REG - GVC Holdings PLC - Notification of Transfer to a Premium Listing <Origin Href="QuoteRef">GVC.L</Origin> - Part 3
01/07/2016 07:07
- Part 3: For the preceding part double click ID:nRSA8980Cb
Group and parent financial statements have been prepared in accordance with those International Financial Reporting
Standards including International Accounting Standards (IASs) and interpretations, (collectively 'IFRS'), published by the
International Accounting Standards Board ('IASB') which have been adopted by the European Commission and endorsed for use
in the EU for the purposes of the Group's full year financial statements.
The Company was listed on the London Stock Exchange but, following its acquisition by GVC Holdings Plc on 1 February 2016,
the Company was re-registered as a private company. The consolidated and Company financial statements complies with the
Gibraltar Companies Act 2014. The financial statements are presented in euros and rounded to the nearest E0.1m.
Statutory accounts for the year ended 31 December 2015 will be filed with Companies House Gibraltar following the Company's
Annual General Meeting.
Adoption of new and revised Standards and Interpretations
There were no new Standards and Interpretations issued by the International Accounting Standards Board ('IASB') that were
effective for the first time in the current financial year and had an impact on the Group.
The following relevant standards and interpretations were issued by the IASB or the IFRIC before the year end but are as
yet not effective for the 2015 year end. The Group is currently assessing the impact these will have on its consolidated
results and financial position:
IFRS 9 Financial Instruments (effective date 1 January 2018)*
IFRS 15 Revenue Recognition (effective date 1 January 2018)*
IFRS 16 Leases (effective date 1 January 2019)*
* Not yet endorsed by the EU.
The Group is currently assessing the impact, if any, that these standards will have on the presentation of, and recognition
in its consolidated results in future periods.
Basis of accounting
The consolidated and company financial statements have been prepared under the historical cost convention other than for
the valuation of certain financial instruments which are held at their fair value.
Critical accounting policies, estimates and judgements
The preparation of financial statements under IFRS requires the Group to make estimates and judgements that affect the
application of policies and reported amounts. Estimates and judgements are continually evaluated and are based on
historical experience and other factors including expectations of future events that are believed to be reasonable under
the circumstances. Actual results may differ from these estimates.
Included in this note are accounting policies which cover areas that the Directors consider require estimates, judgements
and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and
liabilities within the next financial year. These policies, together with references to the related notes to the financial
statements, can be found as follows:
Revenue recognition note 1
Intangible assets and impairment of goodwill note 10
Regulatory compliance, litigation, provisions and contingent liabilities note 24
Tax including deferred tax note 8 and 22
Basis of consolidation
Under section 288(2) of the Gibraltar Companies Act 2014, the Company is exempt from the requirement to present its own
statement of comprehensive income.
All intra-Group transactions, balances, income and expenses are eliminated on consolidation.
Accounting for the Company's acquisition of the controlling interest in bwin.party holdings Limited (formerly PartyGaming
Holdings Limited)
The Company's controlling interest in its directly held, wholly-owned subsidiary, bwin.party Holdings Limited (formerly
PartyGaming Holdings Limited), was acquired through a transaction under common control, using a form of accounting that is
similar to pooling of interests.
Accounting for subsidiaries
A subsidiary is an entity controlled directly or indirectly by the Company. The Company controls an investee if all three
of the following elements are present: power over the investee, exposure to variable returns from the investee, and the
ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and
circumstances indicate that there may be a change in any of these elements of control.
On the date of acquisition the assets and liabilities of the relevant subsidiaries are measured at their fair values. The
non-controlling interest is stated at the non-controlling interest's proportion of the fair values of the assets and
liabilities recognised.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of
comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where
necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line
with those used by the Group
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity
therein. Non-controlling interests consist of the amount of those interests at the date of the original business
combination and the non-controlling shareholder's share of changes in equity since the date of the combination except where
any non-controlling interests have been acquired by the Group. At this point any share of gains or losses are transferred
to the Group's retained earnings. Total comprehensive income is attributed to non-controlling interests even if this
results in the non-controlling interests having a deficit balance.
Investments in subsidiaries held by the Company are carried at cost less any impairment in value.
Business combinations
Acquisitions of subsidiaries are accounted for using the acquisition method. The cost of the acquisition is measured at the
aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity
instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in the
income statement as incurred. The acquiree's identifiable assets and liabilities are recognised at their fair values at the
acquisition date.
The interest of the non-controlling shareholders in the acquiree may initially be measured either at fair value or at the
non-controlling shareholders' proportion of the net fair value of the identifiable assets acquired, liabilities and
contingent liabilities assumed. The choice of measurement basis is made on an acquisition-by-acquisition basis.
Investments
Investments include investments in associates, joint ventures and available for sale investments.
Available for sale investments
Non-derivative financial assets classified as available-for-sale comprise the Group's strategic investments in entities not
qualifying as subsidiaries, associates or jointly controlled entities. They are carried at fair value with changes in fair
value recognised directly in equity except where a fair value cannot be reliably determined whereby they are carried at
cost. In accordance with IAS 39, a significant or prolonged decline in the fair value of an available-for-sale financial
asset is recognised in the consolidated statement of comprehensive income.
Purchases and sales of available-for-sale financial assets are recognised on settlement date with any change in fair value
between trade date and settlement date being recognised in the available for sale reserve. On sale, the amount held in the
available-for-sale reserve associated with that asset is removed from equity and recognised in the consolidated statement
of comprehensive income.
Investments in associates
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest
in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of
the investee but is not control or joint control over those policies.
The results and assets and liabilities of associates are incorporated in the consolidated financial statements using the
equity method of accounting. Under the equity method, investments in associates are carried in the consolidated statement
of financial position at cost as adjusted for post-acquisition changes in the Group's share of the net assets of the
associate, less any impairment in the value of the investment. Losses of an associate in excess of the Group's interest in
that associate are not recognised. Additional losses are provided for, and a liability is recognised, only to the extent
that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.
Investments in joint ventures
A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is
subject to joint control; that is, when the strategic financial and operating policy decisions relating to the activities
require the unanimous consent of the parties sharing control.
The Group reports its interests in jointly controlled entities using the equity method of accounting. Under the equity
method, investments in joint ventures are carried in the consolidated statement of financial position at cost as adjusted
for post-acquisition changes in the Group's share of the net assets of the joint venture, less any impairment in the value
of the investment. Losses of a joint venture in excess of the Group's interest in that investment are not recognised.
Additional losses are provided for, and a liability is recognised, only to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the joint venture.
Intangible assets
Identifiable intangible assets are recognised when the Group controls the asset, it is probable that future economic
benefits attributed to the asset will flow to the Group and the cost of the asset can be reliably measured.
Goodwill
Goodwill is measured as the excess of the sum of the fair value of the consideration transferred, the amount of any
non-controlling interests in the acquiree and the fair value of the Group's previously held equity interest in the
acquiree, if any, over the net amounts of identifiable assets acquired in the subsidiary, associate or jointly controlled
entity and liabilities assumed at the acquisition date.
For acquisitions where the agreement date is on or after 31 March 2004, goodwill is not amortised and is reviewed for
impairment at least annually. Any impairment is recognised immediately in the consolidated statement of comprehensive
income and is not subsequently reversed. Goodwill arising on earlier acquisitions was being amortised over its estimated
useful life of 20 years. In accordance with the transitional provisions of IFRS 3 Business Combinations, the unamortised
balance of goodwill at 31 December 2004 was frozen and reviewed for impairment and will be reviewed for impairment at least
annually.
Externally acquired intangible assets
Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to
other contractual or legal rights. Identifiable assets are recognised at their fair value at the acquisition date. The
identified intangibles are amortised over the useful economic life of the assets.
Internally generated intangible assets - research and development expenditure
Expenditure incurred on development activities, including the Group's software development, is capitalised only where the
expenditure will lead to new or substantially improved products or processes resulting in future economic benefits flowing
to the Group, the products or processes are technically and commercially feasible and the Group has sufficient resources to
complete development. The expenditure capitalised includes the cost of materials, labour and an appropriate proportion of
overheads. All other development expenditure is expensed as incurred.
Subsequent expenditure on capitalised intangible assets is capitalised only where it clearly increases the economic
benefits to be derived from the asset to which it relates. All other expenditure, including that incurred in order to
maintain the related intangible asset's current level of performance, is expensed as incurred.
Licence costs
Expenditure incurred in order to obtain gaming licences is capitalised and amortised over the life over the licence.
Amortisation of intangible assets
Amortisation is provided to write-off the cost of all intangible assets, with the exception of goodwill, over the periods
the Group expects to benefit from their use, and varies between:
Brand and domain names - 5% to 20% per annum
Capitalised development expenditure - 20% to 33% per annum
Contractual relationships - over the length of the contract
Customer lists and contracts - 5% to 50% per annum
Intellectual property and gaming licences - over the length of the licence
Software - 20% to 33% per annum
Impairment of goodwill, other intangibles and property, plant and equipment
At the end of each reporting year, an impairment review of goodwill is completed. In addition, the Group reviews the
carrying amounts of its other intangibles and property, plant and equipment to determine whether there is any indication
that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cashflows
that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the
asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is
an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cashflows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for which the estimates of future cashflows have
not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised
as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is
treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years.
A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued
amount, in which case the reversal of the impairment loss is treated as a revaluation increase. Impairments related to
goodwill are not reversed.
Property, plant and equipment
All property, plant and equipment are stated at cost, less accumulated depreciation, with the exception of freehold land
and buildings which are stated at cost and are not depreciated.
Assets in the course of construction are carried at cost, less any recognised impairment loss. Cost includes directly
attributable costs incurred in bringing the assets to working condition for their intended use, including professional
fees. Depreciation commences when the assets are ready for their intended use.
Depreciation is provided to write-off the cost, less estimated residual values, of all property, plant and equipment with
the exception of freehold land and buildings, evenly over their expected useful lives. It is calculated at the following
rates:
Leasehold improvements - over length of lease
Plant, machinery, computer equipment - 33% per annum
Fixtures, fittings, tools and equipment, vehicles - 20% per annum
Where an item of property, plant or equipment comprises major components having different useful lives, they are accounted
for as separate items of property, plant and equipment.
Segment information
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and
incur expenses. Each segment's operating results are regularly reviewed by the Group to make decisions about resources to
be allocated to the segment and assess its performance. The method for determining what information to report is based on
the way management organises the operating segments within the Group for decision-making purposes and for the assessment of
financial performance. The Group reviews financial statements presented by business segments which are supplemented by some
information about geographic regions for the purposes of making operating decisions and assessing financial performance.
Therefore, the Group has determined that it is appropriate to report according to business segment.
Revenue
Revenue from online gaming, comprising sports betting, casino & games, poker, bingo, and network services (third-party
entities that use the Group's platform and certain services), is recognised in the accounting periods in which the gaming
transactions occur.
Revenue is measured at the fair value of the consideration received or receivable. Net revenue consists of net gaming
revenue and revenue generated from foreign exchange commissions on customer deposits and withdrawals and account fees.
Sports betting, casino & games and bingo net gaming revenue represents net house win adjusted for the fair market value of
gains and losses on open betting positions, certain promotional bonuses and the value of loyalty points accrued. Poker net
gaming revenue represents the commission charged or tournament entry fees where the player has concluded his or her
participation in the tournament less certain promotional bonuses and the value of loyalty points accrued. Revenue generated
from foreign exchange commissions on customer deposits and withdrawals and account fees is allocated to each reporting
segment.
Other revenue consists primarily of revenue from network services, third-party payment services, sale of domain names,
financial markets, software services and fees from broadcasting, hosting and subscriptions. Revenue in respect of network
service arrangements where the third-party owns the relationship with the customer is the net commission invoiced.
Interest income is recognised on an accruals basis.
Cost of sales
Cost of sales consists primarily of betting and gaming taxes and broadcasting costs.
Broadcasting costs are expensed over the applicable lifecycle of each programme based upon the ratio of the current year's
revenue to the estimated remaining total revenues.
Clean EBITDA
Clean EBITDA is the Group's measure of reporting performance and is EBITDA adjusted for exchange differences,
reorganisation expenses, income or expenses that relate to exceptional items and non-cash charges relating to impairments
and share-based payments and associated payroll taxes. Exceptional items are those items the Group considers to be
non-recurring or material in nature that may distort an understanding of financial performance or impair comparability.
Foreign currency
Transactions entered into by group entities in a currency other than the currency of the primary economic environment in
which they operate (their 'functional currency') are recorded at the rates ruling when the transactions occur. Foreign
currency monetary assets and liabilities are translated at the rates ruling at the end of the reporting year. Exchange
differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in the
consolidated statement of comprehensive income.
On consolidation, the results of overseas operations are translated into Euros at rates approximating to those ruling when
the transactions took place. All assets and liabilities of overseas operations, including goodwill arising on the
acquisition of those operations, are translated at the rate ruling at the end of the reporting year. Exchange differences
arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are
recognised directly in equity (the 'currency reserve').
Exchange differences recognised in the statement of comprehensive income of group entities' separate financial statements
on the translation of long-term monetary items forming part of the group's net investment in the overseas operation
concerned are reclassified to the currency reserve on consolidation.
On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating
to that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part
of the profit or loss on disposal.
The financial statements were translated into Euros at the following rates:
31-Dec-15 Average 2015 31-Dec-14 Average 2014
British Pound (GBP) 1.3586 1.3816 1.2870 1.2437
Bulgarian Lev (BGN) 0.5097 0.5112 0.5109 0.5111
Indian Rupees (INR) 0.0139 0.0141 0.0131 0.0124
Israeli Shekel (ILS) 0.2362 0.2332 0.2116 0.2108
Swedish Kronas (SEK) 0.1090 0.1071 0.1058 0.1100
Ukraine Hryvnia (UAH) 0.0383 0.0414 0.0522 0.0656
US Dollar (USD) 0.9203 0.9062 0.8257 0.7582
Taxation
Income tax expense represents the sum of the Directors' best estimate of taxation exposures and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the
consolidated statement of comprehensive income because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for
current tax is calculated using rates that have been enacted or substantively enacted by the end of the reporting year.
Deferred tax
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable profit. It is accounted for using the balance
sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences other than
where IAS 12 Income Taxes contains specific exemptions.
Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary
difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and
liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and
associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting year and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the
asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are
offset when there is a legally enforceable right to set off current assets against current tax liabilities and when they
relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and
liabilities on a net basis.
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.
Share-based payments
The Group has applied the requirements of IFRS 2 Share-based Payments. The Group issues equity settled share-based payments
to certain employees.
Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant
date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period and based, for
those share options which contain only non-market vesting conditions, on the Group's estimate of the shares that will
eventually vest. Fair value is measured by use of a suitable option pricing model. The expected life used in the model has
been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and
behavioural considerations.
For cash-settled share-based payment transactions, the goods or services received and the liability incurred are measured
at the fair value of the liability. Up to the point at which the liability is settled, the fair value of the liability is
re-measured at each reporting date and at the date of settlement, with changes being recorded in the consolidated statement
of comprehensive income. The Group records the expense based on the fair value of the share-based payments on a
straight-line basis over the vesting period.
Where equity instruments of the parent company or a subsidiary are transferred, or cash payments based on the Company's (or
a subsidiary's) share price are made, by shareholder(s) or entities that are effectively controlled by one or more
shareholder(s), the transaction is accounted for as a share-based payment, unless the transfer or payment is clearly for a
purpose other than payment for goods or services supplied to the Group.
Own shares
Own shares relate to shares gifted to the Employee Trust by the Company. The cash cost of own shares creates an own share
reserve.
When options issued by the Employee Trust are exercised the own share reserve is reduced and a gain or loss is recognised
in reserves based on proceeds less weighted-average cost of shares initially purchased now exercised.
The cost of own shares repurchased in cash as part of the share buy-back programme is debited to reserves. The shares are
cancelled at nominal value with a corresponding entry taken to the capital redemption reserve.
Provisions and contingent liabilities
The Group recognises a provision in the consolidated statement of financial position when it has a legal or constructive
obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle
the obligation.
Where the Group has a possible obligation as a result of a past event that may, but probably will not, result in an outflow
of economic benefits, no provision is made. Disclosures are made of the contingent liability including, where practicable,
an estimate of the financial effect, uncertainties relating to the amount or timing of outflow of resources, and the
possibility of any reimbursement.
Where time value is material, the amount of the related provision is calculated by discounting the cashflows at a pre-tax
rate that reflects market assessments of the time value of money and any risks specific to the liability.
Leased assets
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present
value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the
lessor is included in the consolidated statement of financial position as a finance lease obligation. Lease payments are
apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on
the remaining balance of the liability. Finance charges are charged directly to the consolidated statement of comprehensive
income.
Rentals payable under operating leases are charged directly to the consolidated statement of comprehensive income on a
straight-line basis over the term of the relevant lease.
Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis
over the lease term.
Financial assets
The Group's financial assets which are financial instruments are categorised as loans and receivables, available-for-sale
financial assets and those measured at fair value through profit & loss.
These include restricted cash and unrestricted bank deposits with maturities of more than three months. Amounts held as
security deposits are considered to be restricted cash. There are no financial assets that are classified as 'held to
maturity'. A category for 'in the money' derivative financial instruments is included in respect of foreign exchange
contracts entered into by the Group.
Non-derivative financial assets classified as available-for-sale comprise the Group's strategic investments in entities not
qualifying as subsidiaries, associates or jointly controlled entities. They are carried at fair value with changes in fair
value recognised directly in equity except where a fair value cannot be reliably determined whereby they are carried at
cost. In accordance with IAS 39, a significant or prolonged decline in the fair value of an available-for-sale financial
asset is recognised in the consolidated statement of comprehensive income.
Purchases and sales of available-for-sale financial assets are recognised on settlement date with any change in fair value
between trade date and settlement date being recognised in the available for sale reserve. On sale, the amount held in the
available-for-sale reserve associated with that asset is removed from equity and recognised in the consolidated statement
of comprehensive income.
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.
Trade and other receivables represent short-term monetary assets which are recognised at fair value less impairment and
other related provisions, which are recognised when there is objective evidence (primarily default or significant delay in
payment) that the Group will be unable to collect all of the amounts due. The amount of such a provision is the difference
between the net carrying amount and the present value of the future expected cashflows associated with the impaired
receivable.
Cash comprises cash in hand and balances with financial institutions. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash. They include unrestricted short-term bank deposits
originally purchased with maturities of three months or less.
Financial liabilities
The Group's financial liabilities are measured at amortised cost or fair value through profit and loss. Financial
liabilities include the following items:
> Client liabilities, including amounts due to progressive prize pools.
> Trade payables and other short-term monetary liabilities which are initially recognised at fair value and
subsequently carried at amortised cost using the effective interest rate method, which ensures that interest expense over
the period to repayment is at a constant rate on the balance of the liability carried in the consolidated statement of
financial position.
> Loans and borrowings, comprising bank borrowings and overdrafts, which are initially recognised at fair value, net
of any transaction costs directly attributable to the issue of the instrument. Such interest-bearing liabilities are
subsequently valued at amortised cost using the effective interest rate method. Interest expense in this context includes
initial transaction costs, as well as any interest or coupon payable while the liability is outstanding.
> Contingent consideration is initially recognised at fair value and subsequently, for acquisitions completed under
IFRS 3 (2008) at amortised cost and for IFRS 3 (revised) at fair value through profit and loss.
Share capital
Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the definition of
a financial liability. The Group's ordinary shares are classified as equity instruments.
Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is
when declared by the Directors. In the case of final dividends, this is when approved by the shareholders at the Annual
General Meeting.
2. Segment information
The Group's operations were historically segmented into the following reporting segments:
• sports betting;
• casino & games;
• poker;
• bingo; and
• other
In order to improve operational performance the Group re-structured its operations. Following this restructure a review was
undertaken of the need to change the Group's reporting of results to the Chief Operating Decision Makers ('CODMs') which
has had a consequential effect on the reporting of segmental information under IFRS 8. Accordingly, since 1 January 2015
the Group's operations are segmented into the following reporting segments:
• bwin labels;
• Games labels;
• Studios - the Group's technology provided through arms-length B2B agreements with both internal and external
customers;
• Non-core - includes Kalixa, as well as InterTrader and some smaller, non-core assets as well as assets disposed of
in the year (World Poker Tour, Win (social gaming) and Winners); and
• Corporate - includes shared and corporate functions such as finance, legal and HR which are performed by the
corporate centre and the costs associated with being a listed business.
Under the previous basis of segmental reporting, direct costs were allocated directly to each segment, and the remaining
central costs were allocated pro rata to gross profit. Under the new basis only directly attributable costs sit in each
business unit with a re-charge across business units where services are provided to another unit.
The new basis also aims to reflect more appropriately the fact that Studios now runs a fully-integrated and scaleable
technology platform offering full gaming services and generating revenue from both internal and external customers. The
segmental analysis below also shows the prior year comparative on the new segmental basis of reporting in order to aid
comparability.
Removal
of inter-
bwin Games Non- Corporate segmental
Year ended labels led labels Studios core* Services revenue Total
31 December 2015 Emillion Emillion Emillion Emillion Emillion Emillion Emillion
Net revenue 349.4 176.4 - - - - 525.8
Other revenue (external) 1.0 0.4 12.8 35.5 0.9 - 50.6
Other revenue (internal) - - 64.8 18.8 33.9 (117.5) -
Total revenue 350.4 176.8 77.6 54.3 34.8 (117.5) 576.4
Clean EBITDA 95.9 43.6 (20.6) (0.5) (9.9) - 108.5
Removal
of inter-
bwin Games Non- Corporate segmental
Year ended labels led labels Studios core* Services revenue Total
31 December 2015 Emillion Emillion Emillion Emillion Emillion Emillion Emillion
Net revenue 360.7 202.3 - - - - 563.0
Other revenue (external) 0.9 0.2 14.4 32.5 0.9 - 48.9
Other revenue (internal) - - 71.0 21.7 41.6 (134.3) -
Total revenue 361.6 202.5 85.4 54.2 42.5 (134.3) 611.9
Clean EBITDA 73.8 63.2 (16.0) (11.8) (8.0) - 101.2
* Segment includes E14.3m of revenue (2014: E18.6m) and E2.0m of Clean EBITDA (2014: loss of E7.9m) relating to assets
disposed of during the period.
Geographical analysis of total revenue
The following table provides an analysis of the Group's total revenue by geographical segment:
2015 2014
Year ended 31 December Emillion Emillion
Germany 144.4 151.9
United Kingdom 83.2 69.7
Other 348.8 390.3
Total revenue 576.4 611.9
3. Other operating income
2015 2014
Year ended 31 December Emillion Emillion
Release of acquisition fair value tax liability 4.9 -
Contingent consideration adjustments - 11.3
Profit on disposal of assets held-for-sale 5.0 -
Exchange gains 3.0 -
Other - 1.0
Total income 12.9 12.3
The release of the acquisition fair value provision related to the difference between the carrying value and the settlement
value of certain tax liabilities which were created at the time of the Merger. The profit on sale of assets held-for sale
relates to the sale of non-core assets within note 13. The deferred consideration adjustments in 2014 relate to changes in
assumptions arising on the PXP acquisition.
4. Other operating expenses
2015 2014
Year ended 31 December Emillion Emillion
Merger and acquisition costs - successful 25.3 1.5
Merger and acquisition costs - unsuccessful 0.2 -
Exchange losses - 3.1
Total expense 25.5 4.6
5. Loss from operating activities
2015 2014
Year ended 31 December Emillion Emillion
This has been arrived at after charging (crediting):
Amortisation of intangibles 42.0 51.0
Depreciation on property, plant and equipment 31.0 26.3
Loss on disposal of fixed assets 0.6 1.0
Exchange (gains) losses (3.0) 3.1
Reorganisation expenses 9.8 8.9
Chargebacks on trade receivables (bad debts) 3.3 6.4
Impairment losses 17.1 104.4
Adjustment to investment following dividend 1.4 -
Market exit costs - 5.4
Retroactive taxes and associated charges 8.9 -
Adjustments to gaming taxes arising from changes in estimates (5.7) -
Auditors' remuneration - audit services 1.5 1.4
Auditors' remuneration - audit related services 0.1 0.1
Auditors' remuneration - transaction services 1.5 0.1
Merger and acquisition costs 25.5 1.5
Reorganisation expenses reflect the remaining costs of the Group's shift to a label-led set-up and redundancies.
Market exit costs related to expenses incurred on the Group's exit from the Argentinean market and certain committed
expenditure on markets where the Group withdrew its marketing focus.
Retroactive taxes relate to the enactment of the emergency ordinance in Romania.
Adjustments to gaming taxes arising from changes in estimates relate to changes in estimates applied when providing for
gaming taxes in historical periods.
Merger and acquisition costs primarily relate to fees associated with the acquisition of the Group by GVC, including costs
related to the offer from 888 of E10.6m.
6. Staff costs
2015 2014
Year ended 31 December Emillion Emillion
Aggregate remuneration including Directors comprised:
Wages and salaries 107.5 106.3
Share-based payments and associated taxes 33.2 9.8
Employer social insurance contribution 14.3 15.5
Other benefits 4.2 4.9
Total staff costs 159.2 136.5
Staff costs capitalised in respect of internally generated intangible assets (9.6) (10.7)
Net staff costs 149.6 125.8
The increased share-based payments charge resulted from an acceleration of the vesting of share options during the year
following the shareholder vote approving the acquisition of the Company by GVC. Directors emoluments are as disclosed in
the table below:
2015 2014
Year ended 31 December Emillion Emillion
Wages and salaries 2.9 2.7
Share-based payments 7.6 1.5
Termination costs 3.3 -
Total directors remuneration 13.8 4.2
Year ended 31 December 2015 2014
Average number of employees
Directors 10 11
Administration 187 207
Customer service 462 501
Others 1,436 1,834
2,095 2,553
7. Finance income and expense
2015 2014
Year ended 31 December Emillion Emillion
Interest income 1.8 1.2
Finance income 1.8 1.2
Interest expense (2.6) (2.6)
Unwinding of discount on current and non-current liabilities (2.6) (1.0)
Finance expense (5.2) (3.6)
Net finance expense (3.4) (2.4)
8. Tax
Analysis of tax charge
2015 2014
Year ended 31 December Emillion Emillion
Current tax expense for the year 9.8 9.8
Deferred tax credit for the year (5.6) (13.4)
Tax expense (credit) 4.2 (3.6)
The effective tax rate for the year based on the associated tax expense is 10.5% (2014: tax rate of 3.7%).
The total expense for the year can be reconciled to accounting loss as follows:
2015 2014
Year ended 31 December Emillion Emillion
Loss before tax (40.2) (97.9)
Tax rate in Gibraltar of 10% (2014: 10%) (4.0) (9.8)
Effect of differential tax rates in other jurisdictions 1.9 (0.6)
Effect of non-taxable income (1.5) (1.2)
Effect of other expenses not allowed for tax purposes 7.8 8.0
Total tax expense (credit) for the year 4.2 (3.6)
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,
dividend income and the profit on the sale of assets held for sale while in 2014 it represented the IFRS required
adjustments to deferred consideration.
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 registered in 23 countries including Gibraltar. 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 information.
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 and
partially offset by potential tax charges related to the sale of the investment in Visa Europe Limited (see note 14).
9. Earnings per Share ('EPS')
2015 2014
Year ended 31 December Ecents Ecents
Basic EPS (5.3) (11.3)
Diluted EPS * (5.3) (11.3)
Basic Clean EPS 7.6 4.8
Diluted Clean EPS 7.5 4.7
* A diluted EPS calculation may not increase a basic EPS calculation when the basic EPS is a loss.
Basic earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the year, excluding those held as own shares.
Year ended 31 December 2015 2014
Basic EPS
Basic loss (Emillion) (43.6) (92.1)
Weighted average number of ordinary shares (million) 824.9 817.8
Basic loss per ordinary share (E cents) (5.3) (11.3)
Basic Clean EPS
Adjusted earnings (Emillion) 61.1 39.5
Weighted average number of ordinary shares (million) 824.9 817.8
Adjusted earnings per ordinary share (E cents) 7.6 4.8
Clean earnings per share
The performance measure of EPS used internally by management to manage the operations of the business and remove the impact
of one-off and certain non-cash items is Clean EPS, which is calculated before exchange differences, reorganisation
expenses, income or expenses that relate to exceptional items and non-cash charges relating to share-based payments. Clean
net earnings excluding amortisation on acquired intangibles and impairments attributable to equity shareholders is derived
as below.
Management believes that this better reflects the underlying performance of the business and assists in providing a clearer
view of the fundamental performance of the Group.
2015 2014
Total Total
Year ended 31 December Emillion Emillion
Loss for the purposes of basic and diluted earnings per share being loss
attributable to equity holders of the parent (43.6) (92.1)
Reorganisation expenses 9.8 8.9
Merger and acquisition costs - successful 25.3 1.5
Exchange (gains) losses (3.0) 3.1
Share-based payments and associated payroll taxes 33.2 9.8
Release of fair value provision (4.9) -
Contingent consideration adjustments - (11.3)
Retroactive taxes and associated charges 8.9 -
Adjustments to gaming taxes arising from changes in estimates (5.7) -
Market exit costs - 5.4
Amortisation on acquired intangible assets 28.3 40.0
- Tax thereon (4.0) (5.1)
Impairments on acquired intangible assets and goodwill 16.4 79.1
- Tax thereon - (8.3)
Impairments on available-for-sale investments and joint ventures 0.7 3.2
Adjustment to investment following dividend 1.4 -
Impairments on assets held for sale - 5.3
Clean net earnings 62.5 39.5
2015 2014
Total Number
Year ended 31 December Emillion Emillion
Weighted average number of shares
Number of shares in issue as at 1 January 823.2 817.7
Number of shares in issue as at 1 January held by the Employee Trust (1.4) (2.8)
Weighted average number of shares issued during the year 3.1 4.2
Weighted average number of shares purchased during the year - (1.3)
Weighted average number of ordinary shares for the purposes of basic
earnings per share 824.9 817.8
Effect of potential dilutive unvested share options and contingently
issuable shares 12.1 16.3
Weighted average number of ordinary shares for the purposes of diluted
earnings per share 837.0 834.1
In accordance with IAS 33, the weighted average number of shares for diluted earnings per share takes into account all
potentially dilutive equity instruments granted which are not included in the number of shares for basic earnings per share
above. Although the unvested, potentially dilutive equity instruments are contingently issuable, in accordance with IAS 33,
the period end is treated as the end of the performance period. Those option holders who were employees at that date are
deemed to have satisfied the performance requirements and their related potentially dilutive equity instruments have been
included for the purpose of diluted EPS.
10. Intangible assets
Acquired Other
Goodwill intangibles intangibles Total
Emillion Emillion Emillion Emillion
Cost or valuation
As at 1 January 2014 725.7 753.6 54.2 1,533.5
Acquired through business combinations 22.0 18.0 - 40.0
Additions - - 22.7 22.7
Disposals - - (1.4) (1.4)
Reclassified as assets held for sale (8.4) (13.9) (7.7) (30.0)
Exchange movements 7.6 3.6 0.2 11.4
As at 31 December 2014 746.9 761.3 68.0 1,576.2
Additions - - 19.4 19.4
Disposals - - (0.2) (0.2)
Exchange movements 5.9 4.1 0.2 10.2
As at 31 December 2015 752.8 765.4 87.4 1,605.6
Amortisation and impairments
As at 1 January 2014 460.7 422.2 24.5 907.4
Charge for the year - 40.0 11.0 51.0
Impairment 19.7 59.4 16.8 95.9
Disposals - - (1.4) (1.4)
Reclassified as assets held for sale (7.8) (9.9) (7.5) (25.2)
Exchange movements 1.0 2.2 0.2 3.4
As at 31 December 2014 473.6 513.9 43.6 1,031.1
Charge for the year - 28.0 14.0 42.0
Impairment 16.4 - - 16.4
Exchange movements 0.1 3.0 0.7 3.8
As at 31 December 2015 490.1 544.9 58.3 1,093.3
Carrying amounts
As at 1 January 2014 265.0 331.4 29.7 626.1
As at 31 December 2014 273.3 247.4 24.4 545.1
As at 31 December 2015 262.7 220.5 29.1 512.3
Acquired intangible assets are those intangible assets purchased as part of an acquisition and primarily include customer
lists, brands, software and broadcast libraries. The value of acquired intangibles is based on cashflow projections at the
time of acquisition. The fair value of customer lists from existing customers take into account the expected impact of
player attrition.
Other intangibles primarily include development expenditure, long-term gaming and intellectual property licences and
purchased domain names. Development expenditure represents software infrastructure assets that have been developed and
generated internally. Licences are amortised over the life of the licences and other intangibles are being amortised over
their estimated useful economic lives of between three and five years. Amortisation charges are charged through
administration costs on the income statement.
Goodwill
Goodwill is allocated to the following cash generating units (CGUs):
2015 2014
As at 31 December Emillion Emillion
bwin labels 193.5 190.1
Games labels 61.1 60.0
PXP 8.1 23.2
At end of year 262.7 273.3
Impairment
In accordance with IAS 36, the Group regularly monitors the carrying value of its intangible assets. A detailed review was
undertaken at 31 December 2015 to assess whether the carrying value of assets was supported by the net present value of
future cashflows derived from those assets. The recoverable amounts of all the above CGUs have been determined from value
in use calculations based on cash flow projections from formally approved budgets and long-range forecasts. These budgets
and forecasts assume the underlying business models will continue to operate on a comparable basis under the current
regulatory and taxation regimes, adjusted for any known changes. The key assumptions including discount rate, operating
margin and terminal growth rates are based on past experience, long-term growth expectations and the directors best
estimates.
bwin labels
The recoverable amount of the bwin labels CGU of E941.5m has been determined from
- More to follow, for following part double click ID:nRSA8980CdRecent 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