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Annual Report & Accounts 2013 - CHAIRMAN'S STATEMENT
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2013 saw a step-change in GVC, its size, its complexity, but more importantly its profitability, cash generation, and the dividends paid to shareholders following the acquisition of Sportingbet PLC on 19 March 2013. The Group is now generating over €1.2 billion a year in sports wagers, and total revenues in the first quarter of 2014 exceeded €50 million, an average of more than €556k per day (2013: €394k). At the date of this statement, GVC's market capitalisation is now over £240 million, and between 2009 and 2013 the Group has paid to its shareholders £51.8 million in dividends and is already ranked as one of the highest yielding dividend payers on AIM (Source: Dividends on AIM - March 2014 by Allenby Capital). Cash generation and its conversion into dividends is a key part of GVC's strategy, and the Board is pleased to announce today a final dividend for 2013 of 11.5 €cents. In addition, the Board is proposing a special dividend of 4.5 €cents, reflecting results ahead of recently upgraded market expectations for 2013. The payment of the 16 €cents dividend is proposed for 19 May 2014 but is dependent on the shareholder vote at the Annual General Meeting to be held in the Isle of Man on 14 May 2014. Thus the total dividend declared for the year will be 48.5 €cents, an increase of 120% on the prior year (2012: 22.0 €cents). GVC undertook its acquisition of Sportingbet to: mitigate the earn-out payments arising from the November 2011 Superbahis transaction with Sportingbet; acquire market-leading software; and acquire customers in over 20 additional markets. GVC has a proven track record of executing acquisitions and now GVC has the platform, scale and infrastructure to pursue further transactions, along with being able to utilise economies of scale to further drive organic growth. GVC significantly restructured Sportingbet and its balance sheet, which not only had a deficit in working capital of €50 million at acquisition, but also, was substantially loss-making and cash-burning. In the nine and half months since acquisition, a financial turnaround has been achieved resulting in a Clean EBITDA for Sportingbet of €4.7 million with €3.8 million being generated in Q4-2013 alone. The acquisition and the subsequent restructuring costs were largely financed through the issue of an additional 29 million shares to existing Sportingbet shareholders at a "roll-over" price per share of £2.48; and from William Hill plc a contribution of £36.5 million along with a long-term loan of £6.9 million. GVC's strategy is to increase shareholder returns through a combination of: generating high levels of cash and distributing this by way of dividends; increasing the markets in which the Group trades to diversify geographic risk; and improving the quality of the Group's earnings through acquisitions and joint ventures. In the next 12 months, the Group will seek to: accelerate its penetration in Brazil, the host nation of the FIFA World Cup; drive further synergies from the Sportingbet acquisition; improve the product offering, particularly mobile; continue growing the many markets in which GVC operates; and devote more executive time to nondilutive investment and acquisition opportunities. Current trading (Q1 2014) is at record levels, with sports wagers averaging €3.8 million per day, a sports margin of 10.1% and an average Net Gaming Revenue ("NGR") increasing by 41% to €556k per day compared to €394k in 2013, and up by 6.3% on Q4-2013 (€523k). The Board is therefore confident of meeting current market expectations for the 2014 financial year as underpinned by our proposed 16 €cents dividend. Lee Feldman Chairman and Non-Executive Director 8 April 2014 GVC HOLDINGS PLC ANNUAL REPORT 2013 5 CHAIRMAN'S STATEMENT BUSINESS REVIEW