Sport Everywhere Annual Report 2009/2010 Report Annual Sport Everywhere Annual Report 2009/2010 Sportingbet Plc 4th floor 45 Moorfields London EC2Y 9AE Contact us tel: 00 44 (0)20 7184 1800 fax: 00 44 (0)20 7184 1810 email: [email protected] Investor relations email: [email protected] www.sportingbetplc.com Design and production by Firedog www.firedog-design.co.uk 01 Contents Business review 08 16 Key financial highlights 02 Our game plan 04 Australia focus 08 Our international impact 10 Sport everywhere 14 United Kingdom focus 16 20 26 Supplementary products 18 Greece focus 20 Corporate social responsibility 22 Eastern Europe focus 26 Sponsorship 28 Ambassadors 30 32 40 South Africa focus 32 Chairman’s statement 34 Group Chief Executive’s review 36 Spain focus 40 Board of Directors 42 Financial review Financial review 44 Consolidated Cash Flow Statement 65 Managing risk 45 Notes to the Financial Statements 66 Corporate governance statement 46 Parent Company Independent Auditor’s Report Directors’ report 49 Parent Company Balance Sheet 93 Remuneration report 52 Notes to the Parent Company Financial Statements Regulatory developments 57 Notice of Meeting 98 Independent auditor’s report 60 Notes to the Notice of Meeting 100 Consolidated Income Statement 61 Shareholders’ Information 106 Consolidated Statement of Comprehensive Income 62 Financial Summary 107 Consolidated Balance Sheet 63 Corporate Directory 108 Consolidated Statement of Changes in Equity 64 Sportingbet Plc 0202 Annual Report 2009/2010 0303 Operational Sportingbet has had a solid start to the new Key financial year, with amounts wagered up 10% Highlights in the first two months. We were admitted to the Official List of the UKLA in May 2010 with subsequent entry into the FTSE 250 index, financial Graduation reached a Non-Prosecution Agreement with Advancing from AIM to the Official List was a the US, and declared a final dividend of 1.0p, key achievement of the financial year. This move making a total 2010 dividend of 1.5p strengthens our credibility as a leading global highlights (2009: 1.0p). gaming Group, and enhances our position of seeking fair and equitable regulation and taxation in all jurisdictions we operate in. The benefits of legality, stability, freedom to advertise Financial highlights for the year (continuing operations) and creation of stiff barriers to entry for new competitors outweigh the cost of compliance 2010 2009 with new regulation. £m £m % Targets achieved Amounts wagered 1,971.3 1,577.2 25.0 Our annual targets have been repeatedly met Net gaming revenue 207.5 163.6 26.8 10.3% 17% despite significant industry and political turmoil. EBITDA* 46.5 39.7 17.1 Realistic yet challenging targets were set in 2007 and have been reached without revision Adjusted operating profit* 35.4 31.1 13.8 Industry-leading gross EBITDA up 17% or change in our direction. Group operating profit 7.1 21.9 (67.6) margin for European to £46.5m. Adjusted diluted EPS* (p) 6.2 6.0 4.2 sports (2009: 10.2%). Diversity Diluted EPS (p) 0.7 4.2 (82.8) Our breadth of customer base and product range Net cash** 34.2 23.8 43.7 provides stability throughout difficult economic times and dilutes operational risk. * Adjusted to exclude exceptional items of £24.5m (2009: £4.2m), share option charge and amortisation ** Net of long term debt and customer liabilities Group performance (£m) Net gaming revenue 25% 14% 50 Percentage increase in Percentage increase 40 amounts wagered year in adjusted operating 30 on year to £1,971m. profit to £35.4m. 20 10 10 20 30 40 61% £50m 2007 2008 2009 2010 Percentage of European Excellent World Cup Sports 70% sports revenue from with over £50m staked Adjusted operating profit EBITDA Casino & games 22% in:play - a strong throughout. performance for 2010 Group operating profit Poker 8% (2009: 56%). Sportingbet Plc 04 Annual Report 2009/2010 05 Our mission Our strategy Such geographical expansion and diversification not only In IT, we have solved resourcing problems by developing To be the world’s best online betting service, To provide a first-class online sports betting increases our customer base and revenue streams but it and changing the way we work with our third parties and offering customers an unprecedented number product to a geographically diverse customer also helps to minimise the potential risk from prohibitive contractors. We can now tailor the number of people regulation. In an industry that is prone to an ever-changing working on a specific project depending on the various of sports betting opportunities along with a base. Our teams are dedicated to continually regulatory environment we have recently introduced a new influences on the IT business – be it budget or a change full suite of casino, games and poker. developing and improving our websites so regulation team to oversee all regulatory issues that may, in priorities – in a very short time period. Additionally in that existing and new customers alike are and in fact do, face the Sportingbet Group. The ability for IT, we have introduced a 24/7 presence by linking support offered the very best product and service. the Group to adjust to changing political environments teams from London with a new team based in India. throughout the world will become a key driver of future Our trading team (based in Guernsey) can now see the business and the introduction of this team is our next step games they are trading on across the world 24/7, making in recognising this. Swift yet well-considered action entering our prices more expertly driven and dynamic rather than new territories can establish first mover advantage or avoid automated like so many of our competitors. periods which are not viable when the correct strategy is to allow the regulatory framework to settle first. The four Sportingbet has a long history of successful B2B partnerships. most populous nations in the world (China, India, USA Our largest markets – Turkey, Spain, Greece, Bulgaria – and Indonesia) are yet to legalise online gambling proving all started out as partnerships. Some ran their course and that the industry is still immature, however the wheels were brought in-house. Where we have good alignment of change are likely to turn slowly in those countries. It is on corporate objectives with our Greek partner, we continue Our game plan therefore vital that we stay abreast of the situation in these to enjoy a close and strategically vital relationship. jurisdictions so that we can maintain our leadership across There are two dynamics at work prompting a potential the globe. second wave of B2B: Such developments in our company structure form part of • The leading pack of sports operators, including our focus on maximising our operational flexibility which we Sportingbet, has pulled away from the rest of the Future growth believe is paramount to the future success of Sportingbet in market in terms of product differentiation. what remains an immature industry. Further geographic expansion is equally high This differentiation in product offering breadth and trading expertise is difficult and expensive to replicate. on our priority list. We seek to take advantage Other ways we have introduced such flexibility can be seen in the way we contact our customers. In the last few • The move from a pan-European operating model to of increasing broadband penetration and the years we have integrated new and improved customer individual territory regulation erects further barriers general growth in the global sports betting relationship management tools and systems to help us to entry. The complexity and expense involved market, with Eastern Europe and South differentiate between and segment our customers. in obtaining licences and fulfilling their technical America currently dominating our focus. requirements further plays to scale as a strength. Our sportsbook product becomes increasingly valuable and difficult to replicate. There are a number of different potential types of partner who recognise this: • Offline operators looking to move online. • Media and marketing groups looking to enter newly regulated markets. £5.2m • Casino and poker operators without a sports offering. • Existing sports operators with a sub-scale or Net gaming revenue sub-standard offering. derived from European We aim to take advantage of a limited number of basketball alone. significant opportunities. Basketball is one of the most popular sports we offer. Sportingbet Plc 06 Annual Report 2009/2010 07 Our game plan Our strategy is focused on sport. Sport is Why focus on sport? Performance Trading teams our core business - it is in our company name, Sports betting offers greater scope for differentiation This year we delivered sustained growth across the As competitors seek to automate trading processes and it is in our blood. It is what sets us apart than other products. With over a decade of experience business as net gaming revenue increased by 26.8% and use common suppliers for essential services, we stand out and a commanding product knowledge Sportingbet total amounts wagered grew by 25.0%. A strong trading amongst our rivals as the company which offers a better, from our rivals. dominates in many markets across the world, making performance throughout the year capped off by a record more complete experience for the sporting expert. We believe it increasingly more difficult for our competitors to enter World Cup tournament returned an industry-leading gross the people behind the website add significantly more value the same markets at the same level. An industry-leading sports margin of 10.3% despite economic disruption in to the customer than robotic systems programmed to avoid trading team, a clearly defined, highly visible brand name two of our major markets, Greece and Spain.