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THE FULL SP A/W for Pdf.Qxp annual report and accounts 2002/2003 Contents The Full SP Review ‘Our results across the board’ 02 Introduction 04 Customer charter & Code of conduct 06 Chairman’s statement 08 Chief Executive’s review 10 Europe ‘From losses to winnings’ 14 America ‘A lot at stake’ 15 Asia/Australia ‘Going firm to hard’ 16 Financial statements Board of Directors 18 Financial review 20 Corporate governance statement 22 Remuneration report 24 Directors’ report 26 Directors’ responsibilities 28 Report of the independent auditors 29 Results Consolidated profit and loss account 32 Balance sheets 33 Consolidated cash flow statement 34 Consolidated statement of total recognised gains and losses 34 Accounting policies 35 Notes to the financial statements 37 Notice of meeting 54 Five year financial summary 56 The world’s leading online sports betting company Football Boxing Rugby Cricket Basketball US football Australian rules Golf Horse racing Snooker Tennis Baseball Our results across the board Hockey Cycling Motor racing Alpine sports Darts Greyhounds Europe Turnover £173,004,000 Customers 201,514 Number of bets 4,446,990 Sports events covered America Turnover £763,576,000 Customers 644,349 Number of bets 17,392,572 Sports events covered Asia/Australia Turnover £213,709,000 Customers 37,108 Number of bets 820,602 Sports events covered 882,971 £1,150.3m 22.7m £14.6m total customers total turnover total bets operating profit* 2000/01 90,100 2000/01 324.7m 2000/01 3,484,320 2000/01 £(2.1)m 2001/02 558,587 2001/02 991.5m 2001/02 15,140,457 2001/02 £14.3m 2002/03 882,971 2002/03 1,150.3m 2002/03 22,660,164 2002/03 £14.6m *pre exceptionals and goodwill For our customers, picking a winner clearly involves an element of chance. They can be certain, however, that Sportingbet is transparent on the setting and changing of odds. Improving our odds Chance is a major factor facing our gambled. Turnover in America rose we now have a broader-based and more customers. In running our business, considerably, although our costs of viable business. however, we prefer a far greater degree processing customer funds also rose. of certainty. To this end, we took steps Chance comes into play in any business, during the year to further control the In Asia, we re-focussed our business, but we believe that the steps we’ve taken elements effecting our business. withdrawing from some of our existing will achieve the right long-term results. marketing partnerships. Exiting from After a year focussed on profitability In Europe, we made a significant acquisition this high turnover, low margin ‘wholesale’ and efficiency, the odds are increasingly and expanded into new markets. We moved business, we now target the retail market. stacked in our favour. our operations from Alderney to London, This move brings Asia in line with our where we benefit from a well-regarded basic strategy, which is to meet the As we move forward, our previous form regulatory environment. For the first time, needs of recreational gamblers. provides a solid base for victories to come. we’re now making European profits. Even the most severe tipsters should In Australia, we adjusted our structure include us among their names to watch. In America, we completed the integration of to bring it in line with our global business Sportsbook into Sportingbet. We continued model. Previously a telephone business to lobby for regulation. Expanding our serving a relatively small number of campaign, we pointed out that around sixty high spending ‘high-rollers’, it now countries, including the UK and Australia, has an online operation meeting now have a regulated online gaming the needs of many more customers. industry. While we lobbied, our customers Although turnover has dropped, global odds and how they are expressed UK fractional 5/4 European decimal 2.25 US moneyline +225 Sportingbet Plc annual report and accounts 02/03 05 Customer charter Sportingbet promises to ensure complete transparency and clarity in all its financial relationships with customers. Sportingbet will offer odds on all mainstream sporting events and these will be competitive with other major bookmakers. Sportingbet respects the privacy of all its customers and commits itself to protect any data about customers from outside parties. Sportingbet maintains 24 hour customer service, available in a wide range of languages, to resolve all customer matters as quickly as possible. In the event that there is no amicable agreement in a dispute, Sportingbet agrees to abide by independent arbitration. Code of conduct Sportingbet complies with all route-to- Sportingbet is committed to support the market legislation everywhere in the world. world-wide liberalisation and regulation The Company will only physically operate of online gambling. where it is expressly permitted or licensed to do so. Sportingbet commits to be transparent Sportingbet refuses to take bets from on the setting and changing of odds minors and supports all efforts to avoid and the prompt settling of all customers’ taking bets from compulsive or problem financial transactions. gamblers. Sportingbet complies with all securities’ Sportingbet commits to be proactive legislation in each market it operates in combating money laundering and in, and by the appropriate rules and any form of financial fraud. regulations of the UK Stock Exchange. Sportingbet pays all taxes and levies Sportingbet’s conduct with its wherever they are applied. customers will be straightforward and helpful at all times. Sportingbet Plc annual report and accounts 02/03 07 677.8bn forecast wagers globally in 2003 £ billion Horse racing 73.3 Sports betting 48.4 Casinos 208.4 Lotteries 96.0 Gaming machines 223.1 Others 28.6 Total 677.8 source: GBGC Analysis Chairman’s statement Introduction management. In addition, Barclays Bank This has been a challenging year for the Plc agreed to provide the Company with Group in which we have faced and largely a £10 million revolving term loan facility, overcome a number of difficult issues. payable by 31st March 2005, and also to Significant achievements include the full extend the Company’s overdraft facility to integration of our US facing business, £10.5 million. Finally the outstanding £6.5 IOE, with our previously existing operations; million convertible loan stock was redeemed an increase in customer numbers of on schedule at the end of July 2003. approximately 324,000 to 883,000; achievement of profitability in Europe; Outlook bringing our Australian business into a With these uncertainties resolved Sportingbet regulated on-shore territory; and resolving approaches the future with confidence. uncertainties over our Asian strategy. The Board’s focus is now firmly fixed on developing the business it has built over Overview of Results the last three years, maximising organic Turnover for the twelve months to 31 March growth and reducing its debt in a timely 2003 was £1,150.3m, compared to £991.5m manner with the delivery of solid profitability. last year. Gross margin was £74.1m (2002: £60.3m), representing 6.4% of turnover (2002: As I noted in my statement last year, we 6.1%). Operating profit before goodwill and believe the on-line sports betting and gaming exceptional costs was £14.6m (2002: £14.3m). industry has entered a phase of development Profit before tax was £1.4m (2002 £5.0m). wherein the larger players are becoming more Earnings per share pre exceptional costs and successful as they achieve critical mass and goodwill was 7.1p (2002: 8.7p). After taking profitability while, at the same time, a number account of exceptional costs and goodwill, of the smaller participants are experiencing earnings per share was 0.8p (2002: 3.4p). more difficult trading conditions. The Board believes that Sportingbet, as a result of its Financing profitability, sound business practices and As previously announced, since year end, position as the leading worldwide provider, the Company has resolved the financing is well placed to capitalise on the growth uncertainties resulting from its purchase of opportunities which are likely to arise from IOE and the Number One Betting Shop. this consolidation process. The earn out obligations with the vendors of IOE were successfully rescheduled while the Australian earn out obligations were settled in full. These were both important achievements involving significant efforts by Peter Dicks, Chairman Sportingbet Plc annual report and accounts 02/03 09 In the twelve months ended Websites are designed 31 March 2003, Group to appeal to distinct customer numbers customer groups in each increased from 558,587 geographic region. to 882,971 (58.1%). Of this increase, 260,851 customers were gained from organic growth and 63,533 through the acquisition of Sporting Odds at the end of July 2002. Group Chief Executive’s review Review of Operations fee income was £15.3m (2002: £10.2m). close working relationship with World number of sports bets placed increased by has been disappointing. The industry in this In the twelve months ended 31 March 2003 The cost of taking a bet, represented by Gaming. Sportingbet has made a $1m 3.3m to 4.4m. Of this increase, 1.2m came region revolves predominantly around horse IOE, Sportingbet’s US facing business, total operating costs divided by the number loan to World Gaming for the purposes from the acquisition of Sporting Odds in racing. A long and sustained drought made good progress. Its integration into of sports bets placed, fell to £2.32 per bet, of securing additional hardware, and now July 2002 and 1.5m from organic activities. during the peak season led to an increase Sportingbet was completed on 1 July 2002 (2002: £2.57). This fall reflects the integration has a 29.5% equity interest in the company.
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