Annual Report & Accounts 2014
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Stock Code: 888 Code: Stock 888 Holdings plc 888 Holdings Annual Report & Accounts 2014 & Accounts Annual Report Annual Report & Accounts 2014 888 Holdings AR2014 PROOF 8.indd 3 30/03/2015 11:57:46 23968.04 30 March 2015 11:56 AM Proof 8 is one of the world’s most popular online gaming entertainment and solutions providers. 888’s strong and trusted brand offers localised online gaming products with market leading functionality and interactivity to players around the globe, above all in a safe and secure environment. 888 has been at the forefront of the online gaming industry for more than 16 years. With a team of almost 1,800 highly skilled and dedicated employees and outsourced staff, we provide a first-class online gaming experience to customers across products and markets. Our industry-leading business analytics identify the best way to deliver to customers the offerings that they want, and our proprietary technology platform allows 888 to enter new markets efficiently and successfully as regulation allows. 888 is a responsible business and we work hard to ensure that our customers enjoy our games in the safest and securest possible environment. Innovation is at the core of our business and we continue to develop to ensure that our product offer and customer service continually exceeds expectations. This will enable us to further grow the business and deliver value for our shareholders. 888 Holdings plc Annual Report & Accounts 2014 888 Holdings AR2014 PROOF 8.indd 4 slugline 30/03/2015 11:57:47 23968.04 30 March 2015 11:56 AM Proof 8 Overview Highlights Revenue Revenue - B2C Revenue - B2B Revenue - B2C Casino up 14% up 11% up 32% up 16% US$ million US$ million US$ million US$ million 455 391 64 221 352 401 190 48 2013 2014 2013 2014 2013 2014 2013 2014 Profit Before Tax Adjusted EBITDA1 Adjusted EBITDA1 Margin Real money registered customer accounts2 up 28% up 33% US$ million US$ million per cent up 15% 68 101 22.1 million 17.9 15.5 53 18.9 76 2013 2014 2013 2014 2013 2014 2013 2014 Contents Overview Governance Financials 01 Highlights 21 Board of Directors 50 Independent Auditor’s Report 58 Notes to the Consolidated 02 Chairman’s Statement 22 Directors’ Report 54 Consolidated Income Financial Statements 25 Directors’ Statement of Statement 88 Company Balance Sheet Strategic Report Responsibilities 54 Consolidated Statement of 89 Company Statement of 04 Chief Executive’s Review 26 Corporate Governance Comprehensive Income Changes in Equity 04 2014 Overview Statement 55 Consolidated Balance Sheet 90 Company Statement of Cash Flows 05 Our Business Model and 30 Audit Committee Report 56 Consolidated Statement of Strategy 33 Directors’ Remuneration Changes in Equity 91 Notes to the Company Financial Statements 06 Operational Review: Report 57 Consolidated Statement of Delivering Our Strategy Cash Flows 93 Shareholder Information 10 Financial Review and Key Performance indicators 14 Regulation and General Regulatory Developments 16 Corporate Responsibility 19 Principal Risks and Uncertainties 1 As defined in table set out on page 10 2 Casino, Poker and Sport www.888holdingsplc.com Stock Code: 888 01 888 Holdings AR2014 PROOF 8.indd 1 30/03/2015 11:57:49 23968.04 30 March 2015 11:56 AM Proof 8 Chairman’s Statement 2014 was another record year for 888, building on the strategic development of the Group in 2013. This success has been driven by an outstanding Casino performance, but was also underpinned by notably strong growth both in Sport and in our B2B business as well as impressive market outperformance in Poker and in Bingo. Richard Kilsby Mobile is having a markets are becoming advantage of these significant Chairman transformational impact on regulated, presenting opportunities whilst ensuring our business. We continued to opportunities across the that our investment in the US innovate with a ‘mobile first’ globe. In the US, we are is disciplined as the market is approach embedded in all uniquely positioned to exploit established. product development whilst the progressive regulation our best-in-class technology of the market as the only We monitor the regulatory and analytical capabilities operator active in all three environment in the UK and facilitated ever more effective regulated states. Whilst to Europe closely as countries targeting of our marketing date market momentum in adapt their approaches. Our investment. the US has been slower than significant regulatory many anticipated, the long- experience and operational Growth in the global online term opportunities remain scale means that we are able gambling industry is set to significant and we will be a to manage the impact of continue in 2015, despite major player as more states these changes better than challenging Poker market regulate online gaming over most and to take advantage dynamics and a competitive time. Our approach gives us of opportunities that these UK Bingo market. New the financial firepower to take changes open up, particularly in enabling larger players like 888 to increase market share. Financial results and Dividend 2014 has seen another year of record performance driven by growth across our core products and delivering on our financial forecasts enabling us to increase revenue to US$455 million, representing a 14% uplift from the prior year (2013: US$401 million). We continue to strengthen our market position through investment in product development and cost effective customer acquisition, while increasing our adjusted EBITDA by 33% to US$101 million (2013: US$76 million) and profit after tax by 14% to US$57 million (2013: US$50 million). 02 888 Holdings plc Annual Report & Accounts 2014 888 Holdings AR2014 PROOF 8.indd 2 30/03/2015 11:57:50 23968.04 30 March 2015 11:56 AM Proof 8 Overview with regulators. In Brian asset. Their passion will ensure Mattingley, shareholders that 888 continues to be at have an Executive Chairman the fore of the online gaming with huge experience of the industry for years to come. On gaming industry and extensive behalf of the board I would knowledge of our business. like to thank all my colleagues for their commitment to With Brian as Executive making the 888 strategy Chairman, we feel confident come to life. that we have an industry- leading senior team to Outlook continue 888’s growth and 888’s success has been built development in the years to on its world class technology come. and market leading products. As at 31 December 2014, appointed Chair of the Audit The global online gaming 888 had US$163 million cash Committee. With a wealth of Finally, John Anderson will market will continue to and cash equivalents (2013: experience on boards and be stepping down as a develop driven by regulation US$116 million) and US$67 audit committees, and a long Non-executive Director from and with mobile, in particular, million liabilities to customers and respected ‘Big 4’ career the conclusion of the 2015 making our products more (2013: US$55 million). behind him, we can already Annual General Meeting. John accessible and enjoyable see the great value that Ron is a valuable resource of than ever. Given the continuing strong is bringing to 888. knowledge and experience in financial performance the industry, and will remain Although we do face of the Group, the Board From the conclusion of available to consult with and regulatory headwinds in some is recommending a final the 2015 Annual General assist the Board as needed. of our markets, including the dividend of 4.5¢ per share Meeting, I will be stepping I would like to take this Point of Consumption Tax in (which together with the down as Chairman of the opportunity to thank John for the UK, I am confident that we interim dividend equals 8.0¢ Board due to my retirement. his dedication and service are strongly placed to take per share in accordance with It is with a heavy heart to 888, as its CEO until 2006, advantage of opportunities the Group’s dividend policy) that I conclude my nine- and as a Non-executive that they also open up to and an additional one-off year tenure as Chairman. Director thereafter. larger, well-financed market 7.0¢ per share, bringing the However I am consoled by the leaders such as 888. total for the year to 15.0¢ per knowledge that I am leaving On a personal note, I would share (2013: 14.0¢ per share). the Company at the top of like to thank our shareholders Our focus will continue to its game and only getting for the trust and confidence be on delivering a truly Board changes stronger. which they have placed in the satisfying experience for our I would like to take this Board and in my leadership customers and delivering opportunity to highlight At the same time as my as Chairman. strong, sustainable long some changes to our Board, retirement, Brian Mattingley term earnings growth for our some of which have been will be stepping down as Winning team shareholders. previously announced, and all Chief Executive Officer, The success enjoyed by of which have been carefully and appointed Executive the company in the last planned and implemented Chairman. We are very 12-months is, once again, in order to support the excited at this move, which testament to the hard-work Company’s further growth and will allow the Company to and quality of the 888 team. Globally, our 1,800 staff development. continue to take advantage of Richard Kilsby are setting the standard of Brian’s wealth of experience, Chairman Late last year, Ron McMillan particularly in maintaining innovation in online gaming joined the Board and was and developing relationships and are the Group’s greatest www.888holdingsplc.com Stock Code: 888 03 888 Holdings AR2014 PROOF 8.indd 3 30/03/2015 11:57:51 23968.04 30 March 2015 11:56 AM Proof 8 Chief Executive’s Review I am delighted to report that 2014 was another exceptional year for 888 as the Group delivered all-time-high revenues, further enhanced profitability and maintained strong cash generation.