2017 - Lottotech · • live draw!: first outdoor draw organized for the celebration of our...

20172017ANNUAL REPORT

CONTENTS002-003AT A GLANCE

006-007OUR YEAR IN BRIEF!

018COMPANY INFORMATION

024-041CORPORATE GOVERNANCE REPORT

044-045FINANCIAL CAPITAL

075STATEMENT OF CASH FLOWS

072STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

073STATEMENT OF FINANCIAL POSITION

074STATEMENT OF CHANGES IN EQUITY

068SECRETARY’S REPORT

076-102NOTES TO THE FINANCIAL STATEMENTS

069-071INDEPENDENT AUDITOR’S REPORT

103FINANCIAL SUMMARY

028-033DIRECTORS’ PROFILES

046-049HUMAN CAPITAL

035-036PROFILE OF THE SENIOR MANAGERS

050-059SOCIAL AND RELATIONSHIP CAPITAL

019-020DIRECTORS’ REPORT

021STATEMENT OF COMPLIANCE

004ABOUT LOTTOTECH

010-013CHAIRMAN’S MESSAGE

005OUR CONTRIBUTION

014-017CEO’S STATEMENT

062-065RESPONSIBLE GAMING

001

LOTTOTECH LTD / ANNUAL REPORT 2017

LOTTOTECH AT A GLANCE

440 39

2.4102

MUR

MUR

MUR

MUR

Million Million

Million Million

CONSOLIDATED FUND

RETAILER COMMISSION

NATIONALSOLIDARITY FUND

CORPORATE SOCIALRESPONSIBILITY

002

ANNUAL REPORT 2017 LOTTOTECH LTD

898MUR

MUR

MUR2017

20172017

2017 2017

2016

20162016

2016 2016

MUR

MUR

MUR

M

Billion

Million Million

AMOUNT PAID TO WINNERS

EARNINGS PER SHARE

TURNOVER

NET PROFIT BEFORE TAX

DIVIDEND PER SHARE

NET PROFIT AFTER TAX

0.33

1.85MUR 1.65 Billion

MUR 0.26MUR 0.26

MUR 112.2 Million MUR 88.2 Million

135.6

0.32

110.8

003


ABOUTLOTTOTECH

VISIONTo be the preferred gaming provider in Mauritius and the region.

VALUESOur core values of integrity, trustworthiness and responsibility are complemented with our passion for results, innovation and teamwork.

MISSIONTo create and enhance shareholder value through socially responsible and regulated gaming operations.

GOALS To be the preferred gaming provider in Mauritius and create a long-term sustainable business through a responsible growth strategy. The main focus is: offering relevant, regulated products and services to the player; corporate social responsibility (CSR) initiatives congruent with our values; building and protecting a stellar reputation.

004

ANNUAL REPORT 2017 \ LOTTOTECH LTD

LOTTOTECH IS A COMPANY WHERE EVERYBODY WINS! OUR PURPOSE IS TO SHARE

THE MAXIMUM WE CAN FOR THE BENEFIT OF THE COUNTRY. FROM MUR100 SALES,

THIS IS HOW THE MONEY IS REDISTRIBUTED THROUGHOUT THE MAURITIAN ECONOMY.

Rs

RsRs

PAYMENTSTO WINNERS

Rs 49PAYMENTS

TO GOVERNMENT

Rs 25DIRECTCOSTS

Rs 6PROFIT

Rs 6

PAYMENTSTO RETAILERS

Rs 6

INDIRECTCOSTS

Rs 4

PAYMENTS TOEMPLOYEES

Rs 4

OUR CONTRIBUTION

005


OUR YEAR IN BRIEF! • Mauritius Sports Awards: Lottotech

participated in the Mauritius Sports Awards Ceremony organized by the Mauritius Sports Council. The funds were used to reward our best performing athletes of 2016.

• A ar erti�i atio for ea er i Pro ra 30 women who participated in the Women Leadership Program received their certificates. This is an ongoing initiative in collaboration with Women in Networking. To date, over 120 women have graduated from the program. The Lottotech team participates in the facilitation of leadership skills, the application of social media in small business, finance and marketing.

• AN AN N T N TT T PARTICIPATED AND SUPPORTED IN THE RUN ORGANIZED BY LINK TO LIFE.

• LIVE DRAW!: FIRST OUTDOOR DRAW ORGANIZED FOR THE CELEBRATION OF OUR NATIONAL INDEPENDENCE DAY. THE EVENT WAS A GREAT SUCCESS DEMONSTRATING TO OUR PLAYERS AND PUBLIC THE OPENNESS, TRANSPARENCY AND INTEGRITY OF OUR SYSTEMS AND PROCESSES. THE LOTTOTECH TEAM ALSO CONVEYED THE IMPORTANCE OF PASSION AND TEAMWORK.

• Responsible Gaming in the news: Michelle Carinci, the CEO of Lottotech has been featured in Business Magazine Year Book 2017 on Responsible Gaming. The objective of this paper is to create awareness within the business community on the importance of integrating responsible gaming programs throughout all operations of a gambling enterprise.

• Retailers in the digital world: Innovation is key to success. To promote our retailers and increase our visibility on social media, Lottotech has created individual Facebook pages for our retailers.

a ot er aLottotech organized different events to celebrate Mother’s Day in collaboration with TOP FM.

o teeri ro raLottotech volunteers began to deliver Information Technology courses to the students of Atelier Joie de Vivre at Chemin Grenier.

erti�i atio e e Lottotech is committed to its responsible gaming strategy and is proud to have achieved Level 3 of the World Lottery Association Responsible Gaming Certification Program.

• et t e i a Lottotech hosted a Music Day in our studio featuring local artists which was broadcasted live on TelePlus.

FEBRUARY

APRIL

JUNE

MARCH

MAY

006


MERCI A VOUS!This campaign featured NGOs personally thanking the players as without the players their projects would not have been possible.

Women Entrepreneur training program: Two international speakers, Margaret-Ann Blaney and Bernadette Fernandes, were invited by Lottotech to share their experiences and learnings throughout their careers with 100 women entrepreneurs at the National Entrepreneur Women Council Centre. The focus of the event was empowering women.

The Quest of Sherlock Holmes- Amazing Team Building!We had a great time trying to solve the Sherlock case. Very challenging and the whole experience stimulated our curiosity and cognitive abilities.

PORLWI LIVE DRAW:• Lottotech brought the draw

live to this major cultural event in Port Louis.

• The event featured other NGOs we support such as Atelier Mo’zar the very successful jazz music school. The event was organised to raise funds for the reforestation of our Capital. Lottotech contributed MUR 500,000.

• Dinner sans-abris: The annual dinner organized by Lottotech and Radio One for the homeless people in Port Louis was heartwarming.

ISO 27001:2013 : Successful recertification was achieved for the ISO 27001:2013.

SEPTEMBER

DECEMBER

JULY

OCTOBER

007


WIN

008


JACKPOT WINNERS

20009


CARL AH TECK CHAIRMAN

A AN A

010


I WOULD LIKE TO THANK THE LOTTOTECH

TEAM, NAMELY OUR EMPLOYEES FOR THEIR DEDICATION AND OUR

RETAILERS AND SERVICE PROVIDERS FOR THEIR

COMMITMENT TO EXCELLENCE ENABLING

THE COMPANY TO CONTINUE ITS STRONG

PERFORMANCE.

011


Dear ShareholderOn behalf of the Board of Directors, I am pleased to present you the annual report of Lottotech Ltd (“the Company” or “Lottotech”) for the year ending 31 December 2017.

SUSTAINING SHAREHOLDERS’ VALUE

In 2017, despite the challenging circumstances under which the Company is operating, our profit after tax in 2017 was MUR110.8 million, which is 25.7% up from MUR88.2 million in 2016. Revenue was MUR1.85 billion compared to MUR1.65 billion in 2016, and at the end of year 2017, the total assets of the company stood at MUR455.3 million compared to MUR386.7 million for the previous year. Earnings per share was MUR0.33 versus MUR0.26 for the prior year.

I am pleased to report that the Company’s share price has gone from a lowest point of MUR3.00 in October 2015 to a high point of MUR9.12 in October 2017. Today, at date of addressing my message to you, the Company’s share price was MUR9.38.

I am confident that the legal actions taken by the Company, at your request at the last two Annual Meetings, will come to a positive outcome. Lottotech, the Gambling Regulatory Authority (the “GRA”) and the Ministry of Finance and Economic Development (the “Ministry of Finance”) will appear before the Mediation Division of the Supreme Court soon to report progress on negotiation engaged by the parties in relation to the court case entered by the Company against the GRA and the Ministry of Finance.

At the same time, the Board continues to supervise Management in the development of long term sustainable strategies.

MUR

1.85 bnin Loto sales

CHAIRMAN’S MESSAGE

012


DIVIDEND

In line with the provisions of the Company’s constitution on dividend policy, the Company has declared and paid total dividend of MUR0.32 per share, for the financial year ended 31 December 2017, which represents a dividend payout ratio of 97% of the Company’s profit for the year 2017.

OUR PEOPLE

I would like to thank the entire Board for its contribution and oversight of the business of the Company.

On behalf of the Board, I would like to thank the Lottotech team, namely our employees for their dedication and our retailers and service providers for their commitment to excellence enabling the Company to continue its strong performance.

We offer a special thanks to our shareholders for your continued confidence and encouragement despite the challenges which our Company encountered during the year.

ia e A TeChairman

9 April 2018

013


TAT NT

MICHELLE J CARINCI CHIEF EXECUTIVE OFFICER

014


TEAMWORK, STRONG VALUES AND

A PASSION FOR MAKING A DIFFERENCE

ARE INTEGRAL ASPECTS OF LOTTOTECH’S

CONTINUED SUCCESS.

015


110.8MUR

million for the year ended 31 December 2017

BUSINESS PERFORMANCE

As a result of the ongoing and systematic focus on increasing the player base through innovation, communications and responsible cost management, the business continued its strong performance throughout 2017.

The core player base is defined as those players who play regularly at the minimum jackpot level of MUR5 million. The base jackpot transaction level is a strong indicator of a healthy game. We are very pleased with the results in 2017 as the average transactions at the base jackpot have continued to increase throughout the year and are on track to reach the transaction levels achieved prior to the advertising ban in 2015. This is a positive sign that Loto remains a strong game and a healthy brand, and that the Company’s communication strategy is effective and sustainable.

Loto sales were MUR1.85 billion and net profit was MUR110.8 million for the year ended 31 December 2017. This strong performance represents a 26% increase in profit compared to 2016, and an increase of 174% compared to 2015. While the Company continues its exemplary performance, it has not yet reached the profitability levels it enjoyed prior to 2015 budgetary measures.

OUR TEAM

Teamwork, strong values and a passion for making a difference are integral aspects of Lottotech’s continued success. The team’s creative problem solving, ability to work smart and remain humble are key to our resilience over the past few years. Our high retention rates will serve the Company well into the future.

Net Profit

CEO’S STATEMENT

016


SUSTAINABLE AND RESPONSIBLE

Corporate Social Responsibility is embedded in our operations throughout our operations. In 2017, Lottotech enhanced its long term plan to improve the impact of our business in our communities. Our framework is based on best practices developed by the European Lottery Association using ISO26000 global guidelines to operate in a socially responsible way, and integrate the global Sustainable Development Goals (SDG) which were developed by the United Nations. Lottotech has identified five specific SDG’s to focus on namely: gender equality; decent work and economic growth; quality education; responsible consumption and production, and climate action by reducing negative impacts and embracing eco-friendly initiatives.

Lottotech is a member of the World Lottery Association (WLA) which has 148 Lottery members that are highly regulated and dedicate the majority of their net revenue to good causes within their respective jurisdiction. The WLA has developed global standards and certification for critical areas of operations such as responsible gaming. Lottotech received the World Lottery Association Responsible Gaming certification Level 3 in 2017, and aims to reach the highest certification of Level 4 in 2018.

Further, the ISO27001 certification was renewed demonstrating our commitment to world class information security management.

SOCIALLY ACTIVE

The change in legislation effective in 2017 required that 50% of the eligible funding be transferred to the Mauritius Revenue Authority thereby reducing the amount Lottotech had to invest in our community from MUR2.4 million to MUR1.2 million. However, Lottotech does not rely upon the prescribed CSR funds alone to invest in good causes. In addition to the MUR1.2 million in funds that impacted over 700 beneficiaries, throughout 2017, Lottotech invested more than 200 hours of volunteering in schools specifically in the Information Technology discipline to improve the students’ IT literacy and provide them with the right tools for future education and employment.

In collaboration with Women in Networking, Lottotech volunteers have offered digital, communication, marketing and financial training to over 400 women who strive to become successful entrepreneurs and leaders in the community.

RELATIONSHIPS

In keeping with the vision of Lottotech being truly the people’s lottery, the team took the televised draw out of the studio and into the community to our players twice during the year. In March, our first outdoor draw was held at Bagatelle Mall in celebration of our National Independence Day. In December, the draw was held outdoors in Port Louis in conjunction with the cultural event PORLWI by Nature which also featured a reforestation project to which Lottotech contributed MUR500,000.

Lottotech continues to work closely with its valued retailer network of over 750+ retail partners. This year, the team dedicated its efforts to promoting and increasing our retailers’ visibility on social media by creating a Facebook page for our retailers.

On behalf of the Lottotech team, I thank the Board of Directors for their continued guidance, confidence and support.

017


T Chian Yew Ah TeckAlex BursteinAllagappen VeeramootooBanoomatee VeerasamyChian Luck Ah TeckChian Tat Ah TeckCyril How Kin SangFriedrich SticklerGeoffroy DedieuKavita AchameesingMichelle CarinciNarghis BundhunPaul Halpin

Chairman(Resigned on 26 May 2017)(Appointed on 26 May 2017)

(Appointed on 26 May 2017)

TA Gamma Corporate Services LtdRoyal RoadChapman HillBeau BassinRepublic of Mauritius

T Royal RoadChapman HillBeau BassinRepublic of Mauritius

PRINCIPAL PLACE OF N

Ground Floor HSBC Centre18, CybercityEbèneRepublic of Mauritius

A T Ernst & Young9th Floor NeXTeracom Tower1,CybercityRepublic of Mauritius

P N PA AN SBM Bank (Mauritius) LtdSBM Tower1, Queen Elizabeth II AvenuePort LouisRepublic of Mauritius

A A Anwar Moollan, SC6th Floor, PCL Building, Sir William Newton StreetPort LouisRepublic of Mauritius

C PAN N AT N

018


The directors are pleased to present the annual report and the audited financial statements of Lottotech Ltd (“Company” or “Lottotech”) for the year ended 31 December 2017.

Principal Activity

The Company operates the Mauritius National Lottery on behalf of the Government of Mauritius.

Following a Request for Proposal issued by the State Investment Corporation Ltd in March 2008, the proposal of the Company, including its structured game plan, was accepted and the Company was selected in July 2008 as the preferred bidder for the implementation and operation of the Mauritius National Lottery. In April 2009, the Gambling Regulatory Authority (GRA) issued an exclusive licence to Lottotech Ltd to operate the Mauritius National Lottery.

However, subsequently the GRA did not approve all the games as per the structured game plan. This has resulted in the Company instigating legal action in May 2012 against the GRA and the Ministry of Finance and Economic Development.

The litigation was resolved before the Mediation Division of the Supreme Court in October 2012, whereby Lottotech was awarded a one-off compensation and a reduction in the contribution rate to the Consolidated Fund from 58.01% to 46.16% as from 1 July 2012 for not being able to launch new games in the initial years in accordance with the structured game plan submitted at the time of its proposal.

The activity of the Mauritius National Lottery, also called La Loterie Nationale, is regulated by the GRA Act 2007. The Company operates in a highly regulated environment. Currently, the Company offers one loto game that has a weekly Saturday draw.

On 3 March 2014, the Company was converted into a public company, and on 11 June 2014, it was listed on the official market of the Stock Exchange of Mauritius Ltd. The successful listing process created over 8,000 new Central Depository & Settlement Co Ltd (CDS) accounts on the Stock Exchange of Mauritius Ltd, with a total of 12,385 applications and a subscription ratio of 2.99 times. The new shareholders comprised of individual and institutional investors, which included foreign investors.

In March 2015, the Government announced budgetary measures that banned advertising of the lottery effective 24 March 2015, and the prohibition of the Quick Win category of games effective 30 June 2015.

The Company took immediate action to right size the business to the new reality. The Board engaged PwC to evaluate the actual financial impact of the budgetary changes, and these independent reports were submitted to the GRA with a view to open discussions as to the one-time compensation for the severance and Quick Win inventory write-off and to explore options that would restore value for all shareholders and stakeholders in the coming years.

Following the “Mise en Demeure” served on the GRA by the Company on 21 May 2016, a Plaint with Summons has been filed on 13 June 2016 before the Supreme Court of Mauritius (Commercial Division) against the GRA and the Ministry of Finance and Economic Empowerment.

As stated by a communique issued by the Company on 5 June 2017, the parties to the court case have agreed to submit their dispute to the Mediation Division of the Supreme Court with a view to resolving it. The process began on 26 July 2017 and has continued into 2018 on a positive note. The next Mediation Court date is set for 23 May 2018. However, there is a will from all parties to resolve positively in March 2018.

As a result of the ongoing and systematic focus on increasing the player base through innovation and communications and responsible cost management, the business continued its strong performance throughout 2017.

Results and Performance

The Company’s turnover for the year ended 31 December 2017 was MUR1,852.5m compared to the prior corresponding period revenue of MUR1,651.6m.

The profit after tax was MUR110.8m for the year ended 31 December 2017 compared to a profit of MUR88.2m for the last corresponding year.

Contribution to the Consolidated Fund in 2017 was MUR440m compared to the contribution in 2016 of MUR393m.

This very positive result in 2017 when compared with 2016 is directly related to the aggregate jackpot offer being 11% higher in 2017.

The Company continues to be profitable and sustain both top line and bottom line growth. Loto maintained its strong brand with high approval ratings and high participation rates and a modest weekly spend at MUR60. This aligns with the Company’s responsible gaming strategy. The total number of jackpot winners created since the start of operations is 197 while in 2017, 20 winners won or shared the jackpot.

T P T

019


Retailer Network

The retailer network of the Company is over 750 retailers, comprising mainly of small family-owned businesses. Total commissions earned in 2017 were MUR102m. On average, our retailers earn an annual commission of more than MUR117,000 and MUR1m was paid to 20 retailers for selling the jackpot winning tickets. There is approximately one retailer for every 1,600 population.

Corporate Social Responsibility (CSR)

The Company is a member of the World Lottery Association (WLA). The WLA is recognised as the global authority on the lottery business and upholds the highest ethical principles. There are terms and conditions that the Company must fulfil to be a member of the WLA, namely:

• The member organisation must be licensed or authorised to conduct lotteries and/or sports betting operations by a jurisdiction domiciled in a state recognised by the United Nations.

• Sales of games of chance and/or skill must account for the majority of the organisation’s total annual gross revenues.

• The majority of the organisation’s net revenues must be dedicated to the public good.

• The organisation’s business practices must conform to the aims and objectives of the Association.

• The organisation must subscribe to the WLA Code of Conduct as approved by the membership or to an equivalent Code of Conduct adopted by a regional lottery association.

The Company received the WLA Responsible Gaming certification Level 3 in 2017. Further, the ISO 27001 certification was renewed demonstrating the commitment to world class information security management.

For the year ended 31 December 2017, the CSR budget as per the legal requirements totalled MUR2.4m.

Several CSR projects were evaluated on the criteria of making a significant difference, aligning with the Company’s branding of “La Chance Pour Tous”, offering a long term impact and providing opportunities for employees of the Company to become involved. This year, the Company continued its focus on alleviation of poverty and education.

Consolidated Fund and National Solidarity Fund

The Company paid MUR442m to the Consolidated Fund of the Government of Mauritius in 2017. As per the GRA Act, any money paid into the Consolidated Fund is used to finance the implementation of projects relating to community development, the promotion of education, health, sports and culture and for reimbursement of public debt of the Government of Mauritius.

In addition, the National Solidarity Fund received over MUR38m representing unclaimed prizes during the period. The National Solidarity Fund is used to improve the lives of the most vulnerable Mauritian citizens.

Future Outlook

In spite of the current restrictions imposed by the GRA to withhold approval of new games and the 2015 budgetary measures, the Company continues to be profitable. The fundamentals of the Company’s business remain strong. The Company could generate a substantially higher increase in sales once the restrictions are lifted whilst continuing to apply the responsible gaming principles adopted by the WLA. The Company continues to explore opportunities that will create value for its shareholders with its strategy of growing the core business while identifying other opportunities outside of its core business.

During the mediation process, an agreement in principle was arrived at amongst all parties, and it was duly noted in the Mediation Division of the court. As a result of this process, both Lottotech management and the negotiating body appointed by the Lottotech Board believe that the mediation could result in a positive outcome in 2018.

Lottotech will continue to operate within its responsible gaming strategy and our international experience lends itself to working closely with the GRA to develop an overall responsible gaming strategy and gaming alternatives in the regulated market.

Authorised for issue by the Board of directors on 26 March 2018 and signed on its behalf by:

DIRECTORS DIRECTORS

DIRECTORS’ REPORT

020


Statement of Compliance

e tio of t e i a ia e orti A t

NA P Lottotech Ltd

P T N P Financial Year ended 31 December 2017

We, the Directors of Lottotech Ltd, confirm that to the best of our knowledge that Lottotech Ltd has not complied with the hereunder section of the Code, and reason for the non- compliance is as follows:

• Section 2.8.2- Remuneration of Directors: Due to confidentiality of the information, no detailed breakdown of remuneration by Directors is given in the Corporate Governance Report.

NARGHIS BUNDHUN MICHELLE CARINCI(CHAIRMAN) (DIRECTOR)

26 March 2018

021


To exceed one’s

own limits is winning

022


DEDICATION

023


1. Introductory Note

2. Shareholding and shareholders holding more than 5%

3. Constitution

4. Board Structure

5. Role and Function of the Chairman

6. Directors’ profiles

7. Board Attendance

8. Role of the Company Secretary

9. Common Directors

10. Senior Management Team

11. Board Committees

12. Code of Conduct

13. Safety, Health and Environment

14. Directors’ Remuneration and Benefits

15. Directors’ Share Interests

16. Directors’ Dealings in Shares of the Company

17. Directors’ Service Contracts

18. Dividend Policy

19. Shareholders’ Agreement

20. Share Option Scheme

21. Share Price Graph

22. Management Agreements

23. Auditors’ Remuneration

24. Related Party Transactions

25. Contracts of Significance

26. Risk Management, Internal Controls and Internal Audit

27. Interest Register

28. Statement of Remuneration Philosophy

29. Corporate Social Responsibility

30. Donations

31. Environment Policy

32. Calendar of Events

33. Statement of Directors’ Responsibilities

CORPORATE GOVERNANCE REPORT

i tat tor i o re P r a t to e tio of t e o a ie A t

024


THE LOTTOTECH CHARTER, A CHARTER

ESTABLISHED FOR THE COMPANY, ESTABLISHING

THE GOVERNANCE GUIDELINES AND PROCESSES FOR

GOOD CORPORATE GOVERNANCE

025


CORPORATE GOVERNANCE REPORT1. INTRODUCTORY NOTE

Lottotech Ltd (the “Company”) is fundamentally committed to high standards of corporate governance.

The Board of Directors together with Management, have been tasked by the shareholders to ensure that the Company, which is listed on The Stock Exchange of Mauritius (the “SEM”) and which falls under the category of Public Interest Entity (“PIE”) complies with the National Code of Corporate Governance (the “Code”) and the Lottotech Charter, a Charter established for the Company, establishing the governance guidelines and processes for good corporate governance, as far as applicable.

As part of the statutory audit exercise of the Company’s financial year ended 31 December 2017, the Directors have reviewed the Company’s compliance to the Code, and hereby report on the extent to the compliance and provide explanation on the areas not complied with.

2. A N AN A N T AN

The shareholding structure of Lottotech is as follows:

a a i i t

Gamma Leisure Ltd

Maurilot Investments Ltd

14.

Natlot Investments Ltd

14.

ottote t

Glot Holdings (Mauritius) Ltd

14.

Public Hands 24.

State Investment

Corporation Ltd 18.

026


The shareholders holding more than 5% of the ordinary shares of the Company at 31 December 2017 were:

% Shareholding

Gamma Leisure Ltd 14.063

Maurilot Investments Ltd 14.074

Natlot Investments Ltd 14.063

Glot Holdings (Mauritius) Ltd 14.063

State Investment Corporation Ltd 18.750

3. CONSTITUTION

The Company is governed by a constitution, which is in line with the Companies Act 2001. There is no material clause in the Company’s constitution which requires disclosure.

A copy of the Company’s constitution is available for inspection at the registered office of the Company.

4. BOARD STRUCTURE

The Board may be composed of a maximum number of twelve Directors as per the Company’s constitution, to serve a term of office of three years, which term of office is subject to the shareholders’ resolution at each Annual Meeting. The constitution also provides for a staggered rotation system to ensure the Board’s renewal while retaining corporate memory.

The Board is currently composed of twelve Directors, as follows:• Non-Executive Directors: 7• Executive Directors: 2• Independent Directors: 3

The composition of the Board is clearly in line with the National Code of Corporate Governance, having the appropriate mix of executive, non-executive and independent directors, as well as gender balance. Furthermore, the Board has the required mix of skills, experience, independence and knowledge to play its role fully in serving the interests of all the stakeholders of the Company.

5. AN N T N T A AN

The Chairman is elected by members of the Board and he presides over the meeting of Directors and Shareholders.

The Chairman is responsible for corporate governance in the Company, ensuring that the Board carries out its responsibilities efficiently and that it has a clear comprehension of its role, function and deliverables as well as those of the Management and Shareholders. He is also responsible for ensuring that resolutions of the Board are promptly executed and implemented by Management. The Chairman of the Board acts for and on behalf of the Board.

Furthermore, it is part of the Chairman’s responsibility to ensure that new Directors are properly introduced to the businesses of the Company, with the assistance of the Company Secretary.

For the period under review, a Board appraisal, composed of two components, namely a self and peer assessment, has been carried out for the year under review, under the aegis of the Chairman’s office and the Corporate Governance Committee, in house. The exercise is ongoing with the analysis of the result of the appraisal.

Corporate Governance Report (continued)

027


Carl holds a first class degree in Civil Engineering from Lancaster University and an MPhil. Degree in Soil Mechanics from the University of Cambridge. After university, he joined consulting firm Sir Alexander Gibb and Partners in Mauritius. He is a registered professional engineer. He has also attended several executive management programs at NUS/Stanford University, London Business School and INSEAD.

(a) CHIAN YEW AH TECK, (also called Carl Ah Teck)Non-Executive Director & Chairman

T PThe profiles of the individual Directors are given below:

After 5 years with Sir Alexander Gibb and Partners, where he held various positions in both the design office and on site for major projects, he founded Gamma Construction Co Ltd in 1987, which has subsequently acquired Randabel & Sons Ltd (now known Gamma-Civic Ltd).From 1987 to 2011, he was the Chief Executive Officer of the Gamma Group before occupying the post of Chairman of Gamma-Civic Ltd since February 2011, and the Chairman of Lottotech Ltd since its incorporation in 2008.

Directorship in listed companies: Two (Gamma-Civic Ltd & Morning Light Co Ltd)


028


(b) Alex Steven Burstein (also called Alex Burstein)Non-Executive Director

Moorghen holds a Master degree in Marketing and a BSc, Engineering, European Studies & Technology from Coventry University in the UK. He is also a holder of a Diplome Universitaire en Technologie (DUT) from the Institut Universitaire de Technologie of Avignon in France. Moreover, Moorghen is an Insead Alumni, and has attended a number of other Executive programmes, including one at the National University of Singapore.

(c) ALLAGAPPEN VEERAMOOTOO (also called Moorghen Veeramootoo)Executive Director & Chief Operating Officer

Alex holds a BSc Electrical Engineering from Carnegie-Mellon University in Pittsburgh, Pennsylvania. He worked at IGT, the world leader in gaming technology including application software, firmware, communications processing, and central systems software, where he held top management posts. In 1998, he left IGT and started his own company whereby he acted as a consultant and an advisor to a number of lottery companies around the world.

Directorship in listed companies: None.Note: Alex resigned as a Director of the Company on 26 May 2017.

He has previously occupied the post of Marketing and Sales Manager and Business Unit Manager at Gamma-Civic Ltd from 2004 to 2009. He has also worked as Marketing Manager at Happy World Foods Ltd (now Innodis Ltd) from 1999 to 2004, and Cread & Co. Ltd in 1999. He joined Lottotech in 2009, and has occupied the post of Deputy General Manager, and presently holds the post of Executive Director/Chief Operating Officer.Note: Moorghen was appointed as a Director of the Company on 26 May 2017.


DIRECTORS’ PROFILES (continued)

029


Patrice holds a BA (Hons) Accounting and Finance from South Bank University. He worked as a Trainee Accountant with Nunn, Crick and Bussell in the UK, and in 1993, he joined the Gamma Group as Sales and Marketing Manager. He was appointed Sales and Marketing Director in 2000, and he has occupied the post of Deputy Managing Director. Since July 2015, he is no longer an Executive Director, and is a member of the Board of Gamma-Civic Ltd in a Non-Executive capacity.


(e) CHIAN LUCK AH TECK (also called Patrice Ah Teck)Non-Executive Director


Tommy holds a BSc (Hons) Engineering from University of Westminster and an MPhil in Mechanical Engineering from Loughborough University of Technology. He worked as a Trainee Accountant with Griffin & Partners, Chartered Accountants in London, UK. He occupied the post of Managing Director of Gamma-Civic Ltd from 1987 to January 2011. He was appointed Group CEO in February 2011. Since July 2015, he is no longer an Executive Director, and is a member of the Board in a Non-Executive capacity.Tommy is also the Vice Chairman of the Company, whereby he is responsible for public relations and networking for the resolution of issues across the Group under the guidance of the Chairman who is in charge of Corporate Development of the Company. He also chairs the Gamma Foundation.


(f) CHIAN TAT AH TECK (also called Tommy Ah Teck)Non-Executive Director

Banoomatee studied law at the University of London, UK. She is a fellow of the Institute of Chartered Secretaries & Administrators. Besides, she holds BA (Hons) in Administration and a certificate in Financial Management & Banking from the University of Strathclyde in Glasgow. She joined the State Investment Corporation Ltd in year 1985 where she held various positions and since 2015, she is the Acting Managing Director.

Directorship in listed companies: One (Air Mauritius Ltd)

(d) BANOOMATEE VEERASAMYNon-Executive Director


030



Geoffroy holds a DEA Business Law from Université Panthéon-Assas, a LLM from the National University of Singapore and an MBA from INSEAD. After his studies, Geoffroy started his career as a corporate lawyer in Asia. He was previously the Managing Director at a Top 5 Swiss bank in Singapore, and he subsequently set up a single-family office holding company in the UK. He is an experienced family business manager with focus on the entrepreneurial family model. Geoffroy is also a Charter Member of the UK Chartered Institute for Securities & Investments and a Certified Financial Planner.

Directorship in listed companies: Two (Gamma-Civic Ltd and Morning Light Co Ltd)

After completing his studies at the University of Natural Resources and Life Sciences in Vienna, Friedrich worked for Casinos Austria. In 1985, Friedrich was involved as project director on the introduction of Lotto “6 out of 45” in Austria, after which he was appointed Executive Director on the Board of the Austrian Lotteries in 1986, and was promoted to the position of Deputy Managing Director in 2006. He is an Executive Member of the European Lottery Association, and he has been at the vanguard of the movement that promotes preservation of a healthy regulatory framework in the European Union. He is also a member of the Austrian Federal Economic Chamber, and is responsible for the professional group Casinos Austria and Austrian Lotteries. In 2015, Friedrich was elected to the Executive Committee of the Global Lottery Monitoring System (GLMS) for sports betting.

Directorship in listed companies: None.

(h) GEOFFROY DEDIEUNon-Executive Director

(g) FRIEDRICH STICKLERIndependent Non-Executive Director


031


Jyoti holds an MSc in Investment Promotion & Economic Development from Edinburgh Napier University, Scotland, since 2013, after having completed her BA (Hons) Financial Services in 2003. She also holds a Diploma in Management and Marketing from the UK Institute of Commercial Management. Jyoti is currently the Senior Administrative Finance Officer (SAFO) at the SIC.


(i) KAVITA KUMARI ACHAMEESING (also called Jyoti Achameesing)Non-Executive Director

(j) MICHELLE JANE CARINCI (also called Michelle Carinci)Executive Director & CEO

Michelle, a Canadian national, has proven leadership in operations and innovation both locally and internationally, with over 40 years’ experience in the gaming industry. As President and CEO of the Atlantic Lottery Corporation, she developed and implemented a corporate social responsibility framework which strives to promote integrity, transparency and responsibility. Prior to joining Atlantic Lottery Corporation, she was President of Gamescape, a wholly-owned subsidiary of IGT and a Corporate Vice President in charge of marketing and customer relations at IGT.She has also been recognised four times as one of the top 50 CEOs in Atlantic Canada and is an inductee into the Lottery Hall of Fame class of 2006. Michelle is also a strong promoter of responsible gaming having been one of the founding members of the Responsibility Program on behalf of the WLA. Michelle also aided in the creation of responsible gambling principles and its associated frameworks and standards, which were unanimously approved by 140 organisations worldwide.


Since March 2012, Michelle holds the position of CEO of Lottotech Ltd, and in August 2014, she was appointed as board member. As the Company’s CEO, Michelle heads the management team and is responsible for the day-to-day business operations. She is also responsible for implementing the Board’s resolutions and the Company’s strategy as approved by the Board of Directors.



032


Cyril studied accountancy at the University of West London and is a member of the Institute of Chartered Accountants in England & Wales. From 1985 to 1988, he trained and worked as a Chartered Accountant in the UK with a number of accounting firms including KPMG.He joined Gamma in 1989 and has occupied several posts within the Group, including Group Finance Director and Supervisory Executive Director of Lottotech Ltd, and is involved in the business development of the Group.He was appointed as the Managing Director of Gamma-Civic Ltd in February 2011. Since July 2015, he is no longer an Executive Director, and is a member of the Board of Gamma-Civic Ltd in a Non-Executive capacity.

Directorship in listed companies: Two (Gamma-Civic Ltd & Morning Light Co Ltd).

(l) PAUL CYRIL HOW KIN SANG (also called Cyril How Kin Sang)Non-Executive Director

Narghis studied law at Université de la Réunion, and did her Bar at the Council of Legal Education in Mauritius in 1988. She was called to the Bar in 1989. She further holds a Diploma in International Commercial Arbitration, and has attended several training programmes on mediation and arbitration. Narghis is a member of the Electoral Supervisory Commission and the Electoral Boundaries Commission. She also has teaching experience as a lecturer at the Mauritius Council of Legal Education and Council of Vocational and Legal studies and the University of Mauritius. She was the first woman to chair the Mauritius Bar Council in 2000.


Paul is a Chartered Accountant. He is a business services entrepreneur and a former Partner at PwC Johannesburg, London and Dublin. He is widely experienced in matters of corporate governance, board effectiveness and prudential supervision of companies in regulated and non-regulated industries across international borders and in the following sectors: Financial Services, ICT, Healthcare, Real Estate, Construction, Renewables and Heavy Manufacturing. In his capacity as non-executive director, he has chaired Audit and Risk Board Committees. He is now building a portfolio of non-executive directorships.

Directorship in listed companies: One (Gamma- Civic Ltd).

(k) NARGHIS BUNDHUNIndependent Non- Executive Director

(m) PAUL HALPINIndependent Non- Executive Director



033


The following Directors are also Directors on the Board of Kolos Cement Ltd, which has been listed on the Development and Enterprise Market of the Stock Exchange of Mauritius subsequent to the reporting date but prior to the issue of the Corporate Governance Report:

• Carl Ah Teck;

• Cyril How Kin Sang;

• Geoffroy Dedieu;

• Patrice Ah Teck;

• Paul Halpin; and

• Tommy Ah Teck.

7. BOARD ATTENDANCE

For the period under review, the Board of Directors met 5 times and the attendance of the Directors at these meetings was as follows:

Directors Attendance

Carl Ah Teck 5/5

Allagappen Veeramootoo1 3/3

Banoomatee Veerasamy 4/5

Cyril How Kin Sang 5/5

Friedrich Stickler 5/5

Geoffroy Dedieu2 2/2

Kavita Achameesing 4/5

Michelle Carinci 5/5

Narghis Bundhun 4/5

Patrice Ah Teck 5/5

Paul Halpin 5/5

Tommy Ah Teck 5/5

Alex Burstein3 2/2

Note:

1. Allagappen Veeramootoo was appointed on 26 May 2017,

2. Geoffroy Dedieu was appointed on 26 May 2017; and3. Alex Burstein resigned on 26 May 2017.

8. T PAN TA

As an officer of the Company, the Company Secretary is accountable to the Board through the Chairman in the

performance of its duties and responsibilities, as defined in the Companies Act 2001, as well as for the corporate governance processes.

For the period under review, Gamma Corporate Services Ltd is the Company Secretary for the Company. Gamma Corporate Services Ltd is fully qualified as per the requirements of the Companies Act 2001. In addition to its duties and responsibilities as provided under the law, the Company Secretary assists the Chairman in ensuring that sound governance practices permeate throughout the Company. Furthermore, the Company Secretary acts as the Compliance Officer for corporate governance principles, regulatory and statutory requirements.

9. N T

The names of the common Directors within the holding structure at 31 December 2017 are as follows:

Carl A

h Teck

Patrice Ah Teck

Tomm

y Ah Teck

Cyril H

ow Kin Sang

Geoffroy D

edieu

Paul Halpin

Gamma-Civic Ltd * * * * * *

Lottotech Ltd * * * * * *

Gamma Leisure Ltd * * * *

Maurilot Investments Ltd * * * *

Natlot Investments Ltd * * * *

Glot Holdings (Mauritius) Ltd

* * * *

10. N ANA NT T A

The Company is led by a Chief Executive Officer (“CEO”), appointed by the Board of Lottotech Ltd as the Key Employee of the Company. The CEO is assisted by a Chief Operating Officer (“COO”), who acts as a deputy to the CEO.

Hereunder is the profile of the Senior Management Team, which is composed of the CEO, the COO, the Financial Controller, the Chief Technology Officer, the Security Manager and the Compliance and Risk Manager.


034


Please refer to Michelle’s profile under the ‘Directors’ Profiles’ section 6(j) of this report.

MICHELLE CARINCIChief Executive Officer

MOORGHEN VEERAMOOTOOChief Operating Officer

Please refer to Moorghen’s profile under the ‘Directors’ Profiles’ section 6(c) of this report.

Ansuya has a Bachelor of Commerce in Accounting and Finance from the University of Mauritius. She also completed the ACCA qualification. She has more than 10 years of experience in accounting and finance in both local and international organisations. She joined Lottotech in December 2010, and is presently the Company’s Financial Controller.

ANSUYA SEEWOORUTHUNFinancial Controller

PROFILE OF THE SENIOR ANA

10. SENIOR MANAGEMENT TEAM (continued)


035


Richard joined Lottotech in 2009, and has over 24 years of experience within the security profession. He is a former police officer, and held the position of security manager across a number of industries. Richard has a legal background. He oversees, investigates and liaises with the relevant legal and enforcement authorities to authenticate any winning tickets that may be in dispute.

RICHARD PAPIESecurity Manager

Harikrishna has a Master in Business Administration from Heriot Watt University. He has over 20 years’ experience in the IT profession, and was appointed as Chief Technology Officer at Lottotech in 2011. He is responsible for the planning and execution of IT initiatives that support the Company’s objectives. He also oversees and ensures the smooth and efficient running of the on-line lottery sales and IT services.

Sivalingum holds an MSc in Computer Security and Forensics, and a Master in Business Administration from the University Technology of Mauritius. He joined Lottotech in 2009, and is in charge of the risk and compliance aspects of Lottotech’s operations. He assists management in identifying key risks to the business, and ensures that appropriate controls are in place to mitigate these to an acceptable level.

HARIKRISHNA RAMSAMYChief Technology Officer

SIVALINGUM CANDASSAMYCompliance and Risk Manager

Profi e of t e e ior a a er

036


11. A TT

The Board has three committees which assist it to efficiently advance the business of the Board, and to facilitate efficient decision making of the Board, namely the Audit and Risk Committee, the Corporate Governance Committee and the Technical Committee.

The Audit and Risk Committee also fulfils the functions of a Risk Committee, while the Corporate Governance Committee fulfils the functions of Remuneration Committee and Nomination Committee.

A it a i o ittee The Audit Committee assists the Board for reporting financial information, for appropriate application and amendment of accounting policies, for the identification and management of risk, for the implementation of internal control systems and for internal audit, statutory and regulatory compliance of the Company. The Committee provides a forum for effective communication between the Board and the external and internal auditors.

The Audit and Risk Committee holds quarterly meetings to examine the quarterly financial statements and the audited financial statements, as well as reports from the auditors.

Committee Members Role

Paul HalpinChairman- Independent Non- Executive Director

Friedrich SticklerIndependent Non- Executive Director

Geoffroy Dedieu Non-Executive Director

Kavita Achameesing Non-Executive Director

For the period under review, the Audit and Risk Committee met 4 times, and the attendance of the members at these meetings was as follows:

Committee Members Attendance

Paul Halpin 4/4

Friedrich Stickler 4/4

Kavita Achameesing 3/4

Geoffroy Dedieu1 1/1

Note 1: Geoffroy Dedieu was appointed on 26 May 2017.

or orate o er a e o itteeThe Corporate Governance Committee acts as a mechanism for making recommendations to the Board on all corporate governance matters relevant to the Company to ensure that the Board remains effective and complies with the “Code” and prevailing corporate governance principles.

The Committee is also responsible for the remuneration and nomination matters. The remuneration philosophy is geared towards rewarding efforts and merits for individual and joint contribution to the Company’s results, whilst having also due regards to market conditions, the interest of the shareholders and to the financial well-being of the Company.

The Corporate Governance Committee is composed of the hereunder Directors:

Committee Members Role

Narghis BundhunChairperson- Independent Non- Executive Director

Banoomatee Veerasamy Non-Executive Director

Cyril How Kin Sang Non-Executive Director

Geoffroy Dedieu Non-Executive Director

Tommy Ah Teck Non-Executive Director

The Corporate Governance Committee met twice during the financial year under review, and the attendance of the Committee members are as follows:

Committee Members Attendance

Narghis Bundhun 1/2

Banoomatee Veerasamy -

Cyril How Kin Sang 2/2

Geoffroy Dedieu1 -

Tommy Ah Teck 2/2

Note 1: Geoffroy Dedieu was appointed on 26 May 2017.

Te i a o ittee A Technical Committee (“Comtech”) is a committee set up to ensure that Management is functioning within the strategy and budget as approved by the Board of Directors. In no event shall the Technical Committee have authority over or substitute itself for the Board.

The Comtech consists of representatives of the Board and of Management, and it holds monthly meetings.


037


Following each meeting of the Comtech, monthly reports must be circulated to the Board of Directors.

The members of the Comtech are as follows:

• Patrice Ah Teck;

• Geoffroy Dedieu; and

• Management (represented by the CEO & COO).

12. CODE OF CONDUCT

The Company’s Code of Professional and Ethical Conduct (“Code of Conduct”) provides guidance to all Directors and employees of Lottotech Ltd, of their duty and obligation to conduct themselves and their business affairs in accordance with the highest standards of business ethics.

13. A T A T AN N N NT

The Company complies with the Occupational Safety and Health Act 2005, and other applicable legislative and regulatory frameworks. It is committed to sustainable development, and ensures that its operations are conducted in ways that minimize their impact on the environment and on society at large.

14. T N AT N AN BENEFITS

The Company’s Charter provides for the remuneration payable to the Independent Non-Executive Directors, as well as the reimbursement of their expenses, in line with a Remuneration policy, duly approved by the Shareholders in a non-binding vote.

There may be special reward, if approved by the Board, to individual Board members following specific assignment to such members.

Remuneration and benefits received and receivable by the Directors from the Company are as follows:

Remuneration and benefits paid by the Company

MUR

Directors 16,649,396

Note: The Directors’ remuneration is disclosed in aggregate in view of the confidentiality of the information.

15. T A NT T

As at 31 December 2017, the Directors’ share interests in the Company were:

Director Number of Shares

Direct Indirect

Carl Ah Teck 147,840 33,015,181

Tommy Ah Teck - 33,063,307

Patrice Ah Teck 147,840 33,000,146

Friedrich Stickler - -

Cyril How Kin Sang 147,840 35,151,059

Geoffroy Dedieu - -

Michelle Carinci 38,796 14,434

Banoomatee Veerasamy 1,500 -

Kavita Achameesing - -

Narghis Bundhun - -

Allagappen Veeramootoo 52,632 -

Paul Halpin - -

16. T A N N A T PAN

As part of the Company’s statutory quarterly reporting process to the Stock Exchange of Mauritius Ltd and the Financial Services Commission, the Company Secretary would request the Directors to confirm their shareholding and any dealings which they may have effected in the Company’s shares, with reference to Code of Securities Transactions by Directors.

The Directors are thus fully aware of the principles of the Model of Code of Securities Transactions by Directors, as detailed in Appendix 6 of the Mauritius Stock Exchange Listing Rules.

During the period under review, there were no share dealings by any of the Directors holding shares in the Company, as per above table.

17. T NT A T

The Directors have no service contracts with the Company.


038


18. DIVIDEND POLICY

The Company’s Dividend Policy is that the Company shall distribute a minimum of 75% of its annual net profit after tax as dividend, except as otherwise resolved by the shareholders by way of Ordinary Resolution, subject to the Company meeting the Solvency Test.

As a general rule, it is expected that the Company will declare an interim dividend in or around August, and a final dividend in or around March following the year-end.

19. A A NT

Gamma-Civic Ltd, through its intermediate holding companies, entered into a shareholders’ agreement with the State Investment Corporation for Lottotech to implement and operate the Mauritius National Lottery, and SIC became a shareholder of Lottotech for obtention of the licence to operate the Mauritius National Lottery and to operate same.

20. A PT N

There is no share option scheme within the Company.

21. SHARE PRICE GRAPH

Share price

5.80

5.68

5.90

7.24

7.60

8.90

7.78

7.24

5.72

5.98

5.60

5.80

5.00

5.50

6.00

6.50

7.00

7.50

8.00

8.50

9.00

31 J

an 2

017

28 F

eb 2

017

31 M

ar 2

017

28 A

pr 2

017

31 M

ay 2

017

30 J

un 2

017

31 J

ul 2

017

31 A

ug 2

017

29 S

ep 2

017

31 O

ct 2

017

30 N

ov 2

017

29 D

ec 2

017

5.80 5.72 5.98 5.60 5.80 5.68 5.90 7.24 7.60 8.90 7.78 7.24

Lottotech Share Price

22. ANA NT A NT

The Company has a management agreement with A.S. Burstein Management Ltd (“ASB”), a subsidiary of Gamma-Civic Ltd, to offer it specific services related to the technical business operation of the Company. Furthermore, Gamma-Civic Ltd has a management agreement with ASB for the same services.

23. A T N AT N

For the period under review, the auditors’ fees paid by the Company are as per table below:

MUR

Audit fees 1,495,000

Other fees 97,750

24. RELATED PARTY TRANSACTIONS

Please refer to Note 15 of the Financial Statements.

25. CONTRACTS OF SIGNIFICANCE

The Company has no contracts of significance with either a Director or a controlling shareholder.

26. ANA NT NT NA NT AND INTERNAL AUDIT

Lottotech Ltd complies with industry best practices, corporate governance standards and applicable statutory and regulatory requirements. It ensures that risks that arise are effectively assessed, monitored and managed within acceptable levels.

For the year under review, following its business risk management exercise, potential risks which the Company may encounter and its mitigating measures have been laid out.

The potential risks examined are namely:

• Business interruption- Lottotech relies heavily on its IT infrastructure to continue to deliver an uninterrupted quality service to its customers. Its operations depend to a large extent on the reliability, performance and security of its information technology system, software and network.

• Reputational- The risk of reputational damage to Lottotech’s image resulting from negative perception, and information surrounding the gambling industry could adversely affect the business.


039


• Legal and regulatory- The industry in which Lottotech operates is regulated and changes to applicable laws and regulations, including the introduction of more stringent laws and regulations, could adversely affect its business, results of its operations, financial condition and/or its prospects.

• Human resource- The real and perceived integrity and security of the Company’s employees are critical to its ability to attract customers and comply with applicable regulations.

• Strategic- Risk arising from adverse effects of business decisions, failure to meet the business development targets, improper implementation of business decisions/projects, and failure to react to unexpected external events which can negatively impact the business.

Furthermore, the Company has in place a Risk Management Framework based on the following principles:

• There is a clearly defined approach for risk management setting out its strategy and objectives and the approaches and processes that the Company adopts to achieve them;

• There is a clearly defined process to identify, assess and mitigate the significant risks to the achievement of business objectives; and

• There is an on-going process to monitor the risk profile, and identifying and responding to significant issues and events.

The Risk Management report is reviewed by the Audit and Risk Committee and subsequently a report is presented to the Board.

The key risks identified for the Company are outlined in Note 3 of the Financial Statements.

Ernst & Young has transited from being the internal auditor to the external auditor of the company. Consequently, BDO was appointed as internal auditor.

The plan, prepared in collaboration by Management and the auditor, is presented to the Audit and Risk Committee, which is duly mandated by the Board to monitor that Management is ensuring that all significant risk areas of the Company’s activities are being addressed.

27. INTEREST REGISTER

The Company has an Interest Register, and for the period under review there is an entry recorded in the Register.

28. TAT NT N AT N PHILOSOPHY

The Company’s long term philosophy is to attract and retain leaders who are focused and encouraged to deliver business priorities within a framework that is aligned with the interest of the Company.

29. CORPORATE SOCIAL RESPONSIBILITY

Lottotech contributes significantly to the Consolidated Fund of the Government of Mauritius. As per the Gambling Regulatory Act 2007, any money paid into the Consolidated Fund is used to finance the implementation of projects relating to community development, the promotion of education, health, sports and culture, and for reimbursement of public debt of the Government. This contribution is a contractual obligation forming part of the Operator’s licence.

Furthermore as a social player, the Company remains committed to its CSR programme, having focus on projects which would help in alleviating poverty, such as through sports, the youth and education, both in Mauritius and Rodrigues.

For the year 2017, the Company contributed MUR442m to the Consolidated Fund and MUR2.4m as CSR.

30. DONATIONS

The Company did not make any political or other donations for the period under review.

31. N N NTA P

The Company is committed to reducing its environmental impact and continually improving the environmental performance as an integral and fundamental part of the Company’s business strategy and operating methods.

The Company Charter has provided for an Environment Policy.


25. RISK MANAGEMENT, INTERNAL CONTROLS AND INTERNAL AUDIT (continued)

040


32. CALENDAR OF EVENTS

For the financial year ending 31 December 2018, the Board will hold the following statutory Board meetings:

Meeting Date Events

tat tor e orti

ar Publication of audited results for the year ended 31 December 2017

a Publication of quarter results ended 31 March 2018 & Annual Meeting

A t Publication of half year’s results ended 30 June 2018

No e er Publication of nine months’ results ended 30 September 2018

33. TAT NT T P N T

As per the requirement of The Companies Act 2001, the Directors ensure that the financial statements for each financial year, are prepared and presented in a fair manner the financial position and financial performance of the Company.

In preparing those financial statements, the Directors ensure that:

a. A suitable selection of accounting policies is carried out, and that the selection is applied consistently;

b. Judgements and estimates made are reasonable and prudent;

c. It is clearly stated as to whether the International Financial Reporting Standards (IFRS) have been followed and complied with, subject to any material departures disclosed and explained in the financial statements;

d. Proper accounting records, which disclose with reasonable internal accuracy at any time the financial position of the Company, are kept;

e. The assets of the Company are safeguarded by maintaining internal accounting and administrative control systems and procedures, and risk management;

f. Reasonable steps are taken for the prevention of fraud and other irregularities; and

g. The financial statements are prepared on the going concern basis, unless it is not appropriate to presume that the Company will continue in business.

The Directors confirm that they have complied with the above requirements in preparing the financial statements.

The Directors are responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Mauritius Companies Act 2001 and International Financial Reporting Standards. They are also responsible for safeguarding the assets of the Company, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Board acknowledges that the responsibility of the external auditors is to report on these financial statements.

e a f of t e oar

Director Director

26 March 2018


041


To pour one’s heart and soul

into daily duties to reach perfection is called winning

042


PASSION

043


The Company suffered a major setback when the 2015 budgetary measures were introduced which banned the Quick Win category of games and advertising of our products. The objective throughout 2017 was to continue to restore profitability and shareholder value ultimately reaching and surpassing the profitability levels of 2014 prior to the ban in the not too distant future.

The Board, together with management, embarked upon a cost optimisation initiative in 2013 which resulted in an 18% reduction of administrative expenses in 2014. In 2015, the Company responded to the budgetary measures which banned the Quick Win category of games and advertising by undertaking a major restructuring to minimise the impact on shareholder value. In 2016, the restructuring exercise resulted in a reduction of 36% in administrative expenses.

The Company continued the cost optimisation efforts throughout 2017. However, the savings in 2017 were offset by the legal fees associated with the mediation process

with the GRA and an increase in the annual lottery licence fees of 900%.

0

100

200

300

201720162015201420132012

261 259

212

161

135151

Mill

ions

Administrative Expenses- MUR Millions

A A TAT NT

ire t o o i tate e t e erate 2017 2016 2015MUR'M MUR'M

Gross ticket sales 1,852 1,652 1,676

Less Direct Cost (1,405) (1,465)

Tota ire t e o o i tate e t e erate 286 247 211

ea t i tri te

To players as prizes 898 801 745 To employees as salaries, wages and other benefits 69 66 82 To retailers as commissions 102 91 84 To shareholders as dividend 78 92 54 To government and its agents 507 447 456

To communities as corporate social responsibility 2 2 3

Tota ea t i tri te 1,656 1,499 1,424

ea t ei e te

Retained profit 72 39 42

Depreciation 48 46 58

Tota ea t rei e te 120 85 100

FINANCIAL REPORT

044


P AT N P AN

The Company generated a net profit of MUR110.8m for the year ended 31 December 2017 compared to MUR88.2m in 2016 and a turnover of MUR1,852.5m in 2017 compared to MUR1,651.6m in 2016.

The positive results in 2017 compared to 2016 are mainly due to 11% higher aggregate jackpot offering, new and improved communication channels, and an increase in average sales at all jackpot levels.

1550

1600

1650

1700

1750

1800

1850

1900

201720162015

1,852.5

1,651.61,675.6M

illio

ns

Gross Ticket Sales

0

20

40

60

80

100

120

201720162015

88.2

40.5

110.8

Mill

ions

Net Pro�it After Tax

0

50

100

150

200

201720162015

184.1158.5

108.2

Mill

ions

EBITDA

045


H AN CAPITAL HR INITIATIVES

P P N T

Lottotech is a unique diverse community of over 60 employees and partners. We all learn and develop in a challenging and nurturing environment. Multiculturalism is an integral part of everyone’s life at Lottotech.

P N A NT

At Lottotech, we firmly believe that an engaged and empowered workforce is crucial to achieving growth and team success. Every year, employees participate in the people survey. The Survey provides a comprehensive understanding of the employee working experience and assists management and employees to create an environment in which everyone can succeed and deliver sustainable performance. The 2017 results have been very motivating with an engagement score of 81%.

The team believes in continuous improvement to ensure that Lottotech remains a great place to work.

We inspire, engage and empower our people!

Feel proud to work for Lottotech

93%

81%Being socially responsible

(a good “corporate citizen”)

046


A N N P NT

In late 2015, Lottotech conducted a workshop on earmarking Lottotech values and beliefs. Since then a series of awareness campaign, workshop and activities have been conducted to make sure that those values are embedded in our People process. Our internal culture champions “Loto Fun Club” act as culture carriers. The main objective is to connect and engage with others at all levels championing the values of Lottotech.

Lottotech has conducted dedicated programs such as “Develop and Enhance the Organisation” by International expert “Stahl+Partners” to enhance our people skills. Lottotech puts as much emphasis on how employees go about their work as much as on the results they achieve. Employees believe in continuous improvement and high performance teams therefore they continue to benefit from technical training.

Training Spent by Category

Core skills43%

Leadership and Employee Development

36%

Lottery Seminar

6%

Regulatory and Good Governance

15%

TA NT ANA NT APP A

Looking at the current challenges, Lottotech has adopted a tactical approach to talent acquisition. We have leveraged the skills and experience already available within the company while bringing the necessary capabilities from outside to sustain the performance of the business. The cross-divisional moves allow employees to grow and develop their skills and pursue diverse careers. This approach has given rise to greater career development and retention of employees.

ENGAGING WITH INTERNAL & EXTERNAL N T

In 2017, the company has been awarded World Lottery Association (WLA) Level 3 International RG Accreditation and is applying for WLA Level 4 in 2018. This clearly demonstrates its continued commitment to responsible gaming. There was an education and awareness campaign in mid-2017 to sensitize employees on responsible gaming.

SERVICE LEARNING

We further developed our commitment to Service Learning in 2017. A group of employees with a passion for supporting IT programs volunteered at Atelier Joie de Vivre whereby they devoted part of their time to educating primary school kids.

AN AP TA P T

Promoting Professional and Personal Development

• Promoting Internal Employee Mobility (Cross Divisional move)

• Building Leadership Capabilities

Aligning the reward system to the evolving market

Collaborative & Enabling working environment driving an engaged workforce

To deliver WOW Customer Service

047


Employees

Employee Turnover

o ee a a e e t

Female FemaleMale Male22% 38%78% 62%

AN AP TA AP

HUMAN CAPITAL: HR INITIATIVES

639%

048


Operatives68%Employee

21%

Managers11%

Headcount by Employee Category

5-8 years71%Less than 1 year

10%

Up to 4 years19%

Length of Service

049

LOTTOTECH LTD / ANNUAL REPORT 20179854-LOTTOTECH_RA_2017_V7

BrandThe research conducted by Cognito in 2017 concludes that Loto has by far the greatest share of top of mind awareness (TOM) of games of chance and remains the preferred game of chance in the country. As an operator, Lottotech has a positive image and is believed to be financially strong, has the necessary expertise to run the lottery, educates people to play in a responsible way and makes a positive contribution to the country.

In order to increase our brand’s visibility and provide information to the public, Lottotech has used platforms other than traditional media. Digital channels have become one of our powerful modes of communication including social media platforms, digital screens at retailers and the recent addition of big screens in the malls. The content evolved with time and has become more dynamic through mini videos aimed at catching the attention of passers-by.

To demonstrate transparency and instil public trust, Lottotech organised two outdoor draws, one for Independence Day and the other during the Porlwi by Nature event. The events were a real success with a good response from the public.

67%

100% 60

of the adult population are playing Loto

weekly expenditure aided top of mind awareness

SOCIAL AND RELATIONSHIP CAPITAL

MUR

050


RetailersOur retailer network has reached 750+ partners throughout Mauritius and Rodrigues. In order to improve our collaboration, a quarterly retailer focus group was created.

Moreover, our team has created a tailormade approach to developping Facebook pages for our retailer network extending our reach on social media and at the same time promoting our retailers. It also allows retailers to keep up to date with the latest technology.

Our Retailer Jackpot branding strategy introduced in 2015 has improved our visibility and is an integral part of the communication with our players particularly in light of the advertising ban.

423

Subscribers Mau Loto,

Facebook fans

20,000

90,000

50,000

150,000

150%

66%

FACEBOOK PAGE CREATED

2016

2016

2017

2017

Growth rate

Growth rate

051


AT LOTTOTECH, WE BELIEVE that in today’s economy we are not only accountable for profitability but we have an obligation towards our stakeholders; shareholders, players, employees and partners, to fulfill our social and environmental commitments. Our Corporate Social Responsibility (CSR) vision is to contribute to the sustainable development of our society by reinforcing the trust that people of Mauritius place in us, and making a real difference in our community. Consequently, Lottotech is engaged to keep its promises towards the community of which we are part and make Mauritius a more sustainable and healthier country


052


Centre d’Amitié

“Lottotech is still our biggest supporter”Océane Ravina is the manager of Centre d’Amitié in Bambous. This NGO caters for the education needs of nearly 100 children (kindergarten and pre-primary levels). “We are grateful for the continued support of Lottotech, despite the new CSR regulations. We can continue in our caring mission.” The Centre d’Amitié started in 1985 and offers also support services to needy families: food, administrative assistance to obtain legal aid or other aids, school materials etc. Over the years, the NGO has had the privilege of seeing many of its beneficiaries rising out of poverty and becoming active and engaged citizens and professionals. Lottotech has been supporting the Centre d’Amitié since 2015.

Atelier de Formation Joie de Vivre

“The children are happy with the bio-gardening project”In Chemin Grenier, Frances Towsend is a very happy. Her “children” are enjoying themselves with the new project funded by Lottotech: starting a new bio-garden under the supervision of Vélo Vert. Each Thursday, 25 kids clean and learn the basics of setting up a bio garden. “They simply love it! Even if it’s pouring outside, they will still go into their garden.” The team of Vélo Vert teaches them the theoretical and practical aspects of planting without pesticides. The next step is to start the garden with planting flowers and medicinal herbs. “Lottotech’s support is vital for us, they are part of our family.”

T T N A N

053


Corporate Social ResponsibilityCorporate Social Responsibility is embedded throughout our operations. In Mid-2017, Lottotech developed a long-term plan to improve the positive impact of our business. The new framework is based on the best practices developed by the European Lotteries (EL) using ISO 26000, a global guideline to help companies to operate in a socially responsible way. It also integrates the Sustainable Development Goals (SDGs) to help in the impact assessment of the initiatives. The SGD’s are 17 global goals developed by the United Nations and Lottotech has identified 5 SDGs where we can make a difference and continue to find new ways to impact through other SDGs as they relate to our industry.

APP N A A N T TT T A A NThe main objective is to have a CSR programme which encapsulates all the best practices in order to maximise positive impact and minimise negative impact on a global perspective.

Lottotech commits to champion gender equality for employees and promote the cause by reinforcing HR practices and participating in talks to empower women –SDG 5.

Lottotech identifies as priority to reduce negative impact on SDG 12 at production by ensuring supplier’s responsible, environmental and ethical levels and at product end of life by promoting responsible gambling.

Lottotech identifies as priority to increase positive impact on SDG 8 in its operation by providing fair wages to all employees.

Lottotech identifies as priority to increase impact on SDG 4 by improving employee volunteering program and promote projects to allow underprivileged children to have access to education.

Lottotech commits to SDG 13 by reducing negative impact on the environment and taking eco-friendly initiatives.

SDG 5Gender Equality

SDG 8 Decent work

and economic growth

SDG 4Quality

Education

SDG 13Climate Action

SDG 12Responsible

consumption & production

INCREASING P T PA T

N N N AT PA T

A AT A SUPPLIERSINBOUND LOGISTIC

PAN OPERATIONS

DISTRIBUTION PRODUCT USEPRODUCT END LIFE


054


Our AchievementsDue to a change in the legislation, businesses are required to contribute, through Mauritius Revenue Authority (MRA), at least 50% of their CSR money to the new National CSR Foundation. This reduction in our CSR funds has impacted on the number of Non Governmental Organisations (NGOs) that Lottotech used to help financially. However, Lottotech does not rely only on the 2% of CSR funds as prescibed by the law but also uses additional funds to help NGOs.

Lottotech is participating in other ways to assist NGOs through its volunteer programme.

Ate ier oie e i reHaving employees involved in community projects is vital for Lottotech. As such, Lottotech has developed an IT program to help the students of Atelier Joie de Vivre as the school did not have sufficient funds to pay a teacher on a regular basis.Each Wednesday, a group of volunteers, composed of 4 employees, go to Atelier Joie de Vivre to teach IT classes to the kids. The method used is ‘learn by doing’. The level of the kids is being assessed each quarter to see if there is any progression and identify those who need special attention.

The aim of the program is to help the students get acquainted to the digital world which is a prerequisite today to be employable.

• Improve IT literacy of the children

• Giving them the right tools for future jobs

• Encourage employees to have contact with vulnerable people and have personal satisfaction for their contribution

• Employees have a sense of belonging to the company

Facing great difficulties to raise funds due to the changes in the legislation, Atelier Joie de Vivre had stopped providing lunch to the kids. Witnessing the distress of the students, employees contributed and organized a lunch for the school. On the same day MUR200,000 were contributed for their program A lunch A day! No student can learn on an empty stomach.

Volunteer Program

200more than

hours

055


Women in Leadership Another initiative in collaboration with Women in Networking is to help women entrepreneurs to be more confident and become leaders. Various sessions were led by our CEO, Michelle Carinci and other members of the Lottotech team.From digital, communication, marketing to financial courses, Lottotech has trained or impacted over 400 women entrepreneurs.

ItemNumber of

sessions Beneficiaries HoursLeadership session 10 400+ 30+

IT program 15 60 180 35volunteers

Recycling ProgrammeLottotech’s objective is to reduce its carbon footprint and protect the environment. This year, we will continue our collaboration with NGOs/Companies disposing of materials in an ecofriendly way.

NGO Material Amount Date

Paper Link Scratch Cards 50 tons May- June

Belle Verte

Signage and Playstation July

Belle Verte Wood/metal/plastic October

50more than

of paper recycled

tons

55%participation rate


056


Communication supportLottotech is always looking for innovative ways to support our communities and the NGO’s serving the communities. Providing communication opportunities through our digital network enhances the visibility of NGOs and their support initiatives resulting in a greater positive impact in the country.NGO Value Date

Papim – Campaign World Cancer Day MUR4,150 4-Feb-17

Mo’zar – Collect for Festival in Cuba MUR4,150 17-Nov-17

We have also given the opportunity to NGOs to have some visibility during our events such as our outdoor draws. Mo’zar performed for the opening of both events held at Bagatelle and Port Louis Waterfront.

This year we have run a Merci à Vous! campaign thanking our stakeholders and showing how they contribute to good causes. At the same time, this has given visibility to NGOs through testimonials featured on our digital platforms.

Engagement+625k

Shares+450

Reactions +10k

057


5

1 day

+ MUR400,000

1 day

MUR 1,2 Million* 700+

Computers to Esperance 2000

out to Circus for the kids of centre d’amitié

Funds beneficiaries

at the Cinema for the women and Kids of Passerelle

Value of donations and volunteering

Other Donations

Financial Donation


Note *: the other 50% out of the MUR2.4 million CSR funds went to the NCSR foundation as the law prescribes.

058


e tre A itiOver the past two years Lottotech has supported a preschool program in Bambous. The contribution of MUR250,000 is invested in the education program for 105 underprivileged kids.

i to ifeLottotech contributed MUR100,000 for the Link to Life breast cancer awareness program. Link to Life travels around the country offering free cancer screenings.

A o iatio A i e o o oThe Amis de Don Bosco shelter protects and provides a loving environment to children who have suffered from various forms of abuse. Lottotech contributed MUR170,000 to their balanced meal program which has a positive impact on the health of the children.

Ate ier o ar Atelier Mo’zar is a music school created by late José Thérèse. Over the years, the school meant to help children in underprivileged areas has become famous and is now representing our country in an international jazz festival. Lottotech is proud to help them with a contribution of MUR200,000.

i Afri aHaving a balanced meal is important for the health and development of a child. Eli Africa, an NGO caring for children in Cité Kennedy has received MUR50,000 from Lottotech for their program.

e a o a tLe Flamboyant is a little school found in Cité Richelieu. Lottotech contributed MUR50,000 towards their education program.

T e a io e o i arit Tr tFor the third consecutive year, Radio One and Lottotech have collaborated and organized the dinner for homeless people of Port Louis.

Ate ier oie e i re a o ertA lunch a day! This is the project that Lottotech has been supporting for 2 years now. We are also proud to volunteer to teach their IT courses.

This year Lottotech will start a pilot program for ‘Agri-Ecologie’. The main aim of the program is teaching at school level first, how to cultivate land in an eco-friendly and sustainable way. In the long run, this could expand to planters around the island.

• Focus on Education and development of children.

• Minimise negative impact on environment and health

• Encouraging children to be interested in the cultivation of land and look at it as a job opportunity

To start, Lottotech will collaborate with Atelier Joie de Vivre which already has gardening included in the curriculum of the school and ‘Vélo Vert’, a company educating people how to cultivate land without using any chemicals. To kick start the project, we have contributed MUR40,000.

oo ateriaThis year Lottotech has decided to donate school materials to the NGOs. It will be given to 300 beneficiaries.

Link to Life

Vélo Vert

The Radio One Solidarity Trust

059


To grow and help others grow as

blooming human beings is winning

060


PRIDE

061


In 2017, Lottotech was awarded the Responsible gaming level 3 certification by the World Lottery Association.

As a member of the World Lottery Association, our responsibility as an operator is to minimize risk of underage play and problem gambling. Lottotech is proud to be the second lottery in the African region to receive the responsible gaming certification level 3 which demonstrates our commitment towards our objective to be the most responsible operator in the region.

RESEARCH

RETAILERS’ AND EMPLOYEES’ TRAINING

RESPONSIBLE COMMUNICATION

DETECTION TECHNOLOGY & PROCESSES

SUPPORT AND REFERRAL TO TREATMENT PROFESSIONALS

STAKEHOLDERS ENGAGEMENT

EFFECTIVENESS MEASUREMENT

GOVERNANCE STRUCTURE

GAME DESIGN PROCESS

PUBLIC AND PLAYERS’ EDUCATION

INTERVENTION TECH & MESSAGING

INTERVENTIONDETECTIONPREVENTION

P N A N

062


1. RESEARCH

Each year Lottotech runs a tracking study to gather data on players’ behavior and perception. This year, the problem severity index has been included in the study to help Lottotech develop the right strategy to protect and educate players on safe play.

Positive Opinion on Lottotech brand

Awareness campaigns to prohibit underage gambling among those under 18 years

Lottotech has the necessary expertise to organize lottery games in Mauritius

Lottotech educates people how to play Loto in a responsible way

56% 63%

63% 58%

2. P P A

We believe that corporate social responsibility, including responsible gaming, is the responsibility of each and every one of our employees. We aim to ensure that the entire team understands the impacts associated with the misuse of gambling products, what responsible gaming means for their job and personal lives and that they feel empowered to help develop our overall CSR and RG strategies.

100% of employees have taken online RG training

100% of new employees take online responsible gaming online training

100% of employees in touch with public or retailers going through specific RG training

100% of employees achieving

+80% during the online training test

81% of staff: “I am working for a responsible employer.”

100% of staff: “I would recommend Lottotech as a great place to work.”

063


3. TA P A

The objectives of our retailer program are to ensure that our retailers are informed about our games as well as the risks related to gambling more widely. We also aim to ensure that retailers protect vulnerable groups (including minors) and themselves, from adverse impacts of gambling. Also, that they know how to respond when faced with potential questions regarding problems associated with gambling.

All retailers are provided with the rules and regulations of our Loto game, which include responsible gaming related requirements such as:

“Claimant”: A person of age 18 and above who submits a claim for the Prize in accordance with these Rules.

‘Participant’: A member of the public of age 18 and above who purchases or otherwise acquires a Loto 6/40 Game Ticket.

4. T A N

As Lottotech does not sell its products online, we use our online communications channels to provide information to players and the public such as: Odds information: accurate information about Loto to enable players to make informed decisions when buying a ticket.

Treatment referral: there is a hotline where they can call to find further help.

Player self-test: engaging self-test based on the medical DSM-V test to help educate players and the public about what may consist of excessive play behaviour.

100%

100%

of retailers having completed the online interactive training

of retailers achieving +80% during the online training test

participants to the test of “What type of player are you?”

500+

RESPONSIBLE GAMING

064


5. A T N N AT N

Responsible gaming messages are included in all our communications channels

Lottotech communicates and seeks to engage the public and our players on responsible gaming, using all our online channels, social media, corporate site (Lottotech), Loterie Nationale site. Additionally, all other channels of communications also include responsible gaming messages that seek to educate and engage the population on the fact that playing Loto needs to remain an entertainment and is reserved for adults.

In addition, we have developed a marketing code which is signed by all agencies working on our communications. We have even extended it to our hosts.

The code consists of:

• Adherence to the legal requirements of the GRA Act or any other regulations as stipulated by the authority

• Not targeting, or primarily appealing to minors,

• Not encouraging consumers to participate excessively or beyond their means,

• Not promoting lottery games as an alternate to work or means of escape from a bad financial situation,

• Not include text or images that positions the ticket as a financial strategy/or investment,

• Not promising a win,

• Not exaggerating the chances of winning or the size of the prize,

• Not including text that overstates the odds or likelihood of winning,

• Not portraying unrealistic outcomes,

• Not implying a player’s skill can influence the outcome of our games,

• Not associating with other products such as alcohol and cigarettes, etc

6. T AT NT REFERRAL

Mauritius has little to offer to date for treating problem gambling. However, Lottotech does provides a hotline from 6am to 10pm, 7-day-a-week service which can be a first contact point for people seeking further information related to problem gambling. Our team is trained to refer anyone calling and enquiring about treatment support to a professional. All calls received are related to other forms of gambling which is understandable given that the Loto game does not have the inherent characteristics of problematic games which is primarily the perception of being able to control the outcome of a game and high frequency of winning and playing.

The number of the hotline can be found on the back of our tickets as well as in store. We have also included information about referral in our training to retailers and employees. All our employees and retailers know where to find the hotline.

7. TA N A NT

Stakeholder engagement is key to the development of Lottotech’s business strategy. Lottotech is committed to creating long lasting and trusting relationships with all of its stakeholders.

Through our overall stakeholder engagement, we have committed to rallying support for an overall corporate social responsibility strategy that includes a responsible gaming strategy for Mauritius. To develop strong and effective CSR and responsible gaming strategies, we continually encourage stakeholders to provide feedback, input and direction to ensure that we are implementing best-in-class effective programs.

During the year, Lottotech has had meetings with the regulator to engage them on a collective campaign to be rolled out in 2018. Our team has done a presentation on Responsible Gaming in the presence of the GRA members.

Other initiatives for engaging our key stakeholders have been put in place such as collaborating with media so as to engage the business community and community at large on the topic of Responsible gaming.

065


To be surrounded by a team of

dedicated individuals working towards

a common goal is winning.

066

ANNUAL REPORT 2017 \ LOTTOTECH LTD9854-LOTTOTECH_RA_2017_V7

TEAM

067


Secretary’s Report

LOTTOTECH LTD

Under Section 166(d) of the Companies Act 2001

We confirm that, based on records and information made available to us by the directors and shareholders of the Company, the Company has filed with the Registrar of Companies, for the year ended 31 December 2017, all such returns as are required of the Company under the Mauritian Companies Act 2001.

Gamma Corporate Services LtdSECRETARY

26 March 2018

068


Independent auditor’s reportTo the members of Lottotech Ltd

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Lottotech Ltd (the “Company”) set out on pages 72 to 102 which comprise the statement of financial position as at 31 December 2017, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including significant accounting policies.

In our opinion, the financial statements give a true and fair view of the financial position of Company as at 31 December 2017, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and comply with the Companies Act 2001.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We did not identify any Key audit matters during the year.

Other Information

The directors are responsible for the other information. The other information comprises the Directors’ Report, Statement of Compliance, Corporate Governance Report, the Secretary Report as required by the Companies Act 2001, and the financial summary which we obtained prior to the date of this auditor’s report. The Annual Report is expected to be made available to us after that date. Other information does not include the financial statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

069


Independent auditor’s reportTo the members of Lottotech Ltd (continued)

Report on the Audit of the Financial Statements (Continued)

Responsibilities of the Directors for the Financial Statements

The directors are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act 2001 and the Financial Reporting Act 2004, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intends to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the director’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

070


Independent auditor’s reportTo the members of Lottotech Ltd (continued)

Report on the Audit of the Financial Statements (Continued)

Auditor’s Responsibilities for the Audit of the Financial Statements (Continued)

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other matter

This report is made solely for the Company’s members, as a body, in accordance with Section 205 of the Companies Act 2001. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

Report on Other Legal and Regulatory Requirements

Companies Act 2001

We have no relationship with or interests in the Company other than in our capacity as auditors and tax advisors and dealings in the ordinary course of business.

We have obtained all the information and explanations we have required.

In our opinion, proper accounting records have been kept by the Company as far as it appears from our examination of those records.

Financial Reporting Act 2004

The directors are responsible for preparing the Corporate Governance Report. Our responsibility is to report on the extent of compliance with the Code of Corporate Governance as disclosed in the Annual Report and whether the disclosure is consistent with the requirements of the Code.

In our opinion, the disclosure in the Annual Report is consistent with the requirements of the Code.

ERNST & YOUNG ROGER DE CHAZAL, A.C.AEbène, Mauritius Licensed by FRC

26 March 2018

071


Statement of Profit or Loss and Other Comprehensive Income For the year ended 31 December 2017

2017 2016

Note MUR

Revenue on ticket sales 1,852,490,380 1,651,579,840

Prizes (801,016,222)

Consolidated fund (392,620,166)

Net income 513,651,123 457,943,452

Retailers’ and other commissions (90,907,974)

Gaming systems and data communication costs 4 (120,312,893)

Other operating expenses 5 (134,611,555)

Operating profit 135,672,285 112,111,030

Finance income a 3,590 58,116

Finance costs (8,929)

Profit before income tax 135,629,202 112,160,217

Income tax expense 8 (23,964,213)

Profit for the year 110,845,319 88,196,004

Other comprehensive income:

Items that will not be reclassified to profit or loss

Remeasurement of post-employment benefit obligations 17 333,000 35,000

Deferred tax on remeasurement of post-employment benefit obligations 16 (5,950)

Other comprehensive income – net of tax 276,390 29,050

Total comprehensive income for the year 111,121,709 88,225,054

Basic and diluted earnings per share 9 0.33 0.26

The notes on pages 76 to 102 form an integral part of these financial statements.

072


Statement of Financial PositionAs at 31 December 2017

Note 2017 2016MUR

A etNo rre t a et

Property and equipment 10 103,373,494 150,828,200

rre t a etInventories 11 732,339 706,812 Trade and other receivables 12 59,561,671 78,403,928

Cash at bank and in hand 291,605,363 156,806,786

351,899,373 235,917,526

Tota a et 455,272,867 386,745,726

it a ia i itiea ita a re er eStated capital 13 100,000,000 100,000,000

Retained earnings 71,552,139 38,630,430

Tota e it 171,552,139 138,630,430

No rre t ia i itieDeferred income tax liabilities 16 4,331,768 5,101,749

Post-employment benefits 17 2,228,000 2,059,000

6,559,768 7,160,749 rre t ia i itie

Trade and other payables 14 269,724,832 238,664,843

Current income tax liabilities 8 7,436,128 2,289,704

277,160,960 240,954,547

Tota ia i itie 283,720,728 248,115,296

Tota e it a ia i itie 455,272,867 386,745,726

A t ori e for i e t e oar of ire tor o ar a i e o it e a f

DIRECTORS DIRECTORS


073


Statement of Changes in EquityFor the year ended 31 December 2017

NoteStated

a itaetai e

ear iTota

e itMUR MUR MUR

At a ar 100,000,000 42,205,376 142,205,376 Profit for the year - 88,196,004 88,196,004

Other comprehensive income for the year - 29,050 29,050

Tota o re e i e i o e for t e ear - 88,225,054 88,225,054

Tra a tio it o er

Dividends 18 - (91,800,000) (91,800,000)

At e e er 100,000,000 38,630,430 138,630,430

At a ar 100,000,000 38,630,430 138,630,430 Profit for the year - 110,845,319 110,845,319

Other comprehensive income for the year - 276,390 276,390

Tota o re e i e i o e for t e ear - 111,121,709 111,121,709

Tra a tio it o er

Dividends 18 -

At e e er 100,000,000 71,552,139 171,552,139


074


Statement of Cash FlowsFor the year ended 31 December 2017

2017 2016Note MUR MUR

Cash flows from operating activitiesProfit before income tax 135,629,202 112,160,217 Adjustments for:Depreciation on property and equipment 10 49,680,349 46,357,745 Adjustment on property and equipment 10 (1,298,738) - Net foreign exchange differences (569,678) -Provision for impairment of receivables 12 878,353 821,183 Loss/(gain) on disposal of property and equipment 23,687 (3,388)Provision for post-employment benefits 17 502,000 488,000 Interest expense 6 46,673 8,929

Interest income 6 (3,590) (58,116)

Operating profit before working capital changes 184,888,258 159,774,570(Increase)/decrease in inventories (25,527) 1,146,438 Decrease/(increase) in trade and other receivables 17,963,904 (54,385,140)

Increase in trade and other payables 31,059,989 93,920,144

Cash generated from operations 233,886,624 200,456,012Interest paid (46,673) (8,929)Interest received 3,590 58,116

Income tax paid 8 (20,464,050) (23,835,781)

Net cash generated from operating activities 213,379,491 176,669,418

Cash flows from investing activitiesPurchase of property and equipment 10 (959,592) (51,241,040)

Proceeds from sale of property and equipment 9,000 36,000

Net cash used in investing activities (950,592) (51,205,040)

Cash flows from financing activities

Dividends paid 18 (78,200,000) (91,800,000)

Net cash used in financing activities (78,200,000) (91,800,000)Net increase in cash and cash equivalents 134,228,899 33,664,378Net foreign exchange differences 569,678 -

Cash and cash equivalents at 01 January 156,806,786 123,142,408

Cash and cash equivalents at 31 December 291,605,363 156,806,786


075


Notes to the Financial StatementsFor the year ended 31 December 2017

1 GENERAL INFORMATION

The Company is incorporated and domiciled in the Republic of Mauritius as a public company. Its registered office is situated at Royal Road, Chapman Hill, Beau Bassin, Republic of Mauritius.

The Company is the Operator of the Mauritius National Lottery.

2 ACCOUNTING POLICIES

2.1 Basis of preparation

The financial statements have been prepared under the historical cost convention, and are presented in Mauritian Rupees (‘MUR’). All values are rounded to the nearest rupee, except as otherwise indicated.

2.2 Statement of compliance

The financial statements of Lottotech Ltd comply with the Companies Act 2001 and have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.

2.3 Significant accounting judgements and estimates

The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires the directors to exercise judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed below.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are disclosed below.

Post-employment benefits

The present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for post-employment benefits include the discount rate. Any changes in these assumptions will impact the carrying amount of post-employment benefits.

The actuary determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the post-employment benefits. In determining the appropriate discount rate, the actuary considers the interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related post-employment benefits.

Other key assumptions for pension obligations are based in part on current market conditions. Additional information is disclosed in Note 17.

076


Notes to the Financial StatementsFor the year ended 31 December 2017 (continued)

2 ACCOUNTING POLICIES (CONTINUED)

2.3 Significant accounting judgements and estimates (continued)

Assets’ lives and residual value

Plant and equipment are depreciated over their useful life taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually, and may vary depending on a number of factors. In reassessing asset lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values. Consideration is also given to the extent of current profits and losses on the disposal of similar assets.

Going concern

The Company’s management made an assessment of the Company’s ability to continue as a going concern taking into consideration the renewal of the licence due in April 2019. The Company has already launched the procedures for renewal of the licence for two consecutive five years period within the timeframe allowed by the Authority. Concurrently, the Company is also engaged in mediation with the Authorities and is confident over the renewal of the licence. Based on the above, the management of the Company does not believe that there are material uncertainties that will impact on the continuing operation of the Company in the foreseeable future, and has therefore determined that the going concern basis is appropriate for the preparation of the financial statements.

2.4 Standards, amendments to published standards and interpretations effective in the reporting period

The accounting policies adopted are consistent with those of the previous financial year except for the adoption of the following amended standards:

Effective for accounting period beginning on or after

Amendments

IAS 7 Disclosure Initiative - Amendments to IAS 7 1 January 2017

IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses - Amendments to IAS 12 1 January 2017

IFRS 12 Disclosure of Interests in Other Entities - Clarification of the scope of the disclosure requirements in IFRS 12 1 January 2017

The adoption of the above amended standards did not have a material impact on the Company’s financial statements.

077




2.5 Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Company

The following standards, amendments to existing standards and interpretations were in issue but not yet effective. They are mandatory for accounting periods beginning on the specified dates, but the Company has not early adopted them:

Ne or re i e ta ar a i ter retatio

ffe ti e for a o ti erio e i i o or after

Ne or re i e ta ar

IFRS 9 Financial Instruments 1 January 2018

IFRS 15 Revenue from Contracts with Customers 1 January 2018

IFRS 16 Leases 1 January 2019

IFRS 17 Insurance Contracts 1 January 2021

A e e t

IFRS 2 Classification and Measurement of Share-based Payment Transactions - Amendments to IFRS 2 1 January 2018

Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts - Amendments to IFRS 4 1 January 2018

IFRIC 22 Foreign Currency Transactions and Advance Consideration 1 January 2018

IAS 40 Amendments to Transfers of Investment Property 1 January 2018

IFRIC Interpretation 23 Uncertainty over Income Tax Treatments 1 January 2019

Prepayment Features with Negative Compensation - Amendments to IFRS 9 1 January 2019

Long-term Interests in Associates and Joint Ventures - Amendments to IAS 28 1 January 2019

A a ro e e t e i e i e e er

The following amendments were made to these standards:

• IFRS 1 – First-time Adoption of International Financial Reporting Standards - Deletion of short-term exemptions for first-time adopters (01 January 2018)

• IAS 28 – Investments in Associates and Joint Ventures – Clarification that measuring investees at fair value through profit or loss is an investment by investment choice (01 January 2018)

• IFRS 3 – Business Combinations – Previously held interests in joint operation (01 January 2019)

• IAS 12 – Income Taxes – Income tax consequences of payments on financial instruments classified as equity (01 January 2019)

• IAS 23 – Borrowing Costs – Borrowing costs eligible for capitalisation (01 January 2019)

• IFRS 11 – Joint Arrangements – Previously held interests in joint operation (01 January 2019)

078




2.5 Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Company (Continued)

IFRS 9 Financial Instruments

In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Except for hedge accounting, retrospective application is required but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions.

The Company will adopt the new standard on the required effective date and will not restate comparative information. During 2017, the Company has performed an impact assessment of all three aspects of IFRS 9, and expects no significant impact on its financial position or performance. The Company’s financial assets include trade and other receivables, which are held to collect contractual cash flows and are expected to give rise to cash flows representing solely payments of principal and interest. No reclassification is expected for trade and other receivables.

IFRS 9 requires the Company to record expected credit losses on all of its trade and other receivables either on a 12 month or lifetime basis. The Company intends to apply the simplified approach and record lifetime expected losses on all trade receivables. The Company does not expect a significant impact on the loss allowances as a result of the adoption of IFRS 9.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 was issued in May 2014, and amended in April 2016, and establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

The new revenue standard will supersede all current revenue recognition requirements under IFRS. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after 1 January 2018. Early adoption is permitted.

The Company plans to adopt the new standard on the required effective date using the modified retrospective method. During the year, the Company performed an assessment of the application of IFRS 15. The Company is the operator of lottery business and the performance of the draw is considered to be the only performance obligation. No significant impact is expected from the adoption of IFRS 15 on the Company’s revenue and profit or loss. The revenue recognition is expected to occur at a point in time when the draw takes place.

Management is still assessing the impact from the adoption of the other new or amended standards and interpretations on the Company’s financial statements. No early adoption is intended by the Board of Directors.

079




2.6 Summary of significant accounting policies

(a) Revenue on ticket sales

Revenue on ticket sales comprises the wagers placed on lottery tickets on the Company’s draw-based game.

Revenue is recognised on a draw-by-draw basis, at the point at which the draw takes place. Where players wager in advance, the income is deferred and only recognised in the statement of profit or loss and other comprehensive income once the draw has taken place.

(b) Interest income

Interest income is recorded using the effective interest rate (EIR) method. The EIR is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset. Interest income is included in finance income in the statement of profit or loss and other comprehensive income.

(c) Prizes

The draw-based game is operated under a prize pool mechanism under which a predetermined percentage of the ticket sales is allocated to prizes. To the extent that the actual prizes won on the draw vary from the predetermined percentage, the relevant prize is carried forward under a rollover to subsequent draws. The liability for prizes is recognised at the time of the draw in line with the predetermined percentage for that game.

If prizes remain unclaimed for 184 days from the date of the draw-based game, the unclaimed prizes are remitted to the National Solidarity Fund.

(d) Consolidated Fund

The Company has a legal requirement to contribute 46.16% of net proceeds from lottery games to the Consolidated Fund managed by the Government of Mauritius.

The amount charged to profit or loss represents a percentage arising from gross ticket sales net of prizes.

(e) Retailers’ and other commissions

The Company pays commissions to third party retailers who act as agents of the Company under a standard commission structure, fixed at a percentage of total sales. In addition, validation commission is paid on prizes. A similar commission structure is applicable for the Field Sales and Technical Representatives in Rodrigues.

(f) Property and equipment

Property and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated on the straight line method to allocate their costs to their residual values over their estimated useful lives as follows:

Leasehold improvements 3 – 10 years

Equipment 3 – 10 years

Furniture and fittings 8 years

Motor vehicles 6 – 7 years

080




2.6 Summary of significant accounting policies (continued)

(f) Property and equipment (continued)

Depreciation is provided in full in the month of addition and in respect of assets written off and disposed, up to the month of write-off and disposal. Gains and losses on disposal are determined by comparing proceeds with carrying amount and are included in profit or loss.

Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of an asset’s net selling price and value in use. For the purpose of assessing impairment, assets are grouped at the lowest level from which there are separately identifiable cash flows.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial year in which they are incurred.

The assets’ residual values and useful lives are reviewed and adjusted if necessary, at end of each reporting period.

(g) Leases

The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset (or assets) and the arrangement conveys a right to use the asset (or assets), even if that asset is (or those assets are) not explicitly specified in an arrangement.

An operating lease is a lease other than a finance lease. Operating lease payments are recognised as an operating expense in profit or loss on a straight-line basis over the lease term.

(h) Inventories

Inventories are stated at lower of cost and net realisable value. Cost is determined using the first-in, first-out (“FIFO”) method. The cost includes cost of ticket rolls, bet slips, insurance, freight, customs duty and any other direct costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

(i) Cash and cash equivalents

For the purpose of the statement of cash flows, cash and cash equivalents comprise cash at bank, cash in hand, net of any outstanding overdrafts.

(j) Stated capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

081





(k) Current and deferred income tax

The tax expense for the period comprises current and deferred income tax and Corporate Social Responsibility (“CSR”) tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted by the end of the reporting period. The directors periodically evaluate positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation.

Current income tax assets and liabilities are measured at the amount expected to be received or paid to the taxation authorities.

Deferred income tax is provided in full, using the liability method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

The principal temporary differences arise from accelerated capital allowances, provision for post-employment benefits and provision for impairment on receivables.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. The directors apply judgement to determine whether sufficient future taxable profit will be available after considering, amongst others, factors such as cash flows and budgets. The carrying amount of deferred tax asset is reviewed at each reporting date.

The Company offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

(l) Employee benefits

(i) Short-term employee benefits

Short-term employee benefits include wages, salaries, social security contributions, and travelling expenses, profit sharing and bonuses. These costs are charged to profit or loss when incurred. The Company recognises a liability where benefits are contractually obliged or where there is a past practice that has created a constructive obligation.

(ii) Defined contribution

The Company operates a defined contribution pension plan for certain qualifying employees. The assets of the plan are held separately from those of the Company in funds under the control of an independent management committee. Where employees leave the plan prior to full vesting of the contributions, the contributions payable by the Company are reduced by the amount of forfeited contributions. Any residual gratuities under the Employment Rights Act 2008 for the qualifying employees after allowing for permitted deductions in respect of the pension plan are included in the post-employment benefits in respect of the Employment Rights Act 2008.

082





(l) Employee benefits (continued)

(iii) Post-employment benefits

Employees are entitled to a gratuity payment on retirement under the terms of the Employment Rights Act 2008. The Company recognises a liability for employees whose benefits under the defined contribution plan are not expected to fully offset the retirement gratuity.

The net present value of post-employment benefits payable under the Employment Rights Act 2008 is calculated by a qualified actuary and is provided for. The obligations arising from this item is not funded.

Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognised in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method.

The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.

Past-service costs are recognised immediately in profit or loss.

(m) Dividend distribution

Dividend distribution to the Company’s shareholders is recognised as a liability in the financial statements and deducted from equity in the period in which the dividend is declared.

(n) Financial Instruments

(i) Financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, AFS financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.

083





(n) Financial Instruments (continued)

(i) Financial assets (continued)

Subsequent measurement

Loans and receivables

The Company’s financial assets consist of trade and other receivables, and cash and cash equivalents, which are classified as loans and receivables.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the EIR method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in profit or loss. The losses arising from impairment are recognised in the statement of profit or loss and other comprehensive income in finance costs for loans and in other operating expenses for receivables.

Trade receivables are amounts due from retailers for tickets sold in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business, if longer), they are classified as current assets.

Impairment

The Company assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if one or more events that has occurred since the initial recognition of the asset (an incurred ‘loss event’), has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets carried at amortised cost

For financial assets carried at amortised cost, the Company first assesses whether impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Company determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

The amount of any impairment loss identified is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original EIR.

084






(i) Financial assets (continued)

Impairment (continued)

The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognised in the profit or loss. Interest income continues to be accrued on the reduced carrying amount using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Loans, together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Company. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is credited to profit or loss.

Derecognition

Loans and receivables are primarily derecognised (i.e., removed from the Company’s statement of financial position) when:

• The rights to receive cash flows from the asset have expired

Or

• The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.

(ii) Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, net of directly attributable transaction costs.

085






Subsequent measurement

Loans and borrowings

The Company’s financial liabilities consist of trade and other payables which are classified as loans and borrowings.

After initial recognition, loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss and other comprehensive income.

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer).

Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in profit or loss.

(iii) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

(o) Foreign currency translation

Functional and presentation currency

Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The financial statements are presented in Mauritian rupee (“MUR”), which is the presentation currency of the Company.

Transactions and balances

Foreign currency transactions are translated into Mauritian rupees using the exchange rates prevailing at the date of transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss consistent with the nature of the underlying items.

086





(p) Segment information

Segmental reporting is based on the internal reports regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess their performance. There is only one operating segment which is the gaming segment.

(q) Impairment of non-financial assets

The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.

Impairment losses of continuing operations are recognised in the statement of profit or loss in expense categories consistent with the function of the impaired asset.

An assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Company estimates the asset’s or CGU’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss.

(r) Current versus non-current classification

The Company presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is:

• Expected to be realised or intended to be sold or consumed in the normal operating cycle

• Held primarily for the purpose of trading

• Expected to be realised within twelve months after the reporting period

Or

• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

087




2.6 ar of i i�i a t a o ti o i ie o ti e

r rre t er o rre t a i�i atio o ti e

All other assets are classified as non-current.

A liability is current when:

• It is expected to be settled in the normal operating cycle

• It is held primarily for the purpose of trading

• It is due to be settled within twelve months after the reporting period

Or

• There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.

The Company classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities.

3 FINANCIAL RISK MANAGEMENT

The Company’s activities expose it to a variety of financial risks, including market risk (foreign exchange risk and interest rate risk); credit risk and liquidity risk. A description of the significant risk factors is given below together with the risk management policies applicable.

The Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company’s performance.

Risk management is carried out by management under policies approved by the Board of Directors.

a ar et ri

(i) Foreign exchange risk

Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the Company’s functional currency.

The Company carries its operations locally and therefore is not exposed to foreign exchange risk except for transactions with suppliers and bank accounts denominated in foreign currency, which are mainly United States dollars (“USD”). As such, the Company is exposed to the exchange rate movement of the Mauritian rupee against the United States dollar.

The currency profile of the Company’s financial assets and liabilities is summarised as follows:

2017 2017 2016 2016i a ia

a eti a ia

ia i itieFinancial

assetsFinancial liabilities

MUR MUR

Mauritian rupee 343,838,300 266,664,315 221,771,866 238,664,843

United States dollar 2,505,161 3,060,517 5,526,816 -

Euro 1,247,072 - 2,317,936 -

347,590,533 269,724,832 229,616,618 238,664,843

088



3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(a) Market risk (continued)

(i) Foreign exchange risk (continued)

At 31 December 2017, if the Mauritian rupee (“MUR”) had weakened/strengthened by 5% against the United States dollar (“USD”) with all other variables held constant, pre-tax profit and equity for the year would have decreased/increased by MUR27,768 (2016 – MUR276,341).

At 31 December 2017, if the Mauritian rupee (“MUR”) had weakened/strengthened by 5% against the EURO (“EUR”) with all other variables held constant, pre-tax profit for the year and equity would have decreased/increased by MUR62,354 (2016 – MUR115,897), mainly as a result of currency differences on translation of EUR denominated bank balances.

The directors believe that a 5% shift in foreign exchange rate is an appropriate basis for the sensitivity analysis. The sensitivity analysis has been based on the financial assets and liabilities at the reporting date.

The Company has not engaged in any hedging transactions to mitigate its risks relating to exchange rate fluctuations.

(ii) Interest rate risk

The Company’s income and operating cash flows may be affected by changes in market interest rates. The Company did not have significant floating interest rate bearing financial assets and liabilities at the reporting date.

(b) Credit risk

Credit risk is managed on Company-wide basis. Credit risk arises from cash and cash equivalents as well as credit exposures to retailers, including outstanding receivables.

For cash and cash equivalents, the Company manages its credit risk by banking with reputable financial institutions. Management assesses the credit quality of the retailer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal ratings in accordance with limits set by the management. The utilisation of credit limits is regularly monitored. The Company engages with retailers having the appropriate credit rating only.

The maximum exposure with respect to credit risk arise from default of the counter party with a maximum exposure equal to the carrying amount of the Company’s financial assets.

The directors believe that the Company has no significant concentration of credit risk and services are rendered to retailers with an appropriate credit history.

The aged analysis of trade receivables is disclosed in Note 12.

089




i i it ri

Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities and the ability to close our market positions.

The table below analyses the Company’s financial liabilities into relevant maturing groupings based on the remaining period at the end of the reporting period to maturity date. The amounts disclosed in the table are contractual undiscounted cash flows.

A at e e er

At ae t a o e ear

et ee to ear Tota

ia i itie

Trade and other payables - 269,724,832 - 269,724,832

A at e e er

At callLess than one year

Between 1 to 5 years Total

MUR MUR MUR MUR

ia i itie

Trade and other payables - 238,664,843 - 238,664,843

air a e

The carrying amounts of trade and other receivables, cash in hand and at bank, borrowings and trade and other payables approximate their fair values due to their short term nature.

e a ita a a e e t

The Company’s objectives when managing capital are to safeguard its ability to continue as a going-concern in order to provide returns for shareholders and benefits for other shareholders. Capital is represented by the total equity.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

There were no changes in the objectives, policies or processes for managing capital during the years ended 31 December 2017 and 2016.

090




(f) Financial instruments by category

2017 2016

MUR MUR



Financial assets

Trade and other receivables 55,985,170 72,809,832

Cash and cash equivalents 291,605,363 156,806,786

347,590,533 229,616,618

Financial liabilities at

amortised cost

Financial liabilities at

amortised cost

Financial liabilities

Trade and other payables 269,724,832 238,664,843

4 GAMING SYSTEMS AND DATA COMMUNICATION COSTS

2017 2016

MUR MUR

Depreciation 49,680,349 46,357,745

Communication costs 36,414,870 27,983,728

Lottery technological support 22,206,898 21,954,740

Consumables 13,273,917 11,571,117

Other expenses 3,413,703 12,445,563

124,989,737 120,312,893

091



5 OTHER OPERATING EXPENSES

2017 2016

MUR

Staff costs (Note 7) 66,945,096 63,751,511 Management fee (Note 15 (i)) 15,232,714 13,406,732 Rent and utilities 12,696,453 13,120,341 Legal and professional fees 19,073,329 7,039,588 Software licence and other information technology cost 9,311,832 9,768,238 Motor vehicle expenses 3,375,596 3,755,953 Municipal fees and licences 7,116,296 6,067,076 Insurance costs 1,662,991 1,615,720 Increase in provision for impairment of receivables (Note 12) 878,353 821,183 Medical expenses 1,420,577 1,086,486 Maintenance contract 2,309,552 3,507,689 Printing, postages and stationery 1,446,057 1,318,135 Repairs and maintenance 1,415,261 1,301,763 Other expenses 5,144,370 7,338,715 Fees payable to auditor for:

Audit services 1,495,000 712,425 Other services 1,119,813 -

150,643,290 134,611,555

6 FINANCE INCOME/COSTS

2017 2016

MUR

a i a e i o eInterest income on:Bank balances 3,590 58,116

i a e o tInterest expense on:

Bank overdraft (8,929)

7 STAFF COSTS

2017 2016

MUR

Wages and salaries 61,803,476 59,360,177 Staff welfare benefits 1,432,676 1,229,008 Defined contribution costs 3,206,944 2,674,326 Post-employment benefits (Note 17) 502,000 488,000

66,945,096 63,751,511

092



8 INCOME TAX

The Company is liable to income tax on its profits, as adjusted for income tax purposes, at the rate of 17% (2016 – 17%). The 17% tax rate consists of 15% corporate income tax and 2% Corporate Social Responsibility (“CSR”).

(a) Charge for the year2017 2016MUR MUR

Based on profit for the year, as adjusted for tax purposes 23,917,836 20,450,358 Under provision of current income tax expense in previous period 1,692,638 3,175,812

Deferred income tax (credit)/charge (Note 16) (826,591) 338,043

Income tax expense 24,783,883 23,964,213

A reconciliation between the actual rate of income tax charge of MUR24,783,883 (2016 – MUR23,964,213) and the tax calculated at the applicable income tax rate of 17% (2016 – 17%) is as follows:

2017 2016MUR MUR

Profit before income tax 135,629,202 112,160,217

Tax on the profit at 17% (2016 – 17%) 23,056,964 19,067,237 Non-tax deductible expense 412,799 1,721,164 Temporary difference reversal (378,518) -

Under provision of current income tax expense in previous period 1,692,638 3,175,812

Effective income tax charge 24,783,883 23,964,213

(b) Current income tax liabilities

Income tax liabilities are MUR7,436,128 at 31 December 2017 (2016 – MUR 2,289,704).2017 2016MUR MUR

At 01 January 2,289,704 2,499,315 Income tax charge for the year 23,917,836 20,450,358 Under provision of current income tax expense in previous period 1,692,638 3,175,812

Income tax paid (20,464,050) (23,835,781)

7,436,128 2,289,704

9 EARNINGS PER SHARE

(a) Basic

Basic earnings per share is calculated by dividing the profit for the year of the Company by the weighted average number of ordinary shares during the year.

093



9 EARNINGS PER SHARE (CONTINUED)

i te

Diluted earnings per share is calculated by adjusting the result for the year and the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. In 2017 and 2016, there were no instruments with potential dilutive effect.

2017 2016Profit attributable to shareholders (MUR) 110,845,319 88,196,004Number of shares entitled to dividends 340,000,000 340,000,000

Basic and diluted earnings per share (MUR) 0.33 0.26

10 PROPERTY AND EQUIPMENTea e o

i ro e e t i e tr it re a

�ittiotor

e i e Tota

Cost:At 01 January 2016 77,350,845 356,051,626 16,315,825 14,277,764 463,996,060 Additions 698,905 50,350,660 - 191,475 51,241,040 Disposals - - - (336,414) (336,414)Reclassifications 940,121 357,712 (1,297,833) - -

Write-off and adjustments (120,747) (13,099,013) (4,247,973) 2,202,681 (15,265,052)At 31 December 2016 78,869,124 393,660,985 10,770,019 16,335,506 499,635,634 Additions - 959,592 - - 959,592 Disposals - - Reclassifications 925,744 - Write-off - - -

Adjustment - - 1,298,738 - 1,298,738

At e e er 70,017,294 393,804,551 12,994,501 16,224,111 493,040,457

Accumulated depreciation:At 01 January 2016 70,899,952 223,510,977 12,508,587 11,099,027 318,018,543 Charge for the year 3,760,299 39,367,142 1,299,450 1,930,854 46,357,745 Disposals - - - (303,802) (303,802)Reclassifications 929,263 333,538 (1,262,801) - -

Write-off and adjustments - (12,603,287) (2,661,765) - (15,265,052)At 31 December 2016 75,589,514 250,608,370 9,883,471 12,726,079 348,807,434 Charge for the year 3,734,581 42,743,457 1,299,450 1,902,861 49,680,349 Disposals - - Reclassifications 7,077,239 945,281 -

Write-off - - -

At e e er 62,754,282 300,335,224 12,128,202 14,449,255 389,666,963 Net carrying amount

At e e er 7,263,012 93,469,327 866,299 1,774,856 103,373,494

At 31 December 2016 3,279,610 143,052,615 886,548 3,609,427 150,828,200

094



10 PROPERTY AND EQUIPMENT (CONTINUED)

The Company made reclassifications within the different classes of property and equipment for assets having the same characteristics and bearing the same depreciation rates, following the completion of the fixed asset review project that it undertook starting in 2016.

Write-offs of property and equipment are made when assets are no longer in use by the Company.

Depreciation expense of MUR49,680,349 (2016 – MUR46,357,745) has been charged in Gaming systems and data communication costs.

11 INVENTORIES2017 2016MUR MUR

Cost:

Ticket rolls, bet slips and others 732,339 706,812

Inventories consumed during the year amounted to MUR13,273,917 (2016 – MUR11,571,117).

12 TRADE AND OTHER RECEIVABLES2017 2016MUR MUR

Trade receivables 42,290,941 60,520,688

Provision for impairment of receivables (2,199,818) (2,983,657) 40,091,123 57,537,031

Receivable from shareholders (Note 15(ii)) 3,518,209 2,894,334 Receivables from related parties (Note 15(ii)) 11,430,412 11,430,412

Prepayments and deposits 4,521,927 6,542,151

59,561,671 78,403,928

Trade and other receivables are unsecured, bear no interest and are due within one year.

Trade and other receivables are summarised as follows:2017 2016MUR MUR

Neither past due nor impaired 33,871,351 51,934,731 Past due but not impaired 6,219,772 5,602,300

Individually impaired 2,199,818 2,983,657 42,290,941 60,520,688

Provision for impairment (2,199,818) (2,983,657)

40,091,123 57,537,031

095



12 TRADE AND OTHER RECEIVABLES (CONTINUED)

Trade receivables that are less than three months past due are not considered impaired. As of 31 December 2017, trade receivables of (2016 – MUR5,602,300) were past due but not impaired. These relate to a number of retailers for whom there is no recent history of default. The ageing analysis of these trade receivables past due but not impaired is as follows:

2017 2016MUR

Up to 3 months 6,219,772 5,316,566

Over 3 months - 285,734

6,219,772 5,602,300

At 31 December 2017, trade receivables of (2016 – MUR2,983,657) were impaired.

The movement in provision for impairment of trade and other receivables are as follows:

2017 2016MUR

At 01 January 2,983,657 2,162,474 Increase in provision 878,353 821,183

Write-off against provision -

At 31 December 2,199,818 2,983,657

The provision for impaired receivables has been included in profit or loss.

All items within trade and other receivables are denominated in Mauritian Rupee and no collaterals are held against trade and other receivables at the end of the reporting period.

13 STATED CAPITAL2017 2017 2016 2016

N er Number MURIssued and fully paid:

Ordinary shares of no par value each 340,000,000 100,000,000 340,000,000 100,000,000

096



14 TRADE AND OTHER PAYABLES2017 2016MUR MUR

Trade payables and accruals 36,947,847 29,809,188 Amounts due to related parties (Note 15(ii)) 7,286,994 6,783,868 Prize liability and reserve fund 142,598,719 117,335,944 Unclaimed prize 4,610,057 4,463,614

Consolidated fund 78,281,215 80,272,229

269,724,832 238,664,843

Trade and other payables are non-interest bearing, unsecured, and are repayable within one year.

15 RELATED PARTY TRANSACTIONS

The directors consider Gamma-Civic Ltd, a company incorporated and domiciled in the Republic of Mauritius, as the parent, ultimate parent and controlling party.

(i) Transactions carried out with related parties:2017 2016MUR MUR

Management fee charged by an entity under common control of Gamma-Civic Ltd (Note 5) 15,232,714 13,406,732Rent and utilities charged by entities under common control of Gamma-Civic Ltd 5,708,882 8,210,098Rent charged by ultimate parent 697,010 542,561

Purchase of services from entities under common control of Gamma-Civic Ltd 2,525,667 120,134

24,164,273 22,279,525

(ii) Year-end balances arising from transactions with related parties:2017 2016MUR MUR

Amounts receivable from related parties (Note 12): Entities under common control 236,951 236,951

Ultimate parent 11,193,461 11,193,46111,430,412 11,430,412

Shareholders 3,518,209 2,894,334

14,948,621 14,324,746

The amounts receivable from related parties are unsecured, interest free and repayable on demand.

097



12 RELATED PARTY TRANSACTIONS (CONTINUED)

(ii) Year-end balances arising from transactions with related parties (continued)

The receivables from related parties pertain to amounts paid by the Company on behalf of the related parties for the purchase of lottery equipment, software and professional services.

2017 2016MUR

Amounts due to related parties (Note 14): Entities under common control 7,286,994 6,713,067

Ultimate parent - 70,801

7,286,994 6,783,868

The amounts payable to related parties are unsecured, interest free and repayable on demand.

An amount of was held by the Company on trust for Gamma Leisure Ltd, Maurilot Investments Ltd, Natlot Investments, Glot Holdings (Mauritius) Ltd and State Investment Corporation at 31 December 2017 (2016: MUR13,978,544).

(iii) Key management personnel compensation

The compensation to key management personnel for employee services is shown below:

2017 2016MUR

Salaries and other short-term employee benefits 27,101,332 23,338,094

Post-employee benefits 1,128,410 923,327

28,229,742 24,261,421

16 DEFERRED INCOME TAX LIABILITIES

The movement on the deferred income tax liabilities is as follows:2017 2016

MURAt 01 January 5,101,749 4,757,756 Charge/(credit) to profit or loss (Note 8) 338,043

Credit to other comprehensive income 56,610 5,950

At 31 December 4,331,768 5,101,749

098



16 DEFERRED INCOME TAX LIABILITIES (CONTINUED)

The movement in deferred income tax liabilities/(assets) is as follows:

31 December 2017

Accelerated capital

allowances

Post- employment

benefits

Provision for impaired

receivables Total

MUR MUR MUR MUR

At 01 January 2017 5,859,871 (350,031) (408,091) 5,101,749 Charge/(credit) to profit or loss (Note 8) (775,373) (85,340) 34,122 (826,591)

Charge to other comprehensive income - 56,610 - 56,610

At 31 December 2017 5,084,498 (378,761) (373,969) 4,331,768

31 December 2016

Accelerated capital

allowances

Post- employment

benefits

Provision for impaired

receivables TotalMUR MUR MUR MUR

At 01 January 2016 5,398,398 (273,021) (367,621) 4,757,756 (Credit)/charge to profit or loss (Note 8) 461,473 (82,960) (40,470) 338,043

Charge to other comprehensive income - 5,950 - 5,950

At 31 December 2016 5,859,871 (350,031) (408,091) 5,101,749

099



17 POST-EMPLOYMENT BENEFITS

The Company participates in a multi-employer defined contribution (DC) pension plan to which it contributes 6%, 8% or 10% of its eligible employees’ salaries depending on age. These contributions amounted to for the year ended 31 December 2017 (2016 – MUR2,674,326).

In addition, the Company has recognised a net defined benefit liability of as at 31 December 2017 (2016: MUR2,059,000) in respect of any additional retirement gratuities that are expected to be paid out of the Company’s cashflow to its employees under the Employment Rights Act (ERA) 2008.

The Company is subject to an unfunded defined benefit plan for the employees. The plan exposes the Company to normal risks described below:

tere t ri A decrease in the bond interest rate will increase the plan liability; however, this may be partially offset by a decrease in inflationary pressures on salary and pension increases.

a ar ri The plan liability is calculated by reference to the future projected salaries of plan participants. As such, an increase in the salary of the plan participants above the assumed rate will increase the plan liability whereas an increase below the assumed rate will decrease the liability.

The Company had a residual obligation imposed by ERA 2008 on top of its defined contribution (DC) plan. It is therefore particularly exposed to investment under-performance of the DC plan.

There has been no plan amendment, curtailment or settlement during the year.

The amount recognised in the statement of financial position is as follows:

2017 2016

MUR

A o t re o i e i ro�it or o

Current service cost 368,000 376,000

Interest cost 134,000 112,000

502,000 488,000

A o t re o i e i ot er o re e i e i o e

Liability experience gain (11,000)

Liability gain due to change in financial assumptions (24,000)

(35,000)

100



17 POST-EMPLOYMENT BENEFITS (CONTINUED)2017 2016MUR MUR

Movements in liability recognised in statement of financial positionAt 01 January 2,059,000 1,606,000Amounts recognised in profit or loss 502,000 488,000

Amounts recognised in other comprehensive income (333,000) (35,000)

At 31 December 2,228,000 2,059,000

Principal actuarial assumptions at end of yearDiscount rate 5.5% 6.5%Rate of salary increases 4.5% 5.5%Rate of pension increases 0.5% 1.5%Average retirement age (ARA) 65/60 years 60 years

Sensitivity analysis on defined benefit obligation at end of period- Increase due to 1% decrease in discount rate 1,764,000 1,586,000- Decrease due to 1% increase in discount rate 1,424,000 1,221,000

The above sensitivity analysis has been carried out by recalculating the present value of obligation at end of period after increasing or decreasing the discount rate while leaving all other assumptions unchanged. Any similar variation in the other assumptions would have shown smaller variations in the defined benefit obligation.

Future cashflows

The funding policy is to pay benefits out of the reporting entity’s cashflow as and when due.

- Expected employer contribution for the next year 86,000 Nil- Weighted average duration of the defined benefit obligation 19 years 21 years

2017 2016MUR MUR

Reconciliation of the present value of defined benefit obligationPresent value of obligation at 01 January 2,059,000 1,606,000Current service cost 368,000 376,000Interest cost 134,000 112,000Liability experience gain (275,000) (11,000)

Liability gain due to change in financial assumptions (58,000) (24,000)

Present value of obligation at 31 December 2,228,000 2,059,000

101



18 DIVIDENDS

The Company declared and paid dividends of , representing MUR0.23 per share, in the year ended 31 December 2017 (2016 – MUR91,800,000, representing MUR0.27 per share).

19 COMMITMENTS

The company leases its offices under non-cancellable operating lease agreements. The lease terms are for 5 years.

The future aggregate minimum lease payments under the non-cancellable operating leases are as follows:

2017 2016MUR

Not later than one year 4,733,688 4,733,688

Later than 1 year and no later than 5 years 4,733,688 9,467,376

Tota 9,467,376 14,201,064

20 EVENTS AFTER REPORTING PERIOD

There were no events subsequent to the reporting date until the financial statements were authorised for issue that require amendments to or disclosure in these financial statements.

102


Financial Summary(a) Statement of profit or loss and other comprehensive income

2017 2016 2015 MUR MUR MUR

Revenue on ticket sales 1,852,490,380 1,651,579,840 1,675,592,800 Prizes (898,457,834) (801,016,222) (834,306,114)Consolidated fund (440,381,423) (392,620,166) (388,337,934)Net income 513,651,123 457,943,452 452,948,752 Retailers’ and other commissions (102,345,811) (90,907,974) (92,506,409)Gaming systems and data communication costs (124,989,737) (120,312,893) (149,633,827)Other operating expenses (150,643,290) (134,611,555) (161,106,119)Operating profit 135,672,285 112,111,030 49,702,397 Finance income 3,590 58,116 1,426,182 Finance costs (46,673) (8,929) (41,566)Profit before income tax 135,629,202 112,160,217 51,087,013 Income tax expense (24,783,883) (23,964,213) (10,607,310)Profit for the year 110,845,319 88,196,004 40,479,703

Other comprehensive income:Items that will not be reclassified to profit or lossRemeasurement of post-employment benefit obligations 333,000 35,000 1,565,000 Deferred tax on remeasurement of post-retirement benefit obligations (56,610) (5,950) (266,050)

Other comprehensive income – net of tax 276,390 29,050 1,298,950

Total comprehensive income for the year 111,121,709 88,225,054 41,778,653

Basic and diluted earnings per share 0.33 0.26 0.12

103


Financial Summary (continued)tate e t of �i a ia o itio

2017 2016 2015MUR MUR

A etNon-current assets 103,373,494 150,828,200 145,977,517

Current assets 351,899,373 235,917,526 149,835,629

Tota a et 455,272,867 386,745,726 295,813,146

it a ia i itie

Total equity 171,552,139 138,630,430 142,205,376

ia i itieNon-current liabilities 6,559,768 7,160,749 6,363,756

Current liabilities 277,160,960 240,954,547 147,244,014

Tota ia i itie 283,720,728 248,115,296 153,607,770

Tota e it a ia i itie 455,272,867 386,745,726 295,813,146

104


Lottotech LtdHSBC Centre 18, CybercityEbene, 72201 Mauritius

AN

NU

AL

REPO

RT 2

017

LOTT

OTE

CH

LTD

2017 - Lottotech · • live draw!: first outdoor draw organized for the celebration of our...

Documents

Transcript of 2017 - Lottotech · • live draw!: first outdoor draw organized for the celebration of our...