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 professionalfeesamountedto€89,893 (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
Annual Financial Report and Financial Statements - 31 March 2022
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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.
SD FINANCE plc
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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.
SD FINANCE plc
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.
SD FINANCE plc
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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
10
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
Annual Financial Report and Financial Statements - 31 March 2022
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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(seeNote3–Criticalaccountingestimates 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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1.Summary of significant accounting policies - continued
1.3 Financial assets - continued
1.3.2 Recognition and measurement
Regularwaypurchasesandsalesoffinancialassetsarerecognisedonthetradedate,whichisthe dateonwhichthecompanycommitstopurchaseorselltheasset.Financialassetsarederecognised whentherightstoreceivecashflowsfromthefinancialassetshaveexpiredorhavebeentransferred and the company has transferred substantially all the risks and rewards of ownership.
Atinitialrecognition,thecompanymeasuresafinancialassetatitsfairvalueplus,inthecaseofa financialassetnotatfairvaluethroughprofitorloss(FVPL),transactioncoststhataredirectly attributable to the acquisition of the financial asset.
Interestincomeondebtinstrumentsmeasuredatamortisedcostisincludedinfinanceincomeusing theeffectiveinterestratemethod.Anygainorlossarisingonderecognitionoftheseinstrumentsis recogniseddirectlyinprofitorlossandpresentedinothergains/(losses)togetherwithforeign exchangegainsandlosses.Impairmentlossesarepresentedasaseparatelineiteminthe consolidated statement of profit or loss.
1.3.3 Impairment
Thecompanyassessesonaforward-lookingbasistheexpectedcreditlosses(ECL)associatedwith itsdebtinstrumentscarriedatamortisedcost.Theimpairmentmethodologyapplieddependson whethertherehasbeenasignificantincreaseincreditrisk.Thecompany’sfinancialassetsare subject to the expected credit loss model.
Expected credit loss model
ThecompanymeasureslossallowancesatanamountequaltolifetimeECLs,exceptforthe following, which are measured at 12-month ECLs:
•debt securities that are determined to have low credit risk at the reporting date; and
•otherdebtsecuritiesandbankbalancesforwhichcreditriskhasnotincreasedsignificantlysince initial recognition.
Whendeterminingwhetherthecreditriskofafinancialassethasincreasedsignificantlysinceinitial recognitionandwhenestimatingECLs,thecompanyconsidersreasonableandsupportable informationthatisrelevantandavailablewithoutunduecostoreffort. Thecompanyassumesthat thecreditriskonafinancialassethasincreasedsignificantlyifitismorethan30dayspastdue,and itconsidersafinancialassettobeindefaultwhentheborrowerisunlikelytopayitscreditobligations tothecompanyinfull,withoutrecoursebythecompanytoactionssuchasrealisingsecurity(ifany is held); or the financial asset is more than 90 days past due.
LifetimeECLsaretheECLsthatresultfromallpossibledefaulteventsovertheexpectedlifeofa financialinstrument. 12-monthECLsaretheportionofECLsthatresultfromdefaulteventsthatare possiblewithinthe12monthsafterthereportingdate(orashorterperiodiftheexpectedlifeofthe instrumentislessthan12months).ThemaximumperiodconsideredwhenestimatingECLsisthe maximum contractual period over which the company is exposed to credit risk.
ECLsareaprobability-weightedestimateofcreditlosses. Creditlossesaremeasuredasthepresent value of all cash shortfalls. ECLs are discounted at the effective interest rate of the financial asset.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31 March 2022
16
1.Summary of significant accounting policies - continued
1.3 Financial assets - continued
Ateachreportingdate,thecompanyassesseswhetherfinancialassetscarriedatamortisedcostare credit-impaired. Afinancialassetis‘credit-impaired’whenoneormoreeventsthathaveadetrimental impactontheestimatedfuturecashflowsofthefinancialassethaveoccurred.Evidencethata financialassetiscredit-impairedincludesobservabledatasuchassignificantfinancialdifficultyofthe borrower or issuer, or a breach of contract such as a default or being more than 90 days past due.
Lossallowancesforfinancialassetsmeasuredatamortisedcostaredeductedfromthegross carrying amount of the assets.
Fortheloansreceivablefromrelatedpartiesandcashandcashequivalents,theexpectedcredit losses are immaterial.
1.4 Receivables
Receivablesarerecognisedinitiallyatfairvalueandsubsequentlymeasuredatamortisedcostusing the effective interest method, less expected credit loss allowances.
Receivablesarerecognisedinitiallyattheamountofconsiderationthatisunconditionalunlessthey containsignificantfinancingcomponents,whentheyarerecognisedatfairvalue.Thecompanyholds thereceivableswiththeobjectivetocollectthecontractualcashflowsandthereforemeasuresthem subsequently at amortised cost using the effective interest method.
1.5 Cash and cash equivalents
Cashandcashequivalentsarecarriedinthestatementoffinancialpositionatfacevalue. Inthe statementofcashflows,cashandcashequivalentsincludecashinhand,depositsheldatcallwith banksandbankoverdrafts. Bankoverdrafts,ifany,areshownwithinborrowingsincurrentliabilities in the statement of financial position.
1.6 Share capital
Ordinarysharesareclassifiedasequity. Incrementalcostsdirectlyattributabletotheissueofnew ordinary shares are shown in equity as a deduction, net of tax, from the proceeds.
1.7 Financial liabilities
Thecompanyrecognisesafinancialliabilityinitsstatementoffinancialpositionwhenitbecomesa partytothecontractualprovisionsoftheinstrument. Thecompany’sfinancialliabilitiesareclassified asfinancialliabilitieswhicharenotatfairvaluethroughprofitorloss(classifiedas‘Otherliabilities’) underIFRS9. Financialliabilitiesnotatfairvaluethroughprofitorlossarerecognisedinitiallyatfair value,beingthefairvalueoftheconsiderationreceived,netoftransactioncoststhataredirectly attributabletotheacquisitionortheissueofthefinancialliability. Theseliabilitiesaresubsequently measuredatamortisedcost. Thecompanyderecognisesafinancialliabilityfromitsstatementof financialpositionwhentheobligationspecifiedinthecontractorarrangementisdischarged,is cancelled or expires.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31 March 2022
17
1.Summary of significant accounting policies - continued
1.8 Borrowings
Borrowingsarerecognisedinitiallyatthefairvalueofproceedsreceived,netoftransactioncosts incurred. Borrowingsaresubsequentlycarriedatamortisedcost;anydifferencebetweenthe proceeds(netoftransactioncosts)andtheredemptionvalueisrecognisedinprofitorlossoverthe periodoftheborrowingsusingtheeffectiveinterestmethod. Borrowingsareclassifiedascurrent liabilitiesunlessthecompanyhasanunconditionalrighttodefersettlementoftheliabilityforatleast twelve months after the end of the reporting period.
Issuecostsincurredinconnectionwiththeissueofthebondsincludeprofessionalfees,printing, listing, registration, underwriting, management fees, selling costs and other miscellaneous costs.
1.9 Payables
Payablescompriseobligationstopayforgoodsorservicesthathavebeenacquiredintheordinary courseofbusinessfromsuppliers. Accountspayableareclassifiedascurrentliabilitiesifpaymentis due within one year or less. If not, they are presented as non-current liabilities.
Payablesarerecognisedinitiallyatfairvalueandsubsequentlymeasuredatamortisedcostusing the effective interest method.
1.10 Offsetting financial instruments
Financialassetsandliabilitiesareoffsetandthenetamountreportedinthestatementoffinancial positionwhenthereisalegallyenforceablerighttosetofftherecognisedamountsandthereisan intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
1.11 Current and deferred tax
Thetaxexpensefortheperiodcomprisescurrentanddeferredtax. Taxisrecognisedinprofitor loss,excepttotheextentthatitrelatestoitemsrecognisedinothercomprehensiveincomeordirectly inequity. Inthiscase,thetaxisalsorecognisedinothercomprehensiveincomeordirectlyinequity, respectively.
Deferredtaxisrecognised,usingtheliabilitymethod,ontemporarydifferencesarisingbetweenthe taxbasesofassetsandliabilitiesandtheircarryingamountsinthefinancialstatements. However, deferredtaxisnotaccountedforifitarisesfrominitialrecognitionofanassetorliabilityinatransaction otherthanabusinesscombinationthatatthetimeofthetransactionaffectsneitheraccountingnor taxableprofitorloss. Deferredtaxisdeterminedusingtaxrates(andlaws)thathavebeenenacted orsubstantivelyenactedbytheendofthereportingperiodandareexpectedtoapplywhentherelated deferred tax asset is realised or the deferred tax liability is settled.
Deferredtaxassetsarerecognisedonlytotheextentthatitisprobablethatfuturetaxableprofitwill be available against which the temporary differences can be utilised.
Deferredtaxassetsandliabilitiesareoffsetwhenthereisalegallyenforceablerighttooffsetcurrent taxassetsagainstcurrenttaxliabilitiesandwhenthedeferredtaxassetsandliabilitiesrelateto incometaxesleviedbythesametaxationauthorityoneitherthesametaxableentityordifferent taxable entities where there is an intention to settle the balances on a net basis.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31 March 2022
18
1.Summary of significant accounting policies - continued
1.12 Interest income and expense
Interestincomeandexpensearerecognisedinprofitorlossforallinterest-bearingfinancial instrumentsusingtheeffectiveinterestmethod. Theeffectiveinterestmethodisamethodof calculatingtheamortisedcostofafinancialassetorafinancialliabilityandofallocatingtheinterest incomeorinterestexpenseovertherelevantperiod.Theeffectiveinterestrateistheratethatexactly discountsestimatedfuturecashpaymentsorreceiptsthroughtheexpectedlifeofthefinancial instrumenttothenetcarryingamountofthefinancialassetorfinancialliability.Whencalculatingthe effectiveinterestrate,thecompanyestimatescashflowsconsideringallcontractualtermsofthe financialinstrumentbutdoesnotconsiderfuturecreditlosses.Thecalculationincludesallfeesand pointspaidorreceivedbetweenpartiestothecontractthatareanintegralpartoftheeffectiveinterest rate,transactioncostsandallotherpremiumsordiscounts. Accordingly,interestexpenseincludes theeffectofamortisinganydifferencebetweennetproceedsandredemptionvalueinrespectofthe company’s interest-bearing borrowings.
2.Financial risk management
2.1 Financial risk factors
Thecompanyconstitutesafinancingspecialpurposevehiclewhosebondproceedswereadvanced toSDHoldingsLimited(parentundertaking),HotelSanAntonioLimitedandSeabankHoteland CateringLimited(bothfellowsubsidiariesoftheissuer). Thecompany’sprincipalriskexposures relatetocreditriskandliquidityrisk.Thecompanyisnotexposedtocurrencyriskandthedirectors deeminterestrateriskexposuretobeminimalduetothematchingofitsinterestcostsonthebonds with its interest income from its loans and receivables referred to above.
(a) Credit risk
CreditriskprimarilyarisesfromloansreceivablefromSDHoldingsLimited,HotelSanAntonioLimited andSeabankHotelandCateringLimited(Note4),receivables(Note5)andcashandcash equivalents (Note 6).
Themaximumexposuretocreditriskattheendofthereportingperiodinrespectofthecompany’s financial assets is equivalent to their carrying amount, which is analysed as follows:
2022
2021
€
€
Financial assets measured at amortised cost:
Loans receivable from parent undertaking
and fellow subsidiaries (Note 4)
64,332,686
62,232,686
Receivables (Note 5)
91,327
2,819,773
Cash and cash equivalents (Note 6)
3,018,511
2,293,486
67,442,524
67,345,945
Cash and cash equivalents
Thecompany’scashandcashequivalentsareheldwithlocalfinancialinstitutionswithhighquality standingorratingornothingandareduetobesettledondemand.Managementconsidersthe probabilityofdefaulttobeclosetozeroasthefinancialinstitutionshaveastrongcapacitytomeet theircontractualobligationsinthenearterm.Asaresult,whilecashandcashequivalentsaresubject to the impairment requirements of IFRS 9, the identified impairment loss is insignificant.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31 March 2022
19
2.Financial risk management - continued
2.1 Financial risk factors - continued
Loans receivable and other amounts owed by related parties
Thecompany’sloansreceivableconsistofadvancestorelatedpartiesformingpartofthedbGroup (refertoNote4),whichadvanceshavebeeneffectedoutofthecompany’sbondissueproceeds. Thecompanymonitorsintra-groupcreditexposuresonaregularbasisandensurestimely performanceoftheseassetsinthecontextofoverallgroupliquiditymanagement.Thecompany’s collateralheldassecurityinrespectofthefinancialassetsisdisclosedinNote4tothefinancial statements. Theguarantorinrelationtothebondissue(SDHoldingsLimited)isinfactoneofthe borrowers. ThecompanyassessesthecreditqualityofthedbGrouptakingintoaccountfinancial position,performanceandotherfactors. Thecompanytakescognisanceoftherelatedparty relationshipwiththeseentitiesandmanagementdoesnotexpectanylossesfromnon-performance or default.
LoansreceivablefromrelatedpartiesarecategorisedasStage1forIFRS9purposes(i.e. performing)inviewofthefactorshighlightedabove.Theexpectedcreditlossallowancesonsuch loansarebasedonthe12-monthprobabilityofdefault,capturing12-monthexpectedlosses.On31 March2022,thecompany’sdirectorsreviewedthecompany’sfinancialassetsinparticulartheloans advancedtorelatedparties(seeNote4).Inviewoftherespectiveentity’shistory,resultstodate, gearingratiosandreserves,aswellasforwardlookingestimates,thedirectorsappliedjudgementin determiningtheappropriateexpectedcreditlossprovisionsasaresultofadoptingtheexpected future loss framework under IFRS 9.
Followingtheassessmentofthedirectors,allofthecompany’sfinancialassetsareconsideredto havelowcreditriskandalowriskofdefault.Inthisrespect,thelossallowancewasdeemed immaterial to be recognised in the balance sheet on as at 31 March 2022.
Thecompany’sotherreceivablesmainlyincludeinterestreceivablefromthecompany’sparentand otherrelatedpartiesinrespectoftheadvancesreferredtopreviously.Sincesuchbalancesare repayableondemand,expectedcreditlossesarebasedontheassumptionthatrepaymentofthe balanceisdemandedatthereportingdate. Accordingly,theexpectedcreditlossallowance attributable to such balances is insignificant.
(b) Liquidity risk
Thecompanyisexposedtoliquidityriskinrelationtomeetingfutureobligationsassociatedwithits financialliabilities,whichcompriseprincipallythebondsissuedtothegeneralpublicandother payables(refertoNotes8and9respectively). Prudentliquidityriskmanagementincludes maintainingsufficientcashandliquidassetstoensuretheavailabilityofanadequateamountof funding to meet the company’s obligations.
Thecompany’sliquidityriskismanagedactivelybyensuringthatcashinflowsarisingfromexpected maturitiesofthecompany’sadvancestorelatedpartieseffectedoutofthebondissueproceeds, togetherwithanyrelatedinterestreceivable,matchthecashoutflowsinrespectofthecompany’sbond borrowings,coveringprincipalandinterestpayments,asreferredtoinNote9andreflectedinthetable below.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31 March 2022
20
2.Financial risk management - continued
2.1 Financial risk factors - continued
Thefollowingtableanalysesthecompany’sfinancialliabilitiesintorelevantmaturitygroupingsbased ontheremainingperiodatthereportingdatetothecontractualmaturitydate.Theamountsdisclosed inthetablesbelowarethecontractualundiscountedcashflows.Balancesduewithin12months equal their carrying balances, as the impact of discounting is not significant.
Within
Between 1
Between 2
Over
1 year
and 2 years
and 5 years
5 years
Total
€
€
€
€
€
31 March 2022
Borrowings
2,827,500
2,827,500
8,482,500
67,827,500
81,965,000
Payables
27,449
-
-
-
27,449
2,854,949
2,827,500
8,482,500
67,827,500
81,992,449
31 March 2021
Borrowings
2,827,500
2,827,500
8,482,500
70,655,000
84,792,500
Payables
23,695
-
-
-
23,695
2,851,195
2,827,500
8,482,500
70,655,000
84,816,195
2.2 Capital risk management
ThedbGroupobjectiveswhenmanagingcapitalatsubsidiarylevelaretosafeguardtherespective company’sabilitytocontinueasagoingconcerninordertoprovidereturnsforshareholdersand benefitsforotherstakeholders,andtomaintainanoptimalcapitalstructuretoreducethecostofcapital. Inordertomaintainoradjustthecapitalstructure,thecompanymayissuenewsharesoradjustthe amount of dividends paid to shareholders.
Thecompany’sequity,asdisclosedinthestatementoffinancialposition,constitutesitscapital.The companymaintainsitslevelofcapitalbyreferencetoitsfinancialobligationsandcommitmentsarising fromoperationalrequirements. Takingcognisanceofthenatureofthecompany’sassets,togetherwith collateralheldassecurity,backingthecompany’sprincipalborrowings,thecapitallevelattheendof the reporting period is deemed adequate by the directors.
2.3 Fair values of financial instruments
At31March2022,thecarryingamountsofcashatbank,receivables,payablesandaccruedexpenses approximatedtheirfairvaluesduetothenatureorshort-termmaturityoftheseinstruments.Thefair valuesoftheinterestbearingloansreceivablewerenotsignificantlydifferentfromtheircarrying amountsattheendofthereportingperiodbasedondiscountedcashflowsusingmarketinterestrates prevailingat31March2022.Thecurrentmarketinterestratesutilisedfordiscountingpurposes,which werealmostequivalenttotherespectiveinstruments’contractualinterestrates,aredeemedobservable andaccordinglythesefairvalueestimateshavebeencategorisedasLevel2withinthefairvalue measurementhierarchyrequiredbyIFRS7,‘Financialinstruments:Disclosures’.Informationonthefair valueofthecompany’sbondsissuedtothegeneralpublicisdisclosedinNote8tothefinancial statements.ThefairvalueestimateinthisrespectisdeemedLevel1asitconstitutesaquotedpricein an active market.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31 March 2022
21
3.Critical accounting estimates and judgments
Estimatesandjudgmentsarecontinuallyevaluatedandbasedonhistoricalexperienceandother factorsincludingexpectationsoffutureeventsthatarebelievedtobereasonableunderthe circumstances.Intheopinionofthedirectors,theaccountingestimatesandjudgmentsmadeinthe courseofpreparingthesefinancialstatementsarenotdifficult,subjectiveorcomplextoadegree which would warrant their description as critical in terms of the requirements of IAS 1.
4.Loans receivable
2022
2021
€
€
Non-current
Loan to parent
1,488,101
1,488,101
Loans to fellow subsidiaries
62,844,585
60,744,585
64,332,686
62,232,686
Theloansreceivablerepresenttheproceedsfromthebondissue(seeNote8)whichhavebeen advancedbythecompanytoSDHoldingsLimited(thecompany’sparentundertakingandguarantor ofthebonds)andtoHotelSanAntonioLimitedandSeabankHotelandCateringLimited(bothfellow subsidiariesoftheIssuer).Theprincipalpurposesfortheseadvanceswerethere-financingofexisting bankingfacilitiesoftherespectiveborrower,thefinancingoftheredemptionofcertainredeemable preferencesharesofSeabankHotelandCateringLimited,andforthegeneralcorporatefunding purposes of the db Group as the need arises in the ordinary course of business.
During the current financial year an amount of €2.1 million was advanced to fellow subsidiaries.
Theseloansaresubjecttointerestatafixedinterestrateof4.55%(2021:4.55%),withanadditional renewalfee,whichischargedontheloansatafloatingrateatthediscretionofthedirectorsofthe Issuer. Asattheendofthereportingperiod,theelementofthefloatingrateinterestwas0.15% (2021: 0.28%). The loans are unsecured and repayable by not later than 10 April 2027.
5.Receivables
2022
2021
€
€
Current
Amounts owed by parent
2,178
67,426
Amounts owed by fellow subsidiaries
89,149
2,752,347
91,327
2,819,773
6.Cash and cash equivalents
For the purposes of the statement of cash flows, cash and cash equivalents comprise the following:
2022
2021
€
€
Cash at bank and in hand
3,018,511
2,293,486
SD FINANCE plc
Annual Financial Report and Financial Statements - 31 March 2022
22
7.Share capital
2022
2021
€
€
Authorised
250,000 ordinary shares of €1 each
250,000
250,000
Issued and fully paid
250,000 ordinary shares of €1 each
250,000
250,000
Theholdersofordinarysharesareentitledtoreceivedividendsasdeclaredfromtimetotimeand areentitledtoonevotepershareatmeetingsofthecompany. Allsharesrankequallywithregard to the company’s residual assets.
8.Borrowings
2022
2021
€
€
Non-current
650,000 4.35% Bonds 2017-2027
64,490,922
64,401,010
Thebondsaremeasuredattheamountofthenetproceedsadjustedfortheamortisationofthe differencebetweenthenetproceedsandtheredemptionvalueofsuchbonds,usingtheeffective yield method as follows:
2022
2021
€
€
Original face value of bonds issued
65,000,000
65,000,000
Gross amount of bond issue costs
(924,036)
(924,036)
Accumulated amortisation
414,958
325,046
Unamortised bond issue costs
(509,078)
(598,990)
Amortised cost and closing carrying amount of the bonds
64,490,922
64,401,010
SD FINANCE plc
Annual Financial Report and Financial Statements - 31 March 2022
23
8.Borrowings - continued
Byvirtueofanofferingmemorandumdated27March2017,thecompanyissued€65,000,000bonds withafacevalueof€100each. Thebondshaveacouponinterestof4.35%whichispayable annuallyinarrears,on25Aprilofeachyear.Thebondsareredeemableatparandareduefor redemptionon25April2027.ThebondsareguaranteedbySDHoldingsLimited,whichhasbound itselfjointlyandseverallyliablewiththeissuer,fortherepaymentofthebondsandinterestthereon, pursuanttoandsubjecttothetermsandconditionsintheofferingmemorandum.Thebondswere admittedontheOfficialListoftheMaltaStockExchangeon4May2017.Thequotedmarketprice asat31March2022forthebondswas€100.25(2021:€101.50),whichintheopinionofthedirectors fairlyrepresentsthefairvalueofthesefinancialliabilities. Attheendofthecurrentreportingperiod, bonds with a face value of €537,327 (2021: €535,000) were held by a company director.
Inaccordancewiththeprovisionsoftheprospectus,theproceedsfromthebondissuehavebeen advanced by the company to related parties (refer to Note 4).
9.Payables
2022
2021
€
€
Current
Interest payable accrued
2,640,323
2,640,406
Other accruals
10,754
8,762
Other payables
16,695
14,933
2,667,772
2,664,101
10.Finance income
2022
2021
€
€
Interest income on loan advanced to parent
69,892
71,878
Interest income on loans advanced to fellow subsidiaries
2,944,907
2,934,082
3,014,799
3,005,960
11.Finance costs
2022
2021
€
€
Bond interest expense
2,917,413
2,913,811
SD FINANCE plc
Annual Financial Report and Financial Statements - 31 March 2022
24
12.Expenses by nature
2022
2021
€
€
Directors’ fees (Note 13)
15,087
15,087
Listing and related compliance costs
44,643
45,058
Legal and professional fees
26,891
22,648
Other expenses
3,272
2,003
Total administrative expenses
89,893
84,796
Auditor’s fees
Feeschargedbytheauditorforservicesrenderedduringthefinancialyearsended31March2022 and 2021 relate to the following:
2022
2021
€
€
Annual statutory audit
7,800
7,000
Tax advisory and compliance services
-
500
7,800
7,500
Duringthecurrentyearfeesinrelationtonon-assuranceservicesamountingto€600havebeen chargedbyconnectedundertakingsofthecompany’sauditor,inrespectoftaxadvisoryand compliance services.
13.Directors’ emoluments
2022
2021
€
€
Directors’ fees
15,087
15,087
14.Tax expense
2022
2021
€
€
Current taxation
Current tax expense
2,623
2,414
SD FINANCE plc
Annual Financial Report and Financial Statements - 31 March 2022
25
14.Tax expense - continued
Thetaxonthecompany’sprofitbeforetaxdiffersfromthetheoreticalamountthatwouldariseusing the basic tax rate as follows:
2022
2021
€
€
Profit before tax
7,493
7,353
Tax on profit at 35%
2,623
2,574
Tax effect of:
Over provision of tax in prior years
-
(160)
2,623
2,414
15.Net debt reconciliation
OtherthanasdisclosedinNote8‘Borrowings’withrespecttotheamortisationofbondissuecosts, there were no further movements in the company’s net debt.
16.Related parties
ThecompanyformspartofthedbGroupofCompanies. AllcompaniesformingpartofthedbGroup are related parties since these companies are all ultimately owned by SD Holdings Limited.
TransactionswithcompaniesformingpartofdbGroupprincipallyincludeadvanceseffectedbythe companyduringthecurrentfinancialperiod,asdisclosedinNote4tothefinancialstatements. Interest incomeearnedfromtheseadvancesisdisclosedinNote10.Otheryearendbalanceswithrelatedparties aredisclosedseparatelyinNote5andsuchbalancesareunsecured,interestfreeandrepayableon demand.
Keymanagementpersonnelcomprisesthedirectorsofthecompany.Keymanagementpersonnel compensation,consistingofremunerationtothecompany’sdirectors,hasbeendisclosedinNote13.
17.Statutory information
SDFinanceplcisalimitedliabilitycompanyandisincorporatedinMalta,withitsregisteredaddress at db Seabank Resort & Spa, Marfa Road, Mellieha Bay, Mellieha, MLH 9064, Malta.
TheimmediateandultimateparentcompanyofSDFinanceplcisSDHoldingsLimited,acompany registeredinMalta,withitsregisteredaddressatdbSeabankResort&Spa,MarfaRoad,Mellieha Bay, Mellieha, MLH 9064, Malta.
The ultimate beneficial owner of SD Holdings Limited is Silvio Debono.

PwC_fl_4cp.eps

Independent auditor’s report

To the Shareholders of SD Finance plc

 

Report on the audit of the financial statements

Our opinion

 

In our opinion:

 

·      The financial statements give a true and fair view of the financial position of SD Finance plc (the Company) as at 31 March 2022, and of the company’s financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards (‘IFRSs’) as adopted by the EU; and

·       The financial statements have been prepared in accordance with the requirements of the Maltese Companies Act (Cap. 386).

 

Our opinion is consistent with our additional report to the Audit Committee.

 

What we have audited

 

SD Finance plc’s financial statements comprise:

 

·         the statement of financial position as at 31 March 2022;

·         the statement of comprehensive income for the year then ended;

·         the statement of changes in equity for the year then ended;

·         the statement of cash flows for the year then ended; and

·         the notes to the financial statements, which include significant accounting policies and other explanatory information.

 

Basis for opinion

 

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

Independence

 

We are independent of the company in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code) together with the ethical requirements of the Accountancy Profession (Code of Ethics for Warrant Holders) Directive issued in terms of the Accountancy Profession Act (Cap. 281) that are relevant to our audit of the financial statements in Malta. We have fulfilled our other ethical responsibilities in accordance with these Codes.

 

To the best of our knowledge and belief, we declare that non-audit services that we have provided to the company are in accordance with the applicable law and regulations in Malta and that we have not provided non-audit services that are prohibited under Article 18A of the Accountancy Profession Act (Cap. 281).

 

The non-audit services that we have provided to the company, in the period from 1 April 2021 to 31 March 2022, are disclosed in note 12 to the financial statements.

 

 

Our audit approach

 
Overview

 

img

·         Overall materiality: €674,000, which represents 1% of total assets.

 

Recoverability of loans issued to the guarantor of the bonds and fellow subsidiaries

 
 
 
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where the directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

 

We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the company, the accounting processes and controls, and the industry in which the company operates.

 

Materiality

 

The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

 

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall materiality for the financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

 

Overall materiality

€674,000

How we determined it

1% of total assets

Rationale for the materiality benchmark applied

We chose total assets as the benchmark because, in our view, it is an appropriate measure for this type of entity.

We chose 1%, which is within the range of quantitative materiality thresholds that we consider acceptable.

 

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above €67,400 as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

 

Key audit matters

 

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 

Key audit matter

How our audit addressed the Key audit matter

Recoverability of loans issued to the guarantor of the bonds and fellow subsidiaries

(Notes 2.1(a) and 4)

 

Loans receivable represent funds advanced to the company’s parent, SD Holdings Limited,  which is also the guarantor of the bonds issued by the company, and to fellow subsidiaries Hotel San Antonio Limited and Seabank Hotel and Catering Limited. Loan balances with these related parties as at 31 March 2022 amounted to €64.3 million.

 

As explained in accounting policy Note 1.3.3, the recoverability of the loans is assessed at the end of each financial year.

 

The loans are the principal asset of the company, which is why we have given additional attention to this area.

 

 

 

 

We have agreed the terms of these loans to supporting loan agreements.

 

We have assessed the financial soundness of these related parties. In doing this, we made reference to the latest audited financial statements, management accounts, cash flow projections, forecasts and other prospective information made available to us.

 

We also understood the impact of the COVID-19 pandemic on the financial performance and cash flows of the guarantor.

 

Based on evidence and explanations obtained, we concur with management’s view with respect to the recoverability of these loans.

 

 

Other information

 

The directors are responsible for the other information. The other information comprises the Directors’ report and Corporate Governance – Statement of Compliance (but does not include the financial statements and our auditor’s report thereon).

 

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon except as explicitly stated within the Report on other legal and regulatory requirements.  

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

 

Responsibilities of the directors and those charged with governance for the financial statements

 

The directors are responsible for the preparation of financial statements that give a true and fair view in accordance with IFRSs as adopted by the EU and the requirements of the Maltese Companies Act (Cap. 386), and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

 

Those charged with governance are responsible for overseeing the company’s financial reporting process.

 

Auditor’s responsibilities for the audit of the financial statements

 

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

 

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

 

·     Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

·   Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

·     Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

·     Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

·       Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

 

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

 

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

 

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

 

Report on other legal and regulatory requirements

Report on compliance with the requirements of the European Single Electronic Format Regulatory Technical Standard (the “ESEF RTS”), by reference to Capital Markets Rule 5.55.6

 

We have undertaken a reasonable assurance engagement in accordance with the requirements of Directive 6 issued by the Accountancy Board in terms of the Accountancy Profession Act (Cap. 281) - the Accountancy Profession (European Single Electronic Format) Assurance Directive (“the ESEF Directive 6”) on the Annual Financial Report of SD Finance plc for the year ended 31 March 2022, entirely prepared in a single electronic reporting format.              

 

Responsibilities of the directors

The directors are responsible for the preparation of the Annual Financial Report, including the financial statements, by reference to Capital Markets Rule 5.56A, in accordance with the requirements of the ESEF RTS.

Our responsibilities

Our responsibility is to obtain reasonable assurance about whether the Annual Financial Report, including the financial statements, complies in all material respects with the ESEF RTS based on the evidence we have obtained. We conducted our reasonable assurance engagement in accordance with the requirements of ESEF Directive 6.

Our procedures included:

·    Obtaining an understanding of the entity's financial reporting process, including the preparation of the Annual Financial Report in XHTML format.

·       Examining whether the Annual Financial Report has been prepared in XHTML format.

 

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion, the Annual Financial Report for the year ended 31 March 2022 has been prepared in XHTML format in all material respects.

 

Other reporting requirements

 

The Annual Financial Report and Financial Statements 2022 contains other areas required by legislation or regulation on which we are required to report.  The Directors are responsible for these other areas.

 

The table below sets out these areas presented within the Annual Financial Report, our related responsibilities and reporting, in addition to our responsibilities and reporting reflected in the Other information section of our report. Except as outlined in the table, we have not provided an audit opinion or any form of assurance.

 

Area of the Annual Financial Report and Financial Statements 2022 and the related Directors’ responsibilities

Our responsibilities

Our reporting

Directors’ report

The Maltese Companies Act (Cap. 386) requires the directors to prepare a Directors’ report, which includes the contents required by Article 177 of the Act and the Sixth Schedule to the Act.

We are required to consider whether the information given in the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements.     

 

We are also required to express an opinion as to whether the Directors’ report has been prepared in accordance with the applicable legal requirements.

 

In addition, we are required to state whether, in the light of the knowledge and understanding of the Company and its environment obtained in the course of our audit, we have identified any material misstatements in the Directors’ report, and if so to give an indication of the nature of any such misstatements.

 

In our opinion:

·       the information given in the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

·       the Directors’ report has been prepared in accordance with the Maltese Companies Act (Cap. 386).

 

We have nothing to report to you in respect of the other responsibilities, as explicitly stated within the Other information section.

 

Corporate Governance - Statement of Compliance

The Capital Markets Rules issued by the Malta Financial Services Authority require the directors to prepare and include in the Annual Financial Report a Statement of Compliance with the Code of Principles of Good Corporate Governance within Appendix 5.1 to Chapter 5 of the Capital Markets Rules.  The Statement’s required minimum contents are determined by reference to Capital Markets Rule 5.97.  The Statement provides explanations as to how the Company has complied with the provisions of the Code, presenting the extent to which the Company has adopted the Code and the effective measures that the Board has taken to ensure compliance throughout the accounting period with those Principles.

 

We are required to report on the Statement of Compliance by expressing an opinion as to whether, in light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have identified any material misstatements with respect to the information referred to in Capital Markets Rules 5.97.4 and 5.97.5, giving an indication of the nature of any such misstatements.

 

We are also required to assess whether the Statement of Compliance includes all the other information required to be presented as per Capital Markets Rule 5.97.

 

We are not required to, and we do not, consider whether the Board’s statements on internal control included in the Statement of Compliance cover all risks and controls, or form an opinion on the effectiveness of the Company’s corporate governance procedures or its risk and control procedures.

In our opinion, the Statement of Compliance has been properly prepared in accordance with the requirements of the Capital Markets Rules issued by the Malta Financial Services Authority.

 

We have nothing to report to you in respect of the other responsibilities, as explicitly stated within the Other information section.

 

Other matters on which we are required to report by exception

We also have responsibilities under the Maltese Companies Act (Cap. 386) to report to you if, in our opinion:

·       adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us.

·       the financial statements are not in agreement with the accounting records and returns.

·       we have not received all the information and explanations  which, to the best of our knowledge and belief, we require for our audit.

 

We also have responsibilities under the Capital Markets Rules to review the statement made by the directors that the business is a going concern together with supporting assumptions or qualifications as necessary.

We have nothing to report to you in respect of these responsibilities.

 

 

Other matter – use of this report

 

Our report, including the opinions, has been prepared for and only for the Company’s shareholders as a body in accordance with Article 179 of the Maltese Companies Act (Cap. 386) and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior written consent.

 

Appointment

 

We were first appointed as auditors of the Company on 12 January 2018.  Our appointment has been renewed annually by shareholder resolution representing a total period of uninterrupted engagement appointment of 5 years. The company became listed on a regulated market on 4 May 2017.

 

 

 

PricewaterhouseCoopers

78, Mill Street

Zone 5, Central Business District

Qormi

Malta

 

 

 

Stefan Bonello

Partner

 

25 July 2022