Annual Report 2018 A YEAR OF TRANSFORMATION ANOTHER STRONG PERFORMANCE OVERVIEW Chairman’s introduction 02 Read more about our top stories of 2018 on pages 13 to 23. For more information on GVC see at a glance on page 4. STRATEGIC REPORT GOVERNANCE At a glance 04 Read more about the market Chairman’s Governance statement 64 in which we operate on Chief Executive’s Q&A and review 06 pages 24 to 25. Leadership experience across the board 66 2018 Highlights 13 Leadership corporate Major trends in the marketplace 24 governance overview 68 Regulatory update 26 Division of responsibility 71 Business model 28 Composition, succession and evaluation 72 Vision and strategy 30 Nominations Committee report 74 KPIs 31 Audit Committee report 76 Technology platform 32 Directors’ Remuneration report 82 Business review 33 Independent Auditor’s report 103 Corporate social responsibility 42 CSR Committee Report 53 Chief financial officer’s review 54 Principal risks 57 GVC Holdings PLC | Annual Report 2018 01 2018 was a transformational year for the Group with the completion of the Ladbrokes Coral acquisition in March making the Group the largest online-led sports-betting and gaming operator in the world. Excellent operational execution, effective marketing and a strong World Cup helped both the legacy GVC and the acquired Ladbrokes Coral businesses perform ahead of expectations and materially ahead Read more about our corporate social responsibility on page 42. of the market, delivering market share gains in all our major territories. FINANCIAL STATEMENTS Consolidated income statement 110 Consolidated statement of comprehensive income 111 Consolidated balance sheet 112 Consolidated statement of changes in equity 113 Consolidated statement of cashflows 114 Notes to the consolidated financial statements 115 Company balance sheet 162 Company statement of changes in equity 163 Notes to the Company financial statements 164 Glossary 169 Corporate information 170 For more information on GVC’s activities and performance, please visit our website: gvc-plc.com 02 PERFORMANCE HIGHLIGHTS | CHAIRMAN’S INTRODUCTION 2018 WAS A TRANSFORMATIONAL YEAR IN WHICH WE CONTINUED TO DELIVER A VERY STRONG FINANCIAL PERFORMANCE.” Lee Feldman 2018 was a momentous year for the is an enormous opportunity. In July, the Group Non-executive Chairman Group, with the acquisition of the entered into a joint-venture with MGM Resorts 5 March 2019 Ladbrokes Coral Group on 28 March to operate online sports-betting and gaming making the enlarged GVC Group the and retail sport-betting operations in the US, world’s largest online-led sports-betting as and when states regulate. The combination and gaming company. of brands, technology and market access of the two parent companies provide the The acquisition has greatly strengthened opportunity to build a world-class operation the Group through the addition of a strong in the US. portfolio of brands in well-established markets, leading marketing expertise and Integration update the addition of some very talented people. Combined with the existing GVC brands and The acquisition of the Ladbrokes Coral operational expertise that has already proved business completed on 28th March 2018 and so successful, and supported by our leading the integration of that business is already well proprietary technology stack, the enlarged progressed. We expect to deliver significant group is very well placed to continue to grow benefi s from integrating the Ladbrokes Coral at market leading rates. The repeal of the businesses; we have announced £130m Professional and Amateur Sports Protection cost synergies and we will also benefit Act (PASPA) legislation in the US in May, from the implementation of best-of-both effectively enabling each state to legislate operational practices. The initial phase of the and regulate sports-betting for the first time, integration, primarily the implementation of new management and employee structures, has gone well, and it is very pleasing to see the culture of the Ladbrokes Coral businesses fit-in very well with that of the existing GVC business. A key part of the integration is technology, and the migration of the Ladbrokes Coral UK online businesses onto the GVC technology platform. It was pleasing to announce in February that we have reached an agreement with Playtech PLC that will enable us greater fl xibility and support for this transition. Financial performance The performance of the Group in 2018 was very strong. Proforma NGR was 9% ahead on a proforma basis, and underlying proforma EBITDA before separately disclosed items was 13% ahead. Growth in Online was particularly strong, with NGR up 19% and underlying EBITDA also up 19%. This growth was delivered across all our major geographies and brands, with double digit growth NGR in the UK, Germany, Australia, Italy, and Brazil and also in our global partypoker brand. Group proforma underlying operating profit was 19% ahead and we are pleased to announce a second interim dividend of 16p, taking the total 2018 dividend to 32p, an increase of 7% on 2018. GVC Holdings PLC | Annual Report 2018 03 NGR* (£m) Annual growth Corporate activity Non-executive Director Stephen Morana taking on that role. In September, Pierre Other corporate activity by the Group Bouchut joined the board as an Independent included the acquisition in May of 51% of Non-executive Director and took the role 3,571.4 Crystalbet, one of the Georgia’s leading online of Audit Committee Chairman. Pierre has a sports-betting and gaming operators, with wealth of experience in senior finance and an option to buy the remaining 49% in 2021. operational roles at a number of multinational +9% The performance of the Crystalbet business businesses including CFO at Delhaize 2017: 3,288.1 post acquisition has been outstanding, and and Carrefour. He is currently a Non- demonstrates the expertise the Group has in executive Director and chairman of the audit identifying acquisitions that are significantly committee at Hammerson plc and Firmenich value-enhancing. In November the Group SA. In December we announced the announced the acquisition of Neds, an resignation of Karl Diacono as Non-executive online sports-betting operator in Australia. Director after 10 years serving in that role. This acquisition provides further scale to our existing fast-growing Ladbrokes Australia I would like to thank Karl and Will for business in what is a core market for their service and contribution over their the Group. period of board membership. They have Underlying EBITDA* (£m) both been with us through an exciting Responsible Gambling corporate journey. Annual growth As an industry leader in the markets in which Finally, Chief Financial Officer Paul Bowtell we operate, our commitment to responsible stepped down from his role on 5 March 2019 gambling and social responsibility is of following seven years as CFO of first Gala paramount importance. We have announced Coral, then Ladbrokes Coral plc and then a number of responsible gambling research GVC. Paul has left in order to take up a role and education initiatives, backed by a major with Alchemy Partners, the private equity increase in the level of investment in this area firm. Paul is replaced as Chief Financial to twice the contribution called for by the Officer by Rob Wood. Rob has been with the 755.3 sector’s responsible gambling organisations. group for 7 years and was the CFO of the We have also announced a multi-million pound Ladbrokes Coral UK Retail business having investment into a new community programme originally joined Coral Retail as the Business +13% that will deliver grants to local good causes Development and Strategy Director. 2017: 666.5 who promote grassroots sports and tackle Rob is a great addition to the Board and his men’s health issues, and a three-year appointment demonstrates the strong bench partnership with SportsAid, which will of talent within GVC. I would like to thank deliver funding for 50 aspiring Olympians Paul for his invaluable contribution over the across the UK. years to Gala Coral, Ladbrokes Coral and In the UK, we whole-heartedly support the GVC. I wish him well with his new role. decision by the Remote Gaming Association 2018 was a transformational year for of online operators to restrict all TV betting the Group, which continued to deliver advertising around live-sport in 2019. We will a very strong financial performance. Operating Profit* (£m) continue to work closely with the Gambling The combination of our brands, technology, Commission in the UK and support their marketing capability and people, alongside Annual growth efforts to provide a safe environment for our scale, geographic diversification and customers to enjoy their gambling experience. M&A expertise leaves the Group in a very good position to deliver shareholder value. Board GVC will post its 2018 Annual Report to As the business evolves, becoming shareholders in the week commencing significantly larger and more geographically 29 April 2019 and will be uploaded on our diversifi d, it has been important to ensure website from that date. The AGM will be held that the board composition refl cts this. on 5 June 2019. In June, Virginia McDowell joined the board 610.1 as an Independent Non-executive Director. Virginia brings a wealth of industry experience, Lee Feldman having worked in the US gaming market Non-executive Chairman +19% for 35 years, most recently as the CEO 5 March 2019 2017: 514.1 of NASDAQ listed Isle of Capri Casinos. Also in June, Will Whitehorn stepped down as senior Non-executive Director, with existing * The Group’s proforma results are unaudited and presented as if the current Group, post the acquisition of Ladbrokes Coral Group plc, had existed since 1 January 2017. As such, it excludes the results of the Turkish business which was discontinued during 2017 and the 360 shops that the Ladbrokes Coral Group plc was required to divest on the merger of Ladbrokes PLC and the Coral Group.