A N N U A L R E P O R T
DONACO INTER NAT IONA L LIMI T ED A NNUAL R EPORT
FULL YEAR STATUTORY ACCOUNTS – 30 JUNE 2018
YUNNAN
GUIZHOU
ARISTO
INTERNATIONAL HOTEL
GUANGXI
VIETNAM
LAOS
Contents
THAILAND
DNA STAR VEGAS
CAMBODIA
From the Chairman
From the Managing Director
Board of Directors
Corporate Social Responsibility
Directors’ Report
Auditor’s Independence Declaration
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
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
26
30
32
33
34
35
75
76
82
84
NOTICE OF 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 29 November 2018 at 2.30pm (Sydney time).
3
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT DONACO INTER NAT IONA L LIMI T ED A NNUAL R EPORT
FULL YEAR STATUTORY ACCOUNTS – 30 JUNE 2018
YUNNAN
GUIZHOU
ARISTO
INTERNATIONAL HOTEL
GUANGXI
VIETNAM
LAOS
Contents
THAILAND
DNA STAR VEGAS
CAMBODIA
From the Chairman
From the Managing Director
Board of Directors
Corporate Social Responsibility
Directors’ Report
Auditor’s Independence Declaration
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
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
26
30
32
33
34
35
75
76
82
84
NOTICE OF 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 29 November 2018 at 2.30pm (Sydney time).
3
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT FROM THE CHAIRMAN
Dear fellow shareholders,
The 2018 financial year
can be described as a year
of challenges, changes
and progress.
The challenges occurred
early in the year when it
became apparent that the
vendor of the Star Vegas
casino was operating two
casinos in breach of the
non-compete provisions
in the sale contract. This
challenge was compounded by the poaching of our VIP
junkets by the vendor, which severely impacted our junket
business at Star Vegas.
The Board acted swiftly when the issues were identified
and we are actively pursuing all legal avenues to stop the
illegal operation of the competing casinos, and to receive
compensation for the financial impact that we have suffered
as a result of the contract breaches.
The Company was successful in obtaining an injunction
ordering the closure of the competing casinos. After the
injunction was obtained, one of the casinos changed
its name from ‘Star Paradise’ to ‘Winsor’, and at present
continues to operate. The vendor’s initial arguments against
the injunction were rejected by the Cambodian court, but
a further appeal by the vendor to a higher court is pending.
In late March 2018 the Company obtained a freezing order
on the vendor’s Donaco shares from the NSW Supreme Court,
and this order has now been extended until 2 November 2018.
When the breaches became apparent the Board withheld
the final management fee payment to the vendor in respect
of the 2017 financial year. The vendor then made a claim
for security rights over certain assets of Star Vegas, relating
to this payment. This claim was rejected by the Cambodian
court, but a few days later, a different firm of lawyers acting
for the vendor filed an essentially identical claim. We have
argued that this is an abuse of process, and should also
be rejected.
The vendor then threatened to terminate the lease of the
Star Vegas property, on what the Board considers to be
contrived and spurious grounds. The Company has obtained
an injunction to prevent the threatened termination, and
the injunction continues in force. The vendor has now
commenced arbitration proceedings in Cambodia over this
matter. The Board is seeking a positive resolution within the
next six months.
4
The vendor has also commenced defamation proceedings in
Thailand against Donaco and two of our directors for damages
of THB1 million (approximately $41,000). This frivolous claim
relates to Donaco’s ASX releases, which Donaco is legally
required to issue. We will not be deterred from our obligations
to keep our shareholders informed of the important issues and
developments in relation to these matters.
Most significantly, the Board has commenced arbitration
proceedings in Singapore for US$190 million, relating to
the vendor’s breaches of the sale agreements for Star Vegas,
and the subsequent impairment charge that was incurred to
the Star Vegas casino license. The Board would like a rapid
resolution to this issue, but unfortunately the hearing date
is currently set for 29 July 2019, due to unavailability of
lawyers and the arbitrator.
The year has also seen a number of significant changes.
At the Board level, the directors appointed by the Star Vegas
vendor have left, following the breaches by the vendor.
We are comfortable with our present Board composition
and experience of our Board members. Strong corporate
governance remains the Board’s most important area of focus
at Donaco, and we retain our recognition in the Asian region
as a group that operates with high standards of probity and
good governance.
A significant change occurred when management of the Star
Vegas casino was taken in-house in July 2018, following the
expiration of the management contract with the vendor. The
new management team have worked actively to address and
rebuild the VIP business at Star Vegas, and to undertake a
number of improvements at the property during the year.
Progress has also occurred during the year, with new junkets
introduced at Star Vegas, new facilities being built and
introduced at the property to attract new main floor and VIP
patrons, the refurbishment of hotel rooms, the introduction
of new gaming machines and gaming systems, and the
recently announced launch of the online gaming operations.
These initiatives will all hold the business in good stead over
the next few years.
Despite the challenging conditions in our major market,
the casinos continued to produce positive cash flows of
$34.6 million, and this has been used to further strengthen
our financial position through the repayment of debt.
The primary focus, given the challenges during the 2018
financial year, has been on further reducing the Mega Bank
debt, which has now fallen to US$40 million, following the
further repayment of US$8.55 million in August 2018.
The $143.9 million impairment charge which the Board
deemed as prudent, given the breaches by the vendor, did
result in the loss recorded in the statutory results. This has
meant that the Board is unable to declare a dividend for the
2018 financial year, and cannot extend the current buy-back.
Under the Mega Bank facility, these capital management
initiatives are restricted to 100% of statutory net profit after
tax (NPAT).
The Board recognises that capital allocation is one of the
most important areas of value creation for shareholders,
and aims to restore a range of capital management
initiatives, such as buy backs and dividends, as the financial
performance is restored.
On a separate note, despite the attention of the Board to
the challenges presented to it during the 2018 financial
year, we continued to make a positive contribution to the
communities in which we operate both in Cambodia and
Vietnam. For example, during the year we donated two
mobile medical clinics to Samdech Techo Voluntary Youth
Doctors Association. This is a not-for-profit organisation
which mobilises medical professionals, medical students
and volunteers to help provide free healthcare to rural
Cambodians throughout the country. The two new mobile
clinics will help to address a significant problem faced by
poor families in remote areas of Cambodia, who often have
difficulty accessing proper medical and dental treatment. At
the Aristo in Vietnam, we made significant donations to local
orphanages, schools and war veterans, assisting both with
cash and with practical gifts.
In summary, the 2018 financial year was one of challenges,
changes and significant progress. We expect that the
encouraging signs that have emerged in the second half
of the financial year in terms of restoring the VIP junket
business at Star Vegas, the upgrades of facilities and slot
machines and systems, together with the launch of the
online gaming operations, and a further solid contribution
from Aristo in Vietnam, should result in better performance
in the next financial year. As a Board we aim to allow the
management to focus on the business, as we attend to the
issues of progressing and resolving the outstanding litigation
against the vendor.
I thank our shareholders for their continuing support, and
I assure you all that we will continue to pursue our legal
rights aggressively, and demands for compensation, and will
continue to keep you informed of our progress. I am pleased
to say that management have taken up the challenge of
restoring the financial performance of the group, and expect
to see improved financial results for the 2019 financial year.
Stuart McGregor
Chairman
“Strong corporate governance
remains the Board’s most
important area of focus at
Donaco, and we retain our
recognition in the Asian region
as a group that operates with
high standards of probity and
good governance.”
5
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT FROM THE CHAIRMAN
Dear fellow shareholders,
The 2018 financial year
can be described as a year
of challenges, changes
and progress.
The challenges occurred
early in the year when it
became apparent that the
vendor of the Star Vegas
casino was operating two
casinos in breach of the
non-compete provisions
in the sale contract. This
challenge was compounded by the poaching of our VIP
junkets by the vendor, which severely impacted our junket
business at Star Vegas.
The Board acted swiftly when the issues were identified
and we are actively pursuing all legal avenues to stop the
illegal operation of the competing casinos, and to receive
compensation for the financial impact that we have suffered
as a result of the contract breaches.
The Company was successful in obtaining an injunction
ordering the closure of the competing casinos. After the
injunction was obtained, one of the casinos changed
its name from ‘Star Paradise’ to ‘Winsor’, and at present
continues to operate. The vendor’s initial arguments against
the injunction were rejected by the Cambodian court, but
a further appeal by the vendor to a higher court is pending.
In late March 2018 the Company obtained a freezing order
on the vendor’s Donaco shares from the NSW Supreme Court,
and this order has now been extended until 2 November 2018.
When the breaches became apparent the Board withheld
the final management fee payment to the vendor in respect
of the 2017 financial year. The vendor then made a claim
for security rights over certain assets of Star Vegas, relating
to this payment. This claim was rejected by the Cambodian
court, but a few days later, a different firm of lawyers acting
for the vendor filed an essentially identical claim. We have
argued that this is an abuse of process, and should also
be rejected.
The vendor then threatened to terminate the lease of the
Star Vegas property, on what the Board considers to be
contrived and spurious grounds. The Company has obtained
an injunction to prevent the threatened termination, and
the injunction continues in force. The vendor has now
commenced arbitration proceedings in Cambodia over this
matter. The Board is seeking a positive resolution within the
next six months.
4
The vendor has also commenced defamation proceedings in
Thailand against Donaco and two of our directors for damages
of THB1 million (approximately $41,000). This frivolous claim
relates to Donaco’s ASX releases, which Donaco is legally
required to issue. We will not be deterred from our obligations
to keep our shareholders informed of the important issues and
developments in relation to these matters.
Most significantly, the Board has commenced arbitration
proceedings in Singapore for US$190 million, relating to
the vendor’s breaches of the sale agreements for Star Vegas,
and the subsequent impairment charge that was incurred to
the Star Vegas casino license. The Board would like a rapid
resolution to this issue, but unfortunately the hearing date
is currently set for 29 July 2019, due to unavailability of
lawyers and the arbitrator.
The year has also seen a number of significant changes.
At the Board level, the directors appointed by the Star Vegas
vendor have left, following the breaches by the vendor.
We are comfortable with our present Board composition
and experience of our Board members. Strong corporate
governance remains the Board’s most important area of focus
at Donaco, and we retain our recognition in the Asian region
as a group that operates with high standards of probity and
good governance.
A significant change occurred when management of the Star
Vegas casino was taken in-house in July 2018, following the
expiration of the management contract with the vendor. The
new management team have worked actively to address and
rebuild the VIP business at Star Vegas, and to undertake a
number of improvements at the property during the year.
Progress has also occurred during the year, with new junkets
introduced at Star Vegas, new facilities being built and
introduced at the property to attract new main floor and VIP
patrons, the refurbishment of hotel rooms, the introduction
of new gaming machines and gaming systems, and the
recently announced launch of the online gaming operations.
These initiatives will all hold the business in good stead over
the next few years.
Despite the challenging conditions in our major market,
the casinos continued to produce positive cash flows of
$34.6 million, and this has been used to further strengthen
our financial position through the repayment of debt.
The primary focus, given the challenges during the 2018
financial year, has been on further reducing the Mega Bank
debt, which has now fallen to US$40 million, following the
further repayment of US$8.55 million in August 2018.
The $143.9 million impairment charge which the Board
deemed as prudent, given the breaches by the vendor, did
result in the loss recorded in the statutory results. This has
meant that the Board is unable to declare a dividend for the
2018 financial year, and cannot extend the current buy-back.
Under the Mega Bank facility, these capital management
initiatives are restricted to 100% of statutory net profit after
tax (NPAT).
The Board recognises that capital allocation is one of the
most important areas of value creation for shareholders,
and aims to restore a range of capital management
initiatives, such as buy backs and dividends, as the financial
performance is restored.
On a separate note, despite the attention of the Board to
the challenges presented to it during the 2018 financial
year, we continued to make a positive contribution to the
communities in which we operate both in Cambodia and
Vietnam. For example, during the year we donated two
mobile medical clinics to Samdech Techo Voluntary Youth
Doctors Association. This is a not-for-profit organisation
which mobilises medical professionals, medical students
and volunteers to help provide free healthcare to rural
Cambodians throughout the country. The two new mobile
clinics will help to address a significant problem faced by
poor families in remote areas of Cambodia, who often have
difficulty accessing proper medical and dental treatment. At
the Aristo in Vietnam, we made significant donations to local
orphanages, schools and war veterans, assisting both with
cash and with practical gifts.
In summary, the 2018 financial year was one of challenges,
changes and significant progress. We expect that the
encouraging signs that have emerged in the second half
of the financial year in terms of restoring the VIP junket
business at Star Vegas, the upgrades of facilities and slot
machines and systems, together with the launch of the
online gaming operations, and a further solid contribution
from Aristo in Vietnam, should result in better performance
in the next financial year. As a Board we aim to allow the
management to focus on the business, as we attend to the
issues of progressing and resolving the outstanding litigation
against the vendor.
I thank our shareholders for their continuing support, and
I assure you all that we will continue to pursue our legal
rights aggressively, and demands for compensation, and will
continue to keep you informed of our progress. I am pleased
to say that management have taken up the challenge of
restoring the financial performance of the group, and expect
to see improved financial results for the 2019 financial year.
Stuart McGregor
Chairman
“Strong corporate governance
remains the Board’s most
important area of focus at
Donaco, and we retain our
recognition in the Asian region
as a group that operates with
high standards of probity and
good governance.”
5
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT FROM THE MANAGING DIRECTOR
FROM THE MANAGING DIRECTOR
In August 2018, we were pleased to announce that we have
now launched our long awaited online gaming operations. It
has taken us some time to make sure we have the right model
and system, and we have now gone live with an advanced
software platform that has been optimised for both mobile
and desktop devices. The platform has a live dealer and
sportsbook, supports multiple languages and currencies, and
will be offered to downstream partners, who will market to
their own customer bases. We look forward to this becoming
a significant revenue driver for us over the medium term.
The performance of the Aristo has been pleasing, with the
property level NPAT growing by 19% on last year, assisted
by lower finance costs and depreciation and amortisation.
Property level earnings before interest, tax, depreciation
and amortisation (EBITDA) fell 4% to RMB71.8 million due
to a lower win rate, but the normalised EBITDA (using the
theoretical win rate) improved by 38% to RMB151.3 million.
The Aristo VIP turnover improved significantly by 46%, as new
VIP junkets were selectively allowed into the property. However
total revenues at Aristo slightly reduced, with net gaming
revenue 10.8% below last year. This is due to the lower win
rate of 1.9%, compared to 2.3% in FY17, which was caused
by a single VIP player winning RMB22.6 million during July
and August 2017. Since that time the win rate has stabilised.
Visitation at the Aristo was down 12% compared to last year,
due to the cancellation of a marketing initiative which was
not meeting our objectives.
Despite this, slot machine revenue was only down slightly.
Non-gaming revenue increased by 12.7%, to now make up
46% of total revenue, reflecting initiatives put in place to
diversify the business.
Looking forward into the new financial year, our
management team will continue to focus on rebuilding and
improving the Star Vegas business, with multiple initiatives in
progress. Over the medium term, we expect to drive growth
from the newly launched online gaming platform.
At Aristo, we aim to further increase the number of mass
market players visiting the property, and will selectively allow
junket play when appropriate.
And at both properties, we are focused on growing non-
gaming revenues to diversify earnings streams.
Our Board will continue to pursue the multiple legal actions
which are in progress, and we remain confident of our
position in these proceedings.
Overall, we look forward to restoring and growing the group
earnings into the 2019 financial year and beyond.
Joey Lim
Managing Director and Chief Executive Officer
Dear fellow shareholders,
Donaco recorded a
statutory loss of $124.5
million during the 2018
financial year, compared to
a profit of $31 million the
previous year. The primary
factor was the Board’s
decision to incur a non-
cash impairment charge
of $143.9 million in the
value of the Star Vegas
casino license, as a result
of the breaches of the non-compete provisions by the vendor.
Our underlying earnings result, after adjusting for the non-
recurring items, produced a net profit of $18.3 million.
This was below last year’s levels of $54.6 million, again
due to the significant drop in VIP turnover at Star Vegas as
a consequence of the breaches by the vendor.
Aristo continued to perform solidly during the year, and despite
a lower win rate than last year it recorded a higher profit than
last year, with strong growth in the VIP turnover at the property.
Despite the negative headline result, our group financial
position remains strong, retaining positive cash flows of
$34.6 million. Our net debt to equity reduced to 6.3% at the
end of June, and a further principal repayment of US$8.55
million was made in August.
During the year, the new management team efficiently
managed the cost base across the group, and despite the
challenges, both properties were profitable.
Revenue at Star Vegas dropped from $110.2 million to
$66.6 million, due to the poaching of our junkets by the
Star Vegas vendor. There was also a backdrop of continuing
subdued domestic demand in Thailand, which held back
growth in the main floor revenues. The Star Vegas VIP win rate
of 3% was closer to the theoretical range, but significantly
lower than the very high win rate of 3.54% recorded last year.
The new management team put in place at Star Vegas
following the conclusion of the vendor’s management
contract was unexpectedly faced with the challenge of
rebuilding the Thai junket business, as the former junkets
were poached and went to competing casinos operated by the
vendor. It was pleasing to see their response to the challenge.
We finished the financial year with five new junket operators
at Star Vegas, and that was reflected in the second half VIP
turnover, which improved by 54% over the first half.
There has been a substantial upgrade to the non-gaming
facilities at the Star Vegas, together with refurbished hotel
rooms. The slot machine inventory has been refreshed during
the year, and we expect this to increase revenue during the
2019 financial year. During the year we also introduced the
Bally casino management system at the property, which has
allowed us to introduce a new loyalty scheme. Despite all
this activity, our operational costs were tightly managed and
decreased by 11% compared to the previous financial year.
We have also reached agreement in principle for a new tour
group operator to bring in Chinese tourists, with the aim of
filling our second main hall.
I would also like to acknowledge the changing role of
Vivo Tower during the year. We originally engaged them
to fill unused space at Star Vegas, by marketing it to non-
Thai junket operators and players, and to bring in tenants
to operate non-gaming facilities. However, following the
breaches by the Thai vendor, Vivo was redirected to bring
in new Thai junkets, and also assist us in improving the
non-gaming amenities. We have now established a new
nightclub, karaoke bar, spa and sauna, and a Chinese
restaurant. We have also engaged third party online gaming
operators to take space under rental deals.
As the management transition from the vendor is now
complete, we have restructured the arrangements with Vivo.
Under a new agreement, Donaco will receive direct rental
payments from tenants brought in by Vivo, and Vivo have
now been engaged to market and manage the Donaco online
gaming platform, in return for a revenue share.
“ In August 2018, we were pleased to announce that we have now
launched our long awaited on-line gaming operations. It has taken us
some time to make sure we have the right model and system, and we
have now gone live with an advanced software platform that has been
optimized for both mobile and desktop devices.”
6
7
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT FROM THE MANAGING DIRECTOR
FROM THE MANAGING DIRECTOR
In August 2018, we were pleased to announce that we have
now launched our long awaited online gaming operations. It
has taken us some time to make sure we have the right model
and system, and we have now gone live with an advanced
software platform that has been optimised for both mobile
and desktop devices. The platform has a live dealer and
sportsbook, supports multiple languages and currencies, and
will be offered to downstream partners, who will market to
their own customer bases. We look forward to this becoming
a significant revenue driver for us over the medium term.
The performance of the Aristo has been pleasing, with the
property level NPAT growing by 19% on last year, assisted
by lower finance costs and depreciation and amortisation.
Property level earnings before interest, tax, depreciation
and amortisation (EBITDA) fell 4% to RMB71.8 million due
to a lower win rate, but the normalised EBITDA (using the
theoretical win rate) improved by 38% to RMB151.3 million.
The Aristo VIP turnover improved significantly by 46%, as new
VIP junkets were selectively allowed into the property. However
total revenues at Aristo slightly reduced, with net gaming
revenue 10.8% below last year. This is due to the lower win
rate of 1.9%, compared to 2.3% in FY17, which was caused
by a single VIP player winning RMB22.6 million during July
and August 2017. Since that time the win rate has stabilised.
Visitation at the Aristo was down 12% compared to last year,
due to the cancellation of a marketing initiative which was
not meeting our objectives.
Despite this, slot machine revenue was only down slightly.
Non-gaming revenue increased by 12.7%, to now make up
46% of total revenue, reflecting initiatives put in place to
diversify the business.
Looking forward into the new financial year, our
management team will continue to focus on rebuilding and
improving the Star Vegas business, with multiple initiatives in
progress. Over the medium term, we expect to drive growth
from the newly launched online gaming platform.
At Aristo, we aim to further increase the number of mass
market players visiting the property, and will selectively allow
junket play when appropriate.
And at both properties, we are focused on growing non-
gaming revenues to diversify earnings streams.
Our Board will continue to pursue the multiple legal actions
which are in progress, and we remain confident of our
position in these proceedings.
Overall, we look forward to restoring and growing the group
earnings into the 2019 financial year and beyond.
Joey Lim
Managing Director and Chief Executive Officer
Dear fellow shareholders,
Donaco recorded a
statutory loss of $124.5
million during the 2018
financial year, compared to
a profit of $31 million the
previous year. The primary
factor was the Board’s
decision to incur a non-
cash impairment charge
of $143.9 million in the
value of the Star Vegas
casino license, as a result
of the breaches of the non-compete provisions by the vendor.
Our underlying earnings result, after adjusting for the non-
recurring items, produced a net profit of $18.3 million.
This was below last year’s levels of $54.6 million, again
due to the significant drop in VIP turnover at Star Vegas as
a consequence of the breaches by the vendor.
Aristo continued to perform solidly during the year, and despite
a lower win rate than last year it recorded a higher profit than
last year, with strong growth in the VIP turnover at the property.
Despite the negative headline result, our group financial
position remains strong, retaining positive cash flows of
$34.6 million. Our net debt to equity reduced to 6.3% at the
end of June, and a further principal repayment of US$8.55
million was made in August.
During the year, the new management team efficiently
managed the cost base across the group, and despite the
challenges, both properties were profitable.
Revenue at Star Vegas dropped from $110.2 million to
$66.6 million, due to the poaching of our junkets by the
Star Vegas vendor. There was also a backdrop of continuing
subdued domestic demand in Thailand, which held back
growth in the main floor revenues. The Star Vegas VIP win rate
of 3% was closer to the theoretical range, but significantly
lower than the very high win rate of 3.54% recorded last year.
The new management team put in place at Star Vegas
following the conclusion of the vendor’s management
contract was unexpectedly faced with the challenge of
rebuilding the Thai junket business, as the former junkets
were poached and went to competing casinos operated by the
vendor. It was pleasing to see their response to the challenge.
We finished the financial year with five new junket operators
at Star Vegas, and that was reflected in the second half VIP
turnover, which improved by 54% over the first half.
There has been a substantial upgrade to the non-gaming
facilities at the Star Vegas, together with refurbished hotel
rooms. The slot machine inventory has been refreshed during
the year, and we expect this to increase revenue during the
2019 financial year. During the year we also introduced the
Bally casino management system at the property, which has
allowed us to introduce a new loyalty scheme. Despite all
this activity, our operational costs were tightly managed and
decreased by 11% compared to the previous financial year.
We have also reached agreement in principle for a new tour
group operator to bring in Chinese tourists, with the aim of
filling our second main hall.
I would also like to acknowledge the changing role of
Vivo Tower during the year. We originally engaged them
to fill unused space at Star Vegas, by marketing it to non-
Thai junket operators and players, and to bring in tenants
to operate non-gaming facilities. However, following the
breaches by the Thai vendor, Vivo was redirected to bring
in new Thai junkets, and also assist us in improving the
non-gaming amenities. We have now established a new
nightclub, karaoke bar, spa and sauna, and a Chinese
restaurant. We have also engaged third party online gaming
operators to take space under rental deals.
As the management transition from the vendor is now
complete, we have restructured the arrangements with Vivo.
Under a new agreement, Donaco will receive direct rental
payments from tenants brought in by Vivo, and Vivo have
now been engaged to market and manage the Donaco online
gaming platform, in return for a revenue share.
“ In August 2018, we were pleased to announce that we have now
launched our long awaited on-line gaming operations. It has taken us
some time to make sure we have the right model and system, and we
have now gone live with an advanced software platform that has been
optimized for both mobile and desktop devices.”
6
7
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT BOAR D OF DIR ECTORS
BOARD OF DIRECTO RS
STUA RT JAMES M cGRE GOR
JOEY LIM KEONG YEW
BENEDICT PAUL REICHEL
BENJAMIN LIM KEONG H OE
Independent Non-Executive Chairman
(appointed 19 November 2004)
Managing Director and Chief Executive Officer
(appointed 1 February 2013)
BCom, LLB, MBA
BCompSci
Executive Director, Group General Counsel,
Company Secretary (appointed 20 July 2007)
BA, LLB(Hons), LLM(Hons)
Non-executive Director
(appointed 1 February 2013)
BBus (InternatBus)
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 and Risk Management Committee
and the Nominations, Remuneration and 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 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
227,906,797 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
918,245 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 and Risk Management Committee
and the Nominations, Remuneration and Corporate
Governance Committee.
Interests in shares
107,311,200 ordinary shares
Interests in options
None
8
9
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT BOAR D OF DIR ECTORS
BOARD OF DIRECTO RS
STUA RT JAMES M cGRE GOR
JOEY LIM KEONG YEW
BENEDICT PAUL REICHEL
BENJAMIN LIM KEONG H OE
Independent Non-Executive Chairman
(appointed 19 November 2004)
Managing Director and Chief Executive Officer
(appointed 1 February 2013)
BCom, LLB, MBA
BCompSci
Executive Director, Group General Counsel,
Company Secretary (appointed 20 July 2007)
BA, LLB(Hons), LLM(Hons)
Non-executive Director
(appointed 1 February 2013)
BBus (InternatBus)
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 and Risk Management Committee
and the Nominations, Remuneration and 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 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
227,906,797 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
918,245 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 and Risk Management Committee
and the Nominations, Remuneration and Corporate
Governance Committee.
Interests in shares
107,311,200 ordinary shares
Interests in options
None
8
9
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT BOARD OF DIRE CTOR S
BOARD OF DIRECTO RS
HAM TECHATUT SUKJAROEN KR AISRI
Executive Director (retired 23 November, 2017)
BSc (ChemEng)
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 PORN TAT AMATAVIVAD HA NA
Non-executive Director (resigned 3 July 2017)
MSc (MgtSc), BA (Banking&Finance)
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.
RO B ERT ANDRE W HIN ES
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 Chairman Sportsbet Australia Pty Ltd advisory group,
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 and Risk Management Committee
and the Nominations, Remuneration and Corporate
Governance Committee
Interests in shares
195,321 ordinary shares
Interests in options
None
10
11
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT BOARD OF DIRE CTOR S
BOARD OF DIRECTO RS
HAM TECHATUT SUKJAROEN KR AISRI
Executive Director (retired 23 November, 2017)
BSc (ChemEng)
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 PORN TAT AMATAVIVAD HA NA
Non-executive Director (resigned 3 July 2017)
MSc (MgtSc), BA (Banking&Finance)
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.
RO B ERT ANDRE W HIN ES
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 Chairman Sportsbet Australia Pty Ltd advisory group,
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 and Risk Management Committee
and the Nominations, Remuneration and Corporate
Governance Committee
Interests in shares
195,321 ordinary shares
Interests in options
None
10
11
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT CORPORATE SOCI AL RESPONS IBIL IT Y
CORPORATE RESPO NSIBILITY
“ 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.”
In Cambodia, the previous casino management at Star Vegas
was not engaged in charitable work. We have changed this
and have engaged in a number of charitable activities in the
past year.
Cambodia. This helps to address a significant problem
faced by poor families in remote areas of Cambodia,
who often have difficulty accessing proper medical and
dental treatment.
In December 2017, Donaco gave two mobile medical clinics
to Samdech Techo Voluntary Youth Doctors Association.
This is a not-for-profit organisation which mobilises medical
professionals, medical students and volunteers to help provide
free health care to rural Cambodians throughout the country.
With the two new mobile clinics, the association will be able
to conduct minor surgeries and tests in the villages of rural
The mobile clinics were assembled in Thailand from parts
sourced from around the world. Donaco is pleased to be able
to make this significant contribution to the wellbeing of the
Cambodian people.
Other charitable activities included donations of cash
and materials for flood victims in Banteay Meanchey
province, Cambodia.
24 JULY
2017
Aristo presented gifts
for war invalids and
martyr’s relatives
with total amount
of VND10 million
(20 persons with
VND500,000 each)
at Duyen Hai ward,
Lao Cai city on the
occasion of the
70th anniversary
of the martyr’s day of
Vietnam.
5 SEPTEMBER
2017
Aristo presented
uniforms for 500
pupils of Phin Ngan
Primary School and
Junior school of Bat
Xat district worth
a total of VND121
million on the
occasion of New
School Year
2017–2018.
9 FEBRUARY
2018
Aristo presented 100
blankets, 100kg of
rice, 10 piglets, 100
chickens, six chicken
houses and VND15
million in cash with
total value of over
VND120 million to
the Orphan Center
of Lao Cai province
on the occasion of
New Year 2018.
12
13
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT CORPORATE SOCI AL RESPONS IBIL IT Y
CORPORATE RESPO NSIBILITY
“ 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.”
In Cambodia, the previous casino management at Star Vegas
was not engaged in charitable work. We have changed this
and have engaged in a number of charitable activities in the
past year.
Cambodia. This helps to address a significant problem
faced by poor families in remote areas of Cambodia,
who often have difficulty accessing proper medical and
dental treatment.
In December 2017, Donaco gave two mobile medical clinics
to Samdech Techo Voluntary Youth Doctors Association.
This is a not-for-profit organisation which mobilises medical
professionals, medical students and volunteers to help provide
free health care to rural Cambodians throughout the country.
With the two new mobile clinics, the association will be able
to conduct minor surgeries and tests in the villages of rural
The mobile clinics were assembled in Thailand from parts
sourced from around the world. Donaco is pleased to be able
to make this significant contribution to the wellbeing of the
Cambodian people.
Other charitable activities included donations of cash
and materials for flood victims in Banteay Meanchey
province, Cambodia.
24 JULY
2017
Aristo presented gifts
for war invalids and
martyr’s relatives
with total amount
of VND10 million
(20 persons with
VND500,000 each)
at Duyen Hai ward,
Lao Cai city on the
occasion of the
70th anniversary
of the martyr’s day of
Vietnam.
5 SEPTEMBER
2017
Aristo presented
uniforms for 500
pupils of Phin Ngan
Primary School and
Junior school of Bat
Xat district worth
a total of VND121
million on the
occasion of New
School Year
2017–2018.
9 FEBRUARY
2018
Aristo presented 100
blankets, 100kg of
rice, 10 piglets, 100
chickens, six chicken
houses and VND15
million in cash with
total value of over
VND120 million to
the Orphan Center
of Lao Cai province
on the occasion of
New Year 2018.
12
13
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT DI RECTORS’ REPORT
The directors present their report, together with the financial
statements, on the consolidated entity (referred to hereafter
as the ‘consolidated entity’ or ‘group’) 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 2018.
DI RE C TORS
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 (retired 23 November 2017)
Paul Porntat Amatavivadhana (resigned 3 July 2017)
PRI NCI PAL 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.
DIV IDE ND S
A dividend of $4,113,618 (AUD 0.5 cent per ordinary share)
was paid on 20 October 2017. The dividend was 100%
conduit foreign income and was unfranked.
REVIEW OF OPERATIONS AND
FINANCIAL RESULTS
RESU LT HI GHLI GHTS
Underlying net profit after tax (NPAT) was $18.3 million, down
from $54.6 million in FY17. Revenue at Star Vegas was
significantly affected by the breach of contract by the vendor as
well as subdued spending due to weak demand in Thailand.
Statutory NPAT
Contribution of non-recurring items in NPAT result
Underlying NPAT
Group revenue
– Star Vegas revenue
– Aristo revenue
Group earnings before interest, tax, depreciation, amortisation and impairment
(EBITDA)
Underlying Group EBITDA
Strong balance sheet with
– cash
– borrowings
– net debt
– net debt to equity ratio
2018
$ million
(124.5)
(142.8)
18.3
92.6
66.6
26.0
42.4
42.4
47.1
70.4
23.3
2017
$ million
31.0
(23.6)
54.6
136.4
110.2
26.2
65.3
84.4
66.0
108.4
42.4
Reported loss after tax was $124.5 million, which included
non-recurring items totalling negative $142.8 million. In
contrast, the reported NPAT in FY17 was $31.0 million which
included non-recurring items totalling negative $23.6 million.
The non-recurring items in FY18 were largely due to the Star
Vegas impairment of $143.9 million. There was no further
management fee expense payable to the Star Vegas vendor.
In addition, there was positive non-cash warrant revaluation
income of $0.7 million (vs. $1.1 million in FY17) and a net
foreign exchange gain of $0.3 million (vs. loss of $1.1 in
FY17). The working capital facility has now been repaid and
fully amortised.
Excluding the non-recurring items, underlying NPAT for the
group was $18.3 million, down from $54.6 million in FY17.
VEN UE PERFORMAN CES
Star Vegas vs. FY17
• net gaming revenue down 44.7% to THB1,519.7 million
• non-gaming revenue up 2.7% to THB153.3 million
•
EBITDA down 53.9% to THB971.1 million
• property level NPAT down 46.4% to THB785.2 million
• VIP gross win rate of 3.0%.
Gaming revenue at Star Vegas was affected by the breach
of non-compete clauses by the previous Thai vendor, which
had a significant adverse impact on business. Spending was
also subdued due to weak domestic demand in Thailand.
Property level NPAT was down, reflecting lower VIP turnover.
However, operating expenses were also down 11% which
reflects more efficient management by Donaco compared to
the former Thai vendor. The VIP gross win rate of 3.0% is a
better reflection of the normal theoretical range of 2.7–3.0%,
compared to FY17’s win rate of 3.54%.
Overall, for the full 12 month period, the EBITDA at Star
Vegas declined by 53.9% in local currency terms to
THB971.1 million.
Aristo International Hotel vs. FY17
• net gaming revenue down 10.8% to RMB71.4 million
• non-gaming revenue up 12.7% to RMB60.4 million
•
EBITDA down 4.1% to RMB71.8 million
• property level NPAT up 19.3% to RMB38.0 million
DIRECTORS’ REPORT
depreciation and amortisation costs. EBITDA decreased by
4.1% in local currency terms to RMB71.8 million, due to
a lower win rate.
CAPITAL MANAG EMEN T
No FY18 dividend is payable due to the impairment charge,
as dividends are restricted to 100% of NPAT under the Mega
Bank loan facility.
Borrowings under the Mega Bank loan have been reduced
to US$40 million, following a repayment in August 2018.
Further capital management strategies, including any
extension of the current buyback, will require approval from
Mega Bank.
SIGNIFICANT CHANGES I N T HE S TAT E
OF AFFAIRS
There were no significant changes in the state of affairs of the
consolidated entity during the financial year.
MAT TERS SUBSEQUENT TO THE END
OF THE FINANCIAL YE AR
D IVI DE ND
There will be no dividends declared for FY18.
SH ARE OPTI ON S
On 29 June 2018, the company announced the expiration
of 2,930,625 options in accordance with their terms.
The options were part of the FY14, FY15 and FY16 option
series. Currently, there are 2,514,186 remaining options on
issue.
TERMI NATI ON O F VIVO A RRANGEMENT
On 23 August 2018, the contract between DNA Star Vegas
Co., and Ltd and Vivo Tower Holdings Limited (‘Vivo’),
announced to the market on 16 June 2017, was terminated.
DNA Star Vegas will now receive direct rental payments from
the sub-licensees brought into the Star Vegas property by
Vivo, which will substantially replace the fixed fee previously
paid by Vivo. Under a new agreement, Vivo’s role is to market
and manage the online gaming platform owned by DNA Star
Vegas, in return for a revenue share.
No other matter or circumstance has arisen since
30 June 2018 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.
14
DONAC O INTE RNAT IONAL L IMIT ED 2 01 8 A NNUAL REPORT
15
6.3%
8.7%
• VIP gross win rate 1.91%
Gaming revenue declined by 10.8% while non-gaming
revenue increased by 12.7%, reflecting management
initiatives to diversify the business. The increase of 19.3%
in property level NPAT was primarily due to lower finance,
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT DI RECTORS’ REPORT
The directors present their report, together with the financial
statements, on the consolidated entity (referred to hereafter
as the ‘consolidated entity’ or ‘group’) 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 2018.
DI RE C TORS
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 (retired 23 November 2017)
Paul Porntat Amatavivadhana (resigned 3 July 2017)
PRI NCI PAL 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.
DIV IDE ND S
A dividend of $4,113,618 (AUD 0.5 cent per ordinary share)
was paid on 20 October 2017. The dividend was 100%
conduit foreign income and was unfranked.
REVIEW OF OPERATIONS AND
FINANCIAL RESULTS
RESU LT HI GHLI GHTS
Underlying net profit after tax (NPAT) was $18.3 million, down
from $54.6 million in FY17. Revenue at Star Vegas was
significantly affected by the breach of contract by the vendor as
well as subdued spending due to weak demand in Thailand.
Statutory NPAT
Contribution of non-recurring items in NPAT result
Underlying NPAT
Group revenue
– Star Vegas revenue
– Aristo revenue
Group earnings before interest, tax, depreciation, amortisation and impairment
(EBITDA)
Underlying Group EBITDA
Strong balance sheet with
– cash
– borrowings
– net debt
– net debt to equity ratio
2018
$ million
(124.5)
(142.8)
18.3
92.6
66.6
26.0
42.4
42.4
47.1
70.4
23.3
2017
$ million
31.0
(23.6)
54.6
136.4
110.2
26.2
65.3
84.4
66.0
108.4
42.4
Reported loss after tax was $124.5 million, which included
non-recurring items totalling negative $142.8 million. In
contrast, the reported NPAT in FY17 was $31.0 million which
included non-recurring items totalling negative $23.6 million.
The non-recurring items in FY18 were largely due to the Star
Vegas impairment of $143.9 million. There was no further
management fee expense payable to the Star Vegas vendor.
In addition, there was positive non-cash warrant revaluation
income of $0.7 million (vs. $1.1 million in FY17) and a net
foreign exchange gain of $0.3 million (vs. loss of $1.1 in
FY17). The working capital facility has now been repaid and
fully amortised.
Excluding the non-recurring items, underlying NPAT for the
group was $18.3 million, down from $54.6 million in FY17.
VEN UE PERFORMAN CES
Star Vegas vs. FY17
• net gaming revenue down 44.7% to THB1,519.7 million
• non-gaming revenue up 2.7% to THB153.3 million
•
EBITDA down 53.9% to THB971.1 million
• property level NPAT down 46.4% to THB785.2 million
• VIP gross win rate of 3.0%.
Gaming revenue at Star Vegas was affected by the breach
of non-compete clauses by the previous Thai vendor, which
had a significant adverse impact on business. Spending was
also subdued due to weak domestic demand in Thailand.
Property level NPAT was down, reflecting lower VIP turnover.
However, operating expenses were also down 11% which
reflects more efficient management by Donaco compared to
the former Thai vendor. The VIP gross win rate of 3.0% is a
better reflection of the normal theoretical range of 2.7–3.0%,
compared to FY17’s win rate of 3.54%.
Overall, for the full 12 month period, the EBITDA at Star
Vegas declined by 53.9% in local currency terms to
THB971.1 million.
Aristo International Hotel vs. FY17
• net gaming revenue down 10.8% to RMB71.4 million
• non-gaming revenue up 12.7% to RMB60.4 million
•
EBITDA down 4.1% to RMB71.8 million
• property level NPAT up 19.3% to RMB38.0 million
DIRECTORS’ REPORT
depreciation and amortisation costs. EBITDA decreased by
4.1% in local currency terms to RMB71.8 million, due to
a lower win rate.
CAPITAL MANAG EMEN T
No FY18 dividend is payable due to the impairment charge,
as dividends are restricted to 100% of NPAT under the Mega
Bank loan facility.
Borrowings under the Mega Bank loan have been reduced
to US$40 million, following a repayment in August 2018.
Further capital management strategies, including any
extension of the current buyback, will require approval from
Mega Bank.
SIGNIFICANT CHANGES I N T HE S TAT E
OF AFFAIRS
There were no significant changes in the state of affairs of the
consolidated entity during the financial year.
MAT TERS SUBSEQUENT TO THE END
OF THE FINANCIAL YE AR
D IVI DE ND
There will be no dividends declared for FY18.
SH ARE OPTI ON S
On 29 June 2018, the company announced the expiration
of 2,930,625 options in accordance with their terms.
The options were part of the FY14, FY15 and FY16 option
series. Currently, there are 2,514,186 remaining options on
issue.
TERMI NATI ON O F VIVO A RRANGEMENT
On 23 August 2018, the contract between DNA Star Vegas
Co., and Ltd and Vivo Tower Holdings Limited (‘Vivo’),
announced to the market on 16 June 2017, was terminated.
DNA Star Vegas will now receive direct rental payments from
the sub-licensees brought into the Star Vegas property by
Vivo, which will substantially replace the fixed fee previously
paid by Vivo. Under a new agreement, Vivo’s role is to market
and manage the online gaming platform owned by DNA Star
Vegas, in return for a revenue share.
No other matter or circumstance has arisen since
30 June 2018 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.
14
DONAC O INTE RNAT IONAL L IMIT ED 2 01 8 A NNUAL REPORT
15
6.3%
8.7%
• VIP gross win rate 1.91%
Gaming revenue declined by 10.8% while non-gaming
revenue increased by 12.7%, reflecting management
initiatives to diversify the business. The increase of 19.3%
in property level NPAT was primarily due to lower finance,
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT DIR ECTORS ’ REPORT
DIRECTORS’ REPORT
LI KELY DEV ELOPMEN TS A ND EX P ECTED
R ES ULTS OF OPERATION S
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 1,000 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 continues to rebuild and improve the business
at Star Vegas, with multiple initiatives in progress. Medium-
term growth is expected from the newly launched online
gaming platform. Marketing strategies for Aristo continue to
be focused on increasing the number of mass market players
visiting the property, while selectively allowing junket play
where appropriate. The company is also focused on growing
non-gaming revenues at both Star Vegas and Aristo to
diversify earnings streams.
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 licence or legislation. These risks are carefully monitored
by the Board and management team.
Multiple legal actions are in progress involving the Star
Vegas vendor. The company is of the opinion that its position
is strong, as shown by favourable court decisions issued to
date. An injunction continues in force to prevent the vendor’s
attempt to terminate the Star Vegas lease. The company also
believes that this matter will be resolved in its favour within
the next six months. The arbitration in Singapore for the
company’s US$190 million damages claim is likely to exceed
12 months, with a hearing due to commence on 29 July 2019.
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 above under ‘Board of Directors’.
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 2018, and the number of meetings attended by each director were as follows.
Full board
Audit & Risk
Management
Committee
Nominations,
Remuneration
and Corporate
Governance
Committee
Special
Committee1
Attended
Held
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
6
9
7
9
3
–
9
9
9
9
9
4
–
3
–
–
2
3
–
–
3
–
–
3
3
–
–
1
–
–
1
1
–
–
1
–
–
1
1
–
–
2
2
2
–
2
–
–
2
2
2
–
2
–
–
Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee.
1During the year, a special committee was established on a temporary basis to deal with the management transition at Star Vegas.
REMUNERATION REPORT (AUDIT ED)
EXECU TIVE SUM MARY
The remuneration report details the key management
personnel remuneration arrangements for the consolidated
entity, in accordance with the requirements of the
Corporations Act 2001and 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:
•
executive summary
Donaco uses a simple framework for executive remuneration,
consisting of three elements:
1. Fixed remuneration, consisting of base salary,
superannuation and non-monetary benefits (if any).
2. Short-term incentives, which are paid in cash, but only
if executives satisfy applicable key performance
indicators (‘KPIs’).
3. Long-term incentives, under which executives may
receive annual grants of restricted shares purchased on
market, but only if applicable KPIs are satisfied. The
shares vest over a three-year period.
• principles used to determine the nature and amount
For short-term incentives in FY18, the following KPIs applied:
of remuneration
• details of remuneration
•
•
share-based compensation
additional disclosures relating to key management
personnel.
1. Achievement of the budgeted 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 first three KPIs were not satisfied. Two executives did satisfy
their personal KPI, and thus are entitled to be paid 20% of their
potential incentive. Accordingly, two executives forfeited 80%,
and the others forfeited 100%, of their potential incentive.
16
17
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT DIR ECTORS ’ REPORT
DIRECTORS’ REPORT
LI KELY DEV ELOPMEN TS A ND EX P ECTED
R ES ULTS OF OPERATION S
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 1,000 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 continues to rebuild and improve the business
at Star Vegas, with multiple initiatives in progress. Medium-
term growth is expected from the newly launched online
gaming platform. Marketing strategies for Aristo continue to
be focused on increasing the number of mass market players
visiting the property, while selectively allowing junket play
where appropriate. The company is also focused on growing
non-gaming revenues at both Star Vegas and Aristo to
diversify earnings streams.
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 licence or legislation. These risks are carefully monitored
by the Board and management team.
Multiple legal actions are in progress involving the Star
Vegas vendor. The company is of the opinion that its position
is strong, as shown by favourable court decisions issued to
date. An injunction continues in force to prevent the vendor’s
attempt to terminate the Star Vegas lease. The company also
believes that this matter will be resolved in its favour within
the next six months. The arbitration in Singapore for the
company’s US$190 million damages claim is likely to exceed
12 months, with a hearing due to commence on 29 July 2019.
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 above under ‘Board of Directors’.
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 2018, and the number of meetings attended by each director were as follows.
Full board
Audit & Risk
Management
Committee
Nominations,
Remuneration
and Corporate
Governance
Committee
Special
Committee1
Attended
Held
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
6
9
7
9
3
–
9
9
9
9
9
4
–
3
–
–
2
3
–
–
3
–
–
3
3
–
–
1
–
–
1
1
–
–
1
–
–
1
1
–
–
2
2
2
–
2
–
–
2
2
2
–
2
–
–
Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee.
1During the year, a special committee was established on a temporary basis to deal with the management transition at Star Vegas.
REMUNERATION REPORT (AUDIT ED)
EXECU TIVE SUM MARY
The remuneration report details the key management
personnel remuneration arrangements for the consolidated
entity, in accordance with the requirements of the
Corporations Act 2001and 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:
•
executive summary
Donaco uses a simple framework for executive remuneration,
consisting of three elements:
1. Fixed remuneration, consisting of base salary,
superannuation and non-monetary benefits (if any).
2. Short-term incentives, which are paid in cash, but only
if executives satisfy applicable key performance
indicators (‘KPIs’).
3. Long-term incentives, under which executives may
receive annual grants of restricted shares purchased on
market, but only if applicable KPIs are satisfied. The
shares vest over a three-year period.
• principles used to determine the nature and amount
For short-term incentives in FY18, the following KPIs applied:
of remuneration
• details of remuneration
•
•
share-based compensation
additional disclosures relating to key management
personnel.
1. Achievement of the budgeted 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 first three KPIs were not satisfied. Two executives did satisfy
their personal KPI, and thus are entitled to be paid 20% of their
potential incentive. Accordingly, two executives forfeited 80%,
and the others forfeited 100%, of their potential incentive.
16
17
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT DIR ECTORS ’ REPORT
DIRECTORS’ REPORT
For long-term incentives in FY18, the following KPI was
required to be satisfied: Achievement of the budgeted
EBITDA target for the Donaco Group.
This KPI was not satisfied, and accordingly no long-term
incentives were awarded.
Shareholders should note that share price movements
per se are not an applicable KPI. Share prices are affected by
many factors beyond the control of management. However
all of the applicable KPIs should, if achieved, have a positive
impact on Donaco’s performance, which would normally be
reflected in the share price, subject to any external factors.
Accordingly, the remuneration framework focuses executives
on matters that they can control, which are expected to
provide benefits to shareholders through a higher share price.
In addition, the award of restricted shares under the long-
term incentive plan aligns the interests of executives with
shareholders. Executives benefit directly if the share price
increases, and also suffer directly if the share prices decreases.
PRINCIPLES USED TO DETERMINE T HE NAT UR E
AND AMOUNT OF REM UNERAT ION
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
and 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
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:
The executive remuneration and reward framework has
three components:
• 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 nonfinancial drivers of values
• fixed remuneration, consisting of base salary and non-
monetary benefits, together with other statutory forms
of remuneration such as superannuation and long
service leave
•
attracts and retains high calibre executives.
The remuneration framework is also aligned to program
participants’ interests:
•
•
short-term incentives, paid in cash
long-term incentives, currently consisting of restricted
shares purchased on market.
•
•
rewards capability and experience
reflects competitive reward 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 or shares.
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 combination of these components comprises the
executive’s total remuneration.
S ENI OR EXE CUT IV ES ’ REMUNERATION MIX
50%
AT RISK
50%
FIXED
DEFERRED
EQUITY 25%
25%
LTI
CASH 75%
25%
STI CASH
50%
FIXED
FIXED VS. AT RISK
CASH VS. DEFERRED EQUITY
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.
18
19
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT DIR ECTORS ’ REPORT
DIRECTORS’ REPORT
For long-term incentives in FY18, the following KPI was
required to be satisfied: Achievement of the budgeted
EBITDA target for the Donaco Group.
This KPI was not satisfied, and accordingly no long-term
incentives were awarded.
Shareholders should note that share price movements
per se are not an applicable KPI. Share prices are affected by
many factors beyond the control of management. However
all of the applicable KPIs should, if achieved, have a positive
impact on Donaco’s performance, which would normally be
reflected in the share price, subject to any external factors.
Accordingly, the remuneration framework focuses executives
on matters that they can control, which are expected to
provide benefits to shareholders through a higher share price.
In addition, the award of restricted shares under the long-
term incentive plan aligns the interests of executives with
shareholders. Executives benefit directly if the share price
increases, and also suffer directly if the share prices decreases.
PRINCIPLES USED TO DETERMINE T HE NAT UR E
AND AMOUNT OF REM UNERAT ION
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
and 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
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:
The executive remuneration and reward framework has
three components:
• 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 nonfinancial drivers of values
• fixed remuneration, consisting of base salary and non-
monetary benefits, together with other statutory forms
of remuneration such as superannuation and long
service leave
•
attracts and retains high calibre executives.
The remuneration framework is also aligned to program
participants’ interests:
•
•
short-term incentives, paid in cash
long-term incentives, currently consisting of restricted
shares purchased on market.
•
•
rewards capability and experience
reflects competitive reward 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 or shares.
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 combination of these components comprises the
executive’s total remuneration.
S ENI OR EXE CUT IV ES ’ REMUNERATION MIX
50%
AT RISK
50%
FIXED
DEFERRED
EQUITY 25%
25%
LTI
CASH 75%
25%
STI CASH
50%
FIXED
FIXED VS. AT RISK
CASH VS. DEFERRED EQUITY
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.
18
19
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT DIR ECTORS ’ REPORT
DIRECTORS’ REPORT
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 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 FY18, the KPIs applied and the applicable percentage
of STI were:
1. Achievement of the budgeted EBITDA target for the
group. The applicable EBITDA target was $65.6 million.
(This KPI is worth 30% of the potential incentive.)
2. Achievement of the budgeted revenue target for the
Star Vegas property, in Thai baht terms. The applicable
revenue target was THB2.52 billion (25%).
3. Achievement of the budgeted revenue target for
the Aristo property, in Chinese renminbi terms. The
applicable revenue target was RMB141.2 million (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. 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.
During FY18, the first three KPIs were not satisfied. Two
executives did satisfy their personal KPI, and thus are entitled
to be paid 20% of their potential incentive. Accordingly, two
executives forfeited 80%, and the others forfeited 100%,
of their potential incentive.
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.
The objective of the LTI component is to focus on
sustainable shareholder value creation, as expressed through
share price growth.
Under the LTI plan, 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 million. 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
buy back, 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 50%
of base salary in the form of restricted shares, subject to
achievement of applicable KPIs which are set annually. For
FY18, the applicable KPI related to the achievement of the
budgeted EBITDA target for the group.
During FY18 the Trust did not purchase any shares on market.
The applicable KPI was not satisfied, and accordingly no
awards of shares were made.
RELATIO NSH IP B ETWEEN REM UN ERATIO N
POL ICY AN D COM PAN Y PERFO RMAN CE
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.
DO NAC O REV E NUE AN D EB IT DA
)
N
O
I
L
L
I
M
(
$
A
160
140
120
100
80
60
40
20
0
FY15
FY16
FY17
FY18
Revenue
EBITDA
Donaco’s share price decrease during FY18, which also
dragged down the share price performance over recent years,
reflects lower earnings brought on by the Star Vegas vendor’s
breaches of the non-compete agreement, and market
concerns over the resulting legal disputes.
DNA SHA RE PR ICE GROWT H PE R A NNUM
The Remuneration Committee considers that the
remuneration framework has an appropriate mix of fixed
and performance-based remuneration. Since performance
during FY18 did not meet expectations, executives forfeited
all or the majority of their short term incentive (except where
personal KPIs were met), and all of their long term incentive.
The Renumeration Committee also considers that the
remuneration framework in place will assist to increase
shareholder wealth if maintained over the coming years,
subject to any adjustments that are necessary or desirable to
reflect the company’s circumstances.
Use of remuneration consultants
There were no remuneration consultants engaged during
FY17 and FY18.
D ETAI LS OF REMU NER ATION
Amounts of remuneration
Details of the remuneration of key management personnel
of the consolidated entity are set out in the following tables.
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
Joey Lim Keong Yew – Managing Director and
Chief Executive Officer
• 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
(retired 23 November 2017)
• Paul Porntat Amatavivadhana – Non-executive Director
0%
-10%
-20%
-30%
-40%
-50%
-60%
-70%
-80%
-90%
-37%
-42%
-41%
-75%
(resigned 3 July 2017)
And the following persons:
4 YEARS
3 YEARS
2 YEARS
1 YEAR
• Kenny Goh Kwey Biaw – Deputy Chief Financial Officer
and CEO of Donaco Singapore (retired 31 March 2018)
• Chong Kwong Yang – Chief Financial Officer
• Att Asavanund – Chief Operating Officer and Deputy
Chief Executive Officer (resigned 31 August 2017)
20
21
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT
DIR ECTORS ’ REPORT
DIRECTORS’ REPORT
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 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 FY18, the KPIs applied and the applicable percentage
of STI were:
1. Achievement of the budgeted EBITDA target for the
group. The applicable EBITDA target was $65.6 million.
(This KPI is worth 30% of the potential incentive.)
2. Achievement of the budgeted revenue target for the
Star Vegas property, in Thai baht terms. The applicable
revenue target was THB2.52 billion (25%).
3. Achievement of the budgeted revenue target for
the Aristo property, in Chinese renminbi terms. The
applicable revenue target was RMB141.2 million (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. 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.
During FY18, the first three KPIs were not satisfied. Two
executives did satisfy their personal KPI, and thus are entitled
to be paid 20% of their potential incentive. Accordingly, two
executives forfeited 80%, and the others forfeited 100%,
of their potential incentive.
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.
The objective of the LTI component is to focus on
sustainable shareholder value creation, as expressed through
share price growth.
Under the LTI plan, 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 million. 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
buy back, 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 50%
of base salary in the form of restricted shares, subject to
achievement of applicable KPIs which are set annually. For
FY18, the applicable KPI related to the achievement of the
budgeted EBITDA target for the group.
During FY18 the Trust did not purchase any shares on market.
The applicable KPI was not satisfied, and accordingly no
awards of shares were made.
RELATIO NSH IP B ETWEEN REM UN ERATIO N
POL ICY AN D COM PAN Y PERFO RMAN CE
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.
DO NAC O REV E NUE AN D EB IT DA
)
N
O
I
L
L
I
M
(
$
A
160
140
120
100
80
60
40
20
0
FY15
FY16
FY17
FY18
Revenue
EBITDA
Donaco’s share price decrease during FY18, which also
dragged down the share price performance over recent years,
reflects lower earnings brought on by the Star Vegas vendor’s
breaches of the non-compete agreement, and market
concerns over the resulting legal disputes.
DNA SHA RE PR ICE GROWT H PE R A NNUM
The Remuneration Committee considers that the
remuneration framework has an appropriate mix of fixed
and performance-based remuneration. Since performance
during FY18 did not meet expectations, executives forfeited
all or the majority of their short term incentive (except where
personal KPIs were met), and all of their long term incentive.
The Renumeration Committee also considers that the
remuneration framework in place will assist to increase
shareholder wealth if maintained over the coming years,
subject to any adjustments that are necessary or desirable to
reflect the company’s circumstances.
Use of remuneration consultants
There were no remuneration consultants engaged during
FY17 and FY18.
D ETAI LS OF REMU NER ATION
Amounts of remuneration
Details of the remuneration of key management personnel
of the consolidated entity are set out in the following tables.
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
Joey Lim Keong Yew – Managing Director and
Chief Executive Officer
• 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
(retired 23 November 2017)
• Paul Porntat Amatavivadhana – Non-executive Director
0%
-10%
-20%
-30%
-40%
-50%
-60%
-70%
-80%
-90%
-37%
-42%
-41%
-75%
(resigned 3 July 2017)
And the following persons:
4 YEARS
3 YEARS
2 YEARS
1 YEAR
• Kenny Goh Kwey Biaw – Deputy Chief Financial Officer
and CEO of Donaco Singapore (retired 31 March 2018)
• Chong Kwong Yang – Chief Financial Officer
• Att Asavanund – Chief Operating Officer and Deputy
Chief Executive Officer (resigned 31 August 2017)
20
21
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT
DIR ECTORS ’ REPORT
DIRECTORS’ REPORT
POST
EMPLOYMENT
BENEFITS
LONG-TERM
BENEFITS
SHARE-
BASED
PAYMENTS
Leave
Super
entitlements Equity-settled
Total
$
$
$
$
2017
SHORT-TERM BENEFITS
POST
EMPLOYMENT
BENEFITS
Cash salary
and fees
$
Bonus
$
Super
$
LONG-TERM
BENEFITS
Leave
entitlements
SHARE-
BASED
PAYMENTS
Equity-settled
Total
$
$
$
SHORT-TERM BENEFITS
Cash salary
and fees
$
Bonus
$
155,606
174,110
137,300
581,211
332,700
32,243
–
–
–
326,931
166,350
–
2018
Non-executive Directors
S J McGregor
Lim K H
R A Hines
Executive Directors
Lim K Y
B P Reichel
H T Sukjaroenkraisri
14,783
–
13,044
–
25,000
–
Other key management personnel
Goh K B
(retired 31 March 2018)
Chong K Y
A Asavanund
256,917
252,000
56,747
145,945
126,000
–
250,191
23,940
–
1,978,834
765,226
326,958
–
–
–
–
–
–
–
–
–
–
–
–
–
170,389
174,110
150,344
122,072
1,030,214
61,468
–
585,518
32,243
41,207
34,769
–
694,260
436,709
56,747
259,516
3,330,534
The bonuses set out above were paid during FY18, but relate to performance during FY17. The KPIs applicable were set out in
the FY17 annual report.
For performance during FY18, bonuses are not payable until October 2018. The bonus amounts accrued to directors and key
management personnel in FY19 are shown below.
Executive Directors
B P Reichel
Other key management personnel
Chong K Y
Total
$
33,270
25,200
58,470
Non-executive Directors
S J McGregor
Lim K H
R A Hines
P P Amatavivadhana
Executive Directors
Lim K Y
B P Reichel
155,606
178,929
137,300
101,809
–
–
–
–
671,962
288,935
14,783
–
13,044
–
–
327,170
125,000
42,406
H T Sukjaroenkraisri
79,524
–
Other key management personnel
Goh K B
Chong K Y
A Asavanund
257,117
252,000
310,144
96,920
96,000
69,584
–
–
33,060
–
2,471,561
676,439
103,293
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
170,389
178,929
150,344
101,809
115,368
1,076,265
57,684
–
23,752
–
–
552,260
79,524
377,789
381,060
379,728
196,804
3,448,097
The proportion of remuneration linked to performance and the fixed proportion are shown below.
FIXED REMUNERATION
AT RISK – STI
AT RISK – LTI
Name
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
2018
%
100
100
100
–
56
61
100
73
63
100
2017
%
100
100
100
100
62
67
100
68
75
82
2018
%
2017
%
2018
%
2017
%
–
–
–
–
32
28
–
21
29
–
–
–
–
–
27
23
–
26
25
18
–
–
–
–
12
10
–
6
8
–
–
–
–
–
11
10
–
6
–
–
22
23
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT DIR ECTORS ’ REPORT
DIRECTORS’ REPORT
POST
EMPLOYMENT
BENEFITS
LONG-TERM
BENEFITS
SHARE-
BASED
PAYMENTS
Leave
Super
entitlements Equity-settled
Total
$
$
$
$
2017
SHORT-TERM BENEFITS
POST
EMPLOYMENT
BENEFITS
Cash salary
and fees
$
Bonus
$
Super
$
LONG-TERM
BENEFITS
Leave
entitlements
SHARE-
BASED
PAYMENTS
Equity-settled
Total
$
$
$
SHORT-TERM BENEFITS
Cash salary
and fees
$
Bonus
$
155,606
174,110
137,300
581,211
332,700
32,243
–
–
–
326,931
166,350
–
2018
Non-executive Directors
S J McGregor
Lim K H
R A Hines
Executive Directors
Lim K Y
B P Reichel
H T Sukjaroenkraisri
14,783
–
13,044
–
25,000
–
Other key management personnel
Goh K B
(retired 31 March 2018)
Chong K Y
A Asavanund
256,917
252,000
56,747
145,945
126,000
–
250,191
23,940
–
1,978,834
765,226
326,958
–
–
–
–
–
–
–
–
–
–
–
–
–
170,389
174,110
150,344
122,072
1,030,214
61,468
–
585,518
32,243
41,207
34,769
–
694,260
436,709
56,747
259,516
3,330,534
The bonuses set out above were paid during FY18, but relate to performance during FY17. The KPIs applicable were set out in
the FY17 annual report.
For performance during FY18, bonuses are not payable until October 2018. The bonus amounts accrued to directors and key
management personnel in FY19 are shown below.
Executive Directors
B P Reichel
Other key management personnel
Chong K Y
Total
$
33,270
25,200
58,470
Non-executive Directors
S J McGregor
Lim K H
R A Hines
P P Amatavivadhana
Executive Directors
Lim K Y
B P Reichel
155,606
178,929
137,300
101,809
–
–
–
–
671,962
288,935
14,783
–
13,044
–
–
327,170
125,000
42,406
H T Sukjaroenkraisri
79,524
–
Other key management personnel
Goh K B
Chong K Y
A Asavanund
257,117
252,000
310,144
96,920
96,000
69,584
–
–
33,060
–
2,471,561
676,439
103,293
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
170,389
178,929
150,344
101,809
115,368
1,076,265
57,684
–
23,752
–
–
552,260
79,524
377,789
381,060
379,728
196,804
3,448,097
The proportion of remuneration linked to performance and the fixed proportion are shown below.
FIXED REMUNERATION
AT RISK – STI
AT RISK – LTI
Name
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
2018
%
100
100
100
–
56
61
100
73
63
100
2017
%
100
100
100
100
62
67
100
68
75
82
2018
%
2017
%
2018
%
2017
%
–
–
–
–
32
28
–
21
29
–
–
–
–
–
27
23
–
26
25
18
–
–
–
–
12
10
–
6
8
–
–
–
–
–
11
10
–
6
–
–
22
23
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT DIR ECTORS ’ REPORT
DIRECTORS’ REPORT
The proportion of the cash bonus paid/payable or forfeited is shown below.
The proportion of the share options granted or forfeited is shown below.
CASH BONUS PAID/PAYABLE
CASH BONUS FORFEITED
SHARE OPTIONS GRANTED
SHARE OPTIONS FORFEITED
Name
Executive Directors
Lim K Y
B P Reichel
Other key management personnel
Goh K B
Chong K Y
A Asavanund
2018
%
100
100
100
100
–
2017
%
100
100
100
100
–
2018
%
–
–
–
–
–
2017
%
–
–
–
–
–
In relation to performance during FY18, the proportions of the cash bonus paid/payable or forfeited are shown below.
CASH BONUS PAID/PAYABLE
CASH BONUS FORFEITED
2019
%
100
80
100
80
Name
Executive Directors
Lim K Y
B P Reichel
Other key management personnel
Goh K B
Chong K Y
2019
%
–
20
–
20
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 2017.
$765,226 cash bonuses 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 FY18, the relevant criteria for the
award of bonuses relate to revenue growth at each operating
business, namely the Star Vegas and the Aristo International
Hotel, as well as the achievement of budgeted EBITDA
targets for the consolidated entity, and a personal KPI for
each executive.
Name
Executive Directors
Lim K Y
B P Reichel
Other key management personnel
Goh K B
2018
2017
2018
2017
–
–
–
–
–
–
–
–
–
–
–
–
The proportion of the shares granted or forfeited is shown below.
Name
Executive Directors
Lim K Y
B P Reichel
Other key management personnel
Goh K B
Chong K Y
SHARES GRANTED
SHARES FORFEITED
2018
2017
2018
2017
784,872
396,166
300,320
300,071
–
–
–
–
–
–
–
–
–
–
–
–
Service agreements
SH ARE-BASE D COM PENSATION
Remuneration and other terms of employment for the Managing
Director, Chief Financial Officer and the other key management
personnel 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 Lim, termination for any reason
other than just cause will result in a termination payment of 24
months’ base salary (subject to shareholder approval).
Shares
1,781,429 shares were granted as part of compensation
during the year ended 30 June 2018.
Options
There were no options issued as part of compensation during
the year ended 30 June 2018.
Options granted carry no dividend or voting rights.
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 2018
are shown below.
NO. OF OPTIONS
GRANTED DURING
FY18
NO. OF OPTIONS
GRANTED DURING
FY17
NO. OF OPTIONS
VESTED DURING
FY18
NO. OF OPTIONS
VESTED DURING
FY17
Name
Lim K Y
B P Reichel
Goh K B
–
–
–
–
–
–
634,828
317,414
130,700
872,059
496,744
552,020
24
25
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT DIR ECTORS ’ REPORT
DIRECTORS’ REPORT
The proportion of the cash bonus paid/payable or forfeited is shown below.
The proportion of the share options granted or forfeited is shown below.
CASH BONUS PAID/PAYABLE
CASH BONUS FORFEITED
SHARE OPTIONS GRANTED
SHARE OPTIONS FORFEITED
Name
Executive Directors
Lim K Y
B P Reichel
Other key management personnel
Goh K B
Chong K Y
A Asavanund
2018
%
100
100
100
100
–
2017
%
100
100
100
100
–
2018
%
–
–
–
–
–
2017
%
–
–
–
–
–
In relation to performance during FY18, the proportions of the cash bonus paid/payable or forfeited are shown below.
CASH BONUS PAID/PAYABLE
CASH BONUS FORFEITED
2019
%
100
80
100
80
Name
Executive Directors
Lim K Y
B P Reichel
Other key management personnel
Goh K B
Chong K Y
2019
%
–
20
–
20
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 2017.
$765,226 cash bonuses 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 FY18, the relevant criteria for the
award of bonuses relate to revenue growth at each operating
business, namely the Star Vegas and the Aristo International
Hotel, as well as the achievement of budgeted EBITDA
targets for the consolidated entity, and a personal KPI for
each executive.
Name
Executive Directors
Lim K Y
B P Reichel
Other key management personnel
Goh K B
2018
2017
2018
2017
–
–
–
–
–
–
–
–
–
–
–
–
The proportion of the shares granted or forfeited is shown below.
Name
Executive Directors
Lim K Y
B P Reichel
Other key management personnel
Goh K B
Chong K Y
SHARES GRANTED
SHARES FORFEITED
2018
2017
2018
2017
784,872
396,166
300,320
300,071
–
–
–
–
–
–
–
–
–
–
–
–
Service agreements
SH ARE-BASE D COM PENSATION
Remuneration and other terms of employment for the Managing
Director, Chief Financial Officer and the other key management
personnel 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 Lim, termination for any reason
other than just cause will result in a termination payment of 24
months’ base salary (subject to shareholder approval).
Shares
1,781,429 shares were granted as part of compensation
during the year ended 30 June 2018.
Options
There were no options issued as part of compensation during
the year ended 30 June 2018.
Options granted carry no dividend or voting rights.
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 2018
are shown below.
NO. OF OPTIONS
GRANTED DURING
FY18
NO. OF OPTIONS
GRANTED DURING
FY17
NO. OF OPTIONS
VESTED DURING
FY18
NO. OF OPTIONS
VESTED DURING
FY17
Name
Lim K Y
B P Reichel
Goh K B
–
–
–
–
–
–
634,828
317,414
130,700
872,059
496,744
552,020
24
25
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT DIR ECTORS ’ REPORT
DIRECTORS’ REPORT
ADDITIONAL DISCLOSURES RE LAT ING TO KE Y MA NAG EM ENT PE RSO NNE L
SH ARES U ND ER OPTI ON
Shareholding
Unissued ordinary shares of Donaco International Limited under option at the date of this report are shown below.
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 shown below.
BALANCE AT THE
START OF THE
YEAR
RECEIVED
AS PART OF
REMUNERATION
ADDITIONS
DISPOSALS/
OTHER
BALANCE AT
THE END OF
THE YEAR
Ordinary shares
S J McGregor
Lim K Y
B P Reichel
Lim K H
R A Hines
411,735
267,559,325
522,079
144,811,200
145,321
H T Sukjaroenkraisri
148,199,529
–
784,872
396,166
–
–
–
Goh K B
700,000
300,320
Option holding
–
–
411,735
562,600
(37,500,000)
231,406,797
–
–
50,000
–
–
–
918,245
(37,500,000)
107,311,200
–
–
195,321
148,199,529
(200,000)
800,320
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 shown below.
BALANCE AT
THE START
OF THE YEAR GRANTED
EXERCISED
EXPIRED/
FORFEITED/
OTHER
BALANCE
AT THE END
OF THE YEAR
VESTED
UNVESTED
Options over ordinary shares
Lim K Y
B P Reichel
Goh K B
2,257,873
1,256,389
1,212,292
4,726,554
–
–
–
–
–
–
–
–
(326,116)
1,931,757
1,506,887
(229,796)
1,026,593
(442,099)
770,193
814,158
682,720
(998,011)
3,728,543
3,003,765
424,870
212,435
87,473
724,778
TRANSACTIONS WITH RELATE D PA RT IES A N D KEY MA NAG EM E NT PERSO NNE L
The following transactions occurred with related parties during 2018.
Leasing fees paid to Lee Hoe Property Co., Ltd – a director-related entity
Rental received from director’s immediate family
Technical support fees paid by Lao Cai JVC to iSentric Limited –
a director-related entity
Management fees received for Star Paradise Casino property from
MMD Travel 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
The above transactions occurred at commercial rates.
This concludes the remuneration report, which has been audited.
CONSOLIDATED
2018
$
77,382
58,332
2017
$
156,012
111,734
139,243
187,214
477,992
2,338,782
141,351
586,237
GRANT DATE
1 July 2015
25 August 2015
25 August 2015
EXPIRY DATE
EXERCISE PRICE
NUMBER UNDER OPTION
1 July 2019
1 July 2019
1 July 2020
$0.890
$0.770
$0.770
349,377
1,156,784
1,008,025
2,514,186
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 US$100,000.
The warrants have a term of 39 months and expire on
6 October 2018. The exercise price is $0.7579 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.
SH ARES I SSUED ON TH E EX ERCI SE OF OPT IO NS
The were no ordinary shares of Donaco International Limited
issued, during the year ended 30 June 2018 and up to the date
of this report, on the exercise of options granted (2017: nil).
I ND EMN I TY AN D IN SU RAN CE O F AU DI TOR
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.
PROCEE DI NG S O N BEH ALF OF TH E COMPA NY
No person has applied to the court under section 237 of the
Corporations Act 2001 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.
N ON -AUD I T SERVI CES
another person or firm on the auditor’s behalf), is compatible
with the general standard of independence for auditors
imposed by the Corporations Act 2001.
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 2001 for the following reasons:
•
all non-audit services have been reviewed and approved
to ensure that they do not impact the integrity and
objectivity of the auditor
• 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.
OF FICERS O F TH E COM PANY WHO ARE
FO RMER PARTNERS O F CROWE HOR WATH
There are no officers of the company who are former partners
of Crowe Horwath.
AUD I TO R’S IN D EPEN DEN CE DECLARATION
A copy of the auditor’s independence declaration as required
under section 307C of the Corporations Act 2001 is set out
on the following page.
AUD I TO R
Crowe Horwath Sydney continues in office in accordance
with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors,
pursuant to section 298(2)(1) of the Corporations Act 2001.
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.
On behalf of the directors,
Mr Stuart McGregor – Chairman
28 September 2018, Melbourne
The directors are satisfied that the provision of non-audit
services during the financial year, by the auditor (or by
26
27
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT DIR ECTORS ’ REPORT
DIRECTORS’ REPORT
ADDITIONAL DISCLOSURES RE LAT ING TO KE Y MA NAG EM ENT PE RSO NNE L
SH ARES U ND ER OPTI ON
Shareholding
Unissued ordinary shares of Donaco International Limited under option at the date of this report are shown below.
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 shown below.
BALANCE AT THE
START OF THE
YEAR
RECEIVED
AS PART OF
REMUNERATION
ADDITIONS
DISPOSALS/
OTHER
BALANCE AT
THE END OF
THE YEAR
Ordinary shares
S J McGregor
Lim K Y
B P Reichel
Lim K H
R A Hines
411,735
267,559,325
522,079
144,811,200
145,321
H T Sukjaroenkraisri
148,199,529
–
784,872
396,166
–
–
–
Goh K B
700,000
300,320
Option holding
–
–
411,735
562,600
(37,500,000)
231,406,797
–
–
50,000
–
–
–
918,245
(37,500,000)
107,311,200
–
–
195,321
148,199,529
(200,000)
800,320
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 shown below.
BALANCE AT
THE START
OF THE YEAR GRANTED
EXERCISED
EXPIRED/
FORFEITED/
OTHER
BALANCE
AT THE END
OF THE YEAR
VESTED
UNVESTED
Options over ordinary shares
Lim K Y
B P Reichel
Goh K B
2,257,873
1,256,389
1,212,292
4,726,554
–
–
–
–
–
–
–
–
(326,116)
1,931,757
1,506,887
(229,796)
1,026,593
(442,099)
770,193
814,158
682,720
(998,011)
3,728,543
3,003,765
424,870
212,435
87,473
724,778
TRANSACTIONS WITH RELATE D PA RT IES A N D KEY MA NAG EM E NT PERSO NNE L
The following transactions occurred with related parties during 2018.
Leasing fees paid to Lee Hoe Property Co., Ltd – a director-related entity
Rental received from director’s immediate family
Technical support fees paid by Lao Cai JVC to iSentric Limited –
a director-related entity
Management fees received for Star Paradise Casino property from
MMD Travel 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
The above transactions occurred at commercial rates.
This concludes the remuneration report, which has been audited.
CONSOLIDATED
2018
$
77,382
58,332
2017
$
156,012
111,734
139,243
187,214
477,992
2,338,782
141,351
586,237
GRANT DATE
1 July 2015
25 August 2015
25 August 2015
EXPIRY DATE
EXERCISE PRICE
NUMBER UNDER OPTION
1 July 2019
1 July 2019
1 July 2020
$0.890
$0.770
$0.770
349,377
1,156,784
1,008,025
2,514,186
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 US$100,000.
The warrants have a term of 39 months and expire on
6 October 2018. The exercise price is $0.7579 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.
SH ARES I SSUED ON TH E EX ERCI SE OF OPT IO NS
The were no ordinary shares of Donaco International Limited
issued, during the year ended 30 June 2018 and up to the date
of this report, on the exercise of options granted (2017: nil).
I ND EMN I TY AN D IN SU RAN CE O F AU DI TOR
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.
PROCEE DI NG S O N BEH ALF OF TH E COMPA NY
No person has applied to the court under section 237 of the
Corporations Act 2001 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.
N ON -AUD I T SERVI CES
another person or firm on the auditor’s behalf), is compatible
with the general standard of independence for auditors
imposed by the Corporations Act 2001.
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 2001 for the following reasons:
•
all non-audit services have been reviewed and approved
to ensure that they do not impact the integrity and
objectivity of the auditor
• 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.
OF FICERS O F TH E COM PANY WHO ARE
FO RMER PARTNERS O F CROWE HOR WATH
There are no officers of the company who are former partners
of Crowe Horwath.
AUD I TO R’S IN D EPEN DEN CE DECLARATION
A copy of the auditor’s independence declaration as required
under section 307C of the Corporations Act 2001 is set out
on the following page.
AUD I TO R
Crowe Horwath Sydney continues in office in accordance
with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors,
pursuant to section 298(2)(1) of the Corporations Act 2001.
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.
On behalf of the directors,
Mr Stuart McGregor – Chairman
28 September 2018, Melbourne
The directors are satisfied that the provision of non-audit
services during the financial year, by the auditor (or by
26
27
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT AUDITOR’S INDEPENDENCE D EC L A RATION
HEADING
28 September 2018
The Board of Directors
Donaco International Limited
Level 18
28 September 2018
420 George Street
Sydney NSW 2000
The Board of Directors
Donaco International Limited
Level 18
420 George Street
Sydney NSW 2000
Dear Board Members
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
Crowe Horwath Sydney
Australia
ABN 97 895 683 573
Member Crowe Horwath International
Tel +61 2 9262 2155
Fax +61 2 9262 2190
Audit and Assurance Services
www.crowehorwath.com.au
Level 15 1 O'Connell Street
Sydney NSW 2000
Australia
Tel +61 2 9262 2155
Fax +61 2 9262 2190
www.crowehorwath.com.au
Donaco International Limited
Dear Board Members
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.
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 2018, I declare that to the best of my knowledge and belief, that there
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
have been no contraventions of:
declaration of independence to the Directors of Donaco International Limited.
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(i)
As lead audit partner for the audit of the financial report of Donaco International Limited for the
financial year ended 30 June 2018, I declare that to the best of my knowledge and belief, that there
(ii) any applicable code of professional conduct in relation to the audit.
have been no contraventions of:
Yours sincerely
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
CROWE HORWATH SYDNEY
Yours sincerely
CROWE HORWATH SYDNEY
SUWARTI ASMONO
Partner
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. Liability limited other than for the acts or
omissions of financial services licensees.
28
Crowe Horwath Sydney is a member of Crowe Horwath International, a Swiss verein. Each member of Crowe Horwath is a separate and
22
22
independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation. Liability limited other than for the acts or
omissions of financial services licensees.
F I N A N C I A L S
29
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT
AUDITOR’S INDEPENDENCE D EC L A RATION
HEADING
28 September 2018
The Board of Directors
Donaco International Limited
Level 18
28 September 2018
420 George Street
Sydney NSW 2000
The Board of Directors
Donaco International Limited
Level 18
420 George Street
Sydney NSW 2000
Dear Board Members
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
Crowe Horwath Sydney
Australia
ABN 97 895 683 573
Member Crowe Horwath International
Tel +61 2 9262 2155
Fax +61 2 9262 2190
Audit and Assurance Services
www.crowehorwath.com.au
Level 15 1 O'Connell Street
Sydney NSW 2000
Australia
Tel +61 2 9262 2155
Fax +61 2 9262 2190
www.crowehorwath.com.au
Donaco International Limited
Dear Board Members
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.
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 2018, I declare that to the best of my knowledge and belief, that there
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
have been no contraventions of:
declaration of independence to the Directors of Donaco International Limited.
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(i)
As lead audit partner for the audit of the financial report of Donaco International Limited for the
financial year ended 30 June 2018, I declare that to the best of my knowledge and belief, that there
(ii) any applicable code of professional conduct in relation to the audit.
have been no contraventions of:
Yours sincerely
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
CROWE HORWATH SYDNEY
Yours sincerely
CROWE HORWATH SYDNEY
SUWARTI ASMONO
Partner
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. Liability limited other than for the acts or
omissions of financial services licensees.
28
Crowe Horwath Sydney is a member of Crowe Horwath International, a Swiss verein. Each member of Crowe Horwath is a separate and
22
22
independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation. Liability limited other than for the acts or
omissions of financial services licensees.
F I N A N C I A L S
29
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT
2018 FINANCIALS
for the year ended 30 June 2018
Statement of Profit or Loss and Other
Note 18. Current Liabilities – Borrowings
57
Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes To The Financial Statements
Note 1.
Significant Accounting Policies
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
Note 13. Non-current Assets –
Property, Plant And Equipment
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 Other Payables
30
32
33
34
35
35
43
45
48
49
49
50
51
51
51
52
53
53
54
56
57
57
Note 19. Current Liabilities –
Financial Liabilities
Note 20. Current Liabilities – Income Tax
Note 21. Current Liabilities –
Employee Benefits
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. Net Cash Flows from
Operating Activities
Note 37.
Earnings Per Share
Note 38. Share-based Payments
Note 39. Contingent Liabilities
58
59
59
59
59
60
61
62
62
62
65
66
66
67
68
69
70
71
72
72
74
30
30
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT
31
31
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 2018 FINANCIALS
for the year ended 30 June 2018
Statement of Profit or Loss and Other
Note 18. Current Liabilities – Borrowings
57
Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes To The Financial Statements
Note 1.
Significant Accounting Policies
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
Note 13. Non-current Assets –
Property, Plant And Equipment
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 Other Payables
30
32
33
34
35
35
43
45
48
49
49
50
51
51
51
52
53
53
54
56
57
57
Note 19. Current Liabilities –
Financial Liabilities
Note 20. Current Liabilities – Income Tax
Note 21. Current Liabilities –
Employee Benefits
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. Net Cash Flows from
Operating Activities
Note 37.
Earnings Per Share
Note 38. Share-based Payments
Note 39. Contingent Liabilities
58
59
59
59
59
60
61
62
62
62
65
66
66
67
68
69
70
71
72
72
74
30
30
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT
31
31
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 STATEMENT OF PROFIT OR LOS S
AND OTH ER COMP REHEN SIVE INC OME
for the year ended 30 June 2018
Revenue from continuing operations
Other income/(expense)
Total income
Expenses
Food and beverages
Employee benefits expense
DSV management fee
Depreciation and amortisation expense
Impairment of intangible asset
Legal and compliance
Marketing and promotions
Professional and consultants
Property costs
Telecommunications and hosting
Gaming costs
Other expenses
Finance costs
Total expenses
Note
4
5
CONSOLIDATED
2018
$
2017
$
92,606,141
136,443,789
1,022,878
(4,867)
93,629,019
136,438,922
(5,112,751)
(6,018,409)
(22,902,710)
(22,891,204)
-
(19,045,688)
6
14
(9,981,320)
(10,129,299)
(143,860,973)
-
(829,360)
(6,756,555)
(1,924,893)
(6,114,966)
(497,219)
(1,488,052)
(4,491,571)
(680,734)
(4,618,018)
(1,338,743)
(5,952,199)
(382,062)
(2,970,244)
(7,127,174)
(10,255,853)
(20,559,623)
(214,216,223)
(101,713,397)
(Loss)/profit before income tax expense from continuing
operations
(120,587,204)
34,725,525
Income tax expense
7
(3,661,667)
(3,536,476)
(Loss)/profit after income tax expense for the year
(124,248,871)
31,189,049
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
13,600,431
(15,422,693)
Other comprehensive income/(loss) for the year, net of tax
13,600,431
(15,422,693)
Total comprehensive (loss)/income for the year
(110,648,440)
15,766,356
(Loss)/profit for the year is attributable to:
Non-controlling interest
Owners of Donaco International Limited
Total comprehensive (loss)/income for the year is attributable to:
Non-controlling interest
Owners of Donaco International Limited
261,944
(124,510,815)
(124,248,871)
198,751
30,990,298
31,189,049
261,944
(110,910,384)
(110,648,440)
198,751
15,567,605
15,766,356
The above statement of profit or loss and other comprehensive income should be read in conjunction
with the accompanying notes.
32
32
STATEMEN T OF PR OFIT O R LOS S
AND OTH ER COMPREHENSIVE INCO ME
(Loss)/earnings per share for (loss)/profit attributable
to the owners of Donaco International Limited
Basic earnings per share
Diluted earnings per share
for the year ended 30 June 2018
CONSOLIDATED
Note
37
37
2018
Cents
(15.03)
(15.03)
2017
Cents
3.73
3.73
The above statement of profit or loss and other comprehensive income should be read in conjunction
with the accompanying notes.
3333
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT
STATEMENT OF PROFIT OR LOS S
AND OTH ER COMP REHEN SIVE INC OME
for the year ended 30 June 2018
Revenue from continuing operations
Other income/(expense)
Total income
Expenses
Food and beverages
Employee benefits expense
DSV management fee
Depreciation and amortisation expense
Impairment of intangible asset
Legal and compliance
Marketing and promotions
Professional and consultants
Property costs
Telecommunications and hosting
Gaming costs
Other expenses
Finance costs
Total expenses
Note
4
5
CONSOLIDATED
2018
$
2017
$
92,606,141
136,443,789
1,022,878
(4,867)
93,629,019
136,438,922
(5,112,751)
(6,018,409)
(22,902,710)
(22,891,204)
-
(19,045,688)
6
14
(9,981,320)
(10,129,299)
(143,860,973)
-
(829,360)
(6,756,555)
(1,924,893)
(6,114,966)
(497,219)
(1,488,052)
(4,491,571)
(680,734)
(4,618,018)
(1,338,743)
(5,952,199)
(382,062)
(2,970,244)
(7,127,174)
(10,255,853)
(20,559,623)
(214,216,223)
(101,713,397)
(Loss)/profit before income tax expense from continuing
operations
(120,587,204)
34,725,525
Income tax expense
7
(3,661,667)
(3,536,476)
(Loss)/profit after income tax expense for the year
(124,248,871)
31,189,049
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
13,600,431
(15,422,693)
Other comprehensive income/(loss) for the year, net of tax
13,600,431
(15,422,693)
Total comprehensive (loss)/income for the year
(110,648,440)
15,766,356
(Loss)/profit for the year is attributable to:
Non-controlling interest
Owners of Donaco International Limited
Total comprehensive (loss)/income for the year is attributable to:
Non-controlling interest
Owners of Donaco International Limited
261,944
(124,510,815)
(124,248,871)
198,751
30,990,298
31,189,049
261,944
(110,910,384)
(110,648,440)
198,751
15,567,605
15,766,356
The above statement of profit or loss and other comprehensive income should be read in conjunction
with the accompanying notes.
32
32
STATEMEN T OF PR OFIT O R LOS S
AND OTH ER COMPREHENSIVE INCO ME
(Loss)/earnings per share for (loss)/profit attributable
to the owners of Donaco International Limited
Basic earnings per share
Diluted earnings per share
for the year ended 30 June 2018
CONSOLIDATED
Note
37
37
2018
Cents
(15.03)
(15.03)
2017
Cents
3.73
3.73
The above statement of profit or loss and other comprehensive income should be read in conjunction
with the accompanying notes.
3333
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT
STATEMENT OF FI NAN CIAL PO SIT ION
As at 30 June 2018
STATEMEN T O F CHAN GES IN EQ UITY
for the year ended 30 June 2018
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 non-current assets
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
CONSOLIDATED
Note
2018
$
2017
$
ISSUED
CAPITAL
RESERVES
RETAINED
PROFITS
NON–
CONTROLLING
INTEREST
CON SOL IDATED
$
$
$
$
TOTAL
EQUITY
$
Balance at 1 July 2016
360,968,368
24,574,755
92,630,958
1,136,345
479,310,426
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
47,075,589
10,545,030
1,397,344
1,811,360
451,329
66,022,749
20,402,807
893,474
341,184
432,851
61,280,652
88,093,065
162,172,238
161,344,373
254,064,321
389,140,234
591,787
4,018
595,885
3,895
416,832,364
551,084,387
478,113,016
639,177,452
34,652,015
24,594,915
-
2,008,402
1,261,325
41,788,107
54,908,598
681,507
1,127,767
981,006
62,516,657
99,486,985
45,806,572
53,553,627
42,408
32,669
45,848,980
53,586,296
108,365,637
153,073,281
369,747,379
486,104,171
358,656,945
359,968,884
22,540,464
9,425,778
(13,250,020)
115,374,413
Profit after income tax expense
for the year
Other comprehensive loss for
the year, net of tax
Total comprehensive income
for the year
Transactions with owners in their
capacity as owners:
Acquisition of shares
–
–
30,990,298
198,751
31,189,049
–
(15,422,693)
–
–
(15,422,693)
–
(15,422,693)
30,990,298
198,751
15,766,356
for Employee Share Trust
(999,484)
Dividends paid
Share–based payments
–
–
–
–
–
(8,246,843)
273,716
–
–
–
–
(999,484)
(8,246,843)
273,716
Balance at 30 June 2017
359,968,884
9,425,778
115,374,413
1,335,096
486,104,171
Balance at 1 July 2017
359,968,884
9,425,778
115,374,413
1,335,096
486,104,171
Loss after income tax expense
for the year
Other comprehensive income
for the year, net of tax
–
–
(124,510,815)
261,944
(124,248,871)
–
13,600,431
–
–
13,600,431
Total comprehensive loss for the year
–
13,600,431
(124,510,815)
261,944
(110,648,440)
Transactions with owners in their
capacity as owners:
Contributions of equity, net of
transaction costs
–
–
Shares issued to employees
766,014
(766,014)
Share buyback
Dividend paid
Share–based payments
(2,077,953)
–
–
–
–
–
(4,113,618)
–
–
280,269
–
202,950
202,950
–
–
–
–
–
(2,077,953)
(4,113,618)
280,269
Balance at 30 June 2018
358,656,945
22,540,464
(13,250,020)
1,799,990
369,747,379
The above statement of changes in equity should be read in conjunction with the accompanying notes.
Equity attributable to the owners of Donaco International Limited
367,947,389
484,769,075
Non-controlling interest
Total equity
1,799,990
1,335,096
369,747,379
486,104,171
The above statement of financial position should be read in conjunction with the accompanying notes.
34
34
3535
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT
STATEMENT OF FI NAN CIAL PO SIT ION
As at 30 June 2018
STATEMEN T O F CHAN GES IN EQ UITY
for the year ended 30 June 2018
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 non-current assets
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
CONSOLIDATED
Note
2018
$
2017
$
ISSUED
CAPITAL
RESERVES
RETAINED
PROFITS
NON–
CONTROLLING
INTEREST
CON SOL IDATED
$
$
$
$
TOTAL
EQUITY
$
Balance at 1 July 2016
360,968,368
24,574,755
92,630,958
1,136,345
479,310,426
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
47,075,589
10,545,030
1,397,344
1,811,360
451,329
66,022,749
20,402,807
893,474
341,184
432,851
61,280,652
88,093,065
162,172,238
161,344,373
254,064,321
389,140,234
591,787
4,018
595,885
3,895
416,832,364
551,084,387
478,113,016
639,177,452
34,652,015
24,594,915
-
2,008,402
1,261,325
41,788,107
54,908,598
681,507
1,127,767
981,006
62,516,657
99,486,985
45,806,572
53,553,627
42,408
32,669
45,848,980
53,586,296
108,365,637
153,073,281
369,747,379
486,104,171
358,656,945
359,968,884
22,540,464
9,425,778
(13,250,020)
115,374,413
Profit after income tax expense
for the year
Other comprehensive loss for
the year, net of tax
Total comprehensive income
for the year
Transactions with owners in their
capacity as owners:
Acquisition of shares
–
–
30,990,298
198,751
31,189,049
–
(15,422,693)
–
–
(15,422,693)
–
(15,422,693)
30,990,298
198,751
15,766,356
for Employee Share Trust
(999,484)
Dividends paid
Share–based payments
–
–
–
–
–
(8,246,843)
273,716
–
–
–
–
(999,484)
(8,246,843)
273,716
Balance at 30 June 2017
359,968,884
9,425,778
115,374,413
1,335,096
486,104,171
Balance at 1 July 2017
359,968,884
9,425,778
115,374,413
1,335,096
486,104,171
Loss after income tax expense
for the year
Other comprehensive income
for the year, net of tax
–
–
(124,510,815)
261,944
(124,248,871)
–
13,600,431
–
–
13,600,431
Total comprehensive loss for the year
–
13,600,431
(124,510,815)
261,944
(110,648,440)
Transactions with owners in their
capacity as owners:
Contributions of equity, net of
transaction costs
–
–
Shares issued to employees
766,014
(766,014)
Share buyback
Dividend paid
Share–based payments
(2,077,953)
–
–
–
–
–
(4,113,618)
–
–
280,269
–
202,950
202,950
–
–
–
–
–
(2,077,953)
(4,113,618)
280,269
Balance at 30 June 2018
358,656,945
22,540,464
(13,250,020)
1,799,990
369,747,379
The above statement of changes in equity should be read in conjunction with the accompanying notes.
Equity attributable to the owners of Donaco International Limited
367,947,389
484,769,075
Non-controlling interest
Total equity
1,799,990
1,335,096
369,747,379
486,104,171
The above statement of financial position should be read in conjunction with the accompanying notes.
34
34
3535
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT
STATEMENT OF CASH FLOWS
for the year ended 30 June 2018
CASH FLOW FROM OPERATING AC TIVIT IE S
Receipts from customers
Payments to suppliers and employees
Interest received
Interest and other finance costs paid
Government levies, gaming taxes and GST
Note
CONSOLIDATED
2018
$
2017
$
102,284,185
151,208,268
(49,947,841)
(78,700,882)
52,336,344
72,507,386
93,786
100,011
(7,829,780)
(9,968,146)
(11,878,988)
(13,373,011)
Net cash flows from operating activities
36(a)
34,632,204
47,355,398
CASH FLOW FROM INVESTING AC T IV IT IE S
Payments for property, plant and equipment
Net cash flows from investing activities
CASH FLOW FROM FINA NCING AC TIVIT IE S
Repayment of borrowings
Drawdown of borrowings
Payments of dividends
Payments of acquisition of employee shares
Payments for share buyback
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
(5,668,289)
(5,668,289)
(5,727,117)
(5,727,117)
36(b)
(44,326,139)
(69,817,576)
–
25,603,177
(4,113,618)
(8,246,843)
–
(999,484)
(2,077,954)
–
(50,517,711)
(53,460,726)
(21,553,796)
(11,832,445)
66,022,749
78,221,019
2,606,636
(365,825)
Cash and cash equivalents at the end of the financial year
8
47,075,589
66,022,749
The above statement of cash flows should be read in conjunction with the accompanying notes.
NOTE 1. SIGNIFICANT ACCOUNTING
POLICIES
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.
N EW, REVI SED O R AMEN DI NG ACCOU N TIN G
STAN DARD S AN D I NTE RPRETATIO NS ADO PTE D
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.
BASI S OF PREPARATI ON
These general purpose financial statements have been
prepared in accordance with Australian Accounting
Standards and Interpretations issued by the AASB and the
Corporations Act 2001, 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’).
Historical cost convention
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.
PAREN T E NTI TY IN FO RMATIO N
In accordance with the Corporations Act 2001, these
financial statements present the results of the consolidated
entity only. Supplementary information about the parent
entity is disclosed in note 33.
PRI NCI PLES O F CON SOLI DATION
The consolidated financial statements incorporate the assets
and liabilities of all subsidiaries of Donaco International
Limited (‘company’ or ‘parent entity’) as at 30 June 2018 and
the results of all subsidiaries for 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.
OPE RATIN G SEG MEN TS
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
36
36
3737
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 STATEMENT OF CASH FLOWS
for the year ended 30 June 2018
CASH FLOW FROM OPERATING AC TIVIT IE S
Receipts from customers
Payments to suppliers and employees
Interest received
Interest and other finance costs paid
Government levies, gaming taxes and GST
Note
CONSOLIDATED
2018
$
2017
$
102,284,185
151,208,268
(49,947,841)
(78,700,882)
52,336,344
72,507,386
93,786
100,011
(7,829,780)
(9,968,146)
(11,878,988)
(13,373,011)
Net cash flows from operating activities
36(a)
34,632,204
47,355,398
CASH FLOW FROM INVESTING AC T IV IT IE S
Payments for property, plant and equipment
Net cash flows from investing activities
CASH FLOW FROM FINA NCING AC TIVIT IE S
Repayment of borrowings
Drawdown of borrowings
Payments of dividends
Payments of acquisition of employee shares
Payments for share buyback
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
(5,668,289)
(5,668,289)
(5,727,117)
(5,727,117)
36(b)
(44,326,139)
(69,817,576)
–
25,603,177
(4,113,618)
(8,246,843)
–
(999,484)
(2,077,954)
–
(50,517,711)
(53,460,726)
(21,553,796)
(11,832,445)
66,022,749
78,221,019
2,606,636
(365,825)
Cash and cash equivalents at the end of the financial year
8
47,075,589
66,022,749
The above statement of cash flows should be read in conjunction with the accompanying notes.
NOTE 1. SIGNIFICANT ACCOUNTING
POLICIES
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.
N EW, REVI SED O R AMEN DI NG ACCOU N TIN G
STAN DARD S AN D I NTE RPRETATIO NS ADO PTE D
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.
BASI S OF PREPARATI ON
These general purpose financial statements have been
prepared in accordance with Australian Accounting
Standards and Interpretations issued by the AASB and the
Corporations Act 2001, 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’).
Historical cost convention
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.
PAREN T E NTI TY IN FO RMATIO N
In accordance with the Corporations Act 2001, these
financial statements present the results of the consolidated
entity only. Supplementary information about the parent
entity is disclosed in note 33.
PRI NCI PLES O F CON SOLI DATION
The consolidated financial statements incorporate the assets
and liabilities of all subsidiaries of Donaco International
Limited (‘company’ or ‘parent entity’) as at 30 June 2018 and
the results of all subsidiaries for 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.
OPE RATIN G SEG MEN TS
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
36
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DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 Foreign currency transactions
REVEN UE RECOG N ITI ON
NOTE 1 . SIGN IFICA NT ACCOU NTING
PO LI CI ES CONT I NU ED
Decision Makers (‘CODM’). The CODM is responsible
for the allocation of resources to operating segments and
assessing their performance.
FOREIGN CURRENCY TRANSLAT ION
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.
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 the
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.
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.
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.
Subsequently, these consolidated groups are consolidated
with the Australian operations and converted to
Australian dollars.
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.
Casino 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 consist 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.
I NCOME 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.
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 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.
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 trading; it is due
to be settled within 12 months after the 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.
38
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DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 Foreign currency transactions
REVEN UE RECOG N ITI ON
NOTE 1 . SIGN IFICA NT ACCOU NTING
PO LI CI ES CONT I NU ED
Decision Makers (‘CODM’). The CODM is responsible
for the allocation of resources to operating segments and
assessing their performance.
FOREIGN CURRENCY TRANSLAT ION
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.
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 the
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.
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.
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.
Subsequently, these consolidated groups are consolidated
with the Australian operations and converted to
Australian dollars.
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.
Casino 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 consist 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.
I NCOME 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.
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 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.
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 trading; it is due
to be settled within 12 months after the 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.
38
38
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DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 1 . SIGN IFICA NT ACCOU NTING
PO LI CI ES CONT I NU ED
C ASH AND CASH EQUIVALENT S
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.
T RADE AND OT HER R ECEIVABL ES
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,
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 realizable 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 or loss and other comprehensive income,
in the period in which the reversal occurs.
PRO PERTY, PLA NT AN D E QU IP M EN T
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
Leasehold improvements
Machinery and equipment
Motor vehicles
Office equipment and other
Furniture and fittings
Consumables
25–50 years
2–5 years
5–15 years
5–6 years
3–8 years
3–8 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.
LE AS ES
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 profit or loss
and other comprehensive income, on a straight-line basis
over the term of the lease.
INTA NGIBL E A SSE TS
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 license
The group consider casino licenses 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 licenses 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.
PREPAI D CON STRU CTI ON COS TS
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.
I MPAI RMEN T OF NO N- FI NANC IAL ASSET S
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 OTH ER 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.
BORROWI N GS
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.
As 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.
FI NAN CE 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.
40
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DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 1 . SIGN IFICA NT ACCOU NTING
PO LI CI ES CONT I NU ED
C ASH AND CASH EQUIVALENT S
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.
T RADE AND OT HER R ECEIVABL ES
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,
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 realizable 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 or loss and other comprehensive income,
in the period in which the reversal occurs.
PRO PERTY, PLA NT AN D E QU IP M EN T
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
Leasehold improvements
Machinery and equipment
Motor vehicles
Office equipment and other
Furniture and fittings
Consumables
25–50 years
2–5 years
5–15 years
5–6 years
3–8 years
3–8 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.
LE AS ES
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 profit or loss
and other comprehensive income, on a straight-line basis
over the term of the lease.
INTA NGIBL E A SSE TS
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 license
The group consider casino licenses 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 licenses 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.
PREPAI D CON STRU CTI ON COS TS
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.
I MPAI RMEN T OF NO N- FI NANC IAL ASSET S
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 OTH ER 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.
BORROWI N GS
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.
As 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.
FI NAN CE 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.
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DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 1 . SIGN IFICA NT ACCOU NTING
PO LI CI ES CONT I NU ED
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.
Share-based payments
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
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.
FA IR VALUE M EA SUREM E NT
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)
c.
inputs for the asset or liability that are not based on
observable market data (unobservable inputs) (level 3).
During the FY16 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.
I SSUE D 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 buy
back 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.
D IVI DE ND S
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.
BUSI N ESS COM BI NATIO NS
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-controlling
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
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DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 1 . SIGN IFICA NT ACCOU NTING
PO LI CI ES CONT I NU ED
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.
Share-based payments
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
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.
FA IR VALUE M EA SUREM E NT
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)
c.
inputs for the asset or liability that are not based on
observable market data (unobservable inputs) (level 3).
During the FY16 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.
I SSUE D 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 buy
back 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.
D IVI DE ND S
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.
BUSI N ESS COM BI NATIO NS
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-controlling
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
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DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 1 . SIGN IFICA NT ACCOU NTING
PO LI CI ES CONT I NU ED
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.
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 (‘GS T ’ )
AND OTHER SIMILAR TAXES
Revenues, expenses and assets are recognised net of the
amount of associated 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 S TANDARDS AND
INTERPRETATIONS NOT YET M A NDATORY
OR EARLY ADOPTE D
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 2018. 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, address 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 impairment model under the new standard
requires the recognition of impairment provisions based
on expected credit losses rather than only incurred credit
losses. It applies to financial assets classified at amortised
cost, debt instruments measured at fair value through other
comprehensive income, contract assets under AASB 15
Revenue from Contracts with Customers, lease receivables,
loan commitments and certain financial guarantee contracts.
The consolidated entity is currently assessing the impact of
the adoption of this standard and will adopt it from 1 July
2018. The standard will primarily result in the recognition
of loss allowance for trade debtors; however the consolidated
entity does not expect there to be a significant impact.
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 has assessed the impact of the
adoption of this standard and will adopt it from 1 July 2018.
Recognition of both gaming and non-gaming revenue under
the previous requirements already reflects the concept of
transfer of control of goods or services to customers (that
is, revenue is recognised at the time that the performance
obligation has been satisfied). The consolidated entity
therefore does not expect any impact to the financial
statements on adoption of this standard.
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 is currently assessing the impact of
the adoption of this standard and will adopt it from 1 July
2019. The standard will primarily affect the accounting for
the consolidated entity’s operating leases. As at the reporting
date, the consolidated entity has non-cancellable operating
lease commitments of $8,550,607, as disclosed in note 31.
This relates entirely to the lease for the casino premises for
a 50-year term. Based on preliminary assessment, the current
arrangement will meet the definition of lease under AASB 16.
The consolidated entity will recognise a right-of-use asset and
a corresponding liability in respect of the property lease, and
intends to apply the simplified transition approach and will
not restate the comparative amounts for the year prior
to adoption.
IFRS 2 – Classification and Measurement of Share-based
Payment Transactions (Amendments to IFRS 2)
This standard amends 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 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 the annual period beginning
on or after 1 January 2018 and the consolidated entity is
assessing the impact of its adoption, however it does not
expect there to be a material impact.
N EW AN D AM END ED STANDARDS ADOPTED
BY TH E G ROU P
AASB 2016-2 Amendments to Australian Accounting
Standards – Disclosure Initiative Amendments to AASB 107
This standard requires entities to explain changes in their
liabilities from financing activities. This includes changes arising
from cash flows (for example, drawdowns and repayments
of borrowings) and non-cash changes such as acquisitions,
disposals, accretion of interest and unrealised exchange
differences. The adoption of this amendment has no significant
impact on the consolidated entity’s financial statements.
NOTE 2. CRITICAL ACCOU NT IN G
JUDGEMENTS, ESTIMATE S AN D
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.
SH ARE-BASE D PAYM ENT TRANSACTIONS
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.
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DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 1 . SIGN IFICA NT ACCOU NTING
PO LI CI ES CONT I NU ED
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.
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 (‘GS T ’ )
AND OTHER SIMILAR TAXES
Revenues, expenses and assets are recognised net of the
amount of associated 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 S TANDARDS AND
INTERPRETATIONS NOT YET M A NDATORY
OR EARLY ADOPTE D
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 2018. 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, address 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 impairment model under the new standard
requires the recognition of impairment provisions based
on expected credit losses rather than only incurred credit
losses. It applies to financial assets classified at amortised
cost, debt instruments measured at fair value through other
comprehensive income, contract assets under AASB 15
Revenue from Contracts with Customers, lease receivables,
loan commitments and certain financial guarantee contracts.
The consolidated entity is currently assessing the impact of
the adoption of this standard and will adopt it from 1 July
2018. The standard will primarily result in the recognition
of loss allowance for trade debtors; however the consolidated
entity does not expect there to be a significant impact.
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 has assessed the impact of the
adoption of this standard and will adopt it from 1 July 2018.
Recognition of both gaming and non-gaming revenue under
the previous requirements already reflects the concept of
transfer of control of goods or services to customers (that
is, revenue is recognised at the time that the performance
obligation has been satisfied). The consolidated entity
therefore does not expect any impact to the financial
statements on adoption of this standard.
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 is currently assessing the impact of
the adoption of this standard and will adopt it from 1 July
2019. The standard will primarily affect the accounting for
the consolidated entity’s operating leases. As at the reporting
date, the consolidated entity has non-cancellable operating
lease commitments of $8,550,607, as disclosed in note 31.
This relates entirely to the lease for the casino premises for
a 50-year term. Based on preliminary assessment, the current
arrangement will meet the definition of lease under AASB 16.
The consolidated entity will recognise a right-of-use asset and
a corresponding liability in respect of the property lease, and
intends to apply the simplified transition approach and will
not restate the comparative amounts for the year prior
to adoption.
IFRS 2 – Classification and Measurement of Share-based
Payment Transactions (Amendments to IFRS 2)
This standard amends 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 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 the annual period beginning
on or after 1 January 2018 and the consolidated entity is
assessing the impact of its adoption, however it does not
expect there to be a material impact.
N EW AN D AM END ED STANDARDS ADOPTED
BY TH E G ROU P
AASB 2016-2 Amendments to Australian Accounting
Standards – Disclosure Initiative Amendments to AASB 107
This standard requires entities to explain changes in their
liabilities from financing activities. This includes changes arising
from cash flows (for example, drawdowns and repayments
of borrowings) and non-cash changes such as acquisitions,
disposals, accretion of interest and unrealised exchange
differences. The adoption of this amendment has no significant
impact on the consolidated entity’s financial statements.
NOTE 2. CRITICAL ACCOU NT IN G
JUDGEMENTS, ESTIMATE S AN D
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.
SH ARE-BASE D PAYM ENT TRANSACTIONS
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.
44
44
4545
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 INCOME TA X
NOTE 3. OPERATING SEGMENTS
There is no aggregation of operating segments.
I DEN TI FICATI ON OF RE PORTABLE
OPE RATIN G SEG MEN TS
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.
The consolidated entity is domiciled in Australia and operates
predominantly in six countries: Australia, Cambodia,
Vietnam, Singapore, Malaysia and Hong Kong. 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.
TYPES OF PRO DU CTS AN D SERVI CE S
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.
I NTERSE GM ENT TRANSACTI ON S
Intersegment transactions were made at market rates. Intersegment transactions are eliminated on consolidation.
NOTE 2 . CRITICA L ACCOU NTING
JUD GE MENTS, ESTIMATES A ND
A SS UMPTIO NS CONT I NU ED
The fair value of options is determined by using 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.
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
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.
ESTIM ATION OF USEFUL LIVE S OF A S S ET S
WA RRA NTS
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. Impairment
testing 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 INDEFINIT E LIF E
INTANGI BLE A SSETS
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.
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.
EM PLOYEE SH A RE TRU ST A ND O PT IO N T RU ST
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.
IM PA IRM ENT O F TRA DE A ND OT HE R
REC EI VABLE S
The consolidated entity reviews the collectability of trade
receivables 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 judgement is required to determine if a receivable
amount is impaired, based on indicators such as significant
financial difficulties of the debtor, probability that the debtor
will enter bankruptcy or financial reorganisation and default
or delinquency in payments (more than 60 days overdue).
The amount of the impairment allowance is the difference
between the asset’s carrying amount and the present value
of estimated future cash flows.
46
46
4747
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 INCOME TA X
NOTE 3. OPERATING SEGMENTS
There is no aggregation of operating segments.
I DEN TI FICATI ON OF RE PORTABLE
OPE RATIN G SEG MEN TS
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.
The consolidated entity is domiciled in Australia and operates
predominantly in six countries: Australia, Cambodia,
Vietnam, Singapore, Malaysia and Hong Kong. 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.
TYPES OF PRO DU CTS AN D SERVI CE S
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.
I NTERSE GM ENT TRANSACTI ON S
Intersegment transactions were made at market rates. Intersegment transactions are eliminated on consolidation.
NOTE 2 . CRITICA L ACCOU NTING
JUD GE MENTS, ESTIMATES A ND
A SS UMPTIO NS CONT I NU ED
The fair value of options is determined by using 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.
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
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.
ESTIM ATION OF USEFUL LIVE S OF A S S ET S
WA RRA NTS
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. Impairment
testing 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 INDEFINIT E LIF E
INTANGI BLE A SSETS
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.
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.
EM PLOYEE SH A RE TRU ST A ND O PT IO N T RU ST
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.
IM PA IRM ENT O F TRA DE A ND OT HE R
REC EI VABLE S
The consolidated entity reviews the collectability of trade
receivables 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 judgement is required to determine if a receivable
amount is impaired, based on indicators such as significant
financial difficulties of the debtor, probability that the debtor
will enter bankruptcy or financial reorganisation and default
or delinquency in payments (more than 60 days overdue).
The amount of the impairment allowance is the difference
between the asset’s carrying amount and the present value
of estimated future cash flows.
46
46
4747
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 3 . OP ERATIN G SEGMEN TS CONTINUED
OPERATIN G SEGMENT INFORMATION F O R CO NT INUI NG O PE RATIO NS
Consolidated – 2018
$
$
$
CASINO
OPERATIONS
VIETNAM
CASINO
OPERATIONS
CAMBODIA
CORPORATE
OPERATIONS
TOTAL
$
Consolidated – 2017
Revenue
CASINO
OPERATIONS
VIETNAM
CASINO
OPERATIONS
CAMBODIA
CORPORATE
OPERATIONS
$
$
$
TOTAL
$
Revenue
Sales to external customers
Interest and other income
Total revenue
EBITDA
Depreciation and amortisation
Impairment of intangible asset
Interest revenue
Non-recurring items
Net exchange gains
Non-controlling interest
Finance costs
25,905,756
66,606,184
199
92,512,139
57,851
–
36,151
94,002
25,963,607
66,606,184
36,350
92,606,141
14,532,245
38,670,344
(10,808,527)
42,394,062
(4,719,576)
(5,047,359)
(214,385)
(9,981,320)
–
(143,860,973)
–
(143,860,973)
57,851
–
171,936
(261,944)
(1,156,882)
–
–
–
–
–
36,151
681,507
169,435
94,002
681,507
341,371
–
(261,944)
(9,098,971)
(10,255,853)
Profit/(loss) before income tax expense
8,623,630
(110,237,988)
(19,234,790)
(120,849,148)
Income tax expense
Loss after income tax expense attributable
to the owners of Donaco International Limited
(3,661,667)
(124,510,815)
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
87,094,230
373,661,535
17,357,251
478,113,016
478,113,016
16,657,078
26,608,658
65,099,901
108,365,637
108,365,637
Sales to external customers
26,156,663
110,188,090
235
136,344,988
Interest
Total revenue
EBITDA
29,478
–
69,323
98,801
26,186,141
110,188,090
69,558
136,443,789
14,676,730
61,190,103
(10,546,321)
65,320,512
Depreciation and amortisation
(5,294,247)
(4,624,353)
(210,698)
(10,129,298)
Interest revenue
Non-recurring items
Net exchange gains
Non-controlling interest
Finance costs
29,478
–
(727,577)
(198,751)
(1,591,881)
–
–
–
–
–
69,323
98,801
1,113,012
1,113,012
(390,302)
(1,117,879)
–
(198,751)
(18,967,742)
(20,559,623)
Profit before income tax expense
6,893,752
56,565,750
(28,932,728)
34,526,774
Income tax expense
Profit after income tax expense attributable
to the owners of Donaco International Limited
(3,536,476)
30,990,298
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
Geographical Information
Australia
Vietnam
Cambodia
90,565,671
505,688,488
42,923,293
639,177,452
639,177,452
41,265,145
25,039,076
86,769,060
153,073,281
153,073,281
SALES TO
EXTERNAL CUSTOMERS
GEOGRAPHICAL
NON-CURRENT ASSETS
2018
$
2017
$
2018
$
2017
$
199
235
2,761,664
2,828,823
25,905,756
26,156,663
68,654,062
71,201,964
66,606,184
110,188,090
345,416,638
477,053,600
92,512,139
136,344,988
416,832,364
551,084,387
48
48
4949
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 3 . OP ERATIN G SEGMEN TS CONTINUED
OPERATIN G SEGMENT INFORMATION F O R CO NT INUI NG O PE RATIO NS
Consolidated – 2018
$
$
$
CASINO
OPERATIONS
VIETNAM
CASINO
OPERATIONS
CAMBODIA
CORPORATE
OPERATIONS
TOTAL
$
Consolidated – 2017
Revenue
CASINO
OPERATIONS
VIETNAM
CASINO
OPERATIONS
CAMBODIA
CORPORATE
OPERATIONS
$
$
$
TOTAL
$
Revenue
Sales to external customers
Interest and other income
Total revenue
EBITDA
Depreciation and amortisation
Impairment of intangible asset
Interest revenue
Non-recurring items
Net exchange gains
Non-controlling interest
Finance costs
25,905,756
66,606,184
199
92,512,139
57,851
–
36,151
94,002
25,963,607
66,606,184
36,350
92,606,141
14,532,245
38,670,344
(10,808,527)
42,394,062
(4,719,576)
(5,047,359)
(214,385)
(9,981,320)
–
(143,860,973)
–
(143,860,973)
57,851
–
171,936
(261,944)
(1,156,882)
–
–
–
–
–
36,151
681,507
169,435
94,002
681,507
341,371
–
(261,944)
(9,098,971)
(10,255,853)
Profit/(loss) before income tax expense
8,623,630
(110,237,988)
(19,234,790)
(120,849,148)
Income tax expense
Loss after income tax expense attributable
to the owners of Donaco International Limited
(3,661,667)
(124,510,815)
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
87,094,230
373,661,535
17,357,251
478,113,016
478,113,016
16,657,078
26,608,658
65,099,901
108,365,637
108,365,637
Sales to external customers
26,156,663
110,188,090
235
136,344,988
Interest
Total revenue
EBITDA
29,478
–
69,323
98,801
26,186,141
110,188,090
69,558
136,443,789
14,676,730
61,190,103
(10,546,321)
65,320,512
Depreciation and amortisation
(5,294,247)
(4,624,353)
(210,698)
(10,129,298)
Interest revenue
Non-recurring items
Net exchange gains
Non-controlling interest
Finance costs
29,478
–
(727,577)
(198,751)
(1,591,881)
–
–
–
–
–
69,323
98,801
1,113,012
1,113,012
(390,302)
(1,117,879)
–
(198,751)
(18,967,742)
(20,559,623)
Profit before income tax expense
6,893,752
56,565,750
(28,932,728)
34,526,774
Income tax expense
Profit after income tax expense attributable
to the owners of Donaco International Limited
(3,536,476)
30,990,298
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
Geographical Information
Australia
Vietnam
Cambodia
90,565,671
505,688,488
42,923,293
639,177,452
639,177,452
41,265,145
25,039,076
86,769,060
153,073,281
153,073,281
SALES TO
EXTERNAL CUSTOMERS
GEOGRAPHICAL
NON-CURRENT ASSETS
2018
$
2017
$
2018
$
2017
$
199
235
2,761,664
2,828,823
25,905,756
26,156,663
68,654,062
71,201,964
66,606,184
110,188,090
345,416,638
477,053,600
92,512,139
136,344,988
416,832,364
551,084,387
48
48
4949
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 3 . OP ERATIN G SEGMEN TS CONTINUED
NOTE 5. OTHER INCOM E/(EX PENS E)
Revenue and other income
Total reportable segment revenues
Other segment revenues
Total revenue and other income
MAJOR CUSTOMERS
CONSOLIDATED
2018
$
2017
$
92,512,139
136,344,988
1,116,880
93,934
93,629,019
136,438,922
Net foreign exchange gain/(loss)
Gain on derivative financial instrument at fair value through the profit and loss
Other income/(expense)
NOTE 6. EXPENSES
Transactions involving a single external customer amounting to 10% or more of the consolidated entity’s revenue during the
current and previous financial years are shown below.
2018
There was no single external customer that contributed 10% or more of the consolidated entity’s revenue during 2018.
2017
Profit/(loss) before income tax from continuing operations includes
the following specific expenses:
Casino operations – Cambodia
1
23
31,417,980
NUMBER OF
CUSTOMERS
% OF
REVENUE
$
NOTE 4 . REVENU E
From continuing operations
Sales revenue
Casino
– gaming revenue
– non-gaming revenue
Management fee from Star Paradise
Corporate operations
Interest
Revenue from continuing operations
CONSOLIDATED
2018
$
2017
$
74,514,551
120,217,587
17,997,389
13,788,384
–
199
94,002
2,338,782
235
98,801
92,606,141
136,443,789
Depreciation
Land, buildings and structures
Furniture and fittings
Machinery and equipment
Office equipment and other
Motor vehicles
Consumables
Amortisation
Land right
Total depreciation and amortisation
Operating lease payments
Superannuation expense
CONSOLIDATED
2018
$
2017
$
341,371
(1,117,879)
681,507
1,113,012
1,022,878
(4,867)
CONSOLIDATED
2018
$
2017
$
4,216,434
4,115,611
305,076
478,683
1,897,605
1,936,041
1,970,317
1,519,440
248,188
303,678
1,341,602
1,773,683
9,979,222
10,127,136
2,098
2,163
9,981,320
10,129,299
353,355
267,906
Defined contribution superannuation expense
76,766
103,292
Impairment of assets
Leasehold buildings
Furniture and fittings
Other equipment and other
Casino licence
–
–
–
143,860,973
160,011
22,348
16,426
–
143,860,973
198,785
50
50
5151
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 3 . OP ERATIN G SEGMEN TS CONTINUED
NOTE 5. OTHER INCOM E/(EX PENS E)
Revenue and other income
Total reportable segment revenues
Other segment revenues
Total revenue and other income
MAJOR CUSTOMERS
CONSOLIDATED
2018
$
2017
$
92,512,139
136,344,988
1,116,880
93,934
93,629,019
136,438,922
Net foreign exchange gain/(loss)
Gain on derivative financial instrument at fair value through the profit and loss
Other income/(expense)
NOTE 6. EXPENSES
Transactions involving a single external customer amounting to 10% or more of the consolidated entity’s revenue during the
current and previous financial years are shown below.
2018
There was no single external customer that contributed 10% or more of the consolidated entity’s revenue during 2018.
2017
Profit/(loss) before income tax from continuing operations includes
the following specific expenses:
Casino operations – Cambodia
1
23
31,417,980
NUMBER OF
CUSTOMERS
% OF
REVENUE
$
NOTE 4 . REVENU E
From continuing operations
Sales revenue
Casino
– gaming revenue
– non-gaming revenue
Management fee from Star Paradise
Corporate operations
Interest
Revenue from continuing operations
CONSOLIDATED
2018
$
2017
$
74,514,551
120,217,587
17,997,389
13,788,384
–
199
94,002
2,338,782
235
98,801
92,606,141
136,443,789
Depreciation
Land, buildings and structures
Furniture and fittings
Machinery and equipment
Office equipment and other
Motor vehicles
Consumables
Amortisation
Land right
Total depreciation and amortisation
Operating lease payments
Superannuation expense
CONSOLIDATED
2018
$
2017
$
341,371
(1,117,879)
681,507
1,113,012
1,022,878
(4,867)
CONSOLIDATED
2018
$
2017
$
4,216,434
4,115,611
305,076
478,683
1,897,605
1,936,041
1,970,317
1,519,440
248,188
303,678
1,341,602
1,773,683
9,979,222
10,127,136
2,098
2,163
9,981,320
10,129,299
353,355
267,906
Defined contribution superannuation expense
76,766
103,292
Impairment of assets
Leasehold buildings
Furniture and fittings
Other equipment and other
Casino licence
–
–
–
143,860,973
160,011
22,348
16,426
–
143,860,973
198,785
50
50
5151
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 7 . I NCOME TAX EXPENS E
Income tax expense
Current tax
Aggregate income tax expense
Income tax expense is attributable to:
Profit from continuing operations
Aggregate income tax expense
CONSOLIDATED
2018
$
2017
$
3,661,667
3,536,476
3,661,667
3,536,476
3,661,667
3,536,476
3,661,667
3,536,476
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense from continuing operations
(120,587,204)
34,725,525
Profits tax using Australian corporation tax at the statutory tax rate of 30% (2017: 30%)
(36,176,162)
10,417,658
Tax effect of difference in overseas corporation tax at the statutory tax rate
of 20% (2017: 20%)
11,524,310
(4,270,855)
Tax effect amounts which are not deductible in calculating taxable income
30,560,656
1,254,958
Losses not brought to account
Tax exempt profits from Cambodian operations (note (a))
Obligation payments in Cambodia (note (a))
Adjustment for investment spending in Vietnam
Income tax expense
(a) Income tax in profit or loss
Income tax includes obligation payments totalling
$2,620,496 (2017: $2,654,361) 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 US$30,000 is paid.
In respect of gaming activities, DNA Star Vegas Co., Ltd
(DNA Star Vegas) has to pay the Obligatory Tax 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.
2,941,532
5,333,402
(7,005,429)
(11,313,150)
2,620,496
2,654,361
(803,736)
(539,898)
3,661,667
3,536,476
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.
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 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 $1,612,835 (2017: $1,449,439).
NOTE 8. CURRENT ASSETS – CA SH AND C AS H EQ UIVA LE NT S
Cash on hand
Cash at bank
Cash in transit
Short–term deposit
CONSOLIDATED
2018
$
2017
$
28,360,270
21,300,658
16,130,913
41,835,143
840,465
1,203,118
1,743,941
1,683,830
47,075,589
66,022,749
NOTE 9. CURRENT ASSETS – TRADE AND OTHER RECEI VA BLES
Trade receivables
Other receivables
Interest receivable on bank deposits
Tax-related receivables
I MPAI RMEN T OF RECEIVABLE S
CONSOLIDATED
2018
$
2017
$
2,389,633
17,581,840
8,132,629
2,806,040
683
22,085
467
14,460
10,545,030
20,402,807
The consolidated entity has not recognised any loss in profit or loss in respect of impairment of receivables for the year ended
30 June 2018 (2017: $nil).
NOTE 10. CURRENT ASSETS – INVENTORIES
Food and beverage – at cost
CONSOLIDATED
2018
$
2017
$
1,397,344
893,474
52
52
5353
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018
NOTE 7 . I NCOME TAX EXPENS E
Income tax expense
Current tax
Aggregate income tax expense
Income tax expense is attributable to:
Profit from continuing operations
Aggregate income tax expense
CONSOLIDATED
2018
$
2017
$
3,661,667
3,536,476
3,661,667
3,536,476
3,661,667
3,536,476
3,661,667
3,536,476
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense from continuing operations
(120,587,204)
34,725,525
Profits tax using Australian corporation tax at the statutory tax rate of 30% (2017: 30%)
(36,176,162)
10,417,658
Tax effect of difference in overseas corporation tax at the statutory tax rate
of 20% (2017: 20%)
11,524,310
(4,270,855)
Tax effect amounts which are not deductible in calculating taxable income
30,560,656
1,254,958
Losses not brought to account
Tax exempt profits from Cambodian operations (note (a))
Obligation payments in Cambodia (note (a))
Adjustment for investment spending in Vietnam
Income tax expense
(a) Income tax in profit or loss
Income tax includes obligation payments totalling
$2,620,496 (2017: $2,654,361) 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 US$30,000 is paid.
In respect of gaming activities, DNA Star Vegas Co., Ltd
(DNA Star Vegas) has to pay the Obligatory Tax 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.
2,941,532
5,333,402
(7,005,429)
(11,313,150)
2,620,496
2,654,361
(803,736)
(539,898)
3,661,667
3,536,476
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.
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 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 $1,612,835 (2017: $1,449,439).
NOTE 8. CURRENT ASSETS – CA SH AND C AS H EQ UIVA LE NT S
Cash on hand
Cash at bank
Cash in transit
Short–term deposit
CONSOLIDATED
2018
$
2017
$
28,360,270
21,300,658
16,130,913
41,835,143
840,465
1,203,118
1,743,941
1,683,830
47,075,589
66,022,749
NOTE 9. CURRENT ASSETS – TRADE AND OTHER RECEI VA BLES
Trade receivables
Other receivables
Interest receivable on bank deposits
Tax-related receivables
I MPAI RMEN T OF RECEIVABLE S
CONSOLIDATED
2018
$
2017
$
2,389,633
17,581,840
8,132,629
2,806,040
683
22,085
467
14,460
10,545,030
20,402,807
The consolidated entity has not recognised any loss in profit or loss in respect of impairment of receivables for the year ended
30 June 2018 (2017: $nil).
NOTE 10. CURRENT ASSETS – INVENTORIES
Food and beverage – at cost
CONSOLIDATED
2018
$
2017
$
1,397,344
893,474
52
52
5353
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018
NOTE 1 1. CURRENT ASSETS – PR EPA ID CONST RUCTION COSTS
NOTE 12. CURRENT ASSETS – OTHER
Prepaid construction costs
CONSOLIDATED
2018
$
2017
$
1,811,360
341,184
Amounts recognised as prepaid construction costs relate to tranche payments made to third party developers in connection
with the construction of the new Aristo 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 non–current construction in progress.
Bonds and security deposits
Prepayments
Other current assets
CONSOLIDATED
2018
$
5,379
324,245
121,705
451,329
2017
$
5,379
226,565
200,907
432,851
NOTE 13. NON–CURRENT ASSETS – PROPERTY, PLANT A ND EQUIP ME NT
Leasehold buildings and structures – at cost
Less: Accumulated depreciation for leasehold buildings and structures
Furniture and fittings – at cost
Less: Accumulated depreciation for furniture and fittings
Machinery and equipment – at cost
Less: Accumulated depreciation for machinery and equipment
Motor vehicles – at cost
Less: Accumulated depreciation for motor vehicles
Office equipment and other – at cost
Less: Accumulated depreciation for office equipment and other
Consumables
Less: Accumulated depreciation for consumables
CONSOLIDATED
2018
$
2017
$
160,430,636
152,241,908
(17,975,569)
(12,931,787)
142,455,067
139,310,121
4,905,381
4,597,726
(4,753,580)
(4,160,572)
151,801
437,154
40,459,999
34,696,929
(24,964,399)
(18,513,168)
15,495,600
16,183,761
2,298,287
1,869,091
(1,528,435)
(1,312,898)
769,852
556,193
3,463,739
4,702,496
(1,594,665)
(2,584,380)
1,869,074
2,118,116
1,430,844
2,739,028
–
–
1,430,844
2,739,028
162,172,238
161,344,373
54
54
5555
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 1 1. CURRENT ASSETS – PR EPA ID CONST RUCTION COSTS
NOTE 12. CURRENT ASSETS – OTHER
Prepaid construction costs
CONSOLIDATED
2018
$
2017
$
1,811,360
341,184
Amounts recognised as prepaid construction costs relate to tranche payments made to third party developers in connection
with the construction of the new Aristo 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 non–current construction in progress.
Bonds and security deposits
Prepayments
Other current assets
CONSOLIDATED
2018
$
5,379
324,245
121,705
451,329
2017
$
5,379
226,565
200,907
432,851
NOTE 13. NON–CURRENT ASSETS – PROPERTY, PLANT A ND EQUIP ME NT
Leasehold buildings and structures – at cost
Less: Accumulated depreciation for leasehold buildings and structures
Furniture and fittings – at cost
Less: Accumulated depreciation for furniture and fittings
Machinery and equipment – at cost
Less: Accumulated depreciation for machinery and equipment
Motor vehicles – at cost
Less: Accumulated depreciation for motor vehicles
Office equipment and other – at cost
Less: Accumulated depreciation for office equipment and other
Consumables
Less: Accumulated depreciation for consumables
CONSOLIDATED
2018
$
2017
$
160,430,636
152,241,908
(17,975,569)
(12,931,787)
142,455,067
139,310,121
4,905,381
4,597,726
(4,753,580)
(4,160,572)
151,801
437,154
40,459,999
34,696,929
(24,964,399)
(18,513,168)
15,495,600
16,183,761
2,298,287
1,869,091
(1,528,435)
(1,312,898)
769,852
556,193
3,463,739
4,702,496
(1,594,665)
(2,584,380)
1,869,074
2,118,116
1,430,844
2,739,028
–
–
1,430,844
2,739,028
162,172,238
161,344,373
54
54
5555
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 1 3. N ON–CURR ENT A SSE TS – PROPERT Y, PLANT A ND EQUIPMENT CONTINUED
RECO NCIL IATI ON S
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are shown below.
Reconciliations of the written down values at the beginning and end of the current and previous financial year are shown below.
LEASEHOLD
BUILDINGS
FURNITURE
AND
FITTINGS
MACHINERY
AND
EQUIPMENT
MOTOR
VEHICLES
OFFICE
EQUIPMENT
AND OTHER CONSUMABLES
Consolidated
$
$
$
$
$
$
TOTAL
$
Balance at 1 July 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)
(20,817)
(160,011)
(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)
(1,93s6,041)
(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
Consolidated
Balance at 1 July 2016
Disposals
Exchange differences
Amortisation expense
Balance at 30 June 2017
Disposals
Impairment of assets
Exchange differences
Amortisation expense
Balance at 30 June 2018
GOODWILL
LAND RIGHT
CASINO
LICENSE
$
$
$
TOTAL
$
2,426,187
36,397
400,543,357
403,005,941
–
–
–
–
(1,881)
(2,163)
–
–
(13,861,663)
(13,863,544)
–
(2,163)
2,426,187
32,353
386,681,694
389,140,234
–
–
–
–
–
–
932
(2,098)
–
–
(143,860,973)
(143,860,973)
8,786,226
8,787,158
–
(2,098)
2,426,187
31,187
251,606,947
254,064,321
Additions
Disposals
1,394,907
–
–
–
(368,940)
(136,702)
–
–
(505,642)
2,447,269
572,456
202,874
4,560
4,622,066
I MPAI RMEN T TESTI NG OF GO OD WI LL
Exchange differences
5,966,473
19,723
(868,885)
26,093
1,518,401
28,858
6,690,663
Depreciation expense
(4,216,434)
(305,076)
(1,897,605)
(248,188)
(1,970,317)
(1,341,602)
(9,979,222)
Balance at 30 June 2018
142,455,067
151,801
15,495,600
769,852
1,869,074
1,430,844
162,172,238
Consumables represent low value, high turnover items that are depreciated in accordance with company policy
and local legislation.
N OT E 14. N ON–CUR RENT A SSE TS – INTANGIBLES
Goodwill – at cost
Land right – at cost
Less: Accumulated amortisation for land right
Casino license
Less: Impairment
CONSOLIDATED
2018
$
2017
$
2,426,187
2,426,187
69,449
(38,262)
31,187
67,004
(34,651)
32,353
395,467,920
386,681,694
(143,860,973)
–
251,606,947
386,681,694
254,064,321
389,140,234
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 shown below.
Lao Cai International Hotel JVC
Total goodwill
LAO CAI – GO OD WIL L
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
FY19 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
CONSOLIDATED
2018
$
2017
$
2,426,187
2,426,187
2,426,187
2,426,187
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.
The recoverable amount calculation for goodwill is
most sensitive to changes in growth rate and earnings
before interest and taxes (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 2018 (2017:nil).
56
56
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DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018
NOTE 1 3. N ON–CURR ENT A SSE TS – PROPERT Y, PLANT A ND EQUIPMENT CONTINUED
RECO NCIL IATI ON S
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are shown below.
Reconciliations of the written down values at the beginning and end of the current and previous financial year are shown below.
LEASEHOLD
BUILDINGS
FURNITURE
AND
FITTINGS
MACHINERY
AND
EQUIPMENT
MOTOR
VEHICLES
OFFICE
EQUIPMENT
AND OTHER CONSUMABLES
Consolidated
$
$
$
$
$
$
TOTAL
$
Balance at 1 July 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)
(20,817)
(160,011)
(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)
(1,93s6,041)
(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
Consolidated
Balance at 1 July 2016
Disposals
Exchange differences
Amortisation expense
Balance at 30 June 2017
Disposals
Impairment of assets
Exchange differences
Amortisation expense
Balance at 30 June 2018
GOODWILL
LAND RIGHT
CASINO
LICENSE
$
$
$
TOTAL
$
2,426,187
36,397
400,543,357
403,005,941
–
–
–
–
(1,881)
(2,163)
–
–
(13,861,663)
(13,863,544)
–
(2,163)
2,426,187
32,353
386,681,694
389,140,234
–
–
–
–
–
–
932
(2,098)
–
–
(143,860,973)
(143,860,973)
8,786,226
8,787,158
–
(2,098)
2,426,187
31,187
251,606,947
254,064,321
Additions
Disposals
1,394,907
–
–
–
(368,940)
(136,702)
–
–
(505,642)
2,447,269
572,456
202,874
4,560
4,622,066
I MPAI RMEN T TESTI NG OF GO OD WI LL
Exchange differences
5,966,473
19,723
(868,885)
26,093
1,518,401
28,858
6,690,663
Depreciation expense
(4,216,434)
(305,076)
(1,897,605)
(248,188)
(1,970,317)
(1,341,602)
(9,979,222)
Balance at 30 June 2018
142,455,067
151,801
15,495,600
769,852
1,869,074
1,430,844
162,172,238
Consumables represent low value, high turnover items that are depreciated in accordance with company policy
and local legislation.
N OT E 14. N ON–CUR RENT A SSE TS – INTANGIBLES
Goodwill – at cost
Land right – at cost
Less: Accumulated amortisation for land right
Casino license
Less: Impairment
CONSOLIDATED
2018
$
2017
$
2,426,187
2,426,187
69,449
(38,262)
31,187
67,004
(34,651)
32,353
395,467,920
386,681,694
(143,860,973)
–
251,606,947
386,681,694
254,064,321
389,140,234
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 shown below.
Lao Cai International Hotel JVC
Total goodwill
LAO CAI – GO OD WIL L
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
FY19 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
CONSOLIDATED
2018
$
2017
$
2,426,187
2,426,187
2,426,187
2,426,187
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.
The recoverable amount calculation for goodwill is
most sensitive to changes in growth rate and earnings
before interest and taxes (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 2018 (2017:nil).
56
56
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DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018
DNA STAR VEGAS – CAS INO L IC E NC E
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 December 2017. Adjustments were
made to determine the fair value less cost of disposal of the
cash generating unit which was reasonably determined to be
$330,204,466 (US$257,550,000 converted at the spot rate).
This amounts to $348,465,150 at the 30 June 2018 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 five-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 11% in the first year,
3% in the following four years and a terminal growth rate
of 3%. The discount rates used of 15.06% 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 THB32.574: US$1. A capital expenditure percentage of
2.52% has also been included in the valuation. Furthermore,
the valuation includes a Discount for Lack of Marketability
(‘DLOM’) of 20.4%.
Apart from the impairment loss, the movement in the
historical cost of the casino license is due to foreign exchange
translation as the licence is denominated in foreign currency.
LA ND RIGHT
Intangible asset of $31,187 (2017: $32,353) 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.
Construction relates to costs incurred for the new
construction of the Aristo Casino.
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
2018
$
4,018
2017
$
3,895
NOTE 17. CURRENT LIABILITIES – TRADE AN D OTHER PAYABLE S
Trade payables (note 28)
Deposits received
Floating chips (note 28)
Interest payable
CONSOLIDATED
2018
2017
4,842,651
4,472,103
97,285
101,974
6,624,856
13,013,770
646,922
2,060,154
22,440,301
22,140,106
34,652,015
41,788,107
NOTE 1 5. N ON-CU RRE NT ASSE T S – CONSTRUCT ION IN P RO GRESS
Other payables and accrued expenses
Property construction works in progress – at cost
RECON CILIATIONS
CONSOLIDATED
2018
$
2017
$
591,787
595,885
Refer to note 28 for further information on financial instruments.
FLOAT IN G CH IPS
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 reporting date.
Reconciliations of the written down values at the beginning and end of the current and previous financial year are shown below.
NOTE 18. CURRENT LIABILITIES – BORROWIN GS
Consolidated
Balance at 1 July 2016
Additions
Exchange differences
Transfer in/(out)
Balance at 30 June 2017
Additions
Disposals
Exchange differences
Transfers out
Balance at 30 June 2018
58
58
CONSTRUCTION WIP
$
1,143,158
1,612,657
(82,832)
(2,077,098)
595,885
270,209
(261,366)
23,912
(36,853)
591,787
Joint Stock Commercial Ocean Bank
Mega International Commercial Bank Co Ltd
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 Ltd
CONSOLIDATED
2018
$
2017
$
2,882,374
2,791,979
21,712,541
52,116,619
24,594,915
54,908,598
2,882,374
2,791,979
21,712,541
52,116,619
24,594,915
54,908,598
5959
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018
DNA STAR VEGAS – CAS INO L IC E NC E
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 December 2017. Adjustments were
made to determine the fair value less cost of disposal of the
cash generating unit which was reasonably determined to be
$330,204,466 (US$257,550,000 converted at the spot rate).
This amounts to $348,465,150 at the 30 June 2018 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 five-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 11% in the first year,
3% in the following four years and a terminal growth rate
of 3%. The discount rates used of 15.06% 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 THB32.574: US$1. A capital expenditure percentage of
2.52% has also been included in the valuation. Furthermore,
the valuation includes a Discount for Lack of Marketability
(‘DLOM’) of 20.4%.
Apart from the impairment loss, the movement in the
historical cost of the casino license is due to foreign exchange
translation as the licence is denominated in foreign currency.
LA ND RIGHT
Intangible asset of $31,187 (2017: $32,353) 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.
Construction relates to costs incurred for the new
construction of the Aristo Casino.
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
2018
$
4,018
2017
$
3,895
NOTE 17. CURRENT LIABILITIES – TRADE AN D OTHER PAYABLE S
Trade payables (note 28)
Deposits received
Floating chips (note 28)
Interest payable
CONSOLIDATED
2018
2017
4,842,651
4,472,103
97,285
101,974
6,624,856
13,013,770
646,922
2,060,154
22,440,301
22,140,106
34,652,015
41,788,107
NOTE 1 5. N ON-CU RRE NT ASSE T S – CONSTRUCT ION IN P RO GRESS
Other payables and accrued expenses
Property construction works in progress – at cost
RECON CILIATIONS
CONSOLIDATED
2018
$
2017
$
591,787
595,885
Refer to note 28 for further information on financial instruments.
FLOAT IN G CH IPS
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 reporting date.
Reconciliations of the written down values at the beginning and end of the current and previous financial year are shown below.
NOTE 18. CURRENT LIABILITIES – BORROWIN GS
Consolidated
Balance at 1 July 2016
Additions
Exchange differences
Transfer in/(out)
Balance at 30 June 2017
Additions
Disposals
Exchange differences
Transfers out
Balance at 30 June 2018
58
58
CONSTRUCTION WIP
$
1,143,158
1,612,657
(82,832)
(2,077,098)
595,885
270,209
(261,366)
23,912
(36,853)
591,787
Joint Stock Commercial Ocean Bank
Mega International Commercial Bank Co Ltd
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 Ltd
CONSOLIDATED
2018
$
2017
$
2,882,374
2,791,979
21,712,541
52,116,619
24,594,915
54,908,598
2,882,374
2,791,979
21,712,541
52,116,619
24,594,915
54,908,598
5959
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018
The loan from Mega International Commercial Bank Co Ltd,
which was initially drawn down on 1 July 2015, was
refinanced under a new loan agreement dated 14 August
2017 for a total amount of US$57 million. The new loan was
drawn down on 28 August 2017, the proceeds of which were
used to settle the previous loan. Under the refinancing terms,
the loan has been extended for a further three years with a
final settlement date of 28 August 2020.
The consolidated entity complied with loan covenants as
amended by Mega Bank during the year and consequently
continued to present the outstanding loan balance expected
to be settled more than 12 months after the reporting period
as a non-current liability as at 30 June 2018 (note 22).
ASSETS PLEDG ED AS SECURITY
The loan from Mega International Commercial Bank Co. Ltd
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
iii. A pledge of the shares in DNA Star Vegas Co. Ltd
owned by Donaco Hong Kong Limited (carrying value
$443,615,198, 2017: $426,270,598)
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
vi. A security agreement over the assets of DNA Star Vegas
vii. A hypothec agreement over the land and buildings
of DNA Star Vegas.
MO RTGAG E TO JO INT STO C K COM M E RCI AL
O CE AN BA NK
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 2018 under this arrangement were
$7,205,935 (2017: $9,771,928).
Limited owned by the parent entity (carrying value
$293,608,393, 2017: $293,608,393)
Subject to the continuance of satisfactory credit ratings,
the bank loan facilities may be drawn down at any time.
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit
(current and non current):
Total facilities
Bank loans
Used at the reporting date
Bank loans
Unused at the reporting date
Bank loans
NOTE 1 9. CURRENT LIABILITIES – FINA NCIAL LIA BILIT IES
Derivative financial liability at fair value through profit and loss
Warrants
CONSOLIDATED
2018
$
2017
$
70,401,487
108,462,225
70,401,487
108,462,225
–
–
CONSOLIDATED
2018
$
–
2017
$
681,507
warrants issued are measured at fair value. At each reporting
date the derivative financial liability is re-valued to fair value
with the movement in the fair value recorded in profit or loss.
For the warrants granted during the 2016 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 shown below.
GRANT
DATE
EXPIRY
DATE
SHARE PRICE
AT REPORTING
DATE
EXERCISE
PRICE
EXPECTED
VOLATILITY
DIVIDEND
YIELD
RISK-FREE
INTEREST
RATE
FAIR
VALUE
07/07/2015
07/10/2018
$0.145
$0.76
83.17%
–
2.00%
–
The remaining contractual life at 30 June 2018 is 0.27 years (2017: 1.27 years). Given the fair value of the warrants at
30 June 2018 is immaterial in nature, no derivative financial liability has been disclosed at the reporting date.
NOTE 20. CURRENT LIABILITIES – INCOME TAX
Provision for income tax
NOTE 21. CURRENT LIABILITIES – EMPLOYEE BENEFI TS
Annual leave
Accrued salaries, wages and other benefits
NOTE 22. NON-CURRENT LIABILITIES – BORROWINGS
Joint Stock Commercial Ocean Bank
Mega International Commercial Bank Co Ltd
Refer to note 28 for further information on financial instruments.
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Joint Stock Commercial Ocean Bank
Mega International Commercial Bank Co Ltd
NOTE 23. NON-CURRENT LIABILITIES – EMPLOYEE BENE FITS
CONSOLIDATED
2018
$
2017
$
2,008,402
1,127,767
CONSOLIDATED
2018
$
140,590
1,120,735
1,261,325
2017
$
95,613
885,393
981,006
CONSOLIDATED
2018
$
2017
$
4,323,561
6,979,949
41,483,011
46,573,678
45,806,572
53,553,627
7,205,935
9,771,928
63,195,552
98,690,297
70,401,487
108,462,225
CONSOLIDATED
2018
$
42,408
42,408
2017
$
32,669
32,669
As a requirement of the terms of the group’s facility
previously 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 US$100,000.
The warrants have a term of 39 months and expire on
6 October 2018. The exercise price is $0.7579 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
Long service leave
60
60
6161
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 The loan from Mega International Commercial Bank Co Ltd,
which was initially drawn down on 1 July 2015, was
refinanced under a new loan agreement dated 14 August
2017 for a total amount of US$57 million. The new loan was
drawn down on 28 August 2017, the proceeds of which were
used to settle the previous loan. Under the refinancing terms,
the loan has been extended for a further three years with a
final settlement date of 28 August 2020.
The consolidated entity complied with loan covenants as
amended by Mega Bank during the year and consequently
continued to present the outstanding loan balance expected
to be settled more than 12 months after the reporting period
as a non-current liability as at 30 June 2018 (note 22).
ASSETS PLEDG ED AS SECURITY
The loan from Mega International Commercial Bank Co. Ltd
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
iii. A pledge of the shares in DNA Star Vegas Co. Ltd
owned by Donaco Hong Kong Limited (carrying value
$443,615,198, 2017: $426,270,598)
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
vi. A security agreement over the assets of DNA Star Vegas
vii. A hypothec agreement over the land and buildings
of DNA Star Vegas.
MO RTGAG E TO JO INT STO C K COM M E RCI AL
O CE AN BA NK
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 2018 under this arrangement were
$7,205,935 (2017: $9,771,928).
Limited owned by the parent entity (carrying value
$293,608,393, 2017: $293,608,393)
Subject to the continuance of satisfactory credit ratings,
the bank loan facilities may be drawn down at any time.
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit
(current and non current):
Total facilities
Bank loans
Used at the reporting date
Bank loans
Unused at the reporting date
Bank loans
NOTE 1 9. CURRENT LIABILITIES – FINA NCIAL LIA BILIT IES
Derivative financial liability at fair value through profit and loss
Warrants
CONSOLIDATED
2018
$
2017
$
70,401,487
108,462,225
70,401,487
108,462,225
–
–
CONSOLIDATED
2018
$
–
2017
$
681,507
warrants issued are measured at fair value. At each reporting
date the derivative financial liability is re-valued to fair value
with the movement in the fair value recorded in profit or loss.
For the warrants granted during the 2016 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 shown below.
GRANT
DATE
EXPIRY
DATE
SHARE PRICE
AT REPORTING
DATE
EXERCISE
PRICE
EXPECTED
VOLATILITY
DIVIDEND
YIELD
RISK-FREE
INTEREST
RATE
FAIR
VALUE
07/07/2015
07/10/2018
$0.145
$0.76
83.17%
–
2.00%
–
The remaining contractual life at 30 June 2018 is 0.27 years (2017: 1.27 years). Given the fair value of the warrants at
30 June 2018 is immaterial in nature, no derivative financial liability has been disclosed at the reporting date.
NOTE 20. CURRENT LIABILITIES – INCOME TAX
Provision for income tax
NOTE 21. CURRENT LIABILITIES – EMPLOYEE BENEFI TS
Annual leave
Accrued salaries, wages and other benefits
NOTE 22. NON-CURRENT LIABILITIES – BORROWINGS
Joint Stock Commercial Ocean Bank
Mega International Commercial Bank Co Ltd
Refer to note 28 for further information on financial instruments.
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Joint Stock Commercial Ocean Bank
Mega International Commercial Bank Co Ltd
NOTE 23. NON-CURRENT LIABILITIES – EMPLOYEE BENE FITS
CONSOLIDATED
2018
$
2017
$
2,008,402
1,127,767
CONSOLIDATED
2018
$
140,590
1,120,735
1,261,325
2017
$
95,613
885,393
981,006
CONSOLIDATED
2018
$
2017
$
4,323,561
6,979,949
41,483,011
46,573,678
45,806,572
53,553,627
7,205,935
9,771,928
63,195,552
98,690,297
70,401,487
108,462,225
CONSOLIDATED
2018
$
42,408
42,408
2017
$
32,669
32,669
As a requirement of the terms of the group’s facility
previously 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 US$100,000.
The warrants have a term of 39 months and expire on
6 October 2018. The exercise price is $0.7579 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
Long service leave
60
60
6161
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 2 4. EQU ITY – ISSU ED C A P ITAL
NOTE 25. EQUITY – RESERVES
Ordinary shares – fully paid
823,592,773
831,211,424
358,656,945
359,968,884
CONSOLIDATED
2018
Shares
2017
Shares
2018
$
2017
$
DETAILS
Balance at 30 June 2016
Acquisition of shares for employee share scheme
Balance at 30 June 2017
Employee short term incentive
Share buybacks
Balance at 30 June 2018
ORDINARY SH ARES
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.
CAPITAL RISK MA NAGE MENT
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.
SHARES
ISSUE PRICE
$
831,211,424
–
831,211,424
–
(7,618,651)
823,592,773
360,968,368
999,484)
359,968,884
766,014
(2,077,953)
358,656,945
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 2017 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
Opening balance 1 July 2016
Acquisition of shares by the Trust (average price: $0.4199 per share)
Balance 30 June 2017
Shares issued to employees
Balance 30 June 2018
62
62
NUMBER OF
SHARES
$
–
2,376,653
2,376,653
(1,781,429)
595,224
–
999,484
999,484
(766,014)
233,470
Revaluation surplus reserve
Foreign currency reserve
Employee share option reserve
Consolidated
Balance at 1 July 2016
Foreign currency translation
Employee share option expense
Balance at 30 June 2017
Foreign currency translation
Shares allocated to employees
Employee share options
CONSOLIDATED
2018
$
1,855,327
17,875,486
2,809,651
22,540,464
REVALUATION
SURPLUS
RESERVE
SHARE-BASED
PAYMENT
RESERVE
FOREIGN
CURRENCY
RESERVE
$
$
$
2017
$
1,855,327
4,275,055
3,295,396
9,425,778
TOTAL
$
1,855,327
3,021,680
19,697,748
24,574,755
–
–
–
(15,422,693)
(15,422,693)
273,716
–
273,716
1,855,327
3,295,396
–
–
(766,014)
280,269
4,275,055
13,600,431
–
–
9,425,778
13,600,431
(766,014)
280,269
Balance at 30 June 2018
1,855,327
2,809,651
17,875,486
22,540,464
NATU RE AN D PURPO SE OF EQU IT Y RE SERVES
Revaluation surplus
Foreign currency
The revaluation surplus reserve is used to record
increments and decrements in the fair value of net assets
of disposed entities.
Share-based payment
The reserve is used to recognise:
•
•
the grant date fair value of options issued to key
management personnel but not exercised
the issue of options held by the Employee Share Option
Trust to key management personnel.
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.
6363
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 2 4. EQU ITY – ISSU ED C A P ITAL
NOTE 25. EQUITY – RESERVES
Ordinary shares – fully paid
823,592,773
831,211,424
358,656,945
359,968,884
CONSOLIDATED
2018
Shares
2017
Shares
2018
$
2017
$
DETAILS
Balance at 30 June 2016
Acquisition of shares for employee share scheme
Balance at 30 June 2017
Employee short term incentive
Share buybacks
Balance at 30 June 2018
ORDINARY SH ARES
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.
CAPITAL RISK MA NAGE MENT
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.
SHARES
ISSUE PRICE
$
831,211,424
–
831,211,424
–
(7,618,651)
823,592,773
360,968,368
999,484)
359,968,884
766,014
(2,077,953)
358,656,945
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 2017 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
Opening balance 1 July 2016
Acquisition of shares by the Trust (average price: $0.4199 per share)
Balance 30 June 2017
Shares issued to employees
Balance 30 June 2018
62
62
NUMBER OF
SHARES
$
–
2,376,653
2,376,653
(1,781,429)
595,224
–
999,484
999,484
(766,014)
233,470
Revaluation surplus reserve
Foreign currency reserve
Employee share option reserve
Consolidated
Balance at 1 July 2016
Foreign currency translation
Employee share option expense
Balance at 30 June 2017
Foreign currency translation
Shares allocated to employees
Employee share options
CONSOLIDATED
2018
$
1,855,327
17,875,486
2,809,651
22,540,464
REVALUATION
SURPLUS
RESERVE
SHARE-BASED
PAYMENT
RESERVE
FOREIGN
CURRENCY
RESERVE
$
$
$
2017
$
1,855,327
4,275,055
3,295,396
9,425,778
TOTAL
$
1,855,327
3,021,680
19,697,748
24,574,755
–
–
–
(15,422,693)
(15,422,693)
273,716
–
273,716
1,855,327
3,295,396
–
–
(766,014)
280,269
4,275,055
13,600,431
–
–
9,425,778
13,600,431
(766,014)
280,269
Balance at 30 June 2018
1,855,327
2,809,651
17,875,486
22,540,464
NATU RE AN D PURPO SE OF EQU IT Y RE SERVES
Revaluation surplus
Foreign currency
The revaluation surplus reserve is used to record
increments and decrements in the fair value of net assets
of disposed entities.
Share-based payment
The reserve is used to recognise:
•
•
the grant date fair value of options issued to key
management personnel but not exercised
the issue of options held by the Employee Share Option
Trust to key management personnel.
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.
6363
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 2 6. EQU ITY – RETA IN ED P ROFITS
The average exchange rates and reporting date exchange rates applied are shown below.
CONSOLIDATED
2018
$
2017
$
115,374,413
92,630,958
(124,510,815)
30,990,298
(4,113,618)
(8,246,843)
(13,250,020)
115,374,413
USD
THB
VND
CNY
MYR
SGD
HKD
AUSTRALIAN DOLLARS
AVERAGE EXCHANGE RATE
REPORTING DATE EXCHANGE RATE
2018
1.2897
0.0397
0.0001
0.1982
0.3163
0.9608
0.1648
2017
1.3254
0.0380
0.0001
0.1946
0.3093
0.9520
0.1707
2018
1.3530
0.0409
0.0001
0.2045
0.3352
0.9923
0.1724
2017
1.3001
0.0382
0.0001
0.1921
0.3028
0.9436
0.1666
working capital requirements and growth plans. Shareholders
should note that the payment of dividends is not guaranteed.
The carrying amount of the consolidated entity’s foreign currency denominated financial assets and financial liabilities at the
reporting date are shown below.
Retained profits at the beginning of the financial year
(Loss)/profit after income tax expense for the year
Dividends paid
(Accumulated losses)/retained profits at the end of the financial year
NOTE 2 7. EQU ITY – DIVID END S
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,
with the intention to provide regular half-yearly dividend
payments, subject to the consolidated entity’s then current
FRANKING CREDIT BA LA NCE
A dividend of $4,113,618 (0.5 cents per ordinary share) was
paid on 20 October 2017. The dividend was 100% conduit
foreign income and was unfranked.
The dividend recommended after 30 June 2018 is fully unfranked and 100% conduit foreign income.
CONSOLIDATED
2018
$
2017
$
Franking credits available for subsequent reporting periods after payment of tax liability
based on a tax rate of 30% (2017: 30%)
471,682
471,682
NOTE 2 8. FI NA NCIAL IN STRUME NTS
FINAN CIAL RI SK MANAGEMENT OBJEC T IV E S
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.
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.
M ARKE T RI SK
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.
FO RE IGN CURRE NCY RI SK
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.
Consolidated
USD
VND
CNY
MYR
THB
SGD
EUR
HKD
ASSETS
LIABILITIES
2018
13,044,387
5,299,495
12,133,109
800,324
27,070,484
132,179
–
257,378
58,737,356
2017
39,885,279
6,666,217
14,514,911
34,749
26,675,967
203,720
6,685
183,740
2018
2017
(61,506,058)
(101,805,116)
(9,690,246)
(6,175,459)
(72,731)
(11,036,948)
(13,013,771)
(82,477)
(26,610,202)
(25,316,206)
(16,382)
–
(67,324)
(13,219)
–
(55,193)
88,171,268
(104,138,402)
(151,322,930)
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
% change
Effect on profit after tax
Effect on profit after tax
AUD STRENGTHENED
USD
VND
CNY
MYR
THB
SGD
EUR
HKD
5
5
5
5
5
5
5
5
2018
2,423,084
219,538
(297,883)
(36,380)
(23,014)
(5,790)
–
(9,503)
2,270,052
2017
3,095,992
218,537
(75,057)
2,386
(67,988)
(9,525)
(334)
(6,427)
3,157,584
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.
64
64
6565
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 2 6. EQU ITY – RETA IN ED P ROFITS
The average exchange rates and reporting date exchange rates applied are shown below.
CONSOLIDATED
2018
$
2017
$
115,374,413
92,630,958
(124,510,815)
30,990,298
(4,113,618)
(8,246,843)
(13,250,020)
115,374,413
USD
THB
VND
CNY
MYR
SGD
HKD
AUSTRALIAN DOLLARS
AVERAGE EXCHANGE RATE
REPORTING DATE EXCHANGE RATE
2018
1.2897
0.0397
0.0001
0.1982
0.3163
0.9608
0.1648
2017
1.3254
0.0380
0.0001
0.1946
0.3093
0.9520
0.1707
2018
1.3530
0.0409
0.0001
0.2045
0.3352
0.9923
0.1724
2017
1.3001
0.0382
0.0001
0.1921
0.3028
0.9436
0.1666
working capital requirements and growth plans. Shareholders
should note that the payment of dividends is not guaranteed.
The carrying amount of the consolidated entity’s foreign currency denominated financial assets and financial liabilities at the
reporting date are shown below.
Retained profits at the beginning of the financial year
(Loss)/profit after income tax expense for the year
Dividends paid
(Accumulated losses)/retained profits at the end of the financial year
NOTE 2 7. EQU ITY – DIVID END S
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,
with the intention to provide regular half-yearly dividend
payments, subject to the consolidated entity’s then current
FRANKING CREDIT BA LA NCE
A dividend of $4,113,618 (0.5 cents per ordinary share) was
paid on 20 October 2017. The dividend was 100% conduit
foreign income and was unfranked.
The dividend recommended after 30 June 2018 is fully unfranked and 100% conduit foreign income.
CONSOLIDATED
2018
$
2017
$
Franking credits available for subsequent reporting periods after payment of tax liability
based on a tax rate of 30% (2017: 30%)
471,682
471,682
NOTE 2 8. FI NA NCIAL IN STRUME NTS
FINAN CIAL RI SK MANAGEMENT OBJEC T IV E S
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.
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.
M ARKE T RI SK
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.
FO RE IGN CURRE NCY RI SK
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.
Consolidated
USD
VND
CNY
MYR
THB
SGD
EUR
HKD
ASSETS
LIABILITIES
2018
13,044,387
5,299,495
12,133,109
800,324
27,070,484
132,179
–
257,378
58,737,356
2017
39,885,279
6,666,217
14,514,911
34,749
26,675,967
203,720
6,685
183,740
2018
2017
(61,506,058)
(101,805,116)
(9,690,246)
(6,175,459)
(72,731)
(11,036,948)
(13,013,771)
(82,477)
(26,610,202)
(25,316,206)
(16,382)
–
(67,324)
(13,219)
–
(55,193)
88,171,268
(104,138,402)
(151,322,930)
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
% change
Effect on profit after tax
Effect on profit after tax
AUD STRENGTHENED
USD
VND
CNY
MYR
THB
SGD
EUR
HKD
5
5
5
5
5
5
5
5
2018
2,423,084
219,538
(297,883)
(36,380)
(23,014)
(5,790)
–
(9,503)
2,270,052
2017
3,095,992
218,537
(75,057)
2,386
(67,988)
(9,525)
(334)
(6,427)
3,157,584
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.
64
64
6565
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 2 8. FI NA NCIAL IN STRUME NTS
CONTINUE D
INTER EST RATE RISK
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.
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 cash
and cash equivalents shown below.
CONSOLIDATED
Bank loans
Cash on hand and cash at bank
Fixed deposits
Net exposure to cash flow interest rate risk
WEIGHTED
AVERAGE
INTEREST RATE
BALANCE
WEIGHTED
AVERAGE
INTEREST RATE
BALANCE
2018
2017
%
8.19
0.18
5.05
$
(70,401,487)
45,331,648
1,743,941
(23,325,898)
%
8.09
0.41
4.80
$
(108,462,225)
64,338,919
1,683,830
(42,439,476)
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.
LI QU IDITY RI SK
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.
1 YEAR
OR LESS
BETWEEN
1 AND 2
YEARS
BETWEEN
2 AND 5
YEARS
OVER 5
YEARS
TOTAL
CONTRACTUAL
MATURITIES
1 YEAR
OR LESS
BETWEEN
1 AND 2
YEARS
BETWEEN
2 AND 5
YEARS
OVER 5
YEARS
TOTAL
CONTRACTUAL
MATURITIES
WEIGHTED
AVERAGE
INTEREST
RATE
%
–
–
$
$
4,472,103
13,013,770
–
–
8.09
54,908,598
53,553,627
72,394,471
53,553,627
Consolidated – 2017
Non-derivatives
Non-interest bearing
Trade payables
Floating chips
Interest bearing – variable
Bank loans
Total non-derivatives
$
–
–
–
–
$
–
–
–
–
$
4,472,103
13,013,770
108,462,225
125,948,098
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
FAI R VALUE OF F INAN CIAL I N STRUMEN TS
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
NOTE 29. KEY MANAGEMEN T
PERSONNEL DISCLOSU RES
D IRECTORS
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
OTH ER KEY M ANAG EMEN T PERSONNEL
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
(retired 31 March 2018)
Chong Kwong Yang
Chief Financial Officer
Att Asavanund
Chief Operating Officer
and Deputy CEO
(resigned 31 August 2017)
Robert Andrew Hines
Non-executive Director
COM PENSATION
Ham Techatut Sukjaroenkraisri Executive Director
(retired 23 November 2017)
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 shown below.
WEIGHTED
AVERAGE
INTEREST
RATE
%
–
–
$
$
4,842,651
6,624,856
–
–
8.19
24,594,915
45,806,572
36,062,422
45,806,572
Consolidated – 2018
Non-derivatives
Non-interest bearing
Trade payables
Floating chips
Interest bearing – variable
Bank loans
Total non-derivatives
66
66
$
–
–
–
–
$
–
–
–
–
$
4,842,651
6,624,856
70,401,487
81,868,994
Short-term employee benefits
Post-employment benefits
Share-based payments
CONSOLIDATED
2018
$
2017
$
2,744,060
3,148,000
326,958
259,516
103,293
196,804
3,330,534
3,448,097
6767
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018
NOTE 2 8. FI NA NCIAL IN STRUME NTS
CONTINUE D
INTER EST RATE RISK
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.
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 cash
and cash equivalents shown below.
CONSOLIDATED
Bank loans
Cash on hand and cash at bank
Fixed deposits
Net exposure to cash flow interest rate risk
WEIGHTED
AVERAGE
INTEREST RATE
BALANCE
WEIGHTED
AVERAGE
INTEREST RATE
BALANCE
2018
2017
%
8.19
0.18
5.05
$
(70,401,487)
45,331,648
1,743,941
(23,325,898)
%
8.09
0.41
4.80
$
(108,462,225)
64,338,919
1,683,830
(42,439,476)
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.
LI QU IDITY RI SK
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.
1 YEAR
OR LESS
BETWEEN
1 AND 2
YEARS
BETWEEN
2 AND 5
YEARS
OVER 5
YEARS
TOTAL
CONTRACTUAL
MATURITIES
1 YEAR
OR LESS
BETWEEN
1 AND 2
YEARS
BETWEEN
2 AND 5
YEARS
OVER 5
YEARS
TOTAL
CONTRACTUAL
MATURITIES
WEIGHTED
AVERAGE
INTEREST
RATE
%
–
–
$
$
4,472,103
13,013,770
–
–
8.09
54,908,598
53,553,627
72,394,471
53,553,627
Consolidated – 2017
Non-derivatives
Non-interest bearing
Trade payables
Floating chips
Interest bearing – variable
Bank loans
Total non-derivatives
$
–
–
–
–
$
–
–
–
–
$
4,472,103
13,013,770
108,462,225
125,948,098
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
FAI R VALUE OF F INAN CIAL I N STRUMEN TS
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
NOTE 29. KEY MANAGEMEN T
PERSONNEL DISCLOSU RES
D IRECTORS
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
OTH ER KEY M ANAG EMEN T PERSONNEL
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
(retired 31 March 2018)
Chong Kwong Yang
Chief Financial Officer
Att Asavanund
Chief Operating Officer
and Deputy CEO
(resigned 31 August 2017)
Robert Andrew Hines
Non-executive Director
COM PENSATION
Ham Techatut Sukjaroenkraisri Executive Director
(retired 23 November 2017)
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 shown below.
WEIGHTED
AVERAGE
INTEREST
RATE
%
–
–
$
$
4,842,651
6,624,856
–
–
8.19
24,594,915
45,806,572
36,062,422
45,806,572
Consolidated – 2018
Non-derivatives
Non-interest bearing
Trade payables
Floating chips
Interest bearing – variable
Bank loans
Total non-derivatives
66
66
$
–
–
–
–
$
–
–
–
–
$
4,842,651
6,624,856
70,401,487
81,868,994
Short-term employee benefits
Post-employment benefits
Share-based payments
CONSOLIDATED
2018
$
2017
$
2,744,060
3,148,000
326,958
259,516
103,293
196,804
3,330,534
3,448,097
6767
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018
NOTE 3 0. REMUNER ATION OF AUDITORS
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
Audit or review of the financial statements
Audit services – related firms
Audit or review of the financial statements
Preparation of the tax return
Audit services – unrelated firms
Audit or review of the financial statements
Other services – unrelated firms
Preparation of the tax return
NOTE 3 1. COMMITMENTS
Capital commitments
Committed at the reporting date but not recognised as liabilities, payable:
Property construction works
Property, plant and equipment
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
2018
$
97,500
97,500
206,044
984
207,028
2017
$
97,500
97,500
239,202
1,022
240,224
72,660
74,135
1,803
74,463
5,019
79,154
CONSOLIDATED
2018
$
2017
$
599,871
37,914
–
637,785
637,089
–
44,028
681,117
311,063
659,182
7,580,362
8,550,607
371,396
792,453
7,443,115
8,606,964
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
NOTE 32. RELATED PARTY
TRANSACTIONS
PAREN T E NTI TY
Donaco International Limited is the legal parent entity.
Donaco International Limited is listed on the Australian
Securities Exchange (ASX: DNA).
Interests in subsidiaries are set out in note 34.
KEY M ANAGE MEN T PERSONNEL
Disclosures relating to key management personnel are set
out in note 29 and the remuneration report included in the
directors’ report.
TRANSACTI ON S WI TH RELATED PARTIES
The following transactions occurred with related parties
during 2018.
Leasing fees paid to Lee Hoe Property Co., Ltd – a director-related entity
Rental received from director’s immediate family
Technical support fees paid by Lao Cai JVC to iSentric Limited – a director-related entity
CONSOLIDATED
2018
$
77,382
58,332
139,243
2017
$
156,012
111,734
187,214
Management fees received for Star Paradise Casino property from MMD Travel Co Ltd –
a director-related entity
477,992
2,338,782
Disposal of property, plant and equipment to previous owner of DNA Star Vegas Co, Ltd –
a director-related entity
141,351
586,237
The above transactions occurred at commercial rates.
In 2017, the following transactions occurred with parties who ceased to be related parties during 2018:
Labour hire fee paid to Star Vegas Resort & Club Co, Ltd – a director-related entity
Licence agreement for occupation of office space paid to Infinite Capital Co., Ltd –
a director-related entity
Management fees accrued to previous owner of DNA Star Vegas Co, Ltd –
a director-related entity
–
–
–
11,959,472
45,840
19,045,688
There were no other payables or receivables from related parties at the current or previous reporting date.
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
68
68
6969
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 3 0. REMUNER ATION OF AUDITORS
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
Audit or review of the financial statements
Audit services – related firms
Audit or review of the financial statements
Preparation of the tax return
Audit services – unrelated firms
Audit or review of the financial statements
Other services – unrelated firms
Preparation of the tax return
NOTE 3 1. COMMITMENTS
Capital commitments
Committed at the reporting date but not recognised as liabilities, payable:
Property construction works
Property, plant and equipment
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
2018
$
97,500
97,500
206,044
984
207,028
2017
$
97,500
97,500
239,202
1,022
240,224
72,660
74,135
1,803
74,463
5,019
79,154
CONSOLIDATED
2018
$
2017
$
599,871
37,914
–
637,785
637,089
–
44,028
681,117
311,063
659,182
7,580,362
8,550,607
371,396
792,453
7,443,115
8,606,964
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
NOTE 32. RELATED PARTY
TRANSACTIONS
PAREN T E NTI TY
Donaco International Limited is the legal parent entity.
Donaco International Limited is listed on the Australian
Securities Exchange (ASX: DNA).
Interests in subsidiaries are set out in note 34.
KEY M ANAGE MEN T PERSONNEL
Disclosures relating to key management personnel are set
out in note 29 and the remuneration report included in the
directors’ report.
TRANSACTI ON S WI TH RELATED PARTIES
The following transactions occurred with related parties
during 2018.
Leasing fees paid to Lee Hoe Property Co., Ltd – a director-related entity
Rental received from director’s immediate family
Technical support fees paid by Lao Cai JVC to iSentric Limited – a director-related entity
CONSOLIDATED
2018
$
77,382
58,332
139,243
2017
$
156,012
111,734
187,214
Management fees received for Star Paradise Casino property from MMD Travel Co Ltd –
a director-related entity
477,992
2,338,782
Disposal of property, plant and equipment to previous owner of DNA Star Vegas Co, Ltd –
a director-related entity
141,351
586,237
The above transactions occurred at commercial rates.
In 2017, the following transactions occurred with parties who ceased to be related parties during 2018:
Labour hire fee paid to Star Vegas Resort & Club Co, Ltd – a director-related entity
Licence agreement for occupation of office space paid to Infinite Capital Co., Ltd –
a director-related entity
Management fees accrued to previous owner of DNA Star Vegas Co, Ltd –
a director-related entity
–
–
–
11,959,472
45,840
19,045,688
There were no other payables or receivables from related parties at the current or previous reporting date.
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
68
68
6969
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 3 3. PA RENT ENTITY IN FO RMAT ION
NOTE 34. INTERESTS IN SUBSIDIARIES
Set out below is the supplementary information about the parent entity.
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance
with the accounting policy described in note 1.
Statement of profit or loss and other comprehensive income
Profit after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Employee share option reserve
Accumulated losses
Total equity
PARENT
2018
$
2017
$
(344,111)
(344,111)
2,015,705
2,015,705
22,588,546
19,672,065
372,987,687
370,065,828
43,137,126
33,990,140
43,179,534
33,982,653
406,620,031
407,931,972
2,809,651
3,295,396
(79,621,529)
(75,144,193)
329,808,153
336,083,175
GUAR ANTEES ENTERED INTO BY T HE PAR E NT
ENTITY IN RELATION TO THE DEBT S OF ITS
SUB SID IARIES
As at 30 June 2018, the parent entity acts as a guarantor for
the facility provided by Mega International Commercial Bank
Co. Ltd to a controlled entity, Donaco Hong Kong Limited.
CONTINGENT LIABILITIES
The parent entity had no contingent liabilities as at 30 June
2018 and 30 June 2017.
CAPITAL COMMITMENTS – PROP E RTY, P L A NT
AND EQUIPMENT
The parent entity had no capital commitments for property,
plant and equipment at as 30 June 2018 and 30 June 2017.
SIGN IFIC AN T ACCOU NTIN G P OL IC IE S
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.
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 *
Donaco Investment (S) Pte Ltd *
Subsidiary of Donaco Singapore Pty Ltd
*
** Subsidiary of Donaco Hong Kong Limited
The principal activities of each subsidiary are:
Donaco Australia Pty Ltd
OWNERSHIP INTEREST
Principal place of business/
Country of incorporation
2018
2017
Australia
Singapore
British Virgin Islands
Malaysia
Vietnam
Hong Kong
Hong Kong
Hong Kong
Cambodia
Thailand
Singapore
%
100
100
100
100
95
100
100
100
100
49
100
%
100
100
100
100
95
100
100
100
100
49
–
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
Dormant (previously cost centre for corporate operations).
DNA Star Vegas Co. Limited
Operates Cambodian casino operations.
Donaco Entertainment & Marketing (Thailand) Ltd Dormant (previously provided 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.
Donaco Investment (S) Pte Ltd
Investment company.
70
70
7171
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018
NOTE 3 3. PA RENT ENTITY IN FO RMAT ION
NOTE 34. INTERESTS IN SUBSIDIARIES
Set out below is the supplementary information about the parent entity.
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance
with the accounting policy described in note 1.
Statement of profit or loss and other comprehensive income
Profit after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Employee share option reserve
Accumulated losses
Total equity
PARENT
2018
$
2017
$
(344,111)
(344,111)
2,015,705
2,015,705
22,588,546
19,672,065
372,987,687
370,065,828
43,137,126
33,990,140
43,179,534
33,982,653
406,620,031
407,931,972
2,809,651
3,295,396
(79,621,529)
(75,144,193)
329,808,153
336,083,175
GUAR ANTEES ENTERED INTO BY T HE PAR E NT
ENTITY IN RELATION TO THE DEBT S OF ITS
SUB SID IARIES
As at 30 June 2018, the parent entity acts as a guarantor for
the facility provided by Mega International Commercial Bank
Co. Ltd to a controlled entity, Donaco Hong Kong Limited.
CONTINGENT LIABILITIES
The parent entity had no contingent liabilities as at 30 June
2018 and 30 June 2017.
CAPITAL COMMITMENTS – PROP E RTY, P L A NT
AND EQUIPMENT
The parent entity had no capital commitments for property,
plant and equipment at as 30 June 2018 and 30 June 2017.
SIGN IFIC AN T ACCOU NTIN G P OL IC IE S
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.
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 *
Donaco Investment (S) Pte Ltd *
Subsidiary of Donaco Singapore Pty Ltd
*
** Subsidiary of Donaco Hong Kong Limited
The principal activities of each subsidiary are:
Donaco Australia Pty Ltd
OWNERSHIP INTEREST
Principal place of business/
Country of incorporation
2018
2017
Australia
Singapore
British Virgin Islands
Malaysia
Vietnam
Hong Kong
Hong Kong
Hong Kong
Cambodia
Thailand
Singapore
%
100
100
100
100
95
100
100
100
100
49
100
%
100
100
100
100
95
100
100
100
100
49
–
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
Dormant (previously cost centre for corporate operations).
DNA Star Vegas Co. Limited
Operates Cambodian casino operations.
Donaco Entertainment & Marketing (Thailand) Ltd Dormant (previously provided 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.
Donaco Investment (S) Pte Ltd
Investment company.
70
70
7171
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018
NOTE 3 4. I NTERESTS IN SU BS IDIARIES CONTINUED
NOTE 36. NET CASH FLOWS F ROM OP ER ATING ACTIVITI ES
S UMMARISED FINANCIAL INFORM AT ION
Summarised financial information of the subsidiary with non-controlling interests that are material to the consolidated entity are
shown below.
CONSOLIDATED
2018
$
2017
$
LAO CAI I NTERNATIONAL HOT EL JOINT V E NT URE COM PA NY
a) Reconciliation of (loss)/profit after income tax to net cash from operating activities
(Loss)/profit after income tax expense for the year
(124,248,871)
31,189,049
Adjustments for:
Depreciation and amortisation
Impairment of assets
Share-based payments
Non-cash finance costs
Gain on revaluation of derivative financial liability
Change in operating assets and liabilities:
Decrease in trade and other receivables
(Increase)/decrease in inventories
(Increase)/decrease in other operating assets
Decrease in trade and other payables
Increase/(decrease) in provision for income tax
Increase in provisions for employee benefits
Net cash from operating activities
b) Change in liabilities arising from financing activities
Borrowings at beginning of the year (note 22)
Repayments
Foreign exchange adjustments
Other non-cash movements
Borrowings at end of the year (note 22)
9,981,320
10,129,299
143,860,973
280,269
198,785
273,716
3,839,305
8,037,166
(681,507)
(1,113,012)
9,505,655
(503,870)
(1,390,974)
5,581,440
525,402
38,057
(7,180,789)
(7,587,489)
880,635
290,058
(432,382)
515,367
34,632,204
47,355,398
2018
$
108,462,225
(44,326,139)
2,426,096
3,839,305
70,401,487
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
Statement of cash flows
Net cash from operating activities
Net cash used in investing activities
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Other financial information
Profit attributable to non-controlling interests
Accumulated non-controlling interests at the end of reporting period
2018
$
2017
$
18,440,168
14,894,013
68,654,062
54,766,529
87,094,230
69,660,542
20,065,651
18,413,616
11,816,389
13,326,362
31,882,040
31,739,978
55,212,190
37,920,564
25,963,606
26,186,141
(17,078,032)
(19,093,638)
8,885,574
(1,035,477)
7,850,097
7,092,503
(880,886)
6,211,617
6,077,364
13,982,466
(1,529,638)
(1,556,309)
(7,652,100)
(9,897,377)
(3,104,374)
2,528,780
261,944
198,751
1,799,990
1,335,096
NOTE 3 5. EVE NTS A FTER TH E
R EP ORT ING PERIOD
S HARE OPTIONS
On 29 June 2018 the company announced the expiration
of 2,930,625 options on 1 July 2018 in accordance with
their terms. The options were part of the FY14, FY15 and
FY16 option series. Currently, there are 2,514,186 remaining
options on issue.
TE RMINATIO N O F VI VO AR RA NG EM ENT
On 23 August 2018, the contract between DNA Star
Vegas Co., Ltd and Vivo Tower Holdings Limited (‘Vivo’),
announced to the market on 16 June 2017, was terminated.
DNA Star Vegas will now receive direct rental payments from
the sub-licensees brought into the Star Vegas property by
Vivo, which will substantially replace the fixed fee previously
paid by Vivo. Under a new agreement, Vivo’s role is to market
and manage the online gaming platform owned by DNA Star
Vegas, in return for a revenue share.
The directors are not aware of any other events subsequent to
the reporting period that may have a material impact on the
financial statements.
72
72
7373
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 3 4. I NTERESTS IN SU BS IDIARIES CONTINUED
NOTE 36. NET CASH FLOWS F ROM OP ER ATING ACTIVITI ES
S UMMARISED FINANCIAL INFORM AT ION
Summarised financial information of the subsidiary with non-controlling interests that are material to the consolidated entity are
shown below.
CONSOLIDATED
2018
$
2017
$
LAO CAI I NTERNATIONAL HOT EL JOINT V E NT URE COM PA NY
a) Reconciliation of (loss)/profit after income tax to net cash from operating activities
(Loss)/profit after income tax expense for the year
(124,248,871)
31,189,049
Adjustments for:
Depreciation and amortisation
Impairment of assets
Share-based payments
Non-cash finance costs
Gain on revaluation of derivative financial liability
Change in operating assets and liabilities:
Decrease in trade and other receivables
(Increase)/decrease in inventories
(Increase)/decrease in other operating assets
Decrease in trade and other payables
Increase/(decrease) in provision for income tax
Increase in provisions for employee benefits
Net cash from operating activities
b) Change in liabilities arising from financing activities
Borrowings at beginning of the year (note 22)
Repayments
Foreign exchange adjustments
Other non-cash movements
Borrowings at end of the year (note 22)
9,981,320
10,129,299
143,860,973
280,269
198,785
273,716
3,839,305
8,037,166
(681,507)
(1,113,012)
9,505,655
(503,870)
(1,390,974)
5,581,440
525,402
38,057
(7,180,789)
(7,587,489)
880,635
290,058
(432,382)
515,367
34,632,204
47,355,398
2018
$
108,462,225
(44,326,139)
2,426,096
3,839,305
70,401,487
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
Statement of cash flows
Net cash from operating activities
Net cash used in investing activities
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Other financial information
Profit attributable to non-controlling interests
Accumulated non-controlling interests at the end of reporting period
2018
$
2017
$
18,440,168
14,894,013
68,654,062
54,766,529
87,094,230
69,660,542
20,065,651
18,413,616
11,816,389
13,326,362
31,882,040
31,739,978
55,212,190
37,920,564
25,963,606
26,186,141
(17,078,032)
(19,093,638)
8,885,574
(1,035,477)
7,850,097
7,092,503
(880,886)
6,211,617
6,077,364
13,982,466
(1,529,638)
(1,556,309)
(7,652,100)
(9,897,377)
(3,104,374)
2,528,780
261,944
198,751
1,799,990
1,335,096
NOTE 3 5. EVE NTS A FTER TH E
R EP ORT ING PERIOD
S HARE OPTIONS
On 29 June 2018 the company announced the expiration
of 2,930,625 options on 1 July 2018 in accordance with
their terms. The options were part of the FY14, FY15 and
FY16 option series. Currently, there are 2,514,186 remaining
options on issue.
TE RMINATIO N O F VI VO AR RA NG EM ENT
On 23 August 2018, the contract between DNA Star
Vegas Co., Ltd and Vivo Tower Holdings Limited (‘Vivo’),
announced to the market on 16 June 2017, was terminated.
DNA Star Vegas will now receive direct rental payments from
the sub-licensees brought into the Star Vegas property by
Vivo, which will substantially replace the fixed fee previously
paid by Vivo. Under a new agreement, Vivo’s role is to market
and manage the online gaming platform owned by DNA Star
Vegas, in return for a revenue share.
The directors are not aware of any other events subsequent to
the reporting period that may have a material impact on the
financial statements.
72
72
7373
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 3 7. EARNIN GS PER SHA R E
Set out below are summaries of options outstanding under the plan during the year ended 30 June 2018:
Earnings per share for (loss)/profit from continuing operations
(Loss)/profit after income tax
Non-controlling interest
CONSOLIDATED
2018
$
2017
$
(124,248,871)
31,189,049
(261,944)
(198,751)
(Loss)/profit after income tax attributable to the owners of Donaco International Limited
(124,510,815)
30,990,298
Weighted average number of ordinary shares used in calculating basic earnings per share
828,178,915
831,211,424
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
–
–
Weighted average number of ordinary shares used in calculating diluted earnings per share
828,178,915
831,211,424
CONSOLIDATED
2018
2017
Numbers
Numbers
GRANT
DATE
EXPIRY
DATE
EXERCISE
PRICE
BALANCE AT
START OF
THE YEAR
GRANTED
EXERCISED
01/07/2014
01/07/2017
01/07/2014
01/07/2018
01/07/2015
01/07/2017
01/07/2015
01/07/2018
01/07/2015
01/07/2019
25/08/2015
01/07/2018
25/08/2015
01/07/2019
25/08/2015
01/07/2020
$0.59
$0.59
$0.89
$0.89
$0.89
$0.77
$0.77
$0.77
1,194,836
1,149,717
457,047
395,208
349,377
1,385,700
1,156,784
1,008,025
7,096,694
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
EXPIRED/
FORFEITED/
OTHER
BALANCE AT
THE END OF
THE YEAR
(1,194,836)
–
–
1,149,717
(457,047)
–
–
–
–
–
–
395,208
349,377
1,385,700
1,156,784
1,008,025
(1,651,883)
5,444,811
Set out below are the options exercisable at the end of the financial year:
GRANT DATE
EXPIRY DATE
EXERCISE PRICE
NUMBER
NUMBER
Basic earnings per share
Diluted earnings per share
CONSOLIDATED
2018
Cents
(15.03)
(15.03)
2017
Cents
3.73
3.73
01/07/2014
01/07/2014
01/07/2015
01/07/2015
25/08/2015
01/07/2015
01/07/2017
01/07/2018
01/07/2017
01/07/2018
01/07/2018
01/07/2019
$
0.59
0.59
0.89
0.89
0.77
0.89
2018
2017
–
1,149,717
–
395,208
1,385,700
349,377
3,280,002
1,194,836
1,149,717
457,047
395,208
1,385,700
–
4,582,508
The weighted average share price during the financial year was $0.34 (2017: $0.43).
The weighted average remaining contractual life of options outstanding at the end of the financial year was 0.65 years (2017:
1.27 years).
The weighted average exercise price for all outstanding options is $0.75 (2017: $0.73).
An additional 5,444,811 options over ordinary shares and 12,339,408 shares subject to warrants are anti-dilutive and have been
excluded from the above calculations as the exercise price of these options and warrants exceeds the average market share price
during the year.
NOTE 3 8. S HARE-BA SE D PAYM EN TS
EMPLOYEE SHARES
Share allocation FY18
Under the employee share scheme, 1,781,429 shares
were issued to employees on 3 October 2017, held by an
employee share trust. These shares were issued at 41.99 cents
per share and will vest over the three-year vesting period
commencing on 1 July 2017.
EMPLOYEE OPT IONS
Employee option allocation FY14
At the Annual General Meeting on 21 November 2013,
shareholders approved the establishment of a 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.
74
74
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DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018
NOTE 3 7. EARNIN GS PER SHA R E
Set out below are summaries of options outstanding under the plan during the year ended 30 June 2018:
Earnings per share for (loss)/profit from continuing operations
(Loss)/profit after income tax
Non-controlling interest
CONSOLIDATED
2018
$
2017
$
(124,248,871)
31,189,049
(261,944)
(198,751)
(Loss)/profit after income tax attributable to the owners of Donaco International Limited
(124,510,815)
30,990,298
Weighted average number of ordinary shares used in calculating basic earnings per share
828,178,915
831,211,424
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
–
–
Weighted average number of ordinary shares used in calculating diluted earnings per share
828,178,915
831,211,424
CONSOLIDATED
2018
2017
Numbers
Numbers
GRANT
DATE
EXPIRY
DATE
EXERCISE
PRICE
BALANCE AT
START OF
THE YEAR
GRANTED
EXERCISED
01/07/2014
01/07/2017
01/07/2014
01/07/2018
01/07/2015
01/07/2017
01/07/2015
01/07/2018
01/07/2015
01/07/2019
25/08/2015
01/07/2018
25/08/2015
01/07/2019
25/08/2015
01/07/2020
$0.59
$0.59
$0.89
$0.89
$0.89
$0.77
$0.77
$0.77
1,194,836
1,149,717
457,047
395,208
349,377
1,385,700
1,156,784
1,008,025
7,096,694
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
EXPIRED/
FORFEITED/
OTHER
BALANCE AT
THE END OF
THE YEAR
(1,194,836)
–
–
1,149,717
(457,047)
–
–
–
–
–
–
395,208
349,377
1,385,700
1,156,784
1,008,025
(1,651,883)
5,444,811
Set out below are the options exercisable at the end of the financial year:
GRANT DATE
EXPIRY DATE
EXERCISE PRICE
NUMBER
NUMBER
Basic earnings per share
Diluted earnings per share
CONSOLIDATED
2018
Cents
(15.03)
(15.03)
2017
Cents
3.73
3.73
01/07/2014
01/07/2014
01/07/2015
01/07/2015
25/08/2015
01/07/2015
01/07/2017
01/07/2018
01/07/2017
01/07/2018
01/07/2018
01/07/2019
$
0.59
0.59
0.89
0.89
0.77
0.89
2018
2017
–
1,149,717
–
395,208
1,385,700
349,377
3,280,002
1,194,836
1,149,717
457,047
395,208
1,385,700
–
4,582,508
The weighted average share price during the financial year was $0.34 (2017: $0.43).
The weighted average remaining contractual life of options outstanding at the end of the financial year was 0.65 years (2017:
1.27 years).
The weighted average exercise price for all outstanding options is $0.75 (2017: $0.73).
An additional 5,444,811 options over ordinary shares and 12,339,408 shares subject to warrants are anti-dilutive and have been
excluded from the above calculations as the exercise price of these options and warrants exceeds the average market share price
during the year.
NOTE 3 8. S HARE-BA SE D PAYM EN TS
EMPLOYEE SHARES
Share allocation FY18
Under the employee share scheme, 1,781,429 shares
were issued to employees on 3 October 2017, held by an
employee share trust. These shares were issued at 41.99 cents
per share and will vest over the three-year vesting period
commencing on 1 July 2017.
EMPLOYEE OPT IONS
Employee option allocation FY14
At the Annual General Meeting on 21 November 2013,
shareholders approved the establishment of a 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.
74
74
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DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018
NOTE 39. CONTINGENT ASSETS
AND LIABILITIES
CO URT PRO CE EDI NGS
During the year to 30 June 2018, the company commenced
proceedings against the vendor for breach of non-
competition clauses under the agreements of the sale and
purchase of Star Vegas. The company obtained an injunction
on 25 December 2017, ordering the closure of the Star
Paradise and Star Paramax casinos which were illegally
operated by the vendor. A further appeal was submitted to a
higher court by the vendor, contesting against the injunction.
As at the date of this report, the appeal has not been
resolved. The vendor had also attempted to seek security
rights over certain assets of Star Vegas in relation to his claim
for the unpaid FY2017 management fee, however this was
rejected by the court on 6 July 2018.
The vendors are also joint owners of a Cambodian company,
Lee Hoe Property Co. Ltd, which owns and leases the land
occupied by the Star Vegas business. During the reporting
period, threats were made by the vendor to terminate the
lease, however an injunction against this was granted
in favour of the company. The vendor has commenced
arbitration proceedings in Cambodia which is likely to take
three to six months to resolve. On 20 August 2018, the
lessor obtained an order allowing him to develop the land
outside the Star Vegas boundary, which was always agreed
under the lease, provided that no competing casino or
gaming business is built. The vendor has also commenced
defamation proceedings in Thailand against Donaco and two
of its directors, seeking damages of THB1 million (equivalent
to $40,900). No amounts have been recognised as at
30 June 2018 in relation to these proceedings as they are still
in the early stages and no damages have been determined.
As at 30 June 2018, Donaco was also in the process of
enforcing its legal rights via arbitration proceedings in
Singapore. Having considered expert legal and financial
advice, the company has increased the size of its damages
claim from US$120 million (equivalent to $162 million) to
US$190 million (equivalent to $257 million). The hearing
date is currently set for July 2019. No amount receivable
has been recognised as at 30 June 2018 given the delayed
hearing date and the uncertainty over the outcome of the
proceedings.
DI RECTOR’S DECLAR ATION
for the year ended 30 June 2018
In the directors’ opinion:
•
•
•
•
the attached financial statements and notes comply with the Corporations Act 2001, the
Accounting Standards, the Corporations Regulations 2001 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 2018 and of its performance for the financial year
ended on that date
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 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the
Corporations Act 2001.
On behalf of the directors
Mr Stuart McGregor
Chairman
28 September 2018
Melbourne
7777
“As at 30 June 2018, Donaco
was also in the process of
enforcing its legal rights via
arbitration proceedings in
Singapore. Having considered
expert legal and financial advice,
the company has increased the
size of its damages claim from
US$120 million (equivalent
to $162 million) to
US$190 million (equivalent
to $257 million).”
76
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DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018
NOTE 39. CONTINGENT ASSETS
AND LIABILITIES
CO URT PRO CE EDI NGS
During the year to 30 June 2018, the company commenced
proceedings against the vendor for breach of non-
competition clauses under the agreements of the sale and
purchase of Star Vegas. The company obtained an injunction
on 25 December 2017, ordering the closure of the Star
Paradise and Star Paramax casinos which were illegally
operated by the vendor. A further appeal was submitted to a
higher court by the vendor, contesting against the injunction.
As at the date of this report, the appeal has not been
resolved. The vendor had also attempted to seek security
rights over certain assets of Star Vegas in relation to his claim
for the unpaid FY2017 management fee, however this was
rejected by the court on 6 July 2018.
The vendors are also joint owners of a Cambodian company,
Lee Hoe Property Co. Ltd, which owns and leases the land
occupied by the Star Vegas business. During the reporting
period, threats were made by the vendor to terminate the
lease, however an injunction against this was granted
in favour of the company. The vendor has commenced
arbitration proceedings in Cambodia which is likely to take
three to six months to resolve. On 20 August 2018, the
lessor obtained an order allowing him to develop the land
outside the Star Vegas boundary, which was always agreed
under the lease, provided that no competing casino or
gaming business is built. The vendor has also commenced
defamation proceedings in Thailand against Donaco and two
of its directors, seeking damages of THB1 million (equivalent
to $40,900). No amounts have been recognised as at
30 June 2018 in relation to these proceedings as they are still
in the early stages and no damages have been determined.
As at 30 June 2018, Donaco was also in the process of
enforcing its legal rights via arbitration proceedings in
Singapore. Having considered expert legal and financial
advice, the company has increased the size of its damages
claim from US$120 million (equivalent to $162 million) to
US$190 million (equivalent to $257 million). The hearing
date is currently set for July 2019. No amount receivable
has been recognised as at 30 June 2018 given the delayed
hearing date and the uncertainty over the outcome of the
proceedings.
DI RECTOR’S DECLAR ATION
for the year ended 30 June 2018
In the directors’ opinion:
•
•
•
•
the attached financial statements and notes comply with the Corporations Act 2001, the
Accounting Standards, the Corporations Regulations 2001 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 2018 and of its performance for the financial year
ended on that date
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 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the
Corporations Act 2001.
On behalf of the directors
Mr Stuart McGregor
Chairman
28 September 2018
Melbourne
7777
“As at 30 June 2018, Donaco
was also in the process of
enforcing its legal rights via
arbitration proceedings in
Singapore. Having considered
expert legal and financial advice,
the company has increased the
size of its damages claim from
US$120 million (equivalent
to $162 million) to
US$190 million (equivalent
to $257 million).”
76
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DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018
INDEPENDEN T AU DI TOR ’S REP ORT
TO THE MEMBER S OF D ONACO INT ERNAT IONA L L IMIT ED
IN DEPEND EN T AU DITO R’S REP ORT
TO THE MEMBER S OF DONACO I N TER NATI ONAL LIMITED
R EP ORT ON THE AU D IT OF TH E FINA NCIAL REPORT
Decentralised operations
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 2018, 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 2018 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.
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. Liability
limited other than for the acts or omissions of financial services licensees.
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 for 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.
KEY AUDIT MATTER
HOW WE ADDRESSED THE 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, to review financial reporting by the components,
and to undertake the consolidated entity’s consolidation.
This matter has been identified as a key audit matter given
the following:
• number and significance of the subsidiaries to the
consolidated entity
Our audit procedures included, amongst others,
the following:
• visited and held discussion with the component auditor
of DNA Star Vegas Co. Limited
• held discussions with the component auditors of Donaco
Hong Kong Limited and Lao Cai International Hotel Joint
Venture Company
• tailored our group reporting instructions and designed
audit procedures based on information obtained during
audit planning and our assessment of the consolidated
entity’s overall audit risks
• varied nature of the operations and accounting systems
• maintained communication with the component auditors
and processes
throughout the audit process
• manual nature of the consolidation process
• evaluated the work performed by the component auditors
• multiple foreign currencies involved.
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.
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. Liability limited other than for the acts
or omissions of financial services licensees.
78
78
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DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT INDEPENDEN T AU DI TOR ’S REP ORT
TO THE MEMBER S OF D ONACO INT ERNAT IONA L L IMIT ED
IN DEPEND EN T AU DITO R’S REP ORT
TO THE MEMBER S OF DONACO I N TER NATI ONAL LIMITED
R EP ORT ON THE AU D IT OF TH E FINA NCIAL REPORT
Decentralised operations
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 2018, 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 2018 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.
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. Liability
limited other than for the acts or omissions of financial services licensees.
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 for 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.
KEY AUDIT MATTER
HOW WE ADDRESSED THE 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, to review financial reporting by the components,
and to undertake the consolidated entity’s consolidation.
This matter has been identified as a key audit matter given
the following:
• number and significance of the subsidiaries to the
consolidated entity
Our audit procedures included, amongst others,
the following:
• visited and held discussion with the component auditor
of DNA Star Vegas Co. Limited
• held discussions with the component auditors of Donaco
Hong Kong Limited and Lao Cai International Hotel Joint
Venture Company
• tailored our group reporting instructions and designed
audit procedures based on information obtained during
audit planning and our assessment of the consolidated
entity’s overall audit risks
• varied nature of the operations and accounting systems
• maintained communication with the component auditors
and processes
throughout the audit process
• manual nature of the consolidation process
• evaluated the work performed by the component auditors
• multiple foreign currencies involved.
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.
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. Liability limited other than for the acts
or omissions of financial services licensees.
78
78
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DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT INDEPENDEN T AU DI TOR ’S REP ORT
TO THE MEMBER S OF D ONACO INT ERNAT IONA L L IMIT ED
IN DEPEND EN T AU DITO R’S REP ORT
TO THE MEMBER S OF DONACO I N TER NATI ONAL LIMITED
Impairment assessment of intangible assets (Note 14)
Contingent assets and liabilities (Note 39)
KEY AUDIT MATTER
HOW WE ADDRESSED THE KEY AUDIT MATTER
KEY AUDIT MATTER
HOW WE ADDRESSED THE KEY AUDIT MATTER
The consolidated entity recorded a casino licence asset of
$251.61 million as at 30 June 2018. The licence is classified
as an intangible asset with indefinite useful life and is subject
to annual impairment assessment.
Impairment of $143.86 million was recognised in the
statement of profit or loss and other comprehensive income
for the year based on the annual impairment assessment
made as at 31 December 2017.
At 30 June 2018, management performed an impairment
indicators assessment and concluded that no further
impairment testing was required.
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.
Our audit procedures included, amongst others,
the following:
Annual impairment assessment made as at 31 December
2017
• 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 period’s actual results.
• 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 judgements and sources
of estimation uncertainty disclosures in the consolidated
financial report.
Management’s conclusion that there was no further
impairment indications as at 30 June 2018
• Held discussions with management and assessed the
reasonableness of the management’s impairment indicators
assessment.
• Assessed the reasonableness of the market inputs used
by management in calculating the discount rate as at
30 June 2018.
• Reviewed reasonableness of the management’s forecast for
the year ending 30 June 2019.
The group is a party to several ongoing legal actions both
initiated by and directed against its subsidiaries. Outcomes
of these proceedings were uncertain at 30 June 2018.
We determined this to be a key audit matter given the
materiality of the amounts involved together with the level of
judgement required in assessing the developments to ensure
they are appropriately reflected in the financial report.
Our audit procedures, amongst others, included
the following:
• obtained a list of litigation matters and held discussions
with management on the status and outcome of each
matter up to the date of this audit report
• reviewed all solicitor’s representation letters, including
those received by the component auditors of DNA Star
Vegas Co. Limited and Donaco Hong Kong Limited
• held discussions with the component auditors of DNA Star
Vegas Co. Limited and Donaco Hong Kong Limited to gain
understanding of the impact on the consolidated financial
report. Reviewed group reporting package received
• ensured completeness and accuracy of the disclosures
included in the consolidated financial report.
Bank loan covenant compliance (Notes 18 and 22)
KEY AUDIT MATTER
HOW WE ADDRESSED THE KEY AUDIT MATTER
The group’s liabilities included a bank loan from Mega
International Commercial Bank Co Ltd of $63,195,552 at
30 June 2018, with $41,483,011 classified a non-current.
The loan agreement included certain covenants that, if
breached by the group, permitted the lender to demand
repayment before the loan’s normal maturity date.
We determined this to be a key audit matter given the
magnitude of the potential impact on the consolidated
statement of financial position and the going concern
asessment if the covenants were breached and the
borrowings were to be reclassified as a current liability.
Our procedures included, amongst others:
• reviewed bank loan agreements to identify covenants
requirements
• reviewed a letter from Mega International Commercial
Bank Co Ltd that approved an amended covenant ratio
to be effective for 30 June 2018 compliance reporting
• reviewed the management’s covenant calculation and
assessed compliance to the amended covenant ratio
• assessed appropriateness of the bank loan classification
in the consolidated statement of financial position as at
30 June 2018 and adequacy of the disclosures in Notes 18
and 22.
Other information
The directors are responsible for the other information. The other information comprises the information included in the
consolidated entity’s annual report for the year ended 30 June 2018, 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.
80
80
8181
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT INDEPENDEN T AU DI TOR ’S REP ORT
TO THE MEMBER S OF D ONACO INT ERNAT IONA L L IMIT ED
IN DEPEND EN T AU DITO R’S REP ORT
TO THE MEMBER S OF DONACO I N TER NATI ONAL LIMITED
Impairment assessment of intangible assets (Note 14)
Contingent assets and liabilities (Note 39)
KEY AUDIT MATTER
HOW WE ADDRESSED THE KEY AUDIT MATTER
KEY AUDIT MATTER
HOW WE ADDRESSED THE KEY AUDIT MATTER
The consolidated entity recorded a casino licence asset of
$251.61 million as at 30 June 2018. The licence is classified
as an intangible asset with indefinite useful life and is subject
to annual impairment assessment.
Impairment of $143.86 million was recognised in the
statement of profit or loss and other comprehensive income
for the year based on the annual impairment assessment
made as at 31 December 2017.
At 30 June 2018, management performed an impairment
indicators assessment and concluded that no further
impairment testing was required.
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.
Our audit procedures included, amongst others,
the following:
Annual impairment assessment made as at 31 December
2017
• 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 period’s actual results.
• 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 judgements and sources
of estimation uncertainty disclosures in the consolidated
financial report.
Management’s conclusion that there was no further
impairment indications as at 30 June 2018
• Held discussions with management and assessed the
reasonableness of the management’s impairment indicators
assessment.
• Assessed the reasonableness of the market inputs used
by management in calculating the discount rate as at
30 June 2018.
• Reviewed reasonableness of the management’s forecast for
the year ending 30 June 2019.
The group is a party to several ongoing legal actions both
initiated by and directed against its subsidiaries. Outcomes
of these proceedings were uncertain at 30 June 2018.
We determined this to be a key audit matter given the
materiality of the amounts involved together with the level of
judgement required in assessing the developments to ensure
they are appropriately reflected in the financial report.
Our audit procedures, amongst others, included
the following:
• obtained a list of litigation matters and held discussions
with management on the status and outcome of each
matter up to the date of this audit report
• reviewed all solicitor’s representation letters, including
those received by the component auditors of DNA Star
Vegas Co. Limited and Donaco Hong Kong Limited
• held discussions with the component auditors of DNA Star
Vegas Co. Limited and Donaco Hong Kong Limited to gain
understanding of the impact on the consolidated financial
report. Reviewed group reporting package received
• ensured completeness and accuracy of the disclosures
included in the consolidated financial report.
Bank loan covenant compliance (Notes 18 and 22)
KEY AUDIT MATTER
HOW WE ADDRESSED THE KEY AUDIT MATTER
The group’s liabilities included a bank loan from Mega
International Commercial Bank Co Ltd of $63,195,552 at
30 June 2018, with $41,483,011 classified a non-current.
The loan agreement included certain covenants that, if
breached by the group, permitted the lender to demand
repayment before the loan’s normal maturity date.
We determined this to be a key audit matter given the
magnitude of the potential impact on the consolidated
statement of financial position and the going concern
asessment if the covenants were breached and the
borrowings were to be reclassified as a current liability.
Our procedures included, amongst others:
• reviewed bank loan agreements to identify covenants
requirements
• reviewed a letter from Mega International Commercial
Bank Co Ltd that approved an amended covenant ratio
to be effective for 30 June 2018 compliance reporting
• reviewed the management’s covenant calculation and
assessed compliance to the amended covenant ratio
• assessed appropriateness of the bank loan classification
in the consolidated statement of financial position as at
30 June 2018 and adequacy of the disclosures in Notes 18
and 22.
Other information
The directors are responsible for the other information. The other information comprises the information included in the
consolidated entity’s annual report for the year ended 30 June 2018, 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.
80
80
8181
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT IN DEPEN DENT AU DI TOR’S RE P ORT
TO THE MEMBER S OF D ONACO INT ERNAT IONA L L IMIT ED
IN DEPEND ENT AU DI TO R’S REP ORT
TO THE MEMBER S OF DONACO I N TER NATI ONAL LIMITED
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 consolidated entity 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 consolidated entity or to cease operations, or have no realistic alternative but
to do so.
From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the
financial report of the current period and are therefore the key audit matters. We describe these matters in the auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine
that a matter should not be communicated in the auditor’s report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
REPORT ON THE REMUNERATION REPORT
Opinion on the remuneration report
We have audited the remuneration report included in pages 11 to 19 of the directors’ report for the year 30 June 2018.
In our opinion, the remuneration report of Donaco International Limited, for the year ended 30 June 2018, complies with
section 300A of the Corporations Act 2001.
Auditor’s responsibilities for the audit of the financial report
Responsibilities
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain
professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the consolidated entity’s internal
control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on
the consolidated entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the consolidated entity to cease to continue as a going concern.
•
Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the
financial report represents the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within
the consolidated entity to express an opinion on the consolidated financial report. The auditor is responsible for the
direction, supervision and performance of the group audit. The auditor remains solely responsible for the audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during the audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear
on our independence, and where applicable, related safeguards.
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
28 September 2018
Sydney
82
82
8383
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT
IN DEPEN DENT AU DI TOR’S RE P ORT
TO THE MEMBER S OF D ONACO INT ERNAT IONA L L IMIT ED
IN DEPEND ENT AU DI TO R’S REP ORT
TO THE MEMBER S OF DONACO I N TER NATI ONAL LIMITED
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 consolidated entity 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 consolidated entity or to cease operations, or have no realistic alternative but
to do so.
From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the
financial report of the current period and are therefore the key audit matters. We describe these matters in the auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine
that a matter should not be communicated in the auditor’s report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
REPORT ON THE REMUNERATION REPORT
Opinion on the remuneration report
We have audited the remuneration report included in pages 11 to 19 of the directors’ report for the year 30 June 2018.
In our opinion, the remuneration report of Donaco International Limited, for the year ended 30 June 2018, complies with
section 300A of the Corporations Act 2001.
Auditor’s responsibilities for the audit of the financial report
Responsibilities
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain
professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the consolidated entity’s internal
control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on
the consolidated entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the consolidated entity to cease to continue as a going concern.
•
Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the
financial report represents the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within
the consolidated entity to express an opinion on the consolidated financial report. The auditor is responsible for the
direction, supervision and performance of the group audit. The auditor remains solely responsible for the audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during the audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear
on our independence, and where applicable, related safeguards.
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
28 September 2018
Sydney
82
82
8383
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT
SHA REH OLD ER IN FOR MAT ION
for the year ended 30 June 2018
SHAR EHOLDER I NFO RMATIO N
for the year ended 30 June 2018
The shareholder information set out below was applicable as at 31 August 2018.
SU BSTANTI AL H OLD ERS
DISTRIBUTION OF EQUITABL E S EC UR IT IE S
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
EQUITY SECURIT Y HOLDERS
The names of the twenty largest security holders of quoted equity securities are shown below.
NUMBER OF HOLDERS
OF ORDINARY SHARES
333
509
309
718
162
2,031
Substantial holders in the company are shown below.
Lim Keong Yew
Lim Keong Hoe (jointly held as part of Lim Keong Yew’s holding)
Perpetual Limited and subsidiaries
Fidelity International and subsidiaries
Lee Bug Tong
Lee Bug Huy
ORDINARY SHARES
Number held
% of total shares issued
231,406,797
107,311,200
120,080,387
68,554,883
73,599,765
74,599,764
28.10
13.03
14.56
8.31
8.93
9.06
VOTIN G RIG HT S
Options
The voting rights attached to ordinary shares and options are
discussed below.
There are no voting rights attached to options. Upon exercise
of the option, the issued shares will confer full voting rights.
ORDINARY SHARES
Ordinary shares
Warrants
Twenty largest quoted equity security holders
Number held
% of total shares issued
HSBC Custody Nominees (Australia) Limited
359,033,138
43.59
Convent Fine Limited
Total Alpha Investments Limited
Slim Twinkle Limited
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Limited
Mr Keong Yew Lim
National Nominees Limited
Max Union Corporate Development Ltd
BNP Paribas Noms Pty Ltd
HSBC Custody Nominees (Australia) Limited – A/C 2
BNP Paribas Noms Pty Ltd
BNP Paribas Nominees Pty Ltd
BNP Paribas Noms Pty Ltd
Mrs Antonia Collopy
Smartequity EIS Pty Ltd
Vintage Crop Pty Ltd
Holdex Nominees Pty Ltd
N2 Global (HK) Limited
Bt Portfolio Services Limited
Mr Michael Stewart Bunker
60,353,318
56,962,025
46,937,882
41,521,511
39,588,305
34,208,800
28,585,456
26,000,000
17,767,451
12,951,352
5,832,443
5,501,769
3,686,147
3,000,000
2,376,653
2,348,338
2,000,000
1,650,000
1,500,000
1,500,000
7.33
6.92
5.70
5.04
4.81
4.15
3.47
3.16
2.16
1.57
0.71
0.67
0.45
0.36
0.29
0.29
0.24
0.20
0.18
0.18
Unquoted equity securities
Employee options
Warrants
84
84
753,304,588
91.47
NUMBER ON ISSUE
5,444,810
70
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.
There are no voting rights attached to warrants. Upon
conversion of the warrant, the issued shares will confer full
voting rights.
There are no other classes of equity securities.
8585
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT SHA REH OLD ER IN FOR MAT ION
for the year ended 30 June 2018
SHAR EHOLDER I NFO RMATIO N
for the year ended 30 June 2018
The shareholder information set out below was applicable as at 31 August 2018.
SU BSTANTI AL H OLD ERS
DISTRIBUTION OF EQUITABL E S EC UR IT IE S
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
EQUITY SECURIT Y HOLDERS
The names of the twenty largest security holders of quoted equity securities are shown below.
NUMBER OF HOLDERS
OF ORDINARY SHARES
333
509
309
718
162
2,031
Substantial holders in the company are shown below.
Lim Keong Yew
Lim Keong Hoe (jointly held as part of Lim Keong Yew’s holding)
Perpetual Limited and subsidiaries
Fidelity International and subsidiaries
Lee Bug Tong
Lee Bug Huy
ORDINARY SHARES
Number held
% of total shares issued
231,406,797
107,311,200
120,080,387
68,554,883
73,599,765
74,599,764
28.10
13.03
14.56
8.31
8.93
9.06
VOTIN G RIG HT S
Options
The voting rights attached to ordinary shares and options are
discussed below.
There are no voting rights attached to options. Upon exercise
of the option, the issued shares will confer full voting rights.
ORDINARY SHARES
Ordinary shares
Warrants
Twenty largest quoted equity security holders
Number held
% of total shares issued
HSBC Custody Nominees (Australia) Limited
359,033,138
43.59
Convent Fine Limited
Total Alpha Investments Limited
Slim Twinkle Limited
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Limited
Mr Keong Yew Lim
National Nominees Limited
Max Union Corporate Development Ltd
BNP Paribas Noms Pty Ltd
HSBC Custody Nominees (Australia) Limited – A/C 2
BNP Paribas Noms Pty Ltd
BNP Paribas Nominees Pty Ltd
BNP Paribas Noms Pty Ltd
Mrs Antonia Collopy
Smartequity EIS Pty Ltd
Vintage Crop Pty Ltd
Holdex Nominees Pty Ltd
N2 Global (HK) Limited
Bt Portfolio Services Limited
Mr Michael Stewart Bunker
60,353,318
56,962,025
46,937,882
41,521,511
39,588,305
34,208,800
28,585,456
26,000,000
17,767,451
12,951,352
5,832,443
5,501,769
3,686,147
3,000,000
2,376,653
2,348,338
2,000,000
1,650,000
1,500,000
1,500,000
7.33
6.92
5.70
5.04
4.81
4.15
3.47
3.16
2.16
1.57
0.71
0.67
0.45
0.36
0.29
0.29
0.24
0.20
0.18
0.18
Unquoted equity securities
Employee options
Warrants
84
84
753,304,588
91.47
NUMBER ON ISSUE
5,444,810
70
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.
There are no voting rights attached to warrants. Upon
conversion of the warrant, the issued shares will confer full
voting rights.
There are no other classes of equity securities.
8585
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORTDONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT CORPORATE D IR ECTORY
for the year ended 30 June 2018
DIRECTORS
Stuart James McGregor – Non-executive Chairman
Joey Lim Keong Yew – Managing Director and CEO
Benedict Paul Reichel – Executive Director
Benjamin Lim Keong Hoe – Non-executive Director
Robert Andrew Hines – Non-executive Director
COMPANY SECRETARY
Benedict Paul Reichel
REGISTERED OFFICE
PRINCIPAL PLACE OF BUSINESS
SHARE REGISTER
AUDITOR
Level 18, 420 George Street
Sydney NSW 2000, Australia
Level 18, 420 George Street
Sydney NSW 2000, Australia
Boardroom Pty Limited
Level 12, 225 George Street
Sydney NSW 2000
+61 2 9290 9600
Crowe Horwath Sydney
Level 15, 1 O’Connell Street
Sydney NSW 2000, Australia
STOCK EXCHANGE LISTING
Donaco International Limited shares are listed on the Australian Securities Exchange
(ASX code: DNA)
WEBSITE
www.donacointernational.com
CORPORATE GOVERNANCE STATEMENT
The Corporate Governance Statement of Donaco International Limited
is available from our website
www.donacointernational.com, under the tab headed ‘Investor Relations’.
GEN ERAL I NFORMATI ON
The financial statements cover Donaco International Limited as a consolidated entity consisting of Donaco International Limited
and the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which
is Donaco International Limited’s functional and presentation currency.
Donaco International Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its
registered office and principal place of business is:
Level 18
420 George Street
Sydney NSW 2000
Australia
A description of the nature of the consolidated entity’s operations and its principal activities are included in the directors’ report,
which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 28 September 2018.
The directors have the power to amend and reissue the financial statements.
8686
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT
CORPORATE D IR ECTORY
for the year ended 30 June 2018
DIRECTORS
Stuart James McGregor – Non-executive Chairman
Joey Lim Keong Yew – Managing Director and CEO
Benedict Paul Reichel – Executive Director
Benjamin Lim Keong Hoe – Non-executive Director
Robert Andrew Hines – Non-executive Director
COMPANY SECRETARY
Benedict Paul Reichel
REGISTERED OFFICE
PRINCIPAL PLACE OF BUSINESS
SHARE REGISTER
AUDITOR
Level 18, 420 George Street
Sydney NSW 2000, Australia
Level 18, 420 George Street
Sydney NSW 2000, Australia
Boardroom Pty Limited
Level 12, 225 George Street
Sydney NSW 2000
+61 2 9290 9600
Crowe Horwath Sydney
Level 15, 1 O’Connell Street
Sydney NSW 2000, Australia
STOCK EXCHANGE LISTING
Donaco International Limited shares are listed on the Australian Securities Exchange
(ASX code: DNA)
WEBSITE
www.donacointernational.com
CORPORATE GOVERNANCE STATEMENT
The Corporate Governance Statement of Donaco International Limited
is available from our website
www.donacointernational.com, under the tab headed ‘Investor Relations’.
GEN ERAL I NFORMATI ON
The financial statements cover Donaco International Limited as a consolidated entity consisting of Donaco International Limited
and the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which
is Donaco International Limited’s functional and presentation currency.
Donaco International Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its
registered office and principal place of business is:
Level 18
420 George Street
Sydney NSW 2000
Australia
A description of the nature of the consolidated entity’s operations and its principal activities are included in the directors’ report,
which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 28 September 2018.
The directors have the power to amend and reissue the financial statements.
8686
DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT
Donaco International Limited ABN: 28 007 424 777
Level 18, 420 George Street, Sydney NSW 2000, Australia
Phone: +61 2 9106 2149 Fax: +61 2 9106 2106
Email: enquiries@donacointernational.com
www.donacointernational.com