PETROJAM LIMITED

Transcription

PETROJAM LIMITED

SUPREME VENTURES LIMITED
AND ITS SUBSIDIARIES
YEAR ENDED OCTOBER 31, 2006
CONTENTS
Statement
Auditors’ Report - to the members
I
FINANCIAL STATEMENTS
Consolidated Balance Sheet
II
Consolidated Profit and Loss Account
III
Consolidated Statement of Changes in Equity
IV
Consolidated Statement of Cash Flows
Balance Sheet – Supreme Ventures Limited
Profit and Loss Account – Supreme Ventures Limited
Notes to the Financial Statements
V
VI
VII
VIII
Statement III
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Restated
2005
$’000
Notes
2006
$’000
Revenue
22
15,947,789
14,350,135
Direct expenses
23
(14,460,453)
(13,237,061)
1,487,336
1,113,074
Gross profit
Administrative expenses
(
567,755)
(
268,132)
Marketing and business development
(
188,628)
(
353,554)
Other operating expenses
(
468,007)
(
208,566)
( 1,224,390)
(
830,252)
Profit from operations
Interest income
Finance cost
Negative goodwill on acquisition of subsidiary
25
(
7
262,946
282,822
13,073
15,358
19,252)
-
Amortization of goodwill
-
PROFIT BEFORE TAXATION
25
Taxation
27
NET PROFIT
28
EARNINGS PER STOCK
30
(
66,023
(
256,767
(
91,419)
165,348
78,325)
194)
285,684
(
95,493)
190,191
Basic
0.06
0.18
Diluted
0.06
0.18
The Notes on Statement VIII form an integral part of the Financial Statements.
Statement IV
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Notes
Balance at November 1, 2004 as
previously reported
Effects of change in accounting
policy
38
Balance at November 1, 2004
as restated
Share
Capital
$’000
Profit and Loss
Account
$’000
Total
$’000
1,000
(316,850)
( 315,850)
-
( 10,667)
(
1,000
(327,517)
( 326,517)
1,849,846
Net increase in stated capital
19
1,849,846
-
Net profit for the year as restated
38
-
190,191
1,850,846
(137,326)
Balance at November 1, 2005
as restated
Net increase in stated capital
Net profit for the year
Balance at October 31, 2006
19
116,337
10,667)
190,191
1,713,520
-
116,337
-
165,348
165,348
1,967,183
28,022
1,995,205
Statement V
CONSOLIDATED STATEMENT OF CASH FLOWS
2006
$’000
2005
$’000
OPERATING ACTIVITIES
Adjustments for:
Depreciation of property, plant and equipment
Amortization of intangible assets
(Gain) loss on disposal of property, plant and equipment
Unrealized exchange losses
262,946
282,822
92,458
1,564
(
261)
5,520
42,974
2,574
460
6,273
Operating cash surplus before movement in working capital
362,227
335,103
(Increase) decrease in operating assets
Other assets
Inventories
Accounts receivable and prepayments
Due from related parties
3,649
12,851
( 52,039)
2,618
Increase (decrease) in operating liabilities
Accounts payable and accruals
Prizes payable
(
Cash generated by operations
Income tax paid
Interest paid
341,196
( 38,418)
( 19,252)
Cash provided by operating activities
(
9,736)
( 32,251)
( 167,482)
20,752
8,862)
283,526
126,460
16,422
(
(
268,516
5,003)
78,325)
185,188
INVESTING ACTIVITIES
Long-term receivables
Investment in available-for-sale instruments
Proceeds from short-term investments
Acquisition of property, plant and equipment
Acquisition of intangible assets
Acquisition of subsidiaries (Note 37)
Proceeds on disposal of property, plant and equipment
Interest received
Investment in joint venture
( 2,036)
( 68,487)
19,557
( 66,847)
( 1,441)
( 27,809)
774
13,073
( 34,221)
( 421,389)
15,508
( 26,075)
(
1,059)
( 526,510)
15,358
-
Cash used in investing activities
(167,437)
( 944,167)
Directors’ loans
Loans repaid
Proceeds on issue of shares
Cost of initial public offering
( 75,379)
( 80,337)
( 281,345)
( 698,354)
1,849,846
-
Cash (used in) provided by financing activities
(155,716)
870,147
( 39,627)
111,168
OPENING CASH AND CASH EQUIVALENTS
393,390
282,222
CLOSING CASH AND CASH EQUIVALENTS
353,763
393,390
FINANCING ACTIVITIES
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
Statement VII
PROFIT AND LOSS ACCOUNT
2006
$’000
Notes
2005
$’000
Revenue
22
14,943,467
11,804,296
Direct expenses
23
(14,067,912)
(11,161,982)
Gross Profit
875,555
642,314
(
238,776)
(
154,284)
Marketing and business development
(
148,251)
(
203,389)
(
209,542)
(
155,143)
(
596,569)
(
512,816)
Interest income
Finance cost
Taxation
NET PROFIT
25
129,498
9,600
11,594
-
25,26
27
278,986
(
288,586
(
109,545)
179,041
69,807)
71,285
(
39,372)
31,913
Statement VIII.1
NOTES TO THE FINANCIAL STATEMENTS
1
IDENTIFICATION
(a)
Group
The group comprises the company and its wholly-owned subsidiaries which are all
incorporated in Jamaica. The company is registered as a public limited liability company
and was listed on the Jamaica Stock Exchange on February 28, 2006. The company’s main
activities are the promotion and operation of lottery type games under licences from the
Betting, Gaming & Lotteries Commission of Jamaica (BGLC). The company’s registered
office is Life of Jamaica Centre, 4th Floor, 28-48 Barbados Avenue, Kingston 5.
The licence granted to the company which was originally effective for a period of ten (10)
years from January 11, 2001 has been extended to January 10, 2016. Effective December
2, 2005, the licences that were previously granted to the subsidiary, Jamaica Lottery
Company Limited and its subsidiary, Jamaica Lottery Holdings Limited were transferred to
the company. These licences are also valid to January 10, 2016.
The licences permit the company to promote certain lottery type games, namely: Cash Pot,
Lucky 5, Dollaz, Pick 3, Lotto and a variety of instant games.
The companies that are consolidated and their principal activities are as follows:
Name of Company
Percentage
Ownership
%
Principal Activity
Prime Sports (Jamaica) Limited
Gaming operations
Jamaica Lottery Company Limited (JLC)
and its wholly owned subsidiaries
Lottery operations (up to
December 2, 2005) and
Investments management
Lottery operations
(up to December 2, 2005)
Foreign exchange dealer services
Hospitality services
Gaming operations
Gaming operations
(not yet in operation)
Jamaica Lottery Holdings Limited (JLH)
Supreme Ventures Financial Services Limited
Coral Cliff Entertainment Limited
Village Square Entertainment Limited
Chillout Ventures Limited
100
The company acquired the controlling interest of Prime Sports (Jamaica) Limited as of
November 1, 2005.
The subsidiary, JLC acquired the controlling interests of Chillout Ventures Limited, as of
November 22, 2005.
..../2
100
100
100
100
100
100
Statement VIII.2
1
IDENTIFICATION (Cont'd)
(b)
Reporting periods
The fiscal period end of all the subsidiaries in the group is October 31.
(c)
Reporting currency
These financial statements are expressed in Jamaican dollars.
2
ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING
STANDARDS
In the current year, the group has adopted all of the new and revised Standards and Interpretations
issued by the International Accounting Standards Board (the IASB) and the International
Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its
operations and effective for accounting periods beginning on January 1, 2005. The adoption of
these new and revised Standards and Interpretations have resulted in changes to the group’s
disclosures in the financial statements but have not affected the amounts reported for the current
or prior years.
At the date of authorisation of these financial statements, the following Standards and
Interpretations were in issue but not yet effective of which the following standards and
interpretations may become applicable to the group.
IFRS 7
IFRIC 4
IFRIC 5
IFRIC 6
IFRIC 7
IFRIC 8
IFRIC 9
IFRIC 10
IFRIC 11
IFRIC 12
Financial Instruments: Disclosure
Determining whether an Arrangement contains a Lease
Rights to interest arising from decommissioning, restoration and
environmental rehabilitation funds
Liabilities Arising from Participating in a Specific Market - Waste
Electrical and Electronic Equipment
Applying the Restatement Approach under IAS 29 Financial Reporting
in Hyperinflationary Economies
Scope of IFRS 2
Reassessment of Embedded Derivatives
Interim Financial Reporting and Impairments
Group and Treasury Share Transactions
Service Concessionary Arrangements
The directors anticipate that the adoption of these standards and interpretation in future period is
unlikely to have any material impact on the financial statements.
…./3
Statement VIII.3
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)
Basis of preparation
The group’s financial statements have been prepared in accordance and comply with
International Financial Reporting Standards (IFRS).
During the year a new policy was adopted to recognize the Lotto jackpot as advertised at
the balance sheet date. The effect of the change in policy to the prior periods are
reflected at Note 38.
These financial statements have been prepared under the historical cost basis.
(b)
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the
company and entities controlled by the Company (its subsidiaries). Control is achieved
where the company has the power to govern the financial and operating policies of an
entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the
consolidated profit and loss account from the effective date of acquisition or up to the
effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to
bring the accounting policies into line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
(c)
Business combinations
The acquisition of subsidiaries is accounted for using the purchase method. The cost of
the acquisition is measured at the aggregate of the fair values, at the date of exchange, of
assets given, liabilities incurred or assumed, and equity instruments issued by the Group
in exchange for control of the acquiree, plus any costs directly attributable to the business
combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that
meet the conditions for recognition under IFRS 3, Business Combinations are recognized
at their fair values at the acquisition date.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost,
being the excess of the cost of the business combination over the Group’s interest in the
net fair value of the identifiable assets and liabilities recognized. If, after reassessment,
the Group’s interest in the net fair value of the acquiree’s identifiable assets and
liabilities exceeds the cost of the business combination, the excess is recognized
immediately in profit or loss.
…./4
Statement VIII.4
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
(d)
Use of estimates
The preparation of financial statements in conformity with the IFRS requires
management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates and any adjustments that may be
necessary would be reflected in the year in which actual results are known.
(e)
Property, plant and equipment
All property, plant and equipment held for use in the production or supply of goods or
services or for administrative purposes are recorded at historical cost or deemed cost, less
any subsequent accumulated depreciation and subsequent accumulated impairment
losses, if any.
Depreciation is calculated on the straight-line basis on cost over the estimated lives of the
assets.
The gain or loss arising on the disposal or retirement of an asset is determined as the
difference between the sales proceeds and the net carrying amount of the asset and is
recognized in income.
(f)
Intangible assets
These relate to computer software. Computer software are measured initially at purchase
cost and are amortised on a straight-line basis over their estimated useful lives.
(g)
Goodwill
Goodwill arising on the acquisition of a subsidiary represents the excess of the cost of
acquisition over the Group’s interest in the net fair value of the identifiable assets and
liabilities of the subsidiary recognized at the date of acquisition. Goodwill is initially
recognized as an asset at cost and is subsequently measured at cost less any accumulated
impairment losses.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cashgenerating units expected to benefit from the synergies of the combination. Cashgenerating units to which goodwill has been allocated are tested for impairment annually,
or more frequently when there is an indication that the unit may be impaired. If the
recoverable amount of the cash-generating unit is less than the carrying amount of the
unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit pro-rata on the basis of the
carrying amount of each asset in the unit. An impairment loss recognized for goodwill is
not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
…./5
Statement VIII.5
3
(h)
Long-term receivables
Long-term receivables are stated at amortised cost using the effective interest rate
method. Where the amortised cost cannot be reliably determined, they are stated at cost.
(i)
Investment in joint venture
A joint venture is a contractual arrangement whereby the group and other parties
undertake an economic activity that is subject to joint control that is where the strategic
financial and operating policy decisions relating to the activities require unanimous
consent of the parties sharing control.
The joint venture arrangements that involve the establishment of a separate entity in
which each venture has an interest are referred to as jointly controlled entity. The group
reports its interest in the jointly controlled entity using proportionate consolidation
method.
(j)
Available-for-sale investments
Investments are recognized and derecognized on a trade date basis where the purchase or
sale of an investment is under a contract whose terms require delivery of the investment
within the time frame established by the market concern.
Unquoted investments are classified as ‘available-for-sale’ and are stated at fair value,
except where fair value cannot be reliably determined, they are stated at cost.
(k)
Impairment
At each balance sheet date, the group reviews the carrying amounts of its tangible and
intangible assets to determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the impairment loss (if any). Where
it is not possible to estimate the recoverable amount of an individual asset, the group
estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the greater of the net selling price and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than
the carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to
its recoverable amount. Impairment losses are recognised as an expense immediately,
unless the relevant asset is carried at a revalued amount, in which case the impairment
loss is treated as a revaluation decrease.
…./6
Statement VIII.6
3
(k)
Impairment (Cont’d)
Where an impairment loss subsequently reverses, the carrying amount of the asset (cashgenerating unit) is increased to the revised estimate of its recoverable amount, but so that
the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset (cash-generating unit)
in prior years. A reversal of an impairment loss is recognised as income immediately,
unless the asset is carried at a revalued amount in which case the reversal is treated as a
revaluation increase.
(l)
Taxation
Income tax expense represents the sum of tax currently payable and deferred tax.
The tax currently payable is based on taxable profits for the year. Taxable profit differs
from the net profit as reported in the profit and loss account balance. It excludes items of
revenue or expenses that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. Further, it eliminates profits generated from
hotel services as it enjoys relief from income tax for a period of ten years beginning April
1, 2001 based on the Hotel (Incentives) Act. The group’s liability for current tax is
calculated using tax rates that have been enacted at balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the
carrying amount of assets and liabilities in the financial statements and the corresponding
tax basis used in the computation of taxable profits and is accounted for using the balance
sheet liability method. Deferred tax liabilities are generally recognized for all taxable
temporary differences and deferred tax assets are recognized to the extent that it is
probable that taxable profits will be available against which deductible temporary
differences can be utilized. Such assets and liabilities are not recognized if the temporary
differences arise from the initial recognition of assets and liabilities in a transaction that
affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates currently enacted, which rates are expected to
apply in the period when the liability is settled or the asset realized. Deferred tax is
charged or credited in the profit and loss account, except when it relates to items charged
or credited directly to equity, in which case the deferred tax is also charged or credited in
equity.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by
the same taxation authority and the group intends to settle its current tax assets and
liabilities on a net basis.
(m)
Other assets
These are stated at the lower of cost, and net realizable value.
…./7
Statement VIII.7
3
(n)
Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is calculated on a
first-in, first-out (FIFO) basis.
(o)
Accounts receivable
Accounts receivable are measured at initial recognition at their fair value. Interest is not
charged on outstanding balances, as they are usually settled within a short period.
Appropriate allowances for estimated irrecoverable amounts are recognized in profit or
loss when there is objective evidence that the asset is impaired. The allowance
recognized is measured as the difference between the asset’s carrying amount and the
present value of estimated future cash flows discounted at the effective interest rate that
would have been relevant at initial recognitions.
(p)
Related party identification
A party is considered to be related if:
(i)
directly or indirectly, through one or more intermediaries, one party is able to
exercise control or significant influence over the other party;
(ii)
both parties are subject to common control or significant influence from the
same source; or
(iii)
the party is a member of key management personnel of the entity or its parent.
(iv)
The party is a post employment benefit plan for the benefit of the employee of
the entity.
Related party transactions are recorded at their nominal value.
(q)
Cash and cash equivalents
Cash and cash equivalents comprise cash and bank deposits, net of bank overdraft and
short-term highly liquid investments that are readily convertible to a known amount of
cash and are subject to an insignificant risk of changes in value.
(r)
Share capital
Share capital issued by the company are stated at the proceeds received in cash or kind,
net of direct issue cost.
(s)
Long-term liabilities
Long-term liabilities are recorded at the proceeds received net of direct transaction costs.
…./8
Statement VIII.8
3
(t)
Accounts payable
Accounts payable are measured at initial recognition at their fair value. No interest is
charged on outstanding balances and these are not generally discounted as they are
usually settled within a short period during which interest rates do not normally move
significantly.
(u)
Prizes payable
Prizes won and payable are stated to reflect actual unclaimed amounts in respect of all the
lottery games at the balance sheet date except for Lotto jackpot and instant games.
Prize payable on account of the Lotto jackpot is based on the advertised jackpot at the
balance sheet date. In respect of instant games the prize liability is estimated based on
the tickets sold.
(v)
Financial instruments
Financial instruments include contracts that give rise to both financial assets and financial
liabilities. Financial assets and liabilities are recognized on the group’s balance sheet
when the group becomes party to the contractual provisions of the instrument.
Financial assets include cash and bank balances, investment in cash securities, due from
related parties, accounts receivable, long-term receivables, investment in joint venture
and available-for-sale investments.
Financial liabilities include long-term liabilities, accounts payable, prizes payable and
bank overdraft.
Property, plant and equipment, intangible assets, goodwill, prepayments, income tax
payable and recoverable and accruals are treated as non-financial instruments in these
financial statements.
The fair values of the financial instruments are discussed in Note 35.
(w)
Segment reporting
A segment is a distinguishable component of the group that is engaged in either
providing products or services.
Segment information is presented in respect of the group’s business. The primary format
for business segments, is based on the group’s management and internal reporting
structure.
…./9
Statement VIII.9
3
(w)
Segment reporting (Cont’d)
Segment results, assets and liabilities include items directly attributable to a segment as
well as those that can be allocated on a reasonable basis. Segment capital expenditure is
the total cost incurred during the year to acquire segment assets that are expected to be
used for more than one year.
The activities of the group are organized into the following primary segments:
(a)
(b)
(c)
(d)
(e)
(x)
Lottery and gaming
Hospitality
Financial services
Pin codes
Other
Revenue
Revenue represents the gross proceeds of Cash Pot, Lucky 5, Dollaz, Pick 3, Lotto and
Instant Games, pin code sales as well as income earned from remittance and foreign
exchange dealer services and proceeds from hospitality and gaming operations by the
group. Revenue is recognized as follows:
(i)
Lottery and gaming
Ticket sales – lottery games are sold to the public by contracted retail agents.
Revenue is recognized for on-line games when tickets are sold to players.
Instant tickets – when a predetermined percentage of prizes are redeemed.
Unclaimed prizes – in keeping with clause number 28 of the licence, winning
tickets must be redeemed within 90 days of the relevant draw unless otherwise
notified. Any valid winning ticket presented after the expiration of this period
may be paid by the company provided payment is made within 180 days of the
draw, after which prizes may be paid only with written approval of BGLC. Fifty
percent (50%) of unclaimed prizes are transferred to revenue and the remainder
is paid over to the CHASE Fund.
Gaming – revenue is recorded based on cash value of tokens cleared from the
‘drop box’ (net wins) and the cash bills cleared from the bill receptor.
(ii)
Hospitality
Hospitality and related services – recognised when the service is provided.
(iii)
Financial services
Revenue for remittance services – at the point of receipt of funds for remittance
by Moneygram International – (a sent fee) and at the point of pay out by the
agents – (commission income).
…./10
Statement VIII.10
3
(x)
Revenue (Cont’d)
(iii)
Financial services (Cont’d)
Foreign exchange trading – revenue comprises net gains from foreign exchange
trading and is accounted for on the accrual basis.
(iv)
Pin codes
Pin codes are sold to the public by the contracted retail agents. Revenue is
recognized when pin codes are sold by the agents.
(y)
Foreign currencies
The financial statements are presented in the currency of the primary economic
environment in which the group operates (its functional currency).
In preparing the financial statements of the group, transactions in currencies other than
the group’s functional currency, the Jamaican dollar, are recorded at the rates of
exchange prevailing on the dates of the transactions. At each balance sheet date,
monetary items denominated in foreign currencies are retranslated at the rates prevailing
on the balance sheet date. Non-monetary items that are measured in terms of historical
cost in a foreign currency are not retranslated.
Exchange differences arising on the settlements of monetary items and on the
retranslation of monetary items, are included in profit and loss account for the period.
(z)
Leases
Rentals payable under operating leases are charged to income on a straight-line basis over
the term of the relevant lease.
(aa)
Retirement benefit costs
Payments to a defined contribution retirement benefits plan are charged as an expense as
they fall due.
(ab)
Borrowing costs
Borrowing costs are recognized in net profit or loss in the period in which they are
incurred.
…./11
Statement VIII.11
4
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTY
Critical judgements in applying the group’s accounting policies
In the process of applying the group’s accounting policies, which are described in Note 3,
except as noted below, there were no other judgements made by management that has a
significant effect on the amounts recognized in the financial statements.
Goodwill
As described in Note 7 to the financial statements goodwill arising on consolidation at
the balance sheet date amounts to $586.6 million. The directors and management have
carried out an assessment and have made a judgement that goodwill that exists at the
balance sheet date is not impaired, and no adjustments have been made to recognize any
losses.
Deferred tax assets
As described in Note 12, the financial statements include a deferred tax asset of the group
of $58.6 million representing deferred tax assets of the subsidiaries to recognize the
future tax benefits of tax losses available for set-off against future taxable profits. The
judgement made by the directors and management is that based on the plans and
projections of the group; the subsidiaries currently operating at a loss will return to
profitability and therefore the deferred tax asset is realizable in the future.
Key sources of estimation uncertainty
Except as noted below there were no other key assumptions concerning the future, and
other key source of estimation uncertainty at the balance sheet date that has a significant
risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year.
Other assets
As described in Note 13 to the financial statements other assets include acquisition cost
of tokens that are used in the gaming machines in the amount of $12.3 million. The
directors and management estimate that there is no deterioration in value through usage
and cost is less than the net realizable value and no charge has been made to the profit
and loss account.
…./12
Statement VIII.12
5
PROPERTY, PLANT AND EQUIPMENT
The Group
Freehold
Land
$’000
Freehold
Buildings
$’000
Leasehold
Improvements
$’000
Machinery &
Equipment
$’000
Gaming
Equipment
$’000
5,115
112,686
-
35,917
513,348
-
11,703
25,292
7,102
4,048
-
-
-
At November 1, 2005
Acquisition of subsidiary
Additions
Disposals
117,801
-
549,265
-
48,145
148,789
14,791
-
66,439
4,457
-
At October 31, 2006
117,801
549,265
211,725
Cost
At November 1, 2004
Transfers
Additions
Disposals
Furniture,
Fixtures &
Equipment
$’000
Computer
Equipment
$’000
Motor
Vehicles
$’000
Arts &
Paintings
$’000
Signs &
Posters
$’000
Work-inProgress
Leasehold
Improvements
$’000
Total
$’000
230,495
154,423
8,902
-
11,807
2,848
1,601
-
25,645
504
11,379
( 1,380)
2,218
145
-
24,883
-
7,102
(7,102)
-
354,885
809,101
26,075
(
1,380)
34,609
26,688
-
393,820
36,554
13,904
-
16,256
1,683
-
36,148
1,235
5,279
( 2,802)
2,363
-
24,883
45
-
-
1,188,681
287,626
66,847
(
2,802)
70,896
61,297
444,278
17,939
39,860
2,363
24,928
-
1,540,352
-
-
52,371
51,327
28,301
-
10,051
1,333
1,079
-
9,305
140
6,010
( 920)
-
18,233
2,619
-
-
103,283
63,237
42,974
(
920)
208,574
9,088
92,458
2,689)
Depreciation
At November 1, 2004
Charge for the year
On disposals
-
7,346
1,518
-
5,977
10,437
3,447
-
At November 1, 2005
Charge for the year
On disposals
-
8,864
11,555
-
19,861
2,206
19,783
-
6,367
-
6,383
6,921
-
131,999
231
36,882
-
12,463
1,863
-
14,535
268
6,830
( 2,689)
-
20,852
2,257
-
-
At October 31, 2006
-
20,419
41,850
6,367
13,304
169,112
14,326
18,944
-
23,109
-
307,431
Carrying amount
At October 31, 2006
117,801
528,846
169,875
64,529
47,993
275,166
3,613
20,916
2,363
1,819
-
1,232,921
At October 31, 2005
117,801
540,401
28,284
261,821
3,793
21,613
2,363
4,031
-
980,107
-
-
(
Annual depreciation charges are being calculated using the following useful lives:
Freehold buildings
- 50 years
Leasehold improvements
- Over the life of the leases
Machine & equipment
- 10 years
Gaming equipment
- 5 years
Furniture, fixtures and office equipment
- 3-10 years
Computer equipment
- 3-5 years
Motor vehicles
- 5-8 years
Signs and posters
- 5 years
No depreciation is provided on freehold land, art and paintings.
…./13
Statement VIII.13
5
PROPERTY, PLANT AND EQUIPMENT (Cont’d)
The Company
Leasehold
Improvements
$’000
Furniture,
Fixtures
and Office
Equipment
$’000
Computer
Equipment
$’000
Motor
Vehicles
$’000
Art and
Paintings
$’000
Work-inProgress
Leasehold
Improvement
$’000
Total
$’000
Cost
At November 1, 2004
Transfers
Additions
Disposals
4,543
7,102
4,048
-
7,689
8,682
-
3,544
1,601
-
17,322
11,379
( 1,380)
2,218
145
-
7,102
(7,102)
-
42,418
25,855
( 1,380)
At November 1, 2005
Additions
15,693
275
16,371
2,765
5,145
1,629
27,321
2,504
2,363
-
-
66,893
7,173
At October 31, 2006
15,968
19,136
6,774
29,825
2,363
-
74,066
Depreciation
At November 1, 2004
Charge for year
On disposals
1,218
2,714
-
1,772
1,579
-
3,090
387
-
2,725
4,862
( 920)
-
-
8,805
9,542
( 920)
At November 1, 2005
Charge for year
3,932
3,149
3,351
1,842
3,477
1,151
6,667
5,918
-
-
17,427
12,060
At October 31, 2006
Carrying amount
At October 31, 2006
7,081
5,193
4,628
12,585
-
-
29,487
8,887
13,943
2,146
17,240
2,363
-
44,579
At October 31, 2005
11,761
13,020
1,668
20,654
2,363
-
49,466
Annual depreciation rates are based on the following useful lives:
Leasehold improvements
Furniture, fixtures and office equipment
Computer equipment
Motor vehicles
No depreciation is provided on art and paintings.
-
5 years
10 years
3 years
5 years
.../14
Statement VIII.14
5
PROPERTY, PLANT AND EQUIPMENT (Cont’d)
Following the revisions to IAS 16, property, plant and equipment in 2003, that are effective for
the current accounting period, the group has reviewed the residual values used for the purposes of
depreciation calculations in light of amended definition of residual value in the revised standard.
The review did not highlight any requirement for an adjustment to the residual values used in the
current or prior periods. In line with the new requirements, these residual values will be reviewed
and updated annually in the future.
6
INTANGIBLE ASSETS
Computer
Software
$’000
The Group
Licence
$’000
Total
$’000
13,456
1,059
-
13,456
1,059
14,515
1,441
26,155
-
14,515
26,155
1,441
At October 31, 2006
Amortisation
At November 1, 2004
Charge for the year
15,956
26,155
42,111
9,890
2,574
-
9,890
2,574
At November 1, 2005
Charge for the year
12,464
1,564
-
12,464
1,564
At October 31, 2006
14,028
-
14,028
Carrying Amount
At October 31, 2006
1,928
26,155
28,083
At October 31, 2005
2,051
-
2,051
Cost
At November 1, 2004
Additions
At November 1, 2005
Additions
The cost of the licence represents the investment in Chillout Ventures Limited (see Note 1). This
subsidiary has not yet commenced operations.
…./15
Statement VIII.15
6
INTANGIBLE ASSETS (Cont’d)
This include computer software.
7
The Company
$’000
Cost
At November 1, 2004
Additions
2,710
1,059
At November 1, 2005
Additions
3,769
1,034
At October 31, 2006
Amortisation
At November 1, 2004
Charge for the year
4,803
1,708
545
At November 1, 2005
Charge for the year
2,253
1,015
At October 31, 2006
3,268
Carrying Amount
At October 31, 2006
1,535
At October 31, 2005
1,516
GOODWILL
The Group
2005
2006
$’000
$’000
Balance at November 1,
Movements during the year:
Negative goodwill arising on acquisition of CCEL
and VSEL by JLC (see (a) below)
Goodwill arising on acquisition of Prime Sports
(Jamaica) Limited (see (b) below)
Amortisation prior to adoption of IFRS 3:
Business combinations
Negative goodwill transferred to profit and loss account
(a)
204,916
205,110
-
( 66,023)
381,728
-
-
(
194)
586,644
-
138,893
66,023
586,644
204,916
Negative goodwill arising on the acquisition of Coral Cliff Entertainment Limited
(CCEL) and Village Square Entertainment Limited (VSEL) by subsidiary, Jamaica
Lottery Company Limited, effective September 1, 2005.
…./16
Statement VIII.16
7
GOODWILL (Cont’d)
(b)
Goodwill arising on the acquisition of Prime Sports (Jamaica) Limited (PSJL) by the
company effective November 1, 2005.
The group tests goodwill annually for impairment or more frequently if there are indications that
goodwill might be impaired.
The impairment test is carried out by comparing the recoverable amount of the group’s cash
generating units (CGUs) to which goodwill has been allocated, to the carrying amount of those
CGUs plus goodwill. For the purposes of the impairment assessment, goodwill has been
allocated to the group’s cash generating units as follows:
2006
$’000
Gaming operations
Investment Management/Lottery operations
Financial Services
2005
$’000
381,728
189,953
14,963
189,953
14,963
586,644
204,916
Management has determined that the remaining goodwill balance at October 31, 2006 is not
impaired based on an assessment of the recoverable amounts of the CGUs based on present value
of future cash flows and fair market values.
8
LONG-TERM RECEIVABLES
The Group
2006
2005
$’000
$’000
Supreme Ventures Holdings Limited
St. Lucia (see (a) below)
Supreme Gaming International LLC
(see (b) below)
Other
(a)
The Company
2006
2005
$’000
$’000
-
141,354
-
141,354
2,036
280,035
-
-
280,035
-
2,036
421,389
-
421,389
The amount represented advance payments made in 2005 by the company to Supreme
Ventures Holdings Limited (SVHL), a company incorporated in St. Lucia in relation to the
acquisition of shares in Prime Sports (Jamaica) Limited (PSJL). However, arrangements
that were being pursued last year in relation to the acquisition of PSJL through SVHL has
been amended and PSJL has been acquired as of November 1, 2005, as a direct subsidiary
of the company (see Note 9).
…./17
Statement VIII.17
8
LONG-TERM RECEIVABLES (Cont’d)
(b)
9
The amount represented advance to Supreme Gaming International LLC (SGI), a
company incorporated under the laws of the state of Florida, United States of America for
the development of gaming activities in the Caribbean and the Latin American region.
This amount has now been converted to an equity investment in SGI by the company (see
Note 11).
INVESTMENT IN SUBSIDIARIES
The Company
2005
2006
$’000
$’000
At cost
Jamaica Lottery Company Limited
533,710
533,710
Acquisition cost
Additional investments
377,729
281,000
-
658,729
-
1,192,439
533,710
The company acquired the shares and therefore the controlling interest in Prime Sports (Jamaica)
Limited (PSJL) as of November 1, 2005. Advances to PSJL totalling $281 million up to October
31, 2005 were capitalized and converted to an equity investment effective October 31, 2006.
10
INVESTMENT IN JOINT VENTURE
This represents cost of acquisition of a share of Jonepar Development Limited, a joint venture, by
the subsidiary Jamaica Lottery Company Limited. The joint venture owns a parcel of land in
Montego Bay. The finalization of the arrangements are not yet complete and no activities have
taken place since the acquisition of the share and therefore the investment in the joint venture is
stated at the original acquisition cost.
…./18
Statement VIII.18
11
AVAILABLE-FOR-SALE INVESTMENTS
These include unquoted investments as follows:
The Group and the Company
2005
2006
$’000
$’000
Supreme Gaming International
LLC (see below)
Other
348,522
16,939
16,939
365,461
16,939
An agreement has been signed between Supreme Gaming International LLC (SGI) and the
company to acquire an 8% equity interest in SGI. SGI is in the process of finalizing the
arrangements for the issue of shares to the company. These are stated at cost as the fair value
cannot be readily determined.
12
DEFERRED TAXATION
These comprise:
The Group
2005
2006
$’000
$’000
Deferred tax assets
Less: Deferred tax liabilities
The Company
2006
2005
$’000
$’000
63,530
(34,604)
57,447
(20,593)
920
(7,599)
55,376
( 8,557)
28,926
36,854
(6,679)
46,819
The movement of the net deferred tax position was as follows:
Opening balance
Charged to income for the
year (Note 27)
Closing balance
The Group
2005
2006
$’000
$’000
The Company
2006
2005
$’000
$’000
36,854
6,839
81,841
598)
46,819
-
86,191
-
(14,767)
(44,389)
(53,498)
(39,372)
28,926
36,854
( 6,679)
46,819
(
…./19
Statement VIII.19
12
DEFERRED TAXATION (Cont’d)
The following are the major deferred tax assets and liabilities recognized during the year:
Deferred Tax Assets
The Group
Tax Loss
$’000
At November 1, 2004
Credited (charged) to income
for the year
At November 1, 2005
Credited (charged) to income
for the year
At October 31, 2006
Vacation
Leave
Payable
$’000
Interest
Payable
$’000
Unrealised
Foreign
Exchange
Losses
$’000
Total
$’000
85,140
496
1,314
6,171
93,121
(30,101)
568
( 830)
(5,311)
(35,674)
55,039
20,609
1,064
409
484
-
860
-
57,447
21,018
(17,048)
( 220)
( 484)
2,817
(14,935)
58,600
1,253
-
3,677
63,530
The directors and management are of the view that the deferred tax asset recognized on tax losses
of the subsidiaries is realizable based on the projected future profitability of the subsidiaries.
The Company
At November 1, 2004
Credited (charged) to
income for the year
Interest
Payable
$’000
Unrealised
Foreign
Exchange
Losses
$’000
Total
$’000
496
1,058
5,637
92,254
(30,610)
427
(1,058)
(5,637)
(36,878)
54,453
923
-
-
55,376
-
-
(54,456)
-
-
Tax Losses
$’000
Vacation
Leave
Payable
$’000
85,063
At November 1, 2005
Credited (charged) to
income for the year
(54,453)
At October 31, 2006
-
(
3)
920
920
…./20
Statement VIII.20
12
DEFERRED TAXATION (Cont’d)
Deferred Tax Liabilities
The Group
Interest
Receivable
$’000
Total
$’000
At November 1, 2004
(Credited) charged to income for the year
10,720
598
9,108
560
(393)
11,280
598
8,715
At November 1, 2005
Acquisition from subsidiary
20,426
14,174
( 131)
167
5
( 37)
20,593
14,179
( 168)
34,469
135
34,604
At October 31, 2006
The Company
Capital
Allowance in
Excess of
Depreciation
$’000
Interest
Receivable
$’000
Total
$’000
At November 1, 2004
5,888
2,615
175
(121)
6,063
2,494
At November 1, 2005
8,503
(1,034)
54
76
8,557
( 958)
7,469
130
7,599
At October 31, 2006
13
Capital
Allowance in
Excess of
Depreciation
$’000
OTHER ASSETS
These include tokens in the amount of $12.3 million used in the gaming machines operated at the
gaming lounges. The directors are of the view that the carrying value as reflected is less than
the net realisable value and no charge has been made to the profit and loss account.
…./21
Statement VIII.21
14
INVENTORIES
These include:
Pin codes
Food and beverage
Prize and gift items
Stationery and machine parts
15
The Group
2005
2006
$’000
$’000
The Company
2006
2005
$’000
$’000
18,151
7,966
2,488
699
31,413
6,121
2,288
1,033
18,151
-
31,413
-
29,304
40,855
18,151
31,413
ACCOUNTS RECEIVABLE AND PREPAYMENTS
The Group
2005
2006
$’000
$’000
Retailer accounts receivable
Less: Provision for impairment
Other receivables
Prepayments
The Company
2006
2005
$’000
$’000
113,973
( 27,066)
75,139
( 30,908)
70,770
(15,782)
59,061
(19,418)
86,907
36,180
37,867
44,231
32,109
42,388
54,988
13,914
24,213
39,643
7,281
27,016
160,954
118,728
93,115
73,940
The directors and management consider that the carrying amount of accounts receivables approximate
their fair value.
16
DUE FROM RELATED PARTIES
The Group
2005
2006
$’000
$’000
Supreme Ventures Financial
Services Limited
Jamaica Lottery Company Limited
The Company
2006
2005
$’000
$’000
-
284,464
136,045
284,464
-
-
78,885
284,916
84,007
144,794
-
284,464
499,846
513,265
…./22
Statement VIII.22
17
INVESTMENT IN CASH SECURITIES
These represent short-term deposits with National Commercial Bank Jamaica Limited (NCB)
totalling US$306,452. The interest rate on these deposits was 5.75%.
These deposits were held as part of the security for a guarantee issued by National Commercial
Bank Jamaica Limited for loan obtained from Wachovia National Bank.
18
CASH AND BANK BALANCES
These include interest bearing accounts of $65.7 million, including deposits held in foreign
currency of US$433,568. Interest rate on J$ deposits ranged from 9.05% to 11% and on US$
deposits ranged from 5.60% to 6.01% (2005: $198 million including US$ deposit of US$260,093.
Interest rate on J$ deposit ranged from 9.2% - 12.85% and US$ deposit was 9.85%).
19
SHARE CAPITAL
Stated capital (see (a) below)
(a)
2006
$’000
2005
$’000
1,967,183
1,850,846
Authorised capital – ordinary
stocks at no par value (see (b) and (c))
3,000,000,000
Issued capital – ordinary
stocks (see (d) and (e))
2,637,254,926
The stated capital reflected on the balance sheet is made up as follows:
2005
$’000
2006
$’000
Stated capital at November 1,
New capital introduced (see (d) below)
Debit to equity swap (see (d) below)
Raised through private placement (see (f) below)
Premium capital contribution on existing shares
(see (g) below)
1,850,846
-
Stated capital at October 31,
-
196,674
2,047,520
Less: initial public offering and private
placement expenses
1,000
205
96,377
1,852,647
(
80,337)
1,967,183
1,950,229
(
99,383)
1,850,846
…./23
Statement VIII.23
19
SHARE CAPITAL (Cont’d)
(b)
As a result of the new Jamaican Companies Act that came into effect on February 1,
2005, the shares of the company were converted from ordinary shares of $1.00 each to no
par value shares. Therefore the authorized share capital of the company that was
previously 2,000,000 ordinary shares of $1.00 each became 2,000,000 ordinary shares
(no par value). The stated capital (previously referred to as issued share capital) of the
company at this point was $1,000,000.
(c)
By a resolution passed at an Extra-ordinary General Meeting held on May 30, 2005, the
company’s authorized capital was increased from 2,000,000 ordinary shares (no par
value) to 3,000,000,000 ordinary shares (no par value) by the creation of 2,998,000,000
ordinary shares, such new shares to rank pari passu in all respect with the existing
ordinary shares in the capital of the company.
(d)
By a resolution passed at an Extra-ordinary General Meeting held on May 31, 2005,
additional shares were issued to the existing shareholders as follows:
$’000
New capital introduced
Debt to equity swap
205
96,377
96,582
(e)
By a resolution passed at an Extra-ordinary General Meeting held on May 31, 2005, the
issued capital of the company at May 31, 2005 of 97,581,918 shares was sub-divided into
2,136,539,521 ordinary stocks, at no par value.
(f)
In July 2005, the company raised additional capital of $1,852.6 million through a private
placement, by offering additional 500,715,405 ordinary stocks. These stocks have been
allotted to the new shareholders and the issued capital represents 2,637,254,926 ordinary
stocks.
(g)
As part of the settlement of the acquisition price of the subsidiary Prime Sports (Jamaica)
Limited (PSJL), during the year the founding shareholders of the company transferred a
block of shares valued at $196.7 million (number of shares determined based on the IPO
price of $4.81 per share) held by them to the former shareholders of PSJL. The
contribution made by the founding shareholders has been treated as a premium on these
shares and has been recorded as stated capital.
…../24
Statement VIII.24
20
LONG-TERM LIABILITIES
2006
$’000
Telegens Inc. (US$506,123)
(2005: US$815,267) (Note 20(a))
Wachovia Bank National Association
(US$Nil) (2005: US$604,789) (Note 20(b))
First Caribbean International Bank
(Jamaica) Limited (Note 20 (c))
Loan 1 – US$1,270,267 (2005: US$1,472,988)
Loan 2 – US$175,361 (2005: US$229,450)
The Group
33,657
-
2005
$’000
52,029
38,597
84,472
11,662
94,330
14,694
129,791
199,650
36,569
38,301
54,921
-
74,842
34,426
80,555
9,827
129,791
199,650
( 36,569)
( 74,842)
93,222
124,808
These loans are repayable as follows:
Within one year
In the second year
In the third to fifth years inclusive
After five years
Less: amount due for settlement within
12 months (Note 21)
(a)
The loan which is denominated in United States dollars, is repayable in 60 equal monthly
installments by April 2008 and attracts interest at a fixed rate of 7% on the reducing
balance basis. It is secured by a bill of sale over wireless communication equipment.
(b)
The loan which was denominated in United States dollars was repayable by July 2006,
and attracted interest of a variable rate of LIBOR plus 0.75%. It was guaranteed by
National Commercial Bank Jamaica Limited and was secured by lien over credit balances
and/or assignment of liquid assets amounting to US$306,452, first legal mortgage over
premises located at 9a Retirement Crescent and bill of sale over equipment purchased.
The interest rate on this loan at October 31, 2005 was 4.44%. The loan was repaid in full
during the year.
(c)
The loans are repayable in monthly installments of US$31,290 and US$6,645
respectively, at interest rate of base lending rate plus 1.5% per annum. Interest rate at
year end was 12.5% per annum.
…./25
Statement VIII.25
20
LONG-TERM LIABILITIES (Cont’d)
(c) (Cont’d)
Other principal features of the loans are:
(i)
The loans are repayable by 2011 and 2009 respectively.
(ii)
The loans as well as an overdraft facility of $3 million are secured on the
following:
(a)
First demand guarantee mortgage on the property of Coral Cliff
Entertainment Limited stamped to cover US$1,901,000 and with powers
to upstamp.
(b)
Debentures over the fixed and floating charge over the assets of Village
Square Entertainment Limited and Coral Cliff Entertainment Limited.
(c)
Acknowledged assignment of Village Square Entertainment Limited fire
and peril insurance.
(d)
Unlimited corporate guarantee of Coral Cliff Entertainment Limited.
(e)
Hypothecation of the shares of Village Square Entertainment Limited
and Coral Cliff Entertainment Limited.
(f)
Assignment of the rental agreement with Coral Cliff Entertainment
Limited.
…./26
Statement VIII.26
21
ACCOUNTS PAYABLE AND ACCRUALS
The Group
2006
2005
$’000
$’000
Trade
Service contractor fees
Contributions payable to CHASE
Fund
Contributions payable to Betting,
Gaming and Lotteries Commission
Lottery taxes payable
Other payables and accruals
Withholding taxes payable
Current portion of long-term
liabilities (Note 20)
The Company
2006
2005
$’000
$’000
24,930
198,130
184,625
193,094
149,370
38,710
53,780
38,710
39,789
8,405
20,281
205,852
91,211
9,959
24,377
135,000
107,333
8,405
20,281
107,594
86,967
8,276
15,729
90,894
81,710
587,519
515,074
455,051
385,768
36,569
74,842
-
-
624,088
589,916
455,051
385,768
The directors and management consider that the carrying amount of accounts payables approximate their
fair value.
22
REVENUE
Analysis of the revenue is as follows:
The Group
2006
2005
$’000
$’000
The Company
2006
2005
$’000
$’000
Cash Pot
Lucky 5
Dollaz
Lotto
Pick 3
Instant
11,366,319
448,802
239,872
1,206,035
929,813
169,808
10,559,430
426,677
211,386
1,444,008
734,809
209,254
11,366,319
448,802
239,872
1,079,876
866,729
154,134
10,559,430
426,677
211,386
-
Unclaimed prizes
Gaming revenue (net wins)
Hospitality and related revenue
Money Gram remittance service
Foreign exchange trading
Pin codes
Others
14,360,649
58,280
556,157
117,085
40,678
51,037
702,094
61,809
13,585,564
55,023
38,888
13,088
28,657
38,206
549,616
41,093
14,155,732
56,971
702,094
28,670
11,197,493
31,483
549,616
25,704
15,947,789
14,350,135
14,943,467
11,804,296
…./27
Statement VIII.27
23
DIRECT EXPENSES
(a)
Analysis of direct expenses is as follows:
The Group
2006
2005
$’000
$’000
Lottery prizes
Agents’ commissions
Good cause fees
Lottery tax
Contributions to BGLC
Gaming lounge charges
Direct expense – hospitality and
related services
Franchise fee
Pin codes
Commissions – pin codes (cost)
Commissions – Money Gram (cost)
Others
(b)
The Company
2006
2005
$’000
$’000
9,848,923
1,416,285
726,430
672,454
860,776
159,704
51,016
9,143,950
1,286,090
673,361
649,531
792,144
135,869
-
9,725,353
1,338,171
723,955
658,995
792,759
141,624
-
7,905,040
992,364
559,108
495,645
566,257
112,004
-
46,212
616,380
46,201
14,725
1,347
14,721
479,642
51,922
9,041
790
24,474
616,380
46,201
-
479,642
51,922
-
14,460,453
13,237,061
14,067,912
11,161,982
Lottery Prizes
(i)
Cash Pot
-
All prizes are fixed. The prize won for correctly matching the
winning number is $26 for each $1 wagered.
(ii)
Lucky 5
-
Prizes for this game is determined based on the predetermined
prize structure. This prize payout is at least 50.93% of the total
wagers of each game.
(iii)
Dollaz!
-
Prizes for this game are fixed based on each $10 per play per
spot. The prize won will depend on how much of the winning
numbers are correctly matched.
(iv)
Lotto – Prizes are based on the actual winning combination of numbers for each
draw with the amount allocated to prizes being a predetermined percentage of
actual sales;
(v)
Pick 3 – Prizes are computed based on the actual winning combination of
numbers for each draw;
(vi)
Instant – Prizes are accrued as an estimate based on a predetermined prize
structure for each game.
…./28
Statement VIII.28
23
DIRECT EXPENSES (Cont’d)
(c)
GTECH Corporation (GTECH) has been contracted for the provision of technical and
marketing services for lottery gaming activities. GTECH whose primary business is
providing online lottery systems, terminals, networks and services to the lottery industry
provide these services to the company to operate the lotteries. GTECH receives a service
fee calculated using an agreed fee structure based on weekly gross sales.
GTECH has also been contracted to provide electronic gaming services for VLT gaming
activities at a fee calculated using an agreed percentage of meter net wins after taxes.
(d)
Agents’ commission
The agents of the company who sell on-line tickets for the games receive a commission
on ticket sales.
(e)
Good cause fees
Under the terms of its lottery operations licence (Note 1), the company is obligated to
make specific contribution to the culture, health, arts, sports and education (CHASE)
Fund computed as follows:
Cash Pot
Lucky 5
Dollaz!
Lotto and Instant Ticket
Pick 3
-
15% of net ticket sales after prizes
7.5% of gross ticket sales
7.5% of gross ticket sales
7.5% gross Lotto and Instant Ticket sales
4.17% of gross sales
In addition to the above contributions 50% of unclaimed prizes are also paid over to the
same fund (see Note 3 (x) (i) above).
(f)
Lottery tax
In accordance with Section 13 of the Betting, Gaming and Lotteries (Amendment) Act
2000, 17% of weekly net revenues is paid as lottery tax to the Government of Jamaica for
Lucky 5, Cash Pot, Pick 3 and 23% of weekly gross revenues is paid for Dollaz!. The tax
for lotto is computed 23% of lotto sales net of prizes. In relation to VLT gaming
activities a gross profit tax, is paid to the Government of Jamaica calculated at 7.5% of
meter net wins on a monthly basis.
…./29
Statement VIII.29
23
DIRECT EXPENSES (Cont’d)
(g)
Contributions to Betting, Gaming and Lotteries Commission
In accordance with conditions attached to the licence granted by BGLC the company
contributes 1% of gross ticket sales to BGLC. Also in accordance with amended
regulations 2.5% of meter net wins is paid to BGLC in relations to VLT gaming
activities.
(h)
Gaming lounge charges
These charges include payments under contractual arrangements with hotels that operate
gaming lounges.
(i)
Pin codes
This represents the amounts paid to mobile service providers for the purchase of pin
codes.
(j)
Commission – pin codes cost
The agents of the company who sell on-line pin codes and phone cards receive a
commission on sales.
24
SEGMENT REPORTING
The Group is organized into five main business segments.
(a)
Lottery & Gaming
-
this incorporates lottery games, operated through
the agents’ net work and VLT games offered at
gaming lounge.
(b)
Hospitality
-
this incorporates room and restaurant and related
guest services.
(c)
Financial services
-
this incorporates foreign exchange dealer
services and commission Money Gram services.
(d)
Pin codes
-
this incorporates sale of pin codes through the
agents’ network.
(e)
Other
-
this incorporates agents’ service fees, agents’
reconnection fee, sale of assets and other
miscellaneous income.
The Group’s operations are located solely in Jamaica.
.../30
Statement VIII.30
24
SEGMENT REPORTING (Cont’d)
Revenue
External sales
Result
Segment result
Lottery &
Gaming
$’000
2006
Hospitality
$’000
Financial
Services
$’000
Pin Codes
$’000
Other
$’000
Eliminations
$’000
14,972,136
170,588
91,715
702,094
75,854
(
134,368
4,263
8,948
39,513
75,854
64,598)
Group
$’000
15,947,789
-
Finance cost – net
262,946
(
Profit before taxation
256,767
Taxation
(
Profit for the year
Other information
Capital additions
Depreciation and amortization
Balance sheet
Assets
Segment assets
6,179)
91,419)
165,348
65,358
74,080
2,048
19,216
882
726
-
-
3,823,641
719,381
55,572
-
-
-
(1,763,993)
Consolidated total assets
68,288
94,022
2,834,601
2,834,601
Liabilities
Segment liabilities
Consolidated total liabilities
1,305,748
130,812
29,620
-
-
( 626,784)
839,396
839,396
…/31
Statement VIII.31
24
SEGMENT REPORTING (Cont’d)
Revenue
External sales
Result
Segment result
Lottery &
Gaming
$’000
13,679,475
227,356
2005 (Restated)
Hospitality
$’000
Financial
Services
$’000
Pin Codes
$’000
Other
$’000
Eliminations
$’000
16,879
66,863
549,616
47,797
(
( 9,911)
18,052
47,797
(
472)
Group
$’000
10,495)
14,350,135
-
Finance cost – net
Negative goodwill adjustment
Goodwill amortization
282,822
(
(
Profit before taxation
285,684
Taxation
(
Profit for the period
Other information
Capital additions
Depreciation and amortization
Balance sheet
Assets
Segment assets
62,967)
66,023
194)
95,493)
190,191
26,914
42,844
2,121
220
583
2,977,528
741,089
34,001
27,134
45,548
-
(1,220,530)
2,532,088
Consolidated total assets
2,532,088
Liabilities
Segment liabilities
990,588
167,823
19,557
-
( 359,400)
818,568
Consolidated total liabilities
818,568
…/32
Statement VIII.32
25
The profit before taxation is stated after taking account of the following items:
Income
Interest
Expenses
Directors’ emoluments:
Fees
Management remuneration
Audit fees
Depreciation of property, plant
and equipment
Amortisation of intangible assets
Finance cost – interest on loans
26
The Group
2005
2006
$’000
$’000
The Company
2006
2005
$’000
$’000
13,073
15,358
9,600
11,594
9,932
46,447
9,980
53,091
5,789
9,932
46,447
3,850
53,091
2,850
92,458
1,564
19,252
42,974
2,574
78,325
12,060
1,015
-
9,542
545
69,807
TRANSACTIONS WITH RELATED PARTIES
(a)
Marketing and management consulting fees charged by related party, Atlantic
Marketing Services Limited during 2005 amounted to $128.3 million. The
contract was terminated in June 2005. These fees were charged at an agreed
percentage of gross revenue, in the ordinary course of business.
(b)
Compensation of key management personnel
The remuneration of directors and other members of the key management during
the year was as follows:
Short-term benefits
Post employment benefits
The Group
2005
2006
$’000
$’000
The Company
2006
2005
$’000
$’000
74,025
1,092
54,392
724
74,025
1,092
54,392
724
75,117
55,116
75,117
55,116
…./33
Statement VIII.33
27
TAXATION
(a)
The Group
2005
2006
$’000
$’000
The total charge for the year
includes:
Current tax charge
Income tax at 33⅓% of taxable profits
Deferred tax credit adjustment (Note 12)
(b)
The Company
2006
2005
$’000
$’000
(76,452)
(14,967)
(51,104)
(44,389)
( 56,047)
( 53,498)
(39,372)
(91,419)
(95,493)
(109,545)
(39,372)
The charge is reconciled to the profit as per the profit and loss account as follows:
The Group
2005
2006
$’000
$’000
Profit before tax
The Company
2006
2005
$’000
$’000
256,767
285,684
288,586
71,285
Tax at the domestic income tax rate of 33⅓%
( 85,589)
( 95,228)
( 96,195)
(23,762)
Tax effect of expenses disallowable for
tax purposes
( 10,237)
( 21,750)
( 12,511)
(12,398)
-
-
-
-
Tax effect on non taxable income
5,101
Tax effect of goodwill adjustment
-
Other
(
(
56)
21,943
694)
( 91,419)
(
402)
( 95,493)
(
839)
( 3,212)
(109,545)
(39,372)
(c)
Tax losses of sub-subsidiaries amounting to approximately $175.8 million (subject to
agreement with Commissioner, Taxpayer Audit and Assessment Department) are
available for set-off against future taxable profits of the subsidiaries.
(d)
A subsidiary of the Group, Coral Cliff Entertainment Limited has received approval
under the Hotel (Incentive) Act 1968 and accordingly its profits are relieved from income
tax for a period of ten years commencing April 1, 2001. The total profits relieved to date
amounts to $254.2 million.
…./34
Statement VIII.34
28
NET PROFIT
2006
$’000
Restated
2005
$’000
Dealt with in the financial statements of:
The company
The subsidiaries
29
179,041
( 13,693)
31,913
158,278
165,348
190,191
2006
$’000
Restated
2005
$’000
PROFIT AND LOSS ACCOUNT
This is reflected in the financial statements of:
The company
The subsidiaries
30
( 73,302)
101,324
(252,343)
115,017
28,022
(137,326)
EARNINGS PER STOCK
Basic earnings per stock unit is calculated by dividing the net profit (loss) attributable to
shareholders, by the weighted average number of ordinary stock units in issue during the year.
Net profit attributable to shareholders (’000)
Weighted average number of ordinary stock units
in issue (’000)
Basic earnings per stock unit ($)
2006
Restated
2005
165,348
190,191
2,637,254
0.06
1,045,796
0.18
Diluted earnings per stock unit is the same as basic earnings per stock unit as there were no
dilutive potential ordinary stocks.
…./35
Statement VIII.35
31
RETIREMENT BENEFIT PLAN
The group operates a defined contribution retirement benefit plan for all qualifying employees.
The assets of the scheme are held separately from those of the group in funds under the control of
trustees and administered by an insurance company.
Basic contributions are 5% of taxable earnings, made by the employees and 5% by the employer.
The employees may make additional contributions of 5% of their taxable earnings to provide for
additional pension benefits.
32
STAFF COSTS
The Group
2005
2006
$’000
$’000
(a) Average number of persons employed
by the group during the period
The Company
2006
2005
$’000
$’000
400
287
58
47
$’000
$’000
$’000
$’000
342,107
134,460
140,441
75,884
Statutory contributions
26,959
13,285
13,512
8,452
Pension contributions
3,485
2,691
2,709
2,064
372,551
150,436
156,662
86,400
(b) Staff costs incurred during the period
in respect of these employees were:
Salaries, including redundancy costs
and other costs
…./36
Statement VIII.36
33
OPERATING LEASE ARRANGEMENTS
The group has entered into agreements for the lease of office spaces. The instruments of lease are
for a period of 5 years and are renewable by an option to extend for a further 5 years. The annual
rentals are payable in monthly installments.
Minimum lease rental commitments are as follows:
Within 1 year
Year 2 and 3
Year 4 and 5
34
2006
$’000
2005
$’000
8,900
24,910
-
8,820
19,870
13,941
33,810
42,631
COMMITMENTS
(a)
Licence fees to Betting, Gaming & Lotteries Commission (BGLC)
In accordance with conditions attached to the licences granted by BGLC, an annual
licence fee of $12.0 million falls due for payment each year.
(b)
Contingencies – litigation
Claims estimated to total approximately $10.1 million have been made against the
subsidiary. The outcome of these claims is currently indeterminable, therefore no
provision has been made in these financial statements.
…./37
Statement VIII.37
34
COMMITMENTS (Cont’d)
(c)
Other commitments
The company has entered into sponsorship agreements and the total obligation is as
follows:
35
Year
$’000
2009
7,500
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value is the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable, willing parties in an arm’s length transaction.
A market price, where an active market (such as a recognized stock exchange) exists, is the best
evidence of the fair value of a financial instrument.
Where an active market does not exist, the fair values have been estimated using present value or
other estimation techniques based on market conditions existing at balance sheet date.
The values derived using these techniques are significantly affected by underlying assumptions
concerning both the amount and timing of future cash flows and the discount rates used. The fair
values of the group’s financial instruments, where determinable, made use of the following
methods and assumptions:
(i)
The fair values of cash and bank deposits, investment in cash securities, accounts
receivable, accounts payable, prizes payable and bank overdraft are assumed to
approximate their carrying amounts because of the short-term maturity of these
instruments.
(ii)
Long-term receivables, investment in joint venture and available-for-sale investments
have been stated at cost due to reasons described in Notes 8, 10 and 11 respectively.
(iii)
The fair value of long-term liabilities approximates the carrying value as the interest rate
on the loans reflects general market rates.
…./38
Statement VIII.38
36
RISK MANAGEMENT
(a)
Credit risk
Credit risk is the risk of loss from the default by an obligator. The risk is managed
primarily by reviews of the financial status of each obligator. Cash and bank deposits
and investment in cash securities are held with substantial financial institutions. The
book value of receivables is stated after allowance for likely losses estimated by
management based on prior experience and their assessment of current economic
environment.
The group’s main exposure of credit risk is attributable to its retailer accounts receivable.
This risk is minimized by immediate suppression of on-line activity of retailers who fail
to lodge weekly proceeds and by close monitoring of collections.
(b)
Currency risk
The group is exposed to foreign currency risks on transactions that are denominated in
currencies other than the Jamaican dollar. The group’s net foreign currency (liabilities)
assets as at period end, incurred in the normal course of business, were as follows:
2006
$’000
2005
$’000
654
61
( 13)
(1,952)
426
306
112
(3,999)
(1,250)
(3,155)
US$
Cash and bank deposit
Investment in cash securities
Trade receivables
Trade payables
Other foreign currencies
Cash and bank deposit
£
Can.$
CI$
Euro
23
12
3
6
7
19
2
1
…./39
Statement VIII.39
36
RISK MANAGEMENT (Cont’d)
(c)
Interest rate risk
Interest rate risk is the potential impact of changes in market interest rates on the fair
values of assets and liabilities on the balance sheet and on the annual interest income and
expense in the profit and loss account. The average interest rate exposure of the company
at the balance sheet dates was as follows:
Interest bearing assets
Bank deposits
Investment in cash securities
Interest bearing liabilities
(d)
2006
$’000
2005
$’000
5.6% - 10.5%
-
4.5% - 13.25%
5.75%
7% - 12.5%
4.44% - 12.5%
Market risk
Market risk is the risk that the value of a financial instrument will fluctuate as a result of
changes in market prices whether those changes are caused by factors specific to the
individual security or its issuer or factors affecting all securities traded in the market.
The group has no exposure to market risk as there are no traded securities.
(e)
Liquidity risk
Liquidity risk, also referred to as funding risk, is the risk that the group will encounter
difficulty in raising funds to meet commitments associated with financial instruments.
Liquidity risk may result from an inability to sell a financial asset quickly at, or close to
its fair value. Prudent liquidity risk management implies maintaining sufficient cash and
cash equivalents, and the availability of funding through an adequate amount of
committed facilities. Due to the dynamic nature of the underlying business, the
management maintains an adequate amount of its financial assets in liquid form to meet
contractual obligations and other recurring payments.
…./40
Statement VIII.40
36
RISK MANAGEMENT (Cont’d)
(f)
Cash flow risk
Cash flow risk is the risk that future cash flows associated with a monetary financial
instrument will fluctuate in amount. The group manages this risk through budgetary
measures, ensuring as far as possible, that fluctuations in cash flows relating to monetary
financial assets and liabilities are matched, to mitigate any significant adverse cash flows.
37
ACQUISITION OF SUBSIDIARIES
(a)
Effective November 1, 2005 the company acquired Prime Sports (Jamaica) Limited
(PSJL) and effective November 22, 2005 Chillout Ventures Limited (CVL) was acquired
by the subsidiary Jamaica Lottery Company Limited.
$’000
Intangible asset
Other assets
Deferred tax asset
Accounts receivable and prepayment
Cash and bank deposits (net of bank overdraft)
Due to related parties
Goodwill on acquisition (Note 7)
278,938
26,155
15,527
6,839
16,342
11,891
( 51,691)
(281,846)
22,155
381,728
403,883
Cash and bank deposit (net of bank overdraft)
of the subsidiaries acquired
( 11,891)
391,992
Purchase consideration satisfied by cash
During year ended October 31, 2005 (see note below)
During the current year
167,509
27,809
195,318
Purchase consideration satisfied by other
contributions (see Note 19)
196,674
391,992
(b)
The cash outflows amounting to $167.5 million in respect of these acquisitions formed
part of the cash outflows in 2005, and were reflected in long-term receivables in the case
of PSJL and in accounts receivable and prepayments in the case of CVL. This was a
result of the non-completion of the acquisition process as at October 31, 2005.
…./41
Statement VIII.41
37
ACQUISITION OF SUBSIDIARIES (Cont’d)
(b)
The consolidated cash flow statement for year 2005 included the net cash outflow on
acquisition of the subsidiaries, Coral Cliff Entertainment Limited and Village Square
Entertainment Limited and comprises the acquisition of the net assets and goodwill
detailed below:
$’000
38
Income tax recoverable
Inventories
Accounts receivable and prepayments
Cash and bank deposits (net of bank overdraft)
Deferred tax liabilities
Due to related party
745,864
2,583
11,832
13,423
( 15,916)
(108,429)
(
598)
( 34,010)
( 38,132)
Negative goodwill on acquisition
576,617
( 66,023)
Cash and bank deposits of subsidiary acquired
510,594
15,916
Net cash outflow on acquisition
526,510
EFFECT OF CHANGE IN ACCOUNTING POLICY AND RECLASSIFICATIONS
As stated in Note 3(a) to these financial statements the policy on the recognition of the prize
liability of Lotto jackpot was changed during the year. The financial statements for the year
ended October 31, 2006, have been prepared using this policy. The financial statements for the
year ended October 31, 2005 (the immediately preceding comparative period) have been restated
to reflect the financial position and results after the policy change. The restatements were to
recognize additional prize expenses with a corresponding adjustment to prize payable at the
balance sheet dates, together with adjustments for the tax effects of increased expenses.
…./42
Statement VIII.42
38
EFFECT OF CHANGE IN ACCOUNTING POLICY AND RECLASSIFICATIONS (Cont’d)
The effects were as follows:
(a)
Effect on shareholders’ equity as at November 1, 2004.
Previously
Stated
$’000
Effect of
New Policy
$’000
As Restated
$’000
ASSETS
Non-current assets
559,059
Current assets
Income tax recoverable
Other current assets
29,689
602,172
5,333
-
35,022
602,172
631,861
5,333
637,194
1,190,920
5,333
1,196,253
1,000
( 316,850)
(10,667)
1,000
( 327,517)
( 315,850)
(10,667)
( 326,517)
Total assets
-
559,059
EQUITY AND LIABILITIES
Shareholders’ equity
Share capital
Profit and loss account
Non-current liabilities
974,553
-
974,553
Current liabilities
Prize payable
Other current liabilities
51,799
480,418
16,000
-
67,799
480,418
532,217
16,000
548,217
1,190,920
5,333
1,196,253
Total equity and liabilities
…./43
Statement VIII.43
38
(b)
Effect on shareholders’ equity as at October 31, 2005.
Previously
Stated
$’000
Effect of
New Policy
$’000
As Restated
$’000
1,662,256
-
1,662,256
869,832
-
869,832
2,532,088
-
2,532,088
1,850,846
( 110,659)
(26,667)
1,850,846
( 137,326)
1,740,187
(26,667)
1,713,520
ASSETS
Non-current assets
Current assets
Total assets
EQUITY AND LIABILITIES
Shareholders’ equity
Share capital
Profit and loss account
Non-current liabilities
124,808
-
124,808
Current liabilities
Prize payable
Income tax payable
Other current liabilities
44,221
21,829
601,043
40,000
(13,333)
-
84,221
8,496
601,043
667,093
26,667
693,760
Total equity and liabilities
2,532,088
-
2,532,088
…./44
Statement VIII.44
38
(c)
Effect on the net profit for year ended October 31, 2005.
Revenue
Direct expenses
Previously
Stated
$’000
Effect of
New Policy
$’000
Effect of
Reclassifications
$’000
As Restated
$’000
14,399,583
(13,260,773)
(24,000)
(49,448)
47,712
14,350,135
(13,237,061)
1,138,810
(24,000)
( 1,736)
1,113,074
Gross profit
Marketing and business
development
Interest income
Finance cost
Goodwill amortisation
(
274,037)
-
5,905
(
268,132)
(
(
351,906)
206,257)
-
( 1,648)
( 2,309)
(
(
353,554)
208,566)
(
832,200)
-
1,948
(
830,252)
306,610
15,358
78,113)
65,829
(24,000)
-
309,684
103,493)
(24,000)
8,000
-
206,191
(16,000)
-
(
Taxation
NET PROFIT
(
(
212
212)
-
(
(
282,822
15,358
78,325)
65,829
285,684
95,493)
190,191
Comparative amounts in the profit and loss account for year ended October 31, 2005, have been
reclassified to conform with the presentation in the current period.
…./45
Statement VIII.45
39
CONDITIONS ATTACHED TO THE LICENCE GRANTED BY THE BETTING, GAMING
AND LOTTERIES COMMISSION (BGLC)
Clause 3 of the conditions attached to the licence granted by BGLC requires the company to
ensure that its liquid assets are on average not less than 75% of its current liabilities. The
company was not in compliance with this condition as at October 31, 2006.
The company has been in discussions since September 29, 2006 with BGLC to remedy this
breach. The proposal to the BGLC on December 22, 2006 was subsequently approved. The
additional conditions required was to establish a wholly-owned subsidiary company of Supreme
Ventures Limited (SVL) whose operations will consist entirely of conducting the licensed games.
In that regard the new company, Supreme Ventures Lotteries Limited (SVLotteries) has applied
for and received approval for the licence to operate Cash Pot, Lucky 5, Dollaz, Pick 3, Lotto and
a variety of instant games. The effective date of the licences is January 1, 2007.
Under the new licence SVLotteries is required to establish a dedicated bank account into which
will be paid funds to ensure that on a continuous basis throughout the remaining terms of the
licences, the credit balance in that account is not less than 100% of the aggregate amount of
SVLotteries liabilities to pay (a) prizes liability, (b) the fees payable to the BGLC, (c) the specific
gaming taxes payable to the Government of Jamaica, and (d) the contribution payable to the
CHASE Fund under the licences. SVL is also to execute a Debenture in the amount of $500
million in the form approved by the BGLC to satisfy the capital requirement of the licensee,
Supreme Ventures Lotteries Limited.

PETROJAM LIMITED

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