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REPORT
LETTER OF TRANSMISSION BOARD OF DIRECTORS
Honourable Cliff Cullen Polly Craik, Chair
Minister of Crown Services Nick Logan, Vice-Chair
Room 314, Legislative Building Tracey Maconachie
450 Broadway Stuart Murray
Winnipeg, MB R3C 0V8 Marshall Ring
Patricia Solman
July 31, 2018 Randall Swanson
Mavis Taillieu
Dear Honourable Minister: Gary Timlick
It is my pleasure to present you with
the annual report of Manitoba Liquor and
Lotteries Corporation for the fiscal year
ended March 31, 2018.
Respectfully submitted,
Polly Craik
Chair, Board of Directors
Purpose Values
Enrich the lives of Manitobans We aspire to live these values in all that we do
Manitoba Liquor & Lotteries strives to make the greatest to enrich the lives of Manitobans.
possible contribution to the economic and social well-being
of our province.
Caring
Everyone Matters – We care about each other, our
Elements communities and the environment by being genuine,
responsible and considerate.
Perform Profitably and Sustainably
Sound business practices that strengthen our profitability Collaborative
– allowing us to maximize funding available for healthcare, Better Together – We work together in an open, respectful
education and other services Manitobans rely on. way to produce and deliver outstanding results.
Be Progressive Creative
Products and experiences that keep pace with evolving Courage to Explore – We foster an environment of idea
preferences and market trends – ensuring Manitobans’ sharing, continuous learning and improvement, and push
expectations for choice, quality, value and social beyond what we have today to what is possible tomorrow.
responsibility are consistently exceeded.
Committed
Engage Manitobans Keep Promises – We take pride and ownership in making
Meaningful relationships with Manitobans – engaging and meeting our commitments.
Manitobans both as customers and citizens to ensure all
aspects of Manitoba Liquor & Lotteries operations reflect
the needs, expectations and interests of those to whom
we are ultimately accountable.
6 About Us
24 Management Report
Manitoba Liquor & Lotteries belongs to and works for all Manitobans Engage Manitobans: Meaningful relationships with Manitobans –
– where generating revenue for our province, partnering with local engaging Manitobans both as customers and citizens to ensure all
businesses, supporting communities, and investing in employees are aspects of our operations reflect the needs, expectations and interests
just some of the ways we play an important role in our province. of those to whom we are ultimately accountable.
Our consumer brands, such as Liquor Mart and Casinos of Winnipeg, We work hard to build and maintain strong relationships through
connect with Manitobans every day when we sit down to dinner at customer and employee interactions, business partnerships and our
home or go out on the town with friends. We share revenues and presence at community events. By listening to all of our stakeholders’
successes with thousands of business partners, small and large, points of view, we are better able to meet your expectations and
in all corners of the province. We also share Manitobans’ strong support our local businesses and communities.
commitment to philanthropy and volunteerism by supporting the many
charities we all care about and the many festivals and events that Invigorated by the Province’s confidence in the stewardship of
define Manitoba and our communities. Manitoba Liquor & Lotteries by our Board and Management, we will
continue to carefully steer the Corporation through a commitment to
We have identified the key elements that have always been integral to our purpose and its key elements. On behalf of the Board, I would like
our ongoing success: to thank President & CEO Peter Hak and his executive team for their
continued focus, support and dedication. We look forward to another
Perform Profitably and Sustainably: Sound business practices that successful year, continuing to make Manitoba a great place to live.
strengthen our profitability – allowing us to maximize funding available
for healthcare, education and other services Manitobans rely on.
Polly Craik
By following best business practices, Manitoba Liquor & Lotteries Chair, Board of Directors
ensures that we can all rely on successful, sustainable results in our
core operations. New initiatives contribute to steady growth, achieving
the balance necessary to provide reliable revenue to the Province.
We conducted our second Employee Engagement Survey in 2018 Divisions are now working closer than ever to support our business
which saw an outstanding 88% participation rate by employees and operations through collaborative strategies. As we move forward and
showed improvements in a number of important areas including focus on growing our corporate culture, we will continue to seek out
communication. opportunities across departments and divisions to share ideas that will
advance our business.
We have a stake in our communities and are proud of our corporate
social responsibility. We provide 2% of our annual anticipated net Committed: Keep Promises – We take pride and ownership in making
income to fund responsible gambling and alcohol consumption and meeting our commitments.
programs, including research and treatment. We also provide financial
support to further strengthen Manitoba communities through This means keeping our promise to present appealing properties,
worthwhile charitable programs and community sponsorships. products and entertainment so that our customers enjoy what we offer
and receive good value, employees are proud to say they work here,
Collaborative: Better Together – We work together in an open, and our partners are pleased to be affiliated with us.
respectful way to produce and deliver outstanding results.
I thank our Chair Polly Craik and Board of Directors for their steady
Teams from across the organization have been sharing their knowledge support and guidance which empowered the executive and their
and skills to deliver outstanding experiences for our customers, reduce divisions to approach our business with a renewed focus. This past
costs for the Corporation and our partners, and increase revenues for year’s financial success is in part the result of an emphasis on our core
the benefit of all Manitobans. business operations, a disciplined approach to reducing expenses, and
the ability to hold fixed costs flat.
We continue to foster essential partnerships with Manitoba’s hotel
and restaurant industry, First Nations, private liquor retailers, and a I want to thank my executive team and each of our employees for
vast network of lottery retailers. These important relationships have their incredible dedication and commitment over this past year. Your
generated consistent revenue streams for us as well as our partners combined efforts and hard work have directly contributed to our
through commissions, contributions, vendor margins and handling fees. success. That’s something for which we can all be proud.
We are proud to give back to the province we call home, with our revenues supporting a variety of government
programs and initiatives that are essential to Manitobans from the north to the south.
With our business partners - local liquor producers, liquor licensees, agents and suppliers; VLT siteholders,
lottery retailers, gaming product suppliers, and other local businesses – we work collaboratively, supporting and
encouraging the growth of Manitoba’s hospitality industries. Together, we are better – not only for our industry,
but for our province as well.
As a Crown corporation that sells liquor and offers gaming and entertainment experiences, we are deeply
committed to helping our customers use our products in a healthy, responsible and sensible way and to reduce
the risks of harm. To this end, we commit 2% of our annual anticipated net income to social responsibility
initiatives, including extensive consumer social responsibility information and funding organizations that
deliver problem gambling and alcohol addiction services in Manitoba. Services funded include the Addictions
Foundation of Manitoba, Marymound, and Community Financial Counselling Services.
In our communities, we sponsor numerous festivals and events that enhance life in Manitoba. We also support
charities and non-profit organizations in a number of ways such as our coin-box program, the donation of used
assets, and encouraging volunteerism among current and former employees, their families and friends.
Making positive contributions to Manitoba is at the core of who we are as a corporation. We are honoured to
puts Manitoban’s money back to work in the communities in which we live and serve. To learn more about where
Manitoba Liquor & Lotteries’ revenue goes and how we contribute to enriching the lives of Manitobans, please
refer to our inaugural Corporate Responsibility Report, available on our website.
Economic Contributions
Our economic contributions stay in the province and are used to support provincial programs and initiatives
that benefit all Manitobans. Here’s a snapshot of 2017/18:
Support to our business partners through commissions, contributions, margins or handling fees:
• Manitoba Hotel and Restaurant Industry $ 100.2 Million
• First Nations VLT Siteholders $ 62.8 Million
• Private Liquor Retailers $ 18.1 Million
• Lottery Retailers $ 17.1 Million
In the 2017/18 year, the Corporation’s allocation to the Province of Manitoba was
$610.4 million, an increase of $24.3 million or 4.1% when compared to the 2016/17
amount of $586.1 million.
The four operating segments of the Corporation are Casinos, Liquor Operations,
Lottery and Video Lotto. In accordance with International Financial Reporting
Standards (IFRS), the Corporation accounts for the WCLC using the equity
method and therefore presents its share of the profit of WCLC as one line in the
consolidated statement of net income, comprehensive income and equity of the
audited consolidated financial statements.
For reporting purposes within the management discussion and analysis, the
administrative costs associated with corporate support services – including
human resources, finance, marketing & communications, facilities, technology,
internal audit, corporate governance, security and corporate responsibility – have
been allocated to each of the operating segments.
Income Before Allocations and Payments 83,043 291,619 54,076 200,047 628,785
Income Before Allocations and Payments 73,134 282,461 55,653 194,036 605,284
Revenue of $1,418.8 million increased $58.0 million or 4.3% from entertainment revenues. The increase in operating expenses is
the previous year’s revenue of $1,360.8 million. Casino revenues primarily in the category of rent expense. Other operating expenses
increased $16.5 million over the prior year due to increased were carefully managed to maintain levels consistent with the prior
electronic gaming and table games play at the casino properties year.
and increased play on the PlayNow.com online gaming site.
Liquor operations revenues increased $28.1 million over last year Depreciation and amortization of $52.4 million in the 2017/18 year
as continued focus on promoting premium-priced and innovative increased $3.1 million or 6.3% from the $49.3 million recorded
new products has resulted in volume and sales growth in most last year. During the year, the Corporation continued its capital
alcohol beverage categories. Video Lotto revenues increased investment into property and equipment to enhance the overall
$13.0 million during 2017/18 as continued enhancements to game customer experience including ongoing renewal of the two casino
mix and prizes resulted in increased play. properties as well as the construction of new, and renovations of
existing, Liquor Mart locations.
Revenue, net of cost of sales of $888.7 million increased $35.2
million or 4.1% from $853.5 million last year. Operating expenses The Corporation’s allocation to the Province of Manitoba also
of $254.5 million were higher by $5.7 million or 2.3% compared included a one-time gain of $5.8 million on the disposal of the
to $248.8 million in 2016/17, and include employee and other downtown head office property.
costs directly related to the generation of liquor, gaming and
Manitoba Liquor & Lotteries
11/ 2017/18 Annual Report
Management Discussion and Analysis
of Financial Condition and Results of Operations as at March 31, 2018
Casinos
The Corporation owns and operates two casinos in the city of Casino comprehensive income of $76.0 million in 2017/18
Winnipeg - Club Regent Casino and McPhillips Station Casino. increased from last year’s comprehensive income of $65.5
Both casinos offer a full range of gaming services including million by $10.5 million or 16.0%. Electronic gaming and
slots, table games, bingo, and the ability to purchase lottery table games play increased at both casino properties,
tickets and partake in off-track horse racing. In addition to its with significant growth at Club Regent Casino and Event
gaming offerings, the Corporation strives to provide premier Centre, where the renovations have revitalized the gaming
hospitality and entertainment services at its casinos through and entertainment experience. Additionally, increased
food and beverage offerings to meet the varied appetites of play on the PlayNow.com online gaming site contributed
customers and through entertainment offerings at venues to this growth, with well received additions such as the
such as the Club Regent Event Centre. new Live Casino experience, which was launched in the
latter part of the year. The Corporation continues to focus
In addition to the gaming experience provided by the on efforts to be seen as a total entertainment destination.
casinos, the Corporation provides Manitoba players with These efforts include regularly improving gaming offerings
online gaming through the PlayNow.com site. PlayNow.com by updating certain games and by introducing new
is the province’s only regulated offering of online gaming games, both at the casino locations as well as through the
and provides customers a safe and reputable site featuring PlayNow.com online gaming site. The 2017/18 year saw
extensive responsible gaming measures. The online platform the introduction of the Point Play Program, which allows
was developed by the British Columbia Lottery Corporation Club Card members to convert their Player Points into free
(BCLC) and the Corporation has partnered with BCLC to play. Construction was completed on a new parkade at
provide Manitoba players with casino games, lottery products, Club Regent Casino, offering patrons convenient and safe
bingo, poker and live sports betting opportunities. parking connected to the casino and hotel. Work was also
completed on a new two-level front addition at McPhillips
Casino operations, which include the results of online gaming, Station Casino which connects with the parkade, allowing
generated revenues of $253.6 million during the year, an customers direct, climate-controlled access to the casino’s
increase of $16.5 million or 7.0% from the revenues of $237.1 amenities. The exterior of the casino was also refreshed
million last year. with a modern look and enhanced lighting.
Liquor Operations
The Corporation is mandated with distributing and selling Bridgwater Forest area of Winnipeg, while renovations
beverage alcohol in the Province of Manitoba. In addition to were completed at several Liquor Mart locations to provide
the Liquor Mart and Liquor Mart Express locations operated customers with a modern shopping experience. In-store
by the Corporation, the retail network in the province includes initiatives such as single-lane checkouts, gravity fed coolers,
privately owned liquor vendors located throughout rural and wine tasting stations have been well received by
Manitoba, duty-free stores, privately owned beer vendors, customers. Additionally, a revamped home delivery service
and specialty wine stores. This model provides a balance was launched within the city of Winnipeg, offering customers
of private and public retailers while ensuring Manitoba the convenience of ordering popular products through the
consumers enjoy uniform pricing throughout the province. LiquorMarts.ca website. Behind the scenes, significant efforts
are underway to modernize the supply chain and address
Liquor operations generated revenues of $801.4 million during capacity issues. One such initiative was the implementation
the year, an increase of $28.1 million or 3.6% from the revenues of daily deliveries to many Liquor Mart stores to ensure that
of $773.3 million of the previous year. the right products are always in stock.
Lottery
The Province of Manitoba is a member of the WCLC, a
non-profit organization authorized to manage, conduct and
operate lottery and gaming-related activities in the Prairie
provinces and the territories. The Corporation distributes
and sells tickets for national lotteries operated by the ILC
and lottery gaming products operated by the WCLC. As the
province’s sole distributor of lottery products, the Corporation
is responsible for the development and maintenance of a
retailer network of over 900 outlets across Manitoba and
to market a selection of breakopen tickets through lottery
retail outlets, charitable organizations and casinos across the
province. The Corporation also continues to be the exclusive
supplier of bingo paper to Manitoba’s charitable and non-profit
licensed bingo operators.
Video Lotto
Located in Morris, Manitoba, Video Lotto is responsible for the
operation and maintenance of Video Lottery Terminals (VLTs). VLTs
are located at licensed beverage rooms, veterans organizations, and
First Nations communities. The operation of VLTs contributed 32.3%
of the Corporation’s net income and provided annual commissions
and contributions of $117.8 million to all VLT siteholders who
operate equipment on their premises. Included in this amount is
$62.8 million of support to First Nations communities. First Nations
VLT siteholders retain 90% of net win from the VLTs. Of that
90%, 5% represents the actual service component provided to the
Corporation for hosting the terminals and the other 85% is provided
as a contribution to promote sustainable social and economic
benefits and opportunities within First Nations communities. This
support has increased $4.2 million from the $58.6 million provided in
the 2016/17 year. Licensed beverage room VLT siteholders operate
under a tiered structure whereby they retain between 17.5% and
22.0% of the net win from VLTs. Of this amount, 10% represents
the actual service component provided by the siteholders to the
Corporation for hosting the terminals and the other 7.5% to 12% is
provided as a contribution to promote tourism in the province. In
the 2017/18 year, this support totaled $51.8 million, an increase of
$0.9 million over the $50.9 million paid in 2016/17.
Video Lotto operations generated revenue of $361.1 million in 2017/18, an increase of $13.0 million or 3.7% from the revenue
of $348.1 million in the prior year. Video Lotto comprehensive income of $197.3 million increased $5.9 million or 3.1% from the
comprehensive income of $191.4 million in the previous year. Continued enhancements, such as additional new VLT games
allowing customers the ability to play for higher jackpot prize levels, have been a main contributor to the increase, as these
games have proven to be very popular with customers. Additionally, the machine distribution on the VLT network continues to
be refined to match customer demand.
During the 2017/18 year, the Corporation purchased gaming equipment in the amount of $0.4 million for the continuation of South Beach
Casino’s gaming floor refresh project. Aseneskak Casino completed an upgrade to their casino management system for which the
Corporation provided assistance and capital financing in the amount of $0.1 million. No purchases of gaming equipment were required by
either Sand Hills Casino or the Shark Club Gaming Centre in the 2017/18 year.
Social Responsibility Of the 2017/18 committed amount, $2.9 million was unspent and
carried forward, reserved for social responsibility initiatives in
The Corporation is committed to encouraging the responsible the 2018/19 year.
use of its products and services and under The Manitoba Liquor
and Lotteries Corporation Act, is required to allocate 2% of (in thousands) 2018 2017
annual anticipated consolidated net income and comprehensive
income to social responsibility initiatives.
Funding support $ 8,109 $ 8,237
The Corporation fulfills its commitment to social responsibility Internal research and program
in several ways. Social responsibility perspectives are evaluation 959 780
incorporated into many corporate, gaming, liquor and
marketing initiatives annually. Funding support is provided to Operating and consumer
organizations such as the Addictions Foundation of Manitoba awareness 2,136 2,088
that provide programs related to liquor and gaming prevention,
awareness and treatment. Consumer and public information is Prior year funding spent in
developed and promoted to contribute to sensible, responsible current year (2,106) (1,347)
use of the Corporation’s products and to contribute to Funding carried forward to
maintaining and growing a sustainable customer base. future years 2,917 2,106
$ 12,015 $ 11,864
The Corporation focuses on capital investments which support strategies to grow its core operations for the purpose of making the
greatest possible contribution to the economic and social well-being of the province. In order to support these goals, cash spent
on property and equipment, net of proceeds from disposals of assets, totaled $31.2 million as compared to the $68.7 million spent in
the previous year. In addition to the regular process of upgrading existing equipment, facilities and technology to support ongoing
operations, the 2017/18 year saw continued investment associated with casino renewal construction projects as well as the construction
of new, and renovations of existing, Liquor Mart locations.
The Corporation finances capital expenditures through a combination of working capital and long-term debt. All long-term debt is
payable to the Province of Manitoba at rates established by the Minister of Finance at the time of issue. Borrowing is authorized under
The Manitoba Liquor and Lotteries Corporation Act and The Loan Act. The Corporation submits annual requests for necessary borrowing
authority under The Loan Act to fund new capital projects related to its operations, as well as to provide funding to acquire capital assets
related to the conduct and management agreements with the First Nations Casinos. Debt service costs on advances drawn to purchase
gaming equipment for the First Nations Casinos are fully recovered over a five-year term, consistent with the recovery of the capital costs
of the gaming equipment purchased.
In the 2017/18 year, total proceeds of long-term debt received were $40.4 million as compared to the $60.2 million of proceeds received in
the previous year. Of the total proceeds received, $0.4 million was received to purchase gaming equipment for the First Nations Casinos
as compared to $5.2 million in the previous year. All long-term debt has fixed interest rates and a significant portion is repayable in either
quarterly or monthly installments.
Cash distributions to the Province of Manitoba during the current year resulted in a cash outflow of $619.7 million compared to the
previous year’s $578.0 million.
Corporate Governance
Corporate governance is a system of policies and structures by which the long-term goals and strategic plans of the Corporation are
guided. The corporate governance structure specifies the distribution of authority and accountability among the different levels of the
Corporation, particularly at the Government, Board of Directors, and Executive Management levels. It outlines the best practices and
guiding principles for making decisions on corporate affairs and provides a mechanism for accountability in relation to those decisions.
As part of its corporate governance model, the Corporation reports its activities to the government on an annual basis. This reporting
encompasses the Corporation’s Annual Report which includes the externally audited consolidated financial statements and the Schedule
of Compensation which is prepared in accordance with the requirements of the Manitoba Public Sector Compensation Disclosure Act.
Risk Management
The Corporation continues to use and enhance its enterprise risk management framework to effectively embed risk management practices
into key organizational processes.
By establishing a consistent approach for assessing and managing its business risks, the Corporation can effectively address the impact of
internal and external factors and events on the achievement of its business goals and objectives.
In the normal course of business, the Corporation is exposed to a number of risks. These risks and the actions taken to mitigate them are
discussed below.
Strategic Risks
Strategic risks include external environment forces and events, risks impacting the effective allocation of resources, risks that major
initiatives are not aligned with the Corporation’s goals and objectives and are not being carried out effectively, risks of ineffective
relationships with key stakeholders, and risks to reputation.
The Corporation researches, recognizes and understands changes to its external environment through market research and formalized
strategic planning for its key lines of business and corporate functions. Management engages in rigorous annual business planning
and budgeting activities. Management has established a formal project methodology and is dedicated to developing and maintaining
effective communication processes with its key stakeholders. The Corporation is committed to being a good corporate citizen through its
various corporate responsibility programs and initiatives.
Operations Risks
Operations risks include risks that the operations of the Corporation are not efficient, do not meet customer needs, do not effectively
manage product quality, do not protect game integrity, and do not safeguard the Corporation’s significant monetary assets.
The Corporation has established appropriate functional areas and developed processes to effectively provide, promote and deliver
products and services to customers; recruit, develop and retain resources to meet current and future operational needs; manage hazards;
and manage information technology operations in order to achieve its goals and objectives. Management regularly reviews and assesses
the amount of risk present in operating units, large scale projects, and specific business processes and develops action plans to support
continuous improvement.
As the Corporation continues to leverage technological opportunities to support its business, various tactics have been developed to
manage the risks associated with new technologies. These include the development of formal technology strategies, architectures, and
roadmaps to help guide future direction.
Financial Risks
Financial risks include risks that cash flows and financial information are not efficiently and effectively managed which can compromise
decision making ability.
The Corporation’s exposure to interest-rate risk is substantially limited due to the use of fixed-rate, long-term debt. Credit risk due to the
inability or unwillingness of a counterparty to fulfill its payment obligations, while low, is mitigated through the Corporation’s centralized
credit management and collection practices.
Governance & compliance risks include the risks of acts of fraud or corruption; the failure to comply with regulatory or contractual
requirements; and that business objectives are being pursued in an unmanaged environment that does not encourage integrity, ethical
values and competence.
The Corporation is committed to having an effective control environment through the establishment and maintenance of its corporate
governance model, policies and procedures, and regulatory compliance programs. Management regularly reviews the appropriateness
and effectiveness of control activities embedded within processes and takes corrective action to strengthen its system of internal
controls.
Internal controls over financial reporting have been designed by management, with the participation of the President & Chief Executive
Officer (CEO) and the Chief Financial Officer (CFO), to provide reasonable assurance regarding the reliability of the Corporation’s financial
reporting and its preparation of financial statements for external purposes in accordance with IFRS.
In making its assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control – Integrated Framework.
Based on that assessment, the CEO and CFO have concluded that, as at March 31, 2018, the Corporation’s internal controls over financial
reporting are adequately designed and effective for providing reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes.
As well, the CEO and CFO, together with management, after evaluating the effectiveness of the Corporation’s disclosure controls and
procedures, have concluded that the disclosure controls and procedures are adequately designed and effective for providing reasonable
assurance that material information relating to the Corporation would have been made known to them as at March 31, 2018.
There was neither a material weakness nor a change in the Corporation’s disclosure controls and procedures or its internal controls over
financial reporting that has materially affected, or is reasonably likely to materially affect, these controls.
Whistleblower Report
In response to the enactment of The Public Interest Disclosure (Whistleblower Protection) Act, the Corporation implemented the
Whistleblower Protection Policy and put into place a process through which employees can report serious and significant wrongdoings
observed in the workplace without fear of reprisal.
A disclosure of alleged wrongdoing was submitted to the designated officer during the 2017/18 year. It was determined that the inquiry
did not qualify as a wrongdoing as defined in the Corporation’s Whistleblower Protection Policy.
Future Outlook
The Corporation’s allocation to the Province of Manitoba is forecast to be $622.0 million in the 2018/19 year, an increase of $11.6 million or
1.9% as compared to the $610.4 million allocation to the Province of Manitoba in the 2017/18 year.
Planned initiatives for the Corporation address revenue trends and reflect strategic priorities. To ensure the long-term sustainability of
revenues and income streams, continued reinvestment in facilities, retail locations, gaming and non-gaming amenities at the casinos, and
new technology is essential. This is demonstrated by the investment in initiatives to support operations that occurred in the 2017/18 year
and which will continue in the 2018/19 year.
Investment in gaming initiatives include the enhancement of the VLT experience through the release of fresh, new games, and the start of a
multi-year program to replace old and obsolete VLT machines. PlayNow.com looks to continue growth through innovative game offerings.
Construction activities at both casino properties will continue to provide customers with a modern and relevant gaming experience. As
construction wraps up on the exterior, the 2018/19 year will see interior refresh work commence at McPhillips Station Casino. Meanwhile,
the development of the west side of Club Regent Casino is ongoing. This addition will include a new third-party operated restaurant as
well as unique amenities. A renovation of the aquarium at Club Regent Casino will also be completed, providing a dynamic new look to one
of the casino’s most popular attractions. The Corporation will also continue to introduce exciting gaming options to the casino customers
through replacement of aging slot machines with a variety of new leased, purchased and networked games and by introducing new table
games where appropriate. As well, work will begin in the coming year to replace the Bingo Gaming System terminals at both casino
locations.
Liquor Mart and Liquor Mart Express store development activities will continue in the 2018/19 year through the investment into additional
or expanded retail locations. Renovations are ongoing or planned at a number of stores with an aim at providing customers a more
convenient, modern shopping environment. A new Liquor Mart location is under construction in Portage la Prairie, and another is slated
to be constructed in the Seasons of Tuxedo area of Winnipeg, while several stores will be relocating to new, modernized locations in the
coming year. Work will continue on the upgrade of the point-of-sale system used in the stores to remain in compliance with payment card
industry standards, while also enabling future implementation of mobile payments and other advanced features. Implementation continues
on a new liquor operations partner analytics tool. This software will compile sales, inventory and purchasing data into one source, to allow
for the sharing of accurate and timely information and to promote faster decision-making. Finally, as demand for liquor products continues
to increase, liquor operations will seek a solution to the space constraints at the current distribution centre location.
The Government of Canada has announced that the sale and consumption of recreational cannabis will become legal in Canada in 2018.
The Province of Manitoba announced its plans for a public/private model for cannabis distribution and retail sales. The Corporation has
a mandate to secure a safe supply of cannabis, and to coordinate the distribution of cannabis to private sector retailers for sale to the
general public. Work in the 2018/19 year will include the development of a catalogue of available products, understanding retailer inventory
requirements, and testing and implementing both the federal government’s seed-to-sale tracking system as well as the Corporation’s own
central order processing system.
Management is responsible for establishing and maintaining disclosure controls and procedures and internal
controls over financial reporting for Manitoba Liquor and Lotteries Corporation. Management designed
such internal controls, or caused them to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with International Financial Reporting Standards.
Management maintains internal controls to provide reasonable assurance of the reliability and accuracy
of the financial information and that the assets of Manitoba Liquor and Lotteries Corporation are properly
safeguarded. As part of the financial statement audit performed by Ernst & Young LLP, they reviewed the
Corporation’s internal controls to the extent that they considered necessary and reported their findings to
management and the Board of Directors.
The responsibility of Ernst & Young LLP is to express an independent opinion on whether the consolidated
financial statements are fairly stated in accordance with International Financial Reporting Standards. The
Independent Auditors’ Report outlines the scope of the audit examination and provides the audit opinion.
The Board meets with management and Ernst & Young LLP to satisfy itself that each group has properly
discharged its respective responsibilities and to review the consolidated financial statements before
approving them. The Board has reviewed and approved the consolidated financial statements for the fiscal
year ended March 31, 2018.
We have audited the accompanying consolidated financial statements of Manitoba Liquor and Lotteries
Corporation, which comprise the consolidated statement of financial position as at March 31, 2018, and the
consolidated statements of net income, comprehensive income and equity and cash flows for the year then
ended, and a summary of significant accounting policies and other explanatory information.
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards, and for such internal control as
management determines is necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
Auditors’ responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our
audit. We conducted our audit in accordance with Canadian generally accepted auditing standards.
Those standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditors’ judgment, including
the assessment of the risks of material misstatement of the consolidated financial statements, whether due
to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the
entity’s preparation and fair presentation of the consolidated financial statements 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 entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of Manitoba Liquor and Lotteries Corporation as at March 31, 2018, and the results of its operations
and its cash flows for the year then ended in accordance with International Financial Reporting Standards.
Equity
Retained earnings 5,000 5,000
u Investing activities
Purchase of property and equipment (41,485) (67,595)
Purchase of intangible assets (5,146) (1,498)
Proceeds from disposal of property and equipment 348 425
Proceeds from disposal of assets held for sale 15,050 -
Cash used in investing activities (31,233) (68,668)
u Financing activities
Cash distributions to the Province of Manitoba:
Current year (611,000) (578,000)
Prior year (8,725) -
Proceeds from long-term debt 40,360 60,211
Repayment of long-term debt (60,117) (48,866)
Cash used in financing activities (639,482) (566,655)
1. Background
By consent of the Legislative Assembly of Manitoba, The Manitoba Liquor and Lotteries Corporation Act was enacted on
December 5, 2013 and came into force on April 1, 2014. Under The Manitoba Liquor and Lotteries Corporation Act,
Manitoba Liquor and Lotteries Corporation (the Corporation) was established as a Crown corporation.
The registered office of the Corporation is located at 830 Empress Street, Winnipeg, Manitoba.
(h) Property and equipment on the use of a specific asset or assets or the arrangement conveys
a right to use the asset.
Property and equipment is stated at cost, net of accumulated
depreciation and any accumulated impairment losses. Cost includes Leases which transfer to the Corporation substantially all the risks
expenditures directly attributable to the acquisition of the assets. and rewards of ownership are classified as finance leases. Upon
Subsequent costs are included in an asset’s carrying amount or initial recognition, the leased asset is measured at an amount equal
recognized as a separate asset, as appropriate, only when it is to the lower of its fair value and the present value of the minimum
probable that future economic benefits associated with the item lease payments. Lease payments are apportioned between finance
will flow to the Corporation and the cost can be reliably measured. charges and a reduction of the lease liability so as to achieve a
If the costs of a certain component of property and equipment constant rate of interest on the remaining balance of the liability.
are significant in relation to the total cost of the asset, these are Finance charges are recognized in the consolidated statement of
accounted for and depreciated separately. All other repairs and net income, comprehensive income and equity.
maintenance costs are charged to the consolidated statement of net
income, comprehensive income and equity as incurred. Subsequent to initial recognition, the leased asset is accounted for
in accordance with the accounting policy applicable to that asset.
Borrowing costs directly attributable to the acquisition, construction Leased assets are depreciated over the shorter of the estimated
or production of an asset that necessarily takes a substantial period useful life and the lease term.
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective assets. All other borrowing costs Property leases are analyzed into separate components for land
are expensed in the period they occur. Borrowing costs consist of and buildings and tested to establish whether the components
interest and other costs associated with the borrowing of funds. are operating leases or finance leases. Premiums paid for land
are treated as a prepayment of an operating lease rental and
Depreciation is charged to the consolidated statement of net recognized on a straight-line basis over the life of the lease.
income, comprehensive income and equity based on cost, less
estimated residual value, on a straight-line basis over the estimated Other leases are classified as operating leases and the leased
useful life of the asset as follows: assets are not recognized on the consolidated statement of
financial position. Operating lease payments are recognized
as an expense in the consolidated statement of net income,
Furniture and equipment 3 to 40 years comprehensive income and equity on a straight-line basis over
Gaming equipment 5 to 8 years the term of the lease. Any predetermined, fixed rental increases
contained in a lease are recognized over the life of the lease.
Assets related to C&M agreements 5 to 7 years
Parking lots and roads 15 to 25 years (j) Intangible assets
Over the remaining
Leasehold improvements term of the lease
Acquired intangible assets of the Corporation consist of finite
Major building components 5 to 50 years life computer software. Intangible assets acquired separately are
Building structures 40 to 50 years carried at cost less accumulated amortization and any accumulated
impairment losses. Amortization is charged to the consolidated
statement of net income, comprehensive income and equity on
The assets’ residual values, useful lives and methods of depreciation a straight-line basis over the estimated useful life of the asset as
are reviewed at each fiscal year-end and are adjusted prospectively, follows:
if appropriate.
An item of property and equipment is derecognized upon disposal Computer software 3 to 15 years
or when no future economic benefits are expected from its use
or disposal. Any gain or loss arising on derecognition of the The assets’ useful lives and methods of amortization are reviewed
asset is included in the consolidated statement of net income, at each fiscal year-end and adjusted prospectively, if appropriate.
comprehensive income and equity when the asset is derecognized.
Gains or losses arising from the derecognition of an intangible
(i) Leases asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognized
The determination of whether an arrangement is, or contains, a in the consolidated statement of net income, comprehensive
lease is based on the substance of the arrangement at inception income and equity when the asset is derecognized.
date based on whether fulfillment of the arrangement is dependent
(k) Inventories market assessments of the time value of money and the risks
specific to the asset. In determining fair value less costs to
Inventories consist of goods for resale and consumable supplies sell, an appropriate valuation model is used.
and are valued at the lower of average cost and net realizable
value. Costs incurred in bringing each product to its present Impairment losses, if applicable, are recognized in the consolidated
location and condition are accounted for as the purchase cost statement of net income, comprehensive income and equity.
assigned on a weighted average basis and are comprised of the
purchase price, import duties and freight. Net realizable value is An assessment is made at each reporting date as to whether there
the estimated selling price in the ordinary course of business less is any indication that previously recognized impairment losses may
estimated costs necessary to make the sale. no longer exist or may have decreased. A previously recognized
impairment loss is reversed only if there has been a change in the
Inventory write-downs are reversed if the estimated calculations assumptions used to determine the asset’s recoverable amount
of the recoverable amount change. Write-downs are reversed only since the last impairment loss was recognized. An impairment loss
to the extent that the carrying value does not exceed the carrying is reversed only to the extent that the asset’s carrying amount does
value that would have been determined if no write-down had been not exceed the carrying amount that would have been determined,
recognized. net of depreciation or amortization, if no impairment loss had
been recognized. Impairment loss reversals are recognized in the
consolidated statement of net income, comprehensive income
(l) Impairment
and equity in a manner consistent with the originally recognized
impairment loss.
(i) Financial assets
The Corporation assesses at each reporting date whether
there is any objective evidence that a financial asset or group (m) Provisions
of financial assets is impaired. A financial asset is considered
to be impaired if objective evidence indicates that one or more A provision is recognized if, as a result of a past event, the
events have occurred after initial recognition that have had Corporation has a present legal or constructive obligation that
a negative effect on the estimated future cash flows of that can be reliably measured and it is probable that an outflow of
asset. Individually significant financial assets are tested for economic benefits will be required to settle the obligation. The
impairment on an individual basis. The remaining financial expense relating to any provision is presented in the consolidated
assets are assessed collectively in groups that share similar statement of net income, comprehensive income and equity net of
credit risk characteristics. any reimbursement and, if the effect of the time value of money is
material, is discounted using a rate that reflects, where appropriate,
If there is objective evidence that an impairment loss has the risks specific to the liability. Where discounting is used, the
occurred, the amount of the loss measured at amortized cost increase to the provision due to the passage of time is recognized
is calculated as the difference between the financial asset’s as a finance cost.
carrying amount and the present value of the estimated future
cash flows discounted at the current effective interest rate. (n) Pension plans
(ii) Non-financial assets In accordance with the provisions of the Civil Service
The Corporation assesses at each reporting date whether there Superannuation Act (CSSA), employees of the Corporation are
is an indication that a non-financial asset may be impaired. eligible for pension benefits. Plan members are required to
If any such indication exists, the asset’s recoverable amount contribute to the multi-employer Civil Service Superannuation
is estimated. For the purposes of impairment testing, non- Fund (Fund) at prescribed rates for defined benefits and will
financial assets are grouped together into the smallest group receive benefits based on the length of service and on the average
of assets that generates cash inflows from continuing use that of annualized earnings calculated on the best five years prior to
are largely independent of the cash inflows of other assets or retirement, termination or death that provides the highest earnings.
groups of assets, the cash-generating unit (CGU). The Corporation is required to match contributions contributed to
the Fund by the employees at prescribed rates, which are recorded
The recoverable amount of a non-financial asset or CGU is as an operating expense. Under the CSSA, the Corporation has
the greater of its fair value less costs to sell and its value in no further pension liability. Based on limited information available
use. Where the carrying amount of an asset or CGU exceeds from the Fund, the Corporation has judged this information to be
its recoverable amount, the asset is considered impaired and insufficient to properly allocate any potential pension plan deficits
is written down to its recoverable amount. In assessing value and is therefore not able to reliably determine its participation in
in use, the estimated future cash flows are discounted to their any potential future deficit. As a result, the Corporation expenses
present value using a pre-tax discount rate that reflects current contributions made to the pension plan as if the plan was a defined
contribution plan.
Manitoba Liquor & Lotteries
32/ 2017/18 Annual Report
Manitoba Liquor and Lotteries Corporation
For the year ended March 31, 2018
(in thousands of Canadian dollars) Notes to Consolidated Financial Statements
For employees whose annual earnings exceed the limit under the includes points awarded under the program, the revenue allocated
Fund, a pension liability is established. This liability is determined to the points is deferred based on the fair value of the awards,
actuarially on an annual basis. Actuarial gains and losses are which is assigned as $0.01 per point earned, and recognized as
recognized immediately in the consolidated statement of financial revenue when the points are redeemed and the Corporation fulfills
position with a corresponding debit or credit to operating expenses its obligation to supply the awards.
in the period in which they occur.
(q) Goods and Services Tax
The Corporation also makes contributions for certain employees
and officers to a money purchase pension plan at prescribed rates, In lieu of Goods and Services Tax (GST) on lottery and gaming
which are recorded as an operating expense. revenue, the Corporation foregoes claiming input tax credits
and pays an additional 5% GST on gaming expenditures,
(o) Revenue recognition including retailer commissions. This additional 5% is reported
as GST expense in the consolidated statement of net income,
Revenue is recognized to the extent that it is probable that the comprehensive income and equity.
economic benefits will flow to the Corporation and the revenue
can be reliably measured. Revenue is measured at the fair value of The Corporation collects GST on liquor sales, and applicable
the consideration received, excluding discounts, rebates and sales entertainment, food & beverage and casino retail store operations.
taxes. An input tax credit is claimed for GST paid on non-gaming
expenditures.
The Corporation assesses its revenue arrangements against
specific criteria in order to determine if it is acting as principal or (r) Assets held for sale
agent and has concluded that it is acting as principal in all of its
revenue arrangements, with the exception of the third-party AIR
Assets held for sale are presented separately in the consolidated
MILES® program in which the Corporation participates. The AIR
statement of financial position when the Corporation is committed
MILES® program allows customers to earn AIR MILES® points when
to selling the assets, an active plan of sale has commenced, and the
they purchase products in the Corporation’s retail liquor stores.
sale is expected to be completed within 12 months. Immediately
The redemption of points by customers is the responsibility of
before the initial classification of the assets as held for sale, the
the third-party AIR MILES® program. Consideration received is
carrying amounts of the assets are measured in accordance
recorded net of related expenses as the Corporation is acting as an
with the applicable accounting policy. Assets held for sale are
agent for the AIR MILES® program.
subsequently measured at the lower of their carrying amount and
fair value less cost to sell.
Revenue from product sales is recognized when the significant
rewards of ownership of the products have passed to the buyer,
usually on the delivery of products. Lottery revenue is recognized (s) Changes in accounting policies
as of the date of the draw with the exception of instant game
revenue which is recorded at the time the ticket is activated by During the year, the Corporation chose to adopt the following
the retailer via the online accounting system for sale to customers. standard:
Video lottery and other gaming revenue are recognized at the time
of play, net of prizes paid. (i) IAS 7 Statement of Cash Flows
This standard was amended in January 2016 as part of the
(p) Promotional allowances IASB’s major initiative to improve presentation and disclosure
in financial reports (the Disclosure Initiative). The amendments
Promotional allowances include the value of food, beverages and were effective for annual periods beginning on or after
other items provided on a complimentary basis to casino patrons. January 1, 2017. The adoption of the amendments to IAS 7
The value of these complimentary items is included in gross did not have any impact on the Corporation’s consolidated
revenue and then deducted as a promotional allowance to arrive at financial statements.
net revenue.
The Corporation’s exposure to credit risk related to trade and other receivables is disclosed in note 17(d).
The amount of unpaid and unrecorded Customs and Excise duties on owned merchandise held in bond is $4,173 at the end of the 2018 fiscal year (2017 – $4,865).
April 1, 2016 $ 26,272 $ 293,346 $ 25,028 $ 217,184 $ 133,784 $ 34,945 $ 44,504 $ 775,063
Additions - 3,648 172 7,876 6,176 3,423 46,300 67,595
Transfers from WIP - 7,544 45 272 146 1,763 (9,770) -
Reclassified as held for sale (845) (7,266) - - - - (1,141) (9,252)
Disposals - (34) (46) (16,902) (1,491) (469) - (18,942)
March 31, 2017 25,427 297,238 25,199 208,430 138,615 39,662 79,893 814,464
Additions - 21,316 396 11,083 4,658 609 3,423 41,485
Transfers from WIP - 66,345 1,845 489 4,723 - (73,402) -
Reclassified as held for sale - (394) - - - - - (394)
Disposals - - - (3,767) (6,160) (654) - (10,581)
March 31, 2018 $ 25,427 $ 384,505 $ 27,440 $ 216,235 $ 141,836 $ 39,617 $ 9,914 $ 844,974
March 31, 2018 $ 25,427 $ 243,920 $ 12,270 $ 60,678 $ 24,897 $ 7,121 $ 9,914 $ 384,227
March 31, 2017 25,427 167,235 11,995 73,861 25,065 11,412 79,893 394,888
Capital assets related to C&M agreements consist primarily The amount of borrowing costs capitalized during the 2018 fiscal year was
of the cost of the gaming equipment and related computer $444 (2017 – $1,062). The weighted average rate used to determine the
equipment for the First Nations Casinos and Shark Club amount of borrowing costs eligible for capitalization was 2.54%, the effective
Gaming Centre. interest rate of the specific borrowing.
Property and equipment not yet in use is classified as work in The net book value of buildings and parking lots held under finance leases at
progress and is stated at cost. No depreciation is recorded for the end of the 2018 fiscal year is $2,823 (2017 – $3,076) and consists of land
these assets. being used for parking facilities at the McPhillips Station Casino.
Net book value All long-term debt is unsecured and the fair market value as at March 31, 2018
is $364,584.
March 31, 2018 $ 11,085 The Corporation’s exposure to liquidity risk related to long-term debt is disclosed
in note 17(c).
March 31, 2017 11,610
13. Revenue, Cost of Sales and Gaming direct expenses consist primarily of costs associated with
the operation and maintenance of the Corporation’s electronic
Expenses By Nature gaming equipment, table games equipment and online gaming site.
Liquor cost of sales $ 393,263 $ 376,765 Grants in lieu of taxes 5,871 6,277
First Nations allocation 59,362 55,306 Marketing and public awareness 11,675 11,785
Non-gaming cost of sales 9,191 8,417 Supplies and equipment 4,763 5,004
14. Share of Profit of WCLC The WCLC earned revenue in the 2018 fiscal year in the amount
of $1,285,692 (2017 – $1,330,359), of which the Corporation’s share
2018 2017 calculated based on relative sales levels by jurisdiction is 17%
(2017 – 17%). The WCLC’s total profit for the 2018 fiscal year was
$432,438 (2017 – $454,821) of which the Corporation’s share is 14%
Revenue $ 224,495 $ 228,978
(2017 – 14%).
Prizes, commissions and other The Province of Manitoba is a member in the WCLC. An agreement
cost of sales 156,540 159,331 is in place with the Provinces of Alberta and Saskatchewan where
the Corporation provides economic benefit equalization specific to
WCLC partner equalization 4,606 4,701 salary costs of head office employees residing in Manitoba.
Payment to Government of Canada 2,440 2,374
Effective January 1, 1980, the Government of Canada terminated
Profit $ 60,909 $ 62,572 its involvement in lotteries. In return, the ten provinces are to
contribute an annual sum of $24,000, adjusted for inflation, to the
Federal Government.
Manitoba Liquor & Lotteries
38/ 2017/18 Annual Report
Manitoba Liquor and Lotteries Corporation
For the year ended March 31, 2018
(in thousands of Canadian dollars) Notes to Consolidated Financial Statements
Social responsibility funding includes amounts paid to the licence fees for employees, electronic gaming devices and retail
Addictions Foundation of Manitoba and other organizations for liquor locations; as well as additional amounts directed to be paid
their research and programming that promote responsible gaming under The Liquor and Gaming Control Act. The Corporation also
and responsible liquor consumption. The Corporation is required provided funding to the Crown Corporations Council through the
to allocate 2% of annual anticipated consolidated net income and payment of an annual levy.
comprehensive income to social responsibility initiatives. Any
liability associated with this funding is included in trade and other The Corporation provides funding to various charitable and
payables. community organizations throughout Manitoba.
Risk management policies have been established to identify and analyze the risks faced by the Corporation, to set appropriate risk limits and
controls and to monitor risks and adherence to limits. The Corporation’s management oversees the management of these risks in accordance with
the risk management policies and framework approved by the Board of Directors.
The table below summarizes the maturity profile of the Corporation’s financial liabilities as at year-end based on contractual undiscounted payments.
2018 On demand Less than 1 year 1 year 2 years 3 years 4 years 5 years > 5 years
2017 On demand Less than 1 year 1 year 2 years 3 years 4 years 5 years > 5 years
The aging of trade and other receivables at the end of the 2018 fiscal year is as follows:
The Corporation is subject to capital growth restrictions as the result of the requirement to allocate 100% of annual consolidated net income and
comprehensive income to the Province of Manitoba.
Level 1 - measurement based on quoted prices (unadjusted) observed in active markets for identical assets or liabilities. An active market for an
asset or liability is a market in which transactions for assets or liabilities occur with sufficient frequency and volume to provide pricing information
on an ongoing basis.
Level 2 - measurement based on inputs other than quoted prices included in level 1 that are observable for the asset or liability such as quoted
prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or liabilities.
Level 3 - measurement based on inputs that are not observable (supported by little or no market activity) and that are significant to the fair value
of the assets or liabilities.
The Corporation’s financial instruments consist of cash, trade and other receivables, trade and other payables, payable to the Province of Manitoba
and long-term debt. Unless otherwise stated, the fair value of the Corporation’s financial instruments approximates their carrying value.
Financial instruments recorded at fair value, classified using the fair value hierarchy, are as follows:
Compensation of key management personnel of the Corporation, which is recognized as an operating expense during the year, is as follows:
2018 2017