SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
SD FINANCE plc
Annual Financial Report and Financial Statements
31 March 2024
Company Registration Number: C 79193
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
Contents
Pages
Directors’ report
1-4
Corporate Governance – Statement of Compliance
5-8
Statement of financial position
9
Statement of comprehensive income
10
Statement of changes in equity
11
Statement of cash flows
12
Notes to the financial statements
13-29
Independent auditor’s report
30-36
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
1
Directors’ report
The Directors present their report and the audited financial statements for the year ended 31 March 2024.
Principal activities
The Company’s principal activity is to carry on the business by raising funds to finance the operations and capital projects of the companies forming part of the db Group (“the Group”).
Review of business
During the year under review, finance income on loans and ancillary revenue (in the form of renewal fees - see Note 4) from SD Holdings Limited, the guarantor of the Company’s bonds, and Seabank Hotel and Catering Limited and Hotel San Antonio Limited (fellow subsidiaries), amounted to €3.1 million (2023: €3.1 million), whilst interest expense on bonds totalled €2.93 million (2023: €2.92 million).
Administrative expenses mainly representing listing and compliance costs, together with Directors’ and professional fees amounted to €126,696 (2023: €128,210). Profit for the year after tax remained consistent with prior year at €5,021 (2023: €4,882).
The Company’s balance sheet is primarily made up of the bond issue for €65 million (classified as non-current liabilities) and the loans receivable from SD Holdings Limited, Seabank Hotel and Catering Limited, and Hotel San Antonio Limited (classified as non-current assets). SD Finance plc’s equity as at year end is stated at €294,910 (2023: €289,889) primarily made up of the initial share capital funds.
The Company recognises that the key risk and uncertainty of its business is that of the potential non-fulfilment by the borrowers (noted above) of their obligations.
Guarantor’s performance for 2024 and outlook for 2025
The db Group owned by SD Holdings Limited, as guarantor to the bond issue, experienced continued growth in revenues and profitability.
The Group continued its expansion of its Starbucks outlets network in Malta and opened new restaurants in Mellieha, Sliema and Malta International Airport during the current financial year. The Group is also looking into expanding internationally with the first step being the opening of a new restaurant in London. On the other hand, the Court of Appeal upheld the decision of the Environmental and Planning Review Tribunal approving the proposed St George's Bay Multi Purpose Development of former ITS site in St. George’s Bay.
As at 31 March 2024, the Group still has a substantial cash reserve of over €71 million.
  
The health care arm of the Group continued with an upswing in demand for the services offered by the Group within this sector. It provides health and social care services and training to the general public, hospitals and elderly retirement and nursing homes. It also provides nursing, medical, and clinical services apart from catering services in various hospitals and residences especially at the 504-bed wing at the Saint Vincent de Paul Residence.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
2
Directors’ report - continued
Review of business - continued
Guarantor’s performance for 2024 and outlook for 2025 - continued
The Group has also prepared projections for the coming 2 years, based on historical financial information and forecasts, but factoring in the improved results of the past year. The Ukraine-Russia and Israel-Palestine conflicts are not expected to affect the results of the Group as its exposure of business from these two regions is negligible. However, whilst the Group has no direct business linkages with these countries, we are monitoring the effect that this conflict might have. Continued increases in the price of goods and services is the principal challenge that the Group’s entities have experienced during the current financial year. The projections contemplate the existence of a significant liquidity buffer at the end of the year and the Directors feel confident that with the measures taken and the secured financing arrangements, the Group shall overcome any potential further disruptions. On this basis, the Directors are of the opinion that there are no material uncertainties which may cast significant doubt about the ability of the Group to continue operating as a going concern.
Issuer’s outlook for the financial year ending 2025
The Company paid its bondholders the full interest that was due in April 2024. Furthermore, in view of the measures undertaken by the Group, the projections outlined above and the cash reserves available to the Group, the Directors are of the opinion that the Issuer will have the necessary funds to finance the interest falling due in April 2025 and going forward. The Board of the Issuer, having reviewed the Group’s cashflow forecast, further confirms this statement.
Principal risks and uncertainties
Financial risk management
The Company’s activities expose it to a variety of financial risks, including credit risk and liquidity risk. Refer to Note 2 to these financial statements.
Results and dividends
The Company’s financial results are set out on page 10. The Directors do not recommend the payment of a dividend.
The Directors propose that the balance of retained earnings amounting to €44,910 (2023: €39,889) be carried forward to the next financial year.
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.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
3
Directors’ report - continued
Statement of Directors’ responsibilities for the financial statements
The Directors are required by the Companies Act (Cap. 386) of the Laws of Malta to prepare financial statements which give a true and fair view of the state of affairs of the Company as at the end of each reporting year and of the profit or loss for that period.
In preparing the financial statements, the Directors should:
-select suitable accounting policies and apply them consistently;
-ensure that the financial statements have been drawn up in accordance with International Financial Reporting Standards as adopted by the EU and the Companies Act (Cap. 386) of the Laws of Malta;
-account for income and charges relating to the accounting period on the accruals basis;
-value separately the components of asset and liability items;
-report comparative figures corresponding to those of the preceding accounting period;
-make judgments and estimate that are reasonable; and
-prepare the financial statement on a going concern basis, unless it is inappropriate to presume that the Company will continue in business as a going concern.
The Directors are responsible for ensuring that proper accounting records are kept which disclose with reasonable accuracy at any time the financial position of the Company and which enable the Directors to ensure that the financial statements comply with the Companies Act (Cap. 386) of the Laws of Malta. This responsibility includes designing, implementing, and maintaining such internal control as the Directors determine is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. The Directors are also responsible for safeguarding the assets of the Company, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Annual Financial Report 2024, which includes the directors’ report and financial statements of SD Finance plc for the year ended 31 March 2024 are available on the db Group website.
The Directors are responsible for the maintenance and integrity of the Annual Financial Report on the website in view of their responsibility for the controls over, and the security of, the website. Access to information published on the Group’s website is available in other countries and jurisdictions, where legislation governing the preparation and dissemination of financial statements may differ from requirements or practice in Malta.
The Directors confirm that, to the best of their knowledge:
-the financial statements give a true and fair view of the financial position of the Company as at 31 March 2024, and of the financial performance and the cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU; and
-the Annual Financial Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company and the Guarantor face.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
4
Directors’ report - continued
Going concern statement pursuant to Capital Markets rule 5.62
After making enquiries, the Directors, at the time of approving the financial statements, have determined that it is reasonable to assume that the Company has adequate resources to continue operating for the foreseeable future. For this reason, the Directors have adopted the going concern basis in preparing the financial statements.
Auditors
Ernst & Young Malta (EY Malta) have been appointed as auditors of the Company for the audit of the current financial year ending 31 March 2024.
Signed on behalf of the Board of Directors on 29 July 2024 by Robert Debono (Director) and Stephen Muscat (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in 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 - 31st March 2024
5
Corporate Governance – Statement of Compliance
Introduction
Pursuant to the requirements of the Capital Markets Rules issued by the Listing Authority of the Malta Financial Services Authority, SD Finance plc (the “Company” or the “Issuer” - a fully owned subsidiary of SD Holdings Limited) hereby reports on the extent to which the Company has adopted The Code of Principles of Good Corporate Governance (the “Code”) appended to Chapter 5 of the Capital Markets Rules as well as the measures adopted to ensure compliance with these same Principles.
Since its incorporation, the Company’s principal activity is to raise funds from the capital market to finance the operations of other group companies forming part of the db Group (the “Group”).
The Company acknowledges that although the Code does not dictate or prescribe mandatory rules, compliance with the principles of good corporate governance recommended in the Code is in the best interests of the Company, its shareholders, and other stakeholders. In deciding on the most appropriate manner in which to implement the Principles, the Board of SD Finance plc (the “Board”) has taken cognisance of its size, which inevitably impacts on the structures required to implement the Principles without diluting the effectiveness thereof. The Company does not have any employees.
The Board considers that, to the extent otherwise disclosed herein, the Company was generally in compliance with the Principles throughout the year under review.
Roles and responsibilities
The Board acknowledges its statutory mandate to conduct the administration and management of the Company. The Board, in fulfilling this mandate and discharging its duty of stewardship of the Company, assumes responsibility for:
-the Company’s strategy and decisions with respect to the issue, servicing, and redemption of its bonds; and
-monitoring that its operations are in conformity with its commitments towards bondholders, shareholders and all relevant laws and regulations.
The Board is also responsible for ensuring that the Company installs and operates effective internal control 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.
The Board is composed of six members made up of two executive and four non-executive directors. The two executive directors, Mr Silvio Debono and Mr Robert Debono, occupy various senior executive and directorship positions within the Group. The three non-executive independent directors are Mr Philip Micallef, Dr Vincent Micallef and Mr Stephen Muscat. Mr Arthur Gauci is also a non-executive director but is engaged as a consultant within the Group and holds the post as a director in various companies within the Group.
The three non-executive independent directors are considered by the Board as independent directors since they are free of any significant business relationship, family or other relationships with the Issuer, its controlling shareholder, or the management of either, that creates a conflict of interest such as to impair their judgement.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
6
Corporate Governance – Statement of Compliance - continued
The Board of Directors - continued
The activities of the Board are exercised in a manner designed to ensure that it can effectively supervise the operations of the Company and protect the interests of bondholders and the shareholders. During the current financial period, meetings of the Board were held as frequently as considered necessary.
 
The Board members are notified of forthcoming meetings by the Company secretary (Dr Shaheryar Ghaznavi) with the issue of an agenda and supporting documents as necessary which are then discussed during the Board meetings.
The Board does not consider it necessary to institute separate committees for remuneration and nomination, as would be appropriate in an operating company. During the current financial year, the Board met five times and was attended by more than 75% of the Officers of the Company. During this year, the Board did not undertake a performance evaluation of its role in accordance with Article 7 of the Corporate Governance Code but intends to do so in the coming year.
Apart from setting the strategy and direction of the Company, the Board retains direct responsibility for approving and monitoring:
-the direct supervision, supported by expert professional advice as appropriate, on the issue and listing of bonds;
-that the proceeds of the bonds are applied for the purposes for which they were sanctioned as specified in the prospectus of the bonds issued;
-the proper utilisation of the resources of the Company;
-the annual financial report and financial statements, the relevant public announcements and the Company’s compliance with its continuing listing obligations.
Remuneration statement
The Board confirms that the maximum annual aggregate emoluments that may be paid to the Directors pursuant to the Company’s Memorandum and Articles of Association, was approved by the shareholders at the Annual General Meeting. None of the non-executive Directors has service contracts with the Company. Furthermore, the remuneration of two of the independent non-executive Directors is a fixed honorarium of €10,000 each per annum and for the other independent non-executive Director, a fixed honorarium of €13,000 per annum. The director’s fees of the other non-executive director who serves as a consultant within the Group are being recharged to the Company by the Group and is paid to a fellow subsidiary (see Note 16). The fixed remuneration as the Company’s Directors also covers their services as the Company’s Audit Committee. The executive Directors do not earn any fixed honorarium from the Company but have an indefinite full-time contract of service with the companies forming part of the db Group.
None of the Directors have any variable component remuneration relating to profit sharing, share options or pension benefits from the Company.
The Board further confirms that the Company does not intend to effect any changes to its remuneration policy for the following year.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
7
Corporate Governance – Statement of Compliance - continued
Risk management and internal control
The Board is ultimately responsible for the Company’s system of internal controls and for reviewing its effectiveness. The directors are aware that internal control systems are designed to manage, rather than eliminate, the risk of failure to achieve business objectives, and can only provide reasonable, and not absolute, assurance against normal business risks.
 
During the financial year under review the Company operated a system of internal controls which provided reasonable assurance of effective and efficient operations covering all controls, including financial and operational controls and compliance with laws and regulations. Processes are in place for identifying, evaluating, and managing the significant risks facing the Company.
 
The Board recognizes that the Company must manage a range of risks in the course of its activities and in this respect maintains a sound risk management and internal control system which includes the determination of the nature and extent of the risks it is willing to take in achieving its strategic objectives.
  
The Board, in this financial period, established a formal and transparent arrangement to apply risk management and internal control principles, as well as maintaining an appropriate relationship with the Company’s auditors.
The Board is adjourned periodically of the financial affairs and operational developments of the group entities to whom the Issuer has advanced the proceeds from the bond issue.
Audit Committee
During the current financial year, the Audit Committee met three times with 100% attendance.
The Audit Committee’s primary objective is to assist the Board in fulfilling its responsibilities relating to risk, control, and governance as well as to review the financial reporting processes. The Board has set formal terms of reference of the Audit Committee that establish its composition, role, and functions. The Audit Committee is a subcommittee of the Board and is directly responsible and accountable to the Board. The Board reserves the right to change these terms of reference from time to time.
 
Furthermore, the Audit Committee has the role and function of scrutinizing and evaluating any proposed transaction to be entered into by the Company and a related party, to ensure that the execution of any such transaction is at arm’s length and on a commercial basis and ultimately in the best interests of the Company.
 
As required by the Companies Act (Cap. 386) of the Laws of Malta and the Listing Authority Capital Markets Rules, the financial statements of SD Finance plc are subject to annual audit by its external auditors. Moreover, the Audit Committee has direct access to the external auditors of the Company, who attend the Board meetings at which the Company’s financial statements are approved.
 
The Audit Committee is composed of three independent non-executive directors, in accordance with Capital Markets Rule 5.117. The members of the Audit Committee are Mr Stephen Muscat, Mr Philip Micallef and Mr Vincent Micallef. Mr Stephen Muscat, who also acts as the Chairman of the Audit Committee, is a Certified Public Accountant and is considered by the Board to be both independent and competent in accounting as required in terms of the Capital Markets Rules.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
8
Corporate Governance – Statement of Compliance - continued
Relations with bond holders and the market
Pursuant to the Company’s statutory obligations in terms of the Companies Act (Cap. 386) of the Laws of Malta and the Listing Authority Capital Markets Rules, the Annual Financial Report and Financial Statements, the election of directors and approval of Directors’ fees, the appointment of the auditors and the authorisation of the directors to set the auditors’ fees, and other special business, are proposed and approved at the Company’s Annual General Meeting.
The Company communicates with its bondholders by publishing its interim results for a six-month period during the year and by way of publication of the full year Audited Financial Statements. The Financial Analysis Summary is also published in September. Additionally, during the current financial period, the Company organised a specific session for Financial Intermediaries to explain the Company’s results and those of the Group. During the period April 2023 to March 2024, the Company issued eleven company announcements. The Board deems that it is providing the market with adequate information about its activities through these channels.
In this respect, the Directors are of the view that Principle Ten of the Code of Corporate Governance is not applicable to the Company.
Other information
In view of the size and type of operations of the Company, the Board does not consider the Company to require the setting up of a nomination committee.
During the financial year under review, no private interests or duties unrelated to the Company were disclosed by the Directors which were or could have been likely to place any of them in conflict with any interests in, or duties towards the Company.
The Company is a member of the db Group, which group has its own program for Corporate Social Responsibility initiatives.
Conclusion
The Board considers that the Company has generally been in compliance with the Principles throughout the year under review as befits a company of this size and nature.
Approved by the Board on 29 July 2024.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
9
Statement of financial position
as at 31 March
2024
2023
Note
€
€
ASSETS
Non-current assets
Loans receivable
4
64,332,686
64,332,686
Current assets
Receivables
5
204,279
174,294
Current tax assets
-
415
Cash and cash equivalents
6
3,149,230
3,071,996
Total current assets
3,353,509
3,246,705
Total assets
67,686,195
67,579,391
EQUITY AND LIABILITIES
Capital and reserves
Share capital
7
250,000
250,000
Retained earnings
44,910
39,889
Total equity
294,910
289,889
Non-current liabilities
Borrowings
8
64,780,119
64,678,018
Current liabilities
Borrowings
8
2,551,638
2,553,373
Payables
9
57,952
58,111
Current tax liabilities
1,576
-
Total current liabilities
2,611,166
2,611,484
Total liabilities
67,391,285
67,289,502
Total equity and liabilities
67,686,195
67,579,391
The accompanying notes on pages 13 to 29 are an integral part of these financial statements.
The financial statements were approved and authorised for issue by the Board of Directors on 29 July 2024. The financial statements were signed on behalf of the Board of Directors by Robert Debono (Director) and Stephen Muscat (Director) as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
10
Statement of profit/(loss) and other comprehensive income
for the year ended 31 March
2024
2023
Note
€
€
Finance income
10
3,059,494
3,056,881
Finance costs
11
(2,925,074)
(2,921,165)
Net interest income
134,420
135,716
Administrative expenses
12
(126,696)
(128,210)
Profit before tax
7,724
7,506
Tax expense
14
(2,703)
(2,624)
Profit for the year
5,021
4,882
Other comprehensive income
-
-
Total comprehensive income for the year
5,021
4,882
The accompanying notes on pages 13 to 29 are an integral part of these financial statements.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
11
Statement of changes in equity
for the year ended 31 March
Share
Retained
Capital
Earnings
Total
€
€
€
Balance at 1 April 2022
250,000
35,007
285,007
Profit for the year
-
4,882
4,882
Other comprehensive income
-
-
-
Total comprehensive income
-
4,882
4,882
Balance at 31 March 2023
250,000
39,889
289,889
Profit for the year
-
5,021
5,021
Other comprehensive income
-
-
-
Total comprehensive income
-
5,021
5,021
Balance at 31 March 2024
250,000
44,910
294,910
The accompanying notes on pages 13 to 29 are an integral part of these financial statements.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
12
Statement of cash flows
for the year ended 31 March
2024
2023
Note
€
€
Cash flows from operating activities
Interest received
3,026,179
2,973,914
Interest paid
(2,824,708)
(2,805,401)
Cash paid to service providers
(123,525)
(113,166)
Tax paid
(712)
(1,862)
Net cash generated from operating activities
77,234
53,485
Cash flows used in investing activities
Net cash used in investing activities
-
-
Cash flows from financing activities
Net cash generated from financing activities
-
-
Net movement in cash and cash equivalents
77,234
53,485
Cash and cash equivalents at beginning of the year
3,071,996
3,018,511
Cash and cash equivalents at end of the year
3,149,230
3,071,996
The accompanying notes on pages 13 to 29 are an integral part of these financial statements.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
13
Notes to the financial statements
1.Summary of material accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to the year presented, unless otherwise stated.
1.1 Basis of preparation
These financial statements have been prepared in accordance with the requirements of International Financial Reporting Standards (IFRSs) as adopted by the EU and with the requirements of the Companies Act (Cap. 386) of the Laws of Malta. The financial statements have been prepared under the historical cost convention.
The preparation of financial statements in conformity with IFRSs as adopted by the EU requires the use of certain accounting estimates. It also requires directors to exercise their judgment in the process of applying the Company’s accounting policies (see Note 3 – Significant accounting estimates and judgments).
Standards, interpretations and amendments to published standards as endorsed by the European Union effective in the current year
During the current financial year, the Company adopted amendments to existing standards that are mandatory for the Company’s accounting period beginning on 1 April 2023. The adoption of these revisions to the requirements of IFRSs as adopted by the EU did not result in substantial changes to the Company’s accounting policies impacting the Company’s financial performance and position.
-IFRS 17 Insurance Contracts
-Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting Policies
-Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates
-Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction
-Amendments to IAS 12 Income taxes: International Tax Reform – Pillar Two Model Rules (effective immediately – disclosures are required for annual periods beginning on or after 1 January 2023)
The adoption of these standard and amendments has not had any material impact on the other disclosures or on the amounts reported in these financial statements. The Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting Policies are effective for annual periods beginning on or after January 1, 2023. The amendments provide guidance on the application of materiality judgements to accounting policy disclosures. In particular, the amendments to IAS 1 replace the requirement to disclose ‘significant’ accounting policies with a requirement to disclose ‘material’ accounting policies. The Company assessed its accounting policies disclosure and retained material accounting policies.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
14
Notes to the financial statements – continued
1.Summary of material accounting policies - continued
1.1 Basis of preparation - continued
Standards, interpretations and amendments to published standards as endorsed by the European Union but are not yet effective
Up to the date of approval of these financial statements, the following new standards and amendments to existing standards have been published but are not yet effective for the current reporting year and which the Company has not adopted early but plans to adopt upon their effective date.
-IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current (Amendments)
-IFRS 16 Leases: Lease Liability in a Sale and Leaseback (Amendments)
-IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments Disclosure - Supplier Finance Arrangements (Amendments)
None of these new standard or amendments is expected to have an impact on the financial position or performance of the Company.
Standards, interpretations and amendments that are not yet endorsed by the European Union, are not yet effective and not early adopted
Certain new standards, amendments and interpretations to existing standards have been published by the date of authorisation for issue of these financial statements but are not yet endorsed by the European Union. In the opinion of the Directors, the adoption of these standards will not have significant impact on the financial statements of the Company.
-IFRS 19 Subsidiaries without Public Accountability: Disclosures (issued on 9 May 2024)
-IFRS 18 Presentation and Disclosure in Financial Statements (issued on 9 April 2024)
-Amendments to the Classification and Measurement of Financial Instruments (Amendments to IFRS 9 and IFRS 7) (issued on 30 May 2024)
-Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability (issued on 15 August 2023)
1.2 Foreign currency translation
(a)Functional and presentation currency
Items included in these financial statements are measured using the currency of the primary economic environment in which the Company operates (‘the functional currency’). The financial statements are presented in Euro which is the Company’s functional and presentation currency.
1.3 Financial assets
1.3.1 Classification
The Company classifies its financial assets as financial assets measured at amortised cost. The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows. The Company classifies its financial assets as at amortised cost only if both the following criteria are met:
-The asset is held within a business model whose objective is to collect the contractual cash flows, and
-The contractual terms give rise to cash flows that are solely payments of principal and interest.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
15
Notes to the financial statements – continued
1.Summary of material accounting policies - continued
1.3 Financial assets - continued
1.3.1 Classification - continued
Assessment of whether contractual cash flows are solely payments of principal and interest
For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular year of time and for other basic lending risks and costs (e.g., liquidity risk and administrative costs), as well as a profit margin that is consistent with the basic lending arrangement.
In assessing whether the contractual cash flows are solely payments of principal and interest, the Company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition.
The Company’s financial assets include loans receivable and receivables.
1.3.2 Initial recognition and measurement
The Company recognises a financial asset in its statement of financial position when it becomes a party to the contractual provisions of the instrument.
At initial recognition, the Company measures a financial asset at its fair value plus transaction costs that are directly attributable to the acquisition of the financial asset.
1.3.3 Subsequent measurement
Financial assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss. Impairment losses are presented as a separate line item in the statement of profit or loss.
1.3.4 Derecognition
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
16
Notes to the financial statements - continued
1.Summary of material accounting policies - continued
1.3 Financial assets - continued
1.3.5 Expected credit losses
The Company assesses on a forward-looking basis the expected credit losses (ECL) associated with its debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. The Company’s financial assets are subject to the expected credit loss model.
Expected credit loss model
The Company measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured at 12-month ECLs:
-debt securities that are determined to have low credit risk at the reporting date; and
-other debt securities and bank balances for which credit risk has not increased significantly since initial recognition.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due, and it considers a financial asset to be in default when the borrower is unlikely to pay its credit obligations to the Company in full, without recourse by the Company to actions such as realising security (if any is held); or the financial asset is more than 90 days past due.
Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument. 12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter year if the expected life of the instrument is less than 12 months). The maximum year considered when estimating ECLs is the maximum contractual year over which the company is exposed to credit risk.
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls. ECLs are discounted at the effective interest rate of the financial asset.
At each reporting date, the Company assesses whether financial assets carried at amortised cost are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes observable data such as significant financial difficulty of the borrower or issuer, or a breach of contract such as a default or being more than 90 days past due.
Financial assets are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Company, and a failure to make contractual payments for a period of greater than a year past due. Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. For the loans receivable from related parties and cash and cash equivalents, the expected credit losses are immaterial.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
17
Notes to the financial statements - continued
1.Summary of material accounting policies - continued
1.4 Receivables
Receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less expected credit loss allowances.
Receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The Company holds the receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method.
1.5 Cash and cash equivalents
Cash and cash equivalents are carried in the statement of financial position at face value. In the statement of cash flows, cash and cash equivalents include cash in hand and deposits held at call with banks with original maturity of less than three months.
1.6 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction, net of tax, from the proceeds.
1.7 Financial liabilities
The Company recognises a financial liability in its statement of financial position when it becomes a party to the contractual provisions of the instrument. The Company’s financial liabilities are classified as at amortised cost (classified as ‘Other liabilities’) under IFRS 9. Financial liabilities at amortised cost are recognised initially at fair value, being the fair value of the consideration received, net of transaction costs that are directly attributable to the acquisition or the issue of the financial liability. These liabilities are subsequently measured at amortised cost. The Company derecognises a financial liability from its statement of financial position when the obligation specified in the contract or arrangement is discharged, is cancelled, or expires.
The Company’s financial liabilities include borrowings and payables.
1.8 Borrowings
Borrowings are recognised initially at the fair value of proceeds received net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the year of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least twelve months after the end of the reporting period.
Transaction costs are incremental costs that are directly attributable to the issue of the financial liability and are those costs that would not have been incurred if the Company had not issued the financial instrument.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
18
Notes to the financial statements - continued
1.Summary of material accounting policies - continued
1.9 Payables
Payables comprise obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.
Payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
1.10 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
1.11 Current tax
The tax expense for the year is comprised of current tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is recognised in other comprehensive income or directly in equity, respectively.
1.12 Interest income and expense
Interest income and expense are recognised in profit or loss for all interest-bearing financial instruments using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Company estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees and transaction costs paid or received between the parties to the contract that are an integral part of the effective interest rate method. Accordingly, interest expense includes the effect of amortising any difference between net proceeds and redemption value in respect of the Company’s interest-bearing borrowings.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
19
Notes to the financial statements - continued
1.Summary of material accounting policies - continued
1.13Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
-In the principal market for the asset or liability, or
-In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
-Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities
-Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
-Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy, as explained above.
1.14Reclassification
Certain balances (Note 8) in the comparative statement of financial position and supporting note disclosures have been reclassified to conform to the presentation used in the statement of financial position as at 31 March 2024. This reclassification did not affect the total assets, total liabilities and total equity in the statement of financial position as of 31 March 2023, 31 March 2022 and 01 April 2022.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
20
Notes to the financial statements - continued
2.Financial risk management
2.1 Financial risk factors
The Company constitutes a financing special purpose vehicle whose bond proceeds were advanced to SD Holdings Limited (parent undertaking), Hotel San Antonio Limited and Seabank Hotel and Catering Limited (both fellow subsidiaries of the Issuer). The Company’s principal risk exposures relate to credit risk and liquidity risk. The Company is not exposed to currency risk and the Directors deem interest rate risk exposure to be minimal due to the matching of its interest costs on the bonds with its interest income from its loans and receivables referred to above.
(a) Credit risk
Credit risk primarily arises from loans receivable from SD Holdings Limited, Hotel San Antonio Limited and Seabank Hotel and Catering Limited (Note 4), receivables (Note 5) and cash and cash equivalents (Note 6). These financial assets potentially subject the Company to concentrations of credit risk.
The maximum exposure to credit risk at the end of the reporting year in respect of the Company’s financial assets is equivalent to their carrying amount, which is analysed as follows:
2024
2023
€
€
Financial assets measured at amortised cost:
Loans receivable from parent undertaking and fellow subsidiaries (Note 4)
64,332,686
64,332,686
Receivables (Note 5)
200,936
167,620
Cash and cash equivalents (Note 6)
3,149,230
3,071,996
67,682,852
67,572,302
Cash and cash equivalents
The Company’s cash and cash equivalents are held with a local financial institution with high quality standing or rating and are due to be settled on demand. Management considers the probability of default to be close to zero as the financial institutions have a strong capacity to meet their contractual obligations in the near term. As a result, while cash and cash equivalents are subject to the impairment requirements of IFRS 9, the identified impairment loss is insignificant.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
21
Notes to the financial statements - continued
2.Financial risk management - continued
2.1 Financial risk factors - continued
Loans receivable and other amounts owed by related parties
The Company’s loans receivable consist of advances to related parties forming part of the db Group (refer to Note 4), which advances have been effected out of the Company’s bond issue proceeds. The Company monitors intra-group credit exposures on a regular basis and ensures timely performance of these assets in the context of overall group liquidity management. The Guarantor in relation to the bond issue (SD Holdings Limited) is in fact one of the borrowers. The Company assesses the credit quality of the db Group taking into account financial position, performance, and other factors. The Company takes cognisance of the related party relationship with these entities and management does not expect any losses from non-performance or default.
Loans receivable from related parties are categorised as Stage 1 for IFRS 9 purposes (i.e., performing) in view of the factors highlighted above. The expected credit loss allowances on such loans are based on the 12-month probability of default, capturing 12-month expected losses. On 31 March 2024, the Company’s Directors reviewed the Company’s financial assets in particular the loans advanced to related parties (see Note 4). In view of the respective entities’ history, results to date, gearing ratios and reserves, as well as forward looking estimates, the Directors applied judgement in determining the appropriate expected credit loss provisions as a result of adopting the expected future loss framework under IFRS 9.
Following the assessment of the Directors, all of the Company’s financial assets are considered to have low credit risk and a low risk of default. In this respect, the loss allowance was deemed immaterial to be recognised in the balance sheet as at 31 March 2024.
The Company’s other receivables mainly include interest receivable from the Company’s parent and other related parties in respect of the advances referred to previously. Since such balances are repayable on demand, expected credit losses are based on the assumption that repayment of the balance is demanded at the reporting date. Accordingly, the expected credit loss allowance attributable to such balances is insignificant.
Excessive risk concentration
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Company’s performance to developments affecting a particular industry.
Identified concentrations of credit risks are controlled and managed accordingly.
(b) Liquidity risk
The Company is exposed to liquidity risk in relation to meeting future obligations associated with its financial liabilities, which comprise principally the bonds issued to the general public and other payables (refer to Notes 8 and 9 respectively). Prudent liquidity risk management includes maintaining sufficient cash and liquid assets to ensure the availability of an adequate amount of funding to meet the Company’s obligations.
The Company’s liquidity risk is managed actively by ensuring that cash inflows arising from expected maturities of the Company’s advances to related parties effected out of the bond issue proceeds, together with any related interest receivable, match the cash outflows in respect of the Company’s bond borrowings, covering principal and interest payments, as referred to in Note 9 and reflected in the table below.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
22
Notes to the financial statements - continued
2.Financial risk management - continued
2.1 Financial risk factors - continued
The following table analyses the Company’s financial liabilities into relevant maturity groupings based on the remaining year at the reporting date to the contractual maturity date. The amounts disclosed in the tables below are the contractual undiscounted future cash flows. Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant.
Within 1 year
Between 1 and 2 years
Between 2 and 5 years
Over
5 years
Total
€
€
€
€
€
31 March 2024
Borrowings
2,827,500
2,827,500
67,827,500
-
73,482,500
Payables
57,953
-
-
-
57,953
2,885,453
2,827,500
67,827,500
-
73,540,453
31 March 2023
Borrowings
2,827,500
2,827,500
70,655,000
-
76,310,000
Payables
58,111
-
-
-
58,111
2,885,611
2,827,500
70,655,000
-
76,368,111
2.2 Capital risk management
The db Group objectives when managing capital at subsidiary level are to safeguard the respective Companies’ ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may issue new shares or adjust the amount of dividends paid to shareholders.
The Company’s equity, as disclosed in the statement of financial position, constitutes its capital. The Company maintains its level of capital by reference to its financial obligations and commitments arising from operational requirements. Taking cognisance of the nature of the Company’s assets,, backing the Company’s principal borrowings, the Capital level at the end of the reporting year is deemed adequate by the Directors.
2.3 Fair values of financial instruments
At 31 March 2024, the carrying amounts of cash at bank, receivables, payables and accrued expenses approximated their fair values due to the nature or short-term maturity of these instruments. The loans to parent and fellow subsidiaries have a fair value of approximately €59,472,026 as at 31 March 2024, compared to a carrying amount of €64,332,686. The fair values were calculated based on cash flows discounted using a current lending rate for similar instruments at the reporting date. They are classified as Level 3 fair values in the fair value hierarchy required by IFRS 7, ‘Financial instruments: Disclosures’ due to the inclusion of unobservable inputs including counterparty credit risk. Information on the fair value of the Company’s bonds issued to the general public is disclosed in Note 8 to the financial statements. The fair value estimate in this respect is deemed Level 1 as it constitutes a quoted price in an active market.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
23
Notes to the financial statements - continued
3.Significant accounting estimates and judgments
The preparation of the Company’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Use of available information and application of judgement are inherent in the formation of estimates. Actual results in the future could differ from such estimates and the differences may be material to the financial statements. These estimates are reviewed on a regular basis and, if a change is needed, it is accounted for in the year the changes are known.
Except for the below, in the opinion of the Directors, the accounting judgments, estimates and assumptions made in the course of preparing these financial statements are not difficult, subjective, or complex to a degree which would warrant their description as critical in terms of the requirements of IAS 1.
Provision for expected credit losses of loans receivable
The Company assesses the credit risk of loans receivable for significant increase since initial recognition at the reporting date. If there is a significant increase in credit risk, lifetime ECL is recognised. The principle of significant deterioration in credit risk is achieved by performing an assessment to compare the risk of default occurring at the reporting date with the risk of default occurring at the date of initial recognition, by reference to an analysis of the financial performance and position of related party borrowers. The assessment of ECLs is a significant estimate since the amount thereof is sensitive to changes in circumstances and of forecast economic conditions. As at 31 March 2024, the ECL was deemed immaterial to be recognised on the loans receivable.
4.Loans receivable
2024
2023
€
€
Non-current
Loan to parent
1,488,101
1,488,101
Loans to fellow subsidiaries
62,844,585
62,844,585
64,332,686
64,332,686
The loans receivable represents the proceeds from the bond issue (see Note 8) which have been advanced by the Company to SD Holdings Limited (the Company’s parent undertaking and guarantor of the bonds) and to Hotel San Antonio Limited and Seabank Hotel and Catering Limited (both fellow subsidiaries of the Issuer). The principal purposes for these advances were the re-financing of existing banking facilities of the respective borrower, the financing of the redemption of certain redeemable preference shares of Seabank Hotel and Catering Limited, and for the general corporate funding purposes of the db Group as the need arises in the ordinary course of business.
These loans are subject to interest at a fixed interest rate of 4.55% (2023: 4.55%), with an additional renewal fee, which is charged on the loans at a floating rate at the discretion of the directors of the Issuer. As at the end of the reporting period, the element of the floating rate interest was 0.23% (2023: 0.22%). Renewal fees recognised as part of Finance income amounted to €132,357 (2023: €129,744) (see Note 10). The loans are unsecured and repayable by not later than 10 April 2027.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
24
Notes to the financial statements - continued
5.Receivables
2024
2023
€
€
Current
Amounts owed by parent
4,757
1,640
Amounts owed by fellow subsidiaries
196,179
165,980
Prepayments
3,343
6,674
204,279
174,294
Amounts owed by parent and fellow subsidiaries pertains to accrued renewal fees which are repayable every 10th April of each year (see Note 16).
6.Cash and cash equivalents
For the purposes of the statement of cash flows, cash and cash equivalents comprise of the following:
2024
2023
€
€
Cash at bank
3,149,230
3,071,996
7.Share capital
2024
2023
€
€
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
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
25
Notes to the financial statements - continued
8.Borrowings
2024
2023
€
€
Non-current
650,000 4.35% Bonds 2017-2027
64,780,119
64,678,018
Current
650,000 4.35% Bonds 2017-2027
(97,958)
(93,431)
Accrued interest payable
2,649,596
2,646,804
2,551,638
2,553,373
67,331,757
67,231,391
The current portion of the bonds represents unamortised bond issue costs which will be amortised in the next 12 months.
As at 31 March 2024, the comparative balances of the current portion of the bonds and the related accrued interest payable have been reclassified as part of Borrowings under the current classification to conform with IFRS 9 amortised cost basis. This reclassification did not affect the total assets, total liabilities and total equity in the statement of financial position as of 31 March 2023.
The bonds are measured at the amount of the net proceeds adjusted for the amortisation of the difference between the net proceeds and the redemption value of such bonds, using the effective yield method as follows:
2024
2023
€
€
Original face value of bonds issued
65,000,000
65,000,000
Gross amount of bond issue costs
(924,036)
(924,036)
Accumulated amortization
606,197
508,623
Unamortised bond issue costs
(317,839)
(415,413)
Amortized cost and closing carrying amount of the bonds
64,682,161
64,584,587
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
26
Notes to the financial statements - continued
8.Borrowings - continued
By virtue of an offering memorandum dated 27 March 2017, the Company issued €65,000,000 bonds with a face value of €100 each. The bonds have a coupon interest of 4.35% which is payable annually in arrears, on 25 April of each year. The bonds are redeemable at par and are due for redemption on 25 April 2027. The bonds are guaranteed by SD Holdings Limited, which has bound itself jointly and severally liable with the issuer, for the repayment of the bonds and interest thereon, pursuant to and subject to the terms and conditions in the offering memorandum. There are no guarantee fees charged by SD Holdings Limited to the Company. The bonds were admitted on the Official List of the Malta Stock Exchange on 4 May 2017. The quoted market price as at 31 March 2024 for the bonds was €99 (2023: €97). The fair value of these financial liabilities as at 31 March 2024 amounts to €64,350,000 (2023: €63,050,000). At the end of the current reporting period, bonds with a face value of €18,000 (2023: €521,625) were held by a Company director.
In accordance with the provisions of the prospectus, the proceeds from the bond issue have been advanced by the Company to related parties (refer to Note 4).
9.Other payables and accruals
Amounts owed to fellow subsidiaries pertain to Director’s fees recharged by the Group (refer to Note 16).
As discussed in Note 8, the comparative balance of the accrued interest payable on the Company’s borrowings have been reclassified as part of Borrowings under the current classification to conform to the presentation used in the statement of financial position as at 31 March 2024.
10.Finance income
2024
2023
€
€
Current
Other accruals
19,470
15,617
Amounts owed to fellow subsidiaries
10,557
22,809
Other payables
27,925
19,685
57,952
58,111
2024
2023
€
€
Interest income on loan advanced to parent:
Fixed interest income
67,708
67,708
Variable renewal fee
3,117
3,103
Interest income on loans advanced to fellow subsidiaries:
Fixed interest income
2,859,429
2,859,429
Variable renewal fee
129,240
126,631
Other income
-
10
3,059,494
3,056,881
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
27
Notes to the financial statements - continued
11.Finance costs
12.Expenses by nature
Auditor’s fees
                         
Fees charged by the auditor for services rendered during the financial years ended 31 March 2024 and 2023 relate to the following:
During the current year, fees in relation to non-assurance services amounting to €1,000 (2023: €500) have been charged by connected undertakings of the Company’s auditor, in respect of tax advisory and compliance services.
13.Directors’ emoluments
2024
2023
€
€
Nominal interest on bonds
2,827,500
2,827,500
Amortization of bond issue costs
97,574
93,665
2,925,074
2,921,165
2024
2023
€
€
Directors’ fees (Note 13)
43,064
43,069
Listing and related compliance costs
46,710
47,368
Legal and professional fees
32,207
31,896
Other expenses
4,715
5,877
Total administrative expenses
126,696
128,210
2024
2023
€
€
Annual statutory audit
15,000
10,000
2024
2023
€
€
Directors’ fees
43,064
43,069
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
28
Notes to the financial statements - continued
14.Tax expense
The tax on the Company’s profit before tax differs from the theoretical amount that would arise using the basic tax rate as follows:
15.Net debt reconciliation
Net debt pertains to the Company’s borrowings which include the principal of the bonds net of unamortised bond issue costs and the related interest payable. Other than as disclosed in Note 8 ‘Borrowings’ with respect to the amortisation of bond issue costs and payment of interest, there were no further movements in the Company’s net debt.
16.Related parties
The Company forms part of the db Group of Companies. All companies forming part of the db Group are related parties since these companies are all ultimately owned by SD Holdings Limited.
Transactions with companies forming part of db Group principally include loans advanced during prior periods, as disclosed in Note 4 to the financial statements. Interest income and renewal fees earned from these loans, which are repayable every 10th April of each year, is disclosed in Note 10. Other year end balances with related parties are disclosed separately in Note 5 and Note 9 and such balances are unsecured, interest free and repayable on demand.
Part of the director’s fees are being recharged to the Company by the Group and is paid to a fellow subsidiary (see Note 13). The Group also provides certain accounting and management services to the Company that is not being recharged to the Company.
Key management personnel comprises the Directors of the Company. Key management personnel compensation, consisting of remuneration to the Company’s Directors, has been disclosed in Note 13.
2024
2023
€
€
Current taxation
Current tax expense
2,703
2,624
2024
2023
€
€
Profit before tax
7,724
7,506
Tax on profit at 35%
2,703
2,627
Tax effect of:
Income not subject to tax
-
(3)
2,703
2,624
SD FINANCE plc
Annual Financial Report and Financial Statements - 31st March 2024
29
Notes to the financial statements - continued
17.Subsequent events
There were no events subsequent to year end which would require adjustment to or disclosure in the annual financial statements of the Company.
18.Statutory information
SD Finance plc is a limited liability company and is incorporated in Malta, with its registered address at Seabank Hotel, Marfa Road, Mellieha, MLH 9064, Malta.
The immediate and ultimate parent company of SD Finance plc is SD Holdings Limited, a company registered in Malta, with its registered address at db Seabank Resort & Spa, Marfa Road, Mellieha Bay, Mellieha, MLH 9064, Malta.
The ultimate beneficial owner of SD Holdings Limited is Silvio Debono and Veronica Debono.
1
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of S.D. Finance plc
Report on the audit of the financial statements
Opinion
We have audited the financial statements of S.D. Finance plc (the “Company”), set on pages 9 to 29, which comprise the statement of financial position as at 31 March 2024, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and notes to the financial statements, including material accounting policies information.
In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company as at 31 March 2024, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS”) and the Companies Act, Cap.386 of the Laws Malta (the “Companies Act").
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (“ISAs”) and the Companies Act. Our responsibilities under those standards and under the Companies Act are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) as issued by the International Ethics Standards Board of Accountants (the “IESBA Code”) together with the ethical requirements that are relevant to our audit of the financial statements in accordance with the Accountancy Profession (Code of Ethics for Warrant Holders) Directive issued in terms of the Accountancy Profession Act, Cap. 281 of the Laws of Malta, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Ernst & Young Malta Limited
Regional Business Centre
Achille Ferris Street
Msida MSD 1751
Malta
Tel: +356 2134 2134
Fax: +356 2133 0280
ey.malta@mt.ey.com
ey.com
31
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of S.D. Finance plc
Report on the audit of the financial statements - continued
Key audit matters incorporating the most significant risks of material misstatements, including assessed risk of material misstatements due to fraud
Key audit matters (KAM) are those matters that, in our professional judgment, 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. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements.
Recoverability of loans receivable from related parties
The loans receivable represent advances to SD Holdings Limited (the Parent of the Company and the Guarantor of the bonds issued by the Company) amounting to Eur1.5m and to Seabank Hotel and Catering Limited and Hotel San Antonio Limited (fellow subsidiaries) amounting to Eur62.8m.
As disclosed in Note 1.3.5 and Note 4 to the financial statements, the Company assesses whether the loans receivable are impaired at each reporting date.
Reasons for designation as a KAM
The loans receivables which were financed through the bond issue are the primary asset of the Company comprising 95% of the total assets of the Company.
Audit procedures
Our audit procedures over the recoverability of loans receivable from related parties included amongst others:
-Obtaining and agreeing the salient terms and conditions to the underlying loan agreements supporting the loans receivable from the Company’s parent and from fellow subsidiaries;
-Assessing the reasonableness of key assumptions and considerations in assessing the recoverability of loans receivable including amongst others analysis of the latest financial information of the borrowers and the cashflow forecasts prepared by management;
-Assessing the relevance and adequacy of disclosures relating to the Company’s recoverability of loans receivable from related partes presented in Note 1.3.5 to the financial statements.
32
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of S.D. Finance plc
Report on the audit of the financial statements - continued
Other information
The Directors are responsible for the other information. The other information comprises the information included in the Annual Report, other than 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 other than our reporting on other legal and regulatory requirements.
In connection with our audit of the financial statements, our responsibility is to read the other information 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 and fair presentation of the financial statements in accordance with IFRS, and in accordance with the requirements of the Companies Act of the Laws of Malta, 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 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.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
33
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of S.D. Finance plc
Report on the audit of the financial statements - continued
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 skepticism throughout the audit. We also:
-identify and assess the risks of material misstatement in 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.
34
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of S.D. Finance plc
Report on the audit of the financial statements - continued
We communicate with the 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 the 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 the 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.
Matters on which we are required to report by the Companies Act
Directors’ report
We are required to express an opinion as to whether the Directors’ report has been prepared in accordance with the applicable legal requirements. In our opinion the Directors’ report has been prepared in accordance with the Companies Act.
In addition, in the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we are required to report if we have identified material misstatements in the Directors’ report. We have nothing to report in this regard.
Other requirements
We also have responsibilities under the Companies Act to report if in our opinion:
-proper accounting records have not been kept;
-the financial statements are not in agreement with the accounting records and returns;
-we have not received all the information and explanations we require for our audit.
We have nothing to report to you in respect of these responsibilities.
Appointment
We were appointed as the statutory auditor by the General Meeting of the Shareholders of the Company on 1 December 2023. The total uninterrupted engagement period as statutory auditor, including previous renewals and reappointments, amounts to 1 year.
Consistency with the additional report to the audit committee
Our audit opinion on the financial statements expressed herein is consistent with the additional report to the audit committee of the Company, which was issued on the same date as this report.
35
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of S.D. Finance plc
Matters on which we are required to report by the Companies Act - continued
Non-audit services
No prohibited non-audit services referred to in Article 18A(1) of the Accountancy Profession Act, Cap. 281 of the Laws of Malta were provided by us to the Company, and we remain independent of the Company as described in the Basis for opinion section of our report. No other services besides statutory audit services and services disclosed in the annual report and in the financial statements were provided by us to the Company.
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 the Company for the year ended 31 March 2024, 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 and the relevant electronic tagging therein comply 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 2024 has been prepared, in all material respects, in accordance with the requirements of the ESEF RTS.
36
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of S.D. Finance plc
Report on other legal and regulatory requirements - continued
Matters on which we are required to report by the Capital Markets Rules
Corporate governance statement
The Capital Markets Rules issued by the Malta Financial Services Authority (MFSA) require the Directors to prepare and include in their annual report a statement of compliance providing an explanation of the extent to which they have adopted the Code of Principles of Good Corporate Governance and the effective measures that they have taken to ensure compliance throughout the accounting period with those Principles.
The Capital Markets Rules also require the auditor to include a report on the statement of compliance prepared by the Directors. We are also required to express an opinion as to whether, in the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have identified material misstatements with respect to the information referred to in Capital Markets Rules 5.97.4 and 5.97.5.
We read the statement of compliance and consider the implication for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements included in the annual report. Our responsibilities do not extend to considering whether this statement is consistent with the other information included in the annual report.
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 governance procedures or its risk and control procedures.
In our opinion:
-the corporate governance statement set out on pages 5 to 8 has been properly prepared in accordance with the requirements of the Capital Markets Rules issued by the Malta Financial Services Authority
-in light of the knowledge and understanding of the Company and its environment obtained in the course of the audit the information referred to in Capital Markets Rules 5.97.4 and 5.97.5 are free from material misstatement
Other requirements
Under the Capital Markets Rules, we also have the responsibility to review the statement made by the Directors, set out on page 4, 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.
The partner in charge of the audit resulting in this independent auditor’s report is
Christopher Portelli for and on behalf of
Ernst & Young Malta Limited
Certified Public Accountants
29 July 2024