Entain Annual Report 2016

FY2016 Annual Report · Entain

Loading PDF…

STRONG
BRANDS,
TECHNOLOGY
& TALENT

Annual Report 2016

SET FOR
SUCCESS.

GVC Holdings PLC is a multinational sports betting and gaming group.
Listed on the London Stock Exchange (ticker:GVC) and a member of the
FTSE 250. The Group owns some of the world’s leading online gaming
brands across sports, casino, poker and bingo.

2016 was a momentous year in the Group’s history, with the completion
of our biggest acquisition to date, that of bwin.party. Having made
substantial progress in integrating our operations, we delivered both
strong growth and substantive returns to our shareholders.

While the online gaming sector is constantly evolving, with the
challenges of new regulatory requirements and the need to continuously
develop our product, we believe GVC is well positioned to carry the
positive momentum of the past year into 2017 and beyond.

GVC Holdings PLC Annual Report 2016

02
03
04
06
09
10
12
14
16
22
26
32
34
68
119

PERFORMANCE HIGHLIGHTS
CHAIRMAN’S INTRODUCTION
AT A GLANCE
CHIEF EXECUTIVE’S REVIEW
OUR STRATEGY
MAJOR TRENDS IN THE MARKETPLACE
REGULATORY OVERVIEW
BUSINESS MODEL
PERFORMANCE OF DIVISIONS
CORPORATE SOCIAL RESPONSIBILITY
CHIEF FINANCIAL OFFICER’S REVIEW
PRINCIPAL RISKS
GOVERNANCE & REMUNERATION
FINANCIAL STATEMENTS
SHAREHOLDER INFORMATION

Performance highlights/Chairman’s introduction

NGR (€’000) / Annual growth

2015: 822,200

Contribution (€’000) / Annual growth

894,600+9%
464,000+5%
205,700+26%
4,553,600+4%

Total sports wagers (€’000) / Increased

Clean EBITDA (€’000) / Annual growth

2015: 4,389,700

2015: 163,200

2015: 442.8

All ﬁgures are provided on a pro forma basis, as if bwin.party had been acquired on 1 January 2015.

GVC Holdings PLC Annual Report 2016

WE NOT ONLY ACHIEVED
ALL OF OUR TARGETS,
BUT IN MOST CASES
WE EXCEEDED THEM.

We employ c2,800 people across 15 ofﬁces and four
continents. Creating a Group-wide identity and culture
based on common values has been an important
part of the integration process. Our core values of
collaboration, dynamism, ownership, recognition and
transparency, reﬂect the culture of our business and
what we believe is required to succeed in a highly
competitive and rapidly evolving industry.

It is a reﬂection of the progress made and the potential
of GVC, that the Group has been able to attract
a number of highly regarded professionals from
across the gaming industry and beyond. This has
enabled us to strengthen our business in a number
of areas, the beneﬁts of which have already begun
to be experienced, but with much more to come.

...and ﬁnancially
The Group’s ﬁnancial performance during the year
exceeded our original expectations both in terms
of Net Gaming Revenue (NGR) and Clean EBITDA.
Pro forma NGR increased 9% to €894.6m and by
12% in constant currency. Meanwhile, pro forma
Clean EBITDA increased 26% to €205.7m, reﬂecting
an increase in margin to 23% from 20%. Net debt
as at 31 December 2016 was €131.5m, just 0.6x
Clean EBITDA.

We remain on target to secure €125m of synergies by
the end of 2017 with the full impact being derived in
2018 in line with the timetable we set out at the time
of the bwin.party acquisition. In addition to this, annual
capital expenditure is expected to be approximately
€20m lower per annum than the combined Group
spent in 2015.

The Group’s progress is clearly reﬂected in the
development of our ﬁnancing structure. In October
2016, we secured a short term €250m loan facility
from Nomura International plc (the “Nomura Loan”),
which was used in part to fully retire the €400m
loan provided by Cerberus Business Finance LLP.
The Nomura Loan signiﬁcantly lowered our
ﬁnance costs.

In February 2017, we launched our inaugural
syndicated debt offer to great success. A €250m
Senior Secured six year term loan (the “Term Loan”)
was signiﬁcantly oversubscribed. This was used to
pay down the Nomura Loan in full. In addition, we also
secured a €70m Revolving Credit Facility (“RCF”).
The new ﬁnancing gives us both signiﬁcant ﬁnancing
visibility and also access to a broad number of debt
investors. Given the ongoing industry consolidation

and GVC’s proven track record of adding shareholder
value through mergers and acquisitions this is an
important development for the Group.

The strong underlying performance of the business
together with the favourable reﬁnancing enabled the
Group to declare a special dividend in November,
which was subsequently increased by 49% in
December to euro 14.9c per share. The dividend
was settled in sterling at 12.5p per share and paid
14 February 2017. In addition, we have also declared
a second special dividend of euro 15.1c, giving total
declared dividends of euro 30c per share for the
ﬁnancial year ended 31 December 2016. For the 2017
ﬁnancial year and beyond, we will pursue a progressive
dividend policy, reﬂecting the growth in the business
and aiming to return no less than 50% of free cash
ﬂow. In addition, the Board will also give consideration
to returning future excess cash to shareholders.
Excess cash will be determined by the capital
requirements of the business, together with the
trading outlook at the appropriate time.

I would also like to take this opportunity to thank
Richard Cooper, who retired as Group Finance Director
and from the Board in February 2017. Richard joined
the Group in 2008 and has been a major part of the
Company’s success over the past eight years. We wish
him all the success in the future. I would also like to
welcome aboard Paul Miles who joined us as Chief
Financial Ofﬁcer in February.

Finally, as announced separately today, Will Whitehorn
has been appointed to the Board as Senior Independent
Non-executive Director. Will is a highly experienced
business professional and is a signiﬁcant appointment
for the Group. He is the Deputy Chairman and Senior
Independent Director of Stagecoach Group plc and is
an Independent Non-executive Director of Purplebricks
Group plc. This builds upon the strengthening of the
Board in 2016 when Stephen Morana, Peter Isola and
Norbert Teufelberger joined the Group.

Through the combination of talented people, proprietary
technology and strong brands, GVC is well placed to
pursue the many opportunities and face the challenges
presented by the dynamic industry in which we operate.

GVC will be posting its Annual Report to shareholders
the week commencing 1 May 2017 and it will be
uploaded on our website (www.gvc-plc.com) from
that date. The AGM will be held in Gibraltar and is
scheduled for 20 June 2017.

Lee Feldman
Non-executive Chairman
23 March 2017

2 016 was the most signiﬁcant year in the Group’s

history. The acquisition of bwin.party was
completed on 1 February 2016 and transformed

GVC into one of the leading global businesses in the
online gaming industry. Importantly, the purchase
of bwin.party was consistent with our strategy; to
deliver increased scale, further international diversity
and enable us to leverage our proprietary technology
and exceptional management team. In a competitive
and rapidly evolving global regulatory environment,
we believe this strategy leaves GVC well placed to
continue to create shareholder value.

In August, just six months after completing the
bwin.party transaction, the Group was admitted to
the Premium Segment of the Ofﬁcial List. A month
later GVC became a constituent of the FTSE 250
index, having grown from a market value of less than
£100m four years ago to over £2bn today.

GVC is highly ambitious and focused on measurable
delivery. Therefore, it is pleasing to report the
Group achieved a strong operational and ﬁnancial
performance in 2016.

A year of signiﬁcant progress...
operationally
As a management team and a business we set
ourselves a number of targets in 2016, and
I’m pleased to be able to say that we not only
achieved all of these targets but also in most cases
exceeded them.

The integration of bwin.party was a key focus of
2016 and whilst all such large scale transactions
present challenges, the assimilation of the business
has progressed positively and is ahead of our initial
expectations. Our talented, hardworking team and the
corporate culture we have fostered have been the key
drivers for a smooth integration.

At a glance

A GLOBAL LEADER
IN ONLINE GAMING...

FAST FACTS

GVC has four business segments with a number of
leading brands; Sports Labels (bwin, Sportingbet,
gamebookers), Games Labels (partypoker, partycasino,
Foxy Bingo, Gioco Digitale, CasinoClub), B2B and
non-core assets. The Group acquired bwin.party
digital entertainment plc on 1 February 2016.

Headquartered in Isle of Man

B2C and B2B product offer

Listed on LSE (LSE:GVC) and
member of FTSE 250

Licensed in more than
18 jurisdictions

2,800+ employees and
contractors with ofﬁces across
four continents

Leading brands in all product
verticals, sports betting, casino,
poker and bingo

Proprietary technology platform

Gaming sites in 21 languages

Bets accepted in 19 currencies

In 2016 GVC processed €4.6bn
sporting wagers

PRO FORMA FINANCIAL HIGHLIGHTS

NGR
(+9%)

CONTRIBUTION
(+5%)

CLEAN EBITDA
(+26%)

894.6

822.2

(€m)

1,000

800

600

400

200

442.8

464.0

(€m)

500

400

300

200

100

205.7

163.2

(€m)

250

200

150

100

2015

2016

2015

2016

2015

2016

DIVISIONAL SPLIT

2016 NGR

2 % 2%

23%

GVC Holdings PLC Annual Report 2016

Sports Labels

Games Labels

B2B

Non-core

73%

2016 CONTRIBUTION

19 %

Sports Labels

Games Labels

B2B

Non-core
(-1) not shown
in pie chart

STRONG BRANDS...

+ Read more on page 17

+ Read more on page 18

PROVEN TECHNOLOGY...
95% 90% 1k+ >99.95%

Platform up-time

NGR processed on our platform

Increase in games wagers
on mobile

Games

Languages

Currencies

79m We operate our own

unique proprietary
technology platform

+ Read more on page 21

Registered company accounts

GLOBAL TALENT...

GVC has attracted talent from across the gaming industry and beyond.
Following the acquisition of bwin.party we strengthened the Group with
the addition of six new hires to our senior executive management team,
and four new appointments to our Board.

Our workforce includes:

GVC ofﬁces

Full-time employees and contractors

2.8k+
200+
15Ofﬁces

Sports traders

1kTechnology engineers
4Continents

Chief Executive’s review

CREATING AN
EXPERIENCE

GVC Holdings PLC Annual Report 2016

Kenneth Alexander
Chief Executive
23 March 2017

12%

Pro forma NGR grew by 12% on a
constant currency basis in 2016.

I am pleased to report that the Group delivered a

strong ﬁnancial performance in 2016. Pro forma
numbers are provided as, in the Board’s opinion,
they give a more useful comparative of the underlying
performance of the Group.

Pro forma NGR for the year ended 31 December 2016
rose 9% to €894.6m, with the growth in constant
currency registering 12%. Approximately 69% of NGR
was derived from markets either regulated (including
those in the process of regulating) and/or locally taxed.
Clean EBITDA on a pro forma basis was €205.7m,
an increase of 26% on the €163.2m achieved in
2015. This represented a strong improvement in
the Clean EBITDA margin to 23% from 20%, with
acquisition synergies and organic revenue growth
helping to mitigate increased regulatory costs.
A statutory loss before tax of €138.6m reﬂects
one-off costs in the year of €117.8m, largely related
to the acquisition of bwin.party, ﬁnance expense of
€65.3m and depreciation and amortisation charges of
€136.5m. Many of these costs relate to the acquisition
of bwin.party and are forecast to reduce in 2017
following the synergies attached to the acquisition and
the attainment of a signiﬁcantly cheaper ﬁnancing
arrangement entered into.

A key driver of the business in 2016 was the
performance of the bwin sports label across its core

European markets. Whilst sports results were generally
positive, this was just one component part of bwin’s
success in 2016. During the year the value of ﬁrst
time deposits across the acquired bwin sports labels
rose 37%, while improved product and more effective
cross sell saw games revenues from sports customers
increase 26% on pro forma 2015. However, it wasn’t
just about bwin, with all core sports labels delivering
growth in 2016.

Also pleasing in 2016 was the performance of Games
Labels. Although pro forma NGR from Games Labels
for the full year declined to €203.5m from €211.8m
(ﬂat in constant currency), in the second half of 2016
we reversed this trend and returned it to growth.
In H2 pro forma Games Labels NGR grew by 4% in
constant currency.

Historically, partypoker and partycasino were some of
the most challenged parts of bwin.party. Between 2010
and 2015, NGR from these brands declined by over
60%. In part this reﬂected the structural challenge
presented by the poker market, however, it is fair to
say that product development lagged key competitors,
whilst the business suffered from a lack of focus.
In 2016, NGR from partypoker increased 14% in
constant currency. This much improved performance
was the result of a change in management, increased
investment and a more focused approach.

FINANCIAL HIGHLIGHTS

Sports wagers
Sports margin %
Net Gaming Revenue
Revenue
Contribution
Contribution margin
Clean EBITDA
Clean EBITDA margin
Adjusted PBT
Statutory (loss)/proﬁt before tax
Adjusted fully diluted EPS cents
DPS cents

Pro forma
2015
€m
4,389.7
8.5%
822.2
807.9
442.8
54%
163.2
20%

2016
€m
4,553.6
9.6%
894.6
873.2
464.0
52%
205.7
23%

Change
%
4

Constant
currency
%
7

12
11

9
8
5

Actual
2015
€m
1,683.0
9.2%
247.7
246.5
135.4
55%
54.1
22%
46.4
25.5
70
56

2016
€m
4,331.3
9.6%
843.4
823.3
437.5
52%
193.5
23%
93.8
(138.6)
26
30

Numbers may not sum in ﬁnancial tables and charts throughout this document due to the effect of rounding.

9.6%

Our pro forma sports margin has improved
from 8.5% in 2015.

+26%

Pro forma Clean EBITDA was up by €42.5m.

23%

Pro forma Clean EBITDA margin improved
to 23% from 20% in 2015.

Chief Executive’s review continued

As mentioned in the Chairman’s statement, we have
today announced a further dividend of euro 15.1c
in respect of the ﬁnancial year ended 31 December
2016. In total, we have declared euro 30c of dividends
for the 2016 ﬁnancial year, returning some €88m
to shareholders.

Integration creating value
The Group has a strong track record of creating
shareholder value through astute earnings-accretive
acquisitions and efﬁcient integration of the acquired
operations and bwin.party has been no exception.

In bwin.party we saw a business with proven
proprietary technology, established brands and some
excellent people, but a business that had lost its way.
Through a refocusing on core markets, improving
the customer proposition, together with a number of
key hires, our instincts have proven correct, reﬂected
by the strong revenue and Clean EBITDA growth
highlighted above.

It is now just over a year since we acquired bwin.party
and we have been delighted with the way the integration
has progressed. I’m pleased to say that most of the
surprises have proved positive and we have been able
to evolve our integration plans to reﬂect both this and
the constantly changing industry backdrop in which
we operate.

The preparatory work to migrate the Sportingbet and
associated brands onto the bwin platform has largely
been completed with three countries already switched
over. Given the strong underlying performance of
the business we have decided to further mitigate
the risk of disruption by commencing the migration
of the larger territories once the relevant football
seasons have ﬁnished. Our synergy target of €125m
(combined Group savings against 2014) exit run rate
by the end of 2017 remains on schedule.

More to come
Our acquisition of bwin.party was not simply about
cost synergies. We ﬁrmly believed we could return the
business back to growth. Between 2011 and 2015
bwin.party NGR declined by 30% (€816m to €574m),
but in 2016 the business returned to top line growth.

Whilst the integration process is almost complete, we
continue to look for improvement and enhancements
across the business. Indeed, we feel the organic
growth opportunity of the enlarged GVC is greater
than originally expected and a key strategic theme in
2017 will be increased, but focused, investment in
marketing to fully exploit this potential. However, it is
important to note that in 2016 our marketing spend
as a percentage of NGR was just 20%, considerably
lower than many of our peers and the increased
investment in 2017 will merely bring us closer into
line with the market.

We are also excited about the cross-sell opportunity
presented by the migration of Sportingbet and other
associated brands to the bwin platform. The bwin
platform has proven to be particularly effective in
enabling the cross-sell of other products to sports
customers and penetration rates are now double
that achieved across the Sportingbet platform.

The importance of proprietary technology to our
business cannot be overstated. In an increasingly
competitive and regulated industry, control of our own
technology gives the Group signiﬁcant ﬂexibility and
operational leverage. In 2016, 95% of our revenues
were derived/processed through our proprietary
platform and we expect this to increase further in 2017
and beyond.

During 2016, platform stability improved signiﬁcantly,
with availability exceeding 99.9%, while load times
across key sites improved by over 30%. This is key,
as with a robust and efﬁcient platform we can process
substantially more wagers at little additional ﬁxed
cost. Not only does this support the organic growth of
the business but it also places the Group in a strong
position to derive substantial synergies from any future
M&A that we may pursue.

Outlook and current trading
Our strategy is to build further scale and international
diversiﬁcation through leveraging our proven
proprietary technology, established brands and high
quality personnel. In an increasingly competitive and
regulated industry, we believe scale and diversiﬁcation
will enable us to continue to create shareholder
value through capital and income growth. Whilst we
are excited by the organic potential, we believe the
online gaming industry will continue to consolidate.
Historically, GVC has delivered signiﬁcant shareholder
value through M&A and this remains a core
component of our strategy.

GVC enters 2017 with positive momentum and the
integration of bwin.party largely complete. The industry
faces many challenges, but the combination of our
talent, proprietary technology and brand strength,
gives us conﬁdence that we can deliver another
year of growth. Although there is no major football
tournament in 2017, the trajectory in the business
together with a return to more normalised levels of
marketing means that we expect to achieve further
growth in the coming year.

The positive momentum reported throughout 2016 has
continued into the current year. Pro forma daily Group
NGR is up 15% (+16% in constant currency) for the
period up to 19 March 2017. This growth has been
achieved despite some high proﬁle customer friendly
results in Europe during the last few weeks of February
and early March. The strategy of exiting low margin
sports turnover has continued and as a result we
believe a normalised long-term gross win margin for
the Group will be around 10%.

Sports Labels pro forma daily NGR YTD is up 18%
(+19% in constant currency) whilst Games Labels
daily NGR on the same basis is up 6% (+8%
constant currency).

As we pass the ﬁrst anniversary of the bwin.party
acquisition, and with no major summer football
tournament in 2017, year on year comparatives will
inevitably get more challenging. Nevertheless, the
business has made an excellent start to the year
and with the beneﬁts of signiﬁcant product and
customer experience improvements still to come
through, as well as the full synergy savings to be
realised in 2018, the future is extremely encouraging.

GVC Holdings PLC Annual Report 2016

OUR STRATEGY

Our strategy is to build further scale and increase our international diversiﬁcation through leveraging
our proven proprietary technology, established brands and high quality personnel. In an increasingly
competitive and regulated industry, we believe scale and diversiﬁcation will enable us to continue
to create shareholder value through capital and income growth. Whilst we are excited by the organic
potential, we believe the online gaming industry will continue to consolidate. Historically, GVC has
delivered signiﬁcant shareholder value through M&A and this remains a core component of our strategy.

OUR VISION

OUR STRATEGY

(cid:132)(cid:3)To be a top three player in core markets

(cid:132)(cid:3)(cid:3)To build further scale and international diversiﬁcation

(cid:132)(cid:3)To be best in class in core markets

UNDERPINNED BY:

BRANDS

01001001000010000010010000011100011001000011001100001100000010010110100

10001TEC0C01001CHN0001NO00010000OLO00OG1001GY0Y1101Y 11111100111100110011001001001110101
0T010TEC0C00CH1H001HN0N 1100OL1L000100011LOG0GY0010011Y 00010000110000000010101011111011
TECHNOLOGY
TTEECHHHNNOLLOOOGGYY000Y 00010000000011001100000110010100101

0100101001001110101000111000001001111100000001100111000111010

TALENT

Brands support our strategic
ambition through:

Technology supports our strategic ambition
through giving us the ability to:

People support our strategic
ambition through:

(cid:3)(cid:132) Being a valuable commodity in a competitive market

(cid:3)(cid:132) Independently drive product development without

(cid:3)(cid:132) Leadership

(cid:3)(cid:132) Building trust with players

(cid:3)(cid:132) Building trust with business partners

(cid:3)(cid:132) Enabling us to develop a diverse international

customer footprint

The strength of our brands is reﬂected in the strong
growth in 2016 despite an historically low level of
marketing investment in the year (see pages 17 and 18
for further details). Having spent much of 2016 making
improvements to our customer service, product range
and functionality, in 2017 we will invest in our brands
through increased marketing spend. This investment
will be focused in core markets where we believe we
can generate attractive returns.

relying on third-parties

(cid:3)(cid:132) Develop the scale and ﬂexibility to enter new
markets and/or adapt to regulatory changes

(cid:3)(cid:132) Improve our operational leverage

(cid:3)(cid:132) Innovation

(cid:3)(cid:132) Ambition

(cid:3)(cid:132) Drive

In a dynamic industry such as ours, people are
key to the success of the business. GVC has
an impressive track record of retaining our core
people. Since the bwin.party acquisition this has
been supplemented by attracting some of the
industry’s leading talent away from our peers.
Working with our existing people, they are a key
reason behind the success of the Group.

(cid:3)(cid:132) Create the potential to extract signiﬁcant synergies

through acquisitions

(cid:3)(cid:132) Offer our customers distinct, best in class products

and services

Our technology has proven scalability in terms of
both geographic diversiﬁcation and volume. Not only
does this give us ﬂexibility when it comes to organic
expansion and product development, but it also
presents the opportunity for substantial value creation
through M&A.

HOW WE DELIVER IT

Organic:

(cid:3)(cid:132) Return marketing investment to normalised levels

(cid:3)(cid:132) Product and service development

(cid:3)(cid:132) Focus on core markets

(cid:3)(cid:132) Improved CRM and BI

(cid:3)(cid:132) Cross-sell

M&A:

(cid:3)(cid:132) Focus on underweight markets

(cid:3)(cid:132) Regulated and soon to be regulated

(cid:3)(cid:132) Prefer online but ﬂexible

(cid:3)(cid:132) B2C

(cid:3)(cid:132) Technology

10 Major trends in the marketplace

THE INDUSTRY IN
WHICH WE OPERATE

11% 50% 33%

Global online gaming grew by 10% CAGR
over the past decade.

Europe makes up half of the global
online gaming market.

A third of all our online gaming is now
conducted via a mobile device.

1% 1%

7 %

1 % C

35.8

32.4

39.8

12%

29.1

26.3

22.8 23.9

20.6

18.6

16.1

5
0
%

(€bn)

6.6

4.8

3.4

2.7

1.9

2.2

1.2

13.1

10.8

9.0

(%)

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Europe

Asia/Middle East

North America

Latin America &
the Caribbean

Oceania

Africa

GLOBAL GROWTH
GVC Group operates in the global online/interactive
gaming market, a market that was estimated to have
been worth approximately €40bn in 2016. Over the
past ten years the global interactive gaming market
has risen by 11% CAGR. Total market growth in 2016
versus 2015 is forecast to be in line with the 11%
ten year CAGR.

EUROPE
Geographically, Europe is the largest online gaming
market, accounting for 50% of the total, it also
represented over half of the Group’s pro forma NGR
in the past year.

MOBILE
A major driver of industry growth continues to be
mobile. In 2016, mobile represented 33% of global
interactive gaming revenues, an increase of 21%
on the previous year. The statistics in Europe are
even more impressive with mobile growth being an
estimated 29% year on year. Around 50% of the
Group’s Sports Labels gross gaming revenue is now
via mobile, but this is still behind many of our peers
and presents a signiﬁcant opportunity for the Group.

GVC Holdings PLC Annual Report 2016

76% 7%

Sports betting and casino games make up three
quarters of all online gaming.

Online gaming is forecast to continued to
grow at 7% CAGR between 2016–2021.

4 %

5 %

6 %

%
9

Betting

State Lotteries

Skill/Other Gaming/
Commercial Lotteries

4
9
%

Casino

Poker

Bingo

(€bn)

7 % C A G R

49.0

46.4

55.0

52.4

42.7

39.8

2016 2017 2018 2019 2020 2021

FORECAST
Looking ahead, the gaming market is expected to
continue to grow ahead of GDP, with H2 Gaming
Capital forecasting c7% CAGR over the next ﬁve
years. The key driver will continue to be mobile with
c45% of all online revenues expected to be come
from this media in 2021. Regulation will undoubtedly
inﬂuence on whether these growth forecasts are met
or exceeded.

MARKET BY PRODUCT
As well as mobile, growth has been driven by
continued product innovation across all areas of
the market. An ever increasing number of betting
opportunities are being offered to customers with
in-play accounting for over half of wagers in some
markets. Meanwhile, operators are developing
products that present players with increased
functionality, such as cash out.

In terms of product, betting and casino represent
76% of the global interactive market and these two
product categories are also the two core product
offerings of the Group. In 2016, betting and casino
were forecast to grow at 12% globally, slightly above
the industry average.

Source: All data from H2GC, January 2017.

Regulatory overview

REGULATORY
UPDATE
T he regulatory landscape is changing at a rapid pace, particularly across

Continental Europe. Whilst we welcome sustainable legislation, the national
regulatory regimes across the EU Member States differ signiﬁcantly due to
the lack of harmonised gaming rules at an EU level. Within the EU, we work with
the industry and those committed to upholding the open market values of being part
of the union.

In 2016, approximately 69% of our pro forma NGR was derived from territories where
we currently pay gaming taxes/VAT or where a licensing structure is in the process
of being implemented. The Group is currently licensed in more than 18 territories.

In Germany, bwin was among the 20 successful applicants for a sports betting
licence in 2014. However, this process was subsequently suspended after being
challenged by operators who failed to secure licences and licences were never
granted. Nevertheless, all 35 operators (including bwin) that fulﬁlled the minimum
criteria in the licensing procedure will receive temporary sports betting licences
on 1 January 2018. Further, the Second Amended State Treaty on Gambling is
scheduled to enter into force on 1 January 2018. With the exception of the state
of Schleswig-Holstein, licences for online casino/poker are still not available in
Germany. However, it was announced in November 2016 that the German federal
states agreed to evaluate a legal framework for the regulation of online casino and
poker. This evaluation will most likely be concluded in the autumn of 2017. In this
context, the state of Hesse has an extraordinary termination right to the German
State Treaty on Gambling which is linked to the satisfactory solution of the online
casino and poker situation until 30 June 2019. The Group pays betting tax/VAT on
all of its German revenues.

In 2016, the Group received a permanent licence in Romania having previously
operated under an interim licence. A licence application has also been made in the
Czech Republic following new legislation that came into force on 1 January 2017.
The Group will consider applying for a licence in Poland in light of amendments to
their gaming legislation.

In August 2017, the UK government will commence levying the point of consumption
tax on gross gaming revenue on all online gaming products (previously just betting)
as opposed to net gaming revenue. If this had been in place at the start of 2016 the
estimated incremental tax payable by the Group would have been approximately
€7m. Also in the UK, the CMA (Competition and Markets Authority) is undertaking
a review into the advertising of gaming and operators terms and conditions,
particularly in the area of promotions to customers.

Brexit
Beyond the impact of currency movements there has been no visible impact on the
business from the UK’s decision to seek an exit from the EU. The Group has greater
sterling costs than revenues and therefore the impact from the recent sterling
weakness is a net positive. The detail of how the UK intends to exit the EU is yet to
be decided, however, management believe GVC’s global footprint gives it signiﬁcant
ﬂexibility to face any challenges that may arise.

SPORTS (S)

POKER (P)

1. % of GGR unless otherwise stated.
2. H2GC estimates for sports, casino, poker and bingo GGR, January 2017.
3. H2GC estimates, January 2017.
4. A licensing regime for online sports betting has been proposed in all 16
states but no licences have yet been issued. Taxes on sports betting are
at 5% of turnover on all German revenues. Taxes on poker and casino are
being paid at 20% of GGR on revenues generated by Schleswig-Holstein
residents and 19% VAT on all other German gaming revenues.

CASINO (C)

BINGO (B)

5. Draft legislation.

GVC Holdings PLC Annual Report 2016

1. UNITED KINGDOM

Tax rate1
2016 Market size2
2016-21 CAGR3

15%
€5,983m
8.0%

2. AUSTRIA

Tax rate
2016 Market size
2016-21 CAGR

2% S turnover 40% C P B
€256m
3.6%

EUROPEAN AND US REGULATED AND
REGULATING MARKETS TAX LANDSCAPE

Total interactive (excluding lottery)
gross gaming revenue (€m)

United Kingdom

5,983

Germany

1,449

France

Italy

Ireland

Spain

Denmark

1,234

1,124

973

535

473

Belgium

345

Greece

300

Czech Republic

Austria

261

256

Netherlands

212

US (New Jersey)

Poland

181

176

Romania

Bulgaria

9. GREECE

Tax rate
2016 Market size
2016-21 CAGR

10. IRELAND

Tax rate
2016 Market size
2016-21 CAGR

35%
€300m
8.1%

1% S 23% VAT C P B
€973m
0.6%

3. BELGIUM

Tax rate
2016 Market size
2016-21 CAGR

4. BULGARIA

Tax rate
2016 Market size
2016-21 CAGR

5. CZECH REPUBLIC

7. FRANCE

11% GGR + 21% VAT
€345m
-0.2%

Tax rate
2016 Market size
2016-21 CAGR

23% S P 35% C B
€261m
4.6%

Tax rate 9.3% S turnover 2% P turnover + 20% VAT
€1,234m
2016 Market size
3.9%
2016-21 CAGR

6. DENMARK

20%
€34m
5.1%

Tax rate
2016 Market size
2016-21 CAGR

8. GERMANY 4

20%
€473m
5.5%

Tax rate
2016 Market size
2016-21 CAGR

5% S turnover 19% VAT C P B
€1,449m
4.9%

11. ITALY

Tax rate
2016 Market size
2016-21 CAGR

13. POLAND

15. SPAIN

22% S 20% C P B
€1,124m
5.1%

Tax rate
2016 Market size
2016-21 CAGR

12% turnover
€176m
-1.5%

Tax rate
2016 Market size
2016-21 CAGR

12. NETHERLANDS 5

Tax rate
2016 Market size
2016-21 CAGR

14. ROMANIA

29%
€212m
9.0%

Tax rate
2016 Market size
2016-21 CAGR

16. US (NEW JERSEY)

16%
€75m
5.7%

Tax rate
2016 Market size
2016-21 CAGR

25%
€535m
2.7%

17.5%
€181m
13.9%

Business model

HOW WE CREATE VALUE

KEY DIFFERENTIATORS
INPUTS

HOW E-GAMING WORKS
WHAT WE DO

OUR TECHNOLOGY
We operate a unique proprietary
technology platform that sets us apart
from our competitors and allows us to
control our product development.

+ Read more on page 21

OUR BRANDS
Our brands are amongst the most
popular in the industry, across sports,
casino poker and bingo.

+ Read more on pages 17 and 18

OUR PEOPLE
We have been successful in attracting
the brightest and the best from within
and beyond the gaming industry.

+ Read more on page 23

OUR MARKETING
We leverage the popularity of our
brands through sophisticated
CRM systems and the expertise
of our marketeers.

+ Read more on pages 17 and 18

OUR SCALE
We have the scale and diversity
required to succeed across multiple
products and territories and to
be able to adapt to our constantly
evolving industry.

+ Read more on pages 4 and 5

GVC Holdings PLC Annual Report 2016

CUSTOMERS

BRANDS

WAGERS

SPORTS
LABELS

GAMING
LABELS

€bn

WAGERS & BETS

B2B

We provide gaming software
and services to a select
number of partners.

NON-CORE

In 2016 this included our
payments processing business
and ﬁnancial spread betting brand.

€m

OUR PROPRIETARY
TECHNOLOGY PLATFORM

010100100001000010010001100100100101001000010011001110100100010010000100010001000001000101101111101101001011000110001110
111110110101010010001110101001110000110011110000111000111000111010100011000010101011111110110101101000100111110110100
0111110110101010010011101010011100000100111100000110001110000111010011000100000101010011111101110100101000100011111001010
000010000101000110001010010100010000001001011010001000100100110010011000001001010111111110110010010100010011110110100111
0101010010011101011001110001000111110000011001110000011101010001000010110101111110110010110110001001111010100111100011
101010100100111010010011100011001111100000110011100000011101010001000001001010011111101111010100100010011101001000011110000
000010100011001010001010010000010001001101001001000010001001000100001011010111111011001011011000100111010100111100011
1001001110101001111000100111100001110001110001110010110010000010101001111101101010100110001111010010011110000010001111
010010011101010011110001001111100000111001110001111001010010000010101011111101101101100100100011101010001111000001100111
0001100101001010010000100101101000110010010010001001000010010101111101101010010001000111100101000111100001000111100

VALUE WE CREATE
OUTPUTS

POSITIVE RETURNS
Everything we do is ultimately
focused on delivering value to
our shareholders.

+ Read more on page 3

DIVIDENDS
We are committed to regarding our
shareholders with a progressive
dividend policy.

+ Read more on page 3

ENGAGING
CUSTOMER CONTENT
We are focused on delivering the best
product offer to our customers, which
is continuously refreshed.

+ Read more on pages 17 and 18

RESPONSIBLE
GAMING
We are committed to providing
a safe and secure environment
for our customers to play in.

+ Read more on page 22

CORPORATE
RESPONSIBILITY
We recognise our responsibilities
as a corporate citizen in the
communities in which we operate
our business.

+ Read more on pages 24 and 25

NGR

CONTRIBUTION

NET EBITDA

(−)
BONUSES
& WINNINGS

=
€m

NGR

(−)
COST OF SALES

– Local taxes
– Payment processing
– Marketing
– Software royalties
– Partner shares

=
€m

CONTRIBUTION

(−)
ADMIN EXPENSES

– Personnel
– Technology
– Professional fees
– Ofﬁce and travel

=
€m

CLEAN EBITDA

0100110011110000001100111111000000100010001000000010000011001000000111000001010010100100001001011010010010010010010010000101010
0111111000100001111111000000110011011010000100000001000000011010000001110000101001010010000100101101001001001001001001000010101
0001111100010000111110000001100010010110001100000001100000010110000111110010100101001000010010110100100100100100100100101001
1100000010011111100000100100100000010000001001000001100001001000010010010000100101101001001001001001001000010101011111011
1001111100000110001010100110000001000000011011000001110010010001001001000010010110100100100100100100100001010101111101
0100001111000000001100100010100001000000010000000101000011100001011000001010010000100101101001001001001001001000010100100001
10011111000000101001000001000000010100000011100001010000100100010000010010110100100100100100100100001010101111101101010
1000000001100011001001001000011000000101110000111000010110010010001000001001011010010010010010010010000101010111110110101
111000000111000110010100001000001000000110110000111001100100001101000001000010010110100100100100100100100101001000010000101
000001101000100000010000010100000110011100100011001001100000100001101101001001001001001001000010101011111011010101001001

Performance of divisions

THE FUTURE’S
‘IN PLAY’

Customers increasingly want to be involved during live sports events
to stay involved and place bets in real time to predict the outcome.
Our technology platform is key element in allowing us to offer this
improved experience and extension to revenue.

GVC Holdings PLC Annual Report 2016

OPERATIONAL OVERVIEW
Following the acquisition of bwin.party the Group adopted a new reporting structure with the B2C operations
split between Sports Labels and Games Labels, with our other divisions being B2B and Non-core. It is worth
noting that revenues within Sports Labels are not limited purely to sports wagers but include revenues derived
from other gaming activities conducted on any of our Sports Label brands. Similarly, though to a lesser extent,
Games Labels include sports wagers made through any of our Games Label brands.

SPORTS LABELS
G VC owns a number of sports betting brands including bwin, Sportingbet,

Betboo and Gamebookers. bwin was a pioneer in online sports betting and
remains one of the best known brands across Continental Europe. However,
it is fair to say that the brand had lost market share in a number of core territories in
recent years. Therefore, the performance of the business in 2016 was particularly
encouraging. Not only did our existing customers spend more with us but also we
were successful in adding new customers.

Overall sports wagers grew 4% to €4,488m for the pro forma 12 months, whilst an
improvement in the gross win margin to 9.6% (2015: 8.6%) helped to drive sports
NGR 9% higher to €333.2m. In constant currency, wagers rose 7% and sports
NGR by 11%. The higher gross win margin was largely due to the improvements we
made at bwin, particularly in the area of risk management which led to a signiﬁcant
reduction in low margin turnover. The year also beneﬁted from the UEFA Euro 2016
tournament, during which we took €162m of wagers and achieved a gross win
margin of 18.3%.

During the year we signiﬁcantly expanded our gaming offer to our sports customers.
Over 17 deals were signed with leading suppliers, including NetEnt, Evolution,
MicroGaming, IGT, NYX and Edict Gaming to name but a few. In total, this gives us
access to over 650 new games/products across mobile and desktop. Together with
improved cross-sell at the acquired businesses, this helped pro forma gaming NGR
rise 18% to €320.8m in 2016 (+21% in constant currency).

Total NGR from Sports Labels increased 14% (16% in constant currency) to
€653.9m, with revenue 13% higher at €638.9m. Meanwhile, the pro forma
contribution was €362.0m (2015: €318.9m), reﬂecting a maintained margin at 55%.

SPORTS LABELS

Pro forma
2015
€m
4,312.6
8.6
304.5
271.1
575.7
(11.0)
564.7

2016
€m
4,488.3
9.6
333.2
320.8
653.9
(15.0)
638.9

Sports wagers
Sports margin %
Sports NGR
Gaming/other NGR
NGR

EU VAT
Revenue

Contribution
Contribution margin %

362.0
55

318.9
55

Constant
currency
%
7

Change
%
4

11
21
16

9
18
14

Actual
2015
€m
1,683.0
9.2
113.9
101.2
215.1
(0.5)
214.6

2016
€m
4,272.3
9.6
315.9
304.8
620.7
(13.9)
606.8

342.5
55

113.6
53

In 2016, marketing spend as a proportion of Sports Labels NGR was c17%, this is
well below our peers where spend is typically 25-30% of NGR. It was a deliberate
strategy in 2016 to curtail marketing spend in the acquired businesses that
achieved either low returns on investment or returns that could not be accurately
measured. Therefore, to deliver strong growth on relatively low marketing spend is
both pleasing and a recognition of the strength of the brands we own. The current
year will see marketing spend increase to more normalised levels, 23-25% of NGR,
with the focus being on the larger core geographic markets.

Revenue from mobile grew strongly in 2016, and now represents 50% of divisional
gross gaming revenue against 34% in 2015. This is still below many of our peers
and represents an area of real opportunity for the Group.

In addition to increased marketing investment, 2017 will see us continue to expand
the product offering as well as further improvements to the overall customer
experience. CRM is key to generating positive returns from marketing and we have
made a number of key senior appointments in this area.

bwin is one of Europe’s leading
online betting brands and is
synonymous with sports. It has
leading positions in several
markets including Germany,
Belgium, France, Italy and
Spain. bwin also offers casino,
poker as well as bingo on
mobile and web, all through
a single account.

Sportingbet is a leading
provider of sports betting,
casinos, games and poker
online and on mobile. It was
established over 15 years ago
in 1998 and acquired by GVC
in March 2013.

Gamebookers is a full-service
sportsbook which is particularly
popular in east and central
European markets. It offers up
to 30,000 bets daily on more
than 90 sports.

Betboo was established in
2005 to provide online bingo,
sportsbook, casino and poker
access to South American
customers. It was acquired by
the GVC Group in July 2009.

Performance of divisions continued

GAMES LABELS
G VC’s key gaming brands include, partypoker, partycasino, Foxy Bingo,

Gioco Digitale and CasinoClub. Pro forma NGR was €203.5m in 2016
versus €211.8m in the previous year, with the change in constant currency
being 0%. Momentum improved through the year with pro forma NGR in constant
currency +4% in H2 over the previous year. Pro forma contribution from Games
Labels declined to €89.0m from €109.6m in 2015. The decline reﬂected a number
of factors including increased gaming taxes/VAT and investment in partypoker.

Historically, the Games Labels within the bwin.party business had been the most
challenged, in particular partypoker and partycasino. Our focus in 2016 was
to improve management, increase investment, enhance the product and the
customer experience.

It is therefore pleasing to report that despite continued structural challenges in the
poker market, partypoker NGR in 2016 rose 14% in constant currency, with the
growth in H2 over the previous year being 16% in constant currency. In December
2016 we reached a deal with one of Europe’s leading poker rooms, Dusk Till Dawn,
to launch a new live global poker tour, partypoker LIVE which will feature the headline
tournament, the partypoker Million.

We also took the decision to restructure partycasino and separate the brand
from partypoker, repositioning the offering under a new management team.
Taking inspiration from CasinoClub, there is greater emphasis on VIP management
and reducing reliance on partypoker in terms of customer acquisition.
Signiﬁcant improvements were made to the product and customer services before
relaunching the brand in H2 2016. This included the relaunch of the partycasino
frontend, enhancements to our live casino experience, the introduction of new
“Pro Series” table games and a number of technical improvements, such as
the dramatic reduction of game load times. As a result, along with increased
investment, partycasino saw a signiﬁcant acceleration in new player acquisition
through H2, along with lower attrition and increased revenues per customer.
December was particularly strong and this positive momentum has continued
into 2017.

Foxy is one of the UK’s best known online bingo brands but has had a challenging
few years. In the second-half of 2016 we brought in a new Head of Bingo and
signiﬁcant work has already been undertaken to reinvigorate the brand and
customer proposition. New creative and media agencies have been appointed and
in March 2017 a new marketing campaign was launched with Hollywood actress
Heather Graham promoting the rebranded Foxy Bingo and Foxy Casino.

CasinoClub celebrated its 15th anniversary in 2016 with a series of events
across Europe. Through its heritage and bespoke club approach, CasinoClub has
established a leading position in German speaking markets and beneﬁts from a loyal
customer base. Last year also saw the brand take control of its software platform
previously provided by a third party, while delivering a positive top line performance.

GAMES LABELS

Pro forma
2015
€m
77.1
5.0
3.2
208.5
211.8
(3.2)
208.6

2016
€m
65.2
7.7
4.3
199.2
203.5
(6.4)
197.0

Sports wagers
Sports margin %
Sports NGR
Gaming/other NGR
NGR

EU VAT
Revenue

Contribution
Contribution margin %

89.0
44

109.6
52

Constant
currency
%
(14)

Change
%
(15)

35
0
0

(1)

32
(5)
(4)

(6)

(19)

Actual
2015
€m
–
0.0
–
32.6
32.6
(0.7)
31.9

2016
€m
58.9
7.7
3.8
184.4
188.3
(6.2)
182.1

82.9
44

21.8
67

Gioco Digitale is the second largest bingo brand in Italy and a top ten casino brand
and is very much aimed at the casual player looking for entertainment. There was
some restructuring post acquisition, with improved marketing, promotions, CRM and
product. As a consequence, NGR grew strongly, particularly in casino.

All of our Games Labels are also beneﬁting from the many new content deals signed
over the past 12 months.

As with Sports Labels mobile revenue from Games Labels grew strongly in 2016,
and now represents 29% of divisional gross gaming revenue against 20% in 2015.
With further product enhancements and additional content we expect mobile
revenues to continue to grow strongly.

Looking ahead, the focus will be on continued product improvement across all of the
brands, along with improved customer service.

The improvement to product and customer experience across all of our games is
ongoing and supported by more targeted marketing, we expect further progress in
2017 and beyond. Furthermore, in addition to the signiﬁcant amount of new third
party gaming content already secured, the Group is also continuing the development
of its own unique in-house products.

partypoker is one of the
pioneers of the online poker
industry having launched in
2001. It remains one of the
industry’s most recognised
brands, with a particular
focus on the UK.

partycasino is one of the
world’s largest online casinos,
with 180 mobile games on
offer including many of the
classic casino games such as
blackjack, roulette and a broad
variety of slot machines.

CasinoClub was originally
launched in 2001 and acquired
by GVC in 2004, it is a leading
online casino website for
German-speaking markets
with more than 15,000
active customers.

Gioco Digitale was the ﬁrst
fully-regulated gaming site on
the Italian market launched in
2009. It is positioning itself
as a gaming portal for casual
gamers, with a focus on bingo
and casino products.

Foxy Bingo was launched in
2005 and is one of the most
successful brands in online
bingo and is one of the biggest
names in the UK bingo market.

GVC Holdings PLC Annual Report 2016

A BETTER
PRODUCT AND
EXPERIENCE

As one of the pioneers in online gaming, we have
some of Europe’s best known brands, but we needed
to invest to improve both the product and customer
service. We are now beneﬁting from this investment
and a renewed focus on marketing.

Performance of divisions continued

B2B
LEVERAGING TECHNOLOGY
T he Group provides B2B services to a number of well-known gaming

businesses including Borgata (MGM), Danske Spil, Fortuna and PMU.
Pro forma divisional revenues in 2016 were €14.2m compared to €14.2m

B2B

in the previous year, with the contribution being €14.0m versus €13.9m in the
previous year.

Pro forma
2015
€m
14.2

Constant
currency
%
0

Change
%
0

13.9
98

2016
€m
14.2

14.0
99

Actual
2015
€m
–

–
–

2016
€m
13.3

13.1
98

Proprietary technology presents the Group with the opportunity to provide
B2B services to third parties, but this has to be balanced with the potential
presented from our own B2C operations. We will pursue B2B opportunities that
are meaningful but only where there is no signiﬁcant distraction to our core B2C
operations or those that do not compromise our long-term strategy. Consistent
with this focus, the B2B agreement with Betfred was mutually terminated.

Revenue

Contribution
Contribution margin %

At the end of 2016, we were pleased to strengthen our B2B relationship with
Borgata and the MGM Group. Under the new deal, GVC Group will provide an
expanded offering beyond Borgata to additional MGM brands in New Jersey,
with the potential for the partnership to be extended into other US states,
as and when regulation permits.

The Group is committed to B2B and currently has an active pipeline of opportunities
in line with our strategic focus.

The Borgata Hotel, Casino &
Spa is New Jersey’s largest
casino property. GVC has
supplied online casino and
poker products to The
Borgata since New Jersey
regulated online gaming in
November 2013.

Danske Spil is the Danish
monopoly lottery operator
and market leader in online
gaming. GVC has supplied
online casino and poker in the
regulated Danish market since
January 2012.

PMU is the French horseracing
monopoly and one of the
largest gambling companies
in Europe. GVC has supplied
online poker to PMU in the
regulated French market since
July 2010.

Via a strategic partnership with
GVC, Austrian retail solution
provider CBCX use GVC’s
leading live and pre-match
content services to drive their
dynamic sportsbook products
in the retail environment.

Leading Czech based sports
betting operator Fortuna
moved to GVC’s live content
feed in 2013, increasing the
number of events offered to
their customers by 60%, and
driving double digit annual
revenue growth.

NON-CORE
O ther revenues comprise the ﬁnancials business, InterTrader. The business

undertook a restructuring in 2016, consolidating to a single brand and also
bringing in-house a signiﬁcant part of the operation that was previously
outsourced. Whilst this created some disruption in Q3, InterTrader enjoyed its
strongest trading period of the year in Q4, reﬂecting the beneﬁts of the actions
taken in the previous quarter.

In December 2016, we announced the disposal of payments processor Kalixa for
a total cash consideration of €29m (plus potential adjustments up to a maximum
€35.5m). The sale is expected to complete in H1 2017.

GVC Holdings PLC Annual Report 2016

TECHNOLOGY IS
FUNDAMENTAL TO
OUR SUCCESS

It enables us to achieve our strategic ambition and product development without a reliance on third
parties. In an increasingly competitive environment, being in control of our own technology gives us
signiﬁcant operational advantage and enables us to offer customers best in class products and services.

CMS

S
T
N
O
P
H
C
U
O
T
R
E
M
O
T
S
U
C

TRANSLATION

CAMPAIGNS

SOCIAL

COMMON SERVICES

IOT

MOBILE

TABLET

DESKTOP

ONLINE DISTRIBUTION CHANNELS

RACE

PREMATCH

LIVE

GAMES

RING

CASH

SPORTS
BOOKMAKING

POKER
TOURNAMENT MGMT

CASINO
VENDOR INTEGRATION

GAMING PRODUCTS

COMMON

RISK

WALLET
PLAYER PROFILE
ACCOUNT

CASHIER

POST PROCESSING/BUSINESS INTELLIGENCE

BONUS
PROMOTION
LOYALTY
SOCIAL
REWARDS

CRM SERVICES

ONLINE MARKETING
AFFILIATES

ACQUISITION
SERVICES

MAIL
NOTIFICATION
MESSAGING

PRODUCT
INTEGRATION

PARTNER
INTEGRATION

KYC
BLACKLISTS
COFFRE FORT
AAMS
REPORTS

REPORTING

PLATFORM SERVICES

REGULATION

S
E
C
V
R
E
S
N
O
I
T
A
R
G
E
T
N

Corporate Social Responsibility

RESPONSIBLE
GAMING

GVC aims to provide the world’s safest most trusted gaming platform. Across our broad product line-up,
our objective is that every user plays within their ﬁnancial means and receives the best service possible.
The Group is committed to three core principles of integrity, fairness and reliability, with our overarching
goal, of preventing gaming-related problems arising. Together with leading research institutes,
associations and counselling providers, we have developed measures to create a responsible,
safe and reliable place for online gaming.

1. CUSTOMERS

FAIRNESS
It is our responsibility to create a gaming environment
that is founded on the spirit of fair play. The trust
of our customers is fundamental to our success.
Customer conﬁdence is reliant on us safeguarding the
fairness of the games and protecting our customers
against fraud. We work closely with independent
authorities which monitor the fairness of the gaming
products we offer. When it comes to fraud and
manipulation, our dedicated investigation and online
monitoring teams ensure our customers’ protection.

SECURITY
Our gaming sites are subject to strict regulatory
oversight and we comply with a wide range of laws,
rules, standards and regulations throughout various
jurisdictions. Regular veriﬁcation of compliance by
means of independent reviews conﬁrms that random
number generators work as they should, that deposits
are kept safe in segregated accounts and that all
personal data is protected.

PREVENTION
Gaming is a great source of entertainment for millions
of people around the world. But, for a minority, gaming
can cause problems. We are committed to identifying
risks as early as possible and intervening to prevent
these problems before they emerge. We have in place
a responsible gaming framework which includes
controls to help customers to play within their limits
and avoid a situation where gaming causes problems.

GVC Holdings PLC Annual Report 2016

KEY EMPLOYEE STATISTICS

HEAD COUNT

Average number of pro forma employees 2016

2,554

2016

Number of employees prior to acquisition
(31 January 2016)

Number of employees as at 31 December 2016

Net change
Appointments in 2016
Voluntary attrition 2016
Involuntary attrition 2016
Redundancies in 2016
Total attrition
Average length of service
AGE BREAKDOWN
AS AT 31 DECEMBER 2016

Employees under 25
Employees 25 to 29
Employees 30 to 49
Employees 50 and over
GENDER BREAKDOWN
AS AT 31 DECEMBER 2016

Female
Male

2,400

2,338
2.5%

709
15.5%
15.5%

305
31.0%

3 Years, 11 months

203
585
1,494
56

822
1,516

2. EMPLOYEES

T he acquisition of bwin.party transformed the

size and shape of the Group’s workforce, taking
the number of full-time employees from 463
to 2,400. The ﬁrst priority we set ourselves was to
create an organisation where a uniﬁed, dynamic,
entrepreneurial approach would enable our talented
people to thrive.

Having reviewed the structure of the enlarged group,
we identiﬁed a number of strengths to build on as
well as challenges to address. Whilst the business
we acquired contained a wealth of talented and
experienced professionals, they were being hampered
by an overly-complex management structure that was
too process heavy. This over-burdened individuals
with administration and limited their ability to innovate
and focus on delivery to the customer. As a result,
in our restructuring process we have sought to
streamline our processes to create a culture where
entrepreneurism is encouraged and rewarded.

People
An unfortunate but inevitable consequence of any
acquisition of the size we undertook, is the need to
identify and remove duplicate roles. This is never an
easy task, but having determined the right organisation
structure, we moved quickly to select the right people
for the right jobs in the right locations. In total, this
restructuring process meant that 305 roles became
redundant in 2016.

In addition to drawing on the skills from within the
existing businesses, we also used the enlarged
Group’s enhanced proﬁle to recruit the very best
talent from across the industry. These included the
appointments of Shay Segev, as Chief Operations
Ofﬁcer, Liron Snir as Chief Product Ofﬁcer and
following the announcement of Richard Cooper’s
decision to retire, Paul Miles as Chief Financial Ofﬁcer.
We also strengthened our management team with new
Heads of Investor Relations and Bingo as well as by
ﬁlling senior roles within our product delivery teams.

Process
Having built a management team with the skills and
experience to drive our business forward, we have
taken signiﬁcant steps to ensure we have the systems
in place to enable them to ﬂourish. We have embarked
on a process to identify and harmonise employment
policies and terms as well as best practice operations,
across the Group.

We have also revised our approach to reward, to
ensure our remuneration and bonus scheme is more
closely aligned to meeting the business’ performance
targets. In order to reduce administrative burden,
we have commissioned a new Enterprise Resource
Planning (ERP) system, which will be implemented
in the ﬁrst half of 2017.

Engagement
With such large scale structural change, it is vital
that we keep our people well informed so they are
fully aware of our business objectives and how they
can help to deliver them. We believe regular and
transparent communication is key to ensuring we have
an engaged and motivated workforce. Channels we
utilise to do this include: a new Group-wide intranet,
updated on a daily basis; regular webcasts from the
CEO and other members of the senior management
team; physical “town hall” meetings in our ofﬁce
locations; monthly manager briefs, cascaded to all
staff via their managers; as well as business-focused
webinars and discussion forums.

Culture and values
As part of our efforts to develop a uniﬁed,
entrepreneurial culture, throughout the past year we
commenced a company-wide exercise to identify
the core values that deﬁne us. Workshops were held
across all major ofﬁce locations to discuss what type
of attributes and qualities our staff value in themselves
and what they expect in colleagues and in the
workplace. Having identiﬁed a longlist, we held a poll,
which more than 1,500 employees participated in,
to select the top ﬁve corporate values.

These are:

(cid:3)(cid:132) Dynamism.

(cid:3)(cid:132) Ownership.

(cid:3)(cid:132) Collaboration.

(cid:3)(cid:132) Transparency.

(cid:3)(cid:132) Recognition.

We are now introducing a number of initiatives to
embed these values throughout our organisation,
to ensure that they are more than just a positive
sentiment but a fundamental part of how we operate
our business.

2016 Employee statistics
GVC is a highly diverse and culturally rich organisation
with our workforce comprising 57 different nationalities
making it both an interesting as well as a challenging
place to work. The transformation of the Group meant
that by the end of 2016 we had 2,338 employees.

Our future success depends upon the skills,
knowledge and endeavours of our employees.
We are committed to fostering and nurturing a
culture that enables people to learn, develop and
achieve, irrespective of their nationality or gender.
Life is fast-paced and highly demanding, but
for those with the right skills and temperament,
there is great opportunity.

Corporate Social Responsibility continued

3. SUPPLIERS

O ur supply chain is diverse, spanning IT, travel, sponsorship,

translation services, telephony and afﬁliates amongst others.
In 2017 we plan to integrate management of our suppliers

into a single Enterprise Resource Planning system.

Our approach to supply chain management is designed to:

(cid:3)(cid:132) Reduce risk;

(cid:3)(cid:132) Develop mutually beneﬁcial long-term business relationships; and

(cid:3)(cid:132) Deliver best value from our suppliers on a long-term basis.

Our procurement policy includes a “Supplier Acknowledgement and
Self-Certiﬁcation Checklist”, which requests information relating to:

(cid:3)(cid:132) Financial strength to ensure long-term reliability;

(cid:3)(cid:132) Ability to deliver enduring quality and value;

(cid:3)(cid:132) Commitment to innovation and ability to help us develop new products, processes

and ways of working that will provide us with a commercial advantage; and

(cid:3)(cid:132) Commitment to a wider corporate responsibility agenda relating to the
environment, labour/employment standards, equal opportunities and
employee rights.

In return, we aim to operate to the highest professional standards, treating our
suppliers in a fair and reasonable manner and settling invoices promptly.

Our objective is to help current
and potential investors to have a
greater understanding of both our
business model and the industrial
environment in which we operate.

6/1

8/1

GVC Holdings PLC Annual Report 2016

4. CHARITIES AND
COMMUNITY
ENGAGEMENT

I n addition to commitment to provide a safe and secure gaming environment

for our customers, we recognise we have a wider responsibility to supporting
charities who work within our sector and the communities in which our ofﬁces
are located. As a business we make donations to a variety of responsible gambling
organisations across multiple countries.

CSR goes beyond responsible gaming and as a Group we actively encourage and
support our employees’ involvement within local communities. In 2016, our staff
contributed over 1,400 hours on a varied range of community projects including
homeless shelters, children’s orphanages, helping the elderly and animal shelters.

In 2016, our employees were involved with homeless projects in Austria, Bulgaria
and Gibraltar, while in Austria and London we also worked with a number of local
charities for the elderly. Meanwhile, in Hyderabad, our employees have a long
standing tradition and commitment of working closely with numerous charities,
having ﬁnanced the building of clinics and extensive work with orphanages.
Wildlife projects supported during the year included cleaning up a local beach in
Gibraltar to help protect local marine life and the building of new enclosures for the
Wildlife Heritage Foundation.

The acquisition of bwin.party signiﬁcantly increased the scale of our business and
with our subsequent admission to the FTSE 250 Index, it is appropriate that we
evaluate our CSR policies.

In 2017 we intend to substantially increase our contribution to responsible gambling
charities/organisations. However, as mentioned above, we also believe we have
a signiﬁcant responsibility to contribute positively to the many communities in
which we operate. In total we have budgeted to more than double our ﬁnancial
commitment to our CSR programme in 2017.

In addition to a substantial increase in our ﬁnancial support, we have also committed
to expand our successful Pro Bono engagement programme to 15 locations from ﬁve
currently. Furthermore, we have doubled the number of hours individuals are able
to contribute. Last year employee participation in the Pro Bono scheme was around
20% and this year we are aiming to achieve at least 25%. If successful, we expect to
more than treble the number of hours of support given to our local communities.

The increased support and investment in community projects also enables us to
expand the number of good causes that we work with. In January of this year we
welcomed on board FareShare.

FareShare redistributes surplus, in-date food to charities and community groups
across the UK, including nearly 200 in London. Their food saves millions of pounds
for the voluntary sector and reaches people in genuine need in the communities
where we live and work. In addition to a ﬁnancial contribution, employees of GVC
will also be volunteering at FareShare’s Regional Centre in London.

1,400 hours
contributed by our staff in 2016 on a
varied range of community projects
including homeless shelters, children’s
orphanages, helping the elderly and
animal shelters.

5. ENVIRONMENTAL

IMPACT

6. PROVIDERS
OF CAPITAL

W e are a low-impact company, but we are not complacent and monitor

our environmental performance by measuring the water and energy we
consume, the amount of physical waste we produce and the amount of
CO2 gas we produce through air travel. We currently monitor these impacts from
our six main ofﬁces and plan to roll out monitoring across our locations this year.

Key metrics show that:

(cid:3)(cid:132) A total of 3,554 air ﬂights taken by employees producing an estimated

865 metric tons of CO2.

(cid:3)(cid:132) Our highest energy consumption resulted from our eight data centres, which

consumed 8.4 million KWh of electricity in total.

(cid:3)(cid:132) On average, each full-time employee in our six main ofﬁces every month used:

– 289 KWh of electricity;

– 801 litres of water; and

– produced 6.5kg of waste.

Our approach to the environment and the community goes beyond our own
business. Our suppliers’ corporate responsibility agenda relating to the
environment is also assessed before we enter into contractual arrangements.
We believe that by aligning our interests we can make a contribution towards
sustaining our environment.

T he online gaming sector is a rapidly evolving industry, subject to

continuous change in areas including regulation, technology and
competition. Our objective is to help current and potential investors

to have a greater understanding of both our business model and the
industrial environment in which we operate.

There is no set calendar that governs how we interact with our stakeholders, who
include investors, lenders, politicians, regulators and business partners amongst
others but we seek to communicate regularly through a variety of channels
which include:

(cid:3)(cid:132) Providing shareholders and lenders with regular updates on both corporate and

ﬁnancial developments throughout the course of the ﬁnancial year.

(cid:3)(cid:132) Regular meetings between our executive team and ﬁnancial analysts, current as
well as prospective investors, but with a focus around the publication of our half
year and full year results.

(cid:3)(cid:132) Investor and industry presentations, online webcasts, the publishing of ﬁnancial
reports and analysts’ coverage, to name but a few, all of which are publicly
available on our corporate website: www.gvc-plc.com

(cid:3)(cid:132) Using our regular interactions to gain a greater understanding of investors’ and
other stakeholders’ perceptions about our strategy, performance and prospects.

3,554
ﬂights taken by employees
producing an estimated
865 metric tons of CO2.

8.4m KWh
of electricity consumed
across all eight of our
data centres.

289m KWh
used by each full-time
employee in our six main
ofﬁces monthly.

6.5kg
of waste produced by each
full-time employee in our
six main ofﬁces monthly.

Chief Financial Ofﬁcer’s review

REPORT OF THE CHIEF
FINANCIAL OFFICER

PAUL MILES – CHIEF
FINANCIAL OFFICER

Having joined GVC as CFO in February 2017, it is my
pleasure to deliver such a strong set of results.

In line with the approach contained in the Report of the
CEO, both “pro forma” results and “actual” results are
provided. Pro forma results are presented for the period
as if the acquisition of bwin.party (the “Acquisition”)
completed on 1 January (as opposed to the actual date
of 1 February) and has been accounted for as a business
combination under IFRS 3.

It is worth noting the distinction between NGR, a ﬁgure
before VAT, and Revenue, the “statutory” number,
stated after VAT. While Clean EBITDA (earnings before
interest, taxation, depreciation, amortisation, share
based payments and exceptional items) is a non-GAAP
measure, it is used by the Group’s management to
assess the underlying performance of the business.

A summary of revenue, contribution and expenditure by reporting segment is
shown below:

YEAR ENDED 31 DECEMBER

Sports Labels
Games Labels
SPORTS WAGERS

Sports margin %

Pro forma

2015
€m
4,312.6
77.1
4,389.7
8.6%

2016
€m
4,488.3
65.2
4,553.6
9.6%

2016
€m
4,272.3
58.9
4,331.3
9.6%

Actual

2015
€m
1,683.0
–
1,683.0
9.2%

Sports Labels
Games Labels
B2B
Core
Non-core
NGR

EU VAT
REVENUE

Sports Labels
Games Labels
B2B
Core
Non-core
CONTRIBUTION

Sports Labels
Games Labels
B2B
Core
Non-core
CONTRIBUTION MARGIN

Core
Non-core
Corporate
EXPENDITURE

Core
Non-core
Corporate
CLEAN EBITDA

653.9
203.5
14.2
871.6
23.0
894.6
(21.4)
873.2

362.0
89.0
14.0
465.0
(1.0)
464.0

55%
44%
99%
53%
(4%)
52%

195.8
17.6
45.0
258.4

269.3
(18.6)
(45.0)
205.7

575.7
211.8
14.2
801.7
20.5
822.2
(14.2)
807.9

318.9
109.6
13.9
442.3
0.5
442.8

55%
52%
98%
55%
2%
54%

195.0
21.9
62.7
279.6

247.3
(21.4)
(62.7)
163.2

620.7
188.3
13.3
822.3
21.1
843.4
(20.1)
823.3

342.5
82.9
13.1
438.5
(1.0)
437.5

55%
44%
98%
53%
(5%)
52%

185.5
16.3
42.3
244.0

253.1
(17.3)
(42.3)
193.5

215.1
32.6
–
247.7
–
247.7
(1.2)
246.5

113.6
21.8
–
135.4
–
135.4

53%
67%
0%
55%
0%
55%

62.5
–
18.7
81.3

72.9
–
(18.8)
54.1

The table on page 27 highlights the bridge between the actual and pro forma numbers
for the year.

GVC Holdings PLC Annual Report 2016

Bridge between actual and pro forma results

bwin.party
pre-
acquisition
€m

51.2
(1.3)
49.9
(23.3)
26.6

52%
(14.4)
12.2

Actual
€m

843.4
(20.1)
823.3
(385.8)
437.5

52%
(244.0)
193.5

2016

Pro
forma
€m

894.6
(21.4)
873.2
(409.1)
464.0

52%
(258.4)
205.7

bwin.party
pre-
acquisition
€m

574.4
(13.0)
561.5
(254.0)
307.5

2015

Pro
forma
€m

822.2
(14.2)
807.9
(365.1)
442.8

54%
(198.3)
109.2

54%
(279.6)
163.2

Actual
€m

247.7
(1.2)
246.5
(111.1)
135.4

55%
(81.3)
54.1

NGR
EU VAT
Revenue
Cost of sales
Contribution
Contribution
margin
Expenditure
Clean EBITDA

NGR
NGR grew 240% to €843.4m for the year to December 2016, while on a pro forma
basis it grew by 9% to €894.6m. Growth was derived from a number of factors
including, more focused management, stronger sports margins and more effective
product cross-sell. The Group operates in a large number of markets and currency
ﬂuctuations have an impact on reported numbers. On a constant currency basis,
pro forma NGR grew by 12% in the period.

Revenues
Revenues grew by 234% to €823.3m over the 12 months, whilst on a pro forma
basis they increased by 8%. VAT has been imposed since January 2015 in a
number of countries, the most signiﬁcant of which is Germany. VAT at the rate of
21% has now also been introduced in Belgium, a market in which GVC operates
through a locally licensed partner. The ﬁnancial impact is not considered to be
material to the Group.

Variable costs and contribution
The key components of variable costs remain: betting taxes and duties, payment
processing costs, software royalties, afﬁliate commissions, partner shares and
marketing costs.

Contribution in the period was €437.5m in actual terms, up from €135.4m the
previous year. On a pro forma basis, Contribution increased 5% to €464.0m from
€442.8m for 2015. The decline in the Contribution margin on a pro forma basis to
52% from 54% principally reﬂected an increase in betting taxes and duties as a
percentage of revenues.

Expenditure
The prime components of expenditure are personnel (representing around 56%
of the cost base and technology (representing approximately 29% of the cost
base). Other signiﬁcant costs include real estate (with over 15 ofﬁces), travel and
professional fees.

Year ended 31 December

Personnel expenditure
Professional fees
Technology costs
Ofﬁce, travel and other costs
Foreign exchange differences

Pro forma basis

Actual

2016
€m
145.2
19.8
73.4
24.5
(4.6)
258.4

2015
€m
173.1
20.8
62.8
25.0
(2.1)
279.6

2016
€m
136.6
18.4
70.0
22.4
(3.4)
244.0

2015
€m
48.5
4.7
23.7
3.5
0.9
81.3

Costs increased to €244.0m in the period from €81.3m in 2015, reﬂecting the
Acquisition of bwin.party. On a pro forma basis there was an 8% reduction in
expenditure to €258.4m from €279.6m. The reduction in pro forma costs reﬂects
the synergy beneﬁts highlighted at the time of the bwin.party acquisition and thus
far this has predominantly come from personnel.

Technology costs on a pro forma basis have increased to €73.4m from €62.8m
following the purchase of the CasinoClub software platform and due to increases
in data and streaming costs in the year. Cost savings are expected to be realised
here in 2017 as the platform migrations continue and the size of the enlarged
group means it is in a better position to negotiate improved contractual terms
with suppliers.

Clean EBITDA
While Clean EBITDA is a non-GAAP measure, it is used by the Group’s management
to measure the performance of the business. Actual Clean EBITDA increased to
€193.5m from €54.1m in the previous year, boosted by the 11 month contribution
from the Acquisition. On a pro forma basis, Clean EBITDA rose 26% to €205.7m.

Depreciation and Amortisation
Depreciation and amortisation for the year was €136.5m compared to €5.0m in
2015. Amortisation associated with intangible assets recognised on Acquisition
was €109.5m. These assets are being amortised over periods ranging from three
to 12 years.

The amortisation of capitalised development expenditure amounted to €7.0m.

Depreciation
Amortisation
– intangible assets recognised on Acquisition
– internally generated intangibles

2016
€m

20.0

109.5
7.0
136.5

2015
€m

0.8

–
4.2
5.0

Chief Financial Ofﬁcer’s review continued

REPORT OF THE CHIEF
FINANCIAL OFFICER
CONTINUED

Operating proﬁt
The Group reported an operating loss of €81.1m for the year, compared to a proﬁt of
€27.8m the previous year. Exceptional items and amortisation associated with the
Acquisition were responsible for the reported loss in 2016. Excluding exceptional
items and amortisation associated with the Acquisition, the Group’s operating proﬁt
was €146.2m compared to €52.3m in 2015.

Clean EBITDA
Share based payments
Exceptional items
Depreciation & amortisation
Impairment of available for sale asset
Changes in the fair value of derivative ﬁnancial instruments
Operating loss/(proﬁt)

2016
€m

193.5
(31.1)
(117.8)
(136.5)
(4.2)
15.0
(81.1)

2015
€m

54.1
(0.4)
(24.5)
(5.0)
(1.2)
4.8
27.8

The share based payment charge of €31.1m comprises €25.1m for the Group’s LTIP
and MIP share option schemes and a €6.1m charge for share awards for employee
incentive plans.

Financing charges
These comprise: interest on indebtedness (principally loans), an accounting charge
for debt free amortisation, other debt administration fees and foreign exchange
movements. Financial charges totalled €65.3m for the year compared to €2.3m
for 2015.

Interest on Cerberus loan
Amortisation of loan fees and early repayment option
Finance lease interest
Unwinding of interest on non-interest bearing loan
Unwinding of discount on deferred consideration
Foreign exchange revaluation
Other interest

2016
€m

46.0
19.0
0.1
–
–
–
0.2
65.3

2015
€m

1.2
–
0.1
0.2
0.1
0.7
–
2.3

Exceptional items
The bulk of the exceptional items have arisen on the acquisition of bwin.party itself
and subsequent restructuring.

EXCEPTIONAL ITEMS

Professional fees
Currency option
Bonuses and share options
ACQUISITION COSTS

Premium listing application costs
Reorganisation costs
Contract termination costs
Accelerated depreciation
Progressive jackpots
Release of contingent consideration
Foreign exchange on deposit
Proﬁt on disposal of joint venture
Other

2016
€m

18.8
10.8
21.9
51.5
4.4
14.4
11.7
12.5
7.6
8.1
16.4
(11.7)
2.9
117.8

2015
€m

13.5
9.5
–
23.0
–
–
–
–
–
–
–
–
1.5
24.5

A currency option was taken out in 2015 in order to meet the cash conﬁrmation
requirements for the offer for bwin.party by the Company. Under the terms of
the contract the Group would sell €365.0m and buy £260.7m. The movement
in the sterling/euro exchange rate between 31 December 2015 and 2 February
2016 created an additional €10.8m fair value loss on the option which has been
recognised within exceptional items.

The 2014 LTIP was cash settled as part of the acquisition and the after tax
proceeds were rolled into the related share placing, the cost of the settlement
including employer’s taxes of €18.4m was taken as an exceptional cost. In addition
Transaction bonuses of approximately €3.0m were paid to the Directors and the vast
majority of the after tax proceeds were also rolled into the share placing and €0.5m
was paid to other employees in the Group.

Both the legacy GVC business and the acquired bwin.party business have
progressive prize pools on casino games. Following the acquisition GVC evaluated
that a change in accounting judgement was required and recognised a charge of
€7.6m as an exceptional item with the liability being recorded in the balance sheet.

The contract termination costs of €11.7m relate to a legacy afﬁliate agreement
on non-commercial terms that the Group bought out following the acquisition of
bwin.party.

Foreign exchange on deposit relates to foreign exchange movements on GBP
funds raised through the share placing and held on deposit for the restructuring
of bwin.party.

GVC Holdings PLC Annual Report 2016

(Loss)/Proﬁt Before Tax
The Group reported a loss before tax of €138.6m against a proﬁt of €25.5m in
2015. As noted above, the loss was primarily due to the exceptional items and
amortisation associated with the Acquisition. Excluding exceptional items and
amortisation associated with the Acquisition, the Group achieved an adjusted Pre
Tax Proﬁt of €93.8m, a 102% increase against €46.4m for 2015.

(Loss)/proﬁt before tax
Exceptional items
Impairment of available for sale asset
Changes in the fair value of derivative instruments
Amortisation of acquired intangibles
Dividend income
Amortisation of loan fees and early repayment option
ADJUSTED PROFIT BEFORE TAX

2016
€m

(138.6)
117.8
4.2
(15.0)
109.5
(3.1)
19.0
93.8

2015
€m

25.5
24.5
1.2
(4.8)
–
–
–
46.4

Taxation
The Group is currently headquartered in the Isle of Man, with key operating
subsidiaries in Gibraltar (where the headline rate of corporation tax is 10%) and
Malta (5%), as well as a number of jurisdictions with higher tax rates. For the year
ended 31 December 2016 the tax charge/credit was €0.0m, the corporation tax
charge was €11.8m and there was a deferred tax credit of €11.8m.

Earnings per share
Reported EPS for the period was a loss of 51 euro cents, compared to earnings
of 40 euro cents proﬁt for 2015, reﬂecting the amortisation and exceptional items
associated with the acquisition, together with the increased number of shares in
issue. Adjusted EPS (based on adjusted proﬁt) was 26 euro cents compared to
73 euro cents for 2015.

YEAR ENDED 31 DECEMBER

Basic EPS
Basic, fully diluted EPS

Adjusted EPS
Adjusted, fully diluted EPS

2016
€m

(51)
(51)

26
26

2015
€m

40
38

73
70

Dividends
As part of the terms of the Cerberus Loan taken out to part ﬁnance the Acquisition,
the Group undertook to take a dividend holiday until 1 February 2017 (the ﬁrst
anniversary of the Acquisition). In November 2016 the Group declared its intention
to pay a special dividend of 10 euro cents per share. This was subsequently
increased to 14.9 euro cents and settled in sterling at 12.5p and paid to
shareholders on 14 February 2017.

The second special dividend declared of 15.1 euro cents per share will take the total
dividend for the 2016 ﬁnancial year to 30 euro cents per share.

Review of the balance sheet
A summarised balance sheet is shown below:

Goodwill
Intangible assets other than goodwill
Property, plant and equipment
Other non-current assets
NON-CURRENT ASSETS

Cash and cash equivalents
Balances with payment processors
Derivative ﬁnancial assets
Assets and liabilities held for sale
Client liabilities
Progressive prize pools
Loans and borrowings
Net taxation payable
Other net current assets/(liabilities)
Current assets less current liabilities
Non-current liabilities
NET ASSETS

2016
€m

1,090.3
519.1
19.7
8.6
1,637.7
354.8
60.0
26.2
37.0
(112.0)
(22.8)
(403.5)
(58.7)
(44.5)
(163.5)
(76.9)
1,397.3

2015
€m

132.9
22.2
1.4
2.6
159.1
28.2
21.7
3.8
–
(14.8)
–
(3.0)
(3.3)
(41.0)
(8.4)
(22.6)
128.1

Chief Financial Ofﬁcer’s review continued

REPORT OF THE CHIEF
FINANCIAL OFFICER
CONTINUED

Loan and borrowings
The year end loan balance of €403.5m comprised €386.5m of debt principal and
€17.0m of fees and interest due to Cerberus.

Assets and liabilities held for sale
The Group has classiﬁed “Kalixa”, its payments processing business, as held for
sale, the sale was announced in December 2016 for a total cash consideration of
€29.0m with potential adjustments of up to €35.5m. It is expected to complete in
H1 2017. The balance sheet value comprises assets held for sale totalling €59.7m
including €12.2m of cash, and liabilities held for sale of €22.7m.

Derivative ﬁnancial assets
This consists of two main components, the WinUnited option (€3.7m) and the early
repayment option associated with the Cerberus Loan (€22.5m).

The Group entered into an agreement in 2015 with WinUnited to provide day-to-day
back ofﬁce operations for the WinUnited business and as part of this agreement
obtained a call option to purchase the WinUnited assets. In the year the value of the
option reduced from €3.8m to €3.7m.

As part of the ﬁnancing agreement with Cerberus, the Group had the option of
terminating the loan early by 1 February 2017. The option was initially recognised
at €7.4m but during the year it became clear that the Group could re-ﬁnance at
more advantageous rates. This led to the fair value of the option being increased
to €22.5m. A credit has been taken to the income statement for this in the year.

Progressive prize pools
Both GVC and bwin.party have progressive prize pools on casino games.
Following the Acquisition GVC evaluated that a change in accounting judgement was
required and recognised a charge of €7.6m as an exceptional item. The combined
Group liability at the end of 2016 was €22.8m.

Deferred taxation
Deferred taxation has arisen on the intangible assets recognised on the Acquisition
of bwin.party. The liability recognised within non-current liabilities at 31 December
was €65.6m.

Acquisition of bwin.party
The acquisition of bwin.party completed on 1 February 2016 and offer consideration
was made up of 25p in cash plus 0.231 GVC shares in exchange for each
bwin.party share, and accounted for at a currency rate of £1:€1.3205.

Amount paid by GVC:
– value of stock issued
– value of cash component
– options settled post Acquisition
Value of offer
Assets at fair value
Goodwill recognised

Net debt and liquidity

Loans due <1 year
Loans due >1 year
Gross debt
Cash and cash equivalents
Less client liabilities
Net debt
Balances with payment processors
Net debt adjusted for payment processors
Reconciliation to note 25.5.2:
Net debt
Accrued loan interest and fees
Progressive prize pools
Cash within assets held for sale
Non-interest bearing loan

€m

1,201.5
278.5
26.6
1,506.6
542.7
963.9

2015
€m

–
(23.0)
(23.0)
28.2
(14.8)
(9.6)
21.7
12.1

(9.6)
0.2
–
–
3.0
(6.4)

2016
€m

(386.5)
–
(386.5)
367.0
(112.0)
(131.5)
60.0
(71.5)

(131.5)
(17.0)
(22.8)
(12.2)
–
(183.5)

In October 2016, the Group secured a one year (with options to extend for an
additional 6 or 12 months) €250m loan facility from Nomura International plc
(the “Nomura Loan”), which was used (fully drawn down in January 2017) to repay
part of the €400m loan provided by Cerberus Business Finance LLP (the “Cerberus
Loan”) associated with the acquisition of bwin.party digital entertainment plc.
The Nomura Loan provided a short term facility at a signiﬁcantly reduced overall
cost from that associated with the Cerberus Loan.

In March 2017, the Group signed a €320m Senior Secured Term and Revolving
Facility (“the Facility”) comprising a six-year €250m term loan (the “Term Loan”)
and a ﬁve-year €70m revolving credit facility (“RCF”). The Term Loan was used to
fully repay the Nomura Loan.

In the normal course of business the Group’s long-term strategy is to maintain
leverage (net debt to Clean EBITDA) below 2x.

GVC Holdings PLC Annual Report 2016

Cashﬂow
The table below shows a simpliﬁed cashﬂow for the year:

Clean EBITDA
Capitalised software development and other intangibles
Property, plant and equipment purchases
Interest paid including loan costs
Corporate taxes
Other working capital movements
FREE CASHFLOW

Exceptional items (cash)
Acquisition of bwin.party (net of cash acquired)
Proceeds of issued share capital net of costs
Proceeds from disposal of assets held for sale
Interest bearing loan drawdown
Repayment of loans
Dividends paid
Other cash movements
NET CASH GENERATED

Foreign exchange
Cash and equivalents at beginning of the year
CASH AND CASH EQUIVALENTS AT END OF YEAR

2016
€m

193.5
(19.0)
(15.8)
(47.6)
(7.9)
(31.9)
71.3
(86.4)
(189.4)
193.8
20.9
380.0
(55.5)
–
4.8
339.5
(0.7)
28.2
367.0

2015
€m

54.1
(5.0)
(1.2)
(9.0)
(0.6)
6.7
45.0
(14.6)
–
–
–
20.0
(3.2)
(34.3)
(2.4)
10.5
(0.1)
17.8
28.2

Cash has increased to €367.0m at 31 December 2016 from €28.2m following the
acquisition of bwin.party.

To fund the Acquisition the Group drew down a further €380.0m from the Cerberus
loan facility and issued shares with proceeds net of costs of €193.8m. The cash
cost of acquiring bwin.party was €189.4m and comprises €305.1m paid to share
and option holders net of €116.2m of cash acquired.

During the year the Group repaid €55.5m of loan balances. The repayments
consisted of the ﬁnal €3.0m instalment of the William Hill loan, a €13.5m repayment
of the Cerberus Loan and €39.0m of loan balances for bwin.party.

The principal items within other working capital movement relate to the settlement
of 2015 employee remuneration arrangements across both GVC and bwin.party,
and the settlement of trade creditors.

Paul Miles
Chief Financial Ofﬁcer

23 March 2017

Principal risks/Viability statement

PRINCIPAL RISKS

There are a number of potential risks and uncertainties which could have a material impact on the Group’s
future performance. To mitigate against these risks, the Group conducts a continuous process of assessments
that examine whether any risk has increased, decreased or become obsolete; identify new risks; and evaluate
the likelihood of each risk occurring and the impact it would have on the Group.

Our principal risks fall into ﬁve broad categories which are set out below, along with how we seek to manage
them. More detail on our approach to risk management can be found in the Audit Committee Report on
pages 46 to 50 of this Annual Report:

TECHNOLOGY
The Group’s customer offer includes products
operated using different labels and gaming licences,
the majority of which are now driven by the Group’s
proprietary technology obtained through the acquisition
of bwin.party.

In an industry where service reliability and integrity are
key differentiating factors, our continual commitment
to providing a reliable, safe, secure, compliant and
continuous service has continued to be the Group’s
focus this year.

Subsequent to the acquisition of bwin.party, the Group
initiated a signiﬁcant technology platform migration
which carries inherent project risk.

Other technology-related risks, such as our continuing
operations in the event of a natural or man-made
disaster, have been addressed with a substantial
investment and both the Group’s disaster recovery
and business continuity solutions.

With continuous shifts in how consumers choose and
are able to access our services (via different devices
and/or channels), the process of maintaining and
improving our technology will become more complex.

Mitigating factors
In May 2016, the Internal Audit function performed
a cyber security review over the key systems and
interfaces that collectively form the gaming platform,
over both the bwin.party and GVC infrastructures.
The resilience to cyber and denial of service threats have
been carefully considered and improved upon following
the recommendations arising from this review.

Furthermore, the Group has committed to maintain its
ISO 27001 Information Security Management System
certiﬁcation, and is progressing with consolidating its
ISO 27001 certiﬁcation across the locations inherited
through the bwin.party acquisition. Part of this process
involves an internal audit review from an information
security perspective of all certiﬁed sites across a
three-year cycle, which form part of the internal audit
annual calendar.

The technology platform migration has been executed
in phases, by label and territory to minimise risk
and customer impact. The Group aims to complete
the migration by the end of 2017 and subsequently
decommission legacy systems.

GVC Holdings PLC Annual Report 2016

TAXATION
The Group has companies and employees spread
over a number of jurisdictions which creates tax risk
if actions and decisions are being made in the wrong
jurisdictions by the wrong companies. In addition,
these companies contract with one another for
services which are subject to scrutiny by local
tax authorities.

The Group’s strategic focus is to operate in nationally
regulated and/or taxed markets. Revenues earned
from customers located in a particular jurisdiction may
give rise to further taxes in that jurisdiction. If such
taxes are levied, either on the basis of existing law or
the current practice of any tax authority, or by reason
of a change in law or practice, then this may have a
material adverse effect on the amount of tax payable
by the Group.

On 1 January 2015, new VAT rules came into force
across the EU impacting several areas of the digital
economy. Gambling has typically been exempt from
VAT but falls within the rules for VAT on electronically
supplied services. Under EU law, Member States
have the ability to apply VAT to gambling, subject
to certain limitations and conditions, and tax may
be due depending on where customers are located
and how Member States implement any exemption.
Whilst substantial uncertainty remains, in light of the
new rules the Group is now ﬁling for, and paying VAT,
in certain EU Member States. It is possible that VAT
could be payable in other EU Member States.

Mitigating factors
Group companies operate only where they are
incorporated, domiciled or registered across countries.
The multi-location set up of the Group gives rise to
transfer pricing risk, mitigated by the fact that all
intra-group transactions are documented and take
place on an arm’s length basis unless local legislation
or other business conditions make an arm’s length
basis impossible or impractical.

Following the acquisition of bwin.party, the transfer
pricing arrangements are in the process of being
reviewed by the Group’s Director of Tax. As well
as holding workshops with senior management
and business unit leaders, he also meets at least
once a year with the Board to review tax strategy
and management.

REGULATION
Focusing on nationally regulated and/or taxed markets
safeguards our gaming revenues from potential
national legislation threatening to prohibit or restrict
one or more of the products that we offer, or online
gaming entirely. There are potential risks for the Group
from all markets where regulation is not clearly deﬁned
or adopted, especially in relation to EU law.

Mitigating factors
To manage this risk, the Group maintains a dialogue
(either directly or indirectly) with national governments
and regulators of to-be regulated markets. The Group’s
compliance and regulatory affairs teams keep abreast
of the regulatory landscape and report to the Board on
any developments. However, it should be noted that
most of the risks in relation to the regulatory landscape
are outside of the Group’s direct control.

Operating in nationally regulated and/or taxed markets
requires the Group to comply with the rules and
protocols of the particular regimes. Currently, the
Group holds 31 licences each with their own unique
regulatory requirements. The need to sometimes
develop bespoke technological, operational and
promotional offers in each market requires signiﬁcant
investment. The Group is committed to meeting its
licence obligations and monitors its compliance with
regulatory requirements by performing reviews of
its licensed operations on a periodic basis, with the
results reported to the Audit Committee. The Group
also submits the licensed entities to a series of
external audits by regulators and industry specialists
to ensure that policies and procedures are being
followed as intended.

COUNTRY &
CURRENCY RISK
Whilst the continuing uncertainty in the global
economic outlook inevitably increases the trading and
balance sheet risks to which the Group is exposed, the
diversiﬁed nature of the Group’s business means that
such risks are not disproportionately different from
any other commercial enterprise of a similar scale and
international reach. Conditions in the Eurozone remain
challenging and reference has already been made
in previous statements to the challenging economic
backdrop in several European countries, reducing the
spending power of customers particularly in Southern
European countries, which the Group has attempted
to reﬂect in its ﬁnancial forecasts. The weaker
European economies are also increasing the risk of
currency volatility and the potential for signiﬁcant
currency devaluation and business disruption if one
or more of these countries exit the euro currency.
Accordingly, the Group’s treasury processes and
policies are designed with the aim of minimising the
Group’s exposure to the Eurozone economic risk and
preserving our ability to operate if such events arise.

The functional currency of the Company and a
majority of the Company’s subsidiaries is the euro.
Consequently, those GVC companies that have
adopted the euro as their functional currency ensure
their ﬁnancial assets and liabilities in non-euro
currencies are equal and that any residual balance
is held in euros. With the so-called “GIPSI” countries
(Greece, Ireland, Portugal, Spain and Italy), if one
or more of these countries exits the euro then the
Group may be exposed to a currency devaluation
of its ﬁnancial assets to the extent that the ﬁnancial
assets located in the exiting jurisdiction exceed its
ﬁnancial liabilities.

Mitigating factors
The Internal Audit function facilitated a review of the
enlarged Group’s Treasury and Cash Management
process in June 2016. The Group adopted a Treasury
policy, which dictates that all material transaction and
currency liability exposures are hedged with ﬁnancial
derivatives or cash.

The Treasury policy also requires that wherever
practical and subject to regulatory requirements, the
ﬁnancial assets located in each GIPSI country are
limited so they do not exceed the ﬁnancial liabilities
associated with that jurisdiction.

VIABILITY STATEMENT
In accordance with the obligations of the UK
Corporate Governance Code, the Board of GVC
is required to provide its assessment within the
Annual Report and Accounts of the viability of
the Group over an appropriate period of time.
Accordingly, the Directors have assessed the
viability of the Group over a three year period to
December 2019, taking account of the Group’s
current position and the potential impact of the
principal risks as outlined on pages 32 to 33
of this Annual Report.

A three-year period was deemed appropriate for
this assessment as it best reﬂects the strategic
planning and budgeting process required for the
implementation of Group’s strategy. The Board
has completed a thorough review of threats with
the potential to compromise the Group’s business
model, future performance, solvency, liquidity and
its resilience to those risks.

Key factors the Board considered within this
review included:

(cid:3)(cid:132) Progress of the integration the bwin.party

business acquired in February 2016 including
the migration of customers on to a single
technology platform.

(cid:3)(cid:132) The delivery of the €125m by 2017 annualised
synergies resulting from the acquisition by the
end of 2017.

(cid:3)(cid:132) The secured nature of the Group’s long-term

debt facility comprising a €250m term loan and
a €70m revolving credit facility.

(cid:3)(cid:132) The diverse nature of the Group’s revenue base
across both geographical markets and online
gaming product segments.

(cid:3)(cid:132) The Group’s ability to adapt to regulatory change

in regard to online gaming and increase in
taxation that may result from such change.

Having completed this review, the Board has
full conﬁdence that the Company will be able
to continue operating and be will be able to
meet its liabilities over the three year period to
December 2019.

IMPACT OF BREXIT
On 23 June 2016, a referendum was held to
determine whether the United Kingdom remains in
the European Union (EU). In light of the decision to
leave the EU, in addition to the increase in the volatility
of both the global currency and ﬁnancial markets,
it may reduce the Group’s ability to operate on an
unfettered basis in certain EU markets that have tried
to restrict competition in their domestic market from
online gaming companies based overseas. The Group,
along with other EU based online gaming operators,
have previously relied on the ability to challenge such
protectionist measures through the EU Court of Justice
(“CJEU”). In the event that the UK, and by extension
Gibraltar (being a UK protectorate), was to leave the
EU, unless the Group was to re-domicile certain of its
subsidiaries within the EU, it would no longer be able to
rely on such protection. Such a re-domiciliation could
give rise to higher taxes payable.

Mitigating factors
A Brexit task force has been formed, led by the
Group Head of Legal, Compliance and Secretariat
alongside members of senior executive management.
The purpose of the task force is to closely monitor
the situation, propose various contingency plans
and, subject to Board approval where appropriate,
execute them as the UK navigates through the EU
exit process, with minimal business interruption and
customer impact.

Governance/Corporate Governance Statement

GOVERNANCE
AT WORK

The Board looks to encourage a culture of strong governance across the business, and continues
to adopt the principles of good governance by adhering to the requirements of the UK Corporate
Governance Code. The Board is collectively responsible to the Company’s shareholders for creating
and preserving the long-term success and performance of the business. The key principles of the
code are outlined below:

LEADERSHIP
The Board provides leadership either directly or through the operation of
its committees. The Chairman is ultimately responsible for the make-up
and composition of the Board to best deliver the business strategy.

EFFECTIVENESS
The Board sets the strategic objectives and approves and monitors performance
against budgets and forecasts. An evaluation process is regularly undertaken to
ensure Board members have the necessary skills in place. Being effective also
means maintaining relationships and continued engagement with shareholders.

ACCOUNTABILITY
The Board is responsible for establishing and maintaining the risk management
and internal controls and has delegated the responsibility to ensure compliance
with the new code to the Audit & Risk Committee.

REMUNERATION
The role of the Remuneration Committee is to determine and maintain a fair
reward structure that attracts the right talent and incentivises Directors to
deliver its strategic objectives and maintain stability of management.

GVC Holdings PLC Annual Report 2016

WE UNDERTOOK AN
EXTENSIVE CORPORATE
GOVERNANCE JOURNEY
IN 2016.

G VC successfully undertook an extensive

corporate governance journey in 2016.
We started the year as an AIM-listed company,

before obtaining a Standard Listing on the London
Stock Exchange’s Main Market on 2 February in
conjunction with the completion of the acquisition
of bwin.party. The Company then went through
the process of transferring to a Premium Listing.
This required a signiﬁcant amount of work upgrading
the Company’s corporate governance processes
and procedures. GVC successfully transferred to a
Premium Listing on 1 August.

During 2016 GVC appointed three new Non-executive
Directors to the Board. Stephen Morana, who also took
on the role of Chairman of the Audit Committee, is
widely recognised for his accounting and e-commerce
expertise, particularly as a specialist in the online
gaming sector having spent ten years as part of the
management team at Betfair plc, serving as Chief
Financial Ofﬁcer and also interim CEO in 2012.
Peter Isola is an expert in gaming law and regulation
with experience advising numerous e-commerce
clients. Norbert Teufelberger was the former CEO
of bwin and bwin.party and has nearly 20 years of
experience in online gaming operations.

Both Stephen and Peter are regarded by the Board
as independent, thereby ensuring that, excluding
the Chairman, and in accordance with the UK
Corporate Governance Code’s recommendation,
the Non-independent Directors are not in a majority.

In 2017, we have appointed two further directors.
Paul Miles was appointed Chief Financial Ofﬁcer on
28 February following Richard Cooper’s departure
from that role after nine years. In addition, as disclosed
previously, the Board has been searching for a
Senior Independent Director to enhance the Board’s
knowledge and decision-making process and to
comply with the UK Corporate Governance Code’s
recommendation. I am pleased to inform shareholders
that the Board has today announced the appointment
of Will Whitehorn as the Senior Independent Director.
Will is a highly experienced business professional
and is a signiﬁcant appointment to the Group. He is
Deputy Chairman and Senior Independent Director
of Stagecoach Group plc and is an Independent
Non-executive Director of Purplebricks plc. The search
process for this role is set out in the Nominations
Committee’s Report on pages 44 and 45.

Following today’s Senior Independent Director
appointment, the Company is now in compliance
with all but one of the recommendations of the UK
Corporate Governance Code, the remaining exception
relating to certain contractual termination terms for
myself and the CEO which pre-date the Company
becoming Premium Listed (please see page 42).

Lee Feldman
Chairman of the Board
23 March 2017

Governance/Board of Directors

LEADERSHIP:
EXPERIENCE ACROSS
THE BOARD

LEE
FELDMAN

KENNETH
ALEXANDER

PAUL
MILES

WILL
WHITEHORN

Non-executive Chairman of the Board

Chief Executive Ofﬁcer

Chief Financial Ofﬁcer

Senior Independent Director

Kenneth Alexander joined GVC in March
2007 as Chief Executive. He was formerly
Finance Director, then Managing Director,
of the European operations of Sportingbet
plc, which he joined in 2000. He is a
member of the Institute of Chartered
Accountants of Scotland and previously
worked for Grant Thornton.

Paul Miles joined GVC in February 2017
as Chief Financial Ofﬁcer. A Chartered
Accountant, Paul has held a number
of senior ﬁnance roles in regulated
industries, encompassing international
and online operations. Previous roles
include Group Financial Controller at
insurance group RSA Group plc and Acting
Group Finance Director of Phoenix Group
plc, the FTSE 250 life assurance operator.
Paul joined Wonga as CFO in 2014 as a
key member of an executive team brought
in to restructure the business.

Will Whitehorn joined GVC in March 2017.
He is the Deputy Chairman and Senior
Independent Director at Stagecoach
Group plc and is an independent
Non-executive Director of Purplebricks
Group plc. He is also a member of the
First Minister of Scotland’s “GlobalScot”
Business mentoring network, President
of the Chartered Institute of Logistics
and Transport and Chairman of the
Scottish Gallery and Scottish Event
Campus Limited. Previously, Will joined
the Virgin Group in 1987 and served as
Group Public Relations Manager and
as Brand Development and Corporate
Affairs Director, as well as being a
founding director of Virgin Games, before
being appointed as President of Virgin
Galactic from 2007 to 2011. He is also
a former non-executive Chairman of
Next Fifteen Communications Group plc,
Crowd Reactive Limited and Speed
Communications Agency Limited, and was
a member of the Science & Technology
Facilities Council (“STFC”) until 2012,
chairing its Economic Impact Advisory
Board and was a Non-executive director
of STFC Innovations Limited.

Lee Feldman joined GVC in December
2004. He is the Managing Partner of
Twin Lakes Capital, a private equity ﬁrm
focused on branded consumer products,
media and business services. From 2008
through 2015, he was also the CEO
of Aurora Brands: the owner of both
MacKenzie-Childs and Jay Strongwater,
the iconic American luxury home
furnishings and personal accessories
companies. Feldman was named the
CEO of Aurora Brands when Twin Lakes
led the acquisition of the business.
He is also a member of the board of
directors of PaciﬁcHealth Labs and LRN
Corporation. Prior to co-founding Twin
Lakes, Lee was a partner in Softbank
Capital Partners. He has a B.A and J.D.
from Columbia University.

(cid:3)(cid:132) Nominations Committee (Chairman)

(cid:3)(cid:132) Remuneration Committee

GVC Holdings PLC Annual Report 2016

KARL
DIACONO

PETER
ISOLA

STEPHEN
MORANA

NORBERT
TEUFELBERGER

Independent Non-executive Director

Non-executive Director

Karl Diacono joined GVC as a
Non-executive Director in December
2008. He chairs the Remuneration
Committee and serves on the Audit
Committee. He holds a Masters Degree
in Management and is currently CEO of
the Group that is a regulated Corporate
Service Provides and holds a license
to Act as Trustees issued by the Malta
Financial Services Authority. He is also
a non-executive director on a number of
companies as well as other online gaming
companies and is actively involved in the
hospitality industry. Karl is a director of
a number of GVC subsidiaries along with
Gaming VC Corporation Limited, a Maltese
subsidiary of the GVC Group to which
Fenlex Corporate Services Limited also
provides certain payroll and administrative
services. He is a Maltese citizen.

(cid:3)(cid:132) Remuneration Committee (Chairman)

(cid:3)(cid:132) Audit Committee

Peter Isola joined the GVC Board in 2016
following the move to the Main Market
of the LSE as an expert in gaming law
and regulation with experience advising
numerous e-commerce clients. Peter Isola
is the Senior Partner of Isolas, Gibraltar’s
longest established law ﬁrm. He is a
Gibraltarian, domiciled in Gibraltar and in
1982 was called to the Bar of England and
Wales and also Gibraltar. Peter has worked
in the gaming and ﬁnancial services
sector all his professional life and is widely
recognised and respected as a leading
expert in gaming and regulation. Peter is a
former President of the Gibraltar Chamber
of Commerce and advises the Gibraltar
Government on a number of committees in
both ﬁnancial services and gaming. He is a
director of a number of Gibraltar regulated
ﬁrms in ﬁnancial services, gaming
and e-commerce including Gibraltar
International Bank Limited, Callaghan
Insurance Brokers Limited and Sapphire
Networks. He was recently appointed a
Commissioner of the Gibraltar Financial
Services Commission.

(cid:3)(cid:132) Audit Committee

(cid:3)(cid:132) Nominations Committee

(cid:3)(cid:132) Remuneration Committee

Stephen Morana is widely recognised for
his e-commerce expertise, particularly
as a specialist in the online gaming
sector having spent ten years as part
of the management team at Betfair plc.
Stephen joined Betfair in 2002, becoming
Chief Financial Ofﬁcer in 2006 and
also served as Interim CEO in 2012.
After Betfair, Stephen spent over three
years at Zoopla Property Group as CFO
where he helped them join the FTSE
250 in June 2014. Stephen joined
the Board of GVC in February 2016
following the successful acquisition of
bwn.party digital entertainment plc and
the enlarged Group’s move to the Main
Market of the LSE. Stephen is also an
NED and Audit Committee Chairman at
Boohoo.com plc, the high growth fast
fashion business. Stephen is a qualiﬁed
chartered accountant and a member of
the INSEAD alumni.

(cid:3)(cid:132) Audit Committee (Chairman)

(cid:3)(cid:132) Nominations Committee

(cid:3)(cid:132) Remuneration Committee

Norbert Teufelberger has been involved
in the global casino and gaming industry
since 1989. He occupied key positions
with Casinos Austria, was a consultant to
the Novomatic Group of companies and
co-founded a land based casino company
currently listed on the Nasdaq Capital
Market. Norbert joined the GVC Board
from bwin.party digital entertainment
plc (“bwin”) following the acquisition in
February 2016 having been CEO of bwin
since 2001. He joined bwin in September
1999 and was instrumental in drawing up
the initial business plan of the company
and the subsequent structuring and
preparation for its public listing. He holds
a Masters in Business Administration from
the University of Economics and Business
Administration in Vienna.

Governance continued

LEADERSHIP:
CORPORATE GOVERNANCE OVERVIEW

HOW THE BOARD OVERSEES MANAGEMENT AND THE BUSINESS

CEO

(cid:3)(cid:132) Runs the Company’s business.

(cid:3)(cid:132) Proposes and develops GVC’s strategy and
overall commercial objectives in conjunction
with the Chairman.

(cid:3)(cid:132) Responsible, with the senior executive team
for implementing the decisions of the Board
and its committees.

(cid:3)(cid:132) Promotes and conducts affairs of GVC
with the highest standards of integrity,
probity and corporate governance.

(cid:3)(cid:132) Manages the leadership team and promotes

the strategic mission and goals to all employees.

(cid:3)(cid:132) Engages with external stakeholders to explain

the corporate goals and progress of the
business strategy.

SID

As well as performing the normal duties expected
of an NED the SID also:

(cid:3)(cid:132) Is available to shareholders if they have concerns
which contact through the Chairman, CFO or
CEO has failed to resolve or for which contact
is inappropriate.

(cid:3)(cid:132) Leads the NEDs in evaluating performance
of the Chairman, taking into account the
views of Executive Directors.

(cid:3)(cid:132) Maintains sufﬁcient contact with shareholders

to understand their issues and concerns.

(cid:3)(cid:132) Performs such other tasks and responsibilities
as may be contemplated by the code or best
practice from time to time.

GVC Holdings PLC Annual Report 2016

CFO

(cid:3)(cid:132) Ensures future business decisions are
grounded in solid ﬁnancial criteria.

(cid:3)(cid:132) Provides insight and analysis to support

the CEO and senior executive team.

(cid:3)(cid:132) Leads key initiatives in ﬁnance that

support overall strategic goals.

(cid:3)(cid:132) Funds, enables and executes the strategy

set by the CEO.

(cid:3)(cid:132) Develops and deﬁnes the overall

strategy of the organisation.

(cid:3)(cid:132) Presents the organisation’s progress on
strategic goals to external stakeholders.

NED

(cid:3)(cid:132) Constructively challenges and contributes

to the development of strategy.

(cid:3)(cid:132) Scrutinises the performance of management
in meeting agreed goals and objectives and
monitors the reporting of performance.

(cid:3)(cid:132) Satisﬁes themselves that ﬁnancial information is
accurate and that both controls and the systems
of risk management are robust and defensible.

(cid:3)(cid:132) Is responsible for determining appropriate

l evels of remuneration of Executive Directors
and has a prime role in succession planning,
appointing and where necessary removing
senior management.

MANAGEMENT

CHAIRMAN

(cid:132) Oversees the effective running

of the Board.

(cid:132) Ensures that the Board as a whole
plays a full and constructive part in
the development and determination
of GVC’s strategy and overall
commercial objectives.

(cid:132) Acts as a guardian of the Board’s

decision-making.

(cid:132) Promotes the highest standards

of integrity, probity and corporate
governance throughout the Company
and particularly at Board level.

(cid:132) Oversees the effective engagement with

the Company’s various stakeholders.

OVERSIGHT

39
39

THE ROLES ON THE BOARD
The graphic below illustrates how the Board executes its duties through a structured cascade of responsibilities across the Group.

KEY STAKEHOLDERS: SHAREHOLDERS / CUSTOMERS / SUPPLIERS / PARTNERS / REGULATORS / GOVERNMENTS

SPORTS LABELS / GAMES LABELS / US BUSINESS / NON-CORE BUSINESS / TECHNOLOGY

IMPLEMENTATION

OUR EMPLOYEES

GUIDANCE AND INSTRUCTION

SENIOR EXECUTIVE TEAM

DAY-TO-DAY MANAGEMENT

REMUNERATION COMMITTEE
AUDIT COMMITTEE
NOMINATIONS COMMITTEE

DELEGATION

BOARD

As can be seen from the diagram above, the division of responsibilities between
the Chairman and Chief Executive is clearly established and their respective roles
are set out in writing and agreed by the Board.

The Board currently comprises of eight Directors and their biographies are set out
on pages 36 and 37.

The Directors have adopted a formal schedule of matters reserved to the Board,
setting out which issues must be referred to the Board for decision. These can
be categorised into a number of key areas including but not limited to:

(cid:3)(cid:132) long-term business plan, strategy, budgets and forecasts;

(cid:3)(cid:132) dividend policy;

(cid:3)(cid:132) Shareholder circulars, convening of shareholder meetings and stock

exchange announcements;

(cid:3)(cid:132) approval of the Group’s remuneration policy (following recommendations from

the Remuneration Committee);

(cid:3)(cid:132) approval of the Group’s risk management and control framework and the

appointment/reappointment of the external auditors (following recommendations
from the Audit Committee); and

(cid:3)(cid:132) approval of the Group’s policies in relation to corporate and social responsibility,

(cid:3)(cid:132) restructuring or reorganisation of the Group and material acquisitions

health and safety and the environment.

and disposals;

(cid:3)(cid:132) the Group’s ﬁnance, banking and capital structure arrangements;

(cid:3)(cid:132) approval of capital expenditure and ﬁnancial guarantees above certain levels;

(cid:3)(cid:132) ﬁnancial reporting (interim and annual ﬁnancial results and interim

management statements);

In addition, the Board has adopted a delegation of authority mandate which sets out
the levels of authority for the Executive Directors and employees below Board level
to follow when managing the Group’s business day to day.

Governance continued

EFFECTIVENESS:
GOVERNANCE
CONTINUED

How does the Board ensure it is effective?
Composition
The Board has a majority of Non-executive Directors. Drawing on their various
backgrounds and extensive executive and business experience, the Non-executive
Directors engage with the Executive Directors, who manage the day to day business,
in formulating the direction and strategy of the Company. The Non-executive
Directors oversee the implementation of this strategy and challenge management
when appropriate. In accordance with the UK Corporate Governance Code, a
majority of the Directors, excluding the Chairman, are deemed to be independent,
helping to ensure the Company is run in the interests of all shareholders.
The Chairman was deemed to be independent on appointment.

CHAIRMAN
LEE FELDMAN

Independent
Karl Diacono
Peter Isola
Stephen Morana
Will Whitehorn

Non-executive
Norbert Teufelberger

Non-independent
Executive
Kenneth Alexander
Paul Miles
(Richard Cooper until 28.02.17)

Knowledge and experience
The Directors have a wide range of backgrounds and extensive knowledge
of many sectors:

(cid:3)(cid:132) Accountancy

(cid:3)(cid:132) Electronic payments

(cid:3)(cid:132) Entertainment

(cid:3)(cid:132) Finance and investment

(cid:3)(cid:132) Gaming

(cid:3)(cid:132) Healthcare

(cid:3)(cid:132) Insurance

(cid:3)(cid:132) Law and regulation

(cid:3)(cid:132) Property

(cid:3)(cid:132) Retail

(cid:3)(cid:132) Technology

(cid:3)(cid:132) Transport

Diversity
The Board is also diverse geographically, with nationals from the USA, UK, Austria,
Gibraltar and Malta. This aids the Board’s discussions and decision-making process
given our businesses operate in international markets.

For the last six years there has been general encouragement for companies to
appoint more women as directors, in recognition that more than half the world’s
population is female and they may encourage an improved Board decision-making
process, with more insightful and balanced deliberations. The GVC Board supports
the rationale for seeking greater gender diversity on boards of directors and
considers this diversity matter during the recruitment process. It is GVC’s aim to
have at least one women serving on the Board in the next 12 months, although
the Board is mindful that gender is one of a handful of key areas of consideration
and the Board will always focus on a candidate’s experience, knowledge and skills
as critical selection drivers.

GVC Holdings PLC Annual Report 2016

Tenure and succession
To ensure the independent directors continue to be independent in character and
judgement, the UK Corporate Governance Code recommends that Non-executive
Directors should not serve for more than nine years from the date on which they are
ﬁrst elected by shareholders. The tenures of the current directors deemed by the
Board to be independent are as follows:

Director

Karl Diacono
Peter Isola
Stephen Morana
Will Whitehorn

First election

Tenure

2009
2016
2016
2017

8
1
1
0

Regular meetings
During 2016 the Board had ﬁve scheduled meetings. Attendance at these meetings
was as follows:

Director

Kenneth Alexander
Richard Cooper
Karl Diacono
Lee Feldman
Peter Isola
Stephen Morana
Norbert Teufelberger

Meetings
entitled
to attend

Meetings
actually
attended

5
5
5
5
4
4
4

These meetings covered the following areas of business:

(cid:3)(cid:132) The legal mechanics of effecting the acquisition of bwin.party.

(cid:3)(cid:132) The appointment of two new independent Non-executive Directors.

(cid:3)(cid:132) Regular reports from the Executive Directors.

(cid:3)(cid:132) Regular reports from the senior executive team on operations, business

integration, product development, regulatory developments, litigation and
investor relations.

(cid:3)(cid:132) 2015 audited Annual Report.

(cid:3)(cid:132) Planning the step up to the Premium Listing.

(cid:3)(cid:132) Implementing various corporate governance steps expected of a Premium

Listed company.

(cid:3)(cid:132) BREXIT contingency planning.

(cid:3)(cid:132) Block listing shares in regard to various share plans.

(cid:3)(cid:132) Preparing for the 2016 AGM.

(cid:3)(cid:132) Reviewing and approving all steps required for the step up to a Premium Listing,
including the working capital and FPPP reports and audited ﬁnancial statements.

(cid:3)(cid:132) Options for reﬁnancing the loan from Cerberus taken up to facilitate the ﬁnancing

of the acquisition of bwin.party.

(cid:3)(cid:132) Review of the Group’s tax strategy and management.

(cid:3)(cid:132) Appointment of a Disclosure Committee to assist with compliance with the

Company’s new Market Abuse Regime obligations.

(cid:3)(cid:132) Approving the 2016 half year results.

(cid:3)(cid:132) Appointment of a new Chief Financial Ofﬁcer.

(cid:3)(cid:132) Reports from the Chairmen of the Audit, Remuneration and

Nominations Committees.

(cid:3)(cid:132) Merger and acquisition opportunities.

(cid:3)(cid:132) The disposal of non-core assets.

In addition to the scheduled meetings described above, ad hoc Board meetings
were also convened at short notice in 2016, to deal with the following matters:

(cid:3)(cid:132) Agreeing the Nomura bridging loan for repaying the Cerberus loan

in February 2017.

(cid:3)(cid:132) Consideration of potential corporate transaction opportunities.

(cid:3)(cid:132) Adopting the Company’s distribution policy and the payment of a special dividend.

Board meetings are usually held in Gibraltar, where the Group’s gaming business
is headquartered. The Company’s articles of association prohibit any Board or
Board Committee meeting from being held in the United Kingdom.

Meetings without Executive Directors present
The UK Corporate Governance Code recommends that the Chairman meets with
the Non-executive Directors without the Executive Directors present at least once
a year. This meeting will happen in connection with the annual Board performance
evaluation process, however, it is not unusual for the Chairman to conduct these
meetings more frequently, particularly if the Company is contemplating a signiﬁcant
transaction. The Chairman reports back to the full Board any recommendations
arising from these meetings.

How does the Board decide on making changes
to its membership?
The Board has adopted a formal and transparent procedure for the appointment
of new Directors by appointing a Nominations Committee to lead the process of
appointment and make recommendations to the Board. The Nominations Committee
also advises the Board on its structure, size, composition and matters of Director
and senior management succession. A report from the Nominations Committee
on its work appears on pages 44 to 45.

How do Directors develop in the role and fulﬁl
their duties?
A full induction programme is provided to new Directors, which is speciﬁcally
tailored to the needs and experience of the new Director and the committees on
which they sit. The programme provides corporate governance information provided
by the Company Secretary which is both general in nature (eg UK Corporate
Governance Code, remuneration best practice) and speciﬁc to the Company
(eg the risk register, etc.). New Directors may also meet with the Company’s
external auditors and advisers as part of the induction process. After the induction
programme from time to time the Company Secretary notiﬁes Directors of courses
and seminars conducted by corporate governance bodies and professional advisers
that Directors may ﬁnd helpful.

Working with the Chairman the Company Secretary ensures good information
ﬂows within the Board and its committees and between senior management
and the Non-executive Directors. The Company Secretary is the guardian of all
Board procedures and advises the Chairman and other Directors when required.
Agendas and accompanying reports are prepared for each Board or committee
meeting and circulated via a secure data-room in advance of each meeting.
Between scheduled meetings, Directors are updated on business developments
with email reports, management accounts and regulatory updates and, where
necessary, the Chairman of the Board or the Chairman of a committee will convene
a conference call to discuss and reach agreement on material urgent matters.

The Company Secretary is available to all Directors to offer guidance and advice
on corporate governance, company law and share plan matters. The Company
Secretary presents a report at each Board meeting updating the Directors on
share capital and shareholder changes, Group corporate structure changes and
corporate governance developments. GVC’s Head of Legal is also available to all
Directors to provide advice on general legal and regulatory issues. In addition, a
formal procedure has also been adopted allowing Directors to seek independent
professional advice where they believe it is necessary in order for them to fulﬁl their
duties to the Company. Board committees are also authorised by the Board under
their terms of reference to retain external advice as required for each committee
to carry out its duties.

In accordance with best practice, the Board conducts an evaluation of the
performance of the Board, its committees, individuals and the Chairman. For the
2016 evaluation process, the Directors followed the process described in the chart
below. A third party advisory ﬁrm was not engaged on this occasion to facilitate the
exercise, but in accordance with the Code’s recommendation, the Board will retain
such a ﬁrm to support the annual evaluation process at least once every three years.

A list of evaluation questions is drawn up by the Chairman in consultation with the Company
Secretary. Any questions relating to the performance of the Chairman of the Board are set
by the SID in consultation with the Company Secretary.

The questions are circulated to the Directors via a secure website and are answered online.

The Secretary collates the results and reports the results to the Chairman and the feedback on the
Chairman’s performance to the SID.

The Chairman discusses the results of the
Board, individual and committee performance
evaluations with the Board and with individual
Directors where necessary. Possible options for
addressing any issues arising from the review
are considered and action agreed.

The SID meets with the Non-executive Directors
to review the results of the evaluation of
the Chairman’s performance. The SID then
discusses with the Chairman these results and
any further feedback from the Non-executive
Directors.

For the purpose of conducting the 2016 review only, because the Company did not
have a SID, Stephen Morana, the Audit Committee Chairman, stepped in to fulﬁl the
SID’s role in this evaluation process.

What came out of the ﬁrst performance
evaluation processes?

Matters identiﬁed

Action taken

More regular access to the senior
management team
Risk mitigation management

Increase knowledge and understanding
of executive remuneration practices
and developments

To begin from the next Board meeting

The Board and Audit Committee to more
effectively challenge management on the
mitigating action taken to manage risk
Greater access to be given to PwC, the
remuneration consultant, beginning with the
design of the new 2018 remuneration policy

Governance continued

EFFECTIVENESS:
GOVERNANCE
CONTINUED

How does the Board oversee ﬁnancial reporting,
risk management and internal controls?
The Board is required to present a fair, balanced and understandable assessment of
the Company’s position and prospects. This responsibility to present a fair, balanced
and understandable assessment extends to interim and other price-sensitive public
reports and reports to regulators, as well as to information required to be presented
by statutory requirements. The Board is also responsible for determining the nature
and extent of the signiﬁcant risks it is willing to take in achieving its strategic
objectives and, as a consequence, it has to maintain sound risk management and
internal control systems. The Board has appointed a committee of independent
Directors, the Audit Committee, to monitor these areas and report and make
recommendations to the Board. Please see the Report of the Audit Committee
on pages 46 to 50.

How does the Board decide what Directors
and employees should be paid?
The Board is responsible for setting the levels of remuneration for the Executive
Directors and the senior executive team. It is required to set remuneration at
levels sufﬁcient to attract, retain and motivate directors of the quality required to
run the Company successfully, but should avoid paying more than is necessary
for this purpose. The Board has delegated these remuneration matters to a
committee of Non-executive Directors, the Remuneration Committee. The Directors’
Remuneration Report prepared by the Remuneration Committee is set out on pages
51 to 63. The fees paid to the Non-executive Directors are a matter for the Board
on a recommendation from the Executive Directors.

How does the Board engage with shareholders?
The Company keeps shareholders informed of business developments via its
Annual Report, half-year statement and trading update announcements. In addition,
other price sensitive information is publicly disclosed via a regulatory news service.
All these items of information are available on the Company’s corporate website,
www.gvc-plc.com. The website also contains other information about the Group
and its business.

Throughout the year the Chairman, CEO, CFO and Head of Investor Relations meet
with shareholders on request or via organised investor roadshows supported by
GVC’s brokers, as well as by attending and presenting at industry and investor
conferences. During 2016, there were many such meetings, hosted in the UK,
mainland Europe and the US.

The Senior Independent Director is also available to shareholders if they have
concerns which contact through the Chairman, CEO or CFO fails to resolve
or if contact is inappropriate.

Major shareholders also have the opportunity to meet newly appointed
Non-executive Directors should they wish, but in practice our shareholders
have not to date taken up this offer.

GVC Holdings PLC Annual Report 2016

Who are GVC’s major shareholders?
As at 20 March 2016, GVC’s major shareholders were:

Shareholder

Standard Life Investment Holdings Limited
The Capital Group of Companies, Inc.
Janus Capital Management, LLC
Majedie Asset Management

Number
of Shares

% of Issued Share
Capital/ Total
Voting Rights

33,238,094
14,652,094
11,522,047
10,504,658

11.30
4.98
3.92
3.57

As at 20 March 2017, the Company had 294,199,190 shares in issue. Each share carries the right to one vote.
The above shareholding information is based on the last notiﬁcation made by the shareholder under the
Disclosure & Transparency Rule requirements.

When is the Annual General Meeting (“AGM”)?
Tuesday 20 June
A separate notice convening the AGM in Gibraltar will be dispatched to shareholders
more than 20 working days before the AGM. The AGM notice will list each item of
business, which will be dealt with by its own separate resolution. All the Directors
will each stand for re-appointment and there will be separate resolution proposed
for each re-appointment.

All Directors will be present at the AGM to answer questions from those
shareholders that attend.

In accordance with best practice, the Chairman will exercise his discretion under
the articles and call for all resolutions to be decided on by a poll vote rather than a
show of hands. The voting results will be announced via a regulatory news service
and published on GVC’s corporate website shortly after the AGM closes.

Does the Company comply with the UK Corporate
Governance Code?
Prior to listing on the Main Market, the Company chose not to comply with the
Code, because it was not required to as an AIM listed business. After the Company
obtained a Standard Listing in February 2016 and in preparation for applying to step
up to a Premium Listing, GVC worked to align its policies, procedures and practices
to comply with the Code’s recommendations. Since GVC obtained a Premium Listing
on the London Stock Exchange on 1 August 2016 the Company has complied with
the Code’s recommendations except in two respects:

(cid:3)(cid:132) Until 23 March 2017 the Board had not appointed a Senior Independent Director.
Following the appointment today of Will Whitehorn the Company now complies
with this recommendation.

(cid:3)(cid:132) As previously disclosed to shareholders and as set out in the Directors’

Remuneration Report on page 58, in certain termination scenarios the Chairman
and the CEO are entitled to two years’ notice in respect of remuneration
and bonus payments. These contractual obligations were entered into prior
to the Company obtaining a Premium Listing and the Code being applicable
to the Company.

Has the Company allotted or acquired any of its
shares during 2016?
During the year, the Company issued a total of 231,991,749 new ordinary shares
in respect of the acquisition of bwin.party, the satisfaction of various bwin.party
share incentive plans and the Company’s share incentive plans.

(cid:3)(cid:132) state whether they have been prepared in accordance with IFRSs as adopted
by the European Union, subject to any material departures disclosed and
explained in the ﬁnancial statements; and

(cid:3)(cid:132) provide additional disclosures when compliance with the speciﬁc requirements
in IFRSs is insufﬁcient to enable users to understand the impact of particular
transactions, other events and conditions on the entity’s ﬁnancial position and
ﬁnancial performance.

The Directors are responsible for keeping adequate accounting records that are
sufﬁcient to show and explain the Group’s transactions and disclose with reasonable
accuracy at any time the ﬁnancial position of the Group and enable them to ensure
that the ﬁnancial statements comply with Article 4 of the IAS Regulation. They are
also responsible for safeguarding the assets of the Group and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.

In addition, the Directors at the date of this report consider that the ﬁnancial
statements taken as a whole, are fair, balanced and understandable and provide
the information necessary for shareholders to assess the Group’s performance,
business model and strategy.

Financial statements are published on the Company’s website in accordance
with legislation in the United Kingdom 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.

In accordance with DTR 4.1.12 of the Financial Conduct Authority’s Disclosure and
Transparency Rules, the Directors conﬁrm to the best of their knowledge:

(cid:3)(cid:132) the Group’s ﬁnancial statements have been prepared in accordance with IFRS
and Article 4 of the IAS Regulation and give a true and fair view of the assets,
liabilities, ﬁnancial position and proﬁt and loss of the Group; and

(cid:3)(cid:132) the Annual Report includes a fair review of the development and performance of
the business and the ﬁnancial position of the Group and the Company, together
with a description of the principal risks and uncertainties that they face.

Directors’ report
Together with the CEO’s review (pages 6 to 8), the Operational overview (pages
16 to 20) and Chief Financial Ofﬁcer’s Review (pages 26 to 31) sections of this
Annual Report, this corporate governance section (pages 34 to 63) constitutes
the Directors’ Report for the year ended 31 December 2016.

Lee Feldman
Chairman

23 March 2017

Are there any other statutory or good
practice disclosures?
Customer and creditor payment policy
The Group is committed to prompt payment of customer cash-out requests and
maintains adequate cash reserves to cover customer withdrawals and balances.
Normally payments will be made to customers within three days of receiving a
customer instruction. In the case of other creditors, it is the Group’s policy to agree
terms at the outset of a transaction and ensure compliance with such agreed terms.
In the event that an invoice is contested then the Group informs the supplier without
delay and seeks to settle the dispute quickly.

Going concern
The Group’s business activities, together with the factors likely to affect its future
development, performance and position are set out in the “Strategy” section
(page 9) of this Annual Report. The ﬁnancial position of the Group, its cashﬂow,
liquidity position and borrowings are set out in the aforementioned section.
In addition, note 25 to the ﬁnancial statements on pages 99 to 103 includes
the Group’s objectives, policies and processes for managing its capital; its ﬁnancial
risk management objectives; details of ﬁnancial instruments and hedging activities;
and its exposures to credit risk and liquidity risk.

The Group has considerable ﬁnancial resources together with a large number
of players and long-term contracts with a number of corporate customers and
suppliers across different geographic areas and industries. As a consequence, the
Directors believe the Group is well placed to manage its business risks successfully
in the current despite the current challenging economic outlook.

At 31 December 2016, the Group was in net current liabilities position due to loans
existing at that point. The Group subsequently has negotiated a long-term borrowing
facility at a signiﬁcantly reduced cost to the business.

After making enquiries, the Directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to adopt the going
concern basis in preparing the Annual Report.

Statement of Directors’ Responsibilities
The Directors have elected to prepare the Annual Report and the ﬁnancial
statements for the Company and the Group in accordance with International
Financial Reporting Standards as adopted by the European Union (“IFRS”).

The Directors are responsible under applicable law and regulation for keeping
proper accounting records which disclose with reasonable accuracy at any time
the ﬁnancial position of the Group, for safeguarding the assets and for taking
reasonable steps for the prevention and detection of fraud and other irregularities.

International Accounting Standard 1 (“IAS”) (revised) requires that ﬁnancial
statements present fairly for each ﬁnancial year 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. A fair presentation also requires the Directors to:

(cid:3)(cid:132) select suitable accounting policies and then apply them consistently;

(cid:3)(cid:132) present information, including accounting policies, in a manner that provides

relevant, reliable, comparable and understandable information;

(cid:3)(cid:132) make judgements and accounting estimates that are reasonable and prudent;

Governance continued

ACCOUNTABILITY:
NOMINATIONS
COMMITTEE REPORT

Who are the members?
LEE FELDMAN – CHAIRMAN
PETER ISOLA
STEPHEN MORANA

With the exception of the Chairman, all the members are deemed
independent by the Board. Lee Feldman was deemed independent
when appointed Chairman of the Board.

What does the Nominations Committee do?
The Board has adopted a formal and transparent procedure for the
appointment of new Directors to the Board by appointing a Nominations
Committee to lead the process of appointment and make recommendations to
the Board. The Nominations Committee also advises the Board on its structure,
size, composition and matters of Director and senior management succession.

The terms of reference for the Nominations Committee are available on GVC’s
corporate website at:

http://gvc-plc.com/archive/governance/Nomination-Committee-tor.pdf.

How many times did the Nominations Committee
meet in 2016 and who attends?
The Nominations Committee was established by the Board in April 2016.
The Nominations Committee met once in 2016 and all members were present.

The Company Secretary attends all Nominations Committees to record meetings
and provide advice to the Directors.

The CEO is normally invited to attend each meeting and the HR Director may
be invited to attend from time to time to participate in discussions about
succession planning.

What has the Nominations Committee been doing?
In 2016 the Nominations Committee addressed the need to recruit a new Chief
Financial Ofﬁcer following Richard Cooper’s decision to step down as a Director
in early 2017. Guided by the Chairman and CEO, with assistance to ﬁnd suitable
candidates from Shefﬁeld Haworth, a recruitment ﬁrm, Paul Miles, the Chief
Financial Ofﬁcer at Wonga, was eventually identiﬁed as the appropriate successor
to ﬁll the Chief Financial Ofﬁcer position. Following a recommendation from the
Nominations Committee, the Board decided to proceed with the appointment of
Paul Miles, who joined the Company on 20 February 2017 and became Chief
Financial Ofﬁcer on 28 February 2017.

The Nominations Committee retained Heidrick & Struggles in 2016 to ﬁnd
candidates with the necessary knowledge and expertise to take on the Senior
Independent Director (“SID”) role. Following various discussions and meetings
amongst the Nominations Committee members and candidates, in March 2017 the
Nominations Committee recommended to the appointment of Will Whitehorn as a
Non-executive Director. The Board resolved to make this appointment with effect
from 23 March 2017.

Both Shefﬁeld Haworth and Heidrick & Struggles follow best practice and adopt the
Voluntary Code of Conduct for Executive Search Firms.

GVC Holdings PLC Annual Report 2016

As disclosed on page 40 of these corporate governance statements, the Directors
are conscious of the general political and cultural desire to have greater gender
diversity on boards of directors. Whilst women candidates were eligible for the roles
mentioned above, the Nominations Committee has begun a speciﬁc process of
identifying female candidates with the necessary skills, knowledge and expertise
to join the Board as an independent Non-executive Director. The aim is to have
appointed at least one female Director by the end of 2017. The Nominations
Committee intends to follow the process set out below:

Has the Nominations Committee reviewed
the Group’s succession plans?
The Nominations Committee started a process for formalising and documenting
a succession plan for the Directors and members of the senior management team.
The plan covers short-term emergency cover in the event someone is incapacitated
or unavoidably unavailable on a temporary basis and also long-term succession
should an individual leave the Group.

A working draft succession plan was reviewed by the Nominations Committee in
March 2017 and is subject to further development to ensure the plan is thorough
and coherent. The revised plan will be reviewed again in 2017.

Has the Nominations Committee made any
recommendations regarding the re-appointments
at the 2017 AGM?
In March 2017 the Nominations Committee met and reviewed the proposed
re-appointments at the 2017 AGM of:

1. Kenneth Alexander

2. Karl Diacono

3. Lee Feldman

4. Peter Isola

5. Paul Miles

6. Stephen Morana

7. Norbert Teufelberger

8. Will Whitehorn

On the basis of experience, performance, skills and commitment demonstrated,
and also in light of the results of the 2016 Board evaluation results, the Nominations
Committee advised the Board that it is appropriate to recommend each of the
Directors for reappointment.

Lee Feldman
Chairman of the Nominations Committee

23 March 2017

The Nominations Committee agrees a speciﬁcation for the independent Non-executive Director role.

The Nominations Committee decides on which search and selection ﬁrm to use for the project.

With the role speciﬁcation the search and selection ﬁrm look for suitable candidates.

The recruitment ﬁrm presents a long-list of candidates with biographies for the role which is
reviewed by the Nominations Committee and the candidates narrowed down to a short-list.

The recruitment ﬁrm ascertains the chosen candidates’ availability and interest in the role and
arranges interviews with the Nominations Committee members.

Candidates interviewed by the Nominations Committee members, who then feedback to the
Chairman. The candidates also meet with the CEO to give them the opportunity to ask questions
about the Group’s business.

The Nominations Committee meets and decides on which candidates to recommend for
appointment to the role.

The Board considers the recommendations from the Nominations Committee and resolves whether
to make an appointment or refer the recruitment process back to the Nominations Committee for
further work.

Throughout any recruitment the process the Nominations Committee operates
within the parameters of the Company’s diversity policy. The diversity policy ensures
the Group engages trains and promotes employees on the basis of their capabilities,
qualiﬁcations and experience. The policy forbids discrimination or pressure to
discriminate by its employees or others acting on the Group’s behalf or their
employees, contractors or customers in respect of age, sex, sexual orientation, race,
ethnic origin, marital status or civil partnership, nationality, disabilities, political or
religious beliefs, or on any other criteria unrelated to an individual’s ability to perform
the duties. The policy also sets out how the diversity guidelines impact recruitment,
selection and promotion, learning and development, the management of part-time
workers and individual employee responsibilities for ensuring enforcement and
compliance with the policy. Owing to the breadth of diversity existing across the
Group, diversity ratios or objectives have not been set.

Governance continued

ACCOUNTABILITY:
AUDIT
COMMITTEE REPORT

Who are the members?
STEPHEN MORANA – CHAIRMAN
KARL DIACONO
PETER ISOLA

Stephen Morana is a qualiﬁed chartered accountant and is regarded
as the Audit Committee member with recent and relevant ﬁnancial
and industry experience.

What does the Audit Committee do?
(cid:3)(cid:132) Monitors the integrity of GVC’s ﬁnancial statements and any formal

announcements relating to the Company’s ﬁnancial performance and
reviews, and challenges where necessary, the actions and judgements
of management in relation to the half-year and annual ﬁnancial statements
before these are submitted to the Board for ﬁnal approval.

(cid:3)(cid:132) Makes recommendations to the Board concerning any proposed, new or

amended accounting policy.

(cid:3)(cid:132) Meets with the external auditors post-audit at the reporting stage to discuss

the audit, including problems and reservations arising from the audit,
and any matters the auditor may wish to discuss (in the absence of GVC
management, where appropriate).

(cid:3)(cid:132) Recommends the audit fee to the Board and sets GVC’s policy on the

provision of non-audit services by the external auditor.

(cid:3)(cid:132) Considers and make recommendations to the Board about the appointments
of the head of the internal audit function and also the external auditors as
well as the re-appointment of the latter.

(cid:3)(cid:132) Monitors and reviews the internal audit programme and its effectiveness.

(cid:3)(cid:132) Ensures co-ordination between the internal audit department and the
external auditors, and that the internal audit department is adequately
resourced and has appropriate standing within GVC.

(cid:3)(cid:132) Considers any major audit recommendations and the major ﬁndings

of internal investigations and management’s response (in the absence
of management, where appropriate).

(cid:3)(cid:132) Monitors and reviews GVC’s systems for internal control, ﬁnancial reporting

and risk management.

(cid:3)(cid:132) Reviews the individual internal audit reports covering the various areas

and activities of the business.

The Audit Committee also oversees corporate social responsibility
matters and in this respect ensures that the Group has policies and
effective controls regarding the following:

(cid:3)(cid:132) compliance with the gaming and ﬁnancial services licences held by the Company

or any of its subsidiaries;

(cid:3)(cid:132) gambling licence probity matters;

(cid:3)(cid:132) anti-money laundering;

(cid:3)(cid:132) the fairness and integrity of the Company’s gaming and trading systems and
the process for managing any challenges to the fairness and/or integrity of
these systems;

(cid:3)(cid:132) privacy and data protection;

(cid:3)(cid:132) charitable donations and investment in the local community; and

(cid:3)(cid:132) the Group’s suppliers and service providers.

The terms of reference for the Audit Committee are available on GVC’s corporate
website at: http://www.gvc-plc.com/archive/governance/Audit-Committee-tor.
pdf?v=230816

How many times did Audit Committee meet in 2016?
The Audit Committee met three times in 2016 and attendance was as follows:

Director

Stephen Morana
Karl Diacono
Peter Isola

Attendance and total number of
meetings to which the Director
was entitled to attend
3/3
3/3
3/3

The Company Secretary attends all Audit Committee meetings to take the minutes
and advise the Directors where required. The Internal Audit Executive and external
audit partners/directors also attend every Audit Committee meeting and during the
year the Audit Committee does periodically meet with these individuals without any
GVC management present. The Chief Executive Ofﬁcer (“CEO”), Chief Financial
Ofﬁcer (“CFO”), and senior members of the ﬁnance function are normally invited to
attend each meeting.

GVC Holdings PLC Annual Report 2016

What signiﬁcant issues did the Audit Committee
consider in relation to the 2016 ﬁnancial statements
and how were these addressed?
During 2016 following the Company’s admission to the Ofﬁcial List of the UK Listing
Authority with a Standard Listing in February 2016, the Audit Committee engaged
in reviewing the ﬁrst quarter 2016 audited ﬁnancial statements and working capital
reports prepared for the purpose of the Company stepping up to a Premium Listing
in August 2016.

Throughout the course of the year, the Audit Committee determined the following
areas of the ﬁnancial statements were of signiﬁcant interest. These issues were
discussed with management and the external auditors to ensure that the required
level of disclosure is provided and that appropriate rigour has been applied where
any judgement may be exercised.

Acquisition accounting
The GVC Group successfully completed the acquisition of bwin.party digital
entertainment plc on 1 February 2016. The Audit Committee reviewed the
judgements made in connection with the accounting treatment, to determine
whether the assets and liabilities recognised in the ﬁnancial statements are
carried at an appropriate fair value. The Committee reviewed the purchase price
allocation (prepared by external professional advisers), together with the underlying
judgements and forecasts used to determine the fair value of intangible assets.
The Audit Committee satisﬁed itself that the approach taken by the Group was
appropriate and in accordance with IFRS 3: “Business Combinations”.

Impairment of goodwill and intangible assets
During the year, the Audit Committee also considered the judgements made in
relation to the valuation methodology adopted by management to support the
carrying value of goodwill and other intangible assets to determine whether
there was a risk of material misstatement in the carrying value of these assets
and whether any impairment should be recognised. The Committee considered
the assumptions, estimates and judgements made by management to support
the models that underpin the valuation of intangible assets in the balance sheet.
Business plans and cashﬂow forecasts prepared by management supporting the
future performance expectations used in the calculation were reviewed. This was
further facilitated by the review of the reporting accountant’s ﬁndings on the Group’s
working capital report as part of the move to the Premium Listing Segment of
the UKLA, where models in respect to market growth, projections and projected
cash ﬂows were independently tested. The impairment review was also an area
of focus for the external auditor, who reported their ﬁndings to the Committee.
The Committee satisﬁed itself that no material impairments were required to the
carrying value of goodwill or other intangible assets, as outlined in note 8 to the
ﬁnancial statements.

Who is responsible for the preparation of the
GVC ﬁnancial statements?

Ultimately the Board is responsible for presenting a fair, balanced and understandable
assessment of the GVC’s position and prospects, which extends to the half year and annual
ﬁnancial statements.

DELEGATION

GVC’s ﬁnance department,
led by the CFO, prepares the
ﬁnancial statements.

The Head of Investor Relations
coordinates with the CEO, CFO
and Chairman the preparation
of any statements on GVC’s
position, performance, business
model and strategy.

The Company Secretary
prepares with the Chairman of
the Board and the Chairmen of
the various Board Committees
the corporate governance
statements and all Board
committee reports.

EXTERNAL REVIEW

GVC’s external auditors audit the annual ﬁnancial accounts and review the half year accounts together
with any business or corporate governance commentary. A report to Audit Committee is prepared.

COMMITTEE’S REVIEW

The Audit Committee reviews the draft ﬁnancial
statements and accompanying statements
and meets with the external auditors to review
their report. The Audit Committee proposes
amendments and makes recommendations
to the Board and also approves the Audit
Committee’s Report.

For the Annual Report, the Remuneration
Committee and Nominations Committee
review the Directors’ Remuneration Report and
Nominations Committee Report respectively,
propose changes and make recommendations
to the Board.

BOARD REVIEW

Board reviews the ﬁnancial statements, accompanying reports and recommendations from its
committees and makes changes to the disclosures where appropriate.

AUDITOR SIGN-OFF

External auditors carry out ﬁnal review and sign-off the audit report (Annual Report) or review report
(half year results).

BOARD APPROVAL AND PUBLISH

The Board approves the year-end ﬁnancial statements and disclosures and the half year report
and these are then released to the stock exchange and published on GVC’s corporate website.

In respect of the ﬁnancial statements and accompanying reports for the year ended
31 December 2016, the Company has followed the process detailed above. In doing
so, the Directors conﬁrm that they have reviewed the complete 2016 Annual Report
and considered that taken as a whole, the Annual Report is fair, balanced and
understandable and provides the information necessary for GVC’s shareholders
to assess the Company’s performance, business model and strategy.

Governance continued

ACCOUNTABILITY:
AUDIT COMMITTEE REPORT
CONTINUED

How did the Audit Committee go about assessing
the effectiveness of the external audit process?
The Audit Committee is committed to ensuring that the external audit process
remains effective on a continuing basis. In particular, throughout the year the
Audit Committee paid speciﬁc attention to the following areas:

(cid:3)(cid:132) Reviewing that safeguards put in place by the incumbent auditor against

independence threats are sufﬁcient and comprehensive.

(cid:3)(cid:132) Ensuring that the quality and transparency of communications with the external
auditors are timely, clear, concise and relevant and that any suggestions for
improvements or changes are constructive.

(cid:3)(cid:132) Exercising professional scepticism, including but not limited to, looking at

contrary evidence, the reliability of evidence, the appropriateness and accuracy
of management responses to queries, considering potential fraud and the
need for additional procedures and the willingness of the auditor to challenge
management assumptions.

(cid:3)(cid:132) Considering if the quality of the audit engagement team is sufﬁcient and

appropriate – including the continuity of appropriate industry, sector and technical
expertise (including new areas of activity by the client and changes in regulation
or professional standards) and whether it has exercised sufﬁcient objectivity to
mitigate any independence and familiarity threats.

Feedback is provided to the external auditor at every instance by the Audit
Committee and through one-to-one discussions between the Chairman of the
Audit Committee and the audit ﬁrm partner.

What non-audit services did Grant Thornton
provide in 2016?
The Audit Committee has established a policy regarding the appointment of external
auditors to perform non-audit services for the Group and keeps this under continual
review, receiving a report at each Audit Committee meeting. This policy dictates
that in the Company’s ﬁnancial year, the total fees for non-audit services provided
by the external auditors, excluding non-audit fees for due diligence for acquisitions
and other speciﬁc matters noted below, should not exceed 70% of the average of
the total fees for audit services they provided in the preceding three year period.
In the year ended 31 December 2016, the total non-audit fees as a percentage
of the audit fees paid to the external auditors was 12.8%.

In addition to their statutory duties, Grant Thornton LLP is also employed where,
as a result of their position as auditors or for their speciﬁc expertise, they either
must, or the Audit Committee accepts they are best placed to, perform the work
in question. This is primarily work in relation to matters such as shareholder
circulars, Group borrowings, regulatory ﬁlings and certain business acquisitions
and disposals. In such circumstances the Audit Committee will separately review
the speciﬁc service requirements and consider any impact on objectivity and
independence of the auditors and any appropriate safeguards to this. As such the
Audit Committee believes it appropriate for these non-audit services to be excluded
from the 70% cap calculation set out above. In the year ended 31 December 2016
the total fees paid to the external auditors in respect of due diligence for acquisitions
was €0.39m.

The Company has also adopted a policy on external auditor independence to help
ensure the independence of the current external auditors is not compromised.

Provisions for legal and regulatory compliance
The Directors keep abreast of all known or potential regulatory or legal claims
against the Group that may arise from the Group’s operations. The Directors receive
frequent updates from the Group’s Head of Legal, Compliance & Secretariat and
external legal counsel. During the year, the Audit Committee reviewed the likelihood
of the outcomes of various claims lodged against the Group and/or its Board
members as disclosed in note 27 to the ﬁnancial statements.

As there have been no material developments with the cases disclosed in note
27 to the ﬁnancial statements, the Audit Committee is satisﬁed that no provisions
other than those outlined in note 20 to the ﬁnancial statements, are necessary at
this present time. Should any of these cases develop materially during the course
of 2017, the Audit Committee will consider if any provision needs to be made in
respect of the relevant cases.

Taxation
During the year, the Board reviewed the Group’s tax strategy and considered
whether it was aligned with the Group’s commercial strategy, approach to corporate
governance, the attitude to risk and the Group’s business models. The Board also
reviewed external parameters, including the impact on the tax strategy of the
changing tax environment. The Board concluded that the adopted tax strategy is
appropriate in a year of signiﬁcant change for the Group following the acquisition of
bwin.party, supports the Group’s business strategy whilst simultaneously addressing
the risks associated with tax effectively. Owing to the dynamic nature of the online
gaming sector and the Group’s business in particular, the Board has decided to
review the Group’s tax strategy and management and will meet with the Group’s
Director of Tax at least once a year.

Who are the external auditors and how long have
they been appointed?
During the year ended 31 December 2016, Grant Thornton UK LLP was appointed
under an engagement letter to act as auditor to enable the Company to meet its
obligations to prepare ﬁnancial statements in accordance with the Listing Rules.

Grant Thornton UK LLP were originally appointed in 2010 just after the Company’s
re-domiciliation from Luxembourg to the Isle of Man. A member ﬁrm of the Grant
Thornton network, Grant Thornton Lux S.A. previously held ofﬁce as the Company’s
auditors, since 2008. Since their initial appointment, their re-appointment has
been approved by shareholders each year at the AGM. Shareholders approved
the re-appointment of the external auditors at the 2016 AGM, with 99.9% of the
votes cast voted in favour of re-appointment. A resolution will be proposed at
the 2017 AGM to re-appoint Grant Thornton LLP as the external auditors.

What is GVC’s policy on putting the external audit
out to tender?
The UK Corporate Governance Code recommends that FTSE 350 companies
put their external audit out to tender at least once every ten years. The EU Audit
Regulation, effective across all Member States from the 17 June 2016, enforces
mandatory audit ﬁrm rotation after a period of maximum tenure, set at ten years.

The current external auditors have served the Company since 2008. Taking into
account the Financial Reporting Council’s advice on companies transitioning to
putting the external audit out for tender to comply with this recommendation
and the EU Regulation and the timing of the audit partner rotation, the Board has
decided on the recommendation from the Audit Committee to put the external audit
out for tender in 2018. Thereafter the external audit will be put out for tender at
least once every ten years.

The Audit Committee have adopted an Auditor Rotation and Tendering Policy which
follows the above mentioned recommendations and regulation.

GVC Holdings PLC Annual Report 2016

Does GVC have an internal audit department
and how is it effective?
The Internal Audit & Risk Management (“IA”) function facilitates and advises on the
Group’s risk process, for which the Company’s Board is ultimately responsible.

The mission of the IA function is to provide independent, objective assurance
and consulting services designed to add and protect value by improving the
Group’s operations. IA assists the Group to accomplish its objectives by bringing a
systematic, disciplined approach to evaluate and improve the effectiveness of risk
management, control and governance processes.

Through its work, IA provides assurance to the Board, through the Audit Committee
that effective and efﬁcient control processes are in place to identify and manage
business risks that may prevent the business from achieving its objectives.
The scope of this work includes:

(cid:3)(cid:132) Providing assurance to the Board and executive management that effective

systems and controls are in place and are being operated to manage all signiﬁcant
risks within the ﬁnancial and business systems operated within the Group.

(cid:3)(cid:132) Assisting the business in fulﬁlling its corporate governance responsibilities.

(cid:3)(cid:132) Supporting operational management by providing best practice advice on internal
controls, including practical recommendations to mitigate control weaknesses
identiﬁed during the review process.

(cid:3)(cid:132) Promoting effective control at reasonable cost and assisting management

generally in the pursuit of value for money (eg by providing practical
recommendations to improve the efﬁciency of the ﬁnancial and business
processes operated by the business).

(cid:3)(cid:132) Carry out ad-hoc investigations based on any allegations made through the
Whistleblowing Policy or as requested or directed by the Audit Committee
and/or executive management.

The sections below on risk illustrate how IA supports the business through driving
improvements to GVC’s control environment and adding value in core business
areas in the context of the Group’s risk proﬁle.

The Board, with the support of the Audit Committee, has completed its annual
review of the effectiveness of the internal system of control, and is satisﬁed that it is
robust and in accordance with best practice. In doing so the Directors acknowledge
that GVC’s system of internal control can only reduce the probability that business
risks might impede the Company in achieving its objectives, it cannot eliminate
these risks and can therefore provide only reasonable, not absolute, assurance
against material misstatement or loss.

How are risks to the business identiﬁed?
The Board has overall accountability for ensuring that risk is effectively managed
across the Group and, on behalf of the Board, the Audit Committee reviews the
effectiveness of the risk process. Each business area is responsible for identifying,
assessing and managing the risks in their respective area along working within the
parameters of IA’s risk assurance guidance facilitating the process.

IA held a series of meetings and workshops during 2016 to ascertain:

(i) whether a risk had increased or decreased;

(ii) whether a risk remained unchanged or had become obsolete;

(iii) whether any new risks were now relevant, especially from recent key business

events and changes; and

(iv) the probability of a risk materialising and its associated level of impact.

Given the complexity of the Group’s operations, the risk register remains a
central repository for management and the Directors to review and oversee
risk issues effectively.

Risks identiﬁed are measured against a deﬁned set of criteria, requiring the
consideration of the likelihood of an occurrence and the associated potential clean
EBITDA impact to the Group. The extent to which an event is likely to occur is scored
from 1-4, 1 being remote i.e. very unlikely to occur and 4 being probable, where
it has the potential to occur or has already happened. The impact is measured on
a similar scale, where 1 is low, with limited damage to a minor stakeholder, and 4
being severe, which causes substantial damage to the company’s reputation with
many key stakeholders. The product of both scores gives rise to the residual risk
score that determines the relative importance of the individual risk.

This information is combined with a consolidated view of the business area risks.
The top risks (based on likelihood and impact) are migrated onto a risk register,
which is reviewed periodically by the Group’s senior executive management team,
ahead of it being submitted to the Audit Committee for consideration and direction.
In some instances key risks will be escalated to the Board for ﬁnal decision,
sometimes with a recommendation from the Audit Committee.

Governance continued

ACCOUNTABILITY:
AUDIT COMMITTEE REPORT
CONTINUED

The table below is an actual extract of the risk register, illustrating
our approach to evaluating risk:

RISK NO
AREA
MOVEMENT
RISK TITLE
RISK VELOCITY
DESCRIPTION

RISK CATEGORY
EXISTING CONTROLS/ACTION TAKEN

RISK SCORE
Impact
Likelihood
Residual Risk Score

PREVIOUS RISK SCORE
Impact
Likelihood
Residual Risk Score

Risk Action
Action Required

Date
Responsible Leadership Member
Responsibility
Target Date

10.22
Group Finance (Treasury)
Static
Exchange rate volatility
MEDIUM
The risk that exchange rate losses can occur
due to extremely rapid shifts in the exchange
rates due to market volatility
Economic, Financial & Market Risk
1. Currencies are held in the required
currency and there are predeﬁned
exposure limits on other currencies.
2. Reporting currencies and functional

currencies have been aligned, reducing
the exposure to exchange rate ﬂuctuations
on reported results.

3. FX has been removed from the

Clean EBITDA.

2
3
6

2
3
6
TOLERATE
Director of treasury to continue to monitor
exchange rates and ensure that enough
balances are held in those currencies required
Nov-16
CFO
Director of Treasury
Ongoing

GVC Holdings Risk Management Review Strategy 2016:

MAIN BOARD
Most important risks with the greatest velocity

AUDIT COMMITTEE
Risks scored between 12 and 16

TOP 6

40 IN TOTAL

SENIOR EXECUTIVE MANAGEMENT REVIEW
Risks scored between 8 and 16

100 IN TOTAL

T
O
T
A
L
R
S
K
3
0
0

How are these risks managed?
To ensure our risk process drives continuous improvement across the business, the
Internal Audit function monitors the ongoing status and progress of key action plans
against each risk regularly. In addition, risk appetite and mitigation matters remain a
key consideration in all strategic decision-making by senior executive management
and the Board.

The main categories of risk identiﬁed currently by this process are as follows:

(cid:3)(cid:132) Technology – the risk of developing and maintaining product offering

on proprietary software.

(cid:3)(cid:132) Regulation – the risk that changes outside the control of the Group affect its

ability to operate and that without compliant systems and processes in place the
Group could breach regulatory requirements.

(cid:3)(cid:132) Taxation – the risk that the Group incurs increased tax expenditure as a result of

changes outside of the Group’s control.

(cid:3)(cid:132) Country and currency risk – the risk of adverse foreign exchange movements

due to countries exiting the Euro.

(cid:3)(cid:132) Impact of Brexit – the risk that the Group’s ability to operate in certain

EU markets is impeded.

Further details on the Group’s principal risks and actions to mitigate them are
provided in the Principal Risks section on pages 32 and 33.

Is there a whistleblowing policy?
The Group adopted and published a formal “whistleblowing” procedure by which
employees can, in conﬁdence, raise concerns about possible improprieties in
ﬁnancial or other matters. This procedure is set out in the Group’s employee
handbooks having ﬁrst been reviewed and approved by the Audit Committee.

The Group seeks the highest ethical standards in carrying out its various business
activities, and corrupt practices of any sort will not be tolerated. The Group
is committed to tackling malpractice and it is the personal responsibility of
every employee of the Group to manage and reduce the risk of malpractice in
their business.

The Group actively encourages individuals, where they believe that malpractice has
taken place, to make protected disclosures either internally to the Audit Committee
or externally through the outsourced service provider, Expolink. Employees will
be protected where they have reasonable grounds to believe that their employer,
another worker or a third party has committed serious malpractice and make a
disclosure in good faith.

The Group has a written policy available to all employees on the Group’s intranet
and approved by the Audit Committee, which sets out the type of disclosure which
is protected and also speciﬁes to whom disclosures should be made and the
process that will be followed.

The Audit Committee is satisﬁed that robust and appropriate arrangements are in
place for the proportionate and independent investigation of such matters and for
appropriate follow-up action.

Stephen Morana
Chairman of the Audit Committee

BUSINESS UNIT RISK REVIEW
All risks within their area

300 IN TOTAL

23 March 2017

GVC Holdings PLC Annual Report 2016

Remuneration report

REMUNERATION:
DIRECTORS’
REMUNERATION REPORT

for the year ended 31 December 2016

PART A – ANNUAL STATEMENT

Dear Shareholder

As the Chairman of the Remuneration Committee, I am pleased to present
the Board’s report on remuneration policy and practice for the ﬁrst time as a
Premium listed company for the year ended 31 December 2016.

On 1 February 2016 we acquired bwin.party digital entertainment plc
(“bwin.party”) and were admitted to the Main Market of the London Stock
Exchange. As a Company incorporated in the Isle of Man we are not required
to comply with The Large and Medium-sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2013 (“the Regulations”).
We have, however, determined to follow best practice in terms of corporate
governance and take pride in maintaining the transparency of our remuneration
arrangements and as a result have chosen to adopted the Regulations together
with the attached voting requirements.

Structure of the report
(cid:3)(cid:132) Annual Statement (page 51)

(cid:3)(cid:132) Directors’ Remuneration Report “at a glance” (pages 52 to 54)

(cid:3)(cid:132) Directors’ Remuneration Policy (pages 55 to 59)

(cid:3)(cid:132) Annual Report on Remuneration (pages 59 to 63)

Company highlights for the 2016 ﬁnancial period
2016 was a transitional year for the Group as a result of the acquisition of
bwin.party and our move from the AIM to the Main Market. Throughout the
acquisition and transition, the Executive Directors and senior management
team have continued to drive the Group’s strategy to extend its position
in the sport betting and gaming sector. The highlights of our 2016
performance included:

(cid:3)(cid:132) Net Gaming Revenue up 9% to €894.6m (+12% in constant currency)

(cid:3)(cid:132) Clean EBITDA up 26% to €205.7m

(cid:3)(cid:132) Adjusted Proﬁt Before Tax €93.8m vs €46.4m in 2015

(cid:3)(cid:132) Two special dividends totalling 30c declared in respect of the

2016 annual results

(cid:3)(cid:132) Long-term reﬁnancing secured with oversubscribed institutional debt issue

This is reﬂected in the 47% increase in the share price from 1 February 2016
(when the acquisition of bwin.party completed) to 31 December 2016.

SHARE PRICE PERFORMANCE

Remuneration decisions on admission to the Main Market
We set out in our 2015 Annual Report details of the proposed changes to the
current remuneration arrangements on completion of the acquisition in February
2016, which had been overwhelmingly approved by GVC’s shareholders in
December 2015. These included:

(cid:3)(cid:132) No increase to salaries/fees to reﬂect the enlarged group.

(cid:3)(cid:132) No annual bonus arrangements.

(cid:3)(cid:132) Amounts outstanding under previous incentive plans being paid/cash cancelled
with any after-tax amounts invested in new GVC shares with a lock up period for
1 year from 1 February 2016.

(cid:3)(cid:132) A new long-term incentive plan (“LTIP”) to be introduced under which market

priced options will be granted following admission.

Implementation of Remuneration in 2017 and approval of policy
As set out above, immediately following admission, Executive Directors were granted
market priced options which are due to be fully vested in August 2018. No further
awards are intended to be granted under this plan and as such in 2017 Executive
Directors (excluding the new CFO appointed on 28 February 2017) will only be
entitled to Base Salary, Beneﬁts and Pension. On joining it was agreed that the
new CFO would, for 2017, also be entitled to a bonus opportunity of up to 100%
of salary.

Given that the current options run to August 2018, the Remuneration Committee
felt that reviewing and proposing a new incentive structure for approval in 2017
was premature, particularly given the ever evolving executive remuneration
environment. As such for 2017 we will only be proposing a Remuneration Policy in
respect of Base Salary, Beneﬁts and Pension. In the coming months the Committee
will complete a full review of the executive remuneration package with the aim of
developing the appropriate approach to incentives that support the ongoing strategy
of the Company. We will consult fully with our major shareholders by October 2017
on any proposed new incentive arrangements and will welcome your comments
and feedback. At the 2018 AGM the Remuneration Committee will then put to
shareholders a revised Remuneration Policy including new incentive arrangements.

Karl Diacono
Chairman, Remuneration Committee

23 March 2017

GVC Holdings

(p)

800

750

700

650

600

550

500

450

400

Feb-2016

Apr-2016

Jun-2016

Aug-2016

Oct-2016

Dec-2016

Source: LSE

Remuneration report continued

REMUNERATION:
DIRECTORS’ REMUNERATION REPORT
CONTINUED

PART B – OUR REMUNERATION AT A GLANCE
How have we performed in the 2016 ﬁnancial year?
KPIs
(cid:3)(cid:132) Net Gaming Revenue up 9% to €894.6m (+12% in constant currency)

(cid:3)(cid:132) Clean EBITDA up 26% to €205.7m

(cid:3)(cid:132) Adjusted Proﬁt Before Tax €93.8m vs €46.4m in 2015

(cid:3)(cid:132) Two special dividends totalling 30c declared in respect of the 2016 annual results

(cid:3)(cid:132) Long-term reﬁnancing secured with oversubscribed institutional debt issue

TSR
The following chart shows how this performance has ﬂowed through to the Company’s total shareholder return performance over the period:

TOTAL SHAREHOLDER RETURN: GVC VS FTSE 250

(£)

160

150

140

130

120

110

100

GVC Holdings

FTSE 250

Feb-2016

Mar-2016

Apr-2016

May-2016

Jun-2016

Jul-2016

Aug-2016

Sep-2016

Oct-2016

Nov-2016

Dec-2016

Jan-2017

Feb-2017

Source: Datastream

What have we paid our Executives in the 2016 ﬁnancial year?
The following table sets out the single ﬁgure of remuneration for the year. The Company’s Executive Directors have material interests in shares (either through
outright ownership or rights to shares). The purpose of this equity is to align the Executive Directors with shareholder’s interests and to ensure that Executives
share the same ownership experience. We have therefore set out the single ﬁgure of remuneration for the Executive Directors for the year and the change in
the value of their equity over the period:

Executive

Kenny Alexander (CEO)
Richard Cooper (CFO)

Single
ﬁgure
2015
€m

4.69
2.43

Single
ﬁgure
2016
€m

22.19
11.17

Change in Value
of Equity over
the year
€m

17.63
8.81

The above table demonstrates the importance of the impact on the wealth of the Executive Directors of the equity held with the impact of the share price over
the year resulting in 79% of the value of the single ﬁgure. It is the Committee’s view that this material ongoing shareholder alignment is an important pillar of
the current and any future remuneration policy operated by the Company.

What is the Equity exposure of our Executive Directors?
As stated above it is a core facet of the remuneration policy of the Company that the Executive Directors acquire and hold material shareholdings in the
Company. The chart below shows the level of equity held beneﬁcially and under option by the Executive Directors as a % of salary.

GVC Holdings PLC Annual Report 2016

How will we implement our Remuneration Policy in the 2017 ﬁnancial year?
Change of director
As described more fully in the body of the Annual Report, Richard Cooper left GVC on 28 February 2017 and was succeeded by Paul Miles. On departure
Richard Cooper received a full year’s salary for 2017 and all unvested option awards at the time of his retirement will lapse. His replacement, Paul Miles
will be awarded an annual bonus opportunity for 2017 of 100% of base salary and 350,000 market value options on the same terms as the legacy awards
(see further details on page 56).

Base salary
Base salary is determined by reference to the individual’s experience, performance, responsibility and pay levels across the Group more generally.
Current base salary levels for Executive Directors are presented below:

K Alexander
R Cooper
Paul Miles

From 1 January 2017

From 1 January 2016

Increase

£731,000
£403,000
£350,000

£731,000
£403,000
–

0%
0%
–

Beneﬁts
Taxable beneﬁts provided will continue to include private health insurance, life insurance and accommodation allowances. Beneﬁts in kind are not pensionable
and are not taken into account when determining basic salary for performance related remuneration.

Pension
The Company does not currently offer pension arrangements to Executive Directors.

Annual bonus
As part of his remuneration package agreed on recruitment, Paul Miles has the opportunity to earn an annual bonus equal to 100% of base salary for the year
ended 31 December 2017. The annual bonus is subject to the achievement of a net gaming revenue growth performance condition and 100% of the bonus
will paid out for successful achievement of the performance condition. The bonus payable to Paul Miles is assessed on the same basis as the performance
condition for other senior executives who participate in the bonus arrangement.

The Committee is of the opinion that disclosing precise targets in advance would not be in shareholders’ interests. Except in circumstances where elements
remain commercially sensitive, actual targets, performance achieved and awards made will be published at the end of the performance periods so
shareholders can fully assess the basis for any pay-outs.

Long-Term Incentive Plan
In association with his recruitment and once the Company is no longer in a closed period following the release of its 2016 annual results, a one-off award will
be made to Paul Miles of a share option over 350,000 on the same terms as the legacy awards.

Fees to be provided in 2017 to the Non-executive Directors
The following table sets out the annual fee rates for the Non-executive Directors:

Fee component

Chairman fee
Senior Independent Director Fee
Non-executive Director base fee
Audit Committee Chair Fee
Fee paid to Norbert Teufelberger1

2017

2016

% change

£180,000
£155,000
€100,000
€25,000
£175,000

£180,000
–
€100,000
€25,000
£175,000

0%
–
0%
0%
0%

1. Norbert Teufelberger was the former CEO of bwin.party. His role on the Board is to help with the integration of bwin.party into the Group and with implementation of the post-completion plan. He also advises

on the Group’s strategy in German-speaking markets. The appointment is for an initial term of two years.

How is our approach to incentives linked to the Company strategy?
The following table sets out a number our key corporate objectives and how they support the implementation of the Company strategy:

Incentive Plan

Proﬁt generation

Dividend income

Share price growth

OPTION PLAN

The grant of options provides participants
with the ability to receive a bonus equivalent
to the dividends paid on the shares subject
to the option. In order to ensure dividends
can be paid the Company has to deliver
sufﬁcient levels of proﬁtability.

Management are directly aligned
with shareholders’ interests
by receiving dividends on their
options and shares already held.

The options only provide value
if the share price exceeds the
exercise price set. This encourages
management to focus on long-term
sustainable share price performance.

Alignment of interest with
shareholders through equity holding

The management of the Company have
material shareholders as a result of the
options granted and shares retained.

Remuneration report continued

REMUNERATION:
DIRECTORS’ REMUNERATION REPORT
CONTINUED

PART B – OUR REMUNERATION AT A GLANCE CONTINUED
How do we share our success with our Employees?
The Company believes in fairness throughout the organisation. The Company operates a number of general principles applied to all levels. They are as follows:

(cid:3)(cid:132) We will provide a competitive package compared to the relevant market for each employee;

(cid:3)(cid:132) We will ensure all employees share in the success of the business through an element of performance-based pay; and

(cid:3)(cid:132) We ensure a transparent and fair cascade of remuneration throughout the Company.

The following table sets out our approach in more detail:

Item

A competitive pay package

Details

We position ourselves as a market competitive employer in relation to the external market.
At GVC our policy is to ensure that employees receive a fair living wage for their location.

An opportunity to share in our success

We operate all-employee bonus plans based on company performance, whereby all employees are aligned to similar measures.

A tailored beneﬁts offering

GVC provides a ﬂexible beneﬁt scheme that include insurance and health cover, and retail and childcare vouchers to support
a positive work-life balance.

An opportunity to save for the future

Reﬂective of our workforce proﬁle whereby a large proportion are young, pension contributions are provide at the statutory level
with greater emphasis placed on base pay. This is in line with the remuneration approach for Executive Directors.

Training and development opportunities

A diverse and inclusive workplace

We are focused on leadership and technical development across the whole organisation.
We have also an established programme of training and development. The focus in 2016 was on development activities that
ﬁlled the gaps in terms of leadership capability and technical development. This was very much a one-off approach as 2016
was an exceptional year in terms of the business i.e. we conducted extensive restructuring and it was not viable to have a more
structured approach to development activities. The focus has changed in current months and we are now working toward
building capability across all levels of the group utilising the approach detailed in the Investors in People Framework (which we
hope to gain during the course of 2018).
We have also an established programme of training and development.
2016 saw us start to create a new development framework for the combined group which not only will allow us to better
benchmark our talent but it will also drive all training and development activities whilst at the same time be able to have an
enhanced approach to succession planning.
We pride ourselves on the diverse and varied background of our employees. GVC is a highly diverse and culturally rich
organisation with our workforce comprising 57 different nationalities making it both an interesting as well as a challenging
place to work. The transformation of the Group meant that by the end of 2016 we had 2,338 employees. See page 23 for
further details.

The following table sets out details of our various incentive plans and how they are cascade throughout the organisation.

Plan

Participation

ALL EMPLOYEE
BONUS PLAN

All employees except the CEO

2016 MANAGEMENT
INCENTIVE PLAN

Senior Executive Management Team
(including the newly appointed CFO)

Summary

A ﬁnancial target is set at the beginning of the year. For 2016 the target was to achieve
net gaming revenue growth of at least 7.5% every quarter compared with the equivalent
quarter in 2015. The target was exceeded and bonuses paid out in cash in Q1 2017
and a small portion for senior managers in shares in Q1 2017. For 2017 a different target
has been set and will be disclosed in next year’s report. For 2017 the bonus is paid early
in Q1 2018 if the target is met.
A fair market value option plan with the same strike price (£4.22) and vesting schedule
as the 2015 LTIP.

GVC Holdings PLC Annual Report 2016

PART C – DIRECTORS’ REMUNERATION POLICY
This section of the report contains details of the Directors’ Remuneration Policy that will govern the Company’s future remuneration payments and will take
effect from the date of the AGM. The Committee is responsible for establishing the policy on the remuneration of the Executive Directors. The Board is
responsible for setting the remuneration of the Non-executive Directors. Awards granted prior to this ﬁrst vote on Remuneration Policy at the 2017 AGM will
be honoured. A binding resolution to approve this Remuneration Policy will be put to shareholders at the AGM on 20 June 2017.

1. Executive Director Remuneration Policy
As set out in the Annual Statement, for the 2017 Remuneration Policy the Committee is not proposing any ongoing incentive arrangements. This will be
reviewed during the 2017 ﬁnancial year with a revised policy presented to shareholders at the 2018 AGM following the shareholder consultation process in
2017. For 2017, the legacy incentive arrangements, entered into prior to the date of the report will continue to operate.

When setting Executive Directors’ remuneration, the Committee has endeavoured to ensure that all Directors are provided with an appropriate remuneration
framework to encourage enhanced performance and that they are, in a fair and responsible manner, rewarded for their individual contributions to the success
of the Group.

Performance
targets and
recovery provisions

A broad assessment
of individual and
business performance
is used as part of the
salary review.
No recovery
provisions apply.

The Committee ensures that maximum salary levels are
positioned in line with companies of a similar size to GVC and
validated against other companies in the e-gaming industry,
so that they are competitive against the market.
The Committee intends to review the comparator each
year and may add or remove companies from the group as
it considers appropriate. Any changes to the comparator
group will be set out in the section headed Implementation
of Remuneration Policy, in the following ﬁnancial year.
In general salary increases for Executive Directors will be
in line with the increase for employees.
The Company will set out in the section headed
Implementation of Remuneration Policy, in the following
ﬁnancial year, the salaries for that year for each of the
Executive Directors.

The maximum is the cost of providing the relevant beneﬁts
set out adjacent.

No performance or
recovery provisions
applicable.

Operation

Maximum

Element and
strategic link

BASIC SALARY

To provide competitive
ﬁxed remuneration that
will attract and retain
appropriate talent.
Reﬂects an individual’s
responsibilities,
experience and role.

BENEFITS

To provide competitive
beneﬁts and to attract
and retain high calibre
employees.

PENSION

To provide an opportunity
for retirement planning.

An Executive Director’s basic salary is set on appointment and reviewed
annually or when there is a change in position or responsibility.
When determining an appropriate level of salary, the Committee considers:
(cid:3)(cid:132) remuneration practices within the group;
(cid:3)(cid:132) the general performance of the group;
(cid:3)(cid:132) salaries within the ranges paid by the companies in the comparator
group used for remuneration benchmarking (when the Committee
determines it is appropriate to carry out a benchmarking exercise);

(cid:3)(cid:132) any change in scope, role and responsibilities;
(cid:3)(cid:132) the experience of the relevant director; and
(cid:3)(cid:132) the economic environment.
Individuals who are recruited or promoted to the Board may, on occasion,
have their salaries set below the targeted policy level until they become
established in their role. In such cases subsequent increases in salary may
be higher than the general rises for employees until the target positioning
is achieved.

The Executive Directors receive private health insurance, life insurance
and accommodation allowances.
The Committee recognises the need to maintain suitable ﬂexibility
in the beneﬁts provided to ensure it is able to support the objective
of attracting and retaining personnel in order to deliver the Group
strategy. Additional beneﬁts may therefore be offered such as relocation
allowances on recruitment.

The Company does not currently have a separate pension arrangement
for Executive Directors. It does however provide the opportunity for all
employees to participate in a Company-provided pension in line with
statutory requirements.

The Executive Directors do not currently receive a pension.

No performance or
recovery provisions
applicable.

NON-EXECUTIVE DIRECTOR FEES

To provide compensation
that attracts high calibre
individuals and reﬂects
their experience and
knowledge.

Non-executive Directors are paid an annual fee and the Audit Committee
Chairman receives an additional fee for chairing the Audit Committee.
The Company may pay additional fees for chairing a Board Committee
if this is deemed appropriate in speciﬁc circumstances. There are no
additional fees for chairing or being a member of a committee.
Fees are reviewed annually based on equivalent roles in the comparator
group used to review salaries paid to the Executive Directors.
Non-executive Directors and the Chairman do not participate in any
variable remuneration or beneﬁts arrangements.

The fees for Non-executive Directors and the Chairman are
broadly set at a competitive level against the comparator group.
In general the level of fee increase for the Non-executive
Directors and the Chairman will be set taking account of
any change in responsibility and the general rise in salaries
across employees.
The Company will pay reasonable expenses incurred by the
Non-executive Directors and Chairman and may settle any tax
incurred in relation to these.

Remuneration report continued

REMUNERATION:
DIRECTORS’ REMUNERATION REPORT
CONTINUED

PART C – DIRECTORS’ REMUNERATION POLICY CONTINUED
Other contractual entitlements
As detailed in the “at a glance” section, upon appointment, as part of a market-competitive remuneration package, the incoming CFO was offered a bonus
opportunity for the 2017 ﬁnancial year. The maximum opportunity available is 100% of base salary. The performance measures, weightings and targets will
be determined by the Committee. Further details are set out on page 55.

No other Executive Directors are eligible for a bonus.

Discretion within the Directors’ Remuneration Policy
The Committee has discretion in several areas of Policy as set out in this report. The Committee may also exercise operational and administrative discretions
under relevant plan rules as set out in those rules. In addition, the Committee has the discretion to amend the Remuneration Policy with regard to minor or
administrative matters where it would be, in the opinion of the Committee, disproportionate to seek or await shareholder approval.

Comparison with other employees
All employees receive base salary, beneﬁts and may contribute into a Group-provided pension where applicable. For employees below Board level, GVC
operates a discretionary bonus arrangement with opportunity levels linked to seniority and role. In addition a number of key senior employees receive share
options under a Management Incentive Plan (“MIP”) the terms of which are the same as for the legacy awards set out below. Any differences in an individual’s
reward package is reﬂective of an individual’s location, seniority and level of responsibility (see page 59 for further details on approach).

Legacy awards
The Committee reserves the right to honour any historic awards that were granted under any previous share schemes operated by the Company but remain
outstanding, notwithstanding that they are not in line with the Policy set out above, where the terms of the payment or award were agreed before the new
Policy came into effect. Details of these awards are set out below and also in the Annual Report on Remuneration on page 60.

It should be noted that the 2015 LTIP was separately approved by shareholders with a strong level of support as part of the acquisition of bwin.party.

K Alexander
R Cooper
L Feldman
N Teufelberger
P Miles

Date of
grant

Number of shares
under Option

Exercise
price

Vesting
period

2 February 2016
2 February 2016
2 February 2016
2 February 2016
TBC 2017

8,798,075
4,399,037
4,399,037
200,000
350,000

422p
422p
467p
422p
422p

2 years 6 months
2 years 6 months
2 years 6 months
2 years 6 months
2 years 6 months

Final
vesting date

2 August 2018
2 August 2018
2 August 2018
2 August 2018
2 August 2018

Options will vest, subject to the satisfaction of a Performance Condition, one ninth six months after the date of grant, with one ninth vesting in each
subsequent quarter. In order to vest, the total shareholder return (“TSR”) of the Company must rank at median or above against the FTSE 250. Each ninth of
the Shares subject to the Option will have its TSR condition reviewed from the date of grant until the relevant vesting date. To the extent the TSR condition is
not met at that time then it shall be tested in the next quarter and at the end of the 30-month vesting.

The options are entitled to a dividend equivalent and are exercisable up to ten years from the date of grant.

The exercise price of £4.22 in respect of the awards made to Kenneth Alexander, Richard Cooper and Norbert Teufelberger was set out in the Company’s
November 2015 prospectus. Due to certain limitations associated with the grant of options to individuals subject to US federal income taxes, Lee Feldman’s
option was granted at a higher exercise price which represents the market value of the Shares as of the date at which the scheme to acquire bwin.party
became effective, being, £4.67. In order to compensate Lee Feldman for the higher exercise price, the Company agreed to pay him a cash bonus of
£1,979,567 (being £4.67 less £4.22 multiplied by 4,399,037). This cash bonus is to be paid over the 30-month vesting period of his option, but only
upon vesting and satisfaction of the TSR performance condition attaching to the options.

Paul Miles joined the Company on 20 February 2017 and was appointed CFO on 28 February 2017. It is the Company’s intention to grant the share option
set out in the table above as soon as possible; however, as the Company has been in a closed period to the date of this report the grant has not yet been
made. The Committee proposes granting this option under the exemption to Listing Rule 9.4.1 contained in Listing Rule 9.4.2 (2) on the basis the only
participant is a director and the arrangement is established speciﬁcally to facilitate, in unusual circumstances, the recruitment of the new CFO. The terms
of this arrangement were agreed as part of the remuneration negotiations with the new CFO; reﬂect the Committee’s desire to incentivise the new CFO for
the period to August 2018 on the same terms as the MIP and 2015 LTIP participants; and recognise that due to a technical restriction in the legacy plan
rules the option could not be made under these plans. The rules governing this option will be identical to the rules of the GVC 2016 MIP except in respect
of the latter’s eligibility provision. This option will vest one-third on the date of grant. Thereafter, subject to the satisfaction of the TSR performance condition
described above, one ninth will vest on 2 May 2017 and then one-ninth shall vest each subsequent quarter, so that all of the Shares subject to this option
shall have vested by 2 August 2018, in line with the vesting schedule for the awards granted to senior executives under the MIP and to the Directors under
the 2015 LTIP.

GVC Holdings PLC Annual Report 2016

2. Reward scenarios
The charts below show an estimate of the remuneration that could be received by Executives Directors under the Policy set out in this report.

KENNETH ALEXANDER (CEO)

RICHARD COOPER (CFO)

734

100%

Fixed remuneration

(£000)

800

600

400

200

(£000)

800

600

400

200

Fixed remuneration

406

100%

Minimum Mid-point

Maximum

Minimum Mid-point Maximum

Assumptions used in determining the level of pay-out under given scenarios are as follows:

Element

FIXED ELEMENTS

Minimum

On-Target

Maximum

Base salary for FY 2017
Beneﬁts paid for FY 2016 (private medical insurance and life assurance and accommodation allowances)

As set out in above the Remuneration Policy to be approved at the 2017 AGM does not contain any incentive arrangements due to the legacy option grants
that were put in place as part of the acquisition of bwin.party. As such the reward scenarios include only those elements included in the Remuneration Policy
going forward.

3. Approach to recruitment and promotions
The Company’s principle is that the remuneration of any new recruit will be assessed in line with the same principles as for the Executive Directors, as set
out in the Remuneration Policy table above. The Committee is mindful that it wishes to avoid paying more than it considers necessary to secure a preferred
candidate with the appropriate calibre and experience needed for the role. In setting the remuneration for new recruits, the Committee will have regard to
guidelines and shareholder sentiment regarding one-off or enhanced short-term or long-term incentive payments, as well as giving consideration for the
appropriateness of any performance measures associated with an award.

The Company’s detailed policy when setting remuneration for the appointment of new Directors is summarised in the table below:

Remuneration element Recruitment policy

SALARY, BENEFITS
AND PENSION

“BUY OUT” OF
INCENTIVES FORFEITED
ON CESSATION OF
EMPLOYMENT

These will be set in line with the policy for existing Executive Directors.
In instances where the new executive is relocated from one work location to another, the Company will provide compensation to reﬂect the cost of relocation for
the Executive in cases where they are expected to spend signiﬁcant time away from their home location in accordance with its normal relocation package for
employees. The level of the relocation package will be assessed on a case by case basis but may take into consideration any cost of living differences; housing
allowance; and schooling in accordance with the Company’s normal relocation package for employees.
Where the Committee determines that the individual circumstances of recruitment justiﬁes the provision of a buyout, the equivalent value of any incentives that will
be forfeited on cessation of an Executive Director’s previous employment will be calculated taking into account the following:
(cid:3)(cid:132) the proportion of the performance period completed on the date of the Executive Director’s cessation of employment;
(cid:3)(cid:132) the performance conditions attached to the vesting of these incentives and the likelihood of them being satisﬁed; and
(cid:3)(cid:132) any other terms and conditions having a material effect on their value (“lapsed value”);
The Committee may then grant up to the same value as the lapsed value, where possible, under the Company’s incentive plans. To the extent that it was not
possible or practical to provide the buyout within the terms of the Company’s existing incentive plans, a bespoke arrangement would be used.

Where an existing employee is promoted to the Board, the Policy set out above will apply from the date of promotion but there would be no retrospective
application of the policy in relation to subsisting incentive awards or remuneration arrangements. Accordingly, prevailing elements of the remuneration
package for an existing employee would be honoured and form part of the ongoing remuneration of the employee. These would be disclosed to shareholders
in the following year’s Annual Report on Remuneration.

The Company’s policy when setting fees for the appointment of new Non-executive Directors is to apply the policy which applies to current
Non-executive Directors.

Remuneration report continued

REMUNERATION:
DIRECTORS’ REMUNERATION REPORT
CONTINUED

PART C – DIRECTORS’ REMUNERATION POLICY CONTINUED
4. Service contracts and letters of appointment
The Company’s policy is that Executive Directors have rolling contracts which are terminable by either party giving the other 12 months’ notice. Non-executive
Directors do not have service contracts but are appointed under letters of appointment. With the exception of the Chairman of the Board, each Non-executive
Director is subject to an initial three year term (except for Norbert Teufelberger who has an initial term of two years) subject to annual re-election at the
Company’s AGM. All service contracts and letters of appointment are available for viewing at the Company’s registered ofﬁce and at the AGM.

Director

K Alexander
P Miles
L Feldman
K Diacono
N Teufelberger
S Morana
P Isola
W Whitehorn

Date appointed

February 2007
28 February 2017
December 2004
December 2008
2 February 2016
2 February 2016
2 February 2016
23 March 2017

Arrangement

Notice period/unexpired term

Service contract
Service contract
Letter of appointment
Letter of appointment
Letter of appointment: 2 year period
Letter of appointment: 3 year period
Letter of appointment: 3 year period
Letter of appointment: 3 year period

12 months
12 months
12 months
Remaining period
Remaining period
Remaining period
Remaining period
Remaining period

The Board allows Executive Directors to accept appropriate outside commercial Non-executive Director appointments provided the aggregate commitment
is compatible with their duties as Executive Directors. The Executive Directors concerned may retain fees paid for these services, which will be subject to
approval by the Board.

5. Payment for loss of ofﬁce
When determining any loss of ofﬁce payment for a departing Director, the Committee will always seek to minimise cost to the Company whilst complying
with the contractual terms and seeking to reﬂect the circumstances in place at the time. The Committee reserves the right to make additional payments
where such payments are made in good faith in discharge of an existing legal obligation (or by way of damages for breach of such an obligation); or by way
of settlement or compromise of any claim arising in connection with the termination of an executive director’s ofﬁce or employment.

The Committee will honour Executive Directors’ contractual entitlements. Service contracts do not contain liquidated damages clauses. If a contract is to be
terminated, the Committee will determine such mitigation as it considers fair and reasonable in each case. There is no agreement between the Company and
its Executive Directors or employees, providing for compensation for loss of ofﬁce or employment that occurs because of a takeover bid.

A summary of the main contractual terms is set out below:

Treatment on cessation of employment

Treatment on change of control

SALARY, BENEFITS AND PENSION
SUMMARY OF PROVISIONS
OF EXISTING CONTACTS FOR
K ALEXANDER AND L FELDMAN

SUMMARY OF PROVISIONS
RELATING TO LEGACY AWARDS

These will be paid over the notice period. The Company has discretion to make a lump sum payment in lieu.
In the event that either of the Chairman or CEO is given notice of termination without cause or resigns
for a good reason then the executive director shall be entitled to:
(cid:3)(cid:132) a payment equivalent to two year’s salary/fees and bonus (2015 being the reference year);
(cid:3)(cid:132) any unpaid bonus for the prior completed bonus year;
(cid:3)(cid:132) a pro-rata bonus for the current bonus year (being the average of the preceding 12 months); and
(cid:3)(cid:132) maximum discretions being exercised under the 2015 LTIP and any successor plans.
For good leavers, unvested awards will vest on the normal vesting date subject to:
(i)

the extent any applicable performance targets have been satisﬁed at the end of the normal
performance period; and

(ii) pro-rating to reﬂect the period of time between grant and cessation of employment as a proportion

of the vesting period that has elapsed.

The Committee has the discretion to determine that the end of the performance period is the date of
cessation and whether to pro-rate the number of vested awards to reﬂect the vesting period completed.
A “good leaver” is deﬁned as a participant ceasing to be in employment by reason of injury, ill-health,
disability, redundancy, retirement, the company employing the participant ceasing to be a member of the
Group, the participant’s employing business being transferred to a person who is not a Group Member,
or any other reason at the Committee’s discretion.
If a participant dies before his award vests, the award shall vest as soon as practicable after death and shall
be pro-rated for time elapsed and applicable performance targets. The personal representatives may then
exercise the award in the 12 months following death, after which it will lapse.
Anyone who is not a good leaver will be a bad leaver. Bad leavers will forfeit all vested and unvested awards.

GVC Holdings PLC Annual Report 2016

In the event of a takeover, a scheme of
arrangement or voluntary winding up
of GVC, all awards may be exercised
for a period of one month from the date
the participants are notiﬁed of such
event or the change of control occurs.
The Performance Condition shall apply
to any unvested award on a change
of control, unless the Remuneration
Committee determines otherwise.

6. Consideration of employee remuneration and shareholders
All-employee remuneration
In setting the remuneration policy for Directors, the pay and conditions of other employees are taken into account, including any base salary increases
awarded. The Committee is provided with data on the remuneration structure for management level tiers below the Executive Directors, and uses this
information to ensure consistency of approach throughout the Group.

The Committee has not expressly sought the views of employees and no remuneration comparison measurements were used when drawing up the Directors’
Remuneration Policy. Through the Board, however, the Committee is updated as to employee views on remuneration generally. See page 54 for the
Company’s general approach to employee remuneration.

Consideration of shareholder views
The Committee has an open relationship with shareholders on remuneration matters. It welcomes dialogue and will engage with signiﬁcant shareholders on
material changes to its remuneration policy or structure. During the acquisition of bwin.party, we consulted with shareholders on, amongst other aspects, the
remuneration arrangements of the Executive Directors. It should be noted that the 2015 LTIP was separately approved by shareholders with a strong level of
support as part of the acquisition of bwin.party.

PART D – ANNUAL REPORT ON REMUNERATION
The 2016 Annual Report on Remuneration contains details on the remuneration paid and awarded to Directors during the ﬁnancial year ended 31 December
2016. This report has been prepared in accordance with the provisions of the Companies Act 2016 and the Regulations. An advisory resolution to approve the
Annual Report on Remuneration and the Annual Statement will be put to shareholders at the AGM on 20 June 2017.

1. Directors’ remuneration for the year ending 31 December 2016
Single ﬁgure remuneration table (audited)
The remuneration of Directors showing the breakdown between components with comparative ﬁgures for the prior Financial Year is shown below.
Figures provided have been calculated in accordance with Regulations. Further information on this is provided in the table on page 60.

Kenny Alexander (CEO)

Richard Cooper (CFO)

L Feldman

K Diacono

N Teufelberger

P Isola

S Morana

Base
salary/fees
€000

Taxable
Beneﬁts1
€000

Annual variable
remuneration
€000

Long-term
variable
remuneration
€000

Other –
legacy
arrangement
€000

Pension
€000

2016

2015
2016

2015

929
1,052
491
556
158
179
100
69
194
–
92
–
115
–

3
3
4
3
–
–
–
–
–
–
–
–
–
–

–
–
–
–
–
–
–
–
–
–
–
–
–
–

21,257
3,631
10,675
1,866
9,072
1,487
69
69
170
–
–
–
–
–

Total
€000

22,188
4,685
11,169
2,426
9,231
1,666
169
138
364
–
92
–
115
–

1. Taxable beneﬁts comprise a car allowance, private medical and life insurance.

Remuneration report continued

REMUNERATION:
DIRECTORS’ REMUNERATION REPORT
CONTINUED

PART D – ANNUAL REPORT ON REMUNERATION CONTINUED
1. Directors’ remuneration for the year ending 31 December 2016 continued
Shares awards granted under legacy arrangements in the year ending 31 December 2016
The table below sets out the details of legacy awards granted during the year. Some of these awards vested during the course of the year (see next section).

Director

K Alexander
R Cooper
L Feldman
N Teufelberger

Type of Award

Grant date

Market priced options
Market priced options
Market priced options
Market priced options

2 February 2016
2 February 2016
2 February 2016
2 February 2016

Exercise price
(p)

Number of shares
under option

422
422
467
422

8,789,075
4,399,037
4,399,037
200,000

Face value
of award1

£44,912,173
£22,479,079
£22,479,079
£1,022,000

Final
vesting date

2 August 2018

1. The face value of award has been calculated using the closing share price on the date of grant (2 February 2016) of £5.11.

Details of performance conditions attached to the above awards can be found on page 56. If the performance condition is achieved, 100% of the award
will vest.

Shares awards vested under legacy arrangements in the year ending 31 December 2016
During the year ending 31 December 2016 a portion of the awards granted under the legacy arrangement vested. All options are subject to the same single
performance condition details of which are set out below:

Vesting date

2 August 2016
2 November 2016

Portion of
award vesting

Performance
measures

Performance
targets

1/9
1/9

Total Shareholder Return vs FTSE 250
Total Shareholder Return vs FTSE 250

Rank at median or above
Rank at median or above

Performance
outcome

Above median
Above median

% of awards
vesting

100%
100%

Details of the share awards that vested during the year are set out below:

Director

K Alexander

R Cooper

L Feldman

N Teufelberger

Total number
of options
over shares

8,789,075

4,399,037

200,000

Vesting date

2 August 2016
2 November 2016
2 August 2016
2 November 2016
2 August 2016
2 November 2016
2 August 2016
2 November 2016

Portion of
award
vesting

Number of
options over
shares available
to vest

Exercise price
(p)

% of award
vesting

Market share
price on date
of vesting

Value of award
included in
single ﬁgure

1/9
1/9
1/9
1/9
1/9
1/9
1/9
1/9

977,564
976,564
488,781
488,781
488,781
488,781
22,222
22,222

422
422
422
422
467
467
422
422

100
100
100
100
100
100
100
100

£6.635
£6.86
£6.635
£6.86
£6.635
£6.86
£6.635
£6.86

£2,360,817
£2,580,769
£1,180,406
£1,290,382
£960,455
£1,070,430
£53,666
£58,666

In addition, Lee Feldman received a cash bonus of £439,904 in the year ending 31 December 2016 being the difference between the exercise price of £4.67
and the issue price of £4.22 for the 2/9 of the award that vested in the year. This amount has been included in the single ﬁgure table with the amounts above.

As noted on page 53, Richard Cooper left GVC on 28 February 2017 and upon leaving, all unvested option awards (over a total of 2,932,691 shares) lapsed.

GVC Holdings PLC Annual Report 2016

1. Directors’ remuneration for the year ending 31 December 2016 continued
Other awards vesting during the year ending 31 December 2016
As set out in the Prospectus issued on 13 November 2015, upon completion of the acquisition of bwin.party existing incentives ceased and were replaced
with the 2015 LTIP as set out above. As such on the 1 February 2016 the following awards vested and are therefore included in the single ﬁgure table.

Director

K Alexander

R Cooper

L Feldman

Basis of award

2015 Retention Plan
2014 Share Options
2015 Retention Plan
2014 Share Options
2015 Retention Plan
2014 Share Options

Type of award

Cash payment
Share Options
Cash payment
Share Options
Cash payment
Share Options

Amount vesting on
1 February 2016
€000

6,996
7,518
3,498
3,759
3,356
1,880

All outstanding incentives were settled in cash with the after tax proceeds reinvested in new GVC shares and subject to a 1 year lock in period from
1 February 2016.

Reconciliation to total single ﬁgure of remuneration

Director

K Alexander
R Cooper
L Feldman
N Teufelberger
K Diacono

Legacy arrangement (€000)

Award vesting
in August
2016

Awards vesting
in November
2016

2,784
1,392
1,133
81
–

3,027
1,514
1,256
88
–

2015
Retention Plan
€000

2014
Share Options
€000

Total included
in single
ﬁgure table
€000

6,996
3,498
3,356
–
–

7,518
3,759
1,880
–
–

21,257
10,675
9,072
170
69

Cash
bonus

931
512
1,449
–
69

These payments relate to a bwin.party transaction bonus and the Chairman’s option strike price cash bonus adjustment.

Payments to past Directors or for loss of ofﬁce (audited)
During the year, there were no payments to past Directors and no payments for loss of ofﬁce. In line with the normal vesting schedule, 1/9 of Richard Cooper’s
option award vested in February 2017. The remaining unvested awards (6/9) lapsed on his departure.

2. Statement of Directors’ shareholding and share interests
Shareholding and other interests at 31 December 2016 (audited)
Directors’ share interests are set out below:

Director

K Alexander
R Cooper
L Feldman
K Diacono
N Teufelberger
P Isola
S Morana

Shareholding at 31 December 2016

Interests in shares

Interests in options

Number of
beneﬁcially
owned shares1

% of
salary/fee
held

Total interests
subject to
conditions

Total vested
interests
unexercised

Total interests
subject to
conditions

Total interests
unexercised

Total interests at
31 December
2016

1,898,788
1,000,000
719,464
–
2,755,264
–
–

–
–
–
–
–
–
–

6,842,946
3,421,473
3,421,473
–
142,858
–
–

–
–
–
–
57,142
–
–

6,842,946
3,421,473
3,421,473
–
200,000
–
–

1. Beneﬁcial interests include shares held directly or indirectly by connected persons.

Between 31 December 2016 and the date that this report was signed off, no share options were exercised. A further 1/9 of the share options vested in
February 2017 resulting in the movement of share options from “Total interests subject to conditions” to “Total interests unexercised”.

Remuneration report continued

REMUNERATION:
DIRECTORS’ REMUNERATION REPORT
CONTINUED

PART D – ANNUAL REPORT ON REMUNERATION CONTINUED
3. Chief Executive Ofﬁcer and Employee Pay
Total Shareholder Returns and Chief Executive Ofﬁcer remuneration since obtaining main market listing on 1 February 2016
The graph below shows the value of £100 invested in GVC Holdings plc since obtaining main market listing on 1 February 2016 compared with the value of
£100 invested in the FTSE 250 index. The FTSE 250 index has been chosen on the basis that it is the index within which GVC operates.

TOTAL SHAREHOLDER RETURN: GVC VS FTSE 250

(£)

160

150

140

130

120

110

100

GVC Holdings

FTSE 250

Feb-2016

Mar-2016

Apr-2016

May-2016

Jun-2016

Jul-2016

Aug-2016

Sep-2016

Oct-2016

Nov-2016

Dec-2016

Jan-2017

Feb-2017

Source: Datastream

The Company has chosen to compare its performance from 1 February 2016 against the FTSE 250 as this was the point at which the Company exists in its
current form.

Role
Single ﬁgure of total remuneration (€m)
Annual Bonus pay-out (% maximum)
LTIP vesting (% maximum)

Legacy award vesting (% maximum)

December 2016

K ALEXANDER

December 2015

K ALEXANDER

CEO
22.19
–
–

100%

CEO
4.69
–
–

100%

Prior to the acquisition of bwin.party and admission to the Main Market the size (on a market capitalisation basis) and complexity of the Company were
substantially different and as such the Committee does not believe that historic remuneration has any meaningful comparative value. The Committee has
included the remuneration for 2015 to provide some basis of comparison and will continue to add years in the future until the Regulation are satisﬁed in full.

Relative importance of spend on pay
The table below sets out the overall spend on pay for all employees compared with the returns distributed to shareholders.

Signiﬁcant distributions

Staff costs (€m)
Distributions to shareholders (£million)

2016

136.7
0

2015

48.5
34.3

% change

182
–

1. The above ﬁgures are taken from notes 3 and 23 to the ﬁnancial statements. The increase in staff costs is a result of GVC’s takeover of bwin.party’s larger operations. As a result of the acquisition of

bwin.party and the combination of debt covenants and the intended restructuring of the Group, the Company did not pay any dividends in 2016. Subsequent to the year end the Company will pay two special
dividends totalling 30 euro cents per share (€88.5m) in respect of 2016 ﬁnancial performance.

GVC Holdings PLC Annual Report 2016

4. Considerations by the Remuneration Committee of matters relating to Directors’
remuneration for 2016
The Committee is responsible for recommending to the Board the remuneration policy for Executive Directors and the senior management and for setting
the remuneration packages for each Executive Director. The Committee also has oversight of the remuneration policy for all employees. The written Terms
of Reference of the Committee are available on the Company’s website and from the Company on request.

Members of the Committee during 2016

K Diacono1
L Feldman2
P Isola
S Morana

Independent

Number of meetings
held during tenure
during the year

Number of
meetings attended

Yes
Yes
Yes
Yes

4
4
2
2

1. Appointed Remuneration Committee Chairman on 1 February 2016.
2. On appointment as Chairman of the Board Lee Feldman was considered to be independent.

During the year, there were four scheduled Committee meetings. The matters covered were:

(cid:3)(cid:132) Reviewing share option plan rules.

(cid:3)(cid:132) Approval of share options awards.

(cid:3)(cid:132) Reviewing the 2016 employee cash bonus plan.

(cid:3)(cid:132) Satisfaction of the periodic TSR performance conditions attaching to the outstanding share option awards.

(cid:3)(cid:132) Setting the remuneration terms for the new Chief Financial Ofﬁcer.

(cid:3)(cid:132) Agreeing the exit terms for the outgoing Chief Financial Ofﬁcer.

(cid:3)(cid:132) Launching an internal consultation on the shape of a new remuneration policy for launch in 2018.

In addition, the Remuneration Committee met by telephone in December 2016 to grant awards under the MIP and approve the cash equivalent
payments made to the Executive Directors and Chairman of the Board in respect of their exercised 2015 LTIP awards, which had vested on 2 August
and 2 November 2016.

None of the Committee members or attendees is involved in any Committee decisions from which they may ﬁnancially beneﬁt personally (other than as
shareholders) in the decisions made by the Committee and there are no conﬂicts of interests arising from cross-directorships or day-to-day involvement
in running the business.

The Chief Executive Ofﬁcer, Chief Financial Ofﬁcer and HR Director may attend meetings at the invitation of the Committee, but are not present when their
own remuneration is being discussed. The Company Secretary acts as the secretary to the Committee.

The Committee received external advice in 2016 from PwC in connection with remuneration matters including the provision of general guidance on market
and best practice.

PwC are members of the Remuneration Consultants Group and, as such, voluntarily operate under the code of conduct in relation to executive remuneration
consulting in the UK. The Committee reviewed the nature of all the services provided during the year by PwC and was satisﬁed that no conﬂict of interest
exists or existed in the provision of these services.

The total fees paid to PwC in respect of services to the Committee during the year were £72,000. Fees were determined based on the scope and nature of
the projects undertaken for the Committee.

5. Implementation of the Remuneration policy for the year ending 31 December 2017
See page 53.

6. Shareholder voting
This is the ﬁrst year in which the Company has put forward resolutions on remuneration. There are, therefore, no historic voting outcomes to disclose.

Karl Diacono
Chairman, Remuneration Committee

23 March 2017

Independent Auditor’s Report

INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GVC HOLDINGS PLC

Our opinion on the Group ﬁnancial statements
is unmodiﬁed
In our opinion the Group ﬁnancial statements:
(cid:3)(cid:132) give a true and fair view of the state of the Group’s affairs as at 31 December 2016

and of its loss for the year then ended; and

(cid:3)(cid:132) have been properly prepared in accordance with International Financial Reporting

Standards (IFRSs) as adopted by the European Union.

What we have audited
GVC Holdings PLC’s Group ﬁnancial statements for the year ended 31 December
2016 comprise the Consolidated Income Statement, the Consolidated Statement
of Comprehensive Income, the Consolidated Statement of Financial Position,
the Consolidated Statement of Changes in Equity, the Consolidated Statement
of Cashﬂows and the related notes.
The ﬁnancial reporting framework that has been applied in their preparation is
the applicable law and IFRSs as adopted by the European Union.

Other matters
We have reported separately on the parent company ﬁnancial statements of
GVC Holdings PLC for the year ended 31 December 2016.

Who we are reporting to
This report is made solely to the company’s members, as a body, in accordance with
the terms of our engagement dated 8 December 2016. 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.

OVERVIEW OF OUR AUDIT APPROACH

(cid:3)(cid:132) Overall Group materiality: €7.5m, which represents 4% of the Group’s operating

proﬁt adjusted for share-based payments, exceptional items, depreciation,
amortisation, impairment of available for sale assets and changes in the fair value
of derivative ﬁnancial instruments (“clean EBITDA”);

(cid:3)(cid:132) We performed full scope audits at the key business operations in the UK, Malta,

Gibraltar and India; and

(cid:3)(cid:132) Key audit risks were identiﬁed as accounting for the acquisition of bwin, legal and

regulatory compliance, accounting for taxation, revenue recognition, and
impairment of goodwill and other intangible assets.

Our assessment of risk
In arriving at our opinions set out in this report, we highlight the following risks that, in our judgement, had the greatest effect on our audit.

Audit risk

How we responded to the risk

ACCOUNTING FOR THE ACQUISITION OF BWIN
The Group completed the acquisition of the entire issued and to-be-issued ordinary
share capital of bwin.party digital entertainment plc (“bwin”) on 2 February 2016.
The impact on the Group’s ﬁnancial statements for the year ended 31 December
2016 is disclosed in note 29.
We identiﬁed this transaction as a risk due to the signiﬁcance of the balances involved
and also due to the level of judgements and estimates required from management,
particularly in relation to:
(cid:3)(cid:132) The identiﬁcation of the acquirer, taking into account the requirements of IFRS 3
“Business Combinations” and IFRS 10 “Consolidated Financial Statements”; and

(cid:3)(cid:132) Identiﬁcation and valuation of intangible assets and goodwill on acquisition,

and any fair value adjustments to net assets acquired.

We therefore identiﬁed accounting for the acquisition of bwin as a signiﬁcant risk
requiring special audit consideration.
LEGAL AND REGULATORY COMPLIANCE
The Group operates in a heavily regulated industry across multiple geographical
locations. Each jurisdiction has laws and regulations in relation to licensing, data
protection, money laundering, customer identiﬁcation and veriﬁcation, fraud, direct
and indirect taxes and other legislative matters.
It is the responsibility of management, with the oversight of those charged with
governance, to ensure that the Group’s operations are conducted in accordance with
the provisions of laws and regulations, including compliance with the provision of laws
and regulation that determine the reported amounts and disclosures in the Group’s
ﬁnancial statements.
We identiﬁed legal and regulatory compliance as a risk due to the importance of
compliance with laws and regulations to the operations of the Group.

Our audit work included but was not restricted to:
(cid:3)(cid:132) comparing management’s assessment of the accounting treatment of the business

combination, in particular the identiﬁcation of the acquirer, in accordance to
the requirements of IFRS 3 and IFRS 10. We examined signed sales, purchase
agreements, and associated contractual documents to understand the terms
and conditions of the transaction and to conﬁrm management’s assessment;
(cid:3)(cid:132) assessing the models prepared by management to value the intangible assets

identiﬁed in the acquired business using our internal specialists to challenge the
assumptions and methodology used by management; and

(cid:3)(cid:132) assessing whether the disclosures presented in note 29 to the ﬁnancial statements

are in accordance with the requirements of IFRS 3 and IFRS 10.

The Group’s accounting policy on business combinations is shown in note 1 to the
ﬁnancial statements and related disclosures are included in note 29.

Our audit work included, but was not restricted to:
(cid:3)(cid:132) assessing the controls and processes in place across the Group that may assist

in the prevention and detection of non-compliance with laws and regulations in each
of the geographic locations in which the Group operates;

(cid:3)(cid:132) holding discussions with the Group’s in-house and external legal experts and
an assessment of policies and procedures implemented by the Group’s legal
and compliance functions; a review of the reports undertaken by the Group’s legal
and external counsel and internal audit function and reviewing the controls and
processes over new customer account set-up;

(cid:3)(cid:132) reviewing correspondence between the Group and regulators to ensure the

completeness and accuracy of any penalties or ﬁnes recorded as a liability; and
(cid:3)(cid:132) using an independent third party, as an auditor’s expert, to check the completeness

of the Group’s disclosures in relation to laws and regulations.

The Group’s accounting policy on provisions and contingent liabilities is shown in note 1
to the ﬁnancial statements and related disclosures are included in notes 21 and 28.

GVC Holdings PLC Annual Report 2016

Audit risk

How we responded to the risk

ACCOUNTING FOR TAXATION
The Group recognised a corporation tax credit of €0.0m, income and other
taxes reclaimable of €6.7m and income and other taxes payable of €65.4m at
31 December 2016.
The Group operates in a number of countries, resulting in complexities in the payment
or receipt, and accounting for taxation, involving management judgement in arriving
at year-end tax balances.
We therefore identiﬁed accounting for taxation as a signiﬁcant risk requiring special
audit consideration.

REVENUE RECOGNITION
The Group enters into high volumes of Net Gaming Revenue (“NGR”) generating
transactions each day, recorded across in-house and third party IT systems.
International Standards on Auditing (UK and Ireland) prescribe a presumed
risk of fraud in revenue recognition in that revenue may be misstated through
improper recognition.
We have therefore identiﬁed revenue recognition as a signiﬁcant risk requiring special
audit consideration.

IMPAIRMENT OF GOODWILL AND OTHER INTANGIBLE ASSETS
The Group holds goodwill of €1,090.3m and other intangible assets of €519.1m on
its Statement of Financial Position at 31 December 2016.
In accordance with International Accounting Standard (IAS) 36, management have
performed an impairment review for goodwill and have assessed if any indicators of
impairment exist for other intangible assets.
We identiﬁed this area as a risk due to the signiﬁcance of the carrying value of the
assets and because the assessment of the recoverable amount of the Group’s Cash
Generating Units (“CGUs”) involves signiﬁcant judgements about the future results of
the business and the discount rates applied to future cashﬂow forecasts.
In particular, we directed our audit effort on those CGUs with the largest carrying
values and those with the lowest headroom.
We therefore identiﬁed impairment of goodwill and other intangible assets as a
signiﬁcant risk requiring special audit consideration.

Our audit work included, but was not restricted to:
(cid:3)(cid:132) discussing with management’s tax experts, with support from our tax experts,

how the Group manages and controls the companies in countries where it operates;
(cid:3)(cid:132) obtaining and reading correspondence between the Group and tax authorities in order

to support the tax position of the Group;

(cid:3)(cid:132) understanding management’s interpretation and application of relevant tax law
and challenged the appropriateness of its assumptions and estimates in relation
to provisions and contingent liabilities; and

(cid:3)(cid:132) considering whether the Group’s disclosures relating to taxation were in accordance

with the requirements of IFRSs as adopted by the European Union.

The Group’s accounting policy on taxation is shown in note 1 to the ﬁnancial statements
and related disclosures are included in note 6.

Our audit work included, but was not restricted to:
(cid:3)(cid:132) evaluating whether the Group’s revenue recognition policies are in accordance

with IFRSs as adopted by the European Union;

(cid:3)(cid:132) testing the operating effectiveness of controls around the relevant IT systems

including the Group’s gaming platforms. We reconciled data from the platforms
to the general ledger and in reverse; and

(cid:3)(cid:132) testing a sample of bets placed during the year to verify that the event relating to
the bet occurred in the year, and that in the case of winning bets, the payout was
correctly calculated and recorded in the customer’s account.

The Group’s accounting policy on the recognition of revenue is shown in note 1 to the
ﬁnancial statements and the components of that income are included in note 2.

Our audit work included, but was not restricted to:
(cid:3)(cid:132) performing audit procedures on all impairment models relating to material CGUs;
(cid:3)(cid:132) challenging management’s assumptions used in their impairment model. We did this
with reference to historical data and, where applicable, external benchmarks noting
the assumptions used fell within an acceptable range. We used our internal valuation
experts to assist with these procedures;

(cid:3)(cid:132) testing the integrity of models and carried out sensitivity analysis using a range of

different assumptions;

(cid:3)(cid:132) assessing the historical accuracy of management’s budgets and forecasts.

We compared current performance with forecasts, and sought appropriate evidence
for any anticipated improvements in major assumptions such as growth in market
share or cost reductions. We corroborated previous forecasts with actual data; and

(cid:3)(cid:132) considering whether the disclosures on the impairment test performed by

management in the ﬁnancial statements are in line with those prescribed in
accounting standards.

The Group’s accounting policy on impairment is shown in note 1 to the ﬁnancial
statements and the goodwill and impairment testing disclosures are included in note 8.

Independent Auditor’s Report continued

INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GVC HOLDINGS PLC
CONTINUED

Our application of materiality and an overview of the
scope of our audit
Materiality
We deﬁne materiality as the magnitude of misstatement in the ﬁnancial statements
that makes it probable that the economic decisions of a reasonably knowledgeable
person would be changed or inﬂuenced. We use materiality in determining the
nature, timing and extent of our audit work and in evaluating the results of that work.

Our Group audit was scoped by obtaining an understanding of the Group and its
environment, including Group-wide controls, and assessing the risks of material
misstatement at the Group level. We identiﬁed that 4 locations: United Kingdom,
Gibraltar, Malta and India were signiﬁcant components of the Group and these
were subject to a full scope audit. For signiﬁcant components, requiring a full scope
approach we evaluated and tested controls over the ﬁnancial reporting systems
identiﬁed as part of our risk assessment, reviewed the accounts production process
and addressed critical accounting matters.

We determined materiality for the audit of the Group ﬁnancial statements as a whole
to be €7.5m, which is approximately 4% of the Group’s operating proﬁt adjusted for
share-based payments, exceptional items, depreciation, amortisation, impairment
of available for sale assets and changes in the fair value of derivative ﬁnancial
instruments (“clean EBITDA”). This benchmark is considered the most appropriate
because this is a key performance measure used by the Directors to report to
investors on the ﬁnancial position of the Group.

Materiality for the current year is higher than the level that we determined for the
year ended 31 December 2015 to reﬂect that the Group’s revenue has increased
signiﬁcantly in the year because of organic growth and the acquisition of bwin.

We use a different level of materiality, performance materiality, to drive the extent
of our testing and this was set at 75% of ﬁnancial statement materiality for
the audit of the Group ﬁnancial statements. We also determine a lower level of
speciﬁc materiality for certain areas such as directors’ remuneration and related
party transactions.

We determined the threshold at which we will communicate misstatements to the
Audit Committee to be €375,000. In addition, we will communicate misstatements
below that threshold that, in our view, warrant reporting on qualitative grounds.

Overview of the scope of our audit
An audit involves obtaining evidence about the amounts and disclosures in the
ﬁnancial statements sufﬁcient to give reasonable assurance that the ﬁnancial
statements are free from material misstatement, whether caused by fraud or error.
This includes an assessment of whether the accounting policies are appropriate
to the Group’s circumstances and have been consistently applied and adequately
disclosed; the reasonableness of signiﬁcant accounting estimates made by the
directors; and the overall presentation of the ﬁnancial statements. In addition, we
read all the ﬁnancial and non-ﬁnancial information in the Annual Report to identify
material inconsistencies with the audited ﬁnancial statements and to identify
any information that is apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of performing
the audit. If we become aware of any apparent material misstatements or
inconsistencies, we consider the implications for our report.

We conducted our audit in accordance with International Standards on Auditing
(ISAs) (UK and Ireland). Our responsibilities under those standards are further
described in the ‘Responsibilities for the ﬁnancial statements and the audit’ section
of our report. We believe the audit evidence we have obtained is sufﬁcient and
appropriate to provide a basis for our opinion.

For those components that were not identiﬁed as signiﬁcant components, either
a full scope, targeted or analytical audit approach was determined based on
their relative materiality to the Group and our assessment of audit risk. Our audit
procedures covered 100% of the Group’s net gaming revenue, 100% of the Group’s
Clean EBITDA and 100% of the Group’s net assets.

We used component auditors to assist with our audit under our supervision
and review. These were a Grant Thornton International Limited network ﬁrm for
the operations in Malta, and BDO LLP for the operations in Gibraltar and India.
The Group audit team audited the operations in the UK. Our audit was executed at
levels of materiality applicable to each individual entity and ranged from €5,600,000
to €7,500,000. At the parent entity level, we performed audit procedures on
material transactions and consolidation adjustments.

As the Group’s parent company is based in the Isle of Man we used a Grant
Thornton International Limited network member ﬁrm to check the requirements
of local Isle of Man statute had been met in the disclosures included in the
Annual Report.

In the current year the Group audit team visited the operations in the UK, Gibraltar
and India due to their ﬁnancial signiﬁcance to the Group and visited the operations
in Malta in the prior year.

Matters on which we are required to report by exception
Under the Listing Rules, we are required to review:

(cid:3)(cid:132) the directors’ statements in relation to going concern and longer-term viability,

set out on pages 43 and 33 respectively; and

(cid:3)(cid:132) the part of the Corporate Governance Statement relating to the company’s

compliance with the provisions of the UK Corporate Governance Code speciﬁed
for our review.

Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion,
information in the annual report is:

(cid:3)(cid:132) materially inconsistent with the information in the audited ﬁnancial statements; or

(cid:3)(cid:132) apparently materially incorrect based on, or materially inconsistent with, our
knowledge of the Group acquired in the course of performing our audit; or

(cid:3)(cid:132) otherwise misleading.

In particular, we are required to report to you if:

We are independent of the Group in accordance with the Auditing Practices Board’s
Ethical Standards for Auditors, and we have fulﬁlled our other ethical responsibilities
in accordance with those Ethical Standards.

(cid:3)(cid:132) we have identiﬁed any inconsistencies between our knowledge acquired during

the audit and the directors’ statement that they consider the annual report is fair,
balanced and understandable; or

(cid:3)(cid:132) the annual report does not appropriately disclose those matters that were
communicated to the audit committee which we consider should have
been disclosed.

We have nothing to report in respect of any of the above matters.

GVC Holdings PLC Annual Report 2016

We also conﬁrm that we do not have anything material to add or to draw attention to
in relation to:

(cid:3)(cid:132) the directors’ conﬁrmation in the annual report that they have carried out a robust
assessment of the principal risks facing the Group including those that would
threaten its business model, future performance, solvency or liquidity;

(cid:3)(cid:132) the disclosures in the annual report that describe those risks and explain how they

are being managed or mitigated;

(cid:3)(cid:132) the directors’ statement in the ﬁnancial statements about whether they have
considered it appropriate to adopt the going concern basis of accounting in
preparing them, and their identiﬁcation of any material uncertainties to the
Group’s ability to continue to do so over a period of at least twelve months from
the date of approval of the ﬁnancial statements; and

(cid:3)(cid:132) the directors’ explanation in the annual report as to how they have assessed
the prospects of the Group, 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 Group 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.

Responsibilities for the ﬁnancial statements and the audit
What the directors are responsible for:

(cid:3)(cid:132) As explained more fully in the Statement of Directors’ Responsibilities set out on
page 43, the directors are responsible for the preparation of the Group ﬁnancial
statements and for being satisﬁed that they give a true and fair view.

What we are responsible for:

(cid:3)(cid:132) Our responsibility is to audit and express an opinion on the Group ﬁnancial
statements in accordance with applicable law and ISAs (UK and Ireland).
Those standards require us to comply with the Auditing Practices Board’s Ethical
Standards for Auditors.

Grant Thornton UK LLP
Chartered Accountants
London

23 March 2017

Financial statements

CONSOLIDATED INCOME STATEMENT

for the year ended 31 December 2016

NET GAMING REVENUE

EU VAT
REVENUE

Cost of sales
CONTRIBUTION

Administrative costs
CLEAN EBITDA1
Share-based payments
Exceptional items
Depreciation and amortisation
Impairment of available for sale asset
Changes in the fair value of derivative ﬁnancial instruments
OPERATING (LOSS) PROFIT

Financial income
Financial expense
Dividend income
Share of proﬁt of associates
(LOSS) PROFIT BEFORE TAX

Taxation credit (expense)
(LOSS) PROFIT AFTER TAX

(LOSS) PROFIT AFTER TAX ATTRIBUTABLE TO:

Equity holders of the parent
Non-controlling interests

(LOSS) EARNINGS PER SHARE ATTRIBUTABLE TO THE ORDINARY EQUITY HOLDERS OF THE PARENT:
BASIC

DILUTED

Notes

3
3
3, 8, 9
10
3, 12

4
4
5

2016
€m
843.4
(20.1)
823.3
(385.8)
437.5
(244.0)
193.5
(31.1)
(117.8)
(136.5)
(4.2)
15.0
(81.1)
4.5
(65.3)
3.1
0.2
(138.6)
–
(138.6)

138.3)
(0.3)
(138.6)

€

(0.51)

2015
€m
247.7
(1.2)
246.5
(111.1)
135.4
(81.3)
54.1
(0.4)
(24.5)
(5.0)
(1.2)
4.8
27.8
–
(2.3)
–
–
25.5
(0.8)
24.7

24.7
–
24.7

€

0.40

0.38

1. Clean EBITDA is the Group’s alternative non-GAAP performance measure and is considered to be a key performance measure by the Directors as it serves as an indicator of ﬁnancial performance and ability to service debt.
It is deﬁned as operating proﬁt adjusted for share-based payments, exceptional items, depreciation, amortisation, impairment of available for sale assets and changes in the fair value of derivative ﬁnancial instruments.
Exceptional items are those items the Group considers to be non-recurring or material in nature that may distort an understanding of ﬁnancial performance or impair comparability.

GVC Holdings PLC Annual Report 2016

CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME

for the year ended 31 December 2016

(LOSS) PROFIT FOR THE YEAR

OTHER COMPREHENSIVE EXPENSE

Items that will be reclassiﬁed subsequently to proﬁt or loss:
Exchange differences on translation of foreign operations, net of tax
Total comprehensive (expense) income for the year

TOTAL COMPREHENSIVE (EXPENSE) INCOME FOR THE YEAR ATTRIBUTABLE TO:

Equity holders of the parent
Non-controlling interests

The notes on pages 73 to 106 form part of these ﬁnancial statements.

2015
€m
24.7

–
24.7

24.7
–
24.7

Notes

2016
€m
(138.6)

(2.3)
(140.9)

(140.6)
(0.3)
(140.9)

Financial statements continued

CONSOLIDATED STATEMENT OF
FINANCIAL POSITION

for the year ended 31 December 2016

NON-CURRENT ASSETS
Intangible assets
Property, plant and equipment
Investments and assets available for sale
Other receivables
Total non-current assets
CURRENT ASSETS
Trade and other receivables
Derivative ﬁnancial assets
Income and other taxes reclaimable
Short-term investments
Cash and cash equivalents
Assets held for sale
Total current assets
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Derivative ﬁnancial liabilities
Income taxes payable
Other taxation payable
Client liabilities
Progressive prize pools
Amounts due under ﬁnance leases
Loans and borrowings
Provisions
Liabilities held for sale
Total current liabilities
CURRENT ASSETS LESS CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Trade and other payables
Derivative ﬁnancial liabilities
Loans and borrowings
Provisions
Deferred tax
Total non-current liabilities
TOTAL NET ASSETS
CAPITAL AND RESERVES
Issued share capital
Merger reserve
Share premium
Translation reserve
Retained earnings
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
Non-controlling interests
TOTAL EQUITY

Notes

8
9
10
11

11
12

13
14
15

19
17
20
15

16
12
17
20
21

2016
€m

1,609.4
19.7
3.7
4.9
1,637.7

105.2
26.2
6.7
5.4
354.8
59.7
558.0
2,195.7

(93.9)
–
(18.2)
(47.2)
(112.0)
(22.8)
–
(403.5)
(1.2)
(22.7)
(721.5)
(163.5)

(4.4)
–
–
(6.9)
(65.6)
(76.9)
1,397.3

2.9
40.4
1,478.4
(2.0)
(120.9)
1,398.8
(1.5)
1,397.3

2015
€m

155.1
1.4
2.6
–
159.1

34.6
3.8
6.0
–
28.2
–
72.6
231.7

(43.3)
(9.9)
(7.3)
(2.0)
(14.8)
–
(0.7)
(3.0)
–
–
(81.0)
(8.4)

(2.1)
(0.7)
(19.8)
–
–
(22.6)
128.1

0.6
40.4
85.4
0.3
1.4
128.1
–
128.1

The ﬁnancial statements from pages 68 to 72 were approved and authorised for issue by the Board of Directors on 23 March 2017 and signed on their behalf by:

KJ Alexander
(Chief Executive Ofﬁcer)

P Miles
(Chief Financial Ofﬁcer)

The notes on pages 73 to 106 form part of these ﬁnancial statements.

GVC Holdings PLC Annual Report 2016

Total
€m
149.4

0.5
(12.2)
–
(34.3)
(46.0)

24.7
24.7
128.1

128.1

24.0
(0.8)
(6.1)

CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY

for the year ended 31 December 2016

Notes

Share
capital
€m
0.6

Merger
reserve
€m
40.4

Share
premium
€m
85.4

Translation
reserve
€m
0.3

Retained
earnings
€m
22.7

Total
attributable
to equity
holders of
parent
€m
149.4

Non-
controlling
interests
€m
–

Balance at 1 January 2015

Share option charges
Share options surrendered
Share options exercised
Dividend paid
Transactions with owners

Proﬁt for the year
Total comprehensive income for the year
BALANCE AS AT 31 DECEMBER 2015

–
–
–
–
–

–
–
0.6

–
–
–
–
–

–
–
40.4

Balance at 1 January 2016

0.6

40.4

Share option charges
Share options surrendered
Share options exercised
Issue of share capital for the acquisition
of bwin.party
Arising from the acquisition of bwin.party
Transactions with owners

Loss for the year
Loss for the year attributable
to non-controlling interest
Other comprehensive expense for the year
Total comprehensive expense for the year
BALANCE AS AT 31 DECEMBER 2016

24
24
24

22
28

–
–
–

2.3
–
2.3

–

–
–
–
2.9

–
–
–

–

–
–
–
40.4

–
–
–
–
–

–
–
85.4

85.4

–
–
1.1

1,391.9
–
1,393.0

–

–
–
–
1,478.4

–
–
–
–
–

–
–
–

–

–
–
–

0.5
(12.2)
–
(34.3)
(46.0)

24.7
24.7
1.4

0.5
(12.2)
–
(34.3)
(46.0)

24.7
24.7
128.1

1.4

128.1

24.0
(0.8)
(7.2)

–
–
16.0

24.0
(0.8)
(6.1)

1,394.2
–
1,411.3

–
–
–
–
–

–
–
0.3

0.3

–
–
–

–

–
(1.2)
(1.2)

1,394.2
(1.2)
1,410.1

(138.3)

–

(138.3)

–
(2.3)
(2.3)
(2.0)

–
–
(138.3)
(120.9)

–
(2.3)
(140.6)
1,398.8

(0.3)
–
(0.3)
(1.5)

(0.3)
(2.3)
(140.9)
1,397.3

All reserves of the Company are distributable, as under the Isle of Man Companies Act 2006 distributions are not governed by reserves but by the Directors
undertaking an assessment of the Company’s solvency at the time of distribution (section 49, Companies Act Isle of Man 2006).

The notes on pages 73 to 106 form part of these ﬁnancial statements.

Financial statements continued

CONSOLIDATED STATEMENT OF
CASHFLOWS

for the year ended 31 December 2016

CASHFLOWS FROM OPERATING ACTIVITIES

Cash receipts from customers
Cash paid to suppliers and employees
Interest paid including loan costs and loan servicing
Corporate taxes paid

NET CASH FROM OPERATING ACTIVITIES

CASHFLOWS FROM INVESTING ACTIVITIES

Interest received
Dividends received
Acquisition earn-out payments
Acquisition of bwin.party (net of cash acquired)
Acquisition of property, plant and equipment
Proceeds from disposal of assets held for sale
Capitalised development cost and other intangibles
Sale of available for sale assets
Decrease in short-term investments

NET CASH USED IN INVESTING ACTIVITIES

CASHFLOWS FROM FINANCING ACTIVITIES

Proceeds from Cerberus interest bearing loan
Repayment of Cerberus interest bearing loan
Repayment of non-interest bearing loan
Proceeds from issue of share capital, net of costs
Repayment of borrowings
Dividend paid

NET CASH GENERATED (USED) IN FINANCING ACTIVITIES

NET MOVEMENT IN CASH AND CASH EQUIVALENTS

Exchange differences
Cash and cash equivalents at beginning of the year
CASH AND CASH EQUIVALENTS AT END OF THE YEAR

Notes

9
15
8
10

17.1
17.1
17.2
22

14
14

2016
€m

806.7
(737.2)
(47.6)
(7.9)

14.0

1.4
3.1
(1.6)
(189.4)
(15.8)
20.9
(19.0)
1.9
5.7

(192.8)

380.0
(13.5)
(3.0)
193.8
(39.0)
–

518.3

339.5
(0.7)
28.2
367.0

2015
€m

248.2
(200.2)
(9.0)
(0.6)

38.4

–
–
(2.4)
–
(1.2)
–
(5.0)
–
–

(8.6)

20.0
–
(3.2)
–
(1.8)
(34.3)

(19.3)

10.5
(0.1)
17.8
28.2

The balance at the end of the year of €367.0m above consists of €354.8m cash and cash equivalents as shown on the face of the consolidated statement of ﬁnancial
position and €12.2m of cash and cash equivalents recognised within assets held for sale.

The notes on pages 73 to 106 form part of these ﬁnancial statements.

GVC Holdings PLC Annual Report 2016

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS

for the year ended 31 December 2016

1. SIGNIFICANT ACCOUNTING POLICIES
2. SEGMENTAL REPORTING
3. OPERATING COSTS
4. FINANCIAL INCOME AND EXPENSE
5. DIVIDEND INCOME
6. TAXATION
7. EARNINGS PER SHARE
8.
INTANGIBLE ASSETS
9. PROPERTY, PLANT AND EQUIPMENT
10. INVESTMENTS AND AVAILABLE FOR SALE (AFS) FINANCIAL ASSETS
11. RECEIVABLES AND PREPAYMENTS
12. DERIVATIVE FINANCIAL INSTRUMENTS
13. SHORT-TERM INVESTMENTS
14. CASH AND CASH EQUIVALENTS
15. ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE
16. TRADE AND OTHER PAYABLES
17. LOANS AND BORROWINGS
18. OTHER TAXATION PAYABLE
19. COMMITMENTS UNDER OPERATING AND FINANCE LEASES
20. PROVISIONS
21. DEFERRED TAX
22. SHARE CAPITAL
23. DIVIDENDS
24. SHARE OPTION SCHEMES
25. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
26. RELATED PARTIES
27. CONTINGENT LIABILITIES
28. BUSINESS COMBINATIONS
29. NON-CONTROLLING INTERESTS
30. SUBSEQUENT EVENTS

74
81
82
84
84
85
86
87
89
89
90
91
91
92
92
92
93
94
94
95
95
96
96
97
99
104
104
105
106
106

Financial statements continued

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

for the year ended 31 December 2016

1. SIGNIFICANT ACCOUNTING POLICIES
This note deals with both the signiﬁcant accounting policies used in the preparation
of these ﬁnancial statements, together with a note identifying new accounting
standards which will affect the Group.

GVC Holdings PLC is a company registered in the Isle of Man and was incorporated
on 5 January 2010. It is the successor company of Gaming VC Holdings S.A.,
a company which had been incorporated in Luxembourg, and took the assets of
Gaming VC Holdings S.A. on 21 May 2010 after formal approval by shareholders.
The consolidated ﬁnancial statements of the Group for the year ended 31 December
2016 comprise the Company and its subsidiaries (together referred to as the “Group”).

1.1 Statement of compliance
The consolidated ﬁnancial statements have been prepared in accordance
with International Financial Reporting Standards (IFRSs), as adopted by the
European Union.

The Directors have reviewed the accounting policies used by the Group and consider
them to be the most appropriate. The accounting policies are consistent with the prior
year with the exception of revisions and amendments to IFRS issued by the IASB,
which are relevant to and effective for the annual period beginning 1 January 2016
and those policies which have been adopted by the Group following the Acquisition
of bwin.party. There was no material effect on current, prior or future periods arising
from the ﬁrst-time application of these new requirements in respect of presentation,
recognition and measurement. This is described more fully in note 1.24.

1.2 Basis of preparation
The ﬁnancial statements, which comprise the Consolidated Income Statement,
the Consolidated Statement of Comprehensive Income, the Consolidated Statement
of Financial Position, the Consolidated Statement of Changes in Equity, the
Consolidated Statement of Cashﬂows and related notes have been prepared
under International Financial Reporting Standards as adopted by the European
Union (IFRS) and those parts of the Isle of Man Companies Act 2006 applicable
to companies reporting under IFRS.

The Directors have assessed the ﬁnancial risks facing the business, and compared
this risk assessment to the net current assets position and dividend policy.
The Directors have also reviewed relationships with key suppliers and software
providers and are satisﬁed that the appropriate contracts and contingency plans are
in place. The Directors have prepared income statement and cashﬂow forecasts to
assess whether the Group has adequate resources for the foreseeable future and
further details are disclosed in the viability statement. Although the Group is showing
net current liabilities at 31 December 2016 this will reverse upon the re-ﬁnancing
of the Group’s long-term debt which occurred subsequent to the reporting date (see
note 30). The Directors consider that the Group has adequate resources to continue
in operational existence for the foreseeable future. For this reason, they continue to
adopt the going concern basis in preparing the consolidated ﬁnancial statements.

The ﬁnancial statements are presented in euros, rounded to the nearest €0.1m,
and are prepared on the historical cost basis with the exception of those assets
and liabilities carried at fair value. The ﬁnancial statements are prepared on the
going concern basis.

“Fair value” is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement
date, regardless of whether that price is directly observable or estimated using
another valuation technique. In estimating the fair value of an asset or a liability,
the Group takes into account the characteristics of the asset or liability if market
participants would take those characteristics into account when pricing the asset
or liability at the measurement date. Fair value for measurement and/or disclosure
purposes in these consolidated ﬁnancial statements is determined on such a basis,
except for share-based payment transactions that are within the scope of IFRS 2,
leasing transactions that are within the scope of IAS 17, and measurements that
have some similarities to fair value but are not fair value, such as net realisable
value in IAS 2 or value in use in IAS 36.

The preparation of ﬁnancial statements in conformity with IFRSs requires directors
to make judgements, estimates and assumptions that affect the application of
policies and reported amounts of assets and liabilities, income and expenses.
The estimates and associated assumptions are based on various factors that are
believed to be reasonable under the circumstances, the results of which form the
basis of making the judgements about carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the estimate
is revised if the revision affects only that period or in the period of the revision and
future periods if the revision affects both current and future periods.

The accounting policies set out below have been applied consistently to all periods
presented in these consolidated ﬁnancial statements.

The accounting policies have been applied consistently by Group entities.

1.2.1 Signiﬁcant judgements
In the application of the accounting policies, which are detailed in this note, the
Directors are required to make judgements, estimates and assumptions about
the carrying amounts of assets and liabilities that are not readily apparent from
other sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results
may differ from these estimates. The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision affects only that period,
or in the period of the revision and future periods if the revision affects both current
and future periods. The estimates and assumptions, which have a signiﬁcant risk
of causing a material adjustment to the carrying amounts of assets and liabilities
within the next ﬁnancial year, are discussed below.

1.2.1.1 Intangible assets
For all acquisitions, management has recognised separately identiﬁable intangible
assets on the Consolidated Statement of Financial Position. These intangible assets
have been valued based on expected future cashﬂow projections from existing
customers. The calculations of the value and estimated future economic life of the
assets involve, by the nature of the assets, signiﬁcant judgement.

1.2.1.2 Impairment of goodwill and trademarks
Determining whether goodwill and trademarks with an indeﬁnite useful life are
impaired requires an estimation of the value-in-use of the cash-generating units.
The value-in-use calculation requires the entity to estimate the future cashﬂows
expected to arise from the cash-generating unit and select a suitable discount
rate in order to calculate present value. Note 8.2 provides information on the
assumptions used in these consolidated ﬁnancial statements.

The work to assess the existence of impairment indicators and, where applicable,
to evaluate the impairment of goodwill and intangible assets was conducted
internally by management.

1.2.1.3 Receivables
Management applies judgement in evaluating the recoverability of receivables
including balances with payment processors. To the extent that the Board believes
receivables are not recoverable they have been provided for in these consolidated
ﬁnancial statements.

1.2.1.4 Progressive jackpots
Where a legal or constructive obligation exists, management’s policy is to record
a provision. In 2015, based on the history of jackpot pay outs management’s
judgement was that no constructive obligation existed. Following the acquisition
of bwin.party management have re-assessed this judgement based on the history
of the enlarged Group indicating a constructive obligation exists hence a provision
is required.

GVC Holdings PLC Annual Report 2016

1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
1.2 Basis of preparation continued
1.2.1 Signiﬁcant judgements continued
1.2.1.5 Share-based payments
Accounting for share-based payments requires a degree of judgement over such
matters as dividend yield, timing of performance conditions being met, expected
volatility and the method in which those liabilities will be settled. Further details on
the assumptions made by management are disclosed in note 24.

1.2.1.6 Embedded derivatives
The drawn-down Cerberus Loan contains embedded derivatives. The interest
rate on the loan is EURIBOR, subject to a ﬂoor of 1%, plus a margin of 11.5%.
Based on recent guidance issued by IFRIC, management assess this ﬂoor to be
closely related to the host contract and therefore it has not been treated as an
embedded derivative.

In addition, the loan has been repaid early (see note 30) within the ﬁrst year of the
loan. The terms of the loan meant that if it was repaid in the ﬁrst year, there would
be an additional “make-whole” premium payable. If it were to be repaid before the
expiry date, the payment of the exit fees would be brought forward but additional
fees at the 12 month and 18 month date could be avoided. These options for early
repayment are considered to be non-closely related to the host contract and have
been recognised separately. The options have been grouped for the purposes of
evaluating the embedded derivative. They have been valued based on the projected
cashﬂows and applying a probability weighting to the potential cash saving from
lower effective interest rates.

1.2.1.7 Acquisition of bwin.party
The GVC Group has been identiﬁed as the acquirer of bwin.party as it is the entity
ﬁnancing the acquisition through equity interests and debt, paying a premium for
the assets of bwin.party. In the combined entity, the Board is primarily composed
of GVC management, with one Director of bwin.party joining as a Non-executive
Director, together with two other external appointments. On acquisition and post-
acquisition, bwin.party does not have the ability to control the combined entity and
so has been accounted as the acquired party under IFRS 3 Business Combinations.

1.2.1.8 Assets/liabilities held for sale
Assets and liabilities held for sale are measured at the lower of carrying value
and fair value less associated costs of sale. Management apply judgement in
determining when assets meet the criteria to be recognised as held for sale
and in evaluating the fair value less costs to sell.

1.2.1.9 Provisions
The recognition of provisions requires management to apply judgement in
determining the likelihood of the outcome of legal proceedings as well as any other
circumstances that may cause a liability to fall due.

1.3 Basis of consolidation
1.3.1 Subsidiaries
The Group ﬁnancial statements consolidate those of the parent company and all of
its subsidiaries as of 31 December 2016. A list of principal subsidiaries is included
within the parent company accounts.

Proﬁt or loss and other comprehensive income of subsidiaries acquired or disposed
of during the year are recognised from the effective date of acquisition, or up to the
effective date of disposal, as applicable. The Group attributes total comprehensive
income (or loss) of subsidiaries between the owners of the parent and the non-
controlling interests based on their respective ownership interests.

Where the Company has control over an investee, it is classiﬁed as a subsidiary.
The Company controls an investee if all three of the following elements are present:

(cid:3)(cid:132) Power over the investee;

(cid:3)(cid:132) Exposure or rights to variable returns from the investee;

(cid:3)(cid:132) The ability of the Company to use its power to affect those variable returns.

Control is re-assessed whenever facts and circumstances indicate that there may
be a change in any of the above elements of control.

Non-controlling interests in the net assets of consolidated subsidiaries are identiﬁed
separately from the Group’s equity therein. Non-controlling interests consist of
the amount of those interests at the date of the original business combination and
the non-controlling shareholder’s share of changes in equity since the date of the
combination except where any non-controlling interests have been acquired by
the Group. At this point any share of gains or losses are transferred to the Group’s
retained earnings. Total comprehensive income is attributed to non-controlling
interests even if this results in the non-controlling interests having a deﬁcit balance.

1.3.2 Investments in associates
An associate is an entity over which the Group has signiﬁcant inﬂuence and that
is neither a subsidiary nor an interest in a joint venture. Signiﬁcant inﬂuence is the
power to participate in the ﬁnancial and operating policy decisions of the investee
but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in the
consolidated ﬁnancial statements using the equity method of accounting. Under the
equity method, investments in associates are carried in the consolidated statement
of ﬁnancial position at cost as adjusted for post-acquisition changes in the Group’s
share of the net assets of the associate, less any impairment in the value of
the investment. Losses of an associate in excess of the Group’s interest in that
associate are not recognised. Additional losses are provided for, and a liability is
recognised, only to the extent that the Group has incurred legal or constructive
obligations or made payments on behalf of the associate.

1.3.3 Investments in joint ventures
A joint venture is a contractual arrangement whereby the Group and other parties
undertake an economic activity that is subject to joint control; that is, when the
strategic ﬁnancial and operating policy decisions relating to the activities require
the unanimous consent of the parties sharing control.

The Group reports its interests in jointly controlled entities using the equity method
of accounting. Under the equity method, investments in joint ventures are carried
in the consolidated statement of ﬁnancial position at cost as adjusted for post-
acquisition changes in the Group’s share of the net assets of the joint venture, less
any impairment in the value of the investment. Losses of a joint venture in excess
of the Group’s interest in that investment are not recognised. Additional losses
are provided for, and a liability is recognised, only to the extent that the Group
has incurred legal or constructive obligations or made payments on behalf of the
joint venture.

1.3.4 Transactions eliminated on consolidation
All transactions and balances between Group companies are eliminated on
consolidation, including unrealised gains and losses on transactions between Group
companies. Where unrealised losses on intra-group asset sales are reversed on
consolidation, the underlying asset is also tested for impairment from a Group
perspective. Amounts reported in the ﬁnancial statements of subsidiaries have
been adjusted where necessary to ensure consistency with the accounting policies
adopted by the Group.

Financial statements continued

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

for the year ended 31 December 2016

1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
1.3 Basis of consolidation continued
1.3.5 Business combinations
Acquisitions of businesses are accounted for using the acquisition method.
The consideration transferred in a business combination is measured at fair value,
which is calculated as the sum of the acquisition-date fair values of the assets
transferred by the Group, liabilities incurred by the Group to the former owners of
the acquiree and the equity interests issued by the Group in exchange for control
of the acquiree. Acquisition related costs are generally recognised in proﬁt or loss
as incurred.

At the acquisition date, the identiﬁable assets acquired and the liabilities assumed
are recognised at their fair value, except that:

(cid:3)(cid:132) Deferred tax assets or liabilities, and assets or liabilities related to employee

beneﬁt arrangements are recognised and measured in accordance with IAS 12
Income Taxes and IAS 19 Employee Beneﬁts respectively;

(cid:3)(cid:132) Liabilities or equity instruments related to share-based payment arrangements

of the acquiree or share-based payment arrangements of the Group entered into
to replace share-based payment arrangements of the acquiree are measured in
accordance with IFRS 2 Share-Based Payments at the acquisition date; and

(cid:3)(cid:132) assets (or disposal groups) that are classiﬁed as held for sale in accordance

with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are
measured in accordance with that Standard.

Goodwill is measured as the excess of the sum of the consideration transferred,
the amount of any non-controlling interests in the acquiree, and the fair value
of the acquirer’s previously held equity interest in the acquiree (if any) over the
net of the acquisition-date amounts of the identiﬁable assets acquired and the
liabilities assumed. If, after reassessment, the net of the acquisition-date amounts
of the identiﬁable assets acquired and liabilities assumed exceeds the sum of
the consideration transferred, the amount of any non-controlling interests in
the acquiree and the fair value of the acquirer’s previously held interest in the
acquiree (if any), the excess is recognised immediately in proﬁt or loss as a bargain
purchase gain.

When the consideration transferred by the Group in a business combination includes
assets or liabilities resulting from a contingent consideration arrangement, the
contingent consideration is measured at its acquisition-date fair value and included
as part of the consideration transferred in a business combination. Changes in
the fair value of the contingent consideration that qualify as measurement period
adjustments are adjusted retrospectively, with corresponding adjustments against
goodwill. Measurement period adjustments are adjustments that arise from
additional information obtained during the “measurement period” (which cannot
exceed one year from the acquisition date) about facts and circumstances that
existed at the acquisition date.

The subsequent accounting for changes in the fair value of the contingent
consideration that do not qualify as measurement period adjustments depends
on how the contingent consideration is classiﬁed. Contingent consideration that
is classiﬁed as equity is not re-measured at subsequent reporting dates and its
subsequent settlement is accounted for within equity. Contingent consideration that
is classiﬁed as an asset or a liability is re-measured at subsequent reporting dates
in accordance with IAS 39, as appropriate, with the corresponding gain or loss
being recognised in proﬁt or loss.

If the initial accounting for a business combination is incomplete by the end of the
reporting period in which the combination occurs, the Group reports provisional
amounts for the terms for which the accounting is incomplete. Those provisional
amounts are adjusted during the measurement period (see above), or additional
assets or liabilities are recognised, to reﬂect new information obtained about facts
and circumstances that existed at the acquisition date that, if known, would have
affected the amounts recognised at that date.

1.4 Foreign currency
The functional currency of the Company, as well as the presentational currency of
the Group, is the euro.

1.4.1 Foreign currency transactions
Monetary assets and liabilities denominated in foreign currencies at the reporting
date are translated to the euro at the foreign exchange rate ruling at that date.
Foreign exchange differences arising on translation are recognised in the
Consolidated Income Statement within operating costs (note 3) and ﬁnancial costs
(note 4). Non-monetary assets and liabilities that are measured in terms of historical
cost in a foreign currency are translated using the exchange rate at the date of
the transaction.

Income and expense items are translated using the exchange rates at the start of
the relevant month, unless exchange rates ﬂuctuate signiﬁcantly, in which case the
spot rate for signiﬁcant items is used.

Exchange differences arising due to the functional currency of operations differing
from the presentational currency of the Group, if any, are recognised in other
comprehensive income, classiﬁed as equity and transferred to the Group’s
translation reserve. Such translation differences are reclassiﬁed to proﬁt or loss
in the period in which the operation is disposed of.

1.5 Property, plant and equipment
1.5.1 Owned assets
Property, plant and equipment is stated at cost, less accumulated depreciation (see
1.5.2 below) and impairment losses (see accounting policy 1.7). Where parts of an
item of property, plant and equipment have different useful lives, they are accounted
for as separate items of property, plant and equipment.

1.5.2 Depreciation
Depreciation is charged to the Income Statement on a straight-line basis over the
estimated useful lives of each part of an item of property, plant and equipment.
The estimated useful lives are as follows:

Leasehold property:

over the length of the lease

Fixtures and ﬁttings:

Plant and equipment:

3 years

The residual value, if signiﬁcant, is reassessed annually.

GVC Holdings PLC Annual Report 2016

1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
1.6 Intangible assets
1.6.1 Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at
the date of acquisition of the business less accumulated impairment losses, if any.

1.6.3 Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is capitalised only when
it increases the future economic beneﬁts embodied in the speciﬁc asset to which
it relates. This includes legal and similar expenditure incurred in registering brands
and trade names, which is capitalised, all other expenditure is expensed as incurred.

For the purposes of impairment testing, goodwill has been allocated to each of
the Group’s Cash-Generating Units (“CGU”) that is expected to beneﬁt from the
synergies of the combination.

A CGU to which goodwill has been allocated is tested for impairment annually, or
more frequently when there is an indication that the unit may be impaired. If the
recoverable amount of the CGU is less than its carrying amount, the impairment
loss is allocated ﬁrst to reduce the carrying amount of any goodwill allocated to the
unit and then to the other assets of the unit pro rata based on the carrying amount
of each asset in the unit. Any impairment loss for goodwill is recognised directly
in proﬁt or loss. An impairment loss recognised for goodwill is not reversed in
subsequent periods.

On disposal of the relevant CGU, the attributable amount of goodwill is included in
the determination of the proﬁt or loss on disposal.

1.6.2 Other intangible assets
Other intangible assets that are acquired by the Group are stated at cost less
accumulated amortisation (see 1.6.4) and impairment losses (see accounting
policy 1.7).

The cost of intangible assets acquired in a business combination is the fair value at
acquisition date. The valuation methodology used for each type of identiﬁable asset
category is detailed below:

Asset category
Consulting and magazine
Software licence
Trademarks
Trade name
Non-contractual customer relationships

Valuation methodology
Income (cost saving)
Income (incremental value plus loss of proﬁts)
Relief from royalty
Relief from royalty
Excess earnings

Where, in the opinion of the Directors, the Group’s expenditure in relation to
development of internet activities results in future economic beneﬁts, these costs
are capitalised within software licences and amortised over the useful economic
life of the asset.

Development costs are capitalised only when it is probable that future economic
beneﬁt will result from the project and the following criteria are met:

(cid:3)(cid:132) The technical feasibility of the product has been ascertained;

(cid:3)(cid:132) Adequate technical, ﬁnancial and other resources are available to complete and

sell or use the intangible asset;

(cid:3)(cid:132) The Group can demonstrate how the intangible asset will generate future
economic beneﬁts and the ability to use or sell the intangible asset can
be demonstrated;

(cid:3)(cid:132) It is the intention of management to complete the intangible asset and use it or

sell it; and

(cid:3)(cid:132) The development costs can be measured reliably.

1.6.4 Amortisation
Amortisation is charged to the income statement on a straight-line basis over
the estimated useful lives of intangible assets unless such lives are indeﬁnite.
Goodwill and trademarks with an indeﬁnite useful life are systematically tested for
impairment at each reporting date. Other intangible assets are amortised from the
date they are available for use. The estimated useful lives are as follows:

Software licence agreements

Capitalised development expenditure

2-15 years

3-5 years

Trademarks and trade names

12-15 years, or indeﬁnite life

Non-contractual customer relationships

4 years

1.7 Impairment
At each reporting date, the Group assesses whether there is any indication that
an asset may be impaired. Where an indicator of impairment exists, the Group
makes an estimate of the recoverable amount. Where the carrying amount of an
asset exceeds its recoverable amount, the asset is written down to its recoverable
amount. Recoverable amount is the higher of fair value less costs to sell and value
in use and is determined for an individual asset. If the asset does not generate cash
inﬂows that are largely independent of those from other assets or groups of assets,
the recoverable amount of the cash-generating unit to which the asset belongs is
determined. Discount rates reﬂecting the asset speciﬁc risks and the time value
of money are used for the value in use calculation. For goodwill and trademarks
that have an indeﬁnite useful life, the recoverable amount is estimated at each
reporting date.

1.8 Dividends paid to holders of share capital
Dividend distributions payable to equity shareholders are recognised through equity
reserves on the date the dividend is paid.

1.9 Employee beneﬁts
1.9.1 Pension costs
In some jurisdictions in which the Group has employees, there are government or
private schemes into which the employing company or branch must make payments
on a deﬁned contribution basis, the contributions are shown in the proﬁt or loss
account in the year.

1.9.2 Share-based payments
The Group has share-based payment schemes which allow certain employees and
contractors to acquire shares of the Company. The Group has accounted for these
under IFRS 2 Share-Based Payments.

Share option schemes
The fair value of options granted under the LTIP and MIP schemes will be
recognised as a share-based payment expense with a corresponding increase in
equity. The fair value is measured at grant date and spread over the period during
which the employees become unconditionally entitled to the options. The fair
value of the options granted are measured using either a binomial or Monte Carlo
valuation model. This valuation method takes into account the terms and conditions
upon which the options were granted. The amount recognised as an expense
is adjusted to reﬂect the actual number of share options that vest and market
conditions if applicable.

Financial statements continued

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

for the year ended 31 December 2016

1.12 Net gaming revenue (“NGR”)
NGR is the Group’s alternate revenue measure and is revenue before the deduction
of VAT.

1.13 Clean EBITDA
Clean EBITDA is the Group’s alternative performance measure and is considered
to be a key performance measure by the Directors. It is deﬁned as operating proﬁt
adjusted for share-based payments, exceptional items, depreciation, amortisation,
impairment of available for sale assets and changes in the fair value of derivative
ﬁnancial instruments.

1.14 Financial expenses
Financial expenses comprise interest payable on borrowings, calculated using the
effective interest rate method which discounts the expected cashﬂows over the life
of the ﬁnancial instrument, and foreign exchange differences arising on loans and
ﬁnance leases.

1.15 Exceptional items
Exceptional items are those items the Group considers to be non-recurring or
material in nature that may distort an understanding of ﬁnancial performance or
impair comparability.

1.16 Financial income
Financial income is interest income recognised in the income statement as it
accrues, using the effective interest method.

1.17 Tax
The tax currently payable is based on taxable proﬁt for the year. Taxable proﬁt
differs from proﬁt as reported in the consolidated income statement because it
excludes items of income or expense that are taxable or deductible in other years
and it further excludes items that are never taxable or deductible.

Deferred tax is generally provided on the difference between the carrying amounts
of assets and liabilities and their tax bases, calculated using the liability method
on temporary differences. However, deferred tax is neither provided on the initial
recognition of goodwill, nor on the initial recognition of an asset or liability unless
the related transaction is a business combination or affects tax or accounting proﬁt.
Deferred tax on temporary differences associated with investments in subsidiaries
is not provided if reversal of these temporary differences can be controlled by
the Group and it is probable that reversal will not occur in the foreseeable future.
In addition, tax losses available to be carried forward as well as other income tax
credits to the Group are assessed for recognition as deferred tax assets.

Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets
are recognised to the extent that it is probable that the underlying deductible
temporary differences will be able to be offset against future taxable income.
Current and deferred tax assets and liabilities are calculated at tax rates that are
expected to apply to their respective period of realisation, provided they are enacted
or substantively enacted at the reporting date.

Changes in deferred tax assets or liabilities are recognised as a component of
tax expense in the income statement, except where they relate to items that are
charged or credited directly to other comprehensive income or equity in which case
the related deferred tax is also charged or credited directly to other comprehensive
income or equity as appropriate.

1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
1.9 Employee beneﬁts continued
1.9.2 Share-based payments continued
Annual share bonus plan
The Group operates an annual share bonus plan and this gives the Company
the option of rewarding employees and contractors in either cash or shares or a
combination of both upon them achieving performance targets. The type of reward
will be at the discretion of the Remuneration Committee, where a share award is
granted the fair value of the award is recognised as a cash-settled share-based
payment expense in the period that the employee or contractor earned the reward,
with a corresponding liability recognised in the statement of ﬁnancial position.

Cash cancelled options
On occasion, at the Remuneration Committee’s discretion, vested share options
may be settled in cash, as opposed to issuing new shares. Payments made
to repurchase or cancel vested awards are accounted for with the fair value
of the options cancelled, measured at the date of cancellation being taken
to retained earnings. Also on cancellation an accelerated charge would be
recognised immediately.

Employers social security costs
Employers social security costs due on the cash cancellation of options and the
employee gain on exercised options will be paid by the Company and shown within
share-based payments.

See note 24 for further details of the schemes.

1.10 Provisions
A provision is recognised when the Group has a present legal or constructive
obligation as a result of a past event, and it is probable that an outﬂow of economic
beneﬁts will be required to settle the obligation. If the effect is material, provisions
are determined by discounting the expected future cashﬂows at a pre-tax rate
that reﬂects current market assessments of the time value of money and, where
appropriate, the risks speciﬁc to the liability.

1.11 Revenue recognition
Revenue is measured at the fair value of consideration received or receivable and
comprises the following elements:

Casino:

net win in respect of bets placed on casino games that have
concluded in the year, stated net of promotional bonuses and
amounts accrued or progressive prize pools.

Sportsbook: gains and losses in respect of bets placed on sporting events in the
year, stated net of promotional bonuses. Open positions are carried
at fair market value and gains and losses arising on this valuation
are recognised in revenue, as well as gains and losses realised on
positions that have closed.
net win in respect of rake for poker games that have concluded
in the year, stated net of promotional bonuses.
net win in respect of bets placed on bingo games that have
concluded in the year, stated net of promotional bonuses.

Bingo:

Poker:

Where promotional bonuses apply to customers playing a variety of products
through the same wallet, bonuses are allocated pro-rata to the net win. Revenue is
also generated from foreign exchange commissions on customer deposits and
withdrawals and account fees.

B2B income comprises the amounts receivable for services to other online gaming
operators. Other revenue consists primarily of revenue from third-party payment
services and ﬁnancial markets. Revenue in respect of network service arrangements
where the third party owns the relationship with the customer is the net commission
invoiced. Income is recognised when a right to consideration has been obtained
through performance and reﬂects contract activity during the year.

GVC Holdings PLC Annual Report 2016

1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
1.18 Segment reporting
Following the acquisition of bwin.party the Board reviewed and conﬁrmed the
Group’s reportable segments in line with the requirements of IFRS 8 “Operating
Segments”. The segments disclosed below are aligned with the reports the Group’s
Chief Executive reviewed during the year to make strategic decisions.

Sports Labels:
Gaming Labels: partypoker, partycasino, Gioco Digitale, Cashcade, CasinoClub

bwin, Sportingbet, Gamebookers and Superbahis.

1.19.4 Available for sale ﬁnancial assets (“AFS”)
AFS ﬁnancial assets are non-derivative ﬁnancial assets that are either designated
to this category or do not qualify for inclusion in any of the other categories of
ﬁnancial assets.

AFS ﬁnancial assets are measured at fair value. Gains and losses are recognised
in other comprehensive income and reported within the AFS reserve within equity,
except for interest and dividend income, impairment losses and foreign exchange
differences on monetary assets, which are recognised in proﬁt or loss.

When the asset is disposed of or is determined to be impaired, the cumulative gain
or loss recognised in other comprehensive income is reclassiﬁed from the equity
reserve to proﬁt or loss. Interest calculated using the effective interest method and
dividends are recognised in proﬁt or loss within ﬁnance income.

For AFS equity investments impairment reversals are not recognised in proﬁt
and loss and any subsequent increase in fair value is recognised in other
comprehensive income.

1.19.5 Assets held for sale
Non-current assets and disposal groups are classiﬁed as held for sale if the carrying
amount will be recovered through a sale transaction rather than through continuing
use. This condition is regarded as being met only when the sale is highly probable,
management is committed to a sale plan, the asset is available for immediate sale in
its present condition and the sale is expected to be completed within one year from
the date of classiﬁcation. These assets are measured at the lower of carrying value
and fair value less associated costs of sale except where the assets were previously
classiﬁed as available for sale, in which case they are carried at fair value.

1.19.6 Derivative ﬁnancial instruments
Derivative ﬁnancial instruments are accounted for at Fair Value Through Proﬁt
and Loss (FVTPL). Any movements in fair value are taken to the consolidated
income statement.

1.19.7 Impairment of ﬁnancial assets
Financial assets are assessed for indicators of impairment at the end of each
reporting period. Financial assets are considered to be impaired when there is
objective evidence that, as a result of one or more events that occurred after the
initial recognition of the ﬁnancial asset, the estimated future cashﬂows of the
investment have been affected.

Objective evidence of impairment could include:

(cid:3)(cid:132) signiﬁcant ﬁnancial difﬁculty of the issuer or counterparty; or

(cid:3)(cid:132) breach of contract, such as a default or delinquency in interest or principal

payments; or

(cid:3)(cid:132) it becoming probable that the borrower will enter bankruptcy or ﬁnancial

re-organisation; or

(cid:3)(cid:132) the disappearance of an active market for that ﬁnancial asset because of

ﬁnancial difﬁculties.

B2B:
Total core:

Non-core:
Corporate:

and USA assets.
provision of the technology platforms to external customers.
The sum of sports labels, gaming labels and B2B together with
non-allocated costs for technology, operations, customer service,
professional fees and travel and ofﬁce costs.
InterTrader and Kalixa.
includes shared and corporate functions such as ﬁnance,
legal and HR.

Variable costs and costs above Clean EBITDA are either directly attributed or
allocated to a segment. Costs below Clean EBITDA are not reviewed on a segment
basis and accordingly the analysis by segment is from revenue to Clean EBITDA
only. In addition, the Consolidated Statement of Financial Position is not reviewed on
a segment basis.

1.19 Financial instruments
Financial assets and ﬁnancial liabilities are recognised when a Group entity
becomes a party to the contractual provisions of the instruments. Financial assets
and ﬁnancial liabilities are initially measured at fair value. Transaction costs that
are directly attributable to the acquisition or issue of ﬁnancial assets and ﬁnancial
liabilities (other than ﬁnancial assets and ﬁnancial liabilities at fair value through
proﬁt or loss) are added to or deducted from the fair value of the ﬁnancial assets or
ﬁnancial liabilities, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of ﬁnancial assets or ﬁnancial liabilities at fair value
through proﬁt or loss are recognised immediately in proﬁt or loss.

1.19.1 Non-derivative ﬁnancial instruments
Non-derivative ﬁnancial instruments comprise trade and other receivables
including balances with payment processors, cash and cash equivalents, loans
and borrowings, customer liabilities, progressive prize pools, trade and other
payables and deferred consideration. Subsequent to initial recognition, non-
derivative ﬁnancial instruments are measured at amortised cost using the effective
interest method. Contingent consideration is measured at fair value. Provisions for
impairment are made against ﬁnancial assets if considered appropriate and any
impairment is recognised in proﬁt or loss. The liability for inactive customer balances
is derecognised when the obligation is extinguished with reference to player terms
and conditions. Open positions on sports bets are carried within other payables.

1.19.2 Cash and cash equivalents
Cash and cash equivalents comprise cash balances and bank balances.
Bank overdrafts that are repayable on demand and form an integral part of
the Group’s cash management are included as a component of cash and cash
equivalents for the purpose of the statement of cashﬂows.

1.19.3 Short-term investments
Short-term investments are non-derivative ﬁnancial assets with ﬁxed or
determinable payments that are not quoted on an active market. They are initially
recognised at fair value, plus transaction costs directly attributable to their
acquisition or issue. They are subsequently carried at amortised cost using the
effective interest rate method, less any provisions for impairment.

Financial statements continued

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

for the year ended 31 December 2016

1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
1.20 Equity
Equity comprises the following:

(cid:3)(cid:132) Share capital represents the nominal value of equity shares.

(cid:3)(cid:132) Share premium represents the excess over nominal value of the fair value of
consideration received for equity shares, net of expenses of the share issue.

(cid:3)(cid:132) Retained earnings represents retained proﬁts.

(cid:3)(cid:132) Merger reserve arose on the re-domiciliation of the Group from Luxembourg
to the Isle of Man in 2010. It consists of the pre-redomiciliation reserves of
the Luxembourg company plus the difference in the issued share capital
(31,135,762 share at €0.01 versus 31,135,762 shares at €1.24).

(cid:3)(cid:132) Translation reserve represents exchange differences on translation of foreign

subsidiaries recognised in other comprehensive income.

1.21 Finance leases
Management applies judgement in considering the substance of a lease agreement
and whether it transfers substantially all the risks and rewards incidental to
ownership of the leased asset. Key factors considered include the length of the
lease term in relation to the economic life of the asset, the present value of the
minimum lease payments in relation to the asset’s fair value, and whether the Group
obtains ownership of the asset at the end of the lease term.

The interest element of lease payments is charged to proﬁt or loss, as ﬁnance costs
over the period of the lease.

1.22 Operating leases
All other leases other than ﬁnance leases are treated as operating leases. Where
the Group is a lessee, payments on operating lease agreements are recognised
as an expense on a straight-line basis over the lease term. Associated costs, such
as maintenance and insurance, are expensed as incurred.

1.23 Assets classiﬁed as held for sale
Non-current assets and disposal groups are classiﬁed as held for sale if the carrying
amount will be recovered through a sale transaction rather than through continuing
use. This condition is regarded as being met only when the sale is highly probable,
management is committed to a sale plan, the asset is available for immediate sale in
its present condition and the sale is expected to be completed within one year from
the date of classiﬁcation. These assets are measured at the lower of carrying value
and fair value less associated costs of sale except where the assets were previously
classiﬁed as available for sale, in which case they are carried at fair value.

1.24 New and revised standards that are effective for annual periods
beginning on or after 1 January 2016
1.24.1 Amendments to IFRS 11 Joint Arrangements
These amendments provide guidance on the accounting for acquisitions of interests
in joint operations constituting a business. The amendments require all such
transactions to be accounted for using the principles on business combinations
accounting in IFRS 3 “Business Combinations” and other IFRSs except where those
principles conﬂict with IFRS 11. Acquisitions of interests in joint ventures are not
impacted by this new guidance.

The amendments are effective for reporting periods beginning on or after 1 January
2016. No impact arose from the adoption of these amendments to IFRS 11 on
these consolidated ﬁnancial statements.

1.25 Standards in issue, not yet effective
At the date of authorisation of these ﬁnancial statements, certain new standards,
and amendments to existing standards have been published by the IASB that are
not yet effective, and have not been adopted early by the Group. Information on
those expected to be relevant to the Group’s ﬁnancial statements is provided below.

Management anticipates that all relevant pronouncements will be adopted in the
Group’s accounting policies for the ﬁrst period beginning after the effective date of
the pronouncement. New standards, interpretations and amendments not either
adopted or listed below are not expected to have a material impact on the Group’s
ﬁnancial statements.

1.25.1 IFRS 9 “Financial Instruments” (2014)
The IASB has released IFRS 9 “Financial Instruments” (2014), representing the
completion of its project to replace IAS 39 “Financial Instruments: Recognition
and Measurement”. The new standard introduces extensive changes to IAS 39’s
guidance on the classiﬁcation and measurement of ﬁnancial assets and introduces
a new “expected credit loss” model for the impairment of ﬁnancial assets together
with new guidance on the application of hedge accounting. The new standard is
required to be applied for annual reporting periods beginning on or after 1 January
2018. The Group’s management are currently reviewing the various classiﬁcations
of ﬁnancial instruments used by the Group but do not believe that any material
changes to the Group’s results in future periods will arise as a result of any changes
of classiﬁcation. The Group’s treasury ofﬁcials will consider the implications of this
new standard when reviewing the hedging instruments it will utilise going forward.

1.25.2 IFRS 15 “Revenue from Contracts with Customers”
IFRS 15 presents new requirements for the recognition of revenue, replacing
IAS 18 “Revenue”, IAS 11 “Construction Contracts”, and several revenue-
related Interpretations. The new standard establishes a control-based revenue
recognition model and provides additional guidance in many areas not covered
in detail under existing IFRSs, including how to account for arrangements with
multiple performance obligations, variable pricing, customer refund rights, supplier
repurchase options, and other common complexities. IFRS 15 is effective for
reporting periods beginning on or after 1 January 2018. The Group’s management
do not consider that there will be any material impact on the Group’s policy of
recognising revenue but will review the impact of the standard on the Group’s 2017
results during that ﬁnancial year.

1.25.3 IFRS 16 “Leases”
IFRS 16 presents new requirements for the recognition, measurement, presentation
and disclosure of leases, replacing IAS 17 “Leases”. The standard provides a
single lessee accounting model, requiring lessees to recognise assets and liabilities
for all leases of over 12 months unless the underlying asset has a low value.
Lessors continue to classify leases as operating or ﬁnance leases, with minimal
changes from IAS 17. The new standard applies to annual reporting periods
beginning on or after 1 January 2019. The Group’s management consider that the
adoption of this statement will likely result in an increase in the non-current assets
(representing “right-of-use” assets) and a corresponding increase in liabilities, both
current and non-current on the balance sheet of the Group to the approximate value
of the assets contained within its operating lease disclosure in note 19 but will fully
review the impact in the 2018 ﬁnancial year.

GVC Holdings PLC Annual Report 2016

2015
€m
34.7
92.9
9.5
109.4
246.5

Total
€m
843.4
(20.1)
823.3
(385.8)
437.5
52%

(136.6)
(18.4)
(70.0)
(22.4)
3.4
193.5

Total
€m
247.7
(1.2)
246.5
(111.1)
135.4
55%

(48.5)
(4.7)
(23.7)
(3.5)
(0.9)
54.1

2. SEGMENTAL REPORTING
Prior to the acquisition of bwin.party, management followed one business line with two operating segments, being Sports and Gaming. Post the acquisition,
and reﬂecting the label-focused basis for bwin.party’s segmental analysis, this approach has been revised. There are now ﬁve operating segments, being
Sports Labels, Gaming Labels, B2B, Non-core and Corporate. These operating segments are monitored and strategic decisions are made on the basis of
overall operating results. Although Corporate does not fulﬁl the deﬁnition of an operating segment per IFRS 8, management have elected to separate the
results of the corporate support function to aid the users of the ﬁnancial statements. The segmental analysis below shows the prior year comparative on the
new segmental basis of reporting in order to aid comparability.

Management also monitors revenue by geographic location of its customers.

2.1 Geographical analysis
The Group’s revenues and other income from external customers are divided into the following geographic areas:

Germany
Turkey
UK
Other
TOTAL

Revenues from external customers have been identiﬁed on the basis of the customer’s geographical location.

2.2 Reporting by segment

YEAR ENDED 31 DECEMBER 2016
NGR
EU VAT
REVENUE
Variable costs
CONTRIBUTION
Contribution margin
Other operating costs:

Personnel expenditure
Professional fees
Technology costs
Ofﬁce, travel and other costs
Foreign exchange differences

CLEAN EBITDA

YEAR ENDED 31 DECEMBER 2015
NGR
EU VAT
REVENUE
Variable costs
CONTRIBUTION
Contribution margin
Other operating costs:

Personnel expenditure
Professional fees
Technology costs
Ofﬁce, travel and other costs
Foreign exchange differences

CLEAN EBITDA

Sports labels
€m
620.7
(13.9)
606.8
(264.3)
342.5
55%

Games labels
€m
188.3
(6.2)
182.1
(99.2)
82.9
44%

Sports labels
€m
215.1
(0.5)
214.6
(101.0)
113.6
53%

Games labels
€m
32.6
(0.7)
31.9
(10.1)
21.8
67%

B2B
€m
13.3
–
13.3
(0.2)
13.1
98%

B2B
€m
–
–
–
–
–
n/a

Total core
€m
822.3
(20.1)
802.2
(363.7)
438.5
53%

(104.6)
(5.4)
(68.0)
(7.6)
0.2
253.1

Total core
€m
247.7
(1.2)
246.5
(111.1)
135.4
55%

(34.7)
(0.7)
(23.6)
(3.1)
(0.4)
72.9

Non-core
€m
21.1
–
21.1
(22.1)
(1.0)
(5%)

(11.4)
(1.0)
(1.7)
(2.2)
–
(17.3)

Non–core
€m
–
–
–
–
–
n/a

–
–
–
–
–
–

Management do not review the performance of each segment below the level of Clean EBITDA.

2016
€m
187.9
100.3
69.3
465.8
823.3

Corporate
€m
–
–
–
–
–
n/a

(20.6)
(12.0)
(0.3)
(12.6)
3.2
(42.3)

Corporate
€m
–
–
–
–
–
n/a

(13.8)
(4.0)
(0.1)
(0.4)
(0.5)
(18.8)

Financial statements continued

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

for the year ended 31 December 2016

3. OPERATING COSTS

Wages and salaries, including Directors
Staff costs capitalised in respect of intangible asset additions
Outsourced consultants
Compulsory social security contributions
Pension contributions
Health and other beneﬁts
Recruitment and training
PERSONNEL EXPENDITURE (EXCLUDING SHARE-BASED PAYMENT CHARGES)

Professional fees
Technology costs
Ofﬁce, travel and other costs
Foreign exchange differences on operating activity
ADMINISTRATIVE COSTS

Equity-settled share-based payments charges
Cash-settled share-based payments charges (credits)
Exceptional items
Impairment of available for sale asset
Movement in the fair value of derivative ﬁnancial instruments
Depreciation
Amortisation
TOTAL OPERATING COSTS

3.1 Employees
The average monthly number of persons (including Directors) employed by the Group during the year was:

AVERAGE NUMBER OF EMPLOYEES

With employment contracts or service contracts
Contractors

Notes

24
24
3.2
10

9
8

2016
€m
105.9
(10.7)
21.8
12.1
0.9
4.4
2.3
136.7

18.4
70.1
22.1
(3.3)
244.0

24.0
7.1
117.8
4.2
(15.0)
20.0
116.5
518.6

2016

2,211
471
2,682

2015
€m
40.5
–
3.3
2.3
0.7
0.9
0.8
48.5

4.7
23.7
3.4
1.0
81.3

0.5
(0.1)
24.5
1.2
(4.8)
0.8
4.2
107.6

2015

527
49
576

GVC Holdings PLC Annual Report 2016

2015
€m
13.5
9.5
–
23.0

–
1.2
–
–
–
–
–
–
–
0.3
24.5

2015
€m
–
–
–
–

3. OPERATING COSTS CONTINUED
3.2 Exceptional items

Professional fees
Currency option, including fair value adjustment (see note 3.2.1)
Bonuses and share options (see note 3.2.2)
ACQUISITION COSTS

Premium listing application costs
Romanian back taxes and license fees
Reorganisation costs
Contract termination costs
Accelerated depreciation
Progressive jackpots
Release of contingent consideration
Foreign exchange on deposit
Proﬁt on disposal of joint venture and available for sale investment
Other
TOTAL EXCEPTIONAL ITEMS

2016
€m
18.8
10.8
21.9
51.5

4.4
–
14.4
11.7
12.5
7.6
8.1
16.4
(11.7)
2.9
117.8

3.2.1 Currency option
A currency option was taken out in 2015, in order to meet the cash conﬁrmation requirements of the offer for bwin.party. Under the terms of the contract, the
Group would sell €365.0m and buy £260.7m. Hedge accounting was not applied. The derivative, recognised as a current liability, was valued at 31 December
2015 at €9.9m. The option was exercised on 2 February 2016. The movement in exchange rate between 31 December 2015 and 2 February 2016 created
an additional fair value loss of €0.9m. The combined cost of the instrument of €10.8m (being its fair value on the date of extinguishment) has been recognised
as an exceptional item above, as this is related to the ﬁnancing of the acquisition.

At 31 December 2016 there were no other forward exchange contracts taken out in the ordinary course of business. The cost of forward exchange options
during the year is included within administrative costs and not treated as an exceptional cost.

3.2.2 Transaction bonuses and share options

2014 share option plan rolled into share placing1
Transaction bonuses rolled into share placing2
Other transaction bonuses

1. Includes employer’s National Insurance. See pages 322 to 325 of the prospectus.

2. Includes employer’s National Insurance. See page 349 of the prospectus.

2016
€m
18.4
3.0
0.5
21.9

Financial statements continued

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

for the year ended 31 December 2016

3. OPERATING COSTS CONTINUED
3.3 Auditors’ remuneration

GROUP AUDITORS’ REMUNERATION

Audit services
Non-audit services1:

Reporting accountant services
Half-year review
Other services

FEES PAYABLE TO OTHER ACCOUNTING FIRMS

Audit services
Non-audit services

1. Non-audit services include services relating to corporate ﬁnance transactions in respect of the bwin.party acquisition and step up to Premium Listing of €1,016,139, audit related assurance services of

€95,493, taxation compliance services of €26,760, taxation advisory services of €21,425 and other non-audit services of €2,549.

4. FINANCIAL INCOME AND EXPENSE

FINANCIAL INCOME

Interest income
Unwinding of discount on contingent consideration
Other income

FINANCIAL EXPENSE

Unwinding of discount on non-interest bearing loan
Finance lease interest
Unwinding of discount on deferred consideration
Foreign exchange revaluation
Interest on Cerberus loan (see note 17.1)
Amortisation of loan fees
Unwinding of early repayment option
Other interest

5. DIVIDEND INCOME
Dividends were received in the period from the Aldorino Trust in respect of the investment in Betbull.

Dividend income

GVC Holdings PLC Annual Report 2016

2016
€m

2.9
0.5
1.1
4.5

2016
€m

–
0.1
–
–
46.0
23.3
(4.3)
0.2
65.3

2016
€m
3.1

2016
€m

2015
€m

0.7

1.0
0.1
0.1
1.9

1.5
0.5
2.0

0.5

2.1
–
0.1
2.7

–
–
–

2015
€m

–
–
–
–

2015
€m

0.2
0.1
0.1
0.7
1.2
–
–
–
2.3

2015
€m
–

2015
€m

0.7
0.1
0.8
–
0.8

2015
€m
25.5
5.2
(4.8)
0.8
(0.2)
–
0.6
(0.9)
0.1
0.8

2016
€m

12.5
(0.7)
11.8
(11.8)
–

2016
€m
(138.6)
(27.7)
0.7
16.6
(1.0)
(2.5)
15.2
(0.6)
(0.7)
–

6. TAXATION
6.1 Analysis of tax charge

CURRENT TAX EXPENSE

Current year
Prior year
Current tax expense
Deferred tax credit
TAX (CREDIT) EXPENSE

The effective tax rate for the year based on the associated tax expense is 0.0% (2015: tax rate of 3.1%).

The total (credit) expense for the year can be reconciled to accounting (loss) proﬁt as follows:

(LOSS) PROFIT BEFORE TAX

Income tax using the UK corporation tax rate
Effect of tax rates in foreign jurisdictions (rates decreased)
Expenses/(income) not deductible for tax purposes
Utilisation of tax losses not previously provided
Group relief
Tax losses for which no deferred tax assets have been recognised
Capital allowances for the period in excess of depreciation
Adjustments in respect of prior years

The expenses not allowed for tax purposes are primarily share-based payments, depreciation, amortisation and impairment of assets. The effect of
non-taxable income primarily represents the release of the acquisition fair value tax liability and dividend income.

6.2 Factors affecting the tax charge for the year
The Group’s policy is to manage, control and operate Group companies only in the countries in which they are registered. At the year end there were Group
companies or branches registered in 30 countries. However, the rules and practice governing the taxation of e-commerce activity are evolving in many
countries. It is possible that the amount of tax that will eventually become payable may differ from the amount provided in the ﬁnancial statements.

6.3 Factors that may affect future tax charges
As the Group is involved in worldwide operations, future tax charges will be affected by the levels and mix of proﬁtability in different jurisdictions. Future tax
charges will be reduced by a deferred tax credit in respect of amortisation of certain acquired intangibles.

Financial statements continued

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

for the year ended 31 December 2016

7. EARNINGS PER SHARE
7.1 Basic earnings per share and adjusted earnings per share
Basic earnings per share has been calculated by taking the proﬁt attributable to ordinary shareholders and dividing by the weighted average number of shares
in issue.

(Loss) proﬁt for the year attributable to ordinary shareholders (€m)
Weighted average number of shares (millions)
BASIC (LOSS) EARNINGS PER SHARE (€)

2016
(138.3)
271.8
(0.51)

The performance measure of earnings per share used internally by management to manage the operations of the business and remove the impact of one-off
and certain non-cash items is adjusted earnings per share. Management believes that this better reﬂects the underlying performance.

Adjusted earnings per share has been calculated by taking the (loss) proﬁt before tax and adding back the following items in the year and dividing by the
weighted average number of shares in issue.

(Loss) proﬁt before tax attributable to ordinary shareholders (€m)
Exceptional items
Impairment of available for sale asset
Changes in the fair value of derivative ﬁnancial instruments
Dividend income
Amortisation on acquired intangible assets
– Effect of tax thereon
Amortisation of early repayment option on loan
Amortisation of loan fees
Taxation
ADJUSTED EARNINGS

Weighted average number of shares (millions)
ADJUSTED EARNINGS PER SHARE (€)

2016
(138.3)
117.8
4.2
(15.0)
(3.1)
109.5
(14.3)
(4.3)
23.4
(8.2)
71.7
271.8
0.26

7.2 Diluted earnings per share and adjusted earnings per share
Diluted earnings per share has been calculated by taking the proﬁt attributable to ordinary shareholders and dividing by the weighted average number of
shares in issue as diluted by share options.

Adjusted diluted earnings per share has been calculated by taking the adjusted earnings as above and dividing by the weighted average number of shares in
issue, as diluted by share options.

(Loss) proﬁt for the year attributable to ordinary shareholders (€m)
Weighted average number of shares (millions)
Effect of dilutive share options (millions)
Weighted average number of dilutive shares (millions)
DILUTED EARNINGS PER SHARE1 (€)
Adjusted earnings (€m)
ADJUSTED DILUTED EARNINGS PER SHARE1 (€)

2016
(138.3)
271.8
7.5
279.3
(0.51)
71.7
0.26

1. A diluted EPS calculation may not increase a basic EPS calculation when the basic EPS is a loss.

Share options that could potentially dilute basic earnings per share but were not included because they are anti-dilutive for the year ending 31 December
2016 amounted to nil effective shares (2015: nil).

2015
24.7
61.3
0.40

2015
25.5
24.5
1.2
(4.8)
–
–
–
–
–
(1.5)
44.9
61.3
0.73

2015
24.7
61.3
3.1
64.4
0.38
44.9
0.70

GVC Holdings PLC Annual Report 2016

Total
€m

218.0
5.0
223.0
19.0
1,571.9
(20.5)
(0.2)
1,793.2

63.7
4.2
67.9
116.5
(0.6)
183.8

Software
licences
€m

Goodwill
€m

Trade-marks
and trade
name
€m

Consulting and
magazine
€m

Non-
contractual
customer
relationships
€m

27.5
5.0
32.5
19.0
224.0
(2.0)
(0.2)
273.3

21.9
3.9
25.8
62.1
(0.1)
87.8

166.2
–
166.2
–
963.9
(6.5)
–
1,123.6

33.3
–
33.3
–
–
33.3

6.7
185.5

132.9
1,090.3

17.0
–
17.0
–
176.0
–
–
193.0

1.3
0.2
1.5
13.6
–
15.1

15.5
177.9

4.9
–
4.9
–
–
–
–
4.9

4.9
–
4.9
–
–
4.9

–
–

2.4
–
2.4
–
208.0
(12.0)
–
198.4

2.3
0.1
2.4
40.8
(0.5)
42.7

–
155.7

155.1
1,609.4

8. INTANGIBLE ASSETS

COST

At 1 January 2015
Additions
At 31 December 2015
Additions
Acquisition of subsidiaries
Reclassiﬁed as held for sale
Foreign exchange
AT 31 DECEMBER 2016

AMORTISATION AND IMPAIRMENT

At 1 January 2015
Amortisation
At 31 December 2015
Amortisation
Reclassiﬁed as held for sale
AT 31 DECEMBER 2016

NET BOOK VALUE

At 31 December 2015
AT 31 DECEMBER 2016

Certain intangible assets are deemed to have an indeﬁnite useful life as there is no foreseeable limit to the period over which the asset is expected to generate
net cash inﬂows for the entity. The carrying amounts of such assets at 31 December 2016 was as follows:

Trademarks and trade names (related to CasinoClub)

8.1 Amortisation
The amortisation for the year is recognised in the following line items in the income statement.

Net operating expenses

2016
€m
15.1

2016
€m
116.5

2015
€m
15.1

2015
€m
4.2

Financial statements continued

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

for the year ended 31 December 2016

8. INTANGIBLE ASSETS CONTINUED
8.2 Impairment tests for cash-generating units containing goodwill and trademarks
An Impairment Review of the Group’s goodwill was carried out for the year ended 31 December 2016. The goodwill relates to the Group’s acquisitions of
bwin, Betboo, CasinoClub and Sportingbet. 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 for the years ending 31 December 2017 and up to 31 December 2021.
The assumptions detailed below have been determined based on past experience in this market which the Group’s management believes is the best available
input for forecasting this market.

Goodwill can be broken down into the following:

bwin
Betboo
CasinoClub
Sportingbet
TOTAL GOODWILL

2016
€m
957.4
8.3
40.4
84.2
1,090.3

2015
€m
–
8.3
40.4
84.2
132.9

bwin
The allocation of the bwin goodwill includes various CGUs, split along the Group’s reporting segment and includes changes to the CGUs presented in the
2016 interim ﬁnancial statements following a ﬁnal review by management of the assumptions underlying the determination and allocation of goodwill and
intangibles. The carrying value of these, together with the assumptions used within those individual CGUs are shown in the tables below.

The discount rates used have been considered based on the risks involved in each of the underlying business units and terminal growth rates reﬂect the
expected growth in underlying EBITDA expected from these units. These CGUs have been considered for impairment and sensitivities have been calculated
around the terminal growth rates and discount factors used together with speciﬁc scenarios including the loss of revenue where those revenues might be
considered to be at risk. No indicators of impairment have arisen as a result as the impact of all sensitivities were judged to be within tolerable levels.

Sports labels
Games labels
Intertrader
TOTAL GOODWILL

Goodwill
in CGU
€m
849.1
108.3
–
957.4

Discount
rate
%
9.0
11.8
16.8

Terminal
growth rates
%
2.0
2.0
2.0

The goodwill of €6.5m relating to the Kalixa business acquired as part of the bwin acquisition was transferred to assets held for sale as at 31 March 2016 and
its value has been considered as part of the fair value of that disposal group (see note 15).

Betboo
A terminal growth rate of 2% was included to reﬂect the likely competitive pressures on this brand. A discount rate of 35% was used, based on the internal
rate of return of the Betboo acquisition. It was concluded that the carrying value of the goodwill and other intangibles was not impaired.

CasinoClub
A terminal growth rate of 2% was used to reﬂect the increasing competitive pressures from large online gaming companies. A discount rate of 11.8% was
used, based on risk proﬁle. It was concluded that the carrying value of the goodwill and other intangibles was not impaired.

Sportingbet
A terminal growth rate of 2% was used to reﬂect the increasing competitive pressures from large online gaming companies. A discount rate range
of 20%-35% was applied to each of the underlying brands, based on the risk proﬁle of those brands. It was concluded that the carrying value of the
goodwill and other intangibles was not impaired.

Management has considered the sensitivities around its key assumptions used in the review of the carrying values of goodwill and other intangibles with an
indeﬁnite useful life. These sensitivities have considered the terminal growth rates and discount rates together with speciﬁc scenarios around the loss of
revenue where those revenues might be considered to be at risk.

GVC Holdings PLC Annual Report 2016

Total
€m

3.7
1.2
4.9
15.8
44.5
(1.4)
(0.9)
(2.5)
60.4

2.6
0.8
3.4
20.0
(0.5)
18.1
(0.1)
(0.2)
40.7

1.4
19.7

Total
€m
3.8
(1.2)
2.6
4.5
2.2
0.1
(4.2)
(1.5)
3.7

9. PROPERTY, PLANT AND EQUIPMENT

COST

At 1 January 2015
Additions
At 31 December 2015
Additions
Acquisition of subsidiaries
Disposals
Exchange movements
Reclassiﬁed as assets held for sale
AT 31 DECEMBER 2016

DEPRECIATION

At 1 January 2015
Depreciation charge for the year
At 31 December 2015
Depreciation charge for the year
Disposals
Accelerated depreciation
Exchange movements
Reclassiﬁed as assets held for sale
AT 31 DECEMBER 2016

NET BOOK VALUE

At 31 December 2015
AT 31 DECEMBER 2016

Land and
buildings
€m

Plant and
equipment
€m

Fixtures and
ﬁttings
€m

–
–
–
0.1
4.9
(0.1)
(0.2)
–
4.7

–
–
–
1.0
–
–
–
–
1.0

–
3.7

2.3
1.1
3.4
0.4
–
–
0.2
–
4.0

1.5
0.7
2.2
0.7
–
–
–
–
2.9

1.2
1.1

1.4
0.1
1.5
15.3
39.6
(1.3)
(0.9)
(2.5)
51.7

1.1
0.1
1.2
18.3
(0.5)
18.1
(0.1)
(0.2)
36.8

0.2
14.9

The net book value of items held under ﬁnance leases was €nil at 31 December 2016 (31 December 2015: €0.5m).

Accelerated depreciation of €18.1m has been charged in respect of certain software licences which were renegotiated following the bwin.party acquisition.
An associated payable of €5.6m was also released to the income statement following this renegotiation.

9.1 Capital commitments
The Group has capital commitments contracted but not provided for at 31 December 2016 of €1.4m (31 December 2015: €nil).

10. INVESTMENTS AND AVAILABLE FOR SALE (AFS) FINANCIAL ASSETS

At 1 January 2015
Impairment
At 31 December 2015
Acquisition through business combination
Additions
Share of proﬁt
Impairments
Disposals
AT 31 DECEMBER 2016

Available for
sale ﬁnancial
assets
€m
3.8
(1.2)
2.6
3.5
2.2
–
(4.2)
(1.5)
2.6

Associates
€m
–
–
–
1.0
–
0.1
–
–
1.1

Financial statements continued

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

for the year ended 31 December 2016

10. INVESTMENTS AND AVAILABLE FOR SALE (AFS) FINANCIAL ASSETS CONTINUED
10.1 Available For Sale assets (AFS)
On 14 May 2014, the Group acquired a 15% stake in Betit Holdings Limited (“BHL”) from Betit Securities Limited (“BSL”). The consideration was for €3.5m,
which was attributed to both the available for sale asset (€5.2m) and the option liability (€1.7m) taken on at acquisition. The asset held for sale consideration,
together with professional fees incurred at the time, amounted to a total upfront cost of €5.4m which was impaired at 31 December 2015 to €2.6m.
This asset was impaired by €0.7m prior to being sold during the year.

The value of bwin.party’s available for sale assets on acquisition was €3.5m. The value of these has decreased by €3.1m during the period, principally as a
result of the dividend declared by the Aldorino Trust of €3.1m which resulted in the full impairment of this investment. Also as part of the bwin.party acquisition
assets held for sale of €2.2m were recategorised as AFS after the acquisition date.

10.2 Associates
The value of bwin.party’s associates on acquisition was €1.0m. The value of this investment had increased by €0.1m by 31 December 2016 based on
the share of underlying proﬁt in the associate. The Group holds 50% of the voting rights in relation to this entity and amounts related to this entity as at
31 December 2016 are presented in the table below:

Non-current assets
Current assets
Current liabilities
Revenues
Proﬁt

11. RECEIVABLES AND PREPAYMENTS

Balances with payment processors
Trade receivables
Other receivables
Loans and receivables
Prepayments
Deferred consideration
CURRENT ASSETS

Contingent consideration
Deferred consideration
NON-CURRENT ASSETS

€m
0.1
2.2
0.5
2.6
0.4

2015
€m
21.7
0.1
1.3
23.1
11.5
–
34.6

–
–
–

2016
€m
60.0
–
27.6
87.6
16.7
0.9
105.2

4.0
0.9
4.9

Payment processor balances are funds held by third party collection agencies subject to collection after one month, or balances used to make refunds
to players.

Prepayments include payments as at 31 December 2016 for goods or services which will be consumed after 1 January 2017.

Contingent consideration relates to amounts receivable for the sale of domain names following the acquisition of bwin and is measured at fair value.
The non-discounted book values for these amounts are €6.0m (2015: €nil) due later than one year but not later than ﬁve years.

Deferred consideration relates to amounts receivable for the sale of Conspo which was previously classiﬁed as held for sale. The non-discounted book values
for these amounts are €0.9m (2015: €nil) due within one year and €1.0m (2015: €nil) due later than one year but not later than ﬁve years.

GVC Holdings PLC Annual Report 2016

12. DERIVATIVE FINANCIAL INSTRUMENTS

BALANCE AT 1 JANUARY 2015

Movement in fair value
BALANCE AT 31 DECEMBER 2015

Recognised on loan drawdown
Disposal in the year
Change in fair value of early repayment option
BALANCE AT 31 DECEMBER 2016

Winunited
option
€m
–
3.8
3.8
–
–
(0.1)
3.7

Early
repayment
option
€m
–
–
–
7.4
–
15.1
22.5

Betit option
€m
(1.7)
1.0
(0.7)
–
0.7
–
–

Total
€m
(1.7)
4.8
3.1
7.4
0.7
15.0
26.2

12.1 Winunited option
On 24 March 2015, GVC contracted with Winunited Limited for the day-to-day back ofﬁce operations of the Winunited business, licensed in Malta. Under the
terms of the agreement, GVC obtained a call option to purchase the Winunited assets comprising goodwill, customers, licences, brands and websites.
The exercise period for the option is in the three months prior to the ﬁve year anniversary of 24 March 2015. No consideration was paid for the call option.

At 31 December 2016, the option was valued using a Monte Carlo valuation model and two methodologies: a discounted cashﬂow and a multiples based
calculation. A long-term growth rate of 2% (2015: 2%) was assumed, and a discount rate of 13% (2015: 15%) based on industry peers and observable
inputs. Based on this model, the value of the call option at 31 December 2016 was €3.7m (2015: €3.8m). This decrease in the fair value of the option has
been recognised in the income statement in accordance with IAS 39.

12.2 Cerberus loan early repayment option
On 2 February 2016, a further €380m was drawn down under the Cerberus loan facility. The facility had a repayment date of 4 September 2017 but has
been repaid earlier (see note 30). Early repayment changes the proﬁle and size of the cash payments and this feature has been identiﬁed as an embedded
derivative therefore separated from the host contract. Changes in the Group’s credit rating would have an impact on the value of the option for early
repayment. The option has been valued by a third party valuation specialist based on the contracted cashﬂows under the terms of the facility and measuring
the cost saving opportunities resulting from an early repayment and obtaining of new ﬁnancing at a lower rate. Given the reﬁnance agreement disclosed in
note 30, there is considered to be minimal sensitivity of the inputs to the valuation. The value of the early repayment at 31 December 2016 was €22.5m.

12.3 Betit option
On 14 May 2014, the Group acquired a 15% stake in Betit Holdings Limited (“BHL”). The Group had a call option to acquire the balance of the outstanding
shares which could be exercised no earlier than 1 July 2017 and no later than 30 September 2017, and would be subject to further Maltese Gaming Authority
clearance and the Stock Exchange Rules. The minimum call option price was €70m, and the actual price would be determined by the mix of revenues
between regulated and non-regulated markets and certain multiples attaching thereto.

In the year, the Group disposed of its investment in BHL and its call option was also disposed of as part of this arrangement. The net loss on disposal of the
investment and the option has been included within changes in value of available for sale assets.

13. SHORT-TERM INVESTMENTS

Restricted cash

2016
€m
5.4
5.4

2015
€m
–
–

Short-term investments represent cash held as guarantees for regulated markets’ licences. These funds cannot be freely accessed by the Group and so are
not treated as cash or cash equivalents.

Financial statements continued

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

for the year ended 31 December 2016

14. CASH AND CASH EQUIVALENTS

Total cash in hand and current accounts
Cash held within assets held for sale
Cash in hand and current accounts

2016
€m
367.0
(12.2)
354.8

2015
€m
28.2
–
28.2

15. ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE
The Group has classiﬁed its Kalixa business as held for sale. This business, a fully integrated digital payments company, was transferred to held for sale as
at 31 March 2016 after its acquisition as part of the bwin.party group. Certain of the assets of the Kalixa business relating to a beneﬁcial shareholding in
Visa Europe were realised in the year on the sale of that business to Visa Inc. Management have agreed a sale of the majority of the remaining operating
Kalixa business and believe a disposal in the ﬁrst quarter of 2017 will be achieved. The remainder of the business is also being actively pursued for a disposal
during 2017.

During the year, the Group disposed of its joint venture investment in Conspo which has also previously been classiﬁed as held for sale. Proceeds of €16.4m
including deferred consideration of €1.9m gave rise to a proﬁt on disposal of €12.4m after professional costs. All remaining assets and liabilities held for sale
relate to the Kalixa business.

The movements in assets and liabilities held for sale are disclosed in the table below:

As at 31 December 2015
Acquired in business combination
Reclassiﬁed as held for sale
Trading, working capital and revaluation movements
Disposal of Visa shares
Disposal of Conspo
AS AT 31 DECEMBER 2016

16. TRADE AND OTHER PAYABLES

Other trade payables
Accruals
Deferred consideration (note 16.1)
Share option liability
CURRENT LIABILITIES

Share option liability
Contingent consideration (note 16.2)
NON-CURRENT LIABILITIES

Assets
held for sale
€m
–
12.3
55.7
4.0
(8.4)
(3.9)
59.7

Liabilities
held for sale
€m
–
–
(22.9)
0.2
–
–
(22.7)

2016
€m
40.4
46.4
–
7.1
93.9

–
4.4
4.4

Total
€m
–
12.3
32.8
4.2
(8.4)
(3.9)
37.0

2015
€m
12.8
19.2
1.6
9.7
43.3

2.1
–
2.1

16.1 Deferred consideration
Deferred consideration relates to amounts payable for the Group’s 2009 acquisition of Betboo. The non-discounted book values of these amount to €nil
(2015: €1.6m) due within one year.

16.2 Contingent consideration
Contingent consideration relates to amounts payable for previous acquisitions by bwin.party and is measured at fair value. The non-discounted book values of
these amount to €5.8m due after more than one year.

GVC Holdings PLC Annual Report 2016

Total
€m
–
20.0
(0.8)
(0.6)
1.2
19.8
380.0
39.4
(0.4)
(52.5)
(7.6)
(7.9)
7.4
46.0
(39.7)
23.3
(4.3)
403.5

–
19.8

403.5
–

17. LOANS AND BORROWINGS
17.1 Interest bearing loan
On 4 September 2015, the Group entered into an agreement with Cerberus Business Finance LLC for a loan of up to €400m, in order to part-fund the
acquisition of bwin.party. Under the terms of the loan, a “Hedging Loan” of up to €20m could be drawn down in advance of the acquisition, in order to fund
a hedging arrangement for the conversion of the loan funds into GBP and to pay for initial costs including loan arrangement fees. Accordingly, €20m was
drawn down immediately on entering into the contract. The balance of €380m was drawn down on 1 February 2016. This loan was repaid in January 2017
and an alternate bridge ﬁnancing facility of €250m provided by Nomura International plc was drawn down. This loan itself was then replaced with a long-term
institutional loan in March 2017 (see note 30).

The acquisition of bwin.party included an institutional loan of €39.4m due to Royal Bank of Scotland Plc. This loan was repaid after the acquisition date in
February 2016.

Principal
€m
–
20.0
–
–
–
20.0
380.0
39.4
(0.4)
(52.5)
–

–
–
–
–
–
386.5

Interest and
fees
€m
–
–
(0.8)
(0.6)
1.2
(0.2)
–
–
–
–
(7.6)
(7.9)
–
46.0
(39.7)
23.3
–
13.9

Early
repayment
option
€m
–
–
–
–
–
–
–
–
–
–
–
–
7.4
–
–
–
(4.3)
3.1

LOAN BALANCE AT 1 JANUARY 2015

Initial drawdown
Initial costs and loan servicing fees paid
Interest instalments
Effective interest (note 4)
LOAN BALANCE AT 31 DECEMBER 2015

Loan drawdown
Arising on business combinations
Revaluation of loan balances
Loan repayment
Arrangement fees and loan services fees paid in the prior year
Arrangement fees and loan services fees paid in the current year
Fair value of embedded derivatives
Interest charged
Interest instalments paid
Amortisation of loan fees
Unwinding of early repayment option
LOAN BALANCE AT 31 DECEMBER 2016

Split between the following as at 31 December 2015:
CURRENT LIABILITIES
NON-CURRENT LIABILITIES

Split between the following as at 31 December 2016:
CURRENT LIABILITIES
NON-CURRENT LIABILITIES

17.2 Non-interest bearing loan
As part of the Group’s acquisition of Sportingbet PLC, a credit facility was made available to the Group by William Hill PLC. This loan was fully repaid in
February 2016 (31 December 2015: balance of €3.0m).

Financial statements continued

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

for the year ended 31 December 2016

18. OTHER TAXATION PAYABLE

Betting taxes
VAT payable
Other taxes

19. COMMITMENTS UNDER OPERATING AND FINANCE LEASES
19.1 Finance leases
All ﬁnance leases were repaid in 2016 and the Group had no ﬁnance leases outstanding as at 31 December:

31 DECEMBER 2016

Lease payments
Finance charges
NET PRESENT VALUES

31 DECEMBER 2015

Lease payments
Finance charges
NET PRESENT VALUES

2016
€m
42.1
4.3
0.8
47.2

Within 1 year
€m
–
–
–

Within 1 year
€m
0.7
–
0.7

1 to 5 years
€m
–
–
–

19.2 Operating leases
The Group leases various ofﬁces under non-cancellable operating leases. The leases have varying terms, escalation clauses and renewal rights. The future
minimum lease payments under non-cancellable leases are as follows:

No later than one year
Later than one year and no later than ﬁve years
More than ﬁve years

2016
€m
5.9
16.5
4.3
26.7

2015
€m
1.2
–
0.8
2.0

Total
€m
–
–
–

Total
€m
0.7
–
0.7

2015
€m
1.2
0.6
–
1.8

GVC Holdings PLC Annual Report 2016

Total
€m
–
7.7
(7.1)
0.6
1.2

–
7.5
–
(0.6)
6.9

Total
€m
–
(79.6)
11.8
3.8
(1.6)
(65.6)

20. PROVISIONS
Provisions relate to onerous contracts and leases, where the future economic beneﬁts are less than the costs to be incurred, and legal provisions recognised
at fair value as part of the business combination. Further details on the largest legal provision are set out below in note 20.1.

CURRENT

At 31 December 2015
Acquired through business combination
Utilised during the year
Transfer from non-current to current
AT 31 DECEMBER 2016

NON-CURRENT

At 31 December 2015
Acquired through business combination
Utilised during the year
Transfer from non-current to current
AT 31 DECEMBER 2016

Provisions for
litigation
€m
–
–
–
–
–

Other
provisions
€m
–
7.7
(7.1)
0.6
1.2

–
3.7
–
–
3.7

–
3.8
–
(0.6)
3.2

20.1 Provisions for litigation
On 16 October 2014, the Portuguese Supreme Court conﬁrmed a ruling of the Oporto Court of First Instance of September 2011 against Liga Portuguesa de
Futebol Proﬁssional (“Liga”) and certain bwin.party entities. In June 2012, APC initiated enforcement proceedings against the Liga and bwin.party, requesting
the payment of pecuniary sanctions in the total amount of €6.4m for the alleged violation of the ﬁrst instance court judgment during the period between
24 September 2011 and 31 January 2012. The Liga and bwin.party remain ﬁrmly of the view that such enforcement action is without merit. The legal process
is still ongoing.

Due to the inherent uncertainty in legal proceedings, on acquisition of bwin.party in February 2016 the Group recognised a fair value provision for the legal
case of €3.2m on a fair value basis together with a further provision of €0.5m for other unrelated legal cases.

20.2 Other provisions
Other provisions include other uncertainties around potential infrastructure, marketing or taxation costs where the Directors feel that there is a material but
uncertain risk of outﬂows to the business. These have been measured based on the estimated probability of such outﬂows occurring in the near future.

21. DEFERRED TAX

As at 31 December 2015
Acquired in business combination
Deferred tax credit
Transfer to liabilities held for sale
Foreign exchange and other movements
AS AT 31 DECEMBER 2016

Deferred tax liabilities relate primarily to temporary differences arising from fair value adjustments of acquired intangibles and also the repatriation of proﬁts
from foreign jurisdictions.

Financial statements continued

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

for the year ended 31 December 2016

22. SHARE CAPITAL
At an Extraordinary General Meeting on 18 December 2015, the authorised share capital of the Company was increased to 350,000,000 ordinary shares.

On 1 February 2016, the Group acquired 100% of the share capital of bwin.party digital entertainment plc (“bwin.party”), an online gaming company traded
on the Main Market of the London Stock Exchange and listed on the Ofﬁcial List (Premium Segment), for total consideration of €1,506.6m as set out in
note 28. Under the terms of the Acquisition, each bwin.party shareholder received 25p plus 0.231 new GVC shares for each bwin.party share. The total
bwin.party shareholding was 843.5m shares; accordingly, the Group issued 194.8m new shares to bwin.party shareholders. Post the Acquisition, additional
shares have been issued to bwin.party option-holders who had not exercised their options before the date of the Acquisition but do so subsequently and the
value of these has been included in the total consideration.

On the same date as the acquisition of bwin.party, the Group issued additional shares at a price of 422p. The additional share capital consisted of 28.0m
Placing shares, including the subscription by Directors of shares under the terms of the LTIP, and 7.6m Subscription shares. The cash consideration for these
shares was £150.0m, less costs incurred of £4.9m (€6.4m), which have been treated as a deduction from share premium.

The authorised and issued share capital is:

AUTHORISED

Ordinary shares of €0.01 each
At 31 December – 350,000,000 shares (2015: 350,000,000 shares)
ISSUED, CALLED UP AND FULLY PAID

At 31 December – 293,268,229 shares (2015: 61,276,480 shares)

The issued share capital history is shown below:

Balance at 1 January
Issue of shares at acquisition
Issue of shares via placing
Issue of shares via subscription
Other share issues
Balance at 31 December

23. DIVIDENDS
The dividend history for 2015 is shown below.

Date declared
12 January 2015
23 March 2015
23 March 2015 (special)
8 July 2015
8 October 2015
Total in 2015

2016
€m

3.5

2.9

2015
€m

3.5

0.6

2016
61,276,480
194,841,498
27,978,812
7,566,212
1,605,227
293,268,229

2015
61,276,480
–
–
–
–
61,276,480

Per share
€c
12.50
14.00
1.50
14.00
14.00
56.0

Per share

£p Shares in issue
61,276,480
61,276,480
61,276,480
61,276,480
61,276,480

9.6000
10.2900
1.1000
9.7575
10.3472
41.0947

Amount
€
7,659,560
8,578,707
919,147
8,578,707
8,578,707
34,314,828

Amount
£
5,882,542
6,305,350
674,041
5,979,053
6,340,400
25,181,386

As a result of the acquisition of bwin.party and the combination of debt covenants and the intended restructuring of the Group, the Directors did not pay any
dividends in 2016.

GVC Holdings PLC Annual Report 2016

24. SHARE OPTION SCHEMES
At 31 December 2016, the Group had the following share options schemes for which options remained outstanding at the year-end:
i. Options were granted to Directors and employees under the existing and already approved LTIP on 2 June 2014. Under this scheme, 2,450,000 options

held by Directors were cancelled under the arrangements for the acquisition of bwin.party during the year and as at 31 December 2016, 75,000 employee
share options remained outstanding.

ii. Options were granted to Directors under the terms of the 2015 LTIP, as set out in the 13 November 2015 prospectus pages 325 to 329.
iii. Options were granted under a Management Incentive Plan under the same terms of the 2015 LTIP.

Under the terms of the share option plan, the Group can allocate up to 10% of the issued share capital although it must take allowance of the shares issued
or issuable, post the acquisition of bwin.party, as a consequence of rights to subscribe for shares under the 2015 LTIP or any other employees’ share scheme.

The following options to purchase €0.01 ordinary shares in the Company were granted, exercised, forfeited or existing at the year-end:

Date of grant
28 February 2013
2 June 2014
2 February 2016
2 February 2016
2 February 2016
16 December 2016
TOTAL ALL SCHEMES

Exercise price
233.5p
1p
422p
467p
422p
422p

Existing at
1 January
2016
156,947
3,325,000
–
–
–
–
3,481,947

Granted in
the year
–
–
13,197,111
4,399,037
200,000
8,825,000
26,621,148

Cancelled in
the year
–
(2,450,000)
(2,932,691)
(977,564)
–
–
(6,360,255)

Exercised in
the year
(156,947)
(800,000)
–
–
–
(166,666)
(1,123,613)

Existing at
31 December
2016
–
75,000
10,264,420
3,421,473
200,000
8,658,334
22,619,227

Exercisable at
31 December
2016
–
75,000
–
–
–
1,794,445
1,869,445

Vesting
criteria
Note a
Note b
Note c
Note d
Note e
Note f

The existing share options at 31 December 2016 are held by the following employees and consultants:

Option price

Grant date
Kenneth Alexander
Richard Cooper
Lee Feldman (note d)
Norbert Teufelberger (note e)
Employees
Consultants

1p
2 June
2014
–
–
–
–
75,000
–
75,000

422p
2 February
2016
6,842,947
3,421,473
–
200,000
–
–
10,464,420

467p
2 February
2016
–
–
3,421,473
–
–
–
3,421,473

422p
16 December
2016
–
–
–
–
6,963,334
1,695,000
8,658,334

Total
6,842,947
3,421,473
3,421,473
200,000
7,038,334
1,695,000
22,619,227

Note a: These equity-settled options were granted to third parties as part of the Sportingbet PLC acquisition following underwriting commitments made at

the time. The awards vested on the grant date and the options have the exercise price reduced by the value of any dividends declared up to the point
of exercise. These options were fully exercised on 12 February 2016 at a weighted average price of £1.263.

Note b: These equity-settled options were granted to certain Directors and employees. The awards will vest in full (and become exercisable) on the share

price being equal to or exceeding £6.00 per share for a continuous period of 90 calendar days at any time from the date of grant. If there is a
change of control, the awards will vest in full immediately unless the share price is less than £5.00 per share, in which case the Awards will lapse in
full. The awards have been treated as vesting over a three year period. The Directors’ options under this scheme were cash cancelled during the year
on the acquisition of bwin.party, and the after-tax proceeds of £5.4m (£10.3m gross) re-invested in new GVC shares. The remaining fair value of
these options was transferred to equity and the additional cost has been recognised as an exceptional item in the year, see note 3.2.2.
Note c: These equity-settled awards were issued on completion of the acquisition of bwin.party. The options vest and become exercisable, subject to the

satisfaction of a performance condition, over 30 months, with one ninth vesting six months after the date of grant and a further ninth vesting at each
subsequent quarter. The options lapse, if not exercised, on 2 February 2026. The performance condition is comparator total shareholder return
(“TSR”) of the Group against the FTSE 250. Each ninth of the shares will have its TSR condition reviewed from the date of grant until the relevant
testing date. To the extent the TSR is not met at that time, it is tested again the following quarter and, if necessary, at the end of the 30 month
vesting period. In order to vest, the TSR of the Group must rank at median or above against the FTSE 250. In the year two-ninths of the options had
vested. Having received the Directors notice to exercise, the Remuneration Committee exercised its discretion to make a cash alternative payment to
the Directors in respect of that portion of shares. The cash alternative payment was calculated by deducting the option price from the market value
of a share on the day prior to the date the Company received the exercise note.

Financial statements continued

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

for the year ended 31 December 2016

24. SHARE OPTION SCHEMES CONTINUED
Note d: These equity-settled awards were issued on the same basis as the awards in note c but at a higher exercise price which represents the market

value of the shares as at the date the scheme became effective. In order to compensate Lee Feldman for the higher exercise price, the Company
has agreed to pay him a cash bonus of £2.0m over the 30 month vesting period of the option, but only upon option vesting and satisfaction of
the performance condition described above, and he has to reinvest 50% of this in GVC shares. In the year two-ninths of the options had vested.
Having received the Directors notice to exercise, the Remuneration Committee exercised its discretion to make a cash alternative payment to the
Directors in respect of that portion of shares. The cash alternative payment was calculated by deducting the option price from the market value of
a share on the day prior to the date the Company received the exercise note.

Note e: These awards were issued on completion of the acquisition of bwin.party. The equity-settled options, which are not subject to a performance

condition, vest and become exercisable over 24 months, with one-seventh vesting six months after the date of grant and a further seventh vesting
at each subsequent quarter. The options lapse, if not exercised, on 2 February 2026.
These equity-settled awards were issued on the same basis as the awards in note c and granted on 16 December 2016.

Note f:

The charge to share-based payments within the consolidated income statement in respect of these options in 2016 was €31.1m, with a further charge of
€12.8m within exceptional items relating to the cashing-out of the 2014 scheme. Of the 2016 share-based payment charge, €24.0m related to equity-settled
options (2015: €0.1m) and €7.1m to cash-settled options (2015: €0.1m credit).

24.1 Liability for cash-settled options
During 2015, options granted under a previous scheme were surrendered and in light of this surrender, a new retention plan was put in place. The liability
under this plan at 31 December 2015 was €11.7m. In addition there was a cash-settled option liability in respect of the 2014 scheme of €0.2m. As a result
of the acquisition of bwin.party, these liabilities were settled in the period and the after-tax proceeds were re-invested in new GVC shares. During the period
a new liability was recognised for the cash-settled bonus scheme as set out in note d above. Under the annual share bonus plan, the Group has recognised a
cash-settled option liability of €6.0m.

The movements in cash-settled share option liabilities are set out in the table below:

Balance at 1 January 2016
Charged under the 2 June 2014 scheme (note b above)
Settled on the acquisition of bwin.party
Charged under the 2 February 2016 scheme (note d above)
Charged under the annual bonus plan
Balance at 31 December 2016

24.2 Weighted average exercise price of options
The number and weighted average exercise prices of share options is as follows:

Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Surrendered/bought out in the year
Forfeited in the year
Outstanding at the end of the year
Exercisable at the end of the year

€m
(11.8)
(0.2)
11.9
(1.0)
(6.0)
(7.1)

Weighted
average
exercise price
31 December
2016
11p
422p
126p
422p
–
416p

Weighted
average
exercise price
31 December
2015
94p
–
–
184p
1p
11p

Number of
options
31 December
2016
3,481,947
26,621,149
(834,723)
(2,450,000)
–
26,818,373
5,236,844

Number of
options
31 December
2015
6,806,947
–
–
(3,200,000)
(125,000)
3,481,947
156,947

The options outstanding at 31 December 2016 have a weighted average contractual life of 9.1 years (31 December 2015: 8.4 years).

GVC Holdings PLC Annual Report 2016

24. SHARE OPTION SCHEMES CONTINUED
24.3 Valuation of options
The fair value of services received in return for share options granted were measured by reference to the fair value of share options granted. The Group
engaged a third party valuation specialist to provide a fair value for the options.

The 2014 options were valued using a Monte Carlo model due to the performance conditions associated with the options. The 2014 cash-settled options
were revalued using a Monte Carlo model at 31 December 2015. During the year, the 2014 cash-settled options and some of the 2014 equity-settled options
were cashed out at an exercise price of 422p. The excess of the cash settlement over the fair value of the options at the date of the settlement has been
recognised in the Consolidated Income Statement as a cost of share-based payments within exceptional items.

Fair value of share options and assumptions:

Date of grant
2 February 2016 – equity-settled 30 months
2 February 2016 – equity-settled 30 months
2 February 2016 – equity-settled 24 months
16 December 2016 – equity-settled 30 months

Share price at
date of grant1
£
4.67
4.67
4.67
6.48

Exercise
price
£
4.22
4.67
4.22
4.22

Expected
volatility
%
22-30
22-30
n/a
30-28

Exercise
multiple
n/a
n/a
n/a
n/a

Expected
dividend yield
n/a
n/a
n/a
n/a

Risk free
rate2
%
n/a
n/a
n/a
n/a

Fair value at
measurement date
£
0.32-0.47
0.22-0.28
0.32-0.47
1.43-1.94

1. This is the bid price, not the mid-market price, at market close, as sourced from Bloomberg.

2. The measurement of the risk-free rate was based on rate of UK sovereign debt prevalent at each grant date over the expected term of the option.

For the 2016 LTIP scheme, the expected volatilities have been calculated using historical prices for companies that were constituents of the FTSE 250 at the
grant date. These options accrue dividend credits and the yield is assumed to be nil for 2016 and 10% thereafter. As the schemes vest on a staggered basis
over a period of up to 30 months, the volatilities have been calculated over each relevant time period. The fair value of each phase of the options has been
calculated separately, shown as a range in the table above, and the cost of each phase is allocated across the vesting period for that phase.

25. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Group’s principal ﬁnancial instruments as at 31 December 2016 comprise cash and cash equivalents together with loan borrowings. The main purpose
of these ﬁnancial instruments is to ﬁnance the Group’s operations and fund acquisitions and shareholder dividends. The Group has other ﬁnancial instruments
which mainly comprise receivables and payables, which arise directly from its operations. The Group does not typically use derivative ﬁnancial instruments,
other than foreign exchange contracts, to hedge its exposure to foreign exchange or interest rate risks arising from operational, ﬁnancing and investment
activities. During 2016, the Group did not hold or issue derivative ﬁnancial instruments for trading purposes.

25.1 Market risk
Market risk arises from the Group’s use of interest-bearing, tradable and foreign currency ﬁnancial instruments. It is the risk that the fair value of future
cashﬂows on its long-term debt ﬁnance and cash investments through the use of a ﬁnancial instrument will ﬂuctuate because of changes in interest rates
(interest rate risk), foreign exchange rates (currency risk) or other market factors (other price risk). Exposure to market risk arises in the normal course of the
Group’s business.

25.2 Foreign exchange risk
Foreign exchange risk arises from transactions, recognised assets and liabilities and net investments in foreign operations. The Group’s general operating
policy is that all material transaction and currency liability exposures are economically and fully hedged using foreign exchange contracts and/or by holding
cash in the relevant currency.

Following the drawdown of the Cerberus loan in February 2016, the Group held a large position in GBP to meet working capital requirements. This resulted in
a foreign exchange loss following the devaluation of sterling during 2016. This amount has subsequently been used in 2017 to hedge against signiﬁcant GBP
liabilities which have arisen including the dividend paid in February 2017 and repay the Cerberus loan. The Group uses foreign exchange contracts to hedge
its currency risk but as at 31 December 2016 there were no open foreign exchange contracts.

The Group is exposed to currency movements in the euro, arising out of changes in the fair value of ﬁnancial instruments which are held in
non-euro currencies.

25.2.1 Foreign exchange risk sensitivity
A signiﬁcant proportion of the Group’s ﬁnancial assets and liabilities are denominated in euros and GBP. Holding the former currency minimises the Group’s
exposure to currency translation risk. However, its signiﬁcant holding of GBP net assets means that it is exposed to movements in the ﬂuctuation of this
currency. If the value of GBP relative to EUR was to rise by 10% then the value of the Group’s net assets would increase by €15.9m whilst a 10% fall in the
value of GBP relative to EUR would result in a fall in the Group’s net assets of €15.9m. This exposure was reduced after the year end as the Group utilised part
of its GBP cash balances in reﬁnancing its long term loan and also to pay the dividend declared in December.

100

Financial statements continued

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

for the year ended 31 December 2016

25. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT CONTINUED

AT 31 DECEMBER 2016
NON-CURRENT ASSETS

Receivables and prepayments
Derivative ﬁnancial assets
Tax reclaimable
Short-term investments
Cash and cash equivalents
Assets held for sale
TOTAL CURRENT ASSETS

Trade and other payables
Balances with customers
Loans and borrowings
Provisions
Taxation payable
Other taxation liabilities
Liabilities held for sale
TOTAL CURRENT LIABILITIES
NET CURRENT (LIABILITIES) ASSETS

Trade and other payables
Provisions
Deferred tax
TOTAL NON-CURRENT LIABILITIES
TOTAL ASSETS LESS TOTAL LIABILITIES

AT 31 DECEMBER 2015
NON-CURRENT ASSETS

Receivables and prepayments
Derivative ﬁnancial assets
Tax reclaimable
Cash and cash equivalents
TOTAL CURRENT ASSETS

Trade and other payables
Balances with customers
Loans and borrowings
Deferred consideration
Share option liability
Derivative ﬁnancial assets
Taxation payable
Other taxation liabilities
TOTAL CURRENT LIABILITIES
NET CURRENT ASSETS/(LIABILITIES)

Derivative ﬁnancial liabilities
Loans and borrowings
Share option liability
TOTAL NON-CURRENT LIABILITIES
TOTAL ASSETS LESS TOTAL LIABILITIES

GVC Holdings PLC Annual Report 2016

Euro
€m
1,607.0
57.6
26.2
6.7
5.4
164.0
36.2
296.1
(37.6)
(74.2)
(403.5)
(0.7)
(15.5)
(45.2)
(7.9)
(584.6)
(288.5)
–
(6.3)
(65.5)
(71.8)
1,246.7

Euro
€m
149.2
11.8
3.8
0.3
18.6
34.5
(5.9)
(6.7)
–
(1.6)
–
(9.9)
(7.3)
(0.7)
(32.1)
2.4
–
(19.9)
–
(19.9)
131.7

GBP
€m
22.5
24.1
–
–
–
171.7
8.1
203.9
(42.2)
(15.7)
–
–
(0.6)
(2.0)
(6.5)
(67.0)
136.9
–
–
(0.1)
(0.1)
159.3

GBP
€m
9.6
9.9
–
5.7
6.6
22.2
(18.9)
(5.4)
(3.7)
–
(9.7)
–
–
(1.1)
(38.8)
(16.6)
(0.7)
–
(2.0)
(2.7)
(9.7)

Other
€m
8.2
23.5
–
–
–
19.1
15.4
58.0
(14.1)
(44.9)
–
(0.5)
(2.1)
0.0
(8.3)
(69.9)
(11.9)
(4.4)
(0.6)
–
(5.0)
(8.7)

Other
€m
0.3
13.0
–
–
2.9
15.9
(7.2)
(2.7)
–
–
–
–
–
(0.2)
(10.1)
5.8
–
–
–
–
6.1

Total
€m
1,637.7
105.2
26.2
6.7
5.4
354.8
59.7
558.0
(93.9)
(134.8)
(403.5)
(1.2)
(18.2)
(47.2)
(22.7)
(721.5)
(163.5)
(4.4)
(6.9)
(65.6)
(76.9)
1,397.3

Total
€m
159.1
34.6
3.8
6.0
28.1
72.6
(32.0)
(14.8)
(3.7)
(1.6)
(9.7)
(9.9)
(7.3)
(2.0)
(81.0)
(8.4)
(0.7)
(19.9)
(2.0)
(22.6)
128.1

101

25. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT CONTINUED
25.3 Interest rate risk
The Group earns interest from bank deposits. During the year, the Group held cash on deposits with a range of maturities of less than three months.
The Group had a non-interest bearing loan (see note 17) which did not carry any interest rate risk and which was repaid in 2016. On 4 September 2015, the
Group entered into an agreement with Cerberus Business Finance LLC for a loan of up to €400m, in order to part-fund the proposed acquisition of bwin.party.
At 31 December 2016, the Group had €386.5m (2015: €19.8m) of committed and drawn-down borrowing facilities under this loan arrangement, including
€13.5m repaid during the year. The interest on these loans was based on EURIBOR with a ﬂoor of 1%, plus a margin of 11.5%. This facility was repaid on
31 January 2017.

Management do not consider the impact of possible interest rate movements based on current market conditions to be material to the net result for the year or
the equity position at the year end for either the year ended 31 December 2015 or 31 December 2016.

25.4 Credit risk
The Group seldom has any signiﬁcant concentrations of credit risk, with exposure spread over a large number of customers. The Group grants credit facilities
to its customers and the maximum exposure to credit risk is represented by the carrying amount of each ﬁnancial asset in the Statement of Financial Position.

The Group has material exposure to credit risk through amounts owed by payment processors (third party collection agencies) of €60.0m (2015: €21.7m)
and cash and cash equivalent balances held with banking institutions of €367.0m (2015: €28.2m). There is an inherent concentration of risk with PSPs, most
of which are not investment grade banks, in that the majority derive most of their income from the online gaming sector. To this end, where practicable and
economic, the Group seeks to substitute non-investment grade PSPs with investment grade, or, at least, better quality PSPs. The Group considers the general
credit risk associated with these balances to be low, having assessed the credit ratings and ﬁnancial strength of the counter-parties involved. Nevertheless,
the Group maintains a general provision against the recovery of these processing entities.

For one particular processor the Group considered that a speciﬁc provision may be necessary due to concerns about the recoverability of that speciﬁc debt
and accordingly a speciﬁc impairment of €4.2m was recorded in the year ended 31 December 2016. No further signiﬁcant receivable amounts were past due
date at 31 December 2016 (2015: €nil).

25.5 Liquidity and capital risk
Liquidity risk arises from the Group’s management of its working capital as well as the ﬁnance charges and principal repayments on its debt instruments.
In essence, it is the risk that the Group will encounter difﬁculty in meeting its ﬁnancial obligations as they fall due. Management monitors liquidity to
ensure that sufﬁcient liquid resources are available to the Group. The Group’s principal ﬁnancial assets are cash, bank deposits, loans and trade and
other receivables.

In common with many internet companies that have few physical assets, the Group has no policy as to the level of equity capital and reserves other than to
address statutory requirements. The primary capital risk to the Group is the level of debt relative to the Group’s net income.

At 31 December 2016, the Group had cash and cash equivalents and short-term investments of €367.0m (2015: €28.2m). Whilst current assets are
signiﬁcantly lower than current liabilities, this predominantly relates to the Cerberus loan which was reﬁnanced to a longer term facility in 2017. Accordingly,
the liquidity risk for the Group is judged to be low.

25.5.1 Maturity analysis
All ﬁnancial liabilities within the Group’s balance sheet are due within one year except for certain contingent consideration of €4.4m which falls due based on
certain events. Management’s best estimates are that these will fall due after more than one year but before ﬁve years.

25.5.2 Net debt

Loans and borrowings
Client liabilities
Progressive prize pools
Gross debt
Cash and cash equivalents
NET DEBT

2016
€m
403.5
112.0
22.8
538.3
354.8
183.5

2015
€m
19.8
14.8
–
34.6
28.2
6.4

102

Financial statements continued

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

for the year ended 31 December 2016

25. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT CONTINUED
25.6 Fair values
The carrying amounts of the ﬁnancial assets and liabilities, including deferred consideration in the Statement of Financial Position at 31 December 2016 and
2015 for the Group and Company are a reasonable approximation of their fair values.

Financial assets and ﬁnancial liabilities measured at fair value in the Statement of Financial Position are grouped into three levels of a fair value hierarchy.
The three levels are deﬁned based on the observability of signiﬁcant inputs to the measurement, as follows:

(cid:3)(cid:132) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

(cid:3)(cid:132) Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

(cid:3)(cid:132) Level 3: unobservable inputs for the asset or liability.

The following table shows the Levels within the hierarchy of ﬁnancial assets and liabilities measured at fair value on a recurring basis at 31 December 2016
and 31 December 2015:

AT 31 DECEMBER 2016
FINANCIAL ASSETS

Available for sale ﬁnancial assets
Deferred consideration
Contingent consideration
Derivative ﬁnancial assets

FINANCIAL LIABILITIES

Contingent consideration

AT 31 DECEMBER 2015
FINANCIAL ASSETS

Available for sale ﬁnancial assets
Derivative ﬁnancial assets

FINANCIAL LIABILITIES

Derivative ﬁnancial liabilities

Level 1
€m

Level 2
€m

Level 3
€m

–
–
–
–
–

–
–

2.2
–
0.6
–
2.8

–
–

0.4
1.8
4.0
26.2
32.4

(4.4)
(4.4)

Level 1
€m

Level 2
€m

Level 3
€m

–
–
–

–
–

–
–
–

(9.9)
(9.9)

2.6
3.8
6.4

(0.7)
(0.7)

Total
€m

2.6
1.8
4.6
26.2
35.2

(4.4)
(4.4)

Total
€m

2.6
3.8
6.4

(10.6)
(10.6)

There were no transfers between levels in 2016 or 2015.

Measure of fair value of ﬁnancial instruments:
The Group’s ﬁnance team performs valuations of ﬁnancial items for ﬁnancial reporting purposes, including Level 3 fair values, in consultation with third party
valuation specialists for complex valuations. Valuation techniques are selected based on the characteristics of each instrument, with the overall objective of
maximising the use of market-based information.

The valuation techniques for the derivative ﬁnancial assets and liabilities are described in further detail in note 12 above. The valuation technique for the
available for sale asset and the contingent and deferred consideration assets and liabilities were discounted cashﬂow forecasts using the weighted average
cost of capital and expected cashﬂows.

GVC Holdings PLC Annual Report 2016

103

2015
€m

2.6

–
2.6

23.1
–
28.2

–
3.8
55.1

(26.7)
(3.0)
(1.6)

–
(9.9)
(52.5)

(19.9)
(2.0)

–
(0.7)
(22.6)

2016
€m

2.6

4.9
7.5

108.0
9.9
367.0

1.5
26.2
512.6

(114.0)
(403.5)
–

–
–
(517.5)

–
–

(4.4)
–
(4.4)

25. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT CONTINUED
25.7 Summary of ﬁnancial assets and liabilities by category
The carrying amounts of the Group’s ﬁnancial assets and liabilities recognised at the reporting date are categorised as follows:

NON-CURRENT ASSETS:

Available for sale ﬁnancial assets
Financial assets measured at fair value through proﬁt or loss:
– Deferred and contingent consideration
Non-current assets
CURRENT ASSETS:

Financial assets measured as loans and receivables:
– Trade and other receivables
– Short-term investments
– Cash and cash equivalents
Financial assets measured at fair value through proﬁt or loss:
– Deferred and contingent consideration
– Derivative ﬁnancial assets
Current assets
CURRENT LIABILITIES:

Financial liabilities measured at amortised cost:
– Trade and other payables
– Non-interest bearing loans and borrowings
– Deferred consideration
Financial liabilities measured at fair value through proﬁt or loss:
– Contingent consideration
– Derivative ﬁnancial liabilities
Current liabilities
NON-CURRENT LIABILITIES:

Financial liabilities measured at amortised cost:
– Interest-bearing loans and borrowings
– Share option liability
Financial liabilities measured at fair value through proﬁt or loss:
– Contingent consideration
– Derivative ﬁnancial liabilities
Non-current liabilities

104

Financial statements continued

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

for the year ended 31 December 2016

26. RELATED PARTIES
26.1 Identity of related parties
The Group has a related party relationship with its subsidiaries and with its Directors and executive ofﬁcers.

26.2 Transactions with Directors and key management personnel
Karl Diacono is the Chief Executive Ofﬁcer of Fenlex Corporate Services Limited, a corporate service provider incorporated in Malta. During the year ended
31 December 2016, Fenlex received €127,999 from the Group in relation to Company Secretarial and other matters arising in Malta (2015: €97,385).

Peter Isola is a partner at Isolas, a law ﬁrm in Gibraltar which charged legal expenses of €209,858 to the Group relating to the acquisition of bwin.party.

Richard Cooper received dividends during the year of €nil (2015: €934). The wife of Richard Cooper received dividends during the year of €nil
(2015: €184,800) in respect of her interest in the ordinary share capital of the Group.

Lee Feldman received dividends during the year of €nil (2015: €79,265) in respect of his beneﬁcial interest in the ordinary share capital of the Group.
Lee Feldman is the Managing Partner of Twin Lakes Capital, a private equity ﬁrm based in New York. During the year ended 31 December 2016, Twin Lakes
Capital received €61,715 (2015: €68,715) in relation to ofﬁce services.

Kenneth Alexander received dividends during the year of €nil (2015: €69,264). The wife of Kenneth Alexander received dividends during the year of €nil
(2015: €175,466) in respect of her interest in the ordinary share capital of the Group.

On acquisition of bwin.party, Norbert Teufelberger became a Director of the Group and at this date, he had a loan balance due to the Group of €3.1m,
including accrued interest. This liability was settled in full in the period.

The Group purchased certain customer services of €2.5m from an associate, with amounts owed at 31 December 2016 of €0.2m.

During 2016, the Group purchased certain rights to broadcast licensed media of €3.5m (2015: €nil) from Conspo, a previous joint venture company which
was acquired with bwin.party. Conspo was disposed of on 6 July 2016 and ceased to be a related party at that point.

26.3 Transactions with Directors and key management personnel
Details of the remuneration of key management are detailed below:

Short-term employee beneﬁts (Directors)
Short-term employee beneﬁts (Key management)
Termination beneﬁts
Share-based payments

2016
€m
7.3
2.6
–
25.5
35.4

2015
€m
8.9
2.1
0.8
0.5
12.3

Details of Directors’ remuneration is given in the Report of the Remuneration Committee on pages 51 to 63.

27. CONTINGENT LIABILITIES
27.1 East Pioneer Corporation Guarantee
On 21 November 2011, the Group entered into a service agreement and guarantee relating to the acquisition by East Pioneer Corporation B.V. (“EPC”) from
Sportingbet PLC of Superbahis, a Turkish language website. The maximum contingent liability under this agreement at inception was €171m. The Directors
consider this has a fair value of €nil (2015: €nil).

The Group continues to provide back ofﬁce and support services to EPC. Following the acquisition of Sportingbet PLC on 19 March 2013, the Group now
receives all payments of amounts from EPC under the Business Purchase Agreement and other Transaction Documents and does not now offer any guarantee
of payments to legal entities outside of the Group.

27.2 Indirect taxation
Group companies may be subject to VAT on transactions which have been treated as exempt supplies of gambling, or on supplies which have been exported
outside the scope of VAT where legislation provides that the services are received or used and enjoyed in the country where the service provider is located.
Where group companies have treated supplies of gambling as exempt based on exemptions available to comparable supplies in the place where the customer
is located, the right to exemption may be restricted if the supplies do not have similar characteristics or meet the same needs as other exempt gambling from
the customer’s point of view. Where group companies have determined the taxable amount for supplies of gambling to be the amount of stakes received less
amounts that have to be returned to players, the right to a deduction for amounts returned to players may be restricted to the extent that the obligation to
make a payment is not enforceable in the place where the customer is located.

Revenues earned from customers located in any particular jurisdiction may give rise to further taxes in that jurisdiction. If such taxes are levied, either on the
basis of current law or the current practice of any tax authority, or by reason of a change in the law or practice, then this may have a material adverse effect
on the amount of tax payable by the Group or on its ﬁnancial position. Where it is considered probable that a previously identiﬁed contingent liability will give
rise to an actual outﬂow of funds, then a provision is made in respect of the relevant jurisdiction and period impacted. Where the likelihood of a liability arising
is considered remote, or the possible contingency is not material to the ﬁnancial position of the Group, the contingency is not recognised as a liability at the
balance sheet date.

GVC Holdings PLC Annual Report 2016

105

Value
€m

1,201.5
278.5
26.6
1,506.6

Fair value
€m

608.0
44.5
107.8
4.5
12.3
15.6
115.7
908.4

(82.8)
(118.0)
(15.2)
(39.4)
(31.9)
(79.6)
(366.9)

1.2

542.7

1,506.6
963.9

54.7

28. BUSINESS COMBINATIONS
28.1 Acquisition of bwin.party
It is part of the core strategy for the Group to improve the quality and mix of the Group’s earnings through acquisitions, especially where these increase the
markets in which the Group trades and where there are opportunities for high levels of cash generation through synergies. On 1 February 2016, the Group
acquired 100% of the share capital of bwin.party digital entertainment plc (“bwin.party”), an online gaming company traded on the Main Market of the London
Stock Exchange and listed on the Ofﬁcial List (Premium Segment), for total consideration of €1,506.6m as set out in the table below. The acquisition resulted
in GVC obtaining control of bwin.party from 1 February 2016, and this is being accounted for as a business combination in the current year.

The terms of the acquisition included an offer of 25p plus 0.231 new GVC shares for each bwin.party share. At the date of the acquisition, there were 843m
bwin.party shares and 14m of share options and the closing price for GVC Holdings PLC shares on the previous day was £4.67. The total fair value of the
consideration paid was €1,506.6m as set out below:

Total bwin.party shareholding
GVC shares issued (0.231 per bwin.party share, at a price of £4.67)
Cash payment (£0.25 per bwin.party share)
Cash-settled options
Total consideration

The fair value of the assets and liabilities recognised at the date of acquisition is set out in the table below:

No of shares
m
843.5
194.8

Value
£m

Exchange
rate

909.9
210.9
20.1
1,140.9

1.3205
1.3205
1.3205

ASSETS

Intangible assets
Property, plant and equipment
Trade and other receivables
Investments and available for sale assets
Assets held for sale
Short-term investments
Cash
Total assets
LIABILITIES

Trade and other payables
Client liabilities and progressive prize pools
Provisions
Loans
Taxation (including gaming tax)
Deferred tax
Total liabilities

Non-controlling interest

NET ASSETS

Fair value of consideration paid
Goodwill recognised

BUSINESS COMBINATION COSTS

The fair value of trade and other receivables was €107.8m and included trade receivables and payment processor balances with a fair value of €78.4m.
The gross contractual amount for trade receivables and payment processor balances due was €80.2m, of which €1.8m was deemed to be irrecoverable.

The goodwill consists of assembled workforce, future growth and business reputation.

106

Financial statements continued

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

for the year ended 31 December 2016

28. BUSINESS COMBINATIONS CONTINUED
28.1 Acquisition of bwin.party continued
All contingent liabilities have been provided for.

In the year ended 31 December 2015, bwin.party reported revenue of €576.4m and loss before tax of €40.2m. If the Acquisition had occurred at the
beginning of the year, the revenue of the combined entity in the 12 months to 31 December 2016 would have been €873.5m and the loss after tax would
have been €131.8m.

Following the acquisition, GVC has already achieved signiﬁcant synergistic savings through integration and restructuring of operations and expects further
beneﬁts in 2017.

29. NON-CONTROLLING INTERESTS
Non-controlling interests included a 10% holding in bwin.party entertainment (NJ) LLC, a company incorporated in the United States. The loss attributable to
the non-controlling interest was €0.3m.

The balance of retained earnings attributable to non-controlling interests is disclosed in the table below:

As at 31 December 2015
Acquired through business combination
Loss attributable to non-controlling interests
AS AT 31 DECEMBER 2016

30. SUBSEQUENT EVENTS
In October 2016, the Group secured a one year €250m loan facility from Nomura International plc, which was used in part to repay the outstanding loan
provided by Cerberus Business Finance LLP associated with the acquisition of bwin.party. The Nomura Loan provided a short-term facility at a reduced overall
cost from that associated with the Cerberus Loan.

The Group has now successfully secured long-term and increased debt facilities comprising of a €320m Senior Secured Term and Revolving Facility,
composed of a €250m term loan (maturity six years) and a €70m revolving credit facility (maturity ﬁve years).

Total
€m
–
(1.2)
(0.3)
(1.5)

GVC Holdings PLC Annual Report 2016

Independent Auditor’s Report

107

INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GVC HOLDINGS PLC

Opinion on Financial Statements
In our opinion the parent company ﬁnancial statements:

(cid:3)(cid:132) give a true and fair view of the state of the Company’s affairs as at

31 December 2016; and

(cid:3)(cid:132) have been properly prepared in accordance with United Kingdom Generally

Accepted Accounting Practice, including FRS 101.

Other Matter
We have reported separately on the Group ﬁnancial statements of
GVC Holdings PLC for the year ended 31 December 2016.

Grant Thornton UK LLP
Chartered Accountants
London

23 March 2017

We have audited the parent company ﬁnancial statements of GVC Holdings PLC for
the year ended 31 December 2016 which comprise the Balance Sheet, Statement
of Changes in Equity and the related notes. The ﬁnancial reporting framework
that has been applied in their preparation is applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting Practice),
including Financial Reporting Standard 101 “Reduced Disclosure Framework”.

This report is made solely to the Company’s members, as a body. 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.

Respective Responsibilities of Directors and Auditor
As explained more fully in the Statement of Directors’ Responsibilities on page 43,
the Directors are responsible for the preparation of the parent company ﬁnancial
statements which give a true and fair view. Our responsibility is to audit and
express an opinion on the parent company ﬁnancial statements in accordance
with applicable law and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing Practices Board’s Ethical
Standards for Auditors.

Scope of the Audit of the Financial Statements
An audit involves obtaining evidence about the amounts and disclosures in the
ﬁnancial statements sufﬁcient to give reasonable assurance that the ﬁnancial
statements are free from material misstatement, whether caused by fraud or error.
This includes an assessment of: whether the accounting policies are appropriate to
the Company’s circumstances and have been consistently applied and adequately
disclosed; the reasonableness of signiﬁcant accounting estimates made by the
Directors; and the overall presentation of the ﬁnancial statements. In addition,
we read all the ﬁnancial and non-ﬁnancial information in the Annual Report to
identify material inconsistencies with the audited consolidated ﬁnancial statements
and to identify any information that is apparently materially incorrect based on,
or materially inconsistent with, the knowledge acquired by us in the course of
performing our audit. If we become aware of any apparent material misstatements
or inconsistencies we consider the implications for our report.

108

Company ﬁnancial statements

COMPANY BALANCE SHEET

for the year ended 31 December 2016

FIXED ASSETS

Investments

CURRENT ASSETS

Debtors
Derivative ﬁnancial instruments
Cash at bank and in hand

TOTAL ASSETS

CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
NET CURRENT ASSETS/(LIABILITIES)

TOTAL ASSETS LESS CURRENT LIABILITIES

CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
NET ASSETS/(LIABILITIES)

CAPITAL AND RESERVES

Issued share capital
Share premium
Merger reserve
Retained earnings
TOTAL EQUITY

Notes

2016
€m

1,603.9

4
5
6

128.0
26.2
98.5
252.7
1,856.6

(580.7)
(328.0)

1,275.9

–
1,275.9

2.9
1,478.4
40.4
(245.8)
1,275.9

2015
€m

86.6

142.3
3.8
0.4
146.5
233.1

(213.5)
(67.1)

19.6

(22.6)
(3.0)

0.6
85.4
40.4
(129.4)
(3.0)

The Financial Statements from pages 108 to 118 were approved and authorised for issue by the Board of Directors on 23 March 2017 and signed on their behalf by:

KJ Alexander
(Chief Executive Ofﬁcer)

P Miles
(Chief Financial Ofﬁcer)

GVC Holdings PLC Annual Report 2016

COMPANY STATEMENT OF
CHANGES IN EQUITY

for the year ended 31 December 2016

Balance at 1 January 2015

Share option charges2
Share options surrendered
Dividend paid
Transactions with owners

Loss for the year
Total comprehensive income for the year
BALANCE AS AT 31 DECEMBER 2015

Balance at 1 January 2016

Issue of share capital
Share option charges2
Share options surrendered
Share options through subsidiaries
Share options exercised
Transactions with owners

Loss for the year
Total comprehensive income for the year
BALANCE AS AT 31 DECEMBER 2016

Notes

Share
capital
€m
0.6

Share
premium
€m
85.4

Merger
reserve
€m
40.4

Retained
earnings1
€m
(64.1)

–
–
–
–

–
–
0.6

0.6

2.3
–
–
–
–
2.9

–
–
2.9

–
–
–
–

–
–
85.4

85.4

1,391.9
–
–
–
1.1
1,478.4

–
–
1,478.4

–
–
–
–

–
–
40.4

40.4

–
–
–
–
–
40.4

–
–
40.4

0.5
(12.1)
(34.3)
45.9

(19.4)
(19.4)
(129.4)

(129.4)

–
10.9
(0.8)
13.1
(7.2)
16.0

(132.4)
(132.4)
(245.8)

10
10
10
10

109

Total
€m
62.3

0.5
(12.1)
(34.3)
45.9

(19.4)
(19.4)
(3.0)

(3.0)

1,394.2
10.9
(0.8)
13.1
(6.1)
1,408.3

(132.4)
(132.4)
1,275.9

1. The share option reserve included within retained earnings at 31 December 2016 amounted to a balance of €9.0m.

2. Total share option charge per the income statement amounted to €10.9m, the difference being a credit for share options issued to employees of group companies.

All reserves of the Company are distributable, as under the Isle of Man Companies Act 2006 distributions are not governed by reserves but by the Directors undertaking
an assessment of the Company’s solvency at the time of distribution (section 49, Companies Act Isle of Man 2006).

The notes on pages 108 to 118 form part of these ﬁnancial statements.

110

Company ﬁnancial statements continued

NOTES TO THE COMPANY
FINANCIAL STATEMENTS

for the year ended 31 December 2016

1. SIGNIFICANT ACCOUNTING POLICIES
These ﬁnancial statements were prepared in accordance with Financial Reporting
Standard 101 “Reduced Disclosure Framework”.

1.6 Financial instruments
Financial assets and ﬁnancial liabilities are recognised when the Company becomes
a party to the contractual provisions of the instruments.

A summary of the signiﬁcant accounting policies are set out below, these policies
have been applied consistently to the years presented, unless otherwise stated.

1.1 Basis of preparation
The ﬁnancial information has been prepared on the historical cost basis with
the exception of those assets and liabilities which are carried at fair value,
and in accordance with applicable Isle of Man law and United Kingdom
accounting standards.

As permitted under FRS 101, the Company has taken advantage of the disclosure
exemptions available under that standard in relation to share-based payments,
business combinations, ﬁnancial instruments, fair values, presentation of a cashﬂow
statement and certain related party transactions. Where required, equivalent
disclosures are given in the consolidated ﬁnancial statements.

1.2 Investments
Investments in subsidiary undertakings are stated at cost less amounts written off.

1.3 Foreign currency translation
The Company maintains its accounting records in euro and the balance sheet is
expressed in this currency. Income and charges are translated at the exchange rates
ruling at the transaction date. Fixed assets are valued using historical exchange
rates. Other current assets and liabilities expressed in foreign currencies are
translated into euros at the rates of exchange in effect at the balance sheet date.
Realised exchange gains and losses and unrealised exchange losses are recognised
in the proﬁt and loss account.

1.4 Fixed assets
Investments in subsidiaries are shown as ﬁxed assets in the Company balance
sheet, and are valued at cost less any provision for impairment in value.

1.5 Share-based payments
The Group has share based payment schemes which allow certain employees
and contractors to acquire shares of the Company. The Group has accounted for
these under IFRS 2 Share-based payments. As the related services are received by
subsidiary entities, the Company accounts for these as a capital contribution made
to relevant subsidiaries.

Share option schemes
The fair value of options granted under the LTIP and MIP schemes will be
recognised as an share based payment expense with a corresponding increase in
equity. The fair value is measured at grant date and spread over the period during
which the employees become unconditionally entitled to the options. The fair
value of the options granted are measured using either a binomial or Monte Carlo
valuation model. This valuation method takes into account the terms and conditions
upon which the options were granted. The amount recognised as an expense
is adjusted to reﬂect the actual number of share options that vest and market
conditions if applicable.

Financial assets and ﬁnancial liabilities are initially measured at fair value.
Transaction costs that are directly attributable to the acquisition or issue of ﬁnancial
assets and ﬁnancial liabilities (other than ﬁnancial assets and ﬁnancial liabilities
at fair value through proﬁt or loss) are added to or deducted from the fair value
of the ﬁnancial assets or ﬁnancial liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of ﬁnancial assets or
ﬁnancial liabilities at fair value through proﬁt or loss are recognised immediately
in proﬁt or loss.

1.6.1 Non-derivative ﬁnancial instruments
Non-derivative ﬁnancial instruments comprise debtors, loans and borrowings,
and trade and other creditors. Non-derivative ﬁnancial instruments are recognised
initially at fair value, plus, for instruments not at fair value through proﬁt or loss,
any directly attributable transaction costs. Subsequent to initial recognition,
non-derivative ﬁnancial instruments are measured at amortised cost using the
effective interest method. Provisions for impairment are made against ﬁnancial
assets if considered appropriate and any impairment is recognised in proﬁt or loss.

1.6.2 Available for Sale Financial Assets (AFS)
AFS ﬁnancial assets are non-derivative ﬁnancial assets that are either designated
to this category or do not qualify for inclusion in any of the other categories of
ﬁnancial assets.

AFS ﬁnancial assets are measured at fair value. Gains and losses are recognised in
the statement of total recognised gains and losses, except for interest and dividend
income, impairment losses and foreign exchange differences on monetary assets,
which are recognised in proﬁt or loss.

When the asset is disposed of or is determined to be impaired, the cumulative
gain or loss recognised in the statement of total recognised gains and losses is
reclassiﬁed to proﬁt or loss. Interest calculated using the effective interest method
and dividends are recognised in proﬁt or loss within ﬁnance income.

For AFS equity investments impairment reversals are not recognised in proﬁt loss
and any subsequent increase in fair value is recognised in the statement of total
recognised gains and losses.

1.6.3 Derivative ﬁnancial instruments
Derivative ﬁnancial instruments are accounted for at fair value through proﬁt and
loss (FVTPL). The options associated with the Company’s investment in BHL
were considered derivative ﬁnancial instruments and carried at their fair value
and re-measured at each reporting date. Any movements in fair value are taken
to the proﬁt and loss account.

1.6.4 Impairment of ﬁnancial assets
Financial assets are assessed for indicators of impairment at the end of each
reporting period. Financial assets are considered to be impaired when there is
objective evidence that, as a result of one or more events that occurred after the
initial recognition of the ﬁnancial asset, the estimated future cashﬂows of the
investment have been affected.

Objective evidence of impairment could include:

(cid:3)(cid:132) signiﬁcant ﬁnancial difﬁculty of the issuer or counterparty; or

(cid:3)(cid:132) breach of contract, such as a default or delinquency in interest or principal

payments; or

(cid:3)(cid:132) it becoming probable that the borrower will enter bankruptcy or ﬁnancial

re-organisation; or

(cid:3)(cid:132) the disappearance of an active market for that ﬁnancial asset because

of ﬁnancial difﬁculties.

GVC Holdings PLC Annual Report 2016

111

2. PROFIT AND LOSS ACCOUNT
The loss for the year dealt with in the accounts of the Company was €117.9m
(2015: loss of €19.4m). The Company has not presented a separate proﬁt and loss
account. The loss in the year relates mainly to the exceptional costs incurred in
relation to the acquisition of bwin.party.

3. INVESTMENTS

INVESTMENT IN SUBSIDIARY UNDERTAKINGS

At 1 January
Additions
Disposals
At 31 December

AVAILABLE FOR SALE FINANCIAL ASSETS

At 1 January
Impairment
Disposal
At 31 December

2016
€m

84.0
1,519.9
–
1,603.9

2016
€m

2.6
(0.7)
(1.9)
–

2015
€m

148.5
–
(64.5)
84.0

2015
€m

3.8
(1.2)
–
2.6

Total investments 31 December

1,603.9

86.6

Acquisition of bwin.party
On 1 February 2016, the Group acquired 100% of the share capital of bwin.party
digital entertainment plc (“bwin.party”), an online gaming company traded on
the main market of the London Stock Exchange and listed on the Ofﬁcial List
(Premium Segment), for total consideration of €1,506.6m.

Share option schemes
The Company has further increased its investment of €13.1m in certain subsidiary
companies as a consequence of the MIP option scheme (see note 24 of the
consolidated group).

Available for sale asset
On 14 May 2014, the Group acquired a 15% stake in Betit Holdings Limited (“BHL”)
from Betit Securities Limited (“BSL”). The consideration was for €3.5m, which
was attributed to both the available for sale asset (€5.2m) and the option liability
(€1.7m) taken on at acquisition. The asset held for sale consideration, together with
professional fees incurred at the time, amounted to a total upfront cost of €5.4m
which was impaired at 31 December 2015 to €2.6m. This asset was impaired by
€0.7m prior to being sold during the year.

1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
1.7 Going concern
The accounts are prepared on a going concern basis, as there are available proﬁts
within subsidiaries which, when paid as dividends, will offset the net current
liabilities reported on the balance sheet. Further, although the Company is showing
net current liabilities at 31 December 2016 this will reverse upon the re-ﬁnancing
of long-term debt which occurred subsequent to the reporting date (see note 12).

1.8 Signiﬁcant judgements
In the application of the accounting policies, which are detailed in this note, the
Directors are required to make judgements, estimates and assumptions about
the carrying amounts of assets and liabilities that are not readily apparent from
other sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results
may differ from these estimates. The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision affects only that period,
or in the period of the revision and future periods if the revision affects both current
and future periods. The estimates and assumptions, which have a signiﬁcant risk
of causing a material adjustment to the carrying amounts of assets and liabilities
within the next ﬁnancial year, are discussed below.

1.8.1 Available for sale assets
Management apply judgement in evaluating the fair value of the available
for sale assets, and any impairment to the value which is recognised in the
income statement.

1.8.2 Debtors
Management apply judgement in evaluating the recoverability of amounts owed
by Group undertakings. To the extent that the Board believes receivables not to be
recovered they have been provided for in these consolidated ﬁnancial statements.

1.8.3 Share options
Accounting for share option charges requires a degree of judgement over such
matters as dividend yield, and expected volatility. Further details on the assumptions
made by management are disclosed in note 24 of the Group ﬁnancial statements.

1.8.4 Embedded derivatives
The drawn-down Cerberus Loan contains embedded derivatives. The interest
rate on the loan is EURIBOR, subject to a ﬂoor of 1%, plus a margin of 11.5%.
Based on recent guidance issued by IFRIC, management assess this ﬂoor to be
closely related to the host contract and therefore it has not been treated as an
embedded derivative.

In addition, the loan may be repaid early but if it is repaid in the ﬁrst year, there is an
additional “make-whole” premium payable. If it is repaid before the expiry date, the
payment of the exit fees is brought forward but additional fees at the 12 month and
18 month date could be avoided. These options for early repayment are considered
to be non-closely related to the host contract and have been recognised separately.
The options have been grouped for the purposes of evaluating the embedded
derivative. They have been valued based on the projected cashﬂows and applying a
probability weighting to the potential cash saving from lower effective interest rates.

1.8.5 Carrying value of investments
Determining whether investments in subsidiaries are impaired requires an
assessment of impairment indicators and, if indicators exist, and estimation of their
recoverable amounts. The calculation of recoverable amount requires the entity to
estimate the future cashﬂows expected to arise from the investments and select
a suitable discount rate in order to calculate present value.

112

Company ﬁnancial statements continued

NOTES TO THE COMPANY FINANCIAL
STATEMENTS CONTINUED

for the year ended 31 December 2016

3. INVESTMENTS CONTINUED
Subsidiaries
The signiﬁcant subsidiaries of the Company are detailed below:

Subsidiary
GVC Services B.V.1
Intera N.V.
Bluebell B.V.
Sporting Odds Limited
Interactive Sports (C.I.) Limited
Longfrie Limited
Martingale Malta 2 Limited
Headlong Limited
Electraworks Limited
PartyGaming IA Limited
PartyGaming Finance Limited

1. Also has a branch registered in Israel.

4. DEBTORS

Amounts owed by Group undertakings
Other debtors
Prepayments and accrued income

5. DERIVATIVE FINANCIAL INSTRUMENTS

BALANCE AT 1 JANUARY 2015

Movement in fair value
BALANCE AT 31 DECEMBER 2015

Recognised on loan drawdown
Disposal in the period
Change in fair value of early repayment option
BALANCE AT 31 DECEMBER 2016

Country of incorporation
Netherlands Antilles
Netherlands Antilles
Netherlands Antilles
England and Wales
Alderney
Guernsey
Malta
Malta
Gibraltar
Bermuda
Bermuda

Winunited
option
€m
–
3.8
3.8
–
–
(0.1)
3.7

Early
repayment
option
€m
–
–
–
7.4
–
15.1
22.5

Ownership interest
2015
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

2016
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

2016
€m
124.3
2.2
1.5
128.0

Betit
option
€m
(1.7)
1.0
(0.7)
–
0.7
–
–

2015
€m
131.1
3.3
7.9
142.3

Total
€m
(1.7)
4.8
3.1
7.4
0.7
15.0
26.2

5.1 Winunited option
On 24 March 2015, GVC contracted with Winunited Limited for the day-to-day back ofﬁce operations of the Winunited business, licensed in Malta. Under the
terms of the agreement, GVC obtained a call option to purchase the Winunited assets comprising goodwill, customers, licences, brands and websites.
The exercise period for the option is in the three months prior to the ﬁve year anniversary of 24 March 2015. No consideration was paid for the call option.

At 31 December 2016 the option was valued using a Monte Carlo valuation model and two methodologies: a discounted cashﬂow and a multiples-based
calculation. A long-term growth rate of 2% (2015: 2%) was assumed, and a discount rate of 13% (2015: 15%) based on industry peers and observable
inputs. Based on this model, the value of the call option at 31 December 2016 was €3.7m (2015: €3.8m). This decrease in the fair value of the option has
been recognised in the income statement in accordance with IAS 39.

GVC Holdings PLC Annual Report 2016

113

5. DERIVATIVE FINANCIAL INSTRUMENTS CONTINUED
5.2 Cerberus loan early repayment option
On 2 February 2016, a further €380m was drawn down under the Cerberus Loan facility. The facility has a repayment date of 4 September 2017 but has
been repaid earlier (see note 30 in the consolidated Group). Early repayment will change the proﬁle and size of the cash payments and this feature has been
identiﬁed as an embedded derivative therefore separated from the host contract. Changes in the Group’s credit rating will have an impact on the value of the
option for early repayment. The option has been valued by a third party valuation specialist based on the contracted cashﬂows under the terms of the facility
and applying a probability weighted measure to the cost saving opportunities. The value of the early repayment at 31 December 2016 was €22.5m.

5.3 Betit option
On 14 May 2014, the Group acquired a 15% stake in Betit Holdings Limited (“BHL”). The Group had a call option to acquire the balance of the outstanding
shares which could be exercised no earlier than 1 July 2017 and no later than 30 September 2017, and would be subject to further Maltese Gaming Authority
clearance and the Stock Exchange Rules. The minimum call option price was €70m, and the actual price would be determined by the mix of revenues
between regulated and non-regulated markets and certain multiples attaching thereto.

6. CASH AT BANK AND IN HAND

Bank balances

7. CREDITORS

Amounts due to Group undertakings
Interest bearing loan (see note 8.1 below)
Non-interest bearing loan (see note 8.2 below)
Share option liability (note 10)
Forward contract liability
Other creditors
Creditors: amounts due within one year

Other creditors
Share option liability
Interest bearing loan
Creditors: amounts after more than one year

2016
€m
98.5

2016
€m
167.9
403.5
–
–
–
9.3
580.7

–
–
–
–

2015
€m
0.3

2015
€m
186.5
–
3.0
9.7
9.9
4.4
213.5

0.7
2.1
19.8
22.6

114

Company ﬁnancial statements continued

NOTES TO THE COMPANY FINANCIAL
STATEMENTS CONTINUED

for the year ended 31 December 2016

8. LOANS AND BORROWINGS
8.1 Interest bearing loan
On 4 September 2015, the Group entered into an agreement with Cerberus Business Finance LLC for a loan of up to €400m, in order to part-fund the
acquisition of bwin.party. Under the terms of the loan, a “Hedging Loan” of up to €20m could be drawn down in advance of the acquisition, in order to fund
a hedging arrangement for the conversion of the loan funds into GBP and to pay for initial costs including loan arrangement fees. Accordingly, €20m was
drawn down immediately on entering into the contract. The balance of €380m was drawn down on 1 February 2016. This loan was repaid in January 2017
and an alternate bridge ﬁnancing facility of €250m provided by Nomura International plc was drawn down. This loan itself was then replaced with a long-term
institutional loan in March 2017.

LOAN BALANCE AT 1 JANUARY 2015

Initial drawdown
Initial costs and loan servicing fees paid
Interest instalments
Effective interest (note 4)
LOAN BALANCE AT 31 DECEMBER 2015

Loan drawdown
Arising on business combinations
Revaluation of loan balances
Loan repayment
Arrangement fees and loan services fees paid
Fair value of embedded derivatives
Interest instalments paid
Amortisation of loan fees and interest charged
Amortisation of early repayment option
LOAN BALANCE AT 31 DECEMBER 2016

Split between the following as at 31 December 2015:
CURRENT LIABILITIES
NON-CURRENT LIABILITIES

Split between the following as at 31 December 2016:
CURRENT LIABILITIES
NON-CURRENT LIABILITIES

Principal
€m
–
20.0
–
–
–
20.0
380.0
39.4
(0.5)
(52.0)
–
–
–
–
–
386.9

Interest and
fees carried
€m
–
–
(0.8)
(0.6)
1.2
(0.2)
–
–
–
–
(15.6)
–
(39.7)
69.0
–
13.5

Early
repayment
option
€m
–
–
–
–
–
–
–
–
–
–
–
7.4
–
–
(4.3)
3.1

Total
€m
–
20.0
(0.8)
(0.6)
1.2
19.8
380.0
39.4
(0.5)
(52.0)
(15.6)
7.4
(39.7)
69.0
(4.3)
403.5

–
19.8

403.5
–

8.2 Non-interest bearing loan
As part of the Group’s acquisition of Sportingbet PLC, a credit facility was made available to the Group by William Hill PLC. This loan was fully repaid in
February 2016 (31 December 2015: balance of €3.1m).

GVC Holdings PLC Annual Report 2016

115

9. CALLED UP EQUITY SHARE CAPITAL
On 21 May 2010, shareholders of Gaming VC Holdings S.A., approved a redomiciliation to Luxembourg which resulted, pari passu, in shareholders holding
shares with a nominal value of €0.01 in GVC Holdings PLC. As a result of this transaction, GVC Holdings PLC acquired all the assets and liabilities of
Gaming VC Holdings S.A. Arising from this transaction was the creation of a Merger Reserve, which is distributable.

The authorised and issued share capital is:

AUTHORISED

Ordinary shares of €0.01 each
At 31 December – 350,000,000 shares (2015: 350,000,000 shares)
ISSUED, CALLED UP AND FULLY PAID

At 31 December – 293,268,229 shares (2015: 61,276,480 shares)

1. The authorised share capital was increase as part of the Group’s acquisition of Sportingbet PLC.

The issued share capital history is shown below:

Balance at 1 January
Issue of shares at acquisition
Issue of shares via placing
Issue of shares via subscription
Other share issues
Balance at 31 December

2016
€m

3.5

2.9

2015
€m

3.5

0.6

2016
61,276,480
194,841,498
27,978,812
7,566,212
1,605,227
293,268,229

2015
61,276,480
–
–
–
–
61,276,480

10. SHARE OPTION SCHEMES
At 31 December 2016, the Group had the following share options schemes for which options remained outstanding at the year-end:
i. Options were granted to Directors and employees under the existing and already approved LTIP on 2 June 2014. Under this scheme, 2,450,000 options
held by Directors were cancelled under the arrangements for the acquisition of bwin.party during the period and as at 31 December 2016, 75,000
employee share options remained outstanding.

ii. Options were granted to Directors under the terms of the 2015 LTIP, as set out in the 13 November 2015 prospectus on pages 325 to 329.
iii. Options were granted under a Management Incentive Plan under the same terms of the 2015 LTIP.

The following options to purchase €0.01 ordinary shares in the Company were granted, exercised, forfeited or existing at the year-end:

Date of Grant
28 February 2013
2 June 2014
2 February 2016
2 February 2016
2 February 2016
16 December 2016
TOTAL ALL SCHEMES

Exercise
price
233.5p
1p
422p
467p
422p
422p

Existing at
1 January
2016
156,947
3,325,000
–
–
–
–
3,481,947

Granted
in the year
–
–
13,197,111
4,399,037
200,000
8,825,000
26,621,148

Cancelled
in the year
–
(2,450,000)
(2,932,691)
(977,564)
–
–
(6,360,255)

Exercised
in the year
(156,947)
(800,000)
–
–
–
(166,666)
(1,123,613)

Existing at
31 December
2016
–
75,000
10,264,420
3,421,473
200,000
8,658,334
22,619,227

Exercisable at
31 December
2016
–
75,000
–
–
–
1,794,445
1,869,445

Vesting
criteria
Note a
Note b
Note c
Note d
Note e
Note f

116

Company ﬁnancial statements continued

NOTES TO THE COMPANY FINANCIAL
STATEMENTS CONTINUED

for the year ended 31 December 2016

10. SHARE OPTION SCHEMES CONTINUED
The existing share options at 31 December 2016 are held by the following employees and consultants:

Option price

Grant date
Kenneth Alexander
Richard Cooper
Lee Feldman (note d)
Norbert Teufelberger (note e)
Employees
Consultants

1p
2 June
2014
–
–
–
–
75,000
–
75,000

422p
2 February
2016
6,842,947
3,421,473
–
200,000
–
–
10,464,420

467p
2 February
2016
–
–
3,421,473
–
–
–
3,421,473

422p
16 December
2016
–
–
–
–
6,963,334
1,695,000
8,658,334

Total
6,842,947
3,421,473
3,421,473
200,000
7,038,334
1,695,000
22,619,227

Note a: These equity-settled options were granted to third parties as part of the Sportingbet PLC acquisition following underwriting commitments made at

Note b: These equity-settled options were granted to certain Directors and employees. The awards will vest in full (and become exercisable) on the share

Note c: These equity-settled awards were issued on completion of the acquisition of bwin.party. The options vest and become exercisable, subject to the

satisfaction of a performance condition, over 30 months, with one-ninth vesting six months after the date of grant and a further ninth vesting at each
subsequent quarter. The options lapse, if not exercised, on 2 February 2026. The performance condition is comparator total shareholder return
(“TSR”) of the Group against the FTSE 250. Each ninth of the shares will have its TSR condition reviewed from the date of grant until the relevant
testing date. To the extent the TSR is not met at that time, it is tested again the following quarter and, if necessary, at the end of the 30 month
vesting period. In order to vest, the TSR of the Group must rank at median or above against the FTSE 250. In the year, two-ninths of the options had
vested. Having received the Directors’ notice to exercise, the Remuneration Committee exercised its discretion to make a cash alternative payment to
the Directors in respect of that portion of shares. The cash alternative payment was calculated by deducting the option price from the market value
of a share on the day prior to the date the Company received the exercise note.

Note d: These equity-settled awards were issued on the same basis as the awards in note c but at a higher exercise price which represents the market

value of the shares as at the date the scheme became effective. In order to compensate Lee Feldman for the higher exercise price, the Company
has agreed to pay him a cash bonus of £2.0m over the 30 month vesting period of the option, but only upon option vesting and satisfaction of the
performance condition described above, and he has to reinvest 50% of this in GVC shares. In the year, two-ninths of the options had vested. Having
received the Directors’ notice to exercise, the Remuneration Committee exercised its discretion to make a cash alternative payment to the Directors
in respect of that portion of shares. The cash alternative payment was calculated by deducting the option price from the market value of a share on
the day prior to the date the Company received the exercise note.

Note e: These awards were issued on completion of the acquisition of bwin.party. The equity-settled options, which are not subject to a performance

condition, vest and become exercisable over 24 months, with one-seventh vesting six months after the date of grant and a further seventh vesting at
each subsequent quarter. The options lapse, if not exercised, on 2 February 2026.
These equity-settled awards were issued on the same basis as the awards in note c and granted on 16 December 2016.

Note f:

GVC Holdings PLC Annual Report 2016

117

€m
(11.8)
11.8
–

10. SHARE OPTION SCHEMES CONTINUED
10.1 Liability for cash-settled options
During 2015, options granted under a previous scheme were surrendered and in light of this surrender, a new retention plan was put in place. The liability
under this plan at 31 December 2015 was €11.7m. As a result of the acquisition of bwin.party, these liabilities were settled in the period and the after-tax
proceeds were re-invested in new GVC shares.

In addition there was a cash-settled option liability in respect of the 2014 scheme of €0.2m which is recognised as payable to Group undertakings. During the
year, a new liability was recognised for the cash-settled bonus scheme as set out in note d above, however in the Company accounts this is recognised as
payable to Group undertakings, where participants in the scheme are employed.

The movements in cash-settled share option liabilities are set out in the table below:

Balance at 1 January 2016
Settled on the acquisition of bwin.party
Balance at 31 December 2016

10.2 Weighted average exercise price of options
The number and weighted average exercise prices of share options is as follows:

Weighted average
exercise price
31 December
2016
11p
422p
126p
422p
–
416p

Number of options
31 December
2016
3,481,947
26,621,149
(834,723)
(2,450,000)
–
26,818,373
5,236,844

Weighted average
exercise price
31 December
2015
94p
–
–
184p
1p
11p

Number of options
31 December
2015
6,806,947
–
–
(3,200,000)
(125,000)
3,481,947
156,947

The options outstanding at 31 December 2016 have a weighted average contractual life of 9.1 years (31 December 2015: 8.4 years).

10.3 Valuation of options
The fair value of services received in return for share options granted were measured by reference to the fair value of share options granted. The Group
engaged a third party valuation specialist to provide a fair value for the options.

Fair value of share options and assumptions:

Date of grant
2 February 2016 – equity-settled 30 months
2 February 2016 – equity-settled 30 months
2 February 2016 – equity-settled 24 months
16 December 2016 – equity-settled 30 months

Share price at
date of grant1
£
4.67
4.67
4.67
6.48

Exercise
price
£
4.22
4.67
4.22
4.22

Expected
volatility
%
22%-30%
22%-30%
n/a
30%-28%

Exercise
multiple
n/a
n/a
n/a
n/a

Expected
dividend yield
n/a
n/a
n/a
n/a

Risk free
rate2
%
n/a
n/a
n/a
n/a

Fair value at
measurement date
£
0.32-0.47
0.22-0.28
0.32-0.47
1.43-1.94

1. This is the bid price, not the mid-market price, at market close, as sourced from Bloomberg.

2. The measurement of the risk-free rate was based on rate of UK sovereign debt prevalent at each grant date over the expected term of the option.

118

Company ﬁnancial statements continued

NOTES TO THE COMPANY FINANCIAL
STATEMENTS CONTINUED

for the year ended 31 December 2016

11. DIVIDENDS
As a result of the acquisition of bwin.party and the combination of debt covenants and the intended restructuring of the Group, the Directors did not pay any
dividends in 2016. A special dividend of €0.149 (£0.125) per share was declared in December 2016 and paid in February 2017.

12. SUBSEQUENT EVENTS
In October 2016, the Company secured a one year €250m loan facility from Nomura International plc, which was used in part to repay the outstanding loan
provided by Cerberus Business Finance LLP associated with the acquisition of bwin.party. The Nomura Loan provided a short-term facility at a reduced overall
cost from that associated with the Cerberus Loan.

The Group has now successfully secured long-term and increased debt facilities comprising of a €320m Senior Secured Term and Revolving Credit Facility,
composed of a €250m term loan (maturity six years) and a €70m revolving credit facility (maturity ﬁve years).

GVC Holdings PLC Annual Report 2016

Shareholder information

119

SHAREHOLDER INFORMATION

REGISTERED OFFICE, REGISTRAR
AND UK TRANSFER AGENT
Registered Ofﬁce:
32 Athol Street
Douglas
Isle of Man
IM1 1JB

Registration Number:
4685V

Registrar:
Capita Registrars (Isle of Man) Limited
Clinch’s House
Lord Street
Douglas
Isle of Man
IM99 1RZ

UK Transfer Agent:
Capita Asset Services
The Registry
34 Beckenham Road
Kent BR3 4TU

Telephone: 0871 664 0300

DIVIDEND TIMETABLE

23 March
30 March
31 March
12 May

Dividend declared
Ex-dividend date
Record date
Payment

FUTURE TRADING UPDATES AND
FINANCIAL CALENDAR

4 May
12 May
25 May
20 June
July
September
October

Posting of Annual Report and Accounts
Dividend payment
Capital Markets day and trading update
AGM
Trading update
Interim results
Trading update

ADVISORS
Sponsor:
Cenkos Securities plc
6.7.8 Tokenhouse Yard
London EC2R 7AS

Lawyers to the Company:
As to matters of UK law
Addleshaw Goddard LLP
Milton Gate
60 Chiswell Street
London EC1Y 4AG

As to matters of Isle of Man law:
DQ Advocates Limited
The Chambers
5 Mount Pleasant
Douglas
Isle of Man
IM1 2PU

As to matters of Maltese law:
Fenech & Fenech Advocates
198, Old Bakery Street
Valletta, VLT 1455
Malta, Europe

As to matters of Gibraltar law:
Isolas
Portland House
Glacis Road
GX11 1AA
Gibraltar

Auditor:
Grant Thornton UK LLP
Grant Thornton House
Melton Street
London NW1 2EP

Financial PR Advisers:
Bell Pottinger
Holborn Gate
330 High Holborn
London WC1V 7QD

Financial Advisors:
Houlihan Lokey
83 Pall Mall
London SW1Y 5ES

120

Shareholder information continued

GLOSSARY

Automated accounts management systems
The purchase of bwin.party digital entertainment plc by the Company
Fully diluted earnings per share based on adjusted PBT
Proﬁt before exceptional items, amortisation associated with acquisition, dividends from previously sold businesses
Business-to-business
Business-to-consumer
Business intelligence
bwin.party digital entertainment plc
Compound annual growth rate
Cash generating units
Earnings before interest, taxation, depreciation, amortisation, impairment charges, changes in the fair value of derivative
ﬁnancial instruments, share option charges and exceptional items
Customer marketing services
Each month in the prior period re-translated at the current periods exchange rate
Revenue less betting taxes, payment service provider fees, software royalties, afﬁliate commissions, revenue share and
marketing costs
Contribution as a percentage of NGR
Customer relationship management
Customer services
Disclosure and transparency rules
GVC Holdings PLC incorporating bwin.party
Earnings per share
H2 Gambling Capital – independent providers of gambling market data and estimates
Internal audit and risk management
International Accounting Standards
International Financial Reporting Standards
Internet of things
Key performance indicators
Know your customer – customer veriﬁcation tools
Long term incentive plan
Management incentive plan
Cash and cash equivalents (including amounts recorded as assets in disposal groups classiﬁed as held for sale), less customer
liabilities less interest bearing loans and borrowings
Revenue before deducting VAT
Net Gaming Revenue in the year to date
Net Gaming Revenue less VAT (imposed by certain EU jurisdictions on either sports or gaming revenue)
Sports wagers less payouts
Sports Gross Win Margin divided by Sports wagers
Sports Gross Win Margin less free bets and promotional bonuses

DEFINITION OF TERMS

AAMS
Acquisition
Adjusted fully diluted EPS cents
Adjusted PBT
B2B
B2C
BI
bwin.party
CAGR
CGUs
Clean EBITDA

CMS
Constant currency basis
Contribution

Contribution margin
CRM
CS
DTR
Enlarged Group
EPS
H2GC
IA
IAS
IFRS
IOT
KPIs
KYC
LTIP
MIP
Net debt

Net Gaming Revenue (“NGR”)
NGR YTD
Revenue
Sports Gross Win Margin
Sports Gross Win Margin %
Sports Net Gaming Revenue
(“Sports NGR”)

GVC Holdings PLC Annual Report 2016

www.gvc-plc.com

Design and production by Radley Yeldar | ry.com

Printed by Pureprint Group. This report has been printed on paper which is certiﬁed
by the Forest Stewardship Council®. The paper is Process Chlorine Free (PCF)
made at a mill with ISO 14001 environmental management system accreditation.
This report was produced using the pureprint® environmental print technology, a
guaranteed, low carbon, low waste, independently audited process that reduces the
environmental impact of the printing process. Printed using vegetable oil based inks
by a CarbonNeutral® printer certiﬁed to ISO 14001 environmental management
system and registered to EMAS the Eco Management Audit Scheme.

GVC Holdings PLC | www.gvc-plc.com

Registered Ofﬁce
32 Athol Street
Douglas
Isle of Man
IM1 1JB

Incorporated in the Isle of Man
under number 4685V