Quarterly Report • May 30, 2018
Quarterly Report
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ESTORIL-SOL MANAGEMENT REPORT & ACCOUNTS 2018 1Q
Chairman Pedro Canastra de Azevedo Maia
Deputy Chairman Tiago Antunes da Cunha Ferreira de Lemos
Secretary Marta Horta e Costa Leitão Pinto Barbosa
Chairman Stanley Hung Sun Ho
Deputy Chairmen Mário Alberto Neves Assis Ferreira Patrick Wing Ming Huen
Members Pansy Catilina Chiu King Ho Ambrose Shu Fai So Man Hin Choi António José de Melo Vieira Coelho Vasco Esteves Fraga Jorge Armindo de Carvalho Teixeira Calvin Ka Wing Chann Miguel Dias Urbano de Magalhães Queiroz
Pansy Catilina Chiu King Ho Jorge Armindo de Carvalho Teixeira Calvin Ka Wing Chann
Chairman Rui José da Cunha
Deloitte & Associados, SROC, S.A. Represented by Pedro Miguel Argente de Freitas e Matos Gomes
Chairman Manuel Maria Reis Boto
Deputy-Chairmen Vitor Pratas Sevilhano Ribeiro Paulo Ferreira Alves
Alternate Lisete Sofia Pinto Cardoso
Secretary Carlos Alberto Francisco Farinha
Alternate Artur Conde de Magalhães Mateus
Estoril-Sol, S.A. was incorporated on 25 June 1958 and its company object is "the operation of the gambling concession, on an exclusive basis, in the Estoril permanent area, including other related trade and industries".
On 18 March 2002, Estoril-Sol, S.A. modified its legal status to "Holding Company, S.G.P.S.", Public Corporation, thereby no longer directly conducting any business activities, and such business is now to be conducted by various associated undertakings which have been incorporated for this purpose.
The Company held indirectly through subsidiaries interests in the tourism sector, in particular, in gaming activities at casinos. The Company owns the Game Concessions of Estoril (Casino do Estoril and Casino Lisboa) and Póvoa de Varzim. Since July 2016 the Company also began exploring the online gambling activity and sports betting through one of its subsidiaries.
During the first quarter of the year we monitor regularly and in detail the current management of the subsidiaries, giving particular attention and support to streamline processes and control costs.
At 31st March 2018, the share capital of Estoril-Sol, S.G.P.S., S.A. was 59.628.420 Euros, represented by 11.993.684 shares with a nominal unit value of 5 (five).
At the time this report was prepared, Estoril-Sol, S.G.P.S., S.A. held 62.565 treasury shares, with no trading taking place during the financial year.
During the current year, the Company, did not sold or acquired own shares.
The Company's shares are listed on the Lisbon Stock Exchange since February 14, 1986.
The price and trading volume of Estoril-Sol, SGPS, SA securities, on the dates of reporting to the market during the first quarter of 2018 were according table 02.
As at March 31st, 2018 the Company had two reference shareholders, which control 90,46% of the share capital, as shown in infographics 03.
On March 31st, 2018, Estoril-Sol, S.G.P.S., S.A. had the following stakes in the following subsidiaries:
Incorporated on 26 July 2001, headquartered in Estoril, the social object of which is the operation of games of chance in areas where this is permitted by law and, in addition, may also operate in the tourism, hotel, restaurant and entertainment industries, as well as providing consultancy services in those areas of activity. This company operates the Estoril and Lisbon Casinos. Its share capital of EUR 34,000,000 is 100% held by Estoril-Sol, S.G.P.S., S.A..
With a Share Capital of EUR 500.000 is 50% held by Estoril-Sol (III) - Turismo, Animação e Jogo, S.A..
The Company was founded in September 2015 in order to apply for an online gaming license. The license was issue during July 2016 and the Company
| DISCLOSURE | DATE | QTD. | PRICE (EUR) | |||
|---|---|---|---|---|---|---|
| Annual Results for 2017 | 30/04/18 | 2298 | Abertura 12,20 |
Máx. 12,20 |
Mín. 12,20 |
Fecho 12,20 |
Other Shareholders Treasury Shares Finansol, Sociedade de Controlo, SGPS, S.A. Amorim, Entertainment e Gaming International, SGPS, S.A.
immediately started exploring the online gambling activity. During the course of 2017, in August, the company also obtained a license for online sports betting, activity that began on August 6th, 2017.
Within the online gaming activities, which is carried out through Estoril-Sol Digital, Online Gaming Products and Services, S.A., a subsidiary company of Estoril-Sol (III) – Turismo, Animação e Jogo, S.A., a company owned by the issuer (Estoril-Sol, S.G.P.S., S,A,), signed with Vision Gaming Holding Limited, a company based in Malta, an association agreement, through which it holds a minority interest, corresponding to 49.9998% of the share capital of Estoril-Sol Digital, keeping the Estoril-Sol (III) SA most of the capital and votes in that company (Estoril-Sol Digital, Online Gaming Products and Services, S.A.).
Headquartered in Póvoa de Varzim, has the social object, in particular, of operating the gambling concession of Póvoa de Varzim. This company operates the Póvoa de Varzim Casino. It has a share capital of EUR 33.650.000, 100% held by Estoril-Sol, S.G.P.S., S.A..
Online
Estoril
Its share capital of EUR 50,000 is fully paid up by Estoril-Sol, S.G.P.S., S.A.. The Company is now idle, but owns a site located on maritime land in the parish of Ericeira.
With a share capital of EUR 2,429,146, is 100% held by Estoril-Sol, S.G.P.S., S.A.. It owns a plot of land in Monte Estoril, where the former Miramar Hotel stood.
With a share capital of EUR 7,232,570, it is 100% owned by Estoril-Sol, S.G.P.S., S.A.. Its social object is the construction, promotion, management and sale of tourist complexes and real estate.
With a share capital of EUR 10,835,000 is 90% held by Estoril-Sol, S.G.P.S., S.A., with the remaining 10% being held by the company itself.
With a share capital of EUR 1.286.000, is fully paid up by Estoril-Sol, S.G.P.S., S.A..
During the first quarter of 2018 the total gross game revenues of the Estoril Sol Group (territorial and online) amounted to 54 million Euros, with an overall growth of 8,2%. The physical game showed a growth rate of 4% and online gaming revenues grew 58% driven by sports bets non-existent in the first quarter of 2017. Game revenues detailed by casino in the graphics 05.
In the first quarter of 2018 the Group's Consolidated EBITDA increased by 8% and amounted to Euro 10,7 million Euros.
As at 31st March 2018 the Group reported positive consolidated net results of 5,5 million Euros — 06.
In the first quarter of 2018 all casinos, without exception, achieved a positive net results and EBITDA (operational results). In 2017 the Casinos of Estoril and Póvoa still had negative net results.
Despite revenue growth, Online Casino has worsened its performance compared to the previous year due to strong marketing investments related to the operation of sports betting — 07.
The Group's investment remains in line with previous years, although it has grown slightly. In the first quarter of 2018, the Group made investments totaling 0.5 million Euros — see 08.
In a concerted effort to financial stability and less dependence on third parties, the Group has consistently reduced its bank debt, this reduction resulted in a significant decrease in financial costs incurred by the Group. By the end of March 2018 the Group bank debt was 13,1 million Euros — see graphic 09.
(Price in Euros)
08 Capex 09 Financial Debt
In Portugal, the gambling activity in land based casinos is developed by five business groups that exploit, under a public concession, the twelve casinos existing in the national territory. In March 2017 the Casino of Ponta Delgada in the Azores started its activity. To this date there's no information available related to game revenues due to the youth of this operation.
The Estoril-Sol Group, through its subsidiaries, operates three of the four biggest casinos in Portugal, accounting for 63% of net income generated by the activity in Portugal.
Revenues from gambling in Portugal during the first quarter of 2018 amounted to approximately 75,8 million Euros, an increase of 5,6% compared to last year.
In the same period the Group land base game revenues achieved 48,3 million Euros, an increase of 4,3% — 10.
On the 28th June 2015 the online gambling regulation approved by Decree-Law 66/2015 entered into force.
The issue of the first license occurred one year later, in May 2016, it was a sports betting license. The second license issued by the Turismo de Portugal took place in July 2016 and also for sports betting.
In July 2016 the first online casino license (slot machines, roulette and blackjack) was issued. This license was granted to the Estoril-Sol Group on July 25th, 2016, and the Group started
operations on the same day. Since then five more licenses have been issued, totaling to this date six online casino licenses allotted. In August 2017 the Estoril-Sol Group obtained a license to operate online sports betting, and immediately started the operation.
As of March 31st, 2018 there are seven operators to explore twelve online game licenses — 11.
During the first quarter of 2018, online gambling in Portugal generated gross revenues (amount of bets after deducting the premiums paid) in the overall amount of 33,8 million Euros. The sports betting segment accounts for 52% of the market value and generated gross revenues of 17,4 million Euros. Casino Games, including slot machines, roulette and blackjack, represent 40% of the market and generated gross revenues of 13,4 million Euros. Poker generated revenues of 3 million Euros corresponding to 8% of all online bets — 12.
The Estoril-Sol Group on March 31st, 2018 holds two valid licenses, a license to operate online casino games, namely, slot machines, roulette and blackjack, and a second license that allows to operate the sports betting segment.
During the quarter of 2018 Estoril-Sol recorded online gaming revenues of 7,2 million Euros, from which 5,5 million Euros relating to online casino games and 1,7 million Euros relating to online sports betting (see graphs 13).
During the first quarter of 2018, the Group recorded combined gross game revenues, territorial and online, of 54 million Euros, with an overall growth of 8%. Net from gaming taxes, the Group's total game revenues amounted to 26,2 million Euros, an increase of 5,4% over the 24,9 million Euros achieved in the first quarter of the previous year.
The other operating revenues of Estoril-Sol, restaurant and entertainment, increased by 5,8% to 2,3 million Euros. The Group's 4% increase in operating costs reflects the Group's investment in streamlining and increasing the entertainment, leisure and restaurant offer in the casinos, but mainly reflects the strong investment in marketing and advertising carried out by the Group in the first quarter of 2018 related with the online casino operation. This strong commitment and investment during the first quarter of 2018, in line with the investment policy also adopted during the last year, proved to be essential to obtain the good results of this new operation, the online casino.
Estoril-Sol Group improve its operating results in 7,8%, and reached for the first quarter of 2018 a positive EBITDA of 10,7 million Euros.
In a concerted effort to financial stability and less dependence on third parties, the Group has been successively reducing its bank debt. This reduction resulted in a significant decrease in financial costs incurred by the Group Estoril-Sol, a decrease of 46% over the first three months of 2018 compared to same period last year. Estoril-Sol supported almost 0,2 million Euros with loan interests during the first quarter of 2018.
The Consolidated Net Profit in the first quarter of 2018 was positive by 5,5 million Euros compared with earnings of 4,6 million Euros in the previous year. Of these 5,5 million Euros, 4,9 million Euros belong to the shareholders of Estoril-Sol, S.G.P.S., S.A, and the remainder held by minority and non-controlling interests — 14.
10 Game Revenues - Territorial
| Mar 2018 | Mar 2017 | Var. % | |
|---|---|---|---|
| Gaming Revenue | 54 018 764 | 49 896 203 | 8,3% |
| Special Gaming Tax | (27 719 531) | (24 938 950) | a) |
| Effective Tax Rate | 51% | 50% | |
| Game Revenue - Net | 26 299 233 | 24 957 252 | 5,4% |
| Other Revenue (F&B/Entertainment) | 2 305 322 | 2 179 131 | 5,8% |
| Operating Costs | (17 904 085) | (17 209 667) | 4,0% |
| EBITDA | 10 700 470 | 9 926 716 | 7,8% |
| Amortization and Depreciation | (4 893 312) | (4 979 809) | -1,7% |
| Financial Costs | -213 588 | -398 552 | -46% |
| Income Tax (IRC) | - | - | - |
| Consolidated Net Result Revenue | 5 593 570 | 4 548 357 | 23% |
| Equity Holders of the Parent Company | 4 957 842 | 3 526 687 | |
| Non-controlling interests | 635 728 | 1 021 670 | |
| 5 593 570 | 4 548 357 |
During the first quarter of 2013, after a unanimous vote taken at the headquarters of the Portuguese Association of Casinos as well as within the Board of Estoril-Sol, the operating companies from the Group Estoril-Sol, have filed lawsuits against the State in which they seek to be restored the financial balance of Gaming Concessions.
Such a claim is founded, among other reasons, because the State, through its actions and omissions has given rise to changes in circumstances that were the basis for the negotiation of the gaming concessions. Of them highlights the fact that it was assumed for tax basis a continuing and significant increase of gaming revenue throughout the concession period.
Despite not having checked this proposition due to the economic climate and as a result of the State attitude in relation to online gambling and illegal gambling, among others, it continued to require them to pay very high taxes, calculated on revenue that the Concessionaires did not obtain.
Thus, remained no alternative to the Concessionaires that was not to challenge with the competent Administrative and Fiscal Courts the settlements of tax to which they were presented, and for that purpose submit the necessary judicial guarantees.
However by the time of approval of this report, and despite the fact that all tax settlements were contested by the Group, all taxes are without exception, or paid or its payment was legally postponed under Decree-Law 1/2015, and for this reason the Group Estoril-Sol does not have any overdue debt related with game taxes (note 16 and 17 to the Consolidated Accounts).
Between the 31st of March 2018 and the date of this report, no relevant facts occurred that could materially affect the financial position and the future results of Estoril-Sol, S.G.P.S.,S.A. and the other Companies of the Group.
Within the terms of paragraph c) nº1 of article 246 of Portuguese Securities Code, we hereby inform you that to the best of our knowledge:
• The information contained in the interim management report is a faithful statement of the evolution of the business, of the performance and of the position of Estoril-Sol, S.G.P.S., S.A., and the companies includ-ed within the consolidation perimeter, and contains a description of the main risks and uncertainties which they face;
• The information contained in the consolidated financial statements, as well as their annexes, was pro-duced in compliance with the applicable accounting standards and gives a true and fair view of the assets and liabilities, the financial situation and the results of Estoril-Sol, S.G.P.S., S.A. and the companies included in the consolidation perimeter.
Chairman Stanley Hung Sun Ho
Mário Alberto Neves Assis Ferreira Patrick Wing Ming Huen
Pansy Catilina Chiu King Ho Ambrose Shu Fai So Man Hin Choi António José de Melo Vieira Coelho Vasco Esteves Fraga Jorge Armindo de Carvalho Teixeira Calvin Ka Wing Chann Miguel António Dias Urbano de Magalhães Queiroz
Estoril, 30th May, 2018
On 31st March 2018, Estoril-Sol, S.G.P.S., S.A. held 62.565 treasury shares, and as Finansol - Sociedade de Controlo, S.G.P.S., S.A., on 31st March 2017, held 6.930.604 shares of Estoril-Sol, S.G.P.S., S.A., it was a direct holder of 57,79% of the share capital and 58,09% of the voting rights.
The members of the Board of Directors and of the Advisory Board of the Companies which are controlled by or grouped under Estoril-Sol, held 255,698 shares of Estoril-Sol, S.G.P.S., S.A., corresponding to 2,1% of the share capital and voting rights.
Therefore, in overall terms, the direct and indirect stake of Finansol in the capital of Estoril-Sol is 57,79%, and 60,23% to the voting rights.
On 31st March 2018, Estoril-Sol, S.G.P.S., S.A. held 62.565 treasury shares, and, as Amorim – Entertainment e Gaming International, S.G.P.S., S.A. held 3.917.793 shares, this company was a direct holder of 32,67% of the share capital and 32,84% of the voting rights of Estoril-Sol, S.G.P.S., S.A..
Mr. José Américo Amorim Coelho, held 34,915 shares of Estoril-Sol, S.G.P.S., S.A., corresponding to 0,29% of the share capital and voting rights.
Therefore, in overall terms, the direct and indirect stake of Amorim – Entertainment e Gaming International, S.G.P.S., S.A. in the share capital of Estoril-Sol, S.G.P.S., S.A. was, on 31st March 2018, 32,67% and 33,13% of the voting rights.
Amounts in Euros
| Notes | 31-03-2018 | 31-12-2017 | |
|---|---|---|---|
| ASSETS | |||
| NON-CURRENT ASSETS | |||
| Tangible fixed assets: | |||
| Reversible to the State | 36 167 915 | 38 750 376 | |
| Not reversible to the State | 54 147 119 | 54 433 315 | |
| Tax deductions on investments | (14 522 415) | (15 630 596) | |
| 75 792 618 | 77 553 095 | ||
| Intangible assets | 10 | 35 804 833 | 38 465 150 |
| Investment properties | 191 856 | 193 244 | |
| Other non current assets | 33 822 | 30 515 | |
| TOTAL NON-CURRENT ASSETS | 111 823 130 | 116 242 004 | |
| CURRENT ASSETS | |||
| Inventories | 6 922 193 | 6 916 994 | |
| Accounts receivable - trade | 335 807 | 404 291 | |
| Current tax assets | 29 100 | 29 100 | |
| Other current assets | 1 881 545 | 1 451 600 | |
| Cash and cash equivalents | 11 | 29 958 000 | 24 998 841 |
| TOTAL CURRENT ASSETS | 39 126 644 | 33 800 826 | |
| TOTAL ASSETS | 150 949 774 | 150 042 830 | |
| EQUITY AND LIABILITIES EQUITY |
|||
| Capital | 59 968 420 | 59 968 420 | |
| Treasury shares | (708 306) | (708 306) | |
| Share issue premiuns | 960 009 | 960 009 | |
| Legal Reserves | 7 154 428 | 7 154 428 | |
| Other Reserves and Retained earnings | 12 | 15 884 052 | 5 209 045 |
| Consolidated net profit | 17 | 4 957 842 | 10 675 008 |
| Equity attributable to the holders of the Parent Company | 88 216 446 | 83 258 604 | |
| Equity attributable to non-controlling interests | 13 | 3 904 581 | 3 268 850 |
| TOTAL EQUITY | 92 121 027 | 86 527 454 | |
| LIABILITIES | |||
| Non-current Liabilities | |||
| Other non-current liabilities | 15 | 3 734 424 | 3 734 424 |
| Provisions | 8 352 813 | 8 364 036 | |
| Total Non-current Liabilities | 12 087 237 | 12 098 460 | |
| Current Liabilities | |||
| Financial debt | 14 | 13 151 820 | 6 009 432 |
| Current tax liabilities | 114 496 | 114 496 | |
| Other current liabilities | 15 | 33 475 194 | 45 292 988 |
| Total Current Liabilities | 46 741 510 | 51 416 916 | |
| TOTAL LIABILITIES | 58 828 747 | 63 515 376 | |
| TOTAL EQUITY AND LIABILITIES | 150 949 774 | 150 042 830 |
The notes form an integral part of these financial statements.
Amounts in Euros
| Notes | 31-03-2018 | 31-03-2017 | |
|---|---|---|---|
| REVENUE | |||
| Gaming revenues | 6 | 54 018 764 | 49 896 203 |
| Gaming taxes | 6 | (27 719 531) | (24 938 950) |
| 26 299 233 | 24 957 253 | ||
| Other operating revenue | 6 | 2 305 322 | 2 179 131 |
| 28 604 555 | 27 136 384 | ||
| OPERATING EXPENSES | |||
| Cost of sales | (696 165) | (704 046) | |
| Supplies and external services | 7 | (8 275 368) | (7 987 523) |
| Wages and salaries | 8 | (8 296 434) | (7 851 020) |
| Depreciation and amortization | (4 893 312) | (4 979 809) | |
| Impairments - accounts receivable ((increases)/reversals) | 300 | - | |
| Impairment of non-depreciable/amortizable investments | - | (45) | |
| Other operating expenses | (636 417) | (667 033) | |
| Total operating expenses | (22 797 397) | (22 189 476) | |
| INCOME BEFORE FINANCIAL RESULTS AND TAXES | 5 807 158 | 4 946 908 | |
| FINANCIAL (LOSSES) AND GAINS | |||
| Financial losses | 9 | (226 360) | (410 203) |
| Financial gains | 9 | 12 772 | 11 651 |
| (213 588) | (398 552) | ||
| Income before taxes | 5 593 570 | 4 548 357 | |
| Income taxes | - | - | |
| CONSOLIDATED NET INCOME | 17 | 5 593 570 | 4 548 357 |
| Attributable to: | |||
| Equity holders of the Parent Company | 4 957 842 | 3 526 687 | |
| Non-controlling interests | 13 | 635 728 | 1 021 670 |
| 5 593 570 | 4 548 357 | ||
| Net result per share |
Amounts in Euros
| Share Capital |
Treasury Shares |
Issue Premiums |
Legal Reserve |
Other Reserves and Retained Earnings |
Consolidated Net Result of the Year |
Total | Non Controlling Interests (Note 13) |
Total Equity |
|
|---|---|---|---|---|---|---|---|---|---|
| Balance at 1st January 2017 | 59 968 420 | (708 306) | 960 009 | 6 821 678 | 2 987 819 | 6 554 939 | 76 584 559 | 1 148 165 | 77 732 724 |
| Application of the consolidated net profit of the year ended 31st December 2016 |
- | - | - | - | 6 554 939 | (6 554 939) | - | - | - |
| Consolidated Other Comprehensive Income (OCI) of the period ended 31st March 2017 |
- | - | - | - | - | 3 526 687 | 3 526 687 | 1 021 670 | 4 548 357 |
| Balance at 31st March 2017 | 59 968 420 | (708 306) | 960 009 | 6 821 678 | 9 542 758 | 3 526 687 | 80 111 246 | 2 169 835 | 82 281 081 |
| Balance at 1st January 2018 | 59 968 420 | (708 306) | 960 009 | 7 154 428 | 5 209 045 | 10 675 008 | 83 258 604 | 3 268 850 | 86 527 454 |
| Application of the consolidated net profit of the year ended 31st December 2017 |
- | - | - | - | 10 675 008 (10 675 008) | - | - | - | |
| Consolidated Other Comprehensive Income (OCI) of the period ended 31st March 2018 |
- | - | - | - | - | 4 957 842 | 4 957 842 | 635 728 | 5 593 570 |
| Balance at 31st March 2018 | 59 968 420 | (708 306) | 960 009 | 7 154 428 | 15 884 052 | 4 957 842 | 88 216 446 | 3 904 578 | 92 121 024 |
The notes form an integral part of these financial statements.
Amounts in Euros
| Notes | 31-03-2018 | 31-03-2017 | |
|---|---|---|---|
| OPERATING ACTIVITIES | |||
| Receipts from clients | 56 000 821 | 51 172 781 | |
| Payments to suppliers | (10 534 032) | (10 116 960) | |
| Payments to staff | (7 280 511) | (6 875 384) | |
| Cash flow generated by operations | 38 186 277 | 34 180 438 | |
| Payment of income tax | (3 577) | (2 904) | |
| Payment of Special Gaming tax | (37 456 794) | (33 810 706) | |
| Other payments relating to the operating activity | (1 072 790) | (1 761 399) | |
| Cash flow from operating activities (1) | (346 884) | (1 394 571) | |
| INVESTING ACTIVITIES | |||
| Receipts from: | |||
| Interest and similar income | 8 666 | 11 439 | |
| 8 666 | 11 439 | ||
| Payments in respect of: | |||
| Tangible fixed assets | (928 670) | (1 312 916) | |
| (928 670) | (1 312 916) | ||
| Cash flow from investment activities (2) | (920 004) | (1 301 477) | |
| FINANCING ACTIVITIES | |||
| Receipts from: | |||
| Bank loans obtained | 174 592 915 | 91 817 784 | |
| 174 592 915 | 91 817 784 | ||
| Payments in respect of: | |||
| Bank loans repaid | (167 418 715) | (86 835 074) | |
| Loans from related parties | (700 000) | - | |
| Interest and similar costs | (248 153) | (441 615) | |
| (168 366 868) | (87 276 689) | ||
| Cash flow from financing activities (3) | 6 226 047 | 4 541 095 | |
| Variation in cash and cash equivalents (4)=(1)+(2)+(3) | 4 959 159 | 1 845 047 | |
| Cash and cash equivalents at the start of the period | 11 | 24 998 841 | 13 573 389 |
| Cash and cash equivalents at the end of the period | 11 | 29 958 000 | 15 418 436 |
The notes form an integral part of these financial statements.
The Estoril-Sol Group, through its subsidiary and associated companies (Note 4), conducts business in gaming, the restaurant sector, entertainment and also real estate.
Estoril-Sol, S.G.P.S, S.A. is the Holding Company of the Estoril Sol Group ("Group") and the shares representing its share capital are admitted for trading on a regulated market - the Euronext – as such, on 1 January 2005 it was obliged to prepare Consolidated Accounts pursuant to article 3 of Regulation (EC) no. 1606/2002, of the European Parliament and of the Council, of 19 July, following the Portuguese government's publication of Decree Law no. 35/2005, article 11.
The attached financial statements were prepared on the assumption of the continuity of operations, based on the books and accounting records of the companies included in the consolidation (Note 4), adjusted to comply with the provisions of the IAS 34 as adopted in the European Union and should be read together with the consolidated financial statements for the year ended 31st December 2017. The interim financial information now disclose was not subjected to an external audit or limited review.
During the period ended on 31st March 2018, there were no changes in accounting policies in relation to those used in the preparation and presentation of the financial statements of the year ended on 31st December 2017, nor were any material errors recognised relating to previous periods.
The companies included in the consolidation, their registered offices, the method of consolidation adopted and the proportion of the capital effectively held on 31st March 2018 and 31st December 2017 are the following:
| Method of | Effective percentage of the capital held | ||||
|---|---|---|---|---|---|
| Name | Head Office | Consolidation | Mar 2018 | Dec 2017 | |
| Estoril-Sol, S.G.P.S., S.A. | Estoril | Integral | Mãe | Mãe | |
| Estoril-Sol (III) - Turismo, Animação e Jogo, S.A. | Estoril | Integral | 100 | 100 | |
| Varzim Sol - Turismo, Jogo e Animação, S.A. | Póvoa de Varzim | Integral | 100 | 100 | |
| Estoril-Sol V - Investimentos Imobiliários, S.A. | Estoril | Integral | 100 | 100 | |
| DTH - Desenvolvimento Turistico e Hoteleiro, S.A. | Estoril | Integral | 100 | 100 | |
| Estoril-Sol Imobiliária, S.A. | Estoril | Integral | 100 | 100 | |
| Estoril-Sol - Investimentos Hoteleiros, S.A. | Estoril | Integral | 100 | 100 | |
| Estoril-Sol e Mar - Investimentos Imobiliários, S.A. | Estoril | Integral | 100 | 100 | |
| Estoril-Sol Digital, Online Gaming Products and Services, S.A. (a) | Estoril | Integral | 50 | 50 |
Within the online gaming activities, which is carried out through Estoril Sol Digital, Online Gaming Products and Services, S.A, a subsidiary company of Estoril Sol (III) – Turismo, Animação e Jogo, S.A., a company owned by the issuer (Estoril-Sol, SGPS, S,A,), signed with Vision Gaming Holding Limited, a company based in Malta, an association agreement, through which it holds a minority interest, corresponding to 49.9998% of the share capital of Estoril Sol Digital, keeping the Estoril-Sol (III) SA most of the capital and votes in that company (Estoril-Sol Digital, Online Gaming Products and Services, S.A.).
The segments reportable by the Group are based on the identification of segments in line with the financial information that is reported internally to the Board of Directors and which supports the Board in its evaluation of the performance of the businesses and in taking decisions with regard to the allocation of the resources to be used. The segments identified by the Group for reporting by segments, are therefore consistent with the way in which the Board of Directors analyses its business, corresponding to:
| On 31st March 2018 and 2017, the information by business segment, is as follows: | |||
|---|---|---|---|
| -- | ---------------------------------------------------------------------------------- | -- | -- |
| March 2018 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Estoril Game Concession | Póvoa Game Concession |
License for Online Gambling |
||||||
| Estoril Casino |
Lisboa Casino |
Sub-Total | Póvoa Casino |
Casino Online |
Other | Total | ||
| Net assets | 29 844 569 | 74 324 977 | 104 169 547 | 25 333 326 | 13 907 107 | 7 539 794 | 150 949 774 | |
| Net liabilities | 7 761 414 | 14 697 336 | 22 458 750 | 26 818 382 | 5 097 913 | 4 453 702 | 58 828 747 | |
| Result of the segment | 131 870 | 4 327 717 | 4 459 586 | 61 919 | 1 271 466 | (199 398) | 5 593 573 | |
| Investment assets: | ||||||||
| Tangible fixed | 243 614 | 229 934 | 473 548 | 4 443 | 488 | - | 478 479 | |
| Intangible | - | - | - | - | - | - | - |
| March 2017 | |||||||
|---|---|---|---|---|---|---|---|
| Estoril Game Concession | Póvoa Game Concession |
License for Online Gambling |
|||||
| Rubrica | Estoril Casino |
Lisboa Casino |
Sub-Total | Póvoa Casino |
Casino Online |
Other | Total |
| Net assets | 33 054 865 | 77 251 150 | 110 306 015 | 38 345 863 | 5 505 918 | 4 341 273 | 158 499 069 |
| Net liabilities | 18 403 309 | 24 724 978 | 43 128 287 | 26 873 284 | 1 166 237 | 5 050 184 | 76 217 992 |
| Result of the segment | (392 119) | 4 097 082 | 3 704 963 | (842 521) | 2 043 341 | (357 426) | 4 548 357 |
| Investment assets: | |||||||
| Tangible fixed | 243 107 | - | 243 107 | 783 | - | - | 243 890 |
| Intangible | - | - | - | - | - | - | - |
| March 2018 | ||||||
|---|---|---|---|---|---|---|
| Natureza | Estoril Game Concession | Póvoa Game Concession |
License for Online Gambling |
Total | ||
| Estoril Casino | Lisboa Casino | Sub-Total | Póvoa Casino | Casino Online |
||
| Gaming revenues: | ||||||
| Slot Machines | 11 843 552 | 16 887 532 | 28 731 084 | 9 523 551 | 4 649 043 | 42 903 678 |
| Table based gaming | 3 906 537 | 4 197 611 | 8 104 148 | 2 038 257 | 882 810 | 11 025 215 |
| Sports betting | - | - | - | - | 1 730 408 | 1 730 408 |
| Bonuses and other fair value adjustments | (70 764) | (40 171) | (110 935) | 27 374 | (1 556 976) | (1 640 537) |
| 15 679 325 | 21 044 972 | 36 724 297 | 11 589 182 | 5 705 285 | 54 018 764 | |
| Gaming taxes: | ||||||
| Special Gaming Tax (current) | (7 875 045) | (10 542 572) | (18 417 617) | (5 780 904) | (2 491 924) | (26 690 445) |
| Annual Gaming Tax (difference to minimum grant) | - | - | - | (1 029 086) | - | (1 029 086) |
| (7 875 045) | (10 542 572) | (18 417 617) | (6 809 990) | (2 491 924) | (27 719 531) | |
| Other operating revenues: | ||||||
| F&B and Entertainment | 1 004 968 | 164 296 | 1 169 263 | 262 147 | - | 1 431 410 |
| Tax deductions - Entertainment | 285 001 | 210 851 | 495 852 | 294 304 | - | 790 156 |
| Supplementary income | 35 559 | 8 315 | 43 874 | 6 708 | - | 50 582 |
| Other | 801 | 32 372 | 33 173 | - | - | 33 173 |
| 1 326 329 | 415 834 | 1 742 163 | 563 159 | - | 2 305 322 | |
| 9 130 610 | 10 918 234 | 20 048 843 | 5 342 351 | 3 213 361 | 28 604 555 |
| Março 2017 | ||||||
|---|---|---|---|---|---|---|
| Natureza | Estoril Game Concession | Sub-Total | Póvoa Game Concession |
License for Online Gambling |
Total | |
| Estoril Casino | Lisboa Casino | Póvoa Casino | Casino Online |
|||
| Gaming revenues: | ||||||
| Slot Machines | 11 631 293 | 16 396 002 | 28 027 295 | 8 905 693 | 3 052 619 | 39 985 607 |
| Table based gaming | 3 211 546 | 4 303 063 | 7 514 609 | 1 941 371 | 1 036 494 | 10 492 474 |
| Bonuses and other fair value adjustments | (71 335) | (50 632) | (121 967) | (23 497) | (436 414) | (581 878) |
| 14 771 504 | 20 648 433 | 35 419 937 | 10 823 567 | 3 652 699 | 49 896 203 | |
| Gaming taxes: | ||||||
| Special Gaming Tax (current) | (7 421 420) | (10 349 533) | (17 770 953) | (5 423 532) | (614 247) | (23 808 731) |
| Annual Gaming Tax (difference to minimum grant) | - | - | - | (1 130 218) | - | (1 130 218) |
| (7 421 420) | (10 349 533) | (17 770 953) | (6 553 750) | (614 247) | (24 938 950) | |
| Other operating revenues: | ||||||
| F&B and Entertainment | 965 170 | 160 479 | 1 125 649 | 275 360 | - | 1 401 009 |
| Tax deductions - Entertainment | 275 928 | 206 991 | 482 919 | 184 493 | - | 667 412 |
| Supplementary income | 67 007 | 9 215 | 76 222 | 33 874 | - | 110 097 |
| Other | 512 | - | 511 | 102 | - | 613 |
| 1 308 617 | 376 683 | 1 685 301 | 493 829 | - | 2 179 131 | |
| 8 658 702 | 10 675 584 | 19 334 285 | 4 763 646 | 3 038 452 | 27 136 384 |
Income from the segments comes from transactions with external customers. There are no transactions between segments. The accounting policies of each segment are the same as those of the Group.
In the periods ended on 31st March 2018 and 2017, external supplies and services were as follows:
| Mar 2018 | Mar 2017 | |
|---|---|---|
| Advertising | 1 143 617 | 1 074 080 |
| Gifts to customers | 1 095 009 | 1 060 528 |
| Subcontracts | 962 652 | 1 049 298 |
| Fees | 673 959 | 317 188 |
| Energy and other fluids | 639 646 | 695 640 |
| Cleaning and laundry | 620 446 | 612 086 |
| Conservation and repairs | 557 361 | 624 791 |
| Specialized work | 522 405 | 530 152 |
| Royalties | 488 300 | 463 204 |
| Financial services (comissions) | 427 750 | 276 360 |
| Surveillance and security | 408 990 | 412 975 |
| Rents | 339 639 | 280 209 |
| Insurance | 102 694 | 269 334 |
| Communication | 81 985 | 130 587 |
| Travel and hotels | 71 308 | 49 840 |
| Other | 139 607 | 141 251 |
| 8 275 368 | 7 987 523 |
In the periods ended on 31st March 2018 and 2017, staff costs were as follows:
| Mar 2018 | Mar 2017 | |
|---|---|---|
| Remuneration of governing bodies | 743 372 | 748 417 |
| Remuneration of staff | 5 665 143 | 5 336 793 |
| Indemnities | 2 375 | 286 |
| Charges on remuneration | 1 464 757 | 1 387 220 |
| Insurance | 56 292 | 50 067 |
| Social charges | 309 114 | 284 008 |
| Other | 55 383 | 44 229 |
| 8 296 434 | 7 851 020 |
Financial costs and income for the periods ended on 31st March 2018 and 2017 is broken down as follows:
| Mar 2018 | Mar 2017 | |
|---|---|---|
| FINANCIAL COSTS | ||
| Interest borne: | ||
| Financing from banks (a) | (185 839) | (365 458) |
| Finance and operating leasing | (40 521) | (44 746) |
| (226 360) | (410 204) | |
| FINANCIAL INCOME | ||
| Interests from bank deposits | 4 106 | - |
| Exchange gains | 2 892 | 5 624 |
| Other | 5 774 | 6 027 |
| 12 772 | 11 651 | |
| NET FINANCIAL COSTS | (213 588) | (398 553) |
The breakdown of intangible assets on 31st March 2018 and 31st December 2017 is as follows:
| Mar 2018 | |||
|---|---|---|---|
| Gaming Concession | Gross Assets | Accumulated Amortization |
Net Assets |
| Estoril Gaming Concession | |||
| Casino Estoril | 153 576 455 | (137 272 940) | 16 303 515 |
| Casino Lisboa | 30 000 000 | (24 212 807) | 5 787 193 |
| Póvoa Gaming Concession - Casino da Póvoa | 77 034 109 | (63 348 713) | 13 685 396 |
| 260 610 564 | (224 834 460) | 35 776 104 | |
| Intangible assets - Online gaming license | 38 000 | (20 200) | 17 800 |
| Intangible assets - Online sports betting | 14 000 | (3 071) | 10 929 |
| 260 662 564 | (224 857 731) | 35 804 833 |
| Dec 2017 | |||
|---|---|---|---|
| Gaming Concession | Gross Assets | Accumulated Amortization |
Net Assets |
| Estoril Gaming Concession | |||
| Casino Estoril | 153 576 455 | (135 726 693) | 17 849 762 |
| Casino Lisboa | 30 000 000 | (23 698 521) | 6 301 479 |
| Póvoa Gaming Concession - Casino da Póvoa | 77 034 109 | (62 753 095) | 14 281 014 |
| 260 610 564 | (222 178 309) | 38 432 255 | |
| Intangible assets - Online gaming license | 38 000 | (17 200) | 20 800 |
| Intangible assets - Online sports betting | 14 000 | (1 905) | 12 095 |
| 260 662 564 | (222 197 414) | 38 465 150 |
On 31st March 2018 and 31st December 2017, this caption was broken down as follows:
| Mar 2018 | Dec 2017 | |
|---|---|---|
| CASH | 8 110 750 | 9 544 457 |
| Bank Deposits: | ||
| Immediately avaiable bank deposits | 13 847 250 | 8 454 383 |
| Long term deposits | 8 000 000 | 7 000 000 |
| CASH AND CASH EQUIVALENTS | 29 958 000 | 24 998 841 |
The balance of this caption at 31st March 2018, corresponds to the value of the caption as at 31st December 2017 plus the net profit attributable to the parent company for the year 2017, amounting to 10,675,008 Euros, and as of this date, March 31st, 2018, had not yet been applied in accordance with the Proposal for the Application of Profits for the year 2017.
On 31st March 2018 and 31st December 2017, this caption was broken down as follows:
| Mar 2018 | ||||
|---|---|---|---|---|
| Opening Balance | Profit/(Loss) of the period |
Dividends | Closing Balance | |
| Estoril-Sol Digital | 3 268 850 | 635 731 | - | 3 904 581 |
| Dec 2017 | ||||
|---|---|---|---|---|
| Opening Balance | Profit/(Loss) of the period |
Dividends | Closing Balance | |
| Estoril-Sol Digital | 1 148 165 | 3 213 181 | (1 092 496) | 3 268 850 |
On 31st March 2018 and 31st December 2017, this caption was broken down as follows:
| Mar 2018 | Dez 2017 | |||
|---|---|---|---|---|
| Nature of the financing | Nominal Value | Balance Sheet Value | Nominal Value | Balance Sheet Value |
| Current financing: | ||||
| Bank loans | 5 000 000 | 5 000 000 | - | - |
| Commercial paper | 4 000 000 | 4 123 520 | 2 500 000 | 2 645 332 |
| Current accounts | 4 028 300 | 4 028 300 | 3 364 100 | 3 364 100 |
| 13 028 300 | 13 151 820 | 5 864 100 | 6 009 432 | |
| 13 028 300 | 13 151 820 | 5 864 100 | 6 009 432 |
The average interest rates for financing, borne by the Group, including commissions and other charges, come within an interval of between 2% and 4,1%.
Some of the financing operations, mainly bank loans, include commitments to maintain certain financial ratios based on contractually negotiated limits (financial covenants).
On the 31st March 2018 and 31st December 2017, these ratios were according the contractually negotiated limits.
Depending on the operating funds that are freed up, we feel the financial risk to which the associated undertakings are exposed is minimal, and the same understanding has prevailed in the examination carried out by financial institutions, as shown by the fact that assets guarantees are dispensed with for operations under contract.
The amount included in the column "Nominal value" corresponds to the contracted value that is still owing. The column "Balance sheet value" is added to the nominal value of financial charges already incurred but still not due, less interest and or commissions paid in advance.
On 31st March 2018 and 31st December 2017, this caption was broken down as follows:
| Mar 2018 | Dec 2017 | |
|---|---|---|
| Other accounts payable - non-current | ||
| Annual payment - Difference to minimum grant | ||
| Installments payment schedule - approved for 2014 (a) | 3 734 424 | 3 734 424 |
| 3 734 424 | 3 734 424 | |
| Other accounts payable - current | ||
| Current suppliers | 5 990 752 | 6 999 707 |
| Suppliers of investments | 161 129 | 617 715 |
| State and Public Sector | ||
| Annual gaming payment | 4 157 895 | 14 076 910 |
| Annual payment - Difference to minumum grant | ||
| Related to 2018 | 1 029 088 | 4 004 696 |
| Installments payment schedule - approved for 2015 (a) | 576 214 | 576 214 |
| Installments payment schedule - approved for 2017 (a) | 1 773 816 | - |
| Special Gaming Tax (to be paid next month) | 7 213 988 | 6 892 798 |
| Social Security contribuitons | 676 509 | 639 401 |
| Other in favour of the State | 900 748 | 776 983 |
| Clients advance payments (b) | 1 630 564 | 1 048 080 |
| Charges with holidays payable | 5 261 005 | 5 088 294 |
| Responsabilities for accumulated gaming prizes (c) | 1 974 459 | 1 965 104 |
| Other | 2 129 027 | 2 607 086 |
| 33 475 194 | 45 292 988 |
(a) These amounts are defined in payment plans approved by the Regulation and Inspection Service of Turismo de Portugal (SRIJ), which were being complied with, as follows:
• Instalments payment schedule - approved for 2014, that will be paid in three equal annual instalments of 1.244.808 Euros, on December 31st, 2019, 2020 and 2021.
(b) Clients advance payments:
The value of "Clients advance payments" relate entirely to the online casino and refer to the balance of the in-ternet website of the online casino, available for playing or withdraw at 31st March 2018.
(c) This amount is related with liabilities for accumulated gaming prizes. These liabilities are revised on a monthly basis, according to the accumulated prizes announced in the diverse gaming rooms of the Casinos run by the Group .
In the normal course of its business, the Group is involved in several legal proceedings. In result of their nature and provisions and according to the opinion of legal advisors, the expectation is that, from the respective outcome, there will be no material effects that are not yet recognized in the financial statements as of December 31, 2017 and 2016.
The most relevant processes are as follows:
The Group carried out a collective dismissal in 2010 and 2013 in the Casinos of Lisbon, Estoril and Póvoa de Varzim in the terms established in the Law, which included 133 employees. Some of these employees brought up an action to the Court for annulment of the dismissal and reinstatement within the Group. The Group and the legal counsel responsible for the proceeding consider that there is a high probability to obtain a favourable outcome and, in result, the provision recorded corresponds only to the legal obligations the Group would have incurred with be paid ex-employees as compensation. The total amount claimed by these former employees amounts to approximately 3,492,000 Euros and at 31 December 2017 and 2016 the Group's financial statements present provisions to cover only the minimum required by law, in the amounts of, approximately 1,766,000 Euros and 1,817,000 Euros, respectively.
In 2011 Gastronomic Evolution Gestão de Restaurantes, Lda., a former concessionaire of three restaurants in Casino de Lisboa, filed a lawsuit against the Group requiring compensation for loss of customers in relation to expectations that would have been previously generated. The total amount claimed amounts to 906,630 Euros, which is provisioned in the financial statements as of March 31st, 2018 and December 31st, 2017.
In January 2013, the Group, together with other gambling concessionaires with gambling in Portugal, filed a lawsuit against the Portuguese State in order to restore the economic and financial rebalancing of the concession. This process includes the challenges of monthly special income taxes and the annual liquidations of 2012 to 2013, and the liquidations of the annual counterparts from 2014 to 2016, all settled in accordance with Decree-Law - nº 275/2001, so that, in the opinion of the legal and tax advisors of the Group, in the case of favourable decision on the referred objections, the liquidations will be refunded plus interest. In September 2016, the Administrative and Fiscal Court of Sintra ruled in favour of the Group on the unlaw-fulness of the clearance of the income tax payment of October 2013 on automatic machines and charged the Group with its share of responsibility for the value of court expenses, which for the actions involved in this proceeding were estimated as of approximately, 2,501,000 Euros. The Board of Directors, supported by the opinion of its legal and tax advisors, recognized the corresponding liability, considering the complaint presented on the amount of these court expenses, in the amount of 1,250,000 Euros.
On 31st March 2018 and 31st December 2017 the guarantees provided by the Group were as follows:
| Mar 2018 | Dec 2017 | |
|---|---|---|
| Obligations related with the Special Gaming Tax | 15 811 156 | 21 774 166 |
| Tax lawsuits in hand / litigation | 7 414 888 | 7 414 888 |
| Current suppliers | 39 250 | 39 250 |
| 23 265 294 | 29 228 304 |
The consolidated result per basic share of the years ended on 31st March 2018 and 2017 was determined as follows:
| Rubrica | Mar 2018 | Mar 2017 |
|---|---|---|
| Results: | ||
| Net profit of the Equity holders of the Parent Company | 4 957 842 | 3 526 687 |
| Number of shares: | ||
| Average weighted number of shares in circulation (Note 24) | 11 931 119 | 11 931 119 |
| Result per basic share, basic and diluted | 0,42 | 0,30 |
Due to the fact that there are no situations that cause dilution, the net result per diluted share is the same as the net result per basic share.
ESTORIL-SOL, S.G.P.S., S.A.
Capital social integralmente realizado 59.968.420 Euros Sociedade Anónima com sede na Av. Dr. Stanley Ho, Edifício do Casino Estoril, 2765-190 Estoril - Cascais
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