Company Registration Number: C 79193
SD FINANCE plc
Annual Financial Report and Financial Statements
31 March 2022
SD FINANCE plc
Annual Financial Report and Financial Statements - 31 March 2022
Pages
Directors’ report1 - 4
Corporate Governance - Statement of Compliance5 - 8
Statement of financial position9
Statement of comprehensive income10
Statement of changes in equity11
Statement of cash flows12
Notes to the financial statements13 - 25
SD FINANCE plc
Annual Financial Report and Financial Statements - 31 March 2022
1
Directors’ report
The directors present their report and the audited financial statements for the year ended 31 March 2022.
Principal activities
Thecompany’sprincipalactivityistocarryonthebusinessofaninvestmentcompany,byraisingfundsto finance the operations and capital projects of the companies forming part of the db Group.
Review of business
Duringtheperiodunderreview,financeincomeonloansandancillaryrevenuefromSDHoldingsLimited, theguarantoroftheCompany’sbonds,andSeabankHotelandCateringLimitedandHotelSanAntonio Limited(fellowsubsidiaries),amountedto€3million(2021:€3million),whilstinterestpayableonbonds totalled €2.92 million (2021: €2.91 million).
Administrativeexpensesmainlyrepresentinglistingandcompliancecosts,togetherwithdirectors’and professionalfeesamountedto89,893 (2021:84,796). Profitfortheperiodaftertaxremainedconsistent with prior year at €4,870 (2021: €4,939).
TheCompany’sbalancesheetisprimarilymadeupofthebondissuefor€65million(classifiedasnon-currentliabilities)andtheloansreceivablefromSDHoldingsLimited,SeabankHotelandCateringLimited andHotelSanAntonioLimited(classifiedasnon-currentassets).Duringthecurrentfinancialyearafurther amountof€1.2millionwasadvancedtothefellowsubsidiaries.SDFinanceplc’sequityasatyearendis stated at €285,007 (2021: €280,137) primarily made up of the initial share capital funds.
TheCompanyrecognisesthatthekeyriskanduncertaintyofitsbusinessisthatofthepotentialnon-fulfilment by the borrowers (noted above) of their obligations.
Guarantor’s performance for 2022 and outlook for 2023
ThedbGroupownedbySDHoldingsLimited,asguarantortotheBondIssue,experiencedachallenging startduringthefirsttwomonthsofthecurrentfinancialyear,seeingarecoveryfromlateJuneonwards. ThiswasmainlyduetothegradualrelaxationofCOVID-relatedrestrictionswhicheventuallybroughta generalimprovementintheaccommodationandleisureindustry.Thisledtoanincreaseinbookingsand patronageresultinginincreasedrevenuesuptoNovemberwhereonceagainanewCOVIDvariant threatenedtobringtheindustrytoitskneesonceagain.However,byFebruarythesituationstarted improvingwiththegovernmentalsoannouncingthegradualremovalofvariousmeasuresoveranumber ofweeks.ThegroupcontinueditsexpansionofitsStarbucksoutletsnetworkinMaltaandalsoopeneda new restaurant in St. Paul’s Bay towards the end of the current financial year.
TheGroupcontinuedmonitoringtheCOVID-19outcome,takingallnecessaryhealthprecautionsas directedbytheHealthAuthoritiesandmanagingitsoperationsaccordingtothemeasuresapplicableatthat timesoastominimisecostsandmaintainappropriateliquiditylevels.Non-essentialservicecontractsand retainerswerekeptataminimumeventuallybeingrevisedupwardswhenthesituationstartedimproving. Allstaffwhowereonareducedworkingschedulewereeventuallymovedtoanormalscheduleandbythe endofJuneallemployeeswithinthegroupwereworkingona40hourweekbasis.TheGroupalso continuedavailingitselfoftheCOVID-19Governmentschemesthatitwasentitledtoacrossallcompanies withinthegroup.Asat31March2022,theGroupstillhasasubstantialcashreserveofover€40 million.
Weareencouraged,however,tonotethatasatthedatethatthesefinancialstatementshavebeen authorisedforissue,allthebusinessunitsoftheGrouparebackinbusinessandfullyoperationalandhave beenforanumberofmonthsnow.Thisresultedinhigheraccommodationbookings,andsatisfactoryresults in the hospitality and leisure sectors have been registered.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31 March 2022
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Directors’ report- continued
Review of business - continued
Guarantor’s performance for 2022 and outlook for 2023 - continued
ThehealthcarearmoftheGroupcontinuedwithanupswingindemandfortheservicesofferedbythe Groupwithinthissector,specificallynowthatthe504-bedwingattheSaintVincentdePaulResidenceis up and running.
TheGrouphasalsopreparedprojectionsforthecoming2years,basedonhistoricalfinancialinformation andforecasts,butfactoringintheimprovedresultsofthepastyear.TheUkraine-Russiaconflictisnot expectedtoaffecttheresultsofthegroupasitsexposureofbusinessfromthesetwocountriesisnegligible. However,whilstthegrouphasnodirectbusinesslinkageswiththesecountries,wearemonitoringtheeffect thatthisconflictmighthave.Possibleincreasesinthepriceofgoodsandservicesistheprincipalchallenge thatthegroup’sentitieswillexperienceinthenextfinancialyear.Theprojectionscontemplatetheexistence ofasignificantliquiditybufferattheendoftheyearandtheDirectorsfeelconfidentthatwiththemeasures takenandthesecuredfinancingarrangements,theGroupshallovercomeanypotentialfurtherdisruptions. Onthisbasis,thedirectorsareoftheopinionthattherearenomaterialuncertaintieswhichmaycast significant doubt about the ability of the Group to continue operating as a going concern.
Issuer’s outlook for the financial year ending 2023
AmidthedisruptionsfacedbytheGroup,theIssuerpaiditsbondholdersthefullinterestthatwasduein April2022.Furthermore,inviewofthemeasuresundertakenbytheGroup,theprojectionsoutlinedabove andthecashreservesavailabletotheGroup,thedirectorsareoftheopinionthattheIssuerwillhavethe necessaryfundstofinancetheinterestfallingdueinApril2023andgoingforward.Theboardoftheissuer, having reviewed the group’s cashflow forecast, further confirms this statement.
Financial risk management
Thecompany’sactivitiesexposeittoavarietyoffinancialrisks,includingcreditriskandliquidityrisk.Refer to Note 2 to these financial statements.
Results and dividends
Thecompany’sfinancialresultsaresetoutonpage10.Thedirectorsdonotrecommendthepaymentofa dividend.
Thedirectorsproposethatthebalanceofretainedearningsamountingto€35,007(2021:30,137)be carried forward to the next financial year.
SD FINANCE plc
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Directors’ report– continued
Directors
The directors of the company who held office during the year were:
Silvio Debono
Robert Debono
Arthur Gauci
Philip Micallef
Vincent Micallef
Stephen Muscat
The company’s Articles of Association do not require any director to retire.
Statement of directors’ responsibilities for the financial statements
ThedirectorsarerequiredbytheMalteseCompaniesAct(Cap.386)topreparefinancialstatementswhich giveatrueandfairviewofthestateofaffairsofthecompanyasattheendofeachreportingperiodandof the profit or loss for that period.
In preparing the financial statements, the directors are responsible for:
ensuringthatthefinancialstatementshavebeendrawnupinaccordancewithInternationalFinancial Reporting Standards as adopted by the EU;
selecting and applying appropriate accounting policies;
making accounting estimates that are reasonable in the circumstances;
ensuringthatthefinancialstatementsarepreparedonthegoingconcernbasisunlessitisinappropriate to presume that the company will continue in business as a going concern.
Thedirectorsarealsoresponsiblefordesigning,implementingandmaintaininginternalcontrolasthe directorsdetermineisnecessarytoenablethepreparationoffinancialstatementsthatarefreefrommaterial misstatement,whetherduetofraudorerror,andthatcomplywiththeMalteseCompaniesAct(Cap.386). Theyarealsoresponsibleforsafeguardingtheassetsofthecompanyandhencefortakingreasonablesteps for the prevention and detection of fraud and other irregularities.
ThefinancialstatementsofSDFinanceplcfortheyearended31March2022areincludedintheAnnual Financial Report 2022, which is made available on the db Group website.
ThedirectorsareresponsibleforthemaintenanceandintegrityoftheAnnualFinancialReportonthewebsite inviewoftheirresponsibilityforthecontrolsover,andthesecurityof,thewebsite. Accesstoinformation publishedonthegroup’swebsiteisavailableinothercountriesandjurisdictions,wherelegislationgoverning thepreparationanddisseminationoffinancialstatementsmaydifferfromrequirementsorpracticeinMalta.
The directors confirm that, to the best of their knowledge:
thefinancialstatementsgiveatrueandfairviewofthefinancialpositionofthecompanyasat31 March2022,andofthefinancialperformanceandthecashflowsfortheyearthenendedin accordance with International Financial Reporting Standards as adopted by the EU; and
theAnnualFinancialReportincludesafairreviewofthedevelopmentandperformanceofthe businessandthepositionofthecompany,togetherwithadescriptionoftheprincipalrisksand uncertainties that the company and the guarantor face.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31 March 2022
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Directors’ report- continued
Going concern statement pursuant to Capital Markets rule 5.62
Aftermakingenquiries,thedirectors,atthetimeofapprovingthefinancialstatements,havedetermined thatitisreasonabletoassumethatthecompanyhasadequateresourcestocontinueoperatingforthe foreseeablefuture. Forthisreason,thedirectorshaveadoptedthegoingconcernbasisinpreparingthe financial statements.
Auditors
PricewaterhouseCoopershaveindicatedtheirwillingnesstocontinueinofficeandaresolutionfortheirre-appointment will be proposed at the Annual General Meeting.
SignedonbehalfoftheBoardofDirectorson25July2022byRobertDebono(Director)andStephen Muscat(Director)aspertheDirectors'DeclarationonESEFAnnualFinancialReportsubmittedin conjunction with the Annual Financial Report.
Registered office:
Seabank Hotel
Marfa Road
Mellieha
MLH 9064
Malta
Telephone (+356) 2289 1000
Company secretary
Dr Shaheryar Ghaznavi
SD FINANCE plc
Annual Financial Report and Financial Statements - 31 March 2022
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Corporate Governance - Statement of Compliance
Introduction
PursuanttotherequirementsoftheCapitalMarketsRulesissuedbytheListingAuthorityoftheMalta FinancialServicesAuthority,SDFinanceplc(the“Company”orthe“Issuer”-afullyownedsubsidiaryof SDHoldingsLimited)herebyreportsontheextenttowhichthecompanyhasadoptedTheCodeof PrinciplesofGoodCorporateGovernance(the“Code”)appendedtoChapter5oftheCapitalMarketsRules as well as the measures adopted to ensure compliance with these same Principles.
Sinceitsincorporation,thecompany’sprincipalactivitywastoraisefundsfromthecapitalmarkettofinance the operations of other group companies forming part of the db Group (the “Group”).
TheCompanyacknowledgesthatalthoughtheCodedoesnotdictateorprescribemandatoryrules, compliancewiththeprinciplesofgoodcorporategovernancerecommendedintheCodeisinthebest interestsoftheCompany,itsshareholdersandotherstakeholders.Indecidingonthemostappropriate mannerinwhichtoimplementthePrinciples,theBoardofSDFinanceplc(the“Board”)hastaken cognisanceofitssize,whichinevitablyimpactsonthestructuresrequiredtoimplementthePrinciples without diluting the effectiveness thereof. The Company does not have any employees.
TheBoardconsidersthat,totheextentotherwisedisclosedherein,theCompanywasgenerallyin compliance with the Principles throughout the period under review.
Roles and Responsibilities
TheBoardacknowledgesitsstatutorymandatetoconducttheadministrationandmanagementofthe Company.TheBoard,infulfillingthismandateanddischargingitsdutyofstewardshipoftheCompany, assumes responsibility for:
theCompany’sstrategyanddecisionswithrespecttotheissue,servicingandredemptionofitsbonds; and
monitoringthatitsoperationsareinconformitywithitscommitmentstowardsbondholders, shareholders and all relevant laws and regulations.
TheBoardisalsoresponsibleforensuringthattheCompanyinstallsandoperateseffectiveinternalcontrol and management information systems and that it communicates effectively with the market.
The Board of Directors
Principles One to Five of the Code deal fundamentally with the role of the Board of Directors.
TheBoardiscomposedofsixmembersmadeupoftwoexecutiveandfournon-executivedirectors.The twoexecutivedirectors,MrSilvioDebonoandMrRobertDebono,occupyvariousseniorexecutiveand directorshippositionswithintheGroup.Thethreenon-executiveindependentdirectorsareMrPhilip Micallef,DrVinceMicallefandMrStephenMuscat.Mr.ArthurGauci,isalsoanon-executivedirectorbutis engagedasaconsultantwithinthegroupandholdsthepostasadirectorinvariouscompanieswithinthe group.
Thethreenon-executiveindependentdirectorsareconsideredbytheBoardasindependentdirectorssince theyarefreeofanysignificantbusinessrelationship,familyorotherrelationshipswiththeIssuer,its controllingshareholderorthemanagementofeither,thatcreatesaconflictofinterestsuchastoimpair their judgement.
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Corporate Governance - Statement of Compliance- continued
The Board of Directors - continued
TheactivitiesoftheBoardareexercisedinamannerdesignedtoensurethatitcaneffectivelysupervise theoperationsoftheCompanyandprotecttheinterestsofbondholdersandtheshareholders.Duringthe current financial period, meetings of the Board were held as frequently as considered necessary.
TheBoardmembersarenotifiedofforthcomingmeetingsbytheCompanysecretary(DrShaheryar Ghaznavi)withtheissueofanagendaandsupportingdocumentsasnecessarywhicharethendiscussed during the Board meetings.
TheBoarddoesnotconsideritnecessarytoinstituteseparatecommitteesforremunerationandnomination, aswouldbeappropriateinanoperatingcompany.Duringthefinancialyear,theBoardmetfourtimesand wasattendedbymorethan75%oftheOfficersoftheCompany. Duringthisyear,theBoarddidnot undertakeaperformanceevaluationofitsroleinaccordancewithArticle7oftheCorporateGovernance Code, but intends to do so in the coming year.
ApartfromsettingthestrategyanddirectionoftheCompany,theBoardretainsdirectresponsibilityfor approving and monitoring:
thedirectsupervision,supportedbyexpertprofessionaladviceasappropriate,ontheissueandlisting of bonds;
thattheproceedsofthebondsareappliedforthepurposesforwhichtheyweresanctionedasspecified in the prospectus of the bonds issued;
the proper utilisation of the resources of the Company;
theannualfinancialreportandfinancialstatements,therelevantpublicannouncementsandthe Company’s compliance with its continuing listing obligations.
Remuneration Statement
TheBoardconfirmsthatthemaximumannualaggregateemolumentsthatmaybepaidtothedirectors pursuanttotheCompany’sMemorandumandArticlesofAssociation,wasapprovedbytheshareholders attheAnnualGeneralMeeting.NoneofthedirectorshasservicecontractswiththeCompany.Furthermore, theremunerationofeachoftheindependentnon-executivedirectorsisafixedhonorariumof€5,000per annum. Theboardapprovedanincreaseinthefixedhonorariumto€10,000witheffectfromthe1April 2022.TheexecutivedirectorsdonotearnanyfixedhonorariumfromtheCompanybuthaveanindefinite full-time contract of service with companies forming part of the db Group.
Noneofthedirectorshaveanyvariablecomponentremunerationrelatingtoprofitsharing,shareoptionsor pension benefits from the Company.
TheBoardfurtherconfirmsthattheCompanydoesnotintendtoeffectanychangestoitsremuneration policy for the following year.
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Annual Financial Report and Financial Statements - 31 March 2022
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Corporate Governance - Statement of Compliance- continued
Risk Management and Internal Control
TheBoardisultimatelyresponsiblefortheCompany’ssystemofinternalcontrolsandforreviewingits effectiveness.Thedirectorsareawarethatinternalcontrolsystemsaredesignedtomanage,ratherthan eliminate,theriskoffailuretoachievebusinessobjectives,andcanonlyprovidereasonable,andnot absolute, assurance against normal business risks.
DuringthefinancialperiodunderreviewtheCompanyoperatedasystemofinternalcontrolswhichprovided reasonableassuranceofeffectiveandefficientoperationscoveringallcontrols,includingfinancialand operationalcontrolsandcompliancewithlawsandregulations.Processesareinplaceforidentifying, evaluating and managing the significant risks facing the Company.
TheBoardrecognisesthattheCompanymustmanagearangeofrisksinthecourseofitsactivitiesandin thisrespectmaintainsasoundriskmanagementandinternalcontrolsystemwhichincludesthe determination of the nature and extent of the risks it is willing to take in achieving its strategic objectives.
TheBoard,inthisfinancialperiod,establishedaformalandtransparentarrangementtoapplyrisk managementandinternalcontrolprinciples,aswellasmaintaininganappropriaterelationshipwiththe Company’s auditors.
TheBoardisadjournedperiodicallyofthefinancialaffairsandoperationaldevelopmentsofthegroup entities to whom the Issuer has advanced the proceeds from the bond issue.
Audit Committee
During the current financial period, the Audit Committee met three times with 100% attendance.
TheAuditCommittee’sprimaryobjectiveistoassisttheBoardinfulfillingitsresponsibilitiesrelatingtorisk, controlandgovernance;aswellastoreviewthefinancialreportingprocesses.TheBoardhassetformal termsofreferenceoftheAuditCommitteethatestablishitscomposition,roleandfunctions.TheAudit CommitteeisasubcommitteeoftheBoardandisdirectlyresponsibleandaccountabletotheBoard.The Board reserves the right to change these terms of reference from time to time.
Furthermore,theAuditCommitteehastheroleandfunctionofscrutinisingandevaluatinganyproposed transactiontobeenteredintobytheCompanyandarelatedparty,toensurethattheexecutionofanysuch transactionwasatarm’slengthandonacommercialbasisandultimatelyinthebestinterestsofthe Company.
AsrequiredbytheMalteseCompaniesAct(Cap.386)andtheListingAuthorityCapitalMarketsRules,the financialstatementsofSDFinanceplcaresubjecttoannualauditbyitsexternalauditors.Moreover,the AuditCommitteehasdirectaccesstotheexternalauditorsoftheCompany,whoattendtheBoardmeetings at which the Company’s financial statements are approved.
TheAuditCommitteeiscomposedofthreeindependentnon-executivedirectors,inaccordancewithCapital MarketsRule5.117.ThemembersoftheAuditCommitteeareMrStephenMuscat,MrPhilipMicallefand DrVinceMicallef.MrStephenMuscat,whoalsoactsastheChairmanoftheAuditCommittee,isaCertified PublicAccountantandisconsideredbytheBoardtobebothindependentandcompetentinaccountingas required in terms of the Capital Markets Rules.
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Corporate Governance - Statement of Compliance- continued
Relations with Bond Holders and the Market
PursuanttotheCompany’sstatutoryobligationsintermsoftheMalteseCompaniesAct(Cap.386)andthe ListingAuthorityCapitalMarketsRules,theAnnualFinancialReportandFinancialStatements,theelection ofdirectorsandapprovalofdirectors’fees,theappointmentoftheauditorsandtheauthorisationofthe directorstosettheauditors’fees,andotherspecialbusiness,areproposedandapprovedattheCompany’s Annual General Meeting.
TheCompanycommunicateswithitsbondholdersbypublishingitsinterimresultsforasix-monthperiod duringtheyearandbywayofpublicationofthefullyearAuditedFinancialStatements.TheFinancial AnalysisSummaryisalsopublishedinSeptember.Additionally,duringthecurrentfinancialperiod,the CompanyorganisedaspecificsessionforFinancialIntermediariesandthepresstoexplaintheCompany’s resultsandthoseoftheGroup.DuringtheperiodApril2021toMarch2022,thecompanyissuedseven companyannouncements.TheBoarddeemsthatitisprovidingthemarketwithadequateinformationabout its activities through these channels.
Inthisrespect,thedirectorsareoftheviewthatPrincipleTenoftheCodeofCorporateGovernanceisnot applicable to the Company.
Other Information
InviewofthesizeandtypeofoperationsoftheCompany,theBoarddoesnotconsidertheCompanyto require the setting up of a nomination committee.
Duringthefinancialperiodunderreview,noprivateinterestsordutiesunrelatedtotheCompanywere disclosedbythedirectorswhichwereorcouldhavebeenlikelytoplaceanyoftheminconflictwithany interests in, or duties towards the Company.
TheCompanyisamemberofthedbGroup,whichgrouphasitsownprogramforCorporateSocial Responsibility initiatives.
Conclusion
TheBoardconsidersthattheCompanyhasgenerallybeenincompliancewiththeprinciplesthroughoutthe period under review as befits a company of this size and nature.
Approved by the Board on 25 July 2022.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31 March 2022
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Statement of financial position
As at 31 March
2022
2021
Notes
ASSETS
Non-current assets
Loans receivable
4
64,332,686
62,232,686
Current assets
Receivables
5
91,327
2,819,773
Current tax assets
1,177
-
Cash and cash equivalents
6
3,018,511
2,293,486
Total current assets
3,111,015
5,113,259
Total assets
67,443,701
67,345,945
EQUITY AND LIABILITIES
Capital and reserves
Share capital
7
250,000
250,000
Retained earnings
35,007
30,137
Total equity
285,007
280,137
Non-current liabilities
Borrowings
8
64,490,922
64,401,010
Current liabilities
Payables
9
2,667,772
2,664,101
Current tax liabilities
-
697
Total current liabilities
2,667,772
2,664,798
Total liabilities
67,158,694
67,065,808
Total equity and liabilities
67,443,701
67,345,945
The accompanying notes are an integral part of these financial statements.
ThefinancialstatementswereapprovedandauthorisedforissuebytheBoardofDirectorson25July2022. ThefinancialstatementsweresignedonbehalfoftheBoardofDirectorsbyRobertDebono(Director)and StephenMuscat(Director)aspertheDirectors’DeclarationonESEFAnnualFinancialReportsubmittedin conjunction with the Annual Financial Report.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31 March 2022
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Statement of comprehensive income
Year ended 31 March
2022
2021
Notes
Finance income
10
3,014,799
3,005,960
Finance costs
11
(2,917,413)
(2,913,811)
Net interest income
97,386
92,149
Administrative expenses
12
(89,893)
(84,796)
Profit before tax
7,493
7,353
Tax expense
14
(2,623)
(2,414)
Profit for the year
- Total comprehensive income
4,870
4,939
The accompanying notes are an integral part of these financial statements.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31 March 2022
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Statement of changes in equity
Share
Retained
capital
earnings
Total
Balance at 1 April 2020
250,000
25,198
275,198
Comprehensive income
Profit for the year - total comprehensive income
-
4,939
4,939
Balance at 31 March 2021
250,000
30,137
280,137
Comprehensive income
Profit for the year - total comprehensive income
-
4,870
4,870
Balance at 31 March 2022
250,000
35,007
285,007
The accompanying notes are an integral part of these financial statements.
SD FINANCE plc
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Statement of cash flows
Year ended 31 March
Note
2022
2021
Cash flows from operating activities
Interest received
5,743,245
2,989,727
Interest paid
(2,827,584)
(2,817,585)
Cash paid to services providers
(86,139)
(72,199)
Tax paid
(4,497)
(6,068)
Net cash generated from operating activities
2,825,025
93,875
Cash flows used in investing activities
Loans advanced to fellow subsidiaries
4
(2,100,000)
-
Net cash used in investing activities
(2,100,000)
-
Net movement in cash and cash equivalents
725,025
93,875
Cash and cash equivalents at beginning of year
2,293,486
2,199,611
Cash and cash equivalents at end of year
6
3,018,511
2,293,486
The accompanying notes are an integral part of these financial statements.
SD FINANCE plc
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Notes to the financial statements
1.Summary of significant accounting policies
Theprincipalaccountingpoliciesappliedinthepreparationofthesefinancialstatementsaresetout below. Thesepolicieshavebeenconsistentlyappliedtotheperiodpresented,unlessotherwise stated.
1.1 Basis of preparation
ThesefinancialstatementshavebeenpreparedinaccordancewiththerequirementsofInternational FinancialReportingStandards(IFRSs)asadoptedbytheEUandwiththerequirementsofthe MalteseCompaniesAct(Cap.386). Thefinancialstatementshavebeenpreparedunderthe historical cost convention.
ThepreparationoffinancialstatementsinconformitywithIFRSsasadoptedbytheEUrequiresthe useofcertainaccountingestimates. Italsorequiresdirectorstoexercisetheirjudgmentinthe processofapplyingtheCompany’saccountingpolicies(seeNote3Criticalaccountingestimates and judgments).
InviewofthecurrentsituationbroughtaboutbytheCOVID-19pandemic,thecompanyrecognises thatthekeyriskanduncertaintyofitsoperationsisthatofthepotentialnon-fulfilmentbythe borrowers,(thatisSDHoldingsLimited,SeabankHotelandCateringLimitedandHotelSanAntonio Limited) of their obligations.
TheGrouphasalsopreparedprojectionsforthecoming2years,basedonhistoricalfinancial informationandforecasts,butfactoringintheimprovedresultsofthepastyear.Theseforecasts projectapositivecashflowfortheGroup.TheGrouphasoverthepastyearsaccumulateda substantialcashreservewhichasatyearendamountedto€40millionandalsoutiliseda€10million loanundertheMDBCOVID-19Guaranteeschemetomitigateagainstitsworkingcapitalneedsand at the same time cushioning the effect of any prolongment in its receivables cycle.
TheUkraine-Russiaconflictisnotexpectedtoaffecttheresultsofthegroupasitsexposureof businessfromthesetwocountriesisnegligible. However,whilstthegrouphasnodirectbusiness linkageswiththesecountries,thedirectorsaremonitoringtheeffectthatthisconflictmighthave. Possibleincreasesinthepriceofgoodsandservicesistheprincipalchallengethatthegroup’s entities will experience in the next financial year.
Thedirectorsoftheguarantorhaveconcludedthatapartfromthestrongcashreserveposition reportedabove,thegroupalsohasasolidequitypositionresultinginagearingratioof23.1%asat 31March2022.ThiswillenabletheGrouptoensurethatitdoesmeetitscommitmentsbothfinancial and otherwise and hence the company’s obligations to bondholders should be met in full.
Onthisbasis,thedirectorshaveassessedthatthecompanyisexpectedtohavethenecessaryfunds tofinancethepaymentofbondinterestfallingdueinApril2022and2023andgoingforward. Accordingly,theboardcontinuestoadoptthegoingconcernbasisinpreparingthefinancial statementsandconsidersthattherearenomaterialuncertaintieswhichmaycastsignificantdoubt about the ability of the company and the Group to continue operating as a going concern.
Standards,interpretationsandamendmentstopublishedstandardseffectiveduringthecurrent financial year
Duringthecurrentfinancialyear,thecompanyadoptedamendmentstoexistingstandardsthatare mandatoryforthecompany’saccountingperiodbeginningon1April2021.Theadoptionofthese revisionstotherequirementsofIFRSsasadoptedbytheEUdidnotresultinsubstantialchangesto the company’s accounting policies impacting the company’s financial performance and position.
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1.Summary of significant accounting policies - continued
1.1 Basis of preparation - continued
Standards, interpretations and amendments to published standards that are not yet effective
Certainnewstandards,amendmentsandinterpretationstoexistingstandardshavebeenpublished bythedateofauthorisationforissueofthesefinancialstatementsbutaremandatoryforthe company’saccountingperiodsbeginningafter1April2021. Thecompanyhasnotearlyadopted theserevisionstotherequirementsofIFRSsasadoptedbytheEUandthecompany’sdirectorsare oftheopinionthattherearenorequirementsthatwillhaveapossiblesignificantimpactonthe company’s financial statements in the period of initial application.
1.2 Foreign currency translation
(a)Functional and presentation currency
Itemsincludedinthesefinancialstatementsaremeasuredusingthecurrencyoftheprimary economicenvironmentinwhichtheentityoperates(‘thefunctionalcurrency’).Thefinancial statements are presented in euro which is the company’s functional and presentation currency.
(b)Transactions and balances
Foreigncurrencytransactionsaretranslatedintothefunctionalcurrencyusingtheexchangerates prevailingatthedatesofthetransactions. Foreignexchangegainsandlossesresultingfromthe settlementofsuchtransactionsandfromthetranslationatyear-endexchangeratesofmonetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
1.3 Financial assets
1.3.1 Classification
Thecompanyclassifiesitsfinancialassetsasfinancialassetsmeasuredatamortisedcost.The classificationdependsontheentity’sbusinessmodelformanagingthefinancialassetsandthe contractualtermsofthecashflows.Thecompanyclassifiesitsfinancialassetsasatamortisedcost only if both the following criteria are met:
-Theassetisheldwithinabusinessmodelwhoseobjectiveistocollectthecontractualcashflows, and
-The contractual terms give rise to cash flows that are solely payments of principal and interest.
Assessment of whether contractual cash flows are solely payments of principal and interest
Forthepurposesofthisassessment,‘principal’isdefinedasthefairvalueofthefinancialasseton initialrecognition. ‘Interest’isdefinedasconsiderationforthetimevalueofmoneyandforthecredit riskassociatedwiththeprincipalamountoutstandingduringaparticularperiodoftimeandforother basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.
Inassessingwhetherthecontractualcashflowsaresolelypaymentsofprincipalandinterest,the companyconsidersthecontractualtermsoftheinstrument. Thisincludesassessingwhetherthe financialassetcontainsacontractualtermthatcouldchangethetimingoramountofcontractualcash flows such that it would not meet this condition.
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