GVC Holdings PLC 2017 Annual Report
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Annual Report 2017 Report Annual PLC Holdings GVC Annual Report 2017 A GROWING GLOBAL PLAYER PERFORMANCE HIGHLIGHTS 02 CHAIRMAN’S INTRODUCTION 02 AT A GLANCE 04 CHIEF EXECUTIVE’S Q&A AND REVIEW 06 2017 HIGHLIGHTS 10 MAJOR TRENDS IN THE MARKETPLACE 16 REGULATORY OVERVIEW 18 BUSINESS MODEL 20 OUR VISION 22 KPIS 23 PERFORMANCE OF DIVISIONS 24 CORPORATE SOCIAL RESPONSIBILITY 27 CHIEF FINANCIAL OFFICER’S REVIEW 30 PRINCIPAL RISKS 34 GOVERNANCE & REMUNERATION 38 INDEPENDENT AUDITOR’S REPORT 70 FINANCIAL STATEMENTS 76 SHAREHOLDER INFORMATION IBC GVC Holdings PLC | Annual Report 2017 01 We own some of the world’s leading online gaming brands across sports betting, casino, poker and bingo. Our success has always been driven by our strong brands, our technology and the talent we have within the business. Scale is another hugely important element, and our acquisition of the Ladbrokes Coral Group will both transform our business and brings a new and exciting dimension beyond online. SET FOR FOR SET SUCCESS 02 PERFORMANCE HIGHLIGHTS | CHAIRMAN’S INTRODUCTION +17% +40% +203% NGR*# Clean EBITDA*# Adjusted PBT* (€’000) (€’000) (€’000) Annual growth Annual growth Annual growth 2016: 743,100 2016: 158,300 2016: 58,900 The upward trajectory and evolution of GVC into one of the world’s leading online gaming companies continued apace in 2017, culminating in the recommended offer for the Ladbrokes Coral Group plc, announced in December. Ladbrokes Coral shareholders on 9 March overwhelmingly voted in favour of the GVC offer. Before looking at the transaction in more detail it is worth reflecting on what we achieved in 2017 which positioned the Group to be able to pursue such an exciting opportunity. Operational integration complete In February 2016, we undertook our most ambitious acquisition to date with the purchase of bwin.party. In less than two years the business has been fully integrated within the GVC Group. The migration of Latin America onto the bwin.party technology platform completed in early 2018 and represented the last material element to complete the full integration. I’m pleased to report that the migration process was a great success, both from a technology and customer perspective. All of our customers now enjoy a significantly enhanced user experience in terms of breadth of product and speed of delivery. In May 2017, we held a Capital Markets day to demonstrate to investors and analysts the progress we had made with the integration of bwin.party and to give a better insight into GVC and the people, brands and technology that drive the business. The event was well attended and particularly pleasing was the positive feedback on the breadth and depth of our senior management team, something that we are very proud of and which is critical to the success of the business. Financial performance Acquisitions and integrations can often cause short-term distractions in businesses, temporarily impacting growth. Therefore, it is pleasing to report such a strong revenue performance in 2017. On a reported basis, NGR for the financial year to 31 December 2017 was €925.6m, an increase of 17% over pro forma 2016 and +17% on a constant currency basis. Given that 2016 included the UEFA European Championship, the underlying growth was 925,600 239,500 178,700 even more impressive. Including discontinued1 * From continuing operations. activities, NGR was €1,008.0m, an increase # On a pro forma basis, as if bwin.party had been acquired on 1 January 2016. of 13% on pro forma 2016. GVC Holdings PLC | Annual Report 2017 03 WE NOT ONLY ACHIEVED ALL OF OUR TARGETS, BUT IN MOST CASES WE EXCEEDED THEM. Strong revenue growth combined with the GVC elected to give up the right to future Board continuing benefit from synergies, saw Clean earn-out payments. The scale of the potential In June 2017, Jane Anscombe was appointed EBITDA rise 40% over pro forma 2016 to synergies together with the strategic benefits to the Board and became Chair of the €239.5m. This represented an improvement of the Ladbrokes Coral transaction, meant that Remuneration Committee. Jane played a key in the Clean EBITDA margin to 26% (21% pro this was a dis-synergy that was firmly in the role in the introduction of the new incentive forma 2016). Including discontinued interests of the business and its shareholders. plans for management, which were approved businesses, total Clean EBITDA was €274.2m Turning to the proposed Ladbrokes Coral by shareholders at an EGM in December 2017. compared to €205.7m for pro forma 2016. Group acquisition, the combination will create Norbert Teufelberger retired from the With a second interim dividend of 17.5 euro one of the world’s largest online gaming Board in February 2018, having served his cents per share declared, the total declared groups, with a large portfolio of established two-year term. Norbert joined the Board dividend for the 2017 financial year was brands and a proven scalable proprietary following the acquisition of bwin.party and 34 euro cents. This represented an increase technology platform. Over 90% of revenues we would like to thank him for his contribution of 13% on the aggregate two special would be derived from regulated and/or and wish him all the very best for the dividends declared for the 2016 financial year. locally taxed markets and as new markets future. Upon completion of the Ladbrokes In 2017, we returned €141m to shareholders open up this regulatory footprint will become Coral Group transaction, Paul Miles will step via ordinary and special dividend payments. increasingly important. Furthermore, at down from his position as Chief Financial The strong financial and operational progress least £100m of annualised synergies are Officer to be succeeded by Paul Bowtell made by the Group, enabled us to secure expected to be derived from the enlarged of Ladbrokes Coral Group plc. Paul Miles materially improved debt facilities in 2017. Group. These synergies are in addition to the has considerably strengthened the Group’s In February 2017, the Cerberus Loan used to remaining synergies expected to be derived finance function since he arrived and played a partially finance the acquisition of bwin.party, from the Ladbrokes combination with Coral. key role in the further development of GVC as was repaid in full via a bridging loan and Yesterday in separate votes, Ladbrokes Coral a successful global business. We thank Paul this was subsequently replaced with a new and GVC shareholders overwhelmingly voted for his hard work, professionalism and being a €250m six-year Senior Secured loan and in favour of the recommended offer. great member of the team. €70m RCF at materially lower rates of interest. In March 2018, we announced the acquisition I would also like to thank the entire GVC team In November 2017, the Senior Secured loan of 51% of Mars LLC (trading as Crystalbet), for their hard work that has enabled the Group was extended by a further €50m, with a one of the Republic of Georgia’s leading to continue to deliver such strong financial reduction in margin (2.75% + Euribor vs 3.25% fully regulated online gaming companies. results. The gaming industry continues previously) and on more flexible covenants. Crystalbet management has a proven track to evolve, presenting opportunities and Corporate activity record, delivering strong growth and gaining challenges, but through our high quality people, strong brands and proprietary 2017 saw the Group undertake a number of market share with a highly effective approach technology, GVC is well placed to continue transactions as we continue to reshape our to customer acquisition. GVC will provide to deliver shareholder value. business to maximise long-term shareholder Crystalbet with access to a greater portfolio returns. In May 2017, we concluded the sale of product and shared expertise. We expect GVC will be posting its 2017 Annual Report of the payment processing business operating to acquire the remaining 49% in 2021. to shareholders in the week commencing under the Kalixa brand. Kalixa was a non- Regulation 30 April 2018 and it will be uploaded on core activity that was originally part of the our website (www.gvc-plc.com) from that Millions of customers enjoy the entertainment bwin.party acquisition. During the second-half date. The AGM will be held in Gibraltar on of gambling and have a positive experience, of last year we acquired Cozy Games, and 6 June 2018. however, for those few that demonstrate with it, Cozy’s proprietary bingo platform. As problem gambling behaviours, we as 1. Discontinued activities includes Headlong and associated a result, GVC now has proprietary technology operators have an obligation to protect them. Turkish facing operations. across all key online gaming verticals – an In many of the markets in which we operate, important differentiator from our peers. the gaming industry has come under the Also during 2017, we took full control of our LEE FELDMAN increasing scrutiny of regulators. The UK marketing operations in Greece after buying Gambling Commission (UKGC) in particular NON-EXECUTIVE CHAIRMAN out our partners. has been driving the industry to improve its 8 March 2018 In an increasingly regulated online gaming approach to problem gambling and we very environment and one where industry much support this. Where the UKGC has consolidation is vital to diversifying risk and initiated, we as an industry now have to lead. addressing increased costs/taxation, the Ultimately, a higher quality, more professional Board took the decision in November 2017 to industry will be positive for both consumers dispose of GVC’s Turkish-facing operations. and operators. The original intention was to sell the respective businesses in return for an earn-out over a five-year period.