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IZI Finance p.l.c.

Report & Consolidated Financial Statements

30 June 2023

 

 

 

 

 

      

Company registration number: C 101228

 

Contents

 

Directors’ report 2

Statement by the directors on the financial statements   4

Directors’ statement of compliance with the Code Of Principles of Good Corporate Governance   4

Statements of comprehensive income   11

Statements of financial position   12

Statements of changes in equity   13

Statements of cash flows   13

Notes to the financial statements   14

Independent auditor’s report 49

 

 

 

Directors’ report

 

The directors present their report and the audited financial statements for the year 30 June 2023.

 

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, the 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 for a full financial year since the listing of its € 30 million 4.25% unsecured bonds on the Malta Stock Exchange in May 2022. This financial year has been remarkable on all counts with the Company and its subsidiaries now collectively establishing themselves as the largest land-based gaming group of companies in Malta, operating products of excellence across all gaming verticals. The financial period under review was also the first one during which there were no Covid-19 related restrictions, hence enabling the operating companies to gradually return to normal unrestricted operations.

This financial period was characterised by a comprehensive transformation programme through which the Company has transitioned into a major corporate enterprise building a strong corporate executive team that is being successful in putting in place the pillars for sustainable growth across all the Company’s verticals.

These organisational and commercial efforts have been complemented by the adoption of a more extensive enterprise-based approach towards ESG principles and policies, seeking to consistently reducing its carbon footprint, entrenching increasingly rigorous responsible gaming measures as part of its social commitment, whilst sustaining its governance agenda, through the implementation of an effective corporate governance framework and a constant strengthening of the group’s AMLFT systems, processes and capabilities.

The most notable event of the year was the launch of the national lottery operation on 5th July 2022, following an intensive implementation and transition programme through which the fully-owned subsidiary National Lottery plc has taken over the national lottery operations from the previous operator. The directors note that, notwithstanding the complex implementation of the national lottery, the performance of this vertical is now consistently accelerating its pace to reach its stated goals and objectives within the next months. This ramp-up period has mandated a highly capital-intensive programme focusing on stronger direct and distributed retail presence, an enhanced user experience, widespread adoption of digital tools and an upskilled workforce at all customer touchpoints.

The directors note the material leap forward in the Company’s financial performance for the financial period under review. This is largely due to the operation of the national lottery and the sustained growth acceleration in the other established verticals of the Group, most notably the casino and sports betting operations.

In fact, for the year ended 30 June 2023, the Group generated total revenue of € 73,753,267 (2022: € 15,908,923). The growth in revenues is largely attributable to the operation of the national lottery but was also strongly augmented by the established verticals, confirming the strong fundamentals of the businesses the Group has curated over the years. ‘Other Income’ of € 1,423,945 was close to that of the pre vious year (2022: € 1,253,543).

The uplift in revenues translated into a record EBITDAR (Earnings Before Interest Tax Depreciation Amortisation and Rents) registered at € 16,565,021 (2022: € 2,690,219 covering the period of six months from the date of incorporation up to the 30 June 2022) representing a very healthy 22% EBITDAR margin for the year. 63% of this EBITDAR was generated by National Lottery plc, 32% generated by Dragonara Gaming Ltd and the remaining 5% generated from the Group’s online gaming operations.

Notwithstanding that this was the first year of the national lottery operations, this EBITDAR performance represents the best recorded performance ever for the Group, clearly reflecting the robustness of the business model and its outlook in the coming 24 months, once the national lottery is fully deployed and operational. The operating loss for the financial year under review stood at € 668,724 (2022: profit of € 1,436,84 7 ), resulting after depreciation and amortisation amounting to € 16,547,776 (2022: € 1,309,873), principally arising out of the intense capital expenditure programme and concession fees.

In the financial year under review total equity stood at € 81,343,790 (2022: € 85,918,944), with total assets and total liabilities closing at € 279,029,378 and € 197,685,588 respectively, confirming the strong asset base the Group has managed to build over the years, which positions the Group for a heightened tempo of growth acceleration over the next financial years.

The directors note that the next financial year will be one which will see the Company consolidating its performance on the strength of its established verticals whilst accelerating the revenue generation from the national lottery operation. This full alignment to the Company’s long-term plans will enable it to shift its focus on sustainability of its EBITDA levels, pursuant to which it will seek to make its first investments in the international market, leveraging the knowledge and intellectual property it has managed to build across its product portfolio in Malta.

In parallel, on an enterprise-basis, the Company will be escalating its focus and investment in its people through the intensification of the employees’ knowledge, capabilities, and well-being.

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

                        Johann Schembri

                        Franco De Gabriele

                        Joseph Mallia

                        Jacqueline Camilleri

                        Stephanie Fabri

                        Otto Karasek

 

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:

As far as each director is aware, there is no relevant information needed by the independent auditor in connection with preparing the audit report of which the independent auditor is unaware, and

Each director has taken all steps that he/she ought to have taken as a director in order to make himself/herself aware of any relevant information needed by the independent auditor in connection with preparing the audit report and to establish that the independent auditor is aware of that information.

 

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 year.  In preparing these financial statements, the directors are required to:

adopt the going concern basis unless it is inappropriate to presume that the company and the group will continue in business;

select suitable accounting policies and then apply them consistently;

make judgements and estimates that are reasonable and prudent;

account for income and charges relating to the accounting period on the accruals basis;

value separately the components of asset and liability items; and

report comparative figures corresponding to those of the preceding accounting period.

 

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 19 October 2023 by Christian Gernert (chairman) and Johann Schembri as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.

 

 

Registered address:

Portomaso Business Tower

Level 11, Portomaso

St. Julian’s

Malta

 

Statement by the directors on the financial statements

 

Pursuant to Capital Markets Rule 5.68, we, the undersigned, declare that to the best of our knowledge, the financial statements included in the financial statements, and 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 company and the group, together with a description of the principal risks and uncertainties that it faces.

 

 

Signed on behalf of the board of directors on 19 October 2023 by Christian Gernert (chairman) and Johann Schembri as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.

 

 

Directors’ statement of compliance with the Code Of

Principles of Good Corporate Governance

 

Pursuant to 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 2023.

This report covers the period commencing 1 July 2022 up to and including 30 June 2023.

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 of the Company’s securities admitted to trading on the Official List of the Malta Stock Exchange 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 Official List of 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’ ) but may do so on a best-efforts basis. The Statement is to be construed accordingly. 

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:

exercise prudent and effective controls which enable risk to be assessed and managed to achieve continued prosperity to the Company;

be accountable for all actions or non-actions arising from discussions and actions taken by them or their delegates;

determine the Company’s strategic aims and the organisational structure;

regularly review management performance and ensure that the Company has the appropriate mix of financial and human resources to meet its objectives and improve the economic and commercial prosperity of the Company;

acquire a broad knowledge of the business of the Company;

be aware of and be conversant with the statutory and regulatory requirements connected to the business of the Company;

allocate sufficient time to perform their responsibilities; and

regularly attend meetings of the Board.

 

The Board has a structure that ensures a mix of executive and non-executive Directors and that enables the Board, and particularly the non-executive directors, 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 (CEO) are carried out by different individuals Mr Christian Gernert is the Chairman of the Company and Mr Johann Schembri is the CEO of the Company. 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 is responsible to:

lead the Board and set its agenda;

ensure that the Directors receive precise, timely and objective information so that they can take sound decisions and effectively monitor the performance of the Company;

ensure effective communication with shareholders; and

encourage active engagement by all Directors for discussion of complex or contentious issues.

 

The Board believes that these functions have been conducted in compliance with the dictates of Code provision 2.2. The Board considers that notwithstanding that the Chairman is not an independent director as recommended by the Code, the means for addressing potential conflicts of interest are suitably addressed in the statute of the Company and the terms of reference of the Audit Committee of the Company. Furthermore, the Board considers the present Chairman to be fit and proper to occupy the role.

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 three (3) 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 Rules 5.118 and 5.119, Ms Jacqueline Camilleri, Dr Stephanie Fabri and Dr 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, in compliance with Code provision 3.2, none of the independent Directors of the Company:

are or have been employed in any capacity by the Company;

have or have had, over the past three years, a significant business relationship with the Company;

have received or receives significant additional remuneration from the Company in addition to its director's fee;

has served on the board of the Company for more than twelve consecutive years;

have close family ties with any of the Company's executive directors or senior employees; and

have been within the last three years an engagement partner or a member of the audit team or past external auditor 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:          

maintain in all circumstances his independence of analysis, decision and action;

not to seek or accept any unreasonable advantages that could be considered as compromising his independence; and

clearly express his opposition in the event that he finds that a decision of the Board may harm the Company.

 

Each non-executive director has complied with such an undertaking for the period under review.

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 Finance p.l.c. and its subsidiaries. 

The Board is made up as follows:

Executive directors

Dr Christian Gernert - Chairman

Mr Johann Schembri - Executive director

Mr Franco De Gabriele - Executive director

Mr Joseph Mallia - Executive director

Independent non-executive directors

Ms Jacqueline Camilleri

Dr Stephanie Fabri

Dr Otto Karasek

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:

 

a)

defines clearly the Company’s strategy, policies, management performance criteria and business policies which can be measured in a precise and tangible manner;

b)

has established a clear internal and external reporting system so that the Board has continuous access to accurate, relevant and timely information such that the Board can discharge its duties, exercise objective judgment on corporate affairs and take pertinent decisions to ensure that an informed assessment can be made of all issues facing the Board;

c)

establishes an Audit Committee in terms of Rules 5.117 – 5.134;

d)

continuously assesses and monitors the Company`s present and future operations, opportunities, threats and risks in the external environment and current and future strengths and weaknesses;

e)

evaluates management’s implementation of the Company’s policies, corporate strategy and financial objectives, and regularly reviews the strategy, processes and policies adopted for implementation using key performance indicators so that corrective measures can be taken to address any deficiencies and ensure the future sustainability of the Company;

f)

ensures that the Company has appropriate policies and procedures in place to assure that the Company and its employees maintain the highest standards of corporate conduct, including compliance with applicable laws, regulations, business and ethical standards;

g)

assesses its business risk and key performance indicators against industry norms so that the Company’s performance can be effectively evaluated;

h)

requires management to constantly monitor performance and report to its satisfaction, at lease on a quarterly basis, fully and accurately on the key performance indicators; and

i)

ensures that the financial statements of the Company and the annual audit thereof, are completed in a timely manner.

 

In fulfilling its responsibilities, the Board continuously assesses and monitors the company’s present and future operations, opportunities, threats and risks in the external environment, and its current and future strengths and weaknesses. The Board evaluates and reviews the implementation of the business and financial strategy of the Company.

During the period under review, the Board organised 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. The Company remains committed to ensuring that information sessions are organised by the Board on a regular basis.

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 six (6) times. 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 (which term shall have the same meaning as in the International accounting standards adopted in accordance with Regulation (EC) No. 1606/2002 of the European Parliament and of the Council) are carried out on an arm’s length basis, on a commercial basis, and ultimately in the best interests 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 appointed by the Board and 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 Rules 5.118 and 5.119, Ms Jacqueline Camilleri, Dr Stephanie Fabri and Dr Otto Karasek are the non-executive directors who are considered by the Board to be 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):

 

are or have been employed in any capacity by the Company;

have or have had, over the past three years, a significant business relationship with the Company;

have received or receives significant additional remuneration from the Company in addition to its director’s fee;

has served on the board of the Company for more than twelve consecutive years;

have close family ties with any of the Company’s executive directors or senior employees; and

have been within the last three years an engagement partner or a member of the audit team or past external auditor of the Company.

 

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 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.

 

Through the Audit Committee, the Board reviews the effectiveness of the Company’s system of internal controls. 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 strikes 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 meets 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 six (6) 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 organisation 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 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:

 

a system providing for the development and training of management and employees generally so that the Company remains competitive;

a system to provide additional training for individual Directors where necessary;

a system to monitor management and staff morale; and

a system to establish a succession plan for senior management.

 

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) (“ Companies Act ”) and the Rules, 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 auditor’s fees, and other special business, are proposed and approved at the Company’s annual general meeting. In relation to its bondholder, 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 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. The Board believes that this is a procedure that achieves compliance with both the letter and rationale of principle eleven.

 

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.

 

Towards the objective of implementing a more sustainable business model, the Board is committed towards the continued assessment of existing measures and policies to address social and governmental issues such as responsible gaming and player protection, ethical marketing, customer data integrity, cyber security and anticorruption and money laundering.

 

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 therefore 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 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 Board itself (half of which is composed by independent non-executive directors), the Company’s shareholders, the market and all of the rules and regulations to which the Company is subject as a company with its securities listed on a regulated market.   Whilst the requirement under Code provision 7.1 might be useful in the context of larger companies having a more complex set-up and a larger Board, the size of the company’s Board is such that it should enable it to evaluate its own performance without the requirement of setting up an ad - hoc committee for this purpose. The Board shall retain this matter under review over the coming year.

 

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. The Board has not appointed a Remuneration Committee in line with Code provision 8A. The Board believes that the size of the company and the Board itself does not warrant the setting up of an ad hoc committee to establish the remuneration packages of individual directors, and relies on the constant scrutiny of the Board itself, the company’s shareholders, the market and the rules by which the Company is regulated as a listed company. T he Board intends to keep under review the utility and possible benefits of having a Remuneration Committee in due course . The Board has not appointed a Nomination Committee in line with Code provision 8B  as appointments to the Board are determined by the shareholders of the Company in accordance with the appointment process set out in the Company’s Memorandum and Articles of Association. The Company considers that the members of the Board possess the level of skill, knowledge and experience expected in terms of the Code. Notwithstanding this, the Board intends to keep under review the matter relating to the setting up of a nomination committee.

 

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 19 October 2023 by Christian Gernert (chairman) and Johann Schembri as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.

 

 

 

 

Statements of comprehensive income

 

 

The group

The company

Notes

2023

2022

 2023

 2022

 

(1 year)

(6 months)

(1 year)

 (6 months)

 €

 €

 €

 €

 

 

Revenue

7

73,753,267

15,908,923

-  

-  

Other income

8

1,423,945

1,253,543

-  

-  

Staff costs

9

(14,055,427)

(4,979,107)

(54,590)

(29,396)

Gaming tax

(21,655,093)

(4,061,965)

-  

-  

Other operating expenses

(23,587,640)

(5,374,674)

(128,792)

(66,412)

Depreciation and amortisation

13, 14, 15

(16,547,776)

(1,309,873)

-  

-  

 

 

 

 

Operating (loss) profit

10

(668,724)

1,436,847

(183,382)

(95,808)

 

 

 

 

Impairment of goodwill

6

(755,922)

-  

 

-  

-  

Finance income

11

-  

-  

3,477,306

351,427

Finance costs

11

(5,002,965)

(1,081,358)

(3,233,973)

(294,009)

 

 

 

 

(Loss) profit before tax

(6,427,611)

355,489

59,951

(38,390)

 

 

 

 

Tax income (expense)

12

1,852,457

(381,743)

12,550

(20,096)

 

 

 

 

(Loss) profit for the year/ period

(4,575,154)

(26,254)

72,501

(58,486)

 

 

 

 

(Loss) profit for the year/ period attributable to:

 

 

 

 

Non-controlling interest

786,517

263,937

-  

-  

Owners of the parent

(5,361,671)

(290,191)

72,501

(58,486)

 

 

 

 

(4,575,154)

(26,254)

72,501

(58,486)

 

 

 

Statements of financial position

 

 

The group

The company

Notes

2023

2022

 2023

 2022

 €

 €

 €

 €

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Non-current

 

 

Goodwill

6

61,595,544

62,351,466

-  

-  

Intangible assets

13

130,180,791

142,049,060

-  

-  

Property plant and equipment

14

21,849,400

11,926,675

-  

-  

Right-of-use asset

15

44,689,878

42,275,934

-  

-  

Investment properties

16

1,424,975

1,181,764

-  

-  

Investment in subsidiaries

17

-  

-  

100,189,682

100,189,682

Investment in associate

17

400

400

 

-  

-  

Loans receivable

18

-  

-  

 

64,512,519

28,600,000

Other assets

19

2,939,252

2,182,439

 

-  

236,997

Deferred tax asset

20

1,385,280

420,169

 

47,550

-  

Trade and other receivables

22

-  

197,546

 

27,274,126

26,916,360

 

 

 

 

 

 

 

264,065,520

262,585,453

192,023,877

155,943,039

 

 

 

 

 

Current

 

 

 

 

 

 

Loans receivable

18

-  

-  

5,087,481

-  

Other assets

19

6,000

-  

 

-  

-  

Inventories

21

875,045

271,770

 

-  

-  

Trade and other receivables

22

2,511,118

2,031,459

 

354,475

1,760,572

Current tax receivable

 

2,836

2,836

 

-  

-  

Cash and cash equivalents

23

11,568,859

18,869,268

197,558

237,770

 

 

 

 

 

 

 

14,963,858

21,175,333

5,639,514

1,998,342

 

 

 

 

Total assets

279,029,378

283,760,786

197,663,391

157,941,381

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

Share capital

24

80,000,001

80,000,001

 

80,000,001

80,000,001

Accumulated losses

 

(5,651,862)

(290,191)

 

14,015

(58,486)

 

 

 

 

 

 

 

 

74,348,139

79,709,810

 

80,014,016

79,941,515

Non-controlling interest

 

6,995,651

6,209,134

 

-  

-  

 

 

 

 

 

Total equity

 

81,343,790

85,918,944

 

80,014,016

79,941,515

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Non-current

 

 

Bank borrowings

25

41,131,363

7,720,103

 

35,632,565

-  

Debt securities in issue

26

29,504,500

29,418,326

 

29,504,500

29,418,326

Trade and other payables

27

57,943,686

65,984,949

 

46,614,491

4,851,629

Deferred tax liability

20

8,321,392

9,208,738

 

-  

-  

Lease liabilities

15

26,809,560

23,770,083

 

-  

-  

 

 

 

 

 

 

 

 

163,710,501

136,102,199

 

111,751,556

34,269,955

 

 

 

 

 

 

Current

 

 

 

 

 

 

Bank borrowings

25

7,009,511

1,605,252

 

5,087,481

-  

Trade and other payables

27

26,019,871

59,359,845

 

810,338

43,729,911

Lease liabilities

15

945,705

774,546

 

-  

-  

 

 

 

 

 

 

 

 

33,975,087

61,739,643

 

5,897,819

43,729,911

 

 

 

 

 

 

 

Total liabilities

197,685,588

197,841,842

 

117,649,375

77,999,866

 

 

 

 

 

 

 

Total equity and liabilities

279,029,378

283,760,786

 

197,663,391

157,941,381

 

The financial statements were approved and authorised for issue by the Board of Directors on 19 October 2023. The financial statements were signed on behalf of the Board of Directors by Johann Schembri and Christian Gernert as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.

 

 

 

Statements of changes in equity

 

 

 Attributable to

 Share

 Accumulated

 the owners of

 Non-controlling

 Total

 capital

 losses

 the parent

 interest

 equity

 €

 €

 €

 €

 €

The group

At 1 July 2022

80,000,001

(290,191)

79,709,810

6,209,134

85,918,944

Loss for the year

-  

(5,361,671)

(5,361,671)

786,517

(4,575,154)

 

 

 

 

 

At 30 June 2023

80,000,001

(5,651,862)

74,348,139

6,995,651

81,343,790

 

 

 

 

 

 

Issue of share capital

80,000,001

-  

80,000,001

-  

80,000,001

Non-controlling interest from business combination

-  

-  

-  

5,945,197

5,945,197

Loss for the period

-  

(290,191)

(290,191)

263,937

(26,254)

 

 

 

 

 

At 30 June 2022

80,000,001

(290,191)

79,709,810

6,209,134

85,918,944

The company

1 July 2022

80,000,00 1

(58,486)

79,941,515

-  

79,941,515

Profit for the year

-  

72,501

72,501

-  

72,501

 

 

 

 

 

At 30 June 2023

80,000,001

14,015

80,014,016

-  

80,014,016

 

 

 

 

 

 

Issue of share capital

80,000,001

-  

80,000,001

-  

80,000,001

Loss for the period

-  

(58,486)

(58,486)

-  

(58,486)

 

 

 

 

 

At 30 June 2022

80,000,001

(58,486)

79,941,515

-  

79,941,515

 

 

Statements of cash flows

 

The group

The company

Notes

2023

2022

 2023

 2022

 

(1 year)

(6 months)

(1 year)

 (6 months)

 €

 €

 €

 €

 

 

Operating activities

 

 

 

 

 

 

(Loss) profit before tax

 

(6,427,611)

355,489

 

59,951

(38,390)

Adjustments

28

22,339,572

2,379,786

 

(243,333)

(57,418)

Net changes in working capital

28

1,273,511

96,515

 

(494,807)

987,807

Tax paid

 

-  

(25,764)

 

-  

-  

 

 

 

 

 

 

Net cash from (used in) operating activities

17,185,472

2,806,026

 

(678,189)

891,999

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

Payments to acquire subsidiaries

 

-  

(1,282,553)

 

-  

(1,472,555)

Payments to acquire intangible assets

 

(42,372,499)

(2,292,333)

 

-  

-  

Payments to acquire property, plant and equipment

 

(13,087,963)

(9,328,629)

 

-  

-  

Loan advanced to subsidiaries

 

-  

-  

 

(41,000,000)

(28,600,000)

Bank guarantees

 

-  

211,403

 

-  

-  

Payments to acquire investment properties

 

(243,211)

(38,276)

 

-  

-  

Interest received

 

-  

-  

 

3,828,733

-  

 

 

 

 

 

 

Net cash used in investing activities

(55,703,673)

(12,730,388)

 

(37,171,267)

(30,072,555)

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

Net proceeds from issue of bonds

 

-  

29,418,326

 

-  

29,418,326

Net proceeds from bank loans

 

40,917,050

-  

 

40,917,050

-  

Repayment of bank loans

 

(1,904,527)

(914,645)

 

-  

-  

Repayment of lease liabilities

 

(1,049,212)

(249,317)

 

-  

-  

Repayment of amounts due to shareholder

(2,450,658)

-  

 

-  

-  

Interest paid on lease liabilities

 

(1,041,107)

(559,591)

 

-  

-  

Interest paid

 

(3,253,754)

(444,613)

 

(3,107,806)

-  

 

 

 

 

 

 

Net cash from financing activities

31,217,792

27,250,160

 

37,809,244

29,418,326

 

 

 

 

 

Net change in cash and cash equivalents

(7,300,409)

17,325,798

 

(40,212)

237,770

Cash and cash equivalents from business combination

-  

1,543,470

 

-  

-  

Cash and cash equivalents, beginning of year/period

18,869,268

-  

 

237,770

-  

 

 

 

 

 

Cash and cash equivalent, end of year/period

23

11,568,859

18,869,268

 

197,558

237,770

 

 

 

Notes to the financial statements

 

 

1      

Nature of operations

The principal activities of IZI Finance p.l.c. and subsidiaries (collectively referred to as the ‘group’) are to manage and operate casinos, the national lottery, and electronic gaming machines (EGM), sports betting, online gaming, commercial bingo and immovable property situated in Malta.

 

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 public limited liability company incorporated and domiciled in Malta. It was registered with the Malta Financial Services Authority on the 30th day of December 2021. The address of the company’s registered office, which is also its principal place of business, is Portomaso Business Tower, Level 11 Portomaso, St. Julian’s, Malta.

The company forms part of the IZI Group of companies and its parent company is IZI Group plc, which is of the same registered office. IZI Group plc also draws up consolidated financial statements of which the group forms part.

The financial statements of the company and the consolidated financial statements of the group have been prepared in accordance with IFRS as adopted by the European Union (EU) , and in accordance with the Companies Act, Cap 386.

 

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.

In the year under review, the group generated positive cash flows of € 17.19 million, a € 14.38 million increase from previous year. In 2023, the group made significant strategic investments in fixed assets particularly in operating equipment, store refurbishments and the acquisition of a site on which the group intends to consolidate all its operations in the future. The majority of these investments were paid by the group from cash generated from operations. The group’s and the company’s working capital positions as at the end of the reporting period reflect deficits of € 19.01 million (€ 40.56 million and € 258,000 (2022: € 41.73 million), respectively.

Management has performed an assessment incorporating cash flows to be generated from operations during the period 2023 – 2024 and actual cash outflows including interest and other changes. Management has built its assessment on the actual performance of the group and the projected growth in revenues for the said period.

Moreover, the directors are adopting additional measures to ensure that the group will continue to translate the positive operating cash flows into adequate levels of funding to sustain its growth operations and prospective investments. This will be realised through a concerted effort to realise efficiency gains through consolidation of functions, streamlining of operating expenditure and performance optimisation across all subsidiaries. In parallel, the group will also consider aligning its payment commitments to its projected inflows to adequately match the timing of the respective cash flows.

These measures together with the continued improvement in the operating performances of the group’s investments are expected to maintain adequate funding levels to enable the group and the company to meet its financial obligations and sustain its growth efforts going forward.

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’ expectation materialise.

 

4      

New or revised Standards or Interpretations

4.1

New standards adopted

 

Some accounting pronouncements which have become effective for annual periods beginning on or after 1 January 2022 and have therefore been adopted do not have a significant impact on the group’s financial results or position.

 

4.2

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 financial statements, several new, but not yet effective, Standards, amendments to existing Standards, and Interpretations have been published by the IASB. None of these Standards, amendments or Interpretations 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 year have not been disclosed as they are not expected to have a material impact on the group’s financial statements.

 

5    

Summary of accounting policies

5.1   

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 2023.  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 bets placed less players winnings.

The following specific recognition criteria must also be met before revenue is recognised:

Draw-based games

Revenue from draw-based games is recognised on the sale of tickets net client winnings.

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.

Electronic Gaming Machines

Revenue from EGM’s is recognised when machine counts are carried out and represents the increase or decrease in each machine’s position net of client winnings.

Sports betting

Revenue from sportsbook is recognised on gains and losses in respect of bets placed on live sporting events.

Bingo

Revenue from bingo is recognised on the sale of bingo tickets less clients’ winnings.

Food and beverage revenues

Revenue from the sale of food and beverages is recognised when the food and beverage service is consumed by the customer.

 

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, trademarks and domain 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

10

Software

15

Key money

10

 

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, except for land, 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:

 

%

Gaming equipment

10 – 20

Office and computer equipment

15 – 33

Furniture, electrical and sanitary fittings

12.5 – 33

Plant and machinery

20

Motor vehicle

20

Others

20-33

 

In the case of leasehold property, expected useful life is of 10 years or over the term of the lease, if shorter.

Land owned is stated at revalued amounts. Revalued amounts are fair values based on appraisals prepared by external professional valuers once every two years 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 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 land 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.

As land does not have a finite useful life, related carrying amounts are not depreciated.

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, a shop and 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:

the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the group;

the group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract; and

the group has the right to direct the use of the identified asset throughout the period of use. The group assess whether it has the right to direct ‘how and for what purpose’ the asset is used throughout the period of use.

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):


they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows; and

the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.


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 income statement comprises the sum of deferred tax and current tax not recognised 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 assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided those rates are enacted or substantively enacted by the end of the reporting period.

Deferred tax assets are recognised to the extent that it is probable that they will be able to be utilised against future taxable income. This is assessed based on the group’s forecast of future operating results which is adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit. Deferred tax liabilities are always provided for in full.

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.

 

5.23 

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.

In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognised.

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

 

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses.  Use of available information and application of judgement are inherent in making estimates. Actual results in the future could differ from such estimates and the differences may be material to the financial statements. 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.

Except as disclosed below, in the opinion of the directors, the accounting estimates and judgements 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).

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 life 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, Lottery 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 includes:

forecasted cash flow projections for the next ten years and projection of terminal value using the perpetuity method except for Dragonara Gaming Limited where cash flows were forecasted until the end of the sub emphyteusis;

growth rates to perpetuity of 2.02% (2022: 1.9%); and

use of 8%-8.3% (2022: 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 ten years and projection of terminal value using the perpetuity method;

growth rates to perpetuity of 2.02% (2022: 1.9%); and

use of 4.8% (2022: 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, IZI Finance p.l.c. acquired the equity instruments of the following companies:

 

Percentage of

 

Company

shares acquired

 Nature of business

 

 

Peninsula Gaming Group Limited

60% of ordinary shares

Holding company and owner of the Dragonara Casino through a subsidiary named Dragonara Gaming Limited. The company also owns Dragonara Catering Limited, operator of catering and other ancillary services supporting the Dragonara Casino and Dragonara Interactive Limited, operator of an online casino portal.

 

St. George Develpments Limited

99.98% of ordinary shares

Owner of an investment property.

 

Pinnacle IP Limited

100% of ordinary shares

Owner of the intellectual property controlled by the company.

 

O2 Estates Limited

99.92% of ordinary shares

Owner of an investment property.

 

IZI Interactive Limited

99.99% of ordinary shares

Operator of online sports betting and casino portal.

 

Gaming Operations Limited

99.99% of ordinary shares

Merged with National Lottery plc effective from 1 July 2022.

 

National Lottery plc

100% of ordinary shares

Holds a concession to operate the national lottery of Malta.

 

 

The details of the business combination are as follows:

 

 

 

 

 €

 

 

 

 

 

Fair value of consideration transferred

 

 

 

 

 

Ordinary shares issued

 

 

 

 

80,000,000

Deferred consideration

 

 

 

 

6,134,220

Novation of intercompany balances

 

 

 

 

 

13,865,462

 

 

 

 

 

Total

 

 

 

 

99,999,682

 

 

 

 

 

Recognised amounts of identifiable assets

 

 

 

 

 

Intangible assets

 

 

 

 

 

31,559,315

Property, plant and equipment

 

 

 

 

 

3,175,831

Right-of-use assets

 

 

 

 

 

41,887,348

Investment properties

 

 

 

 

 

1,143,488

Investment in associate

 

 

 

 

 

400

Other non-current assets

 

 

 

 

 

863,683

Deferred tax asset

 

 

 

 

 

797,298

 

 

 

 

 

Total non-current assets

 

 

 

 

79,427,363

 

 

 

 

 

Inventories

 

 

 

 

 

271,877

Trade and other receivables

 

 

 

 

 

954,024

Cash and cash equivalents

 

 

 

 

 

1,543,470

 

 

 

 

 

Total current assets

 

 

 

 

2,769,371

 

 

 

 

 

Bank borrowings

 

 

 

 

 

(8,622,091)

Deferred tax liability

 

 

 

 

 

(9,204,091)

Other non-current liabilities

 

 

 

 

 

(2,971,219)

Lease liability

 

 

 

 

 

(23,750,486)

 

 

 

 

 

Total non-current liabilities

 

 

 

 

(44,547,887)

 

 

 

 

 

Bank borrowings

 

 

 

 

 

(1,617,909)

Trade and other payables

 

 

 

 

 

(6,280,060)

Tax payable

 

 

 

 

 

(22,928)

 

 

 

 

 

 

Total non-current liabilities

 

 

 

 

(7,920,897)

 

 

 

 

 

Identifiable net assets

 

 

 

 

29,727,950

Non-controlling interest

 

 

 

 

 

(5,945,196)

 

 

 

 

 

Net assets acquired

 

 

 

 

23,782,754

 

 

 

 

 

Novation of intercompany balances

 

 

 

13,865,462

 

 

 

 

 

 

Goodwill on acquisition

 

 

 

 

62,351,466

 

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 2023, € 3,748,249 (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.

2023

 2022

 

Goodwill allocated to operating segments

 

 

Casino and catering

9,284,960

9,284,960

Retail gaming

48,910,530

48,910,530

Online gaming

3,164,218

3,164,218

Real estate

991,758

991,758

 

 

Total

62,351,466

62,351,466

 

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.

2023

 2022

 

 

 

Recoverable amount of each operating segment

 

 

Casino and catering

21,250,000

18,202,898

Retail gaming

71,617,000

78,528,475

Online gaming

3,636,000

3,164,218

Real estate

235,836

991,758

 

 

Total

96,738,836

100,887,349

 

The movement in the net carrying amount of goodwill are as follows:

2023

 2022

 

 

 

Gross carrying amount

 

 

Balance at 1 July 2022, 2021

62,351,466

-  

Acquired through business combination

-  

62,351,466

 

 

Balance at 30 June

62,351,466

62,351,466

 

 

Accumulated impairment

 

 

Balance at 1 July 2022, 2021

-  

-  

Impairment loss recognised

(755,922)

-  

 

 

Balance at 30 June

(755,922)

-  

 

 

 

Net carrying amount at 30 June

61,595,544

62,351,466

 

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 periods presented are as follows:

The group

2023

2022

 

(1 year)

(6 months)

 

 €

 €

 

 

Casino and catering

 

47,291,320

10,327,653

Retail gaming

 

23,866,566

4,619,725

Online gaming

 

2,595,381

961,545

 

 

 

 

 

73,753,267

15,908,923

 

8

Other income

Other income for the reporting periods presented are as follows:

The group

2023

2022

 

(1 year)

(6 months)

 

 €

 €

 

 

Covid-19-supplement

 

42,064

942,111

Gratuity income

 

426,024

182,923

Insurance income

 

488,293

-  

Others

 

467,564

128,509

 

 

 

 

 

1,423,945

1,253,543

 

9

Staff costs

The group

The company

2023

2022

 2023

 2022

 

(1 year)

(6 months)

 (1 year)

 (6 months)

 

 €

 €

 €

 €

 

 

 

Salaries and wages

 

12,853,057

4,461,863

1,767,499

28,996

Social security

 

710,307

161,925

40,692

200

Other staff costs

 

492,063

355,319

590

200

 

 

 

 

 

 

 

14,055,427

4,979,107

1,808,781

29,396

 

 

 

 

 

 

 

Salaries and wages recharged to subsidiaries

-  

-  

 

(1,754,191)

-  

 

 

 

 

 

 

 

14,055,427

4,979,107

54,590

29,396

 

The average full time equivalent persons employed for the reporting periods presented were:

The group

The company

2023

2022

 2023

 2022

 

(1 year)

(6 months)

 (1 year)

 (6 months)

 

No.

No.

No.

No.

 

 

 

Administration

 

53

37

18

1

Hospitality and gaming

 

402

250

1

-  

Security and surveillance

 

21

26

-  

-  

 

 

 

 

 

 

 

476

313

19

1

 

In addition to the above, the group had for the period ended 30 June 2023 average full time equivalent persons seconded or outsourced of 24 (2022: 22).

 

10

Operating (loss) profit

The operating (loss) profit is stated after charging:

The group

The company

2023

2022

 2023

 2022

 

(1 year)

(6 months)

 (1 year)

 (6 months)

 

 €

 €

 €

 €

 

 

 

Directors’ remuneration

 

90,000

22,500

54,000

22,500

Auditor’s remuneration

 

145,553

128,620

22,420

22,420

Non-audit services

 

25,901

76,700

-  

-  

 

 

 

 

 

 

11

Finance income and finance costs

The following amounts may be analysed as follows for the reporting periods presented:

The group

The company

2023

2022

 2023

 2022

 

(1 year)

(6 months)

 (1 year)

 (6 months)

 

 €

 €

 €

 €

 

 

 

Finance income

 

 

 

 

 

 

Interest income charged to subsidiaries

-  

-  

3,477,306

351,427

 

 

 

 

 

 

 

-  

-  

3,477,306

351,427

 

 

 

 

 

 

 

Finance costs

 

 

 

 

 

 

Interest expense for borrowings at amortised costs:

 

 

 

 

-      Bank loans

 

(2,291,213)

(227,758)

(1,872,799)

-  

-      Bonds

 

(1,361,174)

(294,009)

 

(1,361,174)

(294,009)

Interest expense for leasing arrangements

(1,350,578)

(559,591)

-  

-  

 

 

 

 

 

 

 

(5,002,965)

(1,081,358)

(3,233,973)

(294,009)

 

12

Tax income (expense)

The relationship between the expected tax income (expense) 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:

The group

The company

2023

2022

 2023

 2022

 

(1 year)

(6 months)

 (1 year)

 (6 months)

 

 €

 €

 €

 €

 

 

 

(Loss) profit before tax

 

(5,748,895)

355,489

59,951

(38,390)

Tax rate

 

35%

35%

35%

35%

 

 

 

 

 

Expected tax income (expense)

 

2,012,113

(124,421)

(20,983)

13,437

 

 

 

 

 

 

 

Adjustments for:

 

 

 

 

 

 

Non-deductible expenses

 

(127,689)

(179,014)

 

-  

(33,533)

Non-taxable income

 

168

(383)

-  

-  

Other timing differences

 

(202,206)

(65,056)

 

-  

-  

Movement of deferred tax asset not recognised

(12,915)

(12,869)

-  

-  

Under provision in prior year deferred tax

(54,565)

-  

 

33,533

-  

 

 

 

 

 

Actual tax income (expense), net

 

1,852,457

(381,743)

12,550

(20,096)

 

 

 

 

 

 

 

Comprising:

 

 

 

 

 

 

Current tax expense

 

-  

-  

 

-  

(20,096)

Deferred tax expense

 

1,852,457

(381,743)

 

12,550

-  

 

 

 

 

 

 

 

1,852,457

(381,743)

 

12,550

(20,096)

 

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:

 Concession

 Trademark

 Work-in-

The group

 fee

 Software

 and domain

 Key money

 progress

 Total

 €

 €

 €

 €

 €

 €

Gross carrying amount

Balance at 1 July 2022

106,515,277

5,682,761

29,204,149

732,600

-  

142,134,787

Additions

-  

562,329

42,000

120,225

-  

724,554

Adjustment*

-  

(846,360)

-  

-  

-  

(846,360)

 

 

 

 

 

 

Balance at 30 June 2023

106,515,277

5,398,730

29,246,149

852,825

-  

142,012,981

 

 

 

 

 

 

Amortisation

 

 

 

 

 

 

Balance at 1 July 2022

75,000

10,727

-  

-  

-  

85,727

Charge for the year

10,657,778

1,000,985

-  

87,700

-  

11,746,463

 

 

 

 

 

 

Balance at 30 June 2023

10,732,778

1,011,712

-  

87,700

-  

11,832,190

 

 

 

 

 

 

Carrying amount at 30 June 2023

95,782,499

4,387,018

29,246,149

765,125

-  

130,180,791

 

 

 

 

 

 

Gross carrying amount

 

 

 

 

 

 

Acquisition of subsidiaries

1,437,500

911,040

29,000,000

-  

210,775

31,559,315

Additions

105,077,777

4,691,616

73,479

732,600

-  

110,575,472

Transfers

-  

80,105

130,670

-  

(210,775)

-  

 

 

 

 

 

 

Balance at 30 June 2022

106,515,277

5,682,761

29,204,149

732,600

-  

142,134,787

 

 

 

 

 

 

Amortisation

 

 

 

 

 

 

Charge for the year

75,000

10,727

-  

-  

-  

85,727

 

 

 

 

 

 

Balance at 30 June 2022

75,000

10,727

-  

-  

-  

85,727

 

 

 

 

 

 

Carrying amount at 30 June 2022

106,440,277

5,672,034

29,204,149

732,600

-  

142,049,060

 

*Adjustment relates to the reversal of software cost and the corresponding liability, therefore, there was no effect on profit and loss.


Casino concession

On 28 July 2021, the group through Dragonara Gaming Limited, 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.

The group paid an initial concession fee of €1.5 million. In addition to the initial concession fee, the group 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:

(i)

The first payment of €3.7 million shall be due at the end of the first 12-calendar months from 1 August 2021 and payable by not later than 45 days therefrom.

(ii)

The second payment of €3.7 million shall be due at the end of the second 12-calendar months following the due date of the first payment and payable by not later than 45 days therefrom.

(iii)

The third and final payment of €3.7 million shall be due at the end of the third 12-calendar months following the due date of the second payment and payable by not later than 45 days therefrom.

 

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 exceeded €3.7 million in 2022 and 2023. Therefore, the 1 st and 2 nd payments of €3.7 million each has been 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:

 

Furniture,

Office and

electrical

Leasehold

Gaming

computer

and sanitary

Plant and

Motor

Work-in-

The group

Land

improvements

equipment

equipment

fittings

machinery

vehicle

progress

Others

Total

Gross carrying amount

Balance at 1 July 2022

-  

287,676

7,572,359

2,214,200

1,498,388

237,776

150,653

520,087

14,808

12,495,947

Additions

4,250,096

55,048

4,544,700

1,853,473

877,749

215,981

109,155

1,518,904

112,857

13,537,963

Remeasurement of lease liability

-  

-  

-  

-  

-  

-  

56,282

-  

-  

56,282

Reclassifications

-  

-  

-  

-  

70,668

88,188

-  

(158,856)

-  

-  

Adjustments*

-  

-  

(192,960)

(157,398)

-  

-  

-  

-  

-  

(350,358)

 

 

 

 

 

 

 

 

 

 

Balance at 30 June 2023

4,250,096

342,724

11,924,099

3,910,275

2,446,805

541,945

316,090

1,880,135

127,665

25,739,834

Depreciation

Balance at 1 July 2022

-  

38,130

223,728

122,703

145,644

21,385

14,971

-  

2,711

569,272

Charge for the year

-  

79,484

2,024,191

716,494

334,783

66,545

78,912

-  

20,753

3,321,162

 

 

 

 

 

 

 

 

 

 

Balance at 30 June 2023

-  

117,614

2,247,919

839,197

480,427

87,930

93,883

-  

23,464

3,890,434

 

Carrying amount at 30 June 2023

4,250,096

225,110

9,676,180

3,071,078

1,966,378

454,015

222,207

1,880,135

104,201

21,849,400

Gross carrying amount

Acquisition of subsidiaries

-  

254,340

866,566

520,408

789,260

155,764

150,653

425,006

13,833

3,175,830

Additions

-  

27,436

6,705,793

1,686,667

668,403

82,012

-  

148,831

975

9,320,117

Reclassification

-  

5,900

-  

7,125

40,725

-  

-  

-53,750

-  

-  

 

 

 

 

 

 

 

 

 

 

Balance at 30 June 2022

-  

287,676

7,572,359

2,214,200

1,498,388

237,776

150,653

520,087

14,808

12,495,947

Depreciation

Charge for the year

-  

38,130

223,728

122,703

145,644

21,385

14,971

-  

2,711

569,272

 

 

 

 

 

 

 

 

 

 

Balance at 30 June 2022

-  

38,130

223,728

122,703

145,644

21,385

14,971

-  

2,711

569,272

 

 

 

 

 

 

 

 

 

 

Carrying amount at 30 June 2022

-  

249,546

7,348,631

2,091,497

1,352,744

216,391

135,682

520,087

12,097

11,926,675

 

*Adjustment relates to the reversal of property, plant and equipment costs and the corresponding liability, therefore, there was no effect on profit and loss.

Motor vehicles include the following amounts where the group is a lessee under finance leases.

 

The group

 

 

 2023

 2022

 

 

 

 €

 €

 

 

 

 

Costs

 

 

 

422,892

149,078

Accumulated depreciation

 

 

 

 

(231,057)

(13,621)

 

 

 

 

 

 

 

 

 

191,835

135,457

 

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

 Emphyteusis

 Leased

The group

 deed

 property

 Total

 €

 €

 €

Gross carrying amount

Balance at 1 July 2022

36,612,815

6,317,993

42,930,808

Additions

-  

3,864,665

3,864,665

Remeasurement of lease liability

-  

29,430

29,430

 

 

 

Balance at 30 June 2023

36,612,815

10,212,088

46,824,903

 

 

 

Depreciation and impairment

 

 

 

Balance at 1 July 2022

292,497

362,377

654,874

Charge for the year

589,751

890,400

1,480,151

 

 

 

Balance at 30 June 2023

882,248

1,252,777

2,135,025

 

 

 

Carrying amount at 30 June 2023

35,730,567

8,959,311

44,689,878

 

 

 

Gross carrying amount

 

 

 

Acquisition of subsidiaries

36,612,815

5,274,533

41,887,348

Additions

-  

1,043,460

1,043,460

 

 

 

Balance at 30 June 2022

36,612,815

6,317,993

42,930,808

 

 

 

Depreciation and impairment

 

 

 

Charge for the year

292,497

362,377

654,874

 

 

 

Balance at 30 June 2022

292,497

362,377

654,874

 

 

 

Carrying amount at 30 June 2022

36,320,318

5,955,616

42,275,934

 

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:

 

The group

2023

2022

 €

 €

Non-current

26,809,560

23,770,083

Current

945,705

774,546

 

 

27,755,265

24,544,629

 

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 premises 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

62 years

62 years

-

-

Gaming premises

63

1 – 15 years

10 years

-

63

Commercial properties

3

1 - 23 years

16 years

-

2

 

The lease liabilities are secured by the related underlying assets. Future minimum lease payments at 30 June 2023 and 2022 were as follows:

 

 

The group

2023

2022

 €

 €

Lease payments

- not later than one year

1,956,857

1,602,532

- later than one year and not later than five years

7,852,121

5,801,339

- later than five years

71,918,995

70,290,665

 

 

81,727,973

77,694,536

Finance charges

- not later than one year

1,336,097

1,168,970

- later than one year and not later than five years

5,462,038

4,527,403

- later than five years

47,174,573

47,453,534

 

 

53,972,708

53,149,907

Net present values

- not later than one year

620,760

433,562

- later than one year and not later than five years

2,390,083

1,273,936

- later than five years

24,744,422

22,837,131

 

 

27,755,265

24,544,629

 

16

Investment properties

Details of the group’s investment properties and their carrying amounts are as follows:

Asset under

The group

Land

Shop

construction

Total

Gross carrying amount

Balance at 1 July 2022

216,129

-

965,635

1,181,764

Additions

-

120,000

123,211

243,211

 

 

 

 

Balance at 30 June 2023

216,129

120,000

1,088,846

1,424,975

 

 

 

 

Gross carrying amount

 

 

 

 

Acquisition of subsidiaries

216,129

-

927,359

1,143,488

Additions

-

-

38,276

38,276

 

 

 

 

Balance at 30 June 2022

216,129

-

965,635

1,181,764

 

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.

The directors believe that the fair value of the investment property did not significantly change from the time it was acquired until period end.

During the period, no revenue was received from investment properties.

 

17

Investment in subsidiaries and associate

17.1

Investment in subsidiaries

The amount stated in the statements of financial position is analysed as follows:

 

The company

 

 

 2023

 2022

 

 

 

 €

 €

 

 

 

 

Balance at 1 July 2022, 2021

 

 

 

 

100,189,682

-  

Acquisition of subsidiaries

 

 

 

-  

99,999,682

Additions

 

 

 

 

-  

190,000

 

 

 

 

 

Balance at 30 June

 

 

 

100,189,682

100,189,682

 

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

 

 

 

2023

2022

2023

2022

 

 

 

%

%

%

%

 

 

 

 

 

 

 

 

Dragonara Catering Limited

Dragonara Casino Complex, Dragonara Road, St Julian’s, Malta

60

60

-

-

Catering services

 

 

 

 

 

 

 

Dragonara Gaming Limited

Dragonara Casino Complex, Dragonara Road, St Julian’s, Malta

60

60

-

-

Casino

 

 

 

 

 

 

 

Dragonara Interactive Limited

Dragonara Casino Complex, Dragonara Road, St Julian’s, Malta

60

60

-

-

Online gaming

 

 

 

 

 

 

 

Gaming Operations Limited

Level 11, Portomaso Business Tower, St Julian’s, Malta

-

99.99

-

99.99

Merged with National Lottery plc effective from 1 July 2022.

 

 

 

 

 

 

 

Peninsula Gaming Group Limited

Level 11, Portomaso Business Tower, St Julian’s, Malta

60

60

60

60

Investment

 

 

 

 

 

 

 

IZI Interactive Limited

Level 11, Portomaso Business Tower, St Julian’s, Malta

99.99

99.99

99.99

99.99

Online gaming

 

 

 

 

 

 

 

St. George Developments Limited

Level 11, Portomaso Business Tower, St Julian’s, Malta

99.99

99.99

99.99

99.99

Immovable property

 

 

 

 

 

 

 

O2 Estates Limited

Level 11, Portomaso Business Tower, St Julian’s, Malta

99.99

99.99

99.99

99.99

Immovable property

 

 

 

 

 

 

 

Pinnacle IP Limited

Level 11, Portomaso Business Tower, St Julian’s, Malta

100

100

100

100

Intellectual property and marketing arm

 

 

 

 

 

 

 

National Lottery plc

Level 11, Portomaso Business Tower, St Julian’s, Malta

100

100

100

100

Holds the concession to manage and operate the national lottery 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

 

 

 

 

2023

2022

2023

2022

 

 

 

 

%

%

%

%

 

 

 

 

 

 

 

 

 

 

Confident Limited

1A, Triq Wied Ghomor,

St Julian’s, Malta

22.22

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) of which 40% is owned by non-controlling interests (NCI).

 

 

 

 2023

 2022

Peninsula Group

 

 

 

 €

 €

 

 

 

 

Balance at beginning of year

 

 

 

 

6,209,203

-  

Business combination

 

 

 

 

-  

5,945,246

Profit allocated to NCI

 

 

 

786,682

263,957

 

 

 

 

 

Balance at end of year

 

 

 

6,995,885

6,209,203

 

No dividends were paid to NCI for the reporting periods presented.

 

Summarised financial information for Peninsula Group, before intragroup eliminations, is set out below:

 2023

 2022

 €

 €

 

 

Non-current assets

42,294,804

41,353,916

Current assets

10,423,771

10,575,504

 

 

Total assets

52,718,575

51,929,420

 

 

 

Non-current liabilities

24,819,822

29,637,302

Current liabilities

10,409,048

6,769,091

 

 

Total liabilities

35,228,870

36,406,393

 

 

 

Net assets

17,489,705

15,523,027

 

 

 

Net assets attributable to:

 

 

Owners of the parent

10,493,820

9,313,824

Non-controlling interest

6,995,885

6,209,203

 

 

 

17,489,705

15,523,027

 

 

 

Total comprehensive income for the period attributable to:

 

 

Owners of the parent

1,179,996

395,935

Non-controlling interest

786,682

263,957

 

 

 

1,966,678

659,892

 

 

 

Net cash from operating activities

2,947,740

4,042,159

Net cash use d in investing activities

(2,081,229)

(4,212,256)

Net cash from (used in) financing activities

(1,905,395)

8,674,406

 

 

Net cash inflow

(1,038,884)

8,504,309

 

18

Loans receivable

The company

 2023

 2022

 €

 €

Loans to subsidiary companies

 

Non-current

64,512,519

28,600,000

Current

5,087,481

-  

 

 

 

69,600,000

28,600,000

 

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 are unsecured, bears interest of 5.75% and are repayable by 2 April 2029.

During the year under review, the company extended an additional loan to National Lottery plc amounting to    € 41 million to finance the National Lottery concession fee. The loan is unsecured, bears interest of 4.56% per annum and is repayable by equal monthly instalments of € 571,100. The loan has a moratorium period until June 2023, therefore, first instalment is due in July 2023.

 

The net carrying values of loans are considered a reasonable approximation of fair value.

 

19

Other assets

The group’s other assets include the following:

The group

The company

2023

2022

2023

2022

 €

 €

 €

 €

Deferred charges

2,266,490

1,568,099

-  

236,997

Deposits

406,087

341,665

-  

-  

Guarantees

272,675

272,675

-  

-  

 

 

 

 

2,945,252

2,182,439

-  

236,997

Comprising:

Non-current

2,939,252

2,182,439

-  

236,997

Current

6,000

-  

-  

-  

 

 

 

 

2,945,252

2,182,439

-  

236,997

 

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:

 

Recognised in

 

1 July

(loss) profit

30 June

The group

2022

for the year

2023

 

 

 

 

Intangible assets

(10,183,163)

(10,944,003)

(21,127,166)

Property, plant and equipment

(207,265)

(559,416)

(766,681)

Right-of-use asset

678,198

16,873

695,071

Revaluation of ROU asset

(7,082,322)

29,944

(7,052,378)

Unused tax losses

7,751,665

11,630,904

19,382,569

Unused capital allowances

254,318

1,678,155

1,932,473

 

 

 

Total

(8,788,569)

1,852,457

(6,936,112)

 

 

 

 

Recognised as:

 

 

 

Deferred tax assets

420,169

 

1,385,280

Deferred tax liabilities

(9,208,738)

 

(8,321,392)

 

 

 

 

(8,788,569)

 

(6,936,112)

 

 

Recognised in

 

1 July

(loss) profit

30 June

The company

2022

for the year

2023

 

 

 

 

Unused tax losses

-  

47,550

47,550

 

 

 

Total

-  

47,550

47,550

 

 

 

 

Recognised as:

 

 

 

Deferred tax assets

-  

 

47,550

Deferred tax liabilities

-  

 

-  

 

 

 

 

-  

 

47,550

 

Deferred taxes for the comparative period can be summarised as follows:

 

Recognised in

 

Acquisition of

(loss) profit

30 June

The group

subsidiaries

for the year

2022

 

 

 

 

Intangible assets

(8,458,334)

(1,724,829)

(10,183,163)

Property, plant and equipment

(52,108)

(155,157)

(207,265)

Right-of-use asset

513,764

164,434

678,198

Revaluation of ROU asset

(7,140,873)

58,551

(7,082,322)

Unused tax losses

6,514,350

1,237,315

7,751,665

Unused capital allowances

216,375

37,943

254,318

 

 

 

Total

(8,406,826)

(381,743)

(8,788,569)

 

 

 

 

Recognised as:

 

 

 

Deferred tax assets

 

 

420,169

Deferred tax liabilities

 

 

(9,208,738)

 

 

 

 

 

 

(8,788,569)

 

Refer to note 12 for information on the group’s tax income (expense).

 

21

Inventories

Inventories recognised in the statements of financial position mainly comprise gaming consumables and food and beverages .

 

22

Trade and other receivables

The group

The company

2023

2022

 2023

 2022

 

 €

 €

 €

 €

 

 

 

Trade receivables

 

459,781

74,128

 

-  

-  

Payment processors

 

105,047

87,739

 

-  

-  

Amounts owed by subsidiaries

 

-  

-  

 

27,596,171

28,310,298

Amounts owed by parent company

 

-  

75,600

 

-  

-  

Accrued income

 

256,466

-  

 

-  

351,427

Other receivables

 

706,000

866,418

 

-  

-  

 

 

 

 

 

Financial assets

 

1,527,294

1,103,885

27,596,171

28,661,725

 

 

 

 

 

 

 

Advance payments

 

222,775

561,742

 

-  

-  

Prepayments

 

761,049

563,378

 

32,430

15,207

 

 

 

 

 

Total trade and other receivables

 

2,511,118

2,229,005

27,628,601

28,676,932

 

 

 

 

 

 

 

Comprising:

 

 

 

 

 

 

Non-current

 

-  

197,546

 

27,274,126

26,916,360

Current

 

2,511,118

2,031,459

 

354,475

1,760,572

 

 

 

 

 

 

 

2,511,118

2,229,005

27,628,601

28,676,932

 

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:

The group

The company

2023

2022

 2023

 2022

 

 €

 €

 €

 €

 

 

 

Bank deposits

 

9,276,508

17,588,011

 

197,558

237,770

Cash in hand

 

2,292,351

1,281,257

 

-  

-  

 

 

 

 

 

 

 

11,568,859

18,869,268

197,558

237,770

 

24

Share capital

The share capital of IZI Finance p.l.c. consists of:

 

2023

2022

Shares issued and fully paid-up

80,000,000 ordinary A shares of € 1 each

80,000,000

80,000,000

1 ordinary B shares of € 1 each

1

1

80,000,001

80,000,001

Shares authorised

99,999,999 ordinary A shares of € 1 each

1 ordinary B shares of € 1 each

99,999,999

99,999,999

1

1

100,000,000

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 group

The company

2023

2022

 2023

 2022

 

 €

 €

 €

 €

 

 

 

Non-current

 

 

 

 

 

 

Bank loan I

 

2,248,687

3,113,631

 

-  

-  

Bank loan II

 

1,064,838

1,539,739

 

-  

-  

Bank loan III

 

1,431,724

1,923,229

 

-  

-  

Bank loan IV

 

753,549

1,143,504

 

-  

-  

Bank loan V

 

35,632,565

-  

 

35,632,565

-  

 

 

 

 

 

 

 

 

41,131,363

7,720,103

 

35,632,565

-  

 

 

 

 

 

 

Current

 

 

 

 

 

 

Bank loan I

 

752,510

641,331

 

-  

-  

Bank loan II

 

388,454

282,456

 

-  

-  

Bank loan III

 

449,997

427,537

 

-  

-  

Bank loan IV

 

331,069

253,928

 

-  

-  

Bank loan V

 

5,087,481

-  

 

5,087,481

-  

 

 

 

 

 

 

 

 

7,009,511

1,605,252

 

5,087,481

-  

 

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

Bank loan I is to be repaid over a period of 6 years with interest rate of 1.5% to 6.99% per annum. The loan is secured by a general hypothec over the group’s assets by general and hypothecary guarantees given by third parties and guarantees given by related companies.

 

Bank loan II

This loan is secured by a general hypothec over the Dragonara Gaming Limited’s (DGL) and a 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 6 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

This 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 2 years following the moratorium period and 48 monthly repayments of € 47,443 each inclusive of interest for the final 4 years.

Bank loan IV

This loan is to be repaid within 6 years through 52 monthly instalments of € 32,065 starting from March 2022 after the 6 months moratorium.

Bank loan V

During the year under review, the group obtained a loan amounting to € 41 million. The loan bears interest of 4.56% per annum and is repayable by equal monthly instalments of € 571,100. The loan has a moratorium period until June 2023, therefore, first instalment is due in July 2023. The carrying amount of this loan as at 30 June 2023 is net of transaction costs of €279,954.

Total interest incurred on these loans amounted to € 2,291,214 (2022 - 6 months : € 227,758 ) which are included in ‘finance costs’ in the statements of comprehensive income.

 

26

Debt securities in issue

The group

The company

2023

2022

 2023

 2022

 

 €

 €

 €

 €

 

 

 

Nominal value

 

 

 

 

 

 

4.25% unsecured bonds redeemable 2029

29,504,500

29,418,326

 

29,504,500

29,418,326

 

 

 

 

 

 

 

Comprising:

 

 

 

 

 

 

4.25% unsecured bonds redeemable 2029

30,000,000

30,000,000

 

30,000,000

30,000,000

 

 

 

 

 

 

 

Issue cost

 

603,218

603,218

 

603,218

603,218

Accumulated amortisation

 

(107,718)

(21,544)

 

(107,718)

(21,544)

 

 

 

 

 

 

Closing net book amount

 

495,500

581,674

 

495,500

581,674

 

 

 

 

 

 

 

Amortised costs at 30 June

 

29,504,500

29,418,326

 

29,504,500

29,418,326

 

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 € 495,500 (2022: € 581,674) which are being amortised over the life of the bonds.

 

27

Trade and other payables

The group

The company

2023

2022

 2023

 2022

 

 €

 €

 €

 €

 

 

 

Non-current

 

 

 

 

 

 

Concession fee payable

 

53,689,166

58,569,999

 

-  

-  

Provisions

 

500,000

500,000

 

-  

-  

Cash guarantees from agents

 

210,000

-  

 

-  

-  

Amounts due to parent company

 

2,325,371

4,851,629

 

2,400,971

4,851,629 

'Amounts owed to subsidiary

 

-  

-  

 

44,213,520

-  

 

 

 

 

 

 

 

Financial liabilities

 

56,724,537

63,921,628

 

46,614,491

4,851,629

 

 

 

 

 

 

 

Statutory liabilities

 

1,219,149

2,063,321

 

-  

-  

 

 

 

 

 

 

 

Total non-current liabilities

 

57,943,686

65,984,949

 

46,614,491

4,851,629

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

Concession fee payable

 

9,761,667

46,507,778

 

-  

-  

Trade payables

 

8,321,058

7,030,060

 

19,860

5,900

Players’ liability

 

110,130

57,366

 

-  

-  

Provisions

 

922,479

148,470

 

-  

-  

Amounts due to subsidiary company

 

-  

-  

 

127,116

43,430,425

Amounts due to other related parties

7,874

15,402

 

-  

-  

Accruals

 

2,435,107

1,848,605

 

619,999

293,586

 

 

 

 

 

Financial liabilities

 

21,558,315

55,607,681

766,975

43,729,911

 

 

 

 

 

 

 

Statutory liabilities

 

4,461,556

3,752,164

 

43,363

-  

 

 

 

 

 

 

 

Total current liabilities

 

26,019,871

59,359,845

 

810,338

43,729,911

 

The carrying values of financial liabilities are considered to be a reasonable approximation of fair value.

The amounts due to parent company , subsidiary company and other related parties are unsecured, interest free and repayable on demand.

 

28

Cash flow adjustment s and changes in working capital

The following cash flow adjustments and changes in working capital have been made to (loss) profit before tax to arrive at operating cash flow:

The group

The company

2023

2022

 2023

 2022

 

 €

 €

 €

 €

 

 

 

Adjustments:

 

 

 

 

 

 

Depreciation and amortisation

16,547,776

1,309,873

 

-  

-  

Impairment of goodwill

755,922

-  

 

-  

-  

Interest income

 

-  

-  

 

(3,477,306)

(351,427)

Interest expense

 

5,002,965

1,081,358

 

3,233,973

294,009

Provision for jackpots and cash and bonus points

32,909

(11,445)

 

-  

-  

 

 

 

 

 

 

 

 

 

22,339,572

2,379,786

 

(243,333)

(57,418)

 

 

 

 

 

 

 

Net changes in working capital:

 

 

 

 

 

 

Changes in inventories

 

(603,275)

107

 

-  

-  

Changes in trade and other receivables

(1,281,923)

(2,805,144)

 

696,904

510,183

Changes in trade and other payables

3,158,709

2,901,552

 

(1,191,711)