REG - GVC Holdings PLC - Full Year Results <Origin Href="QuoteRef">GVC.L</Origin> - Part 3
25/04/2016 07:06
- Part 3: For the preceding part double click ID:nRSY1417Wb
E000's E000's
Proposed Acquisition of bwin.party
- Legal advice 5,101 -
- Nominated advisors 1,636 -
- Reporting accountants 2,629 -
- Other professional fees 3,177 -
Total professional fees 12,543 -
- Currency option, including fair value adjustment 9,531
- PR fees 847
- Loan fees 100 -
Total acquisition costs 23,021 -
Non-deal income/expenditure
- Romania tax amnesty payments 1,180 -
- Other 295 -
Total non-acquisition costs 1,475 -
Total exceptional items 24,496 -
3. OPERATING COSTS
3.1.1 Currency option
As part of the requirements for the acquisition of bwin.party, GVC had to "cash-confirm" that it had sufficient GBP funds
to meet the obligations of the acquisition; namely 25p per bwin.party share. As the loan facility from Cerberus was
denominated in Euro, an American style call option was purchased for E5.3 million on 4 September 2015 to sell E365,000,000
and purchase £256,138,750 (a rate of £1:E1.4250). The counterparty to this trade was Nomura.
On 18 December 2015, it was decided to terminate this option and replace its cash-confirmation obligations with a
"flexible-forward", a forward contract with option components. Entering into this transaction resulted in a refund of E5.6
million and a new sale of E365,000,000 and purchase of £260,719,500 (a rate of £1:E1.400).
By 31 December, foreign exchange rates had moved and the rate used by GVC for the translation of its GBP current assets and
current liabilities was £1:E1.36249, whilst the effective rate behind the valuation of the GBP obligation under the
flexible forward was E1.3621. This resulted in a revaluation charge of E9.9 million shown as a forward contract liability.
This is more fully shown in the tables below:
Details Paid E000s ReceivedE000s P&LE000s Balance at 31.12.15 E000s
Arrangement cashflows (5,329) 5,675 346 -
Arrangement valuations - - (9,877) (9,877)
(5,329) 5,675 (9,531) (9,877)
Euro sale under flexible forward E365,000,000
Rate E1.4000
GBP purchase under flexible forward £260,719,500
Implicit rate in valuation E1.3621
Revaluation E355,123,000
Valuation expense E9,877,000
3.2 Employees
The average monthly number of persons (including Directors) employed by the Group during the year was:
2015 2014
Number of personnel
With employment contracts or service contracts 527 507
Contractors 49 42
576 549
4. FINANCIAL INCOME AND EXPENSE
2015 2014
E000's E000's
Financial income - interest income 4 16
4 16
Financial expense - interest payable
- Unwinding of discount on non-interest bearing loan (238) (238)
- Finance lease interest (82) (67)
- Unwinding of discount on Betboo deferred consideration (54) (710)
- Foreign exchange revaluation (see note 4.1) (627) (627)
- Interest on Cerberus loan (see note 9.1)* (1,245) -
- Other expense - (4)
(2,246) (1,646)
* this includes interest payments at the contracted rate of 12.5% and an accrual for exit and similar fees not yet due.
4.1 Foreign exchange differences
The foreign exchange differences above arose as follows:
2015 2014
E000's E000's
Retranslation of the William Hill non-interest bearing loan (516) (467)
Retranslation of amounts due in respect of finance leases (69) (160)
Other (42) -
(627) (627)
5. EARNINGS PER SHARE
5.1 Basic Earnings Per Share and Basic Earnings Per Share Before Exceptional Items
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. Basic earnings per share from continuing operations before exceptional items
has been calculated by taking the profit attributable to ordinary shareholders and adding back the cost of exceptional
items in the year and dividing by the weighted average number of shares in issue.
2015 2014
Profit for the year attributable to ordinary shareholders (E) 24,659,000 40,563,268
Weighted average number of shares 61,276,480 61,099,894
Basic earnings per share (E) 0.402 0.664
Exceptional items (E) 24,496,000 -
Profit for the year attributable to ordinary shareholders before exceptional items (E) 49,155,000 40,563,268
Basic earnings per share before exceptional items (E) 0.802 0.664
5.2 Diluted Earnings Per Share and Diluted Earnings Per Share Before Exceptional Items
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. Diluted earnings per share from continuing
operations before exceptional items has been calculated by taking the profit attributable to ordinary shareholders and
adding back the cost of exceptional items and dividing by the weighted average number of shares in issue, as diluted by
share options.
2015 2014
Profit for the year attributable to ordinary shareholders (E) 24,659,000 40,563,268
Weighted average number of shares 61,276,480 61,099,894
Effect of dilutive share options 3,088,932 5,010,290
Weighted average number of dilutive shares 64,365,412 66,110,184
Diluted earnings per share (E) 0.383 0.614
Exceptional items (E) 24,496,000 -
Profit for the year attributable to ordinary shareholders before exceptional items (E) 49,155,000 40,563,268
Diluted earnings per share before exceptional items (E) 0.764 0.614
6. INTANGIBLE ASSETS
Leased Software Licence Owned Software Licence Total Software Licence Goodwill Trade-marks & Trade Name Consulting & Magazine Non-contractual Customer Relationships Total
E000's E000's E000's E000's E000's E000's E000's E000's
Cost
At 1 January 2014 827 23,009 23,836 166,167 17,065 4,919 2,379 214,366
Additions 306 3,341 3,647 - - - - 3,647
At 1 January 2015 1,133 26,350 27,483 166,167 17,065 4,919 2,379 218,013
Additions - 5,003 5,003 - - - - 5,003
At 31 December 2015 1,133 31,353 32,486 166,167 17,065 4,919 2,379 223,016
Amortisation and Impairment
At 1 January 2014 243 19,017 19,260 33,274 1,095 4,919 1,968 60,516
Amortisation 232 2,451 2,683 - 216 - 338 3,237
At 1 January 2015 475 21,468 21,943 33,274 1,311 4,919 2,306 63,753
Amortisation 390 3,457 3,847 - 190 - 73 4,110
At 31 December 2015 865 24,925 25,790 33,274 1,501 4,919 2,379 67,863
Net Book Value
At 31 December 2014 658 4,882 5,540 132,893 15,754 - 73 154,260
At 31 December 2015 268 6,428 6,696 132,893 15,564 - - 155,153
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 2015 were as follows:
2015 2014
E000's E000's
Trademarks & Trade Names 15,142 15,142
6.1 Amortisation
The amortisation for the year is recognised in the following line items in the income statement.
2015 2014
E000's E000's
Net operating expenses 4,110 3,237
6.2 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 2015. The goodwill relates to
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 2016 and up to 31 December 2020. 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.
Betboo
Significant growth is expected in the short-term reducing to 20% annual growth by 2017, a long-term growth rate of 2% was
used from 2019 to reflect the likely competitive pressures. 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 trademarks was not
impaired.
CasinoClub
A long-term growth rate of 2% was used to reflect the increasing competitive pressures from large online gaming companies.
A discount rate of 17.2% was used, based on company specific pre-tax weighted average cost of capital. It was concluded
that the carrying value of the goodwill and trademarks was not impaired.
Sportingbet
A long-term growth rate of 3% has been applied to reflect the likely competitive pressures from other large online gaming
companies. A discount rate range of 20%-25% was used across the different geographical areas, and a sensitivity analysis
carried out including decreasing the growth rate to 1% and increasing the discount to 30%-45%. It was concluded that the
carrying value of the goodwill and trademarks was not impaired.
The following units have significant carrying amounts of goodwill:
2015 2014
E000's E000's
Betboo 8,333 8,333
CasinoClub 40,339 40,339
Sportingbet 84,221 84,221
Total Goodwill 132,893 132,893
7. AVAILABLE FOR SALE FINANCIAL ASSET - Betit Holdings Limited
Where an entity holds, directly or indirectly through subsidiaries, less than 20% of the voting power of an investee, it is
presumed that the entity does not have significant influence and therefore an investment does not qualify as an associate
unless such influence can be clearly demonstrated.
2015 2014
E000's E000's
At 1 January 3,801 -
Additions - 5,394
Impairment (1,216) (1,593)
At 31 December 2,585 3,801
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 (E5.2 million) and the
option liability (E1.7 million) 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 E5.4 million which was impaired at 31 December 2014 to E3.8
million.
Although the Group has a Director on the Board of BHL and has influence through its shareholding over the payment of
dividends the Director does not participate in policy making decisions, and the entity is unlikely to be in a dividend
paying position over the lifetime of the investment. The Group does not believe there is evidence to rebut the presumption
it does not have significant influence over BHL and therefore the investment is not considered to be an associate and has
been accounted for as an available for sale asset.
The available for sale asset is required to be re-measured at fair value at each reporting date. Changes in the fair value
will be recognised in other comprehensive income, except for impairment losses which are recognised through profit or loss
as a deduction from clean EBITDA. The Group engaged a third party valuations specialist to value the asset.
In valuing the underlying business of BHL, a discounted cash flow model was used, applying a long-term growth rate of 2%
(2014: 2%) to the Group's forecasts and a discount rate of 18% (2014: 18%) (based on comparison to industry peers and
observable inputs). Based on this model, the value as at 31 December 2015 of the asset available for sale was E2.6
million, leading to an impairment of E1.2 million.
8. DERIVATIVE FINANCIAL INSTRUMENTS: OPTIONS
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 the 24 March 2015. No consideration was paid for the call option.
The Betit option was acquired in the prior year as part of the asset purchase set out in note 7.
A summary of the movement in the option values during the year and the balances at 31 December 2015 is shown below:
Winunited option Betit option Total
E000s E000s E000s
Balance at 1 January 2015 - (1,745) (1,745)
Movement in fair value 3,808 1,009 4,817
Balance at 31 December 2015 3,808 (736) 3,072
Split:
Current asset 3,808 -
Non-current liability - (736)
8.1 Winunited option
At 31 December 2015 the option was valued by a third party valuation specialist 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% was assumed, and a
discount rate of 15% based on industry peers and observable inputs. Based on this model, the value of the call option at
31 December 2015 was E3.8 million. This increase in the fair value of the option has been recognised in the income
statement in accordance with IAS 39.
8.2 Betit option
On 14 May 2014, the Group acquired a 15% stake in Betit Holdings Limited ('BHL'). The Group has a call option to acquire
the balance of the outstanding shares. The call option can 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 is E70 million, and the actual price would be determined by the mix of revenues between regulated
and non-regulated markets and certain multiples attaching thereto.
If the Group decides not to exercise its call option BSL may require the Group to acquire its shares in BHL at a price
determined by the mix of revenues between regulated and non-regulated markets and certain multiples thereof (but absent any
floor on the price). Completion of this purchase would be subject to certain conditions including the Group's ability to
raise the necessary financing. Should the Group not raise the required financing, BSL may acquire the Group's shares in
BHL for nominal consideration.
The Group engaged a third party valuations specialist to value the options using a Monte Carlo valuation model based on the
enterprise value for BHL and modelling of the anticipated exercise price. In valuing the underlying business of BHL, a
discounted cash flow model was used, applying a long-term growth rate of 2% (2014: 2%) to the Group's forecasts and a
discount rate of 18% (2014: 18%) (based on comparison to industry peers and observable inputs). Based on this model, the
fair value of the put and call options was a net liability of E0.7 million (2014: E1.7 million), leading to a movement in
the fair value of E1.0 million.
9. LOANS AND BORROWINGS
9.1 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 proposed 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 conversion of the loan
funds into GBP and to pay for initial costs including loan arrangement fees. Accordingly, E20m was drawn down immediately
on entering into the contract. The balance of E380m was drawn down on 1 February 2016 and so was not recorded as a
liability at the year end. The full amount of the loan is to be repaid by 4 September 2017.
IAS 39 Financial Instruments: Recognition and Measurement, states that all financial liabilities should initially be
measured at their fair value and subsequently measured at amortised cost using the effective interest rate method. The
effective interest has been calculated using the internal rate of return on the cash outflows across the period of the
loan, which includes loan arrangement fees, loan servicing fees, interest and transaction costs such as legal fees.
Principal Effective interest 2015Total
E000's E000's E000's
Loan balance at 1 January 2015 - - -
Initial drawdown (20,000) - (20,000)
Initial costs and loan servicing fees paid - 799 799
Interest instalments paid to 31 December 2015 - 625 625
Effective interest due to 31 December 2015 (note 4) - (1,245) (1,245)
Loan balance at 31 December 2015 (20,000) 179 (19,821)
Split between:
Current liabilities -
Non-current liabilities (19,821)
9.2 Non-interest bearing loan
As part of the Group's acquisition of Sportingbet PLC, a credit facility was made available to the Group by William Hill
PLC. At 31 December 2015 the Group had drawn down E3,138,515 (£2,303,513) (2014: E5,867,084 (£4,590,832)) of this
facility. The loan was revalued at the 31 December exchange rate of E1.3625.
IAS 39 Financial Instruments: Recognition and Measurement, states that all financial liabilities should initially be
measured at their fair value and subsequently measured at amortised cost using the effective interest rate method. The loan
has therefore been discounted at a rate of 4% and will be unwound over the period of the loan.
The facility is repayable in three instalments and should GVC declare dividends in excess of 58 Ecents per share, William
Hill is entitled to receive an accelerated repayment equal to the excess of the actual dividend over 58 Ecents per share.
The instalments as well as the impact of the discount are shown below:
2015 2015 2014 2014
Base Currency Total Base Currency Total
£000's E000's £000's E000's
Loan balance at 1 January 4,591 5,867 6,862 8,256
Repayment during the year (2,287) (3,245) (2,271) (2,856)
Revaluation at 31 December exchange rate - 516 - 467
Loan balance at 31 December 2,304 3,138 4,591 5,867
Undiscounted payments due within 12 months: 2,304 3,138 2,295 2,933
Undiscounted payments due between 12 and 24 months: - - 2,296 2,934
Loan balance before discount 3,138 5,867
Discount on recognition of the loan (780) (780)
Unwinding of discount to date 662 425
Loan balance at 31 December 3,020 5,512
Split:
Current liabilities 3,020 2,735
Non-current liabilities - 2,777
10. SHARE CAPITAL AND RESERVES
Share Capital Share Premium Merger Reserve Translation Reserve Retained Earnings Total
E000's E000's E000's E000's E000's E000's
At 1 January 2015 613 85,380 40,407 359 22,699 149,458
Result for the year - - - - 24,659 24,659
Dividends paid - - - - (34,319) (34,319)
Share option charge - - - - 509 509
Share options surrendered - - - - (12,183) (12,183)
At 31 December 2015 613 85,380 40,407 359 1,365 128,124
The 'Merger reserve' arose on the re-domiciliation of the Group from Luxembourg to the Isle of Man. 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).
Capital comprises total equity. The Group's capital management objectives are to ensure its ability to continue as a going
concern and to provide an adequate return to shareholders and benefits to other stakeholders by pricing services
commensurately with the level of risk, and maintaining an optimal capital structure to reduce the cost of capital. The
Group's objective is to pay around 75% of its net operating cashflows to shareholders by way of dividends.
In order to maintain or adjust the capital structure, the Company may issue new shares, return capital to shareholders,
limit the amount of dividends paid, or sell assets.
Total equity employed at 31 December 2015 was E128.1 million (2014: E149.5 million).
11. SHARE OPTION SCHEMES
At 31 December 2015, the Group had the following share options schemes for which options remained outstanding at the year
end:
i. options were granted to third parties on 28 February 2013 as part of the Sportingbet PLC acquisition following
underwriting commitments made at the time. The awards vested on the grant date and the options have the exercise price
reduced by the value of any dividends declared up to the point of exercise. Of the 156,947 outstanding at 1 January 2015,
none were exercised during the year ended 31 December 2015. These options were fully exercised on 12 February 2016 at a
weighted average price of £1.263.
ii. a further grant of options to Directors and employees under the existing and already approved LTIP was made on 2
June 2014. Under this scheme, 125,000 options were forfeited during the year and as at 31 December 2015 3,325,000 share
options remained outstanding. After the year end, 2,450,000 of these options were cancelled under the arrangements for the
acquisition of bwin.party.
Under the terms of the share option plans the Group can allocate up to 16.8% of the issued share capital, although it must
take allowance of the 752,923 shares in issue as a consequence of the exercise of share options.
The following options to purchase E0.01 ordinary shares in the Company were granted, exercised, forfeited or existing at
the year end:
Date of Grant Exercise Price Existing at 1 January 2015 Granted in the year Surrendered/ forfeited in the year Existing at 31 December 2015 Exercisable at 31 December 2015 Vesting criteria
21 May 2010 213p 1,600,000 - (1,600,000) - - Note a
28 Jan 2012 154.79p 1,600,000 - (1,600,000) - - Note a
28 Feb 2013 233.5p 156,947 - - 156,947 156,947 Note b
02 Jun 2014 1p 3,450,000 - (125,000) 3,325,000 - Note c
Total all schemes 6,806,947 - (3,325,000) 3,481,947 156,947
The existing share options at 31 December 2015 are held by the following employees:
Option price 233.5p 1p
Grant date 28-Feb-13 02-Jun-14 Total
Kenneth Alexander - 1,400,000 1,400,000
Richard Cooper - 700,000 700,000
Lee Feldman (note d) - 350,000 350,000
Third parties 156,947 - 156,947
Employees - 875,000 875,000
156,947 3,325,000 3,481,947
Note a: These options were granted under the 2010 scheme. The Company announced on 27 March 2015 that three of its
directors surrendered 3,200,000 fully vested and "in the money" share options granted in 2010 and 2012 at the prevailing
market price at the time (average of £1.83895). The surrender price was £4.46067, being the average of the middle market
closing prices of the Company's shares for the thirty dealing days up to and including the date of surrender.
In light of the surrender of share options, described above, by Kenneth Alexander, Richard Cooper and Lee Feldman (the
"Senior Team"), the Company has implemented a new retention plan for the Senior Team (the "Retention Plan"). The Retention
Plan is focused on ensuring that the Senior Team are compensated for the surrender of their fully vested share options.
Accordingly, each member of the Senior Team will receive cash payments which in total equal the "in-the-money" value of
their surrendered share options. This payment of E12,183,000 is at the fair value of the vested equity instruments and is
accounted for as a deduction from equity and recognition of the liability.
During 2015, the first of the 24 monthly Retention Plan payments was made, but all subsequent payments were put on hold
pending the outcome of the proposed deal with bwin.party. The balance and maturity is shown below:
2015E000s
Value of share options surrendered 12,183
Payment in the year (508)
Revaluation at 31 December 2015 exchange rate 31
Retention plan balance at 31 December 2015 11,706
Liability for cash-settled options under 2014 scheme 70
Balance at 31 December 2015 11,776
Split:
Current liabilities 9,740
Non-current liabilities 2,036
Note b: These options were granted to third parties as part of the Sportingbet PLC acquisition following
underwriting commitments made at the time. The awards vested on the grant date and the options have the exercise price
reduced by the value of any dividends declared up to the point of exercise.
Note c: These options were granted to certain Directors and employees. The awards will vest in full (and
become exercisable) on the share price being equal to or exceeding £6.00 per share for a continuous period of 90 calendar
days at any time from the date of grant. If there is a change of control, the awards will vest in full immediately unless
the share price is less than £5.00 per share, in which case the Awards will lapse in full. The awards have been treated as
vesting over a 3 year period. The directors' options under this scheme were cash cancelled after the year end on the
completion of the acquisition of bwin.party, and the after-tax proceeds re-invested in new GVC shares at 422p per share,
the placing price.
Note d: These awards were issued on the same basis as the awards in Note c but were awarded as cash settled rather than
equity settled options. The director's options under this scheme were cash cancelled after the year end on the completion
of the acquisition of bwin.party, and the after-tax proceeds re-invested in new GVC shares at 422p per share, the placing
price.
The charge to the consolidated income statement in respect of these options in 2015 was E449,000 (2014: E736,000). Of the
2015 charge, E509,000 related to equity settled options and a net credit of E60,000 to cash settled options. The deduction
from equity in respect of the cash payments to be made for the surrender of the vested equity instruments was E12,183,000.
11.1 Weighted Average Exercise Price of Options
The number and weighted average exercise prices of share options is as follows:
Weighted average exercise price Number of options Weighted average exercise price Number of options
2015 2015 2014 2014
Outstanding at the beginning of the year 94p 6,806,947 191p 3,801,667
Granted during the year - - 1p 3,450,000
Exercised during the year - - 184p (369,720)
Surrendered/bought out in the year 184p (3,200,000) 213p (75,000)
Forfeited in the year 1p (125,000) - -
Outstanding at the end of the year 11p 3,481,947 94p 6,806,947
Exercisable at the end of the year 156,947 3,356,947
The options outstanding at 31 December 2015 have a weighted average contractual life of 8.4 years (2014: 5.9 years).
11.2 Valuation of Options
The fair value of services received in return for share options granted were measured by reference to the fair value of
share options granted. With the exception of the options granted in 2014 the estimate of the fair value of the services
received is measured on a Binomial valuation model. The contractual life of the option (10 years) is used as an input into
this model. Expectations of early exercise are incorporated into the Binomial model. The option exercise price for all
individuals was the average market price on grant date, with the exception of the options granted to third parties as part
of the Sportingbet acquisition. These were priced at the amount the Group offered as consideration for the purchase.
The 2014 options were valued using a Monte Carlo model due to the performance conditions associated with the options. The
2014 cash-settled options have been revalued using a Monte Carlo model at 31 December 2015.
Fair value of share options and assumptions:
Date of grant Share price at date of grant*(in £) Exercise price (in £) Expected volatility Exercise multiple Expected dividend yield Risk free rate** Fair value at measurement date (in £)
21 May 10 1.85 2.13 60% 2 17% 2.75% 0.39
21 May 10 1.85 0.01 60% 2 17% 2.75% 0.05
21 May 10 1.85 1.50 60% 2 17% 2.75% 0.59
28 Jan 12 1.67 1.5479 58% 2 20% 2.19% 0.33
28 Feb 13 2.375 2.335 60% 2 12.15% 0.572% 0.61
02 Jun 14 - equity settled 4.49 0.01 24% n/a 10.00% 1.425% 0.41
02 Jun 14 - cash settled 4.49 0.01 21% n/a 9.40% 0.52% 0.28
* This is the bid price, not the mid-market price, at market close, as sourced from Bloomberg.
** The measurement of the risk-free rate was based on rate of UK sovereign debt prevalent at each grant date over the
expected term of the option.
The expected volatility is based on the historic volatility (calculated based on the weighted average remaining life of the
share options), adjusted for any expected changes to future volatility due to publicly available information. There are no
market conditions associated with the share option grants with the exception of those issued in 2014 as noted above.
12. SUBSEQUENT EVENTS
12.1 Acquisition of bwin.party
It is part of the core strategy for the Group to improve the quality and mix of the Group's earnings through acquisitions,
especially where these increase the markets in which the Group trades and where there are opportunities for high levels of
cash generation through synergies. On 1 February 2016, the Group acquired 100% of the share capital of bwin.party digital
entertainment plc ("bwin.party"), an online gaming company traded on the Main Market of the London Stock Exchange and
listed on the Official List (Premium Segment), for total consideration of E1,508.2 million as set out in the table below.
The acquisition resulted in GVC obtaining control of bwin.party from 1 February 2016, and this will be accounted for as a
business combination in the year ending 31 December 2016.
The Group issued a prospectus on 13 November 2015 setting out the terms of the bid, which included an offer of 25p plus
0.231 new GVC shares for each bwin.party share. At the date of the acquisition, there were 843m bwin.party shares and 14m
of share options and the closing price for GVC Holdings PLC shares on the previous trading day was £4.67. The total fair
value of the consideration paid was E1,508.2 million as set out below:
No of shares Value £'000 Exchange rate Value E'000
Total bwin.party shareholding 843,469,689
GVC shares issued (0.231 per bwin.party share, at a price of £4.67) 194,841,498 909,910 1.3205 1,201,536
Cash payment (£0.25 per bwin.party share) 210,867 1.3205 278,450
Cash settled options 21,397 1.3205 28,255
Total consideration 1,142,174 1,508,241
The fair value of the assets and liabilities recognised at the date of acquisition, on a provisional basis, is set out in
the table below:
Fair value E000
Assets
Intangible assets 636,899
Property, plant and equipment 43,555
Trade and other receivables 145,069
Cash 117,325
Total assets 942,848
Liabilities
Trade and other payables (157,597)
Client liabilities and progressive prize pools (115,574)
Taxation (113,379)
Total liabilities (386,550)
Net assets 556,298
Fair value of consideration paid 1,508,241
Goodwill recognised 951,943
Business combination costs 24,800
The fair value of Trade and other receivables is E145.1 million and includes trade receivables with a fair value of E38.5
million. The gross contractual amount for trade receivables due is E40.0 million, of which E1.5 million is expected to be
irrecoverable.
The goodwill consists of assembled workforce, future growth and business reputation.
All contingent liabilities have been provided for.
The total cost that will be recognised in the income statement is E9.6 million, being the business combination costs
incurred in 2016.
The figures presented above are provisional due to the timing of the transaction.
12.1 Acquisition of bwin.party
The audited accounts for bwin.party digital entertainment plc for the year ended 31 December 2015 showed:
· Total revenue of E576.4 million
· Clean EBITDA of E108.5 million
· Loss before tax of E40.2 million
· Net assets of E499.6 million.
Following the acquisition, GVC expects to generate significant synergistic savings through integration and restructuring of
operations. Plans include:
1. The migration of GVC's Sportsbook onto bwin.party's technology platform, after which the GVC platform may cease operating
2. The termination of all sponsorship programmes
3. Restructuring bwin.party's casino and poker operations including integrating GVC's poker operation onto the bwin.party platform
4. Operational efficiencies in customer services, IT and marketing functions
5. Integration of some back office functions which may lead to headcount reductions
All plans are subject to consultation with employee representative bodies and other stakeholders.
The Group will also review non-core assets and may identify some for disposal in due course.
12.2 Funding for the acquisition
The cash element of the acquisition of bwin.party was funded through drawing down the balance of the Cerberus loan facility
(see note 9).
The amount drawn down on the loan was a further E380.0 million. Of this, E365.0m was converted into GBP under a foreign
currency option taken out in 2015. The GBP amount received was £260,719,500. For further details of the currency option,
see note 3.1.1.
The loan is fully repayable on 4 September 2017.
12.3 Issuance of shares
On the same date as the acquisition of bwin.party, the Group issued additional shares at a price of 422p. The additional
share capital consisted of 27,978,812 Placing shares, including the purchase by Directors of shares under the terms of the
LTIP, and 7,566,212 Subscription shares. The cash consideration received for these shares was £150.0 million. The
aggregate net proceeds of these shares of £145.1 million are to be used to fund re-organisational costs (c.£44m), repay
existing debt facilities of bwin.party (c.£45m) and to fund working capital (c.£56.1m).
This information is provided by RNS
The company news service from the London Stock ExchangeRecent 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