Webis Holdings plc
Global Gaming Group
Annual Report and Consolidated Financial Statements for the year ended 31 May 2019
AIM Stock Code: WEB
www.webisholdingsplc.com
AIM Stock Code: WEB
Webis Holdings plc
Contents
Our Performance
2
3
Group at a Glance
Chairman’s Statement
Our Governance
6
7
9
13
14
15
The Board of Directors
Directors’ Report
Corporate Governance Statement
Audit, Risk and Compliance Committee Report
Statement of Directors’ Responsibilities
Report of the Remuneration Committee
Our Financials
17
21
22
23
24
25
Independent Auditor’s Report
Consolidated Statement of Comprehensive Income
Statements of Financial Position
Statements of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Shareholder Information
Notice of Meeting
Company Information
47
49
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1
Webis Holdings plc
Group at a Glance
Webis Holdings plc (the “Company”) and its subsidiary
companies (together the “Group”) operates two primary
segments as described below: -
WatchandWager.com Ltd and WatchandWager.com LLC
– Advanced Deposit Wagering (“ADW”)
WatchandWager.com LLC
– Cal Expo Harness Racetrack
WatchandWager.com Ltd is regulated in the Isle of Man and
operates a totalisator wagering hub through its United States
Tote supplier, which enables it to conduct its ADW business
by passing wagers directly into global racetrack betting pools
in real time.
its operational base
in
WatchandWager.com LLC has
Lexington, Kentucky, with its head office in Larkspur,
California, and provides pari-mutuel wagering, or pool-betting,
services through a number of distribution channels to a global
client base. The company holds United States pari-mutuel
licences for its ADW business in the USA, including a multi-
jurisdictional licence issued by the States of North Dakota, and
individual licences for the States of California, Maryland,
Colorado, Minnesota, New York, Washington and
Kentucky. Three further individual State licences are in the
process of negotiation. 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,
France, Canada, United Kingdom, Ireland, and Australia
amongst others. It provides wagering facilities to customers
through its interactive website, watchandwager.com, as well
as offering a business-to-business wagering product and a
telephone call centre.
WatchandWager.com LLC also 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 USA continues
to provide leverage for our related global pari-mutuel
operations.
As part of the requirements for the Isle of Man licence, client
funds for the Isle of Man licensed companies are held in fully
protected segregated client accounts within an Isle of Man
regulated bank.
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2
Webis Holdings plc
Chairman’s Statement
Introduction
It has been a mixed year for our core USA based business,
WatchandWager.com LLC (“WatchandWager”) over
the
financial year reported, with a reduction in amounts wagered,
and an overall loss returned, but against that a significant
strengthening of our licensed USA position in the increasingly
expanded world of USA regulated gaming.
Despite the loss reported, the Board is overall satisfied with
the performance over the year reported for our three core
business units, namely “Business-to-Consumer”, “Business-
to-Business” and our racetrack operation at “Cal Expo” in
Sacramento, California, and
three sectors are
these
commented upon in more detail below.
Equally importantly, and as shareholders are aware, the
company, as an Isle of Man owned operation, still occupies a
unique advantage in the USA, with our array of USA licenses,
banking, settlement and general business operational skills.
We also consider our license and lease at the Cal Expo
racetrack in Sacramento, California, to be a significant asset
in regulated gaming globally, but of course mainly in the USA
and California. The Company still stands well positioned in
particular in California, and also other States that it is licensed
and operates in.
Year End Results Review
The Group amounts wagered for the year ended 31 May 2019
was US$136.4 million (2018: US$461.2 million) – a significant
decline due to the loss of a large wagering syndicate as
previously reported to shareholders on 19 October 2018 and
commented on below. Gross Profit reported was US$4.5
million (2018: US$5.6 million). This led to an overall loss on
the year.
Operating costs were US$5.3 million: down 5% on 2019
(2018: US$5.6 million), as we continue to manage costs over
the entire operation. We expect these costs to reduce in the
current financial year. As a result, our loss from operations
was US$930,000.
Shareholder equity stands at US$1.2 million (2018: US$2.0
million). Total cash stands at US$2.6 million (2018: US$13.4
million), which includes ring-fenced funds held as protection
against our player liability as required under USA and Isle of
Man gambling legislation. An amount of US$875,000 was held
during the year as bonds and deposits with regulatory
authorities.
Approach to Risk and Corporate Governance
As part of the adoption of the Quoted Companies Alliance
Corporate Governance code, the Board completed an
assessment of the risks inherent in the business and defined
and adopted a statement of risk appetite, being the amount
and type of risk, it is prepared to seek, accept or tolerate in
pursuit of value. This being: -
“The Group’s general risk appetite is a moderate, balanced
one that allows it to maintain appropriate growth, profitability
and scalability, whilst ensuring full regulatory compliance.”
The Group’s primary risk drivers include: -
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Strategic
Reputational
Credit
Operational
Market
Liquidity, Capital and Funding
Regulatory and Compliance
Conduct
Our risk appetite has been classified under an “impact” matrix
defined as Zero, Low, Medium and High. Appropriate steps
are underway to ensure the prudential control monitoring of
risks to the Group and the Audit, Risk and Compliance
Committee will oversee this essential requirement. Further
details of the Corporate Governance Statement will be found
on pages 9 to 12 of this report.
The Board refined
incorporated the risk and compliance framework.
the Group’s business plan which
Performance by Sector
WatchandWager
Business-to-Consumer
www.watchandwager.com/mobile
During the year, we reviewed this sector and whilst our
platform is important to the operation, we have refined our
marketing investment to more accurately target our core
audience, mainly horse players and potential sports players.
Whilst the website and mobile product continue to perform
well, quite simply the marketing investment required to
compete with the large brands in the USA is not commercially
feasible. As a result, we have adjusted our strategy in this
area, with a reduced marketing spend, and some reductions
in data feeds and other products, that after researching our
key clients do not rely upon. This streamlining of our costs has
actually worked well, and player numbers during the period
were up by 16%, whilst costs have reduced. This is
commented upon more in post year developments.
That said, we continue to provide the best possible service to
our clients in this area. We offer some unique opportunities for
clients to bet especially in the very large amount of
international content that we are licensed to provide, and also
our competitive rewards program that we offer. We also have
an excellent array of licenses in USA states we can take bets
from, and we consider this critical to our future. We are
confident that this service will continue to increase our client
base and overall turnover, but under a reduced operational
cost. We also know that our database has a value in the
expanding world of USA regulated sports betting.
Business-to-Business
This sector is the provision of pari-mutuel (pool) wagering to
high-roller clients, many of whom specialise in algorithmic or
computer assisted trading on a wide range of global
racetracks.
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Webis Holdings plc
Chairman’s Statement continued
Business-to-Business continued
Licenses
The amounts wagered for the full year were significantly
reduced by the previously reported cessation of wagering from
a large syndicate group/agent for almost the entire year
reported. Subsequent to that all contractual relations with this
group have been terminated by WatchandWager. This
impacted turnover into primarily the Hong Kong Jockey Club
and the French PMU. This had the anticipated impact
previously reported of around US$800,000 in reduced gross
margin during the period, which is the principal reason for the
losses reported.
However, this does mean that the risk factor of a reliance on
one particular group/agent is no longer. In addition, the
reduction in business has in no manner impacted our world-
wide licenses and content that we have worked hard upon and
continue to be in good standing with. In fact, the opposite is
the case with many regulators and content providers
continuing to be in favour of us possessing a broader range of
clients.
Our network of other players continued to grow both in terms
of turnover and player sign-ups. By not paying third-party fees,
we benefit from a much better margin than those through
agents, and we are able to work proactively and directly with
them.
That said and as previously notified, the entire sector remains
volatile, being subject to changes in player or aggregator
activities, as well as changes in the policies of key content
providers and regulators. To that end whilst we will continue
to service this sector, it is not our principal focus at this time.
The management team have been busy during the period
reported and subsequently, renewing our key strategic
licenses and we can confirm the recent renewal of our core
multi-jurisdictional license for wagering with the North Dakota
Racing Commission for 2020. In addition, as previously
announced, we have renewed our strategically important
license in California for a period of two more years (to be
reheard in 2021). At the same time, we have renewed or are
in the process of renewing other key licenses in New York,
Kentucky, Washington, Colorado and Minnesota. We are very
confident all of these licenses will be in place in advance of
the start of 2020, as we are in good status with the relevant
State regulators. The Board considers these licences and
future applications, alongside our physical presence at Cal
Expo, to be the principal assets of the Group, and this is
commented more in subsequent events below.
Subsequent Events (post period reported)
Trading
Trading has been much improved in the new financial year
from June 1st, 2019 to time of writing. We have seen growth in
all three divisions we operate, and our strategy of controlling
costs, particularly in the areas of data provision, marketing
and some staff costs has been and will continue to be
effective. As a result, we are much closer to a breakeven
situation at EBITDA level which is our initial task, with the
ultimate need to return to profitability. A further update will be
Interim
delivered
announcement which will be delivered in February 2020.
to shareholders at our 2019/20
Cal Expo
Cal Expo
Cal Expo had a good racing season during the period, running
47 race meets between November 2018 and May 2019. Most
importantly, our excellent health and safety record remains
and, unlike other Californian tracks, with no equine fatalities
relating to racing activities incurred during the meeting. Equine
safety, and the safety of all our participants and customers
remains of the upmost priority. These were tested during the
severe wildfires experienced in Northern California during the
period, and as a result we cancelled racing on two occasions
to ensure the safety of all participants.
Given these circumstances, it was very encouraging that both
horse numbers, and all sources handle, were up on the
previous 2017/18 meeting, and this shows an encouraging
trend for the new season. We were also assisted by the new
in California, which
International Racing Bill approved
Management heavily
in Sacramento, and
commenced in January 2019. As predicted, this added circa
US$100,000 of extra revenue to our operations, and we
expect this to continue to improve.
lobbied
for
The Board considers our licensed operations at Cal Expo to
be one of the key assets of the Group and central to our
growth in the USA.
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As previously reported, the Board is currently working with the
Board of the state-run Cal Expo Exposition of Fairs on a
license renewal up to 2025, with the possibility of extending
even further beyond that. This is a very significant move
forward as we believe the racetrack can operate in an
increasing profitable manner, but even more importantly will
continue to give the Group an important licensed presence in
what will become by far the largest State for sports betting and
other forms of gaming in the USA.
Welfare issues
On a less positive note, many shareholders will be aware of
the larger number of equine fatalities at a track in Santa Anita,
California. Whilst our operations are not impacted in any way,
the Board are very aware of the effect this has and can
continue to have on public opinion, particularly through
organizations such as PETA (Protection of Ethical Treatment
for Animals). That said, we are very pleased with the swift
remedial action approved by the California Horseracing Board
in particular. As stated above Cal Expo maintains an excellent
welfare record, and the protection of our horses and
participants is our upmost priority.
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Webis Holdings plc
Chairman’s Statement continued
USA regulated sports betting and other gaming
Corporate Governance
It is now only eighteen months since the Supreme Court’s
positive judgement on USA Sports betting in May 2018, and
the Board is very encouraged by the significant progress that
has been made in many first starter States, especially New
Jersey, which is now creating significant revenues, and most
importantly meaningful duties and tax back to the State. Also,
encouragingly, the two best performing properties in New
Jersey are both racetracks – namely Meadowlands and
Monmouth Park, confirming our opinion that horseracing
players will also bet on sports at far higher levels than casino
or slot machine players. When sports betting is legalised in
California, we plan to adopt a very similar model to that
enjoyed at Meadowlands.
Developments by State
Clearly progress has been fastest on the East Coast, although
we do feel we were best to stay out of these markets, where
we have few licenses and less traction. That said it has been
interesting to note the progress in the currently legalised
states, and also the huge interest from the large USA gaming
and media companies in the sector, not to mention the
European operators, and software companies. This is further
commented upon under strategic opportunities.
California
Our physical presence in California and accompanying
licenses remains our biggest asset and opportunity, but the
situation is complicated given the diverse interests in the
State. We are very encouraged by progress in the State
Capitol in Sacramento, located less than five miles from Cal
Expo racetrack, and where the ultimate decisions will be
made. We welcome the draft Dodd/Gray AB10 Bill and are
actively participating in efforts to move this forward in the
Capitol. Most significant is the current language that will only
allow active land-based participants in California to apply for
licences, namely Racetracks, Native American Casinos, and
possibly Card Clubs. This effectively means the large USA
and international gaming operations and software suppliers
outside California will literally need to buy themselves into the
State at large premiums. Whilst almost impossible to predict
the progress of State legislature particularly in California, at
present, we reasonably expect Sports betting to be legalized
for those with a physical presence in the State by 2021, with
a possible go-live date in 2022. We will update shareholders
as and when more progress is made.
Other State opportunities
With California being a long-term goal, we are also focusing
on other States, and additional opportunities to operate other
forms of gaming, both land-based and on-line, with a view to
generate short term profitability. At present, opportunities exist
in North Dakota, Arizona and a few other key States, plus
some international opportunities. We will update shareholders
in due course.
One of the Group Board’s primary responsibilities is to ensure
the provision of effective corporate governance. To this end,
the Board undertook a full review of every aspect of
governance in light of the Quoted Companies Alliance
Corporate Governance Code for Small and Mid-Size Quoted
Companies (2018) and I am pleased to report that the Group
is fully compliant in all aspects.
Strategic opportunities and Outlook
USA regulated gaming is seen as the hottest subject at
present in global gaming, and something of a gold rush both
in the USA and, indeed, internationally. Non-USA and certain
European companies are experiencing severe regulatory
issues, as well as margin problems, and appear almost
desperate to be a part of the developments in the USA. As a
result, it should come as no surprise that WatchandWager
continues to be courted by large corporations, and indeed
smaller operations with a view to software deals, strategic
alliances, mergers or even outright acquisition opportunities.
Principally led by our Managing Director, the Board assesses
each opportunity on a case-by-case basis. It should be noted
in the majority of instances, the Board takes the view that “they
need us more than we need them” and we continue to protect
our USA licensed presence as a core asset.
We are very aware of the increased consolidation in the
industry and the economies of scale of strategic partnerships
and will keep shareholders aware of any meaningful strategic
developments with the Group, most likely in the USA, but
possibly with international partnerships.
I also believe it is important to re-confirm the support of our
principal shareholder for our USA operations, strategy and
expansion plans. As a Board, we also believe we have the
ability to raise further capital to support our operations both
short term and indeed for future funding of our USA strategy.
Finally, I would like to thank all our shareholders, customers
for their continued loyally, and our staff for their continued hard
work.
Denham Eke
Non-executive Chairman
27 November 2019
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5
Webis Holdings plc
The Board of Directors
Denham Eke, aged 68
Non-executive Chairman
career
Denham Eke began his
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
mining, leisure, manufacturing and financial
services sectors.
Denham Eke was appointed Non-executive
Chairman in April 2003.
Ed Comins, aged 50
Managing Director
the
Tote
Ed Comins has 22 years’ experience in the
betting and gaming industry with Coral,
and
Ladbroke Casinos,
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.
Ed Comins joined the Board in May 2010.
Nigel Caine, aged 49
Non-executive Director
of
Chartered
Nigel Caine is the Chief Financial Officer for
Burnbrae Group Limited. He is a Fellow of the
Certified
Association
Accountants and a Member of both the
Chartered
Institute of Securities and
Investments and the Institute of Chartered
Secretaries and Administrators. He also holds
an MBA from the University of Wales. Nigel
began his career in audit and transaction
services with KPMG and Deloitte. Before
joining Burnbrae Group Limited in 2014, Nigel
was the Chief Financial Officer for Speymill
Deutsche Immobilien Company Plc.
Nigel Caine joined the Board in June 2015.
Sir James Mellon, aged 90
Non-executive Director
Sir James Mellon is a former diplomat who
began his career with the Department of
Agriculture for Scotland before moving on to
several varied roles including Head of Trade
Relations and Export Dept (TRED); FCO; UK
Ambassador to Denmark; 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.
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Webis Holdings plc
Directors’ Report
The Directors present their annual report and the audited
consolidated financial statements for the year ended 31 May
2019.
Principal activities
The Group operates:
•
•
a pari-mutuel service to individual and business
customers; and
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 pari-mutuel
events.
A more detailed review of the business, its results and future
developments is in the Chairman’s Statement on pages 3 to
5.
Proposed dividend
The Directors do not propose the payment of a dividend
(2018: US$Nil).
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.
Directors’ interests
Denham Eke 1
Ed Comins
Nigel Caine
Sir James Mellon
The Group seeks to ensure that payments are always made
in accordance with these terms and conditions.
At the year-end there were 19 days (2018: 12 days) of
purchases in trade creditors.
Financial risks
Details relating to financial risk management are shown in
note 20 to the financial statements.
Directors and Directors’ interests
The Directors who held office during the year and to date were
as follows:
Denham Eke
Non-executive Chairman
Ed Comins
Managing Director
Nigel Caine
Non-executive Director
Sir James Mellon
Non-executive Director
The Director retiring by rotation is Denham Eke 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
2019
Interest at
start of
year
2018
Interest
at end of
year
2019
Interest at
start of
year
2018
—
—
—
—
—
—
—
—
—
—
14,000,000
14,000,000
—
—
—
—
1 Denham Eke is Managing Director of Burnbrae Limited which holds 248,204,442 ordinary shares representing 63.10% 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 15 and 16.
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Webis Holdings plc
Directors’ Report continued
Substantial interests
On 28 July 2019, the following interests in 3% or more of the Company’s ordinary share capital had been reported:
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
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.
to employment,
relating
Number of
ordinary
shares
%
63.10
248,204,442
4.17
16,400,000
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
US$39,807 during the year (2018: US$40,711).
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
The Group recognises the importance of ensuring employees
are kept informed of the Group’s performance, activities and
future plans.
Ed Comins
Managing Director
27 November 2019
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Webis Holdings plc
Corporate Governance Statement
Corporate Governance Report
The Webis Holdings Board (the “Board”) is committed to best
practice in corporate governance throughout Webis Holdings
plc and all subsidiary companies (together the “Group”). The
Directors have agreed to comply with the provisions of the
Quoted Companies Alliance (“QCA”) Corporate Governance
Code for Small and Mid-Size Quoted Companies (2018) to the
extent which is appropriate to its nature and scale of
operations. This report illustrates how the Group complies with
those principles.
QCA Principle 1: Establish a strategy and business model
which promotes long-term value for shareholders
The strategy and business operations of the Group are set out
in the Chairman’s Statement on pages 3 to 5.
The Group’s strategy and business model and amendments
thereto, are developed by the Managing Director and his
senior management team and approved by the Board. The
management
is
responsible for implementing the strategy and managing the
business at an operational level.
the Managing Director,
led by
team,
The Group’s overall strategic objective is to develop a
profitable, sustainable advance deposit wagering (“ADW”)
platform that benefits from a wide and diverse client base,
both business and retail. The Group operates through two
principal operating subsidiaries: WatchandWager.com Ltd
and WatchandWager.com LLC.
WatchandWager.com Ltd is regulated in the Isle of Man and
operates a totalisator wagering hub through its United States
Tote supplier, which enables it to conduct its ADW business
by passing wagers directly into global racetrack betting pools
in real time.
its operational base
WatchandWager.com LLC has
in
Lexington, Kentucky, with its head office in Larkspur,
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 its ADW business in the US, issued by North
Dakota, California, Maryland and Colorado. 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, France, Canada, United Kingdom,
Ireland, and Australia amongst others. It provides wagering
facilities
website,
watchandwager.com, as well as offering a business-to-
business wagering product and a telephone call centre.
customers
through
its
to
WatchandWager.com LLC also 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.
The Group also plans to develop an attractive US-based
sportsbook offering following the recent Supreme Court ruling
which paves the way to legalizing wagering on sports in the
United States, subject to individual State legislation. Whilst the
ruling will not have an immediate impact on revenue levels
until individual State legislation is in place, the Group
considers this market to be a significant growth area for our
US operations. Significantly, California’s draft Sports Betting
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Bill specifies that only land-based racetracks and casinos will
be eligible for license applications. In the United States,
WatchandWager.com LLC holds ADW licenses not only for
California, but also for North Dakota (providing regulated
access to a total of 28 states), together with individual State
licenses for New York, Kentucky, Colorado, Minnesota and
Washington.
The Group operates in an inherently high risk and heavily
regulated sector and this is reflected in the principal risks and
uncertainties.
In executing the Group’s strategy and operational plans,
management will typically confront a range of day-to-day
challenges associated with these key risks and uncertainties
and will seek to deploy the identified mitigation steps to
manage these risks as they manifest themselves.
QCA Principle 2: Seek
shareholder needs and expectations
to understand and meet
The Group via the Managing Director seeks to maintain a
regular dialogue with both existing and potential new
shareholders in order to communicate the Group’s strategy
and progress and to understand the needs and expectations
of shareholders.
Beyond the Annual General Meeting, the Managing Director
and, where appropriate, other members of the senior
management team or Board will meet with investors and
analysts to provide them with updates on the Group’s
business and to obtain feedback regarding the market’s
expectations of the Group.
The Group’s investor relations activities encompass dialogue
with both institutional and private investors. From time to time,
the Company attends private investor events, providing an
opportunity for those investors to meet with representatives
from the Group in a more informal setting.
QCA Principle 3: Take into account wider stakeholder and
social responsibilities and their implications for long-
term success
The Group is aware of its corporate social responsibilities and
the need to maintain effective working relationships across a
range of stakeholder groups. These include the Group’s
employees, clients, partners, suppliers, regulatory authorities
and horseracing colleagues involved in the Group’s track
facility at Cal Expo. The Group’s operations and working
methodologies take account of the need to balance the needs
of all of these stakeholder groups while maintaining focus on
the Board’s primary responsibility to promote the success of
the Group for the benefit of its members as a whole. The
Group endeavours to take account of feedback received from
stakeholders, making amendments to working arrangements
and operational plans where appropriate and where such
amendments are consistent with the Group’s longer-term
strategy.
The Group takes due account of any impact that its activities
may have on the environment and seeks to minimise this
impact wherever possible. Through the various procedures
and systems it operates, the Group ensures full compliance
with health and safety and environmental legislation relevant
to its activities.
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Webis Holdings plc
Corporate Governance Statement continued
QCA Principle 4: Embed effective risk management,
considering both opportunities and threats, throughout
the organisation
The Board is responsible for the systems of risk management
and internal control and for reviewing their effectiveness. The
internal controls are designed to manage rather than eliminate
risk and provide reasonable but not absolute assurance
against material misstatement or loss. Through the activities
of the Group Audit, Risk and Compliance Committee, the
effectiveness of these internal controls is reviewed annually.
A comprehensive budgeting process is completed once a year
and is reviewed and approved by the Board. The Group’s
results, compared with the budget, are reported to the Board
on a monthly basis.
The Group maintains appropriate insurance cover in respect
of actions taken against the Directors because of their roles,
as well as against material loss or claims against the Group.
The insured values and type of cover are comprehensively
reviewed on a periodic basis.
The senior management team meets at least monthly to
consider new risks and opportunities presented to the Group,
making recommendations to the Board and/or Group Audit,
Risk and Compliance Committee as appropriate.
QCA Principle 5: Maintain
functioning, balanced team led by the chair
the board as a well-
The Group’s Board currently comprises three Non-executive
Directors and one Executive Director.
All of the Directors are subject to election by shareholders at
the first Annual General Meeting after their appointment to the
Board and will continue to seek re-election at least once every
three years.
The Board is responsible to the shareholders for the proper
management of the Group and meets at least four times a
year to set the overall direction and strategy of the Group, to
review operational and financial performance and to advise on
management appointments. All key operational decisions are
subject to Board approval.
Sir James Mellon, one of the Non-executive Directors is
considered to be independent, although the Board intends to
appoint at least one further independent Director at an
appropriate time. The other two Non-executive Directors are
not considered independent given their connection to the
Company’s controlling shareholder. The QCA Code suggests
that a board should have at least two independent Non-
executive Directors. The Board considers that the current
composition and structure of the Board of Directors have been
appropriate to maintain effective oversight of the Group’s
activities to date. However, the Board is aware that further
oversight through independent Non-executive Directors could
be beneficial to the governance environment. This process is
under review and is pending the further development of the
sportsbook opportunity in the US in order to be able to
determine the exact need and requirements.
Non-executive Directors receive their fees in the form of a
basic cash emolument. The Executive Director receives a
basic cash salary and also holds options over the Group’s
shares. The number and terms are set out on page 16.
The option grant concerned is not deemed to be significant for
the individual Executive Director. The current remuneration
structure for the Board’s Executive and Non-executive
Directors is deemed to be proportionate.
QCA Principle 6: Ensure that between them the Directors
have the necessary up-to-date experience, skills and
capabilities
The Board considers that all of the Executive and Non-
executive Directors are of sufficient competence and calibre
to add strength and objectivity to its activities and bring
considerable experience in the operational and financial
development of gambling and horseracing companies.
The Directors’ biographies are set out on page 6.
The Board regularly reviews the composition of the Board to
ensure that it has the necessary breadth and depth of skills to
support the ongoing development of the Group. Whilst there
is no Finance Director on the Board, the overview of the
finance function is the responsibility of Nigel Caine, aided by
a non-Board Financial Controller.
The Chairman, in conjunction with the Company Secretary,
ensures that the Directors’ knowledge is kept up to date on
key issues and developments pertaining to the Group, its
operational environment and to the Directors’ responsibilities
as members of the Board. During the course of the year,
Directors received updates from the Company Secretary and
various external advisers on a number of corporate
governance matters.
Directors’ service contracts or appointment letters make
provision for a Director to seek personal advice in furtherance
of his or her duties and responsibilities, normally via the
Company Secretary.
QCA Principle 7: Evaluate board performance based on
clear and relevant objectives, seeking continuous
improvement
Internal evaluation of the Board, the Committees and
individual Directors is undertaken on an annual basis in the
form of peer appraisal and discussions to determine their
effectiveness and performance as well as the Directors'
continued independence.
The results and recommendations that come out of the
appraisals for the directors shall identify the key corporate and
financial targets that are relevant to each Director and their
personal targets in terms of career development and training.
Progress against previous targets is also assessed where
relevant.
www.webisholdingsplc.com
AIM Stock Code: WEB
10
Webis Holdings plc
Corporate Governance Statement continued
QCA Principle 8: Promote a corporate culture that is
based on ethical values and behaviours
The Board seeks to maintain the highest standards of integrity
and probity in the conduct of the Group’s operations. These
values are enshrined in the written policies and working
practices adopted by all employees in the Group. An open
the Group, with regular
culture
communications
to staff regarding progress and staff
feedback regularly sought. The Executive Management
regularly monitors the Group’s cultural environment and seeks
to address any concerns that may arise, escalating these to
Board level as necessary.
is encouraged within
The Group is committed to providing a safe environment for
its staff and all other parties for which the Group has a legal
or moral responsibility in this area. The Group’s health and
safety policies and procedures are enshrined in the Group’s
documented quality systems, which encompass all aspects of
the Group’s day-to-day operations.
QCA Principle 9: Maintain governance structures and
processes that are fit for purpose and support good
decision- making by the board
The Role of the Board
The Board is collectively responsible for the long-term
success of the organisation. Its principal function is to
determine the strategy and policies of the Group within an
effective control framework which enables risk to be assessed
and managed.
The Board ensures that the necessary financial and human
resources are in place for the Group to meet its objectives and
that business and management performances are reviewed.
Furthermore, the Board ensures that the Group operates
within its constitution, relevant legislation and regulation and
that proper accounting records and effective systems of
business control are established, maintained, documented
and audited.
There are at least four formal Board meetings each year. All
Board members have the benefit, at the Group’s expense, of
liability insurance in respect of their responsibilities as
Directors and have access to independent legal or other
professional advice if required. The Board has a formal
schedule of matters which are reserved for its consideration
and it has established three committees to consider specific
issues in greater detail, being the Group Audit, Risk and
Compliance, Remuneration and Nomination Committees. The
Terms of Reference for each of these Committees are
published on the Group’s website.
The Chairman
The Chairman is responsible for leading the Board, ensuring
its effectiveness in all aspects of its role, promoting a culture
of openness of debate and communicating with the Group’s
members on behalf of the Board. The Chairman sets the
direction of the Board and promotes a culture of openness and
debate by facilitating the effective contribution of Non-
executive Directors and ensuring constructive relations
between Executive and Non-executive Directors. The
Chairman also ensures that Directors receive accurate, timely
and clear information. In doing so, this fosters a positive
corporate governance culture throughout the Group.
www.webisholdingsplc.com
AIM Stock Code: WEB
The Managing Director
The Managing Director is responsible for managing the
Group’s business and operations within the parameters set by
the Board.
Non-executive Directors
The Non-executive Directors are responsible for bringing
independent judgement to the discussions held by the Board,
using their breadth of experience and understanding of the
business. Their key responsibilities are to constructively
challenge and contribute to strategic proposals, and to monitor
resources, and standards of conduct,
performance,
compliance and control, whilst providing support to executive
management in developing the Group.
The Board has established a Group Audit, Risk and
a Remuneration
Compliance Committee
Committee and a Nominations Committee with formally
delegated duties and responsibilities. Sir James Mellon chairs
both the ARCC and the Remuneration Committee.
(“ARCC”),
Group Audit, Risk and Compliance Committee
The Group Audit, Risk and Compliance Committee (the
“ARCC”) meets at least two times each year and comprises
two Non-executive Directors, currently Sir James Mellon
(Chairman) and Denham Eke. The external auditors attend by
invitation. Its role is to be responsible for reviewing the
integrity of the financial statements and the balance of
information disclosed in the accompanying Directors’ Report,
to review the effectiveness of internal controls and risk
management systems and recommend to the Board (for
approval by the members) the appointment or re-appointment
of the external auditor. The ARCC reviews and monitors the
external auditor’s objectivity, competence, effectiveness and
independence, ensuring that if it or its associates are invited
to undertake non-audit work it will not compromise auditor
objectivity and independence.
Further information can be found within the Group Audit, Risk
and Compliance Report contained within this Annual Report.
Remuneration Committee
The Remuneration Committee meets at least twice a year and
comprises of two Non-executive Directors. It is chaired by Sir
the
James Mellon and
is responsible
remuneration of
the Company
Secretary and other members of the management. Committee
members do not take part in discussions concerning their own
remuneration.
the Executive Director,
for determining
Further information can be found within the Remuneration
Report contained within this Annual Report.
Nomination Committee
The Nomination Committee is comprised of the whole Board.
It is chaired by the Chairman of the Board and is responsible
for making recommendations to the Board on matters relating
to the composition of the Board, including Executive and Non-
executive Director succession planning, the appointment of
new Directors and the election and re-election of Directors.
The Nomination Committee only meets as matters arise.
11
Webis Holdings plc
QCA Principle 10: Communicate how the company is
governed and is performing by maintaining a dialogue
with shareholders and other relevant stakeholders
The Group places a high priority on regular communications
with its various stakeholder groups and aims to ensure that all
communications concerning the Group’s activities are clear,
fair and accurate. The Group’s website is regularly updated,
and users can register to be alerted when announcements or
details of presentations and events are posted onto the
website.
Notices of General Meetings of the Company can be found
here: http://www.webisholdingsplc.com/latest-news/.
The results of voting on all resolutions in general meetings are
posted to the Group’s website, including any actions to be
taken as a result of resolutions for which votes against have
been received from at least 20 per cent of independent
shareholders.
Approval
This report was approved by the Board of Directors on 27
November 2019 and signed on its behalf by:
Denham Eke
Non-executive Chairman
27 November 2019
Corporate Governance Statement continued
Appointments to the Board
The principal purpose of the Nomination Committee is to
undertake the assessment of the balance of skills, experience,
independence and knowledge on the Board against the
requirements of the business, with a view to determining
whether any shortages exist. Having completed
the
assessment, the Committee makes recommendations to the
Board accordingly. Appointments to the Board are made on
merit, with due regard to the benefits of diversity. Within this
context, the paramount objective is the selection of the best
candidate, irrespective of background, and it is the view of the
Board that establishing quotas or targets for the diversity of
the Board is not appropriate.
All Director appointments must be approved by
the
Company’s Nominated Adviser, as required under the AIM
Rules, before they are appointed to the Board.
Prior to appointment, Non-executive Directors are required to
demonstrate that they are able to allocate sufficient time to
undertake their duties.
Re-election
The Group’s Rules require that all Directors are submitted for
election at the AGM following their first appointment to the
Board. Thereafter all directors will submit themselves for re-
election at least once every three years, irrespective of
performance.
Board and committee attendance
The number of formal scheduled Board and committee
meetings held and attended by Directors during the year was
as follows: -
Board Audit Remuneration Nomination
Denham
Eke
Sir
James
Mellon
Ed
Comins
Nigel
Caine
8/8
2/2
2/2
8/8
2/2
2/2
8/8
8/8
-
-
-
-
-
-
-
-
www.webisholdingsplc.com
AIM Stock Code: WEB
12
Webis Holdings plc
Audit, Risk and Compliance Committee Report
The Directors have agreed to comply with the provisions of
(“QCA”) Corporate
the Quoted Companies Alliance
Governance Code for Small and Mid-Size Quoted Companies
(2018) to the extent which is appropriate to its nature and
scale of operations.
This report illustrates how the Group complies with those
principles in relation to its Group Audit, Risk and Compliance
Committee (the “Committee”).
Membership
The Committee comprises of two Non-executive Directors and
the members are Sir James Mellon (Chairman) and Denham
Eke. The composition of the Committee has been reviewed
during the year and the Board is satisfied that the Committee
members have recent relevant financial experience and the
expertise to resource and fulfil its responsibilities effectively,
including those relating to risk and controls.
Meetings
The Committee meets two times a year, including the review
of the interim and full year results. Other Directors and
representatives from the external auditors attend by invitation.
Duties
The Committee carries out the duties below for the Company
and the Group as a whole, as appropriate:
▪ Monitors the integrity of the financial statements of the
Company, including annual and half-yearly reports,
interim management statements, and any other formal
financial performance,
announcement
to
issues and
reviewing significant
judgements which they contain.
financial reporting
relating
▪ Reviews and challenges the consistency the information
presented within the financial statements, compliance
legal requirements,
with stock exchange or other
accounting policies and the methods used to account for
significant or unusual transactions.
▪ Keeps under review the effectiveness of the Group’s
internal controls and risk management systems.
▪ Reviews the Group’s arrangements for its employees to
raise, in confidence, possible wrongdoing in financial
reporting or other matters, the procedures for detecting
fraud, prevention of bribery and adequacy and
effectiveness of the Group’s anti-money laundering
systems and control.
▪ KPMG Audit LLC was appointed as auditor in 2002 and
the Committee oversees the relationship with them
including regular meetings to discuss their remit and
review the findings and any issues with the annual audit.
It also reviews their terms of appointment, meets them
once a year independent of management and considers
and makes recommendations to the Board, to be put to
the Company for approval at the Annual General Meeting,
in relation to the appointment, re-appointment and
removal of the Company’s external auditor. There are no
contractual restrictions in place in respect of the auditor
choice.
The Committee is governed by a Terms of Reference and
a copy of this is available on www.webisholdingsplc.com
- the Company’s website.
▪
www.webisholdingsplc.com
AIM Stock Code: WEB
2019 Annual Report
During the year the Committee held two meetings and can
confirm that it has received sufficient, reliable and timely
information from management and the external auditors to
enable it to fulfil its responsibilities.
The Committee has satisfied
there are no
relationships between the auditor and the Group which could
adversely affect the auditor’s independence and objectivity
and regular meetings have been held with them at both the
planning stage prior to the audit and after the audit at the
reporting stage.
itself
that
All internal control and risk issues that have been brought to
the attention of the Committee by the external auditors have
been considered and the committee confirms that it is satisfied
that management has addressed the issues or has plans to
do so.
The Group has a number of policies and procedures in place
as part of its internal controls and these are subject to
continuous review and as a minimum are reviewed by the
Committee on an annual basis.
The Committee has reviewed and discussed together with
management and the external auditor the Company’s financial
statements for the year ended 31 May 2019 and reports from
the external auditor on the planning for and outcome of their
reviews and audit. The key accounting issues and judgements
considered relating to the Group’s financial statements and
disclosures were as follows:
▪ Revenue recognition – the Committee considered the
conditions of revenue recognition, including that of being
recognised on an accrual basis. The Committee agreed
that the current method of revenue recognition is
appropriate for the market that the Group operates within
and that revenue satisfied the necessary criteria to be
recognised. Disclosures are included in note 1;
▪ Going concern – the Committee reviewed the going
concern position of the Group, taking into account the 12-
month cash flow forecasts and the continued support of
the principal shareholder. The Committee is satisfied that
preparing the financial statements on a going concern
basis is appropriate. Disclosures are included in note 1;
▪ Cash balances – the Committee reviewed the cash
position to ensure that it is able to meet its ongoing
requirements and also has sufficient cash reserves to
cover the relevant player liabilities. The Committee is
satisfied that there are sufficient cash balances to meet
its ongoing expenses and cover the player balances in full
if required. Disclosures are included in note 12; and
▪ Reviewed changes to impairment model due to adoption
of IFRS 9 effective 1 June 2018.
Denham Eke
Non-executive Chairman
27 November 2019
13
Webis Holdings plc
Statement of Directors’ Responsibilities in Respect of the Annual Report and the Financial
Statements
The Directors are responsible for preparing the Annual Report
and the Group and Parent Company financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and
parent Company financial statements for each financial year.
Under the AIM Rules of the London Stock Exchange they are
required to prepare the Group financial statements in
accordance with International Financial Reporting Standards
as adopted by the EU (IFRSs as adopted by the EU), as
applicable to an Isle of Man company and applicable law and
have elected to prepare the parent Company financial
statements on the same basis.
Under company law the Directors must not approve the
financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and Parent
Company and of their profit or loss for that period. In preparing
each of the Group and Parent Company financial statements,
the Directors are required to:
•
select suitable accounting policies and then apply them
consistently;
• make judgements and estimates that are reasonable,
•
•
relevant and reliable;
state whether they have been prepared in accordance
with IFRSs as adopted by the EU;
assess the Group and Parent Company’s ability to
continue as a going concern, disclosing, as applicable,
matters related to going concern; and
• use the going concern basis of accounting unless they
either intend to liquidate the Group or the Parent
Company or to cease operations or have no realistic
alternative but to do so.
for keeping adequate
The Directors are
accounting records that are sufficient to show and explain the
Parent Company’s transactions and disclose with reasonable
responsible
accuracy at any time the financial position of the Parent
Company and enable them to ensure that its financial
statements comply with the Companies Acts 1931-2004. They
are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud
or error, and have general responsibility for taking such steps
as are reasonably open to them to safeguard the assets of the
Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Directors’ Report that complies
with that law and those regulations.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included on
the company’s website. Legislation in the Isle of Man
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Signed on behalf of the Board.
Denham Eke
Non-executive Chairman
27 November 2019
www.webisholdingsplc.com
AIM Stock Code: WEB
14
Webis Holdings plc
Report of the Remuneration Committee
Directors’ Remuneration Report
As an Isle of Man registered company there is no requirement
to produce a Directors’ Remuneration Report. However, the
Board follows best practice and therefore has prepared such
a report.
The Directors have agreed to comply with the provisions of
(“QCA”) Corporate
the Quoted Companies Alliance
Governance Code for Small and Mid-Size Quoted Companies
(2018) to the extent which is appropriate to its nature and
scale of operations.
This report illustrates how the Group complies with those
principles in relation to Directors’ remuneration.
The Level and Components of Executive Director
Remuneration
The Group’s Remuneration Policy reflects the Group’s
business strategy and objectives as well as sustained and
long-term value creation for shareholders. In addition, the
policy aims to be fair and provide equality of opportunity,
ensuring that: -
▪
▪
▪
▪
the Group is able to attract, develop and retain high-
performing and motivated employees in the competitive
local and wider US markets;
employees are offered a competitive remuneration
package to encourage enhanced performance and are,
in a fair and responsible manner, rewarded for their
individual contribution to the success of the Group;
it reflects our culture and values; and
there is full transparency of the Group’s Remuneration
Policy.
In line with the Board’s approach, which reflects that adopted
the Group’s
within other comparable organisations,
Remuneration Policy provides for the reward of the Executive
Director through salary and other benefits.
Executive Director’s Emoluments
The remuneration for the Executive Director reflects their
to
responsibilities.
participate in an annual bonus scheme when
is
considered appropriate, private healthcare and share option
incentives.
It comprises basic salary, eligibility
this
Annual bonus scheme payments are not pensionable and are
not contracted.
As with staff generally, whose salaries are subject to annual
reviews, the basic salary payable to the Executive Director is
reviewed each year with reference to jobs carrying similar
responsibilities in comparable e-gaming organisations, market
Emoluments — salaries, bonuses and taxable benefits
— fees
www.webisholdingsplc.com
AIM Stock Code: WEB
conditions generally and local employment competition in
view of the Group’s geographical position.
It is anticipated that an annual bonus scheme will operate
when Group profitability and cash flow allow. Bonuses for the
executive director 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.
The Committee believes that share ownership by executives
strengthens the link between their personal interests and
those of shareholders. 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.
The Group does not intend to contribute to the personal
pension plans of Directors in the forthcoming year.
Executive Directors’ Contractual Terms
The service contract of the Executive Director provides for a
notice period of six months.
Non-executive Directors’ Remuneration
Non-executive Directors do not receive any benefits other
than their fees and travelling expenses for which they are
reimbursed. The level of fees payable to Non-executive
Directors is assessed using benchmarks from a group of
comparable e-gaming organisations.
The Procedure for Determining Remuneration
The Remuneration Committee, comprising two Non-executive
Directors, is responsible for setting the remuneration of the
Executive Director and is chaired by Sir James Mellon.
in discussions
Committee members do not
concerning their own remuneration. The basic Non-executive
Director fee is set by the Group Chairman. The Chairman of
the Committee reports at the Board meeting following a
Committee meeting.
take part
It is the view of the Committee that Directors’ remuneration
awarded across the Group for the year has been in
accordance with the Group’s stated Remuneration Policy and,
on behalf of the Committee I recommend that you endorse this
Group report. An analysis of Directors’ emoluments is as
follows:
2019
US$000
2018
US$000
348
67
415
350
69
419
15
Webis Holdings plc
Report of the Remuneration Committee continued
Directors’ Emoluments
Basic
salary
US$000
Fees
US$000
Bonus
US$000
Termination
payments
US$000
Benefits
US$000
2019
Total
US$000
2018
Total
US$000
310
—
—
—
310
—
26
21
20
67
—
—
—
—
—
—
—
—
—
—
38
—
—
—
38
348
350
26
21
20
27
22
20
415
419
Executive
Ed Comins
Non-executive
Denham Eke*
Nigel Caine*
Sir James Mellon
Aggregate emoluments
* Paid to Burnbrae Limited.
Details of the options outstanding at 31 May 2019 are as follows:
Name of
director
Ed Comins
2016 Share Option Plan
31 May
2018
Granted /
(lapsed) in
year
31 May
2019 Exercise price
Date
from which
exercisable
Expiry
date
14,000,000
14,000,000
—
—
14,000,000
14,000,000
1p 3 March 2019 3 March 2026
The market price of the shares at 31 May 2019 was 1.55p. The range during the year was 4.85p to 1.30p.
Approval
The report was approved by the Board of Directors and signed on behalf of the Board.
Denham Eke
Non-executive Chairman
27 November 2019
www.webisholdingsplc.com
AIM Stock Code: WEB
16
Webis Holdings plc
Independent Auditor’s Report, to the members of Webis Holdings plc
1 Our opinion is unmodified
We have audited the financial statements of Webis Holdings PLC (“the Company”) or (“the Group”) for the year ended 31 May 2019
which comprise the Consolidated Statement of Comprehensive Income, Consolidated and Parent Company Statements of Financial
Position, Consolidated and Parent Company Statements of Changes in Equity, Consolidated Statement of Cash Flows and the
related notes, including the accounting policies in note 1.
In our opinion:
•
•
•
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 May
2019 and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU);
the financial statements have been prepared in accordance with the requirements of the Companies Acts 1931-2004.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Group in
accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed entities. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for our opinion
2 Material uncertainty related to going concern
Going concern
Disclosure quality
Our procedures included:
The financial statements explain how
the Directors formed their judgement
that it is appropriate to adopt the going
concern basis of preparation for the
Group and Parent Company.
judgement
is based on an
That
evaluation of the inherent risks to the
Group’s and Company’s business
model and how those risks might affect
the Group’s and Company’s financial
to continue
resources or ability
operations over a period of at least a
year from the date of approval of the
financial statements.
that
The risk for our audit was whether or
not subjectivities in the going concern
assessment were such
they
amounted to a material uncertainty that
may have cast significant doubt about
the ability to continue as a going
concern. The material uncertainty was
identified and disclosed in the financial
statements.
statements
We draw attention to note 1.1 to the
which
financial
describes that the Group incurred a
net loss of US$930,000 for the year
(2018: profit of US$103,000).
Based on forecasts prepared by the
Directors, the Group will sustain
losses to November 2020 and is
dependent on continued financial
support from Galloway Limited in
order to continue its operations and
implement the strategies outlined in
note 1.1.
The Group’s and Parent Company’s
to continue as a going
ability
concern is dependent on Galloway
Limited, a related party, not seeking
repayment of the amounts payable
to it which at the reporting date
to US$850,000 and
amounted
providing
financial
additional
support if required. However, there
is no certainty that such support will
continue.
These events and conditions, along
with the other matters explained in
note 1.1, constitute a material
uncertainty that may cast significant
doubt on the Group and the Parent
Company’s ability to continue as a
going concern.
Our opinion is not modified in
respect of this matter.
www.webisholdingsplc.com
AIM Stock Code: WEB
Funding assessment:
the
- We compared the available cash balance
with the projected expenditure. We also
the
assessed
projected expenditure by comparing
it
against the actual expenditures in the
current year which have been agreed to
invoices and agreements.
reasonableness of
Key dependency assessment:
- We inspected the letter of financial support
from a related party, Galloway Limited,
confirming that it does not intend to call the
loan payable for 12 months after the signing
of
financial statements and will
if
provide additional
required in order to ensure the continuation
of the Group’s existing operations.
financial support
these
- Further, we have enquired of Management
in respect of the ability of Galloway Limited
to provide financial support.
Sensitivity analysis:
- We performed stress testing by assessing
the effect of a reasonable increase in
projected expenditure and a decrease in the
projected revenue on the Group’s net assets.
Assessing transparency:
- We assessed
the completeness and
accuracy of the matters covered in the going
concern disclosure by comparing
the
financial statements
disclosures
the
relevant
against
guidance.
requirements of
the
in
17
Webis Holdings plc
Independent Auditor’s Report, to the members of Webis Holdings plc continued
3 Other key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us,
including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the
efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, we do not provide a separate opinion on these matters. Going concern is a significant key audit
matter and is described in section 2 of our report. In arriving at our audit opinion above, the other key audit matters, in decreasing
order of audit significance, were as follows (the only change from 2018 being the change in the key audit matter over going concern
to an emphasis of a material uncertainty related to going concern):
Key audit matter
Revenue recognition
Consolidated
Comprehensive
US$47,259,000 (2018: US$54,466,000)
Statement
Income:
of
Turnover
Refer to note 1.2 (Accounting Policy for
Turnover) and note 2 (Segmental analysis)
The risk
Revenue
occurrence
Our response
recognition-
Our procedures included:
The Group enters into high
volumes of revenue-generating
transactions each day.
Given the complexity of the
relied upon, we
systems
identified
the occurrence of
revenue as a significant risk.
Outsourcing controls:
- We considered the control environment
of the service organisation by obtaining
the latest System and Organisation
Controls (SOC) reports upon whose
system infrastructure and applications
are relied on by the Group, and in
assessing the design and operating
effectiveness of their controls.
- We
the
assessed
objectivity,
competence and the nature of work
performed by the Independent Service
Auditor who provides the SOC reports.
Tests of detail:
- We agreed total revenues recorded by
the Group to the reports extracted from
the third-party service organisation’s
system.
Expectation vs Outcome
- We re-performed the calculation of the
total pay-out for a sample of racetracks
based on the rates specified within the
signed agreements and compared our
expectation to the amount recorded by
the Group.
-
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Webis Holdings plc
Independent Auditor’s Report, to the members of Webis Holdings plc continued
Key audit matter
The risk
Our response
Cash balances (Group and Parent
Company)
Consolidated Statement of Financial
Position: Cash US$2,594,000 (2018:
US$13,392,000)
Parent Company Statement of Financial
Position: Cash US$1,416,000
(2018:
US$2,961,000)
Refer to note 1.2 (Accounting Policy for
Cash and cash equivalents) and note 12
(Note disclosure for Cash and cash
equivalents)
High value, non-subjective
Our procedures included:
The cash balances comprise 53% of the
Group’s Total Assets (by value) and
76% of the Company’s Total Assets (by
value). We do not consider these cash
balances to be subject to significant
level of judgment because they are
liquid assets. However, due to their
materiality in the context of the financial
they are
statements as a whole,
considered to be one of the areas which
had the greatest effect on our overall
audit
strategy and allocation of
resources in planning and completing
our audit.
Control design:
- Documented and assessed the
processes in place in reconciling
bank balances.
Tests of detail:
- Agreed the bank balances to the
independently obtained bank
confirmations.
- Inspected the credit rating of the
banks to assess their ability to
meet contractual obligations.
4 Our application of materiality and an overview of the scope of our audit
Materiality for the Group financial statements as a whole was set at US$40,000, determined with reference to a benchmark of the
Group’s net gaming revenue, of which it represents 0.9%. We consider net gaming revenue to be the most appropriate benchmark
as it provides a more stable measure year on year than Group profit before tax.
In the prior year, Group materiality was set at US$220,000, determined with reference to a benchmark of gross gaming revenue, of
which it represented 0.4%.
The benchmark used for materiality was changed as a result of a reassessment of the benchmark which is most relevant to users of
the accounts.
Materiality for the Parent Company financial statements as a whole was set at US$18,000 (2018: US$76,000), determined with
reference to a benchmark of Parent Company’s total assets, of which it represents 1% (2018: 2.5%).
We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding US$2,000 (2018:
US$11,000) for the Group financial statements and US$900 (2018: US$4,000) for the Parent Company financial statements, in
addition to other identified misstatements that warranted reporting on qualitative grounds.
All of the Group’s subsidiaries were subjected to full scope audit by the Group audit team and in accordance with the Group’s
materiality, or a lower level of materiality based on their individual financial statements.
5 We have nothing to report on the other information in the Annual Report
The Directors are responsible for the other information presented in the Annual Report together with the financial statements. Our
opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or,
except as explicitly stated below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work,
the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on
that work we have not identified material misstatements in the other information.
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19
Webis Holdings plc
Independent Auditor’s Report, to the members of Webis Holdings plc continued
6 We have nothing to report on the other matters on which we are required to report by exception
Under the Companies Act 1931-2004, we are required 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 financial statements are not in agreement with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or
•
•
• we have not received all the information and explanations we require for our audit.
We have nothing to report in these respects.
7 Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 14, the Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable
the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group
and Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using
the going concern basis of accounting unless they either intend to liquidate the Group or the Parent Company or to cease operations,
or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of
assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
8 The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the company’s members, as a body, in accordance with Section 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.
KPMG Audit LLC
Chartered Accountants
Heritage Court
41 Athol Street
Douglas
Isle of Man IM99 1HN
27 November 2019
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Webis Holdings plc
Consolidated Statement of Comprehensive Income
For the year ended 31 May 2019
Amounts wagered
Turnover
Cost of sales
Betting duty paid
Gross profit
Operating costs
Note
2019
US$000
2018
US$000
136,353
461,154
2
47,259
54,466
(42,625)
(48,027)
(146)
(884)
4,488
5,555
(5,277)
(5,562)
Impairment loss on trade receivables
20
Re-organisational and other costs
Other (losses)/gains
Other income
Operating (loss)/profit
Finance costs
(Loss)/profit before income tax
Income tax expense
(Loss)/profit for the year
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss:
Currency translation differences on disposal of foreign subsidiaries
Other comprehensive income for the year
Total comprehensive income for the year
Basic earnings per share for (loss)/profit attributable to the equity holders of the
Company during the year (cents)
Diluted earnings per share for (loss)/profit attributable to the equity holders of the
Company during the year (cents)
The notes on pages 25 to 46 form part of these financial statements.
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3
4
6
7
7
(67)
(54)
(166)
187
(889)
(41)
(930)
—
(930)
—
—
—
(86)
132
104
143
(40)
103
—
103
—
—
(930)
103
(0.24)
0.03
(0.23)
0.03
21
Webis Holdings plc
Statements of Financial Position
As at 31 May 2019
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 option reserve
Retained losses
Total equity
Current liabilities
Trade and other payables
Total current liabilities
Non-current liabilities
Loans
Total non-current liabilities
Total liabilities
Total equity and liabilities
Note
31.05.19
Group
US$000
31.05.19
Company
US$000
31.05.18
Group
US$000
31.05.18
Company
US$000
8
9
10
11
11
13
12
16
16
14
15
104
26
—
101
231
882
1,191
2,594
4,667
4,898
6,334
42
7
10
3
—
20
—
427
1,416
1,843
1,863
166
60
—
101
327
2,846
2,300
13,392
18,538
18,865
13
19
8
—
40
—
57
2,961
3,018
3,058
6,334
6,334
6,334
42
4
4
(5,224)
(5,412)
(4,294)
(5,282)
1,152
964
2,044
1,056
2,896
2,896
850
850
3,746
4,898
49
49
850
850
899
1,863
16,321
16,321
500
500
16,821
18,865
1,502
1,502
500
500
2,002
3,058
The notes on pages 25 to 46 form part of these financial statements
The financial statements were approved by the Board of Directors on 27 November 2019
Denham Eke
Ed Comins
Non-executive Chairman
Managing Director
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Webis Holdings plc
Statements of Changes in Equity
For the year ended 31 May 2019
Group
Called up
share capital
US$000
Share option
reserve
US$000
Retained
earnings
US$000
Total
equity
US$000
Balance as at 31 May 2017
6,334
2
(4,397)
1,939
Total comprehensive income for the
year:
Profit for the year
Transactions with owners:
Share-based payment expense
Balance as at 31 May 2018
Total comprehensive income for the
year:
Loss for the year
Transactions with owners:
Share-based payment expense (note 16)
Balance as at 31 May 2019
—
—
6,334
—
—
6,334
—
2
4
—
38
42
103
103
—
2
(4,294)
2,044
(930)
(930)
—
(5,224)
38
1,152
Company
Called up
share capital
US$000
Share option
reserve
US$000
Retained
earnings
US$000
Total
equity
US$000
Balance as at 31 May 2017
6,334
2
(5,374)
962
Total comprehensive income for the
year:
Profit for the year
Transactions with owners:
Share-based payment expense
Balance as at 31 May 2018
Total comprehensive income for the
year:
Loss for the year
Transactions with owners:
Share-based payment expense (note 16)
Balance as at 31 May 2019
—
—
6,334
—
—
6,334
—
2
4
—
38
42
92
—
92
2
(5,282)
1,056
(130)
(130)
—
(5,412)
38
964
The notes on pages 25 to 46 form part of these financial statements.
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Webis Holdings plc
Consolidated Statement of Cash Flows
For the year ended 31 May 2019
Cash flows from operating activities
(Loss) / profit before income tax
Adjustments for:
- Depreciation of property, equipment and motor vehicles
- Amortisation of intangible assets
- Finance costs
- Share based payment expense
- Other foreign exchange movements
Changes in working capital:
- Decrease in receivables
- Decrease in payables
Cash flows from operations
Bonds and deposits placed in the course of operations
Net cash used in operating activities
Cash flows from investing activities
Purchase of intangible assets
Purchase of property, equipment and motor vehicles
Net cash used in investing activities
Cash flows from financing activities
Interest paid
Loans received
Net cash generated from / (used in) financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange (losses) / gains on cash and cash equivalents
Cash and cash equivalents at end of year
The notes on pages 25 to 46 form part of these financial statements.
Note
2019
US$000
2018
US$000
9
8
4
16
(930)
103
34
80
41
38
74
70
40
2
363
(691)
1,109
771
(13,425)
(2,563)
(12,690)
(2,194)
11
1,964
19
(10,726)
(2,175)
8
9
4
15
(18)
—
(18)
(41)
350
309
(130)
(24)
(154)
(40)
—
(40)
(10,435)
(2,369)
13,392
15,072
(363)
689
2,594
13,392
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24
Webis Holdings plc
Notes to the Financial Statements
For the year ended 31 May 2019
1 Reporting entity (the “Company”)
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 Webis Holdings plc consolidated financial statements as at and for the year
ended 31 May 2019 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
(“IFRS”) and its interpretations as adopted by the European Union.
There has been no material impact on the Group financial statements of new standards/interpretations that have come into effect
during the current reporting period.
Functional and presentational currency
These financial statements are presented in US Dollars which is the Group’s primary functional currency and its presentational
currency. Financial information presented in US Dollars has been rounded to the nearest thousand. All continued operations of
the Group have US Dollars as their functional currency.
(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 consider the only critical judgement area to be the valuation of share options. 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 Group and Parent Company financial statements have been prepared on a going concern basis.
The Group incurred a net loss of US$930,000 for the year (2018: profit of US$103,000) and as at 31 May 2019. Based on forecasts
prepared by the Directors, the Group will sustain losses to November 2020 and is dependent on continued financial support from
Galloway Limited in order to continue its operations and implement the strategies outlined below. The reported turnover declined
by US$7,207,000 during the year following a decrease in wagering activities and the cessation of wagering services to a large
syndicate, with an anticipated annual impact of approximately US$800,000 in reduced gross margin. The Directors recognise that
there is a risk involved in the sustainability of the business operations and have identified that these circumstances in combination
represent a material uncertainty that casts significant doubt upon the Group’s ability to continue as a going concern, without
shareholder support.
The Directors are pursuing strategies that include:
•
•
•
•
broadening the Group’s client base and expanding its business to customer base
continuing to renew and acquire further US state regulated gaming licenses and continuing to develop and expand the
Cal Expo racetrack operation including the extension of the lease to a longer lease term
taking advantage of the anticipated regulatory change in the State of California’s adoption of sports betting legislation
which will further open up opportunities for the Group
reducing operational costs as a key priority for the Group in achieving its goal of profitability and maintaining adequate
liquidity in order to continue its operations.
The Directors continue to assess all strategic options in this regard, albeit that the ultimate success of strategies adopted is difficult
to predict as they require additional cash, including bonds to be placed with the relevant authorities. The Directors have prepared
cash flow forecasts for a period of 12 months from the date of approval of these financial statements which indicate that, taking
account of reasonably possible downsides, the Group is projected to have sufficient funds through funding from its related entity,
to meet its liabilities as they fall due for that period.
25
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Webis Holdings plc
Notes to the Financial Statements continued
1.1 Basis of preparation continued
Going concern continued
Those forecasts are also dependent on Galloway Limited not seeking repayment of the amounts currently due by the Group,
which at 31 May 2019 amounted to US$850,000, and providing additional financial support if required in order to ensure the
continuation of the Group’s existing operations. Galloway Limited has indicated its intention to continue to make available such
funds as are needed by the company, and that it does not intend to seek repayment of the amounts due at the balance sheet
date, for the period covered by the forecasts. As with any company placing reliance on other parties for financial support, the
Directors acknowledge that there can be no certainty that this support will continue although, at the date of approval of these
financial statements, they have no reason to believe that it will not do so.
The willingness of Galloway Limited to continue to provide this support is reliant on the strategies highlighted above which are
subject to uncertainty.
Based on these indications, the Directors believe that it remains appropriate to prepare the financial statements on a going
concern basis. However, these circumstances represent a material uncertainty that may cast significant doubt on the Company’s
ability to continue as a going concern and, therefore, to continue realising its assets and discharging its liabilities in the normal
course of business. The financial statements do not include any adjustments that would result from the basis of preparation being
inappropriate.
1.2 Changes in significant accounting policies
During the current year the Group adopted all the new and revised IFRSs that are relevant to its operation and are effective for
accounting periods beginning on 1 June 2019. This adoption did not have a material effect on the accounting policies of the
Group. The changes to the significant accounting policies are described below:
IFRS 9 Transition
Classification and measurement on adoption
The Group adopted IFRS 9 Financial Instruments for the first time on 1 June 2018. For the Group, there is no financial impact on
adopting IFRS 9 for changes in the measurement basis for financial assets and liabilities and consequently no adjustment to
opening retained earnings at 1 June 2018. There has however been a change to classification terminology, outlined below for the
company’s main financial instruments:
Financial instrument
New Classification
under IFRS 9
Cash and cash equivalents
Trade receivables
Loans and advances
Amortised cost
Amortised cost
Amortised cost
Bonds and Deposits
Amortised cost
Equity instruments
FV on day 1, no
remeasurements
Original
Classification under
IAS 39
Loans and receivables
Loans and receivables
Loans and receivables
Loans and
receivables/ Loans
and receivables
FV on day 1, no
remeasurements
Measurement
model
Amortised cost
Amortised cost
Amortised cost
Amortised cost
FVTPL
Impairment on adoption
The Group has determined that the impact of adopting IFRS 9’s ECL model is an immaterial transitional impact on the Group’s
opening retained earnings at 1 June 2018. The accounting policies set out above have been applied consistently to all periods
presented in these financial statements in accordance with IFRS.
Impairment of financial assets
IFRS 9 introduces an expected loss accounting model for credit losses that differs significantly from the incurred loss model under
IAS 39 and results in earlier recognition of credit losses. The new impairment model applies to financial assets measured at
amortised cost and contract assets. Financial assets at amortised cost include trade receivables, cash and cash equivalents,
bonds and deposits.
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26
Webis Holdings plc
Notes to the Financial Statements continued
1.2 Changes in significant accounting policies continued
IFRS 9 Transition continued
Impairment of financial assets continued
Performing financial assets
Stage 1
From initial recognition of a financial asset to the date on which an asset has experienced a significant increase in credit risk
relative to its initial recognition, a stage 1 loss allowance is recognised equal to the credit losses expected to result from its default
occurring over the earlier of the next 12 months or its maturity date (‘12-month ECL’).
Stage 2
Following a significant increase in credit risk relative to the initial recognition of the financial asset, a stage 2 loss allowance is
recognised equal to the credit losses expected from all possible default events over the remaining lifetime of the asset (‘Lifetime
ECL’). The assessment of whether there has been a significant increase in credit risk requires considerable judgment, based on
the lifetime probability of default (‘PD’). Stage 1 and 2 allowances are held against performing loans; the main difference between
stage 1 and stage 2 allowances is the time horizon. Stage 1 allowances are estimated using the PD with a maximum period of 12
months, while stage 2 allowances are estimated using the PD over the remaining lifetime of the asset.
Impaired financial assets
Stage 3
When a financial asset is considered to be credit-impaired, the allowance for credit losses (‘ACL’) continues to represent lifetime
expected credit losses, however, interest income is calculated based on the amortised cost of the asset, net of the loss allowance,
rather than its gross carrying amount.
Application of the new impairment model
The Group applies IFRS 9’s new ECL model to two main types of financial assets that are measured at amortised cost:
Trade receivables, to which the simplified approach (provision matrix) prescribed by IFRS 9 is applied. This approach requires
the recognition of a Lifetime ECL allowance on day one.
Other financial assets at amortised cost, to which the general three stage model (described above) is applied, whereby a 12-
month ECL is recognised initially and the balance is monitored for significant increases in credit risk which triggers the recognition
of a Lifetime ECL allowance.
CLs are a probability-weighted estimate of credit losses. ECLs for financial assets that are not credit-impaired at the reporting
date are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due in accordance with
the contract and the cash flows that the company expects to receive). ECLs for financial assets that are credit-impaired at the
reporting date are measured as the difference between the gross carrying amount and the present value of estimated future cash
flows. ECLs are discounted at the effective interest rate of the financial asset which is 0% for all financial assets at amortised
cost. The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed
to credit risk. The measurement of ECLs considers information about past events and current conditions, as well as supportable
information about future events and economic conditions. The Group has revised its impairment methodology for estimating the
ECLs, taking into account forward-looking information in determining the appropriate level of allowance. In addition, it has
identified indicators and set up procedures for monitoring for significant increases in credit risk.
As a result of the adoption of IFRS 9, the Group has adopted the consequential amendments to IAS 1 Presentation of Financial
Statements, which requires impairment of financial assets to be presented in a separate line item in the Statement of
Comprehensive Income. Previously, the Group’s approach was to include impairment of trade receivables in operating costs.
There were no impairment losses recorded that required reclassification in the Statement of Comprehensive Income for the year
ended 31 May 2018.
IFRS 15 Transition – Revenue from contracts with customers
The Group generates revenue primarily from the provision of wagering services and the hosting of races on which guests are
entitled to participate in the related wagering services. Revenue is measured based on the consideration specified in a contract
with a customer. The Group recognises revenue when it discharges services to a customer. Revenue has been disaggregated
by geographical locations which are consistent with the operating segments (note 2).
Hosting fees are recognised when the customers participate in the Group’s pari-mutuel pools and the race audio visual signals
are transmitted.
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27
Webis Holdings plc
Notes to the Financial Statements continued
1.2 Changes in significant accounting policies continued
IFRS 15 Transition – Revenue from contracts with customers continued
Wagering revenue from the Group’s activities as the race host is recognised when a race on which wagers are placed is
completed. The wagering commission from the Group’s commingling of its wagering pools with a host’s pool is recognised when
the race on which those wagers are placed is completed. The Group acts as a principal when it allows customers to place wagers
in the races it hosts and as an agent when it allows customers to place wagers in other entities’ races.
Transactions fees are recognised when the Group facilitates customers’ deposit transactions into their betting accounts.
There were no restatements in the retained earnings on adoption of IFRS 15 as the resultant amounts, timing and pattern of
recognition of revenue did not change.
1.3 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 the Group. 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 the 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.
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 are presented in
the income statement within ‘Finance income’ or ‘Finance costs’. All other foreign exchange gains and losses are presented in
the income statement within ‘Other (losses)/gains’.
(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.
www.webisholdingsplc.com
AIM Stock Code: WEB
28
Webis Holdings plc
Notes to the Financial Statements continued
1.3 Summary of significant accounting policies continued
Segmental reporting
Segmental reporting is based on the business areas in accordance with the Group’s internal reporting structure, which allows the
individual operating segments to be identified by the disparate nature of the principal activity they undertake. The Group
determines and presents segments based on the information that internally is provided to the Board and 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 Board and 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.
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 reporting date in
the countries where the Group operates and generates taxable income. Management periodically evaluates positions taken in
tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where
appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from
the initial recognition of goodwill; deferred 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 tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the reporting 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.
www.webisholdingsplc.com
AIM Stock Code: WEB
29
Webis Holdings plc
Notes to the Financial Statements continued
1.3 Summary of significant accounting policies continued
Intangible assets — goodwill continued
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.
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.
Share-based payment expense
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
www.webisholdingsplc.com
AIM Stock Code: WEB
30
Webis Holdings plc
Notes to the Financial Statements continued
1.3 Summary of significant accounting policies continued
Share-based payment expense continued
• 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.
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.
Financial instruments
Non-derivative financial instruments include trade and other receivables, cash and cash equivalents, bonds and deposits,
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.
Bonds and deposits
Bonds and deposits are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method, less provision for impairment.
Borrowings
Interest-bearing 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.
31
www.webisholdingsplc.com
AIM Stock Code: WEB
Webis Holdings plc
Notes to the Financial Statements continued
1.3 Summary of significant accounting policies continued
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 accrual’s 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.
Standards and interpretations in issue not yet adopted
A number of new standards, amendments to standards and interpretations are not yet effective for the year, and have not been
applied in preparing these consolidated financial statements:
New/revised International Accounting Standards / International Financial Reporting
Standards (“IAS/IFRS”)
IFRS 16 Leases
Amendments
Effective date
(accounting periods
commencing on or after)
1 January 2019
Amendments to reference to Conceptual Framework in IFRS Standards
Annual improvements to IFRS Standards 2015-2017 Cycle (issued on 12 December 2017)
Amendments to IFRS 9 Financial Instruments: Prepayment Features with Negative Compensation
(issued on 12 October 2017)
1 January 2020
Not yet endorsed
Not yet endorsed
IFRS 16 provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the
lease term is less than 12 months, or the underlying asset is of an immaterial value.
The Group’s assessment of the potential impact resulting from the implementation of IFRS 16 is currently in progress. The actual
impact of adopting the standard on 1 June 2019 will be known when the Group presents its first financial statements after the
date of initial application.
www.webisholdingsplc.com
AIM Stock Code: WEB
32
Webis Holdings plc
Notes to the Financial Statements continued
2 Operating Segments
A. Basis for segmentation
The Group has the below two operating segments, which are its reportable segments. The segments offer different services in
relation to various forms of pari-mutuel racing, which are managed separately due to the nature of their activities.
Reportable segments and operations provided
Racetrack operations – hosting of races through the management and operation of a racetrack facility, enabling patrons to attend
and wager on horse racing, as well as utilise simulcast facilities.
ADW operations – provision of online ADW services to enable customers to wager into global racetrack betting pools.
The Group’s Board of Directors review the internal management reports of the operating segment on a monthly basis.
Information about reportable segments
B.
Information relating to the reportable segments is set out below. Segment revenue along with segment profit / (loss) before tax
are used to measure performance as management considers this information to be a relevant indicator for evaluating the
performance of the segments.
External revenues
Segment revenue
Segment loss before tax
Interest expense
Depreciation and amortisation
Other material non-cash items:
-
Impairment losses on trade receivables
Segment assets
Segment liabilities
External revenues
Segment revenue
Segment (loss)/profit before tax
Interest expense
Depreciation and amortisation
Segment assets
Segment liabilities
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AIM Stock Code: WEB
Reportable segments
Racetrack
2019
US$000
44,753
44,753
(97)
–
(8)
–
423
181
ADW
2019
US$000
All other
segments
2019
US$000
2,506
2,506
(708)
–
(106)
(67)
2,612
2,666
–
–
(125)
(41)
–
–
1,863
899
Reportable segments
Racetrack
2018
US$000
ADW
2018
US$000
All other
segments
2018
US$000
50,173
50,173
(359)
–
(41)
327
191
4,293
4,293
477
–
(103)
15,480
14,628
–
–
(15)
(40)
–
3,058
2,002
Total
2019
US$000
47,259
47,259
(930)
(41)
(114)
(67)
4,898
3,746
Total
2018
US$000
54,466
54,466
103
(40)
(144)
18,865
16,821
33
Webis Holdings plc
Notes to the Financial Statements continued
2 Operating Segments continued
C. Reconciliations of information on reportable segments to the amounts reported in the financial statements
i. Revenues
Total revenue for reportable segments
Consolidated revenue
ii. (Loss) / profit before tax
Total (loss) / profit before tax for reportable segments
Loss before tax for other segments
Consolidated (loss) / profit before tax
iii. Assets
Total assets for reportable segments
Assets for other segments
Consolidated total assets
iv. Liabilities
Total liabilities for reportable segments
Liabilities for other segments
Consolidated total liabilities
v. Other material items
Interest expense
Depreciation and amortisation
Impairment losses on trade receivables
D. Geographic information
2019
US$000
2018
US$000
47,259
47,259
54,466
54,466
(805)
(125)
(930)
3,035
1,863
4,898
2,847
899
3,746
(41)
(114)
(67)
118
(15)
103
15,807
3,058
18,865
14,819
2,002
16,821
(40)
(144)
–
The below table analyses the geographic location of the customer base of the operating segments.
Turnover
Racetrack operations
ADW operations
www.webisholdingsplc.com
AIM Stock Code: WEB
2019
US$000
2018
US$000
North America
44,753
50,173
North America
1,541
British Isles
Asia Pacific
692
273
1,323
23
2,947
47,259
54,466
34
Webis Holdings plc
Notes to the Financial Statements continued
3 Operating (loss)/profit
Operating (loss)/profit is stated after charging:
Auditors’ remuneration — audit
Depreciation of property, equipment and motor vehicles
Amortisation of intangible assets
Exchange losses / (gains)
Operating lease rentals — other than plant, equipment and Harness Racetrack
Operating lease rentals — Harness Racetrack
Directors’ fees
4 Finance costs
Loan interest payable
Finance costs
5 Staff numbers and cost
Average number of employees – Pari-mutuel and Racetrack Operations
The aggregate payroll costs of these persons were as follows:
Pari-mutuel and Racetrack Operations
Wages and salaries
Social security costs
6
Income tax expense
2019
US$000
2018
US$000
81
34
80
64
74
70
166
(132)
30
74
67
29
89
69
2019
US$000
2018
US$000
(41)
(41)
(40)
(40)
2019
2018
55
59
2019
US$000
2018
US$000
1,711
121
1,832
1,866
132
1,998
(a) Current and Deferred Tax Expenses
The current and deferred tax expenses for the year were US$Nil (2018: US$Nil). Despite having made losses, no deferred tax
was recognised as there is no reasonable expectation that the Group will recover the resultant deferred tax assets.
www.webisholdingsplc.com
AIM Stock Code: WEB
35
Webis Holdings plc
Notes to the Financial Statements continued
6
Income tax expense continued
(b) Tax Rate Reconciliation
(Loss)/profit 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
2019
US$000
2018
US$000
(930)
–
(166)
166
–
103
–
(97)
97
–
The maximum deferred tax asset that could be recognised at year end is approximately US$810,000 (2018: US$644,000). The
Group has not recognised any asset as it is not reasonably known when the Group will recover such deferred tax assets.
7 Earnings per ordinary share
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 in the current period has not been reflected in the calculation of the diluted
loss per share, as the effect would have been anti-dilutive.
(Loss)/profit for the year
Weighted average number of ordinary shares in issue
Dilutive element of share options if exercised (note 16)
Diluted number of ordinary shares
Basic earnings per share (cents)
Diluted earnings per share (cents)
2019
US$000
(930)
No.
2018
US$000
103
No.
393,338,310
393,338,310
14,000,000
14,000,000
407,338,310
407,338,310
(0.24)
(0.23)
0.03
0.03
The earnings applied are the same for both basic and diluted earnings calculations per share as there are no dilutive effects to
be applied.
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AIM Stock Code: WEB
36
Webis Holdings plc
Notes to the Financial Statements continued
8
Intangible assets
Goodwill
Software & development
costs
Total
Group
US$000
Group
US$000
Company
US$000
Group
US$000
Company
US$000
Cost
Balance at 1 June 2017
Additions during the year
Currency translation differences
Balance at 31 May 2018
Balance at 1 June 2018
Additions during the year
Balance at 31 May 2019
Amortisation and Impairment
Balance at 1 June 2017
Amortisation for the year
Balance at 31 May 2018
Balance at 1 June 2018
Amortisation for the year
Balance at 31 May 2019
Carrying amounts
At 1 June 2017
At 31 May 2018
At 31 May 2019
177
1,354
–
–
177
177
–
177
177
–
177
177
–
177
–
–
–
130
1
1,485
1,485
18
1,503
1,249
70
1,319
1,319
80
1,399
105
166
104
50
14
–
64
64
–
64
50
1
51
51
6
57
–
13
7
1,531
130
1
1,662
1,662
18
1,680
1,426
70
1,496
1,496
80
1,576
105
166
104
50
14
–
64
64
–
64
50
1
51
51
6
57
–
13
7
The goodwill balance brought forward relates to the historical acquisition of subsidiary businesses. The goodwill balances were
fully impaired during the year ended 31 May 2015. The Group tests intangible assets annually for impairment or more frequently
if there are indications that the intangible assets may be impaired (see note 1).
www.webisholdingsplc.com
AIM Stock Code: WEB
37
Webis Holdings plc
Notes to the Financial Statements continued
9 Property, equipment and motor vehicles
Group
Cost
Balance at 1 June 2017
Additions during the year
Currency translation differences
Balance at 31 May 2018
Balance at 1 June 2018
Balance at 31 May 2019
Depreciation
Balance at 1 June 2017
Charge for the year
Balance at 31 May 2018
Balance at 1 June 2018
Charge for the year
Balance at 31 May 2019
Carrying amounts
At 1 June 2017
At 31 May 2018
At 31 May 2019
Company
Cost
Balance at 1 June 2017
Additions
Balance at 31 May 2018
Balance at 1 June 2018
Balance at 31 May 2019
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AIM Stock Code: WEB
Computer
Equipment
US$000
Fixtures,
Fittings &
Track
Equipment
US$000
Motor
Vehicles
US$000
Total
US$000
579
24
1
604
604
604
546
21
567
567
19
586
33
37
18
580
–
–
580
580
580
525
45
570
570
7
577
55
10
3
51
–
–
51
51
51
30
8
38
38
8
46
21
13
5
1,210
24
1
1,235
1,235
1,235
1,101
74
1,175
1,175
34
1,209
109
60
26
Computer
Equipment
US$000
Fixtures &
Fittings
US$000
Total
US$000
419
10
429
429
429
139
–
139
139
139
558
10
568
568
568
38
Webis Holdings plc
Notes to the Financial Statements continued
9 Property, equipment and motor vehicles continued
Company
Depreciation
Balance at 1 June 2017
Charge for the year
Balance at 31 May 2018
Balance at 1 June 2018
Charge for the year
Balance at 31 May 2019
Carrying amounts
At 1 June 2017
At 31 May 2018
At 31 May 2019
10 Investments
Computer
Equipment
US$000
Fixtures &
Fittings
US$000
Total
US$000
403
7
410
410
9
419
16
19
10
139
–
139
139
–
139
–
–
–
542
7
549
549
9
558
16
19
10
Investments in subsidiaries are held at cost. Details of investments at 31 May 2019 are as follows:
Subsidiaries
Country of
incorporation
WatchandWager.com Limited
Isle of Man
Activity
Holding (%)
Operation of interactive wagering
totaliser hub
WatchandWager.com LLC
United States of
America
Operation of interactive wagering
totaliser hub and harness racetrack
Technical Facilities & Services Limited
Isle of Man
betinternet.com (IOM) Limited
B.E. Global Services Limited
Isle of Man
Isle of Man
Dormant
Dormant
Dormant
100
100
100
100
100
11 Bonds and deposits
Group
Company
2019
US$000
2018
US$000
2019
US$000
2018
US$000
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
882
–
101
983
2,846
–
101
2,947
–
–
–
–
–
–
–
–
39
www.webisholdingsplc.com
AIM Stock Code: WEB
Webis Holdings plc
Notes to the Financial Statements continued
11 Bonds and deposits continued
Cash bonds of US$875,000 have been paid as security deposits in relation to various US State ADW licences (2018:
US$925,000). These cash bonds are held in trust accounts used exclusively for cash collateral, with financial institutions which
have been screened for their financial strength and capitalization ratio. The financial institutions have a credit rating of A-
Excellent from AM Best credit rating agency. Therefore, these bonds are considered to be fully recoverable. A rent deposit of
US$100,000 is held by California Exposition & State Fair and is for a term of 5 years (2018: US$100,000). This is held by an
entity of the Californian state government and is therefore considered fully recoverable. Rent and other security deposits total
US$8,227 (2018: US$10,123). These deposits are repayable upon completion of the relevant lease term, under the terms of
legally binding agreements.
Under the terms of the licencing agreement with the Hong Kong Jockey Club the Company is no longer required to hold a
retention amount (2018: US$1,911,461 / HK$15,000,000).
12 Cash and cash equivalents
Cash and cash equivalents – company and other funds
Cash and cash equivalents – protected player funds
Total cash and cash equivalents
Group
Company
2019
US$000
2018
US$000
2019
US$000
2018
US$000
1,363
1,231
2,594
11,962
1,430
13,392
185
1,231
1,416
1,531
1,430
2,961
The Group holds funds for operational requirements and for its non-Isle of Man customers, shown as ‘company and other 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
Amounts due from Group undertakings
Other receivables and prepayments
Group
Company
2019
US$000
2018
US$000
2019
US$000
2018
US$000
770
–
421
1,635
–
665
1,191
2,300
–
393
34
427
–
–
57
57
Included within trade receivables are impairment losses of US$67,000 (see note 20), (2018: US$Nil).
Amounts due from Group undertakings are unsecured, interest free and repayable on demand.
14 Trade and other payables
Group
Company
2019
US$000
2018
US$000
2019
US$000
2018
US$000
Trade payables
2,619
15,757
Amounts due to Group undertakings
Taxes and national insurance
Accruals and other payables
–
17
260
–
16
548
2,896
16,321
12
–
2
35
49
14
1,451
2
35
1,502
Amounts due to Group undertakings are unsecured, interest free and repayable on demand. Included within trade payables are
amounts due to customers of US$2,194,293 (2018: US$15,656,146).
40
www.webisholdingsplc.com
AIM Stock Code: WEB
Webis Holdings plc
Notes to the Financial Statements continued
15 Loans
Group
Company
2019
US$000
2018
US$000
2019
US$000
2018
US$000
Loan – Galloway Ltd
850
500
850
500
A loan of US$500,000 was received from Galloway Ltd in February 2017, to provide financing for cash-backed bonding
agreements. The loan is for a term of five years, attracts fixed interest at 7.75% per annum and is secured over the unencumbered
assets of the company (see note 19). The loan was issued at a market rate with no issue costs and the interest is settled on a
quarterly basis. At year end there are two month’s outstanding interest of US$6,476 (2018: US$6,476), which is recorded in other
payables.
A further loan of US$350,000 was received from Galloway Ltd in May 2019, to provide additional financing for cash-backed
bonding agreements. The loan is for a term of five years, attracts fixed interest at 7.00% per annum and is secured over the
unencumbered assets of the company (see note 19). The loan was issued at a market rate with no issue costs and the interest
is settled on a quarterly basis. At year end there is one month’s outstanding interest of US$2,081 (2018: US$Nil), which is
recorded in other payables.
16 Share capital
Allotted, issued and fully paid
No.
2019
US$000
2018
US$000
At beginning and close of year: ordinary shares of 1p each
393,338,310
6,334
6,334
At 31 May: ordinary shares of 1p each
393,338,310
6,334
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 (2018:
US$9,619,000 divided into 600,000,000 ordinary shares of £0.01 each).
Options
Movements in share options during the year ended 31 May 2019 were as follows:
At 31 May 2018 – 1p ordinary shares
Options granted
Options lapsed
Options exercised
At 31 May 2019 – 1p ordinary shares
No.
14,000,000
–
–
–
14,000,000
During 2016 the Group established an equity-settled share-based option program. The fair value of options granted is recognised
as an expense, with a corresponding increase in equity. The fair value is measured at grant date using a Black-Scholes model
and is spread over the vesting period. The amount recognised in equity is adjusted to reflect the actual number of share options
which are expected to vest. By taking into consideration the volatility of the shares over the 3 years prior to granting, the volatility
of the options is calculated at 75%, with a risk-free interest rate of 0.86%.
The options were issued on 3 March 2016 to Ed Comins, Managing Director of the Group. The fair value of each option on the
grant date was estimated as being £0.0022. The share options vested on 3 March 2019 after Ed Comins had remained in the
employment of the Group for 3 years from when the options were granted. The options are able to be exercised from 3 March
2019 and expire on 2 March 2026. The weighted average exercise price of all options is £0.01.
The charge for share options recorded in profit and loss for the year was US$37,989 (2018: US$1,721), with the corresponding
amount reflected in the share option reserve in the Statement of Financial Position and Statement of Changes in Equity. Since
the grant date, the total charge in relation to the share options was US$42,126.
www.webisholdingsplc.com
AIM Stock Code: WEB
41
Webis Holdings plc
Notes to the Financial Statements continued
17 Capital commitments
As at 31 May 2019, the Group had no known capital commitments (2018: US$Nil).
18 Operating lease commitments
At 31 May 2019, the Group was committed to future minimum lease payments of:
Payments due within one year
Payments due between one to five years
Payments due beyond five years
2019
US$000
2018
US$000
108
186
–
108
294
–
The Group has recognised in the income statement operating lease payments of US$104,000 (2018: US$118,000).
The Group leases office and racetrack facilities. The office facilities lease expires in May 2021, with an option to renew prior to
the expiry date, for a period yet to be determined, customarily with the lease rate increasing 2% annually. The racetrack facilities
lease expires in May 2022, with an option to renew before the expiry date, for a period and rate to be determined at renewal.
19 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).
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 US$45,484 (2018: US$52,858) and Directors’ fees of US$46,898 (2018: US$48,413) were charged
in the year by Burnbrae Limited, of which Denham Eke and Nigel Caine are common Directors. The Group also had a loan of
US$850,000 (2018: US$500,000) from Galloway Ltd, a company related to Burnbrae Limited by common ownership and Directors
(note 15).
Transactions with key management personnel
The total amounts for Directors’ remuneration were as follows:
Emoluments — salaries, bonuses and taxable benefits
2019
US$000
2018
US$000
348
67
415
350
69
419
— fees
Directors’ Emoluments
Executive
Ed Comins
Non-executive
Denham Eke*
Nigel Caine*
Sir James Mellon
Aggregate emoluments
Basic
salary
US$000
Fees
US$000
Bonus
US$000
Termination
payments
US$000
Benefits
US$000
2019
Total
US$000
2018
Total
US$000
310
—
—
—
310
—
26
21
20
67
—
—
—
—
—
—
—
—
—
—
38
—
—
—
38
348
350
26
21
20
27
22
20
415
419
* Paid to Burnbrae Limited.
14,000,000 share options were issued to Ed Comins (see note 16) during 2016.
www.webisholdingsplc.com
AIM Stock Code: WEB
42
Webis Holdings plc
Notes to the Financial Statements continued
20 Financial risk management
Capital structure
The Group’s capital structure is as follows:
Cash and cash equivalents
Loans and similar liabilities
Net funds
Shareholders’ equity
Capital employed
2019
US$000
2018
US$000
2,594
13,392
(850)
(500)
1,744
12,892
(1,152)
(2,044)
592
10,848
The Group’s policy is to maintain as strong a capital base as possible, insofar as can be sustained due to the fluctuations in the
net results of the Group and the inherent effect this has on the capital structure.
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 and foreign exchange risks.
Liquidity risk
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 where applicable to ensure that Isle of Man Gambling Supervision Commission player protection
principles are met. Other customer balances are covered by cash funds held within the Group and by receivables due from ADW
racetrack settlement partners. The Directors anticipate that the business will generate sufficient cash flow in the forthcoming
period, to meet its immediate financial obligations.
The following are the contractual maturities of financial liabilities:
2019
Financial liabilities
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
Trade payables
(2,619)
(2,619)
(2,619)
Other payables and loans
(865)
(15)
(15)
(3,484)
(2,634)
(2,634)
–
–
–
–
(850)
(850)
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43
Webis Holdings plc
Notes to the Financial Statements continued
20 Financial risk management continued
Liquidity risk continued
2018
Financial liabilities
Trade payables
Other payables and loans
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
(15,757)
(15,757)
(15,757)
(756)
(256)
(256)
(16,513)
(16,013)
(16,013)
–
–
–
–
(500)
(500)
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.
Impairment losses on financial assets recognised in profit or loss were as follows:
Non-credit impaired trade receivables
Credit impaired trade receivables
Total impairment losses
2019
US$000
2018
US$000
5
62
67
—
—
—
The Group’s exposure to credit risk is influenced by the characteristics of the individual racetracks and the settling agents
operating on behalf of these tracks. The racetracks themselves are influenced by many factors, including the product they offer,
supporting sources of revenue they might generate, such as offering simulcast, slots or sports wagering facilities, current
economic conditions, ownership structure and so on, all of which can affect their liquidity.
The Group limits its exposure to credit risk by regular settling and verification of balances due to and from settling agents, with
standard terms of one month. While there is on occasion debt that is slower to be settled, historical settlements for the last four
years show that of the current trade receivable balance, greater than 99% would be expected to be received.
In addition, more than 80% of the current Group customers have transacted with the Group for four years or more and none of
these customers balances have been specifically impaired in that period.
The following table provides information about exposure to credit risk and expected credit losses for trade receivables as at 31
May 2019:
Current (not past due)
1-30 days past due
31-60 days past due
61-90 days past due
More than 90 days past due
More than 90 days past due
Weighted
Average
Loss Rate
(%)
0.25%
0.50%
1.00%
2.50%
5.00%
100.00%
Gross
Carrying
Amount
US$000
385
294
55
28
13
62
837
Loss
Allowance
US$000
(1)
(1)
(1)
(1)
(1)
(62)
(67)
Net
Carrying
Amount
US$000
384
293
54
27
12
—
770
Credit
Impaired
No
No
No
No
No
Yes
The Group uses an allowance matrix to measure the ECLs of trade receivables from racetracks and their settling agents, which
comprise a moderate number of balances, ranging from small to large. The Group has reviewed its historical losses over the past
four years as well as considering current economic conditions in estimating the loss rates and calculating the corresponding loss
allowance.
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AIM Stock Code: WEB
44
Webis Holdings plc
Notes to the Financial Statements continued
20 Financial risk management continued
Credit risk continued
Classes of financial assets — carrying amounts
Cash and cash equivalents
Bonds and deposits
Trade and other receivables
2019
US$000
2018
US$000
2,594
983
1,051
4,628
13,392
2,947
2,133
18,472
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 receivables in any business segment:
Pari-mutuel
2019
US$000
2018
US$000
1,051
1,051
2,133
2,133
Of the above receivables, US$770,000 (2018: US$1,635,000) relates to amounts owed from 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. The banks have external credit ratings of at least Baa3 from Moody’s.
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.
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
as the Group and Parent Company do not have floating rate loans payable.
Foreign currency risks
The Group operates internationally and is subject to transactional foreign currency exposures, primarily with respect to Pounds
Sterling, Hong Kong Dollars and Euros.
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 reporting date the Group had the following exposure:
2019
Current assets
Current liabilities
Short-term exposure
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AIM Stock Code: WEB
USD
US$000
GBP
US$000
EUR
US$000
HKD
US$000
Total
US$000
3,128
(1,911)
1,217
289
(196)
93
427
(84)
343
683
4,527
(688)
(2,879)
(5)
1,648
45
Webis Holdings plc
Notes to the Financial Statements continued
20 Financial risk management continued
Foreign currency risks continued
2018
Current assets
Current liabilities
Short-term exposure
USD
US$000
GBP
US$000
EUR
US$000
HKD
US$000
Total
US$000
2,744
(2,013)
731
225
11,214
4,186
18,369
(281)
(10,027)
(3.984)
(16,305)
(56)
1,187
202
2,064
The following table illustrates the sensitivity of the net result for the year and equity with regards to the Group’s financial assets
and financial liabilities and the US Dollar–Sterling exchange rate, US Dollar–Euro exchange rate and US Dollar–Hong Kong Dollar
exchange rate.
A 5% weakening of the US Dollar against the following currencies at 31 May 2019 would have increased/(decreased) equity and
profit and loss by the amounts shown below:
2019
Current assets
Current liabilities
Net assets
2018
Current assets
Current liabilities
Net assets
GBP
US$000
EUR
US$000
HKD
US$000
Total
US$000
15
(10)
5
21
(4)
17
34
(34)
–
70
(48)
22
GBP
US$000
EUR
US$000
HKD
US$000
Total
US$000
11
(14)
(3)
561
(501)
60
209
(199)
10
781
(714)
67
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.
21 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 63.10%.
22 Subsequent events
To the knowledge of the Directors, there have been no material events since the end of the reporting period that require disclosure
in the accounts.
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AIM Stock Code: WEB
46
Webis Holdings plc
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 23 December 2019 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 31 May 2019.
2 To re-elect as a director Denham Eke who retires by
rotation and, being eligible, offers himself for re-election in
accordance with the Company’s Articles of Association.
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
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.
the exercise of
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:
(i) 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
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
respect of overseas shareholders,
fractional entitlements or otherwise howsoever);
laws of any
territory or
the
in
(ii) the allotment of equity securities to holders of any
options under any share option scheme of the
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AIM Stock Code: WEB
Company for the time being in force, on the exercise
by them of any such options; and
(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.
As Ordinary Resolutions
6 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:
(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.
7 That the Report of the Remuneration Committee be
received and adopted.
By order of the Board
Nigel Caine
Company Secretary
27 November 2019
Registered Office: Viking House
Nelson Street, Douglas
Isle of Man, IM1 2AH
47
Webis Holdings plc
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,
Link 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).
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.
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
close of business on 21 December 2019 shall be entitled
to attend and vote at the meeting. Changes to the register
after close of business on 21 December 2019 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.
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AIM Stock Code: WEB
48
Webis Holdings plc
Nominated Adviser and Broker
Beaumont Cornish Limited
10th Floor
30 Crown Place
London
EC2A 4EB
Legal Advisors
Long & Humphrey
The Old Courthouse
Athol Street
Douglas
Isle of Man
IM1 1LD
UK Registrar
Link Asset Services
The Registry, 34 Beckenham Road
Beckenham
Kent
BR3 4TU
Corporate Website
www.webisholdingsplc.com
Twitter
@WebisHoldings
Company Information
Directors
Denham Eke
Non-Executive Chairman
Ed Comins
Managing Director
Nigel Caine
Non-Executive Director
Sir James Mellon
Non-Executive Director
Company Secretary
Nigel Caine
Registered Office
Viking House
Nelson Street
Douglas, Isle of Man
IM1 2AH
Bankers
NedBank Private Wealth Ltd
St Mary’s Court
20 Hill Street
Douglas
Isle of Man
IM1 1EU
Auditors
KPMG Audit LLC
Chartered Accountants
Heritage Court
41 Athol Street
Douglas, Isle of Man
IM99 1HN
www.webisholdingsplc.com
AIM Stock Code: WEB
49
Webis Holdings plc
Webis Holdings plc
Viking House, Nelson Street
Douglas, Isle of Man
IM1 2AH, British Isles
Email: ir@webisholdingsplc.com
Website: www.webisholdingsplc.com
www.webisholdingsplc.com
AIM Stock Code: WEB
50