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Annual Report & Accounts 2015 - REPORT OF THE CHIEF EXECUTIVE
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i am pleased to say the Group delivered on all its objectives in 2015, producing a record Clean eBitDa and culminating in the positive vote by shareholders in both GvC and bwin.party for the acquisition of bwin.party which completed on 1 february 2016. GvC has a strong track record of integrating challenging acquisitions and driving through synergies. the acquisition of sportingbet in 2013 led to Clean eBitDa in 2015 three times higher than the GvC result in 2012 and turned sportingbet from being profoundly loss-making into a significant profit contributor to the Group. Dividends during this time more than doubled from 22 €cents per share to 56 €cents last year. the culture of GvC is to create a dynamic and entrepreneurial working environment, within a professional infrastructure which is imperative given the markets we operate in. as a consequence, GvC has built a strong management team at all levels, alongside highly talented and motivated staff. it is relatively early days but i am delighted to say that bwin.party also has many managers and staff of exceptional calibre, and together we shall drive the enlarged group forward. our philosophy is about rewarding success and not failure; staff rewards are currently aligned to growth in 2016 nGr compared to 2015, whilst the long term incentive plan for senior management is aligned with the price at which shares were issued in relation to the bwin acquisition, £4.22, and total shareholder return, so option holders can only prosper if shareholders do so too. i have already evaluated the bwin, party Gaming, party Casino, Gioco Digitale and foxy Bingo brands and am encouraged by what i see - we have in the combined group a great portfolio of assets. there is undoubtedly great potential, but there is also much to be done. our challenges for 2016 and beyond are to: • Quickly assimilate, reorganise and re-energize bwin.party into the GvC group to drive cost synergies and revenue opportunities • increase the product quality to improve the customer experience • increase the sports margin % and cross-sell additional gaming products to our customers • focus marketing expenditure on areas where we can measure the roi and thus "finely-tune" the campaigns to maximise returns • fully leverage the substantial ip across the enlarged group in both B2C and B2B • review non-core assets and identify potential disposals • inject a cultural change to bwin.party to recognise financial performance as the success trigger for incentives. i am particularly excited by the growth potential of the enlarged Group, and remain confident that we can secure our target of €125 million synergies within a year, the full benefits of which will be seen in 2018. although we have only owned bwin.party since the 1st february, i have visited all the key operations and am very encouraged by what i have seen. we have already made progress in increasing the breadth and depth of management and executed a number of product improvements. it is too soon for these developments to have had a material impact, which makes the positive performance of the business in the first quarter of 2016 (see below), even more pleasing. i feel the positive start to 2016 reflects the fact that we acquired, in bwin.party, a business that had stabilised and was capable of returning to growth after some challenging years. nevertheless, as i commented above, there is still much to be done to derive the inherent value that we believe exists within the bwin businesses. Looking back at 2015, GvC delivered excellent operational and organic growth across the broad spread of markets in which the Group operates. the Board is pleased to report a significant increase in sports wagers driving an increase in Clean eBitDa. Due to the impact of €24.5m of exceptional items, of which €23.0m relate to the acquisition of bwin.party, operating profit is down year on year. this also impacts on profit before tax and earnings per share. Key financial metrics for GvC on a standalone basis are shown below: percentage 2015 2014 increase (€) (€) sports wagers 15% 1.7 billion 1.5 billion nGR 10% 248 million 225 million contribution 10% 135 million 123 million clean eBitDA 10% 54.1 million 49.2 million operating profit (35%) 27.7 million 42.9 million Profit before tax (38%) 25.5 million 41.3 million Basic ePs 40.2 €cents 66.4 €cents Dividends declared 56.0 €cents 55.5 €cents Totals may not sum due to rounding and percentages have been calculated on the underlying rather than the summarised figures. 10 GVC HOLDINGS PLC ANNUAL REPORT 2015 RePoRt oF the chieF eXecUtiVe