GVC.L Regulatory News (GVC)

5 March 2019

GVC Holdings PLC

("GVC" or the "Group")

Final results for the year ended 31 December 2018

Global scale and market diversification delivering very strong online growth in all key territories

GVC Holdings PLC (LSE: GVC), the global sports-betting and gaming Group, is pleased to announce its results for the year ended 31 December 2018.

Financial highlights (proforma basis2)

· Proforma Group NGR up 9% at £3,571.4m

· Proforma Group revenue up 8% at £3,523.6m

· Proforma Group underlying EBITDA4 up 13% at £755.3m

· Proforma Group underlying operating profit5 up 19% at £610.1m

Financial highlights (reported basis1)

· Reported Group NGR up 265% at £2,979.5m

· Reported Group underlying EBITDA4 up 203% at £640.8m

· Reported Group loss after tax of £56.4m after charging £434.2m (£453.5m pre-tax) of separately disclosed items of which £322.5m relates to the non-cash amortisation of acquired intangibles

· Adjusted diluted EPS6 of 76.3p up 75%

· Second interim dividend of 16.0p per share taking the full year dividend to 32.0p, an increase of 7% y-o-y

· Adjusted net debt at 31 December 2018 of £1,896.6m (2.5x underlying proforma EBITDA)

Operational highlights (proforma basis2)

· Very strong growth in Online with market share gains in all key territories; NGR up 19% (+21% in constant currency ("cc")3); Sports brands NGR +20% (+22% cc3) and Games brands NGR+16% (+16% cc3)

· UK Retail like-for-like7 NGR -3%; OTC trends in-line with expectations, Machines returned to growth in H2

· European Retail NGR +16% (+14% cc3) with growth in all territories

· Integration of the Ladbrokes Coral business progressing well; on track to deliver £130m cost synergies and £30m capex synergies. Playtech agreement gives greater flexibility

· US: Business well placed for growth; appointment of key roles

Current Trading2 (Period 1 January 2019 to 24 February 2019)

·  Strong current trading. Group NGR +11% with Online NGR +22%.

Kenneth Alexander (CEO) said:

"The Group's full year results reflect a very strong performance with proforma net gaming revenue 9% ahead of last year and proforma underlying EBITDA 13% ahead. 2018 was a transformational year for the Group with the completion of the Ladbrokes Coral acquisition in March making the Group the largest online-led sports-betting and gaming operator in the world. Excellent operational execution, effective marketing and a good World Cup helped both the legacy GVC and the acquired Ladbrokes Coral businesses perform ahead of expectations and materially ahead of the market, delivering market share gains in all our major territories.

The GVC operating model leverages the Group's leading proprietary technology and product development capability, applying central marketing expertise alongside local operational execution. This model is proving highly effective. Combined with the benefit of being a truly global scale operator, together with the opportunities provided by the integration of Ladbrokes Coral and our joint-venture in the US with MGM Resorts, the Board is confident the Group is well-placed to absorb the impact of the Triennial Review and associated tax increases in 2019, and deliver strong EBITDA growth in future years."

Notes

(1) 2018 and 2017 reported results are audited and reflect the acquisition of the Ladbrokes Coral Group plc on 28 March 2018

(2) The Group's proforma results are unaudited and presented as if the current Group, post the acquisition of Ladbrokes Coral Group plc, had existed since 1 Jan 2017. As such, it excludes the results of the Turkish business which was discontinued during 2017 and the 360 shops that the Ladbrokes Coral Group plc was required to divest on the merger of Ladbrokes PLC and the Coral Group. The results of Crystalbet and Neds are included from the dates of acquisition (11 April 2018 and 28 November 2018 respectively) and the results of Kalixa are excluded from the date of disposal (31 May 2017)

(3) Growth on a constant currency basis is calculated by translating both current and prior year performance at the 2018 exchange rates

(4) Stated pre separately disclosed items and shared based payments

(5) Stated pre separately disclosed items

(6) Adjusted for the impact of separately disclosed items, foreign exchange movements on financial indebtedness and gains on derivative financial instruments (see note 25 in the year end financial statements)

(7) UK Retail numbers are quoted on a LFL basis. During the year ended 31 December 2018 there was an average of 3,524 shops in the estate, compared to an average of 3,618 in the prior year

Presentation and live webcast

An analyst presentation will be held at 9:30am (GMT) at Buchanan Communication, 107 Cheapside, London EC2V 6DN. The presentation will be webcast live and will be available via the following link:

http://webcasting.buchanan.uk.com/broadcast/5c58566da0c50933d2711d23

Replays will be available on the GVC website.

Conference call

UK Toll: +44 3333000804 or UK Toll Free: 08003589473

PIN: 44657245 #

URL for international dial in numbers: http://events.arkadin.com/ev/docs/NE_W2_TF_Events_International_Access_List.pdf

Financial calendar

16 May 2019 Capital Markets Day

5 June 2019 AGM

Enquiries:

Forward-looking statements

This document contains certain statements that are forward-looking statements. They appear in a number of places throughout this document and include statements regarding our intentions, beliefs or current expectations and those of our officers, directors and employees concerning, amongst other things, results of our operations, financial condition, liquidity, prospects, growth, strategies and the business we operate. These forward-looking statements include all matters that are not historical facts. By their nature, these statements involve risks and uncertainties since future events and circumstances can cause results and developments to differ materially from those anticipated. Any such forward-looking statements reflect knowledge and information available at the date of preparation of this document. Other than in accordance with its legal or regulatory obligations (including under the Market Abuse Regulation (596/2014), the Listing Rules, the Disclosure Guidance and Transparency Rules and the Prospectus Rules), the Company undertakes no obligation to update or revise any such forward-looking statements. Nothing in this document should be construed as a profit forecast. The Company and its directors accept no liability to third parties in respect of this document save as would arise under English law.

About GVC Holdings PLC

GVC Holdings PLC is one of the world's largest sports-betting and gaming groups, operating both online and in the retail sector. The Group owns a comprehensive portfolio of established brands; Sports Brands include bwin, Coral, Crystalbet, Eurobet, Ladbrokes, Neds and Sportingbet; Games Brands include CasinoClub, Foxy Bingo, Gala, Gioco Digitale, partypoker and PartyCasino. The Group owns proprietary technology across all of its core product verticals and in addition to its B2C operations provides services to a number of third-party customers on a B2B basis. GVC acquired Ladbrokes Coral Group plc on 28 March 2018 and is now the UK's largest high street bookmaker, with over 3,400 betting shops. The Group has also entered into a joint-venture with MGM Resorts to capitalise on the sports-betting and gaming opportunity in the US. The Group, incorporated in the Isle of Man, is a constituent of the FTSE 100 index and has licences in more than 20 countries, across five continents.

For more information see the Group's website: www.gvc-plc.com 

LEI: 213800GNI3K45LQR8L28

CHIEF EXECUTIVE'S REVIEW

Overview

2018 was a transformational year, with the Group becoming the world's largest online-led sports-betting and gaming operator following the acquisition of the Ladbrokes Coral Group on 28 March 2018. The Group's global footprint was further enhanced by the announcement of a US joint venture with MGM Resorts on 30 July, and also the acquisitions of the Neds International online sports-betting business in Australia and a controlling interest in Crystalbet, one of Georgia's leading online sport-betting and gaming operators. The performance of both the legacy GVC and the acquired Ladbrokes Coral businesses was excellent with good momentum across all our major business units.

On a proforma basis Group NGR was 9% ahead of last year. Before the impact of separately disclosed items, Group underlying EBITDA was 13% ahead and Group underlying operating profit was up 19%. On a reported basis, Group underlying profit before tax was £434.6m (2017: £151.0m), and after charging separately disclosed items of £434.2m (2017: £158.8m), Group loss after tax was £56.4m (2017: £34.9m). Adjusted diluted EPS of 76.3p grew by 75%. The Group will pay a second interim dividend of 16p, taking the total 2018 dividend to 32p, an increase of 7% year-on-year. Going forward, the Group has committed to minimum annual dividend growth of 10%. Net debt at 31 December was £1,896.6m representing 2.5x net debt to proforma underlying EBITDA. After absorbing the expected EBITDA impact arising from the cut in B2 stakes to £2 in April 2019, leverage is expected to increase to 3.0x in 2019, after which the Group expects to de-lever by at least 0.5x in each subsequent year.

Online NGR was 19% ahead of last year with growth across all our main brands. The legacy GVC brands continued the strong growth reported throughout 2016 and 2017 driven by the ongoing turnaround of the bwin and partypoker brands. Performance in the Ladbrokes Coral UK online brands was particularly pleasing; Coral.co.uk continues to outperform the market while the growth rate in Ladbrokes.com is very encouraging. It is early days, but there is no doubt that a reinvigoration of the Ladbrokes brand provides a significant opportunity for the Group. The Group took market share in Australia, while the performance in Eurobet.it was also a real positive.

UK Retail NGR was 3% down on a like-for-like basis and 5% on a total basis. Like-for-like OTC wagers were 6% down, in-line with long term trends, and like-for-like OTC NGR was 7% behind. Like-for-like Machines NGR was marginally ahead with growth accelerating in Q4 following the roll-out of new machines cabinets to the Coral and Ladbrokes estates. The UK Retail business faces its biggest challenge with the imminent cut in B2 maximum stakes to £2 on 1 April 2019, which will result in a significant number of shop closures. The estimated adverse Group EBITDA impact of this change is expected to be £135m in 2019, reducing to £120m within 2 years of implementation. Detailed planning and robust mitigation strategies mean the transition to a smaller, right-sized and more sustainable estate can be achieved as smoothly as possible. The UK Retail estate remains a key contributor to UK online growth with customers able to sign-up in shop to Coral.co.uk and Ladbrokes.com through the Coral Connect and Ladbrokes Grid multi-channel offerings. Our commitment to UK Retail is demonstrated by ongoing investment in new machines units, new Self Service Betting Terminals ("SSBTs") and the EPOS2 shop till system, all of which help support the profitability of the business.

European Retail NGR was 16% ahead of last year driven by good volume growth, with OTC wagers 11% ahead. Performance was strong across all the divisions with Eurobet Italy NGR 18% ahead, Ladbrokes Belgium NGR 15% ahead and Ladbrokes Republic of Ireland NGR 10% ahead.

Integration

The integration of the Ladbrokes Coral Group is progressing well, managed by a team with a wealth of integration and platform migration experience. The integration plan is underpinned by three key principles: firstly, to ensure maximum efficiencies are achieved through both the delivery of cost savings and through sharing best practice operations across the legacy GVC and the acquired Ladbrokes Coral businesses. Secondly, to ensure ongoing growth in the business is not adversely impacted by any integration decisions, and finally, to minimise the impact of the integration on both our customers and our employees.

The Group announced that the Ladbrokes Coral deal would deliver cost synergies of at least £130m and capital expenditure synergies of at least £30m, to be fully delivered by 2022. Around a third of the synergies will be delivered in technology, with the majority being realised when the Ladbrokes and Coral UK online businesses migrate from existing third party technology platforms onto the GVC wholly owned technology platform. New product development will be a priority ahead of the migration, ensuring that growth in the businesses can continue unhindered. Following the announcement of an agreement with Playtech plc, we now have the flexibility to migrate the UK platforms at an earlier date than 2021, and we have commenced planning on this basis.

US joint-venture

The repeal of the Professional and Amateur Sports Protection Act (PASPA) by the US Supreme Court in May is potentially the biggest single development in sports-betting since online sports-betting in the UK became lawful over 20 years ago. The Group has entered into a joint-venture with MGM Resorts to offer online and retail sports-betting in states as they regulate. We believe the journey to the majority of US states being regulated will take between three and five years, and the immediate focus for the Group is ensuring the structure for a successful business is implemented. MGM's brand and market access, and GVC's technology and sports-betting experience is a powerful combination that will enable the joint venture to capitalise on this very significant opportunity and be a leading player in this new market.

Strategic Key enablers

Technology

Ownership of all elements of our technology platform is a significant competitive advantage. Our technology platform is highly flexible and enables us to release new products and features quickly and make rapid changes to the customer user-journey. Our scalable platform has the capacity to manage major increases in volume at minimal incremental cost. The technology platform serves the legacy GVC business very well and has been fundamental in enabling us to execute our operational delivery and grow the business. The migration of both the Ladbrokes Coral UK online businesses and our US joint venture's online operations onto the GVC technology will bring these benefits to the wider Group.

Brands and Marketing

The Group now operates 19 brands across multiple territories world-wide. Our brands are well established with high levels of customer recognition, helping consolidate our leading positions in the markets in which we operate. In particular our multi-channel sports brands (Eurobet, Ladbrokes, Coral) drive faster online growth through cost effective customer recruitment in our retail estates. 2018 saw the launch of new brand campaigns for our main sports-betting online brands ahead of the World Cup. These campaigns resonated well with customers and helped underpin the strong growth in these brands. The enlarged Group now has powerful marketing capability at its disposal, including Return-on-Investment driven analysis and real-time Customer Relationship Management tools. 2018 saw the start of the sharing of "best-of-both" marketing execution between the legacy GVC and Ladbrokes Coral businesses, and a real opportunity lies with the full deployment of this capability across the Group as the businesses come together.

Product

The Group has continued to deliver a strong pipeline of new product and features, helping ensure that the integration of the Ladbrokes Coral business does not come at the expense of business-as-usual operations. Our gaming offering contains the best of both in-house developed and third party content, helping deliver high levels of cross-sell from sports into gaming, while our leading live casino offering is evolving to focus on delivering a more market specific experience. Sports developments included the expansion of our "build-a-bet" offering across brands and improved "stream-and-bet" capability. The Group's ability to "develop once and deploy multiple times" will be further enhanced following the migration of the UK online businesses onto the Group's own technology platform.

People

Throughout every major acquisition, we have added to the quality and depth of our people, and that has continued with the acquisition of the Ladbrokes Coral Group. The enlarged Group has a management team with a depth and range of experience and capabilities that will enable the excellent operational performance of the business to continue, whilst ensuring the businesses are effectively integrated and our ability to engage in opportunities in new and existing markets is not compromised. As always, our people are key to our success.

Corporate Activity

In addition to the purchase of Ladbrokes Coral in 2018, the Group undertook a number of other acquisitions. Neds International was acquired in November for an initial consideration of £40m, strengthening our position in Australia, a fast growing market where scale is increasingly important. In April, the Group completed the acquisition of 51% of the Crystalbet Group in Georgia for £36m with an option to buy the remaining 49% in 2021. Post acquisition, the performance of the Crystalbet business has been exceptional, with GVC being able to provide a very strong local management team with additional product and support. The Group also acquired two small financial trading businesses during the year, helping deliver greater scale to the existing Intertrader business and broaden the Group's financials trading product range. These acquisitions demonstrate the Group's ability to identify acquisitions that are significantly value-enhancing, and we see further opportunities for value-add "bolt-on" acquisitions in both new and existing regulated territories.

Regulation

The Group operates across multiple territories and therefore faces into a range of regulatory opportunities and headwinds.

The biggest regulatory news in 2018 was the repeal of PASPA in the US, enabling individual US states to fully regulate both online and retail sports-betting for the first time. The US sports-betting opportunity is significant, and through our joint-venture with MGM Resorts we believe that we are in a very good position to capitalise.

Late in 2018, the Brazilian Parliament authorised the Brazilian Government to regulate both online and retail sports-betting, a process that is expected to take at least two years. A regulated and sensibly taxed Brazilian market represents another major opportunity for the Group.

The Dutch Parliament approved new online gambling regulation on 19 February 2019 - the law will open up the Dutch online gambling market to foreign operators subject to obtaining a local licence and paying a 29 per cent GGR tax. The law permits online sports-betting, casino and poker. First licences under the new regulation are currently expected to be awarded on 1 January 2021.

Also during the year, Spain reduced its online gambling tax rates from 25% to 20% of gross gaming revenue and the Swedish regulatory process concluded with the Group being one of the successful recipients of the new online sports-betting and gaming licences being issued on 1 January 2019.

In the UK, the cut in maximum B2 stakes to £2 will be implemented on 1 April 2019. The business has planned extensively for this material change and we are confident that we can smoothly transition to a smaller estate with a greater share of the market over a period of up to two years. On the same date, Remote Gaming Duty, which is applicable to online gaming gross gaming revenues, will increase from 15% to 21%.

Throughout 2018 the majority of states in Australia confirmed that they were implementing an online Point of Consumption tax applied to sports-betting gross gaming revenue. This tax was effective from 1 July 2017 in South Australia, 1 October 2018 in Queensland, and 1 January 2019 in Victoria, New South Wales, ACT and Western Australia. The blended rate for the Group is 11.5%. Despite this headwind, Australia remains an important, and profitable, territory for us, where we expect to continue to outperform the market.

The ban on foreign operators offering online sports-betting services in Switzerland became effective on 1 January 2019. Licences for online gaming operators will require a partnership with a land-based casino, and are not expected to be issued until the second half of the year at the earliest. Therefore the Group has withdrawn its brands from both the online sports-betting and online gaming markets.

In January 2018, the Group announced that it had received a tax audit assessment for €186.8m from the Greek Audit Centre for Large Enterprises in respect of 2010 and 2011. In the Directors' opinion, the assessment contained material errors, a view supported by expert tax advice, and was out of all proportion to the size of the Group's Greek business at the time. An appeal has been filed with the Administrative Court of Appeal in Athens and we expect our legal case regarding the 2010/11 tax years to be heard in the current year. The Directors remain highly confident that the Appeal Court will also find that the assessment is out of all proportion to the size of the Group's Greek business at the time. In order to enable the Group's subsidiary to trade normally whilst the appeal process takes place, the Group has entered into a payment scheme with the Greek tax authority whereby payments are held on account. The Group continues to pay the monthly instalments for the 2010 and 2011 assessment, and as at 31 December 2018, had paid £87.5m under this scheme. Of this amount, £41.4m has been recorded as a receivable on the balance sheet and the remainder expensed through the income statement (see below). In the event of a successful appeal, recovery of the debtor will be through either a repayment or an ability to offset other tax liabilities. During the fourth quarter of 2018, the Group made progress in understanding the Greek tax authorities' position on potential tax for years subsequent to 2011, through the ongoing tax audit work in respect of these years. The Greek tax authorities have requested, and the Group has provided, a significant amount of information. The nature of these enquiries from the tax authorities, refreshed external tax advice received by the Group, and our observations of the experience of other operators, have helped the Group understand better the approach being taken by the Greek tax authorities in relation to these years. As a result, the Group has recognised a charge of £186.8m, representing the Group's best estimate of the liability for all years from 2010 to 2017. To date £20.3m has been paid by the Group in relation to years subsequent to 2011. The statutory window in Greece for the tax authorities to conclude their audit work is generally six years from the end of the relevant tax year. As such, both the timing and the conclusions of the tax audits for 2012 to 2017, and any associated tax payments, remains uncertain.

In Italy, the new Government implemented legislation that prohibits all forms of promotion of sports-betting and gaming. The full restrictions come into place on 1 July 2019, and while this will undoubtedly impact overall market growth, we expect to capture online market share, by virtue of our 840-strong retail estate offering a well-established and effective multi-channel solution.

The direction of regulation on a global scale is making the GVC business model increasingly relevant. Scale, international diversification and proprietary technology are valuable assets as barriers to entry in many markets increase. The Group continues to leverage the benefits of its operating model, outgrowing the market while absorbing regulatory headwinds and exploiting regulatory opportunities.

Brexit

The UK and Gibraltar are scheduled to leave the EU on 29 March 2019 and the Group has identified a number of issues arising from Brexit. Firstly, for legal and regulatory reasons, the Group companies providing our gambling offering to customers in the EU need to be established and licensed in an EU member state. Secondly, under the regulations of some EU countries, the servers hosting our online gambling platform need to be located in an EU member state. 

In order to satisfy these requirements, the Group has implemented plans (or, where the timescale allows, has prepared detailed plans that are ready to implement) that involve operating those parts of our business which have customers in the EU under Malta online gambling licenses, and locating servers hosting our online gambling platform in the Republic of Ireland. Our online businesses will continue to be headquartered in Gibraltar and these plans will not have a significant impact on the number of our employees in Gibraltar.

Finally, the Group has made practical contingency arrangements to help employees who live in Spain but work in Gibraltar should there be a significant increase in delays crossing Gibraltar's border with Spain after Brexit. 

Safer Gambling and CSR

The transformation of GVC over the past three years into a global leader in sports-betting and gaming, with over 25,000 employees, has brought with it a commensurate expansion in the requirements of the business to be a leader in the area of corporate social responsibility.

In order to provide the necessary oversight and leadership we established a Board level Corporate Social Responsibility Committee, chaired by Virginia McDowell. We also appointed a Head of CSR, to coordinate our approach with stakeholders across the business and a new Director of Responsible Gambling to help us realise our ambition to be the safest and most trusted operator in the world.

In October 2018, we unveiled our new CSR strategy "Fair Play" which comprises three principal pillars; Safer Gambling, Responsible Employer and Responsible Communities. Under each of these pillars we have rolled-out a number of policies including; a new Group-wide Code of Conduct; a new Diversity and Inclusion (D&I) strategy, with a three-year roadmap towards making us a more inclusive business; the relaunch of the Ladbrokes Coral Trust with major campaigns for The Bobby Moore Fund and Alzheimer's Research UK; a strategic three-year partnership with SportsAid and the establishment of a new GVC Community Fund launching in 2019, backed by an investment of £2m.

Arguably our most important CSR strategic pillar is Safer Gambling. We believe the key to establishing a safer environment for customers to enjoy the services we provide is by working constructively with both national regulators, including the UK Gambling Commission, and our industry peers. We have taken a leading role in cross-industry bodies including the Senet Group and the Remote Gaming Association (RGA), through which we agreed a pre-watershed 'whistle-to-whistle' ban on broadcast advertising around sport in the UK, effective from August 2019.

Through such dialogue, we have developed a comprehensive plan called "Changing for the Bettor", with the aim to lead the industry in minimising the potential for harm while maximising our collective understanding of the issues associated with problem gambling. The campaign is made-up of a number of key commitments, each backed by substantive initiatives. Highlights include; a five-year, multi-million pound research project with the Division on Addiction, a Harvard Medical School teaching hospital; the roll-out of youth-focused education programmes with GamCare and EPIC Risk Management; the introduction of improved player protection tools; a doubling of donations to organisations focused on research and education into problem gambling and its treatments; and improvements to our product design.

The vast majority of consumers enjoy the industry's products and services, but it is imperative that operators work with regulators and governments to provide a safe environment for all and one that encourages consumers to stay within a regulated arena.

At the end of 2018 we published the Group's first CSR Report which will be refreshed within the Group's forthcoming 2018 Annual Report. We are pleased to report that this increased focus on CSR initiatives has been recognised by two of the leading Environmental, Social, and Governance (ESG) indices. In September 2018 GVC was admitted to the Dow Jones Sustainability Index, while in January 2019 the Group joined the FTSE4Good Index. Both of these admissions followed extensive independent reviews of the Group's ESG policies and practices.

Current trading and outlook

For the period 1 January 2019 to 24 February 2019:

Trading in the period was strong. Group NGR was 11% ahead of the same period last year. Online NGR was 22% ahead, European Retail 9% ahead and UK Retail LFL NGR 2% behind. This represents an excellent start to the year, and at this early stage, the Board is confident of delivering EBITDA and operating profit in-line with expectations.

Financial Results and the use of Non-GAAP measures

The reported statutory results for the year ended 31 December 2018 reflect the acquisition of Ladbrokes Coral Group which took place at the close of business on 28 March 2018 and therefore include the results of the Ladbrokes Coral Group from that date only. As such, 2017 reflects the trading for GVC Holdings PLC only as this was prior to acquisition of the Ladbrokes Coral Group.

In order to aid the comparison of year-on-year results, the Directors have deemed it appropriate to provide and analyse proforma results for the combined Group as if it had existed from 1 Jan 2017. Given the changes in capital structure arising from the acquisition of the Ladbrokes Coral Group, the historical interest, tax and dividend charges are not deemed to be meaningful. As a result, proforma results have only been provided down to operating profit.

Proforma results exclude the results of the Turkish business which was discontinued during 2017 and the 360 shops that the Ladbrokes Coral Group was required to divest on the merger of Ladbrokes and Coral. As a result of IFRS 3 requirements to fair value acquired businesses, proforma depreciation and amortisation charges for the year ended 31 December 2017 and the first 3 months of 2018 may not be comparable with those arising post the acquisition. Therefore, the Directors believe that the provision of underlying EBITDA1 within the proforma and segmental information, is appropriate as it aids the comparability of "underlying" profit whilst the IFRS 3 impact on depreciation and amortisation annualises. Contribution, which represents gross profit less marketing cost, is a key measure used by the Group in assessing the Online business. Like-for-like is a measure used in UK Retail to measure performance of the shops that have been open in both 2017 and 2018. Both are industry-standard measures.

The tables below reconcile the reported results to the proforma information for FY 2018 and FY 2017, the latter of which was previously reported in Euros rather than the Group's new reporting currency which is GBP.

Notes

(1) Excludes the impact of separately disclosed items

(2) Represents the trading results for the Ladbrokes Coral Group plc for the period 1 January 2018 to 28 March 2018 pre separately disclosed items

(3) Includes a gross profit figure not previously reported

(4) Translated at a rate of GBP1.00:EUR1.13

(5) Excludes the results of the Turkish business included in the 2017 reported figures but now classified as discontinued

(6) Represents the trading results for the Ladbrokes Coral Group plc for the year ended 31 December 2017 pre separately disclosed items and excluding the 360 shops that the Ladbrokes Coral Group was required to sell as part of the merger of Ladbrokes PLC and the Coral Group

(7) Depreciation and amortisation previously reported included amortisation of acquired intangibles of €121.0m which are now classified separately within the income statement

BUSINESS REVIEW

The Group operates through five segments; Online, UK Retail, European Retail, Other and Corporate.

Group

Reported Results1:

Revenue increased by 272% to £2,935.2m and underlying EBITDA4 increased by 203% to £640.8m reflecting both the continued growth in the legacy GVC business and the impact of the nine months of trading for the Ladbrokes Coral business post acquisition. Underlying operating profit5 of £520.8m was 208% ahead of last year and operating profit post separately disclosed items of £67.3m was £71.7m ahead of 2017.

Proforma Results2:

Revenue of £3,523.6m was 8% ahead of last year driven by a strong performance in Online and European Retail. The World Cup contributed £64.1m of NGR pre-substitution. Operating costs were 2% lower driven by good cost control, the delivery of synergies from the merger of Ladbrokes and Coral and shop closures in UK Retail, resulting in underlying EBITDA4 increasing by 13% to £755.3m. Share based payments were 43% lower than last year helping underlying operating profit5 increase by 19% to £610.1m, with underlying operating profit5 margin improving from 15.6% to 17.1%.

Online

Reported Results1:

On a reported basis, revenue of £1,668.4m was 115% ahead of last year and underlying EBITDA4 of £443.4m was 87% ahead reflecting continued growth in the legacy GVC business and the reporting period containing nine months of trading of the Ladbrokes Coral Group post acquisition. Underlying operating profit5 of £371.1m was 80% ahead of 2017, and an operating loss post separately disclosed items of £132.4m was £230.2m lower than last year.

Proforma Results2:

Online growth was very strong with NGR 19% ahead (cc +21%) driven by good underlying growth in all material markets and also by a positive World Cup. Underlying EBITDA4 of £485.7m was 19% ahead and underlying operating profit of £401.2m was 21% ahead.

Sports brands NGR was 20% ahead (cc +22%) of last year with sports brands sports NGR 17% ahead (cc +19%). Sports wagers were 13% up (cc +14%) and sports gross win margin of 10.5% was 0.4pp ahead of last year.

Legacy GVC sports brands NGR was 27% ahead with strong growth across all major territories including Germany, Italy and Brazil, benefiting from new sports product, a strong pipeline of new games, high levels of cross-sell and a successful World Cup. The bwin "Who Stole The Cup" World Cup marketing campaign featuring Maradona drove high levels of customer engagement into the second half of the year. The acquired Crystalbet business performed very well with NGR 61% ahead of last year, contributing 6.6pp to legacy GVC sports brands NGR growth.

The acquired Ladbrokes Coral sports brands also performed well with NGR up 15%. In the UK, Coral.co.uk continued its strong performance with NGR up 16% helped by leading real-time CRM capability. Growth in Ladbrokes.com of 12% (H2 +17%) was particularly pleasing as the brand started to benefit from the corrective action taken by management in the prior year, including the application of a more Return-on-Investment driven marketing approach. New brand marketing for both Coral "The Smart Money's on Coral" and Ladbrokes "Bettors of Britain", launched ahead of the World Cup, helped drive volumes in the second half of the year.

In Australia, Ladbrokes.com.au NGR was 17% ahead of last year on a constant currency basis, and continued to take market share. Sports wagers were 20% up, partly offset by sports gross win margin of 10.7% which was 0.5pp behind. The acquisition of the Neds online sports-betting business in November gives the Australian business additional scale, the ability to run a dual brand strategy and access to leading technology and people.

In Italy, Eurobet.it NGR was 20% ahead with sports wagers up 11% and sports margins up 0.2pp. The Eurobet business enters 2019 ready to take market share, leveraging the Eurobet Retail multi-channel offering, ahead of the marketing restrictions that come into place in the second half of the year.

Overall sports brands gaming NGR was 25% ahead, with growth driven by new slots content, improved cross-sell, an expanded live casino offering and improved user-journeys.

Games brands NGR was 16% ahead, driven by partypoker NGR growth of 40%, Gala brands NGR growth of 11% and GVC casino brands NGR growth of 14%. Partypoker continues to benefit from the investment in live-events, pooled liquidity in France and Spain and ongoing user-experience enhancements. Improved customer journeys and bonus optimisation, combined with the high profile sponsorship of "The Chase" underpinned the strong growth in the Gala brands, while targeted new gaming content and more personalised customer experiences were key in delivering growth in the GVC casino brands. The Foxy bingo brand migrated to the proprietary bingo platform in November, and post-migration performance has been positive.

Contribution margin of 42.6% was down 2.2pp, driven by increased taxes in the UK (POCT applied to gaming gross gaming revenue from October 2017) and Australian POCT (Queensland and South Australia), the recording in cost of sales of some payment processing costs that were previously recorded in operating costs prior to the disposal of Kalixa, and increased marketing investment in Q4.

Operating costs were 6% higher than the prior year reflecting growth in the business, investment in IT and inclusion of Crystalbet costs, partially offset by the delivery of Ladbrokes Coral merger synergies.

Outlook:

The continued growth in the business demonstrates the effectiveness of the GVC online operating model - leveraging the Group's leading proprietary technology and product development capability, combined with central marketing expertise alongside local operational execution. As the integration of the Ladbrokes Coral business continues, the sharing of "best-of-both" operational practice will accelerate, alongside the pooling of both sports and gaming products across brands, starting with the deployment of the full Ladbrokes Coral and GVC gaming product ranges across all brands in the first half of 2019. With the good momentum in the business continuing into 2019, we are confident in our target of double-digit online NGR growth.

UK Retail

Reported Results1:

On a reported basis, revenue was £1,014.9m and underlying EBITDA4 was £193.4m reflecting the results for the nine months of trading of Ladbrokes Coral Group plc post acquisition. Underlying operating profit5 was £160.9m, and £110.4m after charging separately disclosed items.

Proforma Results2:

UK Retail like-for-like6 NGR was 3% behind last year and 5% behind on a total basis. Underlying EBITDA4 of £251.7m was 2% behind. A 27% reduction in underlying depreciation and amortisation as a result of an impairment in 2017 following the anticipated FOBT stakes restriction, helped drive underlying operating profit5 6% ahead at £211.2m.

OTC wagers were 8% behind last year and 6% behind on a like-for-like basis, in line with longer term trends, with the positive impacts of the World Cup and a full year of horse racing content offset by the negative impact of the prior year comparative period benefiting from wager-enhancing best-price guarantee offers. SSBT wagers continue to grow and now represent over 50% of football wagers.

OTC gross win margin of 17.9% was 0.3pp behind last year. Horse racing gross win margin was 0.4pp ahead of last year with a positive Cheltenham broadly offset by the well-backed Tiger Roll winning the Grand National. Football gross win margin was 1.8pp behind, with the benefit of a good World Cup offset by the bookmaker-friendly football results in Q4 2017.

Machines NGR was marginally ahead on a like-for-like6 basis and 1% behind on a total basis. Customer demand was undoubtedly adversely impacted by the negative coverage of FOBTs in the first half of the year. During the second half, new Equinox cabinets were rolled out across the estate. The new cabinets helped drive like-for-like6 Machines NGR 3% ahead in Q4. Importantly, the majority of this growth was driven by B3 content, which will not be impacted by the impending Triennial measures.

Our unique market-leading Connect and Grid multi-channel products are a core part of our Retail offering. Connect and Grid allow customers to sign-up online to Coral.co.uk and Ladbrokes.com, and seamlessly access their wallet across all products in-store and online. The Connect and Grid offerings are market leading and will be a major advantage in gaining market share post the B2 stakes restrictions in April.

During the year we invested over £20m in our new shop till system "EPOS2". The benefits of this new system are wide ranging, including a more efficient and easier to use back-office process, consistency across the Ladbrokes and Coral estates, and the capability to implement some powerful responsible gambling measures, such as facial recognition, that will make tracking player behaviour and identifying excluded players much easier. At the end of December the EPOS2 systems was live in over 80 shops, with the full roll out due to complete during 2019.

During the year we successfully trialled in-house developed SSBTs in 11 shops. This footprint will be increased over time, complimenting the existing BGT offering. Additionally, increased investment in new SSBT hardware will help ensure that revenue recapture from B2 players is maximised.

Contribution margin of 71.4% was 0.3pp lower than last year driven by a higher mix of machines NGR and also the recording of new revenue share based content costs in costs of sales.

Operating costs were 6% lower, driven by tight cost control, on-going shop closures and the delivery of synergies arising from the Ladbrokes Coral merger. During the year 95 shops were closed, and 3 shops were opened. At the end of the year there were 3,475 shops in the estate (2017: 3,567).

Outlook:

Following the conclusion of the Triennial Review into gaming machines stakes and prizes, the maximum stake on B2 content will be reduced to £2 on 1 April 2019. We anticipate that this will result in the closure of up to a thousand shops. Investment in new machines, new SSBTs and EPOS2, combined with the competitive advantage of our unique multi-channel offer, means the UK Retail business is in very good shape as it faces into the post Triennial world, and we are confident that both Ladbrokes and Coral will be market share winners.

European Retail

Reported Results1:

On a reported basis, revenue was £211.7m and underlying EBITDA4 was £49.1m reflecting the results for the nine months of trading of Ladbrokes Coral Group plc post acquisition. Underlying operating profit5 was £37.7m and was £30.7m after charging separately disclosed items.

Proforma Results2:

European Retail NGR of £278.8m was 16% ahead of last year (+14% cc). Underlying EBITDA4 of £65.4m was 35% ahead and underlying operating profit5 of £49.6m was 29% ahead.

OTC wagers were 11% ahead (+9% cc) driven by growth in Eurobet Italy where football wagers grew by 13%, the acquisition of 26 shops in Ladbrokes Belgium and the benefit of the World Cup. An OTC margin of 17.7% was 0.6pp ahead driven by football margins 1.6pp ahead. Other OTC growth of 18% (+16% cc) was primarily driven by growth in Virtual in Eurobet Italy and in Ladbrokes Belgium, where the legal framework for virtual betting was fully approved by the Belgium Government in May.

Contribution margin of 49.5% was 0.6pp lower than the prior year due to increased marketing investment in Italy ahead of advertising restrictions due to come into force in the second half of 2019. Operating costs were 1% higher with the increased costs from the enlarged estate in Ladbrokes Belgium largely offset by tight cost control.

As at 31 December 2018 there were a total of 1,677 outlets/shops. Italy 851 (2017: 845), Belgium shops 321, outlets 364 (2017: shops 299; outlets 244) and Ireland 141 (2017: 141).

Outlook:

In Italy, we will continue to invest in marketing in the first half of 2019 preceding the full advertising restrictions that will come in to place from July. Eurobet's brand visibility in the market, with over 850 Eurobet branded shops, and a leading multi-channel offering means we are very confident of gaining online market share post the advertising ban. In Belgium, we continue to look for opportunities to expand the estate through the acquisition of independent shops, the development of newsagent networks and through an increase in machines density.

Other

Reported Results1:

On a reported basis, NGR of £43.8m was 198% up on the prior year and underlying EBITDA4 of £2.3m was 138% up reflecting the sale of Kalixa in 2017 and the nine months of trading of Ladbrokes Coral post acquisition. Underlying operating profit5 of £6.8m was £12.8m ahead of 2017 and operating profit after charging separately disclosed items of £6.8m was £15.3m ahead.

Proforma Results2:

NGR of £53.1m was 6% behind last year due to the disposal of Kalixa in May 2017. Excluding Kalixa, NGR was 4% ahead, with growth in Intertrader financials (NGR +30%) partly offset by Telebet where NGR was 26% down. Underlying EBITDA4 of £3.1m was £3.4m ahead of last year and underlying operating profit5 of £7.6m was £5.4m ahead.

Corporate

Reported Results1:

On a reported basis, Corporate costs of £47.4m were 135% higher than last year, and after share based payments and depreciation and amortisation, were £55.7m, an increase of 80% reflecting the inclusion of Ladbrokes Coral results post acquisition. After charging separately disclosed items operating profit of £51.8m was £145.5m ahead of 2017.

Proforma Results2:

On a proforma basis Corporate costs of £50.6m increased by £5.3m. The rise was driven by a one-off credit arising in the prior year and increased staff bonus costs, due to strong performance of the Group, partly offset by the synergies arising from the merger of Ladbrokes and Coral and the subsequent GVC acquisition of Ladbrokes Coral. After the cost of share based payments and depreciation and amortisation, total corporate costs were £59.5m, an increase of £0.3m driven by reduced share based payments following the vesting of a number of legacy schemes in 2017.

Notes

(1) 2018 and 2017 reported results reflect the acquisition of the Ladbrokes Coral Group plc on 28 March 2018

(2) The Group's proforma results are unaudited and presented as if the current Group, post the acquisition of Ladbrokes Coral Group plc, had existed since 1 January 2017. As such, it excludes the results of the Turkish business which was discontinued during 2017 and the 360 shops that the Ladbrokes Coral Group plc was required to divest on the merger of Ladbrokes PLC and the Coral Group. The results of Crystalbet and Neds are included from the dates of acquisition (11 April 2018 and 28 November 2018 respectively) and the results of Kalixa are excluded from the date of disposal (31 May 2017)

(3) Growth on a constant currency basis is calculated by translating both current and prior year performance at the 2018 exchange rates

(4) Stated pre separately disclosed items and shared based payments

(5) Stated pre separately disclosed items

(6) UK Retail numbers are quoted on a LFL basis. During the year ended 31 December 2018 there was an average of 3,524 shops in the estate, compared to an average of 3,618 in the prior year

(7) Statutory administrative costs represent marketing, operating costs, share based payments and depreciation and amortisation

CHIEF FINANCIAL OFFICER'S REVIEW

NGR and Revenue

Group reported NGR was 265% ahead and revenue was 272% ahead due the inclusion of nine months of trading of Ladbrokes Coral Group plc post acquisition in the current year. Group proforma NGR was 9% ahead and revenue was 8% ahead. Further details are provided in the Business Review section.

Underlying operating profit5

Group reported underlying operating profit5 was £520.8m (2017: £169.2m) as a result of underlying EBITDA4 of £640.8m (2017: £211.3m), £10.7m of share based payments costs (2017: £15.5m), £117.7m of underlying depreciation and amortisation (2017: £26.7m) and £8.4m of JV income (2017: £0.1m). This growth is driven by the inclusion of nine months of trading of Ladbrokes Coral Group plc post acquisition in the current year and the continued growth of the legacy GVC businesses.

Group proforma underlying operating profit5 of £610.1m was £96.0m or 19% ahead of prior year which was driven by underlying EBITDA4 growth of £88.8m, savings in share based payment costs of £9.0m, increase in JV income of £2.9m, offset by an increase in depreciation and amortisation of £4.7m.

Financing costs

Net finance costs of £86.2m includes £63.9m of interest payable (2017: £19.3m) and £81.7m (2017: £nil) of foreign exchange losses on financing facilities partly offset by £58.3m (2017: £nil) of gains on derivative financial instruments, which are intended to hedge a proportion of the Group's foreign exchange exposure, and £1.1m (2017: £1.1m) of interest receivable.

The increase in interest payable of £44.6m is driven by the new financing facilities taken as part of the acquisition of the Ladbrokes Coral Group. Whilst the Group has experienced £81.7m of foreign exchange losses on its debt facilities during the year, £58.3m of this has been mitigated through gains in financial derivatives that were taken out to hedge the exposure to the US dollar. The Group is left with residual GBP/Euro foreign exchange risk in its financing facilities, however, this is largely offset by the net asset position on the Group's European subsidiaries.

Separately disclosed items

Items separately disclosed before tax for the year ended 31 December amount to a £453.5m charge (2017: £173.6m) and relate primarily to the amortisation of acquired intangibles, costs associated with Greek Tax assessments (see note 17), costs associated with the acquisition of the Ladbrokes Coral Group and other smaller acquisitions, and impairment of UK Retail shop assets following the decision by the UK Government to bring the £2 FOBT stakes restriction forward to 1 April 2019. This has been partially offset by a £192.5m credit reflecting the net release of contingent consideration provisions, primarily relating to the Contingent Value Right ("CVR"), which was extinguished following the enactment of legislation on the £2 FOBT stakes restriction. The table below summarises the items recorded for both 2018 and 2017:

Profit before tax

Profit before tax and separately disclosed items was £434.6m (2017: £151.0m) reflecting the year-on-year growth in the business and the acquisition of the Ladbrokes Coral Group and other smaller acquisitions. After charging separately disclosed items, the Group recorded a pre-tax loss of £18.9m (2017: £22.6m).

Taxation

The tax charge for the year ended 31 December was £37.5m (2017: £1.7m credit) reflecting a £56.8m charge on underlying trading (2017: £16.2m) and a £19.3m credit on separately disclosed items (2017: £17.9m credit). The underlying tax charge reflects a 13% effective tax rate.

Dividends

A second interim dividend of 16.0p per share was declared, taking the total 2018 dividend to 32.0p, an increase of 7% on the prior year.

Cashflow

The Group generated a net cash inflow of £154.4m (2017: £45.3m outflow). During the period, which contains the results and cashflows of Ladbrokes Coral post acquisition, the Group generated underlying EBITDA4 of £640.8m (2017: £211.3m), incurred £214.2m (2017: £33.1m) of capital investment costs, including the investment in the US joint venture, and had a working capital outflow of £24.8m (2017: £14.1m inflow). The working capital outflow in the year is primarily as a result of timing differences caused by the acquisition of the Ladbrokes Coral business. The Group also paid £55.5m in interest (2017: £37.0m), £43.5m in corporate taxes (2017: £13.1m) and £1.1m in finance lease repayments (2017: £nil) resulting in a free cash inflow of £301.7m (2017: £142.2m).

The Group paid £218.7m (2017: £27.6m) in relation to items that have been separately disclosed in the period. These payments relate to £108.8m of Greek Tax payments (see note 17) and £109.9m of payments primarily consisting of fees associated with the acquisition of Ladbrokes Coral and Crystalbet, costs relating to the integration of the businesses post the Ladbrokes Coral acquisition and payments against onerous leases. The net cash cost of the acquisitions in the year (net of cash within acquired businesses) amounted to £522.6m (2017:£32.3m), the majority of which related to Ladbrokes Coral (see note 16). The Group raised £1,398.0m of new debt to fund the acquisitions and repaid £660.2m of the existing Ladbrokes Coral debt. £32.0m of fees were incurred in raising the new debt and £4.7m of debt repayments have been made since the acquisition. During the prior year the Group made a net repayment of debt of £76.2m.

During the year the Group also raised £26.2m from the issue of share capital (2017: £41.5m) and received £9.4m (2017: £nil) in dividends from associates. Cash dividends of £142.7m (2017: £120.0m) were paid in the period including £1.4m to non-controlling interest and £2.5m in dividend credits on options.

Net debt and liquidity

As at 31 December 2018, accounting net debt was £1,813.5m and adjusted net debt was £1,896.6m, representing a net debt to proforma underlying EBITDA ratio of 2.5x.

Dividend timetable

Going Concern

Having assessed the financial forecasts of the business, the principal risks and other matters discussed in connection with the long-term viability statement, the Directors consider it appropriate to adopt the going concern basis of accounting in preparing the financial statements as the Company will generate sufficient cash to meet its ongoing obligations for at least 12 months from the date of signing the financial statements.

Notes

(1) 2018 and 2017 reported results reflect the acquisition of the Ladbrokes Coral Group plc on 28 March 2018

(2) The Group's proforma results are unaudited and presented as if the current Group, post the acquisition of Ladbrokes Coral Group plc, had existed since 1 January 2017. As such, it excludes the results of the Turkish business which was discontinued during 2017 and the 360 shops that the Ladbrokes Coral Group plc was required to divest on the merger of Ladbrokes PLC and the Coral Group. The results of Crystalbet and Neds are included from the date of acquisition (11 April 2018 and 28 November 2018 respectively) and the results of Kalixa are excluded from the date of disposal (31 May 2017)

(3) Growth on a constant currency basis is calculated by translating both current and prior year performance at the 2018 exchange rates

(4) Stated pre separately disclosed items and shared based payments

(5) Stated pre separately disclosed items

Principal risks

Key risks are reviewed by the executive directors, other senior executives and the Board of GVC Holdings Plc on a regular basis and where appropriate, actions are taken to mitigate the key risks that are identified. The Board has overall responsibility for risk management as an integral part of strategic planning.

The principal risks and uncertainties which could impact the Group are detailed in the Group's Annual Report and Accounts 2018 and are as follows:

Data breach and cyber security

The Group processes 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. The Group is exposed to the risk that this data could be wrongfully obtained through either a cyber-attack or a breach in data security. This could result in prosecutions including financial penalties and the loss of the goodwill of its customers.

Technology failure

The Groups 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.

Taxes, laws, regulations, licensing and 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 the Group and additional costs might be incurred in order to comply with any new laws or regulations in multiple jurisdictions.

Imposition of additional gaming or other indirect taxes

Revenues earned from customers located in a particular jurisdiction may give rise to further taxes in that jurisdiction. If additional taxes are levied, this may have a material adverse effect on the amount of tax payable by the Group.

Further taxes may include corporate income tax, value added tax (VAT) or other indirect taxes. Group companies may be subject to VAT or similar taxes on transactions, which have previously been treated as exempt.

The multi-location of the Group may lead to higher corporate income tax from transfer pricing adjustments.

Increased cost of product

The Group is subject to certain arrangements intended to support industries in which it operates. Examples are the horseracing and the voluntary greyhound racing levies, which respectively support the British horseracing and greyhound industries. In addition, the Group enters into contracts for the distribution of television pictures, audio and other data that are broadcast across the various routes to market. A number of these are under negotiation at any one time.

Trading, liability management and pricing

The Group 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 sports risk management processes.

Health and Safety

Failure to meet the requirements of the various domestic and international rules and regulations could expose the company (and individual employees and directors) to material civil/criminal action with the associated financial and reputational consequences.

Synergy delivery/failure to integrate

Challenges or difficulties to realising synergies/operational integration from the Ladbrokes Coral acquisition could potentially result in interruption to business operations, loss of customers and staff and influence the relationship with key suppliers. The failure to achieve the cost synergies would have a material impact on the financial performance of the Group.

Loss of key locations

Whilst the Group operates out of a number of geographical locations, there are a number of key sites which are critical to the day to day operations of the Group, including our offices in Central London, Gibraltar, Vienna, Hyderabad, Australia, Italy, Manilla and the Philippines. Disruption in any of these locations could have an impact on operations.

Recruitment and retention of key employees

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.

CONSOLIDATED INCOME STATEMENT

Memo

(1) The calculation of underlying earnings per share has been adjusted for separately disclosed items, and for the removal of foreign exchange volatility arising on financial instruments as it provides a better understanding of the underlying performance of the Group. See note 10 for further details.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED BALANCE SHEET