Presentation of VESTAR GROUP and King s Casino 21 September 2016
Contents - Introduction - Description of Core Business and Customers - VESTAR and its group of companies - Gaming Results - Current Developments - Future Opportunities - Appendices
Introduction Main entry of King s Casino King s Casino in the evening
King s Casino from birds-eye perspective Casino Admiral The object of sale as set out in this presentation is 100% shares of VESTAR GROUP as (VESTAR) and all of its holdings represented trough Mr. Leon Tsoukernik. VESTAR is the 100% shareholder of all of the casino assets that are described in this presentation. King s Casino opened for business in 2003 in the town located at the largest border crossing between Germany and the Czech Republic, Rozvadov. The business has expanded several times over the years, including the acquisition, reconstruction, re-branding and re-opening of Casino Admiral directly across the main road in Rozvadov. Rozvadov sits adjacent to the main east west motorway (Autobahn) connecting Germany (Bavaria) and the Czech Republic and the original regional highway (Bundesstrasse) runs directly through the town of Rozvadov. The town of Rozvadov has licensed two (and only two) casino operations. VESTAR owns 100% of the assets and operations of both of the licensed casinos in Rozvadov, King s Casino and Casino Admiral. Any sale of VESTAR would result in the sale of all casino assets to the buyer that are currently licensed to
operate in Rozvadov. There is no expectation in the future that additional casino operations will be licensed in the town. In addition to the assets, the buyer would acquire the operating licenses including the license security deposit with the Ministry of Finance in the amount of CZK 42 million. Upon acquisition, the security deposit would remain, the buyer would simply add the deposit amount to the purchase price. The bank confirmations for the deposits in favor of King s Casino a.s. are attached as Appendix 9. Description of the Core Business and Customers VESTAR owns and operates King s Casino and Casino Admiral. The business of VESTAR is the provision of gaming services in under three licenses from the Ministry of Finance of the Czech Republic; Live Game license, Slot Machine license and Card Game (poker) license. VESTAR is the sole licensed provider of gaming services in Rozvadov. The Ministry of Finance grants two additional gaming licenses; National Lottery license and Sports Betting license. VESTAR is not licensed to provide these gaming services and such services are not available in Rozvadov. Live game arena
King s Casino operates approximately 20 live game tables Live game and slots arena
King s Casino operates approximately 200 slot machines Second slot area
King s Casino provides food and beverage service in a casino environment, unparalleled in the region and on a par with any casino internationally. Restaurant from bar Restaurant back towards casino
True fine dining an experience in and of itself King s Casino ala carte restaurant
King s Casino buffet restaurant Top quality for all guests even in the buffet restaurant VESTAR services customers from three distinct population catchment areas: local customers, regional customers and global customers. Customers visits to VESTAR properties in Rozvadov has continued to grow. The total visitors for 2013 (133,381) grew 34% in 2014 (178,917) and again 14% in 2015 (203,991). As more customers stay for multiple days on the estate in King s Casino and/or Casino Admiral, the customers are able to come and go between the hotel rooms and gaming space from one day to the next without re-registering with our reception. This would indicate that the number of customer visits is slightly understated. This understatement will likely increase as VESTAR builds new hotel capacity, however, the trend of growing customer numbers and length of stay indicates that the business is moving in the correct direction.
The overall strategy of VESTAR GROUP is to make the customer feel that a visit to King s Casino (or Casino Admiral) is like a relaxing time in their own living room. VESTAR GROUP has achieved longer duration of visits and more visits per customer through this strategy. Local Customers: As the sole gaming operator on the largest border crossing between Germany and the Czech Republic, VESTAR has a strong market position with the population within a catchment area who can drive to Rozvadov within 60 to 90 minutes. With the motorway, this includes a population in a circle of approximately 150 km and are the local customers for VESTAR. Casino Admiral is a destination almost exclusively for local customers. It provides a full service of live game and slot game but does not host poker events. It has good but basic food and beverage services. King s Casino is a very popular destination for local customers and works hard to maintain local customer loyalty and extend our market share. King s Casino provides an excellent food destination, a popular destination for groups of all ages, an exciting gaming offer in a luxury setting with limits in all ranges. Customers are certain to find a game on offer in King s Casino, every day and virtually 24/7. Local customers typically return home at the end of a visit to a VESTAR property. VESTAR s local market extends to Nuremberg and Regensburg and includes Weiden, Amberg and Pilsen as the larger cities. Regional Customers: With direct motorway access to all cities in Germany and the Czech Republic, VESTAR has a strong market position amongst regional customers. These customers typically stay over at least 1 night on each visit. King s Casino is the destination of regional customers. King s Casino provides excellent food and beverage services (both luxury restaurant and non-stop free buffet), luxury gaming and high limit gaming and the largest poker tournament and cash game offering in Europe. King s seeks to become the living room for all of its customers but particularly its regional customers who regularly come and arrive home at King s Casino with each visit. VESTAR s regional customers include the population centers of Prague, Munich, Frankfurt, Stuttgart, Dusseldorf/Cologne, Dresden, Berlin and Warsaw and extends throughout Germany, Czech Republic, Poland, Slovakia, The Netherlands, Austria and Switzerland. Global Customers: Principally through the organization of poker events, King s Casino has become a globally known destination in the gaming community. Poker events include; cash games in varying sizes and poker variations; televised cash games and tournaments, daily tournaments, multi-day tournaments and multiday festivals branded by King s Casino, multi-day festivals branded jointly with outside partner poker clubs and multi-day festivals hosted by King s Casino with international branded partners. Full Poker Arena on a typical weekend
Small tournament area with cash game section VESTAR has contracts with the three largest internationally branded poker organizations: WSOP - World Series of Poker (www.wsop.com), a brand of Caesars Entertainment; Pokerstarss (www.pokerstars.com), a brand of Amaya; WPT - World Poker Tour (www.worldpokertour.com), a brand of Ourgame International Holdings. VESTAR also has multiple agreements with German, Czech, Polish and other European poker clubs, news portals, etc. with whom King s Casino builds and presents poker events. Three of VESTAR s (King s Casino) international partners Upcoming WSOP Festival in King s Casino
Past Tournament with International Partner 888 Live and advert for future event Set Up before start of Pokerstars King s Cup 2016 For Regional and Global Customers, King s Casino can be loosely compared to a cruise ship. Once the customer arrives in King s Casino, they are on-board and will remain at the premises until they must sleep. Outside of the VESTAR properties there are limited activities to partake in. The services at King s Casino are world class in the gaming business. The larger the event means that the customers come from farther away and typically in larger groups. If 4 customers travel together to King s Casino and start in a tournament but only 1 makes it towards the end of the tournament, all 4 must stay on-board until they all leave for home, often several days later. When VESTAR creates an event with a group from Italy, The Netherlands, Hamburg or other locations further away, the group provides a core of players from far afield. This will typically be a group of 50 120 players traveling from far by bus, plane or auto. An average weekend event will have local customers travelling alone or in groups of 2-3, regional customers in groups up to 8-10 customers. Big events will attract groups as large as 120 players and travelers from as far as New Zealand (qualifier on-line) and the USA (as a regular stop in Europe).
High stakes poker arena Cash Game TV table Live TV Cash Game table in action
High Rollers on the TV Cash Game The biggest challenge for VESTAR is where to enable our regional and global customers to sleep while ensuring that our frequent visitors (whether local, regional or global) maintain the luxury of spontaneously deciding to visit King s Casino or to stay over if desired. Customers who commit to traveling 6, 8 or 10 hours to spend a few days with their friends at King s Casino often lose patience and understanding when they have a 20, 30 or 40 minute commute to sleep at the end of the evening. VESTAR presently operates the front desk and shuttle services of a medium sized hotel. VESTAR owns approximately 80 hotel rooms in the casino properties and carries out front desk operations (booking/selling, check-in/check-out, key delivery, shuttle service, bill settlement, etc.) for several partner hotels with over 600 rooms. VESTAR has sold over 500 rooms on certain big festival evenings. King s on-site hotel offering
King s Casino Deluxe Room King s Casino Suite King s Admiral 4 star rated room The need for hotel capacity has been one factor holding back the expected growth of VESTAR. In the section Current Developments, following the next section on VESTAR and the review of gaming results, there is a review of the plans in progress to address gaming capacity and hotel constraints.
VESTAR and its group of companies The buyer will gain full control of all of the casino assets and operations of VESTAR. As set out in Appendix 1, (in Czech as found in the company register and with English translation), VESTAR as well as owning the casino real estate assets, is the 100% owner of 3 entities directly and indirectly. Over the past years the purpose of the entities and the assets, licenses, etc. have evolved, however, there are NO assets or operations in the casino sector not encompassed with VESTAR and its direct or indirect subsidiaries, together, VESTAR GROUP. The entities for sale are: 1 - VESTAR GROUP a.s., owner of the casino real estate assets 2 - S.H.F. spol. s r.o., owned 100% by VESTAR GROUP a. s. 3 - King s casino a. s., wholly owned subsidiary of S.H.F. spol. s r.o. 4 - King s slots s.r.o., wholly owned subsidiary of King s casino a.s. Prior to concluding a sale, there are several non-casino assets that find themselves in ownership of VESTAR that will be excluded from the sale. These assets will be listed separately and include; a helicopter, several autos used privately, certain real estate (buildings and land) not associated with the casino operations. The transaction contemplated here is exclusive of these non-casino assets. Additionally, there are two loans at present between Leon Tsoukernik and VESTAR (20.000.000 CZK no interest), (50.000 EUR no interest) and one between Leon Tsoukernik and SHF spol. sr.o. (34.500.000 CZK plus interest to 30.6.2016 of 5.103.750 CZK). These loans will be settled in advance of any transaction contemplated here. Gaming Results Kings Casino pays the revenue based gaming taxes and then the corporate taxes on financial results. VESTAR pays only the corporate taxes on its financial results. Below are the summaries of the gaming tax filing (King s Casino), the corporate tax filing (King s Casino and VESTAR) and the total taxes paid. The following schedule is an excerpt from the 2015 and 2014 gaming tax filing for King s Casino as. The results cover all licensed locations operated by VESTAR for the years 2014 and 2015. There was a small action in Prague in December of 2014 and 2015 during the Prague Poker Festival and very small result from the operation of a casino in Marian Bad, that VESTAR no longer operates. The gaming tax filings are included in Appendix 2.
Excerpts from Gaming Tax Filing 2015 2014 Difference % change Filing Ref Live Game In 118 1,113,621,746 892,319,868 221,301,878 24.8% Out 119 1,010,073,212 797,474,460 212,598,752 26.7% Net 117 103,548,534 94,845,408 8,703,126 9.2% Tax Rate 210a 20% 20% Gaming Tax Paid 310a 20,709,707 18,969,082 1,740,625 9.2% Net Income after Gaming Tax 82,838,827 75,876,326 6,962,501 9.2% Poker In 122 957,714,199 814,053,537 143,660,662 17.6% Out 123 926,221,723 789,901,462 136,320,261 17.3% Net 121 31,492,476 24,152,075 7,340,401 30.4% Tax Rate 220 20% 20% Gaming Tax Paid 320 6,298,495 4,830,415 1,468,080 30.4% Net Income after Gaming Tax 25,193,981 19,321,660 5,872,321 30.4% Slot Machines In 152 1,999,344,831 1,617,169,776 382,175,055 23.6% Out 153 1,823,197,734 1,520,656,007 302,541,727 19.9% Net 151 176,147,097 96,513,769 79,633,328 82.5% Tax Rate 250 20% 20% Gaming Tax Paid 350 35,229,419 19,302,754 15,926,666 82.5% Fixed Tax (per machine) Total Slots days 170 109,214 90,536 18,678 20.6% Average Slots / Day 299 248 51 20.6% Gaming Tax Paid (CZK/Day) 270 55 55 Total Slot Tax Paid 370 6,006,770 4,979,480 1,027,290 20.6% Total Slot Taxes 41,236,189 24,282,234 16,953,956 69.8% Days per year 365 365 Net Income after Gaming Tax 134,910,908 72,231,535 62,679,372 86.8% Total Gaming In 4,070,680,776 3,323,543,181 747,137,595 22.5% Out 3,759,492,669 3,108,031,929 651,460,740 21.0% Net 311,188,107 215,511,252 95,676,855 44.4% Total Taxes Paid 68,244,391 48,081,730 20,162,661 41.9% Net Income after Gaming Tax 242,943,716 167,429,522 75,514,194 45.1% Corparation Tax Calculation Kings Casino VESTAR GROUP 2015 2014 2013 2015 2014 2013 Corporate results before Tax 270 72,554,000 19,375,000 47,500,000 0 6,641,000 0 Tax Rate 280 19% 19% 19% 19% 19% 19% Tax to be paid 290 13,785,260 3,681,250 9,025,000 0 1,261,790 0 Discounts on tax 300 0 0 0 0 0 0 Taxes Paid 310 13,785,260 3,681,250 9,025,000 0 1,261,790 0 Total Taxes Paid Kings Casino VESTAR GROUP 2015 2014 2013 2015 2014 2013 Gaming Taxes Paid 68,244,391 48,081,730 0 0 0 0 Corporate Taxes Paid 13,785,260 3,681,250 9,025,000 0 1,261,790 0 Total Taxes Paid 82,029,651 51,762,980 9,025,000 0 1,261,790 0
VESTAR keeps internal track of drop statistics in order to monitor where customers are bringing cash. The following chart is an internal analysis of drop (in Euro) for the years 2013, 2014, 2015. Drop - King's Casino Live Game Credit Card Poker Slots Reception Total 2013 24,212,769 8,115,700 17,755,595 28,403,778 1,436,140 79,923,982 2014 21,106,308 9,800,877 31,309,751 37,859,446 1,493,950 101,570,332 2015 25,629,470 11,898,975 36,140,158 42,372,444 1,719,960 117,761,007 Change 14/13-12.8% 20.8% 76.3% 33.3% 4.0% 27.1% 15/14 21.4% 21.4% 15.4% 11.9% 15.1% 15.9% Drop - Casino Admiral Live Game Credit Card Poker Slots Reception Total 2013 3,231,781 1,662,456 0 16,569,736 0 21,463,973 2014 3,118,770 1,725,710 0 20,011,936 0 24,856,416 2015 3,400,430 2,182,848 0 26,294,307 0 31,877,585 Change 14/13-3.5% 3.8% na 20.8% na 15.8% 15/14 9.0% 26.5% na 31.4% na 28.2% Drop - Total Live Game Credit Card Poker Slots Reception Total 2013 27,444,550 9,778,156 17,755,595 44,973,514 1,436,140 101,387,955 2014 24,225,078 11,526,587 31,309,751 57,871,382 1,493,950 126,426,748 2015 29,029,900 14,081,823 36,140,158 68,666,751 1,719,960 149,638,592 Change 14/13-11.7% 17.9% 76.3% 28.7% 4.0% 24.7% 15/14 19.8% 22.2% 15.4% 18.7% 15.1% 18.4% This chart covers drop figures for King s Casino and Casino Admiral only. The amounts are estimates where live game drop tracks chip acquisition at the main cash desk (using Euros, Czech Crowns or foreign currency) and chip acquisition at live gaming tables using cash in Euro. Credit card is chip acquisition at cash desk using credit card. Poker is chip acquisition at cash game poker tables with Euro cash or purchase of tournament entry tickets with Euro cash. Slots indicates Euro cash in the machine. Reception is cash payment of entry fees. There is some misstatement between the numbers as customers are free to use live game chips for poker cash game or tournament entry, etc., however, this gives a good picture of the gaming volumes achieved. VESTAR also keeps statistics of miscellaneous revenues from food services and hotels and number of total customers.
Miscellaneous Revenues - King's Casino Restaurant Poker Hotel Total Guests Change 2013 394,388 0 568,183 962,571 133,381 2014 457,874 803,522 683,270 1,944,666 139,556 2015 553,678 897,445 719,013 2,170,136 162,342 14/13 16.1% na 20.3% 102.0% 4.6% 15/14 20.9% 11.7% 5.2% 11.6% 16.3% Restaurant Poker Hotel Total Guests Change 2013 13,657 0 0 13,657 36,789 2014 14,605 0 0 14,605 39,361 2015 14,776 0 0 14,776 41,649 14/13 6.9% na na 6.9% 7.0% 15/14 1.2% na na 1.2% 5.8% Restaurant Poker Hotel Total Guests Change 2013 408,045 0 568,183 976,228 170,170 2014 472,479 803,522 683,270 1,959,271 178,917 2015 568,454 897,445 719,013 2,184,912 203,991 14/13 15.8% na 20.3% 100.7% 5.1% 15/14 20.3% 11.7% 5.2% 11.5% 14.0% Restaurant revenues are net of any complimentary food services provided customers. Payment could be cash, credit card or gaming chips and accordingly, there is some lack of clarity between this amount and the drop reported previously. During 2014, VESTAR began (after consultation with the Ministry of Finance) to charge and record separately tournament buy ins including a poker consumption fee. This amount is the poker revenue shown in this schedule and represents some revenue towards the costs of the non-stop buffet and drinks available to all customers. The main buffet customers are poker players, who enjoy dinner breaks and a non-stop buffet. The hotel revenues include only the revenues collected from guests of VESTAR owned hotel rooms and not revenues collected from partner hotels. These amounts are net of complimentary rooms provided to rated customers. The number of guests visiting King s Casino and Casino Admiral has grown steadily in the past years. We expect a significant future growth as the offer continues to grow and the hotel investment is realized.
Current Developments VESTAR has begun a further expansion of King s Casino. The extension will include four aspects: 1 Further extension of the poker arena The extension of the poker arena is moderate in square meters. The total playing area will be extended by approximately 300 square meters when connection to the new casino space and hotel are completed. The construction of this extension is close to being completed with some remodeling as the other construction phases are completed. Once completed the extended poker arena will be equipped and arranged to be used as a mid-sized conference or small multi-purpose arena. 2 Further extension of the food and beverage outlets and staff areas The extension of the kitchen and staff areas will result in close to doubling these areas and enable the kitchen to serve expected demand for increase food requirements with hotel breakfast, extended buffet and a second seated restaurant. The resulting buffet area (service and seating) will more than double the current capacity and enable the restaurants to serve seated customers and service over 1000 buffet guests. This extension is almost completed and will open in the next weeks. New buffet restaurant nearing completion 3 New hotel The construction of a new 218 room hotel with spa/fitness facilities is underway. After completion (September 2017), VESTAR will own over 300 rooms in Rozvadov, while having the front desk capabilities for managing approximately 1,000 additional rooms at partner hotels. When completed, VESTAR expects a significant increase in the revenues from existing customers. Using the cruise ship analogy, customers who come to King s Casino from (say) Hamburg will no longer have to shuttle to a hotel 30 minutes away from the gaming area when tired or when they need a quick break/shower, etc. By having their rooms directly on site, we estimate an increase in time in the gaming area by an estimated 20%. Second, the events (weekends and festivals) are expected to continue to grow in size of player fields we can service and in greater flexibility with buy in sizes, tournament offers, etc. This expected continued growth will organically bring in more customers. Finally, by having the increased hoteling capacity, VESTAR will be able to reach out to larger groups and visitors from further away. King s Casino will be a big step further in the direction of a destination resort.
4 Extended casino area Connecting the existing live game and slot area of the casino directly to the hotel lobby will be an extension of the existing casino. This construction at 10 meters in height and approximately 1,500 square meters will approximately triple the gaming space for live game and slots with additional service areas for additional services. Based upon the current demand analysis, there will be 30 new live game tables and 500 additional slot machines in this new casino space. Visualization of new casino space The casino extension will be started as soon as the hotel structure is erected. Full connection and opening of all new gaming casino space is expected to take place simultaneously with the opening of the hotel in September 2017. King s Casino before kitchen, restaurant, poker extension and new lobby and casino and hotel
King s Casino with extended front lobby, new casino and hotel New hotel from behind casino complex, spa/fitness area on top floor of right wing
Standard Double Room in new hotel Silver Suite in new hotel
Bathroom of Golden Suite in new hotel Financing of the extension described above is through a combination of internal resources and a bank facility negotiated and agreed with J&T BANKA, a.s., Prague, Czech Republic. The total facility of the loan is; 7.400.000 EUR. The contracted rate is: EURIBOR + 7,5% per annum. The amount drawn as of 20. September 2016 is: 452.500 EUR. All amounts invested previously for land acquisition, parking extension (re-siting), kitchen and restaurant extension, poker extension, soft costs (architects, etc.) and foundational works completed have been paid from company sources. Repayment of the facility will start 3 months after construction completion (expected to be December 2017). The J&T BANKA loan will be drawn upon presentation of materials and labor billings under a construction contract with Metrostav a.s. The contract has performance stipulations by Metrostav and its subcontractors. VESTAR has an agreement to make early repayments on the loan if desired. Future Opportunities There are several exciting areas for growth of the business in the future. The most exciting organic growth opportunity is the continued extension of the international geographic awareness of King s Casino and its potential to continue to build relationships with partners further afield. King s Casino recently expanded its cooperation with WSOP including marketing of King s Casino in Las Vegas during the 7 week WSOP festival. King s Casino also began exploring a working relationship with an enthusiastic poker group in New Delhi, India who hope to bring a group to King s Casino in the near future. Many similar opportunities are presenting themselves. Two big areas for growth are: 1 - The extension of the asset estate and services provided in Rozvadov and 2 Leveraging King s Casino brand to other border towns and municipalities within the Czech Republic Both of these opportunities have been made possible by the new licensing regime giving VESTAR security through a longer license and through the success of VESTAR in building its brand, position in the market and standing with the regulator and community of Czech Republic municipalities (border communities and otherwise).
1 - The extension of the asset estate and services provided in Rozvadov With the expanded casino facilities and hotel facilities on-site, there will be the opportunity for the casino and hotel management to find seasonal activities for customers to participate in in order to bridge slow-season (week days) with high season (weekends). Any investments in this area must be focused on keeping the customers in the town on-site. 2 Leveraging King s Casino brand to other border towns and municipalities within the Czech Republic With the new license regime there is an opportunity to invest and grow in the casino sector in the Czech Republic. King s Casino has earned some recognition as the biggest single casino in the Czech Republic, the most internationally recognized casino in the Czech Republic and the largest fiscal contributor and most dynamically growing casino in the West Bohemia region. Using King s Casino as a platform for growth along the borders of the country serving local customers and throughout the Czech Republic is a real opportunity. There is no better calling card with municipal leaders who must consider investors entering their jurisdictions.
Appendices 1 VESTAR GROUP Organizational Structure 2 Land Registry confirmation of land ownership 3 Commercial Registry statement Vypis King s Casino a.s. (as of September 19, 2016 at 13:25) 3 - Commercial Registry statement Vypis SHF spol. sr.o. (as of September 19, 2016 at 13:26) 3 - Commercial Registry statement Vypis VESTAR GROUP (as of September 19, 2016 at 13:27) 4 - Tax filing for King s Casino (2014, 2015)
Appendix 1 VESTAR GROUP a. s. Company Registered Number: 263 62 686 Purpose: restaurant management, hotel, real estate ownership and management S.H.F. spol. s r.o. Company Registered Number: 615 02 057 Currently inactive (formerly restaurant management) Owned by: 100% VESTAR GROUP a. s. King s casino a. s. Company Registered Number: 263 66 673 Provision of lottery and gaming activities under license (No. i) e) m) dle zákona č.202/1990) Wholly owned subsidiary of S.H.F. spol. s r.o. King s slots s.r.o. Company Registered Number: 279 64 469 Formerly gaming (slots) currently owner and manager of real estate Wholly owned subsidiary of King s casino a. s.
Appendix 2 Overview of Land (both casino assets)
Appendix 2 Overview of land (King s Casino)
Appendix 2 Overview of land (Casino Admiral)
Appendix 3 Commercial Register Extract