
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