Webis Holdings AR2014 PFP.indd 2 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:20 Webis Holdings plc Annual Report and Financial Statements for the year ended 31 May 2014 Webis Holdings AR2014 PFP.indd 3 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:21 s t n e t n o C Contents Our Performance 02 Group at a Glance 03 Operating Highlights 04 Chairman’s Statement Our Governance 06 The Board of Directors 07 Directors’ Report 09 Corporate Governance 11 Statement of Directors’ Responsibilities 12 Report of the Remuneration Committee Our Financials 14 Report of the Independent Auditors 15 Consolidated Statement of Comprehensive Income 16 Consolidated Statement of Financial Position 17 Consolidated Statement of Changes in Equity 18 Consolidated Statement of Cash Flows 19 Notes to the Financial Statements 38 Notice of Meeting www.webisholdingsplc.com Stock Code: WEB 01 Webis Holdings AR2014 PFP.indd 1 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:21 Group at a Glance Webis Holdings plc operates two businesses within its Group structure: Sportsbook betinternet.com m.betinternet.com (mobile) betinternet.com (IOM) Limited betinternet.com NV The betinternet.com sportsbook offers betting opportunities on sports, casinos, poker and games to a growing global customer base through both its website and mobile platforms. The sports betting coverage continues to grow particularly within In Play, where customers place bets on sports events in real time, and this area now accounts for a substantial part of betinternet’s turnover and margin. Also on offer are a ‘Live Dealer’ and traditional casino product with table games and slots as well as an increasing suite of fixed-odds games and poker. The company operates under licences issued by the gaming regulatory bodies in the Isle of Man, United Kingdom and Curacao. Pari-Mutuel and Racetrack Operations watchandwager.com Cal Expo Harness Racetrack WatchandWager.com Limited WatchandWager.com LLC WatchandWager.com Ltd has its operational base in San Francisco, California and provides pari-mutuel, or pool-betting, wagering services through a number of distribution channels to a global client base. The company holds United States pari-mutuel licences for Advanced Deposit Wagering (ADW), issued by North Dakota and California. The business provides wagering opportunities predominantly on horse and greyhound racing and has contracted with a significant number of prestigious racetrack partners within the United States, Hong Kong, Canada, United Kingdom, Ireland, Australia and Sweden amongst others. It provides wagering facilities to customers through its website, watchandwager.com, as well as offering a business-to-business wagering product and a telephone call centre. WatchandWager.com LLC operates Cal Expo Harness Racetrack in Sacramento, California, under a licence issued by the California Horse Racing Board. This ‘bricks and mortar’ presence in the largest state economy in the US continues to provide leverage for our related global pari-mutuel operations. As part of the requirements for Webis Holdings plc’s Isle of Man licence, client funds for all Isle of Man licensed Group companies are held in fully protected client accounts within an Isle of Man regulated bank. 02 Webis Holdings plc Annual Report and Financial Statements for the year ended 31 May 2014 Webis Holdings AR2014 PFP.indd 2 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:21 Operating Highlights } Turnover has increased by 4.2% to US$275.85 million (2013: US$264.68 million) } Gross profit has increased by 2.1% to US$8.71 million (2013: US$8.53 million) } Total comprehensive income has increased to US$0.46 million (2013: profit of US$0.28 million) } Basic earnings per share have increased to 0.13 cents (2013: 0.07 cents) } Total assets have increased by 27.4% to US$13.40 million (2013: US$10.52 million) e c n a m r o f r e P r u O www.webisholdingsplc.com Stock Code: WEB 03 Webis Holdings AR2014 PFP.indd 3 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:25 Chairman’s Statement Shareholders should note that the Board has elected to change the Company’s reporting currency from Sterling to US Dollars so as to more accurately reflect the overall performance of the Group, which has the majority of its assets held, and transactions conducted, in US Dollars. Pool-wagering turnover increased to $67.59 million (2013: $52.89 million), with a loss before tax of $0.17 million (2013: profit of $0.02 million). Racetrack Operations achieved a turnover of $51.45 million (2013: $59.52 million) with a profit before tax of $0.13 million (2013: loss of $0.002m). Introduction I am pleased to report that Webis Holdings plc (“Webis” or “the Group”) has achieved a Total Comprehensive Profit for the full financial year ended 31 May 2014. WatchandWager.com (“WatchandWager”), the Group’s pool- wagering and racetrack operation, has made some excellent strategic progress, particularly with increasing the availability of premium global wagering content for our customers. The Group’s Sportsbook operation, betinternet.com (IOM) Limited (“betinternet” or “Sportsbook”), has remained resilient against some strong regulatory headwinds that are impacting the online gambling industry as a whole. Year End Results Review Group turnover for the year ended 31 May 2014 was $275.85 million (2013: $264.68 million). Gross Profit increased by 2% to $8.71 million (2013: $8.53 million). Overall gross margin was 3.2% (2013: 3.2%). Operating expenses increased by 9% over the previous year to $8.55 million (2013: $7.83 million). The majority of the increase in expenses was attributable to the implementation of our growth strategy for WatchandWager in the US. Shareholder equity has increased to $5.17 million (2013: $4.75 million) with total cash at $8.40 million (2013: $7.79 million), which includes a ring-fenced amount of $4.74 million (2013: $4.02 million) held as protection against our player liability as required under Isle of Man gambling legislation. Our Sportsbook turnover increased to $156.81 million (2013: $152.18 million) achieving a profit before tax of $0.27 million (2013: profit of $0.38 million). WatchandWager WatchandWager experienced a 24% growth in turnover for the full year, boosted by new player activity into the Hong Kong Jockey Club and Swedish ATG racetrack pools. Both of these outlets provide us with a competitive advantage over other international operators and are part of our growth strategy to secure further global licences and agreements. We have now established a highly competitive level of global racing content that we are able to offer to our customers through our multiple wagering channels. Following these successes, the Board has agreed to further investment in our pool-wagering division, concentrating on recruiting additional resource to manage the growing scope of our US-based operations. This activity will be focused to specifically make further improvements to the entire watchandwager.com wagering platform. The Board believes that this additional investment expense will translate into enhanced turnover and margin derived from the operation in the near term. We experienced some delays in the full roll-out of our primary website watchandwager.com and mobile application, in an effort to ensure it adequately caters for the needs of our US customer base. As a result performance was below expectations in this sector over the full year. In addition, redirecting the majority of our transactions through our US licences 04 Webis Holdings plc Annual Report and Financial Statements for the year ended 31 May 2014 has also impacted our cost base with increased levels of duty, licensing and compliance costs incurred in the US. The Board views this increased expenditure as part of the cost of operating legitimately in the US market and anticipates that as our turnover grows, we will see the percentage of these costs level off against revenue. Cal Expo, our Sacramento-based harness racetrack operation, adjusted its meeting schedules to achieve the best return for all stakeholders and, by keeping a very close control of the costs, helped to bring profitability to this part of the Group, despite a reduction in turnover for the full racing season. The racetrack remains a key part of our strategy and has continued to offer meaningful leverage in developing the pool-wagering and wider business, with WatchandWager and partner racetrack groups continuing to be actively involved in discussions on legislative change within online gaming in California. The number of parties who have conflicting interests in the opening up of the gaming market in this state may mean, however, that any legislative changes are likely to take some time to materialise. betinternet betinternet saw overall turnover continue at a similar level to the previous year. Fixed Odds turnover achieved good growth due to the popularity of In Play, whereas Casino and Games activity reduced as the changing government perceptions towards online gaming in Singapore, one of our main Asian markets, meant we were obliged to curtail some of our casino and gaming activity in February. This was one of the external challenges in the second half which resulted in a lower overall full-year margin than had been anticipated. Also, a reduction in card authorisations from Singapore and some unfavourable football results in the latter part of the European football season also had an impact on the overall gross margin achieved for the full year, which ended Webis Holdings AR2014 PFP.indd 4 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:25 Results during the football World Cup tournament in June and July in Brazil were generally favourable for betinternet which achieved an encouraging margin. Overall results during the early part of the year have also been favourable. In Play Tennis has continued to be our biggest growth area, with significant increases in activity, particularly during the Wimbledon and US Open championships. The regulatory environment in which our Sportsbook operates continues to change around us, with many governments taking the opportunity to review their existing gambling legislation, particularly as it relates to online activities. In many cases, the primary reason for the introduction of new laws is to offer protection for customers, but invariably this legislation increases contribution levels through additional licence fees and increased duty payments. In many cases this has the unintended effect of restricting legal competition. As there is little global standardisation of legislation, the overall cost of entering newly regulated markets can be high, making the business case difficult to justify in many jurisdictions, with these costs likely to impact the smaller, niche operators disproportionately. As an example, the Singapore Remote Gambling Bill 2014 was passed by the Singapore Parliament on 7 October 2014. This Bill imposes severe restrictions on the companies that are able to legally provide online gambling services within this jurisdiction. We expect the effects of this Bill to impact during the first half of 2015. Therefore, in compliance with Group policy, we will withdraw betinternet from any activity in the Singapore market. This withdrawal will have a material impact on the profitability of this part of our business, despite concerted efforts to reduce our reliance on this region. at $4.25 million, although this remained ahead of the previous year (2013: $4.01 million). For the full year, the Sportsbook fixed- odds margin showed a good level of consistency, remaining similar to that achieved last year at 3.74% (2013: 3.75%). In Play betting accounted for 73% (2013: 57%) of all fixed odds turnover on single bets, highlighting the shifting preference of our customers towards our engaging live betting product. As we grew more comfortable with our price modelling and technologies for In Play Tennis, we increased our exposure to client activity on this product during the second half, which resulted in an uplift in the overall levels of turnover and margin. We further increased our In Play offering to include Baseball, Rugby and Volleyball and focused the majority of our internal development work on this growing area. Post Year, Strategy and Regulatory Developments WatchandWager has now established full access to all of the major US racetrack pools, following our agreement with the New York Racing Association in June. This contract signing was the trigger for a further increase in a variety of targeted marketing activity for the watchandwager.com website. WatchandWager has renewed its California Horse Racing Board racing licence for Cal Expo and our third season of racing restarted in early October. Following consultation with US media groups, Cal Expo has switched from a Friday and Saturday schedule to race on Saturday and Sunday evenings. WatchandWager is also increasing the prize money incentive scheme for this season. These initiatives are designed to promote strong horse numbers throughout the season and encourage greater exposure of our races on television. www.webisholdingsplc.com Stock Code: WEB e c n a m r o f r e P r u O The Board is currently undertaking a comprehensive review of the opportunities available to the Sportsbook and its continued viability. In the interim, the Board has agreed that betinternet will focus only on regulated gaming markets, including customer activity from UK residents. In this connection, Webis made an application for a UK gambling licence, specifically for sportsbook activities, under the transitional arrangements for those operators holding an existing Isle of Man Gambling licence. I am pleased to report that Webis has been granted a ‘continuation’ licence by the UK Gambling Commission which took effect from the start of the new legislation on 1 November 2014. This will allow us the opportunity to be granted a full UK licence in due course. Pending the outcome of the internal review, the Board considers that the Group’s current activities are correctly aligned to ensure the best prospects for future growth. I would like to thank all of our staff, our customers and our shareholders for their continued support throughout the year. Denham Eke Non-executive Chairman 19 November 2014 05 Webis Holdings AR2014 PFP.indd 5 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:25 The Board of Directors D H N Eke, aged 63 Non-executive Chairman Denham Eke began his career in Stockbroking before moving into Corporate Planning for a major UK Insurance Broker. He is a director of many years’ standing of both public and private companies involved in the retail, manufacturing and financial services sectors. Mr Eke was appointed Non-executive Chairman in April 2003. E Comins, aged 44 Pari-mutuel Operations Director Ed Comins has 22 years’ experience in the betting and gaming industry with Coral, Ladbroke Casinos, the Tote and GameAccount. At the Tote he had overall responsibility for developing Totepool’s pari-mutuel business as General Manager of Tote Direct and Development Director for Totepool. He was Commercial Director for GameAccount, a provider of online skill games, where he managed betting partner relationships with key sportsbooks. Mr Comins joined the Board in May 2010. G Knowles, aged 47 Managing Director Garry Knowles has 25 years’ experience in the gaming industry having worked for the William Hill Organisation for 15 years. He later held the position of Director of Customer Relations for MGM Mirage Online before joining betinternet as Head of Trading Operations in November 2003. Mr Knowles joined the Board in June 2005. Sir James Mellon, aged 85 Non-executive Director Sir James Mellon is a former diplomat who began his career with the Department of Agriculture for Scotland before moving onto several varied roles including Head of Trade Relations and Export Dept (TRED), FCO, UK Ambassador to Denmark and Director- General for Trade and Investment, United States and Consul-General, New York. He has many years of corporate experience having been a director of both public and private companies. Sir James Mellon joined the Board in January 2012. 06 Webis Holdings plc Annual Report and Financial Statements for the year ended 31 May 2014 Webis Holdings AR2014 PFP.indd 6 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:25 Directors’ Report e c n a n r e v o G r u O The directors present their annual report and the audited financial statements for the year ended 31 May 2014. Proposed dividend The directors do not propose the payment of a dividend (2013: $Nil). Directors and directors’ interests The directors who held office during the year and to date were as follows: Principal activities The Group operates: } a licensed sports bookmaker providing a worldwide Internet service; } a pari-mutuel service to individual and business customers; } a racetrack under a licence issued in California, USA. Business review The Group operates on a worldwide basis and provides online and offline facilities in respect of a wide variety of sporting events. A more detailed review of the business, its results and future developments is given in the Chairman’s Statement on page 4. Directors’ interests D H N Eke G Knowles E Comins Sir James Mellon Policy and practice on payment of creditors It is the policy of the Group to agree appropriate terms and conditions for its transactions with suppliers by means of standard written terms to individually negotiated contracts. The Group seeks to ensure that payments are always made in accordance with these terms and conditions. At the year end there were 22 days (2013: 22 days) purchases in trade creditors. Financial risks Details relating to financial risk management are shown in note 21 to the financial statements. D H N Eke G Knowles E Comins Sir James Mellon Non-executive Chairman Managing Director Pari-mutuel Operations Director Non-executive Director The director retiring by rotation is Mr Garry Knowles who, being eligible, offers himself for re-election. The directors who held office at the end of the year had the following interests in the ordinary shares of the Company and options to purchase such shares arising from incentive schemes: Ordinary Shares Options Interest at end of year 2014 – 200,000 – – Interest at start of year 2013 – 200,000 – – Interest at end of year 2014 – 14,000,000 – – Interest at start of year 2013 – 14,000,000 – – D H N Eke is Managing Director of Burnbrae Limited which holds 268,204,442 ordinary shares representing 68.19% of the issued capital of the Company. Further details of the options issued to the executive directors are contained in the Report of the Remuneration Committee on pages 12 and 13. www.webisholdingsplc.com Stock Code: WEB 07 Webis Holdings AR2014 PFP.indd 7 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:25 Directors’ Report continued Substantial interests On 6 October 2014 the following interests in 3% or more of the Company’s ordinary share capital had been reported: % 68.19 7.54 Number of ordinary shares 268,204,442 29,651,666 Burnbrae Limited BBHISL Nominees Ltd Annual General Meeting Shareholders will be asked to approve at the Annual General Meeting certain resolutions as special business. Some of these resolutions have become routine business at the Annual General Meetings of most public companies, including your Company, and relate to the renewal of the authority for the directors to allot relevant securities and the renewal of the powers for the directors to allot equity securities for cash. Employees The Group is committed to a policy of equal opportunity in matters relating to employment, training and career development of employees and is opposed to any form of less favourable treatment afforded on the grounds of disability, sex, race or religion. The Group recognises the importance of ensuring employees are kept informed of the Group’s performance, activities and future plans. Political and charitable contributions The Group made no political contributions during the year. As part of the obligations of the pari- mutuel business in the United States, the Group made charitable contributions of $29,522 during the year (2013: $19,964). Auditors KPMG Audit LLC, being eligible, have expressed their willingness to continue in office in accordance with Section 12(2) of the Isle of Man Companies Act 1982. On behalf of the Board Garry Knowles Managing Director 19 November 2014 08 Webis Holdings plc Annual Report and Financial Statements for the year ended 31 May 2014 Webis Holdings AR2014 PFP.indd 8 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:25 Corporate Governance The Company is committed to high standards of corporate governance. The Board is accountable to the Company’s shareholders for good corporate governance. This statement describes how the principles of corporate governance are applied to the Company. 1. Directors The Company is controlled through the Board of directors which comprises two executive and two non-executive directors. The Non-executive Chairman is mainly responsible for the conduct of the Board, and he, together with the Managing Director, seeks to ensure that all directors receive sufficient relevant information on financial, business and corporate issues prior to meetings. The Managing Director, in conjunction with his executive colleagues, is responsible for co-ordinating the Company’s business and implementing strategy. None of the non-executive directors are deemed to be independent, although the Board intends to appoint at least one independent director at an appropriate time. Shareholders are encouraged to contact the Non-executive Chairman should they require clarification on any aspect of the Company’s business. All directors are able to take independent professional advice in furtherance of their duties if necessary. The Board has a formal schedule of matters reserved for it and meets at regular times throughout the year. It is responsible for overall Group strategy, acquisition and divestment policy, approval of major capital expenditure projects and consideration of significant financing matters. It monitors the exposure to key business risks including legislative, jurisdictional and major liability management issues. The Board approves the annual budget and the progress towards achievement of the budget. The Board also considers employee issues and key appointments. It also seeks to ensure that all directors receive appropriate training on appointment and then subsequently as appropriate. All directors will submit themselves for re-election at least once every three years. The Board has established two standing committees, both of which operate within defined terms of reference. The committees established are the Audit Committee and the Remuneration Committee. The Board does not consider it necessary for a company of its size to establish a standing Nominations Committee. Instead the Board’s policy in relation to Board appointments is for the Non-executive Chairman to agree selection criteria with all Board members and use independent recruitment consultants to initiate the search for candidates. The final decision on appointments rests with the full Board. e c n a n r e v o G r u O 2. Directors’ Remuneration The Report of the Remuneration Committee is set out on pages 12 and 13 of the report and financial statements. 3. Relations with Shareholders The Company encourages two-way communication with both its institutional and private investors and attempts to respond quickly to all queries received verbally or in writing. The Board has sought to use the Annual General Meeting to communicate with private investors and encourages their participation. 4. Financial Reporting The performance and financial position of the Group are provided in the Chairman’s Statement on pages 4 and 5 and the Directors’ Report on pages 7 and 8. These enable the Board to present a balanced and understandable assessment of the Group’s position and prospects. The directors’ responsibilities for the financial statements are described on page 11. www.webisholdingsplc.com Stock Code: WEB 09 Webis Holdings AR2014 PFP.indd 9 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:26 Corporate Governance continued Internal Control The Board believes it has controls in place which have established an ongoing process for identifying, evaluating and managing the significant risks faced by the Group. In this regard, the Board seeks to work closely with the Group’s auditors. } The Board seeks to identify, monitor and control the significant risks to an acceptable level throughout the Group. In order to do so the Audit Committee, acting on behalf of the Board, reviews risk matters at each meeting of the Audit Committee. } The Group operates a comprehensive budgeting and financial reporting system which, as a matter of routine, compares actual results with budgets. Management accounts are prepared for each operating activity and the Group on a monthly basis. Material variances from budget are thoroughly investigated. In addition, the Group’s profitability forecast is regularly updated based on actual performance as the year progresses. A thorough reforecast exercise is undertaken following production of the half-year financial statements. } Cash flow forecasts are regularly prepared to ensure that the Group has adequate funds and resources for the foreseeable future. } Risks are identified and appraised through the annual process of preparing these budgets. } Steps have been taken to embed internal control and risk management into the operations of the business and to deal with areas of improvement which come to management’s and the Board’s attention. This process is continuing to increase risk awareness throughout the Group. The Board also acknowledges that it has overall responsibility for reviewing the effectiveness of internal control. It believes that senior management within the Group’s operating businesses should also contribute in a substantial way and this has been built into the process. There are inherent limitations in any system of internal control and, accordingly, even the most effective system can provide only reasonable, and not absolute, assurance with respect to the preparation of financial information and the safeguarding of assets. The system adopted by the Board manages rather than eliminates the risk of failure to achieve business objectives. In carrying out its review of the effectiveness of internal control in the Group the Board takes into consideration the following key features of the risk management process and system of internal control: } Risks are identified which are relevant to the Group as a whole and encompass all aspects of risk including operational, compliance, financial and strategic. The Board specifically focuses on any risk to the Group from regulatory changes within the jurisdictions from which it currently accepts customers. Audit Committee The Audit Committee comprises the non-executive directors and is chaired by Sir James Mellon. The committee acts in an advisory capacity to the Board and meets not less than twice a year. Its terms of reference require it to take an independent view of the appropriateness of the Group’s accounting controls, policies and procedures. The committee also reviews and approves the reports, appointment and fees of the external auditors, and meets its external auditors at least once a year. Additional meetings may be requested by the auditors. Going Concern As more fully explained in note 1.1 to the financial statements on page 21, and after making enquiries, the directors have formed a judgement, at the time of approving the financial statements, that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the directors continue to adopt the going concern basis in preparing the financial statements. Internal Audit The directors have reviewed the need for an internal audit function and believe that the Group is not of sufficient size and complexity to require such a function. 10 Webis Holdings plc Annual Report and Financial Statements for the year ended 31 May 2014 Webis Holdings AR2014 PFP.indd 10 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:26 e c n a n r e v o G r u O Statement of Directors’ Responsibilities in Respect of the Directors’ Report and the Financial Statements The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Parent Company and to enable them to ensure that its financial statements comply with the Companies Acts 1931 to 2004. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation governing the preparation and dissemination of financial statements may differ from one jurisdiction to another. The directors are responsible for preparing the Directors’ Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare Group and Parent Company financial statements for each financial year which meet the requirements of Isle of Man company law. In addition, the directors have elected to prepare the Group and Parent Company financial statements in accordance with International Financial Reporting Standards as adopted by the European Union. The Group and Parent Company financial statements are required by law to give a true and fair view of the state of affairs of the Group and Parent Company and of the profit or loss of the Group for that year. In preparing these financial statements, the directors are required to: } select suitable accounting policies and then apply them consistently; } make judgements and estimates that are reasonable and prudent; } state whether they have been prepared in accordance with International Financial Reporting Standards; and } prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Parent Company will continue in business. www.webisholdingsplc.com Stock Code: WEB 11 Webis Holdings AR2014 PFP.indd 11 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:26 Report of the Remuneration Committee Introduction As an Isle of Man company there is no requirement to produce a Directors’ remuneration report. However, this report has been prepared to accord as far as possible with rules and regulations for UK public companies in relation to the disclosure of directors’ remuneration. This report also attempts to meet, as far as is practicable for a company of Webis Holdings’ size, the relevant requirements of the Listing Rules of the UK Financial Conduct Authority and describes how the Board has applied the Principles of Good Governance relating to directors’ remuneration. As required by the Regulations, a resolution to approve the report will be proposed at the Annual General Meeting of the Company at which the financial statements will be approved. Remuneration Committee The Company has an established Remuneration Committee which has a formal constitution and is composed of the non-executive directors of the Company under the Chairmanship of Sir James Mellon. No director plays a part in any discussion about his own remuneration. Remuneration Policy The Remuneration Committee’s policy is to ensure that the remuneration packages offered are competitive and designed to attract, retain and motivate executive directors of the right calibre. The major elements of the remuneration package for the executive directors are: } Basic annual salary and benefits. } Eligibility to participate in an annual bonus scheme, when such scheme operates. } Share option incentives. } Contribution to a pension plan. The Committee seeks to ensure that bonus and share option incentives have a strong link with individual performance. Basic Salary The level of basic annual salary and benefits is determined by the Committee, taking into account the performance of the individual and information from independent sources on the rates of salary for similar jobs in comparable companies. Annual Bonus Payments It is anticipated that an annual bonus scheme will operate when Group profitability and cash flow allow. Bonuses for the executive directors are calculated with reference to the profit before tax as disclosed in the audited accounts of the Group, together with an assessment by the Committee of the director’s performance against agreed personal targets. Bonus payments are not pensionable. Share Options The Committee believes that share ownership by executives strengthens the link between their personal interests and those of shareholders. The Company currently operates one share option scheme, being the 2005 Share Option Plan. Options are granted to executives periodically at the discretion of the Remuneration Committee. The grant of share options is not subject to fixed performance criteria. This is deemed to be appropriate as it allows the Committee to consider the performance of the Group and the contribution of the individual executives and, as with annual bonus payments, illustrates the relative importance placed on performance related remuneration. Pensions The Group does not intend to contribute to the personal pension plans of directors in the forthcoming year. Service Contracts During the year under review, the service contracts of Mr G R Knowles and Mr E Comins provided for a notice period of six months. 12 Webis Holdings plc Annual Report and Financial Statements for the year ended 31 May 2014 Webis Holdings AR2014 PFP.indd 12 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:26 Aggregate Directors’ Remuneration The total amounts for directors’ remuneration were as follows: Emoluments — salaries, bonuses and taxable benefits — fees Directors’ Emoluments e c n a n r e v o G r u O 2014 US$000 552 56 608 2013 US$000 392 58 450 Basic salary US$000 Fees US$000 Bonus US$000 Termination payments US$000 Benefits US$000 2014 Total US$000 2013 Total US$000 Executive G Knowles E Comins Non-executive D H N Eke* Sir James Mellon Aggregate emoluments * Paid to Burnbrae Limited. 260 277 – – 537 – – 32 24 56 – – – – – – – – – – 2 13 – – 15 262 290 32 24 608 192 200 35 23 450 Details of the options outstanding at 31 May 2014 are as follows: Name of director G Knowles (a) 2005 Share Option Plan (b) 2005 Share Option Plan (c) 2005 Share Option Plan 31 May 2013 (Lapsed)/ granted in year 31 May 2014 Exercise price Date from which exercisable Expiry date 1,500,000 9,000,000 3,500,000 14,000,000 – – – – 1,500,000 9,000,000 3,500,000 14,000,000 10.4p 18 March 2008 18 March 2015 5p 30 March 2009 30 March 2016 20 Sept 2016 20 Sept 2009 6.0565p The market price of the shares at 31 May 2014 was 3.250p. The range during the year was 6.000p to 3.125p. Approval The report was approved by the Board of directors and signed on behalf of the Board. Denham Eke Non-executive Chairman 19 November 2014 www.webisholdingsplc.com Stock Code: WEB 13 Webis Holdings AR2014 PFP.indd 13 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:26 Report of the Independent Auditors, KPMG Audit LLC, to the members of Webis Holdings plc Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. Opinion on the financial statements In our opinion the financial statements: } give a true and fair view of the state of the Group’s and Parent Company’s affairs as at 31 May 2014 and of the Group’s profit for the year then ended; } have been properly prepared in accordance with IFRSs as adopted by the European Union; and } have been properly prepared in accordance with the provisions of Companies Acts 1931 to 2004. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Acts 1931 to 2004 require us to report to you if, in our opinion: } proper books of account have not been kept by the Parent Company and proper returns adequate for our audit have not been received from branches not visited by us; or } the Parent Company’s statement of financial position and statement of comprehensive income are not in agreement with the books of account and returns; or } certain disclosures of directors’ remuneration specified by law are not made; or } we have not received all the information and explanations we require for our audit. KPMG Audit LLC Chartered Accountants Heritage Court, 41 Athol Street Douglas, Isle of Man, IM99 1HN 19 November 2014 We have audited the financial statements of Webis Holdings plc for the year ended 31 May 2014 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company Statements of Financial Position, the Consolidated Statement of Cash Flows, the Consolidated and Parent Company Statements of Changes in Equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. This report is made solely to the Company’s members, as a body, in accordance with Section 15 of the Companies Act 1982. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Directors and Auditors As explained more fully in the Directors’ Responsibilities Statement set out on page 11, the directors are responsible for the preparation of financial statements that 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 Auditing Practices Board’s (APB’s) Ethical Standards for Auditors. 14 Webis Holdings plc Annual Report and Financial Statements for the year ended 31 May 2014 Webis Holdings AR2014 PFP.indd 14 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:26 i s l a c n a n F r u O i Consolidated Statement of Comprehensive Income For the year ended 31 May 2014 Turnover Cost of sales Betting duty paid Gross profit Operating costs Other gains/(losses) — net Operating profit Finance income Finance costs Finance income/(costs) — net Profit before income tax Income tax expense Profit for the year Other comprehensive income: Items that may be subsequently reclassified to profit or loss: Currency translation differences on translation of foreign subsidiaries Other comprehensive income for the year Total comprehensive income for the year Note 2 3 4 4 6 Restated (see Note 1.1) 2013 US$000 264,678 (255,963) (181) 8,534 (7,832) (462) 240 18 (32) (14) 226 – 226 2014 US$000 275,847 (266,962) (178) 8,707 (8,554) 351 504 12 (3) 9 513 – 513 (58) (58) 455 54 54 280 Basic and diluted earnings per share for profit attributable to the equity holders of the Company during the year (cents) 7 0.13 0.07 The notes on pages 19 to 37 form part of these financial statements. The directors believe that all results derive from continuous operations. www.webisholdingsplc.com Stock Code: WEB 15 Webis Holdings AR2014 PFP.indd 15 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:26 Consolidated Statement of Financial Position As at 31 May 2014 31 May 2014 Group US$000 31 May 2014 Company US$000 Note Restated (see Note 1.1) 31 May 2013 Group US$000 Restated (see Note 1.1) 31 May 2013 Company US$000 Restated (see Note 1.1) 28 May 2012 Group US$000 Restated (see Note 1.1) 28 May 2012 Company US$000 Non-current assets Intangible assets Property, equipment and motor vehicles Investments Bonds and deposits Total non-current assets Current assets Bonds and deposits Trade and other receivables Cash and cash equivalents Total current assets Total assets Equity Called up share capital Share premium account Share option reserve Foreign currency translation reserve Retained losses Total equity Non-current liabilities Bank loans Total non-current liabilities Current liabilities Trade and other payables Bank loans Total current liabilities Total liabilities Total equity and liabilities 8 9 10 11 11 13 12 16 15 14 15 489 183 – 704 1,376 1,298 2,325 8,402 12,025 13,401 6,334 16,978 156 (4) (18,295) 5,169 – – 8,215 17 8,232 8,232 13,401 – 17 1,187 – 1,204 – 97 5,655 5,752 6,956 6,334 16,978 156 – (19,508) 3,960 – – 2,996 – 2,996 2,996 6,956 463 146 – 206 815 – 1,915 7,790 9,705 10,520 6,334 16,978 187 54 (18,808) 4,745 15 15 5,737 23 5,760 5,775 10,520 – – 1,078 – 1,078 – 65 5,412 5,477 6,555 6,334 16,978 187 – (19,903) 3,596 – – 2,959 – 2,959 2,959 6,555 489 50 – – 539 – 997 4,301 5,298 5,837 3,690 16,110 187 – (19,034) 953 – – 4,884 – 4,884 4,884 5,837 – – 1,130 – 1,130 – 48 2,717 2,765 3,895 3,690 16,110 187 – (19,674) 313 – – 3,582 – 3,582 3,582 3,895 The financial statements were approved by the Board of directors on 19 November 2014 Denham Eke Director Garry Knowles Director The notes on pages 19 to 37 form part of these financial statements. 16 Webis Holdings plc Annual Report and Financial Statements for the year ended 31 May 2014 Webis Holdings AR2014 PFP.indd 16 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:27 i s l a c n a n F r u O i Consolidated Statement of Changes in Equity For the year ended 31 May 2014 Group Called up share capital US$000 Share premium US$000 Share option reserve US$000 Foreign currency translation reserve US$000 Balance as at 27 May 2012 (Restated - see Note 1.1) Total comprehensive income for the period: Profit for the period Other comprehensive income Transactions with owners: Arising on shares issued in the period Balance as at 31 May 2013 (Restated - see Note 1.1) Total comprehensive income for the year: Profit for the year Other comprehensive income Transactions with owners: Share-based payment credit Balance as at 31 May 2014 3,690 16,110 187 – – – – 2,644 868 – – – 6,334 16,978 187 – – – – – 6,334 – 16,978 – – (31) 156 – – 54 – 54 – (58) – (4) Company Called up share capital US$000 Share premium US$000 Share option reserve US$000 Foreign currency translation reserve US$000 Balance as at 27 May 2012 (Restated - see Note 1.1) Total comprehensive income for the period: Loss for the period Other comprehensive income Transactions with owners: Arising on shares issued in the year Balance as at 31 May 2013 (Restated - see Note 1.1) Total comprehensive income for the year: Profit for the year Other comprehensive income Transactions with owners: Share-based payment credit Balance as at 31 May 2014 3,690 16,110 187 – – – – 2,644 868 – – – 6,334 16,978 187 – – – – – 6,334 – 16,978 – – (31) 156 The notes on pages 19 to 37 form part of these financial statements. – – – – – – – – – Retained earnings US$000 Total equity US$000 (19,034) 226 – 953 226 54 – 3,512 (18,808) 4,745 513 – – (18,295) 513 (58) (31) 5,169 Retained earnings US$000 Total equity US$000 (19,674) 313 (229) – (229) – – 3,512 (19,903) 3,596 395 – – (19,508) 395 – (31) 3,960 www.webisholdingsplc.com Stock Code: WEB 17 Webis Holdings AR2014 PFP.indd 17 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:27 Consolidated Statement of Cash Flows For the year ended 31 May 2014 Cash flows from operating activities Profit before income tax Adjustments for: — Depreciation of property, equipment and motor vehicles — Amortisation of intangible assets — Finance (income)/costs — net — Foreign exchange (gains)/losses on revaluation — Share-based payment credit Changes in working capital: — Increase in receivables — Increase in payables Cash flows from operations Finance income Bonds and deposits placed in the course of operations Net cash generated from operating activities Cash flows from investing activities Purchase of intangible assets Purchase of property, equipment and motor vehicles Disposal of property, equipment and motor vehicles Net cash used in investing activities Cash flows from financing activities Interest paid Loans (repaid)/received Loans received from related party Issue of equity shares Net cash (used in)/generated from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Exchange gains/(losses) on cash and cash equivalents Cash and cash equivalents at end of year The notes on pages 19 to 37 form part of these financial statements. Restated (see Note 1.1) 2013 US$000 2014 US$000 513 71 135 (9) (478) (31) (410) 2,478 2,269 12 (1,796) 485 (120) (99) 3 (216) (3) (21) – – (24) 245 7,790 367 8,402 226 42 163 14 333 – (918) 2,667 2,527 18 (206) 2,339 (155) (140) – (295) (32) 38 267 1,302 1,575 3,619 4,301 (130) 7,790 18 Webis Holdings plc Annual Report and Financial Statements for the year ended 31 May 2014 Webis Holdings AR2014 PFP.indd 18 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:27 i s l a c n a n F r u O i Notes to the Financial Statements For the year ended 31 May 2014 1 Reporting entity Webis Holdings plc is a company domiciled in the Isle of Man. The address of the Company’s registered office is Viking House, Nelson Street, Douglas, Isle of Man, IM1 2AH. The Group’s consolidated financial statements as at and for the year ended 31 May 2014 consolidate those of the Company and its subsidiaries (together referred to as “the Group”). 1.1 Basis of Preparation (a) Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) and its interpretations as adopted by the European Union. Standards and interpretations not yet effective A number of new standards, amendments to standards and interpretation are not yet effective for year ended 31 May 2014, and have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the measurement of the amounts recognised in the Group’s financial statements; however, IFRS 9, Financial Instruments (“IFRS 9”) may change the classification of financial assets. IFRS 9 is first effective for accounting periods beginning on or after 1 January 2018. There are no other standards, interpretations or amendments to existing standards that are not yet effective that would be expected to have a significant impact on the Group. The Group has continued to apply the accounting policies, presentation and methods of computation used in the 31 May 2013 annual report except that the financial statements are now presented in US Dollars and as described below for fair value measurement. Changes in accounting policies The Group has adopted the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 June 2013: } IFRS 10 Consolidated Financial Statements (2011) (“IFRS 10 (2011)”) along with the consolidation suite of standards, namely: IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities, IAS 27 (revised) and IAS 28 (revised). The amendments to IFRS 10 require investment entities to state controlled portfolio entities at fair value under IAS 39 instead of consolidating such subsidiaries (see (a)) } IFRS 13 Fair Value Measurement (“IFRS 13”) (see (b)) The nature and the effect of the significant changes are further explained below. (a) Subsidiaries As a result of IFRS 10 (2011), the Company has changed its accounting policy for determining whether it has control over and consequently whether it consolidates its subsidiary companies. IFRS 10 (2011) introduces a new control model that is applicable to all investee companies, by focusing on whether the Company has power over an investee company, exposure or rights to variable returns from its involvement with the investee company and ability to use its power to affect those returns. In particular, IFRS 10 (2011) requires that the Company consolidate investee companies that it controls on the basis of de facto circumstances. In accordance with the transitional provisions of IFRS 10 (2011), the Company reassessed the control conclusion for its subsidiary companies at 1 June 2013. No changes resulted from this reassessment. The directors consider that the adoption of IFRS 11 and IFRS 12 will not have any impact on the presentation in the financial statements. www.webisholdingsplc.com Stock Code: WEB 19 Webis Holdings AR2014 PFP.indd 19 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:27 Notes to the Financial Statements continued For the year ended 31 May 2014 1 Reporting entity continued (b) Fair value measurement IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements, when such measurements are required or permitted by other IFRS’s. In particular, it unifies the definition of fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date. It also replaces and expands the disclosure requirements about fair value measurements in other IFRS’s, including IFRS 7 Financial Instruments: Disclosures. In accordance with the transitional provisions of IFRS 13, the Group has applied the new fair value measurement guidance prospectively. Notwithstanding the above, the change had no significant impact on the measurements of the Group’s assets and liabilities. Change in functional currency IAS 21 The Effects of Changes in Foreign Exchange Rates describes functional currency as “the currency of the primary economic environment in which an entity operates”. A change in functional currency reflects the accumulation over time of those factors which are the main determinants of functional currency. Having considered the aggregate effect of all relevant factors, the directors concluded that the functional currency of Webis Holdings plc had changed from Sterling to US Dollars in the first quarter of this financial year. Accordingly, the change in functional currency of Webis Holdings plc is effective from 1 June 2013. In accordance with IAS 21 this change has been accounted for prospectively from this date. Change in presentational currency Following the development of the US-based pari-mutuel and racetrack operations, the Group’s US operations have expanded and become more significant to the results of the Group. The dominant functional currency of the operating subsidiaries is the US Dollar. This is not only driven by US domiciled businesses but also by businesses outside the US, which have a US Dollar functional currency. The Group’s revenues, cash flows and economic returns are now principally denominated in US Dollars. Webis Holdings plc has changed the currency in which it presents its consolidated and Parent Company Financial Statements from Sterling to US Dollars, as this will give a more meaningful view of the Group’s and Company’s financial performance and position. A change in presentational currency is a change in accounting policy which is accounted for retrospectively. Financial information reported in Sterling in the Group’s 2013 Annual Report has been restated into US Dollars using the procedures outlined below: (a) assets and liabilities denominated in non-US Dollar currencies were translated into US Dollars at closing rates of exchange. Non-US Dollar trading results were translated into US Dollars at average monthly rates of exchange. Differences resulting from the retranslation of the opening net assets and the results for the year of non-US trading subsidiaries have been taken to the foreign currency translation reserve; and (b) share capital, share premium and capital redemption reserves were translated at the historic rates prevailing at the dates of transactions. The closing rates for each reporting period included in this report are as follows: Exchange rates US$/£ — year/period end 2014 1.6778 2013 1.5235 2012 1.6031 20 Webis Holdings plc Annual Report and Financial Statements for the year ended 31 May 2014 Webis Holdings AR2014 PFP.indd 20 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:28 i s l a c n a n F r u O i 1 Reporting entity continued (b) Basis of measurement The Group consolidated financial statements are prepared under the historical cost convention except where assets and liabilities are required to be stated at their fair value. (c) Use of estimates and judgement The preparation of the Group financial statements in conformity with IFRS as adopted by the EU requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Although these estimates are based on management’s best knowledge and experience of current events and expected economic conditions, actual results may differ from these estimates. The directors believe the models and assumptions used to calculate the fair value of the share-based payments, outlined in note 16, are the most appropriate for the Group. The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements. Going concern The directors have prepared projected cash flow information for the next 12 months and are satisfied that the Group has adequate resources to meet its obligations as they fall due. The directors consider that it is appropriate that these financial statements are prepared on the going concern basis as the Group is generating positive cash flows, has a positive cash balance and minimal debt. 1.2 Summary of significant accounting policies The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented unless otherwise stated. Basis of consolidation The consolidated financial statements incorporate the results of Webis Holdings plc and its subsidiaries. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue until the date that such control ceases. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are expensed as incurred. Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. When necessary amounts reported by subsidiaries have been adjusted to conform with the Group’s accounting policies. www.webisholdingsplc.com Stock Code: WEB 21 Webis Holdings AR2014 PFP.indd 21 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:28 Notes to the Financial Statements continued For the year ended 31 May 2014 1 Reporting entity continued Foreign currency translation (a) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in US Dollars, which is also the Group’s functional currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement within ‘finance income or costs’. All other foreign exchange gains and losses are presented in the income statement within ‘Other gains/(losses) – net’. (c) Group companies The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; (ii) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and (iii) all resulting exchange differences are recognised in other comprehensive income. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognised in other comprehensive income. Revenue recognition and turnover Turnover represents the amounts staked in respect of bets placed by customers on events which occurred during the year. Cost of sales represents payouts to customers, together with Betting Duty payable and commissions and royalties payable to agents and suppliers of software. Open betting positions are carried at fair market value. Segmental reporting Segmental reporting is based on the business areas in accordance with the Group’s internal reporting structure. The Group determines and presents segments based on the information that internally is provided to the Managing Director, the Group’s chief operating decision maker. An operating segment is a component of the Group and engages in business activities from which it may earn revenues and incur expenses. An operating segment’s operating results are reviewed regularly by the Managing Director to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Borrowing costs Borrowing costs are recognised in profit or loss in the period in which they are incurred. 22 Webis Holdings plc Annual Report and Financial Statements for the year ended 31 May 2014 Webis Holdings AR2014 PFP.indd 22 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:28 i s l a c n a n F r u O i 1 Reporting entity continued Current and deferred income tax The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Only where there is an agreement in place that gives the Group the ability to control the reversal of the temporary difference is the liability not recognised. Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilised. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes, assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. Intangible assets — goodwill Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Group’s interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units (“CGUs”), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level. Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed. www.webisholdingsplc.com Stock Code: WEB 23 Webis Holdings AR2014 PFP.indd 23 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:28 Notes to the Financial Statements continued For the year ended 31 May 2014 1 Reporting entity continued Intangible assets — other (a) Trademarks and licences Separately acquired trademarks and licences are shown at historical cost. Trademarks and licences acquired in a business combination are recognised at fair value at the acquisition date. Trademarks and licences have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of trademarks and licences over their estimated useful lives of three years. Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of three years. (b) Website design and development costs Costs associated with maintaining websites are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique websites controlled by the Group are recognised as intangible assets when the following criteria are met: } it is technically feasible to complete the website so that it will be available for use; } management intends to complete the website and use it; } there is an ability to use the website; } it can be demonstrated how the website will generate probable future economic benefits; } adequate technical, financial and other resources to complete the development and to use the website are available; and } the expenditure attributable to the website during its development can be reliably measured. Directly attributable costs that are capitalised as part of the website include the website employee costs and an appropriate portion of relevant overheads. Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Website development costs recognised as assets are amortised over their estimated useful lives, which do not exceed three years. Property, equipment and motor vehicles Items of property, equipment and motor vehicles are stated at historical cost less accumulated depreciation (see below) and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the financial position date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Depreciation is calculated using the straight-line method to allocate the cost of property, equipment and motor vehicles over their estimated useful lives of three years. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within ‘Other gains/(losses) – net’ in the income statement. 24 Webis Holdings plc Annual Report and Financial Statements for the year ended 31 May 2014 Webis Holdings AR2014 PFP.indd 24 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:28 i s l a c n a n F r u O i 1 Reporting entity continued Impairment of assets Goodwill arising on acquisitions and other assets that have an indefinite useful life and are not subject to amortisation are reviewed at least annually for impairment. Other intangible assets, property, plant and equipment are reviewed for impairment whenever there is an indication that the carrying amount of the asset may not be recoverable. If the recoverable amount of an asset is less than its carrying amount, an impairment loss is recognised. Recoverable amount is the higher of fair value less costs to sell and value in use. If at the financial position date there is any indication that an impairment loss is recognised in prior periods for an asset other than goodwill that no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount. Share-based payments The group operates an equity-settled, share-based compensation plan, under which the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted: } including any market performance conditions (for example, an entity’s share price); and } excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period). Non-market performance and service conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity. When the options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium. Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. The Group is not party to any leases that are classified as finance leases. Equity Share capital is determined using the nominal value of shares that have been issued. The share premium account includes any premiums received on the initial issuing of the share capital. Any transaction costs associated with the issuing of shares are deducted from the premium paid. Equity-settled share-based employee remuneration is credited to the share option reserve until related stock options are exercised. On exercise or lapse, amounts recognised in the share option reserve are taken to retained earnings. Retained earnings include all current and prior period results as determined in the income statement and any other gains or losses recognised in the Statement of Changes in Equity. www.webisholdingsplc.com Stock Code: WEB 25 Webis Holdings AR2014 PFP.indd 25 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:28 Notes to the Financial Statements continued For the year ended 31 May 2014 1 Reporting entity continued Financial instruments Non-derivative financial instruments include trade and other receivables, cash and cash equivalents, loans and borrowings and trade and other payables. Ante-post sports bets are recognised when the Company becomes party to the contractual agreements of the instrument. Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes party to the contractual terms of the instrument. Transaction costs are included in the initial measurement of financial instruments, except financial instruments classified as at fair value through profit and loss. The subsequent measurement of financial instruments is dealt with below. Trade and other receivables Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Cash and cash equivalents Cash and cash equivalents are defined as cash in bank and in hand as well as bank deposits, money held for processors and cash balances held on behalf of players. Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. Bank borrowings Interest bearing bank borrowings and overdrafts are recorded at the proceeds received net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs are charged on an accrual basis using the effective interest method and are added to the carrying amount of the instrument to the extent they are not settled in the period in which they arise. Trade and other payables Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Open sports bets The Group may have at any point in time, an exposure on open sports bets. These bets meet the definition of a financial liability under International Accounting Standard 32 “Financial Instruments: Disclosure and Presentation”, and therefore are recorded at fair value. Employee benefits (a) Pension obligations The Group does not operate any post-employment schemes, including both defined benefit and defined contribution pension plans. (b) Short-term employee benefits Short-term employee benefits, such as salaries, paid absences, and other benefits, are accounted for on an accruals basis over the period in which employees have provided services in the year. All expenses related to employee benefits are recognised in the statement of comprehensive income in operating costs. (c) Profit-sharing and bonus plans The Group recognises a liability and an expense for bonuses and profit-sharing, based on a formula that takes into consideration the profit attributable to the Company’s shareholders after certain adjustments. The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation. 26 Webis Holdings plc Annual Report and Financial Statements for the year ended 31 May 2014 Webis Holdings AR2014 PFP.indd 26 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:28 i s l a c n a n F r u O i Asia Pacific Europe UK & Ireland Rest of the World United States Asia Pacific Caribbean UK & Ireland Europe 2 Segmental Analysis Turnover Sportsbook Pari-mutuel and Racetrack Operations Total comprehensive income Sportsbook Pari-mutuel and Racetrack Operations Group Net assets Sportsbook Pari-mutuel and Racetrack Operations Group 3 Operating profit Operating profit is stated after charging: Auditors’ remuneration — audit Depreciation of property, equipment and motor vehicles Amortisation of intangible assets Exchange (gains)/losses Operating lease rentals — other than plant, equipment and Harness Racetrack Operating lease rentals — Harness Racetrack Directors’ fees 4 Finance income/(costs) — net Bank interest receivable Finance income Bank interest payable Loan interest payable Finance costs Finance income/(costs) — net www.webisholdingsplc.com Stock Code: WEB 2014 US$000 2013 US$000 112,045 23,379 15,874 5,507 88,852 17,010 10,330 2,386 464 275,847 209 (39) 285 455 (578) 2,980 2,767 5,169 120,937 11,372 17,002 2,870 86,038 10,074 15,539 626 220 264,678 437 15 (172) 280 (787) 3,019 2,513 4,745 2014 US$000 2013 US$000 150 71 135 (351) 84 148 56 165 42 163 462 67 163 60 2014 US$000 2013 US$000 12 12 (3) – (3) 9 18 18 (2) (30) (32) (14) 27 Webis Holdings AR2014 PFP.indd 27 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:28 Notes to the Financial Statements continued For the year ended 31 May 2014 5 Staff numbers and cost Average number of employees (including directors) – Sportsbook Average number of employees – Pari-mutuel and Racetrack Operations The aggregate payroll costs of these persons were as follows: Sportsbook Wages and salaries Social security costs Pari-mutuel and Racetrack Operations Wages and salaries Social security costs 6 Income tax expense Profits before tax Tax charge at IOM standard rate (0%) Adjusted for: Tax credit for US tax losses (at 15%) Add back deferred tax losses not recognised Tax charge for the year 7 Earnings per ordinary share 2014 20 65 2014 US$000 1,016 107 1,123 2014 US$000 1,872 153 2,025 2013 19 64 2013 US$000 931 93 1,024 2013 US$000 1,491 121 1,612 2014 US$000 2013 US$000 513 – (95) 95 – 226 – (30) 30 – The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares, on the assumed conversion of all dilutive share options. An adjustment for the dilutive effect of share options and convertible debt in the previous period has not been reflected in the calculation of the diluted loss per share, as the effect would have been anti-dilutive. Profit for the year Weighted average number of ordinary shares in issue Diluted number of ordinary shares Basic and diluted earnings per share (cents) 2014 US$000 2013 US$000 513 No. 226 No. 393,338,310 407,338,310 0.13 330,148,762 344,148,762 0.07 28 Webis Holdings plc Annual Report and Financial Statements for the year ended 31 May 2014 Webis Holdings AR2014 PFP.indd 28 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:28 i s l a c n a n F r u O i 8 Intangible assets Cost Balance at 31 May 2013 Additions during the year Currency translation differences Balance at 31 May 2014 Amortisation and Impairment At 31 May 2013 Amortisation for the year At 31 May 2014 Net book value At 31 May 2014 At 31 May 2013 Goodwill Group US$000 Software & development costs Company US$000 Group US$000 Total Group US$000 Company US$000 169 – 17 186 – – – 186 169 4,357 120 24 4,501 4,063 135 4,198 303 294 50 – – 50 50 – 50 – – 4,526 120 41 4,687 4,063 135 4,198 489 463 50 – – 50 50 – 50 – – The goodwill relates to the acquisition of the pari-mutuel business which is both a cash generating unit and a reportable segment, including goodwill arising on the acquisition in 2010 of WatchandWager.com LLC, a US registered entity licensed for pari-mutuel wagering in North Dakota. The Group tests intangible assets annually for impairment, or more frequently if there are indications that the intangible assets may be impaired. The recoverable amount of goodwill on both pari-mutuel business units has been determined based on a value in use calculation using cash flow projections based on financial budgets approved by the directors. The key assumptions on which the directors have based their three year discounted cash flow analysis are a pre-tax discount rate of 15% and growth rate in pari-mutuel business of 2%. The assumption of growth rate in pari-mutuel business has been based on the historic performance of the business as well as forecast performance based on the Board’s plan to invest further in this business. In respect of the value in use calculations, cash flows have been considered for both the conservative and the full forecast potential of future cash flows with no impact to the valuation of goodwill. 9 Property, equipment and motor vehicles Group Cost At 31 May 2013 Additions Disposals Currency translation differences At 31 May 2014 Depreciation At 31 May 2013 Charge for the year Disposals At 31 May 2014 Net book value At 31 May 2014 At 31 May 2013 www.webisholdingsplc.com Stock Code: WEB Fixtures, Fittings & Track Equipment US$000 Computer Equipment US$000 Motor Vehicles US$000 Total US$000 2,022 70 – 8 2,100 1,920 48 – 1,968 132 102 458 25 (3) 2 482 437 12 (1) 448 34 21 34 4 – 2 40 11 12 – 23 17 23 2,514 99 (3) 12 2,622 2,368 72 (1) 2,439 183 146 29 Webis Holdings AR2014 PFP.indd 29 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:29 Notes to the Financial Statements continued For the year ended 31 May 2014 9 Property, equipment and motor vehicles continued Company Cost At 31 May 2013 Additions Disposals At 31 May 2014 Depreciation At 31 May 2013 Charge for the year At 31 May 2014 Net book value At 31 May 2014 At 31 May 2013 10 Investments Computer Equipment US$000 Fixtures & Fittings US$000 Total US$000 401 – – 401 401 – 401 – – 120 21 – 141 120 4 124 17 – 521 21 – 542 521 4 525 17 – Investments in subsidiaries are held at cost. Details of investments at 31 May 2014 are as follows: Subsidiaries Country of incorporation Activity Holding (%) WatchandWager.com Limited Isle of Man Operation of interactive wagering totaliser hub Dormant Sportsbook trading company Licence holder for games and casinos Technical Facilities & Services Limited Isle of Man Isle of Man betinternet.com (IOM) Limited Netherlands Antilles betinternet.com NV United States of America Operation of interactive wagering WatchandWager.com LLC totaliser hub and harness racetrack Provision of IT & marketing services to the Sportsbook trading company Non-trading B.E. Global Services Limited Webis Ireland Limited Isle of Man Ireland 100 100 100 100 100 100 100 11 Bonds and deposits Bonds and deposits which expire within one year Bonds and deposits which expire within one to two years Bonds and deposits which expire within two to five years Group Company 2014 US$000 2013 US$000 2014 US$000 2013 US$000 1,298 – 704 2,002 – – 206 206 – – – – – – – – A rent deposit of $200,000 was paid to California Exposition & State Fair and is for a term of 5 years (2013: $200,000). $500,000 has been paid as a bond in relation to WatchandWager’s Californian ADW licence (2013: $Nil). Rent and security deposits of $3,678 have been paid in relation to office deposits and security and are expected to be in place for at least a minimum of two years (2013: $Nil). A retainer account of $1,289,792 is held with the Hong Kong Jockey Club. A sales tax deposit of $5,850 was paid to the State Board of Equalization and was refunded in June 2014 (2013: $5,850). An annually renewable insurance bond of $2,000 is also in place. 30 Webis Holdings plc Annual Report and Financial Statements for the year ended 31 May 2014 Webis Holdings AR2014 PFP.indd 30 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:29 i s l a c n a n F r u O i 12 Cash and cash equivalents Cash and cash equivalents – company funds Cash and cash equivalents – protected player funds Total cash and cash equivalents Group Company 2014 US$000 3,657 4,745 8,402 2013 US$000 3,770 4,020 7,790 2014 US$000 910 4,745 5,655 2013 US$000 1,392 4,020 5,412 The Group holds funds for operational requirements, shown as “company funds” and on behalf of its Isle of Man regulated customers, shown as “protected player funds”. Protected player funds are held in fully protected client accounts within an Isle of Man regulated bank. 13 Trade and other receivables Trade receivables Other receivables and prepayments 14 Trade and other payables Trade payables Amounts due to Group undertakings Open sports bets Taxes and national insurance Accruals and other payables Group Company 2014 US$000 590 1,735 2,325 2013 US$000 554 1,361 1,915 2014 US$000 2013 US$000 – 97 97 – 65 65 Group Company 2014 US$000 2013 US$000 2014 US$000 2013 US$000 7,591 – 9 42 573 8,215 4,059 – 9 52 1,617 5,737 43 2,857 – – 96 2,996 69 2,835 – – 55 2,959 Amounts due to Group undertakings are unsecured, interest free and repayable on demand. Included within trade payables are amounts due to customers of $7,323,692. 15 Bank loans Due within one year Due within one to two years Due within two to five years Group Company 2014 US$000 2013 US$000 2014 US$000 2013 US$000 17 – – 17 23 15 – 38 – – – – – – – – The bank loan is provided by Conister Bank Limited (note 20), carries an interest rate of 6.5% per annum on the original principal amount and is fully repayable by 14 January 2015. www.webisholdingsplc.com Stock Code: WEB 31 Webis Holdings AR2014 PFP.indd 31 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:29 Notes to the Financial Statements continued For the year ended 31 May 2014 16 Share Capital Allotted, issued and fully paid At beginning of year/period: ordinary shares of 1p each Issued during the year At 31 May: ordinary shares of 1p each No. 2014 US$000 2013 US$000 393,338,310 – 393,338,310 6,334 – 6,334 3,690 2,644 6,334 The authorised share capital of the Company is US$9,619,000 divided into 600,000,000 ordinary shares of £0.01 each. Options Open share options during the year ended 31 May 2014 were as follows: At 31 May 2014 and 31 May 2013 — 1p ordinary shares Details of options at 31 May 2014 were as follows: No. 14,000,000 2005 Share Option Plan 2005 Share Option Plan 2005 Share Option Plan Price per share Options granted Exercisable between 10.4p 5.0p 6.0565p 1,500,000 9,000,000 3,500,000 14,000,000 March 2008 and March 2015 March 2009 and March 2016 September 2009 and September 2016 The fair value of services received in return for share options granted is based on the fair value of share options granted, measured using the Black–Scholes model with the following inputs: Share price at date of grant Option exercise price at date of grant Expected volatility Option life Expected dividends Risk-free interest rate varies from varies from 2005 Share Option Plan 5.0p to 10.4p 5.0p to 10.4p 20% 3.5 years 0% 4.60% Expected volatility was determined by calculating the historical volatility of the Company’s weighted average share price over the year. The expected life used has been adjusted based on management’s best estimate for the effects of non-transferability, exercise restrictions and behavioural considerations. Credit in profit and loss account: Share options 2014 US$000 31 31 2013 US$000 – – 32 Webis Holdings plc Annual Report and Financial Statements for the year ended 31 May 2014 Webis Holdings AR2014 PFP.indd 32 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:29 i s l a c n a n F r u O i 17 Open sports bets liabilities By the nature of the business, a stake can be received from a customer in respect of some event happening in the future, and hence the level of any actual liability to the Group cannot be assessed until after that event has occurred, although the maximum potential liability can be determined. As at the financial position date there were $8,714 (2013: $8,449) of such stakes that had been received where the event to which they related was after the financial position date. Accordingly, such amount has been reflected as open sports bets in the balance sheet (see note 14). The maximum possible liability on open sports bets is $3.992m (2013: $0.049m). 18 Capital commitments As at 31 May 2014, the Group had no capital commitments (2013: $Nil). 19 Operating lease commitments At 31 May 2014, the Group was committed to future minimum lease payments of: Payments due within one year Payments due between two to five years Payments due beyond five years 2014 US$000 2013 US$000 226 357 – 226 582 – 20 Related party transactions Identity of related parties The Group has a related party relationship with its subsidiaries (see note 10), and with its directors and executive officers and with Burnbrae Ltd (significant shareholder) and with Conister Bank Ltd (common director and shareholder). Transactions with and between subsidiaries Transactions with and between the subsidiaries in the Group, which have been eliminated on consolidation, are considered to be related party transactions. Transactions with entities with significant influence over the Group Rental and service charges of $58,861 (2013: $44,777), loan interest of $Nil (2013: $31,633) and directors’ fees of $32,192 (2013: $36,759) were charged in the year by Burnbrae Limited of which Denham Eke is a common director. Burnbrae Limited had also provided an unsecured loan which was converted into share capital in the previous year of $1,980,550. A loan of $16,952 was owed to Conister Bank Ltd (note 15) at the year end (2013: $38,484). Transactions with other related parties Cash deposits totalling $5,697,311 (2013: $5,564,460) were held with Conister Bank Ltd at the year end. Transactions with key management personnel See page 13 for disclosure of Directors’ Emoluments. www.webisholdingsplc.com Stock Code: WEB 33 Webis Holdings AR2014 PFP.indd 33 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:29 Notes to the Financial Statements continued For the year ended 31 May 2014 21 Financial risk management Capital structure The Group’s capital structure is as follows: Cash and cash equivalents Loans and similar income Net funds Shareholders’ equity Capital employed 2014 US$000 8,402 (17) 8,385 (5,169) 3,216 2013 US$000 7,790 (38) 7,752 (4,745) 3,007 The Group’s principal financial instruments comprise cash and cash equivalents, trade receivables and payables that arise directly from its operations. The main purpose of these financial instruments is to finance the Group’s operations. The existence of the financial instruments exposes the Group to a number of financial risks, which are described in more detail below. The principal risks which the Group is exposed to relate to liquidity risks, credit risks, interest rate risks and foreign exchange risks. Liquidity risks Liquidity risk is the risk that the Group will be unable to meet its financial obligations as they fall due. The Group’s objective is to maintain continuity of funding through trading and share issues but to also retain flexibility through the use of short-term loans if required. Management controls and monitors the Group’s cash flow on a regular basis, including forecasting future cash flow. Banking facilities are kept under review to ensure they meet the Group’s requirements. Funds equivalent to customer balances are held in designated bank accounts to ensure that Isle of Man Gambling Supervision Commission player protection principles are met. The directors anticipate that the business will continue to generate sufficient cash flow in the forthcoming period to meet its financial obligations. The Group had an unsecured loan facility with Burnbrae Limited, with an interest rate of base plus 4%, which had not been utilised during the year. During the year ended 31 May 2013 the total loan balance of $1,980,550 was converted into share capital. The following are the contractual maturities of financial liabilities: 2014 Financial liabilities Trade creditors Income tax and national insurance Other creditors Carrying amount US$000 Contractual cash flow US$000 6 months or less US$000 Up to 1 year US$000 1–5 years US$000 7,591 42 153 7,786 (7,591) (42) (153) (7,786) (7,591) (42) (153) (7,786) – – – – – – – – 34 Webis Holdings plc Annual Report and Financial Statements for the year ended 31 May 2014 Webis Holdings AR2014 PFP.indd 34 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:30 i s l a c n a n F r u O i 21 Financial risk management continued 2013 Financial liabilities Trade creditors Income tax and national insurance Other creditors Carrying amount US$000 Contractual cash flow US$000 4,059 52 1,157 5,268 (4,059) (52) (1,157) (5,268) 6 months or less US$000 (4,059) (52) (1,157) (5,268) Up to 1 year US$000 1–5 years US$000 – – – – – – – – Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Classes of financial assets — carrying amounts Cash and cash equivalents Trade and other receivables 2014 US$000 8,402 2,021 10,423 2013 US$000 7,790 1,713 9,503 Generally, the maximum credit risk exposure of financial assets is the carrying amount of the financial assets as shown on the face of the balance sheet (or in the notes to the financial statements). Credit risk, therefore, is only disclosed in circumstances where the maximum potential loss differs significantly from the financial asset’s carrying amount. The maximum exposure to credit risks for trade receivables any business segment: Pari-mutuel Sportsbook 2014 US$000 1,841 180 2,021 2013 US$000 1,498 215 1,713 Of the above receivables, $589,000 (2013: $542,000) relates to amounts owed from US racing tracks. These receivables are actively monitored to avoid significant concentration of credit risk and the directors consider there to be no significant concentration of credit risk. The directors consider that all the above financial assets that are not impaired for each of the reporting dates under review are of good credit quality. No amounts were considered past due at the year end (2013: $Nil). The credit risk for liquid funds and other short-term financial assets is considered negligible, since the counterparties are reputable banks with high quality external credit ratings. www.webisholdingsplc.com Stock Code: WEB 35 Webis Holdings AR2014 PFP.indd 35 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:30 Notes to the Financial Statements continued For the year ended 31 May 2014 21 Financial risk management continued Interest rate risk The Group finances its operations mainly through capital with limited levels of borrowings. Cash at bank and in hand earns negligible interest at floating rates, based principally on short-term interbank rates. Any movement in interest rates would not be considered to have any significant impact on net assets at the balance sheet date. Foreign currency risks The Group operates internationally and is subject to transactional foreign currency exposures primarily with respect to Pound Sterling, Swedish Krona and Singapore Dollar. The Group does not actively manage the exposures but regularly monitors the Group’s currency position and exchange rate movements and makes decisions as appropriate. At the balance sheet date the Group had the following exposure: 2014 Current assets Current liabilities Short-term exposure 2013 Current assets Current liabilities Short-term exposure HKD US$ 000 GBP US$ 000 EUR US$ 000 USD US$ 000 SGD US$ 000 NOK US$ 000 DKK US$ 000 AUD US$ 000 CAD US$ 000 CHF US$ 000 CNY US$ 000 SEK US$ 000 Total US$ 000 49 3,244 (24) (748) 25 2,496 195 6,168 (298) (5,188) 980 (103) 167 (90) 77 4 (3) 1 7 (1) 6 4 (4) – 5 – 5 2 – 2 – 2,180 12,025 (8,232) – (1,876) 3,793 304 – HKD US$ 000 GBP US$ 000 110 3,614 (41) (628) 69 2,986 EUR US$ 000 USD US$ 000 73 5,355 (265) (4,660) 695 (192) SGD US$ 000 190 (85) 105 NOK US$ 000 DKK US$ 000 AUD US$ 000 CAD US$ 000 CHF US$ 000 CNY US$ 000 2 (3) (1) 8 (3) 5 5 (5) – 6 (2) 4 5 (2) 3 – – – SEK US$ 000 337 (66) 271 Total US$ 000 9,705 (5,760) 3,945 36 Webis Holdings plc Annual Report and Financial Statements for the year ended 31 May 2014 Webis Holdings AR2014 PFP.indd 36 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:30 i s l a c n a n F r u O i 21 Financial risk management continued The following table illustrates the sensitivity of the net result for the year and equity in regards to the Group’s financial assets and financial liabilities and the US Dollar–Sterling exchange rate, US Dollar–Swedish Krona exchange rate and US Dollar–Singapore Dollar exchange rate. A 5% weakening of the US Dollar against the following currencies at 31 May 2014 would have increased equity and profit and loss by the amounts shown below: 2014 Current assets Current liabilities Net assets 2013 Current assets Current liabilities Net assets GBP US$000 SEK US$000 SGD US$000 Total US$000 162 (37) 125 109 (94) 15 8 (5) 3 279 (136) 143 GBP US$000 SEK US$000 SGD US$000 Total US$000 181 (31) 150 17 (3) 14 10 (4) 6 208 (38) 170 A 5% strengthening of the US Dollar against the above currencies would have had the equal but opposite effect on the above currencies to the amounts shown above on the basis that all other variables remain constant. 22 Controlling party and ultimate controlling party The directors consider the ultimate controlling party to be Burnbrae Limited and its beneficial owner Jim Mellon by virtue of their combined shareholding of 68.19%. 23 Post balance sheet events There have been no material events since the end of the reporting period that require disclosure in the accounts. www.webisholdingsplc.com Stock Code: WEB 37 Webis Holdings AR2014 PFP.indd 37 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:30 Notice of Meeting NOTICE IS HEREBY GIVEN that the Annual General Meeting of Webis Holdings plc (the “Company”) will be held at The Claremont Hotel, 18/19 Loch Promenade, Douglas, Isle of Man, on 19 December 2014 at 11 am for the purpose of transacting the following business: Ordinary Business 1 To receive and adopt the report of the directors and the accounts for the year ended 19 May 2014. As a Special Resolution 5 The directors of the Company be and they are hereby empowered pursuant to Article 8 of the Articles of Association of the Company (the “Articles”) to allot equity securities (as defined in Article 7(H) of the Articles) pursuant to the authority conferred on the directors to allot relevant securities by Resolution 4 above as if Article 7(A) of the Articles did not apply to such allotment PROVIDED THAT this power shall be limited to: 2 To re-elect as a director Mr Garry Knowles who retires by rotation and, being eligible, offers himself for re-election in accordance with the Company’s Articles of Association. (i) (iii) the allotment (otherwise than pursuant to paragraphs (i) or (ii) above) of equity securities up to a maximum aggregate nominal value equal to 50% of the issued ordinary share capital of the Company for the time being. The power hereby conferred shall expire at the conclusion of the next Annual General Meeting of the Company after the date of passing of this Resolution unless such power shall be renewed in accordance with and subject to the provisions of the said Article 8, save that the Company may before such expiry make an offer or agreement which would or might require equity securities to be allotted after such expiry and the directors may allot equity securities pursuant to such offer or agreement as if the power conferred hereby had not expired. 6 That, subject to the confirmation of the High Court of Justice of the Isle of Man pursuant to Section 57 of the Companies Act 1931, the share premium account of the Company be cancelled and reduced to nil and that all sums standing to the credit of the share premium account as at the date of this resolution be transferred to distributable reserves. As Ordinary Resolutions 7 That in accordance with Article 12 of the Company’s Articles of Association and with Section 13 of the Companies Act 1992 the Company be generally and unconditionally authorised to make market purchases (as defined by Section 13(2) of the Companies Act 1992) of ordinary shares of 1 pence each in its capital, provided that: the allotment of equity securities in connection with a rights issue in favour of ordinary shareholders where the equity securities are issued proportionally (or as nearly as may be) to the respective number of ordinary shares held by such shareholders (but subject to such exclusions or other arrangements as the directors may deem necessary or expedient to deal with issues arising under the laws of any territory or the requirements of any regulatory body or any stock exchange in any territory or the fixing of exchange rates applicable to any such equity securities where such equity securities are to be issued to shareholders in more than one territory, or legal or practical problems in respect of overseas shareholders, fractional entitlements or otherwise howsoever); (ii) the allotment of equity securities to holders of any options under any share option scheme of the Company for the time being in force, on the exercise by them of any such options; and 3 To reappoint KPMG Audit LLC as auditors and to authorise the directors to determine their remuneration. Special Business To consider and, if thought fit, to pass the following resolutions: As an Ordinary Resolution 4 That the authority granted by special resolution to the directors of the Company to allot relevant securities up to an amount equal to but not exceeding the authorised but unissued share capital of the Company for the time being which was passed at the Annual General Meeting of the Company held on 9 December 2002 be renewed pursuant to the power provided by Article 6(C) of the Company’s Articles of Association, that such renewal of authority be for the exercise of that power generally and unconditionally and in all respects in the same terms as originally granted, and that such authority shall expire at the conclusion of the next Annual General Meeting of the Company after the date of passing of this Resolution unless renewed, varied or revoked by the Company in General Meeting. 38 Webis Holdings plc Annual Report and Financial Statements for the year ended 31 May 2014 Webis Holdings AR2014 PFP.indd 38 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:30 i s l a c n a n F r u O i (a) the maximum number of shares that may be acquired is 39,333,831; (b) the minimum price that may be paid for the shares is 1 pence; (c) the maximum price that may be paid is, for a share the Company contracts to purchase on any day, a sum equal to 105% of the average of the upper and lower quotations on the Daily Official List of the London Stock Exchange for the ordinary shares of the Company on the five business days immediately preceding that day; and (d) the authority conferred by this resolution shall expire at the conclusion of the next Annual General Meeting of the Company after the date of the passing of this Resolution unless renewed, varied or revoked by the Company in General Meeting, but not so as to prejudice the completion of a purchase contracted before that date. 8 That the Report of the remuneration committee be received and adopted. By order of the Board Chris Allen Secretary 19 November 2014 Registered Office: Viking House Nelson Street, Douglas Isle of Man, IM1 2AH www.webisholdingsplc.com Stock Code: WEB 39 Webis Holdings AR2014 PFP.indd 39 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:30 Notice of Meeting continued 7 Pursuant to regulation 22 of the Uncertificated Securities Regulations 2005, the Company has specified that only those members entered on the register of members at 6 pm on 17 December 2014 shall be entitled to attend and vote at the meeting. Changes to the register after 6 pm on 17 December 2014 shall be disregarded in determining the rights of any person to attend and vote at the meeting. 8 Where a corporation is to be represented at the meeting by a personal representative, such corporation must deposit a certified copy of the resolution of its directors or other governing body authorising the appointment of the representative at the Company’s registered office: Viking House, Nelson Street, Douglas, Isle of Man, IM1 2AH not later than 48 hours before the time appointed for the holding of the meeting. 3 The completion and return of a form of proxy will not preclude a member from attending in person at the meeting and voting should he wish to do so. 4 In the case of a corporation, the form of proxy must be executed under its common seal or the hand of an officer or attorney duly authorised. 5 A member may appoint a proxy of his or her own choice. If the name of the member’s choice is not entered in the space provided on the form of proxy, the return of the form of proxy duly signed will authorise the chairman of the meeting to act as that member’s proxy. 6 To abstain from voting on a resolution, select the relevant ‘withheld’ box. A vote withheld is not a vote in law and will not be counted in the calculation of votes for or against the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the meeting. Notes 1 Members are entitled to appoint a proxy to exercise all or any of their rights to attend and vote on their behalf at the meeting. A proxy need not be a shareholder of the Company. A shareholder may appoint more than one proxy in relation to the Annual General Meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that shareholder. To appoint more than one proxy you may photocopy the proxy form accompanying this notice. Please indicate the proxy holder’s name and the number of shares in relation to which they are authorised to act as your proxy (which, in aggregate, should not exceed the number of shares held by you). Please also indicate if the proxy instruction is one of multiple instructions being given. All forms must be signed and should be returned together in the same envelope. 2 To be valid, the form of proxy and the power of attorney or other authority (if any) under which it is signed or a notarially certified or office copy of such power or authority must be lodged at the offices of the Company’s registrars, Capita Asset Services, PXS, 34 Beckenham Road, Beckenham, Kent, BR3 4TU by hand, or sent by post, so as to be received not less than 48 hours before the time fixed for the holding of the meeting or any adjournment thereof (as the case may be). 40 Webis Holdings plc Annual Report and Financial Statements for the year ended 31 May 2014 Webis Holdings AR2014 PFP.indd 40 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:31 Company Information Directors Denham Eke Non-executive Chairman Garry Knowles Managing Director Ed Comins Pari-mutuel Operations Director Sir James Mellon Non-executive Director Secretary Chris Allen Registered Office Viking House Nelson Street Douglas, Isle of Man IM1 2AH Bankers Conister Bank Limited Clarendon House Victoria Street Douglas, Isle of Man IM1 2LN Auditors KPMG Audit LLC Chartered Accountants Heritage Court 41 Athol Street Douglas, Isle of Man IM99 1HN Nominated Adviser and Broker Beaumont Cornish Limited 2nd Floor, Bowman House 29 Wilson Street London EC2M 2SJ Legal Advisers Appleby (Isle of Man) LLC 33–37 Athol Street Douglas, Isle of Man IM1 1LB Mishcon de Reya Summit House 12 Red Lion Square London WC1R 4QD UK Registrar Capita Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Corporate Website www.webisholdingsplc.com Twitter @WebisHoldings Webis Holdings plc Viking House Nelson Street Douglas, Isle of Man IM1 2AH, British Isles Tel: +44 (0) 1624 652590 Email: ir@webisholdingsplc.com Website: www.webisholdingsplc.com Webis Holdings AR2014 PFP.indd 4 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:31 Webis Holdings plc Viking House, Nelson Street Douglas, Isle of Man, IM1 2AH Tel: +44 (0) 1624 652590 Email: ir@webisholdingsplc.com Website: www.webisholdingsplc.com Webis Holdings AR2014 PFP.indd 1 23630.04 20 November 2014 3:13 PM PFP 20/11/2014 15:14:33
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