REG - GVC Holdings PLC - Final Results <Origin Href="QuoteRef">GVC.L</Origin> - Part 4
23/03/2017 07:07
- Part 4: For the preceding part double click ID:nRSW2656Ac
Financial Assets ('AFS')
AFS financial assets are non-derivative financial assets that are either designated to this category or do not qualify for
inclusion in any of the other categories of financial assets.
AFS financial assets are measured at fair value. Gains and losses are recognised in other comprehensive income and reported
within the AFS reserve within equity, except for interest and dividend income, impairment losses and foreign exchange
differences on monetary
assets, which are recognised in profit or loss.
When the asset is disposed of or is determined to be impaired, the cumulative gain or loss recognised in other
comprehensive income is reclassified from the equity reserve to profit or loss. Interest calculated using the effective
interest method and dividends are recognised in profit or loss within finance income.
For AFS equity investments impairment reversals are not recognised in profit and loss and any subsequent increase in fair
value is recognised in other comprehensive income.
1.19.5 Assets held for sale
Non-current assets and disposal groups are classified as held for sale if the carrying amount will be recovered through a
sale transaction rather than through continuing use. This condition is regarded as being met only when the sale is highly
probable, management is committed to a sale plan, the asset is available for immediate sale in its present condition and
the sale is expected to be completed within one year from the date of classification. These assets are measured at the
lower of carrying value and fair value less associated costs of sale except where the assets were previously classified as
available for sale, in which case they are carried at fair value.
1.19.6 Derivative Financial Instruments
Derivative financial instruments are accounted for at Fair Value Through Profit and Loss (FVTPL). Any movements in fair
value are taken to the consolidated income statement.
1.19.7 Impairment of Financial Assets
Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are
considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the
initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.
Objective evidence of impairment could include:
· significant financial difficulty of the issuer or counterparty; or
· breach of contract, such as a default or delinquency in interest or principal payments; or
· it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or
· the disappearance of an active market for that financial asset because of financial difficulties.
1.20 Equity
* Equity comprises the following:
* Share capital represents the nominal value of equity shares.
* Share premium represents the excess over nominal value of the fair value of consideration received for equity shares, net
of expenses of the share issue.
* Retained earnings represents retained profits.
* Merger reserve arose on the re-domiciliation of the Group from Luxembourg to the Isle of Man in 2010. It consists of the
pre-redomiciliation reserves of the Luxembourg company plus the difference in the issued share capital (31,135,762 share at
E0.01 versus 31,135,762 shares at E1.24).
* Translation reserve represents exchange differences on translation of foreign subsidiaries recognised in other
comprehensive income.
1.21 Finance leases
Management applies judgment in considering the substance of a lease agreement and whether it transfers substantially all
the risks and rewards incidental to ownership of the leased asset. Key factors considered include the length of the lease
term in relation to the economic life of the asset, the present value of the minimum lease payments in relation to the
asset's fair value, and whether the Group obtains ownership of the asset at the end of the lease term.
The interest element of lease payments is charged to profit or loss, as finance costs over the period of the lease.
1.22 Operating leases
All other leases other than finance leases are treated as operating leases. Where the Group is a lessee, payments on
operating lease agreements are recognised as an expense on a straight-line basis over the lease term. Associated costs,
such as maintenance and insurance, are expensed as incurred.
1.23 Assets classified as held for sale
Non-current assets and disposal groups are classified as held for sale if the carrying amount will be recovered through a
sale transaction rather than through continuing use. This condition is regarded as being met only when the sale is highly
probable, management is committed to a sale plan, the asset is available for immediate sale in its present condition and
the sale is expected to be completed within one year from the date of classification. These assets are measured at the
lower of carrying value and fair value less associated costs of sale except where the assets were previously classified as
available for sale, in which case they are carried at fair value.
1.24 New and revised standards that are effective for annual periods beginning on or after 1 January 2016
1.24.1Amendments to IFRS 11 Joint Arrangements
These amendments provide guidance on the accounting for acquisitions of interests in joint operations constituting a
business. The amendments require all such transactions to be accounted for using the principles on business combinations
accounting in IFRS 3 'Business Combinations' and other IFRSs except where those principles conflict with IFRS 11.
Acquisitions of interests in joint ventures are not impacted by this new guidance.
The amendments are effective for reporting periods beginning on or after 1 January 2016. No impact arose from the adoption
of these amendments to IFRS 11 on these consolidated financial statements.
1.25 Standards in issue, not yet effective
At the date of authorisation of these financial statements, certain new standards, and amendments to existing standards
have been published by the IASB that are not yet effective, and have not been adopted early by the Group. Information on
those expected to be relevant to the Group's financial statements is provided below.
Management anticipates that all relevant pronouncements will be adopted in the Group's accounting policies for the first
period beginning after the effective date of the pronouncement. New standards, interpretations and amendments not either
adopted or listed below are not expected to have a material impact on the Group's financial statements.
1.25.1 IFRS 9 'Financial Instruments' (2014)
The IASB has released IFRS 9 'Financial Instruments' (2014), representing the completion of its project to replace IAS 39
'Financial Instruments: Recognition and Measurement'. The new standard introduces extensive changes to IAS 39's guidance on
the classification and measurement of financial assets and introduces a new 'expected credit loss' model for the impairment
of financial assets together with new guidance on the application of hedge accounting. The new standard is required to be
applied for annual reporting periods beginning on or after 1 January 2018. The Group's management are currently reviewing
the various classifications of financial instruments used by the Group but do not believe that any material changes to the
Group's results in future periods will arise as a result of any changes of classification. The Group's treasury officials
will consider the implications of this new standard when reviewing the hedging instruments it will utilise going forward.
1.25.2 IFRS 15 'Revenue from Contracts with Customers'
IFRS 15 presents new requirements for the recognition of revenue, replacing IAS 18 'Revenue', IAS 11 'Construction
Contracts', and several revenue-related Interpretations. The new standard establishes a control-based revenue recognition
model and provides additional guidance in many areas not covered in detail under existing IFRSs, including how to account
for arrangements with multiple performance obligations, variable pricing, customer refund rights, supplier repurchase
options, and other common complexities. IFRS 15 is effective for reporting periods beginning on or after 1 January 2018.
The Group's management do not consider that there will be any material impact on the Group's policy of recognising revenue
but will review the impact of the standard on the Group's 2017 results during that financial year.
1.25.3 IFRS 16 'Leases'
IFRS 16 presents new requirements for the recognition, measurement, presentation and disclosure of leases, replacing IAS 17
'Leases'. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities
for all leases of over 12 months unless the underlying asset has a low value. Lessors continue to classify leases as
operating or finance leases, with minimal changes from IAS 17. The new standard applies to annual reporting periods
beginning on or after 1 January 2019. The Group's management consider that the adoption of this statement will likely
result in an increase in the non-current assets (representing 'right-of-use' assets) and a corresponding increase in
liabilities, both current and non-current on the balance sheet of the Group to the approximate value of the assets
contained within its operating lease disclosure in note 19 but will fully review the impact in the 2018 financial year.
2. SEGMENTAL REPORTING
Prior to the acquisition of bwin.party, management followed one business line with two operating segments, being Sports and
Gaming. Post the acquisition, and reflecting the label-focussed basis for bwin.party's segmental analysis, this approach
has been revised. There are now five operating segments, being Sports labels, Gaming labels, B2B, Non-core and Corporate.
These operating segments are monitored and strategic decisions are made on the basis of overall operating results.
Although Corporate does not fulfil the definition of an operating segment per IFRS8, management have elected to separate
the results of the corporate support function to aid the users of the financial statements. The segmental analysis below
shows the prior year comparative on the new segmental basis of reporting in order to aid comparability.
Management also monitors revenue by geographic location of its customers.
2.1 Geographical Analysis
The Group's revenues and other income from external customers are divided into the following geographic areas
2016 2015
Em Em
Germany 187.9 34.7
Turkey 100.3 92.9
UK 69.3 9.5
Other 465.8 109.4
Total 823.3 246.5
Revenues from external customers have been identified on the basis of the customer's geographical location.
1.4 Reporting by Segment
Year ended 31 December 2016 Sports labels Games labels B2B Total core Non-core Corporate Total
Em Em Em Em Em Em Em
NGR 620.7 188.3 13.3 822.3 21.1 - 843.4
EU VAT (13.9) (6.2) - (20.1) - - (20.1)
Revenue 606.8 182.1 13.3 802.2 21.1 - 823.3
Variable costs (264.3) (99.2) (0.2) (363.7) (22.1) - (385.8)
Contribution 342.5 82.9 13.1 438.5 (1.0) - 437.5
Contribution margin 55% 44% 98% 53% (5%) n/a 52%
Other operating costs:
Personnel expenditure (104.6) (11.4) (20.6) (136.6)
Professional fees (5.4) (1.0) (12.0) (18.4)
Technology costs (68.0) (1.7) (0.3) (70.0)
Office, travel and other costs (7.6) (2.2) (12.6) (22.4)
Foreign exchange differences 0.2 - 3.2 3.4
Clean EBITDA 253.1 (17.3) (42.3) 193.5
Year ended 31 December 2015 Sports labels Games labels B2B Total core Non-core Corporate Total
Em Em Em Em Em Em Em
NGR 215.1 32.6 - 247.7 - - 247.7
EU VAT (0.5) (0.7) - (1.2) - - (1.2)
Revenue 214.6 31.9 - 246.5 - - 246.5
Variable costs (101.0) (10.1) - (111.1) - - (111.1)
Contribution 113.6 21.8 - 135.4 - - 135.4
Contribution margin 53% 67% n/a 55% n/a n/a 55%
Other operating costs:
Personnel expenditure (34.7) - (13.8) (48.5)
Professional fees (0.7) - (4.0) (4.7)
Technology costs (23.6) - (0.1) (23.7)
Office, travel and other costs (3.1) - (0.4) (3.5)
Foreign exchange differences (0.4) - (0.5) (0.9)
Clean EBITDA 72.9 - (18.8) 54.1
Management do not review the performance of each segment below the level of Clean EBITDA.
3. OPERATING COSTS
2016 2015
Notes Em Em
Wages and salaries, including Directors 105.9 40.5
Staff costs capitalised in respect of intangible asset additions (10.7) -
Outsourced consultants 21.8 3.3
Compulsory social security contributions 12.1 2.3
Pension contributions 0.9 0.7
Health and other benefits 4.4 0.9
Recruitment and training 2.3 0.8
Personnel expenditure (excluding share based payment charges) 136.7 48.5
Professional fees 18.4 4.7
Technology costs 70.1 23.7
Office, travel and other costs 22.1 3.4
Foreign exchange differences on operating activity (3.3) 1.0
Administrative costs 244.0 81.3
Equity settled share based payments charges 24 24.0 0.5
Cash settled share based payments charges (credits) 24 7.1 (0.1)
Exceptional items 3.2 117.8 24.5
Impairment of available for sale asset 10 4.2 1.2
Movement in the fair value of derivative financial instruments (15.0) (4.8)
Depreciation 9 20.0 0.8
Amortisation 8 116.5 4.2
Total operating costs 518.6 107.6
3.1 Employees
The average monthly number of persons (including Directors) employed by the Group during the year was:
2016 2015
Average number of employees
With employment contracts or service contracts 2,211 527
Contractors 471 49
2,682 576
3.2 Exceptional items
2016 2015
Em Em
Professional fees 18.8 13.5
Currency option, including fair value adjustment (see note 3.2.1) 10.8 9.5
Bonuses and share options (see note 3.2.2) 21.9 -
Acquisition costs 51.5 23.0
Premium listing application costs 4.4 -
Romanian back taxes and license fees - 1.2
Reorganisation costs 14.4 -
Contract termination costs 11.7 -
Accelerated depreciation 12.5 -
Progressive jackpots 7.6 -
Release of contingent consideration 8.1 -
Foreign exchange on deposit 16.4 -
Profit on disposal of joint venture and available for sale investment (11.7) -
Other 2.9 0.3
Total exceptional items 117.8 24.5
3.2.1 Currency option
A currency option was taken out in 2015, in order to meet the cash confirmation requirements of the offer for bwin.party.
Under the terms of the contract, the Group would sell E365.0 million and buy £260.7 million. Hedge accounting was not
applied. The derivative, recognised as a current liability, was valued at 31 December 2015 at E9.9 million. The option was
exercised on 2 February 2016. The movement in exchange rate between 31 December 2015 and 2 February 2016 created an
additional fair value loss of E0.9m. The combined cost of the instrument of E10.8 million (being its fair value on the date
of extinguishment) has been recognised as an exceptional item above, as this is related to the financing of the
acquisition.
At 31 December 2016 there were no other forward exchange contracts taken out in the ordinary course of business. The cost
of forward exchange options during the year is included within administrative costs and not treated as an exceptional
cost.
3.2.2 Transaction bonuses and share options
2016 2015
Em Em
2014 share option plan rolled into share placing * 18.4 -
Transaction bonuses rolled into share placing ** 3.0 -
Other transaction bonuses 0.5 -
21.9 -
* Includes employer's National Insurance. See pages 322-325 of the prospectus.
** Includes employer's National Insurance. See page 349 of the prospectus.
3.3 Auditors' remuneration
2016 2015
Em Em
Group Auditors' remuneration
Audit services 0.7 0.5
Non-audit services 1.2 2.2
1.9 2.7
Non-audit services include services relating to corporate finance transactions in respect of the bwin.party acquisition and step up to premium listing of E1,016,139, audit related assurance services of E95,493, taxation compliance services of E26,760, taxation advisory services of E21,425 and other non-audit services of E2,549.
Fees payable to other accounting firms
Audit services 1.5 -
Non-audit services 0.5 -
2.0 -
4. FINANCIAL INCOME AND EXPENSE
2016 2015
Em Em
Financial income
Interest income 2.9 -
Unwinding of discount on contingent consideration 0.5 -
Other income 1.1 -
4.5 -
2016 2015
Em Em
Financial expense
Unwinding of discount on non-interest bearing loan - 0.2
Finance lease interest 0.1 0.1
Unwinding of discount on deferred consideration - 0.1
Foreign exchange revaluation - 0.7
Interest on Cerberus loan (see note 17.1) 46.0 1.2
Amortisation of loan fees 23.3 -
Unwinding of early repayment option (4.3) -
Other interest 0.2 -
65.3 2.3
5. DIVIDEND INCOME
Dividends were received in the period from the Aldorino Trust in respect of the investment in Betbull.
2016 2015
Em Em
Dividend income 3.1 -
6. TAXATION
6.1 Analysis of tax charge
2016 2015
Em Em
Current tax expense
Current year 12.5 0.7
Prior year (0.7) 0.1
Current tax expense 11.8 0.8
Deferred tax credit (11.8) -
Tax (credit) expense - 0.8
The effective tax rate for the year based on the associated tax expense is 0.0% (2015: tax rate of 3.1%).
The total (credit) expense for the year can be reconciled to accounting (loss) profit as follows:
2016 2015
Em Em
(Loss) profit before tax (138.6) 25.5
Income tax using the UK corporation tax rate (27.7) 5.2
Effect of tax rates in foreign jurisdictions (rates decreased) 0.7 (4.8)
Expenses / (income) not deductible for tax purposes 16.6 0.8
Utilisation of tax losses not previously provided (1.0) (0.2)
Group relief (2.5) -
Tax losses for which no deferred tax assets have been recognised 15.2 0.6
Capital allowances for the period in excess of depreciation (0.6) (0.9)
Adjustments in respect of prior years (0.7) 0.1
- 0.8
The expenses not allowed for tax purposes are primarily share-based payments, depreciation, amortisation and impairment of
assets. The effect of non-taxable income primarily represents the release of the acquisition fair value tax liability and
dividend income.
6.2 Factors affecting the tax charge for the year
The Group's policy is to manage, control and operate Group companies only in the countries in which they are registered. At
the year end there were Group companies or branches registered in 30 countries. However, the rules and practice governing
the taxation of eCommerce activity are evolving in many countries. It is possible that the amount of tax that will
eventually become payable may differ from the amount provided in the financial statements.
6.3 Factors that may affect future tax charges
As the Group is involved in worldwide operations, future tax charges will be affected by the levels and mix of
profitability in different jurisdictions. Future tax charges will be reduced by a deferred tax credit in respect of
amortisation of certain acquired intangibles.
7. EARNINGS PER SHARE
7.1 Basic Earnings Per Share and Adjusted Earnings Per Share
Basic earnings per share has been calculated by taking the profit attributable to ordinary shareholders and dividing by the
weighted average number of shares in issue.
2016 2015
(Loss) profit for the year attributable to ordinary shareholders (Em) (138.3) 24.7
Weighted average number of shares (millions) 271.8 61.3
Basic (loss) earnings per share (E) (0.51) 0.40
The performance measure of earnings per share used internally by management to manage the operations of the business and
remove the impact of one-off and certain non-cash items is adjusted earnings per share. Management believes that this
better reflects the underlying performance.
Adjusted earnings per share has been calculated by taking the (loss) profit before tax and adding back the following items
in the year and dividing by the weighted average number of shares in issue.
2016 2015
(Loss) profit before tax attributable to ordinary shareholders (Em) (138.3) 25.5
Exceptional items 117.8 24.5
Impairment of available for sale asset 4.2 1.2
Changes in the fair value of derivative financial instruments (15.0) (4.8)
Dividend income (3.1) -
Amortisation on acquired intangible assets 109.5 2.8
- Effect of tax thereon (14.3) -
Amortisation of early repayment option on loan (4.3) -
Amortisation of loan fees 23.4 -
Taxation (8.2) -
Adjusted earnings 71.7 44.9
Weighted average number of shares (millions) 271.8 61.3
Adjusted earnings per share (E) 0.26 0.73
7.2 Diluted Earnings Per Share and Adjusted Earnings Per Share
Diluted earnings per share has been calculated by taking the profit attributable to ordinary shareholders and dividing by
the weighted average number of shares in issue as diluted by share options.
Adjusted diluted earnings per share has been calculated by taking the adjusted earnings as above and dividing by the
weighted average number of shares in issue, as diluted by share options.
2016 2015
(Loss) profit for the year attributable to ordinary shareholders (Em) (138.3) 24.7
Weighted average number of shares (millions) 271.8 61.3
Effect of dilutive share options (millions) 7.5 3.1
Weighted average number of dilutive shares (millions) 279.3 64.4
Diluted earnings per share* (E) (0.51) 0.38
Adjusted earnings (Em) 71.7 44.9
Adjusted diluted earnings per share* (E) 0.26 0.70
*A diluted EPS calculation may not increase a basic EPS calculation when the basic EPS is a loss.
Share options that could potentially dilute basic earnings per share but were not included because they are antidilutive
for the year ending 31 December 2016 amounted to nil effective shares (2015: nil).
8. INTANGIBLE ASSETS
Software Licences Goodwill Trade-marks & Trade Name Consulting & Magazine Non-contractual Customer Relationships Total
Em Em Em Em Em Em
Cost
At 1 January 2015 27.5 166.2 17.0 4.9 2.4 218.0
Additions 5.0 - - - - 5.0
At 31 December 2015 32.5 166.2 17.0 4.9 2.4 223.0
Additions 19.0 - - - - 19.0
Acquisition of subsidiaries 224.0 963.9 176.0 - 208.0 1,571.9
Reclassified as held for sale (2.0) (6.5) - - (12.0) (20.5)
Foreign exchange (0.2) - - - - (0.2)
At 31 December 2016 273.3 1,123.6 193.0 4.9 198.4 1,793.2
Amortisation and Impairment
At 1 January 2015 21.9 33.3 1.3 4.9 2.3 63.7
Amortisation 3.9 - 0.2 - 0.1 4.2
At 31 December 2015 25.8 33.3 1.5 4.9 2.4 67.9
Amortisation 62.1 - 13.6 - 40.8 116.5
Reclassified as held for sale (0.1) - - - (0.5) (0.6)
At 31 December 2016 87.8 33.3 15.1 4.9 42.7 183.8
Net Book Value
At 31 December 2015 6.7 132.9 15.5 - - 155.1
At 31 December 2016 185.5 1,090.3 177.9 - 155.7 1,609.4
Certain intangible assets are deemed to have an indefinite useful life as there is no foreseeable limit to the period over
which the asset is expected to generate net cash inflows for the entity. The carrying amounts of such assets at 31
December 2016 was as follows:
2016 2015
Em Em
Trademarks & Trade Names (related to CasinoClub) 15.1 15.1
8.1 Amortisation
The amortisation for the year is recognised in the following line items in the income statement.
2016 2015
Em Em
Net operating expenses 116.5 4.2
8.2 Impairment Tests for Cash-Generating Units Containing Goodwill and Trademarks
An Impairment Review of the Group's goodwill was carried out for the year ended 31 December 2016. The goodwill relates to
the Group's acquisitions of bwin, Betboo, CasinoClub and Sportingbet. The carrying values of the assets were compared with
the recoverable amounts, the recoverable amount was estimated based upon a value in use calculation, based upon management
forecasts for the years ending 31 December 2017 and up to 31 December 2021. The assumptions detailed below have been
determined based on past experience in this market which the Group's management believes is the best available input for
forecasting this market.
Goodwill can be broken down into the following:
2016 2015
Em Em
bwin 957.4 -
Betboo 8.3 8.3
CasinoClub 40.4 40.4
Sportingbet 84.2 84.2
Total Goodwill 1,090.3 132.9
bwin
The allocation of the bwin goodwill includes various CGUs, split along the Group's reporting segment and includes changes
to the CGUs presented in the 2016 interim financial statements following a final review by management of the assumptions
underlying the determination and allocation of goodwill and intangibles. The carrying value of these, together with the
assumptions used within those individual CGUs are shown in the tables below.
The discount rates used have been considered based on the risks involved in each of the underlying business units and
terminal growth rates reflect the expected growth in underlying EBITDA expected from these units. These CGUs have been
considered for impairment and sensitivities have been calculated around the terminal growth rates and discount factors used
together with specific scenarios including the loss of revenue where those revenues might be considered to be at risk. No
indicators of impairment have arisen as a result as the impact of all sensitivities were judged to be within tolerable
levels.
Goodwill in CGU Discount rate Terminal growth rates
Em % %
Sports labels 849.1 9.0% 2.0%
Games labels 108.3 11.8% 2.0%
Intertrader - 16.8% 2.0%
Total Goodwill 957.4
The goodwill of E6.5m relating to the Kalixa business acquired as part of the bwin acquisition was transferred to assets
held for sale as at 31 March 2016 and its value has been considered as part of the fair value of that disposal group (see
note 15).
Betboo
A terminal growth rate of 2% was included to reflect the likely competitive pressures on this brand. A discount rate of 35%
was used, based on the internal rate of return of the Betboo acquisition. It was concluded that the carrying value of the
goodwill and other intangibles was not impaired.
CasinoClub
A terminal growth rate of 2% was used to reflect the increasing competitive pressures from large online gaming companies. A
discount rate of 11.8% was used, based on risk profile. It was concluded that the carrying value of the goodwill and other
intangibles was not impaired.
Sportingbet
A terminal growth rate of 2% was used to reflect the increasing competitive pressures from large online gaming companies. A
discount rate range of 20% - 35% was applied to each of the underlying brands, based on the risk profile of those brands.
It was concluded that the carrying value of the goodwill and other intangibles was not impaired.
Management has considered the sensitivities around its key assumptions used in the review of the carrying values of
goodwill and other intangibles with an indefinite useful life. These sensitivities have considered the terminal growth
rates and discount rates together with specific scenarios around the loss of revenue from where those revenues might be
considered to be at risk.
9. PROPERTY, PLANT AND EQUIPMENT
Land and buildings Plant and Equipment Fixtures and Fittings Total
Em Em Em Em
Cost
At 1 January 2015 - 2.3 1.4 3.7
Additions - 1.1 0.1 1.2
At 31 December 2015 - 3.4 1.5 4.9
Additions 0.1 0.4 15.3 15.8
Acquisition of subsidiaries 4.9 - 39.6 44.5
Disposals (0.1) - (1.3) (1.4)
Exchange movements (0.2) 0.2 (0.9) (0.9)
Reclassified as assets held for sale - - (2.5) (2.5)
At 31 December 2016 4.7 4.0 51.7 60.4
Depreciation
At 1 January 2015 - 1.5 1.1 2.6
Depreciation charge for the year - 0.7 0.1 0.8
At 31 December 2015 - 2.2 1.2 3.4
Depreciation charge for the year 1.0 0.7 18.3 20.0
Disposals - - (0.5) (0.5)
Accelerated depreciation - - 18.1 18.1
Exchange movements - - (0.1) (0.1)
Reclassified as assets held for sale - - (0.2) (0.2)
At 31 December 2016 1.0 2.9 36.8 40.7
Net Book Value
At 31 December 2015 - 1.2 0.2 1.4
At 31 December 2016 3.7 1.1 14.9 19.7
The net book value of items held under finance leases was Enil at 31 December 2016 (31 December 2015: E0.5 million).
Accelerated depreciation of E18.1m has been charged in respect of certain software licences which were renegotiated
following the bwin.party acquisition. An associated payable of E5.6m was also released to the income statement following
this renegotiation.
9.1 Capital commitments
The Group has capital commitments contracted but not provided for at 31 December 2016 of E1.4 million (31 December 2015:
Enil).
10. INVESTMENTS AND AVAILABLE FOR SALE (AFS) FINANCIAL ASSETS
Available-for-sale financial assets Associates Total
Em Em Em
At 1 January 2015 3.8 - 3.8
Impairment (1.2) - (1.2)
At 31 December 2015 2.6 - 2.6
Acquisition through business combination 3.5 1.0 4.5
Additions 2.2 - 2.2
Share of profit - 0.1 0.1
Impairments (4.2) - (4.2)
Disposals (1.5) - (1.5)
At 31 December 2016 2.6 1.1 3.7
10.1 Available For Sale assets (AFS)
On 14 May 2014, the Group acquired a 15% stake in Betit Holdings Limited ('BHL') from Betit Securities Limited ('BSL').
The consideration was for E3.5 million, which was attributed to both the available for sale asset (E5.2m) and the option
liability (E1.7m) taken on at acquisition. The asset held for sale consideration, together with professional fees incurred
at the time, amounted to a total upfront cost of E5.4m which was impaired at 31 December 2015 to E2.6m. This asset was
impaired by E0.7m prior to being sold during the year.
The value of bwin.party's available for sale assets on acquisition was E3.5m. The value of these has decreased by E3.1m
during the period, principally as a result of the dividend declared by the Aldorino Trust of E3.1m which resulted in the
full impairment of this investment. Also as part of the bwin.party acquisition assets held for sale of E2.2m were
recategorised as AFS after the acquisition date.
10.2 Associates
The value of bwin.party's associates on acquisition was E1.0m. The value of this investment had increased by E0.1m by 31
December 2016 based on the share of underlying profit in the associate. The Group holds 50% of the voting rights in
relation to this entity and amounts related to this entity as at 31 December 2016 are presented in the table below:
Em
Non-current assets 0.1
Current assets 2.2
Current liabilities 0.5
Revenues 2.6
Profit 0.4
11. RECEIVABLES AND PREPAYMENTS
2016 2015
Em Em
Balances with payment processors 60.0 21.7
Trade receivables - 0.1
Other receivables 27.6 1.3
Loans and receivables 87.6 23.1
Prepayments 16.7 11.5
Deferred consideration 0.9 -
Current assets 105.2 34.6
Contingent consideration 4.0 -
Deferred consideration 0.9 -
Non current assets 4.9 -
Payment processor balances are funds held by third party collection agencies subject to collection after one month, or
balances used to make refunds to players.
Prepayments include payments as at 31 December 2016 for goods or services which will be consumed after 1 January 2017.
Contingent consideration relates to amounts receivable for the sale of domain names following the acquisition of bwin and
is measured at fair value. The non-discounted book values for these amounts are E6.0m (2015: Enil) due later than one year
but not later than five years.
Deferred consideration relates to amounts receivable for the sale of Conspo which was previously classified as held for
sale. The non-discounted book values for these amounts are E0.9m (2015: Enil) due within one year and E1.0m (2015: Enil)
due later than one year but not later than five years.
12. DERIVATIVE FINANCIAL INSTRUMENTS
Winunited option Earlyrepayment option Betitoption Total
Em Em Em Em
Balance at 1 January 2015 - - (1.7) (1.7)
Movement in fair value 3.8 - 1.0 4.8
Balance at 31 December 2015 3.8 - (0.7) 3.1
Recognised on loan drawdown - 7.4 - 7.4
Disposal in the year - - 0.7 0.7
Change in fair value of early repayment option (0.1) 15.1 - 15.0
Balance at 31 December 2016 3.7 22.5 - 26.2
12.1 Winunited option
On 24 March 2015, GVC contracted with Winunited Limited for the day-to-day back office operations of the Winunited
business, licensed in Malta. Under the terms of the agreement, GVC obtained a call option to purchase the Winunited assets
comprising goodwill, customers, licenses, brands and websites. The exercise period for the option is in the three months
prior to the five year anniversary of 24 March 2015. No consideration was paid for the call option.
At 31 December 2016 the option was valued using a Monte Carlo valuation model and two methodologies: a discounted cash flow
and a multiples based calculation. A long-term growth rate of 2% (2015: 2%) was assumed, and a discount rate of 13% (2015:
15%) based on industry peers and observable inputs. Based on this model, the value of the call option at 31 December 2016
was E3.7m (2015: E3.8m). This decrease in the fair value of the option has been recognised in the income statement in
accordance with IAS 39.
12.2 Cerberus loan early repayment option
On 2 February 2016 a further E380 million was drawn down under the Cerberus loan facility. The facility has a repayment
date of 4 September 2017 but has been repaid earlier (see note 30). Early repayment will change the profile and size of the
cash payments and this feature has been identified as an embedded derivative therefore separated from the host contract.
Changes in the Group's credit rating will have an impact on the value of the option for early repayment. The option has
been valued by a third party valuation specialist based on the contracted cash flows under the terms of the facility and
measuring the cost saving opportunities resulting from an early repayment and obtaining of new financing at a lower rate.
Given the refinance agreement disclosed in note 30, there is considered to be minimal sensitivity of the inputs to the
valuation. The value of the early repayment at 31 December 2016 was E22.5 million.
12.3 Betit option
On 14 May 2014, the Group acquired a 15% stake in Betit Holdings Limited ('BHL'). The Group had a call option to acquire
the balance of the outstanding shares which could be exercised no earlier than 1 July 2017 and no later than 30 September
2017, and would be subject to further Maltese Gaming Authority clearance and the Stock Exchange Rules. The minimum call
option price was E70 million, and the actual price would be determined by the mix of revenues between regulated and
nonregulated markets and certain multiples attaching thereto.
In the year the Group disposed of its investment in BHL and its call option was also disposed of as part of this
arrangement. The net loss on disposal of the investment and the option has been included within changes in value of
available for sale assets.
13. SHORT TERM INVESTMENTS
2016 2015
Em Em
Restricted cash 5.4 -
5.4 -
Short term investments represent cash held as guarantees for regulated markets' licences. These funds cannot be freely
accessed by the Group and so are not treated as cash or cash equivalents.
14. CASH AND CASH EQUIVALENTS
2016 2015
Em Em
Total cash in hand and current accounts 367.0 28.2
Cash held within assets held for sale (12.2) -
Cash in hand and current accounts 354.8 28.2
15. ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE
The Group has classified its Kalixa business as held for sale. This business, a fully integrated digital payments company,
was transferred to held for sale as at 31 March 2016 after its acquisition as part of the bwin.party group. Certain of the
assets of the Kalixa business relating to a beneficial shareholding in Visa Europe were realised in the year on the sale of
that business to Visa Inc. Management have agreed a sale of the majority of the remaining operating Kalixa business and
believe a disposal in the first quarter of 2017 will be achieved. The remainder of the business is also being actively
pursued for a disposal during 2017.
During the year the Group disposed of its joint venture investment in Conspo which has also previously been classified as
held for sale. Proceeds of E16.4m including deferred consideration of E1.9m gave rise to a profit on disposal of E12.4m
after professional costs. All remaining assets and liabilities held for sale relate to the Kalixa business.
The movements in assets and liabilities held for sale are disclosed in the table below:
Assets held-for-sale Liabilities held-for-sale Total
Em Em Em
As at 31 December 2015 - - -
Acquired in business combination 12.3 - 12.3
Reclassified as held-for-sale 55.7 (22.9) 32.8
Trading, working capital and revaluation movements 4.0 0.2 4.2
Disposal of Visa shares (8.4) - (8.4)
Disposal of Conspo (3.9) - (3.9)
As at 31 December 2016 59.7 (22.7) 37.0
16. TRADE AND OTHER PAYABLES
2016 2015
Em Em
Other trade payables 40.4 12.8
Accruals 46.4 19.2
Deferred consideration (note 16.1) - 1.6
Share option liability 7.1 9.7
Current liabilities 93.9 43.3
Share option liability - 2.1
Contingent consideration (note 16.2) 4.4 -
Non-current liabilities 4.4 2.1
16.1 Deferred consideration
Deferred consideration relates to amounts payable for the Group's 2009 acquisition of Betboo. The non-discounted book
values of these amount to Enil (2015: E1.6m) due within one year.
16.2 Contingent consideration
Contingent consideration relates to amounts payable for previous acquisitions by bwin.party and is measured at fair value.
The non-discounted book values of these amount to E5.8m due after more than one year.
17. LOANS AND BORROWINGS
17.1 Interest bearing loan
On 4 September 2015, the Group entered into an agreement with Cerberus Business Finance LLC for a loan of up to E400m, in
order to part-fund the acquisition of bwin.party. Under the terms of the loan, a 'Hedging Loan' of up to E20m could be
drawn down in advance of the acquisition, in order to fund a hedging arrangement for the
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