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Mount Logan CapitalDONACO INTERNATIONAL LIMITED
ABN 28 007 424 777
Full Year Statutory Accounts
30 June 2021
DONACO INTERNATIONAL LIMITED
ABN 28 007 424 777
30 June 2021
Contents Page
From the Chairman
From the Chief Executive Officer
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
General information
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4
5
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26
57
58
63
65
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 43
25 Martin Place
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 29 September 2021. The directors have the
power to amend and reissue the financial statements.
2
DONACO INTERNATIONAL LIMITED
ABN 28 007 424 777
30 June 2021
From the Chairman
Dear fellow shareholders,
Donaco’s recent performance has shown our deeper commitment towards business sustainability during this COVID-19 pandemic. Continuing with
cost management and cash flow management, I believe that Donaco will prevail during the pandemic.
For the financial year, the Group reported statutory net profit after tax of A$25.2 million, which included non-recurring items totalling A$37.9
million. The non-recurring items are non-cash income of A$50.9 million Star Vegas settlement, A$8.4 million Star Vegas license impairment
charge, A$0.4 million impairment of trade and other receivables, A$4.0 million settlement interest and A$0.2 million non-recurring legal fees.
Excluding the non-recurring items, underlying net loss after tax was A$12.7 million, an increase of A$6.4 million from FY20 net loss after tax of
A$6.3 million.
The group recorded a negative EBITDA of A$0.1 million for the financial year 2021, down from prior year positive EBITDA of A$10.4 million, and
generated an underlying net loss after tax of A$12.7 million (excluding the non-recurring items). Group revenue of A$10.3 million was recorded for
the financial year, compared to prior year of A$53.5 million, and the group recorded a negative operational cash flow of A$4.5 million, an increase
on prior year negative cash flow of A$3.2 million. Much of this reflects the broader uncertainty caused by the pandemic, which also affects the
group’s casino operations in Cambodia and Vietnam.
Despite the declined venue performances in financial year 2021, Donaco has successfully settled all legal cases with the Thai Vendors in relation to
Star Vegas which contributed non-cash income of A$50.9 million. Mega Bank debt continued to decline to A$9.0 million as at 30 June 2021 with
final repayment in December 2021. The repayments to Mega Bank from July 2021 has been supported by a US$7.8 million (A$10.4 million as at
30 June 2021 spot rate) shareholder loan from Mr. Lee Bug Huy, aka Techatut Sukcharoenkraisri, Chief Executive Officer and an executive director
of the group.
Looking forward, financial year 2022 will be the year to gradually resume casino operations in Cambodia and Vietnam as the vaccinations will
continue to be administered in the regions.
Porntat Amatavivadhana
Chairman
3
DONACO INTERNATIONAL LIMITED
ABN 28 007 424 777
30 June 2021
Dear Shareholders,
In the financial year 2021, our group has continued to face challenges under the COVID-19 pandemic. I am proud of our group’s response to each
of these challenges and the continued tight cost control measures to preserve Star Vegas, Aristo and shareholder value.
As the COVID-19 pandemic has continued and Star Vegas only operated on a limited basis about 7 months during financial year 2021 and stopped
operations in April 2021, Star Vegas overall performance has fallen against prior corresponding period with EBITDA down by 62% to A$4.2 million.
The 73% decline in net gaming revenue to A$8.7 million, was compounded by a higher VIP gross win rate of 4.48% but with a lower VIP turnover
of A$213.5 million. Non-gaming revenue was down 95% to A$0.4 million. Since Cambodia has been aggressive in rolling out the vaccination
programs and plan to recover its economy by the end of the year, Star Vegas anticipates to resume limited casino operations in December 2021.
Aristo reopened on 8 May 2020 and has been operating on a limited basis ever since while the border with China remains closed. This has been
reflected in Aristo’s venue performance as its EBITDA is down 118% to a loss of A$0.9 million. The main driver of revenue, net gaming revenue,
was down 89% to A$0.9 million with lower VIP gross win rate of 1.88% and a lower VIP turnover of A$25.2 million. Non-gaming revenue fell 94%
to A$0.3 million. Aristo will continue to adapt to border changes with local management having the discretion to tailor operations to local
conditions.
Throughout and post financial year 2021, Donaco continued to receive Mega Bank’s support and agreed on a new repayment plan to repay the
remaining US$6.8 million (A$9.0 million as at 30 June 2021 spot rate) with final debt repayment in December 2021. To fund the needs to make
principal repayments to Mega Bank and also to meet working capital needs, Donaco has raised A$14.4 million (before cost) on 27 July 2020 and
signed a new shareholder loan agreement of US$7.8 million (A$10.4 million as at 30 June 2021 spot rate).
Lee Bug Huy
Group Chief Executive Officer
4
DONACO INTERNATIONAL LIMITED
ABN 28 007 424 777
30 June 2021
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 2021.
Directors
The following persons were directors of Donaco International Limited as at the beginning of the financial year or until the date of this report, unless
otherwise stated:
Yan Ho Leo Chan (resigned 21 December 2020)
Kurkye Wong (resigned 21 December 2020)
Roderick John Sutton
Simon Vertullo (resigned 2 September 2020)
Norman Mel Ashton (resigned 2 September 2020)
Lee Bug Huy (appointed 3 August 2020)
Porntat Amatavivadhana (appointed 3 August 2020)
Andrew Phillips (appointed 2 September 2020)
Issaraya Intrapaiboon (appointed 2 September 2020)
Principal activities
During the financial year the principal continuing activities of the consolidated entity consisted of the operation of leisure and hospitality businesses
across the Asia Pacific region, specifically:
●
●
operation of a hotel and casino in northern Vietnam; and
operation of a hotel and casino in Cambodia.
Dividends
No dividends were paid for the year ended 30 June 2021.
Review of operations and financial results
Result Highlights
Underlying net loss after tax (NLAT) attributable to owners of the Company of A$12.7 million, up from net loss after tax (NLAT) of A$6.3 million in
FY20. Revenue at Star Vegas and Aristo continues to be severely affected by the ongoing COVID-19 pandemic which resulted in the further
temporary closure of the Star Vegas casino while Aristo is only operating on a limited basis. The borders between Vietnam and China, and
Cambodia and Thailand remain closed, resulting in low visitation numbers as the majority of the casino patrons are foreigners.
● Statutory NPAT / (NLAT)
● Contribution of non-recurring items in NPAT / (NLAT) result
● Underlying NLAT
● Group Revenue
- Star Vegas revenue
- Aristo revenue
● Group Earnings Before Interest, Tax, Depreciation, Amortisation and Impairment (EBITDA)
● Underlying Group EBITDA
● Balance sheet with
‒ Cash
‒ Borrowings
‒ Net debt
2021
$ million
2020
$ million
25.2
37.9
(12.7)
10.3
9.1
1.2
(0.1)
(0.1)
6.3
11.1
4.8
(58.9)
(52.6)
(6.3)
53.5
39.7
13.7
10.4
10.4
12.6
28.2
15.6
‒ Net debt to equity ratio
3.0%
11.5%
5
DONACO INTERNATIONAL LIMITED
ABN 28 007 424 777
30 June 2021
Review of operations and financial results (continued)
Reported profit after tax attributable to owners of the Company was A$25.2 million, which included non-recurring items totalling A$37.9 million.
In contrast, the loss after tax reported in FY20 was A$58.9 million which included non-recurring items totalling negative A$52.6 million.
The non-recurring items in FY21 include the Star Vegas licence impairment charge of A$8.4 million (2020: $A50.3 million), proceeds on settlement
of litigation matters of A$50.9 million, interest expense of A$4.0 million on settlement of unpaid management fees, legal fees of A$0.2 million
(2020: $2.0 million) incurred in relation to the litigation matters and A$0.4 million in write-off of trade receivables.
Excluding the non-recurring items, underlying NLAT for the Group was A$12.7 million, up from NLAT of A$6.3 million in FY20.
Venue Performances
Star Vegas - FY21 v FY20
● Net Gaming Revenue down 73% to A$8.7 million
● Non-Gaming Revenue down 95% to A$0.4 million
●
EBITDA down 62% to A$4.2 million
Property Level NPAT down to loss of $A6.9 million
●
● VIP Gross Win rate 4.48%
Star Vegas in Cambodia reopened on 25 September 2020 at limited capacity following Government approval after being closed from 1 April 2020.
Star Vegas again closed from 27 April 2021 following the order from the Cambodian local Government for the temporary closure of all casinos in
the Banteay Meanchay region until further notice. Limited casino operations for only 7 months of the year has led to a 73% decline in gaming
revenue and a 82% decrease in VIP turnover at Star Vegas. Operating expenses were down 83% as cost reduction measures were proactively
implemented to minimise the COVID-19 financial impact. Star Vegas will continue to maintain a tight cost control strategy while operations remain
closed.
Aristo International Hotel - FY21 v FY20
● Net Gaming Revenue down 89% to A$0.9 million
● Non-Gaming Revenue down 94% to $A0.3 million
EBITDA down 118% to loss of A$0.9 million
●
Property Level NPAT down to loss of A$4.2 million
●
● VIP Gross Win rate 1.88%
Aristo was temporarily closed from 1 April 2020 in adherence to the Vietnamese Government mandating the temporary closure of all casinos, and
was allowed to reopen on 8 May 2020. However the business continues to operate on a limited basis as the border with China remains closed. This
subsequently resulted in total revenue and EBITDA declining by 91% and 118% compared to the prior corresponding period. Operating expenses
decreased by 77% compared to FY20, as robust cost reduction measures were implemented to minimize the financial impact from COVID-19.
Aristo will continue to adapt to border changes with local management having the discretion to tailor operations to local conditions.
Capital Management
No FY21 dividend is payable due to underlying NLAT. It is noted that dividends are restricted to 100% of statutory net profit after tax under the
Mega Bank loan facility.
On 27 July 2020, Donaco successfully completed an entitlement offer that has raised approximately A$14.4 million (before costs). Under the
entitlement offer, 1 new share was offered for every 2 existing shares held by eligible shareholders at a price of $0.035 per new share, for a total
of 411,796,609 new shares. This entitlement offfer was fully underwritten by Mr Lee Bug Huy and Mr Lee Bug Tong.
The funds raised were used to make principal repayments to Mega Bank and also to meet the working capital needs of the casino
operations and other corporate, administration and transaction costs.
A new loan repayment plan was agreed with Mega Bank to repay the remaining US$6.8 million (AU$9.0 million as at 30 June 2021 spot rate) loan
balance. This plan comprises monthly repayments of US$1 million (AU$1.3 million as at 30 June 2021 spot rate) over six months from June 2021
to November 2021, with a final instalment of US$1.8 million (AU$2.4 million as at 30 June 2021 spot rate) to be paid by 31 December 2021. The
consolidated entity has also received a waiver from Mega Bank in relation to the default interest and cash and cash equivalent covenant under the
loan facility as at 30 June 2021.
A shareholder loan from Mr Lee Bug Huy, the current Chief Executive Officer and an executive director of Donaco, has been approved by the Board
for borrowings of up to US$7.8 million (AU$10.4 million as at 30 June 2021 spot rate). An unsecured loan facility agreement was signed in July
2021 between Mr Lee Bug Huy and Donaco for a commitment of US$7.8 million (AU$10.4 million as at 30 June 2021 spot rate), which is available
for drawdowns between July 2021 and December 2021, subject to the terms of the agreement. Details are set out under 'Matters subsequent to
the end of the financial year' below.
Significant changes in the state of affairs
Apart from the impact of the COVID-19 pandemic as set out under Review of operations and financial results and elsewhere in the Directors'
report, there were no other significant changes in the state of affairs during the financial year.
6
DONACO INTERNATIONAL LIMITED
ABN 28 007 424 777
30 June 2021
Matters subsequent to the end of the financial year
Dividend
There will be no dividend declared for FY2021.
Additional funding
The Board of Donaco has approved a shareholder loan from Mr Lee Bug Huy, the current Chief Executive Officer and executive director of Donaco,
for borrowings of up to US$7.8 million (AU$10.4 million as at 30 June 2021 spot rate). An unsecured loan facility agreement was signed in July
2021 between Mr Lee Bug Huy and Donaco for a commitment of US$7.8 million (AU$10.4 million as at 30 June 2021 spot rate), which is available
for drawdowns between July 2021 and December 2021, subject to the terms of the agreement. Drawdowns of US$1 million (AU$1.3 million as at
30 June 21 spot rate) were made in July, August and September 2021, and the next drawdown of US$1 million (AU$1.3 million as at 30 June 2021
spot rate) is scheduled on 29 October 2021. The loan is due to be repaid three years from the first drawdown, however the lender may at any time
require early repayment with a minimum of one month's prior notice. The lender has provided a letter of financial support to Donaco which states
that he will not withdraw or call upon the loan should it affect any creditor of the Company in a detrimental way. Such financial support is provided
for the foreseeable future covering a minimum period to September 2022. The terms of the loan are materially the same as those of the Mega
Bank facility, including an interest rate of 6% per annum. The loan is expected to be repaid from operational cash flow within the loan term.
No other matter or circumstance has arisen since 30 June 2021 that has significantly affected, or may significantly affect the consolidated entity's
operations, the results of those operations, or the consolidated entity's state of affairs in future financial years.
Likely developments and expected results of operations
The company operates leisure and entertainment businesses across the Asia Pacific region.
Our largest business is the Star Vegas Resort & Club, a successful casino and hotel complex in Poipet, Cambodia, on the border with Thailand.
Star Vegas was established in 1999, and is the largest and highest quality of the Poipet casino hotels. The property has more than 100 gaming
tables, more than 800 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 is now a 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.
Due to an outbreak in the regional area surrounding Star Vegas which started in January 2021, Star Vegas has temporarily closed since 27 April
2021 pursuant to orders from the Cambodian local authorities. The outbreak has resulted in a further decline in visitation numbers, which were
already low as the majority of the casino's visitors are foreign patrons and international borders with Cambodia remain closed. While Aristo has
reopened since May 2020, it is still operating on a limited basis and patronage at the casino is expected to remain low as the border between
Vietnam and China remain closed and most of Aristo's patrons are Chinese residents. Donaco will continue to monitor the COVID-19 situation
closely and implement measures to keep visitors and staff as safe as possible.
The positive results achieved in the December 2020 quarter provides the Board with confidence that Donaco is well-equipped to meet the ongoing
challenges posed by the pandemic. There will be a continual focus on maintaining a tight control over operating costs. With vaccinations being
administered at high levels daily across the region around Star Vegas and Aristo, Donaco is ready to resume full casino operations once the COVID-
19 situation improves and international borders reopen.
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.
7
DONACO INTERNATIONAL LIMITED
ABN 28 007 424 777
30 June 2021
Information on directors
Name:
Title:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in Options:
Name:
Title:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in Options:
Name:
Title:
Experience and expertise:
Norman Mel Ashton
Non-Executive Chairman (resigned 2 September 2020)
Mr Ashton is a listed company director with over 37 years' experience
across the hospitality, property, banking and finance, and mining and
resources sectors. A chartered accountant, Mr Ashton has senior leadership
experience in restructuring and insolvency having worked with KPMG and
as one of the Founding Partners of PPB.
Aurora Labs Ltd (ASX: A3D)
None
Member of the Audit & Risk Management Committee
None
None
Yan Ho Leo Chan
Executive Director (resigned 21 December 2020)
Mr Chan is a representative from Argyle Street Management Limited
(ASM), an institutional investor. ASM was founded in Hong Kong SAR in
2002 and currently manages approximately US$1.7 billion. Mr Chan is an
Executive Director of ASM, and has more than 13 years' experience in
making and managing investments throughout Asia. He holds a Bachelor of
Economics and Finance from the University of Hong Kong.
None
None
None
None
None
Kurkye Wong
Executive Director (resigned 21 December 2020)
Mr Wong is a representative from Argyle Street Management Limited
(ASM), an institutional investor. ASM was founded in Hong Kong SAR in
2002 and currently manages approximately US$1.7 billion. Mr Wong is
Vice President of ASM, and has previously worked at KPMG and FTI
Consulting in Hong Kong. He holds a Bachelor of Business from the
Queensland University of Technology, a Juris Doctor from the Chinese
University of Hong Kong, and a Master's Degree in Financial Engineering
from Stanford University.
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in Options:
None
None
None
None
None
8
DONACO INTERNATIONAL LIMITED
ABN 28 007 424 777
30 June 2021
Information on directors (continued)
Name:
Title:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in Options:
Name:
Title:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in Options:
Name:
Title:
Experience and expertise:
Roderick John Sutton
Non-Executive Director
Mr Sutton has over 25 years' experience in business advisory and
management. He is currently a Special Advisor to the Asia Pacific region of
FTI Consulting, a professional services and consulting business listed on
the New York Stock Exchange. Upon joining FTI Consulting in 2020, Rod
was appointed as its Chairman of Asia Pacific. In that role he had oversight
of all elements of the Asia Pacific business including FTI Consulting's
numerous client-facing activities, regional and global strategy, vetting of
acquisition opportunities, and management of all support functions.
None
None
Chair of the Audit & Risk Management Committee (effective 19 December
2019 and re-appointed 2 September 2020)
1,539,000 ordinary shares
None
Simon Vertullo
Non-Executive Director (resigned 2 September 2020)
Mr Vertullo is an experienced chartered accountant with broad financial,
transactional and operational expertise, having worked extensively with
listed and large privately-owned companies throughout Australia, Asia and
the United Kingdom. He has experience in senior finance executive roles
with a focus on managing performance, risk and turnarounds and has
previously worked with the leading restructuring practices of KordaMentha
and KPMG.
None
None
Member of the Audit & Risk Management Committee
None
None
Lee Bug Huy (Techatut Sukcharoenkraisri)
Executive Director (appointed 3 August 2020)
Mr Huy is Vice President at the Casino at Star Vegas Casino & Resorts Co,
Ltd where he has been responsible for developing the model for the slot
machine business. He has significant experience in gaming and casino
management and has previously acted as an executive director of the
Company (preivously appointed on 1 July 2015). Mr Huy holds a BSc
majoring in Chemical Engineering.
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in Options:
None
None
Chief Executive Officer (effective 3 September 2020)
260,451,476 ordinary shares
None
9
DONACO INTERNATIONAL LIMITED
ABN 28 007 424 777
30 June 2021
Information on directors (continued)
Name:
Title:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in Options:
Name:
Title:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in Options:
Name:
Title:
Experience and expertise:
Porntat Amatavivadhana
Non-Executive Chairman (effective 3 September 2020) (appointed Non-
Executive Director 3 August 2020)
Mr Amatavivadhana is a founding principal and CEO of Infinite Capital, a
successful boutique corporate advisory firm based in Bangkok. He has
considerable experience in mergers & 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. Mr Amatavivadhana has
also previously acted as non-executive director of the Company (previously
appointed 1 July 2015). Mr Amatavivadhana holds a MSc in Management
Science and a BA in Finance and Banking.
Sansiri Plc (BKK: SIRI)
None
None
3,555,405 ordinary shares
None
Andrew Guy Phillips
Independent non-executive director (appointed 2 September 2020)
Mr Phillips brings over 25 years' experience working in senior financial and
commercial management positions with both publicly listed companies and
multinationals based in Australia and New Zealand. He has a thorough
knowledge of international finance and corporate services and has an
extensive network of contacts throughout Asia and the Americas.
Lithium Power International Ltd (ASX: LPI)
Southern Cross Exploration NL (ASX: SXX)
None
None
None
None
Mr Issaraya Intrapaiboon
Non-executive director (appointed 2 September 2020)
Mr Intrapaiboon has over 20 years' experience in engineering, operation,
maintenance and planning within the water section. He is currently the
Manager Treatment Plants for Unitywater, Australian provider of essential
water supply and sewage treatment services, bringing in-depth capability
in leading large teams and managing an operational budget of $20+
million.
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in Options:
None
None
None
None
None
'Other current directorships' and 'Former directorships (last 3 years)' quoted above are directorships for listed entities only, and exclude
directorships of all other types of entities, unless otherwise stated.
10
DONACO INTERNATIONAL LIMITED
ABN 28 007 424 777
30 June 2021
Company secretary
The company secretary is Mr Hasaka Martin who was appointed on 30 April 2021. Mr Martin is the company secretary of Emerson Corporate
Services which offers a full range of compliance and company secretarial services to companies, funds and family offices.
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 2021,
and the number of meetings attended by each director were:
Norman Mel Ashton
Porntat Amatavivadhana
Yan Yo Leo Chan
Kurkye Wong
Roderick John Sutton
Simon Vertullo
Lee Bug Huy
Andrew Phillips
Issaraya Intrapaiboon
Full board
Audit & Risk
Management
Committee
Nominations,
Remuneration &
Corporate
Governance
Committee
Attended
Held
Attended
Held
Attended
Held
1
11
7
7
10
2
11
7
8
3
11
7
7
11
3
11
8
8
1
-
-
-
4
2
-
3
3
2
-
-
-
5
2
-
3
3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee.
Remuneration report (audited)
The remuneration report details the key management personnel remuneration arrangements for the consolidated entity, in accordance with the
requirements of the Corporations Act 2001 and its Regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity,
directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
Executive Summary
Principles used to determine the nature and amount of remuneration
●
●
● Details of remuneration
● Share-based compensation
● Additional disclosures relating to key management personnel
Executive Summary
Donaco uses a simple framework for executive remuneration, consisting of three elements:
1.
2.
3.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits (if any)
Short-term incentives, which are paid in cash, but only if executives satisfy applicable key performance indicators (“KPIs”)
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.
For short-term incentives in FY21, the following KPIs applied:
1.
2.
3.
4.
Achievement of the budgeted earnings before interest, tax, depreciation and amortisation (EBITDA) target for the Donaco Group (30%)
Achievement of the budgeted revenue target for the Star Vegas property, in Thai Baht terms (25%)
Achievement of the budgeted revenue target for the Aristo property, in Chinese Renminbi terms (25%)
Achievement of a personal KPI relating to the executive’s individual areas of responsibility (20%)
The first three KPIs above were not satisfied for FY21. One executive satisfied their personal KPI during the year.
For long-term incentives in FY21, the following KPI was required to be satisfied:
1.
Achievement of the budgeted earnings before interest, tax, depreciation and amortisation (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.
11
DONACO INTERNATIONAL LIMITED
ABN 28 007 424 777
30 June 2021
Remuneration report (audited) (continued)
Principles used to determine the nature and amount of remuneration
Introduction
The performance of the consolidated entity depends on the quality of its directors and executives. The remuneration philosophy is to attract and
retain high quality personnel, and motivate them to achieve high performance.
The objective of the consolidated entity's executive reward framework is to ensure reward for performance is competitive and appropriate for the
results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders,
and it is considered to conform to the market best practice for the delivery of reward.
Board Oversight
The Board has an established Nominations, Remuneration and Corporate Governance Committee (the “Remuneration Committee”). 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/Chief Executive Officer, and evaluating the performance of the Managing Director/Chief Executive Officer in light of those goals and
objectives;
reviewing and recommending to the Board for approval, remuneration programs applicable to the Company executives, and ensuring that
these programs differ from the structure of remuneration for non-executive directors; and
reviewing the remuneration of non-executive directors, and ensuring that the structure of non-executive directors' remuneration is clearly
distinguished from that of executives by ensuring that non-executive directors are remunerated by way of fees, do not participate in schemes
designed for the remuneration of executives, do not receive options or bonus payments, and are not provided with retirement benefits other
than statutory superannuation.
Due to recent changes in the composition of the Board, all matters in respect of nomination and remuneration are currently being addressed at the
Board level.
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:
has economic profit as a core component of plan design
focuses on sustained growth in shareholders wealth, consisting of growth in share price, as well as focusing the executive on key non-
financial drivers of values
attracts and retains high calibre executives
●
The remuneration framework is also aligned to program participants' interests, in that it:
●
●
●
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.
12
DONACO INTERNATIONAL LIMITED
ABN 28 007 424 777
30 June 2021
Remuneration report (audited) (continued)
Principles used to determine the nature and amount of remuneration (continued)
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/Chief Executive Officer and senior executives include both fixed and performance-based
remuneration.
The executive remuneration and reward framework has three components:
●
●
●
fixed remuneration, consisting of base salary and non-monetary benefits, together with other statutory forms of remuneration such as
superannuation and long service leave
short-term incentives, paid in cash
long term incentives, currently consisting of restricted shares purchased on market
The combination of these components comprises the executive's total remuneration.
Fixed remuneration
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits (if any), is determined by considering the scope of the
executive’s responsibility, importance to the business, competitiveness in the market, and assessed potential. The total remuneration package for
executives includes superannuation and other non-cash benefits to reflect the total employment cost to the Company, inclusive of any fringe
benefits tax.
Fixed remuneration is reviewed annually by the Remuneration Committee, based on individual and business unit performance, the overall
performance of the consolidated entity, and comparable market remuneration.
Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle benefits) where it does not
create any additional costs to the consolidated entity and provides additional value to the executive.
The objective of the fixed remuneration component is to attract and retain high quality executives, and to recognise market relativities and
statutory requirements.
Short term incentives
The short term incentive (STI) framework provides senior executives with the opportunity to earn an annual cash bonus, up to a maximum
amount of 50% of base salary. Clear key performance indicators (KPIs) have been established by the Remuneration Committee. Achievement of
these KPIs gives the executive an opportunity to earn a fixed percentage of their maximum STI, subject to final review and approval by the Board.
13
DONACO INTERNATIONAL LIMITED
ABN 28 007 424 777
30 June 2021
Remuneration report (audited) (continued)
Principles used to determine the nature and amount of remuneration (continued)
For FY21, the KPIs applied and the applicable percentage of STI were:
1.
2.
3.
Achievement of the budgeted earnings before interest, tax, depreciation and amortisation (EBITDA) target for the Donaco Group. The
applicable EBITDA target was AUD46.6m (This KPI is worth 30% of the potential incentive).
Achievement of the budgeted revenue target for the Star Vegas property, in Thai Baht terms. The applicable revenue target was THB663.9
million (25%).
Achievement of the budgeted revenue target for the Aristo property, in Chinese Renminbi terms. The applicable revenue target was RMB10.1
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.
The first three KPIs above were not satisfied for FY21. One executive satisfied their personal KPI during the year.
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 A$1,000,000. The number of shares to be purchased each year will
depend on the share price at the time that purchases take place.
The scheme is executed in a similar manner to an on-market 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.
During FY21 and FY20, the Trust did not purchase any shares on market. The applicable KPI was not satisfied in both years, and accordingly no
awards of shares were made.
Relationship between remuneration policy and company performance
As detailed above, Donaco’s remuneration policy is directly linked to company performance, particularly in relation to top-line revenue growth and
cost control, to ultimately create long-term shareholder value. STI and LTI awards are dependent on defined KPIs being met, which are primarily
financial in nature, and are at the discretion of the Remuneration Committee.
14
DONACO INTERNATIONAL LIMITED
ABN 28 007 424 777
30 June 2021
Remuneration report (audited) (continued)
Principles used to determine the nature and amount of remuneration (continued)
Over the six-year period from FY15 to FY20, revenue and EBITDA have increased at an average annual growth rate of 21.25% and 79.94%
respectively, driven by Star Vegas becoming part of the Group at the beginning of FY16. However, the ongoing COVID-19 pandemic has adversely
afffected revenue and EBITDA in the FY21 year, which in turn has resulted in a decline in average growth rates over the seven-year period to
FY21.
Donaco’s share price has been declining in recent years, reflecting lower earnings brought on by the Star Vegas vendor’s breaches of the non-
compete agreement, and market concerns over the resulting legal disputes, and in both FY20 and FY21 as a result of the COVID-19 pandemic.
The Nominations, Remuneration and Corporate Governance Committee considers that the remuneration framework has an appropriate mix of fixed
and performance based remuneration. Since performance during FY21 did not meet expectations, executives forfeited all or the majority of their
short term incentive, and also forfeited all of their long term incentive.
The 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 the financial years ended 30 June 2021 and 30 June 2020.
Details of remuneration
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:
Yan Ho Leo Chan - Executive Director (resigned 21 December 2020)
● Norman Mel Ashton - Non-Executive Chairman (resigned 2 September 2020)
●
● Kurkye Wong - Executive Director (resigned 21 December 2020)
● Roderick John Sutton - Non-Executive Director
● Simon Vertullo - Non-Executive Director (resigned 2 September 2020)
●
●
● Andrew Phillips - Non-Executive Director (appointed 2 September 2020)
●
Issaraya Intrapaiboon - Non-Executive Director (appointed 2 September 2020)
Porntat Amatavivadhana - Non-Executive Chairman (effective 2 September 2020, appointed Non-Executive Director 3 August 2020)
Lee Bug Huy - Executive Director (appointed 3 August 2020)
And the following persons:
Paul Arbuckle - Chief Executive Officer (terminated 4 August 2020)
●
● Gordon Lo - Chief Financial Officer
15
DONACO INTERNATIONAL LIMITED
ABN 28 007 424 777
30 June 2021
Remuneration report (audited) (continued)
Post
employment
Long-term
Share-based
Short-term benefits
benefits
benefits
payments
Cash salary
and fees
$
Termination
payment
$
Bonus
$
Super
$
Leave
entitlements
$
Equity-
settled
$
Total
$
20,000
120,001
18,000
110,000
109,327
99,545
-
-
-
-
-
-
105,482
105,482
260,000
110,959
110,959
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,457
-
-
-
31,525
250,029
1,229,391
-
-
221,918
-
90,689
90,689
1,808
3,169
14,434
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,000
120,001
18,000
110,000
109,327
109,002
216,441
216,441
260,000
33,333
343,887
1,556,432
2021
Non-Executive
Directors:
Norman Ashton
Roderick Sutton
Simon Vertullo
Porntat
Amatavivadhana
Andrew Phillips
Issaraya
Intrapaiboon
Executive
Directors:
Kurkye Wong
Yan Ho Leo Chan
Lee Bug Huy
Other Key
Management
Personnel:
Paul Arbuckle
Gordon Lo
The bonus above was paid during FY21 and relates to performance for the period 1 January 2020 to 31 December 2020.
No bonus amounts were accrued to directors and key management personnel in FY21 for performance during FY21.
Short-term benefits
Post
employment
benefits
2020
Cash salary
and fees
$
Termination
payment
$
Bonus
$
Super
$
Long-term
benefits
Leave
entitlements
$
Share-based
payments1
Equity-
settled
$
Total
$
Non-Executive Directors:
Stuart McGregor
Norman Ashton
Lim Keong Hoe
Yugo Kinoshita
Roderick Sutton
Simon Vertullo
David Green
Executive Directors:
Lim Keong Yew
Benedict Reichel
Kurkye Wong
Yan Ho Leo Chan
86,758
67,097
6,314
35,398
70,057
71,670
73,059
5,243
200,047
126,313
126,313
Other Key Management Personnel:
Paul Arbuckle
413,608
Chong Kwong
Yang
Gordon Lo
162,333
184,153
1,628,363
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
527,879
-
-
-
33,270
-
-
-
-
208,776
-
736,655
13,750
-
47,020
8,242
-
-
-
-
-
6,941
-
16,667
-
-
21,003
17,751
1,728
72,332
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,115
62,394
-
-
95,000
67,097
6,314
35,398
70,057
71,670
80,000
16,358
840,257
126,313
126,313
-
434,611
4,250
-
77,759
406,860
185,881
2,562,129
1These amounts relate to shares acquired by an employee share trust which will vest to employees over the vesting period of three years. These
shares were either forfeited or subject to accelerated vesting during the year. None remains unvested as at 30 June 2021 and 2020.
16
DONACO INTERNATIONAL LIMITED
ABN 28 007 424 777
30 June 2021
Remuneration report (audited) (continued)
Details of remuneration (continued)
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
Norman Ashton
Roderick Sutton
Simon Vertullo
Porntat Amatavivadhana
Andrew Phillips
Issaraya Intrapaiboon
Executive Directors:
Kurkye Wong
Yan Ho Leo Chan
Lee Bug Huy
Other Key Management
Personnel:
Paul Arbuckle
Gordon Lo
Fixed remuneration
2021
2020
At risk - STI
At risk - LTI
2021
2020
2021
2020
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
n/a
n/a
n/a
100%
100%
n/a
0%
0%
0%
0%
0%
0%
0%
0%
0%
100%
74%
100%
100%
0%
26%
0%
0%
0%
n/a
n/a
n/a
0%
0%
n/a
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
n/a
n/a
n/a
0%
0%
n/a
0%
0%
The proportion of the cash bonus paid/payable or forfeited is as follows:
Name
Other Key Management Personnel:
Gordon Lo
Cash bonus paid/payable
2021
2020
Cash bonus forfeited
2020
2021
100%
n/a
0%
n/a
In relation to performance during FY21, the proportions of the cash bonus paid/payable or forfeited are as follows:
Name
Executive Directors:
Lee Bug Huy
Other Key Management Personnel:
Gordon Lo
Cash bonus
paid/payable
Cash bonus
forfeited
2022
2022
0%
0%
100%
100%
Criteria for performance-based remuneration
The short-term incentive ('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 key performance indicators ('KPIs') being achieved. The Board, advised by the
Nominations, Remuneration and Corporate Governance Committee, applied these criteria in determining the award of performance-based
remuneration during the year.
For performance during FY21, 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.
There were no share options granted or forfeited during the year (2020: nil).
There were no shares granted or forfeited during the year.
Service Agreements
Remuneration and other terms of employment for the Chief Executive Officer, 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 between three to six
months’ notice or paying three to six months’ salary, as stipulated in the contracts.
17
DONACO INTERNATIONAL LIMITED
ABN 28 007 424 777
30 June 2021
Remuneration report (audited) (continued)
Share-based compensation
Shares
There were no shares granted as part of compensation during the year ended 30 June 2021.
Options
There were no options issued as part of compensation during the year ended 30 June 2021.
There were no options over ordinary shares granted to or vested by directors and other key management personnel as part of compensation
during the year ended 30 June 2021.
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the company held during the financial year by each director and other members of key management personnel of the
consolidated entity, including their personally related parties, is set out below:
Ordinary shares
Paul Arbuckle1
Yan Ho Leo Chan1
Kurkye Wong1
Roderick Sutton
Simon Vertullo1
Norman Ashton1
Gordon Lo
Lee Bug Huy
Porntat Amatavivadhana
Andrew Phillips
Issaraya Intrapaiboon
Balance at
the start of
the year
Received
as part of
remuneration
Additions /
(Disposals)
Other changes
during
the year
Balance at
the end of
the year
166,667
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,539,000
-
-
-
-
-
-
-
(166,667)
-
-
-
-
-
-
260,451,476
3,355,405
-
-
-
-
-
1,539,000
-
-
-
260,451,476
3,355,405
-
-
1No longer member of key management personnel as at 30 June 2021.
Option holding
There were no options over ordinary shares in the company held during the financial year.
Transactions with related parties and key management personnel
The following transactions occurred with related parties during 2021:
Non-competition settlement amount from vendors of DNA Star Vegas
Settlement of management fee payable and interest expense to vendors of DNA Star Vegas
Rental received from Arte Mobile Technology Pte Ltd (subsidiary of Isentric Limited)
50,885,800
(24,103,800)
-
-
-
7,448
The above transactions occurred at commercial rates.
This concludes the remuneration report, which has been audited.
Consolidated
2021
$
2020
$
18
DONACO INTERNATIONAL LIMITED
ABN 28 007 424 777
30 June 2021
Shares under option
There were no unissued ordinary shares of Donaco International Limited under option at the date of this report.
Shares issued on the exercise of options
There were no ordinary shares of Donaco International Limited issued, during the year ended 30 June 2021 and up to the date of this report, on
the exercise of options granted (2020: nil).
Indemnity and insurance of auditor
The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the company or any related
entity against a liability incurred by the auditor.
During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company or any related entity.
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 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.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined in note
29 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the
auditor's behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 29 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; and
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.
Auditor
Crowe Sydney continues in office in accordance with section 327 of the Corporations Act 2001 .
Officers of the company who are former partners of Crowe Sydney
There are no officers of the company who are former partners of Crowe Sydney.
19
DONACO INTERNATIONAL LIMITEDABN 28 007 424 77730 June 2021Mr Porntat AmatavivadhanaNon-Executive Chairman SydneyOn behalf of the directorsAuditor's independence declarationA copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on the following page.This report is made in accordance with a resolution of directors, pursuant to section 298 (2) (1) of the Corporation Act 2001.29 September 202120 Crowe Sydney
ABN 97 895 683 573
Level 15 1 O’Connell Street
Sydney NSW 2000
Australia
Tel +61 2 9262 2155
Fax +61 2 9262 2190
www.crowe.com.au
29 September 2021
The Board of Directors
Level 18
420 George Street
Sydney NSW 2000
Australia
Dear Board Members
Donaco International Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the Directors of Donaco International Limited.
As lead audit partner for the audit of the financial report of Donaco International Limited for the year
ended 30 June 2021, I declare that to the best of my knowledge and belief, that there have been no
contraventions of:
(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.
Yours sincerely
Crowe Sydney
Suwarti Asmono
Partner
Liability limited by a scheme approved under Professional Standards Legislation.
The title ‘Partner’ conveys that the person is a senior member within their respective division, and is among the group of persons who hold an
equity interest (shareholder) in its parent entity, Findex Group Limited. The only professional service offering which is conducted by a partnership
is external audit, conducted via the Crowe Australasia external audit division and Unison SMSF Audit. All other professional services offered by
Findex Group Limited are conducted by a privately owned organisation and/or its subsidiaries.
Findex (Aust) Pty Ltd, trading as Crowe Australasia is a member of Crowe Global, a Swiss verein. Each member firm of Crowe Global is a
separate and independent legal entity. Findex (Aust) Pty Ltd and its affiliates are not responsible or liable for any acts or omissions of Crowe
Global or any other member of Crowe Global. Crowe Global does not render any professional services and does not have an ownership or
partnership interest in Findex (Aust) Pty Ltd. Services are provided by Crowe Sydney, an affiliate of Findex (Aust) Pty Ltd. Liability limited by a
scheme approved under Professional Standards Legislation.
© 2021 Findex (Aust) Pty Ltd
21
DONACO INTERNATIONAL LIMITED
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2021
Revenue from continuing operations
Other income
Total income
Expenses
Food and beverages
Employee benefits expense
Depreciation and amortisation expense
Impairment expense
Legal and compliance
Marketing and promotions
Professional & consultants
Property costs
Telecommunications and hosting
Gaming costs
Other expenses
Finance costs
Total expenses
Profit / (loss) before income tax expense from continuing operations
Income tax benefit / (expense)
Consolidated
Note
2021
$
2020
$
4
5
6
6
7
10,319,467
53,485,035
50,885,800
61,205,267
-
53,485,035
(380,809)
(4,792,577)
(8,984,417)
(8,784,961)
(848,507)
(691,000)
(413,481)
(1,929,903)
(148,926)
(100,933)
(1,292,960)
(6,636,504)
(35,004,978)
(3,439,366)
(21,497,734)
(10,220,516)
(50,512,420)
(3,081,011)
(3,989,770)
(1,751,603)
(5,547,611)
(376,710)
(1,510,817)
(3,951,634)
(3,993,946)
(109,873,138)
26,200,289
(56,388,103)
(1,253,339)
(2,485,516)
Profit / (loss) after income tax expense for the year
24,946,950
(58,873,619)
Other comprehensive (loss) / income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
(14,357,740)
5,210,790
Other comprehensive (loss) / income for the year, net of tax
(14,357,740)
5,210,790
Total comprehensive income / (loss) for the year
10,589,210
(53,662,829)
Profit / (loss) for the year is attributable to:
Non-controlling interest
Owners of Donaco International Limited
Total comprehensive income / (loss) for the year is attributable to:
Non-controlling interest
Owners of Donaco International Limited
Profit / (loss) per share for profit / (loss) attributable to
the owners of Donaco International Limited
Basic earnings / (loss) per share
Diluted earnings / (loss) per share
(230,176)
25,177,126
24,946,950
11,815
(58,885,434)
(58,873,619)
(230,176)
10,819,386
10,589,210
11,815
(53,674,644)
(53,662,829)
36
36
Cents
Cents
2.10
2.10
(7.15)
(7.15)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
22
DONACO INTERNATIONAL LIMITED
Statement of financial position
As at 30 June 2021
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Intangibles (including licences)
Construction in progress
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Lease liabilities
Borrowings
Income tax payable
Employee benefits
Total current liabilities
Non-current liabilities
Trade and other payables
Lease liabilities
Borrowings
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Equity attributable to the owners of Donaco International Limited
Non-controlling interest
Total equity
Consolidated
Note
2021
$
2020
$
8
9
10
11
12
13
14
15
16
22
17
18
19
20
22
21
23
24
25
6,316,530
1,241,609
712,622
345,948
8,616,709
170,963,833
19,048,737
456,257
28,974
3,947
190,501,748
12,630,359
1,280,432
670,810
549,716
15,131,317
165,809,709
29,941,540
495,712
15,163
4,288
196,266,412
199,118,457
211,397,729
16,213,767
41,445
11,097,986
1,291,435
75,887
28,720,520
12,814
7,650,565
-
7,663,379
41,267,324
812,591
27,325,224
154,296
196,371
69,755,806
40,277
2,761,061
907,064
3,708,402
36,383,899
73,464,208
162,734,558
137,933,521
372,584,126
33,321,778
(244,972,931)
160,932,973
1,801,585
358,372,299
47,679,518
(270,150,057)
135,901,760
2,031,761
162,734,558
137,933,521
The above statement of financial position should be read in conjunction with the accompanying notes.
23
DONACO INTERNATIONAL LIMITED
Statement of changes in equity
For the year ended 30 June 2021
Consolidated
Note
Issued
capital
$
Accumulated Non-controlling
Reserves
$
losses
$
interest
$
Total
equity
$
Balance at 1 July 2019
358,656,945
42,188,163
(211,264,623)
2,019,946
191,600,431
Loss after income tax
for the year
Other comprehensive income for
the year, net of tax
Total comprehensive loss
for the year
Transactions with owners in their
capacity as owners:
Shares forfeited
Share-based payments
-
-
-
-
(58,885,434)
11,815
(58,873,619)
5,210,790
-
-
5,210,790
5,210,790
(58,885,434)
11,815
(53,662,829)
23, 24
24
(284,646)
-
284,646
(4,081)
-
-
-
(4,081)
Balance at 30 June 2020
358,372,299
47,679,518
(270,150,057)
2,031,761
137,933,521
Balance at 1 July 2020
358,372,299
47,679,518
(270,150,057)
2,031,761
137,933,521
Profit / (loss) after income tax
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:
Contributions of equity, net of
transaction costs
-
-
-
-
25,177,126
(230,176)
24,946,950
(14,357,740)
-
-
(14,357,740)
(14,357,740)
25,177,126
(230,176)
10,589,210
23
14,211,827
-
-
-
14,211,827
Balance at 30 June 2021
372,584,126
33,321,778
(244,972,931)
1,801,585
162,734,558
The above statement of changes in equity should be read in conjunction with the accompanying notes.
24
DONACO INTERNATIONAL LIMITED
Statement of cash flows
For the year ended 30 June 2021
Cash flow from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Lease interest paid
Interest and other finance costs paid
Government levies, gaming taxes, income taxes and GST
Net cash flows from operating activities
Cash flow from investing activities
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Net cash flows from investing activities
Cash flow from financing activities
Proceeds from share issue
Share issue transaction costs
Proceeds from borrowings
Repayment of borrowings
Payments for principal elements of lease
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
Cash and cash equivalents at the end of the financial year
Consolidated
Note
2021
$
2020
$
12,558,829
(15,342,878)
(2,784,049)
1,559
(336,138)
(1,422,281)
(59)
(4,540,968)
58,161,494
(47,990,245)
10,171,249
27,332
(248,251)
(2,755,002)
(10,407,250)
(3,211,922)
(187,819)
-
(187,819)
(1,079,402)
52,564
(1,026,838)
14,412,881
(201,054)
493,243
(16,150,859)
(100,761)
(1,546,550)
(6,275,337)
12,630,359
(38,492)
6,316,530
-
-
-
(9,654,712)
(45,521)
(9,700,233)
(13,938,993)
26,568,268
1,084
12,630,359
35(a)
35(b)
8
The above statement of cash flows should be read in conjunction with the accompanying notes.
25
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
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.
Going concern
At 30 June 2021, the consolidated entity recorded net current liabilities of AU$20.1 million (30 June 2020: A$54.6 million). The consolidated entity
recorded a net profit after tax of AU$24.9 million (2020: net loss after tax of AU$58.9 million), and net operating cash outflows of AU$4.5 million
(2020: AU$3.2 million) for the year ended on that date.
The net profit after tax of AU$24.9 million is largely due to the proceeds of US$38 million (AU$50.9 million as at 30 June 2021 average rate)
received on settlement of all litigation matters over the Star Vegas business. The settlement concluded the various proceedings in Singapore,
Australia, Thailand and Cambodia with Somboon Sukchareonkraisri, Lee Bug Tong, Lee Bug Huy and related persons (together, the vendors). The
consolidated entity and the vendors of the Star Vegas business reached settlement agreements as of 2 March 2020, however the agreements were
only finalised on approval from Mega Bank which was secured on 21 December 2020. Under the settlement agreements, the US$38 million
(AU$50.9 million as at 30 June 2021 average rate) that Donaco was to receive to remove the non-competion and non-solicitation clauses in the
Share Sale Agreement over the Star Vegas business will offset the US$20 million (AU$26.8 million as at 30 June 2021 average rate) in additional
lease payment due to Lee Hoe Property Co., Ltd, the landlord, as well as US$18 million (AU$24.1 million as at 30 June 2021 average rate) of
unpaid management fees plus interest to the vendors. No net cash flow has therefore arisen from the settlement.
The net current liabilities primarily arise due to the remaining US$6.8 million (AU$9.0 million as at 30 June 2021 spot rate) loan from Mega Bank
that is due for repayment by 31 December 2021.
During the period, the consolidated entity successfully completed an entitlement offer that raised approximately AU$14.4 million. Under the
agreement reached with Mega Bank, the proceeds of this capital injection were used to settle the principal repayment that was deferred from June
2020 to December 2020. A new loan repayment plan was agreed with Mega Bank to repay the remaining US$6.8 million (AU$9.0 million as at 30
June 2021 spot rate) loan balance. This plan comprises monthly repayments of US$1 million (AU$1.3 million as at 30 June 2021 spot rate) over six
months from June 2021 to November 2021, with a final instalment of US$1.8 million (AU$2.4 million as at 30 June 2021 spot rate) to be paid by
31 December 2021. The first instalment of US$1 million (AU$1.3 million as at 30 June 2021 spot rate) has already been paid as at the reporting
date. The consolidated entity has also received a waiver from Mega Bank in relation to the default interest and cash and cash equivalent covenant
under the loan facility as at 30 June 2021. A shareholder loan from Mr Lee Bug Huy, the current Chief Executive Officer and an executive director
of Donaco, has been approved by the Board for borrowings of up to US$7.8 million (AU$10.4 million as at 30 June 2021 spot rate). An unsecured
loan facility agreement was signed in July 2021 between Mr Lee Bug Huy and Donaco for a commitment of US$7.8 million (AU$10.4 million as at
30 June 2021 spot rate), which is available for drawdowns between July 2021 and December 2021, subject to the terms of the agreement. The
loan is due to be repaid three years from the first drawdown, however the lender may at any time require early repayment with a minimum of one
month's prior notice. The lender has provided a letter of financial support to Donaco that he will not withdraw or call upon the loan should it affect
any creditor of the Company in a detrimental way. Such financial support is provided for the foreseeable future covering a minimum period to
September 2022. The majority of the loan terms are materially the same as those of the Mega Bank facility, including an interest rate of 6% per
annum. The loan is expected to be repaid from operational cash flows within the loan term.
Notwithstanding the net current liability position and lingering conditions surrounding COVID-19, management have prepared the 30 June 2021
financial report on a going concern basis. The re-opening of Star Vegas in late September 2020 led to a positive EBITDA in the December 2020
quarter, however an outbreak which started in January 2021 in the regional area surrounding Star Vegas has deteriorated further, resulting in the
temporary closure of the casino since 27 April 2021 pursuant to orders from the Cambodian local authorities. The outbreak has resulted in a
further decline in visitation numbers, which were already low as the majority of the casino's visitors are foreign patrons and international borders
with Cambodia remain closed. Management has kept a heavy emphasis on continued cost control measures and mitigation activities, in order to
reduce operating expenses and to preserve cash balances. Management also believes that Donaco is well-equipped to meet the ongoing challenges
posed by the pandemic, as demonstrated by the positive results achieved in the December 2020 quarter when the casinos reopened following their
previous closure. Vaccinations are also being administered at high levels daily across the region around Star Vegas and Aristo, which would enable
Donaco to resume operations readily once external conditions stabilise.
The Board of Directors acknowledges that there is significant uncertainty over Donaco's ability to meet its working capital requirements and the
loan covenants under the Mega Bank loan facility. In the event that Donaco is unable to raise additional capital or debt to meet working capital
requirements and the loan repayments to December 2021 and/or there is an extended period before the resumption of normal casino operations,
then this could have a material impact on the consolidated entity continuing as a going concern.
New, revised or amending Accounting Standards and Interpretations adopted
The consolidated entity has applied the following standards and amendments for the first time in the current reporting period:
AASB 2018-7 Amendments to Australian Accounting Standards - Definition of Material [AASB 101 and AASB 108]
Amendments have been made to AASB 101 Presentation of Financial Statements and AASB 108 Accounting Policies, Changes in Accounting
Estimates and Errors and consequential amendments to other Australian Accounting Standards (AAS) which: i) use a consistent definition of
materiality throughout AAS and the Conceptual Framework for Financial Reporting ; ii) clarify when information is material; and iii) incorporate
some of the guidance in AASB 101 about immaterial information.
26
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 1. Significant accounting policies (continued)
New, revised or amending Accounting Standards and Interpretations adopted (continued)
Conceptual Framework for Financial Reporting and AASB 2019-1 Amendments to Australian Accounting Standards - References to the Conceptual
Framework
The AASB has issued a revised Conceptual Framework which introduces a new reporting entity concept. Additionally, the revised Conceptual
Framework has updated the definitions of an asset and a liability and the recognition criteria, and introduced new concepts on measurement,
presentation and disclosure and new guidance on derecognition of assets and liabilities. Consequential amendments to various other standards
have also been made.
AASB 2019-5 Amendments to Australian Accounting Standards - Disclosure of the Effect of New IFRS Standards Not Yet Issued in Australia [AASB
1054]
Amendments have been made to AASB 1054 Australian Additional Disclosures which clarify that entities that intend to comply with IFRS Standards
will need to disclose the potential effect of new IFRS Standards that have not yet been issued by the AASB as Australian Accounting Standards.
The above standards and amendments did not have a significant impact on the prior and current period financial statements.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early
adopted by the consolidated entity for the annual reporting period ended 30 June 2021. These standards are not expected to have a material
impact on the entity in the current or future reporting periods and on foreseeable future transactions.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by
the Australian Accounting Standards Board ('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.
Parent entity information
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 32.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Donaco International Limited ('company' or 'parent
entity') as at 30 June 2021 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.
27
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 1. Significant accounting policies (continued)
Principles of consolidation (continued)
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of
control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of
the non-controlling interest acquired is recognised directly in equity attributable to the parent.
Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and other comprehensive
income, statement of financial position and statement of changes in equity of the consolidated entity. Losses incurred by the consolidated entity
are attributed to the non-controlling interest in full, even if that results in a deficit balance.
Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest
in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the
consideration received and the fair value of any investment retained together with any gain or loss in profit or loss.
Operating segments
Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports
provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments and
assessing their performance.
Foreign currency translation
The financial statements are presented in Australian dollars, which is Donaco International Limited's functional and presentation currency.
DNA Star Vegas Co Ltd, a subsidiary within the Group, has casino and hotel operations in Cambodia. Its functional currency is Thai Baht.
Donaco Singapore Pte Ltd has an interest in the Lao Cai International Hotel Joint Venture Company which operates a casino and hotel in Vietnam.
The functional currency of the Joint Venture Company is Vietnamese Dong.
The subsidiaries of Donaco that operate in the aforementioned foreign countries are consolidated into the Hong Kong group (Star Vegas Group)
and the Singapore Group (Aristo Group). At this level, the presentation currency is US Dollar.
Subsequently, these consolidated groups are consolidated with the Australian operations and converted to Australian dollars.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues
and expenses of foreign operations are translated into Australian dollars using 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.
Goodwill, casino licence and fair value adjustments arising from the acquisition of a foreign operation are treated as assets and liabilities of the
foreign operations and translated at the closing rate.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.
Revenue recognition
Revenue is recognised when control of the good or service is transferred to the customer, and only to the extent that it is highly probable that a
significant reversal will not occur. 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 provided to
the customer.
Complimentary goods or services
For gaming transactions that include complimentary goods or services being provided to customers, the consolidated entity allocates revenue from
the gaming transaction to the good or service provided based on the standalone selling price which is the arm's length price for that good or
service available to the public.
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.
Government grants and incentives
Government grants and incentives are recognised at their fair value where there is reasonable assurance that the grants and incentives will be
received and the consolidated entity will comply with all the attached conditions.
28
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 1. Significant accounting policies (continued)
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for
each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the
adjustment recognised for prior periods, where applicable.
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.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with
original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any
allowance for expected credit losses. 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 uncollectible are written off by reducing the
carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the
Group will not be able to collect all amounts due according to the original terms of the receivables.
The amount of impairment loss is determined using the simplified approach to measuring expected credit losses which uses a lifetime expected
loss allowance. The expected loss rates used in measuring the expected credit losses are based on historical loss rates, adjusted to reflect current
and forward-looking information on macroeconomic factors affecting the ability of the debtors to settle the receivables. These factors include
significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or
delinquency in payments are considered indicators that the trade receivables are impaired.
The amount of the impairment loss is recognised in the consolidated statement of profit or loss and other comprehensive income. When a trade
receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent year, it is written off against the
allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the consolidated statement of
comprehensive income.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
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.
29
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 1. Significant accounting policies (continued)
Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that
is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment (excluding land) over their
expected useful lives as follows:
Buildings and structures
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.
Leases
Leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the lease asset is available for use by the
consolidated entity. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net
present value of fixed payments, less any lease incentives receivable.
The lease payments are discounted using the consolidated entity's incremental borrowing rates.
Right-of-use assets are measured at cost comprising the following:
- the amount of the initial measurement of lease liability; and
- any lease payments made at or before the commencement date, less any lease incentives received.
Right-of-use assets are depreciated over the lease term on a straight-line basis.
Intangible assets
Land rights
The intangible asset includes costs incurred to acquire interests in the usage of land in the Socialist Republic of Vietnam for the original hotel,
located in Lao Cai. The term of the agreement is 30 years from the initial licencing date of 19 July 2002. These land use rights are stated at cost
less accumulated amortisation. Amortisation is calculated on a straight line basis over a period of 30 years, from the licencing date. At the expiry
of the land term it is expected that the relevant State body will consider an application for extension.
Casino 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.
Prepaid construction costs
Amounts recognised as prepaid construction costs relate to tranche payments made to third party developers in connection with the construction
of the new Lao Cai Casino. Tranche payments are made in advance of construction work being performed in accordance with the terms of the
contractor agreements, however once associated works have been completed an amount equal to the tranche payment is transferred from prepaid
construction costs to construction in progress. Once recognised as part of construction in progress the amounts are then carried on the Statement
of Financial Position at cost, until such time as the asset is completed and ready for its intended use. Work in progress is not depreciated, but
tested for impairment annually. Once ready for its intended use an amount equal to the cost of the completed asset will be transferred to property
plant and equipment and accounted for in accordance with the consolidated entity’s accounting policy for property plant and equipment.
30
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 1. Significant accounting policies (continued)
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or
more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the
estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset
belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.
Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are
unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually
paid within 30 days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently
measured at amortised cost using the effective interest method.
Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the loans or borrowings are
classified as non-current.
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they
are incurred including:
- interest on short term and long term borrowings.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be wholly settled within 12
months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Non-accumulating sick leave is
expensed to profit or loss when incurred.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be wholly settled within 12 months of the reporting date are recognised in non-
current liabilities, provided there is an unconditional right to defer settlement of the liability. The liability is measured as the present value of
expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit
method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected
future payments are discounted using market yields at the reporting date on national corporate bonds with terms to maturity and currency that
match, as closely as possible, the estimated future cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
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.
31
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 1. Significant accounting policies (continued)
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the
price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the
most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their
economic best interest. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are
appropriate in the circumstances and for which sufficient data is available to measure fair value, are used, maximising the use of relevant
observable inputs and minimising the use of unobservable inputs.
The financial instruments recognised at fair value in the Consolidated Statement of Financial Position have been analysed and classified using a fair
value hierarchy reflecting the significance of the inputs used in making the measurements. The fair value hierarchy consist of the following levels:
a. Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
b.
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly
(derived from prices) (level 2), and
c.
Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
The directors consider that the carrying amount of all financial assets and liabilities recorded in the financial statements approximate their fair
value.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Where the consolidated entity purchases the company’s equity instruments, for example as the result of a share 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.
Dividends
Provision is made for the amount of any dividend declared, determined or announced by the directors on or before the end of the financial year
but not distributed at balance date.
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 ('GST') 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.
32
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 2. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported
amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent
liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various
factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting
judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are
discussed below.
Estimation of useful lives of assets
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 indefinite life intangible assets
The consolidated entity tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other
indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in note 1. The recoverable amounts
of cash-generating units have been determined based on the higher of value-in-use calculations and fair value less costs of disposal. These
calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the
estimated future cash flows.
Income tax
The consolidated entity is subject to income taxes in the jurisdictions in which it operates, including Cambodia, Vietnam and Hong Kong.
Significant judgement is required 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.
Allowance for expected credit losses
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. An allowance for expected credit losses 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. The amount of expected credit loss
is determined using the simplified approach which uses a lifetime expected loss allowance. The expected loss rates used in measuring the expected
credit losses are based on historical loss rates, adjusted to reflect current and forward-looking information on macroeconomic factors affecting the
ability of the debtors to settle the receivables. These factors include significant financial difficulties of the debtor, probability that the debtor will
enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivables are
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.
Estimating incremental borrowing rate for leases
The incremental borrowing rate is used to measure lease liabilities, if the consolidated entity is unable to readily determine the interest rate
implicit in the lease. The incremental borrowing rate is the rate of interest that the lessee would have to pay to borrow over a similar term, and
with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The
incremental borrowing rate therefore reflects what the lessee would have had to pay, which requires estimation when no observable rates are
available or when they need to be adjusted to reflect the terms and conditions of the lease.
Lease term
As part of the settlement agreements, an amended perpetual lease agreement was executed as of 2 March 2020 in relation to the DNA Star Vegas
lease of the land in Poi Pet, Cambodia (see note 22). Under the amended perpetual lease agreement, the lease is for a period of 50 years with an
option to extend for another 50 years. However, the extension period of 50 years has not been included in the lease liability and right-of-use asset
calculation as it remains uncertain that both Donaco and the landlord will agree to extend the lease term. Accordingly, while Donaco has security
of tenure over the Star Vegas Casino to 15 June 2115 following finalisation of the settlement agreements, the lease liability and right-of-use asset
have been calculated as at 30 June 2021 over the remaining 44 years to June 2065.
DNA Star Vegas casino licence renewal
The DNA Star Vegas casino licence issued by the royal government of Cambodia is renewable annually and is deemed to have an indefinite useful
life. The annual casino licence renewal process commenced in December 2020 and the casino licence renewal fee was paid in January 2021. In
August 2021, DNA Star Vegas submitted an application for a change in casino licence holder and paid the applicable fee. Based on legal advice
received by the company, application for the change in casino licence holder is still in progress, however the physical casino licence is expected to
be granted before mid-November 2021.
33
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 3. Operating segments
Identification of reportable operating segments
The consolidated entity is organised into three operating segments: Casino operations in Vietnam, Casino operations in Cambodia and Corporate
operations. These operating segments are based on the internal reports that are reviewed and used by the Board of Directors (who are identified
as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources. There is no
aggregation of operating segments.
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 (earnings before interest, tax, depreciation and amortisation). 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 products and services
The principal products and services of each of these operating segments are as follows:
Casino Operations - Vietnam
Casino Operations - Cambodia
Corporate Operations
Intersegment transactions
Comprises the Aristo International Hotel operating in Vietnam. These operations include hotel
accommodation and gaming and leisure facilities.
Comprises the Star Vegas Resort and Club, operating in Cambodia. These operations include
hotel accommodation and gaming and leisure facilities.
Comprises the development and implementation of corporate strategy, commercial
negotiations, corporate finance, treasury, management accounting, corporate governance and
investor relations functions.
Intersegment transactions were made at market rates. Intersegment transactions are eliminated on consolidation.
Operating segment information for continuing operations
Consolidated - 2021
Revenue
Sales to external customers
Government grants and incentives
Interest
Total revenue
EBITDA
Depreciation and amortisation
Impairment of assets
Interest revenue
Non-recurring items
Net exchange gains / (losses)
Non-controlling interest
Finance costs
Profit / (loss) before income tax expense
Income tax expense
Profit after income tax expense attributable
to the owners of Donaco International Limited
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
Casino
Operations
Vietnam
$
Casino
Operations
Cambodia
$
Corporate
Operations
$
Total
$
1,202,454
-
761
1,203,215
(855,941)
(3,121,416)
-
761
-
66,848
230,176
(339,574)
(4,019,146)
9,096,770
-
-
9,096,770
4,237,341
(5,858,410)
(8,784,961)
-
(4,017,300)
(551,755)
-
(515,422)
(15,490,507)
-
18,685
797
19,482
(3,455,055)
(4,591)
-
797
50,723,995
439,180
-
(1,764,208)
45,940,118
63,459,301
132,034,268
3,624,888
10,383,071
16,389,086
9,611,742
10,299,224
18,685
1,558
10,319,467
(73,655)
(8,984,417)
(8,784,961)
1,558
46,706,695
(45,727)
230,176
(2,619,204)
26,430,465
(1,253,339)
25,177,126
199,118,457
199,118,457
36,383,899
36,383,899
34
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 3. Operating segments (continued)
Consolidated - 2020
Revenue
Sales to external customers
Government grants and incentives
Interest
Total revenue
EBITDA
Depreciation and amortisation
Impairment of assets
Interest revenue
Non-recurring items
Net exchange gains / (losses)
Non-controlling interest
Finance costs
Profit/(loss) before income tax expense
Income tax expense
Loss after income tax expense attributable
to the owners of Donaco International Limited
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
Total liabilities
Geographical information
Australia
Vietnam
Cambodia
Major customers
Casino
Operations
Vietnam
$
Casino
Operations
Cambodia
$
Corporate
Operations
$
Total
$
13,712,137
-
15,495
13,727,632
4,857,953
(3,760,731)
-
15,495
-
(159,250)
(11,815)
(611,703)
329,949
39,707,837
-
-
39,707,837
11,014,690
(6,419,583)
(50,512,420)
-
-
-
-
(186,666)
(46,103,979)
-
37,818
11,748
49,566
(5,492,608)
(40,202)
-
11,748
(1,991,054)
81,805
-
(3,195,577)
(10,625,888)
75,602,754
131,001,733
4,793,242
9,050,088
34,861,363
29,552,757
53,419,974
37,818
27,243
53,485,035
10,380,035
(10,220,516)
(50,512,420)
27,243
(1,991,054)
(77,445)
(11,815)
(3,993,946)
(56,399,918)
(2,485,516)
(58,885,434)
211,397,729
211,397,729
73,464,208
73,464,208
Sales to external customers
Geographical non-current
assets
2021
$
-
1,202,454
9,096,770
10,299,224
2020
$
-
13,712,137
39,707,837
53,419,974
2021
$
2,427,389
59,365,982
128,708,377
190,501,748
2020
$
2,432,487
67,952,564
125,881,361
196,266,412
Transactions involving a single external customer amounting to 10 per cent of more of the consolidated entity's revenue during the current and
previous financial years are set out below:
2021
Casino operations Cambodia
2020
No. of
customers
2
% of revenue
27%
$
2,757,226
There was no single external customer that contributed 10% or more of the consolidated entity's revenue during 2020.
Note 4. Revenue
From continuing operations
Sales revenue
Casino
- Gaming revenue
- Non-gaming revenue
Government grants and incentives
Interest
Revenue from continuing operations
Consolidated
2021
$
2020
$
9,613,632
685,592
18,685
1,558
10,319,467
40,706,856
12,713,118
37,818
27,243
53,485,035
Gaming revenue represents net house takings arising from casino operations.
Non-gaming revenue represents house revenue from room rental, food and beverage sales and other related services recognised when the
services are rendered.
35
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 4. Revenue (continued)
Disaggregation of revenue
The consolidated entity derives revenue from the transfer of goods and services over time and at a point in time in the following operating
segments:
Consolidated - 30 June 2021
Revenue
Gaming revenue
Non-gaming revenue
Government grants and incentives
Interest
Total revenue
Timing of revenue recognition
At a point in time
Over time
Consolidated - 30 June 2020
Revenue
Gaming revenue
Non-gaming revenue
Government grants and incentives
Interest
Total revenue
Timing of revenue recognition
At a point in time
Over time
Note 5. Other income
Proceeds on settlement of litigation matters
Casino
Operations
Vietnam
$
Casino
Operations
Cambodia
$
Corporate
Operations
$
Total
$
877,505
324,949
-
761
1,203,215
8,736,127
360,643
-
-
9,096,770
1,027,097
176,118
1,203,215
8,955,132
141,638
9,096,770
-
-
18,685
797
19,482
-
19,482
19,482
9,613,632
685,592
18,685
1,558
10,319,467
9,982,229
337,238
10,319,467
Casino
Operations
Vietnam
$
Casino
Operations
Cambodia
$
Corporate
Operations
$
Total
$
8,089,850
5,622,287
-
15,495
13,727,632
32,617,006
7,090,831
-
-
39,707,837
9,708,737
4,018,895
13,727,632
37,667,019
2,040,818
39,707,837
-
-
37,818
11,748
49,566
-
49,566
49,566
40,706,856
12,713,118
37,818
27,243
53,485,035
47,375,756
6,109,279
53,485,035
Consolidated
2021
$
2020
$
50,885,800
50,885,800
-
-
On securing approval from Mega Bank on 21 December 2020 for the settlement agreements of all litigation matters over the Star Vegas business,
US$38 million (AU$50,885,800 as at 30 June 2021 average rate) has been recognised by the consolidated entity as proceeds to remove the non-
competition and non-solicitation clauses previously agreed in the Share Sale Agreement over the Star Vegas business.
Note 6. Expenses
Profit / (loss) before income tax from continuing operations includes the following specific
expenses:
Impairment of assets
Casino licence (see note 13)
Trade and other receivables (see note 9)
Consolidated
2021
$
2020
$
8,376,114
408,847
8,784,961
50,326,357
186,063
50,512,420
36
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 6. Expenses (continued)
Profit / (loss) before income tax from continuing operations includes the following specific
expenses:
Finance costs
Interest on settlement proceeds
Interest on borrowings
Consolidated
2021
$
2020
$
4,017,300
2,619,204
6,636,504
-
3,993,946
3,993,946
On securing approval from Mega Bank on 21 December 2020 for the settlement agreements of all litigation matters over the Star Vegas business,
US$3 million (AU$4,017,300 as at 30 June 2021 average rate) has been recognised by the consolidated entity as interest on unpaid management
fees which were due to the vendors of the Star Vegas business.
Note 7. Income tax expense
Income tax expense
Current tax
Deferred tax
Aggregate income tax expense
Income tax expense is attributable to:
Profit from continuing operations
Aggregate income tax expense
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit / (loss) before income tax expense from continuing operations
Profits tax using:
Australian corporation tax at the statutory tax rate of 30% (2020: 30%)
Tax effect of difference in overseas corporation tax at the statutory tax rate of 20% (2020: 20%)
Tax effect amounts which are not (taxable) / deductible in calculating taxable income
Losses not brought to account
Tax exempt profits from Cambodian operations
Obligation payments in Cambodia under Lump Sum Tax Regime (note (a))
Gaming duty payments in Cambodia under Real Tax Regime (note (b))
Adjustment for investment spending in Vietnam
Income tax expense
(a)
Lump Sum Tax Regime
Consolidated
2021
$
2020
$
1,268,340
(15,001)
1,253,339
2,500,938
(15,422)
2,485,516
1,253,339
1,253,339
2,485,516
2,485,516
26,200,289
(56,388,103)
7,860,087
(16,916,431)
(4,394,527)
(6,914,977)
225,429
3,098,101
874,636
393,695
110,895
5,173,110
11,657,159
982,322
(738,224)
2,362,161
-
(34,581)
1,253,339
2,485,516
Under the Lump Sum Tax Regime which was effective until 31 December 2020, income tax expense represents monthly gaming obligatory
payments and monthly non-gaming obligatory payments payable by the Company to the Ministry of Economy and Finance ("MoEF") of the
Kingdom of Cambodia. The monthly gaming obligatory payments and non-gaming obligatory payments are as follows:
•
•
In respect of gaming activities, DNA Star Vegas is required to pay the obligatory payment which is a fixed gaming tax. On payment of this
fixed gaming tax, DNA Star Vegas will be exempted from all categories of taxes on gaming activities including advance profits tax, minimum
tax and advance tax on distribution of dividends.
As for non-gaming obligatory payment, it comprises various other taxes such as salary tax, fringe benefit tax, withholding tax, value added
tax, patent tax, tax on rental of moveable properties, minimum tax, advance profit tax, advertising tax and specific tax on entertainment
services which are included in the statement profit or loss and other comprehensive income.
37
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 7. Income tax expense (continued)
(a)
Lump Sum Tax Regime (continued)
•
•
Monthly payments for the obligatory payment are due on the first week of the following month. In the event of late payment within 7 days
from the due date, there will be a penalty of 2% on the late payment and compounding interest of 2% per month. In addition, in the event of
late payment after 15 days when an official government notice is issued to DNA Star Vegas, the penalty will be increased from 2% to 25% on
the late payment plus compounding interest of 2% per month. Non-compliance with the abovementioned requirements may result in the
MoEF not issuing the casino licence in successive years.
On 30 March 2020, the MoEF had issued a directive to exempt all casino operators from making monthly obligatory payments from 1 April
2020 until the date of recommencement of their business. DNA Star Vegas had stopped making obligatory payments since April 2020 due to
its temporary closure, in accordance with the directive from the MoEF. DNA Star Vegas recommenced its operations from 25 September 2020
to 27 April 2021, limiting its operations to a minimum level (less than 35%). During this limited operation, DNA Star Vegas did not make the
monthly obligatory payments, however an accrual for the monthly obligatory payment and the 2% penalty on the late payment plus
compounding interest of 2% per month has been made as at 30 June 2021. The accruals for the obligatory payment and associated penalties
amount to US$668,000 (AU$888,507 as at 30 June 2021 spot rate) and USD$122,347 (AU$162,734 as at 30 June 2021 spot rate)
respectively.
•
The MoEF has not issued any notice for the increase penalty at 25%. DNA Star Vegas is therefore not currently liable for this 25% penalty.
This amount has been disclosed as a contingent liability in note 38.
(b)
Real Tax Regime
(i)
In respect of gaming activities
On 14 November 2020, the Law on the Management of Commercial Gambling (“Gambling Law”) has been promulgated in the Kingdom of
Cambodia.
Pursuant to Article 81 and 82 of Gambling Law, the casino operator and/or the owner of the casino and/or the owner of the Integrated Commercial
Gambling Centre shall fulfill the payment of periodic gaming duty revenue during the licensing period. The gaming duty rate is determined as
follows:
•
•
For casinos located in the Integrated Commercial Gambling Centre, the rate is 4% for VIP guest and 7% for ordinary gaming guest on gross
gambling revenue.
For casinos that are not located in the Integrated Commercial Gambling Centre, the rate is 7% on gross gambling revenue.
Monthly payment for the gaming duty is due within the first week of the following month. In the event of a late payment within 7 days after
receiving the reminder letter for the non-payment of gaming duty, there will be a penalty of 2% on the late payment and compounding interest of
2% per month. In addition, in the event of a late payment within 15 days after receiving the first penalty letter, the penalty will be increased from
2% to 25% on the late payment plus compounding interest of 2% per month. The MoEF has the right to revoke the casino licence in the event of
non-compliance with the abovementioned requirements where the payment of gaming duty is overdue for 180 days.
DNA Star Vegas has not applied to be taxed under the Integrated Commercial Gambling Centre, therefore the applicable gaming duty rate is 7%.
During the period of its limited operations, DNA Star Vegas has not made payments of the monthly gaming duty, however an accrual of
US$302,931 (AU$402,929 as at 30 June 2021 spot rate) has been made as at 30 June 2021.
The MoEF has not issued any reminder letter and/or first penalty letter on the penalty plus interest, therefore DNA Star Vegas is not currently
liable for these penalties and interest. These amounts have been disclosed as contingent liabilities in note 38.
(ii)
In respect of non-gaming activities
Pursuant to Article 81 of the Gambling Law, the casino operator and/or the owner of the casino and/or the owner of the Integrated Commercial
Gambling Centre shall comply with the Cambodian Law on Taxation for various other taxes such as salary tax, fringe benefit tax, withholding tax,
value added tax, patent tax, tax on rental of moveable properties, minimum tax, advance profit tax, advertising tax and specific tax on
entertainment services.
(c)
The parent entity has not brought to account tax losses with a tax effect of $723,162 (2020: $955,546).
38
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 8. Current assets - cash and cash equivalents
Cash on hand
Cash at bank
Short-term deposit
Note 9. Current assets - trade and other receivables
Trade receivables
Other receivables
Tax-related receivables
Consolidated
2021
$
2020
$
4,660,311
1,412,484
243,735
6,316,530
9,463,849
3,166,510
-
12,630,359
1,072,138
153,375
16,096
1,241,609
610,883
644,547
25,002
1,280,432
Impairment of receivables
The consolidated entity recognised a loss of $408,847 in respect of impairment of receivables for the year ended 30 June 2021 (2020: $186,063).
Note 10. Current assets - inventories
Food and beverage - at cost
Note 11. Current assets - other
Bonds and security deposits
Prepayments
Other current assets
Note 12. Non-current assets - property, plant and equipment
Leasehold buildings and structures - at cost
Less: Accumulated depreciation for leasehold buildings and structures
Right-of-use asset - at cost (see note 22)
Less: Accumulated depreciation for right-of-use asset
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
Interactive gaming - at cost
Less: Accumulated impairment
Consolidated
2021
$
2020
$
712,622
670,810
274,420
24,544
46,984
345,948
354,792
127,896
67,028
549,716
160,928,571
(30,876,960)
130,051,611
177,939,404
(29,513,287)
148,426,117
32,546,350
(612,403)
31,933,947
5,014,034
(4,994,474)
19,560
3,549,358
(120,711)
3,428,647
5,695,362
(5,649,274)
46,088
40,769,823
(32,507,683)
8,262,140
47,906,102
(35,586,636)
12,319,466
1,864,274
(1,739,062)
125,212
3,373,347
(2,940,200)
433,147
2,344,341
(2,087,510)
256,831
3,808,247
(2,833,645)
974,602
138,216
138,216
357,958
357,958
3,548,764
(3,548,764)
-
3,887,606
(3,887,606)
-
170,963,833
165,809,709
39
DONACO INTERNATIONAL LIMITED
Notes to financial statements
For the year ended 30 June 2021
Note 12. Non-current assets – Property, plant and equipment (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Leasehold
buildings
Furniture and
fittings
Machinery and
equipment
Motor
vehicles
Office equipment
and other
Consumables
Right-of-use
asset
Consolidated
$
$
$
$
$
$
Balance at 1 July 2019
Additions
Disposals
Exchange differences
Depreciation expense
Balance at 30 June 2020
Additions
Disposals
Exchange differences
Depreciation expense
Balance at 30 June 2021
150,234,646
70,239
(3)
3,348,193
(5,226,958)
148,426,117
154,609
-
(13,790,337)
(4,738,778)
130,051,611
88,660
23,142
-
2,474
(68,188)
46,088
-
-
(4,762)
(21,766)
19,560
14,984,716
894,520
(241,414)
392,110
(3,710,466)
12,319,466
21,761
(7,924)
(1,096,970)
(2,974,193)
8,262,140
600,090
-
(163,798)
8,468
(187,929)
256,831
-
-
(25,103)
(106,516)
125,212
1,499,229
18,912
(14,686)
39,861
(568,714)
974,602
-
-
(85,634)
(455,821)
433,147
552,787
118,690
-
19,335
(332,854)
357,958
33,110
(93,441)
(29,080)
(130,331)
138,216
$
-
3,549,435
-
2,244
(123,032)
3,428,647
29,456,700
(36,805)
(359,731)
(554,864)
31,933,947
Total
$
167,960,128
4,674,938
(419,901)
3,812,685
(10,218,141)
165,809,709
29,666,180
(138,170)
(15,391,617)
(8,982,269)
170,963,833
Consumables represent low value, high turnover items that are depreciated in accordance with company policy and local legislation.
40
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 13. Non-current assets - intangibles
Goodwill - at cost
Land right - at cost
Less: Accumulated amortisation for land right
Casino licence
Less: Accumulated Impairment
Consolidated
2021
$
2020
$
2,426,187
2,426,187
64,160
(39,976)
24,184
74,477
(45,866)
28,611
395,869,288
(379,270,922)
16,598,366
435,515,568
(408,028,826)
27,486,742
19,048,737
29,941,540
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2019
Impairment of assets
Exchange differences
Amortisation expense
Balance at 30 June 2020
Impairment of assets
Exchange differences
Amortisation expense
Balance at 30 June 2021
Goodwill
$
Land right
$
Casino licence
$
Total
$
2,426,187
-
-
-
2,426,187
-
-
-
30,127
-
859
(2,375)
28,611
-
(2,279)
(2,148)
75,116,422
(50,326,357)
2,696,677
-
27,486,742
(8,376,114)
(2,512,262)
-
77,572,736
(50,326,357)
2,697,536
(2,375)
29,941,540
(8,376,114)
(2,514,541)
(2,148)
2,426,187
24,184
16,598,366
19,048,737
Impairment testing of goodwill and intangibles with indefinite useful lives
Impairment of intangibles 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 allocation of intangibles with indefinite useful lives is presented below:
Lao Cai International Hotel JVC
Total goodwill
Lao Cai - Goodwill
Consolidated
2021
$
2,426,187
2,426,187
2020
$
2,426,187
2,426,187
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. A valuation of the 100% equity
interest in Lao Cai International Hotel JVC Limited was undertaken as at 30 June 2021. Based on the valuation undertaken as at 30 June 2021, the
value in use was determined to be $55,904,931 (US$42,030,622).
The valuation as at 30 June 2021 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 based on a 5-year cash flow forecast period. The valuation uses a growth rate of
196% in the first year, based on actual revenue in FY2021, followed by a growth rate of 122% in the second year, 24% to 62% in the subsequent
three years and a terminal year growth rate of 3%. The pre-tax discount rate used of 14.86% reflects specific risks relating to the relevant
segments and the countries in which they operate. The valuation was determined using a foreign exchange rate between Vietnamese Dong and US
dollar of 23,000 VND: 1 USD. Capital expenditure of VND 10.1 billion (AU$584,087 at spot rate) in total over the forecast period was included in
the valuation.
The recoverable amount calculation for the cash-generating unit of Lao Cai is most sensitive to changes in the discount rate and forecast revenue.
An increase in excess of 1.17% in the discount rate (from 14.86% to 16.03%) would result in impairment of the cash-generating unit of Lao Cai,
as would a decrease in forecast revenue in excess of 10% on average for the years within the forecast period.
Based on the valuation, the Directors determined that no impairment loss was required to be recognised for the year ended 30 June 2021 (2020:
nil).
41
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 13. Non-current assets - intangibles (continued)
DNA Star Vegas - Casino Licence
The casino licence relates to the licence to operate the DNA Star Vegas casino acquired on 1 July 2015. The licence is stated at cost less any
impairment losses. This intangible asset is tested for impairment annually or more frequently if events or changes in circumstances indicate that
the carrying value may be impaired.
The recoverable amount of the cash-generating unit of DNA Star Vegas has been determined based on its value in use. A valuation of the 100%
equity interest in DNA Star Vegas Company Limited was undertaken as at 30 June 2021. Based on the valuation undertaken as at 30 June 2021,
the value in use was determined to be $121,025,434 (US$90,989,725).
The valuation as at 30 June 2021 was determined using budgeted gross margin based on past performance and its expectations for the future and
are considered to be reasonably achievable. It is also based on the assumption that the casino will reopen in December 2021. The valuation is
based on a 5-year cash flow forecast period. The valuation uses a growth rate of 143.3% in the first year, based on actual revenue in FY2021,
followed by a growth rate of 91.8% in the second year and a growth rate of 3% in subsequent years. The pre-tax discount rate used of 18.65%
reflects specific risks relating to the relevant segments and the countries in which they operate. The discount rate has been decreased compared to
the prior period rate used of 21.13%. The valuation was determined using a foreign exchange rate between Thai Baht and US Dollar of 32.063
THB:1 USD. Capital expenditure of THB121 million (AU$5 million at the spot rate) in total over the forecast period was included in the valuation.
The ongoing pandemic has resulted in a further temporary closure of the DNA Star Vegas casino since 27 April 2021, which was already
experiencing low visitation numbers from foreign visitors while international borders remain closed. The growth and discount rates used in the
valuation calculations reflect the ongoing challenges and uncertainties in the environment in which the casino operates. Based on the valuation, the
Directors determined that an impairment loss of $8,376,114 needed to be recognised for the year ended 30 June 2021
(2020: $50,326,357).
Land right
Intangible asset of $24,184 (2020: $28,611) relates to a 30-year land use right in the Socialist Republic of Vietnam. Land use right is stated at
cost less accumulated amortisation and any impairment losses. The amortisation period is 30 years. This intangible asset is tested for impairment
annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.
Note 14. Non-current assets - construction in progress
Consolidated
2021
$
2020
$
Property construction works in progress - at cost
456,257
495,712
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2019
Additions
Disposals
Exchange differences
Balance at 30 June 2020
Exchange differences
Balance at 30 June 2021
Construction
works in
progress
$
505,527
29,580
(53,018)
13,623
495,712
(39,455)
456,257
Construction relates to costs incurred for the construction of the new 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.
42
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 15. Non-current assets - other
Consolidated
2021
$
2020
$
Other debtors
3,947
4,288
Note 16. Current liabilities - trade and other payables
Trade payables (note 27)
Deposits received
Floating chips (note 27)
Interest payable
Other payables and accrued expenses
3,707,146
36,553
6,817,476
9,266
5,643,326
16,213,767
7,822,565
74,839
4,759,231
17,315
28,593,374
41,267,324
Refer to note 27 for further information on financial instruments.
Floating chips
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.
Note 17. Current liabilities - borrowings
Joint Stock Commercial Ocean Bank
Mega International Commercial Bank Co Ltd
Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank)
Refer to note 27 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
Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank)
Consolidated
2021
$
2020
$
1,559,595
9,044,680
493,711
11,097,986
1,390,924
24,990,986
943,314
27,325,224
1,559,595
9,044,680
493,711
11,097,986
1,390,924
24,990,986
943,314
27,325,224
A new loan repayment plan was agreed with Mega Bank to repay the remaining loan balance of US$6.8 million at 30 June 2021 (AU$9.0 million as
at the 30 June 2021 spot rate). This plan comprises monthly repayments of US$1 million (AU$1.3 million at spot rate) over six months from June
2021 to November 2021, with a final instalment of US$1.8 million (AU$2.4 million as at 30 June 2021 spot rate) to be paid by 31 December 2021.
Mega Bank has also granted a waiver in relation to the default interest and cash and cash equivalent covenant under the loan facility as at 30 June
2021.
Assets pledged 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 Limited owned by the parent entity (carrying value $73,591,673, 2020: $73,591,673);
iii. A pledge of the shares in DNA Star Vegas Co. Ltd owned by Donaco Hong Kong Limited (carrying value $105,354,030, 2020: $115,413,395);
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; and
vii. A hypothec agreement over the land and buildings of DNA Star Vegas.
Mortgage to Joint Stock Commercial Ocean Bank
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 2021 under this arrangement were $1,559,595 (2020: $2,297,988).
Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn down at any time.
43
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 17. Current liabilities - borrowings (continued)
Joint Stock Commercial Bank for Foreign Trade of Vietnam
The loan from the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) was drawn down on 4 November 2020. The borrowing
is guaranteed over properties held by Lao Cai International Hotel Joint Venture Company Ltd and is for a term of 9 months. Total borrowings as at
30 June 2021 is $493,711 (2020: $943,314).
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
Consolidated
2021
$
2020
$
11,097,986
28,232,288
11,097,986
28,232,288
-
-
Note 18. Current liabilities - income tax
Provision for income tax
1,291,435
154,296
Note 19. Current liabilities - employee benefits
Annual leave
Accrued salaries, wages and other benefits
Note 20. Non-current liabilities - trade and other payables
Other payables - non current
Note 21. Non-current liabilities - borrowings
Joint Stock Commercial Ocean Bank
Refer to note 27 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
Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank)
-
75,887
75,887
2,388
193,983
196,371
12,814
12,814
40,277
40,277
-
-
907,064
907,064
1,559,595
9,044,680
493,711
11,097,986
2,297,988
24,990,986
943,314
28,232,288
44
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 22. Leases
As part of the settlement agreements on resolution of the dispute between the Lee Hoe Property Co., Ltd, the landlord of DNA Star Vegas and the
company, an amended perpetual lease agreement has been executed as of 2 March 2020 in relation to the DNA Star Vegas lease, which grants
Donaco security of tenure over the Star Vegas casino until 15 June 2115. The lease is in relation to land of approximately 232,189 square meters
located in Poi Pet, Cambodia. This follows an additional lease payment of US$20 million (AU$26.6 million as at 30 June 2021 spot rate) to Lee Hoe
Property Co., Ltd. The monthly lease payment is US$20,000 (AU$26,602 as at 30 June 2021 spot rate) for the first 5 years from the effective
settlement date, US$30,000 per month (AU$39,903 as at 30 June 2021 spot rate) starting from the 6th year to the end of the 10th year, and from
the 11th year onwards, the monthly rent will increase 3% every 3 years. In addition, for the five financial years commencing 1 July 2020, there is
an entitlement to share 25% of the Star Vegas business EBITDA in excess of US$16 million (AU$21.3 million as at 30 June 2021 spot rate) of the
EBITDA of the relevant financial year.
Under the amended perpetual lease agreement, the lease is for a period of 50 years with an option to extend for another 50 years. However, the
extension period of 50 years has not been included in the lease liability and right-of-use asset calculation as it remains uncertain that both parties
(Donaco and Lee Hoe Property Co., Ltd) will agree to extend the lease term. Accordingly, while Donaco has security of tenure over the Star Vegas
Casino to 15 June 2115 following finalisation of the settlement agreements, the lease liability and right-of-use asset have been calculated as at 30
June 2021 over the remaining 44 years to June 2065.
Lao Cai International Hotel Joint Venture Company Limited has a non-cancellable operating lease commitment over a 50-year term in respect of its
casino premises in Lao Cai, Vietnam. The lease commenced 8 April 2011 and the remaining lease term as at 30 June 2021 is approximately 40
years.
(i) Amounts recognised in the statement of financial position
The statement of financial position shows the following amounts relating to leases:
Right-of-use assets (recognised as part of property, plant and equipment)
Properties
Consolidated
2021
$
2020
$
31,933,947
31,933,947
3,428,647
3,428,647
The increase in the right-of-use assets during the financial year to 30 June 2021 is due to the additional lease payment of US$20 million (AU$26.6
million as at 30 June 2021 spot rate) to Lee Hoe Property Co., Ltd which grants Donaco security of tenure over the Star Vegas casino until 30 June
2115.
Lease liability
Properties - current
Properties - non-current
Consolidated
2021
$
41,445
7,650,565
7,692,010
2020
$
812,591
2,761,061
3,573,652
The lease liability has been measured at the present value of the remaining lease payments over the term of the lease. For the lease in relation to
the land in Cambodia, the lease payments were discounted using an incremental borrowing rate of 6.53%, while the lease payments for the lease
in Vietnam were discounted using a discount rate of 9.5%.
(i) Amounts recognised in the statement of comprehensive income
The statement of comprehensive income shows the following amounts relating to leases:
Consolidated
2021
$
2020
$
Depreciation of right-of-use asset (recognised as part of depreciation expense)
554,864
123,032
Interest expense (included in finance cost)
336,138
248,251
The total cash outflow for leases in 2021 was $436,899.
45
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 23. Equity - issued capital
Ordinary shares - fully paid
1,234,727,414
822,930,805
372,584,126
358,372,299
Consolidated
2021
Shares
2020
Shares
2021
$
2020
$
Details
Balance
Employee shares forfeited
Balance
Shares issued
Balance
Ordinary shares
Date
Shares
$
30 June 2019
31 December 2019
30 June 2020
27 July 2020
30 June 2021
823,592,773
(661,968)
822,930,805
411,796,609
1,234,727,414
358,656,945
(284,646)
358,372,299
14,211,827
372,584,126
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.
Entitlement offer
On 3 July 2020 the company issued a pro-rata, non-renounceable fully underwritten entitlement offer of 1 new share in the company for every 2
shares held by eligible shareholders at a price of $0.035 for 411,796,609 new shares, to raise approximately AUD14.4 million (before costs). The
offer was subsequently completed on 27 July 2020, with a total of 113,692,949 of new shares applied for by shareholders and the remaining
298,103,660 new shares acquired by Mr Lee Bug Tong and Mr Lee Bug Huy. Post completion of the entitlement offer and associated underwriting,
Mr Lee Bug Huy and Mr Lee Bug Tong hold a relevant interest in the Company of 42.12%, an increase from their previous interest of 17.99%.
The funds raised were used to make principal repayments to Mega Bank and also to meet the working capital needs of the casino operations and
other corporate, administration and transaction costs.
Capital risk management
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.
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.
In light of the impact to the consolidated entity as result of the COVID-19 global pandemic, Mega Bank has granted a waiver in relation to the
default interest and cash and cash equivalent covenant under the loan facility agreement as at 30 June 2021.
The capital risk management policy remains unchanged from the 2020 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 2019
Shares forfeited 31 December 2019
Balance 30 June 2020
Balance 30 June 2021
Number of
shares
595,224
661,968
1,257,192
$
233,470
284,646
518,116
1,257,192
518,116
46
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 24. Equity - reserves
Revaluation surplus reserve
Foreign currency reserve
Employee share option reserve
Consolidated
Balance at 1 July 2019
Foreign currency translation
Shares forfeited
Share-based payments
Balance at 30 June 2020
Foreign currency translation
Consolidated
2021
$
2020
$
1,855,327
28,097,197
3,369,254
33,321,778
1,855,327
42,454,937
3,369,254
47,679,518
Revaluation
surplus
reserve
$
Share-based
payment
reserve
$
Foreign
currency
reserve
$
3,088,689
-
284,646
(4,081)
37,244,147
5,210,790
-
-
1,855,327
-
-
-
1,855,327
-
3,369,254
-
42,454,937
(14,357,740)
47,679,518
(14,357,740)
Total
$
42,188,163
5,210,790
-
280,565
Balance at 30 June 2021
1,855,327
3,369,254
28,097,197
33,321,778
Nature and purpose of equity reserves
Revaluation surplus
The revaluation surplus reserve is used to record increments and decrements in the fair value of net assets of disposed entities.
Share-based payment
The reserve is used to recognise:
●
●
the grant date fair value of options issued to key management personnel but not exercised; and
the issue of options held by the Employee Share Option Trust to key management personnel.
Foreign currency
Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income as described in note 1
and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed
of.
Note 25. Equity - accumulated losses
Accumulated losses at the beginning of the financial year
Profit / (loss) after income tax expense for the year
Consolidated
2021
$
2020
$
(270,150,057)
25,177,126
(211,264,623)
(58,885,434)
Accumulated losses at the end of the financial year
(244,972,931)
(270,150,057)
Note 26. Equity - dividends
The dividend policy that was announced on 29 August 2017 stated that the consolidated entity intends to pay out 10-30% of net profit after tax as
dividends to shareholders, with the intention to provide regular half-yearly dividend payments, subject to the consolidated entity's then current
working capital requirements and growth plans. Shareholders should note that the payment of dividends is not guaranteed.
No dividends were paid for the year ended 30 June 2021 (2020: nil).
Franking credit balance
Franking credits available for subsequent reporting periods after payment of tax liability
based on a tax rate of 30% (2020: 30%)
Consolidated
2021
$
2020
$
471,682
471,682
47
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 27. Financial instruments
Financial risk management objectives
The consolidated entity's activities expose it to a variety of financial risks: market risk (including foreign currency risk and interest rate risk), credit
risk and liquidity risk. The consolidated entity's overall risk management program focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the financial performance of the consolidated entity. The consolidated entity uses different methods to
measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and
other price risks and ageing analysis for credit risk.
Risk management is carried out by senior finance executives ('finance') under policies approved by the Board of Directors ('the Board'). These
policies include identification and analysis of the risk exposure of the consolidated entity and appropriate procedures, controls and risk limits.
Finance identifies, evaluates and hedges financial risks within the consolidated entity's operating units. Finance reports to the Board on a monthly
basis.
Market risk
Market risk is the risk that changes in market prices, such as interest rate and foreign exchange rate will affect the consolidated entity's income.
Foreign currency risk
The consolidated entity is exposed to foreign exchange fluctuations in relation to cash generated for working capital purposes, denominated in
foreign currencies and net investments in foreign operations, in which the functional currencies are Vietnamese Dong and Thai Baht.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency
that is not the entity's functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. An assessment of the
sensitivity of the consolidated entity’s exposure to interest rate movements was performed, and was found to be immaterial for the purposes of
this disclosure.
Exchange rate exposures are managed within approved policy parameters and material movements are not expected. The consolidated entity does
not enter into any forward exchange contracts to buy or sell specified foreign currencies.
The average exchange rates and reporting date exchange rates applied were as follows:
Australian dollars
USD
THB
VND
CNY
MYR
SGD
HKD
Average exchange rate
2020
2021
Reporting date exchange rate
2021
2020
1.3391
0.0433
0.0001
0.2024
0.3246
0.9947
0.1726
1.4895
0.0480
0.0001
0.2119
0.3542
1.0770
0.1911
1.3301
0.0415
0.0001
0.2060
0.3203
0.9892
0.1713
1.4571
0.0471
0.0001
0.2061
0.3404
1.0443
0.1880
The carrying amount of the consolidated entity's foreign currency denominated financial assets and financial liabilities at the reporting date were as
follows:
Consolidated
USD
CNY
MYR
SGD
HKD
Assets
Liabilities
2021
2020
2021
2020
236,450
2,642,200
67,322
-
11,761
2,957,733
798,847
6,352,003
25,657
60,593
38,249
7,275,349
(2,521,638)
(6,744,703)
(2,307)
(16,715)
(57,022)
(9,342,385)
(5,563,524)
(4,335,573)
(3,522)
(17,639)
(64,031)
(9,984,289)
48
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 27. Financial instruments (continued)
A 5% strengthening of the AUD 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
USD
CNY
MYR
SGD
HKD
5%
5%
5%
5%
5%
AUD strengthened
Effect on
profit after
tax
2021
Effect on
profit after
tax
2020
114,259
205,125
(3,251)
836
2,263
319,232
238,234
(100,822)
(1,107)
(2,148)
1,289
135,446
A 5% weakening of the AUD 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.
Interest rate risk
The consolidated entity's exposure to the risk of changes in market interest rates relates primarily to the consolidated 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.
As at the reporting date, the consolidated entity had the following cash and cash equivalents and borrowings:
Consolidated
Bank loans
Cash at bank
Fixed deposits
Net exposure to cash flow interest rate risk
2021
2020
Weighted
average
interest rate
%
6.77%
0.01%
3.10%
Weighted
average
interest rate
%
7.66%
0.10%
n/a
Balance
$
(11,097,986)
1,412,484
243,735
(9,441,767)
Balance
$
(28,232,288)
3,166,510
-
(25,065,778)
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 not
significant for the purposes of this disclosure.
49
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 27. Financial instruments (continued)
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.
Liquidity risk
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.
Consolidated - 2021
%
$
Weighted
average
interest rate 1 year or less
Between 1 and
2 years
$
Between 2 and
5 years
$
Over 5 years
$
Total
contractual
maturities
$
Non-derivatives
Non-interest bearing
Trade payables
Floating chips
Interest bearing - variable
Bank loans
Lease liabilities
Total non-derivatives
-
-
3,707,146
6,817,476
-
-
-
-
-
-
3,707,146
6,817,476
6.77%
2.31%
11,097,986
378,079
22,000,687
-
319,224
319,224
-
1,334,733
1,334,733
-
27,977,231
27,977,231
11,097,986
30,009,268
51,631,876
Consolidated - 2020
%
$
Weighted
average
interest rate 1 year or less
Between 1 and
2 years
$
Between 2 and
5 years
$
Over 5 years
$
Total
contractual
maturities
$
Non-derivatives
Non-interest bearing
Trade payables
Floating chips
Interest-bearing - variable
Bank loans
Lease liabilities
Total non-derivatives
-
-
7,822,565
4,759,231
-
-
-
-
-
-
7,822,565
4,759,231
7.66%
7.71%
27,325,224
298,284
40,205,304
907,064
245,146
1,152,210
-
548,705
548,705
-
13,665,993
13,665,993
28,232,288
14,758,128
55,572,212
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
50
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 28. Key management personnel disclosures
Directors
The following persons were directors of Donaco International Limited during the financial year:
Kurkye Wong
Yan Ho Leo Chan
Roderick John Sutton
Simon Vertullo
Norman Mel Ashton
Lee Bug Huy
Porntat Amatavivadhana
Andrew Phillips
Issaraya Intrapaiboon
Executive Director (resigned 21 December 2020)
Executive Director (resigned 21 December 2020)
Non-Executive Director
Non-Executive Director (resigned 2 September 2020)
Non-Executive Director (resigned 2 September 2020)
Executive Director (appointed 3 August 2020)
Non-Executive Chairman (effective 2 September 2020, appointed Non-Executive Director 3
August 2020)
Non-Executive Director (appointed 2 September 2020)
Non-Executive Director (appointed 2 September 2020)
Other key management 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:
Paul Arbuckle
Gordon Lo
Chief Executive Officer (terminated 4 August 2020)
Chief Financial Officer
Compensation
The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below:
Short-term employee benefits
Post-employment benefits
Share-based payments
Note 29. Remuneration of auditors
Consolidated
2021
$
1,541,998
14,434
-
1,556,432
2020
$
2,412,038
72,332
77,759
2,562,129
During the financial year the following fees were paid or payable for services provided by Crowe the auditor of the company, and unrelated firms:
Audit services - Crowe 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
Consolidated
2021
$
2020
$
123,000
123,000
150,469
1,034
151,503
123,000
123,000
206,969
1,145
208,114
47,782
79,182
2,204
2,657
49,986
81,839
51
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 30. Commitments
Capital commitments
Committed at the reporting date but not recognised as liabilities, payable:
Property, plant and equipment
Lease commitments - operating (as lessor)
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
Consolidated
2021
$
2020
$
37,258
37,258
-
-
-
-
7,520
7,520
The consolidated entity leases out its premises in the DNA Star Vegas Casino under non-cancellable operating leases. There were no outstanding
leases as at 30 June 2021.
Note 31. Related party transactions
Parent entity
Donaco International Limited is the legal parent entity. Donaco International Limited is listed on the Australian Securities Exchange (ASX: DNA).
Subsidiaries
Interests in subsidiaries are set out in note 33.
Key management personnel
Disclosures relating to key management personnel are set out in note 28 and the remuneration report included in the directors' report.
Transactions with related parties
The following transactions occurred with related parties during 2021:
Consolidated
2021
$
2020
$
Non-competition settlement amount from vendors of DNA Star Vegas
Settlement of management fee payable and interest expense to vendors of DNA Star Vegas
50,885,800
(24,103,800)
-
-
Rental received from Arte Mobile Technology Pte Ltd (subsidiary of Isentric Limited)
-
7,448
The above transactions occurred at commercial rates.
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.
52
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 32. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit / (loss) after income tax
Total comprehensive income / (loss)
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
2021
$
2020
$
22,186,718
(54,222,285)
22,186,718
(54,222,285)
7,626,103
32,074,451
153,466,660
162,451,492
15,055,633
60,439,010
15,055,633
60,439,010
420,547,212
3,369,254
406,335,385
3,369,254
(285,505,439)
(307,692,157)
138,411,027
102,012,482
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
As at 30 June 2021, 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 2021 and 30 June 2020.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment at as 30 June 2021 and 30 June 2020.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 1, except for the following:
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
●
● Dividends received from subsidiaries are recognised as other income by the parent entity.
Note 33. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting
policy described in note 1:
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
Donaco Holdings (Hong Kong) Pte Ltd *
DNA Star Vegas Co. Limited **
Donaco Investment (S) Pte Ltd *
* Subsidiary of Donaco Singapore Pte Ltd
** Subsidiary of Donaco Hong Kong Limited
The principal activities of each subsidiary are:
Ownership interest
Principal place of business /
Country of incorporation
Australia
Singapore
British Virgin Islands
Malaysia
Vietnam
Hong Kong
Hong Kong
Cambodia
Singapore
2021
%
100%
100%
100%
100%
95%
100%
100%
100%
100%
2020
%
100%
100%
100%
100%
95%
100%
100%
100%
100%
Donaco Australia Pty Ltd - Dormant (previously operated New Zealand games service, discontinued in January 2015).
Donaco Singapore Pte Ltd - Holding company for Vietnamese casino operations.
Donaco Holdings Ltd - Cost centre for corporate operations.
Donaco Holdings Sdn Bhd - Cost centre for corporate operations.
Donaco Holdings (Hong Kong) Pte Ltd - Cost centre for corporate operations and marketing activities.
Lao Cai International Hotel Joint Venture Company - Operates Vietnamese casino operations.
Donaco Hong Kong Limited - Holding company for Cambodian casino operations.
DNA Star Vegas Co. Limited - Operates Cambodian casino operations.
Donaco Investment (S) Pte Ltd - Investment company.
53
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 33. Interests in subsidiaries (continued)
Summarised financial information
Summarised financial information of the subsidiary with non-controlling interests that are material to the consolidated entity are set out below:
Lao Cai International Hotel Joint Venture Company
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
(Loss) / profit before income tax expense
Income tax expense
(Loss) / profit after income tax expense
Statement of cash flows
Net cash used in operating activities
Net cash from investing activities
Net cash used in financing activities
Net decrease in cash and cash equivalents
Other financial information
(Loss) / profit attributable to non-controlling interests
Accumulated non-controlling interests at the end of reporting period
2021
2020
$
$
4,093,319
7,650,189
59,365,982
67,952,564
63,459,301
75,602,753
10,821,281
17,200,461
5,943,869
3,065,414
16,765,150
20,265,875
46,694,151
55,336,878
1,203,215
13,727,632
(5,452,536)
(13,385,867)
(4,249,321)
15,001
341,765
(123,334)
(4,234,320)
218,431
(1,651,333)
(1,202,711)
761
46,195
(994,735)
(6,104,935)
(2,645,307)
(7,261,451)
(230,176)
1,801,585
11,815
2,031,761
54
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 34. Events after the reporting period
Additional funding
The Board of Donaco has approved a shareholder loan from Mr Lee Bug Huy, the current Chief Executive Officer and executive director of Donaco,
for borrowings of up to US$7.8 million (AU$10.4 million as at 30 June 2021 spot rate). An unsecured loan facility agreement was signed in July
2021 between Mr Lee Bug Huy and Donaco for a commitment of US$7.8 million (AU$10.4 million as at 30 June 2021 spot rate), which is available
for drawdowns between July 2021 and December 2021, subject to the terms of the agreement. Drawdowns of US$1 million (AU$1.3 million as at
30 June 21 spot rate) were made in July, August and September 2021, and the next drawdown of US$1 million (AU$1.3 million as at 30 June 2021
spot rate) is scheduled on 29 October 2021. The loan is due to be repaid three years from the first drawdown, however the lender may at any time
require early repayment with a minimum of one month's prior notice. The lender has provided a letter of financial support to Donaco which states
that he will not withdraw or call upon the loan should it affect any creditor of the Company in a detrimental way. Such financial support is provided
for the foreseeable future covering a minimum period to September 2022. The terms of the loan are materially the same as those of the Mega
Bank facility, including an interest rate of 6% per annum. The loan is expected to be repaid from operational cash flow within the loan term.
COVID-19 pandemic
Subsequent to year end, the impact of the COVID-19 pandemic continues to evolve with restrictions imposed by the Cambodian government and
international borders remaining shut. As vaccination efforts progress in Thailand and Cambodia, Donaco prepares to resume full casino operations
at Aristo and Star Vegas once the COVID-19 situation improves. Management continues to place a heavy emphasis on continued cost control
measures and mitigation activities in order to reduce operating expenses and to preserve cash balances. The consolidated entity will continue to
monitor the potential implications of the ongoing pandemic and the impact on operations.
The Directors are not aware of any other events subsequent to the reporting period that may have a material impact on the financial statements.
Note 35. Net cash flows from operating activities
a) Reconciliation of profit / (loss) after income tax to net cash from operating activities
Profit / (loss) after income tax expense for the year
24,946,950
(58,873,619)
Consolidated
2021
2020
$
$
Adjustments for:
Depreciation and amortisation
Impairment of assets
Share-based payments
Non-cash net proceeds on settlement of litigation matters
Non-cash finance costs
Change in operating assets and liabilities:
(Increase) / decrease in trade and other receivables
(Increase) / decrease in inventories
Decrease in other operating assets
Increase in deferred tax assets
Decrease in trade and other payables
Increase / (decrease) in provision for income tax
Decrease in provisions for employee benefits
Net cash used in operating activities
b) Change in liabilities arising from financing activities
Borrowings at beginning of the year (note 21)
Proceeds from loan borrowings
Repayments
Foreign exchange adjustments
Other non-cash movements
Borrowings at end of the year (note 21)
8,984,417
8,784,961
-
(50,885,800)
6,732,271
10,220,516
50,512,420
(4,081)
-
978,452
(370,023)
1,310,951
(41,812)
204,109
(13,811)
(3,898,885)
1,137,139
(120,484)
478,514
492,861
(15,163)
(6,152,662)
(1,610,400)
(549,711)
(4,540,968)
(3,211,922)
2021
$
28,232,288
493,243
(16,150,859)
(2,345,520)
868,834
11,097,986
55
DONACO INTERNATIONAL LIMITED
Notes to financial statements
30 June 2021
Note 36. Earnings / (loss) per share
Profit / (loss) after income tax
Non-controlling interest interest share of loss / (profit)
Consolidated
2021
$
2020
$
24,946,950
(58,873,619)
230,176
(11,815)
Profit / (loss) after income tax attributable to the owners of Donaco International Limited
25,177,126
(58,885,434)
Weighted average number of ordinary shares used in calculating basic earnings / loss per share
Adjustments for calculation of diluted earnings / loss per share:
Options over ordinary shares
Weighted average number of ordinary shares used in calculating diluted earnings / loss per share
Basic earnings / (loss) per share
Diluted earnings / (loss) per share
Note 37. Share-based payments
Employee shares
Numbers
Numbers
1,199,365,413
823,261,789
-
1,199,365,413
-
823,261,789
Cents
Cents
2.10
2.10
(7.15)
(7.15)
No shares were granted or outstanding under an employee share scheme at any time during the year ended 30 June 2021.
Employee options
No options were granted or outstanding at any time during the year ended 30 June 2021.
Note 38. Contingent assets and liabilities
As at 30 June 2021, the consolidated entity has contingent liabilities in respect of the increased penalties and interest on the late payment of the
obligatory payments payable by DNA Star Vegas to the Ministry of Economy and Finance of the Kingdom of Cambodia (see note 7). The contingent
liabilities are as follows:
Penalties plus interest on non-payment of tax obligatory
payments to MoEF under:
- Lump Sum Tax Regime
- Real Tax Regime
No provisions are recognised as it is not probable that a future sacrifice of economic benefits will be required.
2021
$
2020
$
232,768
133,010
365,778
-
-
-
56
DONACO INTERNATIONAL LIMITEDDirectors' declaration30 June 2021In the directors' opinion:● ● ● ● Mr Porntat AmatavivadhanaChairman 29 September 2021Sydney On behalf of the directorsthere 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.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 2021 and of its performance for the financial year ended on that date; and57 Crowe Sydney
ABN 97 895 683 573
Level 15 1 O’Connell Street
Sydney NSW 2000
Australia
Tel +61 2 9262 2155
Fax +61 2 9262 2190
www.crowe.com.au
Independent Auditor’s Report to the Members of Donaco
International Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Donaco International Limited (the Company) and its
subsidiaries (the consolidated entity), which comprises the consolidated statement of financial position
as at 30 June 2021, 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 2021 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.
Liability limited by a scheme approved under Professional Standards Legislation.
The title ‘Partner’ conveys that the person is a senior member within their respective division, and is among the group of persons who hold an
equity interest (shareholder) in its parent entity, Findex Group Limited. The only professional service offering which is conducted by a partnership
is external audit, conducted via the Crowe Australasia external audit division and Unison SMSF Audit. All other professional services offered by
Findex Group Limited are conducted by a privately owned organisation and/or its subsidiaries.
Findex (Aust) Pty Ltd, trading as Crowe Australasia is a member of Crowe Global, a Swiss verein. Each member firm of Crowe Global is a
separate and independent legal entity. Findex (Aust) Pty Ltd and its affiliates are not responsible or liable for any acts or omissions of Crowe
Global or any other member of Crowe Global. Crowe Global does not render any professional services and does not have an ownership or
partnership interest in Findex (Aust) Pty Ltd. Services are provided by Crowe Sydney, an affiliate of Findex (Aust) Pty Ltd. Liability limited by a
scheme approved under Professional Standards Legislation.
© 2021 Findex (Aust) Pty Ltd
58
Independent Auditor’s Report
Donaco International Limited
Material Uncertainty Related to Going Concern
We draw attention to Note 1 in the financial report, which indicates that the consolidated entity’s
current liabilities exceeded its current assets by $20,103,811 as at 30 June 2021. The consolidated
entity recorded net operating cash outflows of $4,540,968 and net profit after income tax of
$24,946,950 for the year then ended. The net profit after income tax included non-recurring other
income of $50,885,800. As stated in Note 1, the directors have prepared the 30 June 2021 financial
report on a going concern basis and have been taking actions to address these financial positions.
Should the events or actions set forth in Note 1 not eventuate, it may result in a material uncertainty
that may cast significant doubt on the consolidated entity’s ability to continue as a going concern. Our
opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Impairment assessment of intangible assets (Note 13)
Key Audit Matter
How we addressed the key audit matter
The carrying value of the consolidated entity’s
casino licence asset was $16.6 million as at 30 June
2021. The licence is classified as an intangible asset
with indefinite useful life and is subject to annual
impairment assessment.
Our audit procedures included, amongst others, the
following:
• Assessed management’s determination of the
cash generating unit (“CGU”) and the CGU’s
carrying value.
Impairment of $8.4 million was recognised in the
statement of profit or loss and other comprehensive
income for the year based on impairment
assessments performed as at 31 December 2020
and 30 June 2021.
The impairment assessment of the intangible asset
is a key audit matter because of the complexity and
subjectivity involved, including key assumptions
made.
• 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, and
subsequently translated into the Australian Dollar
(AUD).
• Together with our valuation specialists, assessed
reasonableness of the key assumptions used,
being revenue growth rate, discount rate, and
terminal growth rate.
• 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 and
growth rates.
• Evaluated the adequacy of the judgments and
sources of estimation uncertainty disclosures in
the consolidated financial report.
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Independent Auditor’s Report
Donaco International Limited
Accounting outcome from the settlement agreements (Note 1, Note 5, Note 6, Note 22)
Key Audit Matter
How we addressed the key audit matter
The consolidated entity and the vendors of the Star
Vegas business signed settlement agreements on 2
March 2020, and the agreements were finalised
upon securing an approval from Mega Bank on 21
December 2020. The settlement concluded the
various legal proceedings in Australia and other
various jurisdictions.
The accounting treatment of the settlement
agreements is a key audit matter because of their
significant impacts to various areas in the financial
statements.
Our audit procedures included, amongst others, the
following:
• Read the settlement agreements and checked the
completion to supporting documents, including an
approval from Mega Bank.
• Obtained and checked responses from the
solicitors which confirmed that all legal issues had
been set aside.
• Assessed appropriateness of the accounting
treatment of the transactions, including the
recognition and measurement.
• Checked updated lease and right-of-use assets
calculation that incorporated the impact of the
amended perpetual lease agreement.
• Evaluated the adequacy of the presentation and
disclosure in the consolidated financial report.
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 2021 but
does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the
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.
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Independent Auditor’s Report
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Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
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 entity
financial report. The auditor is responsible for the direction, supervision and performance of the
consolidated entity 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.
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Donaco International Limited
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 18 of the directors’ report for the
year ended 30 June 2021.
In our opinion, the remuneration report of Donaco International Limited for the year ended 30 June
2021 complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
Crowe Sydney
Suwarti Asmono
Partner
29 September 2021
Sydney
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DONACO INTERNATIONAL LIMITED
Shareholder information
30 June 2021
The shareholder information set out below was applicable as at 13 August 2021.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Equity security holders
Number
of holders
of ordinary
shares
318
335
203
552
264
1,672
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Ordinary Shares
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
ON NUT ROAD LIMITED
TECHATUT SUKCHAROENKRAISRI
BHUVASITH CHAIARUNROJH
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
MR TECK LEE PATRICK TAN
BNP PARIBAS NOMINEES PTY LTD
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