Gala Coral Group Annual Report Gala Coral Group Limited Glebe House Vicarage Drive Barking Essex IG11 7NS 2008 www.galacoral.com Annual Report 2008 FA Cup Australian Six Cheltenham Australian Grand Third Open Nations Festival Grand Prix National Round (Begins) (Begins) (Begins) 03.01.09 19.01.09 07.02.09 10.03.09 29.03.09 04.04.09 US World French Champions FA Cup The Masters Snooker Open League Final Derby (Begins) Championship (Begins) Final (Begins) 09.04.09 18.04.09 24.05.09 27.05.09 30.05.09 06.06.09 Royal US British Wimbledon First Open Ascot Open Grand Prix (Begins) Ashes Championship (Begins) (Begins) Test (Begins) (Begins) 16.06.09 18.06.09 21.06.09 22.06.09 08.07.09 16.07.09 Glorious US PGA Final US Prix de King Goodwood (Begins) Ashes Open l’Arc de George VI (Begins) Test (Begins) Triomphe Chase (Begins) 28.07.09 13.08.09 20.08.09 31.08.09 04.10.09 26.12.09 SECTION Gala Coral 1 OVERVIEW guide to the Who We Are highlights The Gala Coral Group is the pre-eminent integrated betting and gaming group in Europe. It is the only gambling company in the UK with significant businesses in the bookmaking, bingo and casino markets, both on the high street and online. We are in the 2009 also a growing international business, with our expanding betting business in Italy. Gala Coral is a leader in the field of Corporate Responsibility, and the first gambling sporting company to have received full accreditation from GamCare across all its UK divisions. SECTION calendar 1OVERVIEW 1 Who We Are 2 The Group’s Divisions During the Year 3 Chairman’s Statement SECTION 2OUR BUSINESS 4 Chief Executive’s Review 6 Corporate Responsibility 8 Gala Coral’s People 10 Divisional Review 20 Board of Directors 22 Financial Review 26 Directors’ Report 29 Corporate Governance Report SECTION 3FINANCIAL STATEMENTS AND NOTES 32 Statement of Directors’ Responsibilities in Respect of the Annual Report and the Financial Statements 33 Independent Auditors’ Report to the Members of Gala Coral Group Limited 35 Group Profit and Loss Account 36 Group Statement of Total Recognised Gains and Losses and Reconciliation of Movement in Group Shareholders’ Funds 37 Group Balance Sheet 38 Company Balance Sheet 39 Group Cash Flow Statement 40 Reconciliation of Net Cash Flow to Movement in Net Debt 41 Notes to the Accounts 73 Other Information GALA CORAL GROUP ANNUAL REPORT 2008 1 SECTION SECTION 1 OVERVIEW 1 OVERVIEW The Group’s Divisions During the Year Chairman’s Statement Gala Coral’s brands, combined with the commitment of its employees, enabled the Group to demonstrate a resilience to what was a challenging market in 2007-08. Coral is the most profitable Gala Bingo is the UK’s market leader Gala Casino operates 26 UK casinos Although profit was down on last year, given the impact bookmaker per shop with almost in bingo with a market share of 41% and one in Gibraltar, with a total of the smoking ban on our Gala Bingo business, and 1,600 betting shops across the and employing over 5,000 people of 1.3 million members. country. It employs over 10,000 in 156 bingo clubs. The Group also the competitive pressures on our Casino and E-Commerce people and has a dedicated telephone operates the UK’s most successful In January 2009 we plan to open our divisions, we achieved a performance which demonstrates and internet business. online bingo site. new Casino of the Future in Gibraltar. the underlying strengths of the business and will stand us in good stead for the future. E-Commerce International Given the trading outlook for the leisure The Board recognises the significant and hospitality sector, in January the Board challenges the Group faces over the next year. decided to strengthen the Group’s capital Trading will be tough and will test the structure and subsequently undertook a management’s mettle at all levels. I am confident, refinancing of the Group’s debt arrangements. however, that our dedicated and professional Gala Coral E-Commerce is the online At year end the division had opened Our private equity partners demonstrated their executive team will be more than equal to the gambling arm of the Group, and is 336 licensed outlets in Italy and is continuing support with a further injection challenge. Gala Coral will remain at the forefront responsible for the development, looking at expanding into other key of equity and the Board is now confident that of innovation, and will continue to take the lead management and operation of all markets including China. our capital structure positions us well for in lobbying the Government and the Gambling E-Commerce activities within the Group, including Gala TV which any challenges we may face in the future. Commission to promote the achievement of a can be accessed through the Sky more open and responsible environment in the platform on channel 861. The gaming and betting sectors, in the UK sector. The Board will also support management and overseas, are going through a period in ensuring at all times that the business is of changing legislative and regulatory aware of, and responsive to, the needs of the Group Turnover (£million) Group Turnover by Division* environments. I am, however, confident that local communities in which the Group operates. our strategy, combined with the strength of our brands, will enable us to trade through Finally, I have decided to step down as 2008 1,268.5 the economic cycle, to maintain our position Chairman of the Group with effect from as a strong and robust business and to deliver 1 January 2009 and will be succeeded by 2007 1,309.9 returns to our investors. Neil Goulden. Since the original founding of the Group in 1997, through its many consolidations, its acquisition of the Casino Division and of ● Coral 52.8% A number of Board changes have occurred since ● Gala Bingo 27.2% last year including, in particular, the appointment the Coral Eurobet Group, to its market-leading ● Gala Casino 11.3% of Dominic Harrison (our COO for the past position as Europe’s pre-eminent betting EBITDA pre-exceptionals (£million) ● E-Commerce 6.4% 18 months) as Group CEO on 1 October 2008. and gaming Group, I have been honoured ● International 2.3% Dominic’s achievements since joining the and privileged to serve alongside the best team of management and staff I have ever 2008 362.1 Group in June 2004 make him extremely well qualified for his new role. He succeeded Neil experienced. I am enormously appreciative of the support of all our financial sponsors Segmental Operating Profit Goulden, who has served as Group CEO with 2007 401.8 great dedication for the past five years. We through that exciting journey – eight UK by Division* (pie chart excludes private equity providers have supported us International) look forward to Neil’s continuing contribution. On 30 September 2008 Matthew Roberts left along the way. I thank everybody who has the Company and I would like to thank him contributed to the success of the Gala Coral for his contribution over the past few years. Group, and my support continues, albeit from Cash Flow from Operations (£million) I am pleased to welcome Gary Hughes, who a distance. I have enormous confidence that succeeded Matthew as Chief Financial Officer. the business remains in good hands. ● Coral 62.7% 2008 314.2 I was also delighted to welcome two new non- ● Gala Bingo 21.3% executive Board members: Alexis Dormandy, John Kelly OBE ● E-Commerce 13.2% of Candover – following the resignation of 2007 391.3 ● Gala Casino 3.3% Chairman ● International (0.5)% Gerard Conway – and Tom Attwood, of ICG. * In 2007-08 the Group was organised GALA CORAL GROUP into five divisions. GALA CORAL GROUP 2 ANNUAL REPORT 2008 ANNUAL REPORT 2008 3 SECTION 2 OUR BUSINESS Chief Executive’s Review In the Group’s first full year of trading following the Gala Bingo: This division has been hardest The Group introduction of the smoking ban in England and Wales, hit by the smoking ban, because of its pari- During the year we carried out an extensive Gala Coral’s year end EBITDA pre-exceptionals* of mutuel nature. In response to a reduction review of our business. As a result, we will in admissions we cut costs by 25%. now refocus it into three trading divisions £362.1 million reflects a robust response to increased We continued to invest in games and prizes, post year end: Gala Gaming (Gala Bingo regulatory and economic challenges. most notably Gala High 5, the market’s most and Gala Casinos), Retail Betting (Coral and popular stake retention jackpot product. Eurobet betting shops in Italy), and Remote Gambling (E-Commerce and Telebet). Gala Casinos: The division’s marketing I am also very proud that we have published ensure that regulation is effective and initiatives attracted 400,000 new customers The restructure has three principal our first dedicated Corporate Responsibility proportionate, and that the industry is not during the year. It successfully completed objectives: Report this year. This underscores our stifled by over-regulation and cost. We will the rollout of the industry leading loyalty commitment to Corporate Responsibility continue to make our case to Government card, Fortune. The implementation of the G to make the Group a more cohesive as a business which operates in a wide to end double taxation for the bingo Gambling Act 2005 led to a significant entity by creating synergies and range of diverse communities.