REG - GVC Holdings PLC - Final Results <Origin Href="QuoteRef">GVC.L</Origin> - Part 3
23/03/2017 07:07
- Part 3: For the preceding part double click ID:nRSW2656Ab
Diluted 7 (0.51) 0.38
* Clean EBITDA is the Group's alternative non-GAAP performance measure and is considered to be a key performance measure by
the Directors as it serves as an indicator of financial performance and ability to service debt. It is defined as operating
profit adjusted for share based payments, exceptional items, depreciation, amortisation, impairment of available for sale
assets and changes in the fair value of derivative financial instruments. Exceptional items are those items the Group
considers to be non-recurring or material in nature that may distort an understanding of financial performance or impair
comparability.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2016
2016 2015
Em Em
(Loss) profit for the year (138.6) 24.7
Other comprehensive expense
Items that will be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations, net of tax (2.3) -
Total comprehensive (expense) income for the year (140.9) 24.7
Total comprehensive (expense) income for the year attributable to:
Equity holders of the parent (140.6) 24.7
Non-controlling interests 29 (0.3) -
(140.9) 24.7
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
for the year ended 31 December 2016
2016 2015
Notes Em Em
Non-current assets
Intangible assets 8 1,609.4 155.1
Property, plant and equipment 9 19.7 1.4
Investments and assets available for sale 10 3.7 2.6
Other receivables 11 4.9 -
Total non-current assets 1,637.7 159.1
Current assets
Trade and other receivables 11 105.2 34.6
Derivative financial assets 12 26.2 3.8
Income and other taxes reclaimable 6.7 6.0
Short term investments 13 5.4 -
Cash and cash equivalents 14 354.8 28.2
Assets held for sale 15 59.7 -
Total current assets 558.0 72.6
Total assets 2,195.7 231.7
Current liabilities
Trade and other payables 16 (93.9) (43.3)
Derivative financial liabilities - (9.9)
Income taxes payable (18.2) (7.3)
Other taxation payable 18 (47.2) (2.0)
Client liabilities (112.0) (14.8)
Progressive prize pools (22.8) -
Amounts due under finance leases 19 - (0.7)
Loans and borrowings 17 (403.5) (3.0)
Provisions 20 (1.2) -
Liabilities held for sale 15 (22.7) -
Total current liabilities (721.5) (81.0)
Current assets less current liabilities (163.5) (8.4)
Non-current liabilities
Trade and other payables 16 (4.4) (2.1)
Derivative financial liabilities 12 - (0.7)
Loans and borrowings 17 - (19.8)
Provisions 20 (6.9) -
Deferred tax 21 (65.6) -
Total non-current liabilities (76.9) (22.6)
Total net assets 1,397.3 128.1
Capital and reserves
Issued share capital 22 2.9 0.6
Merger reserve 40.4 40.4
Share premium 1,478.4 85.4
Translation reserve (2.0) 0.3
Retained earnings (120.9) 1.4
Equity attributable to equity holders of the parent 1,398.8 128.1
Non-controlling interests 29 (1.5) -
Total equity 1,397.3 128.1
The financial statements were approved and authorised for issue by the Board of Directors on 23 March 2017 and signed on
their behalf by:
KJ Alexander(Chief Executive Officer) P Miles(Chief Financial Officer)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2016
Share Capital Merger Reserve SharePremium Translation Reserve Retained Earnings Total attributable to equity holders of parent Non-controlling interests Total
Notes Em Em Em Em Em Em Em Em
Balance at 1 January 2015 0.6 40.4 85.4 0.3 22.7 149.4 - 149.4
Share option charges - - - - 0.5 0.5 - 0.5
Share options surrendered - - - - (12.2) (12.2) - (12.2)
Share options exercised - - - - - - - -
Dividend paid - - - - (34.3) (34.3) - (34.3)
Transactions with owners - - - - (46.0) (46.0) - (46.0)
Profit for the year - - - - 24.7 24.7 - 24.7
Total comprehensive income for the year - - - - 24.7 24.7 - 24.7
Balance as at 31 December 2015 0.6 40.4 85.4 0.3 1.4 128.1 - 128.1
Balance at 1 January 2016 0.6 40.4 85.4 0.3 1.4 128.1 - 128.1
Share option charges 24 - - - - 24.0 24.0 - 24.0
Share options surrendered 24 - - - - (0.8) (0.8) - (0.8)
Share options exercised 24 - - 1.1 - (7.2) (6.1) - (6.1)
Issue of share capital for the acquisition of bwin.party 22 2.3 - 1,391.9 - - 1,394.2 - 1,394.2
Arising from the acquisition of bwin.party - - - - - - (1.2) (1.2)
Transactions with owners 2.3 - 1,393.0 - 16.0 1,411.3 (1.2) 1,410.1
Loss for the year - - - - (138.3) (138.3) - (138.3)
Loss for the year attributable to non-controlling interest 29 - - - - - - (0.3) (0.3)
Other comprehensive expense for the year - - - (2.3) - (2.3) - (2.3)
Total comprehensive expense for the year - - - (2.3) (138.3) (140.6) (0.3) (140.9)
Balance as at 31 December 2016 2.9 40.4 1,478.4 (2.0) (120.9) 1,398.8 (1.5) 1,397.3
All reserves of the Company are distributable, as under the Isle of Man Companies Act 2006 distributions are not governed
by reserves but by the Directors undertaking an assessment of the Company's solvency at the time of distribution (section
49, Companies Act Isle of Man 2006).
CONSOLIDATED STATEMENT OF CASH FLOWSfor the year ended 31 December 2015 2016 2015
Notes Em Em
Cash flows from operating activities
Cash receipts from customers 806.7 248.2
Cash paid to suppliers and employees (737.2) (200.2)
Interest paid including loan costs and loan servicing (47.6) (9.0)
Corporate taxes paid (7.9) (0.6)
Net cash from operating activities 14.0 38.4
Cash flows from investing activities
Interest received 1.4 -
Dividends received 5 3.1 -
Acquisition earn-out payments (1.6) (2.4)
Acquisition of bwin.party (net of cash acquired) (189.4) -
Acquisition of property, plant and equipment 9 (15.8) (1.2)
Proceeds from disposal of assets held for sale 15 20.9 -
Capitalised development cost and other intangibles 8 (19.0) (5.0)
Sale of available for sale assets 10 1.9 -
Decrease in short-term investments 5.7 -
Net cash used in investing activities (192.8) (8.6)
Cash flows from financing activities
Proceeds from Cerberus interest bearing loan 17.1 380.0 20.0
Repayment of Cerberus interest bearing loan 17.1 (13.5) -
Repayment of non-interest bearing loan 17.2 (3.0) (3.2)
Proceeds from issue of share capital, net of costs 22 193.8 -
Repayment of borrowings (39.0) (1.8)
Dividend paid 23 - (34.3)
Net cash generated (used) in financing activities 518.3 (19.3)
Net movement in cash and cash equivalents 339.5 10.5
Exchange differences (0.7) (0.1)
Cash and cash equivalents at beginning of the year 14 28.2 17.8
Cash and cash equivalents at end of the year 14 367.0 28.2
The balance at the end of the period of E367.0m above consists of E354.8m cash and cash equivalents as shown on the face of
the consolidated statement of financial position and E12.2m of cash and cash equivalents recognised within assets held for
sale.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Significant accounting policies
2. Segmental reporting
3. Operating costs
4. Financial income and expense
5. Dividend income
6. Taxation
7. Earnings per share
8. Intangible assets
9. Property, plant and equipment
10. Investments and available for sale financial asset
11. Receivables and prepayments
12. Derivative financial instruments
13. Short term investments
14. Cash and cash equivalents
15. Assets and liabilities classified as held for sale
16. Trade and other payables
17. Loans and borrowings
18. Other taxation payable
19. Commitments under operating and finance leases
20. Provisions
21. Deferred tax
22. Share capital and reserves
23. Dividends
24. Share option schemes
25. Financial instruments and risk management
26. Related parties
27. Contingent liabilities
28. Business combinations
29. Non-controlling interests
30. Subsequent events
1. SIGNIFICANT ACCOUNTING POLICIES
This note deals with both the significant accounting policies used in the preparation of these financial statements,
together with a note identifying new accounting standards which will affect the Group.
GVC Holdings PLC is a company registered in the Isle of Man and was incorporated on 5 January 2010. It is the successor
company of Gaming VC Holdings S.A., a company which had been incorporated in Luxembourg, and took the assets of Gaming VC
Holdings S.A. on 21 May 2010 after formal approval by shareholders. The consolidated financial statements of the Group for
the year ended 31 December 2016 comprise the Company and its subsidiaries (together referred to as the 'Group').
1.1 Statement of Compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
(IFRSs), as adopted by the European Union.
The Directors have reviewed the accounting policies used by the Group and consider them to be the most appropriate. The
accounting policies are consistent with the prior year with the exception of revisions and amendments to IFRS issued by the
IASB, which are relevant to and effective for the annual period beginning 1 January 2016. There was no material effect on
current, prior or future periods arising from the first-time application of these new requirements in respect of
presentation, recognition and measurement are described more fully in note 1.25.
1.2 Basis of Preparation
The financial statements, which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive
Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated
Statement of Cash flows and related notes have been prepared under International Financial Reporting Standards as adopted
by the European Union (IFRS) and those parts of the Isle of Man Companies Act 2006 applicable to companies reporting under
IFRS.
The directors have assessed the financial risks facing the business, and compared this risk assessment to the net current
assets position and dividend policy. The directors have also reviewed relationships with key suppliers and software
providers and are satisfied that the appropriate contracts and contingency plans are in place. The directors have prepared
income statement and cash flow forecasts to assess whether the Group has adequate resources for the foreseeable future and
further details are disclosed in the viability statement. Although the Group is showing net current liabilities at 31
December 2016 this will reverse upon the re-financing of the Group's long-term debt which occurred subsequent to the
reporting date (see note 30). The directors consider that the Group has adequate resources to continue in operational
existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the
consolidated financial statements.
The financial statements are presented in Euro, rounded to the nearest E0.1 million, and are prepared on the historical
cost basis with the exception of those assets and liabilities carried at fair value. The financial statements are prepared
on the going concern basis.
'Fair value' is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, regardless of whether that price is directly observable or estimated
using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account
the characteristics of the asset or liability if market participants would take those characteristics into account when
pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these
consolidated financial statements is determined on such a basis, except for share-based payment transactions that are
within the scope of IFRS 2, leasing transactions that are within the scope of IAS 17, and measurements that have some
similarities to fair value but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36.
The preparation of financial statements in conformity with IFRSs requires directors to make judgements, estimates and
assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.
The estimates and associated assumptions are based on various factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision affects only that period or in the period of the revision
and future periods if the revision affects both current and future periods.
The accounting policies set out below have been applied consistently to all periods presented in these consolidated
financial statements.
The accounting policies have been applied consistently by Group entities.
1.2.1 Significant judgements
In the application of the accounting policies, which are detailed in this note, the Directors are required to make
judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is
revised if the revision affects only that period, or in the period of the revision and future periods if the revision
affects both current and future periods. The estimates and assumptions, which have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.
1.2.1.1 Intangible assets
For all acquisitions management has recognised separately identifiable intangible assets on the Consolidated Statement of
Financial Position. These intangible assets have been valued based on expected future cash flow projections from existing
customers. The calculations of the value and estimated future economic life of the assets involve, by the nature of the
assets, significant judgement.
1.2.1.2 Impairment of Goodwill and Trademarks
Determining whether goodwill and trademarks with an indefinite useful life are impaired requires an estimation of the
value-in-use of the cash-generating units. The value-in-use calculation requires the entity to estimate the future cash
flows expected to arise from the cash-generating unit and select a suitable discount rate in order to calculate present
value. Note 8.2 provides information on the assumptions used in these consolidated financial statements.
The work to assess the existence of impairment indicators and, where applicable, to evaluate the impairment of goodwill and
intangible assets was conducted internally by management.
1.2.1.3 Receivables
Management applies judgement in evaluating the recoverability of receivables including balances with payment processors. To
the extent that the Board believes receivables are not recoverable they have been provided for in these consolidated
financial statements.
1.2.1.4 Progressive Jackpots
Where a legal or constructive obligation exists, management's policy is to record a provision. In 2015, based on the
history of jackpot pay outs management's judgement was that no constructive obligation existed. Following the acquisition
of bwin.party management have re-assessed this judgement based on the history of the enlarged group indicating a
constructive obligation exists hence a provision is required.
1.2.1.5 Share based payments
Accounting for share based payments requires a degree of judgement over such matters as dividend yield, timing of
performance conditions being met, expected volatility and the method in which those liabilities will be settled. Further
details on the assumptions made by management are disclosed in note 24.
1.2.1.6 Embedded derivatives
The drawn-down Cerberus loan contains embedded derivatives. The interest rate on the loan is EURIBOR, subject to a floor of
1%, plus a margin of 11.5%. Based on recent guidance issued by IFRIC, management assess this floor to be closely related to
the host contract and therefore it has not been treated as an embedded derivative.
In addition, the loan has been repaid early (see note 30) within the first year of the loan. The terms of the loan meant
that if it was repaid in the first year, there would be an additional 'make-whole' premium payable. If it were to be repaid
before the expiry date, the payment of the exit fees would be brought forward but additional fees at the 12 month and 18
month date could be avoided. These options for early repayment are considered to be non-closely related to the host
contract and have been recognised separately. The options have been grouped for the purposes of evaluating the embedded
derivative. They have been valued based on the projected cash flows and applying a probability weighting to the potential
cash saving from lower effective interest rates.
1.2.1.7 Acquisition of bwin.party
The GVC Group has been identified as the acquirer of bwin.party as it is the entity financing the acquisition through
equity interests and debt, paying a premium for the assets of bwin.party. In the combined entity, the Board is primarily
composed of GVC management, with one director of bwin.party joining as a non-executive director, together with two other
external appointments. On acquisition and post-acquisition, bwin.party does not have the ability to control the combined
entity and so has been accounted as the acquired party under IFRS3 Business Combinations.
1.2.1.8 Assets/liabilities held for sale
Assets and liabilities held for sale are measured at the lower of carrying value and fair value less associated costs of
sale. Management apply judgement in determining when assets meet the criteria to be recognised as held for sale and in
evaluating the fair value less costs to sell.
1.2.1.9 Provisions
The recognition of provisions requires management to apply judgement in determining the likelihood of the outcome of legal
proceedings as well as any other circumstances that may cause a liabilitity to fall due.
1.3 Basis of Consolidation
1.3.1 Subsidiaries
The Group financial statements consolidate those of the parent company and all of its subsidiaries as of 31 December 2016.
A list of principal subsidiaries is included within the parent company accounts.
Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from
the effective date of acquisition, or up to the effective date of disposal, as applicable. The Group attributes total
comprehensive income (or loss) of subsidiaries between the owners of the parent and the non-controlling interests based on
their respective ownership interests.
Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all
three of the following elements are present:
· Power over the investee
· Exposure or rights to variable returns from the investee
· The ability of the company to use its power to affect those variable returns.
Control is re-assessed whenever facts and circumstances indicate that there may be a change in any of the above elements of
control.
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity
therein. Non-controlling interests consist of the amount of those interests at the date of the original business
combination and the non-controlling shareholder's share of changes in equity since the date of the combination except where
any non-controlling interests have been acquired by the Group. At this point any share of gains or losses are transferred
to the Group's retained earnings. Total comprehensive income is attributed to non-controlling interests even if this
results in the non-controlling interests having a deficit balance.
1.3.2 Investments in associates
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest
in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of
the investee but is not control or joint control over those policies.
The results and assets and liabilities of associates are incorporated in the consolidated financial statements using the
equity method of accounting. Under the equity method, investments in associates are carried in the consolidated statement
of financial position at cost as adjusted for post-acquisition changes in the Group's share of the net assets of the
associate, less any impairment in the value of the investment. Losses of an associate in excess of the Group's interest in
that associate are not recognised. Additional losses are provided for, and a liability is recognised, only to the extent
that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.
1.3.3 Investments in joint ventures
A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is
subject to joint control; that is, when the strategic financial and operating policy decisions relating to the activities
require the unanimous consent of the parties sharing control.
The Group reports its interests in jointly controlled entities using the equity method of accounting. Under the equity
method, investments in joint ventures are carried in the consolidated statement of financial position at cost as adjusted
for post-acquisition changes in the Group's share of the net assets of the joint venture, less any impairment in the value
of the investment. Losses of a joint venture in excess of the Group's interest in that investment are not recognised.
Additional losses are provided for, and a liability is recognised, only to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the joint venture.
1.3.4 Transactions eliminated on consolidation
All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and
losses on transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on
consolidation, the underlying asset is also tested for impairment from a group perspective. Amounts reported in the
financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies
adopted by the Group.
1.3.5 Business Combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business
combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets
transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests
issued by the Group in exchange for control of the acquiree. Acquisition related costs are generally recognised in profit
or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value,
except that:
* Deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognised and
measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;
* Liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment
arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in
accordance with IFRS 2 Share Based Payments at the acquisition date; and
1.3 Basis of Consolidation
* Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for
Sale and Discontinued Operations are measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests
in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net
of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment,
the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the
consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's
previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain
purchase gain.
When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a
contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and
included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent
consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments
against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the
"measurement period" (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at
the acquisition date.
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement
period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified
as equity is not re-measured at subsequent reporting dates and its subsequent settlement is accounted for within equity.
Contingent consideration that is classified as an asset or a liability is re-measured at subsequent reporting dates in
accordance with IAS 39, as appropriate, with the corresponding gain or loss being recognised in profit or loss.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the
combination occurs, the Group reports provisional amounts for the terms for which the accounting is incomplete. Those
provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are
recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if
known, would have affected the amounts recognised at that date.
1.4 Foreign Currency
The functional currency of the Company, as well as the presentational currency of the Group, is the Euro.
1.4.1 Foreign Currency Transactions
Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the Euro at the
foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the
Consolidated Income Statement within operating costs (note 3) and financial costs (note 4). Non-monetary assets and
liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at
the date of the transaction.
Income and expense items are translated using the exchange rates at the start of the relevant month, unless exchange rates
fluctuate significantly, in which case the spot rate for significant items is used.
Exchange differences arising due to the functional currency of operations differing from the presentational currency of the
Group, if any, are recognised in other comprehensive income, classified as equity and transferred to the Group's
translation reserve. Such translation differences are reclassified to profit or loss in the period in which the operation
is disposed of.
1.5 Property, Plant and Equipment
1.5.1 Owned Assets
Property, plant and equipment is stated at cost, less accumulated depreciation (see 1.5.2 below) and impairment losses (see
accounting policy 1.7). Where parts of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items of property, plant and equipment.
1.5.2 Depreciation
Depreciation is charged to the Income Statement on a straight-line basis over the estimated useful lives of each part of an
item of property, plant and equipment. The estimated useful lives are as follows:
Leasehold property: over the length of the lease
Fixtures and fittings: years
Plant and equipment: 3 years
The residual value, if significant, is reassessed annually.
1.6 Intangible Assets
1.6.1 Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the
business less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill has been allocated to each of the Group's Cash-Generating Units ('CGU')
that is expected to benefit from the synergies of the combination.
A CGU to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an
indication that the unit may be impaired. If the recoverable amount of the CGU is less than its carrying amount, the
impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the
other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill
is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent
periods.
On disposal of the relevant CGU, the attributable amount of goodwill is included in the determination of the profit or loss
on disposal.
1.6.2 Other Intangible Assets
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation (see 1.6.4) and
impairment losses (see accounting policy 1.7).
The cost of intangible assets acquired in a business combination is the fair value at acquisition date. The valuation
methodology used for each type of identifiable asset category is detailed below:
Asset category Valuation methodology
Consulting and magazine Income (cost saving)
Software licence Income (incremental value plus loss of profits)
Trademarks Relief from royalty
Trade name Relief from royalty
Non Contractual customer relationships Excess earnings
Where, in the opinion of the Directors, the Group's expenditure in relation to development of internet activities results
in future economic benefits, these costs are capitalised within software licences and amortised over the useful economic
life of the asset.
Development costs are capitalised only when it is probable that future economic benefit will result from the project and
the following criteria are met:
* The technical feasibility of the product has been ascertained;
* Adequate technical, financial and other resources are available to complete and sell or use the intangible asset;
* The Group can demonstrate how the intangible asset will generate future economic benefits and the ability to use or sell
the intangible asset can be demonstrated;
* It is the intention of management to complete the intangible asset and use it or sell it; and
* The development costs can be measured reliably.
1.6.3 Subsequent Expenditure
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits
embodied in the specific asset to which it relates. This includes legal and similar expenditure incurred in registering
brands and trade names, which is capitalised, all other expenditure is expensed as incurred.
1.6.4 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. Goodwill and trademarks with an indefinite useful life are systematically tested
for impairment at each reporting date. Other intangible assets are amortised from the date they are available for use. The
estimated useful lives are as follows:
Software licence agreements 2-15 years
Capitalised development expenditure 3-5 years
Trademarks and trade names 12-15 years, or indefinite life
Non-contractual customer relationships 4 years
1.7 Impairment
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an
indicator of impairment exists, the Group makes an estimate of the recoverable amount. Where the carrying amount of an
asset exceeds its recoverable amount, the asset is written down to its recoverable amount. Recoverable amount is the
higher of fair value less costs to sell and value in use and is determined for an individual asset. If the asset does not
generate cash inflows that are largely independent of those from other assets or groups of assets, the recoverable amount
of the cash generating unit to which the asset belongs is determined. Discount rates reflecting the asset specific risks
and the time value of money are used for the value in use calculation. For goodwill and trademarks that have an indefinite
useful life, the recoverable amount is estimated at each reporting date.
1.8 Dividends Paid to holders of share capital
Dividend distributions payable to equity shareholders are recognised through equity reserves on the date the dividend is
paid.
1.9 Employee Benefits
1.9.1 Pension Costs
In some jurisdictions in which the Group has employees, there are government or private schemes into which the employing
company or branch must make payments on a defined contribution basis, the contributions are shown in the profit or loss
account in the year.
1.9.2 Share based payments
The Group has share based payment schemes which allow certain employees and contractors to acquire shares of the Company.
The Group has accounted for these under IFRS2 Share Based Payments.
Share option schemes
The fair value of options granted under the LTIP and MIP schemes will be recognised as a share based payment expense with a
corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the
employees become unconditionally entitled to the options. The fair value of the options granted are measured using either a
binomial or Monte Carlo valuation model. This valuation method takes into account the terms and conditions upon which the
options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that
vest and market conditions if applicable.
Annual share bonus plan
The Group operates an annual share bonus plan and this gives the Company the option of rewarding employees and contractors
in either cash or shares or a combination of both upon them achieving performance targets. The type of reward will be at
the discretion of the remuneration committee, where a share award is granted the fair value of the award is recognised as a
cash-settled share based payment expense in the period that the employee or contractor earned the reward, with a
corresponding liability recognised in the statement of financial position.
Cash cancelled options
On occasion, at the Remuneration Committee's discretion, vested share options may be settled in cash, as opposed to issuing
new shares. Payments made to repurchase or cancel vested awards are accounted for with the fair value of the options
cancelled, measured at the date of cancellation being taken to retained earnings. Also on cancellation an accelerated
charge would be recognised immediately.
Employers social security costs
Employers social security costs due on the cash cancellation of options and the employee gain on exercised options will be
paid by the Company and shown within share based payments.
See note 24 for further details of the schemes.
1.10 Provisions
A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event, and it
is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material,
provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, where appropriate, the risks specific to the liability.
1.11 Revenue Recognition
Revenue is measured at the fair value of consideration received or receivable and comprises the following elements:
Casino: net win in respect of bets placed on casino games that have concluded in the year, stated net of promotional bonuses and amounts accrued or progressive prize pools.
Sportsbook: gains and losses in respect of bets placed on sporting events in the year, stated net of promotional bonuses. Open positions are carried at fair market value and gains and losses arising on this valuation are recognised in revenue, as well as gains and losses realised on positions that have closed.
Poker: net win in respect of rake for poker games that have concluded in the year, stated net of promotional bonuses.
Bingo: net win in respect of bets placed on bingo games that have concluded in the year, stated net of promotional bonuses.
Where promotional bonuses apply to customers playing a variety of products through the same wallet, bonuses are allocated
pro-rata to the net win. Revenue is also generated from foreign exchange commissions on customer deposits and withdrawals
and account fees.
B2B income comprises the amounts receivable for services to other online gaming operators. Other revenue consists primarily
of revenue from third-party payment services and financial markets. Revenue in respect of network service arrangements
where the third-party owns the relationship with the customer is the net commission invoiced. Income is recognised when a
right to consideration has been obtained through performance and reflects contract activity during the year.
1.12 Net Gaming Revenue ("NGR")
NGR is the Group's alternate revenue measure and is revenue before the deduction of VAT.
1.13 Clean EBITDA
Clean EBITDA is the Group's alternative performance measure and is considered to be a key performance measure by the
Directors. It is defined as operating profit adjusted for share based payments, exceptional items, depreciation,
amortisation, impairment of available for sale assets and changes in the fair value of derivative financial instruments.
1.14 Financial Expenses
Financial expenses comprise interest payable on borrowings, calculated using the effective interest rate method which
discounts the expected cash flows over the life of the financial instrument, and foreign exchange differences arising on
loans and finance leases.
1.15 Exceptional Items
Exceptional items are those items the Group considers to be non-recurring or material in nature that may distort an
understanding of financial performance or impair comparability.
1.16 Financial Income
Financial income is interest income recognised in the income statement as it accrues, using the effective interest method.
1.17 Tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the
consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years
and it further excludes items that are never taxable or deductible.
Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax
bases, calculated using the liability method on temporary differences. However, deferred tax is neither provided on the
initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is
a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with
investments in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and
it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried
forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that
it is probable that the underlying deductible temporary differences will be able to be offset against future taxable
income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their
respective period of realisation, provided they are enacted or substantively enacted at the reporting date.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except
where they relate to items that are charged or credited directly to other comprehensive income or equity in which case the
related deferred tax is also charged or credited directly to other comprehensive income or equity as appropriate.
1.18 Segment Reporting
Following the acquisition of bwin.party the Board reviewed and confirmed the Group's reportable segments in line with the
requirements of IFRS 8 'Operating Segments'. The segments disclosed below are aligned with the reports the Group's Chief
Executive reviewed during the year to make strategic decisions.
Sports Labels: bwin, Sportingbet, Gamebookers and Superbahis
Games Labels: partypoker, partycasino, Gioco Digitale, Cashcade, CasinoClub and USA assets
B2B: provision of the technology platforms to external customers
Total core: The sum of sports labels, gaming labels and B2B together with non-allocated costs for technology, operations, customer service, professional fees and travel and office costs.
Non-core: InterTrader and Kalixa
Corporate: includes shared and corporate functions such as finance, legal and HR
Variable costs and costs above Clean EBITDA are either directly attributed or allocated to a segment. Costs below Clean
EBITDA are not reviewed on a segment basis and accordingly the analysis by segment is from revenue to Clean EBITDA only. In
addition, the Consolidated Statement of Financial Position is not reviewed on a segment basis.
1.19 Financial Instruments
Financial assets and financial liabilities are recognised when a Group entity becomes a party to the contractual provisions
of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs
that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair
value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are
recognised immediately in profit or loss.
1.19.1 Non-Derivative Financial Instruments
Non-derivative financial instruments comprise trade and other receivables including balances with payment processors, cash
and cash equivalents, loans and borrowings, customer liabilities, progressive prize pools, trade and other payables and
deferred consideration. Subsequent to initial recognition, non-derivative financial instruments are measured at amortised
cost using the effective interest method. Contingent consideration is measured at fair value. Provisions for impairment are
made against financial assets if considered appropriate and any impairment is recognised in profit or loss. The liability
for inactive customer balances is derecognised when the obligation is extinguished with reference to player terms and
conditions. Open positions on sports bets are carried within other payables.
1.19.2 Cash and Cash Equivalents
Cash and cash equivalents comprise cash balances and bank balances. Bank overdrafts that are repayable on demand and form
an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of
the statement of cash flows.
1.19.3 Short term investments
Short term investments are non-derivative financial assets with fixed or determinable payments that are not quoted on an
active market. They are initially recognised at fair value, plus transaction costs directly attributable to their
acquisition or issue. They are subsequently carried at amortised cost using the effective interest rate method, less any
provisions for impairment.
1.19.4 Available for Sale
- More to follow, for following part double click ID:nRSW2656AdRecent news on Entain
See all newsREG - Entain PLC - BetMGM - Upgraded FY 2025 Guidance
AnnouncementREG - Entain PLC - Director/PDMR Shareholding
AnnouncementREG - Entain PLC - Total Voting Rights
AnnouncementREG - Entain PLC - Board Appointments
AnnouncementREG - Entain PLC - Director/PDMR Shareholding
Announcement