Raport.

FORTUNA ENTERTAINMENT GROUP NV Raport okresowy roczny skonsolidowany za 2017 RS

WYBRANE DANE FINANSOWE w tys. z? w tys. EUR 2017 2017 Amounts Staked 2007143 Revenues 212365 EBITDA 54956 Net profit 15437 total assets 336528 Total Equity 76955

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    FORTUNA ENTERTAINMENT GROUP N.V .
    Annual Report for the year 2017


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    ANNUAL REPORT OF
    FORTUNA ENTERTAINMENT GROUP N.V.
    FOR THE YEAR 2017


































    FORTUNA ENTERTAINMENT GROUP N.V .
    Annual Report for the year 2017


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    TABLE OF CONTENTS



    1. Fortuna at a Glance ................................ ................................ ................................ ..................... 3
    2. 2017 Financial Highlights ................................ ................................ ................................ ............. 4
    3. 2017 Key Events ................................ ................................ ................................ .......................... 6
    4. Letter to Shareholders from the Chairman of the Management Board ................................ ....... 7
    5. Letter to Shareholders from the Chairman of the Supervisory Board ................................ ......... 9
    6. Management Board Report ................................ ................................ ................................ ...... 10
    7. Corporate Governance ................................ ................................ ................................ ............. 45
    8. Investor Information ................................ ................................ ................................ .................. 73
    9. Supervisory Board Report ................................ ................................ ................................ ........ 77
    10. Consolidated Financial Statements of Fortuna Entertainment Group N.V. .............................. 82
    11. Corporate Financial Statements of Fortuna Entertainment Group N.V. ................................ . 152
    12. Other Information ................................ ................................ ................................ .................... 190
    12.1 Independent Auditor’s Report ................................ ................................ ................................ . 190




    FORTUNA ENTERTAINMENT GROUP N.V .
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    1. Fortuna at a Glance


    Fortuna Entertainment Group N. V. (hereinafter “Fortuna” or “FEG” or “the Group” or “the Company”) is
    the leading Central European multi -channel betting and gaming operator. The Group offers a
    comprehensive range of online and land network -based betting an d gaming products, including pre -
    match and live betting on a range of sporting events as well as online gaming.

    Thanks to its 20 -plus years of experience on the CEE market, Fortuna sets industry standards and
    trends in the betting sector. The Group const antly invests in the development of new products and
    services; it has expanded its branch network as well as the quality of its distribution channels.

    The founding company FORTUNA sázková kancelář a.s. (hereinafter “FORTUNA Betting Office, joint
    stock co mpany” or “Fortuna SazKan”) was established in 1990 in Prague. Since its incorporation,
    Fortuna SazKan's primary business has been sports fixed -odds betting. A year after it was formed, T E
    R N O, akciová spoločnosť was established in Slovakia. In 2005, Pe nta Investments became the owner
    of both entities and in the same year it acquired Polish betting operator Profesjonał. Subsequently, all
    the companies were rebranded under one brand: Fortuna.

    In May 2017, Fortuna acquired a 100% stake in Hattrick Sports Group Ltd., Ireland ("Hattrick Sports
    Group"), the owner of Casa Pariurilor, the leading betting operator in Romania, and PSK, the second
    largest operator in Croatia, and B2B in Spain, Germany and other countries. In August 2017, Fortuna
    acquired Romanian comp anies Bet Active Concept S.R.L. and Bet Zone S.R.L. (for which Fortuna had
    provided its trademark since 2015) , Public Slots S.R.L. and Slot Arena S.R.L.

    As of 31 December 201 7, Fortuna operated 3,194 points -of-sale in the Czech Republic, Slovakia,
    Po land, Romania and Croatia.

    Until May 2017, Fortuna operated numerical lottery games and instant scratch tickets. On 23 May 2017,
    Fortuna sold its lottery business represented by the company FORTUNA sázky a.s. to SAZKA a.s.

    In October 2010, FEG under went a successful IPO on the Prague and Warsaw stock exchanges. As of
    31 December 201 7, Fortuna’s majority shareholder was FORTBET HOLDINGS LIMITED, a subsidiary
    of Penta Investments Limited, which held a 79.78 % stake.

























    FORTUNA ENTERTAINMENT GROUP N.V .
    Annual Report for the year 2017


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    2. 2017 Financial High lights


    Financials (EUR thousands) 2017 2016
    Amounts Staked 2,007,143 1,039,605
    - of which Sports Betting & Gaming 1,480,374 1,019,370
    - of which Lottery (discontinued operations) 5,664 20,235
    - of which Hattrick (05 -12/2017 only) 386,187 n/a
    - of which Fortuna Romania (09 -12/2017 only) 134,918 n/a
    Gross Win 1 305,444 162,968
    - of which Sports Betting & Gaming 218,487 153,773
    - of which Lottery (discontinued operations) 2,373 9,195
    - of which Hattrick (05 -12/2017 only) 62,087 n/a
    - of which Fortuna Romania (09 -12/2017 only) 22,497 n/a
    Revenues 212,365 106,189
    - of which Sports Betting & Gaming 136,018 98,947
    - of which Lottery (discontinued operations) 1,870 7,242
    - of which Hattrick (05 -12/2017 only) 56,103 n/a
    - of which Fortuna Romania (09 -12/2017 only) 18,374 n/a
    EBITDA 1 54,956 22,149
    - of which Sports Betting & Gaming 31,885 20,759
    - of which Lottery (discontinued operations) (202) 1,390
    - of which Hattrick (05 -12/2017 only) 18,584 n/a
    - of which Fortuna Romania (09 -12/2017 only) 4,689 n/a
    Operating Profit 40,232 16,700
    - of which Sports Betting & Gaming 24,134 17,998
    - of which Lottery (discontinued operations) (207) (1,298)
    - of which Hattrick (05 -12/2017 only) 12,442 n/a
    - of which Fortuna Romania (09 -12/2017 only) 3,863 n/a
    Net Profit 15,437 8,282
    - of which Sports Betting & Gaming 15,855 9,555
    - of which Lottery (discontinued operations) (245) (1,273)
    - of which Hattrick (05 -12/2017 only) (2,724) n/a
    - of which Fortuna Romania (09 -12/2017 only) 2,551 n/a

    Ratios

    EBITDA Margin 1 25.9% 20.9%
    Operating Profit Margin 1 18.9% 15.7%
    Net Profit Margin 1 7.3% 7.8%
    CAPEX as % of Revenues 1 5.5% 9.9%
    .





    1 See the Section Glossary for a more detailed explanation.


    FORTUNA ENTERTAINMENT GROUP N.V .
    Annual Report for the year 2017


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    As of 31 Dec
    2017
    As of 31 Dec
    2016
    Number of Shares – End of Period (“EOP”) 52,000,000 52,000,000
    Total Assets 33 SIR28 121,54R
    Total Equity (including non Jcontrolling interestF 76,9 55 59,475
    Total Borrowings 129,66P 30,153

    Net Debt / (Net CashF 1 48,947 (1,840)
    CAPEX 11,641 10,516

    Operations

    Number of Points -of-Sale (sports betting) 3,194 1,498
    Number of Employees – EOm 6,064 2,28S


    FORTUNA ENTERTAINMENT GROUP N.V .
    Annual Report for the year 2017


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    3. 201 7 Key Events


    February 201 7 Fortuna became the first company that was granted a licence by the
    Ministry of Finance of the Czech Republic to operate online casino /
    technical games in the Czech Republic.

    Fortuna entered into an agreement to acquire a 100% stake in Hattrick
    Sports Group Ltd., Ireland. Hattrick is the owner of the betting operator
    in Romania, Casa Pariurilor , and the operator in Croatia, PSK.


    March 201 7 Fortuna announced its intention to sell its Czech lottery business
    operat ed via its subsidiary FORTUNA sázky a.s. based in Prague.

    The Management Board and the Supervisory Board of Fortuna
    Entertainment Group N.V. approved the intention to acquire Romanian
    companies Bet Active Concept S.R.L., Bet Zone S.R.L., Public Slots
    S.R.L. and Slot Arena S.R.L. from Fortbet Holdings Limited, the majority
    shareholder of Fortuna and a subsidiary of Penta Investment s Group.

    The majority shareholder of Fortuna Entertainment Group N.V., Fortbet
    Holdings Limited , launched a tender offer f or the purchase of all
    outstanding shares issued by Fortuna.


    April 201 7 Templeton commenced legal proceedings before the Enterprise Court
    of Amsterdam, seeking the prohibition of voting on the proposed
    acquisition of Bet Active Concept S.R.L., Bet Zone S.R.L., Public Slots
    S.R.L. and Slot Arena S.R.L.


    May 201 7 Fortuna closed the acquisition of the 100% stake in Hattrick Sports
    Group Ltd., Ireland which was initially announced in February. The
    acquisition was approved by the regulatory authorities as w ell as by the
    shareholders of the Company.


    July 201 7 Fortuna Entertainment Group N.V. announced that the Enterprise
    Division of the Amsterdam Court of Appeals had dismissed all requests
    submitted by Templeton.


    August 201 7 Fortuna closed the acquisit ion of Bet Active Concept S.R.L., Bet Zone
    S.R.L., Public Slots S.R.L. and Slot Arena S.R.L. through two SPVs
    incorporated in Romania. The acquisition was approved by an
    Extraordinary General Meeting of shareholders on 1 August 2017.


    December 201 7 The Extraordinary General Meeting of Shareholders approved a new
    remuneration policy for the members of the Management Board and the
    Supervisory Board and changes to the Company's articles of
    association and appointed a new member of the Management Board
    and two new members of the Supervisory Board.



    FORTUNA ENTERTAINMENT GROUP N.V .
    Annual Report for the year 2017


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    4. Letter to Shareholders from the Chairman of the
    Management Board


    Dear Shareholders,


    2017 was the year of step change for the Fortuna Entertainment Group (FEG) as we continued to
    implement our value creation strategy that was launched in 2015 and delivered a revenue and EBITDA
    year -on -year growth of 100% and 148% respectively.

    FEG’s valu e creation strategy is based upon the below three main pillars with corresponding
    implementation through the group wide Strategic Initiatives:
     Market share gain in existing markets driven by regulation and operational excellence,
     Product vertical extensio n into gaming driven by regulation and internationalization, and
     Expansion into Central Eastern European regulated markets through M&A

    The FEG vision is to become ‘The no.1 licensed sports betting & gaming operator in CEE with the most
    trusted and exci ting multi -channel betting & gaming brands’. The group wide key strategic initiatives
    focus on establishing the foundation for future growth with respect to instigating operational excellence
    across the group, further investment into our multi -channel & pr oduct offering as well as preparing for
    step -change value creation.

    The strategy implementation gained further momentum in 2017, e.g. scalable customer life cycle
    management driven by improved insights further strengthened our underlying customer model
    performance, FEG becoming the first regulated operator for online gaming in the Czech Republic which
    enabled further market share gain, the retail channel was turned into year -on -year revenue growth after
    years of decline, and the completion of the acquisit ions of Fortbet Romanian entities as well as the
    Hattrick Sports Group ensured further geographical expansion.

    While we in 2017 implemented substantial change throughout the operation as well as initiating the
    integration of the newly acquired companies it was very encouraging to see that FEG achieved
    accelerated growth momentum resulting in record high financial performance with Amount Staked of
    EUR 2.0 billion (+93.1% yoy), Gross W in of EUR 305.4 million (+87.4% yoy) and EBITDA of EUR 55.0
    million (148 .1% yoy).

    In 2018 we foresee continued execution of our value creation strategy with some of the highlights being,
    e.g. complete the integration of Hattrick Sports Group and Fortbet Romanian companies, continued
    investment into Product & Technology to fu rther strengthening our multi -channel and -product customer
    offering, further investment into building operational excellence and human capital as well as seeking
    additional M&A opportunities. Adding our robust underlying business with the FIFA World Cup e vent in
    Russia in the summer we look forward to continuing delivering strong growth in 2018.

    The importance of being a legal, regulated and responsible sports betting and gaming operator cannot
    be underestimated. FEG is committed to pay the appro priate taxes and levies in each of the markets
    we operate within and to ensure a responsible gaming approach so that our customers can remain in
    control of their wagering and enjoy betting and gaming as part of their discretionary spending on leisure
    and e ntertainment. We hope that the governments in the markets FEG operates in will ensure the
    protection of the regulated sports betting and gaming operators who run their business legally and pay
    taxes and will protect their regulated domestic markets by bann ing illegal offshore operators and taking
    measures against them.

    Finally, I would like to thank all the fantastic employees of Fortuna Entertainment Group for their
    dedication and hard work. My thanks also go to the Supervisory Board and the Management B oard for
    their support and commitment to our value creation strategy. As a company, we remain committed to


    FORTUNA ENTERTAINMENT GROUP N.V .
    Annual Report for the year 2017


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    high standards of corporate governance and corporate responsibility in the furtherance of shareholder
    interests.






    Per Widerström
    CEO and Chairman of the Management Board
    Fortuna Entertainment Group N.V.












































    FORTUNA ENTERTAINMENT GROUP N.V .
    Annual Report for the year 2017


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    5. Letter to Shareholders from the Chairman of the
    Supervisory Board


    Dear Shareholders,

    2017 was a very eventful and exciting year for the Fortuna Entertainment Group. I am pleased to say
    that we saw a substantial uplift in the business performance of the Group resulting from the continuing
    pursuit of the transformational plan that we embarke d upon more than 3 years ago. Needless to say,
    none of the success would have been possible without the hard work of all our employees – for which I
    would like to sincerely thank all of them on behalf of the whole Supervisory Board.

    As mentioned in my predecessor’s letter last year, 2017 was also a year of significant changes to the
    regulatory framework across some of our markets. In the Czech Republic, we became the first licensed
    operator to offer online casino in the market in Febr uary. After more than 10 months of live operation, I
    am pleased to say that underlying results continue to be very encouraging and provide a strong
    validation of our strategic focus on being a truly multi -product operator.

    The healthy momentum in the bus iness also served as a fundamental catalyst for our acquisitions of the
    Hattrick Sports Group in May and the Romanian operations in August (previously run under the Fortuna
    brand -licensing agreement by Penta Investments). Both of these transactions togethe r represented a
    historical milestone for the Company. As a result, Fortuna Entertainment Group has become the leading,
    regulated and truly multi -channel, multi -product and multi -brand operator in the region.

    Following the proceedings at the Enterprise Ch amber (Ondernemingskamer) of the Court of Appeal in
    Amsterdam, we also proactively took steps to further strengthen the corporate governance and
    independence of the Group. On behalf of all my colleagues in the Supervisory Board, I would like to
    thank for t he overwhelming majority support and the resulting strong mandate we have been provided
    to represent the interests of all the shareholders.

    Looking into 2018, I am sure the Winter Olympics and the FIFA World Cup will serve as a strong
    testament to the un derlying momentum of the Group and our continuing efforts in delivering a
    sustainable growth.

    On behalf of the Supervisory Board, I would like to offer a strong support to the Management Board and
    all our employees and thank them once again for their con tinuing passion and commitment to the
    Company.

    Yours sincerely,




    Tom de Waard
    Chair man of the Supervisory Board
    Fortuna Entertainment Group N.V.







    FORTUNA ENTERTAINMENT GROUP N.V .
    Annual Report for the year 2017


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    6. Management Board Report

    6.1 Description of the Company’s Business and Markets

    6.1.1 General Market Overview

    The Group operates in the betting and gaming sector. The betting is mainly focused on sporting events
    while gaming services include the following: online casino games such as slots, black jack, roulette as
    well as products like Poker and Bingo . Af ter gaming and lotteries, betting is the biggest subsector in the
    overall EU betting and gaming market. The substantial growth in the European betting market has been
    driven by regulatory change and the growth of online betting. Currently, legal frameworks for betting
    service providers in many European jurisdictions are under review. Some countries are contemplating
    the liberalisation of the betting market, partly due to the inefficiency of various limitations and bans, and
    partly in order to increase exist ing taxes or impose taxes on new areas of commerce. Gaming is the
    most significant subsector, with further prospects for growth that mainly stem from the rapid development
    of online services. This trend is supported by cooperation between various entities in the betting and
    gaming sector: landline operators are starting to cooperate with online service providers, while betting
    organisers are entering into agreements with gaming operators.

    The Group operates in the Czech Republic, Slovakia and Poland and from 2017 also in Romania and
    Croatia . Compared with the markets of Western countries, the Central & Eastern Europe betting markets
    are still relatively underdeveloped and offer opportunities for future growth. Apart from in the Czech
    Republic, the competitive landscape largely consists of a small number of single -country operators.
    However, due to the growth in the online betting industry, country operators have started to compete not
    only at a local level, but also against offshore online operators. In terms of retail operations, potential
    new market entrants encounter significant ent ry barriers such as local licensing requirements , significant
    marketing and branding spen d and high retail establishment costs.

    The table belo w presents the main economic indicators in the countries where the Group operates:

    Czech
    Republic
    Slovakia Poland Romania Croatia
    Population (million, 2017 ) 10.6 5.4 38.0 19.6 4.2
    GDP (EUR billion, 2016 ) 177 81 426 170 46
    GDP per capita (EUR, 201 7) 16,500 14,600 11,200 7,700 11,000
    HICP (all items, annual
    average inflation rate, 2017 )
    2.4 1.4 1.6 1.1 1.3
    Source: Eurostat, Ministry of Finance CR

    6.1.2 Czech Republic

    The competitive landscape in the betting and gaming sector is primarily composed of five major
    bookmakers led by Tipsport, Fortuna and Chance 2, Synot Tip and Sazka . The leading position on the
    market in terms of the number of outlets is held by Tipsport, with a significant factor being “partner”
    outlets in bars. Fortuna has a solid second position with a market share 3 of around 30 %4. Alternative
    bookmakers are SynotTip and Sazka, the core activities of which are slot machines and lotteries.

    2 Chance was acquired by Tipsport, effective 1 January 2013 3 See the section Glossary for a closer explanation 4 Source: the Company


    FORTUNA ENTERTAINMENT GROUP N.V .
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    FORTUNA GAME a.s. obtained the first online casino / technical games license on 24 February 2017.
    The new related legislation enables blocking of offshore operators. Licensing process of other operators
    (including foreign companies) is possible under the condition of registration of all players (in compliance
    with new AML law).

    6.1.3 Slovakia

    There are thre e main competitors on the Slovak betting market. Niké is the market leader with
    approximately 37% market share 5, second place is taken by Fortuna Slovakia with approximately 34%
    of the market and third place is taken by Tipsport with approximate ly 23%. Besides these three market
    leaders, other competitors include Tipos and Junior Game. The deregulation of internet betting has
    allowed for further strong market growth through the online sales channel.

    6.1.4 Poland

    There are three strong players on the Polish betting market: Fortuna PL, Totolotek (majority owner
    Intralot SA), and privately -owned STS (Juroszek family). Fortuna PL is currently number two in terms of
    market presence , with a market share 6 of approximately 33% 7 on the domestic regulated marke t. The
    big market players are followed by smaller operators such as Millenium, E -Toto and newcomers LVBet
    and ForBet, which started its operations in 2016 , and Superbet which started its operations in November
    2017.

    Fortuna PL was the first operator to re ceive an online betting licence from the Polish Ministry of Finance .
    That occurred in January 2012. STS and Millenium obtained their online licences during 2012, while
    Totolotek received a licence in July 2013.

    In 2017, online gaming was allowed by legisl ation in Poland but only as a state monopoly. W ith respect
    to the online gaming, Polish legislation enabled blocking offshore operators. Also bets on virtual sports
    were newly introduced by Polish legislation. Fortuna PL obtained a virtual sports license o n 1 March
    2017.

    6.1.5 Romania

    Romania is one of the Central & Eastern European markets seen as having strong potential for the
    sports betting and gaming business.

    Since the acquisition of Casa Pariurilor and Fortbet companies in Romania, Fortuna has become the
    no. 1 multi -channel and multi -product (sports betting/gaming) operator with more than 30% combined
    market share 8 and the biggest retail network. Other players include Superbet and Stanleybet.

    Online gambling arrived on the Romanian market in November 2015. In an environment dominated by
    the retail business, the main online competitors, which are also established on the European market,
    are Unibet, NetBet, Betano, Sportingbet, Betfair and 888. Besides these operators, local betting
    companies such as Sup erbet have also launched online products.


    5 See the section Glossary for a closer explanation 6 See the section Glossary for a closer explanation 7 Source: the Company 8 See the section Glossary for a closer explanation


    FORTUNA ENTERTAINMENT GROUP N.V .
    Annual Report for the year 2017


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    6.1.6 Croatia

    There are six licensed sports betting operators in Croatia, five of which are privately -owned companies .
    The State Lottery is the sixth operator. Fortuna owns the licensed operator Hattrick -PSK, which is no.
    two on the market with a market share 9 of approximately 24%. The other five operators are Supersport,
    Germania, the State Lottery, Stanleybet and FavBet. Fortuna op erates both online and offline sports
    betting and casino games in addition to offering slot machines in outlets.

    It is estimated that approximately 40% of the overall sports betting business in Croatia is with offshore
    operators.

    Sports betting has been regulated in Croatia since 1998. Online betting has been regulated since 2010,
    while online casino has been regulated since 2016.


    6.2 Regulatory Environment

    The entertainment industry sphere , which includes betting, games of chance and gaming machines , has
    not been subject to harmonisation at the European Union level and the competency remains with EU
    Member States when it comes to defining the conditions for the pursuit of activities in the sector.
    However, regulations concerning the sector have been s everal times brought before the European Court
    of Justice (”ECJ”). The ECJ has indicated that there is no intention to treat the sector as an ordinary
    market sector that should be governed by the rules of the market. It was noted that socially -based
    attitu des towards sector activities tend to restrict, or even prohibit, such activities to prevent them from
    being a source of private profit. Furthermore, the issue of public security, in particular the prevention of
    criminal or fraudulent behaviour, is often r aised by Member States imposing limitations. The ECJ also
    indicated that sometimes a proportion of the funds from operations in the sector should be earmarked
    for social initiatives, charitable works, sport or culture. Therefore limiting the powers of the Member
    States in the ECJ’s interpretations of the provisions of the Treaty with respect to the sector does not
    have the objective of establishing a common market and the liberalisation of its area of activities. In
    accordance with Article 45, in conjunctio n with Article 62 of the Treaty on the Functioning of the
    European Union, the free movement of services, guaranteed in Article 56 of the Treaty, may be restricted
    only on the grounds of public policy, public security or public health.

    The development of E uropean legislation (regarding electronic services, for instance) and further
    judgments of the ECJ might conceivably impact local legislation and result in changes in the gambling
    laws.

    6.2.1 Regulatory Environment in the Czech Republic

    Three bills consisting of a new gambling act, a gambling tax act and an act containing the amendments
    of other acts related to gambling, which aim to replace and reform the current gambling regulatory
    framework in the Czech Republic, were approved by the legislative branch in mid -2016 . However, the
    entire new framework did not enter into force until January 1, 2017 .

    Czech Act No. 186/2016 on Gambling (the “Gambling Act ”), which is the prime legal tool regulating
    gaming in the country, defines gambling as a game of chance, betting or a lottery in which a participant
    wagers a bet while no return on such a bet is guaranteed, and the win or loss is entirely or partly subject
    to chance or unknown circumstance.

    The Gambling Act further differentiates gambling i nto “types of gambling ”. Any other game that meets
    the general gambling definition but does not meet the requirements of one of the specified types of
    gambling is prohibited.

    9 See the section Glossary for a closer explanation


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    Gambling is subject to a special sector tax under the Gambling Tax Act. The tax basis of the gambling
    tax is the difference between the total value of accepted bets or wagers and the total value of paid
    winnings (the tax base). The gambling tax rate is 23 percent of the gross gaming revenues , with the
    exception of technical games that are subject to a 35 percent tax on the gross gaming revenue .
    Additionally, land -based operators of technical games have to account for a “minimum tax ” per each slot
    machine, which is 9,200 Czech koruna per calendar quarter. The gambling tax is paid on a quarterly
    basis. Each gambling operator (even illegal operator s) is subject to the gambling tax regardless of the
    location of its registered seat or main office.

    If a gambling operator has a registered seat or main office within the territory of the Cz ech Republic,
    then it is subject to corporate income tax. The corporate income tax is 19 percent of the net income of
    a company.

    Players’ winnings are not subject to any additional taxation, provided that the players’ winnings come
    from a game operated by a licensed gambling operator with a licence from an EU or European Economic
    Area Member State.

    RECENT CHANGES AND OUTLOOK
    As of 1 January 2017, an amendment to the Anti -Money Laundering Act bec ame effective, requiring
    gambling operators to carry out iden tifications of players and know -your -customer processes similar to
    those carried out by payment and credit institutions. Gambling operators must take steps to prevent
    crime and other wrongdoing.

    On 1 January 2017, the Act on Advertising was amende d. It introduced new gambling advertising
    restrictions, which specify that gambling advertisements

     must not target people under the age of 18 (minors);
     must not give the impression that gambling can serve as a source of income;
     must clearly state that minors are excluded from gambling; and
     must include the text: “Ministry of Finance cautions: Participation in gambling may lead to
    addiction! ”

    With respect to case law, the placement of an illegal online gambling website on the list of illegal
    gambling operators (b lacklist) and the related internet provider (IP) blocking provisions have been
    contested on a constitutional level by a group of 21 senators who filed a motion with the Constitutional
    Court to declare the relevant IP blocking sections of the Gambling Law u nconstitutional, claiming they
    could be a form of unconstitutional censorship. The Constitutional Court, however, upheld the wording
    of the Gambling Act and kept the relevant provisions intact. No additional gambling case law has been
    published.

    Throughout the year, the new regulatory regime was supplemented by secondary legislation and
    government -issued clarifications on the meaning of the new law, including special guidelines with
    respect to bonus allocation.

    Furthermore, the Gambling Act does not expressly provide any e -sports or social gaming provisions.
    Nonetheless, the legal definition of a game of chance under the Gambling Act is quite broad and may
    even include e -sports. This issue has not yet been addressed by either the Ministry or the c ourts of law.

    6.2.2 Regulatory Environment in Slovakia

    The operation of gambling games in the Slovak Republic is regulated primarily by Act No. 171/2005 on
    Gambling Games, as amended (the “Slovak Gambling Act”), which is the main legislative instrument of
    Slo vak gambling law.

    Under Article 3(3) of the Act, betting games may be operated on the basis of a general or individual
    licence “for the operation of betting games issued by the Slovak Ministry of Finance. A separate consent


    FORTUNA ENTERTAINMENT GROUP N.V .
    Annual Report for the year 2017


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    of the municipality has to be o btained for the operation of a betting outlet within its territory. The term of
    validity for a betting licence is limited to 5 years. A betting licence may be issued only to joint stock
    companies or limited liability companies having their registered offic e in the Slovak Republic with the
    minimum amount of registered capital of €331, 900 . In the case of legal entities with a “foreign property
    participation”, a betting licence may only be issued to legal entities with the “foreign property
    participation” of e ntities having their registered office or address of their permanent residence in an EU
    or OECD Member State.

    Online betting is regulated under Article 9 and 35(6) of the Gambling act. However, in practice betting
    licences do contain an authorisation to operate online betting .

    An application for a betting licence is subject to an administration fee charged by the Slovak Ministry of
    Finance , amounting between € 350 and 7,000.

    The operator of a betting game is required to maintain a certain minimum amount of funds as a financial
    guarantee in a bank account solely for the purposes of the settlement of the obligations of the operator
    of the betting game. In the case of fixed -odds betting, the financial guarantee amounts to €750,000. The
    operator of a betting game is required to maintain the financial guarantee during the entire term of validity
    of the betting licence, as well as after the expiration of the validity of the licence until all the above -
    mentioned obligations are settled and the annual settlement of the licence fees is submitted to the
    Slovak Ministry of Finance.

    The operator of a betting game is furthermore under the obligation to pay licence fees to the state and/or
    municipal budget. In the case of fixed -odds betting, the fee is 6% of the sum of Amounts Staked and in
    the case of horse racing betting it is 1% of the sum of Amounts Staked.

    The new regulatio n was approved in November 2016 and took effect from January 2017 .
    Amongst the new amen dments , the Act introduced several important changes wit h respect to client
    identification requir ements and the protection of minors .

    The Act also initiated measures against unlicensed gaming operators . A blacklist of banned operators
    was published on July 17th 2017 for the first time and the regulator has been actively trying to block
    websites and payments of the listed operators since then.

    6.2.3 Regulatory Environment in Poland

    The current gambling law in Poland came into force on 1 January 2010.

    An entity that intends to organise betting is obliged to apply for the permission of the ministry responsible
    for public finances. The permission is issued for 6 years for a specified number of betting outlets , which
    may be amended. After the expiry of that permission, an entity may apply for permission only once for
    6 consecutive years. An entity organising betting should be organised as a limited liability company or
    joint stock company with share capital of at least 2 million zloty and have its registered office in Poland ,
    or if such a company is organising betting in the territory of the EU or EFTA, it is subject to the application
    of a representative, or in the form of a branch .

    The fee for a betting permi t is 2,000% of the base amount and 50% of the base amount for each betting
    outle t or – in the case of organising betting through the Internet - 9,000% of the base amount. The base
    amount is the total average monthly gross wages and salaries excluding payments from profit in the
    second quarter of the previous year as published by the Central Statistical Office. At the end of 2017,
    the base amount was 4,474.00 zloty, which makes the permission fee 89,480 zloty and around 2,237
    zloty for each betting outl et. In addition, a betting company is obliged to establish collateral securing the
    interests of its customers and fiscal obligations. The amount of collateral is determined on the basis of
    the number of betting outlets. The base amount is 40,000 zloty. The amount of collateral for 40 betting
    outlets is six times the base amount and increases by one base amount are set for each further 10
    betting outlets (i.e. in the case of 100 betting outlets = 240,000 zloty + 6 x 40,000 zloty = 480,000 zloty).


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    Annual Report for the year 2017


    15

    The collate ral may be in the form of a banking or insurance guarantee, cash deposit or mortgage . If
    betting is organised through the Internet, the entity organising said betting shall provide, within the time
    limit prescribed in the permit, a financial security of 48 0,000 zloty .

    The total amount of money paid for bets is subject to taxation. A 2.5% tax is imposed on Amounts Staked
    for bets concerning the results of a competition involving animals if permission is issued only for this
    kind of betting and a 12% tax is imposed on Amounts Staked for bets concerning the results of other
    events.

    On 26 May 2011, the Polish parliament amended the gambling law to allow online sports betting for
    locally licensed players. Moreover the new regulations strengthen the Polish Cust oms Service ’s
    authority in controlling illegal activities of online gamblers, including the monitoring and the suspension
    of money transfers. The new regulations came into force on 14 July 2011. Unfortunately, parliament
    decided to maintain a high 12% with holding tax on betting activities, which discriminates against legal
    taxpaying players versus offshore companies.

    Immediately after the new regulations were introduced, the Polish subsidiary of Fortuna Entertainment
    Group N.V. – FORTUNA online zakłady buk macherskie Sp. z o.o. – submitted to the Ministry of Finance
    a request for permission to provide its clients in Poland with online betting. The Ministry of Finance
    awarded the licence to Fortuna in January 2012.

    On 28 December 2016, the Polish president r atified the amendment of the Act on Gambling and related
    acts.

    RECENT CHANGES AND OUTLOOK
    The most important event for the gambling sector that occurred recently was the introduction of an
    amendment to the Act, which came into force on 1 April 2017 (some of its provisions enter ed into force
    on 1 July 2017).

    Owing to the significance of the new regulation, much of the past year has been spent discussing the
    shape of the new laws. In general, it seems that despite claims of the Polish government that the
    amendment is aimed at protect ing participants against the dangers of gambling, its primary concern is
    clearly to increase state revenue. Because of this, while the amendment expanded the scope of legal
    forms of gambling in Poland, the majority of these new forms may only be pursued in a mono po listic
    system . Seve ral operators appealed to the government to liberalise the gambling market in some
    aspects (e.g., by introducing more liberal rules on playing poker, widely considered a skill game, not a
    form of gambling), but these voices were largely ignored. The idea o f blocking gambling websites – the
    first measure of such a kind in Poland – was controversial among privacy advocates, but again these
    concerns were not heard by the authorities.

    In other areas, the situation of slot machine parlours in Poland remains dis puted. Although effectively
    outlawed in 2009, many still operate. Their owners argue that the provisions of the Act that restrict
    gambling to casinos are not binding, because the Act was not notified to the European Commission – a
    step required when legisl ation includes ‘technical regulations ” as defined by EU law. After many
    contradict ory local judgments, in October 2016 the Court of Justice of the European Union ruled in case
    C-303/15 that these provisions do not fall within the scope of “technical regula tion ”. The authorities
    continue to close down unlicensed slot machine parlours, and with the introduction of the amendments
    to the Act in April 2017, which greatly increased the related penalties (and even made it a crime to
    possess a slot machine), enforc ement attempts are expected to increase.

    Among the most significant novelties introduced in the amendment is the introduction of the blocking of
    unlicensed gambling websites. From July 2017, the minister in charge of public finance is able to select
    websites that – in his or her opinion – are used to offer gambling games for residents of Poland while
    not possessing a valid licence or permit. Polish internet service providers will be required to redirect
    users who try to access them to a government web site. Payment service providers will be required to
    cease cooperation with such blacklisted operators . This measure is intended to cut off their funding. The
    impact of these laws is significant. Several crucial foreign gambling websites have been blocked to users
    in Poland.


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    Annual Report for the year 2017


    16


    The amendment reintroduces slot machine parlours to the market after their de facto banishment in
    2009, but this time they will be exclusively operated by a state -owned company. The first venues were
    expected to open in the fourth quar ter of 201 7, however by the end of 2017 no slot machine hall ha d
    been opened Totalizator Sportowy is also expected to start an online casino, as this has also become
    possible under the new regulations (but only for the state).

    6.2.4 Regulatory Environment in Romania
    The Romanian primary gambling legislation (Government Emergency Ordinance No. 77/2009 on the
    organisation and operation of games of chance, as subsequently amended and supplemented), defines
    a series of gambling products : Betting, Casino , Poker, slot machines, bingo and lottery games.
    Gambling is permitted in Romania, provided that the required licences and authorisations are obtained,
    the re spective taxes are paid and the applicable legal provisions are observed in the course of business.
    Gambling is legally allowed in Romania in both its land -based and online forms.
    As a matter of principle, the very first article of the primary gambling legislation sets forth tha t the
    organisation and operation of gambling in Romania represents a state monopoly and may be performed
    only within the specific legal parameters imposed by the gambling regulation.
    However, the legislation creates a legal framework where by any private op erator that fulfils the
    requirements provided by the law is able to apply for a licence and authorisation in order to conduct
    gambling activities in Romania.
    In accordance with the legislation in force, only operators based in the EU, European Economic Ar ea
    (EEA) or the Swiss Confederation may apply for and obtain the necessary licence and authorisation in
    order to provi de remote gambling services in Romania. A situation in which a foreign economic operator
    provides gambling services in Romania without hol ding the relevant licence and authorisation is explicitly
    regulated by the legislation as a criminal offence sanctioned with imprisonment from one month up to
    one year or by a fine. Additional sanctions are also expressly provided in the legislation for a legal entity
    that offers unlicensed gambling services in Romania: the entity shall be dissolved and the amounts
    derived from the unlawfu l activity shall be confiscated. As a separate tool to control and prevent
    unlicensed remote gambling activities, the Romanian regulator manages the ‘blacklist’ of unlicensed
    gambling websites. This list currently comprises almost 1,000 internet domain names. In this regard, the
    legislation also sets forth that internet service providers (ISPs) as well as all service suppliers for the
    gambling industry, including payment processors, are bound to comply with the decisions taken by the
    regulator. Specific reference is made to ISPs that are required to ban access to the blacklisted websites
    (as well as to thos e websites promoting unlicensed gambling) under the threat of a sanction of a fine
    ranging from 50,000 lei to 100,000 lei. In addition, the blacklist may contain individuals or legal entities
    who have carried out or are carrying out unlicensed gambling act ivity.
    The Company acquired Hattrick (with effect of 19 April, 2017) and Bet Active (with effect of 1 September
    2017) activities in Romania during the financial year. As of the respective moment Fortuna obtained
    control, the Company started the integration of the activities into the Fortuna organization. During the
    integration process it was identified that Hattrick and Bet Active might not in all circumstance s have
    applied certain provisions of the law and regulations with regard to AML in the Retail opera tions. The
    non -compliance relates specifically to the identification of some clients and transaction monitoring in the
    way stipulated in the local laws as market practice differs in Romania. Both Hattrick and Bet Active
    entities are fully licensed and regu lated in Romania and they passed annual authorization by the
    Romanian regulator.



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    17

    Management has initiated a project to improve the controls over customer identification and transaction
    identification, verification and monitoring off cash transactions. As the improvements will only materialize
    during 2018, the Company might not be fully compliant with certain provisions in the local laws and
    regulations. To date management is not aware of any transaction used for money laundering and
    financing of terrorism or has it received a formal statement from the betting regulatory bodies in the
    respective countries. However, non -compliance of certain provision of local laws and regulations could
    result in some risks for the financial statement. But management believe that the financial impact would
    not be material.
    LEGAL AND REGULATORY FRAMEWORK
    The conditions under which the organisation and operation of games of chance are regulated in
    Romania are outlined in the following normative acts:
     Government Emergency Ordinance No. 77/2009 on the organisation and operation of games
    of chance (GEO 77/2009) ;
     Government Decision No. 111/2016 for the approval of the Methodological Norms for
    implementation of Government Emergency Ordinance No. 77/2009 on the organisation and
    operation of games of chance (GD 111/2016);
     Law No. 124/2015 for the approval of Govern ment Emergency Ordinance No. 92/2014
    regulating certain fiscal -budgetary measures and amending certain normative acts;
     Government Emergency Ordinance No. 20/2013 on the establishment, organisation and
    functioning of the National Gambling Office; and
     Govern ment Decision No. 298/2013 on the organisation and functioning of the National
    Gambling Office.
    In addition to the above -mentioned normative acts, gambling activities are also regulated by means of
    instructions, orders or decisions issued by the National Gambling Office (NGO) in relation to various
    aspects of gambling activity including the issuance of licen ces and authorisations . Moreover, certain
    specific requirements in the field of anti -money laundering and the prevention of terrorism are also
    applicab le to gambling activities, and are generally comprised in the following normative acts:
     Law No. 656 of 7 December 2002 on the prevention and combating of money laundering and
    financing of terrorism; and
     Regulation of 4 June 2008 for implementing Law No. 656/2002.
    THE LICENSING PROCESS
    As a core rule for remote gambling activity , only operators based in the EU, EEA or Swiss Confederation
    may apply for a licen ce and authorisation.
    In order to perform land -based gambling activities, any gambling operator mus t obtain a Class I licence
    and one or several authorisations. W hile the licensing procedure is not product -specific, the
    authorisation must be obtained for each type of gambling activity for which there is an intention to
    perform .
    The Class I licence is valid for 10 years with the exception of temporary games of chance for which the
    licence is valid for three months. The authorisation is valid for one year, with the same exception – for
    temporary games of chance, the validity of the authorisation is also three months.
    To a certain extent, the licensing and authorisation requirements for land -based gambling also apply for
    online activities. As a preliminary observation, while in the case of land -based gambling activities the
    authorisation must be obtained f or each type of activity (or machine, as the case may be), in the case
    of online gambling, only one authorisation is to be obtained for all the activities conducted on the same
    gambling platform (which can be connected to one or several internet domain nam es).
    In terms of costs, the licence fee is calculated with reference to the operator’s turnover. GEO 77/2009
    provides for several turnover thresholds in order to determine the applicable licence fee (e.g., the


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    Annual Report for the year 2017


    18

    minimum amount of the licence fee is €6,000 pe r year for a turnover of less than €500,000 per year
    while the maximum amount is €120,000 per year for a turnover exceeding €10 million per year).
    The amount of the authorisation fee for remote games of chance is 16 percent of the organiser’s
    revenue, but no less than €100,000 per year.
    In addition to the licence and authorisation fees, online operators are also bound to contribute to the
    public foundation for preventing gambling addiction with a contribution of €5,000 per year , while for
    land -base d operato rs the contributio n has been set at €1,000
    The regulation also sets forth certain administrative fees to be paid by the online gambling operator
    when applying for a licence, namely:
     a documentation analysis fee of €2,500 paid on submission of the licence w ith the NGO; and
     a fee for the issuance of the licence of €8,500 per year, per licence.
    TAXATION
    From a fiscal point of view, land -based gambling operators that operate in Romania are subject to a 16
    percent profit tax (which is for all types of businesses and not specific to gambling), in addition to any
    other fiscal obligations imposed under the Romanian Fiscal Code. The Fiscal Code provides for an
    exception in what concerns land -based casinos, where it is stated that this category may be subject to
    a 5 p ercent turnover tax in the case that the profit tax is less than 5 percent of revenues.
    Online gambling operators are subject to corporate tax in Romania
    In Romania, the revenues obtained by the players are subject to tax charges. In the case of land -base d
    games, the operator is required to withhold the applicable tax and to subsequently pay such to the state
    budget, while in the case of online games, each player is bound to execute individually the tax duties
    imposed by the Romanian authorities.
    ADVERTISI NG AND MARKETING
    The advertising of gambling activities performed in Romania by licensed gambling operators is
    permitted, provided that the principles regarding the protection of minors and responsible gambling are
    observed. In addition, GD 111/2016 also i mposes certain requirements in relation to the placement of
    advertising material and content -related conditions.
    RECENT CHANGES AND OUTLOOK
    Important changes have occurred in the past 12 months in the Romanian gambling market. Thus, 2016
    marked the entry into force of Class I licences and authorisations issued for online gambling in Romania.
    The list of licensed remote gambling organisers in Romania currently comprises of 16 operators. In
    addition, 2016 also marked the starting point for the Class II licen sing process for B2B suppliers and, at
    the time of writing, over 302 Class II licences have been granted by the NGO for all B2B activities subject
    to the licensing requirement.
    Currently, there are two pieces of legislation that are pending as proposal s that, if enacted, will have a
    significant impact on online gambling activities performed in Romania. The first is the amendment of the
    Fiscal Code and the reintroduction of the withholding tax system for revenues obtained by players from
    online gaming activi ties. The fiscal legislation provides for a mechanism whereby each player is bound
    to pay the tax for the revenues obtained from online gambling based on a declaration filed with the tax
    authorities. It seems that the tax and gambling authorities’ intentio n is to amend this system and oblige
    the operators to withhold the gambling tax for players’ revenues and instead transfer the amount of the
    tax to the state budget .
    The second piece of legislation is The Ethical Code of Responsible Communication in Gambli ng ,
    published by the NGO on February 14 th, 2017 . The Code is currently under public debate .


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    Annual Report for the year 2017


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    6.2.5 Regulatory Environment in Croatia
    Croatia became the 28th member state of the European Union in July 2013.
    Sports betting, casino, poker, bingo, and lottery are the products that are currently regulated by the local
    market. Apart from lottery services, which are provided by the state monopoly, literally any operator can
    apply for a licen ce for the operation of any of the other gambling services.
    The conditions und er which the organisation and operation of games of chance are permitted in Croatia
    are outlined in the following acts:
     Act on Games of Chance - NN 87/09, 35/13, 158/13, 41/14, 143/14
     Ordina nce on prize games - NN 8/10
     Ordinance on lottery games - NN 78/10 , 69/11, 22/15, 45/16
     Ordinance on spatial and technical conditions for games o f chance in casinos, slot clubs and
    bet ting shops - NN 38/10, 130/10, 69/11, 15/12, 151/14
     Ordinance on organising remote betting games - NN 8/10, 63/10, 22/15
     Ordinance on the technical accuracy of machines and tables for games of chance - NN 38/10,
    130/10, 49/13, 12/14
     Ordinance on obtaining a licen ce to operate in a casino - NN 78/10
     Ordinance on interactive online casino gaming - NN 78/10
     Ordinance on compulsory records for t he calculation of compensation for playing games of
    chance - NN 8/15
     Regulation on criteria for determining the beneficiary and the method of allocating part of the
    income from games of chance for 2017 - NN 17/17
     Regulation on criteria for determining the beneficiary and the method of allocating part of the
    income from games of chance for 2018 - NN 129/17

    The betting and gaming market in Croatia is regulated by the Ministry of Finance and the Tax
    Administration. The regulator has the right to determine the number of licences awarded. Licences are
    awarded for a period of 15 years.

    Online betting operators are required to be already provid ing land -based betting services, and to employ
    a minimum of 100 employees and have a minimum of 50 active payment spots. Online casino operators
    are required to have a licence for at least one land -based casino in the country and the servers have to
    be located in Croatia. Online betting and gaming is fully regulated and permitted based on domestic
    licences.

    International offshore operators (“operators from abroad” not having a physical presence in Croatia) are
    prohibited from engag ing and organis ing games of chance in Croatia. Only persons who are not Croatian
    citizens and are temporarily resid ing in Croatia are allowed to hold receipts and tickets issued by
    international operators of games of chance.

    TAXATION
    In Croatia, sports betting operators are subject to a 5% withholding tax on Amounts Staked. There is a
    scaling player tax on winnings which ranges from 10 -30%, and there is an annual concession fee of 3
    ml HRK for operating online sports betting.

    Casino games are subject to a 15% Gross Win tax. There is an annual concession fee of 3 ml HRK for
    operating online casino, and a 500 ,000 HRK annual concession fee for operating land -based casino.
    There is a 25% Gross Win tax on tournament games.

    Slot machines are subject to a 25% tax on Gross W in, and there is a fixed annual concession fee of
    10 ,000 HRK per slot machine. The a nnual concession fee for roulette is 40 ,000 HRK, and 50 ,000 HRK
    if there are more than 6 seats.



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    Annual Report for the year 2017


    20

    ADVERTISING AND MARKETING
    Croatia maintains a ban on advertising, promotion or any publicity when it comes to international games
    of chance and award games . It also prohibits the broadcasting o f advertisements on radio or TV
    programmes for children and youth or in printed media for children and youth .


    6.3 Products and Services

    6.3.1 Sports Betting

    The Group ’s products as offered by the sports betting division are divided into three categories: sports
    betting, numerical games (bets on numbers) and bets on social events. The Group offers only fixed -
    odds bets, which are bets at predetermined odds on an event occ urring which gives rise to either the
    retention by the Group of a stake placed by the customer or the liability to make a certain payment to
    the customer. The odds offered by the Group vary depending on the nature of the event and the amount
    to be paid to the given customer depends solely on such odds and is not influenced by the Amounts
    Staked by other customers.

    Within each category of products, the Group generally offers three major types of bets:

     SOLO Bet – where a customer makes a single bet, for exa mple, on the outcome of one specific
    football match;
     AKO BET (accumulator bet) – where a customer can bet on a number of games on one ticket;
     COMBIBET (combination bet) – where a customer can bet on a combination of betting events
    on one betting slip.

    Bets may be placed before the match (prematch bets) and during the event (live bets).

    Live betting was introduced in 2007. As new combinations appear during the event, they result in further
    betting opportunities and live betting allows customers to react to changing circumstances by making
    new bets. Since May 2010, Fortuna has been offering live bets to customers via their mobile phones.
    One of the latest products related to Live betting is “Early Cash Out” which allows customers to receive
    their winnings as they stand before the match finishes.

    Although the popularity of sports events is similar in each country in which the Group operates, there is
    som
    Treść w podglądzie może zawierać błędy powstałe podczas konwersji plików pdf.

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WSZYSTKIE KOMUNIKATY SPÓŁKI
Informacje o spółce
Nazwa:Fortuna Entertainment Group NV
ISIN:NL0009604859
NIP:
EKD:
Adres: Strawinskylaan 809 WTC T.A/L 8 1077XX Amsterdam
Telefon:+31 614832711
www:www.fortuna-group.eu
gpwlink:fortuna.gpwlink.pl
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