Annual report and accounts 2018 Kambi Group plc Corporate governance Annual report and accounts 2018 Kambi Group plc Corporate governance Corporate governance Kambi recognises the importance and value of good corporate governance.
36 37 Annual report and accounts 2018 Kambi Group plc Corporate governance
250 Share230 performance 210
190
170
150 The closing price on the first The highest closing price during the year trading day of the year, was SEK253.50, on 31 October. The 130 lowest closing price during 2018 was 2 January 2018, was SEK95.50. SEK92.00 on 3 January. The average 110 daily volume traded during 2018 was The closing price on the last 133,552 shares and the average closing trading90 day of the year, 28 share price was SEK156.71. Kambi Group December 2018, was SEK190.00 plc is listed on First North at Nasdaq Stockholm with the ticker code ‘KAMBI’ with 70a market capitalisation of and ISIN code: MT0000780107. For €559 million.Jan Feb Mar AprinformationMay on analystsJun coveringJul the Aug Sep Oct Nov Dec Kambi stock, please see the company website www.kambi.com.
Shares traded 2018 Total volume (thousands)
1,600
1,400
1,200
1,000
800
600
400
200
0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: NASDAQ
38 Annual report and accounts 2018 Kambi Group plc Corporate governance
Share price development 2018 Closing price (SEK)
250
230
210
190
170
150
130
110
90
70 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: NASDAQ
Shareholders on 31 December 2018
Shareholder Number of shares % of total Veralda Investment Ltd 7,336,900 24.31% Swedbank Robur Fonder 2,502,414 8.29% 1,600Bodenholm Master 2,139,360 7.09% Keel Capital 1,806,074 5.98% 1,400 Second Swedish National Pension Fund 1,406,333 4.66% 1,200 Total 5 largest shareholders 15,191,081 50.33%
1,000Total other shareholders 14,989,116 49.67%
800Total 30,180,197 100.00%
600
400
200
0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
39 Annual report and accounts 2018 Kambi Group plc Corporate governance
Risk factors
Set out here are some of Regulatory and political Sport-specific the business and industry- environment intellectual property related risk factors, we have The Group’s core business is strictly In certain jurisdictions, regulators have identified as having potential regulated by law in the markets begun to impose charges on licence consequences for Kambi’s where Kambi and our clients operate. holders for the right to offer odds, access future development. This is Accordingly, political decisions, court data and use trademarks on certain not an exhaustive list, and the rulings or changes in laws in the countries sports. Any future changes in these where Kambi or our operators have charges could impact Kambi’s financial below factors are not arranged licences or commercial interests could position. in order of importance, or have a material adverse effect on our potential economic impact. business and operations. Regulatory Dependency on key operators changes can also have a positive impact, such as enabling us to access a market A majority of Kambi’s revenue is currently that becomes regulated or re-regulated. generated from a few large operators. The loss of business with any, or some Risks related to IT of these, could have a material adverse effect on our business. Kambi’s business depends on our IT systems. System failures and other Underlying performance events that affect operations could have a material adverse effect on our business of operators and results. We mitigate this risk by Kambi’s financial performance depends using continuous monitoring to detect on the underlying performance of any problems as early as possible. All our operators. This is a result of our critical servers are duplicated, so that if business model, in which we receive a one server fails, another will immediately percentage-based commission on the take over. We carry out detailed analysis operators’ net gaming revenue. A decline following any downtime to ensure that in our operators’ financial performance the underlying reason for the outage is could have a material effect on our own understood and rectified. financial position. Operator trading margins can vary significantly from one Match fixing period to the next, depending on the outcome of sporting events. Match fixing is defined as ‘the manipulation of an event where the participants seek to fix the outcome Competition and price pressure for financial gain’. Kambi has internal Kambi’s growth depends on our ability systems and alerts in place to highlight to develop and sell competitive products any indications of match fixing and and services. As the market matures, so reduce the financial impact of this increased competition and price risk. We also collaborate with industry pressures may materialise. Our ambition watchdogs and regulators. If match fixing is to continue striving to offer the best were to lead to changes in regulatory B2B Sportsbook in the market and to environments, this could have an impact build further on our customer portfolio, on the results of operators and therefore with successful and loyal operators. our own financial performance.
40 Annual report and accounts 2018 Kambi Group plc Corporate governance
Foreign currency risk to the added cost of gaming-related taxes, which we share with operators. In Two forms of foreign exchange risks exist: managing our taxation affairs, including transaction risks and translation risks. estimating the amounts of taxation due, When our operators handle transactions we rely on the exercise of judgment in a currency other than the Euro, concerning our understanding of and currency movements can have an impact compliance with those laws, assisted by on our revenues. Transaction risks occur professional advice. in conjunction with purchases and sales of products and services that are made in Risk related to convertible bond currencies other than the local currency of the company involved. Translation risks In 2014, Kambi Group plc issued a €7.5 occurs when the income statements and million convertible bond to a wholly owned balance sheets of foreign subsidiaries subsidiary of Kindred Group plc. This are converted into Euros. Changes in the agreement was extended in July 2018, until valuation of Euros, in relation to other December 2023. According to the terms currencies, can therefore have positive of the convertible bond, the Company is and negative effects on the Group’s profit obliged to ensure that certain events listed and financial position. To some degree, we in the agreement do not take place, unless manage currency risk by holding funds on with the prior consent of the lender. In case short-term deposit, in the currencies of of a conversion, Kindred Group plc would our principal cash outflows. obtain a controlling influence over Kambi, consequently having the power to control Tax risks the outcome of most matters to be decided by vote at a shareholders’ meeting. Kambi conducts its business in accordance with its interpretation and understanding of the applicable tax laws and treaties, case law, and the requirements of relevant tax authorities in the countries where we operate. Changes to regulatory, legislative and fiscal regimes in key markets could have an adverse effect on our results due
41 Annual report and accounts 2018 Kambi Group plc Corporate governance
Board Senior of directors executives
Lars Stugemo, Chairman Cecilia Wachtmeister Kristian Nylén, Born: 1961 Born: 1966 Chief Executive Officer Education: MSc. in Electronics Education: MSc. in Industrial Born: 1970 Engineering from KTH Engineering and Management from the Nationality: Swedish Institute of Technology in Linköping, Nationality: Swedish Employed: 2010 Sweden Elected: 2014 Education: BSc. in Business Administration, Nationality: Swedish Lars is CEO, President and co-founder of Mathematics and Statistics from the HiQ International, an IT and management Elected: 2017 University of Karlstad consultancy firm founded in 1995 and Cecilia was previously Vice Kristian joined Unibet in 2000 and within listed on NASDAQ OMX Stockholm. Lars President, Group Head of Sourcing three years had assumed responsibility has been a member of IVA (Kungliga and Procurement at Ericsson AB. for Unibet’s entire Sportsbook operation vetenskapsakademien) and VI since 2013. She joined Ericsson in 1991 and has and joined the Group’s management team. Holdings in Kambi Group plc: 28,180 shares since then held various international Kristian co-founded Kambi in 2010 and as positions in the company, with CEO leads on all commercial aspects of experience of long sales cycles in B2B. the business. Anders Ström Holdings in Kambi Group plc: Holdings in Kambi Group plc: 465,000 Born: 1970 6,080 shares and 46,000 options shares and 322,500 options Education: Studies in Mathematics, Statistics and Economics at Karlstad Marlene Forsell University David Kenyon, Born: 1976 Nationality: Swedish Chief Financial Officer Education: MSc. in Business Elected: 2014 Born: 1975 Administration and Economics from Nationality: British Anders is founder of the sports-information Stockholm School of Economics company Trav-och Sporttjänsten in 1993. Employed: 2010 Nationality: Swedish He was founder of Kindred Group plc in Education: MA in Modern Languages Elected: 2018 1997, where he held various positions from Oxford University including Chief Executive Officer and Marlene recently served as Chief Having qualified at KPMG, David joined Chairman of the Board. Anders was co- Financial Officer of Swedish Match, Unibet in 2002 as Group Financial founder of Kambi Sports Solutions in 2010, a global fast-moving consumer goods Controller, working on Unibet’s NASDAQ Chairman of the Advisory Board of Kambi company within tobacco. Prior to OMX Stockholm listing. He then spent two until May 2014 and then a Board member becoming CFO, Marlene held various years at the Capital Pub Company as CFO, since Kambi’s listing in 2014. He is also a positions at Swedish Match, and where he floated the Company on AIM, director of Veralda AB. before that worked as an analyst before moving back to Unibet in 2008. at Ernst & Young. Holdings in Kambi Group plc: 7,336,900 David has been CFO of Kambi, leading the shares Holdings in Kambi Group plc: no shares financial and corporate functions, since its formation. Patrick Clase Holdings in Kambi Group plc: 42,330 shares and 70,000 options Born: 1968 Education: BSc. in Economics from Lund University and a CEFA from the Erik Lögdberg, Stockholm School of Economics Deputy CEO, Chief Business Nationality: Swedish Development Officer Elected: 2014 Born: 1979 Patrick is Chief Investment Officer and a Nationality: Swedish director of Veralda AB. Highly experienced in the financial markets, Patrick has Employed: 2010 worked, among other positions, as a Education: MSc. Electrical Engineering Financial Analyst with ABG Sundal Collier from the Royal Institute of Technology and with Alfred Berg. (KTH) Holdings in Kambi Group plc: 27,619 shares
42 Annual report and accounts 2018 Kambi Group plc Corporate governance
Senior executives
Erik joined Unibet in 2005, quickly Christina Haralambous, Kamil is responsible for driving and becoming head of live betting, with Chief Communications Officer supporting the Kambi strategy, both its responsibilities including operations development and progression. Kamil and product development. This period Born: 1982 previously spent five years as Kambi’s coincided with the growth in live betting Nationality: British head of business development and and the formation of Kambi. Erik is now business intelligence. Prior to joining Employed: 2016 deputy CEO, and leads on product and the company in 2011, Kamil had spells operational matters. Education: PG Dip in Professional at gaming companies bwin and Ongame. Marketing Management from the Holdings in Kambi Group plc: 66,993 Holdings in Kambi Group plc: Chartered Institute of Marketing (CIM) shares and 112,500 options 10,000 shares and 40,000 options Christina is responsible for Kambi’s brand strategy, marketing, media and Andreas Söneby, communications, both internal and Mattias Eriksson, Chief Information Officer external. Prior to joining Kambi in 2016, Chief Product Officer Christina gained more than 10 years of Born: 1973 media, marketing and communications Born: 1971 Nationality: Swedish experience at WPP media agency MEC Nationality: Swedish (now Wavemaker), Touchline media, TfL, Employed: 2010 Employed: 2017 Net#work BBDO, and TBWA. Education: MSc. in Computer Science Education: BSc. in Business Administration Holdings in Kambi Group plc: from the Royal Institute of Technology from Mälardalen University 15,000 options in Stockholm (KTH) Mattias entered the betting industry in the Andreas is responsible for managing early 2000s and in 2011 became Director and developing Kambi’s technology and Jonas Jansson, of Business Development and Innovation systems, ensuring they meet business Chief Operating Officer at Svenska Spel. In 2017 Mattias joined objectives and have the capacity to Kambi as a strategy consultant before handle fast-growing transactional Born: 1969 becoming Chief Product Officer in 2018. volumes. Andreas was previously CTO Nationality: Swedish Holdings in Kambi Group plc: at Unibet. Employed: 2010 10,000 options Holdings in Kambi Group plc: 55,300 Education: BSc. in Business shares and 22,500 options Administration, Mathematics and Max Meltzer, Statistics from the University of Chief Commercial Officer Chris Fox, Karlstad and studies in Data and System development at Stockholm University Born: 1987 Chief Legal Officer Formerly the head of trading at Unibet, Nationality: British Born: 1983 Jonas was appointed COO of Kambi upon Employed: 2016 Nationality: British its formation in 2010. He leads on all operational aspects of the Sportsbook, Education: LLM Master of Laws degree Employed: 2016 including odds compiling, risk and BA (Hons) Business degree from Education: BA. Ancient History management and sports betting integrity. Durham University from the University of Durham Holdings in Kambi Group plc: 211,500 Leading Kambi’s commercial division, Chris joined Kambi in 2016 and is shares and 22,500 options Max is responsible for the formalisation, responsible for the Legal, Insurance, execution and development of Kambi’s Regulatory Audit, and Licensing commercial strategy, focusing on new functions. His team provides legal Kamil Gajewski, business growth and customer retention. and regulatory support to all areas of Chief Strategy Officer Max joined Kambi in 2016 from the Press the business. Chris previously worked Association where he was Head of Sales, as a strategy consultant and lawyer Born: 1982 prior to that he was a Co-Founder and at Accenture plc, Eversheds LLP and Nationality: Swedish Director of a sports agency. Vodafone Group plc. Employed: 2011 Holdings in Kambi Group plc: Holdings in Kambi Group plc: 15,000 options Education: MSc. in Business 15,000 options Administration from Uppsala University
43 Annual report and accounts 2018 Kambi Group plc Corporate governance
Corporate governance report
Kambi Group plc is listed The Board participate in, any decision-making process on First North at Nasdaq which relates directly to the contract The Board has five directors including the between Kambi and Kindred Group plc. Stockholm, and is not required Chairman. The Board meets regularly to In 2018, the Board held nine meetings, to follow all the provisions of consider strategy, performance and the where four meetings were held in the Swedish and/or Maltese framework of internal controls. connection to the quarterly reports and Corporate Governance Code The Board of Directors comprises a five were regular meetings spread evenly (the Code). The Board however, mix of the necessary skills, knowledge throughout the year. The regular Board meetings are prepared jointly by the recognises the importance and experience required to provide leadership, control and oversight of Chairman of the Board and the CEO of the and value of good corporate the management of the Group and to company. At every regular Board meeting governance practice and contribute to the development and an update is given on the business and accordingly, has selected those implementation of strategy. In particular, financial situation. the Board combines a group of directors procedures and committees with diverse backgrounds within the The Audit Committee of the Code that it considers technology, finance, gaming and other relevant and appropriate to related sectors, which provide the Board The Audit Committee is responsible for the Group, given our size with the resources and expertise to drive ensuring that the financial performance the continuing development of the Group of the Group is thoroughly reported on and structure. Each of the and advance its commercial objectives. and monitored. In addition, it reviews committees meets regularly. In addition to being on the Board of Kambi, the reports from the auditors relating to Anders Ström is also Chairman of the accounts and internal control systems. It Board of Directors in Kindred Group plc. meets at least once a year with the auditors. To avoid any potential conflict of interest, The Audit Committee is comprised of Anders is not present at, nor does he Patrick Clase, who is also the chair, and Susan Ball until her resignation.
Fees/salary Other 2018 2017 Directors’ remuneration €000 €000 €000 €000 Anders Ström 48 - 48 47 Lars Stugemo 97 - 97 117 Patrick Clase 48 81 129 57 Susan Ball 24 - 24 71 Cecilia Wachtmeister 40 123 163 25 Marlene Forsell 4 - 4 -
261 204 465 317 Kristian Nylén (CEO) 464 - 464 562 Management remuneration 1,768 1,567 3,335 1,368
2,493 1,771 4,264 2,247
The basic salary per annum is €50,000 (2017: €40,000) per director. The Chairman of the Board receives an additional fee of €50,000 (2017: €50,000) and each member of the Remuneration and Audit Committee receives €6,500 (2017: €6,500) per annum.
44 Annual report and accounts 2018 Kambi Group plc Corporate governance
Members of the executive management The Remuneration Committee on fulfilment of targets aligned with the take part in the Board meetings in order shareholders’ long-term interests. Where to report on matters within their specific The Remuneration Committee reviews appropriate, the variable element is based areas when relevant and necessary. The the performance of the senior managers on quantitative and qualitative targets. CEO provides a monthly report to the and sets and reviews the scale and The variable element of remuneration Board. This report deals with markets, structure of their remuneration, the basis for the CEO and other members of the operations, and financial development. of their remuneration and the terms of executive management, is a maximum their service agreements, with due regard 50% of the fixed salary cost, depending on The Nomination Committee to the interests of shareholders. The the attainment of personal and company Remuneration Committee is comprised performance targets – such as new The Nomination Committee is of Anders Ström and Lars Stugemo and customer signings and EBIT goals. Salaries responsible for reviewing the size, is chaired by Anders Ström. Details of the in 2018 were increased by an average of structure and composition of the Board, remuneration of the Board of Directors 3% compared to 2017. The CEO and the succession planning, the appointment and senior executives are set out here to executive management are entitled to the of replacement and / or additional the left. same benefits as other local employees. directors, and for making the appropriate Termination and severance pay: in the case recommendations to the Board. The Kambi Remuneration policy of the CEO, there is a reciprocal period of notice of 12 months. If employment is Committee also prepares proposals and report regarding Board remuneration and terminated by the Company, severance fees to the auditor. The members of the pay equivalent to 12 months’ salary is The policy of the Board is to attract, Nomination Committee shall represent payable. If employment is terminated retain, and motivate the best managers, all shareholders and be appointed by by the CEO, salary and other benefits by rewarding them with competitive the three or four largest shareholders are paid for 12 months after cessation of compensation packages linked to as at 30 September each year – having employment, during which period the CEO the Group’s financial and strategic expressed their willingness to participate is prohibited from entering into competing objectives. The compensation packages in the Committee. Kambi’s Nomination activities. In the case of other members need to be fair and reasonable in Committee shall consist of not less than of the executive management, there is comparison with companies of a similar four, and not more than five members, of a mutual period of notice of six months. size, industry, and international scope. which one shall be the Chairman of the Issues concerning remuneration of the The components of remuneration for Board. The members are: Anders Ström executive management are handled by executive managers comprise base – Veralda Investment Ltd, Lars Stugemo the CEO. Decisions on remuneration of the salary, benefits, performance-related – Chairman of the Board, Per Johansson CEO are taken by the Board of Directors. salary, and long-term incentives. The key – Bodenholm Capital, and Mathias The members of the Remuneration performance conditions for long-term Svensson – Keel Capital. The Committee Committee have no personal interest in incentives are EPS growth and continued is chaired by Anders Ström. the outcome of their decisions, and give employment. The variable remuneration due regard to the interests of shareholders shall be in proportion to the executive’s and to the continuing financial and responsibilities and authority. It shall also commercial health of the business. be subject to an upper limit and based
45 Annual report and accounts 2018 Kambi Group plc Corporate governance
Directors’ report
Principal activities audited consolidated financial statements Statement and auditor’s report, for the year ended Kambi Group plc is a B2B supplier of fully 31 December 2018. The directors confirm of directors’ managed sports betting services, on an the Company’s ability to continue in in-house developed software platform, operational existence for the foreseeable responsibilities providing premium turnkey sports betting future. For this reason, in preparing the services to B2C gaming operators. financial statements, they continue to The directors present their adopt the going concern basis. report on the affairs of the Results and dividends Group, together with the Performance review The consolidated income statement is set audited consolidated financial out on page 56. The profit after tax was The directors have conducted a detailed statements and auditor’s €9.8 (€5.9) million. The Board does not review of the Group’s performance during report, for the year ended propose a dividend. the year, the highlights of which are disclosed on pages 12 and 13 of this annual 31 December 2018. Going concern report. Eight new customer contracts were signed: Casumo, Stanleybet Romania, Rush Street Interactive, DraftKings, As required by Listing Rule 5.62 issued ATG, Latvijas Loto, Global Gaming, and by the Listing Authority, upon due Greenwood Gaming and Entertainment. consideration of the Company’s state of The Group renewed its contract with affairs, capital adequacy and solvency, and Kindred Group. The directors have also Statement of directors’ responsibilities, conducted a review of the Group’s Key the directors present their report on the Financial and Non-financial Performance affairs of the Group – together with the Indicators, detailed here as follows:
FY 2018 Operating (EBIT) margin 16.7% EBITDA (€m) 22.5m EBITDA margin 29.5% Equity/assets ratio 74% Employees at period end 695 Earnings per share (€) 0.326 Fully diluted earnings per share (€) 0.318
46 Annual report and accounts 2018 Kambi Group plc Corporate governance
Post-reporting date events Statement of directors’ Disclosure of information responsibilities to the auditor In January, Kambi signed an agreement with Rhinoceros Operations Ltd, the The directors are required by the Maltese At the date of making this report, the owner of online gaming brands Wunderino Companies Act (Chap. 386) to prepare directors confirm the following: As far and mybet. Both brands launched with financial statements in accordance as each director is aware, there is no a Kambi Sportsbook in Q1 2019. In with International Financial Reporting relevant information needed by the March, Kambi signed an agreement with Standards, as adopted by the EU, which independent auditor in connection with Mohegan Gaming & Entertainment, owner give a true and fair view of the state of preparing the audit report, of which the of Mohegan Sun, a casino property in affairs of the Group at the end of each independent auditor is unaware, and Connecticut, United States. financial year, and of the profit or loss of each director has taken all steps that he the Group for the year then ended. / she ought to have taken as a director Financial and non-financial in order to make him / her-self aware In preparing the financial statements, of any relevant information needed by risk management the directors are required to: select the independent auditor in connection suitable accounting policies and apply with preparing the audit report and to The directors have undertaken a them consistently, make judgments establish that the independent auditor is thorough review of both the financial and and estimates that are reasonable, aware of that information. non-financial risks faced by the Group, and prepare the financial statements and details thereof can be found on pages on a going concern basis – unless it is 40 and 41 of this annual report. inappropriate to presume that the Independent auditor Group will continue in business as a Future developments going concern. The auditor, Mazars Malta, has indicated its willingness to continue in office and a The directors are responsible for The Company intends to continue its resolution for its reappointment will be ensuring that proper accounting records investment in people and technology, proposed at the Annual General Meeting are kept, which disclose with reasonable to develop its Sportsbook service. on behalf of the Board, 16 May 2019. accuracy at any time, the financial position of the Group – and which enable Directors the directors to ensure that the financial statements comply with the Companies The following have served as directors Act (Chap. 386). during the year under review: This responsibility includes designing, Lars Stugemo (Chairman) implementing and maintaining such Anders Ström internal control, as the directors determine is necessary to enable the Susan Ball preparation of financial statements that Patrick Clase are free from material misstatement, whether due to fraud or error. Marlene Forsell The directors are also responsible for Cecilia Wachtmeister safeguarding the assets of the Group, and Lars Stugemo, Anders Ström, Patrick hence for taking reasonable steps for the Clase, and Marlene Forsell will seek prevention and detection of fraud and re-election at the forthcoming AGM. other irregularities.
47 For more information, contact: CEO Kristian Nylén +44 (0)20 3617 7270 Head of Investor Relations Mia Nordlander +44 (0)785 091 0933 [email protected] www.kambi.com Kambi Group plc Level 3, Quantum House Abate Rigord Street Ta’ Xbiex XBX1120, Malta