888 Holdings plc
Suite 601/701 Europort
Europort Road
Gibraltar
T: +350 20049800
F: +350 20048280
E: Info@888holdingsplc.com
www.888holdingsplc.com
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Annual Report & Accounts 2009
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888 Holdings plc
Annual Report & Accounts 2009
Welcome
888 is one of the world’s most popular
online gaming entertainment
and solutions providers
888 has been at the forefront of the
online gaming industry for over a
decade, allowing both players and
B2B partners to enjoy a world-class
gaming experience.
888’s consumer facing websites offer more
than just online gaming. They are entertainment
destinations, places where people can enjoy a
truly interactive experience and be part of an
online community that shares common interests.
As well as providing players with an innovative,
comprehensive and enjoyable gaming experience,
through Dragonfish, partners also benefit
from 888’s decade long industry experience.
Dragonfish provides partners with Total Gaming
Services — customisable solutions offering the
ideal platform through which to establish an online
gaming presence and monetise their brand.
888 websites provide an enjoyable customer
experience in a safe and secure environment.
888 remains a leader in responsible gaming, with
specialist websites dedicated to both corporate
responsibility and responsible gaming.
responsibility and responsible gaming.
Our strategy is to increase shareholders’ value
Our strategy is to increase shareholders’ value
through achieving profitable growth both
through achieving profitable growth both
organically, through the acquisition and retention
organically, through the acquisition and retention
of valuable players and partners, and through
of valuable players and partners, and through
strategic acquisitions.
strategic acquisitions.
Contents
01 Highlights
02 Chairman’s Statement
04 Chief Executive Officer’s Review
08 Enhanced Business Review
22 Corporate Social Responsibility
26 Risk Report
27 Board of Directors
28 Corporate Governance
31 Remuneration Report
39 Directors’ Report
42
Independent Auditors’ Report
44 Consolidated Income Statement
45 Consolidated Balance Sheet
46 Consolidated Statement of Changes in Equity
46 Consolidated Statement of Comprehensive
Income
47 Consolidated Statement of Cash Flows
48 Notes to the Consolidated Financial Statements
75 Company Balance Sheet
76 Company Statement of Changes in Equity
76 Company Statement of Comprehensive Income
77 Company Statement of Cash Flows
78 Notes to the Company Financial Statements
80 Shareholder Information
Shareholder Services
All enquiries relating to Ordinary Shares, Depository Interests,
Auditors
BDO LLP
dividends and changes of address should be directed to the Group’s
Chartered Accountants
55 Baker Street
London
W1U 7EU
UK
BDO Limited
Registered Auditors
Montagu Pavilion
8–10 Queensway
Gibraltar
Incorporated in Gibraltar with
registered number 90099
Transfer Agent:
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Tel: 0870 162 3100
www.capitaregistrars.com
Further Information
For further information please contact:
Company Secretary
888 Holdings Public Limited Company
Suite 601/701
Europort
Europort Road
Gibraltar
info@888holdingsplc.com
Principal Bankers
The Royal Bank of Scotland plc
280 Bishopsgate
London
EC2M 4RB
Solicitors
Freshfields Bruckhaus Deringer
65 Fleet Street
London
EC4Y 1HS
Hassans
57/63 Line Wall Road
Gibraltar
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Highlights
Total Operating
Income
Total Operating
Income — B2B
Total Operating
Income — B2C
Total Operating
Income — Emerging
Offerings
263
247
39
51
224
195
25
14
2008
2009
2008
2009
2008
2009
2008
2009
down6%
US$ million
up33%
US$ million
down13%
US$ million
up82%
US$ million
Real money
registered customer
accounts
EBITDA1,2
EBITDA Margin1,2
Dividend
5.8
7.1
56
46
21.2
18.5
6.6
5.4
2008
2009
2008
2009
2008
2009
2008
2009
up22%
million
down18%
US$ million
up22%
US¢
1 Excluding share benefit charges of US$7 million (2008: US$8.4 million).
2 Excluding exchange rate loss of US$2.7 million (2008: loss of US$2.6 million).
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01
888 Holdings plc
Annual Report & Accounts 2009
Chairman’s Statement
On behalf of the Board of 888 Holdings plc, I am pleased to present
the financial results for the year ended 31 December 2009.
These results again demonstrate the resilience of our brand, the
breadth and depth of our product offering and our increasing
geographic reach, in what was a challenging year for all consumer
facing businesses.
Financial Results and Dividend
Total Operating Income (‘TOI’) decreased 6% to US$247 million
(2008: US$263 million) impacted by difficult trading conditions
and unfavourable exchange rates. EBITDA* was US$46 million
During the year we also made a significant change to the 888 brand
(2008: US$56 million). Our financial position remains strong as
architecture as well as our continuous drive to provide the best offering
ever due to the continued cash generative nature of the Business.
and customer service possible. The look and feel of our umbrella brand
Our cash position as at 31 December 2009 was US$87.5 million
has been updated and we have refocused our sub-brands to reflect
(31 December 2008: US$98.4 million). The Board is therefore
the four core gaming products — 888casino, 888poker, 888sport and
recommending a final dividend of 3.0 cents per share in addition to
888bingo. The new sites were launched in early 2010 and have proved
our interim dividend of 1.0 cent per share and special dividend of 2.6
popular with both existing and new players.
cents per share, both paid in October 2009.
We are in a strong position to take advantage of the ongoing
tremendously successful emerging offering, and the relaunch of Reef
industry consolidation and will participate in M&A opportunities as
Club Casino introduced a product ideal for the recession, helping
and when they become available.
888’s casino segment to retain a market leading position.
The acquisition of the Wink Online Bingo business added to our
B2C
888 is more than just a place that offers a first class online gaming
Dragonfish
Early in the year we rebranded and relaunched the B2B business
experience to its players. It is fast becoming an entertainment
as Dragonfish, crystallizing its position as a stand-alone, but
destination, a place where people can enjoy a truly interactive
complementary, part of the Group. The Dragonfish brand is highly
experience and be part of an online community that shares common
visible and has achieved significant cut-through in the competitive B2B
interests.
market. A number of new agreements were signed during the year.
Significantly, in September we signed a landmark deal with Harrah’s
We continue to innovate across the range of our offering providing
International Entertainment, to provide services to its non-US facing
players with a dynamic gaming experience. Cutting edge products
customers, marking the first ever B2B deal with a major US Casino
such as Live Dealer targeted at European customers are growing
operator.
in importance, and a constantly updated suite of instant games
integrated across the portfolio helps to keep customers coming back
to the site with increasing spend. Localisation remains a core focus
The signing of a partnership with Linden Lab® for payment service
provision extends our reach outside the online gaming market for the
for 888 as we deliver regionally targeted and appealing content in an
first time.
increasing number of languages.
* Before share benefit charges of US$7 million (2008: US$8 million).
02
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Responsible Gaming and CSR
Responsibility has always been a cornerstone of our business. The
importance of responsible gaming and corporate responsibility was
illustrated through the publication of our first stand-alone Corporate
Responsibility report, which is available on our dedicated website
www.888responsible.com.
The Group was saddened by the untimely passing of one of its
founders, Dr Aharon Shaked late last year. Aharon continued to
contribute his wisdom and advice to 888 throughout his illness and
our thoughts and prayers are with his family.
In December, Shay Ben-Yitzhak, one of the founders of the
business, decided to step down from the Board to devote more
time to his family. On behalf of the Board and all staff, I would like
to express our appreciation of Shay’s contribution in growing the
Company from its infancy and his continuing contribution to date. We
wish him all the best for the future.
I would also like to add my thanks to all our employees who have
worked hard to drive the performance of the business in a challenging
operating environment.
Outlook
2009 was a testing year but we have continued to drive growth
in both our B2C and B2B businesses, organically and through
acquisition.
As the economy moves on from the global financial crisis the wider
online gaming industry can look to the future with confidence. The
strength and diversity of our offering leaves us well positioned to
continue to create sustainable value for our shareholders.
The Board remains confident about the prospects for the business.
Richard Kilsby
Chairman
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03
888 Holdings plc
Annual Report & Accounts 2009
Chief Executive Officer’s Review
Introduction
While the economic backdrop remained hostile and continued to
Business Overview
Our strategy is underpinned by a number of core objectives:
impact performance both in terms of trading and fluctuating exchange
rates, 2009 was the year that validated the strength of the Group’s
l Maintain and improve our position as a leading B2C operator
combined business model: a world class B2C operator and an
l Become a leading B2B provider with a focus on new entrants
innovative and comprehensive B2B service provider.
and major opportunities
l Make strategic B2C and B2B acquisitions to enhance our
During the first nine months of the year, our B2C business remained
market position
under pressure from the challenging economic environment. The
l Position ourselves to benefit from market trends and regulatory
fourth quarter of 2009 saw a welcome return to more normalised
changes
trading, with much stronger performance. Our stand-alone B2B
l Remain the most responsible company in the sector
business which was branded Dragonfish in March 2009, continued
to show good growth with a number of new strategic deals signed,
These are the building blocks of our business and we are committed
including an agreement with Linden Lab, operator of Second Life for
to delivering a strong performance in each of these areas.
payment processing and an agreement with bwin Italia for casino
tailored for the newly regulated Italian market.
B2C
Whilst the market for our B2C business remained challenging we
Throughout the period we maintained investment and innovation
retained our focus on innovation to ensure our offering remains at the
in both divisions, using our working capital wisely and, as you will
forefront of the gaming experience. This included: exciting visuals,
see from the look and feel of this annual report, creating a new
increased interactivity, more community focus and a new customer
corporate identity and refreshed sub-brands for our B2C offering,
loyalty programme. We also introduced a number of ‘recession
now launched to our customers.
busting’ promotions and products, giving our customers the
opportunity to be entertained whilst being sensitive to their spending
From a financial perspective, in spite of the difficult environment, we
capacity, thus increasing their ‘entertainment value for money’.
have delivered a solid performance. Total Operating Income was
US$247 million (2008: US$263 million) with 33% increase in TOI in
Following the success of 888ladies, our UK-focused Bingo
B2B. EBITDA* was US$46 million (2008: US$56 million). The business
remains highly cash generative and as at 31 December 2009 our cash
offering, we introduced new social networking features which
make the playing environment more social, such as enhanced chat
position was US$87.5 million (31 December 2008: US$98.4 million).
experiences and daily blogs.
* Before share benefit charges of US$7 million (2008: US$8 million).
Under the leadership of the B2C Managing Director the business
has taken on a new focus, leveraging new products and marketing
campaigns to deliver further growth.
A new Bingo TV campaign was launched in the UK to stimulate
Bingo growth. The innovative ‘Poker Ashes’ tournament was
launched and televised featuring celebrities such as Shane Warne
and Darren Gough. In support of this, a large-scale poker league
was launched in hundreds of pubs.
04
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A live casino product targeted at European customers was launched
‘Total Gaming Services’ is the strap line that underpins Dragonfish’s
during the first half of 2009 and includes Roulette, Blackjack
unique positioning. Our clients are given the opportunity to benefit
and Baccarat. Following extensive customer consultation, a new
from the advantage of our comprehensive end-to-end service, global
Poker version was rolled out incorporating 25 features and design
reach, resources and contacts, and specific experience across local
changes and we also introduced a new ‘best of breed’ poker loyalty
markets. This comprehensive offering, unique to Dragonfish, is built
programme.
on our extensive experience as an operator and, as such, is a major
differentiator from other B2B providers.
888sport, while still a nascent business unit for us, continued to
gather momentum during the year. We introduced a new in-play
Dragonfish has its own Managing Director who is responsible for all
betting application as well as an innovative video stream feature
B2B activities. These include business development, Programme
promoting our most popular events, all assisting in driving additional
management & integrations, Client executives Unit, Client marketing &
growth to the domain.
operations, B2B marketing and PR and B2B Finance. This structure
as a stand-alone unit ensures that the confidential separation between
In December we acquired the Wink Online Bingo business. The
the two activities is retained.
transaction marked a further expansion of our emerging offering
segment and is invaluable in helping to support our domination of the
A number of deals were signed during 2009, some of which have
online bingo industry. Wink Bingo runs several online bingo networks
opened up new territories for us as referred to below.
including WinkBingo, PoshBingo and BingoFabulous. The network is
operated on the Dragonfish bingo infrastructure and had over 60,000
active players at the time of acquisition, making it one of the most
popular sites for online bingo in the UK.
Phumelela in South Africa, where we will be providing a
comprehensive sports-book offering; poker and casino in the Balkans
with Loper Gate; and with Probability to develop and execute
opportunities for mobile gaming and mobile lottery services in a
In the third quarter of 2009 we began a restructuring and rebranding of
number of territories including China, and South and Central America.
our consumer offering. Following a comprehensive branding study, it
In September we signed a landmark deal with Harrah’s International
became clear that we needed differentiated sub-brands for each product.
Entertainment, to provide services to its non US facing customers
We carefully researched how we could launch a new streamlined,
marking the first ever B2B deal with a major US Casino operator.
distinctive and digital modern look without alienating our players and with
the potential to attract thousands of new ones. The decision was taken
to build on the strength of the 888 brand and enhance its visual display,
During the year we also announced three new bingo partners,
MoonBingo, BingoHollywood and Costa Bingo, cementing our
while also promoting four key B2C sub-brands with a reinvigorated look
position as a global leader in the provision of bingo services.
and feel — 888casino, 888poker, 888bingo, and 888sport.
Dragonfish
In March we reached an important landmark in the transformation of
an agreement which extends our offering of Total Gaming Services
into Total Payment Services and highlights the increasingly diverse
our B2B business, launching it under its own brand — ‘Dragonfish’.
nature and strength of Dragonfish’s operations. We have various
This stand-alone brand is indicative of 888’s intention to become a
existing and potential gaming partners interested in our e-payment
major player in the B2B market, highlighting Dragonfish’s status as an
solutions demonstrating this giant step beyond our core operations
independent business unit within the 888 Group and emphasising its
into the retail environment.
In November, Dragonfish signed an e-payments deal with Linden Lab,
difference from our traditional B2C offering.
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888 Holdings plc
Annual Report & Accounts 2009
Chief Executive Officer’s Review
continued
People
Key to the sustainable success of our business and, in turn, the
Responsible Gaming
As we state constantly at 888, playing is not just a matter of
delivery of shareholder value, is the continued development of our
entertainment — we take our play very seriously.
team who have once again delivered these excellent results.
Entertainment is our core business and it has an impact both
Looking around the Group today, I am most encouraged by our
on the people who enjoy it and the environment in which it
significant and growing pool of talented employees. Our leadership
operates. Conducting our business responsibly is fundamental
and development programmes are designed to support employees
to the sustainability of our business and its future success. With
at all levels, from senior managers to those who are at an early stage
responsibility comes transparency and we believe that transparency
of their career.
is created through communication and so, as part of that, we took
the decision to share the way we conduct our business with all our
We remain committed to enable our employees to fulfil their potential
stakeholders. During the year we published our first stand-alone
and share in the Group’s success.
Corporate Responsibility report: ‘People-Planet-Play.’ While we
recognise that we still have much to achieve, we are committed to a
We believe we have engendered the right culture within our
proactive policy of corporate and social responsibility that reflects the
business and we are committed to our corporate values: leadership,
innovation, excellence, customer centricity, collaboration and caring,
high professional and ethical standards we have set for ourselves.
all of which helped us withstand the tough trading conditions
888 is committed to provide responsible gaming products that
throughout the year.
comply with the highest standards of gaming safety, security and fair
practice that exist globally. We regularly collaborate with external and
Late last year, 888 mourned the passing of one of its founders, Dr
regulatory bodies who guide us on all aspects of responsible gaming.
Aharon Shaked. Aharon was a committed and passionate supporter
For more details see our website: http://safe.888.com.
of 888 and we shall miss his unique contribution in the future
development of the Company.
Our own dedicated responsible gambling website
Regulation
888, as a regulated and responsible company, is constantly reviewing
(888responsible.com) provides a full guide to responsible practices
and is a source of practical support for all those involved in gaming
or those who seek to understand the gaming environment. We are
actual and potential changes in the online gaming regulatory regime
most proud of our work in this area and will continue to see it as a
all over the world. This serves both to allow the Company to pursue
key element in creating a sustainable, growing business.
any possible opportunities to seek, receive and operate under
local licences, as well as to guide decision making in relation to its
existing operations. Especially in Europe, the Company is pursuing
Our 2010 Focus
We aim to grow our B2C business through various strategic
licensing possibilities in Italy (where the 888 Group already holds a
initiatives, including the rebranding and refocusing around products.
licence), France and other jurisdictions. In addition, 888 is looking
We expect further expansion of our geographical footprint, largely
into potential licensing opportunities outside Europe. We believe
led by the anticipated regulatory changes that the industry is facing,
that the online gaming industry is making big strides towards
offering us a much more favourable environment for years to come.
being fully regulated in an increasing number of jurisdictions, in
an unparalleled manner which will change for ever the industry
In casino, our strategic goal is to maintain our dominant market
landscape. The unique position of 888 makes it well placed to take
leading position by continuing to offer the right variety of products
advantage of these changes.
and we want to capture as many customer segments as possible. In
pursuit of this goal, we will integrate more products and continue to
enhance the customer experience introducing innovative products
such as a 3-D virtual casino.
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As regards our poker business, we will continue to focus on product
innovation and customer needs, and will be launching a major
upgrade to our gaming environment and player experience later
this year. We will also be introducing various features designed
to enhance the online poker-playing experience beyond what is
available today, aiming to attract a bigger audience to our offering.
Outlook
In conclusion, in 2009 we made significant progress in a challenging
environment. Our strong business fundamentals and successful
growth strategy are the basis of our long-term sustainability.
We will continue to drive further organic growth, leveraging our
enhanced geographic footprint and our dual business model. In
We will aim for greater focus on acquiring new players to our sports
parallel, we also remain committed to further acquisitions as part of
offering, promoting additional events and investing more in brand
the ongoing industry consolidation and also achieving our strategic
recognition in specific countries. We will present unique features as
goals.
well as exclusive promotions around the main sports events of the
year — led by the football World Cup. 2009 was the year in which
While 2009 was challenging, the overall market is on a growth
sport betting became a real revenue-driver for us; we plan to build on
trajectory. Casino continues to grow and Bingo has significant
these achievements and grow our market share in 2010.
Bingo will remain a key growth area for us, especially following the
acquisition of Wink Bingo, and we will focus on penetrating new
growth potential especially outside of the UK while Poker remains
challenging. We remain excited that sportsbetting is still a major
opportunity for us. Last but not least, Dragonfish presents significant
additional growth opportunities which we plan to exploit, both in the
geographies throughout the year, bringing the message of bingo to
Total Gaming and Total Payments environments.
many new customers worldwide.
For Dragonfish, 2010 will see a continuation of the successful
Financially and operationally we have a strong platform to grow our
businesses further and look forward to continuing to provide all our
growth strategy, focusing on regulated markets and integrating a
stakeholders with value both now and in the future.
number of new products and services to deliver strong organic
growth for partners, whilst targeting new partners with the Total
Gaming Services proposition. We feel that we have a unique offering,
unparalleled in the market, and will continue to seek major new
deals throughout the year. The year will also see ongoing activity
with our current partners, who will enjoy a variety of new games and
capabilities that will assist them in growing their own businesses.
Dragonfish’s first independent global payments agreement with
Linden Lab will also be launched in 2010, followed by additional
payment processing management agreements.
Gigi Levy
Chief Executive Officer
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888 Holdings plc
Annual Report & Accounts 2009
Enhanced Business Review
Financial Summary
Revenue
B2C
Casino
Poker
Emerging offerings
Other operating income
Total B2C
B2B
Total operating income
Operating expenses2
Research and development expenses
Selling and marketing expenses
Administrative expenses3,4
EBITDA1,3,4
Finance income and exchange gains/(losses)
Depreciation and amortisation
Profit before tax4
1 Rounded.
Year ended
Year ended
31 December 31 December
20091
$ million
20081
$ million
118.7
51.6
25.1
—
195.4
51.3
246.7
89.9
24.1
67.3
19.8
45.6
(2.5)
(8.5)
34.6
133.1
71.6
13.8
5.5
224.0
38.6
262.6
77.3
27.4
80.2
22.0
55.7
0.3
(7.3)
48.6
2 Excluding depreciation of US$7.0 million (2008: US$5.5 million) and amortisation of US$1.5 million (2008: US$1.8 million).
3 Excluding exchange rate loss of US$2.7 million (2008: US$2.6 million).
4 Excluding share benefit charges of US$7.0 million (2008: US$8.4 million).
Financial Results
General
Our financial results in 2009, especially during the first three quarters
generated from operating activities of US$41 million (2008:
US$56 million) and its financial position remains as strong as
ever with cash and equivalents at year end at US$88 million and
were adversely impacted by both the economic downturn and adverse
no debt.
currency movements. Total Operating Income declined 6% to US$247
million (2008: US$263 million), EBITDA* was US$46 million (2008:
US$56 million), Profit before tax* was US$35 million (2008: US$49
million) and Basic Earnings per share* was 9.2¢ (2008: 13.4¢).
The Group continued to be highly cash generative with Net cash
Geographical segmentation
The Group’s revenue stream is well diversified across geographies
with the UK remaining the largest single jurisdiction. The table below
shows the Group’s geographic revenue distribution:
* Before share benefit charges of US$7.0 million
(2008: US$8.4 million).
08
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Total operating income by geographical market:
Total operating income
UK
Europe (excluding UK)
Americas (excluding USA)
Rest of World
Total
* Rounded.
Year ended
31 December
2009*
Year ended
31 December
2008*
$ million
% share
$ million
% share
90.4
113.7
19.1
23.5
246.7
37
46
8
9
100
97.1
122.0
26.2
17.3
262.6
37
46
10
7
100
In 2009 888’s turnover grew 36% in Rest of World while all other
During the year, the Group established a new outsourced low-cost
reported geographic markets showed decline: 7% in UK and Europe
development centre in Ukraine. While the number of development
(excluding UK) and 27% in the Americas (excluding USA). The relative
staff (employed and outsourced) increased during the year,
size of the UK and Europe (excluding UK) remained stable at 37%
development expenses were reduced to US$24.1 million (2008:
and 46%, respectively.
Expenses
During 2009, the Group continued its investment in infrastructure
as required to propel its B2B capabilities while continuing the
development of its B2C offerings.
US$27.4 million). The reduction was driven by more cost-effective
workforce benefited from the new outsource local development
centre which was established in late 2008 in Ukraine and partially a
result of a favourable exchange rate movement.
Marketing expenses, driven almost exclusively by B2C activities,
were US$67.3 million (2008: US$80.2 million), representing 27% of
Operating expenses, which are mainly salaries, chargebacks and
B2C Total Operating Income (2008: 31%).
payment service providers’ commissions, totalled US$98.4 million
(2008: US$84.6 million) representing 40% of Total Operating
Administrative expenses* at US$22.5 million (2008: US$24.6 million).
Income (2008: 32%). Salaries and benefits, representing the
largest component of operating expenses were US$45.5 million
In 2009, the Group continued optimising cost per acquisition across
(2008: US$40.3 million) reflecting an increase of 13% as a result of
various customer recruitment channels. During the year, 888’s
continued investment in building up the B2B business. Chargebacks
marketing team recruited more than 206,000 new Casino and Poker
increased significantly during the year to US$9.0 million (2008:
first time depositors from more than 1.1 million (2008: 0.93 million)
US$4.8 million) as a result of industry-wide concerted fraud
new real money registrations with an average cost per acquisition in
attacks since Q2 2009. 888 responded to these by adopting new
2009 of $177 (2008: $232).
processes and procedures which resulted in a significant reduction in
chargebacks starting in November and continuing to date.
* Excluding share benefit charge.
09
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888 Holdings plc
Annual Report & Accounts 2009
Enhanced Business Review
continued
Share benefit charges
As part of 888’s commitment to invest in human capital, eligible
Dividend
The Group’s stated policy is that it intends to make an annual
management and employees receive equity awards under the 888 All
dividend payment representing 50% of net profit, but the policy
Employee Share Plan (‘Share Plan’). In 2009, the Group continued to
would reflect long-term earnings and cash flow potential of the
award shares and options to employees under the Share Plan. The
Group. Given the performance in 2009, the Board is recommending
non-cash charge for 2009 was US$7.0 million (2008: US$8.4 million),
a final dividend of 3.0 cents per share in addition to the interim and
comprising a US$1.1 million charge relating to grants in the current
special dividend paid in October 2009.
year (2008: US$2.2 million) and US$5.9 million (2008: US$6.2 million)
relating to grants made in the past.
Finance Income
While the Group continued to generate and retain cash surpluses
throughout the year, net interest income was only US$0.2 million
Cash flow
The Group’s strong profitability during the year was matched by
strong cash generation with net cash generated from operating
activities reaching US$41.5 million (2008: US$56.4 million).
(2008: U$3.0 million) reflecting unprecedented low interest rates.
During 2009, the Group made cash payments of US$30.0 million
Profit and Earnings per share
EBITDA
(2008: US$36.7 million) in respect of business investment activities
including US$18 million in respect of the acquisition of the Wink
Online Bingo Business. The Group paid US$22.4 million (2008:
EBITDA* was US$46 million (2008: US$56 million). EBITDA* margin
US$25.6 million) in dividends to its shareholders consistent with its
was 18.5% (2008: 21.2%).
dividend policy.
Taxation
The tax charge for 2009 was $2.7 million (2008: $3.1 million)
reflecting the Group’s efficient tax position.
Earnings per share
Basic Earnings per share* were 9.2¢ in 2009 (2008: 13.4¢).
* Before share benefit charge.
10
Balance Sheet
The Group’s balance sheet remains strong, it has no debt, and
retains ample liquid resources. The Group’s cash position as at
31 December 2009 was US$87.5 million (31 December 2008:
US$98.4 million). This strong position allows the Group to take
advantage of suitable acquisition opportunities in the consolidating
market.
Balances owed to customers were US$37.6 million (2008: US$33.3
million). The Group maintains 100% cash reserves equal to this
liability which would permit immediate withdrawal of all customer
deposits at any time in the extremely unlikely event this was
necessary.
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Adi Soffer-Te’eni
B2C Managing Director
www.888holdingsplc.com
B2C
It has always been 888’s goal to be the market leader in the global
online gaming industry. In order to achieve this, it is vital to offer
an exceptional gaming experience that appeals to a wide range of
consumers — from the experienced poker player to casual sports
fans and people who enjoy a game of bingo.
888 is more than just a place where people go to play online. 2009
saw an increase in the focus on creating online entertainment
destinations where players can combine an unparalleled gaming
offering with a more complete internet experience, including social
networking and personalised activities.
The goal is for people to see 888 as a brand beyond gaming and an
integral part of their online entertainment experience by fulfilling this
wider role in the online lives of players. Building emotional ties with
players and increasing their engagement with the brand builds loyalty,
thereby helping to improve customer retention and spend.
Branding
As the online gaming industry has evolved, it has become
increasingly important to offer all four core gaming products —
casino, poker, bingo and sport. Historically the four segments have
been marketed as distinct brands to targeted audiences, with cross-
selling opportunities being utilised where possible.
In 2009 the decision was taken to streamline the 888 brand focus
and rebrand core products as being distinct, but complementary,
parts of the wider 888 brand. With a reinvigorated look and feel and
unified logos, the brands all speak with one language and link into
one offering. The new sites were launched at the beginning of 2010
as 888casino, 888poker, 888bingo and 888sport, all under the 888.
com umbrella brand.
Creating brand continuity allows the new sites to leverage the
strength of the 888 brand and greatly increase the 888 ‘share of
voice’. The multi-product offering and sub-brand strategy also
increases the effectiveness and efficiency of marketing and search
engine optimisation strategies, while cross-selling potential improves
due to a powerful familiarity between the sites.
888ladies will continue to be the leading bingo site in the UK market
targeting the female population, while Pacific Poker and Casino-
on-Net will remain as additional stand-alone brands and important
aspects of the B2C portfolio. The December acquisition of the Wink
Online Bingo business added other leading brands to the B2C
offering — Wink Bingo, Posh Bingo and Bingo Fabulous, all of which
had previously performed well on the Dragonfish network.
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11
888 Holdings plc
Annual Report & Accounts 2009
Enhanced Business Review
continued
Developing the Offering
Online gaming continues to evolve, and 888’s offering continues to
innovate and change with it in order to remain at the forefront of the
online gaming experience.
888 is a truly global gaming destination, with localised offerings
providing players in different geographies with games that appeal to
them in the language that they speak. The 888 gaming experience
is now available in a total of 23 languages. Four new languages
were added in 2009 as 888 supported growing demand in Eastern
Europe.
As part of tailoring the offering to satisfy the demand of today’s
discerning players we launched the innovative Live 888casino
in June, allowing players to have a ‘Las Vegas style’ live gaming
experience in the comfort of their own home. A live video stream with
a personally chosen dealer provides a choice of Roulette, Black Jack,
and Baccarat. Results in this area have been very encouraging.
Live dealer was an important part of the new no-download Casino,
which launched in May 2009. The no-download Casino uses flash
games that can be accessed through web browsers such as Internet
Explorer or Firefox, rather than downloading any form of software.
The offering of instant online games removes the barrier to entry
brought about by the hardship of extra time and effort to download
software.
As well as innovative new features, constant improvements continue
to provide a fresh and exciting gaming experience. 888 continues
to offer a wide range of instant games across the B2C network,
as games were added in 2009. These included games with iconic
brands, such as Cluedo and Spiderman. Instant games have
proven a popular addition. In Bingo, a new integration platform was
completed allowing rapid game deployment. The speed to market
of these games provides the opportunity to capitalise on trends
and target offerings to interest and excite customers; 11 new side
games have already been integrated. The successful X-Factor game,
launched at the beginning of the popular show’s run in November
supported through exclusive promotions, is a good example of the
timely introduction of a tailored product.
The increasing popularity in quick-play games led to the launch of
888games. Initially launched on 888sport in July, 888games provides
the opportunity to play instant win games whilst browsing the site,
improving the gaming experience and time spent on the site as well
as increasing customer spend.
888games has since been launched as a stand-alone site with 60
varied games, with more released continuously. Games range from
scratch cards to video slots and virtual sports. As the rebranding
of the core offering is completed, 888games will benefit from
cross-selling traffic arising through players looking to enjoy a more
instant gaming proposition. In addition, a further Casino brand was
introduced, as Reef Club Casino was re-launched in August in
both English and German. Reef Club Casino, with a low minimum
deposit limit and high bonus offering, provided an inviting gaming
environment which was well positioned at the height of the recession
when many players were looking for a lower spend alternative and
continues to offer an alternative experience.
The Poker offering also benefited from the addition of new features.
A quick seat for beginners allows novices to pick up the basics in a
free play environment, while private tournaments, the ability to export
hand histories, and re-match tournaments give more experienced
players a more satisfying poker experience.
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www.888holdingsplc.com
Beyond Gaming
888ladies has been a pioneering website not just in its combination
of a leading gaming product with a wealth of interactive features, but
in the creation of a real online community. 888ladies goes beyond the
core bingo product to provide players with a welcoming environment
in which to interact with like-minded friends. Regular promotions,
both online and offline, increase ties with players and provide
incentives to visit the site frequently.
Promotions ran throughout the year, including opportunities to
win tickets to the Soap Awards at Easter and calendar themed
promotions for Valentine’s Day, Mother’s Day and Halloween.
However, it is the social features that set 888ladies apart. The
888ladies blog receives hundreds of visitors every day, with
community features leading to genuine interactivity and goodwill
towards the brand. Utilising social media through providing daily
communication and real-time promotions further increases brand
engagement. A fan page on Facebook, and a regularly updated
Twitter page have both been developed and are great successes.
We will further develop the utilisation of social media and brand
interactivity across additional areas of the B2C offering in 2010.
Introductory offers in Casino included an immediate welcome bonus
of 100% on a first deposit of up to $200, and a welcome package
with a value of up to $1400. Other offers were specifically targeted
for the recession. Promotions included the chance to win a year’s
salary or a dream holiday, while lowering the deposit limit to £25
fulfilled players need to continue playing with smaller stakes.
The largest promotion in 2009 was the £8,888,888 campaign, which
offered the chance to use three free spins to win the biggest
online jackpot of all time. The campaign appealed to players across
the spectrum — including new, registered, and high value players,
VIPs and inactive players. The promotion was supported by a 360
degree marketing drive across all media outlets, including direct
mail, television, online, and prominent public advertising, and also by
search engine optimisation and cross-selling from 888 sites.
Promotions
The economic environment in 2009 was the worst it has been since
the advent of online gaming and indeed well before that. Customer
acquisition conditions were, therefore, usually tough. It was important
to offer new players compelling reasons to open accounts with 888.
Offline Marketing
888 continued to seek out ground-breaking and timely offline
marketing opportunities to build brand awareness amongst key
demographics and to drive online traffic.
Leo Margets, the international female poker icon, and the last woman
standing at the WSOP 2009, signed a 2-year contract with 888 and
will spearhead the 888 ambassador programme. Leo has generated
enormous media coverage, appearing in over 150 publications, most
notably on the front cover of El Pais Semanal — the most important
magazine for the Spanish audience.
2009 was the second year of 888’s partnership with Shane Warne, and
he continues to represent 888 at high-profile poker events such as the
888 Poker Open, the Aussie Millions and the World Series of Poker. Also
in 2009, the 888 Poker Ashes TV show was also launched in 2009 to
coincide with the cricket Ashes series in the UK, and was broadcast
after the cricket each day on Sky Sports. Moving the traditional rivalry of
England and Australia from the cricket pitch onto the poker table led to
one of the most successful poker television shows ever. The 2010/11
cricket Ashes series (this time in Australia) will see the second season of
the 888 Poker Ashes.
As the opposing countries squared up in the Poker Ashes, players could
join and represent their country online. 100% welcome bonuses up
to $400 offered an extra incentive to become an 888 player and was
amongst the most innovative promotions in the poker industry in 2009.
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888 Holdings plc
Annual Report & Accounts 2009
Enhanced Business Review
continued
Shane Warne extended his partnership with 888 in January 2010
and he will continue to represent 888poker and other 888 brands
internationally.
888poker has partnered with an offline poker league and clubs
throughout 2009 taking the 888brand directly to players. The 888 Poker
League was first formed in May, and rolled out in over 200 venues
offering the opportunity to play with Shane Warne in the final.
Customer Relationship Management
Strong customer relationships are the bedrock of our success.
Whilst eye-catching promotions help to drive customer acquisition,
customer retention comes from engendering loyalty through building
bonds with players. This leads to people playing more games, more
often, for more time.
888’s ongoing commitment to localisation strengthens relationships
worldwide through speaking to people in their language and culture,
while the market-leading usage of social features and interactivity
with players strengthens brand loyalty. This loyalty is also gained
through 888’s loyalty plans, which form an important aspect of the
customer relationship. In 2009 888 launched a new Poker loyalty
plan, considered one of the best in the sector.
The VIP offering remains the best in the industry. VIP members get
unparalleled customer service, with personal loyalty managers on call
24 hours a day to deal with any enquiries quickly and easily. Exclusive
promotions and more cashback and bonuses also mean that 888 VIPs
receive a best in class product with best in class service.
separate VIP promotions offered attractive gifts, bonuses
In 2009, 86 separate VIP promotions offered attractive gifts, bonuses
to one of the 46 offline events held in nine different countries.
and tickets to one of the 46 offline events held in nine different countries.
h Engine Optimisation
Search Engine Optimisation
(‘SEO’)
’)
st Search and Web Optimisation Technologies (‘SWOT’)
The specialist Search and Web Optimisation Technologies (‘SWOT’)
inue to give 888’s websites prominence on worldwide search
team continue to give 888’s websites prominence on worldwide search
engines, maximising the impact of the product offering. Successful use
maximising the impact of the product offering. Successful use
as helped to drive players to 888 brands, helping customer
of SWOT has helped to drive players to 888 brands, helping customer
and th
and the ongoing growth of 888sport and 888ladies.
acquisition and the ongoing growth of 888sport and 888ladies.
come out on top of Google searches for
In the UK, 888 sites come out on top of Google searches for
88 sites com
ino’, ‘online blackjack’ and ‘poker.’ This
‘casino’, ‘online casino’, ‘online blackjack’ and ‘poker.’ This
nline casino’,
d across core markets.
positioning is replicated across core markets.
is replicated acro
14
888’s continuing focus on SEO will be a key driver in the success of
the rebranded core 888 offerings.
2010 Focus
2010 has started well. With a number of strategic initiatives in the
pipeline, including the completion of the rebranding and refocusing
around core products, and further expansion of the geographic
footprint, 2010 is set to be a year of growth.
In Bingo, the aim for the year is to become a truly global operator,
with penetration in a number of new countries. In the UK, we will
build on the success of 888ladies with the 888bingo offering, which
appeals to a wider gaming demographic. The acquired Wink Bingo
business also provides an opportunity to further increase market
share in the growing UK bingo market.
The focus in Casino will continue to be on offering the right variety
of products appealing to the widest range of consumers so as to
maintain the Casino offering’s market leading position. In Poker
the strategic goal is to differentiate the offering by identifying, and
fulfilling, a significant customer need that has not yet been answered.
This will be achieved through the creation of a brand positioning that
is based on such unique product that customers need.
Targeted marketing campaigns in 2009 saw 888sport grow from
being mainly a tactical business relying on cross-sell into an
important contributor to the Group. 888sport’s growth in 2010 will
continue through promoting additional events and investing in brand
recognition in specific countries.
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www.888holdingsplc.com
Dragonfish
Gabi Campos
Dragonfish Managing Director
2009 has marked a period of significant growth for the B2B division,
New entrants to the online gaming market require diverse gaming
with 33% growth over 2008. Growth has been achieved organically,
content, a technology platform to work with, expertise in setting up
through the provision of new product and service initiatives that have
operations and, above all, knowledge of how to leverage their assets
helped Dragonfish’s existing partners expand their market share, and
and target the gaming consumer.
through the signing of a number of key new partners.
Dragonfish’s services help partners optimise the player experience
In March 2009, 888 took the decision to brand the rapidly expanding
and maximise customer lifetime value. Utilising over a decade’s
independent B2B division as Dragonfish, crystallizing the division’s
experience in the online gaming industry, Dragonfish is able to offer
separate function in 888 and signifying its evolution into a major
clients a unique end-to-end proposition — Total Gaming Services.
player in the B2B market. A strong leadership team was established
to drive the expansion of the business with departments covering
This strapline reflects the opportunity for clients not only to benefit
Sales & business development, Programme management &
from 888’s gaming portfolio and experience in technology,
integrations, Client executives unit, Client marketing & operations,
operations and e-payments, but also utilise advanced marketing
B2B marketing & PR and B2B Finance. The combination of these
services, from the provision of offline/online marketing, management
teams ensures Dragonfish can provide an outstanding B2B service.
of affiliates and search engine optimisation to Customer Relationship
Management (CRM) and business analytics. Industry leading
The creation of the Dragonfish identity was supported with an
back-office systems, including operational risk management, 24/7
international advertising campaign in key publications, visibility at
customer support and chat hosting services, complete the offering.
major trade shows, and through targeted PR achieving exposure
across all trade publications and in overseas gaming markets.
Dragonfish is able to provide clients with broad and customisable
solutions for all of their gaming needs. They can utilise the complete
The brand has already achieved significant cut-through in a
white label solution or select from individual components to
competitive market, and Dragonfish is now one of the largest
complement and enhance their own existing gaming offering. All
providers in the B2B sector, with a broad cross section of partners
solutions can be tailored for local markets, with Dragonfish currently
across all core gaming segments and numerous geographic regions.
providing services in more than 20 languages. The provision of a
New partners were retained in 2009 as strategic agreements were
dedicated team and market leading technological infrastructure allow
signed with, amongst others, Linden Lab and bwin Italia.
solutions to be both comprehensive and timely.
Dragonfish’s goal is to become the major provider of Games &
Technology, Marketing services, Operations and e-payments
to companies that both lead the e-gaming market or require an
experienced partner for entry into the sector.
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888 Holdings plc
Annual Report & Accounts 2009
Enhanced Business Review
continued
Utilising Dragonfish provides a gateway to a huge suite of successful
games in a variety of languages, allowing rapid entry into emerging
markets. Dragonfish provides hundreds of games with turnkey
integration capabilities, plus the experience and expertise to
customise game suites. Games can be seamlessly integrated
through the Advanced Integration Platform allowing constant
upgrades, increasing player retention and maximisation of customer
lifetime value.
Total Payment Services
The unique Total Payment Services offering combines payment
optimisation technology and fraud management, including anti-
money laundering services, with 24/7 multi-lingual customer
operations that assist customers’ deposits both reactively and
proactively.
Dragonfish has over a decade of experience in global payment
processing and works with a variety of trusted payment partners.
A rich portfolio of local and global payment methods enables
Dragonfish to maximise transaction approval rates and provide the
platform for partners to rapidly penetrate new markets.
With the support of a highly experienced fraud and risk management
department, Dragonfish’s e-payment solutions are both customer
friendly and extremely secure.
In November an agreement was signed with the world’s leading
BUILT FOR YOUR
ONLINE WORLD
Technology Operations Marketing ePayments
Casino Poker Bingo Sport Quickplay
www.dragonfishtech.com
virtual world technology company Linden Lab, the creator of
The agreement with Tsogo Sun Gaming Group followed the
Second Life, to provide e-payments, fraud and customer support
announcement of a partnership with Phumelela, one of the world’s
management services. This collaboration represented an extension of
largest pari-mutuel horseracing and tote betting organisations, to
Dragonfish’s offering beyond the gaming industry into the wider retail
provide a comprehensive sportsbook offering in South Africa. This
environment, and signified its emergence as a strong player in the
deal was an example of Dragonfish’s ability to co-operate with
regulated payment services market.
companies who utilise government licensing, and also indicates
Dragonfish’s strategy of obtaining first-mover advantage in newly
Partners
Dragonfish now works with e-gaming companies, media portals,
regulated territories.
offline casinos and pools operators, helping them all to maximise
Further international agreements were signed in 2009
their online revenues and fulfil the potential of their brands.
harnessing Dragonfish’s multi-lingual offering and e-payments
expertise in emerging territories. A partnership with Loper Gate
A number of significant partnerships were signed in 2009.
launched poker and casino in the Balkans, enabling Dragonfish to
Dragonfish’s prime position to provide the ideal platform for
achieve significant penetration in this emerging market.
international land-based marquee brands to enter the online arena
was illustrated through the signing of an agreement with Harrah’s
Dragonfish remains one of the leading providers of bingo software
to launch the internationally renowned World Series of Poker
worldwide, providing software to some of the biggest names in
and Caesars casino brands online. This capability was further
bingo including Foxy Bingo and Mirror Bingo. Dragonfish also runs
emphasised through the agreement with Tsogo Sun Gaming Group,
one of the world’s leading bingo network with over 60 skins offering
one of the largest hotel and entertainment groups in South Africa,
instant liquidity, dynamic content and access to top tier brands.
also choosing Dragonfish for their first move into online gaming.
This position was further consolidated during the year with the
announcement that Kamay Holdings Ltd, owner of leading poker and
casino sites LuckyAcePoker, LuckyAce Casino and SuproCasino,
selected Dragonfish as its bingo partner to launch Silk Bingo on the
Dragonfish bingo network. The agreement marked the tenth new
brand launched on the network in 2009 and complements the new
stand-alone networks, all powered by Dragonfish.
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www.888holdingsplc.com
2009 also saw the fruition of Dragonfish’s hybrid strategy for its
bingo model. This allows partners to join the Dragonfish bingo
network swiftly, and benefit from instant liquidity whilst gaining a full
understanding of back-office functionality, CRM and chat facilities.
Following success on the network, appropriate levels of liquidity
subsequently enable partners to launch stand-alone networks, whilst
maintaining other brands on the Dragonfish bingo network. This
model was followed by Moon Bingo in June, amongst others.
Dragonfish has been highly pro-active in delivering strong organic
growth for the existing client base through the introduction of new
product initiatives. The poker network has achieved greater liquidity
across a number of diverse territories with particular growth for Lucky
Ace and Tower Torneos. Growth has been achieved through new
$/"’-,&)0((cid:127)%,’),%(cid:127)(cid:5)(cid:2)(cid:9)+(cid:127)1(cid:127)(cid:2)(cid:11)(cid:9)+(cid:127)*",$0#".%(cid:127)(cid:127)(cid:5)(cid:10)(cid:3)(cid:4)(cid:7)(cid:3)(cid:6)(cid:4)(cid:5)(cid:4)(cid:127)(cid:127)(cid:5)(cid:7)(cid:14)(cid:4)(cid:11)(cid:127)(cid:127)(cid:27)"’%(cid:127)(cid:6)
THE GAMES ENGINE
TECHNOLOGY THAT GIVES YOU INSIGHT.
GAMES THAT GIVE YOU CHOICE
www.dragonfishtech.com
poker software upgrades to provide an enhanced and intuitive player
Plans are in place for the development of bingo in the Nordics, enabling
experience, the introduction of a new loyalty club and the extension
partners to achieve further international expansion, together with a range
of the language portfolio. Successful new language integration
projects have been implemented, one example being Lucky Ace
of new features that will cement Dragonfish’s market-leading bingo
position. This will be supported by the launch of a number of new
poker now being offered in languages aimed to target the Eastern
stand-alone networks and new brands on the Dragonfish bingo
European market. The recent agreement with WSOP (World Series of
network.
Poker), arguably the world’s most powerful poker brand, will act as a
further catalyst for liquidity growth on the network.
2010 will also mark the launch of new multi-channel marketing
In Bingo, Dragonfish launched 17 new Quickplay ‘instant’ games on
campaigns as partners increase spend in UK and pan-European
the bingo network, including the global brand X-Factor, to increase
territories.
player retention across networks. A number of these games have
been successfully integrated into Tower Torneos ‘casino in poker’
Dragonfish’s first independent global payments agreement with
offering resulting in increased player performance.
Linden Lab will be launched in 2010. The agreement provides a
2010 Focus
2010 will see a continuation of the successful growth strategy.
This includes being the first to regulated markets and integrating a
number of new products and services. The aim is to deliver strong
organic growth for partners, whilst targeting new partners with the
Total Gaming Services proposition so as to maintain the impressive
growth rate.
The introduction of licensing in newly regulated markets such as
Italy offers a significant opportunity to assist operators looking for
a speedy entry to such markets. Dragonfish has recently signed
an agreement with bwin Italia, a subsidiary of BWIN, to provide a
comprehensive casino games suite. The agreement supports the
Total Gaming Services proposition allowing partners to either take
advantage of the full white label solution or to select constituent
elements to be integrated into their existing online gaming business.
In this case. Dragonfish has developed a flexible gaming platform
that can be integrated into bwin Italia’s existing infrastructure.
Dragonfish has a number of new product integrations in the pipeline
that will provide growth opportunities for partners. Live dealer has
proven to be an excellent product for delivering strong growth and
the live gaming application will soon be integrated into a number
of partners’ offerings. Dragonfish will also be expanding the live
chat multi-lingual customer operations team in Romania to enable
partners to accelerate their penetration into new markets.
platform for marketing its Total Payment Services beyond the gaming
industry. Dragonfish is pursuing a number of existing opportunities in
the Forex industry and other non-gaming opportunities.
Technological Infrastructure
888’s success is built on the strength of its technological
infrastructure. 2009 saw the continued development of the platform
from a pure B2C to a hybrid B2C and B2B platform which is able to
utilise and offer partners leading infrastructure and a comprehensive
suite of applications and services.
In addition to the customer facing applications and services, B2B
licensees are able to view comprehensive customer data, providing
them with the ability to drill down into data at any level in order to
manage their business better.
888 continues to invest in technology. In 2009 a significant
investment was made in upgrading 888’s physical infrastructure,
computing, storage and networking equipment was upgraded,
maintaining the best of breed approach to our physical infrastructure:
A state-of-the-art data centre replaced one of the existing data
centres, and security, networking devices and protocols were
replaced in order to provide better performance, maintainability, and
scalability, as well as to reduce energy consumption and bandwidth
costs.
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888 Holdings plc
Annual Report & Accounts 2009
Enhanced Business Review
continued
The number of servers was also increased. There are now more than
To further enhance development efforts and reduce costs,
1,000 servers in the development and testing environments, and
888 opened and integrated a large new outsourced software
900 in production, most of which are now based on virtual machine
technology.
development facility in Eastern Europe. This development centre, in
Ukraine, allows access to excellent, well-trained, highly professional
and cost-efficient talent. By the end of 2009, around 50% of our
In addition to data centre improvements, further platform
development activities were successfully carried out at this centre.
enhancements and a significant upgrade in 888’s payment
processing capabilities led to 888 receiving the Payment Card
888 has also focused attention and investment on developing
Industry level 1 certification, allowing the Group to provide third party
solutions to take advantage of the changing regulatory scene in
payment services. The creation of a leading payment processing
Europe. Tailor-made solutions for both the French and Italian markets
infrastructure allows 888, through Dragonfish, to offer partners a Total
were developed, seamlessly providing Casino services to B2B partners
Payment Services proposition, moving the Company beyond the
and leading to a number of significant deals being signed in newly
online gaming sector.
regulated regions, such as bwin Italia.
The Integration Platform allows seamless integration of new third
Significant work was done during the latter part of the year on
party games from multiple vendors into the 888 gaming environment.
rebranding the 888 B2C offering. Alongside the eye-catching new
Building on this flexibility, in 2009, a new Content Management
look and feel, the sites’ infrastructure were rebuilt with content
System was implemented for all managed websites. The new system
management systems better optimised for faster performance,
enables a greater quantity of content changes to be implemented
improving the customer experience by more than halving response
with greater speed and frequency across all supported websites.
times.
The bingo platform also benefited from technological enhancement.
Improvements to the Integration Platform saw an abstraction layer
In January 2010, a new enterprise resource planning system was
created allowing for easy integration of games and third party
successfully implemented and integrated into 888’s business
services, while the chat system was upgraded with enhanced
backbone — the result of a large undertaking carried out during
capabilities and performance, further embellishing the community
2009. This new system streamlines 888’s capability to carry out daily
aspect of the bingo offering.
business processes in an optimal manner.
Steps were taken to benefit the player experience as well as
Improvements were also made to 888’s operational command and
improvements in the back-office infrastructure. The most eye-
control capability, dramatically enhancing the service levels provided
catching of these was the introduction of the Live Dealer offering,
to B2B partners through growth and process improvement in the
which has proved to be very popular. A new loyalty system was also
Network Operating Center, the 24/7 nerve centre of operations. This
launched in 2009, with the integration of casual games across the
greatly improved second level support capabilities.
offering further enhancing player satisfaction.
CRM capabilities were also significantly enhanced through the
increasing set of B2B partners, and to adapt to the growing
implementation of a content management system with multiple offers
and communication channels. This allows 888 to better segment
richness and size of our offering, 888 continues to evolve and
upgrade existing offerings through routine maintenance, functionality
and tailor offers and promotions, making the right offer to the right
upgrades, and changes to back-office services.
In order to better support the growing demands from an ever
customer at the right time.
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888 will continue to invest in technology across the business,
ensuring that leading back-office systems provide the basis for an
unparalleled experience for both players and partners.
Customer Support and Service
888 remains committed to its goal of being the market leader in the
global online gaming industry.
First class customer support is offered for each of the Group’s brands
and White Labels via telephone, e-mail and chat 24 hours a day, 7 days
a week, to customers around the world in 11 different languages.
In 2009, we aligned our mission to increase customer conversion
and retention by focusing training efforts on ‘sales through service’.
On average, our support teams converted 28% of all relevant
incoming phone calls to deposits, providing a service convenient to
players and beneficial to the business.
The Telemarketing and Proactive Chat department has continued to
expand. Three additional languages have been added to raise the
total number of languages to eight. We are pleased to see that the
department has increased its performance compared to 2008 on
all main metrics measured internally — efficiency, productivity and
revenue generated. New initiatives and optimisation of talented staff
has also seen all main individual metrics increase.
Five additional languages were added to the Online Web Self-Service,
and a deal with RightNow was signed for the full deployment of its
CRM solution across all operational sites in 2010. This investment will
help 888 to reduce its operational expenditure, effectively manage its
resources and improve efficiency and increase customer satisfaction.
Casino in English
l 98.0% of all phone calls were answered within, on average,
30 seconds
l 99.0% of all e-mails were replied to within 24 hours
l 95.3% of all chats were answered within, on average,
40 seconds
Poker in English
l 98.0 % of all phone calls were answered within, on average,
30 seconds
l 89.0% of all e-mails were replied to within 24 hours
l 89.9% of all chats were answered within, on average 40 seconds
A third operational contact centre site was opened in Romania via an
outsourcing arrangement at the end of the third quarter of 2009 in
order to increase cost-effectiveness, capacity and continue providing
Bingo in English
l 96.0% of all phone calls were answered within, on average,
each individual customer with an outstanding end-to-end customer
30 seconds
experience around the clock. Operating multiple contact centres is
a cost-effective way of managing customer contact overspill and
allows for efficient balancing of operational demands.
The main Gibraltar contact centre focuses on providing support for
our principal markets in Europe, Asia Pacific and Latin America while
the Antiguan contact centre focuses on supporting the English-
speaking markets in Europe, Australia, Asia Pacific and Canada.
In 2010, the newly established contact centre in Romania is set to
expand inbound customer services for more brands and languages,
and ultimately to become the main support centre for Dragonfish and
888’s main markets in Europe, Asia Pacific and Latin America.
Support teams in all locations aim to close the majority of issues
during the first contact, as exemplified in the Service Level
l 91.0% of all e-mails were replied to within 24 hours
Customer Satisfaction
888 continues to monitor customer satisfaction at key points
throughout their lifetime cycle by requesting and analysing real-
time feedback. As in previous years a comprehensive survey was
conducted to benchmark 888’s service level within primary markets,
with the results being used to form the basis of quality improvement
efforts.
888 is proud to note that respondents in 2009 once again gave
their highest rating to the level of professionalism of our support
representatives. Respondents from Germany remain the most
satisfied, closely followed by respondents from France where results
show a considerable increase in satisfaction compared to previous
Achievement reached in 2009:
studies:
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888 Holdings plc
Annual Report & Accounts 2009
Enhanced Business Review
continued
l Casino players rated the level of professionalism of our
Innovation in this area will continue, ensuring that actions are taken in
Representatives at 4.1 (out of 5)
order that services and processes remain one step ahead of potential
l Poker players rated the level of professionalism of our
fraudulent activity.
Representatives at 4.0 (out of 5)
l 89% of all customers who contacted 888 in regards to the
deposit process, were offered assistance in depositing and/or
Corporate Social Responsibility
As a global leader in the online gaming entertainment industry,
were presented with alternative depositing method to use
888 is committed to a pro-active policy of corporate and social
responsibility that reflects the high professional and ethical standards
In addition to understanding the different components of customer
we have set for ourselves.
satisfaction, recent surveys demonstrated increased awareness and
usage of the state-of-the-art Web Self-Service facility available to
Conducting our business responsibly is fundamental to the future
English and German speaking customers. Additional regions will be
success of 888 and the sustainability of the business. At 888, we
surveyed in 2010.
understand that our responsible approach is both the correct way to
do business and one that enhances our credibility with stakeholders,
A vital component in maintaining and exceeding customer
thereby supporting our international business development.
expectations is 888’s ability to access each client’s full and complete
history in real time, thus optimising customer interactions on all levels.
This year marked a significant milestone for the Company in this
field. During October 2009 we published our first ever Corporate
888’s unparalleled customer service and leadership in the e-Gaming
Responsibility report for the year 2008. The report is available at
industry has been also recognised by the judges of the 2009
www.888responsible.com.
e-Gaming Review Awards when awarding 888 the coveted title
‘Casino Operator of the Year’.
We aim to publish such a report every two years.
Fraud and Risk Management
Utilising over a decade of experience, 888’s Fraud and Risk
Management Department continues to provide 888 and B2B
partners with a leading fraud prevention service. 888 has built a
comprehensive database of fraudulent accounts and fraud patterns,
helping introduce new measures to prevent fraudulent activity.
In 2009, the following steps were taken to further develop risk
management and fraud control procedures:
l Fraud Alerts — 888 planned and created an in-house alerts
mechanism that identifies changing trends and patterns,
identifying suspicious activity
l Cashier — a more robust new cashier is being built
l Back-Office — back-office systems were updated, allowing 888
to react to changes in the type of fraudulent activity
l Data Analytics — data continues to be collected and analysed
through the data warehouse systems in order to monitor current
fraudulent activity
l PCI Level 1 Compliance — 888 became the first online
gaming company to be PCI Level 1 Compliant, showing 888’s
commitment in handling sensitive and personal data with the
highest degree of care
888 continues to optimise all procedures to ensure that fraud
aspects are covered across the business. New releases of White
Label brands are thoroughly checked to ascertain whether these
bring any inherent risk, and new offerings investigated for possible
domain specific risks.
20
Regulation and General
Regulatory Developments
The regulatory framework of online gaming in different countries
around the world remains as dynamic and rapidly evolving as ever.
While some jurisdictions have moved to curtail the activities of online
gaming sites (such as the US and Turkey), many others are currently
contemplating liberalisation and regulation of the industry, and some
have already taken this route. The Group remains committed to
monitoring closely and addressing regulatory changes as they occur,
and to fostering, so far as possible, the trend towards liberalisation
and regulation of online gaming throughout the world.
EU
The European Commission is challenging the online gambling
and betting regulatory regimes of various European States. The
Commission holds that, as regards EU licensed companies, these
regimes might infringe the enshrined freedom to provide services, the
freedom of establishment and the concept of mutual recognition. This
effort is reflected in, inter alia, the infringement proceedings initiated
against several EU States (including Spain, Germany, Portugal,
Finland, Austria, Hungary, Italy, Sweden, the Netherlands, Denmark
and France); should these Member States fail to supply adequate
reasoning behind their gambling legislation and fail to rectify what is
required from them by the EU Commission, the Commission may refer
the issue with each Member State to the European Court of Justice.
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While these proceedings may, in the end, cause the European States
Finally in Italy, where the Company holds an online gambling licence,
to liberalise their gambling markets, it should be noted that it could
current and future legislation will expand the scope of the games
be a very long time before resolutions or judgments are reached (if at
allowed to be offered under the licence (e.g. casino games), and will
all); and, as the European Court of Justice opined in its judgment in
also relax some of the requirements posed to licensees (including,
the case of bwin v. Santa Casa, the scope of discretion available to
inter alia, the spheres of taxation and establishment in Italy).
Member States in this sphere is relatively wide. In other cases referred
to the European Court of Justice by several German courts, the EU
In Germany, the State of Schleswig Holstein announced that it will
Advocate General reiterated (in March 2010) this position and opined
not agree to an extension of the prohibitive interstate lottery treaty,
(although his opinion is not binding upon the Court) that EU law does
when its term ends at the end of 2011. While this in itself does not
not oblige Member States to recognise online gambling licenses
impact the formal validity of the treaty, it could represent a potential
issued by other Member States. However, in 2010 the new Internal
future shift in the regulatory regime in Germany.
Market Commissioner opined that the ECJ’s ruling in the bwin v. Santa
Casa case will have little impact on the EU Commission’s activities
In addition to these infringement proceedings, the EU Commission is
in the sphere of cross border gambling services, as that judgment
involved in other instances in which the online gambling and betting
was based on considerations specific to Portugal and its gaming
regulatory regimes appear to contravene rights and freedoms of
monopoly; the Commission will continue to review Member States’
online gambling and betting operators (e.g. issuing detailed opinions
legislation in the gambling sphere on a case by case basis.
against the enactment of prohibitive legislation, and intervening in the
WTO process described below).
However, the pressure exerted by the EU Commission has resulted
in several EU Member States contemplating, and in some cases
advancing, a liberalised (or partially liberalised) gaming sector; these
UK
The DCMS has announced in 2010 that it will review the current
Member States include Spain, France, Sweden, Greece, Estonia,
online gaming licensing regime, and is considering whether to require
Belgium and Denmark. Other EU Member States such as Ireland,
all gaming operators targeting British consumers to be licensed (and
Cyprus and the Czech Republic are also considering (or are already
most probably taxed) in the UK.
in the process of) revising their gaming laws possibly so as to
regulate online gaming.
USA
In the USA, several bills have been introduced into the 111th
Thus, in France, a draft law is in the final stages of the legislative
Congress, which focus on online gambling issues. One of these
process, which will authorize the issue of French online gambling
bills creates an online gambling licensing regime that will allow for
licences, limited to the spheres of poker, sports betting and
a Federal online gambling licence to be issued (subject to various
horserace wagering. While the draft legislation is still being
conditions, limitations and possible exclusions); the bill has yet to be
structured, and several aspects of it are still being discussed with the
advanced in Congress. Another bill aims to delay the implementation
EU Commission, the Group is watching closely these developments
date of the UIGEA regulations to 1 December 2010 (following
so as to be in a position which will allow it to apply for an online
the decision of the Treasury and Federal Reserve to delay the
gambling licence in France; this is expected to happen during 2010.
implementation date of the regulations until 1 June 2010). In parallel,
several US States (including California, Iowa, New Jersey and Florida)
In 2009, Belgium passed a law which will allow issuance of online
gambling licences as an extension of existing terrestrial gambling
are reviewing the possibility of licensing some form of intra-state
online gambling activities.
licences; therefore, pure online gambling operators may face
difficulties in obtaining online gambling licences in that jurisdiction.
The Group is pursuing potential opportunities to allow it to utilise
WTO
Following a complaint filed in 2007 by the Remote Gaming
this change in legislation. In Denmark, the government announced
Association, the European Commission decided to open an
that it will introduce legislation which will regulate and license online
investigation into whether the United States is in breach of its WTO
gambling activities in the spheres of casino, poker and sports betting.
obligations in the sphere of gambling (in relation to the period prior
Spain too partially revealed its intention to license and regulate online
to the planned withdrawal of its commitment). In March 2009,
gaming activities; a draft law is expected to be introduced in 2010,
the investigation was concluded with a report issued by the EU
and is intended to present a federal online gaming licensing regime.
Commission, which stated that the US measures taken against
EU-based online gambling operators breach the WTO commitments
of the US. The EU commission stated that it will seek to reach a
settlement with the US in this respect; trade discussions between the
US and the EU have dealt with, inter alia, this issue but no decision
has been made as yet.
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888 Holdings plc
Annual Report & Accounts 2009
Corporate Social Responsibility
Employees
At 888 we work hard to nurture and maintain the pool of talent of our
High Potential Programme
A high profile programme designed to identify and develop key
employees. We acknowledge and value all our employees and strive
talent within the Company, this programme is a global project with
to be an employer of choice. 888 values everyone’s contribution,
participants from all of 888’s divisions, sites and locations. The
regardless of their background or gender, and believes that diversity
programme includes two groups: team leaders, who are the future
helps meet the need of our global customers.
potential managers, and employees, who are the future potential
team leaders. The programme is either 12 or 18 months long, with
Since our employees are one of our key stakeholders we value their
the time set according to location and includes both individual and
opinion. Therefore, during the last quarter of 2009 we conducted
group training sessions. The project aims to identify future leadership
a global employee opinion survey to understand our employees’
and maximise internal human capital, reducing reliance on sourcing
feedback towards different aspects of their life at 888. The survey’s
new talent externally, creating an internal tool for career progression,
findings form the base for defining our 2010 goals.
forming a tool for retention of key personnel and driving business
success by relying on internal business knowledge.
Professional development and training
We strive to enable our employees to grow with the business,
helping us to retain talent. During 2009 two major programmes were
developed for our employees.
Panoramic Training
A global project designed to connect and enhance employees’
knowledge about the Company’s products. This project aimed to
provide a panoramic outlook on both the internal and external parts
of the business. The objectives of the programme are to improve
employees’ connection to the customer experience and enhance
the employees’ understanding of the end user experience, broaden
employees’ understanding of 888 activities and what the Company
offers its customers; and increase employees’ awareness to
important Company processes.
The programme includes four categories: customer Voice — live
calls from the support team; tools — understanding operational tools
such as reporting systems; products — internal product lectures;
and tailor-made plans — training needs analysis and designed
programmes for each division.
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Life at 888
At 888 we like to treat our employees as individuals and ensure that
Community
888 is committed to supporting the various local communities in
they work in a relaxed and stimulating environment.
which it operates and the broader global community through its
ability to reach millions of consumers worldwide.
During 2009, every division had a dedicated division day and during
the year over ten special days were marked. Celebrations were held
Our community investment programme includes cash donations and
at different times according to locations, their holidays and relevant
long-standing community involvement in our key areas across the
events.
world.
As happens once a year, during the first quarter staff from a wide
variety of levels, from team leaders to senior management, met for a
Local community involvement
The Gibraltar, Antigua and UK offices focused their community work
global summit.
this year on raising funds for a wide range of issues, including Cancer
Research UK, ‘Tarik School of Dance’, ‘Teen Tales’, the Gibraltar
To combine creativity and fun at 888, 2009 saw the initiation of a
Philharmonic Society and various other global charities.
Global Art & Craft Exhibition. The exhibition included works of 888
employees, giving them an opportunity to present their work and
Our employees in Israel have continued their year long relationship
express their creative side.
with the local Derech Haetgar charity, which focuses on enhancing
the education of disadvantaged teenagers.
Twenty-six representatives from all 888 locations took part in the
exhibition, which included different forms of art such as painting,
As has been the case for each of the past three years, employees
photography, sculpture, knitting and many more.
in Israel joined the Ruach Hatova national volunteering organisation
for a day of goodwill. A group of 25 employees helped at a special
The exhibition was presented at 888 premises in various locations
school for refugees, with volunteers working with the children to
for 14 days, with the art works then printed onto a calendar and
create baskets and ornaments.
distributed to all employees.
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888 Holdings plc
Annual Report & Accounts 2009
Corporate Social Responsibility
continued
Online Charity day
888 held its third annual charity day. The 2009 charity day offered 888’s
customers across all brands the opportunity to take part in the day and
play on the sites for a good cause. Together, 888 and its costumers
donated a total of US$70,000 to help with the East Africa Crisis.
Responsible gaming
Our values place the community and the customer at the centre of all
our endeavours. We are constantly creating new and innovative ways
to create a caring, responsible gaming environment and to ensure
our children are safe.
Environment
As an online business 888’s activities have a relatively small
impact on the environment. However, we continue to develop our
commitment to environmental issues in order to ensure that this
impact is kept to a minimum, and 2009 saw a number of initiatives in
this area.
Green IT was targeted as one of our major challenges which
we approached on various levels — (a) Recycling IT: all old and
nonfunctional IT equipment from all of our locations is now sent for
recycling and (b) Virtualisation (VDI project): more than 120 stations
were transformed from a PC to the VDI system, enabling us to use
less hardware.
Alongside these projects we continuously measure our energy
consumption to make sure steps are taken to minimise it at all times.
We try to recycle as many materials as possible. Paper, bottles and
cans are collected regularly from all of our sites on a monthly basis.
We use only ecological detergents in our offices and continue using
water saving devices in all our locations. To minimise the impact of
travel on the environment we encourage employees to either cycle to
work and, in certain locations, provide buses for commuters.
To reduce international travel we continue to invest in state-of-the-
art technology and this year we offered the new option of ‘888Live
Meeting’ to all our staff. ‘888LM’ is a web sharing information tool
which allows all 888 employees to communicate globally while
viewing the same documents on their personal computer.
888 aims to provide responsible adults with the best online gaming
entertainment experience. However, we acknowledge that within our
business there is the possibility of danger that the games may pose
for a small minority of people.
We continuously train all our staff and provide them with the tools
necessary to provide a safe gaming experience. Our training
programme incorporates methods and techniques that assist our
employees in recognising and taking appropriate actions when they
identify compulsive or under-age gambling.
Protecting Customers
As a responsible, regulated gaming Company we comply with both
the GamCare and the eCOGRA guidelines, and during 2009 had our
certification renewed.
GamCare is the leading authority on the provision of counselling,
advice and practical help in addressing the social impact of gambling
in the UK.
eCOGRA ensures that approved online casinos are properly and
transparently monitored to provide player protection.
Our site has links to helping agencies and we have placed many
safeguards for those who need help with controlling their gaming:
— Self-assessment test: For gamblers who are worried about their
gambling habits and want to know more about the signs of
compulsive gambling,
— Controlling deposit limits: Should clients feel the need to, they
can control their gambling by self limiting the amounts they
deposit per day, per week or per month.
— Self exclusion: A member can request to be self excluded for a
chosen period, due to different concerns. Clients can choose
from three options of exclusion period — 7 days, 30 days and
180 days. During this period, 888 blocks the account and no
promotional e-mails are sent to the client.
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Protecting minors
Under-age gambling on our sites is prohibited and the Group takes
United Nations Global Compact (UNGC)
During 2009, 888 joined United Nations Global Compact. The UNGC
the matter of under-age gaming extremely seriously. Our offerings
is the largest global initiative to promote the social responsibility
are not designed to attract minors. We use sophisticated verification
of businesses. It is a voluntary initiative, which brings together
systems to identify and prevent minors from logging into our
thousands of businesses across more than 100 sectors worldwide.
software.
Representatives confirm their commitment to the UNGC in order
to promote ten universally accepted principles in the field of human
We make every effort to prevent minors from playing on our site.
rights, workplace standards and anti-corruption.
This year, we have added the age verification services of 192.com to
complement the existing services provided by URU.
We believe that the activities of 888 are in line with the principles
of the Global Compact, and it therefore seemed appropriate
We train our staff to be highly sensitive to the possibility of under
that we should publicly declare our support and ensure greater
age gambling and make sure we immediately suspend any account
exposure to a wider public. By joining the UNGC we are now in line
suspected to be an under-age account.
with an established and globally recognised policy framework of
environmental, social, and governance policies and practices.
888responsible
Since 2007, a dedicated website, www.888responsible.com,
has been available, providing information regarding all aspects
of responsible gaming. The site was translated in June 2009 into
three additional languages, and is now available in English, French,
Spanish and German.
888safe
888 is committed to providing responsible gaming products which
comply with the highest standards of gaming safety, security and fair
practice.
In March 2009, we were awarded the prestigious TRUSTe Privacy
seal of approval for all our websites. As a result of a rigorous audit we
are the first online gaming company to be awarded the Web Privacy
Seal, a clear indication of the importance we place on being a highly
trustworthy operator.
TRUSTe runs the world’s largest privacy seal programme, with more
than 2,000 organisations certified. It helps millions of consumers
identify trustworthy online organisations through its Web Privacy Seal,
E-mail Privacy Seal and Trusted Download Programmes. TRUSTe
ensures online privacy and protects confidential user information on
more than 2,400 Websites and many of the most highly trafficked,
including Yahoo, AOL, Microsoft, Disney, eBay, Intuit, and Facebook.
We continue to collaborate with external and regulatory bodies who
guide us on all aspects of responsible gaming, and our dedication to
this area is shown through our specialist website,
http://safe.888.com/.
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888 Holdings plc
Annual Report & Accounts 2009
Risk Report
The Group operates in a dynamic business environment. In addition
addressed by rerouting traffic using different routes or providers.
to the day-to-day commercial risks faced by most enterprises, the
888 operates a 2457 Network Operations Centre (NOC). The NOC’s
online gaming industry faces particular challenges in respect of
role is to conduct real time monitoring of production activities using
Regulatory risk, Reputational risk, Information Technology risk and
state-of-the-art systems. These systems are designed to identify and
Taxation risk, each of which is detailed below.
provide alerts regarding problems related to systems, key business
Regulatory risk
The regulatory framework of online gaming is dynamic and complex.
Change in the regulatory regime in a specific jurisdiction could have a
indicators and issues surrounding customer usability experience.
Taxation risk
The Group aims to ensure that each legal entity within the Group
material adverse effect on business volume and financial performance
is a tax resident of the jurisdiction in which it is incorporated and
in that jurisdiction. A detailed regulatory review is set out in previous
has no taxable presence in any other jurisdiction. While the Group’s
pages.
Reputational risk
Under-age and problem gaming are inherent risks associated with
customers are located worldwide, certain jurisdictions may seek to
tax such activity which could have a material adverse effect on the
amount of tax payable by the Group or on customers’ behaviour.
the online gaming industry and the Group is no exception. The
The Group benefits from favourable fiscal arrangements in some of
Group devotes considerable resources to putting in place prevention
the jurisdictions in which it has taxable presence without which its
measures coupled with strict internal procedures designed to prevent
results would be adversely affected. All gaming activities are based
under-aged players from accessing its real money sites. In addition,
in Gibraltar, where the Group currently benefits from a tax exempt
the Group promotes a safe and responsible gaming environment to
status. A change of control or activity of a tax exempt subsidiary
its customers supplemented by its corporate culture. The Group has
would result in the loss of its tax status. However, this is not
a dedicated Director of CSR & Responsible Gaming tasked with the
expected to have a material adverse effect on the overall tax rate of
responsibility of implementing such policies. Further details about the
the Group. The tax exempt status is due to expire by the end of 2010
Group’s responsible gaming initiatives are set out in previous pages.
when the Government of Gibraltar intends to introduce a new fiscal
Information Technology risks
As a leading online business, the Group’s IT systems are critical to its
Domestic corporate tax in Gibraltar is 22% (2009/2010). Gibraltar’s
operation. The Group is reliant on the performance of these systems.
Chief Minister has announced further reductions in anticipation of
regime that complies with EU requirements.
the introduction of a flat tax rate of 10% in 2011. A consultation is in
Cutting-edge technologies and procedures are implemented
place with respect to the new tax regime in Gibraltar and it is widely
throughout the Group’s technology operations and designed to
anticipated, following Government indications, that the new rules
protect its networks from malicious attacks and other such risks.
will subject the Group to an effective rate of tax well below the new
These measures include traffic filtering, anti-DDoS (Distributed Denial
flat tax rate. The Group is currently required to pay a gaming duty,
of Service) devices, Anti-Virus protection from leading vendors
currently set at 1% of gaming yield, with an annual maximum cap
and other such means. Physical and logical network segmentation
of £425,000 in aggregate, in respect of its Casino, Poker and Bingo
is used to isolate and protect the Group’s networks and restrict
activities and, separately, at the same rate in respect of the Group’s
malicious activities. In order to ensure systems are protected properly
and effectively, external security scans and assessments are carried
Sports offering. The applicability of the gaming taxes following the
implementation of the new tax regime is, as yet, unclear.
out in a timely manner. The Group has a high-end storage solution
to ensure storage availability and performance. All critical data is
The Group’s subsidiary in Israel, Random Logic Limited, and the
replicated to another storage device for disaster recovery purposes
Israeli branch of Intersafe Global Limited, have each entered into
and all data is stored off-site on a daily basis.
separate transfer pricing agreements on an arm’s length basis
In order to minimise dependencies on telecommunication service
Random Logic Limited are effective until 31 December 2010, while
providers, the Group invests in network infrastructure redundancies
the arrangement for the Intersafe Global Limited branch terminated
whilst regularly reviewing its service providers. The Group has two
on 31 December 2007. The Group has discontinued the use of this
with the Israeli Income Tax Commissioner. The arrangements for
internet service providers in Gibraltar in order to minimise reliance on
branch.
one provider.
The operation in Antigua also benefits from a low tax regime.
As a part of its monitoring system, the Group deploys set user
experience tests which measure performance from different
locations around the world. Network-related performance issues are
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Board of Directors
Richard Kilsby
Non-executive Chairman
John Anderson
Non-executive Director
Richard Kilsby has been Chairman since March 2006, having
John Anderson was the Chief Executive Officer of the Group from
previously been Deputy Chairman of the Group from August 2005.
September 2000 to December 2006. He is currently Non-executive
He is currently a Non-executive Director of Tullett Prebon plc. Since
Chairman of Burford Holdings plc and was Chief Executive Officer
2001, he has held several Board and management positions in
of Burford Holdings plc from 1996 to 2000. He is Chairman of the
various private and venture capital funded companies. In 2004, he
Interactive Gaming Council; a Board member of eCOGRA and
acted as independent monitor for the SEC and USA Department of
Chairman of 10 Tech Holdings Limited. Previously, he was a Board
Justice in connection with Adecco. From 1999 to 2002, he was Chief
member of Ladbrokes plc from 1990 to 1996. Age 61.
Executive of Tradepoint and subsequently Executive Vice-Chairman
of virt-x plc. From 1995 to 1998, he was an Executive Director of the
Shay Ben-Yitzhak
London Stock Exchange, prior to which he was a Managing Director
Non-executive Director (until 30 December 2009)
for Bankers Trust from 1992 to 1995. He was also Vice-Chairman of
Shay Ben-Yitzhak is one of 888’s founders, was the Chief Technical
Charterhouse Bank from 1988 to 1992, and spent the early part of
Officer of the Group and responsible for research and development
his career with Price Waterhouse (now PwC) where he was a partner
from the establishment of its research and development centre in
from 1984 to 1988. Age 58.
Gigi Levy
Chief Executive Officer
Tel Aviv until June 2006. Previously he was a software engineer for
Tower Semiconductor Limited and CIBAM Technologies Limited. He
holds a BSc in computer science from Technion — the Israel Institute
of Technology. Age 41.
Gigi Levy has been Chief Executive Officer of the Group since January
2007, following six months as Chief Operating Officer. Prior to his
Michael Constantine
appointment, Gigi worked for Amdocs, one of the world’s largest
Independent Non-executive Director
software providers and systems integrators in the telecoms market
Michael Constantine was appointed in August 2005. From 1996
(NYSE: DOX), most recently as Division President managing Amdocs’
to 1998, he was Deputy Superintendent of the Turks and Caicos
activity in Europe (except Eastern Europe), Central and Latin America.
Islands Financial Services Commission, and in 1995 was head of
Before joining Amdocs, Gigi held several interim management and
the Financial Supervision Unit of the Mauritius Offshore Business
consulting roles with various companies in Israel and the UK. Gigi
Activities Authority. From 1991 to 1995 he was Inspector of
also headed Giltek, a telecommunication systems integrator, and
Licensees at the Gibraltar Financial Services Commission, latterly
Girit Telecommunications, an Israeli Information and Communications
Acting Commissioner. He is a Chartered Accountant and for many
Technology systems integrator. He holds an MBA from the Kellogg
years a partner in the firm of Spain Brothers & Company. He served
School of Management at Northwestern University. Age 38.
in the Royal Naval Reserve, reaching the rank of Commander.
Aviad Kobrine
Chief Financial Officer
Age 71.
Amos Pickel
Aviad Kobrine has been Chief Financial Officer of the Group since
Independent Non-executive Director
June 2005, and was appointed to the Board in August 2005. From
Amos Pickel was appointed in March 2006. Formerly the Chief
October 2004 he was a consultant to 888. Previously, he was a
Executive Officer of Atlas Management Company Limited and Chief
banker with the Media Telecoms Investment Banking Group of
Executive Officer and member of the Board of Directors of Red Sea
Lehman Brothers and prior to that, he was a senior associate with
Hotels Ltd. Previously a Non-executive Director of Gresham Hotel
Slaughter and May. He holds a Masters in Finance from the London
Group Plc, he is a non-practising solicitor holding a Masters in Law
Business School (Distinction), a BA in Economics and an LLB from
from New York University and a LL.B. from Tel Aviv University. A
Tel Aviv University. Age 46.
member of the Board of Directors of Twenty10 Hotel Fund Limited
from 2010. Age 43.
Brian Mattingley
Deputy Chairman and Senior Independent Non-executive Director
Brian Mattingley has been Deputy Chairman since March 2006,
and was appointed to the Board in August 2005. He was previously
Chief Executive of Gala Regional Developments Limited until 2005.
From 1997 to 2003 he was Group Finance and Strategy Director of
Gala Group Plc, prior to which he was Chief Executive of Ritz Bingo
Limited. He has held senior executive positions within Kingfisher Plc
and Dee Corporation Plc. Age 58.
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888 Holdings plc
Annual Report & Accounts 2009
Corporate Governance
888 Holdings plc (the ‘Company’) is admitted to the UK Official List
Group budgets and dividend policy. The Board also determines key
and traded on the London Stock Exchange, but it is not subject to
appointments. The Board receives regular updates on shareholders’
the UK Combined Code on Corporate Governance issued in June
views.
2008 (the Code) as it is a Gibraltar incorporated company. The
Directors support high standards of Corporate Governance and will
The Board has established a calendar of business. This provides
continue to comply with the Code as far as it is appropriate for a
for the financial calendar, strategic planning, annual budgets and
company incorporated in Gibraltar.
performance self-assessments, as well as the conduct of standing
The Board
The Directors consider it essential that the Company should be both
business. The calendar forms the basis for effective integration
of business activities as between the Board and its principal
Committees (see pages 29 and 30), which individually consider their
led and controlled by an effective Board.
own operating frameworks against the Board’s business programme.
Composition
Following the resignation of one Director on 30 December 2009,
The Board has established a formal process for the annual evaluation
of the performance of the Board, its committees and individual
the Board consists of seven Directors as follows: three Independent
Directors. The evaluation process covered a range of issues such as
Non-executive Directors, one non-Independent Non-executive
Board processes, Board roles and responsibilities, Board agendas
Director, a Non-executive Chairman, and two Executive Directors,
and committee processes. The Board and its committees were found
comprising the Chief Executive Officer and Chief Financial Officer.
to be operating effectively.
The biographical details of all of the Directors are given on page 27.
The Board plans to meet six times a year. During 2009, the Board
Strategic approach
The Board focuses upon the Group’s long-term objectives, strategic
met six times.
and policy issues and considers the management of key risks
Set out below are details of the Directors’ attendance record at
facing the Group. The Board is responsible for acquisitions and
Board and Committee meetings in 2009.
divestments, major capital expenditure projects and considering
Total held in year
Richard Kilsby
Gigi Levy
Aviad Kobrine
John Anderson
Shay Ben-Yitzhak
Michael Constantine
Brian Mattingley
Amos Pickel
Total number of meetings held during the year ended
December 2009 and the number of meetings
attended by each Director
Audit
Remuneration
Board
Committee
Committee
Nominations
Committee
6
5
6
6
5
4
6
6
5
3
n/a
n/a
n/a
n/a
n/a
3
3
3
4
n/a
n/a
n/a
n/a
n/a
4
4
3
—
—
n/a
n/a
n/a
n/a
—
—
n/a
The Chairman has responsibility for ensuring that agendas for Board
to appraise the performance of the Chairman. The Directors have
meetings are set in advance. Board papers are issued to Directors
wide ranging business experience, and no individual, or group of
sufficiently in advance of meetings to facilitate both informed debate
individuals, dominates the Board’s decision making.
and timely decisions.
Non-executive review and performance
appraisal
The Chairman holds meetings at least once per year with the
The Board considers that Brian Mattingley, Michael Constantine and
Amos Pickel satisfy the criteria of the Code to act as Independent
Non-executive Directors. The Board is satisfied that, upon his
appointment as Chairman, Richard Kilsby met the independence
Non-executive Directors without the Executive Directors being
criteria of the Code. The other significant commitments of the
present. Led by the Senior Independent Director, the Non-executive
Chairman during 2009 are detailed in his biography on page 27.
Directors meet once per year without the Chairman present in order
The Board considers that Mr Kilsby’s other commitments do not
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interfere with the discharge of his responsibilities to the Group and is
Shay Ben-YItzhak and Aviad Kobrine were appointed for a period
satisfied that he makes sufficient time available to serve the Company
of three years, following their reappointment by the shareholders
effectively.
Reserved powers and delegation
A schedule of matters reserved to the Board has been adopted
and its content is reviewed to align it with operational needs and
at the 2008 Annual General Meeting. Michael Constantine, Brian
Mattingley and Amos Pickel were appointed for a period of three
years, following their reappointment by the shareholders at the 2009
Annual General Meeting.
the Board’s preference to monitor and, where appropriate, approve
matters of substance to the Group as a whole. Senior executives
Audit Committee
The Audit Committee comprises three Independent Non-executive
have given written undertakings to ensure compliance within their
Directors: Brian Mattingley (Chair), Michael Constantine and
business operations with the Board’s formal schedule of matters
Amos Pickel. The Board is satisfied that Brian Mattingley has
reserved to it for decision or approval.
sufficient recent and relevant financial experience to Chair the Audit
Committee. Normally, by invitation, the Chairman, Chief Executive
Division of responsibilities
The responsibilities of the Chairman are clearly and formally defined,
Officer and Chief Financial Officer and, where appropriate, the
Internal Auditor and representatives of the Company’s external
with the Chairman being responsible for the effective operation of the
auditors attend the Audit Committee meetings.
Board as a whole and supporting key external relationships.
Other issues
All Directors have access to the advice and services of the
Company Secretary and the Company’s nominated advisers, who
The Audit Committee’s terms of reference are available on request to
the Company Secretary and are included on the Company’s website,
www.888holdingsplc.com.
are responsible for ensuring that Board procedures are followed.
In summary, the Audit Committee assists the Board in discharging
Directors are able to seek independent professional advice, if
its responsibilities with regard to financial reporting, external and
required, at the Company’s expense provided that they have first
internal audits and controls, including reviewing 888’s annual financial
notified their intention to do so. The appointment or removal of the
statements, considering the scope of annual audit and the extent
Company Secretary is a matter for the Board as a whole.
of non-audit work undertaken by external auditors, approving 888’s
The Board accepts that there should be a formal, rigorous and
auditors and reviewing the effectiveness of internal control systems.
internal audit programme, advising on the appointment of external
transparent procedure for the induction of new Directors, which has
been formulated with the guidance of the Nominations Committee.
Nominations Committee
The Nominations Committee comprises three Independent Non-
The opportunity to hold office as Non-executive Directors of other
executive Directors, Michael Constantine (Chair), Brian Mattingley
companies enables Directors of 888 to broaden their experience and
and Amos Pickel, as well as Richard Kilsby, Chairman. The
knowledge, which will benefit the Company. Executive Directors may
Nominations Committee did not meet during 2009.
be allowed to accept Non-executive appointments with the Board’s
prior permission, so long as these are not likely to lead to any conflict
The Nominations Committee assists the Board in discharging
of interest. Executive Directors may be required to account for fees
received from such other companies.
its responsibilities relating to the composition of the Board. The
Nominations Committee is responsible for reviewing, from time
to time, the structure of the Board, determining succession plans
The Company has arranged insurance cover in respect of legal
for the Chairman and Chief Executive Officer, and identifying and
actions against its Directors. To the extent permitted by Gibraltar law,
recommending suitable candidates for appointment as Directors. The
the Company also indemnifies the Directors. Neither the insurance
Nominations Committee’s terms of reference are available on request
nor the indemnity provides cover where a Director has acted
to the Company Secretary and are included on the Company’s
fraudulently or dishonestly.
website, www.888holdingsplc.com.
Re-election of Directors
All Directors are subject to reappointment by shareholders at the
Remuneration Committee
The Company’s Remuneration Committee comprises three
first Annual General Meeting after their appointment, and thereafter,
Independent Non-executive Directors: Brian Mattingley (chair),
in accordance with the Articles of Association of the Company, at
Michael Constantine and Amos Pickel.
intervals of no more than three years. Gigi Levy and John Anderson
were appointed as Directors (Mr Anderson for an initial period of
three years) at the 2007 Annual General Meeting. Richard Kilsby,
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Annual Report & Accounts 2009
Corporate Governance
continued
The Board has overall responsibility for determining the framework of
Brian Mattingley, the Senior Independent Director, is available
Executive remuneration and its cost. It is required to take account of any
to shareholders to address any issues where contact with the
recommendation made by the Remuneration Committee in determining
Chairman, Chief Executive Officer and Chief Financial Officer is
the remuneration, benefits and employment packages of the Executive
inappropriate or where such contact has failed to resolve the issue.
Directors and senior management and the fees of the Chairman.
The Remuneration Report, which outlines the Remuneration
Meeting and private investors are encouraged to take advantage of
Committee’s work and details of Directors’ remuneration, is on pages
the opportunity given to ask questions. The Chairmen (or nominated
31 to 38. The Remuneration Committee’s terms of reference are
members) of the Audit, Remuneration and Nominations Committees
available on request to the Company Secretary and are included on
will attend the meeting and be available to answer questions.
All shareholders are welcome to attend the 2010 Annual General
the Company’s website, www.888holdingsplc.com.
Risk Management and Internal Control
The Directors acknowledge that they are responsible for the
Compliance with the Code Provisions
As 888 Holdings Public Limited Company is registered in Gibraltar, it
is subject to compliance with Gibraltar statutory requirements and is
Company’s system of internal control, for setting policy on internal
not bound by the UK Combined Code. The main legislation relevant
control and risk management, and for reviewing the effectiveness
to companies in Gibraltar is the Gibraltar Companies Act, which is
of internal control and risk management. It is management’s role to
based on the UK Companies Act 1929. 888 Holdings Public Limited
implement Board policies on risk and control, including reporting.
Company is in full compliance with the Gibraltar Companies Act.
The system of internal control is designed to manage rather than
eliminate the risk of failure to achieve business objectives and can
only provide reasonable, and not absolute, assurance against
material misstatement or loss.
Going Concern
After careful review of the Group’s budget for 2010, its medium-term
plans, liquid resources and all relevant matters the Directors are
confident that the Company and the Group have adequate financial
The Board has delegated responsibility to the Audit Committee to
resources to continue in operational existence for the foreseeable
review the appropriateness and adequacy of systems of internal
future. They have therefore continued to adopt the going concern
control and risk management in relation to the financial reporting
basis in preparing the financial statements.
process on an ongoing basis and to make recommendations to the
Board. The Company has an Internal Auditor who reports to the
The principal risks and uncertainties faced by the Group are
Audit Committee.
disclosed on page 26.
888’s payment risk management team, based in Gibraltar, has
developed stringent payment risk management and fraud control
Corporate Social Responsibility Statement
The Group’s Chief Executive Officer is the Director responsible for
procedures. The team makes use of external and internal systems to
monitoring corporate social responsibility within 888. The Board
manage the payment risks. Detailed procedures exist throughout the
receives periodic reports on the Group’s activities in this area
Company’s operations and compliance is monitored by operational
from the Chief Executive Officer. Further details are set out in the
management and the Internal Auditor.
Corporate Social Responsibility report on pages 22 to 25.
The Directors periodically review the effectiveness of the Group’s
systems of internal control and risk management. The review
considers individual risk control responsibilities, reporting lines and
Community
Sponsorship
888 is a sizeable employer with a visible presence in Gibraltar
qualitative assessments of residual risks.
and enjoys a good relationship with the local community. During
Relations with Shareholders and Key Financial
Audiences
The Company maintains an active and regular dialogue with principal
and institutional shareholders and sell-side analysts through a
planned programme of investor relations and financial PR activity. The
2009, the Group continued its policy of reinforcing this relationship
by making contributions to a number of local causes, primarily
educational.
Charities
In 2009, the Group made donations totalling US$124,799
outcome of these meetings is reported to the Board. The programme
(2008: US$107,821) to organizations promoting various social
includes formal presentations of full year and interim results, quarterly
causes in Gibraltar and Israel.
release of Interim Management Statements, analysts’ conference
calls and periodic road shows.
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Remuneration Report
In accordance with the Listing Rules, the Company presents its
At least half of the total potential remuneration of the Chief Executive
report on the remuneration of its Directors for the year ended
Officer and the Chief Financial Officer are represented by a variable
31 December 2009. The Company is incorporated in Gibraltar and,
element, dependent on the performance of the Group. The
therefore, is not required to comply with the Directors’ Remuneration
Remuneration Committee considers that these represent achievable
Report requirements in Schedule 8 to the UK Large and Medium-
and motivational levels of personal rewards commensurate with
sized Companies and Groups (Accounts and Reports) Regulations
stipulated levels of corporate performance.
2008, but has chosen to prepare this Remuneration Report on the
basis of those requirements, as appropriate.
The Remuneration Committee is mandated by the Board to satisfy
itself that the level of the Directors’ and senior management’s
The report sets out the structure and details of the remuneration
remuneration is appropriate, having regard to pay and conditions
of the Directors for the year ended 31 December 2009. It also
throughout the rest of the sectors in which the Group operates. It
describes the Board’s policy and approach to the Principles of Good
will further satisfy itself that such remuneration aligns with the risks
Governance relating to Directors’ remuneration. BDO LLP and BDO
and rewards to shareholders. In this context the Remuneration
Limited have audited the sections headed ‘Directors’ Remuneration
Committee will regularly review individual and corporate performance
Summary’ and ‘Directors’ Interests in Share Awards and Share
targets. In the current volatile economic climate, executive leadership
Options’.
is more important than ever. The Remuneration Committee
will continue to use careful and rigorous judgement to match
A resolution to approve the Remuneration Report is proposed,
remuneration to achievements.
annually, to shareholders for approval. This Remuneration Report will
be put to shareholder vote at the 2010 Annual General Meeting.
Remuneration Committee
The Remuneration Committee consists solely of independent
Non-executive Directors
The Chairman and the Non-executive Directors receive fees only, and
are not eligible to participate in any bonus plan, pension plan, share
plan, or long-term incentive plan of the Company. The Chairman and
Non-executive Directors, currently Brian Mattingley (Chair), Michael
the Executive Directors determine the fees paid to the Non-executive
Constantine and Amos Pickel. Details of attendances at Committee
Directors. The Chairman’s fees are determined by the Remuneration
meetings are contained in the statement on Corporate Governance
Committee.
on page 28. The Remuneration Committee has formal terms of
reference (which are available on request in writing to the Company
Fees paid to the Non-executive Directors are set by reference to an
Secretary and on the Company’s website, www.888holdingsplc.
assessment of the time commitment and responsibility associated
com).
Independent Advice
The Board intends that executive remuneration policies be both
with each role. Levels take account of additional demands placed
upon individual Non-executive Directors by virtue of their holding
particular offices, such as Committee Chairman and/or Deputy
Chairman, and travel time to Board meetings and the Group’s
formal and transparent. It further acknowledges the importance of
headquarters in Gibraltar. The fees paid to each Non-executive
taking into consideration independent advice in setting remuneration
Director during 2009 are disclosed in the Directors’ remuneration
policies and benefit levels. The Remuneration Committee has taken
summary on page 34.
advice from KPMG Somekh Chaikin with regard to the structuring of
awards under the share option plans. The Remuneration Committee
also plans to seek advice from external consultants with regards to
the appropriate amount and terms for future awards to the Executive
Remuneration Structure
Base Salary and Benefits
The Executive Directors’ base salaries are subject to annual review.
Directors and such awards will be granted following the next meeting
Given market conditions, there were no salary reviews in 2009.
of the Remuneration Committee in May 2010.
The Group’s functional currency is USD and the Chief Executive’s
Remuneration Policy
Executive Directors
Remuneration packages must be sufficient to attract, retain and
income, performance and expenses are more closely aligned with
USD than GBP. Accordingly, given currency movement in the USD
GBP exchange rate since he was employed Gigi Levy’s salary
was converted in January 2009 from GBP to USD756,000. Aviad
motivate Directors of the calibre appropriate to a global business in
Kobrine’s salary for 2009 was maintained at GBP285,000*. Benefits
a competitive environment. The Remuneration Committee is mindful
provided to executive Directors include a car (in the case of Gigi
that most of the Group’s competitors are not UK listed companies
Levy) and a car allowance (in the case of Aviad Kobrine) and health,
and takes this into account in determining appropriate remuneration
disability and life insurance.
levels. The components of the remuneration structure are set out
below.
* Part of which is paid by the Company and part of which by
Cassava Enterprises (Gibraltar) Limited.
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888 Holdings plc
Annual Report & Accounts 2009
Remuneration Report
continued
Annual Cash Bonus
Gigi Levy and Aviad Kobrine are entitled to an annual cash bonus
of up to 120% of annualised salary, subject to the achievement of
predetermined targets. The Remuneration Committee sets bonus
targets and levels of eligibility each year. For the 2009 financial year,
the performance target was 20% growth in revenue compared to
2008 and provided that the adjusted EBITDA margin for 2008 was
Awards under the 888 All-Employee Share Plan can either be
granted for no consideration (or with a nil exercise price for options)
or at an exercise price that will normally be no less than the market
value of an Ordinary Share at the time of grant or average share
price during a period as determined by the Remuneration Committee
at time of grant. In countries where an award or option involving
real shares is not appropriate or feasible for legal, regulatory or tax
maintained. The payout levels were set at 50% of base salary for 80%
reasons, a phantom award may be used.
performance, increasing on a linear basis up to 100% where targets
were fully satisfied. In the event that revenue growth exceeded 20%, the
The maximum number of Ordinary Shares that an eligible employee
percentage bonus entitlement increased by 4% for every 1% additional
may acquire pursuant to share awards or options granted to him
revenue growth, up to a maximum bonus entitlement of 120%.
Notwithstanding that the performance targets were not met in
2009, the Remuneration Committee made a discretionary bonus
payment of 35% of base salary. This payment took account of both
the unilateral decision by the Executive Directors to waive 25% of
in any calendar year under the 888 All-Employee Share Plan and
the 888 Long-term Incentive Plan may not have an aggregate
market value, as measured at the date of grant, exceeding 200%
of his annual base salary or such higher limit as the Remuneration
Committee may determine is appropriate in any individual
case. Awards vest over a fixed period of up to four years. The
the bonuses to which they were entitled in 2008 given the economic
Remuneration Committee may determine that the vesting and
environment at that time together with the hard work and dedication
release or exercise of share awards and options under the 888 All-
of the Executive Directors in a particularly difficult economic year.
Employee Share Plan are subject to performance conditions imposed
at the time of grant.
Additionally, the performance conditions attaching to the share award
granted to Gigi Levy in 2006, vesting of which was subject to the
The performance conditions which determine the vesting of the
same conditions as for his annual cash bonus, were not met for the
options and awards granted on 14 September 2006, 30 April 2007
financial year 2009 and the portion of the award capable of vesting in
and 8 April 2008 to Executive Directors are driven solely by financial
2010 lapsed.
Pensions
Gigi Levy and Aviad Kobrine are each entitled to a cash payment in
lieu of an annual contribution to their personal pension schemes of
15% of their respective base salaries.
Long-Term Incentives
The Company has two employee share incentive plans: (i) the 888
performance, not by comparison to an external peer group. Options
and awards vest in portions on a yearly basis over a period of four
consecutive years and are subject to target growth as determined by
the Remuneration Committee.
The performance condition related to the portion of all awards capable
of vesting in 2010 was such that TOI in 2009 must grow by 5% over
financial year 2008 in order for 100% of the portion of the awards due
to vest in 2010 in respect of 2009 performance subject to maintaining
All-Employee Share Plan, and (ii) the 888 Long-term Incentive Plan.
adjusted EPS (excluding share benefit charges, interest receivable and
The Company currently only grants awards under the 888 All-
Employee Plan.
foreign currency impact) at the same level as 2008. Fifty per cent of
the portion vests upon achievement of 50% of the target TOI growth
rate and increases on a linear basis up to 100% upon achievement
of 100% of the target TOI growth. If the threshold of 50% of target
Performance-dependent options and awards were granted under the
TOI growth rate is not met, the portion of the award due to vest
888 All-Employee Plan to the Executive Directors on 14 September
in 2010 lapses. Performance conditions may be amended by the
2006, 30 April 2007 and 8 April 2008. Details of these awards and
Remuneration Committee if circumstances which prevailed at the date
options are set out on pages 36 to 37.
of grant have subsequently changed and are no longer considered
a fair measure of performance provided that the Remuneration
888 All-Employee Share Plan
All employees, exclusive consultants and Executive Directors of the
Committee is satisfied that the amended performance conditions are
consistent with and no less demanding to satisfy than the original
Group who are not within six months of their normal retirement age
conditions. Any such amendment would be reported and explained in
are eligible to participate in the 888 All-Employee Share Plan at the
discretion of the Remuneration Committee.
the remuneration report. The performance conditions were not fulfilled
in 2009 and the awards capable of vesting in 2010 lapsed.
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The Remuneration Committee has sought advice from external
The 888 IPO Share Award Trust and the 888 Holdings plc Share Plan
consultants with regards to the appropriate amount and terms for
Trust were created pursuant to Trust Deeds dated 14 September
future awards and such awards will be granted following the next
2005. The 888 IPO Share Award Trust is operated in connection with
meeting of the Remuneration Committee in May 2010.
the grant of share awards and nil cost options to employees of the
888 Long-term Incentive Plan
All employees and Executive Directors of the Group who are not
within six months of their normal retirement age are eligible to
participate in the 888 Long-term Incentive Plan at the discretion
of the Remuneration Committee. As at the date of this report, no
awards have been granted pursuant to the 888 Long-term Incentive
Group at the time of the IPO. These trusts currently hold 156,441
Ordinary Shares in the Company.
Director Appointments — Service Contracts
and Directors’ Fees
Executive Directors
It is the Company’s policy that each Executive Director’s service
Plan. As set out above, 888 has given long-term incentive awards to
agreement is terminable on no more than 12 months’ written
Executive Directors under the 888 All Employee Plan.
notice by either party. Each Executive Director’s employment
Scheme Limits
Awards and options granted under the 888 All-Employee Share Plan
can be terminated by making a payment equal to the salary and
pension contributions and the value of other contractual benefits
due to the Executive Director in lieu of any unexpired notice
and the 888 Long-term Incentive Plan may be satisfied through the
period. The Executive Directors continue to be entitled to be paid
issue of new shares. It is intended that grants of options and awards
a bonus during any unexpired part of the notice period even if the
are to be planned so as not to exceed 5% of the issued Ordinary
employment is terminated by making payment in lieu of notice.
Share capital in any rolling ten year period for the 888 Long-term
Share Awards granted under the 888 All-Employee Share Plan to
Incentive Plan, and 10% of the issued Ordinary Share capital in any
Gigi Levy and Aviad Kobrine pursuant to their service agreements,
rolling ten year period for the 888 All-Employee Share Plan and the
on 14 September 2006, and 29 September and 4 October 2005
888 Long-term Incentive Plan, in the aggregate. The Committee
respectively, continue to vest during any unexpired part of the notice
intends to have regard to appropriate annual flow-rates so as to
period and they shall be treated as a ‘good leaver’ under the terms of
ensure that these limits are not breached.
Employee Trusts
The Company has established two Trusts to further the interests
the 888 All-Employee Share Plan where their employment has been
terminated by making a payment in lieu of notice. No other benefits
upon termination of employment are payable. An Executive Director’s
entitlement to share awards and share options under the 888 All-
of the Company, its subsidiaries and shareholders by providing
Employee Plan on termination of employment will be governed by
share incentives to employees (including Executive Directors) of any
the terms of that plan (and in the case of the initial awards made to
Group company to enable the Group to attract, retain and motivate
Gigi Levy and Aviad Kobrine by the relevant provisions of their service
employees.
Name
Gigi Levy
Aviad Kobrine
Aviad Kobrine
1 Wholly owned subsidiary of the Company.
agreements) as discussed above.
Employer/
Service
Position
Contracting Party
Contract Date
Chief Executive Officer
The Company
Chief Financial Officer
Chief Financial Officer
The Company
Cassava Enterprises
18/06/2006
14/09/2005
14/09/2005
(Gibraltar) Limited1
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888 Holdings plc
Annual Report & Accounts 2009
Remuneration Report
continued
Chairman and Non-executive Directors
The Chairman and the Non-executive Directors do not have service contracts but have signed Letters of Appointment.
Non-executive Directors’ appointments, which are for a term of three years, may be terminated by the Company without notice in accordance
with the Company’s Articles of Association and the Gibraltar Companies Act, except for the Chairman who is required to be given six months’
prior written notice of termination. No compensation is payable on the termination of the appointment.
Name
Richard Kilsby
Brian Mattingley
John Anderson
Michael Constantine
Amos Pickel
Shay Ben-Yitzhak
Position
Contracting Party
Appointment Date
Employer/
Letter of
Chairman
Deputy Chairman
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
The Company
The Company
The Company
The Company
The Company
The Company
14/03/2009
14/03/2009
14/03/2009
14/03/2009
14/03/2009
18/06/2006
Directors’ Remuneration Summary
The cash emoluments or fees received by the Directors for 2009 are shown below:
Executive
Gigi Levy
Aviad Kobrine2
Non-executive
Richard Kilsby
Brian Mattingley
Michael Constantine
John Anderson
Shay Ben-Yitzhak
Amos Pickel
Total
Base salary/
fees
Bonus
US$’0001
US$’000
Benefits
US$’000
Pensions
Allowance
US$’000
Total
2009
Total
2008
US$’000
US$’000
756
447
345
138
104
121
—
104
265
184
34
34
17
113
67
1,168
732
1,257
841
362
138
104
121
—
104
429
163
123
143
—
123
2,015
449
85
180
2,729
3,079
1 Where Directors’ remuneration is denominated in Sterling, amounts have been converted into US$ at the average rate of exchange for the
relevant month.
2 Part of Mr Kobrine’s remuneration is paid by one of his employers, Cassava Enterprises (Gibraltar) Limited, a wholly owned subsidiary of the
Company.
34
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Directors’ Interests in Ordinary Shares
The notified interests of Executive and Non-executive Directors in the issued share capital of the Company are:
Executive
Gigi Levy
Aviad Kobrine
Non-executive
Richard Kilsby
Brian Mattingley
Michael Constantine
John Anderson
Shay Ben-Yitzhak1
Amos Pickel
Ordinary Shares
31 December 31 December
2009
2008
1,912,999
1,243,457
443,183
435,683
114,285
142,857
22,857
588,869
114,285
142,857
22,857
588,869
37,122,358
37,122,358
—
—
1 These shares are held on Trust and are subject to a Relationship Agreement dated 14 September 2005 between, among others, the Company
and the Principal Shareholder Trusts. Further details can be found on page 39.
Except where stated, all interests were held beneficially.
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35
set out below:
Gigi Levy1
888 All-
Employee Share
Plan2,4
888 All-
Employee Share
888 Holdings plc
Annual Report & Accounts 2009
Remuneration Report
continued
Directors’ Interests in Share Awards & Share Options
The number of shares subject to Share Awards or Share Options granted to the Executive Directors and outstanding as at 31 December 2009 is
Earliest
exercise/
Exercise
Awards at
Market
price at Exercised/
Date of
award
vesting
period
Exercise
31 Dec
Awarded
Vested in
vesting
transferred
date
end date
price
2008
2009
2009
date
2009
Total
14/09/06 18/06/09
14/09/06 18/06/10
Plan2,6
14/09/06 14/04/09
14/09/06 14/04/10
888 All-
Employee Share
Plan2,5
888 All-
Employee Share
Plan2,6
888 All-
Employee Share
Plan2
14/09/06 18/06/09
14/09/06 18/06/10
08/04/08 08/04/09
08/04/08 08/04/10
08/04/08 08/04/11
08/04/08 08/04/12
14/01/09 14/07/09
14/01/09 14/01/10
14/01/09 14/07/10
14/01/09 13/01/12
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
£nil
£nil
337,096
337,097
£nil
£nil
145,787
145,787
£nil
£nil
138,845
138,845
167,351
167,351
167,351
167,352
£nil
£nil
£nil
£nil
£nil
£nil
£nil
£nil
337,096
103.00p
—
98.50p
138,845
103.00p
167,351
95.50p
26,250
96.00p
26,250
42,000
26,250
10,500
337,096
337,097
—
145,787
138,845
138,845
167,351
167,351
167,351
167,352
26,250
42,000
26,250
10,500
36
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Earliest
exercise/
Exercise
Awards at
Market
price at Exercised/
Date of
award
vesting
period
Exercise
31 Dec
Awarded
Vested in
vesting
transferred
date
end date
price
2008
2009
2009
date
2009
Total
29/09/05 04/10/09 04/10/15
£nil
55,621
55,621
86.00p
55,621
04/10/05 04/10/09 04/10/15
£nil
45,508
45,508
86.00p
45,508
Aviad Kobrine
888 All-
Employee Share
Plan2
888 All-
Employee Share
Plan3
888 All-
Employee Share
Plan3,6,7
14/09/06 14/04/09 14/09/16
14/09/06 14/04/10 14/09/16
£nil
£nil
39,050
39,050
23,430
98.50p
888 All-
Employee Share
Plan3,6,7
14/09/06 14/04/09 14/09/16
14/09/06 14/04/10 14/09/16
£nil
£nil
47,728
47,728
28,637
98.50p
888 All-
Employee Share
Plan3,6,7
30/04/07 14/04/09 30/04/17
30/04/07 14/04/10 30/04/17
888 All-
Employee Share
Plan3,6,7
30/04/07 14/04/09 30/04/17
30/04/07 14/04/10 30/04/17
888 All-
Employee Share
Plan3
15/01/08 15/01/09 15/01/18
15/01/08 15/01/10 15/01/18
15/01/08 15/01/11 15/01/18
15/01/08 15/01/12 15/01/18
888 All-
Employee Share
Plan3
15/01/08 15/01/09 15/01/18
15/01/08 15/01/10 15/01/18
15/01/08 15/01/11 15/01/18
15/01/08 15/01/12 15/01/18
888 All-
Employee Share
Plan3
14/01/09 14/07/09 14/01/19
14/01/09 14/01/10 14/01/19
14/01/09 14/07/10 14/01/19
14/01/09 13/01/12 14/01/19
4,773
4,772
3,905
3,905
7,500
7,500
7,500
7,500
42,500
42,500
42,500
42,500
£nil
£nil
£nil
£nil
£nil
£nil
£nil
£nil
£nil
£nil
£nil
£nil
£nil
£nil
£nil
£nil
All awards were made through the 888 All-Employee Share Plan during the year.
2,864
98.50p
2,343
98.50p
7,500
93.00p
42,500
93.00p
17,811
96.00p
17,811
28,500
17,813
7,126
23,430
39,050
28,637
47,728
2,864
4,772
2,343
3,905
7,500
7,500
7,500
7,500
42,500
42,500
42,500
42,500
17,811
28,500
17,813
7,126
37
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888 Holdings plc
Annual Report & Accounts 2009
Remuneration Report
continued
1 Date of appointment, being 18 June 2006, for Gigi Levy.
2 Awarded as a share award.
3 Awarded as a nil cost option.
4 This award was granted pursuant to Gigi Levy’s service agreement. This award was granted to Gigi Levy upon his recruitment as a one-off
award to secure his appointment.
5 This award was made in addition to the annual cash bonus noted on page 32, subject to the annual cash bonus criteria being met.
6 Vesting subject to performance conditions, as described on pages 32 and 33.
7 The performance conditions were partly or not met with respect to the portion of the award capable of vesting in 2010.
The closing price of one Ordinary Share was 111p at 31 December 2009. The highest closing price during 2009 was 116p and the lowest
was 78.75p.
No Director was materially interested during the year in any contract which was significant in relation to the business of the Company.
The parts of the remuneration report from Directors’ Remuneration Summary to this point have been audited in accordance with Schedule 8 to
the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008.
Total shareholder return
The chart below shows the value of an investment of £100 Sterling in the Company’s shares and in the FTSE 250 Index from admission to
31 December 2009. The Directors have chosen the FTSE 250 Index as the most appropriate comparator index as the Company was a
constituent member until October 2006 and was reincluded in that index from February 2008.
VALUE OF £100 STERLING IN 888 Since IPO v. FTSE 250
180
160
140
120
100
80
60
40
20
0
5
0
0
2
/
9
0
/
9
2
5
0
0
2
/
0
1
/
9
2
5
0
0
2
/
1
1
/
9
2
5
0
0
2
/
2
1
/
9
2
6
0
0
2
/
1
0
/
9
2
6
0
0
2
/
2
0
/
8
2
6
0
0
2
/
3
0
/
1
3
6
0
0
2
/
4
0
/
0
3
6
0
0
2
/
5
0
/
1
3
6
0
0
2
/
6
0
/
0
3
6
0
0
2
/
7
0
/
1
3
6
0
0
2
/
8
0
/
1
3
6
0
0
2
/
9
0
/
0
3
6
0
0
2
/
0
1
/
1
3
6
0
0
2
/
1
1
/
0
3
6
0
0
2
/
2
1
/
1
3
7
0
0
2
/
1
0
/
9
2
7
0
0
2
/
2
0
/
8
2
7
0
0
2
/
3
0
/
1
3
7
0
0
2
/
4
0
/
0
3
7
0
0
2
/
5
0
/
1
3
7
0
0
2
/
6
0
/
0
3
7
0
0
2
/
7
0
/
1
3
7
0
0
2
/
8
0
/
1
3
7
0
0
2
/
9
0
/
0
3
7
0
0
2
/
0
1
/
1
3
7
0
0
2
/
1
1
/
0
3
7
0
0
2
/
2
1
/
1
3
8
0
0
2
/
1
0
/
9
2
8
0
0
2
/
2
0
/
8
2
8
0
0
2
/
3
0
/
1
3
8
0
0
2
/
4
0
/
0
3
8
0
0
2
/
5
0
/
1
3
8
0
0
2
/
6
0
/
0
3
8
0
0
2
/
7
0
/
1
3
8
0
0
2
/
8
0
/
1
3
8
0
0
2
/
9
0
/
0
3
8
0
0
2
/
0
1
/
1
3
8
0
0
2
/
1
1
/
0
3
8
0
0
2
/
2
1
/
1
3
9
0
0
2
/
1
0
/
9
2
9
0
0
2
/
2
0
/
8
2
9
0
0
2
/
3
0
/
1
3
9
0
0
2
/
4
0
/
0
3
9
0
0
2
/
5
0
/
1
3
9
0
0
2
/
6
0
/
0
3
9
0
0
2
/
7
0
/
1
3
9
0
0
2
/
8
0
/
1
3
9
0
0
2
/
9
0
/
0
3
9
0
0
2
/
0
1
/
1
3
9
0
0
2
/
1
1
/
0
3
9
0
0
2
/
2
1
/
1
3
888
FTSE 250
Approval
This report was approved by the Board and
signed on its behalf by:
Brian Mattingley
Chairman of the Remuneration Committee
38
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Directors’ Report
The Directors submit to the members their Annual Report and
The beneficial and non-beneficial interests of the Directors in shares
Accounts of the Group for the year ended 31 December 2009. The
of the Company are set out in the Remuneration Report on pages
report on Corporate Governance and the Remuneration Report on
31 to 38.
pages 28 and 31 respectively, form part of this Directors’ Report.
Principal Activities
During 2009 the Group’s principal activities were the provision of
online gaming entertainment to end customers as well as business
Except as noted above, none of the Directors had any interests in the
shares of the Company or in any material contract or arrangement
with the Company or any of its subsidiaries.
partners. A review of the business is given in the Chairman’s
Richard Kilsby, Gigi Levy and John Anderson will retire by rotation at
statement on pages 2 to 3, the Chief Executive’s Review on pages 4
the Annual General Meeting and, being eligible, will offer themselves
to 7 and the Enhanced Business Review on pages 8 to 21.
for re-election.
The principal subsidiary undertakings are listed on page 66.
Share Capital
Changes in the Company’s share capital during the financial year
Results
The Group’s Profit before tax for the financial year (excluding share
are given in the Consolidated Statement of Changes in Equity. As at
31 December 2009, the Company’s issued share capital comprised
benefit charges of US$7 million) of US$35 million is reported in the
346,534,097 ordinary shares of 0.005p each.
Consolidated Income Statement on page 44. It is the intention of the
Directors to declare a final dividend in respect of the financial year in
an amount of 3.0 cents per share.
Directors and their Interests
Biographical details of the current Board of Directors are shown on
Rights Attaching to Ordinary Shares
The rights and obligations attaching to ordinary shares are set out in
the Company’s Articles of Association. Holders of ordinary shares are
entitled to attend and speak at general meetings of the Company, to
appoint one or more proxies and to exercise voting rights. Holders of
page 27. The Directors who served during the year are shown below:
ordinary shares may receive a dividend and on liquidation may share
in the assets of the Company. Holders of ordinary shares are entitled
Richard Kilsby
(appointed 30 August 2005 and
to receive the Company’s Annual Report. Subject to meeting certain
Gigi Levy
(appointed 18 June 2006 and
meeting of the Company or the proposal of resolutions at general
reappointed 21 May 2008)
thresholds, holders of ordinary shares may requisition a general
reappointed 30 May 2007)
meetings.
Aviad Kobrine
(appointed 30 August 2005 and
reappointed 21 May 2008)
John Anderson
(appointed 30 August 2005 and
Deadlines for Exercising Voting Rights
Electronic and paper proxy appointment and voting instructions must
Shay Ben-Yitzhak
(appointed 30 August 2005 and
before a general meeting.
reappointed 30 May 2007)
be received by the Company’s Registrars not later than 48 hours
Michael Constantine
(appointed 30 August 2005 and
reappointed 21 May 2008)*
Brian Mattingley
reappointed 20 May 2009)
(appointed 30 August 2005 and
reappointed 20 May 2009)
Restrictions on Transfer of Shares and
Limitations on Holdings
There are no restrictions on transfer or limitations on the holding
of ordinary shares other than under restrictions imposed by law
Amos Pickel
(appointed 14 March 2006 and
or regulation (for example, insider trading laws) or pursuant to the
reappointed 20 May 2009)
Company’s share dealing code.
* Retired on 30 December 2009.
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39
888 Holdings plc
Annual Report & Accounts 2009
Directors’ Report
continued
Substantial Shareholdings
As at 31 December 2009 the Company had been notified of the
following interests in 3% or more of its share capital:
Principal Shareholder Trust
E Shaked Shares Trust
O Shaked Shares Trust
Ben-Yitzhak Family Shares Trust
FIL Limited
% Issued
Number
Share
of Shares
Capital
86,283,534
86,283,534
37,122,358
34,208,190
24.9
24.9
10.7
9.9
Shareholder Agreements and Consent
Requirements
There are no known arrangements under which financial rights are
held by a person other than the holder of the shares.
A Relationship Agreement governing the relationship between the
above Principal Shareholder Trusts and the Company was entered
into in connection with the Company’s flotation. The Relationship
Agreement provides that all transactions between the Group and
the Principal Shareholder Trusts will be on a normal business basis,
that the Group will be allowed to carry on business independently
of them and that the Principal Shareholder Trusts will not cause the
Company to contravene the Combined Code unless required by
law or as contemplated in the Relationship Agreement. It further
provides that each of the Principal Shareholder Trusts will not solicit
Group employees without consent, that only Independent Directors
can vote on proposals to amend the Relationship Agreement, that
the Principal Shareholder Trusts will consult the Group prior to
disposing of a significant number of shares in order to maintain an
orderly market and shall not disclose confidential information unless
required to do so or having first received the Company’s consent.
The Relationship Agreement also includes restrictions on the
Principal Shareholder Trusts power to appoint Directors and includes
obligations on the trusts to ensure that the majority of the Board,
excluding the Chairman, is independent. The Principal Shareholder
Trusts can nominate a Non-executive Director for appointment to the
Board. In the event that this right is exercised and it results in fewer
than half the Board (excluding the Chairman of the Board) being
Independent Directors, such appointment shall only become effective
upon the appointment to the Board of an additional Independent
Director acceptable to the Nominations Committee. Such restrictions
and obligations apply in respect of the E Shaked Shares Trust and
O Shaked Shares Trust whilst they collectively hold not less than
7.5% of the issued share capital of 888, and in respect of the
Ben-Yitzhak Family Shares Trust whilst it individually holds not less
than 7.5% of the issued share capital of 888.
Change of Control
Other than the Group’s gaming licences where change of control is
subject to prior consent, there are no contracts to which the Group
is a party which would allow the counterparty to terminate or alter
those contractual arrangements in the event of a change of control of
the Group.
Charitable Contributions
Contributions for charitable purposes were made during the year
amounting to US$124,799 (2008: US$107,821).
Directors’ Responsibility Statement
The Directors are responsible for keeping proper accounting records
which disclose with reasonable accuracy at any time the financial
position of the Company, for safeguarding the assets, for taking
reasonable steps for the prevention and detection of fraud and other
irregularities and for the preparation of a Directors’ report which
complies with the Gibraltar Companies (Accounts) Act 1999, the
Gibraltar Companies (Consolidated Accounts) Act 1999 and the
Gibraltar Companies Act.
Financial statements are published on the Group’s website in
accordance with legislation in the UK governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity of the
Group’s website is the responsibility of the Directors. The Directors’
responsibility also extends to the ongoing integrity of the financial
statements contained therein.
The Directors are responsible for preparing the annual report and the
financial statements. The Directors are required to prepare financial
statements for the Group in accordance with International Financial
Reporting Standards (IFRSs) and have also chosen to prepare
financial statements for the Company in accordance with IFRSs.
Corporate Governance
The corporate governance statement is on pages 28 to 30 and is
incorporated in this Directors’ Report by reference.
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Group and Parent Company Financial
Statements
Company law requires the Directors to prepare such financial
statements in accordance with the Gibraltar Companies (Accounts)
(b) the Enhanced Business Review’, includes a fair review of the
development and performance of the business and the position
of the Group and the undertakings included in the consolidation
taken as a whole, together with a description of the principal
Act 1999, the Gibraltar Companies (Consolidated Accounts) Act
risks and uncertainties that they face.
1999 and the Gibraltar Companies Act.
International Accounting Standard 1 requires that financial
statements present fairly for each financial year the Group and
Auditors
A resolution for the reappointment of BDO LLP and BDO Limited
as auditors of the Company will be proposed at the 2010 Annual
Company’s financial position, financial performance and cash flows.
General Meeting.
This requires the faithful representation of the effects of transactions,
other events and conditions in accordance with the definitions and
During the year ended 31 December 2009 BDO LLP were appointed
recognition criteria for assets, liabilities, income and expenses set
auditors for the purposes of the Company preparing financial
out in the International Accounting Standards Board’s ‘Framework
statements as required pursuant to the Listing Rules of the UK Listing
for the preparation and presentation of financial statements’. In
virtually all circumstances, a fair presentation will be achieved by
compliance with all applicable IFRSs. A fair presentation also requires
Authority. BDO Limited have been appointed to act as auditors for
the purposes of issuing an audit report pursuant to Section 10 of
the Gibraltar Companies (Accounts) Act 1999 to be filed with the
the Directors to:
Gibraltar Companies Registry.
l consistently select and apply appropriate accounting policies;
On behalf of the Board:
l present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable
information; and
l provide additional disclosures when compliance with the specific
requirements in IFRSs is insufficient to enable members to
understand the impact of particular transactions, other events
and conditions on the entity’s financial position and financial
Gigi Levy
Chief Executive Officer
23 March 2010
performance.
We confirm, to the best of our knowledge:
(a) the financial statements, prepared in accordance with
International Financial Reporting Standards as adopted by the
EU, give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Group and the undertakings
included in the consolidation taken as a whole; and
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41
888 Holdings plc
Annual Report & Accounts 2009
Independent Auditors’ Report
to the Shareholders of 888 Holdings plc
We have audited the financial statements (‘the financial statements’)
We review whether the corporate governance statement set out in
of 888 Holdings plc for the year ended 31 December 2009 which
the Directors’ Report reflects the Company’s compliance with the
comprise the Group income statement, the Group and Parent
nine provisions of the 2008 Combined Code specified for our review
Company balance sheets, the Group and Parent Company
by the Listing Rules, and we report if it does not. We are not required
statements of changes in equity, Group and Parent Company
to consider whether the Board’s statements on internal control cover
statements of cash flow, Group and Parent Company statements
all risks and controls, or form an opinion on the effectiveness of the
of comprehensive income and the related notes. These financial
Group’s corporate governance procedures or its risk and control
statements have been prepared under the accounting policies set
procedures.
out therein. We have also audited the information in the Directors’
Remuneration Report that is described as having been audited.
We read the other information contained in the Annual Report
Respective responsibilities of Directors and
auditors
The Directors’ responsibilities for preparing the Annual Report, the
and consider whether it is consistent with the audited financial
statements. This other information comprises only the Directors’
Report, the unaudited part of the Directors’ Remuneration Report,
the Chairman’s Statement, the Chief Executive’s Business Review,
Remuneration Report and the financial statements in accordance
the Enhanced Business Review, Risk Report, Corporate and Social
with applicable law and International Financial Reporting Standards
Responsibility Report and the Corporate Governance Statement.
(‘IFRS’) as adopted by the European Union are set out in the
We consider the implications for our report if we become aware of
Statement of Directors’ Responsibilities.
any apparent misstatements or material inconsistencies with the
financial statements. Our responsibilities do not extend to any other
Our responsibility is to audit the financial statements and the part of
information.
the Remuneration Report to be audited in accordance with relevant
legal and regulatory requirements and International Standards on
Our report has been prepared pursuant to the terms of our
Auditing (UK and Ireland). 888 Holdings Plc has complied with the
engagement letter and for no other purpose. No person is entitled
requirements of rules 9.8.6 and 9.8.8 of the Listing Rules of the UK
to rely on this report unless such a person is a person entitled to rely
Financial Services Authority and in accordance with Section 421
upon this report by virtue of the terms of our engagement letter or
of the UK Companies Act 2006 in preparing its Annual Report, as
has been expressly authorised to do so by our prior written consent.
if it was incorporated in the United Kingdom. As auditors, we have
Save as above, we do not accept responsibility for this report to
agreed that our responsibilities in relation to the Annual Report will be
any other person or for any other purpose and we hereby expressly
those as set out below.
disclaim any and all such liability.
We report to you our opinion as to whether the financial statements
give a true and fair view and whether the financial statements have
Basis of audit opinion
We conducted our audit in accordance with International Standards
been properly prepared in accordance with the Gibraltar Companies
on Auditing (UK and Ireland) issued by the Auditing Practices Board.
(Consolidated Accounts) Act 1999, the Gibraltar Companies
An audit includes examination, on a test basis, of evidence relevant
(Accounts) Act 1999 and the Gibraltar Companies Act and the part of
to the amounts and disclosures in the financial statements and the
the Remuneration Report to be audited has been properly prepared
part of the Directors’ Remuneration Report to be audited. It also
in accordance with Section 421 of the UK Companies Act 2006. We
also report to you whether in our opinion, the information disclosed
includes an assessment of the significant estimates and judgements
made by the Directors in the preparation of the financial statements,
in the Directors’ Report is consistent with the financial statements,
and of whether the accounting policies are appropriate to the
if the Company has not kept proper accounting records, if we have
Group’s and Company’s circumstances, consistently applied and
not received all the information and explanations we require for our
adequately disclosed.
audit, or if information specified by the Listing Rules and Gibraltar
legislation regarding Directors’ remuneration and other transactions is
not disclosed.
42
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We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable
assurance that the financial statements and the part of the
Remuneration Report to be audited are free from material
Emphasis of Matter — Regulatory Issues
In forming our opinion, which is not qualified, we have considered
the adequacy of, and draw attention to, the disclosures made in
note 24(c) to the financial statements concerning the residual risk
of an adverse impact arising from the Group having had customers
misstatement, whether caused by fraud or other irregularity or error.
in the US prior to the enactment of the Unlawful Internet Gambling
In forming our opinion we also evaluated the overall adequacy of the
Enforcement Act.
presentation of information in the financial statements and the part of
the Remuneration Report to be audited.
Opinion
In our opinion:
Note 24(c) includes a statement that the Board has not been able
to identify reliably at this stage what, if any, liability may arise and
accordingly no provision has been made.
l
the financial statements give a true and fair view, in accordance
with IFRSs as adopted by the European Union, of the state of the
BDO LLP
Group’s and the Company’s affairs as at 31 December 2009 and
of the Group’s profit for the year then ended;
l
the financial statements have been properly prepared in
accordance with the Gibraltar Companies (Consolidated
Accounts) Act 1999, the Gibraltar Companies (Accounts) Act
Chartered Accountants
55 Baker Street
London
W1U 7EU
22 March 2010
1999 and the Gibraltar Companies Act;
BDO LLP is a limited liability partnership registered in England and
l
the part of the Remuneration Report described as having been
audited has been properly prepared in accordance with Section
421 of the UK Companies Act 2006;
l
the information given in the Directors’ Report is consistent with
the financial statements; and
l we have nothing to report to you in respect of our responsibility
set out above in relation to the Company keeping proper
accounting records and the auditors receiving information and
explanations for our audit and disclosures regarding Directors’
remuneration and other transactions.
Wales with registered number OC305127.
Desiree McHard (Statutory auditor)
For and on behalf of BDO Limited
Montagu Pavilion
8–10 Queensway
Gibraltar
22 March 2010
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43
888 Holdings plc
Annual Report & Accounts 2009
Consolidated Income Statement
For the year ended 31 December 2009
Total revenue
Other operating income
Total operating income
Operating expenses
Research and development expenses
Selling and marketing expenses
Administrative expenses
Operating profit before share benefit charges
Share benefit charges
Operating profit
Finance income
Profit before tax before share benefit charges
Share benefit charges
Profit before tax
Taxation
Profit after tax for the year attributable to equity holders of the parent
Earnings per share
Basic
Diluted
The notes on pages 48 to 74 form part of these financial statements.
Year ended
Year ended
31 December 31 December
2008
US$’000
2009
US$’000
Note
2
2
4
5
20
7
246,703
—
246,703
98,360
24,164
67,329
29,510
34,352
7,012
27,340
226
34,578
7,012
27,566
2,733
24,833
256,862
5,692
262,554
84,637
27,379
80,155
33,069
45,705
8,391
37,314
2,928
48,633
8,391
40,242
3,057
37,185
Year ended
Year ended
31 December 31 December
2008
2009
Note
8
7.2¢
7.1¢
10.9¢
10.7¢
44
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Consolidated Balance Sheet
At 31 December 2009
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Financial assets
Deferred taxes
Current assets
Cash and cash equivalents
Trade and other receivables
Total assets
Equity and liabilities
Equity attributable to equity holders of the parent
Share capital
Share premium
Available-for-sale reserve
Retained earnings
Total equity attributable to equity holders of the parent
Liabilities
Current liabilities
Trade and other payables
Liabilities to customers
Non-current liabilities
Contingent consideration
Total liabilities
Total equity and liabilities
31 December 31 December
2008
US$’000
2009
US$’000
Note
11
12
13
14
15
16
17
18
10
70,832
20,984
—
797
92,613
87,511
21,208
108,719
201,332
3,152
65
—
117,883
121,100
38,851
37,570
76,421
3,811
80,232
201,332
44,812
19,740
223
606
65,381
98,444
18,673
117,117
182,498
3,115
65
(536)
108,716
111,360
37,854
33,284
71,138
—
71,138
182,498
The financial statements on pages 44 to 74 were approved and authorised for issue by the Board of Directors on 22 March 2010 and were
signed on its behalf by:
Gigi Levy
Aviad Kobrine
Chief Executive Officer
Chief Financial Officer
The notes on pages 48 to 74 form part of these financial statements.
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888 Holdings plc
Annual Report & Accounts 2009
Consolidated Statement of Changes in Equity
For the year ended 31 December 2009
Balance at 1 January 2008
Dividend paid
Issue of shares
Exercise of market value options
Share benefit charges
Total comprehensive income for the year
Balance at 1 January 2009
Dividend paid
Issue of shares
Share benefit charges
Total comprehensive income for the year
Balance at 31 December 2009
Share
capital
US$’000
Share
premium
US$’000
Available-
for-sale
reserve
US$’000
3,097
—
18
—
—
—
3,115
—
37
—
—
3,152
—
—
—
65
—
—
65
—
—
—
—
65
(105)
—
—
—
—
(431)
(536)
—
—
—
536
—
Retained
earnings
US$’000
89,735
(25,628)
(18)
—
8,391
36,236
Total
US$’000
92,727
(25,628)
—
65
8,391
35,805
108,716
111,360
(22,445)
(37)
7,012
24,637
(22,445)
—
7,012
25,173
117,883
121,100
The following describes the nature and purpose of each reserve within equity.
Share capital — represents the nominal value of shares allotted, called-up and fully paid for.
Share premium — represents the amount subscribed for share capital in excess of nominal value.
Available-for-sale reserve — represents the gain or loss arising from a change in the fair value of an available-for-sale financial asset.
Retained earnings — represents the cumulative net gains and losses recognised in the consolidated income statement.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2009
Profit for the year
Valuation gain/(losses) of available-for-sale investments
Actuarial losses on defined benefit pension plan
Disposal of available for sale asset
Total comprehensive income for the year attributable to equity holders of the parent
31 December 31 December
2008
US$’000
2009
US$’000
24,833
513
(196)
23
25,173
37,185
(431)
(949)
—
35,805
46
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Consolidated Statement of Cash Flows
For the year ended 31 December 2009
Year ended
Year ended
Year ended
31 December 31 December 31 December 31 December
2008
US$’000
2009
US$’000
2009
US$’000
2008
US$’000
Year ended
Cash flows from operating activities
Profit before income tax
Adjustments for
Depreciation
Loss on sale of property, plant and equipment
Amortisation
Interest received
Share benefit charges
(Increase)/decrease in trade receivables
Decrease/(increase) in other accounts receivables
(Decrease)/increase in trade payables
Increase in liabilities to customers
Increase/(decrease) in other accounts payables
Cash generated from operations
Income tax paid
Net cash generated from operating activities
Cash flows from investing activities
Acquisition of assets comprising the online bingo business
of Globalcom Limited
Acquisition of assets comprising the online Wink
bingo business (see note 10)
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Interest received
Proceeds from disposal of available-for-sale assets
Acquisition of intangible assets
Internally generated intangible assets
Net cash used in investing activities
Cash flows from financing activities
Exercise of Market Value options
Dividends paid
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
The notes on pages 48 to 74 form part of these financial statements.
27,566
7,044
—
1,458
(633)
7,012
42,447
(4,356)
1,715
(868)
3,681
2,964
45,583
(4,086)
—
(18,052)
(8,288)
—
633
732
(100)
(4,910)
—
(22,445)
40,242
5,504
75
1,826
(3,255)
8,391
52,783
4,404
(3,441)
810
6,870
(669)
60,757
(4,363)
41,497
56,394
(25,311)
—
(8,852)
29
3,255
—
(513)
(5,303)
(29,985)
(36,695)
65
(25,628)
(22,445)
(10,933)
98,444
87,511
(25,563)
(5,864)
104,308
98,444
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888 Holdings plc
Annual Report & Accounts 2009
Notes to the Consolidated Financial Statements
1
General information
Company description and activities
888 Holdings Public Limited Company (the ‘Company’) and its subsidiaries (together the ‘Group’) was founded in 1997 and originally
operated as a holding company domiciled in the British Virgin Islands. On 12 January 2000, the Company was continued in Antigua and
Barbuda as a corporation under the International Business Corporation Act 1982 with registered number 12512. On 17 December 2003,
the Company redomiciled in Gibraltar with the Company number 90099. On 4 October 2005, the Company listed on the London Stock
Exchange.
The Group is the owner of innovative proprietary software solutions providing a range of virtual online gaming services over the internet
including Casino, Poker, Bingo, Sport and games to end users and also provides these services through its business to business
independent unit Dragonfish to business partners. In addition, the Group provides payment services, customer support and online
advertising.
Cassava Enterprises (Gibraltar) Limited and Brigend Limited (both subsidiaries) carried out the operations of the Group during the year,
principally under the name www.888.com under the terms of the gaming licences issued in Gibraltar.
Definitions
In these financial statements:
The Company
The Group
Subsidiaries
Related parties
888 Holdings Public Limited Company.
888 Holdings Public Limited Company and its subsidiaries.
Companies over which the Company has control (as defined in International Accounting Standard 27 ‘Consolidated
and Separate Financial Statements’ and whose accounts are consolidated with those of the Company).
As defined in International Accounting Standard 24 — ‘Related Party Disclosures’.
2
Significant accounting policies
The significant accounting policies applied in the preparation of the financial statements are as follows:
Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards,
including International Accounting Standards (‘IAS’) and Interpretations, adopted by the International Accounting Standards Board (‘IASB’)
and endorsed for use by companies listed on an EU regulated market.
The significant accounting policies applied in the financial statements of the Group in the prior years are applied consistently in these
financial statements.
The financial statements are presented in thousands of US dollars (US$’000) because that is the currency the Group primarily operates in.
The consolidated financial statements comply with the Gibraltar Companies (Accounts) Act 1999, the Gibraltar Companies (Consolidated
Accounts) Act 1999 and the Gibraltar Companies Act.
The following standards and interpretations, issued by the IASB or the International Financial Reporting Interpretations Committee (IFRIC),
are also effective for the first time in the current financial year and have been adopted by the Group with no significant impact on its
consolidated results or financial position.
IFRIC 13 — Customer Loyalty Programmes (effective for annual periods beginning on or after 1 July 2008). IFRIC 13 has been endorsed
for use in the EU.
IAS 23 (Amendment) — Borrowing costs (effective for annual periods beginning on or after 1 January 2009). IAS 23 has been endorsed for
use in the EU.
IFRS 2 (amendment) — ‘Share-based payment: vesting conditions and cancellations’ (effective for accounting periods beginning on or
after 1 January 2009). This amendment has been endorsed for use in the EU.
48
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2
Significant accounting policies continued
Amendments to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements — Puttable Financial
Instruments and Obligations arising on Liquidation (effective for accounting periods beginning on or after 1 January 2009). These
amendments have been endorsed for use in the EU.
IFRIC 15 — Agreements for the Construction of Real Estate (effective for accounting periods beginning on or after 1 January 2009). IFRIC
15 has been endorsed for use in the EU.
IFRIC 16 — Hedges of a net investment in a foreign operation (effective for accounting periods beginning on or after 1 January 2009).
IFRIC 16 has been endorsed for use in the EU.
IFRS 1 First Time Adoption of IFRS and IAS 27 Consolidated and Separate Financial Statements (amended) (effective for accounting
periods beginning on or after 1 January 2009). This amendment has been endorsed for use in the EU.
IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures (amended) (effective for
periods beginning on or after 1 July 2008). This amendment has been endorsed for use in the EU.
IFRS 7 (amended) ‘Improving Disclosures about Financial Instruments’ (effective for accounting periods beginning on or after 1 January
2009). This amendment has been endorsed for use in the EU.
In addition, the IASB 2008 annual improvements project includes minor amendments to various accounting standards which are effective
for accounting periods beginning on or after 1 January 2009.
During the year the Group has adopted IAS 1 (revised) ‘Presentation of Financial Statements’ and IFRS 8 ‘Operating Segments’. The effect
of adopting these standards is presentational and has no impact on the reported profit or net assets of any year.
The adoption of IAS 1 (revised) means that a statement of comprehensive income has been included for the first time in this Annual report.
The adoption of IFRS 8 means the Group provide segmental information using the same categories of information the Group’s chief
operating decision maker utilises.
The Group organizes the business segments by the following two distinct lines of business:
l
l
B2C (Business to Consumer) which focuses its activities on the individual end customer through a wide range of product offering;
B2B (Business to Business) which offers Total Gaming Services under the Dragonfish trading brand. Dragonfish offers to its
business use of technology, software, operations, e-payments and advanced marketing services, through the provision of offline/
online marketing, management of affiliates, SEO, CRM and business analytics.
The following standards and interpretations issued by the IASB or IFRIC have not been adopted by the Group as these were not effective
for the year 2009. The Group is currently assessing the impact these standards and interpretations will have on the presentation of its
consolidated results in future periods.
IFRS 3 (revised) — Business combinations (effective for accounting periods beginning on or after 1 July 2009). IFRS3 (revised) has been
endorsed for use in the EU.
IFRIC 17 ‘Distributions of Non-cash Assets to Owners’ (effective for accounting periods beginning on or after 1 July 2009). This IFRIC has
been endorsed for use in the EU.
Amendment to IAS 39 ‘Reclassification of Financial Assets: Effective Date and Transition’ (effective for accounting periods starting on or
after 1 July 2009). This amendment has been endorsed for use in the EU.
Amendment to IAS 39 ‘Financial Instruments: Recognition and Measurement: Eligible Hedged Items’ (effective for accounting periods
starting on or after 1 July 2009). This amendment has been endorsed for use in the EU.
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888 Holdings plc
Annual Report & Accounts 2009
Notes to the Consolidated Financial Statements
2
Significant accounting policies continued
Amendments to IFRIC 9 and IAS 39 ‘Embedded Derivatives’ (effective for accounting periods starting on or after 1 July 2009). This
amendment has been endorsed for use in the EU.
IFRIC 18 ‘Transfers of Assets from Customers’ (effective for accounting periods beginning on or after 1 July 2009). This interpretation has
been endorsed for use in the EU.
Revised IAS 24 ‘Related Party Disclosures’ (effective for accounting periods beginning on or after 1 January 2011). This revision has not
yet been endorsed for use in the EU. This revision will only impact disclosure and have no effect on the net assets or result of the Group.
Amendment to IAS 32 ‘Classification of Rights Issues’ (effective for accounting periods beginning on or after 1 February 2010). This
amendment has been endorsed for use in the EU.
Amendment to IFRS 1 ‘Additional Exemptions for First-time Adopters’ (effective for accounting periods beginning on or after 1 January
2010). This amendment has not yet been endorsed for use in the EU.
IFRIC 19 ‘Extinguishing Financial Liabilities with Equity Instruments’ (effective for accounting periods beginning on or after 1 July 2010).
This interpretation has not yet been endorsed for use in the EU.
Amendment to IFRIC 14 ‘Prepayments of a Minimum Funding Requirement’ (effective for accounting periods beginning on or after
1 January 2011). This amendment has not yet been endorsed for use in the EU.
IFRS 9 ‘Financial Instruments’ (effective for accounting periods beginning on or after 1 January 2013). This standard has not yet been
endorsed for use in the EU.
IFRS 2 (Amended) ‘Group Cash-settled Share-based Payment Transactions’ (effective for accounting periods beginning on or after
1 January 2010). This amendment has not yet been endorsed for use in the EU.
IFRS 1 (amended) ‘Limited exemption from Comparative IFRS 7 Disclosures for first time adopters’ (effective for accounting periods
beginning on or after 1 July 2010). This amendment has not yet been endorsed for use in the EU.
The IASB 2009 annual improvement project includes further minor amendments to various accounting standards and is effective from
various dates from 1 January 2010 onwards, but has not yet been endorsed for use in the EU.
Critical accounting policies, estimates and judgements
The preparation of consolidated financial statements under IFRS requires the Group to make estimates and judgements that affect the
application of policies and reported amounts. Estimates and judgements are continually evaluated and are based on historical experience
and other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual results may
differ from these estimates.
Included in this note are accounting policies which cover areas that the Directors consider require estimates and assumptions which
have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year. These
policies together with references to the related notes to the financial statements can be found below:
Taxation
Contingent consideration
Intangible assets
Impairment of Goodwill and intangible assets
Share-based payments
Regulatory compliance and contingent liabilities
Note 7
Note 10
Note 11
Note 11
Note 20
Note 24
50
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2
Significant accounting policies continued
Basis of consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. The subsidiaries are companies
controlled by 888 Holdings Public Limited Company. Control exists where the Company has the power to govern the financial and
operating policies of an entity so as to obtain benefits from its activities. Subsidiaries are consolidated from the date the parent gained
control until such time as control ceases.
The financial statements of the subsidiaries are included in the consolidated financial statements using the purchase method of
accounting. On the date of the acquisition, the assets and liabilities of a subsidiary are measured at their fair values and any excess of the
fair value of the consideration over the fair values of the identifiable net assets acquired is recognised as goodwill.
Inter-company transactions and balances are eliminated on consolidation.
The financial statements of subsidiaries are prepared for the same reporting period as the Parent Company and using consistent
accounting policies.
Total Revenue
Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably
measured. Revenue is recognised in the accounting periods in which the transactions occurred.
Total Revenue consists of revenue from online gaming and revenue generated from processing customers’ cross currency deposits and
withdrawals. It comprises:
Casino
Casino winnings that are the differences between the amounts of bets placed by customers less amounts won by customers.
Poker
Ring games: Rake, which is the commission charged from each winning hand played.
Tournaments: Entry fees charged for participation in Poker tournaments are recognised when the tournament has concluded.
Emerging Offerings
Revenue from Emerging Offerings is defined as winnings from Sportsbook activity and fees charged for participation in
Bingo games.
Casino winnings, revenues from the Poker business and Emerging Offerings are stated after deduction of certain bonuses
granted to customers.
In the case of white label activity, revenue is the net commission charged.
Other operating income
Other operating income consists mainly of revenue generated from processing customers’ cross currency deposits and withdrawals.
Foreign currency
Monetary assets and liabilities denominated in non-US dollar currencies are translated into US dollar equivalents using year end spot
foreign exchange rates. Non-monetary assets and liabilities are translated using exchange rates prevailing at the dates of the transactions.
Exchange rate differences on foreign currency transactions are included in administrative expenses.
The results and financial position of all Group entities that have a functional currency different from US dollars are translated into the
presentation currency as follows:
(i) monetary assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
income and expenses for each income statement are translated at an average exchange rate (unless this average is not a
(ii)
reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and
expenses are translated at the dates of the transactions); and
exchange rate differences on translation of Group entities that have functional currencies different from US dollars are included in
administrative expenses.
(iii)
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51
888 Holdings plc
Annual Report & Accounts 2009
Notes to the Consolidated Financial Statements
2
Significant accounting policies continued
Taxation
The tax expense represents tax payable for the year based on currently applicable tax rates.
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs from its tax
base. It is accounted for using the balance sheet liability method. Recognition of deferred tax assets is restricted to those instances where
it is probable that taxable profit will be available against which the difference can be utilised. Such assets and liabilities are not recognised
if the temporary differences arise from goodwill or from the initial recognition (other than in a business combination) of other assets and
liabilities in a transaction that affects neither the taxable profit nor the accounting profit. The amount of the asset or liability is determined
using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the deferred
tax liabilities/assets are settled/recovered.
Intangible assets
Acquisitions
Identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value
at the acquisition date. The identified intangibles are amortised over the useful economic life of the assets. For the acquisition completed
during the year 2007, the useful economic life of the intangible assets acquired is estimated to be between three months and four years.
For the 2009 acquisition, the useful economic life of the intangible assets acquired is estimated to be eighteen months with the exception
of trade names, which have an indefinite useful economic life. Intangible assets are reviewed annually for evidence of impairment. Any
impairment in carrying value is charged to the consolidated income statement.
Internally generated intangible assets
Expenditure incurred on development activities is capitalised only when the expenditure will lead to new or substantially improved products
or processes, the products or processes are technically and commercially feasible and the Group has sufficient resources to complete
development. All other development expenditure is expensed. Subsequent expenditure on capitalised intangible assets is capitalised only
where it clearly increases the economic benefits to be derived from the asset to which it relates. The Group estimates the useful life of
these assets as between 3 and 5 years.
Goodwill
Goodwill represents the excess of the cost of a business combination over the interest in the fair value of the identifiable assets, liabilities
and contingent liabilities acquired. Cost comprises the fair value of any assets transferred, liabilities assumed and equity instruments
issued, plus any direct costs of acquisition.
Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated income statement.
Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is
credited in full to the consolidated income statement on the acquisition.
Property, plant and equipment
Property, plant and equipment is stated at historic cost less accumulated depreciation. Carrying amounts are reviewed at each balance
sheet date for impairment.
Depreciation is calculated using the straight-line method, at annual rates estimated to write off the cost of the assets less their estimated
residual values over their expected useful lives. The annual depreciation rates are as follows:
IT equipment
Office furniture and equipment
Motor vehicles
Leasehold improvements
33%
7–15%
15%
Over the shorter of the term of the lease or useful lives
Impairment of non-financial assets
Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually on 31 December,
and where applicable an impairment loss is recognised immediately in the income statement. Other non-financial assets are subject to
impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the
carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is
written down accordingly.
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2
Significant accounting policies continued
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset’s cash
generating unit (i.e. the lowest Group of assets in which the asset belongs for which there are separately identifiable cash flows).
Financial instruments
The Group does not hold or issue derivative financial instruments for trading purposes.
Trade receivables
Trade receivables are recognised at fair value and carried at amortised cost and principally comprise amounts due from credit card
companies and from e-payment companies. An estimate for doubtful debts is made when collection of the full amount is no longer
probable. Bad debts are written off when there is objective evidence that the full amount may not be collected.
Cash and cash equivalents
Cash comprises cash in hand and balances with banks. Cash equivalents are short-term, highly liquid investments that are readily
convertible to known amounts of cash. They include short-term deposits originally purchased with maturities of three months
or less.
Equity
Equity issued by the Company is recorded as the proceeds received, net of direct issue costs.
Trade and other payables
Trade and other payables are recognised at fair value and carried at amortised cost.
Liabilities to customers
Liabilities to customers comprises the amounts that are credited to customers’ bankroll (the Group’s electronic ‘wallet’), including
provision for bonuses granted by the Group, less management fees and charges applied to customer accounts, along with full
provision for jackpots. These amounts are repayable on demand in accordance with the applicable terms and conditions.
Available-for-sale financial assets
Available-for-sale financial assets comprise non-derivative financial assets not included in any of the above financial asset categories
and comprise principally the Group’s investments in entities not qualifying as subsidiaries. They are carried at fair value with
changes in fair value recognised directly in a separate component of equity. Where there is a significant decline in the fair value of an
available-for-sale financial asset the full amount of the impairment, including any amount previously charged to equity, is recognised
in the income statement. On disposal of an available-for-sale asset any balance within equity is transferred to the income statement.
Chargebacks
The cost of chargebacks is included in operating expenses.
Leases
Leases are classified as finance leases wherever the terms of the lease transfer substantially all the risks and rewards of ownership to the
Group. All other leases are classified as operating leases and rentals payable are charged to income on a straight-line basis over the term
of the lease.
Provisions
Provisions are recognised when the Group has a present or constructive obligation as a result of a past event from which it is probable that
it will result in an outflow of economic benefits that can be reasonably estimated.
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888 Holdings plc
Annual Report & Accounts 2009
Notes to the Consolidated Financial Statements
2
Significant accounting policies continued
Segment information
Segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief
operating decision maker has been identified on the management team including the Chief Execute Officer and the Chief Financial Officer.
These segments are:
l
l
B2C (Business to Customer) Casino, Poker and Emerging Offering which mainly comprises Bingo, 888’s Sportsbook, Live dealer
offering and games; and
B2B (Business to Business) which offers Total Gaming Services under the Dragonfish trading brand. Dragonfish offers to its business
partners use of technology, software, operations, E-payments and advances marketing services, through the provision of offline/
online marketing, management of affiliates, SEO, CRM and business analytics.
Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends this is when paid. In the case of final
dividends, this is when approved by the shareholders at the Annual General Meeting.
Share-based payments
Where the Company grants its employees or contractors shares, nil priced options or market value options, the fair value at the date of
grant is charged to the income statement over the vesting period. Non-market performance conditions are taken into account by adjusting
the number of instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the
vesting period is based on the number of instruments that eventually vest.
3
Segment information
Business segments
Year ended
31 December 2009
B2C
B2B
Consolidated
Revenues
Other operating income
Total operating income
Result
Segment result
Unallocated corporate expenses1
Operating profit
Finance income
Tax expense
Profit for the year
Assets
Unallocated corporate assets
Total assets
Liabilities
Segment liabilities — B2B
Segment liabilities — B2C
Unallocated corporate liabilities
Total liabilities
Casino
US$’000
118,693
—
118,693
Poker
US$’000
51,592
—
51,592
Emerging
Offering
US$’000
25,116
—
25,116
Total B2C
US$’000
195,401
—
195,401
US$’000
US$’000
51,302
—
51,302
117,815
31,089
246,703
—
246,703
148,904
121,564
27,340
226
(2,733)
24,833
201,332
201,332
8,408
29,162
42,662
80,232
1 Including share benefit charges of US$7,012,000.
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Segment information continued
Year ended
31 December 2008
B2C
B2B
Consolidated
Revenues
Other operating income
Total operating income
Result
Segment result
Unallocated corporate expenses1
Operating profit
Finance income
Tax expense
Profit for the year
Assets
Unallocated corporate assets
Total assets
Liabilities
Segment liabilities — B2B
Segment liabilities — B2C
Unallocated corporate liabilities
Total liabilities
Casino
US$’000
133,083
3,571
136,654
Poker
US$’000
71,565
1,955
73,520
Emerging
Offering
US$’000
13,790
—
13,790
Total B2C
US$’000
218,438
5,526
223,964
US$’000
US$’000
38,424
166
38,590
137,480
21,844
256,862
5,692
262,554
159,324
122,010
37,314
2,928
(3,057)
37,185
182,498
182,498
5,710
27,574
37,854
71,138
1 Including share benefit charges of US$8,391,000.
Other than where amounts are allocated specifically to the Casino, Poker and Emerging Offerings segments above, the expenses, assets
and liabilities relate jointly to all segments. Any allocation of these items would be arbitrary.
Geographical segments
The Group’s performance can also be reviewed by considering the geographical markets and geographical locations within which the
Group operates. This information is outlined below:
Total operating income by geographical market1
Total
operating
income
Year ended
Total
operating
income
Year ended
31 December 31 December
2008
US$’000
2009
US$’000
UK
Europe (excluding UK)
Americas (excluding USA)
Rest of World
1 Allocation of geographical segments is based on Net Revenue Commission received by the Group.
90,442
113,672
19,145
23,444
246,703
97,127
121,943
26,220
17,264
262,554
55
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888 Holdings plc
Annual Report & Accounts 2009
Notes to the Consolidated Financial Statements
3
Segment information continued
Assets by geographical location
Europe (including UK)
Rest of World
4
Administrative expenses
Share benefit charges — all equity-settled
Other administrative expenses
Administrative expenses
5
Operating profit
Carrying amount
of segment assets
by location
Additions to
property, plant
and equipment
Year ended
Year ended
Year ended
31 December 31 December 31 December 31 December
2008
US$’000
2009
US$’000
2009
US$’000
2008
US$’000
Year ended
144,663
56,669
201,332
151,468
31,030
182,498
6,017
2,271
8,288
6,105
2,747
8,852
Year ended
Year ended
31 December 31 December
2008
US$’000
2009
US$’000
7,012
22,498
29,510
8,391
24,678
33,069
Year ended
Year ended
31 December 31 December
2008
US$’000
2009
US$’000
Operating profit is stated after charging:
Staff costs (see note 6)
Directors remuneration (see note 6)
Audit fees
Other fees paid to auditors in respect of taxation services
Depreciation (within operating expenses)
Amortisation (within operating expenses)
Chargebacks
Exchange losses
Payment service providers’ commissions
Share benefit charges — all equity-settled
71,313
1,900
343
11
7,044
1,458
9,044
2,718
13,750
7,012
72,597
2,098
381
29
5,504
1,826
4,816
2,630
15,256
8,391
56
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6
Employee benefits
Staff cost including Directors’ remuneration comprises the following elements:
Wages and salaries
Social security
Pension costs
Staff costs capitalized in respect of internally generated assets
2009
US$’000
2008
US$’000
68,518
4,850
4,091
77,459
(4,246)
73,213
69,636
4,966
4,050
78,652
(3,957)
74,695
In the income statement total staff costs, excluding share benefit charge of US$7,012,000 (2008: US$8,391,000), are included within the
following expenditure categories:
Operating expenses
Research and development expenses
Administrative expenses
Average headcount number of employees by category:
Operation
Research and development
Administration
2009
US$’000
45,483
15,512
12,218
73,213
2008
US$’000
40,287
20,588
13,820
74,695
2009
Number
2008
Number
669
136
142
947
574
167
143
884
At 31 December 2009 the Company employed 975 (2008: 931) staff.
Severance pay liability — Israel
The Group’s employees in Israel are eligible to receive certain benefits from the Group in certain defined circumstances. As such the Group
operates a defined benefit severance pay plan which requires contributions to be made to separately administrated funds.
The method used to determine the current service cost and the present value of the defined benefit obligation, according to IAS 19
‘Employee Benefits’ is the Projected Unit Credit actuarial cost method. Actuarial gains and losses are recognised by the Group using the
equity method.
The following table summarises the employee benefits figures as included in the Group’s financial statements for 2009 and 2008,
respectively:
Severance pay liability (within trade and other payables)
Income statement
Actuarial movements on severance pay liability (deducted from retained earnings)
2009
US$’000
2008
US$’000
229
2,365
196
276
1,732
949
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888 Holdings plc
Annual Report & Accounts 2009
Notes to the Consolidated Financial Statements
6
Employee benefits continued
The main actuarial assumptions used in determining the fair value of the Group’s employee benefits plan are shown below:
Discount rate (nominal)1
Estimated increase in employee benefits costs
Voluntary termination rate
2009
%
5.06%
3%
70%
2008
%
3.22%
3%
70%
1 The discount rates are based on Israeli government bonds and reflect inflation rates of 2.81% and 0.6% in 2009 and 2008, respectively.
7
Taxation
Corporate taxes
Current tax
Deferred tax
Taxation expense
Year ended
Year ended
31 December 31 December
2008
US$’000
2009
US$’000
2,924
(191)
2,733
2,988
69
3,057
Year ended
Year ended
31 December 31 December
2008
US$’000
2009
US$’000
Profit before taxation
Tax at effective tax rate in Gibraltar
Effect of overseas taxation
Effect of deferred tax originating in overseas jurisdictions
Total tax charge for the year
27,566
40,242
—
2,924
(191)
2,733
—
2,988
69
3,057
Current tax is calculated with reference to the profit of the Company and its subsidiaries in their respective countries of operation:
Gibraltar — The Company and its Gibraltar registered subsidiaries are subject to the provisions of the Gibraltar Companies (Taxation
and Concessions) Act (the ‘CTCA’) as tax-exempt companies. Subject to a change of ownership or activity of a tax-exempt company,
the grandfathering of tax-exempt benefits in respect of existing tax-exempt companies will extend up to 31 December 2010. Domestic
corporate tax in Gibraltar is 22% (2009/2010) 27% (2008/2009). Gibraltar’s Chief Minister has announced further reductions in anticipation
of the introduction of a flat tax rate of 10% in 2010. A consultation is in place with respect to the new tax regime in Gibraltar but it is widely
anticipated, following Government indications that it is expected the new rules will be in place by July 2010 but not come into effect until
January 2011.
Israel — 888 have entered into certain transfer pricing agreements with the Israeli Income Tax Commissioner. The agreement in respect
of Random Logic Limited is effective until the end of 2010. The agreement in respect of the Israeli branch of Intersafe Global Limited was
effective until the end of 2007. Accordingly, the Group has discontinued the use of this branch. Domestic corporate tax in Israel in 2009 is
26% (2008: 27%) and is scheduled to go down to 25% from 2010 and onwards.
UK — 888’s subsidiary in the UK pays corporate tax in the UK at the applicable rate of 28% (2008: 28%).
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8
Earnings per share
Basic earnings per share from continuing operations
Basic earnings per share have been calculated by dividing the profit attributable to ordinary shareholders by the weighted average number
of shares in issue during the year.
Diluted earnings per share
In accordance with IAS 33, ‘Earnings per share’, the weighted average number of shares for diluted earnings per share takes into account
all potentially dilutive shares and share options granted, which are not included in the number of shares for basic earnings per share. In
addition, certain employee options have also been excluded from the calculation of diluted EPS as their exercise price is greater than the
weighted average share price during the year and it would not be advantageous for the holders to exercise the option. The number of
options excluded from the diluted EPS calculation is 2,124,274 (2008: 3,117,110).
Year ended
Year ended
31 December 31 December
2008
US$’000
2009
US$’000
Profit from continuing operations attributable to ordinary shareholders
Weighted average number of Ordinary Shares in issue
Effect of dilutive Ordinary Shares and Share options
Weighted average number of dilutive Ordinary Shares
Basic
Diluted
24,833
345,182,718
3,960,938
349,143,656
37,185
341,515,007
5,807,035
347,322,042
7.2¢
7.1¢
10.9¢
10.7¢
Earnings per share excluding share benefit charges
The Directors believe that EPS excluding share benefit charges better reflects the underlying performance of the business and assists in
providing a clearer view of the performance of the Group. It is also a performance measure used internally to manage the operations of
the business.
Reconciliation of profit to profit excluding share benefit charges:
Year ended
Year ended
31 December 31 December
2008
US$’000
2009
US$’000
Profit from continuing operations attributable to ordinary shareholders
Share benefit charges
Profit excluding share benefit charges
Weighted average number of Ordinary Shares in issue
Weighted average number of dilutive Ordinary Shares
Basic earnings per share excluding share benefit charges
Diluted earnings per share excluding share benefit charges
9
Dividends
24,833
7,012
37,185
8,391
31,845
345,182,718
349,143,656
45,576
341,515,007
347,322,042
9.2¢
9.1¢
13.4¢
13.1¢
Year ended
Year ended
31 December 31 December
2008
US$’000
2009
US$’000
Dividends paid
22,445
25,628
The Board of Directors will recommend to the shareholders a final divided in respect of the year ended 31 December 2009, of 3.0¢.
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888 Holdings plc
Annual Report & Accounts 2009
Notes to the Consolidated Financial Statements
10 Acquisitions made during the year — Wink Bingo business
On 31 December 2009 the Group acquired the trade and assets comprising the online Wink Bingo business of Daub Limited (‘Wink Bingo
Business’) for an all cash consideration.
In calculating the goodwill arising on acquisition, the fair value of the net assets of the Wink Bingo business was valued by a professional
valuation firm and recognised in accordance with IFRS 3 and adjustments from book value have been made where necessary. These
adjustments are summarized as follows:
Liabilities to customers
Intangible assets1
Net assets
1 See note 11.
Book Value on
acquisition
US$’000
Fair value
adjustments
US$’000
(605)
—
(605)
—
2,415
2,415
Fair Value
US$’000
(605)
2,415
1,810
The fair value relates to the recognition of customer relationship (US$1,626,000) and trade names intangible assets (US$789,000) acquired
as part of the acquisition. The customer relationship intangible asset is being amortised over its estimated useful economic life of 18
months. Trade names intangible assets are subject to an annual impairment review. All intangible assets on acquisition have been identified
and fair valued. The remaining goodwill represents the access to future trade associated with the operation of the Wink Bingo Business.
Fair value of net assets acquired
Goodwill
Fair value of consideration including transaction costs
Which is represented by:
Cash consideration to Daub Limited
Contingent consideration (included with non-current liabilities)1
Transaction costs
Total fair value of consideration
US$’000
1,810
20,053
21,863
17,588
3,811
464
21,863
1 The Directors estimate that an earn-out payment of US$3.8 million is likely to become payable in the future based on projected
performance during the period from April 2010 to March 2011. The earn-out payment is payable in cash by 31 May 2011.
Had the business been owned for the entire year, the revenue and operating profit for 2009 would have been $21.0 million and $3.5 million
respectively. Given that the business was acquired on 31 December 2009 there has been no actual contribution to revenue or operating
profit during the year.
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11
Intangible assets
Cost or valuation
At 1 January 2008
Additions
Acquisitions
At 31 December 2008
Cost or valuation
Additions
Acquisitions
At 31 December 2009
Amortisation
At 1 January 2008
Charge for the year
At 31 December 2008
Charge for the year
At 31 December 2009
Carrying amounts
At 31 December 2009
At 31 December 2008
At 31 December 2007
Internally
generated
intangible
assets
US$’000
Acquired
intangible
assets
US$’000
Goodwill
US$’000
Total
US$’000
—
5,303
—
5,303
4,910
—
10,213
—
363
363
908
1,271
8,942
4,940
—
4,314
—
13
4,327
100
2,415
6,842
1,550
1,463
3,013
550
3,563
3,279
1,314
2,764
37,892
166
500
38,558
—
20,053
58,611
—
—
—
—
—
58,611
38,558
37,892
42,206
5,469
513
48,188
5,010
22,468
75,666
1,550
1,826
3,376
1,458
4,834
70,832
44,812
40,656
Acquired intangible assets and goodwill
Online Bingo Business
Intangible assets and goodwill are associated with the cash generating online Bingo business unit acquired during May 2007 of the online
Bingo business of Globalcom Limited and the acquisition of the Wink Bingo business in 2009 (see note 10). The intangible assets include
customer lists, royalty agreements, trade names and software. These intangibles, except for trade names, are being amortised over their
estimated useful economic lives of up to four years. On acquisition, the intangible assets have been identified and valued using third party
professional valuers. During the year the Group also acquired an internet domain name which is used in its online Bingo business for a total
cash consideration of US$100,000. With the exception of the US$500,000 acquisition in the prior year, all of the goodwill relates to the
bingo cash generating unit. All of the income streams generated from the bingo business acquisitions have been treated as a single cash
generating unit as the risks and rewards associated with those income streams are deemed to be sufficiently similar.
At the year end, the carrying value-in-use was determined by discounting the expected future cash flows of the online Bingo cash
generating unit to their present value. The key assumptions for the value-in-use calculations were those regarding discount rate and
growth rates of the business. The Directors estimate discount rates that reflect the current market assessment of the time value of money
and risks appropriate to the online Bingo business. The discount rate that is considered by the Directors to be appropriate is 12% (2008:
12%) being the Group’s specific weighted average cost of capital which also applies to the online Bingo cash generating unit.
In estimating the future cash flows the Group has used conservative estimates in respect of revenues generated and costs incurred.
Growth rates of the online Bingo business are based on past experience and projections of future changes in the online gaming market,
taking into account external sources of information such as analysts’ research reports. These suggest that Bingo is expected to
demonstrate year on year growth. The Group has used lower and declining growth rates in estimating the future cash flows conservatively
reflecting the current uncertainties about the medium-term global economic outlook. The Directors have used forecasts for the next five
years of the expected cash flows, of which the first year is based on the Group’s current approved budget.
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888 Holdings plc
Annual Report & Accounts 2009
Notes to the Consolidated Financial Statements
11
Intangible assets continued
An annual growth rate of 2% (2008: 4%) was used for 2010, 2% for 2011 (2008: 2%), and nil for 2012–2014 (2008: nil). Following year
five, the Group extrapolates cash flows in perpetuity, using an estimated conservative growth rate of 1% (2008: 1%), which is lower than
the forecasted long-term growth rate of the UK economy. Marketing costs associated with the Bingo cash generating unit were projected
as a fixed percentage of revenues. All other operational costs are forecasted as percentage of revenue, such percentage increased
conservatively by 10% (2008: 10%) in each of the five year periods to 2014, over and above the level of growth in revenues.
The Directors are not aware at this time of any need to change their key assumptions on which they have based their determination of
the recoverable amount of the goodwill which would cause its carrying amount to exceed its recoverable amount. In fact, although such
movements are not expected to arise, neither a 1% decrease in the growth rate in each of the next three years nor a 5% increase in the
discount rate would have led to an impairment of the acquired intangible assets and goodwill in the current year.
Internet domain name
During the prior year the Group acquired an internet domain name based business which is used to generate traffic into the Group’s
various web sites. Consideration of $US513,000 was paid in the prior year.
The Directors have performed a valuation of the intangible asset acquired. The Directors took into account the following factors, amongst
other, in determining the fair value of this intangible asset:
l
l
l
l
Domain’s ranking with search engines
Traffic ranking as a measure of popularity
Number of unique visitors to the site
Number of links pointing to the domain
The Directors concluded that the fair value that should be assigned to the intangible asset is of US$13,000 whilst the remainder of
US$500,000 is to be recognised as goodwill (given that trade balances acquired were incidental). No further IFRS 3 disclosures have been
given on the grounds of materiality.
Yearly impairment review
The Group regularly monitors the carrying value of its acquired intangible assets and goodwill, or when such events or changes in
circumstances indicate that these may be impaired. The result of the review, undertaken as at 31 December 2009, was that no impairment
needs to be recognised and the carrying value of the acquired intangible assets and goodwill is considered appropriate.
Internally generated intangible assets
The Group has put in place processes and procedures which enable it to ascertain technological feasibility before development costs
are incurred and therefore be in a position to capitalise costs incurred after that point. Such expenditure is only capitalised when the
development cost meets the definition of an intangible asset and the recognition criteria as set out in IAS 38 ‘Intangible assets’.
The Group estimates the useful life of these assets as between 3 and 5 years. These assets are subject to impairment test wherever
events or changes in circumstances indicate their carrying amount may not be recoverable on the same basis as described above for
acquired intangible assets. At 31 December 2009 no impairment needs to be recognised and the carrying value of internally generated
assets is considered appropriate.
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12 Property, plant and equipment
Office
furniture and
equipment
US$’000
IT equipment
US$’000
Motor
Leasehold
vehicles improvements
US$’000
US$’000
Total
US$’000
Cost
At 1 January 2008
Additions
Disposals
At 31 December 2008
Additions
Disposals
At 31 December 2009
Accumulated depreciation
At 1 January 2008
Charge for the year
Disposals
At 31 December 2008
Charge for the year
Disposals
At 31 December 2009
Depreciated cost
At 31 December 2009
At 31 December 2008
At 31 December 2007
13
Financial Assets
Opening balance at the beginning of the year
Adjustment to market price
Disposal of available for sale assets during the year
18,013
7,502
—
25,515
7,917
(307)
33,125
12,505
3,986
—
16,491
5,485
(307)
21,669
11,456
9,024
5,508
2,436
137
(72)
2,501
140
—
2,641
1,056
232
(17)
1,271
219
—
1,490
1,151
1,230
1,380
406
205
(83)
528
—
(25)
503
203
69
(34)
238
74
(25)
287
216
290
203
13,609
1,008
—
14,617
231
—
14,848
4,204
1,217
—
5,421
1,266
—
6,687
8,161
9,196
9,405
34,464
8,852
(155)
43,161
8,288
(332)
51,117
17,968
5,504
(51)
23,421
7,044
(332)
30,133
20,984
19,740
16,496
31 December 31 December
2008
US$’000
2009
US$’000
223
513
(736)
—
654
(431)
—
223
Available-for-sale assets are quoted equity securities, the fair value of which is based on their published market price.
All the financial assets were available-for-sale investments.
14 Deferred taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The Group’s deferred tax assets resulting from temporary differences
are as follows:
Accrued severance pay
Provision for share benefit charges
Provision for vacation
Provision for convalescence
31 December 31 December
2008
US$’000
2009
US$’000
25
238
508
26
797
37
174
370
25
606
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888 Holdings plc
Annual Report & Accounts 2009
Notes to the Consolidated Financial Statements
15 Cash and cash equivalents
Cash and cash equivalents
Restricted cash
Restricted cash primarily relates to deposits held by banks for guarantees.
16 Trade and other receivables
Trade receivables
Corporate tax
Other receivables and prepayments
31 December 31 December
2008
US$’000
2009
US$’000
86,836
675
87,511
97,522
922
98,444
31 December 31 December
2008
US$’000
2009
US$’000
13,382
—
7,826
21,208
9,026
106
9,541
18,673
The carrying value of trade and other receivables approximates to their fair value as the credit risk has been addressed as part of
impairment provisioning and, due to the short-term nature of the receivables, they are not subject to ongoing fluctuations in market rates.
17 Share capital
Share capital comprises the following:
Ordinary Shares of £0.005 each
Authorised
31 December 31 December 31 December 31 December
2008
US$’000
2009
Number
2009
US$’000
2008
Number
426,387,500
426,387,500
426,387,500
426,387,500
3,880
3,880
3,880
3,880
Allotted, called up and fully paid
31 December 31 December 31 December 31 December
2008
US$’000
2009
US$’000
2009
Number
2008
Number
Ordinary Shares of £0.005 each
Issue of ordinary shares of £0.005 each
342,848,261
3,685,836
340,108,035
2,740,226
346,534,097
342,848,261
3,115
37
3,152
3,097
18
3,115
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17 Share capital continued
The following tables include details on issue of ordinary shares of £0.005 each as part of the Group’s employee share option plan (see
note 20) during 2009 and 2008:
Issued during 2009
1 January 2009
15 January 2009
8 March 2009
17 March 2009
31 March 2009
14 April 2009
30 April 2009
21 May 2009
1 June 2009
10 June 2009
18 June 2009
14 July 2009
3 September 2009
7 September 2009
10 September 2009
14 September 2009
25 September 2009
4 October 2009
19 October 2009
Issued during 2008
16 March 2008
14 April 2008
30 April 2008
30 May 2008
18 June 2008
10 September 2008
15 September 2008
29 September 2008
6 October 2008
20 October 2008
Ordinary shares
of £0.005 each
800,741
50,000
427,161
81,899
100,000
160,000
198,925
51,659
122,318
84,809
475,941
141,972
115,893
124,910
80,023
143,957
3,449
466,428
55,751
Ordinary shares
of £0.005 each
105,503
635,621
320,590
230,671
475,941
184,672
152,004
5,000
527,535
73,855
During 2009, the Company did not issue shares (2008: 28,834) in respect of employees’ exercising of market value options.
Shares issued are converted into US$ at the exchange rate prevailing on the date of issue. The issued and fully paid share capital of the
Group amounts to US$3,217,000 (2008: US$3,180,000) and is split into 346,534,097 (2008: 342,848,261) ordinary shares. The share capital
in UK sterling (GBP) is £1,732,670 (2008: £1,714,241) and translates at an average exchange rate of US$1.57 (2008: $1.85) to GBP.
18 Trade and other payables
Trade payables
Corporate taxes
Other payables and accrued expenses
31 December 31 December
2008
US$’000
2009
US$’000
5,239
210
33,402
38,851
6,107
—
31,747
37,854
The carrying value of trade and other payables approximates to their fair value given the short maturity date of these balances.
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888 Holdings plc
Annual Report & Accounts 2009
Notes to the Consolidated Financial Statements
19
Investments in significant subsidiaries
Name
Percentage of Percentage of
equity interest equity interest
2008
%
2009
%
Country of
Incorporation
Nature of business
Intersafe Global Limited
Cassava Enterprises Limited
Virtual Services Limited
Virtual Holdings Management Services (Gibraltar) Limited
Intersafe Global (Europe) Limited
Cassava Enterprises (Gibraltar) Limited
Virtual Marketing Services (UK) Limited
Cassava Sports Limited
Active Media Limited
Virtual Marketing Services (Gibraltar) Limited
Dixie Operation Limited
Random Logic Limited
Brigend Limited
ACTeCASH Limited1
Fordart Limited
Gibraltar
Antigua
BVI
Gibraltar
Gibraltar
Gibraltar
UK
Gibraltar
BVI
Gibraltar
Antigua
Israel
Gibraltar
Gibraltar
Gibraltar
100
100
100
100
100
100
100
100
100
100
100
100
100
—
100
100
Payment processor
100 Customer call centre operator
100
Advertising
100 Operates Group headquarters
Payment processor
100
Gaming website operator
100
100
Advertising
Domain site owner through
100
which a third party operates
a betting exchange
100 Customer call centre employer
100
Marketing acquisition
100 Customer call centre operator
Research, development
100
and marketing
Bingo business operator
e-Wallet service
General commercial
business activities
100
—
100
1 ACTeCASH is managed as a unit of the Group and utilises staff employed by the Group. In accordance with IAS 27 ‘Consolidated and
Separate Financial Statements’, the Group is deemed to have control of ACTeCASH by virtue of the fact it has the power to govern the
financial and operating policies of this company and derives economic benefit from doing so. ACTeCASH is owned by the ACTeCASH
and SPO ventures Trust and shares are held for the benefit of the Group. As such, ACTeCASH has been consolidated as part of
the Group.
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20 Share-based payment
Prior to flotation, the Company adopted two equity-settled employee share incentive plans — the 888 All-Employee Share Plan and the
Long-term Incentive Plan. Awards were granted under the 888 All-Employee Share Plan conditional upon flotation. The 888 All-Employee
Share Plan is open to all employees and Executive Directors of the Group who are not within six months of their normal retirement age at
the discretion of the Remuneration Committee. Awards under this scheme will vest in instalments over a fixed period of up to four years.
The Company grants awards to certain Executive Directors and members of its senior management. These awards are subject to
performance conditions imposed by the Remuneration Committee at the dates of grant.
Details of Shares and Share Options granted as part of the 888 All-Employee Share Plan and shares granted vesting immediately on IPO
and thereafter:
Share options granted
Outstanding at the beginning of the year
Market value options granted during the year
Market value options lapsed during the year
Exercised during the year
Outstanding at the end of the year1,2
Weighted average exercise price for options outstanding at the end of the year
Weighted average exercise price for options lapsed during the year
31 December 31 December
2008
Number
2009
Number
5,422,027
2,095,864
(1,490,102)
—
5,088,447
1,871,423
(1,509,009)
(28,834)
6,027,789
5,422,027
£1.38
£1.36
£1.50
£1.45
1 Of the total number of options outstanding at the end of the year, 2,450,188 had vested and were exercisable at the end of the year
(2008: 1,843,545).
2 Range of exercise price for options outstanding at the end of the year is £1.02–£1.80 (2008: £1.14–£1.80).
Shares granted
Outstanding at the beginning of the year
Shares granted — future vesting
Lapsed future vesting shares
Shares issued during the year
Outstanding at the end of the year
31 December 31 December
2008
Number
2009
Number
9,786,426
2,429,049
(1,346,710)
(3,685,836)
9,802,660
4,258,381
(1,563,223)
(2,711,392)
7,182,929
9,786,426
The following information is relevant in the determination of the fair value of options granted during the year under the equity-settled 888
All-Employee Share Plan:
Valuation information
Option pricing model used
Weighted average share price at grant date
Weighted exercise price
Risk-free interest rate range
Expected volatility of the price of the underlying share
2009
2008
Monte Carlo Monte Carlo
£1.47
£1.47
4.52–4.66%
47–52%
£1.11
£1.11
3.99–5.48%
55–63%
Exercise period of the market value options is from vesting until expiry of 10 years after grant date.
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888 Holdings plc
Annual Report & Accounts 2009
Notes to the Consolidated Financial Statements
20 Share-based payment continued
The Monte Carlo model takes into account all the minimum requirements set by IFRS 2 such as: the exercise price of the option, the
current price of the underlying share, the expected volatility of the price of the underlying share, the expected dividend on the underlying
share, the expected term of the option both contractual term and based on employees’ expected behaviour and the risk-free interest rate
for the expected term of the option.
In accordance with International Financial Reporting Standards a charge to the income statement in respect of any shares or options
granted under the above schemes will be recognised and spread over the vesting period of the shares or options based on the fair value of
the shares or options at the date at grant, adjusted for changes in vesting conditions at each balance sheet date. This charge has no cash
impact.
Share benefit charges
Year ended
Year ended
31 December 31 December
2008
US$’000
2009
US$’000
Charges in respect of share and option awards granted this year
Charges in respect of share and option awards granted in previous years
Charge for the year
21 Related party transactions
1,146
5,866
7,012
2,176
6,215
8,391
During the year the Group paid US$258,506 (2008: US$296,176) in respect of rent and office expenses to companies of which Mr John
Anderson is a Director. At 31 December 2009 the amount owed to those companies was US$nil (2008: US$nil).
Remuneration paid to the Directors in the year totalled US$2,306,000 (2008: US$3,079,000).
Share benefit charge in respect of awards granted to the Directors totalled US$1,919,127 (2008: US$1,699,587).
22 Commitments
Lease commitments
Future minimum lease commitments under property operating leases for the year ended 31 December 2009 are as follows:
Leases expiring within
One year
Two to five years
The amount paid in the year was US$2,646,000 (2008: US$2,801,000).
Lease commitments on the Group’s property are shown to the date of the first break clause.
31 December 31 December
2008
US$’000
2009
US$’000
2,463
8,104
10,567
1,986
7,010
8,996
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23
Financial risk management
The Group is exposed through its operations to risks that arise from use of its financial instruments. Policies and procedures for managing
these risks are set by the Board following recommendations from the Chief Financial Officer. The Board reviews the effectiveness of these
procedures and, if required, approves specific policies and procedures in order to mitigate these risks.
The main financial instruments used by the Group, on which financial risk arises, are as follows:
l
l
l
l
l
l
l
Cash and cash equivalents
Restricted cash
Trade and other receivables
Available-for-sale financial assets
Trade and other payables
Liabilities to customers
Contingent consideration on acquisition
Detailed analysis of these financial instruments is as follows:
Financial assets
Trade receivables
Other receivables
Cash and cash equivalents
Restricted cash
Available-for-sale financial asset
31 December 31 December
2008
US$’000
2009
US$’000
13,382
7,412
86,836
675
—
9,026
5,897
97,522
922
223
108,305
113,590
In accordance with IAS 39, with the exception of available-for-sale assets, all financial assets are classified as loans and receivables.
Financial liabilities
Trade payables
Other payables and accrued expenses
Contingent Consideration
Liabilities to customers
31 December 31 December
2008
US$’000
2009
US$’000
5,239
33,612
3,811
37,570
80,232
6,107
31,747
—
33,284
71,138
In accordance with IAS 39, all of the above financial liabilities are held at amortised cost.
At 31 December 2009 and 2008, the fair value and the book value of the Group’s financial assets and liabilities were materially the same.
Capital
The capital employed by the Group is composed of equity attributable to shareholders. The primary objective of the Group is maximizing
shareholders’ value, which, from the capital perspective, is achieved by maintaining the capital structure most suited to the Group’s size,
strategy, and underlying business risk. Other than disclosed elsewhere in note 24, there are no demands or restrictions on the Group’s
capital.
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888 Holdings plc
Annual Report & Accounts 2009
Notes to the Consolidated Financial Statements
23
Financial risk management continued
The main financial risk areas are as follows:
Credit risk
Trade receivables
The Group’s credit risk is primarily attributable to trade receivables who are the Group’s payment service providers (‘PSP’). These are third
party companies that facilitate deposits and withdrawals of funds to and from customers’ virtual wallet with the Group. These are mainly
intermediaries that transact on behalf of the main credit card companies.
The risk is that a PSP would fail to discharge its obligation with regard to the balance owed to the Group.
The Group reduces this credit risk by:
l Monitoring those balances on a regular basis.
l
l
l
l
Arranging for the shortest possible cash settlement intervals.
Replacing rolling reserve requirements, where they exist, with a Letter of Credit by a reputable financial institution.
Ensuring a new PSP is only contracted following various due diligence and ‘Know Your Customer’ procedures.
Ensuring policies are in place to reduce dependency on any specific PSP.
The Group believes that based on the above and on extensive past experience, the PSP receivables are of good credit quality and there is
no requirement to provide for any potential bad debts arising from a PSP failing to discharge its obligation. None of the balances owed by
the various PSP are overdue or impaired.
An additional credit risk the Group faces relates to customers disputing charges made to their credit cards (‘chargebacks’) or any other
funding method they have used in respect of the services provided by the Group. Customers may fail to fulfil their obligation to pay which
will result in funds not being collected. These chargebacks and uncollected deposits, when occurring, will be deducted at source by the
PSPs from any amount due to the Group. As such the Group provides for these eventualities by way of a provision based on analysis
of past transactions. This provision is netted off from the trade receivables balance and at 31 December 2009 was $1,586,000 (2008:
$1,070,000).
The Group’s in-house Fraud and Risk Management department carefully monitors deposits and withdrawals by following prevention and
verification procedures using internally developed bespoke systems integrated with commercially available third party measures.
Cash and cash equivalents
The Group controls its cash position out of its Gibraltar headquarters. Subsidiaries in its other locations (Israel, Antigua and London)
maintain minimum cash balances which are deemed required for their operations.
Cash settlement proceeds from PSPs, as described above, are paid into bank accounts controlled by the Treasury function in Gibraltar.
The Group segregates funds due to customers and holds these funds in separate bank accounts. These funds are not used to fund
activity other than that directly related to customers.
The Group maintains its funds with highly reputable financial institutions and will not hold funds with financial institutions with low
credit rating.
The Group maintains its cash reserve in highly liquid deposits and regularly monitors rates in order to maximize yield.
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23
Financial risk management continued
Restricted cash
Restricted cash is mainly attributed to a deposit in respect of the Group’s obligation with the developer of the offices of its subsidiary
in Israel.
The Group’s maximum exposure to credit risk by type of financial instrument is summarized below:
Trade receivables
Other receivables
Cash and cash equivalents
Restricted cash
Available-for-sale financial asset
31 December 2009
31 December 2008
Carrying
value
US$’000
Maximum
exposure
US$’000
13,382
7,412
86,836
675
—
13,382
7,412
86,836
675
—
Carrying
value
US$’000
9,026
5,897
97,522
922
223
Maximum
exposure
US$’000
9,026
5,897
97,522
922
223
108,305
108,305
113,590
113,590
Liquidity risk
Liquidity risk exists in the case where the Group will encounter difficulties in meeting its financial obligations as they become due.
The Group monitors its liquidity in order to ensure that sufficient liquid resources are available to allow it to meet its obligations.
In the case of the Group’s liability to its customers, the Group maintains these deposits in separate bank accounts which are not used for
its day to day operations.
The Group has ensured that cash earmarked to fund its final dividend payment for 2009, is in place.
The Group expects to have sufficient liquidity to meet all of its financial obligations under all reasonably expected circumstances and will
not need to resort to any borrowing.
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888 Holdings plc
Annual Report & Accounts 2009
Notes to the Consolidated Financial Statements
23
Financial risk management continued
The following table details the contractual maturity analysis of the Group’s financial liabilities:
On demand
In 3 months
Between 3 months and 1 year
More than 1 year
Trade
payables
US$’000
2,002
3,237
—
—
5,239
31 December 2009
Other
Contingent
payables1 consideration
US$’000
US$’000
Liabilities
to customers
US$’000
4,592
25,774
3,017
229
33,612
—
—
—
3,811
3,811
37,570
—
—
—
37,570
1 Includes other payables, accrued expenses and provisions.
On demand
In 3 months
Between 3 months and 1 year
More than 1 year
31 December 2008
Trade
payables
US$’000
Other
payables1
US$’000
Deferred
acquisition
liability
US$’000
Liabilities
to customers
US$’000
2,614
3,493
—
—
6,107
7,255
21,955
2,261
276
31,747
—
—
—
—
—
33,284
—
—
—
33,284
Total
US$’000
44,164
29,011
3,017
4,040
80,232
Total
US$’000
43,153
25,448
2,261
276
71,138
1 Includes other payables, accrued expenses and provisions.
Market risk
Interest rate risk
The Group’s exposure to interest rate risk is limited to the interest bearing deposits in which the Group invests surplus funds.
The Group’s policy is to invest surplus funds in low risk money market funds or on call over night facilities. The Group also arranged with its
principal bankers that excess funds are swept automatically across its accounts, every night, in order to maximize availability of funds for
investments.
Downside interest rate risk is minimal as the Group has no borrowings. Given current low US$ interest rate a 0.5% downward movement
in bank interest rates would not have a significant impact on finance income for the year. However, a 0.5% increase in interest rates would,
based on the year end deposits, increase annual profits by US$400,000.
Currency risk
The Group’s financial risk arising from exchange rate fluctuations is mainly attributed to:
l Mismatch between Balance sheet Liabilities to customers which is predominately denominated in US$ and the net receipts from
customers which are settled in the currency of the customer’s choice, of which sterling (GBP) and euros (EUR) are significant.
l Mismatch between reported revenue which is mainly generated in USD (the Group’s functional and reporting currency) and
l
significant portion of deposits which are settled in local currencies.
Expenses, the majority of which are denominated in foreign currencies including sterling (GBP), the euro (EUR) and the New
Israeli Shekel (ILS).
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23
Financial risk management continued
The Group continually monitors the foreign currency risk and takes steps, where practical, to ensure that the net exposure is kept to
an acceptable level, inter alia by using foreign exchange forward contracts designed to fix the economic impact of known liabilities. At
31 December 2009 and 31 December 2008, there were no outstanding forward contracts. There were no significant fair value movements
on these contracts during the year.
The tables below detail the net financial position by currency at 31 December 2009 and 2008:
Cash and cash equivalent
Receivables
Net monetary assets
Payables
Net monetary liabilities
Net financial position
Cash and cash equivalent
Receivables
Net monetary assets
Payables
Net monetary liabilities
Net financial position
GBP
US$’000
EUR
US$’000
ILS
US$’000
USD
US$’000
Other
US$’000
31 December 2009
11,753
7,577
19,330
(23,969)
(23,969)
(4,639)
4,803
1,541
6,344
(2,977)
(2,977)
3,367
7,636
665
8,301
(9,868)
(9,868)
(1,567)
62,195
9,395
71,590
(42,924)
(42,924)
28,666
31 December 2008
1,124
2,030
3,154
(494)
(494)
2,660
GBP
US$’000
EUR
US$’000
ILS
US$’000
USD
US$’000
Other
US$’000
8,755
4,432
13,187
(15,726)
(15,726)
(2,539)
1,891
2,703
4,594
(3,777)
(3,777)
817
8,254
717
8,971
(11,308)
(11,308)
(2,337)
78,837
10,145
88,982
(40,270)
(40,270)
48,712
707
793
1,500
117,234
(57)
(57)
1,443
(71,138)
(71,138)
46,096
Total
US$’000
87,511
21,208
108,719
(80,232)
(80,232)
28,487
Total
US$’000
98,444
18,790
During 2008 the Board authorised the creation of a dedicated treasury function within the Finance division which was set up. Its
responsibility is to manage the cash resources of the Group and minimise the various exposures associated with holding and investing
these funds.
Sensitivity analysis
The table below details the effect on profit before tax of a 10% strengthening (and weakening) in the US Dollar exchange rate at the
balance sheet date for balance sheet items denominated in Sterling, Euros and New Israeli Shekels:
10% Strengthening
10% Weakening
10% Strengthening
10% Weakening
Year ended 31 December 2009
GBP
EUR
ILS
464
(464)
(336)
336
Year ended 31 December 2008
GBP
237
(237)
EUR
(82)
82
156
(156)
ILS
191
(191)
73
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888 Holdings plc
Annual Report & Accounts 2009
Notes to the Consolidated Financial Statements
24 Contingent liabilities and regulatory issues
(a)
(b)
(c)
As part of the Board‘s ongoing regulatory compliance and operational risk assessment process, the Board continues to monitor
legal and regulatory developments, and their potential impact on the business, and continues to take appropriate advice in respect
of these developments.
Given the nature of the legal and regulatory landscape of the industry, from time to time the Group has received notices,
communications and legal actions from a small number of regulatory authorities and other parties in respect of its activities. The
Group has taken legal advice as to the manner in which it should respond and the likelihood of success of such actions. Based on
this advice and the nature of the actions, the Board is unable to quantify reliably any material outflow of funds that may result, if any.
Accordingly, no provisions have been made.
Following the enactment of the UIGEA on 13 October 2006, the Group stopped taking any deposits from customers in the US and
barred such customers from wagering real money on all of the Group’s sites. Notwithstanding this, there remains a residual risk of
an adverse impact arising from the Group having had customers in the US prior to the enactment of the UIGEA. The Board is not
able to identify reliably at this stage what, if any, liability may arise and accordingly, no provision has been made. On 5 June 2007
the Group announced that it has initiated preliminary discussions with the United States Attorney’s Office for the Southern District of
New York. It is too early to assess any particular outcome of these discussions.
74
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www.888holdingsplc.com
Company Balance Sheet
At 31 December 2009
Assets
Non-current assets
Investments in subsidiaries
Financial assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Equity and liabilities
Equity
Share capital
Share premium
Available-for-sale reserve
Retained earnings
Total equity attributable to equity holders of the parent
Liabilities
Current liabilities
Trade and other payables
Total liabilities
Total equity and liabilities
31 December 31 December
2008
US$’000
2009
US$’000
Note
2
6
3
4
5
7
18,941
—
18,941
124,819
45,928
170,747
189,688
3,152
65
—
14,344
17,561
13,777
223
14,000
134,683
38,565
173,248
187,248
3,115
65
(536)
17,951
20,595
172,127
172,127
189,688
166,653
166,653
187,248
The financial statements on pages 75 to 79 were approved and authorised for issue by the Board of Directors on 22 March 2010 and were
signed on its behalf by:
Gigi Levy
Aviad Kobrine
Chief Executive Officer
Chief Financial Officer
The notes on pages 78 and 79 form part of these financial statements.
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75
888 Holdings plc
Annual Report & Accounts 2009
Company Statement of Changes in Equity
For the year ended 31 December 2009
Balance at 1 January 2008
Dividend paid
Issue of shares
Exercise of market value options
Share benefit charges
Total comprehensive income for the year
Balance at 1 January 2009
Dividend paid
Issue of shares
Share benefit charges
Total comprehensive income for the year
Balance at 31 December 2009
Share
capital
US$’000
Share
premium
US$’000
Available-
for-sale
reserve
US$’000
3,097
—
18
—
—
—
3,115
37
—
—
3,152
—
—
—
65
—
—
65
—
—
—
—
65
(105)
—
—
—
—
(431)
(536)
—
—
—
536
—
Retained
earnings
US$’000
19,591
(25,628)
(18)
—
8,391
15,615
17,951
(22,445)
(37)
7,012
11,863
14,344
Total
US$’000
22,583
(25,628)
—
65
8,391
15,184
20,595
(22,445)
—
7,012
12,399
17,561
The following describes the nature and purpose of each reserve within equity.
Share capital — represents the nominal value of shares allotted, called-up and fully paid for.
Share premium — represents the amount subscribed for share capital in excess of nominal value.
Available-for-sale reserve — represents the gain or loss arising from a change in the fair value of an available-for-sale financial asset.
Retained earnings — represents the cumulative net gains and losses recognised in the consolidated income statement.
Company Statement of Comprehensive Income
For the year ended 31 December 2009
Profit for the period
Valuation gain/(losses) of available-for-sale investments
Disposal of available-for-sale asset
Total comprehensive income for the period
31 December 31 December
2008
US$’000
2009
US$’000
11,863
513
23
12,399
15,615
(431)
—
15,184
76
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Company Statement of Cash Flows
For the year ended 31 December 2009
Year ended
Year ended
Year ended
31 December 31 December 31 December 31 December
2008
US$’000
2009
US$’000
2009
US$’000
2008
US$’000
Year ended
Cash flows from operating activities
Loss before income tax
Adjustments for
Interest received
Share benefit charges
Decrease/(increase) in amounts owed by subsidiaries
(Increase)/decrease in other accounts receivables
(Decrease)/increase in trade payables
Increase in amounts owed to subsidiaries
Increase/(decrease) in other accounts payables
Cash generated from/(used in) operations
Tax paid
Net cash generated from/(used in) operating activities
Cash flows from investing activities
Interest received
Disposal of available-for-sale assets
Dividends received
Net cash generated from investing activities
Cash flows from financing activities
Dividends paid
Exercise of Market Value options
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
The notes on pages 78 and 79 form part of these financial statements.
(10,426)
(176)
1,884
10,490
(626)
(168)
4,832
690
176
732
22,445
(22,445)
—
(9,778)
(2,537)
1,499
(51,853)
815
23
11,179
(380)
2,537
—
25,628
6,500
(45)
6,455
(51,032)
(125)
(51,157)
23,353
28,165
(25,628)
65
(22,445)
7,363
38,565
45,928
(25,563)
(48,555)
87,120
38,565
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77
888 Holdings plc
Annual Report & Accounts 2009
Notes to the Company Financial Statements
1
General information and accounting policies
A description of the Company, its activities and definitions are included in note 1 to the consolidated financial statements.
The Company has applied accounting policies identical to the Group’s accounting policies listed in note 2 to the consolidated financial
statements other than in relation to investments in its subsidiaries which are held at cost less any impairment provision required.
Under Section 10(2) of the Gibraltar (Consolidated Accounts) Act 1999, the Company is exempt from the requirement to present its own
income statement.
2
Investments in subsidiaries
The Company’s subsidiaries are listed in note 19 to the consolidated financial statements and are held at cost less provision for any
impairment. The Group applies IFRIC 11 ‘Group and treasury share transactions’. Consequently, the Parent Company recognises as a cost
of investment the value of its own shares that it makes available for the purpose of granting share options to employees or contractors of
its subsidiaries. The movement on investment in subsidiaries in both years was in respect of IFRIC 11. This amount was US$5,164,000 in
2009 (2008: US$6,892,000).
3
Trade and other receivables
Amounts due from subsidiaries
Other receivables and prepayments
31 December 31 December
2008
US$’000
2009
US$’000
123,855
964
124,819
134,345
338
134,683
The carrying value of trade and other receivables approximate to their fair value. None of the balances included within trade and other
receivables are past due or impaired. Amounts due from subsidiaries are payable on demand
4
Cash and cash equivalents
Cash and cash equivalents
Restricted cash
31 December 31 December
2008
US$’000
2009
US$’000
45,928
—
45,928
38,308
257
38,565
Restricted cash primarily relates to deposits held by banks for guarantees.
5
Share capital
The disclosures in note 17 to the consolidated financial statements are identical for the Company.
78
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6
Financial assets
The disclosures in note 13 to the consolidated financial statements are identical for the Company.
7
Trade and other payables
Trade payables
Amounts due to subsidiaries
Corporate tax
Other payables and accrued expenses
31 December 31 December
2008
US$’000
2009
US$’000
21
168,105
223
3,778
172,127
189
163,201
175
3,088
166,653
The carrying value of trade and other payables approximate to their fair value. All balances included within trade and other payables are
repayable on demand.
Financial risk management
The Company’s financial risk management objectives and policies are identical to those of the Group as disclosed in note 23 to the
consolidated financial statements.
Contingent liabilities
The disclosures in note 24 to the consolidated financial statements are identical for the Company.
8
9
10 Share-based payment
The disclosures in note 20 to the consolidated financial statements are identical for the Company.
11 Related party transactions
During the year the Company received dividends from its subsidiaries totalling US$22,445,000 (2008: US$25,628,000) and paid to its
shareholders dividends totalling US$22,445,000 (2008: US$25,628,000).
Remuneration paid to Directors of the Company by its subsidiaries in the year totalled US$155,437 (2008: US$176,000).
Share benefit charges in respect of options and shares of the Company awarded to employees of subsidiaries totalled US$5,164,000
(2008: US$6,892,000).
During the year subsidiaries of the Company participated in funding its costs which totalled US$9,585,000 (2008: US$8,862,000).
At 31 December 2009, net amount owed by the Company to its subsidiaries US$44,214,000 (2008: US$28,856,000).
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79
888 Holdings plc
Annual Report & Accounts 2009
Shareholder Information
Group websites
A range of shareholder information is available in the Investor Relations area of the Group’s website, www.888holdingsplc.com, including:
l Latest information on the Group’s share price
l
Information on the Group’s financial performance
l News and events
The following websites can be also accessed through the Group’s main web portal www.888.com or are available directly.
Casino
888’s Casino games are offered through its Casino-on-Net and Reef Club Casino offerings
l www.Casino-on-Net.com
l www.ReefClubCasino.com
Poker
888’s Poker offering is through Pacific Poker
l www.PacificPoker.com
Sportsbook
888’s Sportsbook offering is through 888sports
l www.888sport.com
Bingo
888’s Bingo offering is through 888ladies and Wink
l www.888ladies.com
l www.winkbingo.com
888.it:
The Group’s sports offering for the Italian market
l www.888.it
Backgammon:
888’s Backgammon offering is through 888backgammon
l www.888.com/backgammon
Mobile:
888’s enable access to a mobile platform through 888mobile
l www.888mobile.com
Betmate:
888 Offers access to a betting exchange
l www.Betmate.com
888.tv:
A portal for skill games allowing members to download games, open accounts and play tournaments
l www.888.tv
888.info:
Allows members to practice their gaming skills for fun through a number of key Casino and Poker games
l www.888.info
888responsible:
The Group’s dedicated site focusing on responsible gaming
l www.888responsible.com
80
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888 Holdings plc
Annual Report & Accounts 2009
Welcome
888 is one of the world’s most popular
online gaming entertainment
and solutions providers
888 has been at the forefront of the
online gaming industry for over a
decade, allowing both players and
B2B partners to enjoy a world-class
gaming experience.
888’s consumer facing websites offer more
than just online gaming. They are entertainment
destinations, places where people can enjoy a
truly interactive experience and be part of an
online community that shares common interests.
As well as providing players with an innovative,
comprehensive and enjoyable gaming experience,
through Dragonfish, partners also benefit
from 888’s decade long industry experience.
Dragonfish provides partners with Total Gaming
Services — customisable solutions offering the
ideal platform through which to establish an online
gaming presence and monetise their brand.
888 websites provide an enjoyable customer
experience in a safe and secure environment.
888 remains a leader in responsible gaming, with
specialist websites dedicated to both corporate
responsibility and responsible gaming.
responsibility and responsible gaming.
Our strategy is to increase shareholders’ value
Our strategy is to increase shareholders’ value
through achieving profitable growth both
through achieving profitable growth both
organically, through the acquisition and retention
organically, through the acquisition and retention
of valuable players and partners, and through
of valuable players and partners, and through
strategic acquisitions.
strategic acquisitions.
Contents
01 Highlights
02 Chairman’s Statement
04 Chief Executive Officer’s Review
08 Enhanced Business Review
22 Corporate Social Responsibility
26 Risk Report
27 Board of Directors
28 Corporate Governance
31 Remuneration Report
39 Directors’ Report
42
Independent Auditors’ Report
44 Consolidated Income Statement
45 Consolidated Balance Sheet
46 Consolidated Statement of Changes in Equity
46 Consolidated Statement of Comprehensive
Income
47 Consolidated Statement of Cash Flows
48 Notes to the Consolidated Financial Statements
75 Company Balance Sheet
76 Company Statement of Changes in Equity
76 Company Statement of Comprehensive Income
77 Company Statement of Cash Flows
78 Notes to the Company Financial Statements
80 Shareholder Information
Shareholder Services
All enquiries relating to Ordinary Shares, Depository Interests,
Auditors
BDO LLP
dividends and changes of address should be directed to the Group’s
Chartered Accountants
55 Baker Street
London
W1U 7EU
UK
BDO Limited
Registered Auditors
Montagu Pavilion
8–10 Queensway
Gibraltar
Incorporated in Gibraltar with
registered number 90099
Transfer Agent:
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Tel: 0870 162 3100
www.capitaregistrars.com
Further Information
For further information please contact:
Company Secretary
888 Holdings Public Limited Company
Suite 601/701
Europort
Europort Road
Gibraltar
info@888holdingsplc.com
Principal Bankers
The Royal Bank of Scotland plc
280 Bishopsgate
London
EC2M 4RB
Solicitors
Freshfields Bruckhaus Deringer
65 Fleet Street
London
EC4Y 1HS
Hassans
57/63 Line Wall Road
Gibraltar
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888 Holdings plc
Suite 601/701 Europort
Europort Road
Gibraltar
T: +350 20049800
F: +350 20048280
E: Info@888holdingsplc.com
www.888holdingsplc.com
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Annual Report & Accounts 2009
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