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Annual Report & Accounts 2016 - Chairman's Introduction
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03 We employ c2,800 people across 15 offices and four continents. Creating a Group-wide identity and culture based on common values has been an important part of the integration process. Our core values of collaboration, dynamism, ownership, recognition and transparency, reflect the culture of our business and what we believe is required to succeed in a highly competitive and rapidly evolving industry. It is a reflection of the progress made and the potential of GVC, that the Group has been able to attract a number of highly regarded professionals from across the gaming industry and beyond. This has enabled us to strengthen our business in a number of areas, the benefits of which have already begun to be experienced, but with much more to come. ...and financially The Group's financial performance during the year exceeded our original expectations both in terms of Net Gaming Revenue (NGR) and Clean EBITDA. Pro forma NGR increased 9% to €894.6m and by 12% in constant currency. Meanwhile, pro forma Clean EBITDA increased 26% to €205.7m, reflecting an increase in margin to 23% from 20%. Net debt as at 31 December 2016 was €131.5m, just 0.6x Clean EBITDA. We remain on target to secure €125m of synergies by the end of 2017 with the full impact being derived in 2018 in line with the timetable we set out at the time of the bwin.party acquisition. In addition to this, annual capital expenditure is expected to be approximately €20m lower per annum than the combined Group spent in 2015. The Group's progress is clearly reflected in the development of our financing structure. In October 2016, we secured a short term €250m loan facility from Nomura International plc (the "Nomura Loan"), which was used in part to fully retire the €400m loan provided by Cerberus Business Finance LLP. The Nomura Loan significantly lowered our finance costs. In February 2017, we launched our inaugural syndicated debt offer to great success. A €250m Senior Secured six year term loan (the "Term Loan") was significantly oversubscribed. This was used to pay down the Nomura Loan in full. In addition, we also secured a €70m Revolving Credit Facility ("RCF"). The new financing gives us both significant financing visibility and also access to a broad number of debt investors. Given the ongoing industry consolidation and GVC's proven track record of adding shareholder value through mergers and acquisitions this is an important development for the Group. The strong underlying performance of the business together with the favourable refinancing enabled the Group to declare a special dividend in November, which was subsequently increased by 49% in December to euro 14.9c per share. The dividend was settled in sterling at 12.5p per share and paid 14 February 2017. In addition, we have also declared a second special dividend of euro 15.1c, giving total declared dividends of euro 30c per share for the financial year ended 31 December 2016. For the 2017 financial year and beyond, we will pursue a progressive dividend policy, reflecting the growth in the business and aiming to return no less than 50% of free cash flow. In addition, the Board will also give consideration to returning future excess cash to shareholders. Excess cash will be determined by the capital requirements of the business, together with the trading outlook at the appropriate time. I would also like to take this opportunity to thank Richard Cooper, who retired as Group Finance Director and from the Board in February 2017. Richard joined the Group in 2008 and has been a major part of the Company's success over the past eight years. We wish him all the success in the future. I would also like to welcome aboard Paul Miles who joined us as Chief Financial Officer in February. Finally, as announced separately today, Will Whitehorn has been appointed to the Board as Senior Independent Non-executive Director. Will is a highly experienced business professional and is a significant appointment for the Group. He is the Deputy Chairman and Senior Independent Director of Stagecoach Group plc and is an Independent Non-executive Director of Purplebricks Group plc. This builds upon the strengthening of the Board in 2016 when Stephen Morana, Peter Isola and Norbert Teufelberger joined the Group. Through the combination of talented people, proprietary technology and strong brands, GVC is well placed to pursue the many opportunities and face the challenges presented by the dynamic industry in which we operate. GVC will be posting its Annual Report to shareholders the week commencing 1 May 2017 and it will be uploaded on our website (www.gvc-plc.com) from that date. The AGM will be held in Gibraltar and is scheduled for 20 June 2017. WE NOT ONLY ACHIEVED ALL OF OUR TARGETS, BUT IN MOST CASES WE EXCEEDED THEM. Lee Feldman Non-executive Chairman 23 March 2017 2016 was the most significant year in the Group's history. The acquisition of bwin.party was completed on 1 February 2016 and transformed GVC into one of the leading global businesses in the online gaming industry. Importantly, the purchase of bwin.party was consistent with our strategy; to deliver increased scale, further international diversity and enable us to leverage our proprietary technology and exceptional management team. In a competitive and rapidly evolving global regulatory environment, we believe this strategy leaves GVC well placed to continue to create shareholder value. In August, just six months after completing the bwin.party transaction, the Group was admitted to the Premium Segment of the Official List. A month later GVC became a constituent of the FTSE 250 index, having grown from a market value of less than £100m four years ago to over £2bn today. GVC is highly ambitious and focused on measurable delivery. Therefore, it is pleasing to report the Group achieved a strong operational and financial performance in 2016. A year of significant progress... operationally As a management team and a business we set ourselves a number of targets in 2016, and I'm pleased to be able to say that we not only achieved all of these targets but also in most cases exceeded them. The integration of bwin.party was a key focus of 2016 and whilst all such large scale transactions present challenges, the assimilation of the business has progressed positively and is ahead of our initial expectations. Our talented, hardworking team and the corporate culture we have fostered have been the key drivers for a smooth integration.