TIDMWEB
RNS Number : 9926K
Webis Holdings PLC
08 January 2021
For immediate release 8 January 2021
Webis Holdings plc
("Webis" or "the Group")
Annual Report and Financial Statements for the year ended 31 May
2020
Notice of Annual General Meeting
Further to the announcement of 27 November 2020, Webis Holdings
plc, the global gaming group, today announces its audited results
and the publication of its 2020 Report and Accounts ("Accounts")
for the year ended 31 May 2020, extracts from which are set out
below. There has been no change to the primary statements in the
intervening period and the Independent Auditor's Report is
unqualified. The Group anticipates that the Interim Financial
Report and Financial Statements will be published by 28 February
2021.
The Accounts are being posted to shareholders today together
with the Notice of Annual General Meeting, and will be available on
the Group's website www.webisholdingsplc.com and at the Group's
Registered Office: Viking House, Nelson Street, Douglas, Isle of
Man IM1 2AH.
The AGM will be held at The Claremont Hotel, 18/19 Loch
Promenade, Douglas, Isle of Man, at 11.00 a.m. on 1 February 2021.
We will inform shareholders should there be any change to the
venue.
The Board has considered how best to deal with the practical
arrangements for the meeting considering the unique circumstances
of the ongoing COVID-19 pandemic. In particular, the Board has also
considered the measures introduced by the Isle of Man Government in
response to the COVID-19 pandemic, still currently in force, which
would prevent shareholders, advisers and directors of the Company
who are not residents of the Isle of Man to attend the AGM in
person. Of those measures, the most relevant to the AGM are the
restrictions governing travelling to the Isle of Man, which require
a 14-day period of self-isolation.
The Board considers it important that all shareholders should
have the opportunity to exercise their voting rights at the AGM. To
this end, the Company invites shareholders to complete the voting
proxy form as early as possible. Shareholders may also submit
questions to the Company Secretary either in writing at the
registered office or by email to ir@webisholdingsplc.com prior to
the meeting and as early as possible.
The Company will continue to monitor the advice of the Isle of
Man Government and, in the event of material changes to the current
advice, the Company will update its shareholders via the Regulatory
Information Service .
Chairman's Statement
Introduction
I am very pleased to report that it has been a much improved
performance from our core USA based business, WatchandWager.com LLC
("WatchandWager") over the financial year, with a significant
improvement in trading especially in the second half. In addition,
I can confirm that this performance has continued into the new
financial year. Indeed, we fully expect a return to profitability
for the Group for the 2020/21 financial year.
In addition, your Board believes that our standing as a credible
proven licensed operator across the USA continues to place us in a
unique position. The USA is clearly the land of opportunity in
relation to licensed forms of gaming, and increasingly the major
operators in our sector are looking to the USA for increased
revenue streams. This can only enhance our position for the benefit
of shareholders.
With that said, and clearly in these extraordinary times, this
positive report comes with a caveat that any external factors, such
as Covid-19 affecting our clients ability to wager on our core
content, or other external factors outside our control, may have an
unforeseen impact. These factors are analyzed in this report.
Year End Results Review
The Group amounts wagered for the year ended 31 May 2020 were
US$ 105.3 million (2019: US$ 136.3 million). Gross Profit reported
was up at US$ 4.53 million (2019: US$ 4.48 million).
Operating costs were US$ 4.9 million: down 7% on 2019 (2019 US$
5.3 million), as we continue to manage costs over the entire
operation. As a result, our loss from operations was US$ 284,000,
again, a significant improvement from last year, and continues our
projected curve to return to bottom line profit.
Shareholder equity stands at US$ 0.9 million (2019: US$ 1.2
million). Total cash stands at US$ 4.0 million (2019: US$ 2.6
million), which includes ring-fenced funds held as protection
against our player liability as required under USA and Isle of Man
gambling legislation. An amount of US$ 0.88 million was held during
the year as bonds and deposits with regulatory authorities.
Approach to Risk and Corporate Governance
As part of the adoption of the Quoted Companies Alliance
Corporate Governance code in 2018, the Board completed an
assessment of the risks inherent in the business and defined and
adopted a statement of risk appetite, being the amount and type of
risk, it is prepared to seek, accept or tolerate in pursuit of
value. This being: -
"The Group's general risk appetite is a moderate, balanced one
that allows it to maintain appropriate growth, profitability and
scalability, whilst ensuring full regulatory compliance."
The Group's primary risk drivers include: -
Strategic
Reputational
Credit
Operational
Market
Liquidity, Capital and Funding
Regulatory and Compliance
Conduct
Our risk appetite is classified under an "impact" matrix defined
as Zero, Low, Medium and High. Appropriate steps are implemented to
ensure the prudential control monitoring of risks to the Group and
the Audit, Risk and Compliance Committee oversees this essential
requirement. Further details of the Corporate Governance Statement
will be found on pages 9 to 12 of this report.
The Board refined the Group's business plan which incorporates
the risk and compliance framework.
Performance by Sector
WatchandWager
Business-to-Consumer
www.watchandwager.com /mobile
I can report a significant improvement in performance, both
during the period reported and in the future outlook. During the
period, we saw a 16% increase in handle versus the same period last
year. This despite much of our core content being postponed in the
early stages of Covid-19 in March, April and May. In addition, we
thoroughly reviewed the operation with a view to improving our
performance. This review is carried out regularly and ensures that
we achieve optimum cost control to maximize our margin. This
excellent performance has continued into the new financial
year.
This improvement continued in the second half of the year,
enhanced by our content continuing to operate, despite the impact
of global Covid-19 lockdowns, from March onwards. Lack of
attendance on racetracks and some other sports being unable to
operate has helped our online operations. The Board wishes to thank
our global content partners for continuing operations during these
extremely difficult times
Business-to-Business
This sector covers the provision of pari-mutuel (pool) wagering
to high-roller clients, many of whom specialise in algorithmic or
computer assisted trading on a wide range of global racetracks.
This sector has performed satisfactorily but is somewhat complex
to manage. We are finding that the area is becoming increasingly
competitive, as content holders manage their rates and control
their channel of distribution. In addition, as stated before, this
sector is a relationship business, where person-to-person
interaction with content holders, suppliers, and customers is an
important factor for success. This has of course been difficult to
achieve during the Covid-19 pandemic due to travel
restrictions.
Cal Expo
Our racetrack operation at Cal Expo, Sacramento performed well
during the period with a good horse population, steady handle and,
importantly, zero horse fatalities at the racetrack itself.
However, we were impacted by the California wildfires in and around
the State, and that remains a concern, mainly due to air quality.
We were fortunate in that our meeting ceased on 31 March before the
major impact of Covid-19.
Health and safety has been our principal focus and will always
continue to be so, especially as a live sporting event. We thank
all our staff and all our participants at Cal Expo for their
diligence and excellent record in this regard during difficult
times to operate a retail operation.
Covid-19 and other risk factors
This has been an unprecedented period to report upon and I feel
it is important to update shareholders on the position of the
Company in relation to Covid-19 and other factors out of our
control. In relation to Covid-19, we believe that the Company will
be largely unaffected by the impact of the pandemic, with our
principal revenues being mainly on-line business. However, there is
always a caveat insofar as we are reliant on racing continuing
throughout any lockdown of sports. We are a content company and
without content that would be a risk to the Company, as with many
other operations. Wildfires in California also remain a risk to our
retail operations at Cal Expo.
Licenses, Regulatory and Compliance
The management team have once again been busy renewing our key
strategic licenses during the period and subsequently. I am pleased
to confirm at the time of writing that all our core licenses have
either been renewed or in the process of being renewed for the
calendar year of 2021 and in some cases, even further.
As announced on to the market on 20 November, we were approved
by the California Horseracing Board to continue our advanced
deposit wagering operations for a further two years. California
being a strategically key State for our operations.
The Board considers these licenses and future applications,
alongside our physical presence at Cal Expo, to be the principal
assets of the Group, and this is commented more in subsequent
events below.
In addition, I can report that the Group did not have any
regulatory breaches or complaints from our valued content providers
during the period, and indeed to date, as we hold compliance and
social responsibility to be high priority across the Group.
Subsequent Events (post period reported)
Trading
As mentioned above, I can report a significant upturn in
business performance in our new financial year. This has
principally been from increased business on our BtoC operation with
increases in player numbers and handle generated. Handle has
increased by 67% at time of writing across the same period last
year.
Our retail facility at Cal Expo has also benefited from wagers
placed from locations inside California, which we are entitled to a
share of as a licensed operator in the State.
Notwithstanding external factors, the Board is confident this
positive trend will continue to the year end. A further update will
be provided at our half year results (due to be announced February
2021).
Cal Expo License Renewal
As reported to shareholders on 19 December 2019, we have renewed
our license with our Cal Expo State landlord until 2025, with an
option to renew until 2030. We believe this is extremely important
to secure our asset in the fifth largest economy in the world. We
can also report that our landlord has received funding from the
State due to lost income as a result of the pandemic lockdowns.
We will commence live Racing on 21 November and race until
mid-April 2021, with 44 race days arranged. At present, we plan to
race without crowds but at all times will be guided by the
Sacramento County Health Authorities. It should be noted that 97%
of our revenues at the facility are generated off the track, and
this figure is expected to increase, so the impact of a lack of
attendance will be negligible, although of course we would want to
welcome spectators back as guided.
USA/California regulated sports betting
Shareholders may have noted the developments in relation to
California legalized sports betting in the summer of this year. We
were disappointed that the Dodd/Gray AB10 Bill did not get
approved, but we are optimistic for the future. We believe that
post the USA Election and in early 2021, this matter will progress.
The State has a significant budget deficit, and it will only be a
matter of time before legalized sports betting will be embraced,
and WatchandWager will be very well positioned to take advantage of
this.
We will be increasing our lobbying and activity in the State
Capitol post the election. We do not favour the Native American
proposal which does not permit on-line wagering. As we have seen
across the world, and in indeed in several market leaders such as
New Jersey and Pennsylvania, on-line wagering will create for much
higher levels of duties, jobs and revenues back into the State. We
plan to lobby more aggressively in this matter in 2021 and will
keep shareholders up to date as to progress
At time of writing we expect sports betting to be legalized for
those with a physical presence in the State by 2022, with a go-live
date in 2023.
The Executive continue to look at other opportunities to
diversify our product offering in other States and will keep
shareholders informed.
Summary and Outlook
Overall, the Board is pleased with the business performance both
during the period and looking forward. Our cash position is much
improved, and we expect trading to continue to be solid,
notwithstanding external factors beyond our control
We also need to look to the future, and we are very aware that
USA regulated gaming is seen as a very relevant subject at present
in global gaming space. The likely acquisition of William Hill by a
US based corporation is clear evidence of that, and we expect this
trend to continue. In relation to that we have hired a leading
gaming consultant to look at merger and acquisition opportunities
with a natural fit to our business, most likely in the USA. We will
keep shareholders informed of any significant developments.
It is also important to re-confirm the support of our principal
shareholder for our USA operations, strategy, and expansion plans.
As a Board, we also believe we have the ability to raise further
capital to support our operations both short term and indeed for
future funding of our USA strategy.
Finally, I would like to thank all our shareholders, customers
for their continued loyalty, and our staff for their continued hard
work during these very difficult times.
Denham Eke
Non-executive Chairman
For further information:
Webis Holdings plc Tel: 01624 639396
Denham Eke
Beaumont Cornish Limited Tel: 020 7628 3396
Roland Cornish/James Biddle
Consolidated Statement of Comprehensive Income
For the year ended 31 May 2020
2020 2019
Note US$000 US$000
------------------------------------------------------ ----- --------- -----------
Amounts wagered 105,325 136,353
------------------------------------------------------ ----- --------- ---------
Revenue 2 43,436 47,259
Cost of sales (38,820) (42,625)
Betting duty paid (83) (146)
------------------------------------------------------ ----- --------- -----------
Gross profit 4,533 4,488
------------------------------------------------------ ----- --------- -----------
Operating costs (4,908) (5,277)
Impairment loss on trade receivables 21 (18) (67)
Re-organisational and other costs (28) (54)
Other losses (29) (166)
Government grant 1.3 48 -
Other income 212 187
Operating loss 3 (190) (889)
------------------------------------------------------ ----- --------- -----------
Finance costs 4 (94) (41)
------------------------------------------------------ ----- --------- -----------
Loss before income tax (284) (930)
------------------------------------------------------ ----- --------- ---------
Income tax expense 6 - -
------------------------------------------------------ ----- --------- -----------
Loss for the year (284) (930)
------------------------------------------------------ ----- --------- ---------
Other comprehensive income:
Items that may be subsequently reclassified to profit
or loss:
Currency translation differences on disposal of
foreign subsidiaries - -
------------------------------------------------------ ----- --------- -----------
Other comprehensive loss for the year - -
------------------------------------------------------ ----- --------- -----------
Total comprehensive loss for the year (284) (930)
------------------------------------------------------ ----- --------- ---------
Basic earnings per share for loss attributable to
the equity holders of the Company during the year
(cents) 7 (0.07) (0.24)
------------------------------------------------------ ----- --------- -----------
Diluted earnings per share for loss attributable
to the equity holders of the Company during the
year (cents) 7 (0.07) (0.23)
------------------------------------------------------ ----- --------- -----------
Statements of Financial Position
As at 31 May 2020
31.05.20 31.05.20 31.05.19 31.05.19
Group Company Group Company
Note US$000 US$000 US$000 US$000
------------------------------ ----- --------- --------- ----------- ---------
Non-current assets
Intangible assets 8 30 - 104 7
Property, equipment and motor
vehicles 9 415 7 26 10
Investments 10 - 2 - 3
Bonds and deposits 11 101 - 101 -
------------------------------ ----- --------- --------- ----------- ---------
Total non-current assets 546 9 231 20
------------------------------ ----- --------- --------- ----------- ---------
Current assets
Bonds and deposits 11 882 - 882 -
Trade and other receivables 13 1,256 463 1,191 427
Cash, cash equivalents and
restricted cash 12 3,969 1,780 2,594 1,416
------------------------------ ----- --------- --------- ----------- ---------
Total current assets 6,107 2,243 4,667 1,843
------------------------------ ----- --------- --------- ----------- ---------
Total assets 6,653 2,252 4,898 1,863
------------------------------ ----- --------- --------- ----------- ---------
Equity
Called up share capital 17 6,334 6,334 6,334 6,334
Share option reserve 17 42 42 42 42
Retained losses (5,508) (5,526) (5,224) (5,412)
------------------------------ ----- --------- --------- ----------- ---------
Total equity 868 850 1,152 964
------------------------------ ----- --------- --------- ----------- ---------
Current liabilities
Trade and other payables 14 3,749 52 2,896 49
Deferred income 15 272 - - -
Loans, borrowings and lease
liabilities 16 97 - - -
------------------------------ ----- --------- --------- ----------- ---------
Total current liabilities 4,118 52 2,896 49
------------------------------ ----- --------- --------- ----------- ---------
Non-current liabilities
Loans, borrowings and lease
liabilities 16 1,667 1,350 850 850
------------------------------ ----- --------- --------- ----------- ---------
Total non-current liabilities 1,667 1,350 850 850
------------------------------ ----- --------- --------- ----------- ---------
Total liabilities 5,785 1,402 3,746 899
------------------------------ ----- --------- --------- ----------- ---------
Total equity and liabilities 6,653 2,252 4,898 1,863
------------------------------ ----- --------- --------- ----------- ---------
Statements of Changes in Equity
For the year ended 31 May 2020
Called up Share option Retained Total
share capital reserve earnings equity
Group US$000 US$000 US$000 US$000
---------------------------- --------------- ------------- ---------- --------
Balance as at 31 May 2018 6,334 4 (4,294) 2,044
Total comprehensive loss
for the year:
Loss for the year - - (930) (930)
Transactions with owners:
Share-based payment expense
(note 17) - 38 - 38
Balance as at 31 May 2019 6,334 42 (5,224) 1,152
Total comprehensive loss
for the year:
Loss for the year - - (284) (284)
Transactions with owners:
Share-based payment expense
(note 17) - - - -
---------------------------- --------------- ------------- ---------- --------
Balance as at 31 May 2020 6,334 42 (5,508) 868
---------------------------- --------------- ------------- ---------- --------
Called up Share option Retained Total
share capital reserve earnings equity
Company US$000 US$000 US$000 US$000
---------------------------- --------------- ------------- ---------- --------
Balance as at 31 May 2018 6,334 4 (5,282) 1,056
Total comprehensive loss
for the year:
Loss for the year - - (130) (130)
Transactions with owners:
Share-based payment expense
(note 17) - 38 - 38
Balance as at 31 May 2019 6,334 42 (5,412) 964
Total comprehensive loss
for the year:
Loss for the year - - (114) (114)
Transactions with owners:
Share-based payment expense
(note 17) - - - -
---------------------------- --------------- ------------- ---------- --------
Balance as at 31 May 2020 6,334 42 (5,526) 850
---------------------------- --------------- ------------- ---------- --------
Consolidated Statement of Cash Flows
For the year ended 31 May 2020
Note 202 0 2019
US$000 US$000
----------------------------------------------------------- ---- -------- -----------
Cash flows from operating activities
L oss before income tax (284) (930)
Adjustments for:
* Depreciation of property, equipment and motor
vehicles 9 122 34
* Amortisation of intangible assets 8 73 80
* R ent concession received (13) -
* Finance costs 4 94 41
* Government grant utilised (48) -
* Share b ased payment expense 17 - 38
* Other foreign exchange movements (83) 3 63
Changes in working capital:
* (Increase) / d ecrease in receivables (65) 1,109
* Increase / (decrease) i n payables 853 (13,425)
----------------------------------------------------------- ---- -------- ---------
Cash flows from operations 649 (12,690)
Bonds and deposits placed in the course of operations 11 - 1,964
Net cash generated from / (used in) operating activities 649 (10,726)
----------------------------------------------------------- ---- -------- ---------
Cash flows from investing activities
Purchase of intangible assets 8 - (18)
Purchase of property, equipment and motor vehicles 9 ( 39) -
Net cash used in investing activities (3 9 ) (18)
----------------------------------------------------------- ---- -------- -----------
Cash flows from financing activities
Interest paid 4 (9 4 ) (41)
Payment of lease liabilities and rent concessions received ( 101) -
Repayment of loans and borrowings ( 1) -
R eceipt of Government funding/grant 320 -
Loans, borrowings a nd lease liabilities received 556 350
Net cash generated from financing activities 680 309
----------------------------------------------------------- ---- -------- ---------
Net i ncrease / (decrease) in cash and cash equivalents 1,290 (10,435)
Cash and cash equivalents at beginning of year 1,363 11,9 62
Exchange gains / ( losses) on cash and cash equivalents 85 (363)
( Increase) / decrease in movement of restricted cash (239) 1 99
----------------------------------------------------------- ---- -------- ---------
Cash and cash equivalents at end of year 12 2,499 1,3 63
----------------------------------------------------------- ---- -------- ---------
Notes to the Financial Statements
For the year ended 31 May 2020
1 Reporting entity (the "Company")
Webis Holdings plc is a company domiciled in the Isle of Man.
The address of the Company's registered office is Viking House,
Nelson Street, Douglas, Isle of Man, IM1 2AH. The Webis Holdings
plc consolidated financial statements as at and for the year ended
31 May 2020 consolidate those of the Company and its subsidiaries
(together referred to as the "Group").
1.1 Basis of preparation
(a) Statement of compliance
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
("IFRS") and its interpretations as adopted by the European
Union.
Except for the changes detailed in note 1.2, the Group has
consistently applied the accounting policies as set out in note 1.3
to all periods presented in these financial statements.
Functional and presentational currency
These financial statements are presented in US Dollars which is
the Group's primary functional currency and its presentational
currency. Financial information presented in US Dollars has been
rounded to the nearest thousand, unless otherwise indicated. All
continued operations of the Group have US Dollars as their
functional currency.
Other information presented
In line with the Isle of Man Companies Acts 1931-2004, the
Company also presents Parent Company Statements of Financial
Position, the Parent Company Statement of Changes in Equity and
related disclosures
(b) Basis of measurement
The Group consolidated financial statements are prepared under
the historical cost convention except where assets and liabilities
are required to be stated at their fair value.
(c) Use of estimates and judgement
The preparation of the Group financial statements in conformity
with IFRS as adopted by the EU requires management to make
judgements, estimates and assumptions that affect the application
of policies and reported amounts of assets and liabilities, income
and expenses. Although these estimates are based on management's
best knowledge and experience of current events and expected
economic conditions, actual results may differ from these
estimates.
The Directors consider the only critical judgement areas to be
as follows:
-- Note 16 - discount rates applied to lease liabilities. The
Directors consider that the assumptions used to determine the
relevant incremental borrowing rates reflect fair market rates and
are appropriate for the purposes of the calculations.
-- Note 21 - the measurement of Expected Credit Loss ("ECL")
allowance for trade and other receivables and assessment of
specific impairment allowances where receivables are past due.
Going concern
The Group and Parent Company financial statements have been
prepared on a going concern basis.
As indicated in the statement of comprehensive income, the Group
has a loss of US $284,000 (2019: US $930,000) in the current year
and net assets have decreased from US $1,152,000 to US $868,000 due
to that.
Further , Watchand W ager.com LLC (US A Subsidiary) has been
historically loss making and nullified the profit generated by W
atchand W ager.com L imited (IOM Subsidiary ) which resulted in the
consolidated accumulated loss of US $5,508,000 at the group level
.
As noted within the Chairman's Statement and note 23, the global
coronavirus ("COVID-19") pandemic has had an unprecedented impact
on communities and businesses worldwide. Despite this, the
horseracing industry was able to reopen, albeit behind closed
doors, in advance of other sports which has attracted higher player
numbers and wagering volumes. This has resulted in increased
profitability since the close of the financial year and extensive
efforts have been made to promote the content and markets the Group
provides to a wider customer base with an increased focus on player
retention. Whilst there can be no certainty as to the level and
duration of higher volumes and improved trading results,
significant attention is being applied to sustain these trading
patterns through attracting and retaining new players.
The D irectors recognise that there is difficulty in maintaining
the recent uplift in revenue as other sporting events start up
again.
In order to help achieve its goal of profitability and
maintaining adequate liquidity in order to continue its operations
the Directors are pursuing strategies that include:
-- broadening the Group's client base and the continued
expansion of its business to customer base;
-- continuing to renew and acquire further US state regulated
gaming licenses and continuing to develop and expand the Cal Expo
racetrack operation; and
-- taking advantage of the anticipated regulatory change in the
State of California's adoption of sports betting legislation which
will further open up opportunities for the Group
Whilst the Directors continue to assess all strategic options in
relation to the strategies noted in the previous paragraph, the
Directors recognize that the ultimate success of strategies adopted
is difficult to predict as they require additional liquidity to
pursue the required investment, including bonds to be placed with
the relevant authorities to allow for betting on those tracks and
excess cost to be paid to service providers to add more servers to
allow for increased number of users . The Directors have prepared
cash flow forecasts for a period of 12 months from the date of
approval of these financial statements which indicate that, taking
account of reasonably possible downsides, the Group is projected to
have sufficient funds. Projections are inherently uncertain (also
considering the history of losses) and, in that regard, the related
entity has committed to extend funding in case the Group faces any
difficulty to meet its liabilities as they fall due for that
period.
The Company and the Group depend on Galloway Limited ( r elated
entity) for financial support and Galloway Limited has indicated
its intention to continue to make available funds as and when
needed by the G roup. The loan from Galloway Limited stands at
$1,350,000 as at 31 May 2020.
As with any company placing reliance on other parties for
financial support, the Directors acknowledge that there can be no
certainty that this support will continue, although, at the date of
approval of these financial statements, they have no reason to
believe that it will not do so. The willingness of Galloway Limited
to continue to provide this support is reliant on the strategies
highlighted above which are subject to uncertainty.
Based on these indications, (namely cashflow projections and
commitment of support from the related entity), the Directors
believe that it remains appropriate to prepare the financial
statements on a going concern basis. However, the circumstances
discussed in the note represent a material uncertainty that may
cast significant doubt on the Company's and the Group's ability to
continue as a going concern and, therefore, to continue realising
its assets and discharging its liabilities in the normal course of
business. The financial statements do not include any adjustments
to the carrying amounts and classification of assets, liabilities
and reported expenses that may otherwise be required if the basis
of preparation should be inappropriate.
1.2 Changes in significant accounting policies
During the current year the Group adopted all the new and
revised IFRSs that are relevant to its operation and are effective
for accounting periods beginning on 1 June 2019. Except for the
transition to IFRS 16 detailed below, no other adoption had a
material effect on the accounting policies of the Group.
IFRS 16 Transition
IFRS 16 introduced a single, on-balance sheet accounting model
for lessees. As a result, the Group, as a lessee, has recognised
right of use assets representing its rights to use the underlying
assets and lease liabilities representing its obligation to make
lease payments.
The Group has applied IFRS 16 using the modified retrospective
approach, under which the cumulative effect of initial application
is recognised in retained earnings as at 1 June 2019. Accordingly,
the comparative information presented to 31 May 2019 has not been
restated - i.e. it is presented, as previously reported, under IAS
17 and related interpretations.
The details of the changes in accounting policies are disclosed
below.
A. Definition of a lease
Previously, the Group determined at contract inception whether
an arrangement was or contained a lease under IAS 17. The Group now
assesses whether a contract is, or contains, a lease based on the
new definition of a lease. Under IFRS 16, a contract is, or
contains, a lease if the contract conveys a right to control the
use of an identified asset for a period of time in exchange for
consideration.
On transition to IFRS 16, the Group elected to apply the
practical expedient to grandfather the assessment of which
transactions are leases. It applied IFRS 16 only to contracts that
were previously identified as leases. Contracts that were not
identified as leases under IAS 17 were not reassessed. Therefore,
the definition of a lease under IFRS 16 has been applied only to
contracts entered into or changed on or after 1 June 2019.
B. As a lessee
The Group leases property assets. As a lessee, the Group
previously classified these leases as operating leases based on its
assessment of whether the lease transferred substantially all of
the risks and rewards of ownership. Under IFRS 16, the Group
recognises right of use assets and lease liabilities for leases
that meet the relevant definition, presenting these leases on the
Statement of Financial Position.
The Group does not recognise right of use assets and lease
liabilities for property rental costs that do not meet the
definition of leases under IFRS 16. The Group recognises these
costs as an expense on a straight-line basis.
i. Significant accounting policies
The Group recognises a right of use asset and a lease liability
at the lease commencement/modification date. The right of use
asset is initially measured at cost, and subsequently at cost
less accumulated depreciation and impairment loss and adjusted for
certain remeasurements of the lease liability.
The right of use asset is subsequently depreciated using the
straight-line method from the commencement date to the end of the
lease term.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted at the Group's applicable incremental borrowing rate
(the rate implicit in the lease cannot be determined). The Group
has measured the incremental borrowing as equal to external
borrowing rates. The lease liability is subsequently increased by
the interest cost of the lease liability and decreased by the lease
payment made. It is remeasured when there is a change in future
lease payments arising from a change in an index or rate, a change
in the estimate of the amount expected to be payable under a
residual value guarantee, or as appropriate, changes in the
assessment of whether a purchase or extension option is reasonably
certain to be exercised, or a termination option is reasonably
certain not to be exercised.
The Group has applied judgment to determine the lease term for
some lease contracts in which it is a lessee that include renewal
options. The assessment of whether the Group is reasonably certain
to exercise such options impacts the lease term, which affects the
amount of lease liabilities and right of use assets recognised.
Extension/renewal is only available to lessor on terms and
conditions to be agreed between both parties.
ii. Impacts on transition
Previously, the Group classified property leases as operating
leases under IAS 17. The leases typically run for a period of 1 to
6 years and the operating lease commitment relating to these leases
at 31 May 2019 as disclosed in the Group's consolidated financial
statements was US$294,000. At transition, for relevant leases
classified as operating leases under IAS 17, lease liabilities were
measured at the present value of the remaining lease payments,
discounted at the Group's applicable incremental borrowing rate as
at 1 June 2019. Right of use assets are measured at an amount equal
to the lease liability, adjusted by the amount of any net prepaid
and accrued lease payments, if applicable. The impact on transition
is summarised below.
As at 1 June 2019 US$000
-------------------- ------
Right of use assets 262
Lease liabilities (262)
Retained earnings -
--------------------- ------
iii. Impacts for the period
Right of use assets
The carrying amount of right of use assets at the end of the
year is as follows:
Right of
Property use assets
US$000 US$000
------------------------------------ -------- -----------
Balance at 1 June 2019 262 262
Depreciation expense (98) (98)
Modification to right of use assets 211 211
------------------------------------ -------- -----------
Balance at 31 May 2020 375 375
------------------------------------ -------- -----------
Lease liability
The carrying amount of lease liability at the end of the year is
as follows:
Property Lease liability
US$000 US$000
---------------------------------- -------- ---------------
Balance at 1 June 2019 262 262
Interest expense 25 25
Lease payments (101) (101)
Rent concessions received (13) (13)
Modification to lease liabilities 211 211
---------------------------------- -------- ---------------
Balance at 31 May 2020 384 384
---------------------------------- -------- ---------------
The Group has classified cash payments for the principal portion
of lease payments as financing activities. During the year under
review, an extension was agreed to the lease term of one of the
leases, which has resulted in a modification to the relevant right
of use asset and lease liability.
During the year, the Group received a rent concession of
US$12,600 and the practical expedient has been applied to all rent
concessions that meet the conditions. This was recognised as a
deduction from depreciation expense.
iv. Exemptions taken
The Group used the following practical expedient when applying
IFRS 16 to leases previously classified as operating leases under
IAS 17:
-- Applied the exemption not to recognise right of use assets
and lease liabilities for leases with less than 12 months of lease
term.
v. Lease policy until 31 May 2019
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any incentives
received from the lessor) are charged to the income statement on a
straight-line basis over the period of the lease. The Group is not
party to any leases that are classified as finance leases.
1.3 Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied to all the years presented
unless otherwise stated.
Basis of consolidation
The consolidated financial statements incorporate the results of
the Group. Subsidiaries are consolidated from the date of
acquisition, being the date on which the Group obtains control, and
continue until the date that such control ceases. Control exists
when the Group has the power, directly or indirectly, to govern the
financial and operating policies of an entity so as to obtain
benefits from its activities.
The Group applies the acquisition method to account for business
combinations. The consideration transferred for the acquisition of
a subsidiary is the fair values of the assets transferred, the
liabilities incurred to the former owners of the acquiree and the
equity interests issued by the Group. The consideration transferred
includes the fair value of any asset or liability resulting from a
contingent consideration arrangement. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the
acquisition date. Acquisition-related costs are expensed as
incurred.
Inter-company transactions, balances and unrealised gains on
transactions between the Group companies are eliminated. Unrealised
losses are also eliminated. When necessary amounts reported by
subsidiaries have been adjusted to conform with the G roup's
accounting policies.
Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates ('the functional
currency'). The consolidated financial statements are presented in
US Dollars, which is also the Group's functional currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions or valuation where items are remeasured. Foreign
exchange gains and losses resulting from the settlement of
such transactions and from the translation at year-end exchange
rates of monetary assets and liabilities denominated in foreign
currencies are recognised in the income statement, except when
deferred in other comprehensive income as qualifying cash
flow hedges and qualifying net investment hedges. Foreign
exchange gains and losses that relate to borrowings are presented
in the income statement within 'Finance income' or 'Finance costs'.
All other foreign exchange gains and losses are presented in the
income statement within 'Other (losses)/gains'.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate. Exchange
differences arising are recognised in other comprehensive
income.
Revenue from contracts with customers
The Group generates revenue primarily from the provision of
wagering services and the hosting of races on which guests are
entitled to participate in the related wagering services. Revenue
is measured based on the consideration specified in a contract with
a customer. The Group recognises revenue when it discharges
services to a customer. Revenue has been disaggregated by
geographical locations which are consistent with the operating
segments (note 2).
Hosting fees (Racetrack operations) are recognised when the
customers participate in the Group's pari-mutuel pools and the race
audio visual signals are transmitted. Hosting fees are recorded on
a gross receipts basis.
Wagering revenue from the Group's activities as the race host is
recognised when a race on which wagers are placed is completed. The
wagering commission from the Group's commingling of its wagering
pools with a host's pool is recognised when the race on which those
wagers are placed is completed. The Group acts as a principal when
it allows customers to place wagers in the races it hosts and as an
agent when it allows customers to place wagers in other entities'
races.
Settlement terms for revenue where the Group acts as a host is
usually 7 days for on and off-track wagering and 30 days from month
end for ADW wagering. Where the Group acts as an agent, settlement
terms are typically 30 days from month end.
Transactions fees (ADW operations) are recognised when the Group
facilitates customers' deposit transactions into their betting
accounts. The Group recognises revenue for transaction services net
of related winnings.
Government grants
The Group initially recognises government grants, that
compensate for expenses incurred, as deferred income at fair value
if there is a reasonable assurance that they will be received. They
are then recognised in profit or loss on a systematic basis in the
periods in which the expenses are recognised.
Segmental reporting
Segmental reporting is based on the business areas in accordance
with the Group's internal reporting structure, which allows the
individual operating segments to be identified by the disparate
nature of the principal activity they undertake. The Group
determines and presents segments based on the information that
internally is provided to the Board and Managing Director, the
Group's chief operating decision maker.
An operating segment is a component of the Group and engages in
business activities from which it may earn revenues and incur
expenses. An operating segment's operating results are reviewed
regularly by the Board and Managing Director to make decisions
about resources to be allocated to the segment and assess its
performance, and for which discrete financial information is
available.
Current and deferred income tax
The tax expense for the period comprises current and deferred
tax. Tax is recognised in the income statement, except to the
extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also
recognised in other comprehensive income or directly in equity,
respectively.
Current tax comprises the expected tax payable or receivable on
the taxable income or loss for the year and any adjustment to the
tax payable or receivable in respect of previous years. The amount
of current tax payable or receivable is the best estimate of the
tax amount expected to be paid or received that reflects
uncertainty related to income taxes, if any. It is measured using
tax rates enacted or substantively enacted at the reporting date.
Current tax also includes any tax arising from dividends. Current
tax assets and liabilities are offset only if certain criteria are
met.
Deferred income tax is recognised on temporary differences
arising between the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial statements. However,
deferred tax liabilities are not recognised if they arise from
the initial recognition of goodwill; deferred tax is not
accounted for if it arises from initial recognition of an asset or
liability in a transaction other than a business combination that
at the time of the transaction affects neither accounting nor
taxable profit or loss. Deferred tax is determined using tax rates
(and laws) that have been enacted or substantively enacted by the
reporting date and are expected to apply when the related deferred
income tax asset is realised or the deferred income tax liability
is settled.
Deferred income tax assets are recognised only to the extent
that it is probable that future taxable profit will be available
against which the temporary differences can be utilised.
Deferred income tax liabilities are provided on taxable
temporary differences arising from investments in subsidiaries
except for deferred income tax liability, where the timing of the
reversal of the temporary difference is controlled by the Group and
it is probable that the temporary difference will not reverse in
the foreseeable future. Only where there is an agreement in place
that gives the Group the ability to control the reversal of the
temporary difference is the liability not recognised.
Deferred income tax assets are recognised on deductible
temporary differences arising from investments in subsidiaries only
to the extent that it is probable the temporary difference will
reverse in the future and there is sufficient taxable profit
available against which the temporary difference can be
utilised.
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income taxes, assets
and liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable
entities where there is an intention to settle the balances on a
net basis.
Intangible assets - goodwill
Goodwill arises on the acquisition of subsidiaries and
represents the excess of the consideration transferred over the
Group's interest in net fair value of the net identifiable assets,
liabilities and contingent liabilities of the acquiree and the fair
value of the non-controlling interest in the acquiree.
For the purpose of impairment testing, goodwill acquired in a
business combination is allocated to each of the cash-generating
units ("CGUs"), or groups of CGUs, that is expected to benefit from
the synergies of the combination. Each unit or group of units to
which the goodwill is allocated represents the lowest level within
the entity at which the goodwill is monitored for internal
management purposes. Goodwill is monitored at the operating segment
level.
Goodwill impairment reviews are undertaken annually or more
frequently if events or changes in circumstances indicate a
potential impairment. The carrying value of goodwill is compared to
the recoverable amount, which is the higher of value in use and the
fair value less costs of disposal. Any impairment is recognised
immediately as an expense and is not subsequently reversed.
Intangible assets - other
(a) Trademarks and licences
Separately acquired trademarks and licences are shown at
historical cost. Trademarks and licences acquired in a business
combination are recognised at fair value at the acquisition date.
Trademarks and licences have a finite useful life and are carried
at cost less accumulated amortisation. Amortisation is calculated
using the straight-line method to allocate the cost of trademarks
and licences over their estimated useful lives of three years.
Acquired computer software licences are capitalised on the basis
of the costs incurred to acquire and bring to use the specific
software. These costs are amortised over their estimated useful
lives of three years.
(b) Website design and development costs
Costs associated with maintaining websites are recognised as an
expense as incurred. Development costs that are directly
attributable to the design and testing of identifiable and unique
websites controlled by the Group are recognised as intangible
assets when the following criteria are met:
-- it is technically feasible to complete the website so that it
will be available for use;
-- management intends to complete the website and use it;
-- there is an ability to use the website;
-- it can be demonstrated how the website will generate probable
future economic benefits;
-- adequate technical, financial and other resources to complete
the development and to use the website are available; and
-- the expenditure attributable to the website during its
development can be reliably measured.
Directly attributable costs that are capitalised as part of the
website include the website employee costs and an appropriate
portion of relevant overheads.
Other development expenditures that do not meet these criteria
are recognised as an expense as incurred. Development costs
previously recognised as an expense are not recognised as an asset
in a subsequent period.
Website development costs recognised as assets are amortised
over their estimated useful lives, which do not exceed three
years.
Property, equipment and motor vehicles
Items of property, equipment and motor vehicles are stated at
historical cost less accumulated depreciation (see below) and
impairment losses. Historical cost includes expenditure that is
directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. The carrying amount of the replaced part is
derecognised. All other repairs and maintenance are charged to the
income statement during the financial period in which they are
incurred.
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at the financial position date. An asset's
carrying amount is written down immediately to its recoverable
amount if the asset's carrying amount is greater than its
estimated
recoverable amount. Depreciation is calculated using the
straight-line method to allocate the cost of property, equipment
and motor vehicles over their estimated useful lives.
The estimated useful lives of property, equipment and motor
vehicles for current and comparative periods are as follows:
Plant and equipment 3 years
Motor vehicles 5 years
Fixtures and fittings 3 years
Gains and losses on disposals are determined by comparing the
proceeds with the carrying amount and are recognised within 'Other
gains/(losses) - net' in the income statement.
Share-based payment expense
The Group operates an equity-settled, share-based compensation
plan, under which the entity receives services from employees as
consideration for equity instruments (options) of the Group. The
fair value of the employee services received in exchange for the
grant of the options is recognised as an expense. The total amount
to be expensed is determined by reference to the fair value of the
options granted:
-- including any market performance conditions (for example, an
entity's share price); and
-- excluding the impact of any service and non-market
performance vesting conditions (for example, profitability, sales
growth targets and remaining an employee of the entity over a
specified time-period).
Non-market performance and service conditions are included in
assumptions about the number of options that are expected to vest.
The total expense is recognised over the vesting period, which is
the period over which all of the specified vesting conditions are
to be satisfied.
At the end of each reporting period, the Group revises its
estimates of the number of options that are expected to vest based
on the non-market vesting conditions. It recognises the impact of
the revision to original estimates, if any, in the income
statement, with a corresponding adjustment to equity.
When the options are exercised, the Company issues new shares.
The proceeds received net of any directly attributable transaction
costs are credited to share capital (nominal value) and share
premium.
Equity
Share capital is determined using the nominal value of shares
that have been issued.
Equity settled share-based employee remuneration is credited to
the share option reserve until related stock options are exercised.
On exercise or lapse, amounts recognised in the share option
reserve are taken to retained earnings.
Retained earnings include all current and prior period results
as determined in the income statement and any other gains or losses
recognised in the Statement of Changes in Equity.
Financial instruments
Recognition and measurement
Non-derivative financial instruments include trade and other
receivables, cash and cash equivalents, bonds and deposits,
borrowings and trade and other payables.
Financial assets and financial liabilities are recognised on the
Group's balance sheet when the Group becomes party to the
contractual terms of the instrument. Transaction costs are included
in the initial measurement of financial instruments, except
financial instruments classified as at fair value through profit
and loss. The subsequent measurement of financial instruments is
dealt with below.
Trade and other receivables
Trade and other receivables are recognised initially at fair
value and subsequently measured at amortised cost using the
effective interest method, less provision for impairment.
Cash and cash equivalents
Cash and cash equivalents are defined as cash in bank and in
hand as well as bank deposits, money held for processors and cash
balances held on behalf of players. Cash equivalents are held for
the purpose of meeting short-term cash commitments rather than for
investment or other purposes.
Bonds and deposits
Bonds and deposits are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment.
Borrowings
Interest-bearing borrowings and overdrafts are recorded at the
proceeds received net of direct issue costs. Finance charges,
including premiums payable on settlement or redemption and direct
issue costs are charged on an accrual basis using the effective
interest method and are added to the carrying amount of the
instrument to the extent they are not settled in the period in
which they arise.
Trade and other payables
Trade payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method.
Impairment of financial assets
The Group uses an impairment model that applies to financial
assets measured at amortised cost and contract assets and is
detailed below. Financial assets at amortised cost include trade
receivables, cash and cash equivalents, bonds and deposits.
Performing financial assets
Stage 1
From initial recognition of a financial asset to the date on
which an asset has experienced a significant increase in credit
risk relative to its initial recognition, a stage 1 loss allowance
is recognised equal to the credit losses expected to result from
its default occurring over the earlier of the next 12 months or its
maturity date ('12-month ECL').
Stage 2
Following a significant increase in credit risk relative to the
initial recognition of the financial asset, a stage 2 loss
allowance is recognised equal to the credit losses expected from
all possible default events over the remaining lifetime of the
asset ('Lifetime ECL'). The assessment of whether there has been a
significant increase in credit risk requires considerable judgment,
based on the lifetime probability of default ('PD'). Stage 1 and 2
allowances are held against performing loans; the main difference
between stage 1 and stage 2 allowances is the time horizon. Stage 1
allowances are estimated using the PD with a maximum period of 12
months, while stage 2 allowances are estimated using the PD over
the remaining lifetime of the asset.
Impaired financial assets
Stage 3
When a financial asset is considered to be credit-impaired, the
allowance for credit losses ('ACL') continues to represent lifetime
expected credit losses, however, interest income is calculated
based on the amortised cost of the asset, net of the loss
allowance, rather than its gross carrying amount.
The Group applies the ECL model to two main types of financial
assets that are measured at amortised cost:
Trade receivables, to which the simplified approach (provision
matrix) prescribed by IFRS 9 is applied. This approach requires the
recognition of a Lifetime ECL allowance on day one.
Other financial assets at amortised cost, to which the general
three stage model (described above) is applied, whereby a 12-month
ECL is recognised initially and the balance is monitored for
significant increases in credit risk which triggers the recognition
of a Lifetime ECL allowance.
ECLs are a probability-weighted estimate of credit losses. ECLs
for financial assets that are not credit-impaired at the reporting
date are measured as the present value of all cash shortfalls (i.e.
the difference between the cash flows due in accordance with the
contract and the cash flows that the company expects to receive).
ECLs for financial assets that are credit-impaired at the reporting
date are measured as the difference between the gross carrying
amount and the present value of estimated future cash flows. ECLs
are discounted at the effective interest rate of the financial
asset which is 0% for all financial assets at amortised cost. The
maximum period considered when estimating ECLs is the maximum
contractual period over which the Group is exposed to credit risk.
The measurement of ECLs considers information about past events and
current conditions, as well as supportable information about future
events and economic conditions. The Group reviews its impairment
methodology for estimating the ECLs,
taking into account forward-looking information in determining
the appropriate level of allowance. In addition, it identifies
indicators and set up procedures for monitoring for significant
increases in credit risk.
Employee benefits
(a) Pension obligations
The Group does not operate any post-employment schemes,
including both defined benefit and defined contribution pension
plans.
(b) Short-term employee benefits
Short-term employee benefits, such as salaries, paid absences,
and other benefits, are accounted for on an accrual's basis over
the period in which employees have provided services in the year.
All expenses related to employee benefits are recognised in the
Statement of Comprehensive Income in operating costs.
(c) Profit sharing and bonus plans
The Group recognises a liability and an expense for bonuses and
profit sharing, based on a formula that takes into consideration
the profit attributable to the Company's shareholders after certain
adjustments. The Group recognises a provision where contractually
obliged or where there is a past practice that has created a
constructive obligation.
Standards and interpretations in issue not yet adopted
A number of new standards, amendments to standards and
interpretations are not yet effective for the year, and have not
been applied in preparing these consolidated financial
statements:
Standards Effective date
(accounting periods
commencing on
or after)
Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate 1 January 2020
Benchmark Reform (issued on 26 September 2019)
Amendments to IAS 1 and IAS 8: Definition of Material 1 January 2020
(issued on 31 October 2018)
Amendments to References to the Conceptual Framework 1 January 2020
in IFRS Standards (issued on 29 March 2018)
2 Operating Segments
A. Basis for segmentation
The Group has the below two operating segments, which are its
reportable segments. The segments offer different services in
relation to various forms of pari-mutuel racing, which are managed
separately due to the nature of their activities.
Reportable segments and operations provided
Racetrack operations - hosting of races through the management
and operation of a racetrack facility, enabling patrons to attend
and wager on horse racing, as well as utilise simulcast
facilities.
ADW operations - provision of online ADW services to enable
customers to wager into global racetrack betting pools.
The Group's Board of Directors review the internal management
reports of the operating segment on a monthly basis.
B. Information about reportable segments
Information relating to the reportable segments is set out
below. Segment revenue along with segment profit / (loss) before
tax are used to measure performance as management considers this
information to be a relevant indicator for evaluating the
performance of the segments.
Reportable segments
Corporate
operating
Racetrack ADW costs Total
2020 2020 2020 2020
US$000 US$000 US$000 US$000
---------------------------------------------- ----------- -------- ---------- -------
External revenues 41,071 2,365 - 43,436
Segment revenue 41,071 2,365 - 43,436
---------------------------------------------- ----------- -------- ---------- -------
Segment profit / (loss) before
tax 62 (232) (114) (284)
Interest expense (20) (5) (69) (94)
Depreciation and amortisation (71) (124) - (195)
Other material non-cash items:
* Impairment losses on trade receivables - (18) - (18)
---------------------------------------------- ----------- -------- ---------- -------
Segment assets 1,185 3,216 2,252 6,653
---------------------------------------------- ----------- -------- ---------- -------
Segment liabilities 870 3,513 1,402 5,785
---------------------------------------------- ----------- -------- ---------- -------
Reportable segments
Corporate
operating
Racetrack ADW costs Total
2019 2019 2019 2019
US$000 US$000 US$000 US$000
---------------------------------------------- ----------- -------- ---------- -------
External revenues 44,753 2,506 - 47,259
Segment revenue 44,753 2,506 - 47,259
---------------------------------------------- ----------- -------- ---------- -------
Segment loss before tax (97) (708) (125) (930)
Interest expense - - (41) (41)
Depreciation and amortisation (8) (106) - (114)
Other material non-cash items:
Impairment losses on trade receivables - (67) - (67)
---------------------------------------------- ----------- -------- ---------- -------
Segment assets 423 2,612 1,863 4,898
---------------------------------------------- ----------- -------- ---------- -------
Segment liabilities 181 2,666 899 3,746
---------------------------------------------- ----------- -------- ---------- -------
C. Reconciliations of information on reportable segments to the
amounts reported in the financial statements
2020 2019
US$000 US$000
---------------------------------------------- ------- -------
i. Revenues
Total revenue for reportable segments 43,436 47,259
---------------------------------------------- ------- -------
Consolidated revenue 43,436 47,259
---------------------------------------------- ------- -------
ii. Loss before tax
Total loss before tax for reportable segments (170) (805)
Loss before tax for other segments (114) (125)
---------------------------------------------- ------- -------
Consolidated loss before tax (284) (930)
---------------------------------------------- ------- -------
iii. Assets
Total assets for reportable segments 4,401 3,035
Assets for other segments 2,252 1,863
---------------------------------------------- ------- -------
Consolidated total assets 6,653 4,898
---------------------------------------------- ------- -------
iv. Liabilities
Total liabilities for reportable segments 4,383 2,847
Liabilities for other segments 1,402 899
---------------------------------------------- ------- -------
Consolidated total liabilities 5,785 3,746
---------------------------------------------- ------- -------
v. Other material items
Interest expense (94) (41)
Depreciation and amortisation (195) (114)
Impairment losses on trade receivables (18) (67)
---------------------------------------------- ------- -------
There were no reconciling items noted between Segment
information and the Financial Statements.
D. Geographic information
i. Revenues
The below table analyses the geographic location of the customer
base of the operating segments.
2020 2019
US$000 US$000
--------------------- -------------- ------- -------
Revenue
Racetrack operations North America 41,071 44,753
ADW operations North America 1,599 1,541
British
ADW operations Isles 760 692
ADW operations Asia Pacific 6 273
43,436 47,259
------------------------------------ ------- -------
ii. Non-current assets
The geographical information below analyses the Group's
non-current assets by the Company's Country of Domicile (Isle of
Man) and the United States of America. Information is based on
geographical location of Group's assets.
2020 2019
US$000 US$000
------------------------- ------- -------
United States of America 439 113
Isle of Man 6 17
445 130
------------------------- ------- -------
Non-current assets exclude financial instruments.
3 Operating loss
2020 2019
Operating loss is stated after charging: US$000 US$000
------------------------------------------------------- ------- -------
Auditors' remuneration - audit 96 81
Depreciation of property, equipment and motor vehicles 122 34
Amortisation of intangible assets 73 80
Exchange losses 29 166
Operating lease rentals - other than plant, equipment
and Harness Racetrack - 30
Operating lease rentals - Harness Racetrack - 74
Directors' fees 64 67
------------------------------------------------------- ------- -------
4 Finance costs
2020 2019
US$000 US$000
---------------------- ------- -------
Loan interest payable (94) (41)
---------------------- ------- -------
Finance costs (94) (41)
---------------------- ------- -------
5 Staff numbers and cost
2020 2019
-------------------------------------------------------- ---- ------
Average number of employees - Pari-mutuel and Racetrack
Operations 52 55
-------------------------------------------------------- ---- ------
The aggregate payroll costs of these persons were as
follows:
2020 2019
Pari-mutuel and Racetrack Operations US$000 US$000
----------------------------------------------------- ------- --------
Wages and salaries 1,701 1,711
Social security costs 114 121
1,815 1,832
----------------------------------------------------- ------- --------
6 Income tax expense
(a) Current and Deferred Tax Expenses
The current and deferred tax expenses for the year were US$Nil
(2019: US$Nil). Despite having made losses, no deferred tax was
recognised as there is no reasonable expectation that the Group
will recover the resultant deferred tax assets.
(b) Tax Rate Reconciliation
2020 2019
US$000 US$000
-------------------------------------------- ------- -------
Loss before tax (284) (930)
Tax charge at IOM standard rate (0%) - -
Adjusted for:
Tax credit for US tax losses (at 15%) (97) (166)
Add back deferred tax losses not recognised 97 166
-------------------------------------------- ------- -------
Tax charge for the year - -
-------------------------------------------- ------- -------
The maximum deferred tax asset that could be recognised at year
end is approximately US$907,000 (2019: US$810,000). The Group has
not recognised any asset as it is not reasonably known whether the
Group will recover such deferred tax assets.
7 Earnings per ordinary share
The calculation of the basic earnings per share is based on the
earnings attributable to ordinary shareholders divided by the
weighted average number of shares in issue during the year.
The calculation of diluted earnings per share is based on the
basic earnings per share, adjusted to allow for the issue of
shares, on the assumed conversion of all dilutive share
options.
An adjustment for the dilutive effect of share options in the
current period has not been reflected in the calculation of the
diluted loss per share, as the effect would have been
anti-dilutive.
2020 2019
US$000 US$000
----------------------------------------------------- ----------- -------------
Loss for the year (284) (930)
----------------------------------------------------- ----------- -----------
No. No.
----------------------------------------------------- ----------- -------------
Weighted average number of ordinary shares in issue 393,338,310 393,338,310
Dilutive element of share options if exercised (note
17) 14,000,000 14,000,000
----------------------------------------------------- ----------- -------------
Diluted number of ordinary shares 407,338,310 407,338,310
----------------------------------------------------- ----------- -------------
Basic earnings per share (cents) (0.07) (0.24)
----------------------------------------------------- ----------- -----------
Diluted earnings per share (cents) (0.07) (0.23)
----------------------------------------------------- ----------- -----------
The earnings applied are the same for both basic and diluted
earnings calculations per share as there are no dilutive effects to
be applied.
8 Intangible assets
Software & development Total
Goodwill costs
--------------------------------- --------------- ------------------------- ---------------------------
Group Group Company Group Company
US$000 US$000 US$000 US$000 US$000
--------------------------------- --------------- ------------ ----------- ------- ----------------
Cost
Balance at 1 June 2018 177 1,485 64 1,662 64
Additions during the year - 18 - 18 -
Balance at 31 May 2019 177 1,503 64 1,680 64
--------------------------------- --------------- ------------ ----------- ------- ----------------
Balance at 1 June 2019 177 1,503 64 1,680 64
Additions during the year - - - - -
Decommissioned assets - (905) (49) (905) (49)
Balance at 31 May 2020 177 598 15 775 15
--------------------------------- --------------- ------------ ----------- ------- ----------------
Amortisation and Impairment
Balance at 1 June 2018 177 1,319 51 1,496 51
Amortisation for the year - 80 6 80 6
--------------------------------- --------------- ------------ ----------- ------- ----------------
Balance at 31 May 2019 177 1,399 57 1,576 57
--------------------------------- --------------- ------------ ----------- ------- ----------------
Balance at 1 June 2019 177 1,399 57 1,576 57
Amortisation for the year - 73 6 73 6
Decommissioned assets - (905) (49) (905) (49)
Currency translation differences - 1 1 1 1
--------------------------------- --------------- ------------ ----------- ------- ----------------
Balance at 31 May 2020 177 568 15 745 15
--------------------------------- --------------- ------------ ----------- ------- ----------------
Carrying amounts
At 1 June 2018 - 166 13 166 13
--------------------------------- --------------- ------------ ----------- ------- ----------------
At 31 May 2019 - 104 7 104 7
--------------------------------- --------------- ------------ ----------- ------- ----------------
At 31 May 2020 - 30 - 30 -
--------------------------------- --------------- ------------ ----------- ------- ----------------
The Group tests intangible assets annually for impairment or
more frequently if there are indications that the intangible assets
may be impaired (see note 1).
During the year a review of assets held was undertaken to remove
any historical items that were considered to be decommissioned and
therefore no longer held by the Group. This principally relates to
software and website costs that were fully amortised and removed
from service in previous years following changes to those business
activities and/or assets reaching their end of useful life.
9 Property, equipment and motor vehicles
Fixtures,
Fittings
Computer & Track Right of
Equipment Equipment Motor Vehicles Use Assets Total
Group US$000 US$000 US$000 US$000 US$000
--------------------------------- ---------- ---------- -------------- ----------- -------
Cost
Balance at 1 June 2018 604 580 51 - 1,235
Balance at 31 May 2019 604 580 51 - 1,235
--------------------------------- ---------- ---------- -------------- ----------- -------
Balance at 1 June 2019 604 580 51 - 1,235
Additions during the year 5 - 34 473 512
Decommissioned/disposed assets (447) (339) (35) - (821)
--------------------------------- ---------- ---------- -------------- ----------- -------
Balance at 31 May 2020 162 241 50 473 926
--------------------------------- ---------- ---------- -------------- ----------- -------
Depreciation
Balance at 1 June 2018 567 570 38 - 1,175
Charge for the year 19 7 8 - 34
--------------------------------- ---------- ---------- -------------- ----------- -------
Balance at 31 May 2019 586 577 46 - 1,209
--------------------------------- ---------- ---------- -------------- ----------- -------
Balance at 1 June 2019 586 577 46 - 1,209
Charge for the year 16 2 6 98 122
Decommissioned/disposed assets (447) (339) (35) - (821)
Currency translation differences - 1 - - 1
--------------------------------- ---------- ---------- -------------- ----------- -------
Balance at 31 May 2020 155 241 17 98 511
--------------------------------- ---------- ---------- -------------- ----------- -------
Carrying amounts
At 1 June 2018 37 10 13 - 60
--------------------------------- ---------- ---------- -------------- ----------- -------
At 31 May 2019 18 3 5 - 26
--------------------------------- ---------- ---------- -------------- ----------- -------
At 31 May 2020 7 - 33 375 415
--------------------------------- ---------- ---------- -------------- ----------- -------
Right of use assets relate to two assets: an office building
leased until May 2021, with an average length of renewal of three
years; and a racetrack facility leased until May 2025, with
extensions or renewals typically ranging between three to five
years.
Fixtures
Computer &
Equipment Fittings Total
Company US$000 US$000 US$000
-------------------------- ---------- --------- -------
Cost
Balance at 1 June 2018 429 139 568
Balance at 31 May 2019 429 139 568
-------------------------- ---------- --------- -------
Balance at 1 June 2019 429 139 568
Additions during the year 5 - 5
Discarded assets (401) (59) (460)
-------------------------- ---------- --------- -------
Balance at 31 May 2020 33 80 113
-------------------------- ---------- --------- -------
Fixtures
Computer &
Equipment Fittings Total
Company US$000 US$000 US$000
----------------------- ---------- --------- -------
Depreciation
Balance at 1 June 2018 410 139 549
Charge for the year 9 - 9
----------------------- ---------- --------- -------
Balance at 31 May 2019 419 139 558
----------------------- ---------- --------- -------
Balance at 1 June 2019 419 139 558
Charge for the year 8 - 8
Discarded assets (401) (59) (460)
----------------------- ---------- --------- -------
Balance at 31 May 2020 26 80 106
----------------------- ---------- --------- -------
Carrying amounts
At 1 June 2018 19 - 19
----------------------- ---------- --------- -------
At 31 May 2019 10 - 10
----------------------- ---------- --------- -------
At 31 May 2020 7 - 7
----------------------- ---------- --------- -------
During the year a review of assets held was undertaken to remove
any historical items that were considered to be decommissioned and
therefore no longer held by the Group. This principally relates to
computer hardware and equipment costs that were fully depreciated
and removed from service in previous years following changes to
those business activities and/or assets reaching their end of
useful life.
10 Investments
Investments in subsidiaries are held at cost. Details of
investments at 31 May 2020 are as follows:
Holding
Subsidiaries Country of incorporation Activity (%)
----------------------------- ------------------------- --------------------------- -------
Operation of interactive
wagering
WatchandWager.com Limited Isle of Man totaliser hub 100
Operation of interactive
wagering
United States totaliser hub and harness
WatchandWager.com LLC of America racetrack 100
Technical Facilities &
Services Limited Isle of Man Dormant 100
betinternet.com (IOM)
Limited Isle of Man Dormant 100
B.E. Global Services Limited Isle of Man Dormant 100
11 Bonds and deposits
Group Company
2020 2019 2020 2019
US$000 US$000 US$000 US$000
-------------------------------- ------- ------- ------- -------
Bonds and deposits which expire
within one year 882 882 - -
Bonds and deposits which expire
within one to two years - - - -
Bonds and deposits which expire
within two to five years 101 101 - -
-------------------------------- ------- ------- ------- -------
983 983 - -
-------------------------------- ------- ------- ------- -------
Cash bonds of US$875,000 have been paid as security deposits in
relation to various US State ADW licences (2019: US$875,000). These
cash bonds are held in trust accounts used exclusively for cash
collateral, with financial institutions which have been screened
for their financial strength and capitalization ratio. The
financial institutions have a credit rating of A- Excellent from AM
Best credit rating agency. Therefore, these bonds are considered to
be fully recoverable. A rent deposit of US$100,000 is held by
California Exposition & State Fair and is for a term of 5 years
(2019: US$100,000). This is held by an entity of the Californian
state government and is therefore considered fully recoverable.
Rent and other security deposits total US$8,155 (2019: US$8,227).
These deposits are repayable upon completion of the relevant lease
term, under the terms of legally binding agreements.
12 Cash, cash equivalents and restricted cash
Group Company
2020 2019 2020 2019
US$000 US$000 US$000 US$000
------------------------------------ ------- ------- ------- -------
Cash and cash equivalents - company
and other funds 2,499 1,363 324 185
Restricted cash - protected player
funds 1,470 1,231 1,456 1,231
------------------------------------ ------- ------- ------- -------
Total cash, cash equivalents and
restricted cash 3,969 2,594 1,780 1,416
------------------------------------ ------- ------- ------- -------
The Group holds funds for operational requirements and for its
non-Isle of Man customers, shown as 'company and other funds' and
on behalf of its Isle of Man regulated customers and certain USA
state customers, shown as 'protected player funds'.
Protected player funds are held in fully protected client
accounts within an Isle of Man regulated bank and in segregated
accounts within a USA regulated bank.
13 Trade and other receivables
Group Company
2020 2019 2020 2019
US$000 US$000 US$000 US$000
------------------------------------ ------- ------- ------- -------
Trade receivables 675 770 - -
Amounts due from Group undertakings - - 428 393
Other receivables and prepayments 581 421 35 34
------------------------------------- ------- ------- ------- ---------
1,256 1,191 463 427
------------------------------------ ------- ------- ------- ---------
Included within trade receivables are impairment provisions of
US$85,775 (see note 21), (2019: US$66,738).
Amounts due from Group undertakings are unsecured, interest free
and repayable on demand.
14 Trade and other payables
Group Company
2020 2019 2020 2019
US$000 US$000 US$000 US$000
----------------------------- ------- ------- ------- -------
Trade payables 603 425 9 12
Amounts due to customers 2,446 2,194 - -
Taxes and national insurance 22 17 2 2
Accruals and other payables 678 260 41 35
------------------------------ ------- ------- ------- ---------
3,749 2,896 52 49
----------------------------- ------- ------- ------- ---------
15 Deferred income
Group Company
2020 2019 2020 2019
US$000 US$000 US$000 US$000
----------------- ------- ------- ------- -------
Government grant 272 - - -
------------------ ------- ------- ------- ---------
The Group received a Paycheck Protection Program ("PPP") loan
for US$319,994, under the provisions of the US CARES Act in May
2020 to support certain incurred expenses. The provisions of the
loan allow for an application for loan forgiveness, directly
relating to expenditure incurred in the 24-week period from the
date of the loan advance, of which at least 60% must be on payroll
related expenditure. The Group has ascertained reasonable assurance
that the loan should be forgiven in its entirety and the
application for forgiveness is expected to be submitted in late
2020/early 2021. The grant will be recognised in profit or loss in
the periods that the relevant expenses are recognised.
16 Loans, borrowings and lease liabilities
Current liabilities
Group Company
2020 2019 2020 2019
US$000 US$000 US$000 US$000
------------------------------------ ------- ------- ------- -------
Unsecured loans (current portion) 5 - - -
Lease liabilities (current portion)
(see note 1.2) 92 - - -
97 - - -
------------------------------------ ------- ------- ------- ---------
Non-current liabilities
Group Company
2020 2019 2020 2019
US$000 US$000 US$000 US$000
---------------------------------------- ------- ------- ------- -------
Unsecured loans (non-current portion) 25 - - -
Lease liabilities (non-current portion)
(see note 1.2) 292 - - -
Secured loans - Galloway Ltd 1,350 850 1,350 850
1,667 850 1,350 850
---------------------------------------- ------- ------- ------- ---------
Terms and repayment schedule
Nominal 2020 2019
interest Year of Total Total
rate maturity US$000 US$000
--------------------------- ---------- ----------- -------- --------
Unsecured loan 8.90% 2025 30 -
Lease liabilities (see
note 1.2) 7.00-9.00% 2021-25 384 -
Secured loan - Galloway
Ltd 7.75% 2022 500 500
Secured loan - Galloway
Ltd 7.00% 2024 350 350
Secured loan - Galloway
Ltd 7.00% 2025 500 -
------------------------------ ---------- ----------- -------- --------
Total loans and borrowings 1,764 850
------------------------------ ---------- ----------- -------- --------
During the year, the Group received the following loans:
Remaining
Lender Principal Drawdown Term term Interest rate
Galloway Ltd US$500,000 March 2020 5 years 4.75 years
7.00% pa
Volkswagen Marin US$30,911 March 2020 5 years 4.75 years
8.90% pa
The secured loans from Galloway Ltd are secured over the
unencumbered assets of the Group.
17 Share capital
2020 2019
No. US$000 US$000
------------------------------------------------ ----------- -------- --------
Allotted, issued and fully paid
At beginning and close of year: ordinary shares
of 1p each 393,338,310 6,334 6,334
At 31 May: ordinary shares of 1p each 393,338,310 6,334 6,334
------------------------------------------------ ----------- -------- --------
The authorised share capital of the Company is US$9,619,000
divided into 600,000,000 ordinary shares of GBP0.01 each (2019:
US$9,619,000 divided into 600,000,000 ordinary shares of GBP0.01
each).
Options
Movements in share options during the year ended 31 May 2020
were as follows:
No.
------------------------------------ ----------
At 31 May 2019 - 1p ordinary shares 14,000,000
------------------------------------ ----------
Options granted -
------------------------------------ ----------
Options lapsed -
------------------------------------ ----------
Options exercised -
------------------------------------ ----------
At 31 May 2020 - 1p ordinary shares 14,000,000
------------------------------------ ----------
During 2016 the Group established an equity-settled share-based
option program. The fair value of options granted is recognised as
an expense, with a corresponding increase in equity. The fair value
is measured at grant date using a Black-Scholes model and is spread
over the vesting period. The amount recognised in equity is
adjusted to reflect the actual number of share options which are
expected to vest. By taking into consideration the volatility of
the shares over the 3 years prior to granting, the volatility of
the options is calculated at 75%, with a risk-free interest rate of
0.86%.
The options were issued on 3 March 2016 to Ed Comins, Managing
Director of the Group. The fair value of each option on the grant
date was estimated as being GBP0.0022. The share options vested on
3 March 2019 after Ed Comins had remained in the employment of the
Group for 3 years from when the options were granted. The options
are able to be exercised from 3 March 2019 and expire on 2 March
2026. The weighted average exercise price of all options is
GBP0.01.
The charge for share options recorded in profit and loss for the
year was US$Nil (2019: US$37,989), with the corresponding amount
reflected in the share option reserve in the Statement of Financial
Position and Statement of Changes in Equity. Since the grant date,
the total charge in relation to the share options was
US$42,126.
18 Capital commitments
As at 31 May 2020, the Group had no known capital commitments
(2019: US$Nil).
19 Operating lease commitments
At 31 May 2020, the Group was committed to future minimum lease
payments of:
2020 2019
US$000 US$000
--------------------------------------- ------- -------
Payments due within one year - 108
Payments due between one to five years - 186
Payments due beyond five years - -
--------------------------------------- ------- -------
The Group has recognised in the income statement operating lease
payments of US$Nil (2019: US$104,000).
The Group leases had comprised office facilities and racetrack
facilities in 2019. These leases now fall under the definition of
IFRS 16 and are disclosed accordingly.
20 Related party transactions
Identity of related parties
The Parent Company has a related party relationship with its
subsidiaries (see note 10), and with its Directors and executive
officers and with Burnbrae Ltd (significant shareholder).
Transactions with and between subsidiaries
Transactions with and between the subsidiaries in the Group,
which have been eliminated on consolidation, are considered to be
related party transactions.
Transactions with entities with significant influence over the
Group
Rental and service charges of US$26,273 (2019: US$45,484) and
Directors' fees of US$45,435 (2019: US$46,898) were charged in the
year by Burnbrae Limited, of which Denham Eke is a common Director.
The Group also had loans of US$1,350,000 (2019: US$850,000) from
Galloway Ltd, a company related to Burnbrae Limited by common
ownership and Directors (note 17).
Transactions with key management personnel
The total amounts for Directors' remuneration were as
follows:
2020 2019
US$000 US$000
----------- ----------------------------------------- ------- -------
Emoluments - salaries, bonuses and taxable benefits 368 348
- fees 64 67
----------------------------------------------------- ------- -------
432 415
----------------------------------------------------- ------- -------
Directors' Emoluments
Basic Termination 2020 2019
salary Fees Bonus payments Benefits Total Total
US$000 US$000 US$000 US$000 US$000 US$000 US$000
--------------------- -------- --------- -------- ------------ ----------- -------- --------
Executive
Ed Comins 310 - 30 - 28 368 348
Non-executive
Denham Eke* - 25 - - - 25 26
Nigel Caine* - 20 - - - 20 21
Sir James Mellon - 19 - - - 19 20
--------------------- -------- --------- -------- ------------ ----------- -------- --------
Aggregate emoluments 310 64 30 - 28 432 415
--------------------- -------- --------- -------- ------------ ----------- -------- --------
* Paid to Burnbrae Limited.
14,000,000 share options were issued to Ed Comins (see note 17)
during 2016.
21 Financial risk management
Capital structure
The Group's capital structure is as follows:
2020 2019
US$000 US$000
------------------------------ ------- -------
Cash and cash equivalents 2,499 1,363
Loans and similar liabilities (1,380) (850)
------------------------------ ------- ---------
Net funds 1,119 513
Shareholders' equity (868) (1,152)
------------------------------ ------- ---------
Capital employed 251 (639)
------------------------------ ------- ---------
The Group's policy is to maintain as strong a capital base as
possible, insofar as can be sustained due to the fluctuations in
the net results of the Group and the inherent effect this has on
the capital structure.
The Group's principal financial instruments comprise cash and
cash equivalents, trade receivables and payables that arise
directly from its operations.
The main purpose of these financial instruments is to finance
the Group's operations. The existence of the financial instruments
exposes the Group to a number of financial risks, which are
described in more detail below.
The principal risks which the Group is exposed to relate to
liquidity risks, credit risks and foreign exchange risks.
Liquidity risk
Liquidity risk is the risk that the Group will be unable to meet
its financial obligations as they fall due.
The Group's objective is to maintain continuity of funding
through trading and share issues but to also retain flexibility
through the use of short-term loans if required.
Management controls and monitors the Group's cash flow on a
regular basis, including forecasting future cash flow. Banking
facilities are kept under review to ensure they meet the Group's
requirements. Funds equivalent to customer balances are held in
designated bank accounts where applicable to ensure that Isle of
Man Gambling Supervision Commission player protection principles
are met. Other customer balances are covered by cash funds held
within the Group and by receivables due from ADW racetrack
settlement partners. The Directors anticipate that the business
will generate sufficient cash flow in the forthcoming period, to
meet its immediate financial obligations.
The following are the contractual maturities of financial
liabilities:
2020
Financial liabilities
Carrying Contractual 6 months Up to 1-5
amount cash flow or less 1 year years
US$000 US$000 US$000 US$000 US$000
-------------------------- -------- ----------- -------- ------- -------
Trade payables (603) (603) (603) - -
Amounts due to customers (2,446) (2,446) (2,446) - -
Other payables, loans and
deferred income (1,967) (1,967) (590) (2) (1,375)
Lease liabilities (384) (384) (16) (76) (292)
-------------------------- -------- ----------- -------- ------- -------
(5,400) (5,400) (3,655) (78) (1,667)
-------------------------- -------- ----------- -------- ------- -------
2019
Financial liabilities
Carrying Contractual 6 months Up to 1-5
amount cash flow or less 1 year years
US$000 US$000 US$000 US$000 US$000
------------------------- -------- ----------- -------- ------- -------
Trade payables (425) (425) (425) - -
Amounts due to customers (2,194) (2,194) (2,194) - -
Other payables and loans (865) (865) (15) - (850)
------------------------- -------- ----------- -------- ------- -------
(3,484) (3,484) (2,634) - (850)
------------------------- -------- ----------- -------- ------- -------
Credit risk
Credit risk is the risk that one party to a financial instrument
will cause a financial loss for the other party by failing to
discharge an obligation.
Impairment losses on financial assets recognised in profit or
loss were as follows:
2020 2019
US$000 US$000
-------------------------------------- ------- -------
Non-credit impaired trade receivables 23 5
Credit impaired trade receivables 62 62
Total impairment losses 85 67
-------------------------------------- ------- -------
The Group's exposure to credit risk is influenced by the
characteristics of the individual racetracks and the settling
agents operating on behalf of these tracks. The racetracks
themselves are influenced by many factors, including the product
they offer, supporting sources of revenue they might generate, such
as offering simulcast, slots or sports wagering facilities, current
economic conditions, ownership structure and so on, all of which
can affect their liquidity.
The Group limits its exposure to credit risk by regular settling
and verification of balances due to and from settling agents, with
standard terms of one month. While there is on occasion debt that
is slower to be settled, historical settlements for the last five
years show that of the current trade receivable balance, greater
than 99% would be expected to be received.
In addition, more than 75% of the current Group customers have
transacted with the Group for five years or more and none of these
customers balances have been specifically impaired in that
period.
While there has been an obvious impact from Covid-19 across many
industries worldwide, horse racing was one of the few events that
managed to maintain some activity during the initial months of the
pandemic. There was a natural slowdown of settlements from settling
agents and tracks, but overall, the Group has currently suffered no
losses from the receivables that were due. Nevertheless, the Group
has taken a more conservative approach to the assessment of the
Weighted Average Loss Rate and increased these rates to reflect the
added risk that exists under current market conditions.
The following table provides information about exposure to
credit risk and expected credit losses for trade receivables as at
31 May 2020:
2020 Weighted Gross Carrying N et Carrying Credit Impaired
Average Amount US$000 Loss Allowance Amount
Loss Rate US$000 US$000
(%)
-------------------- -------------- ------------------ -------------------- ----------------- -------------------
Current (not
past due) 0.50% 305 (2) 303 No
1-30 days past
due 1.00% 129 (1) 128 No
31-60 days past
due 6.00% 97 (6) 91 No
61-90 days past
due 8.00% 147 (12) 135 No
More than 90
days past
due 10.00% 20 (2) 18 No
More than 90
days past
due 100.00% 62 (62) - Yes
-------------------- -------------- ------------------ -------------------- ----------------- -------------------
760 (85) 675
-------------------- -------------- ------------------ -------------------- ----------------- -------------------
2019 Weighted Gross Carrying N et Carrying Credit Impaired
Average Amount US$000 Loss Allowance Amount
Loss Rate US$000 US$000
(%)
-------------------- -------------- ------------------ -------------------- ----------------- -------------------
Current (not
past due) 0.25% 385 (1) 384 No
1-30 days past
due 0.50% 294 (1) 293 No
31-60 days past
due 1.00% 55 (1) 54 No
61-90 days past
due 2.50% 28 (1) 27 No
More than 90
days past
due 5.00% 13 (1) 12 No
More than 90
days past
due 100.00% 62 (62) - Yes
-------------------- -------------- ------------------ -------------------- ----------------- -------------------
837 (67) 770
-------------------- -------------- ------------------ -------------------- ----------------- -------------------
The Group uses an allowance matrix to measure the ECLs of trade
receivables from racetracks and their settling agents, which
comprise a moderate number of balances, ranging from small to
large. The Group has reviewed its historical losses over the past
four years as well as considering current economic conditions in
estimating the loss rates and calculating the corresponding loss
allowance.
Classes of financial assets - carrying amounts
2020 2019
US$000 US$000
---------------------------- ------- -------
Cash and cash equivalents 2,499 1,363
Bonds and deposits 983 983
Trade and other receivables 1,184 1,051
---------------------------- ------- -------
4,666 3,397
---------------------------- ------- -------
Generally, the maximum credit risk exposure of financial assets
is the carrying amount of the financial assets as shown on the face
of the balance sheet (or in the notes to the financial statements).
Credit risk, therefore, is only disclosed in circumstances where
the maximum potential loss differs significantly from the financial
asset's carrying amount.
The maximum exposure to credit risks for receivables in any
business segment:
2020 2019
US$000 US$000
------------ ------- -------
Pari-mutuel 1,184 1,051
------------ ------- -------
Of the above receivables, US$675,000 (2019: US$770,000) relates
to amounts owed from racing tracks. These receivables are actively
monitored to avoid significant concentration of credit risk and the
Directors consider there to be no significant concentration of
credit risk.
The Directors consider that all the above financial assets that
are not impaired for each of the reporting dates under review are
of good credit quality. The banks have external credit ratings of
at least Baa3 from Moody's.
The credit risk for liquid funds and other short-term financial
assets is considered negligible, since the counterparties are
reputable banks with high-quality external credit ratings.
Interest rate risk
The Group finances its operations mainly through capital with
limited levels of borrowings. Cash at bank and in hand earns
negligible interest at floating rates, based principally on
short-term interbank rates.
Any movement in interest rates would not be considered to have
any significant impact on net assets at the balance sheet date as
the Group and Parent Company do not have floating rate loans
payable.
Foreign currency risks
The Group operates internationally and is subject to
transactional foreign currency exposures, primarily with respect to
Pounds Sterling, Hong Kong Dollars and Euros.
The Group does not actively manage the exposures but regularly
monitors the Group's currency position and exchange rate movements
and makes decisions as appropriate.
At the reporting date the Group had the following exposure:
USD GBP EUR HKD Total
2020 US$000 US$000 US$000 US$000 US$000
-------------------- ------- ------- ------- ------- ---------
Current assets 5,144 53 130 708 6,035
Current liabilities (3,170) (127) (83) (716) (4,096)
-------------------- ------- ------- ------- ------- ---------
Short-term exposure 1,974 (74) 47 (8) 1,939
-------------------- ------- ------- ------- ------- -------
USD GBP EUR HKD Total
2019 US$000 US$000 US$000 US$000 US$000
-------------------- ------- ------- ------- ------- -------
Current assets 3,128 289 427 683 4,527
Current liabilities (1,911) (196) (84) (688) (2,879)
-------------------- ------- ------- ------- ------- -------
Short-term exposure 1,217 93 343 (5) 1,648
-------------------- ------- ------- ------- ------- -------
The following table illustrates the sensitivity of the net
result for the year and equity with regards to the Group's
financial assets and financial liabilities and the US
Dollar-Sterling exchange rate, US Dollar-Euro exchange rate and US
Dollar-Hong Kong Dollar exchange rate.
A 5% weakening of the US Dollar against the following currencies
at 31 May 2020 would have increased/(decreased) equity and profit
and loss by the amounts shown below:
GBP EUR HKD Total
2020 US$000 US$000 US$000 US$000
-------------------- ------- ------- ------- ---------
Current assets 3 6 35 44
Current liabilities (6) (4) (36) (46)
-------------------- ------- ------- ------- ---------
Net assets (3) 2 (1) (2)
-------------------- ------- ------- ------- -------
GBP EUR HKD Total
2019 US$000 US$000 US$000 US$000
-------------------- ------- ------- ------- -------
Current assets 15 21 34 70
Current liabilities (10) (4) (34) (48)
-------------------- ------- ------- ------- -------
Net assets 5 17 - 22
-------------------- ------- ------- ------- -------
A 5% strengthening of the US Dollar against the above currencies
would have had the equal but opposite effect on the above
currencies to the amounts shown above on the basis that all other
variables remain constant.
22 Controlling party and ultimate controlling party
The Directors consider the ultimate controlling party to be
Burnbrae Limited and its beneficial owner Jim Mellon by virtue of
their combined shareholding of 63.10%.
23 Impact of COVID-19 on the Company's operations after year
end
COVID-19 has impacted the operations of the entity during the
last few weeks of the financial year. Since 31 May 2020, COVID-19
has continued to cause severe implications for many local economies
around the globe. In many countries, businesses are being forced to
cease or limit operations for long or indefinite periods of time.
Measures taken to contain the spread of the virus, including travel
bans, quarantines, social distancing, and closures of non-essential
services have triggered significant disruptions to businesses
worldwide, resulting in an economic slowdown, which continued to be
in place after year end. Global stock markets have also continued
experienced great volatility and a significant weakening.
Governments and central banks continued responding with monetary
and fiscal interventions to stabilise economic conditions.
The horseracing industry has continued to operate behind closed
doors and the level of wagering opportunities and global content
the Group can offer has remained resilient to date. With a
reduction in other sports events, the Group has seen a significant
increase in retail player numbers and wagering volumes which has
yielded improved trading results. New and refined strategies aimed
at winning and retaining new player accounts remain a core focus of
the Group to underpin a larger and wider customer base that can
deliver profitable and consistent revenue streams. Whilst
significant efforts have been directed towards this objective,
there can be no certainty that these operating results will
continue at current levels or that future wagering content will not
be affected by further restrictions aimed at curbing the spread of
future outbreaks.
Based on an assessment of the impact of COVID-19 on the Group,
the Directors determined that any events occurring after year end
disclosed in this note are deemed non-adjusting subsequent events.
Accordingly, the financial position and results of operations as of
and for the year ended 31 May 2020 have not been adjusted to
reflect their impact. The duration and impact of the COVID-19
pandemic, as well as the effectiveness of government and central
bank responses, remains unclear at this time. It is not possible to
reliably estimate the duration and severity of these consequences,
as well as their ultimate impact on the financial position and
results of the Group for future periods.
24. Subsequent events
To the knowledge of the Directors, there have been no other
material events since the end of the reporting period that require
disclosure in the accounts.
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