2nd Apr 2015 14:50
LADBROKES PLC
Annual Financial Report
The following documents are today being posted or otherwise made available to shareholders of Ladbrokes plc (the "Company"):
1) Annual Report and Accounts 2014;
2) Notice of the 2015 Annual General Meeting; and
3) Proxy form for the 2015 Annual General Meeting.
This follows the release on 26 February 2015 of the Company's preliminary results announcement for the year ended 31 December 2014.
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 2014 and Notice of the 2015 Annual General Meeting are also available on the Company's website at www.ladbrokesplc.com/investors.
Attached to this announcement in the appendices is additional information for the purposes of compliance with the Disclosure and Transparency Rules which has been extracted from the Annual Report and Accounts 2014 and the page numbers in the text refer to the page numbers in that document.
Adrian Bushnell
Company Secretary
APPENDIX A
PRINCIPAL RISKS
The following information is set out on pages 35 to 37 of the Annual Report and Accounts 2014.
The risks outlined here are those principal risks that are material to the Group. 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, changes in consumer leisure spend and international expansion.
- Financial - availability of debt financing and costs of borrowing, taxation and pension fund liability.
Specific risks that are material to Ladbrokes 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 and additional costs might be incurred in order to comply with any new laws or regulations. | Regulatory, legislative and fiscal developments in key markets are monitored closely, allowing Ladbrokes to assess and adapt quickly to changes in the environment and minimise risks to the business. Ladbrokes 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 has entered into a voluntary code of practice and has established a Social Responsibility Committee. | Regulatory Leadership | Increased |
Increased cost of product | |||
Ladbrokes is subject to certain financing arrangements intended to support industries from which it profits. Examples are the horseracing and the voluntary greyhound racing levies which respectively support the British horseracing and greyhound industries. In addition, Ladbrokes enters into contracts for the distribution of television pictures, audio and other data that are broadcast into Ladbrokes' betting shops. A number of these are under negotiation at any one time. | Ladbrokes engages with the relevant trade associations and the principal bodies of sport and event industries with regard to sports rights payments, including the statutory horseracing levy, animal welfare and other issues. | Digital capability and Retail Excellence | Remains unaltered |
OPERATIONAL AND BOOKMAKING | |||
Trading, liability management and pricing | |||
Ladbrokes 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' core expertise is risk 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' gross win percentage has remained fairly constant. | Pricing, Trading and Liability Management | Remains unaltered |
Loss of key locations | |||
Ladbrokes has a number of key sites, in particular Imperial House at Rayners Lane in London, its head office and main operations centre, its premises at Europort in Gibraltar from where online betting and gaming operations are based, and in Tel Aviv, Israel from where our Digital marketing operates. | Existing business continuity plans and arrangements for offsite data storage, alternate system availability and remote working for key operational and senior management continue to be developed and refined as part of an ongoing review process. | All | Remains unaltered |
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 are all constantly reviewed and updated to marry business needs with best practice. An increasingly important part is being played by formal, biannual Talent Management and Succession Plan reviews.
Ladbrokes undertook its latest Colleague Engagement Survey in 2014 and will implement action plans throughout 2015/16 to address areas for improvement.
A process is under way to identify a successor for the Chief Executive following the announcement on succession planning. The search will evaluate both internal and external candidates. | All | Increased |
INFORMATION TECHNOLOGY AND COMMUNICATIONS | |||
Technology failure | |||
Ladbrokes' 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. | Ladbrokes has a level of resilience in place which seeks to eliminate single points of failure within key technology locations. | Digital capability and Retail Excellence | Remains unaltered |
Data management | |||
Ladbrokes process sensitive 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 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 and the loss of the goodwill of its customers and 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.
An independent review was undertaken on our cyber resilience and supporting our approach, a steering group has been formed to drive through changes to ensure we have sufficient maturity. | Digital capability, Retail Excellence, Customer and Brand | Increased |
Technology changes | |||
The market for online and mobile gambling products and services is characterised by technological developments, new product and service introductions and evolving industry standards. Failure by Ladbrokes to use leading technologies effectively, develop its technological expertise, enhance its products and services and improve the performance, features and reliability of its technology and advanced information systems, could have a material adverse effect on its competitive position. | Ladbrokes has invested and committed considerable resources into upgrading its existing technology, IT infrastructure, communication systems and application systems, as well as developing and acquiring new platforms. Rigorous testing regimes are utilised to ensure that a continued high quality of product offerings and services are maintained. | Retail Excellence, Digital Capability, Pricing, Trading, Liability Management, Customer and Brand | Decreased |
Failure in the supply chain | |||
Ladbrokes 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' 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. The ongoing review of business continuity plans includes key supplier alternatives and the introduction of a new SRM platform. | Retail Excellence, Digital Capability, Pricing, Trading, Liability Management, Customer and Brand | Remains unaltered |
MARKETPLACE | |||
Competition | |||
Ladbrokes 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 faces competition from market participants who benefit from greater liquidity as a result of accepting bets and wagers from jurisdictions in which Ladbrokes chooses not to operate (because of legal reasons or otherwise). | Ladbrokes' 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. | Digital Capability and Retail Excellence | Remains unaltered |
APPENDIX B
STATEMENT OF DIRECTORS' RESPONSIBILITY
The following statement is extracted from page 71 of the Annual Report and Accounts 2014:
Each of the directors, whose names and functions are listed in pages 42 to 43 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 32 on pages 116 to 118 of the Annual Report and Accounts 2014:
The consolidated financial statements include the financial statements of Ladbrokes plc and its subsidiaries. The companies listed below are those which were part of the Group at 31 December 2014 and which, in the opinion of the directors principally affected the Group's reported results for the year:
% equity interest | |||
Country of incorporation | 2014 | 2013 | |
Betting and Gaming | 100.0 | 100.0 | |
Ladbrokes Betting & Gaming Limited | United Kingdom | 100.0 | 100.0 |
Ladbroke (Ireland) Limited | Ireland | 100.0 | 100.0 |
Ladbrokes Leisure (Ireland) Limited | Ireland | 100.0 | 100.0 |
Ladbrokes International plc | Gibraltar | 100.0 | 100.0 |
Ladbrokes Sportsbook Limited Partnership | Gibraltar | 100.0 | 100.0 |
Tiercé Ladbroke SA(1) | Belgium | 100.0 | 100.0 |
Ladbrokes Israel Limited(1) | Israel | ||
| |||
Central services | |||
Ladbrokes Group Finance plc(1) | United Kingdom | 100.0 | 100.0 |
(1) Directly owned by Ladbrokes plc.
Providing a full list of related undertakings in this note would lead to a disclosure of excessive length. In accordance with Section 410(3) of the Companies Act 2006, a full list of the subsidiary and other related undertakings will be annexed to the next annual return of Ladbrokes PLC to be filed with the Registrar of Companies.
The Group will be exempting the following companies from an audit under section 479A of the Companies Act 2006, all of which are fully consolidated in these financial statements:
- Birchgree Limited
- Ladbroke Course Limited
- Ladbroke Dormant Holding Company Limited
- Ladbroke Entertainments Limited
- Ladbrokes Group Holdings Limited
- Ladbrokes Investments Holdings Limited
- Ladbroke Racing (Reading) Limited
- Ladbroke Racing (South East) Limited
- Ladbroke Racing (Yorkshire) Limited
- Maple Court Investments Limited
- Westbury Racing Limited
- Ladbrokes Contact Centre Limited
- Ladbroke Group
The following table provides details of the Group's joint venture:
% equity interest | ||||
Principal place of business | Country of incorporation | 2014 | 2013 | |
Sportium Apuestas Deportivas SA | Spain | Spain | 50.0 | 50.0 |
The following table provides details of the Group's associates:
% equity interest | ||||
Principal place of business | Country of incorporation | 2014 | 2013 | |
Satellite Information Services (Holdings) Limited | United Kingdom | United Kingdom | 23.4 | 23.4 |
Asia Gaming Technologies Limited | Hong Kong | Hong Kong | 49.0 | 49.0 |
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:
2014 £m | 2013 £m | |
Equity investment - Joint venture(1) |
4.1 |
3.1 |
Loans - Movement in loan balance with joint venture partner - Movement in loan balance with joint venture |
(1.6) - |
(1.5) 0.1 |
Dividends received - Associates(2) |
1.2 |
2.3 |
Sundry expenditure - Associates(3) |
51.0 |
44.3 |
(1) Equity investment in Sportium Apuestas Deportivas SA.
(2) Dividend received from Satellite Information Services (Holdings) Limited.
(3) Payments in the normal course of business made to Satellite Information Services (Holdings) Limited.
Details of related party outstanding balances
2014 £m | 2013 £m | |
Loan balances outstanding - Joint venture partner - Joint venture |
- 0.5 |
1.6 0.5 |
Other receivables outstanding - Associates - Joint venture |
1.4 1.2 |
1.8 - |
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 2014 are unsecured and settlement occurs in cash. For the year ended 31 December 2014, the Group has not raised any provision (2013: £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 Committee. Further information about the remuneration of individual directors, which totalled £1.8 million (2013: £7.3 million), is provided in the audited part of the Directors' Remuneration Report on pages 52 to 69.
2014 £m | 2013 £m | |
Short-term employee benefits Post-employment benefits Termination benefits Share-based payments | 3.1 0.5 0.2 2.4 | 4.6 0.4 0.3 3.2 |
Total compensation paid to key management personnel | 6.2 | 8.5 |
Directors' interests in the employee share incentive plan and employee share trust are disclosed within the Directors' remuneration report.
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