|
Report & Consolidated Financial Statements For the period 30 December 2021 to 30 June 2022
Company registration number: C 101228
Statement by the directors on the financial statements Directors’ statement of compliance with the Code Of Principles of Good Corporate Governance Statements of comprehensive income Statements of financial position Statements of changes in equity Notes to the financial statements
Directors’ reportThe directors present their report and the audited financial statements for the period 30 December 2021 to 30 June 2022.
Principal activities IZI Finance p.l.c. (the 'Company’) was registered with the Malta Financial Services Authority on the 30th day of December 2021. The Company holds interests in several subsidiaries involved in the gaming industry including the management and operation of the Dragonara Casino, Malta National Lottery, Retail Gaming (Sports Betting and Electronic Gaming Machines), Commercial Bingo, Interactive Gaming, Intellectual Property (IP) and Real Estate.
Review of business and results
This is the first annual report of the Company, covering its first six months of operation between the 30th December 2021 and 30th June 2022. On 30 December 2021, the Company acquired its current subsidiaries from its parent Company IZI Group plc for a total consideration of € 100 million. This resulted in a goodwill on acquisition of € 62.3 million which accounts to 23.7% of the Group’s total assets. The goodwill is primarily driven by the subsidiaries’ business growth expectations, their accumulated intellectual property, their expected future profitability, the substantial skill and expertise of the workforce and the expected cost optimisation to be derived out of the synergies arising from consolidation.
Throughout the six months under review, the principal subsidiaries of the Company managed to reverse the negative impacts of the Covid-19 pandemic, realising a strong operational and financial performance across all its principal operations. In fact, despite the impact of the omicron variant in the first three months of 2022, the Group managed to generate a gaming turnover (total wagered) of c. € 416 million, across its operations. The material increase in revenues was largely driven by a 75% increase in the gaming turnover (total wagered) of Dragonara Gaming Ltd and a 20% increase in that of Gaming Operations Ltd, the two principal business units of the Group.
These heightened levels of turnover contributed towards a total revenue of € 17.1 million, € 16.2 million of which were derived from Gross Gaming Revenues, whilst € 0.9 million were received from Government by way of Covid-19 wage supplement. With a margin of 15.5%, EBITDAR for the six months under review amounted to € 2.7 million, resulting in a profit before tax of € 0.36 million. The financial strength and resilience of the Group is reflected in the value of its total assets, closing at € 283.76 million as at 30th June 2022, with the total equity of the Group amounting to € 85.9 million.
In order to fund its intensive growth programme, the Company made a capital outlay of € 14.9 million, mostly linked to the capital expenditure required for the operations of the National Lottery of Malta, pursuant to the success of National Lottery plc in being awarded the relative exclusive concession. In fact, this subsidiary has managed to execute the transition from the previous operator in a record time, in order for it to be in a position to commence operations on 5th July 2022, in line with its National Lottery concession obligations. To finance its capital programme, the Group issued a € 30 million 4.25% unsecured bonds to the public on 13 April 2022 and was also successful in obtaining banking facilities amounting to € 41 million, enabling the subsidiaries to complete all their capital investments. Dividend and reserves
The directors do not recommend the payment of a dividend. Directors The following have served as directors of the Company during the year under review: Christian Gernert - Chairman (appointed upon incorporation) Johann Schembri (appointed upon incorporation) Franco De Gabriele (appointed upon incorporation) Joseph Mallia (appointed upon incorporation) Jacqueline Camilleri (appointed on 23 February 2022) Stephanie Fabri (appointed on 23 February 2022) Otto Karasek (appointed on 23 February 2022)
In accordance with the Company’s Articles of Association, the present directors remain in office.
Disclosure of information to auditor At the date of making this report, the directors confirm the following:
Statement of directors’ responsibilities The Companies Act, Cap 386 requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year and of the profit or loss of the Company and the Group for that period. In preparing these financial statements, the directors are required to:
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements have been properly prepared in accordance with the Companies Act, Cap 386. This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. They are also responsible for safeguarding the assets of the Company and the Group and for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Auditor The auditor Grant Thornton has intimated its willingness to continue in office and a resolution proposing its reappointment will be put to the Annual General Meeting.
Signed on behalf of the board of directors on 28 October 2022 by Christian Gernert (chairman) and Johann Schembri as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with Annual Financial Report.
Statement by the directors on the financial statementsPursuant to Capital Markets Rule 5.68, we, the undersigned, declare that to the best of our knowledge, the financial statements included in the annual report are prepared in accordance with the requirements of International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the Group, and that this report includes a fair review of the development and performance of the business and position of the Group and the Company, together with a description of the principal risks and uncertainties that it faces.
Signed on behalf of the board of directors on 28 October 2022 by Christian Gernert (chairman) and Johann Schembri as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with Annual Financial Report.
Directors’ statement of compliance with the Code Of Principles of Good Corporate GovernancePursuant to Capital Markets Rules 5.94 and 5.97 issued by the Malta Financial Services Authority (the ‘Rules’), IZI Finance p.l.c. (the ‘Company’) should endeavour to adopt the Code of Principles of Good Corporate Governance contained in Appendix 5.1 to Chapter 5 of the Rules (the ‘Code’), and accordingly, is hereby reporting on the extent of its adoption of the Code for the year ended 30 June 2022. The Company became subject to the Rules when its bonds were admitted to listing and subsequent trading on the Malta Stock Exchange, accordingly, this report covers the period commencing 14 April 2022 up to and including the 30 June 2022. The Company acknowledges that although the Code does not dictate or prescribe mandatory rules, compliance with the principles of good corporate governance recommended in the Code is in the best interests of the Company, its shareholders, bondholders and other stakeholders, and that compliance with the Code, is not only expected by investors but also evidences the directors’ and the Company’s commitment to maintaining a high standard of good governance. The Company has only issued debt securities which have been admitted to trading on the Malta Stock Exchange, and accordingly, in terms of Rule 5.101, is exempt from reporting on the matters prescribed in Rules 5.97.1 to 5.97.3, 5.97.6 and 5.97.7 in this corporate governance statement (the ‘Statement’). It is in the light of this exemption afforded to the Company by virtue of Rule 5.101, that the directors of the Company are herein reporting on the corporate governance of the Company. A. COMPLIANCE WITH THE CODE Although the adoption of the Code is not mandatory, the Board has considered the principles embodied in the Code and has noted the Code’s recommended practices aimed towards the fulfilment of these same principles. The Board has also taken into account the nature of the Company’s structure, business activities and operations and in the light of such considerations, has formulated the view that the Company has fully implemented the principles set out in the Code throughout the financial year under review, except for the principles outlined in part B below. Principles 1: The Board The Board reports that for the period under review, the directors of the Company (the ‘Directors’) have provided the necessary leadership in the overall direction of the Company and have performed their responsibilities for the efficient and smooth running of the Company, with honesty, competence and integrity. The Board is entrusted with the overall direction and management of the Company, including the establishment of strategies for future development, and the approval of any proposed acquisitions by the Company in pursuing its investment strategies, with the aim of enhancing shareholder value. The Board is composed of persons who are fit and proper to direct the business of the Company with honesty, competence and integrity, all of whom are of the appropriate calibre, having the necessary skills and experience to contribute effectively to the decision-making process. All the directors are fully aware of, and conversant with, the statutory and regulatory requirements connected to the business of the Company. The Board is accountable for its performance, and that of its delegates, to shareholders and other relevant stakeholders. The directors acknowledge and ensure that they shall:
The Board has a structure that ensures a mix of executive and non-executive directors and that enables the Board to have direct information about the Company’s performance and business activities. Principle 2: Chairman and Chief Executive The roles of Chairman and Chief Executive Officer are carried out by different individuals, respectively by Mr Christian Gernert and Mr Johann Schembri. There is a clear division of responsibilities between the running of the Board and the CEO’s responsibility in managing the Company’s business. This separation of roles of the Chairman and the CEO avoids concentration of authority and power in one individual and differentiates leadership of the Board, from the running of the business. The Chairman exercises independent judgement and is responsible to:
The Board believes that these functions have been conducted in compliance with the dictates of Code provision 2.2. The CEO is accountable to the Board for all business operations of the Company. Principle 3: Composition of the Board The Board consists of a mix of executive and non-executive, independent, members; four (4) are executive directors and (3) three are independent, non-executive directors. All directors are appointed by the shareholder, IZI Group plc. In line with the requirements of Code provision 3, the present mix of executive directors and independent non-executive directors is considered to create a healthy balance and serves to unite the shareholder's interests, whilst providing direction to the Company's management to help maintain a sustainable organisation. The independent non-executive, directors' main functions are to monitor the operations of the executive directors and their performance as well as to analyse any investment opportunities that are proposed by the executive directors. In addition, the non-executive directors have the role of acting as an important check on the possible conflicts of interest of the executive directors, which may exist as a result of their dual role as executive directors of the Company and their role directors as officers of IZI Group plc. For the purpose of Capital Markets Rules 5.118 and 5.119, Ms Jacqueline Camilleri, Ms Stephanie Fabri and Mr Otto Karasek are the non-executive directors who are considered independent. Each director is mindful of maintaining independence, professionalism and integrity in carrying out his/her duties, responsibilities and providing judgement as a director of the Company. The Board considers that none of the independent directors of the Company:
In terms of Code provision 3.4, each non-executive director has declared in writing to the Board that he/she undertakes to:
The Board also believes that the independence of its directors is not compromised because of long service or the provision of any other service to IZI Group. The Board is made up as follows: Executive directors Mr Christian Gernert - Chairman (appointed since incorporation) Mr Johann Schembri - Executive director (appointed since incorporation) Mr Franco De Gabriele - Executive director (appointed since incorporation) Mr Joseph Mallia - Executive director (appointed since incorporation) Independent non-executive directors Ms Jacqueline Camilleri (appointed on 23 February 2022) Ms Stephanie Fabri (appointed on 23 February 2022) Mr Otto Karasek (appointed on 23 February 2022) Principle 4: The Responsibilities of the Board
The Board acknowledges its statutory mandate to conduct the administration and management of the Company. The Board, in fulfilling this mandate and discharging its duty of stewardship of the Company, meets on a regular basis, with such meetings usually focusing on business strategy, operational and financial performance, and assumes responsibility for the Company’s strategy and decisions with respect to the issue, servicing and redemption of its bonds in issue, and for monitoring that its operations are in conformity with its commitments towards bondholders, shareholders, and all relevant laws and regulations. The Board is also responsible for ensuring that the Company establishes and operates effective internal control and management information systems and that it communicates effectively with the market.
In fulfilling its mandate, the Board:
The Audit Committee The Company has established an Audit Committee in line with the requirements of the Rules. The Audit Committee’s primary objective is to assist the Board in fulfilling its responsibilities: in dealing with issues of risk, control and governance; and to monitor and review the financial reporting processes, financial policies and internal control structure of the Company to ensure that the Company and its employees maintain the highest standards of corporate conduct, including compliance with applicable laws, regulations, business and ethical standards. During the financial year under review, the Audit Committee met once. The Audit Committee has a direct link to the Board and is represented by the Chairperson of the Audit Committee in all Board meetings.
The Audit Committee is also responsible for the overview of the internal audit function. The role of the internal auditor is to carry out systematic risk-based reviews and appraisals of the operations of the Company (as well as of its subsidiaries) for the purpose of advising management and the Board, through the Audit Committee, on the efficiency and effectiveness of management policies, practices and internal controls. The function is expected to promote the application of best practices within the Company to meet stakeholders’ expectations.
The Audit Committee ensures that transactions entered into between related parties are carried out on an arm’s length basis and are for the benefit of the Company, and that the Company, and its subsidiary, accurately report all related party transactions in the notes to the financial statements.
The Audit Committee is composed of three (3) non-executive directors all of whom are also independent:
· Ms Jacqueline Camilleri – Chairperson and Member · Dr. Otto Karasek – Member · Dr. Stephanie Fabri – Member
Dr. Louis Degabriele acted as the secretary to the Audit Committee.
For the purpose of Capital Markets Rules 5.118 and 5.119, Ms Jacqueline Camilleri, Ms Stephanie Fabri and Mr Otto Karasek are the non-executive directors who are considered independent. Each director is mindful of maintaining independence, professionalism and integrity in carrying out his/her duties, responsibilities and providing judgement as a director of the Company.
The Board considers that none of the independent directors of the Company (and members of the Audit Committee):
Ms Jacqueline Camilleri is a non-executive Director and a qualified accountant, who the Board considers as independent and competent in accounting as required in terms of the Capital Markets Rules.
Internal Control and Risk Management The Board is ultimately responsible for the Company’s system of internal controls and for reviewing its effectiveness. The directors are aware that internal control systems are designed to manage, rather than eliminate, the risk of failure to achieve business objectives of the Company, and can only provide reasonable, and not absolute, assurance against normal business risks.
During the financial year under review the Company operated a system of internal controls which provided reasonable assurance of effective and efficient operations covering all controls, including financial and operational controls and compliance with laws and regulations. Processes are in place for identifying, evaluating and managing the significant risks facing the Company.
Principle 5: Board meetings The directors meet regularly to dispatch the business of the Company. The directors are notified in advance of forthcoming meetings so as to provide adequate time to directors to prepare themselves for such meetings. Notification thereof, together with the issue of an agenda and supporting board papers, which are circulated in advance of the meeting, is carried out by the company secretary of the Company. Minutes are prepared during Board meetings recording faithfully attendance, and resolutions taken at the meeting. These minutes are subsequently circulated to all directors as soon as practicable after the meeting. The Chairman of the Board, Mr Christian Gernert, ensures that all relevant issues are on the agenda supported by all available information, whilst encouraging the presentation of views pertinent to the subject matter and giving all directors every opportunity to contribute to relevant issues on the agenda. The Board seeks to achieve a balance between long-term strategic and short-term performance issues. The directors may, in the furtherance of their duties, take independent professional advice on any matter at the Company’s expense. The Board may meet as often and frequently as required in line with the nature and demands of the business of the Company. During the year under review the Board met 3 times to discuss, inter alia, the operations and strategy of the Company, and such meetings were attended by all of the directors for the period under review. Shareholders’ influence is exercised at the annual general meeting of the Company, which is the highest decision-making body. All shareholders have the right to participate and to vote in the meeting. Shareholders who cannot participate in the meeting can be represented by a proxy.
Principle 6: Information and professional development
The Board believes that the Code provision 6 has been effectively met during the period under review as follows:
The Company ensures that the directors are at all times provided with the precise, timely, clear and relevant information necessary to enable them to effectively contribute to board decisions.
The Company is committed to providing adequate and detailed induction training to the directors who are newly appointed to the Board, which covers to the extent necessary the Company’s organization and activities and his responsibilities as a director, and also to those entrusted with the management of the Company, and other employees as the case may be.
The Company ensures that the directors of the Company have access to independent professional advice, at the Company’s expense where they deem necessary in order to discharge their responsibilities as directors.
All directors have access to the advice and services of the company secretary of the Company, who is responsible to the board for ensuring that board procedures are complied with.
The Chief Executive Officer is responsible for the recruitment and appointment of senior management, and, in the performance of his role as CEO, ensures that the following systems are in place:
Principle 9: Relations with shareholders and with the market
Pursuant to the Company’s statutory obligations in terms of the Companies Act (Cap. 386 of the Laws of Malta) and the Capital Markets Rules issued by the Malta Financial Services Authority, the annual report and financial statements, the election of directors and approval of directors’ fees, the appointment of the auditors and the authorisation of the directors to set the auditors’ fees, and other special business, are proposed and approved at the Company’s annual general meeting. Accordingly, the Company is highly committed to having an open and communicative relationship with its bondholders and investors and, over and above the statutory and regulatory requirements relating to the Annual General Meeting applicable to the Company as aforesaid, the Company seeks to address the diverse information needs of its bondholders and investors by providing the market with regular, timely, accurate, comparable and comprehensive information.
Principle 11: Conflicts of interest
The directors are fully aware of their responsibility to act in the interest of the Company and its shareholders as a whole, and accordingly, should avoid conflicts of interest at all times and ensure that his/her personal interests do not take precedence over those of the Company and its shareholders. In accordance with the provisions of article 145 of the Companies Act (Cap. 386 of the Laws of Malta) and in terms of article 55 of the articles of association of the Company, every director who is in any way, whether directly or indirectly, interested in a contract or proposed contract with the Company, or any other arrangement or proposal in which s/he has a material interest, whether direct or indirect, is under the duty to fully declare his/her interest in the relevant transaction to the Board at the first possible opportunity and s/he will not be entitled to vote on matters relating to the proposed transaction and only parties who do not have any conflict in considering the matter will participate in the consideration of the proposed transaction.
Principle 12: Corporate social responsibility
The Company seeks to adhere to sound Principles of Corporate Social Responsibility in its management practices and is committed to high standards of ethical conduct and to contribute to the development of the well-being of employees and their families, stakeholders and the local community and society at large.
The Board is mindful of the environment and its responsibility within the community in which it operates. In carrying on its business, the Company is fully aware of and at the forefront in preserving the environment and continuously reviews its policies aimed at respecting the environment and encouraging social responsibility and accountability. During the period under review, the Company pursued its corporate social responsibility by supporting and contributing to several charitable causes.
B. NON-COMPLIANCE WITH THE CODE In conclusion, the Board considers that the Company has generally been in compliance with the principles of the Code throughout the period under review as befits a Company of this size and nature. Non-compliance with the principles of the Code and the reasons therefor have been identified below. Principle 4: Succession policy
The Board has not formally developed a succession policy for the future composition of the Board as recommended by Code provision 4.2.7. In practice, however, the Board are actively engaged in succession planning and involved in ensuring that appropriate schemes to recruit, retain and motivate employees and senior management are in place. Principle 4: Training of Directors
The Board recognises the
importance of organising regular information sessions to ensure
that directors are made aware of, inter alia, their statutory and
fiduciary duties; the Company’s operations and prospects; the
skills and competence of senior management; the general business
environment; and the Board’s expectations, however, for the
period of review, the Company did not hold any such sessions since
it was only recently Principle 7: Evaluation of the board’s performance Under the present circumstances, the board does not consider it necessary to appoint a committee to carry out a performance evaluation of its role, as the board’s performance is always under the scrutiny of the shareholders.
Principle 8: Committees Under the present circumstances the board does not consider it necessary to appoint a remuneration committee and a nomination committee as decisions on these matters are taken at shareholder level.
Principle 9: Minority shareholders Under the present circumstances, the Board does not consider that Code Provisions 9.2 – 9.4 apply to the Company given the current shareholding structure.
Principle 10: Institutional shareholders This principle is not applicable since the Company has no institutional shareholders.
Signed on behalf of the board of directors on 28 October 2022 by Christian Gernert (chairman) and Johann Schembri as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with Annual Financial Report.
|
|
The financial statements were approved and authorised for issue by the Board of Directors on 28 October 2022. The financial statements were signed on behalf of the Board of Directors by Mr. Christian Gernert (Director) and Mr. Johann Schembri (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report. |
Notes to the financial statements
|
1 |
|
|
|
|
|
2 |
General information and statement of compliance with International Financial Reporting Standards (IFRS) |
|
IZI Finance p.l.c. (the
‘company’), the group’s parent company, is a
|
|
|
|
|
|
|
|
|
|
|
|
3 |
Going concern |
||||
|
The going concern basis underlying the preparation of these financial statements assumes that the company’s and the group’s lenders and creditors will continue to provide the financial support necessary to enable the company and the group to finance their investments and to meet their debts as they fall due. |
|||||
|
As at 30 June 2022, the group has a loan facility amounting to € 41 million as authorised by BOV in terms of the sanction letter dated 19 April 2022. The loan facility will be used to finance the upfront fee of the national lottery concession. No drawdown was made to the loan facility as at end of the reporting period. |
|||||
|
Moreover, current liabilities include an accrual of € 6.5 million which is due in January 2023. After the reporting date, management was able to negotiate a repayment scheme for this liability which will instead be repaid in 24 equal monthly instalments starting January 2023. This will provide the group an additional working capital of € 4.9 million. |
|||||
|
Based on the above, the group will have a working capital of € 5.2 million in the next fiscal year. For the company, this has principally been brought about by the amounts due to a subsidiary of € 43.4 million which is part of the novation of intercompany balances between the company and its parent in relation to the acquisition of its subsidiaries. Furthermore, the directors are taking various measures to ensure that the group will continue to have adequate levels of cash to sustain its operations and investments. Most notable of these are as follows:
These measures together with the continued improvement in the operating performances of the group’s investments are expected to generate sufficient funds to enable the group and the company to meet its financial obligations.
Based on the foregoing, the directors believe that it remains appropriate to prepare the financial statements on a going concern basis. Consequently, these financial statements do not include any adjustments that may be necessary should the directors’ expectations not materialise. |
|||||
|
4 |
Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the group |
|
At the date of authorisation of these consolidated financial statements, several new, but not yet effective, Standards and amendments to existing Standards, and Interpretations have been published by the International Accounting Standards Board (IASB). None of these Standards or amendments to existing Standards have been adopted early by the group. |
|
|
Management anticipates that all relevant pronouncements will be adopted for the first period beginning on or after the effective date of the pronouncement. New Standards, amendments and Interpretations not adopted in the current period have not been disclosed as they are not expected to have a material impact on the group’s consolidated financial statements. |
|
|
Summary of accounting policies |
|
|
Overall considerations |
|
|
The financial statements have been prepared using the significant accounting policies and measurement basis specified by IFRS as adopted by the EU for each type of asset, liability, income and expense. The measurement bases are more fully described in the accounting policies below. |
|
|
The significant accounting policies have been consistently applied by the group and are consistent with those used by the subsidiaries in previous years. |
|
|
The financial information has been prepared from the audited financial statements of the companies comprising the group (see note 17). |
|
|
5.2 |
Presentation of financial statements |
|
The consolidated financial statements are presented in accordance with IAS 1 Presentation of Financial Statements (Revised 2007) . The group has elected to present statements of comprehensive income. |
|
|
5.3 |
Basis of consolidation |
|
The group financial statements consolidate those of the company and all of its subsidiary undertakings drawn up to 30 June 2022. All subsidiaries have a reporting date of 30 June. |
|
|
Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity where the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. |
|
|
All transactions and balances between group companies are eliminated on consolidation, including unrealised gains and losses on transactions between group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the group. |
|
|
Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. |
|
|
The group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests. |
|
|
The consolidated financial statements have been prepared from the financial statements of the companies as set out in note 17. |
|
|
5.4 |
Business combination |
|
The group applies the acquisition method in accounting for business combinations. The consideration transferred by the group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred. |
|
|
The group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in the acquiree’s financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values. |
|
|
The group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets. |
|
|
Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of a) fair value of consideration transferred, b) the recognised amount of any non-controlling interest in the acquiree and c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognised in the statements of comprehensive income. |
|
|
A merger of entities under common control is accounted for by applying the pooling of interests method (predecessor accounting). Under this method, the financial statement items of the combining entities for the period in which the combination occurs and for any comparative periods disclosed are included in the financial statements of the company (the acquirer) as if they had been combined from the beginning of the earliest period presented. Any difference between the amount recorded as share capital issued plus any additional consideration in the form of cash or other assets and the amount recorded for the share capital acquired is adjusted against reserves. |
|
|
5.5 |
Foreign currency translation |
|
Functional and presentation currency |
|
|
The financial statements are presented in euro (€), which is also the group’s functional currency. |
|
|
Foreign currency transactions and balances |
|
|
Foreign currency transactions are translated into the functional currency of the group using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items denominated in foreign currency at year-end exchange rates are recognised in the statements of comprehensive income. |
|
|
Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates at the transaction date). |
|
|
5.6 |
Segment reporting |
|
The group has four operating segments: casino and catering, retail gaming, online gaming and real estate. In identifying these operating segments, management generally follows the group’s service lines representing its main products (see Note 7). |
|
|
Each of these operating segments is managed separately as each requires different technologies, marketing approaches and other resources. All inter-segment transfers are carried out at arm’s length prices based on prices charged to unrelated customers in stand-alone sales of identical goods or services. |
|
|
For management purposes, the group uses the same measurement policies as those used in its financial statements, except for certain items not included in determining the operating profit of the operating segments. |
|
|
5.7 |
Revenue |
|
Revenue comprises revenue from gaming activities and food and beverages. |
|
|
To determine whether to recognise revenue, the group follows a 5-step process:
1. Identifying the contract with a customer 2. Identifying the performance obligations 3. Determining the transaction price 4. Allocating the transaction price to the performance obligations 5. Recognising revenue when/as performance obligation(s) are satisfied. |
|
|
Revenue from contracts with customers is recognised when performance obligations have been satisfied and the consideration to which the group expects to be entitled to can be measured reliably. |
|
|
The group evaluates all contractual arrangements it enters into and evaluates the nature of the promised goods or services, and rights and obligations under the arrangement, in determining the nature of its performance obligations. Where such performance obligations are capable of being distinct and are distinct in the context of the contract, the consideration the group expects to be entitled under the arrangement is allocated to each performance obligation based on their relative stand-alone selling prices. Revenue is recognised at an amount equal to the transaction price allocated to the specific performance obligation when it is satisfied, either at a point in time or over time, as applicable, based on the pattern of transfer of control. |
|
|
Gaming revenue |
|
|
The group recognises revenues as the net win from gaming activities, which is the difference between gaming wins and losses. |
|
|
The following specific recognition criteria must also be met before revenue is recognised: |
|
|
Gaming tables |
|
|
Revenue from gaming tables is recognised on the closure of the individual tables and represents the increase or decrease in each table’s position after the settlement of client winnings. |
|
|
Slot machines |
|
|
Revenue from slot machines is recognised when machine counts are carried out and represents the increase or decrease in each machine’s position net of client winnings. |
|
|
Sportsbook |
|
|
Revenue from sportsbook is recognised on gains and losses in respect of bets placed on sporting events in the year, net of promotional bonuses. |
|
|
Bingo |
|
|
Revenue from bingo is recognised on the sale of bingo tickets net of gaming taxes and client winnings. |
|
|
Food and beverage revenues |
|
|
Revenue from the sale of food and beverages is recognised when or as the group transfers control of the assets to the customer. Control is transferred at a point in time, when the customer takes undisputed delivery of the goods. |
|
|
Interest income |
|
|
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to the asset’s net carrying amount. |
|
|
5.8 |
Operating expenses |
|
Operating expenses are recognised in the statements of comprehensive income upon utilisation of the service or at the date of their origin. |
|
|
5.9 |
Borrowing costs |
|
Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is necessary to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed in the period in which they are incurred and reported in ‘finance costs’. |
|
|
5.10 |
Goodwill |
|||||||||||||||
|
Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately recognised. Goodwill is carried at cost less accumulated impairment losses. Refer to Note 5.14 for a description of impairment testing procedures. |
||||||||||||||||
|
5.11 |
Other intangible assets |
|||||||||||||||
|
Intangible assets include acquired software licences, concession fee, trademark and key money. They are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis over their estimated useful lives, as these assets are considered finite. Residual values and useful lives are reviewed at each reporting date. In addition, they are subject to impairment testing as described in note 5.14. The following rates are applied: |
||||||||||||||||
|
||||||||||||||||
|
|
||||||||||||||||
|
Concession fee is written off to the statements of comprehensive income by equal annual instalments over the term of the concession. |
||||||||||||||||
|
Acquired software is capitalised on the basis of the costs incurred to acquire and install the specific software. |
||||||||||||||||
|
Costs associated with maintaining computer software are expensed as incurred. |
||||||||||||||||
|
Trademark acquired in a business combination that qualifies for separate recognition is recognised as intangible asset at fair value. |
||||||||||||||||
|
5.12 |
Property, plant and equipment |
|||||||||||||||
|
Items of property, plant and equipment are carried at acquisition cost less subsequent depreciation and impairment losses. |
||||||||||||||||
|
Depreciation is recognised on a straight-line basis to write down the cost less estimated residual value of property, plant and equipment as follows: |
||||||||||||||||
|
||||||||||||||||
|
|
||||||||||||||||
|
In the case of leasehold property, expected useful lives are determined by reference to comparable owned assets or over the term of the lease, if shorter. |
||||||||||||||||
|
Material residual value estimates and estimates of useful life are updated as required, but at least annually, whether or not the asset is revalued. |
||||||||||||||||
|
Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognised in the statements of comprehensive income within other income or other expenses. |
||||||||||||||||
|
5.13 |
Investment property |
|||||||||||||||
|
Investment property comprises an arable land currently held for undetermined future use and an asset under construction for the purpose of earning rental once completed. They are accounted for using the cost model. |
||||||||||||||||
|
The land is carried at its purchase price and directly attributable expenditure such as professional fees for legal services, property transfer taxes and other transaction costs. |
||||||||||||||||
|
As no finite useful life for land can be determined, related carrying amounts are not depreciated. Depreciation on asset under construction does not commence until they are complete and available for use. |
||||||||||||||||
|
5.14 |
Impairment of goodwill, other intangible assets, property, plant and equipment, and investment property |
|||||||||||||||
|
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. |
||||||||||||||||
|
All individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. |
||||||||||||||||
|
An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount. The recoverable amount is the greater of its fair value less costs to sell and its value in use. To determine the value in use, the group’s management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. Discount factors are determined individually for each cash-generating unit and reflect their respective risk profiles as assessed by the group’s management. |
||||||||||||||||
|
Impairment losses are recognised immediately in the statements of comprehensive income. Impairment losses for cash-generating units are charged pro rata to the assets in the cash-generating unit. All assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment charge that has been recognised is reversed if the cash-generating unit’s recoverable amount exceeds its carrying amount. |
||||||||||||||||
|
5.15 |
Leased assets |
|||||||||||||||
|
The group as a lessee |
||||||||||||||||
|
The group makes the use of leasing arrangements principally for its land-based casino, retail shops and office space. The rental contracts for offices are typically negotiated for terms of between 3 and 20 years and some of these have extension terms. Lease terms for office fixtures and equipment and motor vehicles have lease terms of between 6 months and 6 years without any extension terms. The group does not enter into sale and leaseback arrangements. All the leases are negotiated on an individual basis and contain a wide variety of different terms and conditions such as purchase options and escalation clauses. |
||||||||||||||||
|
The group considers whether a contract is or contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’. To apply this definition the group assesses whether the contract meets three key evaluations which are, whether:
|
||||||||||||||||
|
|
||||||||||||||||
|
Measurement and recognition of leases as a lessee |
||||||||||||||||
|
At lease commencement date, the group recognises a right of use asset and a lease liability on the statement of financial position. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the commencement date (net of any incentives received). |
||||||||||||||||
|
Subsequent to initial measurement, right-of-use assets of emphyteutic deed are stated at revalued amounts. Revalued amounts are fair values based on appraisals prepared by external professional valuers annually or more frequently if market factors indicate a material change in fair value. Any revaluation surplus is recognised in other comprehensive income and credited to the revaluation reserve in equity. To the extent that any revaluation decrease or impairment loss (note 5.14) has previously been recognised in profit or loss, a revaluation increase is credited to profit or loss with the remaining part of the increase recognised in other comprehensive income. Downward revaluations of right-of-use assets are recognised upon appraisal or impairment testing, with the decrease being charged to other comprehensive income to the extent of any revaluation surplus in equity relating to this asset and any remaining decrease recognised in profit or loss. Any revaluation surplus remaining in equity on disposal of the asset is transferred to retained earnings. |
||||||||||||||||
|
The group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. |
||||||||||||||||
|
At lease commencement date, the group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the group’s incremental borrowing rate. |
||||||||||||||||
|
Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised. |
||||||||||||||||
|
Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. |
||||||||||||||||
|
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero. |
||||||||||||||||
|
On the statements of financial position, right-of-use assets and lease liabilities have been presented separately. |
||||||||||||||||
|
Finance lease |
||||||||||||||||
|
Management applies judgment in considering the substance of a lease agreement and whether it transfers substantially all the risks and rewards incidental to ownership of the leased asset. Key factors considered include the length of the lease term in relation to the economic life of the asset, the present value of the minimum lease payments in relation to the assets value and whether the group obtains ownership of the asset at the end of the lease term. |
||||||||||||||||
|
For leases of land and buildings, the minimum lease payments are first allocated to each component based on the relative fair values of the respective lease interests. Each component is then evaluated separately for possible treatment as a finance lease, taking into consideration the fact that land normally has an indefinite useful life. |
||||||||||||||||
|
Finance lease as lessee or property |
||||||||||||||||
|
Leases of motor vehicle where the group, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are classified at the lease’s inception at the fair value of the leased property or, if lower, the present value of minimum lease payments. The corresponding rental obligations, net of finance lease charges, are included in other short-term and long-term trade and other payables. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The motor vehicles or property acquired under finance leases are depreciated over the assets’ useful lives or over the shorter of the assets’ useful lives and the lease term if there is no reasonable certainty that the group will obtain ownership at the end of the lease term. |
||||||||||||||||
|
5.16 |
Investment in subsidiaries |
|||||||||||||||
|
Investment in subsidiaries is included in the company’s statement of financial position at cost less any impairment loss that may have arisen. Income from investment in subsidiaries is recognised only to the extent of distributions received by the company from post-acquisition profits. Distributions received in excess of such profits are regarded as a recovery of the investment and are recognised as a reduction of the cost of the investment. |
||||||||||||||||
|
At each reporting date the company reviews the carrying amount of its investment in subsidiaries to determine whether there is any indication of impairment and, if any such indication exists, the recoverable amount of the investments is estimated. An impairment loss is the amount by which the carrying amount of an investment exceeds its recoverable amount. The recoverable amount is the higher of fair value less costs to sell and value in use. An impairment loss that has been previously recognised is reversed if the carrying amount of the investment exceeds its recoverable amount. An impairment loss is reversed only to the extent that the carrying amount of the investment does not exceed the carrying amount that would have been determined if no impairment loss had been previously recognised. Impairment losses and reversals are recognised immediately in the statement of comprehensive income. |
||||||||||||||||
|
5.17 |
Investment in associate |
|||||||||||||||
|
Associate is an entity over which the group is able to exert significant influence, but which is neither subsidiary nor a joint venture. Investment in associate is initially recognised at cost and subsequently accounted for using the equity method. Any goodwill or fair value adjustment attributable to the group’s share in the associate is not recognised separately and is included in the amount recognised as investment in associate. |
||||||||||||||||
|
The carrying amount of the investment in associate is increased or decreased to recognise the group’s share of the profit or loss and other comprehensive income of the associate. These changes include subsequent depreciation, amortisation or impairment of the fair value adjustment of assets and liabilities. |
||||||||||||||||
|
5.18 |
Inventories |
|||||||||||||||
|
Inventories are stated at the lower of cost and net realisable value. Costs of ordinarily interchangeable items are assigned using weighted average cost formula. Net realisable value is the estimated selling price in the ordinary course of business less any applicable selling expenses. |
||||||||||||||||
|
5.19 |
Financial instruments |
|||||||||||||||
|
Recognition and derecognition |
||||||||||||||||
|
Financial assets and financial liabilities are recognised when the group becomes a party to the contractual provisions of the financial instrument. |
||||||||||||||||
|
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. |
||||||||||||||||
|
Classification and initial measurement of financial assets |
|||||
|
Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable). |
|||||
|
Financial assets are classified into the following categories: |
|||||
|
· amortised cost · fair value through profit or loss (FVTPL) · fair value through other comprehensive income (FVOCI). |
|||||
|
The group and the company do not have any financial assets categorised as FVTPL and FVOCI in the periods presented. |
|||||
|
The classification is determined by both: · the entity’s business model for managing the financial asset; and · the contractual cash flow characteristics of the financial asset. |
|||||
|
All income and expenses relating to financial assets that are recognised in the statements of comprehensive income are presented within ‘finance costs’ or ‘finance income’. |
|||||
|
Subsequent measurement of financial assets |
|||||
|
Financial assets at amortised cost |
|||||
|
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):
|
|||||
|
|
|||||
|
After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The group’s cash and cash equivalents, loans and receivables fall into this category of financial instruments. |
|||||
|
Trade and other receivables |
|||||
|
The group makes use of a simplified approach in accounting for trade and other receivables and records the loss allowance as lifetime expected credit losses. These are expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix. |
|||||
|
The group assess impairment of trade receivables on a collective basis as they possess share credit risk characteristics. |
|||||
|
Classification and measurement of financial liabilities |
|||||
|
The group’s financial liabilities include borrowings, lease liabilities and trade and other payables. |
|||||
|
Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the group designates a financial liability at fair value through profit or loss. |
|||||
|
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in the statements of comprehensive income are included within ‘finance costs’ or ‘finance income’. |
|||||
|
Offsetting financial instruments |
|||||
|
Financial assets and liabilities are offset and the net amount reported in the statements of financial position when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. |
|||||
|
5.20 |
Income taxes |
||||
|
Tax expense recognised in the statements of comprehensive income comprises the sum of deferred tax and current tax not recognised in other comprehensive income or directly in equity. |
|||||
|
Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the financial statements. Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. |
|||||
|
Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries is not provided if reversal of these temporary differences can be controlled by the group and it is probable that reversal will not occur in the foreseeable future. |
|||||
|
Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted by the end of the reporting period. Deferred tax liabilities are always provided for in full. |
|||||
|
Deferred tax assets are recognised to the extent that it is probable that they will be utilised against future taxable income. |
|||||
|
Deferred tax assets and liabilities are offset only when the group has a right and intention to set off current tax assets and liabilities from the same taxation authority. |
|||||
|
Changes in deferred tax assets or liabilities are recognised as a component of tax income or expense in profit or loss, except where they relate to items that are recognised in other comprehensive income or directly in equity, in which case the related deferred tax is also recognised in other comprehensive income or equity, respectively. |
|||||
|
5.21 |
Cash and cash equivalents |
||||
|
For the purposes of the statements of cash flows, cash and cash equivalents comprise cash in hand and at bank. |
|||||
|
5.22 |
Equity and reserves |
||||
|
Share capital represents the nominal value of shares that have been issued. |
|||||
|
Accumulated losses include current and prior period results. |
|||||
|
Provisions and contingent liabilities |
|||||
|
Provisions are recognised when present obligations as a result of a past event will probably lead to an outflow of economic resources from the group and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive commitment that has resulted from past events, for example, product warranties granted, legal disputes or onerous contracts. Restructuring provisions are recognised only if a detailed formal plan for the restructuring has been developed and implemented, or management has at least announced the plan’s main features to those affected by it. Provisions are not recognised for future operating losses. |
|||||
|
Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material. |
|||||
|
Any reimbursement that the group can be virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related provision. |
|||||
|
All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. |
|||||
|
5.24 |
Significant management judgement in applying accounting policies and estimation uncertainty |
||||
|
When preparing the financial statements, management undertakes a number of judgements, estimates and assumptions about the recognition and measurement of assets, liabilities, income and expenses. |
|||||
|
Significant management judgement |
|||||
|
The following is a significant management judgement in applying the accounting policies of the group that has the most significant effect on the financial statements. |
|||||
|
Recognition of deferred tax asset |
|||||
|
The assessment of the probability of future taxable income in which deferred tax asset can be utilised is based on the group’s latest approved budget forecast, which is adjusted for significant non-taxable income and expenses and specific limits to use of any unused tax loss or credit. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, that deferred tax asset is usually recognised in full. |
|||||
|
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods. |
|||||
|
Determining whether an arrangement contains a lease |
|||||
|
The group uses its judgement in determining whether an arrangement contains a lease, based on the substance of the arrangement and makes assessment of whether it is dependent in the use of a specific asset or assets, conveys a right to use the asset and transfers substantially all the risks and rewards incidental to ownership to/from the group. |
|||||
|
In the opinion of the directors, the accounting and estimates made in the course of preparing these financial statements are not difficult, subjective or complex to a degree which would warrant their description as critical in terms of the requirements of IAS 1 (revised). |
|||||
|
Estimation uncertainty |
|||||
|
Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may be substantially different. |
|||||
|
Useful lives of depreciable assets |
||
|
Management reviews its estimate of useful lives of depreciable assets at each reporting date based on the expected utility of the assets. Uncertainties in these estimates relate to technical obsolescence that may change the utility of certain plant and equipment. |
||
|
Leases - Estimating the incremental borrowing rate |
||
|
The group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the group ‘would have to pay’, which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease. The group estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as the entity’s stand-alone credit rating). |
||
|
Impairment of intangible assets including goodwill and tangible assets |
||
|
An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount. To determine the recoverable amount, management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows (see note 5.14). In the process of measuring expected future cash flows management makes assumptions about future operating results. These assumptions relate to future events and circumstances. The actual results may vary, and may cause significant adjustments to the group’s assets within the next financial year. |
||
|
In most cases, determining the applicable discount rate involves estimating the appropriate adjustment to market risk and the appropriate adjustment to asset-specific risk factors. |
||
|
The group tests goodwill and intangible assets with an indefinite useful life annually for impairment or more frequently if there are indications that goodwill or intangibles might be impaired. Determining whether the carrying amounts of these assets can be realised requires an estimation of the recoverable amount of the cash generating units. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash generating unit and a suitable discount rate in order to calculate present value. |
||
|
Goodwill arising on a business combination is allocated, to the cash-generating units (“CGUs”) that are expected to benefit from that business combination. |
||
|
Furthermore, following an in-depth review of the projections, management opted to include an execution risk premium (based on their professional judgement) to mitigate the current forecasting uncertainty and to obtain added comfort that the carrying value of the intangible assets is indeed recoverable. |
||
|
For further details, refer to note 6 of these financial statements. |
||
|
CGUs – Casino, Retail and Online Gaming |
||
|
The recoverable amounts of the CGUs are determined from their value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. The directors estimate discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. |
||
|
The assessment of recoverability of the carrying amount of goodwill and intangible assets with indefinite useful life includes: |
||
|
· forecasted cash flow projections for the next three years and projection of terminal value using the perpetuity method; · growth rates to perpetuity of 1.9%; and · use of 8% (pre-tax) to discount the projected cash flows to net present values. |
||
|
Based on the above assessment, the directors expect the carrying amount of goodwill and intangible assets with an indefinite useful life to be recoverable. |
||
|
CGU – Property holding entities |
||
|
The recoverable amount of the property which is expected to generate rental revenue is determined from the value in use calculation. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. The directors estimate discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. |
||
|
The assessment of recoverability of the carrying amount of goodwill and the investments held by the company includes: |
||
|
· forecasted cash flow projections for the next three years and projection of terminal value using the perpetuity method; · growth rates to perpetuity of 1.9%; and · use of 4.5% (pre-tax) to discount the projected cash flows to net present values. |
||
|
The recoverable amount of property which comprises land and which is carried at cost is determined by reference to market value. |
||
|
Based on the above assessment, the directors expect the carrying amount of goodwill and intangible assets with an indefinite useful life to be recoverable. |
||
|
Inventories |
||
|
Management estimates the net realisable values of inventories, taking into account the most reliable evidence available at each reporting date. The future realisation of these inventories may be affected by expiry, obsolescence or other market-driven changes that may reduce future selling prices. |
||
|
6 |
Acquisition of subsidiaries |
|
On 30 December 2021, the IZI Finance p.l.c. acquired the equity instruments of the following companies:
|
|
|
The details of the business combination are as follows:
|
|
Consideration transferred |
|
The company acquired the subsidiaries through a share for share exchange plus a deferred consideration of € 6,134,220 and novation of intercompany balances of € 13,865,462. As at 30 June 2022, € 1,282,554 of the deferred consideration has been paid. |
|
Goodwill |
|
Goodwill is primarily growth expectations, expected future profitability, the substantial skill and expertise of the workforce and expected cost synergies. Goodwill has been allocated to the following segments.
|
|
The recoverable amount of each segment was determined based on value-in-use calculations, covering a detailed ten-year forecast, followed by an extrapolation of expected cash flows for the remaining useful lives using a declining growth rate determined by management. The present value of the expected cash flows of each segment is determined by applying a suitable discount rate reflecting current market assessments of the time value of money and risks specific to the segment.
|
|
7 |
Segment reporting |
|
Management currently identifies the group’s four revenue streams as its operating segments (see Note 5.6). The group’s Chief Operating Decision Maker (CODM) is the Chief Executive Officer and he monitors the performance of these operating segments as well as deciding on the allocation of resources to them. Segmental performance is monitored using adjusted segment operating results. |
|
|
Segment information for the reporting period is as follows:
|
|
|
8 |
Other income |
|
Other income for the reporting period is as follows:
|
|
|
9 |
Staff costs |
|
|
|
|
The average full time equivalent persons employed for the reporting periods presented were:
|
|
10 |
Operating profit (loss) |
|
The operating profit (loss) is stated after charging:
|
|
|
11 |
Finance income and finance costs |
|
The following amounts may be analysed as follows for the reporting periods presented:
|
|
|
12 |
Tax expense |
|
The relationship between the expected tax (expense) income based on the effective tax rate of IZI Finance p.l.c. at 35% and the tax expense actually recognised in the statements of comprehensive income can be reconciled as follows:
|
|
|
Refer to note 20 for information on the group’s deferred tax asset and liability. |
|
13 |
Intangible assets |
|
|
|
Details of the group’s intangible assets and their carrying amounts are as follows:
|
|||
|
Casino concession |
||||||
|
On 28 July 2021, Dragonara Gaming Limited (DGL) which is one of the subsidiaries acquired on 30 December 2021 (see note 6), was granted by Ministry for the Economy and Industry (the ‘Ministry’) a new 10-year concession to operate the Dragonara Casino. Dragonara Casino obtained the licence to operate from the Malta Gaming Authority commencing from 1 August 2021 and expiring on 31 July 2031. DGL paid an initial concession fee of € 1.5 million. In addition to the initial concession fee, DGL shall also pay the Ministry an additional fee of € 11.1 million payable in three instalments spread over a period of three years as follows:
The additional fees will be waived by the Ministry in the event that qualifying contributions (i.e., licence fees, gaming levies and/or gaming taxes) paid in relation to the land-based casino equals or exceeds the sum of € 3.7 million before the expiry of each of the 45 days mentioned in relation to the first, second and third payments above. If the qualifying contributions paid in relation to the land-based casino is less than € 3.7 million in any of the 12-calendar month, the group shall pay the difference between the € 3.7 million and the qualifying contributions paid. The total gaming taxes paid by the group in relation to the land-based casino for the period from 1 August 2021 to 30 June 2022 already exceeded € 3.7 million. Therefore, the 1 st payment of € 3.7 million due on 31 July 2022 will be waived by the Ministry. |
||||||
|
National lottery concession |
||||||
|
On 10 March 2022, the group, through its subsidiary namely National Lottery plc, was awarded a concession to manage and operate the National lottery of Malta for a period of 10- years commencing from the 5 July 2022 until the 4 July 2032. |
||||||
|
All amortisation charges are included within ‘depreciation and amortisation’ in the statements of comprehensive income. |
|
14 |
Property, plant and equipment |
|
Details of the group’s property, plant and equipment and their carrying amounts are as follows: |
|
|
Motor vehicles include the following amounts where the group is a lessee under a finance lease.
|
|
All depreciation and impairment charges are included within ‘depreciation and amortisation’ in the statements of comprehensive income. |
|
15 |
Leases |
|
15.1 |
Right-of-use asset |
|
|
|
|
15.2 |
Lease liabilities |
|
The group leases motor vehicles, casino premises, commercial properties and office space. Lease liabilities included in the statements of financial position are as follows:
|
|
|
Each lease generally imposes a restriction that, unless there is a contractual right for the group to sublet the asset to another party, the right-of-use asset can only be used by the group. Leases are either non-cancellable or may only be cancelled by incurring a substantive termination fee. The group is prohibited from lending or transferring the underlying leased assets. Upon termination, the right-of-use assets shall be returned to the lender in as good a condition as when received by the group, except for reasonable wear and tear. The group shall ensure that these assets are at all times kept in a good state of repair and return the shops in their original condition at the end of the lease. |
|
Right-of-use assets |
No of right-of-use assets leased |
Range of remaining term |
Average remaining lease term |
No of leases with extension options |
No of leases with termination options |
|
Casino |
1 |
63 years |
63 years |
- |
- |
|
Gaming premises |
37 |
1 – 15 years |
6 years |
- |
37 |
|
Commercial properties |
3 |
1 - 26 years |
17 years |
- |
2 |
|
|
|||||
|
The lease liabilities are secured by the related underlying assets. Future minimum lease payments at 30 June 2022 were as follows: |
|||||
|
|
|
16 |
Investment properties |
|
Details of the group’s investment properties and their carrying amounts are as follows:
|
|
|
The land is an arable land known as Ta’ Minka situated at Wardija, Malta with an area of 4,140 square metres. This land is held for future agricultural purposes. |
|
The directors believe that the fair value of the investment property did not significantly change from the time it was acquired until period end. |
|
The group holds a 30 (thirty) year temporary emphyteusis of a property situated in Malta. As part of the agreement, the group binds itself to demolish the existing property and to construct a block of buildings to earn rentals. The construction is not yet completed during the period under review. |
|
During the period, no revenue was received from investment properties. |
|
17 |
Investment in subsidiaries and associate |
|
Investment in subsidiaries |
|
|
The amount stated in the statements of financial position is analysed as follows:
|
|
|
On 23 May 2022, the company acquired an additional 190,000 ordinary shares at € 1 each in National Lottery plc. |
|
|
Set out below are the details of the subsidiaries held directly by the group: |
|
|
Subsidiary companies |
Registered office |
Percentage holding in ordinary shares |
Nature of business |
|
|
|
|
The group |
The company |
|
|
|
|
2022 |
2022 |
|
|
|
|
% |
% |
|
|
|
|
|
|
|
|
Dragonara Catering Limited |
Dragonara Casino Complex, Dragonara Road, St Julian’s, Malta |
60 |
- |
Catering services |
|
|
|
|
|
|
|
Dragonara Gaming Limited |
Dragonara Casino Complex, Dragonara Road, St Julian’s, Malta |
60 |
- |
Casino |
|
|
|
|
|
|
|
Dragonara Interactive Limited |
Dragonara Casino Complex, Dragonara Road, St Julian’s, Malta |
60 |
- |
Online gaming |
|
|
|
|
|
|
|
Gaming Operations Limited |
Level 11, Portomaso Business Tower, St Julian’s, Malta |
99.99 |
99.99 |
Bingo hall and electronic gaming devices operator |
|
|
|
|
|
|
|
Peninsula Gaming Group Limited |
Level 11, Portomaso Business Tower, St Julian’s, Malta |
60 |
60 |
Investment |
|
|
|
|
|
|
|
IZI Interactive Limited |
Level 11, Portomaso Business Tower, St Julian’s, Malta |
99.99 |
99.99 |
Online gaming |
|
|
|
|
|
|
|
St. George Developments Limited |
Level 11, Portomaso Business Tower, St Julian’s, Malta |
99.99 |
99.99 |
Immovable property |
|
|
|
|
|
|
|
O2 Estates Limited |
Level 11, Portomaso Business Tower, St Julian’s, Malta |
99.99 |
99.99 |
Immovable property |
|
|
|
|
|
|
|
Pinnacle IP Limited |
Level 11, Portomaso Business Tower, St Julian’s, Malta |
100 |
100 |
Intellectual property |
|
|
|
|
|
|
|
National Lottery plc |
Level 11, Portomaso Business Tower, St Julian’s, Malta |
100 |
100 |
Holds a concession to manage and operate the national lottery games of Malta |
|
17.2 |
Investment in associate |
|
The group also has indirect investment in associate through St. George Developments Limited as follows: |
|
|
Associate company |
Registered office |
Percentage holding in ordinary shares |
Nature of business |
|
|
|
|
The group |
The company |
|
|
|
|
2022 |
2022 |
|
|
|
|
% |
% |
|
|
|
|
|
|
|
|
Confident Limited |
1A, Triq Wied Ghomor, St Julian’s, Malta |
22.22 |
- |
Immovable property |
|
The group holds 22.22% voting and equity interest in Confident Limited engaged in purchasing, selling development and improving land and building for investment purposes. These shares are not publicly listed on a stock exchange and hence published price quotes are not available. |
|
17.3 |
Subsidiaries with material non-controlling interests |
|
The group includes Peninsula Gaming Group Limited (Peninsula Group) with material non-controlling interests (NCI):
|
|
|
No dividends were paid to NCI for the reporting periods presented. |
|
Summarised financial information for Peninsula Group, before intragroup eliminations, is set out below:
|
|
18 |
Loans receivable |
|
|
|
|
On 6 June 2022, the company extended loans to its subsidiaries Gaming Operations Limited and National Lottery plc amounting to € 12.4 million and € 16.2 million, respectively. The loans were to part finance the subsidiaries’ projected capital expenditure for the years 2022 to 2025. Capital expenditure includes the purchase of new gaming equipment and costs associated with the refurbishment of the existing retail outlets. |
|
The loans to subsidiary companies are unsecured, bears interest of 5.75% and are repayable by 2 April 2029. |
|
The net carrying values of loans are considered a reasonable approximation of fair value. |
|
19 |
Other non-current assets |
|
The group’s other non-current assets include the following:
|
|
|
Deferred charges include set-up costs to operate National Lottery Games in Malta. These costs will be amortised over a period of 10 years. |
|
Security deposits are mainly deposits in relation to leased properties. |
|
Guarantees include a € 250,000 cash collateral to act as a security for the performance obligation in relation to the Dragonara Casino concession agreement. |
|
20 |
Deferred tax asset (liability) |
|
Deferred taxes arising from temporary differences, unused tax losses and unabsorbed capital allowances can be summarised as follows:
|
|
|
Refer to note 12 for information on the group’s tax expense. |
|
21 |
Inventories |
|
Inventories recognised in the statements of financial position mainly comprise gaming consumables. |
|
|
22 |
Trade and other receivables |
|
|
|
|
The amounts owed by subsidiaries and parent company are unsecured, interest free and repayable on demand. |
|
The net carrying values of financial assets are considered a reasonable approximation of fair value. |
|
23 |
Cash and cash equivalents |
|
Cash and cash equivalents include the following components:
|
|
|
24 |
Share capital |
|
The share capital of IZI Finance p.l.c. consists of: |
|
|
|
|
2022 |
|
|
|
€ |
|
Shares issued and fully paid-up |
|
|
|
80,000,000 ordinary A shares of € 1 each |
|
80,000,000 |
|
1 ordinary B shares of € 1 each |
|
1 |
|
|
|
80,000,001 |
|
|
|
|
|
Shares authorised |
|
|
|
99,999,999 ordinary A shares of € 1 each |
|
|
|
1 ordinary B shares of € 1 each |
|
99,999,999 |
|
|
|
1 |
|
|
|
100,000,000 |
|
Ordinary A shares are entitled to one vote at a general meeting and are entitled to receive dividend distributions. Ordinary B share do not carry voting rights and has no right to receive dividends nor is entitled to any assets upon dissolution or winding up of the company. |
|
25 |
Bank borrowings |
|
|
|
|
The carrying amount of bank borrowings is considered to be a reasonable approximation of fair value. |
|
Bank loans are secured by a first general hypothec over the group’s assets and by pledges on the shares of the parent company and a subsidiary. |
|
Bank loan I |
|
Gaming Operations Limited’s (GOL) facilities are to be repaid over a period of 6 years with interest rate of 1.5% to 5.15% per annum. The loans are secured by a general hypothec over the GOL’s assets by general and hypothecary guarantees given by third parties and guarantees given by related companies. |
|
Bank loan II |
|
The bank loan taken by Dragonara Gaming Limited (DGL) is secured by a general hypothec over the DGL’s and related party’s assets and a pledge over the shares of DGL and its parent company, Peninsula Gaming Group Limited. |
|
The loan is to be repaid within six years, inclusive of a 12-month moratorium, from first drawdown. During the moratorium, interest is to be met by monthly instalments of approximately € 8,870 and thereafter monthly instalments of € 37,946 each, inclusive of interest. |
|
Bank loan III |
|
Malta Development Bank loan shall be repaid over a period not exceeding 6 years inclusive of a 6 month moratorium on capital and interest through 18 monthly instalments of € 46,768 each inclusive of interest for the first two years following the moratorium period and 48 monthly repayments of € 47,443 each inclusive of interest for the final four years. |
|
Bank loan IV |
|
The group obtained another loan from BOV amounting to € 1,500,000. This loan is to be repaid within six years through 52 monthly instalments of € 32,065 starting from March 2022 after the 6 months moratorium. |
|
Total interest incurred on these loans amounted to € 314,206 which are included in ‘finance costs’ in the statements of comprehensive income. |
|
Bank loan facility |
|
The group has a loan facility with BOV amounting to € 41 million and € 4 million guarantee facility as per the bank sanction letter dated 19 April 2022. The loan facility will be used to finance the upfront fee of the national lottery concession. No drawdown was made to the loan facility as at 30 June 2022. |
|
26 |
Debt securities measured at amortised cost |
|
|
|
|
On 14 April 2022, IZI Finance p.l.c. issued 300,000 4.25% unsecured bonds with a nominal value of € 100 per bond. The bonds are redeemable at their nominal value on 13 April 2029. |
|
Interest on the bonds is due and payable annually on 14 April of each year. |
|
The bonds are listed on the official list of the Malta Stock Exchange. The carrying amount of the bonds is net of direct issue costs of € 581,674 which are being amortised over the life of the bonds. |
|
27 |
Trade and other payables |
|
|
|
|
The carrying values of financial liabilities are considered to be a reasonable approximation of fair value. |
|
The amounts owed to parent company and subsidiary company are unsecured, interest free and repayable on demand. |
|
28 |
Cash flow adjustments and changes in working capital |
|
The following cash flow adjustments and changes in working capital have been made to profit (loss) before tax to arrive at operating cash flow:
|
|
|
29 |
Related party transactions |
|
Unless otherwise stated, none of the transactions incorporates special terms and conditions and no guarantees were given or received. Outstanding balances are usually settled in cash. Amounts owed by/to related parties are shown separately in notes 18, 22 and 27. |
|
|
29.1 |
Transactions with subsidiaries |
|
In the normal course of business, the company extends/receives advances to/from subsidiaries. |
|
|
30 |
Contingent liabilities |
|
|
|
|
31 |
Financial instrument risk |
|
Risk management objectives and policies |
|
|
The group is exposed to various risks in relation to financial instruments. The group’s financial assets and liabilities by category are summarised in note 31.4. The main types of risks are credit risk, liquidity risk and market risk. |
|
|
The group’s risk management is coordinated by the directors and focuses on actively securing the group’s short to medium term cash flows by minimising the exposure to financial risk. |
|
|
The group does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The most significant financial risk to which the group is exposed are described below. |
|
|
31.1 |
Credit risk |
|
Credit risk is the risk that a counterparty fails to discharge an obligation to the group. The group’s exposure to credit risk is limited to the carrying amount of financial assets recognised at the reporting date, as summarised below:
|
|
|
The group continuously monitors defaults of counterparties, identified either individually or by group, and incorporates this information into its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports on counterparties are obtained and used. The group’s policy is to deal only with creditworthy counterparties. |
|
The group’s management considers that all of the above financial assets that are not impaired or past due for each of the reporting dates under review are of good credit quality. |
|
In respect of trade and other receivables, the group is not exposed to any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. Trade receivables consist of a large number of customers in various industries. Based on historical information about customer default rates management consider the credit quality of trade receivables that are not past due or impaired to be good. |
|
The credit risk for cash and cash equivalents is considered negligible, since the counterparties are reputable banks with high quality external credit ratings. |
|
The group banks with local institutions. At 30 June 2022, cash and cash equivalents amounting are held with local counterparties with credit ratings of BBB- and are callable on demand. Management consider the probability of default to be close to zero as the counterparties have a strong capacity to meet their contractual obligations in the near term. As a result, no loss allowance has been recognised based on 12 month expected credit losses as any such impairment would be insignificant to the group. |
|
31.2 |
Liquidity risk |
|
Liquidity risk is that the group might be unable to meet its obligations. The group manages its liquidity needs through yearly cash flow forecasts by carefully monitoring expected cash inflows and outflows on a monthly basis. The group’s liquidity risk is not deemed to be significant in view of the matching of cash inflows and outflows arising from expected maturities of financial instruments, as well as the group’s committed borrowing facilities that it can access to meet liquidity needs. |
|
|
As at 30 June 2022, the non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarised below:
|
|
|
31.3 |
Market risk |
||
|
Foreign currency risk |
|||
|
The group transacts business mainly in euro. Exposure to currency exchange rates arise from the group’s sale and purchase of foreign currency to/from clients. However, foreign currency denominated financial assets and liabilities at the end of the financial reporting date under review are deemed negligible. |
|||
|
Accordingly, the group’s exposure to foreign exchange risk is not significant and a sensitivity analysis for foreign exchange risk disclosing how profit or loss and equity would have been affected by changes in foreign exchange rates that were reasonably possible at the reporting date is deemed not necessary. |
|||
|
Interest rate risk |
|||
|
The group is exposed to changes in market interest rates through its borrowings at variable interest rates. |
|||
|
The following table illustrates the sensitivity of the net result for the year to a reasonably possible change in interest rates of +/- 100 basis points, with effect from the beginning of the year. These changes are considered to be reasonably possible based on observation of current market conditions. |
|||
|
The calculations are based on the group’s financial instruments held at the reporting date of the reporting period under review that are sensitive to changes in interest rates. All other variables are held constant. |
|||
|
The group |
Profit (loss) for the year |
||
|
|
€ |
€ |
|
|
|
+100 bp |
-100 bp |
|
|
|
|
|
|
|
30 June 2022 |
(93,254) |
93,254 |
|
|
|
|
|
|
|
31.4 |
Categories of financial assets and liabilities |
|
The carrying amounts of the group’s financial assets and liabilities as recognised at the reporting date of the reporting period under review may also be categorised as follows. See note 5.19 for explanations about how the category of financial instruments affects their subsequent measurement.
|
|
|
32 |
Capital management policies and procedures |
|
The group’s capital management objectives are to ensure its ability to continue as a going concern and to provide an adequate return to shareholders through innovation, continuous improvement in quality service, resource utilisation, increasing the market share and flexibility. |
|
|
33 |
|
|
|
|
|
34 |
Events after the end of the reporting period |
|
No adjusting or significant other non-adjusting events have occurred between the reporting date and the date of authorisation. |
|