Y.Z. QUEENCO LTD. 
By
29 May 2014
Queenco Leisure International Ltd.
(The "Company" or "QLI", and together with its subsidiaries, associated
companies and joint ventures, the "Group"),
Financial Results for the 3 months ended 31 March 2014
Queenco Leisure International Ltd., the emerging markets developer and operator
of casinos and entertainment centers, is pleased to report its financial
results for the 3 months ended 31 March 2014.
Operating and Business Highlights
* The Group's activities are adversely affected by the global economic crisis
in general and the economic crisis in Greece in particular, and by various
disagreements with other shareholders of its subsidiaries and associated
companies (as further detailed in our annual report for the year ended
December 31, 2013). As a result, the Company was not able to meet its
original repayment schedules of loans and credits received from (Y.Z.)
Queenco Ltd. (the Company's parent corporation, "Y.Z.") and from a previous
shareholder in one of the Company's subsidiaries. So far, the Company has
succeeded in reaching understandings with Y.Z and the abovementioned
previous shareholder regarding a rescheduling of the repayment schedules
such that they will coincide with the Company's payment abilities. As of 31
March 2014, the Company's outstanding obligations to the previous
shareholder and Y.Z. amounted to €0.6 million and €2.6 million,
respectively. Company's management is of the opinion that the Company will
succeed in the future, if needed, in rescheduling the repayment schedules
of loans from both Y.Z. and the previous shareholder. However, the current
payment schedule of the loans from Y.Z. is in line with the repayment
schedule of Y.Z. of debentures issued by it. Accordingly, the ability of
the Company to re-schedule the payment terms of the loans from Y.Z. is
dependent on the ability of Y.Z. to obtain other alternative financing
sources to repay its debentures obligations. The Group is continuing in the
implementation of its cost savings plans and is in the process of expanding
their scope, mainly in Rhodes, due to the decrease in revenues caused by
the economic crisis; and is seeking to increase visitors' arrival to the
Island through a newly formed subsidiary which engages in the marketing and
operation of flights from Israel to Rhodes and in the management of a
customers' club. The Group is also in a process of realization of excess
assets. The Company's ability to meet all its obligations in the
foreseeable future is highly dependent on the Company's ability to
successfully execute such plans. The aforesaid raise substantial doubt
about the Company's ability to continue as a going concern. For a more
detailed description of our financial condition, see Note 1.2 to the
attached financial statements.
* In May 2014, the Company reported that a Greek court approved the petition
filed by the joint venture that operates the Group's casino in Loutraki
(the "JV") to allow a settlement with its creditors. The court has
previously granted the JV a temporary stay of proceedings against it (see
our October 2013 reports in this respect). To the Company's knowledge, the
settlement relates to the debt existing on the date of filing the petition
(August 2013), and provides that most of the debt will be paid over a
period of approximately 7 years, without interest or penalty. To the
Company's knowledge, the JV has incurred further substantial debts
following the filing of the petition.
* For information concerning the actions taken by the Greek Gamming Committee
for the Supervision and Audit of Games against Casino Loutraki due to its
failure to pay amounts owed to the authorities, see Note 1.3 to the
financial statements attached hereto.
* In late April 2014, the board of directors of PBS, has authorized Mr. Yigal
Zilkha, the Company's Chairman (as the Company's representative), and a
representative of the Club Hotel group, to negotiate with the minority
shareholder of CHL (the "Investor") an investment in CHL by the Investor.
Accordingly, the parties are currently negotiating the terms of such
transaction, which is expected to result in a substantial dilution of the
Company's holdings in CHL and the transfer of control in CHL to the
investor. As part of PBS's board resolution noted above, it was resolved
that if the above investment is consummated, PBS and the corporations
jointly held by the Company and the Club Hotel group shall act to
distribute €2.7 million from PBS to each of the Company and Club Hotel.
As of the date hereof, there is an uncertainty concerning the terms of the
contemplated transaction with the Investor as well as an uncertainty whether a
transaction with the Investor shall materialize at all.
* As previously reported, on 2 October 2013 the Company entered into an
agreement with a third party for the sale of QLI's operation in Prague.
Consequently, the Prague operations are presented in the financial
statements as discontinued, for all periods presented.
* The Group's strategy to diverse revenue mix is progressing:
+ Queenco Casino in Sihanoukville, Cambodia soft launched during 2012,
giving us a strong platform for the future.
+ Exploring online gaming in areas where the Group already operates
continues to progress well.
+ Developments in future South East Asia projects form part of our long
term strategy.
Financial Highlights for the 3 months ended 31 March 2014 (as compared to the 3
months ended 31 March 2013)
* Gross revenues were €3.9 million (2013: €3.8 million)
* Net Revenues were €2.7 million (2013: €2.4 million)
* EBITDA was negative €3.6 million (2013: negative €2.7 million)
* Loss for the year was €3.6 million (2013: Loss of €4.2 million)
* Cash and cash equivalents were €1.2 million as of 31 March 2014
Yigal Zilkha, Chairman of QLI, commented on the Company's status:
"We have witnessed some progress in Greece, which in the long term will
hopefully allow Greece to turn a corner, but uncertainty remains as to the
manner and timeframe of Greece's recovery. This situation adversely affects our
Greece operations
"Along with the implementation of our cost-saving plans and increased marketing
efforts in Rhodes, we have shifted our focus to South East Asia, although we
require additional capital in order to truly develop our current project in
Sihanoukville, Cambodia. The Company is now considering various options to
raise such capital".
Chief Executive's Review
Introduction
The Group decided to strategically move away from Europe towards South East
Asia, in order to decrease the losses we had previously incurred. Management
believes that its recent marketing efforts concerning Casino Rhodes have
already paid off and will continue to improve the casino's future prospects.
Summary of financial performance
Results for the 3 months ended 31 March 2014 (as compared to the 3 months ended
31 March 2013)
Gross revenues were €3.9 million (2013: €3.8 million), an increase of 2.6%
whilst net revenues increase by 13% to €2.7 million (2013: €2.4 million), an
increase of €0.3 million, which is mainly due to the new operations of flights
to Casino Rodos. Revenues continue to be suppressed by the prolonged economic
crisis in Greece where the Group generates 95.7% of its net revenue from Casino
Rodos. The Group remains a negative EBITDA at €3.6 million (2013: negative €2.7
million). The Company's net loss during the period amounts to €3.6 million
(2013: loss €4.2 million).
Cash and cash equivalents amounted to €1.2 million as of March 31, 2014. The
Company's management is of the opinion that the Company has good chances of
executing a major portion of its plans in a timely manner. Accordingly the
Company's management is of the opinion that it's existing cash and the expected
inflow of cash through the successful execution of its plans, will enable the
Company to meet the needed cash levels required for the Group's operations and
the payment of its obligations when due.
Operational Review
For detailed results by project for the three months ended 31 March 2014 and
2013 see Note 4 of the attached financial statement: segment information.
Casino Rodos
Results for the 3 months ended 31 March 2014 (as compared to the 3 months ended
31 March 2013)
As would be expected, revenues at Casino Rodos, the only casino located on the
holiday island of Rhodes, continue to be impacted by the economic conditions in
Greece and the uncertainty in the Eurozone. Net gaming revenues amounted to €
2.6 million (2013: €2.2 million). The number of visitors have increased while
the win per visit has decreased. The main reason for the increase in net gaming
revenues was the new operations of flights to Rodos.
Queenco Casino, Sihanoukville
The project in Cambodia has suffered significant losses amounting for the 3
months ended 31 March 2014, to € 0.6 million. Such losses and negative cash
flow were financed up to date by the Company. However, due to the financial
condition of the Company (see note 1.2 to the attached financial statements)
there is uncertainty as to the ability of the Company to continue to do so, if
needed.
Outlook
The sale of our Prague operations in late 2013 and our activities to sell our
assets in Bulgaria are in line with our current strategy to move away from
Europe and to continue to explore opportunities in South East Asia and online
gaming opportunities.
In addition to the development of the current project in Sihanoukville, the
Company would like to develop a new tourist project on a 9 hectare land it owns
in Sihanoukville, which is located near the current Cambodian project. The
Company intends to continue to try and locate investors and/or business
partners for the development of a tourist project on this land, which may
include a hotel, casino, commercial center and a convention center, pursuant to
the building permits for this land, which allow for the building of a 5 star
hotel, consisting of 3,000 rooms, a commercial center and a convention center.
However, due to the Company's cash flow distress, it may need to sell this
land. Indeed, the Company's board of directors resolved in February 2013 to
offer for sale the Company's 9 hectare land in Cambodia, if needed to enable
the Company to meet its obligations. The Company has contracted a selling agent
in Cambodia to help it in realizing the property. The Company also considers
raising funds through the issuance of equity or debt, in which event it may
re-consider its decision to sell the 9 hectare land.
Yariv Lerner
Chief Executive Officer, Queenco Leisure International Limited
29 May 2014
For further information about the Company please visit www.queenco.com or
contact:
Queenco Leisure International Ltd.
Yariv Lerner, CEO T: +972 (0)3 756 6555
Interim condensed consolidated financial statements for
QUEENCO LEISURE INTERNATIONAL LTD
For the interim period ending 31 March 2014
(Unaudited)
QUEENCO LEISURE INTERNATIONAL LTD
Interim condensed consolidated financial statements
Page
Independent auditors review report 1
Statements of comprehensive income (loss) 2
Statements of financial position 3-4
Statements of changes in equity 5-7
Cash flow statements 8
Condensed notes to the interim financial statements 9-17
Review Report of the Independent Auditors to the shareholders of
Queenco Leisure International Ltd.
Introduction
We have reviewed the accompanying financial information of Queenco Leisure
International Ltd. and subsidiaries (hereafter- "the Group") which includes the
condensed consolidated statement of financial position as at 31 March 2014 and
the condensed consolidated statements of comprehensive income (loss), changes
in equity and cash flows for the three month period then ended. The board of
directors and management are responsible for the preparation and presentation
of this interim financial information in accordance with IAS 34 "Interim
Financial Reporting". Our responsibility is to express a conclusion on this
interim financial information based on our review.
We did not review the interim condensed financial information of companies that
were consolidated, whose assets included in the consolidation constitute
approximately 2% of the total consolidated assets as of March 31, 2014, and
whose revenues included in consolidation constitute approximately 3% of the
total consolidated revenues for the three month period then ended. The
condensed financial information for the interim period of those companies was
reviewed by other auditors, whose review reports have been submitted to us, and
our conclusion, insofar as it relates to the financial information included for
those companies, is based on the review reports of the other auditors.
Scope of Review
We conducted our review in accordance with Review Standard No.1 of the
Institute of Certified Public Accountants in Israel "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity". A
review of interim financial information consists of making inquiries, primarily
of persons responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially less in scope
than an audit conducted in accordance with accepted auditing standards in
Israel and consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the above financial information is not prepared, in all material
respects, in accordance with IAS 34.
Emphasis of matter
Without qualifying our above conclusion, we draw attention to the following
issues:
1. Note 1.2 as to the financial condition of the Group and the uncertainty
deriving from such condition. During the three month period ended March 31,
2014, the Company incurred a net loss of €3.6 million and a negative cash
flow from operations of €0.2 million. As of that date, the Company's
current liabilities exceeded its current assets by €16.5 million. These
matters and other matters described in the note, raise substantial doubt
about the Company's ability to continue as a "going concern". Management's
plans concerning these matters are also described in Note 1.2. The
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
2. Note 1.2 as to developments and uncertainties regarding the dispute a
consolidated company is facing with the Greek tax authorities with respect
to a claim by the authorities for the payment of taxes in the amount of €23
million.
3. Notes 1.2 and 1.3 as to the significant doubts regarding the ability of a
subsidiary and an associated company to continue their operations as a
"going concern".
4. Note 6.3 to the financial statements as to certain disagreements the
Company encountered with the co-shareholder of 50% in Vasanta, resulting
in, among others, to a motion to approve a derivative claim requesting
monetary remedies, as amended, of US$53.5 million was served against the
Company.
Brightman Almagor Zohar & Co.
Certified Public Accountants
A member firm of Deloitte Touche Tohmatsu Limited
May 29, 2014
Tel Aviv, Israel
QUEENCO LEISURE INTERNATIONAL LTD
Consolidated Statements of Comprehensive Income (Loss)
(In thousands of €)
Three months ended Year ended 31
December
31 March
2014 2 0 1 3 2 0 1 3
Unaudited Unaudited
Revenues 2,714 2,402 15,287
Operating costs
Cost of revenues (3,532) (3,169) (11,952)
Selling and marketing expenses (792) (427) (3,080)
General and administrative expenses (1,569) (1,069) (4,812)
Other operating expenses (200) - (792)
Share of results of associated company and (222) 6 34
joint ventures
Impairment of investment in associated - - (14,586)
company
Operating profit (loss) (3,601) (2,257) (19,901)
Investment income 41 44 180
Finance costs (153) (532) (1,324)
Foreign exchange gain (loss) 47 (772) (1,048)
Profit (loss) before tax (3,666) (3,517) (22,093)
Tax 26 94 136
Profit (loss) from continued operations (3,640) (3,423) (21,957)
Loss from discontinued operations - (760) (1,583)
Total profit (loss) for the period (3,640) (4,183) (23,540)
Other comprehensive income (loss)
Itemsto be reclassified to profit or loss
in subsequentperiods:
Exchange differences arising on translation (19) 1,259 (849)
of foreign operations
Net other comprehensive income to be (19) 1,259 (849)
reclassified to profit or loss in
subsequent periods
Items not to be reclassified to profit or
loss in subsequent periods:
Re-measurements of net defined benefit - - 208
liability
Net other comprehensive income not being - - 208
reclassified to profit or loss in
subsequent periods
Net other comprehensive income (19) 1,259 (641)
Total comprehensive income (loss) for the (3,659) (2,924) (24,181)
period
Consolidated Statements of Comprehensive Income (Loss) (Cont.)
(In thousands of €)
Three months ended Year ended 31
December
31 March
2 0 1 4 2 0 1 3 2 0 1 3
Unaudited Unaudited
Total profit (loss) for the period
attributable to:
Equity holders of the parent (3,248) (3,819) (22,914)
Minority interests (392) (364) (626)
(3,640) (4,183) (23,540)
Total comprehensive income (loss) for the
year attributable to:
Equity holders of the parent (3,213) (3,298) (23,907)
Minority interests (446) 374 (274)
(3,659) (2,924) (24,181)
Profit (loss) per share for the period
attributable to:
Profit (loss) per share from continued (0.29) (0.36) (2.25)
operations (¢) - basic and diluted
Profit (loss) per share from discontinued - (0.09) (0.17)
operations (¢) - basic and diluted
(0.29) (0.45) (2.42)
Consolidated statements of Financial Position
(In thousands of €)
As at
31 March 31 December
2 0 1 4 2 0 1 3 2 0 1 3
Unaudited Unaudited
Non-current assets
Intangible assets 2,134 2,138 2,134
Property, plant and equipment 27,220 23,565 27,792
Investment in an associated company and 11,443 26,831 11,587
joint ventures
Deferred tax asset 460 486 458
Other long term receivables 1,480 2,492 1,654
Total non-current assets 42,737 55,512 43,625
Current assets
Inventories 112 289 118
Investments - 3 -
Trade and other receivables 1,088 1,560 2.011
Cash and cash equivalents 1,196 2,374 1,679
2,396 4,226 3,808
Non - current assets held for sale - 9,736 -
Total current assets 2,396 13,962 3,808
Total assets 45,133 69,474 47,433
Current liabilities
Accounts payable 1,119 1,545 1,105
Current tax liabilities 1,557 1,643 1,551
Other current liabilities 7,967 9,891 6,136
Bank overdraft and loans 5,845 1,011 6,282
Total current liabilities 16,488 14,090 15,074
Total assets less current liabilities 28,645 55,384 32,359
Non-current liabilities
Long-term bank loans - 5,760 -
Other long-term liabilities 2,551 4,144 2,601
Deferred tax - 96 24
Provision for retirement benefits 594 753 575
Total non-current liabilities 3,145 10,753 3,200
Net assets 25,500 44,631 29,159
Consolidated Statements of Financial Position (cont.)
(In thousands of €)
As at
31 March 31 December
2 0 1 4 2 0 1 3 2 0 1 3
Unaudited Unaudited
Shareholders' equity
Share capital 217,364 114,122 217,634
Share premium - 83,597 -
Translation reserve 11,367 13,036 11,332
Reserve for the waiver of options by a 2,739 2,739 2,739
controlling shareholder
Other reserves (14,319) (14,319) (14,319)
Accumulated deficit (202,806) (166,793) (199,558)
Equity attributable to equity holders of 14,345 32,382 17,558
the parent
Minority interest 11,155 12,249 11.601
Total Equity 25,500 44,631 29,159
The financial statements were approved by the board of directors and authorised
for issue on 29 May, 2014. They were signed on its behalf by:
Yigal Zilkha Yariv Lerner Arie Haviv
Executive Chairman of the Chief Executive Chief Financial Officer
Board Officer,Director
29 May ,2014
Consolidated Statements of Changes in Equity
(In thousands of €)
Share Share Translation Reserve for Other Accumulated Parent Minority Total
reserve the waiver reserves deficit Interest Equity
Capital Premium of options
by a
controlling
shareholder
For the three months 217,364 - 11,332 2,739 (14,319) (199,558) 17,558 11,601 29,159
ended 31 March 2014
(unaudited)
Translation differences - - 35 - - - 35 (54) (19)
Net loss for the period - - - - - (3,248) (3,248) (392) (3,640)
Balance as at 31 March 217,364 - 11,367 2,739 (14,319) (202,806) 14,345 11,155 25,500
2014
For the three months
ended 31 March 2013
(unaudited)
Balance as at 1 January 114,122 83,597 12,515 2,739 (14,319) (162,952) 35,702 11,875 47,577
2013
Effect of Changes in - - - - - (22) (22) - (22)
Accounting Policies
(see note 2)
Balance as at 1 January 114,122 83,597 12,515 2,739 (14,319) (162,974) 35,680 11,875 47,555
2013 restated for
changes in accounting p
olicies
Translation differences - - 521 - - - 521 738 1,259
Net loss for the period - - - - - (3,819) (3,819) (364) (4,183)
Balance as at 31 March 114,122 83,597 13,036 2,739 (14,319) (166,793) 32,382 12,249 44,631
2013
Consolidated Statements of Changes in Equity (cont.)
(In thousands of €)
Share Share Translation Reserve for Other Accumulated Parent Non-controlling Total
Capital Premium reserve the waiver reserves deficit interest Equity
of options
by a
controlling
shareholder
Balance as at 1 114,122 83,597 12,515 2,739 (14,319) (162,974) 35,680 11,875 47,555
January 2013
Share issuance 103,242 (83,597) - - - (13,860) 5,785 - 5,785
Translation differences - - (1,183) - - - (1,183) 334 (849)
Re-measurement of net - - - - - 190 190 18 208
defined benefit liability
Loss for the year - - - - - (22,914) (22,914) (626) (23,540)
Balance as at 31 217,364 - 11,332 2,739 (14,319) (199,558) 17,558 11,601 29,159
December 2013
Consolidated Cash Flow Statements
(In thousands of €)
Three months ended Year ended 31
December
31 March
2 0 1 4 2 0 1 3 2 0 1 3
Unaudited Unaudited
Net cash from operating activities (508) (737) (2,719)
Net cash used for operating activities in (508) (559) (2,521)
continued operations (Note3)
Net cash used for operating activities in - (178) (198)
discontinued (Note5) operations
Net cash from operating activities (508) (737) (2,719)
Investing activities
Interest received - 44 -
Purchases of property, plant and equipment (133) (14) (930)
Realization of a deposit 351 - 500
Net cash used in investing activities 218 30 (430)
Net cash received from investing activities 285 - 216
in discontinued operation
Total net cash used for investing 503 - (214)
activities
Financing activities
Repayments of borrowings (500) - (500)
Receipt of long term loan - 536 730
Repayment of long term loan - - (4,010)
Share issuance - - 5,785
Net cash provided by (used in) financing (500) 536 2,005
activities
Net decrease in cash and cash equivalents (505) (171) (928)
Effect of foreign exchange rate changes 22 139 201
Cash and cash equivalents at beginning of 1,679 2,406 2,406
period(including discontinued operations)
Cash and cash equivalents at end of period 1,196 2,374 1,679
Tax paid - (41) (139)
Interest paid (16) - (362)
NOTE 1 - GENERAL INFORMATION
1.1 Formation and equity developments
Queenco Leisure International Ltd (the "Company" or "QLI") is engaged, through
various Israeli and foreign subsidiaries, associated companies and joint
ventures (together with the Company the "Group") in emerging markets
development and operations of casinos and entertainment centers.
QLI was incorporated in Israel on 9 September 2002 by Milomor Ltd. ("Milomor")
(an Israeli company ) and (Y.Z) Queenco Ltd. ("Queenco" or "YZ") (an Israeli
public company whose shares are listed for trading in the Tel-Aviv stock
exchange), who held, equally, the entire issued and paid up capital of the
Company. The Company commenced its operating activities at the end of 2002. The
Company's address is 11 Menachem Begin road, Ramat Gan, Israel.
On 8 July 2013, the Company's extraordinary general meeting of shareholders
resolved to increase the authorized share capital of the Company from NIS
800,000,000, consisting of 800,000,000 ordinary shares, each having a nominal
value of NIS 1.00, to NIS 1,200,000,000 consisting of 1,200,000,000 ordinary
shares, each having a nominal value of NIS 1.00.
On 12 August 2013 the Company completed a rights issue of its ordinary shares
("New Shares") , of which a portion were offered in the form of Global
Depository Receipts (GDRs").
The completion of the rights issue resulted in the subscription of 488,408,824
New Shares par value NIS 1.00 each, of which 119,577,600 are represented by
GDRs (including through an over-subscription mechanism as detailed in the
Rights Issue Memorandum) for a total consideration of approximately € 5.8
million, net of expenses (including approximately € 4.4 million received from
the Company's controlling shareholders).
Following the rights issue, the issued share capital of the Company is
comprised of 1,098,919,854 ordinary shares with a nominal value of NIS 1.00
each.
Upon completion of the rights issue, Queenco and its wholly owned subsidiary,
which held, together, prior to the completion of the rights issue approximately
67% of the Company's issued share capital, transferred the entire amount of New
Shares purchased by it in the rights issue to A.S.Y.V Hotels Ltd, a company
controlled by Mr Yariv Lerner, a director in the Company and its Chief
Executive officer. ("A.S.Y.V"), an Israeli corporation. Consequently, A.S.Y.V
now holds approximately 33.5% of the issued and outstanding share capital of
the Company; and Y.Z. and its wholly owned subsidiary, together with another
corporation controlled by Yigal Zilkha (one of the controlling shareholders of
Y.Z.), hold, together, approximately 42.4% of the issued and outstanding share
capital of the Company. On 4 September 2013 Y.Z. and A.S.Y.V entered into a
shareholders' agreement (the "Shareholders Agreement") pursuant to which: (a)
the parties will not sell or otherwise transfer their shares of QLI such that
their aggregate voting rights in QLI shall decrease below 50.01% of the total
voting rights of QLI, unless the transferee who receives the shares shall
execute, prior to the consummation of the transfer and as a condition thereof,
an obligation to comply with the provisions of the Shareholders Agreement; (b)
the parties will coordinate their votes as much as possible prior to the
occurrence of each general meeting of QLI's shareholders, such that every
matter brought for the approval of the general meeting shall be discussed by
the parties at a preliminary meeting and the parties shall vote in every
general meeting of QLI's shareholders or every adjourned meeting thereof as
agreed in such preliminary meeting. In the event that the parties are unable to
agree on the manner of their vote regarding a certain matter, they will vote
against its approval; (c) any new appointment, re-election or termination of
office of a director of the Company shall be mutually agreed upon by the
parties.
1.2 Financial Condition
The Group's activities are adversely affected by the global economic crisis in
general and the economic crisis in Greece in particular. The abovementioned,
along with the Company's inability to exercise its rights in Club Hotel
Loutraki S.A. ("CHL") due to disagreements with B.A.T (Management) 2004 Ltd.
(of the Club Hotel Group) ("B.A.T.") regarding the control of CHL and Casino
Austria International Holding GmbH's ("CAIH") unwillingness to comply with its
contractual obligations to transfer € 49.5 million to Powerbrook Spain S.L
("PBS"), have brought the Company to operating losses of approximately € 3.6
million and € 19.9 million for the three month ended 31 March 2014 and the year
ended December 31, 2013, respectively, and to negative operating cash flows
from its continued operations of approximately € 0.5 million for the three
month ended 31 March 2014. The Company's net negative working capital amounted
to approximately € 14.1 million on 31 March 2014.
NOTE 1 - GENERAL INFORMATION (Cont.)
1.2 Financial Condition (cont)
As a result, the Company was not able to meet its original repayment schedules
of loans and credits received from Queenco and from a previous shareholder in
Dasharta (a company indirectly jointly controlled by the Company), from whom
the Company purchased residual shares in said company in 2008. So far, the
Company has succeeded in reaching understandings with Queenco and the
abovementioned previous shareholder regarding a rescheduling of the repayment
schedules such that they will coincide with the Company's payment abilities. As
of 31 March 2014, the Company's outstanding liabilities to the previous
shareholder in Dasharta and to Queenco amounted to € 559 and € 2.6 million,
respectively.
The Company's management is of the opinion that the Company will succeed in the
future, if needed, in rescheduling the repayment schedules of loans from both
Queenco and the previous shareholder of Dasharta. However, the current payment
schedule of the loans from Queenco is in line with the repayment schedule of
Queenco of debentures issued by it. Accordingly, the ability of the Company to
re-schedule the payment terms of the loans from Queenco is dependent on the
ability of Queenco to obtain other alternative financing sources to repay its
debentures obligations.
During 2012, Casino Rhodes has not complied with its ongoing obligations to pay
revenue tax and national security taxes, but has agreed with the tax
authorities on a payment plan concerning these amounts (€1.2 million), and has
recently also agreed with the tax authorities on an additional payment plan
concerning its on-going payment obligations for the first quarter of 2014 in
amount of 1.3 milion. Non-compliance with on-going tax obligations could lead
to the termination of the license.
For details of the tax claims in Rodos that If the court rules against
CR,neither CR nor the Group have the financial means to pay such amount and CR
will probably not be able to continue its operations please see note 1.3 to the
financial statement as of December 31, 2013. It is clarified that QLI and Y.Z.
have provided guarantees for the repayment of a loan extended to CR by a bank
corporation, which balance as of 31 March 2014 amounts to approximately € 5.8
million.
There are substantial doubts as to the ability of the project in Cambodia to
continue its operations as a "going concern". The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
For more information please see note 1.3 to the financial statement as of
December 31, 2013.
The Group is continuing in the implementation of its cost saving plans and is
in the process of expanding their scope, mainly in Rhodes, due to the decrease
in revenues caused by the economic crisis in Greece and the corresponding
adverse effects on the casino operations; and is seeking to increase tourists'
arrival to the Island through a newly formed subsidiary which engages in the
marketing and operation of flights from Israel to Rhodes and in the management
of a customers' club.
In addition, the Group is continuing its efforts to realize excess assets, such
as the planned sale of a real estate in Bulgaria (which is not in use by the
Group) and a 9 Hectare land in Cambodia. Although the Company would like to
develop a new tourist project on the 9 Hectare land, due to the Company's cash
flow distress, it may need to sell this land. Indeed, the Company's Board of
Directors, in a meeting held in February 2013, resolved to offer for salethe 9
Hectare land, if needed, to enable the Company to meet its obligations. The
Company has contracted a selling agent in Cambodia to help it in realizing the
sale. The Company has also contracted a selling agent in Bulgaria to help with
its plans in selling the real estate there. Until and including the third
quarter of 2013, the assets were presented as held for sale. However, due to
the extended period in which such efforts are made, with no success, the
Company has, in the fourth quarter of 2014, reclassified the assets back to
Property Plant and Equipment, where they were originally presented, as the sale
is no longer considered highly probable within the context of IFRS 5.
The Company also considers raising funds through the issuance of equity or
debt, in which event it may re-consider its decision to sell the 9 Hectare
land.
NOTE 1 - GENERAL INFORMATION (Cont.)
1.2 Financial Condition (Cont.)
The aforesaid raise substantial doubts as to the Company's ability to continue
as a "going concern". The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
The timing and scope of the success in the execution of some of the
abovementioned actions depend on agreements with third parties and/or are
affected by processes and other factors that are not under the Company's
control. Nonetheless, the Company's management is of the opinion that the
Company has good chances of executing the sale of the land in Cambodia and at
least a major portion of its other plans in a timely manner. Accordingly, the
Company's management is of the opinion that its existing cash and the expected
inflow of cash through the successful execution of the above mentioned plans,
will enable the Company to meet the needed cash levels required for its
operations and the payment of its obligations when due.
1.3 Activities and Projects
The Company's main activity is investment, through Israeli and foreign
companies, in tourist projects, including casinos and hotels, currently in
Greece and Cambodia. The activities in Greece are in the Rhodes Island, and the
activities in Cambodia are in the city of Sihanounkville. The Company provides
advisory services to its activities in Rhodes and Cambodia. The Company has
direct and indirect interests in Club Hotel Loutraki, S.A. ("CHL"), which
operates a casino in Loutraki, Greece and a casino in Belgrade, Serbia;
however, the Company currently does not attribute any economic value to these
casinos.
Project in Loutraki
CHL has informed the Company of the following:
(a) On 16 October 2013, the joint venture principally held by CHL and operating
Casino Loutraki (the "JV"), has filed a petition with the court to allow the JV
to reach a settlement with its creditors; however, objections to the petition
were filed with the court, among others who objected were the Municipality of
Loutraki and the Ministry of Finance of Greece.
Recently, the Greek court has approved the JV's proposed settlement with its
creditors (the "Settlement"). To the Company's knowledge, the Settlement
relates to the debt existing on the date of filing the petition, and provides
that most of the debt will be paid over a period of approximately 7 years,
without interest or penalty. To the Company's knowledge, the JV has incurred
further substantial debts following the filing of the petition.
(b) On 6 November 2013, the Greek Gamming Committee for the Supervision and
Audit of Games (the "Gamming Committee") has invited the JV for a hearing to
answer claims that it has allegedly breached Casino Loutraki's license terms
due to its failure to transfer certain payments to the Greek authorities (which
may result in the evocation of the licence). The Company was informed that, at
the said hearing, which took place on 18 November 2013, the Gamming Committee
instructed CHL to submit in writing its position concerning the claims raised
by the Committee. CHL submitted its position on 26 November 2013; and an
additional hearing took place in April 2014. The Gamming Committee's decision
has not yet been delivered; however, on 20 May 2014, the Gaming Committee has
informed the JV that it must immediately pay its entire debts to the Greek
authorities - substantial monetary obligations incurred between 1 August 2013
and 30 April 2014, and which are not included as part of the Settlement; and
must present evidence until 28 May 2014 concerning its actions to meet the
above requirement. On 29 may 2014 the JV have reached a settlement concerning
the obligations incurred between 1 August 2013 and 30 April 2014, paid the
first instalment and have presented the required evidence.
The Gaming Committee is expected to convene in order to resolve this matter on
30 May, 2014. The Company is unable to estimate if and to what extent the
Committee's decision shall affect the license granted to the JV for the
operations of Casino Loutraki.
NOTE 1 - GENERAL INFORMATION (Cont.)
1.3 Activities and Projects: (Cont.)
Project in Loutraki: (Cont.)
The above further supports the Company's management's opinion that there are
significant doubts as to the ability of CHL to continue its operations as a
"going concern".
The Company is not obligated to provide a capital injection to CHL or to cover
its liabilities and to the best of the Company's knowledge, as of 31 March
2014, the cash positions of PowerBrook Spain Ltd., the Spanish corporation that
holds CHL, amount to approximately € 7.7 million.
For the year ended 31 December 2013, The Company has recorded an impairment
charge of € 14.6 million with respect to its investment in CHL under
"impairment of investment in an associated company" reducing the carrying
amount in its financial statements to zero.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The interim financial statements have been prepared in accordance with
generally accepted accounting principles for the preparation of financial
statements for interim periods, as prescribed in IAS 34, "Interim Financial
Reporting". The significant accounting policies and methods of computation
adopted in the preparation of the interim Condensed financial statements are
consistent with those followed in the preparation of financial statements as of
December 31, 2013.
NOTE 3 - NOTE FOR THE CONSOLIDATED CASHFLOW STATEMENTS
3 months ended Year ended
March 31 December 31
2014 2013 2 0 1 3
Unaudited
Net profit (loss) (3,640) (4,183) (23,540)
Adjustments for:
Depreciation of property, plant and equipment 476 485 1,954
Increase/ (decrease) in provisions 63 24 (169)
Loss on sale of property, plant and equipment - 296
Impairments and disposals 200 - 478
Impairment of investment in an associated - 14,586
company
Loss on disposal of discontinued operation 760 1,583
Investment income (41) (44) (180)
Finance costs 153 532 1,324
Losses from deem disposal (870)
Foreign exchange loss (gain) (47) 772 1,048
Share of result of associated company and 222 (6) (34)
joint ventures
Expense relating to grant of share options - - -
(2,614) (1,660) (3,524)
Operating cash flows before movements in
working capital
Decrease (increase) inventories 6 21 6
Decrease in receivables 468 166 279
Increase in payables 1,648 955 1,219
Cash generated by operations (492) (518) (2,020)
Income taxes paid - (41) (139)
Interest paid (16) - (362)
Net cash from operating activities (508) (559) (2,521)
NOTE 4 - SEGMENT INFORMATION
IFRS 8 requires operating segments to be identified on the basis of internal
reports about components of the Group that are regularly reviewed by the chief
operating decision maker in order to allocate resources to the segment and to
assess its performance.
The management has decided to present each location as a reportable segment.
NOTE 4 - SEGMENT INFORMATION (Cont.)
Segmental Revenues and Profit:
Rhodes Cambodia Adjustments Total
Three month ended March 31 2014
Revenues 2,599 83 32 2,714
Segment profit (EBITDA (1,811) (593) (299) (2,703)
before other operating
expenses)
Depreciation & 435 23 18 476
Amortization
Impairment of (200)
non-current
Share of results of (222)
associates and joint
ventures
Operating profit (3,601)
(loss)
Finance costs, (65)
investment income and
Foreign exchange gain
Profit before tax (3,666)
Rhodes Prague Cambodia Adjustments Total
Three month ended March 31 2013
Revenues 2,179 164 59 2,402
Segment profit (EBITDA (963) (371) (444) (1,778)
before other operating
expenses)
Depreciation & 435 18 32 485
Amortization
Share of results of 6
associates and joint
ventures
Operating profit (2,738)
(loss)
Finance costs, (1,539)
investment income and
Foreign exchange gain
Profit before tax (4,277)
NOTE 4 - SEGMENT INFORMATION (Cont.)
Segmental Revenues and Profit:
Rhodes Cambodia Adjustments Total
Year ended 31 December 2013
Revenues 14,385 677 225 15,287
Segment profit 668 (1,418) (1,853) (2,603)
(EBITDA before other
operating expenses)
Depreciation & 1,724 109 121 1,954
Amortization
Impairment of - - - - (14,586)
investment in
associated company
Impairment of (478)
non-current held for
sale
Other operating - - - - (314)
expenses
Share of results of 34
associates and joint
ventures
Operating profit (19,901)
(loss)
Finance costs, (2,192)
investment income
and Foreign exchange
gain
Profit before tax (22,093)
NOTE 5 - Discontinued operations in prague
Analysis of profit from discontinued operations
Following the agreement signed regarding the operations in Prague (see Note 1),
these operations are presented in the financial statements as discontinued, for
all periods presented.
3 months Year
ended 30 March ended 31
December
2014 2 0 1 3 2013
unaudited unaudited
Revenues - 972 1,976
Operating costs - (1,453) (2,738)
Other expenses - (423)
Finance costs - (279) (398)
Profit (loss) before tax - (760) (1,583)
Tax benefit (expense) - - -
loss from discontinued operations - (760) (1,583)
Cash flows from discontinued operations
Year
3 months ended 31
ended 31 March December
2014 2013 2013
unaudited unaudited
Net cash inflows (outflows) from operating - (178) (198)
activities
Net cash inflows (outflows) from investing - - 216
activities
Net cash outflows from financing - - -
activities
Cash flow from deconsolidation of Prague:
receivable (198)
Fix assets 1,911
inventory 158
Account payable (820)
Other current liabilities (676)
Other long term liabilities (159)
Total 216
NOTE 6 other INFORMATION
1. On 21 January 2014 the Company adopted a share option plan for employee,
consultants, service providers and office holders of the Company and its
related companies (the "Option Plan"). The board of directors may grant up
to 54,945,993 options to purchase ordinary shares of the Company under the
Option Plan, constituting 5% of the Company's issued and outstanding share
capital, at an exercise price per share of €0.024. The Option Plan allows
for a cashless exercise under certain terms and subject to the sole
discretion of the plan's administrator. Generally, the Option Plan sets
forth a three-year vesting term and a 6 years exercise period, and further
provides for a limited exercise period in the event of the grantee's
termination of employment/service with the Company. After balance sheet
date 23,626,777 options have been granted under the Option Plan to
employees and officers (who are not directors or controlling persons),
constituting 2.15% of the share capital of the Company. The fair value of
the options granted amounts to €270
2. In late April 2014, the board of directors of PBS, has authorized Mr. Yigal
Zilkha, the Company's Chairman (as the Company's representative), and a
representative of the Club Hotel group, to negotiate with the minority
shareholder of CHL (the "Investor") an investment in CHL by the Investor.
Accordingly, the parties are currently negotiating the terms of such
transaction, which is expected to result in a substantial dilution of the
Company's holdings in CHL and the transfer of control in CHL to the
investor. As part of PBS's board resolution noted above, it was resolved
that if the above investment is consummated, PBS and the corporations
jointly held by the Company and the Club Hotel group shall act to
distribute Euro 2.7 from PBS to each of the Company and Club Hotel.
As of the date hereof, there is an uncertainty concerning the terms of the
contemplated transaction with the Investor as well as an uncertainty whether a
transaction with the Investor shall materialize at all.
3. For details of a certain disagreements the Company encountered with the
co-shareholder of 50% in Vasanta, resulting in, among others, to a motion
to approve a derivative claim requesting monetary remedies, as amended, of
US$53.5 million was served against the Company please see note 1.3 to the
financial statement as of December 31, 2013
4. Fair value disclosures:
Carrying amounts for all financial instruments as at 31 March 2014 approximate
fair value.QUEENCO LEISURE : 1st Quarter Results
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