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Donaco International Limited / Annual Report
yUNNAN
GUIZHOU
ArIstO
INterNAtIONAl HOtel
full YEAR stAtutoRY Accounts – 30 JunE 2017
GUANGXI
vIetNAm
lAOs
Contents
From the Chairman
From the Managing Director
Board of Directors
tHAIlAND
Corporate Social Responsibility
stAr veGAs
resOrt & clUb
Directors’ Report
Auditor’s Independence Declaration
Statement of Profit or Loss
and Other Comprehensive Income
cAmbODIA
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report to the
Members of Donaco International Limited
Shareholder Information
Corporate Directory and General Information
2
4
6
10
12
27
30
32
33
34
35
82
83
89
92
AnnuAl GEnERAl MEEtInG
The Annual General Meeting of Donaco International Limited will be held at
Boardroom Pty Limited, Level 12, 225 George Street, Sydney NSW 2000
on 23 November 2017 at 2.30pm.
2
1
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / Annual Report
yUNNAN
GUIZHOU
ArIstO
INterNAtIONAl HOtel
full YEAR stAtutoRY Accounts – 30 JunE 2017
GUANGXI
vIetNAm
lAOs
Contents
From the Chairman
From the Managing Director
Board of Directors
tHAIlAND
Corporate Social Responsibility
stAr veGAs
resOrt & clUb
Directors’ Report
Auditor’s Independence Declaration
Statement of Profit or Loss
and Other Comprehensive Income
cAmbODIA
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report to the
Members of Donaco International Limited
Shareholder Information
Corporate Directory and General Information
2
4
6
10
12
27
30
32
33
34
35
82
83
89
92
AnnuAl GEnERAl MEEtInG
The Annual General Meeting of Donaco International Limited will be held at
Boardroom Pty Limited, Level 12, 225 George Street, Sydney NSW 2000
on 23 November 2017 at 2.30pm.
2
1
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportFrom the Chairman
Overall we are confident that our focus
on driving strong underlying performance
at both of our blue-chip gaming assets
will result in positive results for our
shareholders over the long term.
Dear fellow shareholders
(ii) To look for acquisitive growth opportunities
The 2017 financial year has been a busy year for
Donaco as we laid the foundations for the transition to
full management control of Star Vegas, while launching a
number of international marketing initiatives at the venue
and driving strong growth at Aristo. Although the Thai
economy was depressed for most of the year following the
passing of the late King of Thailand, our underlying Group
profit was in line with the 2016 financial year (FY16). We
believe we are well positioned to resume our growth trend
following the cessation of the official mourning period from
October 2017, with a fresh management team in place to
deliver growth from new marketing initiatives, international
junkets and online gaming.
Following the expiration of the management contract with
the Star Vegas vendor on 30 June 2017, management was
taken in-house, and this allowed us to take full advantage
of the Group’s expertise and experience in managing
Asian gaming businesses. Accordingly, the management
team was refreshed and a number of key appointments
made – including Kenny Bee Meng Chuan as General
Manager – to position Donaco for a strong year in 2018.
Despite the challenging conditions in our major market, the
strong earnings and cash flow generated from Star Vegas
and Aristo further strengthened our financial position.
The Board sees capital allocation as one of the most
important areas of value creation for shareholders,
and on behalf of the Board we were delighted to begin
to implement a range of capital management initiatives.
In addition to our debt obligations, we see the capital
we have available as being directed in four possible ways:
(i) To provide capital to support organic growth initiatives
in our existing venues
in the region
(iii) To apply surplus capital towards dividends, and
(iv) To apply surplus capital towards the buyback of shares.
We recognise that as we reduce our debt, and gain greater
flexibility with our balance sheet, all these areas of capital
deployment become available. With the new debt facility
that has come into effect for the 2018 financial year (FY18)
we are pleased to announce our intention to move to regular
six-monthly dividend payments, commencing with a dividend
of half a cent per share payable in October 2017. As a
further measure to create value for shareholders, the Board
also announced an intention to implement an on-market
share buyback program commencing in October 2017.
Although the transition to in-house management
at Star Vegas was a key focus towards the end of the
2017 financial year (FY17), our senior management
team continued to implement initiatives to improve the
performance of our Aristo business in Vietnam. Pleasingly,
the trajectory of strong growth has continued, aided by
initiatives to focus on mass market players (away from
the more volatile VIP segment) and the strong economy
in Vietnam underpinned by tourism from China.
As Chairman of the Group it was pleasing to see the share
price recover to be up 40% over the financial year, despite
the challenging economic conditions in Thailand, and we
believe that by delivering strong financial management and
earnings growth, shareholders will continue to be rewarded
in future years.
One of Donaco’s strengths is our adherence to strong
corporate governance practices. In the Asian region we
are widely recognised by governments, our visitors and our
customers, as a Group that operates with high standards
of probity and good governance. We believe that this
becomes a competitive advantage in pursuing further
growth opportunities as they arise into the future. Our
Board is culturally and geographically diverse, which is
an element of our success, given we operate in multiple
geographies and our target customers come from a
diverse range of backgrounds.
We believe it is important to make a positive contribution
to the communities we operate in, and accordingly we
engaged in a range of charitable activities to support the
wellbeing of the underprivileged in our regions. During
the year we presented gifts to students at Nam Lu School
in Lao Cai province in Vietnam, and donated 50 computers
to students at Nguyen Ba Ngoc Primary School, to assist
them with their studies. We also presented gifts to students
with blood cancer, school uniforms to other students,
and warm blankets to underprivileged men and women
during winter. Other initiatives included donating bicycles
to students in the Lao Cai province, and donating to the
Children’s Care Fund of Lao Cai.
With the management of the Star Vegas being brought
in-house, Non-Executive Director Paul Porntat
Amatavivadhana resigned after the conclusion of the
financial year. Mr Amatavivadhana made a valuable
contribution to Donaco’s Board over the two-year period
since Star Vegas became part of the Group, and I would
like to thank him for his contribution on behalf of the Board.
In summary, FY17 was one in which Donaco delivered
strong results despite a challenging economic period.
While the result at Star Vegas was down slightly on
FY16, earnings at Aristo continued to grow strongly, and
our underlying Group profit was in line with last year. In
addition, our debt was further reduced, and we employed
capital management initiatives including a dividend and
a buyback program to reward shareholders.
We are excited about the flexibility that in-house
management of Star Vegas brings, and the opportunities
to improve our financial performance over FY18, at a time
when the mourning period in Thailand is about to conclude.
Overall, we are confident that our focus on driving strong
underlying performance at both of our blue-chip gaming
assets will result in positive results for our shareholders
over the long term.
stuart McGregor
Chairman
2
3
HeadingDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportFrom the Chairman
Overall we are confident that our focus
on driving strong underlying performance
at both of our blue-chip gaming assets
will result in positive results for our
shareholders over the long term.
Dear fellow shareholders
(ii) To look for acquisitive growth opportunities
The 2017 financial year has been a busy year for
Donaco as we laid the foundations for the transition to
full management control of Star Vegas, while launching a
number of international marketing initiatives at the venue
and driving strong growth at Aristo. Although the Thai
economy was depressed for most of the year following the
passing of the late King of Thailand, our underlying Group
profit was in line with the 2016 financial year (FY16). We
believe we are well positioned to resume our growth trend
following the cessation of the official mourning period from
October 2017, with a fresh management team in place to
deliver growth from new marketing initiatives, international
junkets and online gaming.
Following the expiration of the management contract with
the Star Vegas vendor on 30 June 2017, management was
taken in-house, and this allowed us to take full advantage
of the Group’s expertise and experience in managing
Asian gaming businesses. Accordingly, the management
team was refreshed and a number of key appointments
made – including Kenny Bee Meng Chuan as General
Manager – to position Donaco for a strong year in 2018.
Despite the challenging conditions in our major market, the
strong earnings and cash flow generated from Star Vegas
and Aristo further strengthened our financial position.
The Board sees capital allocation as one of the most
important areas of value creation for shareholders,
and on behalf of the Board we were delighted to begin
to implement a range of capital management initiatives.
In addition to our debt obligations, we see the capital
we have available as being directed in four possible ways:
(i) To provide capital to support organic growth initiatives
in our existing venues
in the region
(iii) To apply surplus capital towards dividends, and
(iv) To apply surplus capital towards the buyback of shares.
We recognise that as we reduce our debt, and gain greater
flexibility with our balance sheet, all these areas of capital
deployment become available. With the new debt facility
that has come into effect for the 2018 financial year (FY18)
we are pleased to announce our intention to move to regular
six-monthly dividend payments, commencing with a dividend
of half a cent per share payable in October 2017. As a
further measure to create value for shareholders, the Board
also announced an intention to implement an on-market
share buyback program commencing in October 2017.
Although the transition to in-house management
at Star Vegas was a key focus towards the end of the
2017 financial year (FY17), our senior management
team continued to implement initiatives to improve the
performance of our Aristo business in Vietnam. Pleasingly,
the trajectory of strong growth has continued, aided by
initiatives to focus on mass market players (away from
the more volatile VIP segment) and the strong economy
in Vietnam underpinned by tourism from China.
As Chairman of the Group it was pleasing to see the share
price recover to be up 40% over the financial year, despite
the challenging economic conditions in Thailand, and we
believe that by delivering strong financial management and
earnings growth, shareholders will continue to be rewarded
in future years.
One of Donaco’s strengths is our adherence to strong
corporate governance practices. In the Asian region we
are widely recognised by governments, our visitors and our
customers, as a Group that operates with high standards
of probity and good governance. We believe that this
becomes a competitive advantage in pursuing further
growth opportunities as they arise into the future. Our
Board is culturally and geographically diverse, which is
an element of our success, given we operate in multiple
geographies and our target customers come from a
diverse range of backgrounds.
We believe it is important to make a positive contribution
to the communities we operate in, and accordingly we
engaged in a range of charitable activities to support the
wellbeing of the underprivileged in our regions. During
the year we presented gifts to students at Nam Lu School
in Lao Cai province in Vietnam, and donated 50 computers
to students at Nguyen Ba Ngoc Primary School, to assist
them with their studies. We also presented gifts to students
with blood cancer, school uniforms to other students,
and warm blankets to underprivileged men and women
during winter. Other initiatives included donating bicycles
to students in the Lao Cai province, and donating to the
Children’s Care Fund of Lao Cai.
With the management of the Star Vegas being brought
in-house, Non-Executive Director Paul Porntat
Amatavivadhana resigned after the conclusion of the
financial year. Mr Amatavivadhana made a valuable
contribution to Donaco’s Board over the two-year period
since Star Vegas became part of the Group, and I would
like to thank him for his contribution on behalf of the Board.
In summary, FY17 was one in which Donaco delivered
strong results despite a challenging economic period.
While the result at Star Vegas was down slightly on
FY16, earnings at Aristo continued to grow strongly, and
our underlying Group profit was in line with last year. In
addition, our debt was further reduced, and we employed
capital management initiatives including a dividend and
a buyback program to reward shareholders.
We are excited about the flexibility that in-house
management of Star Vegas brings, and the opportunities
to improve our financial performance over FY18, at a time
when the mourning period in Thailand is about to conclude.
Overall, we are confident that our focus on driving strong
underlying performance at both of our blue-chip gaming
assets will result in positive results for our shareholders
over the long term.
stuart McGregor
Chairman
2
3
HeadingDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportFrom the Managing Director
Star Vegas is a world class gaming
and entertainment property and, following
the transition to full management control,
we have additional flexibility to implement
initiatives to increase visitation and
performance.
Dear Fellow Shareholders
The 2017 financial year produced solid performance,
despite a challenging economic period in Thailand
following the passing of the late King. The Group generated
$136.4 million in revenue, of which Star Vegas contributed
$110.2 million, with an underlying earnings before interest,
tax, depreciation and amortisation (EBITDA) of $84.4 million,
only slightly down on the previous year. Aristo in Vietnam
continued its strong growth, as we repositioned the
business towards the mass market.
Overall, our net profit after tax (NPAT) was $31.0 million,
including negative non-recurring items of $23.6 million.
This amount included the final Star Vegas vendor
management fee of $19.0 million, which became payable
as the business exceeded its earnings targets. The balance
of non-recurring items related to non-cash movements
with respect to warrants.
In FY16 the non-recurring items totalled a positive
$24.1 million, predominantly due to the benefit of the
revaluation of Star Vegas following its acquisition, offset by
the initial vendor management fee and acquisition expenses.
After adjusting for the non-recurring items, our underlying
net profit after tax of $54.6 million was in line with last year.
The cash flow from operations of $47.4 million remained
strong, although slightly below the $50.0 million generated
last year.
Despite the subdued consumer sentiment and economic
climate in Thailand, the Star Vegas property experienced
only a moderate reduction in revenue, and a favourable
increase in the VIP gross win rate to 3.54%, which was up
from 3.16% achieved over FY16. We should note that given
the inherent volatility of the VIP gaming business, we do
not always expect to have the win-rate run so strongly
in our favour. We were also pleased to see management
initiatives to improve utilisation of the venue take effect,
with non-gaming revenue experiencing robust growth over
the year. Overall, net profit after tax at Star Vegas declined
by 7.3% to THB1,466 million.
The previous contract with the former Thai vendor for
the management of the Star Vegas property expired in
accordance with its agreed terms on 30 June 2017, and
his involvement with the Star Vegas business ceased on
30 June 2017. Management of the venue has now been
taken in-house by Donaco, and all key management roles
have been filled, utilising our extensive experience in
managing Asian casino operations. We move ahead into
FY18 in full operational control of the venue.
Star Vegas is a world class gaming and entertainment
property and following the transition to full management
control, we have additional flexibility to implement initiatives
to increase visitation and performance. As part of our
strategy to increase visitation from international players,
we signed a contract in June 2016 with international
casino marketing agency, Vivo Tower Limited, to sign up
international junkets and to bring players to the property
from all around Asia.
During the year we announced a partnership with Poker
King Club to host a major international poker tournament,
which was accredited as the South-East Asian leg of the
Asian Poker Tour. The event included a press conference
held by the guests of honour, the Manchester United
‘Class of ’92’ players. This tied in with the official launch
of our Manchester United partnership, which is designed
to increase awareness and visitation of Star Vegas property
for the target market of middle-class Thai visitors.
As we enter FY18 we have made good progress in signing
up additional junket operators, with new customers
joining us during August and September 2017, and further
arrangements due to commence in the coming months.
Although we do expect the earnings from the VIP portion of
the business to be lower in the September quarter, this line
of business is currently rebuilding well. Overall, the main
hall and slot machine business has remained robust during
the transition period to Donaco management, and we have
now been able to implement significant cost savings in the
areas of staffing and procurement.
Some of our new junket customers will shortly commence
offering online gaming as new facilities are built out. In
addition, we have brought in a number of professional
third-party operators to build new entertainment facilities,
at their own cost, for our VIP guests. The new facilities
include a nightclub, karaoke rooms and a new café, which
will help to generate additional visitation to the property.
In Vietnam, the Aristo International Hotel continued to
grow strongly over the course of FY17, with impressive
EBITDA growth driven by increases in both gaming and
non-gaming revenue. Tight cost management resulted in
outstanding NPAT growth of 130.9% to RMB31.8 million.
Our visitor numbers continued to grow, up 18% to 174,000
over FY17, including a new monthly record of 18,356 players
in August 2016. Our marketing strategies were focused on
increasing lower volatility mass market play, which drove
strong growth in net gaming revenue (up 36%), while our
non-gaming revenue also grew, up 12% over the previous
year. The average VIP win rate achieved was 2.28%, a slight
improvement on last year’s 2.20%.
We recorded particularly strong growth in slot
machine revenues at the Aristo, up 62% for the year to
RMB14.9 million. To capitalise on this growth, we added
10 new Aruze slot machines to the gaming floor in April
2017, which resulted in particularly strong growth of 238%
in slot machine revenue in the fourth quarter.
In recent years, our focus has been on developing a leading
Asian gaming and entertainment brand, and with two blue-
chip assets under our management, we are uniquely placed
to grow over the long term.
I am excited about our prospects as we implement our
management plans for our key Star Vegas asset, at a time
when we approach the conclusion of Thailand’s official
mourning period. We anticipate that the business will gain
momentum in FY18, with activity at Star Vegas expected
to recover to normal levels following the first quarter. We
also expect to benefit from the deal with Vivo Tower, as
new entertainment facilities are built out and offered to our
guests. This will help to utilise the full capacity of the venue.
At the Aristo, we will continue to focus on the mass market
and slot machines, to further increase earnings from both
the gaming and non-gaming assets.
Overall, it is a promising time for our business and we look
forward to keeping you updated on the progress of our
management initiatives.
Joey lim
Managing Director and Chief Executive Officer
4
5
HeadingDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportFrom the Managing Director
Star Vegas is a world class gaming
and entertainment property and, following
the transition to full management control,
we have additional flexibility to implement
initiatives to increase visitation and
performance.
Dear Fellow Shareholders
The 2017 financial year produced solid performance,
despite a challenging economic period in Thailand
following the passing of the late King. The Group generated
$136.4 million in revenue, of which Star Vegas contributed
$110.2 million, with an underlying earnings before interest,
tax, depreciation and amortisation (EBITDA) of $84.4 million,
only slightly down on the previous year. Aristo in Vietnam
continued its strong growth, as we repositioned the
business towards the mass market.
Overall, our net profit after tax (NPAT) was $31.0 million,
including negative non-recurring items of $23.6 million.
This amount included the final Star Vegas vendor
management fee of $19.0 million, which became payable
as the business exceeded its earnings targets. The balance
of non-recurring items related to non-cash movements
with respect to warrants.
In FY16 the non-recurring items totalled a positive
$24.1 million, predominantly due to the benefit of the
revaluation of Star Vegas following its acquisition, offset by
the initial vendor management fee and acquisition expenses.
After adjusting for the non-recurring items, our underlying
net profit after tax of $54.6 million was in line with last year.
The cash flow from operations of $47.4 million remained
strong, although slightly below the $50.0 million generated
last year.
Despite the subdued consumer sentiment and economic
climate in Thailand, the Star Vegas property experienced
only a moderate reduction in revenue, and a favourable
increase in the VIP gross win rate to 3.54%, which was up
from 3.16% achieved over FY16. We should note that given
the inherent volatility of the VIP gaming business, we do
not always expect to have the win-rate run so strongly
in our favour. We were also pleased to see management
initiatives to improve utilisation of the venue take effect,
with non-gaming revenue experiencing robust growth over
the year. Overall, net profit after tax at Star Vegas declined
by 7.3% to THB1,466 million.
The previous contract with the former Thai vendor for
the management of the Star Vegas property expired in
accordance with its agreed terms on 30 June 2017, and
his involvement with the Star Vegas business ceased on
30 June 2017. Management of the venue has now been
taken in-house by Donaco, and all key management roles
have been filled, utilising our extensive experience in
managing Asian casino operations. We move ahead into
FY18 in full operational control of the venue.
Star Vegas is a world class gaming and entertainment
property and following the transition to full management
control, we have additional flexibility to implement initiatives
to increase visitation and performance. As part of our
strategy to increase visitation from international players,
we signed a contract in June 2016 with international
casino marketing agency, Vivo Tower Limited, to sign up
international junkets and to bring players to the property
from all around Asia.
During the year we announced a partnership with Poker
King Club to host a major international poker tournament,
which was accredited as the South-East Asian leg of the
Asian Poker Tour. The event included a press conference
held by the guests of honour, the Manchester United
‘Class of ’92’ players. This tied in with the official launch
of our Manchester United partnership, which is designed
to increase awareness and visitation of Star Vegas property
for the target market of middle-class Thai visitors.
As we enter FY18 we have made good progress in signing
up additional junket operators, with new customers
joining us during August and September 2017, and further
arrangements due to commence in the coming months.
Although we do expect the earnings from the VIP portion of
the business to be lower in the September quarter, this line
of business is currently rebuilding well. Overall, the main
hall and slot machine business has remained robust during
the transition period to Donaco management, and we have
now been able to implement significant cost savings in the
areas of staffing and procurement.
Some of our new junket customers will shortly commence
offering online gaming as new facilities are built out. In
addition, we have brought in a number of professional
third-party operators to build new entertainment facilities,
at their own cost, for our VIP guests. The new facilities
include a nightclub, karaoke rooms and a new café, which
will help to generate additional visitation to the property.
In Vietnam, the Aristo International Hotel continued to
grow strongly over the course of FY17, with impressive
EBITDA growth driven by increases in both gaming and
non-gaming revenue. Tight cost management resulted in
outstanding NPAT growth of 130.9% to RMB31.8 million.
Our visitor numbers continued to grow, up 18% to 174,000
over FY17, including a new monthly record of 18,356 players
in August 2016. Our marketing strategies were focused on
increasing lower volatility mass market play, which drove
strong growth in net gaming revenue (up 36%), while our
non-gaming revenue also grew, up 12% over the previous
year. The average VIP win rate achieved was 2.28%, a slight
improvement on last year’s 2.20%.
We recorded particularly strong growth in slot
machine revenues at the Aristo, up 62% for the year to
RMB14.9 million. To capitalise on this growth, we added
10 new Aruze slot machines to the gaming floor in April
2017, which resulted in particularly strong growth of 238%
in slot machine revenue in the fourth quarter.
In recent years, our focus has been on developing a leading
Asian gaming and entertainment brand, and with two blue-
chip assets under our management, we are uniquely placed
to grow over the long term.
I am excited about our prospects as we implement our
management plans for our key Star Vegas asset, at a time
when we approach the conclusion of Thailand’s official
mourning period. We anticipate that the business will gain
momentum in FY18, with activity at Star Vegas expected
to recover to normal levels following the first quarter. We
also expect to benefit from the deal with Vivo Tower, as
new entertainment facilities are built out and offered to our
guests. This will help to utilise the full capacity of the venue.
At the Aristo, we will continue to focus on the mass market
and slot machines, to further increase earnings from both
the gaming and non-gaming assets.
Overall, it is a promising time for our business and we look
forward to keeping you updated on the progress of our
management initiatives.
Joey lim
Managing Director and Chief Executive Officer
4
5
HeadingDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportBoard of Directors
Board of Directors
Stuart James McGregor
Independent Non-Executive Chairman
(appointed 19 November 2004)
Joey Lim Keong Yew
Managing Director and Chief Executive Officer
(appointed 1 February 2013)
B.Com, LLB, MBA
B. Computer Science
Benedict Paul Reichel
Benjamin Lim Keong Hoe
Executive Director, Group General Counsel,
Company Secretary (appointed 20 July 2007)
BA, LLB (Hons), LLM (Hons)
Non-Executive Director
(appointed 1 February 2013)
B. International Business
Experience and expertise
Over the last 30 years, Mr McGregor has had a wide-
ranging business career with active involvement across
the Australasian and Asian Region. In business, he has
been Company Secretary of Carlton United Breweries,
Managing Director of Cascade Brewery Company Ltd in
Tasmania and Managing Director of San Miguel Brewery
Hong Kong Ltd, a publicly listed Hong Kong-based company
with subsidiary businesses in China. In the public sector,
he served as Chief of Staff to a Minister for Industry and
Commerce in the Australian Federal Government, and as
Chief Executive of the Tasmanian Government’s economic
development agency.
Other current directorships
EBOS Group Limited (ASX:EBO) (appointed in July 2013)
Former directorships (last three years)
None
Special responsibilities
Member of the Audit & Risk Management Committee
and the Nominations, Remunerations & Corporate
Governance Committee
Interests in shares
411,735 ordinary shares
Interests in options
None
Experience and expertise
Mr J Lim is the Managing Director and Chief Executive
Officer (CEO) of Donaco International Limited. He is
also a director of Malahon Securities Limited, a stock
brokerage company founded in 1984, and is a member
and participant of the Hong Kong Exchange. He is also
the principal of the Slingshot Group of Companies, which
are investment companies based in Hong Kong. Relevant
experience includes: working as an Executive Director to
M3 Technologies (Asia) Bhd where he was responsible for
strategic investments and corporate affairs; working at
VXL Capital, China, a company whose business was focused
on investing in and restructuring companies in Malaysia,
Beijing, Shanghai and Hong Kong; and working as Project
Manager for Glaxo Wellcome, London, UK.
Other current directorships
None
Former directorships (last three years)
None
Special responsibilities
None
Interests in shares
230,059,325 ordinary shares
Interests in options
1,931,757 unlisted employee options
Experience and expertise
Mr Reichel is an executive and company director in the
gaming, media, and technology sectors, with more than
twenty years’ experience in major Australian listed public
companies and law firms. Mr Reichel held the position of
CEO and Managing Director of the Company (then called
Two Way Limited) from July 2007 to January 2012, and has
remained on the Board since then. Previously, Mr Reichel
was General Counsel of Tab Limited, a $2 billion ASX-listed
company with operations in wagering, gaming and media.
Prior to that, he was General Counsel of racing broadcaster
Sky Channel Pty Limited, and held a number of executive
positions at Publishing and Broadcasting Limited.
Other current directorships
None
Former directorships (last three years)
None
Special responsibilities
None
Interests in shares
400,094 ordinary shares
Interests in options
1,026,593 unlisted employee options
Experience and expertise
Mr B Lim is a director of Donaco Singapore Pte Ltd,
and a major shareholder of Genting Development Sdn Bhd,
a substantial property development business in Malaysia.
He has a bachelors degree in international business with
design management from Regent Business School in the
United Kingdom.
Other current directorships
None
Former directorships (last three years)
None
Special responsibilities
Member of the Audit & Risk Management Committee
and the Nominations, Remuneration & Corporate
Governance Committee.
Interests in shares
107,311,200 ordinary shares
Interests in options
None
6
7
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportBoard of Directors
Board of Directors
Stuart James McGregor
Independent Non-Executive Chairman
(appointed 19 November 2004)
Joey Lim Keong Yew
Managing Director and Chief Executive Officer
(appointed 1 February 2013)
B.Com, LLB, MBA
B. Computer Science
Benedict Paul Reichel
Benjamin Lim Keong Hoe
Executive Director, Group General Counsel,
Company Secretary (appointed 20 July 2007)
BA, LLB (Hons), LLM (Hons)
Non-Executive Director
(appointed 1 February 2013)
B. International Business
Experience and expertise
Over the last 30 years, Mr McGregor has had a wide-
ranging business career with active involvement across
the Australasian and Asian Region. In business, he has
been Company Secretary of Carlton United Breweries,
Managing Director of Cascade Brewery Company Ltd in
Tasmania and Managing Director of San Miguel Brewery
Hong Kong Ltd, a publicly listed Hong Kong-based company
with subsidiary businesses in China. In the public sector,
he served as Chief of Staff to a Minister for Industry and
Commerce in the Australian Federal Government, and as
Chief Executive of the Tasmanian Government’s economic
development agency.
Other current directorships
EBOS Group Limited (ASX:EBO) (appointed in July 2013)
Former directorships (last three years)
None
Special responsibilities
Member of the Audit & Risk Management Committee
and the Nominations, Remunerations & Corporate
Governance Committee
Interests in shares
411,735 ordinary shares
Interests in options
None
Experience and expertise
Mr J Lim is the Managing Director and Chief Executive
Officer (CEO) of Donaco International Limited. He is
also a director of Malahon Securities Limited, a stock
brokerage company founded in 1984, and is a member
and participant of the Hong Kong Exchange. He is also
the principal of the Slingshot Group of Companies, which
are investment companies based in Hong Kong. Relevant
experience includes: working as an Executive Director to
M3 Technologies (Asia) Bhd where he was responsible for
strategic investments and corporate affairs; working at
VXL Capital, China, a company whose business was focused
on investing in and restructuring companies in Malaysia,
Beijing, Shanghai and Hong Kong; and working as Project
Manager for Glaxo Wellcome, London, UK.
Other current directorships
None
Former directorships (last three years)
None
Special responsibilities
None
Interests in shares
230,059,325 ordinary shares
Interests in options
1,931,757 unlisted employee options
Experience and expertise
Mr Reichel is an executive and company director in the
gaming, media, and technology sectors, with more than
twenty years’ experience in major Australian listed public
companies and law firms. Mr Reichel held the position of
CEO and Managing Director of the Company (then called
Two Way Limited) from July 2007 to January 2012, and has
remained on the Board since then. Previously, Mr Reichel
was General Counsel of Tab Limited, a $2 billion ASX-listed
company with operations in wagering, gaming and media.
Prior to that, he was General Counsel of racing broadcaster
Sky Channel Pty Limited, and held a number of executive
positions at Publishing and Broadcasting Limited.
Other current directorships
None
Former directorships (last three years)
None
Special responsibilities
None
Interests in shares
400,094 ordinary shares
Interests in options
1,026,593 unlisted employee options
Experience and expertise
Mr B Lim is a director of Donaco Singapore Pte Ltd,
and a major shareholder of Genting Development Sdn Bhd,
a substantial property development business in Malaysia.
He has a bachelors degree in international business with
design management from Regent Business School in the
United Kingdom.
Other current directorships
None
Former directorships (last three years)
None
Special responsibilities
Member of the Audit & Risk Management Committee
and the Nominations, Remuneration & Corporate
Governance Committee.
Interests in shares
107,311,200 ordinary shares
Interests in options
None
6
7
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportBoard of Directors
Robert Andrew Hines
Independent Non-Executive Director
(appointed 1 November 2013)
Experience and expertise
Mr Hines is one of Australia’s leading gaming and wagering
executives. As CEO of Racing Victoria Limited from 2008
to 2012, he led and managed the Victorian racing industry
through a period of substantial change. Mr Hines also held
CEO roles at Jupiters Limited (2000 to 2004), which was
acquired by Tabcorp; and at AWA Limited (1997 to 2000),
which was acquired by Jupiters. From 2005 to 2008, he was
CEO UK and Europe for Vecommerce Limited, a natural
language speech recognition company providing services to
wagering operators. Mr Hines currently holds the positions
of Non-Executive Director with Sportsbet Australia Pty Ltd,
Group Chairman CEO Circle, and Non-Executive Director
of the Sporting Chance Cancer Foundation.
Other current directorships
None
Former directorships (last three years)
None
Special responsibilities
Chair of the Audit & Risk Management Committee
and the Nominations, Remuneration & Corporate
Governance Committee
Interests in shares
145,321 ordinary shares
Interests in options
None
Ham Techatut Sukjaroenkraisri
Executive Director (appointed 1 July 2015)
BSc Chemical Engineering
Experience and expertise
Mr Sukjaroenkraisri is Vice President, Casino at Star Vegas
Casino & Resorts Co, Ltd. He has more than nine years’
experience in gaming and casino management. In his
role at Star Vegas, one of Cambodia’s largest and most
successful casino resorts, Mr Sukjaroenkraisri has been
responsible for developing the model for the slot machine
business. This has become one of the most successful
and profitable businesses for Star Vegas, and has helped
to put Star Vegas into its current leadership position in
the Cambodian gaming market.
Other current directorships
None
Former directorships (last three years)
None
Special responsibilities
None
Interests in shares
74,599,764 ordinary shares
Interests in options
None
Paul Porntat Amatavivadhana
Non-Executive Director (resigned 3 July 2017)
MSc Management Science, BA Finance and Banking
Experience and expertise
Mr Amatavivadhana is a founding principal and the CEO
of Infinite Capital, a successful boutique corporate advisory
firm based in Bangkok. He has considerable experience
in mergers and acquisitions, corporate restructuring
and capital raisings. Mr Amatavivadhana is currently an
independent director at Sansiri Plc., one of the largest real
estate developers in Thailand, which is listed on the Stock
Exchange of Thailand. His previous roles include: senior
positions at Ayudhya Securities Plc (Managing Director);
Ploenchit Advisory Co Ltd (Assistant Managing Director);
UOB KayHian Securities (Thailand) Ltd; BNP Paribas
Peregrine Securities (Thailand) Ltd and Securities One Plc.
Other current directorships
Sansiri Plc (SET: SIRI) (appointed 13 June 2008)
Former directorships (last three years)
None
Special responsibilities
None
Interests in shares
None
Interests in options:
None
‘Other current directorships’ and ‘Former directorships
(last three years)’ quoted above are directorships for listed
entities only, and exclude directorships of all other types
of entities, unless otherwise stated.
8
9
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportBoard of Directors
Robert Andrew Hines
Independent Non-Executive Director
(appointed 1 November 2013)
Experience and expertise
Mr Hines is one of Australia’s leading gaming and wagering
executives. As CEO of Racing Victoria Limited from 2008
to 2012, he led and managed the Victorian racing industry
through a period of substantial change. Mr Hines also held
CEO roles at Jupiters Limited (2000 to 2004), which was
acquired by Tabcorp; and at AWA Limited (1997 to 2000),
which was acquired by Jupiters. From 2005 to 2008, he was
CEO UK and Europe for Vecommerce Limited, a natural
language speech recognition company providing services to
wagering operators. Mr Hines currently holds the positions
of Non-Executive Director with Sportsbet Australia Pty Ltd,
Group Chairman CEO Circle, and Non-Executive Director
of the Sporting Chance Cancer Foundation.
Other current directorships
None
Former directorships (last three years)
None
Special responsibilities
Chair of the Audit & Risk Management Committee
and the Nominations, Remuneration & Corporate
Governance Committee
Interests in shares
145,321 ordinary shares
Interests in options
None
Ham Techatut Sukjaroenkraisri
Executive Director (appointed 1 July 2015)
BSc Chemical Engineering
Experience and expertise
Mr Sukjaroenkraisri is Vice President, Casino at Star Vegas
Casino & Resorts Co, Ltd. He has more than nine years’
experience in gaming and casino management. In his
role at Star Vegas, one of Cambodia’s largest and most
successful casino resorts, Mr Sukjaroenkraisri has been
responsible for developing the model for the slot machine
business. This has become one of the most successful
and profitable businesses for Star Vegas, and has helped
to put Star Vegas into its current leadership position in
the Cambodian gaming market.
Other current directorships
None
Former directorships (last three years)
None
Special responsibilities
None
Interests in shares
74,599,764 ordinary shares
Interests in options
None
Paul Porntat Amatavivadhana
Non-Executive Director (resigned 3 July 2017)
MSc Management Science, BA Finance and Banking
Experience and expertise
Mr Amatavivadhana is a founding principal and the CEO
of Infinite Capital, a successful boutique corporate advisory
firm based in Bangkok. He has considerable experience
in mergers and acquisitions, corporate restructuring
and capital raisings. Mr Amatavivadhana is currently an
independent director at Sansiri Plc., one of the largest real
estate developers in Thailand, which is listed on the Stock
Exchange of Thailand. His previous roles include: senior
positions at Ayudhya Securities Plc (Managing Director);
Ploenchit Advisory Co Ltd (Assistant Managing Director);
UOB KayHian Securities (Thailand) Ltd; BNP Paribas
Peregrine Securities (Thailand) Ltd and Securities One Plc.
Other current directorships
Sansiri Plc (SET: SIRI) (appointed 13 June 2008)
Former directorships (last three years)
None
Special responsibilities
None
Interests in shares
None
Interests in options:
None
‘Other current directorships’ and ‘Former directorships
(last three years)’ quoted above are directorships for listed
entities only, and exclude directorships of all other types
of entities, unless otherwise stated.
8
9
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportCorporate Social Responsibility
Corporate Social Responsibility
A
B
C
E
F
G
Community is
important to us
We are committed to contributing
to our local communities through
engagement, purposeful charitable
activities and supporting targeted
development and wellbeing initiatives
to enhance the welfare and quality
of life for people in our region. Making
a positive contribution helps build
resilience and provides our
employees with a sense of pride.
D
Community news
A Students receive generous support
at Nam Lu School
Aristo presented gifts to underprivileged and talented
students at Nam Lu primary-secondary school in the
Muong Khuong district of Lao Cai province.
B Nguyen Ba Ngoc Primary School receives
50 new computers
Aristo donated 50 computers to students to help with study
at Nguyen Ba Ngoc Primary School in Lao Cai city.
C Young students with blood cancer offered
critical support to keep up spirits
Aristo presented gifts to students with blood cancer at
Nguyen Ba Ngoc Primary School in Lao Cai city. We hope
they have a speedy recovery and continue to receive plenty
of support.
D Lovely new school uniforms for everyone
to be proud of
Aristo presented new school uniforms to happy children
in the Muong Khuong district of Lao Cai province.
E Warm blankets for winter
Aristo presented warm blankets to underprivileged men
and women and their families at Lao Cai city during the
Winter of 2016.
F Donated bicycles make pedalling
to school fun and easy
Aristo presented beautiful new bicycles to underprivileged
students of Lao Cai province and generously donated to
the Children Care Fund of Lao Cai province.
G Generous gifts donated to support education
at Nguyen Ba Ngoc Primary School
Aristo presented gifts to students at Nguyen Ba Ngoc
Primary School in Lao Cai city to help them with their study.
Awards and recognition
1 Top 100 ASEAN Powerful Companies Award for
the Lao Cai International Hotel JVC Limited which it
received from the Vietnam–Laos–Cambodia Association
for Economic Cooperation and Development.
2 Diploma of Merit by People’s Committee of Lao Cai
province in recognition for the Group’s contribution
to the 25th anniversary of Lao Cai province’s
re-establishment.
3 Vietnam Private Business Association’s Honoured
Award for outstanding entrepreneur, awarded to
Mr Joey Lim Keong Yew, Chairman of Lao Cai
International Hotel JVC Ltd.
4 Vietnam Private Business Association’s Honoured
Award for the outstanding enterprise awarded to
Lao Cai International Hotel JVC Ltd for performance
excellence.
10
11
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportCorporate Social Responsibility
Corporate Social Responsibility
A
B
C
E
F
G
Community is
important to us
We are committed to contributing
to our local communities through
engagement, purposeful charitable
activities and supporting targeted
development and wellbeing initiatives
to enhance the welfare and quality
of life for people in our region. Making
a positive contribution helps build
resilience and provides our
employees with a sense of pride.
D
Community news
A Students receive generous support
at Nam Lu School
Aristo presented gifts to underprivileged and talented
students at Nam Lu primary-secondary school in the
Muong Khuong district of Lao Cai province.
B Nguyen Ba Ngoc Primary School receives
50 new computers
Aristo donated 50 computers to students to help with study
at Nguyen Ba Ngoc Primary School in Lao Cai city.
C Young students with blood cancer offered
critical support to keep up spirits
Aristo presented gifts to students with blood cancer at
Nguyen Ba Ngoc Primary School in Lao Cai city. We hope
they have a speedy recovery and continue to receive plenty
of support.
D Lovely new school uniforms for everyone
to be proud of
Aristo presented new school uniforms to happy children
in the Muong Khuong district of Lao Cai province.
E Warm blankets for winter
Aristo presented warm blankets to underprivileged men
and women and their families at Lao Cai city during the
Winter of 2016.
F Donated bicycles make pedalling
to school fun and easy
Aristo presented beautiful new bicycles to underprivileged
students of Lao Cai province and generously donated to
the Children Care Fund of Lao Cai province.
G Generous gifts donated to support education
at Nguyen Ba Ngoc Primary School
Aristo presented gifts to students at Nguyen Ba Ngoc
Primary School in Lao Cai city to help them with their study.
Awards and recognition
1 Top 100 ASEAN Powerful Companies Award for
the Lao Cai International Hotel JVC Limited which it
received from the Vietnam–Laos–Cambodia Association
for Economic Cooperation and Development.
2 Diploma of Merit by People’s Committee of Lao Cai
province in recognition for the Group’s contribution
to the 25th anniversary of Lao Cai province’s
re-establishment.
3 Vietnam Private Business Association’s Honoured
Award for outstanding entrepreneur, awarded to
Mr Joey Lim Keong Yew, Chairman of Lao Cai
International Hotel JVC Ltd.
4 Vietnam Private Business Association’s Honoured
Award for the outstanding enterprise awarded to
Lao Cai International Hotel JVC Ltd for performance
excellence.
10
11
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDirectors’ Report
Directors’ Report
The directors present their report, together with the
financial statements, on the consolidated entity (referred
to hereafter as the ‘consolidated entity’) consisting of
Donaco International Limited (referred to hereafter as the
‘Company’ or ‘parent entity’) and the entities it controlled
at the end of, or during, the year ended 30 June 2017.
Directors
The following persons were directors of Donaco
International Limited during the whole of the financial year
and up to the date of this report, unless otherwise stated:
Stuart James McGregor – Chairman
Joey Lim Keong Yew
Benedict Paul Reichel
Benjamin Lim Keong Hoe
Robert Andrew Hines
Ham Techatut Sukjaroenkraisri
Paul Porntat Amatavivadhana (resigned 3 July 2017).
Principal activities
During the financial year the principal continuing activities
of the consolidated entity consisted of the operation of
leisure and hospitality businesses across the Asia-Pacific
region. This included:
•
•
operation of a hotel and casino in northern Vietnam
operation of a hotel and casino in Cambodia.
Dividends
A dividend of $8,246,843 (1 cent per ordinary share) was
paid on 19 October 2016. The dividend was 100% conduit
foreign income and was unfranked. Subsequent to the
reporting date, the consolidated entity has declared an
ordinary dividend of 0.5 cents per share, amounting to
$4,156,057. The dividend is 100% conduit foreign income
and is unfranked.
On 29 August 2017, the consolidated entity announce
a new dividend policy, which stated that the consolidated
entity intends to pay out 10–30% of net profit after
tax as dividends to shareholders, with the intention
to provide regular half-yearly dividend payments,
subject to the consolidated entity’s then current working
capital requirements and growth plans. Shareholders
should note that the payment of dividends is not
guaranteed.
Review of operations
and financial results
Result highlights
Underlying NPAT of $54.6 million in line with $54.6 million
in FY16, with strong second half-year recovery at Star Vegas
and continuing growth at Aristo.
• Statutory NPAT:
– Both venues performed consistently with market guidance provided
• Contribution of non-recurring items in NPAT result
• Underlying NPAT:
• Group revenue:
– Star Vegas revenue, impacted by mourning period for the late King of Thailand
– Aristo revenue, growth from mass market focus and slot machines
• Group Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)
• Underlying Group EBITDA
• Strong balance sheet with:
– Cash
– Borrowings
– Net debt
– Net debt to equity ratio
– New debt facility signed and completed with Mega Bank
2017
2016
$ million
$ million
31.0
78.7
(23.6)
54.6
136.4
110.2
26.2
65.3
84.4
66.0
108.4
42.4
8.7%
24.1
54.6
143.4
120.1
23.2
55.5
87.9
78.2
151.8
73.6
15.4%
Reported NPAT was $31.0 million, which included
non-recurring items totalling negative $23.6 million.
In contrast, FY16 included non-recurring items totalling
positive $24.1 million.
The non-recurring items in FY17 were due to the final
$19.0 million management fee expense payable to the
Star Vegas vendor (vs $20.5 million in FY16). In addition,
there was positive non-cash warrant revaluation income of
$1.1 million (vs $2.6 million in FY16); a net foreign exchange
loss of $1.1 million (vs none in FY16); and amortisation
and other costs associated with a working capital facility,
totalling negative $4.6 million (vs negative $1.4 million in
FY16). The working capital facility has now been repaid
and fully amortised, and no further expense will be incurred
in future periods.
In FY16 there was also a valuation uplift of $55.2 million
for Star Vegas, offset by $11.8 million of merger and
aquisition fees, which did not recur in this period. Excluding
the non-recurring items, underlying NPAT for the Group
was $54.6 million, in line with $54.6 million in FY16.
Venue performances
Star Vegas FY17/compared to FY16
• Net gaming revenue down 8.2% to THB2,747.6 million
• Non-gaming revenue up 31.7% to THB149.3 million
• EBITDA down 6.3% to THB2,107.9 million
• Property level NPAT down 7.3% to THB1,465.7 million
•
VIP gross win rate 3.54%.
Star Vegas performed consistently with the market guidance
provided, and recorded an EBITDA of USD60.5 million. The
business produced a strong June half performance assisted
by the high win rate achieved on junket play, and the
seasonal benefits which feature in the June half. Overall,
for the full 12 month period, the EBITDA at Star Vegas
declined by 6.3% in local currency terms to THB2,107.9
million, due to weaker consumer sentiment and economic
conditions in Thailand, following the passing away of the
late King.
12
13
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual Report
Directors’ Report
Directors’ Report
The directors present their report, together with the
financial statements, on the consolidated entity (referred
to hereafter as the ‘consolidated entity’) consisting of
Donaco International Limited (referred to hereafter as the
‘Company’ or ‘parent entity’) and the entities it controlled
at the end of, or during, the year ended 30 June 2017.
Directors
The following persons were directors of Donaco
International Limited during the whole of the financial year
and up to the date of this report, unless otherwise stated:
Stuart James McGregor – Chairman
Joey Lim Keong Yew
Benedict Paul Reichel
Benjamin Lim Keong Hoe
Robert Andrew Hines
Ham Techatut Sukjaroenkraisri
Paul Porntat Amatavivadhana (resigned 3 July 2017).
Principal activities
During the financial year the principal continuing activities
of the consolidated entity consisted of the operation of
leisure and hospitality businesses across the Asia-Pacific
region. This included:
•
•
operation of a hotel and casino in northern Vietnam
operation of a hotel and casino in Cambodia.
Dividends
A dividend of $8,246,843 (1 cent per ordinary share) was
paid on 19 October 2016. The dividend was 100% conduit
foreign income and was unfranked. Subsequent to the
reporting date, the consolidated entity has declared an
ordinary dividend of 0.5 cents per share, amounting to
$4,156,057. The dividend is 100% conduit foreign income
and is unfranked.
On 29 August 2017, the consolidated entity announce
a new dividend policy, which stated that the consolidated
entity intends to pay out 10–30% of net profit after
tax as dividends to shareholders, with the intention
to provide regular half-yearly dividend payments,
subject to the consolidated entity’s then current working
capital requirements and growth plans. Shareholders
should note that the payment of dividends is not
guaranteed.
Review of operations
and financial results
Result highlights
Underlying NPAT of $54.6 million in line with $54.6 million
in FY16, with strong second half-year recovery at Star Vegas
and continuing growth at Aristo.
• Statutory NPAT:
– Both venues performed consistently with market guidance provided
• Contribution of non-recurring items in NPAT result
• Underlying NPAT:
• Group revenue:
– Star Vegas revenue, impacted by mourning period for the late King of Thailand
– Aristo revenue, growth from mass market focus and slot machines
• Group Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)
• Underlying Group EBITDA
• Strong balance sheet with:
– Cash
– Borrowings
– Net debt
– Net debt to equity ratio
– New debt facility signed and completed with Mega Bank
2017
2016
$ million
$ million
31.0
78.7
(23.6)
54.6
136.4
110.2
26.2
65.3
84.4
66.0
108.4
42.4
8.7%
24.1
54.6
143.4
120.1
23.2
55.5
87.9
78.2
151.8
73.6
15.4%
Reported NPAT was $31.0 million, which included
non-recurring items totalling negative $23.6 million.
In contrast, FY16 included non-recurring items totalling
positive $24.1 million.
The non-recurring items in FY17 were due to the final
$19.0 million management fee expense payable to the
Star Vegas vendor (vs $20.5 million in FY16). In addition,
there was positive non-cash warrant revaluation income of
$1.1 million (vs $2.6 million in FY16); a net foreign exchange
loss of $1.1 million (vs none in FY16); and amortisation
and other costs associated with a working capital facility,
totalling negative $4.6 million (vs negative $1.4 million in
FY16). The working capital facility has now been repaid
and fully amortised, and no further expense will be incurred
in future periods.
In FY16 there was also a valuation uplift of $55.2 million
for Star Vegas, offset by $11.8 million of merger and
aquisition fees, which did not recur in this period. Excluding
the non-recurring items, underlying NPAT for the Group
was $54.6 million, in line with $54.6 million in FY16.
Venue performances
Star Vegas FY17/compared to FY16
• Net gaming revenue down 8.2% to THB2,747.6 million
• Non-gaming revenue up 31.7% to THB149.3 million
• EBITDA down 6.3% to THB2,107.9 million
• Property level NPAT down 7.3% to THB1,465.7 million
•
VIP gross win rate 3.54%.
Star Vegas performed consistently with the market guidance
provided, and recorded an EBITDA of USD60.5 million. The
business produced a strong June half performance assisted
by the high win rate achieved on junket play, and the
seasonal benefits which feature in the June half. Overall,
for the full 12 month period, the EBITDA at Star Vegas
declined by 6.3% in local currency terms to THB2,107.9
million, due to weaker consumer sentiment and economic
conditions in Thailand, following the passing away of the
late King.
12
13
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual Report
Directors’ Report
Directors’ Report
Aristo International Hotel FY17/compared to FY16
• Net gaming revenue up 36.3% to RMB80.0 million
• Non-gaming revenue up 11.6% to RMB53.6 million
• EBITDA up 39.6% to RMB74.8 million
• Property level NPAT up 130.9% to RMB31.8 million
•
VIP gross win rate 2.28%.
The Aristo International Hotel continued to grow substantially,
with the strategy to focus on mass market continuing to
provide benefits to the Group. EBITDA increased by 39.6%
in local currency terms to RMB74.8 million.
Capital management
The Company remains in a growth phase, and the
Board aims to retain sufficient cash to pursue growth
opportunities and repay debt as priorities.
However, with the strong cash generated by the business
and no imminent acquisition opportunities, the Board is
pleased to announce a new dividend policy of paying out
10–30% of NPAT in the form of dividends, with the intention
to provide regular half-yearly dividend payments, subject
to the consolidated entity’s then current working capital
requirements and growth plans.
In addition, the Board has announced an intention to pay
a final dividend of 0.5 cents per share, unfranked. The
planned record date for the dividend is 6 October 2017,
and planned payment date is 20 October 2017. Shareholders
should note that the payment of dividends is not guaranteed.
Significant changes in the state
of affairs
There were no significant changes in the state of affairs
of the consolidated entity during FY17.
Matters subsequent to the end
of the financial year
Dividend
On 29 August 2017, the Board of Donaco International
Limited has announced that it intends to declare an
ordinary dividend of 0.5 cents per share, amounting to
$4,156,057. The dividend is 100% conduit foreign income
and is unfranked. Proposed dates for the dividend payment
are: ex-dividend date 5 October 2017, record date
6 October 2017 and payment date 20 October 2017.
Refinance of loan with Mega International
Commercial Bank Co. Limited
The Company has refinanced its term loan facility with
Mega International Commercial Bank Co. Limited of Taiwan.
The Company has now repaid a total of USD63.4 million in
the past two years, with the remaining principal amount
of the previous facility standing at USD56.6 million.
The previous facility had a three-year term, with the
remaining USD56.6 million being repayable within the next
12 months. This consisted of USD20.8 million repayable in
January 2018, and the remaining USD35.8 million repayable
in July 2018.
The new facility is for an amount of USD57 million.
The term has been extended to three years from the date
of drawdown, which occurred on 28 August 2017, following
the completion of the conditions precedent.
Under the new loan, 15% of the principal amount is
repayable every six months. This means that the next
principal repayment has been reduced to approximately
USD8.6 million, due in February 2018.
The interest rate on the loan has also been reduced slightly,
from a margin of 6.75% over the six month USD LIBOR
rate, to a margin of 6.0%, provided that the net debt (total
borrowings minus cash) of Donaco Hong Kong Limited is
less than the EBITDA of Donaco Hong Kong Limited. If net
debt exceeds EBITDA, then the margin may increase to a
maximum of 6.5%.
In addition, a number of covenants controlling capital
management (dividends and buybacks) have been relaxed,
but there are still some restrictions in place until the
remaining principal falls below USD50 million, which
is expected to occur following the next repayment in
February 2018.
Share options
On 28 July 2017, the Company announced the expiration
of 1,651,883 options on 1 July 2017 in accordance to their
terms. The options were part of the FY14 and FY15 option
series. Currently, there are 5,444,810 remaining options
on issue.
No other matter or circumstance has arisen since
30 June 2017 that has significantly affected, or may
significantly affect the consolidated entity’s operations,
the results of those operations, or the consolidated entity’s
state of affairs in future financial years.
Likely developments and expected
results of operations
The Company operates leisure and entertainment
businesses across the Asia-Pacific region.
Our largest business is the Star Vegas Resort & Club,
a successful casino and hotel complex in Poipet, Cambodia,
on the border with Thailand. Star Vegas was established
in 1999, and is the largest and highest quality of the Poipet
casino hotels. The property has more than 100 gaming
tables, more than 1,500 slot machines, and 385 hotel rooms.
Our flagship business is the Aristo International Hotel,
a successful boutique casino in northern Vietnam, located
on the border with Yunnan Province, China. Established
in 2002, the property has recently been expanded to a
brand new five-star resort complex with 400 hotel rooms.
Donaco is a pioneer casino operator in Vietnam, and owns
a 95% interest in the business, in a joint venture with the
Government of Vietnam.
The operation and marketing of both of these properties
will underpin our growth during the next 12 months. Our
strategy is to take advantage of the demand for leisure and
entertainment in the Asia-Pacific region, and to leverage
the experience of the Board and management in the gaming
sector. This will complement the growth at the expanded
casinos in both Cambodia and Vietnam, and provide for
diversification.
The Company has now moved to full management control
of the Star Vegas operation, following the exit of the former
Thai manager. This will provide greater flexibility and control
in marketing the property. While VIP earnings at Star Vegas
are expected to be lower in the September quarter of
FY18 versus the corresponding period last year due to the
transition to in-house management, the main hall and slot
machine business is robust, and VIP revenues are already
rebuilding well as new junket operators enter the property.
In addition, no further management fees are payable to the
former Thai manager.
Material risks to the Company’s strategy include those
affecting listed entities generally, and companies operating
in Thailand, Cambodia and Vietnam generally. These
risks include the possibility of adverse macroeconomic
developments, such as exchange rate declines; cross-
border disputes; or terrorist attacks affecting the
Company’s key target markets. Other material risks include
the possibility of adverse regulatory change affecting casino
operators, such as changes in tax rates, and the possibility
of breach of licences or legislation. These risks are carefully
monitored by the Board and management team.
These key risks should not be taken as the only risks that
may affect the Company’s operations, and many risks are
outside the control of the Board and management team.
Except as noted above, information on likely developments
in the operations of the consolidated entity and the expected
results of operations have not been included in this report
because the directors believe it would be likely to result in
unreasonable prejudice to the consolidated entity.
Environmental regulations
The consolidated entity is not subject to any significant
environmental regulation under Australian commonwealth
or state law.
Company Secretary
Benedict Paul Reichel is an Executive Director and the
Company Secretary. His qualifications and experience
are set out on page 7.
Meetings of directors
The number of meetings of the Company’s Board of
Directors (the Board) and of each Board committee held
during the year ended 30 June 2017, and the number of
meetings attended by each director were:
Full Board
Audit & Risk
Management Committee
Nominations,
Remuneration & Corporate
Governance Committee
Attended
Held*
Attended
Held*
Attended
Held*
Stuart James McGregor
Joey Lim Keong Yew
Benedict Paul Reichel
Benjamin Lim Keong Hoe
Robert Andrew Hines
Ham Techatut Sukjaroenkraisri
Paul Porntat Amatavivadhana
9
8
9
5
9
6
8
9
9
9
9
9
9
9
2
–
–
1
2
–
–
2
–
–
2
2
–
–
1
–
–
–
1
–
–
1
–
–
1
1
–
–
* ‘Held’: represents the number of meetings held during the time the director held office or was a member of the relevant committee.
14
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Directors’ Report
Directors’ Report
Aristo International Hotel FY17/compared to FY16
• Net gaming revenue up 36.3% to RMB80.0 million
• Non-gaming revenue up 11.6% to RMB53.6 million
• EBITDA up 39.6% to RMB74.8 million
• Property level NPAT up 130.9% to RMB31.8 million
•
VIP gross win rate 2.28%.
The Aristo International Hotel continued to grow substantially,
with the strategy to focus on mass market continuing to
provide benefits to the Group. EBITDA increased by 39.6%
in local currency terms to RMB74.8 million.
Capital management
The Company remains in a growth phase, and the
Board aims to retain sufficient cash to pursue growth
opportunities and repay debt as priorities.
However, with the strong cash generated by the business
and no imminent acquisition opportunities, the Board is
pleased to announce a new dividend policy of paying out
10–30% of NPAT in the form of dividends, with the intention
to provide regular half-yearly dividend payments, subject
to the consolidated entity’s then current working capital
requirements and growth plans.
In addition, the Board has announced an intention to pay
a final dividend of 0.5 cents per share, unfranked. The
planned record date for the dividend is 6 October 2017,
and planned payment date is 20 October 2017. Shareholders
should note that the payment of dividends is not guaranteed.
Significant changes in the state
of affairs
There were no significant changes in the state of affairs
of the consolidated entity during FY17.
Matters subsequent to the end
of the financial year
Dividend
On 29 August 2017, the Board of Donaco International
Limited has announced that it intends to declare an
ordinary dividend of 0.5 cents per share, amounting to
$4,156,057. The dividend is 100% conduit foreign income
and is unfranked. Proposed dates for the dividend payment
are: ex-dividend date 5 October 2017, record date
6 October 2017 and payment date 20 October 2017.
Refinance of loan with Mega International
Commercial Bank Co. Limited
The Company has refinanced its term loan facility with
Mega International Commercial Bank Co. Limited of Taiwan.
The Company has now repaid a total of USD63.4 million in
the past two years, with the remaining principal amount
of the previous facility standing at USD56.6 million.
The previous facility had a three-year term, with the
remaining USD56.6 million being repayable within the next
12 months. This consisted of USD20.8 million repayable in
January 2018, and the remaining USD35.8 million repayable
in July 2018.
The new facility is for an amount of USD57 million.
The term has been extended to three years from the date
of drawdown, which occurred on 28 August 2017, following
the completion of the conditions precedent.
Under the new loan, 15% of the principal amount is
repayable every six months. This means that the next
principal repayment has been reduced to approximately
USD8.6 million, due in February 2018.
The interest rate on the loan has also been reduced slightly,
from a margin of 6.75% over the six month USD LIBOR
rate, to a margin of 6.0%, provided that the net debt (total
borrowings minus cash) of Donaco Hong Kong Limited is
less than the EBITDA of Donaco Hong Kong Limited. If net
debt exceeds EBITDA, then the margin may increase to a
maximum of 6.5%.
In addition, a number of covenants controlling capital
management (dividends and buybacks) have been relaxed,
but there are still some restrictions in place until the
remaining principal falls below USD50 million, which
is expected to occur following the next repayment in
February 2018.
Share options
On 28 July 2017, the Company announced the expiration
of 1,651,883 options on 1 July 2017 in accordance to their
terms. The options were part of the FY14 and FY15 option
series. Currently, there are 5,444,810 remaining options
on issue.
No other matter or circumstance has arisen since
30 June 2017 that has significantly affected, or may
significantly affect the consolidated entity’s operations,
the results of those operations, or the consolidated entity’s
state of affairs in future financial years.
Likely developments and expected
results of operations
The Company operates leisure and entertainment
businesses across the Asia-Pacific region.
Our largest business is the Star Vegas Resort & Club,
a successful casino and hotel complex in Poipet, Cambodia,
on the border with Thailand. Star Vegas was established
in 1999, and is the largest and highest quality of the Poipet
casino hotels. The property has more than 100 gaming
tables, more than 1,500 slot machines, and 385 hotel rooms.
Our flagship business is the Aristo International Hotel,
a successful boutique casino in northern Vietnam, located
on the border with Yunnan Province, China. Established
in 2002, the property has recently been expanded to a
brand new five-star resort complex with 400 hotel rooms.
Donaco is a pioneer casino operator in Vietnam, and owns
a 95% interest in the business, in a joint venture with the
Government of Vietnam.
The operation and marketing of both of these properties
will underpin our growth during the next 12 months. Our
strategy is to take advantage of the demand for leisure and
entertainment in the Asia-Pacific region, and to leverage
the experience of the Board and management in the gaming
sector. This will complement the growth at the expanded
casinos in both Cambodia and Vietnam, and provide for
diversification.
The Company has now moved to full management control
of the Star Vegas operation, following the exit of the former
Thai manager. This will provide greater flexibility and control
in marketing the property. While VIP earnings at Star Vegas
are expected to be lower in the September quarter of
FY18 versus the corresponding period last year due to the
transition to in-house management, the main hall and slot
machine business is robust, and VIP revenues are already
rebuilding well as new junket operators enter the property.
In addition, no further management fees are payable to the
former Thai manager.
Material risks to the Company’s strategy include those
affecting listed entities generally, and companies operating
in Thailand, Cambodia and Vietnam generally. These
risks include the possibility of adverse macroeconomic
developments, such as exchange rate declines; cross-
border disputes; or terrorist attacks affecting the
Company’s key target markets. Other material risks include
the possibility of adverse regulatory change affecting casino
operators, such as changes in tax rates, and the possibility
of breach of licences or legislation. These risks are carefully
monitored by the Board and management team.
These key risks should not be taken as the only risks that
may affect the Company’s operations, and many risks are
outside the control of the Board and management team.
Except as noted above, information on likely developments
in the operations of the consolidated entity and the expected
results of operations have not been included in this report
because the directors believe it would be likely to result in
unreasonable prejudice to the consolidated entity.
Environmental regulations
The consolidated entity is not subject to any significant
environmental regulation under Australian commonwealth
or state law.
Company Secretary
Benedict Paul Reichel is an Executive Director and the
Company Secretary. His qualifications and experience
are set out on page 7.
Meetings of directors
The number of meetings of the Company’s Board of
Directors (the Board) and of each Board committee held
during the year ended 30 June 2017, and the number of
meetings attended by each director were:
Full Board
Audit & Risk
Management Committee
Nominations,
Remuneration & Corporate
Governance Committee
Attended
Held*
Attended
Held*
Attended
Held*
Stuart James McGregor
Joey Lim Keong Yew
Benedict Paul Reichel
Benjamin Lim Keong Hoe
Robert Andrew Hines
Ham Techatut Sukjaroenkraisri
Paul Porntat Amatavivadhana
9
8
9
5
9
6
8
9
9
9
9
9
9
9
2
–
–
1
2
–
–
2
–
–
2
2
–
–
1
–
–
–
1
–
–
1
–
–
1
1
–
–
* ‘Held’: represents the number of meetings held during the time the director held office or was a member of the relevant committee.
14
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Directors’ Report
Directors’ Report
Remuneration report (audited)
The remuneration report details the key management
personnel remuneration arrangements for the consolidated
entity, in accordance with the requirements of the
Corporations Act 2001 (Cth) and its regulations.
Key management personnel are those persons having
authority and responsibility for planning, directing and
controlling the activities of the entity, directly or indirectly,
including all directors.
The remuneration report is set out under the following
main headings:
•
•
•
•
principles used to determine the nature and amount
of remuneration
details of remuneration
share-based compensation
additional disclosures relating to key
management personnel.
Principles used to determine the nature
and amount of remuneration
Introduction
The performance of the consolidated entity depends on
the quality of its directors and executives. The remuneration
philosophy is to attract and retain high quality personnel,
and motivate them to achieve high performance.
The objective of the consolidated entity’s executive
reward framework is to ensure reward for performance is
competitive and appropriate for the results delivered. The
framework aligns executive reward with the achievement
of strategic objectives and the creation of value for
shareholders, and it is considered to conform to the
market best practice for the delivery of reward.
Board oversight
The Board has an established Nominations, Remuneration
& Corporate Governance Committee (the Remuneration
Committee), consisting only of Non-Executive Directors,
with a majority of independent directors. It is primarily
responsible for setting the overall remuneration policy
and guidelines for the Company, and its functions include:
•
reviewing and recommending to the Board for
approval, the Company’s general approach towards
remuneration, and to oversee the development and
implementation of remuneration programs
•
reviewing and recommending to the Board for
approval, corporate goals and objectives relevant
to the remuneration of the Managing Director/CEO,
and evaluating the performance of the Managing
Director/CEO in light of those goals and objectives;
•
•
reviewing and recommending to the Board for approval,
remuneration programs applicable to the Company
executives, and ensuring that these programs differ
from the structure of remuneration for Non-Executive
Directors; and
reviewing the remuneration of Non-Executive Directors,
and ensuring that the structure of Non-Executive
Directors’ remuneration is clearly distinguished from
that of executives by ensuring that Non-Executive
Directors are remunerated by way of fees, do not
participate in schemes designed for the remuneration
of executives, do not receive options or bonus
payments, and are not provided with retirement
benefits other than statutory superannuation.
Remuneration framework
In consultation with external remuneration consultants
when necessary (refer to the section ‘Use of Remuneration
Consultants’ below), the Remuneration Committee has
structured an executive remuneration framework that
is market competitive and complementary to the reward
strategy of the consolidated entity. The framework is
designed to satisfy the following key criteria for good reward
governance practices:
•
•
•
aligned to shareholders’ interests
competitiveness and reasonableness
performance linkage/alignment of executive
compensation
•
transparency.
The remuneration framework is aligned to shareholders’
interests, it:
• has economic profit as a core component of plan design
•
focuses on sustained growth in shareholders’ wealth,
consisting of growth in share price, as well as focusing
the executive on key non-financial drivers of values
•
attracts and retains high-calibre executives.
The remuneration framework is also aligned to program
participants’ interests, because it:
•
•
rewards capability and experience
reflects competitive rewards for contribution to growth
in shareholders’ wealth
•
provides a clear structure for earning rewards.
All remuneration paid to directors and executives is valued
at cost to the Company and expensed.
In accordance with best practice corporate governance,
the structures of remuneration for Non-Executive Directors
and for executives are separate.
Non-Executive Directors’ remuneration
Fees and payments to Non-Executive Directors reflect the
demands which are made on, and the responsibilities of,
the directors. Non-Executive Directors’ fees and payments
are reviewed annually by the Remuneration Committee.
The Remuneration Committee may, from time to time,
receive advice from independent remuneration consultants
to ensure Non-Executive Directors’ fees and payments are
appropriate and in line with the market.
There are no bonuses payable to Non-Executive Directors,
and there are no termination payments for Non-Executive
Directors on retirement from office, other than statutory
superannuation entitlements. Non-Executive Directors
are not granted options.
ASX Listing Rules require that the aggregate of
Non-Executive Directors’ remuneration be determined
periodically by a general meeting. The most recent
determination was at the 2013 Annual General Meeting,
where the shareholders approved a maximum
aggregate remuneration of $750,000, including statutory
superannuation contributions.
Executive remuneration
The consolidated entity’s remuneration policy is to ensure
that executive remuneration packages properly reflect a
person’s duties and responsibilities, and that remuneration
is competitive in attracting, retaining and motivating
executives of the highest calibre. As a result, remuneration
packages for the Managing Director/CEO and senior
executives include both fixed and performance-based
remuneration.
The executive remuneration and reward framework has
three components:
• fixed remuneration, consisting of base salary and
non-monetary benefits, together with other statutory
forms of remuneration such as superannuation and
long service leave
•
•
short-term performance incentives
long-term incentives, currently consisting of restricted
shares purchased on market.
The combination of these components comprises the
executive’s total remuneration.
Fixed remuneration
Fixed remuneration, consisting of base salary,
superannuation and non-monetary benefits (if
any), is determined by considering the scope of the
executive’s responsibility, importance to the business,
competitiveness in the market and assessed potential.
The total remuneration package for executives includes
superannuation and other non-cash benefits to reflect
the total employment cost to the Company, inclusive
of any fringe benefits tax.
Fixed remuneration is reviewed annually by the
Remuneration Committee, based on individual and
business unit performance, the overall performance of the
consolidated entity and comparable market remuneration.
Executives may receive their fixed remuneration in the form
of cash or other fringe benefits (for example, motor vehicle
benefits) where it does not create any additional costs to
the consolidated entity and provides additional value to
the executive.
The objective of the fixed remuneration component is to
attract and retain high-quality executives, and to recognise
market relativities and statutory requirements.
Short-term incentives
The short-term incentive (STI) framework provides senior
executives with the opportunity to earn an annual cash
bonus, up to a maximum amount of 50% of base salary.
Clear key performance indicators (KPIs) have been
established by the Remuneration Committee. Achievement
of these KPIs gives the executive an opportunity to earn
a fixed percentage of their maximum STI, subject to final
review and approval by the Board.
For FY17, the KPIs applied and the applicable percentage
of STI were:
1. Achievement of the EBITDA target for the Donaco
Group (30%)
2. Achievement of the budgeted revenue target for
the Star Vegas property, in Thai baht terms (25%)
3. Achievement of the budgeted revenue target for
the Aristo property, in Chinese renminbi terms (25%)
4. Achievement of a personal KPI relating to the
executive’s individual areas of responsibility (20%).
The objective of these KPIs is clearly designed to focus
on financial criteria, including top-line revenue growth,
while maintaining a focus on disciplined cost control,
as expressed through the EBITDA target for the Group.
16
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Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDirectors’ Report
Directors’ Report
Remuneration report (audited)
The remuneration report details the key management
personnel remuneration arrangements for the consolidated
entity, in accordance with the requirements of the
Corporations Act 2001 (Cth) and its regulations.
Key management personnel are those persons having
authority and responsibility for planning, directing and
controlling the activities of the entity, directly or indirectly,
including all directors.
The remuneration report is set out under the following
main headings:
•
•
•
•
principles used to determine the nature and amount
of remuneration
details of remuneration
share-based compensation
additional disclosures relating to key
management personnel.
Principles used to determine the nature
and amount of remuneration
Introduction
The performance of the consolidated entity depends on
the quality of its directors and executives. The remuneration
philosophy is to attract and retain high quality personnel,
and motivate them to achieve high performance.
The objective of the consolidated entity’s executive
reward framework is to ensure reward for performance is
competitive and appropriate for the results delivered. The
framework aligns executive reward with the achievement
of strategic objectives and the creation of value for
shareholders, and it is considered to conform to the
market best practice for the delivery of reward.
Board oversight
The Board has an established Nominations, Remuneration
& Corporate Governance Committee (the Remuneration
Committee), consisting only of Non-Executive Directors,
with a majority of independent directors. It is primarily
responsible for setting the overall remuneration policy
and guidelines for the Company, and its functions include:
•
reviewing and recommending to the Board for
approval, the Company’s general approach towards
remuneration, and to oversee the development and
implementation of remuneration programs
•
reviewing and recommending to the Board for
approval, corporate goals and objectives relevant
to the remuneration of the Managing Director/CEO,
and evaluating the performance of the Managing
Director/CEO in light of those goals and objectives;
•
•
reviewing and recommending to the Board for approval,
remuneration programs applicable to the Company
executives, and ensuring that these programs differ
from the structure of remuneration for Non-Executive
Directors; and
reviewing the remuneration of Non-Executive Directors,
and ensuring that the structure of Non-Executive
Directors’ remuneration is clearly distinguished from
that of executives by ensuring that Non-Executive
Directors are remunerated by way of fees, do not
participate in schemes designed for the remuneration
of executives, do not receive options or bonus
payments, and are not provided with retirement
benefits other than statutory superannuation.
Remuneration framework
In consultation with external remuneration consultants
when necessary (refer to the section ‘Use of Remuneration
Consultants’ below), the Remuneration Committee has
structured an executive remuneration framework that
is market competitive and complementary to the reward
strategy of the consolidated entity. The framework is
designed to satisfy the following key criteria for good reward
governance practices:
•
•
•
aligned to shareholders’ interests
competitiveness and reasonableness
performance linkage/alignment of executive
compensation
•
transparency.
The remuneration framework is aligned to shareholders’
interests, it:
• has economic profit as a core component of plan design
•
focuses on sustained growth in shareholders’ wealth,
consisting of growth in share price, as well as focusing
the executive on key non-financial drivers of values
•
attracts and retains high-calibre executives.
The remuneration framework is also aligned to program
participants’ interests, because it:
•
•
rewards capability and experience
reflects competitive rewards for contribution to growth
in shareholders’ wealth
•
provides a clear structure for earning rewards.
All remuneration paid to directors and executives is valued
at cost to the Company and expensed.
In accordance with best practice corporate governance,
the structures of remuneration for Non-Executive Directors
and for executives are separate.
Non-Executive Directors’ remuneration
Fees and payments to Non-Executive Directors reflect the
demands which are made on, and the responsibilities of,
the directors. Non-Executive Directors’ fees and payments
are reviewed annually by the Remuneration Committee.
The Remuneration Committee may, from time to time,
receive advice from independent remuneration consultants
to ensure Non-Executive Directors’ fees and payments are
appropriate and in line with the market.
There are no bonuses payable to Non-Executive Directors,
and there are no termination payments for Non-Executive
Directors on retirement from office, other than statutory
superannuation entitlements. Non-Executive Directors
are not granted options.
ASX Listing Rules require that the aggregate of
Non-Executive Directors’ remuneration be determined
periodically by a general meeting. The most recent
determination was at the 2013 Annual General Meeting,
where the shareholders approved a maximum
aggregate remuneration of $750,000, including statutory
superannuation contributions.
Executive remuneration
The consolidated entity’s remuneration policy is to ensure
that executive remuneration packages properly reflect a
person’s duties and responsibilities, and that remuneration
is competitive in attracting, retaining and motivating
executives of the highest calibre. As a result, remuneration
packages for the Managing Director/CEO and senior
executives include both fixed and performance-based
remuneration.
The executive remuneration and reward framework has
three components:
• fixed remuneration, consisting of base salary and
non-monetary benefits, together with other statutory
forms of remuneration such as superannuation and
long service leave
•
•
short-term performance incentives
long-term incentives, currently consisting of restricted
shares purchased on market.
The combination of these components comprises the
executive’s total remuneration.
Fixed remuneration
Fixed remuneration, consisting of base salary,
superannuation and non-monetary benefits (if
any), is determined by considering the scope of the
executive’s responsibility, importance to the business,
competitiveness in the market and assessed potential.
The total remuneration package for executives includes
superannuation and other non-cash benefits to reflect
the total employment cost to the Company, inclusive
of any fringe benefits tax.
Fixed remuneration is reviewed annually by the
Remuneration Committee, based on individual and
business unit performance, the overall performance of the
consolidated entity and comparable market remuneration.
Executives may receive their fixed remuneration in the form
of cash or other fringe benefits (for example, motor vehicle
benefits) where it does not create any additional costs to
the consolidated entity and provides additional value to
the executive.
The objective of the fixed remuneration component is to
attract and retain high-quality executives, and to recognise
market relativities and statutory requirements.
Short-term incentives
The short-term incentive (STI) framework provides senior
executives with the opportunity to earn an annual cash
bonus, up to a maximum amount of 50% of base salary.
Clear key performance indicators (KPIs) have been
established by the Remuneration Committee. Achievement
of these KPIs gives the executive an opportunity to earn
a fixed percentage of their maximum STI, subject to final
review and approval by the Board.
For FY17, the KPIs applied and the applicable percentage
of STI were:
1. Achievement of the EBITDA target for the Donaco
Group (30%)
2. Achievement of the budgeted revenue target for
the Star Vegas property, in Thai baht terms (25%)
3. Achievement of the budgeted revenue target for
the Aristo property, in Chinese renminbi terms (25%)
4. Achievement of a personal KPI relating to the
executive’s individual areas of responsibility (20%).
The objective of these KPIs is clearly designed to focus
on financial criteria, including top-line revenue growth,
while maintaining a focus on disciplined cost control,
as expressed through the EBITDA target for the Group.
16
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Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDirectors’ Report
Directors’ Report
In addition, executives also maintained a focus on key
non-financial criteria, relating to the personal KPI applicable
to the individual executive’s area of responsibility.
Long-term incentives
The long-term incentive (LTI) program currently consists
of restricted shares purchased on market. This plan was
adopted in FY17 to replace the former option plan, which
was thought to be excessively complex, and could potentially
result in significant dilution of shareholders.
Under the new LTI scheme, the Board has actively sought
to align senior executive remuneration with shareholder
interests. Shares are purchased on market and held in an
employee share trust (the Trust). The shares will vest to the
employees over the vesting period of three years. The aim
of the scheme is to ensure that executives are motivated to
think like shareholders, with a focus on taking actions that
will lead to sustainable increases in the share price. The
structure of the scheme also ensures that there is
no dilution of shareholders.
The total annual dollar value of shares to be purchased
is a maximum of $1,000,000. The number of shares to
be purchased each year will depend on the share price
at the time that purchases take place.
The scheme is executed in a similar manner to an
on-market buyback, allowing the Trust to stand in the
market and purchase shares at appropriate times. However,
the shares will not be cancelled, but will be held in the
Trust, to be distributed to employees over the vesting period
of three years.
LTI awards are made on an annual basis, subject to
achievement of applicable KPIs. This ensures that at any
given time, the executives have at risk a number of LTI
awards, with different vesting periods and amounts. This
helps to smooth out both the risk and the cash flow for
the Company and for executives.
The LTI scheme allows for an award of a maximum of 75%
of base salary in the form of restricted shares, subject to
achievement of applicable KPIs which are set annually. For
FY17, the applicable KPI related to the achievement of the
budgeted EBITDA target for the Group.
During FY17 the Trust purchased 2,376,653 shares on
market in September 2016, at an average price of 41.99
cents per share. Once awarded, these shares will vest over
the three year vesting period commencing on 1 July 2017.
The objective of the LTI component is to focus on
sustainable shareholder value creation, as expressed
through share price growth.
SENIOR EXECUTIVES’ REMUNERATION MIX
DNA SHARE PRICE GROWTH PER ANNUM
Details of remuneration
50%
AT RISK
50%
FIXED
DEFERRED
EQUITY 25%
LTI
CASH 75%
STI CASH
FIXED
50%
40%
30%
20%
10%
0%
-10%
-20%
15%
-14%
-12%
Amounts of remuneration
Details of the remuneration of key management personnel
of the consolidated entity are set out in the following tables.
40%
The key management personnel of the consolidated entity
consisted of the following directors of Donaco International
Limited:
• Stuart James McGregor – Non-Executive Director
and Chairman
FIXED VS AT RISK
CASH VS DEFERRED EQUITY
4 YEARS
3 YEARS
2 YEARS
1 YEAR
•
Joey Lim Keong Yew – Managing Director and CEO
Relationship between remuneration policy
and company performance
As detailed above, Donaco’s remuneration policy is directly
linked to Company performance, particularly in relation
to top-line revenue growth and cost control, to ultimately
create long-term shareholder value. STI and LTI awards
are dependent on defined KPIs being met, which are
primarily financial in nature, and are at the discretion
of the Remuneration Committee.
In the three years from FY14 to FY16, Donaco’s revenue
increased by a compound annual growth rate of 109%.
The four-year period from FY14 to FY17 also shows a strong
upward trend in revenue and EBITDA.
DONACO REVENUE AND EBITDA
I
S
N
O
L
L
M
$
A
I
160
140
120
100
80
60
40
20
0
FY14
FY15
FY16
FY17
Revenue
EBITDA
Given the nature of Donaco’s business, revenue and
earnings volatility is expected. However, over the medium
term the Company has seen the transformation in earnings
growth translate to share price appreciation. During FY17,
the share price increased 40% and the share price has
grown by an average of 15% per annum over the four
years to 30 June 2017.
• Benedict Paul Reichel – Executive Director, General
Counsel and Company Secretary
• Benjamin Lim Keong Hoe – Non-Executive Director
• Robert Andrew Hines – Non-Executive Director
• Ham Techatut Sukjaroenkraisri – Executive Director
• Paul Porntat Amatavivadhana – Non-Executive Director
(resigned 3 July 2017).
And the following persons:
• Kenny Goh Kwey Biaw – Deputy Chief Financial Officer
and CEO of Donaco Singapore
• Chong Kwong Yang – Chief Financial Officer
• Att Asavanund – CEO and Deputy Chief Operating
Officer (resigned 31 August 2017).
The Remuneration Committee considers that the increase
in the size and scale of the consolidated entity’s revenues,
earnings, profits and cash flow over the past four years can
be attributed in part to the adoption of performance-based
compensation, and is satisfied with the upwards trend in
shareholder wealth. The Remuneration Committee also
considers that the remuneration framework in place will
continue to increase shareholder wealth if maintained
over the coming years, subject to any adjustments that
are necessary or desirable to reflect the Company’s growth.
Use of remuneration consultants
During the financial year ended 30 June 2016, the
consolidated entity received a remuneration recommendation
(as defined in the Corporations Act) from Egan Associates
Pty Limited, to review its existing remuneration policies and
provide market benchmarking. Egan Associates was paid
$25,725 plus GST for these services.
An agreed set of protocols is put in place at the time of
engaging remuneration consultants, to ensure that any
remuneration recommendations are free from undue
influence from key management personnel. The Board
is satisfied that there was no undue influence.
There were no remuneration consultants engaged during
the financial year ended 30 June 2017.
Voting and comments made at the Company’s
2016 Annual General Meeting
At the Annual General Meeting (AGM) held on
24 November 2016, 93.09% of the eligible votes received
supported the adoption of the remuneration report for
the year ended 30 June 2016. Eligible votes received
represented approximately 39% of the total voting power
in the Company at that time. The Company did not
receive any specific feedback at the AGM regarding
its remuneration practices.
18
19
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual Report
Directors’ Report
Directors’ Report
In addition, executives also maintained a focus on key
non-financial criteria, relating to the personal KPI applicable
to the individual executive’s area of responsibility.
Long-term incentives
The long-term incentive (LTI) program currently consists
of restricted shares purchased on market. This plan was
adopted in FY17 to replace the former option plan, which
was thought to be excessively complex, and could potentially
result in significant dilution of shareholders.
Under the new LTI scheme, the Board has actively sought
to align senior executive remuneration with shareholder
interests. Shares are purchased on market and held in an
employee share trust (the Trust). The shares will vest to the
employees over the vesting period of three years. The aim
of the scheme is to ensure that executives are motivated to
think like shareholders, with a focus on taking actions that
will lead to sustainable increases in the share price. The
structure of the scheme also ensures that there is
no dilution of shareholders.
The total annual dollar value of shares to be purchased
is a maximum of $1,000,000. The number of shares to
be purchased each year will depend on the share price
at the time that purchases take place.
The scheme is executed in a similar manner to an
on-market buyback, allowing the Trust to stand in the
market and purchase shares at appropriate times. However,
the shares will not be cancelled, but will be held in the
Trust, to be distributed to employees over the vesting period
of three years.
LTI awards are made on an annual basis, subject to
achievement of applicable KPIs. This ensures that at any
given time, the executives have at risk a number of LTI
awards, with different vesting periods and amounts. This
helps to smooth out both the risk and the cash flow for
the Company and for executives.
The LTI scheme allows for an award of a maximum of 75%
of base salary in the form of restricted shares, subject to
achievement of applicable KPIs which are set annually. For
FY17, the applicable KPI related to the achievement of the
budgeted EBITDA target for the Group.
During FY17 the Trust purchased 2,376,653 shares on
market in September 2016, at an average price of 41.99
cents per share. Once awarded, these shares will vest over
the three year vesting period commencing on 1 July 2017.
The objective of the LTI component is to focus on
sustainable shareholder value creation, as expressed
through share price growth.
SENIOR EXECUTIVES’ REMUNERATION MIX
DNA SHARE PRICE GROWTH PER ANNUM
Details of remuneration
50%
AT RISK
50%
FIXED
DEFERRED
EQUITY 25%
LTI
CASH 75%
STI CASH
FIXED
50%
40%
30%
20%
10%
0%
-10%
-20%
15%
-14%
-12%
Amounts of remuneration
Details of the remuneration of key management personnel
of the consolidated entity are set out in the following tables.
40%
The key management personnel of the consolidated entity
consisted of the following directors of Donaco International
Limited:
• Stuart James McGregor – Non-Executive Director
and Chairman
FIXED VS AT RISK
CASH VS DEFERRED EQUITY
4 YEARS
3 YEARS
2 YEARS
1 YEAR
•
Joey Lim Keong Yew – Managing Director and CEO
Relationship between remuneration policy
and company performance
As detailed above, Donaco’s remuneration policy is directly
linked to Company performance, particularly in relation
to top-line revenue growth and cost control, to ultimately
create long-term shareholder value. STI and LTI awards
are dependent on defined KPIs being met, which are
primarily financial in nature, and are at the discretion
of the Remuneration Committee.
In the three years from FY14 to FY16, Donaco’s revenue
increased by a compound annual growth rate of 109%.
The four-year period from FY14 to FY17 also shows a strong
upward trend in revenue and EBITDA.
DONACO REVENUE AND EBITDA
I
S
N
O
L
L
M
$
A
I
160
140
120
100
80
60
40
20
0
FY14
FY15
FY16
FY17
Revenue
EBITDA
Given the nature of Donaco’s business, revenue and
earnings volatility is expected. However, over the medium
term the Company has seen the transformation in earnings
growth translate to share price appreciation. During FY17,
the share price increased 40% and the share price has
grown by an average of 15% per annum over the four
years to 30 June 2017.
• Benedict Paul Reichel – Executive Director, General
Counsel and Company Secretary
• Benjamin Lim Keong Hoe – Non-Executive Director
• Robert Andrew Hines – Non-Executive Director
• Ham Techatut Sukjaroenkraisri – Executive Director
• Paul Porntat Amatavivadhana – Non-Executive Director
(resigned 3 July 2017).
And the following persons:
• Kenny Goh Kwey Biaw – Deputy Chief Financial Officer
and CEO of Donaco Singapore
• Chong Kwong Yang – Chief Financial Officer
• Att Asavanund – CEO and Deputy Chief Operating
Officer (resigned 31 August 2017).
The Remuneration Committee considers that the increase
in the size and scale of the consolidated entity’s revenues,
earnings, profits and cash flow over the past four years can
be attributed in part to the adoption of performance-based
compensation, and is satisfied with the upwards trend in
shareholder wealth. The Remuneration Committee also
considers that the remuneration framework in place will
continue to increase shareholder wealth if maintained
over the coming years, subject to any adjustments that
are necessary or desirable to reflect the Company’s growth.
Use of remuneration consultants
During the financial year ended 30 June 2016, the
consolidated entity received a remuneration recommendation
(as defined in the Corporations Act) from Egan Associates
Pty Limited, to review its existing remuneration policies and
provide market benchmarking. Egan Associates was paid
$25,725 plus GST for these services.
An agreed set of protocols is put in place at the time of
engaging remuneration consultants, to ensure that any
remuneration recommendations are free from undue
influence from key management personnel. The Board
is satisfied that there was no undue influence.
There were no remuneration consultants engaged during
the financial year ended 30 June 2017.
Voting and comments made at the Company’s
2016 Annual General Meeting
At the Annual General Meeting (AGM) held on
24 November 2016, 93.09% of the eligible votes received
supported the adoption of the remuneration report for
the year ended 30 June 2016. Eligible votes received
represented approximately 39% of the total voting power
in the Company at that time. The Company did not
receive any specific feedback at the AGM regarding
its remuneration practices.
18
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Directors’ Report
Directors’ Report
Short-term benefits
Post
employment
benefits
Long-term
benefits
Share-based
payments
Cash salary
and fees
Bonus paid
Super
Leave
entitlements
Equity-
settled
Total
Short-term benefits
Post
employment
benefits
Long-term
benefits
Share-based
payments
Cash salary
and fees
Bonus Paid
Super
Leave
entitlements
Equity-
settled
Total
2017
$
$
$
$
$
$
2016
$
$
$
$
$
$
Non-Executive Directors
S J McGregor
Lim K H
R A Hines
P P Amatavivadhana
Executive Directors
Lim K Y
B P Reichel
H T Sukjaroenkraisri
Other key management personnel
Goh K B
Chong K Y
A Asavanund
155,606
178,929
137,300
101,809
671,962
327,170
79,524
257,117
252,000
310,144
–
–
–
–
288,935
125,000
–
96,920
96,000
69,584
14,783
–
13,044
–
–
42,406
–
–
33,060
–
2,471,560
676,439
103,292
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
170,389
178,929
150,343
101,809
115,368
1,076,265
57,684
–
552,259
79,524
23,752
–
–
377,789
381,060
379,728
196,804
3,448,095
Bonuses that related to FY17 performance are not payable until October 2017. The bonus amounts accrued to directors
and key management personnel in FY18 are summarised below:
Executive Directors
Lim K Y
B P Reichel
Other key management personnel
Goh K B
Chong K Y
A Asavanund
Total
$
335,981
166,350
128,558
126,000
124,057
880,946
Non-Executive Directors
S J McGregor
Lim K H
R A Hines
P P Amatavivadhana
Executive Directors
Lim K Y
B P Reichel
H T Sukjaroenkraisri
Other key management personnel
Na C W
Goh K B
Chong K Y
A Asavanund
155,606
195,521
137,300
106,104
696,106
224,799
23,220
298,632
266,362
193,708
144,165
–
–
–
–
349,198
113,052
–
232,268
84,954
32,000
–
14,783
–
13,044
–
–
–
–
–
–
–
33,347
13,172
–
–
–
–
–
–
21,933
–
5,169
–
–
–
–
–
170,389
195,521
150,344
106,104
405,145
217,952
–
1,450,449
602,322
23,220
523,920
314,423
–
–
1,054,820
665,739
252,810
144,165
2,441,523
811,472
83,107
18,341
1,461,440
4,815,883
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
2017
2016
2017
2016
2017
2016
Fixed remuneration
At risk – STI
At risk – LTI
Non-Executive Directors
S J McGregor
Lim K H
R A Hines
P P Amatavivadhana
Executive Directors
Lim K Y
B P Reichel
H T Sukjaroenkraisri
Other key management personnel
Na C W
Goh K B
Chong K Y
A Asavanund
100%
100%
100%
100%
62%
67%
100%
0%
68%
75%
82%
100%
100%
100%
100%
48%
43%
100%
28%
40%
87%
100%
0%
0%
0%
0%
27%
23%
0%
0%
26%
25%
18%
0%
0%
0%
0%
24%
19%
0%
22%
13%
13%
0%
0%
0%
0%
0%
11%
10%
0%
0%
6%
0%
0%
0%
0%
0%
0%
28%
36%
0%
50%
47%
0%
0%
20
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Directors’ Report
Directors’ Report
Short-term benefits
Post
employment
benefits
Long-term
benefits
Share-based
payments
Cash salary
and fees
Bonus paid
Super
Leave
entitlements
Equity-
settled
Total
Short-term benefits
Post
employment
benefits
Long-term
benefits
Share-based
payments
Cash salary
and fees
Bonus Paid
Super
Leave
entitlements
Equity-
settled
Total
2017
$
$
$
$
$
$
2016
$
$
$
$
$
$
Non-Executive Directors
S J McGregor
Lim K H
R A Hines
P P Amatavivadhana
Executive Directors
Lim K Y
B P Reichel
H T Sukjaroenkraisri
Other key management personnel
Goh K B
Chong K Y
A Asavanund
155,606
178,929
137,300
101,809
671,962
327,170
79,524
257,117
252,000
310,144
–
–
–
–
288,935
125,000
–
96,920
96,000
69,584
14,783
–
13,044
–
–
42,406
–
–
33,060
–
2,471,560
676,439
103,292
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
170,389
178,929
150,343
101,809
115,368
1,076,265
57,684
–
552,259
79,524
23,752
–
–
377,789
381,060
379,728
196,804
3,448,095
Bonuses that related to FY17 performance are not payable until October 2017. The bonus amounts accrued to directors
and key management personnel in FY18 are summarised below:
Executive Directors
Lim K Y
B P Reichel
Other key management personnel
Goh K B
Chong K Y
A Asavanund
Total
$
335,981
166,350
128,558
126,000
124,057
880,946
Non-Executive Directors
S J McGregor
Lim K H
R A Hines
P P Amatavivadhana
Executive Directors
Lim K Y
B P Reichel
H T Sukjaroenkraisri
Other key management personnel
Na C W
Goh K B
Chong K Y
A Asavanund
155,606
195,521
137,300
106,104
696,106
224,799
23,220
298,632
266,362
193,708
144,165
–
–
–
–
349,198
113,052
–
232,268
84,954
32,000
–
14,783
–
13,044
–
–
–
–
–
–
–
33,347
13,172
–
–
–
–
–
–
21,933
–
5,169
–
–
–
–
–
170,389
195,521
150,344
106,104
405,145
217,952
–
1,450,449
602,322
23,220
523,920
314,423
–
–
1,054,820
665,739
252,810
144,165
2,441,523
811,472
83,107
18,341
1,461,440
4,815,883
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
2017
2016
2017
2016
2017
2016
Fixed remuneration
At risk – STI
At risk – LTI
Non-Executive Directors
S J McGregor
Lim K H
R A Hines
P P Amatavivadhana
Executive Directors
Lim K Y
B P Reichel
H T Sukjaroenkraisri
Other key management personnel
Na C W
Goh K B
Chong K Y
A Asavanund
100%
100%
100%
100%
62%
67%
100%
0%
68%
75%
82%
100%
100%
100%
100%
48%
43%
100%
28%
40%
87%
100%
0%
0%
0%
0%
27%
23%
0%
0%
26%
25%
18%
0%
0%
0%
0%
24%
19%
0%
22%
13%
13%
0%
0%
0%
0%
0%
11%
10%
0%
0%
6%
0%
0%
0%
0%
0%
0%
28%
36%
0%
50%
47%
0%
0%
20
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Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual Report
Directors’ Report
Directors’ Report
The proportion of the cash bonus paid/payable or forfeited is as follows:
Service agreements
Cash bonus paid/payable
Cash bonus forfeited
Name
Executive Directors
Lim K Y
B P Reichel
Other key management personnel
Na C W
Goh K B
Chong K Y
A Asavanund
2017
100%
100%
n/a
100%
100%
100%
2016
100%
100%
100%
100%
100%
–
2017
2016
–
–
–
–
–
–
–
–
–
–
–
–
Criteria for performance-based remuneration
The STI program is designed to align the targets of
executives with the targets of the consolidated entity.
STI payments are granted to executives based on specific
annual targets and KPIs being achieved. The Board, advised
by the Remuneration Committee, applied these criteria
in determining the award of performance-based
remuneration during the year.
Performance-based bonuses were paid in October 2016.
Cash bonuses of $676,439 were awarded to the Executive
Directors and other key management personnel. A break
up of the bonuses paid is in the tables above.
For performance during FY17, the relevant criteria
for the award of bonuses relate to revenue growth at
each operating business, namely Star Vegas and Aristo
International Hotel, as well as the achievement of budgeted
EBITDA targets for the consolidated entity and a personal
KPI for each executive.
Remuneration and other terms of employment for the
Managing Director, Chief Financial Officer and the other
key management personnel (other than Ham Techatut
Sukjaroenkraisri) are formalised in contracts of employment.
The service agreements specify the components of
remuneration, benefits and notice periods. The specified
executives are employed under contracts with no fixed term.
The Company may terminate the contracts immediately
if the executive is guilty of serious misconduct or wilful
neglect of duties. Otherwise, the Company may terminate
the contracts by giving three months’ notice or paying three
months’ salary, or six months in the case of Mr Reichel.
In the case of Mr J Lim (Lim K Y), termination for any reason
other than just cause will result in a termination payment
of 24 months’ base salary (subject to shareholder approval).
Share-based compensation
Issue of shares
There were no shares issued as part of compensation
during the year ended 30 June 2017.
Options
There were no options issued as part of compensation
during the year ended 30 June 2017.
Options granted carry no dividend or voting rights.
Approval for the prior year issue of these options was
obtained pursuant to ASX Listing Rule 10.14.
The number of options over ordinary shares granted
to and vested by directors and other key management
personnel as part of compensation during the year ended
30 June 2017 are set out below:
Name
Lim K Y
B P Reichel
Goh K B
Number of options
granted during the
year 2017
Number of options
granted during the
year 2016
Number of options
vested during the
year 2017
Number of options
vested during the
year 2016
–
–
–
2,002,967
1,001,484
412,376
872,059
496,744
552,020
326,116
229,796
442,099
Additional disclosures relating to key management personnel
The proportion of the share options granted or forfeited is as follows:
Shareholding
Share options granted
Share options forfeited
Name
Executive Directors
Lim K Y
B P Reichel
Other key management personnel
Na C W
Goh K B
2017
–
–
–
–
2016
100%
100%
100%
100%
The proportion of the share issued or forfeited is as follows:
2017
2016
–
–
–
–
–
–
–
–
Name
Executive Directors
Lim K Y
B P Reichel
Other key management personnel
Na C W
Goh K B
22
Shares issued
Shares forfeited
2017
–
–
–
–
2016
100%
100%
100%
100%
2017
2016
–
–
–
–
–
–
–
–
The number of shares in the Company held during the financial year by each director and other members of key management
personnel of the consolidated entity, including their personally related parties, is set out below:
Name
Ordinary shares
S J McGregor
Lim K Y
B P Reichel
Lim K H
R A Hines
H T Sukjaroenkraisri
Goh K B
Balance
at the start
of the year
Received
as part of
remuneration
Additions
Disposals/
other
411,735
264,659,325
400,094
144,811,200
145,321
147,199,529
768,464
558,395,668
–
–
–
–
–
–
–
–
–
2,900,000
–
–
–
1,000,000
–
–
–
–
–
–
Balance
at the end
of the year
411,735
267,559,325
400,094
144,811,200
145,321
148,199,529
–
(68,464)
700,000
3,900,000
(68,464)
562,227,204
23
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual Report
Directors’ Report
Directors’ Report
The proportion of the cash bonus paid/payable or forfeited is as follows:
Service agreements
Cash bonus paid/payable
Cash bonus forfeited
Name
Executive Directors
Lim K Y
B P Reichel
Other key management personnel
Na C W
Goh K B
Chong K Y
A Asavanund
2017
100%
100%
n/a
100%
100%
100%
2016
100%
100%
100%
100%
100%
–
2017
2016
–
–
–
–
–
–
–
–
–
–
–
–
Criteria for performance-based remuneration
The STI program is designed to align the targets of
executives with the targets of the consolidated entity.
STI payments are granted to executives based on specific
annual targets and KPIs being achieved. The Board, advised
by the Remuneration Committee, applied these criteria
in determining the award of performance-based
remuneration during the year.
Performance-based bonuses were paid in October 2016.
Cash bonuses of $676,439 were awarded to the Executive
Directors and other key management personnel. A break
up of the bonuses paid is in the tables above.
For performance during FY17, the relevant criteria
for the award of bonuses relate to revenue growth at
each operating business, namely Star Vegas and Aristo
International Hotel, as well as the achievement of budgeted
EBITDA targets for the consolidated entity and a personal
KPI for each executive.
Remuneration and other terms of employment for the
Managing Director, Chief Financial Officer and the other
key management personnel (other than Ham Techatut
Sukjaroenkraisri) are formalised in contracts of employment.
The service agreements specify the components of
remuneration, benefits and notice periods. The specified
executives are employed under contracts with no fixed term.
The Company may terminate the contracts immediately
if the executive is guilty of serious misconduct or wilful
neglect of duties. Otherwise, the Company may terminate
the contracts by giving three months’ notice or paying three
months’ salary, or six months in the case of Mr Reichel.
In the case of Mr J Lim (Lim K Y), termination for any reason
other than just cause will result in a termination payment
of 24 months’ base salary (subject to shareholder approval).
Share-based compensation
Issue of shares
There were no shares issued as part of compensation
during the year ended 30 June 2017.
Options
There were no options issued as part of compensation
during the year ended 30 June 2017.
Options granted carry no dividend or voting rights.
Approval for the prior year issue of these options was
obtained pursuant to ASX Listing Rule 10.14.
The number of options over ordinary shares granted
to and vested by directors and other key management
personnel as part of compensation during the year ended
30 June 2017 are set out below:
Name
Lim K Y
B P Reichel
Goh K B
Number of options
granted during the
year 2017
Number of options
granted during the
year 2016
Number of options
vested during the
year 2017
Number of options
vested during the
year 2016
–
–
–
2,002,967
1,001,484
412,376
872,059
496,744
552,020
326,116
229,796
442,099
Additional disclosures relating to key management personnel
The proportion of the share options granted or forfeited is as follows:
Shareholding
Share options granted
Share options forfeited
Name
Executive Directors
Lim K Y
B P Reichel
Other key management personnel
Na C W
Goh K B
2017
–
–
–
–
2016
100%
100%
100%
100%
The proportion of the share issued or forfeited is as follows:
2017
2016
–
–
–
–
–
–
–
–
Name
Executive Directors
Lim K Y
B P Reichel
Other key management personnel
Na C W
Goh K B
22
Shares issued
Shares forfeited
2017
–
–
–
–
2016
100%
100%
100%
100%
2017
2016
–
–
–
–
–
–
–
–
The number of shares in the Company held during the financial year by each director and other members of key management
personnel of the consolidated entity, including their personally related parties, is set out below:
Name
Ordinary shares
S J McGregor
Lim K Y
B P Reichel
Lim K H
R A Hines
H T Sukjaroenkraisri
Goh K B
Balance
at the start
of the year
Received
as part of
remuneration
Additions
Disposals/
other
411,735
264,659,325
400,094
144,811,200
145,321
147,199,529
768,464
558,395,668
–
–
–
–
–
–
–
–
–
2,900,000
–
–
–
1,000,000
–
–
–
–
–
–
Balance
at the end
of the year
411,735
267,559,325
400,094
144,811,200
145,321
148,199,529
–
(68,464)
700,000
3,900,000
(68,464)
562,227,204
23
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual Report
Directors’ Report
Option holding
The number of options over ordinary shares in the Company held during the financial year by each director and other
members of key management personnel of the consolidated entity, including their personally related parties, is set out below:
Name
Options over
ordinary shares
Lim K Y
B P Reichel
Goh K B
Balance
at the start
of the year
2,410,339
1,408,857
1,622,550
5,441,746
Granted
Exercised
Expired/
forfeited/
other
Balance
at the end
of the year
Vested
Unvested
–
–
–
–
–
–
–
–
(152,466)
2,257,873
1,198,175
1,059,698
(152,468)
1,256,389
(410,258)
1,212,292
726,540
994,119
529,849
218,173
(715,192)
4,726,554
2,918,834
1,807,720
Transactions with related parties and key management personnel
The following transactions occurred with related parties:
Consolidated
2017
$
2016
$
Labour hire fee paid to Star Vegas Resort & Club Co., Ltd – a director-related entity
11,959,472
10,915,776
Leasing fees paid to Lee Hoe Property Co., Ltd – a director-related entity
Rental received from director’s immediate family
Purchase of fixed assets by DNA Star Vegas from Star Vegas Resort & Club Co., Ltd
– a director-related entity
156,012
111,734
16,159
116,100
–
1,030,727
Technical support fees paid by Lao Cai JVC to iSentric Limited – a director-related entity
187,214
Licence agreement for occupation of office space paid to Infinite Capital Co., Ltd
– a director-related entity
Management fees received for Star Paradise Casino property from MMD Travel Co Ltd
– a director-related entity
45,840
2,338,782
–
–
–
Management fees paid to previous owner of DNA Star Vegas Co., Ltd
– a director-related entity
19,045,688
20,492,174
Disposal of property, plant and equipment to previous owner of DNA Star Vegas Co., Ltd
– a director-related entity
586,237
–
The above transactions occurred at commercial rates.
This concludes the remuneration report, which has been audited.
Directors’ Report
Additional information on company
performance
Earnings per share, adjusted for the impact of
non-recurring items, is set out in the graph below.
Donaco’s total shareholder return, consisting of both
share price growth and dividend payments, is superior
when compared to a number of peer casino and gaming
companies listed on the ASX and in Asia.
ADJUSTED EARNINGS PER SHARE
TOTAL SHAREHOLDER RETURN
10.0
8.0
6.0
4.0
2.0
0
-2.0
6.6
6.6
2.2
-0.5
100%
80%
60%
40%
20%
0%
-20%
-40%
81% 78%
41%
25%
9%
-17%
-4%
-11%
1 YEAR RETURN
4 YEAR RETURN
FY14
FY15
FY16
FY17
PEER1
PEER2
PEER3
DNA
Shares under option
Unissued ordinary shares of Donaco International Limited under option at the date of this report are as follows:
Grant date
1 July 2014
1 July 2015
1 July 2015
25 August 2015
25 August 2015
25 August 2015
Expiry date
1 July 2018
1 July 2018
1 July 2019
1 July 2018
1 July 2019
1 July 2020
Exercise price
Number under option
$0.590
$0.890
$0.890
$0.770
$0.770
$0.770
1,149,717
395,208
349,376
1,385,700
1,156,784
1,008,025
$5,444,810
No person entitled to exercise the options had or has any
right by virtue of the option to participate in any share issue
of the Company or of any other body corporate.
In addition to the above, on 7 July 2015, Donaco International
Limited issued 70 warrants to subscribe for its ordinary
shares. Each warrant has a notional value of USD100,000.
The warrants have a term of 39 months and expire on
6 October 2018. The exercise price is AUD0.7579 cents and
the maximum number of ordinary shares which may be
issued is 12,339,408. The Company may elect to settle the
difference between the share price and exercise price in cash.
Shares issued on the exercise of options
The were no ordinary shares of Donaco International
Limited issued, during the year ended 30 June 2017 and up
to the date of this report, on the exercise of options granted
(2016: nil).
Indemnity and insurance of auditor
The Company has not, during or since the end of the
financial year, indemnified or agreed to indemnify the
auditor of the Company or any related entity against a
liability incurred by the auditor.
During the financial year, the Company has not paid a
premium in respect of a contract to insure the auditor
of the Company or any related entity.
Proceedings on behalf of the Company
No person has applied to the Court under section 237
of the Corporations Act for leave to bring proceedings
on behalf of the Company, or to intervene in any
proceedings to which the Company is a party for
the purpose of taking responsibility on behalf of
the Company for all or part of those proceedings.
24
25
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual Report
Directors’ Report
Option holding
The number of options over ordinary shares in the Company held during the financial year by each director and other
members of key management personnel of the consolidated entity, including their personally related parties, is set out below:
Name
Options over
ordinary shares
Lim K Y
B P Reichel
Goh K B
Balance
at the start
of the year
2,410,339
1,408,857
1,622,550
5,441,746
Granted
Exercised
Expired/
forfeited/
other
Balance
at the end
of the year
Vested
Unvested
–
–
–
–
–
–
–
–
(152,466)
2,257,873
1,198,175
1,059,698
(152,468)
1,256,389
(410,258)
1,212,292
726,540
994,119
529,849
218,173
(715,192)
4,726,554
2,918,834
1,807,720
Transactions with related parties and key management personnel
The following transactions occurred with related parties:
Consolidated
2017
$
2016
$
Labour hire fee paid to Star Vegas Resort & Club Co., Ltd – a director-related entity
11,959,472
10,915,776
Leasing fees paid to Lee Hoe Property Co., Ltd – a director-related entity
Rental received from director’s immediate family
Purchase of fixed assets by DNA Star Vegas from Star Vegas Resort & Club Co., Ltd
– a director-related entity
156,012
111,734
16,159
116,100
–
1,030,727
Technical support fees paid by Lao Cai JVC to iSentric Limited – a director-related entity
187,214
Licence agreement for occupation of office space paid to Infinite Capital Co., Ltd
– a director-related entity
Management fees received for Star Paradise Casino property from MMD Travel Co Ltd
– a director-related entity
45,840
2,338,782
–
–
–
Management fees paid to previous owner of DNA Star Vegas Co., Ltd
– a director-related entity
19,045,688
20,492,174
Disposal of property, plant and equipment to previous owner of DNA Star Vegas Co., Ltd
– a director-related entity
586,237
–
The above transactions occurred at commercial rates.
This concludes the remuneration report, which has been audited.
Directors’ Report
Additional information on company
performance
Earnings per share, adjusted for the impact of
non-recurring items, is set out in the graph below.
Donaco’s total shareholder return, consisting of both
share price growth and dividend payments, is superior
when compared to a number of peer casino and gaming
companies listed on the ASX and in Asia.
ADJUSTED EARNINGS PER SHARE
TOTAL SHAREHOLDER RETURN
10.0
8.0
6.0
4.0
2.0
0
-2.0
6.6
6.6
2.2
-0.5
100%
80%
60%
40%
20%
0%
-20%
-40%
81% 78%
41%
25%
9%
-17%
-4%
-11%
1 YEAR RETURN
4 YEAR RETURN
FY14
FY15
FY16
FY17
PEER1
PEER2
PEER3
DNA
Shares under option
Unissued ordinary shares of Donaco International Limited under option at the date of this report are as follows:
Grant date
1 July 2014
1 July 2015
1 July 2015
25 August 2015
25 August 2015
25 August 2015
Expiry date
1 July 2018
1 July 2018
1 July 2019
1 July 2018
1 July 2019
1 July 2020
Exercise price
Number under option
$0.590
$0.890
$0.890
$0.770
$0.770
$0.770
1,149,717
395,208
349,376
1,385,700
1,156,784
1,008,025
$5,444,810
No person entitled to exercise the options had or has any
right by virtue of the option to participate in any share issue
of the Company or of any other body corporate.
In addition to the above, on 7 July 2015, Donaco International
Limited issued 70 warrants to subscribe for its ordinary
shares. Each warrant has a notional value of USD100,000.
The warrants have a term of 39 months and expire on
6 October 2018. The exercise price is AUD0.7579 cents and
the maximum number of ordinary shares which may be
issued is 12,339,408. The Company may elect to settle the
difference between the share price and exercise price in cash.
Shares issued on the exercise of options
The were no ordinary shares of Donaco International
Limited issued, during the year ended 30 June 2017 and up
to the date of this report, on the exercise of options granted
(2016: nil).
Indemnity and insurance of auditor
The Company has not, during or since the end of the
financial year, indemnified or agreed to indemnify the
auditor of the Company or any related entity against a
liability incurred by the auditor.
During the financial year, the Company has not paid a
premium in respect of a contract to insure the auditor
of the Company or any related entity.
Proceedings on behalf of the Company
No person has applied to the Court under section 237
of the Corporations Act for leave to bring proceedings
on behalf of the Company, or to intervene in any
proceedings to which the Company is a party for
the purpose of taking responsibility on behalf of
the Company for all or part of those proceedings.
24
25
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual Report
Directors’ Report
Auditor’s Independence Declaration
Crowe Horwath Sydney
ABN 97 895 683 573
Member Crowe Horwath International
Audit and Assurance Services
Level 15 1 O'Connell Street
Sydney NSW 2000
Australia
Tel +61 2 9262 2155
Fax +61 2 9262 2190
www.crowehorwath.com.au
29 September 2017
The Board of Directors
Donaco International Limited
Level 18
420 George Street
Sydney NSW 2000
Dear Board Members
Donaco International Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the Directors of Donaco International Limited.
As lead audit partner for the audit of the financial report of Donaco International Limited for the
financial year ended 30 June 2017, I declare that to the best of my knowledge and belief, that there
have been no contraventions of:
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(i)
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
CROWE HORWATH SYDNEY
SUWARTI ASMONO
Partner
Crowe Horwath Sydney is a member of Crowe Horwath International, a Swiss verein. Each member of Crowe Horwath is a separate and
independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of
financial services licensees.
Non-audit services
Details of the amounts paid or payable to the auditor for
non-audit services provided during the financial year by the
auditor are outlined in note 30 to the financial statements.
The directors are satisfied that the provision of non-audit
services during the financial year, by the auditor (or by
another person or firm on the auditor’s behalf), is
compatible with the general standard of independence
for auditors imposed by the Corporations Act.
The directors are of the opinion that the services as
disclosed in note 30 to the financial statements do
not compromise the external auditor’s independence
requirements of the Corporations Act for the
following reasons:
Officers of the Company who are
former partners of Crowe Horwath
There are no officers of the Company who are former
partners of Crowe Horwath.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as
required under section 307C of the Corporations Act
is set out on the following page 27.
Auditor
Crowe Horwath Sydney continues in office in accordance
with section 327 of the Corporations Act.
•
all non-audit services have been reviewed and approved
to ensure that they do not impact the integrity and
objectivity of the auditor; and
This report is made in accordance with a resolution
of directors, pursuant to section 298(2)(a) of the
Corporation Act.
• none of the services undermine the general principles
relating to auditor independence as set out in APES
110 Code of Ethics for Professional Accountants issued
by the Accounting Professional and Ethical Standards
Board, including reviewing or auditing the auditor’s
own work, acting in a management or decision-making
capacity for the Company, acting as advocate for the
Company or jointly sharing economic risks and rewards.
On behalf of the directors
Mr stuart McGregor
Chairman
29 September 2017, Sydney
26
27
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual Report
Directors’ Report
Auditor’s Independence Declaration
Crowe Horwath Sydney
ABN 97 895 683 573
Member Crowe Horwath International
Audit and Assurance Services
Level 15 1 O'Connell Street
Sydney NSW 2000
Australia
Tel +61 2 9262 2155
Fax +61 2 9262 2190
www.crowehorwath.com.au
29 September 2017
The Board of Directors
Donaco International Limited
Level 18
420 George Street
Sydney NSW 2000
Dear Board Members
Donaco International Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the Directors of Donaco International Limited.
As lead audit partner for the audit of the financial report of Donaco International Limited for the
financial year ended 30 June 2017, I declare that to the best of my knowledge and belief, that there
have been no contraventions of:
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(i)
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
CROWE HORWATH SYDNEY
SUWARTI ASMONO
Partner
Crowe Horwath Sydney is a member of Crowe Horwath International, a Swiss verein. Each member of Crowe Horwath is a separate and
independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of
financial services licensees.
Non-audit services
Details of the amounts paid or payable to the auditor for
non-audit services provided during the financial year by the
auditor are outlined in note 30 to the financial statements.
The directors are satisfied that the provision of non-audit
services during the financial year, by the auditor (or by
another person or firm on the auditor’s behalf), is
compatible with the general standard of independence
for auditors imposed by the Corporations Act.
The directors are of the opinion that the services as
disclosed in note 30 to the financial statements do
not compromise the external auditor’s independence
requirements of the Corporations Act for the
following reasons:
Officers of the Company who are
former partners of Crowe Horwath
There are no officers of the Company who are former
partners of Crowe Horwath.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as
required under section 307C of the Corporations Act
is set out on the following page 27.
Auditor
Crowe Horwath Sydney continues in office in accordance
with section 327 of the Corporations Act.
•
all non-audit services have been reviewed and approved
to ensure that they do not impact the integrity and
objectivity of the auditor; and
This report is made in accordance with a resolution
of directors, pursuant to section 298(2)(a) of the
Corporation Act.
• none of the services undermine the general principles
relating to auditor independence as set out in APES
110 Code of Ethics for Professional Accountants issued
by the Accounting Professional and Ethical Standards
Board, including reviewing or auditing the auditor’s
own work, acting in a management or decision-making
capacity for the Company, acting as advocate for the
Company or jointly sharing economic risks and rewards.
On behalf of the directors
Mr stuart McGregor
Chairman
29 September 2017, Sydney
26
27
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual Report
2017 Financials
Note 18. Current liabilities – borrowings
58
Note 19. Current liabilities – financial
liabilities
59
Note 20. Current liabilities – income tax
60
Note 21. Current liabilities – employee
benefits
60
61
62
62
63
65
65
65
69
70
71
72
73
74
76
Note 22. Non-current liabilities
– borrowings
Note 23. Non-current liabilities
– employee benefits
Note 24. Equity – issued capital
Note 25. Equity – reserves
Note 26. Equity – retained profits
Note 27. Equity – dividends
Note 28. Financial instruments
Note 29. Key management personnel
disclosures
Note 30. Remuneration of auditors
Note 31. Commitments
Note 32. Related party transactions
Note 33. Parent entity information
Note 34. Interests in subsidiaries
Note 35. Events after the reporting
period
Note 36. Reconciliation of profit/(loss)
after income tax to net cash
from operating activities
Note 37. Earnings per share
Note 38. Share-based payments
Note 39. Contingent liabilities
77
78
78
79
80
29
Statement of Profit or Loss and Other
Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
30
32
33
34
35
Note 1. Significant accounting policies
35
Note 2. Critical accounting judgements,
estimates and assumptions
Note 3. Operating segments
Note 4. Revenue
Note 5. Other income/(expense)
Note 6. Expenses
Note 7. Income tax expense
Note 8. Current assets – cash and
cash equivalents
Note 9. Current assets – trade and
other receivables
Note 10. Current assets – inventories
Note 11. Current assets – prepaid
construction costs
Note 12. Current assets – other
43
45
48
49
49
50
51
51
51
52
53
Note 13. Non-current assets – property,
plant and equipment
53
Note 14. Non-current assets
– intangibles
Note 15. Non-current assets
– construction in progress
Note 16. Non-current assets – other
Note 17. Current liabilities – trade and
54
56
57
other payables
57
Note 40. Business combinations
financials
Statement of Profit or Loss and Other
Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
30
32
33
34
35
Note 1. Significant accounting policies
35
Note 2. Critical accounting judgements,
estimates and assumptions
Note 3. Operating segments
Note 4. Revenue
Note 5. Other income/(expense)
Note 6. Expenses
Note 7. Income tax expense
43
45
48
49
49
50
2017 Financials
Note 18. Current liabilities – borrowings
58
Note 19. Current liabilities – financial
liabilities
59
Note 20. Current liabilities – income tax
60
Note 21. Current liabilities – employee
benefits
60
61
62
62
63
65
65
65
69
70
71
72
73
74
76
Note 22. Non-current liabilities
– borrowings
Note 23. Non-current liabilities
– employee benefits
Note 24. Equity – issued capital
Note 25. Equity – reserves
Note 26. Equity – retained profits
Note 27. Equity – dividends
Note 28. Financial instruments
Note 29. Key management personnel
disclosures
Note 30. Remuneration of auditors
Note 31. Commitments
Note 32. Related party transactions
Note 33. Parent entity information
Note 34. Interests in subsidiaries
Note 35. Events after the reporting
period
Note 36. Reconciliation of profit/(loss)
after income tax to net cash
from operating activities
Note 37. Earnings per share
Note 38. Share-based payments
Note 39. Contingent liabilities
77
78
78
79
80
29
financials
Note 8. Current assets – cash and
cash equivalents
Note 9. Current assets – trade and
other receivables
Note 10. Current assets – inventories
Note 11. Current assets – prepaid
construction costs
Note 12. Current assets – other
51
51
51
52
53
Note 13. Non-current assets – property,
plant and equipment
53
Note 14. Non-current assets
– intangibles
Note 15. Non-current assets
– construction in progress
Note 16. Non-current assets – other
Note 17. Current liabilities – trade and
54
56
57
other payables
57
Note 40. Business combinations
Statement of Profit or Loss and Other Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2017
Statement of Profit or Loss and Other Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2017
Earnings per share for profit attributable
to the owners of Donaco International Limited
Basic earnings per share
Diluted earnings per share
Consolidated
Note
37
37
2017
Cents
3.73
3.73
2016
Cents
9.47
9.47
The above statement of profit or loss and other comprehensive income should be read in conjunction
with the accompanying notes.
Revenue from continuing operations
Other income/(expense)
Gain on bargain purchase
Total income
Expenses
Food and beverages
Employee benefits expense
DSV management fee
Depreciation and amortisation expense
Legal and compliance
Marketing and promotions
Professional and consultants
Property costs
Telecommunications and hosting
Gaming costs
Other expenses
Finance costs
Total expenses
Consolidated
Note
2017
$
2016
$
4
5
40
40
6
136,443,789
143,385,778
(4,867)
–
2,596,962
55,165,316
136,438,922
201,148,056
(6,018,409)
(22,891,204)
(19,045,688)
(10,129,299)
(680,734)
(4,618,018)
(1,338,743)
(5,952,199)
(382,062)
(2,970,244)
(7,127,174)
(6,182,949)
(22,773,119)
(20,492,174)
(9,945,976)
(382,525)
(4,696,896)
(13,304,649)
(5,862,681)
(267,816)
(6,559,572)
(7,264,048)
(20,559,623)
(20,545,536)
(101,713,397)
(118,277,941)
Profit before income tax expense from continuing operations
34,725,525
82,870,115
Income tax (expense)
7
(3,536,476)
(3,996,731)
Profit after income tax expense for the year
31,189,049
78,873,384
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Profit for the year is attributable to:
Non-controlling interest
Owners of Donaco International Limited
Total comprehensive income for the year is attributable to:
Non-controlling interest
Owners of Donaco International Limited
(15,422,693)
(15,422,693)
7,763,303
7,763,303
15,766,356
86,636,687
198,751
30,990,298
31,189,049
198,751
15,567,605
15,766,356
149,883
78,723,501
78,873,384
149,883
86,486,804
86,636,687
The above statement of profit or loss and other comprehensive income should be read in conjunction
with the accompanying notes.
30
30
31
31
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual Report
Statement of Profit or Loss and Other Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2017
Statement of Profit or Loss and Other Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2017
Earnings per share for profit attributable
to the owners of Donaco International Limited
Basic earnings per share
Diluted earnings per share
Consolidated
Note
37
37
2017
Cents
3.73
3.73
2016
Cents
9.47
9.47
The above statement of profit or loss and other comprehensive income should be read in conjunction
with the accompanying notes.
Revenue from continuing operations
Other income/(expense)
Gain on bargain purchase
Total income
Expenses
Food and beverages
Employee benefits expense
DSV management fee
Depreciation and amortisation expense
Legal and compliance
Marketing and promotions
Professional and consultants
Property costs
Telecommunications and hosting
Gaming costs
Other expenses
Finance costs
Total expenses
Consolidated
Note
2017
$
2016
$
4
5
40
40
6
136,443,789
143,385,778
(4,867)
–
2,596,962
55,165,316
136,438,922
201,148,056
(6,018,409)
(22,891,204)
(19,045,688)
(10,129,299)
(680,734)
(4,618,018)
(1,338,743)
(5,952,199)
(382,062)
(2,970,244)
(7,127,174)
(6,182,949)
(22,773,119)
(20,492,174)
(9,945,976)
(382,525)
(4,696,896)
(13,304,649)
(5,862,681)
(267,816)
(6,559,572)
(7,264,048)
(20,559,623)
(20,545,536)
(101,713,397)
(118,277,941)
Profit before income tax expense from continuing operations
34,725,525
82,870,115
Income tax (expense)
7
(3,536,476)
(3,996,731)
Profit after income tax expense for the year
31,189,049
78,873,384
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Profit for the year is attributable to:
Non-controlling interest
Owners of Donaco International Limited
Total comprehensive income for the year is attributable to:
Non-controlling interest
Owners of Donaco International Limited
(15,422,693)
(15,422,693)
7,763,303
7,763,303
15,766,356
86,636,687
198,751
30,990,298
31,189,049
198,751
15,567,605
15,766,356
149,883
78,723,501
78,873,384
149,883
86,486,804
86,636,687
The above statement of profit or loss and other comprehensive income should be read in conjunction
with the accompanying notes.
30
30
31
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Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual Report
Statement of Financial Position
AS AT 30 JUNE 2017
Statement of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2017
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Prepaid construction costs
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Intangibles (including licences)
Construction in progress
Other
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Financial liabilities
Income tax
Employee benefits
Non-current liabilities
Borrowings – non-current
Employee benefits – non-current
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Note
Consolidated
2017
$
2016
$
Issued capital
Reserves
Retained
profits
Non-
controlling
interest
Total equity
Consolidated
$
$
$
$
$
Balance at 1 July 2015
246,719,609
15,757,522
13,907,457
986,462
277,371,050
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
66,022,749
17,596,767
893,474
341,184
3,238,891
78,221,019
24,002,817
1,418,876
12,800
3,120,464
88,093,065
106,775,976
161,344,373
389,140,234
595,885
3,895
171,715,958
403,005,941
1,143,158
78,451
551,084,387
575,943,508
639,177,452
682,719,484
41,788,107
54,908,598
681,507
1,127,767
981,006
99,486,985
47,754,947
40,107,134
1,794,520
1,560,149
482,097
91,698,847
53,553,627
111,693,999
32,669
16,212
53,586,296
111,710,211
153,073,281
203,409,058
486,104,171
479,310,426
359,968,884
9,425,778
115,374,413
360,968,368
24,574,755
92,630,958
Loss after income tax benefit for the year
Other comprehensive income for the year,
net of tax
Total comprehensive income for the year
Transactions with owners in their capacity
as owners:
Contributions of equity, net of transaction
costs (note 40)
Shares issued to employees
Adjustment to value of shares issued
for acquisition (note 40)
Employee share options
Transfer from reserves
–
–
–
–
78,723,501
149,883
78,873,384
7,763,303
–
–
7,763,303
7,763,303
78,723,501
149,883
86,636,687
154,999,579
341,455
(41,363,075)
–
–
–
–
1,324,730
270,800
(270,800)
–
–
–
–
–
–
–
154,999,579
341,455
–
(41,363,075)
–
–
1,324,730
–
Balance at 30 June 2016
360,968,368
24,574,755
92,630,958
1,136,345
479,310,426
Issued
capital
Reserves
Retained
profits
Total equity
Non-
controlling
interest
Consolidated
$
$
$
$
$
Balance at 1 July 2016
360,968,368
24,574,755
92,630,958
1,136,345
479,310,426
Profit after income tax expense for the year
–
–
30,990,298
198,751
31,189,049
Other comprehensive income for the year,
net of tax
–
(15,422,693)
–
–
(15,422,693)
Total comprehensive income for the year
–
(15,422,693)
30,990,298
198,751
15,766,356
Transactions with owners in their capacity
as owners:
Acquisition of shares for Employee
Share Trust
Dividends paid
Employee share options
(999,484)
–
–
–
–
–
(8,246,843)
273,716
–
–
–
–
(999,484)
(8,246,843)
273,716
Equity attributable to the owners of Donaco International Limited
484,769,075
478,174,081
Balance at 30 June 2017
359,968,884
9,425,778
115,374,413
1,335,096
486,104,171
Non-controlling interest
Total equity
1,335,096
1,136,345
486,104,171
479,310,426
The above statement of changes in equity should be read in conjunction with the accompanying notes.
The above statement of financial position should be read in conjunction with the accompanying notes.
32
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Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual Report
Statement of Financial Position
AS AT 30 JUNE 2017
Statement of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2017
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Prepaid construction costs
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Intangibles (including licences)
Construction in progress
Other
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Financial liabilities
Income tax
Employee benefits
Non-current liabilities
Borrowings – non-current
Employee benefits – non-current
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Note
Consolidated
2017
$
2016
$
Issued capital
Reserves
Retained
profits
Non-
controlling
interest
Total equity
Consolidated
$
$
$
$
$
Balance at 1 July 2015
246,719,609
15,757,522
13,907,457
986,462
277,371,050
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
66,022,749
17,596,767
893,474
341,184
3,238,891
78,221,019
24,002,817
1,418,876
12,800
3,120,464
88,093,065
106,775,976
161,344,373
389,140,234
595,885
3,895
171,715,958
403,005,941
1,143,158
78,451
551,084,387
575,943,508
639,177,452
682,719,484
41,788,107
54,908,598
681,507
1,127,767
981,006
99,486,985
47,754,947
40,107,134
1,794,520
1,560,149
482,097
91,698,847
53,553,627
111,693,999
32,669
16,212
53,586,296
111,710,211
153,073,281
203,409,058
486,104,171
479,310,426
359,968,884
9,425,778
115,374,413
360,968,368
24,574,755
92,630,958
Loss after income tax benefit for the year
Other comprehensive income for the year,
net of tax
Total comprehensive income for the year
Transactions with owners in their capacity
as owners:
Contributions of equity, net of transaction
costs (note 40)
Shares issued to employees
Adjustment to value of shares issued
for acquisition (note 40)
Employee share options
Transfer from reserves
–
–
–
–
78,723,501
149,883
78,873,384
7,763,303
–
–
7,763,303
7,763,303
78,723,501
149,883
86,636,687
154,999,579
341,455
(41,363,075)
–
–
–
–
1,324,730
270,800
(270,800)
–
–
–
–
–
–
–
154,999,579
341,455
–
(41,363,075)
–
–
1,324,730
–
Balance at 30 June 2016
360,968,368
24,574,755
92,630,958
1,136,345
479,310,426
Issued
capital
Reserves
Retained
profits
Total equity
Non-
controlling
interest
Consolidated
$
$
$
$
$
Balance at 1 July 2016
360,968,368
24,574,755
92,630,958
1,136,345
479,310,426
Profit after income tax expense for the year
–
–
30,990,298
198,751
31,189,049
Other comprehensive income for the year,
net of tax
–
(15,422,693)
–
–
(15,422,693)
Total comprehensive income for the year
–
(15,422,693)
30,990,298
198,751
15,766,356
Transactions with owners in their capacity
as owners:
Acquisition of shares for Employee
Share Trust
Dividends paid
Employee share options
(999,484)
–
–
–
–
–
(8,246,843)
273,716
–
–
–
–
(999,484)
(8,246,843)
273,716
Equity attributable to the owners of Donaco International Limited
484,769,075
478,174,081
Balance at 30 June 2017
359,968,884
9,425,778
115,374,413
1,335,096
486,104,171
Non-controlling interest
Total equity
1,335,096
1,136,345
486,104,171
479,310,426
The above statement of changes in equity should be read in conjunction with the accompanying notes.
The above statement of financial position should be read in conjunction with the accompanying notes.
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Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual Report
Statement of Cash Flows
FOR THE YEAR ENDED 30 JUNE 2017
Consolidated
Note 1: Significant accounting policies
Historical cost convention
Cash flow from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Other revenue
Interest and other finance costs paid
Government levies, gaming taxes and GST
Net cash flows from operating activities
Cash flow from investing activities
Payments for property, plant and equipment
Cash investment in subsidiary, net of cash retained
Payment of expenses relating to acquisitions
Net cash flows from investing activities
Cash flow from financing activities
Repayment of borrowings
Drawdown of borrowings
Payments of dividends
Payments for acquisition of employee shares
Share issue transaction costs
Net cash flows from financing activities
Net (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Note
2017
$
2016
$
36
40
40
142,484,849
132,729,587
(78,700,882)
(59,945,137)
63,783,967
72,784,450
100,011
–
(11,878,988)
(4,649,592)
72,805
11,058
(14,947,469)
(7,920,049)
47,355,398
50,000,795
(5,727,117)
(1,851,232)
–
–
(322,655,000)
(11,819,338)
(5,727,117)
(336,325,570)
(69,817,576)
25,603,177
(8,246,843)
(999,484)
(3,218,668)
150,276,599
–
–
–
(442,613)
(53,460,726)
146,615,318
(11,832,445)
(139,709,457)
78,221,019
210,175,119
(365,825)
7,755,357
The principal accounting policies adopted in the preparation
of the financial statements are set out below. These policies
have been consistently applied to all the years presented,
unless otherwise stated.
New, revised or amending Accounting Standards
and Interpretations adopted
The consolidated entity has adopted all of the new, revised
or amending Accounting Standards and Interpretations
issued by the Australian Accounting Standards Board (AASB)
that are mandatory for the current reporting period.
The adoption of these Accounting Standards and
Interpretations did not have any material impact on the
financial performance or position of the consolidated entity.
Any new, revised or amending Accounting Standards or
Interpretations that are not yet mandatory have not been
early adopted.
Basis of preparation
These general purpose financial statements have been
prepared in accordance with Australian Accounting
Standards and Interpretations issued by the AASB and
the Corporations Act, as appropriate for for-profit oriented
entities. These financial statements also comply with
International Financial Reporting Standards as issued
by the International Accounting Standards Board (IASB).
The financial statements have been prepared under the
historical cost convention, except for the revaluation of
financial assets and liabilities at fair value through profit
or loss and derivative financial instruments.
Critical accounting estimates
The preparation of the financial statements requires the
use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of
applying the consolidated entity’s accounting policies. The
areas involving a higher degree of judgement or complexity,
or areas where assumptions and estimates are significant
to the financial statements, are disclosed in note 2.
Presentation of the statement of cash flows
The consolidated entity has changed its policy to present
gaming receipts from customers and payments to junket
operators on a net basis in the Statement of Cash Flows.
Previously, the receipts and payments were reported on
a gross basis based on cash received and paid out. The
restated presentation is considered more appropriate as
it is consistent with the recognition of income and expenses
on a net basis in the profit and loss statement. The
comparative figures have been restated. Additionally, the
comparative figures have been restated using the average
foreign currency rate instead of the closing rate which was
used previously. A summary of the effect of the change in
presentation is provided below.
Restated
Previously
Variance
$
$
$
Cash and cash equivalents at the end of the financial year
8
66,022,749
78,221,019
Receipts from customers
132,729,587
447,352,472
(314,622,885)
The above statement of cash flows should be read in conjunction with the accompanying notes.
Payments to suppliers and employees
(59,945,137)
(376,237,266)
316,292,129
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Effects of exchange rate changes on cash
and cash equivalents
72,784,450
71,115,206
1,669,244
50,000,795
48,657,537
(336,325,570)
(330,085,975)
146,615,318
144,301,206
1,343,258
(6,239,595)
2,314,112
7,755,357
5,173,132
2,582,225
Parent entity information
Principles of consolidation
In accordance with the Corporations Act, these financial
statements present the results of the consolidated entity
only. Supplementary information about the parent entity
is disclosed in note 33.
The consolidated financial statements incorporate
the assets and liabilities of all subsidiaries of Donaco
International Limited (‘the Company’ or ‘parent entity’)
as at 30 June 2017 and the results of all subsidiaries
34
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Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportNotes to the Financial Statements For the year eNded 30 JuNe 2017Statement of Cash Flows
FOR THE YEAR ENDED 30 JUNE 2017
Consolidated
Note 1: Significant accounting policies
Historical cost convention
Cash flow from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Other revenue
Interest and other finance costs paid
Government levies, gaming taxes and GST
Net cash flows from operating activities
Cash flow from investing activities
Payments for property, plant and equipment
Cash investment in subsidiary, net of cash retained
Payment of expenses relating to acquisitions
Net cash flows from investing activities
Cash flow from financing activities
Repayment of borrowings
Drawdown of borrowings
Payments of dividends
Payments for acquisition of employee shares
Share issue transaction costs
Net cash flows from financing activities
Net (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Note
2017
$
2016
$
36
40
40
142,484,849
132,729,587
(78,700,882)
(59,945,137)
63,783,967
72,784,450
100,011
–
(11,878,988)
(4,649,592)
72,805
11,058
(14,947,469)
(7,920,049)
47,355,398
50,000,795
(5,727,117)
(1,851,232)
–
–
(322,655,000)
(11,819,338)
(5,727,117)
(336,325,570)
(69,817,576)
25,603,177
(8,246,843)
(999,484)
(3,218,668)
150,276,599
–
–
–
(442,613)
(53,460,726)
146,615,318
(11,832,445)
(139,709,457)
78,221,019
210,175,119
(365,825)
7,755,357
The principal accounting policies adopted in the preparation
of the financial statements are set out below. These policies
have been consistently applied to all the years presented,
unless otherwise stated.
New, revised or amending Accounting Standards
and Interpretations adopted
The consolidated entity has adopted all of the new, revised
or amending Accounting Standards and Interpretations
issued by the Australian Accounting Standards Board (AASB)
that are mandatory for the current reporting period.
The adoption of these Accounting Standards and
Interpretations did not have any material impact on the
financial performance or position of the consolidated entity.
Any new, revised or amending Accounting Standards or
Interpretations that are not yet mandatory have not been
early adopted.
Basis of preparation
These general purpose financial statements have been
prepared in accordance with Australian Accounting
Standards and Interpretations issued by the AASB and
the Corporations Act, as appropriate for for-profit oriented
entities. These financial statements also comply with
International Financial Reporting Standards as issued
by the International Accounting Standards Board (IASB).
The financial statements have been prepared under the
historical cost convention, except for the revaluation of
financial assets and liabilities at fair value through profit
or loss and derivative financial instruments.
Critical accounting estimates
The preparation of the financial statements requires the
use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of
applying the consolidated entity’s accounting policies. The
areas involving a higher degree of judgement or complexity,
or areas where assumptions and estimates are significant
to the financial statements, are disclosed in note 2.
Presentation of the statement of cash flows
The consolidated entity has changed its policy to present
gaming receipts from customers and payments to junket
operators on a net basis in the Statement of Cash Flows.
Previously, the receipts and payments were reported on
a gross basis based on cash received and paid out. The
restated presentation is considered more appropriate as
it is consistent with the recognition of income and expenses
on a net basis in the profit and loss statement. The
comparative figures have been restated. Additionally, the
comparative figures have been restated using the average
foreign currency rate instead of the closing rate which was
used previously. A summary of the effect of the change in
presentation is provided below.
Restated
Previously
Variance
$
$
$
Cash and cash equivalents at the end of the financial year
8
66,022,749
78,221,019
Receipts from customers
132,729,587
447,352,472
(314,622,885)
The above statement of cash flows should be read in conjunction with the accompanying notes.
Payments to suppliers and employees
(59,945,137)
(376,237,266)
316,292,129
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Effects of exchange rate changes on cash
and cash equivalents
72,784,450
71,115,206
1,669,244
50,000,795
48,657,537
(336,325,570)
(330,085,975)
146,615,318
144,301,206
1,343,258
(6,239,595)
2,314,112
7,755,357
5,173,132
2,582,225
Parent entity information
Principles of consolidation
In accordance with the Corporations Act, these financial
statements present the results of the consolidated entity
only. Supplementary information about the parent entity
is disclosed in note 33.
The consolidated financial statements incorporate
the assets and liabilities of all subsidiaries of Donaco
International Limited (‘the Company’ or ‘parent entity’)
as at 30 June 2017 and the results of all subsidiaries
34
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Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportNotes to the Financial Statements For the year eNded 30 JuNe 2017for the year then ended. Donaco International Limited
and its subsidiaries together are referred to in these
financial statements as the ‘consolidated entity’.
Subsidiaries are all those entities over which the
consolidated entity has control. The consolidated entity
controls an entity when the consolidated entity is exposed
to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns
through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which
control is transferred to the consolidated entity. They are
de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains
on transactions between entities in the consolidated entity
are eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of the impairment
of the asset transferred. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency
with the policies adopted by the consolidated entity.
The acquisition of subsidiaries is accounted for using the
acquisition method of accounting. A change in ownership
interest, without the loss of control, is accounted for as
an equity transaction, where the difference between the
consideration transferred and the book value of the share
of the non-controlling interest acquired is recognised
directly in equity attributable to the parent.
Non-controlling interest in the results and equity of
subsidiaries are shown separately in the Statement of Profit
or Loss and other Comprehensive Income, Statement of
Financial Position and Statement of Changes in Equity of
the Consolidated Entity. Losses incurred by the consolidated
entity are attributed to the non-controlling interest in full,
even if that results in a deficit balance.
Where the consolidated entity loses control over a
subsidiary, it derecognises the assets including goodwill,
liabilities and non-controlling interest in the subsidiary
together with any cumulative translation differences
recognised in equity. The consolidated entity recognises
the fair value of the consideration received and the fair
value of any investment retained together with any gain
or loss in profit or loss.
Operating segments
Operating segments are presented using the ‘management
approach’, where the information presented is on the same
basis as the internal reports provided to the Chief Operating
Decision Makers (CODM). The CODM is responsible for
the allocation of resources to operating segments and
assessing their performance.
Foreign currency translation
Revenue recognition
The financial statements are presented in Australian
dollars, which is Donaco International Limited’s functional
and presentation currency.
DNA Star Vegas Co., Ltd, a subsidiary within the Group,
has casino and hotel operations in Cambodia. Its functional
currency is Thai baht.
Donaco Singapore Pte Ltd has an interest in the Lao Cai
International Hotel Joint Venture Company which operates
a casino and hotel in Vietnam. The functional currency of
the Joint Venture Company is Vietnamese dong.
The subsidiaries of Donaco that operate in the
aforementioned foreign countries are consolidated into
the Hong Kong Group (Star Vegas Group) and the Singapore
Group (Aristo Group). At this level, the presentation currency
is US dollar.
Subsequently, these consolidated groups are consolidated
with the Australian operations and converted to
Australian dollars.
Foreign currency transactions
Foreign currency transactions are translated into Australian
dollars using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and
from the translation at financial year-end exchange rates
of monetary assets and liabilities denominated in foreign
currencies are recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are
translated into Australian dollars using the exchange
rates at the reporting date. The revenues and expenses
of foreign operations are translated into Australian dollars
using average exchange rates, which approximate the
rates at the dates of the transactions, for the period. All
resulting foreign exchange differences are recognised in
other comprehensive income through the foreign currency
reserve in equity.
Goodwill, casino licence and fair value adjustments arising
from the acquisition of a foreign operation are treated
as assets and liabilities of the foreign operations and
translated at the closing rate.
The foreign currency reserve is recognised in profit or loss
when the foreign operation or net investment is disposed of.
Revenue is recognised when it is probable that the
economic benefit will flow to the consolidated entity and
the revenue can be reliably measured. Revenue is measured
at the fair value of the consideration received or receivable.
Gaming revenue
Revenue at the playing tables is recognised upon the
differences between chips at the closing and chips at
the opening of each table plus chips transferred from the
playing table to the cage, less chips transferred from the
cage to the playing table. Revenue is recognised on a net
basis after commission and profit sharing is paid to
junket operators.
Revenue from slot machines represents the amount
received over the exchange counter less the amount
returned to customers and profit-sharing paid.
Sale of goods
The consolidated entity sale of goods consists of food
and beverages sales. Revenue from the sale of goods is
recognised at the point of sale, when a group entity sells
a product to the customer.
Rendering of services
Revenue from the provision of accommodation and
hospitality services is recognised in the accounting period
in which the services are rendered.
Interest
Interest revenue is recognised as interest accrues using
the effective interest method. This is a method of
calculating the amortised cost of a financial asset and
allocating the interest income over the relevant period
using the effective interest rate, which is the rate that
exactly discounts estimated future cash receipts through
the expected life of the financial asset to the net carrying
amount of the financial asset.
Income tax
The income tax expense or benefit for the period is
the tax payable on that period’s taxable income based
on the applicable income tax rate for each jurisdiction,
adjusted by the changes in deferred tax assets and
liabilities attributable to temporary differences, unused
tax losses and the adjustment recognised for prior periods,
where applicable.
settled, based on those tax rates that are enacted or
substantively enacted, except for:
• when the deferred income tax asset or liability arises
from the initial recognition of goodwill or an asset
or liability in a transaction that is not a business
combination and that, at the time of the transaction,
affects neither the accounting nor taxable profits; or
• when the taxable temporary difference is associated
with interests in subsidiaries, associates or joint
ventures, and the timing of the reversal can be
controlled and it is probable that the temporary
difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary
differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those
temporary differences and losses.
The carrying amount of recognised and unrecognised
deferred tax assets are reviewed at each reporting date.
Deferred tax assets recognised are reduced to the extent
that it is no longer probable that future taxable profits
will be available for the carrying amount to be recovered.
Previously unrecognised deferred tax assets are recognised
to the extent that it is probable that there are future taxable
profits available to recover the asset.
Deferred tax assets and liabilities are offset only where
there is a legally enforceable right to offset current tax
assets against current tax liabilities and deferred tax
assets against deferred tax liabilities; and they relate
to the same taxable authority on either the same taxable
entity or different taxable entities which intend to settle
simultaneously.
Current and non-current classification
Assets and liabilities are presented in the Statement
of Financial Position based on current and non-current
classification.
An asset is classified as current when: it is either expected
to be realised or intended to be sold or consumed in the
consolidated entity’s normal operating cycle; it is held
primarily for the purpose of trading; it is expected to be
realised within 12 months after the reporting period; or
the asset is cash or cash equivalent unless restricted from
being exchanged or used to settle a liability for at least
12 months after the reporting period. All other assets
are classified as non-current.
Deferred tax assets and liabilities are recognised for
temporary differences at the tax rates expected to be
applied when the assets are recovered or liabilities are
A liability is classified as current when: it is either
expected to be settled in the consolidated entity’s normal
operating cycle; it is held primarily for the purpose of
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and its subsidiaries together are referred to in these
financial statements as the ‘consolidated entity’.
Subsidiaries are all those entities over which the
consolidated entity has control. The consolidated entity
controls an entity when the consolidated entity is exposed
to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns
through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which
control is transferred to the consolidated entity. They are
de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains
on transactions between entities in the consolidated entity
are eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of the impairment
of the asset transferred. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency
with the policies adopted by the consolidated entity.
The acquisition of subsidiaries is accounted for using the
acquisition method of accounting. A change in ownership
interest, without the loss of control, is accounted for as
an equity transaction, where the difference between the
consideration transferred and the book value of the share
of the non-controlling interest acquired is recognised
directly in equity attributable to the parent.
Non-controlling interest in the results and equity of
subsidiaries are shown separately in the Statement of Profit
or Loss and other Comprehensive Income, Statement of
Financial Position and Statement of Changes in Equity of
the Consolidated Entity. Losses incurred by the consolidated
entity are attributed to the non-controlling interest in full,
even if that results in a deficit balance.
Where the consolidated entity loses control over a
subsidiary, it derecognises the assets including goodwill,
liabilities and non-controlling interest in the subsidiary
together with any cumulative translation differences
recognised in equity. The consolidated entity recognises
the fair value of the consideration received and the fair
value of any investment retained together with any gain
or loss in profit or loss.
Operating segments
Operating segments are presented using the ‘management
approach’, where the information presented is on the same
basis as the internal reports provided to the Chief Operating
Decision Makers (CODM). The CODM is responsible for
the allocation of resources to operating segments and
assessing their performance.
Foreign currency translation
Revenue recognition
The financial statements are presented in Australian
dollars, which is Donaco International Limited’s functional
and presentation currency.
DNA Star Vegas Co., Ltd, a subsidiary within the Group,
has casino and hotel operations in Cambodia. Its functional
currency is Thai baht.
Donaco Singapore Pte Ltd has an interest in the Lao Cai
International Hotel Joint Venture Company which operates
a casino and hotel in Vietnam. The functional currency of
the Joint Venture Company is Vietnamese dong.
The subsidiaries of Donaco that operate in the
aforementioned foreign countries are consolidated into
the Hong Kong Group (Star Vegas Group) and the Singapore
Group (Aristo Group). At this level, the presentation currency
is US dollar.
Subsequently, these consolidated groups are consolidated
with the Australian operations and converted to
Australian dollars.
Foreign currency transactions
Foreign currency transactions are translated into Australian
dollars using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and
from the translation at financial year-end exchange rates
of monetary assets and liabilities denominated in foreign
currencies are recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are
translated into Australian dollars using the exchange
rates at the reporting date. The revenues and expenses
of foreign operations are translated into Australian dollars
using average exchange rates, which approximate the
rates at the dates of the transactions, for the period. All
resulting foreign exchange differences are recognised in
other comprehensive income through the foreign currency
reserve in equity.
Goodwill, casino licence and fair value adjustments arising
from the acquisition of a foreign operation are treated
as assets and liabilities of the foreign operations and
translated at the closing rate.
The foreign currency reserve is recognised in profit or loss
when the foreign operation or net investment is disposed of.
Revenue is recognised when it is probable that the
economic benefit will flow to the consolidated entity and
the revenue can be reliably measured. Revenue is measured
at the fair value of the consideration received or receivable.
Gaming revenue
Revenue at the playing tables is recognised upon the
differences between chips at the closing and chips at
the opening of each table plus chips transferred from the
playing table to the cage, less chips transferred from the
cage to the playing table. Revenue is recognised on a net
basis after commission and profit sharing is paid to
junket operators.
Revenue from slot machines represents the amount
received over the exchange counter less the amount
returned to customers and profit-sharing paid.
Sale of goods
The consolidated entity sale of goods consists of food
and beverages sales. Revenue from the sale of goods is
recognised at the point of sale, when a group entity sells
a product to the customer.
Rendering of services
Revenue from the provision of accommodation and
hospitality services is recognised in the accounting period
in which the services are rendered.
Interest
Interest revenue is recognised as interest accrues using
the effective interest method. This is a method of
calculating the amortised cost of a financial asset and
allocating the interest income over the relevant period
using the effective interest rate, which is the rate that
exactly discounts estimated future cash receipts through
the expected life of the financial asset to the net carrying
amount of the financial asset.
Income tax
The income tax expense or benefit for the period is
the tax payable on that period’s taxable income based
on the applicable income tax rate for each jurisdiction,
adjusted by the changes in deferred tax assets and
liabilities attributable to temporary differences, unused
tax losses and the adjustment recognised for prior periods,
where applicable.
settled, based on those tax rates that are enacted or
substantively enacted, except for:
• when the deferred income tax asset or liability arises
from the initial recognition of goodwill or an asset
or liability in a transaction that is not a business
combination and that, at the time of the transaction,
affects neither the accounting nor taxable profits; or
• when the taxable temporary difference is associated
with interests in subsidiaries, associates or joint
ventures, and the timing of the reversal can be
controlled and it is probable that the temporary
difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary
differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those
temporary differences and losses.
The carrying amount of recognised and unrecognised
deferred tax assets are reviewed at each reporting date.
Deferred tax assets recognised are reduced to the extent
that it is no longer probable that future taxable profits
will be available for the carrying amount to be recovered.
Previously unrecognised deferred tax assets are recognised
to the extent that it is probable that there are future taxable
profits available to recover the asset.
Deferred tax assets and liabilities are offset only where
there is a legally enforceable right to offset current tax
assets against current tax liabilities and deferred tax
assets against deferred tax liabilities; and they relate
to the same taxable authority on either the same taxable
entity or different taxable entities which intend to settle
simultaneously.
Current and non-current classification
Assets and liabilities are presented in the Statement
of Financial Position based on current and non-current
classification.
An asset is classified as current when: it is either expected
to be realised or intended to be sold or consumed in the
consolidated entity’s normal operating cycle; it is held
primarily for the purpose of trading; it is expected to be
realised within 12 months after the reporting period; or
the asset is cash or cash equivalent unless restricted from
being exchanged or used to settle a liability for at least
12 months after the reporting period. All other assets
are classified as non-current.
Deferred tax assets and liabilities are recognised for
temporary differences at the tax rates expected to be
applied when the assets are recovered or liabilities are
A liability is classified as current when: it is either
expected to be settled in the consolidated entity’s normal
operating cycle; it is held primarily for the purpose of
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reporting period; or there is no unconditional right to defer
the settlement of the liability for at least 12 months after
the reporting period. All other liabilities are classified
as non-current.
Deferred tax assets and liabilities are always classified
as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits
held at call with financial institutions, other short-term,
highly liquid investments with original maturities of three
months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant
risk of changes in value.
Trade and other receivables
Trade receivables are initially recognised at fair value and
subsequently measured at amortised cost using the effective
interest method, less any provision for impairment. Trade
receivables are generally due for settlement within 30 days.
Collectability of trade receivables is reviewed on an
ongoing basis. Debts which are known to be uncollectable
are written off by reducing the carrying amount directly.
A provision for impairment of trade receivables is raised
when there is objective evidence that the consolidated entity
will not be able to collect all amounts due according to
the original terms of the receivables. Significant financial
difficulties of the debtor, the probability that the debtor will
enter bankruptcy or financial reorganisation and default
or delinquency in payments (more than 60 days overdue)
are considered indicators that the trade receivable may be
impaired. The amount of the impairment allowance is the
difference between the asset’s carrying amount and the
present value of estimated future cash flows, discounted
at the original effective interest rate. Cash flows relating
to short-term receivables are not discounted if the effect
of discounting is immaterial.
Other receivables are recognised at amortised cost, less
any provision for impairment.
Inventories
Inventories include consumable stores, food and beverages
and are carried at the lower of cost and net realisable
value. Cost is determined on a first-in-first-out basis and
comprises all costs of purchases, conversion and other
costs incurred in bringing the inventories to their present
location and condition. Net realisable value is the estimated
selling price in the ordinary course of business, less the
estimated costs of completion and selling expenses.
When inventories are sold, the carrying amount of those
inventories is recognised as an expense in the period in
which the related revenue is recognised. The amount of
any write-down of inventories to net realisable value and
all losses of inventories are recognised as an expense in
the period of the write-down or loss occurs. The amount
of any reversal of any write-down of inventories, arising
from an increase in net realisable value, is recognised in
the Statement of Profit orLoss and Other Comprehensive
Income, in the period in which the reversal occurs.
Property, plant and equipment
Property, plant and equipment is stated at historical cost
less accumulated depreciation and impairment. Historical
cost includes expenditure that is directly attributable to
the acquisition of the items.
Depreciation is calculated on a straight-line basis to
write off the net cost of each item of property, plant and
equipment (excluding land) over their expected useful lives
as follows:
Buildings and structures
Machinery and equipment
Motor vehicles
Office equipment and other
Furniture and fittings
Consumables
25 years
5–10 years
3–6 years
3–10 years
5 years
1–8 years
The residual values, useful lives and depreciation methods
are reviewed, and adjusted if appropriate, at each
reporting date.
An item of property, plant and equipment is derecognised
upon disposal or when there is no future economic benefit
to the consolidated entity. Gains and losses between the
carrying amount and the disposal proceeds are taken
to profit or loss.
Leases
The determination of whether an arrangement is
or contains a lease is based on the substance of the
arrangement and requires an assessment of whether
the fulfilment of the arrangement is dependent on the use
of a specific asset or assets and the arrangement conveys
a right to use the asset.
A distinction is made between finance leases, which
effectively transfer from the lessor to the lessee
substantially all the risks and benefits incidental to
ownership of leased assets, and operating leases, under
which the lessor effectively retains substantially all such
risks and benefits.
Operating lease payments, net of any incentives received
from the lessor, are charged to the Statement of Profit or
Loss and Other Comprehensive Income, on a straight-line
basis over the term of the lease.
Intangible assets
Land rights
The intangible asset includes costs incurred to acquire
interests in the usage of land in the Socialist Republic of
Vietnam for the original hotel, located in Lao Cai. The term
of the agreement is 30 years from the initial licencing date
of 19 July 2002. These land use rights are stated at cost
less accumulated amortisation. Amortisation is calculated
on a straight-line basis over a period of 30 years, from the
licencing date. At the expiry of the land term it is expected,
that the relevant state body will consider an application
for extension.
Casino licence
The consolidated entity considers casino licences to be
intangible assets with indefinite useful lives. Accordingly,
they are not amortised and are tested annually for
impairment or more frequently if events or changes in
circumstances indicate that it might be impaired, and
is carried at cost less accumulated impairment losses.
Impairment losses on casino licences are recognised
in the profit or loss.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill
is not amortised. Instead, goodwill is tested annually for
impairment, or more frequently if events or changes in
circumstances indicate that it might be impaired, and
is carried at cost less accumulated impairment losses.
Impairment losses on goodwill are taken to profit or loss
and are not subsequently reversed.
Prepaid construction costs
Amounts recognised as prepaid construction costs relate
to tranche payments made to third party developers in
connection with the construction of the new Lao Cai Casino.
Tranche payments are made in advance of construction
work being performed in accordance with the terms of the
contractor agreements; however, once associated works
have been completed an amount equal to the tranche
payment is transferred from prepaid construction costs
to construction in progress. Once recognised as part of
construction in progress the amounts are then carried
on the Statement of Financial Position at cost, until such
time as the asset is completed and ready for its intended
use. Work in progress is not depreciated, but tested for
impairment annually. Once ready for its intended use
an amount equal to the cost of the completed asset will be
transferred to property plant and equipment and accounted
for in accordance with the consolidated entity’s accounting
policy for property plant and equipment.
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite
useful life are not subject to amortisation and are tested
annually for impairment, or more frequently if events or
changes in circumstances indicate that they might be
impaired. Other non-financial assets are reviewed for
impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which
the asset’s carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset’s fair value
less costs of disposal and value-in-use. The value-in-use is
the present value of the estimated future cash flows relating
to the asset using a pre-tax discount rate specific to the
asset or cash-generating unit to which the asset belongs.
Assets that do not have independent cash flows are grouped
together to form a cash-generating unit.
Trade and other payables
These amounts represent liabilities for goods and services
provided to the consolidated entity prior to the end of the
financial year and which are unpaid. Due to their short-term
nature they are measured at amortised cost and are not
discounted. The amounts are unsecured and are usually
paid within 30 days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair
value of the consideration received, net of transaction costs.
They are subsequently measured at amortised cost using
the effective interest method.
Where there is an unconditional right to defer settlement
of the liability for at least 12 months after the reporting
date, the loans or borrowings are classified as non-current.
Warrants
Warrants issued as part of financing arrangements, which
may be net settled in cash or through the issue of shares
of the parent entity are recognised as derivative financial
liabilities measured at fair value through profit or loss.
The fair value of the warrants is determined using the
Black-Scholes model.
At each reporting date the warrants are revalued to fair
value with any difference recognised in the profit or loss.
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reporting period; or there is no unconditional right to defer
the settlement of the liability for at least 12 months after
the reporting period. All other liabilities are classified
as non-current.
Deferred tax assets and liabilities are always classified
as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits
held at call with financial institutions, other short-term,
highly liquid investments with original maturities of three
months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant
risk of changes in value.
Trade and other receivables
Trade receivables are initially recognised at fair value and
subsequently measured at amortised cost using the effective
interest method, less any provision for impairment. Trade
receivables are generally due for settlement within 30 days.
Collectability of trade receivables is reviewed on an
ongoing basis. Debts which are known to be uncollectable
are written off by reducing the carrying amount directly.
A provision for impairment of trade receivables is raised
when there is objective evidence that the consolidated entity
will not be able to collect all amounts due according to
the original terms of the receivables. Significant financial
difficulties of the debtor, the probability that the debtor will
enter bankruptcy or financial reorganisation and default
or delinquency in payments (more than 60 days overdue)
are considered indicators that the trade receivable may be
impaired. The amount of the impairment allowance is the
difference between the asset’s carrying amount and the
present value of estimated future cash flows, discounted
at the original effective interest rate. Cash flows relating
to short-term receivables are not discounted if the effect
of discounting is immaterial.
Other receivables are recognised at amortised cost, less
any provision for impairment.
Inventories
Inventories include consumable stores, food and beverages
and are carried at the lower of cost and net realisable
value. Cost is determined on a first-in-first-out basis and
comprises all costs of purchases, conversion and other
costs incurred in bringing the inventories to their present
location and condition. Net realisable value is the estimated
selling price in the ordinary course of business, less the
estimated costs of completion and selling expenses.
When inventories are sold, the carrying amount of those
inventories is recognised as an expense in the period in
which the related revenue is recognised. The amount of
any write-down of inventories to net realisable value and
all losses of inventories are recognised as an expense in
the period of the write-down or loss occurs. The amount
of any reversal of any write-down of inventories, arising
from an increase in net realisable value, is recognised in
the Statement of Profit orLoss and Other Comprehensive
Income, in the period in which the reversal occurs.
Property, plant and equipment
Property, plant and equipment is stated at historical cost
less accumulated depreciation and impairment. Historical
cost includes expenditure that is directly attributable to
the acquisition of the items.
Depreciation is calculated on a straight-line basis to
write off the net cost of each item of property, plant and
equipment (excluding land) over their expected useful lives
as follows:
Buildings and structures
Machinery and equipment
Motor vehicles
Office equipment and other
Furniture and fittings
Consumables
25 years
5–10 years
3–6 years
3–10 years
5 years
1–8 years
The residual values, useful lives and depreciation methods
are reviewed, and adjusted if appropriate, at each
reporting date.
An item of property, plant and equipment is derecognised
upon disposal or when there is no future economic benefit
to the consolidated entity. Gains and losses between the
carrying amount and the disposal proceeds are taken
to profit or loss.
Leases
The determination of whether an arrangement is
or contains a lease is based on the substance of the
arrangement and requires an assessment of whether
the fulfilment of the arrangement is dependent on the use
of a specific asset or assets and the arrangement conveys
a right to use the asset.
A distinction is made between finance leases, which
effectively transfer from the lessor to the lessee
substantially all the risks and benefits incidental to
ownership of leased assets, and operating leases, under
which the lessor effectively retains substantially all such
risks and benefits.
Operating lease payments, net of any incentives received
from the lessor, are charged to the Statement of Profit or
Loss and Other Comprehensive Income, on a straight-line
basis over the term of the lease.
Intangible assets
Land rights
The intangible asset includes costs incurred to acquire
interests in the usage of land in the Socialist Republic of
Vietnam for the original hotel, located in Lao Cai. The term
of the agreement is 30 years from the initial licencing date
of 19 July 2002. These land use rights are stated at cost
less accumulated amortisation. Amortisation is calculated
on a straight-line basis over a period of 30 years, from the
licencing date. At the expiry of the land term it is expected,
that the relevant state body will consider an application
for extension.
Casino licence
The consolidated entity considers casino licences to be
intangible assets with indefinite useful lives. Accordingly,
they are not amortised and are tested annually for
impairment or more frequently if events or changes in
circumstances indicate that it might be impaired, and
is carried at cost less accumulated impairment losses.
Impairment losses on casino licences are recognised
in the profit or loss.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill
is not amortised. Instead, goodwill is tested annually for
impairment, or more frequently if events or changes in
circumstances indicate that it might be impaired, and
is carried at cost less accumulated impairment losses.
Impairment losses on goodwill are taken to profit or loss
and are not subsequently reversed.
Prepaid construction costs
Amounts recognised as prepaid construction costs relate
to tranche payments made to third party developers in
connection with the construction of the new Lao Cai Casino.
Tranche payments are made in advance of construction
work being performed in accordance with the terms of the
contractor agreements; however, once associated works
have been completed an amount equal to the tranche
payment is transferred from prepaid construction costs
to construction in progress. Once recognised as part of
construction in progress the amounts are then carried
on the Statement of Financial Position at cost, until such
time as the asset is completed and ready for its intended
use. Work in progress is not depreciated, but tested for
impairment annually. Once ready for its intended use
an amount equal to the cost of the completed asset will be
transferred to property plant and equipment and accounted
for in accordance with the consolidated entity’s accounting
policy for property plant and equipment.
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite
useful life are not subject to amortisation and are tested
annually for impairment, or more frequently if events or
changes in circumstances indicate that they might be
impaired. Other non-financial assets are reviewed for
impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which
the asset’s carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset’s fair value
less costs of disposal and value-in-use. The value-in-use is
the present value of the estimated future cash flows relating
to the asset using a pre-tax discount rate specific to the
asset or cash-generating unit to which the asset belongs.
Assets that do not have independent cash flows are grouped
together to form a cash-generating unit.
Trade and other payables
These amounts represent liabilities for goods and services
provided to the consolidated entity prior to the end of the
financial year and which are unpaid. Due to their short-term
nature they are measured at amortised cost and are not
discounted. The amounts are unsecured and are usually
paid within 30 days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair
value of the consideration received, net of transaction costs.
They are subsequently measured at amortised cost using
the effective interest method.
Where there is an unconditional right to defer settlement
of the liability for at least 12 months after the reporting
date, the loans or borrowings are classified as non-current.
Warrants
Warrants issued as part of financing arrangements, which
may be net settled in cash or through the issue of shares
of the parent entity are recognised as derivative financial
liabilities measured at fair value through profit or loss.
The fair value of the warrants is determined using the
Black-Scholes model.
At each reporting date the warrants are revalued to fair
value with any difference recognised in the profit or loss.
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facility, on initial recognition the fair value of the related
loan facility is calculated as the difference between the
proceeds and the fair value of the warrants.
The difference between the fair value of the loan facility
and the proceeds is then amortised over the term of the
loan using the effective interest rate method.
Finance costs
Finance costs attributable to qualifying assets are
capitalised as part of the asset. All other finance costs are
expensed in the period in which they are incurred including
interest on short term and long term borrowings.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary
benefits, annual leave and long service leave expected to
be wholly settled within 12 months of the reporting date
are measured at the amounts expected to be paid when
the liabilities are settled. Non-accumulating sick leave
is expensed to profit or loss when incurred.
Other long-term employee benefits
The liability for annual leave and long service leave not
expected to be wholly settled within 12 months of the
reporting date are recognised in non-current liabilities,
provided there is an unconditional right to defer settlement
of the liability. The liability is measured as the present
value of expected future payments to be made in respect
of services provided by employees up to the reporting date
using the projected unit credit method. Consideration is
given to expected future wage and salary levels, experience
of employee departures and periods of service. Expected
future payments are discounted using market yields at the
reporting date on national corporate bonds with terms to
maturity and currency that match, as closely as possible,
the estimated future cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans
are expensed in the period in which they are incurred.
using an amended Black-Scholes-Merton model that takes
into account the exercise price, the term of the option,
an exercise price multiple, the share price at grant date
and expected price volatility of the underlying share, the
expected dividend yield and the risk free interest rate for the
term of the option, together with non-vesting conditions that
do not determine whether the consolidated entity receives
the services that entitle the employees to receive payment.
No account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised
as an expense with a corresponding increase in equity over
the vesting period. The cumulative charge to profit or loss
is calculated based on the grant date fair value of the
award, the best estimate of the number of awards that are
likely to vest and the expired portion of the vesting period.
The amount recognised in profit or loss for the period is the
cumulative amount calculated at each reporting date less
amounts already recognised in previous periods.
Market conditions are taken into consideration in
determining fair value. Therefore any awards subject
to market conditions are considered to vest irrespective
of whether or not that market condition has been met,
provided all other conditions are satisfied.
If equity-settled awards are modified, as a minimum
an expense is recognised as if the modification has
not been made. An additional expense is recognised,
over the remaining vesting period, for any modification
that increases the total fair value of the share-based
compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the
consolidated entity or employee, the failure to satisfy the
condition is treated as a cancellation. If the condition is not
within the control of the consolidated entity or employee
and is not satisfied during the vesting period, any remaining
expense for the award is recognised over the remaining
vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it
has vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement
award is substituted for the cancelled award, the cancelled
and new award is treated as if they were a modification.
Share-based payments
Fair value measurement
Equity-settled share-based compensation benefits are
provided to employees. Equity-settled transactions are
awards of shares, or options over shares, that are provided
to employees in exchange for the rendering of services.
The cost of equity-settled transactions are measured at fair
value on grant date. Fair value is independently determined
When an asset or liability, financial or non-financial,
is measured at fair value for recognition or disclosure
purposes, the fair value is based on the price that would
be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the
measurement date; and assumes that the transaction will
take place either: in the principal market; or in the absence
of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market
participants would use when pricing the asset or liability,
assuming they act in their economic best interest. For
non-financial assets, the fair value measurement is
based on its highest and best use. Valuation techniques
that are appropriate in the circumstances and for which
sufficient data is available to measure fair value, are used,
maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
The financial instruments recognised at fair value in
the Consolidated Statement of Financial Position have
been analysed and classified using a fair value hierarchy
reflecting the significance of the inputs used in making
the measurements. The fair value hierarchy consist of
the following levels:
a. quoted prices (unadjusted) in active markets for
identical assets or liabilities (level 1)
b.
inputs other than quoted prices included within level
1 that are observable for the asset or liability, either
directly (as prices) or indirectly (derived from prices)
(level 2), and
c.
inputs for the asset or liability that are not based on
observable market data (unobservable inputs) (level 3).
During the 2016 reporting period, the Group issued
warrants which are classified as derivative financial
liabilities and which are measured at fair value through
profit or loss. The warrants (as detailed in note 19) are
classified as level 2 in the fair value hierarchy, as the value
is based on an adjustment to quoted market prices.
The warrants are measured using a Black-Scholes model.
There were no transfers between the levels of the fair
value hierarchy during either the current or previous
reporting period.
The directors consider that the carrying amount of all other
financial assets and liabilities recorded in the financial
statements approximate their fair value.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net
of tax, from the proceeds.
Where the consolidated entity purchases the Company’s
equity instruments, for example as the result of a share
buyback or a share-based payment plan, the consideration
paid, including any directly attributable incremental costs
(net of income taxes) is deducted from equity attributable
to the owners of Donaco International Limited as treasury
shares until the shares are cancelled or reissued. Where
such ordinary shares are subsequently reissued, any
consideration received, net of any directly attributable
incremental transaction costs and the related income
tax effects, is included in equity attributable to the owners
of Donaco International Limited.
Dividends
Provision is made for the amount of any dividend declared,
determined or announced by the directors on or before the
end of the financial year but not distributed at balance date.
Business combinations
The acquisition method of accounting is used to account
for business combinations regardless of whether equity
instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition-
date fair values of the assets transferred, equity
instruments issued or liabilities incurred by the acquirer
to former owners of the acquiree and the amount of any
non-controlling interest in the acquiree. For each business
combination, the non-controlling interest in the acquiree is
measured at either fair value or at the proportionate share
of the acquiree’s identifiable net assets. All acquisition
costs are expensed as incurred to profit or loss.
On the acquisition of a business, the consolidated entity
assesses the financial assets acquired and liabilities
assumed for appropriate classification and designation
in accordance with the contractual terms, economic
conditions, the consolidated entity’s operating or accounting
policies and other pertinent conditions in existence at the
acquisition-date.
Where the business combination is achieved in stages,
the consolidated entity remeasures its previously held
equity interest in the acquiree at the acquisition-date fair
value and the difference between the fair value and the
previous carrying amount is recognised in profit or loss.
Contingent consideration to be transferred by the acquirer
is recognised at the acquisition-date fair value. Subsequent
changes in the fair value of the contingent consideration
classified as an asset or liability is recognised in profit or
loss. Contingent consideration classified as equity is not
remeasured and its subsequent settlement is accounted
for within equity.
The difference between the acquisition-date fair value
of assets acquired, liabilities assumed and any non-
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Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportNotes to the Financial Statements For the year eNded 30 JuNe 2017Notes to the Financial Statements For the year eNded 30 JuNe 2017As the warrants were issued in connection with a loan
facility, on initial recognition the fair value of the related
loan facility is calculated as the difference between the
proceeds and the fair value of the warrants.
The difference between the fair value of the loan facility
and the proceeds is then amortised over the term of the
loan using the effective interest rate method.
Finance costs
Finance costs attributable to qualifying assets are
capitalised as part of the asset. All other finance costs are
expensed in the period in which they are incurred including
interest on short term and long term borrowings.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary
benefits, annual leave and long service leave expected to
be wholly settled within 12 months of the reporting date
are measured at the amounts expected to be paid when
the liabilities are settled. Non-accumulating sick leave
is expensed to profit or loss when incurred.
Other long-term employee benefits
The liability for annual leave and long service leave not
expected to be wholly settled within 12 months of the
reporting date are recognised in non-current liabilities,
provided there is an unconditional right to defer settlement
of the liability. The liability is measured as the present
value of expected future payments to be made in respect
of services provided by employees up to the reporting date
using the projected unit credit method. Consideration is
given to expected future wage and salary levels, experience
of employee departures and periods of service. Expected
future payments are discounted using market yields at the
reporting date on national corporate bonds with terms to
maturity and currency that match, as closely as possible,
the estimated future cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans
are expensed in the period in which they are incurred.
using an amended Black-Scholes-Merton model that takes
into account the exercise price, the term of the option,
an exercise price multiple, the share price at grant date
and expected price volatility of the underlying share, the
expected dividend yield and the risk free interest rate for the
term of the option, together with non-vesting conditions that
do not determine whether the consolidated entity receives
the services that entitle the employees to receive payment.
No account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised
as an expense with a corresponding increase in equity over
the vesting period. The cumulative charge to profit or loss
is calculated based on the grant date fair value of the
award, the best estimate of the number of awards that are
likely to vest and the expired portion of the vesting period.
The amount recognised in profit or loss for the period is the
cumulative amount calculated at each reporting date less
amounts already recognised in previous periods.
Market conditions are taken into consideration in
determining fair value. Therefore any awards subject
to market conditions are considered to vest irrespective
of whether or not that market condition has been met,
provided all other conditions are satisfied.
If equity-settled awards are modified, as a minimum
an expense is recognised as if the modification has
not been made. An additional expense is recognised,
over the remaining vesting period, for any modification
that increases the total fair value of the share-based
compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the
consolidated entity or employee, the failure to satisfy the
condition is treated as a cancellation. If the condition is not
within the control of the consolidated entity or employee
and is not satisfied during the vesting period, any remaining
expense for the award is recognised over the remaining
vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it
has vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement
award is substituted for the cancelled award, the cancelled
and new award is treated as if they were a modification.
Share-based payments
Fair value measurement
Equity-settled share-based compensation benefits are
provided to employees. Equity-settled transactions are
awards of shares, or options over shares, that are provided
to employees in exchange for the rendering of services.
The cost of equity-settled transactions are measured at fair
value on grant date. Fair value is independently determined
When an asset or liability, financial or non-financial,
is measured at fair value for recognition or disclosure
purposes, the fair value is based on the price that would
be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the
measurement date; and assumes that the transaction will
take place either: in the principal market; or in the absence
of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market
participants would use when pricing the asset or liability,
assuming they act in their economic best interest. For
non-financial assets, the fair value measurement is
based on its highest and best use. Valuation techniques
that are appropriate in the circumstances and for which
sufficient data is available to measure fair value, are used,
maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
The financial instruments recognised at fair value in
the Consolidated Statement of Financial Position have
been analysed and classified using a fair value hierarchy
reflecting the significance of the inputs used in making
the measurements. The fair value hierarchy consist of
the following levels:
a. quoted prices (unadjusted) in active markets for
identical assets or liabilities (level 1)
b.
inputs other than quoted prices included within level
1 that are observable for the asset or liability, either
directly (as prices) or indirectly (derived from prices)
(level 2), and
c.
inputs for the asset or liability that are not based on
observable market data (unobservable inputs) (level 3).
During the 2016 reporting period, the Group issued
warrants which are classified as derivative financial
liabilities and which are measured at fair value through
profit or loss. The warrants (as detailed in note 19) are
classified as level 2 in the fair value hierarchy, as the value
is based on an adjustment to quoted market prices.
The warrants are measured using a Black-Scholes model.
There were no transfers between the levels of the fair
value hierarchy during either the current or previous
reporting period.
The directors consider that the carrying amount of all other
financial assets and liabilities recorded in the financial
statements approximate their fair value.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net
of tax, from the proceeds.
Where the consolidated entity purchases the Company’s
equity instruments, for example as the result of a share
buyback or a share-based payment plan, the consideration
paid, including any directly attributable incremental costs
(net of income taxes) is deducted from equity attributable
to the owners of Donaco International Limited as treasury
shares until the shares are cancelled or reissued. Where
such ordinary shares are subsequently reissued, any
consideration received, net of any directly attributable
incremental transaction costs and the related income
tax effects, is included in equity attributable to the owners
of Donaco International Limited.
Dividends
Provision is made for the amount of any dividend declared,
determined or announced by the directors on or before the
end of the financial year but not distributed at balance date.
Business combinations
The acquisition method of accounting is used to account
for business combinations regardless of whether equity
instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition-
date fair values of the assets transferred, equity
instruments issued or liabilities incurred by the acquirer
to former owners of the acquiree and the amount of any
non-controlling interest in the acquiree. For each business
combination, the non-controlling interest in the acquiree is
measured at either fair value or at the proportionate share
of the acquiree’s identifiable net assets. All acquisition
costs are expensed as incurred to profit or loss.
On the acquisition of a business, the consolidated entity
assesses the financial assets acquired and liabilities
assumed for appropriate classification and designation
in accordance with the contractual terms, economic
conditions, the consolidated entity’s operating or accounting
policies and other pertinent conditions in existence at the
acquisition-date.
Where the business combination is achieved in stages,
the consolidated entity remeasures its previously held
equity interest in the acquiree at the acquisition-date fair
value and the difference between the fair value and the
previous carrying amount is recognised in profit or loss.
Contingent consideration to be transferred by the acquirer
is recognised at the acquisition-date fair value. Subsequent
changes in the fair value of the contingent consideration
classified as an asset or liability is recognised in profit or
loss. Contingent consideration classified as equity is not
remeasured and its subsequent settlement is accounted
for within equity.
The difference between the acquisition-date fair value
of assets acquired, liabilities assumed and any non-
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Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportNotes to the Financial Statements For the year eNded 30 JuNe 2017Notes to the Financial Statements For the year eNded 30 JuNe 2017controlling interest in the acquiree and the fair value of
the consideration transferred and the fair value of any
pre-existing investment in the acquiree is recognised
as goodwill. If the consideration transferred and the
pre-existing fair value is less than the fair value of the
identifiable net assets acquired, being a bargain purchase
to the acquirer, the difference is recognised as a gain
directly in profit or loss by the acquirer on the acquisition-
date, but only after a reassessment of the identification
and measurement of the net assets acquired, the non-
controlling interest in the acquiree, if any, the consideration
transferred and the acquirer’s previously held equity
interest in the acquirer.
Business combinations are initially accounted for on a
provisional basis. The acquirer retrospectively adjusts
the provisional amounts recognised and also recognises
additional assets or liabilities during the measurement
period, based on new information obtained about the facts
and circumstances that existed at the acquisition date.
The measurement period ends on either the earlier of (i)
12 months from the date of the acquisition or (ii) when the
acquirer receives all the information possible to determine
fair value.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to the owners of Donaco International Limited,
excluding any costs of servicing equity other than ordinary
shares, by the weighted average number of ordinary shares
outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the financial year
and excluding treasury shares.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in
the determination of basic earnings per share to take into
account the after income tax effect of interest and other
financing costs associated with dilutive potential ordinary
shares and the weighted average number of shares
assumed to have been issued for no consideration in
relation to dilutive potential ordinary shares.
Goods and services tax and other
similar taxes
Revenues, expenses and assets are recognised net of the
amount of associated good and services tax [GST], unless
the GST incurred is not recoverable from the tax authority.
In this case, it is recognised as part of the cost of the
acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount
of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included
in other receivables or other payables in the Statement of
Financial Position.
Cash flows are presented gross of GST and similar taxes.
The GST components of cash flows arising from investing
or financing activities which are recoverable from, or payable
to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of
the amount of GST recoverable from, or payable to, the
tax authority.
New Accounting Standards and Interpretations
not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that
have recently been issued or amended but are not yet
mandatory, have not been early adopted by the consolidated
entity for the annual reporting period ended 30 June 2017.
The consolidated entity’s assessment of the impact of these
new or amended Accounting Standards and Interpretations,
most relevant to the consolidated entity, are set out below.
AASB 9 Financial Instruments
AASB 9 Financial Instruments and applicable amendments,
effective from 1 January 2018, addresses the classification,
measurement and derecognition of financial assets
and financial liabilities. This standard introduces new
classification and measurement models for financial
assets, using a single approach to determine whether a
financial asset is measured at amortised cost or fair value.
It has now also introduced revised rules around hedge
accounting and impairment. The consolidated entity will
adopt this standard and the amendments from 1 July 2017
and it does not expect this to have a significant impact
on the recognition and measurement of the consolidated
entity’s financial instruments as they are carried at fair
value through profit or loss. The derecognition rules have
not been changed from the previous requirements, and
the consolidated entity does not apply hedge accounting.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods
beginning on or after 1 January 2018. The standard provides
a single standard for revenue recognition. The core principle
of the standard is that an entity will recognise revenue
to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to
which the entity expects to be entitled in exchange for those
goods or services. The standard will require: contracts
(either written, verbal or implied) to be identified, together
with the separate performance obligations within the
contract; determine the transaction price, adjusted for the
time value of money excluding credit risk; allocation of the
transaction price to the separate performance obligations
on a basis of relative stand-alone selling price of each
distinct good or service, or estimation approach if no
distinct observable prices exist; and recognition of revenue
when each performance obligation is satisfied. Credit risk
will be presented separately as an expense rather than
adjusted to revenue. For goods, the performance obligation
would be satisfied when the customer obtains control of the
goods. For services, the performance obligation is satisfied
when the service has been provided, typically for promises
to transfer services to customers. For performance
obligations satisfied over time, an entity would select
an appropriate measure of progress to determine how
much revenue should be recognised as the performance
obligation is satisfied. Contracts with customers will be
presented in an entity’s Statement of Financial Position
as a contract liability, a contract asset, or a receivable,
depending on the relationship between the entity’s
performance and the customer’s payment. Sufficient
quantitative and qualitative disclosure is required to enable
users to understand the contracts with customers; the
significant judgements made in applying the guidance
to those contracts; and any assets recognised from the
costs to obtain or fulfil a contract with a customer. The
consolidated entity will adopt this standard from 1 July 2018
and is assessing the impact of its adoption.
AASB 16 Leases
The new standard will be effective for annual periods
beginning on or after 1 January 2019. Early application
is permitted, provided the new revenue standard, AASB 15
Revenue from Contracts with Customers, has been applied,
or is applied at the same date as AASB 16. AASB 16 will
primarily affect the accounting by lessees and will result
in the recognition of almost all leases on the balance sheet.
The standard removes the current distinction between
operating and financing leases and requires recognition
of an asset (the right to use the leased item) and a financial
liability to pay rentals for almost all lease contracts. The
accounting by lessors, however, will not significantly
change. The consolidated entity has not elected early
adoption and is assessing the impact of its adoption.
and non-vesting conditions on the measurement of
cash settled share-based payments and a modification
to the terms and conditions of a share-based payment
that changes the classification of the transaction from
cash settled to equity settled. Adoption of IFRS 2 is not
mandatory until annual period beginning on or after
1 January 2018 and the consolidated entity is assessing
the impact of its adoption.
New and amended standards adopted
by the Group
AASB 2014-4 Clarification of Acceptable Methods
of Depreciation and Amortisation (Amendments
to AASB 116 and AASB 138)
This standard makes amendments to AASB 116 Property,
Plant and Equipment and AASB 138 Intangible Assets. The
main principle is to establish the basis of depreciation and
amortisation as being the expected pattern of consumption
of the future economic benefits of an asset rather than
associated to revenue streams. This standard applies to
annual reporting periods beginning on or after 1 January
2016. The adoption of the standard has not had a material
effect on the financial statements.
Note 2. Critical accounting
judgements, estimates and
assumptions
The preparation of the financial statements requires
management to make judgements, estimates and
assumptions that affect the reported amounts in the
financial statements. Management continually evaluates
its judgements and estimates in relation to assets,
liabilities, contingent liabilities, revenue and expenses.
Management bases its judgements, estimates and
assumptions on historical experience and on other
various factors, including expectations of future events,
management believes to be reasonable under the
circumstances. The resulting accounting judgements
and estimates will seldom equal the related actual results.
The judgements, estimates and assumptions that have
a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities (refer to
the respective notes) within the next financial year are
discussed below.
IFRS 2 – Classification and Measurement of Share-based
Payment Transactions (Amendments to IFRS 2)
Share-based payment transactions
This standard amends to IFRS 2 Share-based Payment,
clarifying how to account for certain types of share-
based payment transactions. The amendments provide
requirements on the accounting for the effects of vesting
The consolidated entity measures the cost of equity-settled
transactions with employees by reference to the fair value
of the equity instruments at the date at which they are
granted. The fair value of options is determined by using
42
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Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportNotes to the Financial Statements For the year eNded 30 JuNe 2017Notes to the Financial Statements For the year eNded 30 JuNe 2017controlling interest in the acquiree and the fair value of
the consideration transferred and the fair value of any
pre-existing investment in the acquiree is recognised
as goodwill. If the consideration transferred and the
pre-existing fair value is less than the fair value of the
identifiable net assets acquired, being a bargain purchase
to the acquirer, the difference is recognised as a gain
directly in profit or loss by the acquirer on the acquisition-
date, but only after a reassessment of the identification
and measurement of the net assets acquired, the non-
controlling interest in the acquiree, if any, the consideration
transferred and the acquirer’s previously held equity
interest in the acquirer.
Business combinations are initially accounted for on a
provisional basis. The acquirer retrospectively adjusts
the provisional amounts recognised and also recognises
additional assets or liabilities during the measurement
period, based on new information obtained about the facts
and circumstances that existed at the acquisition date.
The measurement period ends on either the earlier of (i)
12 months from the date of the acquisition or (ii) when the
acquirer receives all the information possible to determine
fair value.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to the owners of Donaco International Limited,
excluding any costs of servicing equity other than ordinary
shares, by the weighted average number of ordinary shares
outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the financial year
and excluding treasury shares.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in
the determination of basic earnings per share to take into
account the after income tax effect of interest and other
financing costs associated with dilutive potential ordinary
shares and the weighted average number of shares
assumed to have been issued for no consideration in
relation to dilutive potential ordinary shares.
Goods and services tax and other
similar taxes
Revenues, expenses and assets are recognised net of the
amount of associated good and services tax [GST], unless
the GST incurred is not recoverable from the tax authority.
In this case, it is recognised as part of the cost of the
acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount
of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included
in other receivables or other payables in the Statement of
Financial Position.
Cash flows are presented gross of GST and similar taxes.
The GST components of cash flows arising from investing
or financing activities which are recoverable from, or payable
to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of
the amount of GST recoverable from, or payable to, the
tax authority.
New Accounting Standards and Interpretations
not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that
have recently been issued or amended but are not yet
mandatory, have not been early adopted by the consolidated
entity for the annual reporting period ended 30 June 2017.
The consolidated entity’s assessment of the impact of these
new or amended Accounting Standards and Interpretations,
most relevant to the consolidated entity, are set out below.
AASB 9 Financial Instruments
AASB 9 Financial Instruments and applicable amendments,
effective from 1 January 2018, addresses the classification,
measurement and derecognition of financial assets
and financial liabilities. This standard introduces new
classification and measurement models for financial
assets, using a single approach to determine whether a
financial asset is measured at amortised cost or fair value.
It has now also introduced revised rules around hedge
accounting and impairment. The consolidated entity will
adopt this standard and the amendments from 1 July 2017
and it does not expect this to have a significant impact
on the recognition and measurement of the consolidated
entity’s financial instruments as they are carried at fair
value through profit or loss. The derecognition rules have
not been changed from the previous requirements, and
the consolidated entity does not apply hedge accounting.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods
beginning on or after 1 January 2018. The standard provides
a single standard for revenue recognition. The core principle
of the standard is that an entity will recognise revenue
to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to
which the entity expects to be entitled in exchange for those
goods or services. The standard will require: contracts
(either written, verbal or implied) to be identified, together
with the separate performance obligations within the
contract; determine the transaction price, adjusted for the
time value of money excluding credit risk; allocation of the
transaction price to the separate performance obligations
on a basis of relative stand-alone selling price of each
distinct good or service, or estimation approach if no
distinct observable prices exist; and recognition of revenue
when each performance obligation is satisfied. Credit risk
will be presented separately as an expense rather than
adjusted to revenue. For goods, the performance obligation
would be satisfied when the customer obtains control of the
goods. For services, the performance obligation is satisfied
when the service has been provided, typically for promises
to transfer services to customers. For performance
obligations satisfied over time, an entity would select
an appropriate measure of progress to determine how
much revenue should be recognised as the performance
obligation is satisfied. Contracts with customers will be
presented in an entity’s Statement of Financial Position
as a contract liability, a contract asset, or a receivable,
depending on the relationship between the entity’s
performance and the customer’s payment. Sufficient
quantitative and qualitative disclosure is required to enable
users to understand the contracts with customers; the
significant judgements made in applying the guidance
to those contracts; and any assets recognised from the
costs to obtain or fulfil a contract with a customer. The
consolidated entity will adopt this standard from 1 July 2018
and is assessing the impact of its adoption.
AASB 16 Leases
The new standard will be effective for annual periods
beginning on or after 1 January 2019. Early application
is permitted, provided the new revenue standard, AASB 15
Revenue from Contracts with Customers, has been applied,
or is applied at the same date as AASB 16. AASB 16 will
primarily affect the accounting by lessees and will result
in the recognition of almost all leases on the balance sheet.
The standard removes the current distinction between
operating and financing leases and requires recognition
of an asset (the right to use the leased item) and a financial
liability to pay rentals for almost all lease contracts. The
accounting by lessors, however, will not significantly
change. The consolidated entity has not elected early
adoption and is assessing the impact of its adoption.
and non-vesting conditions on the measurement of
cash settled share-based payments and a modification
to the terms and conditions of a share-based payment
that changes the classification of the transaction from
cash settled to equity settled. Adoption of IFRS 2 is not
mandatory until annual period beginning on or after
1 January 2018 and the consolidated entity is assessing
the impact of its adoption.
New and amended standards adopted
by the Group
AASB 2014-4 Clarification of Acceptable Methods
of Depreciation and Amortisation (Amendments
to AASB 116 and AASB 138)
This standard makes amendments to AASB 116 Property,
Plant and Equipment and AASB 138 Intangible Assets. The
main principle is to establish the basis of depreciation and
amortisation as being the expected pattern of consumption
of the future economic benefits of an asset rather than
associated to revenue streams. This standard applies to
annual reporting periods beginning on or after 1 January
2016. The adoption of the standard has not had a material
effect on the financial statements.
Note 2. Critical accounting
judgements, estimates and
assumptions
The preparation of the financial statements requires
management to make judgements, estimates and
assumptions that affect the reported amounts in the
financial statements. Management continually evaluates
its judgements and estimates in relation to assets,
liabilities, contingent liabilities, revenue and expenses.
Management bases its judgements, estimates and
assumptions on historical experience and on other
various factors, including expectations of future events,
management believes to be reasonable under the
circumstances. The resulting accounting judgements
and estimates will seldom equal the related actual results.
The judgements, estimates and assumptions that have
a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities (refer to
the respective notes) within the next financial year are
discussed below.
IFRS 2 – Classification and Measurement of Share-based
Payment Transactions (Amendments to IFRS 2)
Share-based payment transactions
This standard amends to IFRS 2 Share-based Payment,
clarifying how to account for certain types of share-
based payment transactions. The amendments provide
requirements on the accounting for the effects of vesting
The consolidated entity measures the cost of equity-settled
transactions with employees by reference to the fair value
of the equity instruments at the date at which they are
granted. The fair value of options is determined by using
42
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Identification of reportable operating segments
The consolidated entity is organised into three operating
segments: Casino Operations in Vietnam, Casino
Operations in Cambodia and Corporate Operations. These
operating segments are based on the internal reports that
are reviewed and used by the Board of Directors (who are
identified as the Chief Operating Decision Makers (CODM))
in assessing performance and in determining the allocation
of resources. There is no aggregation of operating segments.
Types of products and services
The consolidated entity is domiciled in Australia and
operates predominantly in six countries: Australia,
Cambodia, Hong Kong, Vietnam, Singapore and Malaysia.
The casino operations are segmented geographically
between casino operations in Vietnam and Cambodia.
The CODM reviews EBITDA. The accounting policies
adopted for internal reporting to the CODM are consistent
with those adopted in the financial statements.
The information reported to the CODM is on a monthly basis.
The principal products and services of each of these operating segments are as follows:
Casino Operations – Vietnam
Comprises the Aristo International Hotel operating in Vietnam. These operations include
hotel accommodation and gaming and leisure facilities.
Casino Operations – Cambodia
Comprises the Star Vegas Resort and Club, operating in Cambodia. These operations
include hotel accommodation and gaming and leisure facilities.
Corporate Operations
Comprises of the development and implementation of corporate strategy, commercial
negotiations, corporate finance, treasury, management accounting, corporate governance
and investor relations functions.
an amended Black-Scholes-Merton model taking into
account the terms and conditions upon which the instruments
were granted. The accounting estimates and assumptions
relating to equity-settled share-based payments would have
no impact on the carrying amounts of assets and liabilities
within the next annual reporting period but may impact
profit or loss and equity.
The value of shares issued to employees is based on the
market value of shares traded on the ASX at the time
of issue.
in determining the provision for income tax. There are
many transactions and calculations undertaken during
the ordinary course of business for which the ultimate
tax determination is uncertain. The consolidated entity
recognises liabilities for anticipated tax audit issues based
on the consolidated entity’s current understanding of the
tax law. Where the final tax outcome of these matters is
different from the carrying amounts, such differences will
impact the current and deferred tax provisions in the period
in which such determination is made.
Estimation of useful lives of assets
Business combinations
The consolidated entity determines the estimated useful
lives and related depreciation and amortisation charges for
its property, plant and equipment and finite life intangible
assets. The useful lives could change significantly as a
result of technical innovations or some other event. The
depreciation and amortisation charge will increase where
the useful lives are less than previously estimated lives, or
technically obsolete or non-strategic assets that have been
abandoned or sold will be written off or written down.
The casino licence is stated at cost less impairment losses,
if any. The licence issued by the Royal Government of
Cambodia is renewable annually and deemed to be with
indefinite useful life, and therefore should not be amortised.
Its useful life is reviewed at each reporting period to
determine whether events and circumstances continue
to exist to support indefinite useful life assessment. An
impairment test, by comparing its recoverable amount with
its carrying amount, is performed annually. In the event
that the expected future economic benefits are no longer
probable of being recovered, the licences are written down
to their recoverable amount.
Goodwill and other indefinite life intangible assets
The consolidated entity tests annually, or more frequently
if events or changes in circumstances indicate impairment,
whether goodwill and other indefinite life intangible assets
have suffered any impairment, in accordance with the
accounting policy stated in note 1. The recoverable amounts
of cash-generating units have been determined based on
the higher of value-in-use calculations and fair value less
costs of disposal. These calculations require the use of
assumptions, including estimated discount rates based on
the current cost of capital and growth rates of the estimated
future cash flows.
Income tax
The consolidated entity is subject to income taxes in the
jurisdictions in which it operates, including Cambodia,
Vietnam and Hong Kong. Significant judgement is required
As discussed in note 1, business combinations are initially
accounted for on a provisional basis. The fair value of assets
acquired, liabilities and contingent liabilities assumed are
initially estimated by the consolidated entity taking into
consideration all available information at the reporting date.
Fair value adjustments on the finalisation of the business
combination accounting is retrospective, where applicable,
to the period the combination occurred and may have
an impact on the assets and liabilities, depreciation and
amortisation reported.
Warrants
The consolidated entity measures the cost of warrants
issued by the reference to the fair value of the equity
instruments at the date at which they are granted. The
fair value of warrants is determined by using an amended
Black-Scholes-Merton model taking into account the terms
and conditions upon which the instruments were granted.
Employee share trust and option trust
The consolidated entity has engaged an external unrelated
third party to form trusts to administer the Group’s
employee share schemes. The consolidated entity has
no ownership interest in the trusts and the trusts are not
consolidated as they are not controlled by the consolidated
entity. In determining whether or not the consolidated entity
had control over the trusts, management considered the
trust’s status as an independent trust with an independent
trustee, which holds the assets for the benefit of the
employees rather than the consolidated entity.
In making this determination management have considered
a number of factors, the most relevant being that the trust
deed which governs the trusts, outlines that the trustees
have no obligation to comply with the consolidated entity’s
directions in respect of the allocation and issue of shares
and share options.
44
44
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Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportNotes to the Financial Statements For the year eNded 30 JuNe 2017Notes to the Financial Statements For the year eNded 30 JuNe 2017Note 3. Operating segments
Identification of reportable operating segments
The consolidated entity is organised into three operating
segments: Casino Operations in Vietnam, Casino
Operations in Cambodia and Corporate Operations. These
operating segments are based on the internal reports that
are reviewed and used by the Board of Directors (who are
identified as the Chief Operating Decision Makers (CODM))
in assessing performance and in determining the allocation
of resources. There is no aggregation of operating segments.
Types of products and services
The consolidated entity is domiciled in Australia and
operates predominantly in six countries: Australia,
Cambodia, Hong Kong, Vietnam, Singapore and Malaysia.
The casino operations are segmented geographically
between casino operations in Vietnam and Cambodia.
The CODM reviews EBITDA. The accounting policies
adopted for internal reporting to the CODM are consistent
with those adopted in the financial statements.
The information reported to the CODM is on a monthly basis.
The principal products and services of each of these operating segments are as follows:
Casino Operations – Vietnam
Comprises the Aristo International Hotel operating in Vietnam. These operations include
hotel accommodation and gaming and leisure facilities.
Casino Operations – Cambodia
Comprises the Star Vegas Resort and Club, operating in Cambodia. These operations
include hotel accommodation and gaming and leisure facilities.
Corporate Operations
Comprises of the development and implementation of corporate strategy, commercial
negotiations, corporate finance, treasury, management accounting, corporate governance
and investor relations functions.
an amended Black-Scholes-Merton model taking into
account the terms and conditions upon which the instruments
were granted. The accounting estimates and assumptions
relating to equity-settled share-based payments would have
no impact on the carrying amounts of assets and liabilities
within the next annual reporting period but may impact
profit or loss and equity.
The value of shares issued to employees is based on the
market value of shares traded on the ASX at the time
of issue.
in determining the provision for income tax. There are
many transactions and calculations undertaken during
the ordinary course of business for which the ultimate
tax determination is uncertain. The consolidated entity
recognises liabilities for anticipated tax audit issues based
on the consolidated entity’s current understanding of the
tax law. Where the final tax outcome of these matters is
different from the carrying amounts, such differences will
impact the current and deferred tax provisions in the period
in which such determination is made.
Estimation of useful lives of assets
Business combinations
The consolidated entity determines the estimated useful
lives and related depreciation and amortisation charges for
its property, plant and equipment and finite life intangible
assets. The useful lives could change significantly as a
result of technical innovations or some other event. The
depreciation and amortisation charge will increase where
the useful lives are less than previously estimated lives, or
technically obsolete or non-strategic assets that have been
abandoned or sold will be written off or written down.
The casino licence is stated at cost less impairment losses,
if any. The licence issued by the Royal Government of
Cambodia is renewable annually and deemed to be with
indefinite useful life, and therefore should not be amortised.
Its useful life is reviewed at each reporting period to
determine whether events and circumstances continue
to exist to support indefinite useful life assessment. An
impairment test, by comparing its recoverable amount with
its carrying amount, is performed annually. In the event
that the expected future economic benefits are no longer
probable of being recovered, the licences are written down
to their recoverable amount.
Goodwill and other indefinite life intangible assets
The consolidated entity tests annually, or more frequently
if events or changes in circumstances indicate impairment,
whether goodwill and other indefinite life intangible assets
have suffered any impairment, in accordance with the
accounting policy stated in note 1. The recoverable amounts
of cash-generating units have been determined based on
the higher of value-in-use calculations and fair value less
costs of disposal. These calculations require the use of
assumptions, including estimated discount rates based on
the current cost of capital and growth rates of the estimated
future cash flows.
Income tax
The consolidated entity is subject to income taxes in the
jurisdictions in which it operates, including Cambodia,
Vietnam and Hong Kong. Significant judgement is required
As discussed in note 1, business combinations are initially
accounted for on a provisional basis. The fair value of assets
acquired, liabilities and contingent liabilities assumed are
initially estimated by the consolidated entity taking into
consideration all available information at the reporting date.
Fair value adjustments on the finalisation of the business
combination accounting is retrospective, where applicable,
to the period the combination occurred and may have
an impact on the assets and liabilities, depreciation and
amortisation reported.
Warrants
The consolidated entity measures the cost of warrants
issued by the reference to the fair value of the equity
instruments at the date at which they are granted. The
fair value of warrants is determined by using an amended
Black-Scholes-Merton model taking into account the terms
and conditions upon which the instruments were granted.
Employee share trust and option trust
The consolidated entity has engaged an external unrelated
third party to form trusts to administer the Group’s
employee share schemes. The consolidated entity has
no ownership interest in the trusts and the trusts are not
consolidated as they are not controlled by the consolidated
entity. In determining whether or not the consolidated entity
had control over the trusts, management considered the
trust’s status as an independent trust with an independent
trustee, which holds the assets for the benefit of the
employees rather than the consolidated entity.
In making this determination management have considered
a number of factors, the most relevant being that the trust
deed which governs the trusts, outlines that the trustees
have no obligation to comply with the consolidated entity’s
directions in respect of the allocation and issue of shares
and share options.
44
44
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Intersegment transactions were made at market rates. Intersegment transactions are eliminated on consolidation.
Operating segment information for continuing operations
Consolidated – 2017
$
$
$
Casino Operations
– Vietnam
Casino Operations
– Cambodia
Corporate
Operations
Revenue
Sales to external customers
26,156,663
110,188,090
Interest and other income
29,478
–
Total revenue
Other income
Total income
EBITDA
Depreciation and amortisation
Interest revenue
Other income
Net exchange gains
Non-controlling interest
Finance costs
26,186,141
110,188,090
–
–
26,186,141
110,188,090
14,676,730
(5,294,247)
29,478
–
(727,577)
(198,751)
(1,591,881)
61,190,103
(4,624,353)
–
–
–
–
–
235
69,323
69,558
(4,867)
64,691
(10,546,320)
(210,699)
69,323
1,113,012
(390,302)
–
Profit before income tax expense
6,893,752
56,565,750
(28,932,728)
(18,967,742)
(20,559,623)
Total
$
136,344,988
98,801
136,443,789
(4,867)
136,438,922
65,320,513
(10,129,299)
98,801
1,113,012
(1,117,879)
(198,751)
34,526,774
(3,536,476)
30,990,298
90,565,671
505,688,488
42,923,294
639,177,452
639,177,452
41,265,145
25,039,076
86,769,060
153,073,281
153,073,281
Income tax expense
Profit after income tax expense
attributable to the owners of
Donaco International Limited
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
Profit before income tax benefit
3,818,766
62,562,322
16,339,144
Casino Operations
– Vietnam
Casino Operations
– Cambodia
Corporate
Operations
Consolidated – 2016
$
$
$
Revenue
Sales to external customers
23,202,203
120,116,215
Interest
Total revenue
13,962
–
23,216,165
120,116,215
361
53,037
53,398
Total
$
143,318,779
66,999
143,385,778
55,165,316
2,596,962
82,720,232
(3,996,731)
78,723,501
–
–
–
–
55,165,316
2,596,962
23,216,165
120,116,215
57,815,676
201,148,056
11,683,102
(5,704,998)
13,962
–
(557,147)
(149,883)
(1,466,270)
66,571,238
(4,008,916)
–
–
–
–
–
(22,721,990)
(232,062)
53,037
55,532,350
(9,945,976)
66,999
57,774,655
57,774,655
544,770
–
(12,377)
(149,883)
(19,079,266)
(20,545,536)
97,614,196
537,688,394
47,416,894
682,719,484
682,719,484
28,996,850
29,961,285
144,450,923
203,409,058
203,409,058
Sales to
external customers
2017
$
235
26,156,663
110,188,090
136,344,988
2016
$
361
23,202,203
120,116,215
143,318,779
Geographical
non-current assets
2017
$
2016
$
2,828,823
71,201,965
2,952,743
78,629,651
477,053,600
494,361,114
551,084,387
575,943,508
Gain on bargain purchase
Other income/(expense)
Total income
EBITDA
Depreciation and amortisation
Interest revenue
Other income
Net exchange gains
Non-controlling interest
Finance costs
Income tax benefit
Profit after income tax benefit
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
Geographical information
Australia
Vietnam
Cambodia
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Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportNotes to the Financial Statements For the year eNded 30 JuNe 2017Notes to the Financial Statements For the year eNded 30 JuNe 2017Intersegment transactions
Intersegment transactions were made at market rates. Intersegment transactions are eliminated on consolidation.
Operating segment information for continuing operations
Consolidated – 2017
$
$
$
Casino Operations
– Vietnam
Casino Operations
– Cambodia
Corporate
Operations
Revenue
Sales to external customers
26,156,663
110,188,090
Interest and other income
29,478
–
Total revenue
Other income
Total income
EBITDA
Depreciation and amortisation
Interest revenue
Other income
Net exchange gains
Non-controlling interest
Finance costs
26,186,141
110,188,090
–
–
26,186,141
110,188,090
14,676,730
(5,294,247)
29,478
–
(727,577)
(198,751)
(1,591,881)
61,190,103
(4,624,353)
–
–
–
–
–
235
69,323
69,558
(4,867)
64,691
(10,546,320)
(210,699)
69,323
1,113,012
(390,302)
–
Profit before income tax expense
6,893,752
56,565,750
(28,932,728)
(18,967,742)
(20,559,623)
Total
$
136,344,988
98,801
136,443,789
(4,867)
136,438,922
65,320,513
(10,129,299)
98,801
1,113,012
(1,117,879)
(198,751)
34,526,774
(3,536,476)
30,990,298
90,565,671
505,688,488
42,923,294
639,177,452
639,177,452
41,265,145
25,039,076
86,769,060
153,073,281
153,073,281
Income tax expense
Profit after income tax expense
attributable to the owners of
Donaco International Limited
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
Profit before income tax benefit
3,818,766
62,562,322
16,339,144
Casino Operations
– Vietnam
Casino Operations
– Cambodia
Corporate
Operations
Consolidated – 2016
$
$
$
Revenue
Sales to external customers
23,202,203
120,116,215
Interest
Total revenue
13,962
–
23,216,165
120,116,215
361
53,037
53,398
Total
$
143,318,779
66,999
143,385,778
55,165,316
2,596,962
82,720,232
(3,996,731)
78,723,501
–
–
–
–
55,165,316
2,596,962
23,216,165
120,116,215
57,815,676
201,148,056
11,683,102
(5,704,998)
13,962
–
(557,147)
(149,883)
(1,466,270)
66,571,238
(4,008,916)
–
–
–
–
–
(22,721,990)
(232,062)
53,037
55,532,350
(9,945,976)
66,999
57,774,655
57,774,655
544,770
–
(12,377)
(149,883)
(19,079,266)
(20,545,536)
97,614,196
537,688,394
47,416,894
682,719,484
682,719,484
28,996,850
29,961,285
144,450,923
203,409,058
203,409,058
Sales to
external customers
2017
$
235
26,156,663
110,188,090
136,344,988
2016
$
361
23,202,203
120,116,215
143,318,779
Geographical
non-current assets
2017
$
2016
$
2,828,823
71,201,965
2,952,743
78,629,651
477,053,600
494,361,114
551,084,387
575,943,508
Gain on bargain purchase
Other income/(expense)
Total income
EBITDA
Depreciation and amortisation
Interest revenue
Other income
Net exchange gains
Non-controlling interest
Finance costs
Income tax benefit
Profit after income tax benefit
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
Geographical information
Australia
Vietnam
Cambodia
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Note 5. Other income/(expense)
Total reportable segment revenues
Other segment revenues
Total revenue and other income
Major customers
Consolidated
2017
$
2016
$
136,344,988
143,318,779
93,934
57,829,277
136,438,922
201,148,056
Net foreign exchange loss
Gain on derivative financial instrument at fair value through the profit and loss
Consolidated
2017
$
(1,117,879)
1,113,012
2016
$
(12,377)
2,609,339
Other income/(expense)
(4,867)
2,596,962
Transactions involving a single external customer amounting to 10 per cent or more of the consolidated entity’s revenue
at the end of the current and previous financial year is set out below:
Note 6. Expenses
2017
Number of
customers
% of revenue
$
Casino Operations – Cambodia
1
23%
31,417,980
2016
Number of
customers
% of revenue
$
Casino Operations – Cambodia
1
29%
41,017,389
Note 4. Revenue
From continuing operations
Sales revenue
Casino
– gaming revenue
– non-gaming revenue
Management fee from Star Paradise
Corporate Operations
Interest
Consolidated
2017
$
2016
$
120,217,587
13,788,384
2,338,782
235
98,801
128,512,879
14,805,539
–
361
66,999
Profit/(loss) before income tax from continuing operations
includes the following specific expenses:
Depreciation
Land, buildings and structures
Furniture and fittings
Machinery and equipment
Office equipment and other
Motor vehicles
Consumables
Amortisation
Land right
Consolidated
2017
$
2016
$
4,115,611
478,683
1,936,041
1,519,440
303,678
1,773,683
10,127,136
4,278,759
483,024
2,786,083
285,413
115,978
1,994,417
9,943,674
2,163
2,302
Total depreciation and amortisation
10,129,299
9,945,976
Operating lease payments
Merger and acquisition costs
Superannuation expense
267,906
526,546
–
11,819,338
Revenue from continuing operations
136,443,789
143,385,778
Defined contribution superannuation expense
23,258
92,249
Impairment of assets
Leasehold buildings
Furniture and fittings
Other equipment and other
160,011
22,348
16,426
198,785
–
–
–
–
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Revenue and other income
Note 5. Other income/(expense)
Total reportable segment revenues
Other segment revenues
Total revenue and other income
Major customers
Consolidated
2017
$
2016
$
136,344,988
143,318,779
93,934
57,829,277
136,438,922
201,148,056
Net foreign exchange loss
Gain on derivative financial instrument at fair value through the profit and loss
Consolidated
2017
$
(1,117,879)
1,113,012
2016
$
(12,377)
2,609,339
Other income/(expense)
(4,867)
2,596,962
Transactions involving a single external customer amounting to 10 per cent or more of the consolidated entity’s revenue
at the end of the current and previous financial year is set out below:
Note 6. Expenses
2017
Number of
customers
% of revenue
$
Casino Operations – Cambodia
1
23%
31,417,980
2016
Number of
customers
% of revenue
$
Casino Operations – Cambodia
1
29%
41,017,389
Note 4. Revenue
From continuing operations
Sales revenue
Casino
– gaming revenue
– non-gaming revenue
Management fee from Star Paradise
Corporate Operations
Interest
Consolidated
2017
$
2016
$
120,217,587
13,788,384
2,338,782
235
98,801
128,512,879
14,805,539
–
361
66,999
Profit/(loss) before income tax from continuing operations
includes the following specific expenses:
Depreciation
Land, buildings and structures
Furniture and fittings
Machinery and equipment
Office equipment and other
Motor vehicles
Consumables
Amortisation
Land right
Consolidated
2017
$
2016
$
4,115,611
478,683
1,936,041
1,519,440
303,678
1,773,683
10,127,136
4,278,759
483,024
2,786,083
285,413
115,978
1,994,417
9,943,674
2,163
2,302
Total depreciation and amortisation
10,129,299
9,945,976
Operating lease payments
Merger and acquisition costs
Superannuation expense
267,906
526,546
–
11,819,338
Revenue from continuing operations
136,443,789
143,385,778
Defined contribution superannuation expense
23,258
92,249
Impairment of assets
Leasehold buildings
Furniture and fittings
Other equipment and other
160,011
22,348
16,426
198,785
–
–
–
–
48
48
4949
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportNotes to the Financial Statements For the year eNded 30 JuNe 2017Notes to the Financial Statements For the year eNded 30 JuNe 2017
Note 7. Income tax expense
Income tax expense
Current tax
Adjustment recognised for prior periods
Aggregate income tax expense
Income tax expense is attributable to:
Profit from continuing operations
Aggregate income tax expense
Consolidated
2017
$
2016
$
3,536,476
–
3,232,356
764,375
3,536,476
3,996,731
3,536,476
3,996,731
3,536,476
3,996,731
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense from continuing operations
34,725,525
82,870,115
Profits tax using:
Australian corporation tax at the statutory tax rate of 30% (2016: 30%)
10,417,658
24,861,035
Tax effect of difference in overseas corporation tax at the statutory
tax rate of 20% (2016: 20%)
Tax effect amounts which are not deductible/(taxable) in calculating
taxable income
Prior year tax losses applied to current year tax
Losses not brought into account
(4,270,855)
(9,473,073)
1,254,958
(10,930,302)
–
5,333,402
(267,212)
6,065,355
Obligation payments in Cambodia (note (a))
Adjustment for investment spending in Vietnam
Adjustment recognised for prior periods
Income tax expense/(benefit)
(a) Income tax in profit or loss
Income tax includes obligation payments totalling
$2,654,361 (2016: $2,932,732) payable to the Ministry
of Economy and Finance of Cambodia (MOEF).
As at the date of this report, the Casino Law in respect
of casino taxes in Cambodia is yet to be introduced.
The MOEF levies an Obligatory Tax Payment, payable
on a monthly basis. The Obligatory Tax Payment is
comprised of a fixed gaming tax and a fixed non-
gaming tax payment. In addition, an annual casino
licence fee of USD30,000 is paid.
2,654,361
(539,898)
3,536,476
–
3,536,476
2,932,732
(188,616)
3,950,742
45,989
3,996,731
In respect of gaming activities, DNA Star Vegas Co., Ltd
(DNA Star Vegas) has to pay the obligatory payment
which is a fixed gaming tax and with the payment of
this fixed gaming tax, DNA Star Vegas will be exempted
from all categories of taxes on gaming activities
including advance profits tax, minimum tax and
advance tax on distribution of dividends.
As for non-gaming obligatory payment, it is considered
as a composite of various other taxes such as salary
tax, fringe benefit tax, withholding tax, value-added
tax, tax on rental of moveable and unmoveable assets,
minimum tax, advance profit tax, advertising tax
and specific tax on entertainment services.
50
50
Monthly payments for the obligatory payment are due
on the first week of the following month. DNA Star Vegas
has made the obligatory payment on timely manner.
In the event of late payment within seven days from
the due date, there will be a penalty of 2% on the late
payment and interest of 2% per month. In addition,
after 15 days when official government notice is
issued to DNA Star Vegas for the late payment and
an additional penalty of 25% will be imposed. In the
case where DNA Star Vegas does not comply with the
above-mentioned requirements, the MOEF will not
issue the casino licences to DNA Star Vegas in the
successive years.
Certain amendments to the Law of Investment (LOI)
and Law of Taxation (LOT) were promulgated in
March 2003. Under the amendments made to the
LOT, distribution of dividends to non-residents will be
subject to a withholding tax on the distribution of net
of 20% corporate tax, at a rate of 14%, resulting in a
net distribution tax of 31.2%. These amendments
are not applicable to DNA Star Vegas as they will be
regulated by the Casino Law which is yet to be enacted.
(b) The parent entity has not brought to account tax losses
with a tax effect of $824,314 (2016: $612,978).
Note 8. Current assets – cash and cash equivalents
Cash on hand
Cash at bank
Cash in transit
Short-term deposit
Trade receivables
Interest receivable on bank deposits
Tax related receivables
Impairment of receivables
Consolidated
2017
$
21,300,658
41,835,143
1,203,118
1,683,830
2016
$
26,704,465
49,512,338
1,996,278
7,938
66,022,749
78,221,019
Consolidated
2017
$
2016
$
17,581,840
23,980,927
467
14,460
1,678
20,212
17,596,767
24,002,817
The consolidated entity has recognised a loss of $0 (2016: $0) in profit or loss in respect of impairment of receivables
for the year ended 30 June 2017.
Note 10. Current assets – inventories
Food and beverage – at cost
Consolidated
2017
$
2016
$
893,474
1,418,876
5151
Tax exempt profits from Cambodian operations (note (a))
(11,313,150)
(9,049,176)
Note 9. Current assets – trade and other receivables
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportNotes to the Financial Statements For the year eNded 30 JuNe 2017Notes to the Financial Statements For the year eNded 30 JuNe 2017
Note 7. Income tax expense
Income tax expense
Current tax
Adjustment recognised for prior periods
Aggregate income tax expense
Income tax expense is attributable to:
Profit from continuing operations
Aggregate income tax expense
Consolidated
2017
$
2016
$
3,536,476
–
3,232,356
764,375
3,536,476
3,996,731
3,536,476
3,996,731
3,536,476
3,996,731
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense from continuing operations
34,725,525
82,870,115
Profits tax using:
Australian corporation tax at the statutory tax rate of 30% (2016: 30%)
10,417,658
24,861,035
Tax effect of difference in overseas corporation tax at the statutory
tax rate of 20% (2016: 20%)
Tax effect amounts which are not deductible/(taxable) in calculating
taxable income
Prior year tax losses applied to current year tax
Losses not brought into account
(4,270,855)
(9,473,073)
1,254,958
(10,930,302)
–
5,333,402
(267,212)
6,065,355
Obligation payments in Cambodia (note (a))
Adjustment for investment spending in Vietnam
Adjustment recognised for prior periods
Income tax expense/(benefit)
(a) Income tax in profit or loss
Income tax includes obligation payments totalling
$2,654,361 (2016: $2,932,732) payable to the Ministry
of Economy and Finance of Cambodia (MOEF).
As at the date of this report, the Casino Law in respect
of casino taxes in Cambodia is yet to be introduced.
The MOEF levies an Obligatory Tax Payment, payable
on a monthly basis. The Obligatory Tax Payment is
comprised of a fixed gaming tax and a fixed non-
gaming tax payment. In addition, an annual casino
licence fee of USD30,000 is paid.
2,654,361
(539,898)
3,536,476
–
3,536,476
2,932,732
(188,616)
3,950,742
45,989
3,996,731
In respect of gaming activities, DNA Star Vegas Co., Ltd
(DNA Star Vegas) has to pay the obligatory payment
which is a fixed gaming tax and with the payment of
this fixed gaming tax, DNA Star Vegas will be exempted
from all categories of taxes on gaming activities
including advance profits tax, minimum tax and
advance tax on distribution of dividends.
As for non-gaming obligatory payment, it is considered
as a composite of various other taxes such as salary
tax, fringe benefit tax, withholding tax, value-added
tax, tax on rental of moveable and unmoveable assets,
minimum tax, advance profit tax, advertising tax
and specific tax on entertainment services.
50
50
Monthly payments for the obligatory payment are due
on the first week of the following month. DNA Star Vegas
has made the obligatory payment on timely manner.
In the event of late payment within seven days from
the due date, there will be a penalty of 2% on the late
payment and interest of 2% per month. In addition,
after 15 days when official government notice is
issued to DNA Star Vegas for the late payment and
an additional penalty of 25% will be imposed. In the
case where DNA Star Vegas does not comply with the
above-mentioned requirements, the MOEF will not
issue the casino licences to DNA Star Vegas in the
successive years.
Certain amendments to the Law of Investment (LOI)
and Law of Taxation (LOT) were promulgated in
March 2003. Under the amendments made to the
LOT, distribution of dividends to non-residents will be
subject to a withholding tax on the distribution of net
of 20% corporate tax, at a rate of 14%, resulting in a
net distribution tax of 31.2%. These amendments
are not applicable to DNA Star Vegas as they will be
regulated by the Casino Law which is yet to be enacted.
(b) The parent entity has not brought to account tax losses
with a tax effect of $824,314 (2016: $612,978).
Note 8. Current assets – cash and cash equivalents
Cash on hand
Cash at bank
Cash in transit
Short-term deposit
Trade receivables
Interest receivable on bank deposits
Tax related receivables
Impairment of receivables
Consolidated
2017
$
21,300,658
41,835,143
1,203,118
1,683,830
2016
$
26,704,465
49,512,338
1,996,278
7,938
66,022,749
78,221,019
Consolidated
2017
$
2016
$
17,581,840
23,980,927
467
14,460
1,678
20,212
17,596,767
24,002,817
The consolidated entity has recognised a loss of $0 (2016: $0) in profit or loss in respect of impairment of receivables
for the year ended 30 June 2017.
Note 10. Current assets – inventories
Food and beverage – at cost
Consolidated
2017
$
2016
$
893,474
1,418,876
5151
Tax exempt profits from Cambodian operations (note (a))
(11,313,150)
(9,049,176)
Note 9. Current assets – trade and other receivables
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportNotes to the Financial Statements For the year eNded 30 JuNe 2017Notes to the Financial Statements For the year eNded 30 JuNe 2017
Note 11. Current assets – prepaid construction costs
Note 12. Current assets – other
Prepaid construction costs
341,184
12,800
Bonds and security deposits
Prepayments
Other receivables
Consolidated
2017
$
2016
$
Amounts recognised as prepaid construction costs relate to tranche payments made to third-party developers in connection
with the construction of the new Aristo International Hotel. Tranche payments are made in advance of construction work
being performed in accordance with the terms of the contractor agreements; however, once associated works have
been completed an amount equal to the tranche payment is transferred from prepaid construction costs to non current
construction in progress.
Consolidated
2017
$
5,379
226,565
3,006,947
3,238,891
2016
$
8,167
2,606,234
506,063
3,120,464
Note 13. Non-current assets – property, plant and equipment
Leasehold buildings and structures – at cost
Less: accumulated depreciation
Furniture and fittings – at cost
Less: accumulated depreciation
Machinery and equipment – at cost
Less: accumulated depreciation
Motor vehicles – at cost
Less: accumulated depreciation
Office equipment and other – at cost
Less: accumulated depreciation
Consumables
Less: accumulated depreciation
Consolidated
2017
$
2016
$
152,241,908
(12,931,787)
156,603,786
(9,144,218)
139,310,121
147,459,568
4,597,726
(4,160,572)
437,154
4,673,598
(3,716,907)
956,691
34,696,929
32,856,942
(18,513,168)
(15,619,942)
16,183,761
17,237,000
1,869,091
(1,312,898)
556,193
4,702,496
(2,584,380)
2,118,116
1,726,296
(1,105,804)
620,492
3,621,967
(2,284,589)
1,337,378
2,739,028
4,104,829
–
–
2,739,028
4,104,829
161,344,373
171,715,958
52
52
5353
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportNotes to the Financial Statements For the year eNded 30 JuNe 2017Notes to the Financial Statements For the year eNded 30 JuNe 2017Note 11. Current assets – prepaid construction costs
Note 12. Current assets – other
Prepaid construction costs
341,184
12,800
Bonds and security deposits
Prepayments
Other receivables
Consolidated
2017
$
2016
$
Amounts recognised as prepaid construction costs relate to tranche payments made to third-party developers in connection
with the construction of the new Aristo International Hotel. Tranche payments are made in advance of construction work
being performed in accordance with the terms of the contractor agreements; however, once associated works have
been completed an amount equal to the tranche payment is transferred from prepaid construction costs to non current
construction in progress.
Consolidated
2017
$
5,379
226,565
3,006,947
3,238,891
2016
$
8,167
2,606,234
506,063
3,120,464
Note 13. Non-current assets – property, plant and equipment
Leasehold buildings and structures – at cost
Less: accumulated depreciation
Furniture and fittings – at cost
Less: accumulated depreciation
Machinery and equipment – at cost
Less: accumulated depreciation
Motor vehicles – at cost
Less: accumulated depreciation
Office equipment and other – at cost
Less: accumulated depreciation
Consumables
Less: accumulated depreciation
Consolidated
2017
$
2016
$
152,241,908
(12,931,787)
156,603,786
(9,144,218)
139,310,121
147,459,568
4,597,726
(4,160,572)
437,154
4,673,598
(3,716,907)
956,691
34,696,929
32,856,942
(18,513,168)
(15,619,942)
16,183,761
17,237,000
1,869,091
(1,312,898)
556,193
4,702,496
(2,584,380)
2,118,116
1,726,296
(1,105,804)
620,492
3,621,967
(2,284,589)
1,337,378
2,739,028
4,104,829
–
–
2,739,028
4,104,829
161,344,373
171,715,958
52
52
5353
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportNotes to the Financial Statements For the year eNded 30 JuNe 2017Notes to the Financial Statements For the year eNded 30 JuNe 2017Reconciliations
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year
are set out below:
Reconciliations of the written down values at the beginning and end of the current and previous financial year
are set out below:
Leasehold
buildings
Furniture
and fittings
Machinery
and
equipment
Motor
vehicles
Office
equipment
and other
Consumables
Total
Consolidated
$
$
$
Goodwill
Land right
Casino licence
Total
$
Consolidated
$
$
$
$
$
$
$
Balance at 1 July 2015
2,426,187
38,390
–
2,464,577
Balance at 1 July 2015
60,709,290
–
14,266,923
393,558
1,311,121
5,337,017
82,017,909
Acquisition of a subsidiary
90,768,919
1,245,292
2,662,344
354,580
46,903
–
95,078,038
Additions
Disposals
1,434,892
246,750
3,077,746
–
(704)
–
–
251,858
391,951
5,403,197
–
–
(704)
–
–
Additions through business combinations
Disposal
Exchange differences
Amortisation expense
–
–
–
–
–
–
309
(2,302)
400,543,357
400,543,357
–
–
–
–
309
(2,302)
Balance at 30 June 2016
2,426,187
36,397
400,543,357
403,005,941
Exchange differences
(1,008,995)
(35,554)
(11,668)
12,909
370,278
(673,030)
Additions through business combinations
Transfers in/(out)
(165,779)
(52,327)
52,328
–
–
–
(165,778)
Depreciation expense
(4,278,759)
(483,024)
(2,786,083)
(115,978)
(285,413)
(1,994,417)
(9,943,674)
Disposals
Exchange differences
Amortisation expense
–
–
–
–
–
–
(1,881)
(2,163)
–
–
–
–
(13,861,663)
(13,863,544)
–
(2,163)
Balance at 30 June 2016
147,459,568
956,691
17,237,000
620,492
1,337,378
4,104,829 171,715,958
Additions
Disposals
Impairment
1,461,303
7,045
693,813
319,835
1,168,053
–
3,650,049
(480,951)
(160,011)
(20,817)
(22,348)
–
–
(66,429)
(21,604)
(1,224,055)
(1,813,856)
–
(16,426)
–
(198,785)
Exchange differences
(4,854,177)
(4,734)
(3,509,508)
(14,027)
2,791,554
1,631,937
(3,958,955)
Transfers in/(out)
–
–
3,698,497
–
(1,621,399)
–
2,077,098
Depreciation expense
(4,115,611)
(478,683)
(1,936,041)
(303,678)
(1,519,440)
(1,773,683) (10,127,136)
Balance at 30 June 2017
139,310,121
437,154
16,183,761
556,193
2,118,116
2,739,028 161,344,373
Balance at 30 June 2017
2,426,187
32,353
386,681,694
389,140,234
Impairment testing of goodwill and intangibles with indefinite useful lives
Goodwill is monitored by the Chief Operating Decision Maker (CODM) at the cash-generating unit level. CODM reviews
the business performance based on geography and type of business. It has identified two reportable cash-generating units,
Lao Cai and DNA Star Vegas. A business-level summary of the goodwill allocation is presented below:
Consumables represent low value, high turnover items that are depreciated in accordance with company policy
and local legislation.
Note 14. Non-current assets – intangibles
Lao Cai International Hotel JVC
Total goodwill
Goodwill – at cost
Land right – at cost
Less: accumulated amortisation
Casino licence
Consolidated
2017
$
2016
$
2,426,187
2,426,187
67,004
(34,651)
32,353
70,047
(33,650)
36,397
386,681,694
400,543,357
389,140,234
403,005,941
Lao Cai – goodwill
The recoverable amount of the cash-generating unit of
Lao Cai has been determined based on the value in use
calculation. To calculate this, cash flow projections are
based on financial budgets approved by senior management
covering a five-year period.
The Group determines whether goodwill is impaired at least
on an annual basis. To do so, the Group employs a value in
use calculation using cash flow projections from financial
budgets approved by senior management. Management
has forecast a strong growth rate in budgeted gross margin
for FY18 based on the growth in revenue from Aristo’s main
gaming floor, VIP gaming, and the increase in the number
of slot machines. The new hotel room, entertainment,
restaurant and bar revenue lines, with associated marketing
programs, will increase visitation to the new hotel, which
will also contribute to overall revenue growth. Gross margin
projections for future years are based on past performance
and management’s expectations for future performance in
each segment.
Management determined budgeted gross margin based
on past performance and its expectations for the future
and are considered to be reasonably achievable. The
weighted average growth rates used are consistent with
forecasts included in industry reports. The discount rates
used reflect specific risks relating to the relevant segments
and the countries in which they operate.
54
54
5555
Consolidated
2017
$
2016
$
2,426,187
2,426,187
2,426,187
2,426,187
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportNotes to the Financial Statements For the year eNded 30 JuNe 2017Notes to the Financial Statements For the year eNded 30 JuNe 2017Reconciliations
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year
are set out below:
Reconciliations of the written down values at the beginning and end of the current and previous financial year
are set out below:
Leasehold
buildings
Furniture
and fittings
Machinery
and
equipment
Motor
vehicles
Office
equipment
and other
Consumables
Total
Consolidated
$
$
$
Goodwill
Land right
Casino licence
Total
$
Consolidated
$
$
$
$
$
$
$
Balance at 1 July 2015
2,426,187
38,390
–
2,464,577
Balance at 1 July 2015
60,709,290
–
14,266,923
393,558
1,311,121
5,337,017
82,017,909
Acquisition of a subsidiary
90,768,919
1,245,292
2,662,344
354,580
46,903
–
95,078,038
Additions
Disposals
1,434,892
246,750
3,077,746
–
(704)
–
–
251,858
391,951
5,403,197
–
–
(704)
–
–
Additions through business combinations
Disposal
Exchange differences
Amortisation expense
–
–
–
–
–
–
309
(2,302)
400,543,357
400,543,357
–
–
–
–
309
(2,302)
Balance at 30 June 2016
2,426,187
36,397
400,543,357
403,005,941
Exchange differences
(1,008,995)
(35,554)
(11,668)
12,909
370,278
(673,030)
Additions through business combinations
Transfers in/(out)
(165,779)
(52,327)
52,328
–
–
–
(165,778)
Depreciation expense
(4,278,759)
(483,024)
(2,786,083)
(115,978)
(285,413)
(1,994,417)
(9,943,674)
Disposals
Exchange differences
Amortisation expense
–
–
–
–
–
–
(1,881)
(2,163)
–
–
–
–
(13,861,663)
(13,863,544)
–
(2,163)
Balance at 30 June 2016
147,459,568
956,691
17,237,000
620,492
1,337,378
4,104,829 171,715,958
Additions
Disposals
Impairment
1,461,303
7,045
693,813
319,835
1,168,053
–
3,650,049
(480,951)
(160,011)
(20,817)
(22,348)
–
–
(66,429)
(21,604)
(1,224,055)
(1,813,856)
–
(16,426)
–
(198,785)
Exchange differences
(4,854,177)
(4,734)
(3,509,508)
(14,027)
2,791,554
1,631,937
(3,958,955)
Transfers in/(out)
–
–
3,698,497
–
(1,621,399)
–
2,077,098
Depreciation expense
(4,115,611)
(478,683)
(1,936,041)
(303,678)
(1,519,440)
(1,773,683) (10,127,136)
Balance at 30 June 2017
139,310,121
437,154
16,183,761
556,193
2,118,116
2,739,028 161,344,373
Balance at 30 June 2017
2,426,187
32,353
386,681,694
389,140,234
Impairment testing of goodwill and intangibles with indefinite useful lives
Goodwill is monitored by the Chief Operating Decision Maker (CODM) at the cash-generating unit level. CODM reviews
the business performance based on geography and type of business. It has identified two reportable cash-generating units,
Lao Cai and DNA Star Vegas. A business-level summary of the goodwill allocation is presented below:
Consumables represent low value, high turnover items that are depreciated in accordance with company policy
and local legislation.
Note 14. Non-current assets – intangibles
Lao Cai International Hotel JVC
Total goodwill
Goodwill – at cost
Land right – at cost
Less: accumulated amortisation
Casino licence
Consolidated
2017
$
2016
$
2,426,187
2,426,187
67,004
(34,651)
32,353
70,047
(33,650)
36,397
386,681,694
400,543,357
389,140,234
403,005,941
Lao Cai – goodwill
The recoverable amount of the cash-generating unit of
Lao Cai has been determined based on the value in use
calculation. To calculate this, cash flow projections are
based on financial budgets approved by senior management
covering a five-year period.
The Group determines whether goodwill is impaired at least
on an annual basis. To do so, the Group employs a value in
use calculation using cash flow projections from financial
budgets approved by senior management. Management
has forecast a strong growth rate in budgeted gross margin
for FY18 based on the growth in revenue from Aristo’s main
gaming floor, VIP gaming, and the increase in the number
of slot machines. The new hotel room, entertainment,
restaurant and bar revenue lines, with associated marketing
programs, will increase visitation to the new hotel, which
will also contribute to overall revenue growth. Gross margin
projections for future years are based on past performance
and management’s expectations for future performance in
each segment.
Management determined budgeted gross margin based
on past performance and its expectations for the future
and are considered to be reasonably achievable. The
weighted average growth rates used are consistent with
forecasts included in industry reports. The discount rates
used reflect specific risks relating to the relevant segments
and the countries in which they operate.
54
54
5555
Consolidated
2017
$
2016
$
2,426,187
2,426,187
2,426,187
2,426,187
Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportNotes to the Financial Statements For the year eNded 30 JuNe 2017Notes to the Financial Statements For the year eNded 30 JuNe 2017The recoverable amount calculation for goodwill is most
sensitive to changes in growth rate and EBIT margin on
sales. Based on sensitivity analysis performed, no
reasonable change in these assumptions would give
rise to an impairment.
No impairment has been recognised for the year ended
30 June 2017 (2016: nil).
DNA Star Vegas – casino licence
The casino licence relates to the licence to operate the
DNA Star Vegas casino acquired on 1 July 2015. The licence
is stated at cost less any impairment losses. This intangible
asset is tested for impairment annually or more frequently
if events or changes in circumstances indicate that the
carrying value may be impaired.
The recoverable amount of the cash-generating unit of DNA
Star Vegas has been determined based on the fair value
less costs of disposal. An independent valuation of the 100%
equity interest in DNA Star Vegas Company Limited was
undertaken as at 31 March 2017. Adjustments were made
to determine the fair value less cost of disposal of the cash-
generating units which was reasonably determined to be
$497,685,767 (USD380,431,000 converted at the spot rate).
The valuation was determined using budgeted gross margin
based on past performance and its expectations for the
future and are considered to be reasonably achievable.
The valuation is classified as level 3 fair values in the fair
value hierarchy as it was based on a 10 year cash flow
forecast period. The weighted average growth rates used
are consistent with forecasts included in industry reports.
The valuation uses a growth rate of 4.5% in the first year,
4% in the following nine years and a terminal growth rate
of 3%. The discount rates used of 16.31% reflect specific
risks relating to the relevant segments and the countries
in which they operate. The valuation was determined using
a foreign exchange rate between Thai baht and US dollar
of 34.353 THB:1 USD. A capital expenditure percentage of
1.5% has also been included in the valuation. Furthermore,
the valuation includes a Discount for Lack of Marketability
(DLOM) of 25%.
The recoverable amount calculation for the cash-generating
unit of DNA Star Vegas is most sensitive to changes in the
DLOM changes in growth rate, EBIT margin on sales and a
change in exchange rate between Thai baht and US dollar.
An increase in excess of 1% in the DLOM would result in
impairment of the cash generating unit of DNA Star Vegas.
Additionally, an increase in excess of 0.5 THB:1 USD
would result in impairment of the cash-generating unit
of DNA Star Vegas.
Management reassessed the position as at 30 June 2017
based on this valuation and determined that no impairment
needed to be recognised as at 30 June 2017.
Land use right
An intangible asset of $32,353 (2016: $36,397) which relates
to a 30-year land use right in the Socialist Republic of
Vietnam. Land use right is stated at cost less accumulated
amortisation and any impairment losses. The amortisation
period is 30 years. This intangible asset is tested for
impairment annually or more frequently if events or
changes in circumstances indicate that the carrying
value may be impaired.
Note 15. Non-current assets – construction in progress
Consolidated
2017
$
2016
$
Property construction works in progress
595,885
1,143,158
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year
are set out below:
Consolidated
Balance at 1 July 2014
Additions
Exchange differences
Transfer in/(out)
Balance at 30 June 2015
Additions
Exchange differences
Transfers out
Balance at 30 June 2017
Construction
work in progress
$
205,737
1,539,648
7,031
(609,258)
1,143,158
1,612,657
(82,832)
(2,077,098)
595,885
Construction relates to costs incurred by the new
construction of the Aristo International Hotel.
Amounts previously recognised as prepaid construction
costs, are transferred to construction in progress, once
associated works have been completed.
Once recognised as part of construction in progress the
amounts are then carried on the Statement of Financial
Position at cost, until such time as the asset is completed
and ready for its intended use. Work in progress is not
depreciated, but tested for impairment annually. Once ready
for its intended use an amount equal to the cost of the
completed asset will be transferred to property, plant and
equipment or non-current prepayment and accounted for
in accordance with the consolidated entity’s accounting
policy for each asset class.
Note 16. Non-current assets – other
Other debtors
Consolidated
2017
$
2016
$
3,895
78,451
Note 17. Current liabilities – trade and other payables
Consolidated
Trade payables
Deposits received
Floating chips
Interest payable
Other payables and accrued expenses
Refer to note 28 for further information on financial instruments.
2017
$
4,472,103
101,974
13,013,770
2,060,154
22,140,106
41,788,107
2016
$
5,046,135
111,510
13,652,683
93,071
28,851,548
47,754,947
56
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Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportNotes to the Financial Statements For the year eNded 30 JuNe 2017Notes to the Financial Statements For the year eNded 30 JuNe 2017
The recoverable amount calculation for goodwill is most
sensitive to changes in growth rate and EBIT margin on
sales. Based on sensitivity analysis performed, no
reasonable change in these assumptions would give
rise to an impairment.
No impairment has been recognised for the year ended
30 June 2017 (2016: nil).
DNA Star Vegas – casino licence
The casino licence relates to the licence to operate the
DNA Star Vegas casino acquired on 1 July 2015. The licence
is stated at cost less any impairment losses. This intangible
asset is tested for impairment annually or more frequently
if events or changes in circumstances indicate that the
carrying value may be impaired.
The recoverable amount of the cash-generating unit of DNA
Star Vegas has been determined based on the fair value
less costs of disposal. An independent valuation of the 100%
equity interest in DNA Star Vegas Company Limited was
undertaken as at 31 March 2017. Adjustments were made
to determine the fair value less cost of disposal of the cash-
generating units which was reasonably determined to be
$497,685,767 (USD380,431,000 converted at the spot rate).
The valuation was determined using budgeted gross margin
based on past performance and its expectations for the
future and are considered to be reasonably achievable.
The valuation is classified as level 3 fair values in the fair
value hierarchy as it was based on a 10 year cash flow
forecast period. The weighted average growth rates used
are consistent with forecasts included in industry reports.
The valuation uses a growth rate of 4.5% in the first year,
4% in the following nine years and a terminal growth rate
of 3%. The discount rates used of 16.31% reflect specific
risks relating to the relevant segments and the countries
in which they operate. The valuation was determined using
a foreign exchange rate between Thai baht and US dollar
of 34.353 THB:1 USD. A capital expenditure percentage of
1.5% has also been included in the valuation. Furthermore,
the valuation includes a Discount for Lack of Marketability
(DLOM) of 25%.
The recoverable amount calculation for the cash-generating
unit of DNA Star Vegas is most sensitive to changes in the
DLOM changes in growth rate, EBIT margin on sales and a
change in exchange rate between Thai baht and US dollar.
An increase in excess of 1% in the DLOM would result in
impairment of the cash generating unit of DNA Star Vegas.
Additionally, an increase in excess of 0.5 THB:1 USD
would result in impairment of the cash-generating unit
of DNA Star Vegas.
Management reassessed the position as at 30 June 2017
based on this valuation and determined that no impairment
needed to be recognised as at 30 June 2017.
Land use right
An intangible asset of $32,353 (2016: $36,397) which relates
to a 30-year land use right in the Socialist Republic of
Vietnam. Land use right is stated at cost less accumulated
amortisation and any impairment losses. The amortisation
period is 30 years. This intangible asset is tested for
impairment annually or more frequently if events or
changes in circumstances indicate that the carrying
value may be impaired.
Note 15. Non-current assets – construction in progress
Consolidated
2017
$
2016
$
Property construction works in progress
595,885
1,143,158
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year
are set out below:
Consolidated
Balance at 1 July 2014
Additions
Exchange differences
Transfer in/(out)
Balance at 30 June 2015
Additions
Exchange differences
Transfers out
Balance at 30 June 2017
Construction
work in progress
$
205,737
1,539,648
7,031
(609,258)
1,143,158
1,612,657
(82,832)
(2,077,098)
595,885
Construction relates to costs incurred by the new
construction of the Aristo International Hotel.
Amounts previously recognised as prepaid construction
costs, are transferred to construction in progress, once
associated works have been completed.
Once recognised as part of construction in progress the
amounts are then carried on the Statement of Financial
Position at cost, until such time as the asset is completed
and ready for its intended use. Work in progress is not
depreciated, but tested for impairment annually. Once ready
for its intended use an amount equal to the cost of the
completed asset will be transferred to property, plant and
equipment or non-current prepayment and accounted for
in accordance with the consolidated entity’s accounting
policy for each asset class.
Note 16. Non-current assets – other
Other debtors
Consolidated
2017
$
2016
$
3,895
78,451
Note 17. Current liabilities – trade and other payables
Consolidated
Trade payables
Deposits received
Floating chips
Interest payable
Other payables and accrued expenses
Refer to note 28 for further information on financial instruments.
2017
$
4,472,103
101,974
13,013,770
2,060,154
22,140,106
41,788,107
2016
$
5,046,135
111,510
13,652,683
93,071
28,851,548
47,754,947
56
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Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportNotes to the Financial Statements For the year eNded 30 JuNe 2017Notes to the Financial Statements For the year eNded 30 JuNe 2017
Floating chips
Financing arrangements
The number of floating chips is determined as the difference between the number of chips in use and the actual
chips counted by the casino as at the reporting date.
Unrestricted access was available at the reporting date to the following lines of credit (current and non current):
Note 18. Current liabilities – borrowings
Joint Stock Commercial Ocean Bank
Mega International Commercial Bank Co. Limited
Refer to note 28 for further information on financial instruments.
Total secured liabilities
The total secured current liabilities are as follows:
Joint Stock Commercial Ocean Bank
Mega International Commercial Bank Co. Limited
Consolidated
2017
$
2,791,979
52,116,619
2016
$
2,942,907
37,164,227
54,908,598
40,107,134
Consolidated
2017
$
2,791,979
52,116,619
2016
$
2,942,907
37,164,227
Total facilities
Bank loans
Used at the reporting date
Bank loans
Unused at the reporting date
Bank loans
Note 19. Current liabilities – financial liabilities
Consolidated
2017
$
2016
$
108,462,225
151,801,133
108,462,225
151,801,133
–
–
Consolidated
2017
$
2016
$
54,908,598
40,107,134
Warrants
681,507
1,794,520
Derivative financial liability at fair value through profit and loss
Assets pledged as security
vi. a security agreement over the assets of DNA Star
The loan from Mega International Commercial Bank
Co. Limited is secured by the following:
i.
a parent company guarantee from the parent entity
for the debt owed by Donaco Hong Kong Limited;
ii. a pledge of the shares in Donaco Hong Kong Limited
owned by the parent entity (carrying value $293,608,393,
2016: $293,608,393);
iii. a pledge of the shares in DNA Star Vegas Co., Ltd
owned by Donaco Hong Kong Limited (carrying value
$426,270,598, 2016: $441,516,797);
iv. a pledge of the debt service reserve account maintained
by Donaco Hong Kong Limited;
v. a security assignment of contractual rights held
by the parent entity under the purchase agreement
for DNA Star Vegas;
Vegas; and
vii. a hypothec agreement over the land and buildings
of DNA Star Vegas.
Mortgage to Joint Stock Commercial Ocean Bank
The loans from Ocean Bank of Vietnam are secured by
first mortgages over the land and buildings in Vietnam,
more specifically the Aristo International Hotel operation
(carrying value $67,974,718, 2016: $74,479,953).
A mortgage was registered by the Ocean Bank of Vietnam
over the assets of the Aristo International Hotel,
on 11 July 2011. Total borrowings as per the Statement
of Financial Position as at 30 June 2017 under this
arrangement were $9,771,928 (2016: $13,243,081).
58
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Floating chips
Financing arrangements
The number of floating chips is determined as the difference between the number of chips in use and the actual
chips counted by the casino as at the reporting date.
Unrestricted access was available at the reporting date to the following lines of credit (current and non current):
Note 18. Current liabilities – borrowings
Joint Stock Commercial Ocean Bank
Mega International Commercial Bank Co. Limited
Refer to note 28 for further information on financial instruments.
Total secured liabilities
The total secured current liabilities are as follows:
Joint Stock Commercial Ocean Bank
Mega International Commercial Bank Co. Limited
Consolidated
2017
$
2,791,979
52,116,619
2016
$
2,942,907
37,164,227
54,908,598
40,107,134
Consolidated
2017
$
2,791,979
52,116,619
2016
$
2,942,907
37,164,227
Total facilities
Bank loans
Used at the reporting date
Bank loans
Unused at the reporting date
Bank loans
Note 19. Current liabilities – financial liabilities
Consolidated
2017
$
2016
$
108,462,225
151,801,133
108,462,225
151,801,133
–
–
Consolidated
2017
$
2016
$
54,908,598
40,107,134
Warrants
681,507
1,794,520
Derivative financial liability at fair value through profit and loss
Assets pledged as security
vi. a security agreement over the assets of DNA Star
The loan from Mega International Commercial Bank
Co. Limited is secured by the following:
i.
a parent company guarantee from the parent entity
for the debt owed by Donaco Hong Kong Limited;
ii. a pledge of the shares in Donaco Hong Kong Limited
owned by the parent entity (carrying value $293,608,393,
2016: $293,608,393);
iii. a pledge of the shares in DNA Star Vegas Co., Ltd
owned by Donaco Hong Kong Limited (carrying value
$426,270,598, 2016: $441,516,797);
iv. a pledge of the debt service reserve account maintained
by Donaco Hong Kong Limited;
v. a security assignment of contractual rights held
by the parent entity under the purchase agreement
for DNA Star Vegas;
Vegas; and
vii. a hypothec agreement over the land and buildings
of DNA Star Vegas.
Mortgage to Joint Stock Commercial Ocean Bank
The loans from Ocean Bank of Vietnam are secured by
first mortgages over the land and buildings in Vietnam,
more specifically the Aristo International Hotel operation
(carrying value $67,974,718, 2016: $74,479,953).
A mortgage was registered by the Ocean Bank of Vietnam
over the assets of the Aristo International Hotel,
on 11 July 2011. Total borrowings as per the Statement
of Financial Position as at 30 June 2017 under this
arrangement were $9,771,928 (2016: $13,243,081).
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As a requirement of the terms of the Group’s facility
provided by OL Master Limited, the Company as guarantor
has issued 70 warrants to subscribe for its ordinary
shares. Each warrant has a notional value of USD100,000.
The warrants have a term of 39 months and expire on
6 October 2018. The exercise price is AUD0.7579 and the
maximum number of ordinary shares which may be issued
is 12,334,408, and the Company may elect to settle the
difference between the share price and exercise price
in cash.
The warrants associated with this transaction are classified
as a derivative financial liability. On initial recognition
the warrants issued are measured at fair value. At each
reporting date the derivative financial liability is revalued
to fair value with the movement in the fair value recorded
in profit or loss.
For the warrants granted during the prior financial year,
fair value at grant date was $4,403,859. The valuation model
inputs used to determine the fair value at the balance date,
are as follows:
Note 22. Non-current liabilities – borrowings
Joint Stock Commercial Ocean Bank
OL Master Ltd
Mega International Commercial Bank Co. Limited
Grant date
Expiry date
Share price at
reporting date
Exercise
price
Expected
volatility
Dividend
yield
Risk-free
interest rate
Fair value
Refer to note 28 for further information on financial instruments.
07/07/2015
07/10/2018
$0.580
$0.76
47.85%
–
1.66%
$681,507
The remaining contractual life at 30 June 2017 is 1.27 years (2016: 2.27) The warrants are classified as current liabilities
as they can be exercised at any time.
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Note 20. Current liabilities – income tax
Consolidated
2017
$
2016
$
Joint Stock Commercial Ocean Bank
OL Master Ltd
Mega International Commercial Bank Co. Limited
Provision for income tax
1,127,767
1,560,149
Note 21. Current liabilities – employee benefits
Consolidated
2017
$
6,979,949
–
46,573,678
2016
$
10,300,174
22,519,671
78,874,154
53,553,627
111,693,999
Consolidated
2017
$
9,771,928
–
98,690,297
2016
$
13,243,081
22,519,671
116,038,381
108,462,225
151,801,133
Annual leave
Accrued salaries, wages and other benefits
Consolidated
2017
$
95,613
885,393
981,006
2016
$
39,775
442,322
482,097
Assets pledged as security
A term loan facility from OL Master Limited was drawn
down on 7 July 2015 to provide working capital for the
consolidated entity. As a requirement of the terms of the
consolidated entity’s facility provided by OL Master Limited,
the Company as guarantor has issued 70 warrants to
subscribe for its ordinary shares. Each warrant has
a notional value of USD100,000. The warrants have a term
of 39 months and expire on 6 October 2018. The exercise
price is AUD0.7579 and the maximum number of ordinary
shares which may be issued is 12,339,408. The Company
may elect to settle the difference between the share price
and exercise price in cash.
60
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Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportNotes to the Financial Statements For the year eNded 30 JuNe 2017Notes to the Financial Statements For the year eNded 30 JuNe 2017As a requirement of the terms of the Group’s facility
provided by OL Master Limited, the Company as guarantor
has issued 70 warrants to subscribe for its ordinary
shares. Each warrant has a notional value of USD100,000.
The warrants have a term of 39 months and expire on
6 October 2018. The exercise price is AUD0.7579 and the
maximum number of ordinary shares which may be issued
is 12,334,408, and the Company may elect to settle the
difference between the share price and exercise price
in cash.
The warrants associated with this transaction are classified
as a derivative financial liability. On initial recognition
the warrants issued are measured at fair value. At each
reporting date the derivative financial liability is revalued
to fair value with the movement in the fair value recorded
in profit or loss.
For the warrants granted during the prior financial year,
fair value at grant date was $4,403,859. The valuation model
inputs used to determine the fair value at the balance date,
are as follows:
Note 22. Non-current liabilities – borrowings
Joint Stock Commercial Ocean Bank
OL Master Ltd
Mega International Commercial Bank Co. Limited
Grant date
Expiry date
Share price at
reporting date
Exercise
price
Expected
volatility
Dividend
yield
Risk-free
interest rate
Fair value
Refer to note 28 for further information on financial instruments.
07/07/2015
07/10/2018
$0.580
$0.76
47.85%
–
1.66%
$681,507
The remaining contractual life at 30 June 2017 is 1.27 years (2016: 2.27) The warrants are classified as current liabilities
as they can be exercised at any time.
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Note 20. Current liabilities – income tax
Consolidated
2017
$
2016
$
Joint Stock Commercial Ocean Bank
OL Master Ltd
Mega International Commercial Bank Co. Limited
Provision for income tax
1,127,767
1,560,149
Note 21. Current liabilities – employee benefits
Consolidated
2017
$
6,979,949
–
46,573,678
2016
$
10,300,174
22,519,671
78,874,154
53,553,627
111,693,999
Consolidated
2017
$
9,771,928
–
98,690,297
2016
$
13,243,081
22,519,671
116,038,381
108,462,225
151,801,133
Annual leave
Accrued salaries, wages and other benefits
Consolidated
2017
$
95,613
885,393
981,006
2016
$
39,775
442,322
482,097
Assets pledged as security
A term loan facility from OL Master Limited was drawn
down on 7 July 2015 to provide working capital for the
consolidated entity. As a requirement of the terms of the
consolidated entity’s facility provided by OL Master Limited,
the Company as guarantor has issued 70 warrants to
subscribe for its ordinary shares. Each warrant has
a notional value of USD100,000. The warrants have a term
of 39 months and expire on 6 October 2018. The exercise
price is AUD0.7579 and the maximum number of ordinary
shares which may be issued is 12,339,408. The Company
may elect to settle the difference between the share price
and exercise price in cash.
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Long service leave
Note 24. Equity – issued capital
Consolidated
2017
$
32,669
32,669
2016
$
16,212
16,212
Ordinary shares – fully paid
831,211,424
831,211,424
359,968,884
360,968,368
Consolidated
2017
Shares
2016
Shares
2017
$
2016
$
Date
Shares
Issue price
$
Details
Balance
Issued share – consideration for
DNA Star Vegas Co Ltd
Employee short term incentive
30 June 2015
683,250,290
1 July 2015
147,199,529
1 October 2015
487,793
Less: transaction costs arising on share issue
multiple
Adjustment to equity reserve on issue of shares
for acquisition
multiple
Transfer from share based payments reserve
for 2014 share based payments
–
–
273,812
Balance
30 June 2016
831,211,424
Acquisition of shares for employee share scheme
–
–
Balance at 30 June 2017
–
831,211,424
$
$
$
$
$
$
$
$
$
–
246,719,609
0.775
0.700
–
–
–
–
–
–
114,079,635
341,455
(443,131)
–
270,800
360,968,368
(999,484)
359,968,884
The consolidated entity would look to raise capital when
an opportunity to invest in a business or company was seen
as value adding relative to the current parent entity’s share
price at the time of the investment.
The consolidated entity is subject to certain financing
arrangements and meeting these is given priority in
all capital risk management decisions. The financing
arrangements contain certain covenants relating to interest
cover (the ratio of consolidated EBITDA to consolidated
finance charges), and debt ratio (the ratio of consolidated
net debt to EBITDA), which apply to Donaco Hong Kong
Limited. In addition, covenants relating to the debt equity
ratio (the ratio of consolidated total debt to consolidated
total equity), and minimum cash holdings, apply
to the consolidated entity.
There have been no events of default on the financing
arrangements during the financial year.
The capital risk management policy remains unchanged
from the 2016 financial statements.
Treasury shares are shares in Donaco International
Limited that are held by Smartequity EIS Pty Ltd for
the purpose of issuing shares under the employee share
scheme. Shares issued to employees are recognised on
a first-in-first-out basis.
Details
Number of shares
$
Opening balance 1 July 2015
Acquisition of shares by the Trust
Balance 30 June 2016
Acquisition of shares by the Trust
(average price:$0.4199 per share)
Balance 30 June 2017
Note 25. Equity – reserves
Revaluation surplus reserve
Foreign currency reserve
Employee share option reserve
–
–
–
2,376,653
2,376,653
2017
$
1,855,327
4,275,055
3,295,396
9,425,778
–
–
–
999,484
999,484
2016
$
1,855,327
19,697,748
3,021,680
24,574,755
Consolidated
Ordinary shares
Capital risk management
Ordinary shares entitle the holder to participate in dividends
and the proceeds on the winding up of the Company in
proportion to the number of and amounts paid on the
shares held. The fully paid ordinary shares have no par
value and the Company does not have a limited amount
of authorised capital.
On a show of hands every member present at a meeting in
person or by proxy shall have one vote and upon a poll each
share shall have one vote.
The consolidated entity’s objectives when managing capital
are to safeguard its ability to continue as a going concern,
so that it can provide returns for shareholders and benefits
for other stakeholders and to maintain an optimum capital
structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the
consolidated entity may adjust the amount of dividends paid
to shareholders, return capital to shareholders, issue new
shares or sell assets to reduce debt.
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Note 23. Non-current liabilities – employee benefits
Long service leave
Note 24. Equity – issued capital
Consolidated
2017
$
32,669
32,669
2016
$
16,212
16,212
Ordinary shares – fully paid
831,211,424
831,211,424
359,968,884
360,968,368
Consolidated
2017
Shares
2016
Shares
2017
$
2016
$
Date
Shares
Issue price
$
Details
Balance
Issued share – consideration for
DNA Star Vegas Co Ltd
Employee short term incentive
30 June 2015
683,250,290
1 July 2015
147,199,529
1 October 2015
487,793
Less: transaction costs arising on share issue
multiple
Adjustment to equity reserve on issue of shares
for acquisition
multiple
Transfer from share based payments reserve
for 2014 share based payments
–
–
273,812
Balance
30 June 2016
831,211,424
Acquisition of shares for employee share scheme
–
–
Balance at 30 June 2017
–
831,211,424
$
$
$
$
$
$
$
$
$
–
246,719,609
0.775
0.700
–
–
–
–
–
–
114,079,635
341,455
(443,131)
–
270,800
360,968,368
(999,484)
359,968,884
The consolidated entity would look to raise capital when
an opportunity to invest in a business or company was seen
as value adding relative to the current parent entity’s share
price at the time of the investment.
The consolidated entity is subject to certain financing
arrangements and meeting these is given priority in
all capital risk management decisions. The financing
arrangements contain certain covenants relating to interest
cover (the ratio of consolidated EBITDA to consolidated
finance charges), and debt ratio (the ratio of consolidated
net debt to EBITDA), which apply to Donaco Hong Kong
Limited. In addition, covenants relating to the debt equity
ratio (the ratio of consolidated total debt to consolidated
total equity), and minimum cash holdings, apply
to the consolidated entity.
There have been no events of default on the financing
arrangements during the financial year.
The capital risk management policy remains unchanged
from the 2016 financial statements.
Treasury shares are shares in Donaco International
Limited that are held by Smartequity EIS Pty Ltd for
the purpose of issuing shares under the employee share
scheme. Shares issued to employees are recognised on
a first-in-first-out basis.
Details
Number of shares
$
Opening balance 1 July 2015
Acquisition of shares by the Trust
Balance 30 June 2016
Acquisition of shares by the Trust
(average price:$0.4199 per share)
Balance 30 June 2017
Note 25. Equity – reserves
Revaluation surplus reserve
Foreign currency reserve
Employee share option reserve
–
–
–
2,376,653
2,376,653
2017
$
1,855,327
4,275,055
3,295,396
9,425,778
–
–
–
999,484
999,484
2016
$
1,855,327
19,697,748
3,021,680
24,574,755
Consolidated
Ordinary shares
Capital risk management
Ordinary shares entitle the holder to participate in dividends
and the proceeds on the winding up of the Company in
proportion to the number of and amounts paid on the
shares held. The fully paid ordinary shares have no par
value and the Company does not have a limited amount
of authorised capital.
On a show of hands every member present at a meeting in
person or by proxy shall have one vote and upon a poll each
share shall have one vote.
The consolidated entity’s objectives when managing capital
are to safeguard its ability to continue as a going concern,
so that it can provide returns for shareholders and benefits
for other stakeholders and to maintain an optimum capital
structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the
consolidated entity may adjust the amount of dividends paid
to shareholders, return capital to shareholders, issue new
shares or sell assets to reduce debt.
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Consolidated
$
$
$
$
Revaluation
surplus reserve
Employee share
option reserve
Foreign currency
Total
Note 26. Equity – retained profits
Balance at 1 July 2016
1,855,327
1,967,750
Foreign currency translation
Employee share option expense
Transfer to retained earnings
Balance at 30 June 2016
Foreign currency translation
Employee share option expense
–
–
–
–
1,324,730
(270,800)
11,934,445
7,763,303
–
–
15,757,522
7,763,303
1,324,730
(270,800)
1,855,327
3,021,680
19,697,748
24,574,755
–
–
–
(15,422,693)
(15,422,693)
273,716
–
273,716
Balance at 30 June 2017
1,855,327
3,295,396
4,275,055
9,425,778
Nature and purpose of equity reserves
Revaluation surplus
The revaluation surplus reserve is used to record
increments and decrements in the fair value of net assets
of disposed entities.
Employee share option
The employee share option reserve is used to recognise:
•
the grant date fair value of options issued to key
management personnel but not exercised; and
•
the issue of options held by the Employee Share Option
Trust to key management personnel.
Foreign currency
Exchange differences arising on translation of the foreign
controlled entity are recognised in other comprehensive
income as described in note 1 and accumulated in a
separate reserve within equity. The cumulative amount
is reclassified to profit or loss when the net investment
is disposed of.
Consolidated
2017
$
92,630,958
30,990,298
(8,246,843)
2016
$
13,907,457
78,723,501
–
Retained profits at the beginning of the financial year
Profit/(loss) after income tax expense/(benefit) for the year
Dividends paid
Retained profits at the end of the financial year
115,374,413
92,630,958
Note 27. Equity – dividends
A dividend of $8,246,843 (1 cent per ordinary share) was
paid on 19 October 2016. The dividend was 100% conduit
foreign income and was unfranked. On 29 August 2017, the
consolidated entity announced a final unfranked dividend of
0.5 cents per share, amounting to $4,156,057. The planned
record date for the dividend is 6 October 2017 and planned
payment date is 20 October 2017.
A new dividend policy was announced on 29 August 2017,
which stated that the consolidated entity intends to pay out
10–30% of net profit after tax as dividends to shareholders,
Franking credits available for subsequent reporting
periods after payment of tax liability based on a tax
rate of 30% (2016: 30%)
Note 28. Financial instruments
Financial risk management objectives
The consolidated entity’s activities expose it to a variety of
financial risks: market risk (including foreign currency risk
and interest rate risk), credit risk and liquidity risk. The
consolidated entity’s overall risk management program
focuses on the unpredictability of financial markets and
seeks to minimise potential adverse effects on the financial
performance of the consolidated entity. The consolidated
entity uses different methods to measure different types
of risk to which it is exposed. These methods include
sensitivity analysis in the case of interest rate, foreign
exchange and other price risks and ageing analysis
for credit risk.
with the intention to provide regular half-yearly dividend
payments, subject to the consolidated entity’s then
current working capital requirements and growth plans.
shareholders should note that the payment of dividends
is not guaranteed.
Franking credit balance
The dividend recommended after 30 June 2017 is fully
unfranked and 100% conduit foreign income.
Consolidated
2017
$
2016
$
501,543
501,543
Risk management is carried out by senior finance
executives (finance) under policies approved by the Board.
These policies include identification and analysis of the
risk exposure of the consolidated entity and appropriate
procedures, controls and risk limits. Finance identifies,
evaluates and hedges financial risks within the consolidated
entity’s operating units. Finance reports to the Board on a
monthly basis.
Market risk
Market risk is the risk that changes in market prices, such
as interest rate and foreign exchange rate will affect the
consolidated entity’s income.
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$
$
$
$
Revaluation
surplus reserve
Employee share
option reserve
Foreign currency
Total
Note 26. Equity – retained profits
Balance at 1 July 2016
1,855,327
1,967,750
Foreign currency translation
Employee share option expense
Transfer to retained earnings
Balance at 30 June 2016
Foreign currency translation
Employee share option expense
–
–
–
–
1,324,730
(270,800)
11,934,445
7,763,303
–
–
15,757,522
7,763,303
1,324,730
(270,800)
1,855,327
3,021,680
19,697,748
24,574,755
–
–
–
(15,422,693)
(15,422,693)
273,716
–
273,716
Balance at 30 June 2017
1,855,327
3,295,396
4,275,055
9,425,778
Nature and purpose of equity reserves
Revaluation surplus
The revaluation surplus reserve is used to record
increments and decrements in the fair value of net assets
of disposed entities.
Employee share option
The employee share option reserve is used to recognise:
•
the grant date fair value of options issued to key
management personnel but not exercised; and
•
the issue of options held by the Employee Share Option
Trust to key management personnel.
Foreign currency
Exchange differences arising on translation of the foreign
controlled entity are recognised in other comprehensive
income as described in note 1 and accumulated in a
separate reserve within equity. The cumulative amount
is reclassified to profit or loss when the net investment
is disposed of.
Consolidated
2017
$
92,630,958
30,990,298
(8,246,843)
2016
$
13,907,457
78,723,501
–
Retained profits at the beginning of the financial year
Profit/(loss) after income tax expense/(benefit) for the year
Dividends paid
Retained profits at the end of the financial year
115,374,413
92,630,958
Note 27. Equity – dividends
A dividend of $8,246,843 (1 cent per ordinary share) was
paid on 19 October 2016. The dividend was 100% conduit
foreign income and was unfranked. On 29 August 2017, the
consolidated entity announced a final unfranked dividend of
0.5 cents per share, amounting to $4,156,057. The planned
record date for the dividend is 6 October 2017 and planned
payment date is 20 October 2017.
A new dividend policy was announced on 29 August 2017,
which stated that the consolidated entity intends to pay out
10–30% of net profit after tax as dividends to shareholders,
Franking credits available for subsequent reporting
periods after payment of tax liability based on a tax
rate of 30% (2016: 30%)
Note 28. Financial instruments
Financial risk management objectives
The consolidated entity’s activities expose it to a variety of
financial risks: market risk (including foreign currency risk
and interest rate risk), credit risk and liquidity risk. The
consolidated entity’s overall risk management program
focuses on the unpredictability of financial markets and
seeks to minimise potential adverse effects on the financial
performance of the consolidated entity. The consolidated
entity uses different methods to measure different types
of risk to which it is exposed. These methods include
sensitivity analysis in the case of interest rate, foreign
exchange and other price risks and ageing analysis
for credit risk.
with the intention to provide regular half-yearly dividend
payments, subject to the consolidated entity’s then
current working capital requirements and growth plans.
shareholders should note that the payment of dividends
is not guaranteed.
Franking credit balance
The dividend recommended after 30 June 2017 is fully
unfranked and 100% conduit foreign income.
Consolidated
2017
$
2016
$
501,543
501,543
Risk management is carried out by senior finance
executives (finance) under policies approved by the Board.
These policies include identification and analysis of the
risk exposure of the consolidated entity and appropriate
procedures, controls and risk limits. Finance identifies,
evaluates and hedges financial risks within the consolidated
entity’s operating units. Finance reports to the Board on a
monthly basis.
Market risk
Market risk is the risk that changes in market prices, such
as interest rate and foreign exchange rate will affect the
consolidated entity’s income.
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The consolidated entity is exposed to foreign exchange
fluctuations in relation to cash generated for working
capital purposes, denominated in foreign currencies and
net investments in foreign operations, in which the
functional currencies are Vietnamese dong and Thai baht.
Foreign exchange risk arises from future commercial
transactions and recognised financial assets and financial
liabilities denominated in a currency that is not the entity’s
functional currency. The risk is measured using sensitivity
analysis and cash flow forecasting. An assessment of the
sensitivity of the consolidated entity’s exposure to interest
rate movements was performed, and was found to be
immaterial for the purposes of this disclosure.
Exchange rate exposures are managed within approved
policy parameters and material movements are not
expected. The consolidated entity does not enter into any
forward exchange contracts to buy or sell specified foreign
currencies.
The average exchange rates and reporting date exchange
rates applied were as follows:
Australian dollars
USD
THB
VND
CNY
MYR
SGD
HKD
Average exchange rate
Reporting date exchange rate
2017
2016
2017
2016
1.3254
0.0380
0.0001
0.1946
0.3093
0.9520
0.1707
1.3730
0.0387
0.0001
0.2132
0.3322
0.9881
0.1770
1.3001
0.0382
0.0001
0.1921
0.3028
0.9436
0.1666
1.3466
0.0382
0.0001
0.2027
0.3344
0.9973
0.1736
The carrying amount of the consolidated entity’s foreign currency denominated financial assets and financial liabilities
at the reporting date were as follows:
Assets
Liabilities
2017
2016
2017
2016
Consolidated
USD
VND
CNY
MYR
THB
SGD
EUR
HKD
39,885,279
6,666,217
14,514,911
34,749
49,687,955
(101,805,116)
(141,980,071)
3,402,538
14,511,848
63,329
(11,036,948)
(13,013,771)
(82,477)
(14,033,888)
(12,845,036)
–
–
26,675,967
27,617,696
(25,316,206)
203,720
6,685
183,740
199,763
–
164,218
(13,219)
(100,494)
–
(55,193)
–
(55,576)
88,171,269
95,647,346
(151,322,930)
(169,015,064)
A 5% strengthening of the Australian dollar against the various foreign currencies at the balance date would increase/
(decrease) the Company’s profit/(loss) after tax by the amounts shown below. The analysis assumes that all other variables
remain constant.
Consolidated
USD
VND
CNY
MYR
THB
SGD
EUR
HKD
Australian dollar strengthened
% Change
Effect on
profit after tax
Effect on
profit after tax
5%
5%
5%
5%
5%
5%
5%
5%
2017
$
3,095,992
218,537
(75,057)
2,386
(67,988)
(9,525)
(334)
(6,427)
2016
$
4,614,606
531,568
(83,341)
(3,166)
(1,380,885)
(4,963)
–
(5,432)
3,157,583
3,668,386
A 5% weakening of the Australian dollar against the various
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.
entity’s bank loans and debt obligations and its cash
and cash equivalents. The consolidated entity manages
its interest rate risk by using a combination of variable
and fixed rate borrowings.
Interest rate risk
The consolidated entity’s exposure to the risk of changes in
market interest rates relates primarily to the consolidated
As at the reporting date, the consolidated entity had
the following cash and cash equivalents:
2017
2016
Weighted average
interest rate
Balance
Weighted average
interest rate
Balance
%
$
%
$
Consolidated
Bank loans
Cash on hand and cash at bank
Short-term deposits
Net exposure to cash flow interest
rate risk
8.09%
0.00%
0.00%
(108,462,225)
64,338,919
1,683,830
8.12%
0.05%
0.00%
(151,801,133)
78,213,081
7,938
(42,439,476)
(73,580,114)
An analysis by remaining contractual maturities is shown
in ‘liquidity and interest rate risk management’ below.
An assessment of the sensitivity of the consolidated entity’s
exposure to interest rate movements was performed,
and was found to be immaterial for the purposes of this
disclosure.
Credit risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss
to the consolidated entity. The consolidated entity has
a strict code of credit, including obtaining agency credit
information, confirming references and setting appropriate
credit limits. The consolidated entity obtains guarantees
where appropriate to mitigate credit risk. The maximum
exposure to credit risk at the reporting date to recognised
financial assets is the carrying amount, net of any
provisions for impairment of those assets, as disclosed
in the Statement of Financial Position and notes to the
financial statements. The consolidated entity does not
hold any collateral.
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The consolidated entity is exposed to foreign exchange
fluctuations in relation to cash generated for working
capital purposes, denominated in foreign currencies and
net investments in foreign operations, in which the
functional currencies are Vietnamese dong and Thai baht.
Foreign exchange risk arises from future commercial
transactions and recognised financial assets and financial
liabilities denominated in a currency that is not the entity’s
functional currency. The risk is measured using sensitivity
analysis and cash flow forecasting. An assessment of the
sensitivity of the consolidated entity’s exposure to interest
rate movements was performed, and was found to be
immaterial for the purposes of this disclosure.
Exchange rate exposures are managed within approved
policy parameters and material movements are not
expected. The consolidated entity does not enter into any
forward exchange contracts to buy or sell specified foreign
currencies.
The average exchange rates and reporting date exchange
rates applied were as follows:
Australian dollars
USD
THB
VND
CNY
MYR
SGD
HKD
Average exchange rate
Reporting date exchange rate
2017
2016
2017
2016
1.3254
0.0380
0.0001
0.1946
0.3093
0.9520
0.1707
1.3730
0.0387
0.0001
0.2132
0.3322
0.9881
0.1770
1.3001
0.0382
0.0001
0.1921
0.3028
0.9436
0.1666
1.3466
0.0382
0.0001
0.2027
0.3344
0.9973
0.1736
The carrying amount of the consolidated entity’s foreign currency denominated financial assets and financial liabilities
at the reporting date were as follows:
Assets
Liabilities
2017
2016
2017
2016
Consolidated
USD
VND
CNY
MYR
THB
SGD
EUR
HKD
39,885,279
6,666,217
14,514,911
34,749
49,687,955
(101,805,116)
(141,980,071)
3,402,538
14,511,848
63,329
(11,036,948)
(13,013,771)
(82,477)
(14,033,888)
(12,845,036)
–
–
26,675,967
27,617,696
(25,316,206)
203,720
6,685
183,740
199,763
–
164,218
(13,219)
(100,494)
–
(55,193)
–
(55,576)
88,171,269
95,647,346
(151,322,930)
(169,015,064)
A 5% strengthening of the Australian dollar against the various foreign currencies at the balance date would increase/
(decrease) the Company’s profit/(loss) after tax by the amounts shown below. The analysis assumes that all other variables
remain constant.
Consolidated
USD
VND
CNY
MYR
THB
SGD
EUR
HKD
Australian dollar strengthened
% Change
Effect on
profit after tax
Effect on
profit after tax
5%
5%
5%
5%
5%
5%
5%
5%
2017
$
3,095,992
218,537
(75,057)
2,386
(67,988)
(9,525)
(334)
(6,427)
2016
$
4,614,606
531,568
(83,341)
(3,166)
(1,380,885)
(4,963)
–
(5,432)
3,157,583
3,668,386
A 5% weakening of the Australian dollar against the various
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.
entity’s bank loans and debt obligations and its cash
and cash equivalents. The consolidated entity manages
its interest rate risk by using a combination of variable
and fixed rate borrowings.
Interest rate risk
The consolidated entity’s exposure to the risk of changes in
market interest rates relates primarily to the consolidated
As at the reporting date, the consolidated entity had
the following cash and cash equivalents:
2017
2016
Weighted average
interest rate
Balance
Weighted average
interest rate
Balance
%
$
%
$
Consolidated
Bank loans
Cash on hand and cash at bank
Short-term deposits
Net exposure to cash flow interest
rate risk
8.09%
0.00%
0.00%
(108,462,225)
64,338,919
1,683,830
8.12%
0.05%
0.00%
(151,801,133)
78,213,081
7,938
(42,439,476)
(73,580,114)
An analysis by remaining contractual maturities is shown
in ‘liquidity and interest rate risk management’ below.
An assessment of the sensitivity of the consolidated entity’s
exposure to interest rate movements was performed,
and was found to be immaterial for the purposes of this
disclosure.
Credit risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss
to the consolidated entity. The consolidated entity has
a strict code of credit, including obtaining agency credit
information, confirming references and setting appropriate
credit limits. The consolidated entity obtains guarantees
where appropriate to mitigate credit risk. The maximum
exposure to credit risk at the reporting date to recognised
financial assets is the carrying amount, net of any
provisions for impairment of those assets, as disclosed
in the Statement of Financial Position and notes to the
financial statements. The consolidated entity does not
hold any collateral.
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Vigilant liquidity risk management requires the consolidated
entity to maintain sufficient liquid assets (mainly cash and
cash equivalents) and available borrowing facilities to be able
to pay debts as and when they become due and payable.
The consolidated entity maintains cash to meet all its
liquidity requirements and manages its liquidity by carefully
monitoring cash outflows due in a day-to-day and week-
to-week basis. Furthermore, the consolidated entity’s
long-term liquidity needs are identified in its annual Board
approved budget, and updated on a quarterly basis through
revised forecasts.
Remaining contractual maturities
The following tables detail the consolidated entity’s
remaining contractual maturity for its financial liabilities.
The tables have been drawn up based on the undiscounted
cash flows of financial liabilities based on the earliest date
on which the financial liabilities are required to be paid.
Weighted
average
interest rate
1 year
or less
Between
1 and 2 years
Between
2 and 5 years
Over
5 years
Total
contractual
maturities
Note 29. Key management personnel disclosures
Directors
Other key management personnel
The following persons were directors of Donaco
International Limited during the financial year:
Stuart James McGregor
Joey Lim Keong Yew
Benedict Paul Reichel
Non-Executive Director
and Chairman
Managing Director
and CEO
Executive Director
and Company Secretary
Benjamin Lim Keong Hoe
Non-Executive Director
The following persons also had the authority and
responsibility for planning, directing and controlling
the major activities of the consolidated entity, directly
or indirectly, during the financial year:
Kenny Goh Kwey Biaw Deputy Chief Financial Officer
and CEO of Donaco Singapore
Chong Kwong Yang
Chief Financial Officer
Att Asavanund
Chief Operating Officer
and Deputy CEO
(resigned 31 August 2017)
Consolidated – 2017
%
$
$
$
$
$
Robert Andrew Hines
Non-Executive Director
Compensation
Ham Techatut Sukjaroenkraisri Executive Director
Paul Porntat Amatavivadhana
Non-Executive Director
(resigned 3 July 2017)
The aggregate compensation made to directors and other
members of key management personnel of the consolidated
entity is set out below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Consolidated
2017
$
3,147,999
103,292
–
196,804
3,448,095
2016
$
3,252,995
83,107
18,341
1,461,440
4,815,883
Non-derivatives
Non-interest bearing
Trade payables
Floating chips
Interest-bearing – variable
Bank loans
Total non-derivatives
Consolidated – 2016
Non-derivatives
Non-interest bearing
Trade payables
Floating chips
Interest-bearing – fixed
Bank loans
Non-interest bearing – variable
Bank loans
Total non-derivatives
–
–
4,472,103
13,013,770
–
–
8.09%
54,908,598
53,553,627
72,394,471
53,553,627
–
–
–
–
–
–
–
–
4,472,103
13,013,770
108,462,225
125,948,098
Weighted
average
interest rate
1 year
or loss
Between
1 and 2
years
Between
2 and 5
years
Over 5
years
Total
contractual
maturities
%
–
–
$
$
$
$
$
5,046,135
13,652,683
–
–
–
–
–
–
5,046,135
13,652,683
9.64%
2,942,907
5,885,813
26,934,032
–
35,762,752
7.65%
37,164,227
38,484,710
40,389,444
–
116,038,381
58,805,952
44,370,523
67,323,476
–
170,499,951
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually
disclosed above.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
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Vigilant liquidity risk management requires the consolidated
entity to maintain sufficient liquid assets (mainly cash and
cash equivalents) and available borrowing facilities to be able
to pay debts as and when they become due and payable.
The consolidated entity maintains cash to meet all its
liquidity requirements and manages its liquidity by carefully
monitoring cash outflows due in a day-to-day and week-
to-week basis. Furthermore, the consolidated entity’s
long-term liquidity needs are identified in its annual Board
approved budget, and updated on a quarterly basis through
revised forecasts.
Remaining contractual maturities
The following tables detail the consolidated entity’s
remaining contractual maturity for its financial liabilities.
The tables have been drawn up based on the undiscounted
cash flows of financial liabilities based on the earliest date
on which the financial liabilities are required to be paid.
Weighted
average
interest rate
1 year
or less
Between
1 and 2 years
Between
2 and 5 years
Over
5 years
Total
contractual
maturities
Note 29. Key management personnel disclosures
Directors
Other key management personnel
The following persons were directors of Donaco
International Limited during the financial year:
Stuart James McGregor
Joey Lim Keong Yew
Benedict Paul Reichel
Non-Executive Director
and Chairman
Managing Director
and CEO
Executive Director
and Company Secretary
Benjamin Lim Keong Hoe
Non-Executive Director
The following persons also had the authority and
responsibility for planning, directing and controlling
the major activities of the consolidated entity, directly
or indirectly, during the financial year:
Kenny Goh Kwey Biaw Deputy Chief Financial Officer
and CEO of Donaco Singapore
Chong Kwong Yang
Chief Financial Officer
Att Asavanund
Chief Operating Officer
and Deputy CEO
(resigned 31 August 2017)
Consolidated – 2017
%
$
$
$
$
$
Robert Andrew Hines
Non-Executive Director
Compensation
Ham Techatut Sukjaroenkraisri Executive Director
Paul Porntat Amatavivadhana
Non-Executive Director
(resigned 3 July 2017)
The aggregate compensation made to directors and other
members of key management personnel of the consolidated
entity is set out below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Consolidated
2017
$
3,147,999
103,292
–
196,804
3,448,095
2016
$
3,252,995
83,107
18,341
1,461,440
4,815,883
Non-derivatives
Non-interest bearing
Trade payables
Floating chips
Interest-bearing – variable
Bank loans
Total non-derivatives
Consolidated – 2016
Non-derivatives
Non-interest bearing
Trade payables
Floating chips
Interest-bearing – fixed
Bank loans
Non-interest bearing – variable
Bank loans
Total non-derivatives
–
–
4,472,103
13,013,770
–
–
8.09%
54,908,598
53,553,627
72,394,471
53,553,627
–
–
–
–
–
–
–
–
4,472,103
13,013,770
108,462,225
125,948,098
Weighted
average
interest rate
1 year
or loss
Between
1 and 2
years
Between
2 and 5
years
Over 5
years
Total
contractual
maturities
%
–
–
$
$
$
$
$
5,046,135
13,652,683
–
–
–
–
–
–
5,046,135
13,652,683
9.64%
2,942,907
5,885,813
26,934,032
–
35,762,752
7.65%
37,164,227
38,484,710
40,389,444
–
116,038,381
58,805,952
44,370,523
67,323,476
–
170,499,951
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually
disclosed above.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
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Note 31. Commitments
During the financial year the following fees were paid or payable for services provided by Crowe Horwath the auditor
of the Company, and unrelated firms:
Audit services – Crowe Horwath Sydney (2016: William Buck)
Audit or review of the financial statements
97,500
91,570
Consolidated
2017
$
2016
$
Other services – Crowe Horwath Sydney (2016: William Buck)
Preparation of the tax return
Audit services – related firms
Audit or review of the financial statements
Preparation of the tax return
–
97,500
239,202
1,022
240,223
240,223
10,000
101,570
–
–
–
–
Capital commitments
Committed at the reporting date but not recognised
as liabilities, payable:
Property construction works
Car
Lease commitments – operating
Committed at the reporting date but not recognised
as liabilities, payable:
Within one year
One to five years
More than five years
Consolidated
2017
$
2016
$
637,089
44,028
681,117
371,396
792,453
7,443,115
8,606,964
1,291,389
–
1,291,389
304,374
817,283
7,709,285
8,830,942
Audit services – unrelated firms
Audit or review of the financial statements
74,135
198,409
Operating lease commitments includes contracted amounts for various offices and sites within Australia and South-East Asia
under non-cancellable operating leases. The leases have varying terms, escalation clauses and renewal rights. On renewal,
the terms of the leases are renegotiated.
Other services – unrelated firms
Preparation of the tax return
Other services provided for Donaco Singapore
5,019
–
5,019
79,154
7,509
343,892
351,401
549,810
70
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Note 31. Commitments
During the financial year the following fees were paid or payable for services provided by Crowe Horwath the auditor
of the Company, and unrelated firms:
Audit services – Crowe Horwath Sydney (2016: William Buck)
Audit or review of the financial statements
97,500
91,570
Consolidated
2017
$
2016
$
Other services – Crowe Horwath Sydney (2016: William Buck)
Preparation of the tax return
Audit services – related firms
Audit or review of the financial statements
Preparation of the tax return
–
97,500
239,202
1,022
240,223
240,223
10,000
101,570
–
–
–
–
Capital commitments
Committed at the reporting date but not recognised
as liabilities, payable:
Property construction works
Car
Lease commitments – operating
Committed at the reporting date but not recognised
as liabilities, payable:
Within one year
One to five years
More than five years
Consolidated
2017
$
2016
$
637,089
44,028
681,117
371,396
792,453
7,443,115
8,606,964
1,291,389
–
1,291,389
304,374
817,283
7,709,285
8,830,942
Audit services – unrelated firms
Audit or review of the financial statements
74,135
198,409
Operating lease commitments includes contracted amounts for various offices and sites within Australia and South-East Asia
under non-cancellable operating leases. The leases have varying terms, escalation clauses and renewal rights. On renewal,
the terms of the leases are renegotiated.
Other services – unrelated firms
Preparation of the tax return
Other services provided for Donaco Singapore
5,019
–
5,019
79,154
7,509
343,892
351,401
549,810
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Parent entity
Key management personnel
Donaco International Limited is the legal parent entity.
Donaco International Limited is listed on the Australian
Securities Exchange (ASX: DNA).
Disclosures relating to key management personnel are
set out in note 29 and the remuneration report included
in the Directors’ Report.
Subsidiaries
Transactions with related parties
Interests in subsidiaries are set out in note 34.
The following transactions occurred with related parties:
Labour hire fee paid to Star Vegas Resort & Club Co., Ltd
– a director-related entity
Leasing fees paid to Lee Hoe Property Co., Ltd
– a director-related entity
Rental received from director’s immediate family
Purchase of fixed assets by DNA Star Vegas from Star Vegas
Resort & Club Co., Ltd – a director-related entity
Technical support fees paid by Lao Cai JVC to iSentric Limited
– a director-related entity
Licence agreement for occupation of office space paid
to Infinite Capital Co., Ltd – a director-related entity
Management fees received for Star Paradise Casino property
from MMD Travel Co Ltd – a director-related entity
Consolidated
2017
$
2016
$
11,959,472
10,915,776
156,012
111,734
16,159
116,100
187,214
45,840
2,338,782
–
–
–
Management fees paid to previous owner of DNA Star Vegas Co., Ltd
– a director-related entity
Disposal of property, plant and equipment to previous owner
of DNA Star Vegas Co., Ltd – a director-related entity
19,045,688
20,492,174
586,237
–
The above transactions occurred at commercial rates.
Receivable from and payable to related parties
Loans to/from related parties
There were no loans to or from related parties at the
current and previous reporting date.
A management fee of $19,045,688 (2016: $20,492,174)
was payable to the previous owner of Star Vegas and
a management fee of $2,338,782 was receivable from
Star Paradise Casino at year end. There were no other
receivables from related parties at the current or previous
reporting date.
Note 33. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of Profit or Loss and Other Comprehensive Income
Profit/(loss) after income tax
Total comprehensive income
Statement of Financial Position
Total current assets
Total assets
Total liabilities
Equity
Issued capital
Employee share option reserve
Accumulated losses
Parent
2017
$
2016
$
2,015,705
(16,796,945)
2,015,705
(16,796,945)
Parent
2017
$
2016
$
19,672,065
35,588,600
370,065,828
372,146,330
33,990,140
29,089,505
33,982,653
29,105,717
407,931,972
3,295,396
(75,144,193)
408,931,972
3,021,680
(68,913,039)
Total equity
336,083,175
343,040,613
Guarantees entered into by the parent entity in relation
to the debts of its subsidiaries
As at 30 June 2017, the parent entity acts as a guarantor
for the facility provided by Mega International Commercial
Bank Co. Limited to a controlled entity, Donaco Hong
Kong Limited.
Significant accounting policies
The accounting policies of the parent entity are consistent
with those of the consolidated entity, as disclosed in note 1,
except for the following:
•
•
investments in subsidiaries are accounted for at cost,
less any impairment, in the parent entity
dividends received from subsidiaries are recognised
as other income by the parent entity.
–
1,030,727
Total current liabilities
Terms and conditions
Contingent liabilities
All transactions were made on normal commercial terms
and conditions and at market rates.
The parent entity had no contingent liabilities as at
30 June 2017 and 30 June 2016.
Capital commitments – property, plant and equipment
The parent entity had no capital commitments for property,
plant and equipment at as 30 June 2017 and 30 June 2016.
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Parent entity
Key management personnel
Donaco International Limited is the legal parent entity.
Donaco International Limited is listed on the Australian
Securities Exchange (ASX: DNA).
Disclosures relating to key management personnel are
set out in note 29 and the remuneration report included
in the Directors’ Report.
Subsidiaries
Transactions with related parties
Interests in subsidiaries are set out in note 34.
The following transactions occurred with related parties:
Labour hire fee paid to Star Vegas Resort & Club Co., Ltd
– a director-related entity
Leasing fees paid to Lee Hoe Property Co., Ltd
– a director-related entity
Rental received from director’s immediate family
Purchase of fixed assets by DNA Star Vegas from Star Vegas
Resort & Club Co., Ltd – a director-related entity
Technical support fees paid by Lao Cai JVC to iSentric Limited
– a director-related entity
Licence agreement for occupation of office space paid
to Infinite Capital Co., Ltd – a director-related entity
Management fees received for Star Paradise Casino property
from MMD Travel Co Ltd – a director-related entity
Consolidated
2017
$
2016
$
11,959,472
10,915,776
156,012
111,734
16,159
116,100
187,214
45,840
2,338,782
–
–
–
Management fees paid to previous owner of DNA Star Vegas Co., Ltd
– a director-related entity
Disposal of property, plant and equipment to previous owner
of DNA Star Vegas Co., Ltd – a director-related entity
19,045,688
20,492,174
586,237
–
The above transactions occurred at commercial rates.
Receivable from and payable to related parties
Loans to/from related parties
There were no loans to or from related parties at the
current and previous reporting date.
A management fee of $19,045,688 (2016: $20,492,174)
was payable to the previous owner of Star Vegas and
a management fee of $2,338,782 was receivable from
Star Paradise Casino at year end. There were no other
receivables from related parties at the current or previous
reporting date.
Note 33. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of Profit or Loss and Other Comprehensive Income
Profit/(loss) after income tax
Total comprehensive income
Statement of Financial Position
Total current assets
Total assets
Total liabilities
Equity
Issued capital
Employee share option reserve
Accumulated losses
Parent
2017
$
2016
$
2,015,705
(16,796,945)
2,015,705
(16,796,945)
Parent
2017
$
2016
$
19,672,065
35,588,600
370,065,828
372,146,330
33,990,140
29,089,505
33,982,653
29,105,717
407,931,972
3,295,396
(75,144,193)
408,931,972
3,021,680
(68,913,039)
Total equity
336,083,175
343,040,613
Guarantees entered into by the parent entity in relation
to the debts of its subsidiaries
As at 30 June 2017, the parent entity acts as a guarantor
for the facility provided by Mega International Commercial
Bank Co. Limited to a controlled entity, Donaco Hong
Kong Limited.
Significant accounting policies
The accounting policies of the parent entity are consistent
with those of the consolidated entity, as disclosed in note 1,
except for the following:
•
•
investments in subsidiaries are accounted for at cost,
less any impairment, in the parent entity
dividends received from subsidiaries are recognised
as other income by the parent entity.
–
1,030,727
Total current liabilities
Terms and conditions
Contingent liabilities
All transactions were made on normal commercial terms
and conditions and at market rates.
The parent entity had no contingent liabilities as at
30 June 2017 and 30 June 2016.
Capital commitments – property, plant and equipment
The parent entity had no capital commitments for property,
plant and equipment at as 30 June 2017 and 30 June 2016.
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The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance
with the accounting policy described in note 1:
Summarised financial information
Summarised financial information of the subsidiary with non-controlling interests that are material to the consolidated
entity are set out below:
Ownership interest
2017
2016
Lao Cai International Hotel Joint Venture Company
Principal
place of business/
country of incorporation
Australia
Singapore
British Virgin Islands
Malaysia
Vietnam
Hong Kong
Hong Kong
Hong Kong
Cambodia
Thailand
%
100%
100%
100%
100%
95%
100%
100%
100%
100%
49%
%
100%
100%
100%
100%
95%
100%
100%
100%
100%
49%
Name
Donaco Australia Pty Ltd
Donaco Singapore Pte Ltd
Donaco Holdings Ltd*
Donaco Holdings Sdn Bhd*
Lao Cai International Hotel Joint Venture Company*
Donaco Hong Kong Limited
Prime Standard Limited
Donaco Holdings (Hong Kong) Pte Ltd*
DNA Star Vegas Co. Limited**
Donaco Entertainment & Marketing (Thailand) Ltd*
* Subsidiary of Donaco Singapore Pty Ltd
** Subsidiary of Donaco Hong Kong Limited
The principal activities of each subsidiary are:
Donaco Australia Pty Ltd
Dormant (previously operated New Zealand games service,
discontinued in January 2015).
Donaco Singapore Pte Ltd
Holding company for Vietnamese casino operations.
Donaco Holdings Ltd
Cost centre for corporate operations.
Donaco Holdings Sdn Bhd
Cost centre for corporate operations.
Donaco Holdings (Hong Kong) Pte Ltd
Cost centre for corporate operations and marketing activities.
Lao Cai International Hotel Joint Venture Company Operates Vietnamese casino operations.
Donaco Hong Kong Limited
Holding company for Cambodian casino operations.
Prime Standard Limited
Cost centre for corporate operations.
DNA Star Vegas Co., Limited
Operates Cambodian casino operations.
Donaco Entertainment & Marketing (Thailand) Ltd Provision of marketing services. While the ownership of this entity
is below 50%, it is considered a controlled entity due to the provisions
of the shareholders agreement which give the consolidated entity the
right to appoint a majority of the Board.
Summarised Statement of Financial Position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Summarised Statement of Profit or Loss
and Other Comprehensive Income
Revenue
Expenses
Profit before income tax expense
Income tax expense
Profit after income tax expense
Other comprehensive income
Total comprehensive income
Statement of Cash Flows
Net cash from operating activities
Net cash used in investing activities
Net cash used in financing activities
2017
$
14,894,013
54,766,529
2016
$
14,098,132
58,391,246
69,660,542
72,489,378
18,413,616
13,326,362
20,060,871
17,514,202
31,739,978
37,575,073
37,920,564
34,914,305
26,186,141
(19,093,638)
7,092,503
(880,886)
6,211,617
–
22,659,016
(18,690,367)
3,968,649
(296,582)
3,672,067
–
6,211,617
3,672,067
13,982,466
(1,556,309)
(9,897,377)
8,794,600
(685,635)
(2,483,479)
Net decrease in cash and cash equivalents
2,528,780
5,625,486
Other financial information
Profit attributable to non-controlling interests
Accumulated non-controlling interests at the
end of reporting period
198,751
149,883
1,335,096
1,136,345
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The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance
with the accounting policy described in note 1:
Summarised financial information
Summarised financial information of the subsidiary with non-controlling interests that are material to the consolidated
entity are set out below:
Ownership interest
2017
2016
Lao Cai International Hotel Joint Venture Company
Principal
place of business/
country of incorporation
Australia
Singapore
British Virgin Islands
Malaysia
Vietnam
Hong Kong
Hong Kong
Hong Kong
Cambodia
Thailand
%
100%
100%
100%
100%
95%
100%
100%
100%
100%
49%
%
100%
100%
100%
100%
95%
100%
100%
100%
100%
49%
Name
Donaco Australia Pty Ltd
Donaco Singapore Pte Ltd
Donaco Holdings Ltd*
Donaco Holdings Sdn Bhd*
Lao Cai International Hotel Joint Venture Company*
Donaco Hong Kong Limited
Prime Standard Limited
Donaco Holdings (Hong Kong) Pte Ltd*
DNA Star Vegas Co. Limited**
Donaco Entertainment & Marketing (Thailand) Ltd*
* Subsidiary of Donaco Singapore Pty Ltd
** Subsidiary of Donaco Hong Kong Limited
The principal activities of each subsidiary are:
Donaco Australia Pty Ltd
Dormant (previously operated New Zealand games service,
discontinued in January 2015).
Donaco Singapore Pte Ltd
Holding company for Vietnamese casino operations.
Donaco Holdings Ltd
Cost centre for corporate operations.
Donaco Holdings Sdn Bhd
Cost centre for corporate operations.
Donaco Holdings (Hong Kong) Pte Ltd
Cost centre for corporate operations and marketing activities.
Lao Cai International Hotel Joint Venture Company Operates Vietnamese casino operations.
Donaco Hong Kong Limited
Holding company for Cambodian casino operations.
Prime Standard Limited
Cost centre for corporate operations.
DNA Star Vegas Co., Limited
Operates Cambodian casino operations.
Donaco Entertainment & Marketing (Thailand) Ltd Provision of marketing services. While the ownership of this entity
is below 50%, it is considered a controlled entity due to the provisions
of the shareholders agreement which give the consolidated entity the
right to appoint a majority of the Board.
Summarised Statement of Financial Position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Summarised Statement of Profit or Loss
and Other Comprehensive Income
Revenue
Expenses
Profit before income tax expense
Income tax expense
Profit after income tax expense
Other comprehensive income
Total comprehensive income
Statement of Cash Flows
Net cash from operating activities
Net cash used in investing activities
Net cash used in financing activities
2017
$
14,894,013
54,766,529
2016
$
14,098,132
58,391,246
69,660,542
72,489,378
18,413,616
13,326,362
20,060,871
17,514,202
31,739,978
37,575,073
37,920,564
34,914,305
26,186,141
(19,093,638)
7,092,503
(880,886)
6,211,617
–
22,659,016
(18,690,367)
3,968,649
(296,582)
3,672,067
–
6,211,617
3,672,067
13,982,466
(1,556,309)
(9,897,377)
8,794,600
(685,635)
(2,483,479)
Net decrease in cash and cash equivalents
2,528,780
5,625,486
Other financial information
Profit attributable to non-controlling interests
Accumulated non-controlling interests at the
end of reporting period
198,751
149,883
1,335,096
1,136,345
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Dividend
On 29 August 2017, the Board of Donaco International
Limited has announced that it intends to declare an
ordinary dividend of 0.5 cents per share, amounting to
$4,156,057. The dividend is 100% conduit foreign income
and is unfranked. Proposed dates for the dividend payment
are: ex-dividend date, 5 October 2017; record date,
6 October 2017; and payment date, 20 October 2017.
Refinance of loan with Mega International
Commercial Bank Co. Limited
The Company announced to the ASX on 15 August 2017 that
it has refinanced its loan facility with Mega International
Commercial Bank Co. Limited of Taiwan (Mega Bank). Of
the original USD100 million term loan facility with Mega
Bank drawn down in July 2015 and the additional USD20
million drawn down in July 2016, the Company has repaid
a total of USD63.4 million in the past two years, with the
remaining principal amount of the previous facility standing
at USD56.6 million.
The previous facility had a three-year term, with the
remaining USD56.6 million being repayable within the next
12 months. This consisted of USD20.8 million repayable in
January 2018, and the remaining USD35.8 million repayable
in July 2018.
The new facility will be for an amount of USD57 million.
The term has been extended to three years from the date
of drawdown, which occurred on 28 August 2017, following
the completion of the conditions precedent.
Under the new loan, 15% of the principal amount is
repayable every six months. This means that the next
principal repayment has been reduced to approximately
USD8.6 million, due in February 2018.
The interest rate on the loan has also been reduced slightly,
from a margin of 6.75% over the six month LIBOR rate, to a
margin of 6.0%, provided that the net debt (total borrowings
minus cash) of Donaco Hong Kong Limited is less than the
EBITDA of Donaco Hong Kong Limited. If net debt exceeds
EBITDA, then the margin may increase to a maximum of 6.5%.
In addition, a number of covenants controlling capital
management (dividends and buybacks) have been relaxed,
but there are still some restrictions in place until the
remaining principal falls below USD50 million, which
is expected to occur following the next repayment in
February 2018.
Share options
On 28 July 2017, the Company announced the expiration
of 1,651,883 options on 1 July 2017 in accordance with their
terms. The options were part of the FY14 option series.
Currently, there are 5,444,810 remaining options on issue.
No other matter or circumstance has arisen since
30 June 2017 that has significantly affected, or may
significantly affect the consolidated entity’s operations,
the results of those operations, or the consolidated entity’s
state of affairs in future financial years.
Note 36. Reconciliation of profit after income tax to net cash
from operating activities
Profit after income tax expense for the year
31,189,049
78,873,384
Consolidated
2017
$
2016
$
Adjustments for:
Depreciation and amortisation
Impairment of assets
Net loss/(gain) on disposal of non-current assets
Gain on bargain purchase
Share-based payments
Foreign exchange movements
Expenses related to acquisition
Non-cash finance costs
Gain on revaluation of derivative financial liability
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Decrease/(increase) in inventories
Decrease/(increase) in other operating assets
(Decrease)/increase in trade and other payables
(Decrease)/increase in provision for income tax
Increase in provisions for employee benefits
10,129,299
198,785
–
–
273,716
–
–
8,037,166
(1,113,012)
5,581,440
525,402
38,057
(7,587,488)
(432,382)
515,367
9,945,976
–
167,630
(55,165,316)
1,666,185
(680,309)
11,819,338
5,598,067
(2,609,339)
(21,943,702)
(718,010)
(1,949,631)
23,690,460
1,132,643
173,419
Net cash from operating activities
47,355,398
50,000,795
76
76
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Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportNotes to the Financial Statements For the year eNded 30 JuNe 2017Notes to the Financial Statements For the year eNded 30 JuNe 2017Note 35. Events after the reporting period
Dividend
On 29 August 2017, the Board of Donaco International
Limited has announced that it intends to declare an
ordinary dividend of 0.5 cents per share, amounting to
$4,156,057. The dividend is 100% conduit foreign income
and is unfranked. Proposed dates for the dividend payment
are: ex-dividend date, 5 October 2017; record date,
6 October 2017; and payment date, 20 October 2017.
Refinance of loan with Mega International
Commercial Bank Co. Limited
The Company announced to the ASX on 15 August 2017 that
it has refinanced its loan facility with Mega International
Commercial Bank Co. Limited of Taiwan (Mega Bank). Of
the original USD100 million term loan facility with Mega
Bank drawn down in July 2015 and the additional USD20
million drawn down in July 2016, the Company has repaid
a total of USD63.4 million in the past two years, with the
remaining principal amount of the previous facility standing
at USD56.6 million.
The previous facility had a three-year term, with the
remaining USD56.6 million being repayable within the next
12 months. This consisted of USD20.8 million repayable in
January 2018, and the remaining USD35.8 million repayable
in July 2018.
The new facility will be for an amount of USD57 million.
The term has been extended to three years from the date
of drawdown, which occurred on 28 August 2017, following
the completion of the conditions precedent.
Under the new loan, 15% of the principal amount is
repayable every six months. This means that the next
principal repayment has been reduced to approximately
USD8.6 million, due in February 2018.
The interest rate on the loan has also been reduced slightly,
from a margin of 6.75% over the six month LIBOR rate, to a
margin of 6.0%, provided that the net debt (total borrowings
minus cash) of Donaco Hong Kong Limited is less than the
EBITDA of Donaco Hong Kong Limited. If net debt exceeds
EBITDA, then the margin may increase to a maximum of 6.5%.
In addition, a number of covenants controlling capital
management (dividends and buybacks) have been relaxed,
but there are still some restrictions in place until the
remaining principal falls below USD50 million, which
is expected to occur following the next repayment in
February 2018.
Share options
On 28 July 2017, the Company announced the expiration
of 1,651,883 options on 1 July 2017 in accordance with their
terms. The options were part of the FY14 option series.
Currently, there are 5,444,810 remaining options on issue.
No other matter or circumstance has arisen since
30 June 2017 that has significantly affected, or may
significantly affect the consolidated entity’s operations,
the results of those operations, or the consolidated entity’s
state of affairs in future financial years.
Note 36. Reconciliation of profit after income tax to net cash
from operating activities
Profit after income tax expense for the year
31,189,049
78,873,384
Consolidated
2017
$
2016
$
Adjustments for:
Depreciation and amortisation
Impairment of assets
Net loss/(gain) on disposal of non-current assets
Gain on bargain purchase
Share-based payments
Foreign exchange movements
Expenses related to acquisition
Non-cash finance costs
Gain on revaluation of derivative financial liability
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Decrease/(increase) in inventories
Decrease/(increase) in other operating assets
(Decrease)/increase in trade and other payables
(Decrease)/increase in provision for income tax
Increase in provisions for employee benefits
10,129,299
198,785
–
–
273,716
–
–
8,037,166
(1,113,012)
5,581,440
525,402
38,057
(7,587,488)
(432,382)
515,367
9,945,976
–
167,630
(55,165,316)
1,666,185
(680,309)
11,819,338
5,598,067
(2,609,339)
(21,943,702)
(718,010)
(1,949,631)
23,690,460
1,132,643
173,419
Net cash from operating activities
47,355,398
50,000,795
76
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Donaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportDonaco International Limited / 2017 Annual ReportNotes to the Financial Statements For the year eNded 30 JuNe 2017Notes to the Financial Statements For the year eNded 30 JuNe 2017Note 37. Earnings per share
Consolidated
2017
$
2016
$
Earnings per share for profit/(loss) from continuing operations
Profit/(loss) after income tax
Non-controlling interest
31,189,049
(198,751)
78,873,384
(149,883)
Profit/(loss) after income tax attributable to the owners
of Donaco International Limited
30,990,298
78,723,501
Number
Number
Set out below are summaries of options outstanding under the plan during the year ended 30 June 2017:
Grant date
Expiry date
Exercise price
Balance at
start of the year
Granted
Exercised
Expired
forfeited/other
Balance at the
end of the year
01/07/2014
01/07/2014
01/07/2014
01/07/2015
01/07/2015
01/07/2015
25/08/2015
25/08/2015
25/08/2015
01/07/2016
01/07/2017
01/07/2018
01/07/2017
01/07/2018
01/07/2019
01/07/2018
01/07/2019
01/07/2020
$0.59
$0.59
$0.59
$0.89
$0.89
$0.89
$0.77
$0.77
$0.77
1,365,960
1,294,836
1,249,716
457,047
395,208
349,376
1,385,700
1,156,784
1,008,025
8,662,652
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,365,960)
–
(100,000)
1,194,836
(99,999)
1,149,717
–
–
–
–
–
–
457,047
395,208
349,376
1,385,700
1,156,784
1,008,025
(1,565,959)
7,096,693
Weighted average number of ordinary shares used in calculating
basic earnings per share
Adjustments for calculation of diluted earnings per share:
831,211,424
831,087,477
Set out below are the options exercisable at the end of the financial year:
Options over ordinary shares
–
376,433
Weighted average number of ordinary shares used in calculating
diluted earnings per share
831,211,424
831,463,910
Basic earnings per share
Diluted earnings per share
Cents
Cents
3.73
3.73
9.47
9.47
An additional 7,096,693 options over ordinary shares and 12,339,408 shares subject to warrants are antidilutive and have
been excluded from the above calculations as the exercise price of these warrants exceeds the average market share
price during the year.
Note 38. Share-based payments
Employee options
Employee option allocation FY14
At the Annual General Meeting on 21 November 2013,
shareholders approved the establishment of a long-term
incentive (LTI) plan for executives, consisting of the annual
grant of units under an option share trust (OST). On
23 December 2013, the Company announced that it had
issued options amounting to 1% of its then issued capital
(a total of 4,010,511 options) under the LTI plan. Approval
for the issue of these options under an employee incentive
scheme was obtained pursuant to ASX Listing Rule 10.14.
These options were not contributed to the OST until
1 July 2014. Accordingly employees were not allocated
units in the OST until 1 July 2014.
Employee option allocation FY15
Pursuant to the approval granted by shareholders at
the FY13 Annual General Meeting, further options were
contributed to the OST for FY15. These options were not
contributed to the OST until 1 July 2015, and accordingly
employees were not allocated additional units in the OST
until 1 July 2015.
Employee option allocation FY16
Pursuant to the approval granted by shareholders at
the FY13 Annual General Meeting, further options were
contributed to the OST for FY16. These options were
contributed to the OST and employees were allocated
additional units on 25 August 2015.
Grant date
Expiry date
Exercise price
01/07/2014
01/07/2015
01/07/2015
25/08/2015
01/07/2017
01/07/2017
01/07/2018
01/07/2018
$0.59
$0.89
$0.89
$0.77
2017
Number
2016
Number
2,344,553
1,294,836
457,047
395,208
1,385,700
457,047
–
–
4,582,508
1,751,883
The weighted average share price during the financial year
was $0.43 (2016: $0.65).
of the NPAT of the business. No other management fee
is payable for the management services.
The weighted average remaining contractual life of options
outstanding at the end of the financial year was 1.27 years
(2016: 1.89 years).
The weighted average exercise price for all outstanding
options is $0.73 (2016: $0.71).
Note 39. Contingent liabilities
As part of the agreement for the purchase of the Star
Vegas Resort & Club, the vendor of the business will
manage the business for two full years following completion
on 1 July 2015. The vendor also provided a guarantee that
the EBITDA of the business would be not less than
USD60 million per year for the two full years following
the acquisition, being FY16 and FY17.
If the target EBITDA of USD60 million is not met, the vendor
will top up the shortfall in cash. However, if the target is
met, the vendor will receive a management fee in return
for the management services provided, in the sum of 25%
These arrangements are set out in a Share Sale Agreement
and Management Agreement dated on 23 January 2015,
a Supplemental Share Sale Agreement dated 22 May 2015,
and an Amending and Restating Deed dated 18 June 2015.
At 31 December 2016, the possible obligation to pay a
management fee in respect of the December 2016 half year
was disclosed as a contingent liability as a reliable estimate
of the amount payable could not be made. A contingent
liability is ‘a possible obligation that arises from past
events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain
future events not wholly within the control of the entity’.
At 30 June 2017, the earnings met the EBITDA target and
a management fee was payable by the consolidated entity.
A management fee of $19,045,688 has been recognised
in the Statement of Comprehensive Income and as a
liability by the consolidated entity at 30 June.
The consolidated entity has no contingent liabilities
at 30 June 2017 (2016: nil)
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Note 37. Earnings per share
Consolidated
2017
$
2016
$
Earnings per share for profit/(loss) from continuing operations
Profit/(loss) after income tax
Non-controlling interest
31,189,049
(198,751)
78,873,384
(149,883)
Profit/(loss) after income tax attributable to the owners
of Donaco International Limited
30,990,298
78,723,501
Number
Number
Set out below are summaries of options outstanding under the plan during the year ended 30 June 2017:
Grant date
Expiry date
Exercise price
Balance at
start of the year
Granted
Exercised
Expired
forfeited/other
Balance at the
end of the year
01/07/2014
01/07/2014
01/07/2014
01/07/2015
01/07/2015
01/07/2015
25/08/2015
25/08/2015
25/08/2015
01/07/2016
01/07/2017
01/07/2018
01/07/2017
01/07/2018
01/07/2019
01/07/2018
01/07/2019
01/07/2020
$0.59
$0.59
$0.59
$0.89
$0.89
$0.89
$0.77
$0.77
$0.77
1,365,960
1,294,836
1,249,716
457,047
395,208
349,376
1,385,700
1,156,784
1,008,025
8,662,652
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,365,960)
–
(100,000)
1,194,836
(99,999)
1,149,717
–
–
–
–
–
–
457,047
395,208
349,376
1,385,700
1,156,784
1,008,025
(1,565,959)
7,096,693
Weighted average number of ordinary shares used in calculating
basic earnings per share
Adjustments for calculation of diluted earnings per share:
831,211,424
831,087,477
Set out below are the options exercisable at the end of the financial year:
Options over ordinary shares
–
376,433
Weighted average number of ordinary shares used in calculating
diluted earnings per share
831,211,424
831,463,910
Basic earnings per share
Diluted earnings per share
Cents
Cents
3.73
3.73
9.47
9.47
An additional 7,096,693 options over ordinary shares and 12,339,408 shares subject to warrants are antidilutive and have
been excluded from the above calculations as the exercise price of these warrants exceeds the average market share
price during the year.
Note 38. Share-based payments
Employee options
Employee option allocation FY14
At the Annual General Meeting on 21 November 2013,
shareholders approved the establishment of a long-term
incentive (LTI) plan for executives, consisting of the annual
grant of units under an option share trust (OST). On
23 December 2013, the Company announced that it had
issued options amounting to 1% of its then issued capital
(a total of 4,010,511 options) under the LTI plan. Approval
for the issue of these options under an employee incentive
scheme was obtained pursuant to ASX Listing Rule 10.14.
These options were not contributed to the OST until
1 July 2014. Accordingly employees were not allocated
units in the OST until 1 July 2014.
Employee option allocation FY15
Pursuant to the approval granted by shareholders at
the FY13 Annual General Meeting, further options were
contributed to the OST for FY15. These options were not
contributed to the OST until 1 July 2015, and accordingly
employees were not allocated additional units in the OST
until 1 July 2015.
Employee option allocation FY16
Pursuant to the approval granted by shareholders at
the FY13 Annual General Meeting, further options were
contributed to the OST for FY16. These options were
contributed to the OST and employees were allocated
additional units on 25 August 2015.
Grant date
Expiry date
Exercise price
01/07/2014
01/07/2015
01/07/2015
25/08/2015
01/07/2017
01/07/2017
01/07/2018
01/07/2018
$0.59
$0.89
$0.89
$0.77
2017
Number
2016
Number
2,344,553
1,294,836
457,047
395,208
1,385,700
457,047
–
–
4,582,508
1,751,883
The weighted average share price during the financial year
was $0.43 (2016: $0.65).
of the NPAT of the business. No other management fee
is payable for the management services.
The weighted average remaining contractual life of options
outstanding at the end of the financial year was 1.27 years
(2016: 1.89 years).
The weighted average exercise price for all outstanding
options is $0.73 (2016: $0.71).
Note 39. Contingent liabilities
As part of the agreement for the purchase of the Star
Vegas Resort & Club, the vendor of the business will
manage the business for two full years following completion
on 1 July 2015. The vendor also provided a guarantee that
the EBITDA of the business would be not less than
USD60 million per year for the two full years following
the acquisition, being FY16 and FY17.
If the target EBITDA of USD60 million is not met, the vendor
will top up the shortfall in cash. However, if the target is
met, the vendor will receive a management fee in return
for the management services provided, in the sum of 25%
These arrangements are set out in a Share Sale Agreement
and Management Agreement dated on 23 January 2015,
a Supplemental Share Sale Agreement dated 22 May 2015,
and an Amending and Restating Deed dated 18 June 2015.
At 31 December 2016, the possible obligation to pay a
management fee in respect of the December 2016 half year
was disclosed as a contingent liability as a reliable estimate
of the amount payable could not be made. A contingent
liability is ‘a possible obligation that arises from past
events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain
future events not wholly within the control of the entity’.
At 30 June 2017, the earnings met the EBITDA target and
a management fee was payable by the consolidated entity.
A management fee of $19,045,688 has been recognised
in the Statement of Comprehensive Income and as a
liability by the consolidated entity at 30 June.
The consolidated entity has no contingent liabilities
at 30 June 2017 (2016: nil)
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Note 40. Business combinations
On 1 July 2015, the Group acquired Star Vegas Resort
& Club as it is complementary to the leisure and
entertainment activities of the Group, offers geographic
and market diversification and significantly increases
the revenue and earnings of the Group.
Control was acquired by the Group acquiring 100% of
the issued capital of DNA Star Vegas Co., Ltd, which is
the owner of all the assets of the Star Vegas business, for
agreed consideration of USD360 million (AUD471,841,466).
This consideration consisted of USD240 million cash
(AUD316,451,000) and AUD147,199,529 ordinary shares
in the Company, with an agreed value of USD120 million
(AUD154,999,579) and the Company credited AUD154,999,579
to share capital net of transaction costs. The Company’s
stock closing price on 1 July 2015 was AUD0.775 (equivalent
to approximately USD0.59698) and the fair value of the
shares issued as consideration on the Completion Date
was USD87,396,776 (AUD114,079,635). As a result of this
variance between the fair value of the shares issued and
the agreed price, AUD41,363,075 was debited to contributed
equity to ensure the value of contributed equity was not
recorded at an amount higher than its fair value. A further
adjustment was made for movements in foreign exchange
rates between the date of the agreement and the date the
transaction occurred.
Pursuant to a detailed valuation report and purchase price
allocation report dated 20 June 2016 prepared by Colliers
International Hong Kong Limited and its related parties
Colliers International Thailand and Singapore, the fair value
of the business acquired by Donaco was USD368.1 million
(AUD495,621,397). The difference between the fair value
of the business acquired and fair value of the purchase
consideration of USD327.9 million (AUD440,456,080) gives
rise to a bargain purchase amounting to USD40.2 million
(AUD55,165,316). The bargain purchase of AUD55,165,316
is recognised as a gain in the Company’s income statement
in 2016 in accordance with the Accounting Standard AASB 3
Business Combinations.
Details of the acquisition and the values of assets acquired are as follows:
Equity
Casino licence – at fair value
Buildings
Plant and equipment
Motor vehicles
Slot machines
Furniture and fittings
Cash
Trade and other payables
Net assets acquired
Gain on bargain purchase
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid or payable to vendor
Donaco International Limited shares issued to vendor at agreed price
Share issue transaction costs
Adjustment to value of Donaco International Limited shares issued to vendor
Effect of exchange rate movements
Acquisition costs expensed to profit or loss
Fair value
$
–
400,543,357
90,768,920
1,447,911
354,580
1,261,336
1,245,293
4,245,871
(4,245,871)
495,621,397
(55,165,316)
440,456,080
322,655,000
155,442,710
(443,131)
(41,363,075)
4,164,576
440,456,080
11,819,338
The operating results for DNA Star Vegas Co., Ltd since
acquisition are shown in Casino Operations – Cambodia
in note 3 above.
As part of the agreement for the purchase, the vendor will
manage the business for two full years following completion
on 1 July 2015. The vendor also provided a guarantee that
the EBITDA of the business would be not less than
USD60 million per year for the two full years following
the acquisition, being FY16 and FY17.
If the target EBITDA of USD60 million is not met, the vendor
will top up the shortfall in cash. However, if the target is
met, the vendor will receive a management fee in return
for the management services provided, in the sum of 25%
of the NPAT of the business. No other management fee
is payable for the management services. The amount of
the management fee recognised in 2017 is AUD19,045,688
(2016: AUD20,492,174).
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On 1 July 2015, the Group acquired Star Vegas Resort
& Club as it is complementary to the leisure and
entertainment activities of the Group, offers geographic
and market diversification and significantly increases
the revenue and earnings of the Group.
Control was acquired by the Group acquiring 100% of
the issued capital of DNA Star Vegas Co., Ltd, which is
the owner of all the assets of the Star Vegas business, for
agreed consideration of USD360 million (AUD471,841,466).
This consideration consisted of USD240 million cash
(AUD316,451,000) and AUD147,199,529 ordinary shares
in the Company, with an agreed value of USD120 million
(AUD154,999,579) and the Company credited AUD154,999,579
to share capital net of transaction costs. The Company’s
stock closing price on 1 July 2015 was AUD0.775 (equivalent
to approximately USD0.59698) and the fair value of the
shares issued as consideration on the Completion Date
was USD87,396,776 (AUD114,079,635). As a result of this
variance between the fair value of the shares issued and
the agreed price, AUD41,363,075 was debited to contributed
equity to ensure the value of contributed equity was not
recorded at an amount higher than its fair value. A further
adjustment was made for movements in foreign exchange
rates between the date of the agreement and the date the
transaction occurred.
Pursuant to a detailed valuation report and purchase price
allocation report dated 20 June 2016 prepared by Colliers
International Hong Kong Limited and its related parties
Colliers International Thailand and Singapore, the fair value
of the business acquired by Donaco was USD368.1 million
(AUD495,621,397). The difference between the fair value
of the business acquired and fair value of the purchase
consideration of USD327.9 million (AUD440,456,080) gives
rise to a bargain purchase amounting to USD40.2 million
(AUD55,165,316). The bargain purchase of AUD55,165,316
is recognised as a gain in the Company’s income statement
in 2016 in accordance with the Accounting Standard AASB 3
Business Combinations.
Details of the acquisition and the values of assets acquired are as follows:
Equity
Casino licence – at fair value
Buildings
Plant and equipment
Motor vehicles
Slot machines
Furniture and fittings
Cash
Trade and other payables
Net assets acquired
Gain on bargain purchase
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid or payable to vendor
Donaco International Limited shares issued to vendor at agreed price
Share issue transaction costs
Adjustment to value of Donaco International Limited shares issued to vendor
Effect of exchange rate movements
Acquisition costs expensed to profit or loss
Fair value
$
–
400,543,357
90,768,920
1,447,911
354,580
1,261,336
1,245,293
4,245,871
(4,245,871)
495,621,397
(55,165,316)
440,456,080
322,655,000
155,442,710
(443,131)
(41,363,075)
4,164,576
440,456,080
11,819,338
The operating results for DNA Star Vegas Co., Ltd since
acquisition are shown in Casino Operations – Cambodia
in note 3 above.
As part of the agreement for the purchase, the vendor will
manage the business for two full years following completion
on 1 July 2015. The vendor also provided a guarantee that
the EBITDA of the business would be not less than
USD60 million per year for the two full years following
the acquisition, being FY16 and FY17.
If the target EBITDA of USD60 million is not met, the vendor
will top up the shortfall in cash. However, if the target is
met, the vendor will receive a management fee in return
for the management services provided, in the sum of 25%
of the NPAT of the business. No other management fee
is payable for the management services. The amount of
the management fee recognised in 2017 is AUD19,045,688
(2016: AUD20,492,174).
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FOR THE YEAR ENDED 30 JUNE 2017
Independent Auditor’s Report to the Members
of Donaco International Limited
In the directors’ opinion:
•
•
•
•
the attached financial statements and notes comply with the Corporations Act 2001 (Cth),
the Accounting Standards, the Corporations Regulations 2001 (Cth) and other mandatory
professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board as described in
note 1 to the financial statements;
the attached financial statements and notes give a true and fair view of the consolidated
entity’s financial position as at 30 June 2017 and of its performance for the financial year
ended on that date; and
there are reasonable grounds to believe that the Company will be able to pay its debts
as and when they become due and payable.
The directors have been given the declarations required by section 295A of the Corporations Act.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a)
of the Corporations Act.
On behalf of the directors
Mr stuart McGregor
Chairman
29 September 2017, Sydney
Crowe Horwath Sydney
ABN 97 895 683 573
Member Crowe Horwath International
Audit and Assurance Services
Level 15 1 O'Connell Street
Sydney NSW 2000
Australia
Tel +61 2 9262 2155
Fax +61 2 9262 2190
www.crowehorwath.com.au
Independent Auditor’s Report to the Members of Donaco International
Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Donaco International Limited (the Company and its
subsidiaries (the consolidated entity)), which comprises the consolidated statement of financial
position as at 30 June 2017, the consolidated statement of profit or loss and other comprehensive
income, the consolidated statement of changes in equity and the consolidated statement of cash flows
for the year then ended, and notes to the financial statements, including a summary of significant
accounting policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the consolidated entity is in accordance with the
Corporations Act 2001, including:
(a) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2017 and of
its financial performance for the year then ended; and
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the consolidated entity in accordance with the
auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Crowe Horwath Sydney is a member of Crowe Horwath International, a Swiss verein. Each member of Crowe Horwath is a separate and
independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of
financial services licensees.
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Director’s Declaration
FOR THE YEAR ENDED 30 JUNE 2017
Independent Auditor’s Report to the Members
of Donaco International Limited
In the directors’ opinion:
•
•
•
•
the attached financial statements and notes comply with the Corporations Act 2001 (Cth),
the Accounting Standards, the Corporations Regulations 2001 (Cth) and other mandatory
professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board as described in
note 1 to the financial statements;
the attached financial statements and notes give a true and fair view of the consolidated
entity’s financial position as at 30 June 2017 and of its performance for the financial year
ended on that date; and
there are reasonable grounds to believe that the Company will be able to pay its debts
as and when they become due and payable.
The directors have been given the declarations required by section 295A of the Corporations Act.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a)
of the Corporations Act.
On behalf of the directors
Mr stuart McGregor
Chairman
29 September 2017, Sydney
Crowe Horwath Sydney
ABN 97 895 683 573
Member Crowe Horwath International
Audit and Assurance Services
Level 15 1 O'Connell Street
Sydney NSW 2000
Australia
Tel +61 2 9262 2155
Fax +61 2 9262 2190
www.crowehorwath.com.au
Independent Auditor’s Report to the Members of Donaco International
Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Donaco International Limited (the Company and its
subsidiaries (the consolidated entity)), which comprises the consolidated statement of financial
position as at 30 June 2017, the consolidated statement of profit or loss and other comprehensive
income, the consolidated statement of changes in equity and the consolidated statement of cash flows
for the year then ended, and notes to the financial statements, including a summary of significant
accounting policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the consolidated entity is in accordance with the
Corporations Act 2001, including:
(a) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2017 and of
its financial performance for the year then ended; and
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the consolidated entity in accordance with the
auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Crowe Horwath Sydney is a member of Crowe Horwath International, a Swiss verein. Each member of Crowe Horwath is a separate and
independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of
financial services licensees.
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Independent Auditor’s Report to the Members
of Donaco International Limited
Independent Auditor’s Report to the Members
of Donaco International Limited
Decentralised operations
Key Audit Matter
The consolidated entity comprises subsidiaries
(components) whose operations are spread
across Cambodia, Vietnam and Hong Kong.
The decentralised and varied nature of these
operations require significant oversight by
management to monitor the activities, review
financial reporting by the components, and
undertake the group consolidation.
This matter has been identified as a key audit
matter given the following:
number and significance of the subsidiaries
to the consolidated entity.
varied nature of the operations and
accounting systems and processes.
How we addressed the key audit matter
Our audit procedures included the following:
Visited the operations in Cambodia and
Vietnam, and held discussions with the local
management and component auditors in
January 2017.
Held discussions with the component auditor of
the subsidiaries based in Hong Kong.
Visited the component auditor of DNA Star
Vegas Co. Limited in August 2017.
Tailored our group reporting instructions and
designed audit procedures based on
information obtained during the site visits and
our assessment of the consolidated entity’s
overall audit risks.
Maintained communication with the component
manual nature of the consolidation process.
multiple foreign currencies involved.
auditors throughout the audit process.
Evaluated the work performed by the
component auditors for sufficiency for our
overall group audit purpose.
Agreed the financial data used in the
consolidation to the component auditors’ group
reporting.
Tested the mathematical accuracy of the
consolidation workings, including reperforming
foreign currency translations and evaluating
the completeness and accuracy of the
consolidation elimination entries.
Revenue recognition for casino revenue (Notes 1 and 4)
Key Audit Matter
The consolidated entity’s revenue is
predominantly made up of revenue from
gaming. Revenue recognition for casino revenue
is a key audit matter because of the high volume
of transactions and the relationship with junket
operators and joint venture partners that
supports a significant portion of the revenue
generating capability of the consolidated entity.
How we addressed the key audit matter
Our audit procedures included the following:
Visited the casinos in Cambodia and Vietnam,
in January 2017 to gain an understanding of
the consolidated entity’s revenue recognition
processes, including how gaming transactions
with customers are initiated and settled,
gaining an understanding of the impact of
commission arrangements with junket
operators, and forming a view about the key
drivers and relationships that are used to
monitor revenue.
Challenged the adequacy of revenue
recognition accounting policies, classification
and disclosures in the financial report.
Revenue recognition accounting policies and
disclosures have been enhanced in the
financial report, including the restatement to
the presentation of cash flows as disclosed in
Note 1.
Considered whether the consolidated entity’s
revenue recognition practices are consistent
with industry practice, our knowledge of the
business, and AASB 118 Revenue.
Impairment assessment of intangible assets (Note 14)
Key Audit Matter
The consolidated entity recorded a casino
licence asset of $386.68 million as at 30 June
2017. The licence is classified as an intangible
asset with indefinite useful life and is subject to
annual impairment assessment.
The impairment assessment of the intangible
asset is a key audit matter because of the
complexity and subjectivity involved, specifically
in relation to the Fair Value less Cost of
Disposal model adopted by management and
the key assumptions that are used to determine
the inputs to the assessment.
How we addressed the key audit matter
Our audit procedures included the following:
Together with our accounting technical
specialist, assessed whether the methodology
used by management in the impairment
assessment met the requirements of AASB
136 Impairment of Assets.
Assessed management’s determination of the
cash generating unit (“CGU”) and the CGU’s
carrying value.
Assessed reasonableness of cash flow
forecasts by comparing the base year in the
forecast calculation to the current year’s actual
results.
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Independent Auditor’s Report to the Members
of Donaco International Limited
Independent Auditor’s Report to the Members
of Donaco International Limited
Decentralised operations
Key Audit Matter
The consolidated entity comprises subsidiaries
(components) whose operations are spread
across Cambodia, Vietnam and Hong Kong.
The decentralised and varied nature of these
operations require significant oversight by
management to monitor the activities, review
financial reporting by the components, and
undertake the group consolidation.
This matter has been identified as a key audit
matter given the following:
number and significance of the subsidiaries
to the consolidated entity.
varied nature of the operations and
accounting systems and processes.
How we addressed the key audit matter
Our audit procedures included the following:
Visited the operations in Cambodia and
Vietnam, and held discussions with the local
management and component auditors in
January 2017.
Held discussions with the component auditor of
the subsidiaries based in Hong Kong.
Visited the component auditor of DNA Star
Vegas Co. Limited in August 2017.
Tailored our group reporting instructions and
designed audit procedures based on
information obtained during the site visits and
our assessment of the consolidated entity’s
overall audit risks.
Maintained communication with the component
manual nature of the consolidation process.
multiple foreign currencies involved.
auditors throughout the audit process.
Evaluated the work performed by the
component auditors for sufficiency for our
overall group audit purpose.
Agreed the financial data used in the
consolidation to the component auditors’ group
reporting.
Tested the mathematical accuracy of the
consolidation workings, including reperforming
foreign currency translations and evaluating
the completeness and accuracy of the
consolidation elimination entries.
Revenue recognition for casino revenue (Notes 1 and 4)
Key Audit Matter
The consolidated entity’s revenue is
predominantly made up of revenue from
gaming. Revenue recognition for casino revenue
is a key audit matter because of the high volume
of transactions and the relationship with junket
operators and joint venture partners that
supports a significant portion of the revenue
generating capability of the consolidated entity.
How we addressed the key audit matter
Our audit procedures included the following:
Visited the casinos in Cambodia and Vietnam,
in January 2017 to gain an understanding of
the consolidated entity’s revenue recognition
processes, including how gaming transactions
with customers are initiated and settled,
gaining an understanding of the impact of
commission arrangements with junket
operators, and forming a view about the key
drivers and relationships that are used to
monitor revenue.
Challenged the adequacy of revenue
recognition accounting policies, classification
and disclosures in the financial report.
Revenue recognition accounting policies and
disclosures have been enhanced in the
financial report, including the restatement to
the presentation of cash flows as disclosed in
Note 1.
Considered whether the consolidated entity’s
revenue recognition practices are consistent
with industry practice, our knowledge of the
business, and AASB 118 Revenue.
Impairment assessment of intangible assets (Note 14)
Key Audit Matter
The consolidated entity recorded a casino
licence asset of $386.68 million as at 30 June
2017. The licence is classified as an intangible
asset with indefinite useful life and is subject to
annual impairment assessment.
The impairment assessment of the intangible
asset is a key audit matter because of the
complexity and subjectivity involved, specifically
in relation to the Fair Value less Cost of
Disposal model adopted by management and
the key assumptions that are used to determine
the inputs to the assessment.
How we addressed the key audit matter
Our audit procedures included the following:
Together with our accounting technical
specialist, assessed whether the methodology
used by management in the impairment
assessment met the requirements of AASB
136 Impairment of Assets.
Assessed management’s determination of the
cash generating unit (“CGU”) and the CGU’s
carrying value.
Assessed reasonableness of cash flow
forecasts by comparing the base year in the
forecast calculation to the current year’s actual
results.
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Independent Auditor’s Report to the Members
of Donaco International Limited
Independent Auditor’s Report to the Members
of Donaco International Limited
Key Audit Matter
How we addressed the key audit matter
Key Audit Matter
Assessed the appropriateness of the currency
used in the model. The cash flow forecast is
calculated in the Thai Baht (THB) and
translated to the US Dollar (USD) at the
valuation date.
Together with our valuation specialists,
assessed reasonableness of the key
assumptions used, being revenue growth rate,
discount rate, terminal growth rate and
discount for lack of marketability.
Together with our valuation specialists, tested
the mathematical accuracy and components of
the model that supports the impairment
assessment.
Checked the sensitivity of the impairment
assessment by focusing on the discount for
lack of marketability and THB/USD translation
rate.
Evaluated the adequacy of the judgments and
sources of estimation uncertainty disclosures
in the consolidated financial report.
Obligatory payments (Note 7)
Key Audit Matter
How we addressed the key audit matter
The consolidated entity paid monthly obligation
payments to the government of Cambodia in
respect of its casino business in Cambodia.
These payments are made in accordance with
practices previously agreed with the Ministry of
Economy and Finance of Cambodia (“MOEF”)
and as the Casino Law which is to cover
taxation of gaming activities in Cambodia has
yet to be promulgated.
We determined this to be a key audit matter
given the inherent nature of this matter.
Our group audit procedures included the following:
Held discussions with the component auditor
and management, and researched the tax
obligation in respect of the casino business in
Cambodia to gain an understanding of the
obligatory payments.
Obtained correspondence with the MOEF
relevant to gaming and non-gaming obligation
payments and conditions attached to the
income tax liabilities (obligation payments).
Obtained a legal confirmation on the following:
(a) There is no Casino Law in respect of
casino taxes has been promulgated.
(b) The obligatory payment comprised of fixed
gaming tax and fixed non-gaming tax.
(c) DNA Star Vegas Co. Limited is under a
Lump Sum tax regime on its gaming and
non-gaming earnings until a new law on
gambling is passed.
How we addressed the key audit matter
Checked the payments of monthly obligatory
payments to the bank transfer slips.
Evaluated the adequacy of disclosure in the
consolidated entity’s financial report. The
disclosures in Note 7 have been enhanced.
Other Information
The directors are responsible for the other information. The other information comprises the
information included in the Group’s annual report for the year ended 30 June 2017, but does not
include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing
and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf .This
description forms part of our auditor’s report.
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Independent Auditor’s Report to the Members
of Donaco International Limited
Independent Auditor’s Report to the Members
of Donaco International Limited
Key Audit Matter
How we addressed the key audit matter
Key Audit Matter
Assessed the appropriateness of the currency
used in the model. The cash flow forecast is
calculated in the Thai Baht (THB) and
translated to the US Dollar (USD) at the
valuation date.
Together with our valuation specialists,
assessed reasonableness of the key
assumptions used, being revenue growth rate,
discount rate, terminal growth rate and
discount for lack of marketability.
Together with our valuation specialists, tested
the mathematical accuracy and components of
the model that supports the impairment
assessment.
Checked the sensitivity of the impairment
assessment by focusing on the discount for
lack of marketability and THB/USD translation
rate.
Evaluated the adequacy of the judgments and
sources of estimation uncertainty disclosures
in the consolidated financial report.
Obligatory payments (Note 7)
Key Audit Matter
How we addressed the key audit matter
The consolidated entity paid monthly obligation
payments to the government of Cambodia in
respect of its casino business in Cambodia.
These payments are made in accordance with
practices previously agreed with the Ministry of
Economy and Finance of Cambodia (“MOEF”)
and as the Casino Law which is to cover
taxation of gaming activities in Cambodia has
yet to be promulgated.
We determined this to be a key audit matter
given the inherent nature of this matter.
Our group audit procedures included the following:
Held discussions with the component auditor
and management, and researched the tax
obligation in respect of the casino business in
Cambodia to gain an understanding of the
obligatory payments.
Obtained correspondence with the MOEF
relevant to gaming and non-gaming obligation
payments and conditions attached to the
income tax liabilities (obligation payments).
Obtained a legal confirmation on the following:
(a) There is no Casino Law in respect of
casino taxes has been promulgated.
(b) The obligatory payment comprised of fixed
gaming tax and fixed non-gaming tax.
(c) DNA Star Vegas Co. Limited is under a
Lump Sum tax regime on its gaming and
non-gaming earnings until a new law on
gambling is passed.
How we addressed the key audit matter
Checked the payments of monthly obligatory
payments to the bank transfer slips.
Evaluated the adequacy of disclosure in the
consolidated entity’s financial report. The
disclosures in Note 7 have been enhanced.
Other Information
The directors are responsible for the other information. The other information comprises the
information included in the Group’s annual report for the year ended 30 June 2017, but does not
include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing
and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf .This
description forms part of our auditor’s report.
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Independent Auditor’s Report to the Members
of Donaco International Limited
Shareholder Information
FOR THE YEAR ENDED 30 JUNE 2017
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 16 to 24 of the directors’ report for the
year 30 June 2017.
In our opinion, the Remuneration Report of Donaco International Limited, for the year ended 30 June
2017, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
CROWE HORWATH SYDNEY
SUWARTI ASMONO
Partner
Dated at Sydney this 29th day of September 2017
The shareholder information set out below was applicable as at 31 August 2017.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Number of holders
of ordinary shares
356
662
397
796
133
2,344
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Ordinary Shares
HSBC Custody Nominees (Australia) Limited
Slim Twinkle Limited
Convent Fine Limited
Total Alpha Investments Limited
Citicorp Nominees Pty Limited
Mr Keong Yew Lim
National Nominees Limited
J P Morgan Nominees Australia Limited
Max Union Corporate Development Ltd
BNP Paribas Noms Pty Ltd
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