REG - GVC Holdings PLC - Half-year Report <Origin Href="QuoteRef">GVC.L</Origin> - Part 2
20/09/2016 07:07
- Part 2: For the preceding part double click ID:nRST2604Ka
tax
Deferred taxation has arisen on the intangible assets recognised on the Acquisition of bwin.party.
Share capital
At 1 January 2016 there were 61,276,480 shares in issue. At 30 June 2016 there were 291,980,780 shares in issue. The
Company issued 230,704,300 shares in the period under review as follows:
· 156,947 shares were issued to a third party warrant holder on 12 February 2016.
· 230,547,353 shares were issued in pursuance of the Acquisition
o 32,964,034 placing and subscription to third parties
o 2,580,990 placed with directors in compensation of their share options
o 195,002,329 issued to bwin.party share and option holders
After the period end the Company subsequently issued a further 296,724 shares, also in connection with the Acquisition, so
the total number of (clean) shares in issue at the date of this release is 292,277,504, and thus the total number of shares
issued pursuant to the Acquisition was 230,844,077 of which 195,299,053 were issued to bwin.party share and option holders
and 35,545,024 were issued via a placing or subscription.
CASHFLOW
The table below shows a simplified version of the cashflow during the six month period to 30 June 2016.
Table 13 - summary of the Cashflow
Pro forma* Accounting
Emillions Emillions
Acquisition cashflows (Table 9) 138.3 165.2
Clean EBITDA* 104.4 91.2
Disposal proceeds, interest and dividends received 10.7 10.6
Capitalisation of internally developed software* (6.7) (6.7)
Purchase of intangible assets* (6.7) (5.9)
Purchase of PPE* (10.0) (4.4)
Corporate taxation paid* (6.9) (5.2)
Interest paid (13.5) (13.3)
Working capital movement (40.7) (31.8)
Change in short term investments 8.3 8.1
Earn-outs (1.2) (1.2)
Other exceptional items (14.5) (14.5)
Foreign exchange translation differences on cash* (2.5) 1.0
Net cashflows 159.0 193.1
Cash acquired at Acquisition - 116.2
Cash at 1.1.2016 178.5 28.2
Cash** at 30.06.2016 337.5 337.5
* other than working capital movements which should be considered to be distorted by significant accruals and deferred
payments at 31 December 2015, the "operational" cashflows on a pro forma basis for the six months ended 30 June 2016 were
E71.6 million.
**includes Kalixa
The principal items within working capital movement related to 2015 bonus schemes (across both GVC and bwin.party), and the
settlement of trade creditors.
Richard Cooper
Group Finance Director
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties are those disclosed on pages 26 to 27 of the Group's 2015 Annual Report. The
principal risks and uncertainties which could impact the Group for the remainder of the year are set out below:
TECHNOLOGY
· The Group may be threatened by Denial of Service attacks or similar.
· Natural or man-made disasters may affect continuity of operations, undermining player confidence.
· With technological advances and continuous shifts in how consumers access our services, maintaining and improving technology may become more complex.
· Following the Acquisition of bwin.party, the Group is undertaking a significant technology platform migration, which carries a project risk.
REGULATORY
· Conflict between jurisdictions in which the customer resides and where the service is provided; risk of enforcement action.
· In some markets regulation is not clearly defined or adopted; there may be changes in regulation in all markets.
TAXATION
· Imposition of additional gaming or other indirect taxes.
· Transfer pricing between group entities could be challenged by the tax authorities.
· Changes in VAT rules within the EU impacting the digital economy.
ECONOMIC
· Conditions in the Eurozone remain challenging and this may erode customer base confidence and spending power.
· Foreign exchange movements; risk of certain countries exiting the Euro.
· Brexit: following the outcome of the June referendum, the volatility of global currency and financial markets has
increased. Future changes as a result of the referendum may reduce the Group's ability to operate in certain EU markets
without a change in domicile, which could carry a higher tax burden.
FINANCIAL
· Increases in EURIBOR will increase the interest cost for the Group. The loan arrangements contain covenants which,
if breached, would trigger early repayment of the facility.
OPERATIONAL
· The market place becomes more competitive via new entrants or more attractive products available from those new
entrants or existing competitors.
· Withdrawal of payment processing facilities.
· Reliance on third party payment and multi-currency processing systems.
· Dependence on third party software.
· Dependence on key personnel.
· Loss of major introducer of business.
· Loss of major customer.
· Poor sports results.
· Abnormal jackpot wins.
· Business integration process following the Acquisition : risk of business disruption and the impact on staff; risk
of unexpected costs or constraints on delivering expected synergies.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that to the best of their knowledge:
· The unaudited condensed consolidated set of financial information has been prepared in accordance with IAS 34
'Interim Financial Reporting'; and
· The interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R, being an indication of important events that have occurred during the first six months of the financial
year and their impact on the condensed consolidated set of financial statements; and a description of the principal risks
and uncertainties for the remaining six months of the financial year;
(b) DTR 4.2.8R, being material related party transactions that have taken place in the first six months of the current
financial year and any material changes in the related party transactions described in the Annual Report for the year ended
31 December 2015.
The Directors of GVC Holdings PLC are listed on the GVC website: www.gvc-plc.com.
By order of the Board
Robert Hoskin
Company Secertary
19 September 2016
GLOSSARY AND TERMS
Acquisition The purchase of bwin.party digital entertainment plc by the Company
B2B Business-to-business
B2C Business-to-consumer
bwin.party bwin.party digital entertainment plc
Clean EBITDA Earnings before interest, taxation, depreciation, amortisation, impairment charges, changes in the fair value of derivative financial instruments, share option charges and exceptional items
Clean Net operating Cashflow ('CNOC') Clean EBITDA less: capitalised development costs, net corporate taxes paid, finance lease payments, net working capital movements and exceptional items of a cash nature
Contribution Constant currency basis Total Revenue less betting taxes, payment service provider fees, software royalties, commissions, revenue share and marketing costs Each month in the prior period re-translated at the current periods exchange rate
Enlarged Group GVC Holdings plc incorporating bwin.party
IAS International Accounting Standards
IFRS International Financial Reporting Standards
InterTrader The Group's financial markets services
Kalixa The Group's payments business
KPIs Net debt Key Performance Indicators Cash and cash equivalents, short term investments, less customer liabilities (all including amounts recorded as assets in disposal groups classified as held for sale), less interest bearing loans and borrowings.
Revenue Net Gaming Revenue less VAT (imposed by certain EU jurisdictions on either sports or gaming revenue)
Sports Gross Margin Sports wagers less payouts
Sports Gross Margin % Sports Gross Margin divided by Sports wagers
Sports Net Gaming Revenue ('Sports NGR') Sports Gross Margin less free bets and promotional bonuses
Total Net Gaming Revenue ('Total NGR') Sports NGR + Net gaming stakes less payout winnings less customer bonuses + Other revenues
WPT The business and substantially all the assets of The World Poker Tour that was disposed of by bwin in June 2015
Totals may not sum as rounding and percentages have been calculated on the underlying rather than the summarised figures.
Independent Review Report to GVC Holdings plc
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report
of GVC Holdings PLC for the six months ended 30 June 2016 which comprises the Condensed Consolidated Income Statement, the
Condensed Consolidated Statement of Comprehensive Income, the Condensed Statement of Financial Position, the Condensed
Consolidated Statement of Changes in Equity, the Condensed Consolidated Statement of Cash Flows and the related notes. We
have read the other information contained in the half-yearly financial report and considered whether it contains any
apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company, in accordance with International Standard on Review Engagements (UK and Ireland)
2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board. Our review work has been undertaken so that we might state to the company those matters we are required to
state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company for our review work, for this report, or for the
conclusion we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are
responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with International
Financial Reporting Standards as adopted by the European Union. The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express a conclusion on the condensed set of financial statements in the half-yearly financial
report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board
for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland)
and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial
statements in the half-yearly financial report for the six months ended 30 June 2016 is not prepared, in all material
respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
19 September 2016
CONDENSED CONSOLIDATED INCOME STATEMENT
for the period ended 30 June 2016
Period Ended Period Ended
30 June 2016(Unaudited) 30 June 2015(Unaudited)
Notes Em Em
Net Gaming Revenue (memorandum) 390.6 120.9
Revenue 2 382.1 120.3
Cost of sales (181.2) (54.9)
Contribution 2 200.9 65.4
Administrative costs 3 (109.7) (39.9)
Clean EBITDA 91.2 25.5
Share option charges (6.5) (0.2)
Exceptional items 3 (89.3) (4.7)
Depreciation and amortisation 3 (65.5) (2.2)
Change in value of available for sale asset (4.8) -
Changes in the fair value of derivative financial instruments 8 14.1 -
Operating (loss)/profit (60.8) 18.4
Financial income 0.9 -
Financial expense 4 (29.4) (1.3)
Dividend income 3.1 -
Share of profit/(loss) of associate 0.1 -
(Loss)/profit before tax (86.1) 17.1
Taxation income/(expense) 5 1.9 (0.3)
(Loss)/profit after tax (84.2) 16.8
Attributable to:
Owners of the parent (84.0) 16.8
Non-controlling interests (0.2) -
Earnings per share E E
Basic 6 (0.334) 0.273
Diluted 6 (0.334) 0.260
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the period ended 30 June 2016
30 June 2016(Unaudited) 30 June 2015 (Unaudited)
Em Em
(Loss)/profit for the period (84.2) 16.8
Other comprehensive incomeItems that may subsequently be recycled to profit or loss:
Change in fair value of available for sale assets - -
Exchange differences on translation of foreign operations (3.1) -
Total comprehensive income for the period (87.3) 16.8
Total comprehensive income attributable to:
Owners of the parent (87.1) 16.8
Non-controlling interests (0.2) -
(87.3) 16.8
The notes form part of these financial statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 30 June 2016
30 June 2016(Unaudited) 30 June 2015(Unaudited) 31 December 2015(Audited)
Notes Em Em Em
Assets
Property, plant and equipment 20.0 1.6 1.4
Intangible assets 7 1,660.8 155.2 155.1
Trade and other receivables - - -
Investments and available for sale financial assets 1.4 3.8 2.6
Deferred tax 0.8 - -
Total non-current assets 1,683.0 160.6 159.1
Trade and other receivables 116.3 22.9 34.6
Derivative financial assets 8 25.3 - 3.8
Income and other taxes reclaimable 8.6 5.5 6.0
Short term investments 5.3 - -
Cash and cash equivalents 302.9 21.4 28.2
Assets in disposal groups classified as held for sale 9 75.3 - -
Total current assets 533.7 49.8 72.6
Total assets 2,216.7 210.4 231.7
Current liabilities
Trade and other payables (71.9) (28.3) (32.0)
Balances with customers (107.8) (12.1) (14.8)
Progressive prize pools (18.4) - -
Amounts due under finance leases (0.2) (1.4) (0.7)
Non-interest bearing loans and borrowings 10 - (6.2) (3.0)
Deferred and contingent consideration (3.6) (2.4) (1.6)
Share option liability 13 (0.4) (6.8) (9.7)
Forward contract liability - - (9.9)
Liabilities in disposal groups held for sale 9 (29.8) - -
Provisions (8.9) - -
Income taxes payable (15.5) (6.7) (7.3)
Other taxation payable (40.2) (1.9) (2.0)
Total current liabilities (296.7) (65.8) (81.0)
Current assets less current liabilities 237.0 (16.0) (8.4)
Non-current liabilities
Deferred and contingent consideration (1.8) (0.4) -
Interest bearing loans and borrowings 10 (408.1) (0.2) (19.8)
Share option liability 13 - (5.2) (2.1)
Betit option liability 8 - (1.7) (0.7)
Deferred tax 5 (70.9) - -
Total non-current liabilities (480.8) (7.5) (22.6)
Total net assets 1,439.2 137.1 128.1
Capital and reserves
Issued share capital 11 2.9 0.6 0.6
Merger reserve 40.4 40.4 40.4
Share premium 1,477.6 85.4 85.4
Translation reserve (2.8) 0.3 0.3
Retained earnings (77.5) 10.4 1.4
Total equity attributable to equity holders of the parent 1,440.6 137.1 128.1
Non-controlling interests (1.4) - -
Total equity 1,439.2 137.1 128.1
The notes form part of these financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period ended 30 June 2016
Share Capital Merger Reserve Share Translation Reserve Retained Earnings* Total Non- Total equity
Premium Controlling interest
Em Em Em Em Em Em Em Em
Balance at 1 January 2015 (audited) 0.6 40.4 85.4 0.3 22.7 149.4 - 149.4
Share option charges** - - - - 0.3 0.3 - 0.3
Share options surrendered - - - - (12.2) (12.2) - (12.2)
Share options exercised - - - - - - - -
Dividend paid - - - - (17.2) (17.2) - (17.2)
Transactions with owners - - - - (29.1) (29.1) - (29.1)
Profit for the period - - - - 16.8 16.8 - 16.8
Other comprehensive income for the period - - - - - - - -
Total comprehensive income for the period - - - - 16.8 16.8 - 16.8
Balance as at 30 June 2015 (unaudited) 0.6 40.4 85.4 0.3 10.4 137.1 - 137.1
Balance at 1 January 2016 (audited) 0.6 40.4 85.4 0.3 1.4 128.1 128.1
Share option charges** - - - - 5.9 5.9 - 5.9
Share options surrendered - - - - (0.8) (0.8) - (0.8)
Share options exercised - - 0.3 - - 0.3 - 0.3
Issue of share capital for the Acquisition of bwin.party 2.3 - 1,391.9 - - 1,394.2 - 1,394.2
Resulting from the Acquisition of bwin.party - - - - - - (1.2) (1.2)
Transactions with owners 2.3 - 1,392.2 - 5.1 1,399.6 (1.2) 1,398.4
Loss for the period attributable to the parent - - - - (84.0) (84.0) - (84.0)
Loss for the period attributable to the Non-controlling interest - - - - - - (0.2) (0.2)
Other comprehensive income attributable to the parent - - - (3.1) - (3.1) - (3.1)
Other comprehensive income attributable to the Non-controlling interest - - - - - - - -
Total comprehensive income for the period - - - (3.1) (84.0) (87.1) (0.2) (87.3)
Balance as at 30 June 2016 (unaudited) 2.9 40.4 1,477.6 (2.8) (77.5) 1,440.6 (1.4) 1,439.2
*the share option reserve included within retained earnings at 30 June 2016 amounted to a debit balance of E1.7 million,
largely due to the surrender of fully vested share options during 2015.
**total share option charge per the condensed income statement amounted to E6.5 million, the difference being a cash
settled share option expense of E0.6 million which is not taken directly to retained earnings.
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, 2006 Companies Act Isle of Man).
The notes form part of these financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 30 June 2016
Period Ended Period Ended 30 June 2015(Unaudited)
30 June 2016(Unaudited)
Notes Em Em
Cash flows from operating activities
Cash receipts from customers 398.1 125.5
Cash paid to suppliers and employees (407.3) (99.3)
Interest paid including initial costs and loan servicing (20.9) -
Corporate taxes paid (5.2) (0.2)
Net cash used in operating activities (35.3) 26.0
Cash flows from investing activities
Interest received 0.9 -
Dividends received 3.1 -
Acquisition earn-out payments (Betboo) (1.2) (1.2)
Acquisition of bwin.party (net of cash acquired) 17 (186.9) -
Acquisition of property, plant and equipment (4.4) (0.4)
Proceeds from disposal of assets held for sale 6.6 -
Capitalised development costs and other intangibles 7 (12.6) (2.6)
Decrease in short term investments 8.1 -
Net cash used in investing activities (186.4) (4.2)
Cash flows from financing activities
Proceeds from interest bearing loan (Cerberus) 10 380.0 -
Non-interest bearing loan (from William Hill) 10 (3.0) -
Proceeds from issue of share capital, net of costs 11 192.0 -
Repayment of borrowings 10, 17 (39.0) (0.9)
Dividend paid 12 - (17.2)
Net cash from financing activities 530.0 (18.1)
Net increase in cash and cash equivalents 308.3 3.7
Exchange differences 1.0 (0.1)
Cash and cash equivalents at beginning of the period 28.2 17.8
Cash and cash equivalents at end of the period 337.5 21.4
Cash and cash equivalents
The balance at the end of the period of E337.5 million above consists of E302.9 million cash and cash equivalents as shown
on the face of the consolidated statement of financial position and E34.6 million (2015: Enil) of cash and cash equivalents
recognised within assets held for sale.
The notes form part of these financial statement
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
for the period ended 30 June 2016
1. Basis of preparation
2. Segmental reporting
3. Operating costs
4. Financial expense
5. Taxation
6. Earnings per share
7. Intangible assets
8. Derivative financial instruments: options
9. Assets and liabilities classified as held for sale
10. Loans and borrowings
11. Share capital
12. Dividends
13. Share option schemes
14. Financial instruments and risk management
15. Related parties
16. Contingent liabilities and capital commitments
17. Business combinations
18. Events after the balance sheet date
1. BASIS OF PREPARATION
1.1 General information and accounting policies
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 condensed consolidated financial statements of the
Group for the six months ended 30 June 2016 comprise the Company and its subsidiaries (together referred to as the
'Group'). The condensed consolidated financial statements are unaudited but have been reviewed by the auditor, whose
report is set out in this document.
The condensed consolidated financial statements have been prepared under IAS 34 'Interim Financial Reporting' and those
parts of the Isle of Man Companies Act 2006 applicable to companies reporting under IFRS. They do not constitute full
accounts within the meaning of the Isle of Man Companies Act 2006, and should be read in conjunction with the financial
statements for the year ended 31 December 2015, which have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the EU. Those financial statements have been reported on by the Group's auditor
and are included in the Group's Annual Report 2015, available in the Investor Relations section of the Group website at
www.gvc-plc.com. The auditor's report on those financial statements was unqualified.
The condensed consolidated financial statements are prepared on the basis of the accounting policies stated in the Group's
Annual Report 2015, with the exception of certain updated accounting policies, the introduction of new accounting policies
following the Acquisition of bwin.party, and the new standards adopted during 2016, as shown below. These policies have
been applied consistently to all periods presented in these financial statements and by all Group entities.
The condensed consolidated financial statements were approved by the Board of Directors on 19 September 2016.
The condensed consolidated financial statements are presented in the 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.
1.1.1 Policies updated during 2016
Property, Plant and Equipment: 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:
· Land and buildings: over the length of the lease
· Fixtures and fittings: 3 to 5 years
· Plant and equipment: 3 to 5 years
The residual value, if significant, is reassessed annually.
Intangible Assets: 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 on an annual basis. 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
· Trade-marks and trade names 12-15 years, or indefinite life
· Non-contractual customer relationships 4 years
Employee Benefits: Share Options
The Group has share option schemes which allow Group employees and contractors to acquire shares of the Company. The fair
value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair value is
measured at grant date, including factoring in the value of future dividends or dividend credits, 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.
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; the balance is taken to the income statement. Also
on cancellation an accelerated charge would be recognised immediately.
Segment Reporting
The Board has reviewed and confirmed the Group's reportable segments in line with the requirements of IFRS 8 'Operating
Segments'. Following the Acquisition of bwin.party, the segments have been revised to reflect the activities of the
enlarged Group. The segments disclosed below are those currently aligned with the reports the Group's Chief Executive
reviewed during the period to make strategic decisions.
· Sports labels: bwin, Sportingbet, Gamebookers and Superbahis
· Gaming labels: PartyPoker, PartyCasino, Gioco Digitale, Cashcade and CasinoClub
· B2B: provision of the technology platforms to internal and external customers
· 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 Statement of Financial Position is not reviewed on a segment basis.
1.1.2 Policies adopted during 2016, following the Acquisition of bwin.party
Financial Instruments: 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.
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.
Investments in joint ventures
A joint venture is a contractual relationship 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.
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 information using the
equity method of accounting. Under the equity method, investments in associates are carried 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.
1.1.3 New and revised standards that are effective for annual periods beginning on or after 1 January 2016
Amendments 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. The amendments do not have an
impact on this consolidated historical financial information.
Disclosure Initiative: Amendments to IAS 1 Presentation of Financial Statements
These amendments provide guidance on the materiality considerations to apply to all parts of the financial statements and
the extent to which line items can be aggregated and disaggregated.
The amendments are effective for reporting periods beginning on or after 1 January 2016. The amendments do not have an
impact on this consolidated historical financial information.
1.2 Going Concern
After making enquiries and after consideration of the Group's existing operations, financing arrangements, cash flow
forecasts and assessment of business and regulatory risks, the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt
the going concern basis in preparing the condensed consolidated financial statements.
1.3 Seasonality
The Group's overall profitability is sensitive to sporting events and results. In addition there is underlying seasonality
for online activity which also depends on geographical location of players.
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. 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:
Period ended 30 June 2016 Period ended 30 June 2015
Em Em
Germany 87.9 17.9
Turkey 50.0 42.5
UK 32.0 3.9
Other 212.2 56.0
Total 382.1 120.3
At 31 December 2015, the total non-current assets (other than financial instruments, investments accounted for using the
equity method, deferred tax assets and post-employment benefit assets) located in Europe was E103,350,000, and the total
located in other regions was E55,816,000. Given the recent significant changes in composition of the Group, this
information is not available for the period to 30 June 2016.
Revenues from external customers have been identified on the basis of the customer's geographical location. Non-current
assets are allocated based on their physical location.
2.2 Reporting by Segment
Period ending 30 June 2016:
Sports labels Games labels B2B Total core Non-core Corporate Total
Em Em Em Em Em Em Em
Revenue 280.4 87.0 5.6 373.0 9.1 - 382.1
Variable costs* (122.8) (48.8) (0.1) (171.7) (9.5) - (181.2)
Contribution 157.6 38.2 5.5 201.3 (0.4) - 200.9
Contribution margin 56% 43% 98% 54% (4%) - 53%
Other operating costs:
Personnel expenditure (47.7) (5.0) (9.0) (61.7)
Professional fees (2.4) (0.4) (5.5) (8.3)
Technology costs (31.6) (0.8) (0.1) (32.5)
Office, travel and other costs (3.1) (0.9) (6.7) (10.7)
Foreign exchange differences 0.6 - 2.9 3.5
Clean EBITDA 117.1 (7.5) (18.4) 91.2
Period ending 30 June 2015:
Sports labels Games labels B2B Total core Non-core Corporate Total
Em Em Em Em Em Em Em
Revenue 103.8 16.5 - 120.3 - - 120.3
Variable costs* (49.6) (5.3) - (54.9) - - (54.9)
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