REG - GVC Holdings PLC - Notification of Transfer to a Premium Listing <Origin Href="QuoteRef">GVC.L</Origin> - Part 6
01/07/2016 07:07
- Part 6: For the preceding part double click ID:nRSA8980Ce
'partypoker' www.partypoker.com, the Group's principal poker website
'player' or 'unique active player' Customers who placed a wager or generated rake in the period
'POCT' Point of Consumption Tax, the tax introduced by the UK Gambling Commission in 2014 on all bets made by UK customers
'PXP' PXP Solutions Limited
'rake' the money charged by the Group for each qualifying poker hand played on its websites in accordance with the prevailing and applicable rake structure
'real money sign-ups' or 'sign-ups' new players who have registered and deposited funds into an account with 'real money' gambling where money is wagered, as opposed to play money where no money is wagered
'Shareholders' holders of Shares in the Company
'Shares' the ordinary shares of 0.015 pence each in the capital of the Company
'sports betting' placing bets on sporting events
'wager' a bet on a game or sporting event
'WIN' the Group's Social Gaming business unit established in May 2012
'WPT' The World Poker Tour
'yield per active player day' net revenue in the period divided by the number of active player days in that period
SECTION B
PART I: ACCOUNTANT'S REPORT ON THE HISTORICAL FINANCIAL INFORMATION FOR GVC FOR THE THREE MONTHS ENDED 31 MARCH 2016
The Directors
GVC Holdings PLC
32 Athol Street
Douglas
IM1 1JB
Isle of Man
1 July 2016
Dear Sirs
GVC Holdings PLC (the Company) and its Subsidiary Undertakings (together the Group) - Accountant's Report on Historical
Financial Information
We report on the Group historical financial information set out in Section B of Part II for the three months ended 31 March
2016 (the Historical Financial Information). The Historical Financial Information has been prepared for inclusion in the
Company's announcement dated 1 July 2016 relating to the proposed transfer of the listing category of the Company's
ordinary share capital from a Standard Listing to a Premium Listing (the Announcement) on the basis of the accounting
policies set out in note 1 to the Historical Financial Information.
This report is required by LR 6.1.3R(1)(d) of the Listing Rules of the Financial Conduct Authority (the FCA) (the Listing
Rules) and is given for the purpose of complying with that rule and for no other purpose. We have not audited or reviewed
the financial information for the three months ended 31 March 2015, which has been included for comparative purposes only,
and accordingly do not express an opinion thereon.
Responsibilities
The directors of the Company are responsible for preparing the Historical Financial Information in accordance with
International Financial Reporting Standards as adopted by the European Union. It is our responsibility to form an opinion
on the Historical Financial Information and to report our opinion to you.
Save for any responsibility which we may have to those persons to whom this report is expressly addressed and which we may
have to the shareholders of the Company as a result of the inclusion of this report in the Announcement, to the fullest
extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any
loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement,
required by and given solely for the purposes of complying with LR 6.1.3(1)(d) of the Listing Rules, consenting to its
inclusion in the Announcement.
Basis of opinion
We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in
the United Kingdom. Our work included an assessment of evidence relevant to the amounts and disclosures in the Historical
Financial Information. It also included an assessment of significant estimates and judgements made by those responsible for
the preparation of the Historical Financial Information and whether the accounting policies are appropriate to the entity's
circumstances, consistently applied and adequately disclosed.
We planned and performed our work so as to obtain all the information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable assurance that the Historical Financial Information is free
from material misstatement, whether caused by fraud or other irregularity or error.
Opinion on the Historical Financial Information
In our opinion, the Historical Financial Information gives, for the purposes of the Announcement, a true and fair view of
the state of affairs of the Group as at 31 March 2016 and of its results, cash flows and changes in equity for the three
months ended 31 March 2016 in accordance with International Financial Reporting Standards as adopted by the European
Union.
Yours faithfully
GRANT THORNTON UK LLP
PART II: THE HISTORICAL FINANCIAL INFORMATION FOR GVC FOR THE THREE MONTHS ENDED 31 MARCH 2016
CONSOLIDATED INCOME STATEMENT
for the three months ended 31 March 2016
Period Ended Period Ended
31 March 31 March
2016 2015
(Unaudited)
Notes Em Em
Net Gaming Revenue 2 160.8 59.4
Cost of sales (80.0) (27.3)
Contribution 2 80.8 32.1
Administrative costs 3 (47.6) (20.8)
Clean EBITDA 33.2 11.3
Share option charges 3 (3.0) -
Exceptional items 3 (65.5) -
Depreciation and amortisation 3, 8, 9 (26.3) (1.2)
Change in value of available for sale asset 10 (3.1) -
Changes in the fair value of derivative financial instruments 11 (1.6) 3.1
Operating (loss)/profit (66.3) 13.2
Financial income 4 0.3 -
Financial expense 4 (11.6) (0.7)
Dividend income 5 3.1 -
Share of profit/(loss) of associate 0.1 -
(Loss)/profit before tax (74.4) 12.5
Taxation income/(expense) 6 0.5 (0.2)
(Loss)/profit after tax (73.9) 12.3
Attributable to:
Owners of the parent (73.8) 12.3
Non-controlling interests (0.1) -
Earnings per share E E
Basic 7 (0.350) 0.200
Diluted 7 (0.350) 0.190
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the three months ended 31 March 2016
31 March 31 March
2016 2015
(Unaudited)
Em Em
(Loss)/profit for the period (73.9) 12.3
Other comprehensive income
Items that may subsequently be recycled to profit or loss:
Change in fair value of available for sale assets 0.1 -
Exchange differences on translation of foreign operations 0.3 -
Total comprehensive income for the period (73.5) 12.3
Total comprehensive income attributable to:
Owners of the parent (73.4) 12.3
Non-controlling interests (0.1) -
(73.5) 12.3
The notes on pages 91 to 142 form part of this historical financial information.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2016
31 March 31 December
2016 2015
Notes Em Em
Assets
Property, plant and equipment 8 39.5 1.4
Intangible assets 9 1,684.0 155.1
Trade and other receivables 12 6.5 -
Investments and available for sale financial assets 10 4.2 2.6
Deferred tax 0.6 -
Total non-current assets 1,734.8 159.1
Trade and other receivables 12 107.5 34.6
Derivative financial assets 11 10.8 3.8
Income taxes reclaimable 6 6.0 6.0
Short term investments 13 5.4 -
Cash and cash equivalents 14 307.9 28.2
Assets in disposal groups classified as held for sale 15 68.0 -
Total current assets 505.6 72.6
Total assets 2,240.4 231.7
Current liabilities
Trade and other payables 16 (93.3) (32.0)
Balances with customers and progressive prize pools 17 (125.5) (14.8)
Amounts due under finance leases 22 (0.3) (0.7)
Non-interest bearing loans and borrowings 18 - (3.0)
Deferred and contingent consideration 19 (1.5) (1.6)
Share option liability 25 (0.2) (9.7)
Forward contract liability 3 (1.2) (9.9)
Liabilities in disposal groups held for sale 15 (22.9) -
Provisions 20 (10.6) -
Income taxes payable 6 (14.3) (7.3)
Other taxation payable 21 (35.9) (2.0)
Total current liabilities (305.7) (81.0)
Current assets less current liabilities 199.9 (8.4)
Non-current liabilities
Deferred and contingent consideration 19 (4.3) -
Interest bearing loans and borrowings 18, 22 (402.9) (19.8)
Share option liability 25 - (2.1)
Betit option liability 11 (1.9) (0.7)
Deferred tax 6 (76.9) -
Total non-current liabilities (486.0) (22.6)
Total net assets 1,448.7 128.1
Capital and reserves
Issued share capital 23 2.9 0.6
Merger reserve 23 40.4 40.4
Share premium 23 1,476.6 85.4
Translation reserve 23 0.6 0.3
Retained earnings 23 (70.5) 1.4
Total equity attributable to equity holders of the parent 1,450.0 128.1
Non-controlling interests (1.3) -
Total equity 1,448.7 128.1
The notes on pages 91 to 142 form part of this historical financial information.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the three months ended 31 March 2016
Attributable to equity holders of the parent company:
Non-
Share Merger Share Translation Retained Controlling Total
Capital Reserve Premium Reserve Earnings* Total interest equity
Em Em Em Em Em Em Em Em
Balance at 1 January 2015 0.6 40.4 85.4 0.3 22.7 149.4 - 149.4
Share option charges** - - - - 0.2 0.2 - 0.2
Share options surrendered - - - - (12.2) (12.2) - (12.2)
Share options exercised - - - - - - - -
Dividend paid - - - - (7.7) (7.7) - (7.7)
Transactions with owners - - - - (19.7) (19.7) - (19.7)
Profit for the period - - - - 12.3 12.3 - 12.3
Other comprehensive - - - - - - - -
income for the period
Total comprehensive
income for the period
- - - - 12.3 12.3 - 12.3
Balance as at 31 March
2015 (Unaudited)
0.6 40.4 85.4 0.3 15.3 142.0 - 142.0
Share option charges** - - - - 0.4 0.4 - 0.4
Share options surrendered - - - - - - - -
Share options exercised - - - - - - - -
Dividend paid - - - - (26.7) (26.7) - (26.7)
Transactions with owners - - - - (26.3) (26.3) - (26.3)
Profit for the period - - - - 12.4 12.4 - -
Other comprehensive
income for the period
- - - - - - - -
Total comprehensive
income for the period
- - - - 12.4 12.4 - 12.4
Balance as at
31 December 2015 0.6 40.4 85.4 0.3 1.4 128.1 - 128.1
Share option charges** - - - - 2.6 2.6 - 2.6
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 - 1,390.9 - - 1,393.2 - 1,393.2
Resulting from the
acquisition of
bwin.party
- - - - - - (1.2) (1.2)
Transactions with owners 2.3 - 1,391.2 - 1.8 1,395.3 (1.2) 1,394.1
Loss for the period
attributable to the
parent
- - - - (73.8) (73.8) - (73.8)
Loss for the period
attributable to the Non-
controlling interest
- - - - - - (0.1) (0.1)
Other comprehensive
income attributable to
the parent
- - - 0.3 0.1 0.4 - 0.4
Other comprehensive
income attributable to
the Non-controlling
interest
- - - - - - - -
Total comprehensive
income for the period
- - - 0.3 (73.7) (73.4) (0.1) (73.5)
Balance as at 31 March 2016 2.9 40.4 1,476.6 0.6 (70.5) 1,450.0 (1.3) 1,448.7
* the share option reserve included within retained earnings at 31 March 2016 amounted to a debit balance of E5.0
million, largely due to the surrender of fully vested share options during 2015.
** total share option charge per the consolidated income statement amounted to E3.0 million, the difference being a cash
settled share option expense of E0.4 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 on pages 91 to 142 form part of this historical financial information.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the three months ended 31 March 2016
Period Ended Period Ended
31 March 31 March
2016 2015
(Unaudited)
Notes Em Em
Cash flows from operating activities
Cash receipts from customers 178.3 59.0
Cash paid to suppliers and employees (209.9) (49.8)
Interest paid including initial costs and loan servicing (15.8) -
Corporate taxes paid (0.7) (0.2)
Net cash from operating activities (48.1) 9.0
Cash flows from investing activities
Interest received 0.3 -
Dividends received 3.1 -
Acquisition earn-out payments (Betboo) 19 (0.6) (0.6)
Acquisition of bwin.party (net of cash acquired) 32 (186.4) -
Acquisition of property, plant and equipment 8 (0.5) (0.7)
Capitalised development costs and other intangibles 9 (6.7) (1.2)
Decrease in short term investments 13 4.4 -
Net cash used in investing activities (186.4) (2.5)
Cash flows from financing activities
Proceeds from interest bearing loan (Cerberus) 18 380.0 -
Non-interest bearing loan (from William Hill) 18 (3.0) (0.1)
Proceeds from issue of share capital, net of costs 192.0 -
Repayment of borrowings 21, 32 (38.9) (0.8)
Dividend paid 24 - (7.6)
Net cash used in financing activities 530.1 (8.5)
Net increase/(decrease) in cash and cash equivalents 295.6 (2.0)
Exchange differences 1.5 (0.1)
Cash and cash equivalents at beginning of the period 28.2 17.8
Cash and cash equivalents at end of the period 325.3 15.7
Cash and cash equivalents
The balance at the end of the period of E325.3 million above consists of E307.9 million cash and cash equivalents as shown
on the face of the consolidated statement of financial position and E17.4 million (2015: Enil) of cash and cash equivalents
recognised within assets held for sale.
The notes on pages 91 to 142 form part of this historical financial information.
NOTES TO THE HISTORICAL FINANCIAL INFORMATION
for the period ended 31 March 2016
1. Significant accounting policies
2. Segmental reporting
3. Operating costs
4. Financial income and expenses
5. Dividend income
6. Taxation
7. Earnings per share
8. Property, plant and equipment
9. Intangible assets
10. Investments and available for sale financial assets
11. Derivative financial instruments: options
12. Receivables and prepayments
13. Short term investments
14. Cash and cash equivalents
15. Assets and liabilities classified as held for sale
16. Trade and other payables
17. Balances with customers and progressive prize pools
18. Loans and borrowings
19. Deferred and contingent consideration
20. Provisions
21. Other taxation payable
22. Commitments under operating and finance leases
23. Share capital and reserves
24. Dividends
25. Share option schemes
26. Financial instruments and risk management
27. Related parties
28. Group Structure
29. Contingent liabilities and capital commitments
30. Accounting estimates and judgements
31. Going concern
32. Business combinations
1. SIGNIFICANT ACCOUNTING POLICIES
This note sets out the significant accounting policies used in the preparation of this historical financial information,
and identifies new accounting standards which will affect the Group.
GVC Holdings PLC is a company registered in the Isle of Man and was incorporated on 5 January 2010. It is the successor
company of Gaming VC Holdings S.A., a company which had been incorporated in Luxembourg, and took the assets of Gaming VC
Holdings S.A. on 21 May 2010 after formal approval by shareholders. The consolidated historical financial information of
the Group for the three months ended 31 March 2016 comprise the Company and its subsidiaries (together referred to as the
'Group').
1.1 Statement of Compliance
The consolidated historical financial information has been prepared in accordance with International Financial Reporting
Standards (IFRSs), as adopted by the European Union.
The Directors have reviewed the accounting policies used by the Group and consider them to be the most appropriate. The
accounting policies are consistent with the prior year with the exception of revisions and amendments to IFRS issued by the
IASB, which are relevant to and effective for the annual period beginning 1 January 2016. There was no material effect on
current, prior or future periods arising from the first-time application of these new requirements in respect of
presentation, recognition and measurement which are described more fully in note 1.24.
1.2 Basis of Preparation
The Historical Financial Information, which comprises the Consolidated Income Statement, the Consolidated Statement of
Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity,
the Consolidated Statement of Cash flows and related notes, has been prepared under International Financial Reporting
Standards as adopted by the European Union (IFRS) and those parts of the Isle of Man Companies Act 2006 applicable to
companies reporting under IFRS. It does not constitute full accounts within the meaning of the Isle of Man Companies Act
2006.
The historical financial information is presented in the Euro, rounded to the nearest E0.1 million, and is prepared on the
historical cost basis with the exception of those assets and liabilities carried at fair value. The historical financial
information is prepared on the going concern basis (see note 31).
'Fair value' is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, regardless of whether that price is directly observable or estimated
using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account
the characteristics of the asset or liability if market participants would take those characteristics into account when
pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these
consolidated financial statements is determined on such a basis, except for share-based payment transactions that are
within the scope of IFRS 2, leasing transactions that are within the scope of IAS 17, and measurements that have some
similarities to fair value but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36.
The preparation of historical financial information in conformity with IFRSs requires directors to make judgements,
estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income
and expenses. The estimates and associated assumptions are based on various factors that are believed to be reasonable
under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision affects only that period or in the period of the revision
and future periods if the revision affects both current and future periods.
Significant accounting estimates and judgements are discussed in further detail in note 30.
The accounting policies set out below have been applied consistently to all periods presented in this consolidated
historical financial information.
The accounting policies have been applied consistently by Group entities.
1.3 Basis of Consolidation
1.3.1 Subsidiaries
The Group historical financial information consolidates that of the parent company and all of its subsidiaries as of 31
March 2016.
Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the period are recognised from
the effective date of acquisition, or up to the effective date of disposal, as applicable. The Group attributes total
comprehensive income (or loss) of subsidiaries between the owners of the parent and the non-controlling interests based on
their respective ownership interests.
Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all
three of the following elements are present:
• Power over the investee
• Exposure or rights to variable returns from the investee
• The ability of the company to use its power to affect those variable returns.
Control is re-assessed whenever facts and circumstances indicate that there may be a change in any of the above elements of
control.
1.3.2 Transactions Eliminated on Consolidation
All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and
losses on transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on
consolidation, the underlying asset is also tested for impairment from a group perspective. Amounts reported in the
financial information of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies
adopted by the Group.
1.3.3 Business Combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business
combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets
transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests
issued by the Group in exchange for control of the acquiree. Acquisition related costs are generally recognised in profit
or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value,
except that:
i. deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are
recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;
ii. liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based
payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in
accordance with IFRS 2 Share Based Payments at the acquisition date; and
iii. assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held
for Sale and Discontinued Operations are measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests
in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net
of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment,
the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the
consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's
previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain
purchase gain.
When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a
contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and
included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent
consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments
against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the
"measurement period" (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at
the acquisition date.
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement
period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified
as equity is not re-measured at subsequent reporting dates and its subsequent settlement is accounted for within equity.
Contingent consideration that is classified as an asset or a liability is re-measured at subsequent reporting dates in
accordance with IAS 39, as appropriate, with the corresponding gain or loss being recognised in profit or loss.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the
combination occurs, the Group reports provisional amounts for the terms for which the accounting is incomplete. Those
provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are
recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if
known, would have affected the amounts recognised at that date.
1.4 Foreign Currency
The functional currency of the Company, as well as the presentational currency of the Group, is the Euro.
1.4.1 Foreign Currency Transactions
Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the Euro at the
foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the
Consolidated Income Statement within operating costs (note 3) and financial costs (note 4.1). Non-monetary assets and
liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at
the date of the transaction.
Income and expense items are translated using the exchange rates at the start of the relevant month, unless exchange rates
fluctuate significantly, in which case the spot rate for significant items is used.
Exchange differences arising due to the functional currency of operations differing from the presentational currency of the
Group, if any, are recognised in other comprehensive income, classified as equity and transferred to the Group's
translation reserve. Such translation differences are reclassified to profit or loss in the period in which the operation
is disposed of.
1.5 Property, Plant and Equipment
1.5.1 Owned Assets
Property, plant and equipment is stated at cost, less accumulated depreciation (see 1.5.2 below) and impairment losses (see
accounting policy 1.7). Where parts of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items of property, plant and equipment.
1.5.2 Depreciation
Depreciation is charged to the Income Statement on a straight-line basis over the estimated useful lives of each part of an
item of property, plant and equipment. The estimated useful lives are as follows:
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.
1.6 Intangible Assets
1.6.1 Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the
business less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill has been allocated to each of the Group's Cash-Generating Units ('CGU')
that is expected to benefit from the synergies of the combination.
A CGU to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an
indication that the unit may be impaired. If the recoverable amount of the CGU is less than its carrying amount, the
impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the
other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill
is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent
periods.
On disposal of the relevant CGU, the attributable amount of goodwill is included in the determination of the profit or loss
on disposal.
1.6.2 Other Intangible Assets
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation (see 1.6.4) and
impairment losses (see accounting policy 1.7).
The cost of intangible assets acquired in a business combination is the fair value at acquisition date. The valuation
methodology used for each type of identifiable asset category is detailed below:
Asset category Valuation methodology
Consulting and magazine Income (cost saving)
Software licence Income (incremental value plus loss of profits)
Trademarks Relief from royalty
Trade name Relief from royalty
Non Contractual customer relationships Excess earnings
Where, in the opinion of the Directors, the Group's expenditure in relation to development of internet activities results
in future economic benefits, these costs are capitalised within software licences and amortised over the useful economic
life of the asset.
Development costs are capitalised only when it is probable that future economic benefit will result from the project and
the following criteria are met:
• The technical feasibility of the product has been ascertained;
• Adequate technical, financial and other resources are available to complete and sell or use the intangible asset;
• The Group can demonstrate how the intangible asset will generate future economic benefits and the ability to use or
sell the intangible asset can be demonstrated;
• It is the intention of management to complete the intangible asset and use it or sell it; and
• The development costs can be measured reliably.
1.6.3 Subsequent Expenditure
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits
embodied in the specific asset to which it relates. This includes legal and similar expenditure incurred in registering
brands and trade names, which is capitalised, all other expenditure is expensed as incurred.
1.6.4 Amortisation
Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible
assets unless such lives are indefinite. Goodwill and trademarks with an indefinite useful life are systematically tested
for impairment 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
1.7 Impairment
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an
indicator of impairment exists, the Group makes an estimate of the recoverable amount. Where the carrying amount of an
asset exceeds its recoverable amount, the asset is written down to its recoverable amount. Recoverable amount is the higher
of fair value less costs to sell and value in use and is determined for an individual asset. If the asset does not generate
cash inflows that are largely independent of those from other assets or groups of assets, the recoverable amount of the
cash generating unit to which the asset belongs is determined. Discount rates reflecting the asset specific risks and the
time value of money are used for the value in use calculation.
For goodwill and trademarks that have an indefinite useful life, the recoverable amount is estimated on an annual basis.
1.8 Dividends Paid to Holders of Share Capital
Dividend distributions payable to equity shareholders are recognised through equity reserves on the date the dividend is
paid.
1.9 Employee Benefits
1.9.1 Pension Costs
In some jurisdictions in which the Group has employees, there are government or private schemes into which the employing
company or branch must make payments on a defined contribution basis, the contributions are shown in the profit or loss
account in the period.
1.9.2 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 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.
See note 25 for further details of the schemes.
1.10 Provisions
A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event, and it
is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material,
provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, where appropriate, the risks specific to the liability.
1.11 Revenue Recognition
Net Gaming Revenue ('NGR') is measured at the fair value of consideration received or receivable and include the following
elements:
Casino: net win in respect of bets placed on casino games that have concluded in the period, stated net of promotional bonuses.
Sportsbook: gains and losses in respect of bets placed on sporting events in the period, stated net of promotional bonuses. Open positions are carried at fair market value and gains and losses arising on this valuation are recognised in revenue, as well as gains and losses realised on positions that have closed.
Poker: net win in respect of rake for poker games that have concluded in the period, stated net of promotional bonuses.
Bingo: net win in respect of bets placed on bingo games that have concluded in the period, stated net of promotional bonuses.
Where promotional bonuses apply to customers playing a variety of products through the same wallet, bonuses are allocated
pro-rata to the net win.
B2B income comprises the amounts receivable for services to other online gaming operators. Income is recognised when a
right to consideration has been obtained through performance and reflects contract activity during the period.
Revenue is also generated from foreign exchange commissions on customer deposits and withdrawals and account fees.
1.12 Financial Expenses
Financial expenses comprise interest payable on borrowings, calculated using the effective interest rate method which
discounts the expected cash flows over the life of the financial instrument, and foreign exchange differences arising on
loans and finance leases.
1.13 Exceptional Items
Exceptional items are those that in the judgement of the Directors need to be disclosed by virtue of their size or
incidence in order for the user to obtain a proper understanding of the financial information.
1.14 Financial Income
Financial income is interest income recognised in the income statement as it accrues, using the effective interest method.
1.15 Tax
The tax currently payable is based on taxable profit for the period. Taxable profit differs from reported profit in the
consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years
and it further excludes items that are never taxable or deductible.
Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax
bases, calculated using the liability method on temporary differences. However, deferred tax is neither provided on the
initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is
a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with
investments in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and
it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried
forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that
it is probable that the underlying deductible temporary differences will be able to be offset against future taxable
income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their
respective period of realisation, provided they are enacted or substantively enacted at the reporting date.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except
where they relate to items that are charged or credited directly to other comprehensive income or equity in which case the
related deferred tax is also charged or credited directly to other comprehensive income or equity as appropriate.
1.16 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
Studios: provision of the technology platforms to internal and external customers
Non-core: InterTrader, Kalixa and smaller non-core assets including USA assets
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.
1.17 Financial Instruments
Financial assets and financial liabilities are recognised when a Group entity becomes a party to the contractual provisions
of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial
assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in
profit or loss.
1.17.1 Non-Derivative Financial Assets and Liabilities
Non-derivative financial instruments comprise trade and other receivables including balances with payment processors, cash
and cash equivalents, loans and borrowings, trade and other payables and customer balances. Subsequent to initial
recognition, non-derivative financial instruments are measured at amortised cost using the effective interest method.
Provisions for impairment are made against financial assets if considered appropriate and any impairment is recognised in
profit or loss. The liability for inactive customer balances is derecognised when the obligation is extinguished with
reference to player terms and conditions.
1.17.2 Short term investments
Short term investments are non-derivative financial assets with fixed or determinable payments that are not quoted on an
active market. They are initially recognised at fair value, plus transaction costs directly attributable to their
acquisition or issue. They are subsequently carried at amortised cost using the effective interest rate method, less any
provisions for impairment.
1.17.3 Cash and Cash Equivalents
Cash and cash equivalents comprise cash balances and bank balances. Bank overdrafts that are repayable on demand and form
an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of
the statement of cash flows.
Accounting for financial income and financial expenses are discussed in notes 1.14 and 1.12 respectively.
1.17.4 Available for Sale Financial
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