REG - Entain PLC - Interim Results
10/08/2023 07:00
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RNS Number : 8626I Entain PLC 10 August 2023
7.00am 10 August 2023
Entain plc
("Entain" or the "Group")
Strong H1 Group performance
Record online actives and further delivery of growth and sustainability
strategy
Entain plc (LSE: ENT), the global sports-betting, gaming and interactive
entertainment group, today reports Interim Results for the six-month period
ended 30 June 2023 ("H1").
Key highlights
· Strong H1 Group performance with record Online active customers
and further strategic delivery
· Total Group (including US) Net Gaming Revenue ("NGR") up 19%
(+16%cc(2))
o Group NGR (excluding US) up 14% (+11%cc(2)), +3% proforma(3)
· Online NGR +15% (12%cc(2)), +1% on a proforma(3) basis
o Excluding known regulatory impacts(4), proforma(3) Online NGR up +6%cc(2)
o Record level of online active customers, +23% YoY, +15% proforma(3),
demonstrating ongoing strategic focus of broadening our customer base
· Retail performed ahead of expectations with NGR +12% (+11%
cc(2)), +8%cc(2) proforma(3) supported by market leading offering across
betting and gaming terminals
· BetMGM performing strongly
o H1 NGR of $944m, up +55% YoY
§ Same state NGR growth of +25% from digital operations
o Established US operator with 18%(5) market share and continued iGaming
leadership with 27%(6) share
o Delivered positive EBITDA in Q2
o On track to deliver the upper end of FY23 NGR guidance of $1.8-$2.0bn
o Reiterate expectation to be EBITDA positive in H2 2023(7)
· Announced four transactions
o Entain CEE expansion into Poland with acquisition of STS Holdings to further
unlock the significant growth opportunities across the CEE region
o 25 year partnership with TAB NZ providing unique access to New Zealand
sports betting market
o Acquisitions of 365Scores and Angstrom Sports to expand content and product
capabilities
· As separately announced today, DPA negotiations have progressed
sufficiently that Entain believes it is likely to be able to agree a
resolution of the HMRC investigation into its legacy Turkish facing business,
which was sold in 2017
o Entain is therefore making a provision of £585 million against a potential
settlement payable over a four-year period
Financial highlights
· Group EBITDA(8) at £499m is up +6% vs prior year
· Group underlying profit before tax from continuing operations
£287.6m
· Group loss after tax from continuing operations £502.5m
· Proposed interim dividend of 8.9p per share, +5% year on year
· Successful placing of 48.8m new shares raising £600m to fund the
acquisition of STS Holdings and other strategic investments
· Successful issuance of £500m of Term Loans following strong
global demand enabling redemption of Ladbrokes Bonds due September 2023
· Net Debt of £2,594m at 30 June 2023
· FY 2023 Group EBITDA(8,11) expected to be in the range of
£1,000m to £1,050m(12), pre accounting for TAB NZ
Sustainability Highlights
· Only global operator with 100% of revenue from regulated or
regulating markets, having accelerated exit of markets with no clear path to
domestic regulation
· Further deployment of ARC(TM), continuing to protect players with
c4 million interactions year to date delivering a 36% drop in customer risk
rating
· Partnership with EPIC Risk Management delivering safer gambling
workshops to the NHLAA, NFLPA and MLSPA in the US
· Funding for a two-year Gordon Moody Charity alumni programme, and
Entain Foundation supported sponsorships for 50 new SportsAid athletes
· Entain & McLaren returnship programme launched, winning Women
in Gaming Diversity's 'Innovator' award
· Continued industry leadership and recognition across ESG;
maintained MSCI's AA rating and FTSE4Good index inclusion, and awarded as
'Safer Gambling Operator of the Year' by EGR North America and 'Most Socially
Responsible Operator' by Which Bingo
Jette Nygaard-Andersen, CEO of Entain, commented:
"This has been another period of strong performance for Entain as we make
clear strides towards delivering our strategic ambitions. In particular, we
are making excellent progress in broadening our customer base and deepening
our audience engagement, as evidenced by the record number of active online
customers on our platform. BetMGM continues to show momentum and backed by our
technology and capabilities we are excited by the improvements we are
delivering for customers in the US. I'd like to thank all my Entain colleagues
around the world for their hard work and dedication in delivering this
performance. This clear focus on driving sustainable long term growth combined
with our global operating capabilities underpins our confidence in our
prospects for FY23 and beyond and delivering value for our shareholders."
H1 Trading performance: 1 January to 30 June 2023
H1: Period 1 January to 30 June 2023
Total NGR Sport Wagers Sports Margin
Reported(1) cc(2) Proforma(3) cc(2) Reported(1) cc(2)
Online
Sports 6% 3% (4%) (3%) (5%) 1.1pp
Gaming 22% 19% 5%
Total Online 15% 12% 1%
Retail 12% 11% 8% 13% 11% 0.6pp
Total Group (ex US) 14% 11% 3%
BetMGM 65% 55%
Total Group incl 50% BetMGM 19% 16% 8%
H1 summary : 1 January to 30 June 2023
Total Group (ex US) Reported(1)
2023 2022 Change CC(2)
Six months to 30 June £m £m % %
Net gaming revenue (NGR) 2,404.3 2,117.6 14% 11%
Revenue 2,377.6 2,094.9 13% 11%
Gross profit 1,457.7 1,327.8 10%
Underlying EBITDA(8) 499.4 471.0 6%
Underlying operating profit(9) 307.4 246.5 25%
Underlying profit before tax(9) 287.6 152.4 89%
(Loss)/profit after tax (502.5) 28.1
Continuing diluted EPS (p) (83.9) 5.1
Continuing adjusted diluted EPS(10) (p) 21.6 29.3
Dividend per share (p) 8.9 8.5
( )
Dividend
In line with the Group's progressive dividend policy, the Board has proposed
an interim dividend of £56.5m (8.9p per share), a 5% increase per share year
on year. The interim dividend in respect of the H1 2023 results announced
today is expected to be paid in September 2023 to shareholders on register on
18 August 2023.
HMRC investigation provision
As announced on 31 May and updated today by separate announcement, Entain is
in deferred prosecution agreement (DPA) negotiations with the Crown
Prosecution Service (CPS) to resolve the ongoing HMRC investigation into its
legacy Turkish facing business, which it sold in 2017. The DPA negotiations
have now progressed to the point where Entain believes that it is likely to be
able to agree a resolution of the HMRC investigation insofar as it relates to
Entain and its Group. While the full terms of a DPA are subject to judicial
approval, Entain has a sufficient degree of confidence to take a provision of
£585 million against a potential settlement, which would be paid over a
four-year period in relation to alleged offences under Section 7 of the
Bribery Act 2010. Entain currently anticipates judicial approval will be
sought during Q4 2023.
Outlook
Entain's first half 2023 performance reflects the continued progress on our
growth and sustainability strategy. As we look to the remainder of 2023, our
underlying outlook expectations remain unchanged, however we remain mindful of
the external environment. Following recent acquisitions and an encouraging
start to H2 we expect FY 2023 Group EBITDA(8) (pre accounting for TAB NZ) to
be in the range of £1,000m to £1,050m(12). We remain excited by the
opportunities ahead, confident that our customer focus, diversification and
strategic execution will deliver further progress for all stakeholders.
Notes
(1) 2023 reported numbers are unaudited and relate to continuing
operations
(2) Growth on a constant currency basis is calculated by translating
both current and prior year performance at the 2023 exchange rates
(3) Proforma adjusted for SuperSport and BetCity acquisitions
(4) Adjusted for known regulatory changes impact of UK affordability
measures and lack of enforcement in Germany post licensing
(5) Market share for last three months ending April 2023 by GGR
including iGaming, retail and online sports betting, and only U.S. markets
where BetMGM was active excluding New York; internal estimates used where
operator-specific results are unavailable
(6) Market share for last three months ending April 2023 by GGR,
including only U.S. markets where BetMGM was active; internal estimates used
where operator specific results are unavailable
(7) Based on current assumption of future live markets
(8) EBITDA is defined as earnings before interest, tax, depreciation
and amortisation, share based payments and share of JV income. EBITDA is
stated pre-separately disclosed items
(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 8 in the interim financial statements)
(11) References to profit expectations are made on a reported basis post
IFRS 16 implementation
(12) Includes expected contribution from STS and Angstrom acquisitions yet
to be completed, but excludes an estimated c£35m benefit to EBITDA from TAB
NZ profit share payments which are deemed to form part of consideration under
IFRS 3 (see CFO report for further detail)
Enquiries:
Investor Relations - Entain plc investors@entaingroup.com (mailto:investors@entaingroup.com)
David Lloyd-Seed, Chief IR & Communications Officer
Davina Hobbs, Head of Investor Relations
Aimee Remey, VP US Investor Relations
Callum Sims, IR Manager
Media - Entain plc media@entaingroup.com (mailto:media@entaingroup.com)
Lisa Attenborough, Head of Corporate Communications
Jay Dossetter, Head of Corporate PR
Jodie Hitch, PR Manager
Powerscourt Tel: +44 (0) 20 7250 1446
Rory Godson/Rob Greening/Sam Austrums entain@powersco (mailto:entain@powerscourt-group.com) urt-group.com
(mailto:entain@powerscourt-group.com)
H1 Conference Call & Webcast
The H1 2023 results presentation for analysts and investors will be held
today, Thursday 10(th) August at 9:00am BST. Participants may join via webcast
or conference call dial in, approximately 15 minutes ahead of the event.
Live webcast link: Entain 2023 Interim Results
(https://eur03.safelinks.protection.outlook.com/?url=https%3A%2F%2Fkvgo.com%2FIJLO%2FEntain_Interim_Results&data=05%7C01%7CDavina.Hobbs%40entaingroup.com%7C604f66838cdf4d36a84c08db8eaef491%7C60c43c0a64ac4050bf3e31e1cdfffdeb%7C0%7C0%7C638260654332581412%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=uUQzoqEUOdJ3ZhbUH1B5jUDNDHxcujJRHH7fl67gCw4%3D&reserved=0)
To participate in the Q&A, please also connect via the conference call
dial in details.
UK +44 (0) 20 4587 0498
US +1 855 979 6654
Access Code: 015731
The presentation slides will be accessible on our website shortly before the
event. A replay and transcript will be available afterwards;
https://entaingroup.com/investor-relations/results-centre/
(https://entaingroup.com/investor-relations/results-centre/)
Upcoming dates:
Q3 Trading update: 02 November 2023
Dividend Timetable
Announcement date: 10 August 2023
Ex-Dividend date 17 August 2023
Record date: 18 August 2023
Payment date: 22 September 2023
Forward-looking statements
This document contains certain statements that are forward-looking statements.
They appear in a number of places throughout this document and include
statements regarding our intentions, beliefs or current expectations and those
of our officers, directors and employees concerning, amongst other things,
results of our operations, financial condition, liquidity, prospects, growth,
strategies and the business we operate. These forward-looking statements
include all matters that are not historical facts. By their nature, these
statements involve risks and uncertainties since future events and
circumstances can cause results and developments to differ materially from
those anticipated. Any such forward-looking statements reflect knowledge and
information available at the date of preparation of this document. Other than
in accordance with its legal or regulatory obligations (including under the
Market Abuse Regulation (596/2014) 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 and SuperSport; Gaming brands include Foxy
Bingo, Gala, GiocoDigitale, Ninja Casino, Optibet, Partypoker and PartyCasino.
The Group owns proprietary technology across all its core product verticals
and in addition to its B2C operations provides services to a number of
third-party customers on a B2B basis.
The Group has a 50/50 joint venture, BetMGM, a leader in sports betting and
iGaming in the US. Entain provides the technology and capabilities which power
BetMGM as well as exclusive games and products, specially developed at its
in-house gaming studios. The Group is tax resident in the UK and is the only
global operator to exclusively operate in domestically regulated or regulating
markets operating in over 40 territories.
Entain is a leader in ESG, a member of FTSE4Good, the DJSI and is AA rated by
MSCI. The Group has set a science-based target, committing to be carbon net
zero by 2035 and through the Entain Foundation supports a variety of
initiatives, focusing on safer gambling, grassroots sport, diversity in
technology and community projects. For more information see the Group's
website: www.entaingroup.com (http://www.entaingroup.com) .
LEI: 213800GNI3K45LQR8L28
CHIEF EXECUTIVE OFFICER'S REVIEW
Entain is a leading customer-focussed entertainment business operating in a
global industry with attractive growth dynamics. The Group continues to make
excellent progress executing on our growth and sustainability strategy. As the
most diversified leader of scale across regulated markets, the Group delivers
quality growth and sustainable returns for our stakeholders.
The dynamics of our global industry remain highly attractive with the powerful
combination of regulation, digitalisation and evolving customer behaviours
underpinning a total addressable market opportunity of approximately $170bn
over the medium term. Entain's position as a differentiated leader across
diverse and regulated markets enables us to maximise this growth opportunity.
Embedded in our ambition of being the world leader in betting, gaming and
interactive entertainment, is our ongoing industry leadership in player
protection, responsibility and sustainability. We continue to set the
standards for our industry, ensuring the powerful Entain platform continues to
drive greater diversification, greater scale to leverage our capabilities,
higher quality growth and more sustainable earnings across our markets
globally.
During H1, the Group delivered another strong performance. Reported Total
Group Net Gaming Revenue ("NGR") for H1 2023 was up +19% (+16%cc(2)) including
our 50% share of BetMGM - excluding BetMGM, Group NGR was up +14% (+11%cc(2)),
+3%cc(2) on a proforma(3) basis. Group EBITDA(1) was £499m, up +6% year on
year, along with record levels of online active customers, up +23%,
demonstrating our continued strategic diversification and broadening of our
customer base.
Net Gaming Revenue YoY Net Gaming Revenue YoY
CC(2) Proforma(3) CC(2) CC(2) Proforma(3) CC(2)
Online / Online ex-regulation 12% 1% / 6% Total Retail 11% 8%
Group Online inc. 50% BetMGM 17% - UK / UK LFL 3%/5% -
UK / UK ex-regulation (2%)/ 7% - Italy 31% -
Australia (2%) - Belgium 16% -
Italy 12% - Entain CEE (Croatia) - 16%
Brazil (14%) -
Entain CEE (Croatia) - 31%
Netherlands - (8%)
Germany (30%) -
Georgia 7% -
Baltics Nordics 7% -
Other 17% -
Delivering sustainable growth and value for shareholders
Entain is a business with sustainable growth embedded whilst also operating in
a global industry with attractive growth dynamics. Our two strategic pillars
of growth and sustainability provides us with an exciting opportunity for many
years to come with regulation, online migration and changing customer
behaviours continuing to expand the markets, audiences, and opportunities
available to us. Our results demonstrate that we continue to make strong
progress on these strategic priorities.
Our growth strategy comprises four key areas that continue to deliver value to
our stakeholders; leadership in the US; grow presence in our existing markets;
expand into new regulated markets - both organically and via M&A; and
extend into interactive entertainment.
As we deliver on these strategic pillars we are further positioning Entain to
deliver long term growth and value for our shareholders. We are improving our
capabilities and processes to ensure we remain at the forefront of our
industry, to enable better delivery of operational leverage, and, in turn
drive higher margins and cash flow generation.
The US is a significant opportunity and the operational and product
improvements we are delivering will further enhance and optimise delivery in
this exciting market.
After a busy period of strategic M&A, during which we have taken advantage
of a number of attractive and value creating opportunities to drive
diversification and consolidation, we expect to see a slower pace of activity
ahead. While we will always look for strategic M&A opportunities, we
remain disciplined and selective, and are focusing capital allocation on
investing in our business to integrate our operations, drive operational
performance and top line organic growth.
Leadership in the US
BetMGM delivered a strong performance in H1 2023, with NGR of $944 million,
and is on track to deliver at the upper-end of NGR guidance of $1.8-$2.0
billion for the full year 2023. Entain continues to focus on evolving our
technology, products, trading and analytics capabilities in the US which
underpin BetMGM's continued success. In the US we provide customers with
exclusive products and experiences, differentiating our offer whilst enjoying
significant competitive and long term financial advantages.
BetMGM is live in 26 markets, with three launches (Ohio, Massachusetts, Puerto
Rico) delivered since the start of the year, providing access to approximately
48% of the US adult population plus Ontario, Canada. Launches planned in
Kentucky and North Carolina in the coming months will see BetMGM have access
to approximately 53% of the US adult population.
Performance of key metrics to date reinforces our long-term expectations of
player values for both iGaming and sports betting. While growth in player
participation continues to be impressive, penetration has a long way to go,
providing a tremendous runway for future growth.
Our market share across iGaming and sports betting for the three months to
April 2023 was 18%(4) in the markets in which BetMGM operates excluding New
York, whilst our leadership in iGaming continues with 27%(5) share. The unique
range of own and exclusive products provided through Entain's platform and
award winning in-house studios, continue to differentiate BetMGM's offer,
drive customer engagement and embed our competitive advantage as a market
leader.
BetMGM has the largest portfolio of unique games (more than 1,500), largest
jackpots in the country (paid out more than $75 million in the last six
months) and the benefit of substantial in-house development capabilities
enabling us to offer our customers a range of in-house, branded and exclusive
games. In online sports betting, we have long established our podium position,
with a market share of 11%(4) for the three months to April 2023. We continue
to refine and improve our sports proposition and product specifically for the
US market and customer base.
We were pleased to announce the acquisition of Angstrom Sports, a specialist
provider of next generation sports modelling, forecasting and data analytics,
in July. This acquisition unlocks and accelerates significant opportunities
across BetMGM's US sports betting offering, providing customers with an
unrivalled experience, particularly in the fast-growing markets of parlay and
in-play wagering. The acquisition of Angstrom means we are the only global
operator with full in-house end-to-end capabilities across analytics, risk and
pricing capabilities for US sports betting products. The acquisition is
expected to close in H2 2023 with BetMGM expected to offer an enhanced sports
betting experience through the upcoming NFL and NBA season.
We continue to make progress rolling out single account: single wallet (SASW)
technology across our markets. With 14 markets rolled out already, we are on
track to have all states (excluding Nevada) live in the coming months.
Implementation of SASW will provide customers with a seamless and enhanced
experience across legalised US markets, with improved personalisation and
bonusing. Furthermore, it will unlock a significantly improved and seamless
experience for retail customers as well as visitors to MGM Resorts
International locations, particularly Las Vegas. Through the MGM Rewards
programme, BetMGM customers enjoy unique opportunities to win rewards, play
and experiences across MGM Resorts International's properties. In addition to
MGM Rewards, BetMGM has entered into a loyalty marketing agreement with
Marriott International to extend those rewards opportunities across the
Marriott group of hotel brands.
BetMGM delivered a key milestone of profitability for Q2 2023. The maturity
build of earlier cohorts remains on track to support sustainable
profitability, with, for example, each of the annual cohorts of digital
sportsbooks launched in 2022 and earlier, now delivering positive
contribution. We remain on track for BetMGM to be EBITDA positive in the
second half of 2023 and reiterate our long-term target EBITDA margin of
30-35%.
Grow presence in our existing markets
Entain's operations span over 40 regulated or regulating territories, with
established leading brands in many of our markets. Our existing markets are
expected to grow by approximately mid to high single digit over the medium
term. Our diversified customer focused business model and differentiated
competitive advantage through the Entain platform will enable us to further
outperform these underlying markets, presenting a significant opportunity for
organic growth.
Group NGR grew +19% (+16%cc(2)) compared to H1 2022, including acquisitions
and our share of BetMGM. Excluding BetMGM, Group NGR was +14%, (+11%cc(2))
and on proforma(3) basis NGR was +3%cc(2), with Group EBITDA(1) up +6% versus
the prior year at £499m.
Reported Online NGR (ex US) was up 15% on H1 2022, +12%cc(2) year on year and
+1%cc(2) on a proforma(3) basis. We estimate regulatory changes, particularly
affordability measures implemented in the UK and lack of regulatory oversight
in Germany enabling unlicensed operators to access customers, created a
mid-single digit headwind to Group NGR growth over the H1 period. We estimate
proforma(3) Online NGR growth was +6%cc(2) excluding these known regulatory
headwinds.
During H1 we saw our Online business deliver another record level of active
customers, up +23% year on year, and up +15% excluding acquisitions. This is
testament to our continued strategic focus on the customer, evolving and
broadening our offering for a more recreational audience. Underlying EBITDA(1)
of £415.5m was +8% ahead of 2022.
In the UK our year on year performance for H1 2023 continues to reflect the
ongoing absorption of UK regulatory changes, with Online NGR down 2%. We
estimate that the UK Online operations faced a c.10ppt headwind in H1 from the
tighter affordability measures, therefore seeing Online NGR in H1 excluding
these impacts, up +7%.
Underlying momentum and key customer metrics remain positive, with UK online
actives up +22%, evident across both sports and gaming. This has been driven
by innovative marketing campaigns, new product releases and wider enhancements
to our offering and experience engaging a broader more recreational customer
base. Coral's Racing Club campaign flooded the Cheltenham Festival and our Red
Rum hologram galloping across the Liver Building in Liverpool differentiated
our Grand National campaign. The Coral Racing Club is enormously popular,
finishing H1 with over 123,000 members having only launched in November 2022.
Our recently launched Ladbrokes Live initiative, partnering with O2, NME and
AEG Presents, offers tickets to concerts, boxes and other music event
experiences, reinforcing the entertainment nature of our brands and products.
In gaming, our growth in player base and audience continues as we deliver
fresh products, engaging content and experiences. Our in-house launches
include Slingo Bingo, a multiplayer game launched in May that has been well
received by our bingo-loving UK customers; Crypt of Giza, a live
gameshow-style experience exclusive to our Ladbrokes customers; and most
recently July's launch of Mask of Horus topped the tables for number of active
players on day one.
Our business in Italy continues to perform strongly, with online NGR up
+12%cc(2) year on year. The underlying market growth remains strong, with
omni-channel operators continuing to outperform as point of sales touchpoints
and brand recognition has driven both direct online engagement as well as an
omni-channel experience through our retail estate. During H1 our continued
investment in our sports and gaming offerings, saw Eurobet, bwin and
GiocoDigitale deliver more new products and experiences and grow actives by
+17% compared to the prior year.
In Australia, our Ladbrokes and Neds brands continue to perform well in a
competitive market. NGR for H1 was down -2% (-2%cc(2)) reflecting the strong
prior year comparators, whilst 4yr CAGR was +17%cc(2). As other market
operators have led with price and promotional offerings, Entain Australia's
brands continue to leverage their differentiated offering, delivering unique
content, engaging social player products and a fresh customer experience. The
latest episodes in our horse racing video docu-series, Miles in Front and the
newly launched Ladbrokes Racing Club are just a few examples of what continues
to drive our market share and growing customers base. These initiatives
underpin the exciting opportunity that Entain Australia's partnership with TAB
NZ provides, and we look forward to delivering New Zealand sports fans an
enhanced offer over the coming years.
In Latin America, our Brazilian business continues to face heightened
competition ahead of regulation, with H1 NGR lower than expected at -14%cc(2)
year on year. Our Sportingbet brand continues to differentiate its offer
through product quality, whilst ensuring growth of a sustainable player base
of high-quality customers with our online actives in Brazil in growth during
H1.
We are pleased to see that sports betting regulation in Brazil is now making
progress following its signing by the President. We await approval by Congress
which should enable legislation to proceed to licensing in early 2024. We look
forward to a market post licensing that provides customers with a best in
class offering, more rational marketing and protections from an unregulated
black market. The strength of our Sportingbet brand, product quality, player
safety and enhanced customer acquisition channels sees our operations in
Brazil well positioned for growth. Additionally, our recent acquisition of
365Scores, the leading sports app across Latin America, further improves our
competitive position in Brazil.
Our Entain CEE business continues to perform strongly, maintaining its market
leadership with the SuperSport brand in Croatia. H1 Online NGR for SuperSport
was up +31%cc(2) on a proforma(3) basis with improving momentum through the
half. On 13 June we announced an offer for STS Holdings, bringing the largest
operator in Poland to join the largest operator in Croatia as part of our
Entain CEE business. This positions us well to further leverage the
opportunity that the $8.6bn CEE market offers.
In The Netherlands, BetCity has performed in line with our expectations for H1
2023, down single digit vs last year following the re-entry of a market leader
last summer. BetCity continues to drive its brand with support for Jonas
Vingegaard, winner of the 2023 Tour de France, as well as leveraging the
Entain relationship with McLaren for the Dutch Grand Prix on 27 August 2023.
In Germany, the online betting and gaming market continues to see limited
regulatory enforcement. Therefore, the challenges of an uneven operating
landscape continue to overshadow those operators adhering to licensing
obligations, particularly following the implementation of new deposit limits
for sports customers from July 2022.
As a result, our Online NGR for Germany declined year on year whilst actives
held broadly flat as higher spending customers switch to non-compliant
operators. However, we remain positive on the long-term prospects for the
German market as regulatory oversight is enforced. bwin is a leading brand
across Germany and globally, underpinned by the quality of our products and
offer as well as great partnerships with UEFA Europa League offering exclusive
fan experiences for bwin customers.
In Georgia, the Crystalbet brand remains the market leader and has responded
well as we annualised the new regulatory and tax regime which came into effect
at the start of 2022 with online NGR up +7%cc(2), reflecting the strength of
our operations and brand, with the business outperforming the market.
Enlabs in the Baltics delivered a strong performance with NGR +7%cc(2) despite
some of its markets experiencing challenging economic and inflationary
environments. Enlabs' growth is coupled with improved contribution, and our
offering continues to attract a broader audience, benefiting from Entain's
sports and gaming products, with actives up +22% year on year.
Our Retail operations have reported another period of excellent performance
during H1 2023, with total Retail NGR up +12% (+11%cc(2)) compared to H1 2022,
up +8%cc(2) on a proforma(3) basis. Our two largest estates in the UK and
Italy continue to grow year on year, and we are now also seeing growth in our
other estates.
In the UK, Retail NGR was up +5% on a LFL basis versus 2022, with growth in
both sports and gaming. Our strong underlying performance remains underpinned
by our best-in-class retail offering with market leading (exclusive and
in-house) content on our betting and gaming terminals, and our enhanced
digital in-shop experience. Our increasingly broader demographic of customers
is driven by growth across our betting and gaming machines, as well as OTC
during H1 2023.
In Europe, our Italian business continues to perform strongly, with Retail NGR
in H1 up +31%cc(2) reflecting strong customer engagement driven by ongoing
offering enhancements and a busy sporting calendar. The breadth of our retail
shop network remains invaluable to our omni-channel offering, with in-person
points of sale increasingly important to customer engagement, acquisition and
online migration.
Having now annualised the lingering COVID closures & staffing restrictions
in early 2022, Retail NGR in Belgium was up +16%cc(2).
Proforma(3) Retail NGR in Croatia grew at +16%cc(2) year on year as the
business benefited from its market leading brand position and offering
improvements, including loyalty programs and enhanced sports content,
implemented since our acquisition of SuperSport.
Expand into new regulated markets
Regulation and evolving consumer needs and behaviours continue to provide
exciting growth opportunities for Entain. Our expansion into new regulated
markets continues both geographically as well as through broader product
verticals with organic as well as M&A opportunities. Entain has a strong
track record of successful acquisition, integration and value creation through
M&A.
Having completed our acquisition of BetCity in early January 2023, we are
pleased to have been able to re-enter the newly regulated Netherlands
market. BetCity has performed in line with our expectations, maintaining
market share in this fast growth and highly competitive market. BetCity's
operational and brand strength has laid key foundations as the market absorbs
new advertising and marketing restrictions from 1 July 2023.
Our proposed acquisition of STS Holdings through Entain CEE expected to
complete in Q3 this year, further unlocks the significant opportunity across
the Central and Eastern European region. STS is Poland's leading sport betting
operator with a highly successful omni-channel offering with a substantial
online business complemented by the largest retail estate, operating in a
market which is currently worth $1.6bn and forecast to grow at a 3yr CAGR of
12%. With the potential liberalisation of the online casino market in Poland
(currently regulated through a monopoly licence) as well as leveraging
capabilities of the Entain platform and products, we see significant growth
opportunities for STS. The transaction reinforces our strategic approach to
the CEE region following Entain CEE's acquisition of SuperSport last year and
positions us well to further deliver on the $8.6bn opportunity across wider
CEE market.
In Q2, Entain was selected by TAB NZ for a 25 year strategic partnership, to
be the only licenced provider in the New Zealand sports betting market, a
regulated market worth approximately NZ$600m with significant growth
potential. This unique arrangement enables us to offer New Zealand customers
an enhanced betting experience, secures long term funding support for the
racing and sporting industry, and importantly unlocks a highly attractive
growth opportunity for Entain and TAB NZ. TAB NZ is a well-established
operator with a strong market presence and over 250,000 active digital
customers. We look forward to delivering New Zealand sports fans an enhanced
offer by leveraging Entain's expertise, capabilities and scale, to capture
both underlying market growth, estimated to be over 15% CAGR over the next
five years, as well as recapturing market share lost to offshore operators.
Innovation and extending into interactive entertainment
Entain embraces the opportunity to innovate and evolve. By listening to our
customers, applying data analytics and understanding player engagement
insights, we focus product innovation on driving engagement and reaching new
customers.
This evolving innovation is delivered organically through in-house development
as well as through strategic M&A. Our acquisitions of 365Scores,
Sportsflare and Angstrom Sports during the first half sees us expand our
industry-leading content, data and analytical capabilities, and ultimately our
audience reach.
365Scores is one of the world's leading sports apps providing customers with
real time action and results of their favourite teams. 365Scores is a top
three sports app for Latin America and top five globally, providing Entain
access to a highly engaged audience of sports fans, whilst also enhancing our
offer with additional content and media capabilities as well as powerful
customer personalisation insights. The addition of 365Scores to Entain's
platform and in-house offering delivers attractive growth synergies, further
broadens our audience reach as well as improving customer acquisition metrics,
particularly across Latin America.
Having taken the first steps into interactive entertainment with our
acquisition of unikrn, we continue to build momentum behind our new eSports
and skill based wagering offering. Ahead of further launches expected later in
2023 we have been evolving our product portfolio whilst liaising with partners
and regulators to develop an offering combining a great customer experience
and best in class player protections. Our acquisition of Sportsflare, brings
machine learning and AI based eSports trading capabilities in-house, ensuring
we have the most advanced suite of innovative products. The eSports market
continues to grow strongly and we remain extremely excited by the opportunity
over the longer term.
Sustainability
We are one of the world's largest sports betting, gaming and interactive
entertainment groups, operating in regulated and regulating online and retail
markets. Being a leading global operator in our industry, we are committed to
leading the industry in all areas of sustainability. Our unique platform
distinguishes us as a customer-centric operator with sustainability at the
heart of our business strategy.
We firmly believe that the most sustainable business will be the most
successful business in our industry. Our strategic sustainability pillar
comprises: lead on responsibility; diversify our regulated activities; broaden
our customer appeal; and, invest in people & communities.
We continue to make progress on our Net Zero 2035 commitment. We are reducing
our carbon footprint by transitioning our UK vehicle fleet to EV's and
hybrids, with over half transitioned by year end and have entered into a power
purchase agreement for green energy, that will also provide greater certainty
over future potential energy price fluctuations. The new digi-hub shops in the
UK continue to drive the digitisation of the retail business, with the
introduction of the digital racing post replacing the traditional newspaper,
saving 135kg of carbon emissions per shop.
While we are proud to be leading our industry to higher standards across the
ESG agenda, we continue to strive to meet, and exceed the highest standards in
everything we do, from the way we run our business to the way we support our
colleagues, our customers and our communities. In H1 we have maintained our AA
rating by MSCI and won 'Safer Gambling Operator of the Year' at the EGR North
America awards and 'Most socially responsible operator' at the Which Bingo
awards.
Lead on responsibility
Safer gambling and responsibility are core to delivering a sustainable
business strategy. Throughout H1 2023 we have continued the development of our
industry leading Advanced Responsibility and Care™ (ARC(TM)) programme.
With almost 4 million interactions so far this year, taking the total since
launch to over 7.5m, our latest figures show a 36% drop in customer risk
rating following an ARC(TM) intervention, whilst over 95% of higher risk
customers are now using a gambling control to moderate their play. Our
accuracy rating for the ARC(TM) model is consistently over 90% across our
algorithms providing an effective and reliable system.
The ARC(TM) system uniquely changes player protection from reactive to a
proactive format, that encourages safer playing behaviours by coupling real
time interactions with sophisticated behavioural indicators developed with
Harvard Medical School faculty. The impact and development of ARC(TM)
continues to be a core part of our group wide remuneration scheme.
In the US, Entain continues leading a coalition of 9 big US facing operators
that collaborate on a variety of RG related matters with a view to achieving
long term sustainability of the US online gambling markets. In a similar vein,
Entain has actively engaged with numerous North American regulators on RG as
well as other consumer protection practices.
Beyond the industry, the Entain Foundation US has announced two additional
education partnerships in North America, namely with the MLS Players'
Association (together with EPIC Risk Management) as well as the NHL Alumni
Association. Both partnerships focus on educating active and/or retired
athletes about safe gambling practices. The existing partnerships with the
NFLPA and NCAA continue thriving, with RG awareness classes have been
dispensed to thousands of attendees during H1 2023.
Diversify our regulated activities
Entain currently operates in over 40 regulated markets. Operating in
well-structured regulatory regimes enables us to deliver higher quality
earnings with greater certainty and sustainability as we continue to grow and
expand our global footprint and scale.
During the first half of 2023, Entain made further progress towards our
commitment to only operate in regulated markets by agreeing a unique 25-year
deal with the New Zealand TAB to become the only licensed provider of sports
betting in the country. We also announced our acquisition of STS in Poland
which will give the group the number one position in the regulated Polish
sports betting market.
In parallel, we have withdrawn from markets where we do not see a clear
pathway to regulation and exited further 10 markets in 2023. As a result,
Entain is the only global operator with 100% of revenues from domestically
regulated or regulating markets.
Entain is a strong supporter of good regulation. We engage openly and
proactively with regulators around the world to encourage well-structured and
robust regulatory environments which balance the highest regulatory standards
and responsible player protection, whilst also upholding customer freedoms and
right of choice. At Entain we offer first class player protection through our
industry leading technology platform, while upholding all licensing
objectives, across multiple jurisdictions.
Broaden our customer appeal
Our progress in broadening our appeal to wider, more recreational audiences
continues. We understand that our customers and trends are changing, so we are
evolving our brands and offering too, ensuring we remain engaging and relevant
to an ever-broadening customer base, whilst also providing a safe
entertainment experience.
Across our brands, products and content we continue to drive initiatives to
increase engagement and loyalty across our growing customer base. The unique
edge our in-house game production as well as our exclusivity with third party
providers, enables us to offer a wide variety of choice, something we know
customers like. Unique experiences also drive loyalty and engagement and our
campaigns such as the Coral Racing Club, Ladbrokes Live and our exclusive
docu-series' Miles in Front and Taking the Reins, as well as our partnerships
with UEFA and McLaren enable us to provide differentiated content and an
enhanced proposition to our customers.
Our betting and gaming terminals in Retail are attracting a broader
demographic of customers. In particular our in-house technology on our self
service betting terminals provides a better experience with broader products
and sports appealing to this wider customer base. unikrn extends our offering
across the emerging skill based wagering market for eSports. It is live in
Brazil and Canada (excl Ontario) and we look forward to rolling it out to more
customers over the coming months. 365Scores, with over 18 million customers
worldwide, provides the opportunity to drive brand awareness and engagement
across a wider customer base in markets where we operate.
Invest in our people and communities
Through our Entain Foundation, we continue to invest in safer gambling
programmes, grassroots sports initiatives and increased diversity through
technology projects.
In March 2023 we announced funding for a two-year alumni programme with UK
charity Gordon Moody to establish a support network for those experiencing
gambling harm, including peer to peer mentoring, training and treatment.
Entain is proud of our long-standing partnership with SportsAid. In March we
announced support for the sponsorship for 50 further SportsAid athletes,
bringing the total number of athletes we have supported through our SportsAid
partnership since 2019 to 201.
We also launched our partnerships in Kenya with ComputerAid and the Turing
Trust to provide access to technology education within Kenyan communities.
In Italy we provided support for Sport Senze Frontiere, who provide children
with education and sporting activities across the country. In Austria we
partnered with the Austrian Wheelchair Tennis Cooperation to provide financial
support for specialised wheelchairs. We have also continued our partnership
with Tiempo de Juego in Colombia, providing funding to the Cazucá women's
team.
Diversity, equity and inclusion (DE&I) are key to Entain's future
sustainability and success. Our goal is to attract, hire and keep the best
talent and best minds in the world, from inside and outside of our sector.
To support that in H1 we focused on underrepresented groups, and opportunities
to demonstrate our commitment to diversity internally and externally.
In January we successfully launched our 2023 flagship DEI programme in
partnership with McLaren, supporting women back into technology, data and
engineering roles. The programme has provided 10 high quality placements to
women in both Entain and McLaren HQs, covering a range of technological roles
and expertise.
Entain was awarded three awards at the Women in Gaming Diversity Awards for
'Innovator of the Year' (McLaren Returnship), 'Marketing Campaign of the Year'
(International Women's Day) and 'Star of the Future' for Women@Entain network.
Notes
(1) EBITDA is defined as earnings before interest, tax, depreciation
and amortisation, share based payments and share of JV income. EBITDA is
stated pre-separately disclosed items
(2) Growth on a constant currency basis is calculated by translating
both current and prior year performance at the 2023 exchange rates
(3) Proforma adjusted for SuperSport and BetCity acquisitions
(4) Market share for last three months ending April 2023 by GGR
including iGaming, retail and online sports betting, and only U.S. markets
where BetMGM was active excluding New York; internal estimates used where
operator-specific results are unavailable
(5) Market share for last three months ending April 2023 by GGR,
including only U.S. 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 Contribution and EBITDA as
these metrics are industry standard KPIs which help facilitate the
understanding of the Group's performance in comparison to its peers. A full
reconciliation of these non-GAAP measures is provided within the Income
Statement and supporting memo.
The Group's operating segments are aggregated into five reportable segments;
Online, Retail, New Opportunities, Other and Corporate. This reporting
structure is in line with the Group's reporting to the executive management
team ("CODM").
CHIEF FINANCIAL OFFICER'S REVIEW
FINANCIAL PERFORMANCE REVIEW
Group
Reported results(1)
Six months to 30 June 2023 2022 Change CC(2)
£m £m % %
NGR 2,404.3 2,117.6 14% 11%
VAT/GST (26.7) (22.7) (18%) (19%)
Revenue 2,377.6 2,094.9 13% 11%
Gross profit 1,457.7 1,327.8 10%
Contribution 1,126.2 1,025.5 10%
Operating costs (626.8) (554.5) (13%)
Underlying EBITDA(3) 499.4 471.0 6%
Share based payments (9.1) (5.2) (75%)
Underlying depreciation and amortisation (134.8) (113.2) (19%)
Share of JV loss (48.1) (106.1) (55%)
Underlying operating profit(4) 307.4 246.5 25%
Reported Results(1):
NGR and Revenue increased by +14% and +13% respectively (both +11%cc(2))
versus 2022 in the first half, with strong underlying performance, in both
Online and Retail, and the benefit of NGR from acquisitions, more than
offsetting continued regulatory headwinds, particularly in the UK and Germany.
Online NGR was +15% ahead of 2022 (+12%cc(2)) whilst Retail NGR was +12% ahead
(+11%cc(2)). Group NGR was +3%cc(2) ahead of 2022 on a proforma(5) basis.
Contribution in the first half of £1,126.2m was +10% higher than 2022
reflecting the increase in NGR, offset by a reduction in contribution margin
of -1.6pp, 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 13% higher due to the impact of acquisitions (5pp),
foreign exchange (2pp) and underlying inflation, including wage rate and
energy price inflation guided to in March, partially offset by the
reclassification of costs to cost of sales. Resulting underlying EBITDA(3) of
£499.4m was +6% higher than 2022.
Share based payment charges were £3.9m higher than last year, while
underlying depreciation and amortisation was 19% higher, reflecting the impact
of businesses acquired in the year, the annualisation of prior year
acquisitions and continued investment in the business. Share of JV losses of
£48.1m includes an operating loss of £48.5m relating to BetMGM (2022:
£108.6m), which was in line with expectations.
Group underlying operating profit(4) was +25% ahead of 2022. After
separately disclosed items of £733.4m (2022: £112.9m), the Group made an
operating loss of £426.0m (2022: profit of £133.6m).
Online
Reported results(1)
Six months to 30 June 2023 2022 Change CC(2)
£m £m % %
Sports wagers 6,676.0 6,881.8 (3%) (5%)
Sports margin 13.9% 12.8% 1.1pp 1.1pp
Sports NGR 742.2 702.9 6% 3%
Gaming NGR 918.3 752.7 22% 19%
B2B NGR 23.8 15.1 58% 52%
Total NGR 1,684.3 1,470.7 15% 12%
VAT/GST (26.1) (22.7) (15%) (17%)
Revenue 1,658.2 1,448.0 15% 12%
Gross profit 980.9 886.1 11%
Contribution 659.8 587.3 12%
Contribution margin 39.2% 39.9% (0.7pp)
Operating costs (244.3) (202.6) (21%)
Underlying EBITDA(3) 415.5 384.7 8%
Share based payments (3.2) (1.3) (146%)
Underlying depreciation and amortisation (69.5) (57.2) (22%)
Share of JV (loss)/income (0.3) 1.8 (117%)
Underlying operating profit(4) 342.5 328.0 4%
Reported Results(1):
Our Online business continues to perform strongly with NGR +15% ahead of 2022,
+12% on a constant currency(2) basis, with the benefit of strong underlying
trading and NGR from acquisitions more than offsetting continued regulatory
headwinds, particularly in the UK and Germany. The Group's performance in the
first half has been underpinned by our continued focus on the recreational
customer and we are delighted that we have seen record levels of actives again
in Q2, both on a headline and proforma(5) basis. Online NGR was +4% (+1%cc(2))
ahead on a proforma(5) basis.
In the UK, our underlying trends and key customer metrics remain strong with
actives +22% higher than the same period last year. However, as the Group
continues to absorb the impact of regulatory changes, NGR in the first half
was -2% behind. Excluding the impact of these regulatory headwinds, we
estimate that underlying NGR was +7% ahead of 2022.
In Italy, constant currency(2) NGR was +12% ahead of 2022. We continue to see
the benefits of our focus on the customer experience and our omni-channel
offering with combined Retail and Online NGR up +18% cc(2) year on year and
+16% cc(2) ahead of pre-Covid levels on a 4 year CAGR.
In Australia, our Ladbrokes and Neds brands continue to perform well in a
competitive market. NGR for H1 was down -2% (-2%cc(2)) reflecting the strong
prior year comparators, whilst the 4yr CAGR was +17%cc(2). Our brands in
Australia continue to leverage their differentiated offering, delivering
unique content, engaging products and a fresh customer experience. These
initiatives position the Group well to make the most of the exciting
opportunity in both Australia and New Zealand.
In Germany, the continued lack of regulatory enforcement as well as new
regulation, including stricter deposit limits on sports and casino, continue
to impact the business resulting in NGR -30% behind 2022 on a constant
currency(2) basis. Whilst we received our gaming licenses in November 2022, it
is disappointing that we are yet to see the robust enforcement action that is
needed in this market to combat unlicensed or non-compliant operators.
In Brazil, we continue to see a very competitive market ahead of proposed
regulation. NGR in the first half was -14% cc(2) behind 2022, but actives were
up year on year and NGR is up +41% cc(2) on a 4 yr CAGR basis. Whilst the
market is currently experiencing a significant increase in the amount of
marketing spend by various operators, we are pleased with the progress made
following the acquisition of 365Scores.
Georgia NGR was +7% 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, and retaining its position as the market leader.
In the Baltics-Nordics, NGR was +7% cc(2) ahead of 2022 despite continued high
inflation rates in the region. Our brands remain resilient despite the
economic pressures and we continue to attract more customers each year with
actives +22% ahead of 2022 in the first half.
Our Entain CEE business continues to perform extremely well, maintaining its
position as the market leader in Croatia. NGR in the first half was +31% cc(2)
ahead on a proforma(5) basis, despite the disruption caused across Croatia
following the conversion to the Euro at the start of the year, a transition
which was managed extremely well by our local team.
Contribution margin in the half has been impacted by additional taxation
implemented in Australia in H2 of 2022. Contribution margin of 39.2% is 0.8pp
lower than guidance reflecting the normal phasing of marketing spend which is
traditionally higher in H1. Contribution margin is expected to normalise to
c40% for the full year.
Operating costs were 21% higher than 2022 with underlying inflation accounting
for 9pp of the increase, FX 4pp (consistent with the NGR benefit) and new
businesses 8pp.
Underlying EBITDA(3) of £415.5m was +8% ahead of 2022 reflecting the increase
in NGR, partially offset by a 0.7pp reduction in contribution margin, the
impact on operating costs of acquired businesses and underlying inflation.
Resulting underlying operating profit(4) of £342.5m was £14.5m ahead of 2022
with depreciation and amortisation of £69.5m, £12.3m higher than 2022, a
result of the impact of new acquisitions, including annualisation of those in
the prior year, and ongoing investment in our technology and product.
Operating profit, after charging separately disclosed items of £107.1m (2022:
£50.5m), was £235.4m, £42.1m lower than 2022.
Retail
The Retail business is made up of our Retail estates in the UK, Italy,
Belgium, Croatia, New Zealand and Republic of Ireland.
Reported results(1)
Six months to 30 June 2023 2022 Change CC(2)
£m £m % %
Sports wagers 2,164.2 1,917.1 13% 11%
Sports margin 19.3% 18.7% 0.6pp 0.6pp
Sports NGR/Revenue 415.7 354.7 17% 16%
Machines NGR/Revenue 293.6 281.3 4% 4%
NGR 709.3 636.0 12% 11%
VAT/GST (0.6) - - -
Revenue 708.7 636.0 11% 11%
Gross profit 463.3 428.6 8%
Contribution 457.9 425.1 8%
Contribution margin 64.6% 66.8% (2.2pp)
Operating costs (306.5) (284.0) (8%)
Underlying EBITDA(3) 151.4 141.1 7%
Share based payments (1.2) (0.5) (140%)
Underlying depreciation and amortisation (60.6) (53.0) (14%)
Share of JV income - - -
Underlying operating profit(4) 89.6 87.6 2%
Reported Results(1):
Our Retail businesses continue to perform extremely strongly post the Covid
restrictions that came to an end in early 2022 with NGR +11% ahead on a
constant currency(2) basis, +8% proforma(5). Whilst our two largest estates in
the UK and Italy continue to grow year on year, we are now also seeing growth
in our other estates.
In the UK, NGR was +5% ahead of 2022 on a LFL basis, with growth in both
sports and gaming. Our strong underlying performance continues to be driven by
our ongoing focus on market leading content for our betting and gaming
terminals, and pleasingly we are also seeing growth in our OTC offering during
the first half of 2023. Whilst our SSBT's and gaming machines provide an
experience akin to the digital offering, it is also clear that our customers
value the in-shop experience that cannot be replicated online.
NGR in Italy was up +31% on a constant currency(2) basis in the first half
with the rich football calendar and a number of enhancements to our offering
and the customer experience driving greater
engagement.
Proforma(5) NGR in Croatia grew at +16% cc(2) year on year, further cementing
our position as the market leader and reflecting our ongoing program of
improvements to the customer offer, including the introduction of loyalty
schemes and enhanced sports content.
In Belgium, NGR was up +16% cc(2) as the business has now annualised the
temporary closures in early 2022.
Contribution of £457.9m was +8% ahead of 2022 with contribution margin
falling by 2.2pp due to territory mix and the impact of certain content costs
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 8% higher than in 2022 with the impact of acquisitions
(4pp), FX (1pp) and inflation, including wage rate and energy price inflation
guided to in March, more than offsetting the benefit of costs which are now
classified within cost of sales.
Resulting underlying EBITDA(3) of £151.4m was £10.3m ahead of 2022.
Depreciation of £60.6m was £7.6m higher than 2022, largely due to the impact
of acquisitions and the continued investment in our retail estates.
Underlying operating profit(4) of £89.6m was £2.0m ahead of 2022 and, after
charging £3.1m of separately disclosed items (2022: £50.1m), operating
profit was £86.5m, £49.0m ahead of last year.
As at 30 June 2023, there were a total of 4,894 shops/outlets (2022: 4,287):
UK 2,443 (2022: 2,568), Italy 943 (2022: 940), Belgium shops 273, outlets 341
(2022: shops 287, outlets 359), Ireland 122 (2022: 133), Croatia 311 and New
Zealand 461. During 2023, there was an average of 4,522 shops in the estate,
compared to an average of 4,317 in the same period last year.
New Opportunities
Reported results(1)
Six months to 30 June 2023 2022 Change
£m £m %
Underlying EBITDA(3) (15.0) (14.6) (3%)
Share based payments (0.4) (0.1) (300%)
Underlying depreciation and amortisation (3.1) (1.6) (94%)
Share of JV loss (0.6) - -
Underlying operating loss(4) (19.1) (16.3) (17%)
Reported Results(1):
New Opportunities underlying costs(3) of £15.0m, which are broadly in line
year on year, primarily reflect operating costs associated with our innovation
programme and unikrn. After depreciation and amortisation and share of JV
loss, New Opportunities underlying operating loss(4) was £19.1m, an increase
of £2.8m on 2022.
Other
Reported results(1)
Six months to 30 June 2023 2022 Change CC(2)
£m £m % %
NGR/Revenue 13.5 13.1 3% 3%
Gross profit 13.5 13.1 3%
Contribution 13.3 13.1 2%
Operating costs (10.3) (10.1) (2%)
Underlying EBITDA(3) 3.0 3.0 -
Share based payments - - -
Underlying depreciation and amortisation (1.4) (1.3) (8%)
Share of JV income 1.3 0.7 86%
Underlying operating profit(4) 2.9 2.4 21%
Reported Results(1):
NGR of £13.5m was 3% higher than 2022 driven by our Stadia business which was
disrupted by Covid at the start of 2022. Underlying EBITDA(3) of £3.0m was
in line with 2022, the additional NGR offset by increased overheads associated
with the return to a normal racing calendar in our dog tracks. Underlying
operating profit(4) of £2.9m was 21% ahead of last year.
Corporate
Reported results(1)
Six months to 30 June 2023 2022 Change
£m £m %
Underlying EBITDA(3) (55.5) (43.2) (28%)
Share based payments (4.3) (3.3) (30%)
Underlying depreciation and amortisation (0.2) (0.1) (100%)
Share of JV loss (48.5) (108.6) 55%
Underlying operating loss(4) (108.5) (155.2) 30%
Reported Results(1):
Corporate underlying costs(3) of £55.5m were £12.3m higher than last year
driven by increases in our contributions to Research, Education and Treatment,
including GambleAware, additional costs associated with our commitment to ESG
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(4) was £108.5m, a decrease of
£46.7m, as a result of a £60.1m reduction in the share of loss in the US JV,
BetMGM. After separately disclosed items of £623.2m, the operating loss of
£731.7m was £564.2m higher than in 2022.
Notes
(1) 2023 reported results are unaudited and relate to continuing
operations
(2) Growth on a constant currency basis is calculated by translating both
current and prior year performance at the 2023 exchange rates
(3) EBITDA is defined as earnings before interest, tax, depreciation and
amortisation, share based payments and share of JV income. EBITDA is stated
pre separately disclosed items
(4) Stated pre separately disclosed items
(5) Proforma adjusted for SuperSport and BetCity acquisitions
CHIEF FINANCIAL OFFICER'S REVIEW
Reported results(1)
Period ended 30 June 2023 2022 Change CC(2)
£m £m % %
NGR 2,404.3 2,117.6 14% 11%
Revenue 2,377.6 2,094.9 13% 11%
Gross profit 1,457.7 1,327.8 10%
Contribution 1,126.2 1,025.5 10%
Underlying EBITDA(3) 499.4 471.0 6%
Share based payments (9.1) (5.2) (75%)
Underlying depreciation and amortisation (134.8) (113.2) (19%)
Share of JV loss (48.1) (106.1) 55%
Underlying operating profit(4) 307.4 246.5 25%
Net finance costs (108.4) (39.1)
Net foreign exchange/movement on derivatives 88.6 (55.0)
Profit before tax pre separately disclosed items 287.6 152.4
Separately disclosed items:
Provision for HMRC settlement (585.0) -
Amortisation of acquired intangibles (110.2) (51.5)
Other (40.5) (61.4)
(Loss)/profit before tax (448.1) 39.5
Tax (54.4) (11.4)
(Loss)/profit after tax from continuing activities (502.5) 28.1
Discontinued operations (3.7) (3.1)
(Loss)/profit after tax (506.2) 25.0
NGR and Revenue
Group reported NGR and revenue were +11% ahead of last year on a constant
currency(2) basis, up +14% and 13% respectively on an actual basis, with
Online NGR +15% and Retail NGR +12% year on year. Further details are provided
in the Financial Performance Review section.
Underlying operating profit(4)
The Group reported underlying operating profit(4) of £307.4m, +25% ahead of
2022 (2022: £246.5m). Underlying EBITDA(3) was +6% ahead, with the increase
in revenue offset by a lower contribution margin, operating costs associated
with acquired businesses and inflation. Depreciation and amortisation was 19%
higher than 2022, largely driven by depreciation on acquired businesses as
well as on our recent investment in product and technology. The Group's
share of JV losses in the period were £48.1m (2022: £106.1m), including
£48.5m for the Group's share of BetMGM losses which were £60.1m lower than
in 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(4) of £108.4m excluding separately disclosed items
(2022: £39.1m) were £69.3m higher than 2022 with the increase in costs due
to interest on the Group's new $1bn USD term loan, which was raised in Q4 of
2022 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 £88.6m in the period
(2022: £55.0m 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.
Provision for HMRC settlement
During the period, the Group has made a provision of £585.0m in respect of
its ongoing deferred prosecution agreement (DPA) negotiations with the Crown
Prosecution Service (CPS). The Company previously announced an investigation
by HMRC into its legacy Turkish facing business, which it sold in 2017, and
subsequently announced that it is in DPA negotiations with the CPS to resolve
the ongoing HMRC investigation.
The DPA negotiations have now progressed to the point where the Company
believes that it is likely to be able to agree a resolution of the HMRC
investigation insofar as it relates to the Company and the Group. While the
full terms of a DPA are subject to judicial approval, the Company has a
sufficient degree of confidence to take a provision of £585.0m against a
potential settlement, which would be paid over a four-year period in relation
to alleged offences under Section 7 of the Bribery Act 2010. The Company
currently anticipates judicial approval will be sought during Q4 2023.
Section 7 of the Bribery Act 2010 relates to the failure of a relevant
commercial organisation to have adequate procedures in place designed to
prevent persons associated with it from undertaking bribery for the benefit of
the commercial organisation.
The amount of the provision has been calculated on the basis that the Company
will receive full credit for its extensive co-operation with the investigation
prior, and subsequent, to entering into any DPA.
Since the investigation first commenced, the Group has undertaken a
comprehensive review of anti-bribery policies and procedures and has taken
decisive action to significantly strengthen its wider compliance programme and
related controls.
Other separately disclosed items
Items separately disclosed before tax for the period amount to £150.7m (2022:
£112.9m) and relate primarily to £110.2m of amortisation on acquired
intangibles (2022: £51.5m), corporate transaction costs of £12.2m (2022:
£12.5m), restructuring costs of £6.8m (2022: £4.5m) and legal and onerous
contract costs of £5.6m (2022: £4.7m). The Group also incurred £2.3m on
fees for refinancing and fee write-offs (2022: £nil) as well as recording an
additional £13.6m in contingent consideration liabilities reflecting the
latest estimate of the likely economic outflow (2022: £9.3m income). In the
prior period, the Group also made a £45.5m repayment of amounts received in
2021 under the UK Government furlough scheme and recorded an impairment of
£3.5m on closed shops in the UK.
Other separately disclosed items
2023 2022
£m £m
Amortisation of acquired intangibles (110.2) (51.5)
Corporate transaction costs (12.2) (12.5)
Restructuring costs (6.8) (4.5)
Legal and onerous contract costs (5.6) (4.7)
Impairment - (3.5)
Movement in fair value of contingent consideration (13.6) 9.3
Other including issue cost write-off (2.3) -
Furlough repayments - (45.5)
Total (150.7) (112.9)
Profit before tax
Profit before tax and separately disclosed items was £287.6m (2022:
£152.4m), a year on year increase of £135.2m with the growth in underlying
EBITDA(3), 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 £448.1m (2022: £39.5m profit).
Taxation
The tax charge on continuing operations for the period was £54.4m made up of
an underlying continuing tax charge of £70.5m (2022: £30.7m), reflecting
effective tax rate pre-BetMGM losses and foreign exchange gains on external
debt of 24.1% (2022: 11.4%), and a tax credit on separately disclosed items of
£16.1m (2022: £19.3m).
TAB NZ
During the period, the Group acquired NZ Ent Limited, a business entitled to
run the TAB NZ brand in New Zealand for 25 years. As part of the acquisition,
the Group has committed to make minimum guaranteed funding payments to TAB NZ
in the first 5 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, a financial liability for the provisional, discounted, estimate of
consideration of £1,208.5m has been recognised in the period along with a
corresponding intangible asset which will be amortised over the life of the
agreement.
Cashflow
Period ended 30 June 2023 2022
£m £m
Cash generated by operations 497.9 470.9
Corporation tax (71.2) (40.6)
Interest (65.2) (32.5)
Net cash generated from operating activities 361.5 397.8
Cash flows from investing activities:
Acquisitions & disposals (474.9) (195.7)
Cash acquired/disposed 43.2 16.2
Capital expenditure (130.2) (103.9)
Investment in Joint ventures (40.7) (113.1)
Net cash used in investing activities (602.6) (396.5)
Cash flows from financing activities:
Equity issue 590.6 -
Net proceeds from borrowings 1,142.8 -
Repayment of borrowings (1,007.8) (4.3)
Subscription of funds from non-controlling interest 129.0 -
Settlement of financial instruments and other financial liabilities (204.8) 18.7
Repayment of finance leases (35.0) (48.6)
Equity dividends paid (50.1) -
Minority dividends paid (3.4) -
Net cash used in financing activities 561.3 (34.2)
Foreign exchange (14.1) 11.3
Net increase/(decrease) in cash 306.1 (21.6)
During the period, the Group had a net cash inflow of £306.1m (2022: outflow
of £21.6m).
Net cash generated by operations was £497.9m (2022: £470.9m) including
£499.4m of underlying EBITDA(3) (2022: £471.0m) and a working capital inflow
of £41.8m (2022: £60.9m). Included within working capital is a £30.1m
inflow for balances held with payment service providers as well as customer
funds, which are net debt neutral (2022: £21.7m inflow). This cash inflow was
partially offset by separately disclosed items, excluding those relating to
amortisation, depreciation and impairment, of £39.6m (2022: £57.9m) and a
loss on discontinued operations of £3.7m (2022: £3.1m).
During the period £71.2m was paid out in relation to corporate taxes (2022:
£40.6m) with a further £65.2m paid out in interest (2022: £32.5m).
Net cash used in investing activities for the period was £602.6m (2022:
£396.5m), including cash outflows for acquisitions of £474.9m (2022:
£195.7m), investment in capital expenditure of £130.2m (2022: £103.9m) and
an additional £40.7m invested in BetMGM (2022: £113.1m). These outflows were
partially offset by cash acquired with acquisitions of £43.2m (2022:
£16.2m).
During the period the group received a net £561.3m (2022: £34.2m repayment)
from financing activities. £590.6m was raised through the equity issuance
with a further £1,142.8m through new financing facilities (2022: £nil) which
were used, in part, to repay £1,007.8m of debt (2022: £4.3m). During the
period, the Group also received £129.0m (2022: £nil) from EMMA Capital into
Entain CEE to meet their obligations under the SuperSport earn-out and the STS
acquisition. £204.8m was paid on settlement of other financial instruments
and liabilities, primarily relating to contingent consideration on previous
acquisitions (2022: £19.9m). In the prior period, the Group also received
£38.6m on the settlement of one of the external swap arrangements.
During the period, the Group also paid £50.1m in equity dividends (2022:
£nil) and £3.4m in dividends to the minority interest in Entain CEE (2022:
£nil). Lease payments of £35.0m (2022: £48.6m) including those on
non-operational shops, were made in the period.
Net debt and liquidity
As at 30 June 2023, adjusted net debt was £2,593.9m and represented an
adjusted net debt to underlying EBITDA(3) ratio of 2.5x (3.1x proforma(5)).
The Group has drawn down £150.0m on the revolving credit facility at 30 June
2023 (2022: £nil).
Par value Issue costs/ Premium Total
£m £m £m
Bonds (400.0) (1.4) (401.4)
Term loans (2,795.1) 61.8 (2,733.3)
Interest accrual (46.3) - (46.3)
(3,241.4) 60.4 (3,181.0)
Cash 964.6
Accounting net debt (2,216.4)
Cash held on behalf of customers (196.5)
Fair value of swaps held against debt instruments (30.0)
Other debt related items* 124.9
Lease liabilities (275.9)
Adjusted net debt (2,593.9)
*Other debt related items include balances held with payment service
providers, deposits and other similar items
Going Concern
In adopting the going concern basis of preparation in the interim financial
statements, the directors have considered the current trading performance of
the Group, the potential impact of any settlement of the HMRC investigation,
the principal risks and uncertainties as considered in the 2022 Annual Report
and Accounts and longer term viability statement and the current economic
environment. The assessment performed over going concern included assessing
the impact of the crystallisation of the Group's principal risks in "severe
but plausible" downside scenarios as well as downside sensitivities on
trading.
Given the level of the Group's current financing facilities, the first
material tranche of which does not mature until 2026, and the forecast
covenant headroom even under the sensitised downside scenarios, the directors
believe the Group is well placed to manage the risks and uncertainties it
faces. As such, the directors have a reasonable expectation that the Group
will have adequate financial resources to continue in operational existence
and have, therefore, considered it appropriate to adopt the going concern
basis of preparation in the interim financial statements.
Notes
(1) 2023 and 2022 reported results are unaudited
(2) Growth on a constant currency basis is calculated by translating both
current and prior period performance at the 2023 exchange rates
(3) EBITDA is defined as earnings before interest, tax, depreciation and
amortisation, share based payments, share of JV income and separately
disclosed items
(4) Stated pre separately disclosed items
(5) Proforma leverage reflects reported Net Debt adjusted to remove the
benefit of the equity placing divided by proforma LTM EBITDA
Principal and emerging risks
During the first half of 2023, we have continued to integrate our Group
Enterprise Risk Management programme and have undertaken formal, standardised
risk workshops with each of our functions, and across all Group Principal
Risks, which result in formalised Significant Risk Dashboards and action
plans.
Quarterly reporting and deep dives of Principal Risks have been undertaken by
both the Group Risk Committee and the Board.
We continue to bring newly acquired companies into the Entain Risk Management
framework and the function works closely with Group Internal Audit to undergo
critical control testing in line with the audit programme for risk management.
The principal risks and uncertainties which could impact the Group are
detailed in the Group's Annual Report and Accounts 2022 and are as follows:
Data privacy and cyber security
The Group processes sensitive personal customer data (including name, address,
age, bank details and betting and gaming history) as part of its business and
therefore must comply with strict data protection and privacy laws in all
jurisdictions in which the Group operates. The Group is exposed to the risk
that this data could be wrongfully obtained through either a cyber-attack or a
breach in data security. This could result in prosecutions including
financial penalties, sanctions, the loss of the goodwill of its customers and
an inability to deliver growth and deliver technology synergies.
Laws, regulations, licensing and regulatory compliance
Regulatory, legislative and fiscal regimes for betting and gaming in key
markets around the world can change, sometimes at short notice. Such changes
could benefit or have an adverse effect on the Group's profitability and
additional costs might be incurred in order to comply with any new laws or
regulations in multiple jurisdictions.
Failure to maintain our technology platform excellence
The Group's operations are highly dependent on technology and advanced
information systems and there is a risk that such technology or systems could
fail. In particular, any damage to, or failure of, online systems and
servers, electronic point of sale systems and electronic display systems could
result in interruptions to financial controls and customer service systems and
may impact the Group's ability to retain existing, and attract new, customers
to deliver the Group's growth strategy.
Taxes
The Group is subject to a range of taxes, duties and levies in many of the
countries where we have operations or in which our customers are located.
The taxes imposed upon betting and gaming companies have changed over time,
and the levels of taxation to which the Group is subject may change in the
future. If additional taxes are levied, this may have an adverse effect on
the amount of tax payable by the Group.
Further taxes may include corporate income tax, value added tax (VAT) or other
indirect taxes. Group companies may be subject to VAT or similar taxes on
transactions, which have previously been treated as exempt.
Strategy Execution in Growth Markets
Risk of ineffective execution of growth strategy may impact the Group's goal
of leadership in key growth markets such as those in the Americas and other
emerging countries, resulting in a deterioration in NGR growth opportunities
in regulated and regulating territories.
Safer betting and gaming
Providing a safe and enjoyable betting and gaming experience for our customers
in at the centre of everything that Entain does. Failure to meet the high
standards we, and others, expect of Entain could have a significant impact on
our customers and their wellbeing as well as impact the Group's profitability
and reputation.
Health, Safety, Security & Wellbeing of Employees, Customers and
Communities
Failure to meet the requirements of the various domestic and international
rules and regulations relating to the health and safety of our employees and
customers in both retail and digital markets could expose the Group, including
individual employees and directors, to material civil, criminal and or
regulatory action with the associated financial and reputational consequences.
In addition, as a large corporate we recognise our impact on society and local
communities in which we operate and as a large Group the expectations on us.
Failure to meet these expectations could have widespread reputational
consequences.
Trading, liability management and pricing
The Group may experience significant losses as a result of a failure to
determine accurately the odds in relation to any particular event and/or any
failure of its sports risk management processes.
Loss of key locations
Whilst the Group operates out of a number of geographical locations, there are
several key sites which are critical to the day to day operations of the
Group. Disruption in any of these locations could have an impact on day to
day operations.
Attracting and retaining key talent
The people who work within Entain are pivotal to the success of the company
and our failure to attract or retain key individuals may impact our ability to
deliver on our strategic goals.
As we progress through 2023, we will undertake formalised risk workshops with
the regions to formalise their approach to Risks Management and report back to
the Board, Audit, Sustainability and Compliance, People and Governance and
Remuneration committees on the outputs of the ERM programme.
UNAUDITED FINANCIAL STATEMENTS
INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June
2023 ( ) 2022
Notes Underlying Separately disclosed items Total Underlying Separately disclosed items Total
items (note 4) £m items (note 4) £m
£m £m £m £m
NGR 2,404.3 - 2,404.3 2,117.6 - 2,117.6
VAT/GST (26.7) - (26.7) (22.7) - (22.7)
Revenue 2,377.6 - 2,377.6 2,094.9 - 2,094.9
Cost of sales (919.9) - (919.9) (767.1) - (767.1)
Gross profit 1,457.7 - 1,457.7 1,327.8 - 1,327.8
Administrative costs (1,102.2) (733.4) (1,835.6) (975.2) (112.9) (1,088.1)
Contribution 1,126.2 - 1,126.2 1,025.5 - 1,025.5
Administrative costs excluding marketing (770.7) (733.4) (1,504.1) (672.9) (112.9) (785.8)
Group operating profit/(loss) before share of results from joint ventures and 355.5 (733.4) (377.9) 352.6 (112.9) 239.7
associates
Share of results from joint venture and associates (48.1) - (48.1) (106.1) - (106.1)
Group operating profit/(loss) 307.4 (733.4) (426.0) 246.5 (112.9) 133.6
Finance expense 5 (112.2) (2.3) (114.5) (40.2) - (40.2)
Finance income 5 3.8 - 3.8 1.1 - 1.1
(Losses)/gains arising from financial instruments 5 (23.0) - (23.0) 63.5 - 63.5
Gains/(losses) arising from foreign exchange on debt instruments 5 111.6 - 111.6 (118.5) - (118.5)
Profit/(loss) before tax 287.6 (735.7) (448.1) 152.4 (112.9) 39.5
Income tax (expense)/credit 6 (70.5) 16.1 (54.4) (30.7) 19.3 (11.4)
Profit/(loss) from continuing operations 217.1 (719.6) (502.5) 121.7 (93.6) 28.1
Loss for the period from discontinued operations after tax - (3.7) (3.7) - (3.1) (3.1)
Profit/(loss) for the period 217.1 (723.3) (506.2) 121.7 (96.7) 25.0
Attributable to:
Equity holders of the parent 206.9 (708.0) (501.1) 123.7 (96.7) 27.0
Non-controlling interests 10.2 (15.3) (5.1) (2.0) - (2.0)
Earnings per share on profit/(loss) for the period from continuing 8 21.8p (83.9)p 29.5p 5.1p
operations(1)
From profit/(loss) for the period(1) 21.8p (84.5)p 29.5p 4.6p
Diluted earnings per share on profit/(loss) for the period from continuing 8 21.6p (83.9)p 29.3p 5.1p
operations(1)
From profit/(loss) for the period(1) 21.6p (84.5)p 29.3p 4.6p
Memo: 2023 ( ) 2022
Underlying Separately disclosed items Total Underlying Separately disclosed items Total
items £m £m items £m £m
£m £m
EBITDA 499.4 (623.2) (123.8) 471.0 (59.2) 411.8
Share based payments (9.1) - (9.1) (5.2) - (5.2)
Depreciation, amortisation and impairment (134.8) (110.2) (245.0) (113.2) (53.7) (166.9)
Share of results from joint ventures and associates (48.1) - (48.1) (106.1) - (106.1)
Group operating profit/(loss) 307.4 (733.4) (426.0) 246.5 (112.9) 133.6
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 8 for
further details.
The accompanying notes form part of these financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended Six months ended
30 June 30 June
2023 2022
£m £m
(Loss)/ profit for the period (506.2) 25.0
Other comprehensive income:
Items that may be reclassified to profit or loss:
Currency translation (losses)/gains (164.3) 111.0
Total items that will be reclassified to profit or loss (164.3) 111.0
Items that will not be re-classified to profit or loss:
Changes in the fair value of equity instruments at fair value through other 0.1 (2.7)
comprehensive income/(expense)
Re-measurement of defined benefit pension scheme (4.6) (0.1)
Tax on re-measurement of defined benefit pension scheme 1.6 -
Total items that will not be reclassified to profit or loss (2.9) (2.8)
Other comprehensive (expense)/income for the period, net of tax (167.2) 108.2
Total comprehensive (expense)/income for the period (673.4) 133.2
Attributable to:
- equity holders of the parent (661.2) 135.2
- non-controlling interests (12.2) (2.0)
The accompanying notes form part of these financial statements.
INTERIM CONDENSED CONSOLIDATED BALANCE SHEET
30 June Restated 30 June
2023 31 December 2022
2022
(note 12)
Note £m £m £m
ASSETS
Non-current assets
Goodwill 9 4,362.3 3,986.0 3,392.6
Intangible assets 9 3,703.3 2,672.7 2,231.6
Property, plant and equipment 518.1 507.2 486.4
Interest in joint venture - - 14.2
Interest in associates and other investments 55.1 53.5 57.1
Trade and other receivables 44.0 38.6 4.2
Other financial assets - 0.2 8.0
Deferred tax assets 488.2 157.3 161.6
Retirement benefit assets 60.0 63.8 88.2
9,231.0 7,479.3 6,443.9
Current assets
Trade and other receivables 502.7 500.3 429.6
Income and other taxes recoverable 42.5 30.7 34.1
Derivative financial instruments 15 70.4 72.9 84.0
Cash and cash equivalents 964.6 658.5 465.5
1,580.2 1,262.4 1,013.2
TOTAL ASSETS 10,811.2 8,741.7 7,457.1
LIABILITIES
Current liabilities
Trade and other payables (823.9) (719.8) (702.7)
Balances with customers (196.5) (200.5) (194.9)
Lease liabilities (69.2) (65.1) (62.4)
Interest bearing loans and borrowings (613.1) (424.9) (131.8)
Corporate tax liabilities (59.9) (47.1) (52.8)
Provisions (146.8) (20.6) (42.6)
Derivative financial instruments 15 (100.4) (79.2) -
Other financial liabilities 15 (121.4) (208.8) (62.4)
(2,131.2) (1,766.0) (1,249.6)
Non-current liabilities
Interest bearing loans and borrowings (2,567.9) (2,689.1) (2,271.0)
Lease liabilities (206.7) (215.8) (213.9)
Deferred tax liabilities (794.5) (495.4) (407.8)
Provisions (465.2) (5.4) (5.5)
Other financial liabilities 15 (1,457.0) (253.4) (2.8)
(5,491.3) (3,659.1) (2,901.0)
TOTAL LIABILITIES (7,622.5) (5,425.1) (4,150.6)
NET ASSETS 3,188.7 3,316.6 3,306.5
EQUITY
Issued share capital 5.2 4.8 4.8
Share premium 1,796.8 1,207.3 1,207.3
Merger reserve 2,527.4 2,527.4 2,527.4
Translation reserve 83.0 240.2 174.4
Retained deficit (1,520.9) (846.9) (605.6)
Equity shareholder's funds 2,891.5 3,132.8 3,308.3
Non-controlling interests 297.2 183.8 (1.8)
TOTAL SHAREHOLDERS' EQUITY 3,188.7 3,316.6 3,306.5
The accompanying notes form part of these financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Issued Share Translation reserve(1) Retained deficit Equity shareholders Non-controlling interest Total
share capital premium funds shareholders
Merger equity
Reserve
£m £m £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 period - - - - 27.0 27.0 (2.0) 25.0
Other comprehensive income - - - 111.0 (2.8) 108.2 - 108.2
Total comprehensive income - - - 111.0 24.2 135.2 (2.0) 133.2
Share options exercised - - - - - - -
Share-based payments charge - - - - 6.2 6.2 - 6.2
Equity dividends - - - - - - - -
Purchase of non-controlling Interest - - - - (0.2) (0.2) (1.2) (1.4)
At 30 June 2022 4.8 1,207.3 2,527.4 174.4 (605.6) 3,308.3 (1.8) 3,306.5
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 period - - - - (501.1) (501.1) (5.1) (506.2)
Other comprehensive expense - - - (157.2) (2.9) (160.1) (7.1) (167.2)
Total comprehensive expense - - - (157.2) (504.0) (661.2) (12.2) (673.4)
Share options exercised - - - - - - -
Share-based payments charge - - - - 9.1 9.1 - 9.1
Equity dividends - - - - (50.1) (50.1) (3.4) (53.5)
Equity issue 0.4 589.5 - - - 589.9 - 589.9
Transactions with minority interest(2) - - - - (129.0) (129.0) 129.0 -
At 30 June 2023 5.2 1,796.8 2,527.4 83.0 (1,520.9) 2,891.5 297.2 3,188.7
1. The translation reserve is used to record exchange
differences arising from the translation of the financial statements of
foreign subsidiaries with non-sterling functional currencies.
2. Relates to the subscription of equity in Entain Holdings
(CEE) Limited by minority holders as well as the recognition of the financial
liability for the put option on Entain Holdings (CEE) Limited. See note 12 for
further details.
The accompanying notes form part of these financial statements.
( )
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended Six months ended
30 June 2023 30 June 2022
Notes £m £m
Cash generated by operations 13 497.9 470.9
Income taxes paid (71.2) (40.6)
Net finance expense paid (65.2) (32.5)
Net cash generated from operating activities 361.5 397.8
Cash flows from investing activities:
Acquisitions (474.9) (195.7)
Cash acquired on acquisition of business 43.2 16.2
Purchase of intangible assets (92.0) (56.5)
Purchase of property, plant and equipment (38.2) (47.4)
Investment in joint venture (40.7) (113.1)
Net cash used in investing activities (602.6) (396.5)
Cash flows from financing activities:
Proceeds from issue of ordinary shares 590.6 -
Net proceeds from borrowings 1,142.8 -
Repayment of borrowings (1,007.8) (4.3)
Subscription of equity from non-controlling interests 129.0 -
Settlement of derivative financial instruments - 38.6
Settlement of other financial liabilities (204.8) (19.9)
Payment of lease liabilities (35.0) (48.6)
Dividend paid to shareholders (50.1) -
Dividends paid to non-controlling interests (3.4) -
Net cash utilised from financing activities 561.3 (34.2)
Net decrease in cash and cash equivalents 320.2 (32.9)
Effect of changes in foreign exchange rates (14.1) 11.3
Cash and cash equivalents at beginning of the period 658.5 487.1
Cash and cash equivalents at end of the period 964.6 465.5
The accompanying notes form part of these financial statements.
1. Corporate information
Entain plc ("the Company") is a public limited company incorporated and
domiciled in the Isle of Man whose shares are publicly traded. The principal
activities of the Company and its subsidiaries ("the Group") are described in
Note 3.
2. Basis of preparation
In adopting the going concern basis of preparation in the interim financial
statements, the directors have considered the current trading performance of
the Group, the potential impact of any settlement of the HMRC investigation,
the principal risks and uncertainties as considered in the 2022 Annual Report
and Accounts and longer term viability statement and the current economic
environment. The assessment performed over going concern included assessing
the impact of the crystallisation of the Group's principal risks in "severe
but plausible" downside scenarios as well as downside sensitivities on
trading.
Given the level of the Group's current financing facilities, the first
material tranche of which does not mature until 2026, and the forecast
covenant headroom even under the sensitised downside scenarios, the directors
believe the Group is well placed to manage the risks and uncertainties it
faces. As such, the directors have a reasonable expectation that the Group
will have adequate financial resources to continue in operational existence
and have, therefore, considered it appropriate to adopt the going concern
basis of preparation in the interim financial statements.
(a) The Condensed Interim Financial Statements have been prepared in
accordance with the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority and with International Accounting Standards 34
'Interim Financial Reporting' as issued by the International Accounting
Standards Board. It should be read in conjunction with the Annual Report and
Accounts for the year ended 31 December 2022, which were prepared in
accordance with applicable law and International Financial Reporting Standards
as issued by the International Accounting Standards Board.
The Condensed Interim Financial Statements are not statutory accounts within
the meaning of the Isle of Man Companies Act 2006 and do not include all of
the information and disclosures required for full annual financial
statements. It should be read in conjunction with the Annual Report and
Accounts of Entain plc for the year ended 31 December 2022 which were filed
with the Registrar of Companies in the Isle of Man. This report is available
either on request from the Company's registered office or to download from
https://entaingroup.com/investor-relations/financial-reports/
(https://entaingroup.com/investor-relations/financial-reports/) . The
auditor's report on these accounts was unqualified, did not include a
reference to any matters to which the auditors drew attention by way of
emphasis without qualifying their report, and did not contain a statement
under the Isle of Man Companies Act 2006.
The accounting policies adopted in the preparation of the interim financial
statements are consistent with those followed in the preparation of the
Group's annual financial statements for the year ended 31 December 2022 other
than those listed in 2(f).
Due to the timing of certain acquisitions in the previous financial year, the
fair values applied to the assets and liabilities acquired were provisional,
in accordance with IFRS 3 'Business Combinations'. Since the initial fair
value assessment, certain measurement period adjustments have been identified
resulting in reallocations between goodwill and other components of the net
assets acquired. This has resulted in a restatement of the prior year balance
sheet to reflect these changes. Net assets and Total shareholders' equity have
not changed as a result of this restatement. See note 12 for further details.
The financial statements are presented in million Pounds Sterling, rounded to
one decimal place.
The interim financial information was approved by a duly appointed and
authorised committee of the Board of Directors on 10 August 2023 and is
unaudited but have been reviewed by the Group's auditor.
(b) Critical judgements and estimates
In preparing these Condensed Consolidated Interim Financial Statements, the
Group has made its best estimates and judgements of certain amounts included
in the financial statements, giving due consideration to materiality. The
Group regularly reviews these estimates and updates them as required.
(c) Critical judgements and estimates (continued)
The existing critical accounting estimates, assumptions and judgements set out
in note 4.2 of the Group's Annual Report and Accounts for the 12 months ended
31 December 2022 remain relevant to these Condensed Consolidated Interim
Financial Statements.
(d) To assist in understanding the underlying performance, the Group has
separately disclosed the following items of pre-tax income and expense:
- 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;
- costs associated with business restructuring;
- corporate transaction costs;
- changes in the fair value of contingent consideration;
- the impact of significant litigation; and
- the related tax impact effect on these items.
- any other items are considered individually by virtue of their
nature or size.
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 items disclosed separately have been included within the appropriate
classifications in the consolidated income statement and are detailed in note
4. The directors have also presented Net Gaming Revenue, Contribution and
Underlying EBITDA as these are measures used frequently within the industry.
All of these items are reconciled within the Income Statement.
(e) Accounting policies
Depreciation
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.
The estimated useful lives are as follows:
Land and buildings Lower of 50 years, or estimated useful life of the building, or lease.
Indefinite lives are attached to any land held and therefore it is not
depreciated
Plant and equipment 3 - 5 years
Fixtures, fittings and equipment 3 -10 years
Amortisation
Amortisation is charged to the income statement on a straight-line basis over
the estimated useful lives of intangible assets, unless such lives are
indefinite. All indefinite lived assets are subject to an annual impairment
review from the year of acquisition. Other intangible assets are amortised
from the date they are available for use.
The estimated useful lives are as follows:
Retail licences 15 years, or duration of licence
Software 2 -15 years
Capitalised development expenditure 3 - 5 years
Trademarks and brand names 10 - 25 years, or indefinite life
Customer relationships 3 -15 years
Impairment
An impairment review is performed for goodwill and 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 gambling companies.
Within Retail the cash generating units are generally an individual Licensed
Betting Office ("LBO") and therefore, impairment is first assessed at this
level for licences, property, plant and equipment and right of use ("ROU")
assets, any impairment arising booked first to licences then to property,
plant and equipment and ROU assets.
Separately Disclosed Items
For a full explanation of what is defined as a separately disclosed item and
how they are disclosed, please refer to note 2(d).
(f) Updates to IFRS
A number of amendments to IFRSs became effective for the financial year
beginning 1 January 2023:
IAS 1 'Presentation of Financial Statements' Presentation of Financial Statements and IFRS Practice Statement 2 1 January 2023
IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors' Definition of Accounting Estimates 1 January 2023
IAS 12 'Income Taxes' Deferred Tax related to assets and liabilities arising from a single 1 January 2023
transaction
IAS 17 'Insurance Contracts' Original issue 1 January 2023
None of the amendments to IFRS noted above had a significant effect on the
financial statements.
3. Segment information
The Group's operating segments are based on the reports reviewed by the
Executive management team (who are 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, and the
Group's operating segments are now aggregated into the five reportable
segments.
- Online: comprises betting and gaming activities from online and mobile
operations. Sports Brands include bwin, Coral, Crystalbet, Eurobet, Ladbrokes,
Sportingbet, SuperSport, Sport Interaction, TAB NZ and BetCity; Gaming Brands
include CasinoClub, Foxy Bingo, Gala, Gioco Digitale, partypoker, PartyCasino,
Optibet, Ninja and BetCity;
- Retail: comprises betting and retail activities in the shop
estate in Great Britain, Northern Ireland, Jersey, Republic of Ireland,
Belgium, Italy, Croatia and New Zealand;
- 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 have chosen to assess the
performance of operating segments based on a measure of net revenue, EBITDA
and operating profit with finance costs and taxation considered for the Group
as a whole. 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 six months ended 30 June 2023 were as follows:
2023 Online Retail All Other Segments New Opportunities Corporate Elimination Total Group
£m £m £m £m £m of internal £m
revenue
£m
NGR 1,684.3 709.3 13.5 - - (2.8) 2,404.3
VAT/GST (26.1) (0.6) - - - - (26.7)
Revenue 1,658.2 708.7 13.5 - - (2.8) 2,377.6
Gross Profit 980.9 463.3 13.5 - - - 1,457.7
Contribution 659.8 457.9 13.3 (4.8) - - 1,126.2
Operating costs excluding marketing costs (244.3) (306.5) (10.3) (10.2) (55.5) - (626.8)
Underlying EBITDA before separately disclosed items 415.5 151.4 3.0 (15.0) (55.5) - 499.4
Share based payments (3.2) (1.2) - (0.4) (4.3) - (9.1)
Depreciation and Amortisation (69.5) (60.6) (1.4) (3.1) (0.2) - (134.8)
Share of joint ventures and associates (0.3) - 1.3 (0.6) (48.5) - (48.1)
Operating profit/(loss) before separately disclosed items 342.5 89.6 2.9 (19.1) (108.5) - 307.4
Separately disclosed items (107.1) (3.1) - - (623.2) - (733.4)
Group operating profit/(loss) 235.4 86.5 2.9 (19.1) (731.7) - (426.0)
Net finance expense (22.1)
Loss before tax (448.1)
Income tax (54.4)
Loss for the period from continuing operations after tax (502.5)
Loss for the period from discontinued operations after tax (3.7)
Loss for the period after discontinued operations (506.2)
The segment results for the six months ended 30 June 2022 were as follows:
2022 Online Retail All Other Segments New Opportunities Corporate Elimination Total Group
£m £m £m £m £m of internal £m
revenue
£m
NGR 1,470.7 636.0 13.1 - - (2.2) 2,117.6
VAT/GST (22.7) - - - - - (22.7)
Revenue 1,448.0 636.0 13.1 - - (2.2) 2,094.9
Gross Profit 886.1 428.6 13.1 - - - 1,327.8
Contribution 587.3 425.1 13.1 - - - 1,025.5
Operating costs excluding marketing costs (202.6) (284.0) (10.1) (14.6) (43.2) - (554.5)
Underlying EBITDA before separately disclosed items 384.7 141.1 3.0 (14.6) (43.2) - 471.0
Share based payments (1.3) (0.5) - (0.1) (3.3) - (5.2)
Depreciation and Amortisation (57.2) (53.0) (1.3) (1.6) (0.1) - (113.2)
Share of joint ventures and associates 1.8 - 0.7 - (108.6) - (106.1)
Operating profit/(loss) before separately disclosed items 328.0 87.6 2.4 (16.3) (155.2) - 246.5
Separately disclosed items (50.5) (50.1) - - (12.3) - (112.9)
Group operating profit/(loss) 277.5 37.5 2.4 (16.3) (167.5) - 133.6
Net finance income (94.1)
Profit before tax 39.5
Income tax (11.4)
Profit for the period from continuing operations after tax 28.1
Loss for the period from discontinued operations after tax (3.1)
Profit for the period after discontinued operations 25.0
Assets and liabilities information is reported internally in total and not by
reportable segment and, accordingly, no information is provided in this note
on assets and liabilities split by reportable segment.
Geographical information
Revenue by destination for the Group, is as follows:
Six months ended Six months ended
30 June 2023 30 June 2022
£m £m
United Kingdom 1,027.5 1,028.9
Australia 209.1 213.7
Italy 279.3 225.3
Rest of Europe((1)) 687.4 456.4
Rest of the World((2)) 174.3 170.6
Total 2,377.6 2,094.9
1. Rest of Europe is predominantly driven by markets in Croatia,
Belgium, Netherlands, Germany and Georgia.
2. Rest of the World is predominantly driven by the market in
Brazil and Canada.
4. Separately disclosed items
Six months ended Six months ended
30 June 2023 30 June 2022
£m Tax Impact Tax Impact
£m £m £m
Legal settlement ((1)) 585.0 - - -
Amortisation of acquired intangibles ((2)) 110.2 (19.1) 51.5 (6.9)
Restructuring costs ((3)) 6.8 (0.9) 4.5 (0.6)
Corporate transaction costs ((4)) 12.2 - 12.5 -
Legal and onerous contract provisions ((5)) 5.6 0.3 4.7 -
Movement in fair value of contingent consideration ((6)) 13.6 4.0 (9.3) -
Refinancing fees / Issue cost write-off ((7)) 2.3 (0.4) - -
Impairment loss ((8)) - - 2.2 -
Loss on disposal ((8)) - - 1.3 -
Furlough ((9)) - - 45.5 (11.8)
Separately disclosed items for the period from continuing operations 735.7 (16.1) 112.9 (19.3)
Separately disclosed items for the period from discontinued operations 3.7 3.1
Total before tax 739.4 (16.1) 116.0 (19.3)
Separately disclosed items for the period after discontinued operations 723.3 96.7
(1. )Provision in respect of its ongoing deferred prosecution
agreement negotiations with the Crown Prosecution Service (see note 16)
(2. )Amortisation charges in relation to acquired intangible assets
arising from acquisitions. The majority of the charge is from acquisitions in
the last two years, including Enlabs, Bet.pt, Avid, SuperSport, BetCity, and
365Scores.
(3. )Costs associated with the Group's restructuring programs
including Evolve.
(4. )Deal fees associated with M&A activity in the period as
detailed in note 12.
(5. )Relates primarily to costs associated with certain litigation
and legal claims, including the HMRC investigation.
(6. )Expense reflecting a change in the estimated likely payments
under contingent consideration arrangements.
(7. )Expenses incurred as part of the refinancing of loans.
(8. )During the prior period the Group recognised a non-cash
impairment charge of £2.2m against vacated head office premises, and £1.3m
loss on sale of certain assets.
(9. )Repayment of certain amounts received by the Group under the
Government Coronavirus Job Retention Scheme ("Furlough Scheme").
5. Finance expense and income
Six months ended Six months ended
30 June 2023 30 June 2022
Underlying items Separately disclosed items Total Underlying items Separately disclosed items Total
£m (note 4) £m £m (note 4) £m
£m £m
Bank loans and overdrafts (106.3) (2.3) (108.6) (33.9) - (33.9)
Interest arising on lease liabilities (5.9) - (5.9) (6.3) - (6.3)
Losses arising on financial derivatives (23.0) - (23.0) - - -
Losses arising on foreign exchange on debt instruments - - - (118.5) - (118.5)
Total finance expense (135.2) (2.3) (137.5) (158.7) - (158.7)
Interest receivable 3.8 - 3.8 1.1 - 1.1
Gains arising on financial derivatives - - - 63.5 - 63.5
Gains arising on foreign exchange on debt instruments 111.6 - 111.6 - - -
Net finance expense (19.8) (2.3) (22.1) (94.1) - (94.1)
6. Taxation
The tax charge on continuing operations for the six months ended 30 June 2023
was £54.4m (six months ended 30 June 2022: charge of £11.4m) of which a
credit of £16.1m (30 June 2022: credit of £19.3m) related to separately
disclosed items. The effective tax rate on continuing operations (excluding
the effect of JV results and foreign exchange on financing items) before
separately disclosed items is 24.1% (30 June 2022: 11.4%).
The current period's tax charge on continuing operations before separately
disclosed items was higher than the UK average statutory rate for the period
of 23.5% due to unrecognised deferred tax assets on losses arising in BetMGM
and on surplus interest expenses, partially offset by credits from updates to
prior periods.
The Group's deferred tax assets and liabilities are measured at the tax rates
of the respective territories which are expected to apply in the year in which
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 assets have been recognised based on the ability of future
offset against deferred tax liabilities or against future taxable profits. The
assessment of future taxable profits is based on forecasts and assumptions
consistent with those used for impairment testing.
The underlying effective tax rate on continuing operations for the full year
ended 31 December 2023, excluding the results of BetMGM and foreign exchange
on financing items, is forecast to be c23%.
The Group's future tax charge, and effective tax rate, could be affected by a
number of factors including the geographic mix of profits, changes to
statutory corporate tax rates and the impact of continuing global tax reforms.
The Group continues to monitor the ongoing work of the OECD on the taxation of
the digital economy and specifically the minimum level of taxation for
multinational groups ("Pillar Two"). Each country is at a different stage in
their process for adopting these rules. The UK has enacted initial legislation
and the EU adopted a Pillar Two Directive on 22 December 2022, which is
expected to be transposed into legislation by each of the member states during
2023. Once fully implemented, we anticipate the rules will apply to the Group
from the year ended 31 December 2024. The Group expects this to increase the
future Effective Tax Rate on underlying items, the extent and timing of which
will depend on how the rules are ultimately implemented.
7. Dividends
An interim dividend of 8.9p per share (30 June 2022: 8.5p per share) has been
proposed by the directors.
8. Earnings per share
Basic earnings per share has been calculated by dividing the loss attributable
to shareholders of the Company of £501.1m (30 June 2022: profit of £27.0m)
by the weighted average number of shares in issue during the six months of
593.0m (30 June 2022: 587.5m).
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 2 and disclosed in note 4.
Weighted average number of shares (million): Six months ended Six months ended
30 June 2023 30 June 2022
Shares for basic earnings per share 593.0 587.5
Potentially dilutive share options and contingently issuable shares 5.5 4.3
Shares for diluted earnings per share 598.5 591.8
Six months ended Six months ended
30 June 2023 30 June 2022
£m £m
(Loss)/profit attributable to shareholders (501.1) 27.0
- from continuing operations (497.4) 30.1
- from discontinued operations (3.7) (3.1)
Losses/(gains) arising from financial instruments 23.0 (63.5)
(Gains)/losses arising from foreign exchange of debt instruments (111.6) 118.5
Tax charge/(credit) on foreign exchange 10.8 (5.4)
Separately disclosed items net of tax 708.0 96.7
Adjusted profit attributable to shareholders 129.1 173.3
- from continuing operations 129.1 173.3
- from discontinued operations - -
Standard earnings Adjusted earnings per share
per share Six months ended
Six months ended 30 June
30 June
Stated in 2023 2022 2023 2022
pence
Basic earnings per share
- from continuing operations (83.9) 5.1 21.8 29.5
- from discontinued operations (0.6) (0.5) - -
From profit for the period (84.5) 4.6 21.8 29.5
Diluted earnings per share
- from continuing operations (83.9) 5.1 21.6 29.3
- from discontinued operations (0.6) (0.5) - -
From profit for the period (84.5) 4.6 21.6 29.3
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 29.9p
(2022: 48.0p) and a diluted adjusted earnings per share of 29.7p (2022: 47.6p)
from continuing operations.
9. 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 (restated)(1) 629.1 148.0 7.4 200.1 206.4 1,191.0
Disposals - (0.5) (13.9) - - (14.4)
Reclassification - - (1.0) - - (1.0)
At 31 December 2022 (restated) (1) 4,275.2 204.3 772.7 1,239.2 2,268.8 8,760.2
Exchange adjustment (134.7) (14.5) (11.0) (25.6) (38.8) (224.6)
Additions - - 92.0 - - 92.0
Additions from business combinations (note 12) 492.1 799.3 32.8 75.1 264.3 1,663.6
Disposals - - (0.1) - - (0.1)
At 30 June 2023 4,632.6 989.1 886.4 1,288.7 2,494.3 10,291.1
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 (18.9) (0.6) (4.4) (19.2) (10.3) (53.4)
Amortisation charge - 16.0 63.0 57.5 41.0 177.5
Impairment charge - - - - - -
Disposals - - (0.1) - - (0.1)
At 30 June 2023 270.3 41.7 579.3 1,056.3 277.9 2,225.5
Net book value
At 31 December 2022 3,986.0 178.0 251.9 221.2 2,021.6 6,658.7
At 30 June 2023 4,362.3 947.4 307.1 232.4 2,216.4 8,065.6
(1. Restatement of prior year intangible valuations has been made in relation
to the prior year SuperSport acquisition during the subsequent hindsight
period. See note 12 for further details.)
At 30 June 2023, the Group had not entered into contractual commitments for
the acquisition of any intangible assets (31 December 2022: £nil, 30 June
2022: £nil).
Included within trade-marks and brand names are £1,398.4m (31 December 2022:
£1,398.4m, 30 June 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.
Software relates to the cost of acquired software, through purchase or
business combination, and the capitalisation of internally developed software.
Customer relationships, trade-marks and brand names relate to the fair value
of customer lists, trade-marks and brand names acquired as part of business
combinations, primarily relating to the bwin, Ladbrokes Coral Group plc,
Enlabs, Sport Interaction, SuperSport, BetCity, 365Scores and TAB NZ
businesses.
10. Impairment
IAS 36 Impairment of Assets states that an impairment review must be carried
out at least annually for any indefinite lived assets, such as goodwill and
certain brands. Furthermore, it is necessary to assess whether there is any
indication that any other asset, or cash generating unit (CGU), may be
impaired at each reporting date. Should there be an indication that an asset
may be impaired then an impairment review should be conducted at the relevant
reporting date.
No current indicators which might lead to a material impairment have been
identified by the directors.
11. Net debt
The components of the Group's net debt are as follows:
30 June 30 December 2022 30 June
2023 2022
£m £m £m
Current assets
Cash and short-term deposits 964.6 658.5 465.5
Current liabilities
Interest bearing loans and borrowings (613.1) (424.9) (131.8)
Non-current liabilities
Interest bearing loans and borrowings (2,567.9) (2,689.1) (2,271.0)
Accounting net debt (2,216.4) (2,455.5) (1,937.3)
Cash held on behalf of customers (196.5) (200.5) (194.9)
Fair value swaps held against debt instruments (30.0) (6.5) 84.0
Other debt related items(*) 124.9 193.6 114.9
Adjusted net debt (2,318.0) (2,468.9) (1,933.3)
Lease liabilities (275.9) (280.9) (276.3)
Net debt including lease liabilities (2,593.9) (2,749.8) (2,209.6)
(* Other debt related items include balances held with payment service
providers, deposits, and similar items.)
12. 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 judgement. 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.
Due to the timing of certain acquisitions in relation to the previous
financial year end, the fair values applied to the goodwill acquired was
considered to be provisional. Since the initial fair value, certain
measurement period adjustments have been applied as follows:
SuperSport
Hindsight 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 £6.8m, increase licences by £0.4m, increase
trade-marks & brand names by £0.4m, decrease customer relationships by
£5.8m, and increase other liabilities by £1.8m.
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 holders
During the period, the Group received by way of an equity injection into
Entain Holdings (CEE) Limited £42.6m from EMMA GAMMA in relation to their 25%
share of the 2022 earn-out under the SuperSport acquisition. In addition, the
Group also received £86.4m by the way of another equity injection in Entain
Holdings (CEE) Limited from EMMA GAMMA for the pre-steps in anticipation of
the acquisition of STS. As EMMA GAMMA 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 in the first half to
reflect the future liability against reserves. Following these two
transactions, the 75%:25% equity split has been maintained.
Summary of acquisitions in the period:
Given the proximity of the acquisitions to the period end and as permitted by
IFRS 3 'Business Combinations', the fair value of the acquired identifiable
assets and liabilities has been presented on a provisional basis. Fair values
were determined on the basis of an initial assessment performed by an
independent professional expert.
TAB NZ
On 1(st) June, the Group completed the acquisition of a business (NZ Ent
Limited) entitled to run the TAB NZ brand in New Zealand for 25 years for an
initial payment of £85m. As part of the acquisition, the Group has also
committed to make minimum guaranteed funding payments to TAB NZ in the first 5
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,
the provisional, discounted, estimate of consideration for the TAB NZ
acquisition is £1,208.5m.
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, the net assets acquired and goodwill of
the TAB NZ acquisition are as follows:
Provisional fair value
£m
Intangible assets (excluding goodwill) 959.8
Property, plant and equipment 20.4
Trade and other receivables 9.8
Cash and cash equivalents 24.4
Deferred tax asset 297.0
Deferred tax liability (237.4)
Trade and other payables (44.6)
Lease liabilities (14.4)
Total 1,015.0
Net assets acquired 1,015.0
Goodwill 193.5
Total net assets acquired 1,208.5
Consideration:
Cash 85.3
Non-controlling interests -
Deferred and contingent consideration 1,123.2
Total consideration 1,208.5
BetCity
On 11(th) 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(th) 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(th) 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.
Business combinations
Details of the purchase consideration, the net assets acquired and goodwill on
the acquisition of BetCity, 365Scores and Tiidal Gaming are as follows:
Provisional fair value
£m
Intangible assets (excluding goodwill) 211.7
Property, plant and equipment 1.7
Trade and other receivables 24.5
Cash and cash equivalents 18.8
Deferred tax asset 0.6
Deferred tax liability (53.0)
Trade and other payables (42.7)
Lease liabilities (1.0)
Total 160.6
Net assets acquired 160.6
Goodwill 298.6
Total net assets acquired 459.2
Consideration:
Cash 381.9
Non-controlling interests -
Deferred and contingent consideration 77.3
Total consideration 459.2
The acquired businesses contributed revenues of £101.9m and profit before tax
of £7.7m pre the effect of any fair value adjustments to the Group for the
period post acquisition up to 30 June 2023. If the acquisitions had occurred
on 1 January 2023, consolidated proforma revenue and net profit for the period
ended 30 June 2023 would have been £189.3m and £36.2m respectively before
the effect of fair value adjustments and deal related costs.
13. Note to the statement of cash flows
Six months ended Six months ended
30 June 30 June
2023 2022
£m £m
(Loss)/profit before tax from continuing operations (448.1) 39.5
Net finance expense 22.1 94.1
(Loss)/profit before tax and finance expense from continuing (426.0) 133.6
operations
Loss before tax and net finance expense from discontinued (3.7) (3.1)
operations
(Loss)/profit before tax and net finance expense including (429.7) 130.5
discontinued operations
Adjustments for:
Impairment (note 10) - 2.2
Depreciation of property, plant and equipment 67.5 60.2
Amortisation of intangible assets 177.5 104.5
Share-based payments charge 9.1 5.2
Decrease in trade and other receivables 5.9 108.0
Increase/(decrease) in trade and other payables 36.2 (35.4)
Increase/(decrease) in other financial liabilities 0.5 (7.8)
Increase/(decrease) in provisions 584.1 (1.1)
Share of results from joint ventures and associates 48.1 106.1
Other non-cash items (1.3) (1.5)
Cash generated by operations 497.9 470.9
14. Related party transactions
During the period, Group companies entered into the following transactions
with related parties who are not members of the Group:
Six months ended Six months ended
30 June 30 June
2023 2022
£m £m
Equity investment
- Joint venture(1) 40.7 113.1
Sundry income
- Associates(2) 10.9 -
Sundry expenditures
- Associates(2) (36.2) 1.8
1. Equity investment in BetMGM.
2. Payments in the normal course of business made to Sports
Information Services (Holdings) Limited, Infiniti Gaming Knokke NV, Grand
Casino de Dinant SA, and Leaderbet NV.
The following table provides related party outstanding balances:
30 June 31 December 30 June
2023 2022 2022
£m £m £m
- Joint venture receivables 77.4 87.8 29.3
- Associates payables (6.0) (0.3) (0.3)
- Associates receivables 4.2 4.4 -
15. Financial instruments
Details of the Group's borrowing are set out in note 11.
Fair value of financial instruments
The major component of the Group's derivative financial assets measured at
fair value consist of currency swaps held against debt instruments of £70.4m
(30 June 2022: £84.0m, 31 December 2022: £72.9m). The fair value of the
Group's other financial assets at 30 June 2023 is not materially different to
its original cost.
The major components of the Group's financial liabilities measured at fair
value consist of; the Group's currency swap liability £100.4m (30 June 2022:
£nil, 31 December 2022: £79.2m), discounted deferred and contingent
consideration of £1,245.9m (30 June 2022: £45.2m, 31 December 2022:
£254.9m) principally on TAB NZ which has been discounted at rates relevant to
the local market, put option liabilities of £309.0m on Entain Holdings (CEE)
Limited ( 30 June 2022: £nil, 31 December 2022 £187.2m), ante post
liabilities of £13.0m (30 June 2022: £17.2m, 31 December 2022: £17.2m) and
other financial liabilities of £10.5m ( 30 June 2022: £2.8m, 31 December
2022: £2.9m).
Financial assets and financial liabilities measured at fair value in the
Statement of Financial Position are grouped into three levels of a fair value
hierarchy. The three levels are defined on the observability of significant
inputs to the measurement, as follows:
· Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities;
· Level 2: inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly or indirectly;
and
· Level 3: inputs for the asset or liability that are not based on
observable market data.
There are no reasonably probable changes to assumptions or input that would
lead to material changes in the fair value determined, although the final
value will be determined by future sporting results.
The Group's financial assets and liabilities that are measured at fair value
after initial recognition fall under the 3 levels of the fair value hierarchy
as follows:
· Level 1 - £4.9m assets (30 June 2022: £0.4m, 31 December 2022:
£5.5m), and £nil liabilities (30 June 2022: £nil, 31 December 2022: £nil).
· Level 2 - £72.2m assets (30 June 2022: £86.2m, 31 December
2022: £74.7m), and £100.4m liabilities (30 June 2022: £nil, 31 December
2022: £79.2).
· Level 3 - £8.0m assets (30 June 2022: £9.6m, 31 December 2022:
£5.4m), and £1,261.6m liabilities (30 June 2022: £65.2m, 31 December 2022:
£278.9m).
16. Provision for HMRC settlement
During the period, the Group has taken a £585.0m provision in respect of its
ongoing deferred prosecution agreement (DPA) negotiations with the Crown
Prosecution Service (CPS).
The Company previously announced an investigation by HMRC into its legacy
Turkish facing business, which it sold in 2017, and subsequently announced
that it is in DPA negotiations with the CPS to resolve the ongoing HMRC
investigation.
The DPA negotiations have now progressed to the point where the Company
believes that it is likely to be able to agree a resolution of the HMRC
investigation insofar as it relates to the Company and the Group. While the
full terms of a DPA are subject to judicial approval, the Company has a
sufficient degree of confidence to take a provision of £585.0m against a
potential settlement, which would be paid over a four-year period in relation
to alleged offences under Section 7 of the Bribery Act 2010. The Company
currently anticipates judicial approval will be sought during Q4 2023.
Section 7 of the Bribery Act 2010 relates to the failure of a relevant
commercial organisation to have adequate procedures in place designed to
prevent persons associated with it from undertaking bribery for the benefit of
the commercial organisation.
The amount of the provision has been calculated on the basis that the Company
will receive full credit for its extensive co-operation with the investigation
prior, and subsequent, to entering into any DPA.
Since the investigation first commenced, the Group has undertaken a
comprehensive review of anti-bribery policies and procedures and has taken
decisive action to significantly strengthen its wider compliance programme and
related controls.
17. Contingent liabilities
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
€275m at 30 June 2023.
18. Subsequent events
STS
On 13 June 2023, the Group launched a Tender Offer, through Entain CEE, to
acquire 100% of STS Holdings S.A ("STS") at a purchase price of PLN 24.80 per
share, valuing the equity of STS at approximately £750m and an enterprise
value of £690m. As part of the acquisition, the current majority shareholder
in STS will acquire a 10% economic stake in the enlarged Entain CEE business.
The net consideration payable by Entain will be approximately £450m.
On 12 July 2023, the Group announced that it had received Antitrust approval
for the acquisition of STS with the acceptance period for the offer now
expected to close later in August ahead of completing the transaction shortly
thereafter.
New term loans and loan notes redemption
On 18 July 2023, the Group finalised its issuance of two new term loans for
€230m and $385m respectively. Upon receipt, the Group used £407m of the net
proceeds to repay the Group's loan notes and accrued interest that were due
for repayment in September 2023.
INDEPENDENT REVIEW REPORT TO ENTAIN PLC
Conclusion
We have been engaged by Entain plc ("the Company") to review the condensed set
of financial statements in the half-yearly financial report for the six months
ended 30 June 2023 which comprises the condensed consolidated income
statement, condensed consolidated statement of comprehensive income, condensed
consolidated balance sheet, condensed consolidated statement of changes in
equity, condensed consolidated statement of cash flows and the related
explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2023 is not prepared, in all
material respects, in accordance with IAS 34 Interim Financial Reporting
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European
Union and the Disclosure Guidance and Transparency Rules ("the DTR") of the
UK's Financial Conduct Authority ("the UK FCA").
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity ("ISRE (UK) 2410") issued for use in the
UK. A review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. We read the other
information contained in the half-yearly financial report and consider whether
it contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention that causes us to believe that the directors
have inappropriately adopted the going concern basis of accounting, or that
the directors have identified material uncertainties relating to going concern
that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However, future events or conditions may cause the Group to
cease to continue as a going concern, and the above conclusions are not a
guarantee that the Group will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the Group are
prepared in accordance with International Financial Reporting Standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European
Union.
The directors are responsible for preparing the condensed set of financial
statements included in the half-yearly financial report in accordance with IAS
34 adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union.
In preparing the condensed set of financial statements, the directors are
responsible for assessing the group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the group or to cease operations, or have no realistic alternative
but to do so.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. Our conclusion, including our conclusions relating to going concern,
are based on procedures that are less extensive than audit procedures, as
described in the Basis for conclusion section of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the DTR of the
UK FCA. Our review has been undertaken so that we might state to the Company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company for our review work, for this
report, or for the conclusions we have reached.
Mark Flanagan
for and on behalf of KPMG LLP
Chartered Accountants
EastWest
Tollhouse Hill
Nottingham
NG1 5FS
10 August 2023
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