888 Holdings plc
Annual Report and Accounts 2019
2019
LEADERS IN
ONLINE GAMING
Contents
Introduction
STRATEGIC REPORT
Introduction
01
02 Our Marketplace
04 Our Business Model
06 Our Stakeholders
08
10
16
18
20
21
22
32
42
Chairman’s Statement
Chief Executive Officer’s Strategic Report
The Online Gaming Cycle
888's B2C Proposition
Introducing Section8 Studio
888's Strategy and Progress
Chief Financial Officer's Report
Risk Management Strategy
Regulation and General
Regulatory Developments
Viability Statement
Corporate Social Responsibility
48
50
GOVERNANCE
68
70
76
84
Board of Directors
Directors’ Report
Corporate Governance Statement
Statement by the Chairman of the
Remuneration Committee
Directors’ Remuneration Report
86
103 Audit Committee Report
FINANCIAL STATEMENTS
108
117
117
118
119
Independent Auditors’ Report
Consolidated Income Statement
Consolidated Statement
of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes
in Equity
120 Consolidated Statement of Cash Flows
121
Notes to the Consolidated
Financial Statements
155 Company Balance Sheet
156 Company Statement of Changes in Equity
157 Company Statement of Cash Flows
158 Notes to the Company Financial Statements
160 Shareholder Information
IBC Company Information
This Annual Report may contain statements which are not based
on current or historical fact and which are forward-looking in
nature. These forward-looking statements reflect knowledge and
information available at the date of preparation of this Annual
Report and 888 Holdings plc (the “Company”) and its subsidiaries
(together, “888”, or the “Group”) undertake no obligation to update
these forward-looking statements. Such forward-looking statements
are subject to known and unknown risks and uncertainties facing
888 including, without limitation, those risks described in this Annual
Report and other unknown future events and circumstances which
can cause results and developments to differ materially from those
anticipated. Nothing in this Annual Report should be construed as
a profit forecast.
888 IS ONE OF
THE WORLD'S
MOST POPULAR
ONLINE GAMING
ENTERTAINMENT
AND SOLUTIONS
PROVIDERS.
888 Holdings plc (“888” or the “Company”) and its
subsidiaries (together, the “Group”) operates leading
online gaming brands across four key product verticals
(Casino, Sport, Poker and Bingo) with a presence across
multiple regulated markets.
888’S PURPOSE
Driven to be one of the world’s best performing online
gaming companies, 888 continues to strive to provide
customers with a safe and enjoyable experience
underpinned by the Group’s unique technology and
industry expertise. By doing this effectively, 888 is able
to succeed in the fast-growing and dynamic online
gambling industry and generate value for its shareholders.
888’S FOCUS
888’s primary strategic focus is on growing its strong
brands in sustainable markets where there are regulatory
frameworks that protect customers and provide clarity
for operators. To achieve this, we focus on continuous
investment in protecting our customers, relentless new
product development and effective marketing.
Our purpose is to provide
customers with a safe and
enjoyable experience underpinned
by unique technology and
industry expertise.
More information
Read more about how we
are operating responsibly
50
Highlights
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
16
ANALYTICS-DRIVEN
APPROACH
FINANCIAL HIGHLIGHTS
Revenue - Our overall revenue1
US$ million
2019
2018
B2C – Casino1
US$ million
Sophisticated business analytics drive 888’s approach
to multiple areas of its operations, from safe gambling
to product development to marketing. 888’s highly-
skilled team and its internally generated know-how
remain major drivers of the Company’s value.
2019
2018
20-21
STRATEGIC PROGRESS
B2C – Sport1
US$ million
2019
2018
During 2019, 888 continued to deliver progress against its
strategic objectives by enhancing compliance and safe
gaming, developing its core B2C brands, expanding in
regulated markets and driving efficiencies.
Adjusted EBITDA2
US$ million
50
SAFER. BETTER. TOGETHER.
2019
2018
Conducting business responsibly is fundamental to the
future success of 888, and we are absolutely committed
to a proactive policy of corporate and social responsibility
that reflects the high professional and ethical standards
we set for ourselves across the business.
2019
2018
B2C – First-time depositors
1 At constant currency.
2 Excluding IFRS 16 impact.
+10%
+17%
+19%
-20%
+22%
Corporate.888.com
01
Our Marketplace
A GROWING
GLOBAL MARKET
2019 was a year of further strategic progress for 888. During the
year, 888 welcomed a record number of new customers – more
than a million – to its international brands. In addition, the Group
successfully launched in the Swedish and Portuguese regulated
markets and completed the strategic acquisition of a first-class
sports betting platform and team. The Group also delivered
strong performance in Italy underpinned by its successful focus
on recreational customers.
KEY TRENDS IN OUR INDUSTRY
1
SAFE GAMBLING
2
REGULATION
3
USER EXPERIENCE
Many jurisdictions across the
world are adopting new regulatory
frameworks that are specific to
online gaming. This can increase
the costs of operation but helps
to provide a safer environment
for customers and creates an
environment in which operators with
scale and technological advantages,
such as 888, are able to prosper.
Compliance and safer gambling are
priorities for responsible operators
in our industry. We acknowledge the
potential risks that online gambling
can present and are committed
to ongoing improvements to make
gambling safe, enjoyable and not
a cause of harm.
We are convinced the sustainability
of our business rests on ensuring
our customers are empowered to
make safe and responsible decisions
about their betting and constantly,
ensuring that those struggling to stay
in control of their play receive the
support they need.
Technology businesses in multiple
areas of consumers’ lives, from media
and entertainment to travel and
banking, are consistently innovating
and raising the standards that
consumers expect of online and
mobile services. As a result, our
customers’ expectations of their
digital experiences are increasing.
888 continues to focus on improving
multiple areas of our products
including enhancing interfaces,
greater personalisation, improving
loading times, developing responsible
gaming tools, and delivering quality
customer support to ensure that our
customers enjoy the best possible
user experience with 888.
02
02
888 Holdings plc Annual Report & Accounts 2019
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
DIVERSIFICATION ACROSS
GLOBAL MARKETS
B2B
5%
BINGO
7%
POKER
8%
SPORT
16%
888'S PRODUCTS
& STRUCTURE
95%
B2C
5%
B2B
CASINO
64%
A GROWING GLOBAL MARKET
Total global online gambling market size
US$ billion
Source: H2 Gambling Capital, March 2020
89.3bn
2024
50.2bn
2024
20.3bn
2024
2.9bn
2024
2.2bn
2024
33.1bn
2019
15.3bn
2019
2.7bn
2019
2.0bn
2019
SPORTS BETTING
CAGR: 8.7%
CASINO
CAGR: 5.8%
POKER
CAGR: 1.2%
BINGO
CAGR: 2.2%
61.5bn
2019
TOTAL ONLINE GAMBLING*
CAGR: 7.7%
* Includes sport, casino, poker, bingo,
skill, other gaming and lotteries.
03
Corporate.888.com Our Business Model
Our Marketplace
PROVIDING SAFE AND
SECURE ENTERTAINMENT
GROWTH STRATEGY
KEY DRIVERS
888's growth strategy is based
on four key pillars:
CONTINUE TO PROTECT
CUSTOMERS AND ACT RESPONSIBLY
ONGOING DEVELOPMENT
OF 888’S CORE B2C BUSINESS
EXPANSION IN
REGULATED MARKETS
ENHANCING EFFICIENCIES
REDUCING THE COST PER
PLAYER ACQUISITION
3
HOW WE CREATE VALUE
888’s core B2C business operates across four key
online gaming verticals: Casino, Sport, Poker and
Bingo. The Group also operates a B2B business
called Dragonfish.
To drive value, the Group continually invests in
developing its unique technology and products to
deliver a first-class and safe user experience.
I
S
G
N
D
L
O
H
8
8
8
B2C
B2C
B2C
B2B
04
INCREASING FIRST-
TIME DEPOSITORS
2
Customer
Interaction
Customer Wins
Customer
Interaction
Customer Wins
Customer
Interaction
Customer Loses
Branded
Partners
Agreed Share of
Net Revenue
888 Holdings plc Annual Report & Accounts 2019
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
INFLUENCING FACTORS
1. SAFE GAMBLING
888 is constantly developing new
and innovative ways to deliver a
safer gambling environment and
prevent gambling harm before it
occurs. Our goal is to ensure that
all those who visit our sites can
do so with confidence and that
those for whom our games are
not intended, notably underage
and vulnerable individuals, will
not be drawn into the gambling
environment. We strive to ensure
that we quickly identify any
customers who demonstrate
potentially problematic gambling
behaviour and effectively interact
with them to prevent any potential
harm.
2. CONTINUOUSLY DEVELOPING
OUR UNIQUE TECHNOLOGY-EDGE
888’s unique online platforms
underpin the Group’s ability to
entertain and protect customers,
operate efficiently and adapt
to new regulations. The Group is
constantly evolving and developing
its proprietary platforms and
industry leading back office
systems to maintain its competitive
advantages.
3. PRODUCT FOCUS
888 continues to focus on improving
multiple areas of its products,
including enhancing interfaces,
greater personalisation, improving
loading times, developing
responsible gaming tools, and
delivering quality customer support
to ensure that our customers enjoy
the best possible user experience
with 888.
4. MAINTAINING OUR STRONG AND
TRUSTED BRAND
A strong brand is a key advantage
in what is a competitive global
online gaming market. With
more than 20 years in the online
gaming industry, 888’s consistently
innovative and engaging brand
is amongst the most trusted and
recognised around.
5. BUSINESS ANALYTICS
888’s teams – from product
development to marketing to
customer support – draw on 888’s
extensive and constantly evolving
data set and analysis capabilities
to drive 888’s continued success.
6. MARKETING
Effective marketing plays a critical
role in 888’s business. Drawing on
the Group’s analytics-driven insights
and expertise, 888 is focused on
developing marketing techniques
and channels, both online and
offline, that adhere to strict return-
on-investment criteria and are
always directed within the Group’s
responsible gambling policies.
7. CRM AND CUSTOMER
COMMUNICATIONS
Once a customer joins 888,
underpinned by sophisticated
data insights, statistical models
and customer understanding,
888 interacts with its customers
on a personalised basis.
8. EXCELLENT CUSTOMER
SUPPORT
First-class customer support, with
a focus on safer gambling, is offered
by 888 to customers around the
world through multiple channels,
including telephone, email and
online chat functions.
9. PAYMENT PROCESSING
888’s proprietary payments
solutions support multiple payment
methods in multiple languages,
across both desktop and on
mobile/tablet devices.
10. B2B PARTNERSHIPS
Through its Dragonfish B2B division,
the Group offers gaming partners
a comprehensive end-to-end
solution, encompassing technology,
operations and advanced
marketing tools, as well as online
best practice. The Dragonfish team
is uniquely placed to support its
partners and deliver a cutting-edge
online proposition.
05
INCREASING
PLAYER VALUE
1
SAFER.
BETTER.
TOGETHER.
CUSTOMER
KEEPS WINNINGS
CUSTOMER
RECYCLES WINNINGS
CONTRIBUTION
TO GROUP REVENUE
CONTRIBUTION
TO GROUP REVENUE
Corporate.888.com Our Stakeholders
RESPONDING TO OUR
STAKEHOLDERS' NEEDS
The Company’s key
stakeholders are its
shareholders, employees,
regulators and customers,
as well as the communities
in which it does business.
The Board takes care
to engage with its
stakeholders, and
continually reviews its
engagement mechanisms
in order to make sure
that it is engaging with its
stakeholders effectively.
SUSTAINABLE
BUSINESS
Conducting business responsibly is
fundamental to the future success
of 888, and we are absolutely
committed to a proactive policy of
corporate and social responsibility
that reflects the high professional
and ethical standards we set for
ourselves across the business.
Building on our efforts to date, we
have refined and expanded a new
corporate social responsibility
(‘CSR’) framework that will help
888 to deliver against its broader
responsibilities and commitments
as a business whilst also
supporting the Group’s
long-term, sustainable growth.
More information
Read more about our
sustainable business
50
06
OUR STAKEHOLDERS CUSTOMERS
EMPLOYEES
REGULATORS
SHAREHOLDERS
COMMUNITIES
PARTNERS
Why we engage
Our business would
cease to exist without
customers who can
trust 888 to deliver a
safe, enjoyable and fair
gaming environment.
By understanding what
our customers think
about our products
and services, we can
constantly strive for
improvements that
match their priorities.
The talent, commitment
and skill of our
employees around
the world underpins
our ability to deliver
a superior product
and safe, enjoyable
experience to customers.
Our employees know
our business best, and
we value their feedback
as an important way
of improving how we
operate.
Key areas of
interest
How we engage
The priority for our
customers is a superior
gaming experience.
This means a seamless
online platform, quality
customer service and
the confidence that they
are playing in a safe
environment.
Our employees want
to know they are part
of a business that
cares about their
wellbeing and supports
their professional
development. They care
deeply that we treat
our customers fairly and
operate in a responsible
manner.
As well as conducting
market research into
perceptions of our
brands, we operate
multiple communications
channels with our
customers to generate
feedback, insight and
to understand their
preferences and needs.
We also use these
channels to promote
safer gambling.
We aim to create a
dynamic, caring and
inclusive culture. We
want our team to be
proud of their work and
to feel rewarded in the
workplace.
We have multiple routes
for generating feedback
from our employees,
including effective
line-management
structures and open
employee forums. We are
committed to proactive
and transparent internal
communications with our
team on an ongoing basis.
Regulators give us a
Our shareholders are the
Being able to engage
We work with partners
owners of the Company.
in rich community life
in various areas of our
both in and out of work
business.
The relationship between
the Company and its
shareholders is based on
trust, transparency and
the timely disclosure of
information.
We must demonstrate a
high level of openness
with our shareholders to
maintain confidence in
our ability to create value.
is an important factor
of wellbeing for our
employees. At the same
time, local communities
can be a business’s
greatest advocates,
particularly when it
comes to recruitment.
To maintain a positive
relationship, we need to
listen to local issues and
understand how we can
have a positive impact.
It is imperative we
maintain an open
dialogue with our
partners in order to
operate effectively
and responsibly.
licence to operate
and set the terms for
providing services in
their markets. We need
absolute clarity on their
regulations to ensure
we align with their
priorities. Regulators
have an important role
in promoting a safer
gaming environment,
which benefits all
operators committed to
responsible models of
operation. As such, it is
valuable for the business
to maintain regular
communication with
regulators to identify
areas in which it can
help progress their
agenda.
Regulators want to know
Shareholders seek
The communities around
Our partnerships rely
that operators are using
clear evidence that the
888’s global offices
on our track record for
the full scope of their
company has a strategy
look for the company
effective management,
resources to comply with
for value creation across
to demonstrate its
local market regulations
the short, medium
commitment to the
value creation and
responsibility. Our
and deliver a safe
and long-term. They
local area by taking the
partners want to know
gaming environment.
demand transparency
time to understand and
that this reputation
as the foundation of a
contribute to supporting
is secure for the long-
trust-based relationship
local initiatives.
and expect clarity
on management’s
approach to maximising
growth opportunities
and managing risks.
term and that they
can trust our team
to deliver mutually
beneficial growth.
We engage in regular
We ensure an ongoing
GR8 People programme
We pride ourselves
and transparent
conversation with
encourages employees
on being a partner of
dialogue with regulators
shareholders through
to be involved in
across our global
our financial reporting,
community events
markets.
as well as events such
and participate in
choice. Relevant team
members within 888
have regular dialogue
as our Annual General
local charities. 888’s
with our partners to
Meeting and Capital
Markets Events.
ensure that our visions
and, most importantly,
values are aligned.
We participate in
industry events and
forums to better
understand the
requirements of the
regulators wherever
we operate.
employees dedicate
hundreds of working
hours sponsored by
the Company to these
causes which helps
the Group to build an
understanding of the
issues that matter most.
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
STRATEGIC REPORT
FINANCIAL STATEMENTS
OUR STAKEHOLDERS CUSTOMERS
EMPLOYEES
REGULATORS
SHAREHOLDERS
COMMUNITIES
PARTNERS
Why we engage
Our business would
The talent, commitment
cease to exist without
and skill of our
customers who can
employees around
trust 888 to deliver a
the world underpins
safe, enjoyable and fair
our ability to deliver
gaming environment.
a superior product
By understanding what
our customers think
about our products
and services, we can
constantly strive for
improvements that
match their priorities.
and safe, enjoyable
experience to customers.
Our employees know
our business best, and
we value their feedback
as an important way
of improving how we
operate.
Key areas of
interest
How we engage
The priority for our
Our employees want
customers is a superior
to know they are part
gaming experience.
of a business that
This means a seamless
cares about their
online platform, quality
wellbeing and supports
customer service and
their professional
the confidence that they
development. They care
are playing in a safe
deeply that we treat
environment.
our customers fairly and
operate in a responsible
manner.
As well as conducting
We aim to create a
market research into
dynamic, caring and
perceptions of our
brands, we operate
inclusive culture. We
want our team to be
multiple communications
proud of their work and
channels with our
to feel rewarded in the
customers to generate
workplace.
feedback, insight and
to understand their
preferences and needs.
We also use these
channels to promote
safer gambling.
We have multiple routes
for generating feedback
from our employees,
including effective
line-management
structures and open
employee forums. We are
committed to proactive
and transparent internal
communications with our
team on an ongoing basis.
Regulators give us a
licence to operate
and set the terms for
providing services in
their markets. We need
absolute clarity on their
regulations to ensure
we align with their
priorities. Regulators
have an important role
in promoting a safer
gaming environment,
which benefits all
operators committed to
responsible models of
operation. As such, it is
valuable for the business
to maintain regular
communication with
regulators to identify
areas in which it can
help progress their
agenda.
Regulators want to know
that operators are using
the full scope of their
resources to comply with
local market regulations
and deliver a safe
gaming environment.
We engage in regular
and transparent
dialogue with regulators
across our global
markets.
We participate in
industry events and
forums to better
understand the
requirements of the
regulators wherever
we operate.
Our shareholders are the
owners of the Company.
The relationship between
the Company and its
shareholders is based on
trust, transparency and
the timely disclosure of
information.
We must demonstrate a
high level of openness
with our shareholders to
maintain confidence in
our ability to create value.
Being able to engage
in rich community life
both in and out of work
is an important factor
of wellbeing for our
employees. At the same
time, local communities
can be a business’s
greatest advocates,
particularly when it
comes to recruitment.
To maintain a positive
relationship, we need to
listen to local issues and
understand how we can
have a positive impact.
We work with partners
in various areas of our
business.
It is imperative we
maintain an open
dialogue with our
partners in order to
operate effectively
and responsibly.
Shareholders seek
clear evidence that the
company has a strategy
for value creation across
the short, medium
and long-term. They
demand transparency
as the foundation of a
trust-based relationship
and expect clarity
on management’s
approach to maximising
growth opportunities
and managing risks.
We ensure an ongoing
conversation with
shareholders through
our financial reporting,
as well as events such
as our Annual General
Meeting and Capital
Markets Events.
Our partnerships rely
on our track record for
effective management,
value creation and
responsibility. Our
partners want to know
that this reputation
is secure for the long-
term and that they
can trust our team
to deliver mutually
beneficial growth.
We pride ourselves
on being a partner of
choice. Relevant team
members within 888
have regular dialogue
with our partners to
ensure that our visions
and, most importantly,
values are aligned.
The communities around
888’s global offices
look for the company
to demonstrate its
commitment to the
local area by taking the
time to understand and
contribute to supporting
local initiatives.
GR8 People programme
encourages employees
to be involved in
community events
and participate in
local charities. 888’s
employees dedicate
hundreds of working
hours sponsored by
the Company to these
causes which helps
the Group to build an
understanding of the
issues that matter most.
07
Corporate.888.com Chairman's Statement
CREATING VALUE BY PUTTING
OUR CUSTOMERS FIRST
888’s growing global customer base reflects
the Group’s continued focus on delivering the
safest, most enjoyable customer experience
possible and, on behalf of everyone at 888,
I would like to take this opportunity to thank
all our customers for placing their continued
trust in our business.
This Annual Report is being published at a
time of unprecedented uncertainty regarding
the impact of the COVID-19 outbreak, not
only on the health of individuals, but also on
the global economy.
888 is monitoring closely the spread of
COVID-19 and following all government
and local health organisation guidelines
in order to keep its global teams safe and
healthy. We have implemented our business
continuity plan, including improvements to
our technological infrastructure, priming of
operational teams for emergency support,
implementing work-from-home processes,
and communicating clearly and constantly
with personnel. The majority of our staff
currently work from home across our
locations.
While it is unclear how this fast-moving
situation will evolve over the coming months,
the postponement and cancellation of
sporting events will impact 888's Sport
vertical, which accounted for 16% of revenue
in 2019. There is currently evidence of
increased customer activity in the Group's
Casino and Poker products that might, in
part, compensate for the sports betting
disruption for a period of time. However, in
the event of a prolonged period of global
macro-economic uncertainty, it is possible
that consumer spending across the Group's
online gaming product verticals may also
become impacted.
888 recognises that, with people spending
more time at home and with potentially
increased stress from economic uncertainty,
888's vigilance on safe gambling and
preventing gambling-related harm is even
more important than ever. The Group
continues to offer its customers support
and is proactively communicating with its
customers to make them aware of safe
gambling tools to limit and control their
play. In addition, 888 continues to leverage
its unique Observer software to scan player
data and identify potential areas of concern
in order to prevent gambling harm.
As a purely online operator with diversified
brands across product verticals and
geographies, a strong balance sheet with
$99.5 million of cash and cash equivalents
at the 2019 year-end, and a proven track
record of delivering operational efficiencies,
888 is confident in its ability to manage these
challenges. Underpinned by the strength of
888's technology, its growing customer base
and its talented and committed teams, 888
continues to see a number of significant
growth opportunities for the Group which it is
confident of progressing during 2020
and beyond.
YEAR IN REVIEW
2019 was another year of good progress
for 888 during which the Group welcomed
a record number of new customers – more
than a million – to its international brands.
This growth was achieved despite significant
increase in gaming duties, as well as
challenging trading conditions in some of
our global markets and demonstrates the
strength of 888’s unique combination of
technology, marketing, diversification across
markets, and product expertise.
888’s growing global customer base reflects
the Group’s continued focus on delivering the
safest, most enjoyable customer experience
possible and, on behalf of everyone at 888, I
would like to take this opportunity to thank all
of our customers for placing their continued
trust in our business.
The Group’s revenue growth has again
been driven by the continued expansion of
888casino across a number of regulated
markets, as well as strong revenue growth
in 888sport. The Group’s focus on providing
its customers with a first-class product
experience – one that is fun, fast, responsive
and personalised – has remained a
competitive advantage and the outstanding
success of our Orbit casino platform across
multiple regulated markets during 2019 has
been a stand-out achievement.
The Group has continued to focus on
expanding in attractive regulated markets
and we were delighted to launch in Sweden
and Portugal during 2019. In addition, the
success of our focus on developing a more
recreational customer base has underpinned
good growth in the UK market. In Europe, we
were pleased to deliver strong performances
in Italy and Romania which reflects the
strength of our product and customer
proposition.
SAFER. BETTER. TOGETHER.
888’s business is built on providing its
customers with a consistently great
experience. Ensuring that those who
choose to visit our websites can do so
with confidence and security is therefore
foundational to our continued success. In
addition, we focus with utmost diligence to
ensure that anyone for whom our games
are not intended, notably those who are
underage or vulnerable, are not drawn into
the gaming environment. We are committed
to proactively deploying our technology
and analytical expertise to identify and
help customers who are at risk and we are
continuing to develop the support, and tools
that we offer to customers to help them
make informed, safe decisions about their
gambling. Providing a safe environment is not
only the right thing to do for our customers,
but, by continuing to conduct business
responsibly, we are in a stronger position
to continue to generate long-term value
for all stakeholders, including shareholders,
employees and customers, as well as the
communities in which we do business.
In 2020, we have set out our ambitious
strategy for enhancing and promoting safer
gambling. To achieve this, we will continue to
engage with relevant stakeholders, including
regulators, industry bodies and charities,
who share our commitment to the ceaseless
improvement of standards across the
industry. We expand further on our strategy
and vision – which we have titled Safer.
Better. Together. – on page 51 of this Annual
Report.
08
888 Holdings plc Annual Report & Accounts 2019
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
DURING THE FIRST HALF OF 2019, 888 COMPLETED TWO
ACQUISITIONS INCLUDING THE LANDMARK ACQUISITION
OF A FIRST-CLASS SPORTS BETTING PLATFORM AND
EXPERIENCED TEAM BASED IN DUBLIN
STRATEGIC PROGRESS
888’s ambition is to continue to develop as a
leading global online gaming business with a
focus on operating in sustainable, regulated
markets. In order to achieve this, we continue
to: invest in developing our technologies,
products and marketing capabilities; expand
into new markets; explore M&A opportunities;
and focus on developing the safest and most
secure environment possible for customers.
During 2019, 74% of 888’s revenue was
generated from regulated and taxed
markets. We are pleased to report the
recovery of our business in the UK continued
during the year, with revenue growing by 20%
(24% at constant currency) underpinned
by our sharpened focus on providing safe
entertainment to recreational customers. In
addition to this progress, the Group further
expanded across several regulated European
markets, including launching its offering in
Sweden and Portugal, which marked 888’s
12th and 13th regulated markets globally. 888
has an enviable track record of converting
regulated market launches into significant
growth and, as a result, the fast-evolving
global regulatory landscape continues to
present exciting opportunities for the Group.
During the first half of 2019, 888 completed
two acquisitions including the landmark
acquisition of a first-class sports betting
platform and experienced team based in
Dublin.
For the first time, this has given 888 complete
ownership of technology and product
development across its four key online
gaming product verticals. We have been
delighted to welcome our new colleagues
in Dublin to the Group and remain very
excited by the long-term value-creation
opportunities this acquisition presents.
New product development remains critical
to 888’s continued progress, and we have
been delighted with the positive impact
of our Orbit casino platform throughout
2019 following its initial launch in May 2018.
The Orbit Casino platform has been our
most significant product development in
recent years, delivering a user experience
we believe is unrivalled in the market and
underpinning our stated ambition to become
the world’s premier online casino brand.
BOARD AND TEAM
As reported in the Group’s 2018 Annual
Report, in January 2019, the Board
announced the appointment of Itai Pazner,
previously the Group’s Chief Operating
Officer (the “COO”), as 888’s new Chief
Executive Officer (the “CEO”). Itai Pazner has
in-depth and widespread understanding of
both 888 and the online gaming industry
having spent the past 17 years with the
Group. He replaced Itai Frieberger, who
made a fantastic contribution during his
eight years as part of 888’s executive
leadership team.
In April, the Company announced that Ron
McMillan had stood down from the Board as
a Non-Executive Director in order to focus
on his other commitments. On behalf of the
Board, l would like to restate our thanks to
Ron for his commitment to 888 during his
time with the Group.
In September, we were pleased to announce
the appointment of Mark Summerfield to the
Board as an independent Non-Executive
Director and Chair of the Company's Audit
Committee. Mark brings extensive experience
of working with boards and audit committees
of major listed companies, and he is
already proving to be a valuable addition
to 888. The Company continues to look at
potential additional Non-Executive Director
appointments to the Board to reflect 888’s
strong diversity and leadership objectives,
whilst complementing and building upon the
existing expertise of the Board.
In January 2020, post the year-end, we
announced that after more than 15 years
with the Group, Aviad Kobrine will step down
from his role as Chief Financial Officer during
2020. Aviad joined 888 in 2004 ahead of
the Group’s IPO and was appointed as CFO
in June 2005. He has been an integral part
of the leadership team and made a truly
outstanding contribution to 888, supporting
the Group’s growth into a truly global online
gaming business. On behalf of everyone at
888, I would like to wish Aviad every success
for the future. Aviad will remain in his position
until a successor is appointed to enable a
seamless transition of responsibilities at the
appropriate time. We are progressing our
search for Aviad’s successor and will provide
an update in due course.
The Group’s progress continues to be
made possible by the outstanding skill and
commitment of our global teams. I would
like to take this opportunity to thank all my
colleagues across our business for their hard
work and contribution during 2019.
OUTLOOK
The Board continues to believe that, as
an agile operator with control of its own
technology and diversification across
products and markets, 888 is well positioned
to deliver further growth.
Whilst the COVID-19 outbreak is setting back
the global economy, 888 remains confident
that it will be able to deliver on its plans for
2020 set out in this Annual Report. We are
continuing to regularly communicate with
our teams having successfully implemented
a gradual and smooth transition to working
from home. In addition, we have invested in
IT and telephony upgrades to ensure that we
manage this period of uncertainty.
With the spread of COVID-19 resulting in
people spending increased time at home
and perhaps experiencing heightened
levels of stress and anxiety, the Board
is in no doubt that 888’s commitment to
preventing gambling related harm is even
more important than ever. We are proactively
communicating with our customers to
provide information on safer gambling and,
where necessary, offer support. In addition,
we have introduced new alerts to our
proprietary safe gambling software system,
the Observer, to ensure any areas of concern
are immediately flagged to our highly
trained customer care team so that they can
interact with customers and prevent harm.
The 2019 financial year finished with a
record revenue month in December 2019
and, as reported in our trading update on 24
March 2020, we have continued to perform
in line with the Board’s expectations during
2020 so far.
During 2019, we delivered good growth in our
UK business, underpinned by an enhanced
focus on entertaining recreational customers
in a safe and secure environment. We intend
to build on this further during the year
ahead and direct additional investment to
enhancing responsible gaming processes
and tools across the Group’s global markets.
The developing US market continues to
present a significant long-term opportunity
for 888 – one in which we will invest during
the course of 2020 by strengthening our
team, marketing and product offering. The
Group remains committed to expanding
in the US and we believe that we remain
well-placed to capture the potential
long-term opportunities unlocked by the
future establishment of economically
viable markets in newly regulated states.
Nevertheless, we will continue to appraise
potential partnerships that will support
888’s continued expansion and long-term
prospects in the regulated US market.
We remain focused on building on the
momentum in our Casino business by
continuing to enhance our product
proposition. In Sport, we were pleased to
launch our first proprietary sports product
in Sweden in April 2020 with further markets
planned during the remainder of the year.
Whilst the Poker market has remained
challenging for 888, we are firmly focused on
improving our performance in this important
product vertical and building on our
improved performance in H2 2019. The Group
has been pleased by progress made in the
first-phase roll out of its new poker platform,
Poker 8, which took place during the second
half of 2019 and, looking ahead to 2020,
we will be adding a number of exciting
new product features which are set to be
extended across the Group's poker markets
over the coming months.
M&A continues to be an important pillar
in the Group’s growth strategy and the
Board will continue to carefully appraise
and evaluate possible strategic and
tactical deals during 2020 where we see
the potential to enhance our business and
create value.
Above all, even in light of the challenges of
the COVID-19 outbreak, 888’s focus in 2020
will remain on delivering a truly satisfying
and safe experience for customers, thereby
supporting strong and sustainable growth
for our shareholders.
BRIAN MATTINGLEY
Non-Executive Chairman
15 April 2020
09
Corporate.888.com Chief Executive Officer’s Strategic Report
STRATEGIC PROGRESS UNDERPINNED BY
PRODUCT AND TECHNOLOGY LEADERSHIP
New product development remained a key
focus and competitive advantage for 888
and the continued success of the Orbit
casino platform across multiple regulated
markets throughout 2019 has been a major
achievement for the Group.
INTRODUCTION
Driven to be one of the world’s best
performing online gaming companies,
888 continues to strive to provide
customers with a safe and enjoyable
experience. This is underpinned by the
Group’s proprietary technology and
industry expertise developed over more
than two decades.
Having taken over as Chief Executive
Officer in January 2019, I am pleased
to update the Group’s stakeholders on
a year of further progress for 888 which
has been underpinned by good growth
in both of our Casino and Sport product
verticals. New product development
remained a key focus and competitive
advantage for 888, and the continued
success of the Orbit casino platform
across multiple regulated markets
throughout 2019 has been a major
achievement for the Group.
acquisition of a first-class sports
betting platform and team based in
Dublin, thereby giving 888 complete
ownership of its technology and product
development across its four key online
gaming product verticals (Casino, Sport,
Poker and Bingo). The post-acquisition
integration of the sports betting platform
is progressing in line with our plans and
we were delighted to launch our first
fully-in-house sports betting product in
Sweden in April 2020.
Continuous investment in further
enhancing responsible gaming processes
and tools has remained a key focus for
the Group, and we are proud to have
launched a new corporate responsibility
framework. Our people are incredibly
passionate about this critical focus
for our Group which is expanded on in
greater detail below and in subsequent
areas of the 2019 Annual Report.
The COVID-19 outbreak has given rise to
unprecedented challenges to the global
economy, and 888 is no exception. I am
proud to be able to say that we continue
to prioritise the health and wellbeing of
our staff and customers above all else.
We have successfully implemented a
smooth transition to employees working
from home across the Group, and I am
delighted with how our teams have
adapted. In addition, we continue to
recognise that, with people spending
more time at home and with increased
levels economic uncertainty, 888’s
vigilance on preventing gambling related
harm is even more important than ever.
In the course of 2019, 888 completed
two acquisitions including the strategic
888 remains well positioned as a highly
diversified operator across product
verticals and regulated markets. As
a result of the Group’s continued
momentum during the year, as well as
its strong technology and outstanding
team, the Board continues to believe
that 888 has an excellent platform to
deliver continued growth and further
shareholder returns.
SAFER. BETTER. TOGETHER
Launched in 2020, we have refined
and expanded a new corporate social
responsibility framework that will help
888 to deliver against its broader
responsibilities and commitments as
a business whilst also supporting the
Group’s long-term, sustainable growth.
This framework covers three key
focus areas:
A SAFE PLACE TO PLAY
We acknowledge the potential risks
that online gambling can present.
We are committed to continuous
improvements to make gambling safe,
enjoyable and not a cause of harm.
A GR8 WORKPLACE
The talent, commitment and skill of
our global teams makes our business
what it is. We are committed to
promoting a working environment
that enables our people – and our
business – to flourish.
MORE THAN AN OFFICE
We are supportive of the communities
where we operate and - although we
have a relatively low environmental
impact compared to certain other
industries – we recognise and strive
to mitigate the effects our operations
have on the planet.
Our commitments and activity to drive
continuous improvements in these three
areas are expanded on in greater
detail on pages 50 to 67 of the 2019
Annual Report. The Board views this
framework as integral to delivering
sustainable growth and long-term value
for shareholders. It will be integrated
throughout the business and be a core
driving force of the way we operate.
10
888 Holdings plc Annual Report & Accounts 2019
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
ITAI PAZNER
OWNING AND DEVELOPING ITS OWN TECHNOLOGY ENABLES
888 TO CREATE DIFFERENTIATED PRODUCTS, ADAPT TO
REGULATORY CHANGES EFFECTIVELY, ENHANCE CUSTOMER
SAFETY, AND RESPOND QUICKLY TO NEW OPPORTUNITIES
GROWTH STRATEGY & PROGRESS
888’s strategy for sustainable growth
is focused on achieving the Group’s
significant potential across a diverse
range of products and markets. The
delivery of this strategy is based
upon achieving the Group’s organic
growth potential, as well as evaluating
attractive M&A opportunities.
During 2019, the Group continued
to make progress against the key
pillars of its strategy, outlined below,
underpinned by the strength of its
people, unique technology and product
expertise. 888 owns and develops its
own online gaming technology and
associated platforms which provide
the bedrock of the Group’s success
and progress. Owning and developing
its own technology enables 888 to
create differentiated products, adapt to
regulatory changes effectively, enhance
customer safety, and respond quickly to
new opportunities. In addition, multiple
areas of 888’s operations are directed
by highly sophisticated business
analytics which are critical to the
Group’s approach to safer gambling,
product development, marketing, and
customer relationship management.
During 2019, 888 continued to make
progress against each of the following key
pillars of its growth strategy:
Continue to protect customers
and act responsibly
Ongoing development of 888’s
core B2C business
Casino
Sport
Poker
Bingo
Expansion in regulated markets
Enhancing efficiencies
11
11
12
12
13
13
14
15
Continue to protect customers
and act responsibly
888’s objective, above all else, remains
to ensure that all those who visit
the Group’s websites can do so with
confidence and safety, and that
those for whom our products are not
intended are not drawn into the gaming
environment. We acknowledge the
potential risks that online gambling can
present and are committed to ongoing
improvements to make gambling safe,
enjoyable and not a cause of harm.
The Group’s safer gambling
commitments are outlined in more detail
on page 51 of the 2019 Annual Report.
To deliver our comprehensive
commitments in this crucial area of our
business, we are focused on progress in
four key areas:
1. Knowing our customers
2. Our culture of care
3. Empowering our customers
4. Participating in industry
collaboration to raise standards
888’s approach to each of these areas
is underpinned by continued investments
in its proprietary technology and highly
trained Responsible Gaming team.
During the first half of 2019, the Group
appointed a new Responsible Gaming
Director with extensive experience within
888 who has oversight of the continuous
improvement of our responsible gaming
operations, systems and processes.
888’s specialist Responsible Gaming
team continues to leverage the Group’s
in-house developed player behaviour
monitoring tool, Observer, which sits at
the heart of the Group’s responsible
gaming strategy. The Observer system
uses sophisticated algorithms to flag
unusual or potentially concerning
customer activity to our team. Our highly
trained colleagues then decide the
most appropriate interaction with the
customer that will help the customer to
make informed decisions about their
gambling and, where appropriate, select
the right tools to control, limit or prevent
their play.
During 2019, the Group continued to
invest in further developing its unique
Observer software to better predict
and identify problematic or potentially
problematic gambling before any harm
is caused in addition to investing in
additional training for our Responsible
Gaming team.
Ongoing development of 888’s
core B2C business
In 2019, revenue from 888’s core B2C
business continued to represent the
significant majority of Group revenue
at 95%. The Group remains focused on
developing its B2C business by driving
progress in each of its four product
verticals: Casino, Sport, Poker and
Bingo. We aim to do this by providing
a first-class and safe online gaming
entertainment experience for customers
underpinned by continuous product
development that differentiates 888’s
proposition from those of competitors.
The Group has ambitious targets to
develop its core B2C business with a
strategic focus on expanding 888’s
presence amongst casual customers
across regulated markets globally. The
strengths of 888’s return-on-investment
driven marketing underpinned by big-
data algorithms, as well as our first-
class product technology team remain
critical to the Group’s ability to deliver
continued growth in the B2C business.
Technology businesses in multiple areas
of consumers’ lives, from media and
entertainment to travel and banking,
are consistently innovating and raising
the standards that consumers expect
of online and mobile services. As a
result, our customers’ expectations of
their digital experiences are increasing.
Consequently, we continue to focus on
improving multiple areas of our products,
including enhancing interfaces, greater
personalisation, improving loading times,
developing responsible gaming tools,
and delivering quality customer support
to ensure that our customers enjoy the
best possible user experience with 888.
The Group’s unique marketing expertise
remains critical to growing and
expanding 888’s brands in a cost-
efficient and profitable manner. The
effectiveness of our marketing was again
demonstrated in 2019 with a record
number of new customers – in excess of
one million – signing up to 888’s brands
during the year.
11
Corporate.888.com Chief Executive Officer’s Strategic Report continued
GROWTH STRATEGY
BY PRODUCT
CASINO
Focused on being the
global brand leader
Casino continued to deliver
strong growth in 2019 with a 13%
increase in revenue to US$359.3
million (2018: US$317.6 million),
representing a 17% increase
in revenue in 2019 at constant
currency.
CASINO REVENUE
$359.3m
Casino also delivered a 26%
increase in active players from
2018 and a 43% increase in new
customers from 2018.
ACTIVE PLAYERS
+26%
NEW CUSTOMERS
+43%
More information
Further details on the
Group’s Casino performance
are included in the Business
& Financial Review
Despite being the Group’s largest
product vertical, the Board believes
that Casino continues to offer
significant growth potential for the
Group. Underpinned by the strength
of 888’s brand heritage developed
over more than 20 years in the online
casino industry in combination with the
advantages of Orbit, our unique platform
initially focused on the casino market,
the Board believes that 888casino has
the potential to become the world’s
dominant online casino brand.
The roll-out of Orbit commenced in May
2018 and represented the Group’s most
exciting new product development of
recent years. The Orbit platform has
enhanced the user experience through
enhanced interface response times,
increased customer personalisation by
leveraging artificial intelligence (“AI”)
capabilities, and improved display of
games and content to customers.
12
The Group has seen very positive
reactions in customer activity as Orbit
has been rolled-out market by market.
As a result, we are currently in the
process of importing several of Orbit’s
exciting features into 888’s Sport, Poker
and Bingo products.
We are delighted that our product
innovation and subsequent progress has
been widely recognised with two important
and high-profile industry awards (EGR
– Casino Operator of the Year 2019 and
Gaming Intelligence – Casino Operator of
the Year 2020).
With approximately 1,000 different games
now in its portfolio, 888casino continues to
differentiate itself in the market by offering
a unique range of content. We continue
to bring together a curated selection of
leading games from top-quality third-
party providers alongside bespoke games
developed by our Section8 games studio.
Section8 released more than 20 new
titles last year (including our first ever 888
branded online scratch cards), taking
the total number of in-house developed
games offered by 888casino to more than
120. During 2019, nearly 1.5 million players
played Section8-developed games on
888casino, wagering more than $3 billion.
Continued delivery
against our ambitious
growth plans
Sport continued to deliver solid
growth in 2019, with a 12%
increase in revenue to US$90.0
million (2018: US$80.3 million)
representing a 19% year on year
increase at constant currency.
SPORT REVENUE
$90m
Sport also delivered a 19% year
on year increase in first time
depositors ("FTDs") and deposits
in 2019 against the prior year.
NEW CUSTOMERS
+19%
More information
Further details on the Group’s
Sport performance are included
in the Business & Financial review
22
22
SPORT
888Sport has achieved stand-out
growth over recent years and is now
the Group’s second largest product
vertical. The Group’s ambition is to
continue to develop 888sport as a
leading online sports betting brand
across global regulated markets. To
deliver this, we continue to focus on
ensuring that 888 offers a world-class
sports betting product for customers
with a wide range of events and live
betting options, as well as competitive
odds and a great user experience.
In July 2019, the Group commenced the
roll-out of a new in-house developed
888sport product interface. This was
developed to deliver an improved
customer experience and a more unified
look and feel across 888’s brands. The
new interface was deployed during the
second half of the year and we are
encouraged with the early customer
feedback to the enhanced product.
In March 2019, the Group was
delighted to announce the exciting and
strategically important acquisition of
the sports betting platform and team
previously behind the BetBright brand for
a total consideration of US$ 19.3 million,
thereby giving 888 complete ownership
over an end-to-end sports betting
platform for the very first time. During
2019, the Group was focused on the
integration of the acquired technology
and team into 888’s business and we are
pleased to have commenced a phased
and market-by-market roll out of the
Group’s proprietary sportsbook solution
with a successful launch in Sweden in
April 2020.
The Board believes that this acquisition
will enhance the Group’s long-term
prospects in the significant global
sports betting market by adding a
first-class team of sports betting
professionals to the Group while also
enabling 888 to fully leverage its
marketing and analytics capabilities
in this critical product vertical.
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
During 2019, we continued to promote
and develop the 888poker brand
by sponsoring the 50th anniversary
World Series of Poker tournament,
a partnership that we will continue
in 2020. In addition, 888poker LIVE,
our series of live poker tournaments,
continue to attract growing numbers of
poker players from around the world to
play in live events in some of the world’s
greatest cities. The increasing popularity
of these events continues to support
a steady rise in brand awareness for
888poker.
The Group is firmly focused on improving
its Poker performance in 2020 in order
to return Poker to long-term sustainable
growth. To achieve this, we have been
focused on delivering new product
enhancements including the roll-out
of Poker 8, a next generation poker
platform, which we believe will sharpen
888’s appeal amongst recreational
poker players. In March 2019, we were
pleased to begin a phased roll-out
of Poker 8 to desktop players on the
888poker.com network which initially
provided enhanced graphics, a cleaner
interface and improved speed for
players. We were pleased by the first
phase of the roll-out and continued
to add new features, including mobile
focused enhancements, during the
second half of 2019. During 2020,
we have a number of additional new
product features to add to Poker8
that have been developed following
extensive research and feedback from
customers, and we are looking forward
to introducing the final-phase platform
across all of the Group's poker markets
in the coming months. In addition
to these product enhancements, we
continue to develop new, larger prize
pools for our players and, during 2020,
we have two major events planned – the
Millions Superstorm and the SuperSeries
– that will enable players of all skill-levels
to potentially access big prizes.
POKER
Delivering product
enhancements to
return to growth
Poker revenue declined by 13%
in 2019 to US$42.7 million
(2018: US$ 49.0 million).
POKER REVENUE
$42.7m
However, Poker revenue in the
second half of 2019 increased
by 7% compared to H2 2018,
reflecting an improvement in the
Group’s performance.
REVENUE (H2 2019 VS H2 2018)
+7%
More information
Further details on the Group’s
Poker performance are included
in the Business & Financial review
22
Whilst Poker continued to be a
challenging market for 888 during 2019,
we maintained our strategic position
as one of the top online poker brands
globally by player liquidity. In addition,
888poker remained an important
customer acquisition channel for the
Group, with 18% of the Group’s B2C FTDs
during the period joining 888 through
888poker's websites.
In July 2019, 888 launched 888poker
in Portugal and, at the same time,
introduced 888’s first ever inter-country
shared poker liquidity network in Europe.
This has enabled 888’s customers
in Spain and Portugal to play poker
against each other, thereby increasing
the availability of the games and
formats that 888’s customers in those
markets wish to play. We have been
pleased with the reaction to the network
with good levels of new customer
acquisition in Portugal, resulting in
a considerable increase in liquidity
available for Spanish players.
BINGO
Building on our position
in a challenging market
B2C Bingo recorded revenue
growth of 19% to US$38.5 million
in 2019 (2018: US$32.4 million),
benefitting from the contribution
of a portfolio of acquired Bingo
brands in March 2019. On a like-
for-like basis, Bingo revenues
declined 3%*.
B2C BINGO REVENUE
$38.5m
New customer acquisition
increased by 23% in 2019 (a 10%
increase when excluding the newly
acquired brands) with average
revenue per player also increasing.
NEW CUSTOMERS
+23%
More information
Further details on the Group’s
Bingo performance are included
in the Business & Financial review
22
In February 2019, the Group announced
the acquisition of a portfolio of bingo
brands, including the well-established
Costa Bingo brand, which previously
operated as B2B brands on the Group’s
B2B Dragonfish Platform. The addition
of the new brands increased new
customers acquisition by 23% and
revenue by 19% (organically revenue
declined 3% at constant currency and
new acquisition increased 10%) in 2019.
The Bingo market in the UK has
remained competitive and challenging
for both the Group’s B2C brands and
B2B partners during 2019. This in part
reflects increased fiscal pressures on
UK operators as a result of a further
increase in remote gaming duty, as well
as a stricter regulatory environment
resulting in tighter customer controls
being applied by responsible operators
such as 888.
* At constant currency, adjusted for
the acquired brands.
13
Corporate.888.com Chief Executive Officer’s Strategic Report continued
Expansion in regulated markets
The Group’s geographic
expansion is based upon
driving 888’s growth in
various markets that have
sustainable regulatory
frameworks for online
gaming and where we
are able to benefit from
marketing opportunities
for our brands.
Revenue from regulated and taxed
markets in 2019 continued to represent
the majority of Group revenue at 74%
of revenue (2018: 70%).
REGULATED & TAXED MARKET
74% of revenue
More information
Further details on the Group’s
geographic performance are
contained in the Business
& Financial Review
14
UK
The Group delivered growth in the
UK market which represented 36%
of Group revenue in 2019.
This positive performance reflects
888’s clear and unwavering focus on
entertaining recreational customers in
a safe and secure environment. As a
result of this customer focus, FTDs in the
UK increased by 26% whilst average
revenue per customer decreased by
10%, reflecting the Group’s focus on
providing safe entertainment for an
increasingly recreational customer
base. The success of our recreational
customer focus has been further
demonstrated by the reduction in the
Group’s UK Casino revenues generated
by ‘VIP’ customers reducing to 4% in
2019, compared to approximately 35%
at the beginning of 2018.
22
EUROPE
In Continental Europe, the Group
continued to achieve excellent
progress in Italy, where revenue
increased by 30% (37% at
constant currency) and FTDs
increased by 18% year on year
despite the headwinds presented
by the introduction of an industry-
wide marketing ban in H2 2019.
ITALIAN REVENUE
+30%
This strong performance reflected
the strength of 888’s brands in the
Italian market, highly effective digital
marketing investment, and the impact
of Orbit, which was launched in the
second half of the prior year. The Group
also performed very well in Romania,
reflecting strong momentum in both
Sport and Casino, the latter of which
benefited from the launch of Orbit in
August 2019. As previously indicated,
the Group’s progress in Spain was
moderated by weaker Poker activity
which also adversely impacted customer
cross-sell into 888casino.
Revenue from Spain decreased by
10% (5% at constant currency) driven
by increased competition in the Poker
vertical. The Group is encouraged by
the results of its shared liquidity network,
with Portugal launched during 2019 and
from the progress of Poker 8 that will
hopefully be deployed late 2020.
During 2019, the Group successfully
launched in two new regulated European
markets, Sweden and Portugal, where it
is aiming to build on 888's proven track-
record of efficiently achieving growth in
attractive regulated markets.
NEW REGULATED MARKETS
2
In Sweden, which is one of the largest
online gaming markets in Europe,
888 launched its 888poker, 888casino
and 888sport brands in January, and
the Board has been pleased with the
performance. The Group continues to
appraise new regulated markets and
is looking forward to the anticipated
regulation of the Netherlands during
2021.
In Portugal, the Group launched
888casino in January 2019 and, at
the end of July 2019, was pleased to
introduce the 888poker brand to the
market. As mentioned above, the launch
of Poker in Portugal has enabled the
Group to establish its first European
inter-country poker network and pool
poker players across the Spanish and
Portuguese markets.
US
In the US market, the Group
remains focused on investing
to deliver medium-to-long-term
growth opportunities for 888.
This includes continuing to appraise
strategic partnerships that would
provide both brand-building and market
access opportunities for 888 in this
developing and potentially significant
market.
In July 2019, we were pleased to launch
Orbit in New Jersey, as 888 continues
to invest in its product proposition
in the US to align it with the quality
and flexibility of the Group’s products
across other regulated markets globally.
We have been encouraged by the
performance of this product upgrade,
which was supported by increased
marketing activity in the state including
888 Holdings plc Annual Report & Accounts 2019 the extension of 888casino’s sponsorship
deal with the National Football League’s
(NFL) New York Jets for the 2019-20
season. The renewed partnership has
built on 888's successful partnership
during the 2018-19 season and delivered
extensive 888casino branding within
the 82,000-plus capacity MetLife
Stadium in New Jersey. As part of the
latest deal, New York Jets branding has
also featured on 888casino’s site and
app in New Jersey with promotions also
featured across the team’s websites
and social channels. 888casino was
also proud to be the official game
sponsor for the New York Jets’ October
2019 match against the reigning NFL
champions the New England Patriots
which provided a unique brand-building
opportunity for the Group.
During 2020, we intend to further invest
in our team, marketing and product
development to deliver continued
progress in the US. In addition, we are
evaluating the opportunity to launch our
B2C brands in additional regulated US
states either later in 2020 or in the first
half of 2021.
We continue to appraise growth
opportunities further afield and, in the
first half of 2019, the Group, through
its Dragonfish division, teamed up with
a local partner, Boldt S.A., to apply for
a licence with the aim of establishing
an online presence in the province of
Buenos Aires, Argentina.
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
OUR TEAM
888 has an outstanding team
and culture across the business,
which is led by a talented
and experienced operational
management team.
In March 2019, we were delighted
to welcome approximately 90 new
colleagues to the Group based in
Dublin following the acquisition of
the BetBright sport platform.
The BetBright sportsbook has
been developed by a fantastic
team and our new colleagues
bring genuine sports betting
“DNA”, expertise and industry
know-how to the Group. Our new
colleagues have embraced being
a part of 888, and I would like to
thank them for their commitment
since joining 888.
OUR EMPLOYEES
1,400+
Our team of approximately 1,400
people, now spanning seven global
offices, is brought together by
a shared customer-centric and
“can-do” culture.
On behalf of the Board, I would like
to thank all my colleagues across
the world for their contributions
to the Group’s continued progress
during 2019.
Enhancing efficiencies
Management remain steadfastly
focused on maximising operational
efficiencies and maintaining cost control
by ensuring that the Group has the
correct structure, teams and operations
for success across its global markets.
In the first half of 2019, we expanded
operations in Romania to support the
Group’s continued delivery against
its long-term growth strategy. This
expansion reflects the outstanding
research and development and IT
talent available to the Group in the
Romanian market. As a result, the
Group’s team of more than 300
employees in Bucharest has been
expanded through the transfer of a
number of 888’s technology team from
Israel, as well as a number of new hires.
BUCHAREST EMPLOYEES
300+
In addition, by streamlining and
focusing the Group’s world-class
Israeli technology hub, we believe that
we will deliver important operational
efficiencies and further improve working
practices to support the Group’s long-
term growth.
The Group's marketing ratio decreased
to 28.9% of revenue in 2019 (2018:
29.3%). This reflected the optimisation
and efficiency of 888's marketing
investment which resulted in a strong
22% increase in FTDs in the B2C
business in 2019. Overall, the Group's
cost ratio* increased to 85% of
revenue (2018: 80%) primarily driven
by: increased gaming duties in the
UK due to the new tax regime; the
Group's expansion in various regulated
and taxed markets; and a partial
increase in overheads due to the
BetBright acquisition which has reduced
profitability in 2019.
The decline in B2B revenue is a result of
structural changes in the Group's B2B
business, including: the termination of the
Group's agreement with Cashcade; the
acquisitions of Costa Bingo in 2019 and
AAPN at the end of 2018; and weakness
in the B2B Bingo market in the UK.
* Total of operating expenses, gaming taxes and
duties, research and development expenses,
selling and marketing expenses and administrative
expenses of revenue.
15
Corporate.888.com The Online Gaming Cycle
ANALYTICS-DRIVEN
APPROACH
888’s highly-skilled team and its internally
generated know-how remain major drivers
of the Company’s value. 888 carefully
manages and sustains these resources and
details of key actions taken in 2018 are set
out in the Corporate Responsibility Report
on pages 50 to 67.
GAMING REVENUE
Player activity leads to revenue for the Group.
This then enables our marketing teams to invest
in campaigns to acquire more new customers.
ONLINE GAMING CYCLE
888 employs an extensive team of
highly trained and experienced
business analytics and data-mining
professionals. Teams across 888,
including product development,
marketing and customer support,
leverage this extensive and constantly
evolving data and, by applying robust
statistical models and subject always
to our safe and responsible gaming
policies, influence the following factors
in the online gaming cycle:
ACTIVITY
Whilst subject always to our safe and
responsible gaming policies, offering a high-
quality product helps to increase customer
activity and, consequently, life-time value
with 888. 888’s ability to successfully create
proprietary games, enhance personalisation,
offer great odds, and develop new functionality
on mobile and desktop platforms helps to
differentiate 888 from its competitors.
CUSTOMER RELATIONSHIP
MANAGEMENT (”CRM”)
Once 888 has acquired a customer, our goal is to make sure
that they have a great, safe experience with 888. Subject
always to our safe and responsible gaming policies, tools used
to achieve this include personalised communications and the
promotion of relevant offers and bonuses.
1616
888 Holdings plc Annual Report & Accounts 2019
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
SAFER GAMBLING
We acknowledge the potential risks that online gambling
can present. We are committed to ongoing improvements
to make gambling safe, enjoyable and not a cause of harm.
The sustainability of our business rests on ensuring our
customers are empowered to make safe and responsible
decisions about their betting and constantly ensuring that
those struggling to stay in control of their play receive the
support they need. 888 is constantly developing new and
innovative ways to deliver a safer gaming environment.
Our goal is to ensure that all those who visit our sites can do
so with confidence, and that those for whom our games are
not intended, notably underage and vulnerable individuals,
will not be drawn into the gaming environment. We strive to
ensure that those few customers who develop a gambling
problem are quickly identified and helped. Our strategy for
safe online gambling is disclosed in more detail on page 50.
MARKETING
Central to the Group’s approach to growth is an
unwavering focus on return-to-cost driven marketing.
The Group continually evolves and develops new
marketing techniques and campaigns, both online
and offline, to increase awareness of its brands and
create customer loyalty. The returns to cost ratios
of all marketing campaigns are rigorously tested
against strict criteria before being extended to
their target markets. This helps to ensure that 888’s
marketing spend remains cost-efficient.
SAFER.
BETTER.
TOGETHER.
ACQUISITION
Effective marketing helps to attract
customers to 888’s brands. Strong levels
of customer acquisition, measured by
increases in first-time depositors, is the
fuel for 888’s future growth.
DEPOSITS
Customers need to be able to enjoy a seamless
journey from the moment they visit the Group’s
websites through to making deposits and then
enjoying 888’s games. 888’s proprietary payment
processing capabilities support a wide variety of
languages, methods and currencies, and it is vital
that the Group is able to offer efficient and easy
to use payment processing.
Corporate.888.com
17
17
Corporate.888.com 888's B2C Proposition
ESTABLISHED AND POPULAR
ONLINE GAMING BRANDS
Online casinos replicate the real-life casino
experience with players playing against ‘the house’
across online versions of classic casino table games
such as roulette and blackjack, as well as slot and
video games. In these games, the house has a
statistical advantage or ‘edge’.
Casino gaming revenue is represented by the
difference between the amounts of bets placed
by customers less amounts won.
Sportsbook online gaming revenue comprises bets
placed less pay-outs to customers.
CASINO
How we generate revenue
888casino is one of the longest standing online
casino brands in the market. 888casino aims to
provide the most enjoyable online experience
available by combining exclusive games developed
in-house by Section8 alongside branded video slots
and ‘live’ Casino games, which offer high-quality
video streamed casino games with a range of
professional dealers.
In May 2018, the Group launched a new Casino
platform, internally called Orbit. This represented
the Group’s most exciting new product development
of recent years and has been recognised with two
important and high-profile industry awards (EGR
– Casino Operator of the Year 2019 and Gaming
Intelligence – Casino Operator of the Year 2020).
SPORTS
How we generate revenue
888sport is a fast-growing sports betting
destination. At the heart of the 888sport offer is
genuine passion for sport, with thousands of live
and pre-event betting markets on offer across
hundreds of events, from the obvious to the
obscure.
In March 2019, the Group was delighted to
announce the exciting and strategically important
acquisition of a sports betting platform and team,
thereby giving 888 complete ownership over an
end-to-end.
18
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
POKER
How we generate revenue
888poker offers a leading poker environment that
enables players of all abilities to enjoy the games
of their choice whether on mobile or desktop.
888poker offers Texas Hold’em, Omaha Hi’Lo, 7
Card Stud and other poker variations in Pot Limit,
Fixed Limit and No Limit formats.
During 2020, 888 is rolling out its new poker
platform, Poker8, which has been developed
following customer feedback and will provide
a slicker and more intuitive user experience for
customers.
In online poker, the operator acts as the virtual
host for the game and provides a platform that
enables customers to play various forms of poker
against each other.
Poker revenue represents the commission
(or ‘rake’) charged from each poker hand in ring
games, and entry fees for participation in Poker
tournaments.
BINGO
How we generate revenue
888’s bingo brands each have engaging themes, a
variety of games and a strong sense of community,
replicating the experience of traditional bingo
halls. The Group’s bingo brands also benefit from
an extensive range of 888-developed slot games,
casino games and scratch cards that are offered
alongside traditional bingo formats.
888’s portfolio of brands includes 888ladies, Costa
Bingo and Wink Bingo.
As with traditional bingo halls, online bingo rooms
offer customers the chance of winning prizes by
purchasing tickets and playing their bingo format
of choice.
Bingo online gaming revenue is represented by
the difference between the amounts of tickets
purchased by customers less amounts won.
19
Corporate.888.com 888 Strategy and Progress
INTRODUCING
SECTION8 STUDIO
Q&A
Or Shavit
888’s Director of Casino & Games
Product and heads-up 888’s in-house
games development division, Section8.
In 2019, six out of 888casino’s
top 20 performing games were
developed by Section8 which is
a glowing endorsement of our
ability to identify and create
fantastic games.
20
WHAT ROLE DOES SECTION8 PLAY WITHIN 888?
Section8 is a very important part of 888’s Casino
proposition. Section8 creates unique games ranging from
slots to scratch cards that customers can only play with
888.
Through 888casino, we offer more than 1,000 games from
third-party games developers alongside approximately
125 unique Section8 games. This means that customers
have a huge choice of games to play. As a result, we
leverage one of the major advantages of 888’s new Orbit
platform - the ability to use artificial intelligence (‘AI’) to
personalise which games are highlighted to customers.
This helps to keep our customers’ experiences with 888
exciting and relevant.
The unique games that we create at Section8 ensure that
888 offers a playing environment for customers that is
truly unique and that cannot be replicated anywhere else.
In addition, we do not pay any royalties on our in-house
developed games; this means that as well as improving
the customer proposition these games also support the
Group’s profitability.
CAN YOU EXPLAIN THE PROCESS OF DEVELOPING AN
‘IN-HOUSE’ GAME?
We have an excellent team of developers at Section8
who are solely focused on developing games that meet
or exceed the highest standards of our industry.
As with everything at 888, the process of creating a
new game begins with data. We use the wealth of data
we have developed over more than two decades as an
online casino provider to help us to understand customer
preferences and what will make a truly successful game.
Every new game we create will be tweaked to respond to
different markets where there are different regulations,
preferences and languages.
WHAT WERE THE KEY DEVELOPMENTS AT SECTION8
DURING 2019?
During the year, approximately 1.5 million customers
played Section8’s games. We released 20 new slot
games, created a new and very popular daily jackpot
game. We also started the process of developing exciting
new scratch card games. It was a busy year!
WHAT IS IN STORE FOR 2020?
We will continue our momentum in 2020. We believe
that developing even more unique content will play an
important part in driving 888casino towards its goal of
being the world’s leading online casino brand. One of
Section8’s main focus areas will be on developing new
and more immersive games that feature even better
visuals and audio.
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
STRATEGIC PROGRESS
HIGHLIGHTS
STRATEGIC PILLARS
HIGHLIGHTS IN 2019
Continue to
protect customers
and act
responsibly
• Continued focus on safer gambling with
• Launch of “Too much is too much” safer
the launch of 888’s ‘Safer. Better. Together.’
strategy.
• Interactions with UK customers regarding
safer gambling increased 16%, reflecting
888’s proactive approach to preventing
gambling-related harm.
• UK customers’ usage of safer gambling tools
increased 28% as 888 continues to promote
safe play to its customers.
gambling advertising campaign across TV,
social and print channels in the UK and
Spain in early 2020.
• Development of new My Play feature that
will launch in 2020 across each of 888’s
websites to provide customers with improved
understanding of their gambling behaviour
and further increase the prominence of
safer gambling tools.
Ongoing
development of
888’s core B2C
business
Expansion in
regulated markets
• B2C new customer acquisition increased
22% translating to a record of more than
one million new customers joining 888’s
brands during the year.
• Casino continued to deliver stand-out
growth reflecting investment in product
leadership with new customer acquisition
up 43% year on year; active players up 26%
year on year; deposits up 31% year on year.
• Continued strong progress in Sport despite
strong prior year comparatives with 19%
year on year increases in both first-time
depositors and deposits.
• Continued investment in delivering growth
opportunities for 888sport with the strategic
acquisition and ongoing integration of
the first-class sports betting team and
proprietary platform previously behind
the BetBright brand.
• Investment in Poker turnaround with further
development of the Group’s new Poker 8
platform and successful launch of shared
player liquidity network across Portugal
and Spain.
• B2C Bingo new customer acquisition
increased 23% supported by the acquisition
of a portfolio of bingo brands, including
Costa Bingo; pro-forma Bingo new customer
acquisition increased 10%.
• Revenue from regulated and taxed markets1
accounted for 74% of revenue (2018: 70%).
• Highly successful launches in two new
regulated markets – Sweden and Portugal.
• Further recovery and good growth in the UK
where revenue increased by 20% driven by
first-time depositors growth of 26%.
• Average UK revenue per customer
decreased, reflecting the Group’s focus on
an increasingly recreational customer base.
Revenue from VIP customers reduced to less
than 5% of UK Casino revenue.
• Like-for-like UK Sport revenue increased 44%
with deposits increasing 30%.
• In Italy, despite advertising restrictions and
strong comparatives including the impact of
the 2018 FIFA World Cup, revenue increased
by 30% (37% at constant currency) and
first-time depositors increased by 18%.
• Revenue from the Romanian market
increased by 31% (40% at constant
currency) accompanied by a 41% increase
in first-time depositors.
• Revenue from 888casino in New Jersey
increased 56% in 2019 supported by the
launch of Orbit in July 2019.
• The Group continues to explore further
partnerships and new growth opportunities
for the Group’s B2B business in the US.
Enhancing
efficiencies
• The marketing ratio decreased to 28.9%
(2018: 29.3%) despite record breaking levels
of first-time depositors in the B2C business,
reflecting highly efficient investment.
The strategic report, from pages 10 to 21, was reviewed, approved by the Board on 15 April 2020 and signed on its behalf.
Corporate.888.com
ITAI PAZNER
Chief Executive Officer
21
21
Corporate.888.com Chief Financial Officer's Report
2019 BUSINESS
& FINANCIAL REVIEW
During 2019, 888 delivered further progress
against its strategy for long-term growth.
The Group has continued to focus on
expanding its brands across regulated markets
supported by delivering product innovations
to further enhance the customer experience.
FINANCIAL SUMMARY
Revenue – B2C
• Casino
• Sport
• Poker
• Bingo3
Total B2C
B2B3
Revenue before VAT accrual release
VAT accrual release4
Revenue
Adjustment of VAT accrual release
Operating expenses5
Gaming taxes and duties
Research and development expenses6
Selling and marketing expenses
Administrative expenses7
Adjusted EBITDA excluding IFRS 16 impact8
IFRS 16 impact on EBITDA
Adjusted EBITDA8
Depreciation and amortisation
Finance
Adjusted profit before tax
Share benefit charges
VAT accrual release
Exceptional items9
Gain from re-measurement of previously held equity interest in joint ventures
Share of equity accounted associates loss
Profit before tax
Adjusted basic earnings per share
Basic earnings per share
20191
US$ million
20181
US$ million
Change
Constant
currency2
Change
Reported
17%
19%
(12%)
24%
15%
(39%)
10%
13%
12%
(13%)
19%
11%
(41%)
6%
4%
7%
37%
9%
4%
26%
(14%)
(20%)
359.3
90.0
42.7
38.5
530.5
29.8
560.3
—
560.3
—
(147.5)
(95.5)
(35.6)
(161.8)
(34.3)
85.6
6.6
92.1
317.6
80.3
49.0
32.4
479.3
50.6
529.9
10.7
540.6
(10.7)
(137.8)
(69.9)
(32.8)
(155.0)
(27.3)
107.1
—
107.1
(32.2)
(20.3)
(6.7)
53.2
(5.4)
—
(2.3)
—
(0.2)
45.3
13.5¢
11.3¢
(0.1)
86.7
(8.9)
10.7
11.1
9.3
(0.2)
108.7
20.2¢
26.3¢
Alternative Performance Measures (‘APMs’) used in this Business & Financial Review do not have standardised meanings and therefore may not be comparable to similar
measures presented by other companies.
22
888 Holdings plc Annual Report & Accounts 2019
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
AVIAD KOBRINE
DURING 2019, 888 ACQUIRED A GROUP RECORD OF
MORE THAN ONE MILLION NEW FTDS ACROSS ITS
B2C BRANDS GLOBALLY REPRESENTING A 22%
INCREASE YEAR ON YEAR
RECONCILIATION OF PROFIT BEFORE TAX TO EBITDA AND
ADJUSTED EBITDA
20191
US$ million
20181
US$ million
Profit before tax
Finance
Depreciation
Amortisation
EBITDA
Exceptional items9
VAT accrual release4
Share benefit charges
Gain from re-measurement of
previously
held equity interest in joint ventures
Share of equity accounted
associates loss
Adjusted EBITDA8
1 Totals may not sum due to rounding.
45.3
6.7
12.6
19.6
84.2
2.3
—
5.4
—
0.2
92.1
108.7
0.1
5.3
15.0
129.1
(11.1)
(10.7)
8.9
(9.3)
0.2
107.1
2 Constant currency: 888 reports its financial results in US$ however (i) it generates
certain revenue streams from customers using other currencies and (ii) it incurs
costs in various currencies. Due to the strong US$ in 2019 compared to 2018,
reported revenue and profit were adversely impacted. Constant currency has
been calculated as follows: (i) Revenue: with the exception of Poker, by applying
2018 exchange rates to revenue generated during 2019. Poker revenue was also
adversely impacted given that many Poker customers fund their US$ bankroll
using other currencies, which suffered reduced purchasing power compared to
the US$. It is difficult to quantify reliably this indirect impact (other than a small
adjustment which was made to Poker revenue generated in Euro) (ii) Costs: costs
were retranslated by applying 2018 exchange rates.
3 B2B in 2018 included Costa Bingo games, which is now presented in the B2C Bingo
segment due to Costa Bingo games acquisition in March 2019.
4 Revenue in 2018 includes US$10.7 million in respect of accrual release which relates
to receipt of tax assessments in respect of legacy value-added tax in Germany.
5 Excluding depreciation of US$12.6 million (2018: US$5.3 million) and amortisation
of US$19.6 million (2018: US$15.0 million) and adding back US$3.8 million lease
costs that are cancelled under IFRS 16 implementation.
6 Adding back US$2.0 million lease costs cancelled under IFRS 16 implementation.
7 Excluding share benefit charges of US$5.4 million (2018: US$8.9 million) and
adding back US$0.7 million lease costs that are cancelled under IFRS 16
implementation.
8 Adjusted EBITDA is the main measure the analyst community uses to evaluate the
Company and compare it to its peers. The Group presents adjusted measures
(including adjusted profit before tax) which differ from statutory measures due to
the exclusion of exceptional items and adjustments. It does so because the Group
considers that it allows for a further understanding of the underlying financial
performance of the Group.
9 Exceptional charges of US$2.3 million (2018: exceptional income of US$11.1
million) in respect of organisational restructuring and legal and professional costs
associated with M&A activity.
B2C revenue during 2019 increased by 11% to US$530.5
million (2018: US$479.3 million) and increased by 15% at
constant currency. The B2C business represented 95% of
total Group revenue in 2019 (2018: 90%). This revenue growth
was underpinned by the recovery of the Group’s UK business,
reflecting the success of our recreational customer focus as
well as revenue growth in several regulated markets, including
Italy, Romania, Sweden, Denmark and USA. In terms of product
verticals, the Group’s momentum continued in its two largest
product verticals, Casino and Sport, while its Poker and Bingo
verticals remained more challenging.
B2C – PRODUCT SEGMENTATION
888 continues to focus on developing its B2C business across
all four key product verticals in the industry: Casino, Sport,
Poker and Bingo. The Group’s focus remains on expanding 888’s
brands across global markets that have regulated frameworks
for online gambling, and we achieve this by investing in
analytics-driven marketing and product innovation, as well as
by applying data-driven customer relationship management
(‘CRM’) that supports player retention and customer “cross-sell”
between 888’s products and brands. All of 888’s activities are
conducted within the parameters of providing a safe and secure
online environment for customers.
During 2019, 888 acquired a Group record of more than one
million new FTDs across its B2C brands globally representing a
22% increase year on year. As a result, active customers (defined
as players that have wagered a positive amount during the
period) increased by 19% year on year and deposits increased
by 20% year on year. These positive trends across the Group’s
B2C operational KPIs reflected increased and innovative
marketing, effective CRM, and a first-class customer proposition,
particularly following the introduction of the Orbit platform to
our Casino offering (see below) which commenced in 2018. 888’s
revenue by product segment is set out in the table below:
20191
US$
million
20181
US$
million
Change
Constant
currency
Change
Reported
Revenue – B2C
• Casino
• Sport
• Poker
• Bingo
Total B2C
B2B
Revenue before VAT
accrual release
VAT accrual release
Revenue
359.3
90.0
42.7
38.5
530.5
29.8
560.3
—
560.3
317.6
80.3
49.0
32.4
479.3
50.6
529.9
10.7
540.6
17%
19%
13%
12%
(12%)
(13%)
24%
15%
19%
11%
(39%)
(41%)
10%
6%
4%
23
Corporate.888.com Chief Financial Officer's Report continued
CASINO
Casino continued to deliver
strong growth with a 13%
increase in revenue to US$359.3
million (2018: US$317.6 million).
At constant currency, Casino
revenue increased by 17%.
Casino revenue
US$ million
2019
2018
+13%
359.3
317.6
24
Results overview
This good performance again demonstrated the
strengths of 888’s marketing and CRM, as well as the
positive impact of our Orbit platform that was first
launched in mid-2018 and was fully deployed across
888’s regulated markets and brands during 2019.
Casino FTDs increased by 43% and total Casino
active players increased by 26%. Average revenue
per player declined by 10%, reflecting the Group’s
shift in focus towards a casual customer audience.
In the UK, the shift in Casino focus towards a casual
customer audience continued, with FTDs increasing
by 53% and the proportion of revenue generated by
"VIP" customers decreasing to just 4% in Q4 2019.
FTDs
+53%
Product overview and developments
888casino offers its own versions of classic table
games, such as blackjack and roulette together with
exciting and exclusive Video Slots, Video Poker and
Scratch card games developed by Section8, 888’s
in-house games studio. These in-house developed
games, which are offered to customers alongside
the best games from leading third-party providers,
give 888casino a differentiated proposition in the
market. The Group’s success in Casino remains
underpinned by 888’s very strong brand, as well
as a relentless focus on customer experience.
During 2019, 888casino’s performance continued
to be driven by the success of Orbit, our newest
web-based Casino platform that uses artificial
intelligence (“AI”) and machine learning-driven
recommendations to provide a more personalised
display and seamless user experience for
customers. The new platform, initially launched in
2018 and expanded across further markets during
2019, has also enabled 888 to offer even more
games and better utilise its growing selection
of content for customers.
NEW CASINO GAMES
464
888 added 464 new games (including 22 successful
new games developed by Section8) across mobile
and desktop platforms during the year.
The Group continued its geographic expansion, with
the launches of 888casino in the regulated Swedish
and Portuguese markets in January 2019.
The Group is delighted that 888's Casino product
innovation and subsequent progress was recognised
with two important and high-profile industry awards:
EGR – Casino Operator of the Year 2019 and
Gaming Intelligence – Casino Operator of the
Year 2020.
888 Holdings plc Annual Report & Accounts 2019 SPORT
Sport revenue increased by 12% to
US$90.0 million (2018: US$80.3
million). At constant currency,
Sport revenue increased by 19%
year on year. This encouraging
outcome was achieved despite
strong prior year comparatives
which included the impact of the
FIFA World Cup during 2018.
Sport revenue
US$ million
2019
2018
+12%
90.0
80.3
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
Results overview
Sport FTDs increased by 19% year on year and
deposits increased by 19% year on year. Mobile
and in-play betting remained key drivers for
888sport, with approximately 65% of bet volumes
placed during events in 2019.
SPORT FTDs
+19%
DEPOSITS
+19%
BETS DURING EVENTS
65%
Product overview and developments
n March 2019, the Group was delighted to announce
the acquisition of the technology platform and
team previously behind the BetBright brand for
a consideration of £15 million.
ACQUISITION
BetBright
The acquisition represented a major milestone
for the Group, strengthening 888’s product and
technology capabilities to support the long-term
development strategy of 888Sport. The post-
acquisition integration plans have progressed
in line with expectations and the Group was
pleased to launch its first fully proprietary sports
betting product in Sweden in April 2020 with
plans to gradually deploy it across further markets
thereafter.
As well as being the Group’s second largest
product vertical by revenue, Sport remains a highly
important customer acquisition channel for the
Group and provides additional value by cross-
selling customers into other product verticals,
most notably Casino.
During 2019, 888 introduced a new 888sport
customer interface to improve functionality and
the customer experience by integrating AI tools
to enhance personalisation for players.
The Group continued its geographic expansion,
with the launch of 888sport in the regulated
Swedish market in January 2019.
25
Corporate.888.com Chief Financial Officer's Report continued
POKER
Poker revenue decreased by
13% to US$42.7 million
(2018: $49.0 million).
Poker revenue
US$ million
2019
2018
-13%
42.7
49.0
26
Results overview
The Group’s Poker results have continued to
be impacted by factors including increased
competitor marketing activity in some of
the Group’s markets as well as the unilateral
withdrawal of certain payment providers and
ISP blocking in several unregulated markets.
Nevertheless, Poker stabilised during H2 2019 with
revenue up 7% compared to H2 2018. This result
is in part the outcome of the successful launch of
888’s first shared European poker network between
Spain and Portugal.
Whilst active poker players declined by 7% year on
year, Poker players deposits increased by 1% year on
year, reflecting 888poker’s good customer retention
that is underpinned by a quality product proposition.
Poker remains an important customer acquisition
channel for the Group with 18% of the Group’s B2C
FTDs acquired through 888poker during the year.
The flow of Poker players also playing Casino and
Sport with 888’s brands also continued to be an
important driver of the Group’s overall B2C business.
Product overview and developments
888poker focuses on providing a great customer
experience to recreational Poker players by
providing a range of games and formats to suit
its customers’ preferences across desktop and,
increasingly, mobile devices.
The Group has been pleased by progress made
in the first phase roll-out of its new poker platform,
Poker 8, during 2019. Poker 8 is a new and
improved ‘Orbit inspired’ cross-territory poker
platform that offers an even more engaging
and enjoyable experience for 888poker players.
The development of Poker 8 follows extensive
ongoing research and feedback from customers.
The platform's initial launch in 2019 upgraded
several features for 888poker players on desktop
computers. The Group is now looking forward to
adding a number of exciting new product features
and rolling out the final-phase platform across the
Group's poker markets later in 2020.
In July 2019, 888poker was launched in Portugal,
enabling the Group to establish its first European
interstate poker network and pool poker players
across the Spanish and Portuguese markets for
the very first time. 888poker has quickly become
one of the leading platforms in the Portuguese
market and has quickly taken considerable
market share while, at the same time, injecting
new liquidity for 888's poker players in the highly
competitive Spanish market.
888 Holdings plc Annual Report & Accounts 2019 BINGO
B2C Bingo recorded revenue
of US$38.5 million
(2018: US$32.4 million),
representing a 19% increase
and 24% at constant currency.
Bingo revenue
US$ million
2019
2018
+19%
38.5
32.4
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
Results overview
In February 2019, the Group acquired a portfolio
of bingo brands, including the well-established
Costa Bingo brand from JPJ Group Plc for £18m.
The Board believes that consolidating these
brands, which were previously operated as B2B
brands on the Group’s Dragonfish Platform, into
888’s B2C brand portfolio will deliver economy of
scale opportunities through the application of the
full extent of the Group’s capabilities in product
development, marketing and customer relationship
management to their operations.
B2C Bingo recorded a 19% increase in revenue
to US$38.5 million (2018: US$32.4 million). This
represented a 24% year on year increase at
constant currency. This performance benefited
from the contribution of newly acquired Bingo
brands since mid-March. On a like-for-like* basis,
Bingo revenues declined 3%.
New customer acquisition increased by 23%
(a 10% increase excluding the newly acquired
brands).
* At constant currency, adjusted for the acquired brands.
Product overview and developments
888 offers online bingo entertainment across a
wide array of branded Bingo sites, each with its
own unique themes. The Group’s leading Bingo
brands include 888ladies, Wink Bingo and Costa
Bingo.
The Group is continuing to focus on effective
CRM, increased personalisation and product
enhancements to its Bingo proposition with new
in-house developed games and the addition of
fresh third-party content. During the year, the
Group continued to focus on product development
by integrating several successful elements of its
Orbit platform into the bingo vertical to enhance
personalisation and improve the overall customer
experience.
27
Corporate.888.com Chief Financial Officer's Report continued
B2B REVIEW
Result overview
Revenue from Dragonfish, 888’s B2B
division, decreased by 41% to US$29.8
million (2018: US$50.6 million).
This reflected several factors, including
the migration of Cashcade bingo,
a former B2B customer, to its own
proprietary platform, as well as fiscal
and regulatory challenges impacting
the UK bingo market. These pressures
resulted in some of the Group’s brand
partners prioritising reductions in
their marketing investment and
optimisations to their cost bases over
investing in new customer acquisition.
Adjusting for currency headwind and
the migration of Cashcade bingo,
revenue from B2B decreased 15%
year on year.
Revenue from our B2B business in
the US market remained in line with
the Board’s expectations. The Group
remains committed to exploring
further partnerships and new growth
opportunities for the Group’s B2B
business in the US.
Operational overview
and developments
During the first half of the year, the
Group initiated organisational changes
at Dragonfish to bring all aspects of
the B2B offer except marketing into
one standalone business unit. These
have enhanced the customer focus
of the Group’s B2B operations in line
with the Group’s aim to provide an
increasingly value-added proposition
to a smaller number of larger
customers across both the UK and
international markets.
During the second half of the year,
the Group commenced the gradual
roll-out of a new customer interface.
This new interface has been inspired
by the success of 888’s Orbit casino
platform and has been developed to
enhance the customer experience:
improve responsible gaming
monitoring; and provide a better end-
user experience. Dragonfish continued
to invest in growing its games portfolio
with 179 new games added to the
platform and 18 new bingo “skins”
added to the platform during the year.
During 2019, the Group launched its
first B2B Bingo network in Africa.
28
EMEA
EMEA REVENUE
$231.2m
UK
UK REVENUE
$204.1m
SPAIN
SPAIN REVENUE
$60.9m
US
US REVENUE
$51.7m
REVENUE BY GEOGRAPHIC MARKET
Regulated markets
888’s strategic focus remains on achieving growth in sustainable, regulated markets
where the Group can leverage its marketing expertise to achieve long-term,
profitable growth.
Revenue from regulated markets continued to represent the majority of Group
revenue in 2019, with revenue from regulated and taxed markets1 accounting for
74% of revenue (2018: 70%).
The global regulatory landscape continues to develop and the Group remains
focused on evaluating new regulated markets on a case-by-case basis dependent
on their strategic and economic viability. During 2019, the Group was pleased to
launch its Poker, Sport and Casino offerings in Sweden, as well as its Casino offer
in Portugal in January 2019 followed by the launch of Poker in Portugal in July 2019.
The below table shows the Group’s revenue by geographical market:
EMEA (excluding the UK and Spain)
UK
Spain
Americas
Rest of world
Revenue before VAT accrual release
VAT accrual release
Total revenue
2019
US$
million
2018
US$
million
Change
from
previous
year
% of
reported
Revenue
(2019)
231.2
204.1
60.9
51.7
12.4
560.3
—
560.3
228.9
170.6
68.0
48.1
14.3
529.9
10.7
540.6
1%
20%
(10%)
7%
(13%)
6%
41%
36%
11%
9%
2%
100%
1 Regulated and taxed markets refer to jurisdictions where the Group operates under a local licence or where the
Group is liable for gaming duties or VAT (or its equivalent).
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
EMEA (excluding the UK and Spain)
Revenue from EMEA excluding the UK
and Spain increased by 1% to US$231.2
million (2018: US$228.9 million). 888
continued to experience rapid growth
in European regulated markets, with a
revenue increase of 43% year on year
(51% increase at constant currency).
This outcome reflects strong progress
in Sport and Casino across several
regulated European markets.
In Italy, despite advertising restrictions
in force from H2 2019 and strong
comparatives, including the impact of the
2018 FIFA World Cup, revenue increased
by 30% (37% increase at constant
currency) and FTDs increased by 18%
year on year. This strong performance
reflected the strength of 888’s established
brands in the Italian market, as well
as continued highly effective digital
marketing investment. The Group’s
performance in Italy benefited from the
impact of Orbit, which was launched in
the second half of the prior year, which
supported a 69% increase in new Casino
players against the prior year.
Revenue from the Romanian market
increased by 31% (40% increase at
constant currency) during 2019, reflecting
continued momentum in both Sport
and Casino underpinned by growing
brand awareness in the market. The
Group launched its Orbit platform in
Romania in August 2019 and has been
encouraged by its performance so far.
Romanian growth was accompanied by
a 41% increase in FTDs driven by highly
efficient marketing driving a lower cost
per customer acquisition.
Revenue from the Danish market
decreased by less than 1%, with a 5%
increase at constant currency, FTDs in
Denmark increased by 15% year on year.
This growth in customers reflected further
progress in Sport, as well as the impact
of Orbit on Casino which launched in the
second half of 2018.
As noted above, during 2019 the Group
successfully launched in two new
regulated European markets. In January,
888 launched Sport, Casino and Poker
in the regulated Swedish market. The
Board has been pleased with the Group’s
performance in this significant online
gaming market so far with customer
acquisition and revenue significantly
ahead of initial expectations. The Group
was awarded its 13th geographic licence
in Portugal at the beginning of the year
and successfully launched 888casino in
Portugal in January. This was followed by
the launch of 888poker in Portugal in July,
thereby enabling the Group to establish
its first European interstate poker network
and pool poker players across the
Spanish and Portuguese markets for the
very first time.
The Board is encouraged by the initial
reaction to the 888-interstate network, with
good levels of new customer acquisition
in Portugal and a considerable increase
in liquidity available for Spanish players.
The Board continues to believe that
shared liquidity will provide increased
competitiveness and new opportunities for
the Group’s Poker product in Europe over
the coming years.
Revenue from Germany, which
represented 5.6% of Group revenue,
decreased by 30% year on year due to
a combination of restrictions on selected
payment methods and, subsequently,
proactive reductions of marketing spend
by the Group for the short-term.
Revenue from Middle East and Africa
markets included in the EMEA segment
decreased by 7% to US$42.4 million
(2018: US$45.7 million).
UK
The Group delivered a pleasing recovery
in its UK business in 2019, reflecting
a clear and unwavering focus on
entertaining recreational customers in
a safe and secure environment. This
was underpinned by further effective
marketing investment, as well as the
appeal of the Group’s enhanced
Casino product proposition on the Orbit
platform. UK revenue increased by 20%
compared to the same period last year
to US$204.1 million (2018: US$170.6
million). This was driven by strong
FTDs growth of 26%, however, average
revenue per customer, as well as the
proportion of revenue generated by
VIPs decreased, reflecting the Group’s
focus on entertaining an increasingly
recreational customer base.
Over recent years, 888 has made
considerable changes to its operating
processes in the UK, including tightening
anti-money laundering processes,
increasing customer due diligence and
developing its customer protection tools
and protocols. These changes have been
aimed at providing the safest possible
gambling environment for players and
ensuring the Group is aligned with the
market’s regulatory environment. 888
is committed to continuing to invest in
and enhance its responsible gaming
processes and tools across all markets,
and further details on the Group’s safer
gambling strategy and initiatives can be
found on page 50 of the 2019 Annual
Report.
Spain
In Spain, revenue was US$60.9 million
(2018: US$68.0 million), reflecting a 10%
decrease in revenue year on year (5%
decrease in constant currency). As a
result, Spain represented 11% (2018: 13%)
of total revenue. Casino FTDs in Spain
increased 26%, building a healthy
customer base for 2020.
As previously indicated, the Group’s
progress in Spain was moderated
by weaker Poker activity, which was
impacted by heightened competition
from operators that offered shared
player liquidity with France (launched in
2018), which 888 did not participate in.
The Group’s subdued poker performance
adversely impacted customer cross-sell
into 888casino.
The Board remains confident in 888’s
prospects for Spain and, as described
above, in July 2019, 888 launched shared
poker player liquidity between Spain and
Portugal for the first time. We have been
encouraged by the early signs and believe
that this interstate network will inject
increased momentum to 888’s offering
in the Spanish market in 2020. In 2020,
the Group plans high profile tournaments;
further product optimisation; additional
new casino game vendors to support the
cross-sell of poker players into Casino; and
has confidence in the impact of Poker 8
within the Spanish market once launched.
US
Revenue from the US market remained
in line with the Board’s expectations
during 2019.
888 is continuing to invest in its product
proposition in the US to align it with
the quality and flexibility of the Group’s
products across other regulated markets
globally. In July 2019, the Group launched
its Orbit platform in New Jersey supported
by an increase in marketing activity.
As a result, revenue from 888casino
in New Jersey increased 56% year on
year, and it is the Group’s belief that
once all elements of its USA proposition
are streamlined and the appropriate
marketing spend is in place, it will be well
placed to considerably grow its Casino
volume in New Jersey.
Underpinned by further investment
in our team, marketing and product
development, we remain focused on
achieving further progress in the US
market in 2020. Having operated in
the regulated US market since 2013,
888 enjoys experience in that evolving
market and the Group remains focused
on investing to deliver the medium-
to-long-term growth opportunities for
888. The Board continues to appraise
opportunities to provide both brand
building and market access opportunities
for 888 in the developing North American
online gaming market.
29
Corporate.888.com Chief Financial Officer's Report continued
EXPENSES OVERVIEW
Operating expenses
The Group’s expanding Casino and
Sport offering resulted in higher
commissions and associated expenses
in respect of the Live Casino activity
and the Sport third-party platform. As
a result, Operating expenses* (which
mainly comprise of staff related costs,
commissions and royalties payable to
third parties, chargebacks, payment
service providers’ (“PSP”) commissions
and costs related to operational risk
management services) increased by 7%
to US$147.5 million (2018: US$137.8 million).
The proportion of operating expenses to
revenue increased to 26.3% (2018: 25.6%).
Operating expenses were also impacted
by costs related to Sport events streaming
and stricter regulatory requirements to
enhance the scope of customer related
screening. This was offset in part by a
decrease in employment costs, compared
to 2018, as a result of a cost reduction
and a headcount optimisation plan
implemented during 2019.
Reported operating expenses amounted
to US$175.9 million (2018: US$158.1 million).
The increase is mainly derived from higher
level of depreciation and amortisation
related to IFRS 16 and assets recognised
on acquisitions of AAPN and Costa Bingo.
Gaming taxes and duties
Gaming duties levied in regulated and
taxed markets substantially increased by
37% to US$95.5 million (2018: US$69.9
million). This is a result of the Group’s
revenue growth in the UK coupled with the
increase in the UK Remote Gaming Duty
rate from 15% to 21% effective from April
2019, resulting in incremental duties of
US$15.3 million. In addition, gaming duties
also increased in line with the Group’s
continued expansion in regulated markets
such as Sweden and Portugal as well as
strong revenue growth in both Italy and
Romania where tax rates increased in
January 2019, resulting in incremental
duties of US$10.3 million. The increase was
partly offset by a reduction of the gaming
tax rate in Spain, from 25% to 20%
effective from July 2019.
Research and development ("R&D")
expenses
Research and development expenses
increased by 9% to US$35.6 million (2018:
US$32.8 million). This increase is caused
in part by the Group’s R&D investment
in the BetBright Sport platform that
was acquired in March 2019 as well as
investment across regulated markets.
30
During the year, the Group commenced
the roll-out of Poker 8, a new and improved
Poker platform, across several regulated
markets. The Group continues to invest
in the development of new products,
games and features that further enhance
customer experience, with a specific
emphasis on safer gaming and customer
protection. As a result, the R&D expenses
to revenue ratio increased to 6.4%
(2018: 6.2%).
Reported research and development
expenses amounted to US$33.6 million
(2018: US$32.8 million).
Selling and marketing expenses
One of the key drivers of 888’s business is
effective and innovative marketing spend.
Overall marketing expenses increased to
US$161.8 million (2018: US$155.0 million).
However, as a proportion of revenue, the
selling and marketing ratio decreased
to 28.9% (2018: 29.3%). The increase in
marketing investment supported a strong
22% increase in FTDs in the Group's B2C
business. At the same time, cost per new
customer acquisition declined year on
year, reflecting the effectiveness of the
Group’s strict returns-driven marketing
approach.
The increased marketing investment
during 2019 reflected 888’s focus on the UK
market; the Group’s launches in Sweden
and Portugal; the Group’s focus on building
a wider customer base in Italy ahead of
the country’s advertising ban (introduced
in mid-2019); and investment in the US
market following the Group’s acquisition in
late 2018 which saw 888 take full control of
its US-facing B2C operations.
Administrative expenses
Administrative expenses* amounted to
US$34.3 million (2018: US$27.3 million). The
increased administrative expenses during
2019 reflected higher professional and
corporate costs relating to the Group’s
launch in new regulated markets; the US
market following obtaining full control of
its US facing B2C operations; the Group’s
Brexit preparations; and legal costs
related to the Group’s revolving credit
facility (“RCF”) with Barclays Bank plc
(“Barclays”) agreed in February 2019 in
order to provide short-term finance for
888’s M&A activities.
Reported administrative expenses
amounted to US$39.0 million
(2018: US$36.2 million).
* As defined in the table set out above.
Adjusted EBITDA
Adjusted EBITDA excluding the impact of
IFRS 16 (which was adopted during 2019)
was US$85.6 million (2018: US$107.1 million)
and Adjusted EBITDA after the impact of
IFRS 16 was US$92.1 million (2018: US$107.1
million). Adjusted EBITDA was adversely
impacted by US$25.6 million of higher
gaming duties as described above; US$6.2
million adverse currency impact compared
to the prior year; and US$2.1 million costs
relating to the newly acquired BetBright
Sport platform.
The Adjusted EBITDA margin excluding the
impact of IFRS 16 was 15.3% (2018: 20.2%)
and Adjusted EBITDA margin after the
impact of IFRS 16 was 16.4%. EBITDA for the
period was US$84.2 million (2018: US$129.1
million) as detailed in the Financial
Summary table.
Exceptional items
Exceptional costs of US$2.3 million (2018:
Exceptional income of US$11.1 million)
consist of US$1.0 million in legal and
professional costs associated with the
acquisitions of the Costa Bingo brands
and the BetBright sport platform, as well
as US$1.3 million in restructuring costs
related to employee redundancies as part
of the Group’s headcount cost optimisation
project.
Share benefit charges
Share benefit charges relate to long-term
incentive equity awards granted to eligible
employees.
Equity settled share benefit charges of
US$5.4 million (2018: US$8.9 million) mainly
comprise new awards granted during the
year and the full year effect of awards
granted in previous years. Further details
are given in the Directors’ Remuneration
Report set out in the 2019 Annual Report
and in note 23 to the financial statements.
Finance income and expenses
Finance income of US$0.5 million (2018:
US$0.6 million) less finance expenses
of US$7.2 million (2018: US$0.7 million)
resulted in a net expense of US$6.7 million
(2018: US$0.1 million). The increased
expense compared to the previous year
is mainly comprised of US$2.9 million
interest expenses, resulting from the
implementation of IFRS 16 and interest
costs associated with the new RCF agreed
with Barclays in February 2019 and
US$4.3 million non-cash charge relating
to currency exchange rates mainly a
result of the revaluation of IFRS 16 liabilities
explained by the strengthening of the ILS
against the USD.
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
888 continually monitors foreign currency
risk and takes steps, where practical, to
ensure that net exposure is kept to an
acceptable level.
Adjusted Profit before tax and Profit
before tax
Adjusted Profit before tax was US$53.2
million (2018: US$86.7 million). Profit
before tax declined to US$45.3 million
(2018: US$108.7 million) as a result of the
following:
(i) gaming duties increased by US$25.6
million, as explained above;
(ii) exceptional costs of US$2.3 million
compared to exceptional income of
US$11.1 million in 2018;
(iii) one-off VAT accrual release in 2018 of
US$10.7 million;
(iv) gain from re-measurement of
previously held equity interest in joint
ventures in 2018 of US$9.3 million;
(v) amortisation charges increased to
US$19.6 million (2018: US$15.0 million)
related to the two acquisitions of
AAPN and a portfolio of bingo brands
including Costa Bingo; and
(vi) net finance expenses of US$6.7 million
(2018: US$0.1 million), as explained
above.
Taxation
Taxation for the period was US$3.7 million
(2018: US$13.9 million). The decrease
is primarily a result of the lower profit
before tax during the period, the effect
of foreign currency expenses following
the strengthening of the ILS against the
USD during 2019 (2018: foreign currency
earnings result of the strengthening of the
USD against the ILS) and withholding tax
on a dividend distribution by a subsidiary
to the parent company in 2018.
The Group has taken steps to mitigate
Brexit-related risks, including the re-
domiciliation of certain of its licensed
entities to Malta and establishment of
a data centre in Ireland, so that it can
continue to serve European markets with
no disruption. These steps did not have
a material impact on the taxation level
during 2019.
Adjusted Profit after tax and Profit
after tax
Adjusted profit after tax1 was US$49.5
million (2018: US$72.8 million). Profit after
tax was US$41.6 million
(2018: US$94.8 million).
1
As defined in note 9 of the financial statements
Earnings per share
Basic earnings per share was 11.3¢ (2018:
26.3¢). The decline is a result of higher
gaming duties, higher depreciation and
amortisation in 2019 whilst 2018 benefited
from exceptional income, a one-off VAT
accrual release and the gain from re-
measurement of previously held equity
interest in joint ventures, outlined above.
Adjusted basic earnings per share is 13.5¢
(2018: 20.2¢). Further information on the
reconciliation of Adjusted basic earnings
per share is given in note 9 to 2019
financial statements.
Dividend
The Board of Directors is recommending
a final dividend of 3.0¢ per share in
accordance with 888’s dividend policy,
bringing the total for the year to 6.0¢ per
share (2018: 12.2¢ per share). This reflects
the performance of the Group, regulatory
developments and the importance of
retaining adequate cash to fund potential
investment activities and as a prudent
measure given the unprecedented
uncertainty caused by COVID-19.
Cash flow
Net cash generated from operating
activities increased to US$81.6 million
(2018: US$42.1 million). The increase is
primarily explained by a US$24.6 million
exceptional payment on account of
historical VAT in Germany in 2018 and
a US$12.1 million reduction in customer
deposits in 2018 whilst during 2019 there
was almost no change in that balance.
Net cash used in investing activities was
US$82.9 million (2018: US$30.6 million)
explained by the acquisition of BetBright
sport platform, Costa Bingo brands and
AAPN Holdings LLC (US B2C) in the
amounts of US$19.3 million, US$22.9 million
and US$18.4 million, respectively. These
investments were partially funded by an
RCF loan.
Dividend payments during the year
amounted to US$40.4 million (2018:
US$56.6 million).
Balance sheet
Total assets as at 31 December 2019
amounted to US$433.1 million (2018:
US$380.6 million). Goodwill and other
intangible assets increased by US$40.1
million mainly as a result of the assets
recognised following the acquisition of the
BetBright Sport platform and Costa Bingo
brands, and US$33.3 million right-of-use
assets that were recognised, for the first
time, as a result of adoption of IFRS 16.
Further information is given in note 2.2 to
the financial statements.
888’s management extensively considers
the allocation of capital resources, both
as an integral part of the budgeting
process and on an ongoing basis. The
main decisions relate to the allocation of
marketing and technology resource as
part of management’s strategic review
of launching in regulated markets, as
well as ensuring adequate resource for
compliance and business development.
Key decisions in 2019 related to 888’s
strategic positioning in the US market, the
roll-out of the Orbit platform and launch
of the ‘Safer. Better. Together’ compliance
and safer gambling strategy.
888’s cash position as at 31 December
2019 was US$99.5 million (2018: US$133.0
million). The balance owed to customers
at US$54.7 million (2018: US$57.1 million).
In February 2019, 888 agreed an RCF with
Barclays, enabling the Group to borrow an
amount of up to US$50 million. At year-
end, the outstanding amount was US$18.0
million.
The decline in the cash balance
compared to 31 December 2018 is a
result of the payment of US$40.4 million
dividend during 2019 and total payments
of US$60.6 million in respect of the
acquisitions of BetBright’s Sport platform,
Costa Bingo brands and AAPN (the US
B2C business).
Going concern
In light of the unique and wide-ranging
impact of the COVID-19 outbreak, the
Group has carried out a careful and
detailed going concern analysis. Full
details of this analysis are set out in Note 2
to the Accounts on page 121.
Following consideration of the updated
base case forecasts, and the updated
downside scenarios, the Directors have a
reasonable expectation that the Company
has adequate resources to continue in
operational existence for the foreseeable
future. Therefore, the Directors continue
to adopt the going concern basis of
accounting in preparing the consolidated
financial statements.
AVIAD KOBRINE
Chief Financial Officer
15 April 2020
31
Corporate.888.com Risk Management Strategy
IDENTIFYING AND
MANAGING OUR RISKS
The Board acknowledges that
there is no return without risk.
However, key risks must be
identified, evaluated and where
possible quantified in order for
the Board to rationally determine
how to manage risk to generate
optimal return.
32
The Board acts in accordance with a Risk
Management Policy, which aims to explicitly
identify and evaluate key risks underlying the
Group’s core business strategy and standardise
the approach to risk prioritisation and management
across 888’s operations. This in turn means that
effective controls can be put in place to ensure
888 is able to manage its operations effectively
now and into the future. 888’s risk register is
updated periodically and regular discussions
are held at Board and management level of the
role of risk in 888’s business.
888’s culture emphasises the need for employees
to take responsibility for managing the risks
in their own areas and to transparently and
timely report “bad news” and “near miss”
incidents, with a willingness to constantly learn
and improve. The Board has also adopted a
Reporting and Escalation Procedure to ensure
timely reporting of internal reportable events,
including bugs, technical failures, information
security malfunctions, and marketing, and other
operational incidents which may affect customers.
The Board considers that 888 complies with the
requirements of the Financial Reporting Council’s
Guidance on Risk Management, Internal Control and
Related Financial and Business Reporting dated
September 2014, and specifically confirms that:
• it is responsible for 888’s risk management
systems and for reviewing their effectiveness;
• there is an ongoing process for identifying,
evaluating and managing the principal risks faced
by 888;
• the systems have been in place during 2019 and
up to the date of approval of the annual report
and accounts; and
• they are regularly reviewed by the Board (please
see page 34 for further details of the review
conducted in 2019).
As part of its regular risk assessment procedures,
the Board takes account of the significance of
environmental, social and governance matters to
the business of the Company, and has identified
and assessed the significant risks of that nature
to the Company’s short and long-term value,
as well as the opportunities to enhance value
that may arise from an appropriate response.
The Board confirms it has received adequate
information to make this assessment and that
these matters are considered in the training of
Directors. The Board has specifically verified
environmental, social and governance disclosures –
part of which, where mentioned herein, are verified
by external advisory firms – with Group senior
management in order to ensure their accuracy.
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
RISK APPETITE
Addressing risk is a high priority for the
Board and effective risk management is
an integral part of the way we conduct
our business on a daily basis. The Board
factors into the risk assessment impact,
likelihood and appetite considerations.
Risk is managed across the Group in
the context of overall risk appetite and,
during 2019, the Board considered risk
appetite to ensure adequate resources
are allocated to identified risks. The
Board reviewed and approved the
following risk appetite statement:
Category of risk
Tolerance
Risk parameters
STRATEGIC
MEDIUM
During development and implementation of new
propositions and assessing new opportunities
including potential transactions, we are prepared
to accept medium risks that support our pursuit of
growth.
OPERATIONAL
LOW TO
MEDIUM
When operating within our business, we have a
low to medium tolerance for risk. We will take a
cautious approach to risk within our operations,
but consider that certain risks will be taken in order
to achieve our strategic objectives and maintain
our competitive position.
FINANCIAL
LOW
We consider that robust financial controls are
necessary to manage our business effectively.
All of our operating processes are based around
policies and procedures that minimise the risk of
a loss of financial control.
COMPLIANCE
EXTREMELY
LOW TO ZERO
We have an extremely low to zero tolerance when
complying with laws and regulations that relate
to bribery, corruption and anti-money laundering.
We have controls in place that are designed to
mitigate these risks, and detailed and tested
procedures in place for dealing with these types
of scenarios when they arise. We are particularly
sensitive to compliance risks in our key regulated
markets, including the UK.
33
Corporate.888.com Risk Management Strategy continued
888 FACES THE FOLLOWING SIGNIFICANT RISKS:
REGULATORY RISK
♠
THE RISK
The regulatory framework of online gaming is
dynamic and complex. Change in the regulatory
regime in a specific jurisdiction can have a
material adverse effect on business volume
and financial performance in that jurisdiction.
In addition, a number of jurisdictions have
regulated online gaming, and in several of those
jurisdictions 888 either holds a licence or applied
to obtain one. However, in some cases, lack of
clarity in the regulations, or conflicting legislative
and regulatory developments, mean that 888
may risk failing to obtain an appropriate licence,
having existing licences adversely affected, or
being subject to other regulatory sanctions,
including internet service provider blocking,
payments blocking, black-listing and fines.
Furthermore, legal and other action may be taken
by incumbent gaming providers in jurisdictions
which are seeking to regulate online gaming,
in an attempt to frustrate the grant of online
gaming licences to 888. Finally, changes to either
the regulatory framework or enforcement policy
relating to online gaming in certain markets may
effectively force the Group out of certain markets
where it currently operates or compel it to
change its business practices or technology
in a way that would materially impact results.
RELEVANCE TO STRATEGY
Compliance with regulatory requirements and
the maintenance of regulatory relationships in
multiple jurisdictions is key to maintaining 888’s
online gaming licences which are critical to the
operation and growth of its online gaming business.
In addition, 888 may be exposed to attempts in
jurisdictions which do not regulate online gaming,
to block access to 888’s offering to players located
in such jurisdiction or to penalise 888 for such
offering. A robust understanding of the legal and
regulatory position in key locations worldwide is
crucial to mitigating this risk.
34
HOW THE RISK IS MANAGED
888 manages its regulatory risk by routinely
consulting with legal advisers in various jurisdictions
where its services are marketed or which generate
significant revenue for the Group. Furthermore,
888 obtains frequent and routine updates
regarding changes in the law in jurisdictions of
interest that may be applicable to its operations,
working with local counsel to assess the impact
of any changes on its operations. 888 constantly
adapts and moderates its services to comply with
legal and regulatory requirements. 888 has also
implemented organisational changes in order
to strengthen regulatory compliance oversight,
as well as to improve co-operation between the
different departments and streamline processes of
settling any conflicts between them, ensuring that
888’s regulatory requirements and duty to uphold
the licensing objectives always take priority over
commercial interests. Finally, 888 blocks players
from certain "blocked jurisdictions" using multiple
technological methods as appropriate.
WHAT HAPPENED IN 2019/20
The UK Gambling Commission (“UKGC”) continued
to take a strict approach towards compliance,
tightening requirements, adopting more stringent
policies and regulations, increasing the level of
oversight over licensees and penalising operators
for failing to meet regulatory requirements and
standards. The primary areas of focus for the
UKGC were responsible gambling and prevention
of underage gambling, consumer protection,
and anti-money laundering. The UKGC adopted
additional restrictions, e.g. a ban commencing
in April 2020 on credit card transactions for
gambling and stricter age verification obligations.
The Group continued to work closely with the
UKGC on compliance matters, and also to update
its policies and procedures and to strengthen
internal reporting lines to ensure compliance within
the business, investing significant resources in
regulatory compliance measures. In Germany, the
Company is subject to prohibition orders issued by
various German states, some of which have been
upheld by German courts and others which are in
the process of judicial review. While the Company
continues to challenge the validity of these orders
(where possible) and is seeking relief on this matter
from the German Constitutional Court, it has been
consulting closely with its German advisers as to the
appropriate operational measures to be taken by
the Group in light of the orders issued. The German
regulatory landscape was amended in 2019 to
introduce local licensing for sports betting. 888
applied for such a licence in 2020, while evaluating
the impact of licensure on its various offerings in
the German market and the measures required to
achieve compliance with licensing obligations.
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
Increase
Decrease
Stable
REGULATORY RISK CONTINUED
WHAT HAPPENED IN 2019/20 CONTINUED
Specifically, as part of its licence application,
888 will be required to undertake not to offer
or broker any form of “unlawful gambling” once
issued a licence, wording intended to capture
casino gambling. The Group is evaluating with
its German counsel the validity of such an
undertaking, its practical ramifications once a
licence has been issued, and any means available
to mitigate its impact. In April 2020, a German
court suspended the licensing process, pending
a judicial determination of claims against the
licensing process. It is presently unknown how long
the suspension will last, but it may render the entire
licensing process null and void. In early 2020, it was
announced that the German states had reached
a consensus that would result in regulatory reform
in mid-2021, under which operators would be able
to apply for a licence to offer online slots and
poker, subject to certain restrictions (e.g. deposit
limits, maximum wagers, advertising restrictions,
etc.) The full details of this regime have not yet
been developed, but this development could
significantly impact the Group’s casino offering in
the German market. In the Netherlands, where a
law was approved in February 2019 to liberalise
the market, the local regulator continues to
take a proactive and strict approach towards
enforcement of existing laws against operators
whose operations are conducted in violation of
the "prioritisation criteria" for enforcement issued
by the authorities, and which were updated with
additional criteria during 2019. Several operators
received significant fines due to the conduct of
operations in a manner violating these criteria.
Operators fined may also be barred from
participating in the liberalised market or have
their eligibility for licensing delayed. The Group
has been studying these developments closely
to ensure its offering is in line with the criteria
as updated. In Sweden, the Group began
operating under a local licence in 2019. The
Swedish regulator has shown itself to be strict
and proactive in enforcing regulatory standards,
and has on occasion informed the industry of its
position on compliance by penalising operators
it perceived as non-compliant. 888 has studied
the regulator's position and enforcement
action closely to ensure that its operations
are in-line with local requirements. In January
2019, the US Department of Justice issued a
legal opinion on the scope of the federal Wire
Act, overturning a previous opinion from 2011,
and finding that the Act applies to all forms
of gambling (not only sports betting, as was
concluded in the previous opinion). Later in the
year, a New Hampshire federal court set aside
the aforementioned memorandum and rejected
its interpretation of the Wire Act on substantive
grounds, reverting to the status quo ex ante. The
DOJ has appealed the decision and the appeal
is likely to be considered in 2020. The case
may eventually reach the US Supreme Court.
The appeal indicates that the current Attorney
General is opposed to online casino gambling.
The Group continues to follow developments on
this front closely, to evaluate their impact on
US operations and future growth. Generally, the
COVID-19 outbreak is giving rise to some delays
in legislative and regulatory processes, including
licence applications , as well as temporary
measures such as restrictions on advertising and
promotions in Spain.
BREXIT-RELATED RISKS
♠
THE RISK
The status of Gibraltar as a result of “Brexit”
remains unclear. Having redomiciled relevant
operating entities to Malta, the remaining risks
of Brexit to 888 are the potential for disruption to
movements of staff between Spain and Gibraltar,
and the potential adverse impact on economic
and market conditions in the United Kingdom;
amongst other matters, this could give rise to
partial impairment of 888's online Bingo assets.
RELEVANCE TO STRATEGY
The UK remains an important strategic market for
888, and Gibraltar remains important to 888 as the
location of its headquarters.
HOW THE RISK IS MANAGED
888 obtained a gaming licence in Malta and
established a server farm in Ireland so that it
can continue to serve European markets with no
disruption to its business. 888 also aims to diversify
its geographical customer base so as to mitigate
dependency on the UK market.
WHAT HAPPENED IN 2019
The UK formally exited the European Union on
31 January 2020, with a transition period expected
to conclude at the end of 2020. Cross-border
passage and trade between Gibraltar and the
EU will depend on the outcome of negotiations
between the UK and the EU.
35
Corporate.888.com Risk Management Strategy continued
INFORMATION TECHNOLOGY AND CYBER RISKS
THE RISK
IT systems may be impacted by unauthorised
access, cyber-attacks, DDoS (Distributed Denial
of Service) attacks, theft or misuse of data
by internal or external parties, or disrupted
by increases in usage, human error, natural
hazards or disasters or other events. Cyber-
attack and data theft incidents may expose
888 to “ransom” demands and costs of repairing
physical and reputational damage. Failure of IT
systems, infrastructure or telecommunications/
third-party infrastructure may cause significant
cost and disruption to the business and harm
revenues. Lengthy downtime of the site (including
in transitioning to activated disaster recovery
servers) could also cause 888 to breach
regulatory obligations.
RELEVANCE TO STRATEGY
As an online B2C and B2B business, the integrity
of 888's IT infrastructure is crucial to the supply
of its offerings and compliance with its regulatory
obligations and to the maintenance of customer
loyalty.
HOW THE RISK IS MANAGED
Cutting-edge technologies and procedures
are implemented throughout 888’s technology
operations and designed to protect its networks
from malicious attacks and other such risks.
These measures include traffic filtering, anti-DDoS
devices and obtaining anti-virus protection from
leading vendors. Physical and logical network
segmentation is also used to isolate and protect
888’s networks and restrict malicious activities.
The IT environment is audited by independent
auditors, such as PCI DSS security audit and
eCOGRA audit. These audits form part of 888’s
approach to ensuring proper IT procedures
and a high level of security. In order to ensure
systems are protected properly and effectively,
external security scans and assessments are
carried out on a regular basis. 888 has a disaster
recovery site to ensure full recovery in the event
of disaster. All critical data is replicated to the
disaster recovery site and stored on a Glacier
AWS service. In the event of loss of functionality
of 888’s critical services, the business can be
fully recovered through the resources available
at the disaster recovery site. In order to minimise
dependence on telecommunication service
providers, 888 invests in network infrastructure
redundancies whilst regularly reviewing its service
providers.
As a part of its monitoring system, 888 deploys
set user experience tests which measure
performance from different locations around the
world. Network-related performance issues are
addressed by rerouting traffic using different
routes or providers. 888 operates a 24/7 Network
Operations Centre (“NOC”). The NOC's role is
to conduct real time monitoring of production
activities using state-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 usability experience. The IT environment
tracks changes, incidents and service level
agreement key performance indicators in order
to ensure that client experience is consistent
and well managed. As part of these procedures,
capacity planning takes place and infrastructure
is built accordingly. System-wide availability
and business-level availability is measured and
logged in the IT information systems.
WHAT HAPPENED IN 2019
888's main European data centre operations
moved from Gibraltar to Dublin, with the new
data centre introducing a very high standard
of redundancy, performance and security,
utilising cutting-edge technologies; a disaster
recovery site for the primary on-premises data
center was implemented, on AWS cloud using
VMware Cloud Technologies; security awareness
training continued to be carried out for Group
personnel at all locations by the Chief Information
Security Officer; revised DDoS architecture
was implemented as well as offensive denial-
of-service simulation attacks to test 888
readiness; zero-day protection capabilities were
implemented on critical services; cloud protection
tools have been implemented to protect 888
cloud operations (two factor authentication
and gateway tools); implementation of Identity
Management System has been completed,
covering the automation and provisioning of
new employees with access and permissions
to production and corporate environments;
all corporate mailboxes were moved to Office
365 cloud services, with new security tools
implemented as part of this process and more
strict alignment to GDPR; and machine learning
capabilities were implemented for operational
data for enhancing 888 Network Operation
Center.
♠
♠
36
888 Holdings plc Annual Report & Accounts 2019 TAXATION RISK
♠
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
Increase
Decrease
Stable
THE RISK
Heightened attention continues to be given to
matters of cross-border taxation in line with
the G20/OECD Base Erosion and Profit Shifting
recommendations. During 2019, the OECD/G20
Inclusive Framework on BEPS carried out public
consultations regarding the agreed Programme
of Work for Addressing the Tax Challenges of the
Digitalisation of the Economy, based on two pillars:
Pillar One, which addresses the allocation of taxing
rights between jurisdictions and considers various
proposals for new profit allocation and nexus rules;
and Pillar Two (also referred to as the proposal),
which focuses on the remaining BEPS issues
and seeks to develop rules that would provide
jurisdictions with a right to "tax back" where other
jurisdictions have not exercised their primary taxing
rights or the payment is otherwise subject to low
levels of effective taxation. Some countries, such as
the UK and France, have implemented unilateral
digital service taxes, which has met with threats
of retaliation by the US. The UK also implemented
the Offshore Receipts in respect of Intangible
Property rules imposing UK tax on the receipt of
royalties by offshore companies deriving from
business activity in the UK. Gibraltar transposed the
EU Anti Tax Avoidance Directive into its domestic
law, including changes to its General Anti-Abuse
Rule and Controlled Foreign Corporation rules.
Due to pressure from the European Union, offshore
jurisdictions including the British Virgin Islands
have introduced new “substance” requirements
with regard to IP companies and other entities.
The likelihood of scrutiny of tax practices by
tax authorities in relevant jurisdictions and the
aggressiveness of tax authorities remains high. A
finding of taxable presence of the Group in one or
more jurisdictions (including pursuant to revised
interpretations of the permanent establishment
concept as mentioned above), a transfer pricing
adjustment with respect to attribution of profit to
such jurisdiction(s), or imposition of another form
of tax as mentioned above, may have a substantial
impact on the amount of tax and VAT paid by 888
or require significant payments by 888 in respect
of historical tax liabilities. 888’s effective tax burden
also increases due to the imposition or increase
of gaming duty in markets in which the Group
has customers, including the recently announced
increase in the rate of UK remote gaming duty to
21% of GGR as from 1 April 2019, the additional
Romanian gaming tax at 2% of deposits from
2019, and the increase in Italian gaming duty to
25% of GGR (24% for sports betting) from 2019.
The Company's Israeli subsidiary entered into
an Assessment Agreement with the Israeli Tax
Authority in 2016, in which the subsidiary's transfer
pricing remuneration was agreed with regard to tax
years ending in 2015.
The Company believes that the remuneration
attributed for tax purposes to its Israeli subsidiary
complies with the arm’s length standard, and
therefore continues to rely on the transfer pricing
agreement with regard to tax years following 2015,
however the agreement has not been renewed. As
such, and in light of the developments in taxation
rules internationally, including in the field of transfer
pricing pursuant to which new methodologies are
gaining prominence, in the context of the tax audit
detailed below, the Israeli Tax Authority may seek
to increase the level of remuneration attributed to
the Israeli subsidiary for tax purposes commencing
from the 2016 tax year, which could have material
financial consequences to the Company.
RELEVANCE TO STRATEGY
In addition to the financial consequences of a
challenge to 888’s tax structure, tax compliance –
and being seen to be paying the “right amount”
of tax – has become a serious reputational issue
as well as being a regulatory compliance issue.
As such, it is crucial that 888 has a solid basis for
its tax positions taken in relevant jurisdictions.
HOW THE RISK IS MANAGED
888 aims to ensure that each legal entity within its
Group is a tax resident of the jurisdiction in which
it is incorporated and has no taxable presence
in any other jurisdiction. In addition, 888 consults
with tax advisers not only in jurisdictions in which
its Group companies are incorporated and in
which it has personnel, but also in major markets
in which it has customers, in order to comply with
its legal obligations whilst taking such action as is
necessary to prevent the improper imposition of
unlawful or double taxation.
WHAT HAPPENED IN 2019
888 continues to engage with tax authorities and
obtain legal advice in order to regularise its tax
position and mitigate exposures. As regards the
inquiry in Germany regarding VAT, in 2018, 888
received assessments for tax years 2010-2017
and accordingly partially released the provision
recorded in its financial statements in addition
to the contingent liability; the Company has
filed administrative appeals with regard to the
assessments. The Group's intellectual property
holding company has redomiciled from the British
Virgin Islands to Antigua, where the Group has a
higher level of economic substance. In Israel, the
local subsidiary is undergoing a tax audit with
respect to years 2014-2017, which primarily focuses
on transfer pricing matters. No assessment has
yet been issued, and the Company has included
a provision in its accounts in accordance with its
assessment of the likely outcome. The Company also
agreed to assessments issued in a routine periodic
withholding tax audit of its Israeli subsidiary.
37
Corporate.888.com Risk Management Strategy continued
RETENTION OF KEY PERSONNEL AND SUCCESSION RISK
2019
♠
2020
♠
THE RISK
The success of the Company is in part dependent
on its ability to retain its key personnel, including
at Board and senior management level and
throughout the business, and to successfully
manage succession planning in the case of key
personnel leaving the Company.
RELEVANCE TO STRATEGY
Human capital is important to online gaming
businesses, and online businesses generally, and
competition for highly-qualified personnel is
intense in locations in which the Group is based.
Ensuring orderly succession planning is important
to delivering on the Company's strategy and
avoiding undue disruption to the business.
HOW THE RISK IS MANAGED
Executive directors and senior management are
compensated competitively, including an equity
component and bonus partially deferred into
shares. The Board has an active Nominations
Committee, which is responsible for succession
planning at the Board and senior management
levels, and is supported as necessary by external
executive recruitment agencies.
WHAT HAPPENED IN 2019
During 2019, Itai Pazner successfully transitioned
into his new role as CEO, replacing Itai Frieberger,
who remained on the Board until January 2020.
Aviad Kobrine, our CFO, announced that he
will be leaving the Company during 2020, and
recruitment of his successor is in process, with
Aviad agreeing to remain in his position until
his successor is in place in order to enable a
seamless transition of responsibilities at the
appropriate time. Mark Summerfield joined the
Board as a Non-Executive Director and Chair
of the Audit Committee, replacing Ron McMillan,
who left the Board in April 2019.
BUSINESS DISRUPTION DUE TO PANDEMICS SUCH AS COVID-19
THE RISK
As a multinational company based in a number of
locations worldwide, the Company is dependent
on the ability of its personnel to maintain their
physical health and wellbeing, successfully carry
out their roles from the Group's offices or remote
locations, and at times to travel between sites.
Business disruptions may occur when personnel
are unable to work or communicate with one
another, including due to pandemics such as
COVID-19. Such outbreaks and the response
thereto also affect the global economy, which
can impact our customer base and consumer
confidence and spending more generally, which
can significantly affect our revenues. In particular,
cancellation of sporting events adversely affects
our Sport business, which accounted for 16%
of revenue in 2019. There is currently evidence
of increased customer activity in the Group's
Casino and Poker products that might, in part,
compensate for the sports betting disruption
for a period of time. However, in the event of
a prolonged period of global macro-economic
uncertainty, it is possible that consumer spending
across the Group's online gaming product
verticals may also become impacted. COVID-19
is also impacting 888’s service providers to a
varying extent; including 888’s live casino service
provider, which if disrupted, may affect 888’s
casino offering, as well as provider’s to 888’s
Sport vertical during the transition to 888’s new
proprietary platform, providers of customer KYC
verification, payment processing and the like. 888
is presently identifying these risks, and mitigating
them where possible.
RELEVANCE TO STRATEGY
Online gaming businesses are dependent on
their highly qualified personnel in order to
operate effectively. Ensuring that personnel can
work and communicate is key to delivering on
the Company's strategy and avoiding undue
disruption to the business. Our Sport business
is also dependent on sporting events continuing
to be held on which customers are interested
in betting.
HOW THE RISK IS MANAGED
The Company monitors developments which
may affect its sites and customers, and where
necessary and practicable takes steps to
mitigate disruption to the business. 888 is
satisfied that it has carried out a detailed and
considered analysis of the prospective impact
of COVID-19 across its business.
WHAT HAPPENED IN 2020
In light of the recent COVID-19 outbreak and
limitations imposed in various Group locations,
including with respect to self-isolation, as well
as restrictions on travel and conferences, the
Company has taken a number of mitigation
steps, including enabling remote working and
rebalancing of responsibilities between sites.
The outbreak has given rise to the postponement
and cancellation of sporting events, which is
having an impact on 888’s Sport vertical which
accounted for 16% of revenue in 2019. In parallel,
there is currently evidence of increased customer
activity in the Group's Casino and Poker products.
♠
38
888 Holdings plc Annual Report & Accounts 2019 DATA PROTECTION RISK
♠
THE RISK
888 processes a large quantity of personal
customer data, including sensitive data such
as name, address, age, bank details and
gaming/betting history. Such data could be
wrongfully accessed or used by employees,
customers, suppliers or third parties, or lost,
disclosed or improperly processed in breach of
data protection regulations. In particular, the
European General Data Protection Regulation
(“GDPR”) entered into force in May 2018, having
a significant effect on the Company’s privacy
and data protection practices, as it introduced
various changes to how personal information
should be collected, maintained, processed
and secured. Non-compliance with the GDPR
may result in fines of up to €20 million or 4%
of the Company’s annual global turnover, and
the Company will be particularly exposed to
enforcement action in light of the amount of
customer data it holds and processes. In addition,
various countries in the EU have introduced
domestic data protection laws incorporating the
GDPR requirements. Moreover, 888 makes use of
various tracking technologies (such as cookies,
SDKs, JavaScript and other forms of local
storage), which are subject to stricter standards
of consent and transparency, both under the
GDPR and the e-Privacy Directive. The Company
could also be subject to private litigation and loss
of customer goodwill and confidence.
RELEVANCE TO STRATEGY
The holding and processing of personal and
sensitive data in a lawful and robust manner
is central to 888's analytics-based business
strategy. As an online B2C and B2B business, the
integrity of 888's data protection framework is
crucial to the supply of its offerings, compliance
with its regulatory obligations and maintenance
of the impressive customer loyalty with which 888
is entrusted.
HOW THE RISK IS MANAGED
888 has undergone a robust and risk-oriented
GDPR-preparation project, pursuant to a
designated GDPR Gap Analysis that was
prepared for that purpose in coordination with
its legal advisers. 888 has further mapped the
personal data life-cycle within the organisation,
including how personal data of its customers and
EU employees is collected, stored, secured and
shared with third parties.
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
Increase
Decrease
Stable
888 has further appointed a designated internal
Data Protection Officer ("DPO") and put in
place policies and procedures on relevant
matters, including exercising user rights and
data retention, data sharing with third parties,
security policies, as well as reviewing necessary
product and IT implementation. Such policies
and procedures are reviewed and updated on an
ongoing basis to align with the most up-to-date
regulatory guidelines. 888 has further put in place
adequate contractual measures with respect
to sharing data with third parties, reviewing its
privacy notices and other customer notifications
and reviewing the current data security
framework on an ongoing basis.
WHAT HAPPENED IN 2019
888 reviewed and updated its internal data
protection policies and procedures, as well as
notices provided to the users (such as privacy
notices, cookie notices and consent forms), so as
to ensure alignment with regulatory developments
and guidelines; reviewed a dedicated notice
and choice mechanism (to be implemented
on 888's online properties) so as to meet the
regulatory requirements relating to the use of
tracking technologies; designated a dedicated
SAR officer responsible to ensure that data
subjects requests to exercise rights are handled
in an appropriate manner, in accordance with
the internal procedures and within the regulatory
timeframe; conducted a data protection impact
assessment so as to ensure that data processing
activities that envisage a risk to data subjects are
carefully assessed and balanced with appropriate
controls in order to safeguard data subjects'
privacy expectations; the DPO of 888 acted to
ensure a privacy-aware culture within 888 by way
of conducting training and privacy awareness
exercises to relevant employees and departments
(e.g. customer support and marketing teams);
the DPO of 888 produced an annual report with
the objectives of providing an overview of the key
events, regulatory investigations and inquiries, and
data subjects’ complaints since the GDPR entered
into force, enabling 888's senior management to
ascertain the data protection risks and challenges
in the environment in which the Company operates
and the regulatory exposure, support 888's senior
management with the effort to take appropriate
risk mitigation steps and allocate appropriate
resources for handling data protection issues,
and increase the awareness to data protection
obligations and the 888's responsibilities; reviewed
and responded to data subjects' complaints
and regulatory inquiries relating to compliance
with applicable data protection requirements;
and monitored for and investigated data breach
attempts/incidents and took the appropriate
steps to enhance its cybersecurity posture and
mitigate the residual risks.
39
Corporate.888.com WHAT HAPPENED IN 2019
During 2019, the UKGC continued its regulatory
enforcement processes and actions which
resulted in several public regulatory settlements
with online operators, as published by the
Commission. Such publications raise further
concerns about the sector’s compliance with
regulatory requirements pertaining primarily to
Anti-Money Laundering and Social Responsibility.
888 continued to devote significant resources to
putting in place prevention measures coupled
with strict internal procedures to protect
customers, and monitor and update procedures
to ensure that minors are unable to access their
gaming sites. 888 continues to improve on efforts
to detect and prevent instances of problem
gambling, and continues to review and update
its anti-money laundering policies to better
detect players suspected of using illicit funds for
gambling. 888 has continued its review of all its
websites and those of its B2B partners in light
of the UK Advertising Standards Authority and
Committees of Advertising Practice’s review of
gaming industry practices, with a view to ensuring
that content that may be particularly appealing
to children, whether specific games or general
creative elements on the site, have been removed
or made accessible only after a robust age
verification process has been completed. 888 has
also integrated with the National Online Self-
Exclusion Scheme (also known as “GAMSTOP”) to
enable its customers to self-exclude on national
level from all UK online gambling operators.
Risk Management Strategy continued
REPUTATIONAL RISK
♠
♠
THE RISK
The reputation of 888 is affected by the profile of
both other online gaming and betting operators,
as well as the gaming and betting industry as a
whole. Various regulators, most notably the UKGC
and the Swedish regulator, have adopted stricter
compliance and enforcement policies, conducting
more in-depth reviews of operational practices
and sanctioning operators found to be non-
compliant. There appears to be growing sentiment
in various jurisdictions that existing regulations
do not sufficiently protect minors and vulnerable
players or do enough to prevent the use of illicitly
obtained funds for gambling purposes. This could
result in reputational damage to the Group, as
well as in the adoption of stricter regulations
and enhanced enforcement measures.
RELEVANCE TO STRATEGY
Underage and problem gaming, as well as
the use of illicit funds for gambling, are risks
associated with any gaming business, and
ensuring compliance with regulatory requirements
for the protection of vulnerable people and the
prevention of money laundering is critical to
maintaining 888’s online gaming licences. 888
also recognises that, in light of the COVID-19
outbreak, people are spending more time at
home with potentially increased stress from
economic uncertainty, meaning that 888's
vigilance on safe gambling and preventing
gambling-related harm is even more important
than ever.
HOW THE RISK IS MANAGED
Staff are trained to provide a safer gaming
experience to customers and to recognise
and take appropriate actions if they identify
compulsive or underage activity. 888 also
complies with eCOGRA guidelines to protect
customers. Web links to professional help
agencies are provided on 888’s real money
gaming sites, and 888 has a dedicated
website which provides information regarding
responsible gaming. Players can also limit their
play pattern or request to be self-excluded.
888 furthermore – directly or via industry
bodies – seeks to ensure that legislators and
regulators are provided with accurate and
useful information regarding protections against
problem and underage gaming.
40
888 Holdings plc Annual Report & Accounts 2019 PARTNERSHIP RISK
2019
♠
2020
♠
THE RISK
B2B partnerships expose 888 to business risks,
as well as compliance and reputational risks, with
increased pressure on 888 as the licence holder,
particularly from the UK Gambling Commission,
to monitor activities of its B2B partners. 888
furthermore uses services provided by third parties,
including in its Sport vertical during the transition
to 888’s new proprietary platform, game providers,
including live casino, payment service providers, KYC
and age verification providers, which if disrupted
due to general economic conditions or otherwise,
may impact 888’s operations.
RELEVANCE TO STRATEGY
B2B remains a material part of 888’s business,
particularly for Bingo in the UK; in addition, its US
B2B contracts have strategic importance for the
longer term. Third-party providers are an important
part of maintaining 888’s attractive product offering.
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
Increase
Decrease
Stable
HOW THE RISK IS MANAGED
888 has reduced its dependency on B2B
relationships, following the acquisition of Costa
Bingo and other formerly B2B bingo brands.
Remaining B2B contracts are maintained
commercially in terms of the functionality and
technology of the B2B platform offered, competitive
pricing, maintaining an ongoing relationship with
B2B partners, and ensuring that 888 has a good
understanding of the needs of its B2B partners and
their owners.
WHAT HAPPENED IN 2019/20
In 2019, 888 acquired Costa Bingo and other
formerly B2B bingo brands from its former B2B
partner Jet Management. In June 2019, 888's US
B2B partner Caesars announced that it will be
wholly acquired by Eldorado Resorts; the impact
on the relationship with 888 (if any) is presently
unknown. By developing its own proprietary sports
betting platform, 888 will also reduce its reliance
on external providers. Certain of 888’s service
providers have been impacted by the COVID-19
outbreak and its economic consequences, and
888 is in the process of identifying these risks
and mitigating where possible.
ACQUISITION RISKS
♠
THE RISK
888 has made a number of acquisitions in the online
gaming and betting space. Acquisitions of gaming
companies carry business risks, such as overpaying
for what are mainly intangible assets, as well as
legal and regulatory risks, including the receipt of
necessary regulatory approvals to the transaction
and exposure to legacy non-compliance of the
seller. Furthermore, integration of acquired entities
gives rise to a financial burden and the requirement
of management attention and operational
resources.
RELEVANCE TO STRATEGY
Ongoing consolidation of the online gaming market
has increased the importance of 888 being ready
to acquire smaller operators.
HOW THE RISK IS MANAGED
888’s legal, financial and tax advisers ensure that
a comprehensive due diligence is carried out on
potential acquisition targets. Generally, 888 prefers
to acquire assets rather than shares of companies,
in order to mitigate exposure to any past non-
compliance issues on the part of the seller. 888
seeks to take into account the resources required to
integrate acquired entities in its annual budgeting
and planning.
WHAT HAPPENED IN 2019
In 2019, 888 acquired Costa Bingo and other
formerly B2B Bingo brands from its former partner
Jet Management, as well as acquiring the BetBright
Sports betting technology. Both transactions
were structured as asset acquisitions, and 888 is
dedicating the necessary resources to effectively
integrate these businesses into the Group.
LIQUIDITY RISKS
♠
THE RISK
888 has taken an RCF from Barclays Bank plc in
order to finance its activities. The credit facility
contains covenants by the Group regarding the
maintenance of certain financial ratios, as well as
various regulatory compliance matters.
HOW THE RISK IS MANAGED
888 monitors its ongoing compliance with the
relevant financial ratios. 888, in-house and via
its legal counsel, also monitor changes to the
regulatory landscape which may have an impact on
its obligations under the credit facility.
RELEVANCE TO STRATEGY
Ongoing consolidation of the online gaming market
has increased the importance of 888 being ready
to acquire smaller operators, requiring readily
available cash resources.
WHAT HAPPENED IN 2019 AND 2020
In 2019, 888 executed the revolving credit facility
with Barclays. 888's debt under the RCF as at 31
December 2019 is disclosed in note 20 to the
annual accounts on page 146. In 2020 to the date
of this Annual Report, 888 does not consider it has
increased liquidity risk.
The Strategic Report, from pages 01 to 67, was reviewed, approved by the Board and signed on its behalf.
41
Corporate.888.com Regulation and General Regulatory Developments
OPPORTUNITIES IN A
DYNAMIC GLOBAL MARKET
As anticipated in our 2018
Annual Report, the most
significant developments in the
regulatory landscape governing
gambling in 2019 were observed
in the United States.
An increasing number of US states ushered in
legislation expanding the forms of gambling
available within their territories – both online and
offline. A significant number of states regulated
(or reached advanced stages of regulating)
sports betting, pursuant to the Supreme Court's
overturning of the Professional and Amateur Sports
Protection Act of 1992 ("PASPA") in 2018, and a
smaller number of states introduced online casino
gaming. The proliferation of online casino gaming
was the source of some legal debate during 2019,
which, to an extent, is likely to persist in 2020, as
discussed further below.
2019 saw advancement and shift in regulation
and law in additional geographies as well. Notable
examples include Germany that saw an overhaul
of its sports betting regime; Brazil that continued
advancing towards the liberalization of its sports
betting market; Switzerland that ushered in a
regulated online gaming and betting market;
and the Netherlands that continued progression
towards a regulated and licensed market. The
general trend continued to be towards adoption
of localised legislation permitting the offering
of gaming and betting services subject to local
licensing requirements, with some notable
exceptions taking a more restrictive approach.
888 continued to seize the trend towards
accommodating regulation of online gaming to
increase its presence in locally regulated markets
and grow its licensing portfolio. We realise that the
legal and regulatory environment governing our
industry continues to change rapidly and that this
experience is likely to be a reality for our business
in the coming years. We therefore continue
to adapt to shifting regulatory environments,
while striving constantly to maintain the highest
compliance standards and to support the move
towards clearer regulation in the online gaming
industry. We also look to build 888 on agile and
adaptive foundations, capable of accommodating
rapid and regular changes to the landscape within
which we operate.
42
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
EUROPE
UK
Gibraltar
Ireland
Romania
Spain
Italy
Denmark
Malta
Portugal
Sweden
US
Nevada
Delaware
New Jersey
Our Global Market
Europe and the United States
We look forward to working with our partners
in the industry and with regulators toward
shaping a regulatory landscape that is
business-friendly whilst safeguarding the
objectives of the industry's regulation.
The following paragraphs summarise the
main relevant regulatory developments
of 2019, and our expectations regarding
changes that may impact 888 in 2020.
43
Corporate.888.com » The UKGC continued to focus
its efforts on the protection of
consumers, specifically problem
gamblers and underage gamblers,
and on raising standards in the
gambling market. Changes in 2019
included enhancements to age
verification requirements, stricter
responsible gambling standards,
and in early 2020 – a ban on the
use of credit cards for gambling.
888 continued to take all necessary
measures to fully comply with UKGC
requirements and to cooperate
with the Commission in a fully
transparent manner.
» During 2019, the UKGC continued
to take enforcement action against
operators for failings pertaining
primarily to money laundering and
the use of proceeds of crime for
gambling. We continue to closely
monitor the UKGC’s findings and
determinations in these cases, to
fully understand the regulator's
positions and expectations from the
industry, to anticipate regulatory
trends and to ensure we conduct
our operations in a manner that is
commensurate with the standards
required by the UKGC.
» The Group continued to engage
with the UKGC with respect to
cases submitted to its attention
by the UKGC and is committed to
continuing its open and productive
dialogue with the UKGC on all
matters pertaining to our operations.
Regulation and General Regulatory Developments continued
EUROPE
A growing number of European
jurisdictions having completed the "re-
regulation" of gambling (particularly
online gambling) in recent years, by
introducing or updating their gaming
legislation to address technological
advancements and present attitudes
towards the industry. Notwithstanding
that, a number of significant European
markets, including markets that are
significant for the 888 group, saw
substantive regulatory change in 2019.
There also persist certain Europe
jurisdictions in which the regulatory
regime continues to be ambiguous,
non-compliant with EU law, or simply
outdated. However, the number of such
jurisdictions, in Europe, appears to be in
consistent decline. Since the absence
of well-tailored regulation is an obstacle
to the growth of the industry and leaves
players less protected and with less
access to quality services, we hope that
this decline will continue.
Though the industry had hoped for
a greater degree of pan-European
harmonisation, 2019 saw virtually no
attention from the EU and its institutions
towards gambling. This may, again,
have been the result of a focus on
Brexit, or it may reflect a deeper lack
of desire, on the EU's part, to address
this contentious and controversial issue.
2019 was the second consecutive
year with no landmark rulings by the
European Court of Justice on matters
pertaining to gambling, a notable
absence after several years of rulings
affecting the industry. This may indicate
a lack of willingness by local courts to
refer gambling-related matters to the
ECJ, or it may be reflective of a more
settled and up-to-date regulatory
landscape taking shape across Europe.
Following the formal exit of the UK
from the European Union on 31 January
2020, with a transition period expected
to conclude at the end of 2020,
Gibraltar may cease to be a part of
the EU, with cross-border passage
and trade between Gibraltar and
the EU depending on the outcome of
negotiations between the UK and the
EU. During 2019, 888 continued the
restructuring of its European-facing
business, obtaining Maltese gambling
licenses to complement its Gibraltar
licenses, relocating certain corporate
entities from Gibraltar to Malta,
refreshing its Gibraltar licensing portfolio,
establishing a new server farm in Dublin
and reorganising the distribution of
players between licensed entities
based on jurisdictional considerations.
Notwithstanding Brexit, parts of the
Group’s business remain in Gibraltar,
however the Group has taken the
necessary measures to ensure that
its operations (both its UK operations
and its worldwide operations) continue
undisturbed under any variation of Brexit.
A number of regulatory developments in
European jurisdictions during 2019 are
relevant to 888 and its operations:
• In the UK, 888’s largest market, the
Group continued adapting to meet
the developing and increasingly more
stringent regulatory requirements,
a process which continues to
require significant efforts and the
implementation of changes in many
areas of the business. We continue
to work to adapt our operations and
working modalities to ensure ongoing
adherence to the various (and
evolving) requirements applicable to
our UK operations.
A GROWING NUMBER OF EUROPEAN JURISDICTIONS
HAVING COMPLETED THE ‘RE-REGULATION’ OF GAMBLING
(PARTICULARLY ONLINE GAMBLING) IN RECENT YEARS, BY
INTRODUCING OR UPDATING THEIR GAMING LEGISLATION
TO ADDRESS TECHNOLOGICAL ADVANCEMENTS AND
PRESENT ATTITUDES TOWARDS THE INDUSTRY
44
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
» There continued to be calls,
• In Switzerland, a new law regulating
particularly within Parliament, for
the imposition of stricter limitations
on the advertising of gambling
services. The senior government
officials responsible for the
sector under the current British
administration appear to have
adopted a circumspect approach
towards the industry, which may
result in both restrictive legislation
and regulation, and a further
tightening of regulatory standards
by the relevant authorities. By way
of example, the Gambling Related
All-Party Parliamentary Group
(APPG) issued a report in November
2019 urging, inter alia, the imposition
of a GBP 2 staking limit for online
gambling games (in line with the
limit imposed on FOBTs). The same
report advocated a ban on credit
card gambling, a measure adopted
by the UKGC in early 2020.
• On 1 January 2019, a new law
regulating the online gaming market
came into force in Sweden. 888
obtained a Swedish licence under this
new law and now offers its services in
Sweden under a local licence and in
accordance with the new regulatory
framework in place in this jurisdiction.
The Swedish regulator showed itself,
during 2019, to be strict and proactive
in enforcing regulatory standards,
occasionally revealing its approach
to certain aspects of the regulatory
framework by way of warning
letters, sanctions and penalties. 888
continues to conduct its operations
in this jurisdiction fully in line with its
regulatory obligations and maintains
a collaborative relationship with the
local regulator.
the online gaming and betting market
came into force on 1 January 2019,
followed six months later by entry
into force of the adjunct enforcement
powers. The Swiss regime is
predicated on local casinos (i.e. only
the land-based casinos are entitled
to offer services online), and at this
time the Group has not entered into
a collaboration with any such casino
in connection with an online offering,
and has therefore withdrawn from
this market. We continue to follow this
market and are open to potential
business opportunities.
• In the Netherlands, progress towards
liberalisation of the market continued,
and legislation introducing a new
regulatory framework for online
gaming was passed by Parliament in
February 2019. Progress towards the
adoption of secondary legislation
necessary for implementation of the
new regime has been slow, due to
ongoing parliamentary debate
related to the particulars of the
regulatory regime. It is unclear when
the new regime will come into force,
with estimates pointing to 2021 as the
soonest possible date. In the interim,
the Dutch regulator continued to
update and tighten its enforcement
policy, adopting new “prioritisation
criteria” for enforcement, including
ones not specifically related to the
targeting of Dutch players (e.g. with
respect to player age verification).
The regulator also issued several
fines, including to large international
operators whose operations were
perceived to be in violation of these
criteria, and who are now expected to
suffer a delayed entry into the
ON 1 JANUARY 2019, A NEW LAW REGULATING
THE ONLINE GAMING MARKET CAME INTO FORCE
IN SWEDEN. 888 OBTAINED A SWEDISH LICENCE
UNDER THIS NEW LAW AND NOW OFFERS ITS SERVICES
IN SWEDEN UNDER A LOCAL LICENCE
regulated market due to "bad
actor" language in the new law.
888 continues to adhere strictly to
the regulator's criteria, as updated
from time to time, and to follow
developments on the regulatory front.
• Germany’s regulatory landscape
underwent significant changes
during 2019, the full effects of which
are likely to manifest themselves
in 2020 and 2021. During 2019,
the Group (along with many other
operators) continued to defend the
legality of its services in Germany
on various fronts, primarily vis-à-vis
states seeking to issue or enforce
prohibition orders directed at the
Group's services within such states,
and with respect to attempts by
the German authorities to block
financial transactions related to
gambling services. On 1 January
2020, an amendment to the
Interstate Treaty on Gambling came
into force, introducing a federal
licensing scheme for sports betting,
representing a significant departure
from previous iterations of the Treaty
and previous attempts to introduce
regulatory reform. The licensing
regime imposes certain restrictions
with respect to the available offering
(specifically – a monthly stake
limit, limitations on live betting and
advertising restrictions) and also
requires licensees to make certain
undertakings with respect to their
Group's operations with respect
to the German market. The Group
applied for a licence under the new
regime, which will remain in force
until mid-2021. However, in April
2020 a German court suspended the
licensing process pending a thorough
evaluation of claims against the
process. It is presently unknown if or
when the process will be reinstated.
As noted, applicants for a licence
must undertake that neither they
nor their affiliated companies will
operate or broker unlawful gambling
in Germany once licensed; it is
understood that this undertaking
was primarily designed to capture
applicants' online casino offerings.
Along with its various German
advisers, the Group is evaluating the
impact of the amendment to the
Treaty and of licensure under the new
regime on the Group's German-facing
business more generally.
45
Corporate.888.com
Regulation and General Regulatory Developments continued
• In Italy, an advertising ban imposed
in 2018 came into force during 2019.
The full impact of this ban on the
Group and on the industry is likely
to continue to become apparent in
2020. Other European jurisdictions,
most notably Spain, continue to mull
the possibility of imposing similar
restrictions on the advertising of
gambling services.
• Senior Spanish officials have
expressed support for a ban on
credit card gambling, advertising
restrictions, gambling tax reform
and other measures that, if adopted,
could have a significant impact on
the country's gambling landscape
and on the Group.
• The Greek government has been
making a renewed effort to activate
a regulatory framework for online
gambling that has been all but
defunct since initially adopted.
Late in 2019, the Greek government
notified draft regulations governing
online gambling to the European
Commission, with a view to formally
adopting them in 2020. The fate of
this initiative is presently unclear,
given previous attempts in this
jurisdiction to regulate the industry.
However, the Group, with its local
advisers, is seeking to ensure it is
properly positioned to pursue a
possible licence in this jurisdiction,
if such becomes economically viable.
EUROPE CONTINUED
Germany continued
In early 2020, the German states
agreed on a sweeping reform to the
regulatory landscape, scheduled
for mid-2021, which would see the
introduction of a federal licensing
regime for sports betting and certain
casino products (primarily online
slots) and poker. This would represent
a departure from the historical
ban on online casino, however the
specific details of the new regime are
yet to be confirmed, and therefore
the commercial appeal of this
opportunity and its overall impact
is presently difficult to evaluate. As
presently worded, the amended
Treaty would allow operators to offer
"arcade-style" online slot machines,
which would be subject to low stake
limits and restricted play options.
Other types of casino games (e.g.
table games) would be regulated
on a state by state basis, and could
remain within the state lottery's
monopoly or subject to a restrictive
concession model. The new Treaty
would also impose a EUR 1,000
Euro monthly deposit limit which
would apply across all operators (it
is not clear yet how this would be
implemented in practice.) The Group
continues to seek a ruling from the
German Constitutional Court which
would overturn the ruling, in 2017, of
the German Federal Administrative
Court upholding a prohibition order
issued against the Group's online
casino offering in a single German
state. Finally, the Group continues to
be keen on constructive dialogue with
the German authorities with respect
to its operations in this significant
jurisdiction. As a member of the local
trade association, the Group together
with other industry stakeholders is
able to reach out to legislators and
state governments in order to discuss
the implementation of the future
licensing regime.
2019 SAW TWO SIGNIFICANT DEVELOPMENTS IN THE US
REGULATORY LANDSCAPE, BOTH OF WHICH ARE LIKELY
TO CONTINUE IN 2020
THE UNITED STATES
2019 saw two significant
developments in the US regulatory
landscape, both of which are likely
to continue in 2020.
Following the 2018 US Supreme
Court ruling overturning PASPA, a
growing number of states introduced
legislation legalising retail and/
or online sports betting. Of those
states, some also legalised online or
mobile casino gaming and poker. By
and large, states introducing such
liberalised regimes have preserved
the link between online and land-
based gambling, namely – allowing
only existing land-based operators
to expand their services online, in
collaboration with approved vendors
(such as 888). Though the largest
US states (e.g. California, New York,
Florida and Illinois) continue to
hold out on liberalisation of their
online markets, a growing number
of US states now either have a
licensing regime for certain types
of online gambling in place, or
are considering adopting one.
888 continues to offer its services
in collaboration with land-based
partners in Nevada, New Jersey
and Delaware and is pursuing
commercial opportunities with local
partners in other liberalised states.
Though there appeared to be
some interest in federal legislation
governing sports betting late in
2018, there was no traction on this
front in 2019, and there appears to
be no political interest in pursuing
such legislation at this time. We do
anticipate that the trend towards
market liberalisation and local
licensing opportunities will continue
on the state level in 2020, though the
pace and scope of such reform may
be impacted by the fact that 2020 is
an election year.
46
888 Holdings plc Annual Report & Accounts 2019
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
FURTHER AFIELD
Two heavily populated districts of
Argentina (the State and City of
Buenos Aires) adopted legislation
late in 2018 introducing commercial
gambling services. Political changes
and unrest in 2019 delayed the actual
implementation of this legislation and
to date, no licences have been issued.
The Group applied to obtain one of 7
available licences with a local partner.
The impact of the anticipated
implementation of the 2018 law on
the local market and on the ability
of foreign operators, including the
Group, to offer services to Argentinian
players on a cross-border basis,
remains to be seen.
Brazil adopted framework legislation
late in 2018 which would bring
commercial online gambling to this
significant jurisdiction. During 2019,
the country conducted a public
consultation around secondary
legislation which culminated in
legislative proposals in late 2019.
These were not eventually adopted,
and progress on this front is expected
during 2020. It is anticipated that
the law will provide for an unlimited
number of licences, however the tax
burden is expected to be significant.
The Group will evaluate its position
in this sizeable market once further
details on the incoming regime
become available.
The President of Ukraine announced
his government's intention to reform
the country's gambling laws in 2020.
This is expected to include the
introduction of a licensing regime
for online gambling. Details of the
anticipated reform are not yet known.
888 continues to follow these
developments to assess their
impact on our business and to
identify potential opportunities for
growth. The COVID-19 outbreak
is giving rise to some delays in
legislative and regulatory processes,
including licence applications, as
well as temporary measures such
as restrictions on advertising and
promotions in Spain.
The upcoming elections may also
influence the other context that saw
significant developments in 2019,
namely the interpretation of the
federal Wire Act and its applicability
to casino gambling. In early 2019, the
US DOJ released a 2018 memorandum
overturning a 2011 DOJ memorandum
on the interpretation of the federal
Wire Act. The 2011 memorandum had
restricted applicability of the Wire
Act to sports betting only, and this
interpretation was intended to be
reversed by the 2018 memo. Given its
far-reaching impact on the existing
online casino industry, implementation
of the 2018 memo was temporarily
postponed. During that window, legal
action against the memo was initiated
before a New Hampshire federal court.
Those proceedings culminated with
a judgment ‘setting aside’ the 2018
memo, and upholding the 2011 memo
and its interpretation of the Wire Act
on substantive grounds. As a result,
the US Attorney General appealed
the New Hampshire court ruling. The
reasoning of the appeal suggests that
the Attorney General not only supports
an interpretation of the Wire Act that
applies to online casino gambling,
but is also more generally opposed to
such services. The appeal will likely be
considered in 2020, and irrespective of
its outcome, the matter may eventually
reach the US Supreme Court. While a
reversal of the 2011 memo and the New
Hampshire court ruling could impact
certain aspects of the Group's US online
casino operations, those operations
remain undisturbed at this time.
Naturally, the Group continues to closely
monitor developments on this front.
We continue to believe the
developments in the US will continue to
transform the US into a major gambling
market, and we continue to follow these
developments as they evolve with a view
to capitalising on our strong position in
this market.
47
Corporate.888.com Viability Statement
VIABILITY
STATEMENT
The Directors have re-examined the
timeframe for the viability analysis of
888 pursuant to a two-stage process.
The Directors have first considered
the prospects of the Company taking
into account its current position and
principal risks. Second, they have
considered whether they have a
reasonable expectation that the
Company will be able to continue in
operation and meet its liabilities as
they fall due over the period of their
assessment.
In this light, the Directors note that the
Company operates in the online gaming
sector, which has matured substantially
since the early days of the internet
and is now focused on predominantly
regulated markets, meaning that
there is now more stability and ability
to assess future scenarios than ever
before. Having said that, the online
gaming industry remains fast-moving
and dynamic, with change ongoing in
the global regulatory and competitive
landscape, and the industry is subject
to greater consolidation than ever
before, meaning that it still remains
difficult to forecast a period longer than
three years with any significant level
of certainty. Current market volatility
and uncertainty in light of the COVID-19
outbreak only serves to reinforce this
view.
Management currently forecasts as part
of the business planning process and
capital investment cycle over a varying
period. A detailed bottom-up model is
used to budget the business for a period
of one year in advance and a top down
model for a period of three years.
A longer forecasting period might be
required in the context of equity or debt
financing, however the Company has
not completed any such financing in
which forecasts were produced since
its initial public offering (“IPO”) in 2005,
and believes that the level of certainty
over any such longer period decreases
to such a level as not to be useful for
planning purposes.
On the basis that the top down model
is sufficiently detailed for the Directors
to review, the Directors consider that
a reasonable period on which it can
and should forecast is three years.
Notwithstanding that, the Board
acknowledges that the Company’s
prospects should persist into the longer
term. Following the COVID-19 outbreak,
the base case assumptions adopted in
the top down model have been updated
as set out in the Going Concern section
as set out below.
In addition, a ‘reverse stress test’ was
carried out regarding the COVID-19
issue, in order to analyse the reduction
in Casino, Poker and Bingo revenues
which, together with shutdown of Sport
revenues, in the absence of mitigating
actions, could bring about insolvency of
the Company unless capital were raised;
in such cases it is anticipated that
mitigation actions such as a reduction
in dividends and overheads could be
implemented in order to forestall such
an outcome.
With respect to the period assessed, the
Directors have considered:
• 888’s resilience to threats to its
viability in severe but plausible
scenarios;
• Both qualitative and quantitative
analyses, including the combined
impact of the crystallisation of
multiple risks simultaneously, as well
as stress testing, reverse stress testing
and sensitivity analyses, which the
Directors consider sufficiently robust
to make a sound statement; and
• A broad range of relevant matters
that may threaten 888’s viability.
The severe but plausible scenarios
considered by the Directors included:
• the impact of COVID-19 across the
business, including loss of consumer
confidence, a more general business
downturn, disruption of critical
services and regulatory changes;
• exit/closure of major markets due to
regulatory or legal events;
• a major cyber-attack and/or data
protection violation;
• anticipated tax developments
together with the crystallisation
of tax risks; and
• loss of key personnel.
The Directors confirm their view that they
have carried out a robust assessment of
the emerging and principal risks facing
888, including those that would threaten
its business model, future performance,
solvency and liquidity.
In light of the foregoing, the Directors
confirm they have a reasonable
expectation that 888 will be able to
continue in operation and meet its
liabilities as they fall due over the
three-year period to 31 December 2022.
Furthermore, after careful review
of the Group’s budget for 2020, its
medium-term plans, liquid resources
and all relevant matters, the Directors
are confident that the Company and
the Group have adequate financial
resources to continue in operational
existence for the foreseeable future and
for a period of at least 12 months from
the approval of this Annual Report. They
have therefore continued to adopt the
going concern basis in preparing the
financial statements.
Details of 888’s risk management
strategy and how it manages and
mitigates its risks are set out in the
Risk Management Strategy on page 33.
48
888 Holdings plc Annual Report & Accounts 2019
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
With respect to the period
assessed the Directors
have considered:
01
RESILIENCE
888’s resilience to threats to its viability in severe but
plausible scenarios;
02
ANALYSIS
Both qualitative and quantitative analyses, including the
combined impact of the crystallisation of multiple risks
simultaneously, as well as stress testing, reverse stress
testing and sensitivity analyses, which the Directors
consider sufficiently robust to make a sound statement;
and
03
RELEVANT MATTERS
A broad range of relevant matters that may threaten
888’s viability.
Corporate.888.com
49
Corporate.888.com Corporate Social Responsibility
RESPONSIBLE
BUSINESS ACTIVITIES
“Ever since 888’s foundation, we have constantly strived to create an
environment that offers the most enjoyable experience for customers.
Over recent years, we have increasingly recognised that being
uncompromising on safer gambling lies at the heart of this. Our internal
culture has transformed to put player safety at the center of everything
we do. As a result, we are investing more resources than ever before in
helping to protect customers and providing a great, safe environment.”
CSR FRAMEWORK
This framework covers three key
focus areas:
SAFER. BETTER. TOGETHER
We acknowledge the
potential risks that online
gambling can present. We
are committed to continuous
improvements to make
gambling safe, enjoyable and
not a cause of harm.
EVOLVING OUR CSR FRAMEWORK
In January 2019, in recognition of 888’s
transparent management and clearly-
defined environmental, social and
governance criteria, 888 was admitted
to the FTSE4Good index. 888 is proud
to have been recognised for its efforts
to-date in these areas and we are
committed to ongoing progress.
Building on our efforts to date, we
have refined and expanded a new
corporate social responsibility (“CSR”)
framework that will help 888 to deliver
against its broader responsibilities
and commitments as a business whilst
also supporting the Group’s long-term,
sustainable growth. Conducting business
responsibly is fundamental to the future
success of 888, and we are absolutely
committed to a proactive policy of
corporate and social responsibility
that reflects the high professional and
ethical standards we set for ourselves
across the business.
MORE THAN AN OFFICE
We are supportive of the
communities where we operate
and – although we have a
relatively low environmental
impact – we recognise and
strive to mitigate the effects
our operations have on
the planet.
A GR8 WORKPLACE
The talent, commitment
and skill of our global teams
makes our business what
it is. We are committed
to promoting a working
environment that enables
our people – and our
business – to flourish.
Underpinning this framework are our defining principles that guide activity across the business:
♥
♠
♣
♦
WE CARE
No ifs, no buts. We care for
our customers, our colleagues
and the communities where
we operate.
WE RESPECT
We act with respect and
fairness. We do the right
thing because it’s the right
thing to do.
WE WORK TOGETHER
We collaborate. Together
we are safer, better and
stronger.
WE COMMIT
We’re bold, proactive,
ambitious and challenging.
We don’t do things by
halves. We enjoy what we do.
50
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
SAFER. BETTER.
TOGETHER.
We acknowledge the potential
risks that online gambling can
present. We are committed to
ongoing improvements to make
gambling safe, enjoyable and not
a cause of harm.
We are convinced that the sustainability of our
business rests on ensuring our customers are
empowered to make safe and responsible decisions
about their betting and constantly ensuring that
those struggling to stay in control of their play
receive the support they need. To realise this goal,
we have set out eight Safer Gambling Commitments:
1. We are committed to reducing addiction,
preventing underage play and protecting the
vulnerable.
2. We are committed to identifying those
potentially at risk of harm and supporting them
at the earliest point.
3. We are committed to ensuring customers are
provided an empowered gambling experience,
in which they have the knowledge and tools to
stay in control.
4. We are committed to a culture of responsibility
that ensures safer gambling and transparency
is a priority for everyone in our business.
5. We are committed to promoting responsible
attitudes among players.
6. We are committed to being proactive in helping
our customers.
7. We are committed to collaborating with
relevant stakeholders to develop a shared
knowledge base and stronger overall standards
for safer gambling.
8. We are committed to not standing still and
making continuous progress.
DELIVERING OUR COMMITMENTS
888 is constantly developing new and innovative
ways to deliver a safer gaming environment. Our
goal is to ensure that all those who visit our sites
can do so with confidence and that those for whom
our games are not intended, notably underage and
vulnerable individuals, will not be drawn into the
gaming environment. We strive to ensure that we
quickly identify any customers who demonstrate
potentially problematic gambling behaviour
and effectively interact with them to prevent any
potential harm.
To ensure resources are effectively allocated to
deliver our eight Safer Gambling Commitments, we
have identified four key areas of focus. These are:
Knowing our customers
52
Participating in industry collaboration to raise overall standards 54
Our culture of care
Empowering our customers
55
56
Underpinning our progress in each of these areas,
we leverage our unique technology and analytics
expertise. We also make investments in our business
to ensure continuous progress and work closely with
relevant stakeholders, including regulators, industry
bodies and charities, who share our vision for the
continuous improvement of standards across the
industry.
51
Corporate.888.com Corporate Social Responsibility continued
SAFER. BETTER. TOGETHER.
KNOWING OUR CUSTOMERS
algorithms. This constantly evolving
process enables the 888 team to
increasingly interact with customers
who might be at risk of harm at an
earlier stage and encourage safer
gambling practices, including the
usage of our safer gambling tools.
888 also uses advanced methods,
including automated email monitoring,
segmented deposit limits, and early
gathering of affordability and geo-
demographic information regarding
customers in order to achieve its safer
gambling objectives. In the UK market,
888 uses algorithms designed to check
customers' source of funds, which use
customer information – such as the
customer’s occupation - supplied
at registration, enabling 888 to set
affordability thresholds for individual
customers rather than simply applying
a blanket policy across all customers.
Understanding each customer’s
“affordability” to gamble is a key part of
888’s KYC process. During 2020, 888 will
launch a number of new tools to assess
a customer’s financial risk score that will
enable 888 to apply enhanced levels of
customer due diligence. In conjunction
with the Betting and Gaming Council,
888 and a number of third-party
solution providers are developing
different methodologies of assessing
customers’ affordability. 888 is exploring
open banking, which would provide
888 with full visibility to a customer’s
bank account subject to the customer's
consent.
888 continues to recognise that there
is no “silver bullet” to safer gambling,
however we remain committed to
utilising the leading external solutions
alongside our proprietary technology
and internal processes to achieve an
accurate, holistic view of a customer,
therefore providing better customer
protection.
888 and its employees are committed
to its strict policies around anti-money
laundering (‘AML’) which is enforced
through a combination of robust
operational procedures, ongoing
employee assessment and training,
development in its propriety technology
and partnerships with leading third-
party providers.
Underage activity on our sites is strictly
prohibited and 888 takes the matter of
underage gaming extremely seriously.
Our offering is not designed to attract
minors, and we take seriously the
risk that gambling advertising might
appeal to minors. We make every
effort to prevent minors from playing
on our sites and use sophisticated
verification systems, as well as a third-
party verification supplier to identify
and track minors if they log into our
software. We train our team to be highly
sensitive to the possibility of underage
activity and make sure we suspend any
account suspected to be an underage
account.
Our customers' data privacy is of
key importance. We have a detailed
privacy policy which clearly sets out
how we receive, process, store and use
our customers' data, as well as a data
breach management procedure. Further
details of our activities in 2019 in the
field of data privacy are set out on
page 39.
888 CONTINUES TO RECOGNISE THAT THERE IS NO
“SILVER BULLET” TO SAFER GAMBLING, HOWEVER WE
REMAIN COMMITTED TO UTILISING THE LEADING EXTERNAL
SOLUTIONS ALONGSIDE OUR PROPRIETARY TECHNOLOGY
A critical pillar of being
a safe place to play is
knowing our customers
(‘KYC’).
This helps us achieve our goals of
preventing underage gambling and
protecting customers by identifying those
potentially at risk of harm and interacting
with them at the earliest point.
888's proprietary technology and,
more specifically, our unique Observer
software system, is a key component
of our KYC. The Observer software was
first launched in 2008 and, since then,
has been continuously fine-tuned and
developed to become the sophisticated
and effective tool it is today. Being an
online company with its own technology,
we are able to capture and record every
transaction from customers, helping us
to monitor their behaviour and ensure
they are given all the tools they need to
stay in control.
Observer uses sophisticated algorithms
to measure and analyse changes in an
individual customer’s behaviour and
playing patterns – such as unexpected
increases in time or money spent on
the site – to better predict and identify
problematic or potentially problematic
gambling in its early stages. The system
is programmed to identify several core
behavioural triggers which, combined,
can create possible red flags indicating
possible problematic behaviour.
Observer flags up any potentially
problematic behaviour for our highly
specialised Safer Gambling team to
investigate and interact with customers
to prevent gambling harm. The objective
of the interaction is to provide the
customer with an understanding of
their gambling, thereby helping them
to maintain a healthy relationship
with gambling; or to close customer
accounts, in high-risk cases.
888 continues to invest in analysis of
problematic gambling behaviours, which
results in continuous modifications
and enhancements to the Observer’s
52
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
CUSTOMER JOURNEY
CUSTOMER REGISTRATION
• Our safer gambling
process starts as soon as
a customer lands on our
website.
• At registration, we assess
customer affordability and
set appropriate thresholds.
• Before a single wager
has been placed, we take
measures to protect the
customer.
ACTIVITY
• An advantage of owning
our own technology and
being a purely online
business is that we can
capture and record every
transaction, including
deposits, withdrawal, bets,
wins, playing time.
• This allows us to formulate
a level of risk using our
propriety technology
conducting behavioural
analytics.
BEHAVIOURAL ANALYTICS
• Our unique Observer
technology identifies
problematic gambling
behaviour.
• Risks are flagged to our
specialist Safer Gambling
team.
INTERACTIONS
• We are able to interact
with customers in a number
of ways, including popups,
questionnaires, phone and
email.
• Our safer gambling
systems are integrated with
our CRM tools to ensure
that during interactions
customers do not receive
promotional emails or
bonuses.
EMAIL
IN-PLAY INTERACTIONS
PHONE CALLS
+16%
Year on year increase in
safer gambling interactions
with UK customers
SAFER.
BETTER.
TOGETHER.
TAKE A BREAK
SET YOUR LIMITS
SELF EXCLUDE
NEED HELP?
+28%
Year on year increase in
customers' usage of Safer
Gambling tools across 888's
B2C brands in the UK
53
Corporate.888.com At the beginning of 2020, 888 launched
an offline and online advertising
campaign in the UK to help raise
awareness of potentially problematic
gambling. With the slogan “Too much
is too much”, the advertisements used
three everyday themes to encourage
moderation in gambling by highlighting
the dangers of excess and build
awareness of gambling-related harm.
The advertising campaign went live on
TV and in the national press in the UK
from January 2020, as well as being
published across Facebook, Twitter,
YouTube and other online channels.
The campaign was developed following
research and consultation with
customers.
Corporate Social Responsibility continued
SAFER. BETTER. TOGETHER.
PARTICIPATING IN INDUSTRY
COLLABORATION TO RAISE STANDARDS
888 is committed to
further developing safer
gambling initiatives
and contributing to the
continuous improvement
of standards across the
industry.
To achieve this, we maintain a close
dialogue and collaborate with relevant
stakeholders, including regulators,
industry bodies, peers and charities.
During 2019, members of 888’s team
participated in various research
programmes and workshops organised
by the UK Gambling Commission
("UKGC") and industry bodies with the
aim of sharing knowledge and best
practices. These forums included the
Senet Group Responsible Gambling
forum, the RGA Affordability Working
Group meetings and Responsible
Gambling Week, Patterns of Play
Research Programme, Revealing
Reality’s Safer Messaging workshops
and the UKGC’s Co-Creation Marketing
event. Knowledge sharing and cross-
industry collaboration is something
that 888 is committed to and, in 2020,
amongst other initiatives, 888 will
participate in the UKGC’s Tech Sprint
event, which aims to use technology to
enable a holistic, cross-operator view of
a consumer’s gambling activity.
In addition, the Group is participating
in two ongoing cross-industry efforts
to improve overall operating standards
in the UK market and enhance safer
gambling, as encouraged by the UKGC.
Firstly, the Group is contributing to the
development of an effective Industry
Code for Game Design to set out: the
techniques that the industry plans to
use when designing apps, online games
and gaming machine products;
the risk associated with each product
and how they can be mitigated,
and; a clear explanation of what is
not acceptable in game design. In
addition, the Group is also contributing
to a cross-industry workstream in the
UK to develop a code of conduct for
the treatment of “VIP” customers and
associated inducements to gamble.
During 2019, 888 also participated in
a research project in partnership with
Revealing Reality, a UK research firm
that cooperates with the UKGC to
better understand player behaviour.
The objective of the research is to
understand the impact of 888's Safer
Gambling messages at different stages
of the customer journey and establish
best practices for Safer Gambling
interactions. The project involves testing
customer behaviour based on real-life
cases with the intention that the results
will be published publicly so others
within the industry can have access
to this research and take decisions to
better protect customers.
FEJAR
In Spain, during 2019, the
Group collaborated with FEJAR,
the Spanish Federation of
Rehabilitated Gambling Players
and provided funding to support
the provision of services by FEJAR
for those who are experiencing –
or are in danger of experiencing
– gambling harm. This included
funding to support a free-call,
24-hour-a-day support service
for gamblers, as well as funding
for FEJAR to invest in training its
team and developing its office
infrastructure in Madrid.
54
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
CULTURE OF CARE
Central to 888’s strategy
to deliver a safe place to
play is ensuring we nurture
and strengthen our culture
of care throughout the
business, thereby ensuring
that safer gambling always
remains a priority for all of
our people.
Each 888 customer-facing employee
is trained from day one of joining our
Company to recognise problematic
gambling behaviours and interact
with customers in order to ensure their
wellbeing. This training also highlights
to all relevant joiners the importance of
Safer Gambling as a core value of 888's
business. Our customer-facing employees
also attend annual courses in order to
update and refresh understanding of
behaviour patterns, interactions and
tools available to customers.
In 2019, 888 worked with EPIC Risk
Management and delivered additional
training to its Customer Support, Fraud
and Risk Management, and Safer
Gambling teams. These training sessions
were conducted by an ex-professional
rugby player who suffered a gambling
disorder for 12 years and helped to
empower the 888 team to better
identify and interact with potentially
vulnerable customers. 888 and EPIC Risk
Management plan to expand on their
relationship in 2020 with training also
being delivered to non-customer facing
staff and a dedicated session with 888’s
Operational Management team.
During 2019, 888 appointed a new Group
Safer Gambling Director. The Director
has more than 15 years of experience
within the Group and has oversight of
the continuous improvement of 888’s
safer gambling operations, systems and
processes to further enhance customer
protection, as well as driving the Group’s
ongoing collaborate with industry
stakeholders and regulators.
The Group has established a specialised
and dedicated product team for
regulatory compliance projects,
including safer gambling, thereby
allowing the Safer Gambling team to be
less dependent on the overall technology
pipeline of the business and focus on
delivering its critical agenda. The Safer
Gambling team also expanded during
the year with additional specialists
joining the team, including a new analyst
and a new operations manager. In
addition, the team was reorganised to
enable more efficient use of resources
focused on customer wellbeing.
During the year, 888's Compliance Forum
comprising members of the Group’s
senior management across different
departments met on a monthly basis to
help drive 888’s focus on compliance and
support the Group’s progress against its
safer gambling objectives.
888’s Internal Escalation and Reporting
Policy makes clear to all employees that
any compliance-related cases should
be flagged and escalated promptly.
The Policy emphasises cultural aspects
which apply all the way to the highest
levels of Group management, including
in particular a culture of self-monitoring
and self-criticism. 888 also drives a
culture of safer gambling across the
business through its Social Responsibility
Policy, Responsible Gambling Team
Support Manual, and Guidelines for
Handling Sensitive Phone Calls.
In September 2019, the Group’s
Operational Management held a
regulatory update training session
conducted by the Group’s UK counsel,
which included detailed review and
update of major regulatory and
compliance issues in the UK as well
as recent developments and trends,
including Anti-Money Laundering,
Responsible Gambling, main areas of
UKGC’s focus, Key Reporting Obligations
and Personal Management Licenses
regime.
888 is committed to being transparent
with its customers. The Group has
evaluated all marketing materials across
each 888 brand to align significant
terms and conditions to the most recent
regulatory requirements in each market
and ensure that these are prominently
and clearly displayed to players. In
the UK, 888's marketing teams are
committed to comply with the Gambling
Commission’s Licence Conditions and
Codes of Practice (LCCP), as well as
the CAP code, BCAP code, consumer
protection laws, fair marketing rules
and Industry Group for Responsible
Gambling Code, as well as operating in
line with Advertising Standards Authority
guidance for social influencers. In line
with our marketing supplier standards
pursuant to which 888 aims to ensure
that third parties are fully committed
to their legal obligations, our teams
are instructed to ensure that all third-
party advertisements are in adherence
and clearly marked as advertisements,
and our marketing partners, including
affiliates, have also been notified
and are regularly reminded of their
compliance obligations. In addition to
regular monitoring by our teams, we
deploy technology to monitor marketing
affiliates’ advertisements of our brands.
This helps us ensure that any marketing
materials are verified and updated to
prevent exposure to individuals who are
underage, as well as refreshing excluded
keywords for online searches that we
do not target due to their association
with the underage population. During
2019, 888 further expanded its marketing
compliance team and took steps
to streamline the working processes
between its compliance and marketing
divisions. 888 also conducts periodic
training sessions to B2C and Acquisition
teams on UK advertising guidelines,
making sure all stakeholders are up to
date and aligned with our strict policy.
55
Corporate.888.com Corporate Social Responsibility continued
SAFER. BETTER. TOGETHER.
EMPOWERING OUR CUSTOMERS
At the heart of our Safer.
Better. Together. strategy
is 888's commitment to
empowering our customers
with the information and
tools needed to ensure
that they play safely.
888 provides its customers with a range
of Safer Gambling Tools which include:
• self-deposit limits;
• 'take-a-break' restrictions;
• self-exclusion facilities;
• game time reminders;
• auto-play limits;
• a tool to cancel the option to reverse
pending withdrawal requests.
In addition to the above, 888 also
provides a self-assessment for problem
gambling tool on 888’s dedicated
Responsible Gambling website.
Empowering our customers is a
core component of our new product
development initiatives. During 2020,
888 will launch its 888 My Play – a new
feature that will sit across each of 888’s
websites to provide customers with an
improved interactive interface to help
them better understand their gambling
behaviour and further increase the
prominence of 888’s safer gambling
tools at all times.
In addition to the My Play, during 2020
we plan to introduce to our websites
a number of new safer gambling tools
that are currently in development, which
we believe is more important than
ever given the COVID-19 outbreak, with
people spending more time at home and
with potentially increased stress from
economic uncertainty.
56
SAFER GAMBLING
STRATEGY IN
ACTION
FOCUS AREA
KEY ACTIVITIES AND PROGRESS IN 2019
Knowing our customers
Participating in
industry collaboration
to raise standards
Culture of care
Empowering our
customers
• Expanded several algorithms designed to
initiate source of funds protocols based on
registration details including occupation.
• Research project launched in partnership with
Revealing Reality.
• Launch of “Too much is too much” offline and
online advertising campaign in the UK to help
raise awareness of potentially problematic
gambling.
• In Spain, the Group collaborated with FEJAR, the
Spanish Federation of Rehabilitated Gambling
Players, and provided funding to support the
provision of services provided by FEJAR for
those who are experiencing – or are in danger
of experiencing -gambling harm.
• 888 worked with EPIC and delivered training
to its customer support, fraud and risk
management teams, as well as its responsible
Gambling team across the entire organisation.
• Appointment of new Safer Gambling Director
with more than 15 years’ experience within 888.
• Reorganisation of Safer Gambling team with
additional specialists hired, including a new
analyst and a new operations manager.
• New Compliance Forum established, comprising
senior management across different departments
within the Group.
• Development of the 888 My Play – which will
launch across our websites in 2020.
• Development a new chat feature to provide
better customer support to be deployed across
888’s websites.
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
FOCUS AREA
KEY ACTIVITIES AND PROGRESS IN 2019
Knowing our customers
Participating in
industry collaboration
to raise standards
Culture of care
Empowering our
customers
• Expanded several algorithms designed to
initiate source of funds protocols based on
registration details including occupation.
• Research project launched in partnership with
Revealing Reality.
• Launch of “Too much is too much” offline and
online advertising campaign in the UK to help
raise awareness of potentially problematic
gambling.
• In Spain, the Group collaborated with FEJAR, the
Spanish Federation of Rehabilitated Gambling
Players, and provided funding to support the
provision of services provided by FEJAR for
those who are experiencing – or are in danger
of experiencing -gambling harm.
• 888 worked with EPIC and delivered training
to its customer support, fraud and risk
management teams, as well as its responsible
Gambling team across the entire organisation.
• Appointment of new Safer Gambling Director
with more than 15 years’ experience within 888.
• Reorganisation of Safer Gambling team with
additional specialists hired, including a new
analyst and a new operations manager.
• New Compliance Forum established, comprising
senior management across different departments
within the Group.
• Development of the 888 My Play – which will
launch across our websites in 2020.
• Development a new chat feature to provide
better customer support to be deployed across
888’s websites.
Corporate.888.com
57
Corporate Social Responsibility continued
SAFER. BETTER. TOGETHER.
Q&A
Andrew Anthony
Andrew Anthony is 888’s VP of Customer
Safety and Due Diligence.
We aim to prevent gambling harm, not
to react to it, We want to interact with
customers and ensure their wellbeing is
always at the centre of how we operate.
58
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
HOW DOES 888 BUILD A CULTURE
OF SAFE GAMBLING?
In addition to our designated
responsible gambling team –
which is growing all the time – we
make sure that new joiners at 888
undergo responsible gambling
training. This training is refreshed
on a regular basis. As a result,
everyone at 888 shares the
common goal of keeping our
customers safe and in control
of their gambling activity.
Safer gambling is not just a
slogan at 888 – it is a shared
responsibility across the business.
We know that protecting customers
must be in the hearts and minds
of our colleagues when they
are developing new products,
creating a marketing campaign,
or interacting with a customer.
There are so many elements of
responsible gambling, and I believe
everyone in our business shares
the understanding that 888 has
no interest whatsoever in making
money off problematic gamblers.
HOW DOES THE RESPONSIBLE
GAMBLING TEAM USE ITS
TECHNOLOGY TO HELP PREVENT
GAMBLING HARM?
With 888 being an entirely online
business and owning its own
propriety technology, this gives the
Company a unique opportunity
to evaluate its customers’ activity
across all our products and brands.
A key part of our strategy to
prevent gambling-related harm
is to focus on what we call
“the customer journey”. This
starts as early as a customer’s
registration process to join 888.
When a customer registers with
us, we request their date of birth,
occupation and address. Using
these three pieces of information
we are immediately able to
segment and apply different risk
factors and thresholds to that
customer before they have even
placed a bet with 888. This means
that, even before the customer
gets to play on our websites, we
are taking steps to protect them.
That’s our role; we aim to prevent
gambling harm, not to react to it.
We want to interact with customers
and ensure their wellbeing is
always at the center of how we
operate.
Like many other operators, we
also conduct our customer due
diligence checks through third-
party databases to ensure that
any customer is not registered with
GamStop or self-excluded with 888.
Once a customer has registered
successfully and passed our
checks, they are able to enjoy
the games. At this point, we take
this opportunity to outline all
responsible gaming tools available
to the customer to assist and
encourage them to establish
healthy habits from day one.
An advantage of 888 being
an entirely online company
and having its own proprietary
technology is we are able
record every transaction and
communication we have ever had
with a customer. This information
is fed into a system called the
Observer, which is our own
propriety technology and has
been developed over the past 13
years. The system takes a holistic
view of all the transactions made
by the customers. The Observer
uses complex algorithms to assess
a customer’s patterns in deposits,
withdrawals, bets, communications,
and flags to our team any patterns
that we may deem a potential risk.
However, the data that we capture
about a customer on its own is not
enough to establish the wellbeing
of a customer. Two customers could
demonstrate the same activity but
only one of them might be at risk
or experiencing difficulty. In order
to asses a customer’s wellbeing,
our specially trained staff interact
with the customer. This creates
a deeper level of trust, builds risk
awareness amongst customers,
and encourages customers to
play responsibly before they
could come to any harm.
Another key point is that we are
an international company and
each of our regulated markets
has specific responsible gaming
requirements. If we see certain
safer gambling tools working well
in a particular market, we can
integrate these tools into our offer
in other markets.
HOW EARLY WOULD YOU
INTERACT WITH A CUSTOMER
WHO IS POTENTIALLY AT RISK?
Our objective is to prevent
gambling harm from occurring. This
is why we take measures to record
customer details from the point
that they register with 888 and build
a risk profile on a customer even
before they start playing.
In addition, our customer support
all undertake rigorous training to
identify problematic gambling
behaviour. Therefore, if a customer
demonstrates distress or uses
language that could be related
to problematic gambling in
communications with 888, then
action would be taken immediately.
The customer’s length of time with
888 would never be a factor.
ONE OF 888’S COMMITMENTS
IS TO MAKE CONTINUOUS
PROGRESS IN THE AREA OF SAFE
GAMBLING - WHAT DOES THE
COMPANY HAVE PLANNED FOR
2020?
888’s goal is to remain at the
forefront of safer gambling and
I am very proud to say that, we
have put together a very ambitious
pipeline of activity for 2020.
In particular, a new solution to
assess customer “affordability” is
an exciting development. Having
developed a new, proprietary
affordability solution during 2019,
we are exploring ways to make
this even more effective and have
been in discussions with two UK
Credit Reporting Agencies who
are industry leaders in providing
affordability and financial risk
scores. Our objective is that, during
2020, we will integrate at least
one of these third-party solutions
into our technology to enable
888 to conduct even better due
diligence of customers around
their affordability and ensure
that the right safeguards are in
place to protect customers. We
have also signed an agreement
with Account Score, therefore
providing customers an easy way
to give 888 to access their banking
information, thereby enabling
888 to conduct an even more
accurate level of due diligence and
protection.
A second exciting deliverable for
2020 is a new feature that will sit
across our websites and provide
customers with an interactive
dashboard to give them more
information about their gambling.
This new feature will also provide
accessible safer gambling tools to
assist with ensuring that customers
have a healthier relationship with
their gambling.
59
Corporate.888.com Corporate Social Responsibility continued
A GR8 WORKPLACE
Being a responsible company
means being a responsible
employer. The talent, commitment
and skill of our global teams
makes our business what it is.
60
We invest in a unique working environment that
enables our people – and our business – to flourish.
We believe in talent development and investing in
our people to give us “ROR” which, for us, means
‘returns on relationships’.
Our workforce continues to grow. In 2019, we
established a new Dublin office following our
acquisition of the BetBright platform, and our
Bucharest office expanded significantly to
strengthen the local site in line with our global talent
distribution strategy. It is our job to make sure that
our employees across our sites act as a team which
is at the same time diverse – in thought, culture and
background – and united under a single corporate
vision. We do this by consistent messaging and
open communication between sites, and by utilising
global activities to connect all our people to our
global vision. At the year-end, 888 employed more
than 1,400 people across seven global offices, and
we are continuing recruitment, even through the
present COVID-19 crisis.
During 2019, we established a new "nickname" for
888 employees – ‘the 8sters’ – and defined the
values we encourage from every member of staff.
An 8ster is, first and foremost, a great team player
in addition to being an excellent professional.
8sters care for each other, collaborate and share
knowledge, and everyone is treated with great
respect and appreciation.
BOARD RESPONSIBILITY FOR HUMAN RESOURCES
MATTERS
The Board acknowledges its overall responsibility for
human resources issues within 888. This includes:
• labour standards;
• implementing management structures and
systems to monitor and evaluate employee
performance and satisfaction;
• promoting diversity at all levels of 888 and within
888’s supplier base;
• providing employees with the platforms and
opportunities to have formal input into matters
that affect them;
• overseeing and allocating resources to employee
training, and;
• monitoring key health and safety performance
goals and indicators.
During 2019, there were no material labour disputes,
litigation, or health and safety-related fines or
sanctions imposed on 888. 888 has adopted
a written Board diversity policy, in addition to
statutory requirements in this respect in certain of
its locations. 888 contributes to employee pensions
in accordance with applicable law and practice.
To deliver our priority of being a “GR8 Workplace”,
the Group has key three focus areas:
Ensuring a caring and rewarding environment
Encouraging fairness and embracing diversity
Investing in talent – return on relationships
61
63
64
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
ENSURING A CARING AND
REWARDING ENVIRONMENT
It is vital that our
employees across the
world feel fairly treated
and that they come
to work each day in a
caring and professional
environment.
We continue to invest a great deal of
time, resources and creative energy
making sure that our employees feel
inspired, supported and motivated to
excel. As a leading organisation in the
online gambling industry, the Group is
committed to growing its professional
talent and providing each employee
with a great working environment and
personal development opportunities that
enhances their pride and engagement.
REWARD AND
RECOGNITION
The principles of fair pay and
pay-for-performance are deeply
rooted in our reward guidelines.
We have processes in place to
benchmark our pay practices
to market and to ensure internal
equity in pay. Our variable pay
is strongly tied to individual
performance and contribution
within the larger context of 888's
financial results. We provide
managers with the tools to
recognise individual efforts and
successes throughout the year
to strongly motivate excellent
performance.
In addition, 888 has aligned its
equal opportunities and anti-
discrimination policies and
procedures across sites to ensure
a highly ethical and respectful
working environment.
On an individual level, 888 cares
for each of its employees and
provides special care in cases
of personal hardship, as well as
helping employees celebrate
significant life events.
HEALTH & SAFETY
The health, safety and wellness of our
employees is a priority for the Group.
This extends beyond just ensuring that
employees feel safe at work, we also
recognise that we must promote an
environment that supports their mental
and physical wellbeing.
The COVID-19 outbreak has given rise
to challenges across the Group, and
indeed the global economy, and we
are proud to put our staff’s health,
safety and wellbeing first. We have
rolled out management training on
effective remote work and teaming,
clarified guidelines for HR processes
in these unique circumstances, and
provided employees with a detailed
work-from-home guide, including ideas
and guidance for healthy and effective
remote work, as well as fully cleaning
and sanitising our offices. We are also
working on a full weekly calendar in
order to maintain wellbeing of our
staff, and documenting all crisis-mode
activities and core processes in order to
update our business continuity plan and
benefit in future from lessons learned.
We have continued to align all our
facilities to higher safety, health, comfort
and environmental standards. Several
projects initiated in 2019 (and which
will be completed in 2020) will provide
a more contemporary, pleasant, safe,
and green working environment for our
employees.
In an effort to promote healthy lifestyles
of our employees, we provide healthy
snack alternatives at our cafeterias,
support sports activities, and engage
in other activities suited to our diverse
employee populations.
888 has written policies in place with
regard to occupational health and
safety matters at its sites.
In each of our sites, we operate strictly
within the framework of the local labour
regulations and standards as advised
by our external legal experts. Labour
standards include minimum employment
conditions, including minimum wage,
working age and working hours.
TRANSPARENCY, COMMUNICATION
AND EMPLOYEE ENGAGEMENT
888’s management sees significant
value in direct communication with
employees. We conduct periodic
business updates led by the Group’s
Chief Executive Officer that provide
information on 888's strategic
direction, objectives, challenges and
opportunities. Communication with
employees happens on an ongoing
basis at all levels, particularly following
significant business events and even
more intensively in light of the COVID-19
outbreak. We hold periodic roundtable
events with employees, which provide
a forum for employees to communicate
their unique perspective on our business
and workplace.
Throughout the year, we engage with
employees in a wide spectrum of
group activities, at team, department,
divisional, and company levels, including
celebrating the success of business
initiatives. Our employees share a
common esprit de corps that promotes
co-operation, the exchange of ideas,
and an overall productive, healthy and
fun working environment.
MODERN SLAVERY
Modern slavery is a crime and a
fundamental violation of human rights.
888 aspires to eradicate any form of
modern slavery in our direct operations
and in the indirect operations of our
supply chain, and is determined not
to knowingly or negligently support
or do business with any individual
or organisation involved in slavery,
servitude, forced labour, human
trafficking or child labour.
888 has adopted an Anti-Modern Slavery
Policy, in the context of which the Group
monitors its operations and supply
chain with a view to preventing Modern
Slavery practices. The Group’s Anti-
Modern Slavery and Human Trafficking
Statement can be found in full on 888’s
corporate website.
During 2019, no red flag events were
reported under the Anti-Modern
Slavery Policy.
61
Corporate.888.com Corporate Social Responsibility continued
A GR8 WORKPLACE
ENSURING A CARING AND
REWARDING ENVIRONMENT CONTINUED
BRIBERY AND CORRUPTION;
POLITICAL INVOLVEMENT
888 is committed to operating with
integrity and complying with all
relevant laws, including all applicable
anti-corruption legislation, and has a
zero-tolerance approach to bribery
and corruption.
888 has adopted an Anti-Bribery Policy
which applies to all 888 group personnel
and includes 888's policies with regard
to the giving and receiving of gifts,
business hospitality and other payments,
with particular focus on transactions
with government-related entities and
intermediaries. The key principles of the
Policy are as follows: 888 shall not offer,
give or receive bribes or inducements for
any purpose, whether directly or through
a third party; 888 shall not knowingly
enter into business relationships with any
person or entity who gives or receives
bribes or inducements for any purpose,
whether directly or through a third party;
888 shall comply with all applicable laws,
regulations and contract requirements
relating to the fight against bribery and
corruption, as a minimum, and in the
many instances where 888 sets its own
higher standards, 888 shall apply these
first; 888 shall bring its policy of zero
tolerance of bribery and corruption to
the attention of every employee of the
Group and to the attention of every
actual or potential business associate
of the Group; 888 shall rigorously
implement, supervise and enforce the
foregoing principles of zero tolerance
of bribery and corruption with all of
its employees and all of its business
associates; and 888 is obligated to
keep books, records and accounts
that accurately and fairly reflect all
transactions and disposition of
company assets.
In addition to notifying all business
partners of its zero-tolerance policy for
bribery and corruption, 888 carries out a
comprehensive due diligence process of
potential high-risk business associates,
which includes certain government-
related transactions and certain
intermediaries. 888 also communicates
its policy to its employees and carries
out staff training on the topic. The Board
has oversight of 888's Anti-Bribery Policy.
During 2019, the internal approvals
process was implemented as regards
gifts given and received as required
pursuant to the programme. No instances
of non-compliance with the Policy arose
during the year, and no fines, penalties or
settlements were received or entered into
in connection with bribery and corruption
matters. 888 is not involved in political
matters and did not make any political
donations in 2019.
HUMAN RIGHTS
888 ensures that its policies comply with
local law, in addition to reflecting 888’s
values. These policies set clear standards
of behaviour to which all Group
personnel are expected to adhere,
including as regards social, ethical and
environmental matters. In this respect,
888 is guided by the ten principles of the
THE GROUP HAS A ZERO-TOLERANCE POLICY ON
INAPPROPRIATE CONDUCT SUCH AS BULLYING AND
HARASSMENT, AS WELL AS ROBUST PROCESSES IN PLACE
TO HANDLE COMPLAINTS OF SUCH BEHAVIOUR
62
United Nations (UN) Global Compact,
which encourages companies to
make human rights, labour standards,
environmental responsibility and anti-
corruption part of their business agenda,
as well as the International Labour
Organization core conventions, including
as regards anti-discrimination.
CODE OF PRACTICE
888 has a Code of Practice covering
equal opportunities and diversity that is
clearly communicated to new employees
and reiterated to existing staff. The
Code explicitly forbids discrimination
on the basis of age, race, sex, gender,
disability or any other principle and is
implemented across every aspect of
the business, including recruitment,
pay, promotions, training and dismissals.
To enforce these rules, 888 clearly
communicates a confidential grievance
procedure and whistle-blowing policy
to all employees, guaranteeing that the
complainant will not face recrimination
will take place and committing to
thoroughly investigate any concerns.
The Group has a zero-tolerance policy
on inappropriate conduct such as
bullying and harassment, as well as
robust processes in place to handle
complaints of such behaviour.
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
ENCOURAGING FAIRNESS AND
EMBRACING DIVERSITY
Great teams are built
on a diversity of skills,
backgrounds and thinking.
We encourage and
embrace diversity across
our business to not only
ensure that we have a
culture of fairness, but
also to ensure we have
the breadth of thinking
to support the Group’s
long-term growth.
BOARD DIVERSITY
888 has adopted a written Board
diversity policy. When seeking to recruit
new Non-Executive Directors to the
Board, the Nominations Committee
considers the benefits of all aspects
of diversity including, but not limited
to, age, gender and educational and
professional backgrounds, in order
to enable it to discharge its duties
and responsibilities effectively. Board
appointments are made on merit by
assessing candidates against objective
criteria in the context of the overall
balance of skills and backgrounds that
the Board needs to maintain in order
to remain effective. Where appropriate,
steps are taken to identify and remove
unnecessary or unjustifiable barriers.
Currently the Board is looking at
potential additional Non-Executive
Director appointments reflecting
888's strong diversity and leadership
objectives, whilst complementing and
building upon the existing expertise of
the Board.
GENDER DIVERSITY
We are committed
to ensuring that all
our team members,
regardless of gender,
receive the same support
and opportunities to
progress, develop and
enjoy a rewarding career
with us.
Gender diversity remains a
challenge for many businesses in
the technology industry. We are
committed to tackling that challenge
and continuing to improve gender
diversity amongst our employees.
Currently, 40% of our employees
are women. Whilst we are focused
on reducing any gender pay gap
within 888, the current distribution
of female employees between
functions and the percentage of
women in Group management drives
our current gender pay gap. Whilst
we are confident that all male and
female colleagues are paid equally
for roles of equal value, and that
all our colleagues have the same
opportunities for progression and
development, we are committed
to monitoring the gap and taking
proactive steps to reduce it.
The breakdown of men and women
across 888, as of 31 December 2019,
was as follows:
BOARD OF DIRECTORS
1. Men
6 (85.7%)
2. Women
1 (14.3%)
COO/SENIOR VICE PRESIDENTS
VICE PRESIDENTS
1. Men
5 (71.4%)
2. Women
2 (28.6%)
1. Men
18 (78.3%)
2. Women
5 (21.7%)
OTHER GROUP EMPLOYEES
1. Men
823 (59.6%)
2. Women
556 (40.4%)
63
Corporate.888.com Corporate Social Responsibility continued
A GR8 WORKPLACE
INVESTING IN TALENT
– RETURN ON RELATIONSHIPS
Nurturing and developing
outstanding talent are key
pillars of our success.
We aim to attract and retain the
best people by providing a rewarding
environment with ample opportunities
for personal development. Over the
years, 888 has continued to develop
a unique culture and spirit built on
values of fairness, collaboration and
continuous progress. The Group’s mission
is to remain an employee-centric
organisation with a reputation as one
of the most sought-after employers of
choice in the online gambling industry.
EMPLOYEE PERFORMANCE
AND DEVELOPMENT
888 offers its employees across all global
sites a full spectrum of opportunities
for personal development and
career growth. Managing employee
performance remains an important topic
on the Group’s agenda.
To encourage 888 employees’
professional growth and personal
development, the Group continued to
focus on internal mobility and career
development. 10% of the Group’s
employees were promoted or made an
internal transfer to a different role during
2019.
During 2019, 888 invested in developing
managerial skills across the business.
A programme of training focused
on developing mentorship skills, and
remote and global management was
implemented across managerial levels
throughout 888’s global sites. The Group
also continues to support new managers
promoted to their first managerial roles
by way of dedicated development
programmes.
In 2019, 888 also conducted a
performance-based employee
evaluation process to support the
Group’s goals and business priorities
by achieving a more agile and goal-
oriented dialogue between managers
and employees, as well as strengthening
the link between compensation and
performance. This evaluation process
also provides a platform for individual
career planning, as well as helping to
align the Group’s teams and inspire
employees to personal and team
excellence and success.
During 2019, the Group developed
two of the winning ideas from its 2018
‘Firestarter’ initiative, reflecting the 888
team’s talent and innovative mindset.
Firestarter invited 888’s employees to
propose innovative solutions to the
“big questions” within our business –
ranging from sustainability, to product,
to improving efficiency. The winning
participants were invited to represent
the Group at a major innovation
conference in Silicon Valley. Two winning
Firestarter projects were developed
throughout the year, with the winning
idea, a new personalisation feature for
888sport, soon to be deployed.
TALENT ACQUISITION
We source our employees locally, invest
in their training, and develop our local
talent and local leaders across our sites.
Talent acquisition remained a crucial
and challenging issue in 2019. With the
cost of employee turnover increasing
and the ‘war for talent’ intensifying, the
acquisition of high-quality technological
and online marketing talent remained
a key factor enabling our business to
continue to innovate and grow. Attrition
varies from site to site across our global
offices, with some sites experiencing
retention challenges
During the year, the Group also invested
significant resources in building the local
leadership teams across its sites, in order
to better define and execute its global
leadership strategy and promote 888's
reputation as an employer of choice
amongst both existing and potential
employees globally.
To stand out from the competition as
an employer, a significant part of our
human resources efforts during the year
were focused on planning and executing
marketing initiatives to position 888 as
an employer of choice. We intend to
continue to focus on 888’s employer
positioning and corporate branding
64
during 2020 by introducing an enhanced
candidate experience and an updated
onboarding platform for new joiners. That
said, we are encouraged that more than
40% of all 888's recruitments come from
referrals by existing employees.
Of all our employees, only 3-4% are in
temporary positions, meaning most of
our personnel are permanent employees
with full benefits.
TRAINING
Knowledge sharing and development
was one of 888’s main human resources
focuses in 2019. In an effort to create
tailored learning solutions that are
aligned with our business needs and
advance personal development for
our employees, we conducted a
comprehensive knowledge needs
analysis across each of the Group’s
internal divisions.
During 2019, we introduced a new
training system for employees that
opened a wealth of relevant, new
training and learning content supplied
by more than 50 top eLearning vendors.
In 2019, 888 offered approximately
560 classroom training days for its
employees. In 2020, in addition to
the unlimited eLearning opportunities
accessible to all employees via the new
learning system, we expect to provide
more than 400 days of classroom
training.
HR TOOLS
Our new HR information system
introduced during 2019 became an
indispensable workforce management
tool for the Group’s human resource
and people management teams.
As a data-driven organisation, our
decisions and strategic plans for
workforce management and talent
acquisition are based on accurate and
up-do-date information. Our analytics
expertise enables us to identify and
proactively address emerging trends,
and implement necessary changes, to
optimise the structure of our workforce
on an ongoing basis.
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
MORE THAN
AN OFFICE
Every day we go to work as members
of a wider community. At 888, we
embrace our responsibility to our
communities, local environments
and the planet through proactive
engagement with the issues that
matter most to our business and
the people around us.
EMBRACING OUR
RESPONSIBILITIES
TO THE PLANET
As an online business, 888’s
activities have a relatively small
impact on the environment when
compared to a great number of
companies that operate in more
resource intensive industries.
That said, we are committed to mitigating and
minimising the environmental impact of our
operations and aim to apply environmental
considerations in our day-to-day operations
and managerial decision-making from the
administration of our sites, to our procurement and
supply chain and to our overall vision. To that end,
in March 2020, the Group revised its Environmental
Policy in order to clearly state 888’s Company-wide
environmental values and targets and commitment
to a thriving environment.
As a part of its new Environmental Policy, the
Group has made the following commitments:
• The Group has a responsibility for the
environmental impact of its operations on the
environment and is committed to reducing this;
• The Group is committed to implementing
environmental considerations in its daily and
long-term decisions and activities;
• The Group is committed to helping all employees
to understand their personal environmental
responsibilities, and how they can improve the
Group’s environmental performance; and
• The Group strives to continually improve its
environmental performance as an integral part of
its business strategy.
65
Corporate.888.com Corporate Social Responsibility continued
MORE THAN AN OFFICE
EMBRACING OUR RESPONSIBILITIES
TO THE PLANET CONTINUED
Following the findings of the report, the
Group has identified the below three key
areas of focus for further improving its
environmental performance.
01
REDUCING
CONSUMPTION
OF MATERIALS
Whilst 888 is not a resource
intensive business, as a significant
employer with seven offices
worldwide, the Group is committed
to taking steps to reduce and
minimise the consumption of
materials such as paper and other
office supplies.
During 2019-2020, the Group has
implemented recycling schemes for
plastics, glass and other recyclable
materials across all its offices.
The Group has also taken steps
to promote the reduction in
paper usage across its global
sites by promoting electronic
communications over hard-copy
communications with both internal
and external stakeholders. In
addition, across the Group we
have modified the default setting
for printing to two-sided printing
with the ambition to reduce paper
usage.
The Group is mindful of the harmful
impact that single-use plastics can
have on the environment. During
2019, we commenced an initiative
to reduce and, in some cases,
eliminate of the use of single-use
plastics (for example, plastic
cups, plastic cutlery) across some
of the Group’s global sites which
will remain a focus into 2020 and
beyond.
OUR PRIORITY AREAS OF FOCUS:
During 2019, the Group engaged with
AVIV AMCG, a specialist consultancy,
to conduct a Greenhouse Gas (GHG)
report covering the Group’s GHG
emissions for the period from the
1 January 2019 through to 31 December
2019. This report was conducted to
give the Board a better understanding
of 888’s environmental performance,
particularly in relation of carbon
emissions and to identify the best
ways to improve this performance.
The report was prepared by AVIV
AMCG based on data provided by
the Group and was carried out using
the GHG tool of the Israeli Ministry of
Environmental Protection (MoEP) for
the voluntary national GHG registry.
The recommended methodology
by the MoEP for performing the
emissions’ registry is by using the
Intergovernmental Panel on Climate
Change (IPCC) Guidelines for National
Greenhouse Gas Inventories (2006). The
MoEP’s method adopts the “operational
control” approach - limited to sites
where all equipment and activities are
controlled by the subsidiaries of the
Group, and the associated emissions
therefore must be consolidated.
Direct GHG emissions come from fuels
consumed, use of passenger vehicles in
operational control of the company and
replacement or refill of cooling agents in
air conditioning units. Indirect emissions,
come mainly from office energy
consumption for lighting, heating and
cooling. Other indirect emissions are
mainly from transport-related activities
such as air travel, outsourced activities
and waste disposal.
The below table shows the Group’s GHG
emissions for the period of 1 January
2019 through to 31 December 2019:
Scope
Emission Subcategory
GHG emission
(metric ton CO2 eq)
Contribution
to scope (%)
1
2
3
Total
Corporate metric
Direct GHG emissions
Indirect GHG
emissions associated
with energy
Other indirect GHG
emissions
Emissions per Headcount
Emission per square metres area of offices*
Emissions per turnover
744.88
3,512.07
1,550.20
5,807.15
13
60
27
100
Ratio performance indicators
(per scope 1 and scope 2)
3.00
tCO2e/employee
0.25 tCO2e/m2 office area
0.13
tCO2e/ M US $
We were pleased to report that the Group’s emissions ratio performance indicators
had reduced since the Group’s previous report in 2015, in part due to increased
awareness and investment across the Group in relation to energy efficiency.
The following table shows the total Scope 1 and 2 emissions against corporate
metrics to present an intensity ratio for benchmarking purposes:
Emission per Headcount
Emission per square metres
area of offices*
2015
3.7
0.41
2019
3.00
0.25
Emission per Turnover
14
0.13
* Calculation according to square metres area includes offices that "contribute" to Scopes 1+2
(according to table 2-1).
66
Units
tCO2e/
employee
tCO2e/
m2 office
area
tCO2e/ M
US $
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
02
SUSTAINABLE
CONSUMPTION
OF ENERGY
AND WATER
We are focused on implementing
changes to improve our
environmental impact by making
consumption of energy and water
more sustainable. The Group has
installed energy saving devices
across its global offices.
03
REDUCTION IN
GHG (CARBON)
EMISSIONS
As a global business with seven
worldwide offices, air travel that
enables our people to share
knowledge and operate across
different offices is a necessary
part of how we conduct business
efficiently and effectively. That said,
we are mindful of the emissions
produced by air travel and have
taken several steps to reduce
emissions produced by the Group’s
activities and employees.
In order to support this initiative,
we have continued to invest in our
technology across our global offices
with investments made in state-of-
the-art video conferencing systems
across a number of our global
offices during the year, thereby
reducing any unnecessary air travel.
At some of our sites, the Group also
provides buses for employees to
commute to work in order to reduce
car travel.
ENGAGING & SUPPORTING
OUR LOCAL COMMUNITIES
Engagement with our
communities is an
important part of our DNA.
For our employees to be
able to engage in rich
community life both in and
out of work is an important
factor of their wellbeing.
At the same time, we recognise that as
a global employer with seven offices, our
local communities can be our greatest
advocates, particularly when it comes
to recruiting the best talent available.
To maintain a positive relationship with
our local communities across the world,
we need to listen to local issues and
understand how we can have a positive
impact.
CHARITABLE DONATIONS
Our GR8 People programme
encourages employees to be involved
in community events, promote minority
rights, participate in local charities,
and volunteer their time to support
the underprivileged. Our employees
dedicate hundreds of working hours
sponsored by the Group to sharing their
unique knowledge, whether in the field
of online marketing, technology or other
areas, with charitable organisations.
Across our global offices, our teams
support several charitable causes and
organisations that matter to them and
their communities. In our Israel and
Romania offices, we partnered with
local organisations and encouraged our
employees to make blood donations.
In Israel, during 2019, our colleagues
volunteered to support an animal shelter
charity, as well as several community
charities, including a youth centre
to support young immigrants, as well
as a local mental health facility. Our
employees also raised funds for local
charitable organisations that: organise
sports for children with disabilities,
support the homeless, and support
children suffering from skin diseases.
In Romania, our team donated funds
to a charity that supports families
experiencing severe financial problems.
Our employees also donated funding
to provide Christmas presents for a
local children’s hospital. In Gibraltar, our
employees raised funds for Childline,
a children’s support charity, as well as
a local animal charity and Alzheimer’s
Disease support charity. In Ireland, the
Group funded an initiative to match
employees’ fundraising efforts for a local
children’s hospital.
FISCAL
CONTRIBUTIONS
During the year, the Group made
fiscal contributions totalling
US$104.6 million (2018: US$90.1
million) comprising of corporation
tax of US$3.7 million (2018: US$13.9
million), VAT of US$5.4 million
(2018: US$ 6.31 million) and gaming
duties of US$95.5 million (2018:
US$69.9 million).
FISCAL CONTRIBUTIONS
$104.6m
CORPORATION TAX
$3.7m
VAT
$5.4m
GAMING DUTIES
$95.5m
1 Excluding US$10.7 million VAT accrual release.
On behalf of the Board:
BRIAN MATTINGLEY
Non-Executive Chairman
15 April 2020
67
Corporate.888.com Board of Directors
BRIAN
MATTINGLEY
ITAI
PAZNER
AVIAD
KOBRINE
MARK
SUMMERFIELD
CHAIRMAN
Brian Mattingley was Deputy
Chairman of the Company
and Senior Independent
Non-Executive Director from
March 2006 until March 2012,
and was then Chief Executive
Officer until March 2016. He
joined 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
with Kingfisher Plc and Dee
Corporation Plc.
In his capacity as Chairman
of the UK Bingo Association,
Mr. Mattingley spent a great
deal of time with regulators,
which has assisted in the
Board's understanding of UK
gaming regulation and laws.
Mr Mattingley has been in the
gaming industry since 1993,
and launched one of the UK’s
first online Bingo sites whilst
at Gala.
COMMITTEE KEY
A Audit
R Remuneration
N Nominations
G Gaming Compliance
Chairman of Committee
Member of Committee
CHIEF EXECUTIVE OFFICER
FROM JANUARY 2019
Mr. Pazner was appointed
as COO in November 2017
and as CEO of the Company
in January 2019. He was
appointed to the Board in
March 2019.
He has worked for the Group
since 2001, initially launching
the 888.com brand in the UK
and positioning 888.com as
a top three UK online gaming
operator. Other roles included
Global Offline Marketing
Director, Senior Vice President
Head of EMEA, Senior Vice
President of B2C (Casino) and
Senior Vice President Head
of B2C.
Prior to joining the Group,
Mr. Pazner held managerial
positions at Internet Gold, a
leading ISP.
CHIEF FINANCIAL OFFICER
Aviad Kobrine has been
Chief Financial Officer of the
Company since June 2005,
and was appointed to the
Board in August 2005. From
October 2004, he was a
consultant to the Company.
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.
Mr. Kobrine brings with him
extensive finance, economic
and analytical experience,
an in-depth knowledge of
the Group and detailed
knowledge of the City’s
workings. Mr. Kobrine has
announced that he will step
down from his role as Chief
Financial Officer during 2020.
INDEPENDENT NON-
EXECUTIVE DIRECTOR FROM
SEPTEMBER 2019
Mark Summerfield worked as
a Chartered Accountant for
KPMG in the UK and US for
29 years, 18 as a partner. His
roles included Global Head
of Gaming, UK Head of Audit
for Technology, Media and
Telecoms (“TMT”) and UK Head
of Assurance. He has extensive
knowledge and experience in
auditing, financial reporting
and governance, as well as
mergers and acquisitions and
capital market transactions.
Mr. Summerfield spent most
of his career working for
companies in the TMT and
leisure sectors and built
KPMG’s gaming practice,
working with a number of
online gaming operators. He
was also William Hill’s interim
CFO for 15 months, helping
set the Group’s strategic
direction and assisting with its
transformation and technology
programmes.
Mr. Summerfield was
appointed as Non-Executive
Director and Chair of the Audit
Committee in September
2019. In December 2019,
he was appointed as a
member of the Gaming
Compliance Committee, and
in March 2020, as a member
of the Remuneration and
Nominations Committees.
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08
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10
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22
Read more from Mark
103
AGE: 68
AGE: 47
AGE: 56
AGE: 53
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AAARRRNNGGG888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
ZVIKA
ZIVLIN
ANNE DE
KERCKHOVE
ITAI
FRIEBERGER
RON
MCMILLAN
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Zvika Zivlin is the Founder and
Managing Partner of Tulip
Capital, the exclusive partner
firm of Wells Fargo Securities
in Israel, is a strategic partner
to Alias Tech (JB Capital),
and currently serves on the
advisory board of Infinidat Ltd.
Mr. Zivlin has been engaged
in projects covering the
fields of insurance, banking,
real estate, technology and
communications, and was
previously Chief Executive
Officer of Trans4u Ltd and
Chief Financial Officer of GSI
Group. Mr. Zivlin holds an MSc
in Economics from the London
School of Economics, an
MBA from Tel Aviv University
(1st year, with distinction)
and a BA in Economics and
Management from Tel Aviv
University (with distinction).
Mr Zivlin is the Chair of the
Company’s Remuneration
Committee and a member of
the Audit Committee.
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Anne de Kerckhove is currently
the CEO of Freespee – a
fast-growing company in
the communication cloud
space. Previously, she was the
CEO of Iron Capital and the
Managing Director EMEA for
Videology, Global Director
of Reed Elsevier, and COO
and International Managing
Director at Inspired Gaming
Group. Ms. de Kerckhove
is also an angel investor
and mentor for early-stage
startups and entrepreneurial
funds, including Metail, CRE
and Daphni, and holds
board positions with 7digital.
She holds a Bachelor of
Commerce from McGill
University and an MBA from
INSEAD. Ms. de Kerckhove is
a member of the Company’s
Remuneration Committee,
Audit Committee and
Nominations Committee
(Chair from March 2020).
CHIEF EXECUTIVE OFFICER
UNTIL JANUARY 2019
Itai Frieberger was appointed
Chief Executive Officer of the
Company on 2 March 2016. He
was previously Chief Operating
Officer since April 2011, and
was appointed to the Board
as an Executive Director on
13 May 2015. He also served
as Managing Director of the
Company’s Israeli subsidiary,
Random Logic Ltd. He has
worked for the Group since
2003, and previously served
as Senior Vice President
of Product Technologies,
as well as leading various
parts of the business such
as marketing, product and
business development. Prior
to joining the Group, he held
several management positions
at Orange, one of the world’s
leading telecommunications
operators.
Mr. Frieberger stood down
from his role as the Group’s
Chief Executive Officer in
January 2019 and stepped
down from the Board in
January 2020.
SENIOR INDEPENDENT
DIRECTOR UNTIL APRIL 2019
Ron McMillan was the
PricewaterhouseCoopers
Global Finance Partner,
Northern Regional Chairman
of the UK firm and Deputy
Chairman and Head of
Assurance for the Middle
East firm, in addition to
serving as audit engagement
leader on a number of major
listed companies. He is the
Senior Independent Director
and Chairman of the Audit
Committee of N Brown
Group Plc, SCS Plc and B&M
European Value Retail SA,
and Chairman of the Audit
Committee of Homeserve plc.
Mr McMillan was the Chairman
of the Company’s Audit
Committee and a member of
the Remuneration Committee,
Nominations Committee
and Gaming Compliance
Committee until stepping
down from the Board.
Having worked in PWC's
assurance business for 38
years, Mr. McMillan brings
to the Board a deep
understanding of auditing,
financial reporting regulatory
matters and corporate
governance.
Ron McMillan was appointed
as Non-Executive Director
on 15 May 2014, and Senior
Independent Director on 9
May 2016. He stepped down
from the Board in April 2019.
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84
AGE: 54
AGE: 47
AGE: 49
AGE: 67
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69
AARRNNGGGCorporate.888.com Directors’ Report
DIRECTORS’ REPORT
The Directors submit to the members their Annual Report
and Accounts of the Group for the year ended 31 December
2019. The Strategic Report, Corporate Governance Statement
and Directors’ Remuneration Report, on pages 10, 76 and 84
respectively, form part of this Directors’ Report.
RESULTS
The Group’s profit after tax for the financial year of
US$41.6 million (2018: US$94.8 million) is reported in the
consolidated income statement on page 117. The Board is
recommending a final dividend of 3.0¢ per share, which
together with the interim dividend of 3.0¢ per share equals
6.0¢ per share for the year (2018: 12.2¢ per share).
DIRECTORS AND THEIR INTERESTS
Biographical details of the current Board of Directors, setting
out their relevant skills and experience and their professional
commitments, are shown on pages 68 and 69. The Directors
who served during the year are shown below. In line with the
UK Corporate Governance Code and as required by the
Company’s Memorandum & Articles of Association (“Articles”),
all Directors retire at each Annual General Meeting and those
who wish to continue to serve offer themselves for re-election.
Brian Mattingley (first appointed 30 August 2005).
Itai Pazner (first appointed 8 March 2019).
Aviad Kobrine (first appointed 30 August 2005).
Mark Summerfield (first appointed on 5 September 2019).
Zvika Zivlin (first appointed 9 May 2017).
Anne de Kerckhove (first appointed 28 November 2017).
Itai Frieberger (first appointed 13 May 2015, stepped down
23 January 2020).
Ron McMillan (first appointed 15 May 2014, stepped down
4 April 2019).
The beneficial and non-beneficial interests of the
Directors and their closely associated persons (pursuant
to Article 19 of the European Market Abuse Regulation)
in shares of the Company are set out in the Directors’
Remuneration Report on pages 86 to 102. There has been
no change in the interests of Directors in shares of the
Company between 31 December 2019 and the date
of this Report.
Except as noted above, none of the Directors had any
interests in the shares of the Company or in any material
contract or arrangement with the Company or any of
its subsidiaries.
SHARE CAPITAL
Changes in share capital of the Company during the
financial year are given in the Consolidated Statement
of Changes in Equity. As at 31 December 2019, the issued
share capital of the Company comprised 368,347,794
ordinary shares of GBP £0.005 each (“Ordinary Shares”).
At the Annual General Meeting held in May 2019, the
Board was empowered to allot securities of a value up to
66.66% of the Company’s Ordinary Share capital in issue
as at 31 March 2019, provided that, in accordance with
institutional guidelines issued by the Investment Association,
this would permit up to a maximum nominal value of
£1,225,181.24 (66.66%) to be allotted pursuant to a rights
issue and up to a maximum nominal value of £612,590.62
(33.33%) to be allotted otherwise. Furthermore, the Board was
empowered to allot equity securities of the Company for cash
without application of pre-emptive rights under the Articles,
provided that such power is limited:
(a)
(b)
(c)
to the allotment of equity securities in connection with
an offer or issue of equity securities to or in favour of:
(i) Ordinary Shareholders where the equity securities
respectively attributable to the interests of all Ordinary
Shareholders are proportionate (as nearly as may be)
to the respective numbers of Ordinary Shares held
by them; and (ii) holders of other equity securities if
this is required by the rights of those securities, or if
the Directors consider it necessary, as permitted by
the rights of those securities; so that the Directors
may make such exclusions or other arrangements
as they consider expedient in relation to treasury
shares, fractional entitlements, record dates, shares
represented by depositary receipts, legal or practical
problems under the laws in any territory or the
requirements of any relevant regulatory body or stock
exchange or any other matter;
to the allotment (otherwise than pursuant to sub-
paragraphs (a) above and (c) below) of equity
securities up to an aggregate nominal value of
£91,897.78; and
to the allotment (otherwise than pursuant to
sub-paragraphs (a) and (b) above) of equity securities
in connection with an acquisition or specified capital
investment up to an aggregate nominal value
of £91,897.78;
and shall expire upon the earlier of: (i) the conclusion of the
next Annual General Meeting of the Company after passing
the resolution, save that the Company may before such expiry
make an offer or agreement which would or might require
equity securities to be allotted after such expiry and the
Board may allot equity securities in pursuance of such an
offer or agreement as if the power conferred hereby had not
expired; and (ii) 30 June 2020.
In paragraph (c) “specified capital investment” means
one or more specific capital investments in respect of which
sufficient information regarding the effect of the transaction
on the Company, the assets the subject of the transaction
and (where appropriate) the profits attributable to those
assets is made available to shareholders to enable them
to reach an assessment of the potential return.
In 2019, the Company did not exercise any of the foregoing
powers and authorities.
70
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
SHARE BUY BACK AUTHORITY
At the Annual General Meeting held in May 2019, the Board
was authorised to make market purchases of up to 36,759,113
of its ordinary shares at a minimum price per share (exclusive
of expenses) of £0.005 and a maximum price per share
(exclusive of expenses) of the highest of 105% of the average
of the middle market quotations of an Ordinary Share in the
Company as derived from the London Stock Exchange Daily
Official List for the five business days immediately preceding
the day on which the ordinary share is contracted to be
purchased, the price of the last independent trade of an
Ordinary Share, and the highest current independent bid
for an ordinary share in the Company as derived from the
London Stock Exchange Trading System.
The authority expires upon the earlier of: (i) the conclusion of
the annual general meeting of the Company to be held on 20
May 2020; and (ii) 30 June 2020, unless previously renewed,
varied or revoked by the Company at a general meeting;
and a contract to purchase shares under the authority may
be made prior to the expiry of the authority, and concluded
in whole or in part after the expiry of the authority, and the
Company may purchase its Ordinary Shares in pursuance
of any such contract. In 2019, the Company did not seek
exercise any of the foregoing powers and authorities.
RIGHTS ATTACHING TO ORDINARY SHARES IN THE COMPANY
The rights and obligations attaching to ordinary shares are
set out in the Articles.
Holders of Ordinary Shares are entitled to attend and speak
at general meetings, to appoint one or more proxies and to
exercise voting rights. Holders of Ordinary Shares may receive
a dividend and on liquidation may share in the Company’s
assets. Holders of Ordinary Shares are entitled to receive the
Annual Report. Subject to meeting certain thresholds, holders
of Ordinary Shares may requisition a general meeting or the
proposal of resolutions at general meetings.
MEMORANDUM & ARTICLES OF ASSOCIATION
The Articles can only be amended by a special resolution
at a general meeting of shareholders. There were no
changes to the Articles during 2019.
DEADLINES FOR EXERCISING VOTING RIGHTS AT THE 2020
ANNUAL GENERAL MEETING
Electronic and paper proxy appointment and voting
instructions must be received by the Company’s registrars
not later than 9.00am CET (8.00am GMT) on 18 May 2020.
Forms of Direction from persons holding depository interests
in the Company in uncertificated form through CREST must be
received by the Company’s registrars not later than 9.00am
CET (8.00am GMT) on 15 May 2020.
RESTRICTIONS ON TRANSFER OF SHARES AND LIMITATIONS
ON HOLDINGS
There are no restrictions on transfer or limitations on the
holding of Ordinary Shares other than under restrictions
imposed by law or regulation (for example, insider trading
laws) or pursuant to the Company’s share dealing code.
REQUIREMENTS OF GAMING REGULATIONS
Amongst others, the Group:
(i)
holds a licence from the Nevada Gaming Commission
as the sole shareholder of an Interactive Gaming
Service Provider licensee, and as such is subject to the
Nevada Gaming Control Act and to the licensing and
regulatory control of the Nevada State Gaming Control
Board and the Nevada Gaming Commission;
(ii) holds a Casino Service Industry Enterprise licence
in New Jersey, and as such is subject to the New
Jersey Casino Control Act and to the licensing and
regulatory control of the New Jersey Division of Gaming
Enforcement; and
(iii) holds a Gaming Vendor Licence from the Delaware
Department of Finance, State Lottery Office, and as
such is subject to Title 29 of the Delaware Code and
to the licensing and regulatory control of the Delaware
Department of Finance, State Lottery Office.
The Company and holders of Ordinary Shares therein may
also in the future be subject to similar restrictions in other
jurisdictions where the Group secures a gaming licence.
The criteria used by relevant regulatory authorities to make
determinations as to suitability of an applicant for licensure
varies from jurisdiction to jurisdiction, but generally require
the submission of detailed personal and financial information
followed by a thorough investigation. Gaming authorities have
very broad discretion in determining whether an applicant
(corporate or individual) qualifies for licensing or should be
found suitable.
Many jurisdictions require any person who acquires beneficial
ownership of more than a certain percentage (typically 5%)
of the Company’s securities, to report the acquisition to the
gaming authorities and apply for a finding of suitability. Many
gaming authorities allow an “institutional investor” to apply
for a waiver that allows such institutional investor to acquire
up to a certain percentage of securities without applying
for a finding of suitability, subject to the fulfilment of certain
conditions. In some jurisdictions, suitability investigations
may require extensive personal and financial disclosure.
The failure of any such individuals or entities to submit to
such background checks and provide the required disclosure
could jeopardise the Group’s eligibility for a required licence
or approval.
Any person who is found unsuitable by a relevant gaming
authority may be prohibited by applicable gaming laws or
regulations from holding, directly or indirectly, the beneficial
ownership of any of the Company’s securities.
The Articles include provisions to ensure that 888 has the
required powers to continue to comply with applicable
gaming regulations.
71
Corporate.888.com Directors’ Report continued
These provisions include providing the Company, in the event of a Shareholder Regulatory Event (as defined in the Articles),
with the right to:
(a) suspend certain rights of its members who do not comply with the provisions of the gaming regulations
(the Affected Members);
(b)
require such Affected Members to dispose of their Ordinary Shares; and
(c)
subject to (b) above, dispose of the Ordinary Shares of such Affected Members.
The Company considers that these rights are required in order to mitigate the risk that an interest in Ordinary Shares held by
a particular person could lead to action being taken by a relevant Regulatory Authority (as defined in the Articles) which in
turn could lead to the withdrawal of existing licences held by the Group or the exclusion of being awarded further licences in
other jurisdictions that the Group seeks to pursue. This potential Regulatory Authority action could therefore cause substantial
damage to the Group’s business or prospects.
ENTITIES HOLDING COMPANY SHARES ON BEHALF OF GROUP EMPLOYEES
At 31 December 2019, Virtual Share Services Limited (a wholly owned subsidiary of the Company) held 3,854,827 Ordinary
Shares in its administrative capacity in connection with the 888 Holdings plc Long-Term Incentive Plan 2015 and Deferred
Share Bonus Plan. Full details are set out on pages 86 and 87.
SUBSTANTIAL SHAREHOLDINGS
As at 31 December 2019, the Company had been notified of the following interests in 5% or more of its share capital under
Disclosure Guidance and Transparency Rules (DTR) Rule 5 of the UK Financial Conduct Authority:
Principal Shareholders
Sinitus Nominees Limited in trust on behalf of Dalia Shaked
Standard Life Aberdeen plc
The Phoenix Holdings Ltd.
Number of
shares
% issued
share capital
Nature
of Holding
86,283,534
37,371,905
19,006,183
23.42%
10.15%
5.16%
Indirect
Indirect
Indirect
On 8 January 2020, a notification was received from Blackrock, Inc., to the effect that it and its controlled undertakings held
19,726,301 voting rights through shares and financial instruments in the Company, comprising 5.36% of the Company’s issued
share capital; on 19 February 2020, a notification was received from Blackrock, Inc., to the effect that it and its controlled
undertakings held less than 5% of the Company’s issued share capital. On 5 March 2020, a notification was received from
Aviva plc, to the effect that it and its controlled undertakings held 18,915,937 voting rights through shares and financial
instruments in the Company, comprising 5.13% of the Company’s issued share capital; on 19 March 2020, a notification was
received from Aviva plc, to the effect that it and its subsidiaries held less than 5% of the Company’s issued share capital.
On 31 March 2020, a notification was received from Artemis Investment Management LLP, to the effect that it and its controlled
undertakings held 18,427,293 voting rights through shares and financial instruments in the Company, comprising 5.00% of the
Company’s issued share capital.
Other than as stated above, between 31 December 2019 and the date of this Annual Report, no further notifications were
received regarding holdings comprising 5.0% of the Company’s issued share capital. Information provided to the Company
pursuant to the DTRs is publicly available via the regulatory information services and the Company’s corporate website
corporate.888.com.
SHAREHOLDER AGREEMENTS AND CONSENT REQUIREMENTS
There are no known arrangements under which financial rights are held by a person other than the holder of the shares.
Relationship Agreement
The Company is a party to a relationship agreement with, among others, Sinitus Nominees Limited as trustee for Dalia Shaked
(“DS Trust”) dated 14 September 2005 which was amended on 16 July 2015 (the “Amended Relationship Agreement”).
The O Shaked Shares Trust and the Ben Yitzhak Family Shares Trust (together with Dalia Shaked Bare Trust, the “Principal
Shareholder Trusts”) are also party to the Amended Relationship Agreement but are no longer bound by certain material
provisions since they are no longer shareholders of the Company.
The Amended Relationship Agreement includes the following provisions in respect of the independence of the Company
(in accordance with the UK Listing Rules) which provide that DS Trust shall, and shall procure as far as it is legally able,
that its respective associates:
• conduct all transactions and relationships with 888 Holdings plc and any member of the Group on an arm’s length basis
and on a normal commercial basis;
• not take any action which precludes or inhibits 888 Holdings plc, or any member of the Group, from carrying on its business
independently of it;
• not take any action that would have the effect of preventing the Company, or any member of the Group, from complying
with its obligations under the UK Listing Rules; and
72
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
• not propose or procure the proposal of any shareholder
resolution which is intended, or appears to be intended, to
circumvent any proper application of the UK Listing Rules.
It further provides that the DS Trust will not solicit
Group employees without consent, that only Independent
Directors can vote on proposals to further amend the
Amended Relationship Agreement, that the DS Trust will
consult the Company 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 Amended Relationship Agreement also includes
restrictions on the DS Trust’s power to appoint Directors
and includes obligations on the DS Trust to exercise its voting
rights to ensure that the majority of the Board, excluding
the Chairman, is independent.
The DS Trust 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. There are
no such nominated directors at present.
Such restrictions and obligations apply in respect of the
DS Trust whilst it holds not less than 7.5% of the issued share
capital of the Company.
The obligations of the parties to the Amended Relationship
Agreement are at all times subject to all relevant legal and
regulatory requirements and obligations of the parties thereto
in the United Kingdom, Gibraltar or elsewhere.
Confirmation of independence
The Board confirms that as of the date of this Annual
Report, and during the entirety of 2019, the Company
had no controlling shareholder. Therefore, no confirmation
of independence is required pursuant to UK Listing
Rule 9.8.4 R (14).
FINANCIAL INSTRUMENTS
The Company considers the Group’s exposure to financial
risks, including exposure to specific countries and trading
counterparties, to be low. During 2019, hedging of the Group’s
foreign currency risks was carried out solely with leading
banks including Barclays plc. Further information on the
Group’s use of financial instruments is set out in note 25
to the annual accounts on page 150.
DIRECTORS’ INDEMNITIES
The Articles permit the Company to indemnify its Directors
in certain circumstances, as well as to provide insurance for
the benefit of its Directors. The Company has undertaken
to indemnify certain of its Non-Executive Directors: (a) in
defending any proceedings, whether civil or criminal, in which
judgment is given in favour of such Non-Executive Director
or in which such Non-Executive Director is acquitted; or
(b) in connection with any application under Section 477 of
the Gibraltar Companies Act (pursuant to which the court
may provide relief to such Non-Executive Director in any
proceedings for negligence, default, breach of duty or breach
of trust on grounds that such Non-Executive Director has
acted honestly and reasonably, and that, having regard to
all circumstances of the case, including those connected with
his appointment, he ought fairly to be excused from liability
on such terms as the court thinks fit). The Company also
undertook in favour of the Executive Directors to indemnify
them to the fullest extent permitted by applicable law and
the Articles in connection with the execution of their duties
and/or exercise of their powers, authorities and discretions
pursuant to his employment agreement. In addition, certain
special indemnities were provided to the Executive Directors
in connection with the compliance and licensing procedures
relating to 888’s business in the United States, details of
which were provided in 888’s Annual Report for the year
ended 31 December 2011. Finally, the Company entered into
qualifying third-party indemnity arrangements for the benefit
of all of its Directors in a form and scope which comply with
the requirements of the UK Companies Act 2006 and the
Gibraltar Companies Act 2014 which were in force from
1 November 2017 (or subsequently, with respect to
subsequently appointed Directors) and remain in force.
Shareholders’ Agreements
There are no known Shareholders’ Agreements in force
between shareholders of the Company.
CORPORATE GOVERNANCE
The corporate governance statement is on pages 76 to 83
and is incorporated in this Directors’ Report by reference.
CHANGE OF CONTROL
A change of control in the Company may, in the event of
failure to fulfil any applicable consent requirement, give rise
to certain revocation or termination rights under the Group’s
gaming licences or certain contracts to which Group
companies are a party. The RCF between the Company and
Barclays Bank plc provides that in the event of a change
of control in the Company, the parties have 30 days to
negotiate acceptable terms to continue the facility, failing
which it will be cancelled and all outstanding amounts
thereunder will be immediately payable.
DONATIONS
The Group did not make any donations to any political
party (including any non-EU political party) or organisation
or independent election candidate or incur any political
expenditure during the year.
GOING CONCERN AND VIABILITY STATEMENTS
The going concern and viability statements required to be
included in the annual report pursuant to the UK Corporate
Governance Code are on page 48, and are incorporated in
this Directors’ Report by reference.
PRINCIPAL SUBSIDIARY UNDERTAKINGS
The principal subsidiary undertakings are listed on
note 22.
73
Corporate.888.com Directors’ Report continued
RESEARCH AND DEVELOPMENT ACTIVITIES
In 2019, the Group maintained its focus on enhancing
the products offered, expanding its platform which is
accessible on mobile devices and further developing its
gaming platform capabilities.
Some relevant achievements during the year in the field
of research and development included:
• Spectate Integration Project – Integrating BetBright
sport platform with 888 back-office.
• Orbit Roll-out – Concluding roll-out of the Orbit platform
across all 888 markets. We aim to continue developing
and deploying additional content and features over the
Orbit platform.
• New Sport Front End – Concluding launch of the new front
end. The new front page was fully developed in-house
with a slick, modern user experience. The front end includes
mini-cashier, artificial intelligence based recommendations
and easier access to personal promotional areas.
• Casino games – Leveraging on the increased footprint
of the robust Orbit client software and optimised cross-
jurisdiction content delivery process, an unprecedented
number of new in-house and third-party games were
launched across all markets, with new third-party game
providers and game categories added, thus not only
growing the offering but also greatly diversifying it.
• Introduction of Casino Daily Jackpots – Launching the
new section8 daily jackpot feature, including 13 video
slots contributing to the same jackpot that is guaranteed
to drop every day by a given GMT time.
• European Shared Liquidity between Spain and Portugal –
Adjusting our Poker product to support additional shared
liquidity regulatory requirements.
• Apple New Guidelines – Adjusting our Apple App Store apps
to comply with new App Store Review Guidelines applicable
to real-money gaming apps. We have already submitted
and obtained Apple’s approval for several apps that were
developed in accordance with these guidelines.
• ‘Rate Us’- tool for improved app rating – Integrating
Apple’s Rating API into the Casino and Sport apps
on the App Store.
• Introducing Instant Cash-outs – Launching an instant
low-risk cash-out flow so that players can receive funds
immediately after their request, without any operational
delays. Based on customer research and industry trends,
we believe this feature is an important part of improving
our customer experience and satisfaction.
• Compliance with Regulatory Requirements – Deploying new
flows required by UK regulation facilitating verification of UK
player details and document uploading, and launching new
KYC requirements in order to strengthen the authentication
process of Spanish players.
GREENHOUSE GAS EMISSIONS
Details of 888’s greenhouse gas emissions are set out in the
Corporate Responsibility section of the Strategic Report
on page 50.
POST-PERIOD EVENTS
No important events affecting the Group occurred since
31 December 2019.
FUTURE DEVELOPMENTS
Likely future developments in the business of the Group are
set out in the Market Overview on page 8.
AUDITORS
A resolution for the reappointment of Ernst and Young LLP
and EY Limited, Gibraltar, (together, EY), as auditors
of the Company will be proposed at the 2020 Annual
General Meeting.
During the year ended 31 December 2019, Ernst and Young
LLP were reappointed as auditors for the purposes of the
Company preparing financial statements as required
pursuant to the UK Listing Rules and the DTRs. EY Limited,
Gibraltar, which is approved as a registered auditor under
the Gibraltar Financial Services (Auditors) Act 2009, is
the statutory auditor of the Company including for the
purposes of issuing an audit report pursuant to the Gibraltar
Companies Act 2014.
Details of audit and non-audit fees charged by EY
to the Company are set out on page 103 of the Audit
Committee Report.
DIRECTORS’ STATEMENT OF RESPONSIBILITIES
Company law requires the Directors to prepare financial
statements in accordance with the Gibraltar Companies
Act 2014.
International Accounting Standard 1 requires that financial
statements present fairly for each financial year the
Company’s and the Group’s financial position, financial
performance and cash flows. This requires the faithful
representation of the effects of transactions, other events
and conditions in accordance with the definitions and
recognition criteria for assets, liabilities, income and expenses
set out in the International Accounting Standards Board’s
“Framework for the preparation and presentation of financial
statements”. In virtually all circumstances, a fair presentation
will be achieved by compliance with all applicable
International Financial Reporting Standards (“IFRS”)
as adopted by the EU. A fair presentation also requires
the Directors to:
• consistently select and apply appropriate
accounting policies;
• present information, including accounting policies,
in a manner that provides relevant, reliable, comparable
and understandable information; and
• provide additional disclosures when compliance with
the specific requirements in IFRSs as adopted by the EU
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.
74
888 Holdings plc Annual Report & Accounts 2019 The Directors are responsible for keeping adequate
accounting records which disclose with reasonable
accuracy at any time the financial position of the Group,
for safeguarding the assets, for taking reasonable steps for
the prevention and detection of fraud and other irregularities
and for the preparation of a Directors’ report which complies
with the Gibraltar Companies Act 2014.
Financial statements are published on the Company’s
website in accordance with legislation in the UK governing
the preparation and dissemination of financial statements,
which may vary from legislation in other jurisdictions. The
maintenance and integrity of the Company’s website is the
responsibility of the Directors. The Directors’ responsibility also
extends to the ongoing integrity of the financial statements
contained therein.
The Directors are responsible for preparing the annual report
and the financial statements. The Directors are required to
prepare financial statements for the Company in accordance
with IFRSs as adopted by the EU and have also chosen to
prepare financial statements for the Group in accordance
with IFRSs as adopted by the EU.
The Directors consider that the Annual Report and Accounts,
taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders
to assess the Group’s position, performance, business
model and strategy.
Each of the Directors confirms, to the best of his or
her knowledge:
(a)
(b)
the financial statements, prepared in accordance with
IFRS as adopted by the EU, give a true and fair view of
the assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the
consolidation taken as a whole; and
the Strategic Report includes a fair review of the
development and performance of the business and
the position of the Company and the undertakings
included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face.
All of the current Directors have taken all the steps that they
ought to have taken as Directors to make themselves aware
of any information needed by the Company’s auditors for the
purposes of their audit, and to establish that the auditors are
aware of that information. The Directors are not aware of any
relevant audit information of which the auditors are unaware.
On behalf of the Board:
ITAI PAZNER
Chief Executive Officer
15 April 2020
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
75
Corporate.888.com Corporate Governance Statement
CORPORATE
GOVERNANCE STATEMENT
need to ensure that the process implemented to appoint Mr
Summerfield was robust. Mr. Summerfield’s appointment to
the Remuneration Committee was delayed to March 2020
in order to allow the orderly conclusion of the Committee’s
decision-making with regard to annual remuneration matters.
• There is not presently a Senior Independent Director on the
Board. In addition to the explanation above, it is noted that
upon appointment during 2020 of a further Non-Executive
Director, a decision will be taken as to the designation of a
Senior Independent Director.
LEADERSHIP
The Directors consider it essential that the Company should
be both led and controlled by an effective Board.
BOARD RESPONSIBILITIES AND PROCEDURES
The Board focuses upon the Company’s long-term objectives,
strategic and policy issues. It formally and transparently
considers the management of key risks facing the Group,
as well as determining the nature and extent of significant
risks it will take in achieving its strategic objectives. It
maintains sound risk management and internal control
systems, and reviews annually the effectiveness of the
Company’s risk management and internal control systems.
The Board is responsible for acquisitions and divestments,
major capital expenditure projects and considering the
Company’s budgets and dividend policy. The Board also
determines key appointments. The Board receives regular
updates on shareholders’ views.
Board-level responsibilities of the Chairman are clearly and
formally defined, with the Chairman being responsible for
the effective operation of the Board as a whole, leadership
of the Board in achieving a culture of constructive challenge
by Non-Executive Directors, regularly agreeing and reviewing
each Director’s training and development needs, and
supporting key external relationships; the CEO has the overall
executive responsibility for the running of the Company’s
business; and the Non-Executive Directors are responsible for
constructively challenging and helping develop proposals on
strategy; no one individual has unfettered powers of decision.
The Board has an established 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
79 to 83), which individually consider their own operating
frameworks against the Board’s business programme.
The Directors have wide-ranging business experience, and
no individual, or group of individuals, dominates the Board’s
decision-making.
The Company’s Ordinary Shares are admitted to the premium
segment of the UK Official List and to trading on the London
Stock Exchange’s main market for listed securities. As such,
despite being incorporated in Gibraltar, the UK Corporate
Governance Code (the “Code” or “UK Corporate Governance
Code”) applies to the Company pursuant to the UK Listing
Rules and is available at www.frc.org.uk. The version of the
Code published in July 2018 applied to the financial year
under review.
The Board remains committed to the principles of corporate
governance in the UK Corporate Governance Code which
it considers to be central to the effective management of
the business and to maintaining the confidence of investors.
This report explains how the Company has applied the main
principles of the UK Corporate Governance Code.
The statement contained in this section explains the key
features of the Company’s governance structure and
compliance with the UK Corporate Governance Code. Where
the Company has not complied with the UK Corporate
Governance Code, explanations are given below.
This statement also includes items required by the UK Listing
Rules and the Disclosure Guidance and Transparency Rules,
including how the “Main Principles” of the UK Corporate
Governance Code have been applied.
STATEMENT OF COMPLIANCE WITH THE UK CORPORATE
GOVERNANCE CODE
During 2019, the Company was in compliance with the UK
Corporate Governance Code 2018, other than as regards the
following:
• The Chairman of the Board, Brian Mattingley, has been
a member of the Board since August 2005. The Board’s
decision to retain Mr. Mattingley as its Non-Executive
Chairman reflects the significant value he brings, including
in particular his wealth of gambling industry and public
company experience, deep knowledge of the business
and industry contacts. The Board believes Mr. Mattingley’s
continued tenure as Non-Executive Chairman has benefited
all shareholders. The Board and Mr. Mattingley have agreed
a succession process whereby a new Chairman will be in
place by no later than the 2021 Annual General Meeting.
Whilst it was initially intended that Mr. Mattingley step
down by the end of 2020, given current market conditions
as a result of COVID-19, the Board is of the view that it is
important it has the option of extending Mr. Mattingley’s
tenure for this additional few months.
• Upon Ron McMillan stepping down from the Board in April
2019: at least half of the Board (excluding the Chairman)
did not comprise independent Non-Executive Directors;
the Remuneration Committee comprised of two members
(Zvika Zivlin and Anne de Kerckhove) rather than three;
and the Audit Committee comprised of two members
(Zvika Zivlin and Anne de Kerckhove) rather than three
independent Directors as recommended by the UK
Corporate Governance Code. This was rectified upon
Mark Summerfield’s appointment to the Board and as
Chair of the Audit Committee in September 2019, and to
the Remuneration Committee in March 2020. Mr McMillan
stepped down from the Board without prior notice in order
to focus on his other commitments, thus appointment of his
successor was understandably not immediate due to the
76
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
BOARD ACTIVITIES
During 2019, the Board assessed and monitored 888’s
culture, including in particular the further implementation
of the Group’s across-the-board compliance culture
in the field of responsible gaming. Where the Board is not
satisfied that policy, practices or behaviour throughout the
business are aligned with the Company’s purpose, values
and strategy, the Board seeks assurance that management
has taken corrective action. In 2019, the Board was satisfied
in this respect. The Board assessed the basis on which
888 generates and preserves value over the long-term,
including by way of growing and developing the business
in regulated markets.
INVESTING IN AND REWARDING THE WORKFORCE
The Company’s approach to investing in and rewarding its
workforce is set out under ‘Corporate Responsibility’ on
pages 50 to 67.
KEY STAKEHOLDERS
The Company’s key stakeholders are its shareholders,
employees and customers, as well as the communities in
which it does business. The Board takes care to engage with
its stakeholders, as detailed in the Corporate Responsibility
section on page 50 and the Remuneration Report on page
86. The interests of the Company’s key stakeholders are
considered in Board discussions and decision-making. Whilst
as a Gibraltar company, the UK Companies Act 2006 does
not apply to the Company, the matters set out in section 172
thereof, which include the likely consequences of any decision
in the long-term, the interests of the Company’s employees,
the need to foster the Company’s business relationships with
suppliers, customers and others, the impact of the Company’s
operations on the community and the environment, the
desirability of the Company maintaining a reputation for high
standards of business conduct, and the need to act fairly as
between members of the Company, are taken into account
by the Board in its decision-making to the extent permitted
under Gibraltar law.
The Board continually reviews its engagement mechanisms
in order to make sure that it is engaging with its stakeholders
effectively.
SHAREHOLDER ENGAGEMENT
During 2019, 888’s Chairman Brian Mattingley met with
the Company’s major shareholders in order to discuss the
Company’s performance and to address any concerns.
At the Company’s Annual General Meeting held on 21 May
2019, 21.30% of total votes cast were voted against the
re-election to the Board of the Non-Executive Chairman,
Mr. Brian Mattingley (“Resolution 4”).
The Company held discussions with major shareholders
who voted against Resolution 4 in order to understand their
concerns. The Company understands that the primary
reason for the vote against Resolution 4 was the length
of Mr. Mattingley’s tenure as a Director of 888.
The Board’s decision to retain Mr. Mattingley as its
Non-Executive Chairman reflects the significant value he
brings to the Board, including in particular his wealth of
gambling industry and public company experience, deep
knowledge of the business and industry contacts.
The Board believes Mr. Mattingley’s continued tenure as
Non-Executive Chairman has benefited all shareholders. The
Nominations Committee and Mr. Mattingley have agreed a
succession process whereby a new Chairman will be groomed
to replace Mr. Mattingley by the 2021 Annual General Meeting.
Whilst it was initially intended that Mr. Mattingley step down
by the end of 2020, given current market conditions as a
result of COVID-19 and challenging operating conditions, the
Nominations Committee is of the view that Mr. Mattingley’s
continued tenure for several months is of key importance to
the Company.
The Board recognizes the importance of future succession
planning and was recently strengthened through the
appointment of Mr. Mark Summerfield as a Non-Executive
Director and Chair of 888’s Audit Committee on
5 September 2019. The Company continues to look at
potential additional Non-Executive Director appointments
to the Board and will seek to provide a further update
on this matter by its Annual General Meeting on 20 May
2020. Any future Board appointments will reflect 888’s strong
diversity and leadership objectives, whilst complementing
and building upon the existing expertise of the Board.
All other resolutions were passed with a high level of
shareholder approval at the 2018 Annual General Meeting,
and there was no other resolution recommended by the Board
which garnered 20% or more votes cast against.
During 2019, the Board took steps to ensure that its members
(in particular, the Chairman and Non-Executive Directors)
develop an understanding of the major shareholders’ views
about the Company. This included meetings between the
Chairman and institutional investors, as well as engagement
by the Remuneration Committee Chair with institutional
investors regarding remuneration matters.
ENGAGEMENT WITH THE WORKFORCE
None of the three specific workforce engagement
mechanisms listed in Provision 5 of the UK Corporate
Governance Code have been implemented at present. The
arrangements for how the Board engages with the Group’s
workforce on policies and practices and more broadly on the
business are set out in the Directors’ Remuneration Report
on page 86 and the Corporate Responsibility section on
page 50 respectively. The feedback to be Board is that this
approach has been received favourably by the workforce
and as such the Board is satisfied that engagement is
effective. However, the Board has concluded that more can
be done and further steps are being taken in the current year,
including holding Board meetings in certain of the Group’s
key locations to allow greater interaction by more members
of the Board with the workforce.
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 888
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.
77
Corporate.888.com Corporate Governance Statement continued
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
The Chairman, Mr Mattingley, and the Chief Executive Officer,
Mr Pazner, have a close working relationship to ensure the
integrity of the decision-making process of the Board and
the successful delivery of 888’s strategy. There is a clear
division of responsibilities between the Chairman and the
CEO, which the Board considers an important part of its
corporate governance. Mr. Mattingley was not independent
on his appointment as Executive Chairman in March 2015
as he had previously held the role of Chief Executive Officer.
Mr. Mattingley’s appointment at the time as Executive
Chairman was approved by the Board in light of the benefits
to the Company in terms of his experience of the gaming
industry, extensive knowledge of the business, and in
maintaining and developing relationships with regulators.
NON-EXECUTIVE DIRECTORS’ INDEPENDENCE
The Board is confident that Independent Non-Executive
Directors Mark Summerfield, Zvika Zivlin and Anne de
Kerckhove are and remain independent in character
and judgment, and that there are no relationships or
circumstances which are likely to affect, or could appear
to affect, their judgement.
DIRECTORS’ INSURANCE COVER
The Company has arranged and maintains, at its expense,
a directors’ and officers’ liability insurance policy in respect
of legal actions against its Directors, as recommended by the
UK Corporate Governance Code. To the extent permitted by
Gibraltar law, the Company may also indemnify the Directors.
Neither the insurance nor the indemnity provides cover where
a Director has acted fraudulently or dishonestly.
BOARD DIVERSITY POLICY
The Group has adopted a Board Diversity Policy, which
sets the Company’s aspiration for diversity of its Board
without compromising on the quality or merit of candidates,
including their aptitude and ability. The policy refers to
the diversity criteria of age, gender and educational and
professional backgrounds. Whilst the policy seeks to ensure
that appointments are based on the candidate’s strengths
set by objective criteria, including their past contributions
and potential, the benefits of diversity are also regarded
and decisions are not influenced by certain protected
characteristics, including gender, sexual orientation, marital
or civil partnership status, gender reassignment, pregnancy,
the undergoing of fertility or in vitro fertility treatment,
parenthood, part-time or fixed-term status, age, race, religion
or belief, nationality, ethnicity, country of origin, place of
residence, views, disability, trade union membership and
political affiliation. Where appropriate, steps are taken to
identify and remove unnecessary or unjustifiable barriers.
The standards set out in the policy apply to the Board and
its committees, which are the Company’s administrative,
management and supervisory bodies.
The Board was satisfied that, during 2019, steps were taken
to promote the diversity objectives of the policy. The Group’s
activities detailed in the Corporate Responsibility section on
page 50 support the Group’s diversity objectives.
Details of the Company’s diversity position and involvement
of women in management of the Group are set out in the
Corporate Responsibility section of the Strategic Report
on page 63.
78
EFFECTIVENESS
BOARD COMPOSITION
During 2019, the Board comprised the following Directors:
Chairman Brian Mattingley, Senior Independent Director Ron
McMillan until his resignation in April 2019, independent Non-
Executive Directors Zvika Zivlin and Anne de Kerckhove, as well
as Mark Summerfield from September 2019, Executive Directors
Itai Pazner as Chief Executive Officer, who joined the Board
in March 2019, and Aviad Kobrine as Chief Financial Officer,
as well as Itai Frieberger who remained on the Board after
stepping down as Chief Executive Officer in January 2019 and
stepped down from the Board in January 2020.
The biographical details of all of the Directors, setting out
their relevant skills and experience and their professional
commitments, are given on pages 68 and 69.
INDEPENDENT DIRECTORS
Currently, half of the Directors, excluding the Chairman,
are Non-Executive Directors determined by the Board
to be independent for the purposes of the UK Corporate
Governance Code. In 2019, except during the period from
Ron McMillan stepping down in April 2019 until Mark
Summerfield’s appointment in September 2019, at least half
of the Directors, excluding the Chairman, were independent
Non-Executive Directors (as required by the UK Corporate
Governance Code).
The role of the Senior Independent Director is to provide
a sounding board for the Chairman, to evaluate the
Chairman’s performance and lead the Board’s succession
planning, and to serve as an intermediary for the other
Directors where necessary. Whilst there is not presently a
Senior Independent Director on the Board, upon appointment
of a further Non-Executive Director, a decision will also
be taken as to the designation of a Senior Independent
Director. In the meantime, Anne de Kerckhove is leading the
Nominations Committee’s work on succession planning and
coordinated the process of evaluating the Chairman.
NOMINATIONS COMMITTEE
The Board has established a nominations committee
to lead the process for Board appointments and to
make recommendations to the Board (the “Nominations
Committee”).
The Board considers succession planning matters
on an ongoing basis, with particular focus on succession
planning for the CEO role, as well as for senior management.
The Nominations Committee had a central role in succession
planning for the CEO role, as well as for recruitment
of additional Non-Executive Directors, including Audit
Committee Chair Mark Summerfield. Over the course of 2019,
the alternatives were carefully considered and the Board
ultimately decided to appoint Itai Pazner as CEO in January
2019. Itai Pazner has been with 888 for 18 years and previously
served as its Chief Operating Officer. Furthermore, in order to
ensure a smooth transition, Itai Frieberger remained on the
Board until January 2020.
888 Holdings plc Annual Report & Accounts 2019 During the year, the Nominations Committee comprised
Chairman of the Board Brian Mattingley (Chair), Senior
Independent Director Ron McMillan until April 2019,
Independent Non-Executive Director Zvika Zivlin and
Independent Non-Executive Director Anne de Kerckhove.
In March 2020, Anne de Kerckhove was appointed Chair
of the Nominations Committee, and Mark Summerfield was
appointed as a member of the Nominations Committee.
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. In accordance
with the Nominations Committee’s terms of reference, the
Chairman may not chair the Nomination Committee when
it is dealing with the appointment of a successor to the
chairmanship; presently, Anne de Kerckhove is chair of
the Nominations Committee. The Nominations Committee
is tasked with preparing a description of the role and the
capabilities required for particular roles.
The Nominations Committee’s terms of reference are
available on the Company’s website, corporate.888.com.
The Nominations Committee is also responsible for pursuing
diversity within the scope of its mandate, including setting
measurable objectives and monitoring progress on achieving
such objectives. In considering new Board appointments,
diversity (including of gender, age and professional and
educational background) is one of the criteria considered by
the Nominations Committee in accordance with the Board’s
Diversity Policy. The Company’s statement regarding diversity
is set out in the Corporate Responsibility section of the
Strategic Report on page 63.
During 2019, the Nominations Committee’s work included
the following:
• Succession planning for the CEO role: In the present case,
the Nominations Committee considered that an internal
appointment was most appropriate. In general, the
Nominations Committee acknowledges its role in supporting
the development of a diverse pipeline of candidates for
senior management.
• Recruitment of Non-Executive Directors
• Monitoring the Board evaluation process which is described
on page 80.
• Implementing the Board’s diversity policy which is described
on page 63 (including considering the gender balance of
senior management and their direct reports).
The Board has appointed a leading search firm to assist
the Nominations Committee’s work. The search firm is
independent and has no other connection with the Company.
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
RE-ELECTION AND APPOINTMENT OF DIRECTORS
All Directors are subject to reappointment by shareholders
on an annual basis in accordance with the provisions of the
UK Corporate Governance Code.
When proposing Directors for re-election, the Board rigorously
reviews the performance of each Director and assesses
whether the individual’s performance continues to be effective
and that he or she continues to demonstrate commitment
to the role, taking into account the need for progressive
refreshing of the Board.
The Board may appoint any person to be a Director of
the Company and such Director shall hold office only until
the next AGM, when he or she shall be eligible for election
or re-election by the shareholders.
COMMITMENT
The opportunity to hold office as Non-Executive Directors
of other companies enables the Directors of 888 to
broaden their experience and knowledge, which benefits
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.
Non-Executive Directors are required to allocate sufficient
time to perform all applicable roles and to both disclose
any external appointments and consult with the Company
prior to accepting any new major external appointments.
The Chairman has disclosed details of his other significant
commitments to the Board during 2019 and these are
detailed in his biography on page 68.
The Board considers that Brian Mattingley’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 888 effectively.
The terms of appointment for each Non-Executive Director,
including expected time commitment are available for
inspection at the Company’s registered office during normal
business hours and at the AGM.
79
Corporate.888.com Corporate Governance Statement continued
MEETINGS AND ATTENDANCE
The Board plans to meet six times a year. When urgent
decision-making is required between meetings on matters
reserved for the Board, there is a process in place to facilitate
discussion and decision making. The Directors regularly
communicate and exchange information irrespective
of the timing of meetings.
During 2019, the Board met six times. Set out below are
details of the Directors’ attendance record at Board and
Committee meetings in 2019.
Total held in year
Brian Mattingley
Itai Pazner
Aviad Kobrine
Mark Summerfield1
Zvika Zivlin
Anne de Kerckhove
Itai Frieberger
Ron McMillan2
Total number of meetings held during the year ended
31 December 2019 and the number of meetings
attended by each Director
Board
Audit
Committee
Remuneration
Committee
Nominations
Committee4
Gaming
Compliance
Committee3
6
6
6
6
2
6
5
5
2
3
—
—
—
2
3
3
—
1
4
—
—
—
—
4
4
—
3
0
—
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1
1 Mark Summerfield was appointed as a Non-Executive Director and Chair of the Audit Committee in September 2019, and as a member of the Gaming Compliance
Committee in December 2019.
2 Ron McMillan stepped down as a Non-Executive Director and Chair of the Audit Committee in April 2019.
3 Mr. Michael Alonso is an additional member of the Gaming Compliance Committee, but is not a Board member.
4 Informal discussions amongst Nominations Committee members were held during 2019 regarding succession matters.
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. If a Director is
unable to attend a meeting, he or she is given the opportunity
to raise any issues and give any comments to the Chairman
in advance.
None of the Directors have raised any concerns about the
running of the Company or a proposed action which needed
to be recorded in the Board minutes of the Company or in a
statement to the Chairman for circulation to the Board.
An externally facilitated, in-depth evaluation of the Board
and its Committees relating to performance in 2019, in the
context of the challenges and opportunities facing the
Company, was carried out by Fidelio Partners, an independent
board advisory and search consultancy based in London.
This is the first time Fidelio has conducted an external Board
evaluation for 888, although 888 has undertaken regular
external Board evaluations in the past. Fidelio has no other
connection with 888 or its directors.
• Fidelio undertook the following steps to conduct the Board
evaluation.
MEETINGS WITH NON-EXECUTIVE DIRECTORS
The Chairman holds meetings at least once per year with
the Non-Executive Directors without the Executive Directors
being present.
The Non-Executive Directors meet once per year without
the Chairman present in order to appraise the performance
of the Chairman and take into account the views of the
Executive Directors. Under the UK Corporate Governance
Code, it is part of the role of the Senior Independent Director
to lead this process. This took place in March 2019. In 2020,
in the absence of a Senior Independent Director, the process
was led by Non-Executive Director Anne de Kerckhove.
BOARD EVALUATION
The Board has established a formal process for the annual
evaluation of its performance, and the performance of its
committees and individual Directors. The evaluation process
covers a range of issues such as Board processes, Board
composition, roles and responsibilities, Board agendas
and committee processes, as well as Board dynamic and
communication.
• Built an outline of the process and developed a bespoke
questionnaire based on discussions with the Chairman.
• Interviewed Board Members, senior Executives and advisers.
• Observed meetings of the Board and Remuneration
Committee.
• Reviewed Board papers and other relevant documents.
• Analysed findings and presented results to the Chairman
and the Board.
Fidelio’s focus was increasing effectiveness, taking account
of best practice. Having conducted the evaluation, Fidelio
identified strengths and also made practical, forward looking
recommendations as to how the Board could increase its
effectiveness and add further value. These recommendations
focused on improving the contribution of the Board to
the Group’s strategy, succession planning, continuing to
strengthen the experience of FTSE best practice in the
boardroom, reviewing the Audit Committee’s work improving
Board learning processes, and improving and articulating
stakeholder engagement.
Fidelio will review these recommendations with the Board and
the Board will agree on their implementation. Fidelio will be
80
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
available as a sounding board throughout this process.
Following the evaluation, the Board was satisfied that each
of the Non-Executive Directors continues to be effective and
to demonstrate commitment to their respective roles, and
proposes them for re-election or election at the 2020 Annual
General Meeting. The next Board evaluation is scheduled to
be held in 2021.
DEVELOPMENT AND ADVICE
The Board understands that there should be a formal,
rigorous and transparent procedure for the induction of new
Directors, which has been formulated with the guidance of the
Nominations Committee.
All Directors have access to the advice and services of the
Company Secretary1 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 the Company of their intention
to do so.
During 2019, Mark Summerfield was appointed as a
Non-Executive Director. Itai Pazner was appointed as
Chief Executive Officer in January 2019 and as a Director
in March 2019. The new Directors are being provided with
ongoing corporate governance training by the Group’s
external UK counsel, Latham & Watkins (London) LLP.
As noted above, the Chairman regularly agrees and reviews
each Director’s training and development needs. Members
of the Board committees receive specific updates on
matters that are relevant to their role. Members of the senior
management team with responsibility for the Group’s business
make periodic presentations at Board meetings about their
functions, performance, markets and strategy.
INFORMATION AND SUPPORT
Each of the Directors has access to the advice and services
of the Company Secretary. Under the direction of the
Chairman, the Company Secretary’s responsibilities include
ensuring information flows within and between the Board, its
Committees and senior management, as well as facilitating
induction, evaluation and professional development activities,
and advising the Board on corporate governance, legal and
procedural matters.
The appointment or removal of the Company Secretary is a
matter for the Board as a whole.
CONFLICTS OF INTEREST
Conflicts of interest of the Directors are dealt with in
accordance with the procedures set out in the Articles and
are monitored by the Chairman. Specifically, a Director does
not vote on Board or Committee resolutions in which he or
she or persons connected with him/her have an interest
(other than by virtue of a shareholding in the Company)
which is to his knowledge material, except in specific limited
circumstances. Such procedures operated effectively during
the year.
1 References in this Annual Report to Company Secretary refer to Herzog Fox &
Neeman. The Company secretary for Gibraltar corporate purposes is Straits
Secretaries (Gibraltar) Limited.
ACCOUNTABILITY
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.
The Directors monitor the Company’s systems of internal
control and risk management on an ongoing basis, including
identifying, evaluating and managing the significant risks
faced by the Company. The Board believes that its risk
management process accords with the FRC Guidance on
Risk Management, Internal Control and Related Financial
and Business Reporting and carries out an annual review
of its effectiveness covering all material controls, including
financial, operational and compliance controls.
The annual review considers individual risk control
responsibilities, reporting lines and qualitative assessments of
residual risks. Such a review was carried out in respect of the
processes that were in place throughout 2019 up until the date
of approval of the Annual Report and Accounts. No significant
failings or weaknesses were identified in the review.
It is management’s role to implement Board policies on risk
and control, including reporting. The system of internal control
is designed to manage rather than eliminate the risk of
failure to achieve business objectives and can only provide
reasonable, and not absolute, assurance against material
misstatement or loss.
The Audit Committee also reviews the appropriateness
and adequacy of systems of internal control and risk
management in relation to the financial reporting process on
an ongoing basis and makes recommendations to the Board
based on its findings.
888’s internal control and risk management systems in
relation to the process of preparing consolidated accounts
include the following:
• Identification of significant risk and control areas of
relevance to Group-wide accounting processes;
• Controls to monitor the consolidated accounting process
and its results at the level of the Board and at the level
of the companies included in the consolidated financial
statements;
• Preventative control measures in the finance and
accounting systems of the Company and of the companies
included in the consolidated financial statements and
in the operative, performance-oriented processes that
generate significant information for the preparation of the
consolidated financial statements, including the Strategic
Report, including a separation of functions and pre-defined
approval processes in relevant areas;
• Measures that safeguard proper IT-based processing of
matters and data relevant to accounting; and
• Reporting information of companies around the Group
which enable the Company to prepare consolidated
financial statements including management accounts.
81
Corporate.888.com Corporate Governance Statement continued
The reporting structure relating to all the companies included
in the consolidated financial statements requires that
significant risks are to be reported immediately to the Board
on identification.
AUDIT COMMITTEE AND AUDITORS
The Board has established an Audit Committee. Details of
the Audit Committee’s functions, together with its specific
activities in 2019, are set out in the Audit Committee Report
on page 103.
During the year, the Company’s Audit Committee comprised
Senior Independent Director Ron McMillan (Chair) until April
2019, Mark Summerfield (Chair) from September 2019 (during
the interim period April–September 2019 there was no Audit
Committee Chair), and Independent Non-Executive Directors
Zvika Zivlin and Anne de Kerckhove.
During 2019, Deloitte carried out the Company’s internal audit
function, reporting to the Audit Committee; during 2019, the
internal auditor provided nine reports to the Audit Committee
and discussed the internal audit working plan for 2020.
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
the internal audit function.
Details of the Company’s risk management strategy and the
Board’s assessment of the Company’s viability in light of its
risks are set out on pages 32 and 48 respectively.
REMUNERATION COMMITTEE
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.
During the year, the Company’s Remuneration Committee
comprised Independent Non-Executive Director Zvika Zivlin
(Chair), Senior Independent Director Ron McMillan until
April 2019 and Independent Non-Executive Director
Anne de Kerchkove. Mark Summerfield was appointed as a
member of the Remuneration Committee in March 2020.
The Remuneration Committee determines the Chairman’s
and Executive Directors’ fees, whilst the Chairman and the
Executive Directors determine the fees paid to the Non-
Executive Directors. Further details are provided on page 95.
The Remuneration Committee was advised during 2019
by Korn Ferry. The remuneration consultant has no other
connection with 888 or any of the Directors. Further details
are provided on page 102.
All new long-term incentive schemes and significant
changes to existing long-term incentive schemes are put
to the shareholders of the Company for approval before
they are adopted (save for certain circumstances as set out
in the Listing Rules).
The Directors’ Remuneration Report, which outlines the
Remuneration Committee’s work and details of Directors’
remuneration, is on pages 86 to 102. The Remuneration
Committee’s terms of reference are available on the
Company’s website, corporate.888.com.
GAMING COMPLIANCE COMMITTEE
In accordance with Nevada Gaming Control Board
requirements, the Board has appointed a Gaming
Compliance Committee. Its current members are Michael
Alonso (an external consultant to the Company),
Ron McMillan (until April 2019), Mark Summerfield (from
December 2019) and Zvika Zivlin.
The Gaming Compliance Committee is entrusted with making
sure that the Group’s licensed gaming activity is carried out
with honesty and integrity, in accordance with high moral,
legal and ethical standards, and free from criminal and
corruptive elements. As such, the committee is responsible
and has the power to identify and evaluate situations arising
in the course of the Company’s and its Affiliates’ business that
may adversely affect the objectives of gaming control.
The Committee is not intended to displace the Board or the
Company’s executive officers with decision-making authority
but is intended to serve as an advisory body to better ensure
achievement of the Company’s goals of avoiding unsuitable
situations and in entering into relationships exclusively with
suitable persons.
The Committee’s work is being done independently and
impartially. To this end, its members are appointed by and
report directly to the Board of Directors.
WHISTLE-BLOWING POLICY
The Company’s whistle-blowing policy sets out the overall
responsibility of the Board for implementation of the policy, but
notes that the Board has delegated day-to-day responsibility
for overseeing and implementing it to the designated whistle-
blowing officer who is also Head of Regulatory Affairs and
Group Compliance Officer. The policy provides that where
an employee is not comfortable making a disclosure to
his/her respective direct line manager, disclosure can be
made to the designated whistle-blowing officer whose details
are provided. If the subject of the disclosure in any way
involves the designated whistle-blowing officer, the disclosure
may be made directly to the Chair of the Audit Committee or
to another member of the Group’s senior management. Whilst
employees are permitted to make disclosures anonymously,
disclosing employees are encouraged to reveal their identity
to the designated whistle-blowing officer in order to allow a
full and proper investigation to take place; measures can be
taken to preserve the confidentiality of the disclosure where
appropriate. The Board commits to investigating all disclosures
fully, fairly, quickly and, where circumstances permit,
confidentially. Undertakings are made to employees who raise
genuinely held concerns in good faith under the procedure
that they will not be dismissed or subjected to any detriment
as a result of his/her action. Employees of the Group are
regularly sent reminders regarding the whistle-blowing policy
as part of general refreshers of various Group policies.
No whistle-blowing incidents were internally reported by the
Company’s employees during 2019 and up to the date of this
annual report.
82
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
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 Board also keeps up to date
with the views of major shareholders through meetings
and discussions with shareholder representatives throughout
the year.
The outcome of this dialogue and these meetings is reported
to the Board. The programme includes formal presentations
of full year and interim results, analysts’ conference calls and
periodic roadshows and discussion of the Company’s strategy
and governance. Details of engagement with shareholders
during 2019 are set out on page 102.
The Non-Executive Directors are available to talk to
shareholders if they have any issues or concerns or if there
are any matters where contact with the Chairman, Chief
Executive Officer and Chief Financial Officer is inappropriate
or where such contact has failed to resolve the issue.
All shareholders are welcome to attend the 2020 Annual
General Meeting (scheduled to be held on 20 May 2020)
and private investors are encouraged to take advantage
of the opportunity given to ask questions. All Board members
(including the Chairs of the Audit, Remuneration and
Nominations Committees) will attend the meeting and
be available to answer questions.
COMPLIANCE WITH STATUTORY PROVISIONS
As the Company is registered in Gibraltar, it is subject to
compliance with Gibraltar statutory requirements. The main
corporate legislation relevant to the Company in Gibraltar
is the Gibraltar Companies Act 2014. The Company is in full
compliance with the Gibraltar Companies Act.
GOING CONCERN AND VIABILITY STATEMENTS
The going concern and viability statements required to be
included in the annual report pursuant to the UK Corporate
Governance Code are on page 48, and are incorporated in
this Directors’ Report by reference.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties faced by the Group are
disclosed in the Risk Management Strategy report on page 32.
DIVIDEND POLICY
The Company’s policy, as stated in its IPO Prospectus, is to
distribute 50% of its accounting profit each year.
CORPORATE SOCIAL RESPONSIBILITY STATEMENT
The CEO 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
Responsibility section on page 50.
OTHER DISCLOSURES
The following matters can be found in this report on the following pages:
Applicable sub-paragraph within LR 9.8.4
(1) Interest capitalised by the Group
(2) Publication of unaudited financial information
(3) Details of long-term incentive schemes only involving a Director
(4) Waiver of emoluments by a Director
(5) Waiver of future emoluments by a Director
(6) Non pro-rata allotments for cash (issuer)
(7) Non pro-rata allotments for cash by major subsidiaries
(8) Parent participation in a placing by a listed subsidiary
(9) Contracts of significance
(10) Provision of services by a controlling shareholder
(11) Shareholder waivers of dividends
(12) Shareholder waivers of future dividends
(13) Agreements with controlling shareholders
On behalf of the Board:
BRIAN MATTINGLEY
Non-Executive Chairman
15 April 2020
Disclosure
provided
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
83
Corporate.888.com Statement by the Chairman of the Remuneration Committee
DIRECTORS’ INTERESTS
& THEIR REMUNERATION
PAY OUTCOMES FOR 2019
The Committee noted the Group’s
revenue growth during 2019, driven by
the continued expansion of 888casino
across a number of regulated markets,
strong revenue growth in 888sport,
the outstanding success of the Orbit
casino platform across multiple
regulated markets, expansion of the
Group in attractive regulated markets,
the success of the Group’s focus
on developing a more recreational
customer base underpinning growth
in the UK market, and strong
performances in Italy and Romania,
in addition to the launch of the
Group’s “Safer. Better. Together.” safer
gambling strategy in 2020, all being
achieved against the backdrop of an
increasingly challenging regulated
market and volatile and uncertain
economic and market outlook.
The annual bonus was focused
on the achievement of stretching
adjusted EBITDA targets set relative
to budget with 50% of the maximum
bonus opportunity payable for
achievement of a target level of
performance and 100% of bonus
payable for achieving 110% of target.
No bonus is payable for achieving less
than target. Like-for-Like Adjusted
EBITDA1 in 2019 was $98.0m, resulting
in bonuses to the Directors of 74.6%
of maximum.
As mentioned in the 2018 Remuneration
Report, for the first time, the target range
for 2019 is lower than the prior year
actual EBITDA, reflecting the extremely
challenging regulatory environment in
which 888 operates and the outlook
when targets were set. The Committee
considered at the time the targets
were set that they were as stretching
as those set for the previous year given
the outlook and regulatory environment.
In the circumstances, the Committee
considers that preserving the level of
profitability that management has
achieved is an excellent result for 2019,
and that the annual bonus payment of
74.6% of maximum is appropriate. With
the LTIP vesting of 30.6% of maximum
(see below), the combined level of
annual bonus and LTIP vesting provides
a similar level of pay-out to last year
which is considered by the Committee to
be appropriate in all the circumstances.
For full details of Executive Directors’
bonuses and the associated
performance delivered see page 95.
The LTIP awards granted in 2017 were
based on EPS growth targets for 50% of
the award and for the other 50% based
on relative TSR measured over three
financial years to 31 December 2019.
Adjusted EPS growth over this period
was 12.2% p.a. compounded, against a
target range of 5% p.a. compounded to
20% p.a. compounded. The Company’s
TSR was -11%, which was below the
median TSR performance of the peer
group, therefore the TSR part of the
award will not vest. Therefore, 30.6% of
the 2017 award will vest in 2020.
Taking account of the difficult
and highly regulated market that
the Company is operating in, the
Committee was comfortable that the
Executive Directors delivered a robust
performance and that the annual bonus
payment of 74.6% of maximum and LTIP
vesting of 30.6% of maximum provided
a robust link between performance and
reward and that no discretion needed
to be exercised.
BOARD CHANGES
As announced in January this year,
Aviad Kobrine will be standing down
as CFO once a suitable successor has
been appointed. His remuneration
arrangements on leaving are in line with
our approved policy. Mr Kobrine has a
12-month notice period, during which he
is entitled to receive his current salary,
pension and benefits. Exceptionally, Mr
Kobrine has a contractual entitlement
for an annual bonus opportunity during
his notice period which the Board
anticipates he will work in full and
as a result he remains critical to the
execution of our strategy during this
time. No LTIP award will be granted to
Mr Kobrine during his notice period.
1 Like-for-like adjustments are made to Adjusted
EBITDA take into account the Group’s withdrawal
from any markets during the year (to provide an
assessment of the underlying performance of the
core business), to exclude changes to gaming taxes
arising in the year that were not included at the start
of the year, for tax base changes and for constant
currency.
ANNUAL
STATEMENT
DEAR SHAREHOLDER,
I am pleased to present our Directors’
Remuneration Report to shareholders.
As a company incorporated in
Gibraltar, 888 Holdings plc is not
bound by UK law or regulation in the
area of Directors’ remuneration to
the same extent that it applies to UK
incorporated companies. However, by
virtue of 888’s Premium Listing on the
London Stock Exchange and reflecting
the Committee’s approach to good
governance, we have adopted in
full the disclosure and shareholder
voting requirements of a UK
incorporated company.
At the 2019 Annual General Meeting
we sought shareholder approval for
a new Directors’ Remuneration Policy
and were pleased to receive strong
shareholder support with 99% votes in
favour. At this years’ AGM, the Annual
Statement and the Annual Report on
Remuneration, which sets out how the
policy was applied in 2019 and will be
applied in 2020, will be subject to an
advisory shareholder vote.
84
888 Holdings plc Annual Report & Accounts 2019
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
The Committee has spent time
considering the introduction of a
new long-term incentive structure for
our CEO and we have consulted with
investors about this. Given the current
market environment, we have concluded
now is not the right time to introduce
an alternative structure, although the
Committee will consider this matter
again later in 2020.
The Committee is committed to
maintaining an open and constructive
dialogue with our shareholders on
remuneration matters. I welcome any
feedback you may have and look forward
to your support at our 2020 AGM.
ZVIKA ZIVLIN
Chair of the Remuneration Committee
15 April 2020
With respect to his unvested deferred
bonus shares and unvested LTIPs, Mr
Kobrine will be treated as a good leaver.
As such, his awards will vest at the usual
time, subject to the satisfaction of the
relevant performance conditions at that
time and reduced pro-rata to reflect the
proportion of the vesting period served.
Further details on his remuneration
arrangements are set out in this report.
Holding periods for the 2019 LTIP award
and annual bonus shares will continue
to apply post-employment.
As announced on 24 January 2019,
Itai Frieberger resigned as CEO but
remained on the Board as a director
during his 12-month notice period to
ensure a smooth transition for Itai
Pazner into his role as new CEO and
to retain responsibility for key strategic
priorities. On 24 January 2020, Mr
Frieberger stepped down from the
Board. Mr Frieberger’s remuneration
which is in line with the shareholder
approved policy as disclosed in last
year’s remuneration report is set out
in detail in this report.
APPLICATION OF POLICY FOR 2020
The CEO will receive a salary increase
of 4%, in line with the average salary
increase awarded to the wider Israeli
workforce. Our CFO will not receive a
salary increase for 2020.
The annual bonus opportunity is 150%
of salary for both the CEO and CFO.
The annual bonus will continue to be
determined by Like-for-Like Adjusted
EBITDA for 70% of the bonus with targets
based around budget. The remaining
30% will be based on the achievement of
strategic objectives set by the Committee.
This is the first time the Committee has
based part of the annual bonus on
strategic measures which is considered
a critical part of the evolution of the
remuneration strategy as the Company
continues to navigate a volatile and
increasingly regulated market.
The strategic objectives ensure that the
Executive Directors are focused on, and
rewarded for, driving and developing
specific strategic priorities that are
critical to ensuring future longer-term
sustainable growth. Further detail about
the areas of focus for the strategic
objectives is included in the Annual
Report on Remuneration.
The LTIP award level for 2020 will remain
at 200% of salary for the CEO. When
a new CFO is appointed, the individual
will be entitled to receive an LTIP award
within the terms of our shareholder
approved remuneration policy. No LTIP
award will be granted to our current
CFO Aviad Kobrine.
The Committee has considered carefully
the very recent impact of external
factors on our share price and has
determined to maintain normal award
levels noting it has the discretion to
ensure that the final vesting outcome is
appropriate in all the circumstances.
The Committee has reviewed the
performance conditions for the 2020
LTIP awards, in light of the exceptional
approach taken in 2019 when the
Committee based vesting of the entire
award on relative TSR targets. For 2020,
the Committee has determined that
the vesting of LTIP awards will return
to the pre-2019 approach with 50% of
an award based on adjusted earnings
per share growth targets and 50% on
relative TSR with a small adjustment to
the TSR peer group.
The target range set for the EPS
element of the 2020 LTIP award is 3%
to 9% per annum compounded. Last
year, the entire LTIP award was based
on relative TSR, because the Committee
was unable to set adjusted EPS targets
given the volatile and uncertain
economic, business and regulatory
outlook. The outlook remains difficult,
but the Committee was keen to return
to a mix of EPS and TSR performance
targets. In the circumstances, the
Committee is comfortable that the
targets set for 2020 are, in all the
circumstances, stretching.
Corporate.888.com
85
Directors’ Remuneration Report
REVIEW OF THE POLICY
REMUNERATION POLICY TABLE
As a company incorporated in Gibraltar, 888 Holdings plc is not bound by UK law or regulation in the area of Directors’
remuneration to the same extent that it applies to UK incorporated companies. However, by virtue of 888’s Premium Listing
on the London Stock Exchange and reflecting the Committee’s approach to good governance, we have adopted in full the
disclosure and shareholder voting requirements of a UK incorporated company.
The table below sets out the remuneration policy which was approved by shareholders at the 2019 Annual General Meeting
held on 21 May 2019.
BASE SALARY
Purpose and
Link to Strategy
To recruit, motivate and retain high-calibre Executive Directors by offering salaries
at market competitive levels.
Reflects individual experience and role.
Operation
Reviewed annually with any changes normally effective from 1 January. Positioning
and annual increases are influenced by:
• our sector, where the market for executive talent is intense;
• the experience and performance of the individual;
• changes in responsibility or position;
• changes in broader workforce salary; and
• the performance of 888 as a whole.
Benchmarking is carried out on a total remuneration basis and takes into account pay
levels for comparable roles at a range of organisations of similar size and sector –
including pay practices in other UK listed companies and in the international gaming
industry.
Any increase to Directors’ salaries will generally be no higher than the average increase
for other employees. However, a higher increase may be proposed in the event of a role
change or promotion, or in other exceptional circumstances.
Market competitive structure to support recruitment and retention.
Medical cover aims to ensure minimal business interruption as a result of illness.
Executive Directors may receive various benefits in kind as part of their employment
terms. These may include an accommodation allowance (where 888 has required
the executive to relocate), use of a company car (or car allowance), health insurance
(or a contribution towards a health insurance scheme), “study fund” (a common savings
benefit in Israel), disability and life assurance, relocation expenses, Directors’ indemnities
and Directors’ and officers’ insurances to the extent permitted by law and other ad hoc
benefits at the discretion of the Committee.
Opportunity
BENEFITS
Purpose and
Link to Strategy
Operation
Opportunity
The value of benefits is based on the cost to 888 and there is no pre-determined
maximum limit.
The range and value of the benefits offered is reviewed periodically.
PENSION
Purpose and
Link to Strategy
Operation
Opportunity
86
Contribution towards the funding of post-retirement life.
888 offers a defined contribution pension scheme (via outsourced pension providers)
or cash in lieu of pension.
Up to 15% of base salary. For new appointments, the Committee will align pension to the
workforce average taking into account market practice and legal requirements in the
country of the executive and the wider workforce pension.
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
REMUNERATION POLICY TABLE CONTINUED
ANNUAL BONUS
Purpose and
Link to Strategy
Operation
Rewards the achievement of annual financial and non-financial strategic targets.
Bonus targets (percentage of salary) are based on objective and disclosable
calculations where possible.
The precise weightings between metrics may differ each year, although there will be
always be a greater focus on financial as opposed to non-financial performance.
Any bonus payment in excess of 100% of salary is deferred into shares which vest in
equal tranches after one, two and three years. The deferral period continues on cessation
of employment.
The Committee may adjust the formula-driven outturn of the annual bonus calculation
in the event that the Committee considers that it does not reflect underlying performance,
overall shareholder experience or employee reward outcome. Any such use of discretion
would be detailed in the Chairman’s annual statement and Annual Report on Remuneration.
A dividend equivalent provision operates enabling dividends to be accrued (in shares)
on unvested deferred bonus shares or options and only in truly exceptional
circumstances cash.
The bonus is subject to recovery and withholding provisions which may be applied if the
financial statements of 888 were materially misstated, an error occurred in assessing the
performance conditions of a bonus, if the Executive ceased to be a Director or employee
due to gross misconduct, or in an event of corporate failure, failure of risk management
or reputational damage.
Opportunity
The maximum opportunity is 150% of base salary.
The level of pay-out for the achievement of target performance, as set by the Committee
is 50% of the maximum amount. The threshold level of payment may be up to 25% of the
maximum.
Performance Metrics
Financial Performance
The financial component is based on 888’s key financial measures of performance.
A sliding scale of targets applies for financial performance targets which are measured
annually.
The degree of stretch in targets may vary each year depending on the business aims
and the broader economic or industry environment at the start of the relevant year.
Non-financial Performance
Non-financial performance conditions will be based on KPIs in line with the business plan
which the Committee considers will enhance future financial performance, the long-term
sustainability of the business and shareholder value.
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Corporate.888.com Directors’ Remuneration Report continued
REMUNERATION POLICY TABLE CONTINUED
LONG TERM INCENTIVES (LTIP)
Purpose and
Link to Strategy
Operation
Rewards Executive Directors for achieving superior returns and sustainable growth
for shareholders over a longer-term timeframe.
Enables Executive Directors to build a meaningful shareholding over time and align
goals with shareholders.
LTIP awards are made annually in the form of nil cost options or conditional awards with
vesting dependent on the achievement of performance conditions over at least three
financial years, commencing with the year of grant.
A post-vesting holding period applies to awards granted in or after 2019, which requires
vested shares (or shares acquired on the exercise of vested options) to be retained for
two years post-vesting (except for any earlier sale of shares to meet any tax liabilities
triggered on vesting). This holding period continues on cessation of employment.
The Committee may adjust the formula-driven outturn of an LTIP award in the event
that the Committee considers that it does not reflect underlying performance, overall
shareholder experience or employee reward outcome. Any such use of discretion would
be detailed in the Chairman’s annual statement and Annual Report on Remuneration.
Awards are subject to recovery and withholding provisions which may be applied if there
is a material misstatement in 888’s financial statements, an error in the calculation of any
performance conditions, if the Executive Director ceases to be a Director or employee
due to gross misconduct or in an event of a failure of risk management, corporate failure
or reputational damage.
A dividend equivalent provision operates enabling dividends to be accrued (in shares)
on LTIP awards to the extent they vest and only in truly exceptional circumstances cash.
Opportunity
Award levels are determined primarily by seniority. A maximum individual grant limit of
200% of salary applies, based on the face value of shares at the date of grant.
Performance Metrics
Awards vest at the end of a three-year performance period based on performance
measures reflecting the outputs of the long-term strategy of the business at the time of
grant.
Awards will vest based on a range of challenging financial, total shareholder return (TSR),
or strategic measures. Strategic measures, if used, will represent a minority of the award.
The Committee will review the weightings between measures and the target ranges
prior to each LTIP grant to ensure that the overall balance and level of stretch remains
appropriate.
A sliding scale of targets applies for financial or TSR metrics with no more than 25%
of the award vesting at threshold performance.
SHARE OWNERSHIP GUIDELINES
Executive Directors are expected to build and maintain an interest equivalent in value to no less than two times salary.
Beneficially owned shares, fully vested unexercised nil-cost options (valued on a net of tax basis) and unvested awards
subject to a service requirement for vesting only (valued on a net of tax basis) will be included when determining the extent
to which the guideline holding is achieved. Until such time as the guideline threshold is achieved. Executive Directors are
required to retain 50% of the net of tax value of awards that vest under the LTIP or deferred annual bonus.
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888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
REMUNERATION POLICY TABLE CONTINUED
CHAIRMAN AND NON-EXECUTIVE DIRECTORS’ (NEDs) FEES
Purpose and
Link to Strategy
To recruit, motivate and retain a Chairman and Non-Executive Directors of a high calibre
by offering a market competitive fee level and which takes account of the specific
circumstances of 888.
Operation
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 with
reference to prevailing fee rates amongst other gaming companies. Fees paid to the
Non-Executive Directors are set by reference to an assessment of the time commitment
and responsibility associated with each role, and prevailing fee rates amongst other
gaming companies. Levels take account of additional demands placed upon individual
Non-Executive Directors by virtue of their holding particular offices, such as Committee
Chair and/or Senior Independent Director, and travel time to Board meetings (which are
held outside the UK). Additional fees may be paid as appropriate to reflect increased
time commitments of the role.
The Chairman and the Non-Executive Directors are not eligible to participate in any
bonus plan, pension plan, share plan, or long-term incentive plan of 888. The Chairman
and Non-Executive Directors are entitled to be reimbursed for any reasonable travel
and accommodation and other expenses incurred in the performance of their duties
(including any tax incurred thereon) including any expense deemed a taxable benefit
in kind and the tax payable thereon.
Opportunity
No maximum.
DISCRETIONS RETAINED BY THE COMMITTEE IN OPERATING ITS INCENTIVE PLANS
The Committee will operate the annual bonus plan, deferred annual bonus plan and LTIP according to their respective rules.
The Committee retains discretion in a number of regards to the operation and administration of these plans. These include,
but are not limited to, the following:
• the determination of vesting and the extent to which performance targets have been met;
• the determination of the treatment of leavers;
• determination of the extent of vesting in the event of a change of control; and
• adjustments required in certain circumstances (e.g. rights issues, corporate restructuring events and special dividends).
APPROACH TO SETTING REMUNERATION FOR A NEW RECRUIT
The remuneration package for a new Executive Director would take into account the skills and experience of the individual,
the market rate for a candidate of that experience and the importance of securing the relevant individual. Salary would be
provided at such a level as is required to attract the most appropriate candidate while paying no more than is necessary.
The annual bonus and LTIP award would be in line with the Policy. In addition, the Committee may offer additional cash
and/or share based elements to replace benefits, deferred or incentive pay forfeited by an executive leaving a previous
employer. It would ensure that these awards would be consistent with awards forfeited in terms of delivery mechanism (cash
or shares), vesting periods, expected value and performance conditions. For an internal Executive Director appointment,
any variable pay element awarded in respect of the prior role may be allowed to pay out according to its terms or adjusted
as relevant to take into account the appointment. In addition, any other ongoing remuneration obligations existing prior to
appointment may continue. The Committee may agree that 888 will meet relocation expenses as appropriate.
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Corporate.888.com Directors’ Remuneration Report continued
SERVICE CONTRACTS AND LOSS OF OFFICE PAYMENT POLICY FOR EXECUTIVE DIRECTORS
Executive Directors have service contracts with up to 12-month notice periods. In the event of termination, the Executive
Directors’ contracts provide for compensation up to a maximum of base salary plus the value of any benefits (including
pension), and in the case of the Chief Financial Officer, annual bonus for the unexpired portion of the notice period. This is
a legacy contractual obligation and will not be provided in the contracts of any new appointments. 888 seeks to apply the
principle of mitigation in the payment of compensation on the termination of the service contract of any Executive Director.
There are no special provisions in the service contracts for payments to Executive Directors on a change of control of 888.
In the event of an exit of an Executive Director, the overriding principle will be to honour contractual remuneration entitlements
and determine on an equitable basis the appropriate treatment of deferred and performance linked elements of the package,
taking account of the circumstances. Failure will not be rewarded. If an Executive Director resigns or is summarily dismissed,
salary, pension and benefits will cease on the last day of employment and there will be no further payments. There are no
other obligations to pay remuneration, or which could impact remuneration, contained in any service contract other than
the terms of the Executive Directors’ service agreements described herein. Directors’ service agreements are available for
inspection at 888’s registered office and at each annual general meeting.
REMUNERATION FOR LEAVERS
Fixed pay
Salary, pension and benefits will be paid up to the length of the agreed notice period or agreed period of gardening leave.
Variable pay
Where a Director leaves for certain specified reasons such as retirement, as a result of injury, illness or disability or otherwise
with the agreement of the Committee (sometimes referred to as “good leaver” reasons) the following will apply:
Annual bonus and annual bonus deferred shares
Subject to performance, a bonus may be payable at the discretion of the Committee pro-rata for the portion of the financial
year worked. Unvested deferred bonus shares will ordinarily vest in full at the end of the normal vesting period. The Committee
has discretion to permit in exceptional circumstances such unvested awards to vest early rather than continue on the normal
vesting timetable, taking into account the Company’s policy for bonuses from 2019, for Executive Directors to retain an interest
in shares in the Company for two years post-employment.
LTIPs
Unvested awards under the 888 Long-Term Incentive Plan 2015 would normally vest on the normal vesting date unless the
Committee determines that such awards shall instead exceptionally vest at the time of cessation, taking into account the
Company’s policy for awards granted from 2019 for Executive Directors to retain an interest in shares in the Company for two
years post-employment. Unvested awards will only vest to the extent that the performance conditions have been satisfied
(over the full or curtailed period as relevant). A pro-rata reduction in the size of awards would normally apply, based upon the
period of time after the grant date and ending on the date of cessation of employment relative to the normal vesting period.
Where a Director leaves for any other reason, all annual bonus, annual bonus deferred shares and LTIP awards will lapse
immediately on cessation.
Depending upon circumstances, the Committee may consider other payments to settle statutory entitlements, legal claims or
potential legal claims, in respect of an unfair dismissal award, outplacement support and assistance with legal fees, including
the statutory obligation in Israel to make a severance payment on cessation for any reason equal to one month’s gross salary
for every year of service.
TERMS OF APPOINTMENT FOR NON-EXECUTIVE DIRECTORS
The Non-Executive Directors serve subject to letters of appointment and are appointed subject to re-election at each annual
general meeting. The Non-Executive Directors are typically expected to serve for three years, although the Board may invite
a Non-Executive Director to serve for an additional period. Their letters of appointment are available for inspection at 888’s
registered office and at each annual general meeting.
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888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
DIRECTORS’ SERVICE CONTRACTS
The unexpired term of the directors’ service contracts or appointment letters are as follows:
NAME
Brian Mattingley
POSITION
Chairman
UNEXPIRED TERM OF SERVICE CONTRACT
Terminable at 6 months’ prior written notice. No remuneration
is payable in respect of any unexpired portion of the term
of the Chairman’s appointment, including if the Chairman
is asked to step down from the Board.
Itai Pazner
Chief Executive Officer
Indefinite subject to termination provisions set out in his
Agreement. Loss of office provisions are detailed above.
Aviad Kobrine
Chief Financial Officer
12 month notice period expires on 24 January 2021.
Loss of office provisions are detailed above.
Zvika Zivlin
Non-Executive Director
Anne de Kerckhove Non-Executive Director
Mark Summerfield
Non-Executive Director
Until 8 May 2020. No remuneration is payable in respect
of any unexpired portion of the term of the Director’s
appointment, including if the Director is asked to step down
from the Board.
Until 27 November 2020. No remuneration is payable in
respect of any unexpired portion of the term of the Director’s
appointment, including if the Director is asked to step down
from the Board.
Until 5 September 2022. No remuneration is payable in
respect of any unexpired portion of the term of the Director’s
appointment, including if the Director is asked to step down
from the Board.
All service contracts and letters of appointment are available for inspection at the Company’s registered office and at the
annual general meeting.
HOW THE VIEWS OF SHAREHOLDERS ARE TAKEN INTO ACCOUNT WHEN DETERMINING DIRECTORS’ PAY
888 engages with significant investors regarding remuneration issues and in respect of any proposed changes to the
Directors’ Remuneration Policy and significant changes to operation of that policy and intends to continue doing so.
Views of shareholders and their representative bodies expressed at the annual general meeting and feedback received
at other times will be considered by the Committee.
HOW THE VIEWS OF EMPLOYEES ARE TAKEN INTO ACCOUNT WHEN DETERMINING DIRECTORS’ PAY
888 did not consult with employees regarding the Directors’ Remuneration Policy that was brought to shareholders for approval
in 2019. The Annual Report on Remuneration sets out engagement activities with stakeholders during the year of report.
In determining the remuneration policy for Executive Directors, the Committee takes account of the policy for employees across
the workforce. In particular, when setting base salaries for executives, the Committee takes into account the salary increases
being offered to the workforce as a whole. The overall structure of the remuneration policy for Executive Directors is broadly
consistent with that for other senior employees, but reflects the additional risks and responsibilities borne by the Executive
Directors. Executive remuneration and remuneration of senior employees is weighted towards performance-related pay. 888’s
Senior Vice Presidents all participate in the same annual bonus and long-term incentive arrangements as the Executive
Directors (at varying levels of quantum) and 888’s Business Leadership Forum also participate in a long-term equity plan.
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Corporate.888.com Directors’ Remuneration Report continued
ILLUSTRATION OF APPLICATION OF CURRENT REMUNERATION POLICY
The following charts illustrate the operation of the Directors’ Remuneration Policy for the current Executive Directors (CEO and
CFO), under three different performance scenarios: ‘Fixed pay’, ‘Target’, and ‘Maximum’.
The Maximum scenario includes an additional element to represent 50% share price growth from the date of grant to vesting.
CEO – Itai Pazner
Maximum
27%
31%
42%
$4,392k
Maximum
46%
54%
Target
42%
25% 33% $2,305k
Total: $3,633k
Target
63%
37%
$1,233k
Total: $1,691k
Minimum
100% $978k
Minimum
100%
$776k
$’000 $-
$1,000
$2,000 $3,000 $4,000 $5,000
$’000 $-
$500
$1,000 $1,500 $2,000 $2,500
Fixed
Short-term incentive
Fixed
Short-term incentive
Long-term incentive
LTIP value with 50% share price growth
CFO – Aviad Kobrine
Assumptions:
Maximum
27%
31%
42%
$4,392k
Maximum
46%
54%
• Fixed: Shows fixed remuneration only, base salary
as at 1 January, taxable benefits (as disclosed for the
previous financial year) and pension.
Target
42%
25% 33% $2,305k
Total: $3,633k
Target
63%
37%
$1,233k
Total: $1,691k
• Target: Shows fixed remuneration plus 50% of the maximum
Minimum
100% $978k
Minimum
100%
$776k
$’000 $-
$1,000
$2,000 $3,000 $4,000 $5,000
$’000 $-
$500
$1,000 $1,500 $2,000 $2,500
Fixed
Short-term incentive
Fixed
Short-term incentive
Long-term incentive
LTIP value with 50% share price growth
annual bonus opportunity and 50% of the LTIP award.
• Maximum: Shows fixed remuneration and maximum annual
bonus (150% of salary for the CEO and CFO) and LTIP
(200% of salary for the CEO and no LTIP for the CFO).
The Maximum scenario includes an additional element
to represent 50% share price growth from the date
of grant of the LTIP to vesting (where applicable).
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888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
ANNUAL REPORT ON REMUNERATION
This Annual Report on Remuneration together with the Chairman’s Annual Statement, as detailed on page 84 will be subject
to an advisory vote at the 2020 AGM. The information on page 95 with respect to Directors’ Emoluments and onwards through
page 102 has been audited.
OPERATION OF REMUNERATION POLICY FOR 2020
Set out below is the proposed application of the Remuneration Policy for 2020.
BASE SALARIES
Salaries for 2020 are set out below. The CEO’s salary was increased by 4% in line with that of the workforce in Israel. There is
no increase in the salary of the CFO:
Director
CEO
CFO
2020
2019
Increase
ILS 2,620,800 ILS 2,520,000
£460,000
£460,000
4%
0%
ANNUAL BONUS
The CEO and CFO will each have a maximum bonus opportunity of 150% of salary. Our CFO has exceptionally a contractual
entitlement to an annual bonus opportunity during his notice period and will remain critical to the execution of our strategy
throughout his notice period.
The annual bonus will be determined by adjusted EBITDA for 70% of the bonus. In line with last year, targets will be set by
reference to a range around budget. The remaining 30% will be based on the achievement of strategic objectives set by the
Committee. This is the first time the Committee has based part of the annual bonus on strategic measures, which is considered
a critical part of the evolution of the remuneration strategy as the Company continues to navigate a volatile and increasingly
regulated market. The strategic objectives ensure that the Executive Directors are focused on, and rewarded for, driving and
developing specific strategic parts of the business that are critical to ensuring future longer-term sustainable growth.
These objectives are commercially sensitive but in broad terms are focussed on:
• Growing existing business across and within certain specified markets;
• Developing product growth opportunities;
• Progressing with our M&A strategy to identify, develop and grow new business opportunities;
• Continuing delivery of our responsible gaming proposition, relationships with our regulators and compliance requirements;
• Operational efficiencies.
The Committee has the discretion under the Directors’ Remuneration Policy to review and scale back the formulaic annual
bonus outcome (based on the strategic objectives and the adjusted EBITDA targets) if it does not consider that it is
appropriate in all the circumstances, including taking into account the underlying performance of the Company.
The Committee has determined that the adjusted EBITDA target range and strategic objectives are commercially sensitive,
and therefore cannot disclose these prospectively in this report. However, full disclosure of targets and performance against
them will be disclosed retrospectively in our 2020 Annual Report on Remuneration provided they are no longer commercially
sensitive at that time.
Any bonus above 100% of salary will be deferred into shares in 888 which will vest in equal annual tranches over three years.
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Corporate.888.com Directors’ Remuneration Report continued
LONG-TERM INCENTIVE PLAN
Award levels
The CEO will be granted an award under the 888 Long-Term Incentive Plan 2015 of 200% of salary. When a new CFO is
appointed, the individual will be entitled to receive an LTIP award within the terms of our shareholder approved remuneration
policy. No LTIP award will be granted to our current CFO Aviad Kobrine.
The Committee has considered carefully the very recent impact of external factors on our share price and has determined
to maintain normal award levels, noting it has the discretion to ensure that the final vesting outcome is appropriate in all the
circumstances.
Performance conditions
The Committee has reviewed the performance conditions for the 2020 LTIP awards, in light of the exceptional approach taken
in 2019 when the Committee based vesting of the entire award on relative TSR targets.
For 2020, the Committee has determined that the vesting of LTIP awards will return to the pre-2019 approach with 50% of an
award based on adjusted earnings per share growth targets and 50% on relative TSR.
Target ranges
The targets for the 2020 awards are set out below. Straight line vesting will occur between target points.
The target range set for the adjusted EPS element of the 2020 LTIP award is 3% to 9% per annum compounded. Last year, the
entire LTIP award was based on relative TSR because the Committee was unable to set adjusted EPS targets given the volatile
and uncertain economic, business and regulatory outlook. The outlook remains difficult but the Committee was keen to return
to a mix of adjusted EPS and TSR performance targets. In the circumstances the Committee is comfortable that the targets set
for 2020 are in all the circumstances stretching.
Measure
Relative TSR*
Adjusted EPS
Weighting
(% of max award)
Threshold
(25% of max vesting)
Maximum
(100% of max vesting)
50%
50%
Median
3% CAGR
Median + 10% p.a.
compounded
9% CAGR
* The TSR peer group has been refined for 2020 to remove International Game Technology and OPAP and to introduce Rank Group. This provides a peer group comprising
Betsson AB, Flutter Entertainments, Gamesys (which was acquired by JPJ), GVC Holdings, Kindred Group, Playtech, William Hill, Sportech and Rank Group.
The 2020 awards will be subject to a two-year post vesting holding period.
PENSION AND BENEFITS
888 offers a defined contribution pension scheme (via outsourced pension providers) or cash payment in lieu of pension. In
accordance with standard practice in Israel, Itai Pazner receives personal pension scheme contributions in an amount of
14.87% of base salary, including a contribution for loss of working capacity. Aviad Kobrine receives an annual cash payment in
lieu of pension in the amount of 15% of base salary. The pension contributions received by the Executive Directors are aligned
to those available to the majority of the workforce in Israel where the CEO is based (and other employees in the UK where the
CFO is based).
Benefits will continue as for 2019.
Chairman and Non-Executive Directors fees
The Non-Executive Director fees will remain unchanged from 2019:
• Chairman’s fee: £320,000;
• Non-Executive Director fee: £90,000;
• Senior Independent Director fee: £20,000;
• Chair of a Board committee (inclusive of membership fee): £15,000; and
• Membership of Audit or Remuneration Committee: £5,000.
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888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
Remuneration paid to Executive Directors for service in 20191
The following table presents the Executive Directors’ emoluments in respect of the year ended 31 December 2019 (all amounts
are in US$‘000).
Executive Directors
Itai Pazner, CEO
(24 Jan 2019 onwards)
Aviad Kobrine, CFO
Itai Frieberger, CEO
(Stepped down 23 Jan 2019
but remained as a Director)
Salary2
$’000
Taxable
Benefits3
$’000
Annual
Bonus4
$’000
Long-Term
Incentives5
$’000
Pension6
$’000
2019
2018
2019
2018
2019
2018
681
—
588
601
919
912
99
—
71
55
154
170
766
—
683
251
1,061
387
81
—
152
532
327
913
101
—
88
90
137
136
Total
$’000
1,728
—
1,582
1,529
2,598
2,518
1. Directors’ remuneration is converted from Sterling and New Israeli Shekels into US$ at the average rate of exchange for the relevant month it was paid save for the annual
bonus which is converted into US$ at the year-end exchange rate.
2. Salaries for 2019 were ILS 2,520,000 for Itai Pazner, ILS 3,275,000 for Itai Frieberger and £460,000 for Aviad Kobrine.
3. Benefits for Aviad Kobrine include car allowance and health, disability and life insurance; and for Itai Pazner and Itai Frieberger include convalescence and health insurance
for the individual and their family, contribution to “study fund” up to the Israeli tax-free ceiling (with the excess up to 7.5% of Itai Frieberger’s salary paid in cash), car
allowance (as well as gross-up of car allowance for Itai Frieberger), and meal allowance.
4. A breakdown of the 2019 annual bonus targets and the extent of their achievement is set out overleaf. Out of the total bonus payment made to Itai Pazner of ILS 2,645,533
(total of 111.9% of salary), an amount equal to 100% of salary (ILS 2,520,000) is paid in cash, and the excess portion above 100% of salary (ILS 125,533) is to be deferred
into shares under the DSBP. Out of the total bonus payment made to Aviad Kobrine of GBP 514,740 (total of 111.9% of salary), an amount equal to 100% of salary (GBP
460,000) is paid in cash, and the excess portion above 100% of salary (GBP 54,740) is to be deferred into shares under the DSBP. Out of the total bonus payment made
to Itai Frieberger of ILS 3,664,729 (total of 111.9% of salary), an amount equal to 100% of salary (ILS 3,275,000) is paid in cash, and the excess portion above 100% of salary
(ILS 389,729) is to be deferred into shares under the DSBP.
5. Performance-based long-term incentives are disclosed in the financial year in which the performance period ends. LTIPs for the single total figure in 2019 are the value of
the 2017 LTIP awards, for which the performance period ended on 31 December 2019, and will vest in 2020. The value is based on the average share price for the last three
months of FY19 of $2.07 compared to a share price on the date of grant of $3.38 (£2.73). The value will be restated in the 2020 Annual Report on Remuneration using the
actual share price on vesting. The long-term incentive for Itai Pazner was awarded to him in 2017 prior to his appointment as CEO. The full vesting value is shown in the table
above (and not a time apportioned amount).
6. 888 offers a defined contribution pension scheme (via outsourced pension providers) or cash in lieu of pension. In accordance with standard practice in Israel, Itai Pazner is
granted personal pension scheme contributions in an amount of 14.29% of base salary (Itai Frieberger: 13.99% of base salary), in addition to 0.6% of base salary contribution
for loss of working capacity (Itai Frieberger: 0.9% of base salary). Aviad Kobrine receives a cash payment in lieu of pension in the amount of 15% of base salary.
NON-EXECUTIVE DIRECTORS’ AND CHAIRMAN’S FEES
Non-Executive Directors
Ron McMillan2
Zvika Zivlin
Anne De Kerckhove
Mark Summerfield3
Brian Mattingley (Executive Chairman)
1. “Other” for Brian Mattingley reflects reimbursement of expenses connected with his role.
2. Ron McMillan stepped down from the Board on 9 May 2019.
3. Mark Summerfield was appointed as a Non-Executive Director on 5 September 2019.
Fee
$’000
Other1
$’000
Total
$’000
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
70
160
153
134
128
120
43
—
409
407
—
—
—
—
—
—
—
—
23
24
70
160
153
134
128
120
43
—
432
431
95
Corporate.888.com
Directors’ Remuneration Report continued
ANNUAL BONUS PAYMENTS IN RESPECT OF 2019 PERFORMANCE
The annual bonus opportunity was 150% of base salary and the bonus was determined by reference to challenging adjusted
EBITDA targets based around budget. Annual bonus in excess of 100% of salary is deferred into shares in one-third tranches
for one, two and three years.
EBITDA PERFORMANCE
The extent to which the EBITDA performance condition in respect of 2019 performance was achieved is as follows:
Performance Measures
Like-for-like adjusted EBITDA
Itai Pazner
Aviad Kobrine
Itai Frieberger
Target
(50% pay-out)
Max
(100% pay-out)
Actual performance
% of maximum
$93.4m 110% target $102.7m
$98.0m
Bonus awarded
74.6% of maximum
$766k
$683k
$1,061k
To enable performance to be determined and tested on the basis on which the targets were originally set, the Committee has
determined a range of criteria, which have been applied consistently for several years. On this basis, EBITDA is adjusted to take
into account of:
• the Group’s withdrawal from any markets during the year, to provide an assessment of the underlying performance of the
core business;
• changes to gaming taxes arising in the year that were not included at the start of the year when the targets were set; and
• movements in foreign exchange rates from budgeted rates (like-for-like adjusted EBITDA growth is calculated on a constant
currency basis).
The Committee agreed the following adjustments to the 2019 reported adjusted EBITDA for bonus purposes.
Adjusted EBITDA
– Constant currency adjustment
– Exit certain markets due to adverse regulatory changes
– Impact of M&A transactions on operations
Above plan marketing investment with long-term benefit
(outside of 2019)
Like-for-like Adjusted EBITDA
2019 Reported
(US$ million)
Adjustments
(US$ million)
Adjusted EBITDA
(US$ million)
85.6
4.6
3.4
3.1
1.3
90.2
93.6
96.7
98.0
98.0
As mentioned in the 2018 Remuneration Report, for the first time, the target range for 2019 is lower than the prior year actual
EBITDA, reflecting the extremely challenging regulatory environment in which 888 operates and the outlook when targets were
set. The Committee considered at the time that the targets set were as stretching as those set for the previous
year given the outlook and regulatory environment. In the circumstances, the Committee considers that preserving the level
of profitability that management has achieved is an excellent result for 2019 and that the annual bonus payment of 74.6%
of maximum and LTIP vesting of 30.6% of maximum (see below) are appropriate.
In line with policy, the bonus in excess of 100% of salary will be deferred in shares over one, two and three years for all Directors.
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888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
LONG-TERM INCENTIVE AWARDS WITH PERFORMANCE PERIOD ENDING IN THE YEAR ENDED 31 DECEMBER 2019
Long-Term Incentive Plan
The 2017 LTIP awards have a performance period that ended on 31 December 2019 and the awards are due to vest in 2020.
The tables below set out the achievement against the performance conditions attached to the award, resulting in aggregate
vesting of 30.6%, and the actual number of shares vesting (with their estimated value).
Performance level
Below threshold
Threshold
Stretch or above
Actual achieved
TSR
(relative to a comparator group of five
gaming companies – Bwin.Party Digital
Entertainment, Sportech PLC, Ladbrokes PLC,
Playtech plc and Paddy Power PLC)1
Like-for-like EPS Growth2,3
Performance required
% vesting
Performance required
% vesting
Below median
Median = -5%
33% above median = 27.1%
-11%
0%
25%
100%
0%
Below 15.76%
15.76%
72.8% or above
41.4%
0%
25%
100%
61.2%
1 Relative to a comparator group of five gaming companies – GVC Holdings, Ladbrokes Coral Group plc, Playtech plc, Paddy Power Betfair plc and William Hill plc. On 28
March 2018, the acquisition of Ladbrokes plc by GVC Holdings plc was completed. As of such date, Ladbrokes plc was delisted and therefore the company was removed from
the comparator group. In addition, during 2016, Paddy Power plc acquired Betfair plc and changed its listing to Paddy Power Betfair plc. Playtech Ltd listed on 2 July 2012
and is referred to as Playtech plc.
2 15.76% aggregate EPS growth is the equivalent of 5% EPS growth compounded annually. 72.8% aggregate EPS growth is the equivalent of 20% EPS growth compounded
annually.
3 Like-for-like EPS growth is calculated as the growth in adjusted EPS between 2016 (the base year) and 2019 (the final year of the performance period). To ensure that the
comparison is made on a like-for-like basis, adjustments have been made to exclude the impact of the Group’s withdrawal from certain markets and new gaming duties
and taxes introduced during the period.
Details of the level of vesting for each Director in respect of awards granted under the 2017 LTIP, based on the above, are
shown in the table below:
Executive
Itai Pazner
Aviad Kobrine
Itai Frieberger
Number of
awards
at grant
Number of
awards
to lapse
Number of
awards
to vest
128,347
240,110
89,073
166,636
39,274
73,474
515,334
357,642
157,692
Dividend
accrual
on vested
awards
value2
US$
0
0
0
0
Value of
awards
excluding
Dividend
Accrual1
US$
81,464
152,402
327,091
1 The value of the vested shares is based on the share price of $2.074 (based on the exchange rate of 1.29) being the average share price for the last three months of 2019.
2 Dividends accrue on awards at the date of a dividend payment to the date of vesting and upon exercise the value of the accrued dividends is paid to the employee on the
number of vested awards.
97
Corporate.888.com
Directors’ Remuneration Report continued
SCHEME INTERESTS AWARDED DURING THE YEAR
The table below sets out the grants under the 888 Holdings plc Long-Term Incentive Plan in 2019. As the 2018 bonus achieved
was less than 100% of salary, no Deferred Share Bonus Plan awards were made in 2019.
Itai Pazner was appointed as CEO in January 2019, just prior to the 2019 LTIP awards being granted, and in the circumstances
the Committee did not consider it appropriate to scale back the level of LTIP awards to take into account the fall in share price
from the time the 2018 awards were granted. The Committee has the discretion to adjust formulaic remuneration outcomes if it
considers this appropriate at the time of vesting, for example to take account of windfall gains.
888 Holdings Plc
Scheme interests awarded during
the financial year1
$’000
Executive
Itai Pazner
Aviad Kobrine
Award Type
Grant Date
Number of
awards
granted
Face value
of awards
granted
Face value
of awards
as % salary
% vesting
at threshold
performance
LTIP
LTIP
12-Mar-19
12-Mar-19
638,3322
413,9172
$1,390,155
$901,426
200%
150%
25%
25%
31/12/2019
1 Face value was calculated using share price on the date of grant, which was £1.67 (12 March 2019). The awards to Itai Pazner were awards of Ordinary Shares, whilst the
awards to Aviad Kobrine were Nil Cost Options.
2 These awards are due to vest subject to performance conditions being met at the end of the performance period ending 31 December 2021. The award is subject to a TSR
performance condition versus a peer group comprised of Betsson AB, Flutter Entertainments plc (formerly Paddy Power Betfair plc), GVC Holdings plc, International Game
Technology plc, JPJ Group plc, Kindred Group, OPAP SA, Sportech plc, Playtech plc, and William Hill plc (25% of the TSR awards vest for median performance with full vesting
achieved for out-performance the median plus 10% p.a.).
LOSS OF OFFICE PAYMENTS AND PAYMENTS TO PAST DIRECTORS
In 2019, no loss of office payments were made to Executive Directors, and no payments were made to past Executive Directors.
On 14 January 2020, it was announced that Aviad Kobrine will step down from his role as Chief Financial Officer during 2020.
Mr Kobrine’s remuneration for his notice period and the treatment of his incentive awards, for which he will be treated as a
good leaver, is set out below.
• Salary, benefits and pension to be paid for the duration of his notice period.
• Eligible to receive an annual bonus for 2020 (and for the part of 2021) for the duration of his notice period subject to the
performance targets being met and paid at the normal time. Mr Kobrine exceptionally has a contractual entitlement to be
eligible for an annual bonus payment for the duration of his notice period whether this is worked or not. It is the Company’s
intention that Mr Kobrine will work his full notice period and therefore this will be the period for which he is eligible for an
annual bonus.
• No LTIP grant for 2020.
• Mr Kobrine’s 2017, 2018 and 2019 LTIP awards will vest at the usual time, subject to performance and will be pro-rated to
reflect the period of service as a proportion of the total vesting period.
• The 2019 LTIP award is subject to a two-year post vesting holding period which will continue post employment and annual
bonus share holding periods will also continue post employment.
All payments to Itai Frieberger in 2019 are disclosed in the table of remuneration paid to executive directors on page 95.
98
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
DIRECTORS’ SHAREHOLDINGS AND SHARE INTERESTS
The Executive Directors are required to build and maintain a shareholding in 888 worth two times their annual salary as set out
in the Remuneration Policy.
Details of the Directors’ interests in shares as at 31 December 2019 are shown in the table below. There were no changes in the
Directors’ interests in shares between 31 December 2019 and the date of this Report.
Number of Ordinary Shares
At 31 December 2019
Unvested
shares with
performance
conditions
Unvested
options1
with
performance
conditions
Unvested
options1
without
performance
conditions
909,127
—
1,001,291
—
—
—
—
—
898,415
—
—
—
—
—
—
79,665
122,282
—
—
—
—
Vested
unexercised
options1
—
3,570,910
—
—
—
—
—
Total
1,689,649
4,548,990
4,821,530
142,857
30,446
—
—
%
achievement
against
shareholding
guideline2
Total for
shareholding
guideline
780,522
3,650,575*
3,820,239
—
—
—
—
234%
694%
882%
N/A
N/A
N/A
N/A
Legally
owned
780,522
—
3,697,957
142,857
30,446
—
—
Director
Itai Pazner
Aviad Kobrine
Itai Frieberger
Brian Mattingley
Mark Summerfield
Zvika Zivlin
Anne De Kerckhove
* Aviad Kobrine’s shareholdings calculated on an as-exercised basis after tax payment of 55%.
1 Nil Cost Options.
2 The Executive Directors are required to build and maintain a shareholding equivalent to 200% of base salary. Shares counting towards this guideline include legally owned
shares and fully vested but unexercised nil-cost options and deferred bonus share awards both without performance conditions (valued on a net of tax basis).
3 Share price at 31.12.2019 was £1.65
4 FX ILS/GBP = 4.58
5 Includes Closely Associated Persons in accordance with the EU Market Abuse Regulation.
No Director was materially interested during the year in any contract which was significant in relation to the business of 888.
PERFORMANCE GRAPH
The following graph shows 888’s performance, measured by TSR, compared with the performance of the FTSE 250 Index.
The Directors consider that the FTSE 250 Index is the most appropriate comparator benchmark as it has been a member
of this index for a significant period of the time covered by the chart.
Value of £100 Sterling in 888 1/1/2010 – 31/12/2019 vs FTSE 250
400
350
300
250
200
150
100
50
0
31 Dec
2009
31 Dec
2010
31 Dec
2011
31 Dec
2012
31 Dec
2013
31 Dec
2014
31 Dec
2015
31 Dec
2016
31 Dec
2017
31 Dec
2018
31 Dec
2019
888 Holdings
FTSE 250
99
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Directors’ Remuneration Report continued
TOTAL REMUNERATION HISTORY FOR CEO
The table below sets out the total single figure remuneration for the CEOs over the last ten years with the annual bonus paid
as a percentage of the maximum and the percentage of long-term share awards where the performance period determining
vesting ended in the year.
2010
20111
20122
2013
2014
20153,4
20165
2017
2018
2019
Itai
Frieberger
20196
Itai
Pazner
Total remuneration
($000s)
Annual bonus (%)
LTIP vesting (%)
958
100%
0%
3,783
100%
100%
1,060
100%
0%
1,275
100%
0%
1,331
5,415
100% 100%
59%
0%
1,855
100%
100%
10,771
100%
100%
2,518
29.2%
73.8%
465
74.6%
30.6%
1,728
74.6%
30.6%
1 Gigi Levy was the CEO of 888 in 2010. Mr Levy resigned as CEO of 888 as of 30 April 2011.
2 Brian Mattingley was appointed as CEO on 27 March 2012.
3 Brian Mattingley’s total remuneration in 2015 included a phantom award granted to him on 27 March 2012 and which vested on 27 March 2015.
4 Reflects Brian Mattingley’s tenure as CEO until 13 May 2015.
5 Itai Frieberger was appointed as CEO on 2 March 2016 and stepped down as CEO on 23 January 2019. Remuneration is salary, benefits, pension and annual bonus for the
period as CEO and the total LTIP value for 2019.
6 Itai Pazner was appointed as CEO on 24 January 2019. Remuneration is salary, benefits, pension and annual bonus for the period as CEO and the total LTIP value for 2019.
PERCENTAGE CHANGE IN CEO REMUNERATION COMPARED TO THE AVERAGE FOR OTHER EMPLOYEES
The following table sets out the percentage change in salary, taxable benefits and annual bonus from financial year 2018 to
financial year 2019, for both the CEO and employees of the Group taken as a whole. Exchange rates were normalized for 2019
in order to neutralise foreign exchange effects.
Base salary
Benefits
Bonus
Year on year
change CEO
(2019 vs. 2018)
Year on year
change Employee
(2019 vs. 2018)
-22%
-37%
100%
0%
-7%
3%
The salary figure includes base salary together with other payments made to the employees (e.g. sick pay, vacation pay), but
excluding discretionary bonuses. The benefits figure includes benefits granted to employees which are not part of salary (e.g.
medical insurance, meals, further education funds). Pension amounts are not included in benefits. The short-term incentives
figure solely includes bonuses, which are based on an estimation by the Company based on the bonus accrual, since bonuses
are generally paid to Group employees in April in respect of the previous financial year. Exchange rates were normalized for
2019 in order to neutralise foreign exchange effects. Annual bonus is the bonus averaged across all employees.
CEO PAY RATIO
2019
Salary
Total pay
Method
25th
percentile
50th
percentile
75th
percentile
A
1:25
1:19
1:15
CEO
$709,878
$1,808,299
25th
percentile
$54,100
$73,000
50th
percentile
$71,000
$95,000
75th
percentile
$94,700
$123,000
The table above sets out the CEO pay ratio for 2019. The ratios have been calculated as far as practicable following the
methodology in Option A, as this is the most accurate method of calculation. The CEO pay is compared to the pay of our
Israeli employees at the 25th, 50th and 75th percentile.
The reward policies and practices for our employees are aligned to those set for the Executive Directors, including the CEO and
on this basis the Committee is satisfied that the median pay ratio is consistent with the pay, reward and progression policies
across the 888 Group employees.
100
888 Holdings plc Annual Report & Accounts 2019
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
RELATIVE IMPORTANCE OF SPEND ON PAY
The following graph sets out the actual expenditure by 888 in financial years 2018 and 2019 on items that were the most
significant outgoings for 888 in the last financial year, including on remuneration to Group employees.
+4%
162
155
-1%
105 103
s
n
o
i
l
l
i
m
$
S
U
180
160
140
120
100
80
60
40
20
0
+83%
105
57
-29%
57
40
Employee pay &
benefits*
Selling &
marketing expenses
Dividends
Tax**
* Employee pay & benefits:
Employee pay & benefit is according to note 6.
Employee pay & benefits are included SBC (Equity and Cash settled).
** Tax
2018
2019
YOY increase is mainly derived from:
1 Tax in 2018 includes US$22.4 million release of provision following receipt of tax assessments in respect of legacy VAT relating to the provision of gaming services
in Germany prior to 2015.
2 UK POC3 regime commenced in April 2019, couple with changes in tax rate in Italy and Romania, accompanied by growth in activity.
The comparables chosen were the following:
• The employee pay figure includes employee benefits in accordance with the financial statements (including both staff costs
and share benefit charges).
• Sales and marketing expenses – This reflects the amount invested in development of the future revenue stream of 888 driven
by customer acquisition.
• Dividends – This reflects amounts distributed to shareholders.
• Taxes and duties – This is a necessary cost of doing business in a regulated business environment.
COMMITTEE MEMBERS, ATTENDEES AND ADVICE
The Remuneration Committee consists solely of Non-Executive Directors, Zvika Zivlin (Chair), Anne de Kerckhove,
Ron McMillan (until 4 April 2019) and Mark Summerfield (from 16 March 2020). Details of attendances at Committee meetings
are contained in the statement on Corporate Governance on page 76. The Chairman and Company Secretary attend
meetings by invitation.
The Remuneration Committee’s remit is set out in its Terms of Reference which are available at https://corporate.888.com/
investor-relations/corporate-governance/board-committees. The Committee’s remit has been updated to take into account
the updated UK Corporate Governance Code.
101
Corporate.888.com
Directors’ Remuneration Report continued
REMUNERATION COMMITTEE ADVISER
Korn Ferry was appointed Remuneration Committee adviser to 888 on 30 November 2018 following a tender process.
The primary role of the adviser to the Committee is to provide independent and objective advice and support to the
Committee’s Chair and members. Korn Ferry has discussions with the Committee Chair on a regular basis to discuss executive
and wider Group remuneration matters, reporting, regulation, investor views and process. Korn Ferry does not provide any
other services to 888. The Committee undertakes due diligence periodically to ensure that its advisers remain independent
and is satisfied that the advice that it receives from Korn Ferry is objective and independent. Korn Ferry also is a signatory to
the Remuneration Consultants Group Code of Conduct which sets out guidelines for managing conflicts of interest, and has
confirmed to the Committee its compliance with the Remuneration Consultants Group Code.
The total fees paid to Korn Ferry in respect of its services to the Committee for the year ending 31 December 2019 were
£71,350 (2018: £25,000*). Fees are charged on a ‘time spent’ basis.
* Disclosed as nil in 2018 Report as invoiced after year-end.
ENGAGEMENT WITH SHAREHOLDERS
The Committee includes as part of its annual agenda consideration and review of workforce policies and practices and invites
members of the management team to attend Committee meetings to provide input into the Committee’s considerations.
A key part of the Group’s SVP for Human Resources and Chief Operating Officer’s roles supported by the CEO are to engage with
the wider workforce and views and feedback on remuneration are provided to the Committee and wider Board. The Company
engages with its workforce through a number of different channels (as set out in more detail on pages 60 to 64). Engagement
with the workforce to explain broader pay policies and practices and the alignment to the Executive Directors’ Remuneration
Policy is carried out throughout the year focusing on different elements of pay at different times in line with the Group’s annual
performance, strategy and reward agenda, through a variety of existing engagement channels including town halls and the
cascade of group communication by the Chief Executive Officer to his key team and then throughout the organisation.
The Committee is committed to having a transparent and constructive dialogue with our investors and consults with its
investors to seek feedback on any proposed policy changes and significant operation of policy changes.
The Committee has spent time considering the introduction of a new long-term incentive structure for our CEO and has
consulted with investors about this. Given the current market environment, the Committee has concluded now is not the right
time to introduce an alternative structure although the Committee will consider this matter again later in 2020.
STATEMENT OF SHAREHOLDER VOTING AT AGM
Details of votes cast for and against the resolution to approve last year’s Chairman’s Annual Statement and the Annual Report
on Remuneration and separately the Remuneration Policy in 2019 are shown below.
For
Against
Vote Withheld
Advisory Vote to approve
Annual Report on Remuneration
(at 2019 Annual General Meeting)
Advisory Vote to approve
Remuneration Policy
(at 2019 Annual General Meeting)
Total number
of votes
Total number
of votes
% of votes cast
% of votes cast
237,526,124
14,291,492
2,359
94.32%
5.70%
248,249,462
2,696,883
873,670
98.93%
1.08%
Approved by the Board of Directors and signed on behalf of the Board:
ZVIKA ZIVLIN
Chair of the Remuneration Committee
15 April 2020
102
888 Holdings plc Annual Report & Accounts 2019 Audit Committee Report
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
AUDIT COMMITTEE REPORT
engagement with regulatory bodies.
• 888’s exposure to corporation tax,
VAT and gaming duties in various
jurisdictions.
• The accounting treatment of
the BetBright and Costa Bingo
acquisitions, as well as the carrying
value of goodwill and other intangible
assets relating to prior acquisitions
and their related disclosures in the
financial statements.
• The adequacy of 888’s IT systems and
controls and review of cyber-attack
and data protection incidents and
management response.
• The adequacy of the systems and
controls on which management relies.
• The Board’s assessment of risk,
risk appetite and the risk register
prepared by management.
• The viability statement and going
concern statement prepared by
management.
• 888’s anti-bribery obligations.
• 888’s anti-money laundering
obligations.
Further information on the Committee’s
responsibilities and the way they were
discharged are set out below and are
available on 888’s corporate website:
corporate.888.com.
We seek to respond to shareholders
expectations in our reporting and would
welcome feedback. I am available to
speak with shareholders at any time
and shall also be available at the
Annual General Meeting on 20 May
2020 to answer any questions.
Sincerely,
MARK SUMMERFIELD
Chair of the Audit Committee
15 April 2020
the external auditors an independent
view of the key disclosure issues
and risks.
At the request of the Board, the
Committee has reviewed this Annual
Report and advised that it considers
that sufficient information has been
provided to give shareholders a fair,
balanced and understandable account
of the Group’s business and allow them
to assess its position and performance,
business model and strategy. The
Committee has also ensured that the
financial performance aspects of all
communications with shareholders were
properly considered.
Risk management is a Board
responsibility. However, the Committee
has worked with the Board and Group
management during Board meetings
to ensure that significant risks are
considered on an ongoing basis and
that appropriate responsibilities and
accountabilities for the related controls
have been set.
An associated Committee responsibility
is to review the scope, nature and
effectiveness of internal and external
audits. Internal audit work is conducted
by Deloitte, and the scope of their plan
is agreed with both management and
the Committee to ensure it helps the
Board consider the effectiveness of
controls over certain of the significant
risks disclosed in these accounts.
The Committee also monitors and
reviews the key aspects of 888’s
external audit, which is conducted
by EY. EY Limited, Gibraltar is the
statutory auditor of the Company
including for the purposes of issuing an
audit report pursuant to the Gibraltar
Companies Act 2014. Ernst and Young
LLP are the auditors for the purposes
of the Company preparing financial
statements as required pursuant to the
UK Listing Rules and the Disclosure and
Transparency Rules.
Amongst other things, during the year
the Committee considered:
• The complex legal and regulatory
environment in which 888 operates,
together with changes in laws and
governance regulations that may
impact 888’s business, sector and
market and the Group’s ongoing
LETTER TO
SHAREHOLDERS
DEAR SHAREHOLDERS,
On the following pages we set out
the Audit Committee Report for
2019, providing an overview of the
Committee’s role and the matters it
considered during the year. This is
my first report and I can reassure
shareholders that I have inherited a
Committee that is working well, with the
right mix of skills and experience to
provide constructive, yet independent
and robust, challenge and support to
both management and our auditors.
I would like to thank my colleagues
on the Committee for their help and
support since my appointment.
During the year, the Audit Committee
has continued to carry out a key
role within the Group’s governance
framework, supporting the Board in
risk management, internal control and
financial reporting. The Committee
has monitored the integrity of the
financial statements, in particular
exercising oversight of 888’s financial
reporting policies and considering
the significant financial reporting
judgments applied in preparing the
financial statements, as well as the
implementation of new accounting
standards. It has also ensured that
disclosures in the financial statements
are appropriate and obtained from
Corporate.888.com
103
Audit Committee Report continued
COMMITTEE COMPOSITION
During 2019, the Committee comprised three independent
Non-Executive Directors, except during the period following
the resignation of Ron McMillan (Chair) in April 2019, until the
appointment of Mark Summerfield (Chair) in September 2019;
Zvika Zivlin and Anne de Kerckhove served as members
of the Audit Committee throughout the year.
Two members constitute a quorum. The Committee requires
the inclusion of at least one financially qualified member with
recent and relevant financial experience. The Committee’s
Chairmen fulfilled that requirement. The Committee as a
whole has competence relevant to the online gaming sector
and all members of the Committee have an understanding
of financial reporting, 888’s internal control environment,
relevant corporate legislation, the functions of internal and
external audit and the regulatory and compliance framework
of the business. Specifically, Mr. Zivlin has extensive business
experience through his various roles, Mr. McMillan has served
in the past as the auditor of companies in the betting and
gaming sector, Mr. Summerfield was both an auditor and
worked within the sector, and Ms. de Kerckhove has extensive
strategy, entrepreneurial and sector experience. Details of
meetings of the Audit Committee are set out in the Corporate
Governance Report on page 76.
The timing of Audit Committee meetings is set to
accommodate the dates of release of financial information
at the half-year and full-year ends and the approval of scope
and outputs from work programmes executed by the internal
and external auditors.
In addition to scheduled meetings, the Chairmen of the
Committee met with the Chief Financial Officer and the
internal and external auditors on a number of occasions.
Although not members of the Committee, the Chairman,
Chief Executive Officer and Chief Financial Officer normally
attend meetings, together with representatives from the
internal and external auditors.
RESPONSIBILITIES
The committee is responsible for:
• Monitoring the integrity of 888’s financial statements
and reviewing significant financial judgments;
• Reviewing internal financial controls and management’s
response to required corrective actions identified in both
internal and external audit reports;
• Monitoring and reviewing the effectiveness of the internal
audit function;
• Overseeing the effectiveness of the external audit process,
reviewing and monitoring the external auditor’s objectivity
and independence, and agreeing their terms
of engagement and remuneration;
• Developing and implementing a policy on the engagement
of the external auditor to supply non-audit services; and
• Assisting the Board in its consideration of internal control
and risk management systems and determining appropriate
mitigation actions to the risks identified.
OUR FOCUS IN 2019
In planning its work, the Committee has reference to the
significant risks that may have an impact on the financial
statements. During the year, there were no matters where
there was significant disagreement between management,
the external auditor and the Committee, or unresolved
issues that required referring to the Board. The key matters
discussed by the Committee during the year were as follows:
Legal and regulatory environment
888 operates within an increasingly regulated marketplace
and is challenged by regulatory requirements across all
areas of its business. This creates risk for the Company as
non-compliance can lead to financial penalties, reputational
damage and the loss of licences to operate. As part of this
process, the Board and Audit Committee received updates
from management and discussed follow-up actions in
response to regulatory matters relating to customer activity
in prior periods. The Group manages its regulatory risk with
input from its legal advisers in order to operate its business in
compliance with relevant regulatory requirements. The Group
works with its lawyers to produce regular updates so that the
Board and Audit Committee understand what is happening
in the regulatory landscape.
During 2019, the Board and Audit Committee received
regulatory briefings from the Company’s lawyers and
reviewed updates on the management of regulatory risk from
management, as well as reviewing the status of litigation
involving 888 and the related accounting for 888’s obligations
in the financial statements. This included examination of the
changing regulatory landscape in Germany and defence of
the Company’s position in that market, and implementation
of the Group’s Brexit planning, as well as various compliance
and quality assurance controls in various markets as the
regulatory regimes evolve.
Based on legal advice, the Audit Committee considers whether
it can quantify reliably the outflow of funds that may result
from any regulatory actions. For matters where an outflow
of funds is probable and can be measured reliably, amounts
are recognised in the financial statements within provisions.
Taxation
The Board oversees and sets the Group’s tax strategy
and evaluates tax risk. In undertaking this task, the Group
uses its legal and tax advisers. During the year, the Group’s
legal advisors have kept the Board and Audit Committee
apprised of both existing and emerging tax risks and, where
appropriate, these have been considered by the Board
in conjunction with 888’s commercial strategy.
In 2019, the Board and Audit Committee discussed tax
related matters including the Group’s German VAT
proceedings, which are presently under administrative
appeal. Furthermore, the Committee received detailed
updates regarding the progress of the Israeli tax audit
of Random Logic Ltd. The Committee noted that the Group
registered for taxes in relevant jurisdictions in order to
ensure timely reporting and payment on the correct basis,
whilst reserving its position concerning contesting possible
existence of a liability in appropriate cases. For further
information, see notes 8 and 27 to the financial statements.
104
888 Holdings plc Annual Report & Accounts 2019 GOODWILL AND INTANGIBLE ASSETS
As set out in note 12 to the consolidated financial statements,
888 has significant goodwill and other intangible assets
relating to the acquisitions of the Bingo and AAPN businesses,
the development of gaming platforms and software, and
the internal costs incurred in respect of the new data centre
project in Dublin.
The Audit Committee reviewed the cash flow forecasts
supporting the carrying value of goodwill and other intangible
assets, including the key assumptions and estimates, as well
as the impact of the recent regulatory developments on
the business, and satisfied itself that no impairments were
required in relation to carrying values.
In addition, the committee reviewed the Board paper in
relation to the appropriateness of the capitalisation of
costs relating to the development of gaming platforms
and software with a view to understanding and mitigating
the financial reporting risks involved.
BetBright and Costa Bingo Acquisitions
In February 2019, 888 acquired certain assets primarily
comprising the Costa Bingo business from Jet Management
Group Limited, for £18 million. Furthermore, in April 2019, 888
acquired the assets of BetBright comprising primarily of its
sports betting platform, for US $19.3 million. The Group used
the services of an independent valuation expert to assist with
the fair valuations and purchase price allocations. The Audit
Committee also reviewed the cash flow forecasts supporting
the varying book values including the key assumptions and
estimates and satisfied itself with the resulted goodwill and gain.
Revenue Recognition and Development Costs Capitalisation
Revenue recognition and the capitalisation of development
costs are areas of material risk in relation to the preparation
of the financial statements. The Committee has considered
the Group’s accounting policies in these areas and the
internal controls which are in place, and has concluded that
the Group’s recognition of income and capitalisation of
development costs is appropriate.
IT systems
888’s IT systems are complex and predominantly
developed in-house. The success of the business relies on
the development of IT platforms that are innovative and
appealing to customers. In addition, the integrity and security
of the IT systems are vital from a commercial standpoint as
well as to ensuring a robust control environment.
During the year, the Audit Committee has reviewed a report
from internal audit on the Group’s Security Operations Center
and cyber incident response capability and discussed the
findings with management.
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
Internal controls and risk management
The Board has overall responsibility for ensuring that the
Group maintains a sound system of internal control. There
are inherent limitations in any system of internal control,
and no system can provide absolute assurance against
material misstatements, loss or failure. Equally, no system
can guarantee elimination of the risk of failure to meet
the objectives of the business. Against this background,
the Committee has together with the Board developed
and maintained an approach to risk management that
incorporates risk appetite and tolerance, the framework
within which risk is managed and the responsibility and
procedures pertaining to application of the policy.
The Group is proactive in ensuring that corporate and
operational risks are identified, assessed and managed
by identifying suitable controls. A corporate risk register
is maintained which details
1. The risks and impact they may have;
2. Actions to mitigate risks;
3. Risk scores to highlight the likelihood and implications
of occurrence;
4. The owners of risks; and
5. Target dates for actions to mitigate.
A description of the principal risks is set out on pages 32 to 41.
The Board has confirmed that it has carried out a robust
assessment of the principal risks facing 888, including those
which threaten its business model, future performance,
solvency or liquidity.
105
Corporate.888.com FAIR, BALANCED AND UNDERSTANDABLE
The Committee considered whether the 2019 Annual Report
is fair, balanced and understandable, and whether it provides
the necessary information to shareholders to assess the
Group’s performance, business model and strategy. The
Committee considered management’s assessment of items
included in the financial statements and the prominence
given to them. The Committee and subsequently the Board
were satisfied that, taken as a whole, the 2019 Annual Report
and Accounts are fair, balanced and understandable.
PERFORMANCE OF AUDIT COMMITTEE
The Audit Committee’s performance was evaluated as part
of the Board evaluation carried out during 2019, as detailed
on page 80. The overall conclusion of the review was that the
Committee remains effective in discharging its functions and
reporting to the Board.
INTERNAL AUDITORS
The Group’s internal audit function is outsourced to Deloitte.
The Audit Committee reviewed and monitored the internal
audit plan in accordance with the principal risks to 888’s
business as set out in the Risk Register. It has also reviewed
reports from Deloitte in relation to all internal audit work
carried out during the year and monitored response and
follow up by management to internal audit findings. In the
past three years, the internal auditors have reviewed various
aspects of 888’s customer services and business operations,
finance, B2B and B2C activities, product technologies, human
resources and regulation. In 2019, Deloitte issued reports
on B2B compliance, responsible gaming, Romania location
review, accounts payable, anti-money laundering and source
of funds, accounts receivable, UK gaming tax, implementation
of board resolutions, and follow up of previous internal audit
recommendations, as well as presenting the internal audit plan.
While no critical issues were identified by Deloitte, a number
of matters were identified which required modifications to
procedures and improved controls which either have been or
are being implemented by management. The Committee has
evaluated the performance of Deloitte, and has concluded
that they provide constructive challenge and consistently
demonstrate a realistic and commercial view of the business.
Audit Committee Report continued
Internal controls and risk management continued
In addition to the matters described above, the work of the
Committee during the year included:
• Reviewing the draft interim and annual reports and
considering:
1. The accounting principles, policies and practices
adopted and the adequacy of related disclosures
in the reports;
2. Application of IAS 36;
3. The significant accounting issues, estimates and
judgments of management in relation to financial
reporting, including impairment;
4. Whether any significant adjustments were required
arising from the audit;
5. Compliance with statutory tax obligations and the
Company’s tax policy;
6. Whether the information set out in the Strategic Report
was balanced, comprehensive, clear and concise and
covered both positive and negative aspects
of performance; and
7. Whether the use of ‘alternative performance measures’
obscured IFRS measures.
• Meeting with internal and external auditors, both
with and in the absence of the Executive Directors.
• Reporting to the Board on how it has discharged
its responsibilities.
• Making recommendations to the Board in respect
of its findings in respect of all of the above matters.
• Review and approval of the external audit fee.
The Board considers that the processes undertaken by the
Audit Committee continue to be appropriately robust and
effective and in compliance with the guidance issued by the
FRC. During the year, the Board has not been advised by the
Audit Committee of, nor identified itself, any failings, frauds or
weaknesses in internal control which it has determined to be
material in the context of the financial statements.
The Committee believes that appropriate internal controls
are in place through the Group, that 888 has a well-defined
organisational structure with clear lines of responsibility and
a comprehensive financial reporting system. The Committee
also believes that the Company complies with the FRC
Guidance on Risk Management, Internal Control and Related
Financial and Business Reporting.
GOING CONCERN AND FINANCIAL VIABILITY
The Committee reviewed the appropriateness of adopting the
going concern basis of accounting in preparing the full year
financial statements and assessed whether the business was
viable in accordance with the Code. The assessment included
a review of the principal risks facing the Group, their financial
impact, how they are managed, the availability of finance
and the appropriate period for assessment. The committee
challenged the identification of these significant risks and the
assumptions comprising the viability analysis carried out by
management. The Group’s viability statement is on page 48.
106
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
AUDIT AND NON-AUDIT WORK
The Audit Committee remains mindful of the attitude
investors have to the auditors performing non-audit services.
The Committee has clear policies relating to the auditors
undertaking non-audit work and monitors the appointment
of the auditors for any non-audit work involving fees above
US$0.1 million, with a view to ensuring that non-audit work
does not compromise the Company’s auditors objectiveness
and independence. The Committee is committed to ensuring
that fees for non-audit services performed by the auditors will
not exceed 70% of aggregate audit fees measured over a
three-year period.
Minor non-audit work carried out by the external auditors
for the Group in 2019 amounted to £55,000 (2018: £16,000).
In 2019, the Company paid the external auditors for the
statutory audit of the consolidated financial statements
an amount of US$0.8 million (2018: US$0.7 million).
EXTERNAL AUDITORS
EY has been the Company’s external auditor since their
appointment in 2014. The partners responsible for the
external audit are Angelique Linares, a partner in EY’s
Gibraltar office, and Philip Young, a partner in EY’s London
office, who has replaced Cameron Cartmell who stepped
down from the audit in 2019 due to rotation requirements.
The Committee has reviewed the performance of EY in
relation to the 888 audit, a process which involved all Board
members and senior members of 888’s finance function.
In particular, 2019 was the first audit under a new London
partner and the Committee sought feedback on how well the
change had been handled. The Committee also considered
whether the changes to the audit made in response to the
FRC’s review of the 2017 audit were now fully embedded into
the audit approach.
The conclusions reached were that EY had performed the
external audit in a professional manner, and it was therefore
the Committee’s recommendation that the reappointment
of EY be proposed to shareholders at the Annual General
Meeting to be held on 20 May 2020. If reappointed, EY will
hold office until the conclusion of the next Annual General
Meeting at which accounts are laid. The audit contract was
last tendered for the year ending 31 December 2014 and
no contractual obligations existed that acted to restrict
the Audit Committee’s choice of external auditors. Under
the EU Audit Regulation and the Competition and Markets
Authority “The Statutory Audit Services for Large Companies
Market Investigation (Mandatory Use of Competitive Tender
Processes and Audit Committee Responsibilities)” Order 2014,
the Company is required to run a competitive tender process
in respect of auditor appointment no later than 31 December
2023 year-end. Given EY’s short tenure to date, the Board has
no present plans to consider an audit tender process. The
Committee notes and confirms compliance with the other
provisions of the Competition & Markets Authority Order 2014
in respect of statutory audit services for large companies.
The Committee reviewed the reports prepared by the
external auditors on key audit findings and any significant
deficiencies in the financial control environment, as well
as the recommendations made by EY to improve processes
and controls together with management’s responses to those
recommendations. EY did not highlight any material internal
control weaknesses and management has committed
to making appropriate changes to controls in areas
highlighted by EY.
107
Corporate.888.com Financial Statements
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF 888 HOLDINGS PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion
In our opinion:
• 888 Holdings plc’s Group financial statements and parent company financial statements (the “financial statements”) give a
true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 December 2019 and of the Group’s
profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards
(‘IFRSs’) as adopted by the European Union;
• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union as applied in accordance with the provisions of the Gibraltar Companies Act 2014; and
• the financial statements have been prepared in accordance with the requirements of the Gibraltar Companies Act 2014,
and, as regards the Group financial statements, Article 4 of the IAS Regulation.
We have audited the financial statements of 888 Holdings plc which comprise:
GROUP
PARENT COMPANY
Consolidated balance sheet as at 31 December 2019
Balance sheet as at 31 December 2019
Consolidated income statement for the year then ended
Statement of changes in equity for the year then ended
Consolidated statement of comprehensive income for the
year then ended
Statement of cash flows for the year then ended
Consolidated statement of changes in equity for the year
then ended
Related notes 1 to 10 to the financial statements including a
summary of significant accounting policies
Consolidated statement of cash flows for the year
then ended
Related notes 1 to 27 to the financial statements,
including a summary of significant accounting policies
—
—
The financial reporting framework that has been applied in their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements,
as applied in accordance with the provisions of the Gibraltar Companies Act 2014. We do not, in giving these opinions, accept
or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section
of our report below. We are independent of the Group and parent company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public
interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
108
888 Holdings plc Annual Report & Accounts 2019 STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
CONCLUSIONS RELATING TO PRINCIPAL RISKS, GOING CONCERN AND VIABILITY STATEMENT
We have nothing to report in respect of the following information in the annual report, in relation to which the ISAs require us to
report to you whether we have anything material to add or draw attention to:
• the disclosures in the annual report set out on page 34 that describe the principal risks and explain how they are being
managed or mitigated;
• the Directors’ confirmation set out on page 33 in the annual report that they have carried out a robust assessment of the
principal risks facing the entity, including those that would threaten its business model, future performance, solvency or liquidity;
• the Directors’ statement set out on page 48 in the financial statements about whether they considered it appropriate to
adopt the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the
entity’s ability to continue to do so over a period of at least 12 months from the date of approval of the financial statements
• whether the Directors’ statement in relation to going concern required under the Listing Rules in accordance with Listing Rule
9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or
• the Directors’ explanation set out on page 48 in the annual report as to how they have assessed the prospects of the entity,
over what period they have done so and why they consider that period to be appropriate, and their statement as to whether
they have a reasonable expectation that the entity will be able to continue in operation and meet its liabilities as they fall
due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications
or assumptions.
Key audit matters
• Going concern assessment and covenant compliance
• Regulatory and legal risks
• Taxation
• Revenue recognition
Audit scope
• Impairment of Bingo and AAPN cash generating units
• We performed an audit of the complete financial information of two components,
one being a subsidiary in Israel and the other being the remainder of the Group.
• The components where we performed full audit procedures accounted for 100% of
Profit before tax, Revenue and Total assets.
Materiality
• Overall Group materiality of US$2.2m which represents 5% of Profit before tax.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not
due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in
the context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate
opinion on these matters. All work on the Key audit matters was conducted by the Group audit team.
109
Corporate.888.com INDEPENDENT AUDITORS’ REPORT
CONTINUED
RISKS
OUR RESPONSE TO THE RISK
KEY OBSERVATIONS
COMMUNICATED TO
THE AUDIT COMMITTEE
GOING CONCERN ASSESSMENT AND
COVENANT COMPLIANCE
The outbreak of COVID-19 has resulted in the
postponement and cancellation of sporting
events, which will negatively impact 888’s
revenues from sports. This has significantly
increased the uncertainties inherent in the
going concern assessment.
Management have updated their base case
forecast to reflect the impact of COVID-19, in
particular the cancellation of sports events,
until September 2020.
A downside scenario has been run on the
assumption of a 20% decline in Casino, Poker
and the continued suspension of sporting
events until April 2021. In the down side
scenario, Management have assumed the
related reductions in revenue derived costs,
such as gaming taxes and royalties as well as
reductions in marketing costs and overheads.
Management have also modelled an extreme
downside scenario reflecting a shutdown of
Sport revenues until April 2021 and a very
substantial decline in Casino, Poker and Bingo
revenues, in which case the group would take
further rationalisation of its cost base including
reduction of variable operating costs such as
marketing expenditure, overheads and cuts to
discretionary capital expenditure.
888’s forecast liquidity and covenant
compliance are key considerations when
considering the appropriateness of adopting
the going concern basis of accounting.
Refer to Financial Review (page 31); Refer
to the Audit Committee Report (page 106);
Accounting policies; and Note 2.1 of the
Consolidated Financial Statements (page 121)
REGULATORY AND LEGAL RISKS
• At 31 December 2019, the Group has
provided US$10.2m (2018: US$11.3m) in
respect of ongoing legal disputes.
• Given the industry and jurisdictions in which
the Group operates, as described in the
Principal Risks and Uncertainties on page
32, there is a risk that the Group will operate
without an appropriate licence, have an
existing licence adversely affected, or be
subject to other regulatory sanctions and
gaming duties, and in certain jurisdictions
VAT or equivalent taxes..
110
• Confirmed our understanding of 888’s going
• We reported to the Audit Committee that,
based on our testing performed, we believed
that the going concern assumption adopted
in the 2019 financial statements remains
appropriate after considering management’s
base case updated for COVID-19.
• In the downside and extreme downside
scenarios, management’s key mitigating
actions include the ability reduce variable
operating costs and to defer capital
expenditure, as required.
• We confirmed that management’s disclosure
appropriately describes the risks associated
with 888’s ability to continue to operate as a
going concern
• Based on our audit work we conclude that
the accounting for revenue is appropriate.
concern assessment process as well as
the review controls in place on the going
concern model and management’s Board
memoranda and compared cash on hand
, and forecast cash generation to forecast
liability settlement including committed
dividends to assess liquidity risk;
• Assessed the flexibility of the business model
to respond to reduced revenues; Audited
the reasonableness of all key assumptions,
namely each revenue stream, gaming duties,
marketing expenses and overheads through
reconciliation to the budget approved by the
Board and comparison with recent actuals,
as well as their consistency with other areas
of the audit including impairment assessment
• Compared the reduction in revenue derived
costs to the levels of reduction we would
expect through our other audit work;
• In the severe downside scenarios, we took
into account of the impact of potential
regulatory intervention to ensure responsible
gambling at a time when consumers could be
perceived as more vulnerable;
• Compared the reduction in revenues in
the reasonable worst case to the decline
in revenues observed following the 2008
financial crisis;
• Recalculated management’s forecast
covenant ratio compliance calculations to
check for breaches of each covenant ratio
throughout the going concern period under
management’s base case and downside
scenario;
• Compared current trading to the similar
period last year to assess the impact of
COVID19, and potential impact on cash
flows for the remainder of the going
concern period.
• Considered the likelihood of management’s
ability to execute mitigating actions,
both in timing and amount, to prevent a
breach of covenants in the downside and
extreme downside scenarios based on
our understanding of 888 and the sector
in particular the ability of management to
implement overhead cost savings; and
• Reviewed the appropriateness of
management’s going concern disclosure in
describing the risks associated with its ability
to continue to operate as a going concern
for a period of 12 months from the date of
our Auditor’s Report.
• Understood the Group’s process and
related controls in respect of regulatory and
legal risks and the related accounting, and
assessed whether the controls are designed
effectively to mitigate the risk.
• Challenged the appropriateness of the
group’s assumptions and estimates in relation
to provisions and contingent liabilities,
historical payments made by the Group and
by competitors, emerging industry practice
and the period to which any provision
amounts relate, including with respect to anti-
money laundering and responsible gaming in
the UK and other markets.
888 Holdings plc Annual Report & Accounts 2019Financial Statements continued
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
RISKS
OUR RESPONSE TO THE RISK
KEY OBSERVATIONS
COMMUNICATED TO
THE AUDIT COMMITTEE
REGULATORY AND LEGAL RISKS
CONTINUED
• Judgement is also applied in estimating
amounts payable to regulatory authorities in
certain jurisdictions. This gives rise to a risk
over the accuracy of accruals and disclosure
of contingent liabilities. There is also a risk
that management may influence these
significant estimates and judgements in
order to meet market expectations or bonus
targets.
• Refer to the significant accounting policies
(Note 2 on page 121); and Note 27 to the
Consolidated Financial Statements (page
154).
• In respect of the regulatory provisions, we
discussed any updates to the fact patterns
with management and the Group’s lawyers
and read their legal confirmations. The
Group’s lawyers confirmed that they believed
the quantum of the provisions for regulatory
matters are reasonable.
• Assessed the competence, integrity and
expertise of the Group’s legal advisers and
concluded they were appropriate and we
therefore relied on their opinions.
• Inquired of management and the Group’s
legal advisers, HFN and local legal counsels
involved, where appropriate, about any
known instances of material breaches in
regulatory or licence compliance that need
to be disclosed or required provisions to be
recorded.
• Read the Group’s correspondence with
regulators and tax authorities.
• Circularised legal confirmations to all
significant legal management experts as at
31 December 2019.
• Tested the completeness of the Group’s legal
expenses in coordination with the discussions
with Group’s legal advisers.
• Discussed with management their
interpretation and application of relevant
laws and regulations, as well as analysis of
the risks in respect of the group’s operations
in unregulated markets.
• Engaged EY Germany legal specialists to
assist us in understanding the risks in respect
of online gaming prohibition in Germany.
• Engaged EY gaming tax specialists to assist
us in understanding the risks in respect of
gaming duties and fines in jurisdictions where
the appropriate tax treatment is uncertain.
• Assessed appropriateness of disclosures in
the Annual Report and Accounts.
TAXATION
The Group recognised a taxation charge of
US$3.7 million in 2019 (2018: US$13.9 million)
and had income tax payable of US$10.1 million
at 31 December 2019 (2018: US$11.4 million).
The Group operates in a number of jurisdictions,
resulting in complexities in the payment of
and accounting for tax, particularly related to
Transfer Pricing and Tax Residency. The Group
faces a risk that given the international nature
of its operations, material tax exposures may
not be appropriately provided or disclosed in
the financial statements.
Refer to the Audit Committee Report (page
103); significant accounting policies (Note
2 on page 124); and Notes 8 and 14 to the
Consolidated Financial Statements (pages 136
and 142).
• Understood the Group’s process and related
• With assistance from tax specialists in
each major jurisdiction, we have concluded
that management’s judgements in relation
to the taxation charge and provisions are
materially correct and the related disclosures
are appropriate.
controls over the identification and mitigation
of taxation risks and the related accounting.
• Obtained and read the results of the third-
party tax studies obtained by the group and
reviewed its correspondence with the relevant
tax authorities, in order to support the tax
position of the Group as recorded in the
financial statements.
• We read the Group Transfer Pricing policy
and Permanent Establishment (PE) risk
assessment prepared by management and
their legal adviser (HFN) to understand
the context of the group’s international tax
strategy.
• With support from our international tax
experts, we understood management’s
interpretation and application of relevant tax
law and formed our own view in relation to
provisions and contingent liabilities.
• We read whether the Group’s disclosures
of its tax estimates and judgements are in
accordance with IFRS requirements.
111
Corporate.888.com
INDEPENDENT AUDITORS’ REPORT
CONTINUED
RISKS
OUR RESPONSE TO THE RISK
KEY OBSERVATIONS
COMMUNICATED TO
THE AUDIT COMMITTEE
REVENUE RECOGNITION
The Group recognised revenue of US$560.3
million in 2019 (2018: US$540.6 million).
• We understood and tested the key
application and manual controls over the
Group’s principal gaming systems.
• Based on our audit work, we conclude
that the accounting for revenue is
appropriate.
• We applied IT-based auditing techniques
to re-perform the monthly reconciliation
between the Group’s gaming revenue, cash
and customer accounts.
• We performed testing using “test accounts”
in the live gaming environment for each
revenue stream to test the interface between
gaming servers, production systems and cash
processing system with the Datawarehouse.
• We proved that, in aggregate, the revenues
recognised were equivalent to the cash
receipts adjusted for known timing
differences
• We reviewed management’s assessment
of indicators of impairment in the context of
other information obtained during our audit
and particularly where the performance of
certain products is below management’s and
external expectations.
• We assessed whether the allocation
of goodwill to CGU’s based on our
understanding of the business and guidance
in IAS 36. In particular with relation to AAPN,
we assessed whether it was appropriate to
treat the US as one CGU.
• We corroborated the assumptions used by
management to budgets and historically
observed inputs, particularly in respect of
forecast growth rates, and in the case of
AAPN the duration of the forecast period,
and we performed sensitivity analysis where
there is limited headroom.
The Group’s revenue recognition is highly
dependent on the Group systems, including
the Gaming servers and Datawarehouse.
Systematic errors in calculations which could
result in incorrect reporting of revenue.
The Group also makes a number of judgements
in recognising revenue, principally in respect
of whether the group is acting as a principal
or an agent with its B2B customers and
whether certain customer prizes are treated
as a deduction from revenue or as a cost.
Any inappropriate judgements could result
in a material misstatement of revenue and
operating expenses.
There is also a risk that management may
override controls to influence the significant
judgements in respect of revenue recognition in
order to meet market expectations.
Refer to the significant accounting policies
(Note 2 on page 125); and Note 3 to the
Consolidated Financial Statements (page 130).
IMPAIRMENT OF BINGO AND AAPN
CASH GENERATING UNITS
The Group has goodwill relating to AAPN of
US$30.9m and intangible assets of US$9.9m
arising from the acquisition in December 2018.
The Group has goodwill relating to Bingo B2C
of US$104.4m (2018: US$95.4m) and Bingo B2B
of US$24.9m (2018: US$29.7m).
The Bingo CGU goodwill arises from the
acquisitions Globalcom (2007), Wink (2009)
and Jet (2019).
The Group recognised US$4.2m of goodwill
on the acquisition of former B2B partner Jet
during the period. Following the acquisition,
management undertook a review of the
goodwill allocated to cash generating units.
This resulted in an US$4.8m of goodwill being
reorganised between Bingo B2B to Bingo B2C.
Also included in the carrying value of the Bingo
cash generating units is intangible assets of
US$24.6m (2018: US$3.6m). The majority of
which relates to the value associated with the
Jet customer list.
There is a risk that these assets are not
supported by either the future cash flows they
are expected to generate or their fair value,
resulting in an impairment charge that has not
been recognised by management.
Refer to the significant accounting policies
(Note 2 on page 121); and Note 12 to the
Consolidated Financial Statements (page 139).
112
• Based on our audit work, including the
sensitivities applied, we are satisfied that that
the carrying value of goodwill is materially
correct and no impairment is required on any
cash-generating unit at 31 December 2019.
• In respect of the Bingo cash generating
units, we reported to the Audit Committee
that the decline in revenues over the last two
years indicated to us that more conservative
growth rates should be applied in our
independent forecast. Using these lower
growth rates the headroom on both cash
generating units was reduced, but did not
indicate an impairment.
• In respect of the AAPN cash generating unit
we reported to the Audit Committee that
the potential size of the US market had
increased as compared to the prior year,
and that the company’s assumed market
share was in line with that achieved in other
markets, however should the forecast growth
rates not be achieved an impairment could
be required.
• We reported to the Audit Committee how the
discount rate assumptions of 8.6% and 15%
for Bingo and AAPN respectively compared
with the range of acceptable estimates,
which we consider to be 8.4%-11% and
13.7%-17.0% respectively.
The disclosures in the ARA, in relation to
short-term and long-term growth rates,
appropriately describe that a reasonably
possible change could lead to an
impairment given the limited headroom
for the B2B cash generating unit.
888 Holdings plc Annual Report & Accounts 2019Financial Statements continued STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit
scope for each entity within the Group. Taken together, this enables us to form an opinion on the consolidated financial
statements. We take into account size, risk profile, the organisation of the Group and effectiveness of Group-wide controls,
changes in the business environment and other factors such as recent Internal Audit results when assessing the level of work
to be performed at each entity.
The Group operates from a small number of locations and the Group’s accounting is centrally managed. In assessing the risk
of material misstatement to the Group financial statements, we determined that there were two components, one being a
subsidiary in Israel and the other being the remainder of the Group.
We performed an audit of the complete financial information of both of these components (“full scope”). The components we
audited therefore account for the entirety of the Group’s revenue, profit before tax and total assets. This is consistent with our
approach in the prior year.
Involvement with component teams
In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at each
of the components by us, as the primary audit engagement team, or by component auditors from other EY global network
firms operating under our instruction.
The Israeli subsidiary was subject to a full scope audit by a component team in Israel and the remainder of the Group was
audited directly, as a full scope audit, by the Group audit team.
The Group audit team performed the majority of its audit fieldwork in Israel and to a lesser extent Gibraltar, including auditing
all of the significant judgements. Non-statutory and statutory audit partners visited Israel at the year-end phase of the audit.
During this visit they, conducted and reviewed audit work and attended audit closing meetings.
For the Israeli subsidiary, in addition to the location visits, the Group audit team interacted with the component audit team
regularly during the various stages of the audit, reviewed key working papers, participated in the component team’s planning,
including its discussion of fraud and error and were responsible for the scope and direction of the audit process. The allocation
of responsibilities between the Group audit team and the Israeli component team was such that the audit work on each of
the areas of risk described above was led by the Group audit team. This gave us sufficient and appropriate evidence for our
opinion on the Group financial statements.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements
on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to
influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the
nature and extent of our audit procedures.
We determined materiality for the Group to be US$2.2 million (2018: US$3.7 million), which is 5% (2018: 5%) of profit before tax.
In the prior year we used profit before tax adjusted for exceptional charges.
We believe that profit before tax provides us with a consistent year on year basis for determining materiality and is the most
relevant performance measure to the stakeholders of the Group. The decrease from the prior year primarily reflects the
increase in the gaming tax burden through newly regulated markets and increased gaming tax rates (recognised as operating
expenses), and fall in revenue, by the Group.
Starting basis
• Profit before tax - US$45.3 million
(2018: US$108.7 million)
Materiality
• Materiality of US$2.25 million (2018:
US$3.7 million), representing 5% of
materiality basis (2018: 5%)
We determined materiality for the parent company
to be US$1.2 million (2018: US$1.4 million), which is
2% (2018: 2%) of net assets.
During the course of our audit, we reassessed initial
materiality and did not identify the need for any
significant changes.
113
Corporate.888.com INDEPENDENT AUDITORS’ REPORT
CONTINUED
PERFORMANCE MATERIALITY
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately
low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement
was that performance materiality was 75% (2018: 75%) of our planning materiality, namely US$1.7 million (2018: US$2.8 million).
We have set performance materiality at this percentage due to our past experience of the audit, low number of misstatements
and overall effective internal controls,
Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts
is undertaken based on a percentage of total performance materiality. The performance materiality set for each component is
based on the relative scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement
at that component. In the current year, the performance materiality allocated to Israeli component was US$0.8 million
(2018: US$1.6 million). The audit work on the remainder of the Group was undertaken using Group materiality.
REPORTING THRESHOLD
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of US$113,000
(2018: US$188,000), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in
light of other relevant qualitative considerations in forming our opinion.
OTHER INFORMATION
The other information comprises the information included in the annual report set out on pages 01 to 48, including Strategic
Report, the Directors’ Report and the Corporate Governance Report set out on page 76 other than the financial statements
and our auditor’s report thereon. The directors are responsible for the other information.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in this report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the financial statements or a
material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the
other information and to report as uncorrected material misstatements of the other information where we conclude that those
items meet the following conditions:
• Fair, balanced and understandable set out on pages 74 to 75 – the statement given by the directors that they consider the
annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information
necessary for shareholders to assess the group’s performance, business model and strategy, is materially inconsistent with
our knowledge obtained in the audit; or
• Audit committee reporting set out on pages 103 to 107 – the section describing the work of the Audit Committee does not
appropriately address matters communicated by us to the audit committee; or
• Directors’ statement of compliance with the UK Corporate Governance Code set out on page 76 – the parts of the Directors’
statement required under the Listing Rules relating to the company’s compliance with the UK Corporate Governance Code
containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly disclose
a departure from a relevant provision of the UK Corporate Governance Code.
OPINION ON OTHER MATTER PRESCRIBED BY THE GIBRALTAR COMPANIES ACT 2014
In our opinion, the information given in the Strategic Report and the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements and has been properly prepared in accordance
with the Act.
114
888 Holdings plc Annual Report & Accounts 2019Financial Statements continued STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
OPINIONS ON OTHER MATTERS AS PER THE TERMS OF OUT ENGAGEMENT LETTER WITH THE COMPANY
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with
the Gibraltar Companies Act 2014.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the Directors’ report for the financial year for which the financial statements
are prepared is consistent with the financial statements and those reports have been prepared in accordance with
applicable legal requirements;
• the information about internal control and risk management systems in relation to financial reporting processes and about
share capital structures, given in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Rules and Transparency Rules
sourcebook made by the Financial Conduct Authority (the FCA Rules), is consistent with the financial statements and
has been prepared in accordance with applicable legal requirements; and
• information about the company’s corporate governance code and practices and about its administrative, management
and supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
We have nothing to report in respect of the following matters where the Gibraltar Companies Act 2014 requires us to report
to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• there are material misstatements in the Directors’ Report based on our knowledge and understanding of the Company
and its environment obtained in the course of the audit.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION AS PER THE TERMS OF OUR ENGAGEMENT LETTER WITH
THE COMPANY
In the light of the knowledge and understanding of the Group and the parent company and its environment obtained in the
course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters which we have been instructed to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the Directors’ responsibilities statement set out on pages 74 to 75, the Directors are responsible for
the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal
control as the Directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group and parent company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the Group or the parent company or to cease operations, or have
no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
EXPLANATION AS TO WHAT EXTENT THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES,
INCLUDING FRAUD
The objectives of our audit, in respect to fraud, are; to identify and assess the risks of material misstatement of the financial
statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement
due to fraud, through designing and implementing appropriate responses; and to respond appropriately to fraud or suspected
fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both
those charged with governance of the entity and management.
115
Corporate.888.com INDEPENDENT AUDITORS’ REPORT
CONTINUED
Our approach was as follows:
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the
most significant are those related to Gambling Regulations and related gaming and indirect taxes in different countries where
the Group is operating, including the UK, Spain and Germany and other countries, those related to relevant tax compliance
regulations in Gibraltar and Israel and related to the financial reporting framework (IFRS as adopted by the EU, UK Corporate
Governance Code, Gibraltar Companies Act 2014 the Listing Rules of the London Stock Exchange and the Bribery Act 2010).
• We understood how 888 Holdings plc is complying with those frameworks by making enquiries of management and the
company’s legal counsel (HFN). We corroborated our enquiries through our review of Board minutes, discussion with the audit
committee and any correspondence with regulatory bodies, our audit procedures in respect of “Regulatory and legal risk” and
“Taxation” significant risks, as described above.
• We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur by
meeting with management to understand where they considered there was susceptibility to fraud, including in respect of revenue
recognition. We also considered performance targets and their influence on efforts made by management to manage earnings
or influence the perceptions of analysts. Where this risk was considered to be higher, we performed audit procedures to address
each identified fraud risk. These procedures included testing manual journal entries.
• Based on this understanding, we designed our audit procedures to identify non-compliance with such laws and regulations,
including anti-money laundering. Our procedures involved audit procedures in respect of “Regulatory and legal risk” and
“Taxation” significant risks (as described above), as well as review of Board minutes to identify non-compliance with such laws
and regulations, review of reporting to the Audit Committee on compliance with regulations and enquires of the management
and HFN.
• In respect to the Israeli component, any instances of non-compliance with laws and regulations were communicated to the
Primary team as they arose and were followed up with management by the Primary team.
• The Group operates in the gaming industry which is a highly regulated environment. The non-statutory audit partner has
experience serving clients in the gaming industry and has served a variety of public UK-listed companies, including those with
the majority of their operations overseas. He reviewed the experience and expertise of the engagement team to ensure that the
team had the appropriate competence and capabilities, which included the use of a specialist where appropriate. The team
had discussions during planning and throughout the audit in respect of the evolving gaming regulatory environment.
• We designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved
discussions with management and legal counsel to assess and understand the implications on our audit procedures. Our audit
procedures in respect of the “Regulatory and Legal risk” are described above in “Key audit matters” section.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
OTHER MATTERS WE ARE REQUIRED TO ADDRESS
• We were appointed by the company on 21 May 2019 to audit the financial statements for the year ending 31 December 2019 and
subsequent financial periods. We signed an engagement letter on 19 March 2020.
• The period of total uninterrupted engagement including previous renewals and reappointments is six years, covering the years
ending 31 December 2014 to 31 December 2019.
• The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the parent company and we
remain independent of the Group and the parent company in conducting the audit.
• The audit opinion is consistent with the additional report to the audit committee.
USE OF OUR REPORT
• This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. 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, for this report, or for
the opinions we have formed.
PHILIP YOUNG (NON-STATUTORY AUDITOR)
ANGELIQUE LINARES (STATUTORY AUDITOR)
Ernst & Young LLP
London
15 April 2020
For and on behalf of EY Limited, Registered Auditors
Gibraltar
15 April 2020
The maintenance and integrity of the 888 Holdings plc website is the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes
that may have occurred to the financial statements since they were initially presented on the website.
116
888 Holdings plc Annual Report & Accounts 2019Financial Statements continued
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2019
Revenue before VAT accrual release
VAT accrual release
Revenue
Operating expenses
Gaming duties
Research and development expenses
Selling and marketing expenses
Administrative expenses
Exceptional items
Operating profit before exceptional items, VAT accrual release and share benefit charge
Exceptional items
VAT accrual release
Share benefit charge
Operating profit
Finance income
Finance expenses
Gain from remeasurement of previously held equity interest in joint ventures
Share of post-tax loss of equity accounted joint ventures and associate
Profit before tax
Taxation
Profit after tax for the year attributable to equity holders of the parent
Earnings per share
Basic
Diluted
Note
2019
US$ million
2018
US$ million
3
19
4
5
5
23
4
7
7
14
8
9
560.3
—
560.3
(175.9)
(95.5)
(33.6)
(161.8)
(39.0)
(2.3)
59.9
(2.3)
—
(5.4)
52.2
0.5
(7.2)
—
(0.2)
45.3
(3.7)
41.6
529.9
10.7
540.6
(158.1)
(69.9)
(32.8)
(155.0)
(36.2)
11.1
86.8
11.1
10.7
(8.9)
99.7
0.6
(0.7)
9.3
(0.2)
108.7
(13.9)
94.8
11.3¢
11.3¢
26.3¢
25.8¢
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2019
Note
2019
US$ million
2018
US$ million
Profit for the year
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations
Items that will not be reclassified to profit or loss
Remeasurement of severance pay liability, net of tax
Total other comprehensive (expense) income for the year
Total comprehensive income for the year attributable to equity holders of the parent
The notes on pages 121 to 154 form part of these consolidated financial statements.
41.6
(0.1)
(2.2)
(2.3)
39.3
6
94.8
(0.4)
1.1
0.7
95.5
117
Corporate.888.com
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2019
Assets
Non-current assets
Goodwill and other intangible assets
Right-of-use assets
Property, plant and equipment
Investments
Non-current receivables
Deferred tax assets
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
Foreign currency translation reserve
Treasury shares
Retained earnings
Total equity attributable to equity holders of the parent
Liabilities
Non-current liabilities
Deferred tax liability
Interest-bearing loans and borrowings
Current liabilities
Trade and other payables
Provisions
Income tax payable
Interest-bearing loans and borrowings
Severance pay liability
Customer deposits
Total equity and liabilities
Note
2019
US$ million
2018
US$ million
12
2.2
13
14
17
15
16
17
18
18
23
15
20
19
19
20
6
21
240.4
33.3
13.0
0.9
0.6
2.8
291.0
99.5
42.6
142.1
433.1
3.3
3.7
(2.1)
(0.7)
160.5
164.7
4.0
28.8
32.8
130.9
10.2
10.1
23.7
6.0
54.7
235.6
433.1
200.3
—
11.0
1.1
0.8
1.4
214.6
133.0
33.0
166.0
380.6
3.3
3.6
(2.0)
(1.2)
156.6
160.3
2.3
—
2.3
136.0
11.3
11.4
—
2.2
57.1
218.0
380.6
The consolidated financial statements on pages 117 to 154 were approved and authorised for issue by the Board of Directors
on 15 April 2020 and were signed on its behalf by:
ITAI PAZNER
Chief Executive Officer
AVIAD KOBRINE
Chief Financial Officer
The notes on pages 121 to 154 form part of these consolidated financial statements.
118
888 Holdings plc Annual Report & Accounts 2019Financial Statements continued
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
Share
capital
US$ million
Share
premium
US$ million
Treasury
shares
US$ million
Retained
earnings
US$ million
Foreign
currency
translation
reserve
US$ million
Total
US$ million
Balance at 1 January 2018
3.3
3.5
(0.7)
108.7
Profit after tax for the year attributable
to equity holders of the parent
Other comprehensive (expense) income for the year
Total comprehensive income
Dividend paid (note 10)
Equity settled share benefit charges (note 23)
Acquisition of treasury shares
Exercise of deferred share bonus plan
Issue of shares to cover employee
share schemes (note 18)
Balance at 31 December 2018
Profit after tax for the year attributable
to equity holders of the parent
Other comprehensive (expense) income for the year
Total comprehensive income
Dividend paid (note 10)
Equity settled share benefit charges (note 23)
Exercise of deferred share bonus plan
Issue of shares to cover employee
share schemes (note 18)
Balance at 31 December 2019
—
—
—
—
—
—
—
—
3.3
—
—
—
—
—
—
—
3.3
—
—
—
—
—
—
—
0.1
3.6
—
—
—
—
—
—
0.1
3.7
—
—
—
—
—
(0.8)
0.3
—
(1.2)
—
—
—
—
—
0.5
—
(0.7)
94.8
1.1
95.9
(56.6)
8.9
—
(0.3)
—
156.6
41.6
(2.2)
39.4
(40.4)
5.4
(0.5)
—
160.5
(1.6)
—
(0.4)
(0.4)
—
—
—
—
—
(2.0)
—
(0.1)
(0.1)
—
—
—
—
(2.1)
113.2
94.8
0.7
95.5
(56.6)
8.9
(0.8)
—
0.1
160.3
41.6
(2.3)
39.3
(40.4)
5.4
—
0.1
164.7
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.
Share premium – represents the amount subscribed for share capital in excess of nominal value.
Treasury shares – represent reacquired own equity instruments. Treasury shares are recognised at cost and deducted
from equity.
Retained earnings – represents the cumulative net gains and losses recognised in the consolidated statement of
comprehensive income and other transactions with equity holders.
Foreign currency translation reserve – represents exchange differences arising from the translation of all Group entities
that have functional currency different from US$.
The notes on pages 121 to 154 form part of these consolidated financial statements.
119
Corporate.888.com CONSOLIDATED STATEMENT
OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2019
Cash flows from operating activities
Profit before income tax
Adjustments for:
Depreciation of property plant and equipment and right-of-use assets
Amortisation
Interest income
Interest expenses
Gain from remeasurement of previously held equity interest in joint ventures
Share of post-tax loss of equity accounted associate
Exceptional items
VAT accrual release
Share benefit charges
Profit before income tax after adjustments
(Increase) Decrease in trade receivables
Increase in other receivables
Decrease in customer deposits
Increase (Decrease) in trade and other payables
Decrease in provisions
Cash generated from operating activities
Income tax paid
Net cash generated from operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Investment in BetBright
Investment in Costa Bingo
Investment in AAPN Holdings LLC
Interest received
Acquisition of intangible assets
Internally generated intangible assets
Net cash used in investing activities
Cash flows from financing activities
Issue of shares to cover employee share schemes
Payment of lease liabilities
Interest paid
Proceeds from loans, net of transaction fee
Repayment of loans
Acquisition of treasury shares
Dividends paid
Net cash used in financing activities
Net decrease in cash and cash equivalents
Net foreign exchange difference
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year1
Note
2019
US$ million
2018
US$ million
2.2, 13
12
7
7
14
14
23
13
11
11
14
7
12
12
18
23
10
16
16
45.3
12.6
19.6
(0.5)
2.9
—
0.2
—
—
5.4
85.5
(7.5)
(2.8)
(1.4)
15.6
(1.1)
88.3
(6.7)
81.6
(8.4)
(19.3)
(22.9)
(18.4)
0.5
(2.6)
(11.8)
(82.9)
0.1
(7.5)
(1.4)
32.5
(15.0)
—
(40.4)
(31.7)
(33.0)
(0.5)
133.0
99.5
108.7
5.3
15.0
(0.6)
—
(9.3)
0.2
(11.1)
(10.7)
8.9
106.4
8.4
(1.3)
(12.1)
(29.1)
(24.6)
47.7
(5.6)
42.1
(7.3)
—
—
(9.2)
0.6
(2.7)
(12.0)
(30.6)
0.1
—
—
—
—
(0.8)
(56.6)
(57.3)
(45.8)
(0.8)
179.6
133.0
1 Cash and cash equivalents includes restricted short-term deposits of US$2.6 million (2018: US$1.5 million), see note 16.
Net cash generated from operating activities is presented after deduction of US$1.1 million paid during 2019 in respect
of exceptional items (2018: US$24.6 million).
Trade and other payables include non-cash movement of US$3.2 million related to remeasurement of severance pay scheme
liability (2018 US$1.1 million).
The notes on pages 121 to 154 form part of these consolidated financial statements.
120
888 Holdings plc Annual Report & Accounts 2019Financial Statements continued STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
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 in the
British Virgin Islands and since 17 December 2003 has been domiciled in Gibraltar (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 and games, Poker, Sport, Bingo, social games, and brand licensing revenue on third-party platforms.
These services are provided to end users (“B2C”) and to business partners through its business to business unit, Dragonfish
(“B2B”). In addition, the Group provides payment services, customer support and online advertising.
DEFINITIONS
In these financial statements:
The Company
The Group
Subsidiaries
Related parties
Joint ventures and associates
888 Holdings Public Limited Company.
888 Holdings Public Limited Company and its subsidiaries.
Companies over which the Company has control (as defined in IFRS 10 – Consolidated
Financial Statements) and whose accounts are consolidated with those of the
Company.
As defined in IAS 24 – Related Party Disclosures.
As defined in IFRS 11 – Joint Arrangements and IAS 28 – Investments in Associates
and Joint Ventures.
2 Significant accounting policies
The significant accounting policies applied in the preparation of the consolidated financial statements are as follows:
2.1 BASIS OF PREPARATION
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting
Standards (“IFRSs”), including International Accounting Standards (“IAS”) and Interpretations adopted by the International
Accounting Standards Board (“IASB”), endorsed for use by companies listed on an EU regulated market. The consolidated
financial statements have been prepared on a historical cost basis, except for equity investments which have been measured
at fair value.
The financial statements have been prepared on a going concern basis. Further information relating to the use of the going
concern assumption is provided in the ‘Going concern’ section of the Financial Review as set out on page 48.
The consolidated financial statements are presented in US Dollars because that is the currency in which the Group primarily
operates. All values are rounded to the closest million except when otherwise indicated.
The consolidated financial statements comply with the Gibraltar Companies Act 2014.
Going concern
The Group closely monitors and carefully manages its liquidity risk. Cashflow forecasts are regularly produced, and sensitivities
run for different scenarios including but not limited to market closures, anticipated tax developments together with the
crystallisation of tax risks, a major cyber attack, tighter regulation and loss of key personnel.
Cashflow forecasts have been updated in light of the COVID-19 outbreak, with the base case run using an assumption that
postponement and cancellations of sports events will continue until September 2020. Casino, Poker and Bingo revenues are
forecast to remain on budget including moderate growth compared to 2019. As described on page 38, there is currently
evidence of increased customer activity in the Group’s Casino and Poker products however this offsetting effect is not included
in the base case due to the high levels of uncertainty involved. The base case scenario includes a 33% reduction in Sports
related marketing within the going concern period as compared to Sport related marketing budget. Operating expenses for
Casino, Poker and Bingo are in line with budget. A downside scenario has been run on the assumption of a decline of 20% in
Casino, Poker and Bingo revenues (as compared to the base case) in addition to the shutdown of sports revenues until April
2021 and the implementation of certain possible regulatory restrictions. In the downside scenario, Group management have
assumed additional cost savings of 30% can be implemented by reduced variable operating expense, in line with the revenue
reduction.
The Group has access to a committed revolving credit facility (“RCF”) of US$ 50 million. Both under the base case assumptions
and the downside scenario noted above, the Group will be able to operate within the covenants in the RCF and has sufficient
financial headroom for the 12 months after the approval of the 2019 Annual Report and Accounts.
Under an extreme downside scenario reflecting a shutdown of Sport revenues until April 2021 and a very substantial decline in
Casino, Poker and Bingo revenues, the likelihood of which the Directors consider remote, it is possible, without further mitigating
actions, the Group would breach the finance cost to EBIT ratio covenant set out in the RCF, though not its leverage ratio
covenant. If performance indicates the extreme downside was more likely, the Group would take mitigating actions in advance
to maintain compliance with its external debt facility.
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2 Significant accounting policies continued
2.1 BASIS OF PREPARATION CONTINUED
Going concern continued
These actions would include rationalisation of its cost base including cuts to discretionary capital expenditure and reduction
of variable operating costs such as marketing expenditure, overheads and cuts to discretionary capital expenditure.
Following consideration of the updated base case forecasts, and the updated downside scenarios, the Directors have a
reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable
future. Therefore, the Directors continue to adopt the going concern basis of accounting in preparing the consolidated
financial statements.
The significant accounting policies applied in the consolidated financial statements in the prior year have been applied
consistently in these consolidated financial statements, with the exception of the amendments to accounting standards
effective for the annual periods beginning on 1 January 2019. These are described in more detail on the next following pages.
2.2 NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS ADOPTED BY THE GROUP
The following interpretation and amendments to International Financial Reporting Standards, issued by the IASB and adopted
by the EU, were effective from 1 January 2019 and have been adopted by the Group during the year with no significant impact
on the parent company or on the consolidated results or financial position:
• Amendments to IAS 28 – Long-term Interests in Associates and Joint Ventures.
• Annual Improvements to IFRS Standards 2015-2017 Cycle.
• IFRIC Interpretation 23 – Uncertainty over Income Tax.
• Amendments to IAS 19: Plan Amendment, Curtailment or Settlement.
• Amendments to IFRS 9: Prepayment Features with Negative Compensation.
The Group has applied, for the first time, IFRS 16
IFRS 16 Leases – IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an
Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions
Involving the Legal Form of a Lease. IFRS 16 requires lessees to recognise right-of-use assets and lease liabilities for most
leases. A contract is (or contains) a lease if it conveys the right to control the use of an identified asset for a period of time
in exchange for consideration.
Right-of-use assets are initially measured at cost and depreciated by the earlier of the end of the useful life of the right-of-use
asset or the end of the lease term. The cost of right-of-use assets comprises of initial measurement of the lease liabilities, any
lease payments made before or at the commencement date and initial direct costs. Right-of-use assets are also subject for
impairment losses and adjusted for any remeasurement of lease liabilities. The lease liability is initially measured at the present
value of the lease payments that are not paid at the commencement date and subsequently measured at amortised cost with
the interest expense recognised within finance income (expense) in the consolidated statement of income.
In accordance with the transition provisions in IFRS 16, the Group applied the modified retrospective approach. Under this
approach, a lessee does not restate comparative information and recognise the cumulative effect of initially applying IFRS 16
as an adjustment to the opening balance of retained earnings at the date of initial application. At date of initial application,
lease liabilities for leases previously classified as an operating lease applying IAS 17 were recognised and measured at
the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial
application. Lease liabilities are included within ‘Interest-bearing loans and borrowings’ (see note 20).
Right-of-use asset at the date of initial application for leases previously classified as an operating lease applying IAS 17 was
measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating
to that lease recognised in the statement of financial position immediately before the date of initial application. Leases are
mainly comprised of offices in the period between one to ten years.
The effect of adoption of IFRS 16 is as follows:
Impact on the statement of financial position as at 1 January 2019:
Assets
Right-of-use assets
Liabilities
Current Lease liabilities
Non-current lease liabilities
Net impact on equity
122
US$ million
26.8
(5.6)
(21.2)
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2.2 NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS ADOPTED BY THE GROUP CONTINUED
Movement in the right of use assets during the period:
At 1 January 2019
Arising during the period
Depreciation
At 31 December 2019
Movement in lease liabilities during the period:
At 1 January 2019
Arising during the period
Paid during the period
Interest
Exchange rate
At 31 December 2019
Impact on the statement of profit or loss for the year ended 31 December 2019:
Depreciation expense
Operating lease expense under IAS 17
Operating profit
Finance costs
Profit for the period
Impact on the statement of cash flows for the year ended 31 December 2019:
Net cash flows from operating activities under IAS 17
Net cash flows from financing activities
Net impact on cash flows
Right-of-use
assets
US$ million
26.8
12.6
(6.1)
33.3
Lease
liabilities
US$ million
26.8
12.6
(7.5)
1.3
1.6
34.8
US$ million
(6.1)
6.6
0.5
(1.3)
(0.8)
US$ million
7.5
(7.5)
—
Following the adoption of IFRS 16, the Group’s operating profit improved, while its interest expense increased. This is due
to the change in the accounting for expenses of leases that were classified as operating leases under IAS 17.
2.3 NEW STANDARDS THAT HAVE NOT BEEN ADOPTED BY THE GROUP AS THEY WERE NOT EFFECTIVE FOR THE YEAR:
The following relevant interpretations and amendments to existing standards issued by the IASB, have not been adopted by
the Group as they were either not effective for the year or not yet endorsed for use in the EU. The Group is currently assessing
the impact of these interpretations and amendments will have on the presentation of, and recognition in, parent company or
consolidated results or financial position in future periods:
• Amendments to References to the Conceptual Framework in IFRS Standards, Effective date 1 January 2020
• Amendments to IAS 1 and IAS 8: Definition of Material, Effective date 1 January 2020
The Directors do not expect the adoption of these standards and interpretations to have a material impact on the
consolidated or company financial statements in the period of initial application.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of consolidated financial statements under IFRS as adopted by the EU requires the Group to make estimates
and judgements that affect the application of policies and reported amounts. Estimates and judgements are continually
evaluated and are based on historical experience and other factors including expectations of future events that are believed
to be reasonable under the circumstances. Actual results may differ from these estimates.
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CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS CONTINUED
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 in the future. These policies
together with references to the related notes to the financial statements, which include further commentary on the nature of the
estimates and judgements made, can be found below:
CRITICAL JUDGEMENTS
Revenue
The Group applies judgement in determining whether it is acting as a principal or an agent where it provides services to business
partners through its business to business unit. In making these judgements, the Group considers, by examining each contract with
its business partners, which party has the primary responsibility for providing the services and is exposed to the majority of the risks
and rewards associated with providing the services, as well as if it has latitude in establishing prices, either directly or indirectly.
This is described in further detail in the revenue accounting policy set out below.
Internally generated intangible assets
Costs relating to internally generated intangible assets, are capitalised if the criteria for recognition as assets are met.
The initial capitalisation of costs is based on management’s judgement that technological and economic feasibility criteria are
met. In making this judgement, management considers the progress made in each development project and its latest forecasts
for each project. Other expenditure is charged to the consolidated income statement in the year in which the expenditure is
incurred. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated
impairment losses. For further information see note 12.
Exceptional items and adjusted performance measures
The Group classifies and presents certain items of income and expense as exceptional items. The Group presents adjusted
performance measures which differ from statutory measures due to exclusion of exceptional items and certain non-cash items as
the Group considers that it allows a further understanding of the underlying financial performance of the Group. These measures
are described as “adjusted” and are used by management to measure and monitor the Group’s underlying financial performance.
Non-cash items that are excluded from adjusted performance measures of underlying financial performance include share benefit
charge and share of post-tax loss of equity accounted joint ventures and associates. The Group also seeks to present a measure of
underlying performance which is not impacted by exceptional items. The Group considers any non-recurring items of income and
expense for classification as exceptional by virtue of their nature and size. The items classified as exceptional (and are excluded
from the adjusted measures) are described in further detail in note 5.
Key accounting estimates
The Group’s response to Brexit is detailed on risk management strategy report. Having redomiciled relevant operating
entities to Malta, the remaining risks of Brexit to 888 are the potential for disruption to movements of staff between Spain and
Gibraltar, and the potential adverse impact on economic and market conditions in the United Kingdom; at this stage, the effect of
Brexit on the carrying values of assets and liabilities cannot be quantified. Brexit has been considered when assessing other key
accounting estimates.
Taxation
Due to the international nature of the Group and the complexity of tax legislation in the jurisdictions in which it operates,
the Group applies judgements in estimating the likely outcome of tax matters and the resultant provision for income taxes. These
judgements are reassessed in each period until the outcome is finally determined through resolution with a tax authority or through
a legal process. Differences arising from changes in judgement or from final resolution may be material and will be charged or
credited to the Income statement in the relevant period.
The Group evaluates uncertain items, where the tax judgement is subject to interpretation and remains to be agreed with the
relevant tax authority. Provisions for uncertain items are made using judgement of the most likely tax expected to be paid, based on
a qualitative assessment of all relevant information. In assessing the appropriate provision for uncertain items, the Group considers
progress made in discussions with tax authorities and expert advice on the likely outcome and recent developments in case law.
The Group believes that its accruals or, where applicable, provisions for tax liabilities are appropriate. For further information, see
note 8.
Impairment of goodwill and other intangible assets
Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which
the goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected
to arise from the cash generating unit and a suitable discount rate in order to calculate present value. Cash flows are typically
forecast for periods up to five years. For some cash generating units it is appropriate to use forecasts extending beyond five years
where future investment in the business is expected to result in a long-term growth being achieved outside of five years. For further
information, see note 12.
Provisions, contingent liabilities and regulatory matters
The Group makes a number of estimates in respect of the accounting for and disclosure of expenses and contingent liabilities
for regulatory matters, including gaming duties. These are described in further detail in note 27.
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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 power over an entity;
exposure, or rights, to variable returns from its involvement with an entity; and the ability to use its power over an entity to
affect the amount of its returns. Subsidiaries are consolidated from the date the Parent gained control until such time as
control ceases.
The financial statements of 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.
Intercompany 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 consists of income from online activities and income generated from foreign exchange commissions on customer
deposit and withdrawals and account fees, which is allocated to each reporting segment. Revenue is recognised in the
accounting periods in which the performance obligations associated with the transactions are satisfied after the deduction
of certain promotional bonuses granted to customers and VAT, and after adding the fees and charges applied to customer
accounts, and is measured at the fair value of the consideration received or receivable.
The Group’s income earned from Casino, Bingo and Sports does not fall within the scope of IFRS 15. Income from these online
activities is disclosed as revenue although these are accounted for and meet the definition of a gain under IFRS 9.
Poker and B2B revenue are within the scope of IFRS 15 and recognised at an amount that reflects the consideration to which
an entity expects to be entitled in exchange for transferring goods or services to a customer.
Revenue from online activities comprises:
Casino and Bingo (IFRS 9)
Casino and Bingo online gaming revenue is represented by the difference between the amounts of bets placed by customers
less amounts won, adjusted for the fair value of certain promotional bonuses granted to customers and the value of loyalty
points accrued.
Sport (IFRS 9)
Sport online gaming revenue comprises bets placed less pay-outs to customers, adjusted for the fair value of open betting
positions and the fair value of bonuses and promotions.
Poker (IFRS 15)
Poker online gaming revenue represents the commission (rake) charged from each poker hand in ring games and entry fees
for participation in Poker tournaments less the fair value of certain promotional bonuses and the value of loyalty points
accrued. In Poker tournaments certain promotional costs are accounted for, and entry fee revenue is recognised when the
tournament has concluded.
B2B (IFRS 15)
Revenue from B2B is mainly comprised of services provided to business partners and brand licensing on third-party platforms.
• For services provided to business partners through its B2B unit, the Group considers whether for each customer it is acting
as a principal or as an agent by considering which party has the primary responsibility for providing the services and
is exposed to the majority of the risks and rewards associated with providing the services, as well as if it has latitude in
establishing prices, either directly or indirectly:
• Where the Group is considered to be the principal, income is recognised as the gross revenue generated from use of the
Group’s platform in online gaming activities with the partners’ share of the revenue charged to marketing expenses.
• In other cases, income is recognised as the Group share of the net revenue generated from use of the Group’s platform.
• B2B also includes fees from the provision of certain gaming related services to partners.
• Customer advances received are treated as deferred income within current liabilities and released as they are earned.
• Revenue derived from brand licensing on third-party platforms represents the Group’s net revenue share from that activity.
OPERATING EXPENSES
Operating expenses consists primarily of staff costs, payment service providers’ commissions, chargebacks, commission and
royalties payable to third parties, all of which are recognised on an accruals basis, and depreciation and amortisation.
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2.3 NEW STANDARDS THAT HAVE NOT BEEN ADOPTED BY THE GROUP AS THEY WERE NOT EFFECTIVE FOR THE YEAR CONTINUED
ADMINISTRATIVE EXPENSES
Administrative expenses consist primarily of staff costs and corporate professional expenses, both of which are recognised
on an accruals basis.
FOREIGN CURRENCY
Monetary assets and liabilities denominated in currencies other than the functional currency of the relevant company are
translated into that functional currency 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 financial income or financial expenses in the consolidated income statement, as appropriate.
The results and financial position of all Group entities that have a functional currency different from US$ are translated into
the presentation currency at foreign exchange rates as set out below. Exchange differences arising, if any, are recorded in the
consolidated statement of comprehensive income as a component of other comprehensive income.
(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. They are accounted for using the balance sheet liability method. Recognition of deferred tax assets
is restricted to those instances where it is probable that taxable profits will be available against which the difference can
be utilised. Such assets and liabilities are not recognised if the temporary differences arise from goodwill or from the
initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither
the taxable profit nor the accounting profit. The amount of the asset or liability is determined using tax rates that have
been enacted or substantively enacted by the balance sheet date and are expected to apply when the deferred tax
liabilities/assets are settled/recovered.
INTANGIBLE ASSETS
Acquired intangible assets
Intangible assets acquired separately consist mainly of software licences and domain names and are capitalised at cost.
Those acquired as part of a business combination are recognised separately from goodwill if the fair value can be measured
reliably. These intangible assets are amortised over the useful life of the assets, which for software licences is between one and
five years and for domain names is five years.
Internally generated intangible assets
Expenditure incurred on development activities of gaming platform 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 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 three and five years, except for certain
licence costs which are amortised over either the life of the licence, or up to 20 years, whichever is the shorter period.
GOODWILL
Goodwill represents the excess of the fair value of the consideration in a business combination over the Group’s interest
in the fair value of the identifiable assets, liabilities and contingent liabilities acquired. Consideration comprises the fair value
of any assets transferred, liabilities assumed and equity instruments issued.
Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated
income statement and not subsequently reversed. Where the fair values 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. Changes in the fair value of the contingent consideration are charged or credited to the consolidated income
statement. In addition, the direct costs of acquisition are charged immediately to the consolidated income statement.
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2.3 NEW STANDARDS THAT HAVE NOT BEEN ADOPTED BY THE GROUP AS THEY WERE NOT EFFECTIVE FOR THE YEAR CONTINUED
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at historical cost less accumulated depreciation. Assets are assessed at each balance
sheet date for indicators of impairment.
Depreciation is calculated using the straight-line method, at annual rates estimated to write off the cost of the assets less their
estimated residual values over their expected useful lives. The annual depreciation rates are as follows:
IT equipment
Office furniture and equipment
Motor vehicles
Leasehold improvements
33%
7-15%
15%
Over the shorter of the term of the lease or useful lives
IMPAIRMENT OF NON-FINANCIAL ASSETS
Impairment tests on goodwill are undertaken annually and where applicable an impairment loss is recognised immediately
in the consolidated 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 (being the higher of value in use and fair value less costs to sell), the asset is written down accordingly
through the consolidated income statement.
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 smallest group of assets to which the asset belongs for which there are separately
identifiable and largely independent cash inflows).
INVESTMENT IN EQUITY ACCOUNTED JOINT VENTURES AND ASSOCIATES
Joint ventures are those entities over whose relevant activities the Group has joint control, established by contractual
agreement and requiring unanimous consent for strategic financial and operating decisions.
Associates are those businesses in which the Group has a long-term interest and is able to exercise significant influence over
the financial and operational policies but does not have control or joint control over those policies.
Joint ventures and associates are accounted for using the equity method and are recognised 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 joint ventures and associates are not recognised unless there is an obligation to make good
those losses.
Profits and losses arising on transactions between the Group and its joint ventures or associates are recognised only to the
extent of unrelated investors’ interests in the joint ventures and associates. The investor’s share in the profits and losses of the
investment resulting from these transactions is eliminated against the carrying value of the investment.
Any premium paid 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 investment. Where there is objective evidence that the
investment has been impaired the carrying amount of the investment is tested for impairment in the same way as other
non-financial assets, and any charge or reversal of previous impairments is taken to the consolidated income statement.
Where amounts paid for an investment in joint venture and associates are in excess of the Group’s share of the fair value
of net assets acquired, the excess is recognised as negative goodwill and released to the consolidated income statement
immediately.
The Group’s share of additional equity contributions from other joint venture partners is taken to the consolidated statement
of comprehensive income.
BUSINESS COMBINATION
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate
of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling
interests in the acquiree. Acquisition-related costs are expensed as incurred and included in administrative expenses.
Business combination achieved in stages refers to transactions which the Group obtains control in entities which it held
an equity interest immediately before the acquisition date. The Group remeasure its previously held equity interest in the
acquiree at its acquisition-date fair value and recognise the resulting gain or loss, if any, in the income statement.
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2.3 NEW STANDARDS THAT HAVE NOT BEEN ADOPTED BY THE GROUP AS THEY WERE NOT EFFECTIVE FOR THE YEAR CONTINUED
TRADE RECEIVABLES
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost and principally
comprise amounts due from credit card companies and from e-payment companies. The Group has applied IFRS 9’s simplified
approach and has calculated the ECLs based on lifetime of expected credit losses. Bad debts are written off when there is
objective evidence that the full amount may not be collected.
FAIR VALUE MEASUREMENT
The Group measures certain financial instruments, including derivatives and equity investments, at fair value at each
balance sheet date. The fair value related disclosures are included in notes 25 and 26. Fair value is the price that would be
received or paid in an orderly transaction between market participants at a particular date, either in the principal market
for the asset or liability or, in the absence of a principal market, in the most advantageous market for that asset or liability
accessible to the Group.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available
to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
The fair value measurement hierarchy is based on the inputs to valuation techniques used to measure fair value. The inputs
are categorised into three levels, with the highest level (level 1) given to inputs for which there are unadjusted quoted prices
in active markets for identical assets or liabilities and the lowest level (level 3) given to unobservable inputs. Level 2 inputs are
directly or indirectly observable inputs other than quoted prices.
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 from the issue of shares, net of direct issue costs.
TREASURY SHARES
Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss
is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any difference
between the carrying amount and the consideration, if reissued, is recognised in the share premium account.
TRADE AND OTHER PAYABLES
Trade and other payables are initially recognised at fair value and subsequently measured at amortised cost.
LIABILITIES TO CUSTOMERS
Liabilities to customers comprise the amounts that are credited to customers’ bankroll (the Group’s electronic ‘wallet’),
including provision for bonuses granted by the Group, less fees and charges applied to customer accounts, along with full
progressive provision for jackpots. These amounts are repayable in accordance with the applicable terms and conditions.
LEASES
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right
to control the use of an identified asset for a period of time in exchange for consideration.
RIGHT-OF-USE ASSETS
Right-of-use assets are recognised at the commencement date of the lease and measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities.
Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives
of the assets, as follows:
Office lease
Motor vehicles
1-10 years
3 years
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2.3 NEW STANDARDS THAT HAVE NOT BEEN ADOPTED BY THE GROUP AS THEY WERE NOT EFFECTIVE FOR THE YEAR CONTINUED
LEASE LIABILITIES
Lease liabilities are recognised at the commencement date of the lease and measured at the present value of lease payments
to be made over the lease term.
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement
date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount
of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition,
the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term or a change in
the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such
lease payments).
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.
DIVIDENDS
Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this
is when declared by the Board of Directors and paid. In the case of final dividends, this is when approved by the shareholders
at the Annual General Meeting.
EQUITY-SETTLED SHARE BENEFIT CHARGES
Where the Company grants its employees or contractors shares or options, the cost of those awards, recognised in the
consolidated income statement over the vesting period with a corresponding increase in equity, is measured with reference
to the fair value at the date of grant. Market performance conditions are taken into account in determining the fair value at
the date of grant. Non-market performance conditions, including service 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
The Group operates two severance pay schemes:
Defined benefit severance pay scheme
The Group operates a defined benefit severance pay scheme pursuant to the Severance Pay Law in Israel. Under this scheme,
Group employees are entitled to severance pay upon redundancy or retirement. The liability for termination of employment is
measured using the projected unit credit method.
Severance pay scheme surpluses and deficits are measured as:
• 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
for the appropriate government bonds that have maturity dates appropriate to the terms of the liabilities.
Remeasurements of the net severance pay scheme assets and liabilities, including actuarial gains and losses on the scheme
liabilities due to changes in assumptions or experience within the scheme and any differences between the interest income
and the actual return on assets, are recognised in the consolidated statement of comprehensive income in the period in which
they arise.
Defined contribution severance pay scheme
In 2017, the Group introduced a defined contribution plan pursuant to section 14 to the Severance Pay Law. Under this
scheme, the Group pays fixed monthly contributions. Payments to defined contribution plans are charged as an expense
as they fall due.
Loans and borrowings
Interest-bearing loans and borrowings are recognised initially at fair value net of directly attributable transaction costs and
are subsequently measured at amortised cost using the effective interest rate (EIR) method. Gains and losses are recognised
in profit or loss when the liabilities are derecognised, as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an
integral part of the EIR. The EIR amortisation is included as finance costs in the income statement.
129
Corporate.888.com NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
3 Segment information
Segmental results 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 mainly the Chief
Executive Officer and the Chief Financial Officer. The operating segments identified are:
• B2C (Business to Customer): including Casino and games, Poker, Sport, Bingo; and
• B2B (Business to Business): offering Total Gaming Services under the Dragonfish trading brand. Dragonfish offers to its
business partners use of technology, software, operations, E-payments and advanced marketing services, through the
provision of offline/online marketing, management of affiliates, search engine optimisation (SEO), customer relationship
management (CRM) and business analytics.
There has been no aggregation of these two operating segments for reporting purposes. The management team continues
to assess the performance of operating segments based on revenue and segment profit, being revenue net of chargebacks,
payment service providers’ commissions, gaming duties, royalties payable to third parties, selling and marketing expenses.
2019
Segment revenue
Segment result2
Unallocated corporate expenses3
Exceptional items
Operating profit
Finance income
Finance expenses
Share of post-tax loss of equity
accounted associate
Taxation
Profit after tax for the year
Adjusted profit after tax for the year4
Assets
Unallocated corporate assets
Total assets
Liabilities
Segment liabilities
Unallocated corporate liabilities
Total liabilities
B2C
B2B
Consolidated
Casino
US$ million
Poker
US$ million
Sport
US$ million
Bingo
US$ million
Total B2C
US$ million US$ million US$ million
359.3
42.71
90.0
38.5
530.5
210.2
29.81
13.7
53.8
0.9
560.3
223.9
(169.4)
(2.3)
52.2
0.5
(7.2)
(0.2)
(3.7)
41.6
49.5
433.1
433.1
54.7
213.7
268.4
1 Revenue recognised in accordance with IFRS 15 – Revenue from contracts with customers.
2 Revenue net of chargebacks, payment service providers’ commissions, gaming duties, royalties payable to third parties and selling and marketing expenses.
3 Including staff costs, corporate professional expenses, other administrative expenses, depreciation, amortisation and share benefit charges.
4 As defined in note 9.
130
888 Holdings plc Annual Report & Accounts 2019Financial Statements continued STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
3 Segment information continued
2018
Segment revenue before VAT accrual
VAT accrual release
Segment revenue
Segment result2
Unallocated corporate expenses3
Exceptional items
Operating profit
Finance income
Finance expenses
Gain from remeasurement of previously
held equity interest in joint ventures
Share of post-tax loss of equity
accounted associate
Taxation
Profit after tax for the year
Adjusted profit after tax for the year4
Assets
Unallocated corporate assets
Total assets
Liabilities
Segment liabilities
Unallocated corporate liabilities
Total liabilities
B2C
B2B
Consolidated
Casino
US$ million
Poker
US$ million
Sport
US$ million
Bingo
US$ million
Total B2C
US$ million US$ million US$ million
317.6
49.01
80.3
32.4
479.3
10.7
490.0
218.7
50.61
50.6
25.4
55.5
1.6
529.9
10.7
540.6
244.1
(155.5)
11.1
99.7
0.6
(0.7)
9.3
(0.2)
(13.9)
94.8
72.8
380.6
380.6
57.1
163.2
220.3
1 Revenue recognised in accordance with IFRS 15 – Revenue from contracts with customers.
2 Revenue net of chargebacks, payment service providers’ commissions, gaming duties, royalties payable to third parties and selling and marketing expenses.
3 Including staff costs, corporate professional expenses, other administrative expenses, depreciation, amortisation and share benefit charges.
4 As defined in note 9.
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.
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 MARKET (BASED ON LOCATION OF CUSTOMER)
EMEA (excluding the UK and Spain)1
UK
Spain
Americas
Rest of world
Revenue before VAT accrual release
VAT accrual release
Total revenue
1 Non-European revenue included in the market during 2019 amounts to US$42.8 million (2018: US$45.7 million).
2019
US$ million
2018
US$ million
231.2
204.1
60.9
51.7
12.4
560.3
—
560.3
228.9
170.6
68.0
48.1
14.3
529.9
10.7
540.6
131
Corporate.888.com NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
3 Segment information continued
NON-CURRENT ASSETS BY GEOGRAPHICAL LOCATION
Gibraltar
Rest of world
Total non-current assets by geographical location1
1 Excludes deferred tax assets of US$2.8 million (2018: US$1.4 million).
4 Operating profit
Operating profit is stated after charging:
Staff costs (including Executive Directors)
Gaming duties
Selling and marketing expenses
Exceptional items
Fees payable to EY Limited, Ernst & Young LLP and its affiliates:
Statutory audit of the consolidated financial statements
Other assurance services
Depreciation of property plant and equipment and right-of-use assets
(within operating expenses)
Amortisation (within operating expenses)
Chargebacks
Payment of service providers’ commissions
Carrying amount of
non-current assets by location
2019
US$ million
2018
US$ million
158.5
129.7
288.2
135.6
77.6
213.2
Note
2019
US$ million
2018
US$ million
6
5
2.2,13
12
98.0
95.5
161.8
2.3
0.8
—
12.6
19.6
3.3
23.6
95.7
69.9
155.0
(11.1)
0.7
—
5.3
15.0
2.8
23.2
5 Exceptional items
The Group classifies certain items of income and expense as exceptional, as the Group considers that it allows for a further
understanding of the underlying financial performance of the Group. The Group considers any non-recurring items of income
and expense for classification as exceptional by virtue of their nature and size.
Exceptional legal and professional costs
Restructuring costs
Historical VAT charge
Provision – regulatory matters
Total exceptional items1
2019
US$ million
2018
US$ million
1.0
1.3
—
—
2.3
0.9
—
(22.4)
10.4
(11.1)
1 Tax effect of the exceptional items is US$0.3 million credit (2018: US$0.3 million tax charge).
EXCEPTIONAL LEGAL AND PROFESSIONAL COSTS
During 2019, the Group incurred legal and professional costs of US$1.0 million (2018: US$0.9 million) associated with the
acquisitions of Jet Bingo brands and BetBright’s sports betting platform.
RESTRUCTURING COSTS
Restructuring costs during the period comprises with employees redundancy costs mainly in Israel, part of the Group cost
optimisation project, shifting workforce from high cost locations to low cost locations.
HISTORICAL VAT CHARGE
In 2017, the Group recorded a provision for exceptional items of US$45.3 million in respect of historical value added tax
relating to the provision of gaming services in Germany prior to 2015. During 2018, following receipt of tax assessments from
the Tax Authorities in Germany, the Group paid US$24.6 million on account of this provision and released US$22.4 million
of the provision.
132
888 Holdings plc Annual Report & Accounts 2019Financial Statements continued STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
5 Exceptional items continued
PROVISION – REGULATORY MATTERS
During 2018, the Group recorded a provision of US$10.4 million in respect of regulatory matters related to legacy customers’
activity in prior periods. This amount represents management’s best estimate of probable cash outflows related to these
matters, which are closely monitored by the Group. See also note 19.
6 Employee benefits
Staff costs, including Executive Directors’ remuneration, comprises the following elements:
Wages and salaries
Social security
Employee benefits and severance pay scheme costs
Staff costs capitalised in respect of internally generated intangible assets
2019
US$ million
2018
US$ million
97.4
5.1
7.8
110.3
(12.3)
98.0
94.6
4.9
8.0
107.5
(11.8)
95.7
In the consolidated income statement, total staff costs, excluding share benefit charges of US$5.4 million (2018: US$8.9 million),
are included within the following expenditure categories:
Operating expenses
Research and development expenses
Administrative expenses
The average number of employees by category was as follows:
Operations
Research and development
Administration
2019
US$ million
2018
US$ million
50.8
26.9
20.3
98.0
51.9
25.6
18.2
95.7
2019
Number
2018
Number
843
427
143
1,413
805
388
127
1,320
At 31 December 2019, the Group employed 1,413 (2018: 1,364) staff.
At 31 December 2019, the Group used the services of 62 chat moderators (2018: 210) and 153 contractors (2018: 82).
SEVERANCE PAY SCHEME – ISRAEL
The Group has defined contribution plan pursuant to section 14 to the Severance Pay Law under which the Group pays fixed
contributions and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient
amounts to pay all employee benefits relating to employee service at the date of their departure. The Group recognised an
expense in respect of contribution to the defined contribution plan during the year of US$1.1 million (2018: US$0.8 million).
The Group’s employees in Israel, which are not subject to section 14 to the Severance Pay Law, are eligible to receive certain
benefits from the Group in specific circumstances on leaving the Group. As such, the Group operates a defined benefit
severance pay plan which requires contributions to be made to separately administered funds. The funds are held by an
independent third-party company.
The current service cost and the present value of the defined benefit obligation are measured using the projected unit credit
method. Under this schedule, the Company contributes on a monthly basis at the rate of 8.3% of the aggregate of members’
salaries.
The disclosures set out below are based on calculations carried out as at 31 December 2019 by a qualified independent actuary.
133
Corporate.888.com NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
6 Employee benefits continued
SEVERANCE PAY SCHEME – ISRAEL CONTINUED
The following table summarises the employee benefits figures as included in the consolidated financial statements:
Included in the balance sheet:
Severance pay scheme liability (within trade and other payables)
Included in the income statement:
Current service costs (within operating expenses)
Current service costs (within research and development)
Current service costs (within administrative expenses)
Included in the statement of comprehensive income:
Remeasurement of severance pay scheme liability
Movement in severance pay scheme liability:
Severance pay scheme assets
At beginning of year
Interest income
Contributions by the Group
Benefits paid
Return on assets less interest income already recorded
Exchange differences
At end of year
Severance pay plan liabilities
At beginning of year
Interest expense
Current service costs
Benefits paid
Actuarial gain on past experience
Actuarial loss on changes in financial assumptions
Exchange differences
At end of year
2019
US$ million
2018
US$ million
6.0
1.5
1.3
0.8
2.2
2.2
1.6
1.5
0.7
(1.1)
2019
US$ million
2018
US$ million
21.9
1.0
3.1
(6.0)
0.1
1.7
21.8
22.5
0.8
3.6
(3.2)
(0.2)
(1.6)
21.9
2019
US$ million
2018
US$ million
24.1
1.0
3.6
(6.1)
(0.2)
3.4
2.0
27.8
25.8
0.9
3.8
(3.2)
(0.2)
(1.2)
(1.8)
24.1
As at 31 December, the net accounting deficit of the defined benefit severance pay plan was US$6.0 million
(2018: US$2.2 million). The Scheme is backed by substantial assets, amounting to US$21.8 million at 31 December 2019
(2018: US$21.9 million). The net accounting deficit of defined benefit severance plan is a result of two elements:
• Potential liability to pay further contributions to employees who will be made redundant, if the fund does not hold sufficient
assets to pay all benefits relating to employee service at the date of their departure.
• Volatility of Israeli government bond rates may have substantial impact in absolute terms on the net liability. A decrease
in the discount rate from 4.46% in 2018 to 2.88% in 2019 resulted in a US$3.4 million increase the plan liabilities.
• A further decrease in the discount rate by 0.25% per annum (i.e. 2.88% to 2.63%) would increase the plan liabilities
by US$0.7 million (2018: US$0.5 million).
The impact of the severance deficit on the level of distributable reserves is monitored on an ongoing basis. Monitoring enables
planning for any potential adverse volatility and helps the Group to assess the likely impact on distributable reserves.
Employees can determine individually into which type of investment their share of the plan assets are invested and, therefore
the Group is unable to accurately disclose the proportions of the plan assets invested in each class of asset.
The expected contribution for 2020 is US$3.8 million.
134
888 Holdings plc Annual Report & Accounts 2019Financial Statements continued STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
6 Employee benefits continued
SEVERANCE PAY SCHEME – ISRAEL CONTINUED
The main actuarial assumptions used in determining the fair value of the Group’s severance pay plan are shown below:
Discount rate (nominal)
Estimated increase in employee benefits costs
Voluntary termination rate
Inflation rates based on Israeli bonds
2019
%
2.88
5.14
75
1.52
2018
%
4.46
5.14
75
1.52
SENSITIVITY OF BALANCE SHEET AT 31 DECEMBER 2019
The results of the calculations are sensitive to the assumptions used. The balance sheet position revealed by IAS 19
calculations must be expected to be volatile, principally because the market value of assets (with significant exposure
to equities) is being compared with a liability assessment derived from corporate bond yields.
The table below shows the sensitivity of the IAS 19 balance sheet position to small changes in some of the assumptions.
Where one assumption has been changed all the other assumptions are kept as disclosed above.
Discount rate less 0.25%
Estimated increase in employee benefits costs plus 1%
Voluntary termination rate decrease 5%
Inflation rates up 0.25%
7 Finance income and finance expenses
Finance income:
Interest income
Finance income
Finance expenses:
Foreign exchange losses
Interest expenses related to right-of-use lease liabilities
Interest-bearing credit facility
Finance expenses
Resulted
(surplus)/
deficit
US$ million
Change
from
disclosed
US$ million
(0.7)
(8.6)
(6.2)
(5.4)
(0.5)
(2.6)
(0.2)
0.6
2019
US$ million
2018
US$ million
0.5
0.5
0.6
0.6
2019
US$ million
2018
US$ million
4.3
1.3
1.6
7.2
0.7
—
—
0.7
135
Corporate.888.com NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
8 Taxation
CORPORATE TAXES
Current taxation
Gibraltar taxation
Other jurisdictions taxation
Adjustments in respect of prior years
Deferred taxation
Origination and reversal of temporary differences
Taxation expense
Deferred taxation related to items recognised in OCI
Remeasurement of severance pay liability
2019
US$ million
2018
US$ million
0.4
2.3
1.7
4.4
(0.7)
3.7
2.2
11.9
(0.2)
13.9
—
13.9
(1.1)
—
The taxation expense for the year differs from the standard Gibraltar rate of tax. The differences are explained below:
Profit before taxation
Standard tax rate in Gibraltar (2019: 10%, 2018: 10%)
Higher effective tax rate on other jurisdictions
Tax on dividend distribution from other jurisdictions
Expenses not allowed for taxation
Deferred tax
Capital allowances in excess of depreciation
Non-taxable revaluation of equity interest
Non-taxable income
Adjustments to prior years’ tax charges
Total tax charge for the year
2019
US$ million
2018
US$ million
45.3
4.5
1.9
—
0.2
(0.7)
(0.5)
—
(1.8)
0.1
3.7
108.7
10.9
4.1
5.5
1.8
—
(0.8)
(0.9)
(6.5)
(0.2)
13.9
Current tax is calculated with reference to the profit of the Company and its subsidiaries in their respective countries of
operation. Set out below are details in respect of the significant jurisdictions where the Group operates and the factors that
influenced the current and deferred taxation in those jurisdictions:
GIBRALTAR
Gibraltar companies are subject to a corporate tax rate of 10%. Gibraltar corporate tax expenses for the year are significantly
lower compared to 2018, as a result of lower profit before tax and re-domiciliation of several companies to Malta.
MALTA
During the year, the Company redomiciled several its Gibraltar companies to Malta, and also incorporated a number of new
Maltese companies. Maltese companies are subject to a corporate tax rate of 35%, however a deemed dividend deduction
of 30% reduces the effective rate to 5%. In order to qualify for the deduction, the Company must pay an appropriate dividend
to its shareholders from trading income.
ISRAEL
The domestic corporate tax rate in Israel in 2019 is 23% (2018: 23%). The Company’s Israeli subsidiary concluded an
assessment agreement with respect to all tax years up to and including 2014 and entered into certain transfer pricing
agreements with the Israeli Income Tax Commissioner as regards to 2015.
UK
The Group’s subsidiary in the UK is subject to a corporate tax rate of 19% (2018: 19%). In addition to the previously enacted
reduction in the UK corporation tax rate to 19% from April 2017, the UK government announced and substantively enacted
a further reduction to 17% from April 2020.
136
888 Holdings plc Annual Report & Accounts 2019Financial Statements continued STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
8 Taxation continued
ROMANIA
The Group’s subsidiary in Romania is subject to a corporate tax rate of 16% (2018: 16%).
US
The Group’s subsidiaries in US are subject to federal corporate tax rate of 21% (2018: 21%), and state (New Jersey) tax rate
of 9% (2018: 9%).
SENSITIVITY ANALYSIS
The key operating companies in the Group are incorporated, managed and controlled and tax resident mainly in Gibraltar,
with several operating companies tax residents in Malta. The Group’s subsidiaries are located in different jurisdictions and
these subsidiaries are taxed locally on their respective profits which are determined based on transfer pricing studies.
Effective tax rate increased by 1% would result in an increase in the tax charge (and associated provision) of US$0.5 million
(2018: US$1.1 million).
9 Earnings per share
BASIC EARNINGS PER SHARE
Basic earnings per share (EPS) has been calculated by dividing the profit attributable to ordinary shareholders by the
weighted average number of shares in issue and outstanding during the year.
DILUTED EARNINGS PER SHARE
The weighted average number of shares for diluted earnings per share takes into account all potentially dilutive equity
instruments granted, which are not included in the number of shares for basic earnings per share. Certain equity instruments
have been excluded from the calculation of diluted EPS as their conditions of being issued were not deemed to satisfy the
performance conditions at the end of the period or it will not be advantageous for holders to exercise them into shares, in the
case of options. The number of equity instruments included in the diluted EPS calculation consist of 2,128,947 Ordinary Shares
(2018: 5,759,968) and no market-value options (2018: 18,481).
The number of equity instruments excluded from the diluted EPS calculation is 3,802,458 (2018: 2,078,991).
Profit for the period attributable to equity holders of the parent (US$ million)
Weighted average number of Ordinary Shares in issue and outstanding
Effect of dilutive Ordinary Shares and Share options
Weighted average number of dilutive Ordinary Shares
Basic earnings per share
Diluted earnings per share
2019
2018
41.6
367,173,313
2,128,947
369,302,260
11.3¢
11.3¢
94.8
361,122,725
5,778,449
366,901,174
26.3¢
25.8¢
ADJUSTED EARNINGS PER SHARE
The Directors believe that EPS excluding VAT accrual release, exceptional items, share benefit charges, gain from
remeasurement of previously held equity interest in joint ventures and share of post-tax loss of equity accounted associate
(‘Adjusted EPS’) allows for a further understanding of the underlying performance of the business and assists in providing
a clearer view of the performance of the Group.
Reconciliation of profit to profit excluding VAT accrual release, exceptional items, share benefit charges, gain from
remeasurement of previously held equity interest in joint ventures and share of post-tax loss of equity accounted associate
(‘Adjusted profit’):
Profit for the period attributable to equity holders of the parent
VAT accrual release
Exceptional items (see note 5)
Share benefit charges (see note 23)
Gain from remeasurement of previously held equity interest in joint ventures
Share of post-tax loss of equity accounted associate (see note 14)
Adjusted profit
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
2019
US$ million
2018
US$ million
41.6
—
2.3
5.4
—
0.2
49.5
94.8
(10.7)
(11.1)
8.9
(9.3)
0.2
72.8
367,173,313
369,302,260
361,122,725
366,901,174
13.5¢
13.4¢
20.2¢
19.8¢
137
Corporate.888.com NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
10 Dividends
Dividends paid
2019
US$ million
2018
US$ million
40.4
56.6
An interim dividend of 3.0¢ per share was paid on 18 October 2019 (US$11.0 million). The Board of Directors will recommend
to the shareholders a final dividend in respect of the year ended 31 December 2019 of 3.0¢ per share, which will be recognised
in the 2020 financial statements once approved.
In 2018, an interim dividend of 4.2¢ per share was paid on 31 October 2018 (US$15.2 million) and a final dividend of 6.0¢ per
share plus an additional one-off 2.0¢ per share were paid on 23 May 2019 (US$29.4 million).
11 Business combinations
ACQUISITION OF JET BINGO BRANDS
On 19 February 2019, the Group announced the signing of an agreement for the acquisition of a portfolio of Bingo brands,
including Costa Bingo and certain other Bingo brands of Jet Management Group Limited and Jet Media Limited (together,
“Jet”) for consideration of £18.0 million (US$22.9 million). Jet is part of the group of companies headed by JPJ Group plc, which
owns the Jackpotjoy brands. The consideration was satisfied all in cash during 2019.
Jet has been a partner of Dragonfish, the Group’s B2B Bingo division, since 2009, with brands including Costa Bingo, City
Bingo and Sing Bingo. The acquisition gives the Group full control of these successful brands from a marketing perspective to
support and further strengthen the Group’s position in the UK online bingo market. Revenue of the acquired business since the
acquisition date amount to US$8.3 million. Results of the acquired business are measured as part of Bingo segment. See also
note 3.
The fair values of the identifiable assets and liabilities acquired were:
Assets
Other intangible assets1
Total assets
Liabilities
Deferred tax Liability
Total Liabilities
Total identifiable net assets at fair value
Goodwill arising on acquisition
Purchase consideration transferred
Fair value of purchase consideration
1 Other intangible assets consist of Customer list of US$19.2 million and Brand name of US$2.3 million.
Fair value
recognised on
acquisition
US$ million
21.5
21.5
2.2
2.2
19.3
4.2
23.5
23.5
138
888 Holdings plc Annual Report & Accounts 2019Financial Statements continued STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
11 Business combinations continued
ACQUISITION BETBRIGHT’S SPORTS BETTING PLATFORM
On 4 March 2019, the Group announced the acquisition of BetBright’s sports betting platform for £15.0 million. The consideration
was satisfied all in cash, with £15.0 million (US$19.3 million) paid during H1 2019. The acquisition strengthens 888’s product and
technology capabilities and will support the long-term development strategy for 888Sport. During 2019 the Group was focused
on the integration of the acquired technology and team into 888’s business with the aim of commencing a phased and market-
by-market roll-out of the Group’s proprietary sportsbook solution during 2020.
The fair values of the identifiable assets and liabilities acquired were:
Assets
Property, plant and equipment
Other intangible assets1
Total identifiable net assets at fair value
Purchase consideration transferred
Fair value of purchase consideration
1 Other intangible assets consist of Sport platform technology of US$18.3 million and the right to access third-party customer list of US$0.8 million.
12 Goodwill and other intangible assets
Fair value
recognised on
acquisition
US$ million
0.2
19.1
19.3
19.3
19.3
Cost or valuation
At 1 January 2018
Additions
Acquisition of a subsidiary (AAPN buyout)
At 31 December 2018
Additions1
Acquisition of BetBright Sport platform
Acquisition of Jet Bingo brands
Disposals
At 31 December 2019
Amortisation and impairments:
At 1 January 2018
Amortisation charge for the year
At 31 December 2018
Amortisation charge for the year
Disposals
At 31 December 2019
Carrying amounts
At 31 December 2019
At 31 December 2018
At 1 January 2018
Acquired
intangible
assets
US$ million
Internally
generated
intangible
assets
US$ million
Goodwill
US$ million
Total
US$ million
146.1
—
30.9
177.0
—
—
4.2
—
181.2
20.7
—
20.7
—
—
20.7
160.5
156.3
125.4
21.6
2.7
9.9
34.2
3.1
19.1
21.5
(0.5)
77.4
16.2
3.2
19.4
10.3
(0.5)
29.2
48.2
14.8
5.4
80.6
12.0
—
92.6
11.8
—
—
—
248.3
14.7
40.8
303.8
14.9
19.1
25.7
(0.5)
104.4
363.0
51.6
11.8
63.4
9.3
—
72.7
31.7
29.2
29.0
88.5
15.0
103.5
19.6
(0.5)
122.6
240.4
200.3
159.8
1 Acquired intangible assets includes US$0.5 million capitalisation of finance costs relating to the acquisition of BetBright’s sports betting platform.
Following a review of fully written down assets, assets no longer in use with a total cost and accumulated amortisation of
US$0.5 million were written off in 2019 (2018: nil).
139
Corporate.888.com NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
12 Goodwill and other intangible assets continued
ACQUISITION DURING THE PERIOD
Fair Value of acquired intangible assets recognised on the acquisition of Jet Bingo brands consisting of Customer list of
US$19.2 million and Brand name of US$2.3 million. The estimated remaining useful life of the Customer list and Brand name
is 12 years (using the sliding scale method with 70% of the value to be amortised over five years) and ten years, respectively.
Fair Value of acquired intangible assets recognised on the acquisition of BetBright Sport platform consist of Sport platform of
US$18.3 million and the right to access third-party customer list of US$0.8 million. The estimated remaining useful life of the
Sport platform and right to access third-party customer list is 12 years and eight years, respectively.
ACQUISITION IN 2018
Fair value of acquired intangible assets recognised on acquisition of AAPN included licence to operate, trade names and
customer relationships. The estimated remaining useful life of the acquired intangible assets is five years, five years and up to
12 years, respectively.
SOFTWARE LICENCES
No impairment tests were considered to be required at 31 December 2019 and the carrying value of licences is considered
to be appropriate.
OTHER INTANGIBLE ASSETS
No impairment tests were considered to be required at 31 December 2019 and the carrying value of other intangible assets
is considered to be appropriate.
INTERNALLY GENERATED INTANGIBLE ASSETS
This category of assets includes capitalised development costs in accordance with IAS 38. The material projects
as included within the carrying amount above include compliance with local regulatory requirements in certain
jurisdictions US$5.4 million (2018: US$5.6 million) and a major upgrade to the gaming systems platform US$26.3 million
(2018: US$23.5 million). No impairment tests were considered to be required at 31 December 2019 and the carrying value
of internally generated intangible assets is considered to be appropriate. At 31 December 2019, there were projects with
carrying value US$8.4 million (2018: US$4.3 million) which were not completed and therefore not being amortised. All of
these projects are expected to complete and commence amortisation in 2020.
GOODWILL – JET
The recognised goodwill reflects the potentially significant opportunities in the Bingo business to create additional value
for the Group.
Analysis of goodwill by cash generating units:
B2C
B2B
Consolidated
Bingo
US$ million
AAPN
US$ million
Other
US$ million
Bingo
US$ million
Total goodwill
US$ million
Carrying value at 31 December 2019
Carrying value at 31 December 2018
104.4
95.4
30.9
30.9
0.3
0.3
24.9
29.7
160.5
156.3
REORGANISATION OF GOODWILL
Following the acquisition of B2B partner Jet by the B2C cash generating unit (see note 11), management undertook a review of
the goodwill allocated to its cash generating units. This resulted in an $4.8m of goodwill being reallocated from B2B to B2C cash
generating unit.
Prior to the reallocation of the goodwill, impairment reviews were carried out for each individual goodwill CGU with no impairment
identified. The carrying values of the assets were compared with the recoverable amounts, the recoverable amount was estimated
based upon a value in use calculation, based upon management forecasts, as at 31 December 2019, for the years ending 31
December 2020 and up to 31 December 2024. An impairment review was also carried on the reallocated goodwill using the
assumptions shown below.
IMPAIRMENT
In accordance with IAS 36 and the Group’s stated accounting policy an impairment test is carried out annually on the carrying
amounts of goodwill and a review for indicators of impairment is carried out for other non-current assets. Where an impairment test
was carried out, the carrying value is compared to the recoverable amount of the asset or the cash generating unit. In each case,
the recoverable amount was the value in use of the assets, which was determined by discounting the future cash flows of the relevant
asset or cash generating unit to their present value.
140
888 Holdings plc Annual Report & Accounts 2019Financial Statements continued STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
12 Goodwill and other intangible assets continued
GOODWILL – BINGO B2C AND B2B BUSINESS
Goodwill and intangible assets associated with the Bingo online business unit arose following the acquisition of the Bingo online
business of Globalcom Limited during 2007, the acquisition of the Wink Bingo business in 2009 and the acquisition of the Jet
bingo brands in 2019. The income streams generated from the Bingo online business, comprise the B2C Bingo cash generating
unit and the B2B cash generating unit. Following the acquisition of the Jet bingo brands, revenue associated with Jet is now
recognized as Bingo B2C instead of B2B.
KEY ASSUMPTIONS AND INPUTS USED
Cash flow projections have been prepared for a five-year period, following which a long-term growth rate has been assumed.
Underlying growth rates, as shown in the table below for each of B2B and B2C, have been applied to revenue and are based
on past experience, including the results in 2018 and 2019 and projections of future changes in the UK online bingo gaming
market. Key assumptions in preparing these cash flow projections include zero short-term revenue growth rate, continued
optimisation of costs per customer acquisition and the expectation that the Group will continue to operate and be subject
to gaming duties in its core jurisdictions.
The pre-tax discount rate that is considered by the Directors to be appropriate is the Group’s specific Weighted Average Cost
of Capital, adjusted for tax, which is considered to be appropriate for the online Bingo cash generating units.
Pre-tax
discount rate
applied1
Underlying
growth rate2
year 1
Underlying
short-term
growth rate
years 2-5
Long-term
growth rate
year 6+
Operating
expenses
increase
years 1-5
Operating
expenses
increase
year 6+
At 31 December 2019
At 31 December 2018
9%
9%
2%
2%
0%
3%
2%
2%
0%
2%
2%
2%
1 The pre-tax discount rate is recalculated by taking into account prevailing risk free rates, equity risk premium and company beta and having regard to external data
commenting upon the Weighted Average Cost of Capital applied to the Group.
2 The underlying growth rates of Bingo B2C and Bingo B2B units are 6% and (3%), respectively. This outcome is a direct result of recognising Jet as Bingo B2C rather than B2B
for the first full year following the acquisition of Jet bingo brands.
The calculation of value in use for Bingo B2C and Bingo B2B units is most sensitive to the following assumptions:
(i)
Revenue growth rate assumptions. Growth rates are based on past experience and projections of future changes in the
online gaming market, the continued highly competitive UK Bingo market, as well as the proactive steps 888 has taken
to address the tighter regulatory environment in the UK. A reduction of the short-term growth rates by 2% for each
of B2B and B2C would result in zero headroom for Bingo B2B and Bingo B2C, respectively.
(ii) Cash flow forecast – cash flow projections may be affected by changes in the UK gaming market, including possible
economic slowdown as a result of Brexit. A reduction of 34% and 10% in the cash flow projections for each of B2B
and B2C would result in zero headroom for Bingo B2B and Bingo B2C, respectively.
GOODWILL - AAPN
The Group recognised goodwill of US$30.9 million following the acquisition of the remaining 53% interest in the voting shares
of AAPN in December 2018. The recognised goodwill represents the potential revenues from the US, which the Group considers
as a single CGU, as the states regulate online gambling and reflects potentially significant opportunities in the US to create
additional value for the Group.
KEY ASSUMPTIONS AND INPUTS USED
Given the early stage of market development, cash flow projections have been prepared for a ten year period, following which
a long-term growth rate has been assumed based on the long-term GDP growth rate of the states ten-year. Underlying growth
rates have been applied to revenue and are based on past experience of the Group, including market share forecast for each
relevant state. Key assumptions in preparing these cash flow projections include market share assumptions based on current
888 market share in other regulated online gaming jurisdictions, 15% pre-tax discount rate and the expectation that the
Group will continue to operate in the US and launch in further states as regulation develops. The states which the Group are
forecasted to enter have either already regulated or are in the process of regulating.
The pre-tax discount rate that is considered by the Directors to be appropriate is the Group’s specific Weighted Average Cost
of Capital, adjusted for tax, and including an addition risk premium which is considered to be appropriate for the US B2C cash
generating unit.
The calculation of value in use for US B2C is most sensitive to the following assumptions:
(i) Market share assumptions - A reduction of 25% in market share assumptions for each state would result in zero
headroom for US B2C value in use.
(ii) Pre-tax discount rate – An increase of Pre-tax discount rate from 15% to 18% would result in zero headroom for US B2C
value in use.
141
Corporate.888.com NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
13 Property, plant and equipment
Cost
At 1 January 2018
Additions
Disposals
At 31 December 2018
Additions
Disposals
At 31 December 2019
Accumulated depreciation
At 1 January 2018
Charge for the year
Disposals
At 31 December 2018
Charge for the year
Disposals
At 31 December 2019
Carrying amounts
At 31 December 2019
At 31 December 2018
At 1 January 2018
IT equipment
US$ million
Office furniture,
equipment and
motor vehicles
US$ million
Leasehold
improvements
US$ million
Total
US$ million
44.1
6.4
(3.5)
47.0
7.5
(0.1)
54.4
38.6
4.4
(3.5)
39.5
5.7
(0.1)
45.1
9.3
7.5
5.5
5.5
0.6
—
6.1
0.3
(0.1)
6.3
3.6
0.5
—
4.1
0.5
—
4.6
1.7
2.0
1.9
15.2
0.3
—
15.5
0.8
—
16.3
13.6
0.4
—
14.0
0.3
—
14.3
2.0
1.5
1.6
64.8
7.3
(3.5)
68.6
8.6
(0.2)
77.0
55.8
5.3
(3.5)
57.6
6.5
(0.1)
64.0
13.0
11.0
9.0
Following a review of fully written down assets in 2018, assets no longer in use with a total cost and accumulated depreciation
of US$3.5 million were written off.
14 Investments
INVESTMENTS IN ASSOCIATE
The following entities meet the definition of an associate and have been equity accounted in the consolidated financial
statements:
Name
Come2Play Limited
Relationship
Country of
incorporation
Effective
interest
31 December
2019
Effective
interest
31 December
2018
Associate
Israel
20%
20%
On 15 April 2015, the Group acquired 20% of the Ordinary Shares of Come2Play Limited for a cash payment of US$1.5 million.
As at 31 December 2019, the Group had investment in associate of US$0.7 million (2018: US$0.9 million). Further disclosures
have not been provided as the investment is not material to the Group.
A reconciliation of the movements in the Group’s interest in equity accounted associate is shown below:
At 1 January 2018
Share of post-tax loss of equity accounted associate
At 31 December 2018
Share of post-tax loss of equity accounted associate
At 31 December 2019
142
US$ million
1.1
(0.2)
0.9
(0.2)
0.7
888 Holdings plc Annual Report & Accounts 2019Financial Statements continued STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
14 Investments continued
INVESTMENTS IN US JOINT VENTURES
In 2013, the Group entered into a joint venture agreement (“JVA”) with Avenue OLG Entertainment LLC (“Avenue”)
and other minority shareholders to form AAPN Holdings LLC (“AAPN”), under which the Group had a 47% interest in AAPN.
AAPN has a 100% owned subsidiary, AAPN New Jersey LLC (“AAPN NJ”), which has a B2C gaming offering in New Jersey.
AAPN has been equity accounted for, reflecting the Group’s effective 47% interest in their consolidated results and assets.
On 10 December 2018 (‘AAPN buyout day’), the Group acquired an additional 53% interest in the voting shares of AAPN
Holdings LLC (AAPN), increasing its ownership interest to 100% for cash consideration of US$28.5 million. US$10.0 million was
paid (gross of US$0.8 million cash acquired) to the non-controlling shareholders on the day of acquisition and additional
US$18.4 million paid during the first quarter of 2019.
The Group remeasured its previously held 47% equity interest in AAPN at its acquisition-date fair value and recognised US$9.3
million gain in the consolidated income statement. The US$30.9 million goodwill recognised on acquisition represents the
potential revenues from the US market as the states regulate online gambling.
AAPN results were under the joint venture framework until AAPN buyout day. Starting 11 December 2018, AAPN results are
included in the consolidated income statement. AAPN assets and liabilities as of 31 December 2019 and 31 December 2018 are
included in the consolidated balance sheet.
The Group’s share of post-tax losses of the joint ventures for the period 1 January 2018–10 December 2018 as are as follows:
Income statement of US joint ventures
Revenue
Expenses
Post-tax loss of joint ventures
Expenses attributed to class B holders
Total post-tax loss of joint ventures attributed to the Group
Group effective interest in joint ventures
Group share of post-tax loss of joint ventures1
US$ million
2.7
(10.8)
(8.1)
(2.0)
(10.1)
47%
(4.7)
1 The Group’s investment in the US joint ventures had reduced to nil due to the US joint ventures’ cumulative losses exceeding the Group’s investment. In 2018, the US joint
ventures incurred further losses and, as a result, the Group’s investment remained at nil. As the Group’s investment remained at nil, the Group did not recognise the losses
of US$4.7 million in its consolidated income statement in 2018. The total amount of unrecognised loss as of AAPN buyout day is US$13.2 million.
OTHER INVESTMENTS
The Group holds equity instruments designated at fair value through OCI of US$0.2 million at 31 December 2019
(31 December 2018: US$0.2 million).
15 Deferred taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. The Group’s deferred tax assets and
liabilities resulting from temporary differences, some of which are expected to be settled on a net basis, are as follows:
Deferred tax relates to the following:
Accrued severance pay
Vacation pay accrual
Property, plant and equipment
Intangible assets
Reflected in the statement of financial position as follows:
Deferred tax assets
Deferred tax liabilities
2019
US$ million
2018
US$ million
1.4
0.5
1.2
(4.3)
(1.2)
2.8
(4.0)
0.2
0.5
1.0
(2.6)
(0.9)
1.4
(2.3)
The Group has no tax losses at 31 December 2019 (2018: nil) that are available indefinitely for offset against future taxable
profits of the companies in which the losses arose.
Deferred tax liabilities of US$2.2 million have been recognised in respect of the fair value of acquired intangible assets
recognised on acquisition of Sport platform and Bingo brands (2018: US$2.3 million in respect of the fair value of acquired
intangible assets recognised on acquisition of AAPN).
143
Corporate.888.com NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
16 Cash and cash equivalents
Cash and short-term deposits
Customer funds
Restricted short-term deposits
2019
US$ million
2018
US$ million
42.2
54.7
2.6
99.5
74.4
57.1
1.5
133.0
Customer funds represent bank deposits matched by liabilities to customers and progressive prize pools of an equal value (see
note 21). Restricted short-term deposits represent amounts held by banks primarily to support guarantees in respect
of regulated markets licence requirements.
17 Trade and other receivables
Trade receivables
Other receivables
Prepayments
Current trade and other receivables
Non-current prepayments
2019
US$ million
2018
US$ million
26.5
10.9
5.2
42.6
0.6
43.2
19.0
10.3
3.7
33.0
0.8
33.8
The carrying value of trade receivables 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. Note 25 provides credit risk disclosures on trade and other receivables.
18 Share capital
Share capital comprises the following:
Ordinary Shares of £0.005 each
1,026,387,500
1,026,387,500
8.1
8.1
Authorised
31 December
2019
Number
31 December
2018
Number
31 December
2019
US$ million
31 December
2018
US$ million
Ordinary Shares of £0.005 each at beginning of year
Issue of Ordinary Shares of £0.005 each
Ordinary Shares of £0.005 each at end of year
Allotted, called up and fully paid
31 December
2019
Number
31 December
2018
Number
31 December
2019
US$ million
31 December
2018
US$ million
364,284,539
4,063,255
359,679,561
4,604,978
368,347,794
364,284,539
3.3
—
3.3
3.3
—
3.3
The narrative below includes details on issue of Ordinary Shares of £0.005 each as part of the Group’s employee share option
plan (see note 23) during 2019 and 2018:
During 2019, the Company issued 4,063,255 shares (2018: 4,604,978) out of which 32,440 shares (2018: 60,182) were issued
in respect of employees’ exercising market value options giving rise to an increase in share premium of US$0.1 million
(2018: US$0.1 million).
Shares issued are converted into US$ at the exchange rate prevailing on the date of issue. The issued and fully paid share
capital of the Group amounts to US$3.3 million (2018: US$3.3 million) and is split into 368,347,794 (2018: 364,284,539)
Ordinary Shares. The share capital in UK sterling (GBP) is £1.8 million (2018: £1.8 million).
144
888 Holdings plc Annual Report & Accounts 2019Financial Statements continued STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
19 Trade, other payables and provisions
Trade payables
Accrued expenses1
Liability in respect of AAPN buyout2
Other payables
Total trade and other payables
Provisions3
2019
US$ million
2018
US$ million
28.4
79.9
—
22.6
130.9
10.2
141.1
30.8
63.6
18.5
23.1
136.0
11.3
147.3
1 During 2018, the Group released US$10.7 million of accrued liability in respect of VAT due, following the receipt of tax assessments from the German tax authorities in respect
of 2015-2017.
2 In 2018, the Group acquired the remaining 53% interest in the voting shares of AAPN for cash consideration of US$28.4 million. US$10.0 million (gross of US$0.8 million cash
acquired) was paid on the day of acquisition and additional US$18.4 million was paid during 2019.
3 Includes mainly provisions in respect of regulatory matters related to legacy customers’ activity in prior periods.
The carrying value of trade and other payables approximates to their fair value given the short maturity date of these
balances.
PROVISIONS
The Group has recorded a provision in respect of regulatory matters related to legacy customers’ activity in prior periods.
This amount represents management’s best estimate of probable cash outflows related to these matters, which are closely
monitored by the Group.
During 2017, the Group recorded a provision for exceptional items of US$45.3 million in respect of historical value added
tax relating to the provision of gaming services in Germany prior to 2015. During 2018, following receipt of tax assessments
from the Tax Authorities in Germany, the Group paid US$24.6 million on account of this provision and released US$22.4 million
of the provision, as described in note 5.
Movement in the provision during the year is as follows:
At 1 January 2018
Arising during the year
Paid during the year
Released to income statement during the period
Exchange rate
At 1 January 2019
Paid during the year
At 31 December 2019
Current
Non-current
Total
US$ million
47.0
10.4
(24.6)
(22.4)
0.9
11.3
(1.1)
10.2
10.2
—
145
Corporate.888.com NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
20 Interest-bearing loans and borrowings
Lease liabilities1
Interest-bearing loan – RCF2
Total interest-bearing loans and borrowings
2019
US$ million
2018
US$ million
34.8
17.7
52.5
—
—
—
1 The Group applies, for the first time, IFRS 16 – Leases, see note 2.2. At 1 January 2019, US$26.8 million was recognised as lease liabilities – being the present value of
US$29.2 million remaining lease payments, discounted using a weighted average incremental borrowing rate of 3.9%. As at 31 December 2019, the lease liabilities of US$34.8
million iinclude interest of US$1.3 million.
2 During the period, 888 has finalised a revolving credit facility (“RCF”) with Barclays Bank plc of up to US$50.0 million in order to finance its M&A activities in the short term. At
31 December 2019, the Group has RCF liability of US$18 million. Arrangement fee of US$0.5 million is amortised to income statement over period of the RCF.
At 1 January 2019
Arising during the period
Paid during the period
Interest expenses
Interest paid
Exchange rate
At 31 December 2019
Current
Non-current
21 Liabilities to customers and progressive prize pools
Liabilities to customers
Progressive prize pools
Lease
liabilities
US$ million
RCF
US$ million
Total
US$ million
26.8
12.6
(7.5)
1.3
—
1.6
34.8
6.0
28.8
—
32.5
(15.0)
1.3
(1.1)
—
17.7
17.7
—
26.8
45.1
(22.5)
2.6
(1.1)
1.6
52.5
23.7
28.8
2019
US$ million
2018
US$ million
48.3
6.4
54.7
49.5
7.6
57.1
22 Investments in significant subsidiaries
The consolidated financial statements include the following principal subsidiaries of 888 Holdings plc:
Country of
incorporation
Percentage of
equity interest
2019
%
Gibraltar
Malta
Gibraltar
Gibraltar
Malta
Gibraltar
Gibraltar
Gibraltar
Malta
Malta
100
100
100
100
100
100
100
100
100
100
Percentage of
equity interest
2018
% Nature of business
100 Holding company
100 Holding company
100 Holder of gaming licences in Gibraltar
100 Holder of gaming licences in Gibraltar
during 2019
100 Holder of gaming licences in Malta
for European markets which are not
locally regulated
100 Bingo business operator
100 B2B business operator (except Bingo)
100 Holder of UK remote gaming licence
100 Holder of Italian online gaming licence
100 Holder of Spanish online
gaming licence
Name
VHL Financing Limited
VHL Financing (Malta) Limited
Virtual Global Digital Services Limited
Cassava Enterprises (Gibraltar) Limited
Virtual Digital Services Limited
Brigend Limited
Fordart Limited
888 UK Limited
888 Italia Limited
888 Spain Public Limited Company
146
888 Holdings plc Annual Report & Accounts 2019Financial Statements continued
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
22 Investments in significant subsidiaries continued
Name
888 US Limited
888 Atlantic Limited
888 Liberty Limited
888 Romania Limited
888 (Ireland) Limited
888 Denmark Limited
888 Portugal Limited
888 Sweden Limited
Country of
incorporation
Gibraltar
Gibraltar
Gibraltar
Malta
Malta
Malta
Malta
Malta
Virtual Emerging Entertainment Limited
Gisland Limited
Virtual IP Assets Limited
Virtual Marketing Services (Gibraltar) Limited
Virtual Marketing Services (UK) Limited
888 US Services Inc.
Gibraltar
Gibraltar
BVI1
Gibraltar
UK
New Jersey, USA
Dixie Operations Limited
Random Logic Limited
Random Logic Ventures Limited
Sparkware Technologies SRL
Virtual Internet Services Limited
Virtual Internet Services (Ireland) Limited
Virtual Share Services Limited
888 US Inc.
888 US Holdings Inc.
AAPN Holdings, LLC
AAPN New Jersey LLC
Antigua
Israel
Israel
Romania
Gibraltar
Ireland
Gibraltar
Delaware, USA
Delaware, USA
Delaware, USA
New Jersey, USA
Spectate Limited
Gaming Ventures Europe 2019 Limited
Ireland
Malta
Entertainment Ventures Europe 2019 Limited
Malta
Percentage of
equity interest
2019
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
1 Virtual IP Assets Limited has been redomiciled to Antigua with effect as of 22 November 2019.
Percentage of
equity interest
2018
% Nature of business
100 Holder of Interactive Gaming Service
Provider and Manufacturer licence
in the state of Nevada
100 Holder of Transactional Waiver pending
application for full licensing in the state
of New Jersey
100 Holder of Gaming Vendor License
in the state of Delaware
100 Holder of Romanian online
gaming licence
100 Holder of Irish online betting licence
100 Holder of Danish online gaming licence
100 Holder of Portuguese online
gaming licence
100 Holder of Swedish online
gaming licence
100 Trademark licensor
100 Payment transmission
100 Holder of group IP assets
100 Marketing acquisition
100 Advertising services
100 Provider of US-based services
for US operations
100 Customer call center operator
100 Research, development and
marketing support
100 Investment holding company
100 Software development
100 Data hosting and development services
100 Data hosting services
100 Administration of employee
equity schemes
100 Holder of AAPN
100 Holder of AAPN
47 Holding company
47 Holder of Casino Service Industry
Enterprise licence in New Jersey
N/A Software development
N/A Holder of gaming licences in Malta
for European markets which are not
locally regulated
NA Holder of gaming licences in Malta
for European markets which are not
locally regulated
147
Corporate.888.com
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
23 Share benefit charges
EQUITY-SETTLED SHARE BENEFIT CHARGES
As at 31 December 2019, the Group has equity-settled employee shares and share options granted under two equity-settled
employee share incentive plans – the 888 All-Employee Share Plan (“AEP”), which expired according to its terms in August 2015,
and the 888 Long-Term Incentive Plan 2015 (“LTIP”) which was adopted at the Extraordinary General Meeting on 29 September
2015. The 888 Long-Term Incentive Plan 2015 is open to employees (including Executive Directors) and full-time consultants
of the Group, at the discretion of the Remuneration Committee. Awards under this scheme will vest in instalments over a fixed
period of at least three years subject to the relevant individuals remaining in service. Certain of these awards are subject to
additional performance conditions imposed by the Remuneration Committee at the dates of grant, further details of which are
given in the Directors’ Remuneration Report.
In addition, on 8 May 2017, the Board adopted a Deferred Share Bonus Plan (“DSBP”) in order to allow the Company to comply
with the requirement contained in its Remuneration Policy pursuant to which any annual bonus payment made to an Executive
Director in excess of 100% of such Executive Director’s annual salary is deferred into equity awards of the Company in the form
of nil cost options or share awards.
The Company grants equity awards under which shares of the Company are issued to employees at nil consideration. The
nominal value of such shares is covered internally. Details of equity settled shares and share options granted as part of the
AEP, the LTIP and the DSBP are set out below.
SHARE OPTIONS GRANTED
Outstanding at the beginning of the year
Market value options lapsed during the year
Market value options exercised during the year
Outstanding at the end of the year
ORDINARY SHARES GRANTED (WITHOUT PERFORMANCE CONDITIONS)
2019
2018
Weighted
average
exercise
price
£1.08
£1.02
£1.08
—
Weighted
average
exercise
price
£1.26
£1.08
£1.38
£1.08
Number
33,092
(652)
32,440
—
Number
97,968
(4,694)
(60,182)
33,092
Outstanding at the beginning of the year
Shares granted during the year
Lapsed future vesting shares
Shares issued during the year
Outstanding at the end of the year
Averaged remaining life until vesting
DEFERRED SHARE BONUS PLAN
Outstanding at the beginning of the year
Shares granted during the year
Shares exercised during the year
Outstanding at the end of the year
Averaged remaining life until vesting
2019
Number
2018
Number
3,578,276
1,702,870
(398,981)
(2,970,183)
1,911,982
1.45 years
4,083,372
910,159
(141,397)
(1,273,858)
3,578,276
0.59 years
2019
Number
338,201
—
(136,254)
2018
Number
211,691
197,074
(70,564)
201,947
0.54 years
338,201
1.02 years
The aforementioned grants under the DSBP were approved by the Board as part of the annual bonus award to the Executive
Directors for 2016-2018, pursuant to which an amount equal to 100% of salary was granted in cash, with the additional 50%
of salary deferred into shares of the Company. These grants were made on 21 March 2018 to the CEO (117,965 Shares) and
CFO (79,109 Shares) and 28 June 2017 to the CEO (130,914 Shares) and CFO (80,777 Shares), with the shares vesting in equal
tranches over three years. Ordinary Shares granted for future vesting are valued at the share price at grant date, which the
Group considers approximates to the fair value. On 28 March 2018, the Group purchased 197,074 shares and, on 29-30 June
2017, the Group purchased 211,691 shares on the open market at an average price of 277.9¢ per share and 255.31¢ per share,
respectively, all of which were recognised as treasury shares as of 31 December 2019.
148
888 Holdings plc Annual Report & Accounts 2019Financial Statements continued STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
23 Share benefit charges continued
ORDINARY SHARES GRANTED (SUBJECT TO PERFORMANCE CONDITIONS)
Outstanding at the beginning of the year
Shares granted during the year
Lapsed future vesting shares
Shares issued during the year
Outstanding at the end of the year
Averaged remaining life until vesting
2019
Number
4,142,129
1,703,845
(613,093)
(1,060,632)
4,172,249
1.34 years
2018
Number
5,991,888
1,372,015
—
(3,221,774)
4,142,129
1.25 years
Shares granted during the year (1,703,845) are 100% dependent on total shareholder return (TSR) compared to a peer group
of companies. All other shares outstanding at the end of the year (2,468,405) 50% are dependent on an EPS growth target,
and 50% on total shareholder return (TSR) compared to a peer group of companies. Further details of performance conditions
that have to be satisfied on these awards are set out in the Directors’ Remuneration Report on page 86. The EPS growth target
is taken into account when determining the number of shares expected to vest at each reporting date, and the TSR target is
taken into account when calculating the fair value of the share grant.
VALUATION INFORMATION – SHARES GRANTED UNDER TSR CONDITION:
Shares granted during the year:
Share pricing model used
Determined fair value
Number of shares granted
Average risk-free interest rate
Average standard deviation
Average standard deviation of peer group
VALUATION INFORMATION – SHARES GRANTED
Weighted average share price at grant date
Weighted average share price at issue of shares
2019
2018
Monte Carlo Monte Carlo
£1.72
686,008
0.98%
26%
29%
£1.74
1,703,845
0.75%
27%
30%
2019
2018
Without
performance
conditions
With
performance
conditions
Without
performance
conditions
With
performance
conditions
£1.62
£1.61
£1.67
£1.56
£2.76
£2.29
£2.70
£2.30
Ordinary shares granted for future vesting with EPS growth performance conditions are valued at the share price at grant date,
which the Group considers approximates to the fair value. The restrictions on the shares during the vesting period, primarily
relating to non-receipt of dividends, are considered to have an immaterial effect on the share option charge.
In accordance with IFRS 2 a charge to the consolidated income statement in respect of any shares or options granted under
the above schemes is recognised and spread over the vesting period of the shares or options based on the fair value of the
shares or options at the grant date, adjusted for changes in vesting conditions at each balance sheet date. These charges
have no cash impact.
SHARE BENEFIT CHARGES
Equity-settled
Equity-settled charge for the year
Total share benefit charges
2019
US$ million
2018
US$ million
5.4
5.4
8.9
8.9
149
Corporate.888.com NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
24 Related party transactions
The aggregate amounts payable to key management personnel, considered to be the Directors of the Company, as well as
their share benefit charges, are set out below:
Short-term benefits
Post-employment benefits
Share benefit charges – equity-settled
2019
US$ million
2018
US$ million
5.9
0.3
1.9
8.1
3.2
0.2
4.2
7.6
Further details on Directors’ remuneration are given in the Directors’ Remuneration Report.
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:
• Cash and cash equivalents;
• Trade and other receivables;
• Trade and other payables;
• Customer deposits;
• Lease liabilities;
• Interest-bearing loan – RCF;
• Equity instruments designated at fair value through OCI.
Detailed analysis of these financial instruments is as follows:
Financial assets
Trade and other receivables1 (note 17)
Cash and cash equivalents (note 16)
Equity instruments designated at fair value through OCI (note 14)
1 Excludes prepayments and non-current other receivables.
2019
US$ million
2018
US$ million
37.4
99.5
0.2
137.1
29.3
133.0
0.2
162.5
In accordance with IFRS 9, trade and other receivables and cash and cash equivalents are classified as financial assets
at amortised costs. Equity investments are measured at fair value through other comprehensive income (FVOCI) without
subsequent recycling to income statement.
Financial liabilities
Trade and other payables1 (note 19)
Customer deposits (note 21)
Lease liabilities – IFRS 16 (note 20)
Interest-bearing loan – RCF (note 20)
1 Excludes taxes payable.
In accordance with IFRS 9, all financial liabilities are held at amortised cost.
2019
US$ million
2018
US$ million
102.5
54.7
34.8
17.7
209.7
100.7
57.1
—
—
157.8
150
888 Holdings plc Annual Report & Accounts 2019Financial Statements continued STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
25 Financial risk management continued
CAPITAL
The capital employed by the Group is composed of equity attributable to shareholders. The primary objective of the Group
is maximising 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. 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, most of which are due from the Group’s payment service
providers (PSP). These are third-party companies that facilitate deposits and withdrawals of funds to and from customers’
virtual wallets with the Group. These are mainly intermediaries that transact on behalf of 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:
• Monitoring balances with PSPs on a regular basis.
• Arranging for the shortest possible cash settlement intervals.
• Replacing rolling reserve requirements, where they exist, with a Letter of Credit by a reputable financial institution.
• Ensuring a new PSP is only contracted following various due diligence and ‘Know Your Customer’ procedures.
• Ensuring policies are in place to reduce dependency on any specific PSP and as a limit any concentration of risk.
The Group considers that based on the factors above and on extensive past experience, the PSP receivables are of good
credit quality and there is a low level of potential bad debt as at year-end, amounting to US$0.1 million arising from a PSP
failing to discharge its obligation (2018: US$0.1 million). This has been charged to the consolidated income statement.
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 an impairment provision based on analysis of past transactions. This provision is set off against trade receivables
and at 31 December 2019 was US$1.0 million (2018: US$1.1 million).
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 from its Gibraltar headquarters. Subsidiaries in its other main locations maintain minimal
cash balances as required for their operations. Cash settlement proceeds from PSPs, as described above, are paid into bank
accounts controlled by the Treasury function in Gibraltar.
The Group holds the majority of its funds with highly reputable financial institutions and will not hold funds with financial
institutions with a low credit rating save for limited balances for specific operational needs. The Group maintains its cash
reserves in highly liquid deposits and regularly monitors interest rates in order to maximise yield.
Customer funds
Customer funds are matched by customer liabilities and progressive prize pools of an equal value.
Restricted short-term deposits
Restricted short-term deposits are short-term deposits held by banks primarily to support guarantees in respect of regulated
markets licence requirements.
The Group’s maximum exposure to credit risk is the amount of financial assets presented above, totalling US$137.1 million
(2018: US$162.5 million).
151
Corporate.888.com NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
25 Financial risk management continued
LIQUIDITY RISK
Liquidity risk exists where the Group might encounter difficulties in meeting its financial obligations as they become due. The
Group monitors its liquidity in order to ensure that sufficient liquid resources are available to allow it to meet its obligations.
The following table details the contractual maturity analysis of the Group’s financial liabilities (undiscounted payments):
Trade and other payables1
Customer deposits
Lease liabilities
Interest-bearing loan – RCF
1 Excludes taxes payable.
Trade and other payables1
Customer deposits
1 Excludes taxes payable.
On demand
US$ million
In 3 months
US$ million
15.8
54.7
—
—
70.5
73.7
—
1.7
—
75.4
On demand
US$ million
In 3 months
US$ million
11.6
57.1
68.7
83.1
—
83.1
2019
Between
3 months
and 1 year
US$ million
13.0
—
4.3
18.0
35.3
2018
Between
3 months
and 1 year
US$ million
6.0
—
6.0
More than
1 year
US$ million
Total
US$ million
—
—
34.5
—
34.5
102.5
54.7
40.5
18.0
215.7
More than
1 year
US$ million
Total
US$ million
—
—
—
100.7
57.1
157.8
MARKET RISK
Currency risk
The Group’s financial risk arising from exchange rate fluctuations is mainly attributed to:
• Mismatches between customer deposits, which are predominantly denominated in US$, and the net receipts from customers,
which are settled in the currency of the customer’s choice and of which Pounds Sterling (GBP) and Euros (EUR) are the most
significant.
• Mismatches between reported revenue, which is mainly generated in US$ (the Group’s reporting currency and the functional
currency of the majority of its subsidiaries), and a significant portion of deposits settled in local currencies.
• Expenses, the majority of which are denominated in foreign currencies, including Pounds Sterling (GBP), Euros (EUR) and New
Israeli Shekels (ILS).
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. This includes the potential use of foreign exchange forward contracts designed to fix the
economic impact of known liabilities when considered appropriate.
At 31 December 2019, the Group does not have any open foreign exchange forward contracts.
152
888 Holdings plc Annual Report & Accounts 2019Financial Statements continued STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
25 Financial risk management continued
MARKET RISK CONTINUED
Currency risk continued
The tables below detail the monetary assets and liabilities by currency:
GBP
US$ million
EUR
US$ million
ILS
US$ million
USD
US$ million
Other
US$ million
Total
US$ million
2019
Cash and cash equivalents
Trade and other receivables
Equity instruments designated at fair value
through OCI
Monetary assets
Trade and other payables
Customer deposits
Lease liabilities
Interest-bearing loan – RCF
Monetary liabilities
Net financial position
27.7
9.2
—
36.9
(18.0)
(9.3)
(3.3)
—
(30.6)
6.3
34.4
19.6
—
54.0
(24.7)
(14.4)
(10.4)
—
(49.5)
4.5
27.4
2.1
0.2
29.7
(41.1)
(27.9)
(0.4)
(17.7)
(87.1)
(57.4)
5.0
0.3
—
5.3
(16.3)
—
(20.2)
—
(36.5)
(31.2)
2018
5.0
6.2
—
11.2
(2.4)
(3.1)
(0.5)
—
(6.0)
5.2
99.5
37.4
0.2
137.1
(102.5)
(54.7)
(34.8)
(17.7)
(209.7)
(72.6)
GBP
US$ million
EUR
US$ million
ILS
US$ million
USD
US$ million
Other
US$ million
Total
US$ million
Cash and cash equivalents
Trade and other receivables
Equity instruments designated at fair value
through OCI
Monetary assets
Trade and other payables
Customer deposits
Monetary liabilities
Net financial position
37.8
6.2
—
44.0
(16.2)
(8.7)
(24.9)
19.1
38.6
14.9
—
53.5
(16.1)
(17.6)
(33.7)
19.8
13.2
0.5
—
13.7
(19.9)
—
(19.9)
(6.2)
39.7
2.3
0.2
42.2
(46.9)
(29.0)
(75.9)
(33.7)
3.7
5.4
—
9.1
(1.6)
(1.8)
(3.4)
5.7
133.0
29.3
0.2
162.5
(100.7)
(57.1)
(157.8)
4.7
SENSITIVITY ANALYSIS
The table below details the effect on profit before tax of a 10% strengthening (and weakening) in the US$ exchange rate at
the balance sheet date for balance sheet items denominated in Pounds Sterling, Euros and New Israeli Shekels:
10% strengthening
10% weakening
10% strengthening
10% weakening
Year ended 31 December 2019
GBP
US$ million
EUR
US$ million
ILS
US$ million
(0.6)
0.6
(0.5)
0.5
3.1
(3.1)
Year ended 31 December 2018
GBP
US$ million
EUR
US$ million
ILS
US$ million
(1.9)
1.9
(2.0)
2.0
0.6
(0.6)
153
Corporate.888.com NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS CONTINUED
25 Financial risk management continued
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
and debt obligations (RCF).
At 31 December 2019, the Group has US$18.0 million RCF and is exposed to floating rate risk. Given the magnitude of the max
drawable amount under the RCF (US$50 million), interest rate fluctuations are not expected to be significant.
The Group’s policy is to invest surplus funds in low risk money market funds and in interest-bearing bank accounts. The Group
arranges for excess funds to be placed in these interest-bearing accounts with its principal bankers in order to maximise
availability of funds for investments.
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and
borrowings affected. With all other variables held constant, the Group’s profit before tax is affected through the impact on
floating rate borrowings, as follows:
Effect on profit before tax
50bp increase
50bp decrease
2019
2018
Interest-
bearing
deposits
US$ million
Debt
obligations
(RCF)
US$ million
Interest
bearing
deposits
US$ million
Debt
obligations
(RCF)
US$ million
0.1
(0.1)
(0.1)
0.1
0.3
(0.3)
—
—
26 Fair value measurements
At 31 December 2019 and 2018, the Group’s equity investment is measured at fair value (level 2). For the remaining financial
assets and liabilities, the Group considers that the book value approximates to fair value.
There were no changes in valuation techniques or transfers between categories in the period.
27 Provisions, contingent liabilities and regulatory issues
(a) (a) The Group operates in numerous jurisdictions. Accordingly, the Group files tax returns, provides for and pays all taxes
and duties it believes are due based on local tax laws, transfer pricing agreements and tax advice obtained. The Group
is also periodically subject to audits and assessments by local taxing authorities. Provisions for uncertain items are made
using judgement of the most likely tax expected to be paid and the basis thereon, based on a qualitative assessment of
all relevant information. The Board considers that any exposure for additional taxes, if any, that may arise from the final
settlement of such assessments is unlikely to result in any further liability.
(b)
In 2017, in response to an inquiry from the tax authorities in Germany relating to a legacy VAT matter, the Group disclosed
a contingent liability of US$18.5 million, relating to issues on which the Group considered that it has strong arguments
but regarding which it remained possible that there would be a cash outflow. During 2018, following further discussions
with tax authorities in Germany culminating in the issuance of tax assessments, the Board, supported by their updated
legal advice, considered that the risk of cash outflow in respect of these services is remote, and therefore the contingent
liability no longer exists. The Board has reserved its position and all legal rights, based on the legal advice received.
(c) As part of the Board’s ongoing regulatory compliance and operational risk assessment process, it continues to monitor
legal and regulatory developments, and their potential impact on the business, and continues to take appropriate advice
in respect of these developments.
Given the nature of the legal and regulatory landscape of the industry, from time to time the Group has received notices,
communications and legal actions from a small number of regulatory authorities and other parties in respect of its
activities. The Group has taken legal advice as to the manner in which it should respond and the likelihood of success of
such actions. Based on this advice and the nature of the actions, for the majority of these matters the Board is unable to
quantify reliably the outflow of funds that may result, if any. For matters where an outflow of funds is probable and can be
measured reliably, amounts have been recognised in the financial statements within Provisions. Except for the regulatory
matters described in note 19, these amounts are not material at 31 December 2019.
154
888 Holdings plc Annual Report & Accounts 2019Financial Statements continued
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
COMPANY BALANCE SHEET
AT 31 DECEMBER 2019
Assets
Non-current assets
Investments in subsidiaries
Deferred tax assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Equity and liabilities
Equity
Share capital
Share premium
Treasury shares
Retained earnings1
Total equity
Liabilities
Current liabilities
Trade and other payables
Income tax payable
Interest-bearing loans and borrowings
Non-current liabilities
Loan payable to subsidiaries
Total liabilities
Total equity and liabilities
Note
2019
US$ million
2018
US$ million
2
10
3
4
4
4
5
6
9
46.1
0.7
46.8
90.9
—
90.9
137.7
3.3
3.7
(0.7)
54.9
61.2
4.3
7.8
17.7
29.8
46.7
46.7
76.5
137.7
48.3
0.7
49.0
78.9
—
78.9
127.9
3.3
3.6
(1.2)
61.8
67.5
19.5
10.5
—
30.0
30.4
30.4
60.4
127.9
1 Includes net profit of the Company for the year ended 31 December 2019 of US$28.6 million (31 December 2018: US$64.2 million).
The financial statements on pages 155 to 159 were approved and authorised for issue by the Board of Directors on 15 April 2020
and were signed on its behalf by:
ITAI PAZNER
Chief Executive Officer
The notes on pages 158 to 159 form part of these financial statements.
AVIAD KOBRINE
Chief Financial Officer
155
Corporate.888.com
COMPANY STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
Balance at 1 January 2018
Profit and total comprehensive income for the year
Dividend paid (note 9)
Issue of shares (note 4)
Acquisition of treasury shares (note 4)
Exercise of deferred share bonus plan
Equity settled share benefit charges (note 8)
Balance at 31 December 2018
Profit and total comprehensive income for the year
Dividend paid (note 9)
Issue of shares (note 4)
Exercise of deferred share bonus plan
Equity settled share benefit charges (note 8)
Balance at 31 December 2019
Share
capital
US$ million
Share
premium
US$ million
Treasury
shares
US$ million
Retained
earnings
US$ million
Total
US$ million
3.3
—
—
—
—
—
—
3.3
—
—
—
—
—
3.3
3.5
—
—
0.1
—
—
—
3.6
—
—
0.1
—
—
3.7
(0.7)
—
—
—
(0.8)
0.3
—
(1.2)
—
—
—
0.5
—
(0.7)
45.6
64.2
(56.6)
—
—
(0.3)
8.9
61.8
28.6
(40.4)
—
(0.5)
5.4
54.9
51.7
64.2
(56.6)
0.1
(0.8)
—
8.9
67.5
28.6
(40.4)
0.1
—
5.4
61.2
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.
Treasury shares – represent reacquired own equity instruments. Treasury shares are recognised at cost and deducted from equity.
Retained earnings – represents the cumulative net gains and losses recognised in the parent company statement
of comprehensive income and other transactions with equity holders.
The notes on pages 158 to 159 form part of these financial statements.
156
888 Holdings plc Annual Report & Accounts 2019Financial Statements continued STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
COMPANY STATEMENT
OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2019
Note
2019
US$ million
2018
US$ million
Cash flows from operating activities:
Profit before tax
Adjustments for:
Share benefit charges
Interest costs
Dividends received
Increase in net amounts owed by subsidiaries
(Increase) decrease in other receivables
Increase (decrease) in trade and other payables
Cash generated from operations
Income tax paid
Net cash generated from operating activities
Cash flows from investing activities
Dividends received
Net cash generated from investing activities
Cash flows from financing activities:
Issue of shares
Acquisition of treasury shares
Loan received from subsidiaries
Interest paid
Proceeds from loans, net of transaction fee
Repayment of loans
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 158 to 159 form part of these financial statements.
8
3,5
3
5
9
4
4
9
9
9
26.7
0.7
2.0
(27.2)
(20.1)
(0.2)
0.1
(18.0)
(0.8)
(18.8)
27.2
27.2
0.1
—
15.8
(1.4)
32.5
(15.0)
(40.4)
(8.4)
—
—
—
71.3
0.8
0.4
(72.2)
(42.8)
0.2
(2.0)
(44.3)
(0.7)
(45.0)
72.2
72.2
0.1
(0.8)
30.0
—
—
—
(56.6)
(27.3)
(0.1)
0.1
—
157
Corporate.888.com
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’s financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as adopted by the European Union and on an historical cost basis.
The Company applies consistent accounting policies, as applied by the Group. To the extent that an accounting policy is
relevant to both Group and Company financial statements, refer to the Group financial statements for disclosure of the
accounting policy (see note 2 to the consolidated financial statements). Material policies that apply to the Company only are
included as appropriate.
Under Section 288 of the Gibraltar Companies Act 2014, the Company is exempt from the requirement to present its own
income statement.
INVESTMENT IN SUBSIDIARIES
The Company’s investments in subsidiaries are carried at cost less provisions resulting from impairment.
SHARE-BASED PAYMENTS
The financial effect of awards by the Company of options over its equity shares to employees of subsidiary undertakings is
recognised by the Company in its individual financial statements as an adjustment to its investment in subsidiaries with an
opposite adjustment to equity. The subsidiary, in turn, will recognise the IFRS 2 adjustment in its income statement with a credit
(debit) to equity to reflect the deemed capital contribution from (dividend to) the Company.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS – IMPAIRMENT TESTING OF INVESTMENTS
IN AND AMOUNTS DUE FROM SUBSIDIARIES
The Company’s investments in and amounts due from subsidiaries have been tested for impairment by comparison against
the underlying value of the subsidiaries’ assets.
2 Investments in subsidiaries
The Company’s principal subsidiaries are listed in note 22 to the consolidated financial statements. In the Company’s financial
statements, investments in subsidiaries are held at cost less provision for any impairment. The Group applies IFRS 2 – Share-
based Payment. Consequently, the 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 net movement in
investment in subsidiaries during the year was US$2.2 million (2018: US$7.8 million) included within this were share-based
payment charges of US$4.7 million in 2019 (2018: US$7.8 million), which is net of US$6.9 million intragroup recharges related
to share-based payment schemes (2018: US$0.3 million). No capital contribution during the year (2018: nil) in respect of
incorporation of new subsidiaries.
3 Trade and other receivables
Amounts due from subsidiaries
Other receivables and prepayments
2019
US$ million
2018
US$ million
90.5
0.4
90.9
78.7
0.2
78.9
The carrying value of trade and other receivables approximates 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 Share capital
The disclosures in note 18 to the consolidated financial statements are consistent with those for the Company, including capital
management in note 25 to the consolidated financial statements.
158
888 Holdings plc Annual Report & Accounts 2019Financial Statements continued STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
5 Trade and other payables
Trade payables
Amounts due to subsidiaries
Other payables and accrued expenses
2019
US$ million
2018
US$ million
0.1
1.0
3.2
4.3
0.6
16.3
2.6
19.5
The carrying value of trade and other payables approximates to their fair value. All balances included within trade and other
payables are repayable on demand.
6 Financial risk management
To the extent relevant to Company’s financial assets and liabilities (see notes 3 and 5), the Company’s financial risk
management objectives and policies are consistent with those of the Group as disclosed in note 25 to the consolidated
financial statements.
Interest-bearing loans and borrowings are disclosed in note 20 to the consolidated financial statements.
Loan payable to subsidiaries are made on terms equivalent to those that prevail in arm’s length transactions.
7 Contingent liabilities
The disclosures in note 27 to the consolidated financial statements are consistent with those for the Company.
8 Share benefit charges
The disclosures in note 23 to the consolidated financial statements are consistent with those for the Company except that
the charge for the year is partly taken to investment in subsidiaries, as set out in note 2.
9 Related party transactions
The aggregate amounts payable to key management personnel, considered to be the Directors of the Company, as well as
their share benefit charges is detailed in note 23 to the consolidated financial statements.
During the year, the Company received dividends from its subsidiaries through intercompany accounts (to be paid
subsequently in cash), totalling US$27.2 million (2018: US$72.2 million), and paid to its shareholders dividends totalling
US$40.4 million (2018: US$56.6 million). See note 10 to the consolidated financial statements.
Share benefit charges in respect of options and shares of the Company awarded to employees of subsidiaries totalled
US$4.7 million (2018: US$8.1 million). During the year, the Company charged its subsidiary for cost of awards for US$6.9 million
(2018: US$0.3 million).
During the year, the Company borrowed a US$15.8 million from its subsidiaries (2018: US$30.0 million) and recorded
a US$1.8 million (2018: US$0.4 million) interest expenses in respect of the loan which were recharged to other Group entities.
At 31 December 2019, the net amounts owed by subsidiaries to the Company were US$89.5 million (2018: US$62.4 million).
10 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. As at 31 December 2019, the
Company has a deferred tax asset of US$0.9 million (2018: US$1.0 million) partially offset by deferred tax liabilities of US$0.2
million (2018: US$0.3 million).
159
Corporate.888.com SHAREHOLDER
INFORMATION
GROUP WEBSITES
A range of shareholder information is
available in the Investor Relations area of
the Group’s website, corporate.888.com,
including:
• Latest information on the Group’s
share price
• Information on the Group’s financial
performance
• News and events
The following websites can also be
accessed through the Group’s main
website www.888.com or are available
directly.
CASINO
888’s Casino games are offered
through its 888casino, live casino
and Costacasino:
• www.888casino.com
• www.777.com
• live-casino.888casino.com
• www.888vipcasinoclub.com
• www.costagames.com
• www.slotcrazy.com
• www.fantasticspins.com
• www.skyhighslots.com
• www.costagames.com
• www.slotcrazy.com
• www.fantasticspins.com
• www.skyhighslots.com
• www.slotsforce.com
• www.winkslots.com
• www.888ladies.com
• www.winkbingo.com
• www.poshbingo.co.uk
• www.tastybingo.com
• www.redbusbingo.com
• www.bingostreet.com
• www.daisybingo.com
• www.888bingo.com
• www.bingofabulous.com
• www.deepseabingo.com
• www.sweetshopbingo.com
• www.costabingo.com
• www.realdealbingo.com
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• www.kingdomofbingo.com
• www.rewindbingo.com
• www.bringobingo.com
• www.fancybingo.com
BINGO
888’s Bingo offering is through
888ladies, Wink and Costabingo and
others:
ITALY
888’s Italy Poker, Casino games and
Sport are offered through its Italian
regulated website
• www.888.it
• www.888casino.it
• www.888poker.it
• www.888sport.it
DENMARK
888’s Denmark Poker, Casino games and
Sport are offered through its Denmark
regulated website
• www.888.dk
• www.888poker.dk
• www.888casino.dk
• www.888sport.dk
ROMANIA
888’s Romania Poker, Casino games and
Sport are offered through its Romania
regulated website
• www.888.ro
• www.888poker.ro
• www.888casino.ro
• www.888sport.ro
PORTUGAL
888’s Portugal Casino games and
Poker are offered through its Portugal
regulated website
• www.888.pt
• www.888poker.pt
• www.888casino.pt
SWEDEN
888’s Sweden Poker, Casino games and
Sport are offered through its Sweden
regulated website
POKER
888’s Poker offering is through 888poker
• www.888poker.com
SPORTSBOOK
888’s Sportsbook offering is through
888sport
• www.888sport.com
USA
888’s New Jersey Poker and Casino
games are offered through its US
regulated website
• www.888.se
• www.888poker.se
• www.888casino.se
• www.888sport.se
RESPONSIBLE GAMING:
The Group’s dedicated site focusing
on responsible gaming
• www.888responsible.com
• US.888Poker.com
• US.888Casino.com
• US.888.com
SPAIN
888’s Spain Poker, Casino games and
Sport are offered through its Spanish
regulated website
• www.888.es
• www.888poker.es
• www.888casino.es
• www.888sport.es
160
888 Holdings plc Annual Report & Accounts 2019Financial Statements continued STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER SERVICES
All enquiries relating to Ordinary Shares,
Depository Interests, dividends and
changes of address should be directed
to the Group’s Transfer Agent:
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
UK
Tel: 0871 664 0300
www.signalshares.com
COMPANY SECRETARY
Strait Secretaries Limited
57/63 Line Wall Road
Gibraltar
AUDITORS
Ernst & Young LLP
1 More London Place
London
SE1 2AF
United Kingdom
EY Limited
PO Box 191
Regal House
Queensway
Gibraltar
FURTHER INFORMATION
For further information please contact:
info@888holdingsplc.com
PRINCIPAL BANKERS
Barclays Bank Plc
1 Churchill Place
London
E14 5HP
UK
SOLICITORS
Latham & Watkins
99 Bishopsgate
London
EC2M 3XF
UK
Hassans
7/63 Line Wall Road
Gibraltar
Herzog Fox Neeman
Asia House
4 Weizman Street
Tel Aviv
Israel 64239
Design and Production
www.carrkamasa.co.uk
Corporate.888.com
161
Corporate.888.com 888 Holdings plc
Suite 601/701 Europort
Europort Road
Gibraltar
T +350 20049800
F +350 20048280
E info@888holdingsplc.com
corporate.888.com