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Annual Report & Accounts 2016 - Chief Executive's review
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07 12% I am pleased to report that the Group delivered a strong financial performance in 2016. Pro forma numbers are provided as, in the Board's opinion, they give a more useful comparative of the underlying performance of the Group. Pro forma NGR for the year ended 31 December 2016 rose 9% to €894.6m, with the growth in constant currency registering 12%. Approximately 69% of NGR was derived from markets either regulated (including those in the process of regulating) and/or locally taxed. Clean EBITDA on a pro forma basis was €205.7m, an increase of 26% on the €163.2m achieved in 2015. This represented a strong improvement in the Clean EBITDA margin to 23% from 20%, with acquisition synergies and organic revenue growth helping to mitigate increased regulatory costs. A statutory loss before tax of €138.6m reflects one-off costs in the year of €117.8m, largely related to the acquisition of bwin.party, finance expense of €65.3m and depreciation and amortisation charges of €136.5m. Many of these costs relate to the acquisition of bwin.party and are forecast to reduce in 2017 following the synergies attached to the acquisition and the attainment of a significantly cheaper financing arrangement entered into. A key driver of the business in 2016 was the performance of the bwin sports label across its core European markets. Whilst sports results were generally positive, this was just one component part of bwin's success in 2016. During the year the value of first time deposits across the acquired bwin sports labels rose 37%, while improved product and more effective cross sell saw games revenues from sports customers increase 26% on pro forma 2015. However, it wasn't just about bwin, with all core sports labels delivering growth in 2016. Also pleasing in 2016 was the performance of Games Labels. Although pro forma NGR from Games Labels for the full year declined to €203.5m from €211.8m (flat in constant currency), in the second half of 2016 we reversed this trend and returned it to growth. In H2 pro forma Games Labels NGR grew by 4% in constant currency. Historically, partypoker and partycasino were some of the most challenged parts of bwin.party. Between 2010 and 2015, NGR from these brands declined by over 60%. In part this reflected the structural challenge presented by the poker market, however, it is fair to say that product development lagged key competitors, whilst the business suffered from a lack of focus. In 2016, NGR from partypoker increased 14% in constant currency. This much improved performance was the result of a change in management, increased investment and a more focused approach. Kenneth Alexander Chief Executive 23 March 2017 Pro forma NGR grew by 12% on a constant currency basis in 2016. FINANCIAL HIGHLIGHTS Pro forma Change% Constant currency% Actual 2016 €m 2015 €m 2016 €m 2015 €m Sports wagers 4,553.6 4,389.7 4 7 4,331.3 1,683.0 Sports margin % 9.6% 8.5% 9.6% 9.2% Net Gaming Revenue 894.6 822.2 9 12 843.4 247.7 Revenue 873.2 807.9 8 11 823.3 246.5 Contribution 464.0 442.8 5 437.5 135.4 Contribution margin 52% 54% 52% 55% Clean EBITDA 205.7 163.2 26 193.5 54.1 Clean EBITDA margin 23% 20% 23% 22% Adjusted PBT 93.8 46.4 Statutory (loss)/profit before tax (138.6) 25.5 Adjusted fully diluted EPS cents 26 70 DPS cents 30 56 Numbers may not sum in financial tables and charts throughout this document due to the effect of rounding.