Betfair Group plc Annual Report and Accounts 2015 Accounts and Report Annual plc Group Betfair ANNUAL REPORT AND ACCOUNTS 2015 WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe ABOUT BETFAIR
Betfair is one of the largest online gambling operators in the UK, providing a wide range of sports betting and gaming products to over 1.7 million active customers in more than 100 countries.
Betfair has long been a pioneer in the industry – launching its unique Betting Exchange in 2000 and following up with a range of innovative products and services that have redefined the sports betting landscape.
Our strategy is to compete hard in regulated markets using distinctive products, attractive pricing, strong promotional activity and substantial marketing investment.
Strategy pages 10–11
Risk pages 24–26
Business review pages 12–17 WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe REPORT THIS IN An insight into our three strategic priorities: strategic three our into insight An (£m) Financial statements and corporateFinancial statements information Corporate governance at Betfair Our approach to Corporate Responsibility aspirations growth long-term our to risks the Managing +21% £476.5m review FY15 difference Betfair The creation value our from benefits Who money make we How model business Betfair The responsibly Operating presence international Our Our operating divisions aglance at Betfair GROUP REVENUE gambling in responsible Best practice revenues Focus on sustainable 1. 1. www.corporate.betfair.com For more information about the Group visit:
workforce An engaged 2. (per share) +70% pence 34.0 ORDINARY DIVIDEND and brand product our in Invest 2. to charity Contributions 3.
(per share) 189.0 pence 189.0 B SHARE DIVIDEND B SHARE opportunities international through growth Accelerate 3. the environment Commitment to 4.
Financial Review Business ReviewBetfairUS Business ReviewGaming Business ReviewSports Our StrategyandKPIs Chief Executive’sReview The BetfairDifference Business Model Chairman’s Statement Our YearinReview Betfair ataGlance About Betfair Investor Relations Shareholder Information Five-year Summary Notes totheCompanyFinancialStatements Company BalanceSheet Notes totheFinancialStatements Consolidated StatementofCashFlow Consolidated StatementofChangesinEquity Consolidated BalanceSheet Consolidated StatementofComprehensiveIncome Consolidated IncomeStatement Independent Auditor’sReport Statement ofDirectors’Responsibilities Directors’ Report Directors’ RemunerationReport Audit CommitteeReport Nomination CommitteeReport Corporate GovernanceStatement Board ofDirectors Corporate ResponsibilityReport Balancing RisksandOpportunities Understanding andManagingOurPrincipalRisks Annual Report andAccountsBetfair 2015 Group plcAnnualReport 122 123 IFC 118 119 121 84 04 08 86 06 85 05 42 24 82 43 34 02 83 36 78 07 76 53 22 27 73 14 18 81 10 16 12
FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe 01 STRATEGIC REPORT BETFAIR AT A GLANCE
GROUP FIGURES
REVENUE (£m) SUSTAINABLE REVENUE MIX % UNDERLYING EBITDA £m
476.5 120.2 FY15 82% 387.0 393.6 91.1 73.3 FY14 78%
+2% +21% FY13 72% +24% +32% FY13 FY14 FY15 FY13 FY14 FY15
OUR OPERATING DIVISIONS
SPORTS GAMING BETFAIR US
Principal activities Combining our unique Exchange A wide range of Gaming products TVG online horseracing wagering with a traditional Sportsbook, including Casino, Arcade, Poker, and online casino in New Jersey. enhanced by product features Exchange Games and Bingo. such as Cash Out and Price Rush.
Revenue FY15 £328.0m £88.5m £58.8m +17% +34% +29%
Share of Group revenue (%) 12% 19% 69%
For more information For more information For more information see page 12 see page 14 see page 16 WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe across 4. 3. 2. 1. Over OPERATING RESPONSIBLY OUR INTERNATIONAL PRESENCE • • COMMITTED TO SPORT COMMITTED Gibraltar Malta Ireland United Kingdom to preserve the integrity ofsport. integrity the preserve to work and patterns betting suspicious share we whom with bodies governing sports largest world’s ofthe 60 over with place in (MoUs) understanding of memoranda has Betfair years. five over sport the to £40m least at worth Racing; British with deal commercial a signed have to bookmaker only) the remains (and first the was Betfair see For moreinformation 2,000 page 13 29
offices in in offices 8. 7. 6. 5. employees based employees based
USA Italy Romania Portugal 8 territories • • • • seriously. Our policies include: takesBetfair responsible gambling RESPONSIBLE GAMBLING RESPONSIBLE 8 time out and self exclusion tools. exclusion self and out time manage and their gambling activity; better to customers for checks reality and sessiondeposit timers limits, be developing; might aproblem when understand to and awareness activity betting tests their manage to customers for tools a responsible gambling microsite with changes inidentify behaviour; to transactions and traffic customer a monitoring programme to review see For moreinformation page
28
5 2 4 • • • CONTRIBUTIONS TO CHARITY CONTRIBUTIONS stake went to Cancer Research UK. Research Cancer to went stake £20 the it for, missed ran they if they charity the to went winnings the time target their hit they if runners: Marathon London for bet free £20 a offered –Betfair Yourself Back Injured Jockeys Fund. to the #NationalJockeyDay hashtag the included that tweet every for £1 donated –Betfair Day Jockey National clubs. sports community funding scheme providing to grants sports own –Betfair’s Cash-4-Clubs Annual Report andAccountsBetfair 2015 Group plcAnnualReport see For moreinformation 1 page 32 7 3
6 02–03 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe STRATEGIC REPORT OUR YEAR IN REVIEW
JUNE / JULY 2014
World Cup £16m revenue 999/1 bet SEPTEMBER 2014 matched on Germany winning Scottish Referendum 7-1 against Brazil Over £21m traded Exchange called NOVEMBER 2014 80% chance of a NO vote National Jockey Day Popular charity initiative created in partnership with the Injured Jockeys Fund for the Betfair Chase Festival
DECEMBER 2014
Betfair announced FEBRUARY 2015 a cash return of TAP TAP BOOM ad campaign launched £200m with taxi stunt across the capital - to shareholders highlighting the simplicity of betting with Betfair as well as the fun and excitement of our brand
FEBRUARY 2015
US acquisition MARCH 2015 Betfair announced that it had acquired HRTV and entered Cheltenham Festival into a long-term content deal with the Stronach Group £160m traded across Exchange and Sportsbook
MARCH 2015
Switching Saddles APRIL 2015 Launch of campaign with GB’s most successful Back yourself female Olympian, Victoria Betfair’s Marathon Pendleton, who is vying Betting App allowed to become a qualified customers to bet on amateur jockey riding at the themselves to hit their Cheltenham Festival in just target time, with the 12 months winnings going to the charity of their choice WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe betting customers.betting recreational more attracting successfully by market competitive very this in share win to continued has Betfair and growth ofour forefront the at been has UK The business. our facing risk regulatory the reducing base, revenue total ofour 82% up make now and investment for focus our be to continue delivering this strategy. Sustainable regions on progress consistent We made have up. open markets new when and to internationally expand opportunities as sensible take and market, the in out stand they that so brand and products our develop markets, regulated on focus to been has growth for strategy Betfair’s Strategy 2014.December from UK the in tax (POC) consumption of point ofthe introduction the given an excellent performance, particularly £91.1m).£120.2m (FY14: This represents to 32% up EBITDA with £393.6m) (FY14: £476.5m to 21% by increased Revenue Financial performance customer numbers and revenues is clear. of terms in momentum the and effectively being presented and marketed more now is this Crucially, experience. betting sports aunique offered always has Betfair made. have we investments the on returns strong demonstrate results subsequent the and strategy our executed team has successfully management Our year. exciting an had has Betfair Dear Shareholder STATEMENT CHAIRMAN’S
work fairly and constructively together. together. constructively and fairly work can industries two the how on discussions joined already have we and proposals recentthe Government’s right” “racing with consistent are deal commercial of this aspects Many commitment. funding £40m five-year ofour part as causes grassroots support to funding significant provide we Racing, British In sport. in investment We also continue to make considerable Gambling Trust. substantial contributions to the Responsible making also play, whilst their manage to customers allow to tools gambling responsible our update to continue we end To thrive. this not could business our trust, and enjoyable environment. this Without asafe in play to able be must Customers do. we everything to central remains it and business our to critical is responsible socially being that know we different; be to proud been always has Betfair origins. its to true remains Company the of spirit the years, recent in significantly changed have ofBetfair parts Whilst Responsibility this opportunity. of size the determine to early too remains site,Sportsbook-Casino although it have launched a combined Exchange- we Italy, In trend. this continue to positioned well it leaves 2015 February in network HRTV ofthe acquisition its and share market take to continued has business horseracing TVG our US, the In markets. regulated international several in presence astrategic has now Betfair Chairman Betfair has had an exciting Betfair hashadanexciting we have made. strategy and the subsequent strategy andthesubsequent returns on the investments returns ontheinvestments results demonstrate strong Gerald Corbett Gerald Corbett year. Ourmanagementteam has successfully executed our 17 June 2015 June 17 Chairman Gerald Corbett Gerald Corbett year. coming the to confidence with years has been remarkable. I look forward two last the in achieved have they What to thank the management and employees. opportunity this take to like Iwould Finally, debt. no and of£105.1m cash with sheet, balance healthy avery with year the finished Betfair industry. dynamic this in arising opportunities ofany advantage take to flexibility to strategic retain important considered was it time, same the At term. medium the in ratio payout dividend ofa50% atarget signalling also whilst share, per pence of34.0 dividend year full the to addition in shareholders, to £199.7m ofcash returned year the assesses balance Betfair’s sheet and during continually Board The balance. cash and accordingly built up a considerable business generative cash ahighly is Betfair dividend and cash of Return report. ofthis 32 page on covered other which projects exciting are charity programme through and our Cash-4-Clubs sports grassroots other We support Annual Report andAccountsBetfair 2015 Group plcAnnualReport 04–05 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe STRATEGIC REPORT BUSINESS MODEL
HOW WE MAKE MONEY
SPORTS GAMING BETFAIR US
Sports combines: Gaming includes: Betfair US comprises: • Betfair Exchange, a unique • Betfair Casino; • TVG, the leading online technology platform which • Betfair Arcade; horseracing betting operator connects customers to bet in the US, which earns a share • Betfair Poker; against each other, for which of the stakes placed over its we charge commission; and • Betfair Exchange Games; and platform; and • Betfair Sportsbook, which • Betfair Bingo. • Betfair Casino, an online casino is a traditional fixed odds Some of these see customers site in the state of New Jersey. bookmaker,35 withwords a margin betting against Betfair and on applied to odds. others, like Exchange Games, Both platforms link into each we facilitate the game between other in innovative ways through customers and take a commission. signature products such as Cash Out and Price Rush. THE BETFAIR DIFFERENCE BETFAIR THE
MARGIN / COMMISSION
WHO BENEFITS FROM OUR VALUE CREATION
CUSTOMERS EMPLOYEES SHAREHOLDERS • Over 1.7m customers enjoy our • We employ more than 2,000 people • We are a profitable and highly cash products every year. across the UK, Europe and the USA, generative business with a track record • Betfair’s unique Exchange model with a large proportion of highly of delivering returns. means we welcome winners. skilled technology-related roles. • We returned £199.7m of cash to • Over 600 employees are invested in shareholders this year and increased the business through Save-As-You- our dividend by 70%. Earn share schemes.
SPORTS GOVERNMENTS COMMUNITY • We provide at least £8m of funding • We expect to pay in excess of £75m • We make significant contributions to a year to British Racing, including in gaming, corporation and other the Responsible Gambling Trust to contributions to grassroots causes. taxes in FY16. fund research into problem gambling. • We have MoUs with over 60 sports • We support a wide range of charity organisations including UEFA, the projects including our Cash-4- BHA and the IOC, which enable us Clubs programme for community to share information on suspicious sports clubs. betting patterns to protect the integrity of sport. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe DIFFERENCE BETFAIR THE FOCUSED ON RESPONSIBLE GAMBLING RESPONSIBLE ON FOCUSED FOCUSED ON PRODUCT DEVELOPMENT MARKETS SUSTAINABLE ON FOCUSED of problem gambling. of gambling. problem causes the research into identifying industry fund referenced areas all from of site. our We help also microsite, gambling responsible a dedicated as well as limits, their within to bet customers We of enable site tools that range have awide today. continues this and products gambling responsible inproviding history has aproud Betfair safeenvironment. afun, creating we by this do and business asustainable achieve we way can only is the This back. come site and our on time We to their enjoy customers want offers something different over brands. other different something offers Betfair that and market, inacompetitive customers retaining and key is the to attracting product that We strength. believe has played to traditional this access platforms, Rush both that as Price such products new and of Sportsbook, launch our The technology expertise. in-house high-end, on built was it and industry betting the revolutionised Exchange Our has been a always product-ledBetfair operator. improvedan return. to get expect we then time Over markets. in these marketing and products to inour invest more able we are stable, licensed more revenues are Because taxed. and regulated is properly gambling online where markets, “sustainable” we classfocusing as what on business the has from come of recent growth our Much customers to manage their gambling. their to manage customers tools for microsite and gambling a responsible We customers. provide also contact and behaviour in changes identify transactions, customer to review programme amonitoring uses Betfair How we are different? Cash Out that are setting the industry agenda. industry the setting are that Cash Out as such us to products develop enables This considerations. by retail notare encumbered not have. products our and We online solely are independence that many other operators do and pace,we development enjoy flexibility means This to create products. new engineers software over employs 500 and in-house spend development technology has of 87% its Betfair How we are different? market. US important strategically inthe presence growing We have UK. also to the a does as it markets we to believe that as new appeals much range sustainable and has markets a unique product of 82% revenues from total now derives Betfair How we different? are Annual Report andAccountsBetfair 2015 Group plcAnnualReport 06–07 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe STRATEGIC REPORT CHIEF EXECUTIVE’S REVIEW
Introduction The Group generated £103.8m of New customers are primarily joining Since setting out our strategy in 2012, underlying free cash flow and ended the through our Sportsbook, which is the we have executed our plan to grow in year with a cash balance of £105.1m and most efficient source of activations. sustainable markets, investing heavily in no debt. In January 2015 we returned These customers are then subsequently products and brand. We are competing £199.7m to shareholders via a B share introduced to our other products. This has aggressively on all fronts and the business scheme, while retaining flexibility to resulted in a positive impact across the has good momentum. pursue strategic options in a quickly rest of Betfair’s business, with increases of evolving market. 20% and 74% respectively in the number Overview of FY15 results of first-time Exchange and Gaming users. Revenue increased by 21% to £476.5m Strategy update (FY14: £393.6m), with double-digit Our primary objective is to achieve Revenue from sustainable markets was growth in each of Sports, Gaming and profitable growth in sustainable markets. up 27% to £388.5m (FY14: £306.1m), Betfair US. Revenue growth was driven To this end, we continue to focus our primarily driven by the UK and Betfair by a 52% increase in the number of active resources on regions with good regulatory US. This growth validates our strategy customers to 1,715,000 (FY14: 1,129,000), visibility, which we currently consider of focusing on these regions. supported by a 65% increase in the to be the UK, USA, Australia, Bulgaria, Revenue from other markets was number of new customers acquired in Denmark, Gibraltar, Ireland, Italy, Malta, up 1% to £88.0m (FY14: £87.5m). the year as well as a focus on reducing and Spain. These markets contributed This performance was better than customer churn. 82% of revenue in FY15 (compared to expected, benefitting from the lack of 78% in FY14 and 72% in FY13). While we are investing substantially in major market exits in the year. our products and brand, we continue The number of active customers in New product development continued to run the business with efficiency and sustainable markets increased by 70% to apace in the year. Through the ongoing discipline. This, combined with the revenue 1,456,000 (FY14: 854,000), driven by integration of our Exchange and growth, results in operating leverage and record customer acquisition during the Sportsbook we now have a sports has led to a 32% increase in EBITDA to World Cup, Cheltenham Festival and the betting platform that gives customers a £120.2m. Excluding the new UK point Grand National meeting. Active customer first-class experience. Our flagship Cash of consumption (POC) tax, EBITDA was numbers in other markets declined by 6% Out and Price Rush products, which up 53%. to 259,000 (FY14: 275,000). extend Exchange-style trading and pricing benefits to all customers, are key reasons
We are competing aggressively on all fronts and the business has good momentum.
Breon Corcoran Chief Executive Officer WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe Betfair Group plc Annual Report and Accounts 2015 08–09
why customers join us and also why they from £5.2m in FY14), highlighting the level Betfair continues to engage with stay. We continue to expand the range of investment we are making in customer appropriate authorities in international of these products and launched Cash acquisition and retention. markets where there is the prospect of Out for in-running horseracing and Price fair and workable regulation. During the International opportunities continue Rush for each way betting ahead of the year we exited from Singapore and ceased to be a key focus. In Italy the market Cheltenham Festival. to offer the Exchange in Austria, and we remains tough and we are ensuring continue to expect further market exits Our Brand has evolved considerably we have a competitive product before from territories where the future of online over the year as we have sought to making significant marketing investment. gaming regulation is currently unclear. demonstrate that Betfair is a fun and The acquisition of the HRTV network and different place to bet. In February we related content rights deal in the USA The Strategic Report on pages 2 to 33 is launched our “Tap Tap Boom” advertising secures long term content and distribution approved by the Board and signed on its campaign which highlights the simplicity to support TVG’s growth. We have also behalf by: of betting with Betfair. We have secured seen encouraging momentum from our leading advertising slots for the 2015/16 online casino business in New Jersey, Breon Corcoran football season on the two key UK sports although the wider market has been slower Chief Executive Officer platforms, Sky Sports and BT Sport, and to develop than anticipated. 17 June 2015 have increased our spend in print channels Regulation substantially to supplement our strong During the year Betfair obtained a gaming social and online marketing activities.
licence in the UK and began paying REPORT STRATEGIC We have also significantly increased our POC tax following its introduction in promotional activity to complement the December 2014 (£19.2m cost in FY15). attractive odds available on our Exchange Although timing remains uncertain, we and Sportsbook. For example, we offered expect a new gaming tax regime for eight places on the Open golf, compared Ireland to be in place by August 2015 and to the industry standard of five places, are seeking to obtain a licence. If both whilst at Cheltenham we had a market taxes had been in place for the whole of leading offer where customers received FY15, we estimate that the cost would three free bets for every winner at odds have been approximately £47m. of 3/1 or more on day one. We spent £21.1m on customer bonuses in FY15 (up GOVERNANCE
SUSTAINABLE ACTIVATIONS SUSTAINABLE ACTIVES SUSTAINABLE REVENUE thousands thousands £m 739,000 1,456,000 £388.5m +83% +70% +27%
739 1,456 388.5
306.1 280.0 854 404 674 275
+47% +83% +27% +70% +9% +27%
FY13 FY14 FY15 FY13 FY14 FY15 FY13 FY14 FY15 CORPORATE INFORMATION CORPORATE FINANCIAL AND STATEMENTS WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe STRATEGIC REPORT OUR STRATEGY AND KPIs
WHY WE ARE FOCUSING WHAT ARE WE DOING HOW DO WE MEASURE IT? ON THESE PRIORITIES
1. FOCUS ON SUSTAINABLE REVENUES
Sustainable markets offer greater We have redirected our resources to • Revenue from sustainable regulatory visibility, leading to greater invest in markets that are regulated, or markets increased by 27% in FY15 revenue stability. In these markets we regulating in the near term. This is making can have the confidence to invest and our revenue more stable, enabling us to • 82% of our revenues now employ all of our marketing tools to invest more in attracting customers in come from sustainable markets grow our business. key markets, and is resulting in overall (compared to 78% in FY14) revenue growth.
2. INVEST IN OUR PRODUCT AND BRAND
Our research shows that our products We are increasingly integrating our • Sales and marketing spend are a major reason why customers join Sportsbook and Exchange into one simple up 10% Betfair and they are the key reason Sports platform. This is being done why they stay. through innovative products that access • Over 60 people added to product the best features of both, Cash Out and development teams Brands are important in highly Price Rush. We are using our technology • New activations up 65% competitive consumer industries and capability to offer a peerless experience our brand investment allows us • Active customers up 52% to on these products and have launched bold to reach new customer segments. over 1.7m marketing campaigns that highlight the benefits they bring.
3. ACCELERATE GROWTH THROUGH INTERNATIONAL OPPORTUNITIES
The UK has long been a key online We are improving performance in our • Betfair US revenue up 29% gambling market, but new markets established international businesses such as are opening up across the world and Betfair US, which includes both TVG and • HRTV acquisition in February 2015 offer the chance for Betfair to use its our online casino in New Jersey. existing capabilities to grow scale. Our Italian business, Betfair Italia, launched in April 2014. Although the market is tough, we are investing in our product to increase the number of markets offered. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe STRATEGY IN ACTION 2015STRATEGY ACTION IN TVG had an exciting year, with significant product and marketing developments, as well as the acquisition ofHRTV. acquisition the as well as developments, marketing and product significant year, with exciting an had TVG year. this campaigns marketing high-profile ofour several in role aleading took Out Cash July. in Open the at time this UK, the in summer all about and out was Octopus Betfair’s Annual Report andAccountsBetfair 2015 Group plcAnnualReport 10–11 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe BUSINESS REVIEW SPORTS
Sports revenue was up 17% to £328.0m (FY14: £280.5m). The first half of the year was boosted by World Cup revenue of £15.9m, which was approximately double the amount generated from the last major football tournament, whilst the second half saw strong performances at the Cheltenham and Aintree festivals.
SPORTS AT A GLANCE
PRINCIPAL ACTIVITIES SPORTS REVENUE FY15
Combining our unique Exchange with a traditional Sportsbook, enhanced by product features such as Cash Out and Price Rush. £328.0m +17%
SPORTS REVENUE SHARE OF BETFAIR REVENUE SHARE OF SPORTS REVENUE (£m) (%) FROM SUSTAINABLE MARKETS % 328.0
271.6 280.5 FY15 78%
FY14 75% 69%
+3% +17% FY13 71% FY13 FY14 FY15 Sports WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe activations and 80% of UK Sportsbook customers now transacting via mobile. via transacting now customers Sportsbook ofUK 80% and activations customer UK ofnew majority the for responsible channel the with mobile, through comes now revenue ofSportsbook 70% way. Over the lead to continues Betfair and industry betting sports the across force driving the become has channel mobile The 2014). April in 4,300 around (from 2015 April in 9,500 approximately to events ofin-play number the in c.121% increase the is progress ofour example An rivals. longer-standing its with competitive is product our ensure to services, party third- as well as teams, management risk and trading in-house our in heavily invested We have acquisition. customer new to central remains it and £0.5bn) (FY14: £1.2bn to year the during 140% up were Volumes market. acompetitive in product new acomparatively still is what for strongly perform to continued has Sportsbook Our of 7/1. SP industry an to compared on Betfair 25/1 at off went Shutthefrontdoor mount National Grand final McCoy’s AP in April, and, year the throughout evident were platform the on inherent benefits pricing The days. two in twice event asingle for record Exchange the breaking traded, £100m over seeing semi-finals both with popular proved also Cup World Cricket March’s stage. early an from vote “No” eventual the predicting odds its with Referendum, Scottish the during stage centre took Exchange the September In £52.8bn). (FY14: £55.3bn to increased volume trading total and differentiator key our remains Exchange The fell at the final fence. final the at fell horse the as decision awise be to proved which in-running, button Out Cash the tap to decided customers savvy some but win to destined seemed Power Annie unfolded race the As Hurdle. Mare’s the in Power Annie favourite the just leaving won, all selections three first The fold. four- Mullins Willie popular the backed customers many when one, day on Exchange. This had an immediate impact running racing on and both Sportsbook in- on Out Cash launched we Festival Cheltenham the to Prior out. stand Betfair make to wanted we competition, the with up catching as well As class trading platform. ahigh- us giving Festival, Cheltenham ofthe ahead launched were ofthese All Exchange. the on betting way each integrated content tipping better and through pricing, earlier Sportsbook we improved significantly our product FY15, In competitors. our behind were offer ofour elements but horseracing in heritage astrong has Betfair PRODUCT CASE STUDY CASE PRODUCT HORSERACING www.betfair.com visit products Sports To our view was Rushed from 25/1 to 33/1. to 25/1 from Rushed was including the winner Many Clouds which value excellent received customers Betfair so runners, 39 all Rush Price to able were we National Grand the On customers. more to available Price Rush toextended each way bets, making also was Rush Price February, In Annual Report andAccountsBetfair 2015 Group plcAnnualReport 12–13 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe BUSINESS REVIEW GAMING
Gaming revenue increased by 34% to £88.5m (FY14: £66.2m). The strong performance was primarily driven by the significant increase in the number of Sports customers and the successful cross-selling of Gaming products to these customers.
GAMING AT A GLANCE
PRINCIPAL ACTIVITIES GAMING REVENUE FY15
A wide range of Gaming products including Casino, Arcade, Poker, Exchange Games and Bingo. £88.5m +34%
GAMING REVENUE SHARE OF BETFAIR REVENUE SHARE OF GAMING REVENUE (£m) (%) FROM SUSTAINABLE MARKETS % 88.5 75.9 FY15 82% 66.2
19% FY14 75%
-13% +34% FY13 64% FY13 FY14 FY15 Gaming WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe via mobile. playing months recent in ofactives 60% over with customers, Casino for of choice platform the now is it ofgrowth; driver akey be to continues channel mobile The ofcustomers. retention and acquisition the both boosted has marketing, targeted more with combined this, and experience customer personalising in improvements year. significant the in We made have launched were games new 175 over and content available best the sourcing on focused We also 100%. by time first the for products Gaming using customers ofSports number the increase to helped This app. Sports our within games embedded and apps, Gaming and Sports our across sign-on single as such cross-sell, to improvements on development product concentrated we year the During in mobile revenue. those using mobile and a 45% increase in increase a111% with actives, Casino all in of58% increase a year-on-year saw we 2015 April In app. mobile Sports login and embedded games into the games, single sign-on, free spins, touch new adding by product the improve we continued to FY15 Throughout listings. of games automated promotions and presentation such as personalised and industry-firsts iOS Apps, which included several product, including our Web and Native ofour overhaul an released we 2014 January In customers. for experience desktop full the recreate to look we as Gaming for priority akey is Mobile PRODUCT CASE STUDY CASE PRODUCT MOBILE –CASINO MOBILE www.betfair.com visit products Gaming To our view Annual Report andAccountsBetfair 2015 Group plcAnnualReport 14–15 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe BUSINESS REVIEW BETFAIR US
Betfair US revenue increased by 29% to £58.8m (FY14: £45.7m), mainly driven by TVG where handle (which is the volume of wagers placed) and revenue increased by 11% and 20% respectively (both constant currency). The first full year of operation from our online casino in New Jersey generated revenue of £5.3m (FY14: £1.2m).
BETFAIR US AT A GLANCE
PRINCIPAL ACTIVITIES BETFAIR US REVENUE FY15 TVG online horseracing wagering and online casino in New Jersey. £58.8m +29%
BETFAIR US REVENUE SHARE OF BETFAIR REVENUE SHARE OF BETFAIR US REVENUE (£m) (%) FROM SUSTAINABLE MARKETS % 58.8
45.7 12% FY15 100%
38.0
FY14 100%
+20% +29% FY13 100% FY13 FY14 FY15 Betfair US WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe partner from Trump Plaza to Golden Nugget. Nugget. Golden to Trump Plaza from partner licensing land-based our switched we October In momentum. trading recent our by encouraged are we anticipated, than smaller be to proved has market Jersey New wider the Whilst state. the in gaming ofonline regulation the following 2013 November in launched was Casino Jersey New Betfair’s previously. 27,000 to compared races, live 40,000 over show to able be now will network combined the that chiefly customers; racing US for benefits significant offers networks two of the integration the We believe Group. Stronach the with rights wagering and broadcasting long-term agreed and network horseracing HRTV ofthe acquisition the completed TVG 2015, February In base. customer active its in growth driving is capabilities marketing and digital broadcast, its in investment largest US onlineadvanced depositwageringcontinued operator by market share.TVG’s TVG continues to thewiderUSonlinehorseracing outperform market andduringtheyear itbecamethe grow scale at an efficient cost. efficient an at scale grow to capability technology existing its using ofBetfair example agood is This ofcoverage. quality the an making immediate to difference definition, high to upgraded been now has coverage HRTV Secondly, studio. state-of-the-art new TVG’s into brought was centre presenting and production HRTV’s First, 2015. February in channelupgrade the which HRTV it acquired technology to infrastructure immediately significant its use to able been has TVG PRODUCT CASE STUDY CASE PRODUCT HRTV UPGRADE HRTV www.tvg.com and www.betfaircasino.com visit products US To our view Annual Report andAccountsBetfair 2015 Group plcAnnualReport 16–17 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe STRATEGIC REPORT FINANCIAL REVIEW
YEAR ENDED 30 APRIL FY15 FY14 Change £m £m % Revenue 476.5 393.6 +21% EBITDA 120.2 91.1 +32% Operating profit 94.3 61.6 +53% Profit before tax 101.2 61.1 +66% Underlying profit before tax 1 94.8 61.1 +55% Profit for the year 86.4 51.0 +69% Underlying profit for the year 1 80.0 51.0 +57% Earnings per share 85.9p 49.0p +75% Underlying earnings per share 1 79.5p 49.0p +62%
1 Underlying figures in FY15 exclude the profit on disposal of the Group’s share of Betfair Australia. A reconciliation of reported figures to underlying figures is set out on page 21.
Summary which exclude this item, provide additional guidance to statutory Revenue increased by 21% to £476.5m (FY14: £393.6m) measures to help understand the underlying performance of the driven by double-digit growth in Sports, Gaming and Betfair business during the financial year. Underlying profit before tax was US. EBITDA was up 32% to £120.2m (FY14: £91.1m) as strong up 55% to £94.8m (FY14: £61.1m). operating leverage allowed the business to absorb additional Earnings per share were up 75% to 85.9 pence (FY14: 49.0 marketing investment and the introduction of POC tax in the UK pence) and underlying earnings per share, which exclude the gain from December 2014. on disposal, increased by 62% to 79.5 pence (FY14: 49.0 pence). Reported profit before tax was £101.2m (FY14: £61.1m), which The Group ended the year with a cash balance of £105.1m included a £6.4m profit relating to the disposal of our joint (FY14: £209.8m) and no debt, despite returning £223.8m to venture in Australia. Management believes that underlying results, shareholders through a B share scheme and ordinary dividends.
EBITDA was up 32% to £120.2m as strong operating leverage allowed the business to absorb additional marketing investment and the introduction of POC tax.
Alex Gersh Chief Financial Officer WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe sustainable markets. on ofinvestment focus continued the 6%, reflecting by decreased markets other in ofactives number the while 70%, by increased markets sustainable in customers ofactive number The meeting. National Grand and Festival Cup, Cheltenham World the during ofactivations number arecord by aided 1,129,000), (FY14: 1,715,000 to 52% by increased FY15 in customers ofactive number The obscuring an decline underlying following the decision to focus investment on sustainable markets. revenue Cup World and year the in closures market major no £87.5m), with (FY14: 1% £88.0m to up was markets other from Revenue US. Betfair and UK the by driven £306.1m), primarily (FY14: £388.5m to 27% up was markets sustainable from Revenue £1.2m). (FY14: ofoperation year full first its in of£5.3m revenues generated which Jersey, New in casino online our by boosted also was Growth currency). constant (both respectively 20% and 11% by increased revenue and placed) ofwagers volume the is (which handle where TVG by £45.7m), driven mainly (FY14: £58.8m to 29% by increased revenue US customers. these to products ofGaming cross-selling successful the and customers ofSports number the in increase asignificant by driven primarily was performance strong The £66.2m). (FY14: £88.5m to 34% by increased revenue Gaming of£15.9m. revenue Cup World by boosted was year ofthe half first The £280.5m). (FY14: £328.0m to 17% up was revenue Sports Change % Change % Change % Other markets Change % Sustainable markets Total revenue Other markets Change % Sustainable markets Gaming Sports April 30 Year ended Total actives Betfair US Betfair Change % Total Revenue Funds Customer ACTIVES (K) ACTIVES REVENUE (£M) REVENUE +48% +30% +65% +34% +15% 117.3 23.6 93.7 -2% 784 653 131 Q1 Q1 +30% +23% +31% +51% 120.3 -22% 98.3 22.0 708 594 -1% 114 Q2 Q2 +50% +20% +35% +27% 114.6 -11% 92.9 -2% 638 760 21.7 122 Q3 Q3 +46% +58% 1,040 +18% +13% 103.6 124.3 -8% -6% 20.7 905 135 Q4 Q4 +52% 388.5 +70% 476.5 +27% +21% 1,456 1,715 88.0 -6% +1% FY15 FY15 259 90.4 69.9 20.5 396 530 134 Q1 Q1 Annual Report andAccountsBetfair 2015 Group plcAnnualReport 97.6 22.2 75.4 540 393 147 328.0 476.5 Q2 Q2 88.5 58.8 FY15 1.2 £m
95.4 22.2 73.2 424 561 137 Q3 Q3 280.5 393.6 66.2 45.7 FY14 1.2 £m 110.2 22.6 87.6 714 143
571 Q4 Q4 +34% +29% Change +21% +17% 393.6 306.1 1,129 87.5 854 0% FY14 FY14 275
%
18–19 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe STRATEGIC REPORT FINANCIAL REVIEW CONTINUED
Gross margin Gross profit for the year increased by 13% to £385.9m EBITDA (FY14: £342.7m). This represents a gross margin percentage of FY15 FY14 Change 81.0% (FY14: 87.1%), with the year-on-year reduction largely Year ended 30 April £m £m % driven by additional gaming taxes including UK POC. Betfair excl. US 115.4 89.1 +30% Betfair US 4.8 2.0 +140% ADMINISTRATIVE EBITDA 120.2 91.1 +32% EXPENSES FY15 FY14 Change Year ended 30 April £m £m % EBITDA was up 32% to £120.2m (FY14: £91.1m). The EBITDA Sales and marketing 136.1 124.2 +10% margin increased to 25.2% (FY14: 23.1%), or 29.3% excluding UK POC tax. Technology 62.4 60.1 +4% Operations 36.4 35.1 +4% EBITDA excluding the US was up 30% to £115.4m (FY14: £89.1m), with revenue growth partly offset by increased G&A 30.8 32.2 -4% costs of sales, including £19.2m relating to the introduction of Operating expenses 265.7 251.6 +6% POC tax in the UK, alongside increased investment in marketing Depreciation and amortisation 25.9 29.5 -12% and product. Total administrative expenses 291.6 281.1 +4% Betfair US EBITDA increased by 140% to £4.8m (FY14: £2.0m), with reduced losses as part of our multi-year investment in New Average headcount during the year of 1,901 was 9% higher than Jersey Casino, along with strong revenue growth in TVG. the prior year (FY14: 1,739) driven by increased investment in our Finance income and expenses product and technology teams, alongside additional operational Net finance income was £0.4m (FY14: £0.7m). This includes staff to serve the growing customer base. interest on corporate funds of £1.1m (FY14: £1.1m), net foreign Sales and marketing spend increased by 10%, mainly driven by exchange translation losses of £0.3m (FY14: £0.4m) and charges World Cup investment in the first half of the year. As a proportion of £0.4m relating to deferred and contingent consideration for the of total revenue, sales and marketing spend decreased to 29% acquisition of HRTV. (32% in FY14). Betfair Australia Technology costs before capitalisation of internal development In August 2014, we sold our 50% stake in Betfair Australia to our expenditure were up 2% on the prior year, with additional product joint venture partner Crown Resorts Limited for £5.5m, which development spend offset by efficiencies following the expansion represented a gain on disposal of £6.4m. Our shareholder loan to of our near-shore technology centres. Internal development Betfair Australia of £6.5m was also repaid at the same time. expenditure capitalised was £6.6m (FY14: £7.4m). Our share of operating profit in Betfair Australia was £0.1m Technology costs after this capitalisation were up 4% on the (FY14: loss of £1.2m), relating to the period up until the disposal prior year. of the business. Operations spend was up 4%, predominantly due to increased Betfair US investment in customer services resources to support significant In February 2015, TVG acquired the HRTV horseracing television growth of the customer base. network and entered into a long-term content rights agreement General and administrative (G&A) costs were down 4%, primarily with the Stronach Group. Betfair US made an initial payment of driven by lower headcount in this area. $25.6m (£16.6m) and will pay further consideration estimated to be $47.8m over a seven-year period, although the total Depreciation and amortisation of £25.9m was 12% lower consideration is dependent upon TVG’s future handle. than prior year (FY14: £29.5m), mainly due to historical assets becoming fully depreciated. Based on projected future cash flows, the present value of the total consideration is estimated to be $56.5m. Corporation Tax The Group had a tax charge of £14.8m for the year (FY14: £10.1m). The Group’s effective underlying tax rate was 15.6% (FY14 underlying: 16.5%) and we continue to expect the long-term sustainable tax rate to remain around this level. Dividend The Board is recommending the payment of a final dividend of 25.0 pence per share. Together with the interim dividend of 9.0 pence per share, the proposed full year dividend is 34.0 pence per share (FY14: 20.0 pence). The full year dividend represents 43% of underlying earnings per share. The ex-dividend date will be 10 September 2015, the record date will be 11 September 2015 and payment will be on 9 October 2015. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe introduction of UK POC tax. POC ofUK introduction the including payable taxes in increase an also was There deal. content HRTV ofthe respect in payable consideration contingent and deferred the to relating primarily payables, other and trade by driven mainly £182.6m to £138.1m from increased Total liabilities year. the in operations from generated cash positive by part in offset shareholders, to as return of a cash result the primarily decreased assets Current 75%). (FY14: assets current 55% were ofwhich £309.5m) (FY14: £232.0m were Total assets £171.4m). of£49.4m (FY14: assets net with position, financial astrong in year the ended Group The Balance Sheet completed in 2015. January was This 8basis. a7for on capital share ofour consolidation subsequent the and scheme aBshare via shareholders to capital of£199.7m of return the 2014, announced we December In cash of Return high definition. to ofTVG conversion the in investment one-off the including costs year prior with spend, external lower to due mainly £22.4m) (FY14: £19.8m to decreased (capex) expenditure Capital Total Internal devex FY15 reported FY15 Year ended 30April2015 capex External April 30 Year ended FY15 underlying FY15 ofJV Disposal RECONCILIATION OF REPORTED TO UNDERLYING REPORTED OF RECONCILIATION CAPITAL EXPENDITURE 19.8 13.2 FY15 6.6 £m
22.4 15.0 FY14 7.4 £m
Change -12% -12% -11% %
Cash at 30 April 2015 was £105.1m (30 April 2014: £209.8m). April (30 £105.1m was 2015 April 30 at Cash £70.4m). (FY14: £103.8m to 47% by increased items, disclosed separately to related that year prior the in flow cash excludes which flow, cash free Underlying £58.0m). (FY14: period the in £103.8m was flow cash Free Other in Betfair Australia ofstake disposal from Proceeds duty and fees Return of to capital shareholders, including paid Dividends Cash and cash equivalents as at 30 April 30 at as equivalents cash and Cash 3 2 Year ended 30 April 30 Year ended Free cash flow cash Free items disclosed separately from flow Cash flow cash free Underlying April 30 Year ended and cash equivalents Net (decrease)/increase in cash CASH AND CASH FLOW CASH AND CASH Excludes the effect of exchange rate fluctuations on cash held. cash on fluctuations rate exchange of effect the Excludes capital. share of issue the from proceeds and shares own of purchase net the of comprised is Other 2 Revenue Revenue 476.5 476.5 £m – 3 Annual Report andAccountsBetfair 2015 Group plcAnnualReport EBITDA 120.2 120.2 £m – Operating 94.3 94.3 profit £m –
(200.7) (104.2) Profit for the year the 103.8 103.8 105.1 (24.1) 80.0 86.4 12.0 FY15 FY15 (6.4) 4.8 £m £m £m -
209.8 (15.6) (12.4) 58.0 70.4 85.9 43.7 79.5 FY14 FY14 (6.4) 1.3 EPS £m £m – – p
20–21 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe STRATEGIC REPORT UNDERSTANDING AND MANAGING OUR PRINCIPAL RISKS
To enable the business to focus on achievement of strategic objectives and sustainable long-term growth we recognise the importance of identifying and actively managing the full range of both existing and emerging financial and non‑financial risks. We recognise both the threats and opportunities arising from these risks. This drives a better understanding of risk appetite, tolerance and management across the business.
Corporate Risk Committee
We apply our detailed understanding LINES OF DEFENCE AND RESPONSIBILITIES The first line of defence – operational management and of risks to our overall strategic internal controls: management. We use the • embed and manage internal controls and risk management day- to-day as part of business as usual. “three lines of defence” model. The second line of defence – oversight and assurance functions: • set appropriate policies, provide guidance, advice and direction RISK GOVERNANCE AND RESPONSIBILITIES on implementation of those policies; and • monitor the first line of defence. The Board’s responsibility: • overall responsibility for risk management framework. The third line of defence – Group Internal Audit & Risk Management: The Audit Committee’s responsibility: • independent challenge and assurance on internal controls and • assess the scope and effectiveness of the risk management the first and second lines; and systems established by management. • advice on improvements. The Corporate Risk Committee’s responsibilities: In addition: • ensure management and lines of defence are performing External Audit also provide challenge and assurance on controls their roles in managing risk; and advice on improvements. • risk register is properly maintained; Regulators check our compliance with legislation and • material risks are being properly addressed; and licence requirements. • emerging risks are identified, measured and monitored. Executive Management responsibilities: • identify, assess, monitor, manage and mitigate risks and exploit opportunities; BETFAIR BOARD/AUDIT COMMITTEE • embed risk management as business as usual; • appropriate internal controls are in place; and • all key risks are identified and actions to mitigate risks EXECUTIVE MANAGEMENT/CORPORATE are implemented. RISK COMMITTEE EXTERNAL AUDIT REGULATORS 1ST LINE OF 2ND LINE OF 3RD LINE OF DEFENCE DEFENCE DEFENCE • Senior • Financial control • Group Internal Management • Compliance Audit & Risk • Operational Team Management Management • Legal Team • Internal Controls • Integrity Team & annual self- assessments • Anti-Money Laundering • Internal policies Team & training Corporate governance pages 47-52 • Security Team for further details of how our risk management framework and policies are embedded. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe Betfair Group plc Annual Report and Accounts 2015 22–23
RISK MANAGEMENT PROCESS
Identify risks A robust methodology is used to identify key risks across the Group. Assess and quantify risks Analyse risks and controls to manage identified risks and evaluate to establish root causes, financial impacts and likelihood of 1 2 ASSESS & occurrence. Risk categories used: IDENTIFY RISKS QUANTIFY RISKS • Strategic • Governance, Legal & Regulatory • Security • Financial 4 3 • Commercial & Operational MONITOR & REASSESS DEVELOP ACTION RISK POST MITIGATION PLANS TO MANAGE • People & REPORT & MITIGATE RISKS • Technology STRATEGIC REPORT STRATEGIC Develop action plans to manage and mitigate risks Assess effectiveness and adequacy of controls. If additional controls are required these are identified and responsibilities assigned. Monitor and reassess risk post mitigation and report audit programme which evaluates the design and effectiveness of Management is responsible for monitoring progress of actions controls. The risk management process is continuous; key risks are to treat key risks and is supported through the Group’s internal reported to the Corporate Risk and Audit Committees.
OUR PRINCIPAL RISKS AND POTENTIAL KEY STRATEGIC IMPACTS
IDENTIFYING OUR MATERIAL RISKS During the year a comprehensive bottom-up review of risks was 6 undertaken throughout the Group, supported by facilitated risk workshops, to ensure that all potentially material risks have been 8 9 3 identified, owners agreed and management/mitigation plans 2 established accordingly. An Executive Management workshop 4 1 reviewed the risks completing the top-down review. 5
OUR STRATEGIC PRIORITIES GOVERNANCE 7 1 Focus on sustainable revenues 2 Invest in our product and brand 3 Accelerate growth through international opportunities We see successful risk management as an opportunity to set us apart from our competitors. The principal risks and uncertainties which are considered to have a potentially material impact on the Group’s long-term performance and achievement of strategy are set out on the Detail of risks follows in the tables on pages 24-26 following pages. External and internal risk factors are considered. This is not intended to be an exhaustive and extensive analysis on the business. Further details of how our risk management of all risks which may affect the Group. Additional risks and framework and policies are embedded can be found on pages 47 uncertainties not presently known to management, or currently to 52. deemed to be less material, may also have an adverse effect CORPORATE INFORMATION CORPORATE FINANCIAL AND STATEMENTS WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe STRATEGIC REPORT BALANCING RISKS AND OPPORTUNITIES
Change in potential impact. What’s Key risk/uncertainty changed and why Why we need to manage this How we manage this The opportunity
Territories/countries New licensing regimes which make it We work closely with regulators Early to market in newly 1. ONLINE introducing regulation. commercially unviable for us to and governments throughout the regulated jurisdictions by GAMING Potential for increased operate our products can restrict our EU and elsewhere to try to secure securing licences and REGULATION regulation of ability to grow the business. favourable regulation for our extensions in a short AND LICENSING advertising. While opportunities exist, they are products. We obtained a UK licence time frame. not without risks – such as during the year. Regulated markets provide Risk category: commercial viability, delays in We have dedicated internal and sustainable revenues and Strategic licensing of betting exchanges external legal, tax, compliance and increased access to compared with other products, how public affairs resources with potential customers. Governance, Legal our products are taxed and licensing responsibility for advising business Our strategy is to focus on & Regulatory one section of the online market, units in these matters and through these sustainable such as sports betting, but not appropriate policies, processes regulated jurisdictions. Links to strategy: another, such as casinos or poker. and controls. 1 3 Restrictions on advertising can External third parties help us to reduce our ability to reach new substantiate evidence to support customers and market new using a gross profits tax model. product offerings. We monitor developments in Consequently this could impact our advertising practice. strategic objectives to focus on sustainable revenues and to accelerate growth through international opportunities.
Competition continues Online gambling is a very Investment in brand and marketing Promotional activity 2. COMPETITION/OUR to grow, consolidation competitive industry. Our tools and activity. Monitoring of attracts new customers, BRAND, PRODUCTS creates larger competitors are constantly looking competitors and their robust and innovative AND CUSTOMERS competitors and new to gain advantage through promotional offers. product offerings entrants continue to aggressive marketing campaigns, Continuous development of will encourage enter the market pricing, promotional behaviour and customer loyalty. Risk category: product with emphasis on mobile and innovate. new product features which could Strategic products and innovative features Development of the impact revenue or margins. Product and acquisition through marketing. products of choice in the Commercial and delivery to market is vital to market, enhanced brand, gain competitive edge over We closely monitor the behaviour & Operational of our customers and have teams marketing and potential other operators. gain of market share. Links to strategy: focused on their acquisition, Our customers are at the heart of management and retention. the business, reduced activity by 1 2 3 major customers and/or a We aim to ensure we provide a significant number of customers service and platform which grow could have a material negative value for both the customer and impact on our financial Betfair, and reduce the risk of performance and growth. customers leaving. Consequently this could impact all of our strategic objectives to focus on sustainable revenues, to invest in product and brand and to accelerate growth through international opportunities.
Limited change from We rely on our customers being able Continuous investment in At times of peak demand 3. TECHNOLOGY prior periods. Our to access markets via the internet and a cost effective technology platform availability is key to INFRASTRUCTURE, technology and any extended loss of connectivity and infrastructure to ensure stability attracting and SYSTEMS STABILITY infrastructure remain could have a material effect on and availability, eliminate single retaining customers. & AVAILABILITY capable of supporting revenues. points of failure and improve Further positive our growth. External A major failure of the Group’s and/or performance. Focus is on a secure differentiation through malicious threats to third party infrastructure could lead to and scalable offering across technology stability and Risk category: our products and all products. Technology significant costs and disruptions that availability of product. networks will always could reduce revenue and harm our Robust development and change Links to strategy: exist, our ability to business reputation. Reduced management processes help reduce manage such threats availability of our products arising the risk of unplanned outages. 1 2 3 has kept pace with through software, infrastructure and changes in the systems issues could result in a poor threat landscape. customer experience and may impact customer loyalty. Consequently this could impact all of our strategic objectives, to focus on sustainable revenues, to invest in product and brand and to accelerate growth through international opportunities. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe
Key risk/uncertainty Links to strategy: People Risk category: 7. Links to strategy: Commercial &Operational Technology Risk category: 6. Links to strategy: Commercial &Operational Risk category: 5. Links to strategy: & Regulatory Governance, Legal Financial Risk category: 4. 1 1 1 1 RECRUITMENT EMPLOYEES KEY OF AND RETENTION RELIANCE ON ON RELIANCE THIRD PARTIES TAXATION IT DISASTER DISASTER IT CONTINUITY BUSINESS AND RECOVERY
2 2 2
3 3 3
to priorperiods. No significantchange prior periods. prior periods. unchanged from Impact largely and why changed What’s impact. Change in potential of staff. recruitment with retentionor no significantissues the currentperiod– Risk hasreducedin to priorperiods. No significantchange
opportunities. growth throughinternational product andbrandtoaccelerate sustainable revenues,toinvestin our strategicobjectives,tofocuson Consequently thiscouldimpactallof software solutionsandinfrastructure. functions alsorelyonthirdpartiesfor for content/data.Operational dependent onthirdpartysuppliers business. Allofourproductsare We relyonthirdpartiesacrossour opportunities. growth throughinternational product andbrandtoaccelerate sustainable revenues,toinvestin our strategicobjectives,tofocuson Consequently thiscouldimpactallof creating unexpectedliabilities. undermine existingtaxplanning Changes intaxregimescan Why we need to manage this manage to need we Why international opportunities. and toaccelerategrowththrough revenues, investinproductandbrand objectives tofocusonsustainable ultimately impactallofourstrategic operations, financialperformanceand Consequently thiscouldimpairour opportunities mustbeavailable. competitive packagesanddevelopment competitive environmentmeansthat skilled employeesinanintensely and motivatepassionatehighly Our abilitytocontinueattract,retain develop ourbusiness. securing ourabilitytogrowand individuals isakeycomponentin Retention andrecruitmentofthese directors, managersandstaff. dependent ontheperformanceofkey Continued successandgrowthis sustainable revenues. strategic objectivetofocuson Consequently thiscouldimpactour damage. loss ofcustomersandreputational an outageorincidentcouldresultin Delays inrestoringservicesfollowing loss of customers. can causereductionsinrevenueand unavailability ofanyourproducts paramount. Asignificantoutageor Availability ofourproductis need tochange. potential optionsintheeventofa their resilienceandreviewthe by ourkeysuppliers.Weassess and availabilityofservicesdelivered communication tofocusonquality supported bycontinuous level managementprocesses We useformalcontractandservice single pointsoffailure. a singlesuppliertoreducepotential Where possiblewelimitrelianceon leverage ishelpingtooffsetthetax. Revenue growthandoperating Consumption Taxduringtheyear. We compliedwiththeUKPointof effective. ensures taxplanningremains specialist inkeybusinessdecisions Proactive involvementoftax of governancestructures. monitored throughregularreviews Adherence totaxplanningis How we manage this manage we How failure. and seektolimitsinglepointsof we havefailoversolutionsavailable with thirdparties.Wherepossible service levelagreementsinplace Recovery capabilityandhave Continuity PlansandourITDisaster We regularlyreviewourBusiness productivity andwellbeing. employee turnoverandimproving corporate goalswhilereducing link improvementstoachievingour engagement surveyswhichhelpusto Our employeesparticipatein opportunities. package andcareerdevelopment reviews, andtoprovidecompetitive appraisal, successionandtalent identify keyroles,conductregular place throughoutthebusinessto planning andprocesseswhicharein Group HRactivelymanagesuccession long termstakeinoursuccess. share saveschemeswhichgivethema to localjurisdictionalrequirements) package andareabletojoin(subject reviews, acomprehensivebenefit All staffareofferedregularsalary reward highperformanceandloyalty. of longtermincentiveplanswhich Key seniorstaffanddirectorsarepart Nomination Committees. through theRemunerationand The Boardreviewskeypositions Annual Report andAccountsBetfair 2015 Group plcAnnualReport retain customers. helps usattractand develop ourselves.That areas thatwewouldnot from oursuppliers,oftenin to strongproductinnovation We alsobenefitfromaccess our productsandservices. and increasesavailabilityof risk ofsinglepointsfailure multiple suppliersreduces costs. Inmanycasesuseof helps ustomanageour Use ofstrategicthirdparties increased taxes. remain inmarketsdueto operators whodonot market sharefrom an opportunitytotake changes intaxrepresents Our abilitytocomplywith the Group. position andcashflowof impact onthefinancial planning hasapositive Effective, sustainabletax The opportunity competitors. differentiate usfrom help retaincustomersand operations andservicescan an incidentandrestore Our abilitytorecoverfrom of talent. and retention facilitating attraction within theindustry Positive reputation 24–25 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe STRATEGIC REPORT BALANCING RISKS AND OPPORTUNITIES CONTINUED
Change in potential impact. What’s Key risk/uncertainty changed and why Why we need to manage this How we manage this The opportunity
Risk remains the same Some jurisdictions continue to put We have strong relationships with Availability of a range of 8. SECURITY OF as in prior periods. pressure on banks to refuse to key financial institutions and payment methods CUSTOMER FUNDS process transactions from online banking and payment suppliers. increases opportunities for AND RELIANCE gaming companies. A reduced Wherever possible we avoid customers to deposit funds ability to transact with customers reliance on a single provider. We with us. ON FINANCIAL can impact our growth and regularly assess their resilience and INSTITUTIONS expansion into new territories. alternative options in the event of a Risk category: Actual or perceived mismanagement need to change supplier. of customer funds could have Under the terms of a Trust Deed, Security severe reputational and/or financial approximately 95% of all customer Financial impacts. There is the possibility of funds is held on trust in separate loss arising in the event of failure of bank accounts which are ring- Links to strategy: counterparties. fenced from our corporate funds. The remaining sums are customer Consequently this could impact all of 1 2 3 our strategic objectives, to focus on funds which certain regulators sustainable revenues, invest in require Betfair to hold in separate product and brand and to accelerate non set-off bank accounts in the growth through international name of the licence holder. opportunities. Daily and monthly reconciliations of customer funds take place to ensure timely detection of potential fraud or error. All customer funds are subject to the Group Treasury policy which is reviewed annually by the Audit Committee on behalf of the Board. At 30 April 2015 the majority of the Group’s customer and corporate funds were held with major systemically important counterparties or pooled AAA rated money market funds. Exposure to counterparties are regularly reviewed by the Chief Financial Officer and adjusted accordingly.
Limited change from Breach or loss of customer Specialist monitoring and detection Positive differentiation to 9. DATA prior periods. External or other sensitive data and solutions and teams used across our competitors through MANAGEMENT malicious threats to information could lead to significant development and live product. offering strong security AND SECURITY our products and costs and disruptions that could Access to customer and other over customer funds, data networks will always impact revenue and harm our sensitive data and information is and other information. exist, our ability to business reputation. restricted and monitored in Risk category: manage such threats Consequently this could impact all of a variety of ways. We have Technology has kept pace with our strategic objectives, to focus on appropriate policies, process and changes in the sustainable revenues, to invest in controls and mandatory security Commercial & threat landscape. product and brand and to accelerate awareness training. Operational growth through international We comply with the relevant data opportunities. protection and privacy legislation. Links to strategy: An independent review 1 2 3 of cyber threat has been undertaken and supports our approach to managing this threat. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe corporate citizen in everything that we do. do. we that everything in citizen corporate agood be to try and seriously communities our and sport regulators, customers, to obligations our We take trust. can they abrand with experience betting safe and enjoyable an have customers our ensure safeguards comprehensive Our years. 15 past the for thing” “easy the than rather thing” “right the do to strived has Betfair REPORT RESPONSIBILITY CORPORATE the environment the environment Commitment to Commitment to 4. 4. APPROACH in responsible in responsible Contributions Best practice gambling to charity OUR CR CR 1. 3.
donation to the Injured Jockeys Fund. Fund. Jockeys Injured the to donation do, whilst also guaranteeing a significant highlighted the gruelling work jockeys successfully November in campaign twitter Day Jockey National Our months. 12 past the in supported have we projects charity made great progress with the innovative year, on year also have we improved be to gambling continue integrity and sporting Whilst our approaches to responsible
An engaged An engaged workforce
2. 2. Ourcomprehensive safeguards can trust. can trust. experience withabrand they enjoyable andsafe betting haveensure ourcustomers an and Chair of the Corporate Responsibility Committee Chairman Betfair Gerald Corbett
Responsibility goals and achievements. Responsibility Corporate wider ofour overview an give and detail more in contributions these explain will we sections following the In guaranteed another sizeable donation. – supporting were they that charities the to contributions receive and times target their hit to themselves on bet to runners appMarathon betting – which allowed Similarly, our Yourself” “Back London (CR) COMMITTEE (CR) * At 30 April 2015. April 30 * At International) (Commercial Pinner Jonathan Director, Corporate Communications) of (Head Midmer James Ireland) and UK Affairs, of Public (Head Tom Tuxworth Russell (ChiefFiona Legal Officer) Director) HR (Group Hillier Lisa (Chairman) Corbett Gerald ofMembers the Committee* include: advise the Board. and policies Responsibility Corporate Betfair’s review to year per times four least at meets Committee CR The CORPORATE RESPONSIBILITY Annual Report andAccountsBetfair 2015 Group plcAnnualReport
26–27 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe STRATEGIC REPORT CORPORATE RESPONSIBILITY REPORT CONTINUED 1. Best practice in responsible gambling 18+
Betfair is committed to ensuring its customers gamble responsibly. Our responsible gambling policies include: • a specialist team responsible for age- verifying every customer and reviewing links to anyone identified as having a problem with their gambling; • a dedicated responsible gambling microsite with tools for customers to manage their betting activity and information for gamblers, friends • customer-driven deposit and loss • suggest that gambling can enhance/ and family to increase awareness of limits with “cooling-off” periods that improve personal self-esteem or when someone might be developing have to be observed before they can suggest a link between gambling and a problem; be increased; seduction/sexual success or toughness/ • a monitoring programme to review • “time out” options for customers to take recklessness; customer transactions, identify changes a short break from their gambling and • exploit cultural beliefs or traditions about in behaviour and contact customers; reassess their choices; gambling; or • routinely updated responsible gambling • self-exclusion tools for customers who • suggest peer pressure to gamble. training for all customer-facing staff, would like their account closed for a All our advertising carries an appropriate including identifying the triggers and minimum of six months or over a longer age restriction warning (18+), includes causes of problem gambling and the period; and links to responsible gambling websites risks specific to remote gambling; • session timers and awareness pop-ups and has a responsible gambling message. • links and information on organisations which allow customers to control their Gambling advertising is heavily regulated that can help people work through their activity for games or events that have and our advertising complies with the UK concerns, including: no natural end. Code of Broadcast Advertising (“BCAP o GamCare – the leading authority on Responsible advertising Code”); the UK Code of Non-broadcast the provision of information, advice Betfair takes great care to ensure that Advertising, Sales Promotions and Direct and practical help in addressing the all of its advertising and marketing is Marketing (“CAP Code”), the Gambling social impact of gambling; socially responsible with particular regard Industry Code for Socially Responsible to the need to protect children, young Advertising and Gambling Commission o Gambling Therapy – the first people and other vulnerable groups from of Great Britain: Licence Conditions and online professional advisory service being harmed. codes of practice (“LCCP”). dedicated to serving the online gambling community worldwide; Because of this we do not include anyone who is, or appears to be, under the age o Gamblers Anonymous – a of 25 years in our advertising campaigns. fellowship of men and women As a responsible advertiser, we also ensure who have joined together to that our advertising does not: do something about their own gambling problem and help • portray, condone or encourage gambling other compulsive gamblers to do behaviour that is socially irresponsible the same; or could lead to financial, social or emotional harm; • portray gambling as indispensable or as taking priority in life; • exploit the susceptibilities, aspirations or inexperience of customers; WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe on their sports whenon their required. sports betting track to them enabling tool, supplying an Bet Monitor external organisations, 61 with different sports place in MoUs has now Betfair bodies. governing sports and media MPs, to apresentation at integrity” sports the standardsetting for upholding for “praised recently was Betfair CASE STUDY CASE BET MONITOR • • deal include: commercial element of Betfair’s received funding through the grassroots have which beneficiaries ofthe Some parties. of both interests best the in are which relationships to come together and achieve commercial betting and Racing for possible entirely is it that believe to continue –and betting to linked uniquely –asport Racing to approach right the is this We think causes. good to donations Racing’s grassroots and to make charitable of development the fund to aside set also is contribution annual An markets. betting on have lists fixture that impact the enables both to parties better understand and funding its over certainty greater (“BHA”) Authority Horseracing British the years. This substantial contribution gives five over sport the to £40m than less no worth is 2010, in signed agreement, That agreement British with Racing (“Racing”). acommercial agreed have to bookmaker only) the still is (and first the was Betfair The right approach to horseracing money for a variety of racing charities. charities. ofracing avariety for money raises which Betfair by sponsored Racing of world the at scenes” the behind “look Newmarket Open Day 2014/15. in £50,000 further a contributed Betfair present. and past centre forrehabilitation injured jockeys –astate-of-the-art House Oaksey fund Oaksey House – Betfair continues to to continues –Betfair – an annual year. each issues integrity betting are educated on sports women and sportsmen 7,500 that ensures collaboration Ladbrokes with and Bet365, Our investment, in Players Federation. the with Professional partnership education effective our continued also we 2015 In as a consequence. sports their from banned being corruptors potential many with convictions, numerous to led have MoUs Our details. customer patterns and,betting where appropriate, suspicious by sharing of sport integrity the protect to together work we MoUs Committee.Olympic Through these International the and UEFA, BHA, governing bodies, includingsports the biggest world’s ofthe 61 with (MoUs) of Understanding Memoranda has Betfair of sport Safeguarding the integrity • • event, donating £10,000. this at races ofeight acard sponsor Hurdle Series Novice JockeysAmateur Association £10,000. donating event, charity televised ofthis sponsor Newbury at Day Race Charity Greatwood Annual Report andAccountsBetfair 2015 Group plcAnnualReport – Betfair remains the title title the remains –Betfair – Betfair continues to to continues –Betfair 28–29 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe STRATEGIC REPORT CORPORATE RESPONSIBILITY REPORT CONTINUED
Engagement of our people is fundamental to our performance and we care deeply 2. about what our employees think. We ask An engaged workforce our employees how they feel about working at Betfair through an annual survey. More than 82% of our employees responded to our last survey, the results are positive and tell us our employees are proud to work at Betfair, they understand the strategy and how their roles contribute to the delivery of our strategy. Employee welfare Communicating with employees We have adopted a number of As of 30 April 2015, we employed 2,050 policies relating to CR on aspects of people management. employees globally, with major sites in the Equal opportunities UK, Ireland, Malta, Gibraltar, Romania, We are focused on ensuring our HR We continue to work hard to attract Portugal and the US. We embrace cultural policies and practices have a clear and retain a diverse, inclusive and diversity within our organisation; we value ethical component and are effectively representative workforce where everyone and respect local practices across all of our and fairly applied,BOARD and that Betfair is an is treated with dignity and respect. locations whilst maintaining a consistent employer of choice for our existing and company culture which aligns us to our potential employees. We have invested in a programme targeted company values of Respect, Discipline, at women in Betfair. We have interviewed Pace, Will to Win and Smart. We offer a variety1 of employee benefits7 a number of senior women to establish an to enhance the12.5 wellbeing% of total of our in-depth understanding of what it is like for Talent, reward and engagement employees, which include a core package women working at Betfair and any specific We continue to drive reward on a incorporating DIRECTORSprivate medical OF SUBSIDIARY insurance, COMPANIES challenges1 they face. This has resulted in meritocratic basis. Reward is transparent life assurance, income protection and an opportunity for women to network on a and there is alignment to business critical illness insurance and a voluntary more formal basis and for us to provide the performance and individual performance benefits package3 offering a choice28 of necessary support to continue to invest in ensuring bonuses are an incentive to benefits including9.8% ohealthf total assessments, a their development and career progression drive high performance and business healthBOARD cash plan, dental insurance and to ensure they are able to reach their full delivery which are then used to reward, discounted gym membership. 1 potential at Betfair. recognise and retain the best talent in SENIOR MANAGERS BOARD the organisation. We operate a Save-As-You-Earn (SAYE) scheme,1 which encourages7 employees’ In order to attract and retain the best participation12.5% of total in Betfair’s performance 2 3 1 7 people, we have introduced rigour and and alignment with shareholders’ values. 40% of total 12.5% of total discipline into our processes. We have A newDIRECTORS three-year OF SUBSIDIARY scheme was COMPANIES offered to1 significantly improved the way we hire, employees during FY15 and further details DIRECTORS OF SUBSIDIARY COMPANIES1 onboarding is an experience over 90 days of this are includedALL EM inP LnoteOYEE 18S to which ensures that our new hires are up to the financial statements. speed quickly and we now have data on 3 28 9.8% of total why people are leaving. This helps us to 3 28 450 1,600 understand what the issues are regarding GENDER DIVERSITY 9.8% of total 21.2% of total retention and exit surveys are followed SENIOR MANAGERS1 BOARD up by an interview with one of the HR BOARD Female Male SENIOR MANAGERS1 team to ensure patterns and problems are identified quickly. 2 3 1 7 40% of total We have increased our investment in 1 7 12.5% of to2tal 3 future talent through hiring graduates 12.5% of total 40% of total across many of our locations, all of which ALL EMPLOYEES DIRECTORS OF SUBSIDIARY COMPANIES1 participate in our future talent programme DIRECTORS OF SUBSIDIARY COMPANIES1 ALL EMPLOYEES during their first 18 months working at Betfair. This programme is aligned to 450 1,600 our company values and provides our 3 28 21.23 % of total 28 9.8%450 of total 1,600 graduates with the opportunity to mix with 9.8% of total 1 Senior managers as defined in legislation includes persons21.2% oresponsiblef total for planning, directing or fellow graduates and learn as much about Female Male controlling the activities of the Company (or a strategically significant part of1 the Company) and our business as quickly as possible. any other Directors of undertakings included in the consolidatedSENIOR MANAGERS accounts. However, the Board SENIOR MANAGERS1 Female Male considers that this definition does not reflect the way that Betfair operates, and so has also presented a more appropriate measure, comprising the members of the Executive Committee (excluding Executive Directors). 2 3 2 3 40% of total
40% of total WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe
ALL EMPLOYEES ALL EMPLOYEES
450 1,600 450 1,600 21.2% of total 21.2% of total Female Male Female Male • • • • include: approach H&S ofBetfair’s aspects Key (H&S). Safety and Health to This commitment underpins our approach our activities. by affected be may who public of the for our people, visitors and members environment working healthy and a safe provide to obligation moral and legal wider our recognise we diversity, and wellbeing that environment values working vibrant a providing to commitment our Alongside Health and safety Betfair’s office in Cluj, Romania. Cluj, in office Betfair’s our global locations. occupational health, employed across all and safety in advisers technical specialist by supported & Facilities, ofProperty Head the to apportioned Board being level responsibility ofneed. times in employees all independent and confidential for support providing helpline health occupational An level. (NEBOSH) Health and Safety Occupational in Board accreditedtwo to National Examination health and accreditation safety including (IOSH) &Safety Health of Operational Institute full with managers Facilities approved standards. industry and ofpractice codes legislation, safety Full compliance all with health and
• • • • yearreporting included: past the during activities H&S Notable activity safety and Health insurance claim during the year. related safety and health one was There offences. environmental or safety health, enforcement notices or prosecutions for no in resulted UK the in visit inspection environment and safety A health, or major injuries across our business. regulations 2013) fatalities reportable occurrences dangerous and diseases ofinjuries, (reporting RIDDOR no were there record: H&S agood Maintaining Q1 ofFY16. in out rolled be to due employees, all for and refresher online training programme Establishing a induction new mandatory scheme in the UK. assessment pre-qualification safety and and fastest growing health membership largest the is CHAS operations. course Scheme) accreditation for on its Health and Assessment Safety Contractors (The CHAS received (UK) business, Our Timeform based in Halifax portfolio. offices European our across laws local within Betfair, implementing common practices at system management H&S revised Focusing the on implementing fully Annual Report andAccountsBetfair 2015 Group plcAnnualReport 30–31 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe STRATEGIC REPORT CORPORATE RESPONSIBILITY REPORT CONTINUED
Cash-4-Clubs – a sports funding scheme National Jockey Day – an innovative 3. created by Betfair. Cash-4-Clubs offers Betfair Twitter campaign run in community sports clubs the chance to collaboration with Haydock Racecourse, Contributions apply for grants to improve facilities, the Injured Jockeys Fund and ex- to charity purchase new equipment and gain National Hunt jockey Mick Fitzgerald. coaching qualifications. Betfair donated £1 for every tweet that included the hashtag #NationalJockeyDay to the Injured Jockeys Fund.
The CR Committee is responsible for working with charitable causes which are the best fit for Betfair’s business and are supported by our staff. Below is a selection of the charities supported by Betfair over the past financial year:
“Back Yourself” for the London Fulham Reach Boat Club Community World Horse Welfare – Betfair has Marathon – another hugely popular Investment – Betfair staff chose to continued its proud sponsorship of World Betfair campaign. Runners set a target support the Fulham Reach Boat Club as Horse Welfare in 2015 – an international time for finishing the marathon to receive part of its schools programme to enable horse charity that improves the lives of a free £20 to bet on themselves. If they underprivileged children to take up rowing. horses in the UK and around the world hit their target then the charity they ran The programme received £30,000 from through education, campaigning and for won the money. If not, then the £20 Betfair in 2015. hands-on care. was donated to official marathon charity partner Cancer Research UK.
Responsible Gambling Trust – Betfair Retired Greyhound Trust – Betfair is one Maggie’s Cancer Care – Built in the remains a top 20 donor to the Responsible of the Retired Greyhound Trust’s 2015 grounds of NHS cancer hospitals, Maggie’s Gambling Trust, the leading charity Corporate Patrons, sponsoring the charity provides free practical, emotional and in Britain committed to minimising in its fortieth year. The Trust operates social support to people with cancer as gambling-related harm. 85% of RGT a network of over 70 branches across well as their family and friends. As Betfair’s funds are spent on treatment and harm Britain, run by volunteers. 2014/15 Charity of the Year, Betfair and prevention activities, whilst the remaining Maggie’s have collaborated on various 15% funds research into the causes of volunteering and fundraising events, problem gambling. including the Maggie’s Culture Crawl – a 15-mile night hike around London.
Moorcroft Masterminds Quiz – Gambling Therapy – Betfair continues to Charity Bets – Betfair donated over supported by Betfair for the past six years, support Gambling Therapy in providing an £15,000 in charity bets in 2014/15. this event raises funds for the Moorcroft online support service for people who have Amongst the recipients were the Racehorse Welfare Centre which helps been adversely impacted by gambling. Alzheimer’s Society, Irish Cancer Society, with the rehoming of retired racehorses Paws Animal Rescue, Spina Bifida Charity, throughout the UK. Sparks and the Irish Jockey Trust. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe • include: ofwhich aspects key year, past the over improvements make to continued has business the However low. is impact very environmental Betfair’s business online awholly As own. ofits procedures and implement beneficial standards and develop to seeks exists, legislation no legislation, andenvironmental where relevant all to adheres Betfair the environment. greenhouse gas emissions and for caring isBetfair to committed reducing its Environmental matters • • • Electricity, heat, steam and cooling purchased for own use Emissions above reported normalised to CO Company’s chosen measurement: intensity Combustion of fuel and operation offacilities operation and offuel Combustion 2 1 (tCO emissions Total environment Commitment tothe 4. GREENHOUSE GAS EMISSIONS
A reduction of 10% in tCO in of10% A reduction factor correction. power and systems conditioning air low energy lighting, energy efficient lighting, infrared motion detector perimeter with equipped environments High density modern office Methodology) building. Assessment Environmental (Building Research Establishment BREEAM rated excellent an utilising operations in Cluj,Expanded Romania, commencement date. 2015 December the to prior (ESOS) Scheme Opportunities Savings Energy ofthe requirements the to Adherence Report. Annual FY14 our in out set expectations with line in FY15, during Includes back-up generator fuel, mileage business use and refrigerant losses of owned units by screening method. Refrigerant losses are excluded for landlord 3. Scope as landlord for excluded identified are being losses Betfair, to provided Refrigerant method. services centre screening by data and units owned of systems losses refrigerant and use business mileage fuel, generator back-up Includes Includes electricity and heating purchased by either direct use or proportional charge by landlord. Emissions calculated using UK Government GHG GHG Government UK using calculated Emissions landlord. by charge conversion factors. proportional or use direct either by purchased heating and electricity Includes 2
e) 2 emissions emissions 2 e per total £m ofrevenue total e per next year. next the during trend in continue to expect we which space, ofvacant consolidation earlier ofour benefit year full the to due expected was improvement This centres. premises and operations contract for data including utilities consumption for leased 2, Scope within stated are emissions our of majority The measurement. intensity our in of25% areduction and of 10% period, a reduction in emissions actual reporting were (6,751reporting tCO Scope 2 1and Scope for emissions total Betfair’s growth. ofour indication relevant most the is and time over measure comparative best the provides this as ratio intensity our as revenue We used have factors within our methodology. reporting conversion Defra’s utilised We also have Defra. by issued guidance reporting GHG mandatory and voluntary on based is per capita basis. The methodology used a on portfolio our across assessment an taken have we accommodation office andverified recorded. For serviced available, data source with basis Group a on collected is data emissions Our Greenhouse emissions 1
2 2 e) for the e) the for Annual Report andAccountsBetfair 2015 Group plcAnnualReport 6,615 6,751 14.2 FY15 136 7,494 7,359 19.0 FY14 135 32–33 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe GOVERNANCE BOARD OF DIRECTORS
We have set out to create a balanced Board with a wealth of relevant senior management experience across the gambling, leisure, technology and online sectors.
BALANCE1
2 5
1 (Male 4 Female 1) GERALD CORBETT DL, BREON CORCORAN, NON-EXECUTIVE CHAIRMAN CHIEF EXECUTIVE OFFICER Independent Non-Executive Directors Appointed to this position: Appointed to this position: 6 March 2012 (previously Deputy Chairman 1 August 2012 Chairman from 3 January 2012) Committee memberships: Executive Directors Committee memberships: None Nomination Committee (Chair), External appointments: Corporate Responsibility Committee (Chair) NED of Tilney Bestinvest Group. 1 External appointments: TENURE Previous experience: Chairman of Britvic plc and Chief Operating Officer of Paddy Power Numis Corporation Plc. plc and previously Managing Director, Previous experience: Non Retail and Development and also 2 Gerald has been a Director of 12 public Commercial Director. Before joining Paddy companies, six of which he has chaired. Power, Breon previously worked with His most recent roles were as Chairman of JP Morgan and Bankers Trust. Breon has Moneysupermarket.com Group plc between an MBA (INSEAD). 6 2007 and 2014, and Chairman of SSL International plc between 2005 and 2010. His executive career included Group Finance Director roles with Redland plc and Grand 1–3 Years Metropolitan plc, and he was Chief Executive of Railtrack between 1997 and 2000. 3–6 Years
LEADERSHIP EXPERIENCE1
3 MARK BROOKER, 4 CHIEF OPERATING OFFICER
Appointed to this position: 1 1 June 2015 ALEX GERSH, Committee memberships: None Cur rent/former CEO CHIEF FINANCIAL OFFICER Previous experience: Current/former Appointed to this position: Mark has held the role of Chief Operating Finance Director 3 December 2012 Officer since April 2014. He joined Betfair Current/former in March 2010 and was previously Managing Committee memberships: Finance Director Director of the Company’s Sportsbook Market Disclosure Committee (Chair) and CEO division and Corporate Development Previous experience: Director. Prior to Betfair, Mark spent Chief Financial Officer of NDS Group, Chief 17 years working in investment banking Financial Officer of Flag Telecom and Chief advising UK companies on equity capital 1 As at 30 April 2015. Financial Officer of BT Cellnet. His early raising and M&A, most recently at Morgan career was spent with Ernst & Young. He is Stanley and before that at Merrill Lynch. a qualified Certified Public Accountant. Mark graduated from Oxford University with a Masters degree in Engineering, Economics and Management. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe MSc in Behavioural Change. a and Studies Management in aMA has and Holdings plc. She is a qualified accountant NED positions with Mecom plc and Gondola held also has Zillah 2005. to 2002 from Group Thresher of CFO 2009; to 2006 from Ltd Group First Fitness of CFO 2013; to 2009 from Group Media Trader of CFO Previous experience: CFO). (previously Plc Future of Officer Executive Chief appointments: External Audit Committee memberships: Committee 5 September 2013 Appointed to this position: September 2005. until plc Misys of aNED was Ian Meridien. Group plc, and Finance Director at Le he was Group Financial Controller of Hilton Previously, plc. Group Rank The of Director andMarks Spencer Group plc and Finance Group Finance & Operations Director at plc, Taverns Punch of CEO formerly was Ian Previous experience: plc. ASOS at Chair Audit Group plc, and Director Senior Independent Intercontinental Hotels Group plc and SSP at Chair Audit plc; Taverns Punch of NED appointments: External Committee, Remuneration Committee Audit (Chair), Committee Nomination memberships: Committee 2010 1 February Appointed to this position: DIRECTOR NON-EXECUTIVE INDEPENDENT ZILLAH BYNG-MADDICK, SENIOR INDEPENDENT DIRECTOR IAN DYSON,
Economics and is a qualified accountant. in aBA holds Peter 2013. to 2004 from plc Non 1988; until 1983 from Plc Informa at Director Finance 2013, to 1988 from Plc Informa of Officer Executive Chief was Peter Previous experience: Remuneration Committee, Audit Committee memberships: Committee 2014 1 April Appointed to this position: executive directorships. Inc.Honeywell Leo has also held non- with years 16 and start-up software based internet asuccessful includes also experience Leo’s 2004. to 2001 from Plc Invensys with COO Divisional and 2008 to 2004 from Plc Rue La De of CEO 2014; to 2009 from Plc Group QinetiQ of CEO Previous experience: plc Beatty Balfour of CEO appointments: External Remuneration Committee (Chair) Nomination Committee, memberships: Committee 2014 5 March Appointed to this position: DIRECTOR NON-EXECUTIVE INDEPENDENT RIGBY,PETER DIRECTOR NON-EXECUTIVE INDEPENDENT LEO QUINN, ‑ Executive Chairman of Word Electric
University of University Cambridge. Company. He holds an MEng from the & McKinsey with career his started Peter Lloyds. with merger its before plc HBOS of arm retail the within roles senior of number Banking Group, having previously held a Director of Consumer Banking for the Lloyds Managing was Peter Travelex, Before business. the of sale successful the following leaving 2015, March till 2010 March from Travelex of CEO Group was Peter Previous experience: Audit Committee, Remuneration Committee memberships: Committee 2013 24 April Appointed to this position: DIRECTOR NON-EXECUTIVE INDEPENDENT JACKSON, PETER Annual Report andAccountsBetfair 2015 Group plcAnnualReport
34–35 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe GOVERNANCE CORPORATE GOVERNANCE STATEMENT
What governance means to us Betfair’s Board has five independent We believe that a robust corporate Non-Executive Directors, who bring with STATEMENT OF COMPLIANCE WITH UK CORPORATE governance structure helps us to maintain them significant commercial and financial GOVERNANCE CODE Betfair’s reputation and relationships, and expertise and are well placed to support to deliver sustainable value. the Executive Team in implementing Betfair’s strategy. We continually review The Financial Reporting Council We are pleased to introduce our Corporate the composition of the Board to ensure (“FRC”) issued a revised version Governance Report which incorporates that it has the skills and balance required of the UK Corporate Governance reports from the Chairmen of each of our for the proper stewardship of the business. Board Committees. These reports explain Code (the “Code”) in September our governance policies and procedures in All Directors will be submitted for 2012, which is available at detail and describe how we have applied re‑election by the shareholders at www.frc.org.uk. The Board the principles of corporate governance our AGM. considers that the Group contained in the UK Corporate Governance The AGM provides a useful interface with complied with the main principles Code (the Code), which was enhanced private shareholders, many of whom are in 2012. The FRC’s latest revision to the of the Code for the whole of also customers. All Directors will be in Code, released in September 2014, applies the year ended 30 April 2015 attendance at our AGM on 9 September to accounting periods commencing on or as required by the Listing Rules 2015, and we hope to see many of our after 1 October 2014 and as such will apply shareholders there. 9.8.6. More detail is provided to Betfair’s next financial year. The Board throughout this statement which has already implemented changes to Key actions in 2014/5 incorporates the Directors’ its governance arrangements including As well as ensuring that the mix of skills, Committee Terms of Reference and the experience and expertise on the Board Report, Strategic Report and the Schedule of Matters reserved for the is appropriate, we are committed to Directors’ Remuneration Report Board as necessary. the need to remain effective as a Board by reference. and commissioned an external Board Building a balanced Board evaluation process, conducted by Ffion Our Board is the guardian of Betfair, The latest FRC revision of the Hague of Independent Board Evaluation, its reputation and its responsibilities. Code, released in September which took place from April to June 2015. It leads by example, influencing the way Further details of the Board evaluation 2014, applies to accounting we do business across the organisation. process are set out on pages 40 and 41. periods commencing on or after Details of the composition of our Board 1 October 2014. The Board has are set out in pages 34 to 35 and page 39. already implemented changes Gerald Corbett DL to its governance arrangements, Chairman including Committee Terms 17 June 2015 of Reference and Schedule of Matters reserved for the Board.
Our Board is the guardian of Betfair, its reputation and its responsibilities. It leads by example, influencing the way we do business across the organisation.
Gerald Corbett Chairman WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe terms of reference approved by the Board, which are available on the Group’s website. Group’s the on available are which Board, the by approved ofreference terms written has Committee Board Each Board. ofthe Committees main four are There BOARD COMMITTEES BOARD IN ACCORDANCE WITH THE MAIN PRINCIPLES OF THE CODE OUR CORPORATE GOVERNANCE INFORMATION IS PRESENTED corporate.betfair.com/about-us/governance/committees.aspx For more visit information Relations with Relations Shareholders Page 41 E. Remuneration Page 53 D. D.
BOARD Corporate Responsibility Committee Remuneration Committee Nomination Committee Audit Committee Leadership Page 38 A. Accountability Page 43 C. Effectiveness Page 39 B. 27 Page 53 Page 42 Page 43 Page
• • • • • • • following:the of included key This topics. Team avariety on to present Executive of the members invited year, the During Board the BOARD MEETINGS: BOARD AT PRESENTATIONS Annual Report andAccountsBetfair 2015 Group plcAnnualReport Head of Public Affairs ofHead Public Communications of Corporate Head ofHead Investor Relations Director HR Group Managing Director, International Director,Managing UK & Ireland Risk Management Director
36–37 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe GOVERNANCE CORPORATE GOVERNANCE STATEMENT CONTINUED
SECTION A: Division of responsibilities Role of the CEO LEADERSHIP Breon Corcoran as CEO has Code Provision A.2 responsibility for implementing the The role of the Board strategy agreed by the Board and for the executive management of the There is a clear division of responsibilities at Group. This includes responsibility for: Code Provision A.1 the head of the Group between the Board and executive responsibility for the running • developing and proposing the Group The Board is responsible for the strategic of the Group’s business. No one individual strategy, annual plans and commercial direction, development and control of the has unfettered powers of decision. objectives to the Board, having regard to the Group’s responsibilities Group. It sets strategic aims and approves The roles of the Chairman, CEO and to its shareholders, customers, strategic plans and annual budgets, Non‑Executive Directors have been defined employees and other stakeholders; ensuring that the necessary financial and in writing. human resources are in place for the Group • managing the Group’s risk profile in to meet its objectives. It reviews significant line with the extent of risk identified investment proposals and the performance as acceptable by the Board and to Code Provision A.3 of past investments. ensure appropriate internal controls are in place; It maintains an overview of the Group’s Role of the Chairman • ensuring the development needs of operating and financial performance Gerald Corbett as Chairman is the Executive Directors and senior and monitors the Group’s overall responsible for the leadership and management are identified and met system of internal controls, governance effectiveness of the Board, including and ensuring succession planning; and compliance. ensuring that the Board is run smoothly and that appropriate communication • effective communication with The Board has adopted a formal schedule shareholders; and of matters which are reserved for its is maintained with shareholders. He is decision. This is published on the Group’s available to meet with shareholders • appropriate, timely and accurate corporate website and includes: at the AGM. The Chairman has a disclosure of information to the proven track record as a plc Chairman market, with issues escalated • determining the overall business and and currently acts as Chairman to promptly to the Market commercial strategy; two other publicly quoted companies. Disclosure Committee. • identifying long-term objectives; Gerald Corbett’s biography can be found on page 34. • determining the Group’s risk appetite; • reviewing the annual operating plan The Chairman’s responsibilities include: Code Provision A.4 and budget; • ensuring that the Board has the • considering all matters relating to major right composition and has effective Non-Executive Directors Group policy and regulatory policy; boardroom debate involving all The Company has five Non-Executive • determining the basis of allocation members, and that appropriate Directors on its Board, all of whom are of capital; conclusions are drawn; considered to be independent in character and judgement and are free from any • being accessible and providing • approving the appointment and business or other relationship which support and wise counsel to the CEO removal of any Board member and the could materially influence their judgment. and wider management team; Company Secretary; Other than their fees, which are disclosed • undertaking an annual review of Board, • challenging when required, taking a on page 64, the Non-Executive Directors Committee and individual Director’s “helicopter view” of the business; and received no additional remuneration from performance; and • maintaining relationships with the Group during the year. The Non- • reviewing and approving the terms of shareholders and other stakeholders, Executive Directors are a strong source of reference for Board Committees and as necessary. advice and independent challenge. receiving reports on their activities. Role of the Senior Independent Director Authority is delegated by the Board Board attendance Ian Dyson is the Senior Independent in certain circumstances including the During the year, there were nine scheduled Director. Ian is available to shareholders if approval of delegated authorities for Board meetings including a two-day they have concerns which are not resolved the Chief Executive Officer (CEO), Chief off-site meeting which considered the through the normal channels of Chairman, Financial Officer (CFO) and other senior Group’s strategy. The table on page 40 CEO or CFO. He meets with the other management to approve expenditure, shows attendance at scheduled Board and Non-Executive Directors without Executive investments and other matters as the Committee meetings during the year. Directors present and leads the annual Board may determine, and in granting evaluation of the Chairman’s performance. powers of attorney. In addition, Ian is Chairman of the Audit Committee. Ian’s biography can be found on page 35. Complies with the UK Corporate Governance Code. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe the Group. the of outside commitments external main their include these and 35 to 34 pages on out set are 2015 June 17 at as Directors Board ofall details biographical The 2015. 1June on Director Executive additional an as appointed was Brooker Mark Directors. and five independent Non-Executive Directors Executive two Chairman, the comprised Board the 2015, April 30 at As Directors Board. the to appointed been has Director Executive additional an end, year the since 2014, and in refreshed was Committees of chairmanship and membership Board in the Nomination report, Committee described As basis. aregular on population and senior management Directors Executive Directors, Non-Executive its andperformance likely successors for quality, the considers Board The responsibilities effectively. and duties respective their discharge to them enable to Group of the experience, independence and knowledge an appropriate balance of skills, have Committees its and Board The Composition of the Board EFFECTIVENESS B: SECTION Peter Rigby Leo Quinn Zillah Byng-Maddick Peter Jackson Dyson Ian Gersh Alex Breon Corcoran Corbett Gerald Director 2015: April 30 at as Company ofthe Directors were individuals following The BOARD OF DIRECTORS OF BOARD Code Provision B.1 Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Director Non-Executive Independent Senior Officer Chief Financial Officer Executive Chief Non-Executive Chairman Role 2006 as well as other relevant legislation. legislation. relevant other as well as 2006 Act Companies the and Code the with, connection in duties of, Directors’ and and including guidance on requirements updates, tailored to individual requirements newly appointed Directors and regular for induction acomprehensive is There Training and development directorship. prospective their to time sufficient commit can they responsibilities in assessing whether other their account into take will Committee the Nomination appointment, areDirectors considered for prospectiveWhen Non-Executive Board. the on diversity of benefits the for regard due with and criteria objective against measured and merit on made are 42. Appointments page Nomination is Committee on described ofthe work the on Information Chairman. the by chaired and Directors Executive Non- comprisingestablished, independent Nomination has Committee been a Board, the to Directors of new transparent procedure for the appointment and rigorous To aformal, ensure Appointments toAppointments the Board Code Provision B.4 Code Provision B.3 Code Provision B.2 external auditor.external and advisers legal Group’s the Secretary, Company and Officer Legal Chief of the services and advice the to access have they and duties oftheir furtherance independent professional advice in the take may Board ofthe Members Independent advice of external courses where required. provision the and visits site operational of use the as well as updates, issues business and governance corporate regular professional development. This includes their with Directors the assisting for and matters governance corporate all on Board the advising for responsible Secretary, through the Chairman, is Company The Board. the for reserved amatter is Secretary Company of the and removal appointment The Directors. Non-Executive the and management senior between and Committees its and Board the to flows information good responsibilities ensuring include Secretary’s and Company Secretary. The Company Officer Legal Chief the is Russell Fiona Company Secretary Information andInformation support formally considered on an annual basis. are Committees Board’s ofthe members of and ofDirectors needs training The developments as and when they occur. governance ofany light in necessary as updated is awhole as Board The Annual Report andAccountsBetfair 2015 Group plcAnnualReport Code Provision B.5 5 2013 September 3 December2012 1 February 2010 1 February 3 2012 January 1 August 2012 1 August 5 March 2014 5 March 24 April 2013 24 April Date appointed 1 April 2014 1 April 38–39 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe GOVERNANCE CORPORATE GOVERNANCE STATEMENT CONTINUED
Board meetings process. IBE was founded by Ffion Hague Service agreements and letters All Directors are briefed by the use in 2008 as an independent consultancy of appointment of comprehensive papers circulated working exclusively on Board effectiveness Details of the Executive Directors’ service in advance of Board meetings and by reviews, and has no other connection with agreements are set out in the Directors’ presentations at the meetings in addition the Company. The process commenced Remuneration Report on page 61. to receiving minutes of previous meetings. in April 2015 and consisted of one-to- The Chairman and the Non-Executive Their understanding of the Group’s one interviews and compilation of an Directors have letters of appointment business is enhanced by business specific independent report, the findings of which which are available for inspection at the presentations and operational visits to the were presented back to the Chairman, registered office of the Company during Group’s businesses. Separate strategy Committee Chairs and the Board in detail normal business hours and at the place of meetings and meetings with senior in June 2015. The recommendations the AGM from at least 15 minutes before Executives are also held throughout the arising will be discussed and addressed by and until the end of the meeting. year. Where a Director is unable to attend the Board during 2015/2016. Conflicts of interest a meeting, they are provided with all the Re-election Executive Directors may be permitted papers and information relating to that to accept one external Non-Executive meeting and are able to discuss issues Director appointment with the Company’s arising directly with the Chairman and Code Provision B.7 prior approval as long as this is not likely to CEO. There are nine Board meetings lead to conflicts of interest. including a two-day off-site meeting Once appointed, all Directors should be currently scheduled for the financial year subject to election by shareholders at the The Board has a formal system in place ending 30 April 2016. first annual general meeting after their for Directors to declare situational conflicts appointment, and subject to re-election to be considered for authorisation by Board effectiveness evaluation on an annual basis at the Company’s those Directors who have no interest in AGM, in accordance with the Company’s the matter being considered. The Board Code Provision B.7 Articles of Association and provision B.7.1 believes that the systems it has in place of the Code. for reporting and considering conflicts continue to operate effectively. The Code requires an externally facilitated All Directors will stand for election or re- evaluation of the Board every three election as appropriate at the 2015 AGM. years. This was due in 2014 but was Further information is set out in the Notice delayed to this year due to the fact that of Meeting. the Board had recently been appointed. The Board commissioned Independent Board Evaluation (“IBE”) to conduct the
ATTENDANCE
Board Audit Remuneration Nomination Director scheduled Committee Committee Committee AGM Total meetings held 9 5 6 3 1 Attendance (in brackets – eligible to attend) Gerald Corbett* 9 (9) – – 3 (3) 1 Breon Corcoran* 9 (9) – – – 1 Alex Gersh* 9 (9) – – – 1 Ian Dyson 9 (9) 5 (5) 6 (6) 3 (3) 1 Peter Jackson 9 (9) 4 (5) 5 (6) – 1 Zillah Byng-Maddick 8 (9) 5 (5) – – 1 Leo Quinn* 9 (9) – 6 (6) 3 (3) 1 Peter Rigby 9 (9) 3 (3) 6 (6) – 1
* Attends Committee meetings at the invitation of the respective Committee Chairman. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe answer questions. answer and to Nomination attend Committees Remuneration Audit, ofthe Chairmen The line with recommended best practice. in ofhands, ashow than rather a poll proposed resolutions is conducted on the all on voting itself, meeting the At indicated. are withheld, votes any and the balance for and against, and counted are AGM the at resolution each of respect in received votes proxy All shareholders. major with meetings attend to opportunity the offered are and request on shareholders Executive Directors are available to meet Independent Director and other Non- Senior the and Group, ofthe respect in shareholders ofmajor views the Board the to reports regularly Relations Investor of Head The business. ofthe progress of publicly available information, the back the on discuss, to opportunity an institutional shareholders which provides major its with ofmeetings programme aregular has Group The voluntarily. these publish to continues Group the and has September been abolished but in March interim management statements to publish requirement The shareholders. all to available be to as so Group the together with general information about website, Group’s the on webcast and posted is updates ofthese content The respectively. June and December in results year full and year year, half the at financial performance at least a twice its on market the updates formally Group The Group. ofthe activities and to shareholders for the performance accountable is it that recognises Board The SHAREHOLDERS RELATIONS WITH SECTION E: REMUNERATION D: SECTION ACCOUNTABILITY C: SECTION page 53. page on starting Report Remuneration our to turn please information more For 43. page on starting our report Audit Committee to refer please information more For
Hammersmith head office for a Product and Technology and for update. aProduct office head Hammersmith our attended NovemberIn 2014, analysts and over investors 50 54. page on Report Remuneration our see please base. detail more shareholder For the over of 60% representing shareholders, major all with engaged 2015, we 9 January held Meeting General for the preparation In Develop a statement of purpose and vision for the Board with objectives for the year. the for objectives with Board the for vision and purpose of astatement Develop Improve induction process, training, mentoring and coaching for first-time plc Directors. management. senior with contact and aBoard as together time social Increase Increased focus on people issues and succession planning on Nomination and Board agendas a BoardArrange “deep dive” on compliance with regulation. nationality. and gender of terms in diversity Board increase to opportunities Review Board evaluation 2015/6 from arising recommendations Key Focus on risk, technology and regulation Increase of understanding the business to management exposure Increase Board evaluation Key recommendations arising from 2014/5
INVESTOR DAY FY15 DAY INVESTOR EXTENSIVE REMUNERATION CONSULTATION
differentiation. brand innovation heritageof and andtowith new continue products the allows Betfair to befaster to market development rather thanthird parties Increasingly relying onin-house joiningBetfair.customers isthekeyproduct reason for new press-releases/2014/analyst-presentation-03-11-2014.pdf http://corporate.betfair.com/~/media/Files/B/Betfair-Corporate/ visit presentation full the For Investor day attendee The event highlighted that strength of The event highlighted thatstrength of
Actions More presentations by subject matter experts matter subject by presentations More operational topics on Board agendas Wide range of commercial and ofoutside meetings More direct contact with management in and Annual Report andAccountsBetfair 2015 Group plcAnnualReport 40–41 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe GOVERNANCE NOMINATION COMMITTEE REPORT
We are committed to ensuring a broad mix of gender, age, nationality, experience and skills throughout the business and on the Board.
Gerald Corbett Chairman and Chairman of the Nomination Committee
NOMINATION COMMITTEE Role of the Committee Policy on appointments to the Board The Nomination Committee is responsible All appointments are made on merit for identifying and nominating, for the and measured against objective criteria MEMBERS: approval of the Board, candidates for and with due regard for the benefits appointment to the Board. of diversity on the Board. The Board is Composed of three independent Non- committed to ensuring a broad mix of Activities during the year Executive Directors as detailed in the gender, age, nationality, experience and Following a period of activity in 2013 table below. skills throughout the business and on and 2014, with four new Non-Executive the Board. We keep the composition of At least two meetings are held Directors appointed, 2015 has been the Board under review to ensure it is each year. a year of consolidation for the Board. based on a range and balance of skills, The Committee met three times during knowledge, experience and merit and the year. Members Attendance remains appropriate for a business of this Gerald Corbett, (Chair) 3 (3) Matters considered by the Committee size. The Board has noted the contents of Chairman included: the Davies Report on Women on Boards in April 2014, but does not believe that Ian Dyson, Senior 3 (3) • considering the effectiveness of the setting a target for the number of women Independent Director Non-Executive Directors and the on our Board is appropriate as all our Leo Quinn, Independent 3 (3) Board as a whole as a result of the appointments are made on merit. Non-Executive Director internal Board evaluation process conducted during 2014 and making The process of identifying candidates For more information about recommendations for improvements as for Board appointment is led by the the Committee’s terms of detailed on page 41; Committee. Comprehensive candidate reference visit • recommending the addition of Peter search briefs are agreed. An external www.corporate.betfair.com/ Rigby as an additional Audit Committee executive search firm is engaged and about-us/governance/ member, taking into account his relevant a shortlist of candidates is drawn up. committees/ skills and experience; and A number of shortlisted candidates are invited for meetings with Committee • recommendation of the continuation in members as appropriate. After these NOMINATION COMMITTEE office of Gerald Corbett at the end of meetings, a review of the candidates FOCUS AREAS IN 2015/6: his three-year term. takes place and the preferred candidates Following the year end, the Committee • Continuing to support the are recommended for appointment to recommended the appointment of development of the Executive Team; the Board. Mark Brooker as an Executive Director. • Considering the outcome of the All members of the Board met with Mark Gerald Corbett 2015 external Board evaluation and were pleased to welcome him to the Chairman and Chairman of the process and implementation of Board with effect from 1 June 2015. Nomination Committee recommendations; and • Continuing to review Non-Executive Directors to maintain the appropriate mix of skills. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe REPORT COMMITTEE AUDIT • • • • • • includes: generally and invitation by is Attendance REGULAR INVITEES: REGULAR MEMBERS: COMMITTEE AUDIT * Non-Executive Director* Peter Rigby, Independent Non-Executive Director Independent Zillah Byng-Maddick, Non-Executive Director Peter Jackson, Independent Independent Director Senior (Chair), Dyson Ian Members KPMG, the external auditor external the KPMG, Management & Risk Audit Internal ofGroup Director Group Financial Controller Officer Chief Financial Officer Executive Chief Chairman the and Directors Non-Executive Other Appointed to the Committee on 8 September 2014. committees/ committees/ about-us/governance/ www.corporate.betfair.com/ reference visit the Committee’s terms of For about more information
Attendance 4 (5) 3 (3) 3 5 (5) 5 (5)
• • • • • Key responsibilities: auditing matters; accounting, internal controls or regarding Group the by received for dealing such with correspondence reporting, and oversee the process financial our to relation in regulators review any correspondence from determined necessary; as controls, internal and risks specific areas of financial reporting, of reviews in-depth perform over reporting; financial significant change in internal controls ofany evaluation management’s review occurrence; such any to response Company’s the consider to and weaknesses control for fraud, detecting misconduct and processes Company’s the review – – – – – Board: the by consideration their to Prior significant review and listing; and listing; accordance applicable with legislation fair, balanced and in understandable is it that ensure to Accounts and Report Annual Company’s the on make appropriate recommendations and corporate governance compliance; on internal risks, significant control statements public Company’s the on make appropriate recommendations accounting judgments; statements; financial on the Company’s interim and annual make appropriate recommendations andstatements announcements; financial ofthe integrity and policies appropriateness of accounting the consider and review
Senior Independent Director and Chairman of the Audit Committee Ian Dyson enhancing shareholder value. ourstrategic objectives and supporting are essentialin financial reporting effective internalcontrols androbust riskmanagement, High quality
• • • • • – and good governance: in accordance applicable with legislation and auditor external the to respect with auditing matters; regarding questionable accounting or ofconcerns employees by submission the confidential and/or anonymous with dealing for process the oversee role and responsibilities. and role toreport shareholders annually on its Management; and &Risk Audit Internal ofGroup Director the and auditor external the both with privately as well as required, as staff and management Executives, with meet function; Management & Risk Audit Internal Group ofthe effectiveness and role the monitor and review – – – – Annual Report andAccountsBetfair 2015 Group plcAnnualReport auditor’s independence; external the on have may work non-audit effect the monitor work; that for paid be to fees the and policy the with accordance in auditor external the by out carried be to work non-audit pre-approve Committee; Audit the to auditor’s and findings external report the to response management’s review independence of the auditor; external the and effectiveness cost, its auditor, external the by performed be to ofwork scope and nature the review auditor; the external of oversight and dismissal resignation, compensation, the appointment, for responsibility direct assume 42–43 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe GOVERNANCE AUDIT COMMITTEE REPORT CONTINUED
AUDIT COMMITTEE KEY ACTIVITIES IN 2014/15:
REGULAR INVITEES: CONTINUED • Review of the integrity of the financial • review of the disposal of the 50% statements and recommendation of interest in Australian Joint Venture Other key members of management are interim and full year financial results to to Crown Resorts Limited; invited according to the agenda which in the Board including: • review of compliance with the Code 2015 included: – consideration of significant corporate of Conduct and whistleblowing • Chief Technology Officer governance developments and procedures and the effectiveness of these procedures; • Chief Information Officer their impact on the Committee and the Group; • review of the Committee’s own terms • Director of Security – review of the suitability of the of reference and membership; • Director of Legal & Compliance Group’s accounting policies and • with respect to the external auditors, • Director of Tax practices and significant matters of review of: accounting judgment. • Head of Group Reporting & Treasury – the scope and cost of the • review of the Group’s framework external audit; • Head of Client Funds for the identification, assessment, – non-audit work carried out by & Credit Management monitoring and management/ the external auditor and trends in mitigation plans for major • Head of Integrity, Insider Threat the non-audit fees in accordance risks including: & Anti-Money Laundering with the Committee’s policy – the annual assessment of the to ensure the safeguarding of effectiveness of access to significant auditor independence; Audit Committee process systems, authorisation controls and – the effectiveness of the external The Committee discharges its other internal controls; auditor and consideration of responsibilities, as defined in its terms of – review of minutes of the Corporate its reappointment; Risk Committee. reference, through at least four meetings – management representations during the year at which detailed reports • in-depth reviews with specific provided to the external auditor and are presented for review. In general the presentations from management on the Company’s procedures to ensure the following areas: all relevant audit information has Committee meets in advance of Board been disclosed; meetings. The Deputy Company Secretary – IT security, and other acts as Secretary to the Committee. technology risks; • with respect to Group Internal Audit The terms of reference of the Committee – IT disaster recovery; & Risk management, review of: can be found on the Company’s website: – business continuity; – the effectiveness of Group Internal corporate.betfair.com/about-us/ – customer funds and Audit & Risk Management; governance/committees account security; – the scope of the annual internal – tax; audit plan; The Committee meets privately with – insurance; – internal audit reports of significance KPMG LLP (KPMG) and the Director of – treasury; including internal control and Group Internal Audit & Risk Management. – anti-bribery and anti- assurance reports; KPMG also meet the Director of Group money laundering; – the appropriateness of the function’s Internal Audit & Risk Management in – compliance; resourcing and external support; private throughout the year. – related party transactions; and and • review of the co-ordination of the The Chairman of the Audit Committee – financial authorisation controls. internal and external audit functions. reports to the Board on how the • review of distributable reserves; Committee has discharged its duties after • review of the accounting for the each meeting. acquisition of HRTV in the USA;
AUDIT COMMITTEE FOCUS AREAS IN 2015/16:
Continue to focus on key areas of judgment, risk and controls to ensure the integrity of financial reporting and risks to strategic objectives. Specific areas of focus will be similar to those on 2014/15 and will include reviews of: • financial statements, associated disclosures and judgments; • the effectiveness of external audit and the output of work carried out by the external auditor; • reports on significant controls and risks issued by the Group Internal Audit & Risk Management team; and • in-depth reviews from management on similar areas to 2014/15 and other emerging issues/risks as the Committee considers appropriate. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe statements related to revenue recognition recognition revenue to related statements financial Group’s ofthe of misstatement risks key the that determined Committee the auditor, external the and management both with discussion After governance. financialwith standards reporting and ofclarity disclosures and compliance financial judgments, the reporting main ofthe respect in management accounting papers prepared by judgments. reviewed The Committee had made appropriate estimates and adopted and whether management suitable accounting policies had been The Committee assessed whether statements. and other trading statements offinancial integrity the monitor and review to is reporting financial to relation in Committee Audit ofthe role primary The Financial statements ACCOUNTABILITY above is satisfied with the accounting treatment and conclusions management have reached. reached. have management conclusions and treatment accounting the with satisfied is above the on based and auditor, external the and management both challenged has and acquisition, the for accounting in management by made judgments and estimates key the assessed has Committee The consideration. contingent the and acquired assets the of valuation the both impact which flows cash future estimated the and assets acquired the valuing in used rate discount the on made been also have Judgments exercise. to able is Group the that ofcontrol level the and acquisition, abusiness alongside assets ofintangible acquisition separate the than rather combination business asingle as transaction the for accounting including estimates and judgments accounting ofkey anumber involved has acquisition This ofTVG. growth the support to USA the in racecourses certain to rights wagering and network television horseracing HRTV ofthe acquisition business asignificant completed Group The • Acquisition accounting reached. have management conclusions and control, internal ofrisk, level current the with satisfied is above the on based and auditor external the and management both challenged has Committee The matters. significant on Board the to monthly reports Officer Executive Chief The areas. these manage we how demonstrating Committee the to made been have Tax and teams Anti-Bribery Laundering, Anti-Money Compliance, ofthe members senior by Presentations statements. financial the on impact asignificant have may this and jurisdiction each within interact they how and laws tax ofinternational interpretation the around judgment is there however jurisdictions, regulated from revenues sustainable achieve to designed is strategy The licensing and tax regulation, • gambling Online reached. have management conclusions and control, ofinternal level current the with satisfied is above the on based and auditor external the and management both challenged has Committee The raised. being issues significant any without year the during Committee the to reported and funds customer the around controls reviewed has auditor external The controls. internal and risks the on Committee the to presented Management &Credit Funds ofClient Head The fraud. detect to and ofmisstatement risk the reduce to performed are funds ofthese reconciliations monthly and Daily systems. IT the from transactions the reconciling and on reporting accurately controls and processes finance core and funds customer on dependent is ofrevenue recognition appropriate The statements. financial the to 14 note in 2014), disclosed as April 30 at (£269.0m 2015 April 30 at held was £280.6m Deed. aTrust under accounts ring-fenced in mainly sheet, balance off funds ofcustomer balance asignificant holds Group The • Management and safeguarding of customer funds and recognition of revenue reached. have management conclusions and recognition revenue control, internal ofrisk, level current the with satisfied is above the on based and auditor external the and management both challenged has Committee The audit. the during ofcontrols effectiveness the reviewed specialists IT auditor year. external the The throughout Committee the and Committee Risk Corporate the to operations IT and security around controls and risks the on regularly report personnel and management Security and Technology appropriately. revenue recognising to integral and business ofthe operation effective the to key are These security IT and integrity • Data follows: as were year the during Committee the by considered judgment accounting and ofrisk issues primary The PRIMARY ISSUES OF RISK AND ACCOUNTING JUDGMENT ACCOUNTING AND RISK OF ISSUES PRIMARY found in the course of its work and no no and work ofits course the in found had it that misstatements the Committee the to reported auditor external The presentation. to achieve a particular made intentionally misstatements material ofany aware not were they that Management to confirmed the Committee Board. the by consideration their of advance in Committee the by reviewed are statements financial Group’s The Fair, balanced and understandable yearhalf results. and year full the on auditor external the by reports reviewed also Committee The acquisition accounting. gambling regulation, licensing and and tax online funds, ofcustomer safeguarding and management the losses, and wins of commission revenues and appropriate calculation correct ensure to security IT and integrity data on dependent is which business model and strategy. performance, Group’s the assess to for shareholders necessary information the balanced and and understandable provides fair, is awhole, as taken Accounts, and Report Annual the that consider Committee the above ofthe basis the On and thereported disclosures). amounts the to respect in (both estimates address the critical judgments and key that the financial appropriately statements auditor,external is the Committee satisfied the with necessary where consulting and management from reporting and the presentations reviewing After scepticism. professional diligence responsibilities and with its fulfilled has auditor external the that satisfied is it that confirms Committee The unadjusted. remained amounts material Annual Report andAccountsBetfair 2015 Group plcAnnualReport 44–45 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe GOVERNANCE AUDIT COMMITTEE REPORT CONTINUED
External auditor’s independence, The transitional rules under the new Non-audit services performance and reappointment EU audit reform framework and the The Committee has adopted a policy on The Committee has primary responsibility Competition & Markets Authority’s Order the use of the external auditor for non- for making recommendations on the require an initial change of audit firm no audit work which is in compliance with appointment, reappointment and removal later than for the 30 April 2023 year end the Code. The external auditor may carry of the external auditor. audit. The Committee will continue to out certain specified non-audit work, in monitor the consultation regarding how areas that have been pre-approved by the The Committee took the following into the EU Regulations will be implemented Committee. Any other work for which account in assessing the performance in the UK, and will comply with any management wishes to utilise the external of KPMG. applicable new requirements. auditor must be approved. The pre- The Committee reviewed and challenged approved services include the following: The Committee will continue to consider KPMG’s proposed audit plan prior to the annually the need to go to tender for audit • audit related services, including work commencement of the audit, including quality or independence reasons. related to the annual Group financial the approach, methodology, materiality, statements audit, subsidiary audits and assessment of risk and key areas of There are no contractual obligations local statutory accounts; and judgment and fees. KPMG presented restricting the Committee’s choice of their report to the Committee at the external auditor. • for certain specified tax services, conclusion of the year end audit. KPMG’s including tax compliance, tax planning The Committee is satisfied that there independent report to shareholders is on and tax advice. are no relationships between the pages 78 to 80. The external auditor is precluded from Company and the auditor, its employees engaging in non-audit services that would The Committee reviews the performance or its affiliates that may reasonably be compromise its independence, would of the external auditor each year during thought to impair the auditor’s objectivity violate any laws or regulations affecting the planning process and after the and independence. its appointment as auditor or would lead conclusion of the interim and annual Private meetings were held with KPMG a reasonable third party to regard the audit reviews. A qualitative assessment to ensure there were no restrictions on objectives of the proposed non-audit has been undertaken of the services the scope of their audit and to provide service as being inconsistent with the provided, both audit and non-audit, an opportunity to discuss any items external audit. The policy defines the types against the agreed audit plan/scope of that the auditor did not wish to raise of permitted and not permitted services. service taking into account feedback with the Executive Directors present. Except in exceptional circumstances from management. This included The Committee reviews and agrees the relating to urgent transactions or services consideration of the timeliness, content engagement letter from KPMG and verifies deemed not to be of a material nature, and quality of presentations to the its independence and objectivity. It also the engagement of the auditor for non- Committee, competence with respect to reviewed the scope of non-audit services audit work must be approved in advance issues of risk and accounting judgment provided by KPMG to ensure that its by the Committee Chairman where the and their qualifications and experience. objectivity was not impaired. fee is in excess of £50,000. Fees up to The Committee is satisfied that the £50,000 must be approved in advance by external audit process has operated The Committee, through ongoing the Chief Financial Officer. effectively and is fully satisfied with oversight of the external auditor as KPMG’s performance. noted in the above factors, recommends The Committee is satisfied that the level of that KPMG’s reappointment as external fees payable in respect of audit services is KPMG has been Betfair’s auditor since auditor be proposed at the Annual appropriate for a group of its size and that 2003. The external auditor is required to General Meeting. an effective audit was conducted during rotate the lead partner every five years the year. and other partners that are responsible for the Group and subsidiary audits The fees for audit and non-audit must change at least every seven years. services are disclosed in note 3 to the Such changes are carefully planned to financial statements. ensure business continuity without undue risk or inefficiency. The partner responsible for Betfair’s audit is completing his third year within the Group audit team and his third year as lead partner, which is a role he can continue for a further two years. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe and management. and Directors Executive the to management risk and control ofinternal systems the of design detailed the delegated has Board The reviewed. regularly are and listed was Group the before since place in been have Guidance, Turnbull revised with procedures,These which are in accordance authority. delegated and of responsibility including clear operating procedures, lines Code, Governance Corporate the apply to has established the procedures necessary Board the responsibility, that discharge to order In effectiveness. its reviewing for and management risk and control internal of system Group’s the for responsible is Board, ofthe behalf on Committee, The process Internal controls and risk management Internal Audit & Risk Management Team. Management &Risk Audit Internal Group adedicated by supported ofresponsibility areas their with associated risks specific the manage who members Board Executive and Board respective with resting ownership ultimate with area, this in approach aproactive adopts and Committee Risk Corporate the at quarterly reviewed are which risks key its analyses Group The Annual Report. of this approval the to up status this to change of any aware not is Board the and unsatisfactory or ineffective was system the that indicate not did Board, of the opinion the in review, the context, that In loss. or misstatement material against objectives and, as such, it can only provide reasonable and not absolute assurance business achieve to offailure risk the eliminate, than rather manage, to designed is control ofinternal system The 2015. April 30 ended year the during control of internal system ofthe effectiveness ofthe areview conducted has Board of the Through the monitoring processes set out above, the on Audit Committee behalf IN THE PERIOD UNDER REVIEW UNDER PERIOD THE IN CONTROL INTERNAL OF SYSTEM THE OF EFFECTIVENESS • • • procedures to: These systems include policies and accounts. ofconsolidated preparation the to financial processes reporting and for relation in systems management risk and control internal place in has Group The – – – strategic plan achievement; to monitor: business, ofthe management good normal ofthe part as processes, Executive have Committee established the and Board the and closely managed Committee. Business is performance Audit the by and internally monitoring and reconciled, appropriate with require data to reported be reviewed appropriate; and Accepted as Accounting Principles, Generally UK or (IFRS) Standards International Financial Reporting with accordance in statements offinancial preparation the permit to transactions are recorded as necessary that assurance reasonable provide accurately and transactions; fairly reflect that ofrecords maintenance the facilitate post-investment reviews; detailed appraisal, authorisation and with performance, management asset and investment capital framework; accounting and reporting comprehensive financial planning, financial performance within a
• • • In addition, the receives: Audit Committee external auditor.external the KPMG, from reports and plan; audit internal the under out carried Team work the on Management & Risk from the Group Internalreports Audit Risk Committee; from the Corporate reports – – Annual Report andAccountsBetfair 2015 Group plcAnnualReport and opportunity. cost ofrisk, balance the to regard and appropriately managed, having Group are being identified, evaluated the by faced risks significant the that Team, ensure to Management Risk & Audit Internal Group the from ongoing process, including reports an through management, risk relevant; and and appealing be to continue they that ensure to formats and brands evolve to actions and data insight consumer 46–47 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe GOVERNANCE AUDIT COMMITTEE REPORT CONTINUED
Group Risk Management framework GROUP RISK MANAGEMENT FRAMEWORK The Group Risk Management Framework is a well established process adopted to ensure the Group understands, evaluates and mitigates potential risks facing the business and is shown below. BETFAIR Betfair has a comprehensive Group Risk BOARD Management Framework used across the whole organisation and based on sound principles of good governance. The framework assists in identification of risks and mitigating them to the extent considered appropriate, balancing risk and opportunity to safeguard the business and its reputation. The framework provides AUDIT Directors and senior management with a COMMITTEE consolidated view of the key risks faced by the business which is evaluated and updated regularly. The Directors believe the Group’s risk management approach and capabilities will, over the long term, contribute to the achievement of the Group’s strategic objectives. CORPORATE The Group Risk Management Framework RISK comprises a number of sub-committees COMMITTEE made up of senior Executives and relevant senior managers from across the Betfair Group, which deal with matters of policy and control and exercise oversight of the operational implementation of risk management, together with several operational functions. There are also GROUP RISK GROUP established processes and procedures in MANAGEMENT INTERNAL place between Corporate Risk Committee AUDIT meetings to deal with more urgent decisions and actions. The framework is overseen by the Corporate Risk Committee, which reports to the Audit Committee. The Group Internal Audit & Risk Management Team co-ordinates, structures and promotes the embedding of appropriate risk management practices across the business on an ongoing basis. A risk register is used by the Risk subcommittees: Business functions: Other control and business to document the risks across assurance functions Escalate key Risks identified by the whole organisation and how they are (Compliance, risks requiring business functions Security, Business being managed. Corporate Risk documented on the Continuity Committee review risk register and Management, Fraud, managed/monitored Integrity, Anti- as business as usual Money Laundering): Escalate key risks requiring Corporate Risk Committee review
Additional information about risk management and policies in relation to our customers’, responsible gaming can be found on page 28 WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe Audit Committee Risk Management Director of Group Internal Audit & Chief Legal Officer Officer Chief Financial Officer Executive Chief Corporate Risk Committee Laundering & Anti-Money Threat Insider Integrity, of Head Risk Sportsbook of Head Head of Market Operations Director of Legal & Compliance Corporate Risk Committee team Leadership All members of the Technology Chief Technology Officer Corporate Risk Committee Operations Security of Head &Payments Registrations of Head Director of Legal & Compliance &Projects Operations HR of Head Fraud of Head Treasury & Management Credit Funds, Client of Head Money Laundering &Anti- Threat Insider Integrity, of Head REPORTS TO: REPORTS MEMBERS: COMMITTEE & REGULATIONS RULES TO: REPORTS MEMBERS: COMMITTEE RISK TECHNOLOGY TO: REPORTS MEMBERS: COMMITTEE RISK FRAUD TO: REPORTS MEMBERS: CORPORATE RISK COMMITTEE
• • • • • • • • • • • • • • KEY RESPONSIBILITIES INCLUDE: KEY RESPONSIBILITIES INCLUDE: KEY RESPONSIBILITIES INCLUDE: KEY RESPONSIBILITIES INCLUDE: relating to customers. relating settlement of betting markets and practices Take decisions about the operation and rules; betting Betfair’s Oversee and risks. corporate key the of part including those technology that risks are the key technology in risks the Company Management, oversight and progression of manage fraud incidents. effectively to place in are procedures ensure and Betfair; across management risk fraud promote adoption and use effective of risks; related fraud mitigate to plans action against progress review risks; related fraud of Review Internal Audit. findings and recommendations of Group review management’s response to tocontractors raise concerns; and forarrangements employees and of security and adequacy review review procedures for preventing bribery; review procedures for detecting fraud; management systems; controls, internal controls and risk of review internal effectiveness financial process; assessment risk overall the review Company; the of exposures risk current the on Board the advise and Oversee Committee meetings.Committee prior torisks. quarterly Meets Audit from management on these and emerging management process and has presentations risk Group the through identified as risks corporate significant most the of reviews outThe carries Committee regular betting markets. markets. betting its of operation the in applies Betfair which rules betting of set detailed and is complemented by a comprehensive framework MoU the To end, this bodies. for fairness amongst customers and sports markets to is reputation Betfair’s important betting of Betfair’s the integrity Maintaining or progress/status. session to agree either priority, action plans the in risks of ahandful on done is dive adeep and progress overall for reviewed is tracker risk the session, each In CTO. the by The monthly meets Committee and is chaired oversight, prioritisation, and tracking action. for andstability, security availability top related risks to technology, including the of alist maintains Committee The Risk meetings. Committee Betfair. prior to quarterly Meets Corporate across risks fraud manage to place in are appropriate policies, resources and controls andBetfair is responsible for ensuring that across risks related fraud of management forumthe for primary overseeing the as acts Committee Risk Fraud The APPROACH: APPROACH: APPROACH: APPROACH: Annual Report andAccountsBetfair 2015 Group plcAnnualReport 48–49 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe GOVERNANCE AUDIT COMMITTEE REPORT CONTINUED
SECURITY TEAM PURPOSE AND APPROACH: KEY RESPONSIBILITIES INCLUDE:
Responsible for providing the services that allow Betfair to best • Sets the security strategy; protect its key information assets and includes data, hardware, • conducts security design reviews of new products and services; customer accounts and employees. • performs security assessments of existing and new technologies; The Security team uses a risk-based approach to mitigate security • regular penetration testing; risks and uses the monthly Technology Risk Committee for oversight and communication of our key security risks. Key security risks, trends • training and awareness; and mitigation programmes are communicated from this Committee • employee system access reviews; and on a regular basis to the Corporate Risk and Audit Committees by the • security monitoring and response for threats against the Director of Security. Betfair infrastructure. REPORTS TO:
Chief Technology Officer
GROUP INTERNAL AUDIT & RISK MANAGEMENT TEAM PURPOSE AND APPROACH: KEY RESPONSIBILITIES INCLUDE:
Gives risk-based, independent assurance to the Audit Committee • Delivery of the Internal Audit Plan; and operational management on the effectiveness of the Group’s risk • regular reporting to Corporate Risk and Audit Committees; management, internal control and governance processes. • reporting regularly to management on the effectiveness of the Provides assurance that risk management practices are sound and Group’s internal controls; operating effectively; key risks are being managed to an acceptable • tracking management actions from internal audits to completion; level; internal controls are effective and efficient; and systems, and processes and procedures are in place to assist in the achievement of business objectives. • reporting to the Audit Committee on the status of actions on significant risks to ensure that the risks identified are appropriately addressed. REPORTS TO:
The Director of Group Internal Audit & Risk Management has a direct reporting line to the Chairman of the Audit Committee and to the Chief Financial Officer.
ANTI-MONEY LAUNDERING TEAM PURPOSE AND APPROACH: KEY RESPONSIBILITIES INCLUDE:
Dedicated function responsible for assessing money laundering • Carry out the appropriate level of customer due diligence; threats and implementing Betfair’s Anti-Money Laundering (AML) • risk-based assessment of all financial transactions using Betfair policy to mitigate such threats, in accordance with the Financial payment, betting and gaming systems; Action Task Force (FATF) recommendations and applicable legislation and regulation. This function is also responsible for managing • report any suspicious circumstances concerning financial transactions Betfair’s anti-bribery strategy in accordance with applicable anti- to the relevant statutory authorities; and bribery legislation. • ensure regular staff training in Betfair’s AML procedures. Betfair’s AML compliance policy encompasses a collection of procedures, technologies and techniques.
REPORTS TO:
Chief Legal Officer WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe these policies. of effectiveness the monitors which Risk and Committee Audit Committee, Corporate ofthe meeting each at provided investigated are thoroughly and reports are policies these with accordance in raised matters Any confidence. strict in with dealt and raised be can matters how details legislation and the Whistle-blowing Policy relevant other and 2010 Act Bribery UK the with comply we how specifies Standard Anti-Bribery the individuals, ofall expected are that standards professional and ethical the sets Policy ofConduct Code The required to comply these with policies. All employees, including contractors, are whistle-blowing and Code of anti-bribery conduct, respect of our relationship with the customer. the with relationship our of respect posed by a customer particular and the most appropriate action in be may that risks the consider to basis hoc ad an on sits panel The &Integrity. AML of Head the and Legal Finance, Commercial, from Accounts Review Panel, of members which are senior representatives the by review to subject be may customers circumstances, certain In regulators and governments. gambling and sports customers, by regarded is Betfair which with trust the to contributor akey and leading market be to policy sharing The Directors consider MoU Betfair’s framework and information sport. of integrity the protect to patterns betting suspicious on information share to us enable which IOC, the and BHA the UEFA, including organisations sports 60 over with MoUs We have bodies. governing sports for liaison of point main the investigatingproducts, any potentially suspicious activity, betting and Responsible betting on sports for Betfair’s monitoring activity betting Chief Legal Officer requirements. regulatory launch of new and products, to ensure compliance with existing and development licensing, the support to business the to The Compliance Team provides advice regulatory and guidance Chief Legal Officer REPORTS TO: REPORTS APPROACH: AND PURPOSE TEAM COMPLIANCE TO: REPORTS APPROACH: AND PURPOSE INTEGRITY TEAM TEAM INTEGRITY Practice Guidelines. recognises Betfair the Business Institute’s Continuity Good with aligned also is but practice, best and standards industry current with consistent only not is that System Management demonstrated by a Business Continuity of business readiness continuity is state Betfair’s plan. recovery disaster functions and an information technology plans continuity for departmental all security, site physical are strategy of this technology locations. The key components and operating key ofBetfair’s any on impact may which failure or incident ofany irrespective customers its service to continue to able be to aims Betfair businessThrough its strategy, continuity recovery disaster technology information Business continuity planning and • • • • • • • • • KEY RESPONSIBILITIES INCLUDE: KEY RESPONSIBILITIES INCLUDE: Review Panel in appropriate cases. escalates accounts responsible for suspicious to betting the Accounts and bodies; governing sports for liaison of point main anyinvestigating activity; potentially suspicious betting products; betting on sports Betfair’s monitoring activity betting time; real in exchange Betfair the on activity which enables technology portal them toproprietary monitor betting a tool, ‘BetMonitor’ Betfair’s to access partners MoU its Offers new jurisdictions. technology and operational teams to ensure compliance in provide detailed requirements regulatory to product, Betfair’s products; and its offer to suitable as identified has business the that jurisdictions in applying for, obtaining and maintaining relevant gambling licences licences and relevant legislation; its of terms the with accordance in operates Betfair that ensure and the business; Manage and maintain an ongoing dialogue with gambling regulators deployment to Betfair’s live environment. todeployment Betfair’s testcapacity code new software before and performance to used is equipment this use, DR in not While operated. remotely and over moved be can functionality technology operations and back-end products, key which to Ireland in sites pre-placed equipment in dedicated DR has Betfair requirements. regulatory with businessprioritised needs and compliant with line in is infrastructure technology ofBetfair’s recovery and response that ensure to is strategy ITDR of the business plan. continuity objective The wider ofthe part akey is capability (ITDR) Information technology disaster recovery governance. corporate effective to contributor asignificant is and key for maintaining competitive advantage is discipline continuity business the that Annual Report andAccountsBetfair 2015 Group plcAnnualReport 50–51 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe GOVERNANCE AUDIT COMMITTEE REPORT CONTINUED
REGULATORY OVERVIEW
Betfair operates in a heavily regulated Bearing all these factors in mind, Betfair’s • the terms of Betfair’s betting sector where changes in regulation commercial and marketing strategy is and gaming licences in can have a significant impact on its designed to achieve sustainable revenue individual jurisdictions; operations. The regulation and legality from regulated jurisdictions. The Group • the laws and regulations of the of online betting and gaming varies holds gambling licences in the UK, Malta, jurisdiction including state, federal or from jurisdiction to jurisdiction (from Gibraltar, USA, Italy, Spain, Denmark supranational law, including EU law if open licensing regimes to sanctions or and Bulgaria. applicable, and in particular the way in prohibitions) and in certain jurisdictions Betfair’s determination, as to whether which such laws and regulations apply there is no directly applicable legislation. or not to permit customers in a given to the specific betting and gaming Besides the regulatory changes, online jurisdiction to access any one or more of products and specific types of related betting and gaming is subject to other its products and whether to engage with activity, including marketing; and uncertainties in many jurisdictions and customers, is made on the basis of its • the approach to the application approaches to enforcement of local measured and prudent approach to legal or enforcement of such laws and laws vary. and regulatory compliance, and is based regulations by regulatory and other on a number of factors which include: authorities in the jurisdiction.
Additional risk management policies and • Customer anti-fraud measures: • Ring-fenced customer funds: practices relating to customers Betfair has a 24/7 fraud team looking Under the terms of a trust deed, Betfair has a number of important policies for suspicious activity. The team use approximately 95% of all customer which are embedded in its operations to a number of in-house and external funds is held on trust in separate bank protect both its customers and Betfair applications, including the use of accounts which are ring-fenced from from certain risks often associated adaptive behavioural analytics tools, our corporate funds. The remaining with remote gambling. These policies to protect Betfair and our customers. sums are customer funds which certain help Betfair to meet its licensing and The team liaise with regulators, local regulators require Betfair to hold in regulatory requirements and comply with law enforcement agencies and other separate non set-off bank accounts in applicable legislation. They also underpin operators to ensure we maintain a good the name of the licence holder. some important capabilities of Betfair, understanding of current fraud trends. Insurance in particular by facilitating the close and • Underage betting and gaming: The Group regularly reviews both the consistent cooperation of several of the All customers are required to confirm type and amount of insurance cover risk management functions described in upon registration that they are over with guidance from an external broker, this section. the legal age for gambling within each considering the availability of cover, cost • Customer due diligence: particular jurisdiction. As an essential and the likelihood and magnitude of the Betfair operates a sophisticated four- and specific component of the customer risks involved. level customer due diligence process due diligence process referred to above, Betfair also carries out age (referred to as Know Your Customer or Ian Dyson KYC), which uses both automated and verification checks on all customers. Senior Independent Director manual methods to verify a customer’s Betfair suspends all UK customers and Chairman of the Audit Committee age, identity and source of funds. who fail to verify their age within 72 The KYC process also assesses the hours. Betfair advises and encourages extent and quality of the customer’s its customers to prevent minors from verification information in determining accessing betting and gaming websites. whether to allow the customer to operate a Betfair betting account, either at all, or above certain levels of activity. Betfair’s KYC processes are integral to the anti-money laundering (AML), fraud and integrity policies and practices described above. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe principal responsibilities include:principal committees.aspx). Committee’s The betfair.com/about-us/governance/ corporate. website: Company’s the on found be can (which ofreference terms its refreshed year, Committee the the During The Committee’s responsibilities years. previous from remuneration policy remain unchanged ofour principles The strategy. evolving appropriate the and Company’s support remain to continue they ensure to side, are reviewed periodically which hand right the on principles four the on based was policy This 62. to 56 pages on reference, has the policy been reproduced of year. ease this For policy remuneration We are not proposing any changes to our favour. in vote a99.83% receive to delighted were we and vote shareholder for policy a remuneration binding its forward put year, Committee the Last Remuneration principles FY15. for remuneration onCommittee’s Directors’ report to present the Remuneration opportunity the Iwelcome Board, ofthe behalf On Dear Shareholder, 72). 63to (pages Remuneration on Report Annual an and 62) to 56 (pages Report Policy 55), aRemuneration (page year the for outcomes ofpay asummary including Committee Remuneration ofthe Chairman the from Statement Annual an sections: three into split is report the remuneration, ofDirectors’ approval and disclosure the governing regulations with line In plc. Group ofBetfair Directors Executive Non- and Executive ofthe remuneration the covers Report Remuneration This Introduction ANNUAL STATEMENT STATEMENT ANNUAL DIRECTORS’ REMUNERATION REPORT: • • engagement governance and High levels of corporate Shareholder alignment strategic link and performance for Pay Market competitive levels BETFAIR’S REMUNERATION PRINCIPLES AND PRIMARY OBJECTIVES PRIMARY AND PRINCIPLES REMUNERATION BETFAIR’S the Company; the across trends remuneration account into senior takes the Executives Committee of remuneration the determining In share awards. incentive long-term salary, bonus, pension, and benefits covering executives, senior other and for arrangements Executive Directors the approach to the remuneration approvingsetting, and reviewing Company Secretary; the and reports direct CEO’s the Directors, Executive the Chairman, ofthe remuneration the for policy or broad the framework determining
levels shareholder return. of focus onbothbehaviours andhigh investors, through anappropriate aligned withthelong-terminterests of that executive incentives are closely Your Board iscommitted to ensuring Leo Quinn Chairman of the Remuneration Committee • • • • • • • • dialogue with shareholders throughout the year. The maintains Committee an open and transparent policy.remuneration setting when this of account takes and developments, governance and institutional investor best practice The is Committee regularly updated on corporate term performance. The will Committee seek to reward sustained long- build and maintain significant shareholdings. with shareholding guidelines encouraging Executives to A of significant proportion reward should be share based Executives with those of shareholders. of interests the align to as so set be will incentives term The performance applying targets to and the long- short corporate performance delivered should be established. objectives. A clear link reward between and individual and strategic Board’s the delivering with consistent are which metrics on based be will elements pay variable The towards variable pay. heavily weighted be should package remuneration The remuneration through the performance-related elements. levels and to providing earn the above opportunity market market around pay fixed targeting by calibre highest the of Executives motivate and retain attract, to Designed the business facing significant costs costs significant facing business the despite pence, 79.5 to 62% by increased and earnings underlying per share £120.2m to 32% by increased EBITDA £476.5m, to 21% by increased Revenue year. excellent an had has Betfair outcomePerformance for FY15 • • operated by the Company. the by operated incentive share-based ofany rules the reviewing, recommending and approving strategy; and and considering the long-term business the variable elements of remuneration performance-related to criteria attached appropriatesetting and challenging Annual Report andAccountsBetfair 2015 Group plcAnnualReport 52–53 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe GOVERNANCE DIRECTORS’ REMUNERATION REPORT: ANNUAL STATEMENT CONTINUED arising as a result of point of consumption EPS (FY15: 79.5 pence) and revenue award is based on Group Revenue based taxes in the UK from December (FY15: £476.5m) resulted in performance (25% weighting), TSR (25% weighting) 2014. The business has successfully in excess of the maximum performance and Group EPS (50% weighting). increased its market share by attracting level for both elements and therefore The Committee is satisfied that the recreational customers, as evidenced by Breon Corcoran’s award will vest in full. targets applying to both schemes are the 52% increase in active customers in sufficiently stretching in light of the Half of the CFO’s LTIP award which was the year. The business has also continued internal plan and external forecasts. granted to him on joining was based to improve the quality of its revenues on the same EPS and Revenue metrics Mark Brooker was appointed to the Board through its focus on regulated jurisdictions, and therefore this award will vest in full. on 1 June 2015 and will perform a dual with revenues from sustainable markets The other half was based on relative TSR role, as both a member of the Board and increasing 27% and now representing 82% performance against a group of other continuing as Chief Operating Officer of total revenues. gaming companies. Betfair’s strong TSR (COO) of the Group’s regulated business, The primary annual bonus measures for performance over the period (185.86%) based in Ireland. His salary on appointment FY15 were Group Revenue and Group was sufficient to rank the Company above will be £350,000p.a. and in line with our EBITDA (each determining 44.5% the upper quartile of the Group and remuneration policy, his annual bonus of Executive Directors’ bonuses) with therefore this element also will vest in full. and LTIP opportunities will be 180% and 11% based on personal objectives. 200% of salary respectively. The Committee considers that full vesting Reflecting the strong results for FY15 as of the 2012 LTIP awards is representative We have provided a summary of FY15 set out above, the Company’s EBITDA of performance over the period. remuneration following this statement and performance exceeded the maximum before the Remuneration Policy Report. target set by the Committee and the Remuneration policy for FY16 The summary also sets out performance Revenue target was slightly below the In line with the remuneration philosophy and remuneration outcomes for the maximum, resulting in a payout of outlined earlier, the Committee is year ended 30 April 2015. More detail 157.57% (out of 160%) under these two committed to ensuring that rewards for can be found in the Annual Report on metrics. The Committee determined Executives are closely aligned to the Remuneration which starts on page 63. that the CEO had met all of his personal interests of shareholders through having objectives and the CFO had met the all incentive arrangements linked to Shareholder feedback majority of his (scoring 17% out of the challenging performance targets, focused The Remuneration Committee encourages 20% of salary available). on growing earnings and generating high dialogue with the Company’s shareholders levels of shareholder return. and will consult with major shareholders Accordingly, the CEO and CFO will receive ahead of any significant future changes to bonus awards of 179.57% and 176.57% Following the approval of our the remuneration policy. During the year of salary respectively. The Committee is remuneration policy by shareholders we carried out an extensive consultation satisfied that the bonus outcome reflects at last year’s AGM, the Committee with leading shareholders and shareholder what has been an excellent year for Betfair. is not proposing any changes to the bodies in advance of the changes put to In line with the Company’s policy, one- remuneration policy or how it will be shareholders in January 2015 to agree third of the bonus is deferred in shares. applied at this time as it believes the the rectification required to reflect the current remuneration structure and In January 2015, a shareholder resolution original terms of the CEO’s joining award. variable pay quantum remain appropriate was passed with 99.83% support to The Committee will continue to engage for Betfair. amend the terms of the CEO’s joining with shareholders where relevant including award which was granted to him in The Committee took into account the any material changes to the way the 2012. This was necessary to honour following factors in determining the approved policy will be applied. the understanding reached with Breon approach for FY16: There will be a single advisory vote Corcoran at the time he joined the • The CEO’s and the CFO’s salaries will covering this annual statement and the Company. Accordingly, the Total remain unchanged in 2015/16. Annual Report on Remuneration at the Shareholder Return (TSR) element of 2015 AGM and we look forward to your • Annual bonus and LTIP opportunities his joining award was removed and the continued support. award was subject to EPS and revenue remain unchanged from the year under growth targets, in equal parts. Revisions to review. The Committee continues to the financial targets attached to Breon believe that the current arrangements do Leo Quinn Corcoran’s joining awards (and to other not inadvertently encourage undue risk Chairman of the Remuneration Committee 2012 Long Term Incentive Plan (LTIP) taking given the clear long-term focus in 17 June 2015 award holders) which were set prior to our policy and through the introduction the announcement of a revised strategy of formal shareholding guidelines in December 2012, were discussed with last year. shareholders. In line with the approach • The performance metrics applying to taken last year, the Committee has the FY16 annual bonus and 2015 LTIP adjusted the targets to reflect the new Awards shall also remain unchanged strategic path undertaken and has ensured from the prior year. The annual bonus that the revised targets are at least as will be based on stretching Revenue stretching as the original targets in the and EBITDA targets with a minority circumstances. The Company’s strong on personal performance. The LTIP WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe A summary of vesting is set out in the table below. table the in out set is ofvesting A summary subject to continued employment. year this later full in vest will awards these Therefore, companies). Gaming other against ranking quartile upper above ofan (as aresult full in met also was award CFO’s the to attached element TSR the and full in met were awards these to attached EPS) and (Revenue metrics financial The 2015. April 30 on ending periods performance had 2012 in LTIP granted CFO’s the and award joining CEO’s The LTIP vesting FY15 shares. in deferred be will bonus ofthe One-third CFO. the for £706,288 and CEO the for of£952,539 bonuses annual in resulted This Total Personal Group EBITDA 2015 REMUNERATION SUMMARY (under the LTIP) (under the Long-term incentives Plan) Incentive Share Deferred Plan/ Incentive Cash Annual Annual bonus (under the andBenefits pension Base salary FY16 for Approach 1 CEO FY15 and FY14 for figures remuneration total Single 2015. April 30 to price share average 3-month the being £20.128, of price ashare on * Based Breon Corcoran Group Revenue Element out below: set are performance actual and elements financial the to applying targets The elements. three on based was bonus annual The Annual bonus FY15 AGM. 2015 the at vote advisory an to subject not is section This Remuneration. on Report Annual the in found be can details Full Directors. Executive our by received reward the and year the over Company ofthe performance ofthe asnapshot is section This CFO Alex Gersh DIRECTORS’ REMUNERATION REPORT:
joining which had performance measured up to 30 April 2015. The long-term incentives value reflects the increase in share price over the period (from £7.681 on the 2015). the on April £7.681 30 to (from period period month the over three the price for share in price share increase the average the being reflects £20.128 to value grant of date incentives on him to long-term granted The award 2015. based April 30 to up measured performance long-term performance had first the of which vesting joining upcoming the to due mainly is year prior the over figure single CEO’s the in increase The 1 Agreement Option Option Share Share LTIP Plan TSR against the FTSE 250, (excluding Investment Trusts), and 25% on Group Revenue. Group on 25% Trusts), and Investment (excluding 250, FTSE the against TSR relative on 25% EPS, on 50% based years three over measured metrics performance with COO and CFO the for of salary 200% and CEO the for ofsalary –300% metrics or quantum to change No • 20% on personal objectives. and Revenue; Group on ofsalary • 80% EBITDA; Group on based be will ofsalary • 80% unchanged. remain also shall weightings relative their and metrics The ofsalary. –180% quantum potential to change No COO. and CFO the for ofsalary 10% and CEO the for of15% ofsalary contribution Pension proposed. change No –£350,000 • COO • CFO – £400,000 –£530,450 • CEO are: FY16 for Salaries The CEO’s, CFO’s and COO’s salaries will remain unchanged. 500,000 Number of 108,788 Weighting 44.5% 44.5% 100% awards 11% (% of salary) salary) (% of EPS vesting EPS 50% out 50% 25% out 25% of 50% of 25% Weighting 180% 80% 80% £’000 20% Salary Salary 400 528
50% out 50% 25% out 25% of 50% of 25% £373.7m Revenue Threshold Based on a number of individual objectives £77.7m Benefits Benefits £’000
4 3
50% out 50% of 50% £415.2m £86.3m Annual £’000 Target TSR bonus 706 953 –
£477.5m Long-term £99.2m Maximum 100% 100% incentives 10,064 Overall vesting 2,190 £’000
Annual Report andAccountsBetfair 2015 Group plcAnnualReport
500,000 awards due Number of 108,788 £476.5m £120.2m to vest Pension £’000 Actual 40 79 13 December 13 December
Vesting date Vesting single figure 179.57% award level award 1 August 1 August FY15 total FY15 79.57% Corcoran 11,627 3,340 80% £’000 20% 2015 2015 Breon Breon
£10,064,150 £2,189,718 single figure 176.57% award level award Alex Gersh Gersh Alex FY14 total FY14 79.57% Value of of Value awards* 1,276 80% £’000 17% 972
54–55 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe GOVERNANCE DIRECTORS’ REMUNERATION REPORT: REMUNERATION POLICY REPORT
The contents of the following part of the Remuneration Report, the Remuneration Policy Report, sets out the Group’s remuneration policy and has been prepared in accordance with the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 and UK Listing Rules. The policy was developed taking into account the UK Corporate Governance Code 2010 and 2012 (the “Code”) as applicable for the financial year in which the policy was introduced. The remuneration policy was approved by shareholders at the 2014 AGM and became effective from that date, 4 September 2014. Although not required by the regulations, the substantive terms of the Policy Report are reproduced here for ease of reference. Any details, however, that were specific to 2014 or earlier years (including, for example, any disclosures relating to particular Directors and the illustration of application of remuneration policy chart) have been updated, where applicable, to reflect the current position. We have also updated the policy to reflect the shareholder approval that was received at the January 2015 General Meeting to amend the performance conditions that were applicable to the CEO’s joining award. For the avoidance of doubt, the approved change forms part of the remuneration policy that was approved by shareholders in September 2014. There is no vote on the remuneration policy at the 2015 AGM. Remuneration Policy Report The Committee determines the remuneration policy for the Executive Directors, the Chairman, Company Secretary and other designated members of Executive Management. The overall policy aim is to provide a remuneration package which will attract, retain and motivate high calibre Executives with the appropriate expertise. The Committee believes that the opportunity to earn superior rewards should be directly aligned to the successful delivery of short and long-term performance through a simple and transparent framework. The remuneration package for Executive Directors is weighted towards performance-related pay, with the aim to pay around mid-market levels of total fixed pay but with the opportunity to earn upper quartile levels of reward for delivering superior performance. The Committee regularly reviews the variable incentive elements of the policy to ensure they do not encourage excessive risk taking and that they operate within an overall acceptable risk profile. When setting the policy for Executive Directors’ remuneration, the Committee takes into account total remuneration levels operating in companies of a similar size and complexity, the responsibilities of each individual role, individual performance and an individual’s experience. The Committee also considers developments in best practice and the pay and employment conditions within the wider Group. Remuneration policy for Executive Directors The policy table below sets out the key elements of Betfair’s Executive Director Remuneration, how they are linked to the Company’s strategy, how they operate, the framework for setting performance measures (if applicable) and maximum opportunity levels. Salary Purpose and link to strategy Operation and performance measures Maximum opportunity • To attract and retain high- • Generally reviewed annually (with any change effective • The current salaries are shown in the calibre individuals 1 July) but exceptionally at other times of the year Annual Report on Remuneration • Provides an appropriate • Set with reference to individual skills, experience, • No maximum applies. However, level of basic fixed income responsibilities, Company performance and performance increases, as a percentage of salary, whilst avoiding excessive in role will generally be consistent with those risk arising from over- • Independent benchmarking is conducted on a periodic offered to the wider workforce from reliance on variable income basis against companies of a similar size, complexity and time to time operating in the same sector, although this information is • Higher increases may be appropriate only used as part of a broader review where an individual changes role, there is a material change in the responsibilities of the role, where an individual is appointed on a below market salary with the expectation that this salary will increase with experience and performance, or where salaries, in the opinion of the Committee, have fallen materially below the relevant market rates WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe • • strategy to link and Purpose Annual bonus under the Annual Cash Incentive Plan (“ACIP”) and Deferred Share Incentive Plan (“DSIP”) • strategy to link and Purpose benefits Other • strategy to link and Purpose Pension share ownership greater To facilitate help strategy business short-term of the delivery successful the for reward and To incentivise benefits employment effective competitive, yet cost- market To provide benefit long-term retirement providing a cost-effective by To retention aid • • • • • • • • • • • • • • • Operation and performance measures Operation and performance measures Operation and performance measures Dividends accrue on vested DSIP awards DSIP vested on accrue Dividends DSIP the in included are provisions Clawback pensionable is payment incentive annual of the None personal objectives defined annual incentive payment may be subject to clearly ofthe aminority metrics, financial these to addition In be included, as appropriate may measures other but ofprofit ameasure and revenue of bonus opportunity. Current financial include metrics Financial will metrics comprise at least three-quarters strategy at the time business the with line in year ofeach start the at targets and measures the approves and reviews Committee The ofgrant date the from years two after 50% and year one after 50% vest will element deferred Any DSIP) the (under shares into (under the ACIP), the remaining one-third with deferred cash in be will payment incentive annual ofany Two-thirds employees other to offered those to terms similar broadly on be will which benefits other Executives offer may Committee The required as offered, be may expenses related other or Relocation cover illness Critical Income protection assurance Life insurance medical Private supplement and/or acash contribution adefined as Paid Maximum opportunity Maximum opportunity Maximum opportunity • • • • performance of levels threshold at out pay to starts bonus the metrics, financial For exceptional performance for ofsalary 180% Maximum: supplier costs third-party in variances with line in year to year from vary will Executives to provided ofbenefits value The lieu) in payment cash equivalent (or an 15% ofsalary to ofup Contribution Annual Report andAccountsBetfair 2015 Group plcAnnualReport
56–57 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe GOVERNANCE DIRECTORS’ REMUNERATION REPORT: REMUNERATION POLICY REPORT CONTINUED
Long Term Incentive Plan (“LTIP”) Purpose and link to strategy Operation and performance measures Maximum opportunity • To incentivise and reward • Annual grant of nil-cost options, vesting after three years • LTIP awards with a face value of not for the creation of medium subject to continued service and the achievement of more than 300% of salary to long-term shareholder performance conditions • Up to 25% of the maximum for value • The performance measures and targets are reviewed on each element may vest for threshold • Align the interests of senior an annual basis by the Committee performance Executives with those of • Performance measures may include some element shareholders of relative Total Shareholder Return (“TSR”), EPS or • A vehicle which enables Revenue growth Executives to increase • Alternative or additional measures which are linked to the their shareholding in Company’s overall medium to long-term strategy may be the Company used and the Committee retains the discretion to alter the weightings of performance metrics for awards during the life of this Policy • Clawback provisions are included which permit the Company to claw back awards within two years of an award vesting for reasons of a miscalculation resulting in higher vesting than should have occurred, material misstatement or gross misconduct resulting in cessation of employment • Dividends may be paid on any vested shares
Non-Executive Director fees Purpose and link to strategy Operation and performance measures Maximum opportunity • Attract and retain • Remuneration for Non-Executive Directors, other than • Fee increases may be greater than individuals with the the Chairman, is determined by the Board, on the those offered to wider employees (in relevant skills and recommendation of the Executive Directors percentage terms), reflecting that they experience to complement • The Chairman’s fee is determined and recommended to may only be offered on a periodic basis the Board the Board by the Remuneration Committee or reflect additional responsibilities and/or time commitments • Take into account • Fees are reviewed annually and any increase is effective the expected time from 1 July commitments, scope and responsibilities of the role • Remuneration for Non-Executive Directors, other than the Chairman, comprises a basic annual fee for acting as Non- Executive Director of the Company and additional fees for the Senior Independent Director, and chairmanship of the Audit and Remuneration Committees All-employee share schemes Purpose and link to strategy Operation and performance measures Maximum opportunity • Offered to all employees, • The Committee operates Save-As-You-Earn share plans • HMRC set limit (currently £500 to facilitate share for all employees (in the UK, this is an HMRC approved per month) ownership and provide scheme); the Executive Directors may participate in further alignment with the plan shareholders • Participants will be invited from time to time to save up to the monthly limit set by HMRC (currently £500) over a three-year period and use these savings to buy shares in the Group at up to 20% discount to the share price at the start of the savings period
Share ownership Purpose and link to strategy Operation and performance measures Maximum opportunity • To align the interests of • There is an expectation for Executive Directors to build up • n/a Directors with those of the a shareholding of 100% of salary Company’s shareholders • Executives have five years to build up the expected shareholding WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe expectations. The targets applying to financial measures are based on a sliding scale. asliding on based are measures financial to applying targets The expectations. In financial setting parameters, the takes Committee into account the Company’s internal and, budgets where applicable, investors’ Personal Profit Revenue Measure business. the growing is Group the well how reflect will metric Each generation. profit and to, revenue limited not are but include, may These metrics. financial ofchallenging achievement the on focused are measures performance ofannual majority The Annual bonus indicators. performance key its and strategy business overall Group’s the reflect to selected LTIP been have and bonus annual the both for used are that metrics performance The Choice of performance measures terms.their original to according vest will Board the to promoted subsequently be may who employees to granted been have which awards incentive Any approved policy. ofthis part forms and 2015 9January on held Meeting General the at shareholders by approved was change This Company. the join to decided he time the at CEO the and Company the between reached understanding original the reflect to component TSR the exclude to amended was 2012 1August on granted award joining CEO’s the to attached condition performance The 68. page on Remuneration on Report Annual the in Team disclosed are Executive current the to granted awards joining The recruitment. on made awards joining any including 2014, September in policy remuneration ofthe approval the to prior shareholders to previously disclosed been have that Directors former or current with into entered commitments any honour to Company the to given is authority ofdoubt, avoidance the For Past awards Rules. Listing the and rules HMRC under permitted as be will Plan BETsave Company’s the to relation in ofdiscretion use The shareholders. major Company’s the with ofconsultation subject the appropriate, as and, Remuneration on Report Annual the in justified be would plan, ofthe operation normal the beyond discretion, of use Any satisfy. to difficult less materially not are and purpose original their achieve conditions the that so required is amendment the and appropriate longer no are conditions the that determine to Committee the cause –which business ofaGroup and/or divestment acquisition amaterial or operates, Group the which within environment regulatory ofthe assessment Board’s the to changes material example, –for occur events if set targets the adjust to ability the retains LTIP, and bonus Committee annual the the both to relation In • • • • • • • • • following: to, the limited not are but include, These plans. of these administration and operation the to ofregards anumber in practice, market with consistent discretion, retains Committee The relevant. where Rules Listing the with accordance in and rules respective their to ACIP, the LTIP according and DSIP operate will Committee The to relating discretions variableCommittee pay schemes out above. out set policy the with accordance in plan incentive each under award anew for targets and measures ofperformance choice the requiredadjustments in special circumstances (e.g. issues, rights events and corporate special restructuring, dividends); and challenging than the original target set; less any being not target revised the in result should targets performance the to adjustments Any period. performance the over policy accounting to changes any for made be should how, so, if adjustments and ofwhether, consideration due manner, with appropriate an in made is made) be to required were that adjustments any (including of performance calculation the that confirming chosen; treatment appropriate the and plan ofthe rules the on based purposes plan incentive for leaver ofagood/bad determination Group; ofthe restructuring or ofcontrol achange with dealing when required discretion ofvesting; determination the above); table policy the in out set maximums the to (subject award ofan size the and/or payment; award ofan ofgrant timing the who in participates the plan; personal targets which are linked to the corporate strategy. corporate the to linked are which targets personal Individual measure objectives management whether is delivering against stated key business and effectively. profits into growth converting is management whether and business the by generated profits underlying the measures EBITDA profitability. and growth between abalance ensure helps revenue alongside EBITDA, as such measure, based ofaprofit use The operate. we which in regions all in share market our building and customers, ofexisting activity the increasing customers, new offer, we attracting that services and ofproducts range the ofwidening objectives strategic our with aligns ofrevenue use The Link to strategy to Link Annual Report andAccountsBetfair 2015 Group plcAnnualReport 58–59 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe GOVERNANCE DIRECTORS’ REMUNERATION REPORT: REMUNERATION POLICY REPORT CONTINUED
LTIP For the Company’s long-term plans, awards vest subject to delivering against measures which are aligned with the long-term levels of return targeted by the Company which may include relative TSR, EPS and Group Revenue. Measure Link to strategy Total Shareholder Return TSR provides a clear alignment between the value created for shareholders and the reward earned by Executives. Earnings Per Share EPS captures the long-term growth in earnings, which is most closely aligned to the overall financial performance expected by shareholders. Group Revenue Revenue targets ensure top line growth is being generated from new markets and through the widening of our product offering.
Additional measures which are linked to the business strategy at the time may also be used. Targets are set based on a sliding scale that takes account of internal planning and external market expectations for the Company. How Executive pay compares to other employees The Committee receives an overview of the reward structure and quantum applying to the whole employee population on a periodic basis from the HR Director. The information presented is taken into consideration when setting the pay levels of Executive Directors and other senior Executives. At other levels of the Group, employees will receive a remuneration package that is reflective of their role and responsibilities, set by reference to internal relativities and external market data where applicable. Employees at the Executive level will typically have a greater emphasis on performance-related and long-term pay compared to those below this level. Annual incentives may be payable based on performance measures which are suitable to the nature and responsibility of the role. Illustration of application of remuneration policy
£3,500,000 £3,159,000 LTIP £3,000,000 Annual Bonus Fixed Pay £2,500,000 50%
£2,000,000 £1,964,000 £1,647,000 £1,718,000 £1,500,000 24% 41% 41% £1,124,000 30% £983,000 £1,000,000 18% 39% 18% 37% £613,000 43% 37% £500,000 £444,000 £388,000 43% 100% 37% 19% 100% 40% 23% 100% 39% 23% 0 Minimum Target Maximum Minimum Target Maximum Minimum Target Maximum CEO CFO COO
The Company’s remuneration policy results in a significant proportion of the remuneration received by Executive Directors being dependent on Company performance. The chart above illustrates how the total pay opportunities for the current Executive Directors vary under three performance scenarios – Minimum, Target and Maximum – in the second year to which the policy applies, i.e. FY16. Assumptions underlying the scenarios: • Minimum – comprises fixed pay only which includes base salary effective from 1 July 2015, pension allowances in line with the Company’s policy and the value of benefits (using FY15 actual values as a proxy). For this purpose, the COO’s expatriate allowance has not been included on the basis that this is a temporary benefit. • Target – comprises fixed pay plus two-thirds of the maximum payout under the annual bonus plan (120% of salary), and 25% of the LTIP vesting (75% for the CEO and 50% of salary for the CFO and COO). • Maximum – comprises fixed pay plus 100% of the maximum payout under the annual bonus plan (180% of salary) and 100% of the LTIP vesting (300% for the CEO and 200% of salary for the CFO and COO respectively). • No share price appreciation has been used and all-employee share plan awards have been excluded. In respect of Target performance, the chart reflects the position for the second financial year for which this policy applies for the current Executive Directors. The Committee retains the flexibility to adjust the calibration of performance with incentive plan payouts at Threshold, Target and Maximum levels subject to any constraints set out in the Policy Table. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe The Executive Directors’ service agreements and letters of engagement for Non-Executive Directors will be available for inspection at at AGM. the inspection for available be will Directors Non-Executive for ofengagement letters and agreements service Directors’ Executive The Brooker Mark Gersh Alex Breon Corcoran Directors Executive rules. LTIP the in out set terms cessation the mirror appointment, his on Corcoran Breon to granted awards joining performance-related The so. do to not decide reduction, apro-rata apply to inappropriate is it feels may, it if Committee The vesting. early the reflect to applied be shall reduction apro-rata and ofcessation date the on vest shall awards the discretion, Committee’s the at reason other any or disability or injury retirement, ofdeath, reasons for employment ceases Executive However, the if ofemployment. cessation on lapse normally will appointment his on Corcoran Breon to granted shares restricted The so. do to appropriate is it decides it if pro-rate to not decide may Committee The period. vesting or performance ofthe proportion unexpired the reflect to basis apro-rata on date, either at achieved being conditions performance the to subject cessation upon or date vesting normal the at vest may awards the discretion, Committee’s the at reason other any or disability, permanent or ill-health redundancy, Committee), Remuneration ofthe consent the with (or earlier age retirement contractual at retirement death, to due employment ceases Executive an if LTIP rules, the Under ofcessation. date the on lapse will awards outstanding any circumstances, other any For employer). ofthe agreement the (with retirement and ill-health redundancy, death, for full in vest awards bonus deferred unvested rules, DSIP the under summary, In LTIP. the and DSIP of the rules plan individual the in out set as are payments ofoffice loss covering conditions The conditions. performance ofthe achievement the to subject and apply), should deduction no that determines Committee the (unless payable be may bonus apro-rata discretion, Committee’s the at reason other any for or employer ofthe agreement the with retirement redundancy, ill-health, death, as such situations leaver good However, certain in paid. be to due is bonus the that date the to prior ofemployment oftermination notice under is or employment ceases aDirector if payable is incentive annual No UK. the in employed was he if than perspective oftax anet from off worse no is he ensure to differences tax personal for and movements exchange foreign GBP/EUR for adjustment an for provides contract his employee, Irish an as and, allowance relocation annual an to entitled is Executive the Kingdom, United the outside based is employment his as long COO, so for ofthe case the In terms. similar on based be would appointment new ofany contract service The necessary. as paid be would termination the with connection in claims compromise or settle to sums or entitlements statutory Any oftermination. date the at due amounts any than other made, be will payments no ofcontract breach or ofmisconduct reasons for terminated is employment Executive’s the If ofcontrol. achange on provisions enhanced no are There reduced accordingly. be will ofnotice lieu in payments monthly ofany amount the earned, being ofsalary level aminimum to subject employment relevant alternative finds Executive an If instalments. monthly in payment any make to choose may Company The discretion. Company’s the at salary months’ of12 ofnotice lieu in payment for provisions contain agreements service Directors’ Executive The circumstances. any in ofemployment termination on amount predetermined ofa payment the to entitlement no is There notice. months’ of12 giving the on party either by terminated be can that contracts service Directors’ Executive The plc. Group ofBetfair aDirector as Letter Appointment aseparate and subsidiary) Group owned (a wholly Limited Processing Data TSE with contract aservice has COO The plc. Group Betfair with contracts service have CFO and CEO The office of loss and agreements Service
1 June 2015 1 June 3 December2012 date Commencement 1 August 2012 1 August
on 12 months’ months’ 12 on Terminable notice Expiry Expiry date
Termination payment salary Base Base
performance targets performance targets entitlements, and and entitlements, to determine any would be used used be would Remuneration Remuneration amount paid entitlements No specific No specific Annual Report andAccountsBetfair 2015 Group plcAnnualReport termination following following termination a change of control Compensation on No additional No additional provisions 60–61 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe GOVERNANCE DIRECTORS’ REMUNERATION REPORT: REMUNERATION POLICY REPORT CONTINUED
Chairman and other Non-Executive Directors All Non-Executive Directors’ services are provided for under the terms of a letter of appointment with the Group, and are subject to annual re-election with one month’s notice by either party (except for the Chairman with three months’ notice by either party). The appointment letters for the Chairman and Non-Executive Directors provide that no compensation is payable on termination, other than accrued fees and expenses. Details of the terms of the appointment of the current Non-Executive Directors are as follows:
Non-Executive Director Start of current term* Expiry of current term Ian Dyson 6 October 2013 5 October 2016 Gerald Corbett 3 January 2015 2 January 2018 Peter Jackson 24 April 2013 23 April 2016 Zillah Byng-Maddick 5 September 2013 4 September 2016 Leo Quinn 5 March 2014 4 March 2017 Peter Rigby 1 April 2014 31 March 2017
* Please see Non-Executive Directors’ profiles for total service on pages 34 and 35. Recruitment remuneration The base salary for a new appointment will be set taking into account the skills and experience of the individual, internal relativities and the market rate for the role as identified by any relevant benchmarking of companies of a comparable size and complexity. If it is considered appropriate to set the salary for a new Executive Director at a level which is below market (for example, to allow them to gain experience in the role) their salary may be increased to achieve the desired market positioning by way of a series of phased above inflation increases. Any increases will be subject to the individual’s continued development in the role. The remuneration package for a new Executive Director would be set in accordance with the limits contained in the Company’s approved remuneration policy at the time of appointment. The annual incentive plan will be operated, as set out above for current Executives, albeit with any payment pro-rata for the period of employment and with the flexibility to use different performance measures and targets, depending on the timing and nature of the appointment. Additionally in the case of any Executive Director being recruited overseas, or being recruited by the Company to relocate overseas to perform his duties, the Committee may offer expatriate benefits on an ongoing basis. The Committee may also approve the payment of one-off relocation-related expenses and legal fees incurred by the individual. In addition, the Committee may offer cash and/or share-based elements to compensate an individual for remuneration which would be forfeited on leaving a former employer, when it considers these to be in the best interests of the Company (and therefore shareholders). Such payments would take account of remuneration relinquished and would mirror (as far as possible) the delivery mechanism, time horizons and performance requirement attached to that remuneration. Where possible this will be facilitated through the Company’s existing share plans, but if not the Committee may use the provisions of 9.4.2 of the Listing Rules. In the case of an internal appointment, any variable pay element awarded in respect of the prior role will be allowed to pay out according to its original terms stipulated on grant or adjusted as considered desirable to reflect the new role. For the appointment of a new Chairman or Non-Executive Director, the fee arrangement would be set in accordance with the approved remuneration policy in force at that time. External directorships After the first anniversary of appointment, an Executive Director may take up an external Non-Executive Director position with the agreement of the Board. Fees paid for external appointments may be retained by the individual concerned. Consideration of employee views Whilst the Committee has not formally consulted directly with employees on matters of Executive pay, it does receive periodic updates from the HR Director on the overall remuneration structures and policies for all employees, and uses these as broad context when setting the policy for Executive Directors. Consideration of shareholder views The Committee maintains an open and transparent dialogue with shareholders and takes an active interest in voting outcomes. Feedback received from shareholders, at the AGM and any other meetings during the year, is considered by the Committee on a timely basis. Any material changes to the remuneration policy will be the subject of prior consultation with our major shareholders and institutional investor bodies as required. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe is independent. NBS that considers Committee The £145,399. were year the during advice Committee Remuneration to relation in fees total its and ofConduct Code Group’s signatory to the Remuneration Consulting afounder is NBS Company). the to services other any provide not does it (and plc Aon broker insurance Group’s of the subsidiary aseparate is NBS (NBS). Street Bridge New by year the during advised appointedThe Committee and has been relating to remuneration. their personal no individual is present for decisions although Director, HR Group the and CEO Chairman, the from advice and assistance received Committee The material Advice provided to the Committee 40. page on Report Governance these meetings is set out in the Corporate occasions. Each member’s attendance at six on met review under year the during year, each and twice least at meets Committee The 35. page on found be can members Committee ofthe Biographies Ian Dyson, Peter Jackson and Peter Rigby. are members other its and Quinn, Leo by The Remuneration is Committee chaired Code. the with compliance in Directors, comprises four independent Non-Executive currently Committee Remuneration The The Remuneration Committee stated. where audited been has 72 to 64 pages on information The AGM. 2015 the at vote shareholder advisory an to put be will Statement) Annual Chairman’s Remuneration (together Report with the Annual The Rules. Listing the and 2013 Regulations (Amendment) and Reports) sized Companies and Groups (Accounts Medium- and Large the with accordance in prepared been has report ofthe part This ANNUAL REPORT ON REMUNERATION ON REPORT ANNUAL DIRECTORS’ REMUNERATION REPORT: of the year.of the course the over Committee the by covered issues major the out sets table following The • • • • • • • • • • • • • • • • • • • • • • • KEY ACTIVITIES IN 2014/15 IN ACTIVITIES KEY ratification of share awards. ofshare ratification and leavers; and hires new for ofremuneration approval position; EBT and review dilution share implementation; and –policy 2015 Report Remuneration ofthe draft updated FY16; for proposal BETsave LTIP 2015 awards; and bonus annual FY16 the for targets and measures data; benchmarking remuneration team ofsenior review annual bonus forecast;FY15 LTIP 2012 adjustments; and LTIP awards outstanding for performance on update governance; on update and remuneration in trends ofmarket review ofreference; terms Committee’s ofthe review Meeting; General for circular and resolution ofdraft review LTIP; 2012 CEO’s to changes on consultation shareholder changes; legislative with line in rules plan share approved the to updates team; senior the to changes on update management review of annual Remuneration calendar; Committee 2014; Report Remuneration the approve and review levels; LTIP of2014 award approval LTIP; 2014 for targets performance and ofmeasures approval grants; award DSIP and –ACIP bonus annual ofFY14 determination review;annual salary outcome; LTIP of2011 vesting review bonus; annual FY15 for targets performance and ofmeasures Approval Annual Report andAccountsBetfair 2015 Group plcAnnualReport 62–63 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe GOVERNANCE DIRECTORS’ REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION CONTINUED
Single total figure of remuneration for each Director (audited) Annual bonus (value of ACIP Long-term Salary & fees Benefits1 and DSIP) incentives2 Pension3 Total FY15 FY14 FY15 FY14 FY15 FY14 FY15 FY14 FY15 FY14 FY15 FY14 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Executive Directors Breon Corcoran 528 515 3 3 953 681 10,064 – 79 77 11,627 1,276 Alex Gersh 400 400 4 3 706 529 2,190 – 40 40 3,340 972 Chairman Gerald Corbett 250 250 – – – – – – – – 250 250 Non-Executive Directors4 Ian Dyson 75 66 – – – – – – – – 75 66 Peter Jackson 50 50 – – – – – – – – 50 50 Zillah Byng-Maddick 50 33 – – – – – – – – 50 33 Peter Rigby 50 4 – – – – – – – – 50 4 Leo Quinn 60 9 – – – – – – – – 60 9 Mike McTighe5 – 64 – – – – – – – – – 64 Josh Hannah6 – 41 – – – – – – – – – 41 Fru Hazlitt5 – 46 – – – – – – – – – 46
1 Benefits include the value of life assurance, private medical care, income protection and critical illness cover. 2 The value for Breon Corcoran reflects the performance linked nominal cost options that were granted to him under 9.4.2(R) of the Listing Rules at the time of joining. The value ascribed to Alex Gersh is in respect of the LTIP award that was granted to him on 13 December 2012 under the LTIP. These awards are due to vest on 13 December 2015 and the values are based on the three-month average share price to 30 April 2015 of £20.128. 3 The pension for Breon Corcoran is the value of the cash paid to him in lieu of contributions and for Alex Gersh is the value of the contribution paid into the Company pension scheme. 4 Remuneration for Non-Executive Directors, other than the Chairman, comprised a basic annual fee of £50,000 for acting as Non-Executive Director of the Company and additional fees of £10,000 for holding the position of Senior Independent Director and £15,000 and £10,000 for chairing the Audit and Remuneration Committees respectively. 5 Mike McTighe and Fru Hazlitt retired from the Board on 31 March 2014. 6 Josh Hannah retired from the Board on 22 January 2014. Determination of FY15 annual bonus (audited) Annual bonuses were determined with reference to performance over the financial year ending 30 April 2015. The performance measures and targets are set out below: Breon Corcoran Alex Gersh Opportunity award level award level Element Weighting (% of salary) Threshold Target Maximum Actual (% of salary) (% of salary) Revenue 44.5% 80% £373.7m £415.2m £477.5m £476.5m 79.57% 79.57% EBITDA 44.5% 80% £77.7m £86.3m £99.2m £120.2m 80% 80% Personal 11% 20% See below 20% 17% Total 100% 180% 179.57% 176.57%
FY15 was an excellent year for Betfair with Revenue increasing by 21% and EBITDA increasing by 32%. The financial element of the FY15 bonus was based on a sliding scale of Group Revenue and Group EBITDA targets, each with a 44.5% weighting. As shown in the above table, the strong financial performance meant the Company exceeded the maximum target for EBITDA and the Revenue outcome was slightly below the maximum. The payout for these elements was therefore 157.57%. A more detailed description of the Company’s performance is included in the Financial Review on pages 18 to 21. With regard to the CEO, his personal objectives included, but were not limited to, growing business profitability, focusing on customer acquisition and developing a high performance culture. The CFO’s objectives included, but were not limited to, strengthening internal controls and financial processes, and focusing on our investors. Performance against the objectives is assessed by the Remuneration Committee at the end of the year (with input from the Chairman and CEO as appropriate). In light of performance against the objectives set, the Remuneration Committee determined that the CEO’s personal objectives were met in full and that the majority of the CFO’s objectives were met (17% out of 20% of salary awarded). WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe Executive below: out set as therefore is bonus resulting The Alex Gersh Alex Breon Corcoran the revised performance targets are similarly stretching to those which were originally set. originally were which those to stretching similarly are targets performance revised the that satisfied is Committee The adopted. been has award 2011 the to applied that to treatment asimilar Therefore assumptions. original the versus growth revenue on effect its and path strategic revised the LTIP 2012 reflect to the for ofperformance calculation the to adjustment an make to appropriate was it that was conclusion Committee’s the shareholders, leading with aconsultation Following Policy. Remuneration our in included was and years recent in report remuneration Company’s the in out set been has intention general This intended. originally that to equal is that one to ofstretch level the restore to seek would adjustment such any that and accordingly them adjust would it materially, alter to were targets these set it which on assumptions the if that, policy Committee’s the been always However, has it operates. Company the which in environment regulatory of the aview including factors all account into Company’s financial planning). Targets the into are set based on the Committee’s incorporated assessment was of change the Company’s long-term financial plan, strategic taking ofthis effect the after set were targets their since affected not are cycles (later LTIP cycles 2012 and 2011 the both in used were measures EPS and Revenue revenue. reduce to is effect the general, In set. were LTIP targets the time the at assumed were which those to EPS and revenue for paths growth different very implies strategy new ofBetfair’s pursuit The unregulated jurisdictions. in growth revenue and investment presence, continued assumed and cycles three-year over measures performance on based are and strategy revised the in change the to prior set were which LTIP to awards, attached measures performance the with issue an identified and plans incentive Company’s the on change strategic ofthis impact the to thought considerable gave Committee Remuneration The rewards. potential the outweighed ofrisk level view, the Board’s the in where, and riskier be to considered were which markets certain exit to adecision in resulted this and services and products Betfair’s for frameworks legal clear with markets regulated towards business the re-focusing on based was strategy revised The 2012. December in strategy arevised announced Board the business, ofthe review ofadetailed aresult as and recruitment CEO’s the Following toContext the adjustments adjustments. any making to prior undertaken was shareholders with dialogue extensive ensure to keen was year, Board the last ofshareholders minority asizeable by felt dissatisfaction ofthe Mindful report. year’s last in LTIP 2011 disclosed as the for taken approach the with line in LTIP 2012 awards the to attached targets financial the adjust to intentions its discussed also Committee The EPS and Revenue – adjusted and targets performance 2015. April 30 on ended Gersh Alex and Corcoran Breon to 2012 in granted awards the to applying metrics all for period performance The (50%). TSR relative and (25%) growth Revenue (25%), growth EPS to relating targets three-year to subject was this LTIP and the under Gersh Alex to granted was award an 2012, in Also 9 2015. January on held Meeting aGeneral at Agreement Option Share the from metric TSR ofthe removal the approved ofshareholders 99.83% consultation, shareholder extensive Following Company. the join to decided he time the at Corcoran Breon with reached understanding the honour to necessary and appropriate both was it believed Committee the Accordingly, ofnegotiation. time the at parties the between agreed originally was as measures Revenue and EPS only included have should criteria vesting the that light to came it grant, after Shortly Return. Total Shareholder relative and growth revenue growth, EPS conditions, performance three to subject was which 2012 1August on shares 500,000 over award an granted was Corcoran Breon recruitment, ofhis terms ofthe part As Long Term Incentive (audited) awards periods ending in with performance FY15 review. under year the during performance individuals’ and Group’s ofthe reflection afair is awarded bonus annual the that satisfied is Committee Total (% of of Total (% maximum, maximum, capped at capped at 99.8% 98.1% 100%) Annual Report andAccountsBetfair 2015 Group plcAnnualReport £’000 Total Total 706 953
Annual Cash Cash Annual Incentive Incentive £’000 635 Plan 471
Incentive Incentive Deferred Deferred £’000 Share Share 235 Plan Plan 318
64–65 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe GOVERNANCE DIRECTORS’ REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION CONTINUED
The Committee used its discretion to adjust the Revenue targets that were originally set to reflect: • the decision in November 2012 to exit from Greece due to unacceptable levels of legal risk and to withdraw the Exchange from Germany due to the introduction of a turnover tax; • the withdrawal of Betfair’s Exchange from Spain following new regulations introduced in June 2012; and • changes to the regulatory timetable regarding the introduction of exchanges in Italy. The Committee is satisfied that the adjustments are a result of external factors that were unforeseen, outside the control of management and result in targets that are no less or more challenging than the targets that were originally set. The original and revised targets for Core Revenue are set out below: • Original Target at Maximum: £498m. • Revised Target at Maximum: £393m. Based on FY15 Revenue of £476.5m, 100% of this element will vest. The 2015 EPS of 79.5 pence is higher than the original maximum target of 60.9 pence. The revised targets would have been lower and therefore irrespective of whether the original or revised targets are used, this results in 100% vesting for this element. The financial targets attached to LTIP cycles after 2012 were set based on the revised strategy announced in December 2012. Therefore, at this time, it is not expected that adjustments to the 2013 and 2014 awards, specifically in relation to the December 2012 change in strategy, are required. However, the Committee retains the flexibility in the remuneration policy to adjust targets attached to outstanding and future awards if an event occurs which means it is appropriate to do so. Relative Total Shareholder Return The TSR condition was based on Betfair’s total shareholder return performance against a group of eight other betting companies – Bwin, Ladbrokes, Playtech, Paddy Power, Rank Group, Unibet, William Hill and 888. Over the three-year period ending 30 April 2015, Betfair’s TSR of 185.86% was in the upper quartile of the Group. A summary of vesting is set out in the table below. Number of Number of EPS Overall awards due Vesting Value of Element Plan awards vesting Revenue TSR vesting to vest date awards* Breon Share Option 500,000 50% out of 50% out of – 100% 500,000 1 August £10,064,150 Corcoran Agreement 50% 50% 2015 Alex LTIP 108,788 25% out of 25% out of 50% out of 100% 108,788 13 December £2,189,718 Gersh 25% 25% 50% 2015
* Based on a share price of £20.128, being the three-month average share price to 30 April 2015. As disclosed in previous reports, the second tranche of restricted share awards which were granted to Breon Corcoran on recruitment vested on 1 August 2014 and the final tranche will vest on 1 August 2015. The value of these awards, which were not subject to any performance conditions were disclosed in line with the regulations in the 2013 prior year figure of last year’s single total figure of remuneration table. Awards granted during the year Deferred Share Incentive Plan (audited) On 27 June 2014 the Committee granted the following awards to Executive Directors in respect of the annual bonus for performance in FY14: Number Executive Type of award1 Basis of award of shares Face value2 Vesting Breon Corcoran Nominal value options ¹/₃ of bonus awarded 23,492 £227,050 50% released after 12 months; 50% after 24 months subject to continued employment only Alex Gersh Nominal value options ¹/₃ of bonus awarded 18,246 £176,348 50% released after 12 months; 50% after 24 months subject to continued employment only
1 Nominal value of a share at the date of grant was 0.1 pence and therefore the exercise price is 0.1 pence. 2 Valued using the share price at the date of grant (27 June 2014), being £9.665 per share. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe three-year performance period. Dividends shall accrue on vested awards. vested on accrue shall Dividends period. performance three-year ofthe end the at Committee the by reviewed be will targets performance These ofvesting. level proposed the reflect to performance financial underlying Company’s the consider not does it if targets performance above the on based result vesting the change to Committee Remuneration the enable will which apply also will underpin an above, detailed targets performance three the to addition In higher or £494m £494m £451m and Between £451m £451m than Less FY17 for Revenue Group Revenue. Group FY17 on Based Revenue condition (25% of award) above or index ofthe quartile upper the At index ofthe quartile upper and median Between ofindex median At ofindex median Below Relative TSR performance Relative TSR performance comparing constituents ranking against excluding 250 Betfair’s the Investment FTSE Trusts. award) of (25% condition TSR higher or pence 54.9 pence 54.9 and pence 50.2 Between pence 50.2 pence 50.2 than Less EPS FY17 FY17. in EPS on Based award) of (50% condition EPS 2017: April 30 ending period performance athree-year over measured conditions performance following the to subject are LTIP awards above The 2 1 Executive Directors: Executive to awards following the granted Committee the 2014 June 27 On Long Term Incentive Plan (audited) Alex Gersh Alex Breon Corcoran
Nominal value of a share at the date of grant was 0.1 pence and therefore the exercise price is 0.1 is pence. price exercise the therefore and 0.1 pence was grant of date the at ashare of value Nominal Valued using the share price at the date of grant 27 June 2014, being £9.665 per share. per £9.665 being 2014, June 27 grant of date the at price share the using Valued Type award of Nominal value options Nominal value options 1 Basis of award of Basis salary of 200% salary of 300% 159,855 of shares Number 82,772 100% basis) (on astraight-line 100% and 25% Between 25% Nil 100% basis) (on astraight-line 100% and 25% Between 25% Nil 100% basis) (on astraight-line 100% and 25% Between 25% Nil Shares vesting (as % of number relating to EPS performance condition) performance EPS to relating number %of (as vesting Shares condition) performance Revenue to relating number %of (as vesting Shares Shares vesting (as % of number relating to TSR performance condition)
£1,544,999 Face value £799,991 2 30 April 2017 April 30 2017 April 30 performance performance Annual Report andAccountsBetfair 2015 Group plcAnnualReport End of of End period Threshold Threshold vesting 25% 25% Relative TSR, Relative TSR, Relative Performance Performance Revenue Revenue measures EPS and EPS and EPS
66–67 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe GOVERNANCE DIRECTORS’ REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION CONTINUED
All-employee share plans (audited) The Company made the following grants under the SAYE scheme during the year: Number of Exercise Market price Exercisable Executive Date of grant options price at grant date from Expires on Breon Corcoran 7 November 2014 991 £9.0810 £12.5500 1 December 2017 31 May 2018 Alex Gersh 7 November 2014 1,982 £9.0810 £12.5500 1 December 2017 31 May 2018
The SAYE awards were awarded at a 20% discount to the offer price of £11.3513. Executive Directors – summary of outstanding share awards The interests of the Executive Directors in the Company’s share schemes are set out in the table below: Awards held at Granted Exercised Awards Market End of 1 May during during held at 30 Exercise price at performance Vesting Expires Executive Date of award 2014 the year the year April 2015 price grant date period date on Breon Corcoran Restricted Share 3rd tranche: Plan1 1 August 2012 233,334 – 116,667 116,667 £0 £7.68125 n/a 1 August 2015 31 July 2022 Share Option Agreement2 1 August 2012 500,000 – – 500,000 £0 £7.68125 30-Apr-15 1 August 2015 31 July 2022 Long Term Incentive Plan 23 July 2013 173,668 – – 173,668 £0.001 £8.89625 30-Apr-16 23 July 2016 22 July 2023 Long Term Incentive Plan 27 June 2014 – 159,855 – 159,855 £0.001 £9.66500 30-Apr-17 27 June 2017 27 June 2027 Deferred Share 50%: 5 July 2014 Incentive Plan 5 July 2013 17,832 – – 17,832 4 £0.001 £8.66380 n/a 50%: 5 July 2015 4 July 2023 Deferred Share 50%: 27 June 2015 Incentive Plan 27 June 2014 – 23,492 – 23,492 £0.001 £9.66500 n/a 50%: 27 June 2016 27 June 2027 4 October BETsave 2013 1,102 – 1,102 £8.1670 £9.87500 n/a 1 November 2016 30 April 2017 7 November BETsave 2014 – 991 – 991 £9.0810 £12.5500 n/a 1 December 2017 31 May 2018 TOTAL 925,936 184,338 116,667 993,607 Alex Gersh Long Term 13 December 12 December Incentive Plan3 2012 108,788 – – 108,788 £0 £7.3538 30-Apr-15 13 December 2015 2022 Long Term Incentive Plan 23 July 2013 89,925 – – 89,925 £0.001 £8.89625 30-Apr-16 23 July 2016 22 July 2023 Long Term Incentive Plan 27 June 2014 – 82,772 – 82,772 £0.001 £9.66500 30-Apr-17 27 June 2017 27 June 2027 Deferred Share 50%: 5 July 2014 Incentive Plan 5 July 2013 6,980 – – 6,9805 £0.001 £8.6638 n/a 50%: 5 July 2015 4 July 2023 Deferred Share 50%: 27 June 2015 Incentive Plan 27 June 2014 – 18,246 – 18,246 £0.001 £9.66500 n/a 50%: 27 June 2016 27 June 2027 7 November BETsave 2014 – 1,982 – 1,982 £9.0810 £12.5500 n/a 1 December 2017 31 May 2018 TOTAL 205,693 103,000 – 308,693
1 These awards were granted on joining Betfair under provision 9.4.2(R) in the Listing Rules and were issued in the form of conditional awards with no performance conditions attached. The awards vest in three equal tranches on each anniversary following the date of grant, 1 August 2012. The first tranche vested on 1 August 2013 when the share price was £9.209. The second tranche vested on 1 August 2014 when the share price was £10.279. 2 On joining, Breon Corcoran was granted performance-linked nominal cost options under provision 9.4.2(R) of the Listing Rules. 50% of the award is subject to an EPS target and 50% is subject to a Core Revenue Target, both measured over the three-year financial period ending 30 April 2015. The measures were met in full and the award will vest on 1 August 2015. 3 On joining, Alex Gersh was granted awards under the Long Term Incentive Plan. The performance conditions mirror the terms of the 2012 LTIP grant made to other selected Betfair employees earlier that year. Along with the EPS and Revenue metrics described above, a TSR metric also applied. The measures were met in full and the award will vest on 13 December 2015. 4 8,916 nominal cost options vested on 5 July 2014 together with 262 dividend shares accruing on those vesting shares. 5 3,490 nominal cost options vested on 5 July 2014 together with 102 dividend shares accruing on those vesting shares. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe Alex Gersh Alex Details of the Directors’ share interests as at 30 April 2015, or at date of cessation of directorship, are as follows: as are ofdirectorship, ofcessation date at or 2015, April 30 at as interests share Directors’ ofthe Details in interests sharesDirectors’ (audited) 3 2 1 2015. April 30 ending year financial the to 2014 April 30 ending year financial the from shareholders to distributions and Group ofthe employees the all to paid remuneration on Company the by expenditure in change the illustrates below table The pay on spend of importance Relative 3 2 1 CEO workforce. ofthe majority the comprising employees, Ireland and UK employed continuously for shown is information same The FY14. and FY15 between bonus annual and benefits salary, CEO’s the in change the shows below table The employees other to compared CEO of pay in change of Statement payments. ofoffice loss no were there and year the during left Directors Executive No (audited) office of loss for Payment Directors. past to year the during made were payments No Payment to (audited) past Directors report. ofthis date the and year financial ofthe end the between shares in interests Director’s in changes no were There 1 Corbett Gerald Breon Corcoran Overall expenditure onOverall expenditure pay Return ofcapital Return employees employed UK and Ireland Average for all continuously Dividend paid and proposed Executive Ian Dyson Ian Leo Quinn Peter Jackson Zillah Byng-Maddick Peter Rigby
There is an expectation for Executive Directors to build a holding equal to their salary over a five-year period. The percentage holding is based on beneficially held held beneficially on based is holding percentage £23.067. of The 2015 period. April 30 on price afive-year over share the using salary shares their to equal aholding build to Directors Executive for expectation an is There Average headcount during the period of 1,901 was higher than the prior year (FY14: 1,739), with increases across most areas of the business. the of areas most across increases with 1,739), (FY14: year prior the than higher was 1,901 of period the during headcount Average these. renewing of cost the to due £3,291 to £2,888 from increased benefits of value The provision. benefit in change no was There of this amounts to £23.0m. The full year dividend, excluding the return of capital to shareholders, represents 38% of profit after tax, in line with the Company’s Company’s the with line in tax, after profit of 38% represents respect in paid be shareholders, to to capital of dividend return the estimated policy.dividend The share. excluding per pence 25.0 of dividend, 2015 year full April The 30 ended £23.0m. year to the for amounts this of dividend final proposed the includes FY15 for dividend The 2015). April 30 to 2014 May (1 FY15 for employed continuously were who employees covers calculation The The UK and Ireland employee population covers the of majority the workforce and, in the view of the Committee, is the most appropriate comparator group. In January 2015 the Group returned £199.7m of cash to shareholders via a B share scheme. Please see Note 25 to the financial statements for further detail. further for statements financial the to 25 Note see Please scheme. aBshare via shareholders to cash of £199.7m returned Group the 2015 January In figure. indicative an is this therefore and report this signing of time the at concluded been not have FY15 for workforce the for Bonuses 1 2 3 Beneficially 226,041 17,500 owned 7,437 2,187 2,187 Annual bonus Benefits Salary Annual bonus Benefits Salary 869 – –
Share awards awards Share performance performance LTIP awards conditions 1 subject to to subject 833,523 Unvested 281,485 3 n/a n/a n/a n/a n/a n/a
Unvested Unvested restricted restricted 116,667 shares n/a n/a n/a n/a n/a n/a – Share awards subject to continued
DSIP awards unexercised unexercised Vested and employment only 3,592 9,178 n/a n/a n/a n/a n/a n/a DSIP awards Unvested 32,408 21,736 n/a n/a n/a n/a n/a n/a
SAYE awards Annual Report andAccountsBetfair 2015 Group plcAnnualReport Outstanding Outstanding 2,093 1,982 108.4 n/a n/a n/a n/a n/a n/a 199.7 32.5 FY15 £m
2 1 shareholding expectation expectation salary/fee) 100% 100% (% of of (% 103.1 20.9 FY14 n/a n/a n/a n/a n/a n/a % £m 1 –
shareholding Percentage Percentage +55.5% % actual % actual 39.9%
14.0% +5.1% 983% -0.7% change change 25.1% salary) 8.4% 2.5% (% of of (% 0% n/a n/a n/a n/a n/a n/a – 1
68–69 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe GOVERNANCE DIRECTORS’ REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION CONTINUED
Performance graph The graphs below show Betfair’s Total Shareholder Return (share price with dividend reinvested) against the FTSE 350 Index since listing (27 October 2010) and over the three-year period to 30 April 2015, assuming a nominal £100 investment in Betfair Group plc and the FTSE 350 Index at the start of the timeframe. The FTSE 350 Index has been chosen as an appropriate comparator as Betfair is a constituent of this index. The additional chart has been shown for consistency with the 3-year LTIP performance period.
Value Value £250 £400 £350 £200 £300 £150 £250 £100 £200 £150 £50 £100 £0 £50
Oct 2010 Apr 2011 Apr 2012 Apr 2013 Apr 2014 Apr 2015 Apr 2012 Apr 2013 Apr 2014 Apr 2015
Betfair FTSE 350 Source: Datastream (Thompson Reuters) Betfair FTSE 350 Source: Datastream (Thompson Reuters)
Change in CEO’s single total figure of remuneration Year ending 30 April FY15 FY14 FY13 FY12 FY11 Breon Corcoran – Stephen Morana – 3,7382 291 Breon Corcoran – Breon Corcoran – Stephen Morana– David Yu – David Yu – Single figure of remuneration1 (£’000) 11,627 1,276 215 518 1,6283 Annual bonus (vesting as % BC – 67% SM – 33% of maximum) 99.8% 73% SM – 31% DY – 21% DY – n/a LTIP vesting (vesting as % of maximum)4 100% n/a n/a n/a n/a
1 Breon Corcoran was appointed CEO on 1 August 2012. Stephen Morana was Interim CEO for the period between 1 January 2012 and 31 July 2012. David Yu held the position of CEO prior to 1 January 2012. Information is shown for the full financial years since listing. 2 This figure includes the face value of restricted share awards that were granted on Breon Corcoran’s recruitment. 3 David Yu’s single figure of remuneration includes a cash award on IPO and an award of restricted stock with a combined value of £1,103,405. 4 This is the current CEO’s first LTIP vesting and reflects the joining award he received and significant share price increase from grant (£7.68) to expected vesting (£20.13 based on the three month average share price to 30 April 2015).
Voting on the Remuneration Report at the AGM in 2014 At the 2014 AGM, a resolution was proposed for shareholders to approve the Directors’ Remuneration Policy and to approve the 2014 Annual Report on Remuneration. The following votes were received: Directors’ 2014 Annual Report Remuneration Policy on Remuneration Total number % of Total number % of of votes votes cast of votes votes cast Vote for 77,220,661 99.83% 51,173,565 68.10% Vote against 129,886 0.17% 23,975,304 31.90% Total 77,350,547 100% 75,148,869 100% Votes withheld 1 – 2,201,679 –
The Board was mindful of the sizeable minority of investors who voted against the Annual Report on Remuneration and that the dissatisfaction that caused this resulted principally from the way in which adjustments were made to the 2011 LTIP performance targets. In light of this, the Remuneration Committee Chairman consulted leading shareholders and shareholder bodies to set out the background and context to the decision taken, and the proposed approach to be taken for the 2012 LTIP including the rectification to Breon Corcoran’s performance measures. The resolution presented at the 9 January 2015 General Meeting to amend the performance condition attached to Breon Corcoran’s LTIP award received 99.83% support. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe The Chairman and Non-Executive Director fees remain unchanged from last year. Fees for FY16 are therefore as follows: as therefore are FY16 year. for last Fees from unchanged remain fees Director Non-Executive and Chairman The £350,000p.a. be to continue will COO as role his for salary His Board. the to appointment ofhis respect in remuneration additional any receive not COO. will He and Board ofthe amember both as role, adual perform will and 2015 1June on Board the to promoted was Mark subsidiary). Group owned (a wholly Limited Processing Data TSE by employed is and business regulated Group’s ofthe COO the currently is Brooker Mark commercially sensitive. commercially longer no are measures the that determines Committee the that extent the to Remuneration, on Report Annual year’s next in measures performance ofcertain disclosure retrospective provide to intends Committee The sensitive. commercially considers Committee the which items include year, these as forthcoming the for targets performance the advance, in disclose, to not chosen has Committee The Total Personal EBITDA Revenue Element Fees fees FY16 Executive table below: the in out set are review salary ofthe results The salaries. CFO’s and CEO’s the increase to not decided Committee the FY16, For 2016 April 30 to year for policy remuneration of Implementation Alex Gersh Alex Breon Corcoran The performance measures for the FY16 annual bonus are as follows: as are bonus annual FY16 the for measures performance The taking. risk excessive encourage not do but strategy business overall the to aligned appropriately remain they ensure to basis annual an on targets and measures performance the reviews Committee The of grant. date ofthe years two within misconduct or miscalculation ofmisstatement, reasons for awards DSIP on apply will provisions Clawback shares. DSIP vested any on paid be may Dividends employment. continued to subject ofgrant, date the from years two after 50% and year one after 50% vest will shares deferred Any (DSIP). shares Group into deferred one-third remaining the and (ACIP) cash in payable bonus ofany two-thirds with ofsalary, 180% as remain will bonus maximum The 2015. April 30 ended year the to manner similar abroadly in operate will bonus annual The Annual bonus – Annual Cash Incentive Plan and Deferred Share Incentive Plan respectively. COO and CFO the for ofsalary 10% and CEO the of15% for value the to lieu in supplement cash or contribution adefined to entitled are Directors Executive Pension liabilities. tax personal associated any with together Company the by reimbursed be will expenses these expenses, taxable as classified are travel as such activities business-related out carrying in duties of aDirector’s performance the to relating expenses any that To extent the UK. the in employed was he if than perspective oftax anet from off worse no is he ensure to differences tax personal for and movements exchange foreign GBP/EUR for adjusted is income his employee, Irish an as addition, In Ireland. in based is he while instalments monthly in paid of£50,000p.a. allowance expatriate an receives COO the policy, remuneration the with cover. illness line In critical and protection income care, medical private insurance, life including benefits selected receive to eligible be will Executives Benefits £250,000 Chairman Non-Executive £50,000 Basic fee Basic Director
Independent Annual Report andAccountsBetfair 2015 Group plcAnnualReport £10,000 £400,000 Salary FY16 Salary Director £530,450 Senior
Committee £400,000 Salary FY15 Salary £15,000 £530,450 Chairman Weighting 44.5% 44.5% Audit 100% 11%
Remuneration Committee Percentage Percentage % of salary % of £10,000 Chairman change 180% 80% 80% 20% 0% 0%
70–71 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe GOVERNANCE DIRECTORS’ REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION CONTINUED
Long Term Incentive Plan The Committee intends to make an annual award of nil-cost options under the LTIP at 300% of salary for the CEO and 200% of salary for the CFO and COO during FY16. Vested awards will be eligible to receive dividend equivalents and awards will be subject to clawback provisions for reasons of misstatement, miscalculation or misconduct within two years of vesting. The Committee has reviewed the performance measures and targets for the prospective award and determined that no changes are required to the balance of metrics used for the 2014 award. Therefore, the performance conditions for the 2015 award will be as follows: EPS condition (50% of award) EPS for FY181 Shares vesting (as % of number relating to EPS performance condition) Less than 94.4 pence Nil 94.4 pence 25% Between 94.4 pence and 111 pence Between 25% and 100% (on a straight-line basis) 111 pence or higher 100%
1 New point of consumption gaming taxes were introduced in the UK in December 2014. If these taxes had been applicable for the whole of FY15, Betfair would have incurred additional costs of £28m, significantly reducing EPS. Taking this into account, vesting at 100% would require a 26% CAGR in EPS over the measurement period. TSR condition (25% of award) Relative TSR performance comparing Betfair’s ranking against the FTSE 250 constituents excluding Investment Trusts:
Relative TSR performance Shares vesting (as % of number relating to relative TSR performance condition) Below median of index Nil At median of index 25% Between median and upper quartile of the index Between 25% and 100% (on a straight-line basis) At the upper quartile of the index or above 100%
Group Revenue target (25% of award) Group Revenue for FY18 Shares vesting (as % of number relating to Group Revenue performance condition) Less than £580m Nil £580m 25% Between £580m and £628m Between 25% and 100% (on a straight-line basis) £628m or higher 100%
In addition to the three performance targets detailed above, an underpin will also apply which will enable the Remuneration Committee to change the vesting result based on the above performance targets if it does not consider the Company’s underlying financial performance to reflect the proposed level of vesting. These performance targets will be reviewed by the Committee at the end of the three-year performance period. SAYE Executives will be eligible to participate on the same terms as all other UK employees if an invitation to enter a savings contract is offered during the year.
Approved by the Board of Directors and signed on its behalf by:
Leo Quinn Chairman of the Remuneration Committee 17 June 2015 WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe place in respect of the shares held in the Company’s employee benefit trust as at the record date (2014: 597,171). (2014: date record the at as trust benefit employee Company’s the in held shares ofthe respect in place in is waiver Adividend 2015. September 11 on register the on shareholders all to 2015 9October on paid be will This 2015. April 30 ended year ofthe respect in paid be will share per 14.0 pence) (2014: pence of25.0 dividend afinal that declared has Company The the interim dividend. for trust benefit employee Company’s the in held shares 770,238) (2014: of672,682 respect in place in was Awaiver 2015. January 16 on paid was which share per 6.0 pence) (2014: of9.0 2014 pence 4December on dividend interim an declared Company The Dividends statements. financial the in disclosed are and basis length arm’s an on out carried are persons connected their or Directors involving transactions party related any that ensure to place in are controls Internal transactions Related party Report. Responsibility Corporate the in 30 page on found be can information Further people. its and Betfair concerning news other has an intranet and various internal communication channels for informing Group employees The about financial results, business process. development and engagement employee ofthe part important an as communications continuous and open in believes Group The Group continues and that appropriate training is provided. the within employment their that ensure to made is effort every disabled, becoming ofemployees event the In employees. other as opportunities promotion and development career training, same the with persons such provide to and persons, ofdisabled recruitment the to consideration fair and full give to policy Group also is It obligations. legal its meets it ensure to policies has and of discrimination forms all opposes and employees all for opportunity ofequal principle the supports fully Group The Resources. ofHuman remit the for and ensuring adherence responsibility implementing to formulating, The and policies relevant employment legislation falls under Employees year. financial this for apply not does such as and 2014 1October after or on commencing periods accounting Financial Council Reporting in 2012. The Financial Council Reporting issued the Corporate Governance Code 2014 to apply to the by issued as Code Governance Corporate the 7and DTR with accordance in made is Statement Governance Corporate The Corporate Governance Statement Directors. its and ofitself in respect remains in force. The Company also purchased, year, and maintained and throughout the financial financial year, last the insurance Liability Directors’ and Officers’ throughout force in was indemnity The 2006. Act Companies ofthe 234 section by defined as indemnity provision party third aqualifying is which indemnity ofan benefit the have Directors the ofAssociation Articles the by permitted As indemnity Directors’ AGM. 2015 the at articles existing the to made be to proposed are amendments No 2015. 9January on ofshareholders meeting ageneral at resolution special by amended were ofAssociation Articles The of Association Articles statements. financial these with enclosed is which of Meeting Notice the in found be can details Further (AGM). Meeting General Annual the at Directors as re-election for stand Directors ofthe All 39. page on Statement Governance Corporate the in full in detailed are year ofthe end the since changes any and composition Board the 2015, April 30 at as Directors ofthe Details Directors 76. page on appears Responsibilities ofDirectors’ Statement The strategy. and model business performance, Group’s the assess to shareholders for necessary information the provides and understandable and fair, is balanced awhole, as taken Report, Annual the that consider Directors The Report. Annual ofthe respect in responsibilities ofthe aware are Directors The Annual and Report Accounts • • • • • report: ofthis part form also following The reference. by Report Directors’ this into incorporated are ofwhich all Report, Remuneration Directors’ the and Report Responsibility Corporate Report, Strategic the Report: Annual ofthis sections other the with conjunction in read be should Report Directors’ The 2015. April 30 ended year The Directors present their and Report the audited consolidated financial statements of the Company and its subsidi DIRECTORS’ REPORT other information required to be included by reference, pursuant to LR 9.8.4R LR to pursuant reference, by included be to required information other and statements; financial the to notes the in out set as transactions party related statements; financial the to notes the in provided as instruments, financial to relating information 47; to 36 pages on out set governance corporate on reports the 33; page on out set emissions, gas greenhouse Annual Report andAccountsBetfair 2015 Group plcAnnualReport 72–73 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe GOVERNANCE DIRECTORS’ REPORT CONTINUED
Share capital At the start of the financial year, the Company had a single class of ordinary shares in issue, with a nominal value of £0.001 per share. During the year, at a General Meeting held on 9 January 2015, members voted in favour of the Company’s proposals to return £1.89 per ordinary share to shareholders by way of a B share scheme followed by a seven for eight share consolidation. This share capital reorganisation was effective and the shares were admitted to trading on the London Stock Exchange from 12 January 2015. Full details of the B share scheme and share capital consolidation were set out in a circular to shareholders dated 9 December 2014 which is available on the Company’s website at corporate.betfair.com. As at 30 April 2015 and the date of this report, the Company has a single class of shares in issue divided into ordinary shares of £0.00095 each. As at 30 April 2015 the Company’s issued share capital was 92,603,251. The ordinary shares carry the right to the profits of the Company available for distribution and to the return of capital on a winding up of the Company. The ordinary shares carry the right to attend and speak at general meetings of the Company; each share holds the right to one vote. At 30 April 2015 there were no shares held in treasury and the Company’s employee benefit trust held 429,471 shares. Authority to purchase shares The Company currently has the authority to purchase a maximum of 10,503,988 of its own shares. No purchases were made during the year. This authority will expire at the close of the 2015 AGM. Major shareholdings As at 30 April 2015, the Company had been notified, in accordance with DTR Rule 5 of the UK Listing Authority, of the following major shareholdings in the ordinary share capital of the Company: Number Percentage of shares of issued held shares Mr Edward Wray 8,825,545 9.53 Le Peigne SA 8,548,551 9.23 AXA Framlington Investment Managers 6,960,412 7.52 MFS Investment Management 6,728,308 7.27 Marathon Asset Management 4,451,427 4.81 Kames Capital 4,101,673 4.43 BlackRock 3,280,841 3.54
The Company has not been notified of any changes to the above shareholdings between 30 April 2015 and the date of this report. In addition to the above, the Company was notified on 18 February 2015 of a derivative position of 5.70% held by Parvus Asset Management via equity swap. Parvus has no voting rights over the shares and no option to acquire the shares or the voting rights attributable to them. At the date of this report, this shareholding was 5.62%. The Company has not been notified of any changes to this shareholding between 31 May 2015 and the date of this report. Share transfer restrictions There are no restrictions on the transfer of shares in the Company. Annual General Meeting The Notice convening the AGM to be held on 9 September 2015 is contained in a circular sent out to shareholders with this Report. The Notice of Meeting contains full details of the resolutions that will be put to shareholders. Political donations At the 2014 AGM, shareholders passed a resolution to authorise the Group to make political donations and/or incur political expenditure (as such terms are defined in sections 362 to 379 of the Companies Act 2006), in each case in amounts not exceeding £50,000 in aggregate. As the authority granted will expire on 9 September 2015, renewal of this authority will be sought at this year’s AGM. Further details are available in the Notice of AGM. The definitions of political donations and political expenditure used in the Companies Act 2006 are broad in nature and this authority is sought to ensure that any activities undertaken by the entities within the Group, which could otherwise be construed to fall within these provisions, can be undertaken without inadvertently infringing them. During the year and the previous year, the Group made no EU political donations. In accordance with applicable US state and federal laws, the Group has made £21,905 (2014: £28,165) of contributions to support candidates for nomination and/or election to public office. The Group has fully complied with jurisdictional reporting of these contributions and such contributions in the US are accepted normal business practice. Betfair is committed to working with governments in the EU, US and other jurisdictions in which it operates. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe Registered number 6489716 United Kingdom 9HP W6 London Road) Winslow on (access Road Chancellors Waterfront, Hammersmith Embankment plc Group Betfair office Registered 2015 June 17 Director Gersh Alexander Board ofthe order By shares ofown 9.8.6R(4)(a) Purchase LR schemes incentive oflong-term Details 9.8.3R LR LR 9.8.6R(2) Major interests shareholders’ LR 9.8.6R(1) interests Directors’ RuleListing (LR) Requirement Report: Directors’ the within reference by included is information following the 9.8.4R, LR with ofcompliance purposes the For required to information beOther included by reference • • that: confirms Report Directors’ ofthe ofapproval date the at office held who Directors ofthe Each Disclosure to of information auditors Company’s auditor will be proposed at the AGM. forthcoming the as LLP KPMG reappoint to Aresolution Company. ofthe auditor as reappointed be to willingness their expressed have LLP KPMG Auditors ofcredit. lines committed no has Group The days. 90 least ofat aperiod for expenses operational expected meet to demand on cash sufficient has it that ensure to projections flow cash regular performs Group The risks. counterparty mitigate to investments and banks rated highly several across reserves cash its spreads also Group The reputation. Group’s the to damage risking or losses unacceptable incurring without conditions, stressed and normal both under due, when liabilities its meet to liquidity sufficient have always will it that possible, as far as ensure, to is liquidity managing to approach Group’s The due. fall they as obligations financial its meet to able be not will Group the that risk the is risk Liquidity Funding and risk liquidity concern basis statements. in the financial preparing going the adopt to continue they reason, this For report. this ofsigning date the from months 12 least ofat aperiod for status concern going the considered Directors the assessment, this making In future. foreseeable the for existence operational in continue to resources adequate have Group the and Company the that expectation areasonable have Directors the enquiries, appropriate making After statements. financial the 1to note in discussed are Group ofthe liabilities and ofassets values affecting carrying the estimates accounting Critical Report. Strategic ofthe section Uncertainties and Risks Principal the in described are risks these mitigate to taken steps the and Group, the affecting uncertainties and risks Principal Report. Strategic the in described are position, financial ofits adescription with together development, future its affect to likely factors those and Group ofthe activities current The Going concern, responsibilities and disclosure reconstruction. or ofatakeover event the in apply which provisions include plans share Company’s ofthe ofcertain rules The Company. ofthe control in of achange event the in rights other or termination exercise to parties other entitling provisions contain which agreements significant no are There Significant – agreements change of control provisions businesses. Group’s ofthe position or performance development, ofthe understanding an for necessary considered not is parties third ofthose any about ofinformation Report this in disclosure context, that In activities. business ofits support in parties third numerous with arrangements contractual has Group The arrangements Contractual to establish that the Company’s auditors are aware of that information. ofthat aware are auditors Company’s the that establish to and information audit relevant ofany aware them make to aDirector as taken have to ought they that steps all taken have they that and unaware; are auditors Company’s the ofwhich information audit relevant no is there aware, are they as far so
Directors’ Report, page 74 page Report, Directors’ pages 53–72 Directors’ Remuneration Report, 74 page Report, Directors’ pages 53–72 Directors’ Remuneration Report, Location within Annual Report Location within Annual Report Annual Report andAccountsBetfair 2015 Group plcAnnualReport 74–75 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe GOVERNANCE STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS The Directors are responsible for preparing the Annual Report and the Group and Parent financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and Parent financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) and applicable law, and have elected to prepare the Parent Company financial statements in accordance with UK accounting standards and applicable law (UK Generally Accepted Accounting Practice). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of their profit or loss for that period. In preparing each of the Group and Parent financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgments and estimates that are reasonable and prudent; • for the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU; • for the Parent Company financial statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Parent Company financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Parent Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors’ Report, Directors’ Remuneration Report and Corporate Governance Statement that complies with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Responsibility statement of the Directors in respect of the Annual Report Each of the Directors, whose names and functions are listed on page 39 of this Annual Report, confirm that, to the best of each person’s knowledge and belief: • the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; • the management report, which comprises the Strategic Report and the Directors’ Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and • the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy. By order of the Board of Betfair Group plc
Alexander Gersh Director Compliance statement This review has been prepared in accordance with section 417 of the Companies Act 2006. The review’s intent is to provide information to shareholders and stakeholders. It should not be relied upon by any other party or for any other purpose. Where this review contains forward-looking statements, these are made in good faith based on the information available at the time of this report. These statements should be treated with caution due to the inherent uncertainties underlying any such forward- looking information. Other information Additional financial and non-financial information, including press releases, can be accessed on our website, corporate.betfair.com. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe CORPORATE INFORMATION STATEMENTS AND FINANCIAL Investor Relations Shareholder Information Five-year Summary Financial Statements Notes to theCompany Company Balance Sheet Notes to theFinancial Statements of Cash Flow Cash of Consolidated Statement Equityof Changes in Consolidated Statement Consolidated Balance Sheet Comprehensive Income Consolidated Statementof Consolidated Income Statement Independent Auditor’s Report CONTENTS Annual Report andAccountsBetfair 2015 Group plcAnnualReport
123 122 121 119 118 86 85 84 83 82 81 78
76-77 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BETFAIR GROUP PLC ONLY
Opinions and conclusions arising from our audit 1 Our opinion on the financial statements is unmodified We have audited the financial statements of Betfair Group plc for the year ended 30 April 2015 set out on pages 81 to 121. In our opinion: • the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 30 April 2015 and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union; • the Parent Company financial statements have been properly prepared in accordance with UK Accounting Standards; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006; and, as regards the Group financial statements, Article 4 of the IAS Regulation. 2 Our assessment of risks of material misstatement In arriving at our audit opinion above on the financial statements the risks of material misstatement that had the greatest effect on our audit were as follows: Revenue recognition (£476.5m) Refer to page 45 (Audit Committee Report), page 92 (Accounting policies) and pages 95, 96 and 106 (financial disclosures). • The risk – The recognition of commission revenues or revenues from winning and losing bets may be misstated. The appropriate recognition of revenue is dependent on IT systems correctly calculating commission revenues and appropriate wins and losses and customer funds and core finance processes and controls accurately reporting on and reconciling these transactions. Revenue streams for the vast majority of the Group’s products are computed on highly complex IT systems, with a number of different bases for calculating revenue. There are in excess of one billion transactions each year, all requiring a correct IT outcome. There is a risk that a system may not be configured correctly from the outset such that commissions or winning and losing bets are calculated incorrectly, that the systems do not interface correctly from the customer facing systems through to the financial information systems and that unauthorised changes may be made to any of these systems, which may result in the misstatement of revenue. The calculation of revenue from the IT systems links directly to the reconciliation of funds between customer and corporate accounts and as such customer funds must be appropriately managed and safeguarded. There is a risk that commissions or winning and losing bets are not calculated correctly and consequently a risk that the revenue to be transferred from the customer accounts in the ring-fenced trust to Betfair corporate accounts could be misstated. • Our response – Our audit procedures included, among others, the use of IT audit experts throughout the audit process. We critically assessed the design and operating effectiveness of IT controls and tested that the systems are configured appropriately. We traced bets placed on live betting environments from the customer facing systems to the data centre and then from the data warehouse to the financial information systems to ensure that information is passed appropriately from one system to another. We tested controls over the capture of initial bets, their allocation between different products and their processing through the system to recognition in revenue or in the appropriate customer account. We also tested the configuration of the system which monitors the information transfer between key IT systems and evaluated whether it was operating effectively. Data on a sample of different types of bets placed by customers in different markets was extracted from the systems. Commission rate calculations were re-performed to assess the completeness and accuracy of commissions and revenues from winning bets. We tested controls related to access to programs and data, program change and development and computer operations by evaluating account set-up and termination for users, password restrictions, access reviews, users with super-user access, program change and development process controls and integration monitoring, and tested whether any unauthorised changes had been made to the system. The overall IT environment was critically assessed, including security policies and procedures, IT organisational structure, strategy and reporting, disaster recovery and back-up testing. We tested processes and controls over customer account set-up and cash deposits and withdrawals from customer accounts. We verified customer bank balances to third-party information and tested the reconciliation of these bank balances to Betfair customers’ betting accounts. We have also considered the adequacy of the Group’s disclosures in respect of revenue recognition. Valuation of tax liabilities Refer to page 45 (Audit Committee Report), pages 93 and 94 (Accounting policies) and pages 106 and 117 (financial disclosures). • The risk – The online gaming regulatory environment is complex and constantly changing. Some markets are highly regulated, while in other markets, online gaming regulation is not yet formed or is unclear. Betfair organises its operations in different jurisdictions in a way which requires the Directors to exercise a level of judgment surrounding the interpretation of international tax laws and the way in which they interact within each jurisdiction. This may result in significant provisions or contingent liabilities for gaming and other indirect taxes in countries where the tax and/or other regulations are not yet formed or are unclear, the volatility of which could have a significant impact on the financial statements, particularly if there is a retrospective element applied to taxes. Where tax regulations are formalised in certain jurisdictions, Betfair must adhere to the operating guidelines within these jurisdictions, such that taxes do not
become payable elsewhere, which would result in current tax provisions being understated. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe reported backto theGroupreported auditteam. engagements (which included therelevant risks materialmisstatementdetailed of above) and set outtheinformation required to be wereDetailed instructions sentto component auditors, whichcovered thesignificantareas thatshouldbecovered by theaudit between £0.1 million and£3.0 million,having regard to size themixof andriskprofile theGroup of across thecomponents. levelsmateriality setby, or agreed with,theGroup auditteam. levelsThese materiality were setindividuallyfor each component, ranging forThe auditsundertaken components Group theGroup purposesat thereporting of reporting inMaltawere to allperformed group level to re-examine ourassessmentthat there were nosignificantrisks materialmisstatementwithinthese. of For theremaining components (Betfair US, Portugal, Spain, Italy, Romania andHongKong) we performed analysis atan aggregated and 96% theGroup of netassetandliabilities. UK. These Group procedures covered 87% Group of revenue, 93% thetotal of profits andlossesthatmadeupGroup profit before tax performed theauditover Betfair Group, includingcomponents intheUK,Ireland andGibraltar, andconsolidation adjustmentsinthe type threeThe auditsof components for Group purposeswere reporting performedby component auditors inMalta. The Group auditteam fulfilling itsgovernance responsibilities. corrected by managementidentified duringthe course the auditshouldbecommunicated of to theAudit Committee to assistitin other auditmisstatementswe believed warranted onqualitative grounds. reporting Inadditionwe considered whetherany misstatements We to theAudit report Committee any uncorrected misstatementswe identified through ourauditexceeding £175,000; inadditionto Group profit before whichitrepresents tax(of 3.5%). forThe materiality theGroup financialstatementsasawholewas setat£3.5 million,determined withreference to abenchmarkof thescope of ouraudit of and anoverview materiality 3 Ourapplicationof • • Refer to page45 (Audit Committee pages87, Report), 89and90(Accounting policies) andpages101 and116(financialdisclosures). Acquisition Accounting We alsoconsidered theadequacy thedisclosures of taxpositions. inrespect taxanduncertain of • controlled foreign companies. In additionto gamingtaxes, theDirectors mustmake judgmentsinrelation to internationalincome taxlaws includingtransfer pricingand with thoserequired by therelevant accounting standards. We alsoassessed whethertheGroup’s disclosures regarding theacquisitionandestimation required are appropriate andcomply assessment we hadregard to theperformance theexisting of TVG business, andhistorical accuracy theDirectors’ of forecasts. future trading forecasts thecombined of TVG andHRTV operations, growth rates andthe discount rate applied.this Inperforming We criticallychallenged thekeyevaluated assumptionswithin,andinparticular thereasonableness assumptionsunderlyingthe of which was thebasisfor thefair thedeterminationof value theintangibleassetsused of inthebusinesscombination accounting. Using ourown valuation specialiststo theextent necessary, theGroup’s we inspected valuation analysis prepared by theDirectors, control.assessment of taken to account for theassets acquired asabusinesscombination, theagreements andinspected for the termsthatmay impact transaction through purchase of inspection agreements, Board minutes anddiscussionswiththeDirectors. We challenged thejudgment Our response: Inthisarea ourauditprocedures included, amongstothers, thekey understanding termsandrationale for the total $49.8 millionnetassetsacquired. applied initsvaluation. The fair value theserightsused of inthebusinesscombination accounting amountto $48.3 the millionoutof the underlyingassumptionsaround forecast future cashflows over theseven year theagreements, initialtermof andthediscount rate business combination, theamountderived inarrivingatthefair value thebroadcasting of andwagering rightsacquired issensitive to between the feasible accounting treatments have hadamaterialeffect ontheGroup’s financialstatements. Inaccounting for the purchase hadbeen adopted, aswell asadiffering accounting treatment inrelation to transaction costs. Inaggregate, thedifferences contingentof consideration, andtherecognition alarger of amountfor thanifanalternative accounting goodwill treatment asanasset combination for accounting purposes. Inparticular, thisjudgmentresults intherecognition alarger of balance inrespect sheet liability but external to theHRTV legalentity, form anintegrated andassetstherefore activities setof are thebusiness of treated aspart The Directors have exercised judgmentindeterminingthatthebroadcasting andwagering thetransaction, of rightsacquired aspart arrangements entered into thatare required to beaccounted for separately to theacquisitions. theagreementsThe termsof require judgmentto beexercised by theDirectors inassessingcontrol, any contractual andinidentifying dependentonfuture trading. which isinpart deferred$25.6 millionandanestimated further andcontingent consideration totalling $30.9 millionpayable over aseven year period, broadcasting andwagering racecourses rightsto certain for anaggregate purchase consideration consisting of: aninitialpayment of The risk:Duringthecurrent financialyear theGroup hasacquired theHRTV horseracing broadcasting network alongwithlong-term KPMG taxspecialiststo testgamingtaxes, indirect taxes andincome taxes. to taxation. We examined correspondence withregulators duringtheyear andevaluated theGroup’s taxation position,working with We used KPMG’s theregulatory of widerunderstanding markets to challengetheDirectors andcriticallyassessed theGroup’s exposure to andcriticallyassesstheprocedures understand thattheGroup hasinplace to comply withregulations indifferent jurisdictions. Our response –Ourauditprocedures included, amongothers, challengingtheDirectors andtheGroup’s inorder in-houselawyers Annual Report andAccountsBetfair 2015 Group plcAnnualReport 78-79 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BETFAIR GROUP PLC ONLY CONTINUED
The Group audit team visited Malta, including to assess the audit risk and strategy, and telephone meetings were also held with the component auditors throughout the year. At these visits and meetings, the Group audit team also discussed the findings reported in more detail and assessed the adequacy of the work performed by the component auditors. 4 Our opinion on other matters prescribed by the Companies Act 2006 is unmodified In our opinion: • the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and • the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. 5 We have nothing to report in respect of the matters on which we are required to report by exception Under ISAs (UK and Ireland) we are required to report to you if, based on the knowledge we acquired during our audit, we have identified other information in the annual report that contains a material inconsistency with either that knowledge or the financial statements, a material misstatement of fact, or that is otherwise misleading. In particular, we are required to report to you if: • we have identified material inconsistencies between the knowledge we acquired during our audit and the Directors’ statement that they consider that the Annual Report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s performance, business model and strategy; or • the Report of the Audit Committee on pages 43 to 52 does not appropriately address matters communicated by us to the Audit Committee. Under the Companies Act 2006 we are required to report to you if, in our opinion: • adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or • the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or • certain disclosures of Directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Under the Listing Rules we are required to review: • the Directors’ statement, set out on page 75, in relation to going concern; and • the part of the Corporate Governance Statement on page 36 in the Annual Report and Accounts relating to the Company’s compliance with the ten provisions of the 2012 UK Corporate Governance Code specified for our review. We have nothing to report in respect of the above responsibilities. Scope of report and responsibilities As explained more fully in the Directors’ Responsibilities Statement set out on page 76, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate. This report is made solely to the Company’s members as a body and is subject to important explanations and disclaimers regarding our responsibilities, published on our website at www.kpmg.com/uk/auditscopeukco2014a, which are incorporated into this report as if set out in full and should be read to provide an understanding of the purpose of this report, the work we have undertaken and the basis of our opinions.
Michael Harper (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 15 Canada Square London, E14 5GL 17 June 2015 WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe * FOR THE YEAR ENDED 30 APRIL 2015 30 APRIL ENDED YEAR THE FOR CONSOLIDATED INCOME STATEMENT INCOME CONSOLIDATED Finance income Non-controlling interest Equity theCompany of holders Attributable to: forProfit theyear Tax beforeProfit tax Share profit/(loss) of accounted equity of investments Profit ondisposal jointventure of Net finance income Finance expense Diluted Basic Earnings per share forProfit theyear Group operating profit Administrative expenses Gross profit Cost sales of Revenue Continuing operations Depreciation andamortisation Group operating profit EBITDA* Analysed as: investments andisconsidered by theDirectors to beakey measure itsfinancialperformance. of EBITDA isdefined asprofit for theyear before netfinance income, Itexcludes depreciation tax, amounts inrespect andamortisation. theGroup’s of accounted equity Annual Report andAccountsBetfair 2015 Group plcAnnualReport 8, 9 8, Note 10 10 10 6 5 5 2 2 7 7 (291.6) 85.9p 385.9 476.5 (90.6) 83.7p 120.2 (25.9) (14.8) 101.2 86.4 86.4 86.4 94.3 94.3 (0.7) 2015 6.4 0.4 0.1 £m 1.1 –
49.0p 393.6 (281.1) 342.7 48.1p (50.9) (29.5) (10.1) 61.6 61.6 51.0 51.0 51.0 (0.4) 91.1 2014 61.1 (1.2) 0.7 £m 1.1 – –
80-81 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 APRIL 2015
2015 2014 £m £m Profit for the year 86.4 51.0 Other comprehensive income/(expense) Items that will be reclassified to profit or loss:
Foreign exchange differences arising on consolidation 1.4 (4.0) Reclassification to profit or loss 0.1 – Other comprehensive income/(expense) for the year, net of income tax 1.5 (4.0) Total comprehensive income for the year 87.9 47.0
Attributable to: Equity holders of the Company 87.9 47.0 Non-controlling interest – – Total comprehensive income for the year 87.9 47.0 WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe Non-controlling interest theCompany of holders attributableto equity Equity Breon Corcoran These financialstatementswere approved by theBoard Directors of on17June2015 andwere signed onitsbehalfby: Total equity Retained earnings Chief Executive Officer Other reserves Share premium Share capital Equity Net assets Total liabilities Provisions Trade andotherpayables liabilities Non-current Provisions Tax payable Trade andotherpayables Current liabilities Liabilities Total assets andcashequivalentsCash Trade andotherreceivables Current assets Deferred taxassets Available-for-sale financialassets Investments andotherintangibleassets Goodwill Property, plantandequipment assets Non-current Assets AS AT 30 APRIL 2015AT AS 30APRIL CONSOLIDATED BALANCE SHEET BALANCE CONSOLIDATED Alexander Gersh Chief Financial Officer Annual Report andAccountsBetfair 2015 Group plcAnnualReport Note 10 10 16 16 14 13 15 15 12 17 11 8 9 232.0 128.4 182.6 103.6 162.7 128.1 105.1 49.4 49.4 49.4 53.0 83.2 29.5 14.8 23.3 (9.0) 19.5 2015 0.4 4.2 5.3 1.3 0.1 0.1 0.1 5.1 £m –
209.8 309.5 232.8 160.8 137.4 171.4 171.4 171.4 138.1 111.8 (11.4) 24.4 49.3 23.0 21.9 76.7 16.7 2014 3.9 5.5 0.7 1.3 1.2 0.1 £m – –
82-83 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 APRIL 2015 ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
Foreign currency Total Non- Share Share Other translation Retained parent controlling Total capital premium reserves reserve earnings equity interest equity £m £m £m £m £m £m £m £m Balance at 1 May 2013 0.1 19.4 0.9 (8.5) 120.1 132.0 – 132.0 Comprehensive income/(expense) for the year Profit for the year – – – – 51.0 51.0 – 51.0 Other comprehensive expense – – – (4.0) – (4.0) – (4.0) Total comprehensive income /(expense) for the year – – – (4.0) 51.0 47.0 – 47.0 Transactions with owners, recorded directly in equity Issue of shares – 2.5 – – – 2.5 – 2.5 Dividend paid – – – – (15.6) (15.6) – (15.6) Equity-settled share-based payments – – – – 6.5 6.5 – 6.5 Sale of own shares by the EBT* – – – – 1.7 1.7 – 1.7 Purchase of own shares by the EBT* – – – – (2.9) (2.9) – (2.9) Tax on equity-settled share‑based payments – – 0.2 – – 0.2 – 0.2 Total transactions with owners – 2.5 0.2 – (10.3) (7.6) – (7.6)
Balance at 30 April 2014 0.1 21.9 1.1 (12.5) 160.8 171.4 – 171.4 Balance at 1 May 2014 0.1 21.9 1.1 (12.5) 160.8 171.4 – 171.4 Comprehensive income for the year Profit for the year – – – – 86.4 86.4 – 86.4 Other comprehensive income – – – 1.5 – 1.5 – 1.5 Total comprehensive income for the year – – – 1.5 86.4 87.9 – 87.9 Transactions with owners, recorded directly in equity Issue of shares – 5.6 – – – 5.6 – 5.6 Share premium cancellation** – (22.2) – – 22.2 – – – Capital reduction*** – – – – – – – – Dividend paid – – – – (24.1) (24.1) – (24.1) Return of capital to shareholders including fees and duty *** – – – – (200.7) (200.7) – (200.7) Equity-settled share-based payments – – – – 9.2 9.2 – 9.2 Sale of own shares by the EBT* – – – – 4.4 4.4 – 4.4 Purchase of own shares by the EBT* – – – – (5.2) (5.2) – (5.2) Tax on equity-settled share-based payments – – 0.9 – – 0.9 – 0.9 Total transactions with owners – (16.6) 0.9 – (194.2) (209.9) – (209.9)
Balance at 30 April 2015 0.1 5.3 2.0 (11.0) 53.0 49.4 – 49.4 * Employee Benefit Trust is defined as EBT. ** Following shareholder approval at the Annual General Meeting on 4 September 2014 and court approval on 8 October 2014, the Company cancelled its share premium account, transferring £22.2m to the retained earnings account within reserves. *** During the year the Group returned £200.7m of cash to shareholders, including fees and duty. See note 25 for further details. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe Cash andcashequivalentsCash atyear end Effect exchange of rate oncashheld fluctuations andcashequivalentsCash theyear atthebeginningof Net (decrease)/increase incashandequivalents Net cashflows used infinancingactivities ownSale of shares by theEBT Return capitalto of shareholders, includingfees andduty Dividends paid Proceeds from share theissueof capital flowsCash from financingactivities businesscombination,Acquisition of cashreceived netof flowsCash from investing activities Net cashflows generated from operating activities Profit ondisposal jointventure of Equity-settled share-based payments andassociated costs Depreciation andamortisation Adjustments for: Profit for theyear flowsCash from operating activities Purchase own of shares by theEBT Net cashflows used ininvesting activities Finance income received receivedCash from repayment jointventure of loan receivedCash ondisposal jointventure of Capitalised internaldevelopment expenditure otherintangibleassets Acquisition of property,Acquisition of plantandequipment Tax paid generatedCash from operations Increase/(decrease) inprovisions Increase intrade andotherpayables Share (profit)/loss of accounted equity of investments Increase intrade andotherreceivables Tax Net finance income FOR THE YEAR ENDED 30 APRIL 2015 30 APRIL ENDED YEAR THE FOR CASH FLOW STATEMENTCONSOLIDATED OF Annual Report andAccountsBetfair 2015 Group plcAnnualReport 8, 9 8, Note 23 25 25 10 10 10 10 18 14 14 16 17 8 9 9 6 5 (220.0) (200.7) (104.2) 209.8 (23.3) (16.6) 105.1 (24.1) 139.1 86.4 147.1 25.9 14.8 10.4 (6.4) (8.0) (0.4) (6.6) (6.9) (0.5) 13.6 (6.3) (5.2) (0.7) 2015 (0.1) 4.4 6.5 5.6 3.6 5.5 £m 1.1
209.8 168.1 (14.3) (15.6) (21.5) (11.3) 29.5 79.5 43.7 51.0 (4.4) (2.0) (8.5) 85.1 (6.5) (2.9) (5.6) 2014 (0.7) 10.1 (7.4) 0.9 2.4 2.5 7.3 1.2 1.7 £m – – – – –
84-85 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe FINANCIAL STATEMENTS NOTES (FORMING PART OF THE FINANCIAL STATEMENTS)
1 Accounting policies Reporting entity Betfair Group plc (the “Company”) is a company incorporated and domiciled in the UK. The consolidated financial statements of the Company as at and for the year ended 30 April 2015 comprise the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in jointly controlled entities. The Group is involved in the provision of betting services and online gaming products. The Parent Company financial statements present information about the Company as a separate entity and not about its Group. The consolidated financial statements of the Group for the year ended 30 April 2015 were authorised for issue in accordance with a resolution of the Directors on 17 June 2015. Basis of preparation The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted for use in the European Union. The Company has elected to prepare its Parent Company financial statements in accordance with UK GAAP; these are presented on pages 118 to 120. The consolidated financial statements of the Group have been prepared on the historical cost basis except for the following: • derivative financial instruments are measured at fair value; and • financial instruments at fair value through profit or loss are measured at fair value. Going concern The Group has considerable financial resources. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, and therefore they continue to adopt the going concern basis in the consolidated financial statements. Further detail is contained in the Directors’ Report on page 75. Functional currency and presentation currency These consolidated financial statements are presented in Pounds Sterling, which is the Company’s functional currency. All values are in millions (£m) rounded to one decimal place, except where otherwise stated. Changes in accounting policy The Group has adopted the following accounting policies, standards, interpretations and amendments to existing standards during the year ended 30 April 2015: IFRS 10 Consolidated financial statements IFRS 11 Joint arrangements IFRS 12 Disclosure of interests in other entities IFRIC 21 Levies IAS 27 (revised) Separate financial statements IAS 28 (revised) Investments in associates and joint ventures IAS 32 (amended) Financial instruments: presentation IAS 36 (amended) Impairment of assets IAS 39 (amended) Financial instruments: recognition and measurement
Adopting the above IFRS standards required management to reassess where control is exerted by the Group and elaboration of the relevant changes is provided below. IFRS 10 “Consolidated Financial Statements” IFRS 10 establishes a single control framework to determine whether an entity is required to consolidate investees into its financial statements. It unifies the existing principles from SIC-12 and IAS 27 to provide a single model to be applied to all entities. In particular, the standard redefines the notion of control as when an investor is exposed, or has rights, to variable returns from an investee and has the ability to affect those returns through its power over the investee. IFRS 10 applies prospectively for annual periods beginning on or after 1 January 2014. IFRS 11 “Joint Arrangements” IFRS 11 adopts the same control framework introduced under IFRS 10 and applies its principles to joint operations. It combines the IAS 31 categories of jointly controlled assets and jointly controlled operations into a single classification of joint operations. Jointly controlled entities under IAS 31 are classified as joint ventures and the option of proportional consolidation has been removed, requiring such arrangements to be accounted for under the equity method. The new standards and interpretations did not have a material impact on the results or the financial position of the Group as at 30 April 2015 or on any disclosures. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe differences arisingonretranslation are recognised intheincome statement. are retranslated currency to thefunctional atforeign exchange rates rulingatthe dates thefair value was determined. Foreign currency rate assetsandliabilitiesdenominated the transaction. atthedateof in foreign Non-monetary currencies thatare stated atfair value assetsandliabilities that areNon-monetary measured historical intermsof cost inaforeign currency are translated usingtheexchange cost inforeignand payments andtheamortised duringtheperiod, currency translated attheexchange rate theperiod. attheendof items isthedifference cost currency inthefunctional adjusted for theperiod, atthebeginningof between amortised effective interest retranslated currency to thefunctional attheforeign exchange rate rulingatthatdate. The foreign currency gainorlossonmonetary assetsandliabilities denominated thetransaction. inforeignruling atthedateof Monetary currencies atthebalance sheet dateare Transactions inforeign currencies are translated to therespective currencies functional Group of entitiesattheforeign exchange rate Foreign currency transactions way asunrealised gains, butonlyto theextent that there isnoevidence impairment. of eliminated againsttheinvestment to theextent theGroup’s of interest intheinvestments. Unrealised lossesare eliminated inthesame in preparing theconsolidated financialstatements. Unrealised gainsarisingfrom transactions accounted withequity investments are Intra-group balances andtransactions, andany unrealised income andexpenses arisingfrom intra-group transactions, are eliminated Transactions eliminated onconsolidation is recognised asaresult. non-controllingAcquisitions of interests are accounted for astransactions withowners asowners, intheircapacity therefore nogoodwill interests non-controlling (iv) Acquisitionof obligations ormadepayments aninvestee. onbehalfof is reduced to lossesisdiscontinued nilandrecognition except further of to theextent thattheGroup hasincurred legalorconstructive control ceases. When theGroup’s share lossesexceeds of itsinterest accounted inanequity investment, theGroup’s amount carrying accounted investments, from thedatethatsignificantinfluence orjointcontrol commences untilthedatethatsignificantinfluence orjoint The consolidated financialstatementsincludetheGroup’s share thecomprehensive of income movements andequity equity of accounted (equity method the equity investments) andare initiallyrecognised atcost. requiring unanimousconsent for strategic, financialandoperating decisions. Associatesandjointarrangements are accounted for using Joint arrangements are thoseentitiesover theGroup whoseactivities hasjointcontrol, established by contractual agreement and Associates are thoseentities inwhichtheGroup hassignificantinfluence, butnotcontrol, over thefinancialandoperating policies. (iii) Associatesandjointarrangements (“equity accounted investments”) The accounting subsidiarieshave policiesof been changed to alignthemwiththepoliciesadopted by theGroup whennecessary. subsidiaries are included intheconsolidated financialstatementsfrom the date thatcontrol commences untilthedatethatcontrol ceases. its involvement to affect andhastheability withtheentity thosereturns through itspower over theentity. The financialresults of Subsidiaries are entitiescontrolled by theGroup. Control exists whentheGroup isexposed to, orhasrightsto, variable returns from (ii) Subsidiaries equity, thenitisnotre-measured andsettlementisaccounted for withinequity. Any contingent consideration payable ismeasured atfair value asattheacquisitiondate. Ifthecontingent consideration isclassified as business combination are expensed asincurred. Transaction costs, securities, otherthanthoseassociated debtorequity withtheissueof thattheGroup inconnection incurs witha • • • • potential voting rightsthatare currently exercisable. The Group measures attheacquisitiondateas: goodwill to affect andhastheability entity thosereturns through itspower over theentity. Inassessingcontrol, theGroup takes into consideration transferred to theGroup. Control exists whentheGroup isexposed to, orhasrightsto, variable returns from itsinvolvement withthe Business combinations are accounted for asattheacquisitiondate, usingtheacquisitionmethod whichisthedateoncontrol is (i) Businesscombinations consolidationBasis of require adoptionby theGroup infuture accounting periods. The Group continues othernew to of monitor standards thepotentialimpact andinterpretations whichmay by beendorsed theEUand the netrecognised amount(generally fair value) theidentifiableassetsacquired of andliabilitiesassumed. if thebusinesscombination isachieved instages, thefair value thepre-existing of interest equity intheacquired less entity; the recognised any amountof non-controlling interest intheacquired plus entity; the fair value theconsideration of transferred; plus Annual Report andAccountsBetfair 2015 Group plcAnnualReport 86-87 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe FINANCIAL STATEMENTS NOTES (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED
1 Accounting policies continued Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to the Group’s presentational currency, Pounds Sterling, at foreign exchange rates ruling at the reporting date. The income and expenses of foreign operations are translated at an average rate for the year where this rate approximates to the foreign exchange rates ruling at the dates of the transactions. Exchange differences arising from this translation of foreign operations are taken directly to the translation reserve. When a foreign operation is disposed of, in part or in full, the relevant amount in the translation reserve is transferred to the income statement. When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign currency gains and losses arising from such items are considered to form part of a net investment in the foreign operation and are recognised in other comprehensive income and presented in the translation reserve in equity. The most significant currencies for the Group were translated at the following exchange rates: Assets and liabilities Income and expenses Value of £1 (Closing rates) (Average rates) Euro 1.38 1.29 US Dollar 1.54 1.60 Australian Dollar 1.92 1.86 Romanian Lei 6.08 5.71
Available-for-sale financial assets The Group’s investments in certain equity securities are classified as available-for-sale financial assets. Subsequent to initial recognition, the assets are reviewed annually for changes in value with any impairment loss recognised through the income statement, and on disposal any realised gains and losses are also recognised through the income statement. On an annual basis the available-for-sale financial assets are reviewed and re-measured on a fair value basis if the fair value is significantly different to the value previously recorded and where the fair value of the unlisted equity shares can be reliably measured. Financial instruments (i) Classification of financial instruments issued by the Group Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions: • they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and • where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Company’s own equity instruments or is a derivative that will be settled by the Company exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments. To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the Company’s own shares, the amounts presented in these consolidated financial statements for called up share capital and share premium account exclude amounts in relation to those shares. (ii) Non-derivative financial instruments Non-derivative financial instruments comprise investments in equity securities, trade and other receivables, including cash and cash equivalents and trade and other payables. Non-derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, non-derivative financial instruments are measured as described below. Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Cash and cash equivalents do not include certain customer funds deposited in a stakeholder account held by The Sporting Exchange (Clients) Limited, a wholly-owned subsidiary of the Group, on the basis that they are held on trust for customers and do not belong to and are not at the disposal of the Group. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe are separable. Identifiable intangibles are thosewhichcan be soldseparately orwhich arisefrom legal rightsregardless whether thoserights of considerationof for theacquisition andthenetfair value theidentifiableassets, of liabilitiesandcontingent liabilitiesacquired. In respect businessacquisitionsthathave of occurred since 1May 2007, represents goodwill thedifference between thefair value 1May 2007 Acquisitions onorafter representsGoodwill subsidiaries, amountsarisingonacquisitionof associatesandjointarrangements. (i) Goodwill andotherintangibleassets Goodwill Depreciation methods, usefullives andresidual values are reviewed date. ateach reporting Equipment, fixtures andfittings–3to 5years Computer equipment –3years Leasehold improvements –Over thelease thetermof ortheusefuleconomic life ifshorter theasset, of Freehold buildings–50years The estimated usefullives for thecurrent andcomparative are periods asfollows: property, Landisnotdepreciated. plantandequipment. Depreciation isrecognised intheincome statementonastraight-line basis over anitemof of theestimated usefullife each of part (ii) Depreciation property, amountof the carrying andare plant and equipment, recognised withintheincome statement. Gains andlossesondisposal property, anitemof of plantandequipment are determined by comparing theproceeds from disposal with materialsanddirectof labourandany otherdirectly attributablecost bringingtheassetsto of aworking condition for theirintended use. Cost includesexpenditure thatisdirectly attributableto theasset. theacquisitionof assetsincludesthecosts The cost self-constructed of property,Items of plantandequipment are measured atcost lessaccumulated depreciation andany accumulated impairmentlosses. (i) Recognition andmeasurement Property, plantandequipment shares,potential ordinary whichincludeawards undershare award schemesandshare optionsgranted to employees. attributable to shareholders ordinary andtheweighted average ordinaryshares numberof outstandingfor theeffects alldilutive of year. The weighted average shares numberof isadjusted for amountsheldby theGroup’s EBT. isdetermined Dilutedby EPS theprofit profit attributableto shareholders ordinary theCompany of by theweighted average ordinaryshares numberof outstandingduringthe The Group presents basicanddiluted earnings pershare datafor (“EPS”) shares. itsordinary iscalculated by BasicEPS dividingthe Earnings per share an increase inequity, andtheresulting surplusordeficitonthetransaction istransferred to orfrom retained earnings. presented from asadeduction total equity. When treasury shares are soldorreissued subsequently, theamountreceived isrecognised as anyis netof taxeffects, andisrecognised from asadeduction equity. Repurchased shares are classified astreasury shares andare When share capitalrecognised isrepurchased, asequity theconsideration theamountof paidwhichincludesdirectly attributablecosts, (ii) Repurchase shares) share of capital(treasury recognised from asadeduction equity, any netof taxeffects. Ordinary shares are classified asequity. Incremental costs directly attributableto ordinaryshares theissueof andshare optionsare shares (i) Ordinary Share capital income statement. Subsequent to initialrecognition, derivatives are measured atfair value, andchangestherein are accounted for through the Derivatives are recognised initiallyatfair value; attributable transaction costs are recognised intheincome statementwhenincurred. date.reporting The Group holdsderivative financialinstrumentsinrelation positionsarisingasaresult to openbettingliability openpositionsatthe of (iv) Derivative financialinstruments impairment losses. Other non-derivative financialinstrumentsare measuredcost usingtheeffective atamortised interest lessany method, (iii) Other value through profit orlossare measured atfair value, andchangestherein are recognised intheincome statement. recognition, directly attributabletransaction costs are recognised intheincome statementwhenincurred. Financial instrumentsatfair sale decisionsbased ontheirfair value inaccordance withtheGroup’s documented riskmanagementorinvestment strategy. Uponinitial Financial instrumentsare designated atfair value through profit orlossiftheGroup managessuchinvestments andmakes purchase and An instrumentisclassified atfair value through profit orlossifitisheldfor trading orisdesignated assuchuponinitialrecognition. Non-derivative financialinstrumentsmeasured atfair value through profit orloss
Annual Report andAccountsBetfair 2015 Group plcAnnualReport
88-89 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe FINANCIAL STATEMENTS NOTES (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED
1 Accounting policies continued Goodwill and other intangible assets continued Acquisitions prior to 1 May 2007 The Group has taken advantage of the exemption permitted by IFRS 1 and has not elected to restate business combinations that took place prior to 1 May 2007. In respect of acquisitions prior to 1 May 2007, goodwill is included at 1 May 2007 on the basis of its deemed cost, which represents the amount recorded under the Group’s previous accounting framework which was broadly comparable save that only separable intangibles were recognised and goodwill was amortised. Subsequent measurement Goodwill is measured at cost less any accumulated impairment losses. Goodwill is allocated to cash generating units (CGUs) and is not amortised but is tested annually for impairment. In respect of equity accounted investments, the carrying amount of goodwill is included in the carrying amount of the investment in the investee. (ii) Internally generated goodwill and brands Expenditure on internally generated goodwill and brands is recognised as an expense in the income statement, as incurred. (iii) Research and development Expenditure on research activities is recognised as an expense in the income statement, as incurred. Expenditure on development activities is recognised as an internally generated intangible asset only when the necessary criteria are met; including demonstrating the technical feasibility of the product and having sufficient certainty over the future revenue or cost savings that will be generated from the product. The qualifying expenditure capitalised represents costs directly attributable to the development of the asset. This expenditure is capitalised from the point at which the above criteria are met up to the point at which the asset is available for use. If the criteria are not met the expenditure is recognised in the income statement as an expense in the period in which it is incurred. Capitalised development expenditure assets are amortised on a straight-line basis from the date they are available for use over their useful economic lives. Tax credits receivable in relation to qualifying spend that has been capitalised is treated as a deduction against that asset. (iv) Other intangible assets Identifiable intangibles are assets which have finite lives, can be sold separately or which arise from legal rights regardless of whether those rights are separable. Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring in to use the specific software. These costs are amortised over their estimated useful economic life or the life of the software licence contract. Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and less accumulated impairment losses. (v) Amortisation Amortisation is recognised in the income statement on a straight-line basis over the estimated useful economic lives of intangible assets, other than goodwill, from the date they are available for use. The estimated useful economic lives are as follows: Computer software – The shorter of the licence period and up to 10 years Licences – The shorter of the licence period and up to 10 years Development expenditure – 3 years Brand – 2 years Customer lists – 2 to 4 years Broadcasting rights – 2 to 7 years Wagering rights – 6 to 7 years Impairment (i) Financial assets A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. An indicator of impairment of a financial asset is apparent if objective evidence highlights that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value and book value. Significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in the income statement. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe A number of individualswereA numberof granted restricted shares inthecurrent andpriorperiods. 2012, outstandingshare theGroup InJanuary optionsandreplacednot met. certain modified themwith restricted shares ona3:1basis. a charge isrecognised over the vesting andmay period bereversed to theextent thatany non-market based performance conditions are which vest atspecified datesupto 7years from grant. Performance conditions may beapplied to awards. Asanequity-settled scheme, The Group operates aRestricted Share Awards Plan.Underthisplan,theCompany may grant adhocnominalvalue ornilcost options Restricted share scheme share numberof actual optionsthatvest. account thetermsand conditions upon whichtheoptionswere granted. The amountrecognised asanexpense isadjusted to reflect the which theemployees become unconditionally entitled to theshare takinginto optionsandiscalculated usinganoptionpricingmodel, employee expense withacorresponding increase inequity. The fair value ismeasured atgrant dateandspread over during theperiod the Group willnotberequired to settleitsobligationsundertheseschemesincash. The fair value optionsgranted of isrecognised asan Share optionplansandSave-As-You-Earn schemesare accounted for asequity-settled share-based payment schemesonthebasisthat Share optionplansandSave-As-You-Earn schemes The following schemesare inplace thatallow employees to acquire shares intheGroup: (iii) Share-based payment transactions estimated reliably. present legalorconstructive obligationto pay thisamountasaresult provided pastservice of by theemployee andtheobligationcanbe isrecognisedA liability for cashbonusorprofit-sharing theamountexpected to bepaidundershort-term plansiftheGroup hasa employee benefitobligationsareShort-term measured onanundiscounted basisandare expensed astherelated isprovided. service benefits (ii) Short-term are recognised asanemployee benefit expense intheincome statementwhenthey are due. will have amounts. nolegalorconstructive Obligationsfor obligationto pay contributions further to defined contribution pensionplans A defined contribution benefitplanunderwhichtheGroup planisapost-employment pays fixed contributions into a separate and entity (i) Defined contribution plans Employee benefits if noimpairmentlosshadbeen recognised. the asset’s amountdoesnotexceed carrying amountthatwould have thecarrying been determined, depreciation netof oramortisation, has been achangeintheestimatesused to determinetherecoverable Animpairment lossisreversed amount. onlyto theextent that dateforassessed ateach reporting any indications thatthelosshasdecreased ornolongerexists. Animpairmentlossisreversed ifthere An impairmentlossinrespectisnotreversed. goodwill of Inrespect otherassets, of impairmentlossesrecognised are inpriorperiods pro-rata basis. any amountof allocated to goodwill theunitsandthento reducethe carrying theotherassetsinunitona amountsof thecarrying Impairment lossesare recognised intheincome Impairmentlossesrecognised statement. inrespect CGUs of are to allocated first reduce An impairmentlossisrecognised anassetwhenallocated amountof to aCGU ifthecarrying exceeds itsestimated recoverable amount. isallocated to CGUstesting, thatare expected to benefitfrom thesynergies thecombination. of inflows otherassetsorgroups of assets(theCGU). of acquiredThe goodwill inabusinesscombination, for impairment thepurposeof together into thesmallestgroup assetsthatgenerates of cashinflows from continuing usethatare largely thecash independentof thetimevalueassessments of money of andtherisks For specificto theasset. assetsare impairmenttesting, thepurposeof grouped use, theestimated future cashflows are discounted to theirpresent value usingapre-tax discount rate thatreflects current market The recoverable anassetorCGU amountof isthegreater itsvalue of inuseanditsfair value lesscosts to sell.Inassessingvalue in For andintangibleassetsthatare goodwill notyet available for use, therecoverable amountisestimated each year atthesame time. determine whetherthere isany Ifany impairment. indicationof suchindicationexists, thentheasset’s recoverable amountisestimated. theGroup’s amountsof The carrying assets, non-financial otherthandeferred taxassets, are reviewed date to ateach reporting assets (ii) Non-financial that are securities, equity thereversal isrecognised directly inequity. For financialassetsmeasuredcost, thereversal atamortised isrecognised inthe income For statement. available-for-sale financialassets An impairmentlossisreversed ifthereversal canberelated to objectively anevent theimpairmentlosswas occurring after recognised. Annual Report andAccountsBetfair 2015 Group plcAnnualReport 90-91 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe FINANCIAL STATEMENTS NOTES (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED
1 Accounting policies continued Long Term Incentive Plan (“LTIP”), Deferred Share Incentive Plan (“DSIP”), Short Term Incentive Plan (“STIP”) and Management Incentive Plan (“MIP”) The Group currently operates the LTIP and DSIP. In previous years, the STIP and MIP were used but these were replaced by DSIP in the financial year ended 30 April 2014. • The LTIP entitles recipients to share options and restricted share rewards based on meeting the Group and individual performance criteria over a three-year period. • The DSIP provides for one-third of any annual incentive payment (determined under the Annual Cash Incentive Plan) to be paid in deferred shares. Any such deferred element granted under the DSIP will vest 50% after one year and 50% after two years from the date of grant. Clawback provisions are included and dividends accrue on vested DSIP awards. • The previous STIP and MIP structures had both cash and share elements. The cash element was two-thirds of the award; the remaining one-third was paid in deferred shares. The fair value of the LTIP, DSIP and the share-based elements of the STIP and MIP are calculated under IFRS 2 share-based payment. The cash elements of the STIP and the MIP were fixed in value and paid in the year the award was made, with no option on the part of the recipient to choose whether they received cash or shares. Accordingly, these cash payments were classified as a cash bonus in the income statement (rather than a “cash-settled share-based payment”) and expensed in the year in which the award was made. Long-term Senior Executives’ Incentive Plan (“SEIP”) The long-term SEIP was approved by the Board on 16 October 2007. The plan provides for certain senior management and Directors to be granted one-off awards consisting of a cash and restricted shares element. The scheme came into effect upon the admission of the Group’s shares on the London Stock Exchange. The cash was paid on the date of admission to the participants in the scheme. The restricted shares were granted on the date of admission and half of the restricted shares vested on the first anniversary of the listing and the next half on the second anniversary of the listing. The restricted shares in the SEIP are measured consistently with the treatment of normal restricted shares. All shares granted under the SEIP have now been exercised or have lapsed. Stakeholder award scheme During 2011, the Group issued 309,280 restricted shares and 26,829 phantom shares to the employees of the Group as part of the new Stakeholder award scheme. The scheme relates to the individual employees’ performance during the financial year ended 30 April 2010 for which a cash bonus accrual had been recognised. Subsequent to the year ended 30 April 2010 the reward was settled by the issue of equity instruments. The restricted shares and phantom shares had a vesting period spanning from the first day of the financial year to which they relate to the vest date of 1 August 2011. The restricted shares in the scheme were convertible into shares upon vest date and they were measured consistently with the treatment of normal restricted shares. The phantom shares in the scheme were only convertible to cash upon the vest date and they are measured based on the market value at the date of grant. Revenue Revenue is measured as the consideration received from customers and represents amounts received for services provided by the Group, as set out below. Sports revenue represents the commission earned on the Group’s betting exchange activities and the margin derived from betting activity on the Group’s fixed odds bookmaking product. Commission and margin are recognised on the date the outcome for an event is settled. Open betting liability positions are recognised based on the best estimate of the outflow that will be required to settle the position at the balance sheet date, and losses arising from these positions are recognised in revenue. This gives rise to a derivative financial instrument and is accounted for at fair value through profit and loss, as described in the Financial Instruments section on page 112. Gaming revenue can either represent the margin derived from betting activity between customers and the Group or, in relation to Poker and Exchange Games, the commission earned from customers. TVG revenue is derived from US pari-mutuel betting products (Advanced Deposit Wagering and Tote products), representing a percentage of the stake and is recognised on settlement of the event. Revenue also includes amounts received from the management and investment of customer funds. Expenses (i) Cost of sales Cost of sales principally comprises betting and gaming taxes, customer payment transaction fees, sporting levies and other data rights charges. (ii) Operating lease payments Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense over the term of the lease. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe accurate theGroup’s indicationof underlyingbusiness performance. The separate theseitems, of whichare reporting disclosed withintherelevant intheincome helpsprovide statement, category amore nature thatshouldbebrought to the reader’s theGroup’s attentioninunderstanding financial performance Separately disclosed itemsare thoseitemsincluded withinoperating profit thattheGroup considers to benon-recurring ormaterialin Separately disclosed items asoperating leases.qualify and “buildings”elements. Based onmanagement’s review leases of for theyears ended 30April2015 and2014, allpremises leases determining thefair value atthe inception thelease eachof of andanalysing property theminimumlease payments between their“land” to determine ifthelease meets afinance thedefinitionof lease and,ifso, itshouldbeaccounted for assuch. This review involves Under accounting standards there isarequirement for managementto examine lease thebuildingselementwithineach property Leases financial andoperational performance theGroup of andallocatesresources withinthebudgetsagreed by theBoard. order to assesseach segment’s performance andto allocateresources. The CODM istheExecutive Committee whichmonitors the Segment information regularly isbased on theinternalreports reviewed by theGroup’s ChiefOperating DecisionMaker (“CODM”) in expenses, includingrevenues andexpenses thatrelate to transactions withany theGroup’s of othercomponents. An operating segmentisacomponent theGroup of from thatengagesinbusinessactivities whichitmay earn revenues andincur Operating segments thatsuchadeterminationismade.period to changeitsjudgmentregarding theadequacy existing of taxexpense taxliabilities;suchchangesto taxliabilitieswillimpact inthe assumptions andmay involve judgments aboutfuture aseriesof events. New information may become available thatcausestheGroup manyits assessmentof factors, includinginterpretations taxlaw of andpriorexperience. This assessmentrelies onestimatesand taxes and interest may bedue. The Group believes thatitsaccruals for taxliabilitiesare adequate for allopen taxyears based on In determiningthecurrent and deferred taxtheGroup takes taxpositionsandwhetheradditional into account uncertain of theimpact tax liabilitiesandassetsonanetbasisortheirwillberealised simultaneously. to income taxes levied by thesame onthesame taxauthority taxable entity, orondifferent taxentities, butthey intendto settlecurrent Deferred taxassetsandliabilitiesare offset ifthere isalegallyenforceable rightto offset current taxliabilitiesandassets, andthey relate that have date. by orsubstantively been thereporting enacted enacted Deferred taxismeasured atthetaxrates thatare expected to beapplied to differences temporary whenthey reverse, based onthelaws subsidiaries to theextent thatthey willprobably notreverse intheforeseeable future. that affect neither accounting nortaxable profit otherthaninabusinesscombination; anddifferences relating to investments in The following differences temporary are notprovided for: theinitialrecognition theinitialrecognition goodwill; of assetsorliabilities of dividend isrecognised. Additional income taxes thatarisefrom dividendsare thedistributionof recognised atthesame to pay timethattheliability therelated probable thattherelated taxbenefitwillberealised. difference can beutilised. Deferred taxassetsare reviewed dateand are ateach reporting reduced to theextent thatitisnolonger A deferred taxassetisrecognised to theextent thatitisprobable thatfuture taxable profits willbeavailable againstwhichthetemporary and theamountsused for taxpurposes. Deferred taxisprovided differences ontemporary assetsandliabilitiesfor amountsof purposes between thecarrying financialreporting date,reporting andany adjustmentto taxpayable inrespect previous of years. Current taxistheexpected taxpayable onthetaxable income for theyear, usingtaxrates atthe orsubstantively enacted enacted items recognised directly (through inequity otherreserves), inwhichcaseitisrecognised inequity. Tax expense comprises current anddeferred tax. Tax expense isrecognised intheincome statementexcept to theextent thatitrelates to Tax Foreign currency gainsand lossesare onanetbasis, eitherinfinance reported income orfinance expense asappropriate. relation to deferred andcontingent consideration. Finance expenses comprise changesinthefair value financialassetsatfair of value through profit orlossanddiscount unwinding in in theincome usingtheeffective statement, interest method. profit orloss, andgainsonhedging instrumentsthatare recognised intheincome Interest statement. income isrecognised asitaccrues Finance income comprises interest earned oncorporate fundsinvested, changesinthefair value financialassetsatfair of value through Finance income andexpense Annual Report andAccountsBetfair 2015 Group plcAnnualReport 92-93 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe FINANCIAL STATEMENTS NOTES (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED
1 Accounting policies continued Future accounting developments The following new standards, interpretations and amendments were issued by the IASB or the IFRIC but were not effective for the financial year (and in some cases have not yet been adopted by the EU): • IFRS 9 “Financial Instruments” • IFRS 14 “Regulatory Deferral Accounts” • IFRS 15 “Revenue from Contracts with Customers” The Directors have decided not to early adopt the above standards and they do not expect that the adoption of the standards listed above will have a material impact on the financial statements of the Group in future periods. There are no other IFRSs or IFRICs in issue but not yet effective that are expected to have a significant impact for the Group. Accounting estimates and judgments The preparation of consolidated financial statements in conformity with IFRSs requires management to make estimates, judgments and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements is included in the following notes: Estimates Note 9 – Measurement of the recoverable amounts of goodwill and other intangible assets An impairment review has been performed of all goodwill and intangible assets held by the Group. The impairment review is performed on a “value in use” basis, which requires estimation of future net operating cash flows, the time period over which they will occur, an appropriate discount rate and an appropriate growth rate. Note 12 – Deferred tax Deferred tax assets and liabilities represent management’s best estimate in determining the amounts to be recognised. When assessing the extent to which deferred tax assets should be recognised, consideration is given to the timing and level of future taxable income. Note 18 – Measurement of share-based payments Estimation and judgment is required in determining the fair value of shares at the date of award. The fair value is estimated using valuation techniques which take into account the award’s term, the risk-free interest rate and the expected volatility of the market price of shares of the Group. Note 23 – Determination of fair value of deferred and contingent consideration Deferred and contingent consideration is initially recognised at fair value and subsequently reassessed at each reporting date to reflect changes in estimates and assumptions. Fair value is determined using an income approach which requires estimation of future net operating cash flows, the time period over which they will occur, an appropriate discount rate and an appropriate growth rate. Judgments Note 1 – Basis of consolidation Judgment is applied when determining if an acquired entity is controlled by the Group, and whether the acquired entity meets the criteria to be defined as a subsidiary. In assessing control, the Group considers whether it has the ability to control on a legal or contractual basis rather than whether that control is actually exercised. Valuation of tax provisions and liabilities Judgment and estimation is required to interpret international tax laws and the way that they interact within each jurisdiction, in order to identify and value provisions in relation to gaming taxes as applicable. In addition to gaming taxes, judgment is required in relation to international tax laws including transfer pricing and controlled foreign companies. Business combinations Judgment and estimation is required in the identification and valuation of separable assets and liabilities on acquisitions. In particular, in the identification and valuation of separable intangible assets and determining appropriate useful economic lives for these assets, and also in determining contingent consideration payable in respect of acquisitions where required by the terms of the agreement. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe Total liabilities Total assets forProfit theyear Tax Profit before tax Share profit of equity of Profit ondisposal jointventure of Net finance income Depreciation andamortisation EBITDA Revenue Year ended 30April2015 Segmental information for theyears ended 30April2015 and30April2014 isasfollows: respectively andUS12%). (30April 2014: UK71% theGroup’s of The majority assetsare non-current located intheUKandUS, representing assets and45% total of 44% non-current • • analysed below onthefollowing basis: Management alsoreviews Group revenue onageographic basis, determined by thecustomers. thelocationof This information is The analysis EBITDA of issummarised below. However, expenses are allocated andreviewed by theCODM between Betfair excl. USandtheBetfair USoperating segment. making operating andresource allocationdecisions. Corporate expenses, assetsandliabilitiescannotreadily be allocated to individualoperating segmentsandare notused by theCODM for the chiefdriver theGroup’s of resources. businessandtheallocation of The Group’s cost baseisto alarge extent fixed innature. The Group focuses predominantly itsinternalmanagementreporting onrevenue, astheproducts’ potentialto generate revenue is basis. Assuchonly theGroup’s share gainsandlossesare of presented intheoperating segmentnotebelow. The results theAustralian of jointventure (upto disposal) thedateof were consolidated intheGroup accounts accounting onanequity The Group’s USoperations (includingthe TVG Network) meet thequantitative threshold to bedisclosed separately. customerManagement of fundsdoesnotmeet theserequirements, thissegmentisseparately disclosed asitismonitored by theCODM. andGamingmeet thequantitative thresholds requiredSports segments. by IFRS 8asreportable While therevenue from the are thesegamingactivities Gaming. Allof played by customers geographical inanumberof areas. Gaming consists various of products Casino andbespoke Exchange gamesproducts. Tradefair Spreads andPoker are alsoclassified within 30 April2014 accordingly. product, Timeform, andMultiples. theSportsbook The Group hasrestated theoperating segmentinformation for theyear ended This isto betterreflect theway financialinformation isreviewed by theCODM. now betting consists theExchange of Sports sports andExchange have beenThe previous combined segmentnamed Sportsbook segmentsof “Sports”. into onereportable reportable • • which isused by theGroup’s CODM matters. inmakingdecisionsaboutreporting These segmentsare: The Group’s continuing operating businessesare organised businesssegmentsaccording andmanaged asreportable to theinformation 2 Operating segments accounted investments Rest of World.of Rest UK Betfair US. Betfair excl. US − Management of customer− Managementof funds − Gaming − Sports
328.0 Sports £m Gaming 88.5 £m Management of customerof funds 1.2 £m Annual Report andAccountsBetfair 2015 Group plcAnnualReport Betfair excl. 115.4 417.7 £m US Betfair 58.8 4.8 £m US 476.5 232.0 182.6 120.2 (25.9) (14.8) 101.2 Group 86.4 6.4 6.4 0.4 0.1 £m 94-95 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe FINANCIAL STATEMENTS NOTES (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED
2 Operating segments continued Year ended 30 April 2014 Management of customer Betfair excl. Betfair Sports Gaming funds US US Group £m £m £m £m £m £m Revenue 280.5 66.2 1.2 347.9 45.7 393.6 EBITDA 89.1 2.0 91.1 Depreciation and amortisation (29.5) Net finance income 0.7 Share of loss of equity accounted investments (1.2) Profit before tax 61.1 Tax (10.1) Profit for the year 51.0 Total assets 309.5 Total liabilities 138.1
Geographical information determined by location of customers is set out below: Year ended 30 April 2015 Rest of UK Rest of World Total World Sustainable Sustainable Sustainable Other Group £m £m £m £m £m Betfair excl. US 315.5 14.2 329.7 88.0 417.7 Betfair US – 58.8 58.8 – 58.8 Total Group revenue 315.5 73.0 388.5 88.0 476.5
Year ended 30 April 2014 Rest of UK Rest of World Total World Sustainable Sustainable Sustainable Other Group £m £m £m £m £m Betfair excl. US 246.4 14.0 260.4 87.5 347.9 Betfair US – 45.7 45.7 – 45.7 Total Group revenue 246.4 59.7 306.1 87.5 393.6
Revenue derived from customers located in Ireland and Gibraltar is classified within UK. 3 Profit before tax Profit before tax is stated after charging: 2015 2014 Note £m £m Equity-settled share-based payments and associated costs 18 10.4 7.3 Depreciation of property, plant and equipment 8 8.2 12.1 Amortisation of capitalised development costs 9 11.7 10.2 Amortisation of other intangibles 9 6.0 7.2 Rentals payable under operating leases 5.5 5.7 Research and non-capitalised development costs 44.8 44.4 WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe Unwinding discount of ondeferred andcontingent consideration Foreign exchange loss Finance expense Total Bank interest receivable Finance income Redundancy costs costsSocial security Wages andsalaries Total Recognised inincome statement 5 Finance income andexpense Details ontheremuneration Directors of are setoutintheDirectors’ Remuneration onpages53 to 72. Report Total Pension costs Equity-settled share-based payments andassociated costs The average employed persons numberof by theGroup (includingDirectors) duringtheyear, analysed by category, was asfollows: 4 Employee andcosts numbers Company’s financialstatements, have notbeen disclosed astheinformation isrequired instead to bedisclosed onaconsolidated basis. Amounts paidto theCompany’s auditor andtheirassociatesinrespectto theCompany, services of the otherthantheauditof Total The aggregate payroll costs were thesepersons of asfollows: Technology Fees payable to theCompany’s auditor anditsassociatesfor otherservices: Fees payable to theCompany’s auditor for thesefinancialstatements theauditof remuneration:Auditors’ Total G&A Operations Sales andmarketing Tax services to pursuant legislation–reviewOther services interimfinancialstatements of Audit to subsidiariespursuant financialstatementsof of legislation Annual Report andAccountsBetfair 2015 Group plcAnnualReport Note 18 108.4 1,901 84.2 10.4 10.5 588 2015 388 748 2015 2015 2015 2015 2.0 0.4 0.4 177 0.5 0.3 1.3 0.7 £m 0.1 0.1 £m £m £m 1.1 1.1 1.1 No 103.1 1,739 80.6 10.3 2014 687 2014 2014 2014 2014 333 535 184 3.0 0.4 0.4 0.4 1.9 0.5 7.3 £m 0.1 0.1 £m £m £m 1.1 1.1 1.1 No – 96-97 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe FINANCIAL STATEMENTS NOTES (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED
6 Tax Recognised in the income statement 2015 2014 £m £m Current tax UK – current year 8.1 5.8 UK – adjustments in respect of prior periods 0.3 (0.9) Overseas – current year 6.4 4.1 Overseas – adjustments in respect of prior periods (0.1) – Current tax expense 14.7 9.0 Deferred tax Origination and reversal of temporary differences 0.1 0.7 Tax rate reduction – 0.4 Deferred tax 0.1 1.1 Total tax expense 14.8 10.1
Reconciliation of effective tax rate 2015 2014 £m £m Profit before tax 101.2 61.1 Total tax expense (14.8) (10.1) Profit for the year 86.4 51.0 Tax using the UK corporation tax rate of 20.9% (2014: 22.8%) 21.2 13.9 Effect of tax rates in foreign jurisdictions (9.3) (5.5) Non-deductible expenses 1.0 5.6 Tax rate reduction – 0.4 Current year income statement charge/(credit) for which no deferred tax asset was recognised 3.7 (2.5) Adjustments in respect of prior periods (1.8) (1.8) Total tax expense 14.8 10.1
Tax recognised directly in equity 2015 2014 £m £m Other deferred tax in relation to equity-settled share-based payments 0.4 (0.1) Deferred tax 0.4 (0.1) Current tax in relation to equity-settled share-based payments 0.5 0.3 Total tax 0.9 0.2
The Group’s consolidated effective tax rate for the year was 14.6% (30 April 2014: 16.5%). A reduction in the UK corporation tax rate from 21% to 20% (effective from 1 April 2015) was substantially enacted on 2 July 2013. Any deferred tax assets and liabilities at 30 April 2015 have been calculated at 20%. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe options based onthemarket value for theyear thattheoptions were outstanding. The average market value theCompany’s of shares £13.92 of (30April2014: £9.89) was used to calculatethedilutive effect share of Weighted average ordinaryshares numberof (diluted) Effect share of optionsonissue Weighted average ordinaryshares numberof (basic) Weighted average shares (diluted) numberof Profit used to determinediluted earnings pershare Profit usedProfit to determinediluted earnings pershare the effect alldilutive of potentialordinary shares 103,167,618 of (30April2014: 106,019,686). shareholders £86.4m of (30April2014: £51.0m) andaweighted average ordinaryshares numberof adjustmentfor outstandingafter dilutedThe calculationof earnings pershare for theyear ended 30April2015 was based ontheprofit attributableto ordinary Diluted earnings pershare All earnings inthecurrent year relate to continuing operations. Diluted earnings pershare Basic earnings pershare Weighted average shares numberof Profit for theyear (£m) (30 April2014: 103,975,695). The weighted average shares numberof hasbeen adjusted for amountsheldby theGroup’s EBT. shareholders of £86.4m (30April2014: £51.0m) andaweighted average ordinary shares numberof 100,573,899 outstandingof basicearningsThe calculationof pershare for theyear ended 30April2015 was based ontheprofit attributableto ordinary Basic earnings pershare 7 Earnings pershare Annual Report andAccountsBetfair 2015 Group plcAnnualReport 100,573,899 100,573,899 103,167,618 2,593,719 85.9p 83.7p 86.4 86.4 2015 2015 2015 £m No 106,019,686 103,975,695 103,975,695 2,043,991 49.0p 48.1p 51.0 2014 2014 2014 51.0 £m No 98-99 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe FINANCIAL STATEMENTS NOTES (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED
8 Property, plant and equipment Equipment, Freehold land Leasehold Computer fixtures and buildings improvements equipment and fittings Total £m £m £m £m £m Cost At 1 May 2013 0.8 14.0 90.3 9.2 114.3 Additions – 0.4 2.7 5.4 8.5 Disposals – – (1.0) (0.3) (1.3) Net foreign exchange differences – (0.2) (0.4) (0.5) (1.1) At 30 April 2014 0.8 14.2 91.6 13.8 120.4
Additions – 0.6 4.7 1.0 6.3 Disposals – (0.1) (0.8) (0.1) (1.0) Net foreign exchange differences – 0.1 0.5 0.7 1.3 At 30 April 2015 0.8 14.8 96.0 15.4 127.0 Depreciation At 1 May 2013 0.1 8.5 79.0 6.1 93.7 Depreciation for the year – 1.6 9.3 1.2 12.1 Disposals – – (0.9) (0.1) (1.0) Net foreign exchange differences – (0.1) (0.6) (0.4) (1.1) At 30 April 2014 0.1 10.0 86.8 6.8 103.7
Depreciation for the year – 1.5 4.5 2.2 8.2 Disposals – – (0.8) (0.1) (0.9) Net foreign exchange differences – 0.1 0.7 0.4 1.2 At 30 April 2015 0.1 11.6 91.2 9.3 112.2
Net book value At 30 April 2014 0.7 4.2 4.8 7.0 16.7 At 30 April 2015 0.7 3.2 4.8 6.1 14.8 WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe The amortisation charge intangibleassetsisrecognised of The amortisation within“Administrative expenses” intheincome statement. two andseven years. theHRTVof over theirestimated theseassetsare usefuleconomic acquisition. Otherthangoodwill lives amortised whichfall between The assetsacquired through businesscombinations represent the identifiableintangibleassetsacquired from The Stronach Group aspart fully amortised. in March 2013. over theirestimatedThese are usefuleconomic lives, amortised whichfall between two to sixyears, andare now all customer listsandbroadcasting and wagering rights) theBlueSquare of andthecustomer databasepurchased Betacquisition aspart The remaining otherbrought forward intangiblesrepresent the of assetspurchasedTVG aspart Network acquisition(beingbrand, capitalised inaccordance withtherequirements IAS of 38“Intangible Assets”. Development expenditure represents internallyandexternally generated costs incurred ondevelopment activities. These costs have been licences heldby theGroup. Computer software represents software licences whichhave been purchased from suppliers. Licences represent andgaming bookmaking At 30April2015 At 30April2014 valueNet book At 30April2015 Net foreign exchange differences Amortisation for theyearAmortisation At 30April2014 Net foreign exchange differences Amortisation for theyearAmortisation At 1May 2013 Amortisation At 30April2015 Net foreign exchange differences Other acquisitions– Other acquisitions– combinations Acquired through business At 30April2014 Net foreign exchange differences purchased Other acquisitions–externally developed Other acquisitions–internally At 1May 2013 Cost 9 Goodwill andotherintangibleassets 9 Goodwill externally purchased internally developed Goodwill 60.0 34.9 53.0 55.8 35.3 18.9 34.1 (2.8) 25.1 (1.2) 0.8 4.3 2.7 £m – – – – – – Computer Computer software 30.3 26.6 32.8 34.5 36.2 35.5 (0.1) (0.1) 0.8 3.4 2.6 5.2 1.0 3.7 £m – – – – – Licences (0.1) (0.1) 0.6 0.2 0.2 2.3 1.8 0.7 1.8 1.6 4.1 1.5 2.1 2.1 £m – – – – – Development Development expenditure 108.0 142.0 130.8 119.8 118.8 22.8 22.2 97.8 10.2 (0.3) 11.7 4.9 6.6 4.3 0.3 7.4 0.1 £m – – Brand (0.2) (0.2) 0.4 0.3 0.2 0.2 2.5 2.2 1.9 1.9 0.1 Annual Report andAccountsBetfair 2015 Group plcAnnualReport 2.1 2.1 £m – – – – – – Customer (0.4) (0.3) 4.4 0.4 0.4 2.4 2.4 9.4 9.5 9.5 6.7 2.7 9.1 lists £m – – – – – – and wagering Broadcasting 30.4 32.2 31.3 rights (0.1) (0.1) 0.8 0.8 0.9 0.8 0.9 1.8 0.1 0.1 0.1 £m – – – – – 286.5 203.3 168.5 183.9 233.2 223.1 49.3 36.0 83.2 (2.0) (3.8) 17.4 Total 17.7 6.6 6.9 6.5 3.8 7.4 1.7 £m 100-101
FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe FINANCIAL STATEMENTS NOTES (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED
9 Goodwill and other intangible assets continued Goodwill At 30 April 2015, the carrying amount of goodwill, after the impairment review, was £25.1m (30 April 2014: £18.9m) allocated across one (30 April 2014: one) CGU as follows: 2015 2014 £m £m CGU TVG 25.1 18.9 Total goodwill net book value at 30 April 25.1 18.9
All goodwill is recorded in local currency. Additions are converted at the exchange rate on the date of the transaction and the goodwill at the end of the year is stated at closing exchange rates. Impairment testing Goodwill Goodwill is tested annually for impairment at each reporting date by comparing the carrying amounts of these assets with their recoverable amounts. Where the recoverable amount exceeds the carrying amount of the assets, the assets are considered as not impaired. No impairment charges were incurred in the year ended 30 April 2015 (30 April 2014: £nil). The TVG CGU is comprised of the assets and operations of the TVG Network and newly acquired HRTV network, which are included in the Group’s Betfair US operating segment as disclosed in note 2. Additional information regarding the acquisition is included in note 23. Testing is carried out by allocating the carrying value of these assets to the CGU and determining the recoverable amount of this CGU through a value in use calculation. The calculation is based on projecting future pre-tax cash flows over a five-year period and uses a terminal value to incorporate expectations of growth thereafter. The terminal value is calculated using a perpetuity model, which reflects the expected long-term average growth rate for the business in which the CGU operates. The budgets for the next financial year, which are subject to Board approval, form the basis of the cash flow projections for the CGU. Cash flow projections for the next four financial years reflect management’s expectations of the medium-term operating performance of the CGU and growth prospects in the CGU’s markets and regions, and have been modelled in line with historic patterns experienced by the Group in recent years, where relevant. Growth rates used do not exceed expectations of long-term growth in the local market. A discount factor is applied to obtain a “value in use” which is the recoverable amount, unless the fair value less costs to sell the CGU is an amount in excess of the “value in use”. The discount rate is estimated by the Group using a range of equity costs for similar companies and external market data, with samples chosen where applicable from the same markets or territories as the CGU. The calculation of value in use for goodwill is sensitive to the following key assumptions: (i) Operating cash flow One of the key drivers of operating cash flow is revenue as the calculation of the recoverable amount of TVG goodwill is sensitive to future developments in US horseracing. The 2016 revenue figures for the CGU are based on the budget for the next financial year. For the years 2017 to 2020, the likely organic growth rates were assessed for each region in the CGU, taking account of past experience, growth prospects in regions and historic player patterns. The terminal growth rate used was nil% (30 April 2014: nil%). Management considers the assumed growth rate to be conservative. (ii) Discount rate applied The discount rate applied to the CGU represents a pre-tax rate that reflects the Group’s weighted average cost of capital adjusted for the risks specific to that CGU. For the TVG CGU, a pre-tax discount rate of 11.0% (30 April 2014: 12.5%) has been used in discounting the projected cash flows. As discussed on page 20, the TVG business performed positively during the financial year. As a result, there are no reasonable changes in the key assumptions that would cause the carrying amount of the CGU to exceed the recoverable amount. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe Eliminated ondisposal At theyear thebeginningof Goodwill At theyear theendof Eliminated ondisposal Foreign exchange differences Share interest of receivable Share operating of profit/(loss) Repayment loan of Foreign exchange differences At theyear thebeginningof Loan At theyear theendof The Group’s profit ondisposal jointventure of was calculated asfollows: At 30April2015 At 30April2014 valueNet book At theyear theendof Expenses Revenue Total liabilities assets Non-current Current assets At theyear thebeginningof netassets/(liabilities)Share of The interest intheGroup’s jointventures isasfollows: withthesharemethod profit of for ontheface reported theperiod theincome of statement. Group. disposal, Untilthedateof inaccordance withIAS 28, theGroup’s interest inthejointventure was accounted for usingtheequity A$10.0mof (£5.5m). The shareholder loanowed by thejointventure, whichamounted to A$11.7m (£6.5m), was alsorepaid to the AugustOn 12 2014, theGroup completed thesale its50%share of initsjointventure, Betfair Limited, for Australasia consideration Pty 10 Investments in subsidiaries andjointarrangements 30 April2014. The tablebelow presents aggregated thesummary financial information Betfair of for Limited at100% Australasia theyear Pty ended jointventure ondisposalProfit of Less atdisposal goodwill Add share netliabilities atdisposal of Sale proceeds Annual Report andAccountsBetfair 2015 Group plcAnnualReport (0.4) (6.5) 2015 (1.2) (0.1) 0.4 0.2 6.3 5.5 1.3 0.1 0.1 0.1 £m – – – (31.4) 30.9 (0.4) 10.5 (9.8) (0.3) 2015 2014 2014 (1.4) (1.5) (1.2) 6.4 0.4 0.4 6.3 0.3 0.2 5.3 5.5 5.5 7.8 7.9 1.3 £m £m £m – – – 102-103
FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe FINANCIAL STATEMENTS NOTES (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED
10 Investments in subsidiaries and joint arrangements continued The Group and Company have the following principal holdings in subsidiaries and investments: Ordinary shares Country of origin Principal activity Classification held % The Sporting Exchange Limited England Holding company Subsidiary 100 Betfair Limited England Support services Subsidiary 100 The Sporting Exchange (Clients) Limited England Trust operator Subsidiary 100 Timeform Limited England Publisher Subsidiary 100 TSE Global Limited England Support services Subsidiary 100 TSE Development Limited England Intellectual property licensor Subsidiary 100 TSE Holdings Limited England Holding company Subsidiary 100 TSE (International) Ltd England Holding company Subsidiary 100 Winslow One Limited England Holding company Subsidiary 100 Winslow Two England Holding company Subsidiary 100 Winslow Three Limited Cayman Islands Investment and holding company Subsidiary 100 Winslow Four Cayman Islands Investment and holding company Subsidiary 100 TSE (Gibraltar) LP Gibraltar Online sports betting Subsidiary 100 TSE Data Processing Limited Ireland Data centre and support services Subsidiary 100 Intellectual property licensor and Polco Limited Malta online sports betting Subsidiary 100 Betfair Games Limited Malta Online gaming Subsidiary 100 Betfair Casino Limited Malta Online gaming Subsidiary 100 Betfair Counterparty Services Limited Malta Online sports betting Subsidiary 100 Betfair Entertainment Limited Malta Online gaming Subsidiary 100 Betfair International Plc Malta Online sports betting and gaming Subsidiary 100 Betfair Marketing Limited Malta Marketing activities Subsidiary 100 Betfair Holding (Malta) Limited Malta Holding company Subsidiary 100 Betfair Poker Holdings Limited Malta Holding company Subsidiary 100 Betfair Italia S.R.L. Italy Online sports betting and gaming Subsidiary 100 TSE Development Romania S.R.L. Romania R&D activities Subsidiary 100 TSE Services Limited Gibraltar Support services Subsidiary 100 TSE Marketing España, SL Spain Marketing activities Subsidiary 100 The Rebate Company LLC USA Online gaming Subsidiary 100 TSE US Holdings LLC USA Holding company Subsidiary 100 TSE US LLC USA R&D activities Subsidiary 100 ODS Holding LLC USA Holding company Subsidiary 100 ODS Technologies LP USA Online gaming Subsidiary 100 Trackside Live Productions, LLC USA Online gaming Subsidiary 100 ODS Properties, Inc. USA Property holding company Subsidiary 100 Betfair Interactive US LLC USA Online gaming Subsidiary 100 HRTV, LLC USA Online gaming Subsidiary 100 HRTV Holdco LLC USA Holding company Subsidiary 100 TSED Unipessoal LDA Portugal R&D activities Subsidiary 100 Tradefair Spreads Limited* England Spread betting services Subsidiary 99.75 London Multi Asset Exchange (Holdings) Limited* England Holding company Subsidiary 99.75 LMAX Limited England Trading Investment 31.4 * Non-controlling interest of 0.25% exists in relation to Tradefair Spreads Limited and London Multi Asset Exchange (Holdings) Limited. The value of this non-controlling interest was less than £0.1m at 30 April 2015 and 30 April 2014. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe Movements indeferred taxare asfollows: relevant jurisdictions. These have notbeen recognised there of onthebasisthatthere beingfuture isinsufficientcertainty taxable profits inthe respect share-based of payments £nil(30April2014: of £0.6m). assets inrespect depreciation of inexcess capitalallowances of £0.7m of (30April2014: £0.8m) andunrecognised deferred taxassetsin The Group hasunrecognised deferred taxassetsinrespect £13.2m lossesof of (30April2014: £8.9m), unrecognised deferred tax Deferred taxassets/(liabilities) Other Losses 13 Trade andotherreceivables Balance at30April2015 Equity-settled share-based payments Recognised inequity Intangible assets Total Prepayments Other receivables Trade receivables Recognised inincome statement Balance at30April 2014 Recognised inequity Recognised inincome statement Balance at1May 2013 Property, plantandequipment Recognised deferred taxassetsandliabilitiesare attributableto thefollowing: Deferred12 taxassetsandliabilities At 30April At 1May Featurespace Limited decreased from 9.9% to 6.7% on9June2014 asaresult new of share issuesby Featurespace Limited. Limited decreased from 33% to 31.4% on5March 2014 asaresult new of share issuesby LMAX Limited. The Group’s holdingin operations LMAX anddecisionmakingof Limited anddoesnothave any representation ontheBoard. The Group’s holdinginLMAX Limited (£0.1m) andnon-controlling interest inLMAX Limited 31.4% of (£1.2m). The Group doesnothave significantinfluence over the At 30April2015 and2014, theavailable-for-sale financialassetscomprised theGroup’s 6.7% non-controlling interest inFeaturespace 11 Available-for-sale financialassets deemed to besignificant to theseaccounts. theGroup Afulllistof andCompany subsidiarieswillbeincluded inthenext annualreturn. Other direct theGroup holdingsof andCompany have been excluded inaccordance withtheCompanies s410, 2006 Act asthey are not Exchange Limited ishelddirectly by BetfairThe Sporting Group Allothersubsidiariesare plc. heldindirectly. and associated costs equipment Property, Property, plant and plant and (0.4) (0.5) 2015 2015 0.9 6.3 5.4 5.4 8.3 5.8 0.2 1.8 £m £m Assets – – – Intangible Intangible assets (4.3) 2014 (4.1) (4.1) 8.0 5.8 0.2 1.0 1.2 £m £m – – – – – Share-based Share-based payments 2015 2015 (4.1) (4.1) (0.1) (0.1) Liabilities 0.4 0.4 1.0 1.8 1.2 £m £m – – – – Annual Report andAccountsBetfair 2015 Group plcAnnualReport Tax value of loss carry- forwards 2014 (4.1) (4.1) 0.2 0.2 £m £m – – – – – – – – – Other 14.6 23.3 (0.3) 2015 2015 2015 2015 (4.1) (0.7) 0.9 0.9 4.2 5.4 0.2 3.6 1.8 1.9 1.2 1.3 1.3 5.1 £m £m £m £m Total – – 23.0 15.4 Total 2014 2014 2014 (4.1) (0.1) (0.1) 0.4 4.2 5.8 3.9 3.9 5.4 (1.1) 2.2 1.0 1.3 1.3 1.2 5.1 £m £m £m £m – 104-105
FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe FINANCIAL STATEMENTS NOTES (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED
14 Cash and cash equivalents 2015 2014 £m £m Cash and cash equivalents 105.1 209.8 The above cash and cash equivalents include £12.9m (30 April 2014: £9.0m) of customer funds that are not held on trust in The Sporting Exchange (Clients) Limited in accordance with local regulations. These customer funds that are not held on trust are matched by liabilities of an equal value as disclosed in note 15. The cash and cash equivalents also include an additional £0.7m of restricted cash relating to the Group’s financial guarantees (30 April 2014: £0.9m). As at 30 April 2015, £280.6m (30 April 2014: £269.0m) was held on trust in The Sporting Exchange (Clients) Limited, on behalf of the Group’s customers and is equal to the amounts deposited into customer accounts. 15 Trade and other payables 2015 2014 £m £m Trade payables 8.6 8.1 Other payables 31.0 21.2 Amounts owed to joint ventures – 2.1 Accruals and other taxation 88.5 80.4 Total current 128.1 111.8 Included in other payables at 30 April 2015 is an amount of £12.9m (30 April 2014: £9.0m) in respect of amounts due to customers, representing deposits received and customer winnings which are not held on trust. This is offset by an equivalent amount of customer funds held, which is included in cash and cash equivalents as disclosed in note 14. The non-current trade and other payables are as follows: 2015 2014 £m £m Other payables 19.5 – Total non-current 19.5 –
The non-current trade and other payables relate to the deferred and contingent consideration payable to The Stronach Group that will be settled more than 12 months after the reporting date. 16 Provisions Redundancy Onerous Gaming provision contracts tax Total £m £m £m £m Balance at 1 May 2013 9.7 1.9 – 11.6 Utilised in the year (9.7) (1.6) – (11.3) Reclassification from non-current* – 0.9 – 0.9 Current provisions 30 April 2014 – 1.2 – 1.2 Additions in the year – – 4.1 4.1 Utilised in the year – (0.5) – (0.5) Reclassification from non-current* – 0.3 – 0.3 Current provisions 30 April 2015 – 1.0 4.1 5.1
Balance at 1 May 2013 – 1.6 – 1.6 Reclassification to current* – (0.9) – (0.9) Non-current provisions 30 April 2014 – 0.7 – 0.7 Reclassification to current* – (0.3) – (0.3) Non-current provisions 30 April 2015 – 0.4 – 0.4
* Non-current provisions reflect contractual obligations that will be settled more than 12 months after the reporting date. During the year, £0.3m (30 April 2014: £0.9m) has been reclassified from non-current provisions to current provisions. Onerous contracts relate to provisions made in relation to operating leases for premises that were vacated during the year ended 30 April 2013 as part of the restructuring. Gaming tax provisions relate to amounts provided for taxes in certain jurisdictions where the interpretation of tax legislation is uncertain. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe Share capital 17 Equity their employment ceases. option grants. to Options vest continued employees subject may employment althoughcertain begiven extended vesting datesafter may notexceed 10years. Share optionsare granted condition. underaservice There are nomarket conditions associated withthe share No consideration ispayable onthegrant vest over anoption.Optionstypically of four of aperiod years theoptions andthetermof Under theGroup’s share optionplans, optionsmay begranted to theDirectors andemployees to purchase ordinaryshares. (a) Share optionplans listing ontheLondon Stock Exchange. The expected dividendyieldandvolatility was calculated based onthehistorical yield andhistorical volatilitytheCompany of since initial restrictions andbehavioural considerations. model. The expected isbased onmanagement’s termused inthemodel bestestimate, for theeffects non-transferability, of exercise The fair value theoptions(Share of optionplansandSAYE share optionschemes) isdetermined usingtheBlack-Scholes optionpricing (30 April2014: £0.8m). Insurance costs) for theyear ended 30April2015 (30April2014: £6.5m). Employers’ NationalInsurance costs amountto £1.2m In accordance withIFRS 2,thetotal expense recognised inrespect theseschemes was of £9.2m (excluding Employers’ National outstanding andare exercisable upto 30April2025. As at30April2015, 3,941,432 share optionsandrestricted shares (30April2014: 4,148,327) theGroup inthecapitalof remain (f) (e) (d) (c) (b) Save-As-You-Earn (“SAYE”) share optionschemes (a) The Group hadthefollowing share-based payment schemesinoperation duringtheyear: 18 Share-based payments long-term foreign currency balances considered innature. to bequasi-equity The foreign currency translation reserve comprises allforeign exchange differences ontherevaluation foreign of currency entitiesand Translation reserve Other reserves mainlycomprise taxdirectly recognised inequity. Other reserves The total fullydiluted shares asat30April2015 was 96,544,683 (30April2014: 109,136,657). The Employee Benefit Trust held429,471 shares ordinary intheCompany asat30April2015 (30April2014: 1,515,096). Exercise prices ranged from £0.001 to £10.00. (30 April 2014: 62,294) SAYE options, resulting intotal consideration from shares theissue of £5.6m of (30April2014: £2.5m). (30 April 2014: 704,426) share optionsandrestricted shares and£0.2m (30April2014: £0.3m) for theexercise 35,360 of During theyear, theGroup received consideration £5.4m of (30April2014: £2.2m)for theexercise 790,464 of 92,603,251 ordinaryshares £0.00095 of (30April2014: £0.001) each (30April2014: 104,988,330) Allotted, called upandfullypaid Issued by theGroup inrelation to: As at1May Total £0.00095 shares of (2014: £0.001) fullypaid,ordinary each asat30April Impact of share of Impact consolidation Exercised share optionsandrestricted shares Exercised SAYE options Stakeholder award scheme. Restricted share scheme Share optionplans Senior Executives’ Incentive Plan Long Term Incentive Plan,Deferred Share IncentiveTerm Plan,Short Incentive PlanandManagementIncentive Plan Annual Report andAccountsBetfair 2015 Group plcAnnualReport Note 25 104,988,330 (13,210,903) 92,603,251 790,464 35,360 Ordinary shares Ordinary 2015 2015 0.1 £m No 104,988,330 104,221,610 704,426 62,294 2014 2014 0.1 £m No – 106-107
FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe FINANCIAL STATEMENTS NOTES (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED
18 Share-based payments continued (a) Share option plans continued Lapsed/ Outstanding Granted cancelled Exercised Outstanding Exercise at 1 May during during the during the at 30 April price Exercisable Financial year granted 2014 the year year year 2015 £ before 2005 70,303 – (34,183) (36,120) – 2.17 – 4.50 2015 2006 175,061 – (9,063) (149,336) 16,662 4.50 2016 2007 534,488 – (107,439) (424,686) 2,363 0.001 – 10.00 2017 2008 36,275 – (5,275) (28,000) 3,000 0.001 – 10.00 2018 2009 5,000 – (2,000) (3,000) – 0.001 – 10.00 2019 2010 10,000 – (10,000) – – 0.001 – 10.00 2020 2011 6,129 – (2,726) (403) 3,000 0.001 – 10.00 2021 2012 24,195 – (9,195) (15,000) – 0.001 – 8.71 2022 861,451 – (179,881) (656,545) 25,025
25,025 options were exercisable under this scheme as at 30 April 2015 (30 April 2014: 855,014). The weighted average exercise price for share options exercised during the year is £7.94 (30 April 2014: £4.77) at a weighted average share price at the date of exercise of £11.74 (30 April 2014: £9.51). The fair value of the options is expensed over the period that the options vest. The following assumptions were used in the Black-Scholes pricing model for the above options: Share price at date of grant £0.40 – £10.00 Exercise price £0.001 – £10.00 Expected volatility 32.51% – 62.71% Expected term until exercised 1 – 5 years Expected dividend yield Nil – 0.8% Risk-free interest rate 0.35% – 5.79%
There were no options granted under the share options plan during the year ended 30 April 2015 (30 April 2014: none). No expense was incurred in the year ended 30 April 2015 (30 April 2014: £nil). (b) Save-As-You-Earn (“SAYE”) share option schemes The Group operates an HMRC approved SAYE share option scheme in which all UK employees and some international employees can participate. Participants save a fixed amount of up to £500 (30 April 2014: £250) per month for three years and are then able to use these savings to buy shares in the Group at a price fixed at a 20% discount to the market value at the start of the savings period. There are no market conditions associated with the SAYE option grants. The SAYE options must ordinarily be exercised within six months of completing the relevant savings period. In line with market practice, the exercise of these options is not subject to any performance conditions. Lapsed/ Outstanding Granted cancelled Exercised Outstanding Exercise at 1 May during during the during the at 30 April price Exercisable Financial year granted 2014 the year year year 2015 £ before 2012 271,395 – (16,955) (247,977) 6,463 5.68 2016 2014 210,350 – (50,162) (7,323) 152,865 8.17 2018 2015 – 473,081 (23,120) – 449,961 9.08 2019 481,745 473,081 (90,237) (255,300) 609,289
The weighted average exercise price for share options exercised during the year is £5.75 (30 April 2014: £5.96) at a weighted average share price at the date of exercise of £12.85 (30 April 2014: £9.93). WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe award whichisbetween oneandthree years. schemes isbased onamixture theindividual performance of theemployee of and the Group-wide performance over the thetermof consistent withthemeasurement outlined above ineach share-based payment category. The level award of granted ineach the of The schemeshave awards intheform cash,share of optionsandrestricted shares. Determiningthefair value each of element is • • • • business strategy: The following shares were introduced to incentivise andreward for andlong-term theshort-term thesuccessfulof delivery (d) Long Term Incentive Plan,Deferred ShareTerm Incentive Plan,Short Incentive PlanandManagement Incentive Plan The Employers’ NationalInsurance costs amounted to £0.1m (30April2014: £0.2m). was £0.9m (30April2014: £1.4m). The total expense recognised intheincome statementrelated to therestricted shares (excluding Employers’ NationalInsurance costs) average share price exercise atthedateof £10.32 of (30April2014: £9.94). The weighted average exercise price for share optionsexercised duringtheyear was £0.001 (30April2014: £0.001) ataweighted Restricted shares are valued withreference to themarket value theshares of grant. onthedateof 2015 2014 2013 2012 2009 Share price grant atdateof forpricing model theabove options: The fair value theoptionsisexpensed of over thattheoptionsvest. theperiod The following assumptionswere used intheBlack-Scholes Exercise price Expected volatility Expected Expected termuntilexercisedExpected Expected dividendyield Expected Risk-free interest rate three years. individualswereA numberof granted restricted shares inthecurrent andpriorperiods. These have arange vesting upto of of periods These were expensed over theremaining vestingtheoriginallygranted of period share options. 2012, outstandingshare theGroupIn January optionsandreplaced certain modified themwithrestricted shares ona3:1basis. Awards therestricted madeunderthetermsof shares schemeplanpriorto 2010 have vested. Refer to note18(d). introduction theLong of Term Incentive Plan,Deferred Share IncentiveTerm Plan,Short Incentive PlanandManagementIncentive Plan. The Group provided itsbonusplanuntil2010. of arestricted shares schemeaspart In2011, thebonusplanwas revised withthe (c) Restricted share scheme The expense recognised intheincome statement(excluding Employers’ NationalInsurance costs) was £0.6m (30April2014: £0.4m). value theoptionsgranted of intheyear ended 30April2015 was £5.43. There were 473,081 SAYE optionsgranted duringtheyear ended 30April2015 (30April2014: 231,173). The weighted average fair Deferred Share whichconsists Incentive cashandrestricted of Plan(“DSIP”) share awards. Management Incentive Plan(“MIP”) whichconsists cashandrestricted of share awards; and TermShort Incentive Plan(“STIP”) whichconsists cashandrestricted of share awards; Long Term Incentive Plan(“LTIP”) whichconsists share of optionsandrestricted share awards; Outstanding 358,206 247,859 63,894 30,550 15,903 at 1May 2014 – 70,029 70,029 the year Granted during – – – – during the (14,525) (22,763) (4,488) cancelled (3,750) Lapsed/ year – – (158,335) (116,667) (10,000) during the (14,836) Exercised (11,415) (5,417) year Annual Report andAccountsBetfair 2015 Group plcAnnualReport 3.25 years Outstanding at 30April 30.67% 116,667 247,137 60,029 58,477 0.89% 11,964 1.48% £13.51 £9.08 2015 2015 – Exercise 0.001 0.001 0.001 0.001 0.001 33.36% –54.40% price 0.84% –5.08% £ £2.71 –£10.13 £2.17 –£8.17 Nil –1.29% 3.25 years 2010–2014 Exercisable 2020 2018 2019 2014 before 2017 108-109
FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe FINANCIAL STATEMENTS NOTES (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED
18 Share-based payments continued (d) Long Term Incentive Plan, Deferred Share Incentive Plan, Short Term Incentive Plan and Management Incentive Plan continued Lapsed/ Outstanding Granted cancelled Exercised Outstanding Exercise at 1 May during during the during the at 30 April price Exercisable Scheme year 2014 the year year year 2015 £ before 2010 1,570 – – (1,570) – 0.001 2020 2011 2,223 – (324) (1,899) – 0.001 2021 2012 55,181 – (400) (50,663) 4,118 0.001-8.56 2022 2013 1,033,934 – (92,062) (46,395) 895,477 0.001 2023 2014 1,192,280 6,565 (218,540) (83,839) 896,466 0.001 2024 2015 – 1,286,636 (31,956) (4,469) 1,250,211 0.001 2025 2,285,188 1,293,201 (343,282) (188,835) 3,046,272
The weighted average exercise price for share options exercised during the year was £0.87 (30 April 2014: £0.001) at a weighted average share price at the date of exercise of £11.61 (30 April 2014: £9.71). The fair value of the share options in the LTIP scheme is expensed over the three-year period that the options vest. No grants were awarded in the current year which included option elements. The following assumptions were used in the Black-Scholes pricing model for options granted in the year ended 30 April 2012
Financial year options granted 2012 Share price at date of grant £8.56 Exercise price £8.56 Expected volatility 43.91% Expected term until exercised 4 years Expected dividend yield Nil Risk-free interest rate 1.97%
The STIP and the MIP have cash elements which are fixed in value and are paid and expensed in the first year that the awards are issued. The cash award represents two-thirds of the total award. There is no option given to elect to have these issued in shares. The cash element issued is classified as a cash bonus in the income statement and not a “cash-settled share-based payment” on the basis that the employee does not have the option to choose whether they receive cash or shares. The restricted shares in the LTIP, DSIP, STIP and MIP are measured consistently with the treatment of other restricted shares. The restricted shares in the LTIP scheme vest at the end of the third year. The STIP, MIP and DSIP restricted shares vest over the second and third year of the scheme. An expense of £7.7m for the options and restricted shares has been recognised (excluding Employers’ National Insurance costs) which is management’s best estimate of the charge in respect of these awards for the current year (30 April 2014: £4.7m). The removal of the TSR metric for certain options, as discussed in the Directors’ Remuneration Report, has not resulted in a modification under IFRS 2. The cash element of the scheme has been included in the bonus cash pool for the performance year ended 30 April 2015. The Employers’ National Insurance costs amounted to £1.1m (30 April 2014: £0.6m). (e) Senior Executives’ Incentive Plan The long-term Senior Executives’ Incentive Plan (“SEIP”) was approved by the Board on 16 October 2007. The plan entailed certain senior management and Directors being granted one-off awards consisting of a cash and restricted shares element. The scheme came into effect upon the admission of the Group’s shares on the London Stock Exchange, and the cash was paid on the date of admission to the participants in the scheme. The restricted shares were granted on the date of admission and half vested on the first anniversary of the listing and the next half on the second anniversary of the listing subject to continued employment. The restricted shares in the SEIP are measured consistently with the treatment of other restricted shares. No expense was incurred in the year ended 30 April 2015 (30 April 2014: £nil). Lapsed/ Outstanding Granted cancelled Exercised Outstanding Exercise at 1 May during during the during the at 30 April price Exercisable Scheme year 2014 the year year year 2015 £ before 2011 126,516 – – (126,516) – 0.001 2021
The weighted average exercise price for share options exercised during the year was £0.001 (30 April 2014: £0.001) at a weighted average share price at the date of exercise of £10.29 (30 April 2014: £9.30). WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe present value future of cashflows discounted atthemarket rate interest of dateiftheeffect ismaterial. atthereporting The fair value trade of andotherreceivables isvalued atfair value lessany provision for baddebts. The fair value isestimated usingthe Trade andotherreceivables quoted prices included withinlevel 1. The fair value available-for-sale of financialassetsis valued by reference to valuation techniquesusingobservable inputsotherthan Available-for-sale financialassets (a) Fair values financial instruments of Net financialassets Amounts owed to jointventures Deferred andcontingent consideration Trade andotherpayables cost Liabilities atamortised Derivative financialliability Fair value through theincome statement Financial liabilities Cash andcashequivalentsCash Trade andotherreceivables Loans andreceivables The carrying valueThe carrying theGroup’s of financialinstrumentsby category, together withtheirfair values, isanalysed asfollows: 20 Financial instruments within pensioncosts disclosed innote4relating to thisplaninthecurrent year was £2.0m (30April2014: £1.9m). In August 2008, theGroup introduced adefined contribution pensionplanavailable employees. to certain The total expense shown Defined contribution plans 19 Employee benefits average share price exercise atthe dateof £14.06 of (30April2014: £9.39). The weighted average exercise price for share optionsexercised duringtheyear was £0.001 (30April2014: £0.001) ataweighted Available-for-sale financialassets Available-for-sale financial assets Financial assets 2011 Scheme year No expense was incurred intheyear ended 30April2015 (30April2014: £nil). date andthey are measured based onthemarket value grant atthedateof (1May 2010: £10.00). consistently withthetreatment otherrestricted of shares. The phantom shares intheschemeare to onlyconvertible cashuponthevest the vest 1August dateof 2011. The restricted shares intheschemeare into convertible shares uponvest dateandthey are measured The restricted shares andphantom shares have avesting spanningfrom period day thefirst thefinancialyear of to whichthey relate to scheme. The schemerelates to theindividualemployees’ performance duringthefinancialyear ended 30April2010. During 2011, theGroup issued restricted shares andphantom shares to theemployeesstakeholder of theGroup of award aspart Stakeholder award(f) scheme Outstanding 35,221 at 1May 2014 the year Granted during – during the cancelled (1,805) Lapsed/ 20(b) 20(b) Note year 14 13 15 15 11 during the (19,707) Exercised Carrying (38.6) (20.5) 105.1 55.8 value (0.2) 2015 year 8.7 1.3 £m – Annual Report andAccountsBetfair 2015 Group plcAnnualReport Outstanding at 30April 13,709 (38.6) (20.5) 105.1 55.8 value (0.2) 2015 2015 8.7 Fair 1.3 £m – Carrying Exercise 209.8 0.001 (29.3) 187.2 value 2014 price (0.1) (2.1) 7.6 1.3 £m – £ Exercisable 209.8 2020 (29.3) 187.2 before value 2014 (0.1) (2.1) 7.6 1.3 Fair £m – 110-111 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe FINANCIAL STATEMENTS NOTES (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED
20 Financial instruments continued Cash and cash equivalents The fair value of cash and cash equivalents approximates to book value due to its short-term maturity. Trade and other payables and amounts owed to joint ventures The fair value of trade and other payables and amounts owed to joint ventures is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material. Derivative financial instruments Derivative financial instruments comprise sports betting open positions. The fair value of open sports bets at the year end has been calculated using the latest available prices on the Group’s own markets on relevant sporting events. The fair value calculation also includes the impact of any Exchange hedging activities in relation to these open positions. Deferred and contingent consideration The fair value of deferred and contingent consideration is estimated using the present value of acquired future cash flows discounted at the market rate of interest at the reporting date. The fair value is subsequently reassessed at each reporting date to reflect changes in estimates and assumptions. The table below sets out fair value measurements using the IFRS 13 fair value hierarchy: Total Level 1 Level 2 Level 3 2015 2015 2015 2015 Note £m £m £m £m Available-for-sale financial assets 11 1.3 – 1.3 – Deferred and contingent consideration (20.5) – – (20.5) Fair value of open bets (0.2) – (0.2) – Net position (19.4) – 1.1 (20.5)
Total Level 1 Level 2 Level 3 2014 2014 2014 2014 Note £m £m £m £m Available-for-sale financial assets 11 1.3 – 1.3 – Fair value of open bets (0.1) – (0.1) – Net position 1.2 – 1.2 –
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset as follows: Level 1 – valued using quoted prices in active markets for identical assets Level 2 – valued by reference to valuation techniques using observable inputs other than quoted prices included within level 1 Level 3 – valued by reference to valuation techniques using inputs that are not based on observable market data. There have been no transfers during the year between levels 1 and 2. The fair value of open bet liabilities is classified as level 2 in the hierarchy using observable inputs other than quoted prices. The principal assumptions within the open bet liabilities valuation relate to anticipated gross win margins on unsettled bets with the fair value determined by future sporting results. The fair value of deferred and contingent consideration is classified as level 3 in the hierarchy using some inputs not based on observable market data. The principal assumptions within the deferred and contingent consideration valuation relate to future net operating cash flows, the associated time period of these cash flows, the discount rate applied and the anticipated growth rate. (b) Financial risk management The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. Risk management policies and procedures are reviewed regularly and monitored to reflect changes in market conditions and the Group’s activities. The Group aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations surrounding risk management. The Group has exposure to the following risks from its use of financial instruments: • Liquidity risk • Market risk including currency risk and interest risk • Credit risk. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe except derivatives whenitisbased onnotional amounts: The Group’s exposure to foreign currency riskisasfollows. amountfor financialinstruments This isbased onthecarrying monetary commitments theGroup into. enters and where appropriate currency may undertake hedging to unfavourable mitigate theriskof foreign exchange movements onspecific The Group doesnotnormallyhedge againstthesesales andpurchases. However, theGroup monitors allforeign currency exposures The currencies inwhichthesetransactions primarilyare denominated are (USD), USDollars Euros (EUR)andAustralian (AUD). Dollars The Group isexposed to currency riskonsales andpurchases thatare denominated inacurrency otherthanPounds Sterling(GBP). Foreign currency risk guidelines approved by them. The Group willutilise hedges where there isanidentified requirement to manageprofit orlossvolatility. marketThe managementof risk isperformedby theCorporate theGroup of underthesupervision RiskCommittee andaccording to the risk exposures withinacceptable parameters, whileoptimisingthereturn onrisk. income orthevalue itsholdingsinfinancialinstruments. of market of The objective riskmanagementisto manageandcontrol market Market riskisthethatchangesinmarket prices, suchasforeign currency exchange rates andinterest rates, willaffect theGroup’s Market risk The undiscounted amountspayable underthedeferred andcontingent consideration total £31.1m. 30 April2014 30 April2015 analysisThe maturity thefinancialliabilitiesisasfollows: of Total Deferred andcontingent consideration (withinOtherpayables) Fair value openbets(withinAccruals) of Derivative financialliabilities Amounts owed to jointventures Deferred andcontingent consideration Amounts owed to jointventures Fair value openbets of Fair value openbets of Trade andotherpayables financialliabilities Non-derivative table below: The Group’s financialliabilities, includingestimated interest payments andexcluding theeffect nettingagreements of issummarised inthe for atleast of aperiod 90days. The Group hasnocommitted credit. linesof The Group regular performs cashflow projections to ensure thatithassufficientcashondemandto meet expected operational expenses spreads itscashreserves across several highlyrated banks risks. andinvestments to mitigatecounterparty normal andstressed conditions, withoutincurringunacceptable lossesorriskingdamageto theGroup’s reputation. The Group also isto ensure,managing liquidity asfar aspossible, thatitwillalways have to meet sufficientliquidity itsliabilitieswhendue, underboth riskisthethatGroupLiquidity willnotbeableto meet itsfinancialobligationsasthey fall due. The Group’s approach to risk Liquidity processes for managingfinancialriskandthemeasurement capital. of This notepresents information abouttheGroup’s exposure to theabove risks aswell asoutliningtheGroup’s objectives, policiesand Trade andotherpayables Trade andotherpayables 0–30 days 0–30 days 0–30 28.0 37.1 0.2 0.1 2.1 £m £m – 31–60 days 31–60 days 31–60 0.7 1.2 £m £m – – – – Annual Report andAccountsBetfair 2015 Group plcAnnualReport 61–90 days 61–90 days 61–90 0.1 0.1 £m £m Note – – – – 15 15 > 91 days > 91 days Carrying amount Carrying 20.5 38.6 0.5 0.2 20.5 59.3 £m £m 2015 0.2 – – – £m – 38.6 20.5 29.3 Total Total 0.2 29.3 0.1 31.5 2.1 £m £m 2014 0.1 2.1 £m – 112-113 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe FINANCIAL STATEMENTS NOTES (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED
20 Financial instruments continued Liquidity risk continued 30 April 2015 GBP EUR USD AUD Other Total £m £m £m £m £m £m Cash and cash equivalents 78.2 12.0 13.4 0.9 0.6 105.1 Trade payables (4.5) (3.2) (0.5) – (0.4) (8.6) Balance sheet exposure 73.7 8.8 12.9 0.9 0.2 96.5
30 April 2014 GBP EUR USD AUD Other Total £m £m £m £m £m £m Cash and cash equivalents 180.9 14.1 11.9 2.0 0.9 209.8 Trade payables (6.7) (1.2) (0.1) – (0.1) (8.1) Balance sheet exposure 174.2 12.9 11.8 2.0 0.8 201.7
Sensitivity analysis A 15.0% weakening of Pounds Sterling against the following currencies at 30 April would have increased/(decreased) equity and income statement by the amounts shown below. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk exposures existing at that date. This analysis assumes that all other variables, in particular other exchange rates and interest rates, remain constant.
Equity Income statement 2015 2014 2015 2014 £m £m £m £m Foreign currency EUR 1.2 1.2 0.4 0.9 USD 2.2 1.9 0.1 0.2 AUD – – 0.2 0.4
A 15.0% strengthening of Pounds Sterling against the following currencies at 30 April 2015 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant. Interest rate risk The Group has no bank loans and therefore is not exposed to interest rate risk on its liabilities. At the balance sheet date the Group’s interest-bearing financial assets equated to cash and cash equivalents, all of which are held in variable rate instruments. Sensitivity analysis An increase of 100 and a decrease of 100 basis points in interest rates at the balance sheet date would have increased/(decreased) profit by the amounts shown below. The rationale behind the 1.0% sensitivity analysis is that interest rates in the UK have been low due to the economic climate and any increase or decrease greater than 1.0% is unlikely to occur. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk exposures existing at that date. This analysis assumes that all other variables, in particular foreign currency rates, remain constant and considers the effect of financial instruments with variable interest rates. The analysis is performed on the same basis for 2014 amounts. 2015 2014 £m £m Profit or loss Increase 1.6 1.9 Decrease (1.1) (1.1) WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe Total Marketing Capital Contracted butnotprovided for inthefinancial statements: commitments 22Capital During theyear £5.5m was recognised asanexpense intheincome statementinrespect operating of leases (30April2014: £5.7m). and renewal rights. Operating lease payments represent rents payable by theGroup for office properties. These leases have varying terms, escalationcharges Total Later thanfive years Later thanoneyear andnotlaterthanfive years Not laterthanoneyear The Group hadtotal future operating minimumpayments undernon-cancellable leases asfollows: 21 Operating leases profit taxinthe medium term. after page 5, theBoard targets aprogressive andsustainabledividendconsiders theappropriate payout ratio to beapproximately 50%of the dividendpayment to shareholders, return capitalto shareholders orissuenew shares. Asdiscussed intheChairman’s Statementon workingmanagement of capitalandhassufficientfor itsneeds. To maintainoradjustthecapitalstructure, theGroup may adjust maintain anoptimalcapitalstructure to reduce thecost capital. of The Group finances itsoperations through retained earnings andthe the Group’s to continue ability asagoingconcern inorder to provide returns for shareholders andbenefitsfor stakeholders andto creditor confidence andto sustainfuture development thebusiness. of The Group’s whenmanagingcapitalare objectives to safeguard 30 April 2015 (30April2014: £209.8m). The Board’s policyisto maintainastrong capitalbasesoasto maintaininvestor and The Group regularly monitors gross capitalonthebasisof cash(defined ascashandequivalents) whichwas £105.1m at comprising issued capital,reserves andretained earnings asdisclosed innote17. The capitalstructure theGroup of consists cashandequivalents of theparent, of attributabletoholders andequity equity management Capital investments,equity shown innote20(a). the balance sheet datewas £113.8m (30April2014: £217.4m) thefinancialassetsexcluding amountof beingthetotal thecarrying of thefinancial assetsrepresents amountof The carrying themaximumcredit exposure. Therefore, themaximumexposure to credit riskat Exposure to credit risk £0.1mAn amountof (30April2014: £0.3m) thegross of trade receivable balance hasbeen provided for. 30April2015,As of thetrade receivables balance was £3.6m (30April2014: which£3.2m £2.2m)of iscurrent and£0.4m ispastdue. by theGroup intrustare spread across leading bankinggroups reducing withthemainaimof riskasopposed to maximisingincome. The Group limitsitsexposure to credit basis. riskby onlydepositingsurplusfundsonashort-term The ring-fenced customer fundsheld the financialwellbeing theGroup. of failureto counterparty andto ensure thatintheevent asingleloss, of thefailure would notmateriallyimpact any of singlecounterparty Group treasury inrelation policyandobjectives to credit riskisto minimisethelikelihood thattheGroup willexperience financiallossdue contractual obligations, andarisesprincipallyfrom theGroup’s receivables from customers andinvestments. Credit/counterparty financiallossto riskistheof to theGroup afinancialinstrumentfails ifacustomer orcounterparty to meet its Credit risk Annual Report andAccountsBetfair 2015 Group plcAnnualReport 20.5 10.0 12.6 10.2 2015 2015 6.0 0.2 1.9 £m £m 20.8 12.9 14.7 2014 2014 14.1 0.6 5.6 2.3 £m £m 114-115 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe FINANCIAL STATEMENTS NOTES (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED
23 Acquisitions during the year On 17 February 2015 the Group acquired 100% of the equity interests in HRTV LLC, a horseracing television network, from The Stronach Group. As a result of the acquisition, the Group now has long-term television rights to the racecourses owned and operated by The Stronach Group. This strengthens the Group’s ability to drive incremental wagering on its advanced wagering platform and is expected to lead to additional advertising and distribution opportunities. Initial cash consideration of $25.6m was paid by the Group upon acquisition, with estimated future consideration of $47.8m to be transferred over the next seven years. After discounting at 10% the total fair value of consideration at the acquisition date is estimated to be $56.5m, of which $6.3m is dependent on future performance over the next 7 years. There is no maximum cap on the amount payable however there are no reasonable changes in the assumptions used that would result in a material impact. Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows: 2015 £m Cash paid 16.6 Deferred and contingent consideration 20.1 Total consideration 36.7
Non-current assets (excluding goodwill and other intangible assets) 0.2 Identifiable intangible assets Broadcasting and wagering rights 31.3 Brand 0.4 Working capital 0.5 Net assets acquired 32.4
Goodwill 4.3
The main factor leading to the recognition of goodwill is the synergies expected to be generated from the combined television and wagering operations. The Group expects the goodwill recognised on acquisition to be tax deductible in full. Given the value to the Group lies predominantly in the acquired broadcast and wagering rights and the ability to generate incremental wagering on the existing advanced wagering platform, the post-acquisition revenue and profit and the Group performance assuming the acquisition occurred at the beginning of the year have not been disclosed. 24 Related parties Group Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Betfair Pty Limited During the year, up to the date of disposal, the Group recharged the Australian joint venture, Betfair Pty Limited, the following costs: • operational costs amounting to £2.3m (30 April 2014: £4.6m). During the year the Australian joint venture recharged the Group the following costs: • operational costs amounting to £1.1m (30 April 2014: £2.9m). The outstanding balance of loans receivable from the Australian joint venture was fully repaid during the year (balance at 30 April 2014: £6.3m). The balance was not interest bearing. In addition to the recharges detailed above, the Group collected revenue on behalf of the joint venture and to a lesser extent the Australian joint venture collected revenue on behalf of the Group. As at 30 April 2014, the Group owed £2.1m to the former Australian joint venture. Featurespace Limited During the year the Group was charged £0.1m (30 April 2014: £0.1m) for consultancy services by Featurespace Limited in which the Group has a non-controlling interest. LMAX Limited In the year ended 30 April 2014, the Group utilised tax losses amounting to £1.1m that were transferred from LMAX limited, for consideration of £0.3m. This consideration was paid in the year ended 30 April 2015. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe Final dividendfor theyear ended 30April2014 ordinaryshare 14.0p of (30April2013: perqualifying 9.0p) intheyearAmounts recognised holders asdistributionsto equity Interim dividendfor theyear ended 30April2015 9.0p of ordinaryshare (30April2014: perqualifying 6.0p) cannot always bereliably predicted. harmonised regulatory environment, thevalue any andtimingof obligations inthisregard are to and ahighdegree subject uncertainty of The Board monitors legalandregulatory developments onthebusiness, andtheirpotentialimpact however given a the lack of fiscal arrangements. The Group marketplace operates inanuncertain where many governments are eitherintroducing orcontemplating new regulatory or 26 Contingent liabilities the return. Employee Benefit Trust inrespect theBshares of created theordinaryshares outof heldintheEmployee Benefit Trust atthetimeof £1.0m hasbeen transferred backto theGroup from theEmployee Benefit Trust. This represents thereturn capitalreceived of by the deferred shares, thedeferred beingallof shares inissue, to becancelled inlinewithprevious communication to shareholders. the declaration thedividend, allBshares of were convertedinto deferred shares. theCompany On27 January purchased 105,687,224 amount equal to £1.89pershare. 2015, On23January theCompany declared aBshare £1.89perBshare, dividendof and following 2015,On 22January inaccordance withtheresults theshareholder of elections,Jefferies purchased 34,622,872 Bshares for an Shares were thensubdivided andconsolidated into 92,476,321 New OrdinaryShares 0.095 of pence each. Ordinary Shares were subdivided into 105,687,224 Intermediate OrdinaryShares and105,687,224 Bshares. The Intermediate Ordinary ReorganisationThe Capital 2015 was January following implemented on12 shareholder approval 2015. on9January The Existing Company andsubsequently cancelled. automatically into converted deferred shares with,inpractice, noeconomic orotherrights, to beacquired from shareholders by the the purchase theirBshares of by Jefferies InternationalLimited (“Jefferies”). Following declaration theBshare of dividend,theBshares Shareholders to receive elected theReturn £1.89perBshare eitherasadividendof Cash of orasconsideration £1.89perBshare of for Ordinary Shares andconsolidated were into seven New immediately sub-divided OrdinaryShares. Each Share ExistingOrdinary into oneIntermediate OrdinaryShare was andoneBshare, sub-divided eightIntermediate and every combination thetwo. of “Capital Reorganisation”), whichoffered shareholders to toreceive elect theability proceeds £1.89pershare of asincome, capitalora shareholders (the“Return Cash”). of This was implemented by way aBshare of schemefollowed by ashare consolidation (the On 4December 2014 theCompany announced to shareholder itsintention,subject approval to return approximately to £200m Return thefinancialyear of inrespect to ended 30April2015 shareholders in thesefinancialstatements. The estimated dividendto bepaidinrespect thisamountsto of £23.0m. The proposed to approval finaldividendissubject by shareholders attheAnnualGeneral Meeting andhasnotbeen included asaliability The proposed finaldividendfor theyear ended 30April2015 is25.0 pence pershare (30April2014: 14.0 pence). As aresult thereturn of capitalto of shareholders, theGroup paidanadditional£1.0m inrelation andfees. to stampduty Total Return capitalto of shareholders 25 Dividends 25 Dividends Total Share-based payment expense benefits Short-term Key compensation, managementpersonnel includingtheGroup’s Directors andNon-Executive Directors, isshown inthetablebelow: Transactions withkey managementpersonnel Annual Report andAccountsBetfair 2015 Group plcAnnualReport 223.8 199.7 14.6 2015 2015 11.1 5.4 9.5 5.7 £m £m 10.0 15.6 2014 2014 4.6 6.3 5.4 9.3 £m £m – 116-117 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe FINANCIAL STATEMENTS COMPANY BALANCE SHEET AS AT 30 APRIL 2015
2015 2014 Note £m £m Fixed assets Investments 2 169.4 160.2 Current assets Debtors 3 148.6 201.3 Cash at bank and in hand 0.1 0.2 148.7 201.5 Creditors: Amounts falling due within one year 4 (21.4) (6.5)
Net current assets 127.3 195.0
Net assets 296.7 355.2 Capital and reserves Share capital 5 0.1 0.1 Share premium 5 5.3 21.9 Profit and loss account 5 291.3 333.2 Shareholders’ funds 296.7 355.2
These financial statements were approved by the Board of Directors on 17 June 2015 and were signed on its behalf by:
Breon Corcoran Alexander Gersh Chief Executive Officer Chief Financial Officer WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe At 30April2015 Increase inthecost investment of for share-based payments underFRS 20 As at1May 2014 Cost 2 Investments Group. theDirectors’ Detailsof remuneration isdiscussed intheDirectors’ Remuneration onpages53 to 72. Report The remuneration paidto Directors for to theCompany services duringtheyear was paidandaccounted for withinthe by anotherentity The Company hadnoemployees otherthantheDirectors duringthecurrent orprioryear. andemployeeDirector remuneration The Company hasrecognised anincrease ininvestments corresponding to theFRS 20 Share-based payment charge. Treasury share transactions Fixed assetinvestments are stated atcost lessany provision for impairment. Investments comprisesCash cashatbankandinhanddepositsrepayable ondemand,lessoverdrafts payable ondemand. andliquidresourcesCash to companies. employees subsidiary of The Company hasrecognised anincrease ininvestments corresponding to theFRS 20 Share-based payment charge inrespect awards of difference taken to theprofit andlossaccount, except where thecashcomponent isfixed. All cash-settled share-based payments are recorded andrevalued asaliability atthemarket value at thebalance sheet date withthe years from day thefirst thefinancialyear of to whichthey relate and one-third theshares of willvest each year for three years. Restricted shares are valued withreference to themarket value theshares of grant. onthedateof They have avestingthree of period The amountrecognised asanexpense isadjusted to share reflect numberof theactual optionsthatvest. takingintomodel, account thetermsandconditions uponwhichtheoptionswere granted. duringwhichtheemployees period become intheschemeandiscalculated usinganoptionpricing unconditionally entitled to participate transactions whichresult inacorresponding increase inothercreditors. The fair value ismeasured atgrant dateandspread over the theseschemesisrecognisedof asanemployee expense withacorresponding increase inequity, withtheexception cash-settled of The Group’s share option plansandrestricted shares schemeallows employees to acquire shares intheBetfair Group. The fair value Share-based payments losses ontranslation are included intheconsolidated profit andlossaccount. liabilities denominated inforeign currencies are translated usingtherate exchange of rulingatthebalance sheet dateandthegainsor Transactions inforeign currencies are recorded usingtherate exchange of assetsand thetransaction. rulingatthedateof Monetary Foreign currencies for thefinancialyear ended 30April2015 £151.5m of (30April2014: £264.8m ). includestheCompanythat aparent initsown undertaking published consolidated financialstatements. The Company aprofit reported StandardUnder Financial 1theCompany Reporting isexempt from therequirement to prepare acash flow statementonthegrounds theCompanies 408of theCompany 2006 Under section Act isexempt from therequirement to present itsown profit andlossaccount. standards intheUnited Kingdom (UK). The financialstatementshave been prepared underthehistorical cost accounting rulesandinaccordance withapplicableaccounting preparationBasis of Company’s financialstatements. The following accounting policieshave been applied consistently indealing withitemswhichare considered materialinrelation to the 1 Company accounting policies STATEMENTS) FINANCIAL THE OF PART (FORMING NOTES Annual Report andAccountsBetfair 2015 Group plcAnnualReport Shares in Group Shares inGroup undertakings 169.4 160.2 9.2 £m 118-119 FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe FINANCIAL STATEMENTS NOTES (FORMING PART OF THE FINANCIAL STATEMENTS) CONTINUED
3 Debtors 2015 2014 £m £m Amounts owed by fellow Group undertakings 148.6 201.3
4 Creditors: amounts falling due within one year 2015 2014 £m £m Amounts owed to fellow Group undertakings 21.4 6.5
5 Reconciliation of movement in capital and reserves Capital Share Share redemption Profit and Total Parent capital premium reserve loss account equity £m £m £m £m £m Balance at 1 May 2013 0.1 19.4 – 77.5 97.0 Total profit for the year – – – 264.8 264.8 Issue of shares – 2.5 – – 2.5 Dividends paid – – – (15.6) (15.6) Equity-settled share-based payment transactions – – – 6.5 6.5 Balance at 30 April 2014 0.1 21.9 – 333.2 355.2
Balance at 1 May 2014 0.1 21.9 – 333.2 355.2 Total profit for the year – – – 151.5 151.5 Issue of shares – 5.6 – – 5.6 Share premium cancellation – (22.2) – 22.2 – Dividends paid – – – (24.1) (24.1) Return of capital to shareholders, including fees and duty – – – (200.7) (200.7) Equity-settled share-based payment transactions – – – 9.2 9.2 Balance at 30 April 2015 0.1 5.3 – 291.3 296.7
Return to shareholders in respect of the financial year ended 30 April 2015 On 4 December 2014 the Company announced its intention, subject to shareholder approval to return approximately £200m to shareholders (the “Return of Cash”). This was implemented by way of a B share scheme followed by a share consolidation (the “Capital Reorganisation”), which offered shareholders the ability to elect to receive proceeds of £1.89 per share as income, capital or a combination of the two. Each Existing Ordinary Share was sub-divided into one Intermediate Ordinary Share and one B share, and every eight Intermediate Ordinary Shares were immediately sub-divided and consolidated into seven New Ordinary Shares. Shareholders elected to receive the Return of Cash either as a dividend of £1.89 per B share or as consideration of £1.89 per B share for the purchase of their B shares by Jefferies International Limited (“Jefferies”). Following declaration of the B share dividend, the B shares automatically converted into deferred shares with, in practice, no economic or other rights, to be acquired from shareholders by the Company and subsequently cancelled. The Capital Reorganisation was implemented on 12 January 2015 following shareholder approval on 9 January 2015. The Existing Ordinary Shares were subdivided into 105,687,224 Intermediate Ordinary Shares and 105,687,224 B shares. The Intermediate Ordinary Shares were then subdivided and consolidated into 92,476,321 New Ordinary Shares of 0.095 pence each. On 22 January 2015, in accordance with the results of the shareholder elections, Jefferies purchased 34,622,872 B shares for an amount equal to £1.89 per share. On 23 January 2015, the Company declared a B share dividend of £1.89 per B share, and following the declaration of the dividend, all B shares were converted into deferred shares. On 27 January the Company purchased 105,687,224 deferred shares, being all of the deferred shares in issue, to be cancelled in line with previous communication to shareholders. £1.0m has been transferred back to the Group from the Employee Benefit Trust. This represents the return of capital received by the Employee Benefit Trust in respect of the B shares created out of the ordinary shares held in the Employee Benefit Trust at the time of the return. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe Profit/(loss) for theyear Profit/(loss) before tax EBITDA Separately disclosed items–restructuring andother EBITDA before separately disclosed items * £m Revenue FIVE YEAR SUMMARY YEAR FIVE As reported inprevious andnotrestatedAs reported AnnualReports for discontinued operation LMAX. of 476.5 120.2 120.2 101.2 86.4 2015 – 393.6 51.0 2014 91.1 91.1 61.1 – Annual Report andAccountsBetfair 2015 Group plcAnnualReport 387.0 (66.3) (49.4) (22.1) 73.3 51.2 2013 388.5 86.0 34.0 54.2 83.5 2012* (2.5) 393.3 (17.0) 56.3 26.6 23.0 73.3 2011* 120-121
FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe CORPORATE INFORMATION SHAREHOLDER INFORMATION
Electronic communications Share dealing REGISTERED OFFICE Using the Company’s corporate website If you wish to buy or sell shares in the Betfair Group plc as a method of communicating with Company you can do this by using the Waterfront shareholders the Company is able to services of a stockbroker or high street Hammersmith Embankment distribute messages to shareholders bank or through telephone or online Chancellors Road instantaneously. Receiving the Company’s dealing services. The Company’s Registrar, (access on Winslow Road) communications electronically allows Computershare offer a telephone and London W6 9HP the Company to communicate with its online service, further information can +44 (0) 20 8834 8000 shareholders in a more environmentally be found at www.computershare.com/ friendly, cost effective and timely sharedealingcentre or by calling corporate.betfair.com manner. You can to elect to receive email 0370 703 0084 (Mon–Fri). notifications by contacting Computershare Registrars Please note the following when or by registering with Investor Centre at Computershare Investor Services PLC contacting Computershare: The Pavilions www.investorcentre.co.uk. • you will need to have your shareholder Bridgwater Road Scams and frauds reference number available; and Bristol BS13 8AE Shareholders are advised to be wary of any 0370 703 0084 unsolicited communications, such as: • if your shareholding is in certificated form www.computershare.com you will need to present your valid share • offers to buy or sell shares at a discount; certificate(s) at the time of sale. Please contact Computershare quoting • opportunities to receive free Please note the price of shares can go your shareholder reference number (on company reports; down as well as up, and you are not your share certificate or dividend tax • free financial advice; and guaranteed to get back the amount voucher) for advice regarding any change you originally invested. If you are in any of name or address, transfer of shares • chances to invest in carbon credit trading schemes. doubt you should contact an independent or loss/destruction of share certificate. financial adviser. Details of stockbrokers in If you receive any unsolicited advice, Computershare will also be able to respond the UK can be found via the Association make sure you get the correct name to general queries such as the number of Private Client Investment Managers and of the person and organisation and of shares you hold or payment details Stockbrokers (APCIMS) on check that they are appropriately for dividends. +44(0) 20 7448 7100 or at authorised by the FCA by visiting www.apcims.co.uk. Amalgamation of accounts www.fca.org.uk. More information on Shareholders who receive duplicate sets protecting your investment can be found at ShareGift of Company mailings owing to multiple www.fca.org.uk/consumers. If you have only a small number of shares accounts in their name should contact which would cost more for you to sell Computershare to request their accounts than they are worth, you may wish to be amalgamated. consider donating them to the charity Dividend mandates ShareGift (Registered Charity 1052686) We encourage shareholders to have their which specialises in accepting such shares dividends paid directly into their bank as donations. The relevant stock transfer account. This method of payment removes form may be obtained from the Company’s the risk of delay or loss of dividend cheques registrar Computershare. There are no in the post and ensures your account is implications for Capital Gains Tax purposes credited on the due date. Tax vouchers (no gain or loss) on gifts of shares to are provided by Computershare. To take charity and it is also possible to obtain advantage of this convenient method of income tax relief. Further information about payment contact Computershare or visit ShareGift may be obtained on www.investorcentre.co.uk. 020 7930 3737 or from www.sharegift.org.uk. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe Phone: +44 (0)208834Phone: +44 8000 Email: [email protected] For general enquiriesplease contact: 9HP London W6 Chancellors Road (access on Winslow Road) Embankment Hammersmith Waterfront Betfair Group plc corporate.betfair.com • • • • Here you willfindthelatestinformation onthefollowing: Betfair Online Payment finaldividend of Record date Ex-dividend date Annual General Meeting Q1 FY16 InterimManagementStatement FY15 Final Results Financial calendar investor website at:corporate.betfair.com/Investor-relations Company’s financialstatements, current andhistoric share prices, AGM materials, events andgovernance information. You may visitthe The Company’s corporate website provides shareholders with abroad range information of includinginvestor information suchasthe Betfair Group plcwebsite BETFAIR PLC GROUP ABOUT OUT MORE FIND RELATIONS INVESTOR Latest news andmedia Corporate Responsibility Investor Relations The Betfair Group
Annual Report andAccountsBetfair 2015 Group plcAnnualReport 10 September2015 11 September2015 9 September2015 7 September2015 9 October 20159 October 17 June2015 122-123
FINANCIAL STATEMENTS AND GOVERNANCE STRATEGIC REPORT WorldReginfoCORPORATE INFORMATION - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe CORPORATE INFORMATION NOTES WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe Designed and produced by Radley Yeldar | ry.com This report has been printed on materials that are FSC Certified and sourced from a mill which is ISO14001 accredited. The report is printed by an FSC and ISO14001 certified printer, using vegetable oil based inks and an alcohol free process. WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe Betfair Group plc Annual Report and Accounts 2015 Accounts and Report Annual plc Group Betfair
Betfair Group plc Waterfront Hammersmith Embankment Chancellors Road (access on Winslow Road) London W6 9HP, England United Kingdom For general enquires please contact: Email: [email protected] Phone: +44 (0) 20 8834 8000 WorldReginfo - 192f6524-68e8-4b0b-86ed-b3fff4e4fafe