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TABLE OF CONTENTS strategy in place since 2014. ... Bingo halls followed the downward trend observed

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  • TABLE OF CONTENTS

    1 Mission, Vision and Values

    2 Key Figures of the Year

    3 Economic and Social Contributions

    4 Message from the Chairwoman of the Board of Directors

    6 Message from the President and Chief Executive Officer

    9 Review of Activities

    10 Place the customer at the centre of our decision-making process 16 Develop new growth opportunities combining gaming and entertainment

    22 Foster goodwill towards our organization and offerings

    26 Improve our agility and our work process

    29 Financial Review

    34 Supplementary Information

    36 Comparative Results

    37 Consolidated Financial Statements

    38 Management’s Report 39 Independent Auditors’ Report

    40 Consolidated Statement of Comprehensive Income

    41 Consolidated Statement of Change in Shareholder’s Equity

    42 Consolidated Statement of Financial Position

    43 Consolidated Statement of Cash Flows

    44 Notes to the Consolidated Financial Statements

    72 Measuring Efficiency and Performance

    74 Follow-up on the Actions Outlined in the 2015-2020 Responsible Commercialization Plan

    84 Code of Ethics and Rules of Professional Conduct for Directors and Managers of Loto-Québec and its Subsidiaries

    93 Policies and Laws

    94 Access to Information and Protection of Personal Information

    95 Board of Directors and Corporate Secretariat

    100 Board of Directors and Committee Reports

    108 Executive Committee

    1 10 Organizational Structure

  • 1

    To responsibly and efficiently manage games of chance in a controlled and measured fashion, in the interest of all Quebecers.

    MISSION

    INTEGRITY AND AGILITY

    Integrity guarantees that the chances of winning are the same for everyone, and that the reliability and thoroughness of all processes are ensured. Agility allows us to adjust more quickly to market realities, particularly in terms of method, so we can remain competitive in the gaming and entertainment industry.

    OVERALL PERFORMANCE AND INNOVATION

    Overall performance covers economic, social and environmental issues. It requires efficient and responsible management of the gaming and entertainment offering. Innovation means staying ahead of the curve to foster competitiveness. Developing partnerships also helps us expand our capacity for innovation.

    CLIENT-CENTRED AND CREATOR OF EMOTIONS

    Being client-centred means we are able to provide our clients with an unparalleled and satisfying entertainment experience, by applying high standards, listening to their concerns and demonstrating total respect in every interaction. Being a creator of emotions in the gaming and entertainment offering means using passion to engage the imagination of clients and generate moments of exhilaration.

    SYNERGY AND PLEASURE

    Synergy leverages the varied skill sets of all our employees to deliver an integrated offer to clients. It is a matter of fostering teamwork by setting shared and consistent objectives. The pleasure derived from our work creates an environment that nurtures respect, appreciation and recognition. It kindles both personal and collective pride.

    VISION To offer Quebecers first-rate entertainment thanks to an appealing, innovative and competitive offering, while remaining a recognized world leader for responsible commercialization.

    VALUES

  • 2

    Total revenues

    (In millions of Canadian dollars) 2018 2017 2016 2015 2014

    3,769.2 3,635.6 3,560.3 3,338.0 3,519.1

    Net income

    (In millions of Canadian dollars) 2018 2017 2016 2015 2014

    1,335.5 1,230.6 1,227.0 1,115.8 1,144.1

    (In thousands of Canadian dollars) 2018 2017 $ Variation % Variation

    Total revenues 3,769,224 3,635,627 133,597 3.7

    Lotteries 1,881,127 1,827,896 53,231 2.9

    Casinos 906,948 838,775 68,173 8.1

    Gaming establishments 1,006,563 993,517 13,046 1.3

    Intragroup transactions (25,414) (24,561) (853) (3.5)

    Prizes awarded – lotteries 1,002,074 987,611 14,463 1.5

    Prizes awarded – gaming establishments (bingo and Kinzo) 24,982 24,741 241 1.0

    Gross margin 2,330,771 2,235,649 95,122 4.3

    Expenses 982,571 991,604 (9,033) (0.9)

    Net income 1,335,467 1,230,551 104,916 8.5

    Dividend 1,310,467 1,205,551 104,916 8.7

    Other amounts contributed to the Québec and Canadian governments 188,814 199,897 (11,083) (5.5)

    Total assets 1,233,659 1,216,118 17,541 1.4

    Shareholder’s equity 121,573 129,869 (8,296) (6.4)

    KEY FIGURES OF THE YEAR AS AT MARCH 31

  • 3

    ECONOMIC AND SOCIAL CONTRIBUTIONS

    $1,310.5M Dividend to the Government of Québec

    $17.1M

    $1,027.1M

    $33.4M $16.9M $9.9M

    Prizes awarded to lottery and gaming establishment winners (bingo and Kinzo)

    $146.7M Taxes to governments Contribution to the

    Government of Canada

    Contributions to prevent problem gambling

    Contributions to non-profit organizations

    Sponsorships

    $436.1M Employee benefits

    $252.5M Purchases from companies

    conducting business in Québec

    $342.5M Commissions to lottery and gaming

    establishment network partners

  • 4

    The Board of Directors is very pleased that Loto-Québec’s success continued into 2017-2018. In every sector of the organization, efforts to achieve shared goals have borne fruit, resulting in a significant increase of the dividend paid to the Québec Government; $1.310 billion, $104.9 million more than the previous year and $169.0 more than the target announced by the Government in its March 2017 budget. This significant contribution helps finance public services.

    The last fiscal year was highlighted by the adoption of Loto-Québec’s 2017-2020 Strategic Plan. The four new orientations it outlines build on the successes of the strategy in place since 2014.

    By putting customers at the centre of all its decisions, expanding its gaming-entertainment positioning, main- taining its corporate responsibility process and improving its agility and methods, the Corporation will be able to respond to the issues before it. These include changes in consumer habits, the rapid pace of change in the gaming and entertainment markets, and the public’s high expec- tations concerning responsible gambling.

    Throughout the year, Loto-Québec strove to provide an unparalleled client experience, in part through an integrated offer. Regrouping its online activities on the revamped lotoquebec.com portal was part of this effort.

    The Corporation is still benefiting from the growth of the entertainment market. It continued to renew its global offer, for example, by launching entertaining themes centred on socializing in its casinos and gaming halls.

    HÉLÈNE F. FORTIN, FCPA, FCA, ICD.D CHAIRWOMAN OF THE BOARD OF DIRECTORS

    MESSAGE FROM THE CHAIRWOMAN OF THE BOARD OF DIRECTORS

  • M E S S A G E F R O M T H E C H A I R W O M A N O F T H E B O A R D O F D I R E C T O R S 5

    IN EVERY SECTOR OF THE ORGANIZATION, EFFORTS TO ACHIEVE SHARED GOALS HAVE BORNE FRUIT.

    Responsible commercialization is well anchored in Loto-Québec’s culture, as its World Lottery Association certifica tions attest. Its Security Control Standard Certification, which confirms the application of the worldwide best security and integrity practices in its gaming activities, was renewed through 2020. This is in addition to Level 4 responsible gambling certification, the highest international responsible gambling certification, which Loto-Québec has held since 2009.

    The action plan concerning its video lottery terminal (VLT) network has also advanced as planned. This plan is designed to tighten control over VLTs in Québec and reduce their number. The Board has monitored this issue closely.

    The Board also wants to emphasize, once again, the tight and efficient management of all Loto-Québec projects, achieved in part through optimized and harmonized processes. The creation of hubs of expertise in key areas for the Corporation is one of the initiatives that are fostering convergence among the sectors.

    APPOINTMENTS

    Three new directors were appointed by the Government of Québec’s Cabinet last March, Marie Côté, Hugo Delorme and Dominique Gauthier. The Board is pleased to be able to count on their extensive experience and competency, and wishes them a warm welcome.

    ACKNOWLEDGMENTS

    I want to take this opportunity to thank the four members who have left the Board after several years, Lynda Durand (since 2011), Jean André Élie (since 2011), Mel Hoppenheim (since 2004) and Serge LeBel (since 2003). Thank you for your valuable input.

    I also want to mention the excellent work of my fellow directors. Together, we are ensuring that the very highest governance standards are met.

    I thank President and Chief Executive Officer Lynne Roiter, as well, for her dedication and leadership. This experienced manage

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