REG - Entain PLC - Final Results
09/03/2023 07:00
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RNS Number : 3677S Entain PLC 09 March 2023
9 March 2023
Entain plc
("Entain" or the "Group")
Continued strategic diversification driving sustainable growth
Strong Group performance with underlying EBITDA(1,3) up 13% at £993m
Entain plc (LSE: ENT), the global sports betting, gaming and interactive
entertainment Group, is pleased to announce its results for the year ended 31
December 2022.
Key Highlights:
· Group Net Gaming Revenue ("NGR") up +12% (+10%cc(2)) in the year
o Group NGR including 50% share of BetMGM up +18% (+15%cc(2)) representing a
three year compound growth of +11%cc(2)
· Online NGR down -1% (-2%cc(2)) in 2022, with positive underlying
momentum demonstrated across all key markets
o Underlying Online NGR growth of approximately +3%, excluding the
Netherlands and the impacts of regulatory changes in the UK
o Active customers grew by +7% as we continue to broaden our customer base
o Continued strategic progress driving 3 year compound growth of Online NGR
of +12% cc(2)
· Retail NGR up +66%(9) (+66%cc(,2,9)) reflecting lapping of Covid
comparators in the first half of the year as well as an improved customer
offer through betting and gaming terminals
· BetMGM continues to perform strongly and is on track to be EBITDA
positive in H2 2023
o 2022 NGR of $1.44bn up +71% year on year, ahead of expectations(6)
o 29%(8) share in iGaming and 18%(7,8) share in sports-betting and iGaming
in the markets where BetMGM operates
o 2023 net revenue from operations expected to be in the range of
$1.8bn-$2bn
· Continued growth strategy with further diversification across
regulated geographies and products
o Five transactions announced during 2022, including establishing Entain CEE
to unlock significant growth opportunities across the region
o Launch of unikrn in Brazil and Canada marks our first steps into the
esports and skill based wagering market
· Further progress on leadership of responsibility and
sustainability
o Only global operator with 100% revenue from regulated or regulating
markets
o Groundbreaking ARC™ player protection programme rolled out across 22
markets
o Entain and BetMGM led US online operators' commitment to the first
responsible gaming standards for the industry
o Awarded GamCare's Advanced Safer Gambling Standard, SBC's Global Socially
Responsible Operator of the Year for 2022 and numerous safer gambling awards
including from S&P and EGR
Financial Highlights:
· Strong financial performance with Group underlying EBITDA(1,3) up
+13% at £993m at the top of upgraded guidance range
o Online underlying EBITDA(1,3) down -8% at £828m reflecting strong prior
year Covid comparators and absorption of regulatory changes in major markets
o Retail underlying EBITDA(1,3) of £280m up +319% versus the prior year
· Group profit after tax(1) was £33m, down -88% versus 2021
· Adjusted diluted EPS(5) (pre FX and BetMGM) of 93.2p up +15%
· Second Interim Dividend of £50m (8.5p per share) announced,
bringing the total dividend for the year to £100m (17p per share)
· Successful refinancing of Term Loans with strong global demand
· Year end adjusted net debt of £2,750m with leverage at 2.8x (2.6x
on a proforma basis), reflecting a strong and flexible balance sheet to
support investment in our growth strategy
Jette Nygaard-Andersen, CEO of Entain, commented:
"We made excellent financial, operational and strategic progress during 2022,
and took significant strides towards our goal of being the global leader in
betting, gaming and interactive entertainment. I am particularly proud that
Entain leads our industry on responsible gaming and we are now the only global
operator exclusively in domestically regulated or regulating markets. It is a
mark of the strong progress we have made in executing our sustainable growth
strategy, and we continue to see a vast array of opportunities around the
world as we expand into the $170bn addressable market that we have
identified.
We have a business model that is truly diversified across more than 40
territories, a platform that gives us demonstrable competitive advantages, and
a total commitment to providing our ever-broadening customer base with a safe
environment in which to enjoy our products and services. These factors,
combined with the strong underlying momentum across our business, mean that we
continue to look to the future with confidence."
Group Reported(1)
Year ended 31 December 2022 2021 Change CC(2)
£m £m % %
Net gaming revenue (NGR) 4,348.9 3,886.3 12% 10%
Revenue 4,296.9 3,830.0 12% 11%
Gross profit 2,714.7 2,435.8 11%
Underlying EBITDAR(3) 1,008.5 898.8 12%
Underlying EBITDA(3) 993.2 881.7 13%
Underlying operating profit(4) 541.8 484.1 12%
Underlying profit before tax(4) 321.8 527.3
Profit after tax 32.9 275.6
Diluted EPS (p) 6.3 44.7
Continuing adjusted diluted EPS(5) (p) 60.5 53.8
Continuing adjusted diluted EPS excl US(5) (p) 93.2 81.1
Dividend per share (p) 17.0 -
Dividend
In line with the dividend policy announced with the H1 Results in August 2022,
the Board proposed a total dividend for 2022 of £100m. This is to be paid
to shareholders in equal instalments with H1 and FY results. As such, a
second interim dividend of £50m (8.5p share) will be paid to shareholders on
27 April 2023.
Outlook
The Group has delivered strong 2022 results, reflecting the diversity and
scale of the business, and the strength and competitive advantage of our
unique platform.
As we look to 2023, while we continue to face some regulatory headwinds, we
remain excited by the opportunities ahead. As we continue to deliver on our
strategy we will provide customers with even more innovative and engaging
moments of excitement, and drive further diversification through geographic
expansion, product development and a broader customer base. We have started
2023 with positive underlying momentum and we remain confident in our
long-term strategic prospects.
Notes
(1) 2022 and 2021 reported results are audited and relate to continuing
operations
(2) Growth on a constant currency basis is calculated by translating both
current and prior year performance at the 2022 exchange rates
(3) EBITDAR is defined as earnings before interest, tax, depreciation and
amortisation, rent and associated costs, share based payments and share of JV
income. EBITDA is defined as EBITDAR after charging rent and associated costs.
Both EBITDAR and EBITDA are stated pre-separately disclosed items
(4) Stated pre-separately disclosed items
(5) Adjusted for the impact of separately disclosed items, foreign
exchange movements on financial indebtedness and losses/gains on derivative
financial instruments (see note 6 in the financial statements. EPS is also
disclosed excluding BetMGM as this gives a better view of the EPS attributable
to the Entain trading businesses)
(6) BetMGM guidance on 2022 NGR of over $1.3bn, as stated at Business
Update on 19 January 2022
(7) BetMGM revenues comprise of sports (Online and Retail) and iGaming
revenues
(8) Three month period to December 2022, in markets in which BetMGM
operates, excluding AZ as yet to report
(9) Retail performance numbers are quoted on a LFL basis and also excludes
the post acquisition performance of shops in Croatia
Note: Retail operates in UK, Italy, Belgium, Croatia and Republic of Ireland.
During 2022, there was an average of 4,310 shops in the estate, compared to
an average of 4,540 in the same period last year.
Enquiries:
Investor-Relations - Entain plc investors@entaingroup.com (mailto:investors@entaingroup.com)
David Lloyd-Seed, Chief IR & Communications Officer david.lloyd-seed@entaingroup.com (mailto:david.lloyd-seed@entaingroup.com)
Davina Hobbs, Head of Investor Relations davina.hobbs@entaingroup.com (mailto:davina.hobbs@entaingroup.com)
Aimee Remey, VP US Investor Relations aimee.remey@entaingroup.com (mailto:aimee.remey@entaingroup.com)
Callum Sims, IR Manager callum.sims@entaingroup.co (mailto:callum.sims@entaingroup.com) m
Media - Entain plc media@entaingroup.com (mailto:media@entaingroup.com)
Lisa Attenborough, Head of Corporate Communications lisa.attenborough@entaingroup.com (mailto:lisa.attenborough@entaingroup.com)
Jay Dossetter, Head of Corporate PR jay.dossetter@entaingroup.com (mailto:jay.dossetter@entaingroup.com)
Jodie Hitch, PR Manager jodie.hitch@entaingroup.com (mailto:jodie.hitch@entaingroup.com)
Powerscourt Tel: +44 (0) 20 7250 1446
Rob Greening/Nick Hayns/Sam Austrums entain@powersco (mailto:entain@powerscourt-.com) urt-group.com
(mailto:entain@powerscourt-.com)
Presentation and webcast
The Full Year 2022 Results presentation for analysts and investors will be
held today, Thursday 9(th) March at 9:00am GMT.
Participants may join via webcast or by conference call dial in, approximately
15 minutes ahead of the event.
Live webcast link: https://kvgo.com/IJLO/Entain_2022-Full_Year_Results
(https://eur03.safelinks.protection.outlook.com/?url=https%3A%2F%2Fkvgo.com%2FIJLO%2FEntain_2022-Full_Year_Results&data=05%7C01%7CDavina.Hobbs%40entaingroup.com%7C8b49c2f6f17c4f55759c08db09bcc696%7C60c43c0a64ac4050bf3e31e1cdfffdeb%7C0%7C0%7C638114478656719612%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=koYg%2BVwfN6%2FHv9nEmXk9e9Fvp78chCbhqk8xVP2DVXk%3D&reserved=0)
To participate in the Q&A, please also connect via the conference call
dial in details:
UK +44 (0) 330 551 0200
US +1 786 697 3501
Access Code: Quote Entain when prompted by operator
The presentation slides will be available on our website shortly before the
event: https://entaingroup.com/investor-relations/results-centre/
(https://entaingroup.com/investor-relations/results-centre/)
A replay of the presentation and transcript will be available on our website:
https://entaingroup.com/investor-relations/results-centre/
(https://entaingroup.com/investor-relations/results-centre/)
Upcoming dates:
Q1 Trading Update: 18 April 2023
2023 Interim results: 10 August 2023
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 Entain plc
Entain plc (LSE: ENT) is a FTSE100 company and 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 BetCity, bwin, Coral, Crystalbet, Eurobet, Ladbrokes, Neds,
Sportingbet, Sports Interaction and SuperSport; Gaming brands include Foxy
Bingo, Gala, GiocoDigitale, Ninja Casino, Optibet, Partypoker and PartyCasino.
The Group owns proprietary technology across all its core product verticals
and in addition to its B2C operations provides services to a number of
third-party customers on a B2B basis.
The Group has a 50/50 joint venture, BetMGM, a leader in sports betting and
iGaming in the US. Entain provides the technology and capabilities which power
BetMGM as well as exclusive games and products, specially developed at its
in-house gaming studios. The Group is tax resident in the UK and is the only
global operator to exclusively operate in domestically regulated or regulating
markets operating in over 40 territories.
Entain is a leader in ESG, a member of FTSE4Good, the DJSI and is AA rated by
MSCI. The Group has set a science-based target, committing to be carbon net
zero by 2035 and through the Entain Foundation supports a variety of
initiatives, focusing on safer gambling, grassroots sport, diversity in
technology and community projects. For more information see the Group's
website: www.entaingroup.com (http://www.entaingroup.com)
LEI: 213800GNI3K45LQR8L28
CHIEF EXECUTIVE'S REVIEW
A differentiated leader in a global growth industry
Entain is a leading consumer-focussed business operating in a global industry
with attractive growth dynamics. The Group continues to make excellent
progress as a global leader in betting, gaming and interactive
entertainment. As the most diversified leader of scale with regulated market
growth embedded in the business, the Group delivers profitable and sustainable
returns for our stakeholders.
I am pleased to report that 2022 was another year of strong financial,
operational and strategic progress for the Group, despite facing some
headwinds. Alongside further growth in our revenues, the Group delivered
underlying EBITDA(1,6) up +13%, announced five transactions including
establishing Entain CEE ("Central & Eastern Europe") to unlock significant
growth opportunities across the region, and through unikrn launched a new
segment of skill based wagering for esports.
The dynamics of our global industry remain highly attractive with the powerful
combination of regulation, digitalisation and evolving customer behaviours
underpinning a total addressable market opportunity of approximately $170bn
over the medium term. Entain's position as a differentiated leader across
diverse and regulated markets enables us to maximise this growth opportunity
with the potential to treble the size of our business.
Our operations span over 40 regulated or regulating territories, with
established leading brands in each of our key markets. Group Net Gaming
Revenues ("NGR") for 2022 grew +15%cc(3) including our 50% share of BetMGM (up
+10%cc(3) excluding BetMGM). Our growth continues to be both diversified and
sustainable through our growing global footprint, expanding product offer and
broadening customer base. Our online business has 7% more active customers
than in 2021 achieving record levels during the final quarter.
We continue to set the standards for our industry on responsibility and
sustainability. Our ground-breaking approach to player protection through
our Advanced Responsibility and Care™ programme ("ARC(TM)") was rolled out
internationally to 22 markets during the year. Regulation is the cornerstone
of a sustainable business and we are proud that we lead the industry with 100%
of our revenue now coming from markets that are either domestically regulated
or in the process of regulating - setting a new benchmark for our industry.
Our commitment to this important agenda, elevating integrity within our
industry and doing the right thing sees us absorb responsible gambling
initiatives and impacts from changes in regulated and regulating markets.
This has been particularly evident in the UK with the implementation of
regulator enforced affordability checks, which created a headwind of
approximately 10% on UK Online revenues in 2022, with ongoing impacts expected
in 2023. We are tremendously proud of the leadership role we play in raising
the bar for our industry and our efforts continue to be recognised with
numerous awards as well as related index inclusions.
We have made excellent progress in 2022 across both our growth and
sustainability pillars, to drive greater diversification across our business
model, greater scale to leverage our capabilities as well as higher quality
and more sustainable earnings. These achievements are testament to the high
quality and talented teams we have across the Entain Group. I would like to
thank all of our teams across the globe for their dedication and their
commitment throughout the year that underpins this success.
Entain Platform powering growth
The Entain Platform continues to distinguish us as an operator of excellence;
providing a unique competitive advantage and supporting strategic execution
focused around the customer. Leveraging this powerful and unrivalled
platform enables Entain to optimise core growth and embrace new opportunities,
whilst focusing our customer centric approach across our business.
The Entain Platform is a unique and powerful combination that includes: our
in-house technology; leading global brand portfolio; market leading product
and content; CRM capabilities; marketing excellence; data analytics; industry
leading talent; player protection; innovation; and, regulatory and operational
expertise. It enables us to differentiate our offer, be flexible, responsive
and agile, driving significant competitive advantages. This unique
combination, operating at scale, creates a multiplier effect that helps drive
outperformance in each of the markets in which we operate.
As we grow in more markets around the world, we continue to evolve our
structures and processes to maximise the scale efficiencies and benefits of
the Entain Platform, while ensuring that we remain local and agile for our
customers in each of our markets. Our in-house technology platform is the
largest regulated platform in our industry supporting approximately £3bn of
Online NGR in 2022. As we look to migrate more of our operations onto one
core technology framework, fulfil our significant growth ambitions and broaden
our customer appeal in interactive entertainment we are constantly looking to
evolve our technology platform both through in-house development and by adding
further capabilities through small bolt-on acquisitions. This will not only
unlock further synergies and efficiencies, but will enable us to fully exploit
the flywheel effects of our business model.
Our strategy of leveraging and embracing the powerful advantages of the unique
Entain Platform to deliver on our core pillars of growth and sustainability is
clear. Entain is a truly differentiated business with customers at our
core. Our unwavering ambition to be the world leader in betting, gaming and
interactive entertainment and benefit from the sizeable growth opportunities
ahead of us will drive significant value creation for our stakeholders.
Our strategy for Growth
Entain is a business delivering sustainable and profitable growth. We
operate in a global industry with attractive dynamics embedded as regulation,
online migration and customer behaviours expand the markets available to us.
Today we operate in over 40 regulated or regulating territories with our
betting and gaming offering across both online and retail.
Our online operations have delivered a three year compound annual growth rate
of +12%cc(3), or +18%cc(3) including our share of BetMGM. Our Retail
operations are +66%(5) ahead of a lockdown impacted 2021 and customer volumes
in our two largest retail estates, the UK and Italy, are ahead of pre-Covid
levels.
Our growth strategy comprises four pillars which will continue to broaden our
reach, diversify our audiences, increase our scale and drive a strong
sustainable performance across the Group. These pillars are: leadership in
the US; grow our presence in existing markets; expand into new regulated
markets - both organically and via M&A; and extend into interactive
entertainment.
Leadership in the US
BetMGM is firmly established as a leading operator of sports betting and
iGaming in the US and Ontario, Canada. This success is built on the Entain
Platform comprising powerful scaled capabilities including in-house
technology, industry leading talent, data, analytics and MarTech, supported by
the brand strength of our joint venture partner. The North American market
is expected to be worth around $37bn (which includes Canada) over the long
term, and we are on track for our expected market share of 20-25% over the
long term.
Throughout 2022, we continued to build on early successes and BetMGM has gone
from strength to strength, delivering NGR of $1.44billion for the year, ahead
of expectations(4). In 2023, we expect that this will grow to $1.8bn -
$2.0bn in NGR.
Through the Entain Platform we expanded our BetMGM footprint, launching on day
one in six new online markets and opening four new retail sportsbooks. As at
the end of December 2022, we were live in 24 jurisdictions, with further
launches in Ohio and Massachusetts in early 2023, meaning we now have access
to approximately 48% of the adult US population.
In the three months to December 2022, our share of GGR (gross gaming revenue)
in the sports betting and iGaming markets in which we operate was 18% and 20%
excluding New York.
Our leadership in iGaming continues with a 29% market share. The unique range
of own and exclusive products provided through our platform and award winning
in-house studios continues to differentiate BetMGM's offer, drive customer
engagement and embed our competitive advantage as market leader. In sports
betting, we continue to build our position with a 12% share in GGR across
active markets, in spite of our increasing focus on NGR, discussed below. We
continue to make improvements to our offer with the revamp of BetMGM's
sportsbook app, updating the design, improving the user experience with
simpler and faster optionality and overall enabling easier navigation of the
end to end customer journey. As well as garnering positive feedback, ratings
by third party industry bodies have improved and have driven greater customer
engagement and retention. In Q4 2022, BetMGM's average monthly active gaming
customers were up +51% and up +61% for active sports-betting customers,
compared to Q4 2021.
Alongside our success in securing a market leadership position, we have also
maintained strong financial discipline. Supported by the significant embedded
margin advantage BetMGM enjoys through its parental structure, 2022 saw us
increase focus on building a sustainable and profitable business for the long
term. The prioritisation of NGR over GGR, through progressively strategic
bonus optimisation, has seen sports NGR margins double year on year in Q4.
More rigorous customer segmentation and player analytics, coupled with a
data-led approach to marketing, enables bonusing to be effective and
efficient. Key customer metrics of cost per acquisition (CPA) and first time
depositors (FTD) are ahead or inline with forecasts, which reaffirms
expectation of long-term CPA of approximately $250.
Having already achieved profitability in several states, we expect BetMGM to
be EBITDA positive in the second half of 2023 and a long term target EBITDA
margin of 30-35%. In summary, BetMGM remains firmly on track for its path to
profitability and has secured its position as a leader in the US
sports-betting and iGaming markets.
Grow presence in our existing markets
Entain's operations span over 40 regulated or regulating territories, with
established leading brands in many of our markets. Our existing markets are
expected to grow by approximately mid to high single digit over the medium
term, presenting a significant addressable market opportunity. We are well
positioned to benefit from this long growth runway with the Entain Platform
providing a differentiated competitive advantage.
The Entain Platform powers our brands to outperform their markets enabling our
Online business as a whole to grow at a compound annual growth rate over the
last three years of 12%, including acquisitions.
Excluding our share of BetMGM, full year Group NGR was up +12% (+10%cc(3))
year on year. Online NGR was -2%cc(3) lower year on year, behind our
initial expectations, as the business lapped strong Covid comparators and
faced regulatory headwinds, particularly in the UK as well as the required
closure of our Netherlands business ahead of new licencing. We estimate
regulatory changes, particularly affordability measures in the UK, created a
mid-single digit headwind in terms of Group NGR growth over the year. Having
fully lapped prior year Covid comparators by the end of Q3, we returned to
year on year Online NGR growth in Q4 of +8%cc(3), helped by the men's World
Cup.
We have continued to evolve our offering and appeal, creating moments of
excitement and entertainment for a broader, more recreational customer base.
This resulted in record active customer levels in the year, up +7% year on
year.
In the UK, we made further progress on our brand re-positioning strategy to
engage with a broader and more recreational audience. As a result online
actives were +13% higher year on year. Our Rocky and GalaLand advertising
campaigns, the Coral Racing Club and innovative Jockeycam, as well as
Ladbrokes Fanzone all drove increased customer engagement. Our award winning
Rocky campaign increased new visitors to our website by 75%. Ladbrokes
Fanzone has, since launch, seen over 90% of customer enrolled selecting a
Premier League team and unlocking personalised benefits such as boosted
markets and free 5-a-side bets. We further enhanced our customer offering
and user experience with new games, products and content, documentaries and
social channel engagement.
In Australia, our business continues to go from strength to strength with
excellent performances from both Ladbrokes and Neds. NGR was up +12%
(+8%cc(3)) versus 2021 despite lapping strong Covid comparators. By leveraging
our different brands as well as launching new and innovative products and
content, we continue to outperform the market and grow market share, with
active customers up +7% versus last year. During the year Ladbrokes' launch
of Mates Mode is resonating well with customers, enabling them to chat, share
and bet as a group. Neds continued to perform strongly, with its exclusive
partnership with the UFC delivering both engagement and branding, as well as
its eye catching and humorous 'Take it to the Ned's Level' advertising,
illustrating our unwavering focus on customer experience. We have also
collaborated with the Australian Hotels Associates (AHA) New South Wales in a
long term advertising and sponsorship agreement, providing Ladbrokes and Neds
the opportunity to reach new customers across AHA's 1,800 licenced venues.
Our business in Italy performed strongly again in 2022 despite lapping a year
heavily impacted by Covid. We continue to see the benefits of our
omni-channel offering with combined online and retail NGR up +22%cc(3) year on
year, with Online NGR growing at +26%cc(3) on a 3 year CAGR basis.
Our Brazilian business continues to perform well in this fast growing market.
Despite heightened competition ahead of regulation, NGR was up +20%cc(3)
year on year. Actives were up +25%, demonstrating the strength of our
Sportingbet brand, quality of offer and operational expertise. While
domestic regulation has been held up following the election of a new
Government, we look forward to a market post regulation with clear demand for
the high quality customer experiences and breadth of product offering which
Entain provides.
In Germany, whilst our gaming licenses were issued in late 2022, the German
market is only just starting to experience the emergence of a robust
regulatory regime, although there remains much for the regulator still to do.
As such, the German online betting and gaming market remained challenging
for compliant operators like us, whilst also seeing the introduction of
deposit limits for sports customers. We look forward to 2023 with optimism
and the expectation of greater regulatory oversight providing a more balanced
trading environment and a safe and entertaining experience for all customers.
Bwin is a leading brand across Germany (as well as in many of our other
global markets) underpinned by the quality of our products and offer as well
as great partnerships with the DFB and UEFA Europa League.
Enlabs in the Baltics delivered another strong year despite the challenging
economic environment in the region, with proforma(2) NGR up +5%cc(3) compared
to 2021. Entain's core products are now fully integrated in the customer
proposition, strengthening our product offering and helping to drive actives,
which are up +17% proforma(2) year on year. Ninja Casino launched in Sweden
in H2 and early results have been promising.
In Georgia, the Crystalbet brand remains the market leader and has responded
well to the new regulatory regime which came into effect at the start of 2022.
Our Party brands continue to perform in-line with expectations. We are
delighted our Party brands are now active in the newly regulated Ontario
market, alongside our bwin and BetMGM brands. We welcomed Ontario customers
to their first poker tournament series, the Ontario Poker Championships in
September. Party has continued with its renewed focus on the recreational
player's entertainment experience, with Partypoker Sports launching its first
free-to-play game, Football Full House. This correct score game enables
cross sell to customers with sport, casino and poker prizes available to
win.
In the Netherlands, having been required, along with all responsible
operators, to withdraw from the market by the regulator in Q4 2021, we are
pleased to have acquired BetCity which provides us with a strong platform to
drive further growth in this newly regulated market.
Our Retail operations have performed strongly during 2022, a year which was
largely uninterrupted by Covid related restrictions. On a like-for-like
basis, Retail NGR for 2022 was +66%(5) ahead of a lockdown impacted 2021 and
customer volumes in our two largest retail estates, the UK and Italy, are
ahead of pre Covid levels. This is clear evidence that our customers value
and enjoy the in-shop experience. The reinvigoration of our retail offering
leveraging digital touchpoints, our best in class betting and gaming terminals
combined with our shop colleagues' interaction provides customers in the UK
with an enjoyable and engaging experience whilst also broadening our audience
demographic.
Expand into new regulated markets
Regulation and evolving consumer needs and behaviours continue to prove to be
exciting growth drivers as we expand into the $170bn addressable market we
have identified for betting, gaming and interactive entertainment. We can
expand into these opportunities through organic or inorganic expansion as well
as developing an offer into new product verticals.
We have a strong track record of integration and value creation through
M&A - the acquisitions over the last four years (excluding SuperSport and
BetCity) will see us double their value and create approximately £900m of
value in the first three years of acquisition. This reflects the revenue and
cost synergies benefits as well as improved margins that we can generate as
these businesses benefit from the scale and efficiencies of the Entain
Platform. Many of these businesses have high quality in-house technology into
which we are able to plug products and capabilities to support synergy
delivery. As we evolve our technology platform we expect that many of the
businesses we have acquired will, over time, migrate more fully on to the
Entain Platform, providing further synergy benefits in years to come.
During the year we announced five acquisitions. In Canada we acquired Avid
Gaming which saw Sports Interaction join our bwin, Party and BetMGM brands
licensed to operate in Ontario. Sports Interaction provides access to the
highly attractive, fast growing and regulating sports betting and gaming
market across Canada, outside of the province of Ontario. The acquisition of
Klondaika in Latvia, and Totolotek in Poland, expanded and deepened our access
in these regulated markets where we provide a broader offering of engaging
products and services for customers in their respective markets.
Our acquisition of BetCity, announced in June, and completed in early January
2023, brought one of the Netherlands' leading operators in the newly regulated
online sports betting and gaming market into the Group. Since its licencing
in October 2021, BetCity has grown strongly, establishing a share of over 20%
of this attractive and fast-growing market.
In August 2022, we partnered with EMMA Capital, a leading investment firm in
the Central and Eastern European region to form Entain CEE as an innovative
approach to expansion into the CEE region. Entain CEE's first acquisition
was SuperSport, the leading gaming and sportsbook operator in Croatia.
SuperSport has both online and retail operations with its unrivalled brand
and proprietary technology solution delivering a c.50% share in the fully
regulated Croatian market.
The Group's portfolio of strong and globally recognised brands enables us to
expand into new markets organically where no clear M&A opportunity
provides a more attractive proposition. During the year, we launched bwin in
Zambia and Ninja in Sweden. New market entries via both M&A and organic
expansion, contributed to Online NGR during the year, with SuperSport also
generating retail revenue.
There continues to be significant growth opportunities in regulated markets
across the globe, and we continue to look for further opportunities where we
can drive incremental value for shareholders. There are at least 40 markets
where we do not currently operate today, including Central & Eastern
Europe, Latin America as well as Africa and potentially over time, parts of
Asia.
Extending into interactive entertainment
Technology continues to change consumer behaviours, creating new trends and
experiences, and opportunities for Entain to explore.
We listen to customers to better understand these trends to inform how we
adapt and innovate to capture growth across new audiences. Customers are
seeking more content, more engagement, more interactive and social
experiences, more video, more audio and more free to play entertainment.
Interactive entertainment and media are converging with our traditional
markets of betting and gaming. Entain sits at the heart of this convergence
and as such provides us with a unique strategic opportunity as we continue to
expand our product, offering and content ensuring our customer experience
evolves to remain engaging, innovative and relevant.
Towards the end of 2022 we took our first steps into the esports and skill
based wagering market with the launch of unikrn's new esports offer. unikrn
soft launched in Brazil and Canada (outside of Ontario) with an offer that
includes innovative new features that meet the needs of the skill based
wagering market for esports, such as round the clock video game stream
featuring the world's most popular video game titles, and offering players
more ways to bet while watching and playing their favourite games. The
esports market continues to grow strongly, and we will be expanding our
presence as we rollout to further markets during 2023.
Technology continues to evolve and the diverse scale of the Entain Platform
puts us in a unique position to be able to explore and innovate to further
create exciting new unique products and experiences for our customers.
Sustainability
Entain proudly places sustainability as one of our two strategic pillars and
it remains at the heart of everything we do. We embrace our role within
society and lead our industry on the issues that matter to us -
sustainability, diversity and responsibility - with our firmly held belief
that the most sustainable business will be the most successful business in our
industry. Paired with our strategic growth priorities, our strategic
sustainability pillar is underpinned by the core principles of our
Sustainability Charter which outlines our ESG leadership ambitions.
We aim to meet, and exceed the highest standards in everything we do, from the
way we run our business to the way we support our colleagues, our customers
and our communities. Our Sustainability strategy is underpinned by four
pillars of: lead on responsibility; diversify our regulated activities;
broaden our customer base; and, invest in our people and communities.
Lead on responsibility
Responsible engagement and player protection is an important part of our
sustainability commitment. ARC(TM) is our pioneering approach to customer
protection and its ongoing development continues. During 2022, we saw
greater accuracy of our predictive tools, as well as ARC(TM) being rolled out
internationally, with its principles implemented across 22 of our markets by
the end of 2022. ARC(TM) has delivered over 3.7 million proactive
interactions in the UK, and our most successful ARC(TM) model showed a 36%
drop in customer risk rating following intervention, demonstrating that
ARC(TM) is successfully preventing harmful behaviours amongst our customers
and helping them to keep their play safe with us.
The ARC(TM) programme represents a step-change in player protection and we
were pleased to see the success of our approach recognised in 2022 with the
award of the Advanced Safer Gambling Standard by GamCare.
Safer betting and gaming underpins everything we do. Reflecting this,
metrics regarding the effectiveness of ARC(TM) as well as completion levels
for colleagues' safer betting and gaming training are included in our Group
wide annual bonus plan.
In the US, BetMGM was amongst the first operators to have supported PlayPause,
a project intended to introduce cross-state self-exclusion. We also led a
collaboration of four of the leading US operators to establish the 12
Principles of Responsible Online Gaming, providing an industry benchmark for
responsible operators. A number of other operators have since joined the
collaboration.
Diversify our regulated activities
Entain is currently licensed in over 30 countries, and that number will
continue to rise through a combination of positive regulatory developments as
well as our expansion into new regulated markets. Operating in a
well-structured regulatory regime enables us to deliver higher quality
earnings with greater certainty and sustainability as we continue to grow and
expand our global footprint and scale.
During 2022, Entain made further and significant progress towards our
commitment to only operate in regulated markets, and in January 2023 we
announced that we would accelerate our plans. As a result, Entain is the
only global operator with 100% of revenues from domestically regulated or
regulating markets. Of these markets where there is a clear path to
regulation in due course, Brazil is the most significant for Entain
operations.
In the UK, we continue to wait for the publication of the White Paper
outlining the review of the regulatory framework of the 2005 Gambling Act.
Along with other industry operators we continue to actively engage with
appropriate parties in order to help find a balance between protecting a
minority who are at risk while supporting a healthy entertainment experience
as well as an environment that is commercially viable for operators and
related sports and industries.
Entain is a strong supporter of good regulation. We engage openly and
proactively with regulators around the world to encourage well-structured and
robust regulatory environments which balance the highest regulatory standards
and responsible player protection, whilst also upholding customer freedoms and
right of choice.
Broaden our customer appeal
We made further progress in broadening our appeal towards more recreational
audiences, providing a safe and engaging entertainment experience.
Understanding our customers and changing trends enables the evolution of our
brands and offering to remain engaging and relevant to an ever-broadening
customer base.
The Entain Platform's powerful capabilities and data analytics underpin the
execution of our audience expansion. As part of this broadening customer
experience, we continue to enhance our customer proposition with new games,
experiences, products and content, documentaries and social channel
interactions.
Invest in our people and communities
Investing in our people and communities is a cornerstone of our strategic
sustainability pillar. Recruiting, retaining, and nurturing top talent from
diverse backgrounds is important to ensure that we maintain our industry
leading entertainment proposition. Our ambition is to be the employer of
choice, attracting, engaging and retaining the best talent globally, bringing
the best thinking to the business from inside and outside of our sector.
Our "Everyone's in The Game" people strategy is underpinned by diversity and
inclusion, to ensure everyone at Entain feels valued, respected and included.
2022 was the first year of our new Diversity, Equity, and Inclusion
("DE&I") strategy, supported by a key commitment to creating a safe place
to work. We proactively listen to our people to shape our DE&I agenda,
leveraging the nine employee forums globally and the results of our 2022 Your
Voice employee engagement survey.
2022 was an important year for the Group in delivering against our efforts to
reduce our impact on the environment, as we set out on our pathway to be Net
Zero for carbon emissions throughout our operations by 2035. Having achieved
our previous greenhouse gas (GHG) emissions reduction target, we are now
focused on achieving our new 'near term' science-based targets. Our
commitment to a reduction of 29.4%(1) in our scope 1, 2 and 3 emissions by
2027 has been formally submitted to the Science-based Targets initiative to
ensure our journey to decarbonization is in line with limiting global warming
to 1.5 degrees, as per the Paris Agreement.
Our two Foundations - the Entain Foundation and the Entain Foundation US,
continue to support research into problem gambling and education initiatives
that align with our sustainability ambitions, as well as investing into local
communities and grass roots sports across our key markets.
Building on our EnTrain initiative, with its goal to positively impact one
million people through education in technology by the end of the decade, we
announced a new partnership with McLaren Racing in January 2023 to support
women returning to the tech sector. Through our joint returnship programme,
we aim to help reignite the careers of women returning to roles in STEM
(Science, Technology, Engineering and Mathematics). We have also initiated
returnship programmes in our offices in Hyderabad, India and Manila,
Philipines.
A key focus for the Entain Foundation is supporting grassroots sports through
our Pitching In programme. Our extended partnership with the Pitching In
Trident Leagues supports 248 clubs and over 15,000 community based non-league
football players. In 2022 we launched the Pitching In Volunteer Hub, a unique
online platform enabling every Trident League Club to easily connect with
potential volunteers. In addition, we continue our long term collaboration
with SportsAid, the UK based sports charity, through which we sponsor and
provide personal development coaching to 50 young athletes each year. We
have also internationalised our investment in grassroots sport with new
projects funded in Austria, Italy, Spain, Greece, Latin America and Africa.
Notes
(1) This target has been restated from our 2021 ESG Report as part of our
submission to the Science-Based Targets Initiative (SBTi).
(2) Proforma results are presented as if the Group had owned the entities
since 1 January 2021
(3) Growth on a constant currency basis is calculated by translating both
current and prior year performance at the 2022 exchange rates
(4) BetMGM guidance on 2022 NGR of over $1.3bn, as stated at Business
Update on 19 January 2022
(5) Retail performance numbers are quoted on a LFL basis and also excludes
the post acquisition performance of shops in Croatia
(6) EBITDAR is defined as earnings before interest, tax, depreciation and
amortisation, rent and associated costs, share based payments and share of JV
income. EBITDA is defined as EBITDAR after charging rent and associated costs.
Both EBITDAR and EBITDA are stated pre separately disclosed items
Note: Retail operates in UK, Italy, Belgium, Croatia and Republic of Ireland.
During 2022, there was an average of 4,310 shops in the estate, compared
to an average of 4,540 in the same period last year.
Financial Results and the use of Non-GAAP measures
The Group's statutory financial information is prepared in accordance with
International Financial Reporting Standards ("IFRS") and IFRS Interpretations
Committee ("IFRS IC") pronouncements as adopted for use in the European
Union. In addition to the statutory information provided, management has
also provided additional information in the form of Contribution, EBITDAR and
EBITDA as these metrics are industry standard KPIs which help facilitate the
understanding of the Group's performance in comparison to its peers. A full
reconciliation of these non-GAAP measures is provided within the Income
Statement and supporting memo.
The Group's operating segments are aggregated into five reportable segments;
Online, Retail, New Opportunities, Other and Corporate. This reporting
structure is in line with the Group's reporting to the executive management
team ("CODM").
CHIEF FINANCIAL OFFICER'S REVIEW
FINANCIAL PERFORMANCE REVIEW
Group
Reported results(1)
Year ended 31 December 2022 2021 Change CC(2)
£m £m % %
NGR 4,348.9 3,886.3 12% 10%
VAT/GST (52.0) (56.3) 8% 9%
Revenue 4,296.9 3,830.0 12% 11%
Gross profit 2,714.7 2,435.8 11%
Contribution 2,128.9 1,851.5 15%
Operating costs (1,120.4) (952.7) (18%)
Underlying EBITDAR(3) 1,008.5 898.8 12%
Rent and associated costs (15.3) (17.1) 11%
Underlying EBITDA(3) 993.2 881.7 13%
Share based payments (19.2) (12.3) (56%)
Underlying depreciation and amortisation (238.1) (222.8) (7%)
Share of JV (loss)/income (194.1) (162.5) (19%)
Underlying operating profit(4) 541.8 484.1 12%
Reported Results(1):
The Group delivered strong year on year growth in NGR and Revenue of +12%
(+10%cc(2) and +11%cc(2) respectively). Online NGR was down -1% (-2%cc(2))
reflecting strong Covid comparators and the absorption of regulatory changes,
whilst Retail performed strongly with NGR up +66%(5) (+66% cc(2,5)) and ahead
of pre-covid levels in our two biggest markets, the UK and Italy on a
like-for-like basis ("LFL")(5).
Contribution for the year of £2,128.9m was +15% higher than last year
reflecting the increase in NGR and an increase in the contribution margin of
+1.3pp due to a higher Retail segmental mix versus a Covid impacted 2021.
Operating costs (before rent) were 18% higher due to a full year of trading
in Retail and underlying inflation in Online. Underlying EBITDA(1,3) of
£993.2m was +13% higher than 2021.
Share based payment charges were £6.9m higher than last year, while
underlying depreciation and amortisation was 7% higher reflecting the impact
of businesses acquired in the year, the annualisation of prior year
acquisitions and continued investment in the business. Share of JV losses of
£194.1m includes a loss of £193.9m relating to BetMGM, which is in line with
expectations. Group underlying operating profit(4) was +12% ahead of 2021.
After separately disclosed items of £213.2m excluding £5.7m recorded in
interest (2021: £128.3m excluding £5.8m recorded in interest), operating
profit was £328.6m, a decrease of £27.2m on 2021.
Online
Reported results(1)
Year ended 31 December 2022 2021 Change CC(2)
£m £m % %
Sports wagers 14,090.5 14,165.9 (1%) (3%)
Sports margin 12.9% 12.7% 0.2pp 0.2pp
Sports NGR 1,443.7 1,444.3 flat (2%)
Gaming NGR 1,576.9 1,595.9 (1%) (3%)
B2B NGR 29.9 26.3 14% 14%
Total NGR 3,050.5 3,066.5 (1%) (2%)
VAT/GST (52.0) (56.3) 8% 9%
Revenue 2,998.5 3,010.2 flat (2%)
Gross profit 1,829.6 1,871.5 (2%)
Contribution 1,254.2 1,294.7 (3%)
Contribution margin 41.1% 42.2% (1.1pp)
Operating costs (425.0) (393.7) (8%)
Underlying EBITDAR(3) 829.2 901.0 (8%)
Rent and associated costs (1.0) (2.0) 50%
Underlying EBITDA(3) 828.2 899.0 (8%)
Share based payments (7.8) (5.3) (47%)
Underlying depreciation and amortisation (118.3) (116.7) (1%)
Share of JV (loss)/income (0.2) (1.0) 80%
Underlying operating profit(4) 701.9 776.0 (10%)
Reported Results(1):
Our Online business continues to perform strongly on an underlying basis with
full year NGR and Revenue down -2%cc(2) year on year as the business lapped a
Covid boosted 2021 and absorbed material effects of regulatory changes,
particularly in the UK. Full year NGR of £3,050.5m reflects a 3 year CAGR
of +12%cc(2) illustrating the strength of the Group's Online offering and
underlying growth. The Group continues to focus on expanding its
recreational customer base and we are delighted that actives were +7% ahead of
last year. We are also pleased to exit 2022 with Q4 NGR back in growth at
+8%cc(2) year on year.
In the UK, NGR was -9% behind 2021 as the business absorbed a number of
regulatory changes and lapped Covid boosted comparators from the prior year.
Online NGR in the first half of 2022 was -15% year on year, reflecting the
greater levels of disruption from Covid-19 versus that experienced in H2. We
are pleased to exit the year with UK Online NGR in line during Q4 and active
customers at a record high, with full year actives +13% versus 2021.
In Italy, constant currency NGR was in line year on year despite lapping
strong Covid comparatives and losing domestic football in Q4 whilst Italy was
absent from the FIFA World Cup. Our Omni-channel strategy in Italy continues
to benefit the business with combined Online and Retail NGR up +22%cc(2) year
on year, and Online NGR growing at +26%cc(2) on a 3 year CAGR basis.
Australia has continued to perform strongly with NGR up +8%cc(2) on 2021, and
gaining further market share. Active customers were up +7% year on year as
our focus on brand differentiation, the customer and new innovative product
launches continues to benefit the business.
In Germany, new regulation and a lack of regulatory enforcement continues to
impact the business with NGR -22%cc(2) year on year.
Importantly, however, we received our gaming licences in late November, so
we are hopeful that much needed robust enforcement action will now be more
evident in 2023.
Brazil continues to grow with NGR +20%cc(2) higher than 2021, ahead of the
anticipated regulation of the market. The Sportingbet brand in Brazil
continues to resonate well with our customers with actives +25% ahead of the
prior year.
In Georgia, NGR was -7%cc(2) lower year on year following the introduction of
new regulation at the start of the year which restricted betting opportunities
for certain population cohorts. Crystalbet has responded well to these
changes in regulation and maintains its position as the market leader in
Georgia.
Our operations in Canada continue to perform well following the new regulation
in Ontario.
In the Baltics, despite high levels of inflation in the region, our brands
continue to show their resilience with proforma(6) underlying NGR +5%cc(2) YoY
and actives +17%.
Our new Entain CEE business which acquired SuperSport in November 2022 has
also performed well during the year with proforma(6) NGR +24%.
Underlying EBITDAR(1,3) of £829.2m and underlying EBITDA(1,3) of £828.2m
were -8% behind 2021 reflecting lower Online NGR, a -1.1pp reduction in
contribution margin and underlying inflation which was in line with guidance.
The Online marketing rate was in line with 2021 and gross profit margin was
-1.0pp behind as a result of territory mix and increased taxation in Georgia
and Australia, giving rise to the aforementioned reduction in contribution
margin of -1.1pp. Resulting underlying operating profit(4) of £701.9m was
-10% behind 2021 and, after charging £114.0m of separately disclosed items,
operating profit was £587.9m, £34.1m lower than last year.
Retail
The Retail business is made up of our Retail estates in the UK, Italy,
Belgium, Croatia and Republic of Ireland.
Reported results(1)
Year ended 31 December 2022 2021 Change CC(2)
£m £m % %
Sports wagers(5) 3,817.0 2,277.5 68% 68%
Sports margin 18.3% 18.1% 0.2pp 0.2pp
Sports NGR/Revenue 705.2 426.1 66% 65%
Machines NGR/Revenue 572.6 365.0 57% 57%
NGR/Revenue 1,277.8 791.1 62% 61%
Gross profit 860.0 535.8 61%
Contribution 852.1 529.0 61%
Contribution margin 66.7% 66.9% (0.2pp)
Operating costs (558.4) (447.5) (25%)
Underlying EBITDAR(3) 293.7 81.5 260%
Rent and associated costs (13.5) (14.6) 8%
Underlying EBITDA(3) 280.2 66.9 319%
Share based payments (2.3) (1.9) (21%)
Underlying depreciation and amortisation (112.4) (102.4) (10%)
Share of JV income - - -
Underlying operating profit/(loss)(4) 165.5 (37.4) 543%
Reported Results(1):
With the exception of some restrictions in Belgium during the first quarter,
the full year was largely unaffected by the Covid restrictions that have
disrupted the previous two years. The strong recovery post Covid,
particularly in our two largest markets, the UK and Italy, has been
particularly pleasing resulting in full year NGR of £1,277.8m, +62% ahead of
last year (+66%cc(2) on LFL(5) basis) and representing a LFL 3 year CAGR of
+1%cc(2) (pre SuperSport).
In the UK, NGR was +56% ahead of 2021 with both sports and gaming up +56% year
on year. The strong performance in the year has been driven by our ongoing
focus on market leading content for our gaming machines and betting
terminals. Both sports and gaming NGR was ahead during H2, with increased
sports volumes predominantly driven by our SSBT's, which provide an experience
akin to the digital offering and now represent over one third of our total
sports NGR in UK Retail. Gaming NGR, which was also ahead in H2, was
supported by our best in class machines combined with the most differentiated
content on the high street.
Our focus on the customer is producing strong financial results and, as such,
we are delighted to recognise the great work done by our shop colleagues, who
will now be paid a minimum of £10.90 per hour, an increase of +9%.
NGR in Italy was up +107%cc(2) year on year with H1 2021 heavily impacted by
Covid restrictions. Our Retail business in Italy has recovered quickly post
Covid benefitting from our ability to maintain ongoing relationships with our
customers throughout Covid via our omni-channel offering.
In Belgium, NGR was up +40%cc(2) year on year despite temporarily closing our
estate in January due to local Covid restrictions and the introduction of EPIS
checks in Q4. Belgium has been slower to return to pre Covid levels compared
the UK and Italy as a result of the lingering Covid restrictions in the early
part of the year. Following the year end, the EPIS checks introduced in Q4
have been cancelled in their current form.
Contribution of £852.1m is +61% ahead of 2021 and in line with the increase
in NGR. Contribution margin was -0.2pp behind year on year due to the
geographic mix of revenues.
Operating costs including rent were 24% higher than in 2021 as a result of a
full year of trading largely uninterrupted by Covid related closures, the
non-repetition of prior year furlough receipts (receipts which were repaid
during 2022) and the impact of cost of living payments to shop staff in light
of the current inflationary pressures.
Resulting underlying EBITDA(1,3) of £280.2m was £213.3m ahead of 2021.
Depreciation of £112.4m was 10% higher than 2021 due to continued
investment in our retail estates and the annualisation of depreciation charges
on our Omnia till system in the UK. Underlying operating profit(4) of
£165.5m was £202.9m ahead of 2021 and, after charging £57.4m of separately
disclosed items, operating profit was £108.1m, £144.1m ahead of last year.
As at 31 December 2022, there were a total of 4,455 shops/outlets (2021:
4,346): UK 2,454 (2021: 2,580), Italy 940 (2021: 940), Belgium shops 286,
outlets 341 (2021: shops 291, outlets 402), Ireland 122 (2021: 133) and
Croatia 312.
New Opportunities
Reported results(1)
Year ended 31 December 2022 2021 Change CC(2)
£m £m % %
Underlying EBITDAR(3) (28.9) (8.8) (228%)
Rent and associated costs (0.2) - -
Underlying EBITDA(3) (29.1) (8.8) (231%)
Share based payments (0.3) - -
Underlying depreciation and amortisation (4.5) (0.4) (1,025%)
Share of JV (loss)/income (0.4) - -
Underlying operating loss(4) (34.3) (9.2) (273%)
Reported Results(1):
New Opportunities underlying costs(3) of £29.1m primarily reflect operating
costs associated with the launch phase of unikrn which soft launched in Q4 as
well as innovation costs. After depreciation and amortisation and share of
JV loss, New Opportunities underlying operating loss(4) was £34.3m, an
increase of £25.1m on 2021. Separately disclosed items for the year were
£nil, resulting in an operating loss of £34.3m.
Other
Reported results(1)
Year ended 31 December 2022 2021 Change CC(2)
£m £m % %
NGR/Revenue 25.1 32.8 (23%) 18%
Gross profit 25.1 28.5 (12%)
Contribution 25.0 27.8 (10%)
Operating costs (20.0) (22.1) 10%
Underlying EBITDAR(3) 5.0 5.7 (12%)
Rent and associated costs (0.1) (0.1) -
Underlying EBITDA(3) 4.9 5.6 (13%)
Share based payments - (0.1) 100%
Underlying depreciation and amortisation (2.7) (2.9) 7%
Share of JV income 0.4 0.4 -
Underlying operating profit(4) 2.6 3.0 (13%)
Reported Results(1):
NGR of £25.1m was -23% lower than 2021 due to the prior year disposal of our
Exchange business. Excluding the disposal, NGR was +12% ahead year on year
as our greyhound tracks recover from prior year Covid restrictions.
Underlying EBITDAR(1,3) of £5.0m and underlying EBITDA(1,3) of £4.9m were
£0.7m behind 2021 respectively as a result of the disposal. Underlying
operating profit(4) of £2.6m was -13% behind and, after charging £0.7m of
separately disclosed items, operating profit was £1.9m, £0.6m ahead of last
year.
Corporate
Reported results(1)
Year ended 31 December 2022 2021 Change CC(2)
£m £m % %
Underlying EBITDAR(3) (90.5) (80.6) (12%)
Rent and associated costs (0.5) (0.4) (25%)
Underlying EBITDA(3) (91.0) (81.0) (12%)
Share based payments (8.8) (5.0) (76%)
Underlying depreciation and amortisation (0.2) (0.4) 50%
Share of JV loss (193.9) (161.9) (20%)
Underlying operating loss(4) (293.9) (248.3) (18%)
Reported Results(1):
Corporate underlying costs(3) of £90.5m were £9.9m higher than last year
driven by increases in our contributions to Research, Education and Treatment
including GambleAware, additional contributions to the Entain foundation and
other Group ESG initiatives and investment in our governance policies and
procedures. After share based payments, depreciation and amortisation and
share of JV losses, Corporate underlying operating loss(4) was £293.9m, an
increase of £45.6m, largely as a result of the expected incremental loss in
the US JV, BetMGM. After separately disclosed items of £41.1m, the
operating loss of £335.0m was £112.7m behind 2021.
Notes
(1) 2022 and 2021 reported results are audited and relate to continuing
operations
(2) Growth on a constant currency basis is calculated by translating both
current and prior year performance at the 2022 exchange rates
(3) EBITDAR is defined as earnings before interest, tax, depreciation and
amortisation, rent and associated costs, share based payments and share of JV
income. EBITDA is defined as EBITDAR after charging rent and associated costs.
Both EBITDAR and EBITDA are stated pre separately disclosed items
(4) Stated pre separately disclosed items
(5) Retail performance numbers are quoted on a LFL basis and also excludes
the post acquisition performance of shops in Croatia
(6) Proforma results are presented as if the Group had owned the entities
since 1 January 2021
Note: Retail operates in UK, Italy, Belgium, Croatia and Republic of
Ireland. During 2022, there was an average of 4,310 shops in the estate,
compared to an average of 4,540 in the same period last year.
STATUTORY PERFORMANCE REVIEW
Reported results(1)
Year ended 31 December 2022 2021 Change CC(2)
£m £m % %
NGR 4,348.9 3,886.3 12% 10%
Revenue 4,296.9 3,830.0 12% 11%
Gross profit 2,714.7 2,435.8 11%
Contribution 2,128.9 1,851.5 15%
Underlying EBITDAR(3) 1,008.5 898.8 12%
Underlying EBITDA(3) 993.2 881.7 13%
Share based payments (19.2) (12.3) (56%)
Underlying depreciation and amortisation (238.1) (222.8) (7%)
Share of JV loss (194.1) (162.5) (19%)
Underlying operating profit(4) 541.8 484.1 12%
Net underlying finance costs(4) (84.7) (75.0)
Net foreign exchange/financial instruments (135.3) 118.2
Profit before tax pre separately disclosed items 321.8 527.3
Separately disclosed items:
Amortisation of acquired intangibles (116.9) (144.2)
Other (102.0) 10.1
Profit before tax 102.9 393.2
Tax (70.0) (117.6)
Profit after tax from continuing activities 32.9 275.6
Discontinued operations (13.4) (14.9)
Profit after tax 19.5 260.7
NGR and Revenue
Group reported NGR and revenue were +12% ahead of last year, up +10% and +11%
respectively on a constant currency basis(2), with Online NGR -1% and Retail
NGR +62% year on year - further details are provided in the Financial
Performance Review section.
Underlying operating profit(4)
Group reported underlying operating profit(4) of £541.8m was +12% ahead of
2021 (2021: £484.1m), with underlying EBITDA(3) ahead by +13% as a result of
the increase in revenue. The increase in underlying EBITDA(3) was partially
offset by an increase in losses from the Group's share of the BetMGM joint
venture and an increase in depreciation and amortisation. BetMGM losses in
the year were £193.9m, £32.0m higher than 2021 as the business continued to
invest in new jurisdictions as they opened, with 8 launches in 2022 and early
2023. Analysis of the Group's performance for the year is detailed in the
Financial Performance Review section.
Financing costs
Underlying finance costs(4) of £84.7m excluding separately disclosed items
(2021: £75.0m) were £9.7m higher than 2021 with the increase in costs
largely due to the interest on the Group's new $1bn USD term loan which was
raised in Q4.
Net losses on financial instruments, driven primarily by a foreign exchange
loss on re-translation of debt related items, were £135.3m in the year (2021:
£118.2m gain). This loss is offset by a foreign exchange gain on the
translation of assets in overseas subsidiaries which is recognised in reserves
and forms part of the Group's commercial hedging strategy.
Separately disclosed items
Items separately disclosed before tax for the period amount to a £218.9m
charge (2021: £134.1m) and relate primarily to £116.9m of amortisation on
acquired intangibles (2021: £144.2m), a £45.5m repayment of amounts received
in 2021 under the UK Government furlough scheme (2021: £nil), corporate
transaction costs of £23.9m (2021: £9.4m), integration and restructuring
costs of £11.8m (2021: £17.3m), legal and onerous contract costs of £8.1m
(2021: £26.2m) and an impairment of £7.0m on closed shops in the UK (2021:
£3.3m). The Group also recorded a loss on disposal of assets of £1.0m
(2021: profit of £1.9m) and incurred £5.7m on bridging loan fees used to
facilitate acquisitions in the year (2021: £9.7m including fee write-off on
refinancing) as well as releasing £1.0m from contingent consideration
liabilities reflecting the latest estimate of the likely economic outflow
(2021: £6.1m charge). In the prior year, the Group also recorded an £80.2m
credit in relation to tax litigation, primarily against the Greek Tax
Assessment following a court ruling in the Group's favour.
Separately disclosed items
2022 2021
£m £m
Amortisation of acquired intangibles (116.9) (144.2)
Furlough (45.5) -
Corporate transaction costs (23.9) (9.4)
Integration/restructuring costs (11.8) (17.3)
Legal and onerous contract costs (8.1) (26.2)
Impairment (7.0) (3.3)
(Loss)/profit on sale of assets (1.0) 1.9
Tax litigation/one-off legislative impacts - 80.2
Movement in fair value of contingent consideration 1.0 (6.1)
Other including issue cost write-off (5.7) (9.7)
Total (218.9) (134.1)
Profit before tax
Profit before tax and separately disclosed items was £321.8m (2021:
£527.3m), a year-on-year decrease of £205.5m with the growth in underlying
EBITDA(3) offset by an increase in BetMGM losses, depreciation, interest and
the loss on the retranslation of debt. After charging separately disclosed
items, the Group recorded a pre-tax profit from continuing operations of
£102.9m (2021: £393.2m).
Taxation
The tax charge on continuing operations for the year was £70.0m (2021:
£117.6m), reflecting an underlying effective tax rate pre-BetMGM losses and
foreign exchange gains on external debt of 15.4% (2021: 14.2%) and a tax
credit on separately disclosed items of £27.9m (2021: charge of £27.5m).
Cashflow
Year ended 31 December 2022 2021
£m £m
Cash generated by operations 846.9 803.8
Corporation tax (106.1) (98.7)
Interest (100.6) (73.3)
Net cash generated from operating activities 640.2 631.8
Cash flows from investing activities:
Acquisitions & disposals (738.6) (447.9)
Cash acquired/disposed 29.9 (31.4)
Capital expenditure (212.0) (176.2)
Dividends from associates 3.6 -
Investment in associates and other investments - (29.4)
Investment in Joint ventures (175.1) (164.4)
Net cash used in investing activities (1,092.2) (849.3)
Cash flows from financing activities:
Equity issue - 0.7
Net proceeds from borrowings 838.4 797.2
Repayment of borrowings (271.8) (566.1)
Subscription of funds from non-controlling interest 174.3 -
Settlement of financial instruments and other financial liabilities 8.7 (149.8)
Repayment of finance leases (83.0) (87.9)
Equity dividends paid (50.0) (24.5)
Net cash used in financing activities 616.6 (30.4)
Foreign exchange 6.8 (14.8)
Net increase/(decrease) in cash 171.4 (262.7)
During the year, the Group had a net cash inflow of £171.4m (2021: outflow of
£262.7m).
Net cash generated by operations was £846.9m (2021: £803.8m) including
£993.2m of underlying EBITDA(3) (2021: £881.7m). This was partially offset
by separately disclosed items, excluding those relating to amortisation,
depreciation and impairment, of £88.3m (2021: £26.7m income), a loss on
discontinued operations of £13.4m (2021: £14.9m) and a working capital
outflow of £44.7m (2021: £86.6m). Included within the working capital
outflow is a £47.9m outflow for balances held with payment service providers
and the German regulator as well as customer funds, which are net debt neutral
(2021: £4.3m inflow).
During the year £106.1m was paid out in relation to corporate taxes (2021:
£98.7m) with a further £100.6m paid out in interest (2021: £73.3m).
Net cash used in investing activities for the year was £1,092.2m
(2021:£849.3m), including cash outflows for M&A activity of £738.6m
(2021: £447.9m), investment in capital expenditure of £212.0m (2021:
£176.2m) and an additional £175.1m invested in BetMGM (2021: £164.4m)
partially offset by cash acquired of £29.9m (2021: £31.4m cash disposed) and
£3.6m in dividends received from associates (2021: £nil).
During the year the group received a net £566.6m (2021: £231.1m) from
financing activities. £838.4m was raised through new financing facilities
(2021: £797.2m) and £271.8m of debt was repaid, including £100.0m against
the Group's retail bond (2021: £566.1 term loan) and the repayment of
£162.8.m (2021: £nil) of debt within the acquired SuperSport business. As
part of the establishment of Entain CEE and acquisition of SuperSport, the
Group received £174.3m of cash for the 25% ownership in Entain CEE of the
minority interest (2021: £nil). £8.7m was received on the settlement of
other financial instruments and liabilities including £41.6m of income on the
partial settlement on a number of swap arrangements (2021: £19.1m cost)
partially offset by £32.9m of contingent consideration on previous
acquisitions (2021: £130.7m).
During the year, the Group also paid £50.0m in equity dividends (2021: £nil)
with the prior year dividend payment of £24.5m to the minority holding in
Crystalbet prior to the acquisition of the remaining 49% of equity in that
business, and lease payments of £83.0m (2021: £87.9m) including those on
non-operational shops.
Net debt and liquidity
As at 31 December 2022, adjusted net debt was £2,749.8m and represented an
adjusted net debt to underlying EBITDA(3) ratio of 2.8x (2.6x proforma). There
was no drawdown on the Group's revolving credit facility.
Par value Issue costs/ Premium Total
£m £m £m
Bonds (400.0) (4.1) (404.1)
Term loans (2,743.5) 40.6 (2,702.9)
Interest accrual (7.0) - (7.0)
(3,150.5) 36.5 (3,114.0)
Cash 658.5
Accounting net debt (2,455.5)
Cash held on behalf of customers (200.5)
Fair value of swaps held against debt instruments (6.5)
Short term investments/deposits held 43.8
Balances held with payment service providers 149.8
Lease liabilities (280.9)
Adjusted net debt (2,749.8)
Going Concern
In adopting the going concern basis of preparation in the financial
statements, the directors have considered the current trading performance of
the Group, the financial forecasts, the post balance sheet events disclosed in
note 14 and the principal risks and uncertainties. In addition, the directors
have considered all matters discussed in connection with the long-term
viability statement including the modelling of "severe but plausible" downside
scenarios, which have been run individually and in combination, and include
but are not limited to legislation changes impacting the Group's Online
business and severe data privacy and cyber security breaches. These forecasts
are not reliant on any refinancing occurring in the going concern assessment
period.
Despite the net current liability position, given the level of the Company and
Group's available cash of £0.3bn post Bet City acquisition, available
financing facilities (including an undrawn revolving credit facility of
£0.5bn) and the forecast covenant headroom even under the sensitised downside
scenarios, the directors believe that the Group is well placed to manage the
risks and uncertainties that it faces. As such, the directors have a
reasonable expectation that the Company and Group will have adequate financial
resources to continue in operational existence for twelve months from the date
of signing this report, and have, therefore, considered it appropriate to
adopt the going concern basis of preparation in the financial statements.
Notes
(1) 2022 and 2021 reported results are audited
(2) Growth on a constant currency basis is calculated by translating both
current and prior year performance at the 2022 exchange rates
(3) EBITDAR is defined as earnings before interest, tax, depreciation and
amortisation, rent and associated costs, share based payments and share of JV
income. EBITDA is defined as EBITDAR after charging rent and associated costs.
Both EBITDAR and EBITDA are stated pre separately disclosed items
(4) Stated pre separately disclosed items
Principal and emerging risks
Key risks, both threats and opportunities, are reviewed by the executive
directors, other senior executives and the Board of Entain plc on a regular
basis and, where appropriate, actions are taken to mitigate the key threats
that are identified. The Board has overall responsibility for enterprise
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 2022 and are as follows:
Data privacy 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, sanctions, the loss of the goodwill of its customers and
an inability to deliver growth and deliver technology synergies.
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's profitability and
additional costs might be incurred in order to comply with any new laws or
regulations in multiple jurisdictions.
Failure to maintain our technology platform excellence
The Group's 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 and
may impact the Group's ability to retain existing, and attract new, customers
to deliver the Group's growth strategy.
Taxes
The Group is subject to a range of taxes, duties and levies in many of the
countries where we have operations or in which our customers are located.
The taxes imposed upon betting and gaming companies have changed over time,
and the levels of taxation to which the Group is subject may change in the
future. If additional taxes are levied, this may have an 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.
Strategy Execution in Growth Markets
Risk of ineffective execution of growth strategy may impact the Group's goal
of leadership in key growth markets such as those in the Americas and other
emerging countries, resulting in a deterioration in NGR growth opportunities
in regulated and regulating territories
Safer betting and gaming
Providing a safe and enjoyable betting and gaming experience for our customers
in at the centre of everything that Entain does. Failure to meet the high
standards we, and others, expect of Entain could have a significant impact on
our customers and their wellbeing as well as impact the Group's profitability
and reputation.
Health, Safety, Security & Wellbeing of Employees, Customers and
Communities
Failure to meet the requirements of the various domestic and international
rules and regulations relating to the health and safety of our employees and
customers in both retail and digital markets could expose the Group, including
individual employees and directors, to material civil, criminal and or
regulatory action with the associated financial and reputational consequences.
In addition, as a large corporate we recognise our impact on society and local
communities in which we operate and as a large Group the expectations on us.
Failure to meet these expectations could have widespread reputational
consequences.
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.
Loss of key locations
Whilst the Group operates out of a number of geographical locations, there are
several key sites which are critical to the day to day operations of the
Group. Disruption in any of these locations could have an impact on day to
day operations.
Attracting and retaining key talent
The people who work within Entain are pivotal to the success of the company
and our failure to attract or retain key individuals may impact our ability to
deliver on our strategic goals.
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2022 2021
Notes Underlying Separately disclosed Total Underlying Separately disclosed Total
items Items items Items
(note 3) (note 3)
£m £m £m £m £m £m
Net Gaming Revenue 4,348.9 - 4,348.9 3,886.3 - 3,886.3
VAT/GST (52.0) - (52.0) (56.3) - (56.3)
Revenue 2 4,296.9 - 4,296.9 3,830.0 - 3,830.0
Cost of sales (1,582.2) - (1,582.2) (1,394.2) - (1,394.2)
Gross profit 2,714.7 - 2,714.7 2,435.8 - 2,435.8
Administrative costs (1,978.8) (213.2) (2,192.0) (1,789.2) (128.3) (1,917.5)
Contribution 2,128.9 - 2,128.9 1,851.5 - 1,851.5
Administrative costs excluding marketing (1,393.0) (213.2) (1,606.2) (1,204.9) (128.3) (1,333.2)
Group operating profit/(loss) before share of results from joint ventures and 735.9 (213.2) 522.7 646.6 (128.3) 518.3
associates
Share of results from joint ventures and associates (194.1) - (194.1) (162.5) - (162.5)
Group operating profit/(loss) 541.8 (213.2) 328.6 484.1 (128.3) 355.8
Finance expense 4 (89.0) (5.7) (94.7) (77.1) (5.8) (82.9)
Finance income 4 4.3 - 4.3 2.1 - 2.1
(Losses)/gains arising from change in fair value of financial instruments 4 (23.1) - (23.1) 62.0 - 62.0
(Losses)/gains arising from foreign exchange on debt instruments 4 (112.2) - (112.2) 56.2 - 56.2
Profit/(loss) before tax 321.8 (218.9) 102.9 527.3 (134.1) 393.2
Income tax (97.9) 27.9 (70.0) (90.1) (27.5) (117.6)
Profit/(loss) from continuing operations 223.9 (191.0) 32.9 437.2 (161.6) 275.6
Loss for the year from discontinued operations after tax - (13.4) (13.4) (5.6) (9.3) (14.9)
Profit/(loss) for the year 223.9 (204.4) 19.5 431.6 (170.9) 260.7
Attributable to:
Equity holders of the parent 225.6 (201.4) 24.2 420.2 (170.9) 249.3
Non-controlling interests (1.7) (3.0) (4.7) 11.4 - 11.4
223.9 (204.4) 19.5 431.6 (170.9) 260.7
Earnings per share on profit for the year
from continuing operations 60.9p(1) 6.4p 54.3p(1) 45.1p
From profit for the year 6 60.9p(1) 4.1p 53.3p(1) 42.6p
Diluted earnings per share on profit for the year
from continuing operations 60.5p(1) 6.3p 53.8p(1) 44.7p
From profit for the year 6 60.5p(1) 4.1p 52.8p(1) 42.2p
Memo
EBITDAR(2) 1,008.5 (89.3) 919.2 898.8 19.2 918.0
Rent and associated costs(3) (15.3) - (15.3) (17.1) - (17.1)
EBITDA 993.2 (89.3) 903.9 881.7 19.2 900.9
Share-based payments (19.2) - (19.2) (12.3) - (12.3)
Depreciation, amortisation and impairment (238.1) (123.9) (362.0) (222.8) (147.5) (370.3)
Share of results from joint ventures and associates (194.1) - (194.1) (162.5) - (162.5)
Group operating profit/(loss) 541.8 (213.2) 328.6 484.1 (128.3) 355.8
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 6 for
further details.
2. Included within the Income Statement and Memo above are certain
non-statutory measures. The use of these items and the reconciliation to their
statutory equivalents is provided above and on page 12 of the report.
3. Rent and associated costs include VAT and rent not captured by
IFRS 16. These are predominantly driven by VAT on rental charges not being
recoverable and held over leases.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December Notes 2022 2021
£m £m
Profit for the year 19.5 260.7
Other comprehensive income/(expense):
Items that may be reclassified to profit or loss:
Currency differences on translation of foreign operations 182.9 (128.3)
Total items that may be reclassified to profit or loss 182.9 (128.3)
Items that will not be reclassified to profit or loss:
Re-measurement of defined benefit pension scheme (24.7) 31.2
Tax on re-measurement of defined benefit pension scheme 8.6 (10.9)
Deficit on revaluation of other investment (2.6) -
Total items that will not be reclassified to profit or loss (18.7) 20.3
Other comprehensive income/(expense) for the year, net of tax 164.2 (108.0)
Total comprehensive income for the year 183.7 152.7
Attributable to:
Equity holders of the parent 182.3 141.3
Non-controlling interests 1.4 11.4
CONSOLIDATED BALANCE SHEET
At 31 December Notes 2022 2021
£m £m
Assets
Non-current assets
Goodwill 7 3,979.2 3,217.0
Intangible assets 7 2,677.7 2,152.5
Property, plant and equipment 507.2 467.2
Interest in joint venture - 9.7
Interest in associates and other investments 53.5 58.4
Trade and other receivables 38.6 3.0
Other financial assets 0.2 0.3
Deferred tax assets 157.3 141.4
Retirement benefit asset 63.8 95.1
7,477.5 6,144.6
Current assets
Trade and other receivables 500.3 539.8
Income and other taxes recoverable 30.7 23.1
Derivative financial instruments 72.9 57.4
Cash and cash equivalents 658.5 487.1
1,262.4 1,107.4
Total assets 8,739.9 7,252.0
Liabilities
Current liabilities
Trade and other payables (719.8) (695.8)
Balances with customers (200.5) (205.9)
Lease liabilities (65.1) (78.2)
Interest bearing loans and borrowings 9 (424.9) (121.1)
Corporate tax liabilities (45.3) (59.1)
Provisions (20.6) (43.5)
Derivative financial instruments (79.2) -
Other financial liabilities (208.8) (36.1)
(1,764.2) (1,239.7)
Non-current liabilities
Interest bearing loans and borrowings 9 (2,689.1) (2,161.3)
Lease liabilities (215.8) (215.5)
Deferred tax liabilities (495.4) (408.0)
Provisions (5.4) (6.4)
Other financial liabilities (253.4) (52.6)
(3,659.1) (2,843.8)
Total liabilities (5,423.3) (4,083.5)
Net assets 3,316.6 3,168.5
Equity
Issued share capital 4.8 4.8
Share premium 1,207.3 1,207.3
Merger reserve 2,527.4 2,527.4
Translation reserve 240.2 63.4
Retained earnings (846.9) (635.8)
Equity shareholders' funds 3,132.8 3,167.1
Non-controlling interests 183.8 1.4
Total shareholders' equity 3,316.6 3,168.5
J Nygaard-Andersen R Wood
(Chief Executive Officer) (Deputy Chief Executive Officer/Chief Financial Officer)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Issued share Share Merger Translation reserve1 Retained earnings Equity shareholders' funds Non- controlling Total
Reserve
capital premium
Interests Shareholders' equity
£m £m
£m
£m £m £m
£m
£m
At 1 January 2021 4.8 1,206.6 2,527.4 191.7 (901.3) 3,029.2 52.3 3,081.5
Profit for the year - - - - 249.3 249.3 11.4 260.7
Other comprehensive income - - - (128.3) 20.3 (108.0) - (108.0)
Total comprehensive income - - - (128.3) 269.6 141.3 11.4 152.7
Share options exercised - 0.7 - - - 0.7 - 0.7
Share-based payments charge - - - - 6.9 6.9 - 6.9
Business combinations (note 11) - - - - (50.0) (50.0) 14.2 (35.8)
Purchase of non-controlling interests - - - - 39.0 39.0 (52.0) (13.0)
Equity dividends (note 5) - - - - - - (24.5) (24.5)
At 31 December 2021 4.8 1,207.3 2,527.4 63.4 (635.8) 3,167.1 1.4 3,168.5
At 1 January 2022 4.8 1,207.3 2,527.4 63.4 (635.8) 3,167.1 1.4 3,168.5
Profit for the year - - - - 24.2 24.2 (4.7) 19.5
Other comprehensive income - - - 176.8 (18.7) 158.1 6.1 164.2
Total comprehensive income - - - 176.8 5.5 182.3 1.4 183.7
Share-based payments charge - - - - 18.3 18.3 - 18.3
Business combinations (note 11) - - - - - - 178.9 178.9
Recognition of put option liability - - - - (181.2) (181.2) - (181.2)
Purchase of non-controlling interests - - - - (3.7) (3.7) 2.1 (1.6)
Equity dividends (note 5) - - - - (50.0) (50.0) - (50.0)
At 31 December 2022 4.8 1,207.3 2,527.4 240.2 (846.9) 3,132.8 183.8 3,316.6
1. The translation reserve is used to record exchange differences arising from
the translation of the financial statements of subsidiaries with non-sterling
functional currencies.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December Notes 2022 2021
£m £m
Cash generated by operations 10 846.9 803.8
Income taxes paid (106.1) (98.7)
Net finance expense paid (100.6) (73.3)
Net cash generated from operating activities 640.2 631.8
Cash flows from investing activities:
Acquisitions(1) (738.6) (449.8)
Cash acquired on business combinations 29.9 22.3
Cash disposed on sale of business - (53.7)
Dividends received from associates 3.6 -
Purchase of intangible assets (129.9) (106.4)
Purchase of property, plant and equipment (82.1) (69.8)
Proceeds from the sale of property, plant and equipment including disposal of - 1.9
shops
Purchase of investments in associates and other investments - (29.4)
Investment in joint ventures (175.1) (164.4)
Net cash used in investing activities (1,092.2) (849.3)
Cash flows from financing activities:
Proceeds from issue of ordinary shares - 0.7
Net proceeds from borrowings 838.4 797.2
Repayment of borrowings (109.0) (566.1)
Repayment of borrowings on acquisition (162.8) -
Subscription of funds from non-controlling interests 174.3 -
Settlement of derivative financial instruments 41.6 (19.1)
Settlement of other financial liabilities (32.9) (130.7)
Payment of lease liabilities (83.0) (87.9)
Dividends paid to shareholders (50.0) -
Dividends paid to non-controlling interests - (24.5)
Net cash used in financing activities 616.6 (30.4)
Net increase/(decrease) in cash and cash equivalents 164.6 (247.9)
Effect of changes in foreign exchange rates 6.8 (14.8)
Cash and cash equivalents at beginning of the year 487.1 749.8
Cash and cash equivalents at end of the year 658.5 487.1
1. Included within cash flows from acquisitions is £1.7m (2021: £nil)
relating to the purchase of minority holdings in Scout Gaming AB and Global
Gaming Limited
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
1 Summary of significant accounting policies
1.1 Basis of preparation
The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 December 2022 or 2021 but is derived
from those accounts. Statutory accounts for 2021 have been delivered to the
registrar of companies, and those for 2022 will be delivered in due course.
The auditor has reported on those accounts; their reports were (i) unqualified
and (ii) did not include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report.
The consolidated financial statements of the Group have been prepared in
accordance with international financial reporting standards adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European Union and with
the Isle of Man Companies Act 2006 applicable to companies reporting under
IFRSs. The accounting policies set out in this section as detailed have been
applied consistently year on year other than for the changes in accounting
policies set out in note 1.
1.2 Basis of consolidation
The consolidated financial statements comprise the financial statements of the
Group at 31 December each year. The consolidation has been performed using the
results to 31 December for all subsidiaries, using consistent accounting
policies. With the exception of a small number of immaterial subsidiaries, the
financial statements of those subsidiaries are prepared to 31 December.
Control is achieved where the Company is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability to affect
these returns through its power over the investee.
All intragroup transactions, balances, income and expenses are eliminated on
consolidation.
Subsidiaries are consolidated, using the acquisition method of accounting,
from the date on which control is transferred to the Group and cease to be
consolidated from the date on which control is transferred from the Group. On
acquisition, the assets and liabilities and contingent liabilities of a
subsidiary are measured at fair value at the date of acquisition. Any excess
of the cost of acquisition over the fair values of the separately identifiable
net assets acquired is recognised as goodwill. Where necessary, adjustments
are made to the financial statements of subsidiaries to bring the accounting
policies used in line with those used by the Group.
1.3 Critical accounting estimates and judgements
The preparation of financial information requires the use of assumptions,
estimates and judgements about future conditions. Use of available information
and application of judgement are inherent in the formation of estimates.
Actual results in the future may differ from those reported.
Judgements
Management believes that the areas where judgement has been applied are:
- separately disclosed items (note 3).
Separately disclosed items
To assist in understanding the underlying performance of the Group, management
applies judgement to identify those items that are deemed to warrant separate
disclosure due to either their nature or size. Whilst not limited to, the
following items of pre-tax income and expense are generally disclosed
separately:
- amortisation of acquired intangibles resulting from IFRS 3
"Business Combinations" fair value exercises;
- profits or losses on disposal, closure, or impairment of
non-current assets or businesses;
- corporate transaction and restructuring costs;
- legal, regulatory and tax litigation;
- changes in the fair value of contingent consideration; and
- the related tax effect of these items.
Any other non-recurring items are considered individually for classification
as separately disclosed by virtue of their nature or size. During 2022 the
Group separately disclosed a net charge on continuing operations of £218.9m
including £116.9m of amortisation of acquired intangibles resulting from IFRS
3.
The separate disclosure of these items allows a clearer understanding of the
trading performance on a consistent and comparable basis, together with an
understanding of the effect of non-recurring or large individual transactions
upon the overall profitability of the Group.
The separately disclosed items have been included within the appropriate
classifications in the consolidated income statement. Further details are
given in note 3.
1.4 Other accounting policies
Estimates
Included within the financial statements are a number of areas where
estimation is required.
Management believes that the area where this is most notable within the
financial statements is the accounting for business combinations (note 11).
Business combinations
For business combinations, the Group estimates the fair value of the
consideration transferred, which can include assumptions about the future
business performance of the business acquired and an appropriate discount rate
to determine the fair value of any contingent consideration.
The Group then estimates the fair value of assets acquired and liabilities
assumed in the business combination. The area of most notable estimation
within the fair value exercise relates to separately identifiable intangible
assets including brands, customer lists, and licences. These estimates also
require inputs and assumptions to be applied within the relief from royalty
calculation of fair values with the more significant assumptions relating to
future earnings, customer attrition rates and discount rates. The Group
engages external experts to support the valuation process, where appropriate.
IFRS 3 'Business Combinations' allows the Group to recognise provisional fair
values if the initial accounting for the business combination is incomplete.
The fair value of contingent consideration recognised in business combinations
is reassessed at each reporting date, using updated inputs and assumptions
based on the latest financial forecasts for the relevant business. Fair value
movements and the unwinding of the discounting is recognised within the income
statement as a separately disclosed item. See note 3 and note 11 for further
details.
Goodwill on acquisition is initially measured at cost, being the excess of the
cost of the business combination over the Group's interest in the net fair
value of the separately identifiable assets, liabilities and contingent
liabilities at the date of acquisition in accordance with IFRS 3 Business
Combinations. Goodwill is not amortised but reviewed for impairment at the
first reporting period after acquisition and then annually thereafter. As such
it is stated at cost less any provision for impairment of value. Any
impairment is recognised immediately in the consolidated income statement and
is not subsequently reversed.
On acquisition, any goodwill acquired is allocated to cash generating units
for the purpose of impairment testing. Where goodwill forms part of a cash
generating unit and part of the operation within that unit is disposed of, the
goodwill associated with the disposal is included in the carrying amount of
the assets when determining the gain or loss on disposal. On the current year
acquisitions, any non-controlling interests where put options are in place are
recognised using the present access method where the Group assesses that the
non-controlling shareholder has present access to the returns associated with
their equity interests.
'Put' options over the equity of subsidiary companies
The potential cash payments related to put options issued by the Group over
the equity of subsidiary companies are accounted for as financial liabilities.
The amounts that may become payable under the option on exercise are initially
recognised at the present value of the expected gross obligation with the
corresponding entry being recognised in retained earnings. Such options are
subsequently measured at amortised cost, using the effective interest rate
method, in order to accrete the liability up to the amount payable under the
option at the date at which it first becomes exercisable. The present value of
the expected gross obligation is reassessed at the end of each reporting
period and any changes are recorded in the income statement. In the event that
an option expires unexercised, the liability is derecognised with a
corresponding adjustment to retained earnings.
Intangible assets
Intangible assets acquired separately are capitalised at cost and those
acquired as part of a business combination are capitalised separately from
goodwill. The costs relating to internally generated intangible assets,
principally software costs, are capitalised if the criteria for recognition as
assets are met. Other expenditure is charged in the year in which the
expenditure is incurred. Following initial recognition, intangible assets are
carried at cost less any accumulated amortisation and any accumulated
impairment losses.
The useful lives of these intangible assets are assessed to be either finite
or indefinite. Indefinite lived assets are not amortised and are subject to
an annual impairment review from the year of acquisition. Where amortisation
is charged on assets with finite lives, this expense is taken to the
consolidated income statement through the 'operating expenses, depreciation
and amortisation' line item.
A summary of the policies applied to the Group's intangible assets is as
follows:
Licences Lower of 15 years, or duration of licence
Software - purchased & internally capitalised costs 2-15 years
Trademarks & brand names 10-15 years, or indefinite life
Customer relationships 3-15 years
The useful lives of all intangible assets are reviewed at each financial
period end. Impairment testing is performed annually for intangible assets
which are not subject to systematic amortisation and where an indicator of
impairment exists for all other intangible assets.
An intangible asset is derecognised on disposal, with any gain or loss arising
(calculated as the difference between the net disposal proceeds and the
carrying amount of the item) included in the consolidated income statement in
the year of disposal.
Pensions and other post-employment benefits
The Group's defined benefit pension plan holds assets separately from the
Group. The pension cost relating to the plan is assessed in accordance with
the advice of independent qualified actuaries using the projected unit credit
method.
Actuarial gains or losses are recognised in the consolidated statement of
comprehensive income in the period in which they arise.
Any past service cost is recognised immediately. The retirement benefit asset
recognised in the balance sheet represents the fair value of scheme assets
less the value of the defined benefit obligations.
In accounting for the Group's defined benefit pension plan, it is necessary
for management to make a number of estimates and assumptions each year. These
include the discount rates, inflation rates and life expectancy. In making
these estimates and assumptions, management considers advice provided by
external advisers, such as actuaries. Where actual experience differs to these
estimates, actuarial gains and losses are recognised directly in other
comprehensive income. Refer to note 30 for details of the values of assets and
obligations and key assumptions used. Although the Group anticipates that plan
surpluses will be utilised during the life of the plans to address member
benefits, the Group recognises its pension surplus in full on the basis that
there are no substantive restrictions on the return of residual plan assets in
the event of a winding up of the plan after all member obligations have been
met.
The Group's contributions to defined contribution scheme are charged to the
consolidated income statement in the period to which the contributions relate.
There is a degree of estimation involved in predicting the ultimate benefits
payable under defined benefit pension arrangements. The pension scheme
liabilities are determined using actuarial valuations. The actuarial valuation
involves making assumptions about discount rates, mortality rates and future
pension increases. Due to the long-term nature of this plan, such estimates
are subject to uncertainty.
The Gala Coral Pension Plan has a net asset position when measured on an IAS
19 basis. Judgement is applied, based on legal, actuarial, and accounting
guidance in IFRIC 14, regarding the amounts of net pension asset that is
recognised in the consolidated balance sheet. The Ladbrokes Pension Plan was
bought-out in 2021.
Impairment
On acquisition, any goodwill acquired is allocated to cash generating units
for the purpose of impairment testing. Where goodwill forms part of a cash
generating unit and part of the operation within that unit is disposed of, the
goodwill associated with the disposal is included in the carrying amount of
the assets when determining the gain or loss on disposal.
An impairment review is performed for goodwill and other indefinite life
assets on at least an annual basis. For all other non-current assets an
impairment review is performed where there are indicators of impairment. This
requires an estimation of the recoverable amount which is the higher of an
asset's fair value less costs to sell and its value in use. Estimating a value
in use amount requires management to make an estimate of the expected future
cash flows from each cash generating unit and to discount cash flows by a
suitable discount rate in order to calculate the present value of those cash
flows. Estimating an asset's fair value less costs to sell is determined
using future cashflow and profit projections as well as industry observed
multiples and publicly observed share prices for similar betting and gaming
companies. See note 8 for details on sensitivity analysis performed around
these estimates.
Within UK and European Retail, the cash generating units are generally an
individual Licenced Betting Office ("LBO") and therefore, impairment is first
assessed at this level for licences, right of use ("ROU") assets and property,
plant and equipment, with any impairment arising booked to licences and
property, plant and equipment on a pro-rata basis.
Impairment losses are recognised in the consolidated income statement.
Investments in joint ventures
A joint venture is an entity in which the Group holds an interest on a
long-term basis, and which is jointly controlled by the Group and one or more
other venturers under a contractual agreement.
Joint control exists only when decisions about the relevant activities require
the unanimous consent of the parties that collectively control the
arrangement.
The Group's share of results of joint ventures is included in the Group
consolidated income statement using the equity method of accounting.
Investments in joint ventures are carried in the Group consolidated balance
sheet at cost plus post-acquisition changes in the Group's share of net assets
of the entity less any impairment in value. The carrying value of investments
in joint ventures includes acquired goodwill.
If the Group's share of losses in the joint venture equals or exceeds its
investment in the joint venture, the Group does not recognise further losses,
unless it has obligations to continue to provide financial support to the
joint venture.
Investments in associates
Associates are those businesses in which the Group has a long-term interest
and is able to exercise significant influence over the financial and
operational policies but does not have control or joint control over those
policies.
The Group's share of results of associates is included in the Group's
consolidated income statement using the equity method of accounting.
Investments in associates are carried in the Group's consolidated balance
sheet at cost plus post-acquisition changes in the Group's share of net assets
of the entity less any impairment in value. The carrying value of investments
in associates includes acquired goodwill. If the Group's share of losses in
the associate equals or exceed its investments in the associate, the Group
does not recognise further losses, unless it has obligations to continue to
provide financial support to the associate.
Property, plant and equipment
Land is stated at cost less any impairment in value.
Buildings, plant and equipment are stated at cost less accumulated
depreciation and any impairment in value.
Depreciation is applied using the straight-line method to specific classes of
asset to reduce them to their residual value over their estimated useful
economic lives.
Land and buildings Lower of 50 years, or estimated useful life of the building, or lease.
Indefinite lives are attached to any freehold land held and therefore it is
not depreciated.
Plant and equipment 3-5 years
Fixtures and fittings 3-10 years
Right of Use ("ROU") assets arising under lease contracts are depreciated over
the lease term (as defined in IFRS 16) being the period to the expiry date of
the lease, unless it is expected that a break clause will be exercised when
the lease term is the period to the date of the break.
The carrying values of property, plant and equipment are reviewed for
impairment where an indicator of impairment exists, being events or changes in
circumstances indicating that the carrying values may not be recoverable. If
any such indication exists and where the carrying values exceed the estimated
recoverable amount, the assets or cash generating units are written down to
their recoverable amount.
The recoverable amount of property, plant and equipment is the greater of fair
value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. For an asset that does not
generate largely independent cash inflows, the recoverable amount is
determined for the cash generating unit to which the asset belongs.
An item of property, plant and equipment is derecognised upon disposal, with
any gain or loss arising (calculated as the difference between the net
disposal proceeds and the carrying amount of the item) included in the
consolidated income statement in the year of disposal.
Leases
The Group has applied IFRS 16 only to those contracts that were previously
identified as a lease under IAS 17 Leases; any contracts not previously
identified as leases have not been reassessed for the purposes of adopting
IFRS 16. Accordingly, the definition of a lease under IFRS 16 has only been
applied to contracts entered into on or after 1 January 2019.
Leases, other than those with a lease period of less than one year at
inception, or where the original cost of the asset acquired would be a
negligible amount, are capitalised at inception at the present value of the
minimum lease payments. Lease payments are apportioned between the finance
charges and reduction of the lease liability so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance charges are
charged directly against income.
ROU assets are included within property, plant and equipment at cost and
depreciated over their estimated useful lives, which normally equates to the
lives of the leases, after considering anticipated residual values.
ROU assets which are sub-leased to customers are classified as finance leases
if the lease agreements transfer substantially all the risks and rewards of
usage to the lessee. All other sub-leases are classified as operating leases.
When assets are subject to finance leases, the present value of the sub-lease
is recognised as a receivable, net of allowances for expected credit losses
and the related ROU asset is de-recognised. The difference between the gross
receivable and the present value of the receivable is recognised as unearned
finance lease income.
Finance lease interest income is recognised over the term of the lease using
the net investment method (before tax) so as to give a constant rate of return
on the net investment in sub-leases. Operating lease rental income is
recognised on a straight-line basis over the life of the lease.
Cash and cash equivalents
Cash and cash equivalents consist of cash at bank and in hand, short-term
deposits (and customer balances).
Financial assets
Financial assets are recognised when the Group becomes party to the contracts
that give rise to them. The Group classifies financial assets at inception as
financial assets at amortised cost, financial assets at fair value through
profit or loss or financial assets at fair value through other comprehensive
income.
Financial assets at amortised cost are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active market. On
initial recognition, financial assets at amortised cost are measured at fair
value net of transaction costs.
Trade receivables are generally accounted for at amortised cost. Expected
credit losses are recognised for financial assets recorded at amortised cost,
including trade receivables. Expected credit losses are calculated by using an
appropriate probability of default, taking accounts of a range of possible
future scenarios and applying this to the estimated exposure of the Group at
the point of default.
Financial assets at fair value through profit or loss include derivative
financial instruments. Financial assets through profit or loss are measured
initially at fair value with transaction costs taken directly to the
consolidated income statement. Subsequently, the fair values are remeasured,
and gains and losses are recognised in the consolidated income statement.
Financial assets at fair value through other comprehensive income comprise
equity investments that are designated as such on acquisition. These
investments are measured initially at fair value. Subsequently, the fair
values are remeasured, and gains and losses are recognised in the consolidated
statement of comprehensive income.
Financial liabilities
Financial liabilities comprise trade and other payables, interest bearing
loans and borrowings, contingent consideration, ante-post bets, guarantees and
derivative financial instruments. On initial recognition, financial
liabilities are measured at fair value net of transaction costs where they are
not categorised as financial liabilities at fair value. Financial liabilities
measured at fair value include contingent consideration, derivative financial
instruments, ante-post bets and guarantees.
Financial liabilities at fair value are measured initially at fair value, with
transaction costs taken directly to the consolidated income statement.
Subsequently, the fair values are remeasured and gains and losses from changes
therein are recognised in the consolidated income statement.
Trade and other payables are held at amortised cost and include amounts due to
clients representing customer deposits and winnings, which are matched by an
equal and opposite amount within cash and cash equivalents.
All interest-bearing loans and borrowings are initially recognised at fair
value net of issue costs associated with the borrowing. After initial
recognition, interest bearing loans and borrowings are subsequently measured
at amortised cost using the effective interest rate method.
Derecognition of financial assets and liabilities
Financial assets are derecognised when the right to receive cash flows from
the assets has expired or when the Group has transferred its contractual right
to receive the cash flows from the financial assets or has assumed an
obligation to pay the received cash flows in full without material delay to a
third party, and either:
- substantially all the risks and rewards of ownership have been
transferred; or
- substantially all the risks and rewards have neither been retained
nor transferred but control is not retained.
Financial liabilities are derecognised when the obligation is discharged,
cancelled or expires.
Derivative financial instruments
The Group uses derivative financial instruments such as cross currency swaps,
foreign exchange swaps and interest rate swaps, to hedge its risks associated
with interest rate and foreign currency fluctuations. Derivative financial
instruments are recognised initially and subsequently at fair value. The gains
or losses on remeasurement are taken to the consolidated income statement.
Derivative financial instruments are classified as assets where their fair
value is positive, or as liabilities where their fair value is negative.
Derivative assets and liabilities arising from different transactions are only
offset if the transactions are with the same counterparty, a legal right of
offset exists, and the parties intend to settle the cash flows on a net basis.
Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation.
Provisions are measured at the directors' best estimate of the expenditure
required to settle the obligation at the balance sheet date and are discounted
to present value where the effect is material using a pre-tax rate that
reflects current market assessments of the time value of money and the risks
specific to the liability. The unwinding of the discount is recognised as a
finance expense.
Foreign currency translation
The presentational currency of Entain plc and the functional currencies of its
UK subsidiaries are Pounds Sterling (£).
Other than Sterling the main functional currencies of subsidiaries are the
Euro (€), the US Dollar ($) and the Australian Dollar (A$). At the reporting
date, the assets and liabilities of non-sterling subsidiaries are translated
into Pounds Sterling (£) at the rate of exchange ruling at the balance sheet
date and their cash flows are translated at the weighted average exchange
rates for the year. The post-tax exchange differences arising on the
retranslation are taken directly to other comprehensive income.
Transactions in foreign currencies are initially recorded in the subsidiary's
functional currency and translated at the foreign currency rate ruling at the
date of the transaction. Monetary assets and liabilities denominated in
foreign currencies are retranslated at the foreign currency rate of exchange
ruling at the balance sheet date.
All foreign currency translation differences are taken to the consolidated
income statement. Non-monetary items that are measured at historical cost in a
foreign currency are translated using the exchange rate at the date of the
initial transaction. Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rate at the date when the fair
value was determined.
On disposal of a foreign entity, the deferred cumulative retranslation
differences previously recognised in equity relating to that particular
foreign entity are recognised in the consolidated income statement as part of
the profit or loss on disposal.
The following exchange rates were used in 2022 and 2021:
2022 2021
Currency Average Year end Average Year end
Euro (€) 1.175 1.128 1.159 1.190
US Dollar ($) 1.245 1.208 1.375 1.354
Australian Dollar (A$) 1.788 1.775 1.832 1.862
Income tax
Deferred tax is provided on all temporary differences at the balance sheet
date, between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes except:
- on the initial recognition of goodwill;
- where the deferred tax liability arises from the initial
recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the
accounting profit nor the tax profit; and
- associated with investments in subsidiaries, joint ventures and
associates, where the timing of the reversal of the temporary differences can
be controlled and it is probable that the temporary differences will not
reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences
and carry forward of unused tax assets and unused tax losses, to the extent
that it is probable that taxable profit will be available against which the
deductible temporary differences and carry forward of unused tax assets and
unused tax losses can be utilised. The carrying amount of deferred tax assets
is reviewed at each balance sheet date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to allow all
or part of the deferred tax asset to be utilised. Deferred tax assets and
liabilities are measured at the tax rates that are expected to apply to the
year when the asset is realised or the liability is settled, based on tax
rates (and tax laws) that have been enacted or substantively enacted at the
balance sheet date. Deferred tax balances are not discounted.
Interest or penalties payable and receivable in relation to income tax are
recognised as an income tax expense or credit in the consolidated income
statement.
Income tax expenses are recognised within profit or loss except to the extent
that they relate to items recognised in other comprehensive income or directly
in equity, in which case they are recognised in other comprehensive income or
directly in equity.
Revenues, expenses and assets are recognised net of the amount of sales tax
except:
- where the sales tax incurred on a purchase of goods and services is
not recoverable from the taxation authority, in which case the sales tax is
recognised as part of the cost of acquisition of the asset or as part of the
expense item as applicable; and
- receivables and payables are stated with the amount of sales tax
included.
The net amount of sales tax recoverable from, or payable to, the taxation
authority is included as part of receivables or payables in the consolidated
balance sheet.
Accounting for uncertain tax positions
The Group is subject to various forms of tax in a number of jurisdictions.
Given the nature of the industry within which the Group operates, the tax and
regulatory regimes are continuously changing and, as such, the Group is
exposed to a small number of uncertain tax positions. Judgement is applied to
adequately provide for uncertain tax positions where it is believed that it is
more likely than not that an economic outflow will arise. In particular,
during 2022 judgement has been applied in the Group's accounting for Greek tax
and further disclosure is given in note 12.
Equity instruments and dividends
Equity instruments issued by the Company are recorded at the fair value of
proceeds received net of direct issue costs.
Final dividends proposed by the Board of Directors and unpaid at the year-end
are not recognised in the financial statements until they have been approved
by shareholders at the Annual General Meeting. Interim dividends are
recognised when paid.
Revenue
The Group reports the gains and losses on all betting and gaming activities as
revenue, which is measured at the fair value of the consideration received or
receivable from customers less free bets, promotions, bonuses and other fair
value adjustments. Revenue is net of VAT/GST. The Group considers betting and
gaming revenue to be out of the scope of IFRS 15 Revenue, and accounts for
those revenues within the scope of IFRS 9 Financial Instruments.
For licensed betting offices (LBOs), on course betting, Core Telephone
Betting, mobile betting, Digital businesses (including sportsbook, betting
exchange, casino, games, other number bets), revenue represents gains and
losses, being the amounts staked and fees received, less total payouts
recognised on the settlement of the sporting event or casino gaming machine
roulette or slots spin. Open betting positions ("ante-post") are carried at
fair value and gains and losses arising on these positions are recognised in
revenue.
The following forms of revenue, which are not significant in the context of
Group revenue, are accounted for within the scope of IFRS 15 Revenue. Revenue
from the online poker business reflects the net income (rake) earned from
poker hands completed by the year end. In the case of the greyhound stadia,
revenue represents income arising from the operation of the greyhound stadia
in the year, including broadcasting rights, and sales of refreshments, net of
VAT. Given the nature of these revenue streams they are not considered to be
subject to judgement over the performance obligations, amount received or
timing of recognition.
Finance expense and income
Finance expense and income arising on interest bearing financial instruments
carried at amortised cost are recognised in the consolidated income statement
using the effective interest rate method. Finance expense includes the
amortisation of fees that are an integral part of the effective finance cost
of a financial instrument, including issue costs, and the amortisation of any
other differences between the amount initially recognised and the redemption
price. All finance expenses are recognised over the availability period.
Share-based payment transactions
Certain employees (including directors) of the Group receive remuneration in
the form of equity settled share-based payment transactions, whereby employees
render services in exchange for shares or rights over shares (equity settled
transactions).
The cost of equity settled transactions is measured by reference to the fair
value at the date on which they are granted. In valuing equity settled
transactions, no account is taken of any performance conditions, other than
conditions linked to the price of the shares of Entain plc (market
conditions).
The cost of equity settled transactions is recognised in the consolidated
income statement, with a corresponding credit in equity, over the period in
which the performance conditions are fulfilled, ending on the date on which
the relevant employees become fully entitled to the award (vesting date). The
cumulative expense recognised for equity settled transactions at each
reporting date until the vesting date reflects the extent to which the vesting
period has expired and the number of awards that, in the opinion of the
directors of the Group at that date, based on the best available estimate of
the number of equity instruments, will ultimately vest.
No expense is recognised for awards that do not ultimately vest, except for
awards where vesting is conditional upon a market condition, which are treated
as vesting irrespective of whether or not the market condition is satisfied,
provided that all other performance conditions are satisfied.
The dilutive effect of outstanding options is reflected as additional share
dilution in the computation of earnings per share as shown in note 6.
1.5 Future accounting developments
The standards and interpretations that are issued, but not yet effective,
excluding those relating to annual improvements, up to the date of issuance of
the Group's financial statements are disclosed below. The Group intends to
adopt these standards, if applicable, when they become effective. None of
these are expected to have a significant effect on the consolidated financial
statements of the Group as set out below:
IAS 1 Presentation of Financial Statements Presentation of Financial Statements and IFRS Practice Statement 2 Disclosure 1 January 2023
of Accounting Policies
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors Definition of Accounting Estimates 1 January 2023
IAS 12 Income Taxes Deferred Tax related to assets and liabilities arising from a single 1 January 2023
transaction
IFRS 17 Insurance Contracts Original issue 1 January 2023
IFRS 16 Leases Lease liability in a sale and leaseback transaction 1 January 2024
IAS 1 Presentation of Financial Statements Classification of liabilities as current or non-current 1 January 2024
Non-current liabilities regarding long-term debt with covenants
IFRS 10 Consolidated Financial Statements Sale or contribution of assets between an investor and its associate or joint Date deferred
venture
IAS 28 Investments in Associates and Joint Ventures Sale or contribution of assets between an investor and its associate or joint Date deferred
venture
2 Segment information
The Group's operating segments are based on the reports reviewed by the
Executive Management Team (which is collectively considered to be the Chief
Operating Decision Maker ("CODM")) to make strategic decisions, and allocate
resources.
IFRS 8 requires segment information to be presented on the same basis as that
used by the CODM for assessing performance and allocating resources. The
Group's operating segments are now aggregated into the five reportable
segments as detailed below.
- Online: comprises betting and gaming activities from online and
mobile operations. Sports Brands include bwin, Coral, Crystalbet, Eurobet,
Ladbrokes, Sportingbet, SuperSport, and Sport Interaction; Gaming Brands
include CasinoClub, Foxy Bingo, Gala, Gioco Digitale, partypoker and
PartyCasino, Optibet, and Ninja;
- Retail: comprises betting and retail activities in the shop
estates in Great Britain, Northern Ireland, Jersey, Republic of Ireland,
Belgium, Italy, and Croatia;
- New opportunities: unikrn and innovation spend;
- Corporate: includes costs associated with Group functions
including Group executive, legal, Group finance, US joint venture, tax and
treasury; and
- Other segments: includes activities primarily related to telephone
betting, Stadia and on course pitches.
The Executive Management Team of the Group has chosen to assess the
performance of operating segments based on a measure of NGR , EBITDAR, EBITDA,
and operating profit with finance costs and taxation considered for the Group
as a whole. See page 12 of this annual report for further considerations of
the use of Non-GAAP measures. Transfer prices between operating segments are
on an arm's-length basis in a manner similar to transactions with third
parties.
The segment results for the year ended 31 December were as follows:
2022 Online Retail All other segments New opportunities Corporate Elimination Total Group
of internal revenue
£m £m £m £m
£m £m £m
NGR(1) 3,050.5 1,277.8 25.1 - - (4.5) 4,348.9
VAT/GST (52.0) - - - - - (52.0)
Revenue 2,998.5 1,277.8 25.1 - - (4.5) 4,296.9
Gross profit 1,829.6 860.0 25.1 - - - 2,714.7
Contribution(2) 1,254.2 852.1 25.0 (2.4) - - 2,128.9
Operating costs excluding marketing costs (425.0) (558.4) (20.0) (26.5) (90.5) - (1,120.4)
Underlying EBITDAR before separately disclosed items 829.2 293.7 5.0 (28.9) (90.5) - 1,008.5
Rental costs (1.0) (13.5) (0.1) (0.2) (0.5) - (15.3)
Underlying EBITDA before separately disclosed items 828.2 280.2 4.9 (29.1) (91.0) - 993.2
Share based payments (7.8) (2.3) - (0.3) (8.8) - (19.2)
Depreciation and amortisation (118.3) (112.4) (2.7) (4.5) (0.2) - (238.1)
Share of joint ventures and associates (0.2) - 0.4 (0.4) (193.9) - (194.1)
Operating profit/(loss) before separately disclosed items 701.9 165.5 2.6 (34.3) (293.9) - 541.8
Separately disclosed items (note 3) (114.0) (57.4) (0.7) - (41.1) - (213.2)
Group operating profit/(loss) 587.9 108.1 1.9 (34.3) (335.0) - 328.6
Net finance expense (225.7)
Profit before tax 102.9
Income tax (70.0)
Profit for the year from continuing operations 32.9
Loss for the year from discontinued operations (13.4)
after tax
Profit for the year after discontinued operations 19.5
1. Included within NGR are amounts of £65.6m (2021: £82.6m) in relation to
online poker services and £25.1m (2021: £20.5m) arising from the operation
of greyhound stadia recognised under IFRS 15 Revenue.
2. Contribution represents gross profit less marketing costs and is a key
performance metric used by the Group, particularly in Online.
2 Segment information (continued)
2021 Online Retail All other segments New opportunities Corporate Elimination Total Group
of internal revenue
£m £m £m £m
£m £m £m
NGR 3,066.5 791.1 32.8 - - (4.1) 3,886.3
VAT/GST (56.3) - - - - - (56.3)
Revenue 3,010.2 791.1 32.8 - - (4.1) 3,830.0
Gross profit 1,871.5 535.8 28.5 - - - 2,435.8
Contribution(1) 1,294.7 529.0 27.8 - - - 1,851.5
Operating costs excluding marketing costs (393.7) (447.5) (22.1) (8.8) (80.6) - (952.7)
Underlying EBITDAR before separately disclosed items 901.0 81.5 5.7 (8.8) (80.6) - 898.8
Rental costs (2.0) (14.6) (0.1) - (0.4) - (17.1)
Underlying EBITDA before separately disclosed items 899.0 66.9 5.6 (8.8) (81.0) - 881.7
Share based payments (5.3) (1.9) (0.1) - (5.0) - (12.3)
Depreciation and amortisation (116.7) (102.4) (2.9) (0.4) (0.4) - (222.8)
Share of joint ventures and associates (1.0) - 0.4 - (161.9) - (162.5)
Operating profit/(loss) before separately disclosed items 776.0 (37.4) 3.0 (9.2) (248.3) - 484.1
Separately disclosed items (note 3) (154.0) 1.4 (1.7) - 26.0 - (128.3)
Group operating profit/(loss) 622.0 (36.0) 1.3 (9.2) (222.3) - 355.8
Net finance income 37.4
Profit before tax 393.2
Income tax (117.6)
Profit for the year from continuing operations 275.6
Loss for the year from discontinued operations after tax (14.9)
Profit for the year after discontinued operations 260.7
1. Contribution represents gross profit less marketing costs and is a key
performance metric used by the Group, particularly in Online.
3 Separately disclosed items
2022 2021
Tax Impact Tax Impact
£m £m £m £m
Amortisation of acquired intangibles1 116.9 (16.5) 144.2 (24.6)
Furlough2 45.5 (8.6) - -
Corporate transaction costs(3) 23.9 (0.6) 9.4 (0.1)
Restructuring costs(4) 11.8 (1.4) - -
Legal and onerous contract provisions(5) 8.1 (0.8) 26.2 (2.1)
Impairment loss(6) 7.0 - 3.3 -
Bridging loan fees/issue cost write-off(7) 5.7 - 5.8 (1.0)
Loss/(profit) on disposal of property, plant and equipment(8) 1.0 - (1.9) 1.0
Movement in fair value of contingent consideration(9) (1.0) - 6.1 -
Integration costs(10) - - 17.3 (1.9)
Tax litigation/ one-off legislative impacts(11) - - (80.2) 7.8
Other one-off items(12) - - 3.9 1.3
Change of deferred tax rate on intangible assets - - - 47.1
Separately disclosed items for the year from continuing operations 218.9 (27.9) 134.1 27.5
Separately disclosed items for the year from discontinued operations 13.4 - 9.3 -
Total before tax 232.3 (27.9) 143.4 27.5
Separately disclosed items for the year after discontinued operations 204.4 170.9
1. Amortisation charges in relation to acquired intangible assets
arising from the various acquisitions made by the Group in recent years,
including Ladbrokes Coral, Crystalbet, Neds, Enlabs, Avid, and SuperSport.
2. Voluntary repayment of certain amounts received by the Group
under the Government Coronavirus Job Retention Scheme ("Furlough Scheme").
3. Transaction costs associated with the M&A activity including
the acquisition of SuperSport, Avid and Klondaika (see note 11).
4. Costs associated with the Group's restructuring programme Project
Evolve.
5. Relates primarily to costs associated with certain litigation and
legal claims and regulatory settlements involving the Entain Group.
6. Non-cash impairment charge against closed shops in its retail
estates.
7. Fees incurred in respect of acquisition bridging loan which was
subsequently refinanced. Prior year relates to issue costs written off on the
refinancing of term loans and the Group's revolving credit facility.
8. Loss on the disposal of certain assets and subsidiaries.
9. Income reflecting a change in the estimated likely payments under
contingent consideration arrangements net of discount unwind.
10. During the prior year, the Group incurred final costs associated
with the integration of the Ladbrokes Coral Group and the legacy Entain
businesses.
11. During the prior year, the Group recognised a credit in respect of
the 2010/11 Greek tax case following a ruling by the Athens Administrative
Court of Appeal in favour of the Group (see note 12 for more details).
12. During the prior year, the Group incurred a number of one-off costs
associated with Covid-19.
The items above reflect incomes and expenditures which are either exceptional
in nature or size or are associated with the amortisation of acquired
intangibles. The Directors believe that each of these items warrants separate
disclosure as they do not form part of the day to day underlying trade of the
Group and are not expected to persist beyond the short term (excluding the
amortisation of acquired intangibles).
4 Finance expense and income
2022 2021
£m £m
Interest on term loans, bonds and bank facilities (76.2) (63.3)
Interest on lease liabilities(1) (12.8) (13.8)
Bridging loan fees/issue cost write-off (note 3) (5.7) (5.8)
Total finance expense (94.7) (82.9)
Interest receivable 4.3 2.1
(Losses)/gains arising on financial derivatives (23.1) 62.0
(Losses)/gains arising on foreign exchange on debt instruments (112.2) 56.2
Net finance (expense)/income (225.7) 37.4
Interest on lease liabilities of £12.8m (2021: £13.8) is net of £0.2m of
sub-let interest receivable (2021: £0.2m).
5 Dividends
Pence per share 2022 2021 2022 2021
pence pence Shares in issue number Shares in issue number
Interim dividend paid 8.5 - 588.8 n/a
A second interim dividend of 8.5 pence (2021: nil pence) per share, amounting
to £50.0m (2021: £nil) in respect of the year ended 31 December 2022 was
proposed by the Directors on 9 March 2023. The estimated total amount payable
in respect of the final dividend is based on the expected number of shares in
issue on 9 March 2023. There are no income tax implications for the Group and
Company arising from the proposed second interim dividend. The 2022 interim
dividend of 8.5 pence per share (£50.0m) was paid on 16 September 2022.
No dividends were paid out to non-controlling interests (2021: £24.5m).
6 Earnings per share
Basic earnings per share has been calculated by dividing the profit for the
year attributable to shareholders of the Company of £24.2m (2021: £249.3m)
by the weighted average number of shares in issue during the year of 588.2m
(2021: 585.7m).
At 31 December 2022, there were 588.2m €0.01 ordinary shares in issue.
The calculation of adjusted earnings per share which removes separately
disclosed items and foreign exchange gains and losses arising on financial
instruments has also been disclosed as it provides a better understanding of
the underlying performance of the Group. Separately disclosed items are
defined in note 1 and disclosed in note 3.
Total earnings per share
Weighted average number of shares (millions) 2022 2021
Shares for basic earnings per share 588.2 585.7
Potentially dilutive share options and contingently issuable shares 4.5 5.4
Shares for diluted earnings per share 592.7 591.1
Total profit 2022 2021
£m £m
Profit attributable to shareholders 24.2 249.3
- from continuing operations 37.6 264.2
- from discontinued operations (13.4) (14.9)
Losses/(gains) arising from financial instruments 23.1 (62.0)
Losses/(gains) arising from foreign exchange debt instruments 112.2 (56.2)
Associated tax charge on gains arising from financial instruments and foreign (2.4) 9.9
exchange debt instruments
Separately disclosed items net of tax (note 3) 201.4 170.9
Adjusted profit attributable to shareholders 358.5 311.9
- from continuing operations 358.5 317.5
- from discontinued operations - (5.6)
Standard earnings per share Adjusted earnings per share
Earnings per share (pence) 2022 2021 2022 2021
Basic earnings per share
- from continuing operations 6.4 45.1 60.9 54.3
- from discontinued operations (2.3) (2.5) - (1.0)
From profit for the period 4.1 42.6 60.9 53.3
Diluted earnings per share
- from continuing operations 6.3 44.7 60.5 53.8
- from discontinued operations (2.2) (2.5) - (1.0)
From profit for the period 4.1 42.2 60.5 52.8
The earnings per share presented above is inclusive of the performance from
the US joint venture BetMGM. Adjusting for the removal of the BetMGM
performance would result in a basic adjusted earnings per share of 93.9p
(2021: 81.9p) and a diluted adjusted earnings per share of 93.2p (2021: 81.1p)
from continuing operations.
7 Goodwill and intangible assets
Trade-marks & brand names
Goodwill Licences Software Customer Total
relationships
£m £m £m £m £m £m
Cost
At 1 January 2021 3,352.2 15.7 539.3 948.6 1,954.0 6,809.8
Exchange adjustment (132.8) (0.3) (28.0) (22.5) (32.7) (216.3)
Additions - 12.8 96.7 - - 109.5
Additions from business combinations 273.1 22.3 21.1 78.9 96.2 491.6
Disposals - (0.8) (8.2) - - (9.0)
Reclassification - - 1.1 - - 1.1
At 31 December 2021 3,492.5 49.7 622.0 1,005.0 2,017.5 7,186.7
Exchange adjustment 153.6 7.1 28.3 34.1 44.9 268.0
Additions - - 129.9 - - 129.9
Additions from business combinations (note 11) 622.3 147.6 7.4 205.9 206.0 1,189.2
Disposals - (0.5) (13.9) - - (14.4)
Reclassification - - (1.0) - - (1.0)
At 31 December 2022 4,268.4 203.9 772.7 1,245.0 2,268.4 8,758.4
Accumulated amortisation and impairment
At 1 January 2021 291.1 7.4 332.0 871.6 141.2 1,643.3
Exchange adjustment (15.6) (0.1) (22.3) (19.4) (8.6) (66.0)
Amortisation charge - 6.8 102.7 89.8 48.0 247.3
Impairment charge - - 1.6 - - 1.6
Disposals - (0.8) (8.2) - - (9.0)
At 31 December 2021 275.5 13.3 405.8 942.0 180.6 1,817.2
Exchange adjustment 13.7 0.3 19.8 23.6 11.7 69.1
Amortisation charge - 12.7 109.1 52.4 54.9 229.1
Impairment charge - 0.5 - - - 0.5
Disposals - (0.5) (13.9) - - (14.4)
At 31 December 2022 289.2 26.3 520.8 1,018.0 247.2 2,101.5
Net book value
At 31 December 2021 3,217.0 36.4 216.2 63.0 1,836.9 5,369.5
At 31 December 2022 3,979.2 177.6 251.9 227.0 2,021.2 6,656.9
At 31 December 2022, the Group had not entered into contractual commitments
for the acquisition of any intangible assets (2021: £nil).
Included within trade-marks and brand names are £1,398.4m (2021: £1,398.4m)
of intangible assets considered to have indefinite lives. These assets relate
to the UK Ladbrokes and Coral brands which are considered to have indefinite
durability that can be demonstrated, and their value can be readily measured.
The brands operate in longstanding and profitable market sectors. The Group
has a strong position in the market and there are barriers to entry due to the
requirement to demonstrate that the applicant is a fit and proper person with
the "know-how" required to run such operations.
Goodwill reflects the value by which consideration exceeds the fair value of
net assets acquired as part of a business combination including the deferred
tax liability arising on acquisitions.
Licences comprise the cost of acquired betting shop and online licences.
Software relates to the cost of acquired software, through purchase or
business combination, and the capitalisation of internally developed software.
Additions of £129.9m (2021: £96.7m) include £58.0m of internally
capitalised costs (2021: £46.0m).
Customer relationships, trade-marks and brand names relate to the fair value
of customer lists, trade-marks and brand names acquired as part of business
combinations, primarily relating to the bwin, Ladbrokes Coral Group plc,
Enlabs, Sport Interaction and SuperSport businesses.
8 Impairment testing of goodwill and indefinite life intangible assets
An impairment loss is recognised for any amount by which an asset's carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of
an asset's fair value less costs to sell and its value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash flows (cash-generating units).
Within UK and European Retail, the cash generating units ("CGUs") are
generally an individual Licenced Betting Office ("LBO") and, therefore,
impairment is first assessed at this level for licences (intangibles) and
property, plant and equipment, with any impairment arising booked to licences
and property, plant and equipment on a pro-rata basis. Since goodwill and
brand names have not been historically allocated to individual LBOs, a
secondary assessment is then made to compare the carrying value of the segment
against the recoverable amount with any additional impairment then taken
against goodwill first.
For Online the CGU is the relevant geographical location or business unit, for
example Australia, European digital (defined as websites hosted by proprietary
platforms based in European constituent countries), Digital (defined as
websites hosted by Entain proprietary platforms) etc. and any impairments are
made firstly to goodwill, next to any capitalised intangible asset and then
finally to property, plant and equipment. The expected cash flows generated by
the assets are discounted using appropriate discount rates that reflect the
time value of money and risks associated with the group of assets.
For both tangible and intangible assets, the future cash flows are based on
the forecasts and budgets of the CGU or business discounted to reflect time
value of money. The key assumptions within the UK and European Retail
budgets are OTC wagers (customer visits and spend per visit), the average
number of machines per shop, gross win per shop per week, salary increases,
the potential impact of the shop closures and the fixed costs of the LBOs. The
key assumptions within the budgets for Online are the number of active
customers, net revenue per head, win percentage, marketing spend, revenue
shares and operating costs.
The value-in-use calculations use cash flows based on detailed, board
approved, financial budgets prepared by management covering a three-year
period. These forecasts have been extrapolated over years 4 to 8 representing
a declining growth curve from year 3 until the long-term forecast growth rate
is reached. The growth rates used from years 4-8 range from 0% to 16%. From
year 9 onwards long-term growth rates used are between 0% and 2% (2021:
between 0% and 2%) and are based on the long-term GDP growth rate of the
countries in which the relevant CGUs operate or the relevant outlook for the
business. An eight-year horizon is considered appropriate based on the
Group's history of underlying profit as well as ensuring there is an
appropriate decline to long-term growth rates from those growth rates
currently observed in our key markets. A 0% growth rate has been used for the
UK Retail operating segment. All key assumptions used in the value-in-use
calculations reflect the Group's past experience unless a relevant external
source of information is available.
The discount rate calculation is based on the specific circumstances with
reference to the WACC and risk factors expected in the industry in which the
Group operates.
The pre-tax discount rates used, which have increased year-on-year due to
increasing interest rates, and the associated carrying value of goodwill by
CGU is as follows:
Goodwill 2022 2021 2022 2021
% % £m £m
Digital 12.6 10.9 2,146.5 2,121.5
UK Retail 12.6 10.9 76.4 76.4
Australia 13.5 11.7 347.5 331.2
European Retail 9.5-13.3 9.3 - 11.5 161.5 153.0
European Digital 9.5-13.3 10.9 - 11.5 350.4 332.0
Enlabs 11.8 12.7 209.6 187.7
Avid 12.9 n/a 84.2 n/a
SuperSport 11.8 n/a 536.7 n/a
All other segments 12.4 10.9 66.4 15.2
3,979.2 3,217.0
It is not practical or material to disclose the carrying value of individual
licences by LBO.
Impairment recognised during the year
Impairments of intangible assets and property, plant and equipment are
recognised as separately disclosed items within operating expenses.
During the current year, the Group recorded a non-cash impairment charge of
£7.0m (2021: £3.3m) primarily on closed retail shops.
Sensitivity analysis
A reduction to 0% for the terminal growth rate applied to the cash flows (with
other assumptions remaining constant) would not result in a material
impairment to any CGU.
A 5% decrease in all cash flows, which could be represented by an increase in
the cost base from changing market behaviour and the impact of group
commitment around ESG amongst others, used in the discounted cash flow model
for the value in use calculation (with other assumptions remaining constant)
would not result in a material impairment to any CGU .
A 0.5pp increase in discount rates used in the discounted cash flow model for
the value in use calculation (with all other assumptions remaining constant)
would not result in a material impairment to any CGU .
No other reasonably possible change in assumptions to the CGUs would cause any
additional impairment.
9 Net debt
The components of the Group's adjusted net debt are as follows:
2022 2021
£m £m
Current assets
Cash and short-term deposits 658.5 487.1
Current liabilities
Interest bearing loans and borrowings (424.9) (121.1)
Non-current liabilities
Interest bearing loans and borrowings (2,689.1) (2,161.3)
Accounting net debt (2,455.5) (1,795.3)
Cash held on behalf of customers (200.5) (205.9)
Fair value swaps held against debt instruments (derivative financial (6.5) 57.4
(liability)/asset)
Deposits 43.8 20.3
Balances held with payment service providers 149.8 130.8
Sub-total (2,468.9) (1,792.7)
Lease liabilities (280.9) (293.7)
Adjusted net debt including lease liabilities (2,749.8) (2,086.4)
Cash held on behalf of customers represents the outstanding balance due to
customers in respect of their online gaming wallets.
10 Notes to the statement of cash flows
Reconciliation of profit/(loss) to net cash inflow from operating activities:
2022 2021
£m £m
Profit before tax from continuing operations 102.9 393.2
Net finance expense/(income) 225.7 (37.4)
Profit before tax and net finance expense from continuing operations 328.6 355.8
Loss before tax and net finance expense from discontinued operations (13.4) (14.9)
Profit before tax and net finance expense including discontinued operations 315.2 340.9
Adjustments for:
Impairment 7.0 3.3
Loss on disposal 1.0 7.3
Depreciation of property, plant and equipment 125.9 120.0
Amortisation of intangible assets 229.1 247.3
Share based payments charge 19.2 12.3
Decrease/(increase) in trade and other receivables 44.7 (73.7)
Increase in other financial liabilities 2.2 3.5
(Decrease)/increase in trade and other payables (85.9) 1.9
Decrease in provisions (6.9) (18.5)
Share of results from joint venture and associate 194.1 162.5
Pension settlement 7.0 -
Other (5.7) (3.0)
Cash generated by operations 846.9 803.8
11 Business combinations
Business combinations are accounted for using the acquisition method.
Identifiable assets and liabilities acquired, and contingent liabilities
assumed in a business combination are measured at their fair values at the
acquisition date. The identification and valuation of intangible assets
arising on business combinations is subject to a degree of estimation. We
engaged independent third parties, including Kroll, to assist with the
identification and valuation process. This was performed in accordance with
the Group's policies. The excess of the cost of acquisition over the fair
value of the Group's share of the identifiable assets acquired is recorded as
goodwill. Costs related to the acquisition are expensed as incurred; see note
3 for details.
Summary of acquisitions:
SuperSport
During the year, the Group set up a new subsidiary Entain Holdings (CEE)
Limited which the Group holds 75% of the equity in. On 22 November 2022,
Entain Holdings (CEE) Limited, acquired 100% of EMMA GAMMA Adriatic d.o.o.
EMMA GAMMA owns SuperSport, a leading online and retail sports betting and
gaming brand in Croatia, which provides the Group access to the Central and
Eastern Europe (CEE) region.
Entain Holdings (CEE) Limited paid €623.7m including working capital
adjustments, with further amounts payable in 2023 representing a multiple of
2022 EBITDA and contingent payments in 2024 and 2025 based on future financial
performance.
Given the proximity of the acquisition to the period end and as permitted by
IFRS 3 'Business Combinations', the fair value of the acquired identifiable
assets and liabilities has been presented on a provisional basis. Fair values
were determined on the basis of an initial assessment performed by an
independent professional expert.
Details of the purchase consideration, the net assets acquired and goodwill
are as follows:
Provisional
fair value
£m
Intangible assets (excluding goodwill) 465.6
Property, plant and equipment 10.1
Trade and other receivables 18.2
Cash and cash equivalents 11.8
Deferred tax liability (83.7)
Loans and borrowings (162.8)
Trade and other payables (24.2)
Lease liabilities (6.6)
Total 228.4
Net assets acquired 228.4
Goodwill(1) 518.8
Total net assets acquired 747.2
Consideration:
Cash 534.4
Contingent consideration 212.8
Total consideration 747.2
As part of the incorporation of Entain Holdings (CEE) Limited and the
acquisition of SuperSport, the Group recognised £174.3m of non-controlling
interest in Entain Holdings (CEE) Limited representing the subscription of
funds by the non-controlling entity in Entain Holdings (CEE) Limited as their
share of the cash consideration and their contribution to the repayment of
SuperSport external debt.
The share purchase agreement provides the Group with the opportunity to
purchase (and the non-controlling interest to sell (a put option)) the 25% of
the share capital of Entain Holdings (CEE) Limited currently owned by the
non-controlling interest, from 22 November 2025.
Within the Group balance sheet as at 31 December 2022 is €202.4m of net
assets is associated with the non-controlling interest in Entain Holdings
(CEE) Limited.
Included in the valuation of goodwill is the value attributed to acquired
workforce, and the benefit of future trading potential including synergies
arising as part of the acquisition.
Avid
On 7 February, the Group acquired 100% of the share capital of Avid
International Ltd. Avid owns Sports Interaction, a leading online sports
betting brand in Canada, which provides the Group with access to Canada's
highly attractive and fast growing sports betting and gaming. In accordance
with IFRS 3, as control has been obtained, the business has been consolidated
from the point of acquisition. Consideration amounted to €211.3m.
Klondaika
On 31 January, the Group acquired 100% of the share capital of SIA Klondaika,
a largely online betting and gaming operator in Latvia. In accordance with
IFRS 3, as control has been obtained, the business has been consolidated from
this point forward. Consideration amounted to €24.6m, including €1.6m in
relation to working capital on acquisition. Of the €24.6m consideration
€4.6m is deferred.
Totolotek
On 16 May, the Group acquired 100% of Totolotek S.A. (renamed to bwin Poland
S.A.), an online sports betting operator in Poland. In accordance with IFRS 3,
as control has been obtained, the business has been consolidated from this
point forward. Consideration amounted to €6.1m, including €1.1m in
relation of working capital on acquisition.
Full House Group
On 16 September 2022, the Group acquired 33% of the share capital of Full
House Group Pty Limited ("FHG") in Australia for AUD $4.0m. Whilst the group
owns 33% of the issued equity, it controls the board through its voting rights
and therefore controls FHG. In line with IFRS 3, as the group controls the
acquired entity, it is to be consolidated from the date of acquisition. Given
the acquisition of the 33% share reflected an open market transaction,
consideration for the purposes of IFRS 3 is deemed to be AUD $12.0m.
M3
In July 2022, the Group purchased a small number of shops in Italy via the
acquisition of 100% of shares in Agenzia M3 S.r.l. The acquisition enabled the
Group to develop its franchisee network in the Puglia region.
Details of the purchase consideration, the net assets acquired and goodwill of
all other business combinations are as follows:
Fair value
£m
Intangible assets (excluding goodwill) 101.3
Property, plant and equipment 7.2
Investments 4.9
Trade and other receivables 6.0
Cash and cash equivalents 18.1
Deferred tax liability (2.2)
Trade and other payables (24.9)
Lease Liability (2.9)
Total 107.5
Net assets acquired 107.5
Goodwill(1) 103.5
Total net assets acquired 211.0
Consideration:
Cash 202.5
Non-controlling interests 4.6
Deferred consideration 3.9
Total consideration 211.0
1. Goodwill acquired on business combinations is not tax deductible.
All of the acquired businesses contributed revenues of £46.9m and profit
before tax of £13.9m.
Had the acquisitions occurred on the first day of the financial year the
revenue for the group would have been £4,497.9m with a profit before tax of
£189.0m.
Non-controlling interests have been stated at their fair value on acquisition,
which has been determined by reference to the amount paid for the Group's
controlling interest.
Included in the valuation of goodwill is the value attributed to acquired
workforce, and the benefit of future trading potential including synergies
arising as part of the acquisition.
12 Commitments and contingencies
Contingent liabilities
Guarantees have been given in the ordinary course of business in respect of
loans and derivative contracts granted to subsidiaries amounting to £400.0m
(31 December 2021: £500.0m).
HMRC investigation
On 28 November 2019, one of our UK subsidiaries, Entain Holdings (UK) Limited,
received a production order from HM Revenue & Customs ("HMRC") requiring
it to provide information relating to the Group's former Turkish facing online
betting and gaming business, sold in 2017. At that time, the group understood
that HMRC's investigation was directed at a number of former third-party
suppliers, relating to the processing of payments for online betting and
gaming in Turkey. On 21 July 2020, GVC Holdings Plc announced that HMRC was
widening the scope of its investigation and was examining potential corporate
offending by the GVC group. It had previously been understood that no group
company was a subject of HMRC's investigation. Through ongoing engagement with
HMRC we understand that the group remains a corporate suspect and that the
offences under investigation include, but are not limited to, offences under
sections 1 and 7 of the Bribery Act 2010. The group continues to co-operate
fully with HMRC's enquiries, which are ongoing.
Greek tax
In November 2021, the Athens Administrative Court of Appeal ruled in favour of
the Group's appeal against the tax assessment raised by the Greek tax
authorities in respect of 2010 and 2011. In February 2022, the Greek tax
authorities appealed against the judgements to the Greek Supreme
Administrative Court. The case is not expected to be heard before the Greek
Supreme Administrative Court before 2024. During the first half of 2022, the
Group received a €193m refund of the tax and interest paid. The Group has a
further receivable of €35m, which reflects interest due in relation to this
matter. While the Group expects to be successful in defending the appeal by
the Greek authorities, should the Greek Supreme Administrative Court rule in
favour of the Greek tax authorities, then the Group could become liable for
the full 2010-2011 assessment plus interest, an estimated total of €267m at
31 December 2022.
In addition to the items discussed above, the Group is subject to a number of
other potential litigation claims that arise as part of the normal course of
business and continue to arise throughout 2023. Provision has not been made
against these claims as they are not considered likely to result in an
economic outflow. Consistent with any claims of this nature there can be
uncertainty with the final outcome.
13 Related party disclosures
Other than its associates and joint venture, the related parties of the Group
are the executive directors, non-executive directors and members of the
Executive Committee of the Group.
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. Transactions between the Group and its associates and joint venture and
other related parties are disclosed below.
During the year, Group companies entered into the following transactions with
related parties who are not members of the Group:
2022 2021
£m £m
Equity investment
- Joint venture1 175.1 164.4
Sundry expenditure
- Associates2 (55.5) (59.3)
1. Equity investment in BetMGM
2. Payments in the normal course of business made to Sports
Information Services (Holdings) Limited, bwin eK Neugersdorf, Gran Casino
Dinant SA, Infiniti Casino Oostende NV, and Leaderbet NV.
Details of related party outstanding balances
2022 2021
£m £m
Other amounts outstanding
- Joint venture receivable 87.8 22.1
- Associates receivables 4.4 -
- Associates payables (0.3) (0.1)
Terms and conditions of transactions with related parties
Sales to, and purchases from, related parties are made at market prices and in
the ordinary course of business. Outstanding balances at 31 December 2022 are
unsecured and settlement occurs in cash. For the year ended 31 December 2022,
the Group has not raised any provision (2021: £nil) for doubtful debts
relating to amounts owed by related parties as the payment history has been
good. This assessment is undertaken each financial year through examining the
financial position of the related party and the market in which the related
party operates.
Transactions with directors and key management personnel of the Group
The remuneration of key management personnel is set out below in aggregate for
each of the categories specified in IAS 24 Related Party Disclosures. Key
management personnel comprise executive directors and members of the Executive
management team. Further information about the remuneration of individual
directors is provided in the directors' remuneration report.
2022 2021
£m £m
Short-term employee benefits 7.9 9.7
Pension-related costs 0.1 -
Share-based payments 7.6 5.2
Total compensation paid to key management personnel 15.6 14.9
Peter Isola, who was a non-executive director of Entain plc until 21 March
2022, is a director of Europort (International) Holdings Limited, a property
firm in Gibraltar which charged rental expenses of £0.5m to the Group during
the year (2021: £2.6m).
The consolidated financial statements include the financial statements of
Entain PLC and its subsidiaries. The companies listed below are those which
were part of the Group at 31 December and therefore the results, cash flows
and balance sheets of all subsidiaries listed are consolidated into the Group
financial statements, furthermore the results of joint ventures and associates
are accounted for in accordance with the policy set out in note 1.
14 Subsequent events
On 14 June 2022, the Group announced the acquisition of 100% of the issued
share capital of BetEnt B.V. which trades under the BetCity.nl name for an
initial €300m plus further contingent amounts subject to future trading
performance; these are capped at €550m. On 12 January 2023, the Group
completed on the acquisition. The Group are yet to assess the accounting
values to be attributed to this acquisition.
On 11 January 2023, the Group completed the refinancing of the €1,125m term
loan B through the issuance of a new €800m loan which matures in June 2028,
priced at EURIBOR plus a margin of 375 bps, and a $375m loan which matures in
October 2029, priced at SOFR plus a credit adjustment spread of 10 bps plus
margin of 350 bps. The Euro loan was allocated at an originally issued
discount of 97.5 with the USD loan allocated at an original issue discount of
98.75.
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