REG - Entain PLC - FY23 results in line with expectations
07/03/2024 07:00
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RNS Number : 9164F Entain PLC 07 March 2024
For Release at 7.00am
7 March 2024
THIS ANNOUNCEMENT CONTAINS INFORMATION THAT QUALIFIES AS INSIDE INFORMATION
Entain plc
("Entain" or the "Group")
FY23 results in line with expectations
Improving operational execution to deliver growth
Entain plc (LSE: ENT), the global sports betting and gaming group, is pleased
to announce its results for the year ended 31 December 2023.
Key Highlights:
· Total Group Net Gaming Revenue ("NGR"), including 50% share of
BetMGM, up +14% (+14%cc(2)), +2%cc(2) on a proforma(3) basis
· Reported(1) Group NGR (excluding US) up +11% (+11%cc(2)),
-2%cc(2) on a proforma(3) basis
· Online NGR up +12% (+12%cc(2)), -3%cc(2) on a proforma(3) basis
o Excluding regulatory impacts, underlying proforma(3) Online NGR growth of
+3%cc(2)
o Record level of Online active customers, +23% YoY, +10% proforma(3)
· Retail NGR up +9% (+8%cc(2)), proforma(3) +2%cc(2), reflecting
the acquired shops in New Zealand and Poland, and the continued strength of
the retail estate
· BetMGM delivered a good performance through the year
o 2023 NGR of $1.96bn, +36% year on year(4,5) at the top end of expectations
o 14%(6) market share in sports betting and iGaming in the markets where
BetMGM operates
o Product and technology enhancements including Single Account Single Wallet
("SASW")
o Achieved positive EBITDA for H2 2023
· Further expansion into regulated markets with leading market
positions:
o Entain CEE expansion with acquisition of STS Holdings, the leading sports
betting operator in Poland, to further unlock the region's significant growth
opportunities
o 25 year partnership with TAB NZ providing unique access to the New Zealand
sports betting market
· Enhancement of inhouse content and capabilities with acquisitions
of 365Scores and Angstrom Sports
· Deferred Prosecution Agreement (DPA) resolution to the HMRC
investigation into Entain's legacy Turkish facing business, which was sold in
2017
· Announced revised strategic priorities; focusing on driving
organic growth, expanding online margins, and increasing US market share
Financial Highlights:
· Reported Group EBITDA(7) up 1% at £1,008m
· Group EBITDA(7,8), pre TAB NZ accounting, in line with expectations
at £974m, down -2% year on year:
o Online EBITDA(7,8) of £830m, in line with 2022 (Reported Online EBITDA(7)
up 4% at £857m)
o Retail EBITDA(7,8) of £277m, down -1% (Reported Retail EBITDA(7) up 1% at
£284m)
· Group profit after tax(9) before separately disclosed items was
£339m
· Group loss after tax was £879m, reflecting the DPA settlement
and impairment charges primarily related to the Australia operations being
impacted by point of consumption tax increases
· Adjusted diluted EPS(10) of 44.2p
· Second Interim Dividend of £56.5m (8.9p per share) announced,
bringing the total dividend for the year to £113m (17.8p per share)
· Robust management of balance sheet with year end adjusted net
debt(11) of £3,291m and leverage at 3.3x (3.1x on a proforma(3) basis)
Sustainability Highlights:
· New sustainability strategy including an updated regulatory and
safer gaming charter
· Only global operator with 100% revenue from regulated or
regulating markets
· Continued recognition across ESG agenda; maintaining MSCI's AA
rating and inclusion in FTSE4Good and Dow Jones Sustainability indices,
awarded responsible operator awards by EGR, SBC and Vixio
Capital Allocation Committee
In line with our announcement on 2 November 2023, the recently formed Capital
Allocation Committee has commenced a review of Entain's markets, brands and
verticals. The objectives of the review are to help focus the organisation,
improve competitive positions in core markets and maximise shareholder value.
Dividend
In line with the Group's progressive dividend policy, the Board proposed a
total dividend for 2023 of £113m, to be paid to shareholders in equal
instalments with H1 and FY results. As such, a second interim dividend of
£56.5m (8.9p per share) is expected to be paid on 26 April 2024 to
shareholders on register on 15 March 2024.
Current trading and outlook
Year to date, the Group is trading in line with expectations. In Brazil we are
seeing early signs of benefits from the improvements we initiated through
2023, and in the US, BetMGM's nationwide app is now live in Nevada and we look
forward to introducing Single Account Single Wallet ("SASW") functionality in
the state later this year as well as delivering further product
improvements.
As we look ahead for the balance of the year, we expect significant regulatory
changes in two of our larger markets:
· In the UK, we are delighted to see the long-awaited regulatory
review draw closer to conclusion. We look forward to the implementation of
stake caps on online slot games and a potential agreement on uniform safer
gambling measures across the market. While we expect these changes to be a
positive for Entain in the long run, we may see continued player disruption
over the short term, and with leading brands we may see opportunities for us
to invest in marketing to grow market share.
· In the Netherlands the KSA has recently proposed tighter deposit
limits from Q2 2024 which have the potential to impact 2024 EBITDA
As a result, we expect that, in aggregate, these dynamics could reduce FY24
EBITDA by approximately £40m.
We continue to deliver on our refocused strategic priorities and are making
clear strides in identifying and executing product and technology developments
to improve customer acquisition and retention. Project Romer remains on track,
to simplify our operations, improve efficiency and deliver £70m of net run
rate cost savings by 2025.
Barry Gibson, Chairman of Entain, commented:
"2023 was a period of necessary, but ultimately positive, transition for
Entain. We have significantly strengthened the quality of our revenue base,
enhanced our Board, and delivered a resolution to a critical, historic,
regulatory issue.
We are making positive progress in our search for a new permanent CEO, and in
the meantime Stella is driving the business as it continues to take
appropriate actions to deliver changes to drive a better long term
performance. We are also making good progress in adding to our Board strength
- Ricky Sandler and Amanda Brown joined the Board in recent months and we
expect to announce a further appointment shortly.
As our transformation continues the newly formed capital allocation committee
has commenced a review of Entain's markets, brands and verticals. The
objectives of the review are to help focus the organization, improve
competitive positions and maximize shareholder value."
Stella David, Interim CEO of Entain, commented:
"2023 presented a number of challenges for the Group, both industry-wide and
Entain-specific. I am extremely proud of how our people around the world came
together to navigate the business through an eventful and at times difficult
year. Against that backdrop, Entain was still able to deliver overall revenue
growth of 14% including our US joint venture achieving revenue at the top end
of expectations.
We have started the new financial year with a clear plan to accelerate our
operational strategy, and are making pleasing progress across a range of
initiatives to re-focus our market portfolio, prioritise organic growth, drive
our share in the US, and expand our margins. We are entirely focused on
operational excellence and outstanding execution and, as a result, are
confident that we are on a pathway to delivering future growth. We remain
confident that our continued focused execution will drive organic growth into
2025 and beyond."
FY2023 Financial performance: 1 January to 31 December 2023
Group Reported(1)
Year ended 31 December 2023 2022 Change CC(2)
£m £m % %
Net gaming revenue (NGR) 4,833.1 4,348.9 11% 11%
Revenue 4,769.6 4,296.9 11% 11%
Gross profit 2,907.0 2,714.7 7%
Underlying EBITDA(7) 1,007.9 993.2 1%
Underlying operating profit(9) 641.8 541.8 18%
Underlying profit before tax(9) 444.9 321.8
Profit after tax(9) pre separately disclosed items 339.1 223.9
(Loss)/Profit after tax (878.7) 32.9
Basic EPS (p) (141.4) 6.4
Continuing adjusted diluted EPS(10) (p) 44.2 60.5
Continuing adjusted diluted EPS excl US(10) (p) 51.0 93.2
Dividend per share (p) 17.8 17.0
FY2023 Trading performance: 1 January to 31 December 2023
FY2023: 1 January to 31 December 2023
Total Sport Sports Margin
NGR Wagers
Reported(1) CC(2) Proforma CC(2,3) Reported(1) CC(2)
Online
Sports 6% 7% (9%) (3%) (2%) +0.8pp
Gaming 17% 15% 2%
Total Online 12% 12% (3%)
Retail 9% 8% 2% 12% 11% +0.6pp
Total Group (ex US) 11% 11% (2%)
BetMGM 35% 36%
Total Group inc 50% of BetMGM 14% 14% 2%
Q4 2023 Trading performance: 1 October to 31 December 2023
Q4 2023: 1 October to 31 December 2023
Total Sport Sports Margin
NGR Wagers
Reported(1) CC(2) Proforma CC(2,3) Reported(1) CC(2)
Online
Sports 12% 15% (12%) 1% 4% +0.7pp
+0.1pp PF
Gaming 9% 10% (1%)
Total Online 12% 14% (6%)
Retail 7% 7% (2%) 9% 9% +1.4pp
Total Group (ex US) 10% 11% (5%)
BetMGM 21% 29%
Total Group inc 50% of BetMGM 12% 14% (1%)
Notes
(1) 2023 and 2022 statutory results are audited, with the tables presented
relating to continuing operations and including both statutory and
non-statutory measures
(2) Growth on a constant currency basis is calculated by translating both
current and prior year performance at the 2023 exchange rates
(3) Proforma references include all 2022 and 2023 acquisitions as if they
had been part of the Group since 1 January 2022
(4) As reported in unaudited FY2023 results on 8 February 2024
(5) BetMGM revenues comprise of sports (Online and Retail) and iGaming
revenues
(6) Market share for last three months ending November 2023 by GGR,
including only US markets where BetMGM was active; internal estimates used
where operator-specific results are unavailable
(7) EBITDA is earnings before interest, tax, depreciation and
amortisation, share based payments and share of JV income. EBITDA is stated
pre-separately disclosed items
(8) Presented as if revenue share payments of c£34m, which form part of
the partnership arrangement with TAB NZ, were treated as a cost of sale rather
than forming part of acquisition consideration
(9) Stated pre-separately disclosed items
(10) Adjusted for the impact of separately disclosed items, foreign exchange
movements on financial indebtedness and losses/gains on derivative financial
instruments (see note 9 in the financial statements)
(11) Adjusted net debt excludes the DPA settlement of £585.0m. Leverage also
excludes any benefit from future BetMGM EBITDA or the payments due to acquire
the minority interests in Entain CEE
Enquiries:
Investor-Relations - Entain plc investors@entaingroup.com (mailto:investors@entaingroup.com)
Media - Entain plc media@entaingroup.com (mailto:media@entaingroup.com)
Powerscourt Tel: +44 (0) 20 7250 1446
Rob Greening/Russ Lynch/Sam Austrums entain@powersco (mailto:entain@powerscourt-.com) urt-group.com
(mailto:entain@powerscourt-.com)
Presentation and webcast
Entain will host a Full Year 2023 Results presentation and Q&A session
today, Thursday 7(th) March at 9:30am GMT, at LSEG, 10 Paternoster Square,
London, EC4M 7LS.
Analysts and investors may attend in person, having pre-registered via the
In-person registration link
(https://eur03.safelinks.protection.outlook.com/?url=https%3A%2F%2Fentain-2023-full-year-results-presentation.open-exchange.net%2F&data=05%7C02%7Cdavina.hobbs%40entaingroup.com%7C0b5d8b6416a34577d2ed08dc33a1d705%7C60c43c0a64ac4050bf3e31e1cdfffdeb%7C0%7C0%7C638442017399655816%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=fDsWTPUNIznGlynsSNTPmQFo6oPgMb3%2B%2BFL5kRM8oIw%3D&reserved=0)
, or alternatively join via webcast link: ENTFY23 results presentation
(https://eur03.safelinks.protection.outlook.com/?url=https%3A%2F%2Fentain-2023-full-year-results-presentation.open-exchange.net%2F&data=05%7C02%7Cdavina.hobbs%40entaingroup.com%7C0b5d8b6416a34577d2ed08dc33a1d705%7C60c43c0a64ac4050bf3e31e1cdfffdeb%7C0%7C0%7C638442017399666698%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=BUQUujr5othl%2BhPG8kfwHZvKi1hXlgBbKYxYibMMusU%3D&reserved=0)
The presentation slides as well as a replay 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: 17 April 2024
Annual General Meeting 24 April 2024
2024 Interim results: 8 August
2024
Dividend Timetable
Announcement date: 7 March 2024
Ex-Dividend date 14 March 2024
Record date:
15 March 2024
Payment date:
26
April 2024
Inside Information
This announcement contains information that qualifies as inside information
within the meaning of Article 7 of the Market Abuse Regulation (EU) No.
596/2014 as it forms part of English law by virtue of the European Union
(Withdrawal) Act 2018. The person responsible for releasing this
announcement on behalf of the Company is Simon Zinger, General Counsel. Upon
the publication of this announcement via a regulatory information service,
this inside information is now considered to be in the public domain.
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) as it forms part of English law by virtue
of the European Union (Withdrawal) Act 2018, 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, STS, SuperSport and TAB NZ; 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 30 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
Entain is a leading sports betting and gaming business, operating in a global
industry with attractive dynamics and structural growth. We are the most
diversified leader of scale in our sector, only operating in regulated or
regulating markets. Our strong brands, leading market positions and
increasingly localised offering are supported by in-house technology and
product capabilities.
The Group's strategy is focused on delivering the most entertaining customer
experience supported by market leading-player protection to deliver quality
growth and sustainable returns for our shareholders.
While 2023 presented many challenges and our performance in some of our
markets was behind our expectations, overall we made good strategic progress.
We re-shaped our geographic footprint enabling us to focus on leadership
positions in regulated or regulating markets, broadened our customer
engagement and continued to implement leading player safety measures. We also
secured a conclusion to a material overhanging legacy issue.
Reflecting the significant progress made in re-focusing our business, in
November 2023 we revised our strategic ambitions, focusing on key objectives
and priorities for the next three years that will drive shareholder value.
One of these changes has been leadership. I have been on Entain's board as
Senior Independent Director since March 2021 and was honoured to accept the
role of Interim CEO. Although my appointment is on an interim basis, the
business will not be treading water. We have clear targets to deliver. I will
focus on driving the execution of our revised strategic priorities until the
appointment of a new, permanent, CEO.
Performance in 2023
During 2023, we achieved total revenue growth of 14%, including our 50% share
in BetMGM, in spite of operational and regulatory challenges. We expanded into
the regulated markets of Croatia, Poland and New Zealand as well as adding to
our capabilities with the acquisitions of 365Scores and Angstrom.
Entain's operations now span over 30 regulated or regulating territories, with
established brands supporting leading positions in many of our markets.
Regulation remains an over-arching factor in our industry and for the Group's
performance. Clear regulatory frameworks that are appropriate and well
enforced, are positive for us and our customers. However, in the short term,
they can create headwinds as significant changes are put in place and uneven
implementation can occur ahead of consistent enforcement.
FY2023 Online Net Gaming Revenue YoY FY2023 Retail Net Gaming Revenue YoY
CC(2) Proforma(3) CC(2) CC(2) Proforma(3) CC(2)
Online / Online ex-regulation 12% (3%) / 3% Total Retail 8% 2%
Group Online inc. 50% BetMGM 16% - UK / UK LFL (1%)/2% -
UK / UK ex-regulation (6%)/ 4% - Italy 16% -
Australia (6%) - Belgium 10% -
Italy 3% - Entain CEE (Croatia & Poland) - 4%
Brazil (14%) - New Zealand - (7%)
Entain CEE (Croatia & Poland) - 13%
Netherlands N/A (12%)
New Zealand Flat
Georgia 7% -
Germany (26%) -
Other - 3%
During 2023, we managed regulatory change in a number of our larger markets,
impacting headline organic performance. The most notable being our
implementation of ever-tightening UK affordability measures and the persistent
lack of impactful regulatory oversight in Germany. We estimate the aggregate
of regulatory impacts was a negative 6ppt headwind to Online NGR performance
in 2023. As a result, proforma(3) organic Online NGR was down 3%cc(2) versus
the prior year, whilst proforma(3) Retail NGR grew 2%cc(2). Total Group NGR,
including our 50% share of BetMGM was up 14% and up 2%cc(2) on a proforma(3)
basis.
We also continued to improve the sustainability of our business, ensuring more
diversified, sustainable and ultimately higher quality earnings. We achieved
another record level of active customers, with proforma(3) actives +10%,
demonstrating the underlying strength in our core business as well as our
broadening, more recreational customer base.
In the UK, Online NGR was down 6%, reflecting the ongoing digestion of
regulatory changes. We estimate that we experienced a headwind of
approximately c10ppt to our Online NGR growth. Unfortunately, this drag did
not ease during H2 as we expected due to the imposition of further
affordability measures. The iterative imposition of cumulative safer gambling
measures throughout 2023 has resulted in overly complex journeys for our
customers. We continue to believe that restrictions should be personal and
appropriate for each customer, however, we must ensure the experience for our
customers is smooth. In the short term we expect that the measures currently
in place will continue to weigh on performance. However, we are encouraged
that our industry and regulator are working together to agree a pragmatic
framework for customer safer gambling checks. If implemented as currently
anticipated, these will provide a clear and consistent approach to player
protection for customers across all operators in the UK. Our focus remains
firmly on acquisition and retention of customers to grow market share. In 2023
we grew UK online actives by +18% driven by continued customer engagement with
exciting marketing campaigns, new product releases and wider offering
enhancements.
UK Retail NGR was up +2% on a LFL(4) basis with a good performance in both
sports and gaming across both machines and OTC. Our strong performance is
underpinned by our market leading retail offering reaching a broader
demographic of customers supported by exclusive and in-house content coupled
with digital in-shop experiences.
Our business in Italy continues to perform well, with online NGR up +3%cc(2)
versus 2022. The underlying market growth remains strong and omni-channel
operators continue to outperform. Despite increased competitive activity,
Eurobet, bwin and GiocoDigitale grew actives +13% by leveraging our
onmi-channel proposition, brand strength and ongoing investment in our
products. Retail NGR was up +16%cc(2) and the retail shop network remains
invaluable to our omni-channel offering, with combined Online and Retail NGR
+63%cc(2) versus pre-Covid levels.
Combined Online NGR in Australia and New Zealand was up 11%cc(2), although
down -5%cc(2) on a proforma(3) basis. In Australia, whilst we experienced a
softer market along with increased competition, our Ladbrokes and Neds brands
continue to deliver unique content and engaging products. Entain Australia's
partnership with TAB NZ also provides a broader differentiated experience for
sports betting customers in New Zealand as well as Australia, and we look
forward to customers in New Zealand enjoying an enhanced experience as our
offer migrates to Entain Australia's technology platform in 2024.
Our NGR in Brazil was down 14%cc(2) year on year reflecting our disappointing
operational execution in early 2023. We installed a new management team,
taking swift action to realign customer acquisition channels, payment
processing and product engagement, and are pleased to be seeing positive signs
from the impact of these actions taken. As the Brazilian sports betting and
gaming regulation progresses towards licencing during 2024 the market will
remain intensely competitive. However, we remain excited for our Brazilian
business and believe we are well positioned in this fast growing regulated
market. Sportingbet remains a strong brand and we are focused on rebuilding
market share growth, leveraging an improved app experience, product
innovation, as well as our 365Scores acquisition supporting growth going
forward.
Entain's CEE business continues to perform strongly, maintaining its market
leadership with the SuperSport brand in Croatia and expanding our presence
across the CEE region with the acquisition of STS Holdings in Poland.
Proforma(3) NGR was up 13%cc(2) for Online and 4%cc(2) for Retail on a
constant currency basis. SuperSport proforma(3) Online NGR grew 29%cc(2)
benefitting from its leading omni-channel offering and its first to market
cashout offering, whilst STS Online NGR was flat year on year, reflecting its
sports only offering impacted by customer friendly sporting results in October
offsetting prior growth.
Our Crystalbet brand remains the market leader in Georgia and continues to
perform well. Online NGR grew +7%cc(2), reflecting the strength of our
operations and brand, and sees us well positioned as the market digests
increases in online gaming taxes and licence costs in 2024.
Enlabs continues to perform well, with profoma NGR +3%cc(2) despite some
markets in the Baltics and Nordics experiencing more challenging economic
environments. Enlabs delivered +13% growth in active customers supported by
localised offering of sports and gaming products.
In Germany, we continue to see the impact of new regulatory measures alongside
limited regulatory enforcement. Despite some unregulated operator exits during
2023, the uneven operating landscape remains a significant challenge to
licenced operators adhering to regulation. Our Online NGR for Germany declined
year on year. However, our bwin brand continues to be strong and we remain
positive on the German market's long-term prospects, but regulatory
enforcement is critical.
During 2023, we added further capabilities to evolve our offering and customer
engagement further. Our acquisitions of 365Scores and Angstrom Sports enable
us to expand our content, data and analytical capabilities, and ultimately
enhance our customer's experience.
365Scores is one of the world's leading sports apps providing highly engaged
sports fans real time action and results. Its access, content and data
insights are a key part of how we are reinvigorating our offering in Brazil
and addressing this exciting regulating growth opportunity.
Arguably the most significant for our business, particularly for the US
opportunity and BetMGM's performance, was our acquisition of Angstrom Sports.
Angstrom will provide next generation sports modelling, forecasting and data
analytics. BetMGM is already seeing benefits from offering customers more
betting markets and more accurate pricing. With this addition, Entain will
become the only global operator with a full in-house suite of end-to-end
analytics, risk and pricing capabilities for US sports betting products.
We are excited to build on BetMGM's momentum and successes during 2023. Its
performance inline with targets and achievement of H2 EBITDA profitability
validates our business model and sees BetMGM in position to be self funded
going forward.
BetMGM is established as one of the leaders in the fast-growing, highly
competitive US sports betting and iGaming market. In 2023, BetMGM continued
delivering good growth, with NGR up 36% to $1.96 billion and achieved
profitability over the latter three quarters of the year. Our products are
available in 28 markets with a combined market share of 14%(5) in sports
betting and iGaming across the US.
BetMGM also made fantastic progress against key strategic initiatives,
solidifying the foundations for 2024 and beyond. As well as delivering
substantial enhancements to our app features, design and speed, the seamless
execution of SASW functionality across 21 states was the most significant
upgrade to BetMGM's customer experience. BetMGM players can now travel across
these states, betting with the same account credentials and wallet. We have
already seen improved retention KPIs, a 5x increase in new state bettors who
had previously played with BetMGM in a different state, with multi-state
customers now representing over 20% NGR. Together with our partner, MGM
Resorts International, we look forward to unlocking this powerful
differentiator for BetMGM customers in Nevada, with state regulator's approval
of our SASW functionality expected during 2024.
Revised strategic priorities
The Group has been transformed over the last four years since becoming Entain,
delivering an improved sustainable business only operating in regulated or
regulating markets. In November 2023 we updated our corporate strategy,
focusing on three strategic objectives to deliver value for our shareholders
as the next phase of our transformation:
• Drive organic growth
• Expand online margins
• Empower growth in US
Drive Organic Growth - We are rebalancing our portfolio to prioritise growth
and returns, exiting smaller markets where the timeframe for suitable returns
is too long, such as Chile, Peru, Zambia and Kenya. In addition, we have
closed our B2C operations of Unikrn and are focusing on delivering the Unikrn
eSports offer through our existing sports betting and gaming brands.
We are refocusing our operational execution on customer acquisition and
retention, by reinvigorating our acquisition channels and accelerating
technology and product delivery. In two of our markets, UK & Brazil we see
significant opportunities to drive value through our commercial excellence
programme, including, simplified and streamlined customer journeys, more
effective marketing, improved app experience and products, especially in
sports betting.
Player protection remains embedded in our ambition to deliver the best
experience for customers, however, our approach must evolve along with our
offering, ensuring it is localised and appropriate for each market.
Margin Expansion - Having grown rapidly through M&A we now need to focus
on simplifying our operations, removing duplication and enabling greater
agility. Our efficiency programme, Project Romer, will not only improve ways
of working for our teams, but will also unlock efficiencies through
operational streamlining, functional integration and restructuring, as well as
deliver net cost savings of £70m by 2025. Coupled with maximising our
operational leverage we can expand our EBITDA margins over time, creating
better returns for our shareholders.
US Market Growth - Our focus to drive our US performance remains a key
strategic priority. BetMGM is established as one of the leaders in this fast
growing highly competitive industry. Much of this success is underpinned by
Entain technology and product capabilities, which have been significantly
strengthened for our US proposition. Entain's acquisition of Angstrom further
accelerates this, particularly for our parlay and in-play products with Same
Game Parlay ("SGP"), SGP+ and new LIVE SGP pricing models. Our strategic
roadmap for 2024 sees BetMGM invest behind this strengthening and
differentiated offering. BetMGM's Big Game commercial campaign, as well as
partnership with X, demonstrate the drive behind the brand to accelerate
player acquisition and retention. BetMGM is the only top three operator with a
licenced mobile app live in Nevada. This advantage will be amplified when
BetMGM's single account single wallet functionality receives licence approval
in Nevada. Working closely with our co-parent, BetMGM will be able to unlock
the power of MGM Resorts unique omni-channel advantages leveraging the Las
Vegas visitor footfall as well as tentpole events for a deep and replenishing
pool of players. We remain committed to empowering BetMGM as it continues to
progress towards delivering c$500m of EBITDA in 2026.
Sustainability - A key enabler supporting our growth
In November 2023, we unveiled a refreshed sustainability charter. This updated
charter was informed by a double materiality assessment we conducted
throughout H1 2023, which identified how sustainability-related issues impact
our business and how we impact the environment in which we operate. Our
charter's four pillar structure encapsulates the sustainability issues that
are most important to Entain, our customers and partners:
• Be a leader in player protection
• Provide a secure and trusted platform
• Create an environment for everyone to do their best work
• Positively impact our communities
A leader in player protection - Our objective is to be a leader in player
protection. In 2023, our safer gaming programme ARC™ ("Advanced
Responsibility and Care") was rolled out across 22 jurisdictions alongside the
continuing optimisation of ARC™ features. This saw a significant increase in
the volume of interactions and interventions with customers, with 6.1 million
ARC™ interactions in 2023, up 121% versus 2022.
In recognition of these efforts, during 2023 Entain won a number of
responsible operator awards(1) including EGR, SBC and Vixio.
At the start of 2024 we updated our regulatory and safer gaming charter based
around four principles:
• Only operate in regulated markets or in markets with a clear
path to regulating
• Committed to a constructive and progressive relationship with
regulators
• Always comply with in-market regulation
• Take a market leading approach to player protection in each
market we operate, developing and using tools to identify & limit customer
harm
Provide a secure and trusted platform - We operate in a highly regulated
sector where the highest ethical standards are critical in maintaining trust
with our customers and wider society - from gold standard data protection,
keeping crime out of betting and gaming, to eliminating poor working
conditions in our supplier base. Through this strategy, our expectations of
ourselves is to exceed these standards. We have a comprehensive training
programme for all our colleagues across the Group and I am delighted with the
completion rates.
Governance oversight from the Board is key to ensuring robust execution and
accountability across the business. Further details on these processes are set
out in our Governance report on page 96.
Create an environment for everyone to do their best work - Ensuring we are
able to attract a broad and diverse pool of the best talent is vital for our
success. We aim to be an employer of choice with an inclusive and supportive
culture, where talents from all backgrounds can flourish. Our Diversity,
Equity and Inclusion (DE&I) strategy is built on establishing strong
networks and having launched the Women@Entain and Pride@Entain groups in 2022,
in 2023 we launched Black Professionals@Entain, a new network designed to
create a culture where black colleagues can thrive professionally and
personally.
As a technology based employer, we also recognise the importance of
encouraging women to succeed in the sector. In 2023, Entain partnered with the
McLaren F1 team on a returnship programme, providing unique opportunities for
skilled women to resume their STEM careers. Over six months, 10 career
returners worked at both Entain and McLaren in roles ranging from Data
Analysts to Software Developers. The programme received accolades, including
the Innovator of the Year at the Women in Gaming Diversity Awards.
Positively impact our communities - We were proud to be the first betting and
gaming company to formally commit to a Net Zero target for carbon emissions
with the Science-based Targets Initiative (SBTi). This reflects our ambition
to lead the industry on decarbonisation, along with our commitment to reduce
our absolute scope 1 and 2 (market-based) and material Scope 3 emissions by
42% by 2027 and 60% by 2030, from a 2020 base year. In 2023, our Net Zero
Action Group developed our first net-zero strategy to help us achieve these
ambitions.
We also want to make a positive impact on our communities through the
charitable work of the Entain Foundation. Our flagship Pitching In programme
in the UK pioneers engagement between semi-professional football and local
communities. Our funding of the Trident Community Foundation has helped to
deliver over 100 initiatives to improve the lives of thousands of people
across the country. Last year we also continued to partner with a range of
charities, such as bringing access to technology with community-based
technology hubs in partnership with ComputerAid as well as delivering support
to under privileged communities in the US with the Charles Oakley Foundation.
Notes
(1) Awarded; EGR North America Socially Responsible Operator 2023, SBC
Global and SBC LATAM Socially Responsible Operator of the Year, and Vixio
Global Regulatory Award for Outstanding Contribution to Safer Gambling
(2) Growth on a constant currency basis is calculated by translating both
current and prior year performance at the 2023 exchange rates
(3) Proforma references include all 2022 and 2023 acquisitions as if they
had been part of the Group since 1 January 2022
(4) UK Retail LFL YoY NGR is calculated based on shops that traded for the
full year in both 2023 and 2022
(5) Market share for last three months ending November 2023 by GGR,
including only US markets where BetMGM was active; internal estimates used
where operator-specific results are unavailable
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 have also
provided additional information in the form of constant currency(2),
proforma(3), Contribution(4) and EBITDA(5) 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.
CHIEF FINANCIAL OFFICER'S REVIEW
FINANCIAL PERFORMANCE REVIEW
Group
Year Ended 31 December Results(1)
2023 2022 Change CC(2)
£m £m % %
NGR 4,833.1 4,348.9 11% 11%
VAT/GST (63.5) (52.0) (22%) (29%)
Revenue 4,769.6 4,296.9 11% 11%
Gross profit 2,907.0 2,714.7 7%
Contribution(4) 2,279.4 2,128.9 7%
Operating costs excluding marketing costs (1,271.5) (1,135.7) (12%)
Underlying EBITDA(5) 1,007.9 993.2 1%
Share based payments (21.7) (19.2) (13%)
Underlying depreciation and amortisation (301.5) (238.1) (27%)
Share of JV (loss)/income (42.9) (194.1) 78%
Underlying operating profit(6) 641.8 541.8 18%
Results(1):
NGR and Revenue increased by +11% versus 2022 (+11%cc(2)), with proforma(3)
growth in Retail and the benefit of acquisitions more than offsetting a
-3%cc(2) proforma(3) decline in Online NGR, as we continue to face regulatory
headwinds in both the UK and Germany and experienced soft trading in Australia
and Brazil. Total Online NGR was +12% ahead of 2022 whilst Retail NGR was +9%
ahead.
Contribution(4) in the year of £2,279.4m was +7% higher than 2022 reflecting
the increase in NGR, offset by a reduction in contribution(4) margin of
-1.8pp, due to territory mix, increased taxation in Australia and the
reclassification of certain content costs in Retail to cost of sales rather
than operating costs, following the move to a revenue share arrangement.
Operating costs were 12% higher due to the impact of acquisitions (8pp), FX
(1pp) and underlying inflation, including wage rate and energy price
inflation, partially offset by the reclassification of costs to cost of sales.
Resulting in underlying EBITDA(5) of £1,007.9m, +1% higher than 2022.
Share based payment charges were £2.5m higher than last year, while
underlying depreciation and amortisation was 27% higher, reflecting the impact
of businesses acquired in the year (14pp), the annualisation of prior year
acquisitions and continued investment in the business. Share of JV losses of
£42.9m includes an operating loss of £42.0m relating to BetMGM (2022:
£193.9m), which was in line with expectations.
Group underlying operating profit(6) was +18% ahead of 2022. After charging
separately disclosed items of £1,286.5m (2022: £213.2m), Group operating
loss was £644.7m (2022: profit of 328.6m).
Online
Year Ended 31 December Results(1)
2023 2022 Change CC(2)
£m £m % %
Sports wagers 13,724.5 14,090.5 (3%) (2%)
Sports margin 13.7% 12.9% 0.8pp
Sports NGR 1,531.0 1,443.7 6% 7%
Gaming NGR 1,837.6 1,576.9 17% 15%
B2B NGR 57.9 29.9 94% 90%
Total NGR 3,426.5 3,050.5 12% 12%
VAT/GST (59.9) (52.0) (15%) (21%)
Revenue 3,366.6 2,998.5 12% 12%
Gross profit 1,980.1 1,829.6 8%
Contribution(4) 1,369.8 1,254.2 9%
Contribution(4) margin 40.0% 41.1% (1.1pp)
Operating costs excluding marketing costs (512.4) (426.0) (20%)
Underlying EBITDA(5) 857.4 828.2 4%
Share based payments (7.3) (7.8) 6%
Underlying depreciation and amortisation (160.2) (118.3) (35%)
Share of JV (loss)/income (1.4) (0.2) (600%)
Underlying operating profit(6) 688.5 701.9 (2%)
Results(1):
Whilst there is underlying momentum in a number of our key markets, regulatory
headwinds in the UK and Germany, as well as weaker trading in Australia and
Brazil, impacted NGR performance in 2023. Resulting proforma(3) Online NGR was
down -3%cc(2) in the year but, with the benefit of acquisitions total Online
NGR was +12%cc(2) ahead of 2022. Whilst proforma(3) NGR was down year on year,
actives grew +10% year on year on a proforma(3) basis, emphasising the ongoing
attraction of our brands to our customers.
In the UK, we continue to absorb the impact of regulatory changes and as a
result NGR was down -6%. Excluding the impact of these regulatory headwinds,
we estimate that underlying NGR was +4% ahead of 2022, while actives were +18%
higher than the same period last year.
In Italy, constant currency(2) NGR was +3% ahead of 2022. Whilst our brands,
along with the rest of the market, lost online market share to one of the
leading operators during 2023, our omni-channel offering continues to resonate
with customers with combined Online and Retail NGR +63%cc(2) ahead of
pre-Covid levels.
Local market conditions in Australia have been challenging during 2023 leaving
year on year NGR -6% down on a constant currency(2) basis. Whilst we expect
trading to remain challenging in 2024, we remain confident in our strategy
focussing on brand differentiation, new and innovative products and the
customer experience.
In Germany, whilst we have seen some non-compliant operators exit the market,
the continued lack of robust regulatory enforcement as well as new regulation
last Summer continues to impact the business. Resulting NGR in 2023 was -26%
behind 2022 on a constant currency(2) basis, primarily driven by lower spend
per head. Whilst we received our gaming licences in November 2022, it is
disappointing that we are still yet to see the level of enforcement action
that is needed in this market to combat unlicensed operators and ensure
customers are protected.
In Brazil, we continue to see a fiercely competitive market ahead of
regulation with a significant increase in the amount spent on marketing by
various operators. Whilst we were initially slow to react to changes in the
market, we are confident that following a change in our regional leadership we
now have the team and localised expertise needed to regain share in this
exciting growth market, an opportunity that our 365Scores acquisition will
help us further leverage. NGR in Brazil was -14%cc(2) behind the prior year.
Georgia NGR was +7%cc(2) ahead of 2022 on a constant currency(2) basis, with
our Crystalbet brand performing strongly following the implementation of new
regulation in the prior year. Following a strong 2023, our Crystalbet brand
continues to be the market leader in Georgia.
In the Baltics, proforma(3) NGR was +3%cc(2) ahead of 2022 despite high
inflation rates in the region. Our brands remain resilient despite the
economic pressures in the Baltic states and we continue to attract more
customers each year with proforma(3) actives +13% ahead of 2022.
Our Entain CEE business continues to perform well with proforma(3) NGR
+13%cc(2) ahead year on year. NGR in our SuperSport business in Croatia was
+29%cc(2) ahead of 2022 (proforma(3)) maintaining its position as the market
leader. NGR in our recent acquisition in Poland, STS, was flat year on year
with c4%cc(2) growth to the end of Q3 offset by poor margins in October.
NGR in our newly acquired New Zealand business was £84.7m in 2023, slightly
ahead year on year on a proforma(3) basis.
Contribution(4) margin of 40.0% was in line with guidance but 1.1pp behind
2022 due to territory mix and the impact of additional taxation in Australia
which was implemented in H2 of 2022.
Operating costs were 20% higher than 2022 with recent acquisitions driving
16pp of the increase and FX 1pp with the remaining 3pp due to underlying
inflation offset by the initial benefits from Project Romer.
Underlying EBITDA(5) of £857.4m was +4% ahead of 2022, albeit flat year on
year excluding the benefit of TAB NZ accounting treatment to 2023, reflecting
the contribution from acquired businesses offset by the decline in proforma(3)
NGR and 1.1pp reduction in contribution(4) margin.
Resulting underlying operating profit(6) of £688.5m was £13.4m behind 2022
with depreciation and amortisation of £160.2m, £41.9m higher than 2022, half
of which is a result of the impact of new acquisitions, including
annualisation of those in the prior year, with the remainder of the increase
due to recent investment in our technology and product. After charging
separately disclosed items of £481.1m (2022: £114.0m), operating profit was
£207.4m (2022: £701.9m).
Retail
The Retail business is made up of our Retail estates in the UK, Italy,
Belgium, Croatia, New Zealand, Republic of Ireland and Poland.
Year Ended 31 December Results(1)
2023 2022 Change CC(2)
£m £m % %
Sports wagers 4,341.7 3,893.5 12% 11%
Sports margin 18.9% 18.3% 0.6pp
Sports NGR/Revenue 813.0 705.2 15% 14%
Machines NGR/Revenue 573.7 572.6 0% 0%
NGR 1,386.7 1,277.8 9% 8%
VAT/GST (3.6) - - -
Revenue 1,383.1 1,277.8 8% 8%
Gross profit 900.2 860.0 5%
Contribution(4) 890.3 852.1 4%
Contribution(4) margin 64.2% 66.7% (2.5pp)
Operating costs excluding marketing costs (606.1) (571.9) (6%)
Underlying EBITDA(5) 284.2 280.2 1%
Share based payments (2.4) (2.3) (4%)
Underlying depreciation and amortisation (132.1) (112.4) (18%)
Share of JV income - - -
Underlying operating profit(6) 149.7 165.5 (10%)
Results(1):
Our Retail businesses continue to show the strength of their offer and
customer appeal with 2023 Revenue and NGR both +8%cc(2) ahead of 2022 and
proforma(3) NGR +2%cc(2) ahead.
In the UK, NGR was +2% ahead of 2022 on a LFL(7) basis, with strong
performance across both sports and gaming. Our strong underlying performance
continues to be driven by an ongoing focus on market leading content for our
gaming machines and betting terminals with both providing a proposition akin
to the digital offering but combined with the in-shop experience that cannot
be replicated online.
NGR in Italy was up +16% on a constant currency(2) basis with a number of
enhancements to our offering and the customer experience including cash-out,
reduced minimum bet sizes and continuous development of our SSBT proposition
driving greater customer engagement.
Proforma(3) NGR in Croatia grew at +14%cc(2) year on year further enhancing
our market leading position and reflecting our program of improvements to the
customer offer, including the introduction of a loyalty scheme and enhanced
sports content.
In Belgium, NGR was up +10%cc(2) with Ireland NGR +1%cc(2) ahead year on year.
Our newly acquired Retail businesses in Poland and New Zealand contributed
£40.4m of NGR during 2023.
Contribution(4) of £890.3m was +4% ahead of 2022 with contribution(4) margin
falling by 2.5pp due to territory mix and the impact of certain content costs
(1pp) which are now classified as cost of sales rather than operating costs as
they move to revenue share arrangements from fixed fees.
Operating costs were 6% higher than in 2022 with the impact of acquisitions
(5pp) and inflation, including wage rate and energy price inflation, more than
offsetting the benefit of costs which are now classified within cost of
sales.
Resulting underlying EBITDA(5) of £284.2m was £4.0m ahead of 2022.
Depreciation of £132.1m was £19.7m higher than 2022, largely due to the
impact of acquisitions and the continued investment in our retail estates.
Underlying operating profit(6) of £149.7m was £15.8m behind 2022 and, after
charging £22.8m of separately disclosed items (2022: £57.4m), operating
profit was £126.9m, £18.8m ahead of last year.
New Opportunities
Year Ended 31 December Results(1)
2023 2022 Change
£m £m %
Underlying EBITDA(5) (29.3) (29.1) (1%)
Share based payments (0.7) (0.3) (133%)
Underlying depreciation and amortisation (5.7) (4.5) (27%)
Share of JV (loss)/income (1.5) (0.4) (275%)
Underlying operating loss(6) (37.2) (34.3) (8%)
Results(1):
New Opportunities underlying costs(5) of £29.3m were 1% higher than 2022 with
increased start-up marketing costs in our Unikrn brand offset by reduced costs
associated with our innovation programme. Unikrn has now been closed as a B2C
operation and development of our e-Sports wagering offering is now focussed on
our existing labels. After depreciation and amortisation and share of JV loss,
New Opportunities underlying operating loss(6) was £37.2m, an increase in
losses of £2.9m on 2022 and, after charging separately disclosed items of
£44.3m (2022: £nil), was a loss of £81.5m, £47.2m more than in the prior
year.
Other
Year Ended 31 December Results(1)
2023 2022 Change CC(2)
£m £m % %
NGR/Revenue 26.7 25.1 6% 6%
Gross profit 26.7 25.1 6%
Contribution(4) 26.3 25.0 5%
Operating costs excluding marketing costs (21.0) (20.1) (4%)
Underlying EBITDA(5) 5.3 4.9 8%
Share based payments - - -
Underlying depreciation and amortisation (2.7) (2.7) -
Share of JV income 2.0 0.4 400%
Underlying operating profit(6) 4.6 2.6 77%
Results(1):
NGR of £26.7m was 6% higher than 2022 driven by additional income in our
greyhound stadia with 2022 impacted by adverse weather. Underlying EBITDA(5)
of £5.3m was an increase of £0.4m on 2022, with the additional NGR offset by
increased overheads associated with the aforementioned increase in number of
meets. Underlying operating profit(6) of £4.6m was £2.0m ahead of last year
and after charging separately disclosed items of £nil (2022: £0.7m) was
£2.7m ahead of 2022.
Corporate
Year Ended 31 December Results(1)
2023 2022 Change
£m £m %
Underlying EBITDA(5) (109.7) (91.0) (21%)
Share based payments (11.3) (8.8) (28%)
Underlying depreciation and amortisation (0.8) (0.2) (300%)
Share of JV loss (42.0) (193.9) 78%
Underlying operating loss(6) (163.8) (293.9) 44%
Results(1):
Corporate underlying costs(5) of £109.7m were £18.7m higher than last year
driven by increases in our contributions to Research, Education and Treatment,
including GambleAware, increased legal costs and ongoing investment in our
governance policies and procedures.
After share based payments, depreciation and amortisation and share of JV
losses, Corporate underlying operating loss(6) was £163.8m, a decrease of
£130.1m. The share of JV loss of £42.0m relates to BetMGM. After charging
separately disclosed items of £737.2m (2022: £41.1m), the operating loss was
£902.0m versus £335.0m in 2022.
Notes
(1) 2023 and 2022 statutory results are audited, with the tables presented
relating to continuing operations and including both statutory and
non-statutory measures
(2) Growth on a constant currency basis is calculated by translating both
current and prior year performance at the 2023 exchange rates
(3) Proforma references include all 2022 and 2023 acquisitions as if they
had been part of the Group since 1 January 2022
(4) Contribution represents gross profit less marketing costs and is a key
performance metric used by the Group, particularly in Online
(5) EBITDA is earnings before interest, tax, depreciation and
amortisation, share based payments and share of JV income. EBITDA is stated
pre separately disclosed items
(6) Stated pre separately disclosed items
(7) UK Retail LFL YoY NGR is calculated based on shops that traded for the
full year in both 2023 and 2022
STATUTORY PERFORMANCE REVIEW
Results(1)
Year ended 31 December 2023 2022 Change CC(2)
£m £m % %
NGR 4,833.1 4,348.9 11% 11%
Revenue 4,769.6 4,296.9 11% 11%
Gross profit 2,907.0 2,714.7 7%
Contribution(4) 2,279.4 2,128.9 7%
Underlying EBITDA(5) 1,007.9 993.2 1%
Share based payments (21.7) (19.2) (13%)
Underlying depreciation and amortisation (301.5) (238.1) (27%)
Share of JV loss (42.9) (194.1) 78%
Underlying operating profit(6) 641.8 541.8 18%
Net underlying finance costs(6) (229.4) (84.7)
Net foreign exchange/financial instruments 32.5 (135.3)
Profit before tax pre separately disclosed items 444.9 321.8
Separately disclosed items:
Amortisation of acquired intangibles (254.6) (116.9)
Recognition of HMRC settlement liability (585.0) -
Other (447.9) (102.0)
(Loss)/profit before tax (842.6) 102.9
Tax (36.1) (70.0)
(Loss)/profit after tax from continuing activities (878.7) 32.9
Discontinued operations (57.8) (13.4)
(Loss)/profit after tax (936.5) 19.5
NGR and Revenue
Group NGR and revenue were +11% ahead of last year and the same on a constant
currency basis(2), with Online NGR +12% and Retail NGR +9% year on year.
Further details are provided in the Financial Performance Review section.
Underlying operating profit(6)
The Group reported underlying operating profit(6) of £641.8m, +18% ahead of
2022 (2022: £541.8m). Underlying EBITDA(5) was +1% ahead, with the increase
in revenue offset by additional taxes, particularly in Australia, and
increased operating costs largely associated with acquired businesses and
inflation. Depreciation and amortisation was -27% higher than 2022 driven by
depreciation on acquired businesses as well as on our recent investment in
product and technology. The Group's share of BetMGM losses in the period
were £42.0m, £152.1m lower than 2022 as the business continues on its path
to profitability. Analysis of the Group's performance for the period is
detailed in the Financial Performance Review section.
Financing costs
Underlying finance costs of £229.4m excluding separately disclosed items of
£1.0m (2022: £5.7m) were £144.7m higher than 2022 driven by interest on the
Group's new $1bn USD term loan, which was raised in Q4 of 2022, increased
drawdowns on the Group's RCF and the impact of the increase in global interest
rates.
Net gains on financial instruments, driven primarily by a foreign exchange
gain on re-translation of debt related items, were £32.5m in the period
(2022: £135.3m loss). This gain is offset by a foreign exchange loss 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 year amount to £1,287.5m (2022:
£218.9m) and relate to the Deferred Prosecution Agreement ("DPA") with the
Crown Prosecution Service of £585.0m (2022: £nil), £254.6m of amortisation
on acquired intangibles (2022: £116.9m), corporate transaction costs of
£17.8m (2022: £23.9m), restructuring costs, including the initial costs of
Project Romer, of £49.7m (2022: £11.8m) and legal and onerous contract costs
of £17.6m (2022: £8.1m) primarily relating to the legal costs associated
with the HMRC investigation. The Group also recorded a £1.0m loss on disposal
of assets (£2022: £1.0m), £71.8m on movements in fair value of contingent
consideration (2022: £1.0m income), primarily relating to discount unwind on
TAB NZ consideration, and £1.0m in financing costs (2022: £5.7m).
In addition, the Group has also recognised an impairment charge of £289.0m
during the current year (2022: £7.0m) with impairments recognised against our
Australian business of £190.0m, our closed B2C operations in Unikrn and
Africa of £78.1m, and smaller impairments against our ROI Retail business,
closed shops and offices in the UK and our Totolotek business in Poland of
£20.9m.
The charge which has arisen in the Group's Australian CGU is a result of the
impact of ongoing increases in the rate of Point of Consumption tax across
certain states and a forecast decline in Australian revenues in 2024 as a
result of a reduced market outlook. Our Australian business continues to be
profitable and strategically important. Post the annualisation of the tax
increases and stabilisation of local market conditions, we expect our
Australian business to return to growth.
During the prior year, the Group also recognised a £45.5m charge in respect
of the repayment of amounts received under the Governments Covid Furlough
scheme.
Separately disclosed items
2023 2022
£m £m
Legal settlement (585.0) -
Amortisation of acquired intangibles (254.6) (116.9)
Impairment (289.0) (7.0)
Corporate transaction costs (17.8) (23.9)
Restructuring costs (49.7) (11.8)
Legal and onerous contract costs (17.6) (8.1)
(Loss)/profit on sale of assets (1.0) (1.0)
Movement in fair value of contingent consideration (71.8) 1.0
Other including financing (1.0) (5.7)
Furlough repayments - (45.5)
Total (1,287.5) (218.9)
Profit/(loss) before tax
The Group's profit before tax(6) and separately disclosed items was £444.9m
(2022: £321.8m), a year-on-year increase of £123.1m with the growth in
underlying EBITDA(5), a decrease in BetMGM losses and a gain on foreign
exchange partially offset by the increase in depreciation and amortisation and
interest. After charging separately disclosed items, the Group recorded a
pre-tax loss from continuing operations of £842.6m (2022: £102.9m profit),
with the separately disclosed costs discussed above having a significant
impact on the reported results.
Taxation
The tax charge on continuing operations for the period was £36.1m (2022:
£70.0m), reflecting an underlying effective tax rate pre-BetMGM losses and
foreign exchange gains on external debt of 23.0% (2022: 15.4%) and a tax
credit on separately disclosed items of £69.7m (2022: charge of £27.9m).
Discontinued operations
During the current year, the Group recorded a £57.8m (2022: £13.4m) loss in
discontinued operations relating to its former Intertrader business which was
disposed of in November 2021. The loss recorded primarily reflects legal costs
associated with historic matters as well as a provision for a potential
settlement with former owners of part of the business following a long running
legal dispute.
Cashflow
Year ended 31 December 2023 2022
£m £m
Cash generated by operations 810.0 846.9
Corporation tax (137.3) (106.1)
Interest (224.6) (100.6)
Net cash generated from operating activities 448.1 640.2
Cash flows from investing activities:
Acquisitions & disposals (1,315.4) (738.6)
Cash acquired/disposed 87.9 29.9
Dividends received from associates 9.6 3.6
Net capital expenditure (259.9) (212.0)
Investment in Joint ventures (40.7) (175.1)
Purchase of investments (3.1) -
Net cash used in investing activities (1,521.6) (1,092.2)
Cash flows from financing activities:
Equity issue 589.8 -
Net proceeds from borrowings 1,780.3 838.4
Repayment of borrowings (1,428.6) (271.8)
Subscription of funds from non-controlling interest 350.5 174.3
Settlement of financial instruments and other financial liabilities (279.9) 8.7
Repayment of finance leases (68.5) (83.0)
Equity dividends paid (106.9) (50.0)
Minority dividends paid (7.4) -
Net cash used in financing activities 829.3 616.6
Foreign exchange (13.7) 6.8
Net increase/(decrease) in cash (257.9) 171.4
During the period, the Group had a net cash outflow of £257.9m (2022: inflow
of £171.4m).
Net cash generated by operations was £810.0m (2022: £846.9m) including
£1,007.9m of underlying EBITDA(5) (2022: £993.2m) and a working capital
inflow of £601.8m largely due to payments not having started on the DPA
(2022: £45.9m) offset by separately disclosed items that are reported in
operating activities of £741.9m (2022: £96.0m) including the DPA but
excluding items charged to depreciation, amortisation and impairment as well
as a £57.8m loss on discontinued operations (2022: £13.4m). Included within
working capital is a £29.7m outflow for balances held with payment service
providers as well as customer funds, which are net debt neutral (2022:
£47.9m).
During the period £137.3m was paid out in relation to corporate taxes (2022:
£106.1m) with a further £224.6m paid out in interest (2022: £100.6m).
Net cash used in investing activities for the period was £1,521.6m (2022:
£1,092.2m) and includes cash outflows for acquisitions of £1,315.4m (2022:
£738.6m), net investment in capital expenditure of £259.9m (2022: £212.0m),
an additional £40.7m invested in BetMGM (2022: £175.1m) and £3.1m of other
investments (2022: £nil). These outflows were partially offset by cash
acquired with acquisitions of £87.9m (2022: £29.9m) and dividends received
from associates of £9.6m (2022: £3.6m).
During the period the Group received a net £829.3m (2022: £616.6m) from
financing activities. £589.8m was raised through the equity issuance (2022:
£nil) with a further £1,780.3m through new financing facilities (2022:
£838.4) which were used, in part, to repay £1,428.6m of debt (2022:
£271.8m) including £400m against the Group's retail bond. During the period,
the Group also received £350.5m from minority holdings to meet their
obligations under the Supersport earn-out and STS acquisition. These amounts
are recorded in non-controlling interests (2022: £174.3m for the acquisition
of SuperSport). £279.9m was paid on settlement of other financial instruments
and liabilities, primarily relating to contingent consideration on previous
acquisitions. In the prior year, the Group received £8.7m on the settlement
of other financial instruments and liabilities as a result of the receipt of
£41.6m on the partial settlement on a number of swap arrangements, partially
offset by contingent consideration payments. Lease payments of £68.5m (2022:
£83.0m) including those on non-operational shops, were made in the period.
During the period, the Group also paid £106.9m in equity dividends (2022:
£50.0) and £7.4m in dividends to the minority interest in Entain CEE (2022:
£nil).
Net debt and liquidity
As at 31 December 2023, adjusted net debt(7) was £3,290.9m and represented an
adjusted net debt(7) to underlying EBITDA(5) ratio of 3.3x (3.1x proforma(3)).
The Group has drawn down £295m on the revolving credit facility at 31
December 2023 (2022:£nil).
Par value Issue costs/ Premium Total
£m £m £m
Term loans (3,420.5) 64.1 (3,356.4)
Interest accrual (1.6) - (1.6)
(3,422.1) 64.1 (3,358.0)
Cash 400.6
Net debt (2,957.4)
Cash held on behalf of customers (196.8)
Fair value of swaps held against debt instruments (85.6)
Other debt related items* 224.8
Lease liabilities (275.9)
Adjusted net debt (3,290.9)
*Other debt related items include balances held with payment service
providers, deposits and other similar items
Refinancing
On 1 March 2024, the Group raised an additional £300m of borrowings under a
bank loan facility and used the proceeds to repay all amounts drawn under the
Group's revolving credit facility. Concurrently, the commitments available
under the Group's revolving credit facility (disclosed in note 17) were
increased by £45m further increasing the Group's available liquidity. As
such, the Group's revolving credit facility now has total commitments of
£635m which, as at 1 March 2024, was completely undrawn save £5m carved out
for letters of credit and guarantees.
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 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 such as legislation changes impacting the
Group's Online business and severe data privacy and cybersecurity breaches.
Given the level of the Group's available cash post the recent extension of
certain financing facilities (se note 17) and the forecast covenant headroom
even under the sensitised downside scenarios, the Directors believe that the
Group and the Company are well placed to manage the risks and uncertainties
that it faces. As such, the Directors have a reasonable expectation that the
Group and the Company will have adequate financial resources to continue in
operational existence, for at least 12 months (being the going concern
assessment period) from date of approval of the financial statements, and
have, therefore, considered it appropriate to adopt the going concern basis of
preparation in the financial statements.
Notes
(1) 2023 and 2022 statutory results are audited, with the tables presented
relating to continuing operations and including both statutory and
non-statutory measures
(2) Growth on a constant currency basis is calculated by translating both
current and prior year performance at the 2023 exchange rates
(3) Proforma references include all 2022 and 2023 acquisitions as is they
had been part of the Group since 1 January 2022
(4) Contribution represents gross profit less marketing costs and is a key
performance metric used by the Group, particularly in Online
(5) EBITDA is earnings before interest, tax, depreciation and
amortisation, share based payments and share of JV income. EBITDA is stated
pre separately disclosed items
(6) Stated pre separately disclosed items
(7) Adjusted net debt excludes the DPA settlement of £585.0m. Leverage
also excludes any benefit from future BetMGM EBITDA or the payments due to
acquire the minority interests in Entain CEE
CONSOLIDATED INCOME STATEMENT
2023 2022
For the year ended 31 December
Notes Underlying Separately disclosed Total Underlying Separately disclosed Total
items items items items
(Note 6) (Note 6)
£m £m £m £m £m £m
Net Gaming Revenue 4,833.1 - 4,833.1 4,348.9 - 4,348.9
VAT/GST (63.5) - (63.5) (52.0) - (52.0)
Revenue 5 4,769.6 - 4,769.6 4,296.9 - 4,296.9
Cost of sales (1,862.6) - (1,862.6) (1,582.2) - (1,582.2)
Gross profit 2,907.0 - 2,907.0 2,714.7 - 2,714.7
Administrative costs (2,222.3) (1,286.5) (3,508.8) (1,978.8) (213.2) (2,192.0)
Contribution 2,279.4 - 2,279.4 2,128.9 - 2,128.9
Administrative costs excluding marketing (1,594.7) (1,286.5) (2,881.2) (1,393.0) (213.2) (1,606.2)
Group operating profit/(loss) before share of results from joint ventures and 684.7 (1,286.5) (601.8) 735.9 (213.2) 522.7
associates
Share of results from joint ventures and associates (42.9) - (42.9) (194.1) - (194.1)
Group operating profit/(loss) 641.8 (1,286.5) (644.7) 541.8 (213.2) 328.6
Finance expense 7 (241.8) (1.0) (242.8) (89.0) (5.7) (94.7)
Finance income 7 12.4 - 12.4 4.3 - 4.3
(Losses)/gains arising from change in fair value of financial instruments 7 (90.6) - (90.6) (23.1) - (23.1)
Gains/(losses) arising from foreign exchange on debt instruments 7 123.1 - 123.1 (112.2) - (112.2)
Profit/(loss) before tax 444.9 (1,287.5) (842.6) 321.8 (218.9) 102.9
Income tax (105.8) 69.7 (36.1) (97.9) 27.9 (70.0)
Profit/(loss) from continuing operations 339.1 (1,217.8) (878.7) 223.9 (191.0) 32.9
Loss for the year from discontinued operations after tax - (57.8) (57.8) - (13.4) (13.4)
Profit/(loss) for the year 339.1 (1,275.6) (936.5) 223.9 (204.4) 19.5
Attributable to:
Equity holders of the parent 304.1 (1,232.7) (928.6) 225.6 (201.4) 24.2
Non-controlling interests 35.0 (42.9) (7.9) (1.7) (3.0) (4.7)
339.1 (1,275.6) (936.5) 223.9 (204.4) 19.5
Earnings per share on profit/(loss) for the year
from continuing operations 44.3p(1) (141.4p) 60.9p(1) 6.4p
From profit/(loss) for the year 9 44.3p(1) (150.7p) 60.9p(1) 4.1p
Diluted earnings per share on profit/(loss) for the year
from continuing operations 44.2p(1) (141.4p) 60.5p(1) 6.3p
From profit/(loss) for the year 9 44.2p(1) (150.7p) 60.5p(1) 4.1p
Memo
EBITDA 1,007.9 (742.9) 265.0 993.2 (89.3) 903.9
Share-based payments (21.7) - (21.7) (19.2) - (19.2)
Depreciation, amortisation and impairment (301.5) (543.6) (845.1) (238.1) (123.9) (362.0)
Share of results from joint ventures and associates (42.9) - (42.9) (194.1) - (194.1)
Group operating profit/(loss) 641.8 (1,286.5) (644.7) 541.8 (213.2) 328.6
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 9 for
further details.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December Notes 2023 2022
£m £m
(Loss)/profit for the year (936.5) 19.5
Other comprehensive (expense)/income:
Items that may be reclassified to profit or loss:
Currency differences on translation of foreign operations (83.5) 182.9
Total items that may be reclassified to profit or loss (83.5) 182.9
Items that will not be reclassified to profit or loss:
Re-measurement of defined benefit pension scheme (3.7) (24.7)
Tax on re-measurement of defined benefit pension scheme 1.3 8.6
Surplus/(deficit) on revaluation of other investment 1.1 (2.6)
Share of associate other comprehensive expense (1.1) -
Total items that will not be reclassified to profit or loss (2.4) (18.7)
Other comprehensive (expense)/income for the year, net of tax (85.9) 164.2
Total comprehensive (expense)/income for the year (1,022.4) 183.7
Attributable to:
Equity holders of the parent (1,020.8) 182.3
Non-controlling interests (1.6) 1.4
CONSOLIDATED BALANCE SHEET
At 31 December Notes 2023 2022
£m Restated (Note 15)
£m
Assets
Non-current assets
Goodwill 10 4,716.0 3,980.9
Intangible assets 10 3,960.1 2,676.2
Property, plant and equipment 12 533.4 507.2
Interest in joint venture - -
Interest in associates and other investments 47.1 53.5
Trade and other receivables 31.8 38.6
Other financial assets - 0.2
Deferred tax assets 493.2 157.3
Retirement benefit asset 61.8 63.8
9,843.4 7,477.7
Current assets
Trade and other receivables 503.2 500.3
Income and other taxes recoverable 71.5 30.7
Derivative financial instruments 31.9 72.9
Cash and cash equivalents 400.6 658.5
1,007.2 1,262.4
Total assets 10,850.6 8,740.1
Liabilities
Current liabilities
Trade and other payables (878.6) (720.0)
Balances with customers 13 (196.8) (200.5)
Lease liabilities (65.7) (65.1)
Interest-bearing loans and borrowings (319.2) (424.9)
Corporate tax liabilities (48.6) (45.3)
Provisions (20.9) (20.6)
Derivative financial instruments (117.5) (79.2)
Deferred and contingent consideration and other financial liabilities (157.0) (208.8)
(1,804.3) (1,764.4)
Non-current liabilities
Trade and other payables (433.8) -
Interest-bearing loans and borrowings (3,038.8) (2,689.1)
Lease liabilities (210.2) (215.8)
Deferred tax liabilities (825.1) (495.4)
Provisions (4.2) (5.4)
Deferred and contingent consideration and other financial liabilities (1,741.5) (253.4)
(6,253.6) (3,659.1)
Total liabilities (8,057.9) (5,423.5)
Net assets 2,792.7 3,316.6
Equity
Issued share capital 5.2 4.8
Share premium 1,796.7 1,207.3
Merger reserve 2,527.4 2,527.4
Translation reserve 150.4 240.2
Retained earnings (2,211.7) (846.9)
Equity shareholders' funds 2,268.0 3,132.8
Non-controlling interests 524.7 183.8
Total shareholders' equity 2,792.7 3,316.6
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Issued share Share Merger Translation reserve1 Retained earnings Equity shareholders' funds Non- controlling Total
reserve
capital premium
£m £m interests shareholders' equity
£m
£m £m £m
£m
£m
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/(expense) - - - 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 - - - - - - 178.9 178.9
Recognition of put liability - - - - (181.2) (181.2) - (181.2)
Purchase of non-controlling interests - - - - (3.7) (3.7) 2.1 (1.6)
Equity dividends (Note 8) - - - - (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
At 1 January 2023 4.8 1,207.3 2,527.4 240.2 (846.9) 3,132.8 183.8 3,316.6
Loss for the year - - - - (928.6) (928.6) (7.9) (936.5)
Other comprehensive income/(expense) - - - (89.8) (2.4) (92.2) 6.3 (85.9)
Total comprehensive income - - - (89.8) (931.0) (1,020.8) (1.6) (1,022.4)
Issue of shares 0.4 589.4 - - - 589.8 - 589.8
Share-based payments charge - - - - 23.6 23.6 - 23.6
Business combinations (Note 15) - - - - - - 354.0 354.0
Recognition of put option liability - - - - (350.5) (350.5) - (350.5)
Purchase of non-controlling interests - - - - - - (4.1) (4.1)
Equity dividends (Note 8) - - - - (106.9) (106.9) (7.4) (114.3)
At 31 December 2023 5.2 1,796.7 2,527.4 150.4 (2,211.7) 2,268.0 524.7 2,792.7
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 2023 2022
£m £m
Cash generated by operations 14 810.0 846.9
Income taxes paid (137.3) (106.1)
Net finance expense paid (224.6) (100.6)
Net cash generated from operating activities 448.1 640.2
Cash flows from investing activities:
Acquisitions(1) (1,315.4) (738.6)
Cash acquired on business combinations 87.9 29.9
Dividends received from associates 9.6 3.6
Purchase of intangible assets (191.5) (129.9)
Purchase of property, plant and equipment (69.1) (82.1)
Proceeds from the sale of property, plant and equipment including disposal of 0.7 -
shops
Purchase of investments in associates and other investments (3.1) -
Investment in joint ventures (40.7) (175.1)
Net cash used in investing activities (1,521.6) (1,092.2)
Cash flows from financing activities:
Proceeds from issue of ordinary shares 589.8 -
Net proceeds from borrowings 1,780.3 838.4
Repayment of borrowings (1,419.2) (109.0)
Repayment of borrowings on acquisition (9.4) (162.8)
Subscription of funds from non-controlling interests 350.5 174.3
Settlement of derivative financial instruments (13.2) 41.6
Settlement of other financial liabilities (266.7) (32.9)
Payment of lease liabilities (68.5) (83.0)
Dividends paid to shareholders (106.9) (50.0)
Dividends paid to non-controlling interests (7.4) -
Net cash used in financing activities 829.3 616.6
Net (decrease)/increase in cash and cash equivalents (244.2) 164.6
Effect of changes in foreign exchange rates (13.7) 6.8
Cash and cash equivalents at beginning of the year 658.5 487.1
Cash and cash equivalents at end of the year 400.6 658.5
1. Included within cash flows from acquisitions is £5.4m relating to the
purchase of minority holdings in STS (2022: £1.7m relating to the purchase of
minority holdings in Scout Gaming AB and Global Gaming Limited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 Corporate information
Entain plc ("the Company") is a company incorporated and domiciled in the Isle
of Man on 5 January 2010 whose shares are traded publicly on the London Stock
Exchange. The principal activities of the Company and its subsidiaries ("the
Group") are described in the strategic report. The consolidated financial
statements of the Group for the year ended 31 December 2023 were authorised
for issue in accordance with a resolution of the Directors on 7 March 2024.
The nature of the Group's operations and its principal activities are set out
in Note 5.
2 Basis of preparation
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 in
accordance with the requirements of 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 3.
The consolidated financial statements are presented in Pounds Sterling (£).
All values are in millions (£m) rounded to one decimal place except where
otherwise indicated. The separately disclosed items have been included within
the appropriate classifications in the consolidated income statement. Further
details are given in Note 6.
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 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 such as legislation changes impacting the
Group's Online business and severe data privacy and cybersecurity breaches.
Given the level of the Group's available cash post the recent extension of
certain financing facilities (see Note 17) and the forecast covenant headroom
even under the sensitised downside scenarios, the Directors believe that the
Group and the Company are well placed to manage the risks and uncertainties
that it faces. As such, the Directors have a reasonable expectation that the
Group and the Company will have adequate financial resources to continue in
operational existence, for at least 12 months (being the going concern
assessment period) from date of approval of the financial statements, and
have, therefore, considered it appropriate to adopt the going concern basis of
preparation in the financial statements.
3 Changes in accounting policies
From 1 January 2023 the Group has applied, for the first time, certain
standards, interpretations and amendments. The adoption of the following
standards and amendments to standards did not have a material impact on the
current period or any prior period upon transition:
- Amendments to IAS 1 Presentation of Financial Statements;
disclosure of accounting policies;
- Amendments to IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors; definition of accounting estimates;
- Amendments to IAS 12 Income Taxes; deferred tax related to
assets and liabilities arising from a single transaction;
- Amendments to IAS 12 International Tax Reform Pillar Two Model
Rules;
- IFRS 17 Insurance Contracts; original issue.
4 Summary of significant accounting policies
4.1 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.
4.2 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 6)
- business combinations (Note 15).
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 2023 the
Group separately disclosed a net charge on continuing operations before tax of
£1,287.5m including £254.6m 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 6.
Business combinations - Acquisition consideration
For business combinations, in assessing the relevant consideration
transferred, certain judgements are required to assess whether transfers of
assets reflect payments for future service or elements of acquisition
consideration. Specifically, for the Tab NZ acquisition, the Group has
committed to make minimum guaranteed funding payments to Tab NZ in the first
five years post completion, with further contingent payments subject to
revenue performance due up to and including year 25. As there are no ongoing
obligations or service requirements on the selling party, these payments have
been deemed to form part of consideration under IFRS 3 rather than ongoing
deductions on profits. Further details are provided in Note 15.
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 15).
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. This is
particularly relevant for the Tab NZ acquisition where the value of contingent
consideration is material. Further details are provided in Note 15 which
include associated sensitivities to the estimates taken.
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 and other relevant information for the
businesses acquired. Fair value movements and the unwinding of the discounting
is recognised within the income statement as a separately disclosed item. See
Note 6 and Note 15 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.
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 11 for details on sensitivity analysis performed around
these estimates.
Impairment losses are recognised in the consolidated income statement and
during the current year, the Group has recognised an impairment charge of
£289.0m primarily against the Group's Australian CGU, the closed B2C
operations in Africa, and under the Unirkn B2C offering. See Note 11 for
further details.
4.3 Other accounting policies
'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 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.
The useful lives applied to the Group's intangible assets are as follows:
Exclusive New Zealand licence 25-year duration of licence
Other licences Lower of 15 years, or duration of licence
Software - purchased & internally capitalised costs 2-15 years
Trademarks & brand names 10-25 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.
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.
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. 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.
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.
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
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 derecognised. 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.
All financial liabilities are recorded as cash flows from financing
activities.
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 re-measurement 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 is Pounds Sterling (£).
Other than Sterling the main functional currencies of subsidiaries are the
Euro (€), the US Dollar ($) and the Australian Dollar (A$). At the reporting
date, the assets and liabilities of non-sterling subsidiaries are translated
into Pounds Sterling (£) at the rate of exchange ruling at the balance sheet
date and their cash flows are translated at the weighted average exchange
rates for the year. The post-tax exchange differences arising on the
retranslation are taken directly to other comprehensive income.
Transactions in foreign currencies are initially recorded in the subsidiary's
functional currency and translated at the foreign currency rate ruling at the
date of the transaction. Monetary assets and liabilities denominated in
foreign currencies are retranslated at the foreign currency rate of exchange
ruling at the balance sheet date.
All foreign currency translation differences are taken to the consolidated
income statement. Non-monetary items that are measured at historical cost in a
foreign currency are translated using the exchange rate at the date of the
initial transaction. Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rate at the date when the fair
value was determined.
On disposal of a foreign entity, the deferred cumulative retranslation
differences previously recognised in equity relating to that particular
foreign entity are recognised in the consolidated income statement as part of
the profit or loss on disposal.
The following exchange rates were used in 2023 and 2022:
2023 2022
Currency Average Year end Average Year end
Euro (€) 1.149 1.151 1.175 1.128
US Dollar ($) 1.242 1.274 1.245 1.208
Australian Dollar (A$) 1.873 1.866 1.788 1.775
NZ Dollars (NZD) 2.024 2.010 1.955 1.904
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,
judgement has been applied in the Group's accounting for Greek tax and further
disclosure is given in Note 16.
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 LBOs, on course betting, Core Telephone Betting, mobile betting and
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, admission fees 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 9.
4.4 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:
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
IFRS 7 Financial Instruments Disclosures Supplier Financial Arrangements 1 January 2024
IAS 7 Statement of Cash Flows Supplier Finance Arrangements 1 January 2024
5 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 split into the five reportable segments as
detailed below:
- Online: comprises betting and gaming activities from online and
mobile operations. Brands include bwin, Coral, Crystalbet, Eurobet, Ladbrokes,
Sportingbet, SuperSport, Sports Interaction, STS, Tab NZ and BetCity,
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, Croatia, New Zealand and Poland;
- 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 Stadia.
The Executive Management Team of the Group has chosen to assess the
performance of operating segments based on a measure of NGR, EBITDA, and
operating profit with finance costs and taxation considered for the Group as a
whole. See page 69 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:
2023 Online Retail All other segments New opportunities Corporate Elimination Total Group
of internal revenue
£m £m £m £m
£m £m £m
NGR(1) 3,426.5 1,386.7 26.7 - - (6.8) 4,833.1
VAT/GST (59.9) (3.6) - - - - (63.5)
Revenue 3,366.6 1,383.1 26.7 - - (6.8) 4,769.6
Gross profit 1,980.1 900.2 26.7 - - - 2,907.0
Contribution(2) 1,369.8 890.3 26.3 (7.0) - - 2,279.4
Operating costs excluding marketing costs (512.4) (606.1) (21.0) (22.3) (109.7) - (1,271.5)
Underlying EBITDA before separately disclosed items 857.4 284.2 5.3 (29.3) (109.7) - 1,007.9
Share-based payments (7.3) (2.4) - (0.7) (11.3) - (21.7)
Depreciation and amortisation (160.2) (132.1) (2.7) (5.7) (0.8) - (301.5)
Share of joint ventures and associates (1.4) - 2.0 (1.5) (42.0) - (42.9)
Operating profit/(loss) before separately disclosed items 688.5 149.7 4.6 (37.2) (163.8) - 641.8
Separately disclosed items (Note 6) (481.1) (22.8) - (44.3) (738.3) - (1,286.5)
Group operating profit/(loss) 207.4 126.9 4.6 (81.5) (902.1) - (644.7)
Net finance expense (197.9)
Loss before tax (842.6)
Income tax (36.1)
Loss for the year from continuing operations (878.7)
Loss for the year from discontinued operations (57.8)
after tax
Loss for the year after discontinued operations (936.5)
1. Included within NGR are amounts of £68.1m (2022: £65.6m) in relation
to online poker services and £26.7m (2022: £25.1m) 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.
5 Segment information (continued)
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 (426.0) (571.9) (20.1) (26.7) (91.0) - (1,135.7)
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 6) (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
Geographical information
Revenue by destination and non-current assets on a geographical basis for the
Group, are as follows:
2023 2022
Revenue Non-current Revenue Non-current
assets3 assets3
£m £m
£m £m
United Kingdom 1,953.8 3,076.8 2,032.7 3,022.3
Australia and New Zealand 515.1 1,475.4 463.0 528.8
Italy 517.4 512.2 472.6 523.3
Rest of Europe(1) 1,443.4 3,930.2 968.7 2,922.4
Rest of the world(2) 339.9 293.8 359.9 259.6
Total 4,769.6 9,288.4 4,296.9 7,256.4
1. Rest of Europe is predominantly driven by markets in Croatia, Belgium,
The Netherlands, Georgia, Germany, and Spain.
2. Rest of the world is predominantly driven by the markets in Brazil and
Canada.
3. Non-current assets excluding other financial assets, deferred tax assets
and retirement benefit assets.
6 Separately disclosed items
2023 2022
Tax impact Tax impact
£m £m £m £m
Legal settlement1 585.0 - - -
Amortisation of acquired intangibles2 254.6 (41.6) 116.9 (16.5)
Impairment(3) 289.0 - 7.0 -
Restructuring costs(4) 49.7 (9.6) 11.8 (1.4)
Corporate transaction costs(5) 17.8 - 23.9 (0.6)
Legal and onerous contract provisions(6) 17.6 (3.0) 8.1 (0.8)
Movement in fair value of contingent consideration(7) 71.8 (15.5) (1.0) -
Loss on disposal of property, plant and equipment(8) 1.0 - 1.0 -
Financing(9) 1.0 - 5.7 -
Furlough(10) - - 45.5 (8.6)
Separately disclosed items for the year from continuing operations 1,287.5 (69.7) 218.9 (27.9)
Separately disclosed items for the year from discontinued operations 57.8 - 13.4 -
Total before tax 1,345.3 (69.7) 232.3 (27.9)
Separately disclosed items for the year after tax 1,275.6 204.4
1. On 5 December 2023, Entain plc entered into a Deferred
Prosecution Agreement ("DPA") with the Crown Prosecution Service ("CPS") in
relation to historical conduct of the Group, thereby resolving the HM Revenue
& Customs ("HMRC") investigation into the Group. As a result of the
agreement reached, the Group has recognised a £585.0m discounted liability
during the current year in relation to amounts it has agreed to be pay in
relation to the disgorgement of profits, charitable donations and
contributions to CPS costs.
2. 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, SuperSport, STS, NZ
Tab and 365Scores.
3. Relates to impairments recorded against the Group's Australian
business of £190.0m, the assets associated with the Group's Unikrn and Africa
operations, which have closed as B2C operations during the year, of £78.1m,
an £11.0m impairment of the Group's ROI retail portfolio, an impairment
against the Group's Polish operation (excluding STS) of £5.1m and a number of
smaller impairments against ROU assets that the Group no longer intends to use
following their closure, including UK Retail shops. Further details are
provided in Note 11.
4. Primarily relates to costs associated with the Group's
restructuring programme Project Romer.
5. Transaction costs associated with the M&A activity including
the acquisition of 365Scores, NZ Tab, STS and Angstrom (see Note 15).
6. Relates primarily to costs associated with the Group's legal
expenses in cooperating with the HMRC investigation.
7. Reflects the movement in the fair value of contingent
consideration arrangements on recent acquisitions as well as the associated
discount unwind.
8. Relates to the loss on disposal of certain assets within the
Group's retail estates.
9. Fees incurred in respect of bridging loans and other financing
activities.
10. Relates to the repayment of monies received under the Government
furlough scheme in the prior year.
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.
7 Finance expense and income
2023 2022
£m £m
Interest on term loans, bonds and bank facilities (229.2) (76.2)
Interest on lease liabilities(1) (12.6) (12.8)
Other financing (Note 6) (1.0) (5.7)
Total finance expense (242.8) (94.7)
Interest receivable 12.4 4.3
Losses arising on financial derivatives (90.6) (23.1)
Gains/(losses) arising on foreign exchange on debt instruments 123.1 (112.2)
Net finance expense (197.9) (225.7)
1. Interest on lease liabilities of £12.6m (2022: £12.8m) is net of £0.2m
of sub-let interest receivable (2022: £0.2m).
8 Dividends
Pence per share 2023 2022 2023 2022
pence pence Shares in issue number Shares in issue number
2022 interim dividend paid - 8.5 - 588.8
2022 second interim dividend paid 8.5 n/a 588.8 n/a
2023 interim dividend paid 8.9 n/a 638.8 n/a
A second interim dividend of 8.9p (2022: 8.5p) per share, amounting to £56.9m
(2022: £50.0m) in respect of the year ended 31 December 2023, was proposed by
the Directors on 7 March 2024. The estimated total amount payable in respect
of the final dividend is based on the expected number of shares in issue on 7
March 2024. There are no income tax implications for the Group and Company
arising from the proposed second interim dividend. The 2022 second interim
dividend of 8.5p per share (£50.0m) was paid on 26 April 2023. The 2023
interim dividend of 8.9p per share (£56.8m) was paid on 18 September 2023.
In the year, the Group paid a dividend totalling £7.4m to non-controlling
interests (2022: £nil).
9 Earnings per share
Basic earnings per share has been calculated by dividing the loss for the year
attributable to shareholders of the Company of £928.6m (2022: £24.2m profit)
by the weighted average number of shares in issue during the year of 617.5m
(2022: 588.2m).
The dilutive effects of share options and contingently issuable shares are not
considered when calculating the diluted loss per share.
At 31 December 2023, there were 638.8m €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 4 and disclosed in Note 6.
Total earnings per share
Weighted average number of shares (millions) 2023 2022
Shares for basic earnings per share 616.0 588.2
Potentially dilutive share options and contingently issuable shares 1.5 4.5
Shares for diluted earnings per share 617.5 592.7
Total profit 2023 2022
£m £m
(Loss)/profit attributable to shareholders (928.6) 24.2
- from continuing operations (870.8) 37.6
- from discontinued operations (57.8) (13.4)
Losses arising from financial instruments 90.6 23.1
(Gains)/losses arising from foreign exchange debt instruments (123.1) 112.2
Associated tax charge on (losses)/gains arising from financial instruments and 1.1 (2.4)
foreign exchange debt instruments
Separately disclosed items net of tax (Note 6) 1,232.7 201.4
Adjusted profit attributable to shareholders 272.7 358.5
- from continuing operations 272.7 358.5
- from discontinued operations -
Standard earnings per share Adjusted earnings per share
Earnings per share (pence) 2023 2022 2023 2022
Basic earnings per share
- from continuing operations (141.4) 6.4 44.3 60.9
- from discontinued operations (9.3) (2.3) - -
From profit for the period (150.7) 4.1 44.3 60.9
Diluted earnings per share
- from continuing operations (141.4) 6.3 44.2 60.5
- from discontinued operations (9.3) (2.2) - -
From profit for the period (150.7) 4.1 44.2 60.5
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 51.1p
(2022: 93.9p) and a diluted adjusted earnings per share of 51.0p (2022: 93.2p)
from continuing operations.
10 Goodwill and intangible assets
Trade-marks & brand names
Goodwill Licences Software Customer Total
relationships
£m £m £m £m £m £m
Cost
At 1 January 2022 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 15) (1) 624.0 149.1 7.4 201.9 207.0 1,189.4
Disposals - (0.5) (13.9) - - (14.4)
Reclassification - - (1.0) - - (1.0)
At 31 December 2022 (restated)(1) 4,270.1 205.4 772.7 1,241.0 2,269.4 8,758.6
Exchange adjustment (68.2) 11.8 (12.7) (12.3) (17.4) (98.8)
Additions - - 191.5 - - 191.5
Additions from business combinations (Note 15) 1,067.5 747.8 49.8 275.5 439.5 2,580.1
Disposals - - (2.9) - - (2.9)
At 31 December 2023 5,269.4 965.0 998.4 1,504.2 2,691.5 11,428.5
Accumulated amortisation and impairment
At 1 January 2022 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
Exchange adjustment (13.3) (0.1) (9.1) (13.8) (7.3) (43.6)
Amortisation charge - 45.3 138.0 141.4 90.4 415.1
Impairment charge 277.5 - 2.2 0.5 2.1 282.3
Disposals - - (2.9) - - (2.9)
At 31 December 2023 553.4 71.5 649.0 1,146.1 332.4 2,752.4
Net book value
At 31 December 2022 3,980.9 179.1 251.9 223.0 2,022.2 6,657.1
At 31 December 2023 4,716.0 893.5 349.4 358.1 2,359.1 8,676.1
(1. ) Restatement of prior year intangible valuations has been
made in relation to the prior year SuperSport acquisition during the
subsequent measurement period. See note 15 for further details.
At 31 December 2023 the Group had not entered into contractual commitments for
the acquisition of any intangible assets (2022: £nil).
Included within trade-marks and brand names are £1,398.4m (2022: £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, as
well as licences acquired as part of the NZ Tab acquisition (see Note 15).
Software relates to the cost of acquired software, through purchase or
business combination, and the capitalisation of internally developed software.
Additions of £191.5m (2022: £129.9m) include £92.6m of internally
capitalised costs (2022: £58.0m).
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, Enlabs,
Sport Interaction, SuperSport, BetCity, 365Scores, and Tab NZ businesses.
11 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, European, CEE and Tab NZ Retail, the cash-generating units ("CGUs")
are generally an individual Licensed 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. All forecasts take into account the impact of the
Group's commitment to be Net Zero by 2035 as well as the impact of climate
change.
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 to 8 range from 0% to 10%. From
year 9 onwards long-term growth rates used are between 0% and 2% (2022:
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. Whilst the same approach is adopted for
Tab NZ impairment reviews, the value-in-use is assessed over the 25-year life
of the licence rather than into perpetuity.
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 remained consistent year-on-year,
and the associated carrying value of goodwill by CGU is as follows:
Goodwill 2023 2022 2023 2022
(restated)(1)
% % £m £m
Digital 11.1 12.6-12.9 2,263.4 2,230.7
UK Retail 12.6 12.6 76.4 76.4
Australia 13.5 13.5 145.0 347.5
European Retail 9.5-13.3 9.5-13.3 147.1 161.5
European Digital 9.5-13.3 9.5-13.3 343.3 350.4
Enlabs 11.8 11.8 205.3 209.6
BetCity 12.7 n/a 200.1 n/a
SuperSport 11.5 11.8 527.8 538.4
STS 11.7 n/a 389.1 n/a
365Scores 12.3 n/a 86.8 n/a
Tab NZ 11.1 n/a 255.5 n/a
All other segments 11.1-12.6 12.4 76.2 66.4
4,716.0 3,980.9
(1. ) Restatement of prior year intangible valuations has been
made in relation to the prior year SuperSport acquisition during the
subsequent measurement period. See note 15 for further details.
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.
Australia impairment
During the current year, the Group recorded a non-cash impairment charge of
£190.0m against the Online division. The charge has arisen in the Group's
Australian CGU and is a result of the impact of ongoing increases in the rate
of Point of Consumption tax across certain states and a forecast decline in
Australian revenues in 2024 as a result of a reduced market outlook.
Whilst our Australian business continues to be profitable and strategically
important, market conditions and tax headwinds have reduced the value in use
of the business resulting in the impairment charge. Post the annualisation of
the tax increases and stabilisation of local market conditions, we expect our
Australian business to return to growth.
Unikrn impairment
During the year, the Group took the decision to close its B2C eSports business
operating under the Unikrn brand, in favour of developing a leading eSports
proposition on existing labels. As a result of the decision to turn off its
B2C operations, the Group has recorded an £43.2m impairment of goodwill and
£1.1m impairment of trade-marks and brands associated with the Unikrn
operation during the current year within the New Opportunities segment.
Impala impairment
The Group has also taken the decision during 2023 to close its B2C operations
in Zambia and Kenya, operations that were run out of the previously acquired
African subsidiary. As a result of the decision to close these operations and
focus resources to drive growth in other markets, the Group has recorded an
impairment against the value of assets carried against this business. The
resulting impairment has been booked against goodwill of £29.9m, and against
software of £4.0m within the Online segment.
In addition, an impairment charge of £11.0m has been recognised during the
current year against our Retail estate in ROI as a result of a reduced outlook
for this market, and £5.0m against Totolotek following its closure post the
STS acquisition.
Sensitivity analysis
With the exception of Australia, no reasonable change in assumptions would
cause an additional impairment, including a 5% decrease in all cash flows or a
0.5pp increase in discount rates.
For Australia, a 10% increase in revenue would reduce the impairment by
£110.0m, whereas a 5% decrease in revenue would increase the impairment by
£48.0m. Each 0.5pp movement in the discount rate impacting the charge by
£20.0m.
Impairment testing across the business
http://www.rns-pdf.londonstockexchange.com/rns/9164F_1-2024-3-7.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/9164F_1-2024-3-7.pdf)
12 Property, plant and equipment
Land and buildings Plant and equipment Fixtures and fittings Leased assets
Total
£m £m £m £m £m
Cost
At 1 January 2022 26.8 102.5 188.3 572.3 889.9
Exchange adjustment 0.7 3.2 7.0 5.2 16.1
Additions 24.9 50.6 11.1 61.8 148.4
Additions from business combinations 0.2 3.2 4.4 9.5 17.3
Disposals (10.4) (20.2) (16.1) (3.5) (50.2)
Reclassification (1.6) 1.9 42.9 (42.2) 1.0
At 31 December 2022 40.6 141.2 237.6 603.1 1,022.5
Exchange adjustment (0.3) (2.1) (3.5) (1.4) (7.3)
Additions 18.0 27.0 45.9 45.6 136.5
Additions from business combinations (Note 15) 4.9 8.1 2.2 26.9 42.1
Disposals (4.5) (6.7) (5.7) (49.8) (66.7)
Reclassification - 0.9 (0.9) - -
At 31 December 2023 58.7 168.4 275.6 624.4 1,127.1
Accumulated depreciation
At 1 January 2022 11.3 38.3 52.2 320.9 422.7
Exchange adjustment 0.5 2.7 2.0 4.2 9.4
Depreciation charge 11.4 23.5 26.0 65.0 125.9
Impairment - 0.1 1.9 4.5 6.5
Disposals (10.3) (20.0) (16.1) (2.8) (49.2)
Reclassification - - 21.7 (21.7) -
At 31 December 2022 12.9 44.6 87.7 370.1 515.3
Exchange adjustment (0.2) (1.5) (2.0) (0.6) (4.3)
Depreciation charge 13.7 29.4 36.6 61.3 141.0
Impairment 0.9 0.7 0.4 4.7 6.7
Disposals (4.5) (6.0) (5.1) (49.4) (65.0)
Reclassification - (0.2) 0.2 - -
At 31 December 2023 22.8 67.0 117.8 386.1 593.7
Net book value
At 31 December 2022 27.7 96.6 149.9 233.0 507.2
At 31 December 2023 35.9 101.4 157.8 238.3 533.4
At 31 December 2023, the Group had not entered into contractual commitments
for the acquisition of any property, plant and equipment (2022: £nil).
Included within fixtures, fittings and equipment are assets in the course of
construction which are not being depreciated of £17.1m (2022: £10.6m),
relating predominantly to self-service betting terminals and the new point of
sale system in UK Retail.
An impairment charge of £6.5m (2022: £6.5m) has been made against closed
retail shops and office buildings included within leased assets in the year.
See Notes 6 and 11 for further details.
Analysis of leased assets:
Land and buildings Plant and equipment
Total
£m £m £m
Cost
At 1 January 2022 520.7 51.6 572.3
Exchange adjustment 5.0 0.2 5.2
Additions 60.0 1.8 61.8
Additions from business combinations 9.5 - 9.5
Disposals (2.0) (1.5) (3.5)
Reclassification - (42.2) (42.2)
At 31 December 2022 593.2 9.9 603.1
Exchange adjustment (1.3) (0.1) (1.4)
Additions 32.8 12.8 45.6
Additions from business combinations 26.0 0.9 26.9
Disposals (49.8) - (49.8)
At 31 December 2023 600.9 23.5 624.4
Accumulated depreciation
At 1 January 2022 299.8 21.1 320.9
Exchange adjustment 4.1 0.1 4.2
Depreciation charge 55.1 9.9 65.0
Impairment 4.5 - 4.5
Disposals (2.0) (0.8) (2.8)
Reclassification - (21.7) (21.7)
At 31 December 2022 361.5 8.6 370.1
Exchange adjustment (0.6) - (0.6)
Depreciation charge 59.0 2.3 61.3
Impairment 4.7 - 4.7
Disposals (49.4) - (49.4)
At 31 December 2023 375.2 10.9 386.1
Net book value
At 31 December 2022 231.7 1.3 233.0
At 31 December 2023 225.7 12.6 238.3
13 Net debt
The components of the Group's adjusted net debt are as follows:
2023 2022
£m £m
Current assets
Cash and short-term deposits 400.6 658.5
Current liabilities
Interest-bearing loans and borrowings (319.2) (424.9)
Non-current liabilities
Interest-bearing loans and borrowings (3,038.8) (2,689.1)
Net debt (2,957.4) (2,455.5)
Cash held on behalf of customers (196.8) (200.5)
Fair value swaps held against debt instruments (derivative financial (85.6) (6.5)
(liability)/asset)
Deposits 48.8 43.8
Balances held with payment service providers 176.0 149.8
Sub-total (3,015.0) (2,468.9)
Lease liabilities (275.9) (280.9)
Adjusted net debt including lease liabilities (3,290.9) (2,749.8)
Cash held on behalf of customers represents the outstanding balance due to
customers in respect of their online gaming wallets.
14 Notes to the statement of cash flows
Reconciliation of (loss)/profit to net cash inflow from operating activities:
2023 2022
£m £m
(Loss)/profit before tax from continuing operations (842.6) 102.9
Net finance expense 197.9 225.7
(Loss)/profit before tax and net finance expense from continuing operations (644.7) 328.6
Loss before tax and net finance expense from discontinued operations (57.8) (13.4)
(Loss)/profit before tax and net finance expense including discontinued (702.5) 315.2
operations
Adjustments for:
Impairment 289.0 7.0
Loss on disposal 1.0 1.0
Depreciation of property, plant and equipment 141.0 125.9
Amortisation of intangible assets 415.1 229.1
Share-based payments charge 23.6 19.2
Decrease/(increase) in trade and other receivables 42.2 44.7
Increase in other financial liabilities 62.7 2.2
(Decrease)/increase in trade and other payables 506.0 (85.9)
Decrease in provisions (1.9) (6.9)
Share of results from joint venture and associate 42.9 194.1
Pension settlement - 7.0
Other (9.1) (5.7)
Cash generated by operations 810.0 846.9
15 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
6 for details.
SuperSport
Measurement period adjustment
The initial value of goodwill recognised was £518.8m on acquisition.
Subsequent to this a measurement period adjustment has been applied to
increase the goodwill by £1.7m, increase licences by £1.5m, increase
trade-marks & brand names by £1.0m, decrease customer relationships by
£4.0m, and increase other liabilities by £0.2m.
Due to these measurement period adjustments, in line with IFRS 3 'Business
Combinations' it has been necessary to present a restated 2022 balance sheet
and related notes to the accounts for those balances affected.
Transactions with minority shareholders
During the period, the Group received by way of an equity injection into
Entain Holdings (CEE) Limited £42.6m from EMMA Capital in relation to their
25% share of the 2022 earn-out under the SuperSport acquisition. As EMMA
Capital holds a put option over its equity, which is enforceable on the Group
from November 2025, a financial liability equivalent to the equity injection
has been recognised to reflect the future liability within equity.
Summary of acquisitions in the period:
Acquisitions during the year relate primarily to online gaming activities. Tab
NZ, an STS also have retail estates. Fair values were determined on the basis
of an initial assessment performed by an independent professional expert.
NZ Ent Limited (trading as Tab NZ)
On 1 June, the Group completed the acquisition of a business (NZ Ent Limited)
which entitles them to the exclusive license to operate and run the brand of
Tab NZ in New Zealand for 25 years for an initial payment of £85.3m with a
further £10.6m paid following acquisition. As part of the acquisition, the
Group has also committed to make minimum guaranteed funding payments to Tab NZ
(the seller) in the first five years post completion, with further contingent
payments due up to and including year 25. As there are no ongoing obligations
or service requirements on the selling party, these payments have been deemed
to form part of consideration under IFRS 3 rather than ongoing deductions on
profits. As such, based on forecast performance for the Group's New Zealand
business and the estimated returns on the potential introduction of
geo-blocking, which could be significant, the discounted estimate of
consideration for the Tab NZ acquisition is £1,208.7m, which is considered to
be equal to the fair value.
In accordance with IFRS 3, as control has been obtained, the business has been
consolidated from the point of acquisition.
Details of the purchase consideration, and the values of net assets acquired
and goodwill are as follows:
Fair value
£m
Intangible assets (excluding goodwill) 894.6
Property, plant and equipment 17.4
Trade and other receivables 24.6
Cash and cash equivalents 10.2
Deferred tax asset 309.8
Deferred tax liability (242.6)
Trade and other payables (45.3)
Lease liabilities (10.5)
Total 958.2
Net assets acquired 958.2
Goodwill 250.5
Total net assets acquired 1,208.7
Consideration:
Cash 96.6
Deferred consideration 386.5
Contingent consideration 725.6
Total consideration 1,208.7
STS Holdings SA
On 23 August, a Group subsidiary, Entain CEE, acquired 99.28% of STS Holdings
S.A. ("STS") at a purchase price of PLN 24.80 per share. As part of the
acquisition and the funding of Entain CEE's purchase of STS, the majority
shareholder in STS acquired a 10% economic stake in the enlarged Entain CEE
business for cash with the existing minority shareholder, EMMA Capital, also
subscribing for additional equity in Entain CEE for cash to fund their
economic proportion of the acquisition. Total consideration for the
acquisition of STS was £748.6m, with minority holdings, including the
remaining 0.72% of shares not acquired as part of the initial purchase,
contributing £313.5m of the consideration. As the former majority shareholder
in STS and EMMA Capital have put options on their equity stake in Entain CEE,
the Group has recognised an equivalent financial liability for these two put
options.
Post the acquisition, the remaining 0.72% of equity in STS has been acquired
by Entain CEE, with each parent contributing in line with their economic
interest in Entain CEE.
In accordance with IFRS 3, as the Entain Group exercises control of CEE and
therefore indirectly controls STS, the business has been consolidated from the
point of acquisition.
Details of the purchase consideration, and the values of net assets acquired
and the goodwill are as follows:
Fair value
£m
Intangible assets (excluding goodwill) 401.3
Property, plant and equipment 22.6
Trade and other receivables 5.6
Cash and cash equivalents 56.7
Deferred tax liability (74.8)
Trade and other payables (21.5)
Lease liabilities (15.4)
Total 374.5
Net assets acquired 374.5
Goodwill 374.1
Total net assets acquired 748.6
Consideration:
Cash 435.1
Non-controlling interest 313.5
Total consideration 748.6
Other business combinations
BetCity
On 11 January, the Group acquired 100% of the share capital of BetCity for
initial consideration of €305m, including working capital adjustments, with
further contingent amounts payable in 2024 and beyond subject to financial
performance. Based on financial forecasts at the point of acquisition, total
discounted consideration has been assessed as €362m. Amounts payable are
capped at €550m.
In accordance with IFRS 3, as control has been obtained, the business has been
consolidated from the point of acquisition.
365Scores
On 30 March, the Group acquired 100% of the share capital of 365Scores for
$157m including working capital adjustments, with further contingent payments
payable subject to the achievement of certain financial targets capped at
$10m. Based on financial forecasts at the point of acquisition, total
discounted consideration has been assessed as $161m.
In accordance with IFRS 3, as control has been obtained, the business has been
consolidated from the point of acquisition.
Tiidal Gaming
On 9 June, the Group acquired 100% of the share capital of Tiidal Gaming for
£7.8m. There are no contingent consideration elements in the acquisition.
In accordance with IFRS 3, as control has been obtained, the business has been
consolidated from the point of acquisition.
ASF Limited (trading as Angstrom)
On 29 September the Group completed the acquisition of ASF Ltd, acquiring 100%
of the share capital of the business for initial consideration of $93.5m with
up to an additional $65.0m ($82.7m undiscounted) payable subject to the
achievement of certain milestones. Based on forecasts for the business'
performance post acquisition, total discounted consideration has been assessed
as $138.5m.
In accordance with IFRS 3, as control has been obtained, the business has been
consolidated from the point of acquisition.
Details of the total purchase consideration, and the values of net assets
acquired and goodwill on the acquisition of BetCity, 365Scores, Tiidal Gaming,
and Angstrom are as follows:
Fair value
£m
Intangible assets (excluding goodwill) 216.7
Property, plant and equipment 2.1
Trade and other receivables 26.2
Cash and cash equivalents 21.0
Deferred tax liability (51.5)
Loans and borrowings (9.4)
Trade and other payables (49.3)
Lease liability (1.0)
Total 154.8
Net assets acquired 154.8
Goodwill 442.9
Total net assets acquired 597.7
Consideration:
Cash 455.4
Contingent consideration 142.3
Total consideration 597.7
All of the acquired businesses contributed revenues of £357.6m and underlying
profit before tax of £34.9m.
Had the acquisitions occurred on the first day of the financial year the
revenue for the Group would have been £4,990.2m with an underlying profit
before tax of £493.4m.
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.
16 Commitments and contingencies
AUSTRAC
In October 2020, AUSTRAC initiated a compliance assessment of Entain Group Pty
Ltd, the Group's subsidiary in Australia ("Entain Australia"). Following two
years of assisting AUSTRAC with the assessment, Entain Australia was notified
in September 2022 that AUSTRAC would be commencing an enforcement
investigation. The investigation is focused on whether Entain Australia
complied with its obligations under the AML/CTF Act.
Entain Australia continues to co-operate fully with AUSTRAC's enforcement
team, and is liaising regularly with AUSTRAC's regulatory operations teams as
it implements a detailed remediation plan. As AUSTRAC are still conducting
their investigation and reviewing documentation, it is too early to predict
the likely timing and potential outcome of the investigation. Whilst the
details of the investigation into Entain Australia are different to other
AUSTRAC investigations in the bookmaking industry, the directors note that
previous penalties in AUSTRAC civil penalty proceedings have been significant.
Therefore, as at the Balance Sheet date, uncertainty exists over both the
timing and outcome of the investigation, with any potential penalty, should
one arise, potentially material.
The Group remains fully engaged, working collaboratively with AUSTRAC and
providing detailed quarterly updates on enhancements to its AML/CTF program.
Whilst significant progress has been made since 2022, this remains a key area
of focus.
As a leading gambling operator, the Group recognises that it has a
responsibility to keep financial crime out of gambling, and remains committed
to our customers, our shareholders and the communities that we operate in to
ensure we act as a gatekeeper for safer betting.
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. 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
€283.6m at 31 December 2023.
17 Subsequent events
On 1 March 2024, the Group raised an additional £300m of borrowings under a
bank loan facility and used the proceeds to repay all amounts drawn under the
Group's revolving credit facility. On 1 March 2024, the commitments
available under the Group's revolving credit facility were increased by £45m
further increasing the Group's available liquidity. Following these
transactions, the Group's revolving credit facility had total commitments of
£635m which, as at 1 March 2024 was completely undrawn save £5m carved out
for letters of credit and guarantees.
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