Bringing Excitement to Life
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Paddy Power Betfair plc Annual Report & Accounts 2018 PADDY POWER BETFAIR PLC BETFAIR POWER PADDY ANNUAL REPORT & ACCOUNTS 2018 & ACCOUNTS REPORT ANNUAL BRINGING EXCITEMENT TO LIFE INSIDE THIS REPORT: The Group is a global sports betting and gaming operator, with leading STRATEGIC REPORT brands bringing excitement to life for millions of bettors worldwide. 2 Chair’s Statement 6 At a Glance Across the world our customers benefit from fast, intuitive products 10 Chief Executive Officer’s Review that offer market-leading value, promotions and choice. These are 14 Our Business Model powered by our in-house technology, trading, development and 16 Market Review responsible gambling teams. 18 Our Strategy 30 Corporate Social Responsibility Together, our European, Australian and US operations employ nearly 34 People and Culture 8,000 people who share a common set of traits; competitiveness, agility, 38 Operating and Financial Review integrity and a relentless focus on delivering what the customer wants. 50 Understanding and Managing the Group’s Principal Risks 30 years ago, the Paddy Power journey began when three small Irish betting shop chains combined to take on the Irish retail betting market. GOVERNANCE 20 years ago, Betfair revolutionised the industry by pioneering the betting 54 Chair’s Governance Statement Exchange. Today, our business has grown into an online-led, international 56 Leadership and Board of Directors 58 Corporate Governance Framework, Roles betting powerhouse with a scale that makes it a leader in our industry. and Responsibilities 60 2018 Board Activities 62 Effectiveness 63 Nomination Committee Report 65 Audit Committee Report 70 Risk Committee Report REVENUE REPORTED PROFIT BEFORE TAX 72 Engaging with Stakeholders 74 Directors’ Remuneration Report 96 Directors’ Report £1,873m £219m FINANCIAL STATEMENTS 2017: £1,745m 2017: £247m 101 Statement of Directors’ Responsibilities 102 Independent Auditor’s Report 107 Consolidated Income Statement UNDERLYING* EBITDA† UNDERLYING* EPS 108 Consolidated Statement of Other Comprehensive Income 109 Consolidated Statement of Financial Position 110 Consolidated Statement of Cash Flows £451m 379p 111 Consolidated Statement of Changes in Equity 2017†: £473m 2017: 398p 113 Notes to the Consolidated Financial Statements 164 Company Statement of Financial Position 165 Company Statement of Cash Flows PROFITS ATTRIBUTABLE TO PROPOSED FULL-YEAR DIVIDEND EQUITY SHAREHOLDERS PER ORDINARY SHARE 166 Company Statement of Changes in Equity ** 168 Notes to the Company Financial Statements OTHER INFORMATION 186 Five Year Financial Summary £201m 200p 187 Shareholder Information 2017: £218m 2017: 200p * The “underlying” measures exclude separately disclosed items, that are not part of the usual The Strategic Report on pages 2 to 53 business activity of the Group and are also excluded when internally evaluating performance, was approved by the Board of Directors on and have been therefore reported as “separately disclosed items” (Note 4 and page 125 5 March 2019 to the Consolidated Financial Statements). Peter Jackson † EBITDA is profit before interest, tax, depreciation, amortisation and impairment expenses and Chief Executive Officer is a non-GAAP measure (page 46). Jonathan Hill ** 2018 Final Dividend is subject to shareholder approval. Chief Financial Officer Strategic reportStrategic 2018 KEY STATS ACTIVE CUSTOMERS WORLDWIDE Governance Financial statements Financial TRADED ACROSS ALL PLATFORMS BIGGEST PAYOUT: WORLD CUP FINAL – CROATIA VS FRANCE Other information Other HIGHEST TRADED SPORTSBOOK EVENT: MELBOURNE CUP ONLINE TRANSACTIONS THE EQUIVALENT OF 5,700 A MINUTE ONLINE RESPONSIBLE GAMBLING INTERACTIONS PER MONTH ACROSS THE PADDY POWER AND BETFAIR BRANDS 1 CHAIR’S STATEMENT ANOTHER BUSY AND PROGRESSIVE YEAR Dear Shareholder Our Australian business, Sportsbet, continued to our values as a business. We have made to see strong momentum, with us investing good strides promoting diversity for all of I am pleased to update you on a very busy significantly in our market-leading position to our employee population; an area where and progressive year for the Group, which ensure we remain well placed to capitalise progress has historically been slow across now includes an expanded US sports on current market disruption. our industry. Ensuring we have the right betting operation under the exciting FanDuel culture across the Group and having a Our US division had a transformational year. brand. During Peter Jackson’s first year as diverse Board and workforce will continue Following the repeal of the Professional and Chief Executive Officer, with the support to be a key focus area for the Board. of the Board, he undertook a review of our Amateur Sports Protection Act (“PASPA”) in corporate strategy as well as a review of May 2018, we completed an exciting deal to As the Group is now operating a growing his senior management team. As further combine our pre-existing US business with number of brands and operations, the Board described in the Strategic Report, Peter that of FanDuel, a daily fantasy sports group, believe the name of the Group should be and his team have been executing against forming the FanDuel Group. We subsequently reflective of the broader business and not the resultant strategic priorities across launched sports betting operations in reference any specific brands. Therefore, the business. New Jersey and West Virginia. Operating as we have decided to change the name of the FanDuel Group, the business has seen a very parent company to Flutter Entertainment plc In Europe, the completion of our platform encouraging start to trading and we believe and a resolution will be put to shareholders in integration allowed both the Paddy Power that we are well-positioned to take advantage respect of this at the upcoming AGM. and Betfair brands to accelerate development of the exciting new US sports betting market. work allowing customers to enjoy significant Responsible gambling product improvements. This coincided with a Financially, the Group saw continued good re-invigoration of the Paddy Power brand in growth with Revenue up 9%* in current Underpinning our business, and every † the same year as it celebrated its 30th birthday. currency to £1,873m and underlying element of the Group's strategy, is responsible ** We have also commenced work to deliver EBITDA of £451m. gambling and being a responsible operator. platform enhancements and major In recent years, we have made significant improvements to the Betfair brand’s product Corporate culture progress towards making our products and offering to provide a more tailored local Our industry is competitive and fast-moving services safer for customers. In 2018, we have product, for example increased languages and to be successful it is vital that we foster enhanced our site tools and information to and currencies, which will deliver benefits a culture that recruits potential, develops enable customers to take greater control over during 2019 and beyond. On 1 February 2019, individuals, retains highly talented people their betting while proactively monitoring to we were pleased to announce the acquisition and rewards success. In 2018, we launched identify any potential signs of harm and we of Adjarabet, which in line with our strategy, a range of initiatives designed to ensure a have an agreed programme of future work gives the Group exposure to two new successful and progressive working culture to continue to improve the protections we attractive, fast-growing, regulated markets. across each of our offices, which is aligned offer. For the majority, betting is an enjoyable activity, but for some, it can become a real problem, and unless we can safeguard all customers, we will not have a business in the long term. Our regulatory settlement Gary McGann with the Gambling Commission in October Chair 2018 reflects inadequacies of the past and highlights the ongoing importance of getting this right. In recent years we have made many changes to continually enhance our approach to this fundamental aspect of our business. We also assist a range of external initiatives that support responsible gambling. To reflect the seriousness with which the Group is addressing responsible gambling, in 2018, we appointed a Chief Risk Officer as an additional member of the Executive Committee. Part of the remit of her role is to coordinate a more strategic approach across the Group in this area and her team has made a very promising start in developing the initiatives in this area. Paddy Power Betfair plc 2 Annual Report & Accounts 2018 Strategic reportStrategic Board update Remuneration Committee, and myself met with shareholders separately and together FURTHER INFORMATION On 8 January 2018, Peter Jackson became to discuss remuneration changes in the Our strategy and responsible Chief Executive Officer, replacing Breon context of internal and external strategic Corcoran. Peter has a deep understanding of gambling developments, business and regulatory pages 18 to 30 the digital consumer world and experience of changes, as well as general governance engineering high-performance in a large and Corporate Social Responsibility matters. Our objective in our discussions pages 30 to 33 diverse corporate environment. was to arrive at incentives that strike a People and culture balance between compensation aligned Governance Jonathan Hill joined as Chief Financial Officer pages 6, 7 and 34 to 37 on 22 October 2018 succeeding Alex Gersh, with shareholders’ interests and being