leading edge Annual report & accounts 2013 Introduction Strategic report We want to ‘let the world play for real’ 01 Financial snapshot 02 Our business by improving access to our games and 04 Investment case 08 Our business model and KPIs maximising their appeal – these are 10 CEO’s review Annual report & accounts 2013 key drivers of our revenue model. 16 Strategy 26 Markets and regulatory overview bwin.party 42 Business and financial review 2013 Our proprietary eCommerce platform 52 Principal risks differentiates us from our competitors 54 Focus on responsibility and gives us a leading edge as we Governance transition to regulated markets. We 58 Chairman’s statement 60 Board of Directors deliver world-leading gaming products 62 Corporate governance 83 2013 Directors’ and brands, across multiple channels Remuneration Report and markets to an increasingly 106 Other Directors’ Report Disclosures 109 Statement of Directors’ demanding customer base. responsibilities Financial performance A richer experience online 110 Independent Auditors’ Report View our online report where you 114 Consolidated statement on can see and hear about our strategy comprehensive income in action and thoughts about our 115 Consolidated statement of future at: www.bwinparty.com financial position 116 Consolidated statement of “ Based on our performance changes in equity to-date we expect to deliver 117 Consolidated statement year-on-year revenue growth of cashflows in 2014. With further cost 118 Notes to the consolidated savings to come and the financial statements FIFA World Cup during the 157 Company statement of summer, the Board remains financial position confident about the Group’s 158 Company statement of full year prospects.” changes in equity Norbert Teufelberger 159 Company statement of cashflows CEO 160 Glossary Financial snapshot 01 2013 overview Total revenue by product (€m) % Total revenue from nationally regulated and/or taxed markets StrategicS trateg r report 2013 2012 Change e ¤m ¤m % 100% p ort i Sports betting 235.8 262.9 (10) c 75% 47% 57% Other Casino & games 215.6 271.2 (21) Poker 114.6 176.5 (35) 50% Bingo 53.1 64.3 (17) Nationally 25% 53% 43% regulated Other 33.3 26.7 25 and/or taxed Total 652.4 801.6 (19) 0% 2013 2012 Governance Financial Go v e rn 1 a Clean EBITDA by product (€m) 2013 net revenue by country n ce 2013* 2013# 2012# Change# ¤m ¤m ¤m % Germany 25% Sports betting 53.7 23.2 42.7 (46) UK 10% Italy 9% Casino & games 45.0 72.6 80.1 (9) Americas 6% France 6% Poker 7.7 22.3 28.5 (22) Spain 5% Bingo 8.2 12.9 18.8 (31) Greece 3% Belgium 1% performance Other (6.6) (23.0) (5.2) 342 Denmark 1% p erformance erformance Other EU 18% Fin Total 108.0 108.0 164.9 (35) a Rest of World 16% n c i al * New method – see page 43 # Old method Current trading, outlook and dividend Also in this report t Trading in the first 10 weeks of 2014 in-line with expectations; p16 average daily net revenue down 10% year-on-year but up 6% (Re)-born in the USA versus Q4 2013 t Nationally regulated and/or taxed markets represented 56% of net revenue in the 10 weeks to 11 March 2014 t Board remains confident in the Group’s full year prospects t Recommended final dividend of 1.80p per share, a 5% increase over the prior year making 3.60p per share for the full year – a 5% increase over 2012 DividendDividend perp share 4.0 3.5 3.0 e 2.5 1.80 1.72 Final 2.0 1.5 p18 Pence per share shar Pence 1.0 1.80 1.72 Interim Upwardly 0.5 mobile 0.0 2013 2012 p10 1 Continuing operations – EBITDA adjusted for exchange differences, reorganisation expenses, income or expenses that relate to exceptional items CEO’s review and non-cash charges relating to share-based payments 02 Our business bwin.party is a leading online gaming company with millions of customers who enjoy playing for real or virtual currency. Annual report & accounts 2013 bwin.party Sports betting Casino & games Poker We offer bets on a pre-event Blackjack, roulette, slots One of the leading poker and live basis on all key and jackpot slots are some networks in several markets, sports worldwide. of our most popular online we have thousands of players casino games. each day, offering different levels of stakes and a wide range of tournaments. KeyKey brandbrand 2013 Clean EBITDA2 KeyKey brandsbrand 2013 Clean EBITDA2 KeyKey bbrandsrand 2013 Clean EBITDA2 bbwinwin €53.7m bbwinwin €45.0m papartypokerrtypoke €7.7m ppartypokerartypoke bbwinwin ppartycasinoartycasin GGiocoioco DigDigitale GGiocoioco DigDigitale 47% 39% 7% Read more on page 26 Read more on page 28 Read more on page 30 2 Before unallocated corporate costs of ¤6.6m 03 StrategicS trateg r report e p ort i c Bingo Other revenue Powered by Governance Financial Go v e With leading market positions Payments Our products are enabled rn a n in the UK, Italian and Spanish Kalixa is an integrated payments through our extensive ce online bingo markets, we are business offering acceptance, eWallet, resources in technology, looking to consolidate our acquiring and processing capabilities. supported by marketing position and expand into and customer service. Social gaming new territories. Win Interactive develops and markets Technology a range of games using the ‘freemium’ Our proprietary technology platform performance 2 p erformance erformance KeyKey brandsbrand 2013 Clean EBITDA model through mobiles, social channels is managed by our in-house teams, Fin a and the worldwide web. n supported where necessary by third- c i FFoxyoxy BBingoingo €8.2m party resources. Organised into a series al GiGiocooco DigDigitale Other of Agile scrum teams, our software engineers delivered seven platform The Group has several smaller 7% releases in 2013 and expect to increase businesses including World Poker Tour, this to 11 releases in 2014. Winners (retail), InterTrader, sports content, B2B revenue, software services and domain sales. Marketing Our marketing mix employs a full Read more on page 32 Read more on pages 34 to 37 range of channels and assets to drive new player traffic and retain existing customers. These include offline, online and search, sponsorship and promotions, loyalty programmes and bonuses. Customer service We have over 500 full-time customer service staff who provide around-the- clock assistance to our customers – using phone, email and chat we aim to respond quickly and effectively to all customer queries. 04 Investment case The opportunity The global online real money Global gross gaming revenue (‘GGR’) gaming market is a growing €m % and valuable segment of 400 12 Annual report & accounts 2013 the digital economy, with an increasing share of the global 300 9 bwin.party gaming market. 200 6 €26.1bn 100 3 +10.1% CAGR 3 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 All gambling (land-based and interactive) Percentage interactive (RH Scale) External growth drivers 1 Broadband and mobile penetration4 2 Smartphone and tablet penetration5 Overall European % penetration in 2017 Absolute number of users in France, Germany, Italy, Spain and the UK Broadband Avg 80% Mobile Avg Tablet Smartphone (Vs 2013 Avg 75%) 203.4 78% 29.3 million (Vs 2013 million Avg 52%) 3 Estimated global market size in terms of GGR in 2013 and compound annual growth 2013–2018 – H2 Gambling Capital – March 2014 6 7 3 M-commerce 4 Propensity to play games online 4 PWC Global Entertainment Average European % year-on-year % of 9–16 year olds who play and Media Outlook 2013–2017 (published 2013) growth in use of mobile for payments games on the internet 5 ComScore Rise of the 3Ms: m-retail, m-commerce and m-payments – November 2013 6 PWC Global Entertainment and Media Outlook 2013–2017 83% (published 2013) € +37% 7 Risk and Safety on the Internet – the perspective of European children – London School of Economics, co-funded by the European Union 05 External growth drivers (continued) StrategicS trateg r report e 5 Regulation – Europe p ort i Several countries in Europe have introduced or are c expected to introduce online gaming regulations. The table below seeks to summarise the position in a number of key markets. 3 1 Austria 6 Italy Products S Products S, P, C, B Tax rate8 2% S turnover Tax rate8 2–5% S turnover 8 9 Governance Financial 40% P, C, B 3% P turnover Go 5 v Ring-fenced No in tournaments; e 9 20% GGR for C, 2 rn Market size €191m a n P cash games ce 2 Belgium and 11% B turnover Ring-fenced Yes Products S, P, C 9 8 Market size €893m Tax rate 11% 4 1 Ring-fenced No Market size9 €133m 3 Denmark 7 Spain Products S, P, C Products S, P, C11, B 6 8 performance Tax rate 20% Tax rate8 25% 7 p erformance erformance Ring-fenced No Ring-fenced Yes Fin a Market size9 €276m 9 n Market size €431m c i al 4 France 8 UK Products S, P Products S, P, C, B Tax rate8 9.3% S turnover Tax rate8 15% onshore 2% P turnover 0% offshore12 Ring-fenced Yes Ring-fenced No Market size9 €1,060m Market size9 €2,899m 5 Germany10 9 Netherlands13 Products S Products S, P, C, B Tax rate8 5% S turnover Tax rate 20% Ring-fenced No Ring-fenced No Market size9 €731m Market size9 €205m Product S = Sports betting P= Poker C= Casino & games B= Bingo MarketMarket dynamics in Europe14 8 As a % of gross gambling 11 Currently excludes online slots 25%25% revenue, unless stated otherwise although there are proposals to 3 9 Estimated 2013 gross gaming allow online slots in due course 1 Germany 20 20% revenue for online sports 12 A place of consumption betting, casino, poker and tax of 15% GGR is due to be bingo – H2 Gambling Capital – introduced in December 2014 Spain Austria ket share in 115%5% March 2014 13 Proposed, not enacted mar 10 A licensing regime for online Italy 14 Relative size of circle is total UK sports betting has been market online GGR in 2013 – 10% proposed in all 16 states but estimated France H2 Gambling Capital y no licences have yet been t .par issued.