GVC HOLDINGS PLC | ANNUAL REPORT 2019
FOR THE GOOD OF
ENTERTAINMENT
Annual report 2019
44
Safer gambling
At GVC, everything we do is For the Good of Entertainment.
We’re the global players whose brands you’ll find in local
communities, providing responsible sports-betting and
gaming that makes the world’s biggest live events even
more memorable.
OVERVIEW
GOVERNANCE
Chairman’s introduction
02
Chairman’s letter
Board leadership and company purpose
Division of responsibilities
Composition, succession and evaluation
Nominations Committee report
Audit Committee report
Directors’ Remuneration report
Directors’ report
Independent Auditor’s report
68
70
74
76
80
82
88
115
117
For more information see
page 45
STRATEGIC REPORT
At a glance
Chief Executive’s review
Top stories of 2019
Marketplace
Regulatory update
Business model
Vision and strategy
KPIs
Proven technology platform
Business review
Corporate social responsibility
CSR Committee Report
Section 172 statement
Chief Financial Officer’s review
Principal risks
04
06
12
22
24
26
28
29
30
31
42
53
54
56
60
GVC Holdings PLC | Annual Report 2019
02
Chairman’s Introduction
For more information see
page 02
FINANCIAL STATEMENTS
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated balance sheet
Consolidated statement of
changes in equity
Consolidated statement of cash flows
Notes to the consolidated
financial statements
Company balance sheet
Company statement of
changes in equity
Notes to the Company
financial statements
Glossary
Shareholder information
Corporate information
124
125
126
127
128
129
178
179
180
184
185
186
44
Safer gambling
Read our top
stories from 2019
we launched the
GVC GLOBAL FOUNDATION…
For more information see
page 12
Established brands,
global reach and
local focus…
For more information see
page 14
GVC one, CREATING AN
OPERATING POWERHOUSE…
For more information see
page 16
US – a Land
of opportunity…
For more information see
page 18
Transforming
the customer
experience…
For more information see
page 20
01
“ 2019 was yet
another highly
successful year
for the Group.”
Kenneth Alexander
Chief Executive
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Chairman’s Introduction
Performance highlights
CHAIRMAN’S INTRODUCTION
“ While I have only been with GVC for
a relatively short period of time,
it has become immediately clear
to me that the business really can
make the claim that it has industry-
leading technology, products, brands,
marketing capabilities and people,
underpinned by our determination
to spearhead the industry’s approach
to safer gambling.”
J M Barry Gibson
Non-Executive Chairman
02
GVC Holdings PLC | Annual Report 2019
I am delighted to be writing this, my first
statement, as your Chairman at what is
a particularly exciting moment in GVC’s
extraordinary growth story. Having worked
in a number of companies in the gambling
sector over many years, GVC is a business
that I have long admired and whose stellar
progress I have followed closely.
A key driver behind this success has been
the huge contribution of my predecessor
Lee Feldman, who has played an instrumental
role in GVC’s transformation from a small
AIM listed business to a major Main Market,
premium listed company. On behalf of
everyone at GVC, I would like to sincerely
thank Lee for all that he has done in his
11 years as Chairman.
While I have only been with GVC for a
relatively short period of time, it has become
immediately clear to me that the business
really can make the claim that it has industry-
leading technology, products, brands,
marketing capabilities and people. It is equally
clear to me that I am joining at a time when
there is real momentum across all areas of
GVC’s operations, as demonstrated by its
strong operational and financial performance
in 2019, which has continued into the start of
the new financial year.
2019 was another year of excellent progress.
The integration of the Ladbrokes Coral
businesses is proceeding to plan, and the
migration of the Ladbrokes, Coral and Gala
online brands are due to complete by the
end of the first half of the new financial year.
In the US, Roar Digital, our joint-venture with
MGM Resorts, made good progress during
the year with the highlights being the launch in
September of the BetMGM app in New Jersey,
as well as the signing of an exclusive multi-
year partnerships with Buffalo Wild Wings and
Yahoo Sports.
Safer Gambling and The GVC Foundation
Every aspect of our performance and
strategy continues to be underpinned by our
determination to spearhead the industry’s
approach to safer gaming.
Our customers are vital to us to ensure the
long-term sustainability of our business.
Millions use our products every day and they
have a right to do so in a safe and enjoyable
environment. We have a responsibility to them
and our other stakeholders to protect them
from harm as far as possible. We recognise
that while the overwhelming majority of
customers enjoy our products and services
safely, it is critical that we do everything in
our power to protect the small minority of
customers for whom gambling can become
a problem. To that end, in January 2019,
we launched our ‘Changing for the Bettor’
programme to minimise gambling-related
harm while improving our understanding of
the issues.
OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS
NGR*
(£m)
3,655.1
+2%
2018: 3,571.4
Underlying EBITDA*
(£m)
678.3
-10% (+14% regulation adjusted)
2018: 755.3
Safer Gambling Commitment
RET investment
1% UK GGR
by 2022 (10-fold increase)
2018: 0.1%
* The Group’s proforma results are unaudited and presented
as if the current Group, post the acquisition of Ladbrokes
Coral Group plc, had existed since 1 January 2018.
The results of Crystalbet and Neds are included from
the dates of acquisition (11 April 2018 and 28 November
2018 respectively).
This programme also supports a number of
initiatives including a five-year, multi-million-
pound research project with the Division on
Addiction, a Harvard Medical School teaching
hospital; the roll-out of a youth-focused
education syllabus with GamCare and EPIC
Risk Management; and the introduction of
sophisticated online player protection tools.
We also recognise that this is a multi-
faceted problem, and one that requires both
cross-industry collaboration as well as a
significant increase in investment. In April,
we committed to a ten-fold increase in the
funding of research, education and treatment
of problem gambling to 1% of our UK gross
gaming revenue by 2022 (equivalent to £20m),
a move that was matched by others in our
industry. We have also agreed with our largest
industry peers to work together to increase
safer gambling messages within advertising
and to share player data in order to improve
identification of vulnerable customers.
Our collaborative approach through bodies
including the Senet Group and the Remote
Gaming Association also helped to deliver
the pre-watershed “whistle-to-whistle” ban
on broadcast advertising around sport in
the UK, which came into effect in August.
GVC also unilaterally committed to ending
shirt sponsorships and perimeter board
advertising at all UK football clubs. We have
diverted sponsorship and advertising revenue
to support our partner Children with Cancer
UK as well as GambleAware.
In September we launched The GVC
Foundation, which coordinates and supports
our responsibility initiatives, objectives and
donations around the world. The Foundation
builds on the Group’s existing efforts, and
is focused on making a positive impact on
the societies and communities in which
we operate.
This is an area that is of paramount
importance to everyone at GVC, and indeed
to me personally, and we are deeply aware
that the most responsible operator will be the
most successful and sustainable operator.
While we have made huge progress across
a range of initiatives, we are not complacent
and recognise that there is more to be done
both by GVC and the wider industry.
Financial Performance
The Group delivered another strong
performance in 2019, with NGR up 2%
(3% in constant currency (“cc”)). Online
growth continued to be the highlight, with
NGR growing 13% (14% cc) and growth across
all our established territories. In UK Retail,
like-for-like NGR was down 12%, driven by
the cut in B2 machines maximum stakes to
£2, but trends in this area remain ahead of
initial guidance. Underlying proforma EBITDA
was down 10% and proforma operating
profit was down 20% as a result of the £2
FOBT stakes restriction. Excluding regulatory
change, underlying EBITDA was 14% ahead.
This enabled us to propose a second interim
dividend of 17.6p taking the total 2019
dividend to 35.2p, an increase of 10% on 2018.
Corporate Governance
GVC has evolved into one of the leading
global operators in our industry and we have
a duty to ensure that it is sustainable for
years to come. Your Board is committed to
overseeing and implementing the highest
standards of Environmental, Social and
Governance (“ESG”) behaviours, which are
entrenched in our values across the Group.
Your Board comprises individuals with diverse
backgrounds and experiences, each of whom
bring a wealth of different perspectives to
enable us to deliver GVC’s commercial, social
and financial objectives.
In addition to the change of Chairman,
there were other additions to the Board
during the year. Rob Wood was appointed
in March as a Director and Chief Financial
Officer, replacing Paul Bowtell. Rob has
made a fantastic contribution in his first
year in the role, having previously been
CFO of the Ladbrokes Coral UK Retail
business. In December we announced the
appointment of Jette Nygaard-Andersen
as an Independent Non-executive Director.
Jette has more than 20 years’ experience
in leadership and operational roles in media,
entertainment and digital businesses, and
her appointment further extends the breadth
and depth of the Board’s collective experience
and international outlook.
Post the year-end, in January, we announced
our intention to relocate GVC’s place of
management and control and consequently
its tax residence from the Isle of Man to
the UK, and the adoption of new articles of
association of the Company to facilitate this
relocation. This was subsequently approved
by shareholders at an EGM on 6 February.
In addition to easing the administrative
constraints of arranging Board and
shareholder meetings outside of the UK,
this move is part of our wider commitment
to operate to the very highest standards of
governance in all aspects of our operations.
Finally, none of what has been achieved
this year would have been possible without
the dedication, loyalty and hard work of our
colleagues across the business and around the
world. We are fortunate to have outstanding
talent at all levels of GVC, and I would like to
thank them all for their immense contribution
to the ongoing success of the Group.
J M Barry Gibson
Non-executive Chairman
5 March 2020
03
GVC Holdings PLC | Annual Report 2019 AT a Glance
WE ARE A TRULY
GLOBAL OPERATOR
OUR PURPOSE
To provide the best in class experience where
people can enjoy gambling responsibly.
VISION & STRATEGY
PROVEN TECHNOLOGY
OUR DIVISIONS
We operate a unique proprietary technology
platform across all of our product verticals.
Platform availability
TECHNOLOGY ENGINEERS
99.93%
>1,500+
>420 m
>12 bn
Casino spins a year
Sports bets a year
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,
diversification and a responsible approach
will enable us to continue to create
sustainable shareholder value through
capital and income growth.
“ We believe scale,
diversification
and a responsible
approach will enable
us to continue to
create sustainable
shareholder value
through capital and
income growth.”
Kenneth Alexander
Chief Executive
04
4
3
2
1
2019 NGR
1. Online
2. UK Retail
3. European Retail
4. Other
3 4
2
1
2019 Underlying Ebitda1,2
1. Online
2. UK Retail
3. European Retail
4. Other
59.3%
30.8%
7.9%
1.9%
72.0%
20.1%
8.0%
–0.1%
1. The Group’s proforma results are unaudited and presented
as if the current Group, post the acquisition of Ladbrokes
Coral Group plc, had existed since 1 January 2018.
The results of Crystalbet and Neds are included from
the dates of acquisition (11 April 2018 and 28 November
2018 respectively).
2. Excluding corporate post costs and IFRS 16.
For more information see
page 32
GVC Holdings PLC | Annual Report 2019
“ Our online operating model is highly
effective, delivering a sustainable
competitive advantage.”
Kenneth Alexander
Chief Executive
GLOBAL SCALE
Our scale and diverse base enables us to
operate in markets throughout the world.
>50 Licences in >20 jurisdictions
Offices worldwide
Employees & contractors
50+
20+
24,000+
24
33
42
250
FTSE MEMBERSHIP
GLOBAL BRANDS
Currencies
Languages
ONLINE MARKET POSITIONS
UK
GERMANY
ITALY
AUSTRALIA
Georgia
#1/#2
#2
#1
#3
#1
STRONG BRANDS
We operate a broad portfolio of leading
brands, tailored to local markets.
ONLINE wagers*
PROCESSED IN 2019
£11.2 bn
+9%
2018: £10.3bn
* Proforma.
RETAIL MARKET POSITIONS
(7,000+ GLOBAL OUTLETS)
UK
BELGIUM
ITALY
IRELAND
RETAIL wagers (UK & EUROPE)*
PROCESSED IN 2019
£4.8 bn
+4%
2018: £4.7bn
* Proforma.
#1
#1
#3
#3
For more information see
page 14
05
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Chief Executive’s review
Performance highlights
Chief Executive’s Review
“ 2019 was yet another highly
successful year for the Group.
We performed well ahead of
expectations, which was reflected
in a number of upgrades to EBITDA
guidance during the year.”
Kenneth Alexander
Chief Executive
06
GVC Holdings PLC | Annual Report 2019
2019 was yet another highly successful year
for the Group. We performed well ahead
of expectations, which was reflected in a
number of upgrades to EBITDA guidance
during the year. In addition to delivering a
robust underlying financial performance,
we made positive strategic progress in
existing and new markets. We remain
committed to providing our customers with
an enjoyable, safe and affordable suite of
products and during the year took further
significant strides forward in spearheading
the industry’s approach to safer gaming for
our many millions of customers.
Group proforma² net gaming revenue
(NGR) increased by 2% (+3% on a constant
currency4 (cc) basis) against proforma 2018 to
£3,655.1m. Strong NGR growth from Online,
European Retail and sports in UK Retail offset
the decline in machines revenue in UK Retail
which, as anticipated, was impacted by the cut
in B2 machines maximum stakes to £2. On a
pre IFRS 16 basis, Group proforma² underlying
EBITDA5 was £678.3m versus £755.3m
in 2018, whilst Group proforma² operating
profit6 was £490.1m versus £610.1m in the
previous year. Underlying proforma EBITDA5,
excluding the adverse impact of the Triennial
Review on UK Retail and incremental Online
and European Retail taxes8, rose 14%, whilst
underlying operating profit6 rose 10%. On a
post IFRS 16 basis, Group underlying EBITDA5
was £761.1m and underlying operating profit6
was £520.0m.
On a reported¹ basis, Group underlying profit
before tax6 was £535.8m (2018: £434.6m),
and after charging £710.0m of separately
disclosed items (2018: £453.5m), the loss
after tax was £140.7m (2018: £56.4m loss).
A second interim dividend of 17.6p was
declared making a total for the year of 35.2p,
an increase of 10% on 2018, in line with the
Group’s current dividend policy of double-
digit dividend growth. The Group ended the
period with pre IFRS 16 net debt of £1,822.7m
(2018: £1,896.6m) representing a net debt
to EBITDA ratio of 2.7x, slightly better than
guidance after favourable currency movement
on non-sterling debt. Net debt post IFRS 16 of
£2,169.8m represents a leverage ratio of 2.9x.
OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS
This better than expected performance
in UK Retail was driven by a number of
factors: firstly, as part of our plan to offset
the regulatory headwinds, we continued to
invest in our estate, with the new Equinox
gaming cabinets and SSBTs performing
particularly well; secondly, the importance
of retail betting shops to our customers,
communities and indeed the wider Group
should not be underestimated; and thirdly,
and most importantly, the dedication and
professionalism of our retail colleagues
is an inspiration and continues to deliver
tangible results in terms of customer
engagement and loyalty. In light of these
factors, it is no coincidence that in one of
the most challenging years ever for the UK
Retail industry, we have gained market share.
We now anticipate closing 450 shops as
a direct result of the Triennial Review, less
than half of those originally anticipated.
In recognition of the outstanding efforts,
loyalty and resilience of our colleagues,
we will be awarding a one-off bonus of
£2.5m amongst our front-line colleagues
in UK Retail.
European Retail proforma² NGR rose 4%
(+5% cc), with OTC wagers 6% ahead (+6%
cc), despite 2018 benefiting from the FIFA
World Cup. Our operations in Italy delivered
a strong performance with NGR up 9% cc,
driven by wagers growth of 10% and virtual
revenue growth of 17%. The strength of the
Eurobet brand and omnichannel offering
has proved its value in a market where
significant advertising restrictions were
introduced in 2019. Elsewhere, Belgium
delivered good underlying progress, albeit
with some operational challenges in virtual
leaving revenue flat year on year. Meanwhile,
revenue in our Irish Retail business was in line
with 2018.
Online once again delivered the stand-out
performance, with proforma² NGR growing
13% (+14% cc) to £2,170.7m. The Group
achieved double digit proforma² NGR growth
across all of its core online markets and
continued to grow share. Online proforma²
sports NGR was up 16% (+17% cc) despite the
tough comparison against 2018 which was
boosted by the FIFA World Cup. Proforma²
sports wagers grew 9% (+11% cc), despite a
strong gross win margin at 11.1% (+0.6pp),
which was largely driven by favourable results.
Proforma² gaming NGR rose 13% (+13%
cc), with a strong performance from both
specialist gaming brands and sports brands.
GVC has a truly global online footprint with
licences in 24 territories. This diversification
provides GVC with a significant competitive
advantage, and enables us to spread the
risk and allocate capital and resource to
those markets with the most attractive
opportunities. In addition to entering and
growing in newer markets, the Group
continues to take share in its more
established markets. Our proprietary
technology and products are also major
differentiating factors, providing the scale
and efficiencies required to support multiple
products in multiple markets. Together with
our strong local presence in core markets,
GVC is well placed to continue to achieve
market share gains and support further
geographic expansion, both organically and
through mergers & acquisitions (M&A).
The performance of the Group’s UK Retail
business was very strong against a backdrop
of significant regulatory change. Following the
Triennial Review, the implementation of a
cut in maximum stakes on B2 machines
to £2 was introduced on 1 April 2019. As a
consequence, UK Retail like-for-like9 (“LFL”)
proforma² NGR declined 12%, with revenue
from machines down 26% on a LFL9 basis.
LFL9 over the counter (OTC) wagers were
7% higher than 2018 reflecting a better than
expected level of substitution and strong
self service betting terminals (SSBTs)
performance resulting in LFL9 sports NGR
+7%.
Our strategic
enablers:
Technology
Our technology underpins
our entire offer, to provide
a robust and flexible
platform to release new
products and offer the best
customer experience.
Read more about our technology
platform on page 30
Brands and
marketing
Strong recognition across
our 24 brands around the
world, is driven by our
powerful and efficient
marketing.
Read more about our brands
and marketing on pages 14 to 15
Product
We continue to deliver
a strong pipeline of new
products and features
to provide exciting
experiences across
sports and betting.
Read more about
our product development
on page 9
People
We attract and nurture
the best talent across the
industry, to create a culture
where people can realise
their full potential.
*
The Group’s proforma results are unaudited and presented
as if the current Group, post the acquisition of Ladbrokes
Coral Group plc, had existed since 1 January 2018.
The results of Crystalbet and Neds are included from the
dates of acquisition (11 April 2018 and 28 November 2018
respectively) and the results of Kalixa are excluded from
the date of disposal (31 May 2017).
Read more about our
commitment to social
responsibility on
page 48
07
GVC Holdings PLC | Annual Report 2019 Chief Executive’s review Continued
Chief Executive’s Review
continued
(£m)
online
Proforma NGR1,2
2,170.7
+13%
2018: 1,915.1
UK Retail
Proforma NGR/Revenue1
1,127.8
-15%
2018: 1,328.0
European Retail
Proforma NGR/revenue1
289.8
+4%
2018: 278.8
(£m)
(£m)
(£m)
Group
Proforma Underlying EBITDA1,2
678.3
-10% (+14% Regulation adjusted)
(Reported underlying EBITDA post
IFRS 16 £761.1m)
2018: 755.3
1. Proforma.
2. Pre IFRS 16.
08
Roar Digital – US joint-venture with MGM
Roar Digital, our US JV with MGM
Resorts, made good progress in 2019.
The focus during the year was to establish
the infrastructure, build attractive long-
term partnerships and launch the full GVC
technology platform initially in New Jersey.
During the period, we entered into key
partnerships with Buffalo Wild Wings and
Yahoo Sports. Buffalo Wild Wings is one of
the most iconic sports bar and restaurant
brands in the US, serving over 30 million
guests per annum in an entertaining sports-
focused environment. The agreement with
Yahoo Sports represents a significant step
forward. It is a content-rich digital platform
with over 60 million monthly unique viewers,
and is one of the leading fantasy sports
operators in the US. The launch of the full
GVC technology platform in New Jersey
ahead of the NFL season was an important
development. In Q4, total GGR was 55% ahead
of 2018 and Digital GGR (68% of total GGR)
was 137% higher. Roar has secured access
to 19 states (c50% of the US population), is
currently live in seven markets and is aiming
to operate in 11 markets by the end of 2020
(c20% of the US population). The opportunity
in the US is significant and Roar now has a
strong platform in place from which to pursue
the many opportunities that we see for GVC
in this market. As with any new business,
investment is required at the outset and
during 2019, as the JV invested in promoting
the BetMGM brand and deploying the GVC
platform, the Group has recorded a £12.5m
loss in respect of its share of the JV’s
2019 result.
Integration
In January of 2019 we announced an updated
agreement with Playtech which enabled us
to accelerate the migration of the Ladbrokes
Coral online brands onto the GVC platform.
Coral and Gala have both already been
successfully migrated, with Ladbrokes to
follow in the coming months.
The platform migrations are a key enabler
to further back office integration and, as
previously announced, this enables us to
bring forward £15m of synergies into 2020.
However, the migration is not simply about
cost. Operating on our own platform gives
GVC a significant competitive advantage in
a number of key areas including delivering
greater efficiencies, stability, speed to
market, product development and customer
propositions. The Group remains on track
to complete the migration in 2021.
Corporate Activity
The Group disposed of its 50% interest in the
Spanish JV, Sportium Apuestas Deportivas
S.A. (“Sportium”) during the year for a net
£63.8m in cash plus repayment of loans.
GVC’s interest in Sportium was inherited
through the acquisition of Ladbrokes Coral
and the subsequent divestment enables
the Group to focus on the bwin brand in our
Spanish speaking markets.
GVC has a strong track record in M&A
having integrated acquired operations
seamlessly and accelerating growth through
our technology and marketing expertise.
In particular, the value of local knowledge is
never underestimated and despite the growth
in scale of GVC, at heart the group retains
its entrepreneurial culture. We continue to
evaluate appropriate opportunities.
.
GVC Holdings PLC | Annual Report 2019 OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS
Strategic Key enablers
Technology
Ownership of all elements of our technology
platform is a significant competitive
advantage. The flexibility and stability of our
technology platform enables us to release
new products and features quickly and to
make rapid changes to the customer user-
journey without frustrating customers with
downtime. Its scalability means that it has
the capacity to manage major increases
in volume at minimal incremental cost,
and more generally the platform has been
fundamental in enabling us to execute our
operational delivery, grow our business and
deliver tools and initiatives to support safer
gaming. The migration of both the Ladbrokes
Coral UK Online businesses and our US JV’s
Online operations onto GVC technology will
bring these extensive and clear benefits to the
wider Group.
Brands and Marketing
The Group now operates 24 brands across
multiple territories worldwide. Our brands are
well established with high levels of customer
recognition, and help to consolidate our
leading positions in the markets in which
we operate. Furthermore, our omnichannel
sports brands (Eurobet, Ladbrokes and
Coral) drive faster online growth through
cost effective customer recruitment in our
retail estates. The enlarged Group now
has powerful marketing capabilities at its
disposal, including best in class predictive
analytics, return on investment diagnostics
and real time customer relationship
management tools. Through 2019 we began
the sharing of ‘best-of-both’ marketing
execution between the original GVC and
Ladbrokes Coral businesses with strong initial
results and we foresee further benefits as the
businesses continue to come together.
Product
The Group has continued to deliver a strong
pipeline of new products and features.
Our gaming offering contains the ‘best-of-
both’ inhouse and third party developed
content. This is driving high levels of
cross-sell from sports into gaming, while
our leading live casino offering is evolving to
focus on delivering a more market specific
experience. The Group’s ability to “develop
once and deploy multiple times” will be further
enhanced following the migration of the
UK online businesses onto the Group’s own
technology platform.
People
GVC continues to attract and nurture some
of the best talent in the industry, and through
acquisition we have added to the strength
and depth of our teams at all levels of the
Group. Meanwhile, the growth and success
of the business has enabled us to offer
colleagues attractive career progression,
new opportunities in different divisions
and to work across a variety of brands.
As an example, over 150 GVC colleagues
are now working within the hugely exciting
environment of Roar Digital, a number having
relocated to the US.
A key priority for us is to build our culture to
support integration success and make GVC
a great place to work. With that in mind, in
2019 we held an inaugural global event for all
our employees, under the banner ‘GVC One’.
At the event we launched our new employer
brand ‘For the Good of Entertainment’
encapsulating our corporate purpose; to
deliver exciting gaming experiences in a safe
and fair environment. Bringing together our
colleagues from across the globe, ‘GVC One’
promoted our responsibility-first culture
and how doing the right thing is at the heart
of our business. As part of our employer
brand, we launched a new careers site,
www.gvccareers.com
09
GVC Holdings PLC | Annual Report 2019 Chief Executive’s review Continued
Chief Executive’s Review
continued
SportsAid
In 2019 the Group sponsored 50 athletes
through our continued partnership with
SportsAid, the UK charity which supports
athletes at the outset of their careers.
Children with Cancer UK
Having taken the decision to unilaterally
end all UK football shirt sponsorships in
2019, we donated the rights we held to
appear on the shirts of Sunderland AFC
and Charlton Athletic to our Children with
Cancer UK.
For more information visit
gvc-plc.com/news
10
Safer Gaming and ESG
As a global leader in sports-betting and
gaming, with over 24,000 employees, the
Group is developing a leading role on ESG
and safer gambling issues. The Board level
Corporate Social Responsibility Committee,
chaired by Non-Executive Director Virginia
McDowell, has developed a strategic
approach comprising the three principal
pillars of; Responsible Employer, Responsible
Communities and Safer Gambling.
Diversity and Inclusion
Throughout 2019 we set about embedding
this approach across the Group’s operations.
Our Diversity and Inclusion (“D&I”) strategy,
now into the second year of a three year
roadmap, places an emphasis on inclusion
across the four strands of: recruitment,
process and policy, people development
and awareness and education.
This has already delivered results by, for
example, increasing the number of women in
senior management roles. In Q2 we launched
a multicultural workstream to enable us to
measure the ethnicity of our employees,
establish priorities and to create an internal
multicultural network. Additionally, we
entered into a partnership with Stonewall,
the LGBT rights group, to help us create an
accepting and inclusive workplace for our
LGBT colleagues. To promote the wellbeing
of our employees we have introduced a new
‘Well-me’ programme which focuses on both
physical and mental health as part of the
Group’s comprehensive people plan.
Environment
We set a target to reduce our carbon
footprint by 15% and have been implementing
measures to help us deliver this objective.
At the beginning of 2020 we moved the supply
of electricity to our UK Retail estate to use
100% renewables. We have also progressed
the transition of the retail estate to LED
lighting and have introduced improved video
conferencing technology to help us reduce
the number of flights taken by employees.
Communities and The GVC
Global Foundation
Following an internal voting process, the
Ladbrokes Coral Trust announced two long-
term strategic charitable partnerships as part
of our responsible communities initiative.
Over the next three years Coral will raise
money through its betting shops for Prostate
Cancer UK while Ladbrokes has partnered
with Children with Cancer UK, to whom we
donated the shirt sponsorship rights we
held for the 2019-2020 season for Charlton
Athletic and Sunderland AFC. We also
continue to support SportsAid, backing the
next generation of British athletes, while
the GVC Community Fund has also begun
issuing grants to support UK community
projects from the £2 million fund the
Group established.
GVC Holdings PLC | Annual Report 2019 OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS
This, in part, led to the creation of the Betting
and Gaming Council (“BGC”) in November
2019 to act as a single body to represent the
online and offline industry. Through the BGC,
major operators launched five core Safer
Gambling Commitments, supported by a
detailed action plan.
These efforts were further advanced
in January 2020, when the Gambling
Commission announced the establishment
of three industry working groups to tackle
key challenges as part of a drive to make
gambling safer. GVC was charged with
leading the working group responsible for
developing a code of conduct for VIP and high
value customer reward schemes and is also
contributing to the working groups addressing
safe product design and the use of advertising
technology. These groups will report back
findings at the end of March 2020.
Following extensive independent reviews
of the Group’s ESG policies and practices
GVC was pleased to be re-admitted to two
of the major ESG indices, the Dow Jones
Sustainability Index (“DJSI”) and FTSE4Good.
Current Trading & Outlook
(Period 1 January 2020 to 23 February 2020)
Trading in the year to date was strong with
Group NGR +5% cc and Online NGR +16% cc,
both of which have benefitted from strong
sports margins in the first two months.
This represents a good start to the year and,
at this early stage, the Board is confident of
delivering EBITDA and operating profit in line
with expectations.
Kenneth Alexander
Chief Executive
5 March 2020
A summary of our performance in 2019 is shown below:
Group
Reported1
Proforma2
Year ended 31 December
Net gaming revenue (NGR)
Revenue
Gross profit
Underlying EBITDAR5
Underlying EBITDA5
Underlying operating profit6
Underlying profit before tax6
Loss after tax
Diluted EPS (p)
Adjusted diluted EPS7 (p)
Total dividend per share (p)
2018
£m
2019
£m
Pre
IFRS 16
2019
£m
Pre
IFRS 16
2018
2019
£m
£m
3,571.4
3,655.1 3,655.1 2,979.5 3,655.1
3,523.6
3,600.5 3,600.5 2,935.2 3,600.5
2,378.2 2,378.2 2,004.2 2,378.2 2,404.4
864.3
723.7
755.3
640.8
520.8
610.1
434.6
(56.4)
(12.2)
76.3
32.0
782.7
761.1
520.0
535.8
(140.7)
(26.4)
64.2
35.2
782.7
678.3
490.1
522.9
(159.2)
(28.3)
62.3
782.7
678.3
490.1
Change3
% CC4
2% 3%
2% 3%
(1%)
(9%)
(10%)
(20%)
1. 2019 and 2018 reported results are audited and reflect the acquisition of the Ladbrokes Coral Group plc on 28 March
2018. The pre IFRS 16 2019 reported results are unaudited and reflect the 2019 audited results adjusted to remove
the impact of IFRS 16.
2. The Group’s proforma results for 2019 are unaudited and equal the pre IFRS 16 2019 reported results. The Group’s
proforma results for 2018 are unaudited and presented as if the current Group, post the acquisition of Ladbrokes Coral
Group plc, had existed since 1 Jan 2018. The results of Crystalbet and Neds are included from the dates of acquisition
(11 April 2018 and 28 November 2018 respectively).
3. 2019 (excluding the impact of IFRS 16) change v proforma 2018.
4. Growth on a constant currency basis is calculated by translating both current and prior year performance at the 2019
exchange rates.
5. EBITDAR is defined as earnings before interest, tax, depreciation and amortisation, rent and associated costs, share
based payments and share of results from Joint Ventures (JV) and associates. EBITDA is defined as EBITDAR after
charging rent and associated costs. Both EBITDAR and EBITDA are stated pre separately disclosed items.
6. Stated pre separately disclosed items.
7. Adjusted for the impact of separately disclosed items, foreign exchange movements on financial indebtedness and
losses/gains on derivative financial instruments (see the Separately disclosed items note in the financial statements).
8. After rebasing the prior year for the adverse EBITDA impact of incremental taxes (UK Remote Gaming Duty (RGD), Irish
and Italian taxes and Australian Point of Consumption Tax (POCT)) of £56.7m, and adjusting the current year for the
estimated £118.0m adverse impact of the Triennial Review on UK Retail.
9. UK Retail numbers are quoted on a LFL basis. During 2019 there was an average of 3,341 shops in the estate,
compared to an average of 3,524 in 2018.
10. Excluding horse racing.
11
In September 2019, the Group created The
GVC Global Foundation (“The Foundation”)
to better co-ordinate our international ESG
initiatives and provide oversight for the
distribution of donations to good causes
in support of the Group’s broader ESG
objectives. The Foundation focuses its
activity on four key areas: safer gambling
(including research, education and treatment
and sports integrity); grass roots and
disability sport; men’s health; and projects
with a clear link to the local community in our
major office locations.
Safer Gambling
Delivering a safe and responsible
gambling experience to our customers is
fundamental to the long-term sustainability
of our business. While the vast majority of
consumers enjoy our products safely, we
recognise that for some individuals, gambling
can become a problem and adversely
impact their lives. It is incumbent on us as a
responsible operator to do everything we can
to minimise the potential for harm.
At the beginning of 2019 we launched
‘Changing for the Bettor’, a comprehensive
package of measures designed to minimise
gambling related harm while enhancing our
collective understanding of problem gambling
behaviours. We acknowledged that problem
gambling is a complex issue, it requires a
multi-faceted approach to address and will
require continuous evolution. ‘Changing for
the Bettor’ includes seven key commitments,
with substantive initiatives attached to each.
These include a five year, multi-million-
dollar research project with the Division on
Addiction, a Harvard Medical School teaching
hospital; the roll-out of a youth-focused
education syllabus with GamCare and EPIC
Risk Management and the introduction of
sophisticated online player protection tools.
Successful delivery of this comprehensive
plan to improve standards requires
investment together with a greater
understanding as well as a joined-up
approach by the industry. As such the Group
announced it would be increasing expenditure
on research, education and treatment ten-
fold, to 1% of UK GGR.
This commitment was subsequently matched
by our four largest UK peers, meaning that
the five companies will be cumulatively
investing £100m into research, education
and treatment over the next four years, with
annual spend reaching £60m by 2023.
Building on this financial commitment, and
the voluntary introduction in August of a
pre-watershed ‘whistle-to-whistle’ ban on
broadcast gambling advertising around
sport in the UK, throughout the past year the
industry has accepted the challenge of the
Gambling Commission to collaborate more
closely together to improve standards.
GVC Holdings PLC | Annual Report 2019 Top stories of 2019
WE LAUNCHED THE
GVC GLOBAL
FOUNDATION…
In September 2019 we launched the GVC
Global Foundation in order to coordinate
and support delivery of the Group’s CSR
initiatives, objectives and donations around
the world. The Foundation is focused on
four key areas as shown opposite.
As part of its remit, the Foundation has also
taken on responsibility for administering
the Group’s existing CSR projects, including
its £2m community fund as well as
collaborations with SportsAid, EPIC Risk
Management, Gordon Moody, the US
National Council on Problem Gambling and
the Division on Addiction of Cambridge
Health Alliance, a Harvard Medical School
teaching hospital.
GVC Community Fund IN 2019
£2.0 m
The Foundation has also taken on
responsibility for administering the Group’s
existing CSR projects, including its £2m
community fund.
12
Grass roots, women’s
and disability sport
regulation research, education and treatment
1. Responsible gambling, sports integrity and gambling
2.
3.
4.
Projects with a clear link to the local
community in GVC’s major office locations
Men’s health, with a particular focus
on mental health
GVC Holdings PLC | Annual Report 2019
OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS
…TO SUPPORT
RESPONSIBLE INITIATIVES
AROUND THE WORLD.
“ Responsibility
is at the heart
of our values.”
Ben Islin
Product manager
Promoting women’s football
The GVC Foundation has launched a
collaboration with Inter Milan Football
Club to promote participation in women’s
football in Italy. Backed by a national
media campaign, partnered with Gazzetta
dello Sport, the project is developing a
football-related talent show for aspiring
female footballers.
For more information visit
gvcglobalfoundation.com
Projects the Foundation is currently engaged
in include:
¡ The GVC Foundation has launched a
collaboration with Inter Milan Football
Club to promote participation in women’s
football in Italy. Backed by a national
media campaign, partnered with Gazzetta
dello Sport, the project is developing a
football-related talent show for aspiring
female footballers.
¡ Harvard Medical School, Division on
Addiction The Foundation is vesting
$5.5m into partnership with the Division on
Addiction over the next five years. GVC will
provide Harvard faculty at the Division with
access to anonymised player data across
a range of its brands, sports betting, and
gaming products.
¡ The research will be broad ranging,
focusing on a number of areas including,
but not limited to:
– Patterns of normal internet
gambling behaviour
– Behavioural markers of gambling
problems among internet players
generally and on specific betting and
game types
– Cross-product analyses
– Cross-brand analyses
– The effects of the expansion of gambling
in new markets
¡ German Sports Integrity Forum Together
with German Bundesliga clubs Borussia
Dortmund and 1.FC Koeln, and the sports
integrity platform, the Play Fair Code, the
GVC Foundation recently launched the
German Sports Integrity Forum. The aim of
the Forum is to raise further awareness of
sports integrity programmes in Germany
and other German speaking countries.
¡ Professional Players Federation The
Foundation has entered into a partnership
with the Professional Players Federation
(the “PPF”), the national organisation
for the professional player associations
in the UK, to fund its anti-match-
fixing player education programmes.
The partnership enables the PPF to support
the development and delivery of online
learning and face-to-face education to
hundreds of sportspeople in sports such
as football, cricket, rugby union, golf, darts
and snooker.
GVC Holdings PLC | Annual Report 2019
13
Top stories of 2019 continued
ESTABLISHED
BRANDS
GLOBAL REACH
AND LOCAL FOCUS…
At the heart of GVC’s success is its portfolio
of more than 20 established brands,
each with a regional focus and distinct
localised customer offer. Our brands enjoy
high levels of customer awareness and
benefit from loyal customer bases built
innovative marketing.
Offering such a broad range of popular
brands provides the Group with a number
of operational advantages:
¡ Well established trusted brands act
as barriers to entry
¡ Operating multiple brands in one market
provides an opportunity for customers
to move between our brands
¡ Many of our brands have a distinctive
offer and appeal, specifically tailored
to local market
¡ Omni-channel sports brands (Eurobet,
Ladbrokes, Coral) drive faster online
growth through cost effective online
sign-ups in shop
Foxy Bingo Brand image
to cut out
BWIN
+21% NGR
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.
Foxy bingo
+22% NGR
Launched in 2005 and one
of the most famous brands
in online bingo, Foxy Bingo
with sister Foxy Games
brands enjoyed a stellar 2019,
having migrated on to the
GVC technology platform
while benefitting from the
expertise of sister brand, Gala
Bingo, acquired as part of the
Ladbrokes Coral Group.
Eurobet.it
+25% NGR
A leader in betting in the
Italian market in both retail
and online, Eurobet delivers
a full range of sports betting,
casino and games products,
including virtual racing and
bet-in-play products.
UK Online Sports Brands
+12% NGR
Ladbrokes and Coral are
two of the most historic and
recognisable names on the UK
high street, with a combined
brand history of more than 200
years. Both brands now offer a
comprehensive online offer.
14
GVC Holdings PLC | Annual Report 2019
OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS
In 2019 we continued to outperform
the market, growing in all of our major
territories while increasing market share.
This performance was driven by the
effectiveness of the GVC online operating
model, which leverages the Group’s
leading proprietary technology and product
development capability, applying central
marketing expertise alongside local
operational execution. Combined with
the benefits of scale and geographic
diversification, along with the opportunities
provided by the integration of the
Ladbrokes Coral business and Roar Digital,
our sports-betting joint-venture in the US
with MGM Resorts, the Group is well placed
to continue to outperform the market and
make further market share gains.
Our success in individual markets is
intrinsically linked to our ability to deliver
…DELIVERED
RESPONSIBLY
“ We want our
brands to be the
most trusted in
the market.”
VERONICA BOGDACENCO
CRM Analyst
a safe and fair gaming environment.
Maintaining a reputation for fairness and
integrity and strengthening our customer
focus are all vital to growing our business.
Our approach to safer gambling ensures that
we maintain best practice standards across
the business and minimise the potential
for harm where ever possible. The Group
is licensed in more than 20 territories and
works closely with national regulators to the
principal objectives to ensure that gambling
is crime free, fair and open, and children and
vulnerable people are protected. We commit
to these objectives across the whole of our
business wherever we operate.
CrystalBet
+59% NGR
Licensed and operating in the
Republic of Georgia, Crystalbet
was acquired by GVC in 2018.
Now fully integrated on the
GVC technology platform, it
has rapidly grown, benefitting
from a huge expansion in its
product line-up.
GVC Holdings PLC | Annual Report 2019
15
Top stories of 2019 continued
GVC ONE
CREATING AN OPERATING
POWERHOUSE…
Integration on Track
£130 m
The integration of the Ladbrokes Coral
Group is on track to deliver £130m of exit
run-ratecost savings and at least £30m
of capex synergies by 2021.
The migration provides a number of
tangible benefits:
¡ Material cost savings from the
consolidation reduction in platform
costs and the consolidation of
technology suppliers
¡ The ability to share content between brands
and territories, significantly enhancing the
portfolio of games offered to customers
¡ Reduction in development times and costs
through the enhancement of the ‘develop
once, deploy multiple times’ approach
Operational improvements and
leveraging global scale
By identifying best practice in each business
and leveraging its greater global scale,
the Group has been able to optimise its
operational efficiency while achieving
significant cost savings when negotiating
improved terms on new contracts.
These operational efficiencies included:
¡ Deployment of GVC odds-feed into
the Ladbrokes and Coral brands,
increasing product range and delivering
operational synergies
¡ Shared trading performance models –
driving improved risk management and
increasing margins
¡ Implementation of GVC agile approach and
best practices to Ladbrokes Coral customer
service, has resulted in reduction in
customer response times and KYC checks
¡ Improvements to operational efficiency for
digital marketing teams resulting from best
practice implementation, utilising single
toolsets and unified processes.
Operating on GVC’s technology platform
further enhances our “develop once, deploy
multiple times” approach and unlocks major
opportunities to share “best-of-both” best
practice across the Group. The Group remains
on-track to deliver £130m costs synergies by
2022 and £30m of capex synergies by 2021,
in line with guidance.
The Group’s proven track record
in delivering complex integrations
while accelerating growth was key
to the rationale behind the landmark
acquisition of the Ladbrokes Coral Group.
Under the leadership of COO Shay Segev,
the integration team put together a detailed
model with three guiding principles at
its core; to ensure maximum efficiencies
are achieved through the delivery of cost
savings and the selection of best practice
operations from each legacy business; to
avoid adverse impact to ongoing growth
in the business from the integration
process, and; to minimise the disruption
to employees and customers.
In 2019 we were able to make huge progress
in bringing the businesses together while
staying true to these core principles.
Technology
At the beginning of the year we reached a new
long-term strategic agreement with Playtech,
a key technology supplier to Ladbrokes Coral,
which paved the way for the migration of
the Ladbrokes Coral online brands onto the
GVC platform much earlier than originally
envisaged. The Coral and Gala brands were
successfully migrated at the beginning of
2020, with Ladbrokes set to follow in Q2 to
complete the migration process.
16
GVC Holdings PLC | Annual Report 2019
OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS
A multi-faceted Approach to safety
Our number one priority is to enable
our customers to enjoy gaming with us
safely. In 2019 we launched ‘Changing for
the Bettor’, our safer gambling strategy
that recognises that problem gambling
behaviour is a multi-faceted issue that
needs a multi-layered approach to
address it.
For more information visit
gvc-plc.com/corporate-responsibility/
…WITH A UNIFIED
RESPONSIBILITY
FIRST CULTURE
As important as our technical resources
and marketing capabilities are, the long-
term success of the business is only
possible through the commitment and drive
of our people, pulling together to deliver
common objectives.
That is why alongside our systems integration
we have also been working to integrate
our global workforce into a unified culture
with a responsibility-first ethos at its core.
To underline our purpose as a business,
we developed a new employer brand that
sums up our vision ‘GVC – For the Good of
Entrainment’. We launched this new brand
at the first annual GVC One event which
brought together our executive team and
global workforce into a single location either
physically or via the use of live broadcasting
to our satellite locations. At the centre of
this year’s event was an expo featuring
our ‘Changing for the Bettor’ safer
gambling strategy.
“ We’ve come together
as one company
with a real sense
of purpose.”
Ben Islin
Product manager
GVC Holdings PLC | Annual Report 2019
17
Top stories of 2019 continued
US – A LAND OF
OPPORTUNITY…
The United States is perhaps the most
exciting newly regulating sports-betting
and gaming market in the world, following
the Supreme Court’s decision to repeal
legislation that prohibited sports-betting in
2018. Since that ruling, all states now have
the ability to regulate both land-based and
online sports-betting. A growing number of
states including New Jersey, Pennsylvania,
Indiana and West Virginia have already
launched online and retail sports-betting,
with many more on the way. Estimates for
the potential size of the overall US market
range from £5bn to £20bn – in all cases
making it what would be the largest
regulated sports-betting market in
the world.
Largest regulated
sports-betting market
£20 bn
Estimates for the potential size of the
overall US market range from £5bn
to £20bn – in all cases making it what
would be the largest regulated
sports-betting market in the world.
18
GVC Holdings PLC | Annual Report 2019 OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS
“ The us is the
most exciting
opportunity in
online gaming.”
LUTHER ACHEAMPONG
CUSTOMER INSIGHT ANALYST
…BUILT ON
INTEGRITY
As in all markets, our number one objective
is to ensure that our customers can enjoy
betting and gaming with us in the safest of
environments. Our online sites offer a suite
of player protection tools that encourage
customers to set limits on their spending or
the time they spend playing and ultimately
to self-exclude if they need to take a break
all together.
In addition, through the US arm of the GVC
Global Foundation we are also engaged
with a number of academic institutions
including Harvard Medical School’s Division
on Addiction, Seton Hall Law School
and the University of Nevada Las Vegas.
Through these bodies we are developing a
range of programmes from research into the
issues relating to problem gaming behaviours,
to the preservation of sports integrity projects
and academic courses to develop industry
knowledge. GVC is also a member of US
National Council on Problem Gambling’s
President’s Circle and has funded a major
study into the prevalence of gambling in the
US and potential problems associated with it.
The Foundation is also a donor to the fund
to support research on sports wagering,
which was launched by the US National
Center for Responsible Gaming. The project
will competitively award researchers at top
tier institutions with the resources needed
to uncover novel insights into what the
introduction of legalised, regulated sports-
betting means for public health.
US Partnership
30 m
Roar has signed key partnerships with
Buffalo Wild Wings and Yahoo Sports.
Buffalo Wild Wings is one of the most
iconic sports bar and restaurant brands
in the US, serving over 30 million guests
each year in an entertaining sports-
focused environment.
Recipe for Success
To take advantage of this exciting
opportunity, in 2018 GVC and US gaming
icon MGM Resorts joined forces to create
Roar Digital, a joint venture owned equally
between the two groups. Combining GVC’s
technology platform, sports-betting and
gaming operational expertise in retail and
online, with MGM’s iconic brand and market
access, Roar has all of the attributes to
take a leading role in the market. Over the
past year, whilst launching the full GVC
technology platform in New Jersey, Roar
has focused on putting all the building
blocks for success in place. These include:
Brand
Launched September 2019, BetMGM is
the lead brand, with partypoker being a
secondary brand focusing on the poker
market. All sports-betting branding
nationwide consolidated to BetMGM,
maximising marketing effectiveness.
Technology
Online, Roar uses GVC’s proven proprietary
technology platform, while in retail uses the
Group’s Stadium Technology – already the
leading platform in Nevada.
Market access
Through MGM’s land-based casinos
licences and partnership agreements,
Roar already has the ability to address
a population of over 150 million people,
81 million of whom are already in states
with legalised sports-betting.
Partnerships
Roar has signed key partnerships with
Buffalo Wild Wings and Yahoo Sports.
Buffalo Wild Wings is one of the most iconic
sports bar and restaurant brands in the US,
serving over 30m guests each year in an
entertaining sports-focused environment.
The alliance with Yahoo Sports will embed
Roar’s offer on the company’s digital
platform which has over 60m unique users
a month as well as being one of the leading
fantasy sports operators in the US. Roar is
also partnered with a number of the leading
professional sports leagues including the
NBA, NHL and MLB.
Operating model
These attributes enables Roar to offer
a highly efficient operating mode:
¡ Proprietary technology + efficient
marketing + market access = Efficient
cost model
GVC Holdings PLC | Annual Report 2019
19
Top stories of 2019 continued
A RESPONSIBLE
APPROACH
TO REGULATORY CHANGE…
“ Our shops are part of the fabric
of the high street at the heart
of our local communities.”
CHARMAINE DALEY
RESOURCING ADVISOR
Retail remains a core element of GVC’s
operations. In the UK, via the historic
Ladbrokes and Coral brands, GVC is the
UK’s largest high street bookmaker, with
over 3,200 shops employing more than
16,000 staff at the end of 2019.
In 2019 the division contributed £1.1bn
(30.8%) of Group revenue and £207.9m or
25.7% (£145.8m or 20.1% pre IFRS 16) of
EBITDA in 2019. This was an outstanding
performance given the impact of regulatory
change and reduction of maximum stakes
on FOBT machines from £100 to £2, which
came into effect on 1 April 2019.
Nevertheless, the cut in stakes necessitated
a fundamental review of our UK Retail
estate. To help manage this change, we
deployed a detailed mitigation plan, focused
on minimising job losses and retaining
as many of our best people as possible.
The successful execution of this plan has
meant that we now expect to close fewer
shops than we initially anticipated, with 450
shops expected to close as a result of the
Triennial Review by the end of Q1 2020.
Throughout the year we have continued to
invest in new product, updating both our
front of house and back office systems.
This has seen us introduce Omnia, our new,
optimised till system, which is now in all Coral
shops and is rolling out in Ladbrokes. On the
shop floor, we have introduced our next
generation of Self Service Betting Terminals
(“SSBTS”) complementing Equinox, our
gaming machines rolled out in 2018, that offer
the most attractive gaming content in the
industry, with a focus on slots.
Retail Investment
+9,000
By the end of 2020 we will have rolled
out more than 9,000 new betstations
throughout our UK retail estate.
20
GVC Holdings PLC | Annual Report 2019 OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS
…WHILE TRANSFORMING THE
CUSTOMER EXPERIENCE
As well as investing in our technology and
infrastructure, just as importantly we have
been looking at how we can update the
whole customer experience through the
development of what we call, ‘the shop of
the future’. In December we opened our new
concept stores, in London’s Warren Street
(Coral) and Birmingham’s Stephenson Street
(Ladbrokes) opposite New Street Station both
of which look unlike any other high street
bookmakers ever seen before.
Featuring new signage, soft furnishings and
artwork, the atmosphere is more reminiscent
of a coffee shop than a traditional bookies.
A revised counter area and new layout enable
customers to take a break, while free phone
charging, Wi-Fi and coffee are provided,
transforming the ambience. Within the shop
we have begun trialling a range of innovations
creating a more digitalised experience in
retail including new customer touchscreens
providing pricing and integrated content
from the Racing Post. We are also looking
at how we can utilise facial recognition to
assist in player behaviour tracking and ensure
all of customers bet safely. In the coming
months we will be reviewing the response of
customers before deciding on next steps for
further rollout.
We firmly believe that only by innovating and
updating our shops will we ensure they remain
at the forefront of our market leading omni-
channel customer journey in the UK, offering
players a seamless transition between online
and retail. Retail has been a catalyst in the
successful growth of the Ladbrokes and Coral
online businesses and the shop of the future
represents a step towards the omni-channel
relationship deepening.
21
GVC Holdings PLC | Annual Report 2019 Marketplace
THE INDUSTRY IN WHICH WE OPERATE
GVC operates
multiple brands
in the highly
competitive global
gaming and sports
betting sector,
in both the retail
and online worlds.
22
ONLINE EUROPE
Geographically the Online European
market is the largest at 51% of the total
online global market in 2019 which grew
year-on-year at 11%. GVC Group’s Online
proforma NGR in Europe represents over
75% of total Group Online in 2019. The next
largest market is the unregulated Asia
market which represents 30% of the global
total followed by North America (11%),
Oceania (5%), Latin America (1%), and
Africa (1%). GVC also has online operations
in Australia, Brazil and the US.
51%
Europe makes up more than half of the
global online gaming market.
4 5 6
3
2
1
1. Europe
2. Asia/Middle East
3. North America
4. Oceania
5. Latin America & the Caribbean
6. Africa
51%
30%
11%
5%
1%
1%
GLOBAL ONLINE GROWTH
GVC operates in the global online gaming
market which is estimated to be worth
c£43bn in 2019. Over the past ten years
the global online gaming grew at 10%
CAGR and the market growth from 2018
to 2019 was also 10%.
10%
The global online market grew at 10%
CAGR over the last 10 years.
£bn
50
45
40
35
30
25
20
15
10
5
0
43.8
39.8
36.5
32.9
29.7
26.9
23.9
22.0
19.8
18.8
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E
GVC Holdings PLC | Annual Report 2019
RETAIL
Key retail countries GVC operates in
includes the UK, Italy, Belgium and
Republic of Ireland (ROI).
The UK Retail market (excluding lotteries)
is estimated to be worth £5bn of GGR in
2019. Over the last 10 years the market
has remained flat with growth in machines
offset by the decline in betting. The UK
Retail betting sector is dominated by four
operators which account for over 85% of
all betting shops. GVC Group operates via
the two brands Ladbrokes and Coral and is
the number one operator.
The Italian betting retail market is
estimated to be worth £1bn of GGR in
2019. GVC operates via the Eurobet brand
as the third largest operator in the market.
The Belgium and ROI betting market
is much smaller estimated to be worth
£0.4bn and £0.2bn respectively in 2019.
GVC operates in Belgium and ROI via
the Ladbrokes brand and is the largest
operator in Belgium and third largest
in ROI.
over 85%
Four operators account for over 85%
of all UK betting shops.
t
e
k
r
a
M
l
n
b
£
–
e
z
S
i
g
n
i
t
t
e
B
i
o
n
s
a
C
i
s
e
n
h
c
a
M
o
g
n
B
i
y
r
e
t
t
o
L
a
t
o
T
UK
8.1 18% 13% 29% 4% 36%
Italy
14.0 8% 1% 56% 3% 33%
1.0 38% 4% 25% 3% 30%
ROI
Belgium 1.2 14% 7% 35% 0% 43%
(GVC areas of operations are highlighted)
ONLINE MARKET BY PRODUCT
Online growth has been driven by
continued product development across
all areas. Online betting, casino, bingo and
poker represent 86% of total global online
gaming revenue which are all offerings
the Group delivers.
86%
Online betting, casino, bingo and poker
made up 86% of all online gambling in
2019, betting and casino were forecasted
to grow at 10% globally.
5 6
4
3
2
1
1. Betting
2. Casino
3. State lotteries
4. Poker
5. Skill/Other Gaming/
Commercial Lotteries
6. Bingo
52%
26%
10%
4%
4%
3%
FORECAST
The Online gaming market is forecast to
grow at 7% CAGR over the next five years
driven by product innovation, mobile
growth and US regulation of both online
and retail sports-betting.
UK Retail betting and gaming is forecast
to decline 2% CAGR between 2019 to
2024 attributed to the change to £2
B2 machines stakes implemented April
2019 partially offset by 1% CAGR growth
in betting (see pages 37 to 38) for further
details). In our smaller Retail betting
businesses, forecasted growth in Italy,
Belgium and ROI is low single digits over
the next five years.
7%
Online gaming is forecast to grow at 7%
CAGR between 2019 and 2024.
£bn
80
70
60
50
40
30
20
10
0
2019e 2020e 2021e 2022e 2023e 2024e
Global Online
Belgium Retail (Betting)
UK Retail
(Betting & Gaming)
Italy Retail (Betting)
ROI Retail (Betting)
23
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS
Regulatory update
REGULATORY UPDATE
Gaming is a truly global
market and in 2019 the
Group held licenses in
more than 20 territories/
regions, whilst there
are live applications in
a further five. By the end
of 2019, over 96% of the
Group’s revenues were
from markets that were
either regulated or in the
process of regulating.
The UK
The UK market has seen significant
changes over the past 12 months, with
the implementation of the £2 maximum
B2 machines stakes coming into force in
betting shops on 1 April 2019. At the same
time Remote Gaming Duty (“RGD”) was
increased to 21% from 15%. Following the
General Election the new Government has
committed to reviewing the 2005 Gambling
Act, to ensure it is appropriate for the digital
age. The regulatory focus on the industry
has never been greater and safer gaming
is a core driver, something the industry has
embraced. GVC has led many of the positive
initiatives. According to the NHS Health
Survey, problem gambling fell to just 0.4% of
the population from 0.7% in the last survey.
Whilst a very small percentage of people
have gambling issues, we and the industry
are committed to reducing this even further.
Responsible licensed operators are best
placed to ensure the continued reduction in
problem gambling and it is important that any
legislative developments are properly thought
through and don’t drive the most vulnerable
into the unlicensed environment.
Brazil
Following the 2018 parliamentary
authorisation to regulate sports betting in the
country, the Brazilian government has worked
on draft sports-betting regulation over the
course of 2019. No final draft of the regulation
has been issued yet but the government
has announced that its intention is to attract
foreign operators, such as GVC, to the future
regulated market.
Netherlands
The Dutch authorities have announced that
the newly regulated online gambling market
in the Netherlands will open in July 2021.
The Dutch tolerance policy allowing operators
such as GVC to take business from the Dutch
market without targeting it directly will remain
in place until then.
US
Opening of the US sports betting-market
continued at pace in 2019 with 14 states now
having launched sports-betting and a further
six states (and DC) legalised but not yet
operating (legalised states now accounting
for approximately 36% of the US population)
and this is expected to increase further in
2020. Roar has secured access to 19 states
to date and is already operating in seven.
The focus of US legislators and regulators
is on providing access to the newly opened
sports-betting markets whilst ensuring the
markets remain sustainable in the long run;
GVC’s and Roar’s safer gambling efforts have
played a key contributing role in this regard.
Germany
The German authorities announced in March
2019 that they would launch a new tender
for sports-betting licences in January 2020,
having dropped the previously existing cap
on the number of these licences. GVC has
applied for sports-betting licences for four of
its brands within the framework of the tender.
At the same time, GVC intends to continue
offering its online casino products into the
German market in reliance on EU law.
In the meantime, the German federal states
have continued to negotiate new online
gambling regulation that will apply from
July 2021 onwards. The regulation will not
be finalised until the end of the first quarter
of 2020 but the regulatory trend is towards
allowing all online gambling products,
including online casino. Requirements relating
to product offering, licensing arrangements
and operational obligations are yet to be
finalised. Fair market access is at the heart of
European legislation and any new regulation
will have to comply with these principles or
risk further legal challenges.
24
GVC Holdings PLC | Annual Report 2019 Europe
Several European countries, such as Belgium,
Denmark and Spain, have announced their
intention to introduce stricter responsible
gambling and/or gambling advertising
standards. The Group is in a good position
to absorb these changes.
Australia
A Point of Consumption Tax (POCT) was
introduced by four states in 2019, ranging
from 8% to 15% of gross wagering revenue.
In January 2020, Tasmania also introduced
a POCT at a rate of 15% of net wagering
revenue. Also in 2019, the implementation of
four measures under the National Consumer
Protection Framework introduced restrictions,
in particular to marketing, whilst responsible
gaming obligations have also been enhanced.
The Framework, which needs to be
implemented as law into each state/territory,
has further measures to be implemented in
2020 and beyond. The Framework is part of
a review of online gaming, which has also led
to reforms to grant more powers to tackle
black market operators.
2019 GLOBAL INTERACTIVE GROSS GAMING REVENUE
In 2019 the global gross gaming revenue from interactive market was estimated to be valued
at £49.9bn1. Below are the largest 15 markets that are either regulated or in the process
of regulating.
United Kingdom
United States
France
Germany
Russia
Australia
Italy
Sweden
Spain
Finland
Denmark
Belgium
Ireland
Netherlands
Poland
1. Source: H2 Gambling Capital (including both regulated and non-regulated GGR).
£m
6,896
3,173
2,557
2,387
2,098
1,864
1,672
1,285
951
844
657
559
501
442
438
25
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Business model
Business Model
HOW WE CREATE VALUE
WHAT WE NEED
BRANDS
WHAT WE DO
Our brands are amongst the most
popular in the industry.
For more information see
page 14
PEOPLE
We have been successful in attracting
the brightest and the best from within
and beyond the gaming industry.
For more information see
page 48
TECHNOLOGY
We operate a unique proprietary
technology platform that sets us apart
from our competitors and allows us
to control our product development.
For more information see
page 30
RELATIONSHIPS
We are partnered with the best
and most innovative companies
around the world.
For more information see
page 19
SCALE
We have the scale and diversity
required to succeed across multiple
products and territories.
For more information see
page 4
FINANCIALS
Our excellent financial performance,
provides a flexible base from which
to invest and succeed.
For more information see
page 56
26
safer
gambling
Read more on
page 45
Best in class
gambling
experience
Great family
of brands
Read more on
page 14
Sophisticated
CRM systems
Read more on
page 8
Effective
brand
marketing
Our people’s
expertise
Read more on
page 48
Strong
multi-channel
offer
Online:
19 international
brands
Read more on
page 14
Retail:
c.5,000 outlets
worldwide
Read more on
page 20
Our proprietary
technology platform
GVC Holdings PLC | Annual Report 2019
WHY WE DO IT
MAXIMISING VALUE
THE VALUE WE CREATE
“ To deliver an exciting
playing experience
on a wide selection
of sports and games,
to suit all our
customers, in a safe
and entertaining
environment. ”
Shay Segev
Chief Operating Officer
&
S
E
S
U
N
O
B
–
I
S
G
N
N
N
W
I
I
G
N
T
E
K
R
A
M
D
N
A
S
E
L
A
S
F
O
T
S
O
C
–
S
E
S
N
E
P
X
E
N
M
D
A
–
I
D
N
A
S
R
E
G
A
W
£
S
T
E
B
R
G
N
M
£
=
I
N
O
T
U
B
I
R
T
N
O
C
M
£
=
I
G
N
Y
L
R
E
D
N
U
M
£
=
A
D
T
I
B
E
For more information see
page 31
FINANCIAL
POSITIVE RETURNS
Everything we do is ultimately
focused on delivering value to
our shareholders.
For more information see
page 31
DIVIDENDS
We are committed to rewarding our
shareholders with a progressive
dividend policy.
For more information see
page 59
NON-FINANCIAL
GREAT PLACE TO WORK
We aim to be a destination employer,
attracting the best talent.
For more information see
page 48
BEST GAMBLING EXPERIENCE
We are focused on delivering
our customers a great product.
For more information see
page 9
SAFER GAMBLING
We are committed to providing
a safe and secure environment
for our customers to play in.
For more information see
page 45
COMMUNITY ACTIVITY
We actively support the communities
in which we operate.
For more information see
page 52
27
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS
Vision and strategy
Strategy and KPIs
a clear focused strategy
Our strategy is to increase our 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.
vision
TO BE THE WORLD’S Largest and most
RESPONSIBLE SPORTS-BETTING AND
GAMING ENTERTAINMENT company.
STRATEGIC IMPERATIVES
STRATEGIC PILLARS
Proprietary
Technology
Market leading
proprietary
technology
supporting
the business
through high
quality products,
proven scalability,
and global
platform flexibility.
Greater Scale
& geographic
diversification
Safer gambling
Long-term
Shareholder
value
28
Digital
Retail
US Joint
Venture
Win the digital marketing battle
through standout brands, creating
new recreational opportunities and
advanced marketing analytics
For more information see
page 35
Optimise and future proof real
estate, whilst continuing focus
on omni-channel
For more information see
page 37
Deploy full GVC capability and
leverage MGM’s expertise to
develop highly successfully
US partnership
For more information see
page 18
Mergers &
Acquisitions
Pursue inorganic opportunities
utilising expertise brand strength,
product and technology
For more information see
page 16
GVC Holdings PLC | Annual Report 2019 PURPOSE
KEY ENABLERS
Product
Read more on page 9
Brands
Read more on page 9
Marketing
Read more on page 9
People
Read more on page 9
Measuring our
success
KPIs
Our key performance indicators used to
assess the performance of the business
include; Net Gaming Revenue (revenue
before deducting VAT); Contribution
(revenue less betting taxes, payment
service provider fees, software royalties,
revenue share and marketing costs);
Underlying EBITDA (earnings before interest,
taxation, depreciation, amortisation, share
based payments, joint venture, separately
disclosed items).
The charts show the performance of
the Group against these measures on a
proforma basis, as if the current Group,
post the acquisition of Ladbrokes Coral
Group plc, had existed since 1 Jan 2017.
The results of Crystalbet and Neds
International are included from the date of
acquisition (11 April 2018 and 28 November
2018 respectively) and the results of Kalixa
are excluded from the date of disposal
(31 May 2017).
NGR1
3,500
3,000
2,500
2,000
1,500
1,000
500
0
(£m)
Contribution
(£m)
2,000
1,500
1,000
500
0
2017
2018
2019
2017
2018
2019
Online 2,170.7
European Retail 289.8
Online 887.2
European Retail 138.0
UK Retail 1,127.8
Other 70.4
UK Retail 812.6
Other 45.4
UNDERLYING EBITDA1,2
(£m)
SPORTS WAGERS
(£m)
800
600
400
200
0
Local execution
Read more on page 14
2017
2018
2019
(Pre IFRS)
2019
(Post IFRS)
Online:
– Pre IFRS 16 522.1
UK Retail:
– Pre IFRS 16 145.8
European Retail:
– Pre IFRS 16 57.8
Other:
– Pre IFRS 16 –1.0
1. Excluding internal revenue elimination.
2. Excluding corporate costs.
15,000
12,000
9,000
6,000
3,000
0
2017
2018
2019
Online 11,216.7
European Retail 1,659.9
UK Retail 3,182.7
29
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Business review
Proven technology
platform
Our market-leading proprietary technology supports our strategic
ambition. It enables us to continue to drive product development
without relying on third parties and to enter new markets and/or
adapt to regulatory changes. It ensures we offer our customers
distinct, best in class products and services.
Our technology also has proven scalability in terms of both geographic
diversification and volume. This give us flexibility when it comes to
organic expansion, but it also presents the opportunity for substantial
value creation through M&A.
OMNI-CHANNEL DEVICES
IOT
MOBILE
TABLET
DESKTOP
API SERVICES
2
W
A
Y
SPORTS
CASINO
POKER
BINGO
PLAYER MANAGEMENT SYSTEM
SUPPORTING ECO SYSTEM TOOLS
I
I
N
T
E
G
R
A
T
O
N
S
E
R
V
C
E
S
I
SUSTAINABLE COMPETITIVE ADVANTAGE
¡ Fully integrated proprietary
tech platform
¡ Full product suite
¡ Integrated retail and
omni-channel solution
¡ Growth ready –
extremely scalable
¡ Highly stable and secure
¡ Multi-jurisdiction compliant
¡ Quick to market
¡ Rapid deployment of changes
¡ Cost efficient operation
and development
SIGNIFICANT SCALE
HIGH AVAILABILITY
UNIQUE FLEXIBILITY
POWERFUL RESOURCES
Processing (p.a.):
¡ >420m sports bets
¡ >12bn casino spins
¡ >5bn poker hands
¡ 99.93%
service availability
¡ 82+ changes
deployed per day
Currently supports:
¡ 70+ front-ends
¡ 33 languages
¡ 42 currencies
¡ 1500+ IT staff
¡ Core locations in
Hyderabad + Vienna
30
GVC Holdings PLC | Annual Report 2019
OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS
Business review
Financial Results and the use
of Non-GAAP measures
The reported statutory results for the year ended 31 December 2019
include 12 months of trading for both the legacy GVC and Ladbrokes Coral
businesses. The reported statutory results for the year ended 31 December
2018 reflect the acquisition of the Ladbrokes Coral Group which took place
at the close of business on 28 March 2018 and therefore includes the
results of the Ladbrokes Coral Group from that date only.
As a result, and in order to aid the comparison of year on year results,
the Directors have deemed it appropriate to provide and analyse proforma
results for the combined Group as if it had existed from 1 Jan 2018.
Given the changes in capital structure arising from the acquisition of the
Ladbrokes Coral Group, the historical interest, tax and dividend charges are
not deemed to be meaningful. As a result, proforma results have only been
provided down to operating profit.
Given the nature of the IFRS 3 fair value exercise conducted on the Ladbrokes
Coral business on acquisition, the proforma depreciation and amortisation
charges for 2018 may not be comparable with those arising post the
acquisition of Ladbrokes Coral. Therefore, the Directors believe that the
provision of underlying EBITDA within the proforma and segmental information
is appropriate, as it aids the comparability of “underlying” profit whilst the
impact of IFRS 3 on depreciation and amortisation normalises.
In addition, as the Group has taken transition relief, available under IFRS 16, not
to restate comparative financial information, the 2018 Income Statement has
not been impacted by the adoption of the new accounting standard. To enable
a like-for-like comparison of year-on-year results, the Directors have therefore
also provided the 2019 results pre the impact of IFRS 16. Due to the nature
of our Retail estate and the impact of the Triennial Review on the timing and
extent of our lease renewal programme, the Directors are also of the opinion
that the provision of EBITDAR will aid the understanding of the Group’s results
in the medium term.
Contribution, which is also presented, represents gross profit less marketing
cost and is a key measure used by the Group in assessing the Online
business. Like-for-like (LFL) growth is a measure used in UK Retail to measure
performance of the shops that have been open in both 2018 and 2019.
Along with EBITDA, both are industry-standard measures.
The Group operates through five segments:
Online
UK Retail
European Retail
Other
Corporate
35
37
39
40
41
31
GVC Holdings PLC | Annual Report 2019 Business review continued
Business review
Group
The tables below reconcile reported results to proforma results for 2018 and pre and post IFRS 16 for 2019.
2019 results
Net gaming revenue
Revenue
Gross profit
Contribution
Underlying EBITDAR
Underlying EBITDA
Share based payments
Underlying depreciation & amortisation
Share of JV income
Underlying group operating profit
2018 results
Net gaming revenue
Revenue
Gross profit
Contribution
Underlying EBITDAR
Underlying EBITDA
Share based payments
Underlying depreciation & amortisation
Share of JV income
Underlying Group operating profit
Reported
underlying
results1
3,655.1
3,600.5
2,378.2
1,883.2
782.7
761.1
(12.7)
(219.2)
(9.2)
520.0
Reported
underlying
results1
2,979.5
2,935.2
2,004.2
1,598.8
723.7
640.8
(10.7)
(117.7)
8.4
520.8
IFRS 16
impact3
–
–
–
–
–
(82.8)
–
52.9
–
(29.9)
Ladbrokes
Coral trading
pre acquisition2
591.9
588.4
400.2
341.0
140.6
114.5
(1.0)
(24.0)
(0.2)
89.3
Pre IFRS 16
underlying
results
3,655.1
3,600.5
2,378.2
1,883.2
782.7
678.3
(12.7)
(166.3)
(9.2)
490.1
Proforma
results
(unaudited)
3,571.4
3,523.6
2,404.4
1,939.8
864.3
755.3
(11.7)
(141.7)
(8.2)
610.1
1. Excludes the impact of separately disclosed items.
2. Represents the trading results for the Ladbrokes Coral Group plc for the period 1 January 2018 to 28 March 2018 pre separately disclosed items.
3. IFRS 16 has also resulted in an additional £16.8m of net interest in 2019.
32
GVC Holdings PLC | Annual Report 2019 The Group operates through five segments; Online, UK Retail, European Retail, Other and Corporate.
Group
Year ended 31 December
NGR
VAT/GST
Revenue
Gross profit
Contribution
Operating costs
Underlying EBITDAR4
Rent and associated costs
Underlying EBITDA4
Share based payments
Underlying depreciation
and amortisation
Share of JV income
Underlying operating profit5
Reported results1
Proforma results2
2019
£m
3,655.1
(54.6)
3,600.5
2,378.2
1,883.2
(1,100.5)
782.7
(21.6)
761.1
(12.7)
(219.2)
(9.2)
520.0
Pre IFRS 16
2019
£m
3,655.1
(54.6)
3,600.5
2,378.2
1,883.2
(1,100.5)
782.7
(104.4)
678.3
(12.7)
(166.3)
(9.2)
490.1
2018
£m
2,979.5
(44.3)
2,935.2
2,004.2
1,598.8
(875.1)
723.7
(82.9)
640.8
(10.7)
(117.7)
8.4
520.8
Change
%
23%
(23%)
23%
19%
18%
(26%)
8%
74%
19%
(19%)
(86%)
(210%)
–
Pre IFRS 16
2019
£m
3,655.1
(54.6)
3,600.5
2,378.2
1,883.2
(1,100.5)
782.7
(104.4)
678.3
(12.7)
(166.3)
(9.2)
490.1
2018
£m
3,571.4
(47.8)
3,523.6
2,404.4
1,939.8
(1,075.5)
864.3
(109.0)
755.3
(11.7)
(141.7)
8.2
610.1
Change
%
2%
(14%)
2%
(1%)
(3%)
(2%)
(9%)
4%
(10%)
(9%)
(17%)
(212%)
(20%)
CC3
%
3%
(16%)
3%
Share based payment charges were 9% higher
than last year, while pre IFRS 16 underlying
depreciation and amortisation was 17%
higher, primarily due to the impact of the
prior year IFRS 3 fair value exercise and
amortisation on integration costs. Share of JV
loss of £9.2m includes a loss of £12.5m from
the US JV, Roar Digital and only nine months
of Sportium results following its sale in
October 2019. Pre IFRS 16 Group underlying
operating profit5 was 20% behind last year.
Reported Results1
Revenue increased by 23% to £3,655.1m,
underlying EBITDAR4 increased by 8% to
£782.7m and underlying EBITDA4 increased
by 19% to £761.1m, reflecting the prior
year period only containing nine months of
trading for the Ladbrokes Coral business
post acquisition on 28 March 2018, the
impact of IFRS 16 on rental costs and
underlying growth. Underlying operating
profit5 of £520.0m was in line with last year
and operating loss post separately disclosed
items of £175.9m was £243.2m behind 2018.
Proforma Results2
Revenue increased by 2% driven by the
strong performance in Online, European
Retail and UK Retail OTC, partially offset
by the decline in machines revenue in UK
Retail resulting from the implementation
of £2 maximum B2 stakes on 1 April 2019.
Contribution of £1,883.2m was 3% behind
last year, with contribution margin of 51.5%
in-line with expectations, but 2.8pp lower
than last year due to the change in segmental
mix following the £2 B2 stakes restriction in
UK Retail, an increase in the proportion of
revenue generated from regulated markets in
Online and increased gaming taxes in the UK,
Australia, Ireland and Italy. Operating costs
were 2% higher, primarily driven by the prior
year acquisitions of Crystalbet and Neds (1pp)
and inflation, partly offset by the delivery of
synergies and savings in UK Retail as a result
of mitigation of the Triennial restrictions.
Resulting underlying EBITDAR4 was down
9%. Pre IFRS 16 rent and associated costs
of £104.4m were £4.6m lower than last
year reflecting the impact of shop closures
following the Triennial implementation.
Pre IFRS 16 underlying EBITDA4 was 10%
behind but approximately £50m ahead of
consensus as at the beginning of 2019.
After adjusting for the impact of duty
increases in the UK, Australia, Ireland and
Italy and the estimated impact of the Triennial
Review in UK Retail8, pre IFRS 16 underlying
Group EBITDA4 was 14% ahead.
33
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Business review continued
Business review
Divisional highlights
ONLINe
NGR1
+13%
2,170.7
522.1
underlying ebitda1,2
(£m)
UK Retail
NGR/revenue1
(£m)
European retail
ngr/revenue1
(£m)
-15%
1,127.8
145.8
underlying ebitda1,2
+4%
289.8
57.8
underlying ebitda1,2
2018: 1,915.1
2018: 1,328.0
2018: 278.8
+7%
2018: 485.7
(+20% excluding regulatory change)
-42%
(+5% excluding regulatory change)
2018: 251.7
-12%
(-5% excluding regulatory change)
2018: 65.4
1. Proforma.
2. Pre IFRS 16.
34
GVC Holdings PLC | Annual Report 2019
Business review
Online
Online
Year ended 31 December
Sports wagers
Sports margin
Sports NGR
Gaming NGR
B2B NGR
Total NGR
VAT/GST
Revenue
Gross profit
Contribution
Contribution margin
Operating costs
Underlying EBITDAR4
Rent and associated costs
Underlying EBITDA4
Share based payments
Underlying depreciation
and amortisation
Share of JV income
Underlying operating profit5
Reported results1
Proforma results2
2019
£m
11,216.7
11.1%
966.5
1,189.1
15.1
2,170.7
(54.6)
2,116.1
1,367.8
887.2
40.9%
(352.2)
535.0
(1.1)
533.9
(5.5)
(116.0)
0.8
413.2
Pre IFRS 16
2019
£m
11,216.7
11.1%
966.5
1,189.1
15.1
2,170.7
(54.6)
2,116.1
1,367.8
887.2
40.9%
(352.2)
535.0
(12.9)
522.1
(5.5)
(105.2)
0.8
412.2
2018
£m
8,853.0
10.6%
731.3
958.1
23.3
1,712.7
(44.3)
1,668.4
1,134.9
742.8
43.4%
(289.3)
453.5
(10.1)
443.4
(2.4)
(70.7)
0.8
371.1
Change
%
27%
0.5pp
32%
24%
(35%)
27%
(23%)
27%
21%
19%
(2.5pp)
(22%)
18%
89%
20%
(129%)
(64%)
–
11%
Pre IFRS 16
2019
£m
11,216.7
11.1%
966.5
1,189.1
15.1
2,170.7
(54.6)
2,116.1
1,367.8
887.2
40.9%
(352.2)
535.0
(12.9)
522.1
(5.5)
(105.2)
0.8
412.2
2018
£m
10,251.4
10.5%
835.4
1,055.7
24.0
1,915.1
(47.8)
1,867.3
1,265.0
816.4
42.6%
(319.3)
497.1
(11.4)
485.7
(2.8)
(82.2)
0.5
401.2
Change
%
9%
0.6pp
16%
13%
(37%)
13%
(14%)
13%
8%
9%
(1.7pp)
(10%)
8%
(13%)
7%
(96%)
(28%)
60%
3%
CC3
%
11%
0.6pp
17%
13%
(38%)
14%
(16%)
14%
Reported Results1
On a reported basis, revenue of £2,116.1m
was 27% ahead of last year, underlying
EBITDAR4 of £535.0m was 18% ahead and
underlying EBITDA4 of £533.9m was 20%
ahead, reflecting continued growth in the
Online division, the prior year period only
containing nine months of trading of the
Ladbrokes Coral Group post acquisition on
28 March 2018, and the impact of IFRS 16.
Underlying operating profit5 of £413.2m was
11% ahead of 2018, and an operating loss
post separately disclosed items of £161.5m
was £29.1m lower than last year.
Proforma Results2
Our Online segment has continued to deliver
double digit growth with total Online NGR
13% (+14% cc) ahead of last year, despite the
comparative period containing the FIFA World
Cup. Underlying EBITDAR4 of £535.0m was
8% ahead and pre IFRS 16 underlying EBITDA4
of £522.1m was 7% ahead. After adjusting
for the impact of tax and duty increases
in the UK, Australia and Italy8, pre IFRS 16
underlying EBITDA4 was 20% ahead. Pre IFRS
16 underlying operating profit5 of £412.2m
was 3% ahead.
Sports NGR was 16% (+17% cc) ahead with
sports wagers up 9% (+11% cc) and sports
gross win margin 0.6pp ahead at 11.1%.
After adjusting for the FIFA World Cup7, Online
NGR was 15% ahead, sports NGR 19% ahead
and sports wagers 12% ahead. Gaming NGR
was 13% (+13% cc) ahead. The tailwinds to
NGR growth provided by the acquisition of
Crystalbet in Georgia in April 2018 and Neds
in Australia in November 2018 were broadly
offset by the prior period containing the FIFA
World Cup and the exit from certain territories
in 2019.
Growth was strong across all major territories
as the Group continues to make market
share gains. In the UK, NGR was 11% ahead,
supported by the re-invigoration of the
Ladbrokes brand. Benefits continued to be
delivered from the deployment of enhanced
real-time CRM and improved gaming cross-
sell techniques already utilised in Coral.co.uk.
Enhanced Live Casino features and additional
Slots content have also significantly improved
customer experience. UK gaming brands NGR
growth was +10%. One of the main drivers of
the gaming brands growth was Foxy, where
NGR was 21% ahead of last year driven by the
successful migration of Foxy onto the GVC
technology platform at the end of 2018, which
enabled bespoke customer promotions,
and ‘The Foxy Fabulous’ TV campaign.
These sustained market share gains mean the
Group is on track to be the number 1 operator
in the UK online betting and gaming market.
The Group again demonstrated its ability to
effectively navigate regulatory changes with
no noticeable impact on revenues from the
necessary industry wide enhancements made
to age verification during Q2.
35
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Business review continued
Business review
Online Continued
Growth remains strong in Germany, where
NGR was 15% ahead on a constant currency
basis, despite the impact of the removal of
Paypal from Casino. bwin’s ‘This is our game!’
and ‘Real Football’ campaigns aimed at
creating a ‘passionate and authentic’ identity
helped cement the bwin brand as a leading
online sports-betting and gaming brand in
Germany, and it is well placed to adapt to the
proposed regulatory changes in 2020.
In Australia, NGR was 43% ahead on a
constant currency basis (and 22% cc ahead if
the Neds acquisition is adjusted to a proforma
basis). The market remains competitive and
challenging following the implementation
of POCT in the majority of states and a
significant tightening in the regulatory
framework following the introduction of the
National Consumer Protection Framework
in May 2019. As a result, market overrounds
have increased and above the line marketing
spend has reduced, leading to reduced
volumes across the market, particularly in
racing. However, a disciplined marketing
and bonusing strategy, and the benefits of
‘best-of-both’ sharing between Ladbrokes
and Neds, continues to drive profitable growth
ahead of the market.
In Italy, combined NGR growth across the
three major brands (Eurobet, bwin and Gioco
Digitale) was 21% cc, which was stronger
than the market, consolidating GVC’s position
as the number 1 online operator in Italy.
Growth benefitted from strong acquisition
rates ahead of the advertising restrictions,
increased value of the older loyal customer
base and bonus spend optimisation. Post the
implementation of advertising restrictions,
the Italian brands performed well, benefitting
from strong operational management and
the retail presence of Eurobet keeping the
brand top of mind. During the year the
GVC gaming platform was integrated into
the Eurobet.it online platform providing
access to the Group’s wide range of leading
gaming content.
Meanwhile, Brazil maintained strong growth
which was further boosted by the Copa
America tournament in June and July.
Partypoker NGR was 8% cc ahead of last year,
slowing in the second half due to a tough prior
year comparator and the impact of ecology
changes that were made during H1 to improve
profitability. The rollout of a new partypoker
mobile app began during the final quarter
and is expected to strengthen acquisition
capability in 2020.
In Georgia, the superior gaming product
suite, new sports feeds providing over 8,000
additional markets daily, and access to Group
marketing capabilities, drove Crystalbet NGR
65% cc ahead in H2, leaving the business in a
market leading position in slots.
New sports product development highlights
in the first half included a refresh of the Coral
sports app, the launch of an improved version
of the bwin.com and bwin.es desktop sports
platforms and increased bet-in-play markets
across all brands. In gaming, Playtech content
was launched in Spain, Georgia and Italy,
alongside the rollout of Playtech live casino to
certain legacy GVC brands.
Online contribution margin was ahead of
expectations at 40.9% (0.9pp ahead of
guidance) with the marketing rate 0.9pp
ahead of guidance, which was helped by
early delivery of planned synergies as
marketing teams were brought together.
Contribution margin was 1.7pp lower than
last year as the adverse impact of Australian
POCT and product fees, increases in Italian
online taxes announced in December 2018
and the increase in UK RGD from 15%
to 21% on 1 April 2019, combined with a
change in mix to more regulated territories,
was only partially offset by a relative
reduction in marketing spend as well as the
reclassification of certain costs which are
now reflected in overheads rather than in cost
of sales as they have been brought inhouse.
Operating costs (before rent) were 10%
higher than last year (or 8% excluding the
reclassification from cost of sales), driven
by the acquisitions of Crystalbet and Neds
(+3pp) and underlying inflation of 5%. Pre IFRS
16, rent and associated costs were £12.9m,
compared with £11.4m in the prior year.
Pre IFRS 16 underlying depreciation and
amortisation of £105.2m was 28% higher
than last year primarily due to the impact
of the prior year IFRS 3 fair value exercise,
amortisation on integration capex costs
incurred as we bring the businesses together
and the acceleration of the amortisation on
certain assets rendered redundant following
migration to the GVC technology platform.
The disposal of the Group’s 50% interest in
Sportium to Cirsa S.A. was completed during
the final quarter of the year. Sportium Online
JV income was £0.8m in 2019.
Outlook
The online gaming market continues
to evolve at a rapid pace, in particular
regulation. This is creating opportunities
as well as challenges. We continue
to target double digit online revenue
growth in the medium term, which we
expect to deliver through a combination
of underlying market growth and
continuing to gain share in key territories
and M&A activity. We expect to further
expand internationally, entering new
markets through a combination of
organic (licence applications) and
non-organic (acquisitions and strategic
partnerships) expansion.
36
GVC Holdings PLC | Annual Report 2019 Business review
UK Retail
UK Retail
Year ended 31 December
OTC wagers
OTC margin
Sports NGR/Revenue
Machines NGR/Revenue
Total NGR/Revenue
Gross profit
Contribution
Contribution margin
Operating costs
Underlying EBITDAR4
Rent and associated costs
Underlying EBITDA4
Share based payments
Underlying depreciation
and amortisation
Share of JV income
Underlying operating profit5
Reported results1
Proforma results2
2019
£m
3,182.7
17.9%
565.9
561.9
1,127.8
817.7
812.6
72.1%
(585.1)
227.5
(19.6)
207.9
(1.0)
(72.7)
–
134.2
Pre IFRS 16
2019
£m
3,182.7
17.9%
565.9
561.9
1,127.8
817.7
812.6
72.1%
(585.1)
227.5
(81.7)
145.8
(1.0)
(37.6)
–
107.2
2018
£m
2,372.2
17.8%
417.7
597.2
1,014.9
725.7
723.1
71.2%
(463.7)
259.4
(66.0)
193.4
(0.1)
(32.4)
–
160.9
Change
%
34%
0.1pp
35%
(6%)
11%
13%
12%
0.9pp
(26%)
(12%)
70%
7%
(900%)
(124%)
–
(17%)
Pre IFRS 16
2019
£m
3,182.7
17.9%
565.9
561.9
1,127.8
817.7
812.6
72.1%
(585.1)
227.5
(81.7)
145.8
(1.0)
(37.6)
–
107.2
2018
£m
3,084.5
17.9%
547.3
780.7
1,328.0
952.2
948.3
71.4%
(607.9)
340.4
(88.7)
251.7
(0.3)
(40.2)
–
211.2
Change
%
3%
–
3%
(28%)
(15%)
(14%)
(14%)
0.7pp
4%
(33%)
8%
(42%)
(233%)
6%
–
(49%)
CC3
%
n/a
n/a
n/a
n/a
n/a
Reported Results1
On a reported basis, revenue of £1,127.8m
was 11% ahead of last year, underlying
EBITDAR4 of £227.5m was 12% behind and
underlying EBITDA4 of £207.9m was 7%
ahead, reflecting the prior year period only
containing nine months of trading of the
Ladbrokes Coral Group post acquisition
on 28 March 2018, the impact of IFRS 16
and the impact of the Triennial Review on
machines revenue. Underlying operating
profit5 of £134.2m was 17% behind last
year and operating profit after charging
separately disclosed items of £135.0m
was £24.6m ahead.
Proforma Results2
The cut in maximum B2 stakes to £2
following the UK Government’s Triennial
Review was implemented on 1 April 2019,
resulting in a material change to the division’s
performance in the remainder of the period.
Post the implementation, the performance
of the UK Retail business has been stronger
than initially anticipated, with our leading
sports-betting offering driving higher levels
of substitution from displaced B2 spend into
OTC and SSBTs. Overall the impact of the
Triennial Review is estimated to have reduced
UK Retail EBITDA by £118.0m in 2019, and
we expect it to remain broadly at that level as
further lost revenue from the annualisation of
the new measures is offset by cost mitigation
and competitor closures. Triennial Review
shop closures in the year totalled 245,
with a further c200 closing during the first
quarter of 2020. Closures will now return
to a business as usual level of 2-3%p.a.
including during 2020.
Total UK Retail NGR was 15% behind
last year and 12% on a LFL6 basis.
Underlying EBITDAR4 of £227.5m was 33%
behind and pre IFRS 16 underlying EBITDA4
of £145.8m was 42% behind. After adjusting
for the estimated impact of the Triennial
Review8, pre IFRS 16 underlying EBITDA4 was
5% ahead. Pre IFRS 16 underlying operating
profit5 of £107.2m was 49% behind.
OTC wagers were 3% ahead of last year and
on a LFL6 basis were 7% ahead (+12% in Q4).
OTC wagers benefitted from part substitution
of displaced B2 revenue into sports-betting
and earlier than anticipated industry closures,
with the FIFA World Cup7 in the prior period a
1pp headwind to wagering growth. OTC gross
win margin of 17.9% was in line with last
year, as strong football results offset softer
margins in greyhounds and horse racing.
37
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Business review continued
Business review
UK Retail Continued
LFL6 SSBT wagering was 46% ahead of last
year. The new deal with BGT will result in
9,000 new cabinets being rolled out across
the estate, concluding in 2020 and taking
the density per shop up towards five.
Machines NGR was 28% behind last year
and 26% behind on a LFL6 basis. The excellent
implementation of our Triennial Review
mitigation plans by UK Retail colleagues
and continued investment in our ‘Slots
first’ strategy, meant that the impact of
the cut to maximum B2 stakes to £2,
implemented on 1 April 2019, was better
than initial expectations.
Operating costs (before rent) were 4% lower
than last year, as a result of shops closures
and cost mitigation actions following the
Triennial Review.
Compared to our original Triennial impact
guidance, we now estimate a £30m
outperformance for UK Retail in 2019,
reducing the impact in 2019 to £118.0m.
Pre IFRS 16 rent and associated costs were
£81.7m, compared to £88.7m in the prior
year, reflecting the smaller estate size and
a number of rent reductions achieved as
a response to the Triennial Review (2019
average shops: 3,341; 2018: 3,524).
Pre IFRS 16 underlying depreciation and
amortisation of £37.6m was 6% lower than
last year following shop closures.
At 31 December 2019, there were a total
of 3,233 shops in the estate (2018: 3,475).
During the period 245 shops were closed
as a consequence of the Triennial Review.
Outlook
Following the cut in maximum B2 stakes
to £2, both retained machines revenue
and revenues substituted into OTC
and SSBTs were higher than initially
anticipated, driven by an effective
Triennial Response plan featuring
high levels of staff interaction with
customers and a range of new products
and customer offers.
We have also benefitted from earlier
than anticipated mitigation from
competitor closures and cost savings.
We therefore anticipate a further
£15m improvement to the guided
2020 Triennial Review impact (£40m
total improvement including £25m of
upgrades announced at our Capital
Markets Day presentation and the
Interims in 2019), reducing the guided
2020 impact to c.£125m. Guidance for
2021 is £5m better than previously
communicated and 2022 remains
unchanged as the timing benefits of
mitigation in 2020 unwind.
The UK Retail division is highly cash
generative and post Triennial Review
impacts will deliver over £100m of free
cash-flow per annum. This represents
a c.14% Return on Invested Capital9,
even before considering the benefits to
Online through brand awareness and
customer acquisition. The presence
of Ladbrokes and Coral shops in
most high streets helps reinforce
brand recognition and the Grid and
Connect omnichannel offerings are
a material competitive advantage,
driving online growth through in-shop
sign-ups to the Ladbrokes and Coral
online offerings, and the subsequent
servicing of those customers through
the use of a seamless customer wallet.
Combined with the investment in
machines cabinets, new B3 content,
SSBTs and OTC product and our new
proprietary EPOS system, the UK Retail
business is very well placed to take
market share as the industry transitions
to a post-Triennial Review environment.
38
GVC Holdings PLC | Annual Report 2019 Business review
European Retail
European Retail
Year ended 31 December
OTC wagers
OTC margin
Sports NGR/Revenue
Other OTC NGR/Revenue
Machines NGR/Revenue
Total NGR/Revenue
Gross profit
Contribution
Contribution margin
Operating costs
Underlying EBITDAR4
Rent and associated costs
Underlying EBITDA4
Share based payments
Underlying depreciation
and amortisation
Share of JV income
Underlying operating profit5
Reported results1
Proforma results2
2019
£m
1,659.9
17.4%
218.2
69.3
2.3
289.8
143.6
138.0
47.6%
(70.8)
67.2
(0.8)
66.4
(0.3)
(29.0)
1.0
38.1
Pre IFRS 16
2019
£m
1,659.9
17.4%
218.2
69.3
2.3
289.8
143.6
138.0
47.6%
(70.8)
67.2
(9.4)
57.8
(0.3)
(22.3)
1.0
36.2
2018
£m
1,216.4
17.3%
158.6
51.1
2.0
211.7
109.9
103.4
48.8%
(47.7)
55.7
(6.6)
49.1
(0.1)
(14.0)
2.7
37.7
Change
%
36%
0.1pp
38%
36%
15%
37%
31%
33%
(1.2pp)
(48%)
21%
88%
35%
(200%)
(107%)
(63%)
1%
Pre IFRS 16
2019
£m
1,659.9
17.4%
218.2
69.3
2.3
289.8
143.6
138.0
47.6%
(70.8)
67.2
(9.4)
57.8
(0.3)
(22.3)
1.0
36.2
2018
£m
1,571.4
17.7%
210.2
66.0
2.6
278.8
145.7
138.0
49.5%
(63.9)
74.1
(8.7)
65.4
(0.1)
(18.3)
2.6
49.6
Change
%
6%
(0.3pp)
4%
5%
(12%)
4%
(1%)
–
(1.9pp)
(11%)
(9%)
(8%)
(12%)
(200%)
(22%)
(62%)
(27%)
CC3
%
6%
(0.3pp)
4%
6%
(9%)
5%
Reported Results1
On a reported basis, revenue of £289.8m
was 37% ahead of last year, underlying
EBITDAR4 of £67.2m was 21% ahead and
underlying EBITDA4 of £66.4m was 35%
ahead, reflecting the prior year period only
containing nine months of trading of the
Ladbrokes Coral Group post acquisition on
28 March 2018 and the impact of IFRS 16.
Underlying operating profit5 of £38.1m was
1% ahead of 2018, and operating profit after
charging separately disclosed items was
£16.0m, £14.7m lower than 2018.
Proforma Results2
European Retail NGR of £289.8m was 4%
ahead of last year (+5% cc), delivering growth
in every year since the Ladbrokes and Coral
merger. However, underlying EBITDAR4 of
£67.2m was 9% behind, primarily as a result
of one-off costs in the current year and the
impact of incremental tax in Italy and the
Republic of Ireland. Pre IFRS 16 underlying
EBITDA4 of £57.8m was 12% behind and
pre IFRS 16 underlying operating profit5
of £36.2m was 27% behind.
Sports NGR was 4% ahead with OTC wagers
6% ahead as a result of strong growth in
football wagers in Eurobet Italy (+9% cc) and
Ladbrokes Belgium (+19% cc) despite the
FIFA World Cup comparative. OTC sports
gross win margin of 17.4% was 0.3pp down
primarily driven by football gross win margins
in Belgium, which were 2.8pp behind last year.
Sports NGR was 7% ahead after adjusting
for the FIFA World Cup7. Other OTC growth of
5% was primarily due to growth in Virtual in
Eurobet Italy (+17% cc) driven by the roll-out
of a range of new products, partially offset by
a 6% decline in Belgium due to disruption to
the Virtual product offering in H2.
Eurobet Retail, which represents over half of
the segment, grew NGR at 9%, +5pp ahead
of the Italian Retail market (excluding VLT/
AWP machines).
Contribution margin of 47.6% decreased
1.9pp, as a result of incremental taxes in
Italy and the Republic of Ireland more than
offsetting marketing savings following the
advertising restrictions coming into force
in Italy.
Operating costs (pre rent) were 11% higher
due to the full year effect of the 26 shops
acquired in Belgium during 2018, one off
costs associated with the disruption to our
Virtual product in Belgium and additional
costs in Italy as we integrate the management
of our Italian brands.
Pre IFRS 16 rent and associated costs were
£9.4m in the year, compared to £8.7m in the
prior year.
Pre IFRS 16 underlying depreciation and
amortisation of £22.3m was £4.0m higher
than last year largely due to investment
in Italy.
As at 31 December 2019 there were a total
of 1,730 outlets/shops: Italy 883 (2018: 851),
Belgium shops 311, outlets 397 (2018: shops
321, outlets 364) and Ireland 139 (2018: 141).
The disposal of the Group’s 50% interest in
Sportium to Cirsa S.A. was completed during
the final quarter of the period. Sportium Retail
JV income was £1.0m in 2019.
Outlook
Our Italian business has gone from
strength to strength and the benefits
of the omnichannel approach are
expected to drive further growth
in what is Europe’s largest gaming
market. In Belgium, we are migrating
Ladbrokes.be to an inhouse platform
and introducing significant new
content, whilst in retail we see further
opportunities to expand the network.
Opportunities to leverage the Group’s
omnichannel experience are also being
evaluated in new territories.
39
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Business review continued
Business review
Other
Other
Year ended 31 December
NGR/Revenue
Gross profit
Contribution
Operating costs
Underlying EBITDAR4
Rent and associated costs
Underlying EBITDA4
Share based payments
Underlying depreciation
and amortisation
Share of JV income
Underlying operating profit5
Reported results1
Proforma results2
2019
£m
70.4
49.1
45.4
(46.0)
(0.6)
(0.1)
(0.7)
(0.1)
(1.1)
1.5
(0.4)
Pre IFRS 16
2019
£m
70.4
49.1
45.4
(46.0)
(0.6)
(0.4)
(1.0)
(0.1)
(0.8)
1.5
(0.4)
2018
£m
43.8
33.7
29.5
(27.2)
2.3
–
2.3
–
(0.4)
4.9
6.8
Change
%
61%
46%
54%
(69%)
(126%)
–
(130%)
–
(175%)
(69%)
(106%)
Pre IFRS 16
2019
£m
70.4
49.1
45.4
(46.0)
(0.6)
(0.4)
(1.0)
(0.1)
(0.8)
1.5
(0.4)
2018
£m
53.1
41.5
37.1
(34.0)
3.1
–
3.1
–
(0.6)
5.1
7.6
Change
%
33%
18%
22%
(35%)
(119%)
–
(132%)
–
(33%)
(71%)
(105%)
CC3
%
32%
Reported Results1
On a reported basis, NGR of £70.4m was
61% up on the prior period reflecting the prior
period only containing nine months trading of
Ladbrokes Coral post acquisition and only a
few months of trading from Sigma and Argon,
two small financials businesses acquired in
2018 to complement the existing Intertrader
business. Underlying EBITDAR4 loss was
£0.6m, down from £2.3m of profit last year,
and underlying EBITDA4 loss was £0.7m
(2018: £2.3m profit). Underlying operating
loss5 of £0.4m was £7.2m behind 2018 and
operating loss after charging separately
disclosed items of £3.0m was £9.8m behind.
Proforma Results2
The prior year acquisitions of Sigma and
Argon, helped drive a 33% increase in NGR
to £70.4m, and a 35% increase in operating
costs to £46.0m. Underlying EBITDAR4 loss
of £0.6m was £3.7m behind last year, and is
largely a result of a number of additional costs
associated with changes in regulation in our
financial businesses. Underlying EBITDA4 loss
of £1.0m was £4.1m behind. The operating
loss was £8.0m behind last year, largely due
to the aforementioned reduction in EBITDA
and a one-off profit in our JV during 2018.
40
GVC Holdings PLC | Annual Report 2019 Business review
Corporate
Corporate
Year ended 31 December
Underlying EBITDAR4
Rent and associated costs
Underlying EBITDA4
Share based payments
Underlying depreciation
and amortisation
Share of JV income
Underlying operating profit5
Reported results1
Proforma results2
2019
£m
(46.4)
–
(46.4)
(5.8)
(0.4)
(12.5)
(65.1)
Pre IFRS 16
2019
£m
(46.4)
–
(46.4)
(5.8)
(0.4)
(12.5)
(65.1)
2018
£m
(47.2)
(0.2)
(47.4)
(8.1)
(0.2)
–
(55.7)
Change
%
2%
100%
2%
28%
(100%)
–
(17%)
Pre IFRS 16
2019
£m
(46.4)
–
(46.4)
(5.8)
(0.4)
(12.5)
(65.1)
2018
£m
(50.4)
(0.2)
(50.6)
(8.5)
(0.4)
–
(59.5)
Change
%
8%
100%
8%
32%
–
–
(9%)
Reported Results1
On a reported basis, Corporate costs4 of
£46.4m were 2% lower than last year, and
after share based payments, depreciation
and amortisation and share of JV losses,
were £65.1m, an increase of 17%, reflecting
the prior year period only containing costs for
nine months of Ladbrokes Coral results post
acquisition and the £12.5m loss in the new
US JV, Roar Digital in 2019. After charging
separately disclosed items, the operating loss
of £162.4m was £214.2m behind 2018.
Proforma Results2
Corporate costs4 of £46.4m were 8% lower
than last year as a result of the delivery of
cost synergies arising from the acquisition of
the Ladbrokes Coral Group. During the year
the Group also recorded a £12.5m loss on its
share of the results of the US JV (2018: £nil).
1. 2019 and 2018 reported results are audited and reflect the acquisition of the Ladbrokes Coral Group plc on 28 March 2018. The pre IFRS 16 2019 reported results are unaudited and reflect the
2019 audited results adjusted to remove the impact of IFRS 16.
2. The Group’s proforma results for 2019 are unaudited and equal the pre IFRS 16 2019 reported results. The Group’s proforma results for 2018 are unaudited and presented as if the current Group,
post the acquisition of Ladbrokes Coral Group plc, had existed since 1 Jan 2018. The results of Crystalbet and Neds are included from the dates of acquisition (11 April 2018 and 28 November
2018 respectively).
3. Growth on a constant currency basis is calculated by translating both current and prior year performance at the 2019 exchange rates.
4. Stated pre separately disclosed items and share based payments.
5. Stated pre separately disclosed items.
6. UK Retail numbers are quoted on a LFL basis. During 2019 there was an average of 3,341 shops in the estate, compared to an average of 3,524 in 2018.
7. FIFA World Cup post substitution.
8. After rebasing the prior year for the adverse EBITDA impact of incremental taxes (UK RGD, Irish and Italian taxes and Australian POCT) of £56.7m, and adjusting the current year for the
estimated £118.0m adverse impact of the Triennial Review on UK Retail.
9. Cash return defined as unlevered Cashflow attributable to the UK Retail business as a percentage of the implied valuation at the time of the Ladbrokes Coral Group acquisition after adjusting for
the impact of the Triennial Review.
41
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Corporate social responsibility
Since 2016, GVC has transformed its AML
and safer gambling processes, more than
quadrupling compliance and safer gambling
headcount, more than trebling player source
of funds checks and responsible gambling
customer interactions, and committing to
a ten-fold increase in donations towards
research, education and treatment (“RET”)
of problem gambling. In the words of our CEO,
Kenny Alexander: “These historical failings
were unacceptable and since the acquisition,
I have overseen a systematic review of
the enlarged Group’s player protection
procedures and the individuals responsible
for these problems have exited the business.
I am confident that we now have in place
a robust and industry leading approach to
player protection.”
We know that without earning and
maintaining the trust of regulators,
customers, investors, interest groups and
others, we cannot create long-term value.
We are on a mission to build and extend a
responsibility-first culture into every corner
of our business, from the shop-floor to the
executive suite; something our sector has
failed to do convincingly in the past.
Following extensive independent reviews
of the Group’s environmental, social and
governance (“ESG”) policies and practices,
we remain constituents of the FTSE4Good
and Dow Jones Sustainability Index, the latter
as the only European betting company.
This section highlights our Fair Play
activities and performance in 2019, along
with objectives for the future. In this
limited disclosure, we focus on the Safer
Gambling pillar of our Fair Play strategy as
well as mandatory reporting items such as
greenhouse gas emissions. It complements
our stand-alone ESG Report, published
simultaneously, which covers the remaining
priority areas of our Fair Play strategy,
including additional performance data.
Corporate Social responsibility
Setting the context
“ We know that without
earning and maintaining
the trust of regulators,
customers, investors,
interest groups and
others, we cannot
create long-term
value business.”
Virginia mcdowell
Chair of CSR committee
This is the second Annual Report to be
published following GVC’s acquisition
of Ladbrokes Coral. As a global leader in
sports-betting and gaming, with over 24,000
employees across five continents, GVC
recognises the unique responsibilities we
have towards society, particularly as our
industry is held to ever higher social and
environmental standards by regulators,
investors and citizens alike.
Following the outcome of the Triennial Review,
our sector has faced, and will continue to
face, a tightened regulatory environment,
including, in the UK alone, new ‘know your
customer’ requirements, an increased Remote
Gaming Duty and a ban on credit cards to
place bets. 2019 also saw the introduction of
a £2 maximum stake on fixed odds betting
terminals (FOBTs) in the UK, which will
result in the closure of around 450 betting
shops by the end of Q1 2020. This number is
substantially lower that our initial expectation
of up to 900 closures thanks to a detailed
mitigation plan that enabled us to manage the
change process and minimise job losses.
The UK Gambling Commission has made
no secret of its expectation that the betting
and gambling industry must step up its
game and we welcome the challenge to
improve standards. In 2019, it handed
out close to £14m in penalties against its
licensees, including a significant £5.9m
package of penalties imposed on GVC
for “systemic failings” in its anti-money
laundering (“AML”) and social responsibility
obligations. The penalty relates to historic
failings in the Ladbrokes Coral Group between
November 2014 and October 2017, during
which the company “failed to put in place
effective safeguards to prevent consumers
suffering gambling harm and against money
laundering.” Of the £5.9m settlement, £4.8m
will be paid towards causes helping to deliver
the National Strategy to Reduce Gambling
Harms, with the balance of £1.1m being paid
to affected parties.
RET Investment
10X
We have unilaterally committed
to increasing our investment into
research,education and treatment
of problem gambling behaviours
10-fold by 2022.
42
GVC Holdings PLC | Annual Report 2019 Fair Play
Our CSR Strategy
FAIR PLAY
Growing a global socially
responsible and sustainable
betting and gaming business
SAFER
GAMBLING
RESPONSIBLE
EMPLOYER
RESPONSIBLE
COMMUNITIES
AND MARKETS
UNDERSTANDING
OUR IMPACT
AND MINIMISING
HARM
RESPONDING TO
IMBALANCE
RESPONDING TO
SOCIETAL NEEDS
REWARDING
LEISURE EXPERIENCE
PROVIDING
QUALITY EMPLOYMENT
POSITIVE
ECONOMIC FOOTPRINT
For more information see
For more information see
For more information see
pages 45 to 47
pages 48 to 49
page 52
BUILT ON RESPONSIBLE BUSINESS OPERATIONS
ETHICS
COMPLIANCE
H & S
SECURITY
ENVIRONMENT
DATA
PROTECTION
AML/FRAUD
SUPPLIERS
We launched Fair Play – GVC’s global
responsible business strategy – in October
2018. Following a year of internal and
external consultation, the emerging strategy
sets out our priorities and activities across
three important pillars:
¡ Safer Gambling – leading the industry in
providing safe environments for customers
to enjoy their gambling experience;
¡ Responsible Employer – becoming a
destination employer where all colleagues
can thrive; and
¡ Responsible Communities & Markets –
ensuring we leave a positive footprint in the
communities and markets we serve.
Each pillar comes with its own objectives,
activities and policies, and together, we
believe they add up to something greater
than the sum of their parts. The three pillars
are supported by our Responsible Business
Operations, providing the day-to-day
foundation on which we run our business.
Aside from guiding our responsible business
activities, Fair Play also acts as the framework
for our responsible business disclosures.
43
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Corporate social responsibility continued
Responsible Business Governance
RESPONSIBLE BUSINESS GOVERNANCE STRUCTURE
BOARD
CSR STEERING GROUP
CSR
COMMITTEE
STRATEGY
OVERSIGHT
OPERATING UNITS
CENTRAL FUNCTIONS
COORDINATION
OPERATIONAL TEAMS
DELIVERY
The governance of responsible business at
GVC reflects the high emphasis we place on
managing our non-financial risks effectively
and efficiently. Launched in 2018, the
current governance structure is now fully
bedded in and has proved fit for purpose in
managing the increased scale, complexity
and expectations of the Group.
¡ The Board CSR Committee covers
regulatory compliance, anti-money
laundering (“AML”) and anti-bribery and
corruption (“ABC”), responsible gaming,
health and safety, environmental impact,
data protection and diversity in the
workplace. Chaired by Virginia McDowell,
the Committee has five members and
provides guidance for the business on all
aspects of CSR strategy, agree on targets
and monitors our performance across
the Company.
¡ The CSR Steering Group consists of
functional leaders from across the
business, including Investor Relations,
HR, Legal, Health, Safety and Security,
Operations and Communications.
Convened by our Head of CSR, the
Group oversees implementation of the
CSR strategy.
¡ Sitting below the CSR Steering Group,
the relevant Operating Units and Central
Functions are tasked with coordinating all
GVC’s major CSR initiatives and processes,
which in turn are delivered on a day-to-day
basis by Operational Teams across all
countries of operation.
In addition, a small team of CSR Advisers
sits at the corporate centre, which includes
our external consultants Carnstone Partners
Ltd. Together they advise the Board CSR
Committee and other internal bodies,
assist the operational units and review our
environmental and social performance data.
Externally, we keep abreast of developments
in the responsible investment market and
engage actively with ESG requests from
our investors and key ESG rating agencies.
In 2019, GVC was admitted to both the
FTSE4Good and Dow Jones Sustainability
Indices. We will continue to engage with
these and other ESG indices going forward,
as capital markets increasingly reconsider
risk and asset values based on a broader set
of parameters.
GVC has a policy of not making political
contributions, neither directly nor through
our charitable foundations; in practice this
means we would never support political
parties or organisations associated with
political parties, be it in kind or through
cash donations.
“ We believe the key to
establishing a safer
environment for
customers to enjoy the
services we provide is by
working constructively
with national regulators,
industry peers and third
sector bodies.”
Jay dossetter
Head of CSR
44
GVC Holdings PLC | Annual Report 2019 Safer Gambling
Arguably, our most important responsible
business pillar is Safer Gambling.
We believe the key to establishing a safer
environment for customers to enjoy
the services we provide is by working
constructively with national regulators,
industry peers and third sector bodies.
We are fully aligned with the UK Gambling
Commission’s principal objectives to ensure
that gambling is:
¡ Crime-free;
¡ Fair and conducted in an open way; and
¡ Protecting children and other
vulnerable persons.
We extend these objectives to all our
operations while developing approaches and
solutions that are locally relevant.
Changing for the Bettor
Launched in January 2019, 'Changing for
the Bettor' remains the most ambitious and
far-reaching safer gambling strategy within
our industry. The vision behind the strategy
is to establish GVC as the most trusted and
enjoyable betting operator in the world.
'Changing for the Bettor' comprises seven
key pillars for action, each of which has
substantive projects and outcomes attached
to it. As we mark its first anniversary, the
updates below illustrate key progress against
the priority areas:
¡ Understand the problem
¡ Educate stakeholders
¡ Advertise responsibly
¡ Make it easy to stay safe
¡ Help people in need
¡ Design for safety
¡ Change ourselves for the bettor
It all starts with our seven
principles for safer gambling:
UNDERSTAND
the problem
EDUCATE
STAKEHOLDERS
Advertise
responsibly
Make it easy
to stay safe
Help people
in need
Design
for safety
Change ourselves
for the bettor
Safer gambling is core to the way we
work every day. Because at GVC, safer
gambling is everyone’s business.
45
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Corporate social responsibility continued
Safer Gambling continued
1. Understanding the problem
and best solutions
2. Educating our
key stakeholders
3. Promoting responsible
attitudes
We have committed $5.5m to a five-year
partnership with the Division on Addiction,
Cambridge Health Alliance – a Harvard
Medical School teaching hospital – to better
understand and reduce the potential for
problem gambling behaviour. Now in its
second year, the partnership has crystallised
into the following activity streams:
¡ Patterns of normal internet
gambling behaviour;
¡ Behavioural markers of harm, evaluating
the effectiveness of algorithms deployed
by GVC;
¡ Safer Gambling limits and the affordability
of online gambling;
¡ Adopting an evidence-based approach
to product safety; and
¡ Review of responsible gambling training
and its effectiveness.
In November 2019, we hosted a research
symposium with our project partners at
the British Academy, outlining the scope
and ambition of the research to an invited
audience of academics, researchers
and industry peers. Presenters provided
research updates on topics including the
effectiveness of responsible gambling
intervention messaging, the impact of
operators’ responsible gaming tools and
how the industry can better detect at-risk
behaviours. All the research is carried out
under ‘open science’ practices, which ensure
the work is transparent and protected from
outside influences.
This strand of 'Changing for the Bettor'
includes two flagship initiatives:
¡ The national roll-out of GamCare’s
Youth Outreach Programme. We made a
£0.5m contribution towards expanding
this initiative across Great Britain.
The programme aims to raise awareness
of problem gambling and educate young
people, and the professionals working
with them, about the risks associated with
gambling, helping young people to make
safer choices around gambling when they
come of age. To date over 16,000 young
people aged 12-18 have been engaged
through free, interactive workshops as
well as free training provided to over 5,500
professionals in cities including London,
Birmingham, Bristol, Manchester, Liverpool
and Hull.
¡ A major state school awareness and
intervention programme with EPIC Risk
Management. The ambition is to deliver
Gambling Awareness and Protection
(“GAP”) Seminars to school children,
across UK state schools and sixth form
colleges over a two-year period, equipping
participants to make more informed
decisions around gambling. During 2019,
EPIC piloted the programme with over
11,000 students across 62 schools, and an
independent evaluation was undertaken
by the University Campus of Football
Business (“UCFB”). The evaluation found
that the GAP seminar format and content
were widely endorsed and effective in
engaging the young audience, with 9 in 10
participants reporting their intentions not to
gamble at all or to gamble less.
GVC has led the industry bringing about the
introduction of a 'whistle-to-whistle' ban on
sports-betting broadcast advertising in the
UK. This came into effect in August 2019.
The Group also unilaterally ended all UK
football shirt sponsorship and perimeter
board advertising and has encouraged others
in the industry to follow suit.
We donated our shirt sponsorship rights
for both Charlton Athletic and Sunderland
AFC to our charity partner, Children with
Cancer UK, while sponsorship assets in
the Scottish Professional Football League
and with a number of high-profile English
clubs for the 2019/20 season were given
over to support GambleAware’s ‘Bet Regret’
campaign. In practice, this meant the ‘Bet
Regret’ logo replaced Ladbrokes’ and other
GVC brands’ across interview backdrops and
advertising boards.
Furthermore, during Responsible Gambling
Week, responsible gambling messages
dominated our websites, social media
channels and print advertising, with all our
retail colleagues wearing safer gambling
t-shirts.
Safer Gambling performance
Cash and in-kind contributions towards responsible gambling charities
Customer interactions regarding problem gambling
Customer complaints
Customer complaints which specifically relate to a gambling transaction
Self-exclusions made
Safe and Secure visits
Burglaries and burglary attempts
Shop robberies and robbery attempts
Street robberies
2019
£3,607,889
1,072,416
22,543
2,388
294,946
7,772
99
109
1
2018
£2,506,000
1,124,079
13,503
2,771
334,765
7,066
127
163
9
2017
£2,334,777
302,609
19,690
4,668
164,178
n/a
95
222
14
46
GVC Holdings PLC | Annual Report 2019 4. Empowering
customers
5. Fund treatment for
those in need
6. Champion responsible
product design
During 2019, we rolled out ‘markers of harm’
across our UK facing businesses, with the
aim of proactively spotting problematic play
among our customers. This, in turn, allows us
to provide effective and tailored interactions
with those players most at risk.
To help those customers experiencing
harmful gambling, we now offer the Gamban
software free of charge. Gamban is an app
that blocks access to thousands of gambling
websites and suppresses gambling-related
marketing. Difficult to uninstall, it also offers
access to useful safer gambling resources
and on-demand technical support. 1,570 GVC
customers made use of the Gamban software
since we offered it as an option in April 2019.
Announced early in 2020, GVC has been
appointed by UKGC to co-lead a working
group focusing on the use of incentives to
help ensure bonuses, hospitality and gifts in
particular around VIP programmes are offered
in a manner consistent with making gambling
fairer, safer and crime free. This forms part of
a wider effort by UKGC to tackle challenges
associated with game and product design and
advertising technology.
Alongside these initiatives, we have continued
trialling other player protection methods
and tools, including curfew buttons online.
Our internal analysis indicates that half of
GVC’s active customer base used one or
more RG tools in 2019, including 9 in 10 new
customers. Compared with 2018, there has
been a 200% increase in the number of RG
interactions, mainly driven by changes in how
we measure markers of harm for intervention.
200%
Compared with 2018, there has been
a 200% increase in the number of RG
interactions, mainly driven by changes
in how we measure markers of harm
for intervention.
Having already doubled our investment into
research, education and treatment (“RET”)
of gambling-related harm in 2019 to 0.2% of
UK GGR in 2019 (c.£4m), we led the industry
as the first operator to commit to a 10-fold
increase by 2022 (equivalent to £20m per year
at current rates). We were delighted when four
other major UK operators followed this lead in
July 2019, pledging a similar increase.
To add longevity, independence and
professionalism to our RET investments, we
have launched the GVC Global Foundation,
which will coordinate and support GVC’s
donations and CSR objectives around the
world. In addition to being the vehicle for RET
donations, it will also support:
¡ Grass roots, women’s and disability sport;
¡ Men’s health, with a particular focus on
mental health; and
¡ Projects with a clear link to the local
community in GVC’s major office locations.
Major recipients of GVC donations towards
RG in 2019 included GamCare, the US
National Council on Problem Gambling,
Gordon Moody, Leon House/Cognacity and
Digital Therapy Solutions, and other national
gaming addiction and support charities in
Austria, the Spielsuchthilfe Gemeinnuetziger
Verein, and in Spain, FEREJ.
Together with our four largest peers in
the UK, we have collectively committed to
contributing £100m in instalments between
2020 and 2023 and 1% of revenues thereafter
to safer gambling initiatives. The industry
is working to establish a new independent
charity, Action Against Gambling Harm,
to take responsibility for distributing
this investment.
£20 m BY 2022
Committed to research, education and
treatment (RET) of gambling-related harm.
We will work with leading experts to design
a code of conduct for product design, both
within our business and for external suppliers.
We are currently part of the industry working
group under the Betting and Gaming Council
to produce an effective industry code for
product design. This is an area where to be
effective as a company, we need commitment
and buy-in from the wider industry. Our aim is
to introduce new player protections in product
design and customer engagement, making it
easier for people to gamble safely.
7. Drive cultural change
within our business
We are determined to change the mindset of
our industry, starting with our own company.
To ensure responsibility underpins all
aspects of our business, we have introduced
campaigns and training to make safer
gambling integral to how everyone thinks and
acts at GVC.
As part of our Employee Engagement plan,
we focus on four aspects of building a safer
gambling culture:
¡ Building knowledge;
¡ Raising awareness;
¡ Driving behavioural change; and
¡ Collecting ideas from employees.
In November, we launched a 12-month
campaign that builds awareness,
understanding and ultimately drives
behaviour change through the seven pillars
of 'Changing for the Bettor'. GVC colleagues
will be engaged through regular competitions,
tailored communication and polls, tied into
big events during the year including RG
Week, Wimbledon, the Superbowl and Euro
2020. We are excited about crowd-sourcing
ideas from colleagues to improve our
safer gambling performance, inviting more
colleagues into this critical discussion and
creating ownership in the process.
Additionally we have increased mandatory
training for all colleagues, including VIP and
customer service teams and engaged the
services of EPIC Risk Management to help
us more effectively communicate with at-
risk customers.
47
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Corporate social responsibility continued
Responsible Employer
Enabling a rewarding and
inclusive environment
GVC is a people-driven business in a
highly dynamic sector. As our international
operations grow, we recognise the need to
identify, retain and develop talent from many
backgrounds to meet our customers’ needs
and stay at the forefront of innovation.
Across our business as a whole, 50% of
our employees are female, but this drops
down to 23% at the Senior Manager level.
This represents an improvement of 33% since
2017, but we recognise we still have work to
do. At Board level, the share of females has
increased to 30%, following the appointment
of Jette Nygaard-Andersen as a Non-
executive Director in 2019. Gender remains
one of the key areas of consideration for
the Nominations Committee and the Board,
together with a candidate’s experience,
knowledge and skills.
We launched our international diversity
and inclusion (D&I) strategy in 2018,
Everyone’s in the Game, which set out a
three-year roadmap towards a more inclusive
business. Over the three years, initiatives
and interventions will take place across
four focus areas: recruitment, process &
policy, people development and awareness
& education. In the first wave of activities,
we focused on gender equality, launching
an internal women’s network, training 250
leaders in understanding unconscious
bias and setting up Horizon, a leadership
programme for the top 100 females in our
business. In 2019, we built on this foundation
by introducing a new mentoring programme,
return to work initiatives, and interventions
encouraging more women into digital and
technology roles. We also invested in a new
virtual learning platform that enables us to
create more engaging online content as it
relates to training and development. The first
learning module launched on the platform is
unconscious bias, with more to come.
“ We built on this foundation
by introducing a new
mentoring programme,
return to work initiatives,
and interventions
encouraging more
women into digital
and technology roles.”
Shay Segev
Chief operating officer
48
We also broadened our focus to encompass
wider diversity characteristics such as
ethnicity, sexual orientation and disability,
appointing executive level sponsors to
champion different strands of diversity and
working with third parties such as Stonewall.
We completed the first global all employee
engagement survey, Your Voice Survey, which
provided helpful pointers as to where we can
improve our diversity performance.
GVC remains a flexible employer. In 2019,
over 60% of our UK colleagues chose to
work part time, to accommodate childcare
arrangements, studying or other personal
responsibilities. At the start of 2019, we
began the roll-out of enhanced maternity
and parental leave provisions, which have now
been bedded in.
In a fast-moving sector, ongoing learning
and development is key. We calculated the
average number of learning and development
(“L&D”) hours per fulltime employee to be
22.9 hours during the year. This compares
favourably to a sector media of 18.1 hours,
i.e. an additional 20% compared with other
FTSE 250 companies. From the benchmarking
exercise, we learned that as a company we
need to invest further in automation, making it
easier to book and manage training resources,
as well as L&D headcount. This is something
we plan to address in 2020.
This year we are reporting publicly against
the new UK reporting requirements on CEO
pay ratios for the first time. The median
UK employee (50th percentile) to CEO pay
ratio in 2019 was 229 times, which reflects
an improvement compared with 2018,
following the adoption of a new remuneration
policy in 2017. With the high proportion
of UK employees working in retail roles,
we recognise that the ratio may appear
imbalanced but it is in line with many other
retail organisations.
250
Leaders trained in understanding
unconscious bias and setting up Horizon,
a females in leadership programme.
60%
Of our UK colleagues chose to work
part time, to accommodate childcare
arrangements, studying or other personal
responsibilities, during 2019.
GVC Holdings PLC | Annual Report 2019 GENDER DIVERSITY – FEMALES AS % OF EMPLOYEES
Group board
Senior managers
All employees
8
8
9
1
out of
8
2
out of
8
3
out of
9
127
130
200
21.0
out of
127
28.0
out of
130
45
out of
200
26,413
25,541
24,614
12,883
out of
26,413
12,422
out of
25,541
12,189
out of
24,614
13% 25% 33%
17% 22% 23%
49% 49% 50%
2017
2018
2019
2017
2018
2019
2017
2018
2019
Male Female
Male Female
Male Female
33%
+35%
Increased share of females
at Board level.
Increase in senior female managers
throughout the Group since 2017.
Responsible Employer Performance
Employees worldwide
Female employees
%
Part-time employees
%
Employee Engagement Index
Median hourly pay difference between male and female colleagues (Gender Pay Gap)
Mean Hourly pay difference between male and female colleagues (Gender Pay Gap)
Median bonus pay difference between male and female colleagues
Mean bonus pay difference between male and female colleagues
24,000+
Employees, our people are our
greatest asset. We aim to be a
destination employer for talented
and passionate people.
2019
24,614
12,189
50%
11,269
47%
57%
4%
18%
36%
83%
2018
25,541
12,422
49%
10,497
42%
53%
3%
17%
25%
85%
2017
26,413
12,883
49%
10,657
46%
57%
3%
16%
25%
75%
49
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Corporate social responsibility continued
Responsible Business Operations
“ As of January 2020, all
electricity consumed
by our stadia and
shops in the UK will
come from renewable
sources, following in
the footsteps of our
Irish retail estate.”
Colin Gray
Environment Manager
Scope 1 and 2 emissions
(Tonnes CO2e)
80,000
61,875
60,000
40,000
20,000
0
43,268
37,076
2,753
3,304
3,228
2017
2018
2019
Scope 1
Scope 2
120
We have appointed 120 Green
Ambassadors across GVC to help identify
ways in which we can minimise our
negative impacts on the environment.
Environment
2019 was a watershed year for climate
change. With climate change impacts no
longer a distant threat on the horizon, limiting
global warming to no more than 1.5 C is
now one of the biggest challenges facing
humanity. We acknowledge the role we play
in reducing our greenhouse gas (“GHG”)
emissions and minimising our environmental
footprint. While our carbon footprint is by far
the most significant environmental impact
across the Group, we also look at the wider
environmental picture, monitoring and
reducing water use and waste across our
major offices and retail estate.
Having established the carbon footprint
baseline for the combined Group in 2018,
we introduced a reduction target of 15% per
employee by the end of 2021. Our energy and
carbon data for 2019 shows that we are on
track to meet – or exceed – our 2021 target,
having achieved a carbon saving of 0.19 tonnes
per employee. This is a 10% reduction since
2018. The reductions achieved so far are
primarily due to our rolling programme of shop
refurbishments in the UK, the merging of GVC
and Ladbrokes Coral offices, as well as the
decarbonisation of the electricity grid in our
key markets. As of January 2020, all electricity
consumed by our stadia and shops in the UK
will come from renewable sources, following
in the footsteps of our Irish retail estate.
We have used the integration of the
Ladbrokes Coral businesses into GVC to
identify opportunities for reducing our carbon
footprint, including starting work to merge
our external data centre providers, to unlock
cost and carbon savings. In 2019, through
consolidation, we reduced the number of
externally operated datacentres from 6 to 5.
To keep the momentum going, we have
appointed 120 Green Ambassadors across
GVC to help identify ways in which we
50
can minimise our negative impacts on the
environment. Furthermore, we have appointed
the Carbon Trust to deliver training to our
colleagues in procurement on how to reduce
emissions in our supply chain. The Carbon
Trust will also validate our carbon data to
ensure our processes and reporting are robust
and credible. Finally, to benchmark our carbon
management performance against peers and
create transparency for investors, we will be
disclosing against CDP’s (formerly known
as the Carbon Disclosure Project) Climate
Change questionnaire in 2020.
Cybersecurity and data protection
It is essential that we safeguard our
customer and corporate information,
managing cybersecurity and data protection
risks. Our privacy and data programme is
underpinned by a multi-layered governance
framework and close collaboration between
the privacy, information security, IT and
operations, compliance, HR, regulatory,
legal and business teams. To ensure proper
accountability and oversight, the Chief
Privacy Officer (“CPO”) – who is also GVC’s
dedicated Data Protection Officer – regularly
submits reports to the Board CSR Committee.
Starting from 2020, the CPO will hold
responsibility for a dedicated privacy budget,
following a significant increase in resourcing
and team-size. For example, we have recruited
a team of privacy analysts to embed privacy-
by-design capabilities across GVC through
early and consistent engagement in product
development, marketing and technology
design processes. The privacy team has also
started working more closely with colleagues
in communication and information security,
as well as other stakeholders, to optimise
GVC’s breach response, with an Executive
Committee and Board level cyberattack
simulation to stress-test our processes
scheduled for 2020.
GVC Holdings PLC | Annual Report 2019 Human behaviour can be the biggest threat to
maintaining data privacy and cybersecurity.
A core objective of our programme is to
create awareness and deliver training to
colleagues to raise GVC’s ‘data IQ’, which we
continued to do in 2019. More than 23,000
GVC colleagues received online GDPR
training during the year, with an additional
300 customer-facing colleagues receiving
face-to-face training. Fundamental to these
efforts is our newly developed Group Data
Protection Policy, designed to ensure all
employees understand how to treat and
protect personal data. The policy applies to
all GVC employees globally, as well as agency
staff and contractors.
Health, safety and security
Health, Safety and Security (“HSS”) remain
core priorities for us. We continue to
encourage a positive health and safety culture
throughout the business and to maintain
a safe environment for our customers and
colleagues. To that effect, we approach HSS
risks proactively, using a fully integrated policy
and management framework that allows us to
identify risks early and take action accordingly.
Mental health is the leading cause of sickness
absence in the UK, with one in four adults
experiencing at least one diagnosable mental
health problem in any given year.
Yet only one in 10 employees feel able to
tell their line manager about mental health
issues. Equipped with these facts, we
launched wellbeing as a major theme in
2019, developing a three-year strategy and
plan, ‘Think well, Live well, Work well’. In its
inaugural year, key objectives included:
¡ Developing wellbeing awareness, making
information, tools and support easily
accessible to all colleagues;
¡ Supporting and training line managers,
ensuring regular conversations
about wellbeing;
¡ Developing mental health awareness
among all colleagues, reducing stigma
around mental health issues;
¡ Providing targeted support for those
who are struggling, offering appropriate
workplace adjustments; and
¡ Providing preventive tools to support
colleagues to thrive, improving engagement
and performance.
Among the key achievements in 2019, we
launched the ‘Think Well’ virtual space,
providing easy access to tools and resources
to support mental health; delivered
classroom-based resilience training to 150
Area Managers and e-learning to over 12,000
colleagues; and launched a mental health tool
developed by Mind, the mental health charity,
with over 8,000 colleagues using it to date.
2020 will see us bedding in the mental health
programme – Think Well – further and also
developing and implementing the second
strand of the strategy – Live Well – which is
about physical health and wellbeing.
Supply chain
We take the issues of modern slavery
and human trafficking very seriously and
prohibit all forms of slavery, both in our
own operations and within our extended
supply chains. Our approach is guided and
reinforced by our Code of Conduct, and
Environmental, Social, and Ethical Purchasing
Policies which are communicated to all
employees and explicitly referenced in our
terms of engagement for all suppliers and
business partners.
At the end of 2018, GVC introduced a
combined new supplier protocol which
includes specific requirements that any
third-party must have compliant anti-modern
slavery policies in place. Using the Walk Free
Foundation Global Slavery Index, any supplier
in a high-risk country will be subject to an
enhanced social and environmental risk check
carried out by our procurement team.
Our plans for 2020 include training and
development of guidelines for colleagues with
procurement responsibilities to improve their
understanding of social and environmental
supply chain risks and how to deal with those
risks effectively.
Responsible Business Operations performance
Whistleblowing incidents reported
and investigated
Employee accidents
Employee reportable incidents
Public accidents²
Public reportable incidents
Energy (kWh)3
GHG emissions (tonnes CO2e)2,3,4
GHG efficiency (tonnes CO2e per employee)
Water use (cubic metres)5
Waste (tonnes)6
2019
Group total¹
2018
Group total1
2017
Group total1
34
179
8
31
0
150,734,978
40,305
1.64
485,266
6,560
2
297
12
287
3
155,771,722
46,572
1.8
434,475
13,811
25
140
0
235
0
184,901,000
64,628
2.4
569,980
8,587
1. Proforma figures for both GVC and Ladbrokes Coral combined businesses for the relevant calendar year.
2. The methodology used for 2019 has been updated to reflect work-related injuries only, i.e. accidents caused by a fault/
defect in the working environment or processes GVC has in place. Data reported in previous years included non-work-
related injuries.
3. Emissions from our global operations include those arising from our businesses in Australia, Austria, Belgium, Bulgaria,
Gibraltar, India, Ireland, Israel, Italy, Philippines, Spain, UK, Uruguay. This makes up over 99% of our overall headcount.
Figures shown are prorated to 100% coverage.
4. Based on UK Defra/BEIS greenhouse gas reporting; conversion factors 2018; except for overseas electricity conversion
factors which are based on IEA/OECD CO2 emissions from fuel Combustion 2019. Includes Scope 1: Direct emissions
from the combustion of fuel, and Scope 2: Indirect emissions from the purchase of electricity. Excluding fugitive emissions
from refrigerants, which represent less than 2% of GHG emissions from our business operations.
5. Water data is sourced from our operations in Austria, Bulgaria, Gibraltar, India, Ireland, Israel, Philippines, UK, Uruguay.
This makes up 96% of our overall headcount. These figures are not prorated to 100% coverage.
6. Waste data is sourced from our operations in Austria, Belgium, Bulgaria, Gibraltar, India, Ireland, Philippines, UK, Uruguay.
This makes up 92% of our overall headcount. These figures are not prorated to 100% coverage.
-17%
In 2019, through consolidation,
we reduced the number of externally
operated datacentres from 6 to 5.
51
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Corporate social responsibility continued
Responsible Communities and Markets
Contributing to the economy
by paying taxes and levies
Employing more than 24,000 people across
7,000 retail outlets and offices in 20 countries,
our economic footprint is significant.
During 2019 we paid £984m in taxes and
levies across our countries of operation.
This comes in addition to the £655.6m we
paid in wages and salaries.
£927m
Paid in taxes and levies in 20 countries
during 2019.
Responsible Communities and Markets
Proforma net gaming revenue (NGR)
Proforma underlying EBITDA
Taxes paid2
Wages and salaries3
2018
2019
Group total1
Group Total1
£3,655.1m £3,571.4m
£755.3m
£949m
£627.1m
£761.1m
£927m
£671.2m
2017
Group Total1
£3,288m
£666.5m
£797m
£678.5m
1. Proforma figures for both GVC and Ladbrokes Coral combined businesses for the relevant calendar year.
2. Includes corporation tax, business rates, foreign tax, Machine Games Duty (“MGD”), Amusement Machine Licence
Duty (“AMLD”), employers, National Insurance Contributions (“NIC”), VAT, and other duties and levies.
3. Including pension contributions and share based payment costs.
52
GVC Holdings PLC | Annual Report 2019 Corporate Social Responsibility
Committee report
“ Our ambition is to be
the safest and most
trusted operator in
the world.”
Virginia McDowell
Chair of the CSR Committee
The role of the Committee
The purpose of the Committee is to oversee that the Company
adopts the appropriate policies and processes to properly
manage stakeholder engagement. The role and responsibilities
of the Committee are set out in its formal terms of reference.
A copy of which can be viewed on the Group’s website
www.gvc-plc.com.
Committee membership and attendance
The Committee meets at least three times a year and may
meet at other times as agreed by the Chair or at the request of
a Committee member. The table below shows the Committee’s
membership and attendance at meetings for the year ended
31 December 2019.
Member
Virginia McDowell
Peter Isola¹
Jane Anscombe
Stephen Morana
Attendance
6
5
6
6
Meetings
6
5
6
6
Position
Chair
Member
Member
Member
1. Appointed on 27 February 2019 and therefore attended 5/5 meetings eligible for.
The terms of reference require a majority of the Committee
members to be independent Directors.
The Company Secretary attends all Committee meetings
to record the minutes and provide advice to the Directors.
The Head of CSR and Directors of Responsible Gaming, AML,
International and UK Compliance with the Group HR Director are
normally invited to attend each meeting and the Chief Privacy
Officer and Group Health, Safety, Security and Environment
(“HSSE”) Director may be invited to attend from time to time
to participate in discussions about data protection and HSSE
matters respectively.
Committee activities during 2019
The activities of the Committee during the year focused on the
three principal pillars of: Responsible Employer, Responsible
Communities and Safer Gambling. Further details of the
activities of the Committee can be read in the 2019 Corporate
Social Responsibility Report.
Virginia McDowell
Chair of the CSR Committee
5 March 2020
53
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Section 172 Statement
Engaging with stakeholders
As an Isle of Man incorporated company,
GVC is not subject to the reporting
obligations under section 172 Companies
Act 2006 (UK). Nevertheless, the Board
recognises the importance of effective
governance and intends to operate in
line with the UK reporting regulations.
The information below should be read
in conjunction with the rest of the
Strategic Report.
Section 172 of the Companies Act 2006
imposes a general duty on Directors to act
in a way that they consider, in good faith,
to most likely promote the success of the
company for the benefit of shareholders as
a whole. The Directors in setting policies
and strategies continue to have regard to
the interests of the Company’s employees,
shareholders, investors, suppliers,
customers, regulators, including the impact
of its activities on the community and on
the Company’s reputation. These factors
underpin the way in which the Directors
discharge their duties and the Board is
cognizant of the need to foster strong
relationships with all stakeholders to help
the Company deliver its strategy in line with
its long-term values and operate the business
in a sustainable way.
Engagement with Stakeholders
The Board understands the importance
of effective management with all of its
stakeholders. Depending on the nature
of the issue in question, the relevance of
each stakeholder group may differ and
not every decision the Board makes will
necessarily result in a positive outcome
for all stakeholders.
The Board at each meeting ensures
that the process of considering its
stakeholders is embedded in papers
it receives to enable it to discharge its
duties. The Board monitors the progress
and delivery of strategic initiatives
through metrics reported in meetings.
In addition, the Remuneration Committee
assesses the overall performance of the
Company, including progress against its
responsible gambling and Environmental,
Social and Governance (“ESG”)
strategy to support decision making on
remuneration outcomes.
To ensure that the Company continues
to operate in line with good corporate
practice, Directors as part of their
induction will receive training on the scope
and application of section 172 to ensure
that they are aware of how in its decision
making consider its stakeholders.
Engagement with UK employees
Interests of our employees include
training, development and prospects;
diversity and inclusion; fair pay and
benefits; health and safety and working
conditions. The Chief Executive Officer and
the senior management team are actively
involved in the engagement of employees
through leadership townhalls and in 2019,
held a global event for all employees under
the banner GVC One. Senior management
also engage through the intranet with all
staff emails and newsletter-style updates,
employee questionnaires and workforce
communications. The Board also receives
regular updates from the Group HR
Director, including feedback received
through townhalls.
54
Engagement with the community
Our community interest range from
sustainability, environment, recycling and
waste management and the Company
engages through the publication of its CSR
report and employee-matched funding
for charity policy. The Company created
the GVC Global Foundation to better co-
ordinate its international ESG initiatives
and provide oversight to the distribution
of donations to good causes in support
of the Group’s broader ESG objectives.
The Board has the overall oversight of
corporate responsibility plan and reporting
and the involvement in corporate affairs
strategy and with delegation to the
CSR Committee. The CSR Committee
also works with external consultants
which assist the operational units and
review the environmental and social
performance data.
Stakeholder Analysis
Our analysis below details our stakeholder
groups, their material issues and how the
Company and Board in its duties engage
with them.
The CSR Committee on behalf of the
Board regularly reviews its principal
stakeholders and how it engages with
them. The Strategic and CSR Reports
details the Company’s principal
stakeholders and engagement and
includes examples as below:
¡ Educating our key stakeholders with the
introduction of two flagship initiatives –
GamCare’s Youth Outreach programme
and an intervention campaign with EPIC
Risk Management. This programme
aims to raise awareness of youth
problem gambling and educate young
people, and the professionals working
with them, about the risks associated
with gambling, helping young people to
make safer choices around gambling.
¡ The promotion of responsible attitudes
by ending all broadcast advertising for
sports betting and the introduction of
Responsible Gambling Week.
GVC Holdings PLC | Annual Report 2019 Engagement with Customers
Our customers interests range from
product availability, ethical behaviour,
service, pricing and promoting responsible
attitudes to gambling. The Company as
part of its commitment to responsible
and safer gambling engages through
initiatives like Responsible Gambling Week,
where responsible gambling messages
dominated our websites and social media
channels and with all retail colleagues
wearing safer gambling t-shirts.
In addition, the Company offers the
Gamban software which blocks access
to thousands of gambling websites and
supresses gambling-related marketing.
Engagement with investors
and shareholders
The Company’s investors and
shareholders expect a comprehensive
view of the financial and sustainable
performance of the business, strong
share price and the consideration of
ESG. The Company in its engagement
undertakes regular meetings with
investors through roadshows, publication
of the annual report, press releases
and stock exchange announcements.
The Board engages through its results
announcement meeting, the SID
and regular reports on investor and
analyst feedback.
Engagement with suppliers
The Company works responsibly with
its suppliers and regularly reviews its
Customer and creditor payment policy
and the Modern Slavery Statement sets
outs the steps taken to prevent modern
slavery in our business and various supply
chains. Our supplier interests range from
fair trading, payment terms, success of the
business and long-term partnerships and
the Company engages with suppliers by
direct engagement, supplier conferences
and corporate responsibility and ethics
reporting. The Board in its duties receives
regular reporting on retail performance
and modern slavery.
Engagement with regulators
As a global operator and the largest online betting and gaming company, GVC engages with a wide variety of stakeholders including
regulators, investors, trade associations and customers which we see as a core part of ensuring that we lead on the cutting edge
of technology and product offering while upholding all licensing objectives across multiple jurisdictions. One of the key relationships
we maintain is with our regulators liaising on an open and frequent basis to ensure that all our regulators are engaged in our operating
practices and that we can help policymakers shape our industry environment to best serve our stakeholder group whilst operating in
a legal and fair way.
Who we engage with?
Governments and regulators
¡ UK Department
of Culture, Media
and Sport;
¡ The British Gambling
Commission;
¡ Governments and
regulators in territories
where we hold gaming
licences; and
¡ Domestic and
International
Trade Associations.
What are their
expectations?
How we engage?
¡ Providing an
enjoyable and safe
leisure experience;
¡ Making sure we
operate legally and
in a fair manner;
¡ Minimising harm
and maximising
player protection;
¡ Ensuring that we
protect the young
and the vulnerable;
and
¡ Reducing crime and
unlawful behaviour.
¡ Ongoing dialogue with regulators, domestic and international trade associations
and local authorities;
¡ Liaison programme with MPs, Ministers and government officials in multiple
global jurisdictions;
¡ Numerous face-to-face meetings bilaterally or as part of industry meetings;
¡ British Gambling Commission attended a GVC Board meeting (CSR focused)
in 2019;
¡ Quarterly meetings, at a minimum, between the UK Gambling Commission and the
UK Compliance Director;
¡ Detailing governance, risk management and safer gambling strategies
through submission to the British Gambling Commission Annual Assurance
Statement process;
¡ Invited to lead the industry on behalf of the UK Betting and Gaming Council in the
creation of an Industry Code for Incentivisation of High Value Customers;
¡ Partnerships with the GB Health & Safety Executive;
¡ Hosting a Safer Gambling Research Symposium with international thought leaders,
researchers and academics;
¡ Formal meetings with our regulators in Gibraltar, Jersey (CI) and our other global
regulated jurisdictions;
¡ Engage with the Department of Justice in Ireland as it implements new
AML requirements;
¡ Respond to formal regulatory consultations including most recently on the use of
credit cards for gambling in the UK;
¡ Participate in events organised by our regulatory authorities such as the ‘RegTech
e-gambling international workshop’ in Spain and the ‘Licensing information session’
in Germany; and
¡ Suspicious activity disclosed to relevant national bodies.
55
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Chief financial officer’s review
Report of the
Chief financial officer
“ Reported NGR and revenue
were 23% ahead of 2018
as a result of a full twelve
months of trading of
Ladbrokes Coral in 2019 and
continued growth in online.”
Rob Wood
Chief Financial officer
NGR and revenue
Reported NGR and revenue were 23% ahead of 2018 as a result
of a full twelve months of trading of Ladbrokes Coral in 2019
(only nine months post acquisition in 2018) and underlying
growth in all areas of the business except UK Retail machines
where revenues have declined following the implementation of
the £2 limit on B2 machines stakes. On a proforma basis, Group
NGR and revenue were 2% ahead (+3% cc) with growth in Online
of 13% (+14% cc), European Retail of 4% (+5% cc) and UK Retail
OTC of 7% LFL partially offset by the aforementioned machines
revenue decline of -26% LFL. Further details are provided in the
Business Review section.
Underlying operating profit 5
Group reported underlying operating profit5 of £520.0m
(2018: £520.8m) was marginally behind 2018 with growth
in Online and European Retail offset by declines elsewhere.
Online operating profit increased 11% year on year with the
inclusion of twelve months of Ladbrokes Coral trading and
underlying revenue growth more than offsetting the regulatory
headwinds previously discussed. European Retail operating
profit increased by 1% versus 2018, however, this was driven
by the benefit of including twelve months of trading for the
acquired Ladbrokes Coral businesses with proforma underlying
operating profit 27% behind as discussed in the business review.
Operating profit in UK Retail was 17% behind 2018 due to the
impact of the £2 limit on B2 machines stakes partially offset
by the impact of IFRS 16 and the prior year only including nine
months of trading. On a proforma basis, UK Retail operating
profit was 49% behind 2018. Other and Corporate operating profit
combined to be £16.6m behind 2018, principally driven by the
impact of including twelve months of Ladbrokes Coral, additional
costs in our financial businesses, the prior year containing a one-
off profit in one of our JV’s and the £12.5m loss in the US JV in
2019. See the Business Review for more details.
On a proforma basis, depreciation and amortisation was £24.6m
higher than 2018 as a result of the impact of the IFRS 3 fair
value exercise and integration investment in 2018. The current
year charge also includes £6.9m of accelerated amortisation
on assets which will no longer be used post the GVC platform
migration, this will not repeat in 2020.
Financing costs
Net finance income of £15.8m (2018: £86.2m charge) was
£102.0m favourable to 2018. Excluding foreign exchange
gains of £101.9m (2018: £23.4m loss), net finance costs of
£86.1m were £23.3m higher than the prior year. The year on
year increase was driven by the Group incurring twelve months
of interest charges on the debt raised to acquire Ladbrokes
Coral versus only nine months in the prior year and the impact
of IFRS 16, partially offset by savings resulting from the
refinancing during H2.
56
GVC Holdings PLC | Annual Report 2019 Reported results1
Proforma results2
CC3
%
3%
3%
Pre
IFRS16
2019
£m
3,655.1
3,600.5
2,378.2
1,883.2
782.7
678.3
(12.7)
(166.3)
(9.2)
490.1
2018
£m
3,571.4
3,523.6
2,404.4
1,939.8
864.3
755.3
(11.7)
(141.7)
8.2
610.1
Change
%
2%
2%
(1%)
(3%)
(9%)
(10%)
(9%)
(17%)
(212%)
(20%)
Year ended 31 December
NGR
Revenue
Gross profit
Contribution
Underlying EBITDAR4
Underlying EBITDA4
Share based payments
Underlying depreciation and amortisation
Share of JV income
Underlying operating profit5
Net finance income/(costs)
Profit before tax pre separately
disclosed items
Separately disclosed items:
Amortisation of acquired intangibles
Impairment
Other
Loss before tax
Tax
Loss after tax
2019
£m
3,655.1
3,600.5
2,378.2
1,883.2
782.7
761.1
(12.7)
(219.2)
(9.2)
520.0
15.8
535.8
(376.2)
(245.0)
(88.8)
(174.2)
33.5
(140.7)
2018
£m
2,979.5
2,935.2
2,004.2
1,598.8
723.7
640.8
(10.7)
(117.7)
8.4
520.8
(86.2)
434.6
(322.5)
(41.3)
(88.5)
(18.9)
(37.5)
(56.4)
Change
%
23%
23%
19%
18%
8%
19%
(19%)
(86%)
(210%)
–
118%
23%
(17%)
(493%)
1%
(822%)
189%
(149%)
Separately disclosed items
Separately disclosed items before tax for the period amount to a
£710.0m charge (2018: £453.5m) and includes £376.2m for the
amortisation of acquired intangibles (2018: £322.5m), £44.9m of
costs associated with the integration of the GVC and Ladbrokes
Coral businesses (2018: £14.5m), £8.7m of costs associated with
restructuring in UK Retail following the £2 B2 machines stakes
restriction (2018: £2.3m), corporate transaction costs of £3.1m
(2018: £64.4m including the Ladbrokes Coral acquisition), £3.4m of
costs on onerous contracts including property closure costs following
the triennial stakes restriction (2018: £9.2m) and £44.4m for the
movement in the fair value of contingent consideration driven by the
very strong performance in Crystalbet during the year (2018: £192.5m
gain including the release from the potential CVR liability).
The Group has also separately disclosed income associated with the
sale of assets and investments of £19.0m, most notably the sale of
the Sportium JV (2018: £nil), and a net £11.6m release from provisions
for tax litigation with £21.2m released from the Group’s Greek tax
provision offset by incremental taxes in Austria and a new UK income
tax charge, effective from April 2019, from which we expect to be
exempt after April 2020 once the new UK/Gibraltar double taxation
agreement enters into force. The release from the Group’s Greek tax
provision of £21.2m follows the successful settlement of the liabilities
for 2012 to 2014 and the Director’s best estimate of the likely liability
for the remaining years.
In addition to the items mentioned above, the Group also recorded a
non-cash impairment charge of £245.0m against the Online division,
£243.9m in goodwill and £1.1m in PP&E (2018: £41.3m primarily in UK
Retail PP&E). The charge has arisen in the Group’s Australian online
CGU and follows the impact of unforeseen POCT in certain states/
regions (e.g. New Zealand, and Tazmania), unexpected increases in
product fees and lower pass through to customers in mitigation of
POCT than originally anticipated at the time of the Ladbrokes Coral
and Neds acquisitions. Whilst the Australian business continues to
outperform its market with 2019 revenue growth of 22% cc (on a
proforma basis), the cost headwinds have reduced the value in use of
the business resulting in the impairment charge. Following the impact
of these headwinds which were felt throughout 2019, the Australian
business is now anticipating a more stable 2020 and current
performance is in line with internal expectations.
Whilst the impairment charge has reduced the value at which the
legacy Ladbrokes Coral businesses are carried, the Directors note that
the headroom on the IAS 36 impairment reviews of the other legacy
Ladbrokes Coral CGU’s has increased significantly, with the aggregate
value in use, including Australia, greater than it was in 2018.
Amortisation of acquired intangibles
Impairment loss
Integration costs
Triennial restructuring costs
Corporate transaction costs
Tax litigation/one-off legislation
Legal and onerous contract provisions
Movement in fair value of contingent
consideration
Issue cost write-off
Profit on disposal of joint ventures
and property, plant and equipment
Other one-off items
2019
£m
(376.2)
(245.0)
(44.9)
(8.7)
(3.1)
11.6
(3.4)
(44.4)
(14.1)
19.0
(0.8)
(710.0)
2018
£m
(322.5)
(41.3)
(14.5)
(2.3)
(64.4)
(186.8)
(9.2)
192.5
–
–
(5.0)
(453.5)
Profit before tax
Profit before tax and before separately disclosed items of £535.8m
(2018: £434.6m) was £101.2m ahead of 2018, with the incremental
three months of Ladbrokes Coral trading, underlying growth and
57
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Chief financial officer’s review continued
Report of the
Chief financial officer Continued
favourable FX movements, more than offsetting the £2 limit on
B2 machines stakes headwinds and additional interest. After charging
separately disclosed items, the Group recorded a pre-tax loss of
£174.2m (2018: £18.9m).
Taxation
The tax credit for the year ended 31 December 2019 of £33.5m
(2018: charge of £37.5m) reflects a £46.4m charge on underlying
trading (2018: £56.8m) and a £79.9m credit on separately disclosed
items (2018: £19.3m credit). The underlying tax charge reflects a 9%
(2018: 13%) effective tax rate.
Dividends
A second interim dividend of 17.6p per share has been declared,
an increase of 10% on the prior year in line with the Group’s current
dividend policy of double digit dividend growth.
Cashflow
During the year, the Group had a net cash outflow of £21.3m
(2018: £During the year, the Group had a net cash outflow of £21.3m
(2018: £154.4m inflow). Free cashflow for the period was £395.2m
(2018: £300.7m) with underlying EBITDA (post IFRS 16) of £761.1m
(2018: £640.8m) offset by capital expenditure of £164.1m, including
£2.4m of payments in relation to the 2020 annual Italian licences
whilst we await the tender process (2018: £194.7m), investment
in the US of £3.8m (2018: £20.5m), net finance lease payments
(including IFRS 16) of £77.7m, £68.9m of interest (2018: £55.5m)
including £16.8m on finance leases and £37.5m in corporate
taxes (2018: £43.5m). Following the introduction of the £2 limit on
B2 machines stakes there was also a net working capital outflow
of £13.9m (2018: £24.8m) due to the reduction in the machines
duty creditor.
During 2019, the Group paid an additional £74.7m of payments
on account in relation to the 2010/11 Greek Tax Assessment
(2018: £87.5m), in-line with expectations and £43.3m in settlements
and fees against 2012-2017 (2018: £21.3m) Greek tax provision.
As anticipated, a £30.0m (2018: £nil) payment was made in respect
of the legacy Ladbrokes Coral marketing services agreement with
Playtech. The Group also paid £45.1m (2018: £17.0m) in integration
costs and £26.1m (2018: £92.9m including Ladbrokes Coral
acquisition costs) in relation to other separately disclosed items.
The Group also paid £17.5m in respect of contingent consideration
on historic acquisitions (2018: £nil), made net repayments on debt
of £53.6m and paid £203.6m in dividends during the year including
£8.1m to minority interests.
£1.5m was raised on equity issuances (2018: £26.2m). During the prior
year the Group raised net proceeds on the issuance of debt of £701.1m
and reinvested £522.6m in acquisitions.
Cashflow
Year ended 31 December
Underlying EBITDA4
Underlying working capital
Capital expenditure
Investment in US
Net payments against finance lease (incl. IFRS 16 leases)
Interest paid including interest on finance leases
Corporate taxes
Free Cashflow
Greek tax
Playtech payment
Integration costs
Other separately disclosed items
Acquisitions (net of cash acquired)
Contingent consideration
Disposal proceeds
Net movement on debt and associated instruments
Equity issue
Dividends received from associates
Dividends paid
Net Cashflow
Foreign exchange
Net cash generated
Cash and cash equivalents at beginning of period
Cash and cash equivalents at the end of period
58
2019
£m
761.1
(13.9)
(164.1)
(3.8)
(77.7)
(68.9)
(37.5)
395.2
(118.0)
(30.0)
(45.1)
(26.1)
–
(17.5)
74.7
(53.6)
1.5
1.2
(203.6)
(21.3)
(10.5)
(31.8)
421.9
390.1
2018
£m
640.8
(24.8)
(194.7)
(20.5)
(1.1)
(55.5)
(43.5)
300.7
(108.8)
–
(17.0)
(92.9)
(522.6)
–
1.0
701.1
26.2
9.4
(142.7)
154.4
(2.5)
151.9
270.0
421.9
GVC Holdings PLC | Annual Report 2019 Net debt and liquidity
As at 31 December 2019, net debt post IFRS 16 was £2,169.8m, representing a net debt to proforma underlying EBITDA ratio of 2.9x. Pre IFRS 16,
net debt was £1,822.7m, representing a net debt to proforma underlying EBITDA ratio of 2.7x.
Bonds
Term loans
Interest accrual
Cash
Accounting net debt
Cash held on behalf of customers
Fair value of swaps held against debt instruments
Short term investments/Deposits held
Balances held with payment service providers
Finance leases excluding those arising on IFRS 16
Finance leases including those recognised as a
result of IFRS 16
Adjusted net debt
Interim Dividend timetable
5 March 2020
12 March 2020
13 March 2020
23 April 2020
Dividend declared
Ex-dividend date
Record date
Payment
Going Concern
Having assessed the financial forecasts of the business, the principal
risks and other matters discussed in connection with the long-term
viability statement, the Directors consider it appropriate to adopt
the going concern basis of accounting in preparing the financial
statements as the Company will generate sufficient cash to meet
its ongoing obligations for at least 12 months from the date of signing
the financial statements.
Par value
£m
(500.0)
(1,579.7)
(25.5)
(2,105.2)
Issue costs/
Premium
£m
(24.9)
14.1
–
(10.8)
Total
£m
(524.9)
(1,565.6)
(25.5)
(2,116.0)
390.1
(1,725.9)
(335.4)
47.4
129.1
78.5
(16.4)
(1,822.7)
(347.1)
(2,169.8)
1. (2019 and 2018 reported results are audited and reflect the acquisition of the Ladbrokes
Coral Group plc on 28 March 2018. The pre IFRS 16 2019 reported results are unaudited and
reflect the 2019 audited results adjusted to remove the impact of IFRS 16. The new financial
reporting standard for leases, IFRS 16, applies to financial periods commencing on or after
1 January 2019 and therefore the 2019 reported results. For leases previously classified as
operating leases, a right of use asset and lease liability will be recognised going forward.
The Group has adopted the modified retrospective approach, meaning that comparative
periods are not restated. The Group has elected to use the following practical expedients
proposed by the standard:
¡ The right of use asset for all leases is recognised at an amount equal to the liability
plus prepaid lease payments immediately before the date of initial application;
¡ The application of a single discount rate to a portfolio of leases with reasonably similar
characteristics. The key differential considered in determining the discount rate will be
the length of the lease;
¡ The use of hindsight when determining the lease term, if the lease contains an option
to extend or terminate the lease; and
¡ On initial application, initial direct costs are excluded from the measurement of the
right of use asset.
2. The Group’s proforma results for 2019 are unaudited and equal the pre IFRS 16 2019
reported results. The Group’s proforma results for 2018 are unaudited and presented as if the
current Group, post the acquisition of Ladbrokes Coral Group plc, had existed since 1 Jan
2018. The results of Crystalbet and Neds are included from the dates of acquisition (11 April
2018 and 28 November 2018 respectively).
3. Growth on a constant currency basis is calculated by translating both current and prior year
performance at the 2019 exchange rates.
4. Stated pre separately disclosed items and shared based payments.
5. Stated pre separately disclosed items.
Rob Wood
Chief Financial Officer
5 March 2020
59
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Principal risks
Risk governance
and responsibilities
THE BOARD
¡ Overall responsibility for risk management
as an integral part of strategic planning.
¡ Formal review of risks twice yearly.
¡ Setting clear policies on acceptable
levels of risk.
¡ Bi-annual assessment of the
effectiveness of the Internal
Controls System.
AUDIT COMMITTEE
¡ Responsible for assessing the scope
and effectiveness of the systems
established to identify, assess, manage
and monitor risks.
¡ Reviews reports from Internal Audit and
external audit (KPMG).
¡ Internal audit function has an annual
audit programme that addresses
most of the principal risks as well as
other operational and business risks
which include periodic monitoring of
mitigating actions.
SENIOR EXECUTIVES
¡ Executive Directors and senior
executives identify key risks and make
recommendations on the overall approach
to risk management.
¡ Reviews overall assessment of likely risks.
¡ Responsible for enforcing risk management
as an integral part of the Group’s internal
control, planning and approval process.
¡ Each key risk is assigned Executive
Committee member ownership.
RISK COMMITTEE
¡ Constitutes Group and divisional
executives and senior managers.
¡ Responsible for maintaining the PLC risk
register including periodic monitoring
of the mitigating actions as well as the
likelihood and consequence of each risk.
¡ Meets four times a year.
¡ Business units report into the
Risk Committee.
60
GVC Holdings PLC | Annual Report 2019 Risk management process
and methodology
The effective understanding, acceptance
and management of risk is fundamental to
the Group achieving its strategic priorities.
Over the course of the year, the Group has
continued to enhance its risk management
capabilities, improving its ability to
identify, evaluate, monitor and manage
its principal risks.
We have previously implemented an
integrated and proactive approach to our risk
management responsibilities, and continue
to improve our ability to detect, understand
and debate our risk. The Board maintains
a consolidated view of key risks across all
business segments and takes advice from the
Group Risk Committee and Audit Committee
on the Group’s risk appetite and strategy
as well as the effectiveness of our risk
management processes. Whilst we recognise
that we have limited control over certain risks
faced by the Group, such as macroeconomic
events and the complex regulatory
environment, we continue to monitor
developments in these areas closely whilst
ensuring that the Group has appropriate
response plans in place.
The Board recognises the benefits of ensuring
its risk management processes are in line
with the UK Corporate Governance Code
and the expectations of listed companies.
As part of this process we not only assess
risk but also evaluate the level of risk the
Group is willing to take. This process forms a
key part of the Enterprise Risk Management
(“ERM”) Framework. The ERM Framework
is the vehicle which defines and delivers
risk management across the business
and includes a risk scoring matrix to ensure
a consistent approach to the identification,
measurement and response to risk.
The Group Risk Committee, who are
responsible for the ERM, meets formally four
times each year and comprises operational
and executive management. Whilst the
Committee considers identified risks to the
business, it focuses on the principal risks.
For each risk identified, the impact, likelihood,
consequence, risk owner (Executive
Committee member) and operational lead
are identified by the Risk Committee. The risk
owner and operational lead are responsible
for identifying the relevant mitigating controls
and remedial actions required to manage risk.
The Risk Committee opine on the adequacy
of the businesses risk mitigation with
Internal Audit testing the effectiveness of the
controls identified.
The risk management approach is subject
to continuous review and updates in order
to reflect new and developing issues which
might impact business strategy. Emerging or
topical risks are examined to understand
their significance to the business. Risks are
identified and monitored through risk registers
at the Group level and within key business
units at department level, ensuring both a top
down and bottom up approach.
The UK and Gibraltar left the EU on
31 January 2020. However, given the terms
of the withdrawal agreement between the
UK and the EU, there is no impact of Brexit
for the Group in practice until the end of the
transitional period on 31 December 2020.
The Group has already implemented the
majority of its Brexit plans. In particular, the
Group has located the servers which host the
online gambling platform for EU customers in
the Republic of Ireland, and has established
subsidiaries in Malta which will provide our
online gambling offering to customers in
those EU countries which require operators to
be established and licensed in an EU member
state. Our online businesses continue to
be headquartered in Gibraltar and these
plans will have no significant impact on our
employees there.
Finally, the Group has made certain practical
contingency arrangements to help employees
who live in Spain but work in Gibraltar should
there be a significant increase in delays
crossing Gibraltar’s border with Spain.
How Risks are measured
As part of the risk management process,
all risks identified are measured against a
defined set of criteria, in particular:
¡ The potential impact/consequence to the
Group should the risk materialise:
– The impact of each risk is measured with
reference to the financial implications
(EBITDA and cash), its potential
operational impact (including the
security of our data), the effect on the
reputation of our brands and whether
or not it affects our commitment
to health and safety. The impact
is measured on a scale, where 1 is
low, with limited damage to a minor
stakeholder, and 5 being severe, which
may have a substantial impact on the
Group affecting many key stakeholders,
including customers.
¡ The likelihood of the risk materialising:
– The extent to which an event is likely to
occur is scored from 1-5, 1 being remote
i.e. very unlikely to occur and 5 being
probable i.e. where it has the potential to
occur or has already happened.
The product of both scores gives rise to
the risk score that determines the relative
importance of the individual risk.
61
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Principal risks continued
Principal Risks
The principal risks
and uncertainties,
which are considered
to have a material
impact on the Group’s
long-term performance
and achievement of
strategy, are set out
on the table opposite.
The risks represent a snapshot at a point
in time, and as the environment we operate
in is constantly evolving, new risks may
arise, the potential impact of known
risks may increase or decrease, and our
assessment of a risk may change. They do
not include all those risks associated with
Group’s activities and are not set out in any
order of priority.
This is not intended to be an exhaustive and
extensive analysis of all risks which may
affect the Group.
62
KEY:
Risk increased
Risk decreased
Risk static
New risk
Risk 1
Data breach and
cyber security
Chief Technology Officer
Strategic risk category:
¡ Technology
¡ Legal and regulatory
¡ Reputational
¡ Financial
Impact
High
Likelihood
High
Principal Risk/Uncertainty
The Group operations depend on the fairness
of its gaming engines, the processing of
customer data (protected by strict data
protection and privacy laws in all jurisdictions
in which the Group operates) and the ability
of customers to access its services on a
24x7 basis.
The Group is exposed to the risk that the
integrity of gaming, confidentiality of data
or availability of its services would be
compromised through a cyberattack or a
breach in data security, which would impact
the trust of its customers and could result in
prosecutions including financial penalties.
How we manage and mitigate the risk
The Group has a dedicated Cybersecurity
function entrusted with protecting the security
of its operations and to adapt to emerging
threats. Operating under its ISO27001
Information Security Management System
certification and harmonised security policies,
the Cybersecurity controls are evaluated and
applied where deemed relevant across the
enlarged group.
A Data Privacy team, led by the Group’s
Chief Privacy Officer, was established
during the year, tasked with aligning the
enlarged Group’s data privacy strategy and
governance structure, providing regular
updates to the Group’s Corporate Social
Responsibility Committee.
Strategic relevance
Crystallisation could lead to significant
reputational and operational issues that limit
the Group’s ability to drive Online growth and
deliver technology synergies.
Risk 2
LAWS, REGULATIONS, LICENsING AND
REGULATORY COMPLIANCE
Group Director of Legal,
Regulatory and Secretariat
Strategic risk category:
¡ Commercial
¡ Legal and Regulatory
¡ Reputational
¡ Financial
Impact
High
Likelihood
Medium
Principal Risk/Uncertainty
Regulatory, legislative and fiscal regimes for
betting and gaming in key markets around the
world can change, sometimes at short notice.
Such changes could benefit or have an
adverse effect on the Group and additional
costs might be incurred in order to comply
with any new laws or regulations in
multiple jurisdictions.
How we manage and mitigate the risk
The Group closely monitors regulatory,
legislative and fiscal developments in key
markets allowing the Group to assess,
adapt and takes the necessary action
where appropriate.
Management take external advice,
which incorporates risk evaluation of
individual territories. It also engages in
promoting licensing solutions that provide
commercially viable opportunities for online
gaming operators.
Regulatory updates are provided on a weekly
basis to senior management with updates
provided to the Board of Directors each month
and discussed at every Board meeting.
Strategic relevance
Whilst changing regulatory and tax regimes
offer opportunities to the Group as well as
posing risks, a significant adverse change
in jurisdictions in which the Group operates
could have a significant impact on the Group’s
future profitability and cash generation.
GVC Holdings PLC | Annual Report 2019 Risk 3
TECHNOLOGY
FAILURE
Chief Technology Officer
Strategic risk category:
¡ Technology
¡ Legal and Regulatory
¡ Reputational
¡ Financial
Impact
High
Likelihood
Low
Risk 4
TAXES
Chief Financial Officer and Director of Tax,
Treasury and Insurance
Strategic risk category:
¡ Commercial
¡ Legal and Regulatory
¡ Financial
Risk 5
INCREASED COST
OF PRODUCT
Managing Director – Retail
Managing Director – Digital
Strategic risk category:
¡ Commercial
¡ Financial
Impact
Medium
Likelihood
Medium
Impact
Medium
Likelihood
Medium
Principal Risk/Uncertainty
The Group’s operations are highly dependent
on technology and advanced information
systems, including third party supplied
technology, and there is a risk that such
technology or systems could fail.
In particular, any damage to, or failure of
online systems and servers, electronic
point of sale systems and electronic display
systems could result in interruptions
to financial controls and customer
service systems.
How we manage and mitigate the risk
The Group’s technology resilience levels
continue to mature across all sites and
various platforms, through lessons
learnt from testing procedures and/or
service outages.
In 2020, the Group plans a number of platform
migrations which will continue to enhance
stability and forms a fundamental facet of the
Group’s technology integration objectives for
2020 as in 2019.
Strategic relevance
Significant technology failings or product
outage is likely to impact the Group’s ability
to attract and retain the customers required to
deliver the Group’s growth strategy.
Principal Risk/Uncertainty
The Group is subject to a range of taxes,
duties and levies in many of the countries
where we have operations or in which our
customers are located. The taxes imposed
upon betting and gaming companies have
changed over time, and the levels of taxation
to which the Group is subject may change
in the future.
The Group’s geographical diversity and the
nature of taxation of our industry lead to
considerable complexity in our tax affairs.
There may be areas of differing legal
interpretation between the Group and tax
authorities regarding the scope and scale
of taxation.
How we manage and mitigate the risk
The Group’s tax strategy is approved annually
by the Board of Directors. Responsibility for
the execution of the Group’s tax strategy
is delegated to the Chief Financial Officer
who reports the Group’s tax position to the
Directors on a regular basis.
In order to mitigate tax risks that arise,
the Group actively identifies, evaluates,
manages and monitors its tax risks and the
geographies in which it operates.
The Group has an appropriately qualified and
resourced tax team to manage its tax affairs.
In addition, where there is significant
uncertainty or complexity in relation to a
tax risk, the Group may use the services of
external, expert tax advisors.
Strategic relevance
Short notice, adverse changes in the tax
regimes in the territories in which the Group
operates may impact our brand reputation
and future profitability.
Principal Risk/Uncertainty
The Group is subject to certain arrangements
intended to support industries in which it
operates. Examples are the horseracing and
the voluntary greyhound racing levies, data
and content supply, and the provision of
marketing services. The combined cost of
these 3rd Party Services is material and they
collectively have a significant impact on the
profitability for the business globally.
A number of the contracts that underpin the
provision of 3rd Party Services are under
negotiation at any one time. The pricing of
these services is also subject to inflationary
cost increases and can also be volatile based
on the changeable business environment that
many of our suppliers operate.
How we manage and mitigate the risk
Senior management engages regularly
with the relevant trade associations and the
principal bodies of sport and event industries
with regard to sports rights payments,
including the statutory horse racing levy,
animal welfare and other issues.
Across the wider supplier base, a central
procurement function and cost oversight
processes exist to ensure that pricing is
effectively controlled both at contract stage
and on an ongoing basis.
Strategic relevance
Material increases in the cost of content may
increase the operating costs at higher than
anticipated levels impacting profits.
63
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS
Principal risks continued
Principal Risks Continued
KEY:
Risk increased
Risk decreased
Risk static
New risk
Risk 6
HEALTH, SAFETY & WELLBEING OF
CUSTOMERS AND EMPLOYEES
Retail Managing Director and Group
HR Director
Strategic risk category:
¡ Operational
¡ Reputational
Impact
Medium
Likelihood
Low
Risk 7
TRADING, LIABILITY AND
PRICING MANAGEMENT
Chief Operating Officer
Strategic risk category:
¡ Commercial
¡ Operational
¡ Strategic
Impact
Medium
Likelihood
Medium
Risk 8
LOSS OF
KEY LOCATIONS
Chief Operating Officer
Strategic risk category:
¡ Operational
Impact
Medium
Likelihood
Low
Principal Risk/Uncertainty
Failure to meet the requirements of the
various domestic and international rules and
regulations relating to the health and safety
of our employees and customers (both
retail and digital) could expose the company
(and individual employees and Directors)
to material civil, criminal and/or regulatory
action with the associated financial and
reputational consequences.
How we manage and mitigate the risk
GVC’s Retail and digital businesses have
numerous policies and procedures in place.
Annual training and communication plans
to all staff within these segments, as well
as specific communications to staff across
the wider Group continue to take place.
The Group’s Corporate Social Responsibility
Committee also oversee all aspects of
safer gambling, Health, Safety, Security and
Environmental (“HSSE”) practices.
Strategic relevance
Breaches in the Group’s HSSE and safer
gambling policies could lead to criminal,
civil and or regulatory sanctions, along with
significant reputational damage and negative
implications on employee morale and
customer goodwill.
Principal Risk/Uncertainty
The Group may experience significant losses
as a result of a failure to determine accurately
the odds in relation to any particular
event and/or any failure of its sports risk
management processes.
How we manage and mitigate the risk
The Group has some of the leading expertise
in trading liability management and the
enlarged Group’s trading team has developed
the skills and systems to be able to offer a
wide range of betting opportunities.
Events are priced in order to achieve an
average return to the bookmaker over a large
number of events and therefore, over the
long term.
The Group’s gross win percentage has
remained fairly constant in recent years.
Executive management monitor the gross win
margin on a daily basis in order to ensure the
long-term target is achieved.
Strategic relevance
A run of customer favourable results as
a result of the mismanagement of the
trading book could significantly impact
the Group’s profitability.
Principal Risk/Uncertainty
Whilst the Group operates out of a number of
geographical locations, there are a number
of key sites which are critical to the day-to-
day operations of the Group, including our
offices in Central London, Gibraltar, Vienna,
Hyderabad, Australia, Italy and Manila.
Disruption in any of these locations could
have an impact on operations.
How we manage and mitigate the risk
Existing continuity plans and arrangements
for off-site data storage, alternative
system availability and remote working
for key operational colleagues and senior
management are subject to ongoing review.
Strategic relevance
Loss of a key location could impact
the Group’s ability to offer product
to its customers impacting its ability
to generate revenues.
64
GVC Holdings PLC | Annual Report 2019
Risk 9
SYNERGY DELIVERY/
FAILURE TO INTEGRATE
Chief Operating Officer
and Chief Financial Officer
Strategic risk category:
¡ Operational
¡ Financial
Impact
Medium
Likelihood
Low
Principal Risk/Uncertainty
Challenges or difficulties to realising
synergies/operational integration from the
Ladbrokes Coral acquisition could potentially
result in interruption to business operations,
loss of customers & staff and influence the
relationship with key suppliers.
The failure to achieve the cost synergies
would have a material impact on the financial
performance of the Group.
How we manage and mitigate the risk
Integration workstreams began during the
course of 2018 and this remains a strategic
focus of the Group moving forward into 2020.
The Group’s budgeting process incorporates
synergy delivery and the integration team
capture and monitor progress across
these workstreams.
Strategic relevance
Failure to achieve the Group’s synergy/
operational integration targets could
significantly impact future growth forecasts
and the Group’s strategy to deploy the
proprietary technology across all brands.
Risk 10
RECRUITMENT AND RETENTION
OF KEY EMPLOYEES
Group HR Director
Strategic risk category:
¡ Operational
Impact
Medium
Likelihood
Low
Principal Risk/Uncertainty
The people who work within GVC are pivotal
to the success of the Company and our failure
to attract or retain key individuals may impact
our ability to deliver on our strategic goals.
How we manage and mitigate the risk
In 2019, the Group launched a new Employer
Brand including a new careers website,
enhanced onboarding processes and
referral schemes.
Over 500 colleagues have completed a
Management Development Programme and
we are committed to further investment in
Performance Management, Development,
Reward and Recognition systems. As part
of the merger, we are aligning terms and
conditions wherever appropriate.
The Group has implemented “best practice
employment standards frameworks”
and “enabling a rewarding and inclusive
environment” initiatives as part of our
people plan to underpin our responsible
employer strategy.
Strategic relevance
A pre-requisite to achieving all of the strategic
priorities is ensuring we have the right people
with the right skills, deployed within the right
area of the business. Failing to recruit/retain
the best people could significantly impact the
Group achieving all of its strategic objectives.
65
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS
Principal risks continued
Viability Statement
Going Concern Statement
Having assessed the financial forecasts
of the business, the principal risks
and other matters discussed in
connection with the viability statement
on this page, the Directors consider it
appropriate to adopt the going concern
basis of accounting in preparing the
financial statements as the Company
will generate sufficient cash to meet
its ongoing obligations for at least
12 months from the date of signing the
financial statements.
The financial impact of these risk events
have been assessed both individually and
in combination and include:
¡ The impact of a significant change
in the Group’s duty profile, including
further changes in gaming taxes in
key geographies
¡ Significant changes in the regulatory
environment including gaming
restrictions in key markets, further focus
on AML legislation in the UK by the
Gambling Commission and breaches
in GDPR regulations
¡ Cyber security failings, and major
disruption in supplier/customer contracts
¡ Downturn in trading as a result of a failure
to retain key staff
The Directors have performed reverse
stress tests to assess the level of liquidity
and covenant headroom in the underlying
forecasts as well as considering the potential
impacts of Brexit in forming their view
on viability.
Based on the results of this analysis and the
mitigating actions available to the business,
the Directors confirm that they have a
reasonable expectation that the Company will
be able to continue in operation and meet its
liabilities as they fall due over the three year
assessment period to December 2022.
The going concern statement is provided
in the following column.
In accordance with provision 31 of the 2018
Corporate Governance Code, the Directors
have assessed the prospects and viability
of the GVC Holdings PLC Group over a longer
period than the 12 months required by the
“Going Concern” provision.
The Directors have concluded that three years
was an appropriate period for assessment
as this is aligned to the Group’s strategic
planning process and is considered to be
the period for which reliable estimates can
be made for variations in both industry and
customer dynamics, regulatory change,
technological advancements and the
economic backdrop in the Gambling industry.
The objectives of the strategic planning
process are to further develop the businesses
understanding of the markets in which it
operates, assess the risks and opportunities
facing the business and develop a Group-wide
strategy and associated financial forecasts.
The Directors have utilised these strategic
forecasts, the 2020 Board approved budget
and the current financial position of the
Group to assess the potential impact on
viability of certain severe, but plausible,
“risk events” arising which represent the
crystallisation of the Group’s principal risks
and uncertainties as identified on pages 62
to 65 of this Annual Report. The assessment
conducted considered the Group’s revenue,
EBITDA, operating profits, cash flows, risk
management and controls.
66
GVC Holdings PLC | Annual Report 2019 OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS
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.
We will be reporting in compliance with the 2018 Corporate
Governance Code.
Chairman’s letter
Board leadership and company purpose
Division of responsibilities
Composition, succession and evaluation
Nominations Committee report
Audit Committee report
Directors’ Remuneration report
Directors’ report
Independent Auditor’s report
68
70
74
76
80
82
88
115
117
67
GVC Holdings PLC | Annual Report 2019 Chairman’s letter
Corporate governance report
Chairman’s letter
“ In this, my first Chairman’s
statement on GVC’s corporate
governance, I wanted to set
out clearly my aims during my
first year. It is clear that the
Group does many things well.”
J M Barry Gibson
Chairman
The business is out-performing its competitors and
operationally has been successful in incorporating the UK’s
largest gambling operator, Ladbrokes Coral into the Group
and delivering the forecast synergies. From a governance
angle it is clear that shareholders expect a more informed and
sympathetic approach to shareholder matters.
In relation to the controversial share sales last March, the Board
subsequently agreed that going forward if any Director wants to
transact in the Company’s shares, they were required to give the
rest of the Board at least 48 hours’ notice. In addition, the Chair
would have to get clearance to deal from the Senior Independent
Director, so if the Chair and CEO were going to deal at the same
time, they could not grant each other clearance. Since March
2019 eight Directors have acquired a total of more than 1 million
shares, increasing the aggregate holding of the Board by more
than 100%.
Jane Anscombe, the Remuneration Chair, reports separately in
the Remuneration Report on pages 90 to 106 on the engagement
with shareholders in 2019 about the Company’s remuneration
practices. At this year’s AGM we are proposing an updated
remuneration policy and I trust that shareholders will see that
we have understood their concerns and taken the appropriate
action. I will, however, maintain a watching brief and will engage
with any shareholders should they continue to have concerns
about the Company’s remuneration arrangements.
There is a lot of change in the corporate governance
landscape for this year, and the Board have embraced the
recommendations of the FRC’s updated 2018 Corporate
Governance Code and reporting under Section 172 of the
UK Companies Act. Engagement with our stakeholders,
on the associated matters is key to enabling the Board to
understand the way that the Company does business and its
impact on others, which in turn better informs the Board’s
own decision‑making. This is particularly the case with the
debate about gambling’s place in society and how the risks are
effectively managed.
Further information about GVC’s Code compliance is outlined
in the Governance Report on pages 70 to 81. An explanation
of who the Company’s key stakeholders are, why they are
important and how the Company engages with them is set out
in our voluntary s172 statement set out on pages 54 to 55 of the
Strategic Report.
68
GVC Holdings PLC | Annual Report 2019 I found the feedback from the extensive 2019 Board
performance evaluation process (reported on in the Chair’s letter
accompanying the 2019 AGM notice) and this year’s follow‑up
exercise, extremely informative and this will form the basis of
my steps this year to make changes to the Board’s workings.
Key findings and recommendations from the evaluation
process were:
¡ Allocate more time to developing and evaluating strategy
and in particular a review of key strategic alternatives, with
the Non‑executive Directors having greater input into the
development of the business strategy.
¡ Aim to have an in‑depth strategy session ahead of the annual
budget planning process, which will allow the Chairman
to input.
¡ More Board discussion about the key risks affecting the
business (as opposed to leaving it to the Audit Committee),
in particular looking at the risks associated with regulation,
reputation, people retention and technology.
¡ Building into the Board’s itinerary more time for the Non‑
executive Directors to meet, with Non‑executive Director‑only
sessions being scheduled.
¡ The new Chairman to implement more effective lines of
communication with the Non‑executive Directors than
his predecessor.
¡ Provide the Non‑executive Directors with greater exposure
to and interaction with GVC’s management.
¡ More Board meetings to be held each year and to be better
structured and focused. Associated with this, is the need
to improve the reports for Board meetings, with in some
instances the sacrifice of some of the detail and a better
use of executive summaries.
Over the coming months I plan to address with the Board all
of these identified areas.
This year the Board will meet face to face at least six times and I
will keep this under review to determine if this is sufficient going
forward given the complexity of the business and the regulatory
challenges it faces. Following the Company moving last month
to be onshore in the UK for tax purposes, it should be easier to
convene Board meetings and for the Non‑executive Directors to
interact outside of these formal meetings, which should improve
working relationships amongst the Directors and make the Board
more cohesive. It will also allow the Directors to be more visible
amongst our 17,300 employees in the UK.
Whilst I have already met with some of GVC’s largest investors, I
intend in the Autumn to hold a corporate governance roadshow
for our largest shareholders.
J M Barry Gibson
Chairman
5 March 2020
GOVERNANCE CODE
1. BOARD LEADERSHIP AND COMPANY PURPOSE
The Board is responsible for leading the business in the way which
it believes is most likely to lead to long‑term sustainable success.
This includes effective engagement with our stakeholders
and colleagues.
For more information see
page 70
2. DIVISION OF RESPONSIBILITIES
We ensure we have the right combination of executive and
non‑executive directors, who promote a culture of openness,
without any individual or group of individuals dominating the
decision making.
For more information see
page 74
3. COMPOSITION, SUCCESSION AND EVALUATION
Our practices aim to ensure that we have a balanced board with
the appropriate skills to govern the business, and an effective
evaluation and succession plan.
The Nomination committee is appointed to act on behalf
of the Board.
For more information see
page 76
4. AUDIT, RISK AND INTERNAL CONTROL
The Board defines GVC’s strategy, focusing on the need to avoid
unnecessary or unacceptable risks. The Audit and risk committee
is appointed to oversee this process on behalf of the Board.
For more information see
page 84
5. REMUNERATION
Our remuneration policy is designed to support the strategy and
promote long‑term sustainable success by incentivising the
relevant performance.
We are also mindful of the pay of our colleagues across
the business.
For more information see
page 90
69
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Board leadership and company purpose
Leadership Experience
Across the board
J M BARRY GIBSON
KENNY ALEXANDER
ROB WOOD
JANE ANSCOMBE
PIERRE BOUCHUT
NON-EXECUTIVE CHAIRMAN
CHIEF EXECUTIVE OFFICER
CHIEF FINANCIAL OFFICER
INDEPENDENT NON-EXECUTIVE DIRECTOR
INDEPENDENT NON-EXECUTIVE DIRECTOR
Kenneth joined GVC as its Chief
Executive Officer in March
2007. On the re‑domiciliation of
Gaming VC Holdings S.A. to the
Isle of Man and its renaming as
GVC Holdings PLC, he became a
Director of GVC Holdings PLC in
January 2010. 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 UK LLP.
Key Strengths:
¡ Sector experience
¡ M&A
¡ Management
Appointed as a Director and
Chief Financial Officer of
the Company as of 5 March
2019. Rob has been with the
Group for seven years, the
majority of which was spent
as Chief Financial Officer of
the Ladbrokes Coral UK Retail
business. Prior to GVC, Rob
was Senior VP at Cerberus
Capital, overseeing the PE firm’s
portfolio companies in Europe.
Before Cerberus, Rob worked
in Restructuring advisory at
Rothschild and before that
KPMG, where he qualified
as a Chartered Accountant
and he has a BSc degree in
Mathematics and Management
Studies from the University
of Nottingham.
Key Strengths:
¡ Finance
¡ Sector experience,
particularly retail
¡ Corporate restructuring
Jane joined the GVC Board
in June 2017. She has more
than 30 years of experience
in the gaming, leisure and
entertainment sectors, primarily
as an equity research analyst.
She retired from equity research
in spring 2017 having been
a gaming and entertainment
analyst at Edison Investment
Research since its formation
in 2003.
Prior to that she was an
independent equity research
analyst from 1999 to 2003,
and before that a leisure sector
analyst at Investec Henderson
Crosthwaite from 1998 to 1999.
Prior to this Jane served as the
Director of Investor Relations
at Carlton Communications plc
from 1997 to 1998, having joined
from The Rank Group plc where
she was the Director of Investor
Relations between 1993 and
1997. From 1981 to 1993, Jane
was an equity research analyst
at de Zoete & Bevan and then
Barclays de Zoete Wedd, where
she was a Director of BZW
Research Ltd.
¡ Remuneration Committee
(Chair)
¡ Nominations Committee
¡ CSR Committee
Key Strengths:
¡ Sector experience
¡ Investment
¡ Communications
Pierre Bouchut joined the
GVC Board on 13 September
2018. Pierre has over 40
years of experience in senior
management roles across
finance, European retail and
European property. He is a Non‑
Executive Director and chairman
of the audit committee at
Hammerson plc and Firmenich
SA and a Director and Chairman
of the Audit, Accounts and Risks
Committee of Albioma SA. He is
also a Non‑Executive Director of
GeoPost SA.
Previously Pierre was the chief
operating officer for Europe
and Indonesia at Koninklijke
Ahold Delhaize N.V. (2016‑
2018), chief financial officer at
Delhaize Group SA (2012‑2016),
Carrefour SA (2009‑2012),
Schneider Electric SA (2005‑
2009) and Casino (1995‑2003),
where he also served as the
chief executive officer from
2003 to 2005. He has also
been a Non‑Executive Director
of La Rinascente SPA and a
Non‑Executive member of the
advisory boards of Qualium
Investissement and Lombard
Odier Asset Management
(Switzerland) SA.
¡ Audit Committee (Chair)
Key Strengths:
¡ Finance
¡ Strategic
financial management
¡ Leadership and management
Independent upon appointment
to the Board as a Non‑executive
Director from 4 November
2019, and as Chair on the
27 February 2020. He is the
Chair of HomeServe plc, Barry
has extensive experience in
the gambling sector, having
previously been a Non‑executive
Director of William Hill plc and
bwin.party digital entertainment
plc, where he was the Senior
Independent Director. He also
has a long track record in the
retail sector having previously
been the Group Retailing
Director at BAA plc, Group Chief
Executive of Littlewoods plc,
Non‑executive Chair of Harding
Brothers Holdings Ltd, and
Non‑Executive Director of both
Somerfield plc and National
Express plc.
¡ Nominations Committee
(Chair)
¡ CSR Committee
Key Strengths:
¡ Corporate
governance experience
¡ Sector and
regulatory knowledge
¡ Marketing and retail
70
GVC Holdings PLC | Annual Report 2019 OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS
PETER ISOLA
INDEPENDENT NON-EXECUTIVE DIRECTOR
STEPHEN MORANA
SENIOR INDEPENDENT
NON-EXECUTIVE DIRECTOR
VIRGINIA MCDOWELL
JETTE NYGAARD-ANDERSEN
INDEPENDENT NON-EXECUTIVE DIRECTOR
INDEPENDENT NON-EXECUTIVE DIRECTOR
Peter Isola joined the GVC Board
in 2016 following the move to
the Main Market of the London
Stock Exchange 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 of 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
government of Gibraltar on a
number of committees in both
financial services and gaming.
He is also a Director of a number
of Gibraltar regulated firms
in financial services, gaming
and e‑commerce including
the Gibraltar International
Bank and Broadband Gibraltar
Limited. He was appointed a
Commissioner to the Gibraltar
Financial Services Commission
in March 2017.
¡ CSR Committee
Key Strengths:
¡ Sector experience
¡ Legal and regulatory
¡ Financial services
Stephen Morana joined the
GVC Board on 2 February 2016
and 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 Chief Executive
Officer in 2012. After Betfair,
Stephen spent over three years
at Zoopla Property Group
Plc as Chief Financial Officer,
where he helped them join
the FTSE 250 in June 2014.
Stephen joined the Board of
GVC following the successful
acquisition of bwin.party digital
entertainment plc and the
enlarged Group’s move to the
Main Market of the London
Stock Exchange. Stephen was
until recently a Non‑Executive
Director and Audit Committee
Chairman of boohoo.com plc,
the high growth fast fashion
business. Stephen is a member
of the Institute of Chartered
Accountants in England and
Wales and an alumnus of
the executive management
programme at INSEAD.
¡ Audit Committee
¡ Remuneration Committee
¡ Nominations Committee
Key Strengths:
¡ Commercial
¡ Sector experience, finance
¡ Online disruptor experience
Virginia joined GVC in June
2018. She has 35 years of
experience working in the
US gaming industry and is
the current Vice Chairperson
of Global Gaming Women, a
non-profit organisation with
a mission to support, inspire
and influence the development
of women in the gaming
industry through education
and mentoring. Virginia was
the President and CEO of Isle
of Capri Casinos, Inc. in the
United States from 2011 until
her retirement in 2016, and the
president and COO of Isle of
Capri from 2007 to 2011.
Prior to this she was the Chief
Information Officer at Trump
Entertainment Resorts from
2005 to 2007 and Senior Vice
President of operations, sales
and marketing at Argosy
Gaming Company from 1997
until that business was acquired
in 2005. From 1984 to 1996
Virginia was promoted through
various roles in Tropicana
Casino and Resort before
departing as Vice President of
business development in 1996.
¡ CSR Committee (Chair)
¡ Audit Committee
¡ Remuneration Committee
Key Strengths:
¡ Sector experience
¡ Information technology
¡ Marketing
Jette joined the GVC Board in
December 2019. She has more
than 20 years’ experience in
leadership and operational roles
in media, entertainment and
digital businesses in general, as
well as building and operating
direct‑to‑consumer and over‑the‑
top streaming services across
multiple European countries.
From 2003 until March 2019 she
held several senior executive
and non‑executive roles at
Modern Times Group AB, a listed
international entertainment
group with a strong presence
in Scandinavia and Central
Europe, serving on the
executive committee from 2011.
Jette currently serves on the
board of Coloplast AS, a leading
medical technology company
listed on the Copenhagen
Stock Exchange, where she
also serves as a member of the
remuneration and nomination
committees. She also chairs
the board of Astralis Group
A/S, an international esports
organisation, which is listed
on the Nasdaq First North
Growth Market.
¡ CSR Committee
¡ Remuneration Committee
Key Strengths:
¡ Operational
¡ Digital technology
and entertainment
¡ Marketing
Directors that
served during the
year under review
LEE FELDMAN
Non‑Executive Chair of the
Board and of the Nominations
Committee until he stepped
down on 27 February 2020.
Lee joined the GVC Group in
December 2004 and became
Chairman in 2008. He is the
Managing Partner of Twin Lakes
Capital, a private equity firm
focused on branded consumer
products, media and business
services. From 2008 to 2015,
he was also the Chief Executive
Officer of Aurora Brands: the
owner of both MacKenzie‑
Childs and Jay Strongwater,
the iconic American luxury
home furnishings and personal
accessories companies. He is
also a member of the Board of
Directors of of Guide Beauty
LLC and Sergio Tacchini
Operations, Inc. 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.
Further detail regarding the
defined roles and responsibilities
of the Directors have been
set out in the chart on the
following page.
71
GVC Holdings PLC | Annual Report 2019 Board leadership and company purpose continued
Governance Overview
The Board recognises the importance of, and is committed to,
ensuring that effective corporate governance procedures are in
place that are appropriate for the Group’s size and complexity.
The Board reports against the requirements of the UK Corporate
Governance Code 2018 (the “Code”) issued by the Financial
Reporting Council in July 2018. The Code is available online at
www.frc.org.uk. The revised Code became effective for accounting
periods beginning on or after 1 January 2019.
During 2019 the Company was compliant with nearly all the 2018 Code
recommendations and steps were taken to implement appropriate
changes to close the gaps with the remaining recommendations
(aligning culture with the Company’s strategy, values and purpose
and appointing a Non‑executive Director to be the workforce
engagement representative), so at the year end the Company was
only non-compliant with two aspects of the 2018 Code. The first was
in relation to the Chairman’s tenure being greater than nine years.
This has been resolved with Barry Gibson, who was appointed to the
Board on 4 November 2019, succeeding Lee Feldman as Chairman
on 27 February 2020. The second gap related to adopting a formal
position on the post‑employment shareholdings of Executive Directors
for both vested and unvested shares. This is addressed in the updated
remuneration policy to be placed before shareholders for approval at
the 2020 AGM and details of the updated policy can be found in the
Remuneration Report.
The main highlights of the 2018 Code are:
¡ Greater emphasis on the role of the Board in assessing and aligning
culture with purpose, values and strategy.
¡ Broader focus on diversity and emphasis on skills and experience
within the Board.
¡ Enhanced board engagement with the workforce and focus on
wider stakeholders in decision making.
¡ Proportionate executive remuneration that supports the long‑term
success of the business.
HOW IS THE BOARD ORGANISED AND DOES IT OVERSEE MANAGEMENT?
CEO
¡ Runs the Company’s business.
¡ Proposes and develops GVC’s strategy
and overall commercial objectives in
conjunction with the Chairman.
¡ Responsible, with the senior executive
team for implementing the decisions of
the Board and its committees.
¡ Promotes and conducts affairs of GVC
with the highest standards of integrity,
probity and corporate governance.
¡ Manages the leadership team and
promotes the strategic mission and
goals to all employees.
¡ 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 a NED, the SID also:
¡ 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.
¡ Leads the NEDs in evaluating
performance of the Chairman, taking into
account the views of Executive Directors.
¡ Maintains sufficient contact with
shareholders to understand their issues
and concerns.
¡ Performs such other tasks and
responsibilities as may be contemplated
by the code or best practice from time
to time.
72
Management
Chairman
¡ Oversees the effective running of
the Board.
¡ 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.
¡ Acts as a guardian of the Board’s
decision-making.
¡ Promotes the highest standards
of integrity, probity and corporate
governance throughout the Company
and particularly at Board level.
¡ Oversees the effective
engagement with the Company’s
various stakeholders.
CfO
¡ Ensures future business decisions are
grounded in solid financial criteria.
¡ Provides insight and analysis to support
the CEO and senior executive team.
¡ Leads key initiatives in finance that
support overall strategic goals.
¡ Funds, enables and executes the
strategy set by the CEO.
¡ Develops and defines the overall
strategy of the organisation.
¡ Presents the organisation’s
progress on strategic goals to
external stakeholders.
NED
¡ Constructively challenges and contributes
to the development of strategy.
¡ Scrutinises the performance of
management in meeting agreed goals
and objectives and monitors the reporting
of performance.
¡ Satisfies themselves that financial
information is accurate and that
both controls and the systems of risk
management are robust and defensible.
¡ 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.
Oversight
GVC Holdings PLC | Annual Report 2019 Stakeholder engagement
Stakeholder and engagement
The Board recognises the importance and benefits of engaging
with stakeholders and engages with shareholders through
investor meetings. We formed the CSR Committee in 2018, which
is focused on overseeing the group’s relationships with a wider
portfolio of stakeholders.
A description of how the Company through the CSR Committee
engages with stakeholders is detailed at the end of the CSR report.
For more information see
pages 54 and 55
Workforce engagement and designated workforce Director
We have a clear purpose ‘To provide the best in class experience
where people can enjoy gambling responsibly’. And, as part of
our integration programme GVC ONE, we are working hard to
promote a unified culture with a responsibility-first ethos across the
business. See more on this on pages 16 and 17.
Virginia McDowell, was appointed as Designated Workforce
Director in 2019. More information on this role can be found in the
CSR section on pages 48 and 49.
Shareholder Engagement
An Extraordinary General Meeting of the Company was held
on 6 February 2020 to consider the proposal to relocate the
Company’s place of management and control and consequently
its tax residence to the United Kingdom, and the adoption of new
articles of association of the Company to facilitate this relocation.
The Special Resolution dealing with this proposal was approved by
99.98% of the votes cast in favour, clearly indicating the Company
has robust support from shareholders.
Annual General Meeting (“AGM”)
30/04/20
The AGM is an important part of effective communication with
shareholders. A separate notice convening the AGM on 30 April
2020 will be despatched to shareholders more than 20 working
days before the AGM. The AGM notice will describe each item of
business which will be dealt with by its own separate resolution.
The Chairs of the Audit, CSR, Nominations and Remuneration
Committees will be available to answer questions at the meeting.
Significant Shareholder dissent
The Remuneration Committee has engaged with a broad selection
of shareholders and proxy voting agencies prior to and following
the 2019 AGM. Following the significant shareholder dissent
against the 2018 Directors’ Remuneration Report, the Company
was required to seek views from shareholders as to the reasons
behind their voting decision. The Remuneration Committee
engaged with a broad selection of shareholders and the proxy
voting agencies to understand their views. The Senior Independent
Director also engaged with the Investor Forum during this
process. There was an acknowledgement that the vote against the
Remuneration Report was made in relation to legacy issues and
the 2018 CEO salary increase and feedback received on the need
to introduce a post cessation shareholding requirement in line with
the UK Code.
Feedback received during the shareholder consultation exercise
conducted at the end of 2019 has been incorporated into the
proposed updated Remuneration Policy to be put forward for
approval at the 2020 AGM. More information on this consultation
process is contained in the Remuneration Report on page 91.
For more information see
page 91
73
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Division of responsibilities
An effective structure
The Board
Roles and responsibilities
The Board is collectively responsible for the long‑term success of
the Company by setting the Group’s strategic objectives, ensuring
the maintenance of a robust system of internal controls and risk
management and for reviewing the overall effectiveness of the
systems in place.
The Board reviews the Company’s purpose and principles and
is required to satisfy itself that these are aligned with its culture.
The Board oversees the setting of objectives which are aligned with
the Group’s high‑level strategy and long‑term vision and monitors
progress with their delivery at meetings.
The duties of the Board are detailed in its formal Schedule of
Matters Reserved and is available on the Company’s website
www.gvc‑plc.com. The Schedule of Matters Reserved is reviewed
annually, with the last review undertaken in December 2019.
The activities undertaken by the Board during the year are set out
over the following pages.
Division of Responsibilities
GVC has established a clear division between the respective
responsibilities of the Non‑executive Chairman and the Chief
Executive, and their respective roles are set out in writing and agreed
by the Board. 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.
The Board is led by the Chairman, J M Barry Gibson, who succeeded
Lee Feldman on 27 February 2020. The Chairman is responsible
for the leadership and effectiveness of the Board. The Chairman
promotes open, effective discussion and challenge at meetings and
creates an environment in which all participants feel comfortable.
The Chairman also meets separately with the Senior Independent
Director, Non‑executive Directors, separately with the CEO and with the
Company’s various stakeholders.
Under the recommendations of the 2018 Code, which applied to the
Company with effect from 1 January 2019, the Chairman should
not remain in post beyond nine years from the date of their first
appointment to the Board. That period can, however, be extended
for a limited time to facilitate effective succession. During 2019, Lee
Feldman, who served on the Board since 2004 and as Chairman since
2008, continued to chair the Board, whilst the Board undertook a
search, led by the Senior Independent Director, for a new Chairman.
On 4 November 2019, the Company announced the appointment of
Barry Gibson as an Independent Non‑executive Director, who would
become Chairman on 27 February 2020, following a short induction
and handover period, with Lee Feldman stepping down as a Director
on 27 February 2020.
The implementation and execution of the Group’s strategy is managed
by the Chief Executive, Kenny Alexander. Matters which have been
delegated to the Chief Executive include the development of strategy
and the overall commercial objectives. The Chief Executive is also
responsible for the implementation of Board decisions; ensuring that
the Group complies with all of its regulatory and legal obligations;
and engagement with external stakeholders on the progress of the
business strategy.
The Senior Independent Director, Stephen Morana, provides a
sounding board for the Chairman and, if necessary, acts as an
intermediary for the Non‑executive Directors. He is also available
to shareholders if they have concerns, which contact through the
Chairman, CFO or CEO has failed to resolve. He also leads the annual
appraisal of the Chairman.
The Non‑executive Directors play a key role in contributing to the
delivery of strong governance by constructively challenging the
Executive Directors and senior management and monitoring the
delivery of the Group strategy within the risk and control framework.
The Non‑executive Directors are also critical to the development
of succession planning and the appointment and removal of
senior executives.
Committees of the Board
The Board has four main committees: Audit Committee, Corporate
Social Responsibility Committee, Nominations Committee and
Remuneration Committee to assist in its responsibilities. Details of
the roles and responsibilities of the Committees are set out in the
sections following this report. Although the Board’s powers and
authorities are delegated, the Board retains ultimate responsibility and
authority for their exercise. Each Committee operates under terms of
reference approved by the Board. The terms of reference are reviewed
annually, with the last review taking place in December 2019, and can
be found on the Company’s website www.gvc‑plc.com. An Executive
Risk Committee has also been established with the primary purpose
of assisting the Audit Committee and Board in the management of
the risks for the Company and its subsidiaries and to oversee the
operation of the Group’s risk management framework. The Executive
Risk Committee comprises of the Chief Financial Officer and other
senior executive representatives from the Group’s major functions.
Board Meetings
The Board meets formally on a regular basis and with additional ad
hoc meetings scheduled in line with business needs. All members
of the Board are expected to attend all meetings of the Board and
relevant committees on which they serve.
The Board’s agenda is set by the Chairman and deals with those
matters reserved to the Board and can be categorised into a number
of key areas including but not limited to the long‑term business
plan, strategy, budgets and forecasts, Group reorganisation, risk
management and control framework and capital structure.
74
GVC Holdings PLC | Annual Report 2019 Board attendance and activities
The Board met formally face to face five times, with eight additional
ad hoc meetings held in 2019 and Board sub‑committees were
constituted on a number of occasions in order to deal with matters
arising in the ordinary course of business outside of the formal
schedule of meetings. Each Board meeting follows a carefully tailored
agenda agreed in advance by the Chairman, Chief Executive and
Company Secretary and comprises of reports on current trading and
financial performance from the Chief Executive and Chief Financial
Officer, legal and regulatory updates, people and integration, strategic
proposals and material transactions presented by key individuals from
relevant business areas.
Details of the Directors’ attendance at the scheduled meetings that
occurred during the year can be found in the table below.
The following areas formed substantial areas of focus for
the Board in the year:
¡ Annual governance review
¡ The employee survey and integration updates
¡ The responsible gambling commitments
¡ Gaming licence applications
¡ Regular reports from the Executive Directors
¡ Regular reports from the senior executive team on operations,
business integration, product development, regulatory
developments, litigation and investor relations
Lee Feldman¹
Kenneth Alexander
Rob Wood²
Jane Anscombe
Pierre Bouchut
Barry Gibson3
Peter Isola4
Virginia McDowell
Stephen Morana
Jette Nygaard‑Andersen5
Paul Bowtell6
Board
(5/5)
5
5
4
5
5
1
5
5
5
1
1
Audit
Committee
(4/4)
–
–
–
–
4
–
–
4
4
–
–
Corporate Social
Responsibility
Committee
(6/6)
6
–
–
6
–
–
5
6
6
–
–
Nominations
Committee
(3/3)
3
–
–
3
–
–
–
–
3
–
–
Remuneration
Committee
(4/4)
–
–
–
4
–
–
–
4
4
–
–
1. Stepped down from the Board on 27 February 2020.
2. Appointed to the Board on 5 March 2019.
3. Appointed to the Board, Nominations Committee on 4 November 2019 and the CSR Committee on 25 February 2020.
4. Appointed to the Corporate Social Responsibility Committee on 27 February 2019.
5. Appointed to the Board on 11 December 2019, and the Remuneration and CSR Committees on 25 February 2020.
6. Resigned from the Board on 5 March 2019.
75
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Composition, succession and evaluation
A balanced board
Board Composition
The Board continues to focus on maintaining a well‑balanced
membership with the right mix of individuals who can apply their
diverse business knowledge and experiences to the oversight and
guidance to the delivery of the Group’s strategy in the jurisdictions in
which it operates. As at the date of this report the Board is comprised
of the Chairman, two Executive Directors and six Independent Non‑
executive Directors.
On 5 March 2019, Rob Wood was appointed Chief Financial Officer,
succeeding Paul Bowtell. As previously disclosed, after serving
on the Board of GVC for 15 years and as Chairman for 11 years,
Lee Feldman stepped down from the Board on 27 February 2020.
The Nominations Committee, led by the Senior Independent Director
and with the Chairman abstaining, ran the process to identify
candidates appropriate for the role of Chairman, supported by the
independent recruitment firm, Russell Reynolds. Several short-listed
external candidates were interviewed for the position and, the process
led to the Board announcing the appointment of Barry Gibson as
an Independent Non‑Executive Director on 4 November 2019, with
him stepping up as Chairman on 27 February 2020. Jette Nygaard‑
Andersen was appointed as Independent Non‑executive Director on
11 December 2019. The biographies of all the Directors are detailed
on pages 70 to 71 and highlight the strength and depth of skills and
experience they bring to the Board.
Board Commitment, Balance and Independence
Each Non-executive Director (“NED”) must be able to devote sufficient
time to the role in order to discharge his or her responsibilities
effectively and the Board is satisfied that the Chairman and each of the
NEDs devotes sufficient time to their duties. The terms and conditions
of appointment of each of the NEDs are available for inspection during
normal business hours at the Company’s registered office and at the
AGM for 15 minutes before and after the meeting.
The Board is aware of the other commitments and interests of its
Directors, and changes to these commitments and interests are
reported to and, where appropriate, agreed by the rest of the Board.
The Group believes it has effective procedures in place to monitor
and deal with potential conflicts of interest.
Excluding the Chairman, of the remaining eight Directors, six are
independent NEDs. The Nominations Committee, having considered
the matter carefully, is of the opinion that all the current NEDs
remain independent.
The composition of all Board committees complies with the 2018
Code recommendations.
76
Board Experience
A broad range of skills with a wide range of industry experience:
¡ Accountancy
¡ Business development
¡ Consumer branding
¡ E‑commerce
¡ Entertainment
¡ Equity research
¡ Finance
¡ Government and industry
¡ Strategy
¡ Marketing
¡ Legal and regulatory
¡ Retail
¡ Technology
¡ Travel and leisure
¡ Online gambling
¡ US Gaming
Director Induction, Training and Development
The Chairman is assisted by the Company Secretary in providing
all new directors with a comprehensive induction programme on
joining the Board. The induction programme provides new Directors
with an understanding of the Group, its businesses and the markets
and regulatory environments in which it operates. This includes
meeting with senior executives and their direct reports. The process
also provides an overview of the responsibilities for NEDs and the
Company’s governance practises. Barry Gibson and Jette Nygaard‑
Andersen received tailored inductions following their appointment.
The Chairman has overall responsibility for ensuring that Directors
receive suitable training to enable them to carry out their duties.
Training is also provided by way of reports and presentations prepared
for each Board meeting, as well as meetings with Group employees
and external advisers.
The Directors have access to independent professional advice at the
Group’s expense, as well as the advice and services of the Company
Secretary, who advises the Board on regulatory and corporate
governance matters.
Board Evaluation and Effectiveness
In 2019 an extensive Board performance evaluation process was
conducted, facilitated by the independent corporate governance firm,
Lintstock Limited. This included interviews with each Director by
Lintstock personnel and the results were reported on in the Chairman’s
letter in the 2019 Annual General Meeting notice. This formed the
basis of a follow‑up questionnaire process again facilitated by
Lintstock Limited in the first two months of 2020. The results of this
evaluation are reported on in the Chairman’s statement on pages 68
to 69.
GVC Holdings PLC | Annual Report 2019 Board Diversity
As an international company, diversity is an integral part of GVC’s
culture, with the Board reflecting this. Information about the diversity
of the Board, including its consideration of diversity in its succession
plans and in developing senior management can be found in the
Nominations Committee report. Following the appointment to the
Board of Jette Nygaard‑Andersen on 11 December 2019 a third of the
Board is now female and so is in line with the recommendation of the
Hampton‑Alexander Review.
STRATEGY AWAY DAY
The Board held a strategy event with the senior executive team
in the US in October. At this event the Board reviewed progress
against the Group’s North American strategic plan, set the market,
operational and employee strategies in the context of ongoing
risks and challenges and, on the basis of the former, agreed a
three-year financial plan.
Diversity of the board
6/9
3/9
0-1 Yrs
1-2 Yrs
2-3 Yrs
4+ Yrs
For more information see
pages 06 to 11
“ The Board continues to focus
on maintaining a well-balanced
membership with the right mix
of individuals who can apply their
diverse business knowledge and
experiences to the oversight
and guidance to the delivery
of the Group’s strategy in the
jurisdictions in which it operates.”
Barry Gibson
Non-Executive Chairman
Male
Female
Board Tenure
Barry Gibson
Kenneth Alexander
Rob Wood
Jane Anscombe
Pierre Bouchut
Peter Isola
Stephen Morana
Virginia McDowell
Jette Nygaard‑Anderson
77
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS
Composition, succession and evaluation continued
Fair, balanced
and understandable
“ The Board recognises the
importance and benefits of
engaging with stakeholders.
It engages with shareholders
through investor meetings and
the CSR Committee, which was
formed in 2018 with a focus
on overseeing the Group’s
relationships with a wider
portfolio of stakeholders.”
J M Barry Gibson
Non-Executive Chairman
In accordance with the principles of the 2018 UK Corporate
Governance Code, we have assessed the processes and procedures
in place to ensure that the information presented in the Annual Report
is fair, balanced and understandable. We describe these processes
and procedures on page 74.
On the advice of the Audit Committee, the Board considered that the
Annual Report, as a whole is fair, balanced and understandable, and
provides the information necessary for shareholders to assess the
Group’s position, performance, business model and strategy.
Responsibility statement of the Directors in respect of the
annual financial report
¡ The financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss of the
Company and the undertakings included in the consolidation taken
as a whole; and
¡ the strategic report includes a fair view of the development and
performance of the business and the position of the issuer and
the undertakings included in the consolidation taken as a whole
together with a description of the principal risks and uncertainties
that they face.
Risk management and internal controls
The Board has delegated responsibility for the annual review of the
Group’s internal control systems to the Audit Committee, assisted
by the Executive Group Risk Committee (responsible for the Group’s
risk management framework). Further details of the review and
monitoring procedures can be found within the Audit Committee
report on page 84.
In satisfying the requirements to ensure that the Group has adequate
risk management and internal control systems, the Audit Committee
has monitored the Group’s internal control systems on an ongoing
basis and reviewed the annual effectiveness assessment of the
Group’s risk management and internal control systems.
78
GVC Holdings PLC | Annual Report 2019 The Directors are responsible for keeping proper accounting records
that are sufficient to show and explain the parent Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the parent Company and enable them to
ensure that its financial statements comply with the Isle of Man
Companies Act 2006. They are responsible for such internal control
as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error, and have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of the Group and
to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Directors’ Report and a corporate
governance statement that complies with that law and
those regulations.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.
Going concern
The Group’s business activities, together with the factors likely to
affect its future development, performance and position are set
out in this Annual Report in the sections preceding this governance
report. The financial position of the Group, its cashflow, liquidity
position and borrowings are set out in the aforementioned section.
In addition, notes to the financial statements on pages 129 to 174
include 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 customers 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 context of the current economic outlook.
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 in respect of the
annual report and the financial statements
The Directors are responsible for preparing the Annual Report and the
Group and parent Company financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare Group and parent
Company financial statements for each financial year. Under that
law they are required to prepare the Group financial statements
in accordance with International Financial Reporting Standards
as adopted by the European Union (IFRS as adopted by the EU)
as applicable to an Isle of Man company and applicable law and
have elected to prepare the parent Company financial statements
in accordance with UK accounting standards, including FRS 101
Reduced Disclosure Framework as applicable to an Isle of Man
company. Under company law the Directors must not approve the
financial statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Group and parent Company and
of their profit or loss for that period. In preparing each of the Group and
parent Company financial statements, the Directors are required to:
¡ select suitable accounting policies and then apply
them consistently;
¡ make judgements and estimates that are reasonable, relevant,
reliable and prudent;
¡ for the Group financial statements, state whether they have been
prepared in accordance with IFRSs as adopted by the EU;
¡ for the parent Company financial statements, state whether
applicable UK accounting standards, including FRS 101 Reduced
Disclosure Framework, have been followed, subject to any material
departures disclosed and explained in the parent Company
financial statements;
¡ assess the Group and parent Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern; and
¡ using the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to cease
operations or have no realistic alternative but to do so.
79
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Composition, succession and evaluation continued
Nominations committee report
As announced, the former Chair of the Board and of the
Nominations Committee, Lee Feldman, stepped down from
the Board and the Committee on 27 February 2020. I was
appointed to the Nominations Committee on 4 November
2019 and became Chair of this Committee and of the Board
on 27 February 2020.
During the year, the Committee undertook a number of
activities, including the search for a Chair successor led by
the Senior Independent Director, the results of which led
to my appointment. The Committee’s work also included
bringing in additional skills and knowledge and resulted in the
appointment of Jette Nygaard‑Andersen as an Independent
Non‑executive Director on 11 December 2019.
The role of the Committee
The key responsibilities of the Committee are to assist the
Board in identifying and nominating candidates for the Board
and overseeing the succession planning for Non‑executive
Directors and senior management. This involves regularly
reassessing the structure, size, composition of the Board
and recommending any suggested changes to the Board;
evaluating the balance and skills, knowledge and experience
of the Board and identifying the capabilities required for a
specific appointment.
The role and responsibilities of the Committee are set out in
its formal terms of reference. A copy of which can be viewed
on the Group’s website www.gvc‑plc.com.
Committee membership and attendance
The Committee meets at least twice a year and may meet at other
times as agreed by the Chair or at the request of a Committee
member. The table below shows the Committee’s membership
and attendance at meetings for the year ended 31 December 2019.
The details of their experience and qualifications are shown in the
Directors’ biographies.
Member
Lee Feldman1
Jane Anscombe
Stephen Morana
Barry Gibson2
Position
Chair
Member
Member
Member
Meetings Attendance (3)
2
3
3
–
3
3
3
–
1. Lee Feldman did not participate in meetings to do with his succession; resigned from the
Committee on 27 February 2020.
2. Barry Gibson was appointed to the Committee on 4 November 2019.
All appointments to the Committee are made by the Board on the
recommendation of the Nominations Committee, in consultation
with the Committee Chair.
The Committee comprises of a majority of independent Non‑
executive Directors with the exception of the Committee Chair.
Appointments to the Committee are for a period of up to
three years, which may be extended for two further periods of
three years provided the majority of the Committee members
remain independent.
“ On behalf of the Board,
I am pleased to present
the Committee’s report
for the year ended
31 December 2019.”
J M Barry Gibson
Chair of the Nominations committee
80
GVC Holdings PLC | Annual Report 2019 The Chief Executive Officer and Group HR Director are invited to
attend meetings where this may assist the Committee in fulfilling
its responsibilities and, most notably in relation to executive
appointments and succession planning. The Company Secretary acts
as the Secretary for the Nominations Committee.
Independence
The Committee is responsible for considering the independence of all
Non‑executive Directors by evaluating their character and judgement,
in line with the 2018 UK Corporate Governance Code. During 2019, the
Nominations Committee reviewed the independence of the Board and
concluded that each Non‑executive Director remained independent
and continues to have sufficient time to discharge their responsibilities
to the Company.
How the Committee spent its time in 2019
Following on from the work undertaken in 2018, the Nominations
Committee led the process for the appointment of the successor
Chairman, the appointment of a new Independent Non‑executive
Director and succession planning for senior executives.
Russell Reynolds, an external search consultant was engaged to
facilitate the search and selection process for the successor Chairman
and Independent Non‑executive Director.
The search for the new Chairman was led by the Senior Independent
Director, Stephen Morana. The Committee prepared a detailed
specification for both roles specifying the skills, knowledge,
experience and attributes required.
The Committee as a whole was involved in the shortlisting and
interviewing of candidates and once the preferred candidates had
been identified, the other Board members were included and met
with the candidates.
The Committee considered potential nominees identified
and examined a ‘long list’ of candidates in consultation with
Russell Reynolds, assessing each against the role specification.
The Committee members then agreed a shortlist of the candidates
most closely matching the specification for each role and invited them
for interview. Other Board members were included in the process by
receiving updates on the Committee’s work and having the opportunity
to meet the shortlisted candidates.
The criteria for the new Chair included significant gambling sector
experience, a demonstrable track record of success on a range of
high-profile public company boards, and a deep understanding of the
evolving corporate governance landscape. After an extensive search,
the Committee agreed that I stood out as exceeding all of those
criteria and a short statement by the Senior Independent Director
on the Chair recruitment process is set out below.
The Committee identified that the Board’s skill set and experience
could be strengthened by focusing on candidates with technology
and marketing backgrounds and noted the recommendation of the
Hampton‑Alexander Review on gender and the Parker Review on
ethnic diversity. It is part of the Committee’s policy when making new
appointments to consider the importance of diversity on the Board,
including gender and ethnicity. This is considered in conjunction with
experience and qualifications.
As a consequence, the Committee recommended the appointment
of Jette Nygaard‑Andersen to the Board. Jette brings her expertise
of digital next generation online/mobile experience and has
wide‑ranging knowledge of consumer‑facing businesses in the
entertainment, media and technology sectors. The Board accepted
the recommendation and Jette was appointed to the Board as an
Independent Non‑executive Director on 11 December 2019.
The 2018 Corporate Governance Code places greater emphasis on
succession planning and as a result the Nominations Committee has
built on its existing processes to enhance its focus on succession
planning. This has not just been done at a Board level, but includes
the top 100 management executives in the GVC business, where there
is a focus on developing the talent and career opportunities of the
future leaders of the business. Given the size and complexity of GVC’s
business, it is essential to have robust contingency plans in place for
the management team to ensure the long‑term stability and success
of the organisation. The Committee continued to focus on succession
planning arrangements for each Group Executive member, including
talent development below Group Executive level.
Diversity
As an international company, diversity is an integral part of GVC’s
culture and although the Board does not have a formal written Board
diversity policy, the Committee recognises the importance of diversity
and inclusion in the boardroom and throughout the organisation.
We continue to recruit based on merit while remaining committed to
diversity of gender, social and ethnic backgrounds when seeking to
fill vacant Board positions and for roles in the Group more generally.
This commitment is demonstrated by the composition of the Board,
which comprises three women, two of whom are Committee Chairs.
I am therefore pleased to report that with the appointment to the
Board of Jette Nygaard‑Andersen on 11 December 2019, a third of
our Board members are women and the Board continues to support
Lord Davies’ and the Hampton‑Alexander voluntary targets.
The Board is also committed to increasing the percentage of women
in senior positions in the Company, and whilst there has been an
increase in senior female hires, there is a recognition of the further
work to be done to achieve that. In order to achieve this aim, the
Board continues to support the delivery of talent and leadership
programmes within the wider organisations with initiatives such as the
Horizon Women in Leadership Programme which aims to support and
empower female leaders.
J M Barry Gibson
Chair of the Nominations Committee
5 March 2020
Statement from the Senior Independent Director on the
Chairman Succession process
In 2019 I led the process to recruit a new Chairman of the Board.
As part of this process I met with The Investor Forum. This body
helps facilitate a constructive dialogue between companies
and their investors and represents a number of our largest
shareholders. The Board found The Investor Forum’s input
helpful and insightful. Russell Reynolds, the independent executive
search firm assisted with the process of identifying appropriate
candidates and I liaised with the other Non‑executive Directors
and the CEO as we reviewed the initial candidate list and identified
which individuals to meet.
All the Non‑executive Directors and the CEO interviewed the short‑
listed candidates and feedback shared, before a recommendation
was put to the Board. There were a number of strong candidates,
but Barry Gibson stood out because of his knowledge of and
passion for the gambling industry and his experience chairing
the Homeserve Board, where he has worked successfully over
a long period of time with their CEO who founded the business.
After a short handover process Barry took over the chair from
Lee Feldman on 27 February 2020. On behalf of the Board I
would like to thank Lee for his support through this transition
to his successor and for overseeing GVC becoming one of the
world’s largest sports‑betting and gaming companies – a record he
can be rightly proud of.
81
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Audit, risk and internal control
Audit committee report
“ I am pleased to present the
Committee’s report for the year
ended 31 December 2019. During the
year the Committee continued to
work closely with the Executive
Risk Committee and the Group’s
internal and external auditors
to ensure that the Group was in
compliance with the requirements
set out in the 2018 Corporate
Governance Code.”
Pierre Bouchut
Chair of the Audit committee
MAIN RESPONSIBILITIES OF THE COMMITTEE
¡ Monitors the integrity of GVC Holdings PLC’s financial
statements and any formal announcements relating to the
Company’s financial performance and reviews, and where
necessary challenges, the significant financial reporting
issues and judgements in relation to the half‑year and
annual financial statements before these are submitted to
the Board for final approval;
¡ Makes recommendations to the Board concerning any
proposed, new or amended accounting policies;
¡ Oversees the relationship with the Group’s external auditor
including reviewing the annual external audit plan and
audit findings;
¡ Recommends the audit fee to the Board and sets the
Group’s policy on the provision of non‑audit services by the
external auditor;
¡ Reviews and monitors the external auditor’s independence
and objectivity, and the effectiveness of the audit process;
¡ Monitors and reviews the internal audit programme and
its effectiveness;
¡ Monitors and reviews GVC’s systems for internal control,
financial reporting and risk management;
¡ Reviews internal audit reports covering the various areas
and activities of the business and ensures the business
responds to the recommendations made; and
¡ Assesses and reports on the Group’s viability in line with the
Code requirements, prior to being submitted to the Board
for approval.
The Code requires that the Audit Committee must operate
effectively and efficiently and that its members have a
balance of skills and experience to deliver its responsibilities.
The Committee are comfortable that it currently has the relevant
level of skills and experience to discharge its responsibilities.
82
GVC Holdings PLC | Annual Report 2019 MEMBERS
The Committee is composed entirely of Independent Non‑executive
Directors. Details of their experience are shown in the Directors’
biographies:
¡ Pierre Bouchut (Chairman)
¡ Stephen Morana
¡ Virginia McDowell
Pierre Bouchut is regarded as the Audit Committee member with
recent and relevant financial experience.
Composition and Constitution
The Audit Committee oversees the Group’s financial reporting
and internal controls and provides a formal reporting link with the
external auditors. The Committee’s Terms of Reference, which are
reviewed annually, are available on the Company’s website. The Audit
Committee comprises three members, all of whom are Independent
Non‑executive Directors. Appointments to the Committee are made
by the Board at the recommendation of the Nominations Committee,
which consults with the Chair of the Audit Committee. The Board has
satisfied itself that the Committee’s membership includes at least
one Director with recent and relevant financial experience and have
competence in accounting and/or auditing and that all members are
financially literate and have experience of corporate financial matters.
All Directors on joining the Board are given specific sector training to
ensure competence relevant to the business, in addition to the other
skills they bring to the Board and Committees.
The Committee meets at least four times a year at appropriate
intervals in the financial reporting and audit cycle and otherwise
as required. Other Directors, including the Chief Financial Officer
attend the Audit Committee meetings by invitation. The Committee
also met for private discussions with the external auditor, whose
representatives attend all Committee meetings together with the
Director of Internal Audit.
The table below shows the attendance of the Committee members
at meetings for the year ended 31 December 2019:
Member
Pierre Bouchut (Chair)
Stephen Morana
Virginia McDowell
Meetings
entitled to
attend
4
4
4
Meetings
actually
attended
4
4
4
83
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Audit, risk and internal control continued
Audit committee report continued
RESPONSIBILITY FOR THE GVC FINANCIAL STATEMENTS
The Board is ultimately responsible for presenting a fair, balanced and understandable assessment of 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 Director of Investor Relations
coordinates with the CEO, CFO and Chair
on the preparation of any statements on
GVC’s position, performance, business
model and strategy.
The Company Secretary with the Chair of
the Board and the Chairmen of the various
Board Committees, prepares the corporate
governance statements and all Board
committee reports.
EXTERNAL REVIEW
GVC’s external auditor audits the annual financial accounts and review the half-year accounts together with any business or corporate
governance commentary. A report to the 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
The Board reviews the financial statements, accompanying reports and recommendations from its committees and makes changes
to the disclosure where appropriate.
The external auditor carries out final report and signs-off the audit report (Annual Report) or review report (half-year results).
AUDITOR REPORTING TO THE BOARD
AUDIT/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 2019, the Company has followed
the process detailed above. In doing so the Directors confirm that they have reviewed the complete 2019 Annual Report and considered
that taken as a whole, the 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.
84
GVC Holdings PLC | Annual Report 2019 ACCOUNTING AND KEY AREAS OF JUDGEMENT
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 has been
provided and that appropriate rigour has been applied where any judgement may be exercised.
Matter considered
Separately disclosed items and proforma information
Action
The Group separately discloses certain items in order to allow
a clearer understanding of the underlying trading performance
of the business. In 2019, the Group has recorded a net charge
in respect of items which have been separately disclosed of
£630.1m in the Income Statement.
In addition, given the financial statements in 2018 only include
the nine months of trading post acquisition for the acquired
Ladbrokes Coral business and are stated pre IFRS 16, proforma
financial information has been provided within the Annual Report
and Accounts to assist in the articulation of the underlying
business performance.
Carrying value of long-lived assets and depreciable lives
The Group has significant value in enduring and indefinite
life assets such as UK brands and goodwill which need to be
reviewed for impairment. In 2019, the Group has recognised a
non‑cash impairment charge against the goodwill carried on the
Australian business.
Contingent consideration
Included within the Group Balance Sheet as at 31 December
2019 is contingent consideration of £134.0m, which has
been calculated based on potential future profitability of
previous acquisitions.
Provision for historical tax claims
The Group has recognised a receivable of £116.0m in respect
of amounts paid on account for Greek tax in relation to the
2010/11 Assessment. In recording this receivable, management
have exercised judgement over the likelihood of recovering
these amounts.
As part of their assessment that the treatment of separately
disclosed items in the financial statements is appropriate,
the Committee have considered each of the items disclosed
and challenged, where necessary, the treatment adopted
by management. The Committee has also considered the
conclusions reached by KPMG as part of its audit in this area
and are satisfied with the disclosure adopted.
Management’s use of proforma information in explaining the
underlying business performance has also been considered by
the Committee, as have KPMG’s views on the use of proforma
information and non‑GAAP measures. The Committee has
also considered the prominence given to non‑GAAP measures
compared to statutory measures and is satisfied with the balance
of the disclosure provided.
The carrying value of all enduring and indefinite life assets are
tested for impairment annually. In reaching their conclusion
that the treatment adopted is appropriate, the Committee have
reviewed the forecasts, key assumptions and methodology
adopted by management in determining the impairment charges
required in the 2019 financial statements.
As part of this process and in reaching their conclusion that the
current charges and disclosure are appropriate, the Committee
have also reviewed KPMG’s audit findings.
The Committee have reviewed the process and judgements
taken by management in determining the likely pay‑out under the
contingent consideration agreements as well as the findings of
the KPMG audit and are satisfied that the liabilities recognised are
appropriate given the circumstances.
The Committee have assessed the advice taken by management
and the conclusions reached over the likelihood of success of
the appeal and considered the analysis and conclusions reached
by KPMG as part of their audit work. Whilst there is inherent
uncertainty in the outcome of any appeal, the Committee
consider the judgement taken by management is appropriate.
85
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Audit, risk and internal control continued
Audit committee report continued
Non-audit services provided by the external auditor
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 2019, the total non‑audit fees as a percentage of the
audit fees paid to the external auditors was 21%.
In addition to their statutory duties, KPMG 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 set out above.
In the year ended 31 December 2019 no fees were paid to the external
auditors in respect of due diligence for acquisitions.
Internal audit and its effectiveness
The Board delegates responsibility for reviewing the effectiveness
of the Group’s systems of internal control to the Audit Committee.
This covers all material controls including financial, operational and
compliance controls and risk management systems.
The Group’s Internal Audit function forms the primary source of
internal assurance via the delivery of the Internal Audit Plan, which
is structured to align with the Group’s strategic priorities and key risks
and is developed by Internal Audit with input from management and
the Audit Committee.
Its mission is to provide independent, objective assurance and
consulting services designed to add and protect value by improving
the Group’s operations. Internal Audit 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.
External auditors
During the year ended 31 December 2019, KPMG 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. The 2019 financial year-end is KPMG LLP’s
second financial reporting period as the Group’s external auditor,
following the external audit tender process in 2018, with Mike Harper
as the lead audit partner.
A resolution will be proposed at the 2020 AGM to re‑appoint KPMG
LLP as the external auditors.
Policy on external audit 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 20 years.
GVC last ran a competitive audit tender process in 2018 following
the acquisition of Ladbrokes Coral, with KPMG LLP appointed as
external auditors. The Audit Committee, and the Board intend on
putting the external audit out to tender at least once every ten years,
in line with the guidance provided by the Financial Reporting Council,
the EU Regulation and the Statutory Audit Services Order. The Audit
Committee continues to follow an Auditor Rotation and Tendering
Policy (which was first adopted in 2017).
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:
¡ Reviewing that safeguards put in place by the incumbent auditor
against independence threats are sufficient and comprehensive;
¡ 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;
¡ 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; and
¡ 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
Chair of the Audit Committee and the audit firm partner.
86
GVC Holdings PLC | Annual Report 2019 Through its work, Internal Audit 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:
¡ 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;
¡ Assisting the business in fulfilling its corporate
governance responsibilities;
¡ Supporting operational management by providing best practice
advice on internal controls, including practical recommendations
to mitigate control weaknesses identified during the review process;
¡ Promoting effective control at reasonable cost and assisting
management generally in the pursuit of value for money
(e.g. by providing practical recommendations to improve the
efficiency of the financial and business processes operated by
the business); and
¡ Carrying 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.
Recommendations arising from Internal Audit reviews are
communicated to the relevant business area for implementation
of appropriate corrective measures, with results reported to the
Audit Committee.
The work completed by Internal Audit during the year focused on key
areas of the Group (disclosed on pages 60 to 65 under principal risks),
which included:
¡ Reviews of Anti‑money Laundering and Social Responsibility
processes across various business units
¡ Operating review of the online partypoker and Australian businesses
¡ Review of key investment projects including the new till system for
UK Retail
¡ Compliance review of the InterTrader business
¡ Review of the UK Stadia businesses including health and
safety management, animal welfare management and
licensing compliance
¡ Review of training and staff development processes across
the Group
¡ Ongoing review of GDPR compliance
In addition to the above, the Group formed a Regulatory Assurance
function formed in 2018 and reporting into the Group Director of
Internal Audit. The Regulatory Assurance team has been set up to
ensure that there are regular, ongoing monitoring programmes across
regulatory processes, such as anti‑money laundering, responsible
gambling and Retail licence obligations.
Other regulated activities in scope include marketing compliance and
affiliate management. A periodic review of key compliance activities
aims to maintain ongoing oversight of controls on behalf of internal
and external stakeholders.
The Board, with the support of the Audit Committee, has completed
its annual review of the effectiveness of the internal system of
control, and whilst they are satisfied that it is robust there are areas
which could be improved and these have been incorporated into the
2019 Audit Plan. The areas which will be subject to ongoing focus in
2020 are:
¡ System access controls;
¡ Harmonisation and standardisation of the control environment
in the combined business; and
¡ Ongoing compliance assurance over key regulations including
gambling and responsibility requirements, anti‑money laundering,
marketing and GDPR.
The Directors acknowledge that, whilst GVC’s system of internal
control can reduce the probability of business risks impeding 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. The Directors also
acknowledge that the business continues to face several risks as a
direct result of the integration of its various operations. This means
that in 2020 there will be continued focus on areas of the business
affected by integration where changes in systems, personnel or
processes could lead to weaknesses in internal controls during the
ongoing transitional period.
Whistleblowing policy
The Group has 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 Code of Conduct, which was re‑launched across the
enlarged Group during 2018.
The Company seeks the highest ethical standards in carrying out its
various business activities and corrupt practices of any sort will not be
tolerated. The Company 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 Company 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.
Pierre Bouchut
Chair of the Audit committee
5 March 2020
87
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Remuneration
DIRECTORS’ REMUNERATION REPORT
Annual statement from the
Remuneration Committee Chair
“ 2019 was another highly successful
year for GVC. I believe that our
remuneration structures have
led to pay which has been aligned
with the excellent strategic and
operational performance delivered
by our senior management team.”
Jane Anscombe
Chair of the remuneration committee
2019 GROUP PERFORMANCE
It was another year of strong performance for GVC.
We continued to deliver double-digit growth in online
NGR while successfully managing the impact of the
Triennial Review on our retail business from April
2019. This was the first full year of ownership of
Ladbrokes Coral and the integration is proceeding
to plan. Our results materially exceeded initial
expectations, despite substantial regulatory change
in many of our markets, and we continued to grow
our market share in our core online territories. This is
testament to the clear strategy and operational
excellence of our Executive Directors and senior
management team.
Key 2019 performance highlights include:
¡ Group Net Gaming Revenue up 2% to £3,655m¹;
¡ Underlying EBITDA¹,² down 10% at £678m but 14%
ahead after adjusting for the Triennial Review and
incremental Online taxes;
¡ Adjusted diluted EPS² of 62.3p (2018: 76.3p);
¡ Dividends increased by 10% to 35.2p per share
in respect of 2019, in line with our double-digit
dividend growth policy;
¡ Total shareholder return in 2019 of 39%;
¡ Roar Digital (our US joint venture with MGM
Resorts) made good progress, and was live in six
states at the end of 2019;
¡ A large number of new responsible gambling and
other ESG initiatives launched (see the separate
Corporate Social Responsibility section).
1. 2018 comparative is proforma as if Ladbrokes Coral had been owned
for the whole of 2018.
2. Pre IFRS 16. See the CFO review.
88
GVC Holdings PLC | Annual Report 2019 As the Chair of the Remuneration Committee, I am pleased to
present the Directors’ Remuneration Report for the year ended
31 December 2019.
This year we will be asking shareholders to vote on two remuneration
resolutions at our 2020 AGM:
¡ Our Remuneration Policy (Policy), which outlines the remuneration
framework which will apply to our Executive Directors, Non-
executive Directors and the Chairman of the Board following
approval; and
¡ Our Annual Report on Remuneration, which summarises
remuneration outcomes for 2019 and explains how we intend to
apply the Remuneration Policy in 2020.
As an Isle of Man incorporated company, GVC is not subject to the
remuneration reporting regulations which apply to UK-incorporated
companies. Nevertheless, the Committee recognises the importance
of effective corporate governance and is firmly committed to UK best
practice. We will therefore continue to operate in line with the UK
remuneration reporting regulations and, accordingly, will be submitting
the resolutions above for separate advisory shareholder votes.
New Remuneration Policy
During 2019, the Committee performed a detailed review of our Policy
ahead of its renewal in 2020. As part of this we consulted extensively
with shareholders and their representative bodies to listen to and
reflect on their views on remuneration at GVC. I would like to thank
shareholders for their constructive input during this process, which
was fed back to and discussed by the Committee and Board and
which was helpful in shaping the review of our Policy.
The consultation also took place in the context of the disappointing
vote that we received on our 2018 Directors’ Remuneration Report
(“DRR”) at the 2019 AGM. What we heard supported our initial view
that the vote primarily reflected concern around the outcome of legacy
arrangements (established before our current Policy was put in place),
together with the decision taken to address the competitiveness of our
CEO’s salary, albeit that this was revised prior to the AGM.
I am pleased to report that the majority of views we heard during
the consultation process were supportive of our existing Policy.
This was reinforced by the outcome of our own internal review, which
highlighted that the Policy continues to be appropriate for supporting
and driving progress towards GVC’s strategic goals, and that there was
no pressing rationale for change.
As a result, the Committee determined that only minor changes are
required to the Policy for 2020. The framework of our Annual Bonus
and Long-Term Incentive Plan (“LTIP”) is simple, easily understood and
transparent for participants and shareholders, and aligned with key
corporate goals and ultimately the experience of our shareholders.
We are already well-positioned against many of the provisions of
the revised UK Corporate Governance Code (Code). The changes
we are making to the Policy are primarily to ensure that we remain
fully aligned with developing best practice. In particular we are
proposing to:
¡ Introduce post-employment shareholding requirements, such that
Executive Directors must hold their full guideline (or actual holding if
lower) for two years from the date of departure. This is fully aligned
with the Investment Association guidance in this area.
¡ Reduce the amount of Annual Bonus payable for target
performance from 60% of maximum to 50% of maximum.
¡ Extend our malus and clawback provisions to ensure that the trigger
events align with the Code guidance.
These changes will complement the governance provisions of the
current Policy such as:
¡ no separate Executive Director pensions;
¡ above market shareholding guidelines;
¡ unfettered discretion to adjust formulaic outcomes; and
¡ bonus deferral and holding periods
to ensure that we remain aligned with the expectations of
our shareholders.
Remuneration outcomes for 2019
Our key financial performance indicator, underlying EBITDA was
£678m which was well ahead of consensus of £630m at the start
of the year. This achievement was helped by excellent execution
of triennial mitigation plans in UK Retail which resulted in better
results than originally anticipated (in 2018 we had forecast the
implementation of £2 FOBT stakes would cut our Retail EBITDA by
£135m). The overall result exceeded the stretch target under the
Annual Bonus of £663m. Our Net Debt performance was also strong;
adjusted Net Debt (pre IFRS 16) ended the year at £1,823m, below the
2018 figure of £1,897m despite Ladbrokes Coral integration costs and
Greek tax payments. Even after excluding favourable foreign exchange
and disposal proceeds, the result exceeded the stretch target of
£1,997m.
As a result of this excellent performance, the annual bonus paid out
at 100% of maximum. The Committee assessed whether this outcome
could be justified based on the overall performance of GVC – including
share price performance, progress against our responsible gambling
and ESG strategy, and the quality of underlying earnings – and was
satisfied that this was the case. Further details are provided on pages
105 to 106.
Our performance over the 2017–19 LTIP period was also very strong.
Organic growth was augmented by M&A, increasing the scale and
breadth of our activities and materially increasing the proportion of
our business derived from fully regulated or taxed markets. To ensure
that performance against the EPS condition was being measured on
a like-for-like performance, we adjusted the targets to reflect material
acquisitions and disposals made during the period. This included
the addition of the expected accretive contribution from Ladbrokes
Coral (acquired in March 2018), and the removal of the contribution
from our former Turkish business (disposed in December 2017).
The Committee was comfortable that both of these adjustments were
fair and appropriate. The exceptional performance of the underlying
GVC business, coupled with the outperformance of Ladbrokes Coral,
meant that cumulative EPS exceeded the adjusted stretch target.
For additional comfort, the Committee considered performance
on two other bases against the original targets: reported EPS
and standalone GVC performance. In both cases, performance
significantly exceeded the relevant target range, which gave
reassurance that full vesting under this measure was appropriate and
fairly reflected GVC’s overall performance. Coupled with the relative
TSR element (50% of the total) vesting at 82.3% of maximum, there
was an overall vesting outcome of 91.1% of maximum for the 2017
LTIP award. Further details are provided on pages 106 to 107.
Use of discretion
When considering the allocation of the 2019 LTIP grant to the CEO,
Kenneth Alexander, in March 2019 the Committee took into account
the shareholder experience of preceding months including the impact
on the share price of a sale of shares by the CEO and Chairman.
The Committee applied downward discretion to reduce the CEO’s
LTIP award by 27% compared to what he would have received had the
normal share price at grant been applied.
89
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Remuneration continued
DIRECTORS’ REMUNERATION REPORT
Continued
During 2018 the CEO’s salary had been increased from £750,000 to
£950,000 to reflect the substantial increase in the complexities and
responsibility of the role post the acquisition of Ladbrokes Coral.
In May 2019, in light of shareholder and proxy advisor feedback, and
after consulting with the Chairman of the Board and myself, the CEO
volunteered to reduce his annual salary to £800,000, with effect from
1 June 2019.
Board changes
As announced on 4 November 2019, Lee Feldman stepped down as
Chairman of the Board, after 11 years in the role, and left the Company
on 27 February 2020.
During his tenure, Lee played an instrumental role in GVC’s
transformation from an AIM listed business with a market
capitalisation of around £31m in 2008, to a Main Market, premium
listed company. Lee left the business with it continuing to perform
strongly and has provided a seamless transition of the Chairmanship
to his successor, Barry Gibson. He has also agreed to continue to
serve on the Roar Digital, LLC board of directors, as one of GVC’s
representatives until 31 December 2020, retaining his knowledge in
this critical market, and to waive any fee for these services. In addition,
Lee has agreed to waive the contractual right which he had to a
12-month notice period under the terms of his appointment letter and
any associated payments. As such there will be no further fees paid to
Lee following his departure on 27 February 2020.
In December 2017, Lee received a one-off fee as part of a move to
bring his remuneration arrangements into line with best practice.
The fee was deferred into GVC shares, half of which are due to vest in
December 2020, with a value at 31 December 2019 of around £231k.
The intention was that Lee would remain as Chairman throughout this
period, but subsequently the revised Code brought in new provisions
around the length of tenure for board chairmen, with the result that Lee
is standing down earlier than originally envisaged. Taking into account
these circumstances, coupled with the continued strong performance,
Lee agreeing to waive his notice period, and his service on the Roar
Digital board for no compensation, the Committee will allow Lee to
retain these shares as a good leaver, with them vesting and being
released to him on 31 December 2020.
Incentives
As discussed above, our incentive structure remains fit for purpose, so
we are not making any significant changes to the overall framework.
We are making a small change to the way in which we implement the
Policy, namely in the performance measures used under the LTIP.
Annual Bonus
During our review, we considered the possible inclusion of a
performance measure to reflect our responsible gambling agenda and
discussed this during our shareholder consultations. This is a core
part of our strategy for sustainable growth, and the Committee and
the Board fully supports the strong emphasis placed on this activity
throughout GVC. However, we are conscious that incentive metrics
should be robust, measurable and clearly articulated for management
and shareholders. After careful consideration, the Committee
determined that it was not the appropriate time to include a specific
responsible gambling metric in the annual bonus. This decision will
be kept under review for future years. However, the Committee will
take into account actions by management in support of this agenda,
as well as any significant negative events, when determining the
appropriateness of formulaic bonus outcomes. We will also keep
under review the potential to incorporate responsible gambling as a
more formal metric.
The annual bonus targets will be published in next year’s DRR, but I
can confirm that the EBITDA element represents a material increase
over the 2019 target levels.
Long-Term Incentive Plan
Our review indicated that the current measures were working
well – EPS and relative TSR remain key metrics for understanding
GVC’s performance. However, there was clear appetite to increase
the emphasis on how we are performing relative to our peers, while not
losing sight of our overall performance against the wider stockmarket.
As a result, for the 2020 LTIP awards we are increasing the weighting
of relative TSR from one-half to two-thirds, with measurement
split equally between a broad group of FTSE companies (this year
the FTSE 51 – 150) and a new bespoke group of sectoral peers.
The remaining one-third will be based on cumulative EPS, as before.
As set out on page 112, the Company appointed Barry Gibson to
succeed Lee. He joined the Board in November 2019 on an annual
fee of £450,000.
Our demanding 2020 LTIP targets are published on pages 111 to 112.
To achieve the stretch cumulative EPS element, management will need
to deliver a three-year CAGR in EPS (pre IFRS 16) of 23%.
Conclusion
GVC continued to perform strongly during 2019, delivering robust
underlying growth and outperforming its peers. We continued to
pursue our strategy of building further scale, increasing international
diversification and leveraging our proven proprietary technology,
established brands and high quality people. As a Committee we
have sought to make decisions which effectively drive and support
this growth, while aligning with UK best practice remuneration and
governance standards.
I hope that you find the report clear and informative, and that the
Committee has your support for our Remuneration Policy and Annual
Report on Remuneration at the forthcoming AGM.
Jane Anscombe
Chair of the Remuneration Committee
5 March 2020
Looking ahead to 2020
Directors’ Salaries
The Committee has agreed that the CEO’s salary for 2020 will be
£816,000, a 2% increase. This is in line with the salary increase budget
across our wider UK population.
Rob Wood was appointed to the CFO role on a salary of £400,000 in
March 2019. This was significantly below the salary received by his
predecessor (£656,000 of which £535,000 was eligible for incentive
opportunity) and was also towards the lower end of typical market
practice for companies of equivalent size to GVC. The Committee
considered that this positioning was appropriate at the time, reflecting
that it was Rob’s first listed company role.
Since appointment, Rob has performed very strongly, has built an
excellent reputation with our shareholders and has delivered a major
debt refinancing. Reflecting on this, and taking into account relevant
market practice, both within the wider market and among our peers,
the Committee considered that it was appropriate to increase Rob’s
salary to £430,000 for 2020, to reflect his current performance and the
skills that he brings to the role. The Committee may consider future
above average increases for Rob over the next two to three years so
that an appropriate market positioning can be achieved, dependent on
Rob continuing to perform strongly in the role.
90
GVC Holdings PLC | Annual Report 2019 EXECUTIVE REMUNERATION AT GVC
The remuneration framework for Executive Directors at GVC is intended to incentivise them to execute on the Company’s strategy and
create long-term sustainable value for shareholders. It is simple, focused and aligned with key financial and strategic business goals.
YEAR 1
YEAR 2
YEAR 3
YEAR 4
YEAR 5
Fixed
Pay
Base salary
Benefits
Pension
TOTAL
PAY
Annual
Bonus
One-year performance period
Key financial metrics
Clawback provisions apply
Three-year deferral period
No further performance conditions
Malus provisions apply
LTIP
Three-year performance period
Key financial and total shareholder return metrics
Malus provisions apply
Two-year holding period
No further performance conditions
Clawback provisions apply
2019 – Executive Directors’ remuneration
£000s
Kenneth Alexander (CEO)
Rob Wood (CFO)
Paul Bowtell (ex-CFO)
Base Salary
863
329
117
Benefits
118
12
13
Pension
–
12
–
Annual Bonus
2,000
658
–
LTIP
1,862
–
–
Total
4,843
1,011
130
2019 – Incentive outcomes
Annual Bonus
2017–19 ltip
Threshold
£600m
On-target
£632m
Stretch
£663m
EBITDA
(70%)
Net debt
(30%)
Threshold
£2,047m
100% of max.
Cumulative EPS
(50%)
Outcome
£678m
Stretch
£1,997m
100% of max.
Relative TSR
(50%)
Outcome
£1,823m
Overall outcome
100% of max.
Threshold
145.6p
Threshold
Median
Stretch
173.0p
Stretch
UQ
100% of max.
Outcome
182.2p
Outcome
TSR: 56.2%
82.3% of max.
Overall outcome
91.1% of max.
2020 – Executive Directors’ remuneration
Fixed Pay
Kenny Alexander (CEO) Salary – £816,000
Rob Wood (CFO)
Performance
measures
Framework
Material changes
from 2019
Benefits
Pension – none
Salary – £430,000
Benefits
Pension – 4.5% of salary
n/a
n/a
7.5% salary increase for the CFO,
reflecting strong performance
in new role
CEO increase in line with workforce
Annual Bonus
Max. opportunity – 250% of salary
Target opportunity – 125% of salary
Max. opportunity – 200% of salary
Target opportunity – 100% of salary
Long-Term Incentive Plan
Max. opportunity – 300% of salary
Max. opportunity – 250% of salary
70% EBITDA
30% Net Debt
Half deferred into shares for three
years. Malus and clawback provisions
Full Committee discretion available
On-target opportunity reduced from
60% of maximum to 50%
1/3rd cumulative EPS
1/3rd relative TSR against FTSE 51 – 150
1/3rd relative TSR against peer group
Two-year holding period
Malus and clawback provisions
Full Committee discretion available
Increased emphasis on relative TSR
from half to two-thirds
Introduced peer group to complement
broader FTSE index
91
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS
Remuneration continued
DIRECTORS’ REMUNERATION REPORT
Continued
REMUNERATION IN CONTEXT
Committed to good governance
When determining executive remuneration policy, the Committee takes into account a wide range of factors including legal and regulatory
requirements, associated guidance, and the views of shareholders and their representative bodies. Below is how the Committee addresses
the following principles as set out in the 2018 UK Corporate Governance Code.
Clarity
¡ Our remuneration framework is structured to support the financial and strategic objectives of the Company,
aligning the interests of our Executive Directors with those of shareholders.
¡ We are committed to transparent communication with all our stakeholders, including shareholders – page 55
sets out more details of how we engage with shareholders.
Simplicity
Risk
¡ We operate a simple, but effective remuneration framework.
¡ The annual bonus and LTIP reward performance against key measures of success for the business.
¡ There is clear line of sight for management and shareholders.
¡ Our incentives are structured to align with the Company’s risk management framework.
¡ Three-year deferral under the annual bonus and the two-year holding period on LTIP awards create long-term
alignment, as do our within- and post-employment shareholding guidelines.
¡ Both incentives also incorporate robust performance targets, malus and clawback provisions, and overarching
Committee discretion to adjust formulaic outcomes.
Predictability
¡ The Remuneration Policy clearly sets out the possible future value of remuneration which Executive Directors
could receive, including the impact of share price appreciation of 50%.
Proportionality
¡ There is clear alignment between the performance of the Company and the rewards available to
Executive Directors.
¡ Incentive elements are closely aligned to our strategic goals, transparent and robustly assessed, with the
Committee having full discretion to adjust outcomes to ensure they align with overall GVC performance.
Alignment to
culture
¡ We are committed to effective stakeholder and colleague engagement, part of which is ensuring that the
Committee sees all relevant data relating to pay and conditions in the wider workforce.
¡ Operating responsibly towards our customers is fundamental to the way in which GVC operates
and remuneration outcomes are reviewed in the light of actions taken in support of our responsible
gambling agenda.
Leading on Code implementation
Prior to implementation of the new UK Corporate Governance Code, we were already reasonably well positioned against many of the
provisions. Since implementation, we have taken the opportunity for our new Policy to ensure that we are fully aligned with its provisions,
as set out below:
¡ Pensions – We do not operate separate pension arrangements for our Executive Directors; they are entitled to participate in the
all-employee scheme with the same contribution levels as other UK employees.
¡ Annual Bonus – We require half of any bonus to be deferred for three years. While not a Code provision, for 2020 onwards we have
also reduced the on-target bonus opportunity from 60% of maximum to 50%.
¡ Holding period – There is a two-year post-vesting holding period on all LTIP awards for Executive Directors.
¡ Shareholding guidelines – We operate within- and post-employment shareholding guidelines, both of which are in the upper half of
market practice; under the former the CEO is required to hold 400% of base salary (CFO 200%), while the latter are fully aligned with
Investment Association guidance, with individuals required to hold their guideline in full for two years.
¡ Malus and clawback – We have added ‘corporate failure’ to the list of potential malus and clawback trigger events, maintaining full
alignment with the Code guidance.
¡ Discretion – The Committee has unfettered discretion available under the annual bonus and LTIP to adjust formulaic pay outcomes
to ensure that they align with GVC’s overall performance.
92
GVC Holdings PLC | Annual Report 2019 Understanding our employee context
Our employees are vital to our business. At GVC, we believe in fairness throughout the Company. The Group operates a number of general
principles applied to all levels:
¡ We will provide a competitive package compared to the relevant market for each colleague;
¡ We will ensure colleagues can share in the success of the business, where appropriate, through performance-based variable
remuneration; and
¡ We aim for transparency and a fair cascade of remuneration throughout the Group.
Consideration of Colleague and Stakeholder Views
The Committee supports fairness and transparency of remuneration
arrangements and the Policy has been designed to align with the
remuneration philosophy and principles that underpin remuneration
across the wider Group. To support this, the Committee receives
regular updates on remuneration practices across the Group.
For example, the Committee has received and discussed regular
and substantial updates on the harmonisation of remuneration
arrangements across GVC and Ladbrokes Coral since the acquisition.
When setting Executive Directors’ remuneration, the Committee
considers the remuneration of other senior managers and colleagues
in the Group more generally to ensure that arrangements for Executive
Directors are appropriate in this context. When determining salary
increases for Executive Directors, the Committee considers the
outcome of the wider pay review for the Group. In addition, pension
arrangements for the Executive Directors are aligned with those for
our wider workforce.
While the Committee has not expressly sought the views of
employees, through the Board the Committee is kept updated as to
employee views on remuneration more generally. Our first global
employee survey was carried out in October 2019, and the results of
this, including those on pay and benefits, were presented to the Board.
We also have a number of employee forums within GVC. These play
an important role in providing employees with a voice and allow them
to provide the business with valuable insight and feedback on a range
of topics, including remuneration. Looking forward, Virginia McDowell,
who has been appointed as our Workforce Designated Director, will
provide the Remuneration Committee with updates on employee
views on remuneration.
CEO Pay Ratio (Audited)
In common with many companies we are publishing our CEO pay ratio
for the first time this year. The first table below sets out the ratio at
median, 25th and 75th percentile of the total remuneration received
by the CEO compared to the total remuneration received by our UK
employees, while the second provides further information on the total
pay figure used for each quartile employee, and the salary component
within this. Our CEO’s 2019 pay was 229 times the median (50th
percentile). This is reflective of our large retail workforce in the UK and
we believe is not out of line with other retail organisations.
2019 CEO pay ratio
Method
Option A
25th
percentile
278
50th
percentile
229
75th
percentile
170
UK employees – pay element
– Salary
– Total remuneration
25th
percentile
£14,956
£17,409
50th
percentile
£15,984
£21,120
75th
percentile
£26,095
£28,524
We would highlight the following in terms of the approach taken:
¡ ‘Option A’ was chosen as it is considered to be the most accurate
way of identifying employees at P25, P50 and P75, and is aligned
with investor expectations. Under this approach we calculate total
remuneration for all of our UK employees and rank them accordingly
on this basis.
¡ The lower quartile, median and upper quartile employees
were calculated based on full-time equivalent data as at
31 December 2019.
¡ In reviewing the employee pay data, the Committee is comfortable
that the P25, P50 and P75 individuals identified appropriately reflect
the employee pay profile at those quartiles, and that the overall
picture presented by the ratios is consistent with our pay, reward
and progression policies for UK employees.
The Committee notes that GVC has in place a number of initiatives to
ensure that the pay and conditions for our wider employee population
are fair and reasonable and receives regular updates on reward
practices throughout the Group.
We aim to provide a market competitive remuneration package in
each of the countries in which we operate. This includes benefits
appropriate to the local market and the ability for many colleagues
to share in the success of GVC via annual incentive programmes.
Structures are in place to support salary progression and regular
market analysis, by geography and role function is carried out, with
action taken as appropriate. Salaries are reviewed each year and
for 2020 colleagues typically received a fixed percentage increase
which was determined by market factors in the country in which they
work. In addition, budget was available to allow salary adjustments
to recognise significant contribution or provide alignment to market
pay rates. We also recognise the importance of wellbeing for all our
employees and in 2019 launched our Well Me programme. This initially
concentrated on supporting mental health and we will build on this in
2020 with an increased focus on physical wellness.
93
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Remuneration continued
DIRECTORS’ REMUNERATION REPORT
Continued
Percentage Change in Remuneration of the CEO
and All Employee
The following table sets out the percentage change in remuneration
between 2018 and 2019 for the CEO and for UK-based GVC colleagues,
which we believe represents the most appropriate comparator group
for reward purposes.
Remuneration element
Salary
Taxable benefits²
Annual bonus
CEO
% change1
0.5%
19.2%
12.5%
All employee
% change³
4.2%
–3.6%
7.2%
1. The percentage changes for the CEO have been determined as the percentage change
of each element as set out in the single figure table .
2. Information regarding the taxable benefits for the CEO are shown on page 105. The reduction
in benefits for other employees is due to a reduction in the cost of our insured benefits.
3. Consistent with the 2018 Annual Report, the percentage changes for all employees have
been determined based on the remuneration of colleagues employed by the Group’s UK
entities before the acquisition of Ladbrokes Coral plc.
Relative Importance of the 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)¹
Distributions to shareholders (£m)
2019
655.6
195.5
2018
499.7
138.8
% change
31.2%
40.9%
1. The increase in staff costs reflects the inclusion of Ladbrokes Coral employees for 2019
compared to nine months in 2018.
Gender Pay Gap Reporting
2019 is the second year in which we have published our Gender
Pay Gap results. Our median hourly pay difference between male
and female colleagues in the UK is 4.0%. This compares favourably
with the UK median pay gap of 17.3% across all sectors (source:
Office for National Statistics, October 2019). Our median bonus
pay gap is 36.4%.
From further analyses it is clear that these gaps largely remain a
function of lower numbers of women at our senior levels. We are
committed to making GVC an inclusive place to work and we are
continuing to invest in initiatives to create greater diversity at senior
levels. Further information on these initiatives is provided in the
Corporate Social Responsibility section. Our Gender Pay Gap report for
the year ended 5 April 2019, together with contextual information and
more detail on the initiatives we have underway to close our gender
pay gap, can be viewed on our corporate website.
“ We are committed to making
GVC an inclusive place to work
and we are continuing to invest
in initiatives to create greater
diversity at senior levels.”
Kenneth Alexander
Chief Executive Officer
94
GVC Holdings PLC | Annual Report 2019 DIRECTORS’ REMUNERATION POLICY
The following section sets out our Directors’ Remuneration Policy. This Policy will be submitted as an advisory vote to shareholders at the 2020
AGM and will apply to payments made on or after 30 April 2020.
As an Isle of Man incorporated company, GVC is not subject to the UK remuneration reporting regulations which apply to UK-incorporated
companies. Nevertheless, the Committee recognises the importance of effective corporate governance and is firmly committed to UK best
practice. The Remuneration Policy has therefore been prepared in accordance with the provisions of the UK’s Companies Act 2006 (the Act) and
Schedule 8 of the Large and Medium Sized Companies Groups (Accounts and Reports) (Amendment) Regulations 2013 (the Regulations), the
Listing Rules of the UK Financial Conduct Authority and the UK Corporate Governance Code (the Code).
Changes from previous policy
The significant changes from the previous policy are summarised below:
¡ Reduction in the level of Annual Bonus payable at target performance from 60% of maximum to 50% of maximum;
¡ Introduction of a post-employment shareholding requirement of 100% of the Executive Director’s minimum shareholding requirement for two
years after employment ends. Further details are set out in the Policy table;
¡ Provision of unfettered discretion to the Committee to adjust mechanical incentive plan outcomes, where the outcome is not
considered appropriate;
¡ Extension of the malus and clawback provisions in line with the Code.
In designing the new Policy, the Committee followed a robust process which included discussions on the content of the Policy at two
Remuneration Committee meetings. The Committee considered input from management and our independent advisors and sought the views of
the Company’s major shareholders.
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.
Directors’ Remuneration Policy
Element and strategic link
Operation
Maximum
There is no maximum level of
salary increase. Nevertheless,
salary increases for Executive
Directors will ordinarily be in line
with the typical level of increase
across the wider workforce.
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.
Salary
To provide competitive
fixed remuneration that
will attract and retain
appropriate talent.
Reflects an individual’s
responsibilities,
experience and role.
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:
¡ remuneration practices
within the group including
salary budgets;
¡ the general performance of
the Group;
¡ salaries paid by companies of
a similar size and complexity
and those operating in
similar markets;
¡ any change in scope, role
and responsibilities;
¡ the experience of the relevant
director; and
¡ the economic environment.
Individuals who are recruited
or promoted to the Board may,
on occasion, have their salaries
set lower than might otherwise
be the case until they become
established in their role. In such
cases subsequent increases in
salary may be higher than the
average increase for employees
more generally to recognise the
individual’s progress in the role.
95
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS
Remuneration continued
DIRECTORS’ REMUNERATION REPORT
Continued
Element and strategic link
Operation
Maximum
The maximum is the cost of
providing the relevant benefits set
out adjacent.
Performance targets
and recovery provisions
No performance or recovery
provisions apply.
Maximum company contribution is
currently 4.5% of salary. This may
be reviewed if required to meet any
changes in statutory requirements
or contribution rates for other
employees.
No performance or recovery
provisions apply.
Benefits
To provide competitive
benefits and to attract
and retain high calibre
employees.
Pension
To provide an
opportunity for
retirement planning.
The Executive Directors receive
benefits including, but not limited
to, private health insurance, life
insurance and car or travel 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 such as
relocation allowances on
recruitment may therefore
be offered.
The Company does not currently
have a separate pension
arrangement for Executive
Directors. It does however provide
the opportunity for all employees,
including the Executive Directors,
to participate in a Company-
provided pension in line with
statutory requirements.
96
GVC Holdings PLC | Annual Report 2019 Element and strategic link
Operation
Maximum
Awards made annually based on
the achievement of a combination
of financial and non-financial
performance measures.
50% of the bonus will be paid
immediately following the end of
the financial year.
50% of the bonus will be deferred
into shares which will vest at
the end of three years subject to
continued employment.
Dividend equivalents are payable
on deferred shares.
Annual and Deferred
Bonus Plan
(the “ABP”)
To incentivise the
achievement of key
financial and non-
financial performance
targets in line with
corporate strategy over
a one-year period.
Maximum annual incentive
opportunity of 250% of salary for
the CEO and 200% of salary for
other Executive Directors.
Threshold performance is equal to
25% of maximum opportunity.
Target performance is equal to
50% of the maximum opportunity.
Performance targets
and recovery provisions
Performance measures and targets
will be set by the Committee annually
based on a range of financial and non-
financial measures.
The specific measures, targets and
weightings may vary from year-to-year
in order to align with the Company’s
strategy over each year. However, at
least 50% of the bonus will be linked
to financial measures.
Operational and strategic objectives,
where measurement is qualitative, will
be limited to a maximum weighting
of 30%.
The Committee is of the opinion that
given the commercial sensitivity
arising in relation to the detailed
financial targets used for the bonus,
disclosing precise targets for the
ABP in advance would not be in
shareholder interests. Except in
circumstances where elements
remain commercially sensitive,
targets, performance achieved, and
awards made will be published at
the end of the performance period
so shareholders can fully assess
the basis for any pay-outs under
the ABP. The Committee retains full
discretion to:
¡ change the performance measures
and targets and the weighting
attached to these part-way through
a performance year if there is a
significant and material event
which causes the Committee to
believe the original measures,
weightings and targets are no
longer appropriate;
¡ make downward or upward
adjustments to the amount of
bonus earned resulting from the
application of the performance
measures, if the Committee
believes that the bonus outcomes
are not appropriate.
The use of and rationale for
any application of discretion
by the Committee will be fully
disclosed in the following year’s
Remuneration Report.
Malus and clawback provisions apply.
See further details on page 100.
97
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Remuneration continued
DIRECTORS’ REMUNERATION REPORT
Continued
Element and strategic link
Operation
Maximum
Maximum opportunity of 300% of
base salary for the CEO and 250%
of base salary for other Executive
Directors.
Threshold performance results
in 25% of the award vesting.
Below threshold performance
results in zero vesting.
Long-Term Incentive
Plan (the “LTIP”)
To incentivise the
execution of the long-
term business plan and
the delivery of long-
term sustainable value
for shareholders.
Annual awards of performance
shares in the form of conditional
awards or nil-cost options.
Awards vest three years from
the date of grant subject to the
achievement of performance
measures.
A two-year holding period will
apply following the three-year
vesting period for awards granted
to the Executive Directors.
Upon vesting, sufficient shares
can be sold to pay tax.
Participants may be entitled to
dividends or dividend equivalents
representing the dividends paid
during the performance period on
vested awards.
Performance targets
and recovery provisions
Awards vest based on performance
against stretching targets, measured
over a three-year performance period.
The Committee will review and
set weightings and targets before
each grant to ensure they remain
appropriate. The Committee may
change the balance of the measures,
or use different measures for
subsequent awards, as appropriate.
No material change will be made
to the type of performance
conditions without prior shareholder
consultation.
In exceptional circumstances the
Committee retains the discretion to:
¡ change the performance measures
and targets and the weighting
attached to these part-way through
a performance period if there is
a significant and material event
which causes the Committee to
believe the original measures,
weightings and targets are no
longer appropriate;
¡ make downward or upward
adjustments to the amount of LTIP
award vesting resulting from the
application of the performance
measures, if the Committee believe
that the vesting outcomes are
not appropriate.
The use and rationale for any
application of discretion by the
Committee will be fully disclosed in
the following year’s Remuneration
Report.
Malus and clawback provisions apply.
See more details on page 100.
98
GVC Holdings PLC | Annual Report 2019 Element and strategic link
Operation
Maximum
Performance targets
and recovery provisions
Not applicable
The shareholding guideline is equal
to 400% of salary for the CEO and
200% of salary for other Executive
Directors.
Shareholding
Guidelines
(within employment)
To ensure that
Executive Directors’
interests are aligned
with those of
shareholders over a
longer time horizon.
Shareholding
Guidelines
(post-employment)
To ensure long-term
alignment between
the interests of the
Executive Directors and
those of shareholders
through the operation
of post-employment
shareholding
guidelines.
Formal shareholding
requirements that encourage the
Executive Directors to build up
over a five-year period, and then
subsequently hold, a shareholding
equivalent to a percentage of
base salary.
Adherence to these guidelines
is a condition of continued
participation in the equity
incentive arrangements.
Executive Directors will be
required to retain 50% of the
post-tax number of vested shares
from the Company incentive plans
until the minimum shareholding
requirement is met and
maintained.
The Committee retains discretion
to increase the minimum
shareholding requirement.
Executive Directors are
normally required to maintain
a shareholding for a period
following cessation of service
as a Director.
At the current time, the
Committee expects Executive
Directors to maintain 100% of
their guideline (or their actual
holding if lower) for two years
following departure.
If the Executive Director has
not yet achieved the within
employment shareholding
guideline at cessation, the
post-employment guideline
will be set at their actual level
of shareholding at the point
of cessation.
Shares purchased by the
Executive Directors out of their
own funds will not count towards
these guidelines.
Not applicable
Not applicable
99
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Remuneration continued
DIRECTORS’ REMUNERATION REPORT
Continued
Performance targets
and recovery provisions
Not applicable
Element and strategic link
Operation
Maximum
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 increases
for employees.
Chairman and
Non-executive
Director fees
To ensure we are
able to attract high
calibre individuals
and compensate
appropriately for
their experience and
knowledge.
Non-executive Directors are paid
an annual fee and additional fees
for chairmanship of committees.
They may also be paid an
additional fee for membership
of committees although the
Chairman would not receive any
additional fees for membership
of committees.
Fees are reviewed annually based
on equivalent roles in companies
of a similar size and complexity
and those operating in similar
markets.
The Company may provide the
Chairman and Non-executive
Directors with tax advice and
will pay reasonable expenses
incurred by them in carrying out
their duties. The Company may
settle any tax due in relation
to these items.
Non-executive Directors do
not participate in any variable
remuneration or benefits
arrangements.
Discretion within the Directors’ Remuneration Policy
The Committee has discretion in several areas of Policy as set out in this report. In particular the Committee has unfettered discretion under the
terms of our incentive plans to adjusts upward or downward the mechanical outcome, where it considers that:
¡ the outcome does not reflect the underlying financial or non-financial performance of the participant or the Group over the relevant period;
¡ the outcome is not appropriate in the context of circumstances that were unexpected or unforeseen at the award date; and/or
¡ there exists any other reason why an adjustment is appropriate.
In all cases disclosure would be provided at the relevant time as to the Committee’s rationale if this discretion was used.
The Committee may also exercise operational and administrative discretions under relevant plan rules as set out in those rules. In addition, for
regulatory, exchange control, tax or administrative purposes, or to take account of a change in legislation, the Committee has the discretion to
make minor amendments to the Policy without obtaining shareholder approval.
Malus and Clawback
Malus and clawback provisions apply to awards under the ABP and the LTIP. Trigger events will be:
¡ discovery of a material misstatement resulting in an adjustment in the audited consolidated accounts of the Company or the audited accounts
of any Group Member; and/or
¡ assessment of any performance condition or target in respect of a payment was based on error, or inaccurate or misleading information; and/
or the discovery that any information used to determine the payment was based on error, or inaccurate or misleading information; and/or
¡ action or conduct of a participant which, in the reasonable opinion of the Committee, amounts to fraud or gross misconduct; and/or
¡ events or behaviour of a participant have led to the censure of a Group Member by a regulatory authority or have had a significant detrimental
impact on the reputation of any Group Member provided that the Committee is satisfied that the relevant participant was responsible for the
censure or reputational damage and that the censure or reputational damage is attributable to him; and/or
¡ a material corporate failure in any Group Member.
Malus will operate throughout the vesting periods. Clawback will apply for two years following the vesting of nil cost options or
conditional awards.
The Committee believes that it has the necessary powers under the rules of the LTIP and ABP to enforce these provisions.
100
GVC Holdings PLC | Annual Report 2019 Application of Policy
As an Isle of Man incorporated company, GVC does not have the benefit of the statutory protections afforded by the UK Companies Act 2006 in
relation to the remuneration reporting regime. Accordingly, if there any inconsistency between the Policy (as approved by shareholders) and any
contractual entitlement or other right as a Director, the Company may be obliged to honour that existing entitlement or right.
Comparison with Other Employees
All employees receive base salary, benefits and the opportunity to contribute into a Group-provided pension where applicable. For employees
below Board level, GVC operates discretionary bonus arrangements with opportunity levels linked to seniority and role. Performance measures
under these arrangements are generally aligned with those for the Executive Directors, although there tends to be an increasing emphasis on
business unit performance at more junior levels. The LTIP is extended to a small group of senior executives with performance measures and
targets set in line with the Policy table above. To assist in the retention of senior talent, awards of Restricted Shares are made to a further select
group of senior employees. To facilitate wider share ownership among our employees, we are considering the feasibility of introducing an all
employee share plan; the scope of this will be dependent on tax and legal considerations in the countries in which we operate. Any differences in
an individual’s reward package is reflective of an individual’s location, seniority and level of responsibility.
Further details of how the Committee considers remuneration arrangements for our Executive Directors in the context of pay and conditions
for our wider employees is provided on page 93.
REWARD SCENARIOS
The charts below show an estimate of the remuneration that could be received by Executive Directors under the Policy set out in
this report.
CEO
CFO
Remuneration (£’000)
7,000
6,000
5,000
4,000
3,000
2,000
1,000
3,178
39%
32%
29%
934
100%
6,646
18%
5,422
45%
37%
38%
31%
17%
14%
Minimum
Target
Maximum
Maximum
plus share
price growth
Fixed
Bonus
LTIP
Share price growth
1,422
38%
30%
32%
454
100%
2,389
45%
36%
19%
Minimum
Target
Maximum
2,927
18%
37%
29%
16%
Maximum
plus share
price growth
Assumptions used in determining the level of pay-out under given scenarios are as follows:
Element
Fixed Elements
Annual Bonus Plan
On-Target
Minimum
¡ Base salary for FY 2020
¡ Benefits and pension paid for FY 2019
Nil
LTIP
Nil
50% of maximum pay-out:
¡ CEO – 125% of salary
¡ CFO – 100% of salary
50% of maximum pay-out:
¡ CEO – 150% of salary
¡ CFO – 125% of salary
Maximum
100% of maximum pay-out:
¡ CEO – 250% of salary
¡ CFO – 200% of salary
100% of maximum vesting:
¡ CEO – 300% of salary
¡ CFO – 250% of salary
The maximum plus share price growth column shows the additional value that could pay-out if the LTIP vests at maximum and share price
increases by 50%.
101
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Remuneration continued
DIRECTORS’ REMUNERATION REPORT
Continued
Approach to Recruitment and Promotions
When setting the remuneration for a new Executive Director, the Committee will take into account the candidate’s existing remuneration and the
market rate for the role, and the need to pay no more than necessary to facilitate the recruitment. The remuneration package will generally be set
in line with the remuneration policy for existing Executive Directors. Full details are set out below.
Remuneration element
Salary, Benefits and Pension
Annual Bonus
Long-Term Incentives
Maximum Variable Remuneration
Buy-out Awards
Recruitment policy
These will be set in line with the policy for existing Executive Directors.
Where the new Executive Director is required to relocate, the Company may provide relocation support
in accordance with its normal relocation package for other senior employees. The level of the relocation
package will be assessed on a case by case basis but may include a housing allowance and school fees
and reflect cost of living differences.
The appointed Executive Director will be eligible to earn a discretionary annual award in accordance
with the rules and terms of the ABP.
The maximum opportunity will be 250% of base salary.
The appointed Executive Director will be eligible for performance-based equity awards in accordance
with the rules and terms of the LTIP.
The maximum opportunity will be 300% of base salary.
The maximum variable remuneration which may be granted is 550% of salary.
Where the Committee determines that the individual circumstances of recruitment justifies the provision
of a buy-out, 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:
¡ the proportion of the performance period completed on the date of the Executive Director’s cessation
of employment;
¡ the performance conditions attached to the vesting of these incentives and the likelihood of them
being satisfied; and
¡ any other terms and condition having a material effect on their value (lapsed value).
The Committee may then make a grant up to the value of the lapsed value, where possible, under the
Company’s incentive plans. To the extent that it is not possible or practical to provide the buy-out within
the terms of the Company’s existing incentive plans, a bespoke arrangement may be used.
Where an existing employee is promoted to the Board, the Policy set out above will apply from the date of promotion. Any existing remuneration
arrangements which fall outside of the Policy 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.
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.
The Chairman and Non-executive Directors do not have service contracts but are engaged under letters of appointment. Non-executive
Directors are appointed for an initial three-year term but are 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
R Wood
L Feldman
B Gibson
J Anscombe
P Bouchut
P Isola
V McDowell
S Morana
J Nygaard-Andersen
Date appointed
19 April 2010
5 March 2019
19 April 2010
4 November 2019
20 June 2017
13 September 2018
2 February 2016
6 June 2018
2 February 2016
11 December 2019
Arrangement
Service contract
Service contract
Letter of appointment
Letter of appointment
Letter of appointment
Letter of appointment
Letter of appointment
Letter of appointment
Letter of appointment
Letter of appointment
Notice period
12 months
12 months
12 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
Subject to Board approval, Executive Directors are able to accept appropriate outside 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.
Payment for loss of office
When determining any loss of office payment for a departing Director, the Committee will always seek to minimise the cost to the Company
while complying with the contractual terms and seeking to reflect the circumstances in place at the time. The Committee reserves the right to
102
GVC Holdings PLC | Annual Report 2019 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.
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. Service contracts do not contain liquidated damages clauses.
When determining the treatment of Company incentive plans upon cessation of employment, the Committee will give regard to the rationale
for the departure. An individual may be treated as a ‘good leaver’ for these purposes if they leave by way of the following circumstances
– (i) death, (ii) injury, ill-health or disability, (iii) redundancy, (iv) retirement, (v) the employing company ceasing to be a Group company,
(vi) transfer of employment to a company which is not a Group company, and/or (vii) any other circumstances as determined by the Board.
Other leavers are defined as cessation of employment in any other circumstances.
A summary of the treatment of the various elements of remuneration is set out in the table below. In all cases where there is discretion available
under the Policy, the Committee would consider exercising this ability only after taking into account the particular circumstances of the
departure and any other relevant business rationale. The Committee will explain any discretion used to shareholders in the following Directors’
Remuneration Report.
Treatment on change of control
Any bonus for the year will normally be pro-rated to the
date of the change of control and paid immediately prior
to the date of the change of control.
Performance conditions will be measured at the date
of the change of control.
Discretion
The Committee has discretion available to
determine whether to pro-rate the bonus for time –
the default position is that any bonus award will be
pro-rated for time.
Any unvested deferred shares will vest immediately
prior to a change of control.
Incentive plan
Salary, Benefits
and Pension
Annual Bonus Plan
Treatment on cessation of employment
¡ These will be paid over the notice period.
¡ The Company has discretion to make a lump sum
payment in lieu of notice and to apply mitigation if
considered appropriate.
¡ The Company also has discretion to place an individual
on garden leave for all or a portion of their notice period.
Good leavers
¡ May be entitled to receive an annual bonus for the year
of departure.
¡ Performance conditions will typically be assessed at the
end of the financial year, with the bonus being paid on the
normal payment date.
¡ Any bonus will normally be pro-rated for the period
worked during the financial year.
¡ The Committee would decide whether to make part
payment of the bonus in shares or pay it fully in cash.
Other leavers
¡ Typically, no bonus is payable for the year of cessation.
Discretion
The Committee has the following discretion available:
¡ to determine that an individual is a good leaver; and
¡ to determine whether to pro-rate the bonus for time –
the default position is that any bonus award will be
pro-rated for time.
Deferred Bonus Plan Good leavers
¡ All unvested deferred shares will be preserved, and
typically vest on the normal vesting date.
Other leavers
¡ All unvested deferred shares will be forfeited on
cessation of employment.
Discretion
The Committee has the following discretion available:
¡ to determine that an individual is a good leaver;
¡ to determine whether to pro-rate deferred shares for
good leavers – the Committee’s normal policy is that
it will not pro-rate;
¡ to vest deferred shares for good leavers at the end of the
original deferral period or at the date of cessation – the
default position is that they will vest them in line with the
original schedule.
103
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Remuneration continued
DIRECTORS’ REMUNERATION REPORT
Continued
Incentive plan
LTIP
Treatment on cessation of employment
Good leavers
Unvested awards will vest on the normal vesting date
subject to:
¡ the extent to which any applicable performance
conditions have been satisfied; and
Treatment on change of control
Any unvested awards will normally vest immediately
prior to a change of control subject to:
¡ the extent to which any applicable performance
conditions have been satisfied at the date of change
of control; and
¡ pro-rating to reflect the period of time elapsed between
grant and cessation of employment as a proportion
of the normal vesting period.
¡ pro-rating to reflect the period of time elapsed
between grant and change of control as a proportion
of the normal vesting period.
Discretion
The Committee has discretion available to determine
whether to pro-rate awards for time – the default
position is that they will be pro-rated for time.
The two-year holding period will normally continue to apply.
Other leavers
All unvested awards will be forfeited on cessation
of employment.
Discretion
The Committee has the following discretion available:
¡ to determine that an individual is a good leaver;
¡ to measure performance over the original performance
period or at the date of cessation – the default position is
that the assessment will be performed at the end of the
original performance period;
¡ to determine whether awards should vest on the
normal vesting date or the date of cessation – the
default position is that awards will vest on the original
vesting date;
¡ to determine whether to pro-rate for time – the default
position is that awards will be pro-rated from the date of
grant to the date of cessation; and
¡ to determine that no holding period will apply following
vesting – the default position is that the holding period
will continue to apply.
Consideration of shareholders’ views
The Committee has an open relationship with shareholders on remuneration matters. It welcomes dialogue and seeks to engage with significant
shareholders and representative bodies at the earliest opportunity on material changes to remuneration policy or structure. During development
of this Policy, the Committee Chair contacted our 40 largest shareholders over the course of 2019 to get their input and views on remuneration
at GVC. The feedback received was presented to, and discussed by, the Committee at subsequent sessions, and was taken into account to
inform the final Policy design.
104
GVC Holdings PLC | Annual Report 2019 ANNUAL REPORT
ON DIRECTORS’ REMUNERATION
The 2019 Annual Report on Remuneration contains details of the remuneration paid and awarded to Directors during the financial year
ended 31 December 2019. 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
30 April 2020.
Single figure of remuneration table (audited)
The remuneration of Executive 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 the component elements is
provided in subsequent sections.
Executive Directors
Kenneth Alexander
Rob Wood2
Paul Bowtell³
Base
Salary
£000
863
858
329
–
117
492
Benefits
£000
118
99
12
–
13
10
Annual
Bonus
£000
2,000
1,778
658
–
–
738
Long-Term
Incentive
£000
1,862
–
–
–
–
–
Pension
£000
–
–
12
–
–
–
Legacy
awards
£000
–
16,364
–
–
–
1,240
Total1
£000
4,843
19,100
1,011
–
130
1,240
2019
2018
2019
2018
2019
2018
1. No part of the 2019 total remuneration figures are attributable to an increase in share price growth.
2. Rob Wood was appointed as a Director on 5 March 2019.
3. Paul Bowtell stepped down as a Director on 5 March 2019. The amount disclosed for benefits includes an amount of £10,200 paid in lieu of untaken holiday.
Further information on the single figure of remuneration table
Salary
Salaries are normally reviewed on 1 January each year.
As set out in the Chair’s statement on page 90, Kenneth Alexander agreed to reduce his salary of £950,000 to £800,000 on 1 June 2019, after
discussions with the Chairman of GVC and the Committee and to reflect shareholder feedback ahead of the 2019 AGM.
Rob Wood joined the Board on 5 March 2019 on an annual salary of £400,000. Until he stepped down from the Board, Paul Bowtell’s annual
salary was £656,000 (GVC having matched his previous fixed entitlement at Ladbrokes Coral).
Benefits and pension
Taxable benefits for Executive Directors include private medical and life insurance. In addition, Kenneth Alexander received a housing allowance
of £30,000 and reimbursement of certain travel expenses incurred in undertaking his duties as a Director. The table above includes these
expenses and the related tax. Rob Wood received a car allowance of £10,700 and participated in the defined contribution pension arrangements
which are available on the same basis as other employees, receiving a company contribution of 4.5% of salary from the date he joined the plan.
Paul Bowtell received an annual car allowance of £12,500.
2019 Annual Bonus Plan
The continuing Executive Directors were eligible to participate in the Annual Bonus Plan for 2019. As agreed, as part of his leaving arrangements,
Paul Bowtell was not eligible to participate in the Annual Bonus Plan for 2019.
The annual bonus framework for 2019 was based on performance against two key financial measures for GVC, underlying EBITDA (weighted
70%) and net debt (weighted 30%) (both on a pre IFRS 16 basis). Net debt was introduced for this year in order to ensure an appropriate focus
on cash generation and group leverage. At the start of the year the Committee set stretching targets under these measures, taking into account
internal and external forecasts for business performance. The Committee was satisfied that the ranges set out in the table below represented
challenging but realistic targets, and that significant out-performance of internal and external reference points at the time they were set would be
required to achieve a maximum pay-out.
Measure
Underlying EBITDA¹ (£m)
Net Debt² (£m)
Bonus pay-out
Weighting
70%
30%
100%
Threshold
600.0
2,047.0
25%
Target
632.0
n/a
60%
Stretch
663.0
1,997.0
100%
Actual
678.3
1,988.13
–
Pay-out
(% maximum)
100%
100%
100%
1. Before separately disclosed items and IFRS 16.
2. Pre IFRS 16.
3. In reviewing net debt performance, the Committee were mindful that this included two significant items that it was not appropriate for management to benefit from. The reported outcome
of £1,823m was adjusted by £165.4m in respect of foreign exchange gains and Sportium disposal proceeds. This resulted in net debt for bonus purposes of £1,988.1m.
The Committee noted the strong pay-out when assessed on a purely formulaic basis. This reflected the excellent growth in our online operations
and the lower than expected impact on EBITDA of the Triennial Review.
105
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Remuneration continued
ANNUAL REPORT
ON DIRECTORS’ REMUNERATION Continued
In line with the provisions of the UK Corporate Governance Code, the Committee carefully considered whether the proposed outcome could
be justified in the context of GVC’s overall performance. In doing so, it considered:
¡ Business performance during 2019, including progress against financial, operational, and strategic targets;
¡ The quality of underlying earnings and whether any significant one-off factors influenced the results;
¡ Our risk and reputational performance;
¡ The individual performance of the Executive Directors; and
¡ GVC’s share price performance and the experience of our shareholders over the year.
The Committee noted the Group’s excellent operational and financial progress during the year, including regular earnings upgrades and the
attainment of previously announced synergy and other targets in relation to the integration of the Ladbrokes Coral business. Analyst and
shareholder feedback indicated excellent performance by our Executive Directors leading the Group to outperform in all its major markets.
GVC’s total shareholder return in 2019 was 39% as shown in the Summary of Performance section.
The Committee also considered the impact of one-off items, which included the impairment taken under IFRS 3 in relation to the Ladbrokes
Australia business. The Committee noted that the impairment does not reflect a reduction in the overall value of the acquired Ladbrokes Coral
business (or GVC itself), but rather is required to reflect a change in the relative value split across the business. The Committee was further
reassured that the aggregate value of Ladbrokes Coral CGUs, including Australia, had increased since 2018.The Committee also considered the
adverse publicity in relation to a sale of shares by the CEO in March 2019, but felt comfortable that this had already been dealt with through the
exercise of downward discretion on his 2019 LTIP award.
Given its importance to the long-term sustainability of GVC and our industry, the Committee also considered progress against our ESG and
responsibility agenda. In particular, the Committee noted the launch of the industry’s most ambitious and far-reaching safer gambling strategy:
“Changing for the Bettor”. Full details of this are set out in the Corporate Social Responsibility section. The Committee also considered the
significant penalties imposed on GVC by the UK Gambling Commission during the year. However, it was noted that these related to Ladbrokes
Coral Group during 2014 – 2017, before the acquisition of this business by GVC and that substantial improvement in processes have been put in
place since that time.
Taking all the above factors into account, the Committee considered that the formulaic outcome under the annual bonus was justifiable within
this context and a fair reflection of overall GVC performance during the year, and therefore decided that there was no requirement to exercise
discretion over the outcome. As a result, the table below sets out the final outcome and annual bonus earned by each Executive Director
for 2019.
Measure
Bonus opportunity (% of salary)
Salary eligible for 2019 bonus
Formulaic outcome (% of maximum bonus)
Discretion applied
Final outcome:
– As % of maximum bonus
– As % of salary
– As £ amount
K Alexander1
250%
£800,000
100%
n/a
100%
250%
£2,000,000
R Wood2
200%
£329,231
100%
n/a
100%
200%
£658,462
P Bowtell
Not eligible
–
–
–
–
–
–
1. Kenneth Alexander’s salary reduced from £950,000 to £800,000 from 1 June. However, the salary which is applicable for incentive purposes was restricted to £800,000 for the whole year.
2. The bonusable salary and bonus payment shown for Rob Wood relate to his time serving as an Executive Director.
Half of the total bonus is paid in cash following the year-end, while half is deferred into shares for three years under the Deferred Bonus Plan,
as set out in more detail on page 97.
2017-19 Long-Term Incentive Plan
The Long-Term Incentive Plan values shown in the single figure table for 2019 relate to the vesting of LTIP awards made in 2017. The Plan had
not yet been introduced in 2016, so there is no comparable figure shown for 2018.
The original targets attached to the 2017 LTIP awards are set out below.
Relative TSR vs. FTSE 250
Cumulative adjusted EPS
Weighting
50%
50%
Threshold (25% vesting)
Median
180c
Maximum (100% vesting)
Upper quartile
214c
Straight-line vesting between threshold and maximum
106
GVC Holdings PLC | Annual Report 2019 Since 2017, GVC has been through a period of significant change. In particular, the Company:
¡ Completed the acquisition of Ladbrokes Coral in March 2018, which had a transformational impact on the business;
¡ Disposed of the Turkish business, which at the time contributed EPS of 10€cents or 13% of EBITDA, and made a number of other smaller
business transactions;
¡ Now derives a significantly higher percentage of revenues from regulated and taxed markets (over 90% in 2019 versus 68% in 2017);
¡ Implemented a significant change in its capital structure; and
¡ Changed its reporting currency from euros to GBP.
As a result of all these changes, GVC is now a significantly different business from what it was at the time the targets were set. As a result,
the Committee has carefully considered how best to assess performance to ensure that the outcome is fair to participants and shareholders,
and appropriately aligned with Company performance over the 2017-19 period. Taking all relevant factors into account, the Committee has
determined the following approach:
¡ The targets have been converted from euros to GBP by converting the target for each of the financial years using the average exchange rate
for that year;
¡ An increase to the original targets has been made to reflect EPS accretion from the Ladbrokes Coral transaction. This amounts to an increase
of 14% and 10% for each of the 2018 and 2019 financial years respectively. This level of accretion has been set based on our internal forecasts
for the transaction prior to completion and are in line with the statement made in the Ladbrokes Coral prospectus that the acquisition would
be double digit EPS accretive from the first full year post completion. The Committee is firmly of the view that the overall accretion in the
21 months post completion exceeded the original expectations; and
¡ The contribution which was expected from the Turkish business at the time the targets were set has been backed out which has the effect
of lowering the targets. The Committee considers that this adjustment is appropriate since the disposal of the unregulated Turkish business
was necessary to enable GVC to access competitively priced debt capital to finance the acquisition of Ladbrokes Coral, achievement of which
resulted in a material increase in the share rating.
As a result of the above, the revised target range is set out below, along with the formulaic outcome against these targets.
Measure
Relative TSR vs. FTSE 250
Cumulative Adjusted EPS
Total
1. Excluding Turkey.
Weighting
50%
50%
100%
Threshold
(25% vesting)
Median: 34.7%
145.6p
Maximum
(100% vesting)
Upper quartile: 62.8%
173.0p
GVC performance
56.2%
182.2p1
Vesting
82.3% of maximum
100% of maximum
91.1% of maximum
As a further check, the Committee also sought to validate the formulaic outcome above by considering performance against the original targets
on two different bases:
¡ Adjusted EPS as reported – While it has limitations (as it does not represent a like-for-like comparison), the Committee also considered
performance against the original targets (converted to GBP) on a simple reported basis. Over the three years, cumulative adjusted EPS
in GBP was 196.9p (including Turkey), which compares to a GBP target range of 160p – 190p.
¡ Performance versus GVC forecasts only – This approach looked at the performance of GVC on a standalone basis, excluding Ladbrokes Coral
from both the targets and the outcome. As a further stress test, an adjustment was made to remove the contribution of Crystalbet from the
outcome, while no adjustments were made for either the additional regulatory headwinds the business has faced, or the fact that the GVC
figure includes costs previously borne by Ladbrokes Coral. In all cases, the targets were exceeded in full.
As a final check, as with the annual bonus the Committee assessed whether GVC’s overall performance over the three years justified the vesting
level. In doing so they took into account the same factors as set out above. The Committee found it particularly reassuring that over the period
the Company’s share price had increased by c38% from 1 January 2017 to 31 December 2019, significantly out-performing major UK peers.
All of these factors gave the Committee comfort that a vesting outcome of 91.1% of maximum was fair and reasonable, and appropriately
reflected GVC’s performance and value delivered to shareholders over the period.
The LTIP awards granted in 2017 had not vested at the time this report was finalised, and so the reported value has been based on the average
share price in the last three months of the financial year, which was 884.2p. The value of the awards included in the single figure of remuneration
table is set out below:
K Alexander
LTIP shares
awarded
242,587
% vesting
91.1%
LTIP shares
vesting
220,996
Value of
shares
vesting
(£’000)
1,862
107
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Remuneration continued
ANNUAL REPORT
ON DIRECTORS’ REMUNERATION Continued
Share awards granted during 2019 (audited)
The table below sets out share awards granted to the Executive Directors during 2019 under the LTIP and the Annual Bonus Plan (ABP).
Name
K Alexander
R Wood
Grant date
Award type
LTIP
26 March 2019
ABP1 26 March 2019
26 March 2019
LTIP
Face value
of award
£2,400,000
£889,148
£1,000,000
Shares awarded
344,332
109,293
197,044
% vesting at
threshold
performance
25%
–
25%
% vesting at
threshold
performance
100%
100%
100%
Performance
conditions
See below
None
See below
1. Consistent with the Directors’ remuneration policy, 50% of an Executive Director’s annual bonus is deferred in shares. The deferred bonus award shown above has been granted in respect of
the annual bonuses for the 2018 financial year. This award will normally vest on 26 March 2022, being the third anniversary of the award date, subject to continuous employment. The number
of shares was calculated in line with the Plan rules based on a share price of £8.14 (an average price measured over the last three months of the financial year to which the bonus award relates).
Rob Wood was not an Executive Director during 2018 and so he received all of his annual bonus for 2018 in cash.
Long-Term Incentive Plan
While the CEO’s award was made on 26 March 2019, the Committee applied its discretion to use the share price as at the close on 5 March 2019
of £6.97 to calculate the allocation. This represented a 27% discount to the number of shares which would have been awarded had the usual
price around the grant date been used (507.5p). It aligned the CEO’s award with the shareholder experience of a falling share price following the
sale of shares by the CEO and Chairman on 6 March 2019.
The Committee agreed that the 2019 LTIP should be based on the same measures as in previous cycles, being cumulative adjusted EPS and
relative total shareholder return (“TSR”), measured over the period 1 January 2019 to 31 December 2021. The former represents a key financial
indicator of performance for GVC, while the latter reflects our returns to shareholders over the period. The targets for these awards are set out
below and further information can be found in our 2018 DRR.
Measure
Relative TSR vs. FTSE 51-150
Cumulative adjusted EPS
Weighting
50%
50%
Threshold (25% vesting)
Median
184p
Maximum (100% vesting)
Upper quartile
214p
Straight-line vesting between threshold and maximum
Shareholdings and share interests (audited)
Shareholding guidelines
Executive Directors are required to maintain a shareholding as determined by the Committee and retain this for a period of time following
cessation from the role. Executive Directors are expected to build up their shareholding over a period of five years from the date of appointment
as an Executive Director (or, if later, from the date of any change to the terms of the shareholding requirement). Shares that count towards the
requirement are those that are beneficially owned shares, any vested share awards subject to a holding period and unvested deferred bonus
shares (on an after-tax basis). The current shareholding requirements are:
¡ CEO – 400% of base salary.
¡ CFO – 200% of base salary.
In line with the provisions of the UK Corporate Governance Code, the Committee has implemented post-cessation shareholding requirements
for the Executive Directors to ensure that they remain aligned with shareholders for a period following stepping down from the Board. At the
current time, the Committee expects Executive Directors to maintain 100% of their guideline (or their actual holding if lower) for two years
following departure. Shares purchased by the Executive Directors out of their own funds will not count towards these guidelines.
108
GVC Holdings PLC | Annual Report 2019 Share interests
As at 31 December 2019, the value of the CEO and CFO’s shareholdings were £13.3m and £0.2m respectively. Kenneth Alexander’s shareholding
significantly exceeds his requirement of 400% of salary. He sold 2.1m shares in March 2019 and purchased 0.8m shares in August 2019; he has
committed to no further sales of shares (other than those needed to meet tax liabilities on vesting of share awards) while he remains CEO. In line
with the terms of the shareholding guidelines our CFO, Rob Wood, is building up his holding in GVC shares.
Executive Directors’ share interests as at 31 December 2019 are set out below.
Share interests
subject to
performance
conditions
Share interests
not subject to
performance
conditions
Director
K Alexander
R Wood
P Bowtell3
Number of
beneficially
owned shares1
1,500,000
18,000
387,438
Share awards
569,690
226,087
18,621
Share options
242,587
–
–
Share awards
209,869
–
60,228
Total interests at
31 December
2019
2,522,126
244,087
466,285
Value of shares
held as a %
of base salary2
1,778%
40%
n/a
Shareholding
requirement
met?
Yes
No
n/a
1. Beneficially owned shares include shares held directly or indirectly by connected persons. There were no changes in the number of beneficially owned shares for any Executive Director between
31 December 2019 and the date this report was signed off.
2. Value of shareholding based on the closing share price at 31 December 2019 (884.2p) and includes beneficially owned shares and the after-tax shares held under the Deferred Bonus Plan.
3. As a former Executive Director, the beneficially owned shares column for Paul Bowtell reflects the position on 5 March 2019, the date he stepped down from the Board.
Executive Directors’ service contracts and external appointments
Executive Directors have rolling contracts, terminable by either party giving the appropriate notice. Further details are provided in the table
on page 102.
The Executive Directors do not currently hold any external appointments.
Payments for loss of office (audited)
Paul Bowtell stepped down as an Executive Director on 5 March 2019. Full details of his leaving arrangements were provided in the 2018
Directors’ Remuneration Report. The Committee determined that these arrangements, as set out below, were fair and reasonable, consistent
with the Directors’ Remuneration Policy and in line with Paul’s contractual entitlements:
¡ Paul remained eligible to receive an annual bonus in respect of 2018 but not for 2019.
¡ No payment in lieu of notice was made.
¡ Paul was conferred eligible leaver status to allow him to retain his unexercised 2018 long-term incentive plan awards post his termination.
This award will continue to vest over the original vesting period i.e. there was no acceleration of vesting, and the award will remain subject
to a) malus (i.e. the potential clawback of any unvested element), b) the future satisfaction of performance measures c) time apportionment
based on service and d) the post vesting holding period.
109
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Remuneration continued
ANNUAL REPORT
ON DIRECTORS’ REMUNERATION Continued
SUMMARY OF PERFORMANCE
The chart 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 and the FTSE 350 Travel and Leisure Index. The FTSE 250 Index has been chosen on
the basis that this is the index that GVC has been part of for the majority of the period since listing (at times it has been in the FTSE 100).
£100 invested on 1 February 2016 would have been worth £219 at 31 December 2019 compared with £146 if invested in the FTSE 250
index and £134 if invested in the FTSE 350 Travel and Leisure Index.
Over the three-year period 1 January 2017 to 31 December 2019 (the period covered by the 2017 LTIP) the total shareholder return (“TSR”)
of GVC shares was 59% compared with 31% for the FTSE 250 Index and 29% for the FTSE 350 Travel and Leisure Index.
From 1 January to 31 December 2019, the TSR of GVC shares was 39% compared with 31% for the FTSE 250 Index and 21% for the FTSE
350 Travel and Leisure Index. The outperformance reflected the Group’s strong operational and financial performance during the year.
Dividends per share were increased by 10% in 2019 (2018: 7.4%).
(£)
300
250
200
150
100
50
1 Feb 2016
31 Dec 2016
31 Dec 2017
31 Dec 2018
31 Dec 2019
GVC Holdings
FTSE 250 Index
FTSE 350 Travel and Leisure Index
Source: Datastream
Summary of CEO remuneration outcomes: 2015–2019
Role
Single figure of total remuneration1,2
Annual bonus pay-out (% maximum)
LTIP vesting (% maximum)
Legacy award vesting (% maximum)
December 2019
K Alexander
CEO
£4.84m
100%
91.1%
n/a
December 2018
K Alexander
CEO
£19.10m
92%
–
100%
December 2017
K Alexander
CEO
£18.21m
100%
–
100%
December 2016
K Alexander
CEO
£17.83m
–
–
100%
December 2015
K Alexander
CEO
£3.41m
–
–
100%
1. Figures for 2015, 2016 and 2017 were previously reported in euros and have been converted into sterling using an average rate for the relevant year.
2. Legacy options granted under the 2015 LTIP accounted for a significant proportion of the CEO’s single figure of total remuneration in 2016, 2017 and 2018. The final tranche of these
options vested in August 2018. The lower single figure in 2019 reflects the current, more typical, remuneration policy.
110
GVC Holdings PLC | Annual Report 2019 Implementation of the Remuneration Policy for Executive Directors in 2020
The table below provides a summary of how the Executive Directors’ remuneration policy will be implemented in 2020.
Element
Salary
Benefits
Approach
¡ CEO – £816,000; increase of 2% in line with increases provided to other UK employees
¡ CFO – £430,000; increase of 7.5% recognising strong performance in the role. See the Chair’s statement
on page 90 for more details
¡ No change in how the Policy will be operated
¡ Executive Directors will continue to receive standard benefits such as medical and life insurance cover,
car and accommodation allowance
¡ All employees, including the Executive Directors, have the opportunity to participate in a Company-provided
pension in line with statutory requirements:
– CEO – Opted out of the plan
– CFO – 4.5% of salary
Annual Bonus
¡ No change in maximum opportunity:
– CEO – 250% of salary
– CFO – 200% of salary
¡ On-target pay-out reduced to 50% of the maximum opportunity
¡ Performance measures will continue to be EBTIDA (70%) and Net Debt (30%)
¡ Half of any bonus award will be deferred into shares for three years
¡ Targets are considered commercially sensitive but will be disclosed in full in the 2020 DRR
¡ No change in maximum opportunity:
LTIP
– CEO – 300% of salary
– CFO – 250% of salary
Minor changes to performance measures from 2019 cycle (see further details below)– in all cases threshold
vesting remains at 25% of maximum:
Cumulative EPS (1/3rd)
– Threshold vesting – 267p
– Maximum vesting – 295p
Relative TSR against the FTSE 51 – 150 (1/3rd)
– Threshold vesting – median performance
– Maximum vesting – upper quartile performance
Relative TSR against a bespoke group of sectoral peers (1/3rd)
– Threshold vesting – median performance
– Maximum vesting – upper quartile performance
– Bespoke peer group of the following companies – 888 Holdings, Betsson, Evolution Gaming Group, Flutter
Entertainment, Gamesys, International Game Technology, Kindred Group, Playtech, Rank Group, TabCorp
Holdings, The Stars Group, and William Hill
– These companies have been selected following a review of how they align with GVC in a number of areas,
including financial and operational size, location of business operations and share price correlation
Shareholding Guidelines
¡ Within-employment shareholding requirements:
– CEO – 400% of base salary
– CFO – 200% of base salary
¡ To ensure extended alignment, the Committee has implemented post-cessation shareholding requirements:
– Executive Directors are required to maintain 100% of their guideline (or their actual holding if lower)
for two years following departure
– Shares purchased by the Executive Directors out of their own funds will not count towards these guidelines
2020 LTIP targets
The Committee reviewed the performance measures for the 2020 LTIP and concluded that, while TSR and EPS remained appropriate
performance indicators, it was considered appropriate to increase the emphasis on performance relative to peers, while not losing sight of
overall performance against the wider stockmarket. As a result, the weighting on TSR has been increased from 50% of the LTIP to two thirds,
with this element being split evenly between two comparator groups as set out above.
The remaining one third of the LTIP will be based on a cumulative EPS measure. The target range of 267p – 295p has been set around the latest
consensus for three-year cumulative EPS (281p). The Committee consider this to be an appropriately stretching range given that achieving
maximum vesting would require a CAGR in EPS of 23% over the three-year performance period.
Consistent with 2019, the 2020 EPS targets exclude earnings from the Group’s US joint venture given the uncertainty around the way in which
the US markets will open up for the Group, and how soon. As the performance of the US joint venture will form a significant element of the
111
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Remuneration continued
ANNUAL REPORT
ON DIRECTORS’ REMUNERATION Continued
future value of the Group, the Committee believe that this is adequately reflected via the TSR elements of the LTIP. However, if necessary, the
Committee may apply discretion at the end of the performance period to take into account performance in this important new market.
Inevitably there are several factors which cannot be known at the time targets are originally set and could impact the 2019 LTIP. These factors
might include the impact of corporate activity, material regulatory or tax changes, joint ventures and accounting changes. In each case the
Committee retains discretion whether and, if so, how a) to adjust targets post grant and/or b) to take impact into account when determining
performance outcome.
Chairman and Non-Executive Directors
Single figure of remuneration table (audited)
The remuneration of the Non-Executive Directors is shown below. Figures provided have been calculated in accordance with the Regulations.
Non-Executive Directors
Lee Feldman1
Barry Gibson2
Jane Anscombe
Pierre Bouchut
Peter Isola
Virginia McDowell
Stephen Morana
Jette Nygaard-Andersen3
Pension
£000
Fees
£000
350
350
71
–
110
111
110
33
88
88
110
63
155
142
5
–
Benefits
£000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Annual
bonus
£000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Long-term
incentives
£000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Legacy
awards
£000
–
8,182
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£000
350
8,532
71
–
110
111
110
33
88
88
110
63
155
142
5
–
1. Lee Feldman’s remuneration for 2018 included an amount related to options granted under the 2015 Long-term Incentive Plan. The final vesting of these options was in August 2018.
2. Barry Gibson joined the Board on 4 November 2019.
3. Jette Nygaard-Andersen joined the Board on 11 December 2019.
Fee structure
The table below sets out the fee structures for 2019 and 2020 for the Non-executive Directors and the Chairman of the Board. No changes
are proposed to the Non-executive Directors fees for 2020 other than in early 2020, the Non-executive Directors were given the one-off choice to
have their fee denominated in GBP rather than Euro. The GBP amounts are shown in the table below and, where relevant, will take effect from
March 2020.
Barry Gibson joined the Board on 19 November 2019 as Chairman designate and became Chairman on 27 February 2020. In setting his fee, the
Committee recognised the significant competition for talent that exists in this sector at the current time and also notes that Mr Feldman’s fee
had been unchanged since February 2016.
Chair – Lee Feldman (up to 27 February 2020)
Chair designate – Barry Gibson (from 19 November 2019)
Senior Independent Non-executive Director
Board member
Chairmanship of Audit, Remuneration or Corporate Social Responsibility Committee
As at 1 January 2019
£350,000
–
£155,000
€100,000
€25,000
As at 1 January 2020
£350,000
£450,000
£155,000
€100,000 or £85,000
€25,000 or £21,000
112
GVC Holdings PLC | Annual Report 2019 Letters of appointment
Non-executive Directors are appointed under letters of appointment and as such do not have service contracts. Apart from the Chairman of
the Board, each Non-executive Director is subject to an initial three-year term subject to annual re-election at the Company’s AGM. All letters
of appointment are available for viewing at the Company’s registered office and at the AGM. Further details are provided in the table on page 102.
Payments for loss of office (audited)
As announced on 4 November 2019, Lee Feldman stepped down from his role as Chairman of the Board and left the Company on
27 February 2020.
During his tenure, Lee has played an instrumental role in GVC’s transformation from an AIM listed business with a market capitalisation
of around £31m in 2008, to a Main Market, premium listed company. Lee leaves the business with it continuing to perform strongly, and he has
provided a seamless transition of the Chairmanship to his successor, Barry Gibson. In this context, the Remuneration Committee approved the
following exit terms:
¡ Lee has waived the contractual right under his amended letter of appointment to a 12-month notice period and any associated payment
in lieu of notice (i.e. there will be no further fees paid to Lee following his departure date of 27 February 2020).
¡ Lee has agreed to continue to serve on the Roar Digital, LLC board of directors, as one of GVC’s representatives until 31 December 2020, and
to waive any fee for these services. The opening up of the US online gambling market represents a substantial business opportunity for GVC,
and the Board believes that retaining Lee in this role will put us in the best possible position to take advantage of these opportunities, given his
extensive knowledge of the sector and strong US business relationships.
¡ In December 2017, Lee received a one-off fee as part of a move to bring his remuneration arrangements into line with best practice for non-
executive chairman of FTSE 250 companies. The net-of-tax fee was invested into GVC shares, half of which vested on 13 December 2019, and
half of which are due to vest on 13 December 2020. Vesting was conditional on Lee continuing as Chairman throughout this period, which was
the intention at that time. In due course, the revised UK Corporate Governance Code brought in new provisions around the length of tenure for
board chairmen, with the result that Lee is standing down earlier than originally envisaged. Taking into account these circumstances, coupled
with Lee agreeing to waive his contractual notice period and serve on the Roar Digital LLC board until December 2020 for no compensation,
the Remuneration Committee determined to treat Lee as a good leaver for the second tranche of these shares. As such, 26,134 shares will
vest and be released to him on 13 December 2020.
Share interests (audited)
Non-executive Directors’ share interests as at 31 December 2019 are set out below. Aside from Ms Nygaard-Andersen (who only joined the
Board in December 2019) each of the Non-executive Directors holds shares worth at least 80% of their base fees at the 31 December 2019 share
price of 884.2p.
Director
L Feldman
B Gibson
J Anscombe
P Bouchut
P Isola
V McDowell
S Morana
J Nygaard-Andersen
Number of beneficially
owned shares1
287,408
42,587
17,169
27,000
36,135
15,000
34,184
–
1. Beneficially owned shares include shares held directly or indirectly by connected persons. There were no changes in the number of shares owned outright for any Non-executive Director
between 31 December 2019 and the date this report was signed off.
The Remuneration Committee
Committee members during 2019
J Anscombe
V McDowell
S Morana
Independent
Yes
Yes
Yes
Number of meetings
in year held during tenure
4
4
4
Meetings attended
4
4
4
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. The Chief Executive Officer, Chief Financial Officer, Group HR Director and the
Director of Reward 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.
113
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Remuneration continued
ANNUAL REPORT
ON DIRECTORS’ REMUNERATION Continued
Committee role and focus
The Committee is responsible for recommending to the Board the remuneration policy for Executive Directors and senior management and
for setting the remuneration packages for each Executive Director and for the Chairman of the Board. 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.
During the year, there were four scheduled Committee meetings. The matters covered included:
¡ Approval of the 2018 Directors’ Remuneration Report;
¡ Determination of the pay-outs from the 2018 annual bonus arrangements;
¡ Approval of targets for the 2019 annual bonus plan;
¡ Approval of the 2019 LTIP awards and their associated performance measures and targets;
¡ Review of shareholder feedback received in relation to Directors’ remuneration following the 2019 AGM and consultation in respect of the
Directors Remuneration Policy;
¡ Review of the Directors’ Remuneration Policy;
¡ Determination of the fee for the Chairman designate;
¡ Updates on all employee remuneration arrangements including ongoing reward harmonisation activity across the Group following the
Ladbrokes Coral acquisition; and
¡ Review of salaries and remuneration packages for senior executives.
Advice to the Committee
Advisers are appointed independently by the Remuneration Committee, which reviews its selection periodically and is satisfied that the advice
it receives is independent, objective and free from conflicts of interest. The total fees paid to Deloitte in respect of 2019 was £144,655, on a
time and materials basis. Deloitte’s advice includes reviewing the remuneration policy, support on shareholder consultation exercises, pay
benchmarking and the provision of general guidance on market and best practice. Deloitte LLP also provided a range of tax and advisory
services to GVC during the year, support in certain technology areas and support for the business’s internal audit function.
Deloitte are signatories to the Code of Conduct for Remuneration Consultants in the UK, details of which can be found on the Remuneration
Consultants Group’s website at www.remunerationconsultantsgroup.com.
Management’s advice to the Committee was also supported by a) the provision of market data from Deloitte and Willis Towers Watson and
b) legal advice from Addleshaw Goddard.
Shareholder voting and consideration of shareholder views
We remain committed to taking into consideration shareholder views on our remuneration policy and practices. The Committee chair and the
Senior Independent Director maintain contact, as required, with the Company’s principal shareholders about all relevant remuneration issues.
Ongoing dialogue with our shareholders on executive remuneration is important to us, with feedback being presented to and discussed by the
Committee, where it is used to inform future decision making.
The 2018 Chairman’s Annual Statement and the Annual Report on Remuneration were subject to an advisory vote at the Annual General Meeting
(“AGM”) on 5 June 2019. The Directors’ Remuneration Policy was most recently put to a vote at the General Meeting on 14 December 2017.
Resolution
To approve the 2018 DRR
To approve the 2017 Policy Report
Date
June 2019
Dec 2017
Votes for
268,332,033
148,035,292
% of Votes for
58.0%
72.5%
Votes against
193,955,547
56,145,802
% of Votes against
42.0%
27.5%
Votes withheld
820,549
11,018
While the vote on the 2018 Remuneration Report was passed by shareholders at the June 2019 AGM, a significant minority did not support the
resolution. The Committee was, of course, disappointed by the vote and acknowledges this feedback, thanking those shareholders who spoke
with the Company and explained their reasons for not being able to support this resolution.
Since the June 2019 vote, the Committee Chair met with a significant number of shareholders in order to listen and reflect on their views
on remuneration at GVC and ensure that the Committee fully understood the reasons for the low vote. These discussions highlighted that
shareholders’ primary concern was around legacy arrangements for the CEO and Chairman. These arrangements are now fully vested and do
not form part of our ongoing Remuneration Policy, which is aligned with UK best practice expectations. The Committee Chair also engaged
with a significant number of our major shareholders with respect to our updated Policy and the proposed increase in the CFO’s salary for 2020.
The Committee would like to thank all shareholders for their constructive input and support throughout this process. The regular dialogue with
investors is greatly valued and the Committee will of course continue to engage with shareholders on remuneration matters going forward.
Jane Anscombe
Chair of the Remuneration Committee
5 March 2020
114
GVC Holdings PLC | Annual Report 2019 Directors’ Report
The Directors present their annual report on the affairs of the Group
for the year ended 31 December 2019.
On 6 February 2020, the Company relocated its place of management
and control and consequently its tax residence to the United Kingdom.
Principal activity
GVC Holdings PLC (the “Company”) and its subsidiaries (together
the “Group”) is a major international sports-betting and gaming
company operating both online and in the retail sector. The Company
is registered as a public limited company under the Isle of Man
Companies Act 2006 and is listed in the Premium category on the
Main Market of the London Stock Exchange.
Results and future performance
A review of the Group’s results and activities is covered within the
Strategic Report on pages 31 to 41. This incorporates the Chairman’s
statement, Chief Executive and Chief Financial Officer’s review, which
include an indication of likely future developments.
Key performance indicators
Key performance indicators in relation to the Group’s activities are
continually reviewed by senior management and are presented on
page 29.
Dividends
The Directors have today declared a second interim dividend of 17.6p
per share in respect of the year ended 31 December 2019, payable on
26 April 2020. Together with the first interim dividend of 17.6p paid on
26 September 2019, this makes the total dividend pay-out of 35.2p per
share in respect of the 2019 financial year.
Corporate Governance
The Directors recognise the importance of sound corporate
governance and their associated report is set out on pages 80 to 81.
The information in that section is deemed to form part of this Report
and so fulfils the requirements of the corporate governance statement
for the purposes of DTR 7.2.1.
As a company quoted on the Premium Main Market of the London
Stock Exchange, the Company has adopted the 2018 UK Corporate
Governance Code (“Code”), as amended from time to time, and will
seek to comply with premium listed company norms to the extent
appropriate for the size and nature of the Company.
Engagement with Employee Statements
This element of reporting is discussed in the s172 Statement
on pages 54 to 55.
Engagement with Stakeholder Statement
This element of reporting is discussed in the s172 Statement
on pages 54 to 55.
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 seven 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.
Articles of Association
The Company’s articles of association may only be amended by
special resolution at a general meeting of shareholders.
Directors
The Directors of the Company who were in office during the year, are
disclosed on page 75.
The Company’s Articles of Association provide that any new Director
appointed by the Board during the year, having not been previously
elected by shareholders, may hold office only until the next AGM,
when that Director must retire and stand for election at the meeting.
The Articles also require one third of the Directors not newly appointed
since the last AGM to seek re-election. In compliance with the
recommendation of the 2018 Code, all Directors will seek
reappointment at the 2020 AGM, as they did in 2019.
Directors’ remuneration
Both Executive Directors have service agreements and all the Non-
executive Directors have letters of appointment and the details of their
key terms are set out in the Directors’ Remuneration Report. Details of
remuneration of each Director are provided in the Remuneration
Report on pages 88 to 114.
Powers of directors
Subject to company law and the Company’s articles, the Directors
may exercise all of the powers of the Company and may delegate their
power and discretion to committees. The articles give the Directors
power to appoint and replace Directors.
Directors’ interests
The Directors’ report on remuneration on pages 88 to 114 provides
details of the interests of each Director, including details of current
incentive schemes and long-term incentive schemes, the interests of
Directors in the share capital of the Company and details of their share
interests as at 31 December 2019.
Conflicts of interest
On appointment, each Director must notify the Company of their
external board appointments, other significant commitments
and any actual or potential conflicts of interest. Each Director is
required to disclose actual or potential conflicts of interests to the
Board and where actual or potential conflicts of interest arise, the
relevant Director does not receive Board papers and is excluded
from discussions and voting on the subject matter that gives rise
to the conflict.
Directors’ Indemnities
The Company has entered into deeds of indemnity with each of the
Directors, which comply with the Isle of Man Companies Act 2006.
Share capital
Details of the Company’s authorised and issued share capital, together
with details of the movement therein, are set out in note 27 to the
financial statements. This includes the rights and obligations attaching
to shares and restrictions on the transfer of shares.
115
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Directors’ Report Continued
Directors’ Report
Continued
Substantial shareholdings – Interests in voting rights
As at 1 March 2020, the Company had been notified in accordance
with Chapter 5 of the Disclosure and Transparency Rules of the
following interests in the Company’s Shares:
Shareholder
The Capital Group
Standard Life Aberdeen
BlackRock
Number of Shares
61,013,614
55,347,260
29,832,668
% of Issued Share
Capital & Total
Voting rights
10.47
9.50
5.20
* The Company had 582,745,948 ordinary shares in issue on 1 March 2020.
Use of financial instruments
The risk management objectives and policies of the Group are set out
within Note 24 of the financial statements.
Political donations.
The Company did not make any political donations or incur any
political expenditure during 2019 (2018: Nil).
Insurance
The Company maintains a directors and officers’ liability insurance
policy in respect of any legal costs that may be incurred against the
Directors in dealing with any legal claims or investigations.
Annual General Meeting
The Company’s AGM will be held on 30 April 2020 at 10.00am at The
Mermaid Theatre, Puddle Dock, London, EC4V 3DB.
Independent Auditors
KPMG LLP (“KPMG”) has expressed its willingness to continue in
office as auditor and a resolution to re-appoint KPMG will be proposed
at the forthcoming AGM.
So far as the Directors are aware, there is no relevant audit information
(as defined by Section 418 of the Companies Act 2006) of which the
Company’s auditors are unaware, and each Director has taken all
the steps that he or she ought to have taken as a Director in order to
make himself or herself aware of any relevant audit information and to
establish that the Company’s auditors are aware of that information.
On behalf of the Board:
J M Barry gibson
Chairman
5 March 2020
116
GVC Holdings PLC | Annual Report 2019 INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GVC HOLDINGS PLC
1 Our opinion is unmodified
We have audited the financial statements of GVC Holdings Plc
(“the Company”) and its subsidiaries (together “the Group”) for the year
ended 31 December 2019 which comprise the Consolidated Income
Statement, the Consolidated Statement of Comprehensive Income, the
Consolidated Balance Sheet, the Consolidated Statement of Changes
in Equity, the Consolidated Statement of Cash Flows, the Company
Balance Sheet, the Company Statement of Changes in Equity, and the
related notes, including the accounting policies in note 4.
In our opinion:
¡ the financial statements give a true and fair view of the state of the
Group’s and of the parent Company’s affairs as at 31 December
2019 and of the Group’s loss for the year then ended;
¡ the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union;
¡ the parent Company financial statements have been properly
prepared in accordance with UK accounting standards, including
FRS 101 Reduced Disclosure Framework; and
¡ the financial statements have been prepared in accordance with
the requirements of the Isle of Man Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are
described below. We have fulfilled our ethical responsibilities under,
and we remain independent of the Group in accordance with, UK
ethical requirements including the FRC Ethical Standard as applied to
listed entities. We believe that the audit evidence we have obtained is a
sufficient and appropriate basis for our opinion.
2 Key audit matters: our assessment of risks of
material misstatement
Key audit matters are those matters that, in our professional
judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material
misstatement (whether or not due to fraud) identified by us, including
those which had the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of the
engagement team. We summarise below the key audit matters, in
decreasing order of audit significance, in arriving at our audit opinion
above, together with our key audit procedures to address those
matters and our findings from those procedures in order that the
Company’s members as a body may better understand the process by
which we arrived at our audit opinion. These matters were addressed,
and our findings are based on procedures undertaken, in the context
of, and solely for the purpose of, our audit of the financial statements
as a whole, and in forming our opinion thereon, and consequently are
incidental to that opinion, and we do not provide a separate opinion on
these matters.
DYNAMIC AUDIT PLANNING TOOL
(Relative significance of audit risks before taking account of controls)
H
B
D
C
B
A
O
G
N
h
g
H
i
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
n
o
t
c
a
p
m
i
l
a
i
t
n
e
t
o
P
I
K
Low
Likelihood of material misstatement
High
Key audit matters
Other risks
Change compared to prior year
A Revenue recognition
from online operations
B Goodwill, intangibles
and PPE impairment
assessment
C Gaming taxes in
immature markets
D Disclosure of separately
disclosed items
Recoverability of parent
Company’s investments
in subsidiaries and
receivables due from
group entities (Parent
Company only)
Management override
of controls
G Valuation of defined
benefit pension
H Valuation of defined
benefit pension
I The impact of uncertainties
due to UK exiting the
European Union on
our audit
Share based payments*
K Foreign exchange*
Segmental reporting*
Direct taxation
N Provisions for litigation
and claims
O Contingent consideration
117
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GVC HOLDINGS PLC continued
INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF GVC HOLDINGS PLC continued
Revenue recognition from online operations (2019: £2,116.1 million,
2018: £1,668.4 million)
Refer to page 135 (accounting policy) and pages 136 to 138
(financial disclosures).
The risk (Data capture and processing error or fraud – Revenue
from online operations): risk vs 2018
– The Group has a number
of income streams across its online operations, and the accuracy and
completeness of the amounts recognised from these income streams
is largely dependent on the effectiveness of the operational and anti-
fraud controls in place.
Revenue streams for many of the Group’s products are computed
on highly complex IT systems, with a number of different bases for
calculating revenue. In particular, there is a risk the Group’s in-house
developed IT systems, which aim to correctly calculate revenues and
appropriate wins and losses, as applicable, may not be configured
correctly from the outset such that commissions or winning and
losing bets are calculated incorrectly.
In addition, the Group’s divisions are dependent on their core finance
processes and controls to accurately report and reconcile revenue
transactions, and there is a risk that the customer-facing and financial
information systems may not interface correctly and that unauthorised
changes may be made, which may result in the misstatement
of revenue.
Our response – Our procedures included:
Control operation: We utilised our own IT specialists to assess the
general IT controls (“GITCs”) related to access to programs and data,
program change and development and computer operations by:
¡ Evaluating account set-up and termination of users, password
restrictions, access reviews, users with superuser access, program
change and development process controls, and tested whether any
unauthorised changes had been made to the system. We assessed
the overall IT environment, including relevant security policies and
procedures, IT organisational structure, IT strategy and reporting,
disaster recovery and back-up testing;
¡ Testing the configuration of the betting engine (Platform) that
processes player activity and cash movements;
¡ Testing the data flow in the online betting environment (when hosted
in-house) by observing bets placed from the customer-facing systems
and tracing the transactions to the platform (betting engine), and
then from the data warehouse (storage) to the financial information
systems (accounting records) to assess whether the information is
passed appropriately from one system to another; and
¡ Where systems are hosted by third parties, we obtained an
understanding of the nature of the services being provided.
We performed audit procedures to assess whether the third party
services were operating as intended. Where GITCs were not
operating effectively over in-house systems handling the transfer
of data, we tested the operating effectiveness of compensating
manual controls reconciling the accounting records to the third
party systems.
Data comparisons: Where GITCs over in-house managed systems
handling the transfer of data were not designed and implemented
effectively, we compared the amounts of revenue in the accounting
records against the amounts reported in the platform (source data)
for each month and by label and fully reconciled the information
between systems.
Tests of details (tracing and vouching): We assessed the
appropriateness of revenue recognised by:
¡ Tracing a sample of betting transactions through the online
betting systems or to third party systems (when outsourced), and
assessing that they are appropriately recorded within the financial
information systems at the transaction level;
118
¡ Vouching a sample of betting transactions recognised in the period
from the accounting records back to source data and reperforming
the outcome of the transaction against the client’s result. Where the
IT controls of the online betting environment were not designed or
implemented effectively, we increased our substantive testing due
to the results of our controls testing, as applicable;
¡ Assessing the appropriateness of cash transferred between the
payment service providers to corporate cash by reconciling the
total revenue amounts reported by key IT systems to the amount
transferred from the payment service provider to corporate cash
and testing a sample of these settlements by agreeing the amounts
to the relevant bank information;
¡ Testing a sample of items comprising the customer liability balance
and agreed the amounts recorded to the individual customer wallet
at the end of the financial period; and
¡ Obtaining external confirmation of client funds held in the PSPs
and reconciling the obtained bank balance confirmation to the
customers’ betting accounts.
Assessing transparency: We also considered the adequacy of the
Group’s disclosures in respect of revenue.
Our findings – Our testing identified weaknesses in the design of IT
General Controls for some of the Group’s IT systems; whilst some
steps had been taken in the year to remediate weaknesses identified
in the prior years the remediations were not in place for all of 2019.
As a result we concluded that we could not rely on IT General Controls
for some of the Group’s IT systems and expanded the extent of
our detailed testing as appropriate. In some instances it was not
possible to gain the evidence required to rely on certain IT systems
and in response to this for the Online revenue streams affected we
performed additional substantive testing to reconcile all revenue data
recorded in the general ledger to the transactions in the betting engine
or to third party data. This additional testing identified no errors in the
recording of revenue transactions for the Online businesses (2018: no
errors identified).
Goodwill, intangible assets and PPE impairment assessment
(2019 carrying value: £5,821.7 million, 2018 carrying value:
£6,324.6 million; 2019 impairment charge: £245.0 million,
2018 impairment charge: £41.3 million)
Refer to page 131 (accounting policy) and pages 144 to 147
(financial disclosures).
The risk – (Forecast based valuation – Recoverability of goodwill,
– The carrying amount of
intangible assets and PPE): risk vs 2018
goodwill, intangible assets and PPE is significant and the recoverable
amount is at risk of irrecoverability due to the potential impact on the
business of changes in gaming taxation and regulation. The estimated
recoverable amount is subjective due to the inherent uncertainty
involved in forecasting and discounting future cash flows.
The Group has recognised an impairment loss of £245 million on the
goodwill on the Australian CGU as a result of changes in the market
resulting in significant changes in forecast cash flows. As a result, the
carrying amount of goodwill and intangible assets associated with the
Australian CGU is particularly sensitive to changes in key assumptions.
The effect of these matters is that, as part of our risk assessment,
we determined that the value in use of goodwill and intangible
assets associated with the Australian CGU has a high degree of
estimation uncertainty, with a potential range of reasonable outcomes
greater than our materiality for the financial statements as a whole.
The financial statements (note 14) disclose the sensitivity estimated
by the Group.
GVC Holdings PLC | Annual Report 2019 Our response – Our procedures included:
Our sector experience: We evaluated assumptions used, in particular
those relating to forecast revenue growth and profit margins through
enquiries with the divisional managers and those responsible for
preparing and delivering the forecasts.
Benchmarking assumptions: We compared the Group’s assumptions
in relation to key inputs such as, projected economic growth and, with
the assistance of our own valuation specialist, comparing the discount
rate to historical information and externally derived data.
Historical comparison: We evaluated the adequacy of the budgets
and forecasts used in the value in use calculation by assessing the
historical accuracy of the Group’s previous budgets.
Sensitivity analysis: We performed sensitivity analysis on the key
assumptions noted above.
Comparing valuations: We compared the net asset value of the Group
with the market capitalisation of the Group and assessed whether any
difference is an indicator of impairment with reference to why that
difference has arisen.
Assessing transparency: We assessed whether the Group’s
disclosures about the sensitivity of the outcome of the impairment
assessment to changes in key assumptions reflect the risks inherent
in the calculation of the value in use of goodwill and trade-marks and
brand name intangibles.
Our findings – As a result of our risk assessment and procedures
described above we identified that the Australian CGU was the only
CGU with a carrying amount subject to a high degree of estimation
uncertainty. We found the estimates of the carrying amount of
goodwill, intangible assets and PPE across all CGUs, and in particular
in relation to the Australian CGU, to be balanced (2018: balanced) and
the related disclosure to be balanced (2018: light).
Gaming taxes in immature markets (2019 provision: £49.3 million,
2018 provision: £119.0 million; 2019 prepayment: £116.0 million,
2018 prepayment: £40.5 million)
Refer to page 87 (Audit Committee Report), page 130 (accounting
policy) and page 165 (financial disclosures).
– The business operates in a number
The risk (Subjective judgement – Gaming tax provisions and
prepayments): risk vs 2018
of jurisdictions which have different gaming tax and duty regimes.
For some markets in which the Group now operates or operated in
the past, the tax regulations dealing specifically with online gaming
businesses might not yet be formed, are unclear or continue to evolve.
Changes in gaming tax and duty regimes can be announced suddenly
and applied retrospectively and in these instances the Directors are
required to exercise a level of judgement surrounding the interpretation
and application of the tax laws which may differ from that of relevant
tax authorities. The amounts involved are potentially significant,
and determining the amount, if any, to be provided as a liability, is
inherently subjective.
This leaves the Group exposed to risk of failure to appropriately record
provisions for gaming taxes and duty as the bases of tax assessments
can be subjective.
Our response – Our procedures included:
Enquiry of regulators: We requested and obtained circularisations
from the gaming regulators from the key jurisdictions in which the
Group operates to confirm whether the Group was up to date with its
filing requirements and payment of gambling duties.
Benchmarking assumptions: We compared the Group’s assessment
of the level of exposure arising from changes in gaming tax legislation
to third party evidence, such as the relevant tax authorities’ public
announcements. We assessed the potential impact on the Group in
light of the degree of uncertainty and level of gaming revenue in each
country to confirm that the only country identified with a significant
exposure subject to a high degree of judgement was Greece.
Tests of details: We reviewed the Group’s calculation of gaming
tax and duty costs in the period and provisions and prepayments at
the period end and assessed whether the relevant calculations had
been performed accurately using the appropriate tax/duty rates.
In particular we verified that provisions for Greek gaming taxes
in relation to years remaining open to audit were calculated on a
consistent basis to tax assessments for years already agreed with
the Greek Tax authorities.
Assessing the credentials of third party tax experts: We assessed
the competence and objectivity of third party experts engaged by the
Group to advise on the legal position of any claims received by tax
authorities; for the year ended 31 December 2019 this was in relation
to legal advice given in relation to litigation with respect to Greek
gaming taxes for the years 2010 and 2011.
Our tax expertise: Using our own indirect tax specialists in Greece,
we determined whether advice received from third party experts
is reasonable given the correspondence with the tax authorities
and interpretation of the relevant legislation. We also used our own
indirect tax specialists in Greece to assess whether management
representations, regarding the basis of Greek gaming tax assessments
for years where gaming tax audits are now closed, are consistent with
confirmations received from the Greek Tax authorities.
Assessing transparency: We considered the appropriateness of
the judgements taken and adequacy of the Group’s disclosures in
respect of key tax exposures, notably in relation to the judgement
over the ongoing Greek gaming tax litigation for 2010 and 2011 and
the recoverability of the related prepayments for amounts paid to the
Greek tax authorities.
Our findings – In determining the treatment of gaming taxes there
is room for judgement and we found that within that, the Group’s
judgement was balanced (2018: balanced).
In particular, with respect to the accounting for Greek gaming tax we
note that the outcome could vary significantly in the future depending
on the outcome of the ongoing litigation for the years 2010 and 2011.
Our testing did not identify any indicators of management bias in the
judgements over Greek gaming tax. We found that the disclosure
regarding Greek gaming taxes were light (2018: light).
Disclosure of separately disclosed items (2019: £630.1 million,
2018: £434.2 million)
Refer to page 87 (Audit Committee Report), page 131 (accounting
policy) and page 138 (financial disclosures).
The risk (Disclosure quality) – Disclosure of separately disclosed
–There is a risk that items are classified
items: risk vs 2018
as separately disclosed on an inconsistent basis (both within the
period and between periods), are not disclosed in accordance with
the Group’s accounting policy on separately disclosed items and
that a clear and accurate explanation of the reasons for separate
disclosure items is not given in order to manipulate the presentation
of performance of the business.
119
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GVC HOLDINGS PLC continued
INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF GVC HOLDINGS PLC continued
Our response – Our procedures included:
Tests of details: We reviewed the Group’s calculations of separately
disclosed items within the financial statements to assess the accuracy
of the disclosures and:
¡ Challenged the Group’s classification of separately disclosed items
and assessed whether they were outside the normal course of
business in accordance with the Group’s accounting policy and that
presentation was on a consistent basis with prior periods; and
¡ Agreed separately disclosed items to appropriate documentation
and assessed whether they had been captured accurately.
Assessing transparency: We assessed whether the basis for separate
disclosure was clearly and accurately described and consistently
applied and together with reconciliations to the IFRS measures, shown
with sufficient prominence in the annual report.
Our findings – We consider that there is proportionate disclosure
(2018: proportionate) of the separately disclosed items and the items
included as separately disclosed are balanced (2018: balanced) to
allow shareholders to understand the performance of the Group.
Our testing identified no errors in the adjustments made to calculate
amounts disclosed as separately disclosed items (2018: no errors).
Recoverability of parent Company’s investments in subsidiaries
and receivables due from group entities (Parent Company only):
(2019 carrying value: £4,870.4 million, 2018 carrying value:
£5,571.8 million)
Refer to pages 177 and 179 (Company accounting policy) and page
179 (Company financial disclosures).
– The carrying amount of the
The risk (Forecast-based valuation – Recoverability of parent
Company’s investments in subsidiaries and receivables due from
group entities): risk vs 2018
parent Company’s investments in subsidiaries and of the intra-group
debtor balance together represents 99% (2018: 99%) of the parent
Company’s total assets. Their recoverability is not at a high risk of
significant misstatement or subject to significant judgement. However,
due to their materiality in the context of the parent Company financial
statements, this is considered to be the area that had the greatest
effect on our overall parent Company audit.
Our response – Our procedures included:
Benchmarking assumptions: We challenged the assumptions used in
the cash flows included in the budgets based on our knowledge of the
Group and the markets in which the subsidiaries operate.
Historical comparisons: We assessed the reasonableness
of the budgets by considering the historical accuracy of the
previous forecasts.
Our sector experience: We evaluated the current level of trading,
including identifying any indications of a downturn in activity, by
examining the post year end management accounts and considering
our knowledge of the Group and the market.
Comparing valuations: We compared the carrying value of the parent
Company’s investments in subsidiaries and receivables due from
group entities to value in use calculations for the relevant CGUs and to
the market capitalisation of the Group.
Assessing transparency: We assessed the adequacy of the parent
Company’s disclosures in respect of investments in subsidiaries and
group debtor balances.
Our findings – We found the Group’s assessment of the recoverability
of the investments in subsidiaries and intercompany receivables to be
balanced (2018: balanced).
3 Our application of materiality and an overview of the scope
of our audit
Materiality for the Group financial statements as a whole was
set at £20 million (2018: £20 million), determined with reference
to a benchmark of Group revenue (of which it represents 0.6%
(2018: 0.7%)). We consider revenue to be the most appropriate
benchmark as it provides a more stable measure year on year than
group profit before tax.
Materiality for the parent Company financial statements as a whole
was set at £10 million (2018: £18 million), determined with reference to
a benchmark of total assets, of which it represents 0.2% (2018: 0.3%).
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £1 million, in
addition to other identified misstatements that warranted reporting
on qualitative grounds.
Of the Group’s ten (2018: five) components, we subjected four (2018:
four) to full scope audits for Group purposes. We conducted reviews of
financial information (including enquiry) at six (2018: one) further non-
significant components. The components for which we performed a
review of financial information (including enquiry) were not individually
significant enough to require an audit for Group reporting purposes
but a review was performed to obtain further coverage over the
Group’s results.
The Group team approved the component materialities, which ranged
from £10 million to £12 million (2018: £13.5 million to £18 million),
having regard to the mix of size and risk profile of the Group across
the components.
The work on all of the components (2018: all of the components),
including the audit of the parent company, was performed by the
Group team.
Group revenue
(%)
Underlying EBITDA
(%)
Group Total Assets
(%)
Profit before tax
(%)
20
16
80%
(2018: 84%)
84
80
14
14
86%
(2018: 86%)
86
86
4
5
96%
(2018: 95%)
95
96
7
8
93%
(2018: 92%)
92
93
Full scope for group audit purposes 2019
Full scope for group audit purposes 2018
Specified risk-focused audit purposes 2019
Specified risk-focused audit purposes 2018
120
GVC Holdings PLC | Annual Report 2019 4 We have nothing to report on going concern
The Directors have prepared the financial statements on the going
concern basis as they do not intend to liquidate the Company or
the Group or to cease their operations, and as they have concluded
that the Company’s and the Group’s financial position means that
this is realistic. They have also concluded that there are no material
uncertainties that could have cast significant doubt over their ability
to continue as a going concern for at least a year from the date of
approval of the financial statements (“the going concern period”).
Our responsibility is to conclude on the appropriateness of the
Directors’ conclusions and, had there been a material uncertainty
related to going concern, to make reference to that in this audit report.
However, as we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent with
judgements that were reasonable at the time they were made, the
absence of reference to a material uncertainty in this auditor’s report
is not a guarantee that the Group and the Company will continue
in operation.
In our evaluation of the Directors’ conclusions, we considered the
inherent risks to the Group’s and Company’s business model and
analysed how those risks might affect the Group’s and Company’s
financial resources or ability to continue operations over the going
concern period. The risks that we considered most likely to adversely
affect the Group’s and Company’s available financial resources over
this period were:
¡ The impact of significant changes in regulation affecting the Group’s
ability to operate in certain territories; and
¡ The impact of a significant business continuity issue affecting the
Group’s operating systems over a long period.
As these were risks that could potentially cast significant doubt on
the Group’s and the Company’s ability to continue as a going concern,
we considered sensitivities over the level of available financial
resources indicated by the Group’s financial forecasts taking account
of reasonably possible (but not unrealistic) adverse effects that could
arise from these risks individually and collectively and evaluated the
achievability of the actions the Directors consider they would take to
improve the position should the risks materialise. We also considered
less predictable but realistic second order impacts, such as the impact
of Brexit and the erosion of customer confidence, which could result in
a rapid reduction of available financial resources.
Based on this work, we are required to report to you if we have
anything material to add or draw attention to in relation to the
directors’ statement in Note 2 to the financial statements on the use of
the going concern basis of accounting with no material uncertainties
that may cast significant doubt over the Group and Company’s use
of that basis for a period of at least twelve months from the date of
approval of the financial statements.
We have nothing to report in these respects, and we did not identify
going concern as a key audit matter.
5 We have nothing to report on the other information in the
Annual Report
The directors are responsible for the other information presented in
the Annual Report together with the financial statements. Our opinion
on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except as explicitly
stated below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so,
consider whether, based on our financial statements audit work, the
information therein is materially misstated or inconsistent with the
financial statements or our audit knowledge. Based solely on that work
we have not identified material misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
¡ we have not identified material misstatements in the strategic report
and the directors’ report; and
¡ in our opinion the information given in those reports for the financial
year is consistent with the financial statements.
Directors’ remuneration report
In addition to our audit of the financial statements, the Directors have
engaged us to audit the information in the Directors’ Remuneration
Report that is described as having been audited, which the Directors
have decided to prepare as if the Company was required to comply
with the requirements of Schedule 8 to The Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations 2008 (SI
2008 No. 410) made under the UK Companies Act 2006.
In our opinion the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
UK Companies Act 2006, as if those requirements applied to
the Company.
Disclosures of emerging and principal risks and
longer-term viability
Based on the knowledge we acquired during our financial statements
audit, we have nothing material to add or draw attention to in
relation to:
¡ the directors’ confirmation within the long term viability statement
on page 66 that they have carried out a robust assessment of the
emerging and principal risks facing the Group, including those that
would threaten its business model, future performance, solvency
and liquidity;
¡ the Principal Risks disclosures describing these risks and explaining
how they are being managed and mitigated; and
¡ the directors’ explanation in the long term viability statement of
how they have assessed the prospects of the Group, over what
period they have done so and why they considered 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.
Our work is limited to assessing these matters in the context of only
the knowledge acquired during our financial statements audit. As we
cannot predict all future events or conditions and as subsequent
events may result in outcomes that are inconsistent with judgements
that were reasonable at the time they were made, the absence of
anything to report on these statements is not a guarantee as to the
Group’s and Company’s longer-term viability.
121
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GVC HOLDINGS PLC continued
INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF GVC HOLDINGS PLC continued
7 The purpose of our audit work and to whom we owe our
responsibilities
This report is made solely to the Company’s members, as a body, in
accordance with Section 80 (c) of the Isle of Man Companies Act 2006
and the terms of our engagement by the Company. 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 the further matters we are required to state to them in accordance
with terms agreed with the Company, 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.
Michael Harper
Responsible Individual
for and on behalf of KPMG LLP
Chartered Accountants and Recognised Auditors
15 Canada Square
London
E14 5GL
5 March 2020
Corporate governance disclosures
We are required to report to you if:
¡ we have identified material inconsistencies between the knowledge
we acquired during our financial statements audit and the directors’
statement that they consider that the annual report and financial
statements taken as a whole is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Group’s position and performance, business model and strategy;
or
¡ the section of the annual report describing the work of the Audit
Committee does not appropriately address matters communicated
by us to the Audit Committee.
We are required to report to you if the Corporate Governance
Statement does not properly disclose a departure from the provisions
of the UK Corporate Governance Code specified by the Listing Rules
for our review.
We have nothing to report in these respects.
6 Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 79,
the directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error; assessing the Group and
parent Company’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern; and using the going
concern basis of accounting unless they either intend to liquidate
the Group or the parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud, or error, and to issue our opinion in an auditor’s
report. Reasonable assurance is a high level of assurance, but does
not guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the
basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s
website at www.frc.org.uk/auditorsresponsibilities.
122
GVC Holdings PLC | Annual Report 2019 OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS
Financial statements
In this section:
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Company balance sheet
Company statement of changes of equity
Notes to the Company financial statements
124
125
126
127
128
129
178
179
180
123
GVC Holdings PLC | Annual Report 2019 Financial statements continued
Consolidated income statement
for the year ended 31 December 2019
Notes
5
7
7
16,17
8
8
8
8
10
12
12
11
Net Gaming Revenue
VAT/GST
Revenue
Cost of sales
Gross profit
Administrative costs
Contribution
Administrative costs excluding marketing
Group operating profit/(loss) before share of results
from joint ventures and associates
Share of results from joint ventures and associates
Group operating profit/(loss)
Finance expense
Finance income
Gain arising from change in fair value of financial instruments
Gains/(losses) arising from foreign exchange on debt
instruments
Profit/(loss) before tax
Income tax (expense)/income
Profit/(loss) for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Earnings per share on profit/(loss) for the year
From profit/(loss) for the year1
Diluted earnings per share on profit/(loss) for the year
From profit/(loss) for the year1
Proposed dividends
Memo
EBITDAR2
Rent and associated costs3
EBITDA
Share based payments
Depreciation, amortisation and impairment
Share of results from joint ventures and associates
Group operating profit/(loss)
2019
2018
Underlying
items
£m
3,655.1
(54.6)
3,600.5
(1,222.3)
2,378.2
(1,849.0)
1,883.2
(1,354.0)
Separately
disclosed
items
(note 6)
£m
–
–
–
–
–
(695.9)
–
(695.9)
Total
£m
3,655.1
(54.6)
3,600.5
(1,222.3)
2,378.2
(2,544.9)
1,883.2
(2,049.9)
Underlying
items
£m
2,979.5
(44.3)
2,935.2
(931.0)
2,004.2
(1,491.8)
1,598.8
(1,086.4)
Separately
disclosed
items
(note 6)
£m
–
–
–
–
–
(453.5)
–
(453.5)
529.2
(9.2)
520.0
(88.5)
2.4
17.6
84.3
535.8
(46.4)
489.4
476.4
13.0
489.4
65.1p
64.2p
782.7
(21.6)
761.1
(12.7)
(219.2)
(9.2)
520.0
(695.9)
–
(695.9)
(14.1)
–
–
–
(710.0)
79.9
(630.1)
(630.1)
–
(630.1)
(74.7)
–
(74.7)
–
(621.2)
–
(695.9)
(166.7)
(9.2)
(175.9)
(102.6)
2.4
17.6
84.3
(174.2)
33.5
(140.7)
(153.7)
13.0
(140.7)
512.4
8.4
520.8
(63.9)
1.1
58.3
(81.7)
434.6
(56.8)
377.8
371.7
6.1
377.8
(26.4)p
76.9p
(26.4)p
17.6p
708.0
(21.6)
686.4
(12.7)
(840.4)
(9.2)
(175.9)
76.3p
723.7
(82.9)
640.8
(10.7)
(117.7)
8.4
520.8
(453.5)
–
(453.5)
–
–
–
–
(453.5)
19.3
(434.2)
(434.2)
–
(434.2)
(89.7)
–
(89.7)
–
(363.8)
–
(453.5)
Total
£m
2,979.5
(44.3)
2,935.2
(931.0)
2,004.2
(1,945.3)
1,598.8
(1,539.9)
58.9
8.4
67.3
(63.9)
1.1
58.3
(81.7)
(18.9)
(37.5)
(56.4)
(62.5)
6.1
(56.4)
(12.2)p
(12.2)p
16.0p
634.0
(82.9)
551.1
(10.7)
(481.5)
8.4
67.3
1. The calculation of underlying earnings per share has been adjusted for separately disclosed items, and for the removal of foreign exchange volatility arising on financial instruments as it
provides a better understanding of the underlying performance of the Group. See note 12 for further details.
2. Included within the Income Statement and Memo above are certain non-statutory measures. The use of these items and the reconciliation to their statutory equivalents is provided above and
on pages 31 and 32 of the report.
3. Rent and associated costs being rental costs, including any associated VAT, on items not captured by IFRS 16. These are predominantly driven by low value items, and held over leases where
there is no future rental commitment.
All amounts stated above relate to continuing activities.
The notes from pages 129 to 177 form an integral part of these consolidated financial statements.
124
GVC Holdings PLC | Annual Report 2019 Consolidated STATEMENT
OF COMPREHENSIVE INCOME
for the year ended 31 December 2019
Loss for the year
Other comprehensive expense:
Items that may be reclassified to profit or loss:
Currency differences on translation of foreign operations
Total items that may be reclassified to profit or loss
Items that will not be reclassified to profit or loss:
Re-measurement of defined benefit pension scheme1
Tax on re-measurement of defined benefit pension scheme1
Share of associate other comprehensive income
Total items that will not be reclassified to profit or loss
Other comprehensive (expense)/income for the year, net of tax
Total comprehensive expense for the year
Attributable to:
Equity holders of the parent:
Non-controlling interests
Notes
2019
£m
(140.7)
2018
£m
(56.4)
29
10
17
(158.6)
(158.6)
(104.6)
36.6
1.0
(67.0)
(225.6)
(366.3)
(379.3)
13.0
44.7
44.7
(10.9)
3.8
0.2
(6.9)
37.8
(18.6)
(24.7)
6.1
1. Included within the re-measurement of defined benefit schemes is a charge of £81.3m relating to the buy-in of the Ladbrokes Pension Plan. Further details are provided in note 29.
The notes on pages 129 to 177 form an integral part of these consolidated financial statements.
125
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Financial statements continued
Consolidated BALANCE SHEET
for the year ended 31 December 2019
Assets
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Interest in joint venture
Interest in associates and other investments
Trade and other receivables
Other financial assets
Deferred tax assets
Retirement benefit asset
Current assets
Trade and other receivables
Income and other taxes recoverable
Derivative financial instruments
Other financial assets
Short term investments
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Balances with customers
Lease liabilities
Interest bearing loans and borrowings
Corporate tax liabilities
Provisions
Other financial liabilities
Non-current liabilities
Interest bearing loans and borrowings
Lease liabilities
Deferred tax liabilities
Provisions
Other financial liabilities
Total liabilities
Net assets
Equity
Issued share capital
Share premium
Merger reserve
Translation reserve
Retained earnings
Equity shareholders’ funds
Non-controlling interests
Total shareholders’ equity
Notes
2019
£m
Restated 2018
(note 31)
£m
13
13
15
16
17
18
25
10
29
18
25
25
19
19
20
26
21
22
23
25
22
21
10
23
25
27
34
2,966.4
2,398.0
467.9
6.0
29.9
3.3
2.1
124.4
66.6
6,064.6
477.6
9.1
47.4
–
–
390.1
924.2
6,988.8
(678.7)
(335.4)
(75.5)
(31.5)
(35.1)
(73.0)
(30.7)
(1,259.9)
(2,084.5)
(288.0)
(358.2)
(16.5)
(125.8)
(2,873.0)
(4,132.9)
2,855.9
4.8
1,198.0
2,527.4
54.0
(971.4)
2,812.8
43.1
2,855.9
3,328.1
2,800.9
195.6
46.1
26.0
–
1.5
76.6
168.2
6,643.0
402.7
30.3
43.3
3.4
2.6
421.9
904.2
7,547.2
(639.1)
(312.5)
–
(14.3)
(42.5)
(160.5)
(16.3)
(1,185.2)
(2,221.1)
–
(452.8)
(56.6)
(143.5)
(2,874.0)
(4,059.2)
3,488.0
4.8
1,196.5
2,527.4
212.6
(491.5)
3,449.8
38.2
3,488.0
The financial statements on pages 124 to 177 were approved by the Board of Directors on 5 March 2020 and signed on its behalf by:
KJ Alexander
(Chief Executive Officer)
R Wood
(Chief Financial Officer)
126
GVC Holdings PLC | Annual Report 2019
Consolidated STATEMENT
OF CHANGES IN EQUITY
for the year ended 31 December 2019
At 1 January 2018
Loss for the year
Other comprehensive income
Total comprehensive income
Issue of shares on acquisition
Share options exercised
Share-based payments charge
Acquisition of investment
Equity dividends
Non-controlling interests
At 31 December 2018
At 1 January 2019
Impact of change of accounting policy2
Restated at 1 January 2019
(Loss)/profit for the year
Other comprehensive income
Total comprehensive income
Share options exercised
Share-based payments charge
Equity dividends (note 11)
Non-controlling interests3
At 31 December 2019
Issued
share
capital
£m
2.3
–
–
–
2.4
0.1
–
–
–
–
4.8
4.8
–
4.8
–
–
–
–
–
–
–
4.8
Share
premium
£m
1,170.4
–
–
–
–
26.1
–
–
–
–
1,196.5
1,196.5
–
1,196.5
–
–
–
1.5
–
–
–
1,198.0
Merger
reserve
£m
34.5
–
–
–
2,492.9
–
–
–
–
–
2,527.4
2,527.4
–
2,527.4
–
–
–
–
–
–
–
2,527.4
Translation
reserve1
£m
167.9
–
44.7
44.7
–
–
–
–
–
–
212.6
212.6
–
212.6
–
(158.6)
(158.6)
–
–
–
–
54.0
Equity
shareholders’
funds
£m
1,137.9
(62.5)
37.8
(24.7)
2,495.3
26.2
2.1
(44.6)
(138.8)
(3.6)
3,449.8
Non-
controlling
interests
(note 34)
£m
(1.5)
6.1
–
6.1
–
–
–
35.0
(1.4)
–
38.2
Total
Shareholders’
equity
£m
1,136.4
(56.4)
37.8
(18.6)
2,495.3
26.2
2.1
(9.6)
(140.2)
(3.6)
3,488.0
3,449.8
(70.7)
3,379.1
(153.7)
(225.6)
(379.3)
1.5
10.8
(195.5)
(3.8)
2,812.8
38.2
–
38.2
13.0
–
13.0
–
–
(8.1)
–
43.1
3,488.0
(70.7)
3,417.3
(140.7)
(225.6)
(366.3)
1.5
10.8
(203.6)
(3.8)
2,855.9
Retained
earnings
£m
(237.2)
(62.5)
(6.9)
(69.4)
–
–
2.1
(44.6)
(138.8)
(3.6)
(491.5)
(491.5)
(70.7)
(562.2)
(153.7)
(67.0)
(220.7)
–
10.8
(195.5)
(3.8)
(971.4)
1. The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.
2. On 1 January 2019, GVC Holdings PLC transitioned to IFRS 16 resulting in an opening adjustment to equity of £70.7m. See note 3 for more information.
3. During the year, GVC Holdings PLC recognised amounts paid of £3.8m to acquire the remaining share capital of Stadium Technology Group LLC.
The notes on pages 129 to 177 form an integral part of these consolidated financial statements.
127
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Financial statements continued
Consolidated STATEMENT
OF CASH FLOWS
for the year ended 31 December 2019
Cash generated by operations
Income taxes paid
Net finance expense paid
Net cash generated from operating activities
Cash flows from investing activities:
Acquisitions
Cash acquired on acquisition of businesses
Dividends received from associates
Purchase of intangible assets
Purchase of property, plant and equipment
Proceeds from the sale of property, plant and equipment including disposal of shops
Investment in joint ventures
Decrease in short term investments
Deferred proceeds from disposal of available-for-sale assets
Proceeds from disposal of joint ventures
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issue of ordinary shares
Net proceeds from borrowings1
Repayment of borrowings
Repayment of finance leases
Equity dividends paid2
Net cash generated financing activities
Net (decrease)/increase in cash and cash equivalents
Effect of changes in foreign exchange rates
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
Notes
28
2019
£m
543.7
(37.5)
(68.9)
437.3
(21.3)
–
1.2
(107.2)
(72.6)
10.9
–
–
–
63.8
(125.2)
1.5
1,045.5
(1,099.1)
(77.7)
(203.6)
(333.4)
(21.3)
(10.5)
421.9
390.1
2018
£m
395.5
(43.5)
(55.5)
296.5
(735.6)
213.0
9.4
(99.2)
(95.5)
–
(20.5)
1.8
1.0
–
(725.6)
26.2
1,366.0
(664.9)
(1.1)
(142.7)
583.5
154.4
(2.5)
270.0
421.9
1. Net proceeds from borrowings also includes £12.6m of cash received in relation to the settlement of derivative financial instruments (2018: £nil).
2. Equity dividends paid are inclusive of dividend credits on share options of £nil (2018: £2.5m) and dividends paid to non-controlling interests of £8.1m (2018: £1.4m).
The notes on pages 129 to 177 form an integral part of these consolidated financial statements.
128
GVC Holdings PLC | Annual Report 2019 Notes to the consolidated
financial statements
for the year ended 31 December 2019
1 Corporate information
GVC Holdings PLC (“the Company”) is a company incorporated and
domiciled in the Isle of Man on 5 January 2010 whose shares are
traded publicly on the London Stock Exchange. The principal activities
of the Company and its subsidiaries (“the Group”) are described in the
strategic report. The consolidated financial statements of the Group
for the year ended 31 December 2019 were authorised for issue in
accordance with a resolution of the directors on 5 March 2020.
The nature of the Group’s operations and its principal activities are set
out in note 5.
2 Basis of preparation
The consolidated financial statements of the Group have been
prepared in accordance, and comply, with International Financial
Reporting Standards (“IFRSs”) and IFRS Interpretations Committee
(“IFRS IC”) pronouncements as adopted for use in the European Union
and with the Isle of Man Companies Act 2006 applicable to companies
reporting under IFRSs. The accounting policies set out in this section
as detailed have been applied consistently year on year other than for
the changes in accounting policies set out in note 3.
The Group financial statements are prepared under the historical cost
convention unless otherwise stated. Having assessed the financial
forecasts of the business, the principal risks and other matters
discussed in connection with the long-term viability statement, the
Directors consider it appropriate to adopt the going concern basis
of accounting in preparing the financial statements as the Group will
generate sufficient cash to meet its ongoing obligations for at least
12 months from the date of signing the financial statements.
The consolidated financial statements are presented in Pounds
Sterling (£). All values are in millions (£m) rounded to one decimal
place except where otherwise indicated.
The separately disclosed items have been included within the
appropriate classifications in the consolidated income statement.
Further details are given in note 6.
Due to the timing of certain acquisitions in the previous financial
year, the fair values applied to the assets and liabilities acquired
were provisional, in accordance with IFRS 3 Business Combinations.
Since the initial fair value assessment, certain measurement period
adjustments have been identified resulting in reallocations between
goodwill and other components of the net assets acquired. This has
resulted in a restatement of the prior year balance sheet to reflect these
changes. Net assets and Total shareholders’ equity have not changed as
a result of this restatement. See note 31 for further details.
3 Changes in accounting policies
From 1 January 2019, the Group has applied, for the first time,
certain standards, interpretations and amendments being:
IFRS 16 Leases
The Group applied IFRS 16 with a date of initial application of
1 January 2019. As a result, the Group has changed its accounting
policy for lease contracts as detailed below.
The Group applied IFRS 16 using the modified retrospective approach,
under which the cumulative effect of initial application is recognised
in retained earnings at 1 January 2019. There has been no restatement
of comparative balances.
For leases previously classified as operating leases, a right of use
(“ROU”) asset and associated lease liability has been recognised.
As such, the Group no longer records a lease cost associated
with those assets in its Income Statement, but instead will record
depreciation and interest charges.
In applying the modified retrospective approach, the Group has elected
to use the following practical expedients proposed by the standard:
¡ Reliance on the previous identification of a lease (as provided by
IAS 17) for all contracts that existed on the date of initial application;
¡ the ROU assets for all leases were recognised at an amount equal
to the lease liability plus prepaid lease payments immediately before
the date of initial application;
¡ the application of a single discount rate to a portfolio of leases with
reasonably similar characteristics. The key differential considered in
determining the discount rate is the length of the lease;
¡ the use of hindsight when determining the lease term, if the contract
contains an option to extend or terminate the lease; and
¡ on initial application, initial direct costs are excluded from the
measurement of the right of use asset.
Definition of a lease
The Group has applied IFRS 16 only to those contracts that were
previously identified as a lease under IAS 17 Leases, any contracts
not previously identified as leases have not been reassessed for the
purposes of adopting IFRS 16. Accordingly, the definition of a lease
under IFRS 16 has only been applied to contracts entered into on or
after 1 January 2019.
Upon transition, lease liabilities were measured at the present value
of the remaining lease payments, discounted at the rate implicit in the
lease as at 1 January 2019, or at the Group’s incremental borrowing rate
if this was not ascertainable. The right of use assets for all leases were
recognised at an amount equal to the lease liability plus prepaid lease
payments immediately before the date of initial application. The ROU
assets were then subject to a detailed impairment review to ascertain
whether the attributable cash flows supported the additional ROU
assets recognised. This resulted in an impairment of £136.7m being
recognised at the date of transition, which was a direct consequence of
the regulatory changes in 2018 in the UK Retail segment. To the extent
that certain property provisions were recognised in respect of rent, as
at 31 December 2018, an adjustment has been made to reduce the
provision as part of the transition to IFRS 16.
Following the transition to IFRS 16, equity as at 1 January 2019 has
been restated as follows:
1 January 2019 net assets as previously reported
ROU assets recognised1
Lease liabilities recognised2
Prepayments transferred to right of use assets1
Provisions released3
Impairments recognised4
De-recognition of sub lease right of use assets5
Finance lease debtors recognised5
Associated deferred tax asset recognised
1 January 2019 net assets restated
1 January 2019
£m
3,488.0
396.9
(379.3)
(17.6)
51.7
(136.7)
(5.0)
5.0
14.3
3,417.3
1. ROU assets of £396.9m have been recognised as at 1 January 2019 based on the lease
liabilities calculated upon transition combined with £17.6m of lease prepayments released
from the balance sheet. ROU assets predominantly relate to property leases, for which the
majority relate to UK Retail and Belgium Retail, but also head office leases, car leases and
other leases deemed to be captured by IFRS 16.
3 Changes in accounting policies continued
Definition of a lease continued
2. Lease liabilities of £379.3m have been recognised as at 1 January 2019. The lease liability
has been calculated based on the future cash flows relating to a lease, discounted at the
relevant discount rate. For the transition adjustment, the application of a single discount
129
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
rate has been applied to a portfolio of leases with reasonably similar characteristics.
The key differential considered in determining each lease’s discount rate is the length of
the lease. Where a lease includes an option to break, the group makes a judgement as
to whether it is likely that such a break will be exercised. In the case of LBOs this will take
accounts of current trading and trading forecasts as to the ongoing profitability of the LBO.
The judgement is reassessed at each reporting date.
3. Previously recognised property provisions, in respect of rent obligations, of £51.7m have
been released as they are now included in the calculation of the lease liability under IFRS 16.
Post 1 January 2019, such rental costs are no longer included within the Income Statement
and therefore can no longer be provided for in line with IAS 37 Provisions, Contingent
Liabilities and Contingent Assets.
4. Upon recognition of additional ROU assets, an impairment assessment was performed
under the principles of IAS 36 Impairment, as the £2 limit on B2 machine stakes introduced
by the UK government was expected to result in shop closures. This review resulted in an
impairment of £136.7m on newly capitalised ROU assets. This amount was recognised
directly in retained earnings upon transition, as at 1 January 2019.
5. Where a sub-lease is entered into, with the Group being the lessor, and which is considered
to be a finance lease, part or all of the ROU asset is de-recognised and a finance lease
receivable is recognised in relation to the sub lease. As a result, the ROU asset is disposed of
as the finance lease receivable is recognised.
A reconciliation of the lease liabilities recognised at 1 January 2019 to
the previously reported operating lease commitments at 31 December
2018 is as follows:
Operating lease commitment at 31 December 2018
as disclosed
Effect of discounting at 1 January 2019
Impact of break dates not expected to be exercised
Lease liabilities recognised at 1 January 2019
1 January 2019
£m
345.3
(67.6)
101.6
379.3
Under the modified retrospective transition method, lease payments
were discounted at 1 January 2019 using an incremental borrowing
rate requesting the rate of interest at which the entity within the group
that entered into the lease would have to pay over a similar term and
with similar amounts to borrow the funds to obtain the right of use
asset concerned, in a similar economic environment. The weighted
average incremental borrowing rate applied upon transition was
4.6%. Incremental borrowing rates applied to individual leases ranged
between 3.7% and 5.7%.
The adoption of the following standards and amendments to
standards did not have a material impact on the current period
or any prior period upon transition:
¡ IFFRIC 23 Uncertainty over Income Tax Treatment,
¡ IAS 19 Employee Benefits; amendments regarding plan
amendments, curtailments or settlements,
4 Summary of significant accounting policies
4.1 Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Group at 31 December each year. The consolidation
has been performed using the results to 31 December for all
subsidiaries, using consistent accounting policies. With the exception
of a small number of subsidiaries, the financial statements of those
subsidiaries are prepared to 31 December. Control is achieved where
the Company is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect these returns
through its power over the investee.
All intragroup transactions, balances, income and expenses are
eliminated on consolidation.
Subsidiaries are consolidated, using the acquisition method of
accounting, from the date on which control is transferred to the
Group and cease to be consolidated from the date on which control is
transferred from the Group.
On acquisition, the assets and liabilities and contingent liabilities of
a subsidiary are measured at fair value at the date of acquisition.
Any excess of the cost of acquisition over the fair values of the
separately identifiable net assets acquired is recognised as goodwill.
Where necessary, adjustments are made to the financial statements
of subsidiaries to bring the accounting policies used in line with those
used by the Group.
4.2 Critical accounting estimates and judgements
The preparation of financial information requires the use of
assumptions, estimates and judgements about future conditions.
Use of available information and application of judgement are inherent
in the formation of estimates. Actual results in the future may differ
from those reported.
In this regard, management believes that the accounting policies
where judgement has been applied are:
¡ accounting for uncertain tax positions; and
¡ separately disclosed items.
Furthermore, management believes that the accounting policies where
estimates have been utilised are:
¡ the measurement and impairment of goodwill and other assets;
¡ pension and other post-employment benefit obligations; and
¡ accounting for business combinations.
¡ IAS 28 Investments in Associated and Joint Ventures; amendments
regarding long-term interests in associates and joint ventures, and
¡ amendments resulting for Annual Improvements 2015–2017 Cycle.
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.
Further information about key assumptions concerning the future and
other key sources of estimation uncertainty are set out below.
Accounting for uncertain tax positions
The Group is subject to various forms of tax in a number of jurisdictions.
Given the nature of the industry within which the Group operates, the
tax and regulatory regimes are continuously changing and, as such,
the Group is exposed to a small number of uncertain tax positions.
Provisions are made for uncertain tax positions where it is believed that
it is more likely than not that an economic outflow will arise.
130
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 4 Summary of significant accounting policies continued
4.2 Critical accounting estimates and judgements continued
Accounting for uncertain tax positions continued
The Group has made a provision for a potential liability in Greece (see
note 32) based on the Directors’ best estimate of the likely economic
outflow. However, as the statutory window in Greece for the authorities
to conclude their tax audit work is generally six years from the end of
the relevant tax year, both the timing and the conclusions of the tax
audits, and any associated tax payments, remain uncertain.
Separately disclosed items
To assist in understanding its underlying performance, the Group
has defined the following items of pre-tax income and expense as
separately disclosed items as they either reflect items which are
exceptional in nature or size or are associated with the amortisation
of acquired intangibles. Items treated as separately disclosed
items include:
¡ amortisation of acquired intangibles resulting from IFRS 3 “Business
Combinations” fair value exercises;
¡ profits or losses on disposal, closure or impairment of non-current
assets or businesses;
¡ corporate transaction and restructuring costs;
¡ tax litigation;
¡ changes in the fair value of contingent consideration; and
¡ the related tax effect of these items.
Any other non-recurring items are considered individually for
classification as separately disclosed or exceptional by virtue of their
nature or size.
The separate disclosure of these items allows a clearer understanding
of the trading performance on a consistent and comparable basis,
together with an understanding of the effect of non-recurring or large
individual transactions upon the overall profitability of the Group.
The separately disclosed items have been included within the
appropriate classifications in the consolidated income statement.
Further details are given in note 6.
Goodwill
Goodwill on acquisition is initially measured at cost, being the excess
of the cost of the business combination over the Group’s interest in
the net fair value of the separately identifiable assets, liabilities and
contingent liabilities at the date of acquisition. In accordance with
IFRS 3 Business Combinations, goodwill is not amortised but reviewed
for impairment at the first reporting period after acquisition and then
annually thereafter. As such it is stated at cost less any provision for
impairment of value. Any impairment is recognised immediately in the
consolidated income statement and is not subsequently reversed.
On acquisition, any goodwill acquired is allocated to cash generating
units for the purpose of impairment testing. Where goodwill forms part
of a cash generating unit and part of the operation within that unit is
disposed of, the goodwill associated with the disposal is included in
the carrying amount of the assets when determining the gain or loss
on disposal.
Intangible assets
Intangible assets acquired separately are capitalised at cost and those
acquired as part of a business combination are capitalised separately
from goodwill if the fair value can be measured reliably on
initial recognition. The costs relating to internally generated intangible
assets, principally software costs, are capitalised if the criteria
for recognition as assets are met. Other expenditure is charged
in the year in which the expenditure is incurred. Following initial
recognition, intangible assets are carried at cost less any accumulated
amortisation and any accumulated impairment losses.
The useful lives of these intangible assets are assessed to be either
finite or indefinite. All indefinite lived assets are subject to an annual
impairment review from the year of acquisition. Where amortisation
is charged on assets with finite lives, this expense is taken to the
consolidated Income Statement through the “operating expenses,
depreciation and amortisation” line item. Useful lives are reviewed on
an annual basis.
A summary of the policies applied to the Group’s intangible assets is
as follows:
Retail licences
Software
Capitalised development
expenditure
Trademarks and brand names 10-15 years, or indefinite life
Customer relationships
Lower of 15 years, or duration of licence
2-15 years
3-5 years
3-15 years
The useful lives of all intangible assets are reviewed at each financial
period end. Impairment testing is performed annually for intangible
assets which are not subject to systematic amortisation and where an
indicator of impairment exists for all other intangible assets.
An intangible asset is derecognised on disposal, with any gain or
loss arising (calculated as the difference between the net disposal
proceeds and the carrying amount of the item) included in the
consolidated income statement in the year of disposal.
Pensions and other post-employment benefits
The Group’s defined benefit pension plans, the Ladbrokes Pension
Plan and the Gala Coral Pension Plan hold assets separately from
the Group. The pension cost relating to this plan is assessed in
accordance with the advice of independent qualified actuaries using
the projected unit credit method.
Actuarial gains or losses are recognised in the consolidated statement
of comprehensive income in the period in which they arise.
Any past service cost is recognised immediately. The retirement
benefit asset recognised in the balance sheet represents the fair value
of scheme assets less the value of the defined benefit obligations.
In accounting for the Group’s defined benefit pension plans, it
is necessary for management to make a number of estimates
and assumptions each year. These include the discount rates,
inflation rates and life expectancy. In making these estimates and
assumptions, management considers advice provided by external
advisers, such as actuaries. Where actual experience differs to these
estimates, actuarial gains and losses are recognised directly in other
comprehensive income. Refer to note 29 for details of the values
of assets and obligations and key assumptions used. Although the
Group anticipates that plan surpluses will be utilised during the life
of the plans to address member benefits, the Group recognises its
pension surplus in full on the basis that it does not consider there to
be substantive restrictions on the return of residual plan assets in the
event of a winding up of the plans after all member obligations have
been met.
131
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
4 Summary of significant accounting policies continued
4.2 Critical accounting estimates and judgements continued
Pensions and other post-employment benefits continued
The Group’s contributions to defined contribution schemes are
charged to the consolidated income statement in the period to which
the contributions relate.
Business combinations
For business combinations, the Group estimates the fair value of
the consideration transferred, which can include assumptions about
the future business performance of the business acquired and an
appropriate discount rate to determine the fair value of any contingent
consideration. Judgement is also applied in determining whether any
future payments should be classified as contingent consideration or
as remuneration for future services.
The Group then estimates the fair value of assets acquired and
liabilities assumed in the business combination, including any
separately identifiable intangible assets. These estimates also require
inputs and assumptions including future earnings, customer attrition
rates and discount rates. The Group engages external experts to
support the valuation process, where appropriate. IFRS 3 Business
Combinations allows the Group to recognise provisional fair values
if the initial accounting for the business combination is incomplete.
Judgement is applied as to whether changes should be applied at
the acquisition date or as post-acquisition changes. Further details of
these judgements are given in note 31.
The fair value of contingent consideration recognised in business
combinations is reassessed at each reporting date, using updated
inputs and assumptions based on the latest financial forecasts for
the relevant business. Fair value movements and the unwinding of the
discounting is recognised within operating expenses.
4.3 Other accounting policies
Impairment
An impairment review is performed for indefinite life assets on at least
an annual basis. For all other non-current assets an impairment review
is performed where there are indicators of impairment. This requires
an estimation of the recoverable amount which is the higher of an
asset’s fair value less costs to sell and its value in use. Estimating a
value in use amount requires management to make an estimate
of the expected future cash flows from each cash generating unit
and to discount cash flows by a suitable discount rate in order to
calculate the present value of those cash flows. Estimating an asset’s
fair value less costs to sell is determined using future cash flow and
profit projections as well as industry observed multiples and publicly
observed share prices for similar gambling companies.
Within UK and European Retail the cash generating units are generally
an individual Licensed Betting Office (LBO) and therefore, impairment
is first assessed at this level for licences, right of use assets and
property, plant and equipment, with any impairment arising booked
first to licences and then to property, plant and equipment.
Pension and other post-employment benefit obligations
There is a significant degree of estimation involved in predicting the
ultimate benefits payable under defined benefit pension arrangements.
The pension scheme liabilities are determined using actuarial
valuations. The actuarial valuation involves making assumptions
about discount rates, mortality rates and future pension increases.
Due to the long-term nature of these plans, such estimates are
subject to significant uncertainty. The group’s defined benefit pension
schemes both have a net asset position when measured on an IAS 19
132
basis. Judgement is applied, based on legal, actuarial, and accounting
guidance in IFRIC 14, regarding the amounts of net pension asset that
is recognised in the consolidated balance sheet. Further details are
given in note 29.
Investments in joint ventures
A joint venture is an entity in which the Group holds an interest on a
long-term basis and which is jointly controlled by the Group and one
or more other ventures under a contractual agreement.
Joint control exists only when decisions about the relevant activities
require the unanimous consent of the parties that collectively control
the arrangement. In assessing this joint control no significant
judgements have been necessary.
The Group’s share of results of joint ventures is included in the
Group consolidated income statement using the equity method of
accounting. Investments in joint ventures are carried in the Group
consolidated balance sheet at cost plus post-acquisition changes in
the Group’s share of net assets of the entity less any impairment in
value. The carrying value of investments in joint ventures includes
acquired goodwill.
If the Group’s share of losses in the joint venture equals or exceeds its
investment in the joint venture, the Group does not recognise further
losses, unless it has incurred obligations to do so or made payments
on behalf of the joint venture. Further details are given in note 16.
Investments in associates
Associates are those businesses in which the Group has a long-term
interest and is able to exercise significant influence over the financial
and operational policies but does not have control or joint control over
those policies.
The Group’s share of results of associates is included in the
Group’s consolidated income statement using the equity method
of accounting. Investments in associates are carried in the Group’s
consolidated balance sheet at cost plus post-acquisition changes
in the Group’s share of net assets of the entity less any impairment
in value. The carrying value of investments in associates includes
acquired goodwill. If the Group’s share of losses in the associate
equals or exceed its investments in the associate, the Group does not
recognise further losses, unless it has incurred obligations to do so or
made payments on behalf of the associate. Further details are given in
note 17.
Property, plant and equipment
Land is stated at cost less any impairment in value.
Buildings, plant and equipment are stated at cost less accumulated
depreciation and any impairment in value.
Depreciation is applied using the straight-line method to specific
classes of asset to reduce them to their residual value over their
estimated useful economic lives.
Land and buildings
Plant and equipment
Fixtures and fittings
Lower of 50 years, or estimated useful life
of the building, or lease. Indefinite lives
are attached to any freehold land held and
therefore it is not depreciated
3-5 years
3-10 years
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 4 Summary of significant accounting policies continued
4.3 Other accounting policies continued
Property, plant and equipment continued
ROU assets are depreciated over the lease term (as defined in IFRS 16)
being the period to the expiry date of the lease, unless it is expected
that a break clause will be exercised when the lease term is the period
to the date of the break.
The carrying values of property, plant and equipment are reviewed
for impairment where an indicator of impairment exists as to whether
there are events or changes in circumstances indicating that the
carrying values may not be recoverable. If any such indication exists
and where the carrying values exceed the estimated recoverable
amount, the assets or cash generating units are written down to their
recoverable amount.
The recoverable amount of property, plant and equipment is the
greater of fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the
asset. For an asset that does not generate largely independent cash
inflows, the recoverable amount is determined for the cash generating
unit to which the asset belongs.
Impairment losses are recognised in the consolidated
income statement.
An item of property, plant and equipment is derecognised upon
disposal, with any gain or loss arising (calculated as the difference
between the net disposal proceeds and the carrying amount of the
item) included in the consolidated income statement in the year
of disposal.
Leases
Leases, other than those with a lease period of less than one
year, or where the original cost of the asset acquired would be a
negligible amount (see note 21), are capitalised at the inception at
the present value of the minimum lease payments. Lease payments
are apportioned between the finance charges and reduction of the
lease liability so as to achieve a constant rate of interest on the
remaining balance of the liability. Finance charges are charged directly
against income.
ROU assets are included within tangible fixed assets at cost and
depreciated over their estimated useful lives, which equates to the
lives of the leases, after taking into account anticipated residual
values. Operating lease rental income is recognised on a straight-line
basis over the life of the lease.
Leases which are not capitalised are classified as operating leases.
Operating lease payments, other than contingent rentals, are
recognised as an expense in the consolidated income statement on
a straight-line basis over the lease term or as incurred in respect of
variable lease payments.
ROU assets which are sub-leased to customers are classified as finance
leases if the lease agreements transfer substantially all the risks and
rewards of usage to the lessee. All other sub-leases are classified as
operating leases. When assets are subject to finance leases, the present
value of the sub-lease is recognised as a receivable, net of allowances
for expected credit losses and the related ROU asset is de-recognised.
The difference between the gross receivable and the present value
of the receivable is recognised as unearned finance lease income.
Finance lease income is recognised in interest income over the term of
the lease using the net investment method (before tax) so as to give a
constant rate of return on the net investment in the leases.
Cash and cash equivalents
Cash and cash equivalents consist of cash at bank and in hand, short-
term deposits with an original maturity of less than three months (and
customer balances).
Financial assets
Financial assets are recognised when the Group becomes party to the
contracts that give rise to them.
The Group classifies financial assets at inception as financial assets at
amortised cost, financial assets at fair value through profit or loss or
financial assets at fair value through other comprehensive income.
Financial assets at amortised cost are non-derivative financial assets
with fixed or determinable payments that are not quoted in an active
market. On initial recognition, financial assets at amortised cost are
measured at fair value net of transaction costs.
Trade receivables are generally accounted for at amortised cost.
Expected credit losses are recognised for financial assets recorded
at amortised cost, including trade receivables. Expected credit losses
are calculated by using an appropriate probability of default, taking
accounts of a range of possible future scenarios and applying this to
the estimated exposure of the Group at the point of default.
Financial assets at fair value through profit or loss include derivative
financial instruments. Financial assets through profit or loss are
measured initially at fair value with transaction costs taken directly to
the consolidated income statement. Subsequently, the fair values are
remeasured, and gains and losses are recognised in the consolidated
income statement.
Financial assets at fair value through other comprehensive income
comprise equity investments that are neither designated as such on
acquisition. These investments are measured initially at fair value.
Subsequently, the fair values are remeasured, and gains and losses are
recognised in the consolidated statement of comprehensive income.
Financial liabilities
Financial liabilities comprise trade and other payables, interest bearing
loans and borrowings, contingent consideration, ante-post bets,
guarantees and derivative financial instruments. On initial recognition,
financial liabilities are measured at fair value net of transaction costs
where they are not categorised as financial liabilities at fair value
through profit or loss. Financial liabilities at fair value through profit or
loss include contingent consideration, derivative financial instruments,
ante-post bets and guarantees.
Trade and other payables are held at amortised cost and include
amounts due to clients representing customer deposits and winnings,
which is matched by an equal and opposite amount within cash and
cash equivalents.
Financial liabilities at fair value through profit or loss are measured
initially at fair value, with transaction costs taken directly to the
consolidated income statement. Subsequently, the fair values
are remeasured and gains and losses from changes therein are
recognised in the consolidated income statement.
All interest bearing loans and borrowings are initially recognised at
fair value net of issue costs associated with the borrowing. After initial
recognition, interest bearing loans and borrowings are subsequently
measured at amortised cost using the effective interest rate method.
The Group has provided financial guarantees to third parties in respect
of lease obligations of certain of the Group’s former subsidiaries
within the disposed hotels division. Financial guarantee contracts
are classified as financial liabilities and are measured at fair value by
estimating the probability of the guarantees being called upon and the
related cash outflows from the Group.
133
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
4 Summary of significant accounting policies continued
4.3 Other accounting policies continued
Derecognition of financial assets and liabilities
Financial assets are derecognised when the right to receive cash flows
from the assets has expired or when the Group has transferred its
contractual right to receive the cash flows from the financial assets
or has assumed an obligation to pay the received cash flows in full
without material delay to a third party, and either:
¡ substantially all the risks and rewards of ownership have been
transferred; or
¡ substantially all the risks and rewards have neither been retained nor
transferred but control is not retained.
Financial liabilities are derecognised when the obligation is discharged,
cancelled or expires.
Derivative financial instruments
The Group uses derivative financial instruments such as cross
currency swaps, foreign exchange swaps and interest rate swaps,
to hedge its risks associated with interest rate and foreign currency
fluctuations. Derivative financial instruments are recognised initially
and subsequently at fair value. The gains or losses on remeasurement
are taken to the consolidated income statement.
Derivative financial instruments are classified as assets where their
fair value is positive, or as liabilities where their fair value is negative.
Derivative assets and liabilities arising from different transactions are
only offset if the transactions are with the same counterparty, a legal
right of offset exists and the parties intend to settle the cash flows on
a net basis.
Provisions
Provisions are recognised when the Group has a present obligation
(legal or constructive) as a result of a past event, it is probable that an
outflow of resources embodying economic benefits will be required
to settle the obligation and a reliable estimate can be made of the
amount of the obligation.
Provisions are measured at the Directors’ best estimate of the
expenditure required to settle the obligation at the balance sheet date
and are discounted to present value where the effect is material using
a pre-tax rate that reflects current market assessments of the time
value of money and the risks specific to the liability. The unwinding of
the discount is recognised as a finance expense.
Foreign currency translation
The presentational currency of GVC Holdings PLC and the functional
currencies of its UK subsidiaries are Pounds Sterling (£).
Transactions in foreign currencies are initially recorded in Pounds
Sterling at the foreign currency rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign
currencies are retranslated at the foreign currency rate of exchange
ruling at the balance sheet date.
All foreign currency translation differences are taken to the
consolidated income statement. Non-monetary items that are
measured at historical cost in a foreign currency are translated using
the exchange rate at the date of the initial transaction. Non-monetary
items measured at fair value in a foreign currency are translated using
the exchange rate at the date when the fair value was determined.
Other than Sterling the main functional currencies of subsidiaries are
the Euro (€), the US Dollar ($) and the Australian Dollar (A$). At the
reporting date, the assets and liabilities of non-sterling subsidiaries
are translated into Pounds Sterling (£) at the rate of exchange ruling
at the balance sheet date and their income statements are translated
at the average exchange rates for the year. The post-tax exchange
differences arising on the retranslation are taken directly to other
comprehensive income.
On disposal of a foreign entity, the deferred cumulative retranslation
differences previously recognised in equity relating to that particular
foreign entity are recognised in the consolidated income statement as
part of the profit or loss on disposal.
The following exchange rates were used in 2019 and 2018:
Currency
Euro (€)
US Dollar ($)
Australian Dollar (A$)
Average
1.137
1.272
1.831
2019
Year end
1.182
1.327
1.887
Average
1.130
1.333
1.781
2018
Year end
1.113
1.268
1.810
Income tax
Deferred tax is provided on all temporary differences at the balance
sheet date, between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary
differences except:
¡ on the initial recognition of goodwill;
¡ where the deferred tax liability arises from the initial recognition
of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the
accounting profit nor the tax profit; and
¡ associated with investments in subsidiaries, joint ventures and
associates, where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary
differences and carry forward of unused tax assets and unused
tax losses, to the extent that it is probable that taxable profit will
be available against which the deductible temporary differences
and carry forward of unused tax assets and unused tax losses can
be utilised:
¡ except where the deferred tax asset relating to the deductible
temporary difference arises from the initial recognition of an asset
or liability in a transaction that is not a business combination and, at
the time of the transaction, affects neither the accounting profit nor
the tax profit; and
¡ in respect of deductible temporary differences associated with
investments in subsidiaries and associates, deferred tax assets are
only recognised to the extent that it is probable that the deductible
temporary differences will reverse in the foreseeable future
and taxable profit will be available against which the temporary
differences can be utilised.
4 Summary of significant accounting policies continued
4.3 Other accounting policies continued
Income tax continued
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
134
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 probable that sufficient taxable profit will be available to allow all or
part of the deferred tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that
are expected to apply to the year when the asset is realised or the
liability is settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted at the balance sheet date.
Deferred tax balances are not discounted.
Interest or penalties payable and receivable in relation to income tax
are recognised as an income tax expense or credit in the consolidated
income statement.
Income tax expenses are recognised within profit and loss except to
the extent that it relates to items recognised in other comprehensive
income or directly in equity, in which case it is recognised in other
comprehensive income or directly in equity.
Revenues, expenses and assets are recognised net of the amount of
sales tax except:
¡ where the sales tax incurred on a purchase of goods and services is
not recoverable from the taxation authority, in which case the sales
tax is recognised as part of the cost of acquisition of the asset or as
part of the expense item as applicable; and
¡ receivables and payables are stated with the amount of sales
tax included.
The net amount of sales tax recoverable from, or payable to, the
taxation authority is included as part of receivables or payables in the
consolidated balance sheet.
Equity instruments
Equity instruments issued by the Company are recorded at the fair
value of proceeds received net of direct issue costs.
Dividends
Final dividends proposed by the Board of Directors and unpaid at
the year end are not recognised in the financial statements until they
have been approved by shareholders at the Annual General Meeting.
Interim dividends are recognised when paid.
Revenue
The Group reports the gains and losses on all betting and gaming
activities as revenue, which is measured at the fair value of the
consideration received or receivable from customers less free bets,
promotions, bonuses and other fair value adjustments. Gross win
includes free bets, promotions and bonuses net of VAT/GST.
The Group considers revenue to be out of the scope of IFRS 15
Revenue, and rather accounts for revenue within the scope of IFRS 9
Financial Instruments.
For licensed betting offices (“LBOs”), on course betting, Core
Telephone Betting, mobile betting, Digital businesses (including
sportsbook, betting exchange, casino, games, other number bets),
revenue represents gains and losses, being the amounts staked and
fees received, less total payouts recognised on the settlement of the
event. Open betting positions are carried at fair value and gains and
losses arising on these positions are recognised in revenue.
Revenue from the online poker business reflects the net income (rake)
earned from poker games completed by the year end.
In the case of the greyhound stadia, revenue represents income arising
from the operation of the greyhound stadia in the year, including sales
of refreshments, net of VAT.
Finance expense and income
Finance expense and income arising on interest bearing financial
instruments carried at amortised cost are recognised in the
consolidated income statement using the effective interest rate
method. Finance expense includes the amortisation of fees that are
an integral part of the effective finance cost of a financial instrument,
including issue costs, and the amortisation of any other differences
between the amount initially recognised and the redemption price.
All finance expenses are recognised over the availability period.
Share-based payment transactions
Certain employees (including Directors) of the Group receive
remuneration in the form of equity settled share-based payment
transactions, whereby employees render services in exchange for
shares or rights over shares (equity settled transactions).
The cost of equity settled transactions is measured by reference to
the fair value at the date on which they are granted. Further details
of which are given in note 30. In valuing equity settled transactions,
no account is taken of any performance conditions, other than
conditions linked to the price of the shares of GVC Holdings PLC
(market conditions).
The cost of equity settled transactions is recognised in the
consolidated income statement, with a corresponding credit in
equity, over the period in which the performance conditions are
fulfilled, ending on the date on which the relevant employees become
fully entitled to the award (vesting date). The cumulative expense
recognised for equity settled transactions at each reporting date until
the vesting date reflects the extent to which the vesting period has
expired and the number of awards that, in the opinion of the Directors
of the Group at that date, based on the best available estimate of the
number of equity instruments, will ultimately vest.
No expense is recognised for awards that do not ultimately vest,
except for awards where vesting is conditional upon a market
condition, which are treated as vesting irrespective of whether or not
the market condition is satisfied, provided that all other performance
conditions are satisfied.
The dilutive effect of outstanding options is reflected as additional
share dilution in the computation of earnings per share as shown in
note 12.
135
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
4 Summary of significant accounting policies continued
4.4 Future accounting developments
The standards and interpretations that are issued, but not yet
effective, excluding those relating to annual improvements, up to the
date of issuance of the Group’s financial statements are disclosed
below. The Group intends to adopt these standards, if applicable,
when they become effective. None of these is expected to have a
significant effect on the consolidated financial statements of the
Group, except the following set out below:
Amendments to clarify the
definitions of a business
Amendments regarding
pre-placements issues in the
context of the IBROR reform
1 January 2020
1 January 2020
Original issue
1 January 2021
Amendments regarding the
definition of material
1 January 2020
IFRS 3 Business
Combinations
IFRS 7 Financial
Instruments:
Disclosures
IFRS 9 Financial
Instruments
IAS 39 Financial
Instruments:
Recognition and
Measurement
IFRS 17 Insurance
Contracts
IAS1 Presentation of
Financial Statements
IAS 8 Accounting
Policies, Changes in
accounting Estimates
and Errors
5 Segment information
The Group’s operating segments are based on the reports reviewed
by the Executive management team (which is collectively considered
to be the Chief Operating Decision Maker (“CODM”)) to make strategic
decisions, and allocate resources.
IFRS 8 requires segment information to be presented on the same
basis as that used by the CODM for assessing performance and
allocating resources, and the Group’s operating segments are now
aggregated into the five reportable segments as detailed below:
¡ Online: comprises betting and gaming activities from online
and mobile operations. Sports Brands include bwin, Coral,
Crystalbet, Eurobet, Ladbrokes and Sportingbet; Gaming Brands
include CasinoClub, Foxy Bingo, Gala, Gioco Digitale, partypoker
and PartyCasino;
¡ UK Retail: comprises betting activities in the shop estate in Great
Britain, Northern Ireland and Jersey;
¡ European Retail: comprises all retail activities connected with the
Republic of Ireland, Belgium, Italy and Spanish JV (pre disposal)
shop estates;
¡ Corporate: includes costs associated with Group functions
including Group executive, legal, Group finance, tax and
treasury; and
¡ Other segments: includes activities primarily related to telephone
betting, Stadia, Betdaq, Intertrader and on course pitches.
The Executive management team of the Group has chosen to assess
the performance of operating segments based on a measure of net
revenue, EBITDAR, EBITDA, and operating profit with finance costs
and taxation considered for the Group as a whole. See page 31 of
this annual report for further considerations of the use of Non-GAAP
measures. Transfer prices between operating segments are on
an arm’s-length basis in a manner similar to transactions with
third parties.
136
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 5 Segment information continued
The segment results for the year ended 31 December were as follows:
2019
NGR
VAT/GST
Revenue
Gross Profit
Contribution1
Operating costs excluding marketing costs
Underlying EBITDAR before separately disclosed items
Rental costs
Underlying EBITDA before separately disclosed items
Share based payments
Depreciation and Amortisation
Share of joint ventures and associates
Operating profit/(loss) before separately disclosed items
Separately disclosed items (note 6)
Group operating (loss)/profit
Net finance income
Loss before tax
Income tax
Loss for the year
2018
NGR
VAT/GST
Revenue
Gross Profit
Contribution1
Operating costs excluding marketing/ rental costs
Underlying EBITDAR before separately disclosed items
Rental costs
Underlying EBITDA before separately disclosed items
Share based payments
Depreciation and Amortisation
Share of joint ventures and associates
Operating profit/(loss) before separately disclosed items
Separately disclosed items (note 6)
Group operating (loss)/profit
Net finance expenses
Loss before tax
Income tax
Loss for the year
Online
£m
2,170.7
(54.6)
2,116.1
1,367.8
887.2
(352.2)
535.0
(1.1)
533.9
(5.5)
(116.0)
0.8
413.2
(574.7)
(161.5)
Online
£m
1,712.7
(44.3)
1,668.4
1,134.9
742.8
(289.3)
453.5
(10.1)
443.4
(2.4)
(70.7)
0.8
371.1
(503.5)
(132.4)
UK
Retail
£m
1,127.8
–
1,127.8
817.7
812.6
(585.1)
227.5
(19.6)
207.9
(1.0)
(72.7)
–
134.2
0.8
135.0
UK
Retail
£m
1,014.9
–
1,014.9
725.7
723.1
(463.7)
259.4
(66.0)
193.4
(0.1)
(32.4)
–
160.9
(50.5)
110.4
European
Retail
£m
289.8
–
289.8
143.6
138.0
(70.8)
67.2
(0.8)
66.4
(0.3)
(29.0)
1.0
38.1
(22.1)
16.0
All other
segments
£m
70.4
–
70.4
49.1
45.4
(46.0)
(0.6)
(0.1)
(0.7)
(0.1)
(1.1)
1.5
(0.4)
(2.6)
(3.0)
Elimination
of internal
revenue
£m
(3.6)
–
(3.6)
–
–
–
–
–
–
–
–
–
–
–
–
Corporate
£m
–
–
–
–
–
(46.4)
(46.4)
–
(46.4)
(5.8)
(0.4)
(12.5)
(65.1)
(97.3)
(162.4)
European
Retail
£m
211.7
–
211.7
109.9
103.4
(47.7)
55.7
(6.6)
49.1
(0.1)
(14.0)
2.7
37.7
(7.0)
30.7
All other
segments
£m
43.8
–
43.8
33.7
29.5
(27.2)
2.3
–
2.3
–
(0.4)
4.9
6.8
–
6.8
Corporate
£m
–
–
–
–
–
(47.2)
(47.2)
(0.2)
(47.4)
(8.1)
(0.2)
–
(55.7)
107.5
51.8
Elimination
of internal
revenue
£m
(3.6)
–
(3.6)
–
–
–
–
–
–
–
–
–
–
–
Total
Group
£m
3,655.1
(54.6)
3,600.5
2,378.2
1,883.2
(1,100.5)
782.7
(21.6)
761.1
(12.7)
(219.2)
(9.2)
520.0
(695.9)
(175.9)
1.7
(174.2)
33.5
(140.7)
Total
Group
£m
2,979.5
(44.3)
2,935.2
2,004.2
1,598.8
(875.1)
723.7
(82.9)
640.8
(10.7)
(117.7)
8.4
520.8
(453.5)
67.3
(86.2)
(18.9)
(37.5)
(56.4)
5 Segment information continued
Geographical information
Revenue by destination and non-current assets on a geographical basis for the Group, are as follows:
United Kingdom
2019
Non-current
assets2
£m
3,325.2
Revenue
£m
1,954.1
Revenue
£m
1,572.4
2018
Non-current
assets2
£m
3,292.3
137
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
Rest of the world
Total
1,646.4
3,600.5
2,546.3
5,871.5
1,362.8
2,935.2
3,104.4
6,396.7
1. Contribution represents gross profit less marketing costs and is a key performance metric used by the Group, particularly in Online.
2. Non-current assets excluding other financial assets, deferred tax assets and retirement benefit assets.
6 Separately disclosed items
Amortisation of acquired intangibles1
Impairment loss2
Integration costs3
Triennial restructuring costs4
Corporate transaction costs5
Tax litigation/ one-off legislative impacts6
Legal and onerous contract provisions7
Movement in fair value of contingent consideration8
Issue costs write off9
Profit on disposal of joint ventures and property, plant and equipment10
Other one-off items
Total before tax
Tax on separately disclosed items11
Separately disclosed items for the year
2019
£m
376.2
245.0
44.9
8.7
3.1
(11.6)
3.4
44.4
14.1
(19.0)
0.8
710.0
(79.9)
630.1
2018
£m
322.5
41.3
14.5
2.3
64.4
186.8
9.2
(192.5)
–
–
5.0
453.5
(19.3)
434.2
1. Amortisation charges in relation to acquired intangible assets primarily arising from the acquisitions of Ladbrokes Coral Group plc and Bwin.
2. During the current year, the Group recorded a non-cash impairment charge of £245.0m against the Online division, £243.9m in goodwill and £1.1m in PP&E. The charge has arisen in the
Group’s Australian CGU and follows the impact of unforeseen POCT in certain states/regions (e.g. New Zealand, Tasmania etc.), unexpected increases in product fees and lower pass through
to customers in mitigation of POCT than originally anticipated at the time of the Ladbrokes Coral and Neds acquisitions. Whilst the Australian business continues to grow NGR and outperform
its market with 2019 revenue growth of 22% (on a proforma basis and constant currency), the cost headwinds faced have reduced the value in use of the business resulting in the impairment
charge. Following the impact of these items which were felt throughout 2019, the Australian business is now anticipating a more stable 2020 and current performance is in line with internal
expectations. (2018: comprised a charge of £41.3m which had arisen in UK Retail following the decision to bring forward the implementation of the £2 limit on B2 machine stakes from
1 October 2019 to 1 April 2019.) See notes 14 and 15 for further details.
3. Costs associated with the integration of the Ladbrokes Coral Group and GVC businesses, including redundancy costs arising following the merger (2018: £14.5m).
4. Costs associated with the shop closure program including redundancy, consultation costs and other costs directly associated with the triennial response strategy, but excluding property
related costs which are included in 7. below.
5. The Group incurred £3.1m of corporate transaction costs in relation to acquisitions and US licensing. In the prior year £64.4m of corporate transaction costs were incurred primarily in relation
to the acquisition of Ladbrokes Coral Group plc and other smaller acquisitions.
6. Represents a £21.2m net release against the Greek tax provisions created in 2018 (see note 32) partially offset by a £5.8m cost for historic Austrian duty and £3.8m for a new UK income tax
charge effective from April 2019, from which we expect to be exempt from April 2020 once the new UK / Gibraltar double taxation agreement enters into force.
7. Legal and onerous contract provisions include onerous contracts that have arisen as a result of the closure of shops and other legal and tax provisions outside the ordinary course of business.
8. Costs associated with movements in the fair value of contingent consideration on acquisition activity from previous years. The movement in fair value of contingent consideration in 2018
primarily related to the change in market value of the CVR since the date of acquisition of Ladbrokes Coral Group plc, partially offset by movements in the fair value of contingent consideration
on other M&A activity from previous years.
Issue costs written off on the refinancing of the €1,125m loan during the second half of the year.
9.
10. Relates to a £14.7m profit on the sale of joint ventures, and £4.3m profit on disposal of property, plant and equipment.
11. The tax credit on separately disclosed items of £79.9m (2018: £19.3million) represents 11.3% (2018: 4.3%) of the separately disclosed items incurred of £710.0m (2018: £453.5m). This is lower
than the expected tax credit of 19.0% (2018: 19.0%) as goodwill impairment charges, certain corporate transaction costs and elements of integration costs and the Greek tax provision are non-
deductible for tax purposes, and following a re-assessment of the recoverability of certain deferred tax assets at the year end.
The items above reflect incomes and expenditures which are either exceptional in nature or size or are associated with the amortisation of acquired
intangibles they have been disclosed separately. The Directors believe that each of these items warrants separate disclosure as they are outside of
the underlying trade of the Group and are not expected to persist beyond the short term (excluding the amortisation of acquired intangibles).
7 Administrative costs
Profit/(loss) before tax, net finance expense and separately disclosed items has been arrived at after charging:
Betting tax and Machine Games Duty
Revenue based payments
Software royalties
Other cost of sales
Cost of sales
Salaries and payroll-related expenses (note 9)
Property expenses
138
2019
£m
793.2
325.1
60.3
43.7
1,222.3
646.1
96.0
2018
£m
543.6
296.1
63.8
27.5
931.0
489.0
159.8
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 Content and levy expenses
Marketing expenses
Depreciation and amortisation – owned assets
Depreciation and amortisation – right-of-use assets
Other operating expenses
Administrative costs
Separately disclosed operating expenses before tax (note 6)
Total
Fees payable to KPMG were as follows:
Audit and audit-related services:
Audit of the parent Company and Group financial statements
Audit of the Company’s subsidiaries
Audit-related assurance services
Non-audit services:
Corporate finance services1
Taxation service fees
Total fees
120.1
498.5
166.3
52.9
269.1
1,849.0
98.3
405.4
117.7
–
221.6
1,491.8
695.9
453.5
3,767.2
2,876.3
2019
£m
2018
£m
0.6
1.3
0.3
–
0.1
2.3
0.6
1.7
0.2
0.1
0.3
2.9
1. Fees for corporate finance services relate to work undertaken on corporate transactions and work in respect of the acquisition of Ladbrokes Coral Group plc relating to support for the public
reporting requirements of the deal.
139
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
8 Finance expense and income
Bank loans and overdrafts
Interest on lease liabilities
Issue costs write off (note 6)
Total finance expense
Interest receivable
Gains arising on financial derivatives
Gains/(losses) arising on foreign exchange on debt instruments
Net finance income/(expense)
9 Employee staff costs
The average monthly number of employees (including Executive Directors) was:
Online
UK Retail
European Retail
Other
Corporate
The number of people employed by the Group at 31 December 2019 was 24,614 (2018: 25,565).
Wages and salaries
Redundancy costs
Social security costs
Other pension costs (note 29)
Share-based payments (note 30)
2019
£m
(71.5)
(17.0)
(14.1)
(102.6)
2.4
17.6
84.3
1.7
2019
Number
5,667
17,326
1,085
530
310
24,918
2019
£m
579.2
25.1
41.4
12.8
12.7
671.2
2018
£m
(63.9)
–
–
(63.9)
1.1
58.3
(81.7)
(86.2)
2018
Number
4,180
14,053
968
422
303
19,926
2018
£m
433.0
9.8
35.0
11.2
10.7
499.7
In addition to salary, employees may qualify for various benefit schemes operated by the Group. Eligibility for benefits is normally determined
according to an employee’s length of service and level of responsibility. The amounts of some benefits are proportionate to individual salary.
Benefits may include insured benefits that can cover private healthcare for the employee and their immediate family, long-term disability,
personal accident and death in service cover. Company cars, including fuel benefits, are provided predominantly to meet job requirements but
also to certain executives.
140
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 10 Income tax (credit)/expense
Analysis of expense for the year:
Current income tax:
– UK
– overseas
– adjustments in respect of previous years
Deferred tax:
– relating to origination and reversal of temporary differences
– adjustments in respect of previous years
Income tax (credit)/expense reported in the income statement
Deferred tax credited directly to other comprehensive income
2019
£m
2.1
52.2
(3.2)
(65.6)
(19.0)
(33.5)
(36.6)
2018
£m
5.5
43.5
(2.6)
(8.9)
–
37.5
(3.8)
A reconciliation of income tax credit applicable to loss before tax at the UK statutory income tax rate to the income tax (credit)/expense for the
years ended 31 December 2019 and 31 December 2018 is as follows:
Loss before tax
Corporation tax credit thereon at 19.00%
Adjusted for the effects of:
– Lower effective tax rates on overseas earnings
– Non-deductible expenses
– Fair value adjustment to contingent consideration
– Release of Contingent Value Rights asset
– Goodwill impairment
– (Recognition of tax losses)/increase in unrecognised tax losses
– Fixed asset timing differences recognised1
– Difference in current and deferred tax rates
– Other
Adjustments in respect of prior years:
– Deferred tax prior year adjustments
– Overseas current tax adjustments
– UK current tax adjustments
Income tax (credit)/expense
Reported as:
– expense in consolidated income statement (before separately disclosed items)
– credit in consolidated income statement (tax on separately disclosed items) (note 6)
Income tax (credit)/expense
1. Included within fixed asset timing differences of £11.3m (2018: £nil) is £9.1m in relation to previously unrecognised deferred tax assets (2018: £nil).
2019
£m
(174.2)
(33.1)
(15.2)
9.3
8.4
–
46.9
(14.8)
(11.3)
(1.4)
(0.2)
(19.0)
(1.2)
(1.9)
(33.5)
46.4
(79.9)
(33.5)
2018
£m
(18.9)
(3.6)
(31.3)
52.6
5.1
2.2
–
13.5
–
1.7
(0.1)
–
3.2
(5.8)
37.5
56.8
(19.3)
37.5
141
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
10 Income tax (credit)/expense continued
Deferred tax
Deferred tax at 31 December relates to the following:
Property, plant and equipment
Intangible assets & goodwill
Retirement benefit assets
Losses
Other temporary difference
Deferred tax liabilities/(assets)
Deferred tax
liabilities
Deferred tax
assets
2019
£m
–
322.0
23.4
–
12.8
358.2
2018
£m
–
389.1
58.9
–
4.8
452.8
2019
£m
(56.1)
(17.1)
–
(33.2)
(18.0)
(124.4)
2018
£m
(36.4)
(18.8)
–
(19.8)
(1.6)
(76.6)
During the period the directors have reassessed the level of deferred tax asset recognised relating to interest charges carried forward to be
deducted against future taxable profits. Following reassessment of the amounts now expected to be utilised, a deferred tax asset has been
recognised to the extent that sufficient taxable temporary differences exist at the balance sheet date. This has resulted in a credit of £19.0m
in the year in respect of historical interest amounts, recognised within amounts in respect of prior years’ deferred tax.
Movements in deferred tax during the year ended 31 December 2019 were recognised as follows:
Net deferred tax liabilities/(assets):
At 1 January 2018
Income statement
Other comprehensive income
Acquired through business combinations
At 31 December 2018
Arising on transition to IFRS 16 (note 3)
Income statement
Other comprehensive income
Foreign exchange in other comprehensive income
At 31 December 2019
Property,
plant and
equipment
£m
–
1.6
–
(38.0)
(36.4)
(14.3)
(5.5)
0.1
–
(56.1)
Intangible
assets &
goodwill
£m
44.6
(54.2)
–
379.9
370.3
–
(58.5)
–
(6.9)
304.9
Retirement
benefit
assets
£m
–
(0.3)
(3.8)
63.0
58.9
–
1.1
(36.6)
–
23.4
Other
temporary
differences
£m
1.8
1.7
–
(0.3)
3.2
–
(7.8)
(0.6)
–
(5.2)
Losses
£m
–
42.3
–
(62.1)
(19.8)
–
(13.9)
0.5
–
(33.2)
Total
£m
46.4
(8.9)
(3.8)
342.5
376.2
(14.3)
(84.6)
(36.6)
(6.9)
233.8
142
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 10 Income tax (credit)/expense continued
Deferred tax continued
Amounts presented on the consolidated balance sheet:
Deferred tax liabilities
Deferred tax assets
Net deferred tax liability
2019
£m
358.2
(124.4)
233.8
2018
£m
452.8
(76.6)
376.2
Deferred tax assets are considered recognisable based on the ability of future offset against deferred tax liabilities or against future taxable
profits. The amount recognised in the year for deferred tax relating to losses of £13.9m has arisen following the strength of the current year
performance in UK Retail.
As at 31 December 2019, the Group had £1,437.5m (2018: £1,530.8m) of gross unrecognised deferred tax assets, consisting of £nil of
accelerated capital allowances (2018: £34.5m), £255.2m of capital losses (2018: £258.8m), £1,129.7m of trading losses (2018: £1,237.5m) and
£52.6m of deferred interest relief (£nil). These assets have not been recognised as they are not expected to be utilised in the foreseeable future.
There are no significant unrecognised taxable temporary differences associated with investments in subsidiaries.
The Group has a number of historical unresolved UK tax matters, in respect of which all amounts are fully provided, and all taxes have been paid.
Whilst certain of these matters may be resolved within the next 12 months, it is unknown whether the resolution will be in the Group’s favour.
The standard rate of UK corporation tax throughout the period was 19.0%. A reduction to the standard rate of corporation tax to 17.0%,
effective from 1 April 2020, was substantively enacted on 6 September 2017.
The deferred tax assets and liabilities are measured at the tax rates of the respective territories which are expected to apply to the year in which
the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance
sheet date. Deferred tax on retirement benefit assets is provided at 35.0%, which is the rate applicable to refunds.
11 Dividends
Pence per share
Prior year final dividend paid
Interim dividend paid
2019
pence
16.0
17.6
2018
pence
15.2
16.0
2019
Shares in
issue
number
581.9
581.9
2018
Shares in
issue
number
303.7
578.8
A proposed second interim dividend of 17.6 pence (2018: 16.0 pence) per share, amounting to £102.5m (2018: £93.1m) in respect of the year
ended 31 December 2019 was proposed by the Directors on 5 March 2020. The estimated total amount payable in respect of the final dividend
is based on the expected number of shares in issue on 5 March 2020. The 2019 interim dividend of 17.6 pence per share (£102.4m) was paid
on 20 September 2019.
The dividends represented above are exclusive of dividends paid out of non-controlling interests of £8.1m (2018: £1.4m) and dividend credits
on share options of £nil (2018: £2.5m).
143
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
12 Earnings per share
Basic earnings per share has been calculated by dividing the loss for the year attributable to shareholders of the Company of £153.7m
(2018: £62.5m) by the weighted average number of shares in issue during the year of 582.0m (2018: 513.6m).
At 31 December 2018, there were 582.3m €0.01 ordinary shares in issue.
Given the loss for the year (2018: loss), the Group recognised a basic loss per share rather than a basic earnings per share. As such, the dilutive
effects have not been considered in calculating the diluted loss per share.
The calculation of adjusted earnings per share before separately disclosed items, and for the removal of foreign exchange volatility arising
on financial instruments has also been disclosed as it provides a better understanding of the underlying performance of the Group.
Separately disclosed items are defined in note 4 and disclosed in note 6.
Total earnings per share
Weighted average number of shares (millions)
Shares for basic earnings per share
Potentially dilutive share options and contingently issuable shares
Shares for diluted earnings per share
Total profit
Loss attributable to shareholders
Gain arising from financial instruments
(Gain)/loss arising from foreign exchange debt instruments
Associated tax charge on gains arising from financial instruments and foreign exchange debt instruments
Separately disclosed items net of tax (note 6)
Adjusted profit attributable to shareholders
2019
582.0
7.3
589.3
2019
£m
(153.7)
(17.6)
(84.3)
4.1
630.1
378.6
2018
513.6
4.5
518.1
2018
£m
(62.5)
(58.3)
81.7
–
434.2
395.1
Earnings per share (pence)
Basic earnings per share
From (loss)/profit for the period
Diluted earnings per share
From (loss)/profit for the period
All numbers presented above are based on continuing activities.
Standard earnings
per share
Adjusted earnings
per share
2019
(26.4)
(26.4)
2018
(12.2)
(12.2)
2019
65.1
64.2
2018
76.9
76.3
144
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 13 Goodwill and intangible assets
Cost
At 1 January 2018
Exchange adjustment
Additions
Additions from business combinations
(restated)
Disposals
At 31 December 2018 (restated)
(see note 31)
Exchange adjustment
Additions
Disposals
At 31 December 2019
Accumulated amortisation and impairment
At 1 January 2018
Exchange adjustment
Amortisation charge
Impairment charge
Disposals
At 31 December 2018
Exchange adjustment
Amortisation charge
Impairment charge
Disposals
At 31 December 2019
Net book value
At 31 December 2018
At 31 December 2019
Goodwill
£m
Licences
£m
Software
£m
Customer
relationships
£m
Consulting &
magazine
£m
Trade-marks &
brand names
£m
1,002.0
31.6
–
2,324.4
–
3,358.0
(115.6)
–
(3.6)
3,238.8
29.6
0.3
–
–
–
29.9
(1.4)
–
243.9
–
272.4
–
–
–
15.9
(0.1)
15.8
–
–
(0.1)
15.7
–
–
0.9
4.5
(0.1)
5.3
–
1.1
–
(0.1)
6.3
266.5
3.3
99.2
151.3
(5.4)
514.9
(4.4)
114.4
(29.0)
595.9
143.2
2.5
121.8
0.6
(5.4)
262.7
(0.6)
146.1
–
(28.9)
379.3
197.2
7.6
–
751.5
–
956.3
(20.4)
–
–
935.9
78.6
2.6
231.1
–
–
312.3
(12.7)
293.6
–
–
593.2
4.4
–
–
–
–
4.4
–
–
(4.4)
–
4.4
–
–
–
–
4.4
–
–
–
(4.4)
–
173.5
8.1
–
1,773.5
–
1,955.1
(29.4)
–
–
1,925.7
26.8
0.5
33.6
–
–
60.9
(5.0)
40.5
–
–
96.4
Total
£m
1,643.6
50.6
99.2
5,016.6
(5.5)
6,804.5
(169.8)
114.4
(37.1)
6,712.0
282.6
5.9
387.4
5.1
(5.5)
675.5
(19.7)
481.3
243.9
(33.4)
1,347.6
3,328.1
2,966.4
10.5
9.4
252.2
216.6
644.0
342.7
–
–
1,894.2
1,829.3
6,129.0
5,364.4
At 31 December 2019, the Group had not entered into contractual commitments for the acquisition of any intangible assets (2018: £nil).
Included within trade-marks & brand names are £1,398.4m (2018: £1,398.4m) of intangible assets considered to have indefinite lives. These UK
Ladbrokes and Coral brands are considered to have indefinite durability that can be demonstrated and their value can be readily measured.
The brands operate in longstanding and profitable market sectors. The Group has a strong position in the market and there are barriers to entry
due to the requirement to demonstrate that the applicant is a fit and proper person with the “know-how” required to run such operations.
Goodwill reflects the value by which consideration exceeds the fair value of net assets acquired as part of a business combination including the
deferred tax liability arising on acquisitions.
Licences comprise the cost of acquired betting shop licences.
Software relates to the cost of acquired software, through purchase or business combination, and the capitalisation of internally developed and
externally acquired software.
Customer relationships, trade-marks & brand names relate to the fair value of customer lists, trade-marks & brand names acquired as part of
business combinations, primarily relating to the Bwin and Ladbrokes Coral Group plc businesses.
Refer to notes 6 and 14 for details of the impairment charge.
145
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
14 Impairment testing of goodwill and indefinite life intangible assets
An impairment loss is recognised for any amount by which an asset’s carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs to sell and its value in use. For the purposes of assessing impairment, assets are grouped
at the lowest levels for which there are separately identifiable cash flows (cash-generating units).
Within UK and European Retail, the cash generating units (“CGUs”) are generally an individual Licensed Betting Office (“LBO”) and therefore,
impairment is first assessed at this level for licences (intangibles) and property, plant and equipment, with any impairment arising booked first
to licences and then to property, plant and equipment. Since goodwill and brand names has not been historically allocated to individual LBOs,
a secondary assessment is then made to compare the carrying value of the segment against the recoverable amount with any additional
impairment then taken against goodwill.
For Online the CGU is the relevant geographical location or business unit, for example Australia, European digital (defined as websites hosted by
proprietary platforms based in European constituent countries), Digital (defined as websites hosted by GVC proprietary platforms) etc. and any
impairments are made firstly to goodwill, next to any capitalised intangible asset and then finally to property, plant and equipment.
The expected cash flows generated by the assets are discounted using appropriate discount rates that reflect the time value of money and risks
associated with the group of assets.
For both tangible and intangible assets, the future cash flows are based on the forecasts and budgets of the CGU or business discounted to
reflect time value of money. The key assumptions within the UK and European Retail budgets are OTC wagers (customer visits and spend per
visit), the average number of machines per shop, gross win per shop per week, salary increases, the potential impact of the stakes restriction
on Fixed Odds Betting Terminals (FOBT) resulting from the review by the Department for Digital, Culture, Media and Sport (DCMS) and the
fixed costs of the LBOs. The key assumptions within the budgets for Online are the number of active customers, net revenue per head, win
percentage, marketing spend, revenue shares and operating costs.
The value-in-use calculations use cash flows based on detailed, board approved, financial budgets prepared by management covering a three-
year period. These forecasts have been extrapolated over years 4 to 8 representing a declining growth curve from year 3 until the long term
forecast growth rate is reached. The growth rates used from years 4-8 range from 0% to 16%. From year 9 onwards long term growth rates used
are between 0% and 3.0% (2018: between 0% and 3.0%) and are based on the long term GDP growth rate of the countries in which the relevant
CGUs operate or the relevant outlook for the business. A 0% growth rate has been used for the UK Retail operating segment due to the ongoing
uncertainty surrounding the outlook after the triennial implementation. An 8-year horizon is considered appropriate based on the Group’s history
of underlying profit as well as ensuring there is an appropriate decline to long term growth rates from those growth rates currently observed in
our key markets.
The discount rate calculation is based on the specific circumstances with reference to the WACC and risk factors expected in the industry
in which the Group operates.
The pre-tax discount rates used and the associated carrying value of goodwill by CGU is as follows:
Goodwill
Digital
UK Retail
Australia
European Retail
European Digital
All other segments
2019
%
9.3
9.3
10.9
8.8 – 10.8
10.1 – 10.8
9.3
2018
%
9.5
9.5
11.3
8.9 – 11.1
10.5 – 11.1
9.5
2019
£m
2,045.1
76.4
326.5
154.0
334.3
33.7
2,970.0
2018
£m
2,105.1
76.4
601.5
163.4
354.6
31.4
3,332.4
It is not practical or material to disclose the carrying value of individual licences by LBO.
146
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 14 Impairment testing of goodwill and indefinite life intangible assets continued
Impairment recognised during the year
Impairments of intangible assets and property, plant and equipment are recognised as separately disclosed items.
During the current year, the Group recorded a non-cash impairment charge of £245.0m against the Online division, £243.9m in goodwill and
£1.1m in PP&E. The charge has arisen in the Group’s Australian CGU and follows the impact of unforeseen Point of Consumption tax (POCT)
in certain states/regions (e.g. New Zealand, Tasmania etc.), unexpected increases in product fees and lower pass through to customers
in mitigation of POCT than originally anticipated at the time of the Ladbrokes Coral and Neds acquisitions. Whilst the Australian business
continues to grow NGR and outperform its market with 2019 revenue growth of 22% (on a proforma basis), the cost headwinds faced have
reduced the value in use of the business resulting in the impairment charge. Following the impact of these items which were felt throughout
2019, the Australian business is now anticipating a more stable 2020 and current performance is in line with internal expectations.
Whilst the impairment charge has reduced the value at which the legacy Ladbrokes Coral businesses are carried, the Directors note that the
headroom on the IAS 36 impairment reviews of the other legacy Ladbrokes Coral CGU’s has increased significantly, with the aggregate value
in use, including Australia, greater than it was in 2018.
Sensitivity analysis
A 2pp decline in the growth rate applied to the cash flows (with other assumptions remaining constant) would result in an additional impairment
of £68.6m within the Australian CGU with no impact to the other CGUs.
A 5% decrease in all cash flows used in the discounted cash flow model for the value in use calculation (with other assumptions remaining
constant) would result in an additional impairment of £28.9m within the Australian CGU with no other to the other CGUs.
A 0.5pp increase in discount rates used in the discounted cash flow model for the value in use calculation (with all other assumptions remaining
constant) would result in an additional impairment of £50.9m within the Australian CGU with no impact to the other CGUs.
No other reasonable change in assumptions to the CGUs would cause any additional impairment.
147
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
14 Impairment testing of goodwill and indefinite life intangible assets continued
Impairment testing across the business
Licences/
franchisees
PPE & Software
Customer
Relationships
GoodWill
Brand name
Digital Impairment review
UK Retail site by site Impairment review
UK Retail - Impairment review
ROI site by site Impairment review
ROI Impairment review
Eurobet Digital Impairment review
Eurobet Retail Impairment review
Belgium Digital Impairment review
Belgium Digital Impairment review
Australia Impairment review
Intertrader Impairment review
Combined
Digital/UK Retail
Impairment
review
Eurobet
Impairment
review
Belgium
Impairment
review
Digital
UK Retail
ROI
Eurobet
Digital
Eurobet
Retail
Belgium
Digital
Belgium
Retail
Australia
Intertrader
148
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 15 Property, plant and equipment
Cost
At 1 January 2018
Exchange adjustment
Additions
Additions from business combinations
Disposals
At 31 December 2018
Arising on transition to IFRS 16 (note 3)
Exchange adjustment
Additions
Disposals
At 31 December 2019
Accumulated depreciation
At 1 January 2018
Exchange adjustment
Depreciation charge
Disposals
Impairment charge
At 31 December 2018
Arising on transition to IFRS 16 (note 3)
Exchange adjustment
Depreciation charge
Impairment
Disposals
At 31 December 2019
Net book value
At 31 December 2018
At 31 December 2019
Land and
buildings
£m
Plant and
equipment
£m
Fixtures and
fittings
£m
Right-of-use
assets
£m
4.6
0.5
9.5
20.2
(4.0)
30.8
–
(1.4)
14.5
(14.3)
29.6
1.2
0.3
12.7
(4.3)
11.4
21.3
–
(1.0)
12.2
–
(11.3)
21.2
9.5
8.4
4.7
0.4
4.6
53.2
(0.9)
62.0
–
(0.3)
17.0
(0.1)
78.6
4.2
0.2
2.9
(1.2)
0.8
6.9
–
(0.2)
9.1
–
(0.1)
15.7
55.1
62.9
54.9
2.2
81.4
100.8
(31.1)
208.2
–
(8.3)
62.2
(24.6)
237.5
44.4
1.4
37.2
(29.8)
24.0
77.2
–
(2.2)
39.9
–
(24.6)
90.3
131.0
147.2
–
–
–
–
–
–
391.9
(1.8)
54.8
(5.1)
439.8
–
–
–
–
–
–
136.7
(0.3)
52.9
1.1
–
190.4
–
249.4
Total
£m
64.2
3.1
95.5
174.2
(36.0)
301.0
391.9
(11.8)
148.5
(44.1)
785.5
49.8
1.9
52.8
(35.3)
36.2
105.4
136.7
(3.7)
114.1
1.1
(36.0)
317.6
195.6
467.9
At 31 December 2019, the Group had not entered into contractual commitments for the acquisition of any property, plant and equipment (2018: £nil).
Included within property, plant and equipment are assets held under finance leases with a cost of £18.1m (2018: £nil) and a carrying value of
£16.4m (2018: £nil).Included within fixtures, fittings and equipment are assets in the course of construction, which are not being depreciated,
of £42.7m (2018: £38.4m) relating predominantly to the new EPOS system in UK Retail. Of the £5.1m disposals of ROU assets, £4.2m relate to a
shortening of the lease term and therefore there has been a corresponding release of the IFRS 16 lease liabilities.
149
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
15 Property, plant and equipment continued
Analysis of Right-Of-Use assets:
Net book value
At 31 December 2018
Arising on transition to IFRS 16
At 31 December 2019
Depreciation charge
Year ended 31 December 2019
Land and
buildings
£m
Plant and
equipment
£m
Fixtures and
fittings
£m
–
251.6
245.0
50.6
–
3.6
4.4
2.3
–
–
–
–
Total
£m
–
255.2
249.4
52.9
An impairment charge of £1.1m (2018: £36.2m) has been made against property, plant and equipment in the year. Please see notes 6 and 14 for
further details.
16 Interest in joint venture
Cost
At 1 January 2018
Acquired through business combinations
Additions
Exchange adjustment
Share of profit after tax
At 31 December 2018
Disposals
Exchange adjustment
Share of loss after tax
At 31 December 2019
Share of joint
venture’s net
assets
£m
–
21.9
20.5
0.3
3.4
46.1
(27.4)
(1.9)
(10.8)
6.0
The joint venture represents the Group’s investment in Roar Digital LLC set up in the US in which a 50% stake is held.
On 18 October 2019, the Group sold its 50% share holding in Sportium Apuestas Deportivas S.A. for proceeds net of associated costs of £63.3m
(including accrued costs) with a carrying value of £27.4m. The consideration paid included amounts to be deferred of £21.2m relating to the
provision of certain B2B services until 2024. Accordingly, a profit on disposal of £14.7m has been recognised within separately disclosed items.
Summarised financial information in respect of the joint venture’s net assets is set out below:
Non-current assets
Cash and cash equivalents
Other current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
Group’s share of net assets
16 Interest in joint venture continued
Summarised statement of comprehensive income
Revenue
Depreciation and amortisation
Other operating expenses
Income tax
(Loss)/profit for the year
150
2019
£m
12.6
13.3
3.1
16.4
(17.0)
–
12.0
6.0
2019
£m
132.7
(5.7)
(147.5)
(1.1)
(21.6)
2018
£m
57.2
55.0
10.1
65.1
(26.5)
(3.6)
92.2
46.1
2018
£m
83.0
(6.2)
(68.0)
(2.1)
6.7
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 Group’s share of (loss)/profit
(10.8)
3.4
There are no contingent liabilities relating to the Group’s interest in the joint venture.
The risks associated with the Group’s interest in joint ventures is aligned to the same risks the Group is exposed to on the basis that they operate
wholly within the betting and gaming market.
17 Interest in associates and other investments
Cost
At 1 January 2018
Additions from business combinations
Revaluation gain
Share of profit after tax
Dividends received
Share of other comprehensive income
At 31 December 2018
Additions
Revaluation gain
Share of profit after tax
Dividends received
Share of other comprehensive income
Foreign exchange
At 31 December 2019
Share of
associates’
net assets
£m
Other
investments
£m
1.1
20.2
–
5.0
(9.4)
0.2
17.1
–
–
1.6
(1.2)
1.0
0.5
19.0
2.9
5.7
0.3
–
–
–
8.9
0.5
1.5
–
–
–
–
10.9
Total
£m
4.0
25.9
0.3
5.0
(9.4)
0.2
26.0
0.5
1.5
1.6
(1.2)
1.0
0.5
29.9
151
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
17 Interest in associates and other investments continued
Associates
Summarised financial information in respect of the associates is set out below:
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
Group’s share of net assets
Revenue for the year
Profit for the year
Other comprehensive income
Total comprehensive income
Group’s share of total comprehensive income
Further details of the Group’s associates are listed in note 33.
2019
£m
12.5
102.4
(44.4)
–
70.5
19.0
221.6
4.0
4.5
8.5
2.6
2018
£m
89.7
13.4
(34.9)
(2.2)
66.0
17.1
192.8
20.1
0.8
20.9
5.2
The financial year end of Sports Information Services (Holdings) Limited (“SIS”), an associate of the Group, is 31 March. The Group has included
the results for SIS for the 12 months ended 31 December 2019. SIS is a private company and there is no quoted market price available for
its shares.
The risks associated with associate investments is considered to be aligned to the same risks the Group is exposed to on the basis that they
operate wholly within the betting and gaming market.
Other investments of £10.9m (2018: £8.9m) consist of investments which have no fixed maturity date or coupon rate.
18 Trade and other receivables
Trade receivables
Other receivables
Finance lease receivable
Prepayments
Trade and other receivables are presented on the Balance Sheet as follows:
Current
Non-current
Total
2019
£m
2.2
415.0
4.2
59.5
480.9
2019
£m
477.6
3.3
480.9
Restated
2018
£m
5.1
308.6
–
89.0
402.7
Restated
2018
£m
402.1
–
402.1
Trade receivables are non-interest bearing and are generally on 30-90 day terms. Trade receivables are reviewed for impairment on an ongoing
basis, taking account of the ageing of outstanding amounts and the credit profile of customers. Impaired receivables, including all trade
receivables that are a year old, are provided for in an allowance account. Impaired receivables are derecognised when they are assessed
as irrecoverable.
The majority of other receivables consists of the receivable for Greek tax (see note 32), deposits with brokers and amounts receivable from
payment services providers.
152
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 19 Cash and cash equivalents
Cash and short-term deposits
Short term investments
Total cash and cash equivalents
2019
£m
390.1
–
390.1
2018
£m
421.9
2.6
424.5
Cash and cash equivalents in the consolidated statement of cash flows comprises cash at bank with a maturity of three months or less,
overdrafts net of short term investments and includes £26.9m (2018: £29.4m) held in trust in respect of customers.
20 Trade and other payables
Current trade and other payables comprise:
Trade payables
Other payables
Social security and other taxes
Accruals
21 Lease liabilities
Current
Lease liabilities
Non-current
Lease liabilities
Total lease liabilities
2019
£m
46.3
101.2
234.2
297.0
678.7
2019
£m
75.5
288.0
363.5
Restated
2018
£m
48.3
116.2
220.4
254.2
639.1
2018
£m
–
–
–
Of the lease liabilities recorded, £347.1m relates to those recognised due to the adoption of IFRS 16. Please refer to note 8 for interest expense
on the lease liabilities.
The Group’s leasing activity consists of leases on property, cars, gaming machines and office equipment. The majority of those relate to the
leasing of LBOs within the UK Retail estate.
In relation to those leases recognised under IFRS 16 (see below for more detail), each lease is reflected on the balance sheet as a right-of-use
asset and a lease liability. Variable lease payments which do not depend on an index or a rate (such as lease payments on gaming machines
based on a percentage of revenue) are excluded from the measurement of the lease liability and asset. The Group classifies its right-of-use
assets in a consistent manner to its property, plant and equipment (see Note 15).
Leases of vehicles and IT equipment are generally limited to a new lease term of 3 to 5 years. Leases of property generally have a lease term
ranging from 5 years to 10 years, with some legacy leases extending out to 20 years. Most new leases of property are now generally expected to
be limited to no more than 10 years, with a break option after no more than 5 years, except in special circumstances.
153
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
21 Lease liabilities continued
The maturity analysis of lease liabilities at 31 December 2019 is as follows:
2019
Net present value
2018
Net present value
Within
1 year
£m
75.5
1-2 years
£m
68.9
2-5 years
£m
128.2
> 5 years
£m
90.9
Total
£m
363.5
Minimum lease payments due
–
–
–
–
–
Lease payments not recognised as a liability
The Group continues to pay rents where it continues to occupy properties after the lease has expired. Payments made under such leases are
expensed on a straight-line basis. In addition, certain variable lease payments are not permitted to be recognised as lease liabilities and are
expensed as incurred.
The use of extension and termination options gives the Group added flexibility in the event it has identified more suitable premises in terms of
cost and/or location or determined that it is advantageous to remain in a location beyond the original lease term. An option is only exercised
when consistent with the Group’s regional markets strategy and the economic benefits of exercising the option exceeds the expected
overall cost.
Group as Lessor:
Finance lease receivables are included in the statement of financial position within trade and other receivables and are as follows:
Current
Non-current
The maturity analysis of lease receivables, including the undiscounted lease payments to be received are as follows:
2019
£m
0.9
3.3
2018
£m
–
–
2019
Lease payments receivable
2018
Lease payments receivable
Within
1 year
£m
0.9
1-2 years
£m
1.4
2-5 years
£m
0.6
> 5 years
£m
1.3
Total
£m
4.2
Minimum lease payments due
–
–
–
–
–
Operating lease commitments – Group as lessor
A number of the sublease agreements for unutilised space in the UK shop estate are not classified as finance leases within IFRS 16.
These non-cancellable leases have remaining lease terms of between one and nine years.
Future minimum rentals receivable under non-cancellable operating leases at 31 December are as follows:
Within one year
After one year but not more than five years
After five years
2019
£m
0.6
1.4
1.0
3.0
2018
£m
2.0
3.3
2.0
7.3
154
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 22 Interest bearing loans and borrowings
Current
Euro denominated loans
USD denominated loans
Sterling denominated loans
Non-current
Euro denominated loans
USD denominated loans
Sterling denominated loans
2019
£m
8.4
17.8
5.3
31.5
951.1
581.0
552.4
2,084.5
2018
£m
–
6.2
8.1
14.3
818.8
609.1
793.2
2,221.1
On 4 July 2019, the Group repaid £100.0m of term loans.
On 25 September 2019, the Group raised €1,125.0m of term loans repayable on 29 March 2024 at an interest rate of EURIBOR+ 2.50%. On the
same date the Group repaid loans of £175.0m and €925.0m. As a result of the repayment, £14.1m of issuance costs held against the repaid
loans were written off to separately disclosed items.
As at 31 December 2019, £460.0m of committed bank facilities were undrawn (2018: £495.0m).
23 Provisions
At 1 January 2018
Acquired through business combinations
Provided
Utilised
Released
Discount unwind
Exchange adjustment
At 31 December 2018
Effect of transition to IFRS 16 (note 3)
Provided
Utilised
Released
Reclassification
Exchange adjustment
At 31 December 2019
Property
provisions1
£m
2.9
70.7
14.4
(11.5)
(8.6)
0.6
0.1
68.6
(51.7)
9.4
(9.2)
(2.2)
(1.9)
–
13.0
Restructuring
provision2
£m
–
2.7
9.8
(9.6)
–
–
–
2.9
–
18.9
(12.7)
–
–
–
9.1
Litigation
and
regulation
provisions3
£m
3.3
30.1
119.4
(7.2)
–
–
–
145.6
–
–
(53.3)
(24.6)
1.9
(2.2)
67.4
Total
£m
6.2
103.5
143.6
(28.3)
(8.6)
0.6
0.1
217.1
(51.7)
28.3
(75.2)
(26.8)
–
(2.2)
89.5
1. The Group is party to a number of leasehold property contracts. Provision has been made against the unavoidable non-rent costs on those leases where the property is now vacant.
Provisions have been based on management’s best estimate of the minimum future cash flows to settle the Group’s obligations, taking into account the risks associated with each obligation,
discounted at a risk-free interest rate. The periods of vacant property commitments range from 1 to 16 years (2018: 1 to 17 years).As a result of the implementation of IFRS 16, the rental
elements of certain property provisions are now included within lease liabilities.
2. Restructuring provisions relate to redundancy costs provided in association with merger and acquisition activities.
3. Other provisions include legal, insurance and regulatory provisions associated with certain claims and taxes of which £49.3m relates to Greek tax. See note 32 for further details.
Of the total provisions at 31 December 2019, £73.0m (2018: £160.5m) is current and £16.5m (2018: £56.6m) is non-current.
155
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
24 Financial risk management objectives and policies
The Group’s treasury function provides a centralised service for the provision of finance and the management and control of liquidity, foreign
exchange rates and interest rates. The function operates as a cost centre and manages the Group’s treasury exposures to reduce risk in
accordance with policies approved by the Board.
The Group’s principal financial instruments comprise bank loans, overdrafts, loan notes, bonds, financial guarantee contracts, and cash and
short-term deposits, together with certain derivative financial instruments. The main purpose of these financial instruments is to raise finance
for the Group’s operations. The Group has various other financial instruments such as trade receivables, trade payables and accruals that arise
directly from its operations. Details of derivatives are set out in note 25.
It is, and has been throughout the year under review, the Group’s policy that no trading in financial instruments shall be undertaken other than
betting and gaming transactions and for the purposes of currency trading as part of the newly acquired Intertrader business. Activity of this
nature is only undertaken by the customer and is not speculative activity of the Group. The Group’s exposure to ante-post betting and gaming
transactions is not significant.
The main financial risks for the Group are exchange rate risk, interest rate risk, credit risk and liquidity risk. The Board reviews and agrees
policies for managing each of these risks and they are summarised below. The Group also monitors the market price risk arising from all
financial instruments.
Interest rate risk
The Group is exposed to interest rate risk on certain of its interest-bearing loans and borrowings and on cash and cash equivalents.
The Group’s policy for the year ended 31 December 2019 was to maintain a minimum of 20.0% (2018: 20.0%) of total borrowings at fixed interest
rates to reduce its sensitivity to movements in variable short-term interest rates. At 31 December 2019, £500.0m (2018: £500.0m) or 24.0%
(2018: 22.5%) of the Group’s borrowings were at fixed rates.
Interest on financial instruments at floating rates is repriced at intervals of less than six months. Interest on financial instruments at fixed rates is
fixed until the maturity of the instrument.
Due to reform currently being undertaken over interest rate benchmarking, there may be a possible future impact to the interest charged to the
Group annually on IBOR linked borrowings.
The table below demonstrated the sensitivity to reasonably possible changes in interest rates on income for the year when this movement is
applied to the carrying value of financial liabilities:
Effect on:
25 basis points increase
Profit before tax
2019
6.4
2018
4.8
Foreign currency risk
Given the multi-national nature of the business, the Group is exposed to foreign exchange gains and losses on its trading activities, the net
assets of its overseas subsidiaries and its non-GBP denominated financing facilities. The primary currencies that the Group is exposed to
fluctuations in are the Euro, Australian Dollar and US Dollar.
Whilst the Group does not actively hedge the foreign exposure on its trading cash flows, it continuously monitors exposures to individual
currencies, taking remediating actions as necessary to manage any significant risks as they arise. In the event that the Group anticipates large
transactions in currencies other than GBP, then forward exchange contracts are taken out to manage the potential foreign exchange exposure.
The Group’s exposure to the translation of net assets on foreign currency subsidiaries into its reporting currency are partially offset by the
opposite exposure on the Group’s financing facilities providing a natural economic hedge, even though the Group does not apply hedge
accounting. The Group’s policy on borrowings is broadly aligned to the underlying cash flows of the business.
The Group has financing facilities in GBP, Euro and US Dollars. As the Group’s overseas subsidiaries largely report in Euros, the Group has taken
out a swap contract to hedge the US dollar debt into Euros in order to align the foreign currency exposure on the Group’s financing facilities with
that on the net assets of its subsidiaries.
A 5% weakening in the Euro would reduce Group operating profit by £23.0m (2018: £13.5m) and net assets by £9.0m (2018: £24.0m).
A 5% weakening in the Australian Dollar would reduce Group operating profit by £1.2m and net assets by £27.0m (2018: £44.2m)
156
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 24 Financial risk management objectives and policies continued
Credit risk
The Group is not subject to significant concentration of credit risk, with exposure spread across a large number of counterparties
and customers.
Receivable balances are monitored on an ongoing basis. Any changes to credit terms are assessed and authorised by senior management on an
individual basis.
With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents and a loan to a joint
venture, the Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of
these instruments. Credit risk in respect of cash and cash equivalents is managed by restricting those transactions to banks that have a defined
minimum credit rating and by setting an exposure ceiling per bank.
The Group also has exposure to credit risk arising from the financial guarantee contracts provided by the Group. This risk is partly mitigated
by the indemnity received from Hilton Hotels Corporation for any loss incurred in connection with these guarantees. For further detail of these
guarantees refer to note 25.
Liquidity risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of borrowings with a range of
maturities. The Group’s policy on liquidity is to ensure that there are sufficient medium-term and long-term committed borrowing facilities
to meet the medium-term funding requirements. At 31 December 2019, there were undrawn committed borrowing facilities of £460.0m
(2018: £495.0m). Total committed facilities had an average maturity of 4.0 years (2018: 5.0 years).
The total gross contractual undiscounted cash flows of financial liabilities, including interest payments, fall due as follows. Cash flows in respect
of financial guarantee contracts reflect the probability weighted cash flows.
2019
Interest bearing loans and borrowings
Other financial liabilities
Trade and other payables
Lease liabilities
Total
2018
Interest bearing loans and borrowings
Other financial liabilities
Trade and other payables
Total
On demand
or within
1 year
£m
103.1
27.3
444.5
89.9
664.8
On demand
or within
1 year
£m
84.2
24.2
638.3
746.7
1-2 years
£m
262.8
160.0
–
83.6
506.4
1-2 years
£m
181.9
161.2
–
343.1
2-5 years
£m
2,006.6
0.6
–
145.5
2,152.7
2-5 years
£m
950.1
0.6
–
950.7
> 5 years
£m
–
1.2
–
103.2
104.4
> 5 years
£m
1,441.4
1.4
–
1,442.8
Total
£m
2,372.5
189.1
444.5
422.2
3,428.3
Total
£m
2,657.6
187.4
638.3
3,483.3
The Group secures the use of its retail premises primarily through taking out leases for these premises. Typically, the leases are for a duration
between 5 and 20 years. In respect of the UK property portfolio there is commonly a right to renew leases on expiry, by virtue of the Landlord
and Tenant Act 1954. Details of discounted contractual cash flows of leasing liabilities are set out in note 21.
Capital risk management
The primary objective of the Group’s capital management is to ensure that it maintains a credit quality that enables the Group to raise funds at
an economic interest rate and to maintain healthy capital ratios in order to support its business and maximise shareholder value. The Group
manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital
structure, the Group may adjust the dividend payment to shareholders, adjust borrowings, return capital to shareholders or issue new shares.
The Group monitors capital using a net debt to proforma EBITDA ratio (before separately disclosed items). The ratio at 31 December 2019 was
2.9 times (2018: 2.5 times).
The Group’s funding policy is to raise funds centrally to meet the Group’s anticipated requirements. These are planned so as to mature at
different stages in order to reduce refinancing risk. The Board reviews the Group’s capital structure and liquidity periodically.
157
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
25 Financial instruments and fair value disclosures
The table below analyses the Group’s financial instruments into their relevant categories:
31 December 2019
Assets
Non-current:
Other investments
Other financial assets
Current:
Trade and other receivables
Derivative financial instruments
Cash and short-term investments (including customer funds)
Total
Liabilities
Current:
Customer balances
Interest bearing loans and borrowings
Trade and other payables
Other financial liabilities1
Lease liabilities (note 21)
Non-current:
Interest bearing loans and borrowings
Other financial liabilities1
Lease liabilities (note 21)
Total
Net financial assets/(liabilities)
Assets/
(liabilities)
at fair value
through
profit loss
£m
Assets
at fair value
through other
comprehensive
income
£m
4.2
–
–
47.4
–
51.6
–
–
–
(30.7)
–
–
(123.4)
–
(154.1)
(102.5)
4.9
–
–
–
–
4.9
–
–
–
–
–
–
–
–
–
4.9
Total
£m
10.9
2.1
301.1
47.4
390.1
751.6
(335.4)
(31.5)
(444.5)
(30.7)
(75.5)
(2,084.5)
(125.8)
(288.0)
(3,415.9)
(2,664.3)
Amortised
cost
£m
1.8
2.1
301.1
–
390.1
695.1
(335.4)
(31.5)
(444.5)
–
(75.5)
(2,084.5)
(2.4)
(288.0)
(3,261.8)
(2,566.7)
158
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 25 Financial instruments and fair value disclosures continued
31 December 2018
Assets
Non-current:
Other investments
Other financial assets
Current:
Trade and other receivables
Derivative financial instruments
Other financial assets
Cash and short-term investments (including customer funds)
Total
Liabilities
Current:
Customer balances
Trade and other payables
Interest bearing loans
Other financial liabilities1
Non-current:
Interest bearing loans and borrowings
Other financial liabilities1
Total
Net financial assets/(liabilities)
Assets/
(liabilities)
at fair value
through
profit loss
£m
Assets
at fair value
through other
comprehensive
income
£m
2.6
–
–
43.3
3.4
–
49.3
–
–
–
(16.3)
–
(108.5)
(124.8)
(75.5)
4.9
–
–
–
–
–
4.9
–
–
–
–
–
–
–
4.9
Total
£m
8.9
1.5
314.0
43.3
3.4
424.5
795.6
(312.5)
(417.9)
(14.3)
(16.3)
(2,221.1)
(143.5)
(3,125.6)
(2,330.0)
Amortised
cost
£m
1.4
1.5
314.0
–
–
424.5
741.4
(312.5)
(417.9)
(14.3)
–
(2,221.1)
(35.0)
(3,000.8)
(2,259.4)
1. Other financial liabilities include £134.0m deferred and contingent consideration (2018: £109.2m), £nil due to the Playtech agreement described below (2018: £35.0m), £2.4m of financial
guarantees (2018: £2.6m) and £20.1m of ante-post liabilities (2018: £12.9m).
159
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
25 Financial instruments and fair value disclosures continued
Playtech Plc
During the year, the Group renegotiated its contract with Playtech as part of the integration of the legacy GVC and Ladbrokes Coral businesses.
The renegotiated contract extinguishes the previous £35.0m payable to Playtech Plc.
Fair value hierarchy
IFRS 13 requires financial assets and liabilities recorded at fair value to be categorised in three levels according to the inputs used in the
calculation of their fair value:
¡ Level 1 – uses quoted prices as the input to fair value calculations
¡ Level 2 – uses inputs other than quoted prices, that are observable either directly or indirectly
¡ Level 3 – uses inputs that are not observable
The following tables illustrate the Group’s financial assets and liabilities measured at fair value after initial recognition at 31 December 2019 and
31 December 2018:
Assets measured at fair value
Other investments
Derivative financial instruments
Total
Liabilities measured at fair value
Other financial liabilities
Total
Net assets/(liabilities) measured at fair value
Assets measured at fair value
Other investments
Derivative financial instruments
Other financial assets
Total
Liabilities measured at fair value
Other financial liabilities
Total
Net assets/(liabilities) measured at fair value
Level 1
£m
Level 2
£m
Level 3
£m
(154.1)
(149.2)
(154.1)
(97.6)
2019
Total
£m
9.1
47.4
56.5
2018
Total
£m
7.5
43.3
3.4
54.2
4.9
–
4.9
4.9
–
3.4
8.3
(124.8)
(124.8)
(116.5)
(124.8)
(124.8)
(70.6)
–
–
–
–
–
4.2
47.4
51.6
–
51.6
–
43.3
–
43.3
–
–
43.3
2.6
–
–
2.6
–
–
2.6
Level 1
£m
Level 2
£m
Level 3
£m
There have been no transfers of assets or liabilities recorded at fair value between the levels of the fair value hierarchy.
Included within other financial assets and derivative financial instruments measured at fair value is: the Group’s currency swaps held against
debt instruments £47.4m (2018: £43.3m), investment in Hui 10, designated as fair value through other comprehensive income, of £4.9m
(2018:£4.9m) and a convertible equity instrument with Visa Inc. for £4.2m (2018: £2.6m). The fair value of the investment at 31 December 2019
is not materially different to its original cost.
Contingent consideration
Contingent consideration arises through business combinations, the fair value for which is reassessed at each reporting date using updated
inputs and assumptions based on the latest financial forecasts of each respective business. As at 31 December 2019, contingent consideration
included within other financial liabilities was £134.0m (2018: £109.2m) arising from the historical transactions involving Mars LLC, Neds
International Pty Limited, Sigma Booking Limited, Argon Financial Limited and Dusk Till Dawn Limited. The historical amounts related to the
Zatrix acquisition were settled in full during the year ended 31 December 2019.
160
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 25 Financial instruments and fair value disclosures continued
Ante-post
Ante-post liabilities are valued using methods and inputs that are not based upon observable market data. There are no reasonably probable
changes to assumptions or inputs that would lead to material changes in the fair value determined, although the final value will be determined by
future sporting results. The principal assumptions relate to anticipated gross win margins on unsettled bets.
Financial Guarantee Contracts
Financial guarantee contracts of £2.4m (2018: £2.6m), were acquired through the acquisition of Ladbrokes Coral Group plc. These are classified as
level 3 financial instruments as their fair value is measured using techniques where the significant inputs are not based on observable market data.
26 Net debt
The components of the Group’s net debt are as follows:
Current assets
Cash and short-term deposits
Current liabilities
Interest bearing loans and borrowings
Non-current liabilities
Interest bearing loans and borrowings
Accounting net debt
Cash held on behalf of customers
Fair value swaps held against debt instruments (derivative financial assets)
Balances held with brokers
Balances held with payment service providers
Short term investments
Adjusted net debt
Lease liabilities
Net debt including lease liabilities
2019
£m
2018
£m
390.1
421.9
(31.5)
(14.3)
(2,084.5)
(1,725.9)
(335.4)
47.4
129.1
78.5
–
(1,806.3)
(363.5)
(2,169.8)
(2,221.1)
(1,813.5)
(312.5)
43.3
93.6
89.9
2.6
(1,896.6)
–
(1,896.6)
Of the lease liabilities included, £347.1m have arisen as a result of the adoption of IFRS 16.
Cash held on behalf of customers represents the outstanding balance due to customers in respect of their online gaming wallets.
161
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
27 share capital
Authorised:
At 31 December 2018 and 31 December 2019
Issued and fully paid:
At 1 January 2018
Exercise of share options
Allotment of shares
Issue of shares to fund acquisition of Ladbrokes Coral Group plc
At 31 December 2018
Exercise of share options
At 31 December 2019
Number of €0.01
ordinary shares
Total
€m
Total
£m
773,000,000
303,726,475
3,873,132
2,444,150
271,826,514
581,870,271
461,675
582,331,946
7.7
3.0
0.1
–
2.7
5.8
–
5.8
2019
£m
(175.9)
245.0
(19.0)
114.1
481.3
12.7
2.6
2.8
(92.0)
(30.5)
29.5
(73.7)
(3.0)
9.2
40.6
543.7
6.4
2.3
0.1
–
2.4
4.8
–
4.8
2018
£m
67.3
41.3
–
52.8
387.4
6.3
–
(1.0)
(80.0)
(1.9)
16.5
106.8
0.7
(8.2)
(192.5)
395.5
The Company’s share capital consists entirely of ordinary shares, accordingly all shares rank pari passu in all respects.
See note 30 for further information on terms and amounts of shares reserved for issue under options.
28 Notes to the statement of cash flows
28.1 Reconciliation of (loss)/profit to net cash inflow from operating activities:
(Loss)/profit before tax and net finance expense including discontinued operations
Adjustments for:
Impairment
Profit on disposal
Depreciation of property, plant and equipment
Amortisation of intangible assets
Share based payments charge
Decrease in short term investments
Decrease/(increase) in other financial assets
Decrease/(increase) in trade and other receivables
Decrease in other financial liabilities
(Decrease)/increase in trade and other payables
(Decrease)/increase in provisions
Non-cash movements relating to pensions
Share of results from joint venture and associate
Other non-cash items
Cash generated by operations
162
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 28 Notes to the statement of cash flows continued
28.2 Reconciliation of movements of liabilities to cash flows arising from financing activities:
Balance at 1 January
Arising on adoption of IFRS 16
Restated at 1 January
Changes from financing cash flows
Proceeds from borrowings, net of issue costs
Repayment of borrowings
Payment of lease liabilities1
Total changes from financing cash flows
Changes arising from obtaining control
of Ladbrokes Coral Group plc
The effect of changes in foreign exchange
Other changes
Interest expense
Interest paid
New finance leases
Finance fees
Remeasurement adjustments
Total other changes
Balance at 31 December
Other
loans and
borrowings
2,235.4
–
2,235.4
1,032.9
(1,099.1)
–
(66.2)
–
(84.3)
72.5
(54.5)
–
13.1
–
31.1
2,116.0
Lease
liabilities
–
379.3
379.3
–
–
(78.5)
(78.5)
–
(2.1)
16.8
(16.8)
72.9
–
(8.1)
64.8
363.5
2019
£m
Total
2,235.4
379.3
2,614.7
1,032.9
(1,099.1)
(78.5)
(144.7)
–
(86.4)
89.3
(71.3)
72.9
13.1
(8.1)
95.9
2,479.5
Other
loans and
borrowings
262.5
–
–
Finance
lease
liabilities
–
–
–
1,366.0
(664.9)
–
701.1
1,197.3
66.7
58.3
(56.1)
–
5.6
–
7.8
2,235.4
–
–
(1.1)
(1.1)
1.1
–
–
–
–
–
–
–
–
2018
£m
Total
262.5
–
–
1,366.0
(664.9)
(1.1)
700.0
1,198.4
66.7
58.3
(56.1)
–
5.6
–
7.8
2,235.4
1. In addition to the above, the Group received £0.8m (2018: £nil) in respect of finance lease receivables resulting in a net repayment of finance leases of £77.7m (2018: £1.1m).
Non cash movements include amounts acquired as a result of business combinations and the amortisation of issue costs incurred in respect
of debt instruments.
29 Retirement benefit schemes
Defined contribution schemes
During the year, the Group charged contributions of £14.0m (2018: £10.3m) to the consolidated income statement in relation to the defined
contribution pension schemes.
Defined benefit plans
Judgement is applied, based on legal, actuarial, and accounting guidance in IFRIC 14, regarding the amounts of net pension asset that is
recognised in the consolidated balance sheet.
The Group has two significant defined benefit plans, the Ladbrokes Pension Plan and the Gala Coral Pension Plan. Both are final salary pension
plans for UK employees. These are closed to new employees and future accrual.
At retirement, each member’s pension is related to their final pensionable salary for the Ladbrokes Pension Plan and their “career average
earnings” for the Gala Coral Pension Plan. The weighted average duration of the expected benefit payments from the Plan is around 17 years
(2018: 17 years) for Ladbrokes Pension Plan and 21 years (2018: 21 years) for the Gala Coral Pension Plan.
The Plans’ assets are held separately from those of the Group. The Plans are approved by HMRC for tax purposes, and are managed by an
independent set of Trustees. The Plans are subject to UK regulations, which require the Group and Trustees to agree a funding strategy and
contribution schedule at least every three years. Under the current contribution schedule in place, the Group does not pay contributions to the
Ladbrokes Pension Plan or Gala Coral Pension Plan but are paying the administrative costs related to the Gala Coral Pension Plan scheme.
There is a risk to the Group that adverse circumstances could lead to a requirement for the Group to make additional contributions to recover
any deficit that arises. As at the date of signing the financial statements no such event has arisen.
163
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
29 Retirement benefit schemes continued
The results of the formal actuarial valuation as at 30 June 2016 for the Ladbrokes Pension Plan and 30 June 2019 for the Gala Coral Pension
Plan were updated to 31 December 2019 by an independent qualified actuary in accordance with IAS 19 (Revised) Employee Benefits. The value
of the defined benefit obligation and current service cost have been measured using the projected unit credit method, as required by IAS 19
(Revised). Actuarial gains and losses are recognised immediately through other comprehensive income.
During the year, the Group undertook a pension buy-in on the Ladbrokes pension scheme with the assets of the scheme replaced with an
insurance policy against the payment of future liabilities. As a result of the buy-in, the Group recorded an actuarial loss of £81.3m which has
been recognised within the Statement of Comprehensive Income. An associated deferred tax credit of £28.5m has also been recognised in the
Statement of Other Comprehensive Income.
The amounts recognised in the balance sheet are as follows:
Present value of funded obligations
Fair value of plan assets
Net asset
Disclosed in the balance sheet as: Retirement
benefit asset
2019
(Coral)
£m
(396.0)
455.9
59.9
2019
(Ladbrokes)
£m
(357.5)
364.2
6.7
2019
Total
£m
(753.5)
820.1
66.6
2018
(Coral)
£m
(358.9)
418.1
59.2
2018
(Ladbrokes)
£m
(316.6)
425.6
109.0
2018
Total
£m
(675.5)
843.7
168.2
59.9
6.7
66.6
59.2
109.0
168.2
The Group has considered the appropriate accounting treatment in respect of the pension plan surplus, taking into account the current
agreement with the Trustees and concluded the recognition of the surplus is appropriate.
The amounts recognised in the income statement are as follows:
Analysis of amounts charged to the Income Statement
Separately disclosed items
Other administrative expenses
Net interest on net asset
Total charge/(credit) recognised in the Income Statement
2019
(Coral)
£m
2019
(Ladbrokes)
£m
–
–
(1.7)
(1.7)
0.8
0.8
(2.9)
(1.3)
The actual return on plan assets over the year was a £5.5m gain (2018: £11.6m loss).
The amounts recognised in the statement of comprehensive income are as follows:
2019
Total
£m
0.8
0.8
(4.6)
(3.0)
2019
Total
£m
(17.4)
1.4
(84.9)
(3.7)
2018
(Coral)
£m
2018
(Ladbrokes)
£m
2.2
–
(1.0)
1.2
1.9
–
(2.2)
(0.3)
2018
(Coral)
£m
(15.8)
2018
(Ladbrokes)
£m
(11.6)
–
13.0
–
–
3.5
–
2018
Total
£m
4.1
–
(3.2)
0.9
2018
Total
£m
(27.4)
–
16.5
–
2019
(Coral)
£m
39.0
2019
(Ladbrokes)
£m
(56.4)
5.5
(49.0)
3.5
(4.1)
(35.9)
(7.2)
(1.0)
(103.6)
(104.6)
(2.8)
(8.1)
(10.9)
Actual return on assets less interest on plan assets
Actuarial gains/(losses) on defined benefit obligation
due to changes in demographic assumptions
Actuarial (losses)/gains on defined benefit obligation
due to changes in financial assumptions
Experience adjustments on benefit obligation
Actuarial losses recognised in the statement
of comprehensive income
164
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 29 Retirement benefit schemes continued
Changes in the present value of the defined benefit obligation are as follows:
At 1 January
On acquisition of Ladbrokes Coral Group plc
Interest on obligation
Actuarial gains/(losses) due to changes
in demographic assumptions
Actuarial (losses)/gains due to changes
in financial assumptions
Experience adjustments on obligations
GMP equalisation reserve
Benefits paid
At 31 December
Changes in the fair value of plan assets are as follows:
At 1 January
On acquisition of Ladbrokes Coral Group plc
Interest on plan assets
Administrative expenses
Actual return less interest on plan assets
Buy in project costs
Benefits paid
At 31 December
2019
(Coral)
£m
(358.9)
–
(9.9)
2019
(Ladbrokes)
£m
(316.6)
–
(8.4)
2019
Total
£m
(675.5)
–
(18.3)
2018
(Coral)
£m
–
(375.3)
(6.8)
2018
(Ladbrokes)
£m
–
(323.1)
(5.8)
2018
Total
£m
–
(698.4)
(12.6)
5.5
(4.1)
1.4
–
–
–
(49.0)
3.5
–
12.8
(396.0)
2019
(Coral)
£m
418.1
–
11.6
–
39.0
–
(12.8)
455.9
(35.9)
(7.2)
–
14.7
(357.5)
2019
(Ladbrokes)
£m
425.6
–
11.3
(1.6)
(56.4)
–
(14.7)
364.2
(84.9)
(3.7)
–
27.5
(753.5)
2019
Total
£m
843.7
–
22.9
(1.6)
(17.4)
–
(27.5)
820.1
13.0
–
(2.2)
12.4
(358.9)
2018
(Coral)
£m
–
438.5
7.8
–
(15.8)
–
(12.4)
418.1
3.5
–
(1.6)
10.4
(316.6)
2018
(Ladbrokes)
£m
–
439.9
8.0
–
(11.6)
(0.3)
(10.4)
425.6
16.5
–
(3.8)
22.8
(675.5)
2018
Total
£m
–
878.4
15.8
–
(27.4)
(0.3)
(22.8)
843.7
The Group does not expect to contribute to either plan in 2020. The Group will however continue to meet the administrative expenses of the Gala
Coral Pension Plan scheme.
The major categories of plan assets as a percentage of total plan assets are as follows:
Equities and Diversified Growth Funds
Insurance policy
Liability Driven Investment (%)
Private credit
Cash
2019
(Coral)
%
25.4
–
72.4
1.8
0.5
2019
(Ladbrokes)
%
–
98.2
1.2
–
0.7
2018
(Coral)
%
18.4
–
81.3
–
0.3
2018
(Ladbrokes)
%
19.8
–
24.3
–
55.9
The Plan assets are held exclusively within instruments with quoted market prices in an active market with the exception of the holdings in an
insurance policy and a private credit asset. At 31 December 2019, these represented c.44.6% (2018: c.0.2%) of the Plan’s total assets.
The Plan does not invest directly in property occupied by the Group or in financial securities issued by the Group. Although, as the Plan holds
pooled investment vehicles, there may at times be indirect employer related investment. At 31 December 2019, these represented less than 0.1%
(2018: 0.1%) of the Plan’s total assets.
The investment strategy is set by the Trustees of the Plans in consultation with the Group. For the Gala Coral Plan the current long-term strategy
is to invest in a low-risk matching bond portfolio with a relatively small investment in return seeking funds.
165
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
29 Retirement benefit schemes continued
Principal actuarial assumptions at the balance sheet date (expressed as weighted averages where appropriate):
Discount rate
Price inflation (CPI)
Price inflation (RPI)
Future pension increases – LPI 5% (CPI)
– LPI 3% (RPI)
– LPI 2.5% (CPI)
2019
(Coral)
% p.a.
2.0
2.1
2.9
2.8
2.3
1.7
2019
(Ladbrokes)
% p.a.
2.0
2.1
2.9
2.8
2.3
1.7
2018
(Coral)
% p.a.
2.8
2.2
3.2
3.1
2.4
2.1
2018
(Ladbrokes)
% p.a.
2.7
2.2
3.2
3.1
2.4
2.1
Post-retirement mortality assumed for most members is based on the standard SAPS mortality table with the CMI 2018 projections for the Gala
Coral Pension Plan, and 2016 projections for the Ladbrokes Pension Plan, which takes into account future improvements, adjusted to reflect plan
specific experience.
The assumption used implies that the expected lifetime of members for the two schemes is:
Male aged 65 for the year ended
Female aged 65 for the year ended
2019
(Coral)
2019
(Ladbrokes)
2018
(Coral)
2018
(Ladbrokes)
86.4
88.5
86.7
88.7
86.8
88.8
86.6
88.6
Changes to the assumptions will impact the amounts recognised in the consolidated balance sheet and the consolidated income statement in
respect of the Plan. For the significant assumptions, the following sensitivity analysis provides an indication of the impact on the defined benefit
obligation for the year ended 31 December 2019:
– 0.5% p.a. decrease in the discount rate
– 0.5% p.a. increase in price inflation
– One year increase in life expectancy
2019
(Coral)
%
9.9
7.3
4.0
2019
(Ladbrokes)
%
8.8
5.2
3.6
2018
(Coral)
%
9.7
6.9
3.8
2018
(Ladbrokes)
%
7.9
4.5
3.6
These sensitivities have been calculated to show the movement in the defined benefit obligation in isolation, and assuming no other changes
in market conditions at the accounting date. This is unlikely in practice, for example, a change in discount rate is unlikely to occur without any
movement in the value of the assets held by the Plan.
30 Share-based payments
The following options to purchase €0.01 Ordinary Shares in the Group were granted, exercised forfeited or existing at the year-end:
Date of grant
16 Dec 2016
30 Mar 2017
28 Dec 2017
19 Sep 2018
26 Mar 2019
Total Schemes
Exercise
price
422p
422p
0p
0p
0p
Existing at
1 January
2019
3,665,022
175,000
563,627
1,890,211
–
6,293,860
Granted
in the year
–
–
–
–
3,404,563
3,404,563
Cancelled
or forfeited
in the year
–
–
–
–
–
–
Exercised
in the year
(461,675)
–
–
–
–
(461,675)
Existing at
31 December
2019
3,203,347
175,000
563,627
1,890,211
3,404,563
9,236,748
Exercisable at
31 December
2019
3,203,347
175,000
–
–
–
3,378,347
Vesting
criteria
Note a
Note a
Note b
Note c
Note d
166
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 30 Share-based payments continued
Note a:
2016 MIP Scheme – These equity settled awards were issued on completion of the acquisition of bwin.party. The options vest and
became 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.
Note b:
Note c:
Note d:
2017 LTIP Scheme – These equity settled awards were awarded to certain Directors and employees and vest over a three-year period
from the date of grant. The number of awards to vest are conditional on both cumulative Earnings Per Share (“EPS”) exceeding
180 euro cents, with a pro-rata increase in the amount vesting between 180 cents and 214 cents, and TSR performance conditions
being met which are split with equal weighting.
2018 LTIP Scheme – These equity settled awards were awarded to certain Directors and employees and vest over a three-year period
from the date of grant. The number of awards to vest are conditional on both cumulative 3 year Earnings Per Share (“EPS”) exceeding
191p, with a pro-rata increase in the amount vesting between 191p and 224p, and TSR performance conditions being met which are
split with equal weighting.
2019 LTIP Scheme – These equity settled awards were awarded to certain Directors and employees and vest over a three-year period
from the date of grant. The number of awards to vest are conditional on both cumulative 3 year Earnings Per Share (“EPS”) exceeding
184p, with a pro-rata increase in the amount vesting between 184p and 214p, and TSR performance conditions being met which are
split with equal weighting.
The charge to share-based payments within the consolidated income statement in respect of these options in 2019 was £12.7m (2018: £10.7m)
of which £12.7m related to equity settled options (2018: £10.2m) and £nil to cash settled options (2018: £0.5m).
Weighted average exercise price of options
The number and weighted average exercise prices of share options are as follows:
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Outstanding at the end of the year
Exercisable at the end of the year
Weighted
average
exercise price
31 December
2019
263p
0p
422p
154p
422p
Number
of options
31 December
2019
6,293,860
3,404,563
(461,675)
9,236,748
3,378,347
Weighted
average
exercise price
31 December
2018
416p
0p
429p
263p
422p
Number
of options
31 December
2018
10,720,930
1,890,211
(6,317,281)
6,293,860
3,840,022
The options outstanding at 31 December 2019 have a weighted average contractual life of 3.8 years (31 December 2018: 5.4 years).
Valuation of options
The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted.
The Group engaged third-party valuation specialists to provide a fair value for the options.
The 2018 and 2019 LTIP plan was valued using both a Black Scholes valuation model and Monte Carlo valuation for the cumulative EPS and TSR
conditions respectively.
Fair value of share options and assumptions:
Date of grant
Dec 16
Mar 17
Dec 17
Sep 18
Mar 19
Share price at
date
of grant
(£)
6.48
7.28
9.34
9.14
4.96
Exercise
price
(£)
4.22
4.22
–
–
–
Expected
volatility
%
28%-30%
28%-30%
26.6%
33.7%
31.54%
Exercise
multiple
n/a
n/a
n/a
n/a
n/a
Expected
dividend
yield
n/a
n/a
n/a
n/a
n/a
Risk
free rate
%
–
–
0.4%
0.95%
0.66%
Fair value at
measurement
date
(£)
1.43 – 1.94
1.88 – 2.39
7.39 – 9.34
4.58 – 9.14
1.90 – 4.96
167
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
31 Business Combinations
Business combinations are accounted for using the acquisition method. Identifiable assets and liabilities acquired and contingent liabilities
assumed in a business combination are measured at their fair values at the acquisition date. The identification and valuation of intangible assets
arising on business combinations is subject to a degree of judgement. In respect of these acquisitions the Group engaged independent third
parties, including Duff and Phelps Limited to assist with the identification and valuation process. This was performed in accordance with the
Group’s policies. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable assets acquired is recorded as
goodwill. Costs related to the acquisition are expensed as incurred.
Due to the timing of certain acquisitions in relation to the previous financial year end, the fair values applied to the goodwill acquired was
considered to be provisional. Since the initial fair value, certain measurement period adjustments have been applied as follows:
Neds International Pty Limited
The initial fair value of goodwill recognised was £26.1m on acquisition. Subsequent to this a measurement period adjustment has been applied
to reduce the goodwill balance from £26.1m to £19.5m, increase customer relationships £5.8m to £13.5m, increase trade-marks & brand names
from £9.3m to £9.5m and reduce other assets and liabilities by £1.3m.
Sigma Booking Limited
The initial fair value of goodwill recognised was £9.8m on acquisition. Subsequent to this a measurement period adjustment has been applied to
increase the goodwill balance from £9.8m to £12.1m, increase customer relationships from £3.1m to £7.0m, reduce trade-marks & brand names
from £6.6m to £0.1m and increase other assets and liabilities by £0.3m.
Due to these measurement period adjustments, in line with IFRS 3Business Combinations it has been necessary to present a restated 2018
balance sheet and related notes to the accounts for those balances affected.
32 Commitments and Contingencies
Contingent liabilities
Guarantees have been given in the ordinary course of business in respect of loans and derivative contracts granted to subsidiaries amounting
to £500.0m (2018: £503.3m). Bank guarantees have been issued on behalf of subsidiaries with a value of £47.0m (2018: £51.3m) and the joint
venture with a value of £nil (2018: £13.9m).
The Group has given guarantees to third parties in respect of lease liabilities of former subsidiaries within the disposed hotels division (Note 25).
Greek tax
In the year ended 31 December 2018, the Group recognised a charge of £186.8m in the Income Statement within non-trading items for potential
Greek tax liabilities for the years 2010 to 2017. Of the charge recognised, €51.4m (£46.1m) related to 2010/11 for which the Group received an
assessment of €186.8m in 2017.
2010/11
The Group’s appeal against the original assessment in respect of 2010 and 2011 was heard before the Administrative Court of Appeal in Athens
on 13 January 2020. Whilst we do not expect to hear the verdict until mid 2020, the Directors remain confident that the Court will find that the
original assessment was out of all proportion to the size of the Group’s Greek business at the time.
By 31 December 2019, the Group had paid all bar €8m of the 2010/2011 Assessment with the last payment made in January 2020. As at
31 December 2019, the total payments made in respect of the Assessment exceed our best estimate of the liability for these years by £116m,
and accordingly this is recorded as a receivable in the Group’s balance sheet (2018: £41.4m). In the event of a successful appeal, recovery of the
debtor will be through either a repayment or an ability to offset future tax liabilities.
2012-2017
The enquiries from the Greek tax authorities into the subsequent years continued throughout 2019. By 31 December 2019, the Group had filed
amended returns in respect of 2012-2017. The audits for 2012-2014 have been completed and all resultant liabilities settled. Based on the
experience of the settlements reached so far, the Group has reassessed the provision carried against 2015-2017 and now holds a provision of
£49.3m against these years (2018: £119.4m).
The statutory window in Greece for the tax authorities to conclude their audit work is generally six years from the end of the relevant tax year.
As such, the conclusions of the tax audits and any associated tax payments remains uncertain.
UK VAT claims
The Group has submitted refund claims in respect of VAT paid on certain gaming machines in UK Retail prior to February 2013, the success
of which is reliant on the outcome of court proceedings involving two other operators. The latest hearing before the Upper Tribunal (the UK’s
second-tier tax court) took place in January 2020 and we are awaiting the verdict, which could be appealed further. It is possible that the cases
may take several years to be finally determined.
If the UK tax courts ultimately find in favour of the other operators (and therefore also GVC), the Group expects to receive a refund
of approximately £200m. Given the inherent uncertainty surrounding a claim of this nature, no receivable has been recognised at
31 December 2019.
168
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 32 Commitments and Contingencies continued
Austrian betting and gaming taxes
Since the acquisition of bwin.party in 2016, the Group has fully provided for, but not fully paid, betting and gaming taxes on Austrian revenues
as a result of ongoing litigation over the Austrian authority’s right to charge taxes on overseas companies. As at 31 December 2019, the amount
accrued by the Group amounts to €91m. The litigation is expected to be resolved during 2020.
33 Related party disclosures
Other than its associates and joint venture, the related parties of the Group are the Executive Directors, Non-executive Directors and members of
the Executive Committee of the Group.
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed
in this note. Transactions between the Group and its associates and joint venture and other related parties are disclosed below.
During the year, Group companies entered into the following transactions with related parties who are not members of the Group:
Equity investment
– Joint venture1
– Associates2
Loans
– Movement in loan balance with joint venture partner
Dividends received
– Associates3
Sundry expenditure
– Associates4
1. Equity investment in Roar Digital, LLC.
2. Equity investment in Asia Gaming Technologies Limited, Sports Information Services (Holdings) Limited and bwin eK Neugersdorf.
3. Dividend received from Sports Information Services (Holdings) Limited.
4. Payments in the normal course of business made to Sports Information Services (Holdings) Limited and bwin eK Neugersdorf.
Details of related party outstanding balances
Loan balances outstanding
– Joint venture
Other amounts outstanding
– Associates
– Joint venture
2019
£m
–
–
(1.8)
1.2
82.3
2019
£m
–
0.3
–
2018
£m
44.4
20.2
1.8
9.4
79.6
2018
£m
1.8
0.2
0.3
Terms and conditions of transactions with related parties
Sales to, and purchases from, related parties are made at market prices and in the ordinary course of business. Outstanding balances at
31 December 2019 are unsecured and settlement occurs in cash. For the year ended 31 December 2019, the Group has not raised any
provision (2018: £nil) for doubtful debts relating to amounts owed by related parties as the payment history has been good. This assessment is
undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.
Transactions with Directors and key management personnel of the Group
Lee Feldman received dividends during the year of £0.1m (2018: £0.2m) 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.
Kenneth Alexander received dividends during the year of £0.4m (2018: £0.3m).
The remuneration of key management personnel is set out below in aggregate for each of the categories specified in IAS 24 Related Party
Disclosures. Key management personnel comprise Executive Directors, Non-executive Directors and members of the Executive management
team. Further information about the remuneration of individual Directors is provided in the Directors’ Remuneration Report.
169
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
33 Related party disclosures continued
Short-term employee benefits
Share-based payments
Total compensation paid to key management personnel
2019
£m
12.7
5.5
18.2
2018
£m
11.8
20.8
32.6
The consolidated financial statements include the financial statements of GVC Holdings PLC and its subsidiaries. The companies listed below
are those which were part of the Group at 31 December and therefore the results, cash flows and balance sheets of all subsidiaries listed are
consolidated into the Group financial statements, furthermore the results of joint ventures and associates are accounted for in accordance
with the policy set out in note 4.
Subsidiaries based in the United Kingdom
% equity interest
Registered address
3rd Floor
One New Change
London
United Kingdom
EC4M 9AF
170
Company
Arbiter & Weston Limited(4)(5)
Ladbrokes Coral Group Limited(2)
Bartletts Limited(5)
Birchgree Limited(4)
Chequered Racing Limited(5)
Competition Management Services Co. Limited(5)
E.F. Politt & Son Limited(5)
Forestal Land, Timber and Railways Company Limited (The)(5)
Gable House Estates Limited(5)
Ganton House Investments Limited
Greatmark Limited(5)
GVC Administration Services Limited
Hindwain Limited
J. Ward Hill & Company(5)
Jack Brown (Bookmaker) Limited
Jerusalem Development (Mamilla) Co. Limited(5)
Jerusalem Development Corporation (Holdings) Limited(4)(5)
Krullind Limited(5)
Ladbroke & Co., Limited(4)(5)
Ladbroke (Course) Limited(5)
Ladbroke (Rentals) Limited(5)
Ladbroke City & County Land Company Limited(4)(5)
Ladbroke Coral Corporate Director Limited(5)
Ladbroke Coral Corporate Secretaries Limited(5)
Ladbroke Dormant Holding Company Limited(4)(5)
Ladbroke Entertainments Limited
Ladbroke Group(4)(5)
Ladbroke Group Homes Limited(5)
Ladbroke Group International(5)
Ladbroke Group Properties Limited(4)(5)
Ladbroke Land Limited(5)
Ladbroke Leasing (South East) Limited(5)
Ladbroke Racing (Reading) Limited(5)
Ladbroke Racing (South East) Limited(5)
Ladbroke Retail Parks Limited(5)
Ladbroke US Investments Limited(4)(5)
Ladbrokes (CLJEA) Limited(5)
Ladbrokes (CLJHC) Limited(5)
Ladbrokes (CLJSW) Limited(5)
Ladbrokes Betting & Gaming Limited(2)(3)(4)
Ladbrokes Contact Centre Limited(5)
Ladbrokes CPCB Limited(5)
Ladbrokes E-Gaming Limited
Ladbrokes Group Finance plc(2)
Ladbrokes Group Holdings Limited(4)(5)
2019
100.0
100.0
100.0
100.0
100.0
97.5
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
2018
100.0
100.0
100.0
100.0
100.0
97.5
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 33 Related party disclosures continued
Subsidiaries based in the United Kingdom continued
% equity interest
Registered address
Company
Ladbrokes Investments Holdings Limited(4)(5)
Ladbrokes IT & Shared Services Limited
Ladbrokes PT Limited(5)
Ladbrokes Trustee Company Limited
Maple Court Investments Limited(5)
Margolis and Ridley Limited(4)
New Angel Court Limited(5)
Paddington Casino Limited(5)
Sabrinet Limited(5)
Sponsio Limited(4)(5)
Techno Land Improvements Limited(5)
Town and County Factors Limited(2)
Travel Document Service(4)(5)
Ventmear Limited
Vernons Competitions Company(5)
Arthur Prince (Turf Accountants) Limited(5)
Bloxhams Bookmakers Limited(5)
Brickagent Limited
CE Acquisition 1 Limited(4)
Chas Kendall (Turf Accountant) Limited(5)
Choicebet Limited(5)
C L Jennings (1995) Limited(5)
Coral (Holdings) Limited(4)
Coral (Stoke) Limited(5)
Coral Estates Limited
Coral Eurobet Limited
Coral Eurobet Holdings Limited(4)
Coral Group Limited(4)
Coral Group Trading Limited(4)
Coral Limited(4)
Coral Racing Limited(2)(3)(4)
Coral Stadia Limited(3)(4)
Forster’s (Bookmakers) Limited(5)
Gala Coral Nominees Limited(5)
Ladbrokes Coral Group Life Benefits Trustee Limited(5)
Gala Coral Properties Limited(5)
Gala Coral Secretaries Limited(5)
J G Leisure Limited(5)
Joe Jennings (1995) Limited(5)
Joe Jennings Limited(5)
Lightworld Limited(4)(5)
London & Leeds Estates Limited(5)
Reg.Boyle Limited(5)
Reuben Page Limited(4)(5)
Romford Stadium Limited(3)
Rousset Capital Limited
Sports (Bookmakers) Limited(5)
Vegas Betting Limited(5)
GVC Marketing (UK) Limited
Cashcade Limited
GVC Holdings (UK) Limited(1)(2)
Hillford Estates Limited(5)
Interactive Sports Limited
Sporting Odds Limited(2)(3)
Sportingbet (IT Services) Limited(5)
Sportingbet (Management Services) Limited
2019
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
93.5
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
97.5
100.0
100.0
100.0
100.0
2018
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
93.5
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
97.5
100.0
100.0
100.0
100.0
171
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
33 Related party disclosures continued
Subsidiaries based in the United Kingdom continued
Company
Sportingbet (Product Services) Limited(5)
Sportingbet Holdings Limited(5)
Sportingbet Limited(5)
Ladbrokes (Northern Ireland) (Holdings) Limited(4)
Ladbrokes (Northern Ireland) Limited(5)
North West Bookmakers Limited(2)(3)
Techno Limited
% equity interest
2019
100.0
100.0
100.0
100.0
100.0
100.0
84.0
2018
100.0
100.0
100.0
100.0
100.0
100.0
84.0
Moffat Lodge Motor Inn Limited(5)
100.0
100.0
Creative Trend Limited
CTL Holdings International Limited(4)
SRL Holdings International Limited(4)
Sunrise Resources Limited
Westman Holdings Limited
Cayman Investments Number 1(4)
International Finance Investment
Company
GVC Technology Consulting (Asia) Co Limited
Exchange Platform Solutions Limited(3)
ElectraWorks (Alderney) Limited
Ace Racing Limited(5)
Dara Properties Limited
Harney Bookmakers Limited(5)
Ladbroke (Ireland) Limited(2)(3)(4)
Ladbroke Leisure (Ireland) Limited(2)(3)
Ladbrokes Payments (Ireland) Limited(5)
M D Betting Limited(5)
Fort Anne Limited(1)
Garton Admin Services Limited
M.L.B. Limited
Ladbroke Services (Ireland) Limited
Gala Interactive (Services) Limited
Ladbrokes Israel Limited(2)
Eurobet Holding SRL(4)
Eurobet Italia SRL(2)(4)(3)
IHF (Jersey) Limited(5)
Ladbroke (Channel Islands) Limited(3)
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
% equity interest
2019
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
2018
–
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Registered address
77A Andersonstown Road
Belfast
BT11 9AH
35 Great St. Helen’s
London
United Kingdom
EC3A 6AP
28 la Porte Precinct
Grangemouth
FK3 8BG
Belmont Chambers
Road Town
Tortola
British Virgin Islands
Jayla Place, Wickhams Cay 1
Road Town, Tortola
British Virgin Islands
Maples Corporate Services Limited
PO Box 309, Ugland House
Grand Cayman KY1-1104, Cayman Islands
Registered address
13/F, Gloucester Tower
The Landmark
15 Queen’s Road
Central Hong Kong, China
Inchalla, Alderney
GY9 3UL, Guernsey
1st Floor, Otter House
Naas Road
Dublin 22
Ireland
25/28 North Wall Quay
Dublin 1, D01 H104
Ireland
4th Floor, IFSC House
Custom House Quay
Dublin 1, Ireland
Menahem Begin 125
Tel Aviv, Israel
Via Alessandro Marchetti No.105
Rome 00148
Italy
1st Floor, Liberation House
Castle Street,
St. Helier, JE1 1GL, Jersey
172
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 33 Related party disclosures continued
Subsidiaries based overseas
Registered address
461-473 Lutwyche Road
Lutwyche
Queensland
QLD 4030
Australia
IFC 5 ST. HELIER,
JE1 1ST
Jersey
Chaussée de Wavre 1100/3
1160 Auderghem
Belgium
Company
Gaming Investments Pty Limited(4)
GVC Australia Pty Ltd(2)(3)
Sportingbet IP Enterprises PTY Ltd(3)
LB Australia Holdings Pty Limited(4)
Panda Gaming Pty Limited
Neds International Pty Ltd(2)(3)
Neds.com.au Pty Ltd
Nedscoin Pty Ltd
Maple Court Investments (Jersey) Limited(5)
PartyGaming Finance Limited
GVC Finance Limited
Ladbroke Belgium S.A.(4)
Pari Mutuel Management Services S.A.
Redsports.be SPRL
S.A. Derby N.V.(2)(3)(4)
Tierce Ladbroke S.A.(3)
Professional Gaming Services Sprl
NCH Customer Support Services, Inc
InteractiveSports Asia Limited Inc.
Ladbrokes (SA) (Pty) Limited
Ladbrokes Betting and Gaming Spain, S.A.
29 Avenue Lavoisier, 1300 Wavre, Belgium
6F Tower 3 Double Dragon Plaza EDSA Ext. cor.
Macapagal Avenue, Pasay City, Philippines
24A 18th Street
Menlo Park, Pretoria
0081, South Africa
Castello 82 4 IZQ, 28006
Madrid, Spain
270 E. Park Street, Suite 1 Butte, Montana 59701 Ladbrokes Holdco, Inc.(4)
608 Lander Street
Reno Nevada 89509
United States
15 Agion Omologiton, Nicosia, 1080, Cyprus
1565 Carling Avenue, Suite 400, Ottawa, Ontario
K1Z 8R1
19 Boulevard Malesherbes, 75008, Paris, France B.E.S. S.A.S
2nd Floor, St Mary’s Court, 20 Hill Street
Douglas, IM1 1EU, Isle of Man
32 Athol Street, Douglas, IM1 1JB, Isle of Man
820 Bear Tavern Road, Trenton,
New Jersey, 08628, USA
Bellingrath Enterprises Limited
Canada Limited
Stadium Technology Group, LLC(3)
Cozy Games Management Limited
GVC Investments Limited(1)
bwin.party entertainment (NJ) LLC
bwin.party (USA) Inc
bwin.party services (NJ) Inc
Ladbrokes Subco LLC
GVC Holdings (USA) Inc
Cozy Games Pte Limited
Florent Pte Limited
GVC Services (Bulgaria) EOOD
701 S. Carson Street, Suite 200, Carson City
89701, Nevada
Harborside Plaza 3, 210 Hudson Street
Jersey City, New Jersey 07311
50 Raffles Place, 32-01 Singapore Land Tower
Singapore (048623)
55 Nikola Vaptsarov Blvd, Office Park Expo 2000
Building Phase 4, Floor 3, Lozenets Area,
Sofia 1407, Bulgaria
5th Floor, Divyasree Omega, Block – B
Hitec City Road, Kondapur, Hyderabad
Andhra Pradesh, 500081, India
6th Floor, Divyashree omega, Block-B, Plot No.
13/E, Survey no.13(part), Kondapur, Hyderabad
500081, Andhra Pradesh, India
% equity interest
2019
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
60.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
90.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
2018
100.0
100.0
100.0
100.0
100.0
–
–
–
100.0
100.0
–
100.0
100.0
–
100.0
100.0
–
100.0
100.0
60.0
100.0
100.0
79.0
100.0
100.0
100.0
100.0
100.0
90.0
100.0
100.0
–
–
100.0
100.0
100.0
IVY Comptech Private Limited
100.0
100.0
IVY Global Shared Services Private Limited
IVY Software Development Services Private Limited
IVY Foundation Limited
100.0
100.0
100.0
100.0
99.9
100.0
173
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
33 Related party disclosures continued
Subsidiaries based overseas continued
Registered address
85 St John Street, Valletta, VLT 1165, Malta
Avenida de Fuencarral 44, Edificio Tribeca 1
modulo B, CP 28108, Alcobendas, Madrid, Spain
Bertolt – Brecht – Allee 24, 01309, Dresden
Germany
Box 3095, 350 33 Växjö, Sweden
c/o Kilpatrick Townsend & Stockton Advokat KB
Box 5421, 114 84 Stockholm, Sweden
Calle Amador de los Ríos n°1, 6 planta, 28010
Madrid, Spain
c/o The Corporation Trust Company, 1209
Orange Street, County of New Castle, Wilmington
Delaware, 19801, USA
Calle Josep Plá, número 2, planta 5ªD, Edificio
Torre Diagonal Litoral, 08019, Barcelona
Century House, 12 Victoria Street, Alderney, GY9
3UF, Channel Islands
Global Gateway 8, Rue de la Perle, Providence
Mahe, Seychelles
Emancipatie Boulevard Dominico F. “Don”
Martina 29, Curaçao
Fruebjergvej 3, Copenhagen, 2100, Denmark
Lagoas Park, Edificio 11, Piso 0 Sul, 2740-244
Porto Salvo, Portugal
Marxergasse 1b, 1030 Vienna, Austria
Moskovská 13, Bratislava, 81108,Slovakia
Penthouse, Palazzo Spinola Business Centre
Number 46, St Christopher Street, Valletta
VLT 1464, Malta
Oficina nr.201-2015, edeficio@3, ruta 8, km.
17,500, Uruguay
Quay House South Esplanade St Peter Port
GUERNSEY GY1 4EJ, PO Box 132
174
Company
Dominion Entertainment Limited
Gaming VC Corporation Limited
GVC Support Services Limited
Scandic Bookmakers Limited
Spread Your Wings Bravo Limited
Spread Your Wings Germany Limited
Headlong 2 Limited(1)
Winner Apuestas S.A.
DSG Deutsche Sportwelt GmbH
Webdollar Sweden AB
bwin.party Games AB
bwin Interactive Marketing Espana S.L.
GVC Finance LLC(1)
Javari Marketing Consultancy Services S.L.
Interactive Sports (C.I.) Limited
InterTrader International Limited
First Slip N.V
GVC Services BV
Intera N.V
Luther Properties N.V
Interactive Sports (Denmark) ApS
Infield – Servicos de Consultoria Marketing Unipessoal LDA.
bwin.party services (Austria) GmbH
Websports Entertainment Marketing Services GmbH
VTD Media(1)
bwin.party services (Malta) Limited
bwin.party International Malta Limited
bwin.party holding Malta Limited
ElectraWorks (Malta) PLC
ElectraWorks (France) Limited
ElectraWorks (Kiel) Limited
ElectraWorks (Svenska) Limited
bwin Holdings (Malta) Limited
ElectraWorks Europe Ltd
bwin (Deutschland) Limited
Sportingbet (Deutschland) Limited
Gamebookers (Deutschland) Limited
Ladbrokes (Deutschland) Limited
Martingale Malta 2 Limited
Martingale Europe Limited
Gomifer S.A.
Longfrie Limited
% equity interest
2019
100.0
99.0
99.0
99.0
99.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
2018
100.0
99.0
99.0
99.0
99.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
–
–
–
–
–
100.0
–
100.0
100.0
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 33 Related party disclosures continued
Subsidiaries based overseas continued
Registered address
Sea Meadow House, Blackburne Highway, Road
Town, Tortola, British Virgin Islands, PO BOX 116
CL Conde de Aranda 20, 28001, Madrid, Spain
Suite 4, Constantia House, Steenberg Office Park
Constantia, 7800, South Africa
Vake District, Kavtaradze Str., No 5, Entrance 2
Floor 2, Office Space No 2, Tbilisi, Georgia
Suite 6, Atlantic Suites, Europort Avenue
Gibraltar
Via Gaetano Previati 9, 20149, Milan, Italy
Company
Cream Legbar Limited
Wavecrest Providers Limited
Sportingbet Spain S.A.
SBT Software Operations (SA) (Pty)
Main Street 1013 Pty Limited
MARS LLC(2)
GVC Holdings (Gibraltar) Limited(1)
GVC Corporate Services Limited
bwin.party services (Gibraltar) Limited
bwin.party holdings Limited
ElectraGames Limited
ElectraWorks Limited(2)(3)
IGM Domain Name Services Limited
InterTrader Limited(2)(3)
PartyGaming IA Limited
ISG (Gibraltar) Limited
Argon Financial Limited(2)(3)
GVC Trustees Limited
ITL Holdings Limited
Greyjoy Limited
Party Ventures Limited
GVC Services Limited
Claymore Interactive Entertainment Holdings Limited
Gala Interactive (Gibraltar) Limited(2)(3)
Coral Interactive (Gibraltar) Limited(2)(3)
Gala Coral Interactive (Gibraltar) Limited(4)(5)
LC International Limited(2)(3)(4)
Ladbrokes Sportsbook Limited Partnership(2)(3)
Bingo Marketing Limited
Balltree (International) Limited
bwin Italia S.R.L.(3)
bwin European Markets Holding SpA
% equity interest
2019
100.0
100.0
100.0
100.0
100.0
51.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
2018
100.0
100.0
–
100.0
100.0
51.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
1. Company that is directly owned by GVC Holdings PLC.
2. Company that forms part of the Group as at 31 December 2019 and which, principally affected the Group’s reported results for the year.
3. Trading entity engaged in activity associated with betting and gaming.
4. Holding company.
5. Dormant company.
Joint ventures
Registered address
Corporation Service Company
251 Little Falls Drive
Wilmington
Delaware 19808
Company
Roar Digital, LLC
% equity interest
2019
50.0
2018
50.0
175
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
33 Related party disclosures continued
Subsidiaries based overseas continued
33 Related party disclosures continued
Associates
Country of incorporation
China
Germany
United Kingdom
Company
Asia Gaming Technologies (Beijing) Co., Ltd(1)
Asia Gaming Technologies (Tianjin) Co., Ltd(1)
Asia Gaming Technologies Limited
bwin E.K. Neugersdorf
49’s Limited
Games For Good Causes PLC
Lucky Choice Limited(2)
Sports Information Services (Holdings) Limited
% equity interest
2019
49.0
49.0
49.0
50.0
66.6
36.3
66.6
23.4
2018
49.0
49.0
49.0
50.0
66.6
36.3
66.6
23.4
1. Subsidiary of Asia Gaming Technologies Limited.
2. GVC Holdings PLC hold 66.6% of the equity of the investment. The associate is not consolidated in the Group financial statements on the basis that the Group does not exercise management
control over the associate.
34 Non-controlling interests
Non-controlling interests includes a 10% holding in bwin.party entertainment (NJ) LLC, a company incorporated in the United States and a 49%
holding in Mars LLC a company incorporated in Georgia.
The profit attributable to non-controlling interests was £13.0m (2018: £6.1m profit attributable).
The balance of retained earnings attributable to non-controlling interest is disclosed in the table below:
As at January 2018
Profit attributable to non-controlling interests
Acquired through business combinations
Payment of dividends
As at 31 December 2018
Profit attributable to non-controlling interests
Payment of dividends
As at 31 December 2019
35 Subsequent events
On 14 February 2020, GVC Holdings PLC completed the repricing and allocation of its existing $786m First Lien Term Loan B. As part of
the transaction, the debt was transferred to GVC Holdings (Gibraltar) Limited, with an inter-company loan of $786m arising between GVC
Holdings PLC and GVC Holdings (Gibraltar) Limited. The new USD Term Loan B’s pricing is USD LIBOR+225bps and was allocated at par,
which represented a saving of 25bps versus the existing pricing.
Total
£m
(1.5)
6.1
35.0
(1.4)
38.2
13.0
(8.1)
43.1
176
Notes to the consolidated financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 177
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Company Financial Statements
Company BALANCE SHEET
for the year ended 31 December 2019
At 31 December
Assets
Non-current assets
Investments
Current assets
Trade and other receivables
Derivative financial assets
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Net current assets
Non-current liabilities
Interest bearing loans and borrowings
Other financial liabilities
Net assets
Shareholders’ equity
Called up share capital
Share premium account
Merger reserve
Retained earnings
Total shareholders’ equity
Note
2019
£m
2018
£m
6
7
8
9
9
11
3,950.9
1,638.6
897.5
47.4
12.8
957.7
4,908.6
(683.4)
(17.0)
(700.4)
3,934.2
43.3
4.8
3,982.3
5,620.9
(652.5)
(6.2)
(658.7)
257.3
3,323.6
(573.5)
(10.5)
(584.0)
(1,689.2)
(22.5)
(1,711.7)
3,624.2
3,250.5
4.8
1,198.0
2,527.4
(106.0)
3,624.2
4.8
1,196.5
2,527.4
(478.2)
3,250.5
The Company generated a profit for the year of £555.0m (2018: loss of £19.0m).
Under the Companies Act 2006 section 49 (Isle of Man), the Directors are satisfied that the Company satisfies the solvency test for distributions
to be made.
The notes on pages 180 to 183 are an integral part of these financial statements.
The financial statements on pages 178 to 183 were approved by the Board of Directors on 5 March 2020 and signed on its behalf by
KJ Alexander
(Chief Executive Officer)
RM Wood
(Chief Financial Officer)
178
GVC Holdings PLC | Annual Report 2019
Company STATEMENT
OF CHANGES IN EQUITY
for the year ended 31 December 2019
At January 2018
Profit for the year
Total comprehensive expense
Issue of shares
Share options exercised
Share-based payments charge
Equity dividends
At 31 December 2018
Profit for the year
Total comprehensive expense
Share options exercised
Share-based payments charge
Equity dividends
At 31 December 2019
Called up
share capital
£m
2.3
–
–
2.4
0.1
–
–
4.8
–
–
–
–
–
4.8
Share
premium
account
£m
1,170.4
–
–
–
26.1
–
–
1,196.5
–
–
1.5
–
–
1,198.0
Merger
Reserve
account
£m
34.5
–
–
2,492.9
–
–
–
2,527.4
–
–
–
–
–
2,527.4
Retained
earnings
£m
(359.2)
19.0
19.0
–
–
0.8
(138.8)
(478.2)
555.0
555.0
–
12.7
(195.5)
(106.0)
Total
£m
848.0
19.0
19.0
2,495.3
26.2
0.8
(138.8)
3,250.5
555.0
555.0
1.5
12.7
(195.5)
3,624.2
The notes on pages 180 to 183 are an integral part of these financial statements.
179
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the Company Financial Statements
Notes to the Company
financial statements
for the year ended 31 December 2019
1 General information
GVC Holdings PLC (“the Company”) is a limited company incorporated and domiciled in the Isle of Man. The address of its registered office
and principal place of business is disclosed in the Directors’ report.
The financial statements of the Company for the year ended 31 December 2019 were authorised for issue in accordance with a resolution
of the Directors on 5 March 2020.
The parent Company profit for the year was £555.0m (2018: £19.0m).
The Company has taken advantage of the exemption from preparing a cash flow statement under paragraph 8(g) of the disclosure exemptions
from EU-adopted IFRS for qualifying entities included in Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”). The GVC
Holdings PLC consolidated financial statements for the year ended 31 December 2019 contain a consolidated statement of cash flows.
The Company is exempt under paragraph 8(k) of the disclosure exemptions from EU-adopted IFRS included in FRS 101 for qualifying entities
from disclosing related party transactions with entities that form part of the GVC Holdings PLC group of which GVC Holdings PLC is the ultimate
parent undertaking.
The Company’s financial statements are presented in Pounds Sterling (£), which is also the Company’s functional currency, and all values
are rounded to the nearest million (£m) except when otherwise indicated. The Company’s financial statements are individual entity
financial statements.
2 Basis of preparation
These financial statements were prepared in accordance with FRS 101 and Isle of Man Companies Act 2006. The financial statements
are prepared on a going concern basis under the historical cost convention except for certain financial liabilities measured at fair value.
The accounting policies which follow in note 3 set out those policies which apply in preparing the financial statements for the year ended
31 December 2019 and have been applied consistently to all years presented.
The Company has taken advantage of the following disclosure exemptions under FRS 101 in respect of:
¡ IFRS 3 Business Combinations;
¡ the requirements of IFRS 7 Financial Instruments: Disclosures;
¡ IFRS 13 Fair Value Measurement;
¡ Share-based payments;
¡ Intra-Group-related party transactions; and
¡ Related party transactions.
Income statement
For details of audit fees, see note 7 of the consolidated financial statements.
As permitted by the Isle of Man Companies Act 2006, the income statement and the statement of comprehensive income of the parent
Company have not been separately presented in these financial statements.
3 Summary of significant accounting policies
Investments
Investments held as fixed assets are stated at cost less provision for impairment.
The Company assesses these investments for impairment wherever events or changes in circumstances indicate that the carrying value of an
investment may not be recoverable. If any such indication of impairment exists, the Company makes an estimate of the recoverable amount.
If the recoverable amount is less than the value of the investment, the investment is considered to be impaired and is written down to its
recoverable amount. An impairment loss is recognised immediately in the profit and loss account.
Cash and cash equivalents
Cash and short term deposits in the balance sheet consist of cash at banks and in hand, short-term deposits with an original maturity of less
than three months.
Financial assets
Financial assets are recognised when the Company becomes party to the contracts that give rise to them.
The Company classifies financial assets at inception as either financial assets at fair value or loans and receivables. On initial recognition, loans
and receivables are measured at fair value. Financial assets at fair value comprise guarantees provided to the Company. Financial assets at fair
value through profit or loss are measured initially at fair value, with transaction costs taken directly to income statement. Subsequently, the fair
values are remeasured and gains and losses from changes therein are recognised in the income statement.
180
GVC Holdings PLC | Annual Report 2019 3 Summary of significant accounting policies continued
Financial assets continued
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. On initial
recognition, loans and receivables are measured at fair value plus directly attributable transaction costs. Subsequently, such assets are
measured at amortised cost, using the effective interest (“EIR”) method, less any allowance for impairment.
Financial liabilities
Financial liabilities comprise guarantees given to third parties and contingent consideration. On initial recognition, financial liabilities are
measured at fair value plus transaction costs where they are not categorised as financial liabilities at fair value through profit or loss.
Financial liabilities at fair value through profit or loss are measured initially at fair value, with transaction costs taken directly to the income
statement. Subsequently, the fair values are remeasured and gains and losses from changes therein are recognised in the income statement.
Derecognition of financial assets and liabilities
Financial assets are derecognised when the right to receive cash flows from the assets has expired or when the Company has transferred its
contractual right to receive the cash flows from the financial assets or has assumed an obligation to pay the received cash flows in full without
material delay to a third party, and either:
¡ Substantially all the risks and rewards of ownership have been transferred; or
¡ Substantially all the risks and rewards have neither been retained nor transferred but control is not retained.
Financial liabilities are derecognised when the obligation is discharged, cancelled or expires.
Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it
relates to items recognised in other comprehensive income or directly in shareholders’ funds. In this case, the tax is also recognised in other
comprehensive income or directly in shareholders’ funds, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the
countries where the Company operates and generates taxable income. Management periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of
amounts expected to be paid to the tax authorities.
Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts
in the financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; or arise from
initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss.
Deferred income tax is recognised using the tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and
are expected to apply then the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are
only recognised to the extent it is probable that there will be suitable taxable profits from which they can be recovered.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the
same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. Deferred tax balances are
not discounted.
Foreign currency translation
The presentation and functional currency of the Company is Pounds Sterling (£).
Transactions in foreign currencies are initially recorded in Pounds Sterling (£) at the foreign currency rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated into Pounds Sterling (£) at the rates of exchange ruling at the
balance sheet date (the closing rate).
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the
initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rate at the date when the
fair value was determined.
Dividends
Final dividends proposed by the Board of Directors and unpaid at the year end are not recognised in the financial statements until they have been
approved by shareholders at the Annual General Meeting. Interim dividends are recognised when paid.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received net of direct issue costs.
181
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Notes to the company financial statements continued
3 Summary of significant accounting policies continued
Share-based payments
The cost of equity settled transactions with employees is measured by reference to the fair value at the date on which they are granted (see note
30 of the consolidated financial statements for further details).
The cost of equity settled transactions is recharged to the respective employing entities.
4 Judgements and key sources of estimation uncertainty
The preparation of financial statements requires management to make assumptions, estimates and judgements that affect the amounts
reported as assets and liabilities as at the balance sheet date and the amounts reported as revenues and expenses during the year. Use of
available information and application of judgement are inherent in the formation of estimates. Actual results in the future may differ from those
reported. In this regard, management believes that the accounting policies where judgement is necessarily applied are those that relate to:
Investment in subsidiaries
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. The following estimates are dependent upon assumptions which could change in the next financial year and have
a material effect on the carrying amounts of assets and liabilities recognised at the balance sheet date.
5 Dividends
Pence per share
Prior year final dividend paid
Interim dividend paid
2019
pence
16.0
17.6
2018
pence
15.2
16.0
2019
Shares in
issue
number
581.9
581.9
2018
Shares in
issue
number
303.7
578.8
A second interim dividend of 16.0 pence (2018: 15.2 pence) per share, amounting to £93.1m (2018: £46.2m) in respect of the year ended
31 December 2018 was proposed by the directors on 5 March 2019. The 2019 interim dividend of 17.6 pence per share (£102.4m) was paid on
20 September 2019.
6 Investments
Cost and net book value
At 1 January 2018
Additions
Disposals
At 31 December 2018
Cost and net book value
At 1 January 2019
Additions
At 31 December 2019
Total
£m
1,244.9
467.4
(73.7)
1,638.6
1,638.6
2,312.3
3,950.9
Subsidiaries and other related entities are listed in note 33 of the consolidated financial statements.
On 28 January 2019, the Company subscribed for 2,300,000,000 shares in GVC Holdings UK Limited in exchange for the redemption of loan
notes to equal value resulting in an additional investment in the year.
182
Notes to the Company financial statements continued for the year ended 31 December 2019GVC Holdings PLC | Annual Report 2019 7 Trade and other receivables
Amounts due from Group companies
Other debtors
Prepayments
2019
£m
895.8
1.0
0.7
897.5
2018
£m
3,933.2
0.7
0.3
3,934.2
Amounts owed by other group undertakings are included under amounts falling due within one year as they are repayable on demand,
unsecured, and accumulate interest in a range between 0% and 5.095%.
8 Trade and other payables
Current
Amounts due to Group companies
Other payables
2019
£m
683.2
0.2
683.4
Amounts owed to other group undertakings are included under amounts falling due within one year as they are repayable on demand,
unsecured, and accumulate interest in a range between 0% and 5.095%.
9 Interest bearing loans and borrowings
Current
Euro denominated loans
USD denominated loans
Sterling denominated loans
Non-current
Euro denominated loans
USD denominated loans
Sterling denominated loans
2019
£m
1.9
17.8
(2.7)
17.0
–
581.0
(7.7)
573.5
2018
£m
651.3
1.2
652.5
2018
£m
–
6.2
–
6.2
818.8
609.1
261.3
1,689.2
As at 31 December 2019, £460.0m of committed bank facilities were undrawn (2018: £495.0m).
10 Financial risk management objectives and policies
The financial risk management objectives and policies applied by the Company are in line with those of the Group as disclosed in note 24
to the consolidated financial statements.
11 Called up share capital
Details of the share capital of the Company are given in note 27 of the consolidated financial statements.
12 Related party transactions
The Company has taken advantage of the exemption under paragraph 8(k) of FRS 101 not to disclose transactions with fellow wholly-owned
subsidiaries. See note 33 of the consolidated financial statements for disclosure of remuneration of key management personnel.
13 Subsequent events
See note 35 of the Group accounts for disclosure of subsequent events related to the Company.
183
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Glossary/Shareholder information
Glossary
Definition of terms
Definition of terms
AAMS
Adjusted fully diluted
EPS cents
Adjusted PBT
B2B
B2C
BI
bwin.party
CAGR
CGUs
CMS
Automated accounts management systems
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
Customer marketing services
Constant currency basis
Contribution
Contribution margin
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
CRM
CS
CSR
DTR
Customer relationship management
Customer services
Corporate Social Responsibility
Disclosure and transparency rules
Enlarged Group
GVC Holdings PLC incorporating Ladbrokes Coral Group
EPS
H2GC
IA
IAS
IFRS
IOT
KPIs
KYC
Ladbrokes Coral
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”)
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
Ladbrokes Coral Group Plc
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
Underlying EBITDA
Stated pre separately disclosed items and shared based payments
184
GVC Holdings PLC | Annual Report 2019 Shareholder information
Annual General Meeting
The 2020 AGM will be held on 30 April 2020 at The Mermaid,
Puddle Dock, London EC4V 3DB. Details of each resolution to be
considered at the meeting and voting instructions are provided in
the Notice of AGM which is available on the Company’s website
at www.gvc-plc.com. The voting results of the 2020 AGM will be
accessible on the Company’s website at www.gvc-plc.com shortly
after the meeting.
Communications
Information about the company, including details of the current share
price, is available on the website, www.gvc-plc.com
Shareholding contacts
For any queries regarding your shareholding, please contact
Link Asset Services.
Share fraud warning
Fraudsters use persuasive and high-pressure tactics to lure investors
into scams. They may offer to sell shares that turn out to be worthless
or non-existent, or to buy shares at an inflated price in return for an
upfront payment. While high profits are promised, if you buy or sell
shares in this way you will probably lose your money. Should you
receive any unsolicited calls or documents to this effect, you are
advised not to give out any personal details or to hand over any
money without ensuring that the organisation is authorised by the
UK Financial Conduct Authority (FCA) and doing further research.
If you are unsure or you think you have been targeted, you
should report the organisation to the FCA. For further
information, please visit the FCA’s website at www.fca.org.uk,
email consumer.queries@fca.org.uk or call the FCA consumer
helpline on 0800 111 6768 if calling from the UK or +44 20 7066 1000
if calling from outside the UK.
185
GVC Holdings PLC | Annual Report 2019OVERVIEW | STRATEGIC REPORT | GOVERNANCE | FINANCIAL STATEMENTS Corporate information
Corporate information
Independent auditor
KPMG LLP
Chartered Accountants and Statutory
Auditor
15 Canada Square
London
E14 5GL
DIVIDEND TIMETABLE
05 March
Dividend declared
12 March
Ex-dividend date
13 March
Record date
23 April
Payment
Solicitors
Addleshaw Goddard
DQ Advocates
Principal UK Bankers
Barclays Bank PLC
The Royal Bank of Scotland plc
FUTURE TRADING UPDATES
AND FINANCIAL CALENDAR
30 April
AGM
July
August
October
Post close trading update
Interim results
Q3 trading update
Company name
GVC Holdings PLC
Company number
4685V
Secretary and registered office
Robert Hoskin
GVC Holdings PLC
32 Athol Street
Douglas
Isle of Man
IM1 1JB
Telephone: +350 200 78700
www.gvc-plc.com
Registrars
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
BR3 4TU
Telephone: 0871 664 0300 from the UK or
+44 (0)371 664 0300 from outside the UK
Email: shareholderenquiries@linkgroup.co.uk
186
GVC Holdings PLC | Annual Report 2019 44
Safer gambling
www.gvc-plc.com
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WWW.GVC-PLC.COM
GVC HOLDINGS PLC
REGISTERED OFFICE
32 ATHOL STREET
DOUGLAS
ISLE OF MAN
IM1 1JB
INCORPORATED IN THE ISLE OF MAN
UNDER NUMBER 4685V