2011 Annual Report

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2011 Annual Report Annual Report and Accounts 2011 REVOLUTIONISING THE BETTING LANDSCAPE Revolutionising the betting landscape for over 10 years Number of settled bets Number of active customers 2008-2011 2008-2011 2011 916m 2011 949,000 2010 756m 2010 823,000 2009 603m 2009 652,000 2008 469m 2008 522,000 Core Betfair revenue Number of transactions on the exchange per day 2008-2011 2008-2011 2011 £330.0m 2011 7.0m 2010 £306.0m 2010 5.7m 2009 £291.3m 2009 5.4m 2008 £242.3m 2008 3.9m 1998 2005 2009 2011 January November January March Andrew (Bert) Black develops Betfair becomes the fi rst Betfair completes its Betfair transfers its Betting his idea of a betting exchange. company to successfully $50 million acquisition of US Exchange licence from the UK retain the title of ‘Company of online betting and cable TV to Gibraltar. July the Year’ at the CBI Growing operator TVG from Bert meets Edward Wray to Business Awards. Macrovision. Betfair announces new discuss his idea and the two revenue-share deal with agree to work together. August third party mobile 2006 Betfair becomes the Offi cial software developers. October Betting Partner of Manchester 1999 Betfair launches its online United FC and FC Barcelona. April August casino, featuring the Betfair breaks through the The parent company, The revolutionary Zero Lounge. £1 billion barrier in bets taken Sporting Exchange Limited, 2010 through its mobile products in is formed to develop the April a single year. betting exchange platform. 2008 Betfair announces that it has January three million registered Betfair announces a Cash 4 customers. 2000 Clubs, an innovative new June scheme to help community May The Sporting Exchange sports clubs throughout the Betfair is the fi rst betting launches Betfair. Its fi rst market country raise vital funds. company to launch an is on The Oaks, won by ‘Love application for the iPhone Divine’. April in Apple’s AppStore. Betfair wins an unprecedented second Queen’s Award for October 2003 Enterprise, this time in the Betfair lists on the London April International Trade category. Stock Exchange. Betfair wins Queen’s Award for Enterprise, in the Innovation September category. Betfair registers its two millionth customer. December Betfair announces fi ve-year sponsorship of the King George VI & Queen Elizabeth Stakes at Ascot. We’re Betfair. We transformed the betting landscape 11 years ago. We’re committed to innovation, value and giving our customers the best betting experience. We’ve grown responsibly and we’re ready for the future. Growth opportunities: Strong sports-led growth page 04 Cross-selling and portfolio expansion page 06 New channels page 08 Geographic expansion page 10 New markets page 12 Icons used in this report: Related information More information in this Report online 2011 overview 2011 Highlights Governance Financial statements 2011 overview 01-31 2011 Financial highlights 01 2011 Highlights 02 Chairman’s Introduction to Betfair Group Revenue 04 Growth opportunities 2011 £393.3m 14 Chief Executive Offi cer’s Review 2010 £340.9m 24 Betfair people, culture and values 2009 £301.2m 26 Financial Review 2008 £242.4m Governance 32-56 Core Revenue* 32 The Board of Directors and Executive team 34 Corporate Responsibility 2011 £330.0m 36 Directors’ Report 2010 £306.0m 38 Statement of Directors’ responsibilities in respect 2009 £291.3m of the Annual Report and Financial Statements 2008 £242.3m 39 Principal risks and uncertainties 45 Corporate Governance Statement Group EBITDA 50 Directors’ Remuneration Report 2011 £56.3m 2010 £44.7m Financial statements 57-99 2009 £65.1m 57 Independent Auditor’s Report to the members of 2008 £49.5m Betfair Group plc 58 Consolidated Income Statement Core Adjusted EBITDA** 59 Consolidated Statement of Comprehensive Income 60 Consolidated Balance Sheet 2011 £80.2m 61 Consolidated Statement of Changes in Equity 2010 £62.2m 62 Consolidated Statement of Cash Flow 2009 £74.8m 63 Notes to the Consolidated Financial Statements 2008 £53.7m 96 Company Balance Sheet 97 Notes to the Company Financial Statements Basic earnings per share 99 Five Year Summary 2011 22.6p 100 Shareholder Information 2010 14.4p 2009 37.2p 2008 28.1p Underlying basic earnings per share 2011 33.9p 2010 21.7p 2009 40.4p 2008 32.0p * Core Betfair includes the unique Betting Exchange and our portfolio of other sports betting, Games and Poker products. ** Adjusted EBITDA is EBITDA excluding share-based payment charges and exceptional items. 2011 Operational highlights Record year for site activity with 916 million bets matched and a new peak load of 30,000 bets per minute during the 2011 Grand National You can access the latest information and read Signifi cant product enhancements in Games this report online at Betfair’s corporate website: http://corporate.betfair.com and Poker to improve cross-sell offering 88% growth in mobile channel revenue Legislation passed for Exchange Wagering in California and New Jersey Listing on the London Stock Exchange Betfair Group plc Annual Report and Accounts 2011 01 Chairman’s Introduction to Betfair Dear Shareholder, Overview For Betfair, the most signifi cant event in the past year has been the Company’s listing on the London Stock Exchange, which was a key step in the evolution of the Company. So in our fi rst annual report as a public company, I would like to welcome our new shareholders and thank them, along with our longstanding investors, for their support. Edward Wray Non-executive Chairman The Company’s status may have changed, but our aims and ambitions have not. This business was created to offer customers a unique, revolutionary alternative to the traditional betting model. Building on this foundation, over the past 12 months we have continued to invest for the future and to deliver growth. Our fi rst year as a listed company During the past year the Company delivered record revenues and Football is a growing product and we had a very profi tability. However, the challenges of the past year resulted in slower growth than we would have liked. But I am confi dent that we have the successful FIFA World Cup in June and July in terms strategy, the people and the products to grow more rapidly in the future of levels of activity and customer acquisition and, in turn, to protect and grow shareholders’ assets. We have completed a number of signifi cant milestones that position We successfully completed the migration of our Betfair well for the future. Sports accounts for the majority of our business and football in particular has grown at a robust rate following our activity Casino and Poker products onto new platforms and customer acquisition strategy around the FIFA World Cup in June during July and August and July. During July and August we successfully migrated our Casino and Poker The migration of our main data centre to Dublin products onto new platforms and in January moved our main data centre to Dublin. This gave us increased regulatory fl exibility, enabling us to in January gave us increased regulatory fl exibility transfer the licence for our Betting Exchange from the UK to Gibraltar in March. With new offi ces in Dublin and Gibraltar, we are now in a strong position to derive real benefi ts for the business in terms of technology, customer service and profi tability. In the short term, the regulatory environment for our industry remains unpredictable and challenging. However, over the long term we believe it is preferable to have the clarity and player protection offered by licensed and regulated markets. I am encouraged by the progress a number of European countries have made towards creating their regulatory frameworks and the overall trend across the whole continent is moving in a direction that will benefi t Betfair and our customers in future years. In the US, both California and New Jersey have passed legislation introducing Exchange Wagering for the fi rst time. We look forward to applying to be an operator in both these jurisdictions when the application process begins. Our aim is to be the leading global Related information More information in this Report: online: online sports betting operator. Our people You can access the latest Page 24 information and read this report online at NO.1 Corporate Responsibility Betfair’s corporate website: Page 34 http://corporate.betfair.com Corporate Governance Page 45 Betfair Group plc 02 Annual Report and Accounts 2011 2011 overview Governance Financial statements Responsibility and integrity Dividend and share repurchase We put responsibility at the heart of what we do. We aim to operate The Board is recommending a fi nal dividend of 5.9 pence per share. This to the highest ethical standards at all times and to have a positive is the fi rst regular dividend we have paid and represents approximately impact on the communities where we work. Our work in this area is two-thirds of the payment we would have made had the Company been led by Non-executive Director Fru Hazlitt, who chairs our Corporate listed for the entire year. The fi nal dividend will be payable, subject to the Responsibility Committee. approval of shareholders at our Annual General Meeting on 22 September 2011. The Directors have chosen to adopt a progressive dividend policy We work closely with sports governing bodies across the world to support while maintaining an appropriate level of dividend cover: you can read integrity in sport, and now hold Memoranda of Understanding with 48 of more detail on page 31. them. We continue to work honestly and openly with anyone who shares our goal of keeping sport free from corruption. We have also announced our intention to return £50 million of cash to our shareholders over the next 12 months through an on-market share Our people repurchase programme.
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