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Welcome
Technology driving the
customer journey
Playtech is a market leader in the gambling and financial
trading industries. Founded in 1999 and listed on the Main
Market of the London Stock Exchange, Playtech has more
than 5,000 employees in 17 countries.
Acquisitive capability
Playtech plc Annual Report and Accounts 2016
At a glance
Playtech today
I am very excited about the future of our industries and
the growth of Playtech. Our continued commercial success
should not only be about growing our business, but also
about the way we do business.
Mor Weizer
Chief Executive Officer
Our Group structure
Gaming
division
Financials
division
Playtech’s Gaming
division is driven by
our omni-channel
philosophy, consisting of
our platform and business
intelligence solutions,
product offering
and services.
See more on pages 08 to 23
Our Financials division
is a rapidly growing
vertical in a dynamic
and expanding sector
of the market.
See more on pages 24 to 27
Our values
Integrity
We strive to be responsible,
honest and open in our
dealings with each other
and with all our stakeholders
– licensees, regulators,
business partners and
suppliers.
Innovation
We endeavour to always
be at the forefront of our
industry; to lead, develop
and deliver new products
and services that meet all risk
and regulatory compliance
measures.
Excellence
We aim for excellence in
everything we do; in the
delivery of our products and
services, in our interaction
with the outside world and
in working with each other.
Performance
We deliver outstanding
performance in the
context of the legitimate
and realistic expectations
of our customers and
shareholders.
Key
Main
offices
Other
offices
No. of
employees
01
Contents
In this report
06 56 98
Governance
Financial statements
The Board believes that high standards
of corporate governance contribute to
Playtech’s performance and continued
success. In this section we discuss
the way the Board runs itself and its
committees, and how decisions are
taken at Playtech.
Board of Directors
Chairman’s introduction
to governance
Directors’ governance report
Audit Committee report
Remuneration report
– annual statement
Remuneration policy report
Annual report on remuneration
Directors’ report
56
58
59
67
70
72
78
86
The financial statements provide an
analysis of our financial results and
a full audited accounts for the 2016
financial year.
Independent auditors’ report
Consolidated statement
of comprehensive income
Consolidated statement
of changes in equity
Consolidated balance sheet
Consolidated statement
of cash flows
Notes to the financial statements
Company statement
of changes in equity
Company balance sheet
Company statement of cash flows
Notes to the Company
financial statements
Five-year financial summary
98
104
105
106
107
109
154
155
156
157
160
At a glance
Leading the industry
Chairman’s statement
Highlights of the year
Strategic report
02
04
05
In this section we demonstrate
how we run our business and
how we create value for shareholders
and stakeholders.
Gaming division
Overview of our Gaming division
Our business model
Responding to our market
Our omni-channel philosophy
Platform and intelligence
Products
Services
Financials division
Markets.com
CFH acquisition
Review of 2016
Chief Executive Officer’s review
Financial review
Risks and uncertainties
Regulation and
responsible business
08
10
12
14
16
22
24
26
28
38
44
48
Find more information on our website:
www.playtech.com
Playtech plc Annual Report and Accounts 2016 | Strategic reportGovernanceFinancial statements 02
Leading the industry
What sets us apart
As market-leading pioneers with a holistic approach
to both internal and external business strategy,
Playtech presents a strong case for investment.
1
2
3
A unique
offering
Omni-channel offers
users a unique and
seamless journey
through technology and
compliance tools.
At the
forefront
of innovation
Our investment into
R&D is enhancing the
digitalisation of gaming
and extending our lead
against the competition.
Committed
to regulation
We work closely with
regulators to ensure
they understand the
impact of technical
changes and specific
local requirements.
See more on page 12
See more on page 31
See more on page 46
4
5
6
Successful
leadership
A track record
of growth
A strong, experienced
and successful
leadership team,
together with a
management structured
to implement strategy
and deliver results.
We have a strong
track record of growth
across our business
through a combination
of organic growth
and the acquisition
of complementary
businesses, technology
and content.
High
shareholder
returns
We are committed
to returning value
to shareholders, as
evidenced by the
strong compound
growth in our regular
dividends and the
special dividend paid.
See more on page 56
See more on page 36
See more on page 39
Playtech plc Annual Report and Accounts 2016 03
G
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Year in review
Renewals with William Hill,
Betfred, Rank and Paddy
Power Betfair
One of the strengths of Playtech is our
commitment to our customers, 2016 saw the
signing of significant new customers with ten
new customer go-lives. The trend of securing
longer term agreements with key customers
continued with nine of our top ten customers
on long-term contracts following the renewals
with William Hill, Betfred and Rank all renewing
in the first two months of 2017 alone.
Strengthening Playtech’s
position as the leading
content provider
May
Playtech acquired Quickspin, a fast-growing
Swedish games studio that develops and supplies
high-quality video slots to operators, both in online
real money gambling as well as in the social
gaming market.
See more on page 17
bet365 first to launch
Playtech native app
September
bet365 became the first operator to go live with
Playtech’s new native mobile casino application,
offering instant gameplay and improved speed
and performance across all iOS and Android
devices. bet365 players can download and play
games in seconds, with loading speeds up to
three times faster than HTML5 equivalents,
giving them instant access to the most immersive
mobile gameplay experience there is.
Playtech claims top prize
at the Global Gaming
Awards 2016
September
Playtech was awarded the ‘Best Digital Industry
Supplier’ at the Global Gaming Awards for our
unrivalled gaming portfolio, breadth of new
business and pioneering Playtech ONE omni-
channel solution which has ensured record-
breaking results.
Enhancing
omni-channel to drive
digitalisation of retail
July
Playtech acquired Best Gaming
Technology (BGT) for €138m*. BGT’s
offering combines best-in-class
technology with a digital terminal that
revolutionises the traditional over-
the-counter experience. This creates
an incredibly powerful omni-channel
solution when coupled with our
Playtech ONE infrastructure.
€138m*
Acquired BGT for €138m*
* For 90% of issued share capital.
See more on page 20
Playtech partners with
Warner Bros. Consumer
Products and DC
Entertainment
October
Playtech partners with Warner Bros.
Consumer Products on behalf of DC
Entertainment, to launch the first two
of six slot games based on DC’s
1960’s Batman Classic TV Series.
Expanding Playtech’s
Financials division
November
Playtech acquired a 70% interest in
Consolidated Financial Holdings A/S
(CFH), a technology company with
products including a leading Straight
Through Processing (STP) brokerage
which provides retail brokers with
multi asset execution, prime brokerage
services, liquidity and complementary
risk management tools. The acquisition
enhances Playtech’s position as it
continues to build a B2B offering
within its Financials division.
Playtech Sports launches
first virtual retail product
with Coral
July
Playtech goes live with our first ‘out of the
box’ retail virtual sports product across 100
UK Coral shops with the potential to deploy
it across 1,000 outlets in the next 12 months.
We’ve been working
round the clock on a retail
solution and firmly believe
we’ve launched the best
product on the market.
Elliott Norris
Head of Virtual at Playtech Sports
Playtech places itself at
the forefront of the retail
bingo market with
acquisition of ECM
October
Playtech acquired bingo software and
hardware solutions provider ECM Systems
(ECM). ECM supplies software and support
services to the UK retail bingo market,
including major operators Gala Leisure,
Mecca Bingo and the leading independent
bingo operators. ECM will empower
Playtech to provide omni-channel solutions
to the bingo operators by connecting
their retail and online operations as
well as providing a platform to supply
Playtech content.
Important new licensees
signed
• PokerStars
• Fortuna
• Sun Bets
See more on page 26
www.playtech.com/news
See more of our news at
Playtech plc Annual Report and Accounts 2016 | Strategic reportGovernanceFinancial statements
04
Chairman’s statement
Commitment to growth and leadership
Playtech has continued to successfully execute its strategy
for strong operational and financial performance, strategic
M&A and shareholder returns.
Alan Jackson
Chairman
I am pleased to report that during 2016
Playtech continued to successfully execute
its strategy with a strong operational and
financial performance, delivering important
M&A and significant capital returned
to shareholders.
The Gaming division continued to deliver,
with exceptional growth in the flagship
Casino offering driven by the largest
portfolio of games boasting some of
the most popular content across the
industry. Sports saw a good second half
performance following the acquisition of
BGT, and later in the year with the newly
formed Playtech BGT Sports bringing
together all aspects of Playtech’s
sports offering creating the only true
omni-channel, best-in-class sports betting
technology. Playtech will always remain
a customer focused business and 2016
saw the signing of more than ten new
customers with ten new customer
go-lives. The trend of securing longer
term agreements with key customers
continued with nine out of ten now on
long-term contracts following the renewals
with Paddy Power Betfair, William Hill,
Betfred and Rank all renewing in the
first two months of 2017 alone.
The Financials division went through a
significant transition in the first half of the
year with an encouraging performance
delivered in the second half.
Towards the end of the year the Group
acquired CFH, enhancing Playtech's
position as it continues to build a B2B
offering within its Financials division.
Playtech spent a total of €240 million on
acquisitions during the full year. At the
beginning of 2016 Playtech outlined its
intention to utilise the capital raised from
shareholders to maintain its market leading
position by acquiring complementary
technologies and premium content. The
acquisitions of BGT, Quickspin and ECM
will augment organic growth in the Gaming
division in 2017, whilst the acquisition of
CFH was a landmark transaction for the
Financials division. The acquisition of
Eyecon in February 2017 demonstrates
Playtech’s continued focus on value
enhancing M&A.
The strength of Playtech’s cash flows and
the flexibility of its balance sheet enabled
the Company to return €296 million
to shareholders in 2016 including a €150
million special dividend announced at the
time of the half-year results and a €50
million share buyback programme before
the year end. Strong cash generation
continues to be a key characteristic of the
Group and the high levels of shareholder
returns had no impact on the Group’s
acquisition capabilities. In accordance
with the new progressive dividend policy
adopted in 2016, the 2016 full-year dividend
has been increased by 15% taking the total
full-year increase to 15%.
Finally, the Board was delighted to
announce the appointment of Andrew
Smith as Chief Financial Officer following
the period end. Andrew replaced Ron
Hoffman who became full time CEO of the
Financials division. The move has provided
a greater depth of management resource
and focus on Playtech’s Financials division
following the acquisitions of Markets
Limited and CFH. In addition, the Board
was further strengthened in 2016 by the
appointment of Claire Milne as a Non-
executive Independent Director in July.
Claire joined the Board as a recognised
industry expert in eGaming and technology
law and regulation, with 20 years’
experience advising gaming and financial
services clients as both an in-house and
private practice lawyer. Claire was the Chair
of the Isle of Man Gambling Commission,
and Playtech is already seeing the benefits
of her depth of expertise.
Given the progress outlined above
and Playtech’s proven ability to achieve
its strategic objectives and drive
operational performance, the Board
remains confident of a strong
performance in 2017 and beyond.
Alan Jackson
Chairman
22 February 2017
Playtech plc Annual Report and Accounts 2016 Highlights of the year
Continuing success
05
€708.6m
Revenue (€m)
+12% €302.2m
Adjusted EBITDA* (€m)
708.6
630.1
2016
2015
€206.2m
Adjusted net profit** (€m)
+0% €193.0m
Reported net profit*** (€m)
+20%
251.9
302.2
2016
2015
+42%
206.2
205.9
2016
2015
135.8
193.0
2016
2015
59.8 €cents
Adjusted diluted EPS**** (€cents)
-3%
32.7 €cents
Total dividend per share***** (€cents)
+15%
59.8
61.8
2016
2015
32.7
28.5
2016
2015
Financial review, see page 38
Group financial highlights
Our Gaming division
• Total revenues up 12% vs 2015 on a reported basis:
– 20% revenue growth at constant currency
– 13% revenue growth excluding acquisitions and at
constant currency
– 48% of Group revenues are regulated (2015: 47%)
• Adjusted EBITDA up 20% on a reported basis and 32%
at constant currency
• Adjusted Group EBITDA margin of 42.7% (2015: 40.0%)
• Adjusted Net Profit and Adjusted diluted EPS at constant
currency up 42% and 37% respectively
• Strong revenue performance with 21% growth at constant
currency led by flagship casino offering
• Strong performance in Sports in H2 2016 following
acquisition of BGT
• Regulated Gaming revenues of 42% (2015: 41%)
• Software revenues from mobile of 33% in 2016 (2015: 21%),
with 54% of UK revenues from mobile
• ‘Locking-in’ future growth:
– Over ten new customers signed in 2016 including Pokerstars,
MaxBet and Mr Green with OPAP after the period end
• Improved cash conversion of 94% (2015: 80%) with DSOs*****
– Significant contracts renewed, including with Paddy Power
down 23 days from H1 2016
• Gross cash at period end of €545 million (€469 million
adjusted for CFH customer deposits) taking into account:
– €240 million spent on acquisitions including BGT, CFH,
Quickspin and ECM in 2016
– returning €296 million to shareholders in 2016 including
€150m special dividend and €50m via a share buyback
• Full-year dividend per share up 15% in accordance with
progressive dividend policy adopted in 2016
*
Adjusted numbers relate to certain non-cash and one-off items including
amortisation of intangibles on acquisitions, professional costs on acquisitions,
finance costs on acquisitions and additional various non-cash charges. The
Directors believe that the adjusted profit measures represent more closely
the consistent trading performance of the business. A full reconciliation
between the actual and adjusted results is provided in Note 5.
** Attributable to the owners.
*** Constant currency numbers exclude the exchange rate impact on the results
by using previous period relevant exchange rate and also exclude the total
cost/income of exchange rate differences recognised in the period.
**** Weighted average number of shares used in diluted EPS for the 12 months
ended 31 December 2015 were adjusted reflect the impact of the convertible
bonds.
***** Days sales outstanding.
Betfair, William Hill, Rank and Betfred in 2017
– Nine of top ten licensees now on long-term contracts
• Launched Playtech BGT Sports presenting significant
opportunity across Europe and South America
• Acquisitions integrated and performing in line with expectations
• Pipeline of new licensees and new structured agreements
remains strong
Our Financials division
• Revenue of €65.6 million (2015: €60 million) in 2016
with Adjusted EBITDA of €15.4 million (2015: €15.9 million)
• 2016 results reflect full impact of the business transition
• Encouraging performance and improved KPIs in H2 2016
• B2B offering strengthened by acquisition of CFH in
November 2016
• Ron Hoffman has become full time CEO of the
Financials division
Playtech plc Annual Report and Accounts 2016 | Strategic reportGovernanceFinancial statements 06
STRATEGIC REPORTPlaytech plc Annual Report and Accounts 2016 07
Contents
Gaming division
Overview of our Gaming division
Our business model
Responding to our market
Our omni-channel philosophy
Platform and intelligence
Products
Services
Financials division
Markets.com
CFH acquisition
Review of 2016
Chief Executive Officer’s review
Financial review
Risks and uncertainties
Regulation and responsible business
08
10
12
14
16
22
24
26
28
38
44
48
Playtech plc Annual Report and Accounts 2016 08
Overview of our Gaming division
Our business model
Our Gaming division
Our business model and strategy help create a sustainable
and responsible cycle of value creation for our shareholders.
Our assets
What we do and how we do it
Playtech’s six strategic pillars enable us to
maximise opportunities and create added
value for our shareholders.
Support organic
growth
We pioneer new ideas
and technologies
We offer seamless
experiences
We develop valuable
partnerships
We help our partners
differentiate themselves
Cross-sell
products and
services
Attract new
licensees
Our strategy
Support organic
growth
The depth and breadth
of Playtech’s offering
means that we are able
to partner with our licensees
to deliver some of the most
successful and innovative
online businesses in the
world. In 2016, Playtech
achieved organic revenue
growth of 13%, ahead of the
growth of the underlying
global market.
Cross-sell products
and services
Playtech’s industry leading
IMS and BI management
systems allow licensees
to enhance their customer
journey, service and
ultimately, their cross-sell
ability e.g. Ladbrokes Coral
Group and Paddy Power
Betfair. In partnering with
our licensees, we can
support them in entering
new product verticals and
new geographical markets.
Attract new
licensees
The value of Playtech’s
market leading offering is
reflected in the continued
momentum of attracting
new licensees every year.
Playtech has an impressive
track record of adding
five to ten new licensees
every year – attracted by
our unique omni-channel
offering and the quality of
software and technology.
Our services
Our market leading services
offer all-encompassing solutions
across all platforms for our clients.
See more on pages 22 to 23
Our software
We continually invest in innovative
software, encouraging access
to best-in-class products for all
of our customers.
See more on pages 14 to 15
Our people
Our people make Playtech the
success it is and will be in the future.
Inclusion and freedom of ideas and
identity are central to what we do.
See more on pages 50 to 55
Our financial strength
Playtech has a proven track
record of driving shareholder
returns through efficient use
of capital – augmenting growth
through investment in technology
and strategic M&A.
See more on pages 38 to 45
Playtech plc Annual Report and Accounts 2016 09
Increasing
product,
service and
distribution
capabilities
Acquisitions
remain key
Improve
quality of
earnings
Risk management
Our risk management framework provides a structured
and consistent process for identifying, assessing and
responding to risks, throughout the business.
See more on pages 46 to 48
Regulation and responsible business
Responsible business practices are critical to protecting
our licences to operate, and to delivering long-term
commercial success.
See more on pages 50 to 55
Governance
High standards of corporate governance contribute
to Playtech’s continued success.
See more on pages 56 to 91
Increasing product,
service and distribution
capabilities
Playtech’s philosophy is to
offer all product verticals
across all distribution
channels. Playtech invests
to expand its offering to
support its licensees with
new technologies, avenues
to market and products e.g.
Playtech Live, virtual racing
and casual gaming.
Improve quality
of earnings
A strategic focus for Playtech
remains to continue to grow
its regulated revenue. This
has been increasing steadily
in the last few years and
in 2016 the proportion of
regulated revenues at
Group level stood at 42%.
In 2016 Playtech launched
Sun Bingo and created the
new Playtech BGT Sports
division which should result
in growth of regulated
revenue in 2017.
Acquisitions remain key
Playtech has an outstanding
acquisition track record,
investing in new technology,
exciting content, and new
products. Companies have
mostly been acquired on
an earn-out basis, enabling
Playtech to leverage its
existing business and
licensee base to create
strong synergies. Playtech
is focused on making
further, similar bolt-on
and larger acquisitions.
Given the Group’s ability
to generate cash and
the strength of its
balance sheet, the
Board will continue to
target acquisitions which
enhance the Group’s
technology, content
and services whilst also
growing regulated revenue.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 10
Overview of our Gaming division continued
Responding to our market
Our Gaming division
The market trends
Total online gambling
market (€bn)
.
9
5
5
.
2
2
5
.
2
9
4
.
3
5
4
.
0
2
4
.
9
7
3
.
3
4
3
.
8
0
3
.
8
7
2
.
2
4
2
.
3
5
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
Global online gambling
market 2016 by region
€42bn
Europe: 47%
Asia/Middle East: 28%
North America: 12%
Oceania: 6%
Latin America/Caribbean: 5%
Africa: 2%
Forecast compound
annual growth rate
of mobile interactive
gambling between
2016 and 2020
15%
Source: H2 Gambling Capital.
The online
gambling market
The online gambling market offers a
constantly growing and dynamic market
place. H2 Gambling Capital estimated that
in 2016 Gross Gambling Revenues (GGR
defined as amounts staked less prizes)
for casino, poker, bingo, sports betting,
skill based gaming and lotteries, grew
by approximately 11% to €42bn from
€38bn in 2015. H2 Gambling Capital
predicts this is in addition to a compound
annual growth rate of 10% from 2016
to 2020.
Geographical development
The UK remains the most mature and largest
online market by player location, data from
H2 Gambling Capital shows that in 2016
the UK accounted for 14% of the overall
interactive market. China and Japan are
the next largest markets with 10% and 11%
respectively. Europe remains the leading
and largest segment, comprising 47% of
the overall market. Europe alone is forecast
to grow at a compound annual growth
rate of 13% from 2015 to 2018.
Drivers of market
growth
In line with the growth of e-commerce
across all consumer and leisure related
sectors globally, the online gaming market
continues to benefit from the transition of
land-based revenue to online revenue.
Improved broadband penetration and
capacity, faster mobile data transfer rates,
improved smartphone penetration, a
growing number of market participants,
along with increased marketing expenditure
by operators through a wide range of
marketing channels are all driving factors
for growth in the industry. In addition, the
growing trend of greater acceptance of
online gambling as a mainstream leisure
pastime is contributing to increasing
regulatory regimes appearing globally.
Regulation
Regulation remains a key opportunity for
growth in geographical markets. Moving
from a predominantly .com regime to a
regulated regime presents numerous
challenges to operators and suppliers
but also creates opportunities, potentially
opening up new product verticals and
increased marketing activity for operators.
A combination of factors determine whether
the opportunity will be attractive in the long
term; including tax rate, product availability
and technical requirements. Playtech
is uniquely placed given its strength,
geographic diversity and technical acumen
to manage these challenges and continue to
be the leading supplier in regulated markets.
Europe continues to lead the regulatory
movement, with the Czech Republic, Poland
and Portugal recently regulated. Holland,
Switzerland and Sweden are expected to
regulate in the near future. In Latin America,
Brazil is a big opportunity, whilst Peru and
Uruguay are reviewing historic positions.
Finally, Asia and the Indian sub-continent
remain interesting and lucrative markets.
Playtech plc Annual Report and Accounts 2016
11
Technology
The Playtech operating system is agnostic,
allowing upgrades and new features to
be rolled out to every operator from a
single platform. This enables all operators
the benefit of a more advanced offering.
Playtech’s R&D costs vary from year to
year, but are typically around 17% of overall
software revenue. This development
cost is shared across the licensee base,
and the revenue share model offered by
Playtech is cost effective when compared
to self-development, and allows licensees
to remain at the cutting edge of the market.
Operators also benefit from product
development through two-way feedback
with Playtech.
Experience
As Playtech’s scale has increased over
the 18 years since its incorporation, its
knowledge, expertise and offering in all
markets have enabled operators to grow
their businesses and to diversify into new
markets more quickly.
Liquidity
Playtech offers greater liquidity in the bingo
and poker markets, and can provide highly
progressive jackpots for casino players.
Services
Other barriers to entry are Playtech’s
expertise in the services environment
(marketing, hosting and affiliates) and
increasingly longer-term supply contracts
and established relationships with licensees.
Mobile
The number of mobile devices in use
continues to grow every day. In the
gambling sector increasing numbers
of players are choosing mobile sports
betting and gaming for the convenience
it brings. Playtech is at the forefront of
mobile development with 33% of revenues
generated from mobile devices in 2016.
This represents an increase from 22% in
2015 and 16% in 2014. It is forecast that
mobile interactive gambling will enjoy
a compound annual growth rate of
15% between 2015 and 2020.
Convergence of online
and land-based
In line with other consumer and leisure
lead sectors a significant industry trend in
gambling is the growing convergence of
land-based and online market segments.
This is principally a result of many of the
new entrants in regulated online markets
being existing land-based gaming, betting
and lottery operators. These operators
already have a substantial local presence,
well-recognised brands, existing player
databases and are familiar with the local
regulatory environment. Historically
separate in their philosophy and systems,
there has been a fundamental shift in both
segments towards common techniques for
player attraction and retention, such as VIP
levels and loyalty schemes. Operators are
becoming more aware of the importance
of player retention and of incentivising the
player on an individual basis regardless
of channel. The retention of players and
the ability to cross-sell them on to other
products provides an opportunity for
operators, but also presents substantial
technical challenges for them. Playtech has
focused much of its recent development
efforts on ensuring that it is able to deliver
functionality, player management and
content across the full range of distribution
channels, and to capitalise on this trend
of convergence.
How we respond
Leading the competition
Maintaining and extending
our leadership
The single most realistic alternative to
partnering with Playtech is for operators to
utilise their own proprietary platform together
with proprietary and third-party software.
Playtech believes this is an increasingly
unsustainable and costly business model.
Whilst currently accounting for around 30%
of the total online gambling market and
the trend has been for this to decrease.
Playtech enjoys significant scale advantages
by being able to leverage operating and
development costs of more than 140
licensees, including the top ten European
and UK online gambling operators.
Playtech’s strategy is to offer all product
verticals across all distribution channels on
an integrated platform that offers a single
wallet and sign-on. Playtech is also the
only supplier that can offer sophisticated
marketing and operational services to
drive player acquisition and retention via a
modular range of flexible approaches from
a full turnkey solution to equity joint ventures
or structured agreements. This enables
operators to offer their players a true omni-
channel approach across land-based/digital/
mobile channels, providing the ultimate
player experience.
Barriers to entry
Scale
The rapid growth and increased scale of
Playtech has enabled the development of
a superior platform, more relevant software
and more products than other suppliers.
New B2B operators or licensees are not
able to undertake significant product
development as they lack economies of
scale. This is even more apparent in new
channels coming to market such as mobile,
or new products such as virtual racing.
Games such as bingo or poker rely on
liquidity to satisfy player demand. Networked
casino games can also provide significant
jackpot opportunities.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 12
Playtech plc Annual Report and Accounts 2016
Overview of our Gaming division continued
Our omni-channel philosophy
Our Gaming division
Consumers today live and play in a world without restrictions
and so do we. A user’s experience should be the same no
matter what the content, where it is accessed from, when it
is played, or on whatever device they play on. The industry
term for this is omni-channel. Only Playtech can deliver
this – play any game, on any platform and on any device
using a single account and a single wallet, anywhere
and at any time. This is what we call Playtech ONE.
Playtech ONE
Playtech ONE allows an operator and
its customers, a seamless, anytime,
anywhere experience across any
product, any channel and any device
using a single account and single wallet.
Our pioneering innovation has enabled
licensees to bridge the retail-online-
mobile gap, giving their customers
what they want, when they want it, in
any location or time and on whatever
hardware they choose to use.
Operator results speak for themselves.
We offer and enable them with all the
tools and technology; they present
their players with the ultimate gaming
experience; and they generate
improved results.
Playtech plc Annual Report and Accounts 2016
13
How omni-channel works
5 pillars of omni-channel
1
2
3
4
5
Playtech ONE
See page 14
See page 16
See page 22
User experienceOne way for seamless playSeamless, responsive and adaptive gameplay across all channels and devices.CRMData driven in real-timeAutomated data-driven, real-time, BI marketing tools and bonus engine.ContentAll content, all channels, all devicesPlay any product, across all channels, locations and devices.PersonalisationTailored player experienceBespoke player experience, enabled by segmentation and supported by real-time communication tools.WalletONE wallet, ONE view, ONE platformSeamless wallet and balance management, payments, fraud, responsible gaming and compliance tools.Using a single wallet anywhere and at any time.Only Playtech ONE can deliver this.Platform & intelligence• Playtech Open Platform (POP)• Playtech Web Platform• Information Management System (IMS)• Business Intelligence Technology (BIT)Products• Casino• Playtech live casino• Sports• Virtual sports• Bingo• Playtech poker• RetailServices• Marketing• Payment advisory• Financial services• Hosting services• Fraud preventionPlay any gameOn any platformOn any deviceStrategic reportGovernanceFinancial statements 14
Platform and intelligence
The data-driven journey
Our Gaming division
Playtech
Open Platform (POP)
Playtech Portal
Information Management
System (IMS)
Extensive games library
Full front-end customisation
Huge range of designs,
tools and features
Integrate user interface
with any Playtech product
Playtech Portal is an open framework
designed to integrate content and deliver
an unparalleled experience for operators
and their players.
It allows operators complete control and
flexibility and all the tools they need to
configure their customer-facing front-end
solutions across any channel and device,
is fully optimised across all platforms
allowing a seamless offering and
experience and is fully integrated into
Playtech’s industry-leading IMS player
management system. Portal supports
a multitude of languages and markets
and comes complete with full CRM and
personalisation, reporting and analytics
and player communication tools.
Best-performing games
Exclusive content
Playtech’s omni-channel Open Platform
allows licensees access to more than 600
of the industry’s most popular online and
mobile in-house and third-party games
at any time, across any channel and on
any device.
The POP content library includes a
comprehensive selection of classic slot
games, multi-line video and premium
branded slots from our own cutting-edge
in-house studios, more than 100 mobile
titles and content from 20 of the industry’s
largest suppliers. All new POP titles are
launched simultaneously across mobile
and desktop.
Key components include aggregation
through one integration; bonusing across
all content including third parties; on-
going support; real-time content and
competitor performance league tables;
games development kit; multiple game
integration frameworks; seamless third-
party wallet integration; single player
account across all products; and data
integration and warehousing and
support for all gaming standards.
Most powerful gaming
intelligence platform
Seamless games and
platforms transition via
single account
Full player lifecycle
visibility and control
Playtech’s award-winning Information
Management System (IMS) is the backbone
of our omni-channel product and services
portfolio, powering Playtech ONE, and
offering licensees all the tools they need
to manage their operations in the most
efficient and profitable way.
IMS enables our licensees to access all
the elements of our unique omni-channel
capabilities allowing players to seamlessly
transition across games and platforms via
a single account and single wallet, while
providing operators with simple third-party
integration and full visibility and control
of the entire player lifecycle.
IMS unifies all Playtech products across
all channels, including retail, presenting
operators with a single account overview
and allowing them to streamline and
optimise marketing spend, maximise
cross-sell and conversion potential,
leverage player loyalty and value and
increase revenues by automating key
aspects of the player journey.
There is simply no industry equivalent
to IMS – gaming’s most powerful
omni-channel enabler.
Playtech plc Annual Report and Accounts 2016 15
Business Intelligence
Technology (BIT)
Data-driven marketing tools
Fully automated BI software
Increases lifetime value
and revenues
BIT provides new and existing licensees
with superior innovation for their next stage
of growth. Our unique data-driven, business
intelligence marketing technology,exclusive
to Playtech, significantly enhances licensee
revenues by increasing player experience
and lifetime value. BIT revolves around a
series of game-changing features including:
The BI platform
• Complete operational overview
Enables day-to-day and high-level
decisions by comparing key metrics
against competitors.
Data-driven marketing tools
• The power of personalisation
Automates and personalises every
major aspect of the player journey.
Playtech Analytics
• Real-time decision making
Real-time tracking and reporting
to maximise player value and
brand profitability.
Playtech optimiser
• Omni-channel personalisation
Real-time, easy-to-use personalisation
and optimisation engine, powering all
of our offering across all channels.
Strategy in action
Strengthening
our bingo offering
Playtech’s recent
acquisition, ECM
Systems (ECM) supplies
software and support
services to the UK retail
bingo market, including
major operators Gala
Leisure, Mecca Bingo and
the leading independent
bingo operators.
ECM is highly regarded within the
bingo industry and its extensive range
of products is instrumental to the daily
operation of retail bingo in the UK and the
Republic of Ireland. Its systems provide key
facilities for Main Stage Bingo, Cash Bingo,
wide area linked gaming operations and
front-of-house reporting. A complete
customer support facility provides technical
and repair services for all current and
legacy products.
Read more at www.playtech.com
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 16
Products
The complete product suite
Our Gaming division
Casino
Playtech Live
Playtech BGT Sports
Complete omni-channel
experience
Complete omni-channel
experience
Complete omni-channel
experience
Largest portfolio of best-
performing content
Award-winning back-end
platform
Unique player segmentation
and personalisation tools
Simultaneous mobile-
desktop launches
Powered by innovation
Playtech offers the industry’s most
extensive portfolio of omni-channel
casino content, delivering 600+ of the
most innovative titles across all channels,
platforms and devices.
As part of our Playtech ONE omni-channel
offering, our casino product allows players
to access content anywhere, at any time
and on any device through a single
wallet experience.
Driven by our powerful IMS platform and
BIT, Playtech casino delivers industry
leading in-house and premium branded
games including a large selection of
DC Entertainment titles such as Batman
Classic TV Series, as well as Top Gun and
The Flintstones to name just a few, while
our Open Platform offers hundreds more
titles which flawlessly integrate with our
licensees’ websites.
Our commitment to providing new and
existing licensees with access to our
leading content, powerful platform, and
fully automated marketing tools ensures
operators deliver the ultimate casino
experience to their players.
Our unrivalled offering underlines our
position as the industry’s leading casino
content, software and services provider.
Playtech’s live casino platform and products
are designed to provide the most authentic,
omni-channel gaming experience
supported by a new user interface and
experience and cutting-edge platform
that uses the latest business intelligence
data-driven technology.
Our extensive live product offering,
manned by native-speaking dealers,
includes all the casino classics such as
Blackjack, Baccarat and Roulette in addition
to innovative new variants including
Unlimited Blackjack, Prestige Roulette
and Baccarat and Casino Hold’em.
We use state-of-the-art cameras
broadcasting in premium HD quality, offer
the fastest streaming and highest up-time
in the market, bespoke branding and
individual training, establishing the trust
and loyalty associated with a real casino
experience.
We have dedicated tables with native-
speaking dealers for the UK, Italy, Spain
and Romania, and others due to an
increasing demand in newly regulating
markets. Our core focus revolves around
unbeatable licensee service, ensuring
we outperform our competitors with our
world-class omni-channel technology,
features, user experience and dedicated
support services.
Brandable mobile solution,
platform, user interface
and features
Playtech BGT Sports delivers next
generation sports betting solutions,
delivering a true omni-channel offering,
with content available across any device,
any channel and any location.
Working with more than 80 licensees in 24
territories resulting in more than 30,000
live products, we are the powerhouse
for sports betting solutions across retail
and Self Service Sports Betting Terminals
(SSBTs), online and mobile. Our vision is
to create a fully integrated, best-in-class
sports betting technology offering by
drawing on Playtech’s technology and
infrastructure. Our sports betting platform
is robust, secure and highly scalable,
integrated with Playtech’s award-winning
IMS and BIT, offering player segmentation
and personalisation, configurable to
both large-scale and smaller managed
operations.
Our powerful omni-channel mobile platform
is also exclusively able to support any
channel, any product, on any device, at any
time, using one wallet and one account,
enabling licensees to track, customise and
significantly enhance players’ experience,
setting us apart as the only true omni-
channel offering.
Playtech plc Annual Report and Accounts 2016 17
Strategy in action
Leading content
providers
Playtech acquired
Quickspin, a fast-growing
Swedish games studio
that develops and
supplies high-quality
video slots to operators,
both in online real money
gambling as well as in the
social gaming market.
The acquisition provides Playtech with
a proven virtual slot machine games
portfolio, strengthening Playtech’s
position as the leading content provider
in the industry, as well as providing
greater penetration in the Nordic region.
In addition to Quickspin’s existing
customer base, Playtech plans to
distribute Quickspin’s content through
its existing distribution channels across
all verticals.
Quickspin’s portfolio currently consists
of over 20 high-quality games with
the company providing games to over
40 customers, including many international
tier 1 operators. Quickspin generated
revenue and Adjusted EBITDA of €6.0m
and €2.1m respectively in the financial
year ending 31 December 2015 and is
forecast to grow significantly over the
coming years, with a number of new
customers recently secured and with a
strong pipeline of both new customers
and new games.
Read more at www.playtech.com
Virtual sports
Complete omni-channel
experience
State-of-the-art graphics
and motion capture
technologies
In-game branding,
promotions and
bespoke events
Our diverse and growing virtual sports
offering combines the very latest 3D game
graphics and motion capture technology
with a highly sophisticated virtual racing
simulator across a wealth of sports,
including horse racing, tennis, basketball
and football.
Our virtual products enable players
to bet within the familiar sportsbook
environment, with our graphics engine
and servers allowing for integrated odds,
data feeds and bespoke in-game branding,
promotions and tailored races, matches,
games and promotional events.
With more than ten years’ experience in
developing and providing virtual racing
simulators, our virtual racing server
creates familiarity for the player, ensuring
experienced racing fans can follow
the form of the runners, enhancing
the overall gameplay.
We work closely with well-known racing
venues, professional sports players and
commentators to design ultra-realistic,
high-quality environments, combining
leading-edge graphics with CGI techniques,
providing an experience comparable
only to the real thing.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 18
Products continued
Our Gaming division
Bingo
Poker
Retail
Complete omni-channel
experience
Complete omni-channel
experience
Complete omni-channel
experience
Most extensive
side-games portfolio
Bespoke bingo client
and room variants
Playtech delivers the industry’s most
complete, omni-channel bingo portfolio,
allowing players to enjoy the same
seamless experience between all
platforms, on any channel and on
any device, through one wallet
and one account.
Our acquisition of ECM Systems
has strengthened our ability to further
increase our position as the leading
omni-channel bingo provider for both
major and independent retail and online
operators and includes the capability
to deploy content across Electronic
Bingo Terminals (EBTs).
We have the largest selection of omni-
channel bingo games, variants and side
games, with the bingo client and room
variants all tailor-made to an operator’s
brand requirements, giving a truly
bespoke look and feel.
Our award-winning IMS platform supports
each operation, with data analysis and
player segmentation tools enabling the
targeting of promotions for the most
effective acquisition and retention
campaigns.
Our unique offering comes complete
with the best performing omni-channel
slot games with retail favourites mirrored
both online and on mobile.
Innovative game features
Reliable back-end
management tools
Intuitive player management
and tracking tools
600+ games to choose from
Playtech’s omni-channel poker offering
remains unrivalled, and is available on the
industry-leading iPoker network, the world’s
largest .com, regulated poker network.
Playtech Retail offers a next generation
omni-channel network for land-based
venues, with seamless player access
between each channel.
Our user-friendly service features multiple
game types with an extensive selection
of table stakes and buy-ins allowing
licensees to launch their own fully branded,
fully customisable poker rooms, hosting
multiple languages and currencies.
Through our award-winning IMS platform,
the client remains supported by premium
back-end management tools coupled with
a powerful marketing system and services,
allowing for targeted promotions, bonuses,
next generation collusion prevention
and detection tools and dedicated
24/7 online support.
Playtech’s iPoker network leads the
way in network liquidity and a vast
array of tournaments, making it the first
choice for operators and players alike.
Operators implement their own
content but also benefit from 600+
award-winning Playtech games, as
well as exhilarating titles from over
30 of the industry’s best suppliers.
Licensees can enjoy total control,
segment customers based on overall
value to the business and gain full visibility
of player lifecycles. Our unique single
wallet functionality allows players to
effortlessly move between products
and channels without the need to
withdraw or deposit funds.
With real-time reporting, business
intelligence, optimisation and player
tracking capabilities, operators manage
and modify their activity based on success,
while our system also allows operators
to segment players based on the value
they offer to their business.
Playtech’s extensive retail offering
caters for a large variety of venues,
including casinos, betting shops, bingo
halls, high street locations, restaurants,
bars, hotels, resorts and cruise ships.
Playtech plc Annual Report and Accounts 2016 19
* Post period end.
Strategy in action
Acquisition
of Eyecon*
Playtech acquired Eyecon,
a specialist supplier of
online gaming slots
software to an international
customer base.
Eyecon was founded in Brisbane, Australia
in 1997 and is a specialist software supplier
with a particular focus on bingo audiences
with an established games portfolio of over
70 games, including the industry-leading
soft gaming slot ‘Fluffy Favourites’. Eyecon
has also developed its own Remote
Gaming Server (RGS) which enables it to
distribute its content direct to operators
and via distributors, such as 888 and
Virtue Fusion, Playtech’s bingo network.
Eyecon currently derives almost all
its revenue from the UK market and
in line with Playtech’s acquisition strategy,
almost all of Eyecon’s revenues are fully
regulated. The addition of Eyecon’s
content portfolio strengthens Playtech’s
position as the leading content provider
in this key market. In addition, Eyecon’s
proprietary RGS and distribution network
will strengthen the penetration of Playtech’s
Virtue Fusion offering.
In order to assist in retaining the
knowledgeable and specialist Eyecon
team, its founder Scott Murray, has
committed to remain with the business
for at least three years.
Read more at www.playtech.com
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 20
Acquisition of BGT
Driving the digitalisation of retail
Our Gaming division
BGT is at the vanguard of retail gaming technology in the
wagering industry and leads the way as an innovator and
provider of sport betting services worldwide.
In July 2016, Playtech announced
that it had acquired Best Gaming
Technology GmbH (BGT) for €138
million*. The consideration was paid
from Playtech’s existing cash resources.
Headquartered in Vienna, BGT was
founded in 2005 and is the leading
provider of sports betting software and
solutions for gaming and sports betting
operators. Its customer base includes,
amongst others, some of the most well
established bookmakers in the UK and
Spain, such as Betfred, Codere, Coral,
* For a 90% share of ownership.
Ladbrokes, Paddy Power Betfair
and William Hill.
BGT’s business model is based on a
revenue share of the gross win margin
from each SSBT. At the end of FY2016,
BGT provided more than 27,000 machines
with its betting software to licensed
operators with this number forecast to
increase significantly over the coming
years driven primarily by the roll-out
of new SSBTs, compact terminals and
tablets as bet entry devices as well as
by increased usage of existing SSBTs.
27,000
Installed machines globally
Platform features
• Smart pricing: set and manage prices
across various channels within a single
risk system
• Integrated services: accounting systems
(SAP, ProAlpha), bank services (HalCash),
third-party protocols (NXCS casino
protocol)
• Innovative survey and marketing tools
for content management, bonus and
promotion schemes, and reporting on
big data as well as customer tracking
• Incredibly powerful omni-channel
solution when coupled with the
Playtech ONE infrastructure
• Pricing flexibility with dynamic risk
management
• Early cash out: customers can cash out
their bets at any time on all channels
• Maximum ARPU from multi-channel
customers
BGT’s technology
BGT's main product is its proprietary
software for self-service betting terminals
(SSBTs). Its offering combines class-leading
technology with a digital terminal that
revolutionises the traditional over-the-
counter experience, at times generating
more than double the volumes of other
SSBT providers. Other products include
ePOS and till systems for betting operators
and an omni-channel web/mobile betting
platform. In addition to supplying many
of the most profitable bookmakers in the
UK, the acquisition will provide Playtech
with greater penetration into the Spanish
and Italian markets with several significant
potential new customers in the pipeline.
Benefits of the
transaction
SSBTs and ePOS systems that digitise retail
betting businesses form one of the fastest
growing areas for betting companies and
one of the most important elements of a
true omni-channel offering. BGT's product
portfolio will enhance the Playtech ONE
omni-channel offering, which enables
players to enjoy a seamless, anywhere-
anytime gaming experience across any
product, channel and device, all using
a single account and wallet.
Playtech plc Annual Report and Accounts 2016 21
The opportunity
in sports
When I founded BGT in Vienna, Austria, in mid-2005
I had the vision of a high-end provider for the sports
betting industry with a focus on self-service systems.
Whilst other suppliers focused on online and digital,
I focused BGT on land-based technology.
Having worked through some challenging years
in the beginning, BGT has become the number
one sports betting technology provider for land-
based products worldwide, founded on our goals
of making sports betting fun, providing high-end
technology, being a reliable partner and offering
best in class services to our customers.
BGT is at an inflexion point in its development as
we penetrate into new markets whilst upgrading
our products at a phenomenal speed. I believe
that becoming part of the Playtech family will
allow Playtech and BGT to take omni-channel
to the next level.
Armin Sageder
Chief Executive Officer
of Playtech BGT Sports
We believe that the future
of gaming is for retail
operators to digitise their
offering, creating a simple
and intuitive experience for
customers as well as creating
an opportunity to extend
beyond retail and into online,
including web and mobile.
This follows the same trends we see in other
commercial sectors around the world with the
modernisation and digitalisation of betting shops
not only improving the retail experience but
also adding a whole new channel as it integrates
into an online offering.
BGT is the leading provider of sports betting
software and solutions for gaming and sports
betting operators in what is one of the fastest
growing verticals of our industry. BGT offers the
market's most sophisticated retail sports solution
which is also both modularised and flexible,
allowing Playtech to quickly integrate with its own
platform. As the only company that will offer FOBTs
and SSBTs, all integrated with the world's leading
online platform and products, Playtech will realise
the potential of a true omni-channel offering for
the benefit of both consumers and operators.
Mor Weizer
Chief Executive Officer
Playtech plc Annual Report and Accounts 2016Strategic reportGovernanceFinancial statements
22
Services
Playtech Turnkey Services
Comprehensive set
of tools and skills
Player acquisition
and retention
Levels playing field
for new operators
Marketing services
Unbeatable industry
experience and expertise
Access to 50,000+ affiliates
Optimisation driven
Our Gaming division
As part of our Playtech ONE offering,
operators and their customers are
presented with a seamless, anytime,
anywhere experience, across any
product, any channel and any device
using a single account and wallet.
Playtech’s Turnkey Services (PTTS) offer
all-encompassing solutions across all
platforms by supplying product design,
operational management, internal and
external marketing tools, fully customisable
applications and around the clock
interactive player support.
PTTS is designed to deliver material
value and expertise to licensees across
key elements of player acquisition and
retention, together with the opportunity
to realise substantial cost savings by
outsourcing operational services.
Playtech offers in-depth marketing services
based on decades of expertise from
gaming industry experts.
Our offering includes affiliate marketing
services and access to 50,000+
affiliates with the tools to push our
licensees’ products through the world’s
leading e-gaming affiliate programme;
dedicated affiliate product managers;
branding during affiliate tradeshows;
and multilingual services to suit all
online marketing requirements.
We offer unbeatable Search Engine
Optimisation skills with full-scope promotion
within the dominant search engines by our
developers and SEO experts, in addition
to effective optimisation across all relevant
languages using the appropriate keywords.
Our turnkey solutions bring more than
a decade of expertise to assist those
new operators preparing to enter highly
competitive online regulated markets,
including access to some of the most
powerful marketing affiliates.
Our experienced team of media buyers
build multi-language campaigns and offer
daily campaign tracking, with a strong focus
on optimisation so as to obtain maximum
return on investment.
Payment advisory
Expert consultancy services
All payment queries
dealt with
Extensive choice of
payment methods
Our professional consultants provide
advice on all payment issues related
to cashier, processing, payments, risk
management and financial performance,
creating and simplifying the implementation
of processing and payment models.
With an extensive choice of more than
50 existing payment methods, including
credit card processing gateways, acquirers,
e-wallets, EFT, bank draft payout options
via local banks worldwide, wire transfer
and prepaid cards, a payment model
can be customised to meet the specific
requirements of each individual client.
Playtech plc Annual Report and Accounts 2016 23
Customer support services
Comprehensive customer support is
crucial to the success of a gaming brand,
from sign-ups, through to deposit, play
and withdrawal.
Our email and telephone customer support
is accessible 24/7, met by our team of
highly skilled professionals with industry-
leading customer response times.
24/7 email and phone
support
Unrivalled response times
Service at the heart
of Playtech philosophy
Financial reporting services
Unmatched reporting
and analysis
Broad range of services
Real-time online monitoring
Hosting services
Expansive industry
experience
Tried, tested, trusted
Understand operator’s
specific requirements
Fraud prevention
Next generation tracking
technology
Rapid suspicious
activity detection
Automated alerts
Our advanced financial reporting and
analysis tools offer our customers a
comprehensive portfolio of financial
services coupled with the ability to
review and monitor a selection of
online activities, all in real time.
Our world-class financial tools include
player payout approval/decline, dispute
withdrawal requests, wagering calculations,
procedure submittal, document review
and much more.
With years of industry experience,
our hosting services are world class.
We give you peace of mind and work
to ensure your operation remains reliable
and secure at all times, providing DDoS
prevention; DNS management; third-
party services; geo-location services;
maintenance services and client and
banner hosting amongst others.
We are experts in and lead the industry
in omni-channel gaming, software and
services, so we understand operators’
specific business needs, therefore our
customers can rely on us to foresee
every possible threat and issue, prevent
unplanned system failure and ensure
businesses are running safely and at
their maximum potential.
As the gaming industry continues to grow,
so too do the number of fraudsters keen
to take advantage of the huge revenues
earned by operators.
Our state-of-the-art tracking technology
allows for the rapid detection of suspicious
behaviour and the prevention of illegal
activity, while our top tier management
tools monitor deposits and withdrawals,
track player activity and deliver
automated alerts.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements Our Financials division
24
Markets.com
The home for traders
Markets.com is a fast-growing provider of online
financial trading platforms for B2C and B2B customers.
Markets.com offers Contracts for Difference (CFDs)
for online traders on more than 2,000 underlying
global financial instruments comprising equities,
indices, commodities, exchange-traded funds
(ETFs) and foreign exchange.
B2C platforms
Markets.com’s proprietary web and mobile
trading platforms are available to use online
or downloadable for Android and Apple
devices, on Google Play and the App
Store and are available in 15 languages.
Both the web and mobile platforms are in-
house developed, and specially designed
to be intuitive, powerful and robust, catering
for all levels of traders.
In Markets.com’s Trading Central area,
B2C customers can access data charts
and other tools, including MACD, RSI,
SMA, Support and Resistance, pivot
points and over 50 other studies.
B2B platform
Playtech’s Financials division offers a
full turnkey solution to operators in the
financials trading space by utilising the
software and infrastructure behind
Markets.com as a B2B offering.
B2C operators utilising the Playtech
Financials platform benefit from robust,
reliable technology coupled with access
to competitive spreads and exceptional,
round-the-clock customer support.
Playtech has augmented its B2B offering
with the acquisition of STP brokerage
service provider CFH – see pages 26
and 27 for further details.
Playtech plc Annual Report and Accounts 2016 25
ARSENAL F.C.
OFFICIAL PARTNER
ARSENAL F.C.
ARSENAL F.C.
OFFICIAL PARTNER
OFFICIAL PARTNER
Playtech plc Annual Report and Accounts 2016Strategic reportGovernanceFinancial statements Our Financials division
26
CFH acquisition
Building our B2B offering
The acquisition of CFH will strengthen Playtech’s offering in
the B2B market of financial trading and provide the foundation
for future acquisitions as well as to become one of the only
businesses to offer proprietary, dedicated B2C and B2B
platforms to clients.
450
Customers and partners worldwide
80
Countries served
In November 2016 Playtech was pleased
to announce the acquisition of a 70%
stake in Consolidated Financial Holdings
AS (CFH). CFH offers a Straight-Through
Processing brokerage service which
provides retail brokers multi-asset
execution, prime brokerage services,
liquidity and complementary risk
management tools.
The agreement will back Playtech’s
target of creating a business-to-business
financial software offering and will
provide a significant growth opportunity
for CFH by providing it access
to Playtech’s greater scale and
financial strength.
Benefits of the
acquisition
• CFH will remain a provider of STP
processing and, due to Playtech’s
scale and financial strength, will be
able to provide its customers with
improved trading terms and more
attractive margins
• CFH customers will have access to
a deeper pool of liquidity through
the addition of intra group liquidity
arrangements, enabling more
competitive prices and
faster execution
• CFH will have access to the Playtech
Financials division’s wide range of
CFD instruments which CFH will be
able to offer on its clearing system
over time
• CFH will benefit from Playtech’s
leading technological superiority
to further develop its offering and
improve client experience
Playtech plc Annual Report and Accounts 2016
27
Within the CFH Group
there is:
CFH Clearing
FX Prime brokerage and regulated by the FCA
and run out of London, providing institutional
clients (mainly other retail forex brokers)
with multi-asset Execution, Prime Brokerage
services and trading technology.
CFH Systems
Technology company run out of Copenhagen,
which serves Forex brokers and banks, offering
end-to-end white-label solutions with extensive
back office access and fully customisable
front-end trading platforms, supporting brokers
running both STP and market making models.
Tradimo
An online trading school and education website.
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Playtech plc Annual Report and Accounts 2016 Strategic report
28
Chief Executive Officer’s review
Respect, innovation, progression
We remain confident of strong performance in 2017
driven by both organic growth and the acquisitions
made in 2016.
Mor Weizer
Chief Executive Officer
Our results
48%
Revenues from regulated markets
(2015: 47%)
10
Ten new customer wins
33%
Of software revenues from mobile
€296m
Returned to shareholders
Playtech plc Annual Report and Accounts 2016 29
Overview: executing
on our strategy
I am proud to report that 2016 saw
Playtech deliver on its operational
and strategic objectives.
The double-digit growth reported in
the Gaming division at the half year has
continued into the second half including
the announcement of new licensees,
new content and features for customers
and important long-term renewals.
The repositioning of our Financials
division also produced an encouraging
performance in the second half of the year.
Playtech has continued to successfully
execute its strategy of acquiring
complementary businesses, including
enhancing our omni-channel offering and
adding further premium content, with the
acquisitions of BGT, Quickspin and ECM.
In addition, the acquisition of Eyecon
post the period end further strengthens
Playtech’s position and extending its
reach into new areas. The acquisition
of CFH in November significantly
enhanced Playtech’s B2B offering
in the Financials division.
Our balance sheet strength and continued
substantial cash generation enabled us
to execute the two cornerstones of our
strategy, firstly to continue the programme
of strategic acquisitions to further
strengthen our market leading position,
and secondly to focus on shareholder
returns by returning €150 million through a
special dividend and launch a €50 million
share buyback programme in 2016. This
commitment was underlined by the move
to a progressive dividend policy to provide
shareholders with more certainty and
consistency of dividend payments.
Gaming division
Overview
The Gaming division delivered another
strong year achieving 21% reported
revenue growth at constant currency,
with a good contribution from existing
and new customers.
Licensees
I am pleased to report that operationally
Playtech had a strong 2016 from
an operational perspective, achieving
one of our key strategic objectives of
‘locking-in’ future growth for the business.
This year saw the launch of several
important customers including
Pokerstars, Sun Bingo, Mr Green,
Maxbet, Win2day and Victor Chandler
with further significant new licensees
signed in 2016 including Fortuna and
others still to launch. In total, more than
ten new licensees launched in the year
with a number of relationships already
secured and expected to go-lives
in 2017.
The strength of Playtech’s offering
and commitment to its licensees is
clearly evidenced by the length of its
relationships with its customers. Many
important agreements were renewed
in 2016 and the beginning of 2017 with
nine out of Playtech’s top ten licensees
now on long-term contracts, including
Paddy Power Betfair, William Hill,
Rank and Betfred.
While we have been successful in
extending relationships into new verticals
and new geographies, due to regulatory
changes in Europe, Latin America and
elsewhere, we are seeing a fundamental
change in the type of licensees we do
business with. Given our experience of
regulated and newly regulated markets,
Playtech is seeing an increase in early
stage customers in new or emerging
regulatory regimes. Over a short period,
as the new regulatory framework is being
introduced, these operators become
amongst the largest and best performing
online operators in the new markets.
As most retail gaming operators lack
the operational capabilities required to
successfully operate an online gaming
arm they seek a strong technology
partner. In many cases, they often also
lack the digital infrastructure to support
their retail arm, and through its unique
omni-channel solution, Playtech is the
obvious choice to provide better CRM,
technology, premium products and a
best of breed operational skills, expertise
and capabilities. Accordingly, Playtech
remains focused on regulated and newly
regulated jurisdictions.
Our pipeline of new licensees and
structured agreements remains strong,
driven by newly regulated and soon-
to-be-regulated markets. We have
relationships with the leading retail
gaming operators in every commercially
viable jurisdiction and expect the
regulatory shift identified several years
ago, to continue being the Company’s
largest growth opportunity.
Customer concentration
As outlined at the half-year results, in
future we will be presenting customer
concentration on a new basis to more
accurately reflect the reality of how
we operate.
Historically we have presented our largest
licensee as a single customer. However,
this licensee is a licensed distributor for
many smaller licensees who sit beneath
the distributor. The aggregator model is
common in Asia and used by different
B2B and services providers. Playtech
has always used licensed distributors
and local companies to establish itself
across the region given the importance
of understanding the culture and the
importance of having the right partner
– not just any partner.
This model serves us well as it provides us
with access to local gaming specialists who
truly understand the culture, the key people
and the most relevant potential operators.
They ensure that all operators go through
a strict due diligence process and that they
maintain all relevant permits and licences
as well as serve them locally by using local
personnel who share the same languages
and culture.
Following the reclassification at the half year
the revenue from our top five licensees
stood at 36% compared to 42% at the 2015
year end. The trend of diversification in our
customer base continued from the previous
year at all levels, with the top 15 licensees
accounting for 66% of revenues, down from
73% at the 2015 year end.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 30
Chief Executive Officer’s review continued
Regulated markets
Our focus remains on regulated
markets which represent the future of
our ever-evolving industry. During the
period we continued to strengthen
our position and extend our reach
in regulated markets by supporting
the organic growth of our customers
in the UK, Italy, Spain, Denmark and
Finland. Additionally, we established our
presence in newly regulated markets
such as Mexico, Bulgaria and Romania
working with existing and new retail
gaming companies.
Regulated revenues in the Gaming
division grew both in absolute terms
and as a percentage of total revenues
despite strong growth in soon and yet
to be regulated markets and a weaker
Sterling. Looking forward to 2017, we
will see the percentage of revenues
from regulated markets further improve.
This will be predominantly driven by
the continued growth of our licences
in regulated markets, as operators
reallocate their marketing budgets
and focus on regulated and soon to
be regulated markets, and also within
Playtech we will see the full-year impact
from Sun Bingo, BGT, ECM and Eyecon.
The strong momentum that we
experienced in recent years is expected
to continue as Playtech benefits from
the growth of its customers and signs
new licensees in regulated markets.
In addition, a significant number of
countries are well advanced in their
legislation processes across Europe,
Latin America and elsewhere while
other important markets are considering
regulating in the coming future.
Playtech ONE: omni-channel
offering
Playtech ONE is the industry’s only
true integrated omni-channel offering.
Playtech ONE allows operators to
develop a seamless inclusive approach
to channels, products and platforms.
A true, commercial omni-channel
offering is not just an integrated solution
connecting products or games delivered
to customers or the same games offered
across different channels. Instead, omni-
channel is a comprehensive solution
that shares the same infrastructure and
CRM (through Playtech’s IMS) across
retail, web and mobile environments,
allowing a seamless journey between
the different channels, products and
platforms as well as cross platform
functionality improving the offering to
players and creating an eco-system
that incentivises the players to remain
loyal to the operators. The one CRM and
infrastructure provides operators with a
single view across all customer activity
and allows them to tailor promotions and
bonuses across channels and verticals.
It also provides operators with the ability
to deliver a fully personalised offering
and successfully target players through
cross-product marketing.
Our proven track record of working
with operators in regulated markets
demonstrates that there is an overlap
in the demographics of retail and online,
that traditional retail customers playing
online are more valuable; and that the
acquisition costs associated with such
players are far lower when compared
to direct acquisition channels. A number
of operators have been pre-occupied
in recent years with the digitalisation
of retail, concentrating on taking retail
online, in reality retail and online form
part of one experience and channel
for customers. Accordingly, we believe
that an omni-channel solution will
inevitably be implemented by most
retail businesses that have or intend
to launch an online gaming arm.
We truly believe that the convergence
between retail and online is inevitable
due to the combination of two factors
– the fact that a large number of retail
gaming businesses still operate legacy
systems that do not fit players’ demand
and more than ever understand the
importance of digitising their retail
infrastructure. In addition, the significant
opportunity in the online space
capitalising the investments made into
the brand that usually comes with better
cash conversion due to lower capex and
opex investments and better margins.
Mobile
Across all verticals mobile continues to be
a key driver of increased player activity with
revenues from mobile accounting for 33%
of overall software revenues, an increase
of 50% on the same period last year.
Importantly Playtech saw an 80% increase
in Gaming mobile penetration during the
year. With increases across all verticals
except for Sports, with the Sports figure
affected by the previously disclosed
loss of certain Mobenga contracts and
the inclusion of BGT in the second half.
Unsurprisingly given the maturity of the
UK gaming market and the quality of its
mobile networks, there still exists a material
difference between the UK and the rest of
the world, with mobile accounting for 54%
of UK software revenues, but only 24% for
the rest of the world. This highlights not
only how developed the UK market is, but
also the significant opportunity in other
parts of the world.
Mobile remains an important element of
omni-channel and is an integral part of
every development cycle for our products
alongside retail and web. Accordingly, we
have reorganised internally to ensure we
streamline the development lifecycle to
include a sophisticated mobile solution that
includes native apps and not just HTML5
or an HTML5 based solution as most other
companies do.
Playtech plc Annual Report and Accounts 2016 31
Product
Playtech continues to lead innovation
and can deploy unmatched research and
development resources, all of which is
available to our licensees.
Live casino
Playtech remains focused on live casino
given the strong growth we have seen
across all our licensees. We believe
positive momentum will continue in
2017 and beyond and have continued
to develop our live casino offering.
Throughout the year new launches
and releases have included innovative
concepts, games and features, as well as
never-before-seen real native apps that
prove to be very successful and appealing
to customers. We have also continued to
develop our relationships with customers
and worked closely to ensure success
and accelerated growth in their live
casino operations.
In early 2017 Playtech revealed its latest
ground-breaking Augmented Reality
experience within a spectacular Age
of the Gods™ Live environment.
The augmented reality roulette – themed
around Playtech’s smash-hit suite of Age of
the Gods™ games and due to be launched
later this year – uses the latest augmented
reality technology to significantly heighten
the live experience with 3D graphics that
can be configured to suit any operator
requirements, players experience a range
of visuals depending on the outcome of
each game round.
The game concept is aimed at not only
creating a next generation gaming
experience, but also giving Playtech
licensees greater flexibility and further
opportunities to cross-sell to a new
demographic of player who would either
have not previously considered or who
could potentially re-connect to live casino.
In addition, we also opened two new
Live studios in the past few months in
Latvia and Romania due to the high
levels of customer demand.
Playtech opens world’s
largest live casino studio
Surge in demand sees opening of unrivalled
next generation operation.
In February 2017 Playtech opened the world’s largest
next generation live casino studio in Riga, Latvia due
to a huge surge in client demand.
Built on top of the city’s fortified 16th century walls in
the heart of Riga Old Town, the 8,500 square metre
capacity studio dwarfs any existing live casino area
in the market today.
The technology within the building is equally
unmatched with hundreds of state-of-the-art cameras,
catering for hundreds more custom-made tables and
gaming areas, an advanced control and monitoring
centre and large-scale dealer campus that will be
used to train and develop all of Playtech Live’s staff.
The new studio will cater for the majority of Playtech’s
European live casino footprint, further building on the
Company’s reputation as the leading, global provider
of next generation live casino games, software and
services. Playtech Live has further studios in the
Philippines, Spain, Belgium and a recently opened
operation in Romania to cater for an increase in
demand for the newly regulated gaming market.
As part of the Playtech ONE omni-channel offering,
Playtech Live allows players to access content
anywhere, at any time and on any device through
a single wallet and single account. Driven by the
powerful Playtech IMS player management platform
and data-driven business intelligence technology,
Playtech casino delivers industry-leading in-house
and premium branded games.
This has been a huge undertaking but,
more importantly, is a huge step forwards
in live casino and one no other company
except Playtech is capable of making.
Our licensees’ offerings have firmly been
futureproofed with the completion of our
new studio, leading-edge software and
hardware and state-of-the-art control centre.
And crucially, it is their players who will
benefit the most from the best live casino
offering on the market.
Mor Weizer
Chief Executive Officer
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
32
Chief Executive Officer’s review continued
Live casino continued
Built on top of the city’s fortified 16th century
walls in the heart of Riga Old Town in
Latvia, the 8,500 square metre capacity
studio dwarfs any existing live casino
area in the market today. The technology
within the building is equally unmatched
with hundreds of state-of-the-art cameras,
catering for hundreds more custom-made
tables and gaming areas, an advanced
control and monitoring centre and large-
scale dealer campus that will be used to
train and develop all of Playtech Live’s staff.
Every inch of the new operation has been
conceptualised, designed and delivered
with a future-first approach with all Playtech
Live common and Live dedicated licensee
areas remodelled to accommodate the
latest software and hardware presenting
players with the ultimate, never-before-
seen gaming experience.
The second studio, a state-of-the-art live
casino studio facility in Bucharest, Romania
will cater for demand in licensees in the
newly regulated Eastern European country.
New content
We launched over 55 new games in the
year, including the innovative and exciting
Age of the GodsTM suite, a great addition to
our own industry leading game intellectual
property. This has been a highly successful
launch and has been very popular with
licensees and is based on an extensive
data analysis ahead of the game’s
development to ensure its appeal
to customers.
Playtech’s scale also allows it to launch
branded content. After the period end, in
February 2017 Playtech signed its largest
ever, multi-year, exclusive branded games
content deal with Warner Bros. Consumer
Products, on behalf of DC Entertainment,
to license and develop an extensive
catalogue of iconic DC-branded film and
television properties into leading omni-
channel casino games, with the deal
being announced at the start of ICE 2017.
Drawing from the worlds of such Warner
Bros. Pictures titles as Batman v Superman:
Dawn of Justice, The Dark Knight Trilogy,
Suicide Squad and the Studio’s upcoming
action adventure Justice League, Playtech,
the world’s leading gaming content and
software, systems and services supplier,
will develop a series of omni-channel
DC-branded slot, bingo and roulette
games, available across multiple
channels and devices.
As a result of extensive development
during 2016 Playtech launched post period
end an industry first new slot game, Tiki
Paradise, that rewards customers with
unique enhanced experiences, features
and bonuses through the use of omni-
channel play.
Launched across all channels and devices
with Coral throughout its 1,800 shop
estate, Tiki Paradise is a true omni-channel
game that rewards players as they unlock
enhanced features and functionality by
playing in-shop, online and on mobile,
made possible due to Playtech’s cutting-
edge platform technology and unified
system that enables cross-channel play.
Given the first feedbacks and performance
we are confident that omni-channel content
will play a key role in the success of our
omni-channel approach and will become
a necessary and important element of
the offering provided by retail and online
operators delivering a single coherent user
experience across retail, online and mobile.
The game is equally beneficial to the
licensees as it both increases omni-channel
sign ups and incentivises the players to
remain loyal to the brand within the eco-
system created between retail and online in
the most efficient and responsible way. The
launch of Tiki Paradise is the first of a series
of new omni-channel games expected to
launch in the coming months.
Gaming division
performance by vertical
Casino
Casino, Playtech’s flagship offering,
continues to go from strength to strength,
with revenue increasing 23% on a constant
currency basis in 2016. Casino contributed
€354.6 million to reported revenues in
2016, with mobile revenues seeing a
113% increase in mobile penetration.
This exceptional performance was driven
by a mixture of existing and new business,
including growth from UK customers
such as Ladbrokes, Sky and BGO, with a
particularly strong performance from both
Live and Asia, where we have added
new customers as well as improved our
commercial terms.
The casino offering is at times mistakenly
regarded as casino games offered on
operators’ sites under the casino tab while
the Playtech casino platform is a lot more.
Integrated with the Playtech infrastructure
and information management system the
Playtech casino platform provides online
casino operators with the most advanced
and sophisticated feature-rich solution
that allows operators to better control
their offering.
Playtech’s cutting-edge casino platform
enables operators to maximise player
value by offering a full suite of real-time
player incentives and engagement
tools. The platform allows for industry
standard bonusing, such as deposit match
bonuses, together with more sophisticated
mechanics, including automated cashback,
free-spins, golden chip (for table and card
games) and game play bonuses. All these
promotional methods can be controlled
and configured by the operator, allowing
for stringent liability and monetary control.
To illustrate the platform’s sophistication,
gameplay bonuses allow the operator to
incentivise players based on the outcome
of a specific hand of black jack or spin of a
roulette wheel. All promotional types can
be triggered by a player event, but Playtech
has also developed the ability to automate
some of the player journeys by developing
business intelligence (BI) algorithms to
trigger the qualification of such incentives.
Furthermore, players can be targeted
with personalised login/logout messages
and communications, segmented cross-
promotion messages in-game and, ‘game
adviser,’ possibly one of the system’s most
effective tools. Game adviser is a real-time
BI driven recommendation engine that
suggests other games the player might be
interested in, dependent on many game-
specific variables, including volatility, win
hit frequency and win distribution.
During the period, we invested heavily into
the entire casino platform and focused on
its key strength as the largest distributor of
games. With its unrivalled knowledge and
experience of omni-channel game content,
Playtech has built a ground-breaking
new games platform that will change the
way slot games are built, tested, certified,
delivered and distributed. Our revolutionary
platform uses a modelling approach instead
of a coding approach, resulting in faster
development and more cost-effective
casino content delivery than ever before.
Playtech plc Annual Report and Accounts 2016 33
Contributing
to society
Playtech employees are
sharing their knowledge, skills
and expertise as a way of
contributing to the long-term
success of the communities
where we operate. From
mentoring to charitable initiatives
to equipping more women to
enter the technology industry.
For instance, during 2016/2017,
Playtech in the UK hosted a
series of meetup groups on
various technical subjects. These
forums bring together Playtech
employees, industry experts,
professionals and customers from
different communities in order to
share knowledge and insights
related to specific technical
applications. In addition, the
series enables participants to
explore how the application of
these technologies can improve
business performance and
team collaboration, while they
are also able to explore career
development opportunities
within Playtech, as well as other
sponsors or guest speakers at
the events.
See more on page 52
This unified approach to rapid omni-
channel game deployment enables
operators seeking differentiation and
customisation to integrate bespoke
games in record time and under budget.
The new games platform technology is
now being rolled out across a number
of Playtech’s content creation units and,
looking ahead, it positions Playtech as
not only the world’s leading software
and platform provider, but also a true
pioneer and world leader in games
content creation.
Services
Services grew 4% in the full year on a
constant currency basis, in line with the
growth reported at the half year, reflecting
the continued transition from .com to
regulated revenue streams strengthened
through the white-label offering, resulting in
a higher proportion of regulated revenues
for this vertical.
The significant efficiencies achieved
at the beginning of 2016, changing
the operational structure to localised
operations in jurisdictions where we service
our customers, will result in approximately
€9 million of savings on an annualised
basis, although investment in the business
means that this will not simply drop
through to the bottom line given
the local investment required.
We are also making significant progress
in certain markets such as Mexico and
Spain, where we have established a
broader relationship as part of structured
agreements with local companies. This
is an example of the opportunity in an
increasing number of regulated jurisdictions
and soon to be regulated markets, where
well recognised retail brands intend to
launch an online gaming arm, seek a
strategic partner that can equip them with
not only best of breed technology and
products but a sophisticated tool box of
online operational capabilities they usually
lack. The success Playtech enjoyed in
previous years and the successful launch
of new partners in key markets we believe
that the Services division will continue to
see strong growth in the coming years and
will play a key role in our future success.
Bingo
In line with the trend identified at the interim
results, despite high levels of activity at the
operator level, Bingo saw a small decline
in revenue at constant currency for the full
year. This was a result of continuing trend
for increased bonusing from operators.
As outlined previously this approach is part
of an industry wide strategy to utilise bingo
as an acquisition channel, cross-selling
strategy driving further revenues into other
verticals, predominantly casino. We believe
this approach will strengthen Playtech’s
position in the long term as our Playtech
ONE omni-channel offering will allow
operators to successfully cross-sell
across all products and all verticals.
Late in the year, the Company successfully
migrated The Sun Bingo to the Playtech
platform as part of an initial five-year
relationship. While the technical migration
was successful, the low quality of the data
provided during the migration meant it
required additional analysis to ensure that
the information is correctly segmented
into different types of VIPs to better utilise
the customer base. The Sun Bingo brand
remains amongst the best and strongest
brands in the industry and continues to
attract high levels of new players, and
Playtech remains committed to ensure the
success of The Sun Bingo through the
delivery of better products, data analysis
and services.
The end of 2016 and the start of 2017
also saw two significant acquisitions
which have enhanced our Bingo and
omni-channel offering.
ECM is highly regarded within the bingo
industry and its extensive range of products
is instrumental to the daily operation of
retail bingo in the UK and the Republic of
Ireland. Its systems provide key facilities
for Main Stage Bingo, Cash Bingo, wide
area linked gaming operations and
front-of-house reporting. A complete
customer support facility provides
technical and repair services for all
current and legacy products.
Eyecon, announced post the period end,
is a further example of driving revenue
across verticals. The acquisition
strengthens Playtech’s Bingo distribution
network whilst offering industry leading
slots content such as the Fluffy Favorites
game and others which will all be available
to Playtech bingo licensees.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 34
Chief Executive Officer’s review continued
Sports
Growth in Sports slowed in the second half
of 2016 following the loss of the Mobenga
contracts which came into effect at the end
of H1. Ultimately performance for the full
year increased 2% at constant currency,
with the inclusion of BGT for much of H2
offsetting the loss of the contracts.
We believe that our approach to Sports is
unique in the industry. Playtech is focusing
on delivering an omni-channel sports
solution to licensees. As we are seeing
across all retail industries the convergence
of e-commerce and physical retail is a
two-way process. Playtech’s omni-channel
offering can offer a fully integrated retail,
online and mobile solution allowing
licensees to offer a seamless customer
journey through online and in-store
integration. As outlined above this allows
retail operators to launch an online gaming
arm in newly regulated markets, partnering
with Playtech to utilise their retail base
and footprint and become the largest and
best performing online bookmakers in a
relatively short period of time.
Accordingly, following the acquisition
of BGT in July 2016, in November we
launched the new Playtech BGT Sports
division (PBS). The new division brings
together Playtech Sports companies BGT,
Geneity, Mobenga, Unilogic and Playtech’s
internal Sports Trading team and contains
more than 600 employees. Playtech BGT
Sports will provide a ‘bricks-to-clicks’
fully integrated sports betting technology
solution based on Playtech’s unique omni-
channel platform. With Dr Armin Sagader
appointed as CEO of the new division
we believe that PBS will continue
to revolutionise retail and online
businesses alike.
Post the period end, PBS announced that
it has signed a three-year agreement
with OPAP, the leading Greek betting
and lottery operator, for the supply of
self-service betting terminals (SSBTs),
relevant software and services, as well as
the subsequent introduction of an Over-
the-Counter (OTC) sports betting solution.
Under the agreement, PBS will supply
software and services for a combination
of full-sized SSBTs, as well as the recently
launched compact SSBTs, with the initial
roll-out of machines commencing in 2017
followed by the rollout of an OTC solution
in 2018. PBS will provide a fully managed
service to OPAP including trading and
over 25,000 in-play markets.
Virtual sports
Working with Warner Bros. Studios the
virtual sports product began life in the
summer of 2015 using the most advanced
systems and technology available today.
Following almost a year-long process of
exhaustive and record-breaking motion
capture initiatives at Warner Bros. Studios
and 3D design and modelling work at
the Playtech Studios, both in the UK,
Playtech virtual products using professional
sportsmen and women in competition
conditions and techniques and technology
used in films such as Avatar, Godzilla
and James Bond’s Quantum of Solace,
in order to capture hundreds of hours
of movement and footage, the result of
which is as close to the real game as
anyone has ever achieved with compelling
graphics, gameplay and extensive betting
opportunities. All Playtech’s virtual sports
products are future proof and developed
with tournament, matches and leagues
in mind. Playtech also concentrated
heavily on back-end simulation,
ensuring real-life football, tennis
and basketball was replicated from
a gameplay, user experience and
an odds and betting perspective.
The first half of 2016 saw the launch of
a pioneering virtual product in 2016,
including best ever virtual Tennis and a
Virtual Sports Football Accumulator or Acca
across all platforms, channels and devices.
Replicating a real-life football Acca, the
Virtual Sports Football Accumulator ‘out of
the box’ product has been rolled out across
100 UK Coral shops with the potential to
deploy it across 1,000 outlets
in the next 12 months.
Land-based
Land-based increased markedly in 2016,
primarily reflecting the revenues from
BGT which were included from July 2016
onwards and the organic growth of what
was referred to as land-based vertical. As
discussed at the interim results in August
2016, it is worth noting that from 2017
onwards, the Land-based vertical will be
removed with revenues from this vertical
allocated into Casino, Sports, Bingo and
Other as appropriate. Removing Land-
based reflects the true omni-channel nature
of our offering. Revenues from BGT will be
included in the Sport vertical going forward.
A detailed breakdown of the reallocation
is on pages 39 to 40.
Poker
The online Poker market remains
challenging with revenues down 17% for
the fully year at constant currency. Playtech
remains dedicated to the poker product,
and we believe poker remains an important
part of the full product offering of operators.
However, it remains a low margin vertical
and accordingly operators focus on
investing in cross selling into casino.
Notwithstanding, in some markets such as
France where only sports betting and poker
are allowed, poker remains a very valid
product vertical. Playtech also gains from
the natural conversion of certain players
to the poker product. We also believe that
Poker will continue to attract recreational
players to the product and is utilising it
cross-product expertise to develop new
poker experiences such as an Age of the
GodsTM themed poker experience.
Financials division
The year was a transformational one for
Playtech’s Financials division, which today
finds itself at an inflection point following
the re-positioning of the business and
the structural changes in the industry.
This necessitated Ron Hoffman to take
full-time control of the business as its
Chief Executive. Under Ron’s leadership
we anticipate the Financials division will
capitalise on its position and realise the
significant opportunities before it.
Playtech plc Annual Report and Accounts 2016 35
There has been continuous development
in the regulatory landscape across different
jurisdictions in the industry, including the UK
and Europe. Tighter on-boarding controls
have been imposed on brokers; there are
now greater restrictions on marketing and
promotions; companies are required to
provide enhanced AML procedures; and,
more recently, new leverage limitations
were introduced.
In the face of this more demanding
regulatory framework, the 2016 results
reflect the full impact of the business
transition completed in the first half
of the year. Our experience of new
regulatory frameworks learned in the
Gaming division prompted improvements
to our business model, including the
cessation of relationships with Introducing
Brokers and the decision to move from a
salesperson-based approach to automated
funnels for customer acquisition.
The second half of the year saw a
significant improvement in the performance
of the Financials division with a small
improvement in revenues, encouraging
KPIs and the benefits of cost reductions
flowing through.
In the B2C Markets.com business,
we have grown active customers by
7%. This reflects an improvement in
the attrition rate and an increase in
the attractiveness of Markets’ platform,
following its continued development
and addition of further features, such
as live trader’s trends, more relevant
notifications and personalised customer
communications relevant to their
trading history.
The performance improvement of Markets.
com is even more visible in the number
of first time depositors, which increased by
almost 60% compared to the first half
of the year. This reflects a significant
growth trajectory, which we anticipate
will translate into an increased number
of active customers, increased revenues
and EBITDA. These will be driven by
efficient marketing initiatives through
our unique media buying technology and
automated customer acquisition funnels.
In November 2016, Playtech announced
the acquisition of CFH, a technology
company with products including a
leading Straight Through Processing (STP)
brokerage which provides retail brokers
with multi-asset execution, prime brokerage
services, liquidity and complementary
risk management tools. The acquisition
significantly enhances Playtech’s position
as it continues to build a B2B offering
within its Financials division. CFH’s wholly
owned subsidiary, CFH Clearing Limited
is regulated by the Financial Conduct
Authority (FCA) and Playtech received
regulatory approval from the FCA as
part of the acquisition process.
CFH is uniquely positioned in the market
with $1.5 billion in direct interbank credit
lines with tier 1 banks, liquidity providers
and prime brokers, including Barclays,
Goldman Sachs, UBS, Jefferies and more.
We see significant opportunities following
the acquisition, including enabling CFH
customers to enjoy a deeper pool of
liquidity and an expanded variety of
tradable instruments. In addition, we see
significant cross-selling opportunities to
offer our unique trading platform, CRM and
back office systems to a selective range of
customers which will fit the relevant profile,
increasing our market reach and cater for
further stickiness with our customers.
The acquisition completed on 30 November
2016 meaning that €1.8 million of new
revenue has been contributed to our
consolidated accounts for 2016; and
in 2017 CFH’s contribution has met
expectations, with a healthy pipeline
of further customers to be on-boarded.
In summary, 2016 has seen our Financials
division establish the foundations needed
to capture future growth. We now have
an efficient, compliant and competitive
business model offering an industry
leading B2B and B2C solution. This young
industry is experiencing the development
of appropriate regulation which will only
improve the customer experience and
our model is well placed to gain market
share as the regulatory framework
continues to evolve. As the industry
continues to mature and non-compliant
companies exit the sector the Financials
division’s unique B2C and B2B model of
will create opportunities to play a potential
role in industry consolidation.
M&A
We have been pleased with Group’s M&A
activity in 2016, having spent €240 million
on acquisitions. After the period end, we
spent a further initial consideration of
£25 million (€29 million) on Eyecon.
Quickspin
In May Playtech announced the acquisition
of Quickspin, a fast-growing Swedish
games studio that develops and supplies
high-quality video slots to operators, both
in online real money gambling as well as
in the social gaming market.
Headquartered in Stockholm, Quickspin’s
portfolio currently consists of over 20
games which the company provides
to over 40 customers, including many
international tier 1 operators. Quickspin
generated revenue and Adjusted EBITDA
of €6.0 million and €2.1 million respectively
in the financial year ending 31 December
2015 and is forecast to grow significantly
over the coming years, with a number of
new customers recently secured and with
a strong pipeline of both new customers
and new games.
The acquisition provides Playtech with a
proven virtual slot machine games portfolio,
strengthening its position as the leading
content provider in the industry, as well as
providing greater penetration in the Nordic
region. In addition to Quickspin’s existing
customer base, Playtech plans to cascade
Quickspin’s content through its existing
distribution channels across all verticals.
Playtech will pay a maximum consideration
of €50 million based on 2017 and 2018
EBITDA levels. The maximum consideration
of €50 million comprises an initial payment
of €24 million for 100% of the shares of
Quickspin on a cash-free/debt-free basis
with the remaining maximum consideration
of €26 million payable on an earn-out basis
by reference to Quickspin’s EBITDA in 2017
and 2018.
The founders of the business, Daniel
Lindberg (CEO), Joachim Timmermans
(CPO) and Mats Westerlund (CCO), who
are all industry veterans and highly
regarded in the online gambling market,
will remain with the business for at least
three years from completion.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 36
Chief Executive Officer’s review continued
BGT
In July 2016, Playtech announced the
strategic acquisition of Best Gaming
Technology GmbH (BGT) for €138 million
(for 90% of the issued share capital). The
consideration was paid from Playtech’s
existing cash resources.
Headquartered in Vienna, BGT was
founded in 2005 and is the leading
provider of sports betting software and
solutions for gaming and sports betting
operators. Its customer base includes some
of the most well established bookmakers in
the UK and Spain, such as Betfred, Codere,
Coral, Ladbrokes, Paddy Power Betfair
and William Hill.
BGT’s main product is its proprietary
software for self-service betting terminals
(SSBTs). Its offering combines class-leading
technology with a digital terminal that
transforms the traditional over-the-counter
experience, at times generating more
than double the volumes of other SSBT
providers. Other products include ePOS
and till systems for betting operators and an
omni-channel web/mobile betting platform.
In addition to supplying many of the most
profitable bookmakers in the UK, the
acquisition will enable Playtech to achieve
greater penetration into the Spanish and
Italian markets, with several significant
potential new customers in the pipeline.
SSBTs and ePOS systems that digitise retail
betting businesses form one of the fastest
growing areas for betting companies and
one of the most important elements of a
true omni-channel offering given the priority
and focus provided by the majority of retail
operators many of which are bookmakers
with sports being their core business. BGT’s
product portfolio will enhance the Playtech
ONE omni-channel offering, which enables
players to enjoy a seamless, anywhere-
anytime gaming experience across any
product, channel and device, all using
a single account and wallet.
BGT’s business model is based on a
revenue share of the gross win margin from
each SSBT. At the end of FY2016, BGT
provided approximately 27,000 SSBTs with
its betting software to licensed operators
with this number forecast to increase
significantly over the coming years, driven
primarily by the roll-out of new SSBTs,
compact terminals and tablets as bet entry
devices as well as by increased usage of
existing SSBTs.
Playtech acquired 90% of the issued
share capital of BGT with the remaining
10% retained by Dr. Armin Sageder, BGT’s
founder and CEO, who will remain with BGT
for at least three years from completion.
Playtech has a call option to purchase the
remaining 10% of BGT at a valuation of 6x
BGT’s 2019 EBITDA, subject to maximum
consideration of €55 million for the 10%
holding, with Dr. Sageder having certain put
options over his 10% holding at the same
valuation. Dr. Sageder may also be entitled
to an additional payment of €5 million
subject to the achievement of certain
operational milestones.
In FY2015, BGT generated revenues of
€41.6 million, with all of these revenues
coming from regulated markets; and over
three quarters of revenues coming from the
SSBT software segment. BGT generated
Adjusted EBITDA of €12.9 million in FY2015
and €12.5 million of Adjusted EBITDA in
the first six months of 2016. In 2015, BGT
generated profit before tax of €6.0 million
and had gross assets of €35.9 million
as at the year end.
Playtech acquired BGT on a forecast
2016 EBITDA multiple of less than 7x, a
highly attractive multiple for an asset of
this quality, which has a track record of
significant growth and which is expected
to continue to achieve significant growth
going forwards in both revenues and profit,
including margin expansion. The acquisition
is expected to generate high single-digit
earnings accretion for Playtech in the first
full year of ownership.
The acquisition of BGT was central to
the foundation of Playtech BGT Sports in
November this year which combined BGT,
Geneity, Mobenga, Unilogic and Playtech’s
internal Sports Trading team.
ECM
In October 2016 Playtech acquired bingo
software and hardware solutions provider
ECM Systems (ECM). ECM supplies software
and support services to the UK retail bingo
market, including major operators Gala
Leisure, Mecca Bingo and the leading
independent bingo operators.
ECM is highly regarded within the bingo
industry and its extensive range of products
is instrumental to the daily operation of
retail bingo in the UK and the Republic
of Ireland. Its systems provide key facilities
for Main Stage Bingo, Cash Bingo, wide
area linked gaming operations and front-
of-house reporting. A complete customer
support facility provides technical and
repair services for all current and
legacy products.
Given the inevitable change across the
gaming industry bingo operators had to
revamp and digitize their retail offering.
Accordingly, the last few years have seen
ECM invest in expanding its digital strategy.
As a result, ECM is the leading provider
and licensor of digital bingo software for
a wide range of handheld tablets known
as Electronic Bingo Terminals (EBT), and
this generates a significant proportion of
its revenues. The digitisations of the bingo
halls together which is based on the ECM
infrastructure and technology will serve
Playtech well and will allow it to integrate
ECM into Playtech world’s largest bingo
network and offer a true omni-channel that
will not only provide better tools to the
bingo hall operators as they use one single
set of integrated infrastructure but will also
provide a seamless journey and better
experience across the different channels.
The acquisition of ECM positions Playtech
at the forefront of the retail bingo market
in the UK. It also empowers Playtech to
provide omni-channel solutions to the
bingo operators by connecting their retail
and online operations as well as providing
a platform to supply Playtech content.
For FY2016, ECM reported revenues of
£9.1 million and Adjusted EBITDA of £4.5
million. Playtech has paid approximately
£14.9 million for 90% of the issued share
capital of ECM. The remaining 10%, which
is subject to put and call options capped at
£1.1 million, is held by Allen Richardson who
will remain as CEO of the business for the
next three years.
Playtech plc Annual Report and Accounts 2016
37
CFH
November this year saw the Playtech
Financials division announce the acquisition
of Consolidated Financial Holdings A/S
(CFH) for an initial consideration of €39.8
million for 70% of CFH’s diluted share
capital. The remaining 30% will be subject
to put and call options between Playtech
and CFH’s management team, who are
remaining with the business, and which can
be exercised in 2019. CFH is a technology
company with products including a
leading Straight Through Processing (STP)
brokerage which provides retail brokers
with multi-asset execution, prime brokerage
services, liquidity and complementary risk
management tools. CFH’s wholly owned
subsidiary, CFH Clearing Limited (CFH
Clearing) was regulated by the Financial
Conduct Authority and as a result of
the acquisition Playtech received FCA
regulatory approval.
Through its proprietary ClearVision
technology, CFH’s services to customers
include providing liquidity control and
customisation capabilities; real time risk
management tools; and cloud-based
back office.
CFH Clearing is one of the top STP venues
in the world with award-winning liquidity
services and $1.5 billion in direct interbank
credit lines with tier 1 banks, liquidity
providers and prime brokers including
Barclays, Goldman Sachs, UBS, Jefferies
and BNP Paribas. Through its relationships
with liquidity providers and prime brokers,
CFH is currently able to offer liquidity on
approximately 110 instruments.
CFH’s revenue and Adjusted EBITDA
generated for the year ended 31 December
2015 was $19.2 million (€17.6 million) and
$5.7 million (€5.2 million) respectively.
As a result of the acquisition CFH will
have access to the Playtech’s Financials
division’s wide range of CFD instruments
which CFH will be able to offer on its
clearing system over time. Playtech will also
allow CFH to offer a deeper pool of liquidity
through the addition of intra group liquidity
arrangements, enabling more competitive
prices and faster execution. Moreover,
CFH will benefit from Playtech’s leading
technological superiority to further develop
its offering and improve client experience.
The acquisition of CFH is a major
step forward in the development of
our financial division B2B offering
given the hundreds of brokers CFH
has a relationship with, an advanced
sophisticated offering and technology,
coverage of an enlarged number of
instruments as well as the ability to
provide an attractive liquidity pool.
Eyecon
Following the period end in February 2017,
Playtech announced the acquisition of
the entire issued share capital of Eyecon
Limited and Eyecon Pty. Ltd (together
‘Eyecon’), a specialist supplier of online
gaming soft slots and a bingo slots
specialist software to a number of bingo
networks and other international operators
for a maximum total consideration of
£50 million.
Eyecon was founded in Brisbane, Australia
in 1997 and is a specialist software supplier
with a particular focus on bingo audiences
with an established games portfolio of over
70 games, including the industry-leading
soft gaming slot ‘Fluffy Favourites’. Eyecon
has also developed its own Remote
Gaming Server (RGS) which enables it to
distribute its content direct to operators
and via distributors, such as the entire 888
bingo network including 888 own bingo
brand and Virtue Fusion, Playtech’s bingo
network which integrated only a selected
few games so far with the intention to offer
the entire portfolio of Eyecon games across
the network for the benefit of its licensees
and their customers, who will now have
access to the same portfolio of Eyecon
games offered elsewhere.
Eyecon currently derives almost all its
revenue from the UK market and in line with
Playtech’s acquisition strategy, almost all
of Eyecon’s revenues are fully regulated.
The addition of Eyecon’s content portfolio
strengthens Playtech’s position as the
leading content provider in this key
market. In addition, Eyecon’s proprietary
RGS and distribution network will
strengthen the penetration of
Playtech’s Virtue Fusion offering.
The maximum consideration of £50 million
(c.€58 million) comprises an initial payment
of £25 million (c.€29 million) on a cash free/
debt free basis, representing a multiple
of c.8x Eyecon’s current run-rate EBITDA.
An additional consideration of up to £25
million is payable on an earn-out basis of
6x Eyecon’s EBITDA in the period to June
2019 (subject to certain adjustments) less
the initial payment.
To assist in retaining the knowledgeable
and specialist Eyecon team, its founder
Scott Murray, has committed to remain
with the business for at least three years.
Current trading
and outlook
Average daily revenue in the Gaming
division for the first 51 days of Q1 2017
was up 27% on Q1 2016 (32% at constant
currency) and up 11% on Q4 2016 (10% at
constant currency). Excluding acquisitions,
average daily revenue in the Gaming
division for the first 51 days of Q1 2017
was up 9% on Q1 2016 (12% at constant
currency) and up 11% on Q4 2016 (up 10%
at constant currency).
The Financials division has performed
in line with expectations in 2017 to
date. Markets.com KPIs continue to be
encouraging against a backdrop of low
volatility and CFH continues to perform well
with B2B volumes in line with expectations.
Playtech continues to focus on M&A to
augment organic growth and its M&A
pipeline remains healthy.
Given the progress we have made in 2016,
delivering on our strategic objectives, we
remain confident of strong performance
in 2017 driven by both organic growth
and the acquisitions made in 2016.
Mor Weizer
Chief Executive Officer
22 February 2017
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 38
Financial review
Confident financial management
2016 has seen Playtech once again deliver a strong
financial performance with total reported revenues
and Adjusted EBITDA up 12% and 20% respectively
compared to 2015.
Andrew Smith
Chief Financial Officer
Playtech plc Annual Report and Accounts 2016 39
2015
€m
308.7
155.6
32.2
29.8
20.5
11.2
12.1
2016
€m
354.6
151.6
30.9
57.1
17.8
9.1
21.9
570.1
643.0
60.0
630.1
65.6
708.6
2015
€m
328.8
155.6
34.5
–
20.5
11.2
19.5
2016
€m
374.1
151.6
58.4
–
19.8
9.1
30.0
570.1
643.0
60.0
630.1
65.6
708.6
Constant
currency
change
Change
15%
-3%
-4%
92%
-13%
-19%
81%
13%
9%
12%
23%
4%
2%
108%
-1%
-17%
89%
21%
11%
20%
Constant
currency
change
Change
14%
-3%
69%
–
-3%
-19%
54%
13%
9%
12%
22%
4%
82%
–
10%
-17%
62%
21%
11%
20%
Presentation of results
The Directors believe that in order to
best represent the trading performance
and results of the Group, the reported
numbers should exclude certain non-cash
and one-off items including amortisation
of intangibles on acquisitions, professional
costs on acquisitions, finance costs on
acquisitions, and additional various
non-cash charges.
The Directors believe therefore that
Adjusted EBITDA and Adjusted Net Profit
more accurately represent the trading
performance of the business and are the
key performance metrics used by the
Board when assessing the Group’s financial
performance. A full reconciliation between
the actual and adjusted results is provided
in Note 5 of the financial statements.
Current presentation
Casino
Services
Sport
Land-based
Bingo
Poker
Other
Gaming division
Financials division
Total revenue
Future presentation
Given the significant fluctuations in
exchange rates in the period, the
underlying results are presented in respect
of the above measures after excluding
acquisitions and on a constant currency
basis to best represent the trading
performance and results of the Group.
Casino
Services
Sport
Land-based
Bingo
Poker
Other
Gaming division
Financials division
Total revenue
Overview
2016 has seen Playtech once again deliver
a strong financial performance with total
reported revenues and Adjusted EBITDA
up 12% and 20% respectively compared
to 2015. In addition, Playtech executed
its M&A strategy, investing cash of €240
million in acquisitions including BGT,
Quickspin, ECM and CFH, whilst
returning €296 million to investors
through progressive dividends, a
special dividend and a €50 million
share buy back programme.
Significant fluctuations in currency
exchange rates, mainly in Sterling, due to
macro-economic events had a material
effect on the financial results of the year
across all key metrics. On a constant
currency basis, revenues, Adjusted EBITDA
and Adjusted Net Profit, increased by
20%, 32% and 42% respectively. When
further excluding the effect of acquisitions,
reflecting the underlying performance of
the business, revenues, Adjusted EBITDA
and Adjusted Net Profit increased by 13%,
28% and 48% respectively.
The percentage of total regulated revenues
for the Gaming division increased by 1%
in 2016 to 42% with Sun Bingo launched
towards the end of the third quarter of the
year, together with the acquisitions of BGT
and ECM, all contributing fully regulated
revenue streams to our top line.
Adjusted EBITDA was up 20% in the period,
or 32% at constant currency and 28%
when further excluding acquisitions. Group
Adjusted EBITDA margin increased from
40% in 2015 to 43%, and from 40% to 44%
at constant currency, despite a greater
contribution from lower margin areas of the
business such as white-label, the Financials
division and casual. This improved margin
is a result of tight cost control to create
sustainable efficiencies across all areas
of the business as well as improved
commercial terms in Asia, which increased
revenues with no material additional cost.
Playtech continues to be highly cash
generative and once again delivered
strong operating cash flows of €251.4
million, representing high conversion from
Adjusted EBITDA. When excluding cash
movements, which are not reflected in
Adjusted EBITDA, such as movements
in jackpot liabilities, customer security
deposits and changes in client equity,
cash from operating activities represented
a 94% conversion to Adjusted EBITDA.
Playtech has a very strong balance sheet
with cash and cash equivalents of €544.8
million at the end of the year, or Adjusted
Gross cash of €392.0 million net of cash
held on behalf of client funds, progressive
jackpot and security deposits. Together
with the available-for-sale investments,
which stood at €230.3 million at year
end, Playtech has considerable available
resources to execute its strategy.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
40
Financial review continued
Revenue
Total reported revenue increased by 12%
to €708.6 million (2015: €630.1 million) and
by 20% on a constant currency basis, with
underlying growth of 13% (after excluding
acquisitions at constant currency).
New presentation of Gaming
revenues by vertical
From the 2017 interim results onwards,
Playtech will be removing the land-based
vertical which reflects the true omni-channel
nature of the offering by allocating revenues
which were defined as land-based revenues
to the relevant product verticals.
The revenues from land-based
were allocated as follows:
• Videobet and Videobet interactive
to Casino;
• Retail sport revenues, which are mainly
BGT, to Sports;
• Retail bingo revenues, generated
by ECM to Bingo; and
• IGS, including other sale of machines,
to Other.
From the old presentation of the verticals to
the new there was an increase in the 2016
Casino revenue figure of €19.5 million and
in Sport an increase of €27.5 million. Bingo
saw a €2.0 million increase while Other
increased by €8.1 million.
Casino continues to be the biggest product
vertical, adding €45.9 million of revenues
in the period, taking Casino revenues
to €354.6 million, with growth of 23% at
constant currency and 21% when excluding
acquisitions. Mobile Casino revenues
more than doubled over 2015, pushing
mobile penetration to 29% compared
to 16% in 2015. The main growth drivers
in both total Casino and Mobile Casino
were the continued growth in Asia, which
more than tripled its mobile penetration
compared to 2015; and the growth in the
UK’s casino mobile revenues, reaching
more than 50% in penetration, led by top
operators, including Ladbrokes, GalaCoral,
Bet365 and Sky. The growth in Casino
is predominantly from core casino, e.g.
slots and roulette, with addition growth
generated by Playtech Live casino
and the Playtech Open Platform.
Services revenues increased by 4% on a
constant currency basis, whilst decreasing
by 3% on a reported basis. The decrease
on a reported basis is mainly due to a
faster decline in .com revenues, mostly
reflected in marketing and affiliation
services revenues, than the increase
in regulated revenues. The increase
in regulated services revenues were
mainly generated from structured
agreements, such as Caliente and
Marca, and a moderate increase in
white-label operations revenues.
Sport revenues increased in 2016 by
2% on a constant currency basis after
excluding acquisitions, decreasing on
a reported basis by 4% to €30.9 million.
The decrease on a reported basis, as
previously indicated, is mainly due to
the loss of three Mobenga contracts
with UK licensees. When excluding the
aforementioned licensees, Sports grew
by 53%, on a reported basis, mainly
from growth in Ladbrokes and Caliente.
Land-based revenues increased by 9%
at constant currency, after excluding the
acquisitions of BGT and ECM and by 92%
on a reported basis. The underlying growth
driven mainly by growth from IGS and a
one-off sale income from Elite gaming,
which should start producing recurring
revenues at the end of Q3 2017.
Bingo revenues decreased by 1% on a
constant currency basis and reported
Bingo revenues decreased by 13%. Bingo
remains a gateway to maximise value by
attracting players and then cross-sell them
to Casino and other product verticals.
Bonusing schemes by operators were the
main reasons for the decrease, while KPIs,
such as active players per week, bets per
week and gross gaming win per week, at
an all-time high. If Bingo casino side games
are added to the revenues reported in the
Bingo line item, the total revenues would
be €28.9 million. During the year, key
contracts were renewed, such as Paddy
Power Betfair, William Hill and others,
securing Playtech’s strong position in
this important vertical.
Adjusted EBITDA and Adjusted EBITDA margin
EBITDA
Employee stock option expenses
Professional expenses on acquisitions
Irrecoverable deposit and professional fees on abandoned acquisitions
Adjusted EBITDA
Adjusted EBITDA margin
Adjusted EBITDA on a constant currency basis
Adjusted EBITDA margin on a constant currency basis
EBITDA related to acquisitions at constant currency
Underlying adjusted EBITDA
Underlying adjusted EBITDA margin
2016
€’000
291,852
6,940
3,441
–
2015
€’000
234,011
4,904
6,181
6,792
302,233
251,888
42.7%
331,586
44.0%
(29,774)
301,812
47.1%
40.0%
251,888
40.0%
(16,774)
235,114
41.4%
Playtech plc Annual Report and Accounts 2016
41
Poker reported revenues have decreased
by 19% compared to 2015, as the entire
market continues to be challenging. Poker
is still an important vertical in the operators’
offering and Playtech remains dedicated
to the product.
Other revenues grew by 81% mainly due
to Casual games revenues which enjoyed
a significant uplift in the second half of the
year following the launch of the Narcos
branded game.
The first half results reflected the full
impact of the business transition and
improvements made due to the regulatory
changes, including the cessation of
relationships with Introducing Brokers;
moving away from binary options;
fundamental changes in onboarding
processes; financial promotions as well
as the transition made from a salesperson
based approach to automated funnels
for customer acquisition and retention
initiatives.
Revenues in
Financials division
Playtech completed the acquisition of
Markets Limited on 8 May 2015 with
the acquisition of CFH completing on
30 November 2016 with the respective
financial performance from these
companies consolidated into Group
results from these dates.
2016 revenue in the Financials division was
€65.6 million, up 9% versus 2015. CFH
contributed €1.8 million to 2016 revenues
from completion.
As presented in the 2015 final results and
2016 interim results, since Playtech entered
into the financial vertical, the regulatory
backdrop under which it operates has
become increasingly developed, with
tighter restrictions and controls imposed on
brokers across all aspects of the business.
Following these changes, the second half
of 2016 saw a material improvement in
performance with encouraging KPIs. Total
active CFD customers were up 10% in H2
2016 with total first time CFD depositors up
37%. As discussed at the time of the interim
results in 2016, the second half of the year
also benefited from further reductions in
the cost base made in June 2016 with
headcount now reduced by a third since
the acquisition in May 2015.
Adjusted EBITDA and
Adjusted EBITDA margin
The Adjusted EBITDA margin increased
significantly from 40.0% in 2015 to 42.7%
in 2016 and 44.0% on a constant currency
basis. When excluding the effect of
acquisitions, the margin increased to
47.1%. This improved margin is a result
of tight cost control to create sustainable
efficiencies across all areas of the business
as well as improved commercial terms
in Asia, which increased revenues with
no material additional cost.
Adjusted EBITDA for the Financials
division was €15.4 million, against an
Adjusted EBITDA of €15.9 million in 2015.
The reduction in EBITDA compared to
the prior period was a direct result of
the reduced revenue arising from lower
volatility in 2016 when compared to 2015,
together with the consequences of the
business enhancements in building a solid
foundation for future growth.
It is worth noting that Adjusted EBITDA
margin will become a less relevant metric
for the Group over time as due to the
greater contribution from lower margin
areas of the business such as white-label,
the Financials division and casual.
Cost of operations
Adjusted operating expenses increased
by 7%, from €378.2 million to €406.3
million in 2016 and by 12% on a constant
currency basis.
Revenue-driven costs comprise mainly
of white-label related costs, such as brand
fees gaming taxes, processing fees and
others, fees paid to sales agents and
licence fees paid to third parties, including
games developers, IP owners and branded
content, which are typically calculated as a
share of the licensee revenues generated.
Revenue-driven costs as a proportion of
total revenue increased from 6% in 2015
to 7% in 2016, mainly due to additional
cost related to Sun Bingo.
Cost of operations
Adjusted operating expenses
Less revenue-driven costs
Adjusted operating expenses excluding revenue-driven costs
Employee-related costs
Cost of service
Operational marketing costs
Admin and office costs
Other costs
Travel, exhibition and marketing costs
Adjusted operating expenses excluding revenue-driven costs
2016
€’000
406,325
52,004
354,321
190,023
51,076
41,366
34,320
24,473
13,063
354,321
2015
€’000
378,198
36,026
342,172
181,711
48,242
45,773
28,702
26,129
11,615
342,172
53%
14%
12%
10%
7%
4%
53%
14%
13%
9%
8%
3%
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
42
Financial review continued
Adjusted profit and Adjusted EPS
Profit attributable to owners of the parent
Amortisation on acquisitions
Impairment of intangible assets
Non-cash accrued bond interest
Employee stock option expenses
Professional costs on acquisitions
Movement in deferred and contingent consideration
Profit on disposal of investment in associates
Irrecoverable deposit and professional fees on abandoned acquisitions
Adjusted profit attributable to owners of the parent
Adjusted basic EPS (in €cents)
Adjusted diluted EPS (in €cents)
Constant currency impact
Adjusted profit for the year attributable to owners of parent on constant currency
Adjusted net profit on constant currency related to acquisitions
Underlying adjusted profit – attributable to owners of the parent
Employee-related costs increased by 5%,
and decreased by 4% after excluding
acquisitions. The decrease is mainly due to
the weakening of the Sterling compared to
Euro and due to a cost reduction plan that
was executed towards the end of the first
half of 2016, which resulted in a decrease
of about 500 employees when comparing
the headcount at the end of 2016 to the
end of 2015, excluding acquisitions made
during the year. Capitalised development
costs increased by 1%, to 15% of total
employee related costs to €34.2 million
(2015: €28.6 million), reflecting 36% and
34% out of development employee related
costs in 2016 and 2015 respectively.
The increase in the capitalisation rate
is mainly due to the development of the
CFD trading platform and the development
of the Sportsbook system, including
BGT, together with new games and
platform capabilities.
Cost of service comprises mainly of
dedicated development teams cost,
charged back to licence, hosting and
software license cost. During 2016 B2B
marketing cost was reclassified from cost of
service to operational marketing cost and
the comparative numbers were adjusted
accordingly. The decrease is mainly as a
result of last year’s expiration of a licensing
agreement for certain real money and
social games IP.
Admin and office costs increased by 20%
and by 11% excluding acquisitions, mainly
due to expansion of existing offices. As a
proportion of adjusted non-revenue-related
costs of operation remained broadly at the
same level as in 2015.
Operational marketing costs include
marketing cost for B2B and white-label
activity of the Gaming division and B2C
marketing costs in the Financials division.
These costs were reclassified from
revenue-driven costs and cost of service,
including in the 2015 comparative to better
reflect the operational marketing costs
of the business. In 2016 there was a 10%
decrease and a 26% decrease when
excluding acquisitions, mainly linked
to the decrease in marketing revenues.
Finance income,
financial cost and tax
Foreign exchange rate losses of €44.7
million during 2016, compared to a gain
of €10.6 million in 2015 is the main reason
that adjusted net finance cost was €37.2
million in 2016 compared to an adjusted
net finance income of €9.4 million in 2015,
together with higher interest cost, due to
a full term of interest on the debt facility,
which were offset by dividends from the
available for sale investment in Ladbrokes
of €3.7 million (2015: €2.3 million) and
Plus500 of €8.2 million (2015: zero).
2016
€’000
193,030
44,318
12,335
9,802
6,940
3,441
832
(64,459)
–
206,239
65.7
59.8
72,110
278,349
(6,673)
271,676
2015
€’000
135,810
41,751
–
9,388
4,904
6,181
1,088
–
6,792
205,914
67.5
61.8
(10,578)
195,336
(11,333)
184,003
The Company is tax registered, managed
and controlled from the Isle of Man, where
the corporate tax rate is set at zero. The
Group’s main trading subsidiaries are
registered either in the Isle of Man, British
Virgin Islands, Alderney, Gibraltar or Cyprus,
where effective tax rates are low or set at
zero. Other subsidiaries (normally related
to the Group’s development centres) are
located in other jurisdictions and operate
on a cost-plus basis, and are taxed on their
residual profits. The tax charge in 2016 was
€6.3 million (2015: €5.6 million).
Adjusted profit and
Adjusted EPS
Adjusted profit remained at the same
level as in 2015, significantly impacted by
fluctuations in currency exchange rates,
mainly in Sterling, resulting in unrealised
exchange rate losses. On a constant
currency basis, Adjusted Net Profit
increased by 42% compared to 2015.
Adjusted diluted EPS was down 3%,
whilst Adjusted diluted EPS on a constant
currency basis was up 37%, impacted by
an increase in shares from the placing
in June 2015 and a decrease due to the
share buyback executed in December
2016. Adjusted diluted EPS is calculated on
the basis of a weighted average number of
shares in issue during 2016 of 347.5 million
which includes the shares underlying the
convertible bond issued in November 2014.
The diluted EPS and the adjusted diluted
EPS amounts for 2015 was adjusted to
reflect the impact of the convertible bonds.
Playtech plc Annual Report and Accounts 2016
43
Total amortisation and impairments in the
period was €87.5 million (2015: €70.8
million), an increase generated mainly by
new acquisitions and impairment of certain
intangible assets of €12.3 million, the
largest of these relating to the impairment
of goodwill of Pokerstrategy, following a
decline in the Poker market and loss of key
customer. When excluded, amortisation
decreased by a marginal 3%.
Cash flow
Playtech continues to be highly cash
generative and once again delivered
strong operating cash flows of
€251.4 million.
Cash conversion
Operating cash conversion improved from
80% to 94% from Adjusted EBITDA when
adjusted for jackpots, security deposits
and client equity. Since the timing of cash
inflows and outflows for jackpots, security
deposits and client equity only affects
operating cash flow for technical accounting
reasons, and not EBITDA, adjusting these
cash fluctuations is essential to truly reflect
the quality of revenues and cash collection.
The increase in cash conversion reflects
the improvement in the Gaming division
days sales outstanding (DSO) from 48 days
at the end of 2015 and 60 days at the first
half of 2016 to 40 days at the end of the
year. As indicated previously the higher
trade receivables in prior periods were
part of regular course of business, as there
were no changes to customers’ payment
terms or revenue recognition methods.
Net cash outflows from investing activities
totalled €219.7 million in the period. €240.2
million relates to consideration paid for
acquisitions including BGT, Quickspin,
ECM, CFH and others. Cash outflows from
financing activities included €96.1 million
of annual and interim dividend payments,
€149.6 million of special dividend payment
and a €49.8 million share buyback
programme.
Balance sheet and financing
As at 31 December 2016, cash and cash
equivalents amounted to €544.8 million,
a decrease of €313.1 million compared
to the end of 2015, following the €245.7
million paid in dividend and special
dividend during the year, €49.8 million
of share buy back, total acquisitions of
€240.2 million and the exchange rate
losses of €44.7 million. Playtech acquired
Eyecon after year the end for an initial
amount of £25 million.
Progressive, operators’ jackpots and
security deposits decreased by €16.6
million to €46.8 million and client funds
and deposits increased by €62.3 million,
including the client funds acquired from
CFH, to €106.1 million, from the end of
2015. Cash and cash equivalents net
of cash held on behalf of client funds,
progressive jackpot and security deposit
is €392.0 million
Total available-for-sale investments were
€230.3 million, a decrease compared to
the end of 2015, mainly due a depreciation
in value of holdings in Plus500 and in
Ladbrokes and exchange rate losses in
total of €53.9 million, which was set off by
additional shares in Ladbrokes, which were
received on 1 November 2016, following
the completion of the merger between
Ladbrokes and Coral Group, in total of
€44.5 million.
Contingent and deferred consideration
liability increased to €209.1 million, mainly
due to the redemption liabilities on
Quickspin, BGT and CFH acquisitions.
Dividend
To provide greater certainty and
consistency of dividend payments, the
Board adopted a progressive dividend
policy in 2016 which allows the Board to
reflect its confidence in the growth and
cash generation of the business without
being tied to a firm percentage payout as
one-off items can impact results, such as
the impact from foreign exchange which
we saw in 2016.
Playtech’s intention to grow dividends
from the current level in line with the
underlying performance of the business on
a smoothed basis and to continue to pay
the dividend split approximately one-third
as an interim dividend and two-thirds as a
final dividend.
In October 2016 the Company paid an
interim dividend of 11.0 €cents per share
(2015: 9.6 €cents per share), an increase
of 15%.
The Board has recommended a final
dividend of 21.7 €cents per share (2015:
18.9 €cents), an increase of 15% over 2015,
taking the total dividend for 2016 to 32.7
€cents per share being a total payout
of €96 million, or €246 million including
the €150 million special dividend paid in
November and December 2016. The final
dividend is subject to shareholder approval
at the AGM in May 2017.
For those shareholders wishing to receive
their dividends in Sterling the last date for
currency elections is 12 May 2017.
Timetable
Ex-dividend date:
Record date for dividend:
Currency election date:
Payment date:
4 May 2017
5 May 2017
12 May 2017
2 June 2017
Andrew Smith
Chief Financial Officer
22 February 2017
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 44
Risks and uncertainties
Minimising our risk
The risks outlined below are those principal risks and
uncertainties that are material to the Group. They do
not include all the risks associated with Group activities
and are not set out in any order of priority.
How these risks are identified
is described in the Corporate
Governance section on pages 63
and 64. Achieving Playtech’s strategic
objectives while minimising the key
risks the business faces will deliver
sustainable and long-term growth.
Change in risk key
Up
No
change
Down
NEW
New
risk
Gaming
division
Financials
division
Risks relating to both the Gaming and Financials divisions
Risk
Regulation – licensing requirements
Likelihood/impact and
change from prior year
Mitigation
The Group holds a number of licences for its activities from
regulators. Loss of all or any of these licences may adversely
impact on the revenues and/or reputation of the Group.
Likelihood: Low
Impact: High
Playtech has a fully resourced compliance
team, which constantly monitors Group
activities and ensures they are compliant
with regulatory and licensing requirements.
Category
Regulatory
Regulation – local requirements
New licensing regimes may impose conditions. For example,
introduction of a requirement to locate significant technical
infrastructure within the relevant territory or to establish
and maintain real-time data interfaces with the regulator.
Such conditions present operational challenges and may
prohibit the ability of licensees to offer the full range of
the Group’s products.
Likelihood: Low
Impact: Medium
Playtech works closely with regulators to
ensure regulators understand the impact
of technical changes and specific local
requirements.
Regulatory
Taxation
Given the environment in which the Group operates, the
business is exposed to continuously evolving rules and
practices governing the taxation of e-commerce activity
in various jurisdictions. Adverse changes to tax rules and
changes may increase the Group’s underlying effective tax
rate and reduce profits available for distribution.
Likelihood: Low
Impact: Medium
Regulatory
Management remains fully informed of
developments in domestic and international
tax laws within jurisdictions where the Group
has a local presence, whether the presence is
driven by assets and/or people. In conjunction
with consultation with the Group’s professional
advisers, management seeks to ensure that
evolving tax rules and practices are carefully
considered in advance of actual enactment and
implementation of changing laws and practices
which, together with ensuring that appropriate
discipline is strictly adhered to, minimises the
risk that potentially adverse consequences
will significantly impact the Group’s underlying
effective tax rate.
Playtech plc Annual Report and Accounts 2016 45
Economic environment
A downturn in consumer discretionary spend or macro-
economic factors outside of Playtech’s control could result
in reduced spend by consumers on gambling and financial
trading and the Group’s revenues would fall.
Likelihood: Low
Impact: Medium
Cash management – acquisitions
Playtech have significant cash balances, which may be
used to acquire other businesses. Such acquisitions may
not deliver the expected synergies and/or benefits and may
destroy shareholder value.
Likelihood: Low
Impact: Medium
Economic
environment
Playtech’s customers and licensees are
geographically diverse, which should
mitigate reliance on any particular region.
Management closely monitors business
performance and, if a downturn were to
occur, remedial action commensurate with
the nature and scale of the slowdown could
be taken.
The Company has made a number of very
successful, value creating acquisitions and
has an established process in place and
experienced staff to conduct thorough due
diligence before completing any transaction.
Business
operations
Cash management – cash balances
Foreign exchange volatility could impact the Group’s
financial position.
Likelihood: High
Impact: Medium
The Group holds currency in various
denominations and our operations are
geographically diverse. The Group finance
team continually review cash balances to
ensure that this risk is mitigated effectively.
Economic
environment
Key employees
The Group’s future success depends in large part on the
continued service of a broad leadership team including
Executive Directors, senior managers and key personnel.
The development and retention of these employees along
with the attraction and integration of new talent cannot
be guaranteed.
Likelihood: Medium
Impact: Medium
IT security
The risk of impairment to our operations for example
through cyber and distributed denial of service (DDoS)
attacks, technology failure or terrorist attack continues
to be one that the Group considers to be significant.
System failure could significantly affect the services
offered to our licensees.
Likelihood: Medium
Impact: High
Business
operations
The Group provides a stimulating
professional environment and has a
comprehensive performance evaluation
system to identify key talent and to ensure
that key personnel are appropriately
rewarded and incentivised through a
mixture of salary,v annual bonus and long-
term incentives linked to the attainment of
business objectives and revenue growth.
Business
operations
The Group adopts industry standard
protections to detect any intrusion or
other security breaches, together with
preventative measures safeguarding against
sabotage, hacking, viruses and cybercrime.
The Group works continuously to improve
the robustness and security of the Group’s
information technology systems.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 46
Risks and uncertainties continued
Risk
Market exposure
Likelihood/impact and
change from prior year
Mitigation
The fair value of financial assets and financial liabilities
could adversely fluctuate due to movements in market
prices of foreign exchange rates, commodity prices,
equity and index prices.
Likelihood: Medium
Impact: Medium
Regulatory – capital adequacy
The requirement to maintain adequate regulatory capital
may affect the Group’s ability to conduct its business and
may reduce profitability.
Likelihood: Low
Impact: Medium
Trading volume
Low volatility within foreign exchange rates, commodity
prices, equity and index prices may reduce profitability.
Likelihood: Low
Impact: Medium
Regulatory – data protection
The requirements of the new EU General Data Protection
Regulations (GDPR) will come into force in May 2018.
This places onerous responsibilities on data controllers
and processors who have users in the EU regardless of
where the data is held or processed.
Likelihood: High
Impact: Medium
NEW
Category
Economic
environment
Regulatory
Market exposure is monitored 24 hours
a day on a real-time basis, using our
proprietary automated reporting systems
to measure client exposure on all open
positions. Where exposure levels and client
behaviour reaches certain levels, whether
in total or on specific instruments, our risk
management policy requires that mitigating
actions, such as reducing exposure through
hedging or liquidity arrangements,
are considered.
Our proprietary automated reporting system
is used to monitor capital adequacy 24 hours
a day on a real-time basis. This is considered
within pre-determined limits, set by the risk
management committee, which include an
approved level of ‘buffer’ to ensure that
levels determined by our regulators are
not breached. Where the capital adequacy
levels approach the pre-determined limits,
necessary steps are taken to ensure that
exposures are managed so as to not fall
foul of regulatory requirements.
Economic
environment
Trading volumes are monitored in real-time
and the number of instruments available
for clients to trade continues to increase
in order to ensure that potential for market
volatility is captured within our offering.
Where markets become volatile within
specific instruments, our technology allows
for specific and tailored material to be
released which highlights such instances
to attract trading volume.
Regulatory
In 2016, the Group appointed a new Data
Protection Officer (DPO) who works closely
with the Chief Security Office (CSO) and Risk
Committee to continuously strengthen our
defences against cybercrime and comply
with future regulatory changes, including the
EU General Data Protection Regulation.
We continue to invest in the security of our
systems and processes to meet the needs
of our business customers. A continual
assessment of information security risks has
resulted in the implementation of multiple
layers of assurance and audit activities
leading to an enhancement of our security
controls and our ability to reduce the
likelihood of unauthorised access and to
reduce the impact of any successful attack.
Playtech plc Annual Report and Accounts 2016
Regulatory – preventing financial crime
New regulations requiring companies to take action in
preventing financial crime are being developed. These
include a new Anti-Money Laundering (AML) directive
coming into force on 26 June 2017 and calls for improved
Anti-Bribery and Corruption (ABC) regulations.
Likelihood: High
Impact: Low
NEW
47
Regulatory
The Board and Risk Committee have
oversight of AML and ABC risk. The
compliance and regulatory affairs team have
day to day oversight of AML and ABC policy
and implementation. Training is provided to
all levels of employee throughout the year.
The Group regularly reviews and refreshes
its strategic and operational policies and
procedures to take into account changes
in regulatory and policy landscape, best
practices, business changes and changes
in risk appetite. The Group also participates
in an industry wide initiative to combat
money laundering, Gambling Anti-Money
Laundering Group.
The Group takes a zero tolerance approach
to bribery and corruption. Policies and
operational procedures will be refreshed
in 2017 to ensure alignment with evolving
regulatory frameworks.
Regulatory – responsible gambling
Responsible gambling is a material concern to society as
well as a regulatory priority. Licensing requirements are
regularly updated to ensure that companies in the sector
provide a safe environment for consumers. Recent trends
have seen an additional regulatory focus on treating
customers fairly and conducting marketing and advertising
in a responsible manner.
Likelihood: Medium
Impact: Medium
NEW
The Group provide a wide range of tools
to help its licensees protect players and
enable responsible gambling control. The
effectiveness of these tools are monitored
and use of data analytics to enhance player
protection in both B2C and B2B markets is
being explored.
Regulatory
Intellectual property rights
The Group’s primary commercial activity is as a licensor
of gambling software. The Group predominantly owns
the intellectual property (IP) rights in that gambling
software, including the IMS which is key to maintaining our
competitive advantage. Any claim that the Group doesn’t
own its IP (by a licensee or a third party), or any copying of
the Group’s IP by a third party, could have a significant effect
on revenues. In addition, the Group licenses intellectual
property from third parties, including creation of very
successful branded games. Any loss of such IP rights
could lead to a decline in casino revenues.
Likelihood: Low
Impact: Medium
NEW
Business continuity planning
Loss of revenue, reputational damage or breach of
regulatory requirements may occur as a result of a
business or location disruptive event.
Likelihood: Medium
Impact: Medium
New policies and guidance in B2C
operations for responsible advertising
and marketing have been developed and
supported by training delivered by legal
and compliance teams. Promotions and
advertisements are also reviewed by our
legal and compliance teams to ensure
they adhere to regulatory requirements.
The Group puts into place contractual
clauses with its licensees and suppliers to
protect its intellectual property.
Business
and legal
A dedicated business continuity specialist
was hired in October 2016 to increase the
focus on ensuring all business continuity
plans are up to date and complete.
Completed plans will also be tested to
ensure effectiveness and training will
be provided to key staff members.
Business
operations
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 48
Regulation and responsible business
Promoting integrity
Playtech is committed to designing, developing and providing
the world’s best and most responsible gambling and financial
trading technology. As a rapidly growing, global FTSE 250
Company, we recognise that taking into account the needs
of all of our stakeholders is critical to creating long-term value
and maintaining our position as a leader in regulated markets.
I am very excited about
the future of our industry
and the growth of Playtech.
Our continued commercial
success should not only be
about growing our business,
but also about the way we
do business.
Mor Weizer
Chief Executive Officer
Playtech plc Annual Report and Accounts 2016 49
As part of our B2B operations, Playtech
also runs a poker network. Within this
network, Playtech employs its analytical
skills to proactively identify ‘at-risk’ play
and unusual betting patterns that could
indicate a responsible gambling and/or
anti-money laundering issue. Once the
team identifies potential issues, it escalates
these issues to licensees to take action. In
2016, escalations to licensees regarding
collusion represented 0.59% of total unique
accounts on the network. Escalations to
licensees regarding anti-money laundering
concerns represented 0.06% of total
unique accounts on the network. In 2016,
a pilot to identify and escalate patterns of
play that indicate problem gambling was
implemented and data will be available
in 2017.
In 2017, Playtech will continue to explore
how to help licensees more effectively
identify and engage with ‘at-risk’ players
as well as developing enhanced tools
to combat fraud and manage risk in
licensees’ operations.
Our approach in
B2C operations
Playtech uses a suite of responsible
gambling tools within its B2C operations.
These include reality checks, time-outs
and deposit limits, and we report player
data in accordance with local regulations
wherever we operate. During 2016,
Playtech introduced enhanced processes
to improve detection of harmful play and
strengthen early intervention with players.
Playtech recognises that our processes
can be further improved and potentially
automated. We are exploring the use of
data analytics to identify and engage with
‘at-risk’ players to this effect.
Introduction
In 2016, the industry continued to face
an increase in stakeholder interest on
the important social challenges confronting
it, including responsible gambling and
advertising, treating customers fairly,
data protection and anti-money
laundering (AML). Playtech is committed
to constructive engagement with
policymakers, regulators and other
stakeholders in order to strengthen
policy and regulatory frameworks on
these topics.
Governance and
engagement
The Group’s Risk Committee is responsible
for overseeing responsible business and
ethics commitments and performance.
More information about the Risk Committee
is available in the Governance section of
this report on page 63.
In 2016, Playtech enhanced its oversight
of these matters by appointing Claire Milne
as the lead Board member responsible for
anti-bribery, anti-money laundering, ethics
and social responsibility. Claire works with
the Chair of the Risk Committee to ensure
these matters are adequately represented
at Board level.
The Regulatory Affairs and Compliance
function executes the day-to-day strategy
on ethics, social responsibility, compliance
and regulatory issues. In 2016, the team
expanded and strengthened its capacity
with five new hires. The team works with
the functional and divisional leadership to
ensure that these issues are embedded in
processes and operations across Playtech.
Externally, Playtech engaged with gambling
industry peers, regulators and stakeholders
throughout 2016, both through one-on-one
engagement as well as through industry
associations and initiatives. We are
active participants in, and supporters
of, the Remote Gambling Association
(RGA), International Masters of Gaming Law
(IMGL), International Association of Gaming
Regulators (IAGR), International Association
of Gaming Advisors (IAGA), the UK National
Online Self-Exclusion Scheme (NOSES),
the Gambling Anti-Money Laundering
Group (GAMLG) and the Institute for
Business Ethics.
Enabling responsible
gambling
Online gambling continues to grow as a
popular source of entertainment. Playtech
recognises that many individuals and
organisations have concerns about the role
and impact of online gambling in society.
Playtech shares these concerns and is
committed to strengthening its approach
to responsible gambling. We are committed
to engaging with governments and society
to ensure that our operations, products
and services are contributing positively
to enabling end users to play safely and
responsibly. In doing so, we strive to
conduct business and create products that:
• Prevent gambling from being a source
of crime or being used to support crime;
• Ensure that gambling is conducted
in a fair and open way; and
• Protect under 18s and other vulnerable
persons from being harmed or exploited
by gambling.
Our approach is supported by our policies
and procedures related to responsible
gambling and responsible advertising
as well as training for relevant staff.
As expectations and regulations evolve,
Playtech will ensure that its approach to
responsible gambling is aligned to reflect
these changes. This is an evergreen
process and strengthening our approach
to responsible gambling in both our B2B
and B2C operations is a key priority.
Our approach in
B2B operations
Playtech’s Information Management
Solution (IMS) provides licensees with the
latest responsible gambling tools. The IMS
includes controls and can be configured
to ensure fair play through fraud-detection
services and to facilitate responsible
gambling tools for players, including:
• Deposit and bet limits;
• Reality checks;
• Session time limits; and
• Self-exclusion tools.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 50
Regulation and responsible business continued
In 2016, there was a significant increase in
the uptake of responsible gambling tools,
including self-exclusion.
Use of responsible
gambling tools – B2C
Proportion of customers
self-excluding*
14.7%
2016
2015
4.4%
Proportion of customers
using RG tools**
9.8%
2016
2015
3.3%
* Number of self-exclusions as a percentage
of total unique customers within Playtech’s
B2C operations in the UK.
** RG tools comprise reality checks,
time-outs and deposit limits.
Partnership and
collaboration
We believe that no one company alone
can tackle the root causes and impacts of
problem gambling in society. This is why
we collaborate, support and partner with
many organisations whose aim is to support
responsible gambling, including:
• Participating in and shaping the
development of the National Online Self-
Exclusion System in the UK;
• Collaborating with GamCare to support
efforts to continuously improve
operational responsible gambling
activity; and
• Sponsoring 2016 GambleAware’s annual
Harm Minimisation Conference as well
as providing financial support for their
activities and research.
Minimising integrity risk
Playtech takes a zero tolerance
approach to bribery, corruption and
money laundering. During 2016, Playtech
continued to strengthen its policies and
procedures on anti-bribery and corruption
and anti-money laundering and deployed
additional training for its staff through a mix
of face to face and virtual learning modules.
Playtech also refreshed its anti-money
laundering policy and operational
procedures, including its know your
customer (KYC) procedures. Furthermore,
the Group joined the Gambling Anti-
Money Laundering Group, an industry
wide initiative to combat money
laundering in the gambling sector.
In addition, the Compliance function added
resources dedicated to compliance on
these topics and the Financials division
introduced a new code of conduct and
new controls with regards to anti-bribery
and corruption.
In 2017 Playtech will continue to enhance
and strengthen the quality of AML and
ABC training provided to all colleagues.
We will also review and update our
policies and procedures in light of the 4th
Anti-Money Laundering Directive (AMLD),
strengthen risk assessment models and
reflect changes in licensing and regulatory
requirements.
Safeguarding data
We recognise that the trust of our
licensees, customers and employees is
dependent upon our ability to safeguard
data. In 2016, Playtech appointed a new
Data Protection Officer (DPO) who will work
closely with the Chief Security Officer (CSO)
and Risk Committee to strengthen our
defences against cybercrime and comply
with future regulatory changes, including
the EU General Data Protection Regulation.
We continue to invest in the security of our
systems and processes to meet the needs
of our business customers. A continual
assessment of information security risks
has resulted in the implementation of
multiple layers of assurance and audit
activities, leading to an enhancement of
our security controls. As a result, the
likelihood of unauthorised access and
the impact of any successful attack
have both been reduced.
Contributing to the
local economy
Playtech employs over 5,000 people in 17
countries; one of the key ways that Playtech
creates economic value in its markets of
operation is through local tax payments and
employment of individuals. The Group is
committed to meeting its legal and ethical
obligations to pay tax while also fulfilling its
commitment to shareholders to maximise
value through tax efficient management.
Playtech recognises that tax affairs –
including fairness and transparency – are
topics of significant interest to governments
and society. Furthermore, tax policy and
regulatory requirements for companies –
particularly in the e-commerce arena –
are developing and changing. As a result,
Playtech is committed to managing its
approach in the ever-evolving e-commerce
environment in order to ensure it aligns
with the changing nature of tax regimes
in the regions and markets of operation.
Tax governance and
responsibilities
The tax strategy of the Playtech Group is
governed by the Board of Directors and
monitored by the Audit Committee. The
Audit Committee reviews the tax strategy
annually as part of its considerations in
connection with the audited financial
statements.
The Chief Financial Officer (CFO) is
responsible for developing and managing
the Group’s tax strategy. The CFO is
supported by the Treasury, Finance and
Accounting functions; comprising qualified
accountants in multiple jurisdictions.
The CFO and Treasury function are also
assisted by external advisers on a country-
by-country basis. The Group’s external tax
advisers are selected based upon their
reputation, knowledge and expertise in
local markets, together with their expertise
in the gambling sector.
The CFO and the Finance function
constructively engage with tax authorities
in the markets where the Group operates.
Approach to tax
The Playtech Group’s tax policy is
based upon the following principles:
Playtech plc Annual Report and Accounts 2016
51
• We manage our tax affairs in line with the
Group’s governance framework and
tax strategy;
• We act responsibly with respect
to our tax obligations;
• We comply with tax requirements and
disclosure obligations in accordance
with local applicable regulations;
• We strive to manage an efficient tax
environment that is informed by:
– The numerous jurisdictions where
we operate; and
– The Group’s employee footprint, which
is based on local expertise and talent
pools in those markets;
• We conduct intra-group transactions
(transfer pricing) on an independent,
arm’s length basis; and
• We engage constructively with
local tax authorities.
As a global company, Playtech operates in
many markets. Playtech selects the location
of its operations based on commercial and
operational factors, that extend well beyond
tax, including: a widely available pool of
technical talent, the linguistic capabilities
in these jurisdictions, the location of
our licensees, labour and operational
cost factors.
The Playtech Group is headquartered in the
Isle of Man, where it is centrally managed
and controlled. This location was chosen
as a jurisdiction in which to develop the
head office function due to shareholders
benefitting from an Isle of Man company
falling under the remit of the City Code
on Takeovers and Mergers.
Playtech has offices in 17 countries with
the majority of its development and
technical operations in the Ukraine, Estonia,
Latvia and Bulgaria. These locations are
well known for being among the best
technology hubs with a large population
of well educated, technical experts. Our
presence in some markets, such as Austria
and Australia, is a result of acquisitions. In
each of these locations, our payments to
government include corporate tax, local
employment tax, sales tax, property tax,
licensing fees, duties and taxes.
The corporate tax charge for the year
was €6.3 million (2015: €5.6 million),
and our effective tax rate was 3% (2015:
4%). In addition to the corporate tax, the
tax charge for gaming taxes on the Group’s
white-label operations is €6.6 million.
Please refer to page 123, Note 8 for
additional information.
Our people
With more than 5,000 people in 17
different countries, we rely on diverse
backgrounds, cultures and nationalities
to remain successful and serve a wide
range of international operators. We
embrace different cultures, genders,
ethnicities, social backgrounds and
beliefs in the workplace. In 2017, Playtech
will review its approach to diversity and
inclusion with a focus on increasing female
representation at senior levels within the
organisation. Playtech is also committed
to upholding the principles embodied in
the Universal Declaration of Human Rights
and the International Labour Organization’s
Declaration on Fundamental Principles
and Rights at work. In 2016, Playtech
codified its commitment to human rights
and combatting modern slavery and will
continue to review its risks associated
with these issues. We will also update our
statement on combatting modern slavery
and take actions to further embed human
rights policies into our procurement and
HR processes in 2017.
Gender diversity
(on 31 December 2016)
Employees
3,039/60.2%
2,007/39.8%
Senior managers
88.5%
85.7%
11.5%
Directors
14.3%
Men
Women
Men
Women
Men
Women
Managing our
environmental footprint
As a predominantly online gaming software
supplier, our environmental footprint is
limited compared to that of our peers
with industrial operations. Our biggest
environmental impacts are caused by the
energy we consume in our offices and
datacentres. Our energy usage creates
greenhouse gas (GHG) emissions which
in turn contribute to climate change. We
recognise that climate change is one of
the biggest challenges facing society, and
we are committed to reducing our carbon
footprint by being as efficient as we can.
In 2017, we will review opportunities to
reduce our carbon footprint, identifying
energy hotspots within our business.
As we are growing fast and through
acquisitions, our carbon reduction
ambitions are likely to be relative rather
than absolute. We will continue to
strengthen our reporting systems, data
quality and approach to data collection
and analysis.
Greenhouse gas
emissions
Energy
consumption*
Scope 1 GHG
emissions (gas)**
Scope 2 GHG
emissions
(electricity)***
2016
13,213,044
kWh
342 tonnes
CO2e
7,025 tonnes
CO2e
Total GHG emissions
scope 1 and scope 2
7,367 tonnes
CO2e
CO2e intensity
1.46 tonnes
CO2e/employee
* Absolute data is an estimate based on
91% actual data coverage by headcount.
** Using the Department for Environment,
Food & Rural Affairs (DEFRA) 2016 gas
conversion factor (CO2e).
*** Using the DEFRA 2016 electricity
conversion factor (CO2e) for all UK locations
and the latest International Energy Agency
(IEA) conversion factors for all non-UK
sites (CO2).
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
52
Regulation and responsible business continued
Contributing to our local communities
We encourage our employees to play an active role in their communities.
Many contribute time, skills, in-kind and volunteering services and financial
support to charitable organisations and causes. The following are just a few
stories about how employees are making a difference in their communities.
Inspiring the next generation of
female IT professionals in Estonia
– Playtech’s founding country
Playtech Estonia has a mission to share knowledge,
skills and expertise to encourage and equip more
women to enter the technology industry. In 2016 the
team in Estonia engaged in a variety of activities and
events, including graduate technology conferences,
mentoring and hosting panels & discussions to
encourage more women and girls to enter the
IT sector. In November 2016, Playtech Estonia
sponsored the ‘Tech Sisters’ community which
organises a series of hands-on technology-focused
workshops and regular networking events. These are
available to anyone of any level of IT expertise and
experience, and focus on bringing more diversity into
the field of IT or, in the words of one of our Estonian
colleagues, “to encourage women and girls of all
ages to take a leap into this wonderful world”. The
team will continue to inspire and encourage, nurture
and grow new female talent – not just in Playtech
but across the country.
Using skills based volunteering
to game for good
For the last four years, Daniel Fairs, a Playtech games artist,
has volunteered his gaming skills to raise funds for the charity
‘SpecialEffect’. SpecialEffect designs and produces games and
games equipment for people who previously were unable to play
due to their disabilities or special needs. A large portion of the
money raised has gone to designing custom software and hardware
for specific needs such as developing a one-button control system
for severely restricted wheelchair users, a one-handed control for
amputee war veterans and eye recognition software for sufferers of
locked-in syndrome in order for them to play games using their eyes.
From my first Commodore 64 to a Sega Mega
Drive and then an Xbox to a more sophisticated
PC, games have been such an important part
of my life that if I can help someone with a
disability who can’t play then I’m always happy
to give up some of my spare time to do that.
Playtech plc Annual Report and Accounts 2016 53
YoYo Games & Humble
Bundle: partnering
to deliver social and
commercial value
YoYo Games partnered with Humble
Bundle to use specialist gaming
knowledge and experience to
provide consumers with affordable
downloadable content whilst also
raising over half a million pounds
towards worthy causes. Humble
Bundle bundles games and books
as part of a cheaper time-set ‘bundle’
and at a price determined by the
purchaser, with a proportion of the
cost going to humanitarian causes.
The money raised through this
partnership has been allocated to
the humanitarian-aid organisation,
Médecins Sans Frontières/Doctors
Without Borders (MSF) as well as
other charities.
Partnering with GamCare
to support the UK’s first
youth-targeted initiative
on problem gambling
Since 2013, Playtech has supported
GamCare’s Youth Outreach Programme.
The long-term aim of the programme is
to bring about a reduction in gambling-
related harm in young people.
The programme pilot included delivering
awareness workshops to young people
in schools, colleges and Pupil Referral
Units across Bristol and the South
West of the UK, as well as one-to-one
screening and outreach services to
those affected by their own or someone
else’s gambling. 113 children and young
people were screened during the pilot,
and a total of 53 young people received
tailored help and support as a result of
this. This was the first youth-targeted
initiative around problem gambling
in the UK.
Frontline professionals were also trained
to deliver workshops, as well as how to
identify warning signs of problematic
gambling and how to intervene
sensitively. This laid the foundation for
the next phase of work, to develop
further ‘youth hubs’ in the North West
(Liverpool and Manchester), Birmingham
and London. This includes developing
materials to deliver sessions to young
people and youth professionals, as well
as upskilling counsellors to treat young
people should they need one-to-one
help and support.
Playtech’s support was instrumental in
helping GamCare extend its pilot work
in Bristol and the South West, which
ultimately supported 3,000 young
people and a further 150 frontline
professionals. The extension to a
third year helped GamCare reach over
1,000 additional young people and train
50 additional professionals directly.
3,000
Young people supported
by the programme
150
Frontline professionals who work
with vulnerable young people have
been supported by the programme
Feedback during the pilot phase
from young people and professionals
This has helped me
understand gambling
better and it will help
me in the future.
Most helpful to learn what
practical abilities to take
away and use with young
people and also identifying
signs of a problem gambler.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 54
GOVERNANCEPlaytech plc Annual Report and Accounts 2016 55
Contents
Board of Directors
Chairman’s introduction to governance
Directors’ governance report
Audit Committee report
Remuneration report – annual statement
Remuneration policy report
Annual report on remuneration
Directors’ report
56
58
59
67
70
72
78
86
Playtech plc Annual Report and Accounts 2016 56
Board of Directors
Trusted leadership
4
2
6
3
7
1
5
1
Board Committees:
He is Chairman of the Nominations
Committee and a member of the
Remuneration and Risk &
Compliance Committees.
2
Mor Weizer
Chief Executive Officer
Appointment to the Board:
Mor was appointed as Playtech’s
Chief Executive Officer in May 2007.
Career:
Prior to being appointed CEO, Mor was
the Chief Executive Officer of one of the
Group’s subsidiaries, Techplay Marketing
Ltd., which required him to oversee the
Group’s licensee relationship management,
product management for new licensees
and the Group’s marketing activities.
Before joining Playtech, Mor worked for
Oracle for over four years, initially as a
development consultant and then as a
product manager, which involved creating
sales and consulting channels on behalf
of Oracle Israel and Oracle Europe, the
Middle East and Africa. Earlier in his career,
he worked in a variety of roles, including
as an auditor and financial consultant for
PricewaterhouseCoopers and a system
analyst for Tadiran Electronic Systems
Limited, an Israeli company that designs
electronic warfare systems.
Skills, competences and experience:
Mor is a qualified accountant and brings
considerable international sales and
management experience in a hi-tech
environment and extensive knowledge
of the online gambling industry. Until
June 2013 he was a Non-executive
Director of Sportech PLC as the Company’s
representative, and resigned when
Playtech disposed of its shareholding.
Board Committees:
He chairs the Management Committee
and attends the Remuneration, Risk &
Compliance and Nominations Committees
at the invitation of the Chairs of those
Committees.
3
Andrew Smith
Chief Financial Officer
Appointment to the Board:
Andrew was appointed as Playtech’s
Chief Financial Officer on 10 January 2017,
having joined the Group in 2015.
Career:
Having qualified as a solicitor with Ashurst
in 2001, Andrew moved into investment
banking, first with ABN AMRO and then
with Deutsche Bank, specialising in both
the Technology and Leisure sectors.
Andrew joined Playtech in 2015 as
Head of Investor Relations.
Alan Jackson
Non-executive Chairman
Appointment to the Board:
Alan was appointed to the Board in
2006 on the Company’s flotation on
the Alternative Investment Market and
became Chairman in October 2013.
Career:
Alan has over 40 years’ experience in
the leisure industry. From 1973 to 1991,
he occupied a number of positions
at Whitbread, both in the UK and
internationally, principally as Managing
Director of Beefeater Steak Houses and
also the Whitbread restaurant division
where he was responsible for the creation
and development of the Beefeater,
Travel Inn and TGI Friday brands and was
responsible for Whitbread’s international
restaurant development. In 1991, he
founded Inn Business Group plc, which
was acquired by Punch Taverns plc in 1999.
He was Chairman of The Restaurant Group
plc from 2001 until he retired from this
position in 2016. He stepped down from
his role as Deputy Chairman and Senior
Non-executive Director at Redrow plc
in September 2014.
Skills, competences and experience:
Having held several Board positions in both
an executive and non-executive capacity
in a variety of listed companies in the UK,
he brings substantial experience of working
in public and private companies, along with
strategic and leadership experience.
Playtech plc Annual Report and Accounts 2016 57
Skills, competences and experience:
Andrew brings a wealth of financial,
capital markets and M&A experience
to the Board and has been integral to
Playtech’s operational and strategic
progress since joining the business.
Board Committees:
Andrew sits on the Management
Committee and attends meetings of
the Audit Committee and the Risk &
Compliance Committee at the invitation
of the Chairs of those Committees.
4
Andrew Thomas
Senior Non-executive Director
Appointment to the Board:
Andrew was appointed to the Board in
June 2012, shortly before the Company’s
admission to the Main Market.
Career:
Andrew has enjoyed a career as an
accountant and businessman, much of
which has been within the leisure industry.
Andrew is currently Chairman of Randalls
Limited, a family-owned pub company in
Jersey, where he lives. Andrew previously
served as Chairman of The Greenalls
Group plc and as a Non-executive
Director of a number of private and public
companies. He is the founding partner
of the Cheshire-based accounting firm,
Moors Andrew Thomas & Co. LLP. Andrew
is a member of the Institute of Chartered
Accountants in England & Wales and a
member of the Institute of Taxation.
Skills, competences and experience:
Andrew combines many years’ detailed
experience of advising on taxation matters,
with financial expertise both as a Chartered
Accountant and sitting as a Non-executive
Director of a number of publicly listed
companies.
Board Committees:
Andrew chairs the Audit Committee, which
oversees the work of the internal auditors
and sits on the Remuneration, Nomination
and Risk & Compliance Committees.
He is also the Senior Independent
Non-executive Director.
5
Paul Hewitt
Non-executive Director
Appointment to the Board:
Paul was appointed to the
Board in August 2015.
Career:
Paul is a qualified accountant, and his
recent executive responsibilities included
being the Deputy Group Chief Executive
and Chief Financial Officer of the Co-
Operative Group from 2003 to 2007; and
Finance and IT Director of the RAC plc
from 1999 to 2003. Since starting to build
a portfolio of non-executive roles in 2007,
Paul has helped many management teams
adapt their business models to respond
to, and anticipate, changes in their
regulatory environments, including as
Non-executive Director and Chairman
of the Audit Committee of Tesco Bank
from 2012 to 2014.
Skills, competences and experience:
Paul brings a wealth of experience across
a variety of sectors, including in the financial
services industry.
Board Committees:
Paul is Chair of the Risk & Compliance
Committee and sits on the Audit
Committee, Remuneration Committee
and Nominations Committee.
6
John Jackson
Non-executive Director
Appointment to the Board:
John was appointed to the Board
in January 2016.
Career:
John is a qualified accountant and his
previous roles include Group Chief
Executive of Jamie Oliver Holdings Limited
from 2007 to 2015 and Group Retail and
Leisure Director of Virgin Group Limited
from 1998 to 2007. He is currently Non-
executive Chairman of Rick Stein Group,
a senior independent director of Game
Digital plc; and a Non-executive Director
of Wilkinson’s Hardware Stores Limited.
Skills, competences and experience:
John brings a wealth of consumer industry
experience combined with a strong
accountancy and finance background.
Board Committees:
John is Chair of the Remuneration
Committee and sits on the Audit
Committee, Risk & Compliance
Committee and Nominations Committee.
7
Claire Milne
Non-executive Director
Appointment to the Board:
Claire was appointed to the Board
in July 2016.
Career:
Claire has a master’s degree from The
Johns Hopkins University, Baltimore, is a
member of The Law Society of Scotland,
a Manx Advocate and a Writer to Her
Majesty’s Signet. She is a member of
the Institute of Directors, the Licensing
Executive Society and the Society for
Computers and the Law, a General Member
of the International Masters of Gaming Law
and was Chair of the Isle of Man Gambling
Supervision Commission from 2007-2012.
She is currently a Partner and Team Leader
within the Intellectual Property and Science
& Technology teams for Appleby in the
Isle of Man.
Skills, competences and experience:
Claire is a recognised industry expert
in eGaming and technology law and
regulation, with over 20 years’ experience
advising gaming and financial services
clients as an in-house and private
practice lawyer.
Board Committees:
Claire sits on the Remuneration Committee,
Risk & Compliance Committee, Audit
Committee and Nominations Committee.
Note:
Ron Hoffman served as an Executive Director and
Chief Financial Officer throughout the financial year
ended 31 December 2016. Ron moved from his
position as an Executive Director and Chief Financial
Officer in January 2017 to become full-time Chief
Executive Officer of Playtech’s Financials division.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 58
Chairman’s introduction to governance
The Board is committed to high standards
of corporate governance.
Alan Jackson
Chairman
Dear Shareholder
I am pleased to present Playtech’s
Governance Reports to shareholders.
This was a busy year for the Group during
which time the Board has been able to
provide strategic leadership and I would like
to pass on my gratitude for the enthusiasm
and dedication which the Directors and
senior management have demonstrated.
We have, however, continued to focus
on ensuring that we have an appropriate
governance framework in place. The Board
is committed to high standards of corporate
governance which it considers to be
central to the effective management of the
business and to maintaining the confidence
of investors.
The Board has confidence in the future
of the Group and sees significant growth
opportunities, and remains focused on
looking for such opportunities in regulated
and soon-to-be regulated markets. We
continue to work closely with regulators in
various markets to ensure our compliance
with local laws and regulations.
The second half of the year saw the
expansion of our Financials division through
the acquisition of 70% of Consolidated
Financial Holdings A/S. The regulatory
backdrop under which our Financials
division operates has become increasingly
developed and, against this backdrop,
we are taking a risk based approach with
an ongoing review of our business model
to further enhance compliance, control
and oversight, setting industry-leading
standards in these areas.
At the beginning of the year, we appointed
two experienced Internal Auditors to report
directly to the Head of Internal Audit. This
was in recognition of the increasing levels
of complexity in relation to internal controls
and our commitment to having a dedicated
in-house function. Our relationship with
PricewaterhouseCoopers continues to
be a co-sourced arrangement, with PwC
providing support to the Internal Audit Team.
We continued to listen to and understand
the views of our shareholders. In addition
to the usual processes, we met with
institutional shareholders, particularly around
results announcements and at different
investor conferences with a focus on the
strategic vision of the Group and the quickly
evolving developments in our industry in
terms of innovation, regulation and tax.
The Board continues to strive to ensure that
the Group’s governance structure protects
the sustainability of its businesses and the
communities in which it operates, while
maximising shareholder value and treating
all shareholders fairly. The Board also sets
the tone for the Company. The way in
which it conducts itself, its attitude to ethical
matters, its definitions of success and the
assessment of appropriate risk, all define
the atmosphere within which the executive
team works.
The Board is cognisant of the need to
strike a careful balance to ensure that
shareholders and other stakeholders are
appropriately protected by robust processes
and procedures while providing an
environment that fosters an entrepreneurial
spirit that allows our senior management
team and employees to continue to deliver
the year-on-year growth that we have
achieved in recent years. This balance
enables us to clearly focus on the key risks
facing the Group but to be flexible enough
in our approach to accommodate changes
resulting from developments in our strategy
or changes in the regulatory environment.
We have set out in the following sections
how we seek to manage the principal
risks and uncertainties facing the business
with further details on our governance
framework, to explain how our corporate
governance practices support our strategy.
The Annual General Meeting (AGM) is
an important opportunity for the Board to
meet with shareholders, particularly those
who may not otherwise have the chance
to engage with the Board and senior
management. Our 2017 AGM is scheduled
for 10.00 am on 17 May 2017 at The Sefton
Hotel, Douglas, Isle of Man and we look
forward to seeing you there.
Alan Jackson
Chairman
22 February 2017
Playtech plc Annual Report and Accounts 2016
59
The Company’s auditor, BDO LLP, is
required to review whether the above
statement reflects the Company’s
compliance with the Code by the Listing
Rules of the UK Listing Authority and to
report if it does not reflect such compliance.
No such negative report has been made.
The Board is accountable to the Company’s
shareholders for good governance and the
statement set out below describes how the
Group applies the principles identified in
the Code.
Directors’ governance report
Claire Milne was appointed as a
Non-executive Director on 8 July 2016.
Claire is a recognised expert in eGaming
and technology law and regulation, with
20 years’ experience advising gaming and
financial services clients as an in-house
and private practice lawyer and was, at the
time of her appointment, and continues
to be, a Partner and Team Leader within
the Intellectual Property and Science and
Technology teams for Appleby (Isle of Man)
LLC (the “Firm”). The Firm has provided,
and continues to provide, regulatory
and legal advice to the Company from
time to time, however, given the overall
size of the Firm and the relatively small
scale of fees received, this relationship
was not considered to impact on her
independence. In addition, in order to
reinforce her independence, it was agreed
that following her appointment, Claire would
not be involved in the provision of advice
by the Firm to the Group, her remuneration
from the Firm would not be linked, directly
or indirectly, to the receipt of fees from
the Group, and that any potential residual
conflicts will be managed carefully.
Introduction
Responsibility for corporate governance
lies with the Board, which is committed
to maintaining high standards of corporate
governance and is ultimately accountable
to shareholders. The report which follows
explains our most important governance
processes and how they support the
Group’s business. In particular, we
have applied the principles of good
governance advocated by the UK
Corporate Governance Code (the “Code”).
The Code applied to Playtech throughout
the financial year ended 31 December
2016. A copy of the Code is available at
www.frc.org.uk/Our-Work/Codes-Standards/
Corporate-governance/UK-Corporate-
Governance-Code.aspx.
Compliance statement
We continued to make improvements
during the year both to our Board structure
and our governance procedures and I am
delighted to be able to report that it is the
view of the Board that the Company has
been fully compliant with the principles
of the Code during 2016 save in relation
to C.3.1 of the Code.
As regards C.3.1 of the Code and, as noted
in last year’s report, the Board reviewed
the position during the course of the year
and following the appointment of John
Jackson as a Non-executive Director in
January 2016, the Chairman stepped down
as a member of the Audit Committee
in February 2016. The Committee now
consists of four independent Non-executive
Directors.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
60
Directors’ governance report continued
The Board
Composition
As at 31 December 2016, the Board
comprised the Non-executive Chairman,
the Chief Executive Officer, the Chief
Financial Officer, and four independent
Non-executive Directors. The list of
Directors holding office during the year to
31 December 2016 and their responsibilities
are set out on pages 56 to 57.
With the exception of Claire Milne who was
appointed as a Non-executive Director in
July 2016, the Directors served throughout
the financial year.
John Jackson was appointed as a
Non-executive Director on 1 January 2016.
Ron Hoffman stepped down as an
Executive Director and Chief Financial
Officer on 10 January 2017.
Andrew Smith was appointed as an
Executive Director and Chief Financial
Officer on 10 January 2017.
Director’s name
Title
Alan Jackson
Non-executive Chairman
Mor Weizer
Executive Director, Chief Executive Officer
Andrew Smith
Executive Director, Chief Financial Officer
(appointed on 10 January 2017)
Andrew Thomas
Non-executive Senior Independent Director
Paul Hewitt
Non-executive Director
John Jackson
Non-executive Director (appointed on 1 January 2016)
Claire Milne
Non-executive Director (appointed on 8 July 2016)
Ron Hoffman
Executive Director, Chief Financial Officer
(stepped down on 10 January 2017)
The Non-executive Directors are all
considered by the Board to be independent
of management and free of any relationship
which could materially interfere with the
exercise of their independent judgement,
as explained above.
Board operation
The roles of the Chairman (Alan Jackson)
and the Chief Executive Officer (Mor
Weizer) are separated, clearly defined
and their respective responsibilities are
summarised below.
The Company Secretary acts as secretary
to the Board and its Committees and his
appointment and removal is a matter for the
Board as a whole. The Company Secretary
is a member of the Group’s management
team and all the Directors have access to
his advice and services.
Chairman
• Overall effectiveness of the running
of the Board;
• Ensuring the Board as a whole plays
a full part in the development and
determination of the Group’s strategic
objectives;
• Keeping the other Directors informed
of shareholders’ attitudes towards
the Company;
• Safeguarding the good reputation
of the Company and representing
it both externally and internally;
• Acting as the guardian of the Board’s
decision-making processes; and
• Promoting the highest standards
of integrity, probity and corporate
governance throughout the Company
and particularly at Board level.
Chief Executive Officer
• Executive leadership of the Company’s
business on a day-to-day basis;
• Developing the overall commercial
objectives of the Group and proposing
and developing the strategy of the Group
in conjunction with the Board as a whole;
• Responsibility, together with his senior
management team, for the execution of
the Group’s strategy and implementation
of Board decisions;
• Recommendations on senior
appointments and development
of the management team; and
• Ensuring that the affairs of the
Group are conducted with the highest
standards of integrity, probity and
corporate governance.
Playtech plc Annual Report and Accounts 2016
61
Matters considered by the Board in 2016
Month
January
February
March
April
May
June
August
October
November
December
Material matters considered
• Review of operations
• Appointment of John Jackson as a Non-executive Director
• Budget approval
• Review of the 2015 financial results and approval of the Annual Report and Accounts for 2015
• Consideration of a final dividend
• Review of merger & acquisition opportunities
• Review of operations – Markets Ltd.
• Review of merger & acquisition opportunities
• Consideration of forthcoming regulatory changes in key markets
• Review of Asian markets
• Review of operations
• Regulatory Affairs and Compliance
• Three-year Strategic Plan
• Prepare for AGM
• Consideration of proposed acquisition of BGT
• Review of Legal Report
• Approval of Quickspin acquisition
• Review of Operations – Markets Ltd.
• Acquisition of BGT
• Review of Investor Relations report
• Review of new Market Abuse Regulations
• Ratification of Clare Milne’s appointment as a Non-executive Director
• Review of interim results
• Consideration of interim dividend
• Review of Legal & Compliance
• Appointment of General Counsel
• Consideration of proposal to acquire CFH
• Review of operations
• Approval of CFH acquisition
• Review of HR
• Board evaluation
• Share buyback
• Board evaluation
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 62
Directors’ governance report continued
How the Board
functions
In accordance with the Code, the Board
is collectively responsible for the long-
term success of the Company. The Board
provides entrepreneurial leadership for the
Company within a framework of prudent
and effective controls that enable risk to be
assessed and managed. The Board sets
the Company’s strategic aims, and ensures
that the necessary resources are in place
for the Company to meet its objectives and
reviews management performance.
The Board meets regularly and frequently,
with nine meetings scheduled and held in
2016. During the year, it was also necessary
for the Board to hold one unscheduled
Board meeting by telephone in accordance
with the articles of association, in
connection with the share buyback
programme announced in December 2016.
During the year, the Chairman met
the other Non-executive Directors
in the absence of the Executive Directors
to re-confirm and take account of their
views. All Non-executive Directors have
sufficient time to fulfil their commitments
to the Company.
In addition to receiving reports from the
Board’s Committees, reviewing the financial
and operational performance of the Group
and receiving regular reports on M&A,
legal, regulatory and investor relations
matters at the Board meetings, the other
key matters considered by the Board
during 2016 are set out in the table
on page 61.
Board meetings are generally held
at the registered office of the Company
on the Isle of Man, although during the
year a meeting was held in each of
Jersey and Cyprus.
Directors are provided with comprehensive
background information for each meeting
and all Directors were available to
participate fully and on an informed basis
in Board decisions. In addition, certain
members of the senior management team
including the Chief Operating Officer, the
General Counsel, the Head of Regulatory
and Compliance and the Head of Investor
Relations are invited to attend the whole or
parts of the meetings to deliver their reports
on the business. Any specific actions
arising during meetings are agreed by
the Board and a comprehensive follow-up
procedure ensures their completion.
Details of the attendance of the Directors
at meetings of the Board and its
Committees are set out in the table below.
Responsibility
and delegation
The Chairman is primarily responsible
for the efficient functioning of the Board.
He ensures that all Directors receive
sufficient relevant information on financial,
business and corporate issues prior to
meetings. The Chief Executive Officer’s
responsibilities focus on co-ordinating the
Group’s business and implementing Group
strategy. Regular interaction between the
Chairman and Chief Executive Officer
between meetings ensures the Board
remains fully informed of developments
in the business at all times.
There remains in place a formal schedule
of matters specifically reserved for Board
consideration and approval, which includes
the matters set out below:
• Approval of the Group’s long-term
objectives and commercial strategy;
• Approval of the annual operating and
capital expenditure budgets and any
changes to them;
• Major investments or capital projects;
• The extension of the Group’s
activities into any new business or
geographic areas, or to cease any
material operations;
• Changes in the Company’s capital
structure or management and
control structure;
Number of meetings
Alan Jackson
Mor Weizer
Ron Hoffman
Claire Milne
John Jackson
Andrew Thomas
Paul Hewitt
Board
10 of 10
10 of 10
9 of 10
4 of 10
10 of 10
10 of 10
10 of 10
Audit
Remuneration
Nominations
1 of 4
8 of 8
2 of 2
–
–
2 of 4
4 of 4
4 of 4
4 of 4
–
–
4 of 8
8 of 8
8 of 8
8 of 8
–
–
0 of 2
2 of 2
2 of 2
2 of 2
Risk
4 of 4
–
–
2 of 4
4 of 4
4 of 4
4 of 4
Playtech plc Annual Report and Accounts 2016 63
In addition, PwC LLP, in their capacity as
providers of co-sourced internal audit
services, and members of the Group’s
senior management including the Chief
Security Officer, the Chief Executive Officer,
Chief Financial Officer and Chief Operating
Officer may be invited to attend meetings
to present matters or for the Committee
to have the benefit of their experience.
The primary responsibilities delegated to,
and discharged by, the Committee include:
• Review management’s identification and
mitigation of key risks to the achievement
of the Company’s objectives;
• Monitor incidents and remedial activity;
• Agree and monitor the risk assessment
programme including, in particular,
changes to the regulation of online
gambling and the assessment of
licensees’ suitability;
• Agree on behalf of the Board and
continually review a risk management
strategy and relevant policies for the
Group, including the employee code of
conduct, anti-bribery policy, anti-money
laundering policy and wider social
responsibility issues;
• Satisfy itself and report to the Board
that the structures, processes and
responsibilities for identifying and
managing risks are adequate; and
• Monitor and procure ongoing
compliance with the conditions of the
regulatory licences held by the Group.
• Approval of the Annual Report and
Accounts, preliminary and half-yearly
financial statements; interim management
statements and announcements
regarding dividends;
• Approval of treasury policies, including
foreign currency exposures and use
of financial derivatives;
• Ensuring the maintenance of a sound
system of internal control and
risk management;
• Entering into agreements that are
not in the ordinary course of business
or material strategically or by reason
of their size;
• Changes to the size, composition
or structure of the Board and its
Committees; and
• Corporate governance matters.
In addition, the Board has adopted a formal
delegation of authorities memorandum
which sets out levels of authority for
employees in the business.
The Board has delegated certain of its
responsibilities to a number of Committees
of the Board to assist in the discharge of its
duties. The principal Committees currently
are the Audit Committee, the Remuneration
Committee, the Risk & Compliance
Committee and the Nominations
Committee. The minutes of each of these
Committees are circulated to and reviewed
by their members. The Company Secretary
is secretary to each of these Committees.
The terms of reference for each of the
Committees are available to view on the
Company’s website www.playtech.com.
Audit Committee
The Audit Committee’s key objectives are
the provision of effective governance over
the appropriateness of the Group’s financial
reporting, including the adequacy of related
disclosures, the performance of both the
internal and external audit function, and the
management of the Group’s systems
of internal control, business risks and
related compliance activities.
The Audit Committee’s report is set out
on pages 67 to 69 and details the Audit
Committee’s membership, activities
during the year, significant issues that
it considered in relation to the financial
statements and how those issues were
addressed. The report also contains
an explanation of how the Committee
assessed the effectiveness of the
external audit process and the approach
taken in relation to the appointment or
reappointment of the auditors.
Remuneration
Committee
The Remuneration Committee is
responsible for making recommendations
to the Board on remuneration policy for the
Chairman, Executive Directors and senior
management.
The Directors’ Remuneration Report is
set out on pages 70 to 85 and contains
details the Remuneration Committee’s
membership, activities during the year and
the policy on remuneration. The Chairman
of the Remuneration Committee attends the
Annual General Meeting to respond to any
questions that shareholders might raise on
the Remuneration Committee’s activities.
Risk & Compliance
Committee
Under the Code, the Board is responsible
for determining the nature and extent of
the significant risks it is willing to take in
achieving its strategic objectives. The
Board should maintain a sound system
of risk management and internal control
systems (Main Principle C.2).
The Risk & Compliance Committee is
chaired by Paul Hewitt. The other members
of the Committee are Alan Jackson (Non-
executive Chairman), Andrew Thomas
(Non-executive Director), John Jackson
(Non-executive Director) and Claire Milne
(Non-executive Director). Ian Ince (Head of
Regulatory and Compliance) and Robert
Penfold (Head of Internal Audit) attend the
Committee. The Company Secretary, Brian
Moore, is secretary to the Committee.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 64
Directors’ governance report continued
A table setting out the principal significant
risks identified by the Group (including
with the oversight and input of the Risk &
Compliance Committee) and the mitigating
actions that have been undertaken by the
Group in relation to these is set out on
pages 44 to 47 of this report.
Nominations Committee
The Board is required by the Code to
establish a Nominations Committee
which should lead the process for Board
appointments and make recommendations
for appointments to the Board. A majority
of members of the Nominations Committee
should be independent Non-executive
Directors. The Nominations Committee’s
key objective is to ensure that the Board
comprises individuals with the necessary
skills, knowledge and experience to
ensure that it is effective in discharging
its responsibilities.
The Nominations Committee comprises
Alan Jackson (Chairman), Andrew Thomas,
Paul Hewitt, John Jackson and Claire Milne.
The Nominations Committee reviews the
structure, size and composition of the
Board and its Committees and makes
recommendations with regard to any
changes considered necessary in the
identification and nomination of new
Directors, the reappointment of existing
Directors and appointment of members to
the Board’s Committees. It also assesses
the roles of the existing Directors in
office to ensure that there continues to
be a balanced Board in terms of skills,
knowledge, experience and diversity.
The Nominations Committee reviews the
senior leadership needs of the Group
to enable it to compete effectively in
the marketplace. The Nominations
Committee also advises the Board on
succession planning for Executive Director
appointments although the Board itself is
responsible for succession generally.
The Nominations Committee has not
set itself any formal targets for diversity,
including gender, and believes that
appointments should be based on merit,
compared against objective criteria, with
the ultimate aim of ensuring the Board
has the right skills, knowledge and
experience that enable it to discharge
its responsibilities properly.
The Nominations Committee meets on an
as-needed basis. Two formal meetings
were held in 2016. The meetings focused
on the consideration of candidates for the
appointment of additional Non-executive
Directors that led, after a process involving
the review of a number of potential
candidates, to the appointment of Claire
Milne in July 2016. No external search
consultancy was used in the appointment
of Claire Milne; however a list of candidates
from a range of backgrounds was prepared
and the Nominations Committee agreed a
shortlist to be considered. The Nominations
Committee went on to recommend
Claire Milne’s appointment as a Non-
executive Director of the Company having
considered in detail her skills, knowledge
and experience particularly with regard
to eGaming and technology law and
regulation. Claire Milne will formally stand
for election at the next Annual General
Meeting to be held on 17 May 2017.
Disclosure Committee
The Disclosure Committee ensures
accuracy and timeliness of public
announcements of the Company and
monitors the Company’s obligations
under the Listing Rules and Disclosure
and Transparency Rules of the UK Listing
Authority. Meetings are held as required.
At the date of this report the Disclosure
Committee comprises Andrew Thomas
(Chairman of the Audit Committee), Andrew
Smith (Chief Financial Officer), Alex Latner
(General Counsel) and Brian Moore
(Company Secretary).
The Risk & Compliance Committee met
formally four times during the year and in
addition held a number of conference calls
throughout the year, and a summary of the
key matters considered by the Committee
during 2016 are set out below:
• Monitor the regulatory position in a
number of jurisdictions including those
which are of relative importance to
the Group financially and those where
changes may represent a risk or
opportunity for the Group;
• Consider the costs and regulatory
requirements for the Group to seek
relevant licences in newly regulating
markets;
• Applications by or on behalf of the
Group for licences in existing or newly
regulated markets;
• Monitor developments in relation to
changes in the regulatory regime in the
United Kingdom and receiving reports in
relation to the likely impact on the Group
and the need for entities within the
Group to apply for licences;
• Consider the overall effectiveness
of the compliance strategy and the
regulatory risks to the Group’s operations
and revenues;
• Receive and consider reports on
discussions with, and the results of audits
by regulators;
• Monitoring compliance with regulatory
licences held in all jurisdictions and
adapting procedures, products and
technology as appropriate;
• Review reports by PwC as external
advisers on risk management;
consideration of the risks identified
from the Group’s risk register and of the
effectiveness of actions taken to mitigate
such risks; and
• Consideration of the key risks associated
with the Financials division.
The Committee has been kept informed
of any changes to the regulatory position
in any significant jurisdiction where the
Group, through its licensees, and Financials
division, may be exposed and updated
on progress in relation to agreed action
items on a regular basis. The Committee
can also convene meetings on a more
frequent basis or as when matters arise,
if it is determined that enhanced monitoring
of a specific risk is warranted.
Playtech plc Annual Report and Accounts 2016 65
Management
Committee
The senior management committee is the
key management committee for the Group.
The standing members of the Committee
are Mor Weizer (Chief Executive Officer),
Andrew Smith (Chief Financial Officer),
Shimon Akad (Chief Operating Officer),
Uri Levy (VP Business Development), Ian
Ince (Head of Regulatory and Compliance),
Brian Moore (Company Secretary) and Alex
Latner (General Counsel). Other members
of senior management are invited to the
Committee as and when required. The
Committee considers and discusses plans
and recommendations coming from the
operational side of the business and from
the various product verticals, in the light the
Group’s strategy and capital expenditure
and investment budgets, including the
implications of those plans (in areas such as
resources, budget, legal and compliance).
The Committee either approves the plans
or as necessary refers the proposal for
formal Board review and approval in
accordance with the Company’s formal
matters reserved for the Board.
Board tenure
In accordance with the Company’s
articles of association, every new Director
appointed in the year is required to stand
for re-election by shareholders at the
Annual General Meeting (“AGM”) next
following their appointment. Also, under
the articles of association, at each AGM
one-third of the Directors (excluding any
Director who has been appointed by the
Board since the previous AGM) or, if their
number is not an integral multiple of three,
the number nearest to one-third but not
exceeding one-third shall retire from office
(but so that if there are fewer than three
Directors who are subject to retirement by
rotation under the articles one shall retire).
Notwithstanding the provisions of the
articles of association, the Board has
decided to comply with the Code
requirements that Directors of companies
in the FTSE 250 Index submit themselves
for re-election annually. Therefore, all
Directors are seeking their reappointment
at this year’s AGM.
The Board has collectively agreed that
the Directors proposed for re-election
at this year’s AGM have made significant
contributions to the business since their
last re-election and each has a key role
to play in the formulation of the Group’s
future strategy.
In certain circumstances, Directors are
entitled to seek independent professional
advice under an agreed Board procedure,
which would then be organised by the
Company Secretary, and in this regard the
Company would meet their reasonable
legal expenses.
Balance of the Board
The Board comprises individuals with
wide business experience gained in
various industry sectors related to the
Group’s current business and it is the
intention of the Board to ensure that
the balance of the Directors reflects
the changing needs of the business.
The Board considers that it is of a size
and has the balance of skills, knowledge,
experience and independence that
is appropriate for the Group’s current
business. While not having a specific
policy regarding the constitution and
balance of the Board, potential new
Directors are considered on their own
merits with regard to their skills, knowledge,
experience and credentials.
The Non-executive Directors continue
to contribute their considerable collective
experience and wide-ranging skills
to the Board and provide a valuable
independent perspective; where necessary
constructively challenging proposals,
policy and practices of executive
management. In addition, they help
formulate the Group’s strategy.
Evaluation
The Board is committed to an ongoing
evaluation process of itself and its
Committees to assess their performance and
identify areas in which their effectiveness,
policies and processes might be enhanced.
Alan Jackson, in discussion with the Senior
Non-executive Director, undertook a review
of the performance of individual Directors.
Andrew Thomas as Senior Non-executive
Director considered the performance of Mr
Jackson taking into account the views of the
Executive Directors. There were no material
areas of concern highlighted and the main
outcome of the evaluation this year was to
shape and define the Board’s objectives for
the coming year, continuing the focus on
Group strategy and ensuring the structures,
capabilities and reporting are in place to
achieve the Board’s goals.
A review of the Board’s effectiveness
was conducted in late 2016. This review
was carried out by Independent Audit
Limited, using their Thinking Board online
assessment service. Independent Audit
Limited have no other connection to the
Company and are considered by the Board
to be independent. The Board is in the
process of considering the findings from
this review and will continue to adopt and
implement plans to further develop the
effectiveness of the Board during 2017.
Newly appointed Directors can expect
a detailed and systematic induction on
joining the Board. They meet various
members of senior management and
familiarise themselves with all core
aspects of the Group’s operations. On
request, meetings can be arranged with
major shareholders. Members of senior
management are invited to attend Board
meetings from time to time to present on
specific areas of the Group’s business.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 66
Directors’ governance report continued
Relationship with
shareholders
Primary responsibility for effective
communication with shareholders lies
with the Chairman, but all the Company’s
Directors are available to meet with
shareholders throughout the year. Alan
Jackson, Mor Weizer and Ron Hoffman
met with a number of shareholders
to discuss the Company’s business
strategy throughout the year. The
Executive Directors prepare a general
presentation for analysts and institutional
shareholders following the interim and
full-year announcements. Details of
these presentations together with the
Group’s financial statements and other
announcements can be found on the
investor relations section of the Company’s
website. Further presentations are also
prepared following significant acquisitions
and whenever the Board considers it
beneficial to shareholders to do so. Regular
meetings with shareholders and potential
shareholders are also held by the Head of
Investor Relations, and in conjunction with
either the Chief Executive Officer or the
Chief Financial Officer.
The Company endeavours to answer all
queries raised by shareholders promptly.
The Company’s largest shareholder is
Brickington Trading Limited (“Brickington”).
Brickington is a wholly owned subsidiary
of a trust, the ultimate beneficiary of
which is Teddy Sagi, one of the Group’s
founders. In connection with the Company’s
premium listing on the main market of the
London Stock Exchange, the Company
and Brickington entered into a relationship
agreement, pursuant to which Brickington
has agreed that: (i) it will vote its shares
in such a manner so as to procure that
each member of the Group is capable of
carrying on its business independently of
Brickington and its associates; and (ii) it
will not exercise any of the voting rights
attaching to its shares in such a manner
so as to procure any amendment to the
articles of association which would be
inconsistent with, undermine or breach
any of the provisions of the relationship
agreement. Brickington also agreed that all
transactions and relationships between it
(or any of its associates) and the Company
will be on arm’s length terms and on a
normal commercial basis.
On 2 December 2016, the Company
and Brickington entered into a variation
to the relationship agreement (the
“Relationship Agreement”), whereby
the rights afforded to Playtech in the
Relationship Agreement will remain in
place for so long as Brickington’s holding
(together with its associates) remains at
at least 15% of the issued share capital.
As Brickington’s shareholding is now
below 30% of the issued share capital,
it would no longer have the power to
nominate two Non-executive Directors
of the Company.
The Board believes that the provisions
of the Relationship Agreement provides
reassurance that Brickington will not seek
to exercise its shareholding capriciously
and re-enforces the independence
of the Company.
The Board confirms that, during 2016:
• The Company has complied with the
independence provisions included
in the Relationship Agreement;
• So far as the Company is aware, the
independence provisions included in
the Relationship Agreement have been
complied with by Brickington and its
associates; and
• So far as the Company is aware, the
procurement obligations included in
the Relationship Agreement, have been
complied with by Brickington and its
associates.
Separately, Mr Sagi entered into an
agreement with the Company in 2012
pursuant to which he will, as and when
requested to do so by the Board, provide
advisory services to the Company for a
nominal fee of €1 per annum until either
Mr Sagi ceases to be interested (whether
legally or beneficially) in any ordinary
shares or either party terminates the
agreement following its fifth anniversary,
whichever is the earlier. During the year,
the Company has sought advisory services
on occasion in relation to certain significant
strategic matters.
Shareholders are encouraged to participate
in the Company’s AGM, at which the
Chairman will present the key highlights of
the Group’s performance. The Board will be
available at the AGM to answer questions
from shareholders.
Investor relations and
communications
The Company has well-established Investor
Relations (IR) processes, which support a
structured programme of communications
with existing and potential investors and
analysts. Executive Directors and members
of the IR team participated in a number
of investor events, attending industry
conferences and regularly meet or are
in contact with existing and potential
institutional investors from around the
world, ensuring that Group performance
and strategy is effectively communicated,
within regulatory constraints. Other
representatives of the Board and senior
management meet with investors from time
to time. The Head of IR provides regular
reports to the Board on related matters,
issues of concern to investors, and analysts’
views and opinions.
Whenever required, the Executive
Directors and the Chairman communicate
with our joint brokers Canaccord Genuity
and Goodbody to confirm shareholder
sentiment and to consult on governance
issues.
During 2016, 36 regulatory announcements
were released informing the market of
acquisitions, corporate actions, important
customer contracts, financial results,
the results of Annual General Meetings
and Board changes. Copies of these
announcements, together with other IR
information and documents, are available
on the Group website www.playtech.com.
Summary
In presenting this report, and having
monitored, reviewed or approved all
shareholder communications in 2016 and
since the end of the financial year, the
Board is confident that it has presented a
balanced and understandable assessment
of the Company’s position and prospects.
Alan Jackson
Chairman
22 February 2017
Playtech plc Annual Report and Accounts 2016
Audit Committee report
Composition
The Audit Committee comprises four
independent Non-executive Directors
and is chaired by Andrew Thomas, who
is a qualified Chartered Accountant and
member of the Institute of Taxation.
Therefore Andrew has recent relevant
financial experience, in compliance with the
Code provision C3.1, and was appointed
to chair the Committee on his appointment
to the Board in June 2012. The other
members of the Audit Committee are Paul
Hewitt, John Jackson and Claire Milne, all
Non-executive Directors. The Committee
is authorised to obtain independent advice
if considered necessary.
The Chief Financial Officer attended
all meetings of the Audit Committee
by invitation, and the Vice President of
Finance was invited to attend the meetings
of the Committee that considered the
audited accounts and the interim financial
statements, as was the external auditor,
BDO LLP (“BDO”). The members of the
Committee were also able to meet the
auditors without any Executive Directors
being present in order to receive feedback
from them on matters such as the quality
of interaction with management. The
Chairman of the Committee also met with
BDO separately on several occasions to
discuss matters involving the audit process.
During the year, the Chairman of the
Audit Committee met, individually and in
private, with members of the management
team in order to understand more fully
the context and challenges of Playtech’s
business operations and thereby ensure
the Committee’s time was used most
effectively. The activities of the Committee
members during the last year have enabled
it to gain a good understanding of the
culture of the organisation, the risks and
challenges faced and the adequacy and
timeliness of the action being taken to
address them.
67
Responsibilities
The Audit Committee’s primary function
is to assist the Board in fulfilling its financial
oversight responsibilities. The Board
is required by the Code to establish
formal and transparent arrangements for
considering how it should apply required
financial reporting standards and internal
control principles and also for maintaining
appropriate relationships with the
Company’s external auditors, BDO.
The Committee’s terms of reference
can be viewed on the Company’s website
www.playtech.com.
In particular, the Code calls for the
description of the work of the Audit
Committee to include the significant
issues considered in relation to the
financial statements and how they were
addressed, how the Committee assessed
the effectiveness of the external audit
process, the approach of the Committee to
appointing the auditors and how objectivity
and independence are safeguarded
relative to non-audit services.
The primary responsibilities delegated
to, and discharged by, the Committee
included:
• Monitoring and challenging the
effectiveness of internal control and
associated functions;
• Approving and amending Group
accounting policies;
• Reviewing and ensuring the integrity of
interim and annual financial statements,
in particular the actions and judgements
of management in relation thereto before
submission to the Board;
• Monitoring the implementation of the
Company’s Code of Business Ethics
(“Code of Ethics”) and compliance with
their provisions;
• Reviewing the Company’s arrangements
for its employees to raise concerns,
anonymously or in confidence and
without fear of retaliation, about possible
wrongdoing in financial reporting or other
matters arising under the Code of Ethics;
• Reviewing promptly all reports on the
Company from the internal auditors and
reviewing and assessing the annual
internal audit plan;
• Monitoring the external auditor’s
independence and objectivity, including
the effectiveness of the audit services;
• Monitoring and approving the scope and
costs of audit; and
• Ensuring audit independence and pre-
approving any significant non-audit
services to be provided by the auditor.
Audit Committee’s
activities
In 2016, the Audit Committee met formally
four times.
Matters that were considered by the
Committee during the year included:
• Valuation of available-for-sale
investments held by the Group;
• Management of the Group’s cash
balances (in particular the effectiveness
of the Group’s treasury management and
hedging practices) and stability of the
Group’s banking relationships;
• Adoption of an updated risk register
for the Group;
• Effectiveness of the Group’s system of
internal controls and risk management;
• Entry into related party transactions and
structured agreements;
• Updates on people risk, and
cybersecurity risks;
• Review of internal audit plan;
• Results of internal audit reviews,
management action plans to resolve any
issues arising and the tracking of their
resolution; and
• Review of Committee terms of reference.
Its work also included reviewing the final
and interim financial statements and matters
raised by management and BDO. After
discussions with both management and the
external auditor, including the consideration
of acquisition accounting relating to
Markets Limited, the Committee determined
that the key risks of misstatement of the
Group’s financial statements, related to the
following areas (which are described in the
relevant accounting policies and detailed
in the Notes to the financial statements on
pages 109 to 153.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
68
Audit Committee report continued
Revenue recognition
The Audit Committee reviewed the
judgements made in respect of revenue
recognition, in particular to assess the
recognition of revenue from arrangements
with customers and partners where
the Group is to be remunerated other
than by way of a simple revenue share
arrangement, and undertook a review of
key contracts. Following this review, the
Committee concluded that the timing of
revenue recognition continues to be in line
with IFRS requirements. BDO performed
detailed audit procedures on revenue
recognition and reported their findings
to the Committee, which was satisfied
as a result of the review process that
the approach taken by the Group in the
financial statements was appropriate.
Business combinations
The Audit Committee reviewed the
judgements made in connection with
the accounting treatment for business
combinations during the year, together
with the assessment of related liabilities in
connection with deferred and contingent
consideration. The Committee reviewed
the purchase price allocations (prepared
by professional advisers), together with the
underlying judgements and forecasts used
to determine the fair value of intangible
assets, put and call options, and contingent
consideration, and satisfied itself that the
approach to the accounting treatment
taken by the Group was appropriate and
in accordance with IFRS requirements
and accounting practice. In particular, the
Committee reviewed and considered
Board papers prepared to support the
assessment of the fair value of contingent
consideration at 31 December 2016 in
respect of the 2015 acquisition of Markets
Limited, based on the most up to date
information available and computation
of the potential liability under the terms
of the share price agreement.
the Head of Regulatory and Compliance.
Following this review, the Committee
were satisfied that adequate provisions
and disclosures were being made for
any potential contingent liabilities.
The Audit Committee reviewed and
approved the overall tax management
and strategy of the Group during the year
in light of external and internal advice
sought by management and reviewed
how the Group considers tax as part of its
overall business planning. Consideration
was given to transfer pricing studies
carried out on behalf of the Group in the
period, and assessed, in respect of earlier
studies, whether there had been any
change in the basis of operations in the
relevant territories. Furthermore, given
that the tax rules and practices governing
the e-commerce environment in which
the Group operates continue to evolve,
based on the aforementioned external
and internal advice received, the Audit
Committee considered developments
and pending changes in domestic and
international tax laws and was satisfied
that adequate tax provisions and
disclosures were being made for
any potential liabilities.
Related party
transactions
The Audit Committee examined the
practices and procedures adopted by
the Group to ensure that related party
transactions are conducted on arm’s
length terms. The Committee considered
the processes followed in relation to such
transactions that were entered into during
2016 and concluded that the process had
worked effectively and that the related
party transactions with entities that are
related by virtue of a common significant
shareholder had been properly conducted
on an arm’s length basis and appropriately
disclosed in the financial statements.
BDO undertook a review of this area
as part of its audit work.
Goodwill and
intangible assets
During the year, the Audit Committee
also considered the judgements made
in relation to the valuation methodology
adopted by management to support
the carrying value of goodwill and other
intangible assets to determine whether
there was a risk of material misstatement
in the carrying value of these assets
and whether an impairment should be
recognised. The Committee considered the
assumptions, estimates and judgements
made by management to support the
models that underpin the valuation of
intangible assets in the balance sheet.
Business plans and cash-flow forecasts
prepared by management supporting
the future performance expectations
used in the calculation were reviewed.
The Committee received a report on
the outcome of the impairment review
performed by management. The
impairment review was also an area of
focus for the external auditor, who reported
their findings to the Committee. The
Committee satisfied itself that no material
impairments were required to the carrying
value of goodwill or other intangible assets.
Legal, regulatory
and taxation
Given the developing nature of the
gambling sector in many countries across
the world, there is a risk that potential
material legal or regulatory matters are not
disclosed or provided for in the financial
statements and therefore the Committee
considered with the Group’s compliance
and legal departments whether there were
any known instances of material breaches
in regulatory and licence compliance that
needed to be disclosed or other claims
that required provisions to be made in
the financial statements. In particular,
the Committee considered forthcoming
changes in the regulatory environment
in a number of jurisdictions in which the
Group’s licensees operate. The Committee
considered the control systems adopted
to identify potential regulatory issues and
the compliance control systems operating
in the Group. Discussions were held with
Playtech plc Annual Report and Accounts 2016 69
An Internal Audit Plan for 2017 was
developed by the Internal Audit Team
and agreed with the Audit Committee
at the November 2016 Audit Committee
meeting. Internal Audit will carry out audits
in accordance with this plan using a risk
based approach and continue to maintain
effective lines of communication with the
Audit Committee and key management.
The Internal Audit Team will also be utilised
to provide assurance over corporate
governance matters and for ad hoc
projects, where necessary.
The Board confirms that any necessary
action will be taken to remedy any
significant failings or weaknesses identified
from any Internal Audit reviews. The system
of internal controls and audit is designed
to ensure local legal and regulatory
compliance and manage, rather than
eliminate, the risk of failure to achieve
business objectives. It can therefore only
provide reasonable and not absolute
assurance against material misstatement
or loss.
Auditor’s independence
The Audit Committee, on behalf of the
Board, undertakes a formal assessment
of the auditor’s independence each year,
which includes:
• A review of non-audit related services
provided by BDO and related fees;
• A discussion with the auditor of a written
report detailing all relationships with the
Group and any other parties which could
affect independence or the perception of
independence;
• A review of the auditor’s own procedures
for ensuring independence of the audit
firm and partners and staff involved in the
audit, including the periodic rotation of
the audit partner;
• Obtaining written confirmation from the
auditors that they are independent; and
• A review of fees paid to the auditors in
respect of audit and non-audit services.
BDO’s audit in respect of the year ended
31 December 2015 was subject to review by
the FRC’s Audit Quality Review team during
the year as part of its routine program of
audit firm quality inspection program. In line
with its policy, the Committee was provided
with a copy of the review findings. The
Committee discussed the findings of the
review with the audit engagement partner
and consider that the points raised have
been addressed as part of the audit of
31 December 2016 year end.
During the year the auditors undertook
certain specific pieces of non-audit
work (including work in relation to tax
matters and the evaluation of potential
acquisition targets). BDO were selected
to undertake these tasks due to their
familiarity with the gambling industry. In
order to maintain BDO’s independence
and objectivity, BDO undertook its standard
independence procedures in relation to
those engagements. Further details of
the non-audit fees are included in Note
6 to the financial statements on page 122.
The Audit Committee will continue
to assess the effectiveness and
independence of the external auditors.
In doing so, the Audit Committee will
consider a formal tender process in
accordance with the provisions of the
Code. The Audit Committee will continue
to comply with the Competition Commission
Order relating to the statutory audit
market for FTSE 350 companies, which
came into effect from 1 October 2014. The
Audit Committee expects a formal tender
process to be held no later than 2018.
Andrew Thomas
Chairman of Audit Committee
22 February 2017
Financial statements
The Group’s financial statements are
reviewed by the Audit Committee in
advance of their consideration by the
Board. The Committee confirms that it
is satisfied that the auditor has fulfilled
its responsibilities with diligence and
professionalism.
Having undertaken the processes
described above, the Committee is satisfied
that the financial statements appropriately
address the critical judgements and key
estimates (both in respect to the amounts
reported and the disclosures).
On the basis of the above, the Committee
consider that the Annual Report and
Accounts, taken as a whole, is fair,
balanced, understandable and provide the
information necessary for shareholders to
assess the Group’s performance, business
model and strategy.
Internal control
At the beginning of 2016, we appointed
two experienced Internal Auditors to report
directly to the Head of Internal Audit. This
was in recognition of the increasing levels
of complexity in relation to internal controls
and a desired commitment to have a
dedicated in-house function. The historical
Internal Audit relationship between
PricewaterhouseCoopers LLP (PwC) and
Playtech is therefore now a co-sourced
arrangement, with PwC continuing to
provide support to the Internal Audit Team
given their experience of the Group and
the specialist services they offer.
During the year, the Internal Audit Team
performed a number of reviews over both
individual entities and central functions
such as Finance, IT and HR. The results
of these audits were reported to the
Audit Committee on a regular basis, with
recommendations made by Internal Audit
and corresponding management actions
being reviewed and challenged, where
appropriate. In addition to regular feedback
of audit results, the Internal Audit Team
monitor completion of management actions
and provide updates of these to the Audit
Committee on a quarterly basis.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 70
Remuneration report – annual statement
Dear Shareholder
On behalf of the Board, I welcome
the opportunity to present the
Remuneration Committee’s report
on Directors’ remuneration for the year
to 31 December 2016. This report, as
required by the Code, describes how
the Board has applied the principles
of the Code to Directors’ remuneration.
Although Playtech is an Isle of Man
incorporated entity and, as such, is
not required to comply with the UK
regulations on Directors’ remuneration, we
recognise the importance of shareholder
transparency. Accordingly, we can
confirm that the Company adheres to the
UK regulations and the report below is
divided into: (i) this Annual Statement; (ii)
the Remuneration Policy Report containing
the Group’s Remuneration Policy, as
approved by shareholders at the 2014 AGM
(the Policy) and (iii) the Annual Report on
Remuneration (or ARR) that reports on the
implementation of the Company’s stated
Remuneration Policy for the year to
31 December 2016.
During 2016, the Committee reviewed the
Policy, taking close account of the business
strategy, current and emerging market
practice and the best practice expectations
of institutional investors, to ensure it
remained fit for purpose. In particular, the
Committee wishes to ensure that the Policy
will ensure that executive remuneration:
• Is aligned to the delivery of the Group’s
business strategy;
• Is appropriate in terms of quantum
taking into account the experience
of the executives and market data for
organisations of a similar size
and complexity;
• Is sufficiently flexible to cope with
changes to the Group over the life
of the policy; and
• Will strengthen the alignment between
executives and shareholders;
and therefore will be in the best interests
of shareholders to ensure future growth
of the Group.
At the time of publishing this report, the
Committee was in consultation with major
shareholders on the proposed changes
to the Policy and therefore the new policy
which will be put to a vote in May 2017 will
be published separately. In line with the UK
regulations, the existing Policy will be put to
a binding vote at the forthcoming AGM and
the revised policy will be put to a binding
vote at the General Meeting to be held
immediately following the AGM.
The ARR and this Statement will be
the subject of an advisory shareholder
resolution at the forthcoming AGM.
Philosophy
Our Remuneration Policy, which is set out
in more detail in this report, is designed
to reward the contributions of senior
management as well as incentivise them to
maintain and enhance Playtech’s position
as the software and services provider of
choice to the gambling sector and deliver
in line with Playtech’s M&A strategy.
Remuneration is delivered via fixed
remuneration and simple and transparent
incentive-based plans enabling the
Executive Directors to be rewarded for
delivering strong financial performance and
sustainable returns to shareholders. In fast
moving sectors such as ours we need to
apply the policy flexibly in order to deliver
the right level of overall pay to Directors.
Performance outcome
for 2016
2016 was an extremely busy year for
Playtech with outstanding operational
and financial performance. Progress has
been driven through strong organic
growth and successful acquisitions
and strategic agreements.
This excellent performance resulted in
achieving impressive results across our key
financial performance measures including
growth in revenue of 12%, Adjusted EBITDA
20%, Adjusted Net Profit remained flat and
Adjusted diluted EPS decreased by 3%
due to the placing in June 2015. The 2016
results significantly exceeded both internal
forecasts and external market expectations
against a backdrop of an ever evolving
regulatory and tax landscape.
Playtech plc Annual Report and Accounts 2016
71
Implementation of
Remuneration Policy
for 2017
The Company will be proposing changes
to the Remuneration Policy at a General
Meeting immediately following the
forthcoming AGM in May 2017 from that
presented and approved at the AGM held
in May 2014. Full details of the proposed
changes will be set out in the notice to
that General Meeting. The Remuneration
Committee believes the proposed changes
will reinforce the Company’s strategy to
create a business with significant scale
and a full product and service capability,
underpinned by a pre-eminent technology
platform. We believe that an appropriate
Remuneration Policy and incentive
framework can support the Company’s
strategy in the current economic
environment and help to retain and
motivate our management team in
order to assist in driving strong returns
for our shareholders.
The Remuneration Committee encourages
dialogue with the Company’s shareholders
and will discuss any proposed changes to
our policy with major institutional investors
ahead of the 2017 AGM. The Committee
and I hope we can count on your continued
support at the 2017 AGM and at the
General Meeting to be held immediately
after this.
John Jackson
On behalf of the Remuneration Committee
22 February 2017
Given the strong financial and operational
results, the Remuneration Committee
considered that the Executive Directors
had exceeded both the challenging
financial targets and the other strategic
objectives given to them at the start of
2016, including successful negotiations
with new and existing customers,
expanding the business in regulated
and soon-to-be regulated markets,
strengthening the Group’s regulatory
functions in light of increased regulation in
the UK and elsewhere and the continuing
integration of Markets Limited and our new
acquisitions during the year including BGT,
Quickspin, ECM and CFH. Accordingly,
in recognition of this strong performance,
the Committee has, consistent with our
Remuneration Policy, awarded a bonus of
200% of actual salary earned during the
year to the CEO and 150% of actual salary
earned during the year to the former CFO.
Ron Hoffman served as CFO throughout
2016 until he stepped down in January
2017. The Committee is very comfortable
that this level of bonus reflects the delivery
of superior financial performance together
with the strong personal performance of
the Executive Directors during 2016.
Further details of the bonuses are set
out in the ARR.
As outlined in our Annual Report for 2015,
the Remuneration Committee considered
the position of grants to Executive Directors
pursuant to the Group’s Long Term
Incentive Plan 2012 and made grants to
them in December 2016. Further details
of the grants are set out in the ARR. No
LTIP awards vested by reference to
performance in 2016 as the first awards
under the LTIP were only granted in 2015.
The Committee is satisfied that the
total remuneration of the Executive
Directors is reasonable in the context of
performance delivered and is below the
total remuneration delivered in comparable
businesses in the Gaming sector.
Ron Hoffman stepped down as an
Executive Director and Chief Financial
Officer on 10 January 2017 and was
replaced in both roles by Andrew
Smith with effect from the same date.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
The Committee believes that its
Remuneration Policy creates a coherent
and appropriate framework for remunerating
Executive Directors and other senior
executives of the Company and draws
a clearer link between performance and
reward. The details of this policy are clearly
set out in the following pages.
The Committee considers that the targets
set for the different components of
performance related remuneration are both
appropriate and sufficiently demanding in
the context of the business environment
and the challenges with which the Group
is faced as well as complying with the
provisions of the Code.
72
Remuneration Policy report
Remuneration packages are designed
to reward the Executive Directors and
members of the senior management team
fairly for their contributions, whilst remaining
within the range of benefits offered by
similar companies in the sector.
The Committee believes that the individual
contributions made by Executive Directors
and senior management are fundamental
to the successful performance of the
Company. The Committee after discussion
with the Executive Directors and its
advisers, New Bridge Street, has therefore
adopted a remuneration policy with the
following objectives:
• Seek to pay executives competitively,
recognising that they have highly
marketable skills to companies already
in (and those considering entry to)
the online gambling industry, but
acknowledge local market levels, and
where appropriate, practices;
• Incentivise and reward behaviours that
will contribute to superior Company
performance;
• Avoid the need to make ad-hoc
payments outside the formal structure;
• Enable the Company to attract and
retain international executives at the
required calibre, particularly in potential
new markets;
• Be simple and understandable;
• Provide good lock-in of key employees
through deferred elements; and
• Avoid reward for failure.
The Remuneration Policy was approved
by shareholders at the 2014 AGM, with
the expectation it would be applied for
a period of three years from that date.
The Remuneration Policy is re-presented
here for completeness and transparency.
Some minor amendments have been made
to (i) references to particular years, (ii) page
and Note references, and (iii) the removal
of the Total Remuneration Opportunity
charts which were in relation to 2014 pay
levels. The full original report can be
viewed at http://playtech-ir.production.
investis.com/~/media/Files/P/Playtech-IR/
results-reports-webcasts/2016/2015-report-
and-accounts.pdf.
As outlined in the Annual Statement, at
the time of publication of this report the
Committee was still in consultation with
shareholders on a proposed revised policy.
Therefore, in line with UK regulations,
shareholders will be asked to formally
reapprove the existing policy as set out
below, before being asked to approve
the revised policy at a General Meeting
immediately following the 2017 AGM.
Once the terms of the new policy have
been confirmed, full details of it will be set
out in the notice of the General Meeting.
The Remuneration Committee reviews
the Company’s remuneration philosophy
and structure each year to ensure that the
remuneration framework remains effective
in supporting the Company’s strategic
objectives, is in line with best practice and
fairly rewards individuals for the contribution
that they make to the business, having
regard to the international nature, size and
complexity of the Group’s operations and
the need to attract and motivate employees
of the highest calibre.
Playtech plc Annual Report and Accounts 2016
73
Remuneration Policy for Executive Directors
The following table gives an overview of the Remuneration Policy for the Executive Directors:
Element and
maximum
Purpose and link
to strategy
Operation
Maximum
Performance targets
Salary
Bonus
To attract, retain and
motivate high calibre
individuals for the role
and duties required.
To provide market
competitive salary relative
to the external market.
To reflect appropriate
skills, development and
experience over time.
Normally reviewed annually
by the Committee, effective
in June.
Takes account of the
external market and other
relevant factors including
internal relativities and
individual performance.
Paid in cash.
Clear and direct
incentive linked to annual
performance targets.
Incentivise annual delivery
of financial measures and
personal performance.
Corporate measures
selected consistent with
and complement the
budget and strategic plan.
N/A
Based on a mixture of
financial performance
(including Adjusted
EBITDA) and performance
against strategic objectives.
No less than 70% of the
bonus will be dependent
on financial performance.
Bonus is paid on a sliding
scale of 0% for threshold
increasing to 100% for
maximum performance.
Other than when an
executive changes roles
or where benchmarking
indicates individual salaries
require realignment,
annual increases will
not exceed the general
level of increases for the
Group’s employees, taking
into account the country
where the executive
ordinarily works.
Where benchmarking
indicates that any
individual salaries require
realignment, these
may be spread over
a period of time if the
required adjustment is
particularly large.
Normally 150% of salary for
the CEO (but 200% in very
exceptional circumstances
as described below) and
100% of salary for other
Executive Directors (but
150% in very exceptional
circumstances). The
additional limit will only be
used in truly exceptional
circumstances where
performance significantly
exceeds the targets
already set for bonus and
reflects the unique and
challenging environment
in which the Company
operates.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 74
Remuneration policy report continued
Element and
maximum
Purpose and link
to strategy
Long Term
Incentive Plan
(LTIP)
Aligned to key strategic
objective of delivering
strong returns to
shareholders and
earnings performance.
Operation
Maximum
Performance targets
Grant of performance
shares, restricted shares
or options.
150% and 100% of salary in
performance shares for the
CEO and CFO respectively.
Performance measured
over three years.
Awards may be subject
to clawback in certain
circumstances.
Performance targets
aligned with the Group’s
strategy of delivering
strong returns to
shareholders and
earnings performance.
25% of the awards vest
for threshold performance.
N/A
N/A
Pension
Provide retirement benefits. Provision of cash
5% of salary.
N/A
Other benefits
To help attract and retain
high calibre individuals.
Share ownership
guidelines
The Company has a policy
of encouraging Directors
to build a shareholding
in the Company.
Non-executive
Directors
To provide a competitive
fee for the performance
of NED duties, sufficient
to attract high calibre
individuals to the role.
allowance.
Provision of private
medical, permanent
health insurance, life
insurance and rental
and accommodation
expenses on relocation.
Non pensionable.
Executive Directors are
required to retain 50%
of the net of tax out-turn
from the vesting of awards
under the LTIP until a
shareholding with
a minimum value has
been achieved.
Fees are set in conjunction
with the duties undertaken.
N/A
N/A
N/A
Other than when an
individual changes roles
or where benchmarking
indicates fees require
realignment, annual
increases will not exceed
the general level of
increases for the
Group’s employees.
Playtech plc Annual Report and Accounts 2016
75
Explanation of chosen
performance measures
and target setting
Performance measures have been
selected to reflect the key performance
indicators which are critical to the
realisation of our business strategy
and delivery of shareholder returns.
The performance targets are reviewed
each year to ensure that they are
sufficiently challenging. When setting
these targets the Committee will take into
account a number of different reference
points including, for financial targets, the
Company’s business plan and consensus
analyst forecasts of the Company’s
performance. Full vesting will only occur
for what the Remuneration Committee
considers to be stretching performance.
Policy on recruitment or
promotion of Executive
Directors
Base salary levels will be set to reflect the
experience of the individual, appropriate
market data and internal relativities. The
Remuneration Committee may feel it is
appropriate to appoint a new Director
on a below market salary with a view to
making above market and workforce
annual increases over a number of years to
reach the desired salary positioning subject
to individual and Company performance.
Normal policy will be for the new Director
to participate in the remuneration structure
detailed above, including the maximum
incentive levels of 350% and 250% of
salary for the Chief Executive Officer and
Chief Financial Officer respectively. The
Committee may decide that different
performance criteria will apply to awards
made in the year of appointment from those
stated in the policy above. The Committee
may also provide relocation expenses/
arrangements, legal fees and costs.
The variable pay elements that may be
offered will be subject to the maximum
limits stated in the policy table. The
Remuneration Committee may consider
it necessary and in the best interests of
the Company and its shareholders to
offer additional cash and/or make a grant
of shares (including use of awards made
under section 9.4.2 of the Listing Rules)
in order to compensate the individual for
remuneration that would be forfeited from
the current employer. Where possible such
awards would be structured to mirror the
value, form and structure of the forfeited
awards or to provide alignment with
existing shareholders.
In the case of an internal promotion, any
commitments entered into prior to the
promotion shall continue to apply. Any
variable pay elements shall be entitled
to pay out according to its original terms
on grant.
For the appointment of a new Chairman
or Non-executive Director, the fee
arrangement would be set in accordance
with the approved remuneration policy in
force at that time.
Service contracts
and exit payments
Executive Directors
The service agreements of the Executive
Directors are with PTVB Management
Limited, a wholly owned Isle of Man
incorporated subsidiary of the Company.
The service agreement of the outgoing
Chief Financial Officer, Ron Hoffman, was
entered into on 5 December 2012 and
effective from 1 January 2013 and the
service agreement of the Chief Executive
Officer was amended effective from
1 January 2013. Both service agreements
are for an indefinite term and provide for
formal notice of 12 months to be served
to terminate the agreement, either by the
Company or the Director. Mr Hoffman
stepped down as an Executive Director
and Chief Financial Officer in January
2017. Andrew Smith was appointed as
an Executive Director and Chief Financial
Officer on 10 January 2017. His service
agreement is for an indefinite term and
provides for formal notice of six months
to be served to terminate the agreement,
either by the Company or the Director. Set
out in the table below are the other key
terms of the Executive Directors’ terms
and conditions of employment.
Provision
Remuneration
Detail
Base salary and benefits.
Company car.
Private health insurance for Director and dependents.
Life assurance.
30 days’ paid annual leave in the case of the CFO and 30 days’ paid annual leave
in the case of the CEO.
Participation in annual bonus plan, subject to plan rules.
Participation in LTIP, subject to plan rules.
Contribution equal to 5% of salary to personal pension plan.
No special contractual provisions apply in the event of a change of control.
12 months’ notice on either side for the CEO and six months’ notice for the CFO.
The Company may make a payment in lieu of notice equal to basic salary plus
benefits for the period of notice served.
Change of control
Notice period
Termination payment
Restrictive covenants
During employment and for 12 months thereafter.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 76
Remuneration policy report continued
A bonus is not ordinarily payable unless
the individual is employed and not under
notice on the payment date. However, the
Remuneration Committee may exercise
its discretion to award a bonus payment
for the notice period served (not on
garden leave).
The LTIP rules provide that other than
in certain ‘good leaver’ circumstances
awards lapse on cessation of employment.
Where an individual is a ‘good leaver’ the
Committee’s policy is for the award to vest
on the normal vesting date (or cessation
of employment in the event of death)
following the application of performance
targets and a pro-rata reduction to take
account of the proportion of the vesting
period that has elapsed. The Committee
has discretion to partly or completely
dis-apply pro-rating or to permit awards
to vest on cessation of employment.
The Committee acknowledges that
Executive Directors leave for a variety
of reasons that do not necessarily fall
within the prescribed categories in the
plan rules. It therefore retains discretion
to deem an individual to be a ‘good leaver’
in accordance with the plan rules and in
making that decision will take into account
the performance of the individual in office
and their reason for leaving.
Non-executive Directors
The Non-executive Directors each have
specific letters of appointment, rather than
service contracts. Their remuneration is
determined by the Board within limits set
by the articles of association and is set
taking into account market data as obtained
from independent Non-executive Director
fee surveys and their responsibilities.
Non-executive Directors are appointed
for an initial term of three years and, under
normal circumstances would be expected
to serve for additional three-year terms,
up to a maximum of nine years, subject
to satisfactory performance and re-election
at the Annual General Meeting as required.
On his appointment as Chairman of the
Board being announced, Alan Jackson
entered into a new letter of appointment
(effective from 9 October 2013) when Roger
Withers announced his decision to retire as
Chairman of the Board in August 2013.
The table below is a summary of the key
terms of the letters of appointment for the
Non-executive Directors.
In accordance with provision B.3.2 of the
Code the letters of appointment of the
Non-executive Directors are available for
inspection at the Company’s registered
office and will be available before and after
the forthcoming AGM.
Consideration of
employment conditions
elsewhere
The Remuneration Committee when setting
the policy for Executive Directors takes into
consideration the pay and employment
conditions through the Company as a whole.
In determining salary increases for
Executive Directors, the Committee
considers the general level of salary
increase across the Company. Typically
salary increases will be aligned with those
received elsewhere in the Company unless
the Remuneration Committee considers
that specific circumstances require a
different level of salary increase for
Executive Directors.
The Company extends its annual
bonus plan and share awards to senior
management and other key members
of the workforce as the Remuneration
Committee feels that it is important to
incentivise and retain these employees
in order for the Company to continue
its development.
Consideration of
shareholder views
The Company is committed to engagement
with shareholders and will seek major
shareholders’ views in advance of
making significant changes to its
remuneration policies.
Name
Date
Term
Termination
Alan Jackson
29 August 2013
Andrew Thomas
19 June 2012
Paul Hewitt
27 August 2015
John Jackson
1 January 2016
Claire Milne
8 July 2016
Until third AGM after appointment
unless not re-elected.
Until third AGM after appointment
unless not re-elected.
Until third AGM after appointment
unless not re-elected.
Until third AGM after appointment
unless not re-elected.
Until third AGM after appointment
unless not re-elected.
120 days’ notice on either side
or if not re-elected, disqualification
or commits gross misconduct.
120 days’ notice on either side
or if not re-elected, disqualification
or commits gross misconduct.
90 days’ notice on either side
or if not re-elected, disqualification
or commits gross misconduct.
90 days’ notice on either side
or if not re-elected, disqualification
or commits gross misconduct.
90 days’ notice on either side
or if not re-elected, disqualification
or commits gross misconduct.
Playtech plc Annual Report and Accounts 2016 77
In relation to the annual bonus plan,
the Remuneration Committee retains
discretion over:
• The participants;
• The timing of a payment;
• The determination of the amount
of a bonus payment;
• Determination of the treatment
of leavers; and
• The annual review of performance
measures and weighting, and targets for
the annual bonus plan from year to year.
In relation to both the Company’s LTIP
and annual bonus plan, the Committee
retains the ability to adjust the targets and/
or set different measures if events occur
(e.g. material acquisition and/or divestment
of a Group business) which cause it to
determine that the conditions are no longer
appropriate and the amendment is required
so that the conditions achieve their original
purpose and are not materially less difficult
to satisfy. Given the unique, fast-changing
and challenging environment in which
the Group operates, the Remuneration
Committee considers that it needs some
discretion if, acting fairly and reasonably,
it feels that the pay-out is inconsistent with
the Company’s overall performance taking
account of any factors it considers relevant.
Any use of the above discretions would,
where relevant, be explained in the Annual
Report on Remuneration and may, as
appropriate, be the subject of consultation
with the Company’s major shareholders.
Legacy arrangements
For the avoidance of doubt, in approving
the Remuneration Policy, authority is
given to the Company to honour any
commitments previously entered into with
current or former Directors that have been
disclosed previously to shareholders.
The policy described above includes
some flexibility to allow the Remuneration
Committee discretion to increase the
maximum bonus payment to an Executive
Director; it was considered that given the
unique, fast-changing and challenging
environment in which the Group operates,
the Committee needed some discretion if,
acting fairly and reasonably it feels that the
pay-out is inconsistent with the Company’s
overall performance taking account of any
factors it considers relevant.
Discretion vested in
the Remuneration
Committee
The Remuneration Committee will operate
the annual bonus and LTIP according
to their respective rules (or relevant
documents) and in accordance with
the Listing Rules where relevant. The
Committee retains discretion, consistent
with market practice, in a number of
regards to the operation and administration
of these plans. These include, but are
not limited to, the following in relation
to the LTIP:
• The participants;
• The timing of grant of an award;
• The size of an award;
• The determination of vesting;
• Discretion required when dealing with
a change of control or restructuring
of the Group;
• Determination of the treatment of leavers
based on the rules of the plan and the
appropriate treatment chosen;
• Adjustments required in certain
circumstances (e.g. rights issues,
corporate restructuring events and
special dividends); and
• The annual review of performance
measures and weighting, and targets
for the LTIP from year to year.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
78
Annual report on remuneration
The sections of this report subject to audit have been highlighted.
Directors’ emoluments (in €) (Audited)
Executive Director
Salary1
Bonus2
Long-term incentives
Benefits3
Pension
Total emoluments
2016
703,801
1,359,371
208,952
26,077
48,130
Mor Weizer
2015
761,425
1,306,113
313,176
29,663
39,043
2016
493,443
711,470
87,707
28,200
30,624
Ron Hoffman
2015
480,656
636,094
130,488
30,099
24,033
2,346,331
2,449,420
1,340,978
1,301,370
1 Basic salary of the Executive Directors is determined in Pounds Sterling and then converted into euros at the average exchange rate applicable during the relevant
financial year for the purpose of this report. As noted on page 80, the salary for Mor Weizer was increased from £550,000 to £600,000 with effect from 1 June 2016
and the salary for Ron Hoffman was increased from £375,000 to £425,000 with effect from 1 June 2016.
2 The figure for bonuses in 2016 above represents a payment as determined by the Remuneration Committee for the Executive Directors given the excellent performance
during the period and by reference to their actual salary earned during the year to 31 December 2016. The bonuses were determined in Pounds Sterling and then
converted into euros at the exchange applicable as at 31 December 2016. Details of (a) how the annual performance bonus for the Executive Directors was determined;
and (b) the timing of bonus payments, is set out below.
3 Benefits include private medical insurance, permanent health insurance, car and life assurance.
Non-executive Directors’ emoluments (in €) (Audited)
Director
Alan Jackson3
Andrew Thomas
Paul Hewitt
John Jackson1
Claire Milne2
2016
468,461
121,995
121,995
121,995
55,904
Fees
2015
531,251
138,347
47,620
N/A
N/A
Annual bonus
2015
2016
–
–
–
–
–
–
–
–
N/A
N/A
2016
10,528
–
–
–
–
Benefits
2015
Pension
2015
Total emoluments
2015
2016
2016
–
–
–
N/A
N/A
–
–
–
–
–
– 478,989
–
121,995
–
121,995
N/A
121,995
N/A
55,904
531,251
138,347
47,620
N/A
N/A
1 John Jackson was appointed as a Non-executive Director on 1 January 2016.
2 Claire Milne was appointed as a Non-executive Director on 8 July 2016.
3 Alan Jackson was provided with a company car during the year
Determination of 2016 bonus
In accordance with the Company’s Remuneration Policy, the CEO and CFO had the opportunity to earn a normal bonus in respect
of 2016 of 150% and 100% of salary respectively and a further 50% of salary each in exceptional circumstances. The 2016 performance
was assessed against a mixture of financial and non-financial targets.
The financial targets (representing 70% of bonus opportunity) were based on the achievement of Adjusted EBITDA of €287 million payable
on a scale of 90%-105% around this target, with 0% of bonus payable below 90% of target and 100% of bonus payable for on or over 105%
of target.
Adjusted EBITDA was selected as an appropriate measure as it is the key financial performance metric of the Company, most closely
representing the underlying trading performance of the business and is calculated after adding back certain non-cash charges, cash
expenses relating to professional costs on acquisitions, gains on sale of investments and certain one-off charges as set out in the financial
statements on page 121. The non-financial performance targets were selected to underpin key strategic objectives of the Group, in
particular recognising the challenges of expanding the business into regulated and soon-to-be regulated markets and strengthening
the Group’s regulatory functions in light of increased regulation in the UK and elsewhere.
Playtech plc Annual Report and Accounts 2016
79
When reviewing the performance during 2016 the Committee noted that the Adjusted EBITDA for the financial year ended 31 December
2016 was €302.2 million (consolidated) with €286.6 million for the Gaming division and the balance for the Financials division, representing
a 20% increase on the prior year. This was achieved at the same time as significant improvements in other key financial indicators including
growth in revenue 12%. Adjusted Net Profit remained flat and adjusted EPS decreased by 3% due to the placing in November 2016.
The operational highlights set out in the Strategic Report on page 5 demonstrate that a number of the key strategic objectives set for
executives have already been successfully implemented, particularly as regards securing business in regulated and soon-to-be regulated
markets. The Committee also took account of the exceptional work and effort undertaken as part of the continuing integration of Markets
Limited and the acquisitions of Quickspin, BGT and CFH.
The Committee considered that performance in 2016 was excellent as it far surpassed expectations and the targets set at the start of
the financial year and was achieved in the wake of Brexit and volatile currency markets. The Committee felt it was fair and reasonable
to recognise this exceptional Group and individual performance of the Executive Directors. The Committee therefore approved the use
of the facility within the approved policy whereby up to an additional 50% of salary can be payable to Executive Directors in exceptional
circumstances where performance significantly exceeds the targets set. On this basis the Committee approved additional bonuses of
50% of salary for the CEO and CFO.
Accordingly, the Committee determined that the bonus payable for 2016 was €1,359,371 for the CEO (200% of salary) and a bonus
of €711,470 for the CFO (150% of salary).
The bonus payments were awarded based on the actual salary earned in the calendar year 2016.
The Committee is satisfied that the annual bonus payments to Executive Directors are a fair reflection of corporate and individual
performance during the year and that overall remuneration is not excessive given the size and complexity of the Group’s business
and the industry in which it operates.
LTIP awards (Audited)
On 21 December 2016, the following awards were made to Executive Directors under the LTIP:
Mor Weizer
Ron Hoffman
Type of award
Nil-cost option
Nil-cost option
Total number
of awards
110,038
51,193
Aggregate
market value
(€)
1,019,5281
474,3151
% of award
vesting for
threshold
performance
Performance
period
25%
25%
1.1.16 – 31.12.18
1.1.16 – 31.12.18
1 Awards represent 150% and 100% of salary respectively based on a share price on grant of 789.5 pence.
When considering these awards, the Committee took into account the long delay in making the awards due to the Company being in an
almost constant close period during 2015 and 2016. Therefore, it was decided that the vesting period would commence from 1 March 2016.
In the normal course of events these awards will vest on the third anniversary of the start of the vesting period, 1 March 2019, subject to the
satisfaction of the performance conditions.
Awards granted in 2016 are subject to the achievement of a mixture of performance conditions: 70% of the award is subject to a
performance condition that the Company’s simple annual EPS growth must match a threshold determined by the Committee for 25% of this
portion of the award to vest, increasing to full vesting for achieving a maximum performance level. EPS will be measured over three financial
years commencing with the financial year in which the award is granted. The remaining 30% of the award is subject to a performance
condition comparing the Company’s total shareholder return (TSR) against the FTSE 250 (on a ranked basis). The TSR tranche shall vest
25% for median performance increasing straight line to full vesting for upper quartile performance.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
80
Annual report on remuneration continued
The EPS tranche shall vest over a number of shares determined as follows:
Company’s simple annual EPS growth
15% or more per annum
Between 6% and 15% per annum
6% per annum
Less than 6% per annum
% of EPS tranche that vests
100%
On a straight line basis between 25% and 100%
25%
0%
When setting the EPS performance range the Committee considered both internal financial targets and external market consensus. The
target range is considered to be challenging given the current view of the business and wider macroeconomic factors, but is achievable
without incentivising any undue risk behaviour.
Termination payments (Audited)
No termination payments to Directors were made in 2016.
Payments to past Directors (Audited)
There were no payments made to past Directors in 2016.
Implementation of Policy for 2017
Salary pay review
The Remuneration Committee takes into account individual performance and experience, the size and nature of the role, the relative
performance of the Company, pay policy within the Company (including the general pay and employment terms of all employees in
the Group) and salaries in comparable companies.
Mr Weizer’s salary was set at £600,000 with effect from 1 June 2016.
Mr Hoffman stepped down as an Executive Director and Chief Financial Officer on 10 January 2017.
Mr Smith was appointed as an Executive Director and Chief Financial Officer on 10 January 2017. His salary was set at £325,000
with effect from appointment.
The Committee considers that the salaries of both the Executive Directors remain below the mid-market position. In view of this, the
Committee intends to re-evaluate the salaries for both Executive Directors as part of the annual review in 2017, which is expected to
commence in June.
The current basic salary levels of the Executive Directors are:
• M. Weizer: £600,000 (equivalent to €731,970 at the average exchange rate between Sterling and Euro used in the accounts) which
was effective from 1 June 2016; and
• A. Smith £325,000 (equivalent to €396,484 at the average exchange rate between Sterling and Euro used in the accounts) which
was effective from 10 January 2017.
Fees currently payable to Non-executive Directors are:
• Chairman: £384,000 (equivalent to €468,461 at the average exchange rate between Sterling and Euro used in the accounts); and
• Non-executive Director base fee: £100,000 (equivalent to €121,995 at the average exchange rate between Sterling and Euro
used in the accounts).
The Non-executive Director fees recognise core responsibilities and additional duties as Chair of a Board Committee.
Benefits and pension
Benefit and pension provision will continue to be set in line with the approved policy.
Playtech plc Annual Report and Accounts 2016 81
Annual bonus
For 2017, bonuses for the Executive Directors will be based on the following:
Adjusted EBITDA
Non-financial and strategic objectives
Performance target
Weighting
Commercially confidential
Commercially confidential
70%
30%
When setting the Adjusted EBITDA target, the Committee was mindful of a number of factors and believes that the targets set are
very challenging.
The level of bonus payable by reference to the financial performance of the Company will be determined on a sliding scale based
on the Company’s budget for the forthcoming financial year.
The annual bonus will be subject to recovery and withholding provisions in relation to material misstatement, gross misconduct,
material error in calculation and for a serious reputational event. These provisions will apply for a period of three years after payment.
Long Term Incentive Plan (LTIP)
Awards made to Executive Directors will vest on the third anniversary of grant subject to (i) participants remaining in employment
(other than in certain ‘good leaver’ circumstances) and (ii) achievement of challenging performance targets.
Awards granted in 2017 will continue to be subject to a combination of EPS growth (70% of awards) and relative TSR (30% of awards).
Threshold performance will result in 25% of each element vesting.
As with the awards granted in 2016, the relative TSR measure will be measured against the FTSE 250 (on a ranked basis) over three
financial years and require at least median performance for 25% of this portion of the award to vest, increasing to full vesting for upper
quartile performance.
EPS will be measured over three financial years. At the time of preparing this report EPS targets for 2017 have not been determined
by the Remuneration Committee. The EPS targets will be stretching and demanding and will be set out in Stock Exchange announcements
when made.
LTIP awards granted from 2017 will be subject to recovery and withholding provisions in relation to material misstatement, gross misconduct,
material error in calculation and for a serious reputational event. These provisions will apply for a period of three years post vesting.
Awards may be satisfied by the issue of new shares, market purchase shares or may be cashed-out, subject to the tax treatment in the
hands of the recipient.
Dilution limits
All of the Company’s equity based incentive plans (other than the Option Plan which was established before the Company’s admission
to AIM in 2006) incorporate the current Investment Association Guidelines on headroom which provide that overall dilution under all plans
should not exceed 10% over a ten-year period in relation to the Company’s issued share capital (or reissue of treasury shares), with a further
limitation of 5% in any ten-year period for executive plans. The Committee monitors the position and prior to the making of any award
considers the effect of potential vesting of options or share awards to ensure that the Company remains within these limits. Any awards
which are required to be satisfied by market purchased shares are excluded from such calculations. No treasury shares were held or
utilised in the year ended 31 December 2016.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
82
Annual report on remuneration continued
Review of performance
The following graph shows the Company’s total shareholder return (TSR) performance over the past five years: the Company’s
TSR is compared with a broad equity market index. The index chosen here is the FTSE 250, which is considered the most
appropriate published index.
1,200
1,000
800
600
400
200
0
Jan-12
Playtech
FTSE 250
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
The Remuneration Committee believes that the current Remuneration Policy and the supporting reward structure provide a clear alignment
with the strategic objectives and performance of the Company. To maintain this relationship, the Remuneration Committee constantly reviews
the business priorities and the environment in which the Company operates. The table below shows the total remuneration of Mor Weizer
over the last five years and his achieved annual variable and long-term incentive pay awards as a percentage of the plan maxima.
Total remuneration (€’000)
Annual bonus (%)1
LTIP vesting (%)2
2011
808
34%
–
2012
800
150%
–
2013
1,381
150%
–
2014
1,740
200%
–
Year ending 31 December
2015
2,449
175%
–
2016
2,346
200%
–
1 For the financial year ended 31 December 2012, Mor Weizer decided in light of his overall aggregate remuneration, to waive approximately three-quarters of his earned
bonus for that year.
2 As awards previously granted were share options without performance conditions, under the Regulations they are not required to be shown in this table.
Playtech plc Annual Report and Accounts 2016 83
Percentage change in remuneration of Chief Executive Officer
In the financial year ended 31 December 2016, Mr Weizer’s salary was increased by 9% effective 1 June 2016 and was awarded an
exceptional bonus of 200% of salary compared with 175% of salary in the year ended 31 December 2015. On a value basis the increase
was 4% which reflects the 9% increase in salary and also in part reflected movements in exchange rates. The average percentage changes
for all UK-based full-time employees were a 3% decrease and a 35% decrease in salary and benefits respectively mainly due to significant
fluctuations in exchange rates in the period, and 2% increase in bonus payments. The UK workforce was chosen as a comparator group as
the Remuneration Committee looks to benchmark the remuneration of the Chief Executive Officer with reference mainly to the UK market
(albeit that he has a global role and responsibilities, and remuneration packages across the Group vary widely depending on local market
practices and conditions).
Relative importance of spend on pay
The following table sets out the amounts paid in share buybacks, dividends, and total remuneration paid to all employees as follows:
Pay-outs (€m)
Dividends1
Share buy backs
Total employee remuneration2
2016
€m
102.8
49.9
241.4
2015
€m
91.0
–
224.6
Change
%
13%
N/A
7%
1 The total dividend in respect of the year ended 31 December 2016 is calculated on the basis that the shareholders approve the proposed final dividends of 21.7 €cents
per share.
2 Total employee remuneration for continuing and discontinued operations, includes wages and salaries, social security costs, share-based payments and pension costs
for all employees, including the Directors. The average number of employees, including Executive Directors and part-time employees in continuing and discontinued
operations was 5,254 during the financial year to 31 December 2016.
Directors’ interests in ordinary shares (Audited)
Director
Executive Directors1, 2, 3
Mor Weizer
Ron Hoffman (resigned 10 January 2017)
Andrew Smith (appointed 10 January 2017)
Non-executive Directors
Alan Jackson
Andrew Thomas
Paul Hewitt
John Jackson
Claire Milne
Ordinary shares
2015
2016
Share options
2015
2016
36,000
10,000
–
15,000
7,500
2,524
–
–
36,000
10,000
–
15,000
7,500
–
–
–
213,116
94,404
22,501
103,078
43,211
13,084
–
–
–
–
–
–
–
–
–
–
Total
interests at
31 December
2016
249,116
104,404
22,501
15,000
7,500
2,524
–
–
1 Mor Weizer and Ron Hoffman currently hold shares to the value of 50% and 19% of salary (based on salaries as of 31 December 2016 respectively and based on the closing
share price on 31 December 2016). The Committee will continue to monitor progress towards the share ownership guidelines of 100% of salary.
2 Share options are granted for Nil consideration.
3 These options were granted in accordance with the Rules of the Playtech Long Term Incentive Plan 2012 (the “Option Plan”). Options under the Option Plan are granted
as Nil cost options and in the case of Executive Directors exclusively, the options vest and become exercisable on the third anniversary of the notional grant date.
Unexercised options expire ten years after the date of grant, unless the relevant employee leaves the Group’s employment, in which case the unvested options lapse
and any vested options lapse three months after the date that the employment ends.
None of the Non-executive Directors have any options over shares in the Company.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
84
Annual report on remuneration continued
Role and membership
The Remuneration Committee is currently comprised entirely of five independent Non-executive Directors as defined in the Code. John
Jackson was appointed as Chair on 1 February 2016. The other members are Andrew Thomas, Alan Jackson, Paul Hewitt and Claire Milne.
Details of attendance at the Remuneration Committee are set out on page 62 and their biographies and experience on pages 56 to 57.
The Committee operates within agreed terms of reference detailing its authority and responsibilities. The Committee’s terms of reference
were reviewed and updated during 2016 and are available for inspection on the Company’s website www.playtech.com and include:
• Determining and agreeing the policy for the remuneration of the CEO, CFO, the Chairman and other members of the senior
management team;
• Review of the broad policy framework for remuneration to ensure it remains appropriate and relevant;
• Review of the design of and determine targets for any performance-related pay and the annual level of payments under such plans;
• Review of the design of and approve any changes to long-term incentive or option plans; and
• Ensuring that contractual terms on termination and payments made are fair to the individual and the Company and that failure
is not rewarded.
The Remuneration Committee also considers the terms and conditions of employment and overall remuneration of Executive Directors, the
Company Secretary and members of the senior management team and has regard to the Company’s overall approach to the remuneration
of all employees. Within this context the Committee determines the overall level of salaries, incentive payments and performance related
pay due to Executive Directors and senior management. The Committee also determines the performance targets and the extent of their
achievement for both annual and long-term incentive awards operated by the Company and affecting the senior management. No Director
is involved in any decisions as to his/her own remuneration.
The Remuneration Committee takes advice from both inside and outside the Group on a range of matters, including the scale and
composition of the total remuneration package payable to people with similar responsibilities, skills and experience in comparable
companies that have extensive operations inside and outside the UK.
During the year the Remuneration Committee received material assistance and advice from the Company Secretary (who is also secretary
to the Committee).
Playtech plc Annual Report and Accounts 2016 85
The Remuneration Committee has a planned schedule of at least four meetings throughout the year, with additional meetings and calls
held when necessary. During 2016, the Committee met in person eight times and these meetings, together with a number of conference
calls, addressed a wide variety of issues, including:
Month
January
February
March
June
August
October
November
December
Principal activity
Review of bonus and other incentivisation arrangements in relation to Executive Directors
and certain members of senior management.
Set financial targets for 2016 bonuses.
Review of Remuneration Policy for Non-executive Directors.
Review of LTIP criteria.
Review of senior management salaries.
Review of Remuneration Policy for Executive Directors.
Review of senior management incentives.
Approval of grant of Nil cost options for a limited number of Group personnel.
External advisers
New Bridge Street (a trading name of Aon Hewitt Limited) is the Committee’s independent adviser. New Bridge Street is a member
of the Remuneration Consultants Group and is a signatory to its Code of Conduct. New Bridge Street does not provide any other services
to the Company. New Bridge Street was paid €94,534 in relation to advice provided during 2016.
Engagement with shareholders and shareholder voting
The Remuneration Committee is committed to ensuring open dialogue with shareholders in relation to remuneration and would normally
consult with major shareholders regarding any significant future changes to remuneration policy.
The voting outcome at the AGM held on 18 May 2016 in respect of the Directors’ Remuneration Report for the year ended 31 December
2015 was as follows:
Approval of Remuneration Report
For
Against
Withheld
196,846,079
(83.08%)
40,076,752
(16.92%)
3,774,607
At 17 May 2016, the issued share capital of the Company was 322,624,603 ordinary shares of no par value.
By order of the Board
John Jackson
Chair of the Remuneration Committee
22 February 2017
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
86
Directors’ report
The Directors are pleased to present to shareholders their report and the audited financial statements for the year ended 31 December 2016.
The Directors’ Report should be read in conjunction with the other sections of this Annual Report: the Strategic Report, Corporate
Responsibility Report and the Remuneration Report, all of which are incorporated into this Directors’ Report by reference.
The following also form part of this report:
• The reports on corporate governance set out on pages 56 to 85;
• Information relating to financial instruments, as provided in the Notes to the financial statements; and
• Related party transactions as set out in Note 28 to the financial statements.
Annual Report and Accounts
The Directors are aware of their responsibilities in respect of the Annual Report. The Directors consider that the Annual Report, taken as a
whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s performance,
business model and strategy. The Statement of Directors’ Responsibilities appears on page 94.
Principal activities and business review
The Group’s principal activities are the development and licensing of software and the provision of ancillary services for the online and
land-based gambling industries and since its acquisition of Markets Limited in May 2015, an online trading platform to retail customers
which enables them to trade CFDs (Contracts for Difference) on a variety of instruments which fall under the general categories of Foreign
Exchange Commodities. In November 2016, the Company acquired 70% of Consolidated Financial Holdings A/S, which provides retail
brokers with multi-asset execution, prime brokerage services, liquidity and complementary risk management tools. Playtech plc is a public
listed company, with a premium listing on the Main Market of the London Stock Exchange. It is incorporated and domiciled in the Isle of Man.
The information that fulfils the requirement for a management report as required by Rule 4.1.5 of the Disclosure and Transparency
Rules applicable to the Group can be found in the Strategic Report on pages 6 to 53 which also includes an analysis, the development,
performance and position of the Group’s business. A statement of the key risks and uncertainties facing the business of the Group
at the end of the year is found on pages 44 to 47 of this Annual Report and details of the policies and the use of financial instruments
is set out in Note 2 to the financial statements.
Directors and Directors’ indemnity
The Directors of the Company who held office during 2016 and to date are:
Alan Jackson
Mor Weizer
Andrew Thomas
Ron Hoffman
Andrew Smith
Paul Hewitt
John Jackson
Claire Milne
Appointed
Resigned
28.03.2006
02.05.2007
19.06.2012
31.12.2012
10.01.2017
27.08.2015
01.01.2016
08.07.2016
–
–
–
10.01.2017
–
–
–
–
All of the current Directors will stand for re-election at the forthcoming Annual General Meeting.
Save as set out in Note 28 to the financial statements, no Director had a material interest in any significant contract, other than a service
contract or contract for services, with the Company or any of its operating companies at any time during the year.
As at the date of this report, an indemnity is in place under which the Company has agreed to indemnify Alan Jackson who held office
during the year ended 31 December 2016, to the extent permitted by law and by the Company’s articles of association, in respect of all
liabilities incurred in connection with the performance of his duties as a Director of the Company or its subsidiaries. A copy of the indemnity
is available for review at the Company’s registered office. The Company also purchased, and maintained throughout 2016, Directors’ and
Officers’ Liability Insurance in respect of itself and its Directors.
Playtech plc Annual Report and Accounts 2016
87
Corporate governance statement
The Disclosure and Transparency Rules require certain information to be included in a corporate governance statement in the
Directors’ Report. Information that fulfils the requirements of the corporate governance statement can be found in the Governance
Report on pages 54 to 85 and is incorporated into this report by reference.
Disclaimer
The purpose of these financial statements (including this report) is to provide information to the members of the Company. The financial
statements have been prepared for, and only for, the members of the Company, as a body, and no other persons. The Company, its
Directors and employees, agents and advisers do not accept or assume responsibility to any other person to whom this document is
shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed.
The financial statements contain certain forward-looking statements with respect to the operations, performance and financial condition
of the Group. By their nature, these statements involve uncertainty since future events and circumstances can cause results and
developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available
at the date of preparation of these financial statements and the Company undertakes no obligation to update these forward-looking
statements. Nothing in this document should be construed as a profit forecast.
Results and dividend
The results of the Group for the year ended 31 December 2016 are set out on pages 104 to 153. On 22 February 2017, the Board
recommended the payment of a final dividend for the year ended 31 December 2016 of 21.7 €cents per share which will be paid to
shareholders on the register as at 5 May 2017. The payment of the final dividend requires shareholder approval which will be sought
at the Company’s Annual General Meeting to be held at the Sefton Hotel, Douglas, Isle of Man on 17 May 2017. If approved, the final
dividend will be paid on 2 June 2017 and together with the interim dividend of 11.0 €cents per share paid on 25 October 2016 and a
special dividend representing 46.0 €cents per share paid on 6 December 2016 makes a total dividend (expressed in €) of 78.7 €cents
per share for the year.
Shareholders who wish to receive their final dividend in Sterling rather than Euros will be required to return currency election forms to the
Company’s registrars by 12 May 2017. Currency election forms are contained with the notice of Annual General Meeting that accompanies
the Annual Report and further copies are available from the Company’s website www.playtech.com.
Going concern, viability, responsibilities and disclosure
The current activities of the Group and those factors likely to affect its future development, together with a description of its financial
position, are described in the Strategic Report. Principal risks and uncertainties affecting the Group, and the steps taken to mitigate these
risks are described on pages 44 to 47. Critical accounting estimates affecting the carrying values of assets and liabilities of the Group are
discussed in Note 3 to the financial statements.
During 2016, the Board carried out a robust assessment of the principal risks facing the Group, including those factors that would threaten
its future performance, solvency or liquidity. This ongoing assessment forms part of the Group’s three-year strategic plan.
After making appropriate enquiries and having regard to the Group’s cash balances and normal business planning and control procedures,
the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational
existence for the foreseeable future. As part of this assessment, the Directors prepared a three-year forecast considering the going
concern status for the period to December 2018 in accordance with the Company’s Three Year Plan, which is considered to be an
appropriate period over which the Group can predict its revenue, cost base and cash flows with a higher degree of certainty, as opposed
to more arbitrary forms of forecasts based solely on percentage increases. Notwithstanding, due to the significant cash reserves and
projected profitability over the next 12 months, the Directors have no reason to believe that the Group’s viability will be threatened
over a period longer than that covered by the positive confirmation of long-term viability above. Given the above, the Directors continue
to adopt the going concern basis in preparing the accounts.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
88
Directors’ report continued
Significant shareholdings
As of 31 January 2017 the Company had been advised of the following significant shareholders each holding more than 3% of the
Company’s issued share capital, based on 317,344,603 ordinary shares in issue:
Shareholder
Brickington Trading Limited
Morgan Stanley
Fidelity Mgt & Research
DNB Asset Mgt
Legal & General Investment Mgt
%
21.93
3.80
3.63
3.39
3.11
No. of
ordinary shares
69,582,169
12,070,148
11,505,382
10,769,638
9,880,740
The persons set out in the table above have notified the Company pursuant to Rule 5 of the Disclosure and Transparency Rules of their
interests in the ordinary share capital of the Company.
The Company has not been notified of any changes to the above shareholders between 31 January 2017 and the date of this report.
Capital structure
As at 31 January 2017, the Company had 317,344,603 issued shares of no par value. The Company has one class of ordinary share and
each share carries the right to one vote at general meetings of the Company and to participate in any dividends declared in accordance
with the articles of association. No person has any special rights of control over the Company’s share capital.
The authorities under the Company’s articles of association granted at the last Annual General Meeting for the Directors to issue new
shares for cash and purchase its own shares remain valid until the forthcoming Annual General Meeting when it is intended that resolutions
will be put forward to shareholders to renew the authority for the Company to issue shares for cash and purchase its own shares.
Following an announcement on 6 December 2016, the Company carried out a share buyback programme and purchased and cancelled
a total of 5,280,000 ordinary shares at a cost of €50 million, which was funded from the Company’s existing cash resources.
Articles of association
The Company’s articles of association do not contain any specific restrictions on the size of a shareholder’s holding.
Voting rights
Subject to any special rights or restrictions as to voting attached to any shares by or in accordance with the articles of association,
on a show of hands every member who is present in person or by proxy and entitled to vote has one vote and on a poll every member
who is present in person or by proxy and entitled to vote has one vote for every share of which he is the holder.
Restrictions on voting
No member shall, unless the Board otherwise determines, be entitled to vote at a general meeting or at any separate meeting of the
holders of any class of shares, either in person or by proxy, in respect of any share held by him or to exercise any right as a member unless
all calls or other sums presently payable by him in respect of that share have been paid to the Company. In addition, any member who
having been served with a notice by the Company requiring such member to disclose to the Board in writing within such reasonable period
as may be specified in such notice, details of any past or present beneficial interest of any third party in the shares or any other interest of
any kind whatsoever which a third party may have in the shares and the identity of the third party having or having had any such interest,
fails to do so may be disenfranchised by service of a notice by the Board.
Playtech plc Annual Report and Accounts 2016
89
Transfer
Subject to the articles of association, any member may transfer all or any of his or her certificated shares by an instrument of transfer in any
usual form or in any other form which the Board may approve. The Board may, in its absolute discretion, decline to register any instrument
of transfer of a certificated share which is not a fully paid share or on which the Company has a lien. The Board may also decline to register
a transfer of a certificated share unless the instrument of transfer is: (i) delivered for registration to the registered agent, or at such other
place as the Board may decide, for registration; and (ii) accompanied by the certificate for the shares to be transferred except in the case
of a transfer where a certificate has not been required to be issued) by the certificate for the shares to which it relates and/or such other
evidence as the Board may reasonably require to prove the title of the transferor and the due execution by him of the transferor, if the
transfer is executed by some other person on his behalf, the authority of that person to do so, provided that where any such shares are
admitted to AIM, the Official List maintained by the UK Listing Authority or another recognised investment exchange.
Amendment of the Company’s articles of association
Any amendments to the Company’s articles of association may be made in accordance with the provisions of the Isle of Man Companies
Act 2006 by way of special resolution.
Appointment and removal of Directors
Unless and until otherwise determined by the Company by ordinary resolution, the number of Directors (other than any alternate Directors)
shall not be less than two and there shall be no maximum number of Directors.
Powers of Directors
Subject to the provisions of the Isle of Man Companies Act 2006, the memorandum and articles of association of the Company and to any
directions given by special resolution, the business of the Company shall be managed by the Board, which may exercise all the powers
of the Company.
Appointment of Directors
Subject to the articles of association, the Company may by ordinary resolution appoint a person who is willing to act to be a Director,
either to fill a vacancy, or as an addition to the existing Board, and may also determine the rotation in which any Directors are to retire.
Without prejudice to the power of the Company to appoint any person to be a Director pursuant to the articles of association, the Board
shall have power at any time to appoint any person who is willing to act as a Director, either to fill a vacancy or as an addition to the existing
Board, but the total number of Directors shall not exceed any maximum number fixed in accordance with the articles of association.
Any Director so appointed shall hold office only until the next Annual General Meeting of the Company following such appointment
and shall then be eligible for re-election but shall not be taken into account in determining the number of Directors who are to retire
by rotation at that meeting.
Retirement of Directors
At each Annual General Meeting one-third of the Directors (excluding any Director who has been appointed by the Board since the
previous Annual General Meeting) or, if their number is not an integral multiple of three, the number nearest to one-third but not exceeding
one-third shall retire from office (but so that if there are fewer than three Directors who are subject to retirement by rotation under this
Article one shall retire).
Removal of Directors
The Company may by ordinary resolution passed at a meeting called for such purpose or by written resolution consented to by members
holding at least 75% of the voting rights in relation thereto, remove any Director before the expiration of his period of office notwithstanding
anything in the articles of association or in any agreement between the Company and such Director and, without prejudice to any claim for
damages which he may have for breach of any contract of service between him and the Company, may (subject to the articles) by ordinary
resolution, appoint another person who is willing to act as a Director in his place. A Director may also be removed from office by the service
on him of a notice to that effect signed by all the other Directors.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 90
Directors’ report continued
Significant agreements
There are no agreements or arrangements to which the Company is a party that are affected by a change in control of the Company
following a takeover bid, and which are considered individually significant in terms of their impact on the business of the Group as a whole.
The rules of certain of the Company’s incentive plans include provisions which apply in the event of a takeover or reconstruction.
Related party transactions
Details of all related party transactions are set out in Note 28 to the financial statements. Internal controls are in place to ensure that
any related party transactions involving Directors or their connected persons are carried out on an arm’s length basis and are disclosed
in the financial statements.
Political and charitable donations
During the year ended 31 December 2016, the Group made charitable donations of €433,513 (2015: €208,888), primarily to charities that
fund research into and treatment of problem gambling but also to a variety of charities operating in countries in which the Company’s
subsidiaries are based.
The Group made no political donations during this period (2015: Nil).
Sustainability and employees
Information with respect to the Group’s impact on the environment and other matters concerning sustainability can be found on pages 48
to 53. Applications for employment by disabled persons are always fully and fairly considered, bearing in mind the aptitude and ability of the
applicant concerned. The Group places considerable value on the involvement of its employees and has continued to keep them informed
of matters affecting them as employees and on the performance of the Group and has run information days for employees in different
locations across the Group during the year. Some employees are stakeholders in the Company through participation in share option plans.
Information provided by the Company pursuant to the Disclosure and Transparency Rules is publicly available via the regulatory information
services and the Company’s website, www.playtech.com.
Branches
The Company’s subsidiaries Playtech Retail Limited and PT Turnkey Services Limited have established branch offices in the Philippines.
It is intended that PT Turnkey Services Limited will establish a branch in Gibraltar as will another of the Company’s subsidiaries, Playtech
Software Limited.
Playtech plc Annual Report and Accounts 2016
91
Regulatory disclosures
The information in the following tables is provided in compliance with the Listing Rules and the Disclosure and Transparency Rules (DTRs).
The DTRs also require certain information to be included in a corporate governance statement in the Directors’ Report. Information
that fulfils the requirements of the corporate governance statement can be found in the Governance Report on pages 58 to 66 and
is incorporated into this Directors’ Report by reference.
Disclosure table pursuant to Listing Rule 9.8.4C
Listing Rule
Information included
Interest capitalised by the Group.
Unaudited financial information.
Disclosure
None
None
Long-term incentive scheme only involving a Director.
None
Directors’ waivers of emoluments.
Directors’ waivers of future emoluments.
Non pro-rata allotments for cash.
None
None
None
Non pro-rata allotments for cash by major subsidiaries.
None
Listed company is a subsidiary of another.
Contracts of significance.
N/A
None
Contracts of significance involving a controlling
shareholder.
Brickington Trading Limited, the Company’s largest
shareholder, ceased to be a controlling shareholder on
2 December 2016. The Notes to the financial statements
set out details of transactions with the Company’s former
controlling shareholder.
Waivers of dividends.
Waivers of future dividends.
None
None
Agreement with a controlling shareholder.
See disclosure against LR 9.8.4(11).
9.8.4(1)
9.8.4(2)
9.8.4(4)
9.8.4(5)
9.8.4(6)
9.8.4(7)
9.8.4(8)
9.8.4(9)
9.8.4(10)
9.8.4(11)
9.8.4(12)
9.8.4(12)
9.8.4(14)
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
92
Directors’ report continued
Additional information provided pursuant to LR9.8.6
Listing Rule
Information included
9.8.6(1)
9.8.6(2)
9.8.6(3)
9.8.6(4)(a)
9.8.6(4)(b)
9.8.6(4)(c)
9.8.6(4)(d)
9.8.6(5)
9.8.6(6)
9.8.6(7)
Interests of Directors (and their connected persons) in
the shares of the Company at the year end and not more
than one month prior to the date of the notice of AGM.
Disclosure
See page 83.
Interests in Playtech shares disclosed under DTR5 at the
year end and at not more than one month prior to the
date of the notice of AGM.
See page 88.
The going concern statement.
See page 87.
Amount of the authority to purchase own shares available
at the year end.
26,982,460 ordinary shares which authority will expire
at the AGM and will be renewed.
Off market purchases of own shares during the year.
None
Off market purchases of own shares after the year end.
None
Non pro-rata sales of treasury shares during the year.
None
Compliance with the main principles of the UK Corporate
Governance Code.
See the statement on page 59.
Details of non-compliance with the UK Corporate
Governance Code.
See the statement on page 59.
Re Directors proposed for re-election: the unexpired
term of their service contract and a statement about
Directors without a service contract.
The Chairman and the Non-executive Directors serve
under letters of appointment described on page 76.
Playtech plc Annual Report and Accounts 2016 93
Additional information under Rule 4.1 of the Disclosure and Transparency Rules
DTR
4.1.3
Requirement
How fulfilled
Publication of Annual Financial Report
within four months of the end of the
financial year.
This document is dated 22 February 2017 being a date less than four
months after the year end.
4.1.5
Content of Annual Financial Report.
The audited financial statements are set out on page 97 to page 153.
Audited financial statements.
The information that fulfils the requirement for a management report
can be found in the Strategic Report on pages 6 to 53.
The Statement of Directors’ Responsibilities can be found on page 94.
The audited financial statements set out on page 97 to page 53
comprise consolidated accounts prepared in accordance with IFRS
and the accounts of the Company.
Auditing of financial statements.
The financial statements have been audited by BDO LLP.
4.1.6
4.1.7
4.1.8 & 4.1.9
Content of management report.
4.1.11(1)
Important events since the year end.
4.1.11(2)
Future development.
4.1.11(3)
Research & development.
The Strategic Report on pages 6 to 53, includes an analysis, using
financial key performance indicators, of the development, performance
and position of the Company’s business, a review of the Company’s
business and on pages 44 to 47 a description of the principal risks
and uncertainties.
The Strategic Report on pages 6 to 53 gives details of the acquisition
of Eyecon Limited and Eyecon Pty. Ltd (together “Eyecon”).
The Strategic Report on pages 6 to 53 gives an indication of the likely
future development of the Company.
The Strategic Report on pages 6 to 53, gives an indication of ongoing
research and development activities.
4.1.11(4)
4.1.11(5)
4.1.11(6)
Purchase of own shares.
See disclosure pursuant to LR9.8.6(4) above.
Branch offices.
See the statement on page 40.
Use of financial instruments.
See Note 2 to the audited financial statements on pages 109 to 116.
4.1.12 & 13
Responsibility statement.
See the statement of the Directors on page 94.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 94
Directors’ report continued
Statement of Directors’ responsibilities
The Directors have elected to prepare the Annual Report and the financial statements for the Company and the Group in accordance
with International Financial Reporting Standards as adopted by the European Union (IFRS).
The Directors are responsible under applicable law and regulation for keeping proper accounting records which disclose with reasonable
accuracy at any time the financial position of the Group, for safeguarding the assets and for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
International Accounting Standard 1 (revised) requires that financial statements present fairly for each financial year the Group’s financial
position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and
conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International
Accounting Standards Board’s ‘Framework for the Preparation and Presentation of Financial Statements’. In virtually all circumstances, a fair
presentation will be achieved by compliance with all applicable International Financial Reporting Standards. A fair presentation also requires
the Directors to:
• Select suitable accounting policies and then apply them consistently;
• Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable
information;
• Make judgements and accounting estimates that are reasonable and prudent;
• State whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures
disclosed and explained in the financial statements; and
• Provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand
the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions
and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial
statements comply with Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence
for taking reasonable steps for the prevention and detection of fraud and other irregularities.
In addition, the Directors at the date of this report consider that the financial statements taken as a whole, are fair, balanced and
understandable and provide the information necessary for shareholders to assess the Group’s performance, business model and strategy.
Website publication
Financial statements are published on the Company’s website. The maintenance and integrity of the Company’s website is the responsibility
of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein.
Directors’ responsibilities pursuant to DTR4
Each of the Directors, whose names and functions are listed within the Governance section on pages 56 to 57 confirm that, to the best
of their knowledge:
• The Group financial statements, which have been prepared in accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union and Article 4 of the IAS Regulation, give a true and fair view of the assets, liabilities, financial position
and profit of the Group; and
• The Annual Report includes a fair review of the development and performance of the business and the financial position of the Group
and the Company, together with a description of the principal risks and uncertainties that they face.
Playtech plc Annual Report and Accounts 2016
95
Annual General Meeting
The Annual General Meeting in 2016 was held in May in Douglas, Isle of Man. With the exception of Andrew Thomas and Paul Hewitt,
who were delayed due to adverse weather conditions, all Directors were present and made themselves available to answer questions
from shareholders. The Annual General Meeting provides an opportunity for the Directors to communicate personally performance and
future strategy to non-institutional shareholders and for those shareholders to meet with and question the Board. All Directors plan to be
present at the 2017 Annual General Meeting. All results of proxy votes are read out, made available for review at the meeting, recorded
in the minutes of the meeting and communicated to the market and via the Group website.
The Annual General Meeting for 2017 will be held at the Sefton Hotel, Douglas, Isle of Man, IM1 2RW on Wednesday 17 May 2017
at 10.00 am. The notice convening the Annual General Meeting for this year, and an explanation of the items of non-routine business,
are set out in the circular that accompanies the Annual Report.
Auditors
So far as each Director is aware, at the date of the approval of the financial statements there is no relevant audit information of which
the Company’s auditors are unaware. Each Director has taken all the steps that they ought to have taken as a Director in order to make
themselves aware of any information needed by the Group’s auditors for the purposes of their audit and to establish that the auditors
are aware of that information.
A resolution to reappoint BDO LLP as the Company’s auditors will be submitted to the shareholders at this year’s AGM.
Approved by the Board and signed on behalf of the Board
Andrew Smith
Chief Financial Officer
22 February 2017
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 96
wFINANCIAL STATEMENTSPlaytech plc Annual Report and Accounts 2016 97
Contents
Independent auditors’ report
Consolidated statement
of comprehensive income
Consolidated statement
of changes in equity
Consolidated balance sheet
Consolidated statement
of cash flows
Notes to the financial statements
Company statement
of changes in equity
Company balance sheet
Company statement of cash flows
Notes to the Company
financial statements
Five-year financial summary
98
104
105
106
107
109
154
155
156
157
160
wPlaytech plc Annual Report and Accounts 2016 98
Independent auditors’ report
To the members of Playtech plc
Opinion on financial statements of Playtech Plc
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and the parent company’s affairs as at 31 December 2016
and of the group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union; and
• the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union
and as applied in accordance with the provisions of the Isle of Man Companies Act 2006.
We have audited the financial statements of Playtech plc for the year ended 31 December 2016 which comprise the:
• Consolidated Statement of Comprehensive Income;
• Consolidated and Parent Company Balance Sheets;
• Consolidated and Parent Company Statements of Changes in Equity;
• Consolidated and Parent Company Statements of Cash Flows; and
• Notes to the financial statements.
The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European Union.
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to
comply with the Financial Reporting Council’s (FRC’s) Ethical Standards for Auditors.
The purpose of this report and restrictions on its use by persons other than the members
of the Company, as a body
Our report is made solely to the Company’s members, as a body, in accordance with section 80C of the Isle of Man Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters that we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Our assessment of risks of material misstatement
In preparing the financial statements, the directors made a number of subjective judgements and significant accounting estimates that
involved making assumptions and considering future events that are, by their nature, inherently uncertain (see note 3 to the consolidated
financial statements). We primarily focussed our work in these areas by assessing the directors’ judgements against available evidence,
including the risk of management override and bias, forming our own judgements and evaluating the disclosures in the financial statements.
Playtech plc Annual Report and Accounts 2016 99
We set out below the risks that had the greatest impact on our audit strategy and scope. This is not a complete list of all risks or areas
of audit focus identified by our audit. We discussed these areas of focus with the Audit Committee. The Audit Committee’s consideration
of these matters is set out on page 68:
Title
Risk
Our response
Revenue
recognition
The Group has a number of revenue streams. The
details of the accounting policies applied during the
period are given in note 2 to the financial statements.
We assessed the design and implementation
of the controls over the Group’s revenue cycles.
Management make certain judgements around
revenue recognition and the treatment of contractual
arrangements for revenue streams entered into by both
the Gaming and Financials divisions. There is a potential
risk that revenue is recorded incorrectly from a timing
perspective and inappropriately recognised on a gross
versus net basis.
Impairment
of Goodwill,
capitalised
development
costs and other
intangibles
In accordance with IAS 36, the Group monitors the
carrying value of goodwill and other intangibles for
indications of impairment. The Group performs annual
impairment reviews for goodwill, for other intangibles
where there are indicators of impairment and for
capitalised development costs relating to projects
not launched as at the year end.
Impairment reviews require significant judgement from
management and are inherently based on assumptions
in respect of future profitability.
IAS 36 also requires management to test intangible
assets not yet available for use (such as projects in
development) for impairment.
If the carrying value of these assets exceeds their
recoverable amount there is a risk of material
misstatement in the carrying value of these assets.
We assessed whether the revenue recognition policies
adopted by the Group comply with IFRS as adopted by
the European Union and Industry standard.
We tested revenue through substantive procedures. Our
work included the use of IT audit data analytic techniques
to underpin our substantive testing of the revenue
recognised by both the Gaming and Financials divisions.
We reviewed a sample of key contracts entered into
during the year to assess whether the revenue had been
recognised in accordance with the Group’s accounting
policy, appropriately from a timing perspective and
whether any other terms within the contract had any
material accounting or disclosure implications.
We considered whether there were any indications
of impairment in respect of intangible assets.
The audit team, which includes valuation specialists,
challenged the appropriateness of the key assumptions
used in the discounted cash flow models prepared by
management and applied sensitivities to assess the
potential impairment of goodwill and those assets where
indications of impairment were present. Our work was
based on our assessment of the historical accuracy
of the Group’s estimates in previous periods, our
understanding of the commercial prospects of the assets,
identification and analysis of changes in assumptions
from prior periods and an assessment of the consistency
of assumptions across the impairment reviews.
We selected a sample of projects not yet launched at the
balance sheet date and confirmed that there remains a
future intent to launch. Further to this we reviewed the
results of management’s impairment review of these
assets on a portfolio basis.
We considered the appropriateness of the related
disclosure provided in the Group financial statements.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 100
Independent auditors’ report continued
To the members of Playtech plc
Title
Risk
Our response
Compliance
risk – Legal,
regulatory and
taxation
The Group has compliance obligations that range from
administration of their licences to assessing the impact
of changes in country-specific and pan-regional rules
and regulations on its businesses.
The nature of the e-commerce business and operational
structure of the Playtech Group requires management
judgement with regard to the assessment and
interpretation of domestic and international tax laws.
The taxation of e-commerce is still an evolving matter
for tax authorities.
The Group makes certain provisions and disclosures
required under IFRS for outstanding legal and regulatory
disputes based on Management’s best estimate of
where there is a probable outflow of economic benefits.
Where the Group does not consider the likelihood of
a provision being probable, the Group will disclose the
existence of a contingent liability (unless that likelihood
of occurrence is considered to be remote when no
disclosure is required).
Given the continual changes in the regulatory
environment of the gambling and financial trading sectors
in many countries across the world, there is a risk that
potential material legal, regulatory or taxation matters
are not disclosed or provided for.
Related party
transactions
There is a risk that disclosures in respect of related party
transactions are incomplete or that the assertion that
related party transactions are on an arm’s length basis
is unsupported.
We considered how the Group monitors legal and
regulatory developments and their assessment of the
potential impact on the business, and also considered
the internal and external advice taken in respect of these
developments. We discussed with Management how
they manage, control and operate Group companies in
the countries in which they are registered. This included
how the Group manages its tax strategy as part of the
overall business planning and how the Group monitors
the rules and practices governing the taxation of
e-commerce activity that is evolving in many countries.
We discussed with the Group’s Compliance and Legal
teams whether there were any known instances of
material breaches in regulatory and licence compliance
that required disclosure or required provisions to be
made in the financial statements. We discussed the
assertions of the Group’s Compliance and Legal teams
with the Group’s principal external legal advisors,
with no material matters to report.
As part of the audit team, we have tax specialists who
reviewed and evaluated the risks in the jurisdictions
in which Playtech has a significant physical presence.
As part of this process we liaised with the local audit
teams and tax specialists in those jurisdictions to
assess the provisioning for current and deferred taxes.
We considered the latest externally prepared advice
received by management with regard to any exposure
to taxation in existing or proposed territories in which
the Group operates or intends to operate.
We reviewed disclosures prepared by the Group
in respect of contingent liabilities.
We assessed the design and implementation of the
Group’s policies and procedures in respect of the
capturing of related party transactions.
We obtained a list of related parties from Management.
We gave consideration to the completeness of the
list based on our knowledge of related parties and
confirmations received by the Company from identified
related parties.
We ensured all transactions and balances with those
entities identified as related parties were disclosed
in accordance with IAS 24, including consideration
of whether material transactions with the substantial
shareholder or companies under their control were
correctly disclosed as being on an arm’s length basis.
Playtech plc Annual Report and Accounts 2016 101
Title
Risk
Our response
Business
combinations
The Group completed the following principal acquisitions
in the year:
• Quickspin AB
• Patelle Limited (Best Gaming Technology, BGT)
• ECM Systems Holdings
• Consolidated Financial Holdings A/S (CFH)
Management are required to make significant
judgements in assessing the fair values of consideration
including contingent consideration (whether arising on
acquisitions made in the current year or previous years)
and of the assets and liabilities acquired. Management
have engaged external valuations experts to undertake
the purchase price allocation exercise required.
In respect of the acquisitions of BGT, ECM and CFH, put
and call options were agreed as part of the acquisitions
in relation to the shareholdings retained by the vendors
being 10%, 10% and 30% respectively. In accordance
with IFRS, management assessed whether the put and
call option is at fair value and the resulting accounting
treatment. Management determined that the terms of the
options did not meet the definition of being at fair value
under the standard and as such the fair value of the
shares which are subject to the put and call option has
been recognised as a liability of the Group. As such there
is a risk in respect of the accounting for and the valuation
applied to the options.
We challenged the assumptions underpinning
the significant judgements and estimates used by
management in the assessment of the fair values of the
assets and liabilities acquired and consideration paid
including; underlying cash flow projections, royalty rates,
discount rates applied and the long term growth rates.
We used our valuation specialists to review and
evaluate the identified intangible assets and consider
the judgemental areas and those subject to significant
estimation.
We challenged management’s assessment of the
fair value of contingent consideration in respect of
acquisitions made in the current year and previous
periods, including principally the level of expected
profitability over the forecast period.
We considered the terms of the put and call options
agreements and the accounting treatment adopted
to confirm that requirements of accounting standards
have been met. We considered the valuation applied
to each of the put and call options including the basis
of valuation, the key inputs and the discount rate applied.
Scope of the audit of the financial statements performed in accordance with ISAs (UK and Ireland)
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance
that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether
the accounting policies are appropriate to the company’s circumstances and have been consistently applied and adequately disclosed;
the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements.
In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited
financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements
or inconsistencies we consider the implications for our report.
Overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the group and its environment, including the group’s system of internal
control, and assessing the risks of material misstatement in the financial statements at the group level.
In determining the scope of our audit we considered the level of work to be performed at each component in order to ensure sufficient
assurance was gained to allow us to express an opinion on the financial statements of the Group as a whole.
We tailored the extent of the work to be performed at each component, either by us, as the Group audit team, component auditors
within the BDO network or non-BDO member firms, based on our assessment of the risk of material misstatement at each component.
We have obtained an understanding of the entity-level controls of the Group as a whole which assisted us in identifying and assessing
risks of material misstatement due to fraud or error, as well as assisting us in determining the most appropriate audit strategy.
Classification of components
The 3 components that are considered significant (defined as those that were greater than 15% of Adjusted EBITDA, or where the
risks of the component were significantly different to the group risks) were audited by the Group audit team.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
102
Independent auditors’ report continued
To the members of Playtech plc
The Group audit team centrally performed the audit of 100% of group revenue and the audit of 100% of intangible assets including
development costs using the materiality levels set out below.
For the 22 components not considered significant, the component auditors were asked to perform review procedures or specific scope
procedures on certain balances based on their relative size, risks in the business and our knowledge of those entities appropriate to
respond to the risk of material misstatement.
Review and specific scope procedures were performed by the Group audit team or BDO network firms on 18 reporting components
and by 4 non-BDO member firms on a further 4 reporting components.
Summary audit scope
Revenue
Total assets
Adjusted EBITDA
100%
97%
93%
Full audit
Specific procedures
Group level procedures
Based on the above scope we were able to conclude that sufficient and appropriate audit evidence had been obtained as a basis
to form our opinion on the group financial statements as a whole.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. For planning,
we consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of
reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level the probability that
any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed.
Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of
identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements
as a whole.
Level of materiality applied and rationale
We consider Adjusted EBITDA to be the critical performance measure for the Group. Using this benchmark we set materiality at €13.0m
(2015: €12.5m) being 4.4% (2015: 5%) of Adjusted EBITDA. In setting this level of materiality we considered the quantum of materiality was
appropriate in comparison to other benchmarks: 1.8% of revenue; 0.6% of total assets. Our materiality level is higher than in previous years
reflecting the continued growth in the results of the Group.
Performance materiality was set at 75% of materiality. In setting the level of performance materiality we considered a number of factors
including the expected total value of known and likely misstatements (based on past experience and other factors) and Management’s
attitude toward proposed adjustments.
Component materiality
We set materiality for each component of the Group based on a percentage of materiality dependent on the size and our assessment
of the risk of material misstatement of that component. Component materiality ranged from €3.15m to €6.3m.
Agreement with the Audit Committee
We agreed with the Audit Committee that we would report to the Committee all audit differences individually in excess of €500k.
We also agreed to report differences below these thresholds that, in our view, warranted reporting on qualitative grounds.
Playtech plc Annual Report and Accounts 2016
103
Matters on which we are required to report by exception
Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion, information
in the Report and Accounts is:
We have nothing to report
in respect of these matters.
• materially inconsistent with the information in the audited financial statements; or
• apparently materially incorrect based on, or materially inconsistent with, our knowledge
of the Company acquired in the course of performing our audit; or
• is otherwise misleading.
In particular, we are required to consider whether we have identified any inconsistencies between our
knowledge acquired during the audit and the Directors’ statement that they consider the Report and
Accounts is fair, balanced and understandable and whether the Report and Accounts appropriately
discloses those matters that we communicated to the Audit committee which we consider should have
been disclosed.
Under the Listing Rules we are required to review the part of the corporate governance statement
relating to the company’s compliance with the provisions of the UK Corporate Governance Code
containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R (2).
The Listing Rules also require that we review the directors’ statements set out on page 87 regarding
going concern and longer term viability.
We have nothing to report
in respect of these matters.
Statement regarding the directors’ assessment of principal risks, going concern and longer term viability of the company
We have nothing material to add or to draw attention to in relation to:
• the directors’ confirmation in the annual report that they have carried out a robust assessment of the principal risks facing the entity,
including those that would threaten its business model, future performance, solvency or liquidity;
• the disclosures in the annual report that describe those risks and explain how they are being managed or mitigated;
• the directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis
of accounting in preparing them and their identification of any material uncertainties to the entity’s ability to continue to do so over
a period of at least twelve months from the date of approval of the financial statements; or
• the directors’ explanation in the annual report as to how they have assessed the prospects of the entity, over what period they have
done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation
that the entity will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including
any related disclosures drawing attention to any necessary qualifications or assumptions.
Matthew White
For and on behalf of BDO LLP
Chartered Accountants
London
United Kingdom
22 February 2017
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 104
Consolidated statement of comprehensive income
For the year ended 31 December 2016
Revenue
Distribution costs before depreciation and amortisation
Administrative expenses before depreciation and amortisation
EBITDA
Depreciation, amortisation and impairment
Finance income
Finance cost
Share of profit from joint ventures
Share of loss from associates
Profit on disposal of investment in associate
Profit before taxation
Tax expenses
Profit for the year
Note
4
7a
7b
13a
13b
13c
Actual
€’000
708,558
(345,934)
(70,772)
2016
Adjusted*
€’000
708,558
(340,790)
(65,535)
Actual
€’000
630,086
(331,705)
(64,370)
2015
Adjusted*
€’000
630,086
(327,791)
(50,407)
291,852
302,233
234,011
251,888
(107,600)
13,270
(61,119)
146
(693)
64,459
(50,947)
13,270
(50,485)
146
(693)
–
(85,398)
14,631
(15,666)
229
(5,856)
–
(43,647)
14,631
(5,190)
229
(5,856)
–
200,315
213,524
141,951
212,055
8
(6,303)
(6,303)
(5,646)
(5,646)
194,012
207,221
136,305
206,409
Other comprehensive income for the year:
Items that may be classified to profit or loss:
Change in fair value of available-for-sale equity instruments
Exchange gains arising on translation of foreign operations
Total items that may be classified to profit or loss
14
(53,868)
14,251
(39,617)
(53,868)
14,251
(39,617)
1,160
3,491
4,651
1,160
3,491
4,651
Total comprehensive income for the year
154,395
167,604
140,956
211,060
Profit for the year attributable to:
Owners of the parent
Non-controlling interest
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interest
193,030
982
206,239
982
135,810
495
205,914
495
194,012
207,221
136,305
206,409
153,543
852
166,752
852
140,236
720
210,340
720
154,395
167,604
140,956
211,060
Earnings per share for profit attributable to the owners of the
parent during the year:
Basic (€cents)
Diluted (€cents)
9
9
61.4
58.8
65.7
59.8
44.5
43.7
67.5
61.8
* Adjusted numbers relate to certain non-cash and one-off items including amortisation of intangibles on acquisitions, professional costs on acquisitions and irrecoverable
deposit and abandoned acquisitions, finance costs on acquisitions, change in fair value of available-for-sale investments in the income statement, non-cash accrued bond
interest and additional various non-cash charges. The Directors believe that the adjusted profit measures represent more closely the consistent trading performance of the
business. A full reconciliation between the actual and adjusted results is provided in Note 5.
Playtech plc Annual Report and Accounts 2016
Consolidated statement of changes in equity
For the year ended 31 December 2016
105
Additional
paid in
capital
€’000
Available-
for-sale
reserve
€’000
Retained
earnings
€’000
Employee
benefit
trust
€’000
Convertible
bond
option
reserve
€’000
Put/Call
options
reserve
€’000
Foreign
exchange
reserve
€’000
Total
attributable
to equity
holders of
parent
€’000
Non-
controlling
interest
€’000
Total
equity
€’000
Balance at 1 January 2016
638,209
1,964 592,051
(27,495)
45,392
–
3,266 1,253,387
7,308 1,260,695
Changes in equity for the year
Total comprehensive income
for the year
Dividend paid
Exercise of options
Employee stock
option scheme
Share buyback
Acquisition of minority interest
Non-controlling interest
acquired on business
combination
–
–
–
(53,021)
193,030
– (245,734)
(1,937)
–
–
–
2,078
–
(10,445)
–
–
–
–
–
–
6,812
(39,384)
(5,974)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(34,341)
13,534
–
–
153,543
(245,734)
141
852
–
–
154,395
(245,734)
141
–
–
–
–
6,812
(49,829)
(5,974)
128
–
(1,320)
6,940
(49,829)
(7,294)
(34,341)
14,746
(19,595)
Balance at 31 December 2016 627,764
(51,057) 498,864
(25,417)
45,392
(34,341)
16,800 1,078,005
21,714 1,099,719
Balance at 1 January 2015
324,774
804 537,692
(36,154)
45,392
Changes in equity for the year
Total comprehensive income
for the year
Dividend paid
Issue of share capital
(net of issue cost)
Exercise of options
Employee stock
option scheme
Acquisition of minority interest
Non-controlling interest
acquired on business
combination
–
–
1,160
–
135,810
(81,805)
–
–
313,032
403
–
–
–
–
–
–
–
–
–
(4,381)
–
8,659
4,735
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 31 December 2015 638,209
1,964 592,051
(27,495)
45,392
–
–
–
–
–
–
–
–
–
872,508
675
873,183
3,266
–
140,236
(81,805)
720
–
140,956
(81,805)
–
–
–
–
–
313,032
4,681
4,735
–
–
140
169
131
313,032
4,821
4,904
131
–
5,473
5,473
3,266 1,253,387
7,308 1,260,695
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 106
Consolidated balance sheet
As at 31 December 2016
NON-CURRENT ASSETS
Property, plant and equipment
Intangible assets
Investments in equity accounted associates & joint ventures
Available-for-sale investments
Other non-current assets
CURRENT ASSETS
Trade receivables
Other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY
Additional paid in capital
Available-for-sale reserve
Employee Benefit Trust
Convertible bonds option reserve
Put/Call options reserve
Foreign exchange reserve
Retained earnings
Equity attributable to equity holders of the parent
Non-controlling interest
TOTAL EQUITY
NON CURRENT LIABILITIES
Loans and borrowings
Convertible bonds
Deferred revenues
Deferred tax liability
Contingent consideration and redemption liability
Other non-current liabilities
CURRENT LIABILITIES
Trade payables
Progressive operators’ jackpots and security deposits
Client deposits
Client funds
Tax liabilities
Deferred revenues
Contingent consideration
Other payables
TOTAL EQUITY AND LIABILITIES
The financial information was approved by the Board and authorised for issue on 22 February 2017.
Mor Weizer
Chief Executive Officer
Andrew Smith
Chief Financial Officer
Note
2016
€’000
2015
€’000
11
12
13
14
15
16
17
18
19
19
21
20
21
24
22
23
22
25
72,893
1,014,635
39,026
230,278
26,861
1,383,693
73,744
73,966
544,843
692,553
51,337
750,872
51,778
237,100
20,830
1,111,917
74,632
27,806
857,898
960,336
2,076,246
2,072,253
627,764
(51,057)
(25,417)
45,392
(34,341)
16,800
498,864
638,209
1,964
(27,495)
45,392
–
3,266
592,051
1,078,005
1,253,387
21,714
7,308
1,099,719
1,260,695
200,000
266,230
3,454
40,443
204,550
1,627
200,000
256,429
3,235
14,049
141,347
1,175
716,304
616,235
28,171
46,759
76,229
29,863
11,732
4,456
4,577
58,436
17,411
63,340
–
43,761
5,910
4,355
4,491
56,055
260,223
195,323
2,076,246
2,072,253
Playtech plc Annual Report and Accounts 2016
Consolidated statement of cash flows
CASH FLOWS FROM OPERATING ACTIVITIES
Profit after tax
Adjustments to reconcile net income to net cash provided by operating activities (see below)
Income taxes paid
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Loans and deposits advanced
Acquisition of property, plant and equipment
Return on investment in joint ventures and associates
Acquisition of intangible assets
Acquisition of subsidiaries
Cash of subsidiaries on acquisition
Capitalised development costs
Investment in equity-accounted associates
Investment in available-for-sale investments
Return on available-for-sale investments
Proceeds from sale of property, plant and equipment
Acquisition of minority interest
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid to the holders of the parent
Issue of share capital, net of issue costs
Share buyback
Interest paid on convertible bonds and bank borrowing
Proceeds from bank borrowings
Exercise of options
Net cash (used in)/from financing activities
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
Exchange (losses)/gains on cash and cash equivalents
CASH AND CASH EQUIVALENTS AT END OF YEAR
107
Note
2016
€’000
2015
€’000
11
13c
12
12
13b,13c
14
7a
19
19
20
194,012
67,085
(9,731)
136,305
69,950
(5,487)
251,366
200,768
(9,162)
(26,224)
1,844
(13,019)
(240,225)
100,244
(36,176)
(1,701)
–
11,894
145
(7,329)
(6,386)
(27,327)
2,362
(4,331)
(228,414)
49,487
(31,357)
(25,503)
(209,797)
2,311
398
(598)
(219,709)
(479,155)
(245,734)
–
(49,829)
(4,594)
–
141
(81,805)
313,032
–
(2,685)
200,000
4,818
(300,016)
433,360
(268,359)
154,973
857,898
692,347
(44,696)
10,578
544,843
857,898
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 108
Consolidated statement of cash flows continued
ADJUSTMENT TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Income and expenses not affecting operating cash flows:
Depreciation
Amortisation
Impairment
Share of profit from joint ventures
Share of loss from associates
Non-cash transaction
Non-cash accrued bond interest
Income tax expense
Employee stock option plan expenses
Movement in deferred and contingent consideration
Return on available-for-sale investments
Exchange losses/gains on cash and cash equivalents
Other
Changes in operating assets and liabilities:
Increase/(decrease) in trade receivables
Increase in other receivables
Increase/(decrease) in trade payables
Increase/(decrease) in progressive, operators jackpot, security deposits
Decrease in client funds
Increase/(decrease) in other payables
Decrease in deferred revenues
Acquisition of subsidiary
Acquisitions in the year
A. Acquisition of Best Gaming Technology GmbH
B. Acquisition of Consolidated Financial Holdings A/S
C. Acquisition of Quickspin AB
D. Acquisition of ECM Systems Holdings Ltd
E. Other acquisitions
Acquisitions in previous years
A. Acquisition of Yoyo Games Limited
B. Acquisition of Markets Limited
C. Other acquisitions
Non-cash transaction
Disposal of investment in associate
Fair value of Ladbrokes Coral plc shares received
Cost related to the software and services agreement
Disposal of investment in associate
Profit on disposal of investment in associate
Impairment of investment in associate
Net profit on disposal of investment in associate
Note
2016
€’000
2015
€’000
11
12
13a
13b
8
10
Note
26b
26d
26a
26c
26e
27a
27b
Note
13c
13c
13b
20,092
75,173
12,335
(146)
693
(30,686)
9,802
6,303
6,940
832
(11,894)
44,696
(191)
12,258
(43,551)
4,969
(16,582)
(17,512)
(5,910)
(536)
14,578
69,610
1,210
(229)
5,856
–
9,388
5,646
4,904
1,088
(2,311)
(10,578)
230
(29,010)
(3,169)
(6,842)
5,973
(6,496)
12,353
(2,251)
67,085
69,950
2016
€’000
138,490
38,927
24,461
25,038
9,545
2015
€’000
–
–
–
–
–
1,808
–
1,956
14,427
207,987
6,000
240,225
228,414
2016
€’000
44,477
(5,312)
(6,893)
32,272
(1,586)
30,686
2015
€’000
–
–
–
–
–
–
Playtech plc Annual Report and Accounts 2016 Notes to the financial statements
109
Note 1 – General
Playtech plc and its subsidiaries (the “Group”) develop unified software platforms for the online and land-based gambling industry, targeting
online and land-based operators. Since May 2015 the Group also offered an online trading platform to retail customer which enabled
them to trade CFD (Contracts for Differences) on a variety of instruments which fall under the general categories of Foreign exchange,
commodities, equities and indices. In the context of this activity, the Group acts as a market-maker in a predominantly B2C environment.
Following the acquisition of CFH in November 2016, the Group also provides B2B clients with technology for liquidity and clearing.
Playtech’s gaming applications – online casino, poker and other P2P games, bingo, mobile, live gaming, land-based terminal and fixed-
odds game are fully inter-compatible and can be freely incorporated as stand-alone applications, accessed and funded by the operators’
players through the same user account and managed by the operator by means of a single, powerful management interface.
Basis of preparation
The Directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future and that
it is therefore appropriate to adopt the going concern basis in preparing its financial statements.
Note 2 – Significant accounting policies
The significant accounting policies followed in the preparation of the financial information, on a consistent basis, are:
Accounting principles
This financial information has been prepared in accordance with International Financial Reporting Standards, International Accounting
standards and interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB) as adopted by the European
Union ("adopted IFRSs"). In the current year the Group has adopted all of the new and revised standards and interpretations issued by the
IASB and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB, as they have been adopted by the European
Union, that are relevant to its operations and effective for accounting periods beginning on 1 January 2016.
New standards, interpretations and amendments effective from 1 January 2016
There are no new standards, interpretations or amendments which are effective for periods beginning on or before 1 January 2016 which
have a material effect on the Group’s financial information.
The Directors are still considering the potential impact of IFRS 15: Revenue from contracts with customers, and IFRS 9: Financial Instruments,
but do not expect these standards to have a material effect on the Group’s future financial information. The Directors are still considering
the potential impact of IFRS 16: Leases but expect a material adjustment to arise on transition as the Group has material lease commitments.
Other than as noted, the Directors do not expect that any other new standards, interpretations and amendments which are effective for
periods beginning after 1 January 2016 to have a material effect on the Group’s future financial information.
Basis of consolidation
Where the Company has control over an investee it is classified as a subsidiary. The Company controls an investee if all three of the
following elements are present: power over the investee; exposure to variable returns from the investee; and the ability of the investor
to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may
be a change in any of these elements of control.
The consolidated financial information presents the results of the Group as if they formed a single entity. Intercompany transactions
and balances between Group companies are therefore eliminated in full.
The consolidated financial information incorporates the results of business combinations using the acquisition method. In the statement
of financial position, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the
acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date
on which control is obtained. They are deconsolidated from the date on which control ceases.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
110
Notes to the financial statements continued
Note 2 – Significant accounting policies continued
Foreign currency
The financial information of the Gaming division, which includes the Company and some of its subsidiaries is prepared in Euros
(the functional currency), which is the currency that best reflects the economic substance of the underlying events and circumstances
relevant to the Gaming division. Transactions and balances in foreign currencies are converted into Euros in accordance with the principles
set forth by IAS 21 (‘The Effects of Changes in Foreign Exchange Rates’). Accordingly, transactions and balances have been converted into
the presentation currency of Euros as follows:
• Monetary assets and liabilities – at the rate of exchange applicable at the balance sheet date; and
• Income and expense items – at exchange rates applicable as of the date of recognition of those items. Non-monetary items are
converted at the rate of exchange used to convert the related balance sheet items i.e. at the time of the transaction. Exchange gains
and losses from the aforementioned conversion are recognised in the consolidated statement of comprehensive income.
The financial information of the Financials division is prepared in US dollars (the functional currency), which is the currency that best reflects
the economic substance of the underlying events and circumstances relevant to the Financials division. The transactions and balances are
converted into the presentation currency of Euros as follows:
• Assets and liabilities – at the rate of exchange applicable at the balance sheet date; and
• Income and expense items – at average exchange rates applicable at the period of recognition of those items;
• Equity – at historic rate.
Exchange gains and losses from the aforementioned conversion are recognised in the foreign exchange reserve.
Revenue recognition
The Group’s principal revenue streams and their respective accounting treatments are discussed below:
Royalty income
Royalty income relating to licensed technology and the provision of certain services provided via various distribution channels (online,
mobile or land-based interfaces). Royalty income is based on the underlying gaming revenue earned by our licensees and is recognised
in the accounting periods in which the gaming transactions occur.
Trading income
Trading income represents gains (including commission) and losses arising on client trading activity, primarily in contracts for difference
on shares, indexes, commodities and foreign exchange. Open client positions are carried at fair market value and gains and losses arising
on this valuation are recognised in revenue as well as gains and losses realised on positions that have closed.
Fixed-fee income
Other revenue includes revenue derived from the provision of certain services and licensed technology for which charges are based on a
fixed fee and stepped according to the usage of the service/technology in each accounting period. Income is recognised over the period
of service once the obligations under the contracts have passed. Where amounts are billed and obligations not met, revenue is deferred.
Fixed-term arrangements
Other income receivable under fixed-term arrangements is recognised as revenue over the term of the agreement on a straight-line basis.
Distribution costs
Distribution costs represent the direct costs of the function of providing services to customers, costs of the development function and
advertising costs.
Share-based payments
Certain employees participate in the Group’s share option plans which commenced with effect from 1 December 2005. The fair value of the
equity settled options granted is charged to the consolidated statement of comprehensive income on a straight-line basis over the vesting
period and the credit is taken to equity, based on the Group’s estimate of shares that will eventually vest. Fair value is determined by the
Black-Scholes and Binomial valuation models. The share options plan does not have any performance conditions other than continued
service. Where equity settled share options are settled in cash at the Group’s discretion the debit is taken to equity.
The Group has also granted awards to be distributed from the Group’s Employee Benefit Trust. The fair value of these awards is based
on the market price at the date of the grant, some of the grants have performance conditions.
Playtech plc Annual Report and Accounts 2016 111
Note 2 – Significant accounting policies continued
Income taxes and deferred taxation
Provision for income taxes is calculated in accordance with the tax legislations and applicable tax rates in force at the balance sheet date
in the countries in which the Group companies are incorporated.
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated balance sheet differs
from its tax base, except for differences arising on:
• The initial recognition of goodwill;
• The initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects
neither accounting or taxable profit; and
• Investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference
and it is probable that the difference will not reverse in the foreseeable future.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date
and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities
and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
• The same taxable Group company; or
• Different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle
the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be
settled or recovered.
Dividend distribution
Final dividends are recorded in the Group’s financial information in the period in which they are approved by the Group’s shareholders.
Interim dividends are recognised when paid.
Property, plant and equipment
Property, plant and equipment comprise computers and gaming machines, buildings and leasehold and buildings improvements, office
furniture and equipment, and motor vehicles and are stated at cost less accumulated depreciation. Carrying amounts are reviewed on each
balance sheet date for impairment. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written
down immediately to its recoverable amount.
Depreciation is calculated to write off the cost of fixed assets on a straight-line basis over the expected useful lives of the assets
concerned. The principal annual rates used for this purpose, which are consistent with those of the previous years, are:
Computers and gaming machines
Office furniture and equipment
Freehold and leasehold buildings and improvements
Motor vehicles
%
20-33
7-33
10-20, or over the length of the lease
15
Subsequent expenditures are included in the asset carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits will flow to the Group and the cost of the item can be measured reliably. All other repairs and
maintenance are charged to the income statement during the financial period in which they are incurred.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in the consolidated
statement of comprehensive income.
Business combinations
The consolidated financial information incorporates the results of business combinations using the purchase method. In the consolidated
balance sheet, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the
acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the
date on which control is obtained.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 112
Notes to the financial statements continued
Note 2 – Significant accounting policies continued
Put/Call options
Where a Put/Call option is entered into over the non-controlling interest the ownership risks and rewards of the shares relating to the option
are analysed to determine whether the equity is attributable to the non-controlling interest or the parent. The non-controlling interest is
recognised if the risks and rewards of ownership of those shares remain with them.
A financial liability is recorded to reflect the option. All subsequent changes to the liability (other than the cash settlement) are recognised
in profit or loss.
Where the significant risks and rewards of ownership remain with the non-controlling interest the non-controlling interest continues
to be recognised and is allocated its share of profits and losses.
Where the significant risks and rewards of ownership reside with the controlling interest, the financial liability recognised offsets the
non-controlling interest.
Investments in subsidiary undertakings
Investments in subsidiary undertakings are recognised at cost less, if any, provision for impairment.
Intangible assets
Intangible assets comprise externally acquired patents, domains and customer lists. Intangible assets also include internally generated
capitalised software development costs. All such intangible assets are stated at cost less accumulated amortisation. Where intangible
assets are acquired as part of a business combination they are recorded initially at their fair value. Carrying amounts are reviewed on
each balance sheet date for impairment. Where the carrying amount of an asset is greater than its estimated recoverable amount, it
is written down to its recoverable amount.
Amortisation is calculated at annual rates estimated to write off the costs of the assets over their expected useful lives and is charged
to operating expenses from the point the asset is brought into use. The principal annual rates used for this purpose, which are consistent
with those of the previous years, are:
Domain names
Internally generated capitalised development costs
Technology IP
Customer lists
Affiliate contracts
Patents and licences
%
Nil
20-33
13-33
In line with projected cash flows or 7-20
5-12.5
Over the expected useful lives 10-33
Management believes that the useful life of the domain names is indefinite. Domain names are reviewed for impairment annually.
Expenditure incurred on development activities including the Group’s software development is capitalised only where the expenditure
will lead to new or substantially improved products, the products are technically and commercially feasible and the Group has sufficient
resources to complete development.
Subsequent expenditure on capitalised intangible assets is capitalised only where it clearly increases the economic benefits to be derived
from the asset to which it relates. All other expenditure, including that incurred in order to maintain an intangible asset’s current level of
performance, is expensed as incurred.
Playtech plc Annual Report and Accounts 2016
113
Note 2 – Significant accounting policies continued
Goodwill
Goodwill represents the excess of the cost of a business combination over, in the case of business combinations completed prior
to 1 January 2010, the Group’s interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired and, in the case
of business combinations completed on or after 1 January 2010, the total acquisition date fair value of the identifiable assets, liabilities
and contingent liabilities acquired.
For business combinations completed prior to 1 January 2010, cost comprised the fair value of assets given, and liabilities assumed, plus
any direct costs of acquisition. Changes in the estimated value of contingent consideration arising on business combinations completed
by this date were treated as an adjustment to cost and, in consequence, resulted in a change in the carrying value of goodwill.
For business combinations completed on or after 1 January 2010, cost comprises the fair value of assets given and liabilities assumed,
plus the amount of any non-controlling interests in the acquired business. Contingent consideration is included in cost at its acquisition
date fair value and, in the case of contingent consideration classified as a financial liability, remeasured subsequently through profit
or loss. For combinations completed on or after 1 January 2010, direct costs of acquisition are recognised immediately as an expense
in the consolidated statement of comprehensive income, within administrative costs.
Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated income statement.
Goodwill is not amortised and is reviewed for impairment, annually or more specifically if events or changes in circumstances indicate that
the carrying value may be impaired.
Impairment of non-financial assets
Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial year
end. Other non-financial assets are subject to annual impairment tests whenever events or changes in circumstances indicate that their
carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value
in use and fair value less costs to sell), the asset is written down accordingly.
Where it is not possible to establish the recoverable amount of an individual asset, the impairment test is carried out on the asset’s cash
generating unit (i.e. the lowest group of assets in which the asset belongs for which there are separately identifiable cash flows). Goodwill
is allocated on initial recognition to each of the Group’s cash generating units that are expected to benefit from the synergies of the
combination giving rise to the goodwill.
Impairment charges are included in the administrative expenses line item in the consolidated statement of comprehensive income, except
to the extent they reverse gains previously recognised in the consolidated statement of comprehensive income. An impairment loss
recognised for goodwill is not reversed.
Associates and structured agreements
Where the Group has the power to participate in (but not control) the financial and operating policy decisions of another entity, it is classified
as an associate or structured agreements, as appropriate. Associates are initially recognised in the consolidated statement of financial
position at cost. Subsequently associates are accounted for using the equity method, where the Group’s share of post-acquisition profits
and losses and other comprehensive income is recognised in the consolidated statement of profit and loss and other comprehensive
income (except for losses in excess of the Group’s investment in the associate unless there is an obligation to make good those losses).
Profits and losses arising on transactions between the Group and its associates are recognised only to the extent of unrelated investors’
interests in the associate. The investor’s share in the associate’s profits and losses resulting from these transactions is eliminated against
the carrying value of the associate.
Any premium paid for an associate above the fair value of the Group’s share of the identifiable assets, liabilities and contingent liabilities
acquired is capitalised and included in the carrying amount of the associate. Where there is objective evidence that the investment in an
associate has been impaired the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 114
Notes to the financial statements continued
Note 2 – Significant accounting policies continued
Joint ventures
The Group is a party to a joint arrangement when there is a contractual arrangement that confers joint control over the relevant activities of
the arrangement to the Group and at least one other party. Joint control is assessed under the same principles as control over subsidiaries.
The Group classifies its interests in joint arrangements as either:
• Joint ventures – where the Group has rights to only the net assets of the joint arrangement; or
• Joint operations – where the Group has rights to both the assets and obligations for the liabilities of the joint arrangement.
In assessing the classification of interests in joint arrangements, the Group considers:
• The structure of the joint arrangement;
• The legal form of joint arrangements structured through a separate vehicle;
• The contractual terms of the joint arrangement agreement; and
• Any other facts and circumstances (including any other contractual arrangements).
The Group accounts for its interests in joint ventures in the same manner as investments in associates (i.e. using the equity method
– refer above).
Any premium paid for an investment in a joint venture above the fair value of the Group’s share of the identifiable assets, liabilities and
contingent liabilities acquired is capitalised and included in the carrying amount of the investment in joint venture. Where there is objective
evidence that the investment in a joint venture has been impaired the carrying amount of the investment is tested for impairment in the
same way as other non-financial assets.
The Group accounts for its interests in joint operations by recognising its share of assets, liabilities, revenues and expenses in accordance
with its contractually conferred rights and obligations.
Financial assets
The Group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was
acquired. The Group has not classified any of its financial assets as held to maturity. The Group does not hold any financial assets at fair
value through profit and loss.
Loans and receivables
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise
principally through the provision of services to customers (e.g. trade receivables), but also incorporate other types of contractual monetary
asset. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue and are
subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.
The Group’s receivables comprise trade and other receivables, cash and cash equivalents, and loans to customers in the balance sheet.
Trade receivables which principally represent amounts due from licensees are carried at original invoice value less an estimate made for
bad and doubtful debts based on a review of all outstanding amounts at the year end. An estimate for doubtful debts is made when there
is objective evidence that the Group will not be able to collect amounts due according to the original terms of receivables. Bad debts are
written off when identified.
Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with
original maturities of three months or less. Where cash is on deposit with maturity dates greater than three months, it is disclosed within
other receivables.
Loans to customers are in respect of formal loan agreements entered into between the Group and its customers, which are carried
at original advanced value less provision for impairment (or fair value on inception, if different). They are classified between current
and non-current assets in accordance with the contractual repayment terms of each loan agreement.
Playtech plc Annual Report and Accounts 2016 115
Note 2 – Significant accounting policies continued
Financial assets continued
Available-for-sale financial assets
Non-derivative financial assets classified as available-for-sale comprise the Group’s strategic investments in entities not qualifying as
subsidiaries, associates or jointly controlled entities. They are carried at fair value with changes in fair value generally recognised in other
comprehensive income and accumulated in the available for sale reserve. In accordance with IAS 39, a significant or prolonged decline
in the fair value of an available-for-sale financial asset is recognised in the consolidated statement of comprehensive income.
Purchases and sales of available-for-sale financial assets are recognised on settlement date with any change in fair value between trade
date and settlement date being recognised in the available-for-sale reserve. On sale, the amount held in the available-for-sale reserve
associated with that asset is removed from equity and recognised in the consolidated statement of comprehensive income.
Financial liabilities
Trade payables and other short-term monetary liabilities are initially recognised at fair value and subsequently carried at amortised cost
using the effective interest method.
Several of the Group’s licensees participate in progressive jackpot games. Each time a progressive jackpot game is played, a preset
amount is added to a cumulative jackpot for that specific game. The accrual for the jackpot at the consolidated balance sheet date is
included in progressive jackpot and other operators’ jackpot liabilities.
The Group’s liability in connection with client funds includes customer deposits offset by the fair value of open positions, the movement
on which is recognised through profit or loss. Such open positions are classified as short-term financial derivatives in the balance sheet.
Liability components of convertible loan notes are measured as described further below.
Loans and bank borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the
instrument. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method,
which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in
the consolidated balance sheet. Interest expense in this context includes initial transaction costs and premia payable on redemption,
as well as any interest or coupon payable while the liability is outstanding.
Fair value measurement hierarchy
IFRS 7 and IFRS 13 require certain disclosure which requires the classification of financial assets and financial liabilities measured at fair
value using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurement (see Note 30).
The fair value hierarchy has the following levels:
a) Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
b) Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. – derived from prices) (Level 2); and
c) Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
The level in the fair value hierarchy within which the financial asset or financial liability is categorised is determined on the basis of the
lowest level input that is significant to the fair value measurement. Financial assets and financial liabilities are classified in their entirety
into only one of the three levels. The Group measures its available-for-sale investments at fair value – refer to Note 14 for more detailed
information in respect of the fair value measurement.
Share capital
Ordinary shares are classified as equity and are stated at the proceeds received net of direct issue costs.
Employee Benefit Trust
Consideration paid/received for the purchase/sale of shares subsequently put in the Employee Benefit Trust is recognised directly in
equity. The cost of treasury shares held is presented as a separate reserve (the ‘Employee Benefit Trust reserve’). Any excess of the
consideration received on the sale of treasury shares over the weighted average cost of the shares sold is credited to retained earnings.
Share buyback
The Group cannot hold treasury shares under the Group’s memorandum and articles of association and therefore the shares are cancelled
after the buyback.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 116
Notes to the financial statements continued
Note 2 – Significant accounting policies continued
Convertible bond
The proceeds received on issue of the Group’s convertible bond are allocated into their liability and equity components. The amount
initially attributed to the debt component equals the discounted cash flows using a market rate of interest that would be payable on
a similar debt instrument that does not include an option to convert. Subsequently, the debt component is accounted for as a financial
liability measured at amortised cost until extinguished on conversion or maturity of the bond, where the option meets the definition
of an equity instrument. The remainder of the proceeds is allocated to the conversion option and is recognised in the ‘Convertible
bond option reserve’ within shareholders’ equity.
Long-term liabilities
Long-term liabilities are those liabilities that are due for repayment or settlement in more than 12 months from balance sheet date.
Provisions
Provisions, which are liabilities of uncertain timing or amount, are recognised when the Group has a present obligation as a result
of past events, if it is probable that an outflow of funds will be required to settle the obligation and a reliable estimate of the amount
of the obligation can be made.
Leases
Where substantially all of the risks and rewards incidental to ownership are not transferred to the Group (an ‘operating lease’), the total
rentals payable under the lease are charged to the consolidated statement of comprehensive income on a straight-line basis over
the lease term. The aggregate benefit of lease incentives is recognised as a reduction of the rental expense over the lease term
on a straight-line basis.
Non-controlling interests
Non-controlling interest is recognised at the present ownership instruments’ proportionate share in the recognised amounts of the
acquiree’s identifiable net assets. The total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the
parent and to the non-controlling interests in proportion to their relative ownership interests.
Adjusted results
The Directors believe that in order to best represent the trading performance and results of the Group, the reported numbers should
exclude certain non-cash and one-off items including the below. Accordingly, these are the key performance metrics used by the Board
when assessing the Group’s financial performance. Such exclusions include:
• Material non-cash items, e.g. amortisation of intangibles on acquisition, change in fair value of available-for-sale investments in the
income statement and Employee Share Option Plan expenses; and
• Material one-off items, e.g. gain on sale of investment in associates, professional services cost related to acquisitions, irrecoverable
deposit and professional fees on abandoned acquisitions and other exceptional projects.
Underlying adjusted results exclude the following items in order to present a more accurate ‘like for like’ comparison over the
comparable period:
• The impact of acquisitions made in the period or in the comparable period; and
• Specific material agreements, adjustments to previous years or currency fluctuations affecting the results in the period and the
comparable period.
A full reconciliation of adjustments is included in Note 5.
Playtech plc Annual Report and Accounts 2016 117
Note 3 – Critical accounting estimates and judgements
The preparation of financial information in conformity with generally accepted accounting principles requires the use of estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial information and the reported amounts of revenues and expenses during the reporting period. Although these estimates
are based on management’s best knowledge of current events and actions, actual results ultimately may differ from those estimates.
The areas requiring the use of estimates and critical judgements that may potentially have a significant impact on the Group’s earnings
and financial position are detailed below.
Estimates and assumptions
Impairment of goodwill and other intangibles
The Group is required to test, on an annual basis, whether goodwill, intangible assets not yet in use and indefinite life assets have suffered
any impairment. The Group is required to test other intangibles if events or changes in circumstances indicate that their carrying amount
may not be recoverable. The recoverable amount is determined based on value in use calculations. The use of this method requires the
estimation of future cash flows and the choice of a discount rate in order to calculate the present value of the cash flows. Such estimates
are based on management’s experience of the business, but actual outcomes may vary. More details including carrying values are
included in Note 12.
Amortisation of development costs and other intangible assets and the useful life of property, plant and equipment
Intangible assets and property, plant and equipment are amortised or depreciated over their useful lives. Useful lives are based on
management’s estimates of the period that the assets will generate revenue, which are periodically reviewed for continued appropriateness.
Changes to estimates can result in significant variations in the amounts charged to the consolidated statement of comprehensive income
in specific periods. More details including carrying values are included in Notes 11 and 12.
Compliance risk – Legal, regulatory and taxation
Legal proceedings and contingent liabilities
Management regularly monitors the key risks affecting the Group, including the regulatory environment in which the Group operates.
A provision will be made where there is a present obligation from a past event, a transfer of economic benefits is probable and the
amount of costs of the transfer can be estimated reliably. In instances where the criteria are not met, a contingent liability may be disclosed
in the notes to the financial information. More details are included in Note 31.
Income taxes
The Group is subject to income tax in jurisdictions in which its companies are incorporated and registered and judgement is required in
determining the provision for income taxes. The Group is basing its tax provisions on current (and enacted but not yet implemented) tax
rules and practices, together with advice received from professional advisers, and believes that its accruals for tax liabilities are adequate
for all open enquiry years based on its assessment of many factors including past experience and interpretations of tax law. The Group
constantly monitors changes in legislation and updates its accruals accordingly. The principal risks relating to the Group’s tax liabilities,
and the sustainability of the underlying effective tax rate, arise from domestic and international tax laws and practices in the e-commerce
environment continuing to evolve, including the corporate tax rates in jurisdictions where the Group has a significant asset or people
presence. More details are included in Note 8.
Regulatory
The Group’s subsidiary, Safecap Investments Limited (“Safecap”), is primarily regulated by the Cyprus Securities and Exchange Commission.
The regulatory environment is regularly changing and imposes significant demands of the resources of the subsidiary. As the subsidiary’s
activities expand, offering new products and penetrating new markets, these regulatory demands will inevitably increase. The increasing
complexity of the Group’s operations require training and recruitment be tailored to meet these regulatory demands and the costs of
compliance are expected to increase.
In addition to the above, Safecap manages its capital resources on the basis of capital adequacy requirements as prescribed by its
regulator, together with its own assessment of other business risks and sensitivities which may impact the business. Capital adequacy
requirements are monitored on a real-time basis, including a ‘buffer’ which is deemed sufficient by management to ensure that capital
requirements are not breached at any time.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
118
Notes to the financial statements continued
Note 3 – Critical accounting estimates and judgements continued
Structured agreements
For all arrangements structured in separate vehicles the Group must assess the substance of the arrangement in determining whether
it meets the definition to be classified as an associate or joint venture. Factors the Group must consider include:
• Structure;
• Legal form;
• Contractual agreement; and
• Other facts and circumstances.
Upon consideration of these factors, the Group has determined that all of its arrangements structured through separate vehicles give
it significant influence but not joint control rights to the net assets and are therefore classified as associates.
Share-based payments
The Group has a share-based remuneration scheme for employees. The fair value of share options is estimated by using the Black-Scholes
and Binomial models, on the date of grant based on certain assumptions. Those assumptions are described in Note 10 and include, among
others, the dividend growth rate, expected share price volatility, expected life of the options and number of options expected to vest.
Determination of fair value of intangible assets acquired on business combinations
The fair value of the intangible assets acquired is based on the discounted cash flows expected to be derived from the use of the asset.
Further information in relation to the determination of fair value of intangible assets acquired is given in Notes 26 and 27.
Determination of the fair value of contingent consideration and redemption liability
The fair value of contingent consideration and redemption liability is based on the probability of expected cash flow outcomes and the
assessment of present values using appropriate discount rates. Recognition of Put/Call options over non-controlling interest is based on
consideration of the ownership risks and rewards of the shares relating to the option to determine whether the equity is attributable to the
non-controlling interest or the parent. Further information in relation to the determination of the fair value of contingent consideration is
given in Notes 26 and 27.
Note 4 – Segment information
The Group’s reportable segments are strategic business units that offer different products and services.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.
The chief operating decision-makers have been identified as the management team including the Chief Executive Officer and the
Chief Financial Officer.
The operating segments identified are:
• Gaming: including Casino, Services, Sport, Bingo, Poker and land-based; and
• Financials: including B2C and B2B CFD.
The Group-wide profit measures are Adjusted EBITDA and Adjusted Net Profit (see Note 5). Management believes the adjusted profit
measures represent more closely the underlying trading performance of the business. No other differences exist between the basis
of preparation of the performance measures used by management and the figures in the Group financial information.
There is no allocation of operating expenses, profit measures, assets and liabilities to individual products within the segments.
Playtech plc Annual Report and Accounts 2016 119
Note 4 – Segment information continued
Year ended 31 December 2016
Casino
€’000
Services
€’000
Sport
€’000
Land-
based
€’000
Bingo
€’000
Poker
€’000
Other
€’000
Total
Gaming
€’000
Total
Financials Consolidated
€’000
€’000
Total revenue
Adjusted EBITDA
Adjusted Net Profit
Total assets
Total liabilities
354,595
151,557
30,915
57,048
17,846
9,092
21,913 642,966
286,863
190,338
1,881,342
797,588
65,592
15,370
16,883
194,904
178,939
708,558
302,233
207,221
2,076,246
976,527
Year ended 31 December 2015
Casino
€’000
Services
€’000
Sport
€’000
Land-
based
€’000
Bingo
€’000
Poker
€’000
Other
€’000
Total
Gaming
€’000
Total
Financials Consolidated
€’000
€’000
Total revenue
Adjusted EBITDA
Adjusted Net Profit
Total assets
Total liabilities
308,712
155,625
32,206
29,749
20,468
11,241
12,079 570,080
236,022
192,176
1,911,203
672,164
60,006
15,866
14,233
161,050
139,394
630,086
251,888
206,409
2,072,253
811,558
In 2016, there were two licensees (2015: two licensees) who individually accounted for more than 10% of the total gaming revenue
and the total revenue of the Group. Aggregate revenue from these licensees totalled €255.4 million (2015: €192.3 million).
Geographical analysis of revenues by jurisdiction of gaming licence
Analysis by geographical regions is made according to the jurisdiction of the gaming licence of the licensee. This does not reflect the
region of the end users of the Group’s licensees whose locations are worldwide.
Philippines
UK
Rest of World
Antigua
Gibraltar
Malta
Italy
Spain
Curacao
2016
€’000
257,002
188,847
81,595
28,891
25,410
25,341
17,132
12,654
6,094
2015
€’000
199,608
179,510
64,141
53,512
30,285
10,798
15,591
6,209
10,426
642,966
570,080
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
120
Notes to the financial statements continued
Note 4 – Segment information continued
Geographical analysis of non-current assets
The Group’s information about its non-current assets by location of the domicile are detailed below:
British Virgin Islands
Isle of Man
Austria
UK
Sweden
Cyprus
Denmark
Luxemburg
Gibraltar
Netherland
Latvia
Rest of World
The Group’s information about its non-current assets by location of the assets are detailed below:
British Virgin Islands
UK
Austria
Sweden
Cyprus
Gibraltar
Denmark
Isle of Man
Netherland
Latvia
Malta
Philippines
Rest of World
2016
€’000
560,528
208,603
162,097
108,915
76,670
61,690
51,583
51,352
32,322
19,159
13,947
36,827
2015*
€’000
571,446
192,452
–
90,550
24,714
53,560
–
65,874
37,032
18,579
11,243
46,467
1,383,693
1,111,917
2016
€’000
552,766
349,190
162,097
76,670
50,018
32,322
37,261
27,664
15,959
13,947
12,601
6,711
46,487
2015*
€’000
571,447
316,565
–
24,714
53,560
37,032
–
32,311
18,579
11,243
–
12,929
33,537
1,383,693
1,111,917
* 2015 comparative numbers were adjusted to reflect the location of intangible assets based on the location of the underlying acquired businesses rather than the location
of the acquirer.
Playtech plc Annual Report and Accounts 2016
121
2016
€’000
345,934
(5,144)
2015
€’000
331,705
(3,914)
340,790
327,791
70,772
(1,796)
(3,441)
–
(5,237)
65,535
17,887
2,205
75,173
12,335
107,600
(44,318)
(12,335)
50,947
708,558
45,608
754,166
(113,311)
64,370
(990)
(6,181)
(6,792)
(13,963)
50,407
12,653
1,925
69,610
1,210
85,398
(41,751)
–
43,647
630,086
–
630,086
(62,881)
Note 5 – Adjusted items
The following tables give a full reconciliation between adjusted and actual results:
Distribution costs before depreciation and amortisation
Employee stock option expenses
Adjusted distribution costs before depreciation and amortisation
Administrative expenses before depreciation and amortisation
Employee stock option expenses
Professional fees on acquisitions
Irrecoverable deposit and professional fees on abandoned acquisitions
Total adjusted items
Adjusted administrative expenses before depreciation and amortisation
Depreciation – distribution costs
Depreciation – administrative costs
Amortisation – distribution costs
Impairment
Total depreciation and amortisation
Amortisation of intangibles on acquisitions – distribution costs
Impairment
Adjusted depreciation and amortisation
Revenue
Constant currency impact
Revenue on constant currency basis
Revenue related to acquisitions on a constant currency basis
Underlying revenue
640,855
567,205
EBITDA
Employee stock option expenses
Professional expenses on acquisitions
Irrecoverable deposit and professional fees on abandoned acquisitions
Adjusted EBITDA
Constant currency impact
Adjusted EBITDA on constant currency basis
EBITDA related to acquisitions on constant currency basis
Underlying Adjusted EBITDA
Profit for the year – attributable to owners of parent
Amortisation of intangibles on acquisitions
Impairments
Profit on disposal of investment in associates
Employee stock option expenses
Professional expenses on acquisitions
Irrecoverable deposit and professional fees on abandoned acquisitions
Non-cash accrued bond interest
Movement in deferred and contingent consideration
Adjusted profit for the year – attributable to owners of the parent
Constant currency impact
Adjusted net loss/(profit) related to acquisitions on constant currency basis
Adjusted net profit related to acquisitions on constant currency basis
Underlying adjusted profit for the year – attributable to owners of the parent
291,852
6,940
3,441
–
302,233
29,353
331,586
(29,774)
301,812
193,030
44,318
12,335
(64,459)
6,940
3,441
–
9,802
832
206,239
72,110
278,349
(6,673)
271,676
234,011
4,904
6,181
6,792
251,888
–
251,888
(16,774)
235,114
135,810
41,751
–
–
4,904
6,181
6,792
9,388
1,088
205,914
(10,578)
195,336
(11,333)
184,003
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
122
Notes to the financial statements continued
Note 6 – EBITDA
EBITDA is stated after charging:
Directors’ compensation
Short-term benefits of Directors
Share-based benefits of Directors
Bonuses to Executive Directors
Auditors’ remuneration
Group audit and parent company (BDO)
Audit of subsidiaries (BDO)
Audit of subsidiaries (non-BDO)
Total audit fees
Non-audit services provided by parent company auditor and its international member firms
Corporate finance services related to acquisitions
Other non-audit services
Tax advisory services
Total non-audit fees
2016
€’000
2,231
297
2,071
4,599
362
599
207
1,168
320
133
418
871
2015
€’000
2,359
444
1,942
4,745
362
544
194
1,100
883
60
213
1,156
Development costs (net of capitalised development costs of €35.5 million (2015: €29.7 million)
88,036
80,988
Note 7 – Financing income and costs
A. Finance income
Interest received
Return on available-for-sale investments
Exchange differences
B. Finance cost
Finance cost – movement in contingent consideration
Exchange differences
Notional interest expenses on convertible bonds
Nominal interest expenses on convertible bonds
Bank charges and interest paid
Net financing cost
2016
€’000
2015
€’000
1,376
11,894
–
1,741
2,311
10,579
13,270
14,631
(832)
(44,696)
(9,802)
(1,485)
(4,304)
(1,088)
–
(9,388)
(1,485)
(3,705)
(61,119)
(15,666)
(47,849)
(1,035)
Playtech plc Annual Report and Accounts 2016
123
2016
€’000
9,652
(3,349)
2015
€’000
7,759
(2,113)
6,303
5,646
2016
€’000
200,315
–
2015
€’000
141,951
–
6,303
5,646
Note 8 – Taxation
Current income tax
Income tax on profits of subsidiary operations
Deferred tax (Note 24)
Total tax charge
The tax charge for the year can be reconciled to accounting profit as follows:
Profit before taxation
Tax at effective rate in Isle of Man
Higher rates of current income tax in overseas jurisdictions
The Group is tax registered, managed and controlled from the Isle of Man where the corporate tax rate is set to zero. The majority of profits
arise in the Isle of Man and British Virgin Islands, in which the corporate tax rate is set to zero as well. The Group’s subsidiaries are located
in different jurisdictions. The subsidiaries are taxed on their residual profit.
The deferred tax is due to the reversal of temporary differences arising on the identification of the intangible assets acquired in the current
and prior years.
Note 9 – Earnings per share
Earnings per share have been calculated using the weighted average number of shares in issue during the relevant financial periods.
The weighted average number of equity shares in issue and the earnings, being profit after tax is as follows:
Profit for the year attributable to owners of the parent
Add interest on convertible bond
2016
Actual
€’000
193,030
11,287
2016
Adjusted
€’000
206,239
1,485
2015
Actual
€’000
135,810
10,873
2015
Adjusted
€’000
205,914
1,485
Earnings used in diluted EPS
204,317
207,724
146,683
207,399
Basic (€cents)
Diluted (€cents)
61.4
58.8
65.7
59.8
44.5
43.7
67.5
61.8
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
124
Notes to the financial statements continued
Note 9 – Earnings per share continued
Denominator – basic
Weighted average number of equity shares
Denominator – diluted
Weighted average number of equity shares
Weighted average number of option shares
Weighted average number of convertible bonds
2016
Actual
Number
2016
Adjusted
Number
2015
Actual*
Number
2015
Adjusted*
Number
314,130,671
314,130,671
305,086,266 305,086,266
314,130,671
2,326,838
31,059,798
314,130,671
2,326,838
31,059,798
305,086,266 305,086,266
411,618
30,170,356
411,618
30,170,356
Weighted average number of shares
347,517,307
347,517,307
335,668,240 335,668,240
* Earnings used in diluted EPS and the weighted average number of shares used in diluted EPS for 2015 were adjusted to reflect the impact of the convertible bonds.
As at 31 December 2016, none (2015: none) of the outstanding share options were included in the calculation of diluted EPS as their
exercise price is greater than the weighted average share price during the year (i.e. they are out of the money) and therefore it would not
be advantageous for the holders to exercise those options. The total number of options in issue is disclosed in Note 10.
Note 10 – Employee benefits
Total staff costs comprise the following:
Salaries and employee-related costs
Employee stock option costs
Average number of employees:
Distribution
General and administration
2016
€’000
234,410
6,940
2015
€’000
219,676
4,904
241,350
224,580
4,782
472
5,254
4,837
324
5,161
The Group has the following employee share option plans (“ESOP”) for the granting of non-transferable options to certain employees:
• Playtech 2005 Share Option Plan (“the Plan”) and Israeli plans, options granted under the plans vest on the first day on which they
become exercisable which is typically between one to four years after grant date;
• GTS 2010 Company Share Option Plan (“CSOP”), options granted under the plan vest on the first day on which they become exercisable
which is three years after grant date; and
• Long Term Incentive Plan 2012 (“LTIP”), awards (options, conditional awards or a forfeitable share award) granted under the plan vest
on the first day on which they become exercisable which is typically between 18 to 36 months after grant date.
The overall term of the ESOP is five to ten years. These options are settled in equity once exercised. Option prices are either denominated
in US dollar or Sterling, depending on the option grant terms.
During 2012, the Group amended some of the rules of the equity based Plan. The amendments allow the Group, at the employee’s
consent, to settle fully vested and exercisable options for cash instead of issuing shares.
The Group granted 203,487 and 1,500,529 Nil cost awards in December 2015 and December 2016 respectively.
Playtech plc Annual Report and Accounts 2016
125
Note 10 – Employee benefits continued
At 31 December 2016, options under these schemes were outstanding over:
2016
Number
2015
Number
Shares vested between 21 June 2007 and 21 June 2009 at an exercise price of $5.75 per share
Shares vested between 21 June 2007 and 21 June 2009 at an exercise price of £3.16 per share
Shares vested between 11 December 2007 and 11 December 2009 at an exercise price of £2.21 per share
Shares vested between 18 June 2008 and 18 June 2010 at an exercise price of £3.96 per share
Shares vested between 31 December 2008 and 31 December 2010 at an exercise price of $7.68 per share
Shares vested between 31 December 2008 and 31 December 2010 at an exercise price of £3.86 per share
Shares vested between 25 April 2009 and 25 April 2012 at an exercise price of £4.35 per share
Shares vested between 28 November 2009 and 28 November 2012 at an exercise price of £3.20 per share
Shares vested on 22 May 2012 at an exercise price of £4.155 per share
Shares vested between 18 April 2012 and 18 April 2013 at an exercise price of £5.12 per share
Shares vested between 26 August 2012 and 26 August 2013 at an exercise price of £4.16 per share
Shares vested on 10 March 2015 at an exercise price of £3.5225 per share
Shares vested on 23 June 2016 at an exercise price of £3.48 per share
Shares will vest between 17 June 2016 and 17 June 2017 at Nil cost
Shares vested on 21 December 2016 at Nil cost
Shares will vest on 1 March 2018 at Nil cost
Shares will vest between 1 September 2016 and 1 March 2018 at Nil cost
Shares will vest on 1 March 2019 at Nil cost
Shares will vest between 1 September 2017 and 1 March 2019 at Nil cost
Shares will vest on 21 December 2019 at Nil cost
–
–
–
3,750
–
5,000
10,000
29,952
20,000
23,200
35,811
49,000
–
28,713
64,935
146,919
383,071
246,728
677,338
111,720
1,667
10,000
5,334
6,267
3,000
7,000
10,000
37,518
20,000
23,200
37,111
73,000
13,000
57,425
99,291
146,919
56,568
–
–
–
1,836,137
607,300
Total number of shares exercisable as of 31 December 2016 is 376,213 (2015: 247,097).
The following table illustrates the number and weighted average exercise prices of share options for the ESOP.
Outstanding at the beginning of the year
Granted
Forfeited
Exercised
2016
Number of
options
607,300
1,500,529
(13,215)
(258,477)
2015
Number of
options
2016
Weighted
average
exercise price
2015
Weighted
average
exercise price
1,209,873
360,203
(25,041)
$6.99, £1.52
Nil
Nil
(937,735) $6.99, £0.87
$5.27, £3.64
Nil
£4.44
$4.99, £3.64
Outstanding at the end of the year
1,836,137
607,300
£0.38
$6.99, £1.52
Included in the number of options exercised during the year are 14,061 options (2015: Nil) where a cash alternative was received.
The weighted average share price at the date of exercise of options was £8.718 (2015: £8.036).
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 126
Notes to the financial statements continued
Note 10 – Employee benefits continued
Share options outstanding at the end of the year have the following exercise prices:
Expiry date
Exercise price
2016
Number
2015
Number
Between 6 February 2016 and 11 December 2016
Between 15 May 2017 and 31 December 2017
Between 25 April 2018 and 31 December 2018
Between 22 May 2019 and 6 November 2019
Between 18 April 2020 and 26 August 2020
Between 10 March 2021 and 16 December 2021
21 June 2022
17 December 2024
17 December 2025
Between 21 December 2026 and 31 December 2026
Between $4.35 and $5.75 and between £1.72 and £3.16
Between $7.19 and $7.79 and between £3.39 and £3.96
$4.35 and between £3.17 and £5.31
Between £3.70 and £4.16
Between £4.16 and £5.12
Between £2.30 and £3.52
£3.48
Nil
Nil
Nil
–
8,750
39,952
20,000
59,011
49,000
–
93,648
529,990
1,035,786
17,001
16,267
47,518
20,000
60,311
73,000
13,000
156,716
203,487
–
1,836,137
607,300
Markets ESOP
Options granted under TradeFX 2009 Global Share Option Plan (“TradeFX Plan”) vest on the first day on which they become exercisable
which is typically between one to four years after grant date.
The overall term of the ESOP is ten years. These options are settled in equity once exercised. Option prices are either denominated
in US dollars or Sterling, depending on the option grant terms.
Total number of share options exercisable as of 31 December 2016 is 55,734 (2015: 10,126).
Shares vested between 1 June 2011 and 31 December 2016 at an exercise price of $4 per share
Shares vested between 1 November 2013 and 31 December 2016 at an exercise price of $12 per share
Shares vested between 1 December 2015 and 31 December 2016 at an exercise price of $70 per share
Shares vesting between 1 January 2016 and 31 August 2016 at an exercise price of $4 per share
Shares vesting between 1 January 2016 and 31 May 2017 at an exercise price of $12 per share
Shares vesting between 1 January 2017 and 31 August 2020 at an exercise price of $70 per share
2016
Number
3,800
4,338
47,596
55,734
–
612
103,715
2015
Number
4,089
5,537
500
10,126
2,749
10,838
145,186
104,327
158,773
160,061
168,899
Playtech plc Annual Report and Accounts 2016
127
Note 10 – Employee benefits continued
The following table illustrates the number and weighted average exercise prices of share options for the ESOP:
2016
Number of
options
2015
Number of
options
2016
Weighted
average
exercise price
2015
Weighted
average
exercise price
Outstanding at the beginning of the year
Granted through the year
Forfeited
Exercised
168,899
11,000
(12,410)
(7,428)
60,300
139,486
(29,838)
(1,049)
$60.7
$70
$36.75
$9.17
Outstanding at the end of the year
160,061
168,899
$66.64
$6.58
$70
$1.33
$4
$60.7
Included in the number of options exercised during the year are 1,049 options (2014: 25) where a cash alternative was received.
Share options outstanding at the end of the year have the following exercise prices:
Share options to be expired between 1 June 2020 and 1 August 2022 at an
exercise price of $4 per share
Share options to be expired between 1 September 2022 and
1 November 2023 at an exercise price of $12 per share
Share options to be expired between 1 December 2024 and 10 March 2025
at an exercise price of $70 per share
2016
Number
2015
Number
3,800
4,950
6,838
16,375
151,311
145,686
160,061
168,899
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
128
Notes to the financial statements continued
Note 11 – Property, plant and equipment
Computers
and gaming
machines
€’000
Office
furniture and
equipment
€’000
Freehold and
leasehold
buildings and
improvements
€’000
Motor
vehicles
€’000
Cost
At 1 January 2015
Additions
Acquired through business combinations
Disposals
Foreign exchange movements
At 31 December 2015
Accumulated depreciation
At 1 January 2015
Charge
Disposals
At 31 December 2015
Net book value
At 31 December 2015
At 31 December 2014
54,857
13,435
621
(1,723)
1
67,191
33,617
10,770
(976)
5,721
2,490
435
(190)
3
8,459
1,581
1,856
(172)
43,411
3,265
23,780
21,240
5,194
4,140
456
202
–
(144)
–
514
180
83
(61)
202
312
276
Computers
and gaming
machines
€’000
Office
furniture and
equipment Motor vehicles
€’000
€’000
Buildings and
leasehold
buildings and
improvements
€’000
Cost
At 1 January 2016
Additions
Acquired through business combinations
Disposals
Foreign exchange movements
67,191
17,816
14,392
(246)
53
8,459
2,560
1,049
(126)
23
At 31 December 2016
99,206
11,965
514
284
–
(92)
1
707
202
136
(64)
–
274
43,411
15,419
(206)
27
3,265
1,922
(60)
8
58,651
5,135
Accumulated depreciation
At 1 January 2016
Charge
Disposals
Foreign exchange movements
At 31 December 2016
Net book value
At 31 December 2016
40,555
6,830
433
25,075
72,893
Total
€’000
76,375
27,327
1,122
(2,066)
4
15,341
11,200
66
(9)
–
26,598
102,762
2,678
1,869
–
4,547
38,056
14,578
(1,209)
51,425
22,051
51,337
12,663
38,319
Total
€’000
102,762
26,224
15,485
(633)
78
26,598
5,564
44
(169)
1
32,038
143,916
4,547
2,615
(199)
–
51,425
20,092
(529)
35
6,963
71,023
Playtech plc Annual Report and Accounts 2016 129
Note 12 – Intangible assets
Patents,
domain names
and licences
€’000
Technology
IP
€’000
Development
costs
€’000
Customer list
& affiliates
€’000
Goodwill
€’000
Total
€’000
Cost
As of 1 January 2015
Additions
Assets acquired on business combinations
Impairment of intangible assets
Foreign exchange movements
23,168
4,331
35,059
–
333
26,661
–
16,416
–
105
90,145
31,357
2,177
(1,210)
41
226,840
–
81,536
–
775
205,097
–
261,834
–
2,282
571,911
35,688
397,022
(1,210)
3,536
As of 31 December 2015
62,891
43,182
122,510
309,151
469,213
1,006,947
Accumulated amortisation
As of 1 January 2015
Provision
Foreign exchange movements
8,674
5,713
(6)
13,149
3,930
(25)
44,346
20,249
30
124,597
35,448
(30)
As of 31 December 2015
14,381
17,054
64,625
160,015
–
–
–
–
190,766
65,340
(31)
256,075
Net book value
As of 31 December 2015
48,510
26,128
57,885
149,136
469,213
750,872
As of 31 December 2014
14,494
13,512
45,799
102,243
205,097
381,145
Patents,
domain names
and licences
€’000
Technology
IP
€’000
Development
costs
€’000
Customer list
& affiliates
€’000
Goodwill
€’000
Total
€’000
Cost
As of 1 January 2016
Additions
Disposals
Assets acquired on business combinations
Impairment of intangible asset
Foreign exchange movements
62,891
1,305
–
13,536
–
1,391
43,182
11,714
–
38,560
–
527
122,510
35,649
–
–
–
574
309,151
–
–
79,261
–
3,344
469,213
–
(5,312)
158,992
(12,335)
9,699
1,006,947
48,668
(5,312)
290,349
(12,335)
15,535
As of 31 December 2016
79,123
93,983
158,733
391,756
620,257
1,343,852
Accumulated amortisation
As of 1 January 2016
Provision
Foreign exchange movements
14,381
5,901
157
17,054
8,872
167
64,625
22,818
214
160,015
34,273
740
As of 31 December 2016
20,439
26,093
87,657
195,028
–
–
–
–
256,075
71,864
1,278
329,217
Net book value
As of 31 December 2016
58,684
67,890
71,076
196,728
620,257
1,014,635
The Group amortisation charge of €75.2 million (2015: €69.9 million) also includes €3.3 million (2015: €4.2 million) in relation to the release
of the buyout of reseller agreement (Note 17).
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 130
Notes to the financial statements continued
Note 12 – Intangible assets continued
In accordance with IAS 36, the Group regularly monitors the carrying value of its intangible assets, including goodwill. Goodwill is allocated
to 11 (2015: 14) cash generating units (“CGU”). Following the restructure of the Sports division, the previous CGUs’ of Mobenga, Geneity and
other acquisitions were combined to form the Sports CGU in accordance with IAS 36. Management determines which of those CGUs’ are
significant in relation to the total carrying value of goodwill as follows:
• Carrying value exceeds 10% of total goodwill; or
• Acquisition during the year; or
• Contingent consideration exists at the balance sheet date.
Based on the above criteria in respect of the goodwill, management has concluded that the following are significant:
• Markets, with a carrying value of $265.3, €252.3 million (2015: $265.3 million, €240.6 million);
• Services, with a carrying value of €100.0 million (2015: €108.6 million);
• BGT, with a carrying value of €88.3 million (2015: Nil);
• Quickspin, with a carrying value of €26.8 million (2015: Nil);
• CFH, with a carrying value of €23.9 million (2015: Nil);
• Casino product, with a carrying value of €34.0 million (2015: €34.0 million); and
• ECM Systems, with a carrying value of €9.4 million (2015: Nil).
The recoverable amounts of all the CGUs have been determined from value in use calculations based on cash flow projections from
formally approved budgets covering a one-year period to 31 December 2017 in addition to two to three year forecasts. Beyond this period,
management has applied an annual growth rate of between 2% and 5% based on the underlying economic environment in which the CGU
operates. Management has applied a discount rates to the cash flow projections between 11.9% and 13.9% (2015: between 12.0% and 18.4%).
The results of the review indicated that there was an impairment of goodwill of three CGUs’ in a total amount of €12.3 million
at 31 December 2016, which has been charged to the income statement. Management has also reviewed the key assumptions
and forecasts for the customer lists, brands and affiliates, applying the above same key assumptions. The results of the reviews
indicated that except the above, there was no impairment of the intangible assets at 31 December 2016.
Note 13 – Investments in equity accounted associates & joint ventures
Investment in joint ventures comprise:
A. Investment in International Terminal Leasing
Investment in equity accounted associates:
B. Investment in associates
C. Investment in structured agreements
2016
€’000
2015
€’000
2,091
3,388
11,612
25,323
39,026
17,254
31,136
51,778
A. Investment in International Terminal Leasing
On 8 March 2011, the Group entered into an agreement with Scientific Games to form a partnership called International Terminal Leasing
(“ITL”), which relates to the strategic partnership with Scientific Games Corporation.
The Group’s future profit share from this joint venture varies depending on the commercial arrangements in which ITL and its partners enter
into with third parties. However, the Group’s share of profit is expected to be between 20%-50%.
The Group received a return on investment of €1.4 million during the year (2015: €2.4 million).
Playtech plc Annual Report and Accounts 2016 Note 13 – Investments in equity accounted associates & joint ventures continued
A. Investment in International Terminal Leasing continued
Movements in the carrying value of the investment during the year are as follows:
Investment in joint venture at 1 January 2016
Share of profit in joint venture
Return of investment
Investment in joint venture at 31 December 2016
131
€’000
3,388
146
(1,443)
2,091
B. Investment in associates
Investment in BGO
In August 2014, the Group acquired 33.33% of the shares of BGO Limited for a total consideration of £10 million (€12.5 million). In 2015
the Group invested an additional £0.7 million (€0.9 million).
The purpose of this investment is to further enhance BGO gaming applications on the Group’s platform and to enable BGO to further
invest in its successful brands and grow into international markets.
Other individually immaterial investments
During the year the Group paid €0.2 million additional consideration to non-controlling investments acquired in previous years
(2015: €6.6 million and €0.3 million additional consideration to non-controlling investments).
Total associates:
Investment in associates at 1 January 2016
Investment in associates in the year
Investment in associate acquired on business combination
Share of loss
Impairment of investment in associate
Subsidiary acquired in steps (Note 26e)
Investment in associates at 31 December 2016
Aggregated amounts relating to BGO Limited are as follows:
Total non-current assets
Total current assets
Total non-current liabilities
Total current liabilities
Revenues
Loss
€’000
17,254
220
5
(693)
(1,586)
(3,588)
11,612
2015
€’000
328
8,544
–
(7,662)
33,974
(15,437)
2016
€’000
77
5,958
(3,521)
(4,475)
40,609
(3,484)
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
132
Notes to the financial statements continued
Note 13 – Investments in equity accounted associates & joint ventures continued
C. Investment in structured agreements
During the year the Group entered into two new structured agreements (2015: three structured agreements), which include agreements
covering software licensing and services provisions with Nil initial investment cost and invested additional €1.4 million in existing agreement
(2015: three agreements of a total cash investment of €8.9 million and additional €9.3 million invested in existing agreements). These
structured agreements are individually immaterial.
Movement in structured agreements:
Investment in structured agreements at 1 January 2016
Investment in structured agreements in the year
Return on investment in structured agreement
Disposal of investment in Ladbrokes agreements
Investment in structured agreements at 31 December 2016
€’000
31,136
1,481
(401)
(6,893)
25,323
Ladbrokes software and services agreement
In 2013, the Group entered into a landmark transaction with Ladbrokes plc (“Ladbrokes”), which includes three significant agreements
covering software licensing, marketing and advisory services.
As part of the advisory services agreement, the Group through its marketing division will have significant influence over the financial and
operational decision-making of the Ladbrokes digital business. The Group will receive a share of profit based on the EBITDA performance
of the Ladbrokes digital business in the financial year ended 31 December 2017 over and above that achieved in the financial year ended
31 December 2012, as adjusted (the “Base EBITDA”).
On 27 July 2015, the Group agreed to an early settlement of its marketing services subject to the completion of the merger between
Ladbrokes and Coral.
On 1 November 2016, the merger was completed. The Group received €44.5 million (£40 million) satisfied by way of the issue of shares
in Ladbrokes Coral plc. A further £35 million in cash is to be received upon delivery of key operational milestones by the Group but, in any
event, within 42 months following completion of the merger.
Upon completion the Group disposed of the investments relating to the Ladbrokes software and services agreements. Profit on disposal
is calculated as follows:
Income from Ladbrokes:
Ladbrokes Coral plc shares fair value as at 1 November 2016
Present value of cash receivable (using a 5.0% discount rate)
Cost related to the software and services agreement
Disposal of investment in associate
Profit on disposal of investment of associate
Impairment of investment in associate (Note 13b)
Net profit on disposal of investment of associate
€’000
44,477
38,100
(9,639)
(6,893)
66,045
(1,586)
64,459
Playtech plc Annual Report and Accounts 2016 133
2016
€’000
237,100
44,477
(53,868)
2,569
2015
€’000
24,219
209,797
1,160
1,924
Note 14 – Available-for-sale investments
Investment in available-for-sale investments at 1 January
Investment in the year (Note 13c)
Unrealised valuation movement recognised in equity
Foreign exchange movements
Investment in available-for-sale investments at 31 December
230,278
237,100
Available-for-sale financial assets include the following:
Quoted:
Equity securities – UK
Equity securities – Asia
2016
€’000
2015
€’000
225,280
4,998
226,015
11,085
230,278
237,100
The fair value of quoted investments is based on published market prices.
The maximum exposure to credit risk at the reporting date is the carrying value of the financial assets classified as available-for-sale.
Note 15 – Other non-current assets
Loans to customers
Loan to affiliate
Rent and car lease deposits
Guarantee for gaming licences
Related parties (Note 28)
Deferred tax
Non-current prepayments
Other
2016
€’000
7,293
4,382
3,758
2,000
5,050
2,025
740
1,613
2015
€’000
7,199
2,825
3,312
2,000
3,561
–
766
1,167
26,861
20,830
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
134
Notes to the financial statements continued
Note 16 – Trade receivables
Customers
Related parties (Note 28)
Note 17 – Other receivables
Prepaid expenses
VAT and other taxes
Advances to suppliers
Buyout of reseller agreement
Proceeds from disposal of investment (Note 13c)
Related parties (Note 28)
Other receivables
Note 18 – Cash and cash equivalents
Cash at bank
Deposits
2016
€’000
71,506
2,238
2015
€’000
72,341
2,291
73,744
74,632
2016
€’000
17,054
9,675
2,141
–
39,865
228
5,003
2015
€’000
14,340
6,785
380
3,308
–
–
2,993
73,966
27,806
2016
€’000
409,158
135,685
2015
€’000
501,336
356,562
544,843
857,898
The Group held cash balances which include monies held on behalf of operators in respect of operators’ jackpot games and poker and
casino operations and client funds with respect to CFD and client deposits in respect of liquidity and clearing activity.
Funds attributed to jackpots
Security deposits
Client deposits
Client funds
2016
€’000
31,589
15,172
76,229
29,863
2015
€’000
30,886
32,454
–
43,761
152,853
107,101
Playtech plc Annual Report and Accounts 2016
135
2016
Number of
shares
2015
Number of
shares
N/A
317,344,603
N/A
322,624,603
Note 19 – Shareholders’ equity
A. Share capital
Share capital is comprised of no par value shares as follows:
Authorised*
Issued and paid up
* The Group has no authorised share capital but is authorised under its memorandum and article of association to issue up to 1,000,000,000 shares of no par value.
In 2015 the Group issued 29,050,000 shares of no par value.
In 2016 the Group has cancelled 5,280,000 shares as part of share buyback for a total consideration of €49,829,000.
B. Employee Benefit Trust
In 2014 the Group established an Employee Benefit Trust by acquiring 5,517,241 shares for a total consideration of €48.5 million. During
the year 244,416 shares (2015: 855,749) were issued as a settlement for employee share option exercises with a cost of €2.1 million
(2015: €8.7 million), and as of 31 December 2016, a balance of 3,035,673 (2015: 3,280,089) shares remains in the trust with a cost of
€25.4 million (2015: €27.5 million).
C. Share options exercised
During the year 258,477 (2015: 81,986) share options were exercised. The Group cash-settled 14,061 share options during the year
(2015: Nil).
D. Distribution of dividend
In May and June 2016, the Group distributed €60,810,670 as a final dividend for the year ended 31 December 2015 (18.9 €cents per share).
In October 2016, the Group distributed €35,274,873 as an interim dividend in respect of the period ended 30 June 2016 (11.0 €cents
per share).
In December 2016, the Group distributed €149,648,301 as special dividend (46.0 €cents per share).
E. Reserves
The following describes the nature and purpose of each reserve within owner’s equity:
Reserve
Description and purpose
Additional paid in capital
Available-for-sale reserve
Employee Benefit Trust
Put/Call options reserve
Foreign exchange reserve
Convertible bond option reserve
Retained earnings
Share premium (i.e. amount subscribed for share capital in excess of nominal value)
Changes in fair value of available-for-sale investments (Note 14)
Cost of own shares held in treasury by the trust
Fair value of put options as part of business acquisition
Gains/losses arising on retranslating the net assets of overseas operations
Amount of proceeds on issue of convertible debt relating to the equity component (i.e. option to
convert the debt into share capital)
Cumulative net gains and losses recognised in the consolidated statement of comprehensive income
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
136
Notes to the financial statements continued
Note 20 – Loans and borrowings
The loan balance as of 31 December 2016 is €200 million (2015: €200 million). The loan is a revolving credit facility available until July 2018.
Interest payable on the loan is based on a margin on Euro libor rates.
Note 21 – Convertible bonds
On 12 November 2014 the Group issued €297.0 million of senior, unsecured convertible bonds due 2019 and convertible into fully paid
ordinary shares of Playtech plc (the “Bonds”). The net proceeds of issuing the Bonds, after deducting commissions and other direct costs
of issue, totalled €291.1 million.
The Bonds were issued at par and will be redeemed (if not converted before) on 19 November 2019 at their principal amount. The Bonds
bear interest at 0.5% per annum, payable annually in arrears on 19 November.
Upon conversion, Bondholders are entitled to receive ordinary shares at the conversion price of €10.1325 per ordinary share, subject to
adjustment in respect of (i) any dividend or distribution by the Company, (ii) a change of control and (iii) customary anti-dilution adjustments
for, inter alia, share consolidations, share splits and rights issues.
The fair value of the liability component, included in non-current borrowings, at inception was calculated using a market interest rate
for an equivalent instrument without conversion option of 4%.
The fair value of the liability component, which is immateriality different to the amortised cost, of the Bonds (including accrued interest) at
31 December 2016 amounted to €266.2 million (2015: €256.4 million), which was calculated using cash flow projections discounted at 4%.
The fair value at inception of the equity component of the bonds at 31 December 2016 was €45.4 million (2015: €45.4 million).
Note 22 – Contingent consideration and redemption liabilities
Non-current contingent consideration consists:
Acquisition of Markets Limited (Note 27b)
Acquisition of Quickspin AB (Note 26a)
Acquisition of Patelle Limited (Note 26b)
Other acquisitions (Note 27c)
Non-current redemption liability consists:
Acquisition of Consolidated Financial Holdings A/S (Note 26d)
Acquisition of Patelle Limited (Note 26b)
Acquisition of ECM Systems Holdings Limited (Note 26c)
2016
€’000
2015
€’000
139,133
24,143
4,792
1,645
138,196
–
–
3,151
169,713
141,347
17,102
16,593
1,142
34,837
–
–
–
–
Total non-current contingent consideration and redemption liability
204,550
141,347
Current contingent consideration consists:
Acquisition of ECM Systems Holdings Limited (Note 26c)
Acquisition of Consolidated Financial Holdings A/S (Note 26d)
Acquisition of Yoyo Games Limited (Note 27a)
Other acquisitions (Note 27c)
3,061
336
–
1,180
4,577
–
–
2,036
2,455
4,491
Playtech plc Annual Report and Accounts 2016
Note 23 – Trade payables
Suppliers
Customer liabilities
Related parties (Note 28)
Other
Note 24 – Deferred tax liability
The deferred tax liability is due to temporary differences on the acquisition of certain businesses.
The movement on the deferred tax liability is as shown below:
At the beginning of the year
Arising on the acquisitions during the year (Note 26)
Reversal of temporary differences, recognised in the consolidated statement of comprehensive income (Note 8)
Note 25 – Other payables
Payroll and related expenses
Accrued expenses
Related parties (Note 28)
Other payables
137
2016
€’000
23,235
3,932
573
431
28,171
2015
€’000
14,907
1,292
200
1,012
17,411
2016
€’000
14,049
29,743
(3,349)
2015
€’000
4,904
11,258
(2,113)
40,443
14,049
2016
€’000
37,626
16,328
1,309
3,173
2015
€’000
35,147
15,955
353
4,600
58,436
56,055
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
138
Notes to the financial statements continued
Note 26 – Acquisitions during the year
A. Acquisition of Quickspin AB
On 24 May 2016, the Group acquired 100% of the shares of Quickspin AB (“Quickspin”). Quickspin is a Swedish games studio that
develops and supplies high quality video slots to operators, both in online real money gambling as well as in the social gaming market.
The Group paid total cash consideration of €24.5 million (SEK 228.4 million) and additional consideration capped at €26.0 million
(SEK 242.9 million) in cash will be payable subject to achieving target EBITDA.
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill, are as follows:
Property, plant and equipment
Intangible assets
Trade and other receivables
Cash and cash equivalent
Trade payables
Deferred tax liability
Net identified assets
Goodwill
Fair value of consideration
Cash consideration
Non-current contingent consideration
Finance cost arising on discounting of contingent consideration
Fair value of consideration
Cash purchased
Net cash payable
Adjustments to fair value include the following:
Customer relationship
IP Technology
Brand
Fair value on
acquisition
€’000
123
26,996
1,249
535
(935)
(6,074)
21,894
26,802
48,696
€’000
24,461
26,019
(1,784)
48,696
(535)
48,161
Amount
€’000
Amortisation
%
18,645
5,499
2,852
6.7
20
16.7
The main factor leading to the recognition of goodwill is the time to market benefit, large pipeline of operators, revenue stream from new
games and new licensees and assembled work force with vast experience in the virtual slot machines games. In accordance with IAS 36,
the Group will regularly monitor the carrying value of its interest in Quickspin.
Playtech plc Annual Report and Accounts 2016
139
Note 26 – Acquisitions during the year continued
A. Acquisition of Quickspin AB continued
The key assumptions used by management to determine the value in use of the Customer relationship and Brand within Quickspin
are as follows:
• The relief from royalty approach;
• The royalty rate was based on a third-party market participant assumption for the use of the Customer relationship and Brand;
• The discount rate assumed is equivalent to the WACC for the Customer relationship and Brand; and
• The growth rates and attrition rates were based on market analysis.
The key assumptions used by management to determine the value in use of the IP Technology within Quickspin are as follows:
• The with and without model, taking into account the time and additional expenses required to recreate the IP Technology
and the level of lost cash flows in the period;
• The discount rate assumed is equivalent to the WACC for the IP Technology; and
• The growth rates and attrition rates were based on market analysis.
Management has not disclosed Quickspin contribution to the Group profit since the acquisition nor has the impact the acquisition would
have had on the Group’s revenue and profits if it had occurred on 1 January 2016 been disclosed, because the amounts are not material.
B. Acquisition of Patelle Limited
On 13 July 2016, the Group acquired 90% of the shares of Patelle Limited. Patelle owns 100% of Best Gaming Technology GmbH (“BGT”).
BGT is an Austrian leading provider of sports betting software and solutions for gaming and sports betting operators. The remaining 10%
of the shares are held by the founder and CEO of BGT.
The Group paid total cash consideration of €138.5 million.
The Group has a call option to purchase the remaining 10% of BGT at a valuation of six times 2019 EBITDA capped at €55.0 million. The
founder and CEO of BGT have certain put options over his 10% holding at the same valuation. The fair value of this option was recognised
as non-current liability and reflected in the Groups’ statement of changes in equity. The fair value as of 31 December 2016 was €16.6 million.
The founder and CEO of BGT may also be entitled to an additional payment of €5.0 million subject to the achievement of certain
operational milestones.
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill, are as follows:
Property, plant and equipment
Intangible assets
Trade and other receivables
Cash and cash equivalent
Trade and other payables
Deferred tax liability
Non-controlling interest
Net identified assets
Goodwill
Fair value of consideration
Fair value on
acquisition
€’000
11,832
64,815
11,150
5,698
(16,331)
(16,141)
(6,102)
54,921
88,283
143,204
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
140
Notes to the financial statements continued
Note 26 – Acquisitions during the year continued
B. Acquisition of Patelle Limited continued
Cash consideration
Non-current contingent consideration
Finance cost arising on discounting of contingent consideration
Fair value of consideration
Cash purchased
Net cash payable
Adjustments to fair value include the following:
Customer relationship
IP Technology
Brand
Other
€’000
138,490
5,000
(286)
143,204
(5,698)
137,506
Amount
€’000
Amortisation
%
39,503
16,883
8,177
252
6.7
20
10
20
The main factor leading to the recognition of goodwill is the time to market benefit, revenue stream from newly developed terminals
and assembled work force with vast experience in self-service betting terminals (“SSBT”) sector. In accordance with IAS 36, the Group
will regularly monitor the carrying value of its interest in BGT.
The key assumptions used by management to determine the value in use of the Customer relationship, IP Technology and Brand
within BGT are as follows:
• The relief from royalty approach;
• The royalty rate was based on a third-party market participant assumption for the use of the Customer relationship and Brand;
• The discount rate assumed is equivalent to the WACC for the Customer relationship, IP technology and Brand; and
• The growth rates and attrition rates were based on market analysis.
Since the acquisition date, BGT has contributed €25.0 million to the Group revenue, €8.9 million to the Adjusted EBITDA and €5.0 million
to the Adjusted Net Profit. The combined Group revenue as if BGT acquisition had occurred on 1 January 2016 would have been higher
by €29.0 million, the combined Group Adjusted EBITDA and Adjusted Net Profit would have been higher by €10.5 million and €4.0 million.
Playtech plc Annual Report and Accounts 2016
141
Note 26 – Acquisitions during the year continued
C. Acquisition of ECM Systems Holdings Ltd
On 20 October 2016, the Group acquired 90% of the shares of ECM Systems Holdings Limited (“ECM”). ECM is a bingo software and
hardware solutions provider to the UK retail bingo market. The remaining 10% of the shares are held by the founder and CEO of ECM.
The Group paid total cash consideration of €25.0 million (£22.4 million). The Company will pay €3.1 million (£2.7 million) as additional
working capital adjustment in the beginning of 2017.
The Group has a call option to purchase the remaining 10% of ECM at a valuation of 6 times 2019 EBITDA capped at £1.1 million (€1.2 million).
The CEO of ECM have certain put options over his 10% holding at the same valuation. The fair value of this option was recognised as non-
current liability and reflected in the Groups’ statement of changes in equity. The fair value as of 31 December 2016 was €1.1 million. The
Group paid to an escrow account the fair value of the option.
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill, are as follows:
Property, plant and equipment
Intangible assets
Trade and other receivables
Cash and cash equivalent
Trade and other payables
Deferred tax liability
Minority
Net identified assets
Goodwill
Fair value of consideration
Cash consideration
Current deferred consideration
Fair value of consideration
Cash purchased
Net cash payable
Fair value on
acquisition
€’000
2,127
8,713
1,354
12,133
(1,852)
(1,742)
(2,071)
18,662
9,437
28,099
€’000
25,038
3,061
28,099
(12,133)
15,966
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
142
Notes to the financial statements continued
Note 26 – Acquisitions during the year continued
C. Acquisition of ECM Systems Holdings Ltd continued
Adjustments to fair value include the following:
Customer relationship
IP Technology
Brand
Amount
€’000
Amortisation
%
5,290
2,273
1,150
10
12.5
10
The main factor leading to the recognition of goodwill is the substantial market presence and business reputation. In accordance
with IAS 36, the Group will regularly monitor the carrying value of its interest in ECM.
The key assumptions used by management to determine the value in use of the Customer relationship, IP Technology and Brand
within ECM are as follows:
• The relief from royalty approach;
• The royalty rate was based on a third-party market participant assumption for the use of the Customer relationship and Brand;
• The discount rate assumed is equivalent to the WACC for the Customer relationship, IP technology and Brand; and
• The growth rates and attrition rates were based on market analysis.
Management has not disclosed ECM’s contribution to the Group profit since the acquisition nor has the impact the acquisition would
have had on the Group’s revenue and profits if it had occurred on 1 January 2016 been disclosed, because the amounts are not material.
D. Acquisition of Consolidated Financial Holdings A/S
On 30 November 2016, the Group acquired 70% of the shares of Consolidated Financial Holdings A/S (“CFH”). CFH is a technology
company with products including a Straight Through Processing brokerage which provides retail brokers with multi-asset execution,
prime brokerage services, liquidity and complementary risk management tools. The remaining 30% of the shares are held by the
founder and CEO of CFH.
The Group paid total cash consideration of €38.6 million ($41.0 million). The Company will pay €0.3 million ($0.3 million) as additional
working capital adjustment in the beginning of 2017.
The Group has a call option to purchase the remaining 30% of CFH at a valuation of six times 2018 EBITDA capped at a total consideration
of $76.6 million less the initial consideration. The founder and CEO of CFH have certain put options over his 30% holding at the same
valuation. The fair value of this option was recognised as a non-current liability and reflected in the Groups’ statement of changes in
equity. The fair value as of 31 December 2016 was €16.9 million.
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill, are as follows:
Property, plant and equipment
Intangible assets
Trade and other receivables
Cash and cash equivalent
Trade and other payables
Client funds
Deferred tax liability
Non controlling interest
Net identified assets
Goodwill
Fair value of consideration
Fair value on
acquisition
€’000
214
26,446
3,338
80,463
(6,364)
(76,952)
(5,246)
(6,570)
15,329
23,927
39,256
Playtech plc Annual Report and Accounts 2016
143
€’000
38,927
329
39,256
(80,463)
(41,207)
Amount
€’000
Amortisation
%
14,322
11,019
1,105
10
10-14.3
10
Note 26 – Acquisitions during the year continued
D. Acquisition of Consolidated Financial Holdings A/S continued
Cash consideration
Current contingent consideration
Fair value of consideration
Cash purchased
Net cash payable
Adjustments to fair value include the following:
Customer relationship
IP Technology
Brand
The main factor leading to the recognition of goodwill is the substantial market presence and business reputation. In accordance
with IAS 36, the Group will regularly monitor the carrying value of its interest in CFH.
The key assumptions used by management to determine the value in use of the Customer relationship, IP Technology and Brand
within CFH are as follows:
• The relief from royalty approach;
• The royalty rate was based on a third-party market participant assumption for the use of the Customer relationship and Brand;
• The discount rate assumed is equivalent to the WACC for the Customer relationship, IP technology and Brand; and
• The growth rates and attrition rates were based on market analysis.
Management has not disclosed CFH’s contribution to the Group profit since the acquisition nor has the impact the acquisition would have
had on the Group’s revenue and profits if it had occurred on 1 January 2016 been disclosed, because the amounts are not material.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
144
Notes to the financial statements continued
Note 26 – Acquisitions during the year continued
E. Other acquisitions
During the period, the Group acquired the shares of various companies for a total consideration of €13.1 million. One of these subsidiaries
was acquired in steps, with previous consideration of €2.4 million paid to acquire the previously recognised associate.
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill, are as follows:
Property, plant and equipment
Intangible assets
Trade and other receivables
Cash and cash equivalent
Trade and other payables
Deferred tax liability
Net identified assets
Goodwill
Total fair value of consideration
Cash consideration
Conversion of previously recognised associate
Fair value of consideration
Cash purchased
Net cash payable
Adjustments to fair value include the following:
Customer relationship
IP Technology
Fair value on
acquisition
€’000
1,189
4,387
683
1,415
(4,989)
(94)
2,591
10,543
13,134
€’000
9,545
3,589
13,134
(1,415)
11,719
Amount
€’000
Amortisation
%
1,501
2,886
6.7-10
20-33.33
The main factor leading to the recognition of goodwill is the unique workforce and time to market benefit. In accordance with IAS 36, the
Group will regularly monitor the carrying value of its interest in these acquisitions.
The key assumptions used by management to determine the value in use of the IP Technology within these acquisitions are as follows:
• The income approach, in particular, the multi period excess earnings method;
• The discount rate assumed is equivalent to the WACC for the IP Technology; and
• The growth rates and attrition rates were based on market analysis.
Management has not disclosed other acquisitions contribution to the Group profit since these acquisitions nor has the impact the
acquisition would have had on the Group’s revenue and profits if it had occurred on 1 January 2016 been disclosed, because the amounts
are not material.
Playtech plc Annual Report and Accounts 2016
145
Note 27 – Acquisitions in prior year
A. Acquisition of Yoyo Games Limited
On 13 February 2015, the Group acquired 100% of the shares of Yoyo Games Limited (“Yoyo”). Yoyo is the home of Game Maker:
Studio™ ("GMS"), a mobile driven cross-platform casual game development technology that enables developers to create games
using a single programming code and then publish them to run natively across most common platforms.
The Group paid total cash consideration of €14.4 million ($16.4 million) and additional consideration capped at €2.2 million ($2.5 million),
of which €1.8 million was paid in current year.
B. Acquisition of Markets Limited (previously named TradeFX Limited)
On 8 May 2015, the Group acquired 95.05% of the shares of Markets Limited (“Markets”), 91.1% on fully diluted basis. The sellers included
a company related to the significant shareholder, Telesphere Services Limited.
Markets is an online CFDs broker and trading platform provider, operates a platform for CFDs trading across multiple channels. In addition,
Markets provides a turnkey offering, including a white-label solution, for B2B clients, in return for a revenue share.
The Group paid total cash consideration of €208 million, and additional consideration capped at €250 million in cash will be payable
subject to achieving target EBITDA (Note 22).
C. Other acquisitions
During the period the Group acquired 100% of the shares of various companies for a total initial consideration of €3.5 million and additional
consideration capped at €4.9 million in cash will be payable subject to the achievement of certain operational targets.
Note 28 – Related parties and shareholders
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other
party’s making of financial or operational decisions, or if both parties are controlled by the same third party. Also, a party is considered
to be related if a member of the key management personnel has the ability to control the other party.
Skywind Holdings Limited (“Skywind”), SafeCharge Limited, Crossrider Technologies Ltd (“Crossrider”), Royalfield Limited, Easydock
Investments Ltd. (“Easydock”), Selfmade Holdings, Glispa GmbH, Anise Development Limited and Anise Residential Limited (together
“Anise”) and Telesphere Services Ltd (Note 27b) are related by virtue of a common significant shareholder.
Joint venture and the structured agreements are associates of the Group by virtue of the Group’s significant influence over
those arrangements.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 146
Notes to the financial statements continued
Note 28 – Related parties and shareholders continued
The following transactions arose with related parties:
Revenue including revenue from associates
Skywind
Structured agreements and associates
Share of profit in joint venture
Share of loss in associates
Operating expenses/(credit)
SafeCharge Limited
Crossrider
Structured agreements
Anise
Skywind, net of capiltalised cost
Glispa GmbH
Selfmade Holdings
Royalfield Limited
Easydock
PT Games
Interest payable
Niceidea
The following are year-end balances:
Intangible assets
Skywind
Cash and cash equivalent
Safecharge Limited
Niceidea
Structured agreements and associates
Total non-current related party receivables
Structured agreements and associates
Skywind
Crossrider
PT Games Limited
Total current related party receivables
SafeCharge Limited
Structured agreements
Total related party payables
2016
€’000
1,683
12,904
146
(693)
6,150
2,615
1,309
1,037
82
28
11
4
1
–
2015
€’000
1,562
35,531
229
(5,856)
6,674
2,472
1,910
1,174
3,438
6
52
(272)
358
220
–
46
4,128
1,037
2,968
–
5,050
5,050
1,971
267
228
–
2,466
200
1,682
1,882
5,341
1,596
1,965
3,561
1,435
582
266
8
2,291
200
353
553
Following Hilary Stewart-Jones stepping down from the Board on 1 January 2016, Niceidea and PT Games are no longer related parties.
On 31 December 2016, Brickington held 21.93% (31 December 2015: 33.61%) of Playtech plc shares.
Mr Teddy Sagi, the ultimate beneficiary of a trust that owns Brickington, provides advisory services to the Group for a total annual
consideration of €1. Brickington ceased to be a controlling shareholder as defined under the listing rules when its holding fell
below 25%. The relationship agreement remains in place, all transactions with the controlling shareholder or their associates were
made at an arms length.
The details of key management compensation (being the remuneration of the Directors) are set out in Note 6.
Playtech plc Annual Report and Accounts 2016
147
Note 29 – Subsidiaries
Details of the Group’s principal subsidiaries as at the end of the year are set out below:
Name
Country of
incorporation
Proportion of
voting rights and
ordinary share
capital held
Nature of business
Playtech Software Limited
British Virgin Islands
100%
OU Playtech (Estonia)
Estonia
Techplay Marketing Limited
Israel
Video B Holding Limited
British Virgin Islands
OU Videobet
Playtech Bulgaria
Estonia
Bulgaria
PTVB Management Limited
Isle of Man
Evermore Trading Limited
British Virgin Islands
Playtech Services (Cyprus) Limited
Cyprus
VB (Video) Cyprus Limited
Cyprus
Techplay S.A. Software Limited
Israel
Technology Trading IOM Limited
Isle of Man
Gaming Technology Solutions Limited
UK
VS Gaming Limited
VS Technology Limited
UK
UK
Virtue Fusion (Alderney) Limited
Alderney
Virtue Fusion CM Limited
UK
Playtech Software (Alderney) Limited
Alderney
Intelligent Gaming Systems Limited
UK
VF 2011 Limited
Alderney
PT Turnkey Services Limited
British Virgin Islands
PT Turnkey EU Services Limited
PT Entertenimiento Online EAD
Cyprus
Bulgaria
PT Marketing Services Limited
British Virgin Islands
PT Operational Services Limited
British Virgin Islands
Tech Hosting Limited
Alderney
Paragon International Customer
Care Limited
British Virgin Island &
branch office in the
Philippines
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Main trading company of the Group, owns the
intellectual property rights and licenses the
software to customers.
Designs, develops and manufactures
online software.
Marketing and advertising.
Trading company for the Videobet software,
owns the intellectual property rights of Videobet
and licenses it to customers.
Develops software for fixed odds betting
terminals and casino machines (as opposed
to online software).
Designs, develops and manufactures
online software.
Management.
Holding company.
Activates the ipoker network in regulated markets.
Owns the intellectual property of GTS, Ash and
Geneity businesses.
Trading company for the Videobet product
to Romanian companies.
Develops online software.
Owns the intellectual property rights
of Virtue Fusion business.
Holding company of VS Gaming
and VS Technology.
Develops software and casino games.
Develops EdGE platform.
Online bingo and casino software provider.
Chat moderation services provider to end users
of VF licensees.
To hold the Company’s Alderney Gaming licence.
Casino management systems
to land-based businesses.
Holds licence in Alderney for online gaming.
Holding company of the Turnkey Services group.
Turnkey services for EU online gaming operators.
Poker & Bingo network for Spain.
Marketing services to online gaming operators.
Operational & hosting services to online
gaming operators.
Alderney Hosting services.
English customer support, chat, fraud, finance,
dedicated employee services to parent company.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 148
Notes to the financial statements continued
Note 29 – Subsidiaries continued
Name
CSMS Limited
TCSP Limited
S-Tech Limited
Country of
incorporation
Bulgaria
Serbia
British Virgin Islands
& branch office in the
Philippines
PT Advisory Services Limited
British Virgin Islands
PT Processing Advisory Limited
British Virgin Islands
PT Processing EU Advisory Limited
Cyprus
PT Network Management Limited
British Virgin Islands
Playtech Mobile (Cyprus) Limited
Cyprus
Playtech Holding Sweden AB Limited
Sweden
Mobenga AB Limited
Ash Gaming Limited
Geneity Limited
Factime Limited
Juego Online EAD
PlayLot Limited
PokerStrategy Ltd.
Videobet Interactive Sweden AB
V.B. Video (Italia) S.r.l.
PT Entertainment Services LTD
Sweden
UK
UK
Cyprus
Bulgaria
British Virgin Islands
Gibraltar
Sweden
Italy
Antigua
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Markets Limited
British Virgin Islands
95.256%
Safecap Limited
TradeFXIL limited
ICCS BG
Stronglogic Services Limited
Yoyo Games Limited
Quickspin AB
Best Gaming Technology GmbH
Cyprus
Israel
Bulgaria
Cyprus
UK
Sweden
Austria
ECM Systems Holdings Ltd
UK
Consolidated Financial Holdings AS
Denmark
95.256%
95.256%
95.256%
95.256%
100%
70%
90%
90%
70%
Proportion of
voting rights and
ordinary share
capital held
Nature of business
Consulting and online technical support, data
mining processing and advertising services to
parent company.
Operational services for Serbia.
Live games services to Asia.
Holds PT processing Advisory Ltd.
Advisory services for processing & cashier
to online gaming operators.
Advisory services for processing & cashier
for EU online gaming operators.
Manages the ipoker network.
Holds the IP of Mobenga AB.
Holding company of Mobenga AB.
Mobile sportsbook betting platform developer.
Develops interactive gambling and betting games.
Develops Sportsbook and Lottery software.
Holding company of Juego.
Gaming operator. Holds a licence in Spain.
Distributing lottery software.
Operates poker community business.
Trading company for the Aristocrat Lotteries VLTs.
Trading company for the Aristocrat Lotteries VLTs.
Holding gaming licence in the UK.
Owns the intellectual property rights and
marketing and technology contracts of the
Financials division.
Primary trading company of the Financials division.
Licensed investment firm and regulated by Cysec.
Financials division sales, client retention,
R&D and marketing.
Financials division back office customer support.
Maintains the Financials division marketing
function for EU operations.
Casual game development technology.
Owns video slots intellectual property.
Owns sports betting intellectual property solutions
and primary trading company for sports betting.
Owns bingo software intellectual property
and bingo hardware.
Owns the intellectual property which provides
brokerage services, liquidity and risk
management tool.
CFH Clearing Limited
UK
70%
Primary trading company of CFH Group.
Playtech plc Annual Report and Accounts 2016 149
Note 30 – Financial instruments and risk management
The Group is exposed to a variety of financial risks, which results from its financing, operating and investing activities. The objective of
financial risk management is to contain, where appropriate, exposures in these financial risks to limit any negative impact on the Group’s
financial performance and position. The Group’s financial instruments are its cash, available-for-sale financial assets, trade receivables, loan
receivables, bank borrowings, accounts payable and accrued expenses. The main purpose of these financial instruments is to raise finance
for the Group’s operation. The Group actively measures, monitors and manages its financial risk exposures by various functions pursuant to
the segregation of duties and principals. The risks arising from the Group’s financial instruments are credit risk and market price risk, which
include interest rate risk, currency risk and equity price risk. The risk management policies employed by the Group to manage these risks
are discussed below.
A. Market risk
Market risk changes in line with fluctuations in market prices, such as foreign exchange rates, interest rates, equities and commodities
prices. These market prices affect the Group’s income or the value of its holding in financial instruments.
Exposure to market risk
In the Financials division, the Group has exposure to market risk to the extent that it has open positions. The Group’s exposure
to market risk at any point in time depends primarily on short-term market conditions and client activities during the trading day. The
exposure at each reporting date is therefore not considered representative of the market risk exposure faced by the Group over the year.
The Group’s exposure to market risk is mainly determined by the clients’ open position. The most significant market risk faced by the Group
on the CFD products it offers changes in line with market changes and the volume of clients’ transactions.
Interest rate risk
Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group’s income
and operating cash flows are substantially independent of changes in market interest changes. The management monitors interest rate
fluctuations on a continuous basis and acts accordingly.
Where the Group has generated a significant amount of cash, it will invest in higher earning interest deposit accounts. These deposit
accounts are short term and the Group is not unduly exposed to market interest rate fluctuations.
During the year the Group advanced loans to affiliates and customers for a total amount of €5.5 million (2015: €2.3 million). The average
interest on the loans is 5%.
A 1% change in deposit interest rates would impact on the profit before tax by €55 thousands.
B. Credit risk
Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash inflows from
financial assets on hand at the balance sheet date.
The Group closely monitors the activities of its counterparties and controls the access to its intellectual property which enables it to ensure
the prompt collection of customers’ balances.
The Group’s main financial assets are cash and cash equivalents as well as trade and other receivables and represent the Group’s maximum
exposure to credit risk in connection with its financial assets. Trade and other receivables are carried on the balance sheet net of bad debt
provisions estimated by the Directors based on prior year experience and an evaluation of prevailing economic circumstances.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 150
Notes to the financial statements continued
Note 30 – Financial instruments and risk management continued
B. Credit risk continued
Wherever possible and commercially practical the Group invests cash with major financial institutions that have a rating of at least A- as
defined by Standard & Poors. While the majority of money is held in line with the above policy, a small amount is held at various institutions
with no rating. The Group also holds small deposits in Cypriot and Spanish financial institutions, as required by the respective gaming
regulators that have a rating below A-. The Group holds approximately 4% of its funds (2015: 2%) in financial institutions below A- rate
and 2% in payment methods with no rating (2015:3%).
At 31 December 2016
At 31 December 2015
Financial
institutions
with A- and
above rating
€’000
476,904
813,164
Financial
institutions
below A- rating
and no rating
€’000
67,939
44,734
Total
€’000
544,843
857,898
The Group has no credit risk to clients since all accounts have an automatic margin call, which relates to a guaranteed stop such that the
client’s maximum loss is covered by the deposit. The Group has risk management and monitoring processes for clients’ accounts and this
is achieved via margin calling and close-out process.
The ageing of trade receivables that are past due but not impaired can be analysed as follows:
At 31 December 2016
At 31 December 2015
Total
€’000
Not past due
€’000
1-2 months
overdue
€’000
More than
2 months
past due
€’000
73,744
74,632
55,928
47,945
5,325
12,849
12,491
13,838
The above balances relate to customers with no default history and management estimate full recoverability given the provision below.
A provision for doubtful debtors is included within trade receivables that can be reconciled as follows:
Provision at the beginning of the year
Charged to income statement
Provision acquired through business combination
Utilised
Provision at end of year
2016
€’000
86
795
404
(153)
1,132
2015
€’000
908
–
–
(822)
86
Related party receivables included in Note 16 are not past due.
C. Currency risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates.
Foreign exchange risk arises because the Group has operations located in various parts of the world. However, the functional currency
of those operations is the same as the Group’s primary functional currency (Euro) and the Group is not substantially exposed to fluctuations
in exchange rates in respect of assets held overseas.
Foreign exchange risk also arises when Group operations are entered into, and when the Group holds cash balances, in currencies
denominated in a currency other than the functional currency.
The Group’s policy is not to enter into any currency hedging transactions.
Playtech plc Annual Report and Accounts 2016 151
Note 30 – Financial instruments and risk management continued
D. Equity price risk
The Group’s balance sheet is exposed to market risk by way of holding some investments in other companies on a short-term
basis (Note 14). Variations in market value over the life of these investments have or will have an impact on the balance sheet and
the income statement.
The Directors believe that the exposure to market price risk is acceptable in the Group’s circumstances.
The Group’s balance sheet at 31 December 2016 includes available-for-sale investments with a value of €230.3 million (2015: €237.1 million)
which are subject to fluctuations in the underlying share price.
A change of 1% in share price will have an impact of €2.3 million on the consolidated statement of comprehensive income and the fair value
of the available-for-sale investments will change by the same amount.
E. Capital disclosures
The Group seeks to maintain a capital structure which enables it to continue as a going concern and which supports its business strategy.
The Group’s capital is provided by equity and debt funding. The Group manages its capital structure through cash flow from operations,
returns to shareholders primarily in the form of dividends and the raising or repayment of debt.
F. Liquidity risk
Liquidity risk arises from the Group’s management of working capital and the financial charges on its debt instruments.
Financials division liquidity risk
Positions can be closed at any time by clients and can also be closed by the Group, in accordance with the Group’s margining rules. If after
closing a position a client is in surplus, then the amount owing is repayable on demand by the Group. When client positions are closed, any
corresponding positions relating to the hedged position (if applicable) are closed with brokers.
Liquidity risk arises if the Group encounters difficulty in meeting obligations which arise following profitable positions being closed by
clients. This risk is managed through the Group holding client funds in separately segregated accounts whereby cash is transferred to or
from the segregated accounts on a daily basis to ensure that no material mismatch arises between the aggregate of client deposits and the
fair value of open positions, and segregated cash. Through this risk management process, the Group considers liquidity risk to be low.
Client deposits
Open positions
Client funds
2016
€’000
46,581
(16,897)
2015
€’000
64,875
(21,114)
29,864
43,761
CFH trades on a matched principal basis and financial instruments are used to hedge all client positions. The management of market risk in
respect of matching of derivatives is through automated tools, together with active monitoring and management by senior personnel under
the supervision of its directors. CFH’s liquidity obligations are monitored daily and it is adequately capitalised with a steady revenue stream
to meet its day to day obligations. CFH client deposits balance as at 31 December 2016 was €76.2 million.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 152
Notes to the financial statements continued
Note 30 – Financial instruments and risk management continued
F. Liquidity risk continued
Financials division liquidity risk continued
The following are the contractual maturities (representing undiscounted contractual cash flows) of the Group’s financial liabilities:
2016
Trade payables
Other accounts payable
Loans and borrowings
Progressive and other operators’ jackpots
Client funds
Contingent consideration and redemption liability
Other non-current liabilities
2015
Trade payables
Other accounts payable
Loans and borrowings
Progressive and other operators’ jackpots
Client funds
Contingent consideration
Other non-current liabilities
Total
€’000
Within 1 year
€’000
1-2 years
€’000
2-5 years
€’000
28,171
58,436
200,000
46,759
106,092
209,127
1,627
17,411
56,055
200,000
63,340
43,761
145,838
1,175
28,171
58,436
–
46,759
106,092
4,577
–
17,411
56,055
–
63,340
43,761
4,491
–
–
–
200,000
–
–
204,550
–
–
–
–
–
–
141,347
–
–
–
–
–
–
–
1,627
–
–
200,000
–
–
–
1,175
G. Total financial assets and liabilities
The fair value together with the carrying amount of the financial assets and liabilities shown in the balance sheet are as follows:
Amount
Cash and cash equivalent
Available-for-sale investments
Other assets
Deferred and contingent consideration and redemption liability
Convertible bonds
Loans and borrowings
Other liabilities
2016
€’000
Fair
value
2016
€’000
Carrying
amount
2015
€’000
Fair
value
2015
€’000
Carrying
amount
544,843
230,278
174,571
209,127
266,230
200,000
148,319
544,843
230,278
174,571
209,127
266,230
200,000
148,319
857,898
237,100
123,268
145,838
256,429
200,000
102,190
857,898
237,100
123,268
145,838
256,429
200,000
102,190
Available-for-sale investments are measured at fair value using level 1. Refer to Note 14 for further detail. These are the Group’s only
financial assets and liabilities which are measured at fair value.
Playtech plc Annual Report and Accounts 2016 153
Note 31 – Contingent liabilities
As part of the Board’s ongoing regulatory compliance process, the Board continues to monitor legal and regulatory developments
and their potential impact on the Group.
Management is not aware of any contingencies that may have a significant impact on the financial position of the Group.
Note 32 – Operating lease commitment
The Group has a variety of leased properties. The terms of property leases vary from country to country, although they tend to be tenant
repairing with rent reviews every two to five years and many have break clauses. Total operating lease cost in the year was €14.7 million
(2015: €13.8 million).
The total future value of minimum lease payments is due as follows:
Not later than one year
Later than one year and not later than five years
Later than five years
2016
€‘000
15,257
38,470
1,249
54,976
2015
€‘000
15,846
44,001
8,370
68,217
Note 33 – Post balance sheet events
Acquisition of Eyecon Pty. Ltd
On 7 February 2017, the Group acquired 100% of the shares of Eyecon Pty. Ltd (“Eyecon”), a specialist supplier of online gaming
slots software.
The Group paid in cash £25.0 million and additional consideration of up to £25.0 million, is payable in cash subject to achieving
target EBITDA.
As of the approval date of the financial statements by the Board and due to the proximity to the reporting date, the Group had
not completed the valuation of the fair value of the intangible assets and liabilities acquired and accordingly these disclosures
are not provided in the financial statements.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
154
Company statement of changes in equity
For the year ended 31 December 2016
Balance at 1 January 2016
Changes in equity for the year
Total comprehensive income for the year
Dividend paid
Exercise of options
Share buy back
Employee stock option scheme
Additional
paid in
capital
€’000
Available-
for-sale
reserve
€’000
Convertible
bond
reserve
€’000
Retained
earnings
€’000
Total equity
attributable
to holders
of parent
€’000
638,209
(7,714)
45,392
158,225
834,112
–
–
–
(10,445)
(30,690)
–
–
–
–
–
–
–
–
–
262,990
(245,734)
(1,937)
(39,384)
4,478
232,300
(245,734)
(1,937)
(49,829)
4,478
Balance at 31 December 2016
627,764
(38,404)
45,392
138,638
773,390
Balance at 1 January 2015
Changes in equity for the year
Total comprehensive income for the year
Dividend paid
Exercise of options
Issue of share capital
Employee stock option scheme
324,774
–
45,392
271,528
641,694
–
–
403
313,032
–
(7,714)
–
–
–
–
–
–
–
–
(28,603)
(81,805)
(4,367)
–
1,472
(36,317)
(81,805)
(3,964)
313,032
1,472
Balance at 31 December 2015
638,209
(7,714)
45,392
158,225
834,112
Playtech plc Annual Report and Accounts 2016
Company balance sheet
As at 31 December 2016
NON-CURRENT ASSETS
Property, plant and equipment
Intangible assets
Investments
Available-for-sale investments
Other non-current assets
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY
Additional paid in capital
Available-for-sale reserve
Convertible bond reserve
Retained earnings
Equity attributable to equity holders of the parent
NON CURRENT LIABILITIES
Long-term loan
Convertible bond
CURRENT LIABILITIES
Trade payables and other payables
TOTAL EQUITY AND LIABILITIES
155
Note
2016
€’000
2015
€’000
1
2
3
4
5
6
7
8
167
169
215,948
173,928
1,737
109
177
211,740
160,141
279
391,949
372,446
732,436
158,478
523,095
541,321
890,914
1,064,416
1,282,863
1,436,862
627,764
(38,404)
45,392
138,638
638,209
(7,714)
45,392
158,225
773,390
834,112
200,000
266,230
200,000
256,429
466,230
456,429
43,243
146,321
43,243
146,321
1,282,863
1,436,862
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 156
Company statement of cash flows
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit
Adjustments to reconcile net income to net cash provided by operating activities (see below)
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment
Investment in available-for-sale investments
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid to the holders of the parent
Share buy back
Issue of share capital
Proceeds from borrowing
Exercise of options
Net cash used in financing activities
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
Exchange (losses)/gains on cash and cash equivalents
CASH AND CASH EQUIVALENTS AT END OF YEAR
ADJUSTMENT TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Income and expenses not affecting operating cash flows:
Depreciation
Amortisation
Employee stock option plan expenses
Disposal of investment in associate
Exchange loss/(gains) on cash and cash equivalents
Changes in operating assets and liabilities:
(Increase)/decrease in trade and other receivables
Interest accrued
Increase in trade and other payables
Non-cash transaction
Disposal of investment in associate
Fair value of Ladbrokes Coral plc shares received
Net profit on disposal of investment in associate
The Company’s registered address is St George’s Court, Upper Church Street, Douglas, Isle of Man, IM1 1EE.
2016
€’000
2015
€’000
262,990
(299,465)
(28,603)
(236,467)
(36,475)
(265,070)
(125)
–
(125)
(245,734)
(49,829)
–
–
(1,937)
(67)
(148,044)
(148,111)
(81,805)
–
313,032
200,000
(3,964)
(297,500)
427,263
(334,100)
14,082
541,321
521,299
(48,743)
158,478
5,940
541,321
2016
€’000
2015
€’000
67
8
270
(44,477)
48,743
59
28
85
–
(5,940)
(210,799)
9,802
(103,079)
(342,409)
9,389
102,321
(299,465)
(236,467)
2016
€’000
44,477
44,477
2015
€’000
–
–
Playtech plc Annual Report and Accounts 2016
Notes to the Company financial statements
Note 1 – Investments
Investment in subsidiary undertaking – Cost
Details of investments in subsidiary undertakings as at the end of the year are set out below:
Name
Country of
incorporation
Proportion of
voting rights and
ordinary share
capital held
Nature of business
157
2016
€’000
2015
€’000
215,948
211,740
Playtech Software Limited
British Virgin Islands
100%
Video B Holding Limited
British Virgin Islands
100%
PTVB Management Limited
Technology Trading IOM Limited
Isle of Man
Isle of Man
100%
100%
PT Turnkey Services Limited
British Virgin Islands
100%
Playtech Holding Sweden AB Limited
Sweden
PlayLot Limited
British Virgin Islands
Roxwell Investments Limited
PT Gaming Limited
Dowie Investments LTD
Isle of Man
Isle of Man
Isle of man
100%
100%
100%
100%
100%
Note 2 – Available-for-sale investments
Available-for-sale investments comprise:
Investment in available-for-sale investments at 1 January
Additions
Unrealised valuation movement recognised in equity
Investment in available-for-sale investments at 31 December
All of the available-for-sale assets are equity securities quoted in the UK.
The fair value of quoted investments is based on published market prices.
Main trading company of the Company, owns
the intellectual property rights and licenses the
software to customers.
Trading company for the Videobet software, owns
the intellectual property rights of Videobet and
licenses it to customers.
Management.
Owns the intellectual property rights of Virtue
Fusion business.
Holding company of the Turnkey Services
Company.
Holding company of Mobenga AB.
Distributing lottery software.
Holds the Employee Benefit Trust.
Holding company of Factime investments Ltd.
Holding company of Markets company.
2016
€’000
160,141
44,477
(30,690)
2015
€’000
19,811
148,044
(7,714)
173,928
160,141
The maximum exposure to credit risk at the reporting date is the carrying value of the financial assets classified as available-for-sale.
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements
158
Notes to the Company financial statements continued
Note 3 – Trade and other receivables
Other receivables
Amounts due from subsidiary undertakings
Note 4 – Cash and cash equivalents
Cash at bank
Deposits
Note 5 – Shareholders’ equity
A. Share capital
Authorised
Issued and paid up
2016
€’000
1,238
691,333
2015
€’000
1,077
522,018
692,571
523,095
2016
€’000
67,094
91,384
2015
€’000
229,781
311,540
158,478
541,321
2016
Number of
shares
2015
Number of
shares
N/A*
N/A*
317,344,603** 322,624,603**
* The Company has no authorised share capital but is authorised under its memorandum and articles of association to issue up to 1,000,000,000 shares of no par value.
** In 2016 the Company has cancelled 5,280,000 shares as part of a share buy back for a total consideration of €49,829,000.
B. Share option exercised
During the year 244,416 (2015: 81,986) share options were exercised. The Company cash-settled 14,061 share options during the year
(2015: Nil).
C. Distribution of dividend
In May and June 2016, the Company distributed €60,810,670 as a final dividend for the year ended 31 December 2015
(18.9 €cents per share).
In October 2016, the Company distributed €35,274,873 as an interim dividend in respect of the period ended 30 June 2016
(11.0 €cents per share).
In December 2016, the Company distributed €149,648,301 as special dividend (46.0 €cents per share).
Playtech plc Annual Report and Accounts 2016 159
Note 5 – Shareholders’ equity continued
D. Reserves
The following describes the nature and purpose of each reserve within owner’s equity:
Reserve
Description and purpose
Additional paid in capital
Available-for-sale reserve
Convertible bond option reserve
Retained earnings
Share premium (i.e. amount subscribed for share capital in excess of nominal value)
Changes in fair value of available-for-sale investments (Note 14)
Amount of proceeds on issue of convertible debt relating to the equity component
(i.e. option to convert the debt into share capital)
Cumulative net gains and losses recognised in the consolidated statement
of comprehensive income
Note 6 – Loans and borrowings
The loan balance as of 31 December 2016 is €200 million (2015: €200 million). The loan is a revolving credit facility available until July 2018.
Interest payable on the loan is based on a margin on Euro libor rates.
Note 7 – Convertible bonds
On 12 November 2014 the Company issued €297.0 million of senior, unsecured convertible bonds due 2019 and convertible into fully paid
ordinary shares of Playtech plc (the “Bonds”). The net proceeds of issuing the Bonds, after deducting commissions and other direct costs of
issue, totalled €291.1 million.
The Bonds were issued at par and will be redeemed (if not converted before) on 19 November 2019 at their principal amount. The Bonds
bear interest at 0.5% per annum, payable annually in arrears on 19 November.
Upon conversion, Bondholders are entitled to receive ordinary shares at the conversion price of €10.1325 per ordinary share, subject to
adjustment in respect of (i) any dividend or distribution by the Company, (ii) a change of control and (iii) customary anti-dilution adjustments
for, inter alia, share consolidations, share splits and rights issues.
The fair value of the liability component, included in non-current borrowings, at inception was calculated using a market interest rate for an
equivalent instrument without conversion option of 4%.
The fair value of the liability component, which is immateriality different to the amortised cost, of the Bonds (including accrued interest) at
31 December 2016 amounted to €266.2 million (2015: €256.4 million), which was calculated using cash flow projections discounted at 4%.
The fair value at inception of the equity component of the Bonds at 31 December 2016 was €45.4 million (2015: €45.4 million).
Note 8 – Trade and other payables
Suppliers and accrued expenses
Payroll and related expenses
Amounts owed to Company undertakings
2016
€’000
3,182
14,980
25,081
2015
€’000
3,715
14,736
127,870
43,243
146,321
Playtech plc Annual Report and Accounts 2016 Strategic reportGovernanceFinancial statements 160
Five-year financial summary
Income statement
Total revenues
Associate income
Gross income
Adjusted EBITDA
Adjusted net profit
Balance sheet
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
Equity
Additional paid in capital
Available-for-sale reserve
Employee benefit trust
Convertible bonds option reserve
Put/Call options reserve
Foreign exchange reserve
Retained earnings
Non-controlling interest
Statistics
Basic adjusted EPS (in €cents)
Diluted adjusted EPS (in €cents)
Ordinary dividend per share (in €cents)
Share price low/high
2016
€’000
708.6
–
708.6
302.2
206.2
1,383.7
692.5
260.2
716.3
1,099.7
627.8
(51.1)
(25.4)
45.4
(34.3)
16.8
498.8
21.7
2015
€’000
630.1
–
630.1
251.9
205.9
1,111.9
960.3
195.3
616.2
1,260.7
638.2
2
(27.5)
45.4
–
3.3
592.1
7.3
65.7
59.8
32.7
710.5p/946.5p
67.5
61.8
28.5
636p/924p
2014
€’000
457
–
457
207.1
190.8
494.2
759.8
105
275.7
873.2
324.8
0.8
(36.2)
45.4
–
–
537.7
0.7
2013
€’000
367.2
18.1
385.3
159.4
148.3
470.8
595.2
117.6
27.4
921
323.2
1.6
–
–
–
–
596.3
–
2012
€’000
317.5
50.6
368.1
186.7
168.3
589.2
195.2
181.9
88.4
514.2
310.5
17.2
–
–
–
–
186.4
–
65.9
65.6
26.4
58.1
57.1
23.2
579p/836.5p 422.5p/761.5p 262.25p/435p
50.7
50.2
23.2
Playtech plc Annual Report and Accounts 2016 Playtech plc Annual Report and Accounts 2016
Registered Office
Ground Floor
St George’s Court
Upper Church Street
Douglas
Isle of Man IM1 1EE
Financial PR
Bell Pottinger
5th Floor
Holborn Gate
330 High Holborn
London WC1V 7QD
Corporate Brokers
Solicitors
Canaccord Genuity
9th Floor
88 Wood Street
London EC2V 7QR
Goodbody Stockbrokers
2 Ballsbridge Business Park
Ballsbridge Park
Dublin 4 Ireland
Auditors
BDO LLP
55 Baker Street
London W1U 7EU
Berwin Leighton Paisner LLP
Adelaide House
London Bridge
London EC4R 9HA
Registrars
Computershare Investor Services
(Isle of Man Limited)
International House
Castle Hill
Victoria Road
Douglas
Isle of Man IM2 4RB
www.playtech.com