5th Apr 2017 15:19
LADBROKES CORAL GROUP PLC
Annual Financial Report
The following documents are today being posted or otherwise made available to shareholders of Ladbrokes Coral Group plc (the "Company"):
1) Annual Report and Accounts 2016;
2) Notice of the 2017 Annual General Meeting; and
3) Proxy Form for the 2017 Annual General Meeting.
This follows the release on 28 March 2017 of the Company's preliminary results announcement for the year ended 31 December 2016.
In accordance with Listing Rule 9.6.1, the documents have been submitted to the National Storage Mechanism and will shortly be available for viewing at www.Hemscott.com/nsm.do.
The Annual Report and Accounts 2016 and Notice of the 2017 Annual General Meeting are also available on the Company's website at www.ladbrokescoralplc.com/investors.
Attached to this announcement in the appendices is additional information for the purposes of compliance with the Disclosure Guidance and Transparency Rules which has been extracted from the Annual Report and Accounts 2016 and the page numbers in the text refer to the page numbers in that document.
Geoff Mason
Company Secretary
APPENDIX A
PRINCIPAL RISKS
The following information is set out on pages 38 to 40 of the Annual Report and Accounts 2016.
The risks outlined here are those principal risks that are material to the Group and assume existing controls are effective. The risks represent a snapshot and, as the environment we operate in is constantly evolving, new risks may arise, the potential impact of known risks may increase or decrease and our assessment of a risk may change. They do not include all those associated with Group activities and are not set out in any order of priority. Additional risks not presently known to management, or currently deemed less material, may also have an adverse effect on the business including:
- Marketplace and Operational - changes in the economic environment, the European Union, changes in consumer leisure spend and international expansion.
- Financial - availability of debt financing and costs of borrowing, taxation and pension fund liability.
The results of the EU referendum and the Brexit implications for risk within the Group were also considered and it was determined that a new principal risk covering this issue was not required. However, existing principal risk descriptions, likelihood and impact scores may be amended as a consequence of Brexit.
Specific risks that are material to Ladbrokes Coral are:
Risks | Mitigation | Relevance to strategy | Change in risk to the business |
BETTING AND GAMING INDUSTRY | |||
Taxes, laws, regulations and licensing, regulatory compliance | |||
Regulatory, legislative and fiscal regimes for betting and gaming in key markets around the world can change, sometimes at short notice. Such changes could benefit or have an adverse effect on Ladbrokes Coral and additional costs might be incurred in order to comply with any new laws or regulations in multiple jurisdictions. | Regulatory, legislative and fiscal developments in key markets are monitored closely, allowing Ladbrokes Coral to assess and adapt quickly to changes in the environment and minimise risks to the business. Ladbrokes Coral engages with its regulators and the relevant trade organisations with regard to the betting and gaming regulatory framework and other issues of shared concern, such as problem gambling. Ladbrokes Coral has entered into a voluntary code of practice and has a Social Responsibility Committee. | Online Growth/UK Retail /Pursuing International Opportunities | Increased |
Increased cost of product | |||
Ladbrokes Coral is subject to certain financing arrangements intended to support industries from which it profits. Examples are the horse racing and the voluntary greyhound racing levies which respectively support the British horse racing and greyhound industries. In addition, Ladbrokes Coral enters into contracts for the distribution of television pictures, audio and other data that are broadcast into Ladbrokes' and Coral's betting shops. A number of these are under negotiation at any one time. | Ladbrokes Coral engages with the relevant trade associations and the principal bodies of sport and event industries with regard to sports rights payments, including the statutory horse racing levy, animal welfare and other issues. | UK Retail/Online Growth | Increased |
OPERATIONAL AND BOOKMAKING | |||
Trading, liability management and pricing | |||
Ladbrokes Coral may experience significant losses as a result of a failure to determine accurately the odds in relation to any particular event and/or any failure of its risk management processes. | Ladbrokes Coral core expertise is trading liability management and it has developed the skills and systems to be able to offer a wide range of betting opportunities and accept large bets. There is in place a highly experienced trading team and risks are spread across a wide range of events. A bookmaker's odds are determined so as to provide an average return to the bookmaker over a large number of events and therefore, over the long-term, Ladbrokes Coral's gross win percentage has remained fairly constant. | UK Retail/Online Growth/Delivering synergies | Remains unaltered |
Loss of key locations | |||
Ladbrokes Coral has a number of key sites, in particular in Greater London in Rayners Lane and Stratford and the head office in Victoria; its premises at Europort and Regal House in Gibraltar from where online betting and gaming operations are based; in Tel Aviv, Israel and Manilla, Philippines from where our Digital marketing operates; and our operations in Australia, Italy, Eire and Manilla. | Existing business continuity plans and arrangements for off-site data storage, alternative system availability and remote working for key operational and senior management and, as a consequence of the merger, will be the subject of a detailed review. | Online Growth/UK Retail | Increased |
Recruitment and retention of key employees and succession planning | |||
Our people are our greatest asset. We aim to be an employer of choice for talented and passionate people and we need a high level of competence across the business to meet our objectives and respond to changing market needs. | Performance Management, Development, Reward and Recognition systems and, as part of the merger, we are aligning terms and conditions wherever appropriate. | UK Retail/Online Growth/Delivering synergies | Increased |
Failure to integrate | |||
Integration takes longer, the level of synergy savings reduces and the cost of delivering the synergies increases. Difficulties experienced during integration or challenges to realising synergies could potentially result in interruption to business operations, loss of customers, suppliers or key personnel; which could have a material adverse effect on the business, results of operations or financial health of the newly merged company. | Prior to the merger, a governance committee (Steering Integration Committee) was established and chaired by the then CEO of Gala Coral Group. The main objectives of this committee were to plan, as far as possible, pre merger, all integration activities and to ensure that adequate resource and timelines for integration were fully understood. This committee remains in operation and meets fortnightly. | Delivering synergies | New |
INFORMATION TECHNOLOGY AND COMMUNICATIONS | |||
Technology failure | |||
Ladbrokes Coral operations are highly dependent on technology and advanced information systems and there is a risk that such technology or systems could fail. In particular, any damage to, or failure of online systems and servers, electronic point-of-sale systems and electronic display systems could result in interruptions to financial controls and customer service systems. The Group's technology function is undertaking a significant programme of complex work through the merger. | Ladbrokes Coral has a level of resilience in place which seeks to eliminate single points of failure within key technology locations. | Online Growth/UK Retail/Delivering synergies | Increased |
Data management | |||
Ladbrokes Coral processes personal customer data (including name, address, age, bank details and betting and gaming history) as part of its business and therefore must comply with strict data protection and privacy laws in all jurisdictions in which the Group operates. Ladbrokes Coral is exposed to the risk that this data could be wrongfully appropriated, lost or disclosed, or processed in breach of data protection regulation. This could also result in prosecutions including potential financial penalties and the loss of the goodwill of its customers and could deter new customers. | Security systems are deployed to protect transactional data. Sophisticated hardware and security mechanisms are used to ensure all sensitive and confidential data is fully encrypted.
To provide fail-safe integrity of all data, a series of storage systems are used to replicate all data processed by online services. In respect of fraud protection, an extensive programme of data monitoring is in place with both prevention and detection audit controls.
A cyber security programme is in place supporting our ongoing approach to assessing the threats and improving our security maturity. | Online Growth/UK Retail/Delivering synergies | Remains unaltered |
Failure in the supply chain | |||
Ladbrokes Coral is dependent on a number of third parties for the operation of its business. The withdrawal or removal from the market of one or more of these major third-party suppliers, or failure of third-party suppliers to comply with contractual obligations could adversely affect Ladbrokes Coral operations. | Infrastructure suppliers, network and telecommunication suppliers and application service providers are long-term partners in providing an infrastructure which seeks to ensure the delivery of sophisticated and high performance transaction processing systems. There is continual communication with these suppliers and providers at an operating level and service level agreements have been established to maintain high service levels. | Online Growth/UK Retail | Remains unaltered |
MARKETPLACE | |||
Competition | |||
Ladbrokes Coral faces competition primarily from other land-based bookmakers, online betting exchanges and other online gambling operators. In particular, the online gambling market is characterised by intense and substantial competition and by relatively low barriers to entry for new participants. In addition, Ladbrokes Coral faces competition from market participants who benefit from greater liquidity as a result of accepting bets and wagers from jurisdictions in which Ladbrokes Coral chooses not to operate (because of legal reasons or otherwise). | Ladbrokes Coral's performance and competitive position are continuously monitored and, where appropriate, changes are instituted, including in relation to marketing, product development, yield management, cost control and investment. Acquisition opportunities, with a view to taking advantage of market consolidation, are continuously evaluated. | UK Retail/Online Growth | Remains unaltered |
Health and Safety | |||
Failure to meet the requirements of the various domestic and international rules and regulations could expose the Company (and individual employees and directors) to material civil/criminal action with the associated financial and reputational consequences. | Ladbrokes Coral has numerous policies and procedures in place and introduced an updated Group health and safety policy in 2016. As a consequence of the merger, a review of policies and procedures is in progress to align both organisations taking existing best practice from either business and/or the wider market and rolling these out consistently. | UK Retail | Increased |
APPENDIX B
STATEMENT OF DIRECTORS' RESPONSIBILITY
The following statement is extracted from page 91 of the Annual Report and Accounts 2016:
Each of the directors, whose names and functions are listed in pages 6 and 7 of this Annual Report confirm that, to the best of their knowledge:
- the consolidated financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and
- the Strategic report and Directors' report contained in the Annual Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
APPENDIX C
RELATED PARTY DISCLOSURES
The following is set out in Note 36 on pages 147 and 148 of the Annual Report and Accounts 2016:
Other than its associates and joint venture, the related parties of the Group are the executive directors, non-executive directors and members of the Executive Committee of the Group.
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and its associates and joint venture and other related parties are disclosed below.
Trading transactions
During the year, Group companies entered into the following transactions with related parties who are not members of the Group:
2016 £m | 2015 £m | |
Equity investment - Joint venture(1) - Associates(2) |
1.2 1.0 |
2.8 -
|
Loans - Movement in loan balance with joint venture partner - Movement in loan balance with joint venture |
1.0 _ |
- 0.1 |
Dividends received - Associates(3) |
4.7 |
- |
Sundry expenditure - Associates(4) |
60.5 |
52.1 |
(1) Equity investment in Sportium Apuestas Deportivas SA.
(2) Equity investment in Asia Gaming Technologies.
(3) Dividend received from Satellite Information Services (Holdings) Limited.
(4) Payments in the normal course of business made to Satellite Information Services (Holdings) Limited.
Details of related party outstanding balances
2016 £m | 2015 £m | |
Loan balances outstanding - Joint venture |
1.6 |
0.6 |
Other receivables outstanding - Associates - Joint venture |
(2.6) 1.8 |
(1.6) 1.6 |
Terms and conditions of transactions with related parties
Sales to, and purchases from, related parties are made at market prices and in the ordinary course of business. Outstanding balances at 31 December 2016 are unsecured and settlement occurs in cash. For the year ended 31 December 2016, the Group has not raised any provision (2015: £nil) for doubtful debts relating to amounts owed by related parties as the payment history has been good. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.
Compensation of key management personnel of the Group
The remuneration of key management personnel is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures. Key management personnel comprise executive directors, non-executive directors and members of the Executive management team. Further information about the remuneration of individual directors, which totalled £2.3 million (2015: £2.1 million), is provided in the audited part of the Directors' remuneration report on pages 64 to 86.
2016 £m | 2015 £m | |
Short-term employee benefits Post-employment benefits Termination benefits Share-based payments | 3.1 0.6 0.2 0.6 | 2.9 0.6 1.4 2.6 |
Total compensation paid to key management personnel | 4.5 | 7.5 |
Directors' interests in the employee share incentive plan and employee share trust are disclosed within the Directors' remuneration report.
Related Shares:
Ladbrokes Coral