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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 2010
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888 Holdings plc Annual Report & Accounts 2010
Welcome to 888 one of the world’s most
popular online gaming entertainment and
solutions providers.
888 is one of the world’s most popular online
gaming entertainment companies
Contents
888 is a truly global gaming destination that
remains at the cutting edge of the online
gaming industry, offering both players and
B2B partners the chance to enjoy a world-
class gaming experience in a personalised and
localised setting.
888’s consumer facing websites offer more than
just online gaming. They are an entertainment
destination, places where people can enjoy
a truly interactive experience that extends
beyond pure play and be part of an online social
network that shares common interests.
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 a brand.
As well as providing players with an innovative,
comprehensive and enjoyable gaming
experience, 888 websites provide an exciting
customer experience in a safe and secure
environment. It remains a leader in corporate
responsibility, with specialist websites dedicated
to both responsible gaming and corporate
responsibility.
Our strategy is to increase shareholders’
value through achieving profitable growth
both organically, through the acquisition and
retention of valuable players and partners, and
through acquisitions.
01 Highlights
02 Chairman’s Statement
04 Chief Executive Officer’s Review
08 Enhanced Business Review
24 Corporate Social Responsibility
28 Risk Report
30 Board of Directors
31 Corporate Governance
35 Directors’ Remuneration Report
42 Directors’ Report
45
Independent Auditors’ Report
47 Consolidated Income Statement
48 Consolidated Balance Sheet
49 Consolidated Statement of Changes in Equity
49 Consolidated Statement of Comprehensive
Income
50 Consolidated Statement of Cash Flows
51 Notes to the Consolidated Financial Statements
83 Company Balance Sheet
84 Company Statement of Changes in Equity
85 Company Statement of Cash Flows
86 Notes to the Company Financial Statements
88 Shareholder Information
Shareholder Services
All enquiries relating to Ordinary Shares, Depository
Auditors
BDO LLP
Interests, dividends and changes of address should be
Chartered Accountants
directed to the Group’s Transfer Agent:
55 Baker Street
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Tel: 0870 162 3100
www.capitaregistrars.com
London
W1U 7EU
UK
BDO Limited
Registered Auditors
Montagu Pavilion
8–10 Queensway
Gibraltar
Further Information
For further information please contact:
Incorporated in Gibraltar with
registered number 90099
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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Enjoy casino
www.888holdingsplc.com
Highlights
Total Operating
Income
Total Operating
Income — B2B
Total Operating
Income — B2C
Total Operating
Income — Bingo
262
51
222
50
247
40
195
2009
2010
2009
2010
2009
2010
2009
2010
up 6%
US$ million
down 21%
US$ million
up 13%
US$ million
up 370%
US$ million
11
Real money
registered customer
accounts
EBITDA*
8.7
46
7.1
29
2009
2010
2009
2010
up 23%
million
down 37%
US$ million
* Excluding share benefit charges of US$2.3 million (2009: US$7.0 million) and
restructuring costs of US$2.2 million (2009: nil).
01
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888 Holdings plc Annual Report & Accounts 2010
Chairman’s Statement
2010 was a challenging year for the Company in which
trading was impacted by a number of factors. 888 was able
B2C
This year, 888 made significant innovative strides to expand
to achieve solid financial results while continuing to invest in
and maintain its customer base, as new locally regulated
its B2C offering to ensure that it remains at the forefront of
online gaming. At the same time, the Company has worked
to position itself to take advantage of the opportunities
markets start to open up. Our new suite of sites was
officially launched at the beginning of the year as 888casino,
888poker, 888bingo and 888sport, all under the 888.com
arising through the forthcoming opening of significant
umbrella brand.
locally regulated markets in Europe.
As the start of 2011 has already demonstrated, 888 is well
After some 12 months in development, we launched Poker 6
in June. Poker 6, which is targeted at the more casual player,
placed to harness the many opportunities that the changing
is a significant leap forward and has increased our player
regulatory environment will bring. Our reputation as a
numbers noticeably.
trusted, leading international operator was demonstrated
by the approval by the Nevada Gaming Control Board and
the Nevada Gaming Commission of the suitability of the
commercial relationship between Caesars Entertainment
and Dragonfish. This enables us to continue to work with
Caesars to offer support for its UK product. This is the
first deal ever approved between a state-licensed gaming
888 continues to monitor developments as markets
become locally regulated. At the forefront of these is Italy.
Italy has huge potential for online gaming, and the new
licensing regime permitting cash gaming Poker and Casino
is expected in 2011. 888 is well placed to capitalise on its
position when the market opens, through a B2C Joint
Company and a foreign-based Internet gaming operator and
Venture with Endemol (the largest independent production
is a significant development.
company in Italy).
Financial Results and Dividend
Revenue increased 6% to US$262 million (2009: US$247
Wink Bingo has been an extremely successful acquisition
for the Group and continued to be an immensely popular
million) impacted by difficult trading conditions mainly due
web destination.
to weak poker and unfavourable exchange rates especially
during the first half and the World Cup in the summer.
EBITDA* was US$29 million (2009: US$46 million) in part
impacted by increased marketing investment. Our cash
position as at 31 December 2010 was US$27 million net of
customers’ liabilities. Given the higher than expected earn
customers’ liabilities. Given the higher than expected earn
out payment related to the Wink acquisition, the Board
is recommending that no dividend be paid for 2010. We
believe this is in the best interests of the business and we
will continue to review the dividend policy with a view to
reinstating payment of dividends as appropriate.
* Excluding share benefit charge of US$2.3 million (2009: US$7.0
million) and restructuring costs of US$2.2 million (2009: nil) as
more fully described in the Expenses section of the Financial
Review below.
02
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April 22,
Celebrating the new 888.com
In June we made an entry into the nascent but significant
social gaming market through the acquisition of a social
games development studio, Mytopia. This not only
compliments our core offering, but gives us access to
People
I would like to take this opportunity to express my thanks
and appreciation and that of the Board, to all of our
management and employees for their support and efforts
millions of potential customers.
throughout a challenging year.
Dragonfish
The first half of the year saw a number of landmark casino
deals in Italy with Bwin Italia/Gioco Digitale and Microgame
S.p.A.. These provide 888 with a strong platform ahead of
the opening of the significant Italian market, though launch
Outlook
2010 was a testing year for the business 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
dates for these deals were delayed as a result of slower than
wider online gaming industry can look to the future with
anticipated enactment of the Italian legislation.
confidence. The strength and diversity of our offering and
the strong trading performance at the start of the new
During the year Dragonfish has further improved its Total
financial year, leaves us well positioned to create sustainable
Gaming Services offering, launching new games and features.
value for our shareholders.
Richard Kilsby
Chairman
We have added new partnerships as well as extending
existing ones, such as our agreement with Cashcade.
We received a number of awards in the year including two
of the most prestigious awards at the inaugural eGaming
Review B2B Awards — Bingo Network of the Year and
White Label Partner of the Year. More recently, players voted
Dragonfish as the provider of the ‘Most Popular Online
Bingo Software’ at the iGB Affiliate Awards.
Responsible Gaming and CSR
888 is committed to a pro-active policy of corporate and
social responsibility and we place the community and the
customer at the centre of all our endeavours. In recognition
of our commitment to combining the best gaming
experience with the most responsible gaming environment,
we were awarded “Socially Responsible Operator of the year
at the eGaming Review Awards. Our dedicated multi-lingual
website www.888responsible.com provides information
regarding all aspects of responsible gaming.
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03
888 Holdings plc Annual Report & Accounts 2010
Chief Executive’s Review
Introduction
Following a challenging start to the year 888 finished 2010
strongly. Due to steps taken throughout 2010 we ended the
year with record 18% growth in Revenue Q4 on Q3, and 6%
growth compared with 2009. The fourth quarter of the year
was the strongest in our history, since withdrawing from the
USA, with 283,000 active B2C Casino and Poker customers,
and Revenue of US$71.3 million.
The pace of regulatory change in many markets, adverse
F/X movement and the impact of the World Cup in relation
to Poker and Casino all affected the business adversely and
to differing degrees. This variability dominated much of
the year.
Our strategy of continuously improving our market leading
customer offering has again led to significant progress
in product innovation, including an overhauled poker
platform, the addition of new games, increased localisation
of our various products and further CRM and bonus tools.
These developments began to make an impact towards the
end of the year, and we expect them to facilitate further
growth in 2011.
B2C
Trading in 2010 has been challenging. It was impacted in
the first half by the deterioration of online poker across the
industry, with the daily average ring game players falling
by approximately 25% in the period from January to July.
There were encouraging signs towards the end of the year
that 888’s Poker 6 offering is significantly bucking this trend,
with Revenue from poker rising 28% to US$11 million from
Dragonfish added new partnerships and increased the
Q3 to Q4 in 2010.
scope of existing ones, including contract extensions, such
as its existing agreement with Cashcade, which operates
some of the leading brands in the UK bingo market.
Newly locally regulated markets form a core focus of the
Dragonfish strategy and significant deals were signed,
especially in Italy.
Our EBITDA* for the year was US$29 million (2009: US$46
Our EBITDA* for the year was US$29 million (2009: US$46
million), a 37% decline compared to previous year mainly
as a result of the disappointing performance of our poker
as a result of the disappointing performance of our poker
business as well as unfavourable exchange rates during
the first half of the year and increased marketing spend.
Similarly, Profit Before Tax* was US$15 million (2009:
US$35 million).
Excluding share benefit charges of US$2.3 million (2009: US$7.0
* Excluding share benefit charges of US$2.3 million (2009: US$7.0
million and restructuring costs of US$2.2 million (2009: nil) as fully
million and restructuring costs of US$2.2 million (2009: nil) as fully
described in the Expenses Section of the Financial Review below.
described in the Expenses Section of the Financial Review below.
04
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This change in fortune followed the launch and marketing
This year in casino we added 42 new games to the
of Poker 6 in June, which had been nearly 12 months in
Quickplay suite of products and launched a new brand —
development. This interface is widely considered to be the
Euro City.
best in breed in the industry today and marked a huge leap
forward. It has helped 888 transform its focus to capture a
We are delighted that our innovation and success was
larger proportion of our customers ’share of time’. We built
recognised when 888 received the award for Best Operator
a strong community platform that is state of the art in the
of Online Casino at the prestigious Monaco iGaming Awards.
industry and we also have a dedicated team that focuses on
engaging more with customers through community forums.
We are a leader in the online bingo field, Wink Bingo in
particular is enormously popular. We launched two new
We also made substantial improvements this year to our
offerings in the second quarter of the year — Tasty Bingo
customer interfaces, with the aim of providing the customer
and Red Bus Bingo. We also entered into new territories
with the best possible online gaming experience. Amongst
such as Sweden. The Bingo Golden ticket campaign at the
our latest releases are a new poker playing concept, as well
beginning of the year, offering players the opportunity to
as the innovative PokerCam product (launched in 2011)
allowing players to play real-money poker with real time
win golden tickets to 888’s £5 million Jackpot game, was
one of our many marketing initiatives.
video streams from their webcams, giving for the first time a
real meaning to the term ‘poker face’ in online poker.
Our rebranded 888sport site has been well received by
We have increased marketing spend in proven growth
racing offering, including live race streaming. During the
categories and are achieving very impressive results.
year we also launched a mobile product for Smartphones
Marketing has included high profile campaigns and
enabling customers to place bets anywhere and anytime,
promotions, such as the Shane Warne poker multi-media
including in-play, a VIP and High Value Rewards program
advertising campaign, and the launch of the Casino 8 Free
and a site promotion with the Fontwell racecourse.
customers and in the first half we launched a new horse
Spins to win £8.88 million TV campaign.
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05
888 Holdings plc Annual Report & Accounts 2010
Chief Executive’s Review
Dragonfish
Dragonfish has continued to improve its Total Gaming
Services offer, and has signed a number of strategic deals
during the year. These include material casino deals in Italy
with Bwin Italia/Gioco Digitale and Microgame S.p.A., set to
provide a significant market share in the potentially huge
Social and Mobile Gaming
Social gaming in its broadest sense is set to be a mature
multi-billion-dollar industry in 2011. This meteoric rise of
social networks and the emergence of the social gaming
trend, alongside recent developments in the online gaming
industry, mean social networking will be key to the future of
Italian online casino market. Newly locally regulated markets,
the industry.
are a core focus and Dragonfish tailors its solutions to assist
partners in these markets by offering a flexible solution
ranging from software only to fully managed service.
Contract extensions were signed with Moon Bingo and
Costa Bingo, and we were pleased to sign an extension
to Dragonfish’s existing agreement with Cashcade (now
owned by PartyGaming). The Cashcade offering includes
some of the biggest brands in the UK bingo market, such as
Foxy Bingo, Cheeky Bingo and Think Bingo, all of which are
standalone networks powered by Dragonfish bingo software.
During the year we appointed a new Managing Director
David Zerah, who has significant B2B experience in the
media industry, both broadcast and online. We believe
that as the industry moves towards a greater emphasis on
content and flexible solutions his experience and contacts
will enable Dragonfish to capitalise on new opportunities.
A number of new standalone bingo networks were launched
in 2010, including ones with Cashcade (Rollover Bingo) and
Costa (Sing Bingo), underlining Dragonfish’s position as
the market leader in online bingo in the UK. MTV Networks
UK & Ireland also marked their entry into online gaming by
selecting Dragonfish to provide a bingo product. There are
now more than 20 standalone bingo networks powered by
Dragonfish, and the Dragonfish network supports over 80
skins offering instant liquidity, industry leading software and
top tier brands.
In recognition of Dragonfish’s leading market position we
were awarded White Label Partner of the Year and Bingo
Network of the Year at the prestigious eGaming Review
B2B awards.
The industry now concentrates on casual players and
social networks can play a key role. To support that future
vision, we acquired the assets comprising the Mytopia
social games development studio, giving us an immediate
footprint in the social gaming arena and access to millions
of potential customers.
Access to this new gaming audience provides a number of
cross-selling opportunities, and ensures that we are at the
forefront of what is expected to be a key trend in the habits
of consumers in our industry.
People
The key driver in the success of 888 is the quality of our
people. Everyone has worked enormously hard in what was
a tough, though satisfying year. I want to recognise that
enormous collective effort, and to add how fortunate I am to
work with such talented and dedicated people.
Regulation
888, as a regulated and responsible company, constantly
reviews actual and potential changes in the online gaming
regulatory regime all over the world. This serves to allow
the Company to pursue any possible opportunities to
seek, receive and operate under local licenses and to guide
decision making in relation to existing operations. In Europe,
the Company has been granted licenses in Italy and France
and is pursuing additional licensing possibilities in Italy and
Denmark. In addition, 888 is considering potential licensing
opportunities outside Europe. We believe that the online
gaming industry is making big strides towards being fully
locally regulated in an increasing number of jurisdictions,
which will change forever the industry landscape. 888’s
positioning makes it well placed to take advantage of
these changes. This is illustrated by the recent approval
by the Nevada Gambling Commission of the suitability of
the supplier relationship between Dragonfish and Caesars
Interactive Entertainment.
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Responsible Gaming
888 is committed to a pro-active policy of corporate and
social responsibility that reflects the high professional and
ethical standards we have set for ourselves. Conducting
our business responsibly is fundamental to the future
success of 888 and the sustainability of the business. At
888, we understand that our responsible approach is both
the correct way to do business and one that enhances
our credibility, thereby supporting the development of the
business. In 2010 our efforts were recognised when we were
voted “Socially Responsible Operator of the Year” at the
eGaming Review Awards.
2011 Focus
We will continue to innovate in products and marketing in
order to attract customers to our offerings and build brand
loyalty. There are many customer and product developments
planned for the coming year.
Wink has been an extremely successful acquisition for 888,
Poker 6.5 will further improve what is already accepted
performing well above our expectations. As previously
as a leading platform in our B2C offering through the
announced, we have reached agreement with the Wink
introduction of video play and improved social features,
Vendors to defer part of the earn out to May 2012.
including the opportunity to play as part of a team.
Locally regulated markets will form a key focus for both B2C
Gaming Control Board and the Nevada Gaming Commission
and Dragonfish. The flexibility of the Dragonfish platform
voted unanimously to grant a finding of suitability to
means that it is ideally placed to help partners capture
Caesars Entertainment regarding its commercial
regulated market share. We are well-placed to capitalise
relationship with Dragonfish.
We were delighted that, in March 2011, both the Nevada
on the Italian market potential, and will monitor other
opportunities as they arise.
Outlook
2010 saw a move towards locally regulated markets across
Europe, and this should continue in 2011. The market with
This finding, which resulted from a rigorous and lengthy
process of scrutiny, underlines the integrity, sophistication
and professionalism that the Company maintain as core
tenets of its business model.
most immediate potential is Italy, through the recent online
888 has begun 2011 well and continues to make good
casino and poker cash games regulation. This development
progress across all segments of the business. We have
is very exciting for both our B2C joint venture with Endemol
an exciting base on which to build in 2011, with a high
and for Dragonfish, which is supporting the Italian market
proportion of sustainable locally regulated earnings and
leaders — win/Gioco Digitale and Microgame S.p.A..
a well diversified business, product line and geographic
Additional high potential markets include Spain, Greece and
revenue stream. Further imminent improvements in our
other European jurisdictions.
product offering will lead to increased success in driving
players to our sites and retaining them going forward. This,
alongside our expanding licensee base within Dragonfish,
puts us in a strong position for the future.
Gigi Levy
Chief Executive Officer
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888 Holdings plc Annual Report & Accounts 2010
Enhanced Business Review
FInanCIaL REvIEw
Financial Summary
Revenue
B2C
Casino
Poker
Bingo
Emerging offering
Total B2C
B2B
Revenue
Operating expenses2,3
Research and development expenses3
Selling and marketing expenses
Administrative expenses3,4,5
EBITDA3,4,5
Exchange losses and net finance costs
Depreciation and amortisation
Profit before tax3,5
Year ended Year ended
31 December 31 December
20091
US$ million US$ million
20101
116.9
38.4
50.1
16.2
221.7
40.4
262.1
98.7
21.8
91.5
21.6
28.6
(1.2)
(12.3)
15.1
118.7
51.6
10.7
14.4
195.4
51.3
246.7
89.9
24.2
67.3
19.8
45.6
(2.5)
(8.5)
34.6
1 Figures may not cast due to rounding
2 Excluding depreciation of US$8.5 million (2009: US$7.0 million), amortisation of US$3.8 million (2009: US$ 1.5 million)
3 Excluding restructuring costs totalling US$2.2 million (2009: nil): US$1.2 million from Operating expenses, US$0.6 million from Research and
development and US$0.4 million from Administrative expenses
4 Excluding exchange rate loss of US$ 0.3 million (2009: US$2.7 million)
5 Excluding share benefit charges of US$ 2.3 million (2009: US$7.0 million)
08
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FInanCIaL RESuLtS
General
Our financial results in 2010 were adversely impacted by
challenging trading conditions especially in the online poker
market and unfavourable exchange rates during the first
half and the World Cup during the summer. Despite this,
Revenue increased 6% to US$262 million (2009: US$247
million). However, the increased marketing investment,
which resulted in record new player recruitment, had an
inevitable impact on margins. EBITDA* was $29 million
(2009: US$46 million), Profit before tax US$15* million
(2009: US$35 million) and Basic Earnings per share* 3.6¢
(2009: 9.2¢).
Geographical segmentation
The Group’s revenue stream is diversified across
geographies, with the majority arising from Europe. The UK
remained the largest single market. The table below shows
the Group’s geographic revenue distribution:
Revenue by geographical market:
Revenue
UK
Europe (excl. UK)
Americas (excluding USA)
Rest of World
Total
* Figures may not add to total due to rounding
Year ended
31 December
2010*
US$million
128.2
96.8
16.1
21.0
262.1
% share
49
37
6
8
100
Year ended
31 December
2009*
US$million
% share
90.4
113.7
19.1
23.4
246.7
37
46
8
9
100
As the table illustrates, in 2010 888’s turnover grew by 42%
in the UK but declined elsewhere: 15% in Europe (excluding
million (2009: US$98.4 million), an increase of 14%. Most
of the increase is driven by the addition of Wink bingo
UK), 16% in the Americas (excluding USA) and 10% in the
and Mytopia from January and June, respectively, an
rest of the World. The relative size of the UK increased
increase in B2B revenue share due to partners which
significantly to 49% of Revenue.
were launched in late 2009 and the establishment of a
Expenses
Operating expenses, mainly comprising salaries,
supplementary low cost support centre in Eastern Europe.
Staff Costs representing the largest component of operating
expenses, were US$48.5 million (2009: US$45.5 million)
chargebacks, payment service providers’ commissions
reflecting the additional staff joining with Wink bingo
and revenue share due to B2B partners, totalled US$112.1
and Mytopia, mitigated in part by the restructuring cost
* Excluding share benefit charge of US$2.3 million (2009: US$7.0 million) and restructuring costs of US$2.2 million (2009: nil) as fully described
in the Expenses section of the Financial Review below.
09
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888 Holdings plc Annual Report & Accounts 2010
Enhanced Business Review
cutting announced in May (staff costs in Q4 reduced by
approximately 5% compared to Q1). Chargebacks reduced
significantly during the year to US$3.0 million (2009:
US$9.0 million) as the business reverted to historic levels
following the fraud attacks in 2009.
During 2010, the Group continued its investment in
taxation
The tax charge for 2010 was US$2.7 million (2009: US$2.7
million) reflecting the Group’s efficient tax position.
Earnings per share
Adjusted Basic Earnings per share2 were 3.6¢ in 2010
(2009: 9.2¢) whereas Basic Earnings per share were 2.3¢ in
infrastructure across business lines, however Research and
2010 (2009: 7.2¢).
Development expenses reduced 7% to US$22.4 million (2009:
US$24.2 million). The reduction was driven by utilising a
more cost-effective workforce based on the new outsource
Dividend
The Board recommended that no final dividend be paid for
development centre established in late 2008 in Ukraine.
the 2010 financial year.
Marketing expenses, driven almost exclusively by B2C
activities, were US$91.5 million (2009: US$67.3 million).
The increase was driven by the addition of the Wink bingo
Cash flow
During the year, the Group generated net cash from
operating activities of US$16.2 million (2009: US$41.5
business and by multiple marketing initiatives across 888’s
million).
business aimed at driving growth. The result of this is reflected
in the strong trading in Q4 2010 and 2011 year to date.
In 2010, the Group continued to optimise cost per
acquisition across various customer recruitment channels.
During the year, 888’s marketing team recruited more than
During 2010, the Group made cash payments of US$28.3
million (2009: US$30.0 million) in investment in activities
including the Mytopia acquisition at US$12.3 million and
capital expenditure at US$8.6 million (2009: US$8.3 million).
The Group returned US$10.5 million (2009: US$22.4 million)
213,334 new Casino and Poker first time depositors from
in dividends to its shareholders.
more than 1.4 million (2009: 1.1 million) new real money
registrations with an average cost per acquisition in 2010 of
US$201 (2009: US$177).
Administrative expenses1 increased 9% to US$21.6 million
(2009: US$19.8 million).
Share benefit charges
In 2010, the Group reduced the level of equity awards made
under the All Employee Share Plan and scope of eligible
grantees and the charge to the profit and loss account
reduced significantly. The non-cash charge for 2010 was
Balance Sheet
The Group’s cash position as at 31 December 2010 was
US$61.5 million (31 December 2009: US$87.5 million).
Balances owed to customers were US$34.7 million (2009:
US$37.6 million).
As at 31 December 2010 Current Liabilities include
Contingent Consideration of US$78 million (2009: nil)
comprising discounted amounts of US$72 million in respect
of Wink Bingo and US$6 million in respect of Mytopia
acquisitions. As announced on 18 March 2011, the Wink
related earn out payment has now been rescheduled such
US$2.3 million (2009: $7.0 million), comprising a US$0.2 million
that £21.7 million is deferred and is due on 21 May 2012.
charge relating to grants in the current year (2009: US$1.1
million) and US$2.1 million (2009: US$5.9 million) relating to
grants made in the past.
Finance income
Low interest rates resulted in interest income of US$197,000
(2009: US$633,000).
Profit and Earnings per share
EBITDA2 was US$29 million (2009: US$46 million). EBITDA2
margin was 10.9% (2009: 18.5%).
10
1 Excluding exchange rate loss of US$ 0.3 million (2009: US$2.7
million), share benefit charges of US$ 2.3 million (2009: US$7.0
million) and restructuring costs of US$0.4 million (2009: nil).
2 Excluding share benefit charge of US$2.3 million (2009: US$7.0
million) and restructuring costs of US$2.2 million (2009: nil).
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B2C
888 remains at the cutting edge of the online gaming
experience, and 2010 saw the Company take large and
innovative strides forward across the B2C offering.
The customer experience is of paramount importance,
The year also saw the roll-out of the new branding for
our four core offerings. With a reinvigorated look and feel
under unified logos, the brands all speak with one language
and link into one offering. This creates brand continuity,
leveraging the strength of the 888 brand and increasing its
reach. The new sites were launched at the beginning of 2010
and 888 provides online entertainment destinations where
as 888casino, 888poker, 888bingo and 888sport, all under
players can combine an unparalleled gaming offering with
the 888.com umbrella brand.
a more complete internet experience, including social
networking and personalised activities.
In 2010 the offering was enhanced to provide customers
with an experience that they could not find elsewhere. The
new Poker 6 platform was an enormous step forward, and
is widely considered one of the best in the industry. It has
helped 888 significantly outperform peers through providing
an enjoyable, accessible and different gaming environment.
Leadership through Innovation
Online gaming continues to evolve, and 888’s offering
continues to innovate and change with it.
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 more than 20
The opportunity to play online using live video stream games
languages in over 150 countries.
also reminds players that, at 888, ‘We Play Different.’
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11
888 Holdings plc Annual Report & Accounts 2010
Enhanced Business Review
Poker
In 2009 the decision was taken to carry out a complete
Reaction to the changes has been extremely positive, with
an increase of more than 50% in the liquidity of ring cash
overhaul of 888’s poker offering and deliver a ground-
games since launch.
Casino
During the year the flash casino was significantly enhanced,
with the addition of dozens of new games and further core
features. This no-download product allows players at 888
to enjoy faster access to all their favourite games and is
available in more than 20 languages at both 888casino and
888sport. The product contains a lounge for VIP Players and
high-rollers, where they can see their status prominently
displayed and receive an impressive list of membership
benefits. Additionally high stake versions of roulette and
blackjack are available in the VIP arena.
breaking environment for players of all abilities. Analysis
showed that there was a gap in the market for a poker offer
that provided a bridge between soft social game poker and
real money online poker, catering for beginners as well as
experienced players.
A year in development, the result was the launch of Poker 6
in June 2010. The new platform was built from scratch, with
feedback throughout the whole process from focus groups
comprised of 888 players and people representing the
demographics that 888 was looking to reach.
Poker 6 was a huge leap forward, with an intuitive usability
that targeted the casual player. This included the creation
of a beginners lobby with one-click options to immediately
place players at the table of their choice. At the same time
a new tournament lobby appealed across the demographic,
and an improved multi-table playability ensured that
experienced players remained well-catered for.
As well as these functional improvements the look and feel
of the sites was greatly improved. Features implemented
include a customisable lobby, individual avatars and tag
icon options, new table themes and card choices. Improved
social aspects were also incorporated, and an extensive
online shop for players to redeem their poker points helped
to create a personalised experience that helps to build
loyalty and drive repeat visits.
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Alongside these eye-catching innovations, the instant games
offering was expanded, with dozens of new games added
to the quickplay suite. In the first half of the year a new
casino brand, Euro City, was launched, targeted at particular
European markets.
888 continues to monitor developments in new markets.
At the forefront of these is Italy. Italy has huge potential for
online gaming, and the new licensing regime that permits
cash gaming Poker and Casino is already in force. 888 is
well placed to capitalise on our position, both directly and
through Dragonfish. A joint venture with Endemol Italy, the
prominent independent TV production Company in Italy,
is being set up to co-invest in the Italian market. The deal
will see the launch of a comprehensive gaming offering,
operating on 888.it, which will benefit from the exclusive
Bingo
888 continues to be a leader in the online bingo field.
Following its acquisition in December 2009, 2010 was
the first full year of Wink Bingo’s contribution and the
site proved once again one of the most popular in the
UK. 888ladies continued to perform well, boosted by
an overhaul of the lobby. The new look and feel of the
888ladies site was very well received by its loyal players.
utilisation of Endemol’s brands in Italy. This modus operandi
888’s share of the UK bingo market was further increased
is becoming a cornerstone of our strategy in the new locally
through the addition of two new offerings — Tasty
regulated markets, where we will be seeking strong partners
Bingo and Red Bus Bingo, launched in March and April
who will assist us by providing access to significant local
assets and by investing additional funds into our activity.
respectively. The two sites both offer regular promotions,
attractive prizes and the wealth of interactive features that
make 888’s bingo sites social destinations that draws users
The success of our work in 2010 was recognised when 888
to make repeat visits.
received the award for Best Operator of Online Casino
at the prestigious Monaco iGaming Awards.
The successful bingo offering was introduced into new
markets in 2010, notably in June with the launch of
888bingo in Sweden.
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13
888 Holdings plc Annual Report & Accounts 2010
Enhanced Business Review
Sport
888sport made significant steps forward in 2010. The
rebranding, alongside the other core 888 offerings, heralded
a major change in its look and feel. The homepage was
In the first quarter of the year a new horse racing offering
was launched, which included a new ‘i-card’, showing
detailed and comprehensive graphical statistics and
information. A Bet & Watch application enabling the
improved through the addition of promotional videos, one-
streaming of live racing from a number of UK tracks was
click prices for key events, a live betting widget and live
another popular addition.
odds carousel banners, all supported on a new and wider
screen resolution.
As well as the improvements made to the 888sport website,
an all new 888sport mobile product for Smartphones was
launched, allowing customers to place bets anywhere and
anytime, including in-play.
Social gaming
The rise of social networking sites, now the most visited
sites on the internet, and the emergence of social gaming,
illustrate the growing importance of social features to the
future of the industry.
Understanding and adapting to this changing consumer
behaviour has led 888 to embrace the new era of social
interaction. The acquisition of the assets comprising the
Mytopia social games development studio from Real Dice
Inc. in June 2010 gave us an immediate footprint in the
social gaming arena, complementing our core offering and
giving us access to millions of customers.
Access to this new gaming audience provides a number of
cross-selling opportunities, and ensures that we are at the
forefront of what is expected to be a key trend in the habits of
consumers in the online gaming industry. The acquisition forms
the cornerstone of our social gaming and mobile strategy,
allowing us to offer a seamless experience across different
platforms to both our B2C customers and via Dragonfish.
Marketing and promotions
888 continued to seek out ground-breaking and timely
offline marketing opportunities to build brand awareness
amongst key demographics and increase online traffic. 888
launched some of its most high-profile campaigns in 2010,
reaching new customers and helping to bring old players
back onto the improved offerings.
2010 was the third year of 888’s partnership with Shane
Warne, and he continues to represent 888 at international
poker events such as the 888 Poker Open, the Aussie
Millions and the World Series of Poker. Shane also fronted a
multi-media advertising campaign around the launch of the
new poker offering. The campaign, based around the slogan
‘We Play Different’, yielded very good results.
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The television campaign was the culmination of marketing
facelift, with the £6.5m 888sport Premier Grandstand now
activities surrounding 888poker. As the new offering was
providing breathtaking views of the course.
introduced, an innovative marketing campaign offered
players a proposition never seen before. The “8 ways to 88
WSOP packages” global campaign offered new players a
Customer relationship management
Strong customer relationships are the bedrock of our
variety of ways to win one of 88 packages to the WSOP, not
success. Whilst eye-catching promotions help to drive
all of which were at poker tables — there was even a way
customer acquisition, customer retention comes from
to win by creating a YouTube video to plea for the prize. To
engendering loyalty through building bonds with players.
jump start the campaign, US$500,000 worth of free US$8
This leads to people playing more games, more often, for a
registration accounts were handed out.
longer time.
In addition to the “8 ways” campaign, an online promotion
888’s ongoing commitment to localisation strengthens
with the tagline “A New Era has Begun” heralded the
relationships worldwide through speaking to people in their
arrival of the new 3D poker software and offered players
language and culture, while the market-leading usage of
the chance to turn 8¢ into US$30,000, iPads, Sony Home
Cinemas and Kindles.
social features and interactivity with players strengthens
brand loyalty.
Marketing for both of these promotions was undertaken
888 never forgets that the customer has a choice, and strong
using global online affiliates, search engine marketing,
customer relationships are the bedrock of our success. A
localized promotional landing pages in 11 languages, offline
positive customer experience has a direct impact on engaging
print advertisements in several poker publications and via
customer loyalty and subsequently improving retention.
on the ground poker leagues.
888sport continued to be prominently marketed at key
our retention goals, included loyalty schemes and our
sporting events, building brand awareness. The biggest
successful VIP programs. The use of sophisticated data
casino promotion was a repeat of the £8,888,888 campaign,
mining helps to focus marketing efforts and target players
which offered the chance to use seven free spins to win the
with the right offers at the right time. Offline events help
biggest online jackpot of all time. The campaign appealed
the Company to meet VIP clients face to face and build
to players across the playing spectrum — including new,
relationships. These relationships are managed by dedicated
In 2010, further initiatives were introduced in order to meet
registered, and high value players, VIPs and inactive players.
VIP Loyalty Managers.
The promotion was supported by a 360 degree marketing
drive across all media outlets, including direct mail, television,
The numerous offline events that took place in 2010
online, and prominent public advertising, and also by search
included a trip for VIPs to the FIFA World Cup and Royal
engine optimisation and cross selling from 888 sites.
Ascot, an event for 888ladies in Manchester, and for
888poker members a trip to the WSOP and an exclusive
High profile sponsorship of events, with corresponding online
888poker party.
promotions, also helps to drive customers to 888 sites. In
February 2011 it was announced that 888 has teamed up with
the Professional Darts Corporation to sponsor what is now
Search Engine Optimisation (‘SEO’)
The specialist Search and Web Optimisation Technologies
called the 888.com Premier League Darts. The tournament
(‘SWOT’) team continue to give 888’s websites prominence
is the biggest indoor sporting event in the United Kingdom,
on worldwide search engines, maximising the impact of the
with a significant international reach. The tournament this
product offering. Successful use of SWOT has helped to
year features a new format with two teams battling it out
bring players to 888 brands, helping customer acquisition
for superiority, with Team Blue and Team Green representing
and the ongoing growth of 888sport and 888ladies.
888poker and 888casino respectively.
888sport is also the proud partner of Fontwell Park
‘online casino’, and ‘bingo.’ This positioning is replicated
Racecourse, which fittingly is home to the world’s only
across core markets.
In the UK, 888 sites were top in Google searches for ‘casino’,
figure of eight race track. Fontwell Park, in East Sussex in
the south of England, has recently undertaken a significant
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888 Holdings plc Annual Report & Accounts 2010
Enhanced Business Review
Dragonfish
Dragonfish continued to mature in 2010, further improving
the total Gaming Services Offering
New entrants to the online gaming market require diverse
the Total Gaming Services offering, adding new partnerships
gaming content, a technology platform to work with,
while increasing the scope of existing ones, and moving into
expertise in setting up operations as well as marketing and,
new markets.
above all, knowledge of how to leverage their assets and
To oversee this expansion a new Managing Director was
appointed, David Zerah, who has significant B2B experience
Steps were taken in 2010 to ensure that Dragonfish
in the media industry, both broadcast and online. As the
continues to offer just such a compelling product across all
target the gaming consumer.
industry moves towards a greater emphasis on content and
core gaming areas.
flexible solutions his experience and contacts will enable
Dragonfish to capitalise on these opportunities.
The Poker 6 upgrade provided a more contemporary
look and feel for poker clients, with enhanced usability,
In recognition of Dragonfish’s position as a leading B2B
functionality and playability on the tables.
provider helping companies deliver online gaming results,
we were delighted to receive two of the most prestigious
The casino offering continues to reflect 888’s decade
awards at the inaugural eGaming Review B2B Awards —
long experience as a leading casino operator. This allows
White Label Partner of Year and Bingo Network of the Year.
Dragonfish to provide a suite of games that helps partners
to appeal to beginners and experts, through the vast range
of games available, easy to navigate casino lobby with
intuitive buttons for communicating promotions, tutorials,
24/7 customer help, wins and bonuses.
Each product is tailored for individual markets, and can take
advantage of multi-platform compatibility. Casino games are
now available in more than 20 languages across a variety of
platforms.
In order to enhance the gaming experience, further casino
games were added in 2010. Due to Dragonfish’s integration
platform, these games can be integrated into the poker,
sport, or bingo offerings swiftly, using a single wallet
application that provides seamless account processing.
Dragonfish launched more than 30 new Quickplay games
across the year, including the global brands ‘Monopoly’
and ‘Wheel of Fortune’. As well as these famous brands,
Dragonfish also utilises major events to increase the
relevance of offerings and provide an enjoyable gaming
experience. The highest profile example of this in 2010 was
the launch of a suite of Quickplay games built specifically
for the FIFA World Cup. The games are highly sought after
by partners as Dragonfish aims to deliver best in class
offerings. Providing a more diverse offering, such games are
a proven formula for increasing player retention and lifetime
customer value.
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Another way to increase player retention and drive traffic
to sites is through interactive and social features. The rise of
social networking has been one of the key internet trends of
the last few years, and a number of additions have been made
to help fulfil the social wants of players. In Bingo, “Virtual” gifts
were added to chat applications, together with a live video
streaming feature that enables the chat moderators to build a
more personal dialogue with the players.
Back office services continue to be a core part of the
proposition. Dragonfish provides a customisable deposit
and cash-out cashier per country, localised with a look
and feel tailored to a partner’s specification. This provides
innovative payment optimisation technology and fraud
management, including anti-money laundering services.
The Total Payment Services offering gives 24/7 multi-lingual
customer operations that assist customers’ deposits and
withdrawals both reactively and proactively.
In total, 2010 saw the launch of several new standalone
bingo networks, with Cashcade (Rollover Bingo) and Costa
2010 saw the launch of Dragonfish Affiliates. The program
(Sing Bingo), emphasizing Dragonfish’s position as the
currently has tens of thousands of affiliates focused
market leader in online bingo in the UK. MTV Networks UK
on customised sponsorship promotions, with new and
& Ireland also marked their entry into online gaming by
existing affiliate partners, driving partner growth activity.
selecting Dragonfish to provide their bingo product.
The program was supported through attendance at major
affiliate shows in London, Prague and Budapest.
There are now over 20 standalone bingo networks powered
Partners
Dragonfish helps a wide range of companies to maximise
over 80 skins offering instant liquidity, industry leading
software and top tier brands. We were proud to see this
their online revenues and fulfil the potential of their brands,
leading position in bingo recognised at the eGaming Review
including e-gaming companies, media portals, offline
B2B Awards, and also to be voted by players as the provider
casinos and pools operators.
of the ‘Most Popular Online Bingo Software’ at the 2011
by Dragonfish, and the Dragonfish bingo network supports
BingoPort.co.uk Players’ Choice Awards.
Contract extensions were signed with Moon Bingo and
Costa Bingo, and we were pleased to sign an extension
to Dragonfish’s existing agreement with Cashcade (now
Regulated markets
Newly regulated local markets form a core focus of the
owned by Party Gaming). The Cashcade offering includes
Dragonfish strategy, and the Company has tailored its
some of the biggest brands in the UK bingo market, such
product and marketing towards this area. Dragonfish
as Foxy Bingo, Cheeky Bingo and Think Bingo, all of which
provides flexible gaming solutions to help partners capture
are standalone networks powered by Dragonfish bingo
locally regulated market share. This flexibility gives partners
software. As part of this extension, Dragonfish developed
the ability to cherry pick from the Total Gaming Services
a bingo network for Nordic countries with localised bingo
offering to create bespoke solutions fully customised for
game, localised currencies and payment methods. This
individual markets.
new offering enabled UK market leaders 888ladies and
Foxy Bingo to enter the Swedish market with new product
Partners can combine those products and services that
initiatives while sharing the same liquidity.
complement their own and the relevant market, from
as little as one gaming product with no back office, to
a full managed service. In 2010 advertising campaigns
concentrated on Dragonfish’s flexible gaming solutions
for locally regulated markets, and there were a number of
notable successes.
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888 Holdings plc Annual Report & Accounts 2010
Enhanced Business Review
Italy
The Italian eGaming market is one of the largest in Europe
and, with the market now open to online casino providers,
there are huge opportunities in the country.
Dragonfish worked hard to identify the best games for
Caesars, which is registered with the Nevada Gaming
Commission (‘NGC’), submitted to the NGC and the Nevada
State Gaming Control Board (‘GCB’) an application for a
finding of suitability concerning CIE’s supplier relationship
with Dragonfish. The application relates to state law in
Nevada that covers Nevada gaming companies conducting
this market, and the best product for partners. Two major
gaming outside the state of Nevada.
agreements were signed in 2010.
In March an agreement was signed with win Italia, a
subsidiary of win, to provide a casino games portfolio
for the Italian market. This was followed in August by the
signing of an agreement with Microgame, Italy’s leading
remote gaming service provider, for the provision of a
On 9 March 2011, the GCB considered the application and
recommended to the NGC that the requested finding of
suitability be granted to CIE regarding its commercial
relationship with Dragonfish. On 24 March 2011 the
Nevada Gaming Control Board unanimously approved the
suitability of the commercial relationship between Caesars
comprehensive casino product.
Entertainment and Dragonfish.
The partnerships are significant steps forward for
Dragonfish in the locally regulated Italian gaming market
and provide the platform to become one of the largest
casino providers in Italy. Dragonfish was able to provide
both partners with a flexible casino platform that included
casino games combined with a Player Management System
that could be seamlessly integrated into their existing
operating systems.
France
The online gaming environment in France entered a new
phase of regulation in 2010. 888’s award of a licence by
Autorité de Régulation des Jeux En Ligne (ARJEL), the
French Gaming regulator, allowed Dragonfish to enter
this new environment. A joint venture was signed with
Microgaming for a comprehensive poker network offering
of a suite of games, multiple tournaments and a fully
customized poker solution. Whilst at an early stage, it is
2011 Focus
Dragonfish continues to be focused on the achievement
of growth both organic, through driving increased revenue
from partners, and through the acquisition of new partners.
The Company will continue to deliver market-leading Total
Gaming Services from the most complete gaming platform
to cutting edge back office services. It will strive to be the
first to enter locally regulated markets. For example, having
secured agreements with some of the largest operators in
the newly locally regulated Italian market, we are launching
our flexible casino product in line with the new legislation
set by AAMS. As the regulatory landscape continues to
alter, the flexibility of Dragonfish’s offering allows us to focus
on partnerships in markets where regulation is still to be
defined, including Belgium, Spain, Germany, and Denmark.
We will continue to monitor developments in North America,
and we are currently exploring opportunities to build our
anticipated that over time the network will provide a shared
presence in Canada.
pool of player liquidity on a single platform available to
licensees and also 888’s own B2C poker customers.
Growth has been supported through a prominent media
campaign across trade media outlets, and through a
significant presence at conferences and exhibitions
throughout 2010. This will continue into 2011 together with
the expansion into advertising in newly locally regulated
territories.
The network was launched in October, with French poker
sites Poker Subito and Poker Xtrem launching alongside
888’s own poker site.
united States
The partnership with Caesars Interactive Entertainment
(CIE) was significantly augmented in August by the launch
of a free play World Series of Poker offering for the United
States. The new free play poker software, utilising the
Poker 6 software upgrade, provided US players with the
opportunity to play on the pre-eminent brand in poker
worldwide, tailored to their local market.
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technological Infrastructure
888’s success is built on the strength of its technological
Content Management
During 2010, our web infrastructure was upgraded with
infrastructure which provides the platform for the cutting
a new Content Management System that allows a quick
edge innovation for which it is renowned. The cutting-edge
turnaround on changes to 888 sites. By using this system,
offering, including the ground-breaking Poker 6 as well
888 can now alter its websites and banners across all
as numerous back office and infrastructure capabilities,
domains at a single touch of a button.
are all aimed to improve the way 888 operates, utilising
automated tools allowing efficient customer acquisition and
retention. During 2010, 888 casino introduced new bonus
Gaming Solutions Platform
The Gaming Solutions Platform, which supports external
and promotion tools, a new No-Download client and more
wallet and external user management, can now support
than 40 new games together with a Games-Tab offering. All
Dragonfish partners’ gaming platforms, allowing them to
of this is a result of the behind the scenes expertise that is
take advantage of our advanced unified offering capabilities.
at the heart of 888.
888 has invested significantly in its physical infrastructure,
and has more than 1,000 servers in the development and
testing environments, and 900 in production. To enhance
development efforts and reduce costs, 888 operates a large
The first brands to work with the GSP platform are set to be
the Italian partners of Dragonfish — bwin, Gioco Digitale and
Microgame.
Promotions
In order to support our Free Spins Casino campaign, the
outsourced software development facility in Eastern Europe.
promotion management system was improved to allow
This development centre, in Ukraine, allows access to excellent,
players to claim bonuses via email, and for bonuses to be
well-trained, highly professional and cost-efficient talent.
granted in stages. Campaign management was improved
through enhanced, automated campaign effectiveness
As well as the considerable work that has gone into the
analysis. Systems were also developed that allow us more
eye-catching improvements to the B2C offering and the new
effectively to manage and operate customer campaigns,
standalone casino product which opened up new markets
targeting relevant promotions at players quickly and cost-
for 888, a number of notable technological enhancements
effectively.
were also made:
Unified Offering Infrastructure
During the first half of 2010 our infrastructure was upgraded
Online analytical processing
Secured Analytical Services were introduced for Dragonfish
Partners, on software as a service basis, allowing them
in order to support our next generation platform. This
direct access to aggregated data.
was the culmination of two years’ work and ensured that
our back office services are at the forefront of customer
management abilities and cross sale support. The new
Enterprise resource planning
In January 2010, a new enterprise resource planning system
platform supports single registration and a single wallet
was successfully implemented and integrated into 888’s
for all of our 888 brands, while also improving services
business infrastructure, the result of a large undertaking
to include real time risk management checks, automatic
carried out during 2009. This new system streamlines
cashout restrictions, presentation of the bonus details in My
888’s capability to carry out daily business processes in an
Account and more. The new infrastructure forms the basis
optimal manner.
for our new B2B casino standalone product. During H1 2011
we plan to move most of our brands to this infrastructure.
Regulatory Environments
To comply with changing regulatory environments, all
systems must fulfil the requirements of local regulators.
During the second half of 2010 significant changes were
made to satisfy the regulations around Italian cash games.
The changes that were made, position the platform well
to adapt to new markets as and when further regulatory
changes are introduced.
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888 Holdings plc Annual Report & Accounts 2010
Enhanced Business Review
ePayments
2010 was the first year that 888 provided payment services
to non-gaming operators, following the signing of an
agreement with the world’s leading virtual world technology
CuStOMER SuPPORt anD SERvICE
Customer Relationship Management
888 remains committed to its goal of providing the best
Company Linden Lab, the creator of Second Life, to provide
customer support and service in the global online gaming
e-payments, fraud and customer support management
industry. Strong customer relationships are the bedrock of
services. This collaboration represented an extension of
888’s success. Whilst eye-catching promotions help to drive
Dragonfish’s offering beyond the gaming industry into the
customer acquisition, customer retention is generated by
wider retail environment, and signified its emergence as a
fostering loyalty through building bonds with players.
strong player in the regulated payment services market.
This leads to people playing more games, more often, for
more time.
The comprehensive Total Payment Services offering
includes payment processing tailored for local markets, fully
First class customer support is offered for each of the
managed fraud detection and prevention services as well as
Group’s brands and White Labels via telephone, e-mail
customer support services.
and chat 24 hours a day, seven days a week, to customers
around the world in 11 different languages.
Several new payment options were introduced in 2010,
allowing customers to make deposits using their preferred
888’s ongoing commitment to localisation strengthens
currency and payment medium.
relationships worldwide, through speaking to people in their
language and cultural context, while the market-leading
The prevention of fraud is central to an ePayments platform,
usage of social features and interactivity with players
and new capabilities were added in 2010 to reduce the cost
strengthens brand loyalty.
of fraud to both 888 and our partners. These included the
use of 3D secure code and Verified by Visa.
Through improving the customer experience and ensuring that
sites are intuitive, 888 aims to increase customer conversion
888 will continue to invest in technology across the
and retention. In 2010 the UNICA Campaign Manager was
business, ensuring that leading back office systems provide
integrated into 888’s back office application. This effective
the basis for an unparalleled experience for both players
marketing tool enables support staff to offer tailored
promotions to players based on their activity & status, and
is used during live inbound contacts to reinforce loyalty and
promote up/cross sells. On average, 888’s support teams
converted 24% of all incoming phone calls and 10% of relevant
incoming chats to deposits; expanding this convenient service
to players and further benefiting the business.
The Telemarketing and Pro-active Chat department has
continued to deliver excellent performance, accounting
for millions of deposits in 2010. The department has
increased its performance year on year in all three key
metrics — efficiency, productivity and revenue generated.
The department recently expanded the proactive chat
capabilities to help boost customer acquisition, with more
improvements in the pipeline.
and partners.
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The Group continues to invest in industry leading
Support teams in all locations aim to close the majority of
technology in order to enhance its Customer Relationship
issues during the first contact, as exemplified in the Service
Management (‘CRM’) capabilities and support its online
Level Achievement reached in 2010.
customer experience initiatives. In 2010 888 upgraded to a
new Telecommunications system at both the Gibraltar and
The increased usage of the Online Web Self Service by 888’s
Antigua contact centres, and completed the deployment
customers, coupled with new measures aimed at optimising
of RightNow’s CRM full solution within the entire Business
resources and improving operational efficiency have
Operation Division.
resulted in a decrease in overall contact volumes in 2010;
even with the addition of several new Bingo White Label
This project integrates existing Online Web Self-Service
Partners which increased contacts from Bingo customers
capabilities and enables 888 to reduce its operational
alone by an 82% in 2010.
expenditure and manage its resources more effectively.
Dynamic and flexible user interfaces help to improve
agent efficiency and advanced contact management tools
Customer Satisfaction
888 monitors customer satisfaction at key points throughout
facilitate higher customer satisfaction.
their lifetime cycle in order to assist stakeholders in the Group
RightNow capabilities such as monitoring Social Networks
players, as well as to design service initiatives and ongoing
and the option of sending feedback surveys to players at
refresher training, based on the results.
to identify and understand habits and expectations of loyal
any point will enable actionable next steps in the future,
and will connect 888 to the growing trend of customer
In addition to the customary study conducted to benchmark
conversations occurring in the social cloud.
888’s service level within its primary markets, the 2010
survey for the first time included English speaking 888sport
The main Gibraltar contact centre focuses on providing
customers. 888 is pleased that all of the main language
support for 888’s principal markets in Europe, Asia Pacific
markets once again gave their highest rating to the level of
and Latin America while the Antiguan contact centre
professionalism of our support representatives.
focuses on supporting the English speaking markets in
Europe, Australia, Asia Pacific and Canada.
The survey also sought insight into customer awareness and
usage of the Online Self-Help facility available to English,
The fully established contact centre in Romania is providing
German, Spanish, French and Italian customers. In 2010, 66%
inbound customer support in several languages for
Dragonfish and 888’s main markets in Europe, Asia Pacific
of respondents were aware of the Online Web Self-Service
tool and reported using it.
and Latin America. In addition, support staff at this contact
centre focus on providing customer support for the recently
locally regulated French poker market.
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888 Holdings plc Annual Report & Accounts 2010
Enhanced Business Review
To further increase usage of this facility, 888’s Content
Several EU Member States are either contemplating or have
Management staff continue to refine Help access points
already put in place, a liberalised (or partially liberalised)
and FAQ content, and as a result facilitate zero contact
gaming sector; The UK, France, Italy, Denmark, Belgium
resolution for customers who prefer this avenue of support.
and Estonia have already adopted a regulatory regime
Regulation and General Regulatory
Developments
The regulatory framework of online gaming in different
for online gaming. Other EU Member States comprising
Ireland, Hungary, Germany, Bulgaria, Latvia, Lithuania, The
Netherlands, Switzerland, Sweden, Poland, Greece, Spain,
Romania and the Czech Republic are also considering (or
countries around the world remains as dynamic and rapidly
are already in the process of) revising their gaming laws
evolving as ever. While some jurisdictions have moved to
possibly to include liberalization of the online gaming
curtail the activities of online gaming sites, many others
market.
(including many European jurisdictions and even some
US states) are currently contemplating liberalisation and
Thus, in France, a 2010 law introduced a licensing regime for
regulation of the industry, and some have already taken this
online poker, sports betting and horse race wagering. Over
route. The Group remains committed to monitoring closely
and addressing regulatory changes as they occur, and to
the past year, licenses were issued by the newly created
state regulator. The new regime resulted in the European
fostering, so far as possible, the trend towards liberalisation
Commission abandoning its infringement proceedings
and regulation of online gaming throughout the world.
against France. Under the 2010 French law, the online
Eu
The European Commission holds that gaming and gambling
(i.e. at the end of 2011). This review could lead to further
amendments of the French legal regime, including further
fall within the scope of the Free Movement of Goods
liberalization of the market, or changes to the tax structure.
regime will be evaluated 18 months after coming into force
and Services enshrined by European law. In the past, the
Commission launched infringement proceedings against
Also in 2010, Denmark passed a law introducing a licensing
numerous EU States (including Spain, Germany, Portugal,
regime for online gaming operators. This law is now the
Finland, Austria, Hungary, Italy, Sweden, the Netherlands,
subject of an EU Commission investigation, following claims
Denmark and France). These proceedings contributed to the
by terrestrial operators that the tax regime applicable
present European trend towards liberalization of the online
to online gaming is a form of unlawful State Aid. The
gaming market.
investigation has postponed the entry of the new regime
into force of the law.
The European Court of Justice, in the win v. Santa Casa
case (and later in other cases), recognized the relatively
In 2009, Belgium passed a law allowing issuance of online
wide sphere of discretion available to Member States in
gambling licences as an extension of existing terrestrial
regulating gaming activities. However, in several rulings
gambling licences; therefore, pure online gambling operators
handed down during 2010 (most notably those regarding
may face difficulties in obtaining online gambling licences in
the German Inter-State Gambling Treaty), the European
that jurisdiction. However, the Belgian Gambling Commission
Court of Justice reiterated that the gaming legislation of
has expressly supported partnerships between existing
Member States must conform to the basic principles of EU
online gambling operators and terrestrial licensees, aimed at
law, including the free passage of goods and services and
offering services to the Belgian market. Italy, where the Group
the freedom of association. Specifically, the Court struck
holds an online gambling concession, has recently introduced
down legislation which it found curtailed these freedoms,
new legislation, expanding the scope of licensable online
despite the fact that such legislation was ostensibly aimed at
activities, and significantly easing access to the market by
protecting local interests, ruling that it was disproportionate,
EU-based operators.
inconsistent and unsystematic. Against this backdrop, the
European Commission will continue to review Member States’
Spain is anticipated to be one of the next EU member states
legislation in the gambling sphere on a case by case basis.
to introduce a regulatory and licensing regime for online
gambling. The Spanish authorities have already published
draft legislation on this matter, which has been presented
to the Spanish Parliament and notified to the European
Commission.
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In Germany, following the European Court of Justice rulings
mentioned above, momentum is gathering for adoption of a
new legal regime to govern online gambling, to replace the
existing (prohibitive) Inter-State Gambling Treaty (which is
uK
The DCMS announced in 2010 that it will review the current
online gaming licensing regime, and is considering whether
to require all gaming operators targeting British consumers
scheduled to expire at the end of 2011).
to be licensed in the UK.
The European Commission is involved in other instances
in which the online gambling and betting regulatory
regimes appear to contravene rights and freedoms of
uSa
In the USA, several federal legislative initiatives aimed
at creating a regulatory regime for online gaming were
online gambling and betting operators (e.g. issuing detailed
promoted by various political factions. The most prominent
opinions against the enactment of prohibitive legislation,
and intervening in the WTO process described below).
examples were initiatives backed by US Representative
Barney Frank and Senator Harry Reid to regulate online
poker in the US. However, neither of these initiatives
The EU Council of Ministers recently adopted a declaration
eventually became law.
supporting the development of regulatory regimes for
online gaming by Member States, while recognizing the
need for joint efforts by Member States to remove barriers
hampering free access for online gaming providers across
borders within the European Union.
In March 2011, Representatives John Campbell and Barney
Frank introduced a federal bill to provide for the licensing
and regulation of Internet gaming in the USA. This bill is
identical to H.R. 2267 promoted by Representative Frank
and reported by the House Financial Services Committee
In March 2011, the European Commission published a long
during 2010.
awaited Green Paper on online gaming The Green Paper
launches a public consultation between EU Members, the
EU institutions and other stakeholders regarding the legal
and technical challenges arising from the activities of
both “lawful” and “unlawful” online gambling operations.
In this context, the draft recognizes the existence of the
two regulatory models adopted by EU Member States - a
liberalized licensing model and the national monopoly
model. In line with the declaration adopted by the EU
Council of Ministers, the Green Paper recognizes that the
online gaming market has not been the subject of pan-
European regulation, and that this state of affairs is unlikely
to change. The Green Paper indicates the need to identify
ways in which cooperation between national regulatory
authorities at EU level will assist Member States in achieving
more effectively the objectives of their gambling policy, in
line with the principles of the EU internal market.
In early 2011 the New Jersey Legislature passed a bill
allowing terrestrial licensees to offer online gaming
services to State residents. However, this bill was vetoed
by the Governor of New Jersey on 3 March 2011. Other US
jurisdictions (including California, Iowa, and Florida) are
also reviewing the possibility of licensing some form of
intra-state online gambling activities. In March 2011, Hawaii
legislators proposed a bill to allow for hosting of a limited
number of global online poker operations from the State.
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888 Holdings plc Annual Report & Accounts 2010
Corporate Social Responsibility
As a global leader in online gaming entertainment, 888 is
committed to a pro-active policy of corporate and social
responsibility that reflects the high professional and ethical
standards we have set for ourselves.
Conducting our business responsibly is fundamental to the
future success of 888 and the sustainability of the business.
At 888, we understand that our responsible approach is
both the correct way to do business and one that enhances
our credibility, thereby supporting the development of the
Internal communication
As we are a global organisation, we strive to ensure that
our employees have the best technology with which to
communicate. In this regard, a new social platform was
introduced in 2010 for our employees and a new global
intranet portal established to connect employees in a new
social context. Some of the new features of the portal
include: professional online forums and informal blogs
run by specific employees, special features to connect
employees who are based in different locations, and fun
business. In 2010 our efforts were recognised when we were
gimmicks that facilitate and increase employee interaction.
voted “Socially Responsible Operator of the Year” at the
eGaming Review Awards.
Our philosophy
We aim to contribute to the global community in which we
operate in order to benefit society as a whole:
l We sponsor and participate in activities in the
neighbourhoods in which we live and work.
l We create collaborative and rewarding work
In addition, candidates from the Company were selected
to run three different social communities: ‘competitive
intelligence’, ‘social gaming’, and ‘Know your customer’.
The aim is: (i) to establish user-to-user interaction by
enabling employees to come together for networking
and support, (ii) to facilitate an exchange of ideas and
information, and (iii) to promote greater awareness and
understanding by providing a focus for discussions and
environments where new ideas can flourish and
collaboration on issues of mutual relevance.
employees can develop.
l We encourage responsible gaming practices to avoid
the dangers of problem gambling, and we have taken
Employee Engagement
Our goal at 888 is to ensure that employees remain
rigorous steps at all our online sites to prevent underage
motivated and engaged in their working life.
gambling.
Our values
At 888 we place the community and the customer at the
centre of all our endeavours. We are constantly looking at
new and innovative ways to create a caring, responsible
gaming environment and to ensure that underage persons
are unable to access our games. For customers who suspect
During 2010 a number of social activities took place across
all our sites in the UK, Israel and Gibraltar. Activities were
aimed to celebrate professional successes and special
achievements. Each office celebrated with a year end party
at their various locations. Some activities included end of
year gifts and outstanding employee of the year awards.
they have a problem, our Director of Responsible Gaming
We value our employees’ opinions, and conduct a regular
and our well-trained staff provide individual assistance that
global employee opinion survey to understand their
is considerate, supportive, and helpful.
Employees
At 888 we work hard to nurture and retain our talented
employees. We acknowledge and value them and always
strive to be an employer of choice. At 888 we value
everyone’s contribution, regardless of their background or
gender, and believe that diversity helps us meet the needs
of our global customers.
thoughts about different aspects of their life at 888. The
survey’s findings are treated seriously and are taken into
account as part of ongoing improvement plans.
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Professional development and training
We strive to enable employees to grow with the business,
which helps us to retain talent. During 2010, a number of
Community
Community Involvement
888 is committed to supporting the various local
programmes were developed for employees:
communities in which it operates and also the broader
global community. Our community investment program
Talking @ 888 Annual Review: The annual performance
includes cash donations and long standing community
review process, run globally, was rolled out towards the
involvement in our key areas across the world.
end of 2010. A new online system was implemented
incorporating an assessment model focusing on measuring
the performance and importance of tasks within an
Local Community Involvement
In the later part of the year, 20 employees in the Gibraltar
employee’s role. This allows managers to assess the
office volunteered to raise money for ‘Children in Need’. A
importance of individual activities, making for richer
cake sale was organised giving volunteers who participated,
feedback discussion and closer assessment of task
the chance to cook and bake as well as to prepare the
prioritisation for employees and teams.
event. In addition, donations of Easter eggs were made to
Management Development Training: A training program
based in Israel, run twice a year, specialises in introductory
St Martin’s Special Needs School at Easter as a gift for all
children at the school.
management training for first time managers. The course is
Our employees in the Israel office continue their year long
divided into four main areas: (i) general management skills,
relationship with the national Derech Haetgar charity which
(ii) expanding managerial points of view, (iii) enhancing self
focuses on enhancing the education of disadvantaged
awareness in management, and (iv) theoretical enrichment
teenagers. The program allows volunteers to assist with
in the subject of management. Participants are selected from
homework and studies by combining fun and educational
those who have been with the Company for a minimum of
indoor and outdoor activities. Various field trips are also
a year.
arranged with volunteers from the Company to different
educational sites and learning centres around Israel.
High Potential Program: This 18 month program concluded
in July 2010, and had the aim of identifying future leaders
As has been the case for each of the past four years,
within the organisation. By maximizing internal human
employees in Israel joined the Ruach Hatova national
capital, we created an internal tool for career progression
volunteering organization for a day of goodwill. A Group
and retention of key personnel, thus driving business
of 20 employees helped at a special school for refugees,
success by retaining and relying on internal business
with volunteers working with the children to create baskets
knowledge. The program included two Groups: (i) team
and ornaments.
leaders, training to be future senior managers, and (ii)
employees, training to be future team leaders.
For the first time, the Israel office participated in the
universal charity organisation FIRST, a non profit
Business Leaders Forum Annual Conference: Business leaders
organization devoted to helping young people develop a
from each location get together once a year for a three day
passion for maths and science. The programme involves
conference in a relaxed and low-key environment to discuss
building a robot which will eventually be submitted to an
strategy and business planning. The conference takes place in
international robotic competition. A Group of 20 employees
Israel and also includes an outdoor trip for team building.
volunteer in the programme which, aside from helping to
build the robot, imparts solid project management and
teamwork skills.
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888 Holdings plc Annual Report & Accounts 2010
Corporate Social Responsibility
Charity and our members
Following feedback from the 888 community, the fourth
Responsible gaming
Our values place the community and the customer at the
annual charity day was expanded. The day became the
centre of all our endeavours. We are constantly creating new
888charity Weekend and involved all 888 players. The
and innovative ways to create a caring, responsible gaming
slogan, “It’s Time for Giving”, was used to inform players that
environment and to ensure underage persons are unable to
8% of 888’s total revenues (up to US$70,000) generated
access our gaming sites.
over the weekend of 3-5th December would be donated to
888’s three chosen charities: Oxfam GB, Bliss and Against.
888 aims to provide responsible adults with the best
These charities were chosen following consultation with our
online gaming entertainment experience. However, we
customers. The weekend was supported through extensive
acknowledge that gaming poses a potential danger to a
cross product marketing activities – including emails,
small minority of people. We continuously train all our staff
alterations to our landing pages and banners. Further to
in how to provide a safe gaming experience. Our training
this, pin badges with the 888charity weekend logo were
program incorporates methods and techniques to help our
produced and displayed to casino VIPs at the VIP Christmas
employees recognise and take appropriate actions if they
party. An extensive campaign internally ensured that all staff
were aware of the event.
identify compulsive or underage gambling.
In response to the Australian flood crisis we ran a
Protecting Customers
As a responsible, regulated gaming Company we comply
fundraising poker tournament in aid of the Australia Charity
with both the GamCare and the eCOGRA guidelines, and
Relief fund.
during 2009 had our certification renewed. GamCare is the
leading authority on the provision of counselling, advice and
Environment
As an online businesses 888’s activities have a relatively
practical help in addressing the social impact of gambling
in the UK. eCOGRA ensures that approved online casinos
small impact on the environment, but 888 continues to
are properly and transparently monitored to provide player
develop its commitment to environmental issues:
protection.
l Green IT:
Our site has links to helping agencies and we have placed
l Recycling IT: all 888’s redundant l IT equipment is
many safeguards for those who need help with controlling
now recycled.
their gaming. For gamblers who are worried about their
l Virtualisation (VDI project): More than 120 stations
were transformed from a PC to the VDI system,
gambling habits and want to know more about the signs of
compulsive gambling we have a self assessment test. Should
enabling us to use less hardware.
members feel the need to, they can control their gambling
l Energy consumption: Alongside these projects we
by self-limiting the amounts they deposit per day, per week
continuously monitor our energy consumption to help us
or per month.
ensure we are being as energy efficient as possible.
l Recycling: We recycle as much as possible. Paper,
bottles and cans are collected from all of our sites .
l Water: We use only ecological detergents in our offices
A member can request to be self excluded for a chosen
period, for whatever reasons. Based on studies carried out
internally, we decided to increase time cool off periods
and use water saving devices in all our locations.
available for members. Members can choose from six
l Travel: To minimise the impact of travel on the
different exclusion periods from one day to six months.
environment we encourage employees to either cycle
During this period, 888 blocks the account and no
to work and, in certain locations, provide buses for
promotional e-mails are sent to the customer.
commuters. We also continue to invest in the state-of-
the-art technology to help meetings occur remotely.
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Protecting minors
Underage gambling on our sites is prohibited and 888 takes
the matter of underage gaming extremely seriously. Our
offering is not designed to attract minors. We make every
effort to prevent minors from playing on our sites and use
sophisticated verification systems as well as third party
verification, URU, suppliers to identify and track minors if
they log into our software. We train our staff to be highly
sensitive to the possibility of underage gambling and make
sure we suspend any account suspected to be an underage
account. Once identified, an underage account is blocked
permanently and deposits are refunded.
888responsible
Since 2007 a dedicated website, www.888responsible.
com, has been available, providing information regarding
all aspects of responsible gaming. The site is available in
English, French, Spanish and German.
This year we upgraded and expanded the site so that
the content reflects our holistic CSR approach, while the
updated platform allows for greater flexibility in content
changes as well as supporting more languages.
united nations Global Compact (unGC)
During 2009, 888 entered into in the United Nations Global
Compact.
The UNGC is the largest global initiative to promote the
social responsibility of businesses. It is a voluntary initiative,
which brings together thousands of businesses across
more than 100 sectors worldwide. Representatives confirm
their commitment to the UNGC in order to promote ten
universally accepted principles in the field of human rights,
workplace standards and anti-corruption.
We believe that the activities of 888 are in line with the
principles of the Global Compact, and it therefore seemed
appropriate that we should publicly declare our support and
ensure greater exposure to a wider public. By joining the
UN Global Compact we are now in line with an established
and globally recognised policy framework of environmental,
social, and governance policies and practices.
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888 Holdings plc Annual Report & Accounts 2010
Risk Report
The Group operates in a dynamic business environment. In
In order to minimise dependence on telecommunication
addition to the day-to-day commercial risks faced by most
service providers, the Group invests in network
enterprises, the online gaming industry faces particular
infrastructure redundancies whilst regularly reviewing
challenges in respect of Regulatory risk, Reputational risk,
its service providers. The Group has two internet service
Information Technology risk and Taxation risk, each of which
providers in Gibraltar in order to minimise reliance on one
is detailed below.
provider.
Regulatory risk
The regulatory framework of online gaming is dynamic
As a part of its monitoring system, the Group deploys set
user experience tests which measure performance from
and complex. Change in the regulatory regime in a specific
different locations around the world. Network-related
jurisdiction could have a material adverse effect on business
performance issues are addressed by rerouting traffic using
volume and financial performance in that jurisdiction. A
different routes or providers. 888 operates a 24/7 Network
detailed regulatory review is set out in the Regulation and
Operations Centre (NOC). The NOC’s role is to conduct
General Regulatory Developments section above.
real time monitoring of production activities using state-
Reputational risk
Underage and problem gaming are inherent risks associated
of-the-art systems. These systems are designed to identify
and provide alerts regarding problems related to systems,
key business indicators and issues surrounding customer
with the online gaming industry. The Group devotes
usability experience.
considerable resources to putting in place prevention
measures coupled with strict internal procedures designed
to prevent under aged players from accessing its real money
taxation risk
The Group aims to ensure that each legal entity within
sites. In addition, the Group promotes a safe and responsible
the Group is a tax resident of the jurisdiction in which it
gaming environment to its customers supplemented by its
is incorporated and has no taxable presence in any other
corporate culture. The Group has a dedicated Director of
jurisdiction. While the Group’s customers are located
CSR & Responsible Gaming tasked with the responsibility
worldwide, certain jurisdictions may seek to tax the Group’s
of implementing such policies. Further details about the
activity which could have a material adverse effect on
Group’s responsible gaming initiatives are set out in previous
the amount of tax payable by the Group or on customers’
pages.
behaviour.
Information technology risks
As a leading online business, the Group’s IT systems
The Group benefits from favourable fiscal arrangements in
some of the jurisdictions in which it has taxable presence
are critical to its operation. The Group is reliant on the
without which its results would be adversely affected. Most
performance of these systems.
of the Group’s gaming activities are based in Gibraltar.
The Group has to date benefited from tax exempt status
Cutting-edge technologies and procedures are implemented
but, such tax exempt status regime was abolished as
throughout the Group’s technology operations and
of December 31, 2010, as part of the introduction by
designed to protect its networks from malicious attacks and
the Government of Gibraltar of a new fiscal regime that
other such risks. These measures include traffic filtering,
complies with EU requirements.
anti-DDoS (Distributed Denial of Service) devices and Anti-
Virus protection from leading vendors. Physical and logical
network segmentation is also used to isolate and protect the
Group’s networks and restrict malicious activities. In order
to ensure systems are protected properly and effectively,
external security scans and assessments are carried out in a
timely manner. The Group has a high-end storage solution to
ensure storage availability and performance. All critical data
is replicated to another storage device for disaster recovery
purposes and all data is stored off-site on a daily basis.
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Commencing as of January 1, 2011, Gibraltar companies will
be subject to a corporate tax rate of 10%. However, certain
forms of income, including royalty income, will be exempt
from corporate tax. The Group is currently required to pay
a gaming duty, currently set at 1% of gaming yield, with an
annual maximum cap of £425,000 in aggregate, in respect
of its Casino, Poker and Bingo activities and, separately,
at the same rate in respect of the Group’s Sports offering.
The applicability of such gaming taxes following the
implementation of the new tax regime is, as yet, unclear.
The Group’s subsidiary in Israel, Random Logic Limited,
entered into a transfer pricing agreement on an arm’s
length basis with the Israeli Income Tax Commissioner.
The agreement was effective until 31 December 2010.
The operation in Antigua also benefits from a low tax
regime.
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888 Holdings plc Annual Report & Accounts 2010
Board of Directors
Richard Kilsby
Non-executive Chairman
Richard Kilsby has been Chairman since March 2006,
having previously been Deputy Chairman of the Group from
August 2005. He is currently a Non-executive Director of
Tullett Prebon plc. Since 2002, he has held several Board
and management positions in various private and venture
capital funded companies. In 2004, he acted as independent
monitor for the SEC and USA Department of Justice in
connection with Adecco. From 1999 to 2002, he was Chief
Executive of Trade point and subsequently Executive
Vice-Chairman of virt-x plc. From 1995 to 1998, he was an
Executive Director of the London Stock Exchange, prior to
which he was a Managing Director for Bankers Trust from
1992 to 1995. He was also Vice-Chairman of Charterhouse
Bank from 1988 to 1992, and spent the early part of his
career with Price Waterhouse (now PwC) where he was a
partner from 1984 to 1988. Age 59.
Gigi Levy
Chief Executive Officer
Gigi Levy has been Chief Executive Officer of the Group
since January 2007, following six months as Chief
Operating Officer. Prior to his appointment, Gigi worked
for Amdocs, one of the world’s largest software providers
and systems integrators in the telecoms market (NYSE:
DOX), most recently as Division President managing
Amdocs’ activity in Europe (except Eastern Europe),
Central and Latin America. Before joining Amdocs, Gigi
held several interim management and consulting roles
with various companies in Israel and the UK. Gigi also
headed Giltek, a telecommunication systems integrator,
and Girit Telecommunications, an Israeli Information and
Communications Technology systems integrator. He
holds an MBA from the Kellogg School of Management at
Northwestern University. Age 39.
aviad Kobrine
Chief Financial Officer
Aviad Kobrine has been Chief Financial Officer of the
Group since June 2005, and was appointed to the Board in
August 2005. From October 2004 he was a consultant to
888. Previously, he was a banker with the Media Telecoms
Investment Banking Group of Lehman Brothers and prior to
that, he was a senior associate with Slaughter and May. He
holds a Masters in Finance from the London Business School
(Distinction), a BA in Economics and an LLB from Tel Aviv
University. Age 47.
30
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 59.
John anderson
Non-executive Director
John Anderson was the Chief Executive Officer of the Group
from September 2000 to December 2006. He is currently
Non-executive Chairman of Burford Holdings plc and was
Chief Executive Officer of Burford Holdings plc from 1996
to 2000. He is Chairman of the Interactive Gaming Council;
a Board member of eCOGRA and Chairman of 10 Tech
Holdings Limited. John is also Non-Executive Director of
Probability (Gibraltar) Limited which is a wholly owned
subsidiary of Probability Plc. Previously, he was a Board
member of Ladbrokes plc from 1990 to 1996. Age 62.
Michael Constantine
Independent Non-executive Director
Michael Constantine was appointed in August 2005.
From 1996 to 1998, he was Deputy Superintendent of the
Turks and Caicos Islands Financial Services Commission,
and in 1995 was head of the Financial Supervision Unit
of the Mauritius Offshore Business Activities Authority.
From 1991 to 1995 he was Inspector of Licensees at the
Gibraltar Financial Services Commission, latterly Acting
Commissioner. He is a Chartered Accountant and for many
years a partner in the firm of Spain Brothers & Company.
He served in the Royal Naval Reserve, reaching the rank of
Commander. Age 72.
amos Pickel
Independent Non-executive Director
Amos Pickel was appointed in March 2006. Formerly the
Chief Executive Officer of Atlas Management Company
Limited and Chief Executive Officer and member of the
Board of Directors of Red Sea Hotels Ltd. Previously a
Non-executive Director of Gresham Hotel Group Plc, he is
a non-practising solicitor holding a Masters in Law from
New York University and a LL.B. from Tel Aviv University.
Since January 2010, he has been a member of the Board
of Directors of Twenty10 Hotel Fund Limited and since
September 2010 the chairman of the Board of Directors of
Berggruen Residential Limited. Age 44.
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Corporate Governance
888 Holdings plc is admitted to the UK Official List and its
shares are traded on the London Stock Exchange. During
2010, the Company was not subject to the Combined Code
(2008) or the UK Corporate Governance Code (the ‘Code’)
as it is a Gibraltar incorporated company. However, as the
Company has ‘Premium Listed’ equity shares, the Code will
Strategic approach
The Board focuses upon the Group’s long-term objectives,
strategic and policy issues and considers the management
of key risks facing the Group. The Board is responsible for
acquisitions and divestments, major capital expenditure
projects and considering Group budgets and dividend
begin to apply to the Company in respect of the accounting
policy. The Board also determines key appointments. The
period commencing 1 January 2011. Until this time, the
Directors continue to support high standards of Corporate
Governance and continued to voluntarily comply with the
Combined Code (2008) as far as it is appropriate for a
company incorporated in Gibraltar.
the Board
The Directors consider it essential that the Company should
be both led and controlled by an effective Board.
Composition
The Board consists of seven Directors as follows: three
independent Non-executive Directors, one non-independent
Non-executive Director, a Non-executive Chairman, and two
Executive Directors, comprising the Chief Executive Officer
and Chief Financial Officer. The biographical details of all of
the Directors are given on page 30.
Board receives regular updates on shareholders’ views. The
Board has established a calendar of business. This covers
the financial calendar, strategic planning, annual budgets
and performance self-assessments, as well as the conduct
of standing business. The calendar forms the basis for
effective integration of business activities as between the
Board and its principal Committees (see pages 32 and 33),
which individually consider their own operating frameworks
against the Board’s business programme. The Board has
established a formal process for the annual evaluation of its
performance, its committees and individual Directors. The
evaluation process covered a range of issues such as Board
processes, Board roles and responsibilities, Board agendas
and committee processes. The Board and its committees
were found to be operating effectively. The Board plans to
meet six times a year. During 2010, the Board met six times.
Set out below are details of the Directors’ attendance record
at Board and Committee meetings in 2010.
Total held in year
Richard Kilsby
Gigi Levy
Aviad Kobrine
John Anderson
Michael Constantine
Brian Mattingley
Amos Pickel
Total number of meetings held during the year
ended December 2010 and the number of
meetings attended by each Director
Audit Remuneration Nominations
Board
committee
committee
committee
6
5
6
6
5
5
6
5
3
n/a
n/a
n/a
n/a
3
3
3
4
n/a
n/a
n/a
n/a
4
4
3
—
-
n/a
n/a
n/a
-
-
n/a
The Chairman has responsibility for ensuring that agendas for Board meetings are set in advance. Board papers are issued to
Directors sufficiently in advance of meetings to facilitate both informed debate and timely decisions.
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888 Holdings plc Annual Report & Accounts 2010
Corporate Governance
non-executive review and performance
appraisal
The Chairman holds meetings at least once per year with
The appointment or removal of the Company Secretary is a
matter for the Board as a whole.
the Non-executive Directors without the Executive Directors
The Board accepts that there should be a formal, rigorous
being present. Led by the Senior Independent Director, the
and transparent procedure for the induction of new
Non-executive Directors meet once per year without the
Directors, which has been formulated with the guidance of
Chairman present in order to appraise the performance of
the Nominations Committee.
the Chairman. The Directors have wide ranging business
experience, and no individual, or Group of individuals,
dominates the Board’s decision making.
The Board considers that Brian Mattingley, Michael
Constantine and Amos Pickel satisfy the independence
criteria of the Code. The Board is satisfied that, upon
his appointment as Chairman, Richard Kilsby met the
independence criteria of the Code. The other significant
commitments of the Chairman during 2010 are detailed
in his biography on page 30. The Board considers that
Mr Kilsby’s other commitments do not interfere with
the discharge of his responsibilities to the Group and is
satisfied that he makes sufficient time available to serve the
Company 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 the Board’s preference to monitor
and, where appropriate, approve matters of substance to
the Group as a whole. Senior executives have given written
undertakings to ensure compliance within their business
operations with the Board’s formal schedule of matters
reserved to it for decision or approval.
Division of responsibilities
The responsibilities of the Chairman are clearly and formally
defined, with the Chairman being responsible for the
The opportunity to hold office as non-executive Directors of
other companies enables Directors of 888 to broaden their
experience and knowledge, which will benefit the Company.
Executive Directors may 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 of
interest. Executive Directors may be required to account for
fees received from such other companies.
The Company has arranged insurance cover in respect of
legal actions against its Directors. To the extent permitted
by Gibraltar law, the Company also indemnifies the
Directors. Neither the insurance nor the indemnity provides
cover where a Director has acted fraudulently or dishonestly.
Re-election of Directors
Commencing as of the 2011 AGM, all Directors are subject to
reappointment by shareholders on an annual basis.
audit Committee
The Audit Committee comprises three independent Non-
executive Directors: Brian Mattingley (Chair), Michael
Constantine and Amos Pickel. The Board is satisfied that
Brian Mattingley has sufficient recent and relevant financial
experience to Chair the Audit Committee. Normally, by
invitation, the Chairman, Chief Executive Officer and Chief
Financial Officer and, where appropriate, representatives
of the Company’s external auditors attend the Audit
effective operation of the Board as a whole and supporting
Committee meetings.
key external relationships.
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.
Other issues
All Directors have access to the advice and services of the
Company Secretary and the Company’s nominated advisers,
who are responsible for ensuring that Board procedures
are followed. Directors are able to seek independent
professional advice, if required, at the Company’s expense
provided that they have first notified their intention to do so.
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In summary, the Audit Committee assists the Board in
discharging its responsibilities with regard to financial
reporting, external and internal audits and controls,
including reviewing 888’s annual financial statements,
considering the scope of annual audit and the extent of non-
audit work undertaken by external auditors, approving 888’s
internal audit programme, advising on the appointment of
Risk Management and Internal Control
The Directors acknowledge that they are responsible for the
Company’s system of internal control, for setting policy on
internal control and risk management, and for reviewing the
effectiveness of internal control and risk management. It is
management’s role to implement Board policies on risk and
control, including reporting. The system of internal control
external auditors and reviewing the effectiveness of internal
is designed to manage rather than eliminate the risk of
control systems.
failure to achieve business objectives and can only provide
reasonable, and not absolute, assurance against material
nominations Committee
The Nominations Committee comprises three independent
misstatement or loss.
Non-executive Directors: Michael Constantine (Chair), Brian
The Board has delegated responsibility to the Audit
Mattingley and Amos Pickel, as well as Richard Kilsby,
Chairman. The Nominations Committee did not meet
during 2010.
The Nominations Committee assists the Board in
discharging 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 for the Chairman and Chief
Executive Officer, and identifying and recommending
suitable candidates for appointment as Directors. The
Nominations Committee’s terms of reference are available
Committee to review the appropriateness and adequacy of
systems of internal control and risk management in relation
to the financial reporting process on an ongoing basis and
to make recommendations to the Board. The Company has
an Internal Auditor who reports to the Audit Committee.
888’s payment risk management team, based in Gibraltar,
has developed stringent payment risk management and
fraud control procedures. The team makes use of external
and internal systems to manage the payment risks. Detailed
procedures exist throughout the Company’s operations and
compliance is monitored by operational management and
on request to the Company Secretary and are included on
the Internal Auditor.
the Company’s website, www.888holdingsplc.com.
Remuneration Committee
The Company’s Remuneration Committee comprises three
independent Non-executive Directors: Brian Mattingley
(chair), Michael Constantine and Amos Pickel.
The Board has overall responsibility for determining the
framework of executive remuneration and its cost. It is
required to take account of any recommendation made
by the Remuneration Committee in determining the
remuneration, benefits and employment packages of the
Executive Directors and senior management and the fees of
the Chairman.
The Directors’ Remuneration Report, which outlines the
Remuneration Committee’s work and details of Directors’
remuneration, is on pages 35 to 41. The Remuneration
Committee’s terms of reference are available on request to
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 qualitative assessments of residual risks.
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 outcome of these meetings
is reported to the Board. The programme includes formal
presentations of full year and interim results, quarterly
release of Interim Management Statements, analysts’
conference calls and periodic road shows.
Brian Mattingley, the Senior Independent Director, is
available to shareholders to address any issues where
the Company Secretary and are included on the Company’s
contact with the Chairman, Chief Executive Officer and
website, www.888holdingsplc.com.
Chief Financial Officer is inappropriate or where such
contact has failed to resolve the issue.
33
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888 Holdings plc Annual Report & Accounts 2010
Corporate Governance
All shareholders are welcome to attend the 2011 Annual
General Meeting (scheduled to be held on 24 May 2011)
and private investors are encouraged to take advantage
of the opportunity given to ask questions. The Chairmen
(or nominated members) of the Audit, Remuneration and
Nominations Committees will attend the meeting and be
available to answer questions.
Corporate Social Responsibility Statement
The Group’s Chief Executive Officer is the Director
responsible for monitoring corporate social responsibility
within 888. The Board receives periodic reports on the
Group’s activities in this area from the Chief Executive
Officer. Further details are set out in the Corporate Social
Responsibility report on pages 24 to 27.
Compliance with Statutory Provisions
As 888 Holdings Public Limited Company is registered in
Gibraltar, it is subject to compliance with Gibraltar statutory
requirements. The main legislation relevant to companies
in Gibraltar is the Gibraltar Companies Act, which is based
on the UK Companies Act 1929. 888 Holdings Public
Limited Company is in full compliance with the Gibraltar
Companies Act.
Going Concern
As at 31 December 2010 the Group has a liability in respect
of the acquisition of Wink Bingo, which has been computed
at the maximum amount payable under the purchase
agreement of £48.7 million (approximately US$75 million)
and arises due to an increase in contingent consideration
following the strong performance of that business
during 2010 and the first quarter of 2011. Accordingly, as
announced on 18 March 2011, the Board have renegotiated
and agreed revised payment terms with the vendors of
the Wink business such that the liability is settled over the
period March 2011 through to May 2012, rather than in a
single payment in May 2011 as envisaged under the original
purchase agreement.
The Group’s forecasts and projections, taking account of
reasonably possible changes in trading performance, the
Board’s recommendation that no dividend should be paid
for 2010 and the revised payment profile in respect of the
Wink business consideration, show that the Group should
be able to continue its ordinary course of business within its
available financial resources. After careful review of these
forecasts and projections, the Group’s medium-term plans,
and all relevant matters, the Directors are confident that
the Company and the Group have adequate resources to
continue in operational existence for the foreseeable future.
They have therefore continued to adopt the going concern
basis in preparing the financial statements.
The principal risks and uncertainties faced by the Group are
disclosed in the Risk Report above.
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Directors’ Remuneration Report
In accordance with the Listing Rules, the Company presents
its report on the remuneration of its Directors for the year
ended 31 December 2010. The Company is incorporated in
Gibraltar and, therefore, is not required to comply with the
Directors’ Remuneration Report requirements in Schedule 8
to the UK Large and Medium sized Companies and Groups
(Accounts and Reports) Regulations 2008, but has chosen
to prepare this Remuneration Report on the basis of those
requirements, as appropriate.
The report sets out the structure and details of the
remuneration of the Directors for the year ended 31 December
2010. It also describes the Board’s policy and approach to
the Principles of Good Governance relating to Directors’
remuneration. BDO LLP and BDO Limited have audited the
sections headed ‘Directors’ Remuneration Summary’ and
‘Directors’ Interests in Share Awards and Share Options’.
Remuneration Policy
Executive Directors
Remuneration packages must be sufficient to attract,
retain and motivate Directors of the calibre appropriate
to a global business in a competitive environment. The
Remuneration Committee is mindful that most of the Group’s
competitors are not UK listed companies and acknowledges
the unique risk profile associated with online businesses
of the nature of the Group’s, and takes these matters into
account in determining appropriate remuneration levels. The
components of the remuneration structure are set out below.
At least half of the total potential remuneration of the
Chief Executive Officer and the Chief Financial Officer
is represented by a variable element, dependent on the
performance of the Group. The Remuneration Committee
considers that these represent achievable and motivational
levels of personal rewards commensurate with stipulated
A resolution to approve the Directors’ Remuneration Report
levels of corporate performance.
is proposed, annually, to shareholders for approval. This
Remuneration Report will be put to shareholder vote at the
2011 Annual General Meeting.
Remuneration Committee
The Remuneration Committee consists solely of
independent Non-executive Directors, currently Brian
Mattingley (Chair), Michael Constantine and Amos Pickel.
Details of attendances at Committee meetings are
contained in the statement on Corporate Governance on
page 31. The Remuneration Committee has formal terms
of reference (which are available on request in writing to
the Company Secretary and on the Company’s website,
www.888holdingsplc.com).
Independent advice
The Board intends that executive remuneration policies
The Remuneration Committee is mandated by the Board
to satisfy itself that the level of the Directors’ and senior
management’s remuneration is appropriate, having
regard to pay and conditions throughout the sectors in
which the Group operates. It will further satisfy itself that
such remuneration aligns with the risks and rewards to
shareholders. In this context the Remuneration Committee
will regularly review individual and corporate performance
targets. In the current economic climate, executive
leadership is more important than ever. The Remuneration
Committee will continue to use careful and rigorous
judgement to match remuneration to achievements.
The Remuneration Committee applies a remuneration policy
which has at its core the following objectives:
be both formal and transparent. It further acknowledges
l to align the interests of executives with those of
the importance of taking into consideration independent
shareholders
advice in setting remuneration policies and benefit levels. In
2010, the Remuneration Committee took advice from KPMG
l to focus on top-line growth and margin improvement
l to link a significant proportion of remuneration to
Somekh Chaikin with regard to the structuring of awards
under the share option plans as well as from Hewitt New
financial and individual performance, both in the short
term and long term
Bridge Street with regard to the appropriate amount and
l to provide strong linkage between remuneration and
terms for future awards to the Executive Directors together
performance
with guidance on overall compensation packages.
l to ensure total remuneration is market-competitive in
the industry and helps attract and retain executives of
the highest calibre.
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888 Holdings plc Annual Report & Accounts 2010
Directors’ Remuneration Report
It is the Company’s policy to take into account the pay
and conditions of employees throughout the Group when
determining Directors’ remuneration.
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 the Executive Directors
determine the fees paid to the Non-executive Directors.
The Chairman’s fees are determined by the Remuneration
Committee.
Fees paid to the Non-executive Directors are set by
reference to an assessment of the time commitment and
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 pre-determined targets. The Remuneration
Committee sets bonus targets and levels of eligibility each
year. For the 2010 financial year, the performance target was
20% growth in revenue compared to 2009 and provided
that the adjusted EBITDA margin for 2009 was maintained.
The payout levels were set at 50% of base salary for 80%
performance, increasing on a linear basis up to 100%
where targets were fully satisfied. In the event that revenue
growth exceeded 20%, the percentage bonus entitlement
increased by 4% for every 1% additional revenue growth,
up to a maximum bonus entitlement of 120%. Since the
performance targets were not met for the 2010 financial
responsibility associated with each role. Levels take account
year, no bonus is payable with respect to this year.
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 at the Group’s headquarters
in Gibraltar. The fees paid to each Non-executive Director
during 2010 are disclosed in the Directors’ remuneration
summary on page 38.
Remuneration Structure
Base Salary and Benefits
The Executive Directors’ base salaries are subject to annual
review. Given market conditions, there was a salary review in
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 All-Employee Share Plan, and (ii) the 888 Long-
Term Incentive Plan. The Company currently only grants
awards under the 888 All Employee Plan.
2010, with a decision not to increase salaries. Furthermore,
Performance-dependent options and awards were
the executive Directors voluntarily deferred payment of
10% of their respective salaries commencing from May 2010
to year end; the deferred amounts may be ultimately paid.
Subject to the foregoing, Gigi Levy’s salary for 2010 was
maintained at USD756,000, and Aviad Kobrine’s salary for
2010 was maintained at GBP285,000*. Benefits provided to
executive Directors include a car (in the case of Gigi Levy)
granted under the 888 All-Employee Share Plan to the
Executive Directors on 14 September 2006, 30 April 2007
and 8 April 2008. In addition on 14 January 2009 an award
was made to the Executive Directors in lieu of their waiver
of a part of their annual cash bonus. Details of these awards
and options are set out on pages 39 to 40. Other than the
award in lieu of cash bonus no equity awards have been
and a car allowance (in the case of Aviad Kobrine) and
made to Executive Directors since April 2008.
health, disability and life insurance.
* Part of which is paid by the Company and part by Cassava
Enterprises (Gibraltar) Limited.
888 all-Employee Share Plan
All employees, exclusive consultants and Executive Directors
of the Group who are not within six months of their normal
retirement age are eligible to participate in the 888 All-
Employee Share Plan at the discretion of the Remuneration
Committee.
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Awards under the 888 All-Employee Share Plan can either
be granted for no consideration (or with a nil exercise price
Employee trusts
The Company established two Trusts to further the
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 reasons, a phantom award may be used.
The maximum number of ordinary shares that an eligible
employee may acquire pursuant to share awards or options
interests of the Company, its subsidiaries and shareholders
by providing share incentives to employees (including
Executive Directors) of any Group Company to enable the
Group to attract, retain and motivate employees.
The 888 IPO Share Award Trust and the 888 Holdings plc
Share Plan Trust were created pursuant to Trust Deeds
dated 14 September 2005. The 888 IPO Share Award Trust
was terminated on 17 August 2010. The 888 Holdings plc
Share Plan Trust currently holds 46,432 ordinary shares in
granted to him in any calendar year under the 888 All-
the Company.
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 Remuneration
Committee may determine that the vesting and release
or exercise of share awards and options under the 888 All
Director appointments — Service Contracts
and Directors’ Fees
Executive Directors
It is the Company’s policy that each Executive Director’s
service agreement is terminable on no more than 12 months’
written notice by either party. Each Executive Director’s
employment can be terminated by making a payment equal
Employee Share Plan are subject to performance conditions
to the salary and pension contributions and the value of
imposed at the time of grant.
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 Plan. As set out above,
888 has given Long-Term Incentive Awards to Executive
Directors under the 888 All Employee Plan.
Scheme Limits
Awards and options granted under the 888 All-Employee
Share Plan and the 888 Long-term Incentive Plan may be
satisfied through the issue of new shares. It is intended that
grants of options and awards are to be planned so as not
to exceed 5% of the issued ordinary share capital in any
other contractual benefits due to the Executive Director in
lieu of any unexpired notice period. The Executive Directors
continue to be entitled to be paid a bonus during any
unexpired part of the notice period even if the employment
is terminated by making payment in lieu of notice. Share
Awards granted under the 888 All-Employee Share Plan
to Aviad Kobrine pursuant to his service agreement, on
15 January 2008 and 14 January 2009, continue to vest
during any unexpired part of the notice period and he shall
be treated as a ‘good leaver’ under the terms of the 888
All-Employee Share Plan where his 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 Employee Plan on termination
of employment will be governed by the terms of that plan
(and in the case of the initial awards made to Gigi Levy and
Aviad Kobrine by the relevant provisions of their service
rolling ten year period for the 888 Long-term Incentive Plan,
agreements) as set out above.
and 10% of the issued ordinary share capital in any rolling
ten year period for the 888 All-Employee Share Plan and
the 888 Long-Term Incentive Plan, in the aggregate. The
Committee intends to have regard to appropriate annual
flow-rates so as to ensure that these limits are not breached.
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37
888 Holdings plc Annual Report & Accounts 2010
Remuneration Report
Name
Gigi Levy
Aviad Kobrine
Aviad Kobrine
Position
Chief Executive Officer
Chief Financial Officer
Chief Financial Officer
1 Wholly owned subsidiary of the Company.
Contracting Party
The Company
The Company
Cassava Enterprises
(Gibraltar) Limited1
Service Contract/
Letter of
Appointment Date
18/6/2006
14/9/2005
14/9/2005
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
Position
Chairman
Deputy Chairman
John Anderson
Non-executive Director
Michael Constantine Non-executive Director
Amos Pickel
Non-executive Director
Contracting Party
Service Contract Date
The Company
The Company
The Company
The Company
The Company
14/3/2009
14/3/2009
14/3/2009
14/3/2009
14/3/2009
Directors’ Remuneration Summary
The cash emoluments or fees received by the Directors for 2010 are shown below:
Base salary/
fees
US$ ‘0001
Bonus
US$ ‘0001
Benefits
US$ ‘000
Executive
Gigi Levy
Aviad Kobrine2
Non-executive
Richard Kilsby
Brian Mattingley
Michel Constantine
John Anderson
Amos Pickel
Total
815
411
340
136
102
119
102
2,025
Pensions
Allowance
US$ ‘0003
105
62
38
37
17
92
167
Total 2010
US$ ‘000
Total 2009
US$ ‘000
958
510
357
136
102
119
102
2,284
1,168
732
362
138
104
121
104
2,729
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.
3 In 2009 Pension allowance amounted to US$113,000 for Gigi Levy and US$67,000 for Aviad Kobrine.
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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
Michel Constantine
John Anderson
Amos Pickel
Ordinary Shares
31 December 31 December
2009
2010
2,318,345
443,183
1,912,999
443,183
114,285
142,857
22,857
588,869
—
114,285
142,857
22,857
588,869
—
Unless where stated, all interests were held beneficially.
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 2010 is set out below:
Earliest Exercise
exercise/
period
Awards
Market
price at
Awards
Date of
vesting
end Exercise at 31 Dec Awarded Vested in
vesting Lapsed in at 31 Dec
award
date
date
price
2009
2010
2010
date
2010
2010
Gigi Levy1
888 All Employee
share plan2,4
888 All Employee
Share Plan2,6,7
888 All Employee
Share Plan2
14/09/06
18/06/10
14/09/06 14/04/10
14/09/06
18/06/10
08/04/08
18/04/10
08/04/08
18/04/11
08/04/08 08/04/12
14/01/09
14/01/09
14/01/10
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
£ nil 337,097
£ nil
£ nil
145,787
138,845
£ nil
£ nil
£ nil
£ nil
£ nil
£ nil
167,351
167,351
167,352
42,000
26,250
10,500
(337,097) 103.00p
(42,000)
(26,250)
(145,787)
(138,845)
(167,351)
—
—
—
—
167,351
167,352
—
—
10,500
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39
888 Holdings plc Annual Report & Accounts 2010
Remuneration Report
Earliest Exercise
exercise/
period
Awards
Market
price at
Awards
Date of
vesting
end Exercise at 31 Dec Awarded Vested in
vesting Lapsed in at 31 Dec
award
date
date
price
2009
2010
2010
date
2010
2010
Aviad Kobrine
888 All Employee
Share Plan3,6,7
888 All Employee
Share Plan3,6,7
888 All Employee
Share Plan3
888 All Employee
Share Plan3
14/09/06 14/04/10
14/09/16
14/09/06 14/04/10
14/09/16
£ nil
£ nil
39,050
47,728
30/04/07 14/04/10 30/04/17
30/04/07 14/04/10 30/04/17
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
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
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
£ nil
£ nil
£ nil
£ nil
£ nil
£ nil
£ nil
£ nil
£ nil
£ nil
£ nil
4,772
3,905
7,500
7,500
7,500
42,500
42,500
42,500
28,500
17,813
7,126
(39,050)
(47,728)
(4,772)
(3,905)
—
—
—
—
(7,500)
112.3p
—
(42,500)
112.3p
(28,500)
111p
(17,813) 42.25p
—
7,500
7,500
—
42,500
42,500
—
—
7,126
All awards were made through the 888 All-Employee Share Plan during the year.
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 36, subject to the annual cash bonus criteria being met.
6 Vesting subject to performance conditions, as described on pages 36 and 37.
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 55p at 31 December 2010. The highest closing price during 2010 was 120p and the
lowest was 36p.
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 directors’ 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.
40
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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 2010. 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 All Share
160
140
120
100
80
60
40
20
0
5
0
0
2
/
9
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2
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/
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2
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0
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9
0
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2
9
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9
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2
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/
1
3
888
FTSE All Share
approval
This report was approved by the Board and signed on its behalf by:
Brian Mattingley
Chairman of the
Remuneration Committee
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41
888 Holdings plc Annual Report & Accounts 2010
Directors’ Report
The Directors submit to the members their Annual
Except as noted above, none of the Directors had any interests
Report and Accounts of the Group for the year ended
in the shares of the Company or in any material contract or
31 December 2010. The report on Corporate Governance
arrangement with the Company or any of its subsidiaries.
and the Directors’ Remuneration Report on pages 31 and 35
respectively, form part of this Directors’ Report.
Commencing as of the 2011 AGM, it is proposed that all
Principal activities
During 2010 the Group’s principal activities were the
provision of online gaming entertainment to customers and
business partners. A review of the business is given in the
Chairman’s statement on pages 2 to 3, the Chief Executive’s
Directors will retire by rotation at the Annual General
Meeting and, being eligible, will offer themselves for
re-election on an annual basis.
Share Capital
Changes in the Company’s share capital during the financial
Review on pages 4 to 7 and the Enhanced Business Review
year are given in the Consolidated Statement of Changes in
on pages 8 to 23.
The principal subsidiary undertakings are listed on page 74.
Results
The Group’s Profit before tax for the financial year
Equity. As at 31 December 2010, the Company’s issued share
capital comprised 345,429,509 ordinary shares of 0.005p each.
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
(excluding share benefit charges of US$2.3 million and
ordinary shares are entitled to attend and speak at general
restructuring costs of US$2.2 million) of US$15.1 million is
meetings of the Company, to appoint one or more proxies
reported in the Consolidated Income Statement on page 47.
and to exercise voting rights. Holders of ordinary shares
The Directors do not recommend a dividend in respect of
may receive a dividend and on liquidation may share in
the financial year.
the assets of the Company. Holders of ordinary shares are
entitled to receive the Company’s Annual Report. Subject
Directors and their Interests
Biographical details of the current Board of Directors are
to meeting certain thresholds, holders of Ordinary Shares
may requisition a general meeting of the Company or the
shown on page 30. The Directors who served during the
proposal of resolutions at general meetings.
year are shown below:
Richard Kilsby (appointed 30 August 2005 and
Deadlines for Exercising voting Rights
Electronic and paper proxy appointment and voting
reappointed 21 May 2008 and 26 May 2010)
instructions must be received by the Company’s Registrars
Gigi Levy (appointed 18 June 2006 and reappointed
not later than 48 hours before a general meeting.
30 May 2007 and 26 May 2010)
Aviad Kobrine (appointed 30 August 2005 and
reappointed 21 May 2008)
Brian Mattingley (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
John Anderson (appointed 30 August 2005 and
imposed by law or regulation (for example, insider trading
reappointed 30 May 2007 and 26 May 2010)
laws) or pursuant to the Company’s share dealing code.
Michael Constantine (appointed 30 August 2005 and
reappointed 20 May 2009)
Amos Pickel (appointed 14 March 2006 and reappointed
20 May 2009).
The beneficial and non-beneficial interests of the Directors
in shares of the Company are set out in the Directors’
Remuneration Report on pages 35 to 41.
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Substantial Shareholdings
As at 31 December 2010 the Company had been notified of the following interests in 3% or more of its share capital:
Principle Shareholder Trust
E Shaked Shares Trust
O Shaked Shares Trust
Ben-Yitzhak Family Shares Trust
Number of
% issued
shares share capital
86,283,534
86,283,534
37,122,358
24.98
24.98
10.74
Shareholder agreements and Consent
Requirements
There are no known arrangements under which financial
rights are held by a person other than the holder of
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.
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
Change of Control
Other than the Group’s gaming licences where change of
control is subject to prior consent, and the Wink earn out
amendment announcement in March 2011, 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
Combined Code unless required by law or as contemplated
year amounting to US$223,075 (2009: US$124,799).
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
Directors’ Responsibility Statement
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any
Agreement, that the Principal Shareholder Trusts will consult
time the financial position of the Company, for safeguarding
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 by law or relevant regulation or having first received
the Company’s consent. The Relationship Agreement also
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
includes restrictions on the Principal Shareholder Trusts
Gibraltar Companies Act.
power to appoint Directors and includes obligations on the
trusts to ensure that the majority of the Board, excluding the
Financial statements are published on the Group’s website
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
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.
43
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888 Holdings plc Annual Report & Accounts 2010
Directors’ Report
The Directors are responsible for preparing the Annual
We confirm, to the best of our knowledge:
Report and the financial statements. The Directors are
required to prepare financial statements for the Group
(a) the financial statements, prepared in accordance
in accordance with International Financial Reporting
with International Financial Reporting Standards as
Standards (IFRSs) and have also chosen to prepare financial
adopted by the EU, give a true and fair view of the
statements for the Company in accordance with IFRSs.
assets, liabilities, financial position and profit or loss
Corporate Governance
The Corporate Governance Statement is on pages 31 to 34
of the Group and the undertakings included in the
consolidation taken as a whole; and
and is incorporated in this Directors’ Report by reference.
(b) the Enhanced Business Review’, includes a fair review of
Group and Parent Company Financial
Statements
Company law requires the Directors to prepare financial
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 risks and uncertainties that
statements in accordance with the Gibraltar Companies
they face.
(Accounts) Act 1999, the Gibraltar Companies (Consolidated
Accounts) Act 1999 and the Gibraltar Companies Act.
auditors
A resolution for the reappointment of BDO LLP and BDO
International Accounting Standard 1 requires that financial
Limited as auditors of the Company will be proposed at the
statements present fairly for each financial year the Group
2011 Annual General Meeting.
and Company’s financial position, financial performance
and cash flows. This requires the faithful representation of
During the year ended 31 December 2010 BDO LLP were
the effects of transactions, other events and conditions in
appointed auditors for the purposes of the Company
accordance with the definitions and recognition criteria
preparing financial statements as required pursuant to
for assets, liabilities, income and expenses set out in the
the Listing Rules of the UK Listing Authority. BDO Limited
International Accounting Standards Board’s ‘Framework for
have been appointed to act as auditors for the purposes
the preparation and presentation of financial statements’.
of issuing an audit report pursuant to Section 10 of the
In virtually all circumstances, a fair presentation will be
Gibraltar Companies (Accounts) Act 1999 to be filed with
achieved by compliance with all applicable IFRSs. A fair
the Gibraltar Companies Registry. On behalf of the Board:
presentation also requires the Directors to:
l consistently select and apply appropriate accounting
policies;
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 performance.
Gigi Levy
Chief Executive Officer
31 March 2011
44
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Independent Auditors’ Report to the members of
888 Holdings plc
We have audited the financial statements of 888 Holdings
We report to you our opinion as to whether the financial
plc for the year ended 31 December 2010 which comprise
statements give a true and fair view and whether the
the Consolidated income statement, the Consolidated and
financial statements have been properly prepared in
Company Balance Sheet, the Consolidated and Company
accordance with the Gibraltar Companies (Consolidated
statements of changes in equity, the Consolidated
Accounts) Act 1999, the Gibraltar Companies (Accounts)
Statement of Comprehensive Income, the Consolidated and
Act 1999 and the Gibraltar Companies Act 1930 (as
Company statement of cash flows and the related notes.
amended), and the part of the Remuneration Report to be
The financial reporting framework that has been applied
audited has been properly prepared in accordance with
in their preparation is applicable law and International
Section 421 of the UK Companies Act 2006. We also report
Financial Reporting Standards (IFRSs) as adopted by the
to you whether in our opinion, the information disclosed
European Union.
in the Directors’ Report is consistent with the financial
statements, if the Company has not kept proper accounting
This report is made solely to the Company’s members, as a
records, if we have not received all the information and
body, in accordance with our engagement letter. Our audit
explanations we require for our audit, or if information
work has been undertaken so that we might state to the
specified by the Listing Rules and Gibraltar legislation
Company’s members those matters we are required to state
regarding Directors’ remuneration and other transactions is
to them in an auditor’s report and for no other purpose.
not disclosed.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company
and the Company’s members as a body, for our audit work,
Scope of the audit of the financial statements
A description of the scope of an audit of financial
for this report, or for the opinions we have formed.
statements is provided on the APB’s website at www.frc.org.
Respective responsibilities of Directors and
auditors
As explained more fully in the Directors’ Report, the
Directors are responsible for the preparation of the financial
uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion:
statements and for being satisfied that they give a true
l the financial statements give a true and fair view of
and fair view. Our responsibility is to audit and express an
the state of the Group’s and the Company’s affairs as
opinion on the financial statements in accordance with
31 December 2010 and of the Group’s profit for the year
applicable law and International Standards on Auditing (UK
then ended;
and Ireland). Those standards require us to comply with the
l the Group and parent Company financial statements
Auditing Practices Board’s (APB’s) Ethical Standards for
have been properly prepared in accordance with IFRSs
Auditors.
888 Holdings Plc has complied with the requirements of
as adopted by the European Union;
l the financial statements have been properly prepared in
accordance with the Gibraltar Companies (Consolidated
rules 9.8.6 and 9.8.8 of the Listing Rules of the UK Financial
Accounts) Act 1999, the Gibraltar Companies (Accounts)
Services Authority and in accordance with Section 421 of
Act 1999 and the Gibraltar Companies Act 1930 (as
the UK Companies Act 2006 in preparing its Annual Report,
amended);
as if it was incorporated in the United Kingdom. As auditors,
l the part of the Directors’ remuneration report to be
we have agreed that our responsibilities in relation to the
audited has been properly prepared in accordance with
Annual Report will be those as set out below.
Section 421 of the Companies Act 2006;
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45
888 Holdings plc Annual Report & Accounts 2010
Independent Auditors’ Report to the members of
888 Holdings plc
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 26(d) to the financial statements
Matters on which we are required to report by
exception
We have nothing to report in respect of the following:
concerning the residual risk of an adverse impact arising
Under Gibraltar legal and regulatory requirements we are
from the Group having had customers in the US prior to
required to report to you if, in our opinion:
the enactment of the Unlawful Internet Gambling
Enforcement Act.
l the Company has not kept proper accounting records,
if we have not received all the information and
Note 26(d) includes a statement that the Board has not been
explanations we require for our audit, or if information
able to identify reliably at this stage what, if any, liability may
specified by law regarding directors’ remuneration and
arise and accordingly no provision has been made.
other transactions is not disclosed.
Opinion on other matters prescribed by legal
and regulatory requirements
In our opinion information given in the Directors’ Report for
the financial year 31 December 2010 for which the financial
statements are prepared is consistent with the financial
statements.
Under the Listing Rules we are required to review:
l the Directors’ statement, in relation to going concern;
l the part of the corporate governance statement relating
to the Company’s compliance with the nine provisions of
the June 2008 Combined Code specified for our review;
and
l certain elements of the report to shareholders by the
Board on Directors’ remuneration.
BDO LLP
Chartered Accountants
55 Baker Street
London
W1U 7EU
31 March 2011
Desiree McHard (Statutory Auditor)
For and on behalf of
BDO Limited
Registered Auditors
PO Box 1200
Montagu Pavilion
8–10 Queensway
Gibraltar
31 March 2011
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
BDO Limited, a Gibraltar limited company, is registered in Gibraltar with company number 52200.
46
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Consolidated Income Statement
For the year ended 31 December 2010
Revenue
Operating expenses
Research and development expenses
Selling and marketing expenses
Administrative expenses
Operating profit before share benefit charges and restructuring costs
Restructuring costs
Share benefit charges
Operating profit
Finance income
Finance expenses
Share of post tax profit of equity accounted joint ventures
Profit before tax before share benefit charges and restructuring costs
Restructuring costs
Share benefit charges
Profit before tax
Taxation
Profit after tax for the year attributable to equity holders of the parent
Note
3
4
5
13
22
7
Year ended Year ended
31 December 31 December
2009
2010
US$‘000
262,113
112,145
22,356
91,501
24,622
16,017
2,219
2,309
11,489
197
(1,141)
19
15,092
2,219
2,309
10,564
2,701
7,863
US$‘000
246,703
98,360
24,164
67,329
29,510
34,352
—
7,012
27,340
633
(407)
—
34,578
—
7,012
27,566
2,733
24,833
Earnings per share
Basic
Diluted
The notes on pages 51 to 82 form part of these financial statements.
Note
8
Year ended Year ended
31 December 31 December
2009
2010
US$‘000
US$‘000
2.3¢
2.3¢
7.2¢
7.1¢
47
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888 Holdings plc Annual Report & Accounts 2010
Consolidated Balance Sheet
At 31 December 2010
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Investment in equity accounted joint ventures
Available for sale investment
Deferred taxes
Current assets
Cash and cash equivalents
Trade and other receivables
Total assets
Equity and liabilities
Equity attributable to equity holders of the parent
Share capital
Share premium
Capital Redemption Reserve
Retained earnings
Total equity attributable to equity holders of the parent
Liabilities
Current liabilities
Trade and other payables
Liabilities to customers
Contingent consideration
Non-current liabilities
Contingent consideration
Total liabilities
Total equity and liabilities
Note
11
12
13
14
15
16
17
18
19
20
31 December 31 December
2009
2010
US$‘000
US$‘000
70,832
20,984
—
—
797
92,613
87,511
21,208
108,719
201,332
3,152
65
—
117,883
121,100
38,851
37,570
—
76,421
3,811
80,232
201,332
162,291
21,547
1,297
175
586
185,896
61,520
24,344
85,864
271,760
3,145
65
24
113,716
116,950
37,814
34,725
78,033
150,572
4,238
154,810
271,760
The financial statements on pages 47 to 82 were approved and authorised for issue by the Board of Directors on 31 March 2011
and were signed on its behalf by:
Gigi Levy
Chief Executive Officer
Aviad Kobrine
Chief Financial Officer
The notes on pages 51 to 82 form part of these financial statements.
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Consolidated Statement of Changes in Equity
For the year ended 31 December 2010
Capital
Available-
Share
Share
redemption
capital
premium
reserve
US$’000
3,115
US$’000
65
US$’000
—
for-sale
reserve
US$’000
(536)
Retained
earnings
US$’000
108,716
Total
US$’000
111,360
Balance at 1 January 2009
Dividend paid
Issue of shares
Share benefit charges
Total comprehensive income for the period
Balance at 1 January 2010
Dividend paid
Share buy back
Share benefit charges
Issue of shares
Total comprehensive income for the period
—
37
—
—
3,152
—
(24)
—
17
—
Balance at 31 December 2010
3,145
—
—
—
—
65
—
—
—
—
—
65
—
—
—
—
—
—
24
—
—
—
24
—
—
—
536
—
—
—
—
—
—
—
(22,445)
(22,445)
(37)
7,012
24,637
117,883
(10,491)
(3,465)
2,309
(17)
7,497
—
7,012
25,173
121,100
(10,491)
(3,465)
2,309
—
7,497
113,716
116,950
The following describes the nature and purpose of each reserve within equity.
Share capital — represents the nominal value of shares allotted, called-up and fully paid for.
Share premium — represents the amount subscribed for share capital in excess of nominal value.
Capital redemption reserve — represents amounts transferred from the share capital reserve following the buy back and
cancellation of equity shares.
Available-for-sale reserve — represents the gain or loss arising from a change in the fair value of an available-for-sale financial
assets.
Retained earnings — represents the cumulative net gains and losses recognized in the consolidated income statement.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2010
Profit for the year
Valuation gain of available-for-sale investments
Actuarial losses on defined benefit pension plan
Disposal of available for sale asset
Total comprehensive income for the year attributable to equity holders of the parent
31 December 31 December
2009
2010
US$‘000
7,863
—
(366)
—
7,497
US$‘000
24,833
513
(196)
23
25,173
49
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888 Holdings plc Annual Report & Accounts 2010
Consolidated Statement of Cash Flows
For the year ended 31 December 2010
Year ended
31 December
Year ended
31 December
2010
US$‘000
2010
US$‘000
2009
2009
US$‘000
US$‘000
Cash flows from operating activities:
Profit before income tax
Adjustments for:
Depreciation
Amortization
Interest received
Interest expense
Share of post Tax profit of equity accounted joint ventures
Share benefit charges
Decrease (increase) in trade receivables
Decrease (increase) in other accounts receivables
Decrease in trade payables
Increase (decrease) in liabilities to customers
Increase in other accounts payables
Cash generated from operations
Income tax paid
Net cash generated from operating activities
Cash flows from investing activities
Acquisition of Mytopia (see Note 10)
Acquisition of assets comprising the online Wink bingo business
(See note 10)
Purchase of property, plant and equipment
Investment in equity accounted joint ventures
Available-for-sale investments
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
Share buy-back
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 51 to 82 form part of these financial statements.
10,564
8,480
3,796
(197)
1,141
(19)
2,309
26,074
1,050
(3,393)
(1,060)
(2,845)
48
19,874
(3,659)
(12,320)
—
(8,610)
(1,131)
(175)
197
—
(341)
(5,870)
(3,465)
(10,491)
27,566
7,044
1,458
(633)
—
—
7,012
42,447
(4,356)
1,715
(868)
3,681
2,964
45,583
(4,086)
16,215
41,497
—
(18,052)
(8,288)
—
—
633
732
(100)
(4,910)
(28,250)
(29,985)
—
(22,445)
(13,956)
(25,991)
87,511
61,520
(22,445)
(10,933)
98,444
87,511
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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 888 Holdings Public Limited Company.
The Group
888 Holdings Public Limited Company and its subsidiaries.
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).
Related parties 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 financial statements continue to be prepared on a going concern basis as explained in the Corporate Governance
Report on pages 31 to 34.
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 effective from 1 January 2010 (current financial year) and have been adopted by the Group with
no significant impact on its consolidated results or financial position.
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Notes to the Consolidated Financial Statements
2
Significant accounting policies continued
IFRS 3 (revised) — Business combinations (effective for annual periods beginning on or after 1 July 2009).
Amendments to IAS 27 — Consolidated and Separate Financial Statements (effective for annual periods beginning on or
after 1 July 2009).
Amendment to IAS 39 Financial Instruments — Recognition and Measurement: Eligible Hedged Items. (effective for
annual periods beginning on or after 1 July 2009).
IFRIC 17 — Distributions of Non—cash Assets to Owners. (effective for annual periods beginning on or after 1 November
2009).
IFRIC 18 — Transfer of Assets from Customers. (effective for annual periods beginning on or after 1 November 2009).
The IASB 2009 annual improvement project includes further minor amendments to various accounting standards and is
effective from various dates from 1 January 2010.
IFRS 2 (amended) — Group Cash-settled Share-based Payment Transactions. (effective for annual periods beginning on
or after 1 January 2010).
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 2010. The Group is currently assessing the impact these standards and interpretations will
have on the presentation of its consolidated results in future periods.
IAS 32 (amendment) — Classification of Rights Issues. (effective for accounting periods beginning on or after
1 February 2010).
Revised IAS 24 — Related Party Disclosures. (effective for accounting periods beginning on or after 1 January 2011). This
revision will only impact disclosure and have no effect on the net assets or result of the Group.
Amendments to IFRIC 14 (IAS 19) — Limit on a Defined Benefit Asset Minimum Funding Requirements and their
Interaction (effective for accounting periods beginning on or after 1 January 2011).
Amendments to IFRS 7 — Disclosures: Transfers of Financial Assets (effective for accounting periods beginning on or
after 1 July 2011). This amendment has not yet been endorsed for use in the EU.
Amendments to IAS 12 — Deferred Tax: Recovery of Underlying Assets (effective for accounting periods beginning on or
after 1 January 2012). 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). IFRS 9 has not yet
been endorsed for use in the EU.
The IASB 2010 annual improvement to the IFRS’s project clarify the requirements of IFRSs and eliminate inconsistencies
within and between Standards, further minor amendments to various accounting standards and is effective from various
dates from 1 January 2011 onwards, but has not yet been endorsed for use in the EU.
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2
Significant accounting policies continued
The preparation of consolidated financial statements under IFRS requires the Group to make estimates and judgments
that affect the application of policies and reported amounts. Estimates and judgments 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
10
11
11
22
26
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.
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.
Revenue consists of revenue from online gaming and revenue generated from processing customers’ cross currency
deposits and withdrawals. It comprises:
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888 Holdings plc Annual Report & Accounts 2010
Notes to the Consolidated Financial Statements
2
Significant accounting policies continued
Casino and Bingo
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 mainly comprise winnings from Sportsbook activity.
Casino and Bingo winnings, revenues from the Poker business and Emerging Offerings are stated after deduction of
certain bonuses granted to customers.
B2B
In the case of white label activity, revenue is the net commission charged.
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) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance
sheet; and
(ii) income and expenses for each income statement are translated at an average exchange rate (unless this average is
not a 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).
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.
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2
Significant accounting policies continued
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 18 months. The intangible assets acquired during 2010 are assumed to
have useful economic lives of between nine months and four years.
The exception is acquisitions of trade names, which have an indefinite useful economic life and therefore an annual
impairment test is conducted.
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, for acquisition completed prior to 1 January 2010, any direct costs
associated with the 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.
For business combinations completed prior to 1 January 2010 changes in the estimated value of contingent consideration
post acquisition are treated as an adjustment to cost and therefore change the carrying value of goodwill. For business
combinations completed after that date changes in the fair value of the contingent consideration are charged or credited
to the income statement. In addition for those business combinations completed after 1 January 2010 the direct cost of
acquisition are treated immediately as an expense.
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888 Holdings plc Annual Report & Accounts 2010
Notes to the Consolidated Financial Statements
2
Significant accounting policies continued
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
Over the shorter of the term of the lease or useful lives
33%
7–15%
15%
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.
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.
Investment in equity accounted joint ventures
Jointly controlled entities (JCE) are those entities over whose activities the Group has joint control, established by
contractual agreement and requiring unanimous consent for strategic financial and operating decisions.
JCEs are accounted for using the equity method (equity accounted investees) and are recognized initially at cost. The
Group’s share of post-acquisition profits and losses is recognised in the consolidated income statement, except that
losses in excess of the Group’s investment in the JCEs are not recognised unless there is an obligation to make good
those losses.
Profits and losses arising on transactions between the Group and its JCEs are recognised only to the extent of unrelated
investors’ interests in the JCE. The investor’s share in the JCEs profits and losses resulting from these transactions is
eliminated against the carrying value of the JCEs.
Any premium paid for a JCE above the fair value of the Group’s share of the identifiable assets, liabilities and contingent
liabilities acquired is capitalised and included in the carrying amount of the JCE. Where there is objective evidence that
the investment in a JCE has been impaired the carrying amount of the investment is tested for impairment in the same
way as other non-financial assets.
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.
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2
Significant accounting policies continued
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 joint ventures or 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.
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 as the management team comprising the Chief Executive Officer
and the Chief Financial Officer. These segments are:
l B2C (Business to Customer) Casino, Poker ,Bingo and Emerging Offering which mainly comprises 888’s Sportsbook,
Live dealer offering and games; and
l 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.
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Notes to the Consolidated Financial Statements
2
Significant accounting policies continued
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.
Severance pay schemes
Severance scheme surpluses and deficits are measured at:
l
l
the fair value of plan assets at the reporting date; less
plan liabilities calculated using the projected unit credit method discounted to its present value using yields available
on Israeli government bonds that have maturity dates appropriately to the terms of the liabilities; plus
l unrecognised past service costs.
Any difference between the expected return on assets and that actually achieved, and any changes in liabilities over the
year due to changes in assumptions or experience within the scheme, are recognised in other comprehensive income in
the period in which they arise.
3
Segment information
Business Segments
B2C
B2B Consolidated
Year Ended 31 December, 2010
Casino
Poker
Bingo
offering
Emerging
Total
B2C
US$‘000
US$‘000
US$‘000
US$‘000
US$‘000
US$‘000
US$‘000
116,922
38,407
50,140
16,206
221,675
40,438
262,113
114,470
22,993
137,463
125,974
11,489
(944)
19
(2,701)
7,863
271,760
271,760
29,142
5,547
34,689
120,121
154,810
Revenue
Result
Segment result
Unallocated corporate
expenses1
Operating profit
Financial expenses, net
Share of post tax profit
of equity accounted
joint ventures
Tax expense
Profit for the year
Assets
Unallocated corporate
assets
Total assets
Liabilities
Segment Liabilities
Unallocated corporate
liabilities
Total liabilities
1 Including share benefit charges of US$2,309,000.
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3
Segment information continued
Revenue
Result
Segment result
Unallocated corporate
expenses1
Operating profit
Financial income
Tax expense
Profit for the year
Assets
Unallocated corporate assets
Total assets
Liabilities
Segment Liabilities
Unallocated corporate liabilities
Total liabilities
1 Including share benefit charges of US$7,012,000.
Year ended 31 December, 2009
B2C
B2B Consolidated
Casino
Poker
Bingo
offering
Emerging
Total
B2C
US$‘000
US$‘000
US$‘000
US$‘000
US$‘000
US$‘000
US$‘000
118,693
51,592
10,659
14,457
195,401
51,302
246,703
117,815
31,089
148,904
121,564
27,340
226
(2,733)
24,833
201,332
201,332
37,570
42,662
80,232
29,162
8,408
Other than where amounts are allocated specifically to the B2C and B2B segments above, the expenses, assets and
liabilities relate jointly to all segments. These amounts are not discretely analysed between the two operating segments
as any allocation would be arbitrary. Analysis of revenue across the B2C segment has been presented purely as
additional information and these revenue streams do not constitute separate operating segments for the purposes of
IFRS 8 “Operating Segments”.
Geographical information
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:
Revenue by geographical market1
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.
Year ended Year ended
31 December 31 December
2009
2010
Revenue
US$‘000
128,216
96,814
16,084
20,999
262,113
Revenue
US$‘000
90,442
113,672
19,145
23,444
246,703
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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 Year ended
31 December 31 December 31 December 31 December
2009
2009
2010
US$‘000
229,954
41,806
271,760
US$‘000
144,663
56,669
201,332
2010
US$‘000
7,365
1,700
9,065
US$‘000
6,017
2,271
8,288
Year ended Year ended
31 December 31 December
2009
2010
US$‘000
2,309
22,313
24,622
US$‘000
7,012
22,498
29,510
Year ended Year ended
31 December 31 December
2009
2010
US$‘000
Operating profit is stated after charging:
Staff costs (see note 6)
Directors remuneration (see note 6)
Audit fees
Other fees paid to auditors in respect of taxation services
Depreciation (within operating expenses)
Amortisation (within operating expenses)
Chargebacks
Exchange losses
Payment service providers’ commissions
Share benefit charges — all equity-settled
Restructuring costs1
73,386
1,468
402
11
8,480
3,796
2,987
321
13,882
2,309
2,219
US$‘000
71,313
1,900
343
11
7,044
1,458
9,044
2,718
13,750
7,012
—
1 Restructuring costs — During the year the Group initiated measures designed to reduce its overheads and increase operational
efficiency. These measures mainly affected employment costs and included redundancies across the Group’s locations. Costs associated
with these redundancies are included as per above.
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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
2010
US$‘000
71,673
2,898
4,521
79,092
(4,238)
74,854
2009
US$‘000
70,580
2,788
4,091
77,459
(4,246)
73,213
In the income statement total staff costs, excluding share benefit charge of US$2,309,000 (2009: US$7,012,000), are
included within the following expenditure categories:
Operating expenses
Research and development expenses
Administrative expenses
Average headcount number of employees by category:
Operation
Research and development
Administration
2010
US$‘000
48,525
14,483
11,846
74,854
2009
US$‘000
45,483
15,512
12,218
73,213
2010
632
179
126
937
2009
669
136
142
947
At 31 December 2010 the Company employed 928 (2009: 975) staff.
Severance pay liability — Israel
The Group’s employees in Israel are eligible to receive certain benefits from the Group in certain defined circumstances.
As such the Group operates a defined benefit severance pay plan which requires contributions to be made to separately
administrated funds.
The method used to determine the current service cost and the present value of the defined benefit obligation, according
to IAS 19 ‘Employee Benefits’ is the Projected Unit Credit actuarial cost method. Actuarial gains and losses are recognised
by the Group using the equity method.
The following table summarises the employee benefits figures as included in the Group’s financial statements for 2010
and 2009, respectively:
Severance pay liability (within trade and other payables)
Income statement
Actuarial movements on severance pay liability (included in statement of comprehensive income)
2010
US$‘000
273
2,548
366
2009
US$‘000
229
2,365
196
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Notes to the Consolidated Financial Statements
6
Employee benefits continued
Movement in severance pay liability:
Severance pay plan assets
At beginning of year
Expected return
Contributions
Benefits paid
Actuarial gain on assets
Exchange differences
At end of year
Severance pay plan liabilities
At beginning of year
Interest cost
Current service costs
Benefits paid
Actuarial loss on obligations
Exchange differences
At end of year
Severance pay plan trends
Plan assets
Plan liabilities
Severance pay liability
Year ended Year ended
31 December 31 December
2009
2010
US$‘000
6,784
359
2,630
(2,254)
181
579
8,279
US$‘000
4,220
160
2,542
(1,103)
865
100
6,784
Year ended Year ended
31 December 31 December
2009
2010
US$‘000
7,013
299
2,608
(2,380)
547
465
8,552
US$‘000
4,496
126
2,399
(1,135)
1,061
66
7,013
Year ended Year ended Year ended
31 December 31 December 31 December
2008
2009
2010
US$‘000
8,279
(8,552)
(273)
US$‘000
US$‘000
6,784
(7,013)
(229)
4,220
(4,496)
(276)
The main actuarial assumptions used in determining the fair value of the Group’s employee benefits plan are shown
below:
Discount rate (nominal)
Estimated increase in employee benefits costs
Voluntary termination rate
2010
%
4.71
3
70
2009
%
5.06
3
70
The discount rates are based on Israeli government bonds and reflect inflation rates of 2.86% in 2010 (2009: 2.81%).
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7
Taxation
Corporate taxes
Current tax
Deferred tax
Taxation expense
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
Year ended Year ended
31 December 31 December
2009
2010
US$‘000
2,490
211
2,701
US$‘000
2,924
(191)
2,733
Year ended Year ended
31 December 31 December
2009
2010
US$‘000
10,564
—
2,490
211
2,701
US$‘000
27,566
—
2,924
(191)
2,733
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 extended
up to 31 December 2010. Commencing as of 1 January 2011, Gilbraltar companies are subject to a corporate tax rate of
10%. However, certain forms of income, including royalty income, are exempt from corporate tax.
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. Domestic corporate tax in Israel in 2010
is 25% (2009: 26%) and is scheduled to go down to 18% from 2011 until 2016.
UK — 888’s subsidiary in the UK pays corporate tax in the UK at the applicable rate of 28% (2009: 28%).
8
Earnings per share
Basic earnings per share
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
781,953 (2009: 2,124,274).
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Notes to the Consolidated Financial Statements
8
Earnings per share continued
Profit 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
Year ended Year ended
31 December 31 December
2009
2010
US$‘000
7,863
345,709,869
2,620,010
US$‘000
24,833
345,182,718
3,960,938
348,329,879 349,143,656
7.2¢
2.3¢
2.3¢
7.1¢
Earnings per share excluding share benefit charges and restructuring costs
The Directors believe that EPS excluding share benefit charges and restructuring costs 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 and restructuring costs:
Profit attributable to ordinary shareholders
Share benefit charges and restructuring costs
Profit excluding share benefit charges and restructuring costs
Weighted average number of Ordinary Shares in issue
Weighted average number of dilutive Ordinary Shares
Adjusted basic earnings per share
Adjusted diluted earnings per share
9 Dividend
Dividends paid
10 Acquisitions made during the year
US$‘000
Year ended Year ended
31 December 31 December
2009
2010
US$‘000
7,863
4,528
12,391
345,709,869
345,182,718
348,329,879 349,143,656
9.2¢
24,833
31,845
7,012
3.6¢
3.6¢
9.1¢
Year ended Year ended
31 December 31 December
2009
2010
US$‘000
10,491
US$‘000
22,445
Mytopia social games
On 16 June 2010 the Group acquired the trade and assets comprising the Mytopia social games development studio
(“Mytopia”) from Real Dice Inc. for an all cash consideration in order to enter this fast growing market.
In calculating the goodwill arising on acquisition, the fair value of the assets of Mytopia were valued by a professional
valuation firm and recognised in accordance with IFRS 3 (revised) and adjustments from book value have been made
where necessary. These adjustments are summarized as follows:
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10 Acquisitions made during the year continued
Intangible assets
Assets
Book value on
Fair value
acquisition adjustments
Fair value
US$’000
—
US$’000
1,870
—
1,870
US$’000
1,870
1,870
The fair value relates to the recognition of online bingo game application (US$830,000), software license agreement
(US$410,000), non-compete agreement (US$540,000) and a service agreement (US$90,000) acquired as part of the
acquisition. The online bingo game application intangible asset is being amortised over its estimated useful economic life
of 3 years. The software license agreement intangible asset is being amortised over its estimated useful economic life of
9 months. The non-compete agreement intangible asset is being amortised over its estimated useful economic life of 4
years. The service agreement is being amortised over its estimated useful economic life of 1 year. All intangible assets on
acquisition have been identified and fair valued. The remaining goodwill represents the access to future trade associated
with the operation of Mytopia.
Fair value of intangible assets acquired
Goodwill
Fair value of consideration
Which is represented by:
Cash consideration to Real Dice Inc.
Contingent consideration (included with current liabilities)1
Contingent consideration (included with non-current liabilities)2
Total fair value of consideration at time of acquisition
US$’000
1,870
20,173
22,043
12,320
5,955
3,768
22,043
1 US$6.0 million due upon meeting certain milestones connected to the mobile and social networking games was paid in February 2011.
This earn-out payment has been discounted.
2 An estimated earn-out payment of US$5.1 million is payable in cash during the second quarter of 2012 based on achieving certain
performance criteria during the period from January 2011 to December 2011. The estimated earn-out payment has been discounted.
Revenue and operating loss for the post acquisition period was $1 million and $1.4 million respectively. Had the business
been owned by the Group for the entire year, the revenue and operating profit for the year ended 31 December 2010
would have been approximately $1.8 million higher and $1.6 million lower respectively.
Acquisition costs of US$360,000 were incurred and have been charged to the income statement during the year.
Wink online Bingo business (Prior year acquisition)
On 31 December 2009 the Group acquired the trade and assets comprising the Wink online Bingo business of Daub
Limited (‘Wink Bingo Business’) for an all cash consideration.
Intangible assets acquired consisted of customer relationship (US$1,626,000) and trade names intangible assets
(US$789,000). The remaining goodwill (US$20,053,000) represented the access to future trade associated with the
operation of the Wink online Bingo business.
The fair value of consideration originally estimated at the time of acquisition, including contingent consideration, was
$21,863,000. As set out in note 11, subsequent financial performance has led to an increase in the consideration payable.
The unwinding of the discount element of contingent consideration is charged to finance expenses in the Income
statement.
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Notes to the Consolidated Financial Statements
11
Intangible assets
Cost or valuation
At 1 January 2009
Additions
Acquisitions
At 31 December 2009
Additions
Acquisitions
At 31 December 2010
Amortisation:
At 1 January 2009
Charge for the year
At 31 December 2009
Charge for the year
At 31 December 2010
Carrying amounts
At 31 December 2010
At 31 December 2009
At 31 December 2008
Internally
generated
Acquired
intangible
intangible
assets
assets
Goodwill
Total
US$‘000
US$‘000
US$‘000
US$‘000
5,303
4,910
—
10,213
5,870
—
4,327
100
2,415
6,842
—
2,211
38,558
—
20,053
58,611
67,001
20,173
48,188
5,010
22,468
75,666
72,871
22,384
16,083
9,053
145,785
170,921
363
908
1,271
1,785
3,056
13,027
8,942
4,940
3,013
550
3,563
2,011
5,574
3,479
3,279
1,314
Bingo
online
business
US$‘000
38,058
20,053
58,1 1 1
—
67,001
125,112
Mytopia
social
games
US$‘000
—
—
—
20,173
—
20,173
—
—
—
—
—
145,785
58,611
38,558
Internet
domain
name
US$‘000
500
—
500
—
—
3,376
1,458
4,834
3,796
8,630
162,291
70,832
44,812
Total
goodwill
US$‘000
38,558
20,053
58,61 1
20,173
67,001
500
145,785
Analysis of goodwill by cash generating unit:
Valuation at 1 January 2009
Acquisitions
Valuation at 1 January 2010
Acquisitions of Mytopia social games (see note 10)
Adjustment to the Wink bingo business contingent consideration1
Valuation at 31 December 2010
1 Since the commencement of the earn-out period on 1 April 2010 the financial performance of the Wink bingo business has improved.
As a result the Board has revised its estimate in respect of the potential contingent consideration, that will become payable to US$ 75.5
million. This estimate is based on the assumption that the earn-out payment will reach its contractual cap. As a result US$ 72.0
million has consequently been recognized in current liabilities. As the Wink Bingo acquisition was accounted for under IFRS3 (2004)
the adjustment to contingent consideration has been taken to goodwill. See note 27, Post balance sheet events, for details in respect of
payment deferral arrangement agreed on 18 March 2011.
Bingo Online Business
Intangible assets and goodwill associated with the cash generating online Bingo business unit relates to the acquisition of
the online Bingo business of Globalcom Limited during 2007 and the acquisition of the Wink Bingo business in 2009. 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.
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Intangible assets continued
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% (2009: 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 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.
An annual growth rate of 7% (2009: 2%) was used for 2011 mainly attributed to the success of the Wink online bingo
business. For 2012–2015, on average, no growth was assumed, consistent with prior year assumption. Following year
five, the Group extrapolates cash flows in perpetuity, using an estimated conservative growth rate of 1% (2009: 1%),
which is lower than the forecast 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 7% (2009: 10%) in each of the five year periods to
2015, over and above the level of growth in revenues and well above actual level of 2010.
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.
Mytopia social games
Intangible assets and goodwill are associated with the cash generating Mytopia social games unit acquired during June
2010 (see note 10). The intangible assets including an online bingo game application, software license agreement, non-
compete agreement and a service agreement, 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.
At the year end, the carrying value-in-use was determined by discounting the expected future cash flows generated
by the Mytopia social games cash generating unit to their present value. The key assumptions for the value-in-use
calculations were those regarding discount rate, users’ life time value, marketing spend 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 Mytopia social games business. The discount rate that is considered by the Directors to be appropriate
is 18%. This discount rate is higher than Group discount rate in line with the risk profile of the cash expected to be
generated by Mytopia and consistent with the rates applied at acquisition.
In estimating the future cash flows the Directors have used appropriate estimates in respect of revenues generated and
costs incurred. Growth rates of the Mytopia social games business are based on projections of future changes in the
Social games market, taking into account external sources of information such as analysts’ research reports and publicly
available information that analyzes KPIs of various social networks game providers. The Directors have used forecasts for
the next four years of the expected cash flows, of which the first year is based on the Group’s current approved budget.
Revenue is forecast to grow between 2011 and 2014 assuming a compound quarterly growth rate of 21%.
.
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Notes to the Consolidated Financial Statements
11
Intangible assets continued
The Mytopia social games cash generating unit is in the process of developing two new branded social games. Launch is
scheduled for the fourth quarter of 2011 and first quarter of 2012. Forecast revenues assume lower user’s life time value
compared to other major social games.
The Directors assumed steady Cost Per Install (“CPI”) during 2011–2014 based on analysis of empirical data of marketing
campaigns that took place on Mytopia’s current bingo social game platform. In the case of the two new social games, CPI
is assumed to increase by 50% after the first four months of operation, by an additional 33% after a period of one year
and 20 months for each of the games respectively and by 10% thereafter. Marketing costs were projected to increase by a
fixed compounded monthly percentage during 2012 to 2014 across all games.
Cost of sales is forecast at an average rate of 23% of revenue. All other overhead costs (mainly comprise of wages) are
forecast in line with the 2011 budget which assume an increase of 50% over 2010 actual figure on an annualized basis.
Thereafter these costs are assumed to increase by 3% in each of 2012 to 2014. Following year four, the Group has used a
long term growth rate of 2%.
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
nor a 1% 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 2008 the Group acquired an internet domain name based business which is used to generate traffic into the
Group’s various web sites. Out of total consideration of US$513,000, an intangible asset of US$13,000 was recognized
whilst the remainder of US$500,000 was recognised as goodwill.
The Directors performed an impairment review in respect of the carrying value-in-use of the internet domain name. The
directors have assumed a discount rate of 12% (2009: 12%) which is being the Group’s specific weighted average cost of
capital. No growth was assumed for the period 2011–2015.
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
nor a 5% increase in the discount rate would have led to an impairment of the goodwill in the current year.
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 three and five 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 2010 no impairment needs to be
recognised and the carrying value of internally generated assets is considered appropriate.
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Intangible assets continued
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
2010, was that no impairment needs to be recognised and the carrying value of the acquired intangible assets and
goodwill is considered appropriate.
12 Property, plant and equipment
Cost
At 1 January 2009
Additions
Disposals
At 31 December 2009
Additions
Disposals
At 31 December 2010
Accumulated depreciation
At 1 January 2009
Charge for the year
Disposals
At 31 December 2009
Charge for the year
Disposals
At 31 December 2010
Depreciated cost
At 31 December 2010
At 31 December 2009
At 31 December 2008
Office
furniture and
Motor
Leasehold
IT equipment
equipment
vehicles improvements
Total
US$‘000
US$‘000
US$‘000
US$‘000
US$‘000
25,515
7,917
(307)
33,125
8,617
—
41,742
16,491
5,485
(307)
21,669
6,920
—
28,589
13,153
11,456
9,024
2,501
140
—
2,641
120
—
2,761
1,271
219
—
1,490
251
—
1,741
1,020
1,151
1,230
528
—
(25)
503
63
(35)
531
238
74
(25)
287
75
(13)
349
182
216
290
14,617
231
—
14,848
265
—
43,161
8,288
(332)
51,117
9,065
(35)
15,113
60,147
5,421
1,266
—
6,687
1,234
—
7,921
7,192
8,161
9,196
23,421
7,044
(332)
30,133
8,480
(13)
38,600
21,547
20,984
19,740
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888 Holdings plc Annual Report & Accounts 2010
Notes to the Consolidated Financial Statements
13
Investment in equity accounted joint ventures
The following entity meets the definition of a Jointly controlled entity and has been equity accounted in the consolidated
financial statements:
Name
Technology Solutions (Gibraltar) Limited
Country of
incorporation
Gibraltar
Percentage Percentage
of equity
of equity
interest
2010
%
50%
interest
2009
%
—
On 6 October 2010 the Group entered into a Joint Venture Agreement (“JVA”) via 888 Regulated Markets Ltd. (“888
RM”), a wholly owned subsidiary, with Prima Networks Ltd. (“PNL”) and Technology Solutions (Gibraltar) Ltd. (“TSG”), a
Gibraltar Company jointly owned by 888 RM and PNL in equal parts.
The Group through 888 RM obtained during the year a license to operate online poker games in France.
Under the terms of the JVA, 888 RM, PNL and TSG operate the network jointly, utilizing rights to use poker software
technology and related services required to make the Games available for use in the French poker networks of PNL
(licensed to TSG) and 888 RM and combining them into one French poker network sharing the liquidity of their
respective members.
Aggregated amounts relating to TSG are as follows:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Revenues
Expenses
Profit
Share of before tax profit of Joint Venture
Investment including loans in equity accounted Joint Venture
2010
US$’000
6
2,502
2,467
—
414
(376)
38
19
1,297
2009
US$’000
—
—
—
—
—
—
—
—
—
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14 Financial Assets — Available for sale investments
Opening balance at the beginning of the year
Investments during the year
Adjustment to market price
Disposal of available for sale assets during the year
Year ended Year ended
31 December 31 December
2009
2010
US$‘000
—
175
—
—
175
US$‘000
223
—
513
(736)
—
Available-for-sale assets in 2009 are quoted equity securities, the fair value of which is based on their published
market price. In 2010 available for sale investments comprised of unquoted securities. The fair value of these has been
determined on the basis of expected cash flows discounted using a rate based on the market interest rate and a premium
specific to the unlisted securities. Fair value movements for 2010 were insignificant.
15 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
16 Cash and cash equivalents
Cash and cash equivalents
Restricted cash
Restricted cash primarily relates to deposits held by banks for guarantees.
Year ended Year ended
31 December 31 December
2009
2010
US$‘000
88
94
382
22
586
2010
US$‘000
60,569
951
61,520
31 December 31 December
2009
US$‘000
25
238
508
26
797
US$‘000
86,836
675
87,511
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888 Holdings plc Annual Report & Accounts 2010
Notes to the Consolidated Financial Statements
17 Trade and other receivables
Trade receivables
Corporate tax
Other receivables and prepayments
31 December 31 December
2009
2010
US$‘000
12,332
796
11,216
24,344
US$‘000
13,382
—
7,826
21,208
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.
18 Share capital
Share capital comprises the following:
Ordinary Shares of £0.005 each
Ordinary Shares of £0.005 each
Issue of Ordinary Shares of £0.005 each
Share buy-back
Authorised
31 December 31 December 31 December 31 December
2009
2009
2010
Number
Number
426,387,500 426,387,500
2010
US$‘000
3,880
US$‘000
3,880
Allotted, called up and fully paid
31 December 31 December 31 December 31 December
2009
2009
2010
Number
Number
346,534,097 342,848,261
3,685,836
2,190,090
(3,294,678)
—
345,429,509 346,534,097
2010
US$‘000
3,152
17
(24)
3,145
US$‘000
3,115
37
—
3,152
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 22) during 2010 and 2009:
Issued during 2010
January 2010
March 2010
April 2010
May 2010
June 2010
July 2010
August 2010
September 2010
October 2010
72
Ordinary
Shares of
£0.005 each
255,812
88,884
613,110
145,055
421,905
125,884
231,653
279,306
28,481
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18 Share capital continued
Issued during 2009
January 2009
March 2009
April 2009
May 2009
June 2009
July 2009
September 2009
October 2009
Ordinary
shares of
£0.005 each
850,741
609,060
358,925
51,659
683,068
141,975
468,232
521,999
During 2010, the Company did not issue shares (2009: Nil) 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$3,210,000 (2009: US$3,217,000) and is split into 345,429,509 (2009: 346,534,097)
Ordinary Shares. The share capital in UK sterling (GBP) is £1,727,148 (2009: £1,732,670) and translates at an average
exchange rate of US$1.86 (2009: US$1.86) to GBP.
19 Trade and other payables
Trade payables
Corporate taxes
Other payables and accrued expenses
31 December 31 December
2009
2010
US$‘000
4,179
309
33,326
37,814
US$‘000
5,239
210
33,402
38,851
The carrying value of trade and other payables approximates to their fair value given the short maturity date of these
balances.
20 Liabilities to customers and progressive prize pools
Liabilities to customers
Progressive prize pools
31 December 31 December
2009
2010
US$‘000
30,630
4,095
34,725
US$‘000
34,194
3,376
37,570
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888 Holdings plc Annual Report & Accounts 2010
Notes to the Consolidated Financial Statements
21
Investments in significant subsidiaries
Name
Cassava Enterprises (Gibraltar) Limited
Virtual Marketing Services (UK) Limited
Cassava Sports Limited
Country of
incorporation
Gibraltar
UK
Gibraltar
Active Media Limited
Virtual Marketing Services (Gibraltar) Limited
Dixie Operation Limited
Random Logic Limited
Brigend Limited
Fordart Limited
BVI
Gibraltar
Antigua
Israel
Gibraltar
Gibraltar
New Wave Virtual Ventures Limited
Gibraltar
Virtual Internet Services limited
Gisland Limited
Gibraltar
Gibraltar
Percentage Percentage
of equity
of equity
interest
2010
%
100
100
100
interest
2009
Nature of
business
100 Gaming website operator
%
100
Advertising services
100 Domain site owner through
which a third party operates
a betting exchange
100
Customer call center
employer
100
100
Marketing acquisition
Customer call center
operator
100
Research, development
100
100
and marketing
Bingo business operator
General commercial
business activities
100
Development of social
games — Mytopia.
100
General commercial
business activities
100
Provider of payments
service solutions;
Holds money transmission
license
100
100
100
100
100
100
100
100
100
888 Regulated Markets Limited
Malta
100
100
Holder of French online
gaming license
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22 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. 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:
Share options granted
31 December
2010
31 December
2009
Outstanding at the beginning of the year
Market value options granted during the year
Market value options lapsed during the year
Outstanding at the end of the year1,2
Weighted
average
exercise price
£1.38
—
£1.36
£1.38
Weighted
average
Number exercise price
£1.50
6,027,789
—
(1,440,308)
4,587,481
Number
5,422,027
2,095,864
(1,490,102)
6,027,789
£1.06
£1.36
£1.38
1 Of the total number of options outstanding at the end of the year, 2,836,040 had vested and were exercisable at the end of the year
(2009: 2,450,188).
2 Range of exercise price for options outstanding at the end of the year is £1.02–£1.80 (2009: £1.02–£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
Shares are granted at a nominal exercise price.
31 December 31 December
2009
2010
Number
7,182,929
1,689,103
(2,240,804)
(2,190,090)
4,441,138
Number
9,786,426
2,429,049
(1,346,710)
(3,685,836)
7,182,929
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 — Market value options
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
2010
2009
— Monte Carlo
£1.11
—
—
£1.11
— 3.99%–5.48%
55%–63%
—
75
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Notes to the Consolidated Financial Statements
22 Share-based payment continued
During 2010 no market value options were granted.
Exercise period of the market value options is from vesting until expiry of 10 years after grant date.
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.
Valuation information — Shares granted
Weighted average share price at grant date
Weighted average share price at issue of shares
Average remaining life until vesting (Months)
2010
£0.50
£0.66
15
2009
£1.06
£0.97
15
Shares granted for future vesting are fair valued at the share price at grant date. The restrictions on the shares during
the vesting period, primarily relating to non-receipt of dividends, have an immaterial effect on this fair value estimate at
grant date.
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
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
23 Related party transactions
Year ended Year ended
31 December 31 December
2009
2010
US$‘000
246
2,063
2,309
US$‘000
1,146
5,866
7,012
During the year the Group paid US$258,815 (2009: US$258,506) in respect of rent and office expenses to companies
of which John Anderson is a Director. At 31 December 2010 the amount owed to those companies was US$nil (2009:
US$nil).
Remuneration paid to the Directors in the year totalled US$2,284,000 (2009: US$2,729,000). Share benefit charge in
respect of awards granted to the Directors totalled US$348,380 (2009: US$1,919,127).
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24 Commitments
Lease commitments
Future minimum lease commitments under property operating leases for the year ended 31 December 2010 are as
follows:
Leases expiring within
One year
Two to five years
Year ended Year ended
31 December 31 December
2009
2010
US$‘000
2,937
12,956
15,893
US$‘000
2,463
8,104
10,567
The amount paid in the year was US$3,060,000 (2010: US$2,646,000).
Lease commitments on the Group’s property are shown to the date of the first break clause.
25 Financial risk management
The Group is exposed through its operations to risks that arise from use of its financial instruments. Policies and
procedures for managing these risks are set by the Board following recommendations from the Chief Financial Officer.
The Board reviews the effectiveness of these procedures and, if required, approves specific policies and procedures in
order to mitigate these risks.
The main financial instruments used by the Group, on which financial risk arises, are as follows:
Trade and other receivables;
l Cash and cash equivalents;
l Restricted cash;
l
l
l
l Contingent consideration on acquisition;
l Available-for-sale financial investments.
Trade and other payables;
Liabilities to customers;
Detailed analysis of these financial instruments is as follows:
Financial assets
Trade receivables
Other receivables
Cash and cash equivalents
Restricted cash
Available-for-sale financial investments
31 December 31 December
2009
2010
US$‘000
12,332
12,012
60,569
951
175
86,039
US$‘000
13,382
7,826
86,836
675
—
108,719
In accordance with IAS 39, with the exception of available-for-sale assets, all financial assets are classified as loans and
receivables.
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Notes to the Consolidated Financial Statements
25 Financial risk management continued
Financial liabilities
Trade payables
Other payables and accrued expenses
Contingent Consideration
Liabilities to customers
31 December 31 December
2009
2010
US$‘000
4,179
33,635
82,271
34,725
154,810
US$‘000
5,239
33,612
3,811
37,570
80,232
In accordance with IAS 39, all of the above financial liabilities are held at amortised cost except for US$10,225,000
relating to the contingent consideration arising on acquisitions accounted for under IFRS3 (revised) which are
recognised as fair value.
At 31 December 2010 and 2009, 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.
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 Arranging for the shortest possible cash settlement intervals.
l Replacing rolling reserve requirements, where they exist, with a Letter of Credit by a reputable financial institution.
l
Ensuring a new PSP is only contracted following various due diligence and ‘Know Your Customer’ procedures.
l
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 (2009: Nil).
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25 Financial risk management continued
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 2010 was $886,000 (2009: $1,586,000).
The Group’s in-house Fraud and Risk Management department carefully monitors deposits and withdrawals by following
prevention and verification procedures using internally developed bespoke systems integrated with commercially
available third party measures.
Cash and cash equivalents
The Group controls its cash position out of its Gibraltar headquarters. Subsidiaries in its other locations (Israel, Antigua
and London) maintain minimum cash balances which are deemed required for their operations.
Cash settlement proceeds from PSPs, as described above, are paid into bank accounts controlled by the Treasury
function.
The Group maintains its funds with highly reputable financial institutions and will not hold funds with financial institutions
with low credit rating.
The Group maintains its cash reserve in highly liquid deposits and regularly monitors rates in order to maximize yield.
Restricted cash
Restricted cash is mainly attributed to a deposit in respect of the Group’s obligation with the developer of the offices of
its subsidiary in Israel.
The Group’s maximum exposure to credit risk by type of financial instrument is summarized below:
Trade receivables
Other receivables
Cash and cash equivalents
Restricted cash
Available-for-sale financial investments
US$‘000
value
12,332
31 December 2010
Carrying Maximum
exposure
US$‘000
12,332
12,012
60,569
951
175
86,039
86,039
60,569
12,012
951
175
31 December 2009
Carrying
Maximum
value
exposure
US$‘000
US$‘000
13,382
7,826
86,836
675
—
13,382
7,826
86,836
675
—
108,719
108,719
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Notes to the Consolidated Financial Statements
25 Financial risk management continued
Liquidity risk
Liquidity risk exists in the case where the Group will encounter difficulties in meeting its financial obligations as they
become due.
The Group monitors its liquidity in order to ensure that sufficient liquid resources are available to allow it to meet its
obligations.
The following table details the contractual maturity analysis of the Group’s financial liabilities:
On demand
In 3 months
Between 3 months and 1 year
More than 1 year
31 December 2010
Trade
payables
US$‘000
Other Contingent
Liabilities
payables1 consideration to customers
US$‘000
US$‘000
US$‘000
1,857
2,068
254
—
4,179
7,356
24,621
662
996
33,635
—
5,987
72,046
4,238
82,271
34,725
—
—
—
34,725
1 Includes other payables, accrued expenses and provisions.
On demand
In 3 months
Between 3 months and 1 year
More than 1 year
31 December 2009
Trade
payables
US$‘000
Other Contingent
Liabilities
payables1 consideration to customers
US$‘000
US$‘000
US$‘000
2,002
3,237
—
—
5,239
4,592
25,774
3,017
229
33,612
—
—
—
3,811
3,811
37,570
—
—
—
37,570
Total
US$‘000
43,938
32,676
72,962
5,234
154,810
Total
US$‘000
44,164
29,011
3,017
4,040
80,232
1 Includes other payables, accrued expenses and provisions.
Market risk
Interest rate risk
The Group’s exposure to interest rate risk is limited to the interest bearing deposits in which the Group invests surplus
funds.
The Group’s policy is to invest surplus funds in low risk money market funds or on call over night facilities. The Group also
arranges with its principal bankers that excess funds are swept automatically across its accounts, every night, in order to
maximize availability of funds for investments.
Downside interest rate risk is minimal as the Group has no borrowings. Given current low US$ 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$300,000.
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25 Financial risk management continued
Currency risk
The Group’s financial risk arising from exchange rate fluctuations is mainly attributed to:
l Mismatch between Balance sheet Liabilities to customers which is predominately denominated in US$ 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 significant portion of deposits which are settled in local currencies.
l
l
Expenses, the majority of which are denominated in foreign currencies including sterling (GBP), the euro (EUR) and
the New Israeli Shekel (ILS).
The Wink Bingo contingent consideration is denominated in GBP. The Group will enter into a specific forward
contract in order to fix the economic impact of the currency mismatch.
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 2010 and 31 December 2009, 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 2010 and 2009:
Cash and cash equivalent
Receivables
Available-for-sale financial investments
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
31 December 2010
GBP
EUR
ILS
USD
Other
Total
US$‘000
US$‘000
US$‘000
US$‘000
US$‘000
US$‘000
11,820
10,779
—
22,599
(94,226)
(94,226)
(71,627)
9,430
4,631
—
14,061
(2,828)
(2,828)
11,233
5,706
1,454
—
7,160
(9,308)
(9,308)
(2,148)
31,496
5,863
175
37,534
(48,115)
(48,115)
(10,581)
3,068
1,617
—
61,520
24,344
175
4,685
86,039
(333)
(333)
(154,810)
(154,810)
4,352
(68,771)
31 December 2009
GBP
EUR
ILS
USD
Other
Total
US$‘000
US$‘000
US$‘000
US$‘000
US$‘000
US$‘000
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
1,124
2,030
3,154
(494)
(494)
2,660
87,511
21,208
108,719
(80,232)
(80,232)
28,487
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Notes to the Consolidated Financial Statements
25 Financial risk management continued
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, 2010
GBP
7,163
EUR
1,123
(7,163)
(1,123)
ILS
215
(215)
Year ended 31 December, 2009
GBP
464
(464)
EUR
336
(336)
ILS
156
(156)
26 Contingent liabilities and regulatory issues
(a) 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.
(b) 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.
(c) The Group operates in numerous jurisdictions. Accordingly, the Group is filing tax returns, providing for and paying
all taxes it believes are due based on local tax laws, transfer pricing agreements and tax advice obtained. The Group
is periodically subject to audits and assessments by local taxing authorities. The Board is unable to quantify reliably
any exposure for additional taxes, if any, that may arise from the final settlement of such assessments. Accordingly
no additional provisions have been made.
(d) 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.
27 Postbalance sheet events
On 18 March 2011 the Group announced that it has entered into an amendment agreement with the Wink Bingo vendors
to reschedule the earn out payment payable in May 2011. As announced on 7 February 2011 the earn out payment is
expected to be at the upper end of the earn out range. Under the revised payment terms the Group made a payment out
of its cash resources of £9.26 million on 18 March 2011 and further payments of £9.26 million is due on 21 May 2011 and
£6.173 million on 31 August 2011. The balance will be payable on 21 May 2012. Payments due after 21 May 2011 bear interest
at 15% per annum. The Group may repay outstanding amounts without penalty. The Group has agreed to implement
security over the assets comprising the Wink bingo business in favour of the vendors.
82
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Company Balance Sheet
At 31 December 2010
Assets
Non-current assets
Investments in subsidiaries
Fixed assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Equity and liabilities
Equity
Share capital
Share premium
Retained earnings
Capital redemption reserve
Total equity attributable to equity holders of the parent
Liabilities
Current liabilities
Trade and other payables
Total liabilities
Total equity and liabilities
Note
2
3
4
5
6
31 December 31 December
2009
2010
US$‘000
US$‘000
18,941
—
18,941
124,819
45,928
170,747
189,688
3,152
65
14,344
—
17,561
20,956
5
20,961
135,339
13,674
149,013
169,974
3,145
65
7,454
24
10,688
159,286
159,286
169,974
172,127
172,127
189,688
The financial statements on pages 83 to 87 were approved and authorised for issue by the Board of Directors on 31 March 2011
and were signed on its behalf by:
Gigi Levy
Chief Executive Officer
Aviad Kobrine
Chief Financial Officer
The notes on pages 86 and 87 form part of these financial statements
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83
888 Holdings plc Annual Report & Accounts 2010
Company Statement of Changes in Equity
For the year ended 31 December 2010
Year ended 31 December 2010
Capital
Share redemption
Share
capital
reserve
premium
US$’000
3,115
US$’000
—
US$’000
65
Available-
for-sale
reserve
US$’000
(536)
—
37
—
—
3,152
—
17
—
(24)
—
3,145
—
—
—
—
—
—
—
—
24
—
24
—
—
—
—
65
—
—
—
—
—
65
—
—
—
536
—
—
—
—
—
—
—
Retained
earnings
US$’000
17,951
Total
US$’000
20,595
(22,445)
(22,445)
(37)
7,012
11,863
14,344
(10,491)
(17)
2,309
(3,465)
4,774
7,454
—
7,012
12,399
17,561
(10,491)
—
2,309
(3,465)
4,774
10,688
Balance at 1 January 2009
Dividend paid
Issue of shares
Share benefit charges
Total comprehensive income for the year
Balance at 1 January 2010
Dividend paid
Issue of shares
Share benefit charges
Share buy-back
Total comprehensive income for the year
Balance at 31 December 2010
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.
Capital redemption reserve — represents amounts transferred from the share capital reserve following the buy back and
cancellation of equity shares.
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.
84
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Company Statement of Cash Flows
For the year ended 31 December 2010
Cash flows from operating activities:
Loss before income tax
Adjustments for
Interest received
Share benefit charges
Depreciation
Decrease/(increase) in amounts owed by subsidiaries
(Increase)/decrease in other accounts receivables
(Decrease)/increase in trade payables
(Decrease)/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
Purchase of fixed assets
Dividends received
Net cash generated from investing activities
Cash flows from financing activities:
Dividends paid
Share buy-back
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 86 and 87 form part of these financial statements.
31 December
31 December
2010
US$‘000
2010
US$‘000
2009
2009
US$‘000
US$‘000
(5,810)
(63)
293
1
(11,047)
528
39
(11,035)
(1,702)
63
—
(6)
10,491
(10,491)
(3,465)
(10,426)
(176)
1,884
—
10,490
(626)
(168)
4,832
690
176
732
—
22,445
6,500
(45)
6,455
(28,796)
(50)
(28,846)
10,548
23,353
(22,445)
—
(13,956)
(32,254)
45,928
13,674
(22,445)
7,363
38,565
45,928
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888 Holdings plc Annual Report & Accounts 2010
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 21 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$2,015,000 in 2010 (2009: US$5,164,000).
3
Trade and other receivables
Amounts due from subsidiaries
Other receivables and prepayments
31 December 31 December
2009
2010
US$‘000
134,902
437
135,339
US$‘000
123,855
964
124,819
The carrying value of trade and other receivables approximate to their fair value. None of the balances included within
trade and other receivables are past due or impaired. Amounts due from subsidiaries are payable on demand.
4
Cash and cash equivalents
Cash and cash equivalents
Year ended Year ended
31 December 31 December
2009
2010
US$‘000
13,674
13,674
US$‘000
45,928
45,928
5
Share capital
The disclosures in note 18 to the consolidated financial statements are identical for the Company.
86
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6
Trade and other payables
Trade payables
Amounts due to subsidiaries
Corporate tax
Other payables and accrued expenses
31 December 31 December
2009
2010
US$‘000
61
156,959
190
2,076
159,286
US$‘000
21
168,105
223
3,778
172,127
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 25 to the consolidated financial statements.
Contingent liabilities
The disclosures in note 26 to the consolidated financial statements are identical for the Company.
Share-based payment
The disclosures in note 22 to the consolidated financial statements are identical for the Company except that the charge
for the year is partly taken to investment in subsidiaries as set out in note 2.
7
8
9
10 Related party transactions
During the year the Company received dividends from its subsidiaries totalling US$10,491,000 (2009: US$22,445,000)
and paid to its shareholders dividends totalling US$10,491,000 (2009: US$22,445,000).
Remuneration paid to Directors of the Company by its subsidiaries in the year totalled US$127,938 (2009: US$155,437).
Share benefit charges in respect of options and shares of the Company awarded to employees of subsidiaries totalled
US$2,015,000 (2009: US$5,164,000).
During the year subsidiaries of the Company participated in funding its costs which totalled US$8,379,000 (2009:
US$9,585,000). At 31 December 2010, net amount owed by the Company to its subsidiaries US$22,059,000 (2009:
US$44,214,000).
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888 Holdings plc Annual Report & Accounts 2010
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
l News and events
Information on the Group’s financial performance
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.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
88
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888 Holdings plc Annual Report & Accounts 2010
Welcome to 888 one of the world’s most
popular online gaming entertainment and
solutions providers.
888 is one of the world’s most popular online
gaming entertainment companies
Contents
888 is a truly global gaming destination that
remains at the cutting edge of the online
gaming industry, offering both players and
B2B partners the chance to enjoy a world-
class gaming experience in a personalised and
localised setting.
888’s consumer facing websites offer more than
just online gaming. They are an entertainment
destination, places where people can enjoy
a truly interactive experience that extends
beyond pure play and be part of an online social
network that shares common interests.
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 a brand.
As well as providing players with an innovative,
comprehensive and enjoyable gaming
experience, 888 websites provide an exciting
customer experience in a safe and secure
environment. It remains a leader in corporate
responsibility, with specialist websites dedicated
to both responsible gaming and corporate
responsibility.
Our strategy is to increase shareholders’
value through achieving profitable growth
both organically, through the acquisition and
retention of valuable players and partners, and
through acquisitions.
01 Highlights
02 Chairman’s Statement
04 Chief Executive Officer’s Review
08 Enhanced Business Review
24 Corporate Social Responsibility
28 Risk Report
30 Board of Directors
31 Corporate Governance
35 Directors’ Remuneration Report
42 Directors’ Report
45
Independent Auditors’ Report
47 Consolidated Income Statement
48 Consolidated Balance Sheet
49 Consolidated Statement of Changes in Equity
49 Consolidated Statement of Comprehensive
Income
50 Consolidated Statement of Cash Flows
51 Notes to the Consolidated Financial Statements
83 Company Balance Sheet
84 Company Statement of Changes in Equity
85 Company Statement of Cash Flows
86 Notes to the Company Financial Statements
88 Shareholder Information
Shareholder Services
All enquiries relating to Ordinary Shares, Depository
Auditors
BDO LLP
Interests, dividends and changes of address should be
Chartered Accountants
directed to the Group’s Transfer Agent:
55 Baker Street
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Tel: 0870 162 3100
www.capitaregistrars.com
London
W1U 7EU
UK
BDO Limited
Registered Auditors
Montagu Pavilion
8–10 Queensway
Gibraltar
Further Information
For further information please contact:
Incorporated in Gibraltar with
registered number 90099
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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l
8
8
8
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o
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s
p
l
c
i
888 Holdings plc
Suite 601/701 Europort
Europort Road
Gibraltar
T: +350 20049800
F: +350 20048280
E: Info@888holdingsplc.com
www.888holdingsplc.com
A
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Annual Report & Accounts 2010
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