Unibet Group plc Annual Report and Accounts 2009 A NNU A L
REPORT www.unibetgroupplc.com 2009 playing to win
Unibet Group plc by players for players
Unibet Group plc PROFIT BEFORE TAX Fawwara Buildings Msida Road, Gzira GZR1402, Malta. Tel: +356 2133 3532 +161% Company No: C39017. PBT GBP 28.9M Registered in Malta.
Registered office: c/o Camilleri Preziosi, Level 2, Valletta Buildings South Street, Valletta VLT11, Malta.
Active customers Pioneer in the moneytainment® +25% industry 365,865 Active customers worldwide Unibet was founded in 1997. With over 4.1 million registered customers AnnuAl generAl meeting in more than 100 countries, the Group is one of Europe’s largest online gaming operators.
Gaming products include pre-game sports betting, live betting, casino, poker, The Annual General Meeting (AGM) of Unibet Group plc will be held at 15.00 CET on Thursday 6 May 2010, at the Grand Hotel, Södra Blasieholmshamnen bingo and soft games. Customers can bet via websites in 27 languages, 8, Stockholm in Sweden. and increasingly via mobile phones and other mobile devices. Right to participate Unibet creates products and services intended for the global market, Holders of Swedish Depositary Receipts (SDRs) who wish to attend the AGM must be registered at Euroclear Sweden AB/VPC on Monday 26 April 2010 and customises them to suit local needs. This “glocal” approach – global and notify Skandinaviska Enskilda Banken AB (publ) of their intention to attend reach and mindset combined with local understanding – helps Unibet the AGM no later than 11.00 CET on Friday 30 April 2010, by filling in the enrolment form provided at www.unibetgroupplc.com/AGM, Notification to make all customers feel at home. holders of Swedish Depository Receipts in Unibet Group plc. The form must be completed in full and delivered electronically.
Please note that conversions to and from SDRs and ordinary shares will not vision mission be permitted between 26 April and 6 May 2010. The thrill of putting money at stake for To provide reliable online gaming and build Dividend the chance to win more is at the heart value by delivering entertaining products The Board of Directors proposes a dividend of GBP 0.71 per share/SDR, of Unibet’s vision – it’s moneytainment®. and excellent service. which is approximately SEK 7.68 per share/SDR.
Financial information Unibet Group plc’s financial information is available in Swedish and English. Key objectives unibet’s strengths Reports can be obtained from Unibet’s website, www.unibetgroupplc.com or Satisfied and excited customers One of Europe’s largest gaming ordered by email at [email protected]. Distribution will be via email. companies in a fast-growing and exciting Annual Reports can be ordered through the website, www.unibetgroupplc.com Motivated employees consumer category or ordered by email at [email protected]. Strong financials Unibet will publish financial reports for the financial year 2010 on Diversified product and geographic the following dates: portfolio • Interim Report January – March 2010, on 5 May 2010 • Interim Report January – June 2010, on 11 August 2010 Main focus on organic growth combined • Interim Report January – September 2010, on 3 November 2010. with selected acquisitions Regarded as one of Europe’s strongest sportsbooks Addition A
Designed and produced by SampsonMay whAt’s inside Telephone: 020 7403 4099 www.sampsonmay.com 50%l inform A When you have finished with This report is printed Printed by Park Communications on FSC certified paper. this report please recycle it on 50% recycled paper overview business review governAnce AdditionAl informAtion
Key highlights 1 Delivering against our strategy 12 Shares and share capital 32 Independent auditors’ report to the Park is an EMAS certified CarbonNeutral® Company and its Environmental tion Unibet at a glance 2 Emerging markets new opportunities 14 Directors’ report 34 members of Unibet Group plc 62 Management System is certified to ISO14001. Gaming responsibly 4 Innovation leading the way 16 Remuneration Committee report 36 Board of Directors and CEO 63 Q&A with the CEO 6 Market overview 18 Corporate governance statement 38 Definitions 64 100% of the inks used are vegetable oil based 95% of press chemicals are Sports betting 8 Unibet’s markets 20 Annual General Meeting 65 recycled for further use and on average 99% of any waste associated with Non-sports betting 10 Financial objectives 22 this production will be recycled. Sportsbook B2B network 23 Accounts Business performance review 24 Consolidated income statement 41 This document is printed on Revive 50:50; a paper containing 50% virgin fibre Unibet going forward 26 Statement of comprehensive income 41 and 50% recycled fibre. The pulp used in this product is bleached using an Consolidated balance sheet 42 Dedicated people 27 Elemental Chlorine Free (ECF) process and contains fibre from well managed, Consolidated statement of changes General legal environment 28 sustainable, FSC certified forests. Principal risks 30 in equity 43 Consolidated cash flow statement 44 The unavoidable carbon emissions generated during the manufacture and Notes to the consolidated financial delivery of this document have been reduced to net zero through a verified, statements 45 carbon offsetting project.
Unibet is not affiliated or connected with sports teams, event organisers or players displayed in this report.
Unibet Group plc Annual Report and Accounts 2009 65 overview key hiGhliGhTs
ifrs (GBp) non-GAAp* 2009 2008 138.3m 41.9m EBITDA GBPm 41.9 46.3 overview Gross winninGs revenue 2009 eBiTDA 2009 EBITDA per share GBP 1.498 1.657 +12% (2008: 123.4m) (2008: 46.3m) EBITDA margin % 30 37 Net cash less bond per share GBP -0.352 -1.340
operATionAl 2009 2008 Number of employees at year end 465 412 Registered customers at year end 4,149,668 3,142,751 Active customers last three 365,865 292,168 months of the year Number of shares at year end 28,258,038 28,241,092
2009 2008 All time high in active customers Profit from operations GBPm 32.8 36.5 All time high in sports betting gross Equity: assets ratio % 58 45 winnings revenue Net cash per share GBP -0.352 0.994 Dividend per share paid 0.23 0.50 For the third time in four years Unibet was awarded out to SDR-holders GBP “European Sports betting operator of the Year”
*Certain measures used in the reporting are not defined under Due to the popularity and success the Live Casino IFRS. The Company believes that these measures are important to understand the performance of the business. (Also refer to has achieved Unibet was also awarded the definitions on page 64). “European Live Gaming Operator of the Year”
The Company’s registered office is at Camilleri Preziosi, Level 2 Valletta Buildings, South Street, Valletta, Malta. The Company’s registered number is C39017. furTher non-GAAp* furTher operATionAl AnAlysis AnAlysis This document is the English original. In the event of any More information to be found More information to be found discrepancy between the original English document and the in the business performance in the financial objectives Swedish translation, the English original shall prevail. review on page 24. section on page 22.
for furTher informATion for furTher informATion see pAGe 11 see pAGe 17 live BeTTinG AccelerATinG
LIVE
live cAsino LIVE moBile chAnnel GrowinG Unibet has a dominant position in Strong barrier to market entry Mobile betting took some major the Nordics and Western Europe Over 21,000 events offered steps forward in 2009 as the mobile in the live gaming segment and a Over 4,500 events streamed platform asserted its place in the strong position in Southern Europe. betting industry’s future plans. for furTher informATion see pAGes 8-9
Unibet Group plc Annual Report and Accounts 2009 1 overview
2009 AwArDs
Awarded two prizes at the prestigious eGaming Annual Awards ceremony organised by the international gaming magazine uniBeT eGaming Review, Unibet is a clear leader in the moneytainment® industry.
For the third time in four years Unibet was awarded “European Sports Betting Operator of the Year”. The second award was the AT A GlAnce “European Live Gaming Operator” which Unibet was awarded due to the popularity and success the Live Casino has achieved.
who we Are key fAcTs whAT we Do 465 pAssionATe, frienDly eXperTs
40 for furTher informATion nATionAliTies see pAGes 8-9
sporTs BeTTinG Sports betting is the heartbeat of Unibet’s business. 27 To illustrate the sheer power of major sporting events, lAnGuAGes the number of active customers using Unibet hit a peak of 365,865 in the fourth quarter of 2009. over
Unibet is one of the largest online gaming operators in the European market with over 100 4.1 million customers worldwide. counTries wiTh cusTomer presence
Unibet offers a comprehensive range of online gaming products, such as pre-match sports betting, live betting, casino, poker, bingo and soft games, through the Group’s websites.
Unibet now also offers Sportsbook and risk management services to external B2B customers.
The customer base spans more than for furTher informATion see pAGes 10-11 100 countries.
Unibet is audited and certified by eCOGRA non-sporTs BeTTinG and by G4, Global Gambling Guidance Group, Online poker is a phenomenon. Bingo brings people together. The online casino gives players a little of in relation to responsible and fair gaming. the glamour of the real thing. Non-sports betting is an important part of Unibet’s business, and opens up a broad range of target markets – young and old, male and female – to the possibilities of moneytainment®.
2 Unibet Group plc Annual Report and Accounts 2009 uniBeT AT A GlAnce overview
Unibet has customers in more than 100 countries worldwide. The Group’s key markets are divided into three territories: Nordic and Western Europe, along with the combined region of Central, Eastern and Southern Europe. Nordic is the Group’s biggest market, while Central, Eastern and Southern Europe is the fastest growing. 28.9m profiT Before TAX (GBp) 4.1m reGisTereD cusTomers worlDwiDe online Gross GAminG 2007 – 2012e uniBeT rollinG 12-monTh ADjusTeD cAsh flow versus profiT (eur Bn) from operATions AnD Before TAX (GBp million) 11.1m esTimATeD online sporTs BeTTinG AccounTs in europe 2012
Source: H2 Gambling Capital, January 2010
Source: H2 Gambling Capital, January 2010 Profit from operations (trailing 12-mth) Profit before tax (trailing 12-mth) Operating cash flow before movements in working capital after tax and capital expenditure (see Note 28 on page 61) (trailing 12-mth)
Unibet Group plc Annual Report and Accounts 2009 3 overview GAminG responsiBly
The imporTAnce of out of their gaming? What do they do responsiBle GAminG right, which the minority does wrong? “By players, for players” does not stop What good does it do them? What at providing fair gaming and betting are the moral benefits for society as products tailored to customer’s a whole? Everyone will benefit from entertainment needs. It also entails this: Unibet, the gaming industry, as a shared responsibility to educate well as the specialised service centres, customers on responsible online customers, and potential customers. behaviour and ensure that gaming As the dominant research paradigm is and remains fun and entertaining. for gambling behaviour relates to In contrast to what conventional understanding, mitigating or treating wisdom may suggest, Unibet has gambling-related risk or harm, Unibet vested interests in providing for a safe initiated cooperation with a leading and responsible moneytainment® scientific research centre to study environment. The key objective the possible benefits of gambling for as a customer-centric company society at large. Acknowledging that is to provide value added service problem behaviour remains a priority, to customers over a longer period by supporting this scientific initiative, of time, build trust and increase Unibet aims to contribute in a positive customer retention and satisfaction. manner to a broader responsible In this regard, responsible gaming is gaming debate. an integrated part of the overriding company objectives. When consumer protection at large is based upon an informed choice Being a founding member of EGBA and self-responsibility, why should and ESSA, Unibet has always 98 per cent of European consumers advocated a constructive dialogue be denied and restricted in their based upon facts, instead of myths choice to purchase services across and misunderstandings. Whilst borders? When one does too much acknowledging that consumer of something, whether it is food, protection and problem gambling, shopping, gambling, alcohol or other like any other problem behaviour, chemical substances, one will start must be addressed in the most to get negative consequences of that adequate manner, one may not forget particular behaviour. Balance is the key that studies in the field of responsible in enjoying life and having a good time. gaming reveal that more than 98 per This is no different in the gaming or cent of the population enjoy gaming moneytainment® industry. and betting in a responsible manner. An analysis of Unibet’s database What has changed over the last shows that the average player is decade, and driven by innovation 32 years old, places 188 stakes per and the further development of year with an average value per stake e-commerce, is that more people are of GBP 6.2. discovering the internet and internet gaming. As such this is not more For the vast majority of people, dangerous or problematic. However gambling is fun and entertaining, addressing new challenges and risks a hobby or a social activity among associated with e-commerce such others, this both online and land-based. as the protection of minors on the To a very small percentage of people, internet, is a shared responsibility gambling – like any other human of us all, including service providers, behaviour – can become problematic politicians, adults and regulators. and develop into problem behaviour, even addiction. The questions also New technologies also provide new needing to be answered are; what opportunities to increase protection do 98 per cent of the gamblers get and security. The mere fact that
4 Unibet Group plc Annual Report and Accounts 2009 As A leADer in The europeAn moneyTAinmenT® inDusTry, responsiBiliTy AnD cusTomer sATisfAcTion Are key +10 over 10 yeArs eXperience of responsiBle oBjecTives AnD pArT of uniBeT’s corporATe DnA. GAminG, conTrols, securiTy AnD for uniBeT, responsiBiliTy TAkes A numBer of forms, frAuD prevenTion GAminG of which primAry prevenTion is The mosT imporTAnT. +98% overview over 98% of plAyers enjoy GAminG responsiBly AnD BeTTinG in A responsiBle mAnner
responsible gaming is high up the responsiBle GAminG agenda of all stakeholders, including monopolies and politicians, finds its DAy-To-DAy root cause in the arrival of technology To implement its Responsible driven operators such as Unibet. Gaming vision, Unibet, amongst Together with other EGBA members, other things, undertakes to: Unibet is raising the bar and standards on an ongoing basis. Educate and provide information to all staff in Responsible Gaming strategies and procedures. The yearly Responsible Gaming Day (RGD), organised in the Have Responsible Gaming as an European Parliament by EGBA, is integrated part of the daily operations a good illustration of how Unibet in everything the company does, from customer service to marketing and wishes to come via open dialogue technical solutions. to more efficient and sustainable solutions for all. The work done by Be committed in being up to date the EGBA in relation to consumer with research and public awareness protection and its standards was regarding Responsible Gaming and taken into consideration by the contribute to further research in this area. Swedish EU presidency. As history has demonstrated, prohibition Evaluate, and improve where needed, is counterproductive as it drives its policies and procedures from both provision and consumption an holistic point by a qualified underground without any safeguards behavioural psychologist, appointed for consumers. If consumer Responsible Gaming Manager. protection is the true driver of the Monitor vigilantly all transactions and debate then Unibet and alike are have a zero-tolerance policy against part of the solution. fraud, including under-age gambling. Advertise responsibly. In line with the six points on page 7, Unibet advocates a passport Use the opportunities offered by new mechanism based on cooperation technologies to optimise consumer between Member States, non- protection, e.g. by implementing third party ID verification tools or relying duplication of requirements and the on objective recorded data instead definition of equivalent or minimum of self-reported data. consumer protection standards in the European Union. Have tools available on the Group’s websites to enable customers to set responsiBle GAminG DAy-To-DAy their own gaming limits in function of time, budget and/or products. For Unibet, responsibility takes a number of forms, of which primary Provide responsible gaming information, prevention is the most important. including self-assessment tools and All of the Company’s operations are links where to turn for further specialised designed to prevent problems as assistance on the websites. much as possible, including gambling Engage with external specialists and addiction, under-age gambling and have processes audited and improved safeguarding the integrity and security in cooperation with suppliers as G4, of the operations. the Global Gambling Guidance Group (G4), Adictel, eCOGRA (eCommerce In general, the Company’s responsible and Online Gaming Regulation and Assurance) or Gambling Therapy. gaming policy is designed i) to apply to all the customers, not just problem gamblers, and ii) to increase customer satisfaction and retention as part of house-hold entertainment.
Unibet Group plc Annual Report and Accounts 2009 5 overview Q&A wiTh The ceo peTTer nylAnDer
whAT hAs hAppeneD in 2009? A new EU Commission with the important task of being guardians of If we summarise 2009 we can see the treaty and supporting the single that despite the economic downturn market principle has just been installed the gaming industry has continued in Brussels. However it seems to take to grow. Compared to other consumer time before the vision of one digital industries we have been resilient but European market place becomes not totally immune. a reality.
Re-regulation has gained momentum whAT will Drive uniBeT with Italy reducing betting duties, and in The cominG yeAr? adding more products, and France and Denmark moving from monopoly Besides the strong sports positions opening up for private calendar, streaming and broadcasting industry in different forms. of sport events will be an important factor. Live betting is still in a fantastic Consolidation has continued to be a growth phase and we will continue theme with Bwin, Mangas and others to develop the product and broaden being active in the market place. our offerings in order to always be on the forefront. We could also see that the online industry keeps on delivering more innovation Our emerging markets in Europe are with streaming, WebTV and the mobile developing well, stimulated by our channel producing real numbers and investments in a number of activities real contribution for the industry and such as sponsorships, poker TV, and for ourselves. active online marketing.
whAT cAn we eXpecT We have also added a new business from 2010? area where we offer our B2B in-house developed proprietary system for fixed If we look at where independent and live odds betting, including odds analysts predict this industry is compiling and risk management. going, the underlying growth and the The first operator to sign up was the consumer demand is expected to Ålandic gaming company Paf. They will continue and support industry growth. also be able to offer our fast growing sports betting pool products, SuperToto 2010 will also be a big year for and SuperScore to their punters. European sportbooks with the winter Olympics just passed and the World In connection with this we have Cup in football to come later this spring. initiated investigations on how to structure our B2B business in order We also expect the consolidation to protect the integrity of the B2B to continue and the underlying trend customers and to maximise the towards re-regulation to carry on shareholder value for the Unibet paralleled with a persisting legal tension shareholders. field. An interesting phenomenon is that re-regulation triggers potential So all in all, our shareholders can look new entrants such as telecom, media, forward to a very exciting year whereby land-based casino groups and venture “By players, for players” will show that capitalists, creating a new wave of we really work for our players… industry entrants.
6 Unibet Group plc Annual Report and Accounts 2009 The online GAminG inDusTry is 100% in
The new fronTier overview DrivinG chAnGe wiTh no AnAloGue leGAcy peTTer nylAnDer
uniBeT ToDAy
uniBeT’s 6 poinTs of A moDern europeAn GAminG mArkeT
1. free movemenT AnD choice Article 56 in the Treaty of the Functioning of the European Union (Treaty of Lisbon), is one of the fundamental principles of the EU constellation and prosperity.
2. compeTiTion increAses reGulATion AnD conTrol A competitive market has a regulatory and controlling effect between market operations. Trust and security are key differentiators in e-commerce. As in telecoms, we wish for a highly regulated EU market with appropriate consumer protection mechanisms.
3. fiGhT proBlem GAminG BAseD on science The vast majority use gaming services in a responsible manner. Responsible gaming is a top priority.
4. sTATe reGulATe, noT operATe Regulation and enforcement by independent authorities and cooperation between Member States.
5. AppropriATe eu frAmework Recognises cross-border technology-driven industry. High-end consumer protection. Guarantees consumer choice. Fair and equal market access. Cooperation between Member States.
6. we Are pArT of The soluTion Unibet is a public company, listed on NASDAQ OMX Nordic Exchange since 2004. We are EU-regulated and push for higher standards. Self-regulation and co-regulation are key. Cooperation, not repression. Trust and security are key differentiators in e-commerce.
Unibet Group plc Annual Report and Accounts 2009 7 overview sporTs BeTTinG
inTroDucTion vArieTy AnD innovATion pre-mATch BeTTinG 232,247.6 875,000 The BiGGesT pAyouT for 14 correcT pre-mATch BeT offers DurinG 2009 preDicTions on superToTo DurinG 2009 (eur)
The Unibet Sportsbook product The continued expansion of the Unibet portfolio consists of fixed odds sporting range has proved the strength betting as well as the Football/Ice behind the success of 2009. Hockey pool betting products Supertoto and SuperScore. Unibet By offering a forever growing range of also offers betting on French Horses product offers, the product pushed all and on Swedish Trotting through barriers with over 68 million bets the Travnet Live Racing platform. placed in 2009.
Unibet offered odds on over 50 Football is the sport that provided different sports during 2009, ranging over 55 per cent of Unibet’s pre-match from Champions League football to betting turnover. The most popular Sports betting is the heart of the Unibet business – Mixed Martial Arts. The most popular Football Leagues to bet on in 2009 providing high-octane, high-thrills entertainment Sportsbook bets were on English were the English leagues closely on local and international events 24 hours a day, football with over 17 million bets placed. followed by the Champions League and the leagues in Spain, France 7 days a week. Furthermore, Unibet continued its and Italy. market-leading approach to non- There are a vast range of sporting opportunities sports offering. Once again, the Tennis, ice hockey, basketball and to bet on around the globe, from the biggest Eurovision Song Contest was the trotting were the other highest international events to more localised competitions, most popular entertainment event. turnover sports after football. There was huge interest across whilst also providing coverage of popular non- Europe with 40,000 bets placed. Unibet has proved this year that sporting events; everything from the Eurovision the product is not reliant on major Song Contest and the Oscars, to whether or not Mobile betting really took off in showpieces such as the World Cup Susan Boyle will win a Grammy. 2009 and with new platforms coming and the Olympics. By having a variety next year the potential for 2010 of events and bet types, the fixed looks enormous. Thanks in part to odds can generate interest even in Unibet is always looking to the future and raising the launch of an iPhone client, Unibet quieter months. the bar with innovative new products and an had a 400 per cent increase in mobile expansion of the existing Sportsbook portfolio. actives at the end of 2009 compared 2010 is definitely a year to keep an During 2009, mobile channel developments, live to the end of 2008. The mobile eye on – the recent Winter Olympics betting and a significant increase in streamed live channel provides even more and the World Cup will fuel betting opportunities to bet wherever you interest and push the fixed odds offering sport, were key elements in the Group’s drive are and whenever you want; at the up to a new level. The World Cup to be an industry leader and innovator. stadium, on the bus or at home dream scenario would see an early exit with friends. from the tournament for Brazil and a 51.2m final between Australia vs Denmark. overAll Gross winninGs revenue By sporTs BeTTinG proDucT 2009 (GBp)
uniBeT Gross winninGs revenue 2009
26% Pre-match betting Live betting 63% 11% Total Sports betting GBP 51.2m
Non-sports betting GBP 87.2m 30 Jan 2010: Birmingham City v Tottenham 24 Feb 2010: Cross-Country Skiing Men’s Hotspur, Premier League. 4 x 10km Relay.
8 Unibet Group plc Annual Report and Accounts 2009 live BeTTinG sTreAminG/uniBeT Tv 31.67% 4,500 overview live BeTTinG AcTiviTies GrowTh live sTreAmeD evenTs offereD DurinG 2009
Live betting continued to thrive and The Sportsbook streaming has flourish throughout 2009. revolutionised the brand in 2009 and looks set to push the product for 2010. The range of bets Unibet offers on a live match is continually increasing, The impressive growth in the live giving a greater range of variety of betting product has also been achieved bet types. by the substantial strengthening of the live streaming offer. The product grew so much in 2009 that it accounted for over 50 per cent Streaming has become a vital part of of the Sportsbook total turnover. 2009 the business, providing entertainment saw Unibet offer over 21,000 live on a whole new level and combined Del Potro vs Federer – a thrilling match. events in total of which 12,000 were with the live offer this creates an football matches. In 2010 live betting ultimate service to watch and bet at will offer over 30,000 matches in total. the same time. With the acquisition of 684,399 many new leagues and events, Unibet hiGhesT live BeTTinG Turnover (GBp) Tennis was the next most popular live now streams about 450 live events betting sport with over 3,400 events per month – that’s almost 15 matches offered. It proves to be a successful per day! In 2010 these figures will AchievemenTs live betting sport due to the vast range continue to increase significantly. of bet offers that Unibet is able to For the third time in four years, Unibet was awarded the provide. As well as all the prices on The offer is a strategic mix of high prestigious European Sports betting operator of the Year match odds and next set, there are profile events and smaller events at the annual EGR Awards. prices on such things as next point, ranging in size and stature from It was also a record-breaking year – in October the Sportsbook next game and next game score. Spanish Primera and Grand Slam posted an all time high in gross winning revenue, just short of These offerings encourage turnover tennis down to well-timed events the GBP 10 million mark. and stimulate activity as they are very like Darts World Championships fast and settled quickly, enabling the and Philippine basketball. customer to then bet again and again throughout the match. DiD you know?
Live betting gives the ability to bet ...That the football match that created the biggest live betting on practically anything, any time from turnover for Unibet during 2009 was the Champions League the top football and tennis matches to Final between Barcelona and Manchester United at the Stadio squash and beach soccer, and watch Olimpico in Rome. The odds on Barcelona to win the treble were 30.00 at the start of the season. the match in the live betting console thanks to Unibet TV with the unique ...That the SuperScore odds record is 139,986 (10 March 2009). design of the client. There is also the “Ca$h In” function, an innovative feature which enables the customer to take a profit on both sides as a match is in progress. This sophisticated tool really makes Unibet’s product stand out from its competitors.
21,000 evenTs in live BeTTinG DurinG 2009 26 Jan 2010 Rafael Nadal of Spain eyes a return.
14 May 2009 Eurovision Song Contest – Moscow.
Unibet Group plc Annual Report and Accounts 2009 9 overview non-sporTs BeTTinG
inTroDucTion poker cAsino 1,889 12m ToTAl plAyers in uniBeT open 2009 ToTAl jAckpoTs offereD (eur)
Poker continues to be a strong force In 2009 Unibet’s existing casino within the Unibet product portfolio, portfolio, a flash casino on unibet.com registering an increase in new and a download casino on depositors of 24 per cent in 2009, unibetcasino.com, saw an exciting compared with 2008. new addition with the launch of a Live Dealer Casino. Streaming from This growth can be attributed to a a studio in Riga, the Live Casino offers range of factors including successful dedicated Blackjack tables, Roulette local marketing initiatives such as the and Baccarat, and is the closest Swedish and Finnish Online poker you can get to a bricks-and-mortar championships which gained over casino online. 76,000 entries, local poker tours in Poland and the Czech Republic Every November the egaming industry The quality of graphics, the range of games, the combined with the continued success gets together at the prestigious reliability of the technical platform and, of course, of the Unibet Open. These activities EGR Awards, the industry’s very own the quantity of prizes available all helped Unibet and others have ensured substantial “Oscars”. In 2009 Unibet was handed presence in both online and offline the European Live Gaming Operator to extend its leadership of non-sports online spaces across Europe. trophy for its new Live Casino. betting in 2009. The award is a celebration and The poker software saw upgrades acknowledgement by the industry, too with the aim of refining and underlining what was the most improving the user experience: successful launch for Evolution A new “XL” lobby was launched, Gaming’s Live product by any of 87.2m new tournament types including their partners. uniBeT Gross winninGs revenue By non-sporTs the popular “Survivor” tournaments, BeTTinG proDucT 2009 (GBp) and a new Single Table Tournament Over 200 casino games are currently offering, were all implemented during offered combined on Unibet’s three 2009. The network also proved itself casinos, including more than 110 video to be one of the most stable around slots and over 30 progressive jackpot with 99.994 per cent up time. games. Regular casino tournaments are held on a daily and monthly basis uniBeT Gross winninGs revenue 2009 The Unibet Open has gone from with prize pools of up to EUR 20,000. strength to strength as one of Europe’s leading poker events, attracting strong media coverage and positive feedback for building 37% the Unibet brand as well as acquiring Sports betting GBP 51.2m new players. Non-sports betting GBP 87.2m 63%
10 Unibet Group plc Annual Report and Accounts 2009 sofT GAmes BinGo 50 50 overview GAmes AvAilABle BinGo rooms
2009 has seen the portfolio of games Bingo remains a key part of the Unibet more than double to 50, including over offering and continues to dominate 20 new slots. The portfolio still aims activity on the Maria brand. The Bingo to satisfy all tastes with Keno, Sports product offers players a unique Dice and other games. opportunity to join players from across our markets in pan-European bingo Frequency of play is high, with players games featuring multiple currencies looking for the entertainment factor and nationalities – with the prizes paid with a quick and frequent bet rather in the local currency. Players can than the higher rolling casinos. also enjoy a localised experience Therefore games provide an important with each market having dedicated element of our overall casino and Bingo rooms and Chat Hosts. games offering, giving players more Anthon-Pieter from the Netherlands was the winner of Unibet Open reasons to come to Unibet. Bingo development continued in 2009 in Budapest 2010. with further strengthening of the The year also saw the launch of a new online community, including innovative games lobby with 15 games targeting features such as online profiles for 690,000 the female-dominated Maria site. players with direct appeal to the key prize pool in uniBeT open (eur) bingo audience. skill GAmes AchievemenTs
Unibet has growing presence in 20 the European market and offers DifferenT skill GAmes Live Casino in all markets in 18 languages. Unibet believes in a Skill covers single and multiplayer localised approach with the products games with a wide range of regular and services offered in the customer’s tournaments and jackpots including language as this builds trust and loyalty. favourites such as Head to Head The Live Casino was launched in Solitaire games and Yatzy. early June 2009 and started out with one private Unibet branded This year saw the launch of a new Blackjack table, exclusively comprehensive Backgammon. for Unibet players. After just two Approved by the World Series of months a second private Unibet table Backgammon, it is as close to the was enabled to meet demand, and real thing as you can get in the online both tables are usually full throughout world and is already proving a hit with most parts of the day. Backgammon aficionados. Unibet now has a dominant position in the Nordics and the Western Europe in the live gaming segment, and a strong position in Southern Europe.
Unibet is dedicated to make the user experience the best to be online. Through surveys and customer focus groups Unibet understands what is important for the players, and the future roadmap is largely based on that input. With this information and feedback the live gaming offering at Unibet will continue to grow to be Europe’s biggest and best.
Unibet Group plc Annual Report and Accounts 2009 11 Business review DeliverinG AGAinsT our sTrATeGy uniBeT’s Business concepT is To Be A reliABle proviDer operATinG in The online GAminG mArkeT, BuilDinG vAlue By DeliverinG enTerTAininG GAminG proDucTs wiTh An eXcellenT service.
Aims our sTrATeGy eXplAineD Unibet’s business aim is to strengthen its position as one of the major players in the European market for online 1 2 3 gaming. The financial aim is for gaming Enter into more markets within Strenghthen the position in the Offer a wide range of new profits to increase by at least the same Europe, historically characterised market for sports betting by offering gaming products, for example rate as market growth for online by monopolies and a strong better odds on major events, Casino and Poker, to existing gaming and for at least 50 per cent gaming culture, where there particularly within domestic sports. and new customers, reducing of this increase to directly improve the is also high internet penetration. dependence on sports betting. operating result. sTrATeGies how we Deliver Unibet has a leading position in the European market for online gambling. Unibet’s strategies to expand activities 4.1m 80 140 and achieve the business and financial reGisTereD cusTomers in more ThAn live evenTs every DAy DownloADABle cAsino GAmes aims are: 100 counTries Though the Company has customers Unibet now offers between 6,000 Unibet has continued to broaden the in more than 100 countries, historically and 10,000 odds and almost 80 range of gaming products with exciting Unibet’s operations have been live events every day. Almost every new offers designed to capture specifically targeted at Sweden, sport event broadcast in Europe or customers’ imaginations and grow Denmark, Norway and Finland. streamed on the site is offered live, quickly. The Unibet browser casino plus much, much more... Focus is consists of more than 80 games such Even Spain, Italy and Poland have to always have any relevant market as Roulette, Blackjack, Caribbean their dedicated marketing teams. available at the best price, and Stud, Video Slots and Video Poker, With the acquisition of MrBookmaker markets are offered on anything and the downloadable casino offers in 2005, the Netherlands, Belgium right down to next point or next over 140 games to give players the and France became important corner. Unibet also provides perfect casino experience. markets. Since then the expansion coverage of popular non-sporting has encompassed several new events, everything from Eurovision Unibet’s Live Casino offers two countries in Central, Southern and to Big Brother. Unibet-branded Blackjack tables, AchievemenTs Eastern Europe – each with its Roulette and Baccarat. The Live dedicated website. The important differentiator, live Casino is the closest you can get to betting, is also the fastest growing a real bricks-and-mortar casino online, for furTher informATion product. It is an important entry with real dealers spinning the roulette see pAGes 20-21 barrier to market and during 2009 wheel and dealing the cards. Due to Unibet offered over 21,000 live its popularity and incredible success events in total, of which 12,000 with the players, it was handed the were football matches. “European Live Gaming Operator of the Year” trophy at the prestigious for furTher informATion eGaming Awards in November 2009 see pAGes 8-9 – the industry’s very own annual Oscars.
Unibet Games includes a wide range In 2009, Unibet was awarded two of entertainment games with many prizes at the prestigious eGaming themes and there are now almost 50 Annual Awards ceremony organised by the international gaming magazine games in this lobby. The games are a eGaming Review. For the third time softer version of the casino and are in four years Unibet was awarded derived from the popularity of lottery “European Sports betting operator and keno-based games, virtual sports of the Year”. The second award was the “European Live Gaming Operator and hi/lo games. of the Year” which Unibet was awarded due to the popularity and for furTher informATion success it has achieved. see pAGes 10-11
12 Unibet Group plc Annual Report and Accounts 2009 uniBeT GoinG forwArD
our sTrATeGy eXplAineD Business r
4 5 eview Develop new distribution methods, Prioritise organic growth. for example, mobile applications.
uniBeT’s moDel hAs proveD successful Given The sTronG TrAck-recorD in how we Deliver DeliverinG profiTABle GrowTh since iTs founDinG. The pillArs of The moDel will conTinue To Be The key for uniBeT’s 400% Top 3 fuTure success AnD Are encApsulATeD increAse in moBile AcTiviTy online GAminG proviDers By 2010 in “The uniBeT wAy”:
As a company that relies so heavily In earlier phases of development, on technology, Unibet has to effectively Unibet focused on products and on Leadership – Unibet aims for a top 3 position use developments in digital distribution regions. That work has now paid off, in every geographic market entered. channels, with particular focus on with the customer base reaching interactive services via PC and mobile critical mass, and an exceptionally Brand – Unibet has a strong pan-European devices. This means ever more strong combination of products, opportunities to bet wherever you are infrastructure and personnel in place. brand supported by high-value niche brands and whenever you want. At a stadium, for all markets and products. in a bar or just at home with friends – While the focus is on online marketing, the growth of the mobile market looks a broad range of channels are used Horizontal approach – Unibet has a horizontal to have forever expanding possibilities tactically to develop recognition and business model, working with the best available as smartphones become more and respect for the Unibet brand and core suppliers for non-sports products, to enhance more prevalent. values and to treat customers like friends by delivering offers tailored time to market, customer satisfaction and return Mobile betting really took off in 2009 exactly to them. on capital while managing the Sportsbook and with new platforms the potential internally using proprietary software, odds for 2010 looks enormous. Thanks In building the Unibet Open Poker compilation and risk management. in part to the launch of an iPhone tournament into one of Europe’s client, Unibet had over 400 per cent biggest events, with opportunities for Digital – Unibet is mainly focusing on increase in mobile activities at the end online players to win a seat at the of 2009 compared to the end of 2008. table, Unibet has even crossed the digital distribution. boundary between the virtual and for furTher informATion real worlds. Responsible – Unibet works proactively see pAGes 16-17 to secure responsible gaming. By 2010 Unibet aims to be among the top three online gaming providers Talent – Unibet employs talented people, focuses in all of its prioritised markets. That on accountability and rewards high performers. vision is ambitious. It is also achievable. Unibet’s product breadth, commitment to marketing innovation and strategic focus on the customer, will help make it happen.
for furTher informATion see pAGes 14-15
Unibet Group plc Annual Report and Accounts 2009 13 Business review emerGinG mArkeTs new opporTuniTies sTrATeGy in AcTion
poker Tv sponsorship In the Czech Republic Unibet has Unibet is the official sponsor of Nõmme produced the first celebrity-style Kalju in Estonia, Ferencvaros in Hungary, poker show called “VIP Poker Show”. Žalgiris Vilnius in Lithuania and Rapid The show was broadcast on the Bucure¸sti in Romania. biggest commercial TV channel Nova. Eight episodes were shown These sponsorships include the Unibet for almost three months on Nova logo on the players’ shirts, billboards and Nova Sport, and reached a and scoreboards. majority of their late-night audience. JK Nõmme Kalju is one of Estonia’s It opened a door to media publicity and most popular football clubs based through 12 celebrities, Unibet received in Tallinn and currently plays in the significant media attention on different Meistriliiga, the highest level of channels. This investment had a huge Estonian football. influence on securing Unibet’s position in the market and gave high credibility The green and white club colours for future investments. of the well-supported Ferencvárosi Torna Club in Budapest make a In the spring of 2009 Unibet perfect match with the Unibet logo. launched the Unibet “Pókermilliomos” Championship in Hungary. During six The Romanian football club FC Rapid weeks of qualification over 15,000 Bucure¸sti is one of the top three teams players entered the competition and in Romania and has won the Romanian the 12 best players had the chance to championship four times and the play against top national celebrities, Romanian Cup on 13 occasions. fight for fame and the HUF 10 million prize money. The highlights of the In green and white the FK Žalgiris in series were an instant hit on Hungarian Vilnius have won the Lithuanian TV channel Viasat3, and had over Championship three times. 100,000 viewers on average in front of the screens. online mArkeTinG Online marketing is important to cooperATion wiTh sporT porTAls attract visitors and convert them to real Another important channel to the money players that can drive revenues customers in Eastern Europe is from the emerging markets. Unibet cooperation with sport portals. Special focuses on optimising search engine Unibet-branded poker sections have positioning, social media and invesTinG in “emerGinG mArkeTs” been introduced on the top two sport cooperation with affiliates/partners. portals in each country. These poker During 2009 a brand-new design Valencia CF – official sponsor sections included the Unibet Poker of unibetaffiliates.com was launched School and general tips and explanations in 18 languages promoting all the Main sponsor of football clubs: of the online poker game. Special three brands: Unibet, Maria and Carlos. Nõmme Kalju (EE) tournaments will introduce Sportsbook The affiliate team also uses a scientific Ferencvaros (HU) punters to the online poker world. approach for banner tracking and FC Rapid Bucure¸sti (RO) FK Žalgiris Vilnius (LI) Poker has grown steadily in the reward plans for affiliates signing up.
Eastern region. Unibet Open poker in Budapest, Prague and Warsaw
Poker TV shows in Hungary and the Czech Republic
Maria brand expansion with online campaign, affiliates, media cooperations and poker events
14 Unibet Group plc Annual Report and Accounts 2009 invesTinG in emerGinG mArkeTs is An imporTAnT pArT of uniBeT’s AmBiTion To Grow in eAsTern europe. ThrouGh sponsorships, poker Tv proGrAmmes AnD cooperATion wiTh lArGe sporTs porTAls, uniBeT is BuilDinG The BrAnD in These imporTAnT counTries. 15,000 18 plAyers TryinG To QuAlify for The lAnGuAGe versions of pokermilliomos uniBeTAffiliATes.com Business r eview
451 plAyers compeTeD in The uniBeT open in prAGue 2009
Unibet Group plc Annual Report and Accounts 2009 15 Business review innovATion leADinG The wAy sTrATeGy in AcTion
140,000 loG-ins since lAunch in june 2009
16 Unibet Group plc Annual Report and Accounts 2009 converGence is DrAmATic, chAnGinG consumers’ BehAviour. innovATion is supporTinG The inDusTry AnD uniBeT To Grow. The sTronGesT consumer TrenD in online GAminG riGhT now is To enjoy A live eXperience. iT’s All ABouT live.
TechnoloGy converGence Smartphones and particularly Business r Unibet now offers live betting, live iPhones have dramatically changed 21,000 streaming and Live Casino and the mobile usage and behaviour over the live BeTTinG evenTs offereD customers really appreciate the live past few years. User experience has eview element in these products. In less increased significantly and with than a year Unibet has transformed these new devices the possibilities by being much more active in using for development are endless. Web TV to strengthen products, brand and user experience. During 2009 Unibet’s Sportsbook and Casino have 4,500 Unibet offered over 21,000 live events been well received by both existing live BeTTinG evenTs sTreAmeD integrated into the live betting offer. and new customers when using the mobile betting platform. Several markets have also started to produce excellent Web TV shows In order to serve our customers with any European television station. Unibet (5-10 min) and/or video blogs the best and the latest solutions for aims to keep the continued integration dedicated for different markets. moneytainment®, Unibet continues of sports and media as a focus area to stay focused on the mobile betting for 2010. Unibet Open is also a fantastic platform industry and the transition period it for developing and use of Web TV. is going through with fast-moving live cAsino internet and betting into mobile. Unibet’s Live Casino was launched This is just the beginning of how in June 2009 and currently offers television and the PC are becoming three classic casino games: Roulette, one, and Unibet is in a pole position Blackjack and Baccarat. The big making it a vital part of the DNA. difference between the Live Casino and other online casinos is that you moBile chAnnels GrowinG have real live dealers spinning the Mobile betting took some major roulette wheel and dealing your cards steps forward in 2009 as the mobile while you play and watch the action platform asserted its place in the via live streaming. betting industry’s future plans. The mobile channel is without doubt The fact that the gaming experience one of the most important areas of in Live Casino is as close as you potential growth. can get to a real land-based casino, live BeTTinG including real-time chat with the H2 Gambling Capital predicts that Unibet live betting is now more or less dealers and other players, made it an the global market for mobile gaming a 24/7 product with matches offered instant hit with the players. It became will grow to EUR 2.9 billion by 2012 in through the night. This, in addition so popular during the year that terms of gross gaming yield. Given the to the launch of combination bets, dedicated Unibet Blackjack tables rapid growth rate so far, this appears offers the customer more options and were added to accommodate demand to be a conservative estimate. flexibility than ever before. The aim for and its success earned Unibet the Live 2010 is to continue customer-driven Gaming European Operator of 2009 The underlying market trend is that innovation, with the goal being for Award from eGaming Review. internet is moving into the mobile the customer to consider Unibet live arena and so is Unibet. betting to be not just a betting site, but a sporting hub. Unibet has continued to be at the forefront of mobile development by During 2009 live betting continued extending the mobile betting offer to accelerate, with a doubling of both to meet with new handset technology turnover and the number of events requirements and opportunities offered. A huge investment has been that they bring. This leadership by made in the live streaming product, innovation philosophy has established with full coverage offered on two Unibet as a leading mobile betting of the top four European Football operator. The outlook is very positive leagues, as well as over 500 Grand with expectations that mobile betting Slam Tennis matches from Wimbledon will get its real breakthrough in 2010. and the Australian Open, more than
Unibet Group plc Annual Report and Accounts 2009 17 Business review mArkeT overview percenTAGe of householDs wiTh BroADBAnD Access Source: Eurostat, February 2010 jusT Three yeArs AGo, The GBGc norDic reGion reporTeD ThAT There were 9.3 The Nordic Region, which includes million online sporTs BeTTinG Sweden, Denmark, Norway and Finland, AccounTs in ToTAl ThrouGhouT is the Company’s biggest and most 77% europe. in DecemBer 2009, uniBeT’s established market. Unibet is one of the BroADBAnD TAke-up largest private online gambling operators cusTomer BAse wiThin sporTs & in the region. non-sporTs proDucTs sTooD AT norDic Gross winninGs 4.1 million AccounT holDers. revenue conTriBuTion By reGion
30% Those two figures underline not just the rapid growth in online gaming, but that Unibet is now established 70% as one of the major online bookmakers in the world.
The homogenising influence of the European Union Sports betting notwithstanding, the continent’s online gaming GBP 19.4m market remains complex, with individual nations Non-sports betting retaining unique characteristics and varying degrees GBP 44.9m of growth. State gambling monopolies, local laws and interpretations of European law vary from one country to another. It means that the way in which wesTern europe Unibet markets itself varies greatly. Within Western Europe, Unibet has The popularity of live televised events is indicative three established markets in France, of a worldwide determination to be part of the action. Belgium and Netherlands, and four 65% Online gaming helps quench this thirst and advanced new markets in Germany, the UK, BroADBAnD TAke-up technology assists delivery of the product. Austria and Switzerland.
The European market has one of the world’s highest wesTern europe Gross – and fastest growing – rates of internet and winninGs revenue conTriBuTion By reGion broadband penetration. The number of worldwide consumer broadband connections will reach over half a billion in 2010, according to the European Travel Commission, with a 56 per cent broadband 44% 56% penetration of all European Union households in 2009 says Eurostat. Online payment systems and state regulation have improved across Europe as a whole. Sports betting GBP 23.9m Market outlook for world egaming gross gaming Non-sports betting yield is estimated to be EUR 25.3 billion by 2012 GBP 30.0m according to H2 Gambling Capital.
The Group made giant strides in 2009, despite a cenTrAl, eAsTern AnD souThern europe worldwide economic downturn, maintaining strong growth in established markets, building on the Central, Eastern and Southern foundation of success in established markets, and Europe is the fastest growing of Unibet’s introducing the Unibet brand to several new markets. three regional markets – albeit from 40% a relatively small base. BroADBAnD TAke-up The bank of knowledge, experience and success across the Unibet organisation enables the Group to enter new markets quickly and efficiently. Tried cenTrAl, eAsTern AnD and tested systems are used alongside common souThern europe Gross winninGs revenue principles of customer relationship management conTriBuTion By reGion (CRM). These are amalgamated with marketing campaigns and products that are tailor-made to the local interests and characteristics. 39% 61% The year ahead is a bright one, with a strong sports calendar expected to drive online betting levels to new heights, and a live offering and live streaming of Sports betting thousands of events is expected to be a cornerstone GBP 7.2m of that success. Non-sports betting GBP 11.5m
Other regions – comprised of Sports betting GBP 0.7m and Non-sports betting GBP 0.8m
18 Unibet Group plc Annual Report and Accounts 2009 online GGy By proDucT 2012e
11% Sports betting 4% Poker Casino 8% 36% Bingo Skill-based and other gaming Lotteries 22%
19%
Source: H2 Gambling Capital, January 2010 Business r eview
Unibet Group plc Annual Report and Accounts 2009 19 Business review uniBeT’s mArkeTs
ADvAnceD TechnoloGy, comBineD wiTh The eXpAnDinG suiTe of sophisTicATeD BeTTinG AnD GAminG proDucTs, AnD eXTensive knowleDGe of eAch locAl TerriTory AnD iTs cusTomer BAse, hAve meAnT susTAineD GrowTh in 2009.
This has placed Unibet at the forefront Managing the cost base to ensure of a modern market and the Group is efficient use of resources is +32% now widely acknowledged as one fundamental, though significant reGisTereD cusTomer GrowTh 2009 of the world’s leading betting and progress on key technology gaming companies. programmes is expected to ensure further growth in the year ahead. While Unibet has a historical strength in the Nordic Region, there has been Live streaming of a large number of 4.1m continued expansion in the last 12 high-profile events in 2009 via the reGisTereD cusTomers months. Unibet now has over 4.1 million Unibet website proved an unreserved clients in over 100 different countries. success and acted as a catalyst for increased site traffic. It is not a coincidence that Unibet is sponsoring For operational purposes, the market Valencia CF in Spain. The Valencia Football team is as passionate, friendly and ambitious as Unibet. is divided into three territories: Nordic Betting in running is, by its nature, uniBeT’s Gross winninGs revenue Region, Western Europe and the a high-risk transaction in a fast- By reGion 2009 combined area of Central, Eastern moving environment, where speed 1% and Southern Europe. Each market of bet acceptance and time validation 14% is divided into three phases: is critical. Established markets, Emerging markets and New markets. Increasingly, the clients demand a live 46% offering and Unibet has demonstrated Each stage and market is unique, in the past year its willingness and requiring specific initiatives. ability to react to the new demands. 39% norDic reGion By investing in the technology for live The Nordic Region, which includes betting and mobile betting, Unibet has Nordic Region Sweden, Denmark, Finland and left many competitors in the shade. Western Europe Norway, is where the Group is The popularity of the live poker tournament The most established. The aim going forward is to maintain Unibet Open, underlines Unibet’s commitment to Central, Eastern and Southern Europe be a customer focused, multi-channel business. Other the high levels of customer satisfaction Unibet is the largest private online and build upon a broad and solid gaming operator in the region, with foundation to consolidate Unibet’s The Western Region reported very a well-established and widely position as a market leader in solid and strong growth in 2009, recognised brand, including a strong Northern Europe. thanks in part to the fantastic reputation for quality. development of live betting, particularly wesTern europe in France and the Netherlands, The threat of a prolonged economic Within Western Europe there are three supported by live streaming of mArkeT ouTlook europeAn eGAminG GGy recession and other geo-political well-established markets in France, approximately 4,500 events across (eur Bn) events resulting in a reduction of Belgium and the Netherlands, and four all regions. 15 betting activity across Europe was developing markets in Germany, UK,
12.83 very real in 2009. Austria and Switzerland. The Maria brand was launched in the 11.81 Western Region as a female gaming 10 10.47 8.72 Yet against this backdrop, Unibet’s Huge variations in regulatory brand in 2009 and it proved a success. 7.16 track record of innovation and profitably environments within the region require 5 5.38 exploiting regulatory, fiscal and an imaginative approach to develop In June, Unibet had high exposure 4.04 2.71 technological change shone through, the Unibet brand. throughout Europe when a Dutch 0.97 1.67 0 as the Group saw sustained growth woman landed a staggering EUR overall, especially in the Nordic Region. Unibet strives to build an increasingly 4,345,183 jackpot on the Mega 2003 2004 2005 2006 2007 2008 2009E2010E2011E2012E profitable business by exploiting its Fortune casino game for a bet Source: H2 Gambling Capital, January 2010 There was again an increase in resources and relationships and, at the of just EUR 1.25. It is one of the competitive activity, although the cost same time, carefully managing the largest jackpots in the history of of gaining a foothold in this region risks to the operation. online gaming. remains significant.
20 Unibet Group plc Annual Report and Accounts 2009 emerGinG mArkeTs
The Unibet Open is a great-value poker tournament with a special atmosphere and has become one of the most sought-after live events in Europe. The tournament structure has proved extremely popular with all types of players from high rollers to novices, giving everyone who plays the chance to experience live poker with some of the best players in the world.
Germany and the ultra-competitive UK with full-time employees dedicated Business r market both showed continued growth. to Spain, Italy, Greece, Estonia, Russia, Portugal, Poland, Romania, Hungary, The promotion of the Sportsbook Croatia, Latvia, Lithuania, Bulgaria and eview was enhanced through innovative the Czech Republic. value-added content: Web TV and Video Tipsters have proved to be a The fastest growing market, albeit great success within the region. from a relatively small base, is Unibet also has a commercial deal Eastern Europe. mAriA – you GoT To see her...! as a betting partner with FC Brugge. Broadband internet access, online The year 2009 was the year where the Maria brand The Live Dealer Casino has proved payment systems and state regulation really popular and the Unibet Open have all improved across Europe as a shifted into high gear. The Maria Bingo and Maria became a permanent fixture on the whole and a continuation of these Casino products were improved by a new flexible calendar, gaining fantastic momentum, trends has helped support Unibet’s platform making it possible to increase conversion and attracting more players than potential in the emerging markets. rates, the ability to play and the attractiveness of ever before. the products. A community was added, servicing all The basis for rapid growth mirrored, The Unibet Open events in Budapest, to a large extent, the Western Maria products, making it possible to upload your the Algarve, London, Prague and European model, with live betting and own material, blog, read articles and connect with Warsaw gained increased coverage live streaming providing the main other customers. and attention from the poker thrust and significant returns were communities – both online and offline a result. Later on, the bingo and casino products were – supported by the broadcasting of two editions in London and the Key investment in mobile betting joined by soft games early in the year, broadening Algarve on Belgian, French and solutions in 2009 has also maintained the appeal of Maria as an online meeting-place Flemish TV channels. the brand-leader status in many for women. Finally, the much-awaited Maria Poker of these developing markets and was launched in June, the most exciting online Unibet is rightly proud of the Unibet Unibet strives to build significant and poker site for women. With this addition, the Maria Open, which is a great opportunity for valuable brand awareness through the poker community to see the affiliate deals. Universe became a 100 per cent experience human face of the Group, and to covering a broad spectre of online gaming services. promote Unibet’s values through the Unibet is proud to maintain the friendly, passionate and expert people. sponsorship deal with Spanish Primera All this was done with the single focus of providing division giant Valencia FC. Unibet is women with everyday moneytainment® and a sense Allied to this great opportunity to equally thrilled to be the official partner market the Unibet brand and bond of Nõmme Kalju in Estonia, Žalgiris of belonging, escapism and excitement online. with poker players is the creation Vilnius in Lithuania, Ferencvaros of a professional Unibet poker team, in Hungary and Rapid Bucure¸sti in Market-wise, renewed focus was put on the with celebrities and professional Romania. The Unibet brand name is emerging markets so that Maria is now offered in poker players who are ambassadors emblazoned on the shirts of each of 25 languages in 23 countries. This sits well with for the Group. these great soccer teams. the fact that Maria is the most common female cenTrAl, eAsTern AnD Unibet will continue to explore name in the world. souThern europe opportunities which will create value “Know your market”. It sounds a simple for the shareholders. and logical statement, but in such a competitive industry, it is fundamental to identify the needs of your customers and cater for their needs.
Unibet’s strength is its diverse talent pool, a well-educated European workforce who identify with an increasingly youthful customer-base,
Unibet Group plc Annual Report and Accounts 2009 21 Business review finAnciAl oBjecTives uniBeT Gross winninGs revenue By proDucT 2009
8% 26% resilienT BuT noT immune. DurinG 2009 The re-reGulATion in europe GAineD momenTum wiTh iTAly, frAnce AnD DenmArk in Discussions To open up Their mArkeTs. Also, consoliDATion 37% conTinueD wiTh severAl merGers AnD joinT venTures. The 11% TechnoloGy converGence increAseD AnD supporTeD GrowTh AnD miGrATion from The mArkeT To The online mArkeT wiTh 18% moBile Devices AnD weB Tv BeinG more AnD more ATTrAcTive. Sports betting Casino Live betting Other products Poker
AcTive cusTomers AnD Gross maximum number of shares/SDRs In the exercise window ending on finAncinG winninGs revenue on All that may be so acquired was 15 November 2009, under the rules In November 2009 Unibet signed a Time hiGh 2,824,109, i.e. may not exceed 10 per of Unibet’s option schemes no. 14 revolving credit facility with a maximum For 2009 the gross winnings revenue cent of the total number of shares and 15 for senior executives, 98,176 value of EUR 24.0 million with a leading increased to GBP 138.3 (2008: GBP issued by the Group as at 31 December share options were exercised. Of these international bank. In December 2009, 123.4) million. A big driver was the 2008. Under this approval, 297,900 options 16,946 options were exercised the full EUR 24.0 million facility was live betting which accounted for over shares/SDRs were acquired by the by issuing 16,946 new ordinary shares utilised in connection with the early 11 per cent of the total gross winnings Group during 2007. No share buy with a par value of GBP 0.005, and in redemption of the bond. The bond had revenue for 2009. backs were made during 2008 or 2009. connection with this exercise, Unibet a nominal value of EUR 100 million, has received GBP 0.2 million which was denominated in EUR and bore The gross margin for total sports The objective of the buy back has, in full, been taken to equity. interest at a fixed rate of 9.7 per cent betting in 2009 before Free Bets was programme is to achieve added value The remaining 81,230 options were per annum, which was payable 6.5 (2008: 6.9) per cent. The gross for the Group’s shareholders and exercised using SDRs from Unibet’s annually in arrears. The bond’s original margin for total sports betting in 2009 to give the Board increased flexibility share buy back programme initiated in maturity was on 21 December 2010. after Free Bets was 5.8 (2008: 6.2) with the Group’s capital structure. 2007. In connection with this exercise, On 22 December 2009 Unibet per cent. Unibet has received GBP 1.0 million, redeemed the outstanding balance of The intention of the Board is to which has, in full, been taken to equity. the bond of EUR 65.8 million in full. Earnings before interest, tax and either cancel the shares (requires depreciation and amortisation further shareholder approval), use Following this exercise, the total Through this early redemption of the (EBITDA) was GBP 41.9 (2008: 46.3) as consideration for an acquisition, amount of shares outstanding in bond, Unibet expects to save GBP 3.5 million for the full year 2009. or issue to employees under a Share Unibet Group plc is 28,258,038 – 4.5 million in finance costs compared Option programme. ordinary shares with a par value of to holding the bonds to its original DiviDenD policy unchAnGeD GBP 0.005. Of the total outstanding maturity in December 2010. This The dividend policy remains shares, 216,670 from the share buy saving includes early redemption costs unchanged with an intended payout back programme initiated in 2007 incurred of GBP 1.2 million in the fourth of up to 75 per cent of the Group’s net continue to be held by Unibet as a quarter of 2009. income after tax for a financial year deduction to equity. provided other financial objectives uniBeT AcTive cusTomers (ThousAnDs) are met and an appropriate capital All structure is maintained. time Euro high 2008 The Board of Directors proposes a effect 366 330 dividend of GBP 0.71 (2008: 0.23) per World Cup 309 317 315 309 2006 288 292 share/SDR, which is approximately effect 257 264 240 SEK 7.68 (2008: 2.75) with the 223 214 219 221 191 exchange rate 10.819 GBP/SEK at 172 19 March 2010 per ordinary share, to 139 be paid to holders of ordinary shares 90 91 72 80 and SDRs. If approved by the AGM, the 63 68 dividend is expected to be distributed Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 on 17 May 2010 and amounts to a 2004 2005 2006 2007 2008 2009 total of GBP 20.0 (2008: 6.4) million which is approximately 75 per cent of net profit after tax. performAnce inDicATors No dividend will be paid on the shares/ Actual Actual SDRs held by the Group as a result of GBP million 2008 2009 the share buy back programme. Gross winning 123 138 shAre Buy BAck proGrAmme Maturing markets1 66 64 At the 2007, 2008 and 2009 AGMs, Growth markets2 57 74 shareholders approved a share buy back programme whereby the Board EBITDA (margin) 46 (37%) 42 (30%) was authorised, until the next AGM in ROAE3 37% 29% 2010, to acquire GBP 0.005 ordinary shares/SDRs in the Group. The 1 Sweden, Denmark, Norway and Finland 2 Rest of countries 3 Return (EBIT) on average equity (ROAE)
22 Unibet Group plc Annual Report and Accounts 2009 sporTsBook B2B neTwork in 2010 uniBeT enTereD The B2B mArkeT AnD The firsT cusTomer To siGn A conTrAcT wAs The ÅlAnDic GAminG compAny pAf in eArly 2010.
Expansion into the global gaming • Live betting, which is the fastest The product a customer can get today Business r B2B market is an important step for growing product within the online will include: Unibet. Paf will be fully serviced with a gaming sector. The demand from sports betting solution. The scope of the punters to have a full range of • Full scale Sportsbook offer eview the services includes odds-compiling events and variety of bet offers in • The skills from over 100 employees and risk management on an in-house live betting has increased for the with up to 10 years experience developed proprietary system for fixed online gaming operators. • Software developed together with and live odds betting. Paf will also odds compilers and risk managers become a customer in the fast growing • Re-regulation, which has started • More than 2,200 live events/month sports betting pool products SuperToto in Italy, and both France and • Full risk management and SuperScore offered by Unibet. Denmark have declared that they • Second line support Land-based and online gaming companies will open up their markets. Several • Pool betting products around the world are facing new challenges, other countries in Europe are and Unibet can offer them a fully serviced why offer uniBeT’s core sports betting solution, including odds-compiling proDucT To oThers? looking into re-regulation and in new sTrucTure To Be and risk management. The cost to maintain and develop the most cases it will put new demands invesTiGATeD Sportsbook requires more investment on the IT platform to comply with Unibet has initiated investigations in terms of money and people from licence requirements. on how to structure the Unibet year to year. This has been accelerated Sportsbook B2B Network business by the rapid growth and commitment • New players, such as state-owned in order to protect the integrity of to being market leader in live betting. gaming companies and other the B2B customers and to maximise By entering into the B2B market, companies in the leisure industry, the shareholder value for Unibet Unibet will ensure that betting customers entering the online gaming sector. shareholders. will continue to have a world-class sport betting product in the future. why ouTsourcinG? A new player in the market has to build Unibet will reduce the business risk up an excellent Sportsbook which and create shareholder value by requires investments that will take a adding another business leg that will long time to build up, when time to capitalise on an already existing asset. market is essential. Unibet can offer a customer: mArkeT Drivers ToDAy Both land-based gaming and online • Higher quality gaming companies around the world • Risk reduction are facing new challenges all the time. • Flexibility The challenges that are driving the • Lower costs business for Unibet’s Sportsbook B2B • Scalability Network are mainly: • Competence
why shoulD A B2B clienT choose uniBeT? Unibet’s legacy since it was founded in 1997 has been the Sportsbook and GloBAl sporTs BeTTinG Gross GAminG yielD (us$ Bn) a lot of resources have been invested to build up the unique infrastructure 45 and experience. The tagline is “By players, for players” to visualise 43 43.40 42.60 the passion behind the work to build, 42.10 41 operate and be innovative in delivering 40.90 40.90 a world-class Sportsbook. Unibet has 39.60 39.90 39 39.30 38.90 39.10 received appreciation not only from its 38.50 38.60 38.30 38.10 customers but also from the online 37 gaming industry by receiving the 35 “European Sports Betting Operator
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 of the Year” award in 2006, 2008 2009E 2010E 2011E 2012E and 2009. Source: H2 Gambling Capital, January 2010
Unibet Group plc Annual Report and Accounts 2009 23 Business review Business performAnce review commenTs on The finAnciAl DevelopmenT. The oriGinAl sporTs BeTTinG Business of uniBeT hAs Grown conTinuAlly over The pAsT finAnciAl yeArs. The GrowTh hAs Been eXperienceD Across All of uniBeT’s GeoGrAphicAl mArkeTs. The inTroDucTion of non-sporTs BeTTinG proDucTs hAs sTronGly conTriBuTeD To uniBeT’s resulTs in The lAsT five yeArs AnD hAs Also helpeD To smooTh ouT The seAsonAl effecTs AnD volATiliTy of sporTs BeTTinG.
uniBeT’s sporTs BeTTinG Gross win mArGin % (Before AnD AfTer free BeTs) 9.1 (2008: GBP 9.8) million were 10 in respect of depreciation and amortisation charges. IncludedSports Betting within after free bets 8 amortisation charges wasSports GBP Betting before free bets 4.0 million charged in respect of 6 capitalised development expenditure (2008: GBP 4.8 million), and GBP 3.4 4 (2008: GBP 3.1) million attributable to other intangibles. 2
0 Excluding depreciation and amortisation, therefore, administrative
2006 Q1 2006 Q2 2006 Q3 2006 Q4 2006 YR 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2007 YR 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2008 YR 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2009 YR expenses were GBP 42.2 (2008: GBP 42.0) million, of which GBP 21.0 Sports Betting before Free Bets for the quarter Sports Betting after Free Bets for the quarter Sports Betting before Free Bets for the full year Sports Betting after Free Bets for the full year (2008: GBP 18.9) million were salaries and associated costs. finAnciAl sTATemenT Gross mArGin on sporTs are levied at varying rates of betting profiT from operATions presenTATion BeTTinG turnover, averaging about 4% of Profit from operations for the full year These financial statements have The gross margin for sports betting stakes. There are no betting duties 2009 was GBP 32.8 (2008: GBP been prepared in accordance with excluding live betting and before in Antigua. 36.5) million. Earnings before interest, International Financial Reporting Free Bets in 2009 was 9.0 (2008: 9.2) tax and depreciation and amortisation Standards (IFRS) and IFRIC per cent. Gross profiT (EBITDA) for the full year 2009 was interpretations as adopted by the Gross profit for the full year 2009 GBP 41.9 (2008: GBP 46.3) million. EU and with the Maltese Companies The gross margin for total sports amounted to GBP 120.7 (2008: GBP Act 1995. betting in 2009 before Free Bets was 112.4) million. cApiTAliseD DevelopmenT 6.5 (2008: 6.9) per cent. The gross eXpenDiTure The accounting policies as adopted margin for total sports betting in 2009 mArkeTinG cosTs IAS 38 requires the capitalisation of in the published results for the year after Free Bets was 5.8 (2008: 6.2) During the full year 2009, marketing certain development costs. These are ended 31 December 2009 have per cent. costs were GBP 36.6 (2008: GBP costs incurred in developing the existing been consistently applied. 24.2) million. Active customers at 31 IT platform and the integration and Live betting accounted for 29.2 December 2009 had increased to further development of new products. Where relevant, certain additional (2008: 19.4) per cent of gross 365,865 from 292,168 at the end of These are identifiable assets from information has been presented in winnings revenue on sports betting, the previous year. which a future economic benefit is compliance with the NASDAQ OMX excluding Free Bets, in 2009. expected to be derived. In the full year Nordic Exchange in Stockholm ADminisTrATive eXpenses 2009, expenditure of GBP 2.1 (2008: requirements. Sports betting gross margins can During the full year 2009, GBP 4.2) million, had been capitalised. vary from one quarter to the next, administrative expenses were GBP Expenditure of 0.5 million was Gross winninGs revenue depending on the outcome of sporting 51.3 (2008: GBP 51.8) million. Of capitalised with regard to other Gross winnings revenue on sports events. However, over time these the administrative expenses GBP intangible assets (2008: GBP 0.6 million). betting represents the net receipt of margins will even out. This can be bets and payouts within the Group seen in the graph above. eArninGs per shAre DevelopmenT for the financial period as reduced 0.957 for Free Bets. Free Bets are bonuses cosT of sAles 0.301 granted or earned in connection with Cost of sales covers betting duties, customer acquisition. Total gross revenue share and affiliate 0.659 *0.71 winnings revenue in 2009 increased programmes. Betting duties are 0.08 0.108 0.229 0.192 to GBP 138.3 (2008: GBP 123.4) payable in the licensed jurisdictions 0.50 0.314 million. Gross winnings revenue from UK, Malta and Italy. The betting duty 0.057 0.141 0.357 sports betting amounted to GBP 51.2 in the UK is currently 15 per cent 0.293 0.23 (2008: GBP 41.2) million for the full of gross winnings. Betting duties in 0.127 year 2009. Non-sports betting saw Malta are levied at varying rates on 0.078 gross winnings revenue amounting to different gaming products, subject -0.030 07 08 09 GBP 87.2 (2008: GBP 82.3) million to a maximum capped amount per for the full year 2009. year per licence. Betting duties in Italy Q1 Q2 Q3 Q4 Dividend paid out * Proposed dividend
24 Unibet Group plc Annual Report and Accounts 2009 profiT AnD operATinG cAsh flow Before movemenTs in workinG cApiTAl (GBp million) 16 14 12 10 8 6 4 2 0
Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Profit from operations Operating cash flow before movements in working capital
finAnce cosTs Invest and Monnet Enterprises Limited Significant liabilities on the balance of the bond. The bond had a nominal Business r Finance costs for the full year 2009 was denominated in currencies other sheet include trade and other payables, value of EUR 100 million, was were GBP 4.3 (2008: GBP 27.0) than GBP and has therefore been customer balances, and the bank loan denominated in EUR, and bore interest million, including GBP 1.4 (2008: retranslated at the closing exchange (see Note 17). at a fixed rate of 9.7 per cent per eview GBP 1.3) million of charges arising on rate as required by IAS 21. This annum, which was payable annually repurchase and the early redemption translation adjustment decreased the finAncinG AnD cAsh flow in arrears. The bond’s original maturity of EUR 65.8 million of the remaining carrying value of goodwill by GBP 0.8 The cash in hand position at the end was on 21 December 2010. On 22 nominal value of the bond during million in 2009 (2008: increased by of 2009 stood at GBP 39.8 (2008: December 2009 Unibet redeemed 2009. The balance of finance costs GBP 6.8 million). The carrying value GBP 53.4) million. This is before the outstanding balance of the bond of GBP 3.0 (2008: GBP 25.7) million of other intangible assets decreased deducting GBP 21.4 (2008: GBP of EUR 65.8 million in full. Unibet was comprised foreign exchange gains of by GBP 0.3 million (2008: increased 65.9) million for borrowings. in full compliance with the terms of the GBP 3.5 (2008: losses of GBP 17.9) by GBP 2.7 million). These translation outstanding bank facility between the million and interest costs of GBP 6.5 adjustments were debited to the The cash outflow for the year 2009 date of signature of the facility and (2008: GBP 7.8) million. The foreign translation reserve. was GBP 12.3 (2008: GBP 11.7) the date of this report. exchange gain of GBP 3.5 million million, which included cash generated was in relation to realised exchange Certain non-current assets of the of GBP 44.4 (2008: GBP 53.3) million Through this early redemption of gains arising on retranslation of the Group relate to IT development from operating activities. the bond, Unibet expects to save bond during the 2009 financial year costs, which have been capitalised in GBP 3.5-4.5 million in finance costs (2008: GBP 15.1 million of unrealised accordance with the policy described Significant non-operating cash compared to holding the bond to its exchange losses on the bond). earlier. Other non-current assets flows for 2009 included GBP 6.4 original maturity in December 2010. include computer hardware and (2008: GBP 14.0) million which This saving includes early redemption profiT AfTer TAX fixtures and fittings. was distributed as a dividend to the costs of GBP 1.2 million incurred in Profit after tax for the full year 2009 shareholders, GBP 64.3 (2008: GBP the fourth quarter of 2009. was GBP 26.8 (2008: GBP 8.8) million. The non-cash current assets on 24.3) million which was used for buy the balance sheet therefore relate back and repayment of the bond, and The operating cash flow before BAlAnce sheeT only to other receivables, prepayments GBP 21.6 (2008: GBP Nil) million movements in working capital Unibet’s balance sheet reflects both and taxation. The movements in the which was received from borrowings. amounted to GBP 42.7 (2008: GBP the Group’s growth and its ability to tax balances in the consolidated In November 2009 Unibet signed 46.8) million for the full year 2009. manage working capital. balance sheet are influenced by the a revolving credit facility with a timing of dividend payments within maximum value of EUR 24.0 million As is common in the bookmaking the Group. with a leading international bank. industry, the Group employs a In December 2009, the full EUR requirement of ensuring customer 24.0 million facility was utilised in deposits are received before bets can connection with the early redemption be placed and therefore customer balances have increased with the growth in gross winnings revenue. uniBeT hAs orGAniseD iTs Business inTo Three DifferenT GeoGrAphicAl AreAs, norDic reGion, wesTern europe, AnD ces (cenTrAl, eAsTern AnD souThern europe) The gross cash position held at year end has decreased primarily as a result Gross winninGs revenue By mArkeT AnD proDucT seGmenT of the early repayment of the bond. 2009 2008 In addition to these two line items, Sports Non-sports Total Sports Non-sports Total along with reserves, the other GBP 000 betting betting betting betting significant asset on the balance sheet Nordic Region 21,425 44,893 66,318 21,114 46,332 67,446 is goodwill. The goodwill balance arose on the acquisitions of the Western Europe 26,448 29,976 56,424 19,177 26,565 45,742 MrBookmaker Group of companies in Central, Eastern and Southern Europe 8,469 11,474 19,943 6,262 8,030 14,292 2005, Maria Holdings in December 2007, Guildhall Media Invest in 2008, Other 676 809 1,485 -639 1,366 727 and Monnet Enterprises Limited in Total before Free Bets 57,018 87,152 144,170 45,914 82,293 128,207 2009. The balance of goodwill and of certain intangible assets recognised Free Bets -5,852 – -5,852 -4,762 – -4,762 in connection with the acquisitions Total after Free Bets 51,166 87,152 138,318 41,152 82,293 123,445 of Maria Holdings, Guildhall Media
Unibet Group plc Annual Report and Accounts 2009 25 Business review uniBeT GoinG forwArD
“fesTinA lenTe”. To sAy ThAT This pAsT yeAr hAs Been A momenTous perioD for The GAminG inDusTry woulD Be A consiDerABle unDersTATemenT. in 2009 The GAminG inDusTry wiTnesseD AnD emBrAceD mAny chAnGes ThAT will impAcT in BoTh The lonG AnD shorT Term.
Against this backdrop, Unibet has It boasts a strong management team The exceptionally strong combination Unibet offers more live, in-running quietly and efficiently continued to and workforce of trained employees. of products, infrastructure and betting opportunities than most of modernise its structure and has experienced personnel, combined the main competitors. boosted year-on-year gross winnings And it is focused on sustainable with the Unibet reputation for fairness growth, while expenses continue to be and profitable growth and tight and integrity, means the Group is well Unibet’s business is to deliver casino kept under tight control. management of costs. positioned to secure a solid foothold games that are as exciting and as the major online gaming platform in rewarding as the real thing. That is “Make Haste Slowly” is a mantra that Above all, it is a vibrant company all the European markets. why the Group continues to invest in only comes with knowing your product with well-balanced geographical and the technology to provide stunning and the opportunities that are product portfolio. A strong cash flow if you BuilD iT... graphics and functionality across all presented to you. means that it remains well placed In 2007, the goal was to be among the its websites. to weather a prolonged economic top three online gaming providers in all It is not a phrase frequently used in recession, and 2009 saw growth of the prioritised markets. It was an movinG forwArD coffee shop conversation, let alone across the board. ambitious vision, but one the Group The key to long-term loyalty is regular online betting discourse. felt was achievable. Suffice to say, increasing the personalisation of Unibet’s trusted brand meant the Unibet has all but achieved that goal communication with customers. Rather, it is an English translation of customer base hit the 4.1 million with 12 months remaining. The first five months are crucial in the Latin proverb “Festina lente”, a mark in 2009 and the regular determining whether a new customer command allegedly used by Julius surveys concluded that levels of The goal for 2010 is obviously to becomes a loyal player. Caesar and one which, according to customer satisfaction were higher sustain this continued growth, while the philosopher Desiderius Erasmus, than ever before. focusing more on enhancing the The customers expect nothing less means to approach a task with “the customer’s enjoyment through than a secure, trusted and user-friendly right timing and the right degree, Yet although the customer base has innovation and attention to detail. website, which offers attractive odds, governed alike by vigilance and risen by over 1.8 million in the past two and interesting and innovative betting patience, so that nothing regrettable years, this is not a time for complacency. Unibet is an online business. The opportunities. is done through haste and nothing majority of customer communication left undone through sloth”. The online gaming market continues is online – via email, and live chat, Above all else, Unibet prides itself on to evolve and expand. Consumers are although the Company does also exceptional customer service. While In other, less complex words, proceed aware that the choice is bountiful and contact some customers by phone. the technology may advance, the focus quickly, but with caution. Unibet is committed to working harder on the customer will not change in to maintain their loyalty and interest in Customer Relationship Management 2010. If anything, it will intensify. Be under no illusion: Unibet is well 2010 and beyond. (CRM) is about taking care of placed to make haste slowly. customers, meeting their needs and lAyinG founDATions fostering a close customer It has a long-established and widely Pressure continues to be exerted by relationship. Unibet uses three main recognised brand, with a strong the EU on Member States that seek channels to build this relationship: the reputation for quality. to restrict access for private operators Unibet website, SMS and email. to their sports betting markets. Online marketing is cost-efficient and measurable, helping Unibet put its products in front of the ideal target market precisely when they are looking for entertainment. sTrATeGic evoluTion Unibet’s systems are set up to monitor and measure every view, click and conversation, leading to a very high return on the Group’s investment in online marketing. proDucT- reGion- cusTomer- cenTric cenTric cenTric Unibet is at the forefront of innovation 2005-2007 2007-2008 2009 and cutting-edge technology. Web TV, Video Tipsters, live streaming of over 4,500 events and growing each year with value-added content have helped drive the Sportsbook, where
26 Unibet Group plc Annual Report and Accounts 2009 DeDicATeD people
By plAyers, for plAyers iT is noT eAsy To GeT A joB AT uniBeT – BuT The oDDs Are ThAT if you Do, you will finD iT chAllenGinG, rewArDinG – AnD eXciTinG!
Unibet truly believes that the key to the Group’s success are the employees, who are engaged, committed and always hungry to find new ways “we hire only The BesT” “people mATTer” “GooD leADers lisTen” to grow the business. No matter what their Business r Unibet is always looking to employ Unibet focuses on linking the strategic Unibet has always recognised the backgrounds, or which of the 40 countries they come from, Unibet’s people are uniquely qualified outstanding achievers who want and operational needs of the business importance of good leadership and to understand their customers and contribute to grow with the company. To that with the skills and talent of all the its critical role in stimulating the high directly to the Group’s continuing success. eview end, Unibet has put in place specific employees, helping them to meet the level of performance and engagement recruitment requirements which specific characteristics of each market. that is essential to the continued employee sTrucTure 2008 include academic degree, fluency in success in a changing and increasingly GenDer at least two languages, international This means giving the employees the challenging environment. Simply Unibet is committed to a policy of equal opportunity in matters relating to employment, experience and – as an extra responsibility and support they need setting high-level performance targets training and career development. dimension – an interesting talent to develop their full potential, and is not enough. Opportunities must be or passion. Unibet people must providing a working environment in identified and responsibility assigned also share their customers’ passion which they thrive and are clear about at the right levels to ensure action for gaming. their individual objectives and how is implemented. Unibet continues to 30% these align to the Group strategy. encourage an open and participative In order to attract the right candidates, management style at every level, and Unibet makes a real effort to position PAGE (Performance And Growth is committed to promoting from within itself as an employer of choice by Enrichment) is an internally developed the Group. 70% becoming recognised for the positive programme that was launched in working environment, diverse workforce, 2007. The system enables the Group Unibet regularly performs 360-degree equal opportunities and great growth to identify high-growth potential, evaluations of managers which help opportunities. In 2009, Unibet was target development efforts and identify and develop the potential of Women 30% Men 70% nominated “Employer Branding develop succession planning that today’s leaders – and, maybe even Company of the Year” by the global crosses geographical and more importantly, tomorrow’s. eDucATion leader in employer branding, “Universum”. departmental boundaries. An important objective is to ensure that Unibet has a workplace that can attract “we celeBrATe success and help retain existing skilled staff. “livinG The GAme” Through PAGE, Unibet has improved (yeT we Are never sATisfieD)” The Group’s motto is “By players, for the managers’ ability to identify and Unibet strives to create an players”, and this is something which reward outstanding performance. environment which is challenging, every employee lives and breathes. Equally important is the way which enjoyable and rewarding. Every year, 35% The core values and promise of the PAGE enables the Group to find out the company asks the employees Unibet brand are passion, friendliness what best motivates each individual in for feedback – enhanced through an and expertise. Unibet people share the line for reward and encouragement. annual survey from every member 65% enthusiasm of the sports aficionado PAGE also ensures the of the Unibet team – and thereafter and the poker player. They understand implementation of equal opportunities makes an action plan based on it. the thrill of the casino just as much as and provides fair and consistent the players, and enjoy the opportunity procedures to deal quickly with any With a global presence, the Group also to interact with customers via live chat. issues of underperformance. offers a variety of career experiences High school or equivalent 35% University degree 65% But they also have a level of expertise and international career paths which is that sets them apart. There are two career paths – the hard to find anywhere else. Everyone AGe Expert and the Leader – both seeking at Unibet welcomes and values the Unibet’s relatively low average age reflects A shared vision, people who genuinely new challenges, being able to look diversity of skills and abilities that a the fact that the Company is operating in a young industry. care about what they do and who beyond existing boundaries and global workforce brings to the business have the ability to adapt the product thrive under pressure. Those with a because ultimately, it gives the Group 12% and marketing mix to meet the passion to succeed in a competitive an advantage over competition. specific characteristics of each environment have the opportunity market, enable Unibet to develop the to thrive. As the Group grows, While it is a lively environment for a most exciting new products in the increased opportunities for fulfilling career, the vibrant Group is 47% market – anticipating the demands internal promotion and relocation reflected in the active social scene. of customers and staying one step between offices and countries are Poker nights, 10-pin bowling, trips to 41% ahead of the competition. providing additional motivation for the Epsom Derby or the All England Unibet people. Club, drinks at the local or eating out in style, Unibet knows how to let its hair down. There is always something < 30 years 47% 30-40 years 41% fun going on within the Unibet family! > 40 years 12% Unibet celebrates success, yet is never satisfied.
Unibet Group plc Annual Report and Accounts 2009 27 bUSineSS review general legal environment
Unibet groUp’S core bUSineSS, namely SportS betting and other gaming ServiceS, may be SUbject to a nUmber of legal reStrictionS in the marketS where Unibet haS a commercial intereSt and focUS.
The majority of revenues are derived Opinions against seven Member of ways depending upon the applicable from markets located within the EU. States, including France, Sweden law and court system of a particular Unibet is established and licensed in and the Netherlands. Further, certain Member State. In addition, legal action a number of Member States of the Member States have expressed in Member States may be subject to EU. Unibet and its EU customers intent – or are underway of doing so a number of levels of court hierarchy benefit from the application of – to open up their national market for and can therefore take many years to certain fundamental freedoms competition. As long as the regulatory conclude. There may also be further applicable to citizens of the EU. process is ongoing, it is difficult delays as a result of a particular legal These freedoms include, amongst to take a detailed position on the action or process triggering another others, the principle that there subject matter. Unibet further holds ancillary court proceeding, such as should be no restrictions within the that any “controlled opening” may those dealing with claims for EU affecting the free movement of constitute a continued breach of EU injunctions or similar interim relief. goods, the free circulation of capital, law. This is confirmed by the Detailed the right to establish and the right Opinions and comments issued by the Despite an increasing number of to consume, provide and promote European Commission on the draft cases pending before the ECJ for a services across borders. legislation submitted under the so- preliminary ruling, including Swedish, called notification mechanism. Dutch and French cases, there is a risk Any law, practice or procedure that courts judging under the national applicable under the domestic law In September 2009, the European laws of a particular country may rule of individual Member States may be Court of Justice (“ECJ”) held in its against the activities of Unibet and its contrary to EU law (and therefore Santa Casa judgment that in the private sector competitors. Subject in theory unlawful) where such law, absence of dedicated secondary to advice on a case-by-case basis, practice or procedure amounts to a EU legislation the mere fact that a Unibet expects to appeal any adverse restriction or barrier affecting the EU licence was issued in another Member judgments to higher courts evoking fundamental freedoms. An exception State did not provide on its own for overriding principles of European law. to this position is where a Member sufficient guarantees. In the absence For this reason, Unibet does not hold State is able to demonstrate that of any dedicated EU harmonisation in any provisions in its balance sheet for the non-discriminatory restriction the field of gaming services, the ECJ potential adverse judgments. Unibet’s is necessary and proportionate to rejected – for the time being – assessment of the current legal meet general public interests such a mandatory mutual recognition of environment it faces in certain material as the protection of public health gaming regulations between Member European markets is set out country and public policy. States. Observers, however, indicated by country below. Given the legal that under established ECJ case situation in the USA, Unibet stresses The application of EU law in the law and primary EU law, Member that its standing policy and practice context of the gaming industry means States must continue to consider remain not to accept any paying that certain restrictions purportedly safeguards already in place in the customer resident in the USA. applicable to the Unibet Group under country of establishment as part of the domestic law of a Member State the overall proportionality test and, Sweden may be unlawful. It is even more for instance, keep in mind that money In 2003, Unibet launched legal likely that restrictive domestic laws laundering regulations and/or financial proceedings against the Swedish are contrary to EU law where there services are already subject to EU government claiming that the Swedish is an inconsistent gaming policy in harmonisation. government were in contravention the particular market or the policy is of EU law in seeking to restrict mainly directed at sustaining revenues As a result of the recent developments, cross-border gaming services. This generated through banning market it is not possible to draw detailed action was taken by Unibet in order to competitors such as Unibet. conclusions in relation to the legality safeguard its fundamental freedom to of specific legislation and practice provide and promote gaming services In this regard, reference can be made applicable to the gaming industry in to its customers, and to allow Swedish to the ongoing formal infringement the various Member States. Legislation consumers the possibility of choice. procedures initiated by the European and practice vary from country to The hearing was held in January Commission (EC) against 10 Member country and will be tested on an 2010 and a judgment was rendered on States in relation to the cross-border individual basis. This being the case, 2 March 2010 against Unibet. Unibet provision and promotion of gaming and it should also be noted that legislation will file an appeal to the Appeal Court. betting services. In the course of 2007 or practice in this area can be and 2008, the EC issued Reasoned challenged or tested in a number
28 Unibet Group plc Annual Report and Accounts 2009 AB Trav och Galopp (ATG) has filed a Unibet is monitoring this regulatory bUSineSS r lawsuit against a subsidiary of Unibet development. Unibet further believes claiming infringement in its database that France must meet its continued on horse race fixtures. ATG is claiming obligations under EU law. If the new eview damages up to the amount of SEK French law is in breach of overriding 325 million. During the spring of 2008 EU law, this could lead to the opening the Supreme Court ruled in favour of up of a second infringement case the Unibet subsidiary in the matter of against France. The criminal cases the interim decision. The main hearing against Unibet and Unibet’s CEO are is expected to take place during the still pending and first judgments are autumn of 2010 or the beginning awaited for in 2010. of 2011. the netherlandS norway In October and December 2007, The Norwegian parliament adopted De Lotto (the local State-approved payment blocking restrictions in monopoly) brought ex parte relation to payment transactions. procedures against several Unibet Unibet asserts that the measure legal entities in relation to a cease is against Norway’s free trade and desist order. In the summary obligations, disproportionate, proceedings, the district court of counter-productive and ineffective. Utrecht ordered the legal entities concerned to stop the provision and france and belgiUm promotion of all gaming services to In view of the multitude of IPR and Dutch residents, or pay a fine of EUR related cases before a number of 100,000 per day up to a maximum courts in France and Belgium, it is of EUR 3 million. In the second case, too soon to draw a final conclusion. brought on the merits before the same On certain questions of law, such as district court, the latter ordered the legitimate use of trademark, courts legal entities concerned to stop the have ruled in favour of Unibet, on provision and promotion of all gaming other points, such as passing off, not. services to Dutch residents, or pay a fine of EUR 10,000 per day. Unibet The Paris Court of Appeal ordered has introduced appeals against both Unibet to pay EUR 1.2 million in judgments and awaits a hearing date damages in relation to its offering of before the competent jurisdiction. bets on the French Open organised The Reasoned Opinion of the EC by the French Tennis Federation (FFT). and two references to the ECJ for The court further ordered Unibet to preliminary rulings seem to support immediately cease its activities on Unibet’s opinion. total sanction of EUR 700,000 per day or per breach. Unibet is currently assessing all legal avenues possible, including an appeal to the French Supreme Court. Unibet is further involved in an alleged infringement of trademarks and passing off case initiated by PMU, the French horse racing monopoly.
France is in the process of re- regulating its online market and will allow companies such as Unibet to apply under national law for a local French licence. In consultation with a number of key stakeholders,
Unibet Group plc Annual Report and Accounts 2009 29 bUSineSS review principal riSkS
Unibet divideS itS riSkS into the following categorieS: riSk mitigation Legal risk is the risk that, despite the general A detailed discussion of the general legal environment is contained on pages 28 to 29. principles of the EU, which creates Unibet’s ability as an operator properly established, licensed and regulated within the EU to operate its business throughout its principal market of Europe, certain individual countries may seek to place restrictions on Unibet’s legitimate business.
Market risk is the risk that Unibet will lose money The Group has adopted specific risk management policies that control the maximum risk level for each sport or event on which on its business due to unfavourable outcomes on the Group offers odds. The results of the most popular teams in major football leagues comprise the predominant market risk. the events where the Group offers odds. Market Through diversification, which is a key element of Unibet’s business, the risk is spread across a large number of events and risk includes risks in relation to match fixing and sports. The heads of Odds compilation and Risk management are responsible for day-to-day monitoring of Unibet’s market suspicious betting behaviour. risk. It is also their responsibility to advise the odds compilers and risk managers on appropriate risk levels for certain events. To achieve the desired risk profile, Unibet conducts trading with a small number of well-known companies. The Compliance Officer and the Head of Sports Betting jointly assess risk levels for individual events as well as from a longer-term perspective.
Counter-party risk All bets and stakes are made No customers are offered credit. through account gaming, i.e. the player deposits money in an account, from which he/she then draws to place bets.
Operational risk is the risk that the Group will The Group has internal procedures to monitor and detect mistakes caused by operational error or human factor. lose money as a result of individual mistakes, e.g. by an odds compiler.
Foreign exchange risk The Group operates The Group’s operating cash flows provide a natural hedge of operating currency risks, since deposits and payouts to internationally and in addition to GBP sterling, customers in different territories are matched in the same currency. is exposed to foreign exchange risk arising from The spread of the Group’s operations, including material revenue and expenses denominated in many different currencies, various currency exposures, primarily with respect and taking into account the fact that customers can trade with the Group in currencies other than the currency of their to the euro, Swedish kronor, Norwegian kroner, territory of residence, makes it impractical to give an indication of the impact of single currency movements on the results Danish kroner, Swiss francs and US dollars. from operations. In general, when the reporting currency of GBP sterling weakens against the euro and other major trading currencies of the Group, as occurred during 2008, that would tend to increase operating profits because of the positive operating profits and cash flows generated by the Group. In relation to borrowings of the Group, the bank loan issued in December 2009 is denominated in euros, which is why there is a currency translation exposure related to that financial liability. Until such time as the loan becomes repayable, such translation gains and losses are unrealised. The potential translation gains and losses arising on the loan would be offset to the extent that the Group generates positive future cash flows in other areas of the business in euros.
Customer-specific riskThe risk that Unibet has introduced three types of customer limit: the Group will lose money on customers • Each event on which the Group offers odds has a limit for how much an individual customer can win on the event. who are exceptionally successful is These limits vary depending on the event and can be changed over time. called customer-specific risk. • It is also possible to set a limit for combinations of bets. This limit is normally higher than for an individual bet. • Each customer has a personal limit, which regulates the maximum amount that can be staked in a single bet.
Technical risks Unibet’s activities are Interruptions on the internet, e.g. viruses, intrusion attempts or access restrictions due to reduced capacity, have an impact highly dependent on information systems on the business. Unibet works actively and continuously to minimise the risk of such attacks. and other types of technical risk. Secure transmission of confidential information over the internet and the overall security of Unibet’s system are crucial to the business. The Group uses licensed encryption and authentication systems to ensure secure transmission of confidential information such as credit card numbers. The gaming application is business-critical, and Unibet has gone to considerable lengths to ensure that it is able to handle various types of interruption. All critical servers are duplicated, i.e. if one server fails, another will immediately take over. Unibet has also created a back-up site, which in the event of a serious operational interruption will take over from the primary servers.
System security The security of Unibet’s systems and applications are tested several times per year by third-party security experts. Furthermore Unibet has an Intrusion Detection System that monitors all network traffic 24/7 for signs of attacks or intrusions.
Treasury management – customer deposits All customers wishing to place a bet with Unibet must first register by opening an account and making a deposit. Deposits can be made by credit or debit card, through a cash deposit or via bank transfer at a local branch or using an online banking service. Alternatively, Unibet offers a variety of other payment solutions in different countries. Bets can be placed as soon as the account has been credited. Withdrawal requests can be satisfied only if certain criteria are met and confirmation that a deposit has been cleared is obtained. In addition, several other checks are made to minimise the risk of fraud. Payouts to customers are made via bank transfer from one of Unibet’s network of banks worldwide, in the currency requested by the customer and directly into their nominated bank account or via a preferred payment solution. The Group has accounts with many major banks in the EU.
Fraud and money laundering Unibet requires all customers to provide detailed information upon registration. The Group applies a strict age limit and accepts no customers under the age of 18. Unibet uses industry-leading providers of identity verification to ensure that details provided are correct. All clients making major transactions or having a high risk profile will be requested to undergo further documentation requirements. Unibet has a dedicated fraud department and advanced systems in place to detect and prevent suspicious activity, to ensure that Unibet’s website remains a secure playing-field. Any account involved in suspicious activity will be suspended and investigated to the fullest extent. All deposits and withdrawals are made through banks or established electronic payments solutions and Unibet has clear internal procedures for detecting and handling suspect transactions. In order to comply with obligations under money laundering and gaming legislations, all employees need to annually complete a course and pass an assessment.
30 Unibet Group plc Annual Report and Accounts 2009 monthly retUrnS Unibet employs various risk management benchmarked against a long-term average The chart illustrates that over time the and tracking errorS tools to assess and manage the risks. return. The tracking errors are measured tracking error band has become narrower, For example, to monitor the relative risk of by taking the standard deviation on indicating that the monthly margins have the Sportsbook, Unibet has risk tools and the difference in return between the become more stable. This is because models normally used in the investment Sportsbook and the average return at the relative amount of live betting within management industry. a 95 per cent confidence interval. the Sportsbook has increased, and live betting is more stable, even though it The chart below sets out the monthly A 95 per cent confidence interval indicates has a lower margin. return on the Sportsbook from mid-2003 that on average, for 19 months out of 20, to date (pre-match and live betting). The the actual return should be between the two outside lines represent the upside two tracking error lines. and downside tracking error of this return 0.20
0.15 bUSineSS r
0.10 eview
0.05
0.00
-0.05 2003 2004 2005 2006 2007 2008 2009 July-Dec
Upside of tracking error Monthly return Downside of tracking error
integrity in SportS SenSitivity analySiS For Unibet, a key element of responsibility means keeping online Unibet’s performance is affected by a number of factors. The sensitivity analysis sports betting free of corruption, which below only takes into account direct changes. It is likely that actual changes in a ensures that customers are provided specific item will also affect other items and that estimates made by Unibet and other with a fair betting product. parties on the basis of a change of circumstance would also affect other items.
Sensitivity analysis – detail Sports and betting are part of the Unibet considers movements in the factors below to have the most impact on profit same entertainment chain and as a before tax (PBT). consequence, both have a common objective to ensure the integrity of sport is not compromised.
Far from contributing to betting fraud Factor % change PBT impact GBP and match-fixing, the internet and Gross winnings revenue +/- 1 +/- 1.383m new technologies make it possible to record and analyse each individual Administrative expenses +/- 1 +/- 0.513m action taken online. For instance, Marketing expenses +/- 1 +/- 0.366m irregular betting activities, such as an unusually high amount placed on the Exchange rate impact of the +/- 1 +/- 0.213m unexpected outcome of an event bank loan (e.g. an outsider wins) can be immediately identified.
To proactively fight all types of fraud in In 2009, millions of betting sports betting, Unibet co-founded in transactions were registered within 2005 the European Sports Security the ESSA security network. Of those Association (ESSA). ESSA acts as transactions, only 45 incidents of an early warning system to alert the irregular betting across a range of sports federations of any suspicious sporting disciplines were investigated. betting before and during any of their However, only one single event proved sporting events. The Association to be suspicious and passed on to the has been working hand in hand with respective sport’s governing body. some of the leading sport federations including FIFA, UEFA, the ATP, and the IOC, to make sure any such intelligence is shared as soon as possible.
Unibet Group plc Annual Report and Accounts 2009 31 governance ShareS and Share capital
Shareholding information Trading volumes In 2009, 49,722 trades in Unibet Group were made, representing a total value Unibet groUp plc’S iSSUed Share capital compriSeS of over SEK 3.9 billion. 28,258,038 ordinary ShareS each with a par Dividend policy valUe of gbp 0.005. all ordinary ShareS carry It is the intention of the Board of Directors that the Company should pay eqUal voting rightS and rightS to Share in a dividend of up to 75 per cent of the Group’s net income after tax to the aSSetS and profitS of the groUp. the shareholders, provided that other financial objectives are met and an appropriate capital structure is maintained. In addition, all banking and debt Listing of Swedish Depositary Receipts covenants will need to be adhered to. All SDRs entitle the holder to the same Unibet Group plc’s Swedish Depositary Receipts (SDRs) were listed on the dividend rights as holders of ordinary shares. O-list of the Stockholm Stock Exchange (Stockholmsbörsen) on 8 June 2004. From 2 October 2006, the SDRs have been listed on the MidCap part of the Proposed dividend Nordic List at the NASDAQ OMX Nordic Exchange in Stockholm. The Board of Directors proposes a dividend of GBP 0.71 (2008: 0.23) per share/SDR which is approximately SEK 7.68 (2008: 2.75) with the constant The trading symbol is UNIB SDB and the ISIN code is SE0001 835588. Unibet exchange rate 10.819 GBP/SEK at 19 March 2010, per ordinary share to has a liquidity guarantee agreement with HQ Bank AB. be paid to holders of ordinary shares and SDRs. If decided by the AGM, the dividend is expected to be distributed on 17 May 2010 and amounts Share price performance approximately to 75 per cent of net profit after tax. Unibet’s SDRs ended the year at SEK 174 having started the year at SEK 108. The highest price during the year was SEK 200. The lowest price during the No dividend will be paid on the shares/SDRs held by the Company as a result year was SEK 107. As at 31 December 2009, Unibet Group plc had a market of the share buy back programme. Since the bond issued by Unibet in 2007 capitalisation of approximately SEK 4.9 billion. was redeemed in full in December 2009, the restrictions on dividend payments contained in the Bond Terms & Conditions no longer apply.
Analysis of shareholdings Unibet Share price development at 26 February 2010 Share of share 300 Number of capital/votes, Shareholder shares/SDRs % Accumulated % 250 Anders Ström through his 2,925,000 10.4 10.4 200 company 150 Fidelity International 2,744,179 9.7 20.1
Swedbank Robur Fonder 2,660,868 9.4 29.5 100 Länsförsäkringar 1,009,505 3.6 33.1 fondförvaltning 10,000 8,000 Danske Capital Funds 933,069 3.3 36.4 50 6,000 Lannebo Fonder 853,150 3.0 39.4 4,000 2,000 Skandia Liv 842,479 3.0 42.4 30 Catella Fondförvaltning 709,712 2.5 44.9 2004 2005 2006 2007 2008 2009 2010 Peter Lindell through his 708,570 2.5 47.4 Share price company Total Shareholder Return (TSR) (including delivery) OMX Stockholm Price Index Ram One 690,000 2.4 49.8 SIX Return Index Monthly trading volume, 1000’s (including after hours trading) The Northern Trust 571,624 2.0 51.8 Company © NASDAQ OMX Fjärde AP-fonden 533,350 1.9 53.7
Verdipaperfond Odin 514,796 1.8 55.5 Ownership distribution Sverige at 26 February 2010 Number Number of Share capital/ SEB Fonder 511, 2 75 1.8 57.3 Holding of shareholders shares/SDRs votes, % Unibet Group plc 216,670 0.8 58.1 1-500 5,364 722,355 2.6 Others 11, 8 3 3 ,791 41.9 100.0 501-1,000 467 3 8 4 ,118 1.3 Total 28,258,038 100 1,001-10,000 392 1,259,684 4.5 Source: Euroclear Sweden. 10,001- 250,000 143 9,318,608 33.0 250,001- 24 16,573,265 58.6 Total 6,390 28,258,038 100.0
Source: Euroclear Sweden.
32 Unibet Group plc Annual Report and Accounts 2009 Share buy back programme Dialogue with capital markets At the 2007, 2008 and 2009 AGMs, shareholders approved a share buy back Unibet’s Investor Relations policy focuses on conducting a dialogue with programme whereby the Board was authorised, until the next AGM in 2010, representatives from the capital markets, aimed at increasing interest in to acquire GBP 0.005 ordinary shares/SDRs in the Company. The maximum Unibet’s shares/SDRs among existing and potential investors by providing number of shares/SDRs that may be so acquired is 2,824,109, i.e. may not relevant, up-to-date and timely information. exceed 10 per cent of the total number of shares issued by the Company. Under this approval, 297,900 shares/SDRs were acquired by the Company Investors and capital market players should be provided with clear information during 2007. No share buy back was made during 2008 or 2009. 81,230 of about the Group’s activities with the aim of increasing shareholder value. Unibet the shares/SDRs held by the Company at 1 January 2009 were sold during the strives to ensure good access to such information for capital markets, notably year in connection with the Company’s share option programmes. The number through presentations in Stockholm and London and through road shows in of outstanding shares at 31 December 2009 was 28,041,368. other European countries as well as the USA.
The intention of the Board is to either cancel the shares (requires further On Unibet’s corporate website, www.unibetgroupplc.com, investors can find shareholder approval), use as consideration for an acquisition or issue to up-to-date information about the Group’s financial performance, stock market employees under a share option programme. During 2008, 87,883 options data, a financial calendar, Company information and other important data. were issued over the same amount of shares in the share buy back programme. Unibet arranges the following capital market activities: Shareholders ownership data On 26 February 2010, Unibet Group had 6,390 holders of SDRs. • Quarterly meetings and teleconferences for analysts, investors and financial media On 26 February 2010, the Group’s 14 largest owners represented 57.3 per cent • Financial hearings in Stockholm of the capital and votes, as shown on page 32. • Participation in industry seminars and conferences • Webcasts are available after each quarterly presentation. g overnance Ownership structure at 26 February 2010 % Swedish financial institutions 39.0 Other Swedish financial entities 1.5 Other Swedish legal entities 11. 2 Non-Swedish owners 44.0 Swedish naturalised persons 4.3 Total 100.0
Source: Euroclear Sweden.
Share capital development The only changes in share capital in 2009 or the prior year related to the exercise of share options in November 2009. The development of the Company’s share capital since the Group’s reorganisation carried out on 1 November 2006 is shown in the following table:
Change Par value Increase in Issue in number Total number per share share capital Share capital Transaction Year price ordinary shares ordinary shares GBP GBP GBP Issued in Group reorganisation 2006 – 21,841,092 28,241,092 0.005 109,205.46 141,205.46 Exercise of share options 2009 12.16 16,946 28,258,038 0.005 84.73 141,290.19
Five-year summary 2009 2008 2007 2006 2005 Equity per share GBP 4.343 3.565 3.384 3.290 2.155 Equity per share after full dilution GBP 4.333 3.565 3.376 3.248 2.135 Earnings per share GBP 0.957 0.314 0.665 1.344 0.523 Earnings per share after full dilution GBP 0.956 0.312 0.659 1.342 0.515 Cash flow per share GBP -0.43 -0.41 0.59 0.50 0.07 Dividend per share SEK1 7.68 2.75 6.00 5.50 2.25 Return on total average equity % 29.3 37.2 10.9 31.0 18.9 Equity:assets ratio % 58 45 45.1 70.8 53.6 Number of shares at year end 28,258,038 28,241,092 28,241,092 28,241,092 28,125,092 Fully diluted number of shares at year end 28,322,407 28,241,092 28,308,080 28,612,088 28,394,747 Average number of shares 27,955,464 27,946,192 28,096,472 28,197,870 26,223,857 Average number of fully diluted shares 27,989,238 28,091,206 28,355,999 28,236,388 26,640,068
1 The Board of Directors proposes a dividend of GBP 0.71 which is approximately SEK 7.68 per share/SDR with the exchange rate of 10.819 GBP/SEK. The above figures have been restated to reflect changes in nominal value of the share.
Unibet Group plc Annual Report and Accounts 2009 33 governance directorS’ report
the directorS preSent their annUal report on On 30 September 2009 Unibet launched a mobile sports betting version the affairS of the groUp, together with the specially adapted to the iPhone. User experience and functionality have aUdited financial StatementS and aUditorS’ been central elements in the development of the iPhone version and it has shown that the iPhone technology is well suited for sports betting and report, for the year ended 31 december 2009. provides customers with a new way to have 24/7 access to Unibet’s extensive Sportsbook. Principal activities Unibet is an online gaming business, with over 4.1 million registered customers On 18 November 2009 Unibet Group plc signed an agreement with a leading worldwide as at 31 December 2009, and is one of the largest privately-owned, international bank for a 12-month Revolving Credit Facility with a maximum publicly-quoted online gaming operators in the European market. value of EUR 24 million. The new facility was drawn to cover the early redemption of the bonds that had an outstanding amount of EUR 65.8 million. The internet is the main distribution channel for Unibet’s products. The Group Through this early redemption Unibet expects to save between GBP 3.5 and offers a comprehensive range of online gaming products, such as pre-match 4.5 million in Finance Costs during the facility’s duration compared to holding sports betting, live betting, bingo, soft games, online casino and poker products, the bonds to maturity. This saving includes the early redemption costs of through the Group’s primary websites, www.unibet.com and www.mariabingo. approximately GBP 1.2 million in the fourth quarter of 2009. com. The customer base spans more than 100 countries. On 19 November 2009 Unibet Group plc announced an early redemption of On average, the Unibet Group handles over 600,000 transactions every the EUR 100 million bond in Unibet Group plc in accordance with Condition day (including bets, deposits and withdrawals) and has between 6,000 and 9 of the terms and conditions for the bonds. The early redemption occurred 10,000 offerings on major international and local sporting events every day. on 22 December 2009.
The principal subsidiaries and associated undertakings which affect the On 30 November 2009, Unibet was for the third time in four years awarded results and net assets of the Group in the year are listed in Note 13 to “European Sports Betting Operator of the Year 2009” at the prestigious the financial statements. eGaming Annual Awards ceremony organised by the international gaming magazine eGaming Review. The award goes to the operator that has made the Results and dividends biggest impression in Europe and continued to grow and broaden its product The consolidated income statement is set out on page 41 and shows the result offerings. Unibet was also awarded “European Live Gaming Operator of the for the year. The profit after tax was GBP 26.8 (2008: GBP 8.8) million. Year 2009” for its simplicity of use and innovative approach to live gaming.
The Board of Directors proposes a dividend of GBP 0.71 per ordinary share/ On 11 December 2009, Unibet Group plc bond loan 1 was de-listed from SDR, which is approximately SEK 7.68 per ordinary share/SDR, to be paid to NASDAQ OMX Nordic Exchange in Stockholm’s Retail Bond List. holders of ordinary shares and SDRs (2008: dividend of SEK 2.74/GBP 0.23 per ordinary share paid in May 2009) and amounts to a total of GBP 20.0 On 22 December 2009 Unibet Group plc repaid the outstanding amount of (2008: 6.4) million which is approximately 75 per cent of net profit after tax. EUR 65.8 million of the original EUR 100 million 9.70% bonds 2007/2010, a year ahead of the original maturity, in accordance with Condition 9 of the Business review terms and conditions for the bond. Significant events during the year 2009 On 15 March 2009 Unibet signed an agreement to become the main web The above developments during 2009 illustrate the following trends that affect partner with the popular French football club Paris Saint-Germain. the business of the Unibet Group:
On 21 March 2009 the Unibet poker TV show “Pokermilliomos” started to run Unibet continues to invest in the expansion of both its product set in its core in one of Hungary’s largest TV channels, Viasat 3. markets and its geographical and demographical reach into new markets.
On 12 May 2009 Unibet signed an agreement with the Belgian football club Unibet is committed to the promotion of responsible gaming and remains at FC Bruges for the seasons 2009-2012. The deal includes multivision the forefront of industry initiatives in this area. boarding for all Belgian first league matches and all European qualification matches together with several other forms of visibility in the stadium and on Unibet continues both to seek further opportunities to cross-sell its the club’s website. products and also to drive efficiencies in its internal operations through the standardisation of its technology platform. On 1 June 2009, Unibet signed an agreement with the Spanish football club Valencia CF to become the main sponsor of the club for the seasons Pressure continues to be exerted by the EU on Member States that seek to 2009/10 and 2010/11. The deal includes the Unibet logo on the front of the restrict access for private operators to their sports betting markets. shirts in all competitions, including Primera Division, Copa del Rey and UEFA Europa League. Significant events after the year end On 17 February 2010, Unibet signed a contract with the Ålandic gaming On 8 June 2009 Unibet was certified being compliant with all the 277 company, Paf, for the provision of full Sportsbook B2B. The scope of the requirements of the PCI DSS, Payment Card Industry Data Security Standard. services includes fixed odds and live betting including full risk management. Paf will also become a customer in the fast-growing sports betting pools In August 2009, Unibet became the main sponsor for the biggest Hungarian products SuperToto and SuperScore offered by Unibet. football club, Ferencvaros, for the next three seasons up until 2012. The deal includes the Unibet logo on the front of the shirt in all competitions that A detailed Business Performance Review is set out on pages 24 to 25. Ferencvaros participates in. For further information on risk management, refer to Note 2C and 2D Early in the third quarter 2009, Unibet Mobile Casino was launched. on pages 48 to 49. Initially there were 11 games available covering favourites such as BlackJack, Roulette, Baccarat and Keno. This provides players with another reason to choose Unibet whenever they want to play.
34 Unibet Group plc Annual Report and Accounts 2009 Future developments Legislation in Malta and Sweden concerning the preparation and dissemination Although they are conscious of the potential impact of the macroeconomic of financial statements may differ from legislation in other jurisdictions. situation in Unibet’s core markets, the Directors are confident in the Group’s trading and financial prospects for the forthcoming financial year. The Board of Directors and Chairman declare that the Annual Report has been prepared in accordance with generally accepted accounting principles, that the Directors and their interests consolidated financial statements have been prepared in accordance with the The following Directors served during the year and subsequently, unless international financial reporting standards referred to in European Parliament otherwise stated: and Council of Europe Regulation (EC) No. 1606/2002 of 19 July 2002, on application of international financial reporting standards, that disclosures Daniel Johannesson Chairman herein give a true and fair view of the Group’s financial position and results of Anders Ström Deputy Chairman operations, and that the statutory Annual Report provides a fair review of the Kristofer Arwin Non-executive Group’s operations, financial position and results of operations and describes Peter Boggs Non-executive material risks and uncertainties facing the Parent Company and the companies Peter Lindell Non-executive included in the Group. Staffan Persson Non-executive Disclosure of information to the auditors Daniel Johannesson, Anders Ström, Kristofer Arwin, Peter Boggs and Peter So far as the Directors are aware, there is no relevant audit information (that Lindell will seek re-election at the forthcoming AGM. is, information needed by the Group’s auditors in connection with preparing their report) of which the Group’s auditors are unaware, and the Directors have The interests of the Directors are shown on page 37. taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Research and development Group’s auditors are aware of that information. The Group capitalises certain expenditure when it relates to the development of the core IT platform of the business. During the year the Group capitalised Independent Auditors GBP 2.1 (2008: GBP 4.2) million of development expenditure, and expensed The auditors, PricewaterhouseCoopers (Malta) and PricewaterhouseCoopers g
GBP 6.1 (2008: GBP 6.0) million. LLP (UK), have indicated their willingness to continue in office, and a resolution overnance that they be re-appointed will be proposed at the AGM. Employees The Group is committed to a policy of equal opportunity in matters relating to On behalf of the Board employment, training and career development of employees and is opposed to Malta, 29 March 2010 any form of less favourable treatment afforded on the grounds of disability, sex, race or religion. The Group recognises the importance of ensuring employees Daniel Johannesson Peter Lindell are kept informed of the Group’s performance, activities and future plans. Chairman and Director Director
Substantial shareholdings Shareholdings of 3 per cent or more of the Company’s ordinary share capital are detailed on page 32.
Statement of Directors’ responsibilities The Directors are required by the Maltese Companies Act 1995 to prepare financial statements which give a true and fair view of the state of affairs of the Group as at the end of each financial period and of the profit or loss for that period. In preparing the financial statements, the Directors are responsible for:
• Ensuring that the financial statements have been drawn up in accordance with International Financial Reporting Standards as adopted by the EU. • Selecting and applying appropriate accounting policies. • Making accounting estimates that are reasonable in the circumstances. • Ensuring that the financial statements are prepared on the going concern basis unless it is inappropriate to presume that the Group will continue in business as a going concern.
The Directors are also responsible for designing, implementing and maintaining internal control relevant to the preparation and the fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error, and that comply with the Maltese Companies Act 1995. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors confirm they have complied with the above.
The Directors are responsible for the maintenance and integrity of the Group’s website.
Unibet Group plc Annual Report and Accounts 2009 35 governance remUneration committee report
the remUneration committee conSiderS and Remuneration of the Board of Directors recommendS to the board remUneration packageS The remuneration is recommended by the full Board, conditional upon approval for the Senior managerS inclUding the execUtive at the AGM. management team, acroSS the groUp. the remUneration All Board Directors are elected, as appropriate, at the AGM. committee haS written termS of reference to determine the groUp’S policy on management The Group does not operate any form of executive retirement benefits or remUneration. pension scheme, and thus no contributions are made in respect of any Director. All Directors have rolling service contracts without notice periods. The auditors are required to report on the information contained in the following two sections the committee’S propoSed report, which iS UnaUdited, of this report on Directors’ Remuneration. except where indicated, iS Set oUt below. Total emoluments (audited) The Committee, which had six meetings during the year, comprises Peter Lindell All information concerning emoluments and interests of the Directors is and Anders Ström who were both elected at the 2008 and 2009 AGM. presented on the basis of continuity from the date of their appointment to the Peter Lindell chairs the Committee. Board of Directors of the Unibet Group plc. Total emoluments of the Board of Directors and executive managers who served during the year are set Remuneration policy out opposite. The policy of the Board is to attract, retain and motivate the best managers by rewarding them with competitive salary and benefit packages linked to achieving the Group’s financial objectives, as defined on page 22.
During the year the Committee considered a variety of independent sources of information including the comparison of the CEO’s and the Senior Management’s remuneration with companies of a similar size and diversification. In addition, as Unibet is an international business, the Committee takes into account relevant international employment practices, as well as having due regard to the remuneration packages throughout the Group.
The performance-related elements of executive remuneration comprise annual bonuses and awards under the Unibet Executive Share Option Scheme. These incentives are designed to be relevant to the overall objectives of the Group and to enhance the business. The performance targets referred to below, recommended by the Committee, are reviewed annually and are intended to reward superior performance in light of competition and the prevailing economic climate.
The members of the Committee have no personal interest in the outcome of their decisions and give due regard to the interests of shareholders and to the continuing financial and commercial health of the business.
The remuneration packages of Senior Managers comprise: • Basic salaries, which are reviewed annually, having regard to individual performance, responsibility and skills, and comparable evidence of other companies in the sector, together with specific employee benefits. • Performance-related bonuses, which are based on quantitative and qualitative goals. The goals are mainly linked to the Group’s financial objectives such as gross winnings and EBITDA, as well as the delivery of specific projects and business critical processes. Performance is assessed on an annual basis. Bonuses are awarded only once specified objectives are achieved. The amount of potential bonus compared to basic salary varies depending on position and situation, but is in general less than half the amount of the basic salary. • Equity awards through option schemes are granted based on position and performance under the terms of the Unibet Share Option Scheme, and are linked to the performance of the Group to further align Senior Management’s interests with those of the shareholders.
All the 613,493 share options outstanding at 31 December 2009 may generally be exercised if the holder is employed by the Unibet Group at the date of exercise. Exceptions are made in special circumstances.
36 Unibet Group plc Annual Report and Accounts 2009 Fees/ 2009 2008 GBP 000 salary Other Total Total Directors Daniel Johannesson, chairman 101.8 – 101.8 85.0 Anders Ström, deputy chairman 117. 0 – 117. 0 121.3 Kristofer Arwin 40.0 – 40.0 26.7 Peter Boggs 30.0 – 30.0 38.9 Peter Lindell 45.3 – 45.3 44.0 Staffan Persson 41.8 – 41.8 39.5 Henrik Tjärnström1 – – – 8.3
Executive management Petter Nylander, CEO 327.9 1.3 329.2 293.3 Executive management 820.2 2.1 822.3 1,164.0
Total 1,524.0 3.4 1,527.4 1,821.0
1 Henrik Tjärnström resigned on 18 March 2008.
Directors’ interests (audited) The Directors’ and Executive managers’ beneficial interests in the shares/SDRs of Unibet Group plc as at 31 December 2009 are set out below: g overnance Ordinary Ordinary Share Share shares/SDRs shares/SDRs options at options at at 31 December at 31 December 31 December 31 December 2009 2008 2009 2008 Directors Kristofer Arwin 500 500 – – Peter Boggs 15,600 15,600 – – Daniel Johannesson 7,000 7,000 – – Peter Lindell 908,570 1,597,304 – – Staffan Persson 137,101 1,762,000 – – Anders Ström 2,925,000 3,480,000 – –
Executive management CEO 3,200 23,200 100,375 147,155 Executive management 47,464 64,261 188,630 210,706
Total 4,044,435 6,949,865 289,005 357,861
The closing price of the Company’s SDRs at 31 December 2009 was SEK 174, and it ranged from SEK 107 to SEK 200 during 2009.
Performance graph Shown on page 32 is a performance graph that compares the Total Shareholder Return (TSR) of Unibet SDRs with the OMX Stockholm Price Index, this being the index where Unibet is listed and therefore the most appropriate comparison.
TSR is defined as the return shareholders would receive if they held a notional number of shares and received dividends on those shares over a period of time.
Peter Lindell Chairman Remuneration Committee
Unibet Group plc Annual Report and Accounts 2009 37 governance corporate governance Statement
Unibet groUp plc iS incorporated and regiStered The Chairman is responsible for the leadership of the Board; setting its agenda in malta and liSted on naSdaq omx nordic exchange and taking full account of the issues and concerns of all Board members; in Stockholm. ensuring effective communication with shareholders; taking the lead on Director induction and development; encouraging active engagement by all Unibet Group plc is required to: Directors; and ensuring that the performance of individuals and of the Board as a whole, and its Committees, is evaluated at least once a year. • Explain how it applies the main and supporting principles of the Swedish Code of Corporate Governance. The Chairman ensures that the Board is supplied with accurate, timely and clear • Confirm whether or not it complies with the Code’s provisions and, where information. Directors are encouraged to update their knowledge and familiarity it has not complied, to provide an explanation why not. with the Group through meetings with Senior Management. As part of the induction process, an induction pack is provided to non-executive Directors. On 1 July 2008, the Listing Rules for the NASDAQ OMX Nordic Exchange in Stockholm incorporated the Swedish Code of Corporate Governance for All Directors have access to the company secretary who is responsible for all listed companies. ensuring good information flows within the Board and its Committees and between Senior Management and non-executive Directors. The company The following statement on pages 38 to 40 has not been audited. secretary is also responsible for advising the Board, through the Chairman, on all corporate governance matters. Directors are encouraged to seek Directors independent or specialist advice or training at the Group’s expense where this The Board of Directors of Unibet Group plc is collectively responsible for the will add to their understanding of the Group in the furtherance of their duties. success of the Group and for its Corporate Governance and aims to provide entrepreneurial leadership of the Group within a framework of prudent and In accordance with Provision 8.1 of the Code, the Board has a process effective financial controls that enable risk to be assessed and managed. to formally evaluate its own performance and that of its Committees. The performance of the Board and its Committees has been the subject of Board As outlined on page 35, the Board comprises the Chairman and five Directors, discussion, led by the Chairman, to consider effectiveness against performance of which four are independent non-executive Directors. The Swedish Code criteria and potential risks to performance. The performance evaluations of the identifies the fundamental importance of independent non-executive Directors in Board have been structured in such a way as to ensure a balanced and objective ensuring the objective balance of a Board, and sets out criteria to be considered review of Directors’ performance by using a system of questionnaires intended in determining the independence of non-executive Directors. In accordance with to stimulate discussion of factors including performance and commitment. Provision 4.4 of the Code, the Board considers Kristofer Arwin, Peter Boggs, Daniel Johannesson, Peter Lindell and Staffan Persson to be independent non- Following these performance reviews, the Chairman is responsible for ensuring executive Directors. Anders Ström is Deputy Chairman of the Board. that the appropriate actions are taken. The evaluations provide a feedback mechanism to the Nomination Committee and have helped in identifying Board To ensure effectiveness, the Board’s composition brings together a balance performance objectives as well as individual actions such as training. of skills and experience appropriate to the requirements of the business. The composition of the Board and recommendations for the appointment of Remuneration and Directors and Officers Liability insurance Directors are dealt with by the Nomination Committee and its activities are set The general meeting establishes the principles and the maximum amount of out separately in this report. the Directors’ fees. Employees cannot receive Director’s fees. A Director can, during a short period of time, supply consultancy services, but only if this is more The Board is responsible to the shareholders for the Group’s overall strategy cost-effective and better than any external alternative. Any such consultancy and direction and it usually meets on a quarterly basis throughout the year. fee will be disclosed in the Annual Report. None of the Directors holds share A formal schedule sets out those matters specifically reserved for the Board options issued by the Company. Unibet has taken out Directors and Officers and its Committees. Those matters include decisions on Group strategy and Liability insurance covering the risk of personal liability for their services to the direction, acquisitions, disposals and joint ventures, capital structure, material Group. Cover is in place for an indemnity level of GBP 1 million. contracts, corporate governance and Group policies. Audit Committee Report The number of Board and Committee meetings attended by each of the The Audit Committee advises and makes recommendations to the Board on Directors during the year can be seen in the table on the following page. matters including financial reporting, internal controls, risk management, and the appointment of auditors. The role of the Committee is set out in its written The Board has a standard agenda, including receiving and considering reports terms of reference. from the Chief Executive Officer and the Chief Financial Officer on the Group’s operational performance, finances, ongoing strategy and risk profile, all of The Committee, which met five times during the year to review the interim which are considered at the quarterly meetings. Where appropriate, matters are reports etc., comprises two independent non-executive Directors, Kristofer Arwin delegated to the Audit, Legal, Nomination and Remuneration Committees, and and Staffan Persson. The Committee is chaired by Staffan Persson, a senior reports on their activities are included within this corporate governance statement. finance professional who has the relevant accounting and financial management expertise. Where appropriate, the Committee consulted with the Chairman of the Brief résumés of the Board and CEO can be found on page 63. Board, the Chief Executive Officer and the Chief Financial Officer regarding their proposals. The external auditors also attended three of the meetings. The Working Procedures of the Board of Directors The Board of Directors has adopted written instructions for the Chief Executive Responsibilities include monitoring the integrity of the financial statements Officer. The roles of the Chairman and Chief Executive Officer have been of the Group and any formal announcements relating to the Group’s financial established in writing to ensure the clear division of responsibilities, and this performance. The Committee has reviewed the Group’s financial statements has been agreed by the Board. At least once a year the Board of Directors will and formal announcements relating to the Group’s financial performance before review the strategy and visit the Group’s different office locations. Normally their presentation to the Board. In doing so, it considered accounting policies, the Board has a short meeting without the management, CEO or CFO in areas of judgment or estimation, and reporting requirements, as well as matters conjunction with each Board meeting. brought to their attention by the external auditors.
The Committee is responsible for reviewing the Group’s systems of internal control and risk management, and determines the scope of work undertaken by
38 Unibet Group plc Annual Report and Accounts 2009 the Chief Financial Officer, the Group Compliance and Security Officer Nomination Committee Report and the Head of Trading. It receives reports from the Chief Financial Officer, The Nomination Committee has written Terms of Reference to lead the process with whom the results are discussed on a regular basis. The Group Compliance for Board appointments and make recommendations to the AGM thereon. and Security Officer reports quarterly to the Audit Committee. The Nomination Committee met three times for the 2009 AGM. At the AGM on 13 May 2009, it was decided that the Nomination Committee shall consist The Committee remains satisfied that the controls in place, and the review of the Chairman of the Board and representatives from at least two of the process overseen by the Chief Financial Officer, the Group Compliance and other largest shareholder’s in the Company at the end of the third quarter. Security Officer and the Head of Trading, are effective in monitoring the The Nomination Committee shall appoint as its chairman the representative established systems. of the largest shareholder in terms of voting rights.
The Committee is responsible for making recommendations to the Board in The Nomination Committee for the 2010 AGM will consist of Anders Ström, relation to the appointment of external auditors. It is responsible for monitoring Committee Chairman, and shareholders Peter Lindell, Åsa Nisell from the independence and objectivity of the external auditors, and for agreeing Swedbank Robur, Johan Ståhl from Lannebo Fonder and Daniel Johannesson, the level of remuneration and the extent of non-audit services. During the year, Chairman of the Board. Daniel Johannesson, Anders Ström and Peter Lindell PricewaterhouseCoopers (Malta) and PricewaterhouseCoopers LLP (UK) are members of the Board. (‘PwC’), reported to the Committee on their audit strategy and the scope of audit work. The Committee has reviewed the performance of PwC and the level Remuneration Committee Report of non-audit fees paid to PwC during the year. These are disclosed in Note 4 on A report on Directors’ remuneration and the activities of the Remuneration page 51. The provision of non-audit services, except tax compliance and routine Committee is set out on pages 36 to 37. taxation advice, must be referred to the Committee where it is likely to exceed a pre-determined threshold of GBP 50,000. Any work that falls below that Communication with investors threshold must be pre-approved by the Chief Financial Officer. By monitoring In the interests of developing a mutual understanding of objectives, the Investor and restricting both the nature and quantum of non-audit services provided Relations manager has met regularly with institutional investors to discuss the by the external auditors, the Committee seeks to safeguard auditor objectivity publicly disclosed performance of the Group and its future strategy. Institutional and independence. investors have also been able to meet the Chief Executive Officer, the Chief g
Financial Officer, line managers and other key persons of the Group. overnance The Board remains satisfied that the Group’s systems of internal control and risk management, together with the work of the Chief Financial Officer, the The Board is kept informed of shareholder views and correspondence. Group Compliance & Security Officer and the Head of Trading, is effective in Corporate and financial presentations are regularly made to fund managers, monitoring, controlling and reporting the Group’s risks. An internal audit function brokers and the media, particularly at the announcement of interim and year end would have only limited additional benefit at this time due to the size of the results. Links to webcast presentations are published on the Group’s website. Group, although this matter is reviewed annually. All shareholders are invited to attend the AGM where they have the opportunity to put questions to the Directors, including the Chairmen of Board Committees. Legal Committee Report The Legal Committee’s task is to reflect, discuss and stimulate interaction At the AGM separate resolutions are proposed for each substantially different between the Board of Directors and the management. This gives the Board issue to enable all of them to receive proper and due consideration. Notice of the opportunity to increase awareness and to better understand the legal and the AGM and related papers are posted on the Group’s website between four political environments surrounding the Group, including the associated risks. and six weeks in advance of the meeting. Further information on the activities of The Committee, which met on four occasions during the year, comprises two the Group and other shareholder information is available via the Unibet Group’s independent non-executive Directors, Peter Lindell and Daniel Johannesson corporate website, www.unibetgroupplc.com. (Committee Chairman).
The Legal Committee does not make any decisions, which remain with the Board of Directors.
Board and Committee meeting attendance
Full Audit Legal Nomination Remuneration Name Board Committee Committee Committee Committee Kristofer Arwin 4 5 – – – Peter Boggs 4 – – – – Daniel Johannesson, Chairman 4 – 4 – – Peter Lindell 4 – 4 – 6 Staffan Persson 4 5 – 3 – Anders Ström, Deputy Chairman 4 – – 3 6
Unibet Group plc Annual Report and Accounts 2009 39 governance corporate governance Statement
The Board of Directors’ Report on Internal Control over Financial Statement of Compliance with the Swedish Code of Corporate Governance Reporting for the Financial Year 2009 Unibet does not comply with Provision 2.4 of the Code since a majority of members of the Nomination Committee were members of the Board Introduction of Directors, including Anders Ström who is both Deputy Chairman of the According to the Maltese Companies Act and the Swedish Code of Corporate Board of Directors and Chairman of the Nomination Committee. However Governance, the Board is responsible for internal control. This report has been this procedure to nominate the Nomination Committee was decided by prepared according to the Swedish Code of Corporate Governance Provisions shareholders at the 2009 AGM. 10.5 and 10.6 and is accordingly limited to internal control over financial reporting. This report, which has not been reviewed by the auditors, is not Unibet does not comply with Provision 10.1 of the Code, which requires part of the formal financial statements. the Audit Committee to have at least three members. Unibet considers that the Audit Committee as presently constituted is effective in meeting the Description requirements of Provision 10.2 of the Code. a. Control environment The Directors have ultimate responsibility for the system of internal controls With the exception of the matters noted above, the Directors believe that they and for reviewing its effectiveness. The system of internal control is designed to are in compliance with the Swedish Code of Corporate Governance. manage rather than eliminate the risk of failure to achieve business objectives. In pursuing these objectives, internal control can only provide reasonable and not absolute assurance against material misstatement or loss. b. Risk assessment The Executive management members are responsible for reviewing risks, and for identifying, evaluating and managing the significant risks applicable to their respective areas of business. Risks are reviewed and assessed on a regular basis by the Group Compliance and Security Officer, the Head of Trading, the Audit Committee and the Board. The effectiveness of controls is considered in conjunction with the range of risks and their significance to the operating circumstances of individual areas of the business. c. Control activities The Board is responsible for all aspects of the Group’s control activities.
The Audit Committee assists the Board in its review of the effectiveness of internal controls and is responsible for setting the strategy for the internal control review. In doing so, it takes account of the organisational framework and reporting mechanisms embedded within the Group, and the work of the Group Compliance & Security Officer and the Head of Trading.
Working throughout the Group, the role of the Group Compliance and Security Officer and the Head of Trading is to identify, monitor and report to the Board on the significant financial and operating risks faced by the Group to provide assurance that Unibet meets the highest standards of corporate governance expected by its stakeholders. d. Information and communication The Board receives regular formal reports from Executive management concerning the performance of the business, including explanations for material variations from expected performance and assessments of changes in the risk profile of the business that have implications for the system of internal control. In particular the Board receives direct periodic reports from the Group Compliance & Security Officer.
The Board also takes account of the advice of the Audit Committee, reports received from the external auditors, and any other related factors which come to its attention. e. Monitoring Further information concerning the activities of the Audit Committee in relation to the monitoring of Unibet’s internal controls, including the annual evaluation of the requirement to implement a special internal audit function and review of the financial reports published quarterly, is contained in the Audit Committee Report on pages 38 and 39.
On behalf of the Board Malta, 29 March 2010
Daniel Johannesson Peter Lindell Chairman and Director Director
40 Unibet Group plc Annual Report and Accounts 2009 accoUntS conSolidated income Statement
Year ended Year ended 31 December 31 December GBP 000 Note 2009 2008 Gross winnings revenue 3 138,318 123,445 Cost of sales 4 -17,641 -11, 0 4 0 Gross profit 120,677 112,405
Marketing costs 4 -36,637 -24,153 Administrative expenses 4 -51,289 -51,751 Profit from operations 3 32,751 36,501
Finance costs arising on bond repurchase 6 -1,353 -1,321 Other finance costs 6 -2,984 -25,725 Total finance costs 6 -4,337 -27,046 Finance income 7 480 1,625 Finance cost – net -3,857 -25,421 Share of (loss)/profit from associate 13 -12 4 Profit before tax 28,882 11,084
Income tax expense 8 -2,116 -2,313 Profit after tax 26,766 8,771 All the above amounts relate to continuing operations and are attributable to equity shareholders. Key ratios Note 2009 2008 Operating margin % (Profit from operations/gross winnings revenue for the year) 23.7 29.6 Return on total assets % (Profit after tax/average of opening and closing assets for the year) 12.2 4.0 Return on average equity % (EBIT/average of opening and closing equity for the year) 29.3 37.2 a Equity: asset ratio % 58 45 cco U
EBITDA margin % 30 37 nt S Net debt/EBITDA (rolling 12-month basis) 0.2 0.8 Employees at year end 465 412 Earnings per share GBP 10 0.957 0.314 Fully diluted earnings per share GBP 10 0.956 0.312 Number of shares at year end 20 28,258,038 28,241,092 Fully diluted number of shares at year end 28,322,407 28,241,092 Average number of shares 10 27,955,464 27,943,192 Average number of diluted shares 10 27,989,238 28,091,206
More detailed definitions can be found on page 64.
Statement of comprehenSive income Year ended Year ended 31 December 31 December GBP 000 2009 2008 Profit for the year 26,766 8,771
Other comprehensive income Currency translation adjustments taken to equity -136 9,909 Comprehensive income for the year 26,630 18,680
Profit and comprehensive income relate to continuing operations and are wholly attributable to equity holders. The translation adjustment relates primarily to foreign currency retranslation of goodwill and acquired intangibles and the net investment in the subsidiaries, to the closing exchange rate for each period.
Unibet Group plc Annual Report and Accounts 2009 41 accoUntS conSolidated balance Sheet
As at As at 31 December 31 December GBP 000 Note 2009 2008 Assets Non-current assets Goodwill 11 122,369 123,165 Other intangible assets 11 26,597 31,570 Investments in associates 13 – 119 Property, plant and equipment 12 2,952 3,993 Deferred tax asset 18 169 6,226 152,087 165,073 Current assets Trade and other receivables 15 9,538 8,927 Taxation recoverable 11,327 – Cash and cash equivalents 26 39,764 53,383 60,629 62,310 Total assets 212,716 227,383
Equity and liabilities Capital and reserves Share capital 20 141 141 Share premium 20 74,044 73,838 Currency translation reserve 9,921 10,057 Reorganisation reserve 20 -42,889 -42,889 Retained earnings 81,517 59,531 Total equity 122,734 100,678 Non-current liabilities Deferred tax liability 18 2,048 3,677 Borrowings 17 – 65,926 2,048 69,603 Current liabilities Trade and other payables 16 24,205 24,717 Customer balances 16 28,305 25,309 Tax liabilities 14,021 7,076 Borrowings 17 21,403 – 87,934 57,102 Total liabilities 89,982 126,705 Total equity and liabilities 212,716 227,383
The notes on pages 45 to 61 are an integral part of these financial statements.
The financial statements on pages 41 to 61 were authorised for issue by the Board of Directors on 29 March 2010 and were signed on its behalf by:
Daniel Johannesson Peter Lindell Chairman and Director Director
42 Unibet Group plc Annual Report and Accounts 2009 conSolidated Statement of changeS in eqUity
Currency Re- Share Share translation organisation Retained GBP 000 Notes capital premium reserve reserve earnings Total Balance as at 1 January 2008 141 73,838 148 -42,889 64,328 95,566
Comprehensive income Profit for the year – – – – 8,771 8,771 Other comprehensive income Foreign exchange differences on the translation of net equity – – 449 – – 449 investments in foreign enterprises Translation adjustment on goodwill and acquired intangibles 11 – – 9,460 – – 9,460 – – 9,909 – – 9,909 Total comprehensive income – – 9,909 – 8,771 18,680
Transactions with owners Share options – value of employee services 19 – – – – 404 404 Dividend paid 9 – – – – -13,972 -13,972 Total transactions with owners – –– – -13,568 -13,568 At 31 December 2008 20 141 73,838 10,057 -42,889 59,531 100,678
Comprehensive income Profit for the year – – – – 26,766 26,766 Other comprehensive income Foreign exchange differences on the translation of net equity – – 956 – – 956 investments in foreign enterprises Translation adjustment on goodwill and acquired intangibles 11 – – -1,092 – – -1,092 – – -136 – – -136 Total comprehensive income – – -136 – 26,766 26,630 a cco U nt S Transactions with owners Share options – value of employee services 19 – – – – 659 659 Proceeds of shares issued 19, 20 – 206 – – – 206 Disposal of treasury shares 19, 20 – – – – 988 988 Dividend paid 9 – – – – -6,427 -6,427 Total transactions with owners – 206 – – -4,780 -4,574 At 31 December 2009 20 141 74,044 9,921 -42,889 81,517 122,734
Unibet Group plc Annual Report and Accounts 2009 43 accoUntS conSolidated caSh flow Statement
Year ended Year ended 31 December 31 December GBP 000 Notes 2009 2008 Operating activities Profit from operations 32,751 36,501 Adjustments for: Depreciation of property, plant and equipment 12 1,741 1,868 Amortisation of intangible assets 11 7,400 7,918 Loss on disposal of property, plant and equipment 99 108 Share-based payment 19 659 404 Decrease/(increase) in receivables 630 -1,519 Increase in payables 3,107 9,253 Cash flows from operating activities 46,387 54,533 Income taxes paid -1,992 -1,197 Net cash generated from operating activities 44,395 53,336
Investing activities Acquisition of subsidiaries, net of cash acquired and debt assumed 354 -3,518 Additional investment in associate 13 – -34 Interest received 480 1,526 Interest paid -6,132 -8,319 Purchases of property, plant and equipment -837 -1,957 Purchases of intangible assets -2,642 -4,816 Net cash used in investing activities -8,777 -17,118
Financial activities Dividends paid 9 -6,427 -13,972 Proceeds of issue of new shares for share options 19,20 206 – Disposal of treasury shares 19,20 988 – Bond buy back 17 -64,266 -24,275 Proceeds from borrowings 17 21,602 – Repayment of borrowings – -9,687 Net cash used in financing activities -47,897 -47,934
Net decrease in cash and cash equivalents -12,279 -11,716
Cash and cash equivalents at the beginning of the year 53,383 56,047
Effect of foreign exchange rate changes -1,340 9,052 Cash and cash equivalents at the end of the year 39,764 53,383
44 Unibet Group plc Annual Report and Accounts 2009 noteS to the conSolidated financial StatementS
note 1: baSiS of preparation or free products), the arrangement is a multiple-element arrangement and These consolidated financial statements have been prepared in accordance the consideration receivable from the customer is allocated between the with International Financial Reporting Standards (IFRS) as adopted by the components of the arrangement using fair values. The amendment does EU, IFRIC interpretations and the Maltese Companies Act 1995, applicable not have a material impact on the Group’s financial statements. to companies reporting under IFRS as adopted by the EU. (b) Standards, amendments and interpretations to existing standards that are The consolidated financial statements have been prepared under the historical not yet effective and have not been early adopted by the Group cost convention, subject to modification where appropriate by the revaluation IFRS 3 (revised), ‘Business combinations’ (effective for accounting periods of financial assets and liabilities at fair value through profit or loss. The starting from 1 July 2009). The revised standard continues to apply the individual parent financial statements have been prepared separately. acquisition method to business combinations, with some significant changes. It will require all payments to purchase a business, including contingent The preparation of financial statements in conformity with IFRS requires the payments, to be recorded at fair value at the acquisition date. All acquisition- use of certain critical accounting estimates. It also requires management related costs should be expensed. The Group will apply the revised standard to exercise its judgment in the process of applying the Group’s accounting from 1 January 2010 to future business combinations. policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial IAS 27 (revised), ‘Consolidated and separate financial statements’ (effective statements are disclosed in Note 2. from 1 July 2009). The revised standard requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change (a) New and amended standards and interpretations effective from 1 January in control and these transactions will no longer result in goodwill or gains and 2009 and adopted by the Group losses. The standard also specifies the accounting when control is lost. The following interpretations are mandatory for accounting periods beginning Any remaining interest in the entity is re-measured to fair value and a gain or loss on or after 1 January 2009: is recognised in profit or loss. The Group will apply IAS 27 (revised) prospectively to transactions with non-controlling interests from 1 January 2010. IAS 1 (revised), ‘Presentation of financial statements’ (effective from 1 January 2009). The revised standard prohibits the presentation of items of income and IAS 38 (amendment), ‘Intangible assets’ (effective from 1 July 2009). The expenses (that is ‘non-owner changes in equity’) in the statement of changes amendment clarifies guidance in measuring the fair value of an intangible asset in equity, requiring ‘non-owner changes in equity’ to be presented separately acquired in a business combination and it permits the grouping of intangible from owner changes in equity in a statement of comprehensive income. As assets as a single asset if each asset has similar useful lives. The amendment is a result the Group presents in the consolidated statement of changes in not expected to result in a material impact on the Group’s financial statements. equity all owner changes in equity, whereas all non-owner changes in equity are presented in the consolidated statement of comprehensive income. The IFRS 5 (amendment), ‘Non-current assets held-for-sale and discontinued Group has applied the revised standard from 1 January 2009 and has restated operations’ (effective from 1 July 2009). The amendment provides clarification comparative information so that it is in conformity with the revised standard. that IFRS 5 specifies the disclosures required in respect of non-current assets The change in accounting policy impacts on presentation only. (or disposal groups) classified as held-for-sale or discontinued operations. The amendment is not expected to result in a material impact on the Group’s IFRS 2 (amendment), ‘Share-based payment’ (effective from 1 January 2009). financial statements. This amendment provides clarifications in respect of the treatment of vesting conditions and cancellations. The Group has applied the revised standard IAS 1 (amendment), ‘Presentation of financial statements’. The amendment a cco U from 1 January 2009. The amendment does not have a material impact on the provides clarification that the potential settlement of a liability by the issue of
Group’s financial statements. equity is not relevant to its classification as current or non-current. The Group nt S will apply IAS 1 (amendment) from 1 January 2010 but its adoption is not IFRS 7 (amendment), ‘Financial Instruments – Disclosures’ (effective from 1 expected to result in a material impact on the Group’s financial statements. January 2009). The amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure IFRS 9 (amendment), ‘Financial instruments’ (effective 1 January 2013). The of fair value measurements by level of fair value hierarchy. Additional disclosures Standard covers the classification and measurement of financial assets. The have been made throughout the financial statements. IASB intends to expand IFRS 9 to add new requirements for the classification and measurement of financial liabilities, derecognition of financial instruments, IFRS 8, ‘Operating segments’ (effective from 1 January 2009). IFRS 8 replaces impairment and hedge accounting. IAS 14, ‘Segment reporting’, and requires a ‘management approach’, under which segment information is presented on the same basis as that used for note 2a: SUmmary of Significant accoUnting policieS internal reporting purposes. The segments are reported in a manner that is The principal accounting policies applied in the preparation of these consistent with the internal reporting provided to the chief operating decision- consolidated financial statements are set out below. The policies have been maker. IFRS 8 is applicable to all entities whose debt or equity instruments consistently applied to all years presented, unless otherwise stated. are traded in a public market. As shown in Note 3, the Group has modified the classification of operating segments in 2009 as a result of adoption of IFRS 8 Basis of consolidation and of changes in the internal management of the business. The consolidated financial statements incorporate the financial statements of Unibet Group plc (‘the Company’) and enterprises controlled by the IAS 23 (Amendment), ‘Borrowing costs’ (effective from 1 January 2009). Company (its subsidiaries) made up to 31 December each year. Control is The amendment to the standard requires an entity to capitalise borrowing costs achieved where the Company has the ability to govern the financial and directly attributable to the acquisition, construction or production of a qualifying operating policies of an investee enterprise so as to obtain benefits from asset (one that takes a substantial period of time to get ready for use or sale) its activities. Where necessary, adjustments are made to the financial as part of the cost of that asset. The option of immediately expensing those statements of subsidiaries to bring the accounting policies used in line with borrowing costs will be removed. Further, the IASB has amended the definition those used by other members of the Group. All intercompany transactions of borrowing costs so that interest expense is calculated using the effective and balances between Group companies are eliminated on consolidation. interest rate method defined in IAS 39 ‘Financial Instruments’ recognition Subsidiaries are consolidated, using the purchase method of accounting, and measurement. The amendment does not have a material impact on the from the date on which control is transferred to the Group and cease to Group’s financial statements. be consolidated from the date on which control is transferred from the Group. On acquisition, the assets and liabilities and contingent liabilities of IFRIC 13, ‘Customer loyalty programmes’ (effective for accounting periods a subsidiary are measured at their fair values at the date of acquisition. All starting from 1 July 2008). IFRIC 13 clarifies that where goods or services associate entities are accounted for by applying the equity accounting method. are sold together with a customer loyalty incentive (for example, loyalty points
Unibet Group plc Annual Report and Accounts 2009 45 accoUntS noteS to the conSolidated financial StatementS
Revenue recognition contributions have been paid. The contributions are recognised as employee Gross winnings revenue on sports betting represents the net receipt of bets benefit expense when they are due. The Group does not provide any other placed and payouts made within the consolidated entity for the financial year. post-retirement benefits. For the non-sports betting segment, gross winnings revenue equates to gross turnover. Taxation The tax expense represents the sum of the tax currently payable, and Revenue is recognised when the amount of revenue can be measured reliably, movements in the deferred tax provision. and it is probable that future economic benefits will flow after specific criteria have been met. Where revenue can be measured reliably but transactions The tax currently payable is based on taxable profit for the year. Taxable have not closed at balance sheet date, the revenue will be presented within the profit differs from net profit as reported in the income statement because it balance sheet as deferred income. excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group considers: i) gross winnings revenue to be financial instruments in which betting The Group’s liability for current and deferred tax is calculated using tax rates transactions are shown net, i.e. stakes (or gross turnover) less payouts, and that have been enacted or substantially enacted by the balance sheet date. ii) the gains and losses arising as a result of customer bonuses (or free bets) as revenue, which is measured at the value of the consideration received or Deferred tax is the tax expected to be payable or recoverable on differences receivable from customers. between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit, and Segment reporting is accounted for using the balance sheet liability method. Deferred tax liabilities Following adoption of IFRS 8 in 2009, operating segments are reported in a are generally recognised for all taxable temporary differences and deferred tax manner consistent with the internal reporting provided to the chief operating assets are recognised to the extent that it is probable that taxable profits will be decision-maker. The chief operating decision-maker, who is responsible available against which deductible temporary differences can be utilised. Such for allocating resources and assessing the performance of the operating assets and liabilities are not recognised if the temporary difference arises segments, has been identified as the Chief Executive Officer who, subject to from the initial recognition (other than in a business combination) of other authorisation by the Board, makes strategic decisions. Comparative figures assets and liabilities in a transaction that affects neither the tax profit nor the for 2008 have been restated in line with the new presentation of operating accounting profit. segments. Deferred tax liabilities are recognised for taxable temporary differences arising Leasing on investments in subsidiaries and associates and interests in joint ventures, Unibet’s leases are all operating leases (leases in which a significant portion of the except where the Group is able to control the reversal of the temporary risks and rewards of ownership are retained by the lessor). Rentals payable under difference and it is probable that the temporary difference will not reverse operating leases are charged to the income statement on a straight-line basis over in the foreseeable future. the term of the relevant lease (net of any incentive received from the lessor). The carrying amount of deferred tax assets are reviewed at each balance Foreign currencies sheet date and reduced to the extent that it is no longer probable that sufficient The Group operates in Malta and in a number of international territories. The taxable profit will be available to allow all or part of the asset to be recovered. presentation currency of the consolidated financial statements is GBP since that is the currency in which the shares of the Company are denominated. Deferred tax is calculated at the tax rates that are expected to apply in the Transactions in currencies other than the functional currency of the company period when the liability is settled or the asset realised. Deferred tax is charged in which they are recorded are initially recorded at the rates of exchange or credited in the income statement, except when it relates to items charged or prevailing on the dates of transactions. Monetary assets and liabilities credited directly to equity, in which case the deferred tax is also dealt with in equity. denominated in such currencies are re-translated at the rates prevailing on Deferred tax is offset where appropriate. the balance sheet date. Profits and losses arising on exchange are included in the net profit or loss for the year. Gains and losses related to financing, Goodwill including unrealised gains and losses arising on the retranslation of the bond, Goodwill arising on an acquisition of a subsidiary undertaking is the difference are recognised within finance costs. Gains and losses arising on operations between the fair value of the consideration paid and the fair value of the are recognised within administrative expenses. identifiable assets and liabilities acquired. Goodwill is carried at cost, less accumulated impairment losses. Goodwill and fair value adjustments arising The Group does not enter into forward contracts nor options to hedge on the acquisition of a foreign entity are treated as assets and liabilities of its exposure to foreign exchange risks. Translation differences related to the acquired entity and translated at the closing rate. Adjustments arising on retranslation of the bond are recognised in the income statement as part of translation are taken to the currency translation reserve. Impairment tests on finance costs. the carrying value of goodwill are undertaken every year. Impairment losses on goodwill are not reversed. On consolidation, the assets and liabilities of the Group’s overseas operations are translated at exchange rates prevailing on the balance sheet date. Income Other intangible assets and expense items are translated at the average exchange rates for the period. Expenditure on research activities is recognised at cost as an expense in the Exchange differences arising on the translation of subsidiary reserves are period in which it is incurred. classified as equity and transferred to the Group’s translation reserve. An internally-generated development intangible asset is recognised at cost only Goodwill and fair value adjustments arising on acquisition of a foreign entity if all of the following criteria are met: are treated as assets and liabilities of the foreign entity and translated • An asset is created that can be identified (such as a database or software) at the closing rate. • It is probable that the asset created will generate future economic benefits • The development cost of the asset can be measured reliably. Retirement benefit costs and pensions The Group does not operate any defined benefit pension schemes for Where no internally-generated intangible asset can be recognised, development employees or Directors. Certain Group companies do make contributions expenditure is recognised as an expense in the period in which it is incurred. to defined contribution pension schemes for employees on a mandatory or Internally generated intangible assets are amortised on a straight-line basis contractual basis. The Group has no further payment obligations once the over three to five years.
46 Unibet Group plc Annual Report and Accounts 2009 Intangible assets identified as a result of a business combination are dealt with (b) Loans and receivables at fair value in line with IAS 38, and are brought on to the consolidated balance Loans and receivables are non-derivative financial assets with fixed or sheet at the date of acquisition. Where they arise as a result of the acquisition of a determinable payments that are not quoted in an active market. They are foreign entity they are treated as assets of the acquired entity and are translated included in current assets, except for maturities greater than 12 months after at the closing rate. Acquired intangibles include brands, customer databases the balance sheet date. These are classified as non-current assets. The Group’s and trade names which are being amortised over a period of three to five years, loans and receivables comprise trade and other receivables and cash, and cash as the Directors believe this to be their useful economic life. The ‘Maria’ brand equivalents in the balance sheet. is considered to have an indefinite economic life and is therefore not subject to amortisation, but is instead subject to an annual impairment review. Regular purchases and sales of financial assets are recognised on the trade-date – the date on which the Group commits to purchase or sell the asset. Computer software Investments are initially recognised at fair value plus transaction costs for all Acquired computer software licences are capitalised on the basis of the costs financial assets not carried at fair value through profit or loss. Financial assets incurred to acquire and bring to use the specific software. These costs are carried at fair value through profit or loss are initially recognised at fair value and amortised over their estimated useful life of three years. Costs associated with transaction costs are expensed in the income statement. Financial assets are maintaining computer software are expensed as incurred. derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all Impairment of non-financial assets risks and rewards of ownership. Loans and receivables are carried at amortised Assets that have an indefinite useful life, such as goodwill, are not subject to cost using the effective interest method. amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in Gains or losses arising from changes in the fair value of the ‘financial assets at circumstances indicate that the carrying amount may not be recoverable. An fair value through profit or loss’ category are presented in the income statement impairment loss is recognised for the amount by which the asset’s carrying within gross winnings revenue. amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. The translation differences on monetary securities are recognised in the consolidated income statement, while translation differences on non-monetary Property, plant and equipment securities are recognised in the statement of changes in equity. The Group Fixtures and equipment are stated at cost less accumulated depreciation and assesses at each balance sheet date whether there is objective evidence that any recognised impairment loss. a financial asset or a group of financial assets is impaired.
Depreciation is charged so as to write off the cost or valuation, less the Trade and other receivables estimated residual value, of the assets over their estimated useful lives, using Trade receivables are recognised initially at fair value and subsequently the straight-line method, on the following bases: measured at amortised cost using the effective interest method, less any provision for impairment that is required when there is objective evidence that Plant and office equipment 3 years the Group will not be able to collect all amounts due according to the original Fixtures and fittings 3-5 years term of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or
The gain or loss arising on the disposal or retirement of an asset is determined delinquency in payments (more than 30 days overdue) are considered indicators a cco U as the difference between the sales proceeds and the carrying amount of the that the receivable is impaired. The amount of the provision is the difference asset and is recognised in the income statement. between the assets’ carrying value and the present value of estimated future nt S cash flows, discounted at the original effective interest rate. The residual values of assets and their useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Financial liabilities Financial liabilities are classified as financial liabilities at fair value through profit If any impairment is identified in the carrying value of an asset, it is written down or loss or as financial liabilities measured at amortised cost, as appropriate. The to its recoverable amount. Group determines the classification of its financial liabilities at initial recognition.
Share capital The measurement of financial liabilities depends on their classification (i) Ordinary shares are classified as equity. Incremental costs directly attributable financial liabilities at fair value through profit or loss are carried on the balance to the issue of new shares or options are shown in equity as a deduction, net of sheet at fair value with gains or losses recognised in the income statement; and tax, from the proceeds. Where any Group company purchases the Company’s (ii) financial liabilities measured at amortised cost are initially recognised at fair equity share capital, the consideration paid, including any directly attributable value and subsequently measured at amortised cost using the effective interest incremental costs (net of income taxes) is deducted from equity attributable to method. Amortised cost is calculated by taking into account any issue costs, the Company’s equity holders until the shares are cancelled or reissued. Where and any discount or premium on settlement. Gains and losses arising on the such shares are subsequently re-issued, any consideration received, net of any repurchase, settlement or cancellation of liabilities are recognised respectively directly attributable incremental transaction costs and the related income tax in interest and other revenues and finance costs. effects, is included in equity attributable to the Company’s equity holders. Trade payables Financial assets Trade payables, including customer balances, are recognised initially at fair The Group classifies its financial assets in the following categories: at fair value value and subsequently measured at amortised cost using the effective interest through profit or loss and loans and receivables. The classification depends method. on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Borrowings and finance costs Borrowings are initially recognised at fair value net of transaction costs (a) Financial assets at fair value through profit or loss incurred. Borrowings are subsequently stated at amortised cost; any Financial assets at fair value through profit or loss are financial assets held for difference between the proceeds (net of transaction costs) and the trading. A financial asset is classified in this category if acquired principally for redemption value is recognised in the income statement over the period of the purpose of selling in the short term. Assets in this category are classified as the borrowings using the effective interest method. Borrowings are classified current assets. as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.
Unibet Group plc Annual Report and Accounts 2009 47 accoUntS noteS to the conSolidated financial StatementS
Share-based employee remuneration Risk management is managed by the finance team reporting through the Chief The Group operates a number of equity-settled share-based compensation Financial Officer to the Board of Directors. The Board of Directors supervises plans, under which Group companies receive services from employees strategic decisions, including the management of the Group’s capital structure. as consideration for equity instruments (options) in Unibet. The fair value of the employee services received in exchange for the grant of options is Market risk recognised as an expense. The total amount to be expensed is determined Market risk is the risk that Unibet will lose money on its business due to by reference to the fair value of the options granted, excluding the impact of unfavourable outcomes on the events where the Group offers odds. The Group any service or vesting conditions. The total amount expensed is recognised has adopted specific risk management policies that control the maximum risk over the vesting period of the options, which is usually three years. level for each sport or event where the Group offers odds. The results of the most popular teams in major football leagues comprise the predominant market At the end of each reporting period, the Group revises the estimates of risk. Through diversification, which is a key element of Unibet’s business, the the number of options that are expected to vest. It recognises the impact risk is spread across a large number of events and sports. See the graph on of the revision to original estimates, if any, in the income statement, with a page 24 for more information on the volatility of the sports betting margin. corresponding adjustment to equity. The heads of Odds compilation and Risk management are responsible for day-to- The proceeds received net of any direct costs are credited to share capital and day monitoring of Unibet’s market risk. It is also their responsibility to advise the share premium when options are exercised. odds compilers and risk managers on appropriate risk levels for certain events.
Cash and cash equivalents, and finance income The Compliance officer and the head of sports betting jointly assess risk levels Cash and cash equivalents includes cash in hand, deposits held at call with for individual events as well as from a longer-term perspective. Independent banks, other short-term highly liquid investments with original maturities of three staff make random risk evaluations for the various regions. months or less and bank overdrafts. On non-sports betting, Unibet does not usually incur any significant financial risk, Finance income is recognised on bank balances as and when it is receivable. except for the risk of fraudulent transactions considered within credit risk below.
Dividend distribution Foreign exchange risk Dividends are recognised as a liability in the period in which the dividends are The Group operates internationally and in addition to GBP sterling, is exposed approved by the Company’s shareholders. Interim dividends are recognised to foreign exchange risk arising from various currency exposures, primarily when paid. with respect to the euro, Swedish kronor, Norwegian kroner, Danish kroner, Swiss franc and US dollar. Foreign exchange risk arises from future commercial note 2b: critical accoUnting eStimateS and aSSUmptionS transactions, recognised assets and liabilities and net investments in Estimates and judgments are continually evaluated and are based on historical foreign operations. experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes The Group’s operating cash flows provide a natural hedge of operating currency estimates and assumptions concerning the future. The resulting accounting risks, since deposits and pay-outs to customers in different territories are estimates will, by definition, seldom equal the related actual results. The matched in the same currency. estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next The Group has certain investments in foreign operations, whose net assets financial year are discussed below. are exposed to foreign currency translation risk. In addition, the Group reports in GBP sterling, which is the currency in which its own share capital is Impairment of goodwill and other intangible assets denominated, although it is incorporated and trading in Malta, which converted The Group tests annually whether goodwill and other intangible assets have to the euro with effect from 1 January 2008. suffered any impairment, in accordance with the accounting policy stated above. The recoverable amount of cash-generating units has been determined based The spread of the Group’s operations, including material revenue and expenses on value-in-use calculations which require the use of estimates. See Note 11. denominated in many different currencies, and taking into account the fact that customers can trade with the Group in currencies other than the currency of Income taxes their territory of residence, makes it impractical to isolate the impact of single The Group is subject to income taxes in numerous jurisdictions. Significant currency movements on the results from operations. During 2009 the rate of judgment is required in determining the worldwide provision for income taxes. exchange of the euro weakened against GBP by 7.2% (from a rate of EUR 1.05 There are many transactions for which the ultimate tax determination is per GBP to a rate of EUR 1.126 per GBP). The rate of exchange of the Swedish uncertain during the ordinary course of business. kronor weakened by 1.2% (from a rate of SEK 11.41 per GBP to a rate of SEK 11.544 per GBP). The main currency movements during 2009 occurred during Legal environment the second and third quarters of the year. These movements in some of the The Group operates in a number of markets in which its operations may be Group’s principal trading currencies contributed to the overall foreign exchange subject to litigation risks, as highlighted on pages 28 and 29. The Group gain on operations as shown in Note 4 on page 51 and to the foreign exchange routinely makes estimates concerning the potential outcome of such risks. gain on the bond as shown on Note 6 on page 52. Additional foreign exchange disclosures are contained in Note 16 on page 55. note 2c: financial riSk management Financial risk factors In relation to borrowings of the Group at the end of the financial year, as the The Group’s activities expose it to a variety of financial risks: market risk loan issued in December 2009 is denominated in euros, there is a currency (including currency risk and interest rate risk), credit risk and liquidity risk. The translation exposure related to that financial liability. Based on the exchange Group’s overall risk management programme focuses on the unpredictability rate between the euro and GBP at 31 December 2009, a 5% fall in the of the Group’s markets and seeks to minimise potential adverse effects on the value of the GBP against the euro would give rise to an exchange loss of Group’s financial performance. approximately GBP 1.1 million, while a 5% gain in the value of the GBP against the euro would give rise to an exchange gain of approximately GBP 1 million. Until such time as the loan becomes repayable, such translation gains and losses are unrealised. The potential translation gains and losses arising on the loan would be offset to the extent that the Group generates positive future cash flows in euros.
48 Unibet Group plc Annual Report and Accounts 2009 There is no longer any currency translation exposure in relation to the bond, The principal credit risk that the Group faces in its gaming operations comes since this was repaid in full on 22 December 2009, as explained further in from the risk of fraudulent transactions and the resulting charge-backs from Note 17 on page 55. banks and other payment providers. The Group has a Fraud department that is independent of its Finance function that investigates each case that is reported Interest rate risk and also monitors the overall level of such transactions in connection with The Group interest rate risk was managed during the year through the changes in the business of the Group, whether in terms of new markets, new negotiation of a fixed rate on the bond issued in December 2007, and on the products or new payment providers. See also Note 2F below. bank loan drawn down in December 2009. Liquidity risk The substantial majority of the Group’s liquid resources are held in short- Prudent liquidity risk management implies maintaining sufficient cash and term accounts in order to provide the necessary liquidity to fund the Group’s availability of funding for the business. The Group ensures adequate liquidity operations, so there is no significant exposure to interest rate risk in respect of through the management of rolling cash flow forecasts, the approval of investment the Group’s interest-bearing assets. decisions by the Board and the negotiation of appropriate financing facilities. The Group also monitors adherence to debt covenants related both to the bank loans Credit risk and the bond, in accordance with the conditions of those instruments. The Group manages credit risk on a group-wide basis. The Group does not in normal circumstances offer credit to any customers and therefore the only The maturity of the Group’s borrowings is disclosed in Note 17 on page 55. The exposure to credit risk in respect of its sports betting business arises in respect Group’s financial liabilities of GBP 73.9 (2008: 57.1) million all mature in less of the limited trading activities that it occasionally conducts with other parties in than one year. order to lay off its exposure. In non-sports betting the Group works with a small number of partners and at any time may have a small degree of credit exposure.
The table below analyses the Group’s financial liabilities based on the remaining period at the balance sheet date. The amounts disclosed in the table are the contractual undiscounted cash flows.
At 31 December 2009 At 31 December 2008
Less than Between Between Less than Between Between GBP 000 1 year 1 and 2 years 2 and 5 years 1 year 1 and 2 years 2 and 5 years Bond and related interest1 – – – 6,527 73,818 – Bank and other borrowings 21,403 – – – – – Trade and other payables 52,510 – – 50,026 – –
1 The amount reported for the bond and related interest does not take account of repurchases of the bond made after 31 December 2008, which total EUR 4.9 million (2008: GBP 4.667 million at the closing rate).
note 2d: capital riSk management note 2e: fair valUe eStimation a cco U Unibet’s objectives when managing capital are to safeguard the Group’s ability The carrying value less impairment provision of trade and other receivables and to continue as a going concern in order to provide returns for shareholders and trade and other payables are assumed to approximate their fair values. The fair nt S benefits for other stakeholders and to maintain an optimal capital structure both value of financial liabilities for disclosure purposes is estimated by discounting to reduce the cost of capital and to provide appropriate funding for expansion the future contractual cash flows at the current market interest rate that is of the business. Unibet has a consistent record of positive operating cash flows available to the Group for similar financial instruments. as well as significant ability to manage the timing and extent of discretionary expenditure in the business. Although the balance sheet at 31 December 2009 note 2f: credit qUality of financial aSSetS showed net current liabilities, the Group expects to move into a net current The credit quality of financial assets that are neither past due nor impaired can asset position in 2010. be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue Since Unibet does not have significant trade receivables other than payment new shares or sell assets. solution providers, the credit risk associated with its normal operations is principally in relation to fraudulent transactions as described in Note 2C above. Unibet monitors capital on the basis of the gearing ratio, which is calculated as net debt divided by total capital. Net debt is calculated as total borrowings Unibet uses a large number of banks and payment solution providers both in (including customer balances) less cash and cash equivalents. Total capital is order to provide maximum access to markets and convenience for customers calculated as ‘equity’ as shown in the consolidated balance sheet plus net debt. and also to ensure that credit risk in banking relationships is spread.
The gearing ratios at 31 December 2009 and 2008 were as follows:
GBP 000 Note 2009 2008 Total borrowings 17 21,403 65,926 Customer balances 16 28,305 25,309 Less: cash and cash equivalents -39,764 -53,383 Net debt 9,944 37,852 Total equity 122,734 100,678 Total capital 132,678 138,530 Gearing ratio 7% 27%
Unibet Group plc Annual Report and Accounts 2009 49 accoUntS noteS to the conSolidated financial StatementS
The credit ratings of Unibet’s principal banking partners at 31 December 2009, note 3: operating SegmentS based on publicly reported Fitch ratings, are as follows: Management has determined the operating segments based on the reports reviewed by the CEO and Executive management team and provided to the GBP 000 2009 2008 Board, which are used to make strategic decisions. AA 417 432 Management considers the business primarily from a geographic perspective and during 2009 has reorganised the business to reinforce the primary role of AA- 18,238 15,850 territory management in driving the business forward. Products are an important A+ 10,929 27,719 part of Unibet’s operational matrix but the product teams are considered as A 2,456 - suppliers of products and services to the territory managers. This reflects the fact that products may be sourced both internally and externally from A- 940 879 independent suppliers. Not rated 5,645 5,099 Where products, such as the Sportsbook, are sourced internally, it is Unibet’s Other 1,139 3,404 intention that the provision of the products and related services should be Total cash and cash equivalents 39,764 53,383 conducted on a professional basis, consistent with Unibet’s strategy of offering such products on a business-to-business basis to external customers in such a way that the integrity of the offering is assured. It should be noted that the change in the profile of credit ratings reflects the overall changes in the banking market and does not indicate that the Group The reportable operating segments derive their revenues from online sports and has changed its attitude to risk. Unibet continually monitors its credit risk non-sports betting operations. with banking partners and did not incur any losses during 2009 as a result of The primary measure used by the CEO and Executive management to assess bank failures. the performance of operating segments is gross profit, which is defined as Not rated consists of payment solution providers where credit risk is managed gross winnings revenue (net of commissions and bonuses), less cost of sales. by maintaining Unibet funds in segregated accounts. This measurement basis excludes central overheads incurred in support of the integrated operating model applied by Unibet in order to derive maximum Other consists of a large number of banks, none of whom held more than 3% of operational efficiency. the Group’s total cash and cash equivalents at 31 December 2009 and 2008. None of the financial assets that are fully performing have been renegotiated Unibet does not allocate such central operating and administrative expenses by during the year. segment since any allocation would be arbitrary. The measure also excludes the effects of equity-settled share-based payments, depreciation and amortisation, The maximum exposure to credit risk for cash and cash equivalents, receivables, and finance costs and income. and other financial assets is represented by their carrying amount. Unibet operates an integrated business model and does not allocate either assets or liabilities of the operating segments in its internal reporting, except for certain acquired intangibles as shown in the tables below.
The segment information provided to the CEO and Executive management team for the reportable segments during the year ended 31 December 2009 is as follows:
31 December 2009 Central, Eastern and GBP 000 Nordic Region Western Europe Southern Europe Other Total Revenue Gross winnings revenue from external customers 66,318 56,424 19,943 1,485 144,170 Free Bets -2,014 -2,538 -1,265 -35 -5,852 Gross winnings revenue as reported 64,304 53,886 18,678 1,450 138,318 Cost of sales -3,968 -5,551 -5,474 -2,648 -17,641 Gross profit 60,336 48,335 13,204 -1,198 120,677
Marketing costs – – – – -36,637 Administrative expenses – – – – -51,289 Profit from operations – – – – 32,751
Assets by reportable segments Goodwill 49,628 61,830 10,911 – 122,369 Intangibles acquired through business combinations 15,294 611 108 – 16,013
Other assets not allocated to reportable segments Other intangible assets – – – 10,584 10,584 Property, plant and equipment – – – 2,952 2,952 Deferred tax assets – – – 169 169 Trade and other receivables – – – 9,538 9,538 Taxation recoverable – – – 11,327 11,327 Cash and cash equivalents – – – 39,764 39,764 64,922 62,441 11,019 74,334 212,716
Liabilities Liabilities are not allocated by reportable segment in the internal management reporting of Unibet.
50 Unibet Group plc Annual Report and Accounts 2009 The segment information provided to the CEO and Executive management team for the reportable segments during the year ended 31 December 2008 is as follows:
31 December 2008 Central, Eastern and GBP 000 Nordic Region Western Europe Southern Europe Other Total Revenue Gross winnings revenue from external customers 67,446 45,742 14,292 727 128,207 Free Bets -1,885 -1,660 -1,105 -112 -4,762 Gross winnings revenue as reported 65,561 44,082 13,187 615 123,445 Cost of sales -1,763 -4,738 -2,235 -2,304 -11,040 Gross profit 63,798 39,344 10,952 -1,689 112,405
Marketing costs – – – – -24,153 Administrative expenses – – – – -51,751 Profit from operations – – – – 36,501
Assets by reportable segments Goodwill 50,454 61,804 10,907 – 123,165 Intangibles acquired through business combinations 16,910 1,575 278 – 18,763
Other assets not allocated to reportable segments Other intangible assets – – – 12,807 12,807 Investment in associate – – – 119 119 Property, plant and equipment – – – 3,993 3,993 Deferred tax assets – – – 6,226 6,226 Trade and other receivables – – – 8,927 8,927 Cash and cash equivalents – – – 53,383 53,383 67,364 63,379 11,185 85,455 227,383
Liabilities Liabilities are not allocated by reportable segment in the internal management reporting of Unibet. Product revenues a
Gross winnings revenue by principal product groups: cco U
GBP 000 2009 2008 nt S
Sports betting 51,166 41,152 Non-sports betting 87,152 82,293 138,318 123,445 note 4: expenSeS by natUre
31 December 31 December GBP 000 2009 2008 Cost of sales 17,641 11,040 Marketing costs 36,637 24,153
Administrative expenses Annual statutory audit 315 379 Operating lease rentals 1,261 1,459 Depreciation of property, plant and equipment 1,741 1,868 Amortisation of intangibles 7,400 7,918 Loss on disposal of property, plant and equipment and intangibles 99 108 Staff costs 21,033 18,929 Research and development expenditure 6,084 5,972 Foreign exchange differences on operations -1,114 -1,230 Other 14,470 16,348 Total administrative expenses 51,289 51,751 Total expenses 105,567 86,944
Total administrative expenses include fees paid to PwC for non-audit services, comprising of GBP 84,000 for tax advisory and compliance services (2008: GBP 150,000), and GBP 50,000 for other assurance services (2008: GBP 50,000).
Unibet Group plc Annual Report and Accounts 2009 51 accoUntS noteS to the conSolidated financial StatementS
note 5: Staff coStS 31 December 31 December The work of all employees relates principally to marketing of sports betting and GBP 000 2009 2008 non-sports betting products. Profit before tax 28,882 11,084 31 December 31 December Taxation at the basic income tax rate of 35% -10,109 -3,879 Average number of employees 2009 2008 (2008: 35%) Finance, administration and management 69 59 Effects of: Marketing and customer service 175 186 Non-utilisation of tax losses -571 1,874 Gaming 107 80 Double-taxation relief 40 136 Research and development 67 60 Tax refund 9,163 10,036 418 385 Overseas tax rates 70 -26 Staff costs can be broken down as follows: Items of income/expenditure not taxable/deductible -2,377 -10,667 Other 1,793 202 31 December 31 December GBP 000 2009 2008 Reversal of prior years’ deferred tax provision -125 11 Wages and salaries 17,439 16,069 Tax expense -2,116 -2,313 Share option charge – value of employee services 659 404 The tax refund of GBP 9,163,000 (2008: GBP 10,036,000) represents Malta Social security costs 2,503 2,358 tax recoverable by the Company in accordance with applicable fiscal legislation Other pension costs 432 98 on intra-Group dividends distributed during the year. 21,033 18,929 The main item of income/expenditure not taxable/deductible as shown above, is in relation to finance costs, including the foreign exchange gain/losses on The remuneration of the Directors and Executive management is disclosed borrowings. on page 37. note 9: dividendS note 6: finance coStS 31 December 31 December 31 December 31 December GBP 000 2009 2008 GBP 000 2009 2008 Dividend paid GBP 0.23 per share 6,427 13,972 Interest on bond 6,190 7,567 (2008: GBP 0.50 per share) Other loan interest payable 305 225 In addition the Board of Directors is proposing a final dividend in respect of the Finance costs on bond repurchase 1,353 1,321 financial year ending 31 December 2009 of GBP 0.71 per ordinary share/SDR, Foreign exchange (gain)/loss on borrowings -3,511 17,933 which will absorb an estimated GBP 20.0 million of shareholders’ funds. It will 4,337 27,046 be paid on 17 May 2010 to shareholders who are on the Euroclear Sweden (formerly VPC) register on 11 May 2010. Foreign exchange gains or losses on operating activities are included within operating costs. note 10: earningS per Share The calculation of the basic and diluted earnings per share is based on the note 7: finance income following data:
31 December 31 December 31 December 31 December GBP 000 2009 2008 GBP 000 2009 2008 Interest on bank deposits 480 1,625 Earnings 480 1,625 Earnings for the purposes of basic earnings 26,766 8,771 per share note 8: income tax expenSe Earnings for the purposes of diluted earnings 26,766 8,771 per share 31 December 31 December GBP 000 Note 2009 2008 Number of shares Current tax: Weighted average number of ordinary shares for 27,955,464 27,943,192 the purposes of basic earnings per share Income tax credit/(expense) 2,072 -5,268 Effect of dilutive potential ordinary shares – 33,774 148,014 2,072 -5,268 Share options Deferred tax: Weighted average number of ordinary shares for 27,989,238 28,091,206 Deferred tax (expense)/credit 18 -4,188 2,955 the purposes of diluted earnings per share -4,188 2,955 Earnings per share GBP Total tax expense -2,116 -2,313 Basic earnings per share 0.957 0.314 Fully diluted earnings per share 0.956 0.312 Income tax in Malta is calculated at a basic rate of 35% (2008: 35%) of the estimated assessable profit for the year. Taxation for other jurisdictions is The nominal value per share is GBP 0.005. calculated at the rates prevailing in the respective jurisdictions. The tax expense for the year can be reconciled to the profit per the income statement as follows:
52 Unibet Group plc Annual Report and Accounts 2009 note 11: intangible aSSetS
Other intangible assets Development Computer Customer Brands GBP 000 Note Goodwill costs software database and other Total Cost At 1 January 2008 112,176 15,556 4,453 6,624 13,638 40,271 Additions – 4,235 581 – – 4,816 Adjustment to prior year business combination 726 – – – – – Acquisitions – through business combination 3,415 25 – – 600 625 Currency translation adjustment 6,848 335 – 275 2,078 2,688 At 31 December 2008 123,165 20,151 5,034 6,899 16,316 48,400 Additions – 2,085 557 – – 2,642 Disposals – – -156 – – -156 Acquisitions – through business combination 21 12 – 66 – – 66 Reclassifications – – 134 – – 134 Currency translation adjustment -808 – -101 -24 -224 -349 At 31 December 2009 123,369 22,236 5,534 6,875 16,092 50,737 Accumulated amortisation At 1 January 2008 – 4,824 1,538 2,300 174 8,836 Charge for the year 4 – 4,827 1,026 1,262 803 7,918 Currency translation adjustment – – – 19 57 76 At 31 December 2008 – 9,651 2,564 3,581 1,034 16,830 Charge for the year 4 – 3,990 1,043 1,627 740 7,400 Disposals – – -145 – – -145
Reclassifications – – 111 – – 111 Currency translation adjustment – – -92 13 23 -56 a
At 31 December 2009 – 13,641 3,481 5,221 1,797 24,140 cco U nt S Net book value At 31 December 2009 122,369 8,595 2,053 1,654 14,295 26,597 At 31 December 2008 123,165 10,500 2,470 3,318 15,282 31,570
Goodwill arising on business combinations is not subject to amortisation, but is reviewed for impairment as described below. The amortisation period for development costs is between three and five years depending on the nature of the project. For other intangible assets, the amortisation period is between three and five years, based on the Directors’ assessment of their useful economic lives.
Impairment Review Following the acquisition of the MrBookmaker Group in 2005, the Maria Group in 2007, Guildhall Media Invest in 2008 and Monnet Enterprises Limited in 2009, the activities of the acquired businesses have been integrated into the existing businesses of Unibet and the combined businesses are now managed on a unified basis. Management considers the combined business to be one cash-generating unit, as the originally purchased businesses are no longer separately identifiable.
Goodwill was subject to foreign currency adjustments in 2009 as shown in the above table and explained within the Group’s accounting policies.
During the year, therefore, the goodwill of GBP 122.4 million, and the Maria Brand of GBP 14.2 million was tested for impairment on a value-in-use basis, based on the budget approved by the Board and extrapolated projections of the Group. These calculations used post-tax cash flow projections based on the 2009 trading performance of Unibet, extrapolated forward using growth rates consistent with the forecasts included in industry reports. The projections do not take account of any growth after the first five years.
The key assumptions which have been approved by the Board used for the value-in-use calculations were as follows:
EBITDA margin 30.0% Effective tax rate applicable to operating income 5.0% Discount rate 10%
Unibet Group plc Annual Report and Accounts 2009 53 accoUntS noteS to the conSolidated financial StatementS
note 12: property, plant and eqUipment note 13: SUbSidiarieS and aSSociated companieS Details of the Company’s principal subsidiaries and associated companies Plant at 31 December 2009 are as follows: Fixtures and and office GBP 000 Note fittings equipment Total Proportion of Cost ownership & Place of voting power At 1 January 2008 1,053 6,115 7,168 incorporation % Additions 718 1,239 1,957 Name of subsidiary Disposals -129 -245 -374 Global Leisure Partners Limited Malta 100% Acquisitions – through 151 – 151 Unibet (Holding) Limited Malta 100% business combinations Unibet (International) Limited Malta 100% Foreign exchange translation 19 68 87 MrBookmaker.com Limited Malta 100% difference Maria Holdings Limited Malta 100% At 31 December 2008 1,812 7,177 8,989 Maria Services Limited Malta 100% Additions 108 730 838 Monnet Enterprises Limited Malta 100% Disposals -65 -371 -436 UGP Limited Great Britain 100% Acquisitions – through 21 – 13 13 business combination Unibet (London) Limited Great Britain 100% Foreign exchange translation -24 -52 -76 Firstclear Limited Great Britain 100% difference Parabol Limited Great Britain 100% At 31 December 2009 1,831 7,497 9,328 North Development AB Sweden 100% Accumulated depreciation PR Entertainment AB Sweden 100% At 1 January 2008 536 2,813 3,349 E-Gaming United Limited Belize 100% Charge for the year 4 244 1,624 1,868 Global Entertainment (Antigua) Limited Antigua 100% Disposals -25 -241 -266 Global IP and Support Services LP British Virgin Islands 100% Foreign exchange translation 6 39 45 Unibet Italia SRL Italy 100% difference Mantaray Networks SA Costa Rica 100% At 31 December 2008 761 4,235 4,996 Charge for the year 4 302 1,439 1,741 In November 2009 the Group increased its interest in Monnet Enterprises Limited from 50% to 100% and accordingly this company ceased to be an associate and Disposals -34 -315 -349 is now consolidated as a wholly-owned subsidiary. See also Note 21. Foreign exchange translation -1 -11 -12 difference The movements in the Group’s interests in associates are shown below: At 31 December 2009 1,028 5,348 6,376
GBP 000 2009 2008 Net book value Carrying value at 1 January 119 81 At 31 December 2009 803 2,149 2,952 Additions – 34 At 31 December 2008 1,051 2,942 3,993 Share of associate’s (loss)/profit after tax -12 4 107 119 Converted to subsidiary -107 – Carrying value at 31 December – 119
54 Unibet Group plc Annual Report and Accounts 2009 note 14: financial inStrUmentS note 17: borrowingS The carrying value of the Group’s financial assets and financial liabilities approximated to their fair values at the year end. At 31 December 2009, other 31 December 31 December receivables of GBP 6.4 (2008: GBP 4.8) million were considered to be fully GBP 000 2009 2008 performing. Because of the nature of the Group’s business, the Group does not Due within 1 year: carry any provision for impairment of receivables. The Group does not hold any collateral as security for its receivables. Bank borrowings 21,314 – Other short-term borrowings 89 – The Group’s financial assets consist of loans and receivables, except for assets at fair value through profit and loss of GBP 0.475 (2008: GBP 0.665) million. 21,403 – The Group’s financial liabilities consist of other financial liabilities, except for Due after more than 1 year: liabilities at fair value through profit and loss of GBP 1.758 (2008: GBP 2.084) Bond – 65,926 million. – 65,926 IFRS7 requires management to identify a three level hierarchy of financial Total borrowings 21,403 65,926 assets and liabilities at fair value. As noted above, the financial assets at fair value are immaterial and the financial liabilities at fair value have been Borrowings are repayable with the following maturity: measured using inputs based on unobservable market data. A reasonable change in assumptions would not give rise to a material change in value. 31 December 31 December GBP 000 2009 2008 note 15: trade and other receivableS Due in 1 year 21,403 –
31 December 31 December Due in 1 to 2 years – 65,926 GBP 000 2009 2008 Due in 2 to 5 years – – Due within 1 year: 21,403 65,926 Other receivables 6,408 4,789 Prepayments and accrued income 3,130 4,138 Bank borrowings: In November 2009 Unibet signed a revolving credit facility with a maximum 9,538 8,927 value of EUR 24 million with a leading international bank. In December 2009, the full EUR 24 million facility was utilised in connection with the early note 16: trade and other payableS redemption of the bond (see below).
31 December 31 December Bank borrowings are denominated in EUR and bear interest at a fixed rate GBP 000 2009 2008 of 3.5 per cent above EURIBOR at inception, and are unsecured. The bank Due within 1 year: borrowings under the revolving credit facility are repayable by 20 December
2010. The fair value of the bank borrowings was EUR 24 (2008: Nil) million a Trade payables 5,342 4,296 cco U at 31 December 2009.
Other taxation and social security 119 2,258 nt S The revolving credit facility is subject to financial undertakings, principally in Other payables 686 394 relation to debt service ratio and limitations in respect of permitted business Accruals and deferred income 18,058 17,769 acquisitions and disposals. At 31 December 2009 Unibet was in compliance 24,205 24,717 with these undertakings. Unibet anticipates continued full compliance and that the facility will be repaid in accordance with contracted terms. Customer balances of GBP 28.305 (2008: 25.309) million are repayable on demand, subject to the terms and conditions of the Group’s websites. Bond: The bond was issued on 21 December 2007 in order to finance the acquisition The following table shows the split by currency of customer balances: of Maria Holdings Limited and to provide additional funds for future investment.
The bond was listed on the NASDAQ OMX Nordic Exchange in Stockholm in 31 December 31 December 2009 2008 February 2008.
EUR 71% 63% The bond had a nominal value of EUR 100 million, was denominated in EUR and SEK 11% 12% bore interest at a fixed rate of 9.7 per cent per annum, which is payable annually in arrears. The bond’s original maturity was on 21 December 2010. At Unibet’s DKK 4% 5% option, the bond could be repaid early, from 21 December 2008 onwards. NOK 4% 5% USD 4% 6% During 2009, Unibet spent GBP 4.5 million of surplus cash to repurchase EUR 4.9 million of the nominal value of the bond. On 22 December 2009 Unibet Other 6% 9% redeemed the outstanding balance of the bond of EUR 65.755 million in full for 100% 100% a total consideration of GBP 59.8 million, including a 1 per cent premium on the outstanding nominal value of the bond as laid down in the bond conditions. Certain third-party suppliers used by Unibet in its non-sports business use either EUR or USD as their standard currency and therefore the above analysis During 2008, Unibet spent GBP 24.3 million of surplus cash to repurchase does not represent the spread of customer balances by territory. EUR 29.345 million of the nominal value of the bond on the open market.
The Group’s operating cash flows provide a natural hedge of operating currency As a result of the early redemption and market repurchases of the bond, risks, since deposits and pay-outs to customers in different territories are the outstanding nominal value of the bond at 31 December 2009 was Nil matched in the same currency. (2008: EUR 70.655 million).
Unibet Group plc Annual Report and Accounts 2009 55 accoUntS noteS to the conSolidated financial StatementS
The fair value of the bond at 31 December 2009 was GBP Nil (2008: GBP 66.6) d) Not to provide security as a guarantee or otherwise for a market loan raised million, compared to its carrying value of GBP Nil (2008: GBP 65.9) million. by a Unibet Group Company. e) To ensure the bond was registered at the NASDAQ OMX Nordic Exchange The bond was subject to a number of special undertakings by the Company in Stockholm. as follows: f) To publish quarterly reports. a) Not to make any dividend or buy back or redemption of share capital in excess of 75 per cent of the Unibet Group’s profit for the previous financial year. The Company regularly monitored compliance with these undertakings and b) To ensure that the Unibet Group’s net debt at each quarterly reporting date was in full compliance between the issue of the bond on 21 December 2007 does not exceed three times EBITDA for the previous 12 months. and the date of redemption of the Bond on 22 December 2009. c) To procure that no substantial change is made in the nature of the Unibet Group’s business nor that any disposal is made of any material part of that business. note 18: deferred tax The following are the deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior reporting period:
Tangible Unrealised Unused Unremitted fixed exchange Tax tax Intangible GBP 000 Note earnings assets differences losses credits assets Other Total At 1 January 2008: Deferred tax liability 1,050 58 ––– 670 – 1,778 Deferred tax asset –– -482 -423 –– -108 -1,013 (Credit)/charge to income for the year – 35 290 -102 -3,127 -139 88 -2,955 Transfer to currency translation reserve – 16 21 – -623 74 – -512 Arising on acquisition 21 ––––– 153 – 153 At 31 December 2008: Deferred tax liability 1,050 149 1,720 –– 758 – 3,677 Deferred tax asset – -40 -1,891 -525 -3,750 – -20 -6,226 Charge/(credit) to income for the year – -100 468 525 3,506 -147 -64 4,188 Transfer to currency translation reserve – -4 -10 – 244 11 – 241 At 31 December 2009 Deferred tax liability 1,050 85 291 –– 622 – 2,048 Deferred tax asset – -80 -5 ––– -84 -169
Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:
31 December 31 December GBP 000 2009 2008 Deferred tax liabilities 2,048 3,677 Deferred tax assets -169 -6,226 Net position 1,879 -2,549
At 31 December 2009 the Group had unused trading tax losses of GBP 128,000 (2008: GBP 849,000) and other unused tax losses of GBP 2,255,000 (2008: GBP 3,330,000) available for offset against future profit, and had no deferred tax asset in respect of unused tax credits (2008: GBP 3,750,000) as a consequence of the distribution of the intra-group dividends over which Malta tax is recoverable. No deferred tax asset has been recognised in respect of trading losses (2008: GBP 616,000) and of the other unused tax losses (2008: GBP 1,310,000) due to insufficient evidence of their reversal in future periods.
The aggregate amount of other deductible temporary timing differences at 31 December 2009 for which deferred tax assets have been recognised are GBP 675,000 (2008: GBP 6,968,000). A deferred tax asset has not been recognised in respect of unexercised share options for GBP 325,000 (2008: GBP 263,000) and other deductible temporary differences for GBP 2,126,000 (2008: GBP Nil).
56 Unibet Group plc Annual Report and Accounts 2009 note 19: Share-baSed paymentS The Unibet Group plc Executive Share Option Scheme was first introduced in December 2000 and revised in May 2004. Under the scheme, the Board can grant options over shares in the Company to employees of the Company. Options are normally granted with a fixed exercise price equal to 110 per cent of the average closing share price in the five days prior to the date of grant. Awards under the scheme are generally made to employees at a senior level. Options granted under the scheme during 2009 will become exercisable during 2012. Exercise of an option is subject to continued employment. Options were valued using the Black-Scholes option-pricing model. Certain performance conditions are attached to share options. The fair value per option granted and the assumptions used in the calculation are as follows:
19 28 30 03 29 29 5 Sept Sept April Sept Sept Sept March Grant date 2006 2007 2008 2008 2008 2008 2009 Average share price prior to grant GBP 11.04 16.29 13.26 11.98 12.72 12.72 12.78 Exercise price GBP 12.16 17.93 14.59 13.18 13.99 12.72 14.05 Number of employees 9 25 21 13 12 9 38 Shares under option 33,392 53,081 206,669 19,162 48,471 76,303 176,415 Vesting period (years) 3.16 3.13 3.11 3.18 3.10 3.10 3.25 Expected volatility % 35 35 35 40 39 39 42 Option life (years) 3.16 3.13 3.11 3.18 3.10 3.10 3.25 Expected life (years) 3.16 3.13 3.11 3.18 3.10 3.10 3.25 Risk-free rate % 3.47 4.09 4.00 4.15 3.72 3.72 1.75 Expected dividends expressed as dividend yield % 2.50 5.75 3.64 4.08 4.08 4.08 1.65 Fair value per option GBP 2.28 2.59 3.47 2.92 2.27 2.12 3.27
Note: The options granted on 29 September 2008 at an exercise price of GBP 12.72 [SEK 155] were subject to a cap on the potential gain of SEK 200 per share.
The risk-free rates of return applied to the 2009 grants is the approximate implicit risk-free interest rate for the options’ term to maturity, based on the three-year maturity rate offered by Riksbank at 5 March 2009. A reconciliation of option movements over the year to 31 December 2009 is shown below:
2009 2008 Weighted Weighted average average exercise price exercise price
Number GBP Number GBP a cco U Outstanding at 1 January 647,214 13.99 483,960 14.65 nt S Exercised -98,176 12.16 – – Granted 180,237 14.05 461,733 14.09 Lapsed -115,782 14.29 -298,479 15.26 Outstanding at 31 December 613,493 14.27 647,214 13.99
Dilution effects Options over 115,782 shares lapsed or were cancelled during 2009 (2008: 298,479). If all option programmes are fully exercised, the share capital of the Company will increase by a total maximum of GBP 3,067.47 (2008: GBP 3,236.07) by the issue of a total maximum of 613,493 (2008: 647,214) ordinary shares, corresponding to 2.17 (2008: 2.26) per cent of the capital and votes in the Company.
Performance conditions related to 169,725 of the share options granted in 2009 were only partially achieved (2008: 77,294). Since the year end, the Board has therefore decided to cancel 84,860 of these options (2008: 57,970).
As a result, of the 613,493 options outstanding at 31 December 2009 (2008: 647,214), 528,633 options with a weighted average exercise price of GBP 14.27 (2008: 589,244 options at GBP 13.99) remained outstanding after this cancellation.
Unibet Group plc Annual Report and Accounts 2009 57 accoUntS noteS to the conSolidated financial StatementS
2009 2008 Weighted average remaining life Weighted average remaining life Exercise Exercise price Number of price Number of GBP shares Expected Contractual GBP shares Expected Contractual 12.16 33,392 0.1 0.7 13.73 10,000 0.9 0.9 17.93 53,081 0.9 0.9 12.16 142,532 0.9 0.9 14.59 206,669 1.4 1.4 17.93 56,942 1.9 1.9 13.18 19,162 1.9 1.9 14.59 276,716 2.4 2.4 13.99 48,471 1.9 1.9 13.18 19,162 2.9 2.9 12.72 76,303 1.9 1.9 13.99 53,979 2.9 2.9 14.05 176,415 2.4 2.4 12.72 87,883 2.9 2.9
98,176 (2008: Nil) options were exercised during 2009. The total charge for the year relating to employee share-based payment plans was GBP 659,000 (2008: GBP 404,000), all of which related to equity-settled share-based payment transactions.
Options Option price The Company operates two Option Schemes, the Unibet Group plc Unapproved The option price must not be less than the market value of the ordinary shares Executive Share Option Scheme (the ‘Unapproved Scheme’) and the or SDRs. For this purpose, market value means the weighted average of the Unibet Group plc Approved Executive Share Option Scheme (the ‘Approved market quotations on the five trading days immediately prior to the date of grant. Scheme’) under which employees may acquire ordinary shares or SDRs. The difference between the Schemes is that the Unapproved Scheme does not Individual limits comply with the relevant United Kingdom tax legislation while options granted The Board of Directors will decide the maximum number of ordinary shares under the Approved Scheme attract UK tax benefits. The main differences or SDRs, which may be granted under option to individual participants. At any between the Approved Scheme and Unapproved Scheme are as follows. given time, the number of ordinary shares or SDRs under subsisting options will A participant may not hold HM Revenue and Customs (HMRC) approved not exceed the following: options over more than GBP 30,000 worth of Ordinary Shares (valued at date of grant). Alterations to key features of the Approved Scheme are subject to the • In the case of subsisting options held by the Chief Executive Officer of the prior approval of HMRC. The Directors can make, without shareholder approval, Company, 2.75 per cent of the ordinary share capital of the Company. amendments to the Approved Scheme to obtain or maintain HMRC approval. • In the case of subsisting options held by the Executive management The principal terms of the Unapproved Scheme and Approved Scheme are set (including the Chief Executive Officer) of the Company and other out below. participating companies, 3.75 per cent of the ordinary share capital of the Company. The share option schemes described in this section were established when • In the case of subsisting options held by the Executive management the holding company of the Unibet Group was a company incorporated in the (including the Chief Executive Officer) of the Company and other UK. Following the Scheme of Arrangement during 2006 which inserted a new participating companies, and all other employees, 5 per cent of the ordinary Maltese company as the holding company for the Unibet Group, all employees share capital of the Company. holding share options were offered the opportunity to exchange those options for equivalent options to acquire shares of Unibet Group plc on substantially the Scheme limit same terms. At any time, not more than 5 per cent of the issued ordinary share capital of the Company may be issued or be issuable under the Unapproved Scheme and The Unapproved Scheme all other employees’ share schemes operated by the Company. This limit does Responsibility for operation not include options which have lapsed or been surrendered. The Unapproved Scheme is operated by the Directors or, in respect of Executive Directors of the Company, by the Remuneration Committee appointed by the Exercise of options Board, which consists mainly of non-executive Directors of the Company. Options will normally be exercisable in accordance with a vesting schedule set at the date of grant and will expire not later than the fifth anniversary of the Eligibility date of grant. It is intended to grant options on the basis that they will become Employees and Executive Directors of the Company and any subsidiary exercisable on the third anniversary of grant, for a period of one year, and expire companies are eligible to participate in the Unapproved Scheme. Non-executive on the fourth anniversary of grant. Exercise of options may take place only Directors of these companies are not eligible to participate. within prescribed exercise windows during the one-year exercise period. The rules of the Unapproved Scheme allow the Directors to grant options on the Grant of options basis that they will be exercisable only to the extent that certain performance Options may be granted at the discretion of the Directors, or the Remuneration conditions have been satisfied. Options may, however, be exercised early Committee in the case of Executive Directors of the Company, to selected in certain circumstances. These include, for example, an employee leaving employees, normally within 42 days of the announcement of the results for the because of ill health, retirement, redundancy or death. On cessation of second quarter. Options are not pensionable or transferable. employment for other reasons, options will normally lapse.
58 Unibet Group plc Annual Report and Accounts 2009 Change of control, merger or other reorganisations note 20: Share capital Options may generally be exercised early on a takeover, scheme of a) Movements in Share capital arrangement, merger or other corporate reorganisation. Alternatively, participants may be allowed or, in certain cases, required to exchange their GBP 2009 2008 options for options over shares in the acquiring company. No options were exercised under these provisions following the Scheme of Arrangement. Authorised: 200,000,000 ordinary shares of 1,000,000 1,000,000 Issue of shares GBP 0.005 each (2008: 200,000,000 Any ordinary shares issued on the exercise of options will rank equally with ordinary shares of GBP 0.005 each) shares of the same class in issue on the date of allotment except in respect of At 31 December 1,000,000 1,000,000 rights arising by reference to a prior record date. Issued and fully paid up: Variation in share capital At 1 January – 28,241,092 ordinary shares of GBP 141,206 141,206 If there is a consolidation or reduction in the share capital of the Company, 0.005 each options may be adjusted as the Directors consider appropriate in order to ensure that the number of ordinary shares or SDRs comprised in an option and Issue of share capital - 16,946 ordinary shares of 84 - the option price equal the same proportion of the share capital as against the GBP 0.005 each same option price as was the case before the variation took place. At 31 December – 28,258,038 ordinary 141,290 141,206 shares of GBP 0.005 each The Unapproved Scheme During 2009, 16,946 shares were issued by the Company at a price of Option Number of Exercise price GBP 12.16 per share, as a result of the exercise of employee share options. The programme options Exercise period per option GBP total proceeds of this issue of new shares was GBP 206,063, of which GBP 84 14 33,392 1 Nov 2009 – 12.16 was an increase in issued share capital and GBP 205,979 was an increase in 15 Sep 2010 share premium. 16 47,922 1-15 Nov 2010 17.93 During 2009 and 2008 no shares were repurchased by the Company. During 18 63,979 1-15 Jun 2011 14.59 2009, 81,230 of the shares repurchased by the Company in 2007 were sold for 20 130,014 1-15 Jun 2011 14.59 net proceeds to the Company of GBP 988,000 in connection with the exercise of employee share options at the option price of GBP 12.16. See also Note 19. 22 19,162 1-15 Nov 2011 13.18 Of the 297,900 shares that were acquired by the Company in 2007, a balance 23 30,777 1-15 Nov 2011 13.99 of 216,670 of those shares remains held by the Company. 25 76,303 1-15 Nov 2011 155SEK b) Movements in Share premium 26 74,288 1-15 Jun 2012 14.05 Apart from the premium arising on the issue of new shares related to the share 28 66,514 1-15 Jun 2012 14.05 option scheme as described above, there was no movement in share premium a
in 2009 or the previous year. cco U 29 14,338 1-15 Jun 2012 14.05
Total 556,689 The following reserve was created as a result of the Group reorganisation nt S in 2006: Approved Scheme The Approved Scheme is substantially the same as the Unapproved Scheme, Reorganisation reserve: this reserve of GBP -42.9 million (2008: GBP except that it has been drafted to comply with the relevant United Kingdom tax -42.9 million) arises in the consolidated financial statements, as a result of legislation so that options granted under it will attract UK tax benefits. Options the application of the principles of predecessor accounting to the Group may be granted in respect of ordinary shares only. reorganisation in 2006. The reorganisation reserve represents the differences between the share capital and non-distributable reserves of Unibet Group plc and The Approved Scheme the share capital and non-distributable reserves of the former parent company, UGP Limited. This reserve does not arise in the separate financial statements Option Number of Exercise price of the parent company and therefore has no impact on distributable reserves. programme options Exercise period per option GBP 17 5,159 1-15 Nov 2010 17.93 Currency translation reserve: This reserve of GBP 9.9 million (2008: GBP 10.1 million) is a non-distributable reserve. 19 8,642 1-15 Jun 2011 14.59 21 4,034 1-15 Jun 2011 14.59 24 17,694 1-15 Nov 2011 13.99 27 21,275 1-15 Jun 2012 14.05 Total 56,804
Unibet Group plc Annual Report and Accounts 2009 59 accoUntS noteS to the conSolidated financial StatementS
note 21: acqUiSitionS note 22: capital and other commitmentS (a) Acquisition of Monnet Enterprises (Malta) Limited The Group has not entered into any contracted fixed asset expenditure as at On 5 November 2009, Unibet Group plc increased its holding from 50 per 31 December 2009. As at 31 December 2009, the Group had an outstanding cent to 100 per cent of the voting share capital of Monnet Enterprises (Malta) guarantee of GBP 266,430 (2008: GBP 286,000) to the UCI. Limited (Monnet). Monnet therefore ceased to be an associated company from that date and became a wholly-owned subsidiary of Unibet Group plc. note 23: operating leaSe commitmentS The cumulative consideration for the acquisition was GBP 84,000, comprising The Group leases various offices under non-cancellable operating lease GBP 39,000 being the existing cost of Unibet’s investment in the 50 per cent agreements. The leases have varying terms, including provision for rent reviews of ordinary shares already owned by Unibet plus a payment of GBP 45,000 for and for early termination. the additional 50 per cent of ordinary shares. The purchase consideration was settled in full in December 2009 following the completion of legal formalities. The future aggregate minimum lease payments under non-cancellable operating leases are as follows: The net assets of Monnet at the date of acquisition were GBP 72,000 and accordingly Unibet has recognised provisional goodwill of GBP 12,000 on 31 December 31 December this acquisition. Unibet has not made any adjustments to the fair values of the GBP 000 2009 2008 assets and liabilities of Monnet. The acquisition has not had a material effect on No later than 1 year 1,208 1,265 the financial results or position of Unibet. Later than 1 year and no later than 5 years 1,558 2,792 The balance sheet of Monnet at the date of acquisition is set out below: 2,766 4,057
Carrying Operating lease payments represent rent payable by the Group on properties in values Provisional Malta and other territories. GBP000 pre-acquisition fair value Intangible assets 66 66 note 24: related party tranSactionS Property, plant and equipment 13 13 For details of Directors’ and Executive Management Remuneration please refer to the Remuneration Committee Report on pages 36 and 37. Receivables 5 5 Payables -411 -411 Executive management have loans outstanding with a Group company at varying rates of interest based on market rates. The aggregate loans and Taxation interest at 31 December 2009 were GBP 177,620 (2008: GBP 357,356). Current – – Deferred – – note 25: contingent liabilitieS Currently the Group has not provided for potential or actual claims arising from Cash and cash equivalents 399 399 the promotion of gaming activities in certain jurisdictions. Based on current Net assets acquired 72 legal advice the Directors do not anticipate that the outcome of proceedings and potential claims, if any, set out above will have a material adverse effect Goodwill 12 upon the Group’s financial position. Further details can be found in the General Consideration 84 Legal Environment section on pages 28 and 29.
Consideration satisfied by: Existing cost of investment by Unibet 39 Cash (including costs) 45
The intangible assets acquired as part of the acquisition of Monnet consist of computer software at cost less accumulated amortisation.
(b) Acquisition of Guildhall Media Invest Limited On 25 April 2008, Unibet Group plc acquired 100 per cent of the voting share capital of Guildhall Media Invest Limited and its subsidiaries (“Guildhall”) for a total consideration of GBP 3.623 million, giving rise to provisional goodwill of GBP 3.415 million.
As the goodwill arising on the acquisition of Guildhall is considered to be denominated in EUR, it is subject to revaluation in the consolidated financial statements of Unibet. As a result of this currency translation adjustment, which is recognised through the translation reserve, the balance of goodwill related to the acquisition of Guildhall was GBP 3.851 (2008: 4.130) million at 31 December 2009.
Unibet conducted a review during 2009 of the provisional values assigned to goodwill on this acquisition, but did not record any adjustments to the original calculation.
60 Unibet Group plc Annual Report and Accounts 2009 note 26: caSh and caSh eqUivalentS GBP 266,430 (2008: GBP 286,000) of the total cash and cash equivalents of GBP 39,764,000 at 31 December 2009 (2008: GBP 53,383,000) represented restricted cash, since this amount was set aside to back the guarantee given to the UCI in 2007 as part of Unibet’s Pro tour 2007 engagement. note 27: reconciliation of ebitda to operating profit
GBP 000 2009 2008 EBITDA 41,892 46,287 Depreciation -1,741 -1,868 Amortisation -7,400 -7,918 Profit from operations 32,751 36,501
The table above shows how EBITDA, which is a non-GAAP measure, is derived from the profit from operations reported in the consolidated income statement. note 28: reconciliation of adjUSted operating caSh flow to profit from operationS
Year ended Year ended 31 December 31 December GBP 000 2009 2008 Profit from operations 32,751 36,501 Adjustments for: Depreciation of property, plant and equipment 1,741 1,868 Amortisation of intangible assets 7,400 7,918 Loss on disposal of property, plant and equipment 99 108 Share-based payment 659 404 Operating cash flows before movements in 42,650 46,799 working capital a cco U
Income taxes paid -1,992 -1,197 nt S Purchases of property, plant and equipment -837 -1,957 Purchases of intangible assets -2,642 -4,816 Operating cash flows before movements 37,179 38,829 in working capital and after tax and capital expenditure
The table above shows how Adjusted operating cash flow, which is a non- GAAP measure, is derived from the profit from operations reported in the consolidated income statement.
Unibet Group plc Annual Report and Accounts 2009 61 additional information independent aUditorS’ report to the memberS of Unibet groUp plc
We have audited the Group financial statements of Unibet Group plc for Other Matters the year ended 31 December 2009 on pages 41 to 61 which comprise the This report, including the opinions, has been prepared for and only for the Consolidated Income Statement, the Statement of Comprehensive Income, the company’s members as a body in accordance with Section 179 of the Maltese Consolidated Balance Sheet, the Consolidated Statement of Changes in Equity, Companies Act 1995 and for no other purpose. We do not, in giving these the Consolidated Cash Flow Statement, a summary of significant accounting opinions, accept or assume responsibility for any other purpose or to any other policies and the related notes. person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Directors’ Responsibility for the Group Financial Statements As explained more fully in the Statement of Directors’ Responsibilities set We have reported separately on the parent company financial statements of out on page 35, the directors are responsible for the preparation and fair Unibet Group plc for the year ended 31 December 2009. presentation of the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union Lucienne Pace Ross (Partner) and the requirements of the Maltese Companies Act 1995. This responsibility for and on behalf of PricewaterhouseCoopers includes designing, implementing and maintaining internal control relevant to Registered Auditors the preparation and fair presentation of financial statements that are free of 167 Merchants Street material misstatement, whether due to fraud or error; selecting and applying Valletta appropriate accounting policies; and making accounting estimates that are Malta reasonable in the circumstances. David Snell (Partner) Auditors’ Responsibility for and on behalf of PricewaterhouseCoopers LLP Our responsibility is to express an opinion on the Group financial statements Chartered Accountants and Statutory Auditors based on our audit. We conducted our audit in accordance with International 1 Embankment Place Standards on Auditing. Those standards require that we comply with ethical London requirements and plan and perform the audit to obtain reasonable assurance WC2N 6RH whether the Group financial statements are free of material misstatement. United Kingdom
An audit involves performing procedures to obtain evidence about the amounts 29 March 2010 and disclosures in the financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material Note The maintenance and integrity of the Unibet Group plc website is the responsibility of the misstatement of the financial statements, whether due to fraud or error. In directors; the work carried out by the auditors does not involve consideration of these matters making those risk assessments, the auditors consider internal control relevant and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the entity’s preparation and fair presentation of the financial statements in to the Group financial statements since they were initially presented on the website. order to design audit procedures that are appropriate in the circumstances, Legislation in Malta and Sweden governing the preparation and dissemination of financial but not for the purpose of expressing an opinion on the effectiveness of the statements may differ from legislation in other jurisdictions. entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion on financial statements In our opinion the Group financial statements give a true and fair view of the financial position of the Group as at 31 December 2009 and of its financial performance and cash flows for the year then ended in accordance with IFRSs as adopted by the European Union and have been properly prepared in accordance with the requirements of the Maltese Companies Act 1995.
Report on Other Legal and Regulatory Requirements We also have responsibilities under the Maltese Companies Act 1995 to report to you if, in our opinion: • The information given in the Directors’ Report is not consistent with the financial statements. • Adequate accounting records have not been kept, or that returns adequate for our audit have not been received from branches not visited by us. • The financial statements are not in agreement with the accounting records and returns. • We have not received all the information and explanations we require for our audit. • Certain disclosures of directors’ remuneration specified by law are not made in the financial statements, giving the required particulars in our report.
We have nothing to report to you in respect of these responsibilities.
62 Unibet Group plc Annual Report and Accounts 2009 board of directorS and ceo
Daniel Johannesson Staffan Persson Chairman Board member Swedish citizen. Born in 1943. Board member since 2005. B.Sc. (Econ.) Swedish citizen. Born 1956. Board member since 2007. B.Sc. (Econ.) Senior from Göteborg School of Economics, Sweden. ISMP, Harvard Business School. Partner at ITP. Other significant board assignments: Non-executive Chairman His other positions include Chairman of Millicom International Cellular SA, in Neonet AB and Neonet Securities AB, Accelerator Nordic AB och Swedia Luxembourg. Capital AB. Board member in Rite Internet Ventures AB, Klar Invest AB, The Lexington Company AB., Sveab Holding AB and Bidrivals Ltd. Holding: 7,000 Unibet SDRs. Holding: 5,000 SDRs (through company). Anders Ström Deputy Chairman Petter Nylander Swedish citizen. Born 1970. Board member since incorporation. Mr. Ström was CEO the original founder of the Company in 1997. He started his career as a teacher Swedish citizen. Born 1964. B.Sc. (Econ.) from Stockholm University, Sweden. in 1989 and went on to study Mathematics, Statistics and Economics from Mr. Nylander joined the Group in 2005. Prior to that date, Mr. Nylander 1991 to 1993. After a period as a journalist, Mr. Ström then founded Trav- och was CEO and Managing Partner of OMD Sweden AB, which is part of the Sporttjänst in 1993. By 1997, the Company had revenues of GBP 1 million with international Omnicom Group. From 1994 to 2003 he held various senior good profitability. Trav- och Sporttjänst was sold in order to found Unibet. positions within Swedish-listed Modern Times Group MTG AB. These included CEO TV3 Sweden, CEO TV3 Scandinavia and VP Global Broadcasting. Holding: 2,925,000 Unibet SDRs (through company). Member of the Board of Cherryföretagen during 2001-2003 and Ongame e-solutions during 2004-2005. Kristofer Arwin Board member Holding: 3,200 SDRs and 85,016 options in accordance with option Swedish citizen. Born in 1970. Board member since 2008. He is a co-founder programmes 14, 15 and 17 and 12,400 call options expiring 30 June 2010 of the consumer buying guide www.TestFreaks.com and its CEO since the start and 18,284 call options expiring 15 November 2011. in 2006. He is also the founder of the price comparison site PriceRunner in 1999 which he then sold to the NASDAQ-listed company ValueClick in 2004. The above-mentioned holdings include personal holdings, family holdings Mr. Arwin also worked as COO at the eCommerce website Paletten during and holdings through companies in which they have an interest, and are as 1998/99. Mr. Arwin has a B.Sc. in Business Administration and Economics at 26 February 2010. from the Stockholm University. Mr. Arwin is a Non-executive Director of TradeDoubler AB and AlertSec AB. Independent Auditors of the Company PricewaterhouseCoopers, Malta and PricewaterhouseCoopers LLP, London Holding: 500 SDRs. With audit partners Ms. Lucienne Pace Ross from the PricewaterhouseCoopers Malta office and Mr. David Snell, from the PricewaterhouseCoopers LLP Peter Boggs London office. Board member US citizen. Born 1948. Board member since 2002. B.A. in American Studies from Washington College, Maryland USA. Previous engagements include: 1975-1981: President and COO of NDMS Inc. a US political lobbying and fundraising company; 1981-1985: Managing Director of Brown Direct, Division of Earle Palmer Brown Inc. a US advertising agency; 1985-1991: Director of Ogilvy & Mather Direct Plc, London; 1991-2002: President and COO of Grey Direct Worldwide, a division of Grey Worldwide Inc. New York.
Holding: 13,100 Unibet SDRs. a
Peter Lindell dditional information Board member Swedish citizen. Born 1954. Board member since 2003. M.Sc. in Industrial Engineering and Management from the Institute of Technology, Linköping University, Sweden. Senior Partner at ITP. Other significant board assignments: Accelerator Nordic AB; Svenska Allt för Föräldrar AB, Cidro Invest AB, Rite Internet Ventures I resp II AB, Syntetich Mr AB, and Lednil AB. Previous engagements include: Djurgården Fotboll AB; Colorcraft AB; Springtime AB; Upsize Rental AB; Swedish Private Equity & Venture Capital Association.
Holding: 708,570 Unibet SDRs (through company).
Unibet Group plc Annual Report and Accounts 2009 63 additional information definitionS
Average number of employees Number of active customers Average number of employees based on headcounts at each month end. Number of active customers is defined as total registered customers who have placed a bet with Unibet during the last three months. Dividend per share Dividends paid divided by the fully diluted weighted average number of ordinary Number of registered customers shares for the period. Number of registered customers means the total number of customers on Unibet’s customer base. Earnings per share, fully diluted Profit after tax adjusted for any effects of dilutive potential ordinary shares Operating margin divided by the fully diluted weighted average number of ordinary shares for Profit from operations as a percentage of gross winnings revenue. the period. Profit margin EBIT Profit after tax as a percentage of gross winnings revenue. Earnings before interest and taxation, equates to profit from operations. Return on average equity EBIT margin EBIT as a percentage of average equity. EBIT as a percentage of gross winnings revenue. Return on total assets EBITDA Profit after tax as a percentage of average total assets. Profit from operations before depreciation and amortisation charges. Return on total capital Equity:assets ratio Profit after tax as a percentage of total capital. Shareholders’ equity as a percentage of total assets. Total capital Equity per share Total capital is equal to total equity as disclosed on the consolidated balance Total assets less total liabilities, divided by the number of ordinary shares at the sheet, plus net debt (comprising total borrowings and customer balances, less balance sheet date. cash and cash equivalents).
Gross profit Weighted average number of shares Gross winnings revenue less cost of sales. Calculated as the weighted average number of ordinary shares outstanding during the year. Gross turnover Amounts receivable in respect of bets placed on sporting events, together with Weighted average number of shares, fully diluted other income from non-sports betting. Calculated as the weighted average number of ordinary shares outstanding and potentially outstanding (i.e. including the effects of exercising all share Gross winnings revenue options and converting all convertible loan notes) during the year. For sports betting, represents gross turnover less payouts; for non-sports betting, equates to gross turnover.
Net cash Total cash at period end less customer balances and bank loans.
64 Unibet Group plc Annual Report and Accounts 2009 Unibet was founded in 1997. With over 4.1 million registered customers AnnuAl generAl meeting in more than 100 countries, the Group is one of Europe’s largest online gaming operators.
Gaming products include pre-game sports betting, live betting, casino, poker, The Annual General Meeting (AGM) of Unibet Group plc will be held at 15.00 CET on Thursday 6 May 2010, at the Grand Hotel, Södra Blasieholmshamnen bingo and soft games. Customers can bet via websites in 27 languages, 8, Stockholm in Sweden. and increasingly via mobile phones and other mobile devices. Right to participate Unibet creates products and services intended for the global market, Holders of Swedish Depositary Receipts (SDRs) who wish to attend the AGM must be registered at Euroclear Sweden AB/VPC on Monday 26 April 2010 and customises them to suit local needs. This “glocal” approach – global and notify Skandinaviska Enskilda Banken AB (publ) of their intention to attend reach and mindset combined with local understanding – helps Unibet the AGM no later than 11.00 CET on Friday 30 April 2010, by filling in the enrolment form provided at www.unibetgroupplc.com/AGM, Notification to make all customers feel at home. holders of Swedish Depository Receipts in Unibet Group plc. The form must be completed in full and delivered electronically.
Please note that conversions to and from SDRs and ordinary shares will not vision mission be permitted between 26 April and 6 May 2010. The thrill of putting money at stake for To provide reliable online gaming and build Dividend the chance to win more is at the heart value by delivering entertaining products The Board of Directors proposes a dividend of GBP 0.71 per share/SDR, of Unibet’s vision – it’s moneytainment®. and excellent service. which is approximately SEK 7.68 per share/SDR.
Financial information Unibet Group plc’s financial information is available in Swedish and English. Key objectives unibet’s strengths Reports can be obtained from Unibet’s website, www.unibetgroupplc.com or Satisfied and excited customers One of Europe’s largest gaming ordered by email at [email protected]. Distribution will be via email. companies in a fast-growing and exciting Annual Reports can be ordered through the website, www.unibetgroupplc.com Motivated employees consumer category or ordered by email at [email protected]. Strong financials Unibet will publish financial reports for the financial year 2010 on Diversified product and geographic the following dates: portfolio • Interim Report January – March 2010, on 5 May 2010 • Interim Report January – June 2010, on 11 August 2010 Main focus on organic growth combined • Interim Report January – September 2010, on 3 November 2010. with selected acquisitions Regarded as one of Europe’s strongest sportsbooks Addition A
Designed and produced by SampsonMay whAt’s inside Telephone: 020 7403 4099 www.sampsonmay.com 50%l inform A When you have finished with This report is printed Printed by Park Communications on FSC certified paper. this report please recycle it on 50% recycled paper overview business review governAnce AdditionAl informAtion
Key highlights 1 Delivering against our strategy 12 Shares and share capital 32 Independent auditors’ report to the Park is an EMAS certified CarbonNeutral® Company and its Environmental tion Unibet at a glance 2 Emerging markets new opportunities 14 Directors’ report 34 members of Unibet Group plc 62 Management System is certified to ISO14001. Gaming responsibly 4 Innovation leading the way 16 Remuneration Committee report 36 Board of Directors and CEO 63 Q&A with the CEO 6 Market overview 18 Corporate governance statement 38 Definitions 64 100% of the inks used are vegetable oil based 95% of press chemicals are Sports betting 8 Unibet’s markets 20 Annual General Meeting 65 recycled for further use and on average 99% of any waste associated with Non-sports betting 10 Financial objectives 22 this production will be recycled. Sportsbook B2B network 23 Accounts Business performance review 24 Consolidated income statement 41 This document is printed on Revive 50:50; a paper containing 50% virgin fibre Unibet going forward 26 Statement of comprehensive income 41 and 50% recycled fibre. The pulp used in this product is bleached using an Consolidated balance sheet 42 Dedicated people 27 Elemental Chlorine Free (ECF) process and contains fibre from well managed, Consolidated statement of changes General legal environment 28 sustainable, FSC certified forests. Principal risks 30 in equity 43 Consolidated cash flow statement 44 The unavoidable carbon emissions generated during the manufacture and Notes to the consolidated financial delivery of this document have been reduced to net zero through a verified, statements 45 carbon offsetting project.
Unibet is not affiliated or connected with sports teams, event organisers or players displayed in this report.
Unibet Group plc Annual Report and Accounts 2009 65 Unibet Group plc Annual Report and Accounts 2009 A NNU A L
REPORT www.unibetgroupplc.com 2009 playing to win
Unibet Group plc by players for players
Unibet Group plc PROFIT BEFORE TAX Fawwara Buildings Msida Road, Gzira GZR1402, Malta. Tel: +356 2133 3532 +161% Company No: C39017. PBT GBP 28.9M Registered in Malta.
Registered office: c/o Camilleri Preziosi, Level 2, Valletta Buildings South Street, Valletta VLT11, Malta.
Active customers Pioneer in the moneytainment® +25% industry 365,865 Active customers worldwide