Codere Q Earnings Results May 12, 2017

Transcription

1 Codere Q 07 Earnings Results May, 07

2 Table of Contents Financial and Operating Overview... 3 Consolidated Income Statement... 4 Operating Expenses... 6 Revenue and Adjusted EBITDA... 7 Earnings per Share... 7 Revenue and Adjusted EBITDA at Constant Currency... 8 Income Statement by Country Argentina... 9 Mexico... 0 Italy... Spain... Other Operations... 3 Consolidated Cash Flow Statement... 4 Capital Expenditures... 6 Consolidated Balance Sheet... 7 Net Working Capital... 8 Capitalization... 9 Gaming Capacity by Venue... 0 Gaming Capacity by Product... Recent Events... Contact Information

3 Financial and Operating Overview Herein, for comparative purposes, all figures for 06 have been restated to include 00% of HRU. Also, figures presented above Operating Profit (other than non-recurring items and impairment charges) are shown excluding the impact of non-recurring items and Adjusted EBITDA refers to EBITDA excluding all non-recurring items. Q 07 operating revenue increased by 7.7% compared to Q 06, mainly driven by strong performance in Argentina, on the back of a relatively stable exchange rate, together with growth in Spain (although softened by a weaker take in sports betting) and Other Operations, partially offset by a decrease of revenue in Italy as a result of AWP payout reductions to mitigate the 06 gaming tax increase. Meanwhile, a strong devaluation of the Mexican peso was offset by a 9% growth in local currency; in constant currency terms, revenue for the quarter would have grown by 0.4% versus 06. Q 07 Adjusted EBITDA reached 68. mm (+.0% versus Q 06), above our guidance of mm. This outperformance was mainly driven by i) stronger than expected operating results, primarily in Mexico and Argentina, but also in Panama and Uruguay (due to the Carrasco Nobile turnaround), ii) a delayed implementation of certain Argentine gaming tax increases (i.e. the cash-in tax and entry fee) which we expected to come into effect on March st, and iii) better than expected exchange rate evolution in Argentina and Mexico in March. Q 07 Adjusted EBITDA margin was 6.8%,.0 percentage point below that of Q 06 driven by margin declines in Argentina (due to the 3.0 percentage points increase in provincial gross revenue tax) and Spain. Non-recurring items in Q 07 were 4. mm, mostly related to operational efficiencies in Argentina, Mexico, Colombia and Spain, but also included.3 mm related to the April 06 financial restructuring and November 06 refinancing (we expect no additional amounts related to the latter two concepts in future periods). In terms of gaming capacity 3, the total number of slots 4 increased.4% to 55,63 in Q 07, compared to 54,496 5 for Q 06, driven by the growth of the portfolio in Italy (+7.8%) and Mexico (+.4%) partially offset by the rationalization of machines in other operations 6 (-3.%). The total number of gaming halls remained constant at 44 while sports betting shops increased to 66 in Q 07 from 45 in Q On March 3 st, we acquired the remaining 3.7% stake that Grupo Caliente held in the consolidated subsidiaries which we refer to as Codere Caliente in Mexico for $6 mm. Accordingly, Codere and Grupo Caliente have extinguished all shareholder agreements in place between the parties. Excluding the 4.5 mm related to the 3.7% Codere Caliente acquisition, capex in Q 07 was 3.6 mm, slightly below Q 06, and included 5.7 mm of maintenance capex (including.6 mm of catch-up capex) and 7.9 mm for other growth projects. As of March 3, 07, we had 49.4 mm in cash and equivalents and 6.9 mm in total liquidity (i.e. including availability under the SSRCF). On November 30, 06, we completed the acquisition of our partner s 50% interest (and, prior to such date, reported our 50% interest pursuant to the equity method); thereafter, we own and consolidate 00% of HRU. EBITDA, as defined by the Company, is operating profit (EBIT) plus depreciation and amortization, variation in provisions for trade transactions, gains / (losses) on asset disposals, and impairment charges. 3 Figures reflect end of period installed (i.e. operating) units; please see Gaming Capacity overview for details. 4 Includes AWPs, VLTs, electronic bingo terminals and all other gaming machines; excludes 3rd party operated slots. 5 Figure will vary from prior earnings releases; prior figures for Spain reflected documented slots (i.e. authorized units) while current figures reflect installed (i.e. operating units) and prior figures for Italy included 3rd party operated AWPs and VLTs. 6 Includes Panama, Colombia and Uruguay (Carrasco Nobile and HRU). 7 Figures will vary from prior earnings releases; gaming halls in Colombia excludes route business gaming venues (reclassified as Arcades), sports betting shops in Panama excludes 3rd party operated agencies (horse race betting) and sports betting shops in Spain excludes Bars and Arcades with self-service sports betting terminals. 3

4 Consolidated Income Statement Quarter Q 06 Q 07 Var. % Operating Revenue % Operating Expenses (excl. D&A): Gaming & Other Taxes (34.9) (47.6) (9.4%) Personnel (70.6) (74.6) (5.7%) Rentals (9.3) (30.6) (4.3%) Cost of Goods Sold (0.5) (.8) (.9%) Other (63.8) (7.4) (3.3%) Total (309.3) (337.0) (9.0%) Depreciation & Amortization (6.9) (7.7) (.8%) Variation in Provisions for Trade Transactions () n.a. Gains / (Losses) on Asset Disposals () (0.9) (0.5) 44.4% Impairment Charges n.a. Non-Recurring Items (9.0) (4.) 54.4% Operating Profit % Interest Expense (3) (33.6) (8.3) 45.6% Interest Income.5.4 (6.7%) Loss on Debt for Equity Exchange n.a. Gains / (Losses) on Disposal of Financial Investments (0.5) 0.0 n.a. Gains / (Losses) from Exchange Rate Variations n.a. Earnings before Corporate Income Taxes n.a. Provision for Corporate Income Taxes (.8) (.) (73.4%) Minority Interests in (Income) / Loss of Consolidated Subs.4 (3.5) n.a. Equity in Income / (Loss) of Unconsolidated Subs (0.0) (0.) n.a. Net Income / (Loss) (9.0).7 n.a. EBITDA EBIT (Operating Profit) % (+) Impairment Charges n.a. (+) (Gains) / Losses on Asset Disposals (44.4%) (+) Variation in Provisions for Trade Transactions (0.) 0.0 n.a. (+) Depreciation & Amortization % EBITDA % EBITDA Margin 5.4% 5.8% 0.4 p.p. Adjusted EBITDA EBITDA % (+) Non-Recurring Items (54.4%) Adjusted EBITDA % Adjusted EBITDA Margin 7.8% 6.8% (.0 p.p.) Adjusted EBITDAR Adjusted EBITDA % (+) Rentals % Adjusted EBITDAR % Adjusted EBITDAR Margin 5.6% 4.4% (. p.p.) Figures reflect change in provisions on advances to site owners in connection with contracts to install our machines in their establishments. Figures primarily reflect disposal of gaming machines; 3 Figure for Q 07 includes 0. mm in revolver backed letter of credit fees and 0.3 mm in fees on unused revolver availability. 4

5 Operating Revenue increased by 9. mm or 7.7% to 405. mm in Q 07, due to the increase in revenues in Argentina ( 6. mm) together with growth in Spain (. mm), Uruguay (.8 mm) and Colombia (. mm), the latter two primarily due to strengthened local currencies. Operating Expenses (excluding depreciation and amortization) increased by 7.7 mm or 9.0% to mm, primarily due to an increase in costs in Argentina (including higher gaming taxes) and Spain of.7 and 4.4 mm, respectively, partially offset by a 4.9 mm reduction in costs in Italy (mainly gaming taxes). Adjusted EBITDA increased.3 mm or.0% to 68. mm, mainly due to results in Argentina ( 3.4 mm), Italy (.9 mm) and Uruguay (.0 mm), partially offset by a decrease in Spain (.3 mm) due to higher marketing spend and other costs related to the deployment of the sports betting business. In Q 07, Adjusted EBITDA margin was 6.8%,.0 percentage points below that of Q 06 mainly driven by margin declines in Argentina (due to the 3.0 percentage points increase in provincial gross revenue tax) and Spain. Adjusted EBITDAR increased.6 mm or.7% to 98.7 mm driven by strong growth in Argentina and Italy. Losses on Asset Disposals were 0.5 mm in Q 07 compared to a loss of 0.9 mm in Q 06, due to losses in Mexico, Spain and Italy. Non-Recurring Items in Q 07 totaled 4. mm and were mostly related to cost efficiency measures implemented in the quarter, but also included.3 mm related to the April 06 restructuring and November 06 refinancing processes. Operating Profit increased by 5.7 mm to 35.8 mm. The operating profit margin increased to 8.8% in Q 07 from 8.0% in the same period last year. Excluding all non-recurring items, operating profit was 39.9 mm, a 9.8% operating profit margin, 0.6 percentage points below Q 06. Interest Expense decreased by 5.3 mm to 8.3 mm, which reflects a substantially lower cost of funding in the quarter (the first to have the full benefit from the November 06 refinancing) versus our legacy (i.e. prerestructuring) debt capitalization. Interest income decreased by 0. mm to.4 mm. There were no Gains or Losses on Disposal of Financial Investments in Q 07 compared to a loss of 0.5 mm in Q 06, as a result of the discontinuation of sovereign bond transactions in Argentina. Gains on Exchange Rate Variations increased by 4.7 mm in Q 07 on the back of strength across nearly all of our local currencies. Provision for Corporate Income Tax increased by 9.4 mm to. mm in Q 07, primarily due to a 0.4 mm increase in provision for corporate income taxes in Argentina as a result of: (i) a 5% increase in earnings before taxes (.3 mm impact on the provision for corporate income taxes); (ii) an increase in the corporate income tax rate from 35% to 4.5% in December 06 (.8 mm); (iii) an increase in withholding taxes related to corporate shared services provided ( 0.8 mm); and (iv) Codere s participation in a tax self-disclosure program as outlined in Recent Events ( 5.6 mm). Minority Interest represents a loss of 3.5 mm in Q 07 compared to a gain of.4 mm in Q 06 due to the significant exchange rate gain in our Codere Caliente business in Q 07 (i.e. prior to the acquisition). Equity in Income represents a loss of 0. mm in Q 07. As a result of the aforementioned results, the Net Income for Q 07 was.7 mm, compared to a Net Loss of 9.0 mm in the same period in 06. Adjusted EBITDAR, as defined by the Company, is Adjusted EBITDA plus rental expenses. While the December 06 statutory CIT rate was retroactive to January, 06, in Q 06 the provision for corporate income taxes reflected a 35% statutory CIT rate; in Q4 06 we made an additional provision for Q 06 CIT at the higher 4.5% statutory rate. 5

6 Operating Expenses Q 06 Quarter Q 07 Var. %/p.p. Operating Revenue % Operating Expenses (excl. D&A): Gaming & Other Taxes (34.9) (47.6) (9.4%) Personnel (70.6) (74.6) (5.7%) Rentals (9.3) (30.6) (4.3%) Cost of Goods Sold (0.5) (.8) (.9%) Other (63.8) (7.4) (3.3%) Total (309.3) (337.0) (9.0%) Rentals Gaming Venues & Other (9.) (9.9) (4.0%) Slots (0.) (0.7) (5.0%) Total (9.3) (30.6) (4.3%) Other Professional Fees () (.8) (3.) (.7%) Advertising and Marketing (9.9) (.5) (5.9%) Utilities (9.7) (0.9) (.4%) Repairs & Maintenance (3) (6.7) (7.7) (4.9%) Insurance (4) (.0) (.3) (38.%) Travel (0.9) (.) (.5%) Transportation (5) (0.6) (0.7) (0.3%) Other Expenses (.4) (6.) (6.6%) Total (63.8) (7.4) (3.3%) As % of Operating Revenue Operating Revenue 00% 00% - Operating Expenses (excl. D&A): Gaming & Other Taxes 35.9% 36.4% 0.6 Personnel 8.8% 8.4% (0.4) Rentals 7.8% 7.6% (0.) Cost of Goods Sold.8%.9% 0. Other 7.0% 7.9% 0.9 Total 8.% 83.% 0.9 Rentals Gaming Venues & Other 5.% 4.9% (0.) Slots.7%.6% (0.) Total 7.8% 7.6% (0.) Other Professional Fees () 3.4% 3.% (0.) Advertising and Marketing.6%.8% 0. Utilities.6%.7% 0. Repairs & Maintenance (3).8%.9% 0. Insurance (4) 0.3% 0.3% 0. Travel 0.% 0.3% 0.0 Transportation (5) 0.% 0.% 0.0 Other Expenses 5.9% 6.4% 0.5 Total 7.0% 7.9% 0.9 Figures exclude non-recurring items. Figures exclude payments to personnel via outsourcing agreements in Mexico which are re-classified as personnel expense. 3 Includes cleaning services and general supplies consumed. 4 Includes insurance (including surety bonds) premiums and non-revolver backed letter of credit fees. 5 Includes armored vehicles for route collections and other transportation costs. 6

7 Revenue and Adjusted EBITDA Earnings per Share Quarter Q 06 Q 07 Var. % Operating Revenue Argentina % Mexico % Panama % Uruguay % Colombia % Brazil % Sub-Total - Latin America % Italy (3.7%) Spain % Sub-Total - Europe 3..3 (0.7%) Total % Adjusted EBITDA Argentina % Mexico.7.5 (0.9%) Panama % Uruguay % Colombia (.%) Brazil (0.7) (.) (7.4%) Sub-Total - Latin America % Italy % Spain (6.7%) Sub-Total - Europe (.9%) Corporate (5.8) (8.0) (37.9%) Total % Earnings per Share Quarter Q 06 Q 07 Var. % Net Income / (Loss) (EUR mm) (9.0).7 n.a. Average Shares Issued & Outstanding () (mm): Basic 54.8,59.4 n.a. Diluted () 54.8,59.4 n.a. Earnings per Share (EUR): Basic (0.6) 0.00 n.a. Diluted (0.6) 0.00 n.a. Figure excludes 0.3 mm shares held in treasury stock. Figure reflects shares and share equivalents (per treasury stock method); no impact from 40.5 mm warrants issued to Key Executives on March 5, 07 as would be anti-dilutive. 7

8 Revenue and Adjusted EBITDA at Constant Currency Constant Currency Quarter Q 06 Q 07 Var. % Operating Revenue Argentina % Mexico % Panama (.7%) Uruguay (3.%) Colombia % Brazil % Sub-Total - Latin America % Italy (3.7%) Spain % Sub-Total - Europe 3..3 (0.7%) Total % Adjusted EBITDA Argentina % Mexico % Panama % Uruguay.8..% Colombia (.%) Brazil (0.7) (0.9) (8.6%) Sub-Total - Latin America % Italy % Spain (6.7%) Sub-Total - Europe (.9%) Corporate (5.8) (8.0) (37.9%) Total % 8

9 Argentina Quarter Q 06 Q 07 Var. % Operating Revenue % Operating Expenses (excl. D&A): Gaming & Other Taxes (55.0) (69.3) (6.0%) Personnel (.0) (4.7) (.3%) Rentals (4.3) (4.4) (.3%) Cost of Goods Sold (.7) (.4) (4.%) Other (.4) (6.3) (43.0%) Total (94.4) (7.) (4.0%) Depreciation & Amortization (.6) (.5) 3.8% Variation in Provisions for Trade Transactions n.a. Gains / (Losses) on Asset Disposals () n.a. Impairment Charges n.a. Non-Recurring Items (5.) (.8) 65.4% Operating Profit % EBITDA % EBITDA Margin.0%.9% 0.9 p.p. Adjusted EBITDA % Adjusted EBITDA Margin 5.% 3.% (.0 p.p.) Adjusted EBITDAR % Adjusted EBITDAR Margin 8.5% 6.0% (.5 p.p.) Avg. Exchange Rate EUR/ARS % Key Performance Indicators Avg. Installed Capacity (Slots) 6,95 6,95 0.0% Gross Win per Slot per Day: EUR % Local Currency 3,004 3,879 9.% Revenue in Q 07 increased by 6. mm or 0.7% compared to Q 06, due to the strong underlying performance of the business and relatively low depreciation of the Argentine peso against the euro (4.%) despite year on year inflation being 35.6%. Average daily gross win per position (in EUR terms) grew 3.3% on the back of a stable average installed capacity. This growth is the outcome of the commercial initiatives implemented in the period as well as inflationary trends in Argentina. Operating Expenses (excluding D&A) increased by 4.0%, also below local inflation, due to the relatively low depreciation of the Argentine peso against the euro and the 4.3 mm increase in gaming taxes; the effective gaming tax (as a percentage of revenue) increased.9 percentage points as a result of the increase in the gross revenue tax to 5% and the introduction from mid-march of the new 0.95% indirect federal tax on bets. Adjusted EBITDA increased by 0.7% to 35. mm, compared to 3.7 mm in Q 06 as a result of the above mentioned growth in revenues partially offset by higher gaming taxes. The Adjusted EBITDA margin was 3.% in Q 07,.0 percentage points lower than the 5.% margin in Q 06, due to higher gaming taxes in 07 and despite efficiencies achieved in the second half of 06. Figures reflect primarily disposal of gaming machines. Figure reflects Codere estimate based on INDEC (Instituto Nacional de Estadísticas y Censos de la República Argentina) published data. 9

10 Mexico Quarter Q 06 Q 07 Var. % Operating Revenue % Operating Expenses (excl. D&A): Gaming & Other Taxes (7.8) (9.3) (9.%) Personnel () (5.0) (4.3) 4.4% Rentals (6.3) (6.) 0.6% Cost of Goods Sold (3.3) (3.4) (3.0%) Other (7.) (6.7).6% Total (59.5) (59.9) (0.7%) Depreciation & Amortization (0.3) (8.).4% Variation in Provisions for Trade Transactions n.a. Gains / (Losses) on Asset Disposals () (0.8) (0.) 87.5% Impairment Charges n.a. Non-Recurring Items (0.3) (0.6) n.a. Operating Profit % EBITDA (.3%) EBITDA Margin 6.4% 5.7% (0.7 p.p.) Adjusted EBITDA.7.5 (0.9%) Adjusted EBITDA Margin 6.7% 6.4% (0.3 p.p.) Adjusted EBITDAR (0.8%) Adjusted EBITDAR Margin 46.8% 46.3% (0.5 p.p.) Avg. Exchange Rate EUR/MXN % Key Performance Indicators Avg. Installed Capacity (Slots) 8,70 9,6.8% Gross Win per Slot per Day: EUR % Local Currency % Revenue in Q 07 increased by 0. mm (0.%) compared to Q 06, despite the significant depreciation of the Mexican peso against the euro (9.%). In local currency terms, revenue grew 9.4% driven by higher average installed capacity (.8%) and higher daily win per machine (9.%) as well as further deployment of table games, both enhanced by commercial initiatives to improve customer loyalty and enhance revenue per visit. Operating Expenses (excluding D&A) in Q 07 increased by 0.4 mm (0.7%) compared to Q 06 as a result of higher effective gaming taxes, despite personnel and other efficiencies achieved during the last twelve months. Adjusted EBITDA decreased by 0.9% to.5 mm driven by the depreciation of the peso. Adjusted EBITDA margin decreased 0.3 percentage points to 6.4% versus 6.7% in Q 06. In constant currency terms, Adjusted EBITDA in Q 07 would have been 3.6 mm, an increase of 8.8% over Q 06. Includes personnel costs related to outsourced employees. Figures reflect primarily disposal of gaming machines. 0

11 Italy Quarter Q 06 Q 07 Var. % Operating Revenue (3.7%) Operating Expenses (excl. D&A): Gaming & Other Taxes (5.) (48.) 7.9% Personnel (8.9) (8.9) 0.0% Rentals (.6) (3.) (9.%) Cost of Goods Sold (0.5) (0.4) 0.0% Other (.) (.0) 9.8% Total (76.4) (7.5) 6.4% Depreciation & Amortization (4.) (4.0).4% Variation in Provisions for Trade Transactions () n.a. Gains / (Losses) on Asset Disposals () (0.) (0.) 50.0% Impairment Charges n.a. Non-Recurring Items n.a. Operating Profit. 3.0 n.a. EBITDA % EBITDA Margin 6.4% 9.0%.6 p.p. Adjusted EBITDA % Adjusted EBITDA Margin 6.4% 9.0%.6 p.p. Adjusted EBITDAR % Adjusted EBITDAR Margin 9.6% 3.0% 3.4 p.p. Key Performance Indicators Avg. Installed Capacity (AWPs) 7,549 8,06 7.4% Avg. Installed Capacity (VLTs),45, % Gross Win per Slot per Day - EUR AWPs % VLTs (3.3%) Revenue in Q 07 decreased by 3.0 mm (3.7%) compared to Q 06. This is the result of the reduction in payout in machines deployed during 06 that, despite reducing the overall revenue, increases net (after tax) revenue for operators 3. Additionally, we have recorded an improvement in the average daily gross win per unit for AWPs (0.8%), an increase in the number of installed AWPs (7.4%) and VLTs (3.9%) and, to a lesser extent, an increase in units connected to our network. Operating Expenses (excluding D&A) decreased by 6.4% in Q 07 compared to Q 06 due to a 7.9% decline in gaming taxes. Adjusted EBITDA was 7. mm in Q 07, 36.5% higher than in Q 06. Adjusted EBITDA margin was 9.0%,.6 percentage points higher than in Q 06, due to the aforementioned reduction in payout of AWPs. Figures reflect change in provisions on advances to site owners in connection with contracts to install our machines in their establishments. Figures reflect primarily disposal of gaming machines. 3 The initial impact from the increase in gaming tax derived from the 06 Stability Law was an increase in our reported revenue which reflects the amounts collected (i.e. gross win) from AWPs net of the participation of the bar owner which decreases proportionally with gaming tax increases.

12 Spain Quarter Q 06 Q 07 Var. % Operating Revenue % Operating Expenses (excl. D&A): Gaming & Other Taxes (4.0) (5.0) (7.%) Personnel (9.4) (0.6) (.8%) Rentals (.4) (.8) (8.6%) Cost of Goods Sold (.3) (.6) (3.0%) Other (5.9) (7.4) (5.4%) Total (33.0) (37.4) (3.3%) Depreciation & Amortization (4.5) (5.7) (6.7%) Variation in Provisions for Trade Transactions () n.a. Gains / (Losses) on Asset Disposals () 0.0 (0.3) n.a. Impairment Charges n.a. Non-Recurring Items 0.0 (0.) n.a. Operating Profit (97.6%) EBITDA (9.%) EBITDA Margin 0.7% 4.0% (6.7 p.p.) Adjusted EBITDA (6.7%) Adjusted EBITDA Margin 0.7% 4.4% (6.3 p.p.) Adjusted EBITDAR (9.0%) Adjusted EBITDAR Margin 4.0% 8.5% (5.5 p.p.) Key Performance Indicators Avg. Installed Capacity (Slots) 9,8 9,67 (0.7%) Avg. Installed Capacity (Sports Betting Terminals) 3,380 3,98 7.8% Gross Win per Slot per Day - EUR Slots % Revenue in Q 07 grew by. mm (5.0%) compared to Q 06, driven by growing revenues in our slot and bingo businesses. On the other hand, and despite an increase in deployed units of 7.8%, our Sports Betting revenue decreased in the quarter by 8.% due to a decline in take. We consider that this drop is not a result of structural changes in the business (as our client, product and betting mixes remain stable), but rather a consequence of specific player friendly sports results (mainly in football) that have caused most other operators to experience soft takes in the quarter. The growing revenue in the Slot Route business was driven by the significant increase in average daily gross win per position (5.8%) in Q 07, partially due to continued significant investment in product and macroeconomic recovery in Spain. Operating Expenses (excluding D&A) increased by 3.3% in Q 07 as a result of the increase on marketing spend in our Online and Sports Betting businesses, higher personnel associated with further deployment of sports betting and other related expenses. Adjusted EBITDA decreased by.3 mm versus Q 06, as a result of the weak revenue in sports betting despite increased capacity. Adjusted EBITDA margin decreased by 6.3 percentage points to 4.4%. Figures reflect change in provisions on advances to site owners in connection with contracts to install our machines in their establishments. Figures reflect primarily disposal of gaming machines.

13 Other Operations Quarter Q 06 Q 07 Var. % Operating Revenue Panama % Uruguay % Colombia % Brazil % Operating Revenue % Adjusted EBITDA Panama % Uruguay % Colombia (.%) Brazil (0.7) (.) (7.4%) Adjusted EBITDA % Adjusted EBITDA Margin.9%.4% 0.5 p.p. EBITDA % EBITDA Margin.9%.0% 0. p.p. Avg. Exchange Rates EUR/USD.0.07 (.7%) EUR/UYU (.9%) EUR/COP 3,58 3, (3.%) EUR/BRL (.%) Other Operations includes results from Panama, Uruguay, Colombia and Brazil, but excludes Corporate Overhead. Operating revenue increased by 3.7 mm (8.%), to 49. mm as a result of: An increase in Panama of 0.5 mm mainly due to the improvement in operating performance and a stronger dollar. An increase in Uruguay of.8 mm due to the.9% appreciation of the Uruguayan peso. An increase in Colombia of. mm mainly due to the 3.% appreciation of the Colombian peso against the euro and improved performance in our halls. Adjusted EBITDA increased by 0.7 mm (3.0%), to 6. mm as a result of: An increase in Panama of 0.4 mm principally due to cost savings initiatives and a stronger dollar against the euro. An increase in Uruguay of 0.9 mm due to improved operational performance in Carrasco and the decrease in gaming taxes following the new, more favorable, tax structure. A decrease in Colombia of 0. mm due to the higher effective gaming tax, due to the deployment of the variable tax on machines, partially offset by efficiency initiatives. A decrease in Brazil of 0.5 mm mainly due to the closing of of our 7 horserace betting agencies in March 06 and increased local headquarter costs. Adjusted EBITDA margin in Q 07 was.4%, 0.5 percentage points above that of Q 06. we closed our Turff Bet & Sports Bar venues in Gávea and Avenida Nilo, both in Rio de Janeiro. 3

14 Consolidated Cash Flow Statement Quarter Q 06 Q 07 Var. % Operating Profit % Non-Cash Items in Operating Profit: Impairment Charges n.a. Gains / (Losses) on Asset Disposals (44.4%) Depreciation & Amortization % Other Expenses..3 n.a. Other Income 0.0 (0.) n.a. Total % Corporate Income Taxes Paid (8.3) (.5) (50.6%) Chg. in Working Capital () (4.6).0 n.a. Cash Flow from Operations % Capital Expenditures () (6.7) (48.) (80.%) Cash Flow from Investing (6.7) (48.) (80.%) Cash Interest Expense (7.4) (3.8) 48.6% Cash Interest Income 0.4. n.a. Chg. in Financial Debt (0.4) 8.0 n.a. Chg. in Financial Investments (64.3%) Chg. in Deferred Payments (3) 4.9 (3.) n.a. Dividends Paid, net (4) (0.) (.9) n.a. Investment in Treasury Shares, net n.a. Cash Effect from Exchange Rate Difference (.0) (.4) n.a. Cash Flow from Financing.9 (.) n.a. Exchange Rate Impact on Cash Balances (4.).0 n.a. Cash Flow % Cash & Equivalents Beginning of Period % Cash Flow % End of Period % Cash flow from operations in Q 07 was 54.6 mm, a 5.% increase versus 36. mm in Q 06. This increase is primarily attributable to (i) a 6. mm increase in reported EBITDA and (ii) an increase in the change working capital, partially offset by higher corporate income taxes paid. Cash flow from investing in Q 07 reflects 48. mm in capital expenditures, of which 4.5 mm are related to the acquisition of the 3.7% stake of Codere Caliente,. mm for acquisitions of Spanish AWP operators,.0 mm for the acquisition of an AWP operator in Italy and 0.3 mm in advances to bar owners in Spain and Italy. Please see earnings results presentation for reconciliation between this figure and management reporting of net working capital. Figures reflect accrued amounts, including contingency payments (if any), and prior to any deferred payment arrangements (if applicable). 3 Includes changes in deferred payments related to capital expenditures and authorized deferred gaming taxes (Spain). 4 Figure reflects dividends paid to minority partners net of dividends received from Group investments in unconsolidated entities. 4

15 Cash flow from financing was (.) mm and included: 3.8 mm of cash interest expense, including 0.3 mm related to our SSRCF and 3.5 mm related to OpCo debt (including capital leases);. mm of cash interest income; 8.0 mm increase in financial debt made up of: (i) 0.0 mm drawn under the SSRCF; (ii).4 mm borrowed under a working capital facility in Uruguay HRU; (iii). mm increase in capital leases, primarily in Argentina; (iv) a decrease in OpCo financial debt (excluding capital leases) of 5.5 mm, due to scheduled amortization of loans in Uruguay HRU (. mm), Mexico (.4 mm), Uruguay Carrasco (.3 mm), Panama ( 0.5 mm), Spain ( 0. mm) and Italy ( 0. mm);.0 mm decrease in financial investments; Decrease in deferred payments of 3. mm, consisting of a decrease in deferred payments with capex suppliers of 0.9 mm and a decrease in authorized deferred gaming taxes in Spain of.3 mm; Dividends paid to minority partners of.9 mm;.4 mm net negative impact from exchange rate differences; The fluctuation in foreign exchange rates has resulted in a positive impact of.0 mm on conversion of cash balances; During Q 07, there has been an increase in cash and equivalents of 7.3 mm to 49.4 mm. 5

16 Capital Expenditures Quarter Q 06 Q 07 Var. % Capital Expenditures Maintenance () (9.6%) Growth (3) n.a. Total % Maintenance Argentina % Mexico (58.8%) Panama % Colombia Uruguay.8.4 (.%) Brazil Sub-Total - Latin America (4.9%) Italy.7.7 (37.0%) Spain % Sub-Total - Europe (5.4%) Corporate Total (9.6%) Growth Argentina n.a. Mexico n.a. Panama n.a. Colombia n.a. Uruguay n.a. Brazil n.a. Sub-Total - Latin America n.a. Italy 0..0 n.a. Spain. 5.5 n.a. Sub-Total - Europe. 7.5 n.a. Corporate n.a. Total n.a. Maintenance Capex in Q 07 was principally affected by: Investment in Mexico of 4.7 mm, a decrease of 6.7 mm, associated with slot renewal and gaming halls refurbishment but at a slower pace than in the prior year period in the case of slot renewals; Investment in Argentina of.4 mm, an increase of 0.5 mm, due to increased investment in slot renewals; Spanish investment of 5.3 mm, an increase of 0.6 mm, due to continued significant product renewal in our AWP retail business and commercial capex in a context of higher AWP revenues; and Italian investment of.7 mm, a decrease of.0 mm, due to higher investment in 06 associated with the renewal of AWPs to adapt payouts to the new regulation. Growth Capex in Q 07 was 8.0 mm higher than in Q 06 due to the 4.5 mm acquisition of a 3.7% interest in Codere Caliente and higher investments in Spain and Italy, partially offset by lower investment in Argentina. Figures as per consolidated cash flow statements. Includes primarily slot product/gaming hall renovation, exclusivity payments to site owners and gaming license renewals. 3 Includes primarily slot product/gaming hall expansion and acquisition activity. 6

17 Consolidated Balance Sheet As at Dec-6 Mar-7 Var. Var. % Assets Cash & Equivalents % S-T Financial Investments () (.6) (3.4%) Accounts Receivable () % Taxes Receivable (3) (5.0) (3.9%) Prepaid Expenses (0.4) (.3%) Inventory % Other Current Assets % Current Assets % Fixed Assets % L-T Financial Investments % Intangible Assets (excl. Goodwill) % Goodwill % Deferred Tax Assets % Other Non-Current Assets n.a. Total Assets,479.4, % Liabilities & Shareholders' Equity Accounts Payable (4) % S-T Provisions (5) % S-T Taxes Payable (6) % S-T Financial Debt % S-T Deferred Payments (7) (.6) (4.%) Other Current Liabilities % Current Liabilities % L-T Provisions (8) (.9) (6.%) L-T Taxes Payable (.) (0.9%) L-T Financial Debt % L-T Deferred Payments (7) % Deferred Tax Liabilities % Other Non-Current Liabilities (0.0) (0.6%) Total Liabilities,405.8, % Minority Interests (4.8) n.a. Shareholders' Equity 98.5 (.6) (0.) n.a. Total Liabilities & Shareholders' Equity,479.4, % End of Period Exchange Rates EUR/ARS (0.3) (.8%) EUR/MXN (.78) (8.%) EUR/USD % EUR/COP 3,63 3,079 (84) (.6%) EUR/UYU (0.4) (.3%) EUR/BRL (0.05) (.5%) Includes 4.4 mm and 3.6 mm, respectively, in cash in transit (Codere participation in realized gross win pending route operator collection). Includes A/R from customers, other parties and advances to employees. 3 Includes all taxes receivable from tax authorities, including the 0.5% canon (AAMS) in Italy. 4 Includes accounts payable to suppliers, other parties and accrued wages. 5 Figures include provision for trade transactions and other provisions related to treasury share activity. 6 Figures include gaming taxes, corporate income taxes and other taxes payable to tax authorities. 7 Figures include deferred payments (and other partner investments) related to capital expenditures and other deferred payment obligations. 8 Figures include all other provisions related to business contingencies (personnel, tax, etc.). 7

18 Net Working Capital Dec-6 Mar-7 Var. Var. % Assets Accounts Receivable % Taxes Receivable () (5.0) (4.0%) Prepaid Expenses (0.4) (.3%) Inventory % Other Current Assets () Total (.9) (0.8%) Liabilities Accounts Payable (6.) 5.0% S-T Provisions (3) (0.).8% Taxes Payable () (4.8%) Deferred Payments (4) (9.%) Other Current Liabilities ().4.9 (0.4) 7.5% Total (0.5%) Net Working Capital (54.9) (55.) (0.3) (0.6%) Balance Sheet Total assets increased by 50.9 mm in Q 07. This increase is principally attributable to appreciation of the Mexican peso (8.%) and, to a lesser extent, the Argentine peso (.8%). Fixed and intangible assets (excluding goodwill) increased 3.8 mm due to the appreciation of the Mexican peso, and lower amortization of assets versus the prior year period. Goodwill increased by 6.8 mm, primarily due to the appreciation of the Mexican peso against the euro. Financial debt, including both the short and long term portion and taking into account exchange rate impacts, increased by.6 mm as a result of 4.6 mm in accrued interest for the Senior Notes and the 0.0 mm drawn under the SSRCF, partially offset by the decline in the dollar denominated Senior Notes due to the depreciation of the dollar. Minority interests increased by 9. mm to 94.3 mm and shareholders equity decreased by 0. mm to (.6) mm primarily due to the reclassification of minority interest in Codere Caliente to shareholder s equity upon the acquisition of Grupo Caliente shares on March 3, 07. Net Working Capital Net working capital decreased by 0.3 mm to negative 55. mm. This change in net working capital was primarily due to a.8 mm increase in accounts receivable and a.6 mm reduction in taxes payable, net 5, more than offset by a 6. mm increase in accounts payable. Figures reflect gaming and other taxes (i.e. exclude corporate income taxes). Figures exclude security deposits. 3 Figures reflect provisions for trade transactions. 4 Figures reflect other deferred payment obligations (i.e. exclude deferred payments and other partner investments related to capital expenditures). 5 Taxes payable less taxes receivable. 8

19 Capitalization As at Dec-6 Mar-7 Var. Var. % Capitalization S-T Financial Debt () % L-T Financial Debt () % Total Financial Debt % Minority Interests (4.8) n.a. Shareholders' Equity 98.5 (.6) (0.) n.a. Total Capitalization % Financial Debt () OpCo Debt (excl. Capital Leases) (0.) (0.%) OpCo Capital Leases % Sub-Total % Super Senior Revolving Credit Facility (0.5) n.a. Senior Notes % Total Financial Debt % Capitalization of Operating Leases () % Total Adjusted Financial Debt,355.3, % Cash & Equivalents Argentina % Mexico (9.) (36.5%) Italy % Spain % Other Operations % Sub-Total % Corporate (6.8) (4.0%) Total % Europe (incl. Corporate) (5.9) (8.3%) Latam % Total % Credit Statistics LTM Adjusted EBITDA % LTM Adjusted EBITDAR % Proforma Interest Expense (3) % Leverage: Senior Financial Debt (4) / LTM Adjusted EBITDA 0.4x 0.4x 0.0x 0.5% Total Financial Debt / LTM Adjusted EBITDA 3.3x 3.4x 0.x.9% Total Adjusted Financial Debt / LTM Adjusted EBITDAR 3.5x 3.6x 0.0x.3% Total Net Financial Debt / LTM Adjusted EBITDA.8x.8x 0.0x.4% Coverage: LTM Adjusted EBITDA / Proforma Interest Expense 4.3x 4.3x 0.0x 0.0% Figures include accrued interest and impact of deferred financing fees. Figures reflect 4.0x multiple on LTM rental expenses, as per Moody's Investor Services methodology (Operating Lease Adjustments Treatment, Rationale and Sector Data for Retail, Restaurants, Gaming, Lodging & Apparel, dated June 4, 06). 3 Figures based on December 3,06 and March 3, 07, as applicable, financial debt outstanding and interest rates; excludes revolver backed letter of credit fees and fees on unused revolver availability. 4 Includes structurally senior OpCo debt (including capital leases) plus drawn amounts outstanding under the 95 mm SSRCF. 9

20 Gaming Capacity by Venue Region Latin America Gaming Venues Sports Gaming Halls () Arcades (3) Bars (4) Betting Shops (5) Racetracks Total Argentina Mexico (6) Panama (6, 7) Colombia Uruguay (CN) Uruguay (HRU) (8) Brazil Total Europe Co-located Italy - -,54, ,65,363 Spain (9) ,67 7, ,078 8,45 Total ,88 9, ,343 0,508 Total Group ,88 9, ,684 0,843 Operator "Corners" Codere Third Party ,88 9, ,98 0,447 Total ,88 9, ,684 0,843 Spain SSTs Only (0) ,07 - -,37,54 AWPs & SSTs Sub-Total ,6, ,677,88 AWPs Only ,40 6, ,40 6,63 Total ,67 7, ,078 8,45 Figures as at March 3 of 06 and 07, as applicable. Includes all gaming venues with > 50 slot machines. 3 Includes all gaming venues with between 5 and 50 (inclusive) slot machines (Codere and/or 3 rd party operated). 4 Includes all bars, restaurants, tobacco shops and other retail locations with < 5 slot machines and/or self-service sports betting terminals. 5 Includes sports books co-located within Codere gaming halls and other Codere operated standalone sports betting shops. 6 Figure for sports betting shops reflects sports books co-located within Codere operated gaming halls. 7 Figure for sports betting shops excludes 5 and 4, respectively, affiliated agencies (horserace betting only). 8 Figure for sports betting shops includes 5 sports books co-located within HRU operated gaming halls. 9 Sports betting shops excludes 5 and 0, respectively, franchised locations (included in Arcades). 0 Self-service sports betting terminals; arcades and bars would, however, typically have 3 rd party operated AWPs. 0

21 Gaming Capacity by Product Gaming Product (Installed Capacity) Slots () Table Seats (3) Bingo Seats Sports Betting (4) Network (5) Total Region Latin America Argentina 6,95 6,95 - -,780, ,73 8,857 Mexico 8,865 9,36,740,908,60, ,30 3,440 Panama (6) 3,03 3, ,543 3,506 Colombia 5,783 5, ,903 6,466 Uruguay (CN) Uruguay (HRU),863, ,887,888 Brazil Total 36,870 36,977,676,706 4,50 3, ,98 63,70 Europe Italy: (7) 8,439 9, ,4 5, ,34,073 5,39 7,0 AWP (8) 7,5 8, ,934 9,594 8,769 0,496 VLT (9) ,407,479,48,564 Spain (0) 9,87 9, ,434 4, ,6 4,0 Total 7,66 8, ,747 5,935 3,434 4,7 9,34,073 38,68 4,303 Total Group 54,496 55,63,676,706 9,997 9,8 3,556 4,48 9,34,073 0,536 05,004 Gaming Venue Gaming Halls 33,79 33,88,676,706 9,997 9, ,094 66,494 Arcades 4,904 4, ,036, ,940 7,070 Bars 6,9 6, ,6, ,58 8, Sports Betting Shops Network () ,34,073 93,6 97,043 Total Group 54,496 55,63,676,706 9,997 9,8 3,556 4,48 9,34,073 0,536 05,004 Figures as at March 3 of 06 and 07, as applicable. Includes all Codere operated AWPs, VLTs, electronic bingo terminals and other gaming machines; excludes 3 rd party operated slots. 3 Figure reflects number of total gaming positions assuming (for illustrative purposes only) 6 seats per table. 4 Figures for Spain reflects self-service terminals (SSTs); in other markets figure reflects number of sports books/betting shops. 5 Reflects all slots connected to Codere network (i.e. both Codere and 3 rd party operated). 6 Figure for sports betting shops excludes 5 and 4, respectively, affiliated agencies (horserace betting only). 7 Figures for slots reflect Codere operated units connected to both Codere Network (typical) and 3 rd party networks. 8 Figures for slots include 835 and 90 units, respectively, connected to 3 rd party networks. 9 Figures for slots include 74 and 85 units, respectively, connected to 3 rd party networks. 0 Figures for slots reflect operating units (i.e. do not include authorized but not deployed units). Figures in total column reflect only 3 rd party operated slots that are connected to Network (to avoid double counting of Codere operated units).

22 Recent Events Increase in ownership of Codere Caliente to 00%. On March 3, 07, primarily through its wholly-owned indirect subsidiary Codere Mexico S.A. de C.V. we acquired from Grupo Caliente all of the shares that Grupo Caliente held in the consolidated Subsidiaries which we refer to as Codere Caliente and in which Codere, prior to completion of this transaction, had a 67.3% equity interest. With this agreement, Codere and Grupo Caliente extinguished all shareholder agreements in place between the parties. The share purchase price of $6 mm included $ mm paid in cash and $4 mm paid via off-set against amounts due to Codere by Grupo Caliente. New gaming tax structure in Carrasco Nobile. In November 06, the Company reached an agreement with the gaming authority (Intendencia de Montevideo) to modify the tax structure from a fixed canon and a flat tax rate of 8.8% to no fixed canon and a sliding scale tax rate, subject to a minimum annual gaming tax; the agreement was effective as of February 3, 07. We estimate that the impact of the legacy gaming tax structure on our business through February 3, 07 was 850 k. Tax changes in Argentina. In December 06, in the context of the 07 provincial (Buenos Aires) and federal budget approval process, legislation was passed that included tax increases on the gaming sector (among others) as follows: (i) At the federal level, Law 7346 established (a) a new tax of 0.75% on bets, which, according to point 6 of the aforementioned Law, could be temporarily increased by 50% or reduced to 0 and (b) an increase in the corporate income tax rate from 35% to 4.5% for gaming operators. (ii) At the Province of Buenos Aires level, Law 4880 established (a) a new tax on players in the form of a 0 ARS entry fee to gaming venues (still pending to be regulated and therefore not applied) and (b) an increase in the existing gross revenue tax from % to 5%. In the final regulation to implement the federal taxes, which was published in March and May 07, the federal tax on bets was set at 0.95% of initial amounts played (cash-in), applicable from March 7, 07. Gaming tax changes in Italy. On April 4, 07, the Italian government increased the gaming tax (PREU) on slots effective immediately, in a decree which has to be ratified by the Italian parliament within 60 days. For amusement with prize machines (AWPs), the tax has increased from 7.5% to 9% of amounts wagered while for video lottery terminals (VLTs) it has risen from 5.5% to 6%. No additional reduction of the 70% minimum payout for AWPs (as permitted under the 06 Stability Law) was included in this decree. As such, we expect limited leeway to offset the impact of these increased taxes on AWPs (though a reduction in payouts of VLTs may be possible) beyond ongoing efforts to improve operational efficiency to mitigate the overall impact of these tax increases. Based on 06 figures, the proforma impact of these new taxes would have been approximately 5% of Italian EBITDA, before any actions taken to mitigate this impact. Argentine tax self-disclosure program. On July, 06, the Argentine Government published Law 7,60 which provided for a one-time tax self-disclosure program (the Program ) in effect through March 3, 07, related to taxes accrued prior to May 3, 06. Participants in the Program were entitled to i) relief from penalties, ii) a reduction in the interest expense on past amounts due, and iii) a payment plan for total amounts due including up to 60 monthly installments. Our Argentine subsidiaries have elected, considering that the tax deductibility of certain expenses could be challenged by the Argentine Tax Authorities (AFIP), to participate in the Program by amending prior years tax returns to exclude those expenses. This results in a total negative impact to our operating results of 6.4 mm in Q 07 including interest. In terms of the installment plan, we have made the initial payment of 5% and expect that the installment payments, including accrued interest, will be paid quarterly over 5 years. Results of Hípica Rioplatense of Uruguay (HRU). Since the acquisition of the 50% equity interest in HRU on November 30, 06, Codere owns 00% of HRU which is consolidated since December, 06. In order to

23 compare the full evolution of our business, please note that figures presented herein (and in our earnings results presentation) for 06 have been restated to include 00% of HRU since January, 06. Implementation of IFRS 6. The Company will be implementing new standards issued by the IASB regarding accounting for operating leases (IFRS 6) in 09. Group management believes that application of IFRS 6 will have a significant impact on its financial statements, as IFRS 6 will require that operating leases (with the exception of short-term leases and leases related to low-value assets) be capitalized to the balance sheet, and expensed (as D&A and interest expense) over the term of the lease. In the context of the application of this new standard, we are providing herein additional metrics (EBITDAR and Total Adjusted Financial Debt) which we believe will be useful to investors and analysts in their analysis of the company. Warrant grant to Key Executives. On March 5, 07, the Board of Directors approved the issuance of 40,539,698 warrants to Key Executives (as contemplated in the April 06 restructuring documents) which, when exercised, will result in the issuance of 40,539,698 new ordinary shares of Codere S.A. Issuance of shares. In the Extraordinary General Shareholders Meeting held on May, 07, a proposal was passed whereby the Company will issue 8,859,448 shares, or 0.7% of the pro-forma issued and outstanding total shares of the Company, to be paid to Houlihan Lokey EMEA LLP in satisfaction of amounts due ( 5.0 mm) related to services provided to the Company in connection with the financial restructuring completed in April 06. As per Shareholders Agreement, any such newly issued shares to Key Executives will be subject to said agreement (i.e. restricted ). 3

24 Contact Information Codere is a leading international gaming operator with over 55,000 slot machines, nearly 30,000 bingo seats and 4,00 sports betting terminals in Latin America, Spain and Italy, across various gaming venues, including 44 gaming halls, 65 arcades, 0,000 bars, 66 sports betting shops and 4 horse racetracks. Codere, S.A. Avda. de Bruselas, Alcobendas (Madrid), Spain Investor Relations inversor@codere.com Notice on Rounding. Due to decimal rounding, numbers presented throughout this report may not add up precisely to the totals and subtotals provided, and percentages may not precisely reflect the absolute figures. Alternative Performance Measures. This report includes certain Alternative Performance Measures in accordance with the European Securities and Markets Authority (ESMA) Directive 05/45. These measures, which are not defined under IFRS standards, are intended to provide more useful, comparable and reliable information in order to improve the understanding of the Company s financial performance and its reported information. For definitions, usage rationales and reconciliation of these metrics with IFRS, please visit the Presentations section within the Shareholders and Investors site of Forward Looking Statements. Codere cautions that this document may contain forward looking statements with respect to the business, financial condition, results of operations, strategy, plans and objectives of the Codere Group. While these forward looking statements represent our judgment and future expectations concerning the development of our business, a certain number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to, () general market, macroeconomic, governmental, political and regulatory trends; () movements in local and international securities markets, currency exchange rates and interest rates; (3) competitive pressures; (4) technical developments; (5) changes in the financial position or credit worthiness of our customers, obligors and counterparts. These and other risk factors published in our past and future filings and reports, including those with the Spanish Securities and Exchange Commission ( CNMV ) and available to the public both in Codere s website ( and in the CNMV s website ( as well as other risk factors currently unknown or not foreseeable, which may be beyond Codere's control, could adversely affect our business and financial performance and cause actual results to differ materially from those implied in the forward-looking statements. 4