REG - Webis Holdings PLC - Audited Accounts published and Notice of AGM
07/12/2021 07:00
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RNS Number : 7497U Webis Holdings PLC 07 December 2021
For immediate
release
7
December 2021
Webis Holdings plc
("Webis" or "the Group")
Annual Report and Financial Statements for the year ended 31 May 2021
Notice of Annual General Meeting
Further to the announcement of 29 November 2021, Webis Holdings plc, the
global gaming group, today announces its audited results and the publication
of its Report and Accounts for the year ended 31 May 2021 ("Accounts"),
extracts from which are set out below. There has been no change to the primary
statements in the intervening period and the Independent Auditor's Report is
unqualified.
Denham Eke, Non-executive Chairman stated:
"I am pleased to report our profit for the year was US$ 0.824 million, a
marked increase on the 2020 loss of US$ 0.284 million. This is a very
significant turnaround from our previous losses in 2020 and 2019 and shows
signs of promise for the future."
The Accounts are being posted to shareholders today together with the Notice
of Annual General Meeting, and will be available on the Group's website
www.webisholdingsplc.com and at the Group's Registered Office: Viking House,
Nelson Street, Douglas, Isle of Man IM1 2AH. The AGM will be held at The
Claremont Hotel, 18/19 Loch Promenade, Douglas, Isle of Man, at 11.00 a.m. on
31 January 2022.
We will inform shareholders should there be any change to the venue. The Board
has considered how best to deal with the practical arrangements for the
meeting considering the uncertainty surrounding travel during the ongoing
COVID-19 pandemic. The Board considers it important that all shareholders
should have the opportunity to exercise their voting rights at the AGM. To
this end, the Company invites shareholders to complete the voting proxy form
as early as possible. Shareholders may also submit questions to the Company
Secretary either in writing at the registered office or by email to
ir@webisholdingsplc.com prior to the meeting and as early as possible. The
Company will continue to monitor the advice of the Isle of Man Government and,
in the event of material changes to the current advice, the Company will
update its shareholders via the Regulatory Information Service.
The Accounts are being posted to shareholders today together with the Notice
of Annual General Meeting and will be available on the Group's website
www.webisholdingsplc.com (http://www.webisholdingsplc.com) and at the Group's
Registered Office: Viking House, Nelson Street, Douglas, Isle of Man IM1 2AH.
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 as it forms part of UK domestic law by virtue of the
European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance
with the Company's obligations under Article 17 of MAR.
For further information:
Webis Holdings plc Beaumont Cornish Limited
Denham Eke Roland Cornish/James Biddle
Tel: 01624 639396 Tel: 020 7628 3396
Chairman's Statement
Introduction
I am pleased to report an excellent performance from our core USA based
business WatchandWager.com LLC ("WatchandWager") over the financial year with
a significant surge in profitability as can be seen below. The company has
proved to be robust despite the impact of Covid-19 upon our key content and
operations. Our online business performed well, and our racetrack
operation at Cal Expo was also remarkably resilient in the face of difficult
operational challenges.
I am also pleased to report that these positive trends have continued into the
new financial year. That said, we are very aware that with reduced leisure
restrictions relating to Covid-19, we are now facing increased competition for
the leisure dollar. This is a focus for our executive team based in the USA.
On a wider picture and perhaps most importantly, we believe that we have
further cemented our position as a credible and proven licence operator across
the USA and in particular in California. One needs only to take a cursory
check of the online and business media to see the progress that has been made
in regulating sports betting in many states in the USA. In addition, we
continue to see significant large-scale merger and acquisition activity in the
sector, unprecedented anywhere else but in the USA.
Our key focus and highest priority remains in California, the biggest market
in the USA and indeed, by most statistics, ranked the fifth largest economy in
the world. We remain very well positioned in this state and this is commented
on in more detail below.
It should be noted that this positive report comes with the caveat that
external factors, including a potential increase in COVID-19 or any other
factors outside our control, could have a detrimental impact on business
performance.
Year End Results Review
The Group amounts wagered for the year ended 31 May 2021 were US$ 132.1
million (2020: US$ 105.3 million). Gross Profit reported was up at US$
5.8million (2020: US$ 4.53 million), an increase of 27.9% on prior year.
Operating costs were up on last year at US$ 5.3 million, (2020 US$ 4.9
million), with the increases primarily due to managing our operation
effectively during the pandemic and increases in costs directly related to the
improvement in performance in the year under review.
I am pleased to report our profit for the year was US$ 0.824 million, a marked
increase on the 2020 loss of US$ 0.284 million. This is a very significant
turnaround from our previous losses in 2020 and 2019 and shows signs of
promise for the future.
Shareholder equity stands at US$ 1.7 million (2020: US$ 0.9 million). Total
cash stands at US$ 5.1 million (2020: US$ 4.0 million), which includes
ring-fenced funds held as protection against our player liability as required
under USA and Isle of Man gambling legislation. An amount of US$ 0.88 million
was held during the year as bonds and deposits with regulatory authorities.
Shareholders should note that during the previous period, through our US
bankers Wells Fargo, we applied for and received a loan of $319,994 from the
USA Small Business Administration ("SBA"). Subsequent to the end of this
period, a forgiveness application has been submitted for the entirety of this
loan, which is currently under review with the SBA. We are confident that we
have proven to Wells Fargo and the SBA that this loan was fully utilized in
the correct manner, namely, to ensure that all staff were retained on payroll
and that no redundancies or furlough schemes were entered into. As a result,
we expect that this loan will be fully forgivable, and the Group has
accordingly fully recognised this as income as of 31 May 2021.
Approach to Risk and Corporate Governance
As part of the adoption of the Quoted Companies Alliance Corporate Governance
code in 2018, the Board completed an assessment of the risks inherent in the
business and defined and adopted a statement of risk appetite, being the
amount and type of risk, it is prepared to seek, accept or tolerate in pursuit
of value. This being: -
"The Group's general risk appetite is a moderate, balanced one that allows it
to maintain appropriate growth, profitability and scalability, whilst ensuring
full regulatory compliance."
The Group's primary risk drivers include: -
Strategic
Reputational
Credit
Operational
Market
Liquidity, Capital and Funding
Regulatory and Compliance
Conduct
Our risk appetite is classified under an "impact" matrix defined as Zero, Low,
Medium and High. Appropriate steps are implemented to ensure the prudential
control monitoring of risks to the Group and the Audit, Risk and Compliance
Committee oversees this essential requirement. Further details of the
Corporate Governance Statement will be found on pages 10 to 13 of this report
and should be read in conjunction with my report.
The Board refined the Group's business plan which incorporates the risk and
compliance framework.
Performance by Sector
WatchandWager
Business-to-Consumer
www.watchandwager.com/mobile
This sector performed very well during the period. We experienced a 53%
increase in handle versus the same period last year. Importantly, we saw a 67%
increase in active player wagering from our non-rebate players on the website
versus the prior year. This sector derives a much higher margin than our
Business-to-Business operation.
These increases have primarily been due to improvements in our website
application especially in the areas of content, player verification, payments,
retention, and re-activation marketing. It should be noted that we did not
spend any significant sums on external media advertising for player
acquisition. This was a deliberate policy as we continue to manage cash flow
throughout the operation.
That said, we should be realistic about the levels of growth that we saw
during the period and these levels. We believe that equivalent levels have
been achieved by our competitors, especially the major online gaming
companies. This means that making this sector more competitive is a key goal
for the company.
Business-to-Business
This sector covers the provision of pari-mutuel (pool) wagering to high-roller
clients, many of whom specialise in algorithmic, or computer assisted trading,
on a wide range of global racetracks.
Conversely, this sector was mainly stagnant during the period and is becoming
increasingly competitive as content holders manage their rates and control
distribution. Whilst it is important that we manage and provide the highest
standard of service to existing and potentially new players, we will only
engage in business if it is compliant with the key licences that we hold. It
goes without saying that our licences are the key asset that the company
holds. In addition, we will only engage in business in this sector if it
provides a satisfactory margin back to WatchandWager, otherwise this becomes a
race to the bottom.
Cal Expo
Our racetrack operation at Cal Expo Sacramento performed very well during the
period under adverse operational challenges due to Covid-19. We were unable to
race at the end of the season as directed by the Sacramento Department of
Health and on most days, we were unable to allow customers onto the track.
This of course reduced our on-track revenue to almost zero, while the cost of
operations remained higher due to emergency procedures relating to the
pandemic.
Against that, our product was extremely strong and well covered in the racing
media. This meant that we received a significant increase in wagering from our
online and international partners (typically known in industry parlance as
"dark monies") and this offset the losses at the track.
Importantly, I am very pleased to report that we operated a safe and
successful meeting with no fatalities amongst our large horse population.
Health and safety and the protection of our equine and human participants
continues to be integral to our operation at Cal Expo.
Covid-19 and other risk factors
During the period we have updated our Risk Assessment procedures and will
continue to do so. Of course, in terms of our online operations, IT Security
remains integral to our operations, and we have made many improvements in this
area during and after the period reported. In terms of our retail operations,
external threats such as Covid-19 remain a concern, albeit largely out of our
control. In the same way, the persistent wildfires in California remain a risk
to our operations, but we have robust protocol in place to deal with these
external issues.
Licences, Regulatory and Compliance
I am pleased to report that during the period we renewed all our key licences.
As reported, we also added further States for licenced wagering. We also
commissioned a comprehensive legal opinion of our position regarding
state-by-state wagering. This was well received by our bankers, payment
providers, and content providers.
In addition, I can report that the Group did not have any regulatory breaches
or complaints from our valued content providers during the period, and indeed
to date. We consider compliance and social responsibility to be important to
the brand and company.
Subsequent Events (post period reported)
Trading
As mentioned above, I can report our positive trading momentum has continued.
We are seeing good levels of business in our B2C sector and at Cal Expo, even
whilst we are out of season. Our B2B business remains steady but showing
little growth as per previous trends.
With the usual caveat for external factors, the Board remains confident of
continued progress and reasonable profitability. A further update will be
provided post half year with an announcement due in February 2022.
Cal Expo License Renewal
As reported, we have resumed racing in November 2021 and expect a positive and
profitable season currently planned through end of April 2022. Shareholders
should be reminded that our licence with our Cal Expo state landlord lasts
until 2025, with an option to renew until 2030. This remains our most
important asset as analysed in the section below. We continue to enjoy good
relations with our landlord and our State regulator and that is very important
to our business.
USA/CA regulated sports betting
This area is of course arguably the most interesting area of our business,
with our strategic licences in California in both online and land-based
gambling the priority to the company. Shareholders will have noted the
increasing expansion in regulated sports wagering across the USA, and we
remain well positioned in California, truly the land of opportunity, given
likely regulation and the enormous market size in the State.
At time of writing, we are aware of at least four separate bills/propositions
that could be voted upon in November 2022, in the form of a proposition
(referendum). We are working closely with our advisors and contracted
lobbyists in Sacramento to provide input into the political process. It should
be noted that we strongly oppose the current Native American proposition which
is based on sports gaming only to be available via their own casinos and
land. This is obviously commercially highly unattractive to anyone who
understands the sports betting business and will derive negligible revenue to
the state. We much prefer several of the more progressive draft bills in the
State, which provide credible opportunities for all licensed land based and
mobile operators based in the State. We continue to work with regulators to
make them understand these issues and drive forward an economically attractive
option for the State and licence holders.
It should be noted we continue to also assess other opportunities outside
California and will update shareholders if feasible business opportunities
come to rise.
Finally, all observers will know that the rapid expansion of regulated gaming
in the USA is the most exciting development in the sector globally. As a
company we are very confident of our position in the USA and California in
particular and our unique position. We welcome dialogue with credible software
providers or operators in the sector who wish to assist our efforts. Should
these discussions move forward, we will of course update shareholders in line
with our regulatory obligations.
Summary and Outlook
I wish to confirm the support of our principal shareholder for our USA
operations, strategy, and expansion plans. We are in a stable and improved
position as a business, and we also believe we can raise further capital to
support our operations both short term and indeed for future funding of our
USA strategy.
Finally, I would like to thank all our shareholders and customers for their
continued loyalty. In addition, I would like to thank all of our staff and
team for their work and commitment to keeping the operation "on the road"
during some of the logistical difficulties all companies have experienced in
the recent period.
Denham Eke
Non-executive Chairman
For further information:
Webis Holdings plc Tel:
01624 639396
Denham Eke
Beaumont Cornish Limited Tel: 020 7628
3396
Roland Cornish/James Biddle
Consolidated Statement of Comprehensive Income
For the year ended 31 May 2021
Note
2021 2020
US$000 US$000
Amounts wagered 132,149 105,325
Revenue 2 55,668 43,436
Cost of sales (49,757) (38,820)
Betting duty paid (114) (83)
Gross profit 5,797 4,533
Operating costs (5,314) (4,908)
Impairment movement on trade receivables 21 7 (18)
Re-organisational and other costs - (28)
Other gains / (losses) 2 (29)
Government grant 15 272 48
Other income 185 212
Operating profit / (loss) 3 949 (190)
Finance costs 4 (125) (94)
Profit / (loss) before income tax 824 (284)
Income tax expense 6 - -
Profit / (loss) for the year 824 (284)
Total comprehensive profit / (loss) for the year 824 (284)
Basic earnings per share for profit / (loss) attributable to the equity 7 0.21 (0.07)
holders of the Company during the year (cents)
Diluted earnings per share for profit / (loss) attributable to the equity 7 0.20 (0.07)
holders of the Company during the year (cents)
Statements of Financial Position
As at 31 May 2021
Note 31.05.21 31.05.21 31.05.20
Group Company 31.05.20 Company
US$000 US$000 Group US$000
US$000
Non-current assets
Intangible assets 8 12 - 30 -
Property, equipment and motor vehicles 9 380 6 415 7
Investments 10 - 3 - 2
Bonds and deposits 11 101 - 101 -
Total non-current assets 493 9 546 9
Current assets
Bonds and deposits 11 882 - 882 -
Trade and other receivables 13 1,896 150 1,256 463
Cash, cash equivalents and restricted cash 12 5,083 2,142 3,969 1,780
Total current assets 7,861 2,292 6,107 2,243
Total assets 8,354 2,301 6,653 2,252
Equity
Called up share capital 17 6,334 6,334 6,334 6,334
Share option reserve 17 42 42 42 42
Retained losses (4,684) (5,516) (5,508) (5,526)
Total equity 1,692 860 868 850
Current liabilities
Trade and other payables 14 4,995 91 3,749 52
Deferred income 15 - - 272 -
Loans, borrowings and lease liabilities 16 572 500 97 -
Total current liabilities 5,567 591 4,118 52
Non-current liabilities
Loans, borrowings and lease liabilities 16 1,095 850 1,667 1,350
Total non-current liabilities 1,095 850 1,667 1,350
Total liabilities 6,662 1,441 5,785 1,402
Total equity and liabilities 8,354 2,301 6,653 2,252
Statements of Changes in Equity
For the year ended 31 May 2021
Group Called up Share option reserve Retained earnings Total
share capital US$000 US$000 equity
US$000 US$000
Balance as at 31 May 2019 6,334 42 (5,224) 1,152
Total comprehensive loss for the year:
Loss for the year - - (284) (284)
Transactions with owners:
Share-based payment expense (note 17) - - - -
Balance as at 31 May 2020 6,334 42 (5,508) 868
Total comprehensive profit for the year:
Profit for the year - - 824 824
Transactions with owners:
Share-based payment expense (note 17) - - - -
Balance as at 31 May 2021 6,334 42 (4,684) 1,692
Called up Share option reserve Retained earnings Total
share capital US$000 US$000 equity
US$000 US$000
Company
Balance as at 31 May 2019 6,334 42 (5,412) 964
Total comprehensive loss for the year:
Loss for the year - - (114) (114)
Transactions with owners:
Share-based payment expense (note 17) - - - -
Balance as at 31 May 2020 6,334 42 (5,526) 850
Total comprehensive profit for the year:
Profit for the year - - 10 10
Transactions with owners:
Share-based payment expense (note 17) - - - -
Balance as at 31 May 2021 6,334 42 (5,516) 860
Consolidated Statement of Cash Flows
For the year ended 31 May 2021
Note 2021 2020
US$000 US$000
Cash flows from operating activities
Profit / (loss) before income tax 824 (284)
Adjustments for:
- Depreciation of property, equipment and motor vehicles 9 119 122
- Amortisation of intangible assets 8 26 73
- Rent concession received (5) (13)
- Finance costs 4 125 94
- Government grant utilised (272) (48)
- Other foreign exchange movements 222 (83)
Changes in working capital:
- Increase in receivables (640) (65)
- Increase in payables 1,246 853
Cash flows from operations 1,645 649
Bonds and deposits placed in the course of operations 11 - -
Net cash generated from operating activities 1,645 649
Cash flows from investing activities
Purchase of intangible assets 8 (8) -
Purchase of property, equipment and motor vehicles 9 (84) (39)
Net cash used in investing activities (92) (39)
Cash flows from financing activities
Interest paid 4 (125) (94)
Payment of lease liabilities and rent concessions received 19 (111) (101)
Repayment of loans and borrowings (5) (1)
Receipt of Government funding/grant - 320
Increase in loans, borrowings and lease liabilities 24 556
Net cash (used in) / generated from financing activities 16 (217) 680
Net increase in cash and cash equivalents 1,336 1,290
Cash and cash equivalents at beginning of year 2,499 1,363
Exchange (losses) / gains on cash and cash equivalents (222) 85
Increase in movement of restricted cash (375) (239)
Cash and cash equivalents at end of year 12 3,238 2,499
Notes to the Financial Statements
For the year ended 31 May 2021
1 Reporting entity (the "Company")
Webis Holdings plc is a company domiciled in the Isle of Man. The address of
the Company's registered office is Viking House, Nelson Street, Douglas, Isle
of Man, IM1 2AH. The Webis Holdings plc consolidated financial statements as
at and for the year ended 31 May 2021 consolidate those of the Company and its
subsidiaries (together referred to as the "Group").
1.1 Basis of preparation
(a) Statement of compliance
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") and its interpretations
as adopted by the European Union.
The Group has consistently applied the accounting policies as set out in note
1.2 to all periods presented in these financial statements.
Functional and presentational currency
These financial statements are presented in US Dollars which is the Group's
primary functional currency and its presentational currency. Financial
information presented in US Dollars has been rounded to the nearest thousand,
unless otherwise indicated. All continued operations of the Group have US
Dollars as their functional currency.
Other information presented
In line with the Isle of Man Companies Acts 1931-2004, the Company also
presents Parent Company Statements of Financial Position, the Parent Company
Statement of Changes in Equity and related disclosures
(b) Basis of measurement
The Group consolidated financial statements are prepared under the historical
cost convention except where assets and liabilities are required to be stated
at their fair value.
(c) Use of estimates and judgement
The preparation of the Group financial statements in conformity with IFRS as
adopted by the EU requires management to make judgements, estimates and
assumptions that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. Although these estimates are
based on management's best knowledge and experience of current events and
expected economic conditions, actual results may differ from these estimates.
The Directors consider the only critical estimate area to be as follows:
· Note 21 - the measurement of Expected Credit Loss ("ECL")
allowance for trade and other receivables and assessment of specific
impairment allowances where receivables are past due.
Going concern
The Group and Parent Company financial statements have been prepared on a
going concern basis.
As indicated in the statement of comprehensive income, the Group has seen a
significant improvement in results with an uplift in profitability of
$1,108,000 when compared to last year. The net profit in the current year is
US$824,000 (2020: loss of US$284,000) and due to that, net assets have
increased from US$868,000 to US$1,692,000.
In advance of other sports, the horseracing industry continued to operate
during the lockdown period of the pandemic in 2020, which allowed the industry
to attract higher player numbers and wagering volumes and this has resulted in
improved performance and has increased Group profitability during 2020/21.
Extensive efforts have been made to promote the content and markets the Group
provides to a wider customer base with an increased focus on player retention.
Whilst there can be no certainty as to the level and duration of higher
volumes and improved trading results, significant attention is being applied
to sustain these trading patterns through attracting and retaining new
players.
This improved performance has led to a more positive cash flow position,
growing the Group operational cash, which allows the Group to continue to meet
its liabilities for the foreseeable future.
In order to help achieve and maintain its goal of profitability and
maintaining adequate liquidity in order to continue its operations the
Directors are pursuing strategies that include:
· broadening the Group's client base and the continued expansion of
its business to customer base;
· continuing to renew and acquire further US state regulated gaming
licenses and continuing to develop and expand the Cal Expo racetrack
operation; and
· taking advantage of the anticipated regulatory change in the
State of California's adoption of sports betting legislation which will
further open up opportunities for the Group
Whilst the Directors continue to assess all strategic options in relation to
the strategies noted in the previous paragraph, the Directors recognize that
the ultimate success of strategies adopted is difficult to predict as they
require additional liquidity to pursue the required investment, including
bonds to be placed with the relevant authorities to allow for betting on those
tracks and excess cost to be paid to service providers to add more servers to
allow for increased number of users. The Directors have prepared cash flow
forecasts for a period of 12 months from the date of approval of these
financial statements which indicate that, taking account of reasonably
possible downsides, the Group is projected to have sufficient funds.
Projections are inherently uncertain (also considering the history of losses)
and, in that regard, the related entity has committed to extend funding in
case the Group faces any difficulty to meet its liabilities as they fall due
for that period.
The Company and the Group have, in previous years, received financial support
from Galloway Limited (related entity) and Galloway Limited has expressed its
willingness to continue to make funds available as and when needed by the
Group and Company. The loans from Galloway Limited stand at US$1,350,000 as at
31 May 2021.
As with any company placing reliance on other parties for financial support,
the Directors acknowledge that there can be no certainty that this support
will continue, although, at the date of approval of these financial
statements, they have no reason to believe that it will not do so.
Based on these indications, (namely cashflow projections and commitment of
support from the related entity), along with the improved performance of the
Group and its improved cash position, the Directors believe that it remains
appropriate to prepare the financial statements on a going concern basis.
1.2 Summary of significant accounting policies
During the current year the Group adopted all the new and revised IFRSs that
are relevant to its operation and are effective for accounting periods
beginning on 1 June 2020. No adoptions had a material effect on the accounting
policies of the Group.
The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies have been
consistently applied to all the years presented unless otherwise stated.
Basis of consolidation
The consolidated financial statements incorporate the results of the Group.
Subsidiaries are consolidated from the date of acquisition, being the date on
which the Group obtains control, and continue until the date that such control
ceases. Control exists when the Group has the power, directly or indirectly,
to govern the financial and operating policies of an entity so as to obtain
benefits from its activities.
The Group applies the acquisition method to account for business combinations.
The consideration transferred for the acquisition of a subsidiary is the fair
values of the assets transferred, the liabilities incurred to the former
owners of the acquiree and the equity interests issued by the Group. The
consideration transferred includes the fair value of any asset or liability
resulting from a contingent consideration arrangement. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition
date. Acquisition-related costs are expensed as incurred.
Inter-company transactions, balances and unrealised gains on transactions
between the Group companies are eliminated. Unrealised losses are also
eliminated. When necessary, amounts reported by subsidiaries have been
adjusted to conform with the Group's accounting policies.
Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates ('the functional currency'). The consolidated financial
statements are presented in US Dollars, which is also the Group's functional
currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions or
valuation where items are remeasured. Foreign exchange gains and losses
resulting from the settlement of
such transactions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies are
recognised in the income statement, except when deferred in other
comprehensive income as qualifying cash
flow hedges and qualifying net investment hedges. Foreign exchange gains and
losses that relate to borrowings are presented in the income statement within
'Finance income' or 'Finance costs'. All other foreign exchange gains and
losses are presented in the income statement within 'Other (losses)/gains'.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate. Exchange differences arising are recognised in
other comprehensive income.
Revenue from contracts with customers
The Group generates revenue primarily from the provision of wagering services
and the hosting of races on which guests are entitled to participate in the
related wagering services. Revenue is measured based on the consideration
specified in a contract with a customer. The Group recognises revenue when it
discharges services to a customer. Revenue has been disaggregated by
geographical locations which are consistent with the operating segments (note
2).
Hosting fees (Racetrack operations) are recognised when the customers
participate in the Group's pari-mutuel pools and the race audio visual signals
are transmitted. Hosting fees are recorded on a gross receipts basis.
Wagering revenue from the Group's activities as the race host is recognised
when a race on which wagers are placed is completed. The wagering commission
from the Group's commingling of its wagering pools with a host's pool is
recognised when the race on which those wagers are placed is completed. The
Group acts as a principal when it allows customers to place wagers in the
races it hosts and as an agent when it allows customers to place wagers in
other entities' races.
Settlement terms for revenue where the Group acts as a host is usually 7 days
for on and off-track wagering and 30 days from month end for ADW wagering.
Where the Group acts as an agent, settlement terms are typically 30 days from
month end.
Transactions fees (ADW operations) are recognised when the Group facilitates
customers' deposit transactions into their betting accounts. The Group
recognises revenue for transaction services net of related winnings.
Government grants
The Group initially recognises government grants, that compensate for expenses
incurred, as deferred income at fair value if there is a reasonable assurance
that they will be received. They are then recognised in profit or loss on a
systematic basis in the periods in which the expenses are recognised.
Segmental reporting
Segmental reporting is based on the business areas in accordance with the
Group's internal reporting structure, which allows the individual operating
segments to be identified by the disparate nature of the principal activity
they undertake. The Group determines and presents segments based on the
information that internally is provided to the Board and Managing Director,
the Group's chief operating decision maker.
An operating segment is a component of the Group and engages in business
activities from which it may earn revenues and incur expenses. An operating
segment's operating results are reviewed regularly by the Board and Managing
Director to make decisions about resources to be allocated to the segment and
assess its performance, and for which discrete financial information is
available.
Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is
recognised in the income statement, except to the extent that it relates to
items recognised in other comprehensive income or directly in equity. In this
case, the tax is also recognised in other comprehensive income or directly in
equity, respectively.
Current tax comprises the expected tax payable or receivable on the taxable
income or loss for the year and any adjustment to the tax payable or
receivable in respect of previous years. The amount of current tax payable
or receivable is the best estimate of the tax amount expected to be paid or
received that reflects uncertainty related to income taxes, if any. It is
measured using tax rates enacted or substantively enacted at the reporting
date. Current tax also includes any tax arising from dividends. Current
tax assets and liabilities are offset only if certain criteria are met.
Deferred income tax is recognised on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the
consolidated financial statements. However, deferred tax liabilities are not
recognised if they arise from
the initial recognition of goodwill; deferred tax is not accounted for if it
arises from initial recognition of an asset or liability in a transaction
other than a business combination that at the time of the transaction affects
neither accounting nor taxable profit or loss. Deferred tax is determined
using tax rates (and laws) that have been enacted or substantively enacted by
the reporting date and are expected to apply when the related deferred income
tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is
probable that future taxable profit will be available against which the
temporary differences can be utilised.
Deferred income tax liabilities are provided on taxable temporary differences
arising from investments in subsidiaries except for deferred income tax
liability, where the timing of the reversal of the temporary difference is
controlled by the Group and it is probable that the temporary difference will
not reverse in the foreseeable future. Only where there is an agreement in
place that gives the Group the ability to control the reversal of the
temporary difference is the liability not recognised.
Deferred income tax assets are recognised on deductible temporary differences
arising from investments in subsidiaries only to the extent that it is
probable the temporary difference will reverse in the future and there is
sufficient taxable profit available against which the temporary difference can
be utilised.
Deferred income tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax liabilities
and when the deferred income taxes, assets and liabilities relate to income
taxes levied by the same taxation authority on either the same taxable entity
or different taxable entities where there is an intention to settle the
balances on a net basis.
Intangible assets - goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess
of the consideration transferred over the Group's interest in net fair value
of the net identifiable assets, liabilities and contingent liabilities of the
acquiree and the fair value of the non-controlling interest in the acquiree.
For the purpose of impairment testing, goodwill acquired in a business
combination is allocated to each of the cash-generating units ("CGUs"), or
groups of CGUs, that is expected to benefit from the synergies of the
combination. Each unit or group of units to which the goodwill is allocated
represents the lowest level within the entity at which the goodwill is
monitored for internal management purposes. Goodwill is monitored at the
operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if
events or changes in circumstances indicate a potential impairment. The
carrying value of goodwill is compared to the recoverable amount, which is the
higher of value in use and the fair value less costs of disposal. Any
impairment is recognised immediately as an expense and is not subsequently
reversed.
Intangible assets - other
(a) Trademarks and licences
Separately acquired trademarks and licences are shown at historical cost.
Trademarks and licences acquired in a business combination are recognised at
fair value at the acquisition date. Trademarks and licences have a finite
useful life and are carried at cost less accumulated amortisation.
Amortisation is calculated using the straight-line method to allocate the cost
of trademarks and licences over their estimated useful lives of three years.
Acquired computer software licences are capitalised on the basis of the costs
incurred to acquire and bring to use the specific software. These costs are
amortised over their estimated useful lives of three years.
(b) Website design and development costs
Costs associated with maintaining websites are recognised as an expense as
incurred. Development costs that are directly attributable to the design and
testing of identifiable and unique websites controlled by the Group are
recognised as intangible assets when the following criteria are met:
· it is technically feasible to complete the website so
that it will be available for use;
· management intends to complete the website and use it;
· there is an ability to use the website;
· it can be demonstrated how the website will generate
probable future economic benefits;
· adequate technical, financial and other resources to
complete the development and to use the website are available; and
· the expenditure attributable to the website during its
development can be reliably measured.
Directly attributable costs that are capitalised as part of the website
include the website employee costs and an appropriate portion of relevant
overheads.
Other development expenditures that do not meet these criteria are recognised
as an expense as incurred. Development costs previously recognised as an
expense are not recognised as an asset in a subsequent period.
Website development costs recognised as assets are amortised over their
estimated useful lives, which do not exceed three years.
Property, equipment and motor vehicles
Items of property, equipment and motor vehicles are stated at historical cost
less accumulated depreciation (see below) and impairment losses. Historical
cost includes expenditure that is directly attributable to the acquisition of
the items.
Subsequent costs are included in the asset's carrying amount or recognised as
a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Group and the cost
of the item can be measured
reliably. The carrying amount of the replaced part is derecognised. All other
repairs and maintenance are charged to the income statement during the
financial period in which they are incurred.
The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at the financial position date. An asset's carrying amount is
written down immediately to its recoverable amount if the asset's carrying
amount is greater than its estimated recoverable amount. Depreciation is
calculated using the straight-line method to allocate the cost of property,
equipment and motor vehicles over their estimated useful lives.
The estimated useful lives of property, equipment and motor vehicles for
current and comparative periods are as follows:
Plant and
equipment
3 years
Motor
vehicles
5 years
Fixtures and
fittings
3 years
Gains and losses on disposals are determined by comparing the proceeds with
the carrying amount and are recognised within 'Other gains/(losses) - net' in
the income statement.
Share-based payment expense
The Group operates an equity-settled, share-based compensation plan, under
which the entity receives services from employees as consideration for equity
instruments (options) of the Group. The fair value of the employee services
received in exchange for the grant of the options is recognised as an expense.
The total amount to be expensed is determined by reference to the fair value
of the options granted:
· including any market performance conditions (for example, an entity's share
price); and
· excluding the impact of any service and non-market performance vesting
conditions (for example, profitability, sales growth targets and remaining an
employee of the entity over a specified time-period).
Non-market performance and service conditions are included in assumptions
about the number of options that are expected to vest. The total expense is
recognised over the vesting period, which is the period over which all of the
specified vesting conditions are to be satisfied.
At the end of each reporting period, the Group revises its estimates of the
number of options that are expected to vest based on the non-market vesting
conditions. It recognises the impact of the revision to original estimates, if
any, in the income statement, with a corresponding adjustment to equity.
When the options are exercised, the Company issues new shares. The proceeds
received net of any directly attributable transaction costs are credited to
share capital (nominal value) and share premium.
Equity
Share capital is determined using the nominal value of shares that have been
issued.
Equity settled share-based employee remuneration is credited to the share
option reserve until related stock options are exercised. On exercise or
lapse, amounts recognised in the share option reserve are taken to share
capital.
Retained earnings include all current and prior period results as determined
in the income statement and any other gains or losses recognised in the
Statement of Changes in Equity.
Financial instruments
Recognition and measurement
Non-derivative financial instruments include trade and other receivables, cash
and cash equivalents, bonds and deposits, borrowings and trade and other
payables.
Financial assets and financial liabilities are recognised on the Group's
balance sheet when the Group becomes party to the contractual terms of the
instrument. Transaction costs are included in the initial measurement of
financial instruments, except financial instruments classified as at fair
value through profit and loss. The subsequent measurement of financial
instruments is dealt with below.
Trade and other receivables
Trade and other receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective interest method,
less provision for impairment.
Cash and cash equivalents
Cash and cash equivalents are defined as cash in bank and in hand as well as
bank deposits, money held for processors and cash balances held on behalf of
players. Cash equivalents are held for the purpose of meeting short-term cash
commitments rather than for investment or other purposes.
Bonds and deposits
Bonds and deposits are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method, less provision
for impairment.
Borrowings
Interest-bearing borrowings and overdrafts are recorded at the proceeds
received net of direct issue costs. Finance charges, including premiums
payable on settlement or redemption and direct issue costs are charged on an
accrual basis using the effective interest method and are added to the
carrying amount of the instrument to the extent they are not settled in the
period in which they arise.
Trade and other payables
Trade payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method.
Impairment of financial assets
The Group uses an impairment model that applies to financial assets measured
at amortised cost and contract assets and is detailed below. Financial assets
at amortised cost include trade receivables, cash and cash equivalents, bonds
and deposits.
Performing financial assets
Stage 1
From initial recognition of a financial asset to the date on which an asset
has experienced a significant increase in credit risk relative to its initial
recognition, a stage 1 loss allowance is recognised equal to the credit losses
expected to result from its default occurring over the earlier of the next 12
months or its maturity date ('12-month ECL').
Stage 2
Following a significant increase in credit risk relative to the initial
recognition of the financial asset, a stage 2 loss allowance is recognised
equal to the credit losses expected from all possible default events over the
remaining lifetime of the asset ('Lifetime ECL'). The assessment of whether
there has been a significant increase in credit risk requires considerable
judgment, based on the lifetime probability of default ('PD'). Stage 1 and 2
allowances are held against performing loans; the main difference between
stage 1 and stage 2 allowances is the time horizon. Stage 1 allowances are
estimated using the PD with a maximum period of 12 months, while stage 2
allowances are estimated using the PD over the remaining lifetime of the
asset.
Impaired financial assets
Stage 3
When a financial asset is considered to be credit-impaired, the allowance for
credit losses ('ACL') continues to represent lifetime expected credit losses,
however, interest income is calculated based on the amortised cost of the
asset, net of the loss allowance, rather than its gross carrying amount.
The Group applies the ECL model to two main types of financial assets that are
measured at amortised cost:
Trade receivables, to which the simplified approach (provision matrix)
prescribed by IFRS 9 is applied. This approach requires the recognition of a
Lifetime ECL allowance on day one.
Other financial assets at amortised cost, to which the general three stage
model (described above) is applied, whereby a 12-month ECL is recognised
initially and the balance is monitored for significant increases in credit
risk which triggers the recognition of a Lifetime ECL allowance.
ECLs are a probability-weighted estimate of credit losses. ECLs for financial
assets that are not credit-impaired at the reporting date are measured as the
present value of all cash shortfalls (i.e. the difference between the cash
flows due in accordance with the contract and the cash flows that the company
expects to receive). ECLs for financial assets that are credit-impaired at the
reporting date are measured as the difference between the gross carrying
amount and the present value of estimated future cash flows. ECLs are
discounted at the effective interest rate of the financial asset which is 0%
for all financial assets at amortised cost. The maximum period considered when
estimating ECLs is the maximum contractual period over which the Group is
exposed to credit risk. The measurement of ECLs considers information about
past events and current conditions, as well as supportable information about
future events and economic conditions. The Group reviews its impairment
methodology for estimating the ECLs, taking into account forward-looking
information in determining the appropriate level of allowance. In addition, it
identifies indicators and set up procedures for monitoring for significant
increases in credit risk.
Leases
At inception of a contract, the Group assesses whether a contract is, or
contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in
exchange for consideration.
i. As a lessee
The Group recognises a right-of-use asset and a lease liability at the lease
commencement/modification date. The right-of-use
asset is initially measured at cost, and subsequently at cost less accumulated
depreciation and impairment loss and adjusted for certain remeasurements of
the lease liability.
The right-of-use asset is subsequently depreciated using the straight-line
method from the commencement date to the end of the lease term.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted at the Group's
applicable incremental borrowing rate (the rate implicit in the lease cannot
be determined). The Group has measured the incremental borrowing as equal to
external borrowing rates. The lease liability is subsequently increased by
the interest cost of the lease liability and decreased by the lease payment
made. It is remeasured when there is a change in future lease payments arising
from a change in an index or rate, a change in the estimate of the amount
expected to be payable under a residual value guarantee, or as appropriate,
changes in the assessment of whether a purchase or extension option is
reasonably certain to be exercised, or a termination option is reasonably
certain not to be exercised.
The Group has applied judgment to determine the lease term for some lease
contracts in which it is a lessee that include renewal options. The assessment
of whether the Group is reasonably certain to exercise such options impacts
the lease term, which affects the amount of lease liabilities and right of use
assets recognised. Extension/renewal is only available to lessor on terms
and conditions to be agreed between both parties.
The Group receives rent concessions on its racetrack lease when, due to
external factors, the number of days raced in a season is lower than the
actual number of days scheduled to be raced.
The Group determines its incremental borrowing rate by obtaining interest
rates from various external financing sources and makes certain adjustments to
reflect the terms of the lease and the type of the asset leased.
Lease payments included in the measurement of the lease liability comprise the
following:
- Fixed payments, including in-substance fixed payments;
- Variable lease payments that depend on an index or a rate, initially
measured using the index or rate as at the commencement date;
- Amounts expected to be payable under a residual value guarantee; and
- The exercise price under a purchase option that the Group is reasonably
certain to exercise, lease payments in an optional renewal period if the Group
is reasonably certain to exercise an extension option, and penalties for early
termination of a lease unless the Group is reasonably certain not to terminate
early.
The lease liability is measured at amortised cost using the effective interest
method. It is remeasured when there is a change in future lease payments
arising from a change in an index or rate, if there is a change in the Group's
estimate of the amount expected to be payable under a residual value
guarantee, if the Group changes its assessment of whether it will exercise a
purchase, extension or termination option or if there is a revised
in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment
is made to the carrying amount of the right-of-use asset or is recorded in
profit or loss if the carrying amount of the right-of-use asset has been
reduced to zero.
The Group presents right-of-use assets that do not meet the definition of
investment property in 'property, equipment and motor vehicles' and lease
liabilities in 'loans, borrowings and lease liabilities' in the statement of
financial position.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease
liabilities for property rental costs that do not meet the definition of
leases under IFRS 16. The Group recognises these costs as an expense on a
straight-line basis.
Employee benefits
(a) Pension obligations
The Group does not operate any post-employment schemes, including both defined
benefit and defined contribution pension plans.
(b) Short-term employee benefits
Short-term employee benefits, such as salaries, paid absences, and other
benefits, are accounted for on an accrual's basis over the period in which
employees have provided services in the year. All expenses related to employee
benefits are recognised in the Statement of Comprehensive Income in operating
costs.
(c) Profit sharing and bonus plans
The Group recognises a liability and an expense for bonuses and profit
sharing, based on a formula that takes into consideration the profit
attributable to the Company's shareholders after certain adjustments. The
Group recognises a provision where contractually obliged or where there is a
past practice that has created a constructive obligation.
Standards and interpretations in issue not yet adopted
A number of new standards, amendments to standards and interpretations are not
yet effective for the year, and have not been applied in preparing these
consolidated financial statements:
Standards Effective date
(accounting periods
commencing on or after)
Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 1 January 2021
7, IFRS 4 and IFRS 16)
COVID-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16) 1 April 2021
Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37) 1 January 2022
Annual Improvements to IFRS Standards 2018 - 2020
Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS
16)
Reference to the Conceptual Framework (Amendments to IFRS 3)
Classification of Liabilities as Current or Non-current (Amendments to IAS 1) 1 January 2023
Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12)
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice
Statement 2)
Definition of Accounting Estimates (Amendments to IAS 8)
2 Operating Segments
A. Basis for segmentation
The Group has the below two operating segments, which are its
reportable segments. The segments offer different services in relation to
various forms of pari-mutuel racing, which are managed separately due to the
nature of their activities.
Reportable segments and operations provided
Racetrack operations - hosting of races through the management and operation
of a racetrack facility, enabling patrons to attend and wager on horse racing,
as well as utilise simulcast facilities.
ADW operations - provision of online ADW services to enable customers to wager
into global racetrack betting pools.
The Group's Board of Directors review the internal management
reports of the operating segment on a monthly basis.
B. Information about reportable segments
Information relating to the reportable segments is set out below. Segment
revenue along with segment profit / (loss) before tax are used to measure
performance as management considers this information to be a relevant
indicator for evaluating the performance of the segments.
Reportable segments
Racetrack ADW Corporate operating costs Total
2021 2021 2021 2021
US$000 US$000 US$000 US$000
External revenues 52,640 3,028 - 55,668
Segment revenue 52,640 3,028 - 55,668
Segment profit before tax 390 424 10 824
Interest expense (23) (4) (98) (125)
Depreciation and amortisation (79) (66) - (145)
Other material non-cash items:
- Impairment movement on trade receivables - 7 - 7
Segment assets 2,138 3,915 2,301 8,354
Segment liabilities 1,409 3,812 1,441 6,662
Reportable segments
Racetrack ADW Corporate operating Total
2020 2020 costs 2020
US$000 US$000 2020 US$000
US$000
External revenues 41,071 2,365 - 43,436
Segment revenue 41,071 2,365 - 43,436
Segment loss before tax 62 (232) (114) (284)
Interest expense (20) (5) (69) (94)
Depreciation and amortisation (71) (124) - (195)
Other material non-cash items:
- Impairment movement on trade receivables - (18) - (18)
Segment assets 1,185 3,216 2,252 6,653
Segment liabilities 870 3,513 1,402 5,785
C. Reconciliations of information on reportable segments to the amounts
reported in the financial statements
2021 2020
US$000 US$000
i. Revenues
Total revenue for reportable segments 55,668 43,436
Consolidated revenue 55,668 43,436
ii. Profit / (loss) before tax
Total profit / (loss) before tax for reportable segments 814 (170)
Profit / (loss) before tax for other segments 10 (114)
Consolidated profit / (loss) before tax 824 (284)
iii. Assets
Total assets for reportable segments 6,053 4,401
Assets for other segments 2,301 2,252
Consolidated total assets 8,354 6,653
iv. Liabilities
Total liabilities for reportable segments 5,221 4,383
Liabilities for other segments 1,441 1,402
Consolidated total liabilities 6,662 5,785
v. Other material items
Interest expense (125) (94)
Depreciation and amortisation (145) (195)
Impairment movement on trade receivables 7 (18)
There were no reconciling items noted between Segment information
and the Financial Statements.
D. Geographic information
i. Revenues
The below table analyses the geographic location of the customer base of the
operating segments.
2021 2020
US$000 US$000
Revenue
Racetrack operations North America 52,640 41,071
ADW operations North America 2,294 1,599
ADW operations British Isles 734 760
ADW operations Asia Pacific - 6
55,668 43,436
ii. Non-current assets
The geographical information below analyses the Group's non-current assets by
the Company's Country of Domicile (Isle of Man) and the United States of
America. Information is based on geographical location of Group's assets.
2021 2020
US$000 US$000
United States of America 386 439
Isle of Man 6 6
392 445
Non-current assets exclude financial instruments.
3 Operating profit / (loss)
Operating profit / (loss) is stated after charging: 2021 2020
US$000 US$000
Auditors' remuneration - audit 136 96
Depreciation of property, equipment and motor vehicles 119 122
Amortisation of intangible assets 26 73
Exchange (gains) / losses (2) 29
Directors' fees 73 64
4 Finance costs
2021 2020
US$000 US$000
Loan interest payable (125) (94)
Finance costs (125) (94)
5 Staff numbers and cost
2021
2020
Average number of employees - Pari-mutuel and Racetrack Operations 52 52
The aggregate payroll costs of these persons were as follows: 2021
US$000 2020
Pari-mutuel and Racetrack Operations US$000
Wages and salaries 1,676 1,701
Social security costs 116 114
1,792 1,815
6 Income tax expense
(a) Current and Deferred Tax Expenses
The current and deferred tax expenses for the year were US$Nil (2020: US$Nil).
Despite having made losses, no deferred tax was recognised as there is no
reasonable expectation that the Group will recover the resultant deferred tax
assets.
(b) Tax Rate Reconciliation
2021 2020
US$000 US$000
Profit / (loss) before tax 824 (284)
Tax charge at IOM standard rate (0%) - -
Adjusted for:
Tax credit for US tax gains / (losses) (at 15%) 84 (97)
Add back deferred tax (gains) / losses not recognised (84) 97
Tax charge for the year - -
The maximum deferred tax asset that could be recognised at year end is
approximately US$823,000 (2020: US$907,000). The Group has not recognised any
asset as it is not reasonably known whether the Group will recover such
deferred tax assets.
7 Earnings per ordinary share
The calculation of the basic earnings per share is based on the earnings
attributable to ordinary shareholders divided by the weighted average number
of shares in issue during the year.
The calculation of diluted earnings per share is based on the basic earnings
per share, adjusted to allow for the issue of shares, on the assumed
conversion of all dilutive share options.
An adjustment for the dilutive effect of share options in the current period
has not been reflected in the calculation of the diluted profit per share, as
the effect would have been anti-dilutive.
2021 2020
US$000 US$000
Profit / (loss) for the year 824 (284)
No. No.
Weighted average number of ordinary shares in issue 393,338,310 393,338,310
Dilutive element of share options if exercised (note 17) 14,000,000 14,000,000
Diluted number of ordinary shares 407,338,310 407,338,310
Basic earnings per share (cents) 0.21 (0.07)
Diluted earnings per share (cents) 0.20 (0.07)
The earnings applied are the same for both basic and diluted earnings
calculations per share as there are no dilutive effects to be applied.
8 Intangible assets
Goodwill Software & development costs Total
Group Group Company Group Company
US$000 US$000 US$000 US$000 US$000
Cost
Balance at 1 June 2019 177 1,503 64 1,680 64
Additions during the year - - - - -
Decommissioned assets - (905) (49) (905) (49)
Balance at 31 May 2020 177 598 15 775 15
Balance at 1 June 2020 177 598 15 775 15
Additions during the year - 8 - 8 -
Balance at 31 May 2021 177 606 15 783 15
Amortisation and Impairment
Balance at 1 June 2019 177 1,399 57 1,576 57
Amortisation for the year - 73 6 73 6
Decommissioned assets - (905) (49) (905) (49)
Currency translation differences - 1 1 1 1
Balance at 31 May 2020 177 568 15 745 15
Balance at 1 June 2020 177 568 15 745 15
Amortisation for the year - 26 - 26 -
Balance at 31 May 2021 177 594 15 771 15
Carrying amounts
At 1 June 2019 - 104 7 104 7
At 31 May 2020 - 30 - 30 -
At 31 May 2021 - 12 - 12 -
The Group reviews intangible assets annually for impairment or more frequently
if there are indications that the intangible assets may be impaired (see note
1).
During 2019/20, a review of assets held was undertaken to remove any
historical items that were considered to be decommissioned and therefore no
longer held by the Group. This principally related to software and website
costs that were fully amortised and removed from service in previous years
following changes to those business activities and/or assets reaching their
end of useful life.
9 Property, equipment and motor vehicles
Group Computer Fixtures, Motor Vehicles Right-of- Total
Equipment Fittings & Track Equipment US$000 use Assets US$000
US$000 US$000 US$000
Cost
Balance at 1 June 2019 604 580 51 - 1,235
Additions during the year 5 - 34 473 512
Decommissioned/disposed assets (447) (339) (35) - (821)
Balance at 31 May 2020 162 241 50 473 926
Balance at 1 June 2020 162 241 50 473 926
Additions during the year 4 80 - - 84
Balance at 31 May 2021 166 321 50 473 1,010
Depreciation
Balance at 1 June 2019 586 577 46 - 1,209
Charge for the year 16 2 6 98 122
Decommissioned/disposed assets (447) (339) (35) - (821)
Currency translation differences - 1 - - 1
Balance at 31 May 2020 155 241 17 98 511
Balance at 1 June 2020 155 241 17 98 511
Charge for the year 5 9 7 98 119
Balance at 31 May 2021 160 250 24 196 630
Carrying amounts
At 1 June 2019 18 3 5 - 26
At 31 May 2020 7 - 33 375 415
At 31 May 2021 6 71 26 277 380
Company Computer Equipment US$000 Fixtures & Total
Fittings US$000
US$000
Cost
Balance at 1 June 2019 429 139 568
Additions during the year 5 - 5
Discarded assets (401) (59) (460)
Balance at 31 May 2020 33 80 113
Balance at 1 June 2020 33 80 113
Additions during the year 4 - 4
Balance at 31 May 2021 37 80 117
Company Computer Equipment US$000 Fixtures & Total
Fittings US$000
US$000
Depreciation
Balance at 1 June 2019 419 139 558
Charge for the year 8 - 8
Discarded assets (401) (59) (460)
Balance at 31 May 2020 26 80 106
Balance at 1 June 2020 26 80 106
Charge for the year 5 - 5
Balance at 31 May 2021 31 80 111
Carrying amounts
At 1 June 2019 10 - 10
At 31 May 2020 7 - 7
At 31 May 2021 6 - 6
10 Investments
Investments in subsidiaries are held at cost. Details of investments at 31 May
2021 are as follows:
Subsidiaries Country of incorporation Activity Holding (%)
WatchandWager.com Limited Isle of Man Operation of interactive wagering 100
totaliser hub
WatchandWager.com LLC United States of America Operation of interactive wagering 100
totaliser hub and harness racetrack
Technical Facilities & Services Limited Isle of Man Dormant 100
betinternet.com (IOM) Limited Isle of Man Dormant 100
B.E. Global Services Limited Isle of Man Dormant 100
11 Bonds and deposits
Group Company
2021 2020 2021 2020
US$000 US$000 US$000 US$000
Bonds and deposits which expire within one year 882 882 - -
Bonds and deposits which expire within one to two years - - - -
Bonds and deposits which expire within two to five years 101 101 - -
983 983 - -
Cash bonds of US$875,000 have been paid as security deposits in relation to
various US State ADW licences (2020: US$875,000). These cash bonds are held
in trust accounts used exclusively for cash collateral, with financial
institutions which have been screened for their financial strength and
capitalization ratio. The financial institutions have a credit rating of A-
Excellent from AM Best credit rating agency. Therefore, these bonds are
considered to be fully recoverable. A rent deposit of US$100,000 is held by
California Exposition & State Fair and is for a term of 5 years (2020:
US$100,000). This is held by an entity of the Californian state government
and is therefore considered fully recoverable. Rent and other security
deposits total US$8,315 (2020: US$8,155). These deposits are repayable upon
completion of the relevant lease term, under the terms of legally binding
agreements.
12 Cash, cash equivalents and restricted cash
Group Company
2021 2020 2021 2020
US$000 US$000 US$000 US$000
Cash and cash equivalents - company and other funds 3,238 2,499 312 324
Restricted cash - protected player funds 1,845 1,470 1,830 1,456
Total cash, cash equivalents and restricted cash 5,083 3,969 2,142 1,780
The Group holds funds for operational requirements and for its non-Isle of Man
customers, shown as 'company and other funds' and on behalf of its Isle of Man
regulated customers and certain USA state customers, shown as 'protected
player funds'.
Protected player funds are held in fully protected client accounts within an
Isle of Man regulated bank and in segregated accounts within a USA regulated
bank.
13 Trade and other receivables
Group Company
2021 2020 2021 2020
US$000 US$000 US$000 US$000
Trade receivables 907 675 - -
Amounts due from Group undertakings - - 98 428
Other receivables and prepayments 989 581 52 35
1,896 1,256 150 463
Included within trade receivables are impairment provisions of US$78,002 (see
note 21), (2020: US$85,775).
Amounts due from Group undertakings are unsecured, interest free and repayable
on demand.
14 Trade and other payables
Group Company
2021 2020 2021 2020
US$000 US$000 US$000 US$000
Trade payables 686 603 33 9
Amounts due to customers 2,968 2,446 - -
Taxes and national insurance 15 22 2 2
Accruals and other payables 1,326 678 56 41
4,995 3,749 91 52
15 Deferred income
Group Company
2021 2020 2021 2020
US$000 US$000 US$000 US$000
Government grant - 272 - -
The Group received a Paycheck Protection Program ("PPP") loan for US$319,994,
under the provisions of the US CARES Act in May 2020 to support certain
incurred expenses. The provisions of the loan allowed for an application for
loan forgiveness, directly relating to expenditure incurred in the 24-week
period from the date of the loan advance, of which at least 60% must be on
payroll related expenditure. The Group has ascertained reasonable assurance
that the loan should be forgiven in its entirety and the application for
forgiveness was submitted in June 2021. The grant has been recognised in
profit or loss in the periods that the relevant expenses are recognised.
16 Loans, borrowings and lease liabilities
Current liabilities
Group Company
2021 2020 2021 2020
US$000 US$000 US$000 US$000
Unsecured loans (current portion) 6 5 - -
Lease liabilities (current portion) 66 92 - -
Secured loans - Galloway Ltd 500 - 500 -
572 97 500 -
Non-current liabilities
Group Company
2021 2020 2021 2020
US$000 US$000 US$000 US$000
Unsecured loans (non-current portion) 19 25 - -
Lease liabilities (non-current portion) 226 292 - -
Secured loans - Galloway Ltd 850 1,350 850 1,350
1,095 1,667 850 1,350
Terms and repayment schedule
Nominal 2021 2020
interest rate Year of maturity Total Total
US$000 US$000
Unsecured loan 8.90% 2025 25 30
Lease liabilities 7.00-9.00% 2021-25 292 384
Secured loan - Galloway Ltd 7.75% 2022 500 500
Secured loan - Galloway Ltd 7.00% 2024 350 350
Secured loan - Galloway Ltd 7.00% 2025 500 500
Total loans and borrowings 1,667 1,764
The Group did not receive any new loans during the year.
The secured loans from Galloway Ltd are secured over the unencumbered assets
of the Group.
Reconciliation of movements of liabilities to cash flows arising
from financing activities
Other loans and borrowings Lease liabilities Total
US$000 US$000 US$000
Balance at 1 June 2019 850 - 850
Changes from financing cash flows
Proceeds from loans, borrowings and lease liabilities 531 25 556
Proceeds from Government funding/grant 320 - 320
Repayment of borrowings (1) - (1)
Payment of lease liabilities - (101) (101)
Interest paid (69) (25) (94)
Total changes from financing cash flows 781 (101) 680
Other changes
Liability-related
New leases - 473 473
Rent concession received - (13) (13)
Interest expense 69 25 94
Forgiveness of Government funding/grant (320) - (320)
Total liability-related other changes (251) 485 234
Balance at 31 May 2020 1,380 384 1,764
Balance at 1 June 2020 1,380 384 1,764
Changes from financing cash flows
Proceeds from loans, borrowings and lease liabilities - 24 24
Repayment of borrowings (5) - (5)
Payment of lease liabilities - (111) (111)
Interest paid (101) (24) (125)
Total changes from financing cash flows (106) (111) (217)
Other changes
Liability-related
Rent concession received - (5) (5)
Interest expense 101 24 125
Total liability-related other changes 101 19 120
Balance at 31 May 2021 1,375 292 1,667
17 Share capital
No. 2021 2020
US$000 US$000
Allotted, issued and fully paid
At beginning and close of year: ordinary shares of 1p each 393,338,310 6,334 6,334
At 31 May: ordinary shares of 1p each 393,338,310 6,334 6,334
The authorised share capital of the Company is US$9,619,000 divided into
600,000,000 ordinary shares of £0.01 each (2020: US$9,619,000 divided into
600,000,000 ordinary shares of £0.01
each).
Options
Movements in share options during the year ended 31 May 2021 were as follows:
No.
At 31 May 2020 - 1p ordinary shares 14,000,000
Options granted -
Options lapsed -
Options exercised -
At 31 May 2021 - 1p ordinary shares 14,000,000
During 2016 the Group established an equity-settled share-based option
program. The fair value of options granted is recognised as an expense, with a
corresponding increase in equity. The fair value is measured at grant date
using a Black-Scholes model and is spread over the vesting period. The amount
recognised in equity is adjusted to reflect the actual number of share options
which are expected to vest. By taking into consideration the volatility of
the shares over the 3 years prior to granting, the volatility of the options
is calculated at 75%, with a risk-free interest rate of 0.86%.
The options were issued on 3 March 2016 to Ed Comins, Managing Director of the
Group. The fair value of each option on the grant date was estimated as being
£0.0022. The share options vested on 3 March 2019 after Ed Comins had
remained in the employment of the Group for 3 years from when the options were
granted. The options are able to be exercised from 3 March 2019 and expire
on 2 March 2026. The weighted average exercise price of all options is £0.01.
The charge for share options recorded in profit and loss for the year was
US$Nil (2020: US$Nil). Since the grant date, the total charge in relation to
the share options was US$42,126.
18 Capital commitments
As at 31 May 2021, the Group had no capital commitments (2020: US$Nil).
19 Leases
A. Leases as lessee
The Group leases office and racetrack facilities. The office facility is
leased until May 2021, with an average length of renewal of between two to
three years. The racetrack facility is leased until May 2025, with
extensions or renewals typically ranging between three to five years.
The Group also leases additional office facilities with contract terms of no
more than one year. These leases are short-term and the Group has elected
not to recognise right-of-use assets and lease liabilities for these leases.
Information about leases for which the Group is a lessee is presented below.
i. Right-of-use assets
Right-of-use assets related to leased properties that do not meet the
definition of investment property are presented within property, equipment and
motor vehicles.
Group Property Total
US$000 US$000
Cost
Balance at 1 June 2019 - -
Additions during the year 473 473
Balance at 31 May 2020 473 473
Balance at 1 June 2020 473 473
Additions during the year - -
Balance at 31 May 2021 473 473
Depreciation
Balance at 1 June 2019 - -
Charge for the year 98 98
Balance at 31 May 2020 98 98
Balance at 1 June 2020 98 98
Charge for the year 98 98
Balance at 31 May 2021 196 196
Carrying amounts
At 1 June 2019 - -
At 31 May 2020 375 375
At 31 May 2021 277 277
ii. Amounts recognised in profit or loss
2021 2020
US$000 US$000
Interest on lease liabilities 24 25
Depreciation expense 98 98
Rent concessions received (5) (13)
Expenses relating to short-term leases 69 47
iii. Amounts recognised in statement of cash flows
2021 2020
US$000 US$000
Total cash outflow for leases 111 101
20 Related party transactions
Identity of related parties
The Parent Company has a related party relationship with its subsidiaries (see
note 10), and with its Directors and executive officers and with Burnbrae Ltd
(significant shareholder).
Transactions with and between subsidiaries
Transactions with and between the subsidiaries in the Group, which have been
eliminated on consolidation, are considered to be related party transactions.
Transactions with entities with significant influence over the Group
Rental and service charges of US$45,652 (2020: US$26,273) and Directors' fees
of US$26,461 (2020: US$45,435) were charged in the year by Burnbrae Limited,
of which Denham Eke is a common Director. The Group also had loans of
US$1,350,000 (2020: US$1,350,000) from Galloway Ltd, a company related to
Burnbrae Limited by common ownership and Directors (note 17).
Transactions with key management personnel
The total amounts for Directors' remuneration were as follows:
2021 2020
US$000 US$000
Emoluments - salaries, bonuses and taxable benefits 366 368
- fees 73 64
439 432
Directors' Emoluments
Basic Bonus Termination 2021 2020
salary Fees US$000 payments Benefits Total Total
US$000 US$000 US$000 US$000 US$000 US$000
Executive
Ed Comins 310 - 35 - 21 366 368
Non-executive
Denham Eke* - 26 - - - 26 25
Nigel Caine - 20 - - - 20 20
Sir James Mellon - 20 - - - 20 19
Richard Roberts - 7 - - - 7 -
Aggregate emoluments 310 73 35 - 21 439 432
* Paid to Burnbrae Limited.
14,000,000 share options were issued to Ed Comins (see note 17) during 2016.
21 Financial risk management
Capital structure
The Group's capital structure is as follows:
2021 2020
US$000 US$000
Cash and cash equivalents 3,238 2,499
Loans and similar liabilities (1,375) (1,380)
Net funds 1,863 1,119
Shareholders' equity (1,692) (868)
Capital employed 171 251
The Group's policy is to maintain as strong a capital base as possible,
insofar as can be sustained due to the fluctuations in the net results of the
Group and the inherent effect this has on the capital structure.
The Group's principal financial instruments comprise cash and cash
equivalents, trade receivables and payables that arise directly from its
operations.
The main purpose of these financial instruments is to finance the Group's
operations. The existence of the financial instruments exposes the Group to a
number of financial risks, which are described in more detail below.
The principal risks which the Group is exposed to relate to liquidity risks,
credit risks and foreign exchange risks.
Liquidity risk
Liquidity risk is the risk that the Group will be unable to meet its financial
obligations as they fall due.
The Group's objective is to maintain continuity of funding through trading and
share issues but to also retain flexibility through the use of short-term
loans if required.
Management controls and monitors the Group's cash flow on a regular basis,
including forecasting future cash flow. Banking facilities are kept under
review to ensure they meet the Group's requirements. Funds equivalent to
customer balances are held in designated bank accounts where applicable to
ensure that Isle of Man Gambling Supervision Commission player protection
principles are met. Other customer balances are covered by cash funds held
within the Group and by receivables due from ADW racetrack settlement
partners. The Directors anticipate that the business will generate
sufficient cash flow in the forthcoming period, to meet its immediate
financial obligations.
The following are the contractual maturities of financial liabilities:
2021
Financial liabilities
Carrying amount Contractual cash flow 6 months Up to 1-5
US$000 US$000 or less 1 year years
US$000 US$000 US$000
Trade payables (686) (686) (686) - -
Amounts due to customers (2,968) (2,968) (2,968) - -
Other payables, loans and deferred income (2,269) (2,507) (947) (893) (667)
Lease liabilities (292) (338) (13) (72) (253)
(6,215) (6,499) (4,614) (965) (920)
2020
Financial liabilities
Carrying amount Contractual cash flow 6 months Up to 1-5
US$000 US$000 or less 1 year years
US$000 US$000 US$000
Trade payables (603) (603) (603) - -
Amounts due to customers (2,446) (2,446) (2,446) - -
Other payables, loans and deferred income (1,967) (2,306) (640) (52) (1,614)
Lease liabilities (384) (454) (29) (87) (338)
(5,400) (5,809) (3,718) (139) (1,952)
Credit risk
Credit risk is the risk that one party to a financial instrument will cause a
financial loss for the other party by failing to discharge an obligation.
Impairment losses on financial assets recognised in profit or loss were as
follows:
2021 2020
US$000 US$000
Non-credit impaired trade receivables 16 23
Credit impaired trade receivables 62 62
Total impairment losses 78 85
The Group's exposure to credit risk is influenced by the characteristics of
the individual racetracks and the settling agents operating on behalf of these
tracks. The racetracks themselves are influenced by many factors, including
the product they offer, supporting sources of revenue they might generate,
such as offering simulcast, slots or sports wagering facilities, current
economic conditions, ownership structure, state laws and so on, all of which
may affect their liquidity and ability to operate.
The Group limits its exposure to credit risk by regular settling and
verification of balances due to and from settling agents, with standard terms
of one month. While there is on occasion debt that is slower to be settled,
historical settlements for at least the last six years show that of the
current trade receivable balance, greater than 99% would be expected to be
received.
In addition, the majority of the current Group customers have transacted with
the Group for five years or more and none of these customers balances have
been specifically impaired in that period.
While there has been an impact from Covid-19 across many industries worldwide,
horse racing was one of the few events that managed to maintain some activity
during the initial months of the pandemic, and which therefore assisted in the
recommencement of operations for those tracks which had temporarily halted
operations for a period of time. While we saw a slowdown of settlements
from settling agents and tracks at the end of 2019/20, settlements and
recovery are now back in line with general terms of business. The Group has
continued to take a conservative approach to the assessment of the Weighted
Average Loss Rate and maintained rates that are considered to reflect the risk
that exists under current market conditions.
The following table provides information about exposure to credit risk and
expected credit losses for trade receivables as at 31 May 2021:
2021 Weighted Average Loss Rate (%) Gross Carrying Amount US$000 Net Carrying Amount US$000 Credit Impaired
Loss Allowance US$000
Current (not past due) 1.00% 479 (5) 474 No
1-30 days past due 2.00% 406 (8) 398 No
31-60 days past due 5.00% 10 (1) 9 No
61-90 days past due 7.00% 20 (1) 19 No
More than 90 days past due 10.00% 8 (1) 7 No
More than 90 days past due 100.00% 62 (62) - Yes
985 (78) 907
2020 Weighted Average Loss Rate (%) Gross Carrying Amount US$000 Net Carrying Amount US$000 Credit Impaired
Loss Allowance US$000
Current (not past due) 0.50% 305 (2) 303 No
1-30 days past due 1.00% 129 (1) 128 No
31-60 days past due 6.00% 97 (6) 91 No
61-90 days past due 8.00% 147 (12) 135 No
More than 90 days past due 10.00% 20 (2) 18 No
More than 90 days past due 100.00% 62 (62) - Yes
760 (85) 675
The Group uses an allowance matrix to measure the ECLs of trade receivables
from racetracks and their settling agents, which comprise a moderate number of
balances, ranging from small to large. The Group has reviewed its historical
losses over the past four years as well as considering current economic
conditions in estimating the loss rates and calculating the corresponding loss
allowance.
Classes of financial assets - carrying amounts
2021 2020
US$000 US$000
Cash and cash equivalents 3,238 2,499
Bonds and deposits 983 983
Trade and other receivables 1,766 1,184
5,987 4,666
Generally, the maximum credit risk exposure of financial assets is the
carrying amount of the financial assets as shown on the face of the balance
sheet (or in the notes to the financial statements). Credit risk, therefore,
is only disclosed in circumstances where the maximum potential loss differs
significantly from the financial asset's carrying amount.
The maximum exposure to credit risks for receivables in any business segment:
2021 2020
US$000 US$000
Pari-mutuel 1,766 1,184
Of the above receivables, US$907,000 (2020: US$675,000) relates to amounts
owed from racing tracks. These receivables are actively monitored to avoid
significant concentration of credit risk and the Directors consider there to
be no significant concentration of credit risk.
The Directors consider that all the above financial assets that are not
impaired for each of the reporting dates under review are of good credit
quality. The banks have external credit ratings of at least Baa3 from
Moody's.
The credit risk for liquid funds and other short-term financial assets is
considered negligible, since the counterparties are reputable banks with
high-quality external credit ratings.
Interest rate risk
The Group finances its operations mainly through capital with limited levels
of borrowings. Cash at bank and in hand earns negligible interest at floating
rates, based principally on short-term interbank rates.
Any movement in interest rates would not be considered to have any significant
impact on net assets at the balance sheet date as the Group and Parent Company
do not have floating rate loans payable.
Foreign currency risks
The Group operates internationally and is subject to transactional foreign
currency exposures, primarily with respect to Pounds Sterling, Hong Kong
Dollars and Euros.
The Group does not actively manage the exposures but regularly monitors the
Group's currency position and exchange rate movements and makes decisions as
appropriate.
At the reporting date the Group had the following exposure:
2021 USD GBP EUR HKD Total
US$000 US$000 US$000 US$000 US$000
Current assets 6,710 283 78 659 7,730
Current liabilities (4,778) (339) (85) (700) (5,902)
Short-term exposure 1,932 (56) (7) (41) 1,828
2020 USD GBP EUR HKD Total
US$000 US$000 US$000 US$000 US$000
Current assets 5,144 53 130 708 6,035
Current liabilities (3,170) (127) (83) (716) (4,096)
Short-term exposure 1,974 (74) 47 (8) 1,939
The following table illustrates the sensitivity of the net result for the year
and equity with regards to the Group's financial assets and financial
liabilities and the US Dollar-Sterling exchange rate, US Dollar-Euro exchange
rate and US Dollar-Hong Kong Dollar exchange rate.
A 5% weakening of the US Dollar against the following currencies at 31 May
2021 would have increased / (decreased) equity and profit and loss by the
amounts shown below:
2021 GBP EUR HKD Total
US$000 US$000 US$000 US$000
Current assets 14 4 33 51
Current liabilities (17) (4) (35) (56)
Net assets (3) - (2) (5)
2020 GBP EUR HKD Total
US$000 US$000 US$000 US$000
Current assets 3 6 35 44
Current liabilities (6) (4) (36) (46)
Net assets (3) 2 (1) (2)
A 5% strengthening of the US Dollar against the above currencies would have
had the equal but opposite effect on the above currencies to the amounts shown
above on the basis that all other variables remain constant.
22 Controlling party and ultimate controlling party
The Directors consider the ultimate controlling party to be Burnbrae Limited
and its beneficial owner Jim Mellon by virtue of their combined shareholding
of 63.10%.
23 Subsequent events
To the knowledge of the Directors, there have been no other material events
since the end of the reporting period that require disclosure in the accounts.
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