Olympic Entertainment Group
Quarterly report

OEG: Consolidated unaudited results for Q3 and 9 months of 2017

Key performance indicators of the Group

Key developments of the Group during 9 months of 2017:

• The financial results in the management report section of this report have been presented together with discontinued operations Poland and Belarus, whereas in the statement of comprehensive income the results of discontinued operations have been separated and presented in a single line. Please see page 13 for the income statements of continued and discontinued operations.
• The Group’s consolidated total revenue before gaming taxes for 9 months of 2017 amounted to EUR 158.6 million, up 3.8% or EUR 5.8 million y‑o‑y.
• Total gaming revenue before gaming taxes accounted for 89.7% (142,2 m€) and other revenues for 10.3% (16.3 m€) of the Group’s consolidated total sales revenues for 9 months of 2017. A year before the revenue split was 93.1% (142.2 m€) and 6.9% (10.6 m€), respectively.
• The Group’s consolidated EBITDA for 9 months of 2017 amounted to EUR 33.9 million, a decline of 23.4% from EUR 44.2 million a year before. The Group’s consolidated operating profit decreased EUR 3.2 million (11.7%) to EUR 24.5 million. 2016 respective numbers included profit from the hotel real estate sales transaction in amount of EUR 17.8 million and impairment of goodwill and assets in Poland (Polish segment’s operating loss for 9 months of 2016 was EUR -8.8 million.
• The Group’s consolidated net profit attributable to equity holders of the parent company for 9 months of 2017 totalled EUR 21.1 million compared to EUR 23.7 million a year ago.
• In the current financial statements, Polish and Belarusian segments have been classified as discontinued operations, for which the net profit for 9 months of 2017 amounted to EUR 0 million (in 9 months of 2016 net loss of EUR 9.4 m€).
• Group Polish subsidiary Casino Polonia-Wrocław sp. z o.o. that operated the flagship casino of OEG in Warsaw until September 2016 submitted to the court its bankruptcy petition on 2 January 2017.
• On 11 January 2017 Group established and registered the company Olybet Malta Limited in Malta with share capital of EUR 5,000. Group owns through a subsidiary 100% of the shares of Olybet Malta Limited. The aim of establishing the subsidiary is to develop the legal platform for the expansion of OEG group's activities in the business of remote gambling.
• Group Polish subsidiaries Baina Investments sp. z o.o. and Silber Investments sp. z o.o. submitted to the court their bankruptcy petitions on 20 January 2017. These holding companies own shares in the OEG subsidiary Casino Polonia-Wrocław sp. z o.o.
• On 27 February 2017 Group announced that the Lithuanian subsidiary of OEG, UAB Orakulas will be demerged into two entities within the first half of this year. The aim of the demerger was to adjust the group structure by separating the technology platform of online operations and trading and risk management for sports betting services from the operational activities of the subsidiary. OEG would own 100% of the shares in both entities after the demerger. Demerger was completed on 16 May 2017.
• On 28 March 2017 Group initiated proceedings for delisting its shares from the main market of the Warsaw Stock Exchange. After receiving permission from the Polish Financial Supervision Authority the Group announced that its shares are delisted from Warsaw Stock Exchange as of 19 September 2017.
• The general meeting of shareholders held on 20 April 2017 decided to pay out dividends in amount of EUR 15,179,120.60 (EUR 0.1 per share), that were paid out to shareholders on 9 May 2017.
• On 9 May 2017 Group announced that Italian subsidiaries of OEG, casino operating companies Slottery S.r.l. and Jackpot Game S.r.l., have concluded a merger agreement. The merger was finalised on 28 June 2017 and during the course of the merger Jackpot Game S.r.l. was merged with Slottery S.r.l. The aim of the merger was the adjustment of the group’s structure.
• On 29 May 2017 OEG announced of the liquidation of its Belarusian subsidiary Olympic Casino Bel IP. The aim of the liquidation was the adjustment of the group’s structure.
• On 9 June 2017 the Group announced that its Lithuanian subsidiaries, Olympic Casino Group Baltija UAB and Orakulas UAB have concluded a merger agreement on 7 June 2017. The merger was completed on 31 August 2017 and during the course of the merger Orakulas UAB was merged with Olympic Casino Group Baltija UAB. The aim of the merger was the adjustment of the group’s structure.

The Group’s consolidated total revenue before gaming taxes by segments:

Number of casinos by segment:

The Group’s consolidated operating expenses for 9 months of 2017 amounted to EUR 102.3 million, down 6.4% or EUR 7.0 million y‑o‑y. Costs decline is caused by the fact that last year´s costs included impairment of goodwill and assets in Poland. Depreciation and impairment costs declined by 43% (-7.1 m€). The growth was highest in rent expenses (+0.8 m€, +6.9%), personnel expenses (+0.8 m€, +2.1%) and utilities and maintenance costs (+0.2 m€, +3.8%). Personnel expenses (41.0 m€) and rent costs (12.5 m€) represented the largest cost items accounting for 52.0% of total operating expenses.

The income statement now presents revenue before gaming taxes, then gaming taxes and thereafter net revenue. Therefore, gaming taxes are no longer presented under operating expenses. Gaming taxes for 9 months of 2017 decreased 6.9% (‑2.3 m€) compared to 9 months of 2016.

Overview by markets

Estonia

Total revenue before gaming taxes of Estonian segment for 9 months of 2017 amounted to EUR 41.5 million (+9.0 m€, +27.8%), EBITDA to EUR 7.7 million (-14.0 m€, -64.6%) and operating profit to EUR 5.0 million (-14.1 m€, -73.9%). The reason for the EBITDA and operating profit decline is that last year´s numbers included profit from the hotel real estate sales transaction in amount of EUR 17.8 million. Gaming revenue before gaming taxes increased 12.9% y-o-y amounting to EUR 32.6 million.

At the end of September 2017, there were 24 Olympic casinos with 988 slot machines, 46 electronic roulette terminals, 24 gaming tables and 24 poker tournament tables operating in Estonia. At 30 September 2017 Estonian operations employed 711 people.

Latvia

Total revenue before gaming taxes of Latvian segment for 9 months of 2017 amounted to EUR 51.1 million (+2.8 m€, +5.9%), EBITDA to EUR 21.3 million (+1.3 m€, +6.5%) and operating profit to EUR 18.2 million (+0.9 m€, +5.3%). Gaming revenue before gaming taxes increased 5.2% y‑o‑y amounting to EUR 46.4 million.

At the end of September 2017, there were 52 Olympic casinos with 1,454 slot machines, 8 electronic roulette terminals, 24 gaming tables and 9 poker tournament tables operating in Latvia. At 30 September 2017 Latvian operations employed 931 people.

Lithuania

Total revenue before gaming taxes of Lithuanian segment for 9 months of 2017 amounted to EUR 20.2 million (+1.9 m€, +10.4%), EBITDA to EUR 2.6 million (+1.2 m€, +80.9%) and operating profit to EUR 1.3 million (+1.0 m€, +344.1%). Gaming revenue before gaming taxes increased 10.5% y-o-y amounting to EUR 19.2 million.

At the end of September 2017, there were 18 Olympic casinos with 527 slot machines, 8 electronic roulette terminals, 53 gaming tables and 2 poker tournament tables and 28 betting shops operating in Lithuania. At 30 June 2017 Lithuanian operations employed 753 people.

Slovakia

Total revenue before gaming taxes of Slovak segment for 9 months of 2017 amounted to EUR 13.3 million (+0.6 m€, +4.6%), EBITDA to EUR 1.3 million (+0.2 m€, +14.7%) and operating profit to EUR 0.4 million (+0.1 m€, +36.3%). Gaming revenue before gaming taxes increased 5.2% y-o-y amounting to EUR 11.9 million.

At the end of September 2017, there were 7 Olympic casinos with 268 slot machines, 36 electronic roulette terminals, 45 gaming tables and 21 poker tournament tables operating in Slovakia. At 30 September 2017 Slovak operations employed 341 people.

Italy

Total revenue before gaming taxes of Italian segment for 9 months of 2017 amounted to EUR 22.6 million (+3.7 m€, +19.5%), EBITDA to EUR 1.1 million (+0.6 m€, +118.2%) and operating profit to EUR 0.5 million (+0.3 m€, +98.5%). Gaming revenue before gaming taxes increased 19.3% y-o-y amounting to EUR 22.4 million.

At the end of September 2017, there were 15 VLT slot casinos with 545 slot machines operating in Italy. At 30 September 2017 Italian operations employed 91 people.

Malta

Total revenue before gaming taxes of Maltese segment for 9 months of 2017 amounted to EUR 9.9 million (+1.4 m€, +17.1%), EBITDA to EUR -0.1 million (-0.4 m€) and operating loss to EUR 0.9 million (-0.5 m€). Gaming revenue before gaming taxes increased 16.9% y-o-y amounting to EUR 9.7 million.

At the end of September 2017, there was 1 casino with 285 slot machines, 18 electronic roulette terminals, 21 gaming tables and 10 poker tournament tables operating in Malta. At 30 September 2017 Maltese operations employed 181 people.

Financial position

At 30 September 2017, the total assets of the Group amounted to EUR 158.9 million, up 3.4% or EUR 5.2 million compared to the same period a year ago.

Current assets totalled EUR 53.3 million or 33.6% of total assets, and non-current assets EUR 105.6 million or 66.5% of total assets. The liabilities amounted to EUR 23.1 million and equity to EUR 135.8 million. The largest liabilities included suppliers payables and advances (8.2 m€), tax liabilities (5.2 m€) and payables to employees (4.7 m€).

Investments

Within 9 months of 2017, the Group’s expenditures on property, plant and equipment totalled EUR 6.7 million (‑21.8 m€, ‑76.5%), of which EUR 4.6 million was invested into construction and reconstruction of casinos and EUR 1.6 million into new gaming equipment. First 9 months of 2016 also includes investments into the hotel construction, which is why investments for the 9 months of 2017 were lower.

Cash flows

Group’s cash flows generated within 9 months of 2017 from operating activities amounted to EUR 31.8 million (+5.8 m€) and cash flows used in investing activities to EUR -7.2 million (+14.9 m€). Financing cash flows amounted to EUR ‑15.4 million (‑17.0 m€). Net cash flows totalled EUR 9.2 million (+3.7 m€).

Staff

At 30 September 2017 Group employed 3,009 people, down by 60 y-o-y.

Within 9 months of 2017, total personnel expenses amounted to EUR 41.0 million (+0.8 m€, +2.1%). In 9 months 2017, the members of the Management Board and Supervisory Board of all Group entities were paid remuneration and benefits including social security taxes in the amount of EUR 755 thousand (9M 2016: EUR 1,032 thousand) and EUR 111 thousand (9M 2016: EUR 111 thousand), respectively.

Consolidated statement of financial position

Consolidated statement of comprehensive income

 * euro cents
 

Madis Jääger
CEO
Olympic Entertainment Group AS
Tel + 372 667 1250
E-mail madis.jaager@oc.eu
http://www.olympic-casino.com