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REG - Flutter Entertainmnt - 2022 Interim Results

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RNS Number : 7834V  Flutter Entertainment PLC  12 August 2022

12 August 2022

Flutter Entertainment plc - 2022 Interim Results

Strong recreational player growth; US profitable in Q2; Group in line with
expectations

Flutter Entertainment plc (the "Group") announces interim results for six
months ended 30 June 2022.

                                     Reported(1)              Adjusted(2)
                                     H1       H1              H1     H1
                                     2022     2021            2022   2021           CC(3)
                                     £m       £m       YoY %  £m     £m      YoY %  YoY %
 Average monthly players(4) ('000s)                           8,716  7,625   +14%
 Group Revenue                       3,388    3,053    +11%   3,388  3,053   +11%   +9%
 Group EBITDA(5)                     434      562      -23%   476    597     -20%   -19%
 Group EBITDA excluding US                                    608    684     -11%   -10%
 (Loss)/Profit after tax             (112)    (86)            177    306     -42%
 (Loss)/Earnings per share (pence)   (64.7p)  (50.4p)         97.2p  171.1p  -43%
 Net Debt at period end(6)           3,004    2,682

Operational Highlights:

•     Group: Positive revenue momentum of +9% driven by recreational
player growth

-     Average monthly players ('AMPs') 1.1m or 14% higher at 8.7m

•     US: Adjusted EBITDA positive in Q2

-     Sports betting market share accelerated to 51%(7) in Q2 driven by
FanDuel's superior product, efficient customer acquisition and strong
operational execution

-     Increasingly profitable player base underpinning confidence in full
year 2023 EBITDA profit(8)

•     Group ex-US:

-     UK & Ireland: H1 performance reflects safer gambling initiatives
and prior year Covid frequency benefit; product improvements delivered in H1
support expected return to revenue growth in H2

-     Australia: AMPs 10% higher with strong customer retention driving
revenue growth

-     International: Investments in high growth markets generating strong
returns, partially offsetting known headwinds; Acquisition of Sisal completed
on 4th August 2022

-     Three-year compound growth in revenue of 10% and in Adjusted EBITDA
of 6% demonstrating growth through regulatory change, driven by operational
execution, scale and diversification

•     Sustainability: Positive Impact Plan launched in March; Safer
gambling tool usage at 34.8% of online customers, two percentage points up
from December 2021(9)

Financial Highlights:

•     Adjusted EBITDA of £476m (Reported EBITDA of £434m), in line
with expectations

-     Increased US investment as the business scales and builds towards
full year profitability in 2023(8)

-     Proactive safer gambling initiatives and International regulatory
changes improved sustainability of Group

•     Reported loss after tax of £112m (2021: £86m) after £286m
charge for amortisation of acquired intangibles

•     Net debt increased £322m year-on-year to £3,004m at 30 June 2022
including H1 completion of Tombola acquisition. Leverage ratio of 3.4 times(6)
(June 2021: 2.3 times), or 2.6 times excluding US losses

Outlook:

•     H2 has started in line with expectations. No discernible signs of
a consumer slow down currently, but we are closely monitoring key spend
indicators given the uncertain macro economic outlook. Assuming normalised
sports results, we anticipate full year EBITDA to be in line with market
expectations:

-     US: Net revenue ahead of expectations at between £2.3bn and £2.5bn
($2.85bn - $3.1bn) and Adjusted EBITDA loss of between £225m and £275m

-     Group ex-US: Adjusted EBITDA of between £1,290m and £1,390m
including a five-month contribution from Sisal (completed 4 August)

•     Hosting an investor day on our US business on 16 November 2022

 

Peter Jackson, Chief Executive, commented:

"The first half of 2022 was positive for the Group with significant progress
made against the strategic objectives we outlined in March. We expanded our
recreational customer base by over one million players in the half and
increased the proportion of customers using safer gambling tools to over one
third.

We are particularly pleased with momentum in the US where we extended our
leadership in online sports betting with FanDuel claiming a 51% share of the
market and number one position in 13 of 15 states, helping contribute to
positive earnings in Q2. We remain firmly on the path to profitability in
2023, driven by our compelling customer economics and disciplined investment.

Outside of the US, the business remains well positioned thanks to its
leadership positions in its mature markets and the investment we are making in
attractive, high growth markets such as India, Canada and Brazil. In the UK,
while the delay in publishing the Gambling Act Review White Paper has been
disappointing, we are confident that the safer gambling changes we have
already made to date position us well for the future. In Australia, we
delivered another excellent performance with revenue and players continuing to
grow. We were also delighted to welcome Sisal to the Group earlier this month,
a business that performed strongly during H1.

The second half of the year has started well and we look forward to the start
of the football seasons in both the US and Europe. Being part of the Flutter
Group provides unique strategic advantages to our portfolio of brands, giving
access to expertise, technology and resources to drive performance and
capitalise on further growth opportunities we see ahead."

 

 Analyst briefing:

 The Group will host a questions and answers call for institutional investors
 and analysts this morning at 9:30am (BST). Ahead of that call, a pre-recorded
 presentation will be made available on the Group's corporate website
 (www.flutter.com/investors (http://www.flutter.com/investors) ) from 8:00am.
 To dial into the conference call, participants need to register here
 (https://cossprereg.btci.com/prereg/key.process?key=P7X8TYAD8) where they will
 be provided with the dial in details to access the call.

 Contacts:

 Investor Relations:
 Paul Tymms, Group Director of Investor Relations and FP&A      + 44 75 5715 5768
 Ciara O'Mullane, Director of Investor Relations                + 353 87 947 7862
 Liam Kealy, Director of Investor Relations                     + 353 87 665 2014

 Press:
 Kate Delahunty, Group Director of Corporate Communications     + 44 78 1077 0165
 Lindsay Dunford, Group Head of Corporate Affairs               + 44 79 3197 2959
 Rob Allen, Group Head of Corporate Campaigns                   + 44 75 5444 1363
 Billy Murphy, Drury Communications                             + 353 1 260 5000
 James Murgatroyd, Finsbury                                     + 44 20 7251 3801

 

 

 

Business review (2-5)

The scale and diversification of the Group have been transformed during the
last three years with the US accounting for over one third of Group revenue in
Q2. FanDuel has strengthened its clear leadership position in US online sports
betting, gaining market share through a combination of superior product,
efficient customer acquisition and strong operational execution. Our US
business was profitable during Q2 (£16m/$22m) and remains firmly on track to
be EBITDA positive for the full year 2023(8).

During the same period the Group's ex-US business has also grown and been
reshaped. We have expanded our gold medal positions in the UK&I and
Australia. With the recent acquisition of Sisal in Italy providing another
number one position in one of the world's largest regulated markets, our
International division is on a more sustainable footing with 86% of revenue
from regulated or regulating markets(10). These strong podium positions are
combined with high growth opportunities in a number of markets that have
significant long term market potential. The Group's track record of
operational execution, combined with its scale and diversification give us
confidence that the ex-US Group can continue to outgrow regulatory headwinds.

Being part of the Flutter Group provides unique strategic advantages to our
portfolio of brands, driving both revenue growth and operating efficiencies.
Our people have industry leading sports betting and gaming expertise, with
high levels of talent and idea sharing in the Group. Our products enable the
broadest and deepest range of options for local hero brands, while our
technology stack delivers scalable, reliable platforms for growth. Our strong
cash generation profile allows us to allocate resources to power the
'flywheel' at a local market level.

In March, we launched our sustainability strategy, the Positive Impact Plan.
Good progress has been made in the half with (i) Safer gambling tool usage two
percentage points higher at 34.8%(9) of AMPs, (ii) the launch of global
advocacy and Pride groups and (iii) significant time (nearly 2,200 hours) and
monetary (£1.1m) donations as we continue to contribute positively to the
communities in which we operate.

H1 2022 review

The Group delivered positive top line momentum with revenue growth of 9%
driven by a 14% increase in our recreational player base. Adjusted EBITDA of
£476m included a £132m investment loss from our US division. The Group ex-US
had Adjusted EBITDA of £608m, a 10% decline on the prior year, with continued
growth in Australia, offset by our proactive safer gambling initiatives in the
UK&I and regulatory changes in International markets, all as previously
guided. Excluding these guided items, Group ex-US Adjusted EBITDA was 4%
higher year-on-year.

US

Our US division delivered another excellent performance during H1. Quarterly
revenue exceeded $750m for the first time in Q2 with positive Adjusted EBITDA
of $22m in the same period. We expanded our clear number one position in the
market, growing online sports betting market share(7) to 51% in Q2 and an
overall combined online share of 36%(7), clearly demonstrating our significant
operational and structural advantages over the rest of the market. This
competitive lead is delivered by winning in two key areas: (i) customer
acquisition and (ii) product.

Customer acquisition: The strength of the FanDuel brand, coupled with
strategic partnerships including Turner Sports and Pat McAfee, have ensured we
are accessing the broader population of sports bettors more quickly, leading
to faster adoption curves as each state launches. In the four years since
launch, FanDuel has refined its state launch 'play book', converting customers
from our daily fantasy sports database at a faster rate with each new state.
Combined with a disciplined and efficient approach to marketing investment,
FanDuel's cost per acquisition(11) has remained attractive at under $300.

Product: FanDuel has the best sports betting product in the market,
benefitting from Flutter's global pricing and risk management capabilities. We
are continually improving, with incremental features such as 'Same Game
Parlay+', helping FanDuel fortify its sportsbook leadership position and
maintain its competitive edge. Penetration of higher margin parlay products
was over 80% of customers in Q2 and is a major factor in FanDuel's superior
monetisation of customers. Retention rates also remain strong as customers
favour FanDuel's market leading product. US customer cohorts are exhibiting
reassuringly familiar characteristics to those in our existing established
businesses, with each cohort's revenue growing year-on-year as the customer
base matures.

We continue to improve our iGaming proposition, with the launch of FanDuel
branded live dealer tables in the first half as well as adding new content to
our platform. Through leveraging our market leading gaming capabilities in the
Group, we are focusing on growing our market share in our existing five
iGaming states and ensuring we are well positioned to leverage our sportsbook
penetration as future states regulate.

Execution across customer acquisition and product continues to deliver
attractive customer economics with payback periods of 12-18 months. As noted
at our preliminary results announcement dated 1 March 2022, customer
acquisition is now being funded by profits from existing customers. As the
existing customers continue to become an increasingly large proportion of our
total customer base, profits will increase, delivering an expected EBITDA
profit for the full year 2023(8). This pattern can be evidenced in H1, where
sportsbook and iGaming contribution was more than three times greater than for
the entire year in 2021.

In states that launched before 2021, bonus and marketing spend is reducing
toward levels observed in existing businesses and profit margins are
increasing. Operating leverage is also clearly evident as we have grown
revenue more than twice as fast as other operating costs since H1 2019, with
further operating efficiency expected as our US footprint expands. We estimate
that New Jersey EBITDA margin is already 17%(12) despite the early stage of
the market and continued disciplined investment behind the strong customer
economics we see.

Group excluding the US

UK & Ireland

Revenue declined 4% as a result of our proactive safer gambling actions and
the prior year Covid-related increase in player days, which has now moderated
towards pre-Covid levels. The significant actions taken in 2021 to improve the
sustainability of our business in advance of the Government's review of the
Gambling Act had an annualised revenue impact of £48m during H1, in line with
previous guidance. While the delay to the publication of the UK Gambling Act
Review White Paper has been disappointing, our proactive safer gambling
actions position us well for the future. In Ireland, we welcome and fully
support the recent progress towards regulation, and we are meaningfully
contributing to the legislative process.

Online performance has improved sequentially with Q2 just 4% lower versus 20%
lower in Q1. This included a return to year-on-year gaming revenue growth in
June 2022 as we lapped the introduction of some of these safer gambling
measures, giving us confidence of delivering growth in H2. This growth will be
driven by continued expansion of our recreational customer base, which has
increased at a compound rate of 13% since 2019. Combined with our safer
gambling initiatives just 5% of revenue, excluding Tombola, came from the
highest value tier in H1. The proportion of revenue from our lowest value tier
has increased by 14% percentage points since H1 2019 to 43%.

In H1, Sky Bet released a number of improvements to its pre-game sports
betting product, including the launch of 'BuildABet', which has already been
used by nearly one-third of football customers. Further enhancements are
planned for H2. On the gaming side, Paddy Power continues to innovate its
offering with branded slots content and free-to-play initiatives proving
popular with direct gaming customers. Over 80% of customers are playing with
our daily engagement tool 'Wonder Wheel', which is powering record gaming
customer volumes and retention levels.

As we further integrate the businesses, we have also identified a range of
efficiency initiatives:

•     Optimising the efficiency of marketing and promotional spend by
delivering more value to the right customers at the right time and a greater
allocation of spend to our more recreational brands

•     Integrating more of the SBG technology stack onto proprietary
platforms

•     Removing team structure complexity

These initiatives will both help offset the current high inflationary
headwinds we are seeing, and ensure the UK&I division is well-placed ahead
of the pending Gambling Act Review.

Australia

Sportsbet delivered another strong performance, once again demonstrating
excellent execution across product, value and brand. Following significant
retail restrictions in H2 2021, we focused on retaining customers through
targeted generosity initiatives ahead of the new AFL and NRL season in H1. As
a result AMPs were 10% higher year-on-year, driving revenue growth of 5%
despite the adverse impact of year-on-year sports results. Penetration of our
long-established Same Game Multi product continues to increase and a number of
new product features were rolled out during Q2, helping to drive player
engagement levels. 'Same Game Multi Cash Out' and 'Same Game Multi Bet
Tracker' have proven very popular with punters, further enhancing our market
leading product.

We remain well positioned to capitalise on the recent Point of Consumption
('POC') tax changes announced in Queensland, New South Wales and the
Australian Capital Territory which will cost an estimated £22m in 2022 with
an annualised impact in 2023 of £73m (AUD $125m). Sportsbet has a strong
track record of managing regulatory risk, having taken meaningful market share
and grown profits after the initial implementation of POC taxes in 2019.

International

In our International division, we continue to refine our approach to the
diverse range of markets we operate in. This consists of four categories where
we will:

•     Consolidate our existing #1 positions and drive market share
growth across Italy, Georgia, Armenia and Spain. Following the Sisal
acquisition, Italy now accounts for approximately 50% of the division's EBITDA

•     Invest for leadership in the high growth regulated and regulating
markets including Canada, Brazil and India. We will continue to innovate with
PokerStars virtual reality poker and casino products, a top five experience in
the Oculus app store and the highest revenue generating freemium product on
the market

•     Optimise return on investment in key regulated markets by
supporting the liquidity they provide with targeted marketing spend. While
these markets have some attractive qualities, our current lack of scale limits
the returns from increasing investment. This covers several, mostly European,
regulated markets

•     Maintain existing position in the tail of remaining unregulated or
non-regulating markets, which now make up 14% of revenue for the International
division, of which the largest market is 0.3% of Flutter Group revenue(10)

The acquisition of Junglee in January 2021 is a great example of our
investment in a high growth market. India is one of the fastest growing gaming
market globally powered by both a doubling of India's internet and smartphone
penetration, and a 45% increase in disposable income over the last five years.
The online gaming market is expected to reach £4.2bn by 2026, from £1.4bn in
2021, of which rummy is the fastest growing segment, accounting for 57% of
revenue(13). Junglee is the fastest growing rummy brand and now number two in
the rummy market. Product leadership and increased investment in player
acquisition has resulted in compound growth of 73% in gross gaming revenue and
112% in players since H1 2019. Since acquisition, Flutter has added its global
gaming product expertise and sophisticated marketing capabilities to
accelerate Junglee's growth, in tandem with excellent execution from the local
team.

Capital structure and balance sheet update(6)

The Group had gross debt of £3,785m(14) at 30 June 2022 and a net debt
position of £3,004m (30 June 2021: £2,682m) which represents a leverage
ratio of 3.4x. During the period the Group acquired Tombola for a cash cost of
£410m in January and post period end the Group completed the acquisition of
Sisal on 4 August 2022 utilising existing debt facilities.

This acquisition will result in an increased leverage ratio in the near term
of 4.1 times or 3.3 times excluding US losses. As previously highlighted, the
Group continues to generate significant free cash flow which will facilitate
de-levering quickly. In addition, as the US business becomes profitable this
will transform the earnings and debt profile of the Group.

The Group remains committed to its medium-term leverage target of 1-2 times at
which point the Board will review the Group's dividend policy.

Other updates

As previously disclosed, the Group is in a legal arbitration process with FOX
Corporation with respect to its option to acquire an 18.6% stake in FanDuel
and related issues. The arbitration hearing commenced in June and, should the
parties not reach a negotiated agreement in the interim, we expect a binding
decision from the arbitrator in October 2022. The Group continues to
vigorously defend its position.

Current trading/outlook

In the first 5 weeks to 7 August, Group revenue was in line with our
expectations. We currently see no discernible signs of a consumer slow down
and resultant reduced spending levels across our businesses. However, we will
continue to closely monitor key spend indicators as we move through H2 given
the uncertain macro economic outlook. Assuming normalised sport results for
the remainder of the year, the Group anticipates:

•     US revenue of between £2.3bn - £2.5bn ($2.85bn - $3.1bn) and an
Adjusted EBITDA loss of between £225m - £275m. This assumes we launch online
in Kansas in Q4 2022

•     Group ex-US Adjusted EBITDA in line with market expectations of
between £1,290m - £1,390m, including a five-month contribution from Sisal,
which completed on 4 August 2022, and Australian point of consumption tax
changes

The Group also anticipates for 2022:

•     An effective Group ex-US corporate tax rate for the full year of
between 22% - 24% including Sisal

•     Capital expenditure of between £360m - £390m including Sisal

•     A weighted average cost of debt for H2 of 3.4%

 

 

Operating and financial review(1-6)

Group

                                      H1       H1                CC
                                      2022     2021     Change   Change
 Unaudited Adjusted                   £m       £m       %        %
 Average monthly players ('000s)      8,716    7,625    +14%

 Sports revenue                       2,118    1,894    +12%     +10%
 Gaming revenue                       1,270    1,159    +10%     +8%
 Total revenue                        3,388    3,053    +11%     +9%

 Cost of sales                        (1,353)  (1,109)  +22%     +20%
 Cost of sales as a % of net revenue  39.9%    36.3%    +360bps  +350bps

 Gross profit                         2,036    1,944    +5%      +3%

 Sales and marketing                  (819)    (728)    +12%     +9%
 Contribution                         1,216    1,215    -%       -1%

 Other operating costs                (686)    (563)    +22%     +19%
 Corporate costs                      (55)     (55)     -1%      -6%

 Adjusted EBITDA(2,5)                 476      597      -20%     -19%
 Adjusted EBITDA margin %             14.1%    19.6%    -550bps  -500bps

 Depreciation and amortisation        (143)    (125)    +14%     +11%
 Adjusted operating profit            334      472      -29%     -28%

 Net finance expense                  (57)     (74)     -23%
 Adjusted profit before tax           277      398      -30%

 Taxation                             (100)    (91)     +10%
 Adjusted profit for the period       177      307      -42%

 Adjusted basic earnings per share    97.2p    171.1p   -43%

 Net debt(6) at period end            3,004    2,682    +12%

Note: Junglee, acquired in January 2021, Singular, acquired in September 2021
and Tombola, acquired in January 2022, have been included on a reported basis
due to materiality. A full analysis of the Group's reported performance can be
found at pages 16-17. A reconciliation to the Group's consolidated income
statement is included in Appendix 2.

During the half we increased our recreational customer base by over one
million monthly players to 8.7m, 14% higher than the prior year. The rapid
expansion of our US business has been key to this growth, along with good
underlying player momentum in the UK&I and Australia. This resulted in
revenue growth of 9% to £3.4bn, including a 50% increase in the US. Outside
of the US, the increase in revenue as a result of strong customer retention in
Australia and the addition of Tombola was offset by regulatory changes in
International markets and our proactive safer gambling initiatives in the
UK&I, both of which put our business on a more sustainable footing for
growth.

Cost of sales as a percentage of net revenue increased by 350 basis points to
39.9% with a greater proportion of revenue coming from higher direct cost
markets.

Sales and marketing costs increased by 9% in line with revenue growth.
Marketing spend in the US increased 29% as we acquired large volumes of new
players but reduced as a percentage of revenue, declining by 620 basis points.
Other operating costs increased 19% or 9% for Group ex-US where the return of
retail and addition of Tombola more than offset synergies and cost
efficiencies in the UK&I. Corporate costs remain tightly controlled.

Adjusted EBITDA was £476m with the US investment-led loss increasing by £46m
to £132m, despite being profitable in Q2. As expected, Group ex-US Adjusted
EBITDA was 10% lower due to the regulatory changes and safer gambling
initiatives noted above. Excluding these headwinds, Adjusted EBITDA increased
4% in H1.

The Group's Adjusted effective tax rate in the period was 36.2% (HY 2021:
22.9%), primarily driven by the changing mix of taxable earnings across
geographies. The Group ex-US effective tax rate in the period was 22% with the
full-year 2022 adjusted Group ex-US effective tax rate expected to be between
22% and 24% (FY2021: 18.5%). This includes Sisal and reflects upward pressure
due to profits earned in higher tax geographies.

Adjusted basic earnings per share reduced from 171p to 97p reflecting the
lower Adjusted EBITDA and the increased tax charge in the current period.

Net debt at 30 June 2022 was £3,004m, a £322m increase on prior year,
primarily due to the acquisition of Tombola in January 2022 and settlement of
a historic legal case with the state of Kentucky offsetting the free cash flow
generated by the operating activities of the Group.

A full analysis of the Group's reported performance can be found at pages
16-17.

 

US(3)

                                      H1       H1                CC
                                      2022     2021     Change   Change
 Unaudited Adjusted                   £m       £m       %        US$
 Average monthly players ('000s)      2,188    1,470    +49%

 Sportsbook stakes                    10,911   5,072    +115%    +102%
 Sportsbook net revenue margin        6.0%     6.2%     -20bps   -20bps

 Sports revenue                       770      452      +70%     +58%
 Gaming revenue                       281      200      +41%     +31%
 Total revenue                        1,051    652      +61%     +50%

 Cost of sales                        (544)    (293)    +86%     +73%
 Cost of sales as a % of net revenue  51.8%    44.9%    +680bps  +700bps
 Gross profit                         507      359      +41%     +31%

 Sales and marketing                  (399)    (292)    +37%     +29%
 Contribution                         108      67       +60%     +38%

 Other operating costs                (240)    (154)    +56%     +46%
 Adjusted EBITDA(2,5)                 (132)    (87)     +52%     +53%
 Adjusted EBITDA margin               (12.5%)  (13.3%)  +70bps   -30bps

 Depreciation and amortisation        (31)     (22)     +39%     +29%
 Adjusted operating profit            (162)    (108)    +50%     +48%

The US division includes FanDuel, FOXBet, TVG, PokerStars and Stardust brands,
offering regulated real money and free-to-play sports betting, casino, poker,
daily fantasy sports and online racing wagering products to customers across
various states in the US and in Canada.

Revenue grew 50% to £1.1bn ($1.4bn) in H1 with an Adjusted EBITDA loss of
£132m ($176m). This was driven by efficient customer acquisition in new and
existing states, our superior product driving strong customer economics and
good operating efficiencies, offset by the cost of our sportsbook launch in
New York where tax rates are higher. Within this performance FanDuel Group
represented 97% of revenue and 80% of Adjusted EBITDA loss.

Sports revenue grew 58% with sportsbook revenue increasing by 91%. This was
driven by staking growth which more than doubled year-on-year to over £10.9bn
($14.2bn). Our continued sportsbook expansion aided growth, with five new US
states as well as Ontario, Canada added to our offering since H1 last year
(Arizona in Q3 2021, Connecticut in Q4 2021 and New York, Louisiana and
Wyoming in Q1 2022). A full six-month of revenues from Michigan and Virginia,
which launched part way during Q1 2021 also provided a benefit to growth.

Net revenue margin of 6.0% was 40 basis points below expectations (£41m) due
to a run of adverse sports results in Q1. Excluding this impact, net revenue
margin would have been broadly flat year-on-year. Our improving product mix
and superior pricing and risk management capabilities funded additional
promotional generosity to acquire customers in the period in both new and
existing states and also offset the impact of £63m in favourable sports
results in the prior year.

Gaming revenue was 31% higher driven by an increase in AMPs of 40% and the
full six months of revenue from the three additional gaming states launched in
the prior year; Michigan (Q1 2021), West Virginia (Q2 2021) and Connecticut
(Q4 2021).

Cost of sales as a percentage of net revenue increased by seven percentage
points primarily reflecting the launch of the FanDuel sportsbook in New York,
where the gaming tax rate is 51%, materially higher than in other states.

Sales and marketing increased by 29% as we continued to invest in customer
acquisition both in new and existing states. As a proportion of revenue, sales
and marketing declined by 620 basis points as our business continues to scale
and acquisition investment in existing states, which are an increasingly large
proportion of our business, reduces.

Other operating costs increased 46%. Adjusting for the year-on-year impact of
sports results, operating costs would have declined by around four percentage
points as a proportion of revenue demonstrating operating leverage. This is
despite the business still being at a relatively early stage in its expansion.

 

UK & Ireland

                                      UK & Ireland Total              UK & Ireland Online             UK & Ireland Retail
                                      H1        H1                    H1        H1                    H1        H1
 Unaudited Adjusted                   2022      2021      Change      2022      2021      Change      2022      2021      Change
                                      £m        £m        %           £m        £m        %           £m        £m        %
 Average monthly players ('000s)                                      3,704     3,303     +12%

 Sportsbook stakes                    5,185     6,091     -15%        4,494     5,885     -24%        691       207       +234%
 Sportsbook net revenue margin        10.9%     10.7%     +20bps      10.6%     10.6%     0bps        13.2%     12.5%     +70bps

 Sports revenue                       630       738       -15%        538       712       -24%        92        26        +253%
 Gaming revenue                       462       397       +16%        418       382       +10%        44        16        +183%
 Total revenue                        1,092     1,135     -4%         956       1,094     -13%        136       41        +227%

 Cost of sales                        (335)     (342)     -2%         (304)     (332)     -8%         (31)      (10)      +218%
 Cost of sales as a % of net revenue  30.7%     30.1%     +60bps      31.8%     30.4%     +140bps     22.8%     23.4%     -70bps
 Gross profit                         757       793       -5%         652       762       -14%        105       32        +230%

 Sales and marketing                  (197)     (207)     -5%         (194)     (204)     -5%         (3)       (3)       +13%
 Contribution                         559       587       -5%         458       558       -18%        101       29        +251%

 Other operating costs                (239)     (227)     +5%         (155)     (160)     -3%         (83)      (68)      +23%
 Adjusted EBITDA(2,5)                 321       359       -11%        303       398       -24%        18        (39)      -147%
 Adjusted EBITDA margin               29.4%     31.6%     -220bps     31.6%     36.4%     -470bps     13.5%     (93.6%)   +10,710bps

 Depreciation and amortisation        (63)      (63)      +1%         (44)      (42)      +5%         (19)      (21)      -7%
 Adjusted operating profit            258       297       -13%        259       356       -27%        (1)       (59)      -98%

The UK & Ireland division operates Paddy Power, Betfair, Sky Betting &
Gaming and Tombola brands online, as well as retail operations in the UK and
Ireland.

Revenue declined by 4% and Adjusted EBITDA was £38m lower at £321m. The
Covid-related restrictions in the prior year result in complex year-on-year
comparatives in our online and retail businesses.

UK & Ireland Online

Revenue was 13% lower in H1, sequentially improving from -20% in Q1 to -4% in
Q2, due to the:

•     Annualisation of our proactive safer gambling measures introduced
across 2021 reducing revenue by £48m

•     Peak in Covid related player engagement during H1 2021, with
average player days down 10% in H1 2022

•     Benefit of the European football championships in June 2021,
generating revenue of £43m in H1 2021

•     Addition of Tombola in January 2022 which added eight percentage
points of growth (pro forma including Tombola H1 -19%, Q2 -11%)

The relative impact of these factors by product is reflected in the 24%
decline of sports revenue compared to 10% growth in gaming revenue. Sportsbook
net revenue margin was in line year-on-year, with both periods benefitting
from approximately 100 basis points in favourable sports results.

AMPs grew 12% (flat including Tombola's highly recreational customer base on a
pro forma basis) with strong acquisition and retention of gaming customers in
Paddy Power being offset by the factors above.

Cost of sales as a percentage of revenue increased by 140 basis points to
31.8% reflecting higher transaction fees and streaming costs.

Sales and marketing decreased by 5% (pro forma including Tombola -13%)
reflecting the European football championships investment in the prior year.
Sales and marketing was 20.3% of revenue in H1, in line with the prior full
year. Other operating costs were 3% lower in H1 (pro forma including Tombola
-11%) with synergies and cost efficiencies offsetting the inflationary
increases in employee pay and data.

Online Adjusted EBITDA declined £95m year-on-year to £303m.

UK & Ireland Retail

Retail revenue more than trebled in the half, with our estate open for all of
H1. In the prior year, our shops were closed from January to April in the UK
and to May in Ireland due to Covid-related restrictions. In the UK estate,
both sports and gaming revenue has returned to 2019 levels while in our
Ireland estate revenue is at 69% of H1 2019, reflecting the slower return of
retail footfall in Ireland.

Other operating costs increased by 23% reflecting our shops being open across
the half. The business generated £18m of Adjusted EBITDA in H1.

Currently, we have 614 (June 2021: 624) retail outlets with 362 in the UK and
252 in Ireland. Since June 2021 we have opened 5 shops in the UK and closed 15
shops in Ireland as part of normal business practice.

 

Australia(3)

                                      H1     H1              CC
                                      2022   2021   Change   Change
 Unaudited Adjusted                   £m     £m     %        A$
 Average monthly players ('000s)      993    906    +10%

 Sportsbook stakes                    5,209  5,000  +4%      +4%
 Sportsbook net revenue margin        11.8%  11.7%  +10bps   +10bps

 Total revenue                        612    585    +5%      +5%

 Cost of sales                        (290)  (275)  +5%      +5%
 Cost of sales as a % of net revenue  47.3%  47.0%  +30bps   +30bps
 Gross profit                         322    310    +4%      +4%

 Sales and marketing                  (54)   (59)   -9%      -10%
 Contribution                         269    252    +7%      +7%

 Other operating costs                (50)   (51)   -2%      -3%
 Adjusted EBITDA(2,5)                 219    201    +9%      +10%
 Adjusted EBITDA margin               35.8%  34.3%  +150bps  +180bps

 Depreciation and amortisation        (14)   (13)   +4%      +5%
 Adjusted operating profit            206    188    +9%      +11%

The division encompasses Sportsbet, which offers online sports betting in the
Australian market.

Sportsbet delivered another excellent performance during H1 as Adjusted EBITDA
increased by 10% to £219m. This was driven by a combination of a 10% increase
in the player base leading to good top line momentum as well as continued
operating leverage improving EBITDA margins by 180 basis points.

Customer growth was aided by strong retention of players who migrated online
during H2 2021 when Covid restrictions were at their peak. Staking growth of
4% and an increase in net revenue margin of 10 basis points to 11.8%,
delivered revenue growth of 5% in the period. Sports results represented a
headwind year-on-year with 50 basis points of favourable results in H1 2022
compared to a 140 basis point benefit in H1 2021. This headwind, along with a
further step up in promotional generosity spend was more than offset by
structural margin improvements due to increased penetration of higher margin
products and improvements to pricing and risk management capabilities.

Our continued focus on a personalised approach to promotional spend and
generosity led to an increase in cost of sales by 30 basis points as a
percentage of revenue as taxes are levied on gross gaming revenue, resulting
in a higher effective tax rate. Sales and marketing also reflected this
dynamic, declining by 10% primarily driven by promotional spend shifting to
within our net revenue margin of 11.8%.

Other operating costs were roughly flat year-on-year with Adjusted EBITDA of
£219m.

 

International(3)

                                      H1     H1              CC
                                      2022   2021   Change   Change
 Unaudited Adjusted                   £m     £m     %        %
 Average monthly players ('000s)      1,831  1,945  -6%

 Sportsbook stakes                    710    871    -18%     -18%
 Sportsbook net revenue margin        9.0%   9.1%   -10bps   -10bps

 Sports revenue                       106    118    -10%     -10%
 Gaming revenue                       527    562    -6%      -7%
 Total revenue                        633    680    -7%      -8%

 Cost of sales                        (184)  (199)  -8%      -8%
 Cost of sales as a % of net revenue  29.1%  29.3%  -20bps   -20bps
 Gross profit                         449    481    -7%      -7%

 Sales and marketing                  (169)  (171)  -1%      -3%
 Contribution                         280    310    -10%     -10%

 Other operating costs                (158)  (131)  +20%     +18%
 Adjusted EBITDA(2,5)                 122    179    -32%     -31%
 Adjusted EBITDA margin               19.3%  26.3%  -700bps  -630bps

 Depreciation and amortisation        (33)   (25)   +31%     +22%
 Adjusted operating profit            89     154    -42%     -40%

International includes PokerStars, Adjarabet, Betfair and Junglee brands which
offer online poker, casino, sports betting, rummy and daily fantasy products.
Excludes PokerStars US business and Betfair UK and Ireland operations.

Strong revenue growth in our 'consolidate and invest' markets including India,
Brazil, Georgia, Armenia and Canada was offset by the previously guided impact
of regulatory changes and the challenging Covid-related comparatives. Adjusted
EBITDA of £122m, a decline of £57m, reflects a £98m Adjusted EBITDA impact
from these known headwinds:

•     Combined impact of market exits in the Netherlands (£20m) and
Russia/Ukraine (£20m), along with a gaming tax change in Germany (£20m) of
£60m

•     Covid restrictions boosted online activity by an estimated £38m
in the prior period

Revenue in H1 of £633m, a decline of 8%, reflected these headwinds. Excluding
market exits and tax changes, revenue increased by 4%. Revenue growth in our
'consolidate and invest' markets was 14% and these markets represented 56% of
the International division in H1 (72% including Sisal on a pro forma basis).
This growth was largely offset by the unwind of the prior year Covid-related
boost to revenue in our remaining markets.

Cost of sales as a % of net revenue is broadly in line year-on-year at 29.1%.

Sales and marketing declined by 3% in H1 reflecting the ongoing investment in
our 'consolidate and invest' markets offset by savings elsewhere. Other
operating costs increased by 18% in H1. This partly reflects the annualisation
of the increased resources put into the business to stabilise and improve our
capabilities across product, technology and customer operations, along with
the expansion of Junglee in India. We continue to monitor opportunities for
improved operational efficiencies as we further integrate our International
businesses.

 

Statutory review(1)

Group

                                                  H1       H1
                                                  2022     2021     Change
 Unaudited                                        £m       £m       %
 Sports revenue                                   2,118    1,894    +12%
 Gaming revenue                                   1,270    1,159    +10%
 Total revenue                                    3,388    3,053    +11%

 Cost of sales                                    (1,353)  (1,122)  +21%
 Cost of sales as a % of net revenue              39.9%    36.8%            +310        bps

 Gross profit                                     2,036    1,931    +5%

 Operating costs                                  (1,602)  (1,368)  +17%

 EBITDA                                           434      562      -23%
 EBITDA margin %                                  12.8%    18.4%           -560 bps

 Amortisation of acquisition related intangibles  (286)    (276)    +4%
 Depreciation and amortisation                    (145)    (125)    +16%
 Gain on disposal                                 2        -        +100%
 Operating profit                                 5        162      -97%

 Net finance expense                              (57)     (85)     -33%
 (Loss)/ profit before tax                        (51)     77

 Taxation                                         (61)     (163)    -63%
 Loss after tax                                   (112)    (86)

 Basic loss per share                             (64.7p)  (50.4p)
 Diluted loss per share                           (64.7p)  (50.4p)

 Net current liabilities                          (439)    (327)
 Net assets                                       10,226   10,724

 Net cash from operating activities               264      427      -38%

Note: A full analysis of the Group's adjusted performance can be found at
pages 8-15. A reconciliation of the Group's adjusted performance to the
Group's consolidated income statement is included in Appendix 2.

H1 revenue grew 11% to £3.4bn driven by the rapid expansion of our US
business, where revenue was 50% higher, strong customer retention in Australia
and the addition of Tombola.

Cost of sales as a percentage of net revenue increased by 310 basis points to
39.9% with a greater proportion of revenue coming from higher direct cost
markets.

Operating costs were 17% higher in H1 driven by the US, where we increased
marketing investment to acquire large volumes of new customers and scaled up
our operational capabilities.

Reported EBITDA was £128m lower at £434m due to the increased US
investment-led loss, regulatory changes in International markets and proactive
safer gambling initiatives in the UK&I.

A reduced tax charge in the period of £61m resulted in a loss after tax of
£112m, £26m higher than H1 2021. The lower tax charge was primarily due to a
one off deferred tax charge of £105m in the prior year relating to the UK's
main corporate tax rate change from 19% to 25% applicable from 1 April 2023.
Loss per share of 64.7p decreased in line with the movement in the loss after
tax.

Net current liabilities increased from £112m at 31 December 2021 to £439m at
30 June 2022 mainly due to the purchase of Tombola in January 2022 for £410m
which was financed from the Group's cash resources. As in previous years, the
Group regularly operates in a net current liability position due to the
Group's operating model whereby it receives payments for nearly all revenues
in advance with material cost items paid in arrears.

Net assets reduced in the period from £10.3bn at 31 December 2021 to £10.2bn
due to a reported loss after tax of £112m and the recognition of a £204m
liability relating to the exercise of the Adjarabet put option. This was
partially offset by the foreign currency translation impact relating to
goodwill and intangible assets.

Net cash flow from operating activities reduced from £427m to £264m mainly
due to EBITDA reducing by £128m. Other factors included a higher working
capital outflow compared to the prior year period and higher tax payments.
These were partially offset by amounts paid in respect of the Kentucky
litigation in the prior year period.

A full analysis of the Group's Adjusted performance can be found at pages
8-15.

 

Separately disclosed items

                                                        H1     H1
                                                        2022   2021
 Unaudited                                              £m     £m
 Amortisation of acquisition related intangible assets  (286)  (276)
 Transaction fees and associated costs                  (10)   -
 Restructuring and integration initiatives              (32)   (22)
 Greece tax expense                                     -      (13)
 Operating loss impact of separately disclosed items    (328)  (310)

 Financial expense                                      -      (11)
 Loss before tax impact of separately disclosed items   (328)  (321)

 Tax credit / (charge) on separately disclosed items    39     (72)
 Total separately disclosed items                       (289)  (392)

Separately disclosed items do not relate to business as usual activity of the
Group, are items that are volatile in nature or non-cash purchase price
accounting amortisation and therefore are excluded from Adjusted profits.

Amortisation of acquisition related intangible assets increased £10m to
£286m in H1. The current period will include a charge for Tombola, which was
acquired in January 2022.

Transaction and associated costs of £10m were incurred for the acquisition of
Tombola and Sisal, along with legal fees for the FOX arbitration.

Restructuring and integration costs primarily relate to the integration with
TSG.

The tax credit of £39m primarily relates to a deferred tax credit in respect
of the amortisation of acquisition-related intangibles.

 

Cash flow and financial position

                                                           H1                                      H1
                                                           2022                                    2021
 Unaudited                                                 £m                                      £m
 Adjusted EBITDA                                                         476                                     597
 Capex                                                                  (156)                                   (138)
 Working capital                                                          (41)                                      18
 Corporation tax                                                        (132)                                     (92)
 Lease liabilities paid                                                   (21)                                    (27)
 Adjusted free cash flow                                                 127                                     358

 Cash flow from separately disclosed items                                (39)                                    (24)
 Free cash flow                                                             87                                   333

 Interest cost                                                            (46)                                    (70)
 Other borrowing costs                                                       (2)                                     (5)
 Amounts paid in respect of Kentucky settlement                             -                                     (71)
 Purchase of shares by the Employee Benefit Trust ("EBT")                   -                                     (89)
 Acquisitions and disposals                                             (410)                                     (51)
 Cash transferred in acquisitions/ disposals                                15                                      18
 Other                                                                       (3)                                     (4)
 Net (decrease)/increase in cash                                        (360)                                       61

 Net debt(6) at start of year                                        (2,647)                                 (2,814)
 Foreign currency exchange translation                                  (241)                                       26
 Change in fair value of hedging derivatives                             244                                        45
 Net debt as at 30 June                                              (3,004)                                 (2,682)

Note: Prepared on a net cash/debt basis including borrowings, debt related
derivatives and cash and cash equivalents - available for corporate use but
excluding cash and cash equivalents - customer balances. A reconciliation to
the Group's consolidated statement of cash flows is included in Appendix 4.

Adjusted free cash flow of £127m in H1 compared with £358m in the prior
year. This reduction reflects:

•     Capital expenditure of £156m which was £18m higher, primarily
driven by continued investment in product and technology in the US

•     Corporate tax payments increased by £40m reflecting the change in
the geographic mix of profits in H1 as a greater proportion of profits were
earned in jurisdictions with higher tax rates, as well as the timing of
payments and refunds in the period

•     A working capital outflow due to an unwind of accruals at 31
December 2021 and the prepayment of some US marketing assets during H1 when
compared with a working capital benefit in the prior year

Cash flow from separately disclosed items of £39m principally relates to
restructuring and integration costs in relation to the combination with TSG.

Interest costs were £24m lower than in the prior year due to the debt
refinancing in July 2021 which significantly reduced the effective cost of
debt for the Group.

The acquisition of Tombola in January resulted in a cash outflow of £410m.

As at 30 June 2022, the Group had net debt of £3,004m, excluding customer
balances, representing a leverage ratio of 3.4x times(6). The Group continues
to hedge the impact of currency fluctuations on its leverage ratio through
cross currency swap agreements. Changes in the fair value of these hedging
derivatives are reflected in net debt.

 

Notes:

(1) Reported figures represent the IFRS reported statutory numbers. Where
amounts have been normalised for separately disclosed items they are noted as
Adjusted.

(2) "Adjusted" measures exclude items that are separately disclosed as they
are: (i) not part of the usual business activity of the Group (ii) items that
are volatile in nature and (iii) purchase price accounting amortisation of
acquired intangibles (non-cash). Therefore, they have been reported as
"separately disclosed items (SDIs)" (see note 5 to the financial statements).

(3) Growth rates in the commentary are in local or constant currency(15)
except reported numbers which are in nominal currency.

(4) Average Monthly Players represent the average number of players who have
placed and/or wagered a stake and/or contributed to rake or tournament fees
during the month in the reporting period.

(5) EBITDA is defined as profit for the period before depreciation,
amortisation, impairment, gain on disposal, financial income, financial
expense and taxation and is a non-GAAP measure. This measure is used
internally to evaluate performance, to establish strategic goals and to
allocate resources. The directors also consider the measure to be commonly
reported and widely used by investors as an indicator of operating performance
and ability to incur and service debt, and as a valuation metric. It is a
non-GAAP financial measure and is not prepared in accordance with IFRS and, as
not uniformly defined terms, it may not be comparable with measures used by
other companies to the extent they do not follow the same methodology used by
the Group. Non-GAAP measures should not be viewed in isolation, nor considered
as a substitute for measures reported in accordance with IFRS. All of the
adjustments shown have been taken from the financial statements.

(6) Net debt is the principal amount of borrowings plus associated accrued
interest, minus available cash & cash equivalents plus/minus carrying
value of debt related derivatives. Leverage is calculated using Adjusted
EBITDA for the appropriate 12-month period.

(7) Online sportsbook market share is the GGR market share of FanDuel and
FOXBet for Q2 2022 in the states in which FanDuel was live based on published
gaming regulator reports in those states. During Q2 2022 FanDuel was live in
15 states; Arizona (AZ), Colorado (CO), Connecticut (CT), Illinois (IL),
Indiana (IN), Iowa (IA), Louisiana (LA), Michigan (MI), New Jersey (NJ), New
York (NY), Pennsylvania (PA), Tennessee (TN), Virginia (VA), West Virginia
(WV) and Wyoming (WY). During Q2 2022 FOXBet was live in 4 states; CO, NJ, MI
and PA. Market share does not include AZ and IL for June as the data has yet
to be released. Combined online market share is the GGR online sportsbook
market share above plus the combined CT, MI, NJ, PA and WV market share of our
gaming brands.

(8) 2023 profit projection is for full year 2023 including share based
compensation and FOXBet. Projections are based on our current expectation of
the timing of regulatory developments and new state launches in 2022 and 2023,
and excludes California.

(9) Global Play Well goal now measured as the 12 month rolling average % of
AMPs who use a safer gambling (Play Well) tool in the specified reporting
period. A safer gambling tool is any tool that a customer has used (or Flutter
has applied to a customer) in the reporting period that helps to promote safer
gambling. During H1, Flutter strengthened the measurement of this metric
including a change to measure AMPs instead of active customers, apply more
consistent tool usage definitions across the Group as well as including
Adjarabet, Junglee and Tombola.

(10) Includes Sisal revenue for H1 of £402m.

(11) Cost per acquisition is the cumulative cost per acquisition for FanDuel
sportsbook and iGaming and represents the total media and digital marketing
spend per acquired customer including those cross-sold from daily fantasy
sports.

(12) The US business is not managed to EBITDA on a state by state or product
basis given its shared cost base. For the purposes of illustrating FanDuel
online sportsbook and iGaming state EBITDA, operating costs have been
allocated to US product verticals on a GGR basis with an allocation to online
sportsbook/casino business of each state based on the population of that state

(13) Source: Redseer Strategy Consultants.

(14) Includes the gross value of derivatives.

(15) Constant currency ("CC") growth is calculated by retranslating the
non-sterling denominated component of H1 2021 at H1 2022 exchange rates (see
Appendix 3).

Appendix 1: Divisional Key Performance Indicators H1 2022

Unaudited adjusted

                                     US                           UK & Ireland               Australia                International            Group
                                     H1       H1       CC(1) %    H1      H1      CC(1) %    H1     H1     CC(1) %    H1     H1     CC(1) %    H1       H1       CC(1) %
 £m                                  2022     2021     Change     2022    2021    Change     2022   2021   Change     2022   2021   Change     2022     2021     Change
 Average monthly players(2) (000's)  2,188    1,470    +49%       3,704   3,303   +12%       993    906    +10%       1,831  1,945  -6%        8,716    7,625    +14%
 Sportsbook stakes                   10,911   5,072    +102%      5,185   6,091   -15%       5,209  5,000  +4%        710    871    -18%       22,015   17,034   +27%
 Sportsbook net revenue margin       6.0%     6.2%     -20bps     10.9%   10.7%   +20bps     11.8%  11.7%  +10bps     9.0%   9.1%   -10bps     8.6%     9.6%     -100bps

 Sports revenue                      770      452      +58%       630     738     -14%       612    585    +5%        106    118    -10%       2,118    1,894    +10%
 Gaming revenue                      281      200      +31%       462     397     +16%       0      0      0%         527    562    -7%        1,270    1,159    +8%
 Total revenue                       1,051    652      +50%       1,092   1,135   -4%        612    585    +5%        633    680    -8%        3,388    3,053    +9%

 Cost of Sales                       (544)    (293)    +73%       (335)   (342)   -2%        (290)  (275)  +5%        (184)  (199)  -8%        (1,353)  (1,109)  +20%
 Cost of sales as % of net revenue   51.8%    44.9%    +700bps    30.7%   30.1%   +50bps     47.3%  47.0%  +30bps     29.1%  29.3%  -20bps     39.9%    36.3%    +350bps

 Gross Profit                        507      359      +31%       757     793     -4%        322    310    +4%        449    481    -7%        2,036    1,944    +3%

 Sales & marketing                   (399)    (292)    +29%       (197)   (207)   -4%        (54)   (59)   -10%       (169)  (171)  -3%        (819)    (728)    +9%
 Contribution                        108      67       +38%       559     587     -4%        269    252    +7%        280    310    -10%       1,216    1,215    -1%

 Other operating costs               (240)    (154)    +46%       (239)   (227)   +6%        (50)   (51)   -3%        (158)  (131)  +18%       (686)    (563)    +19%
 Corporate costs                     0        0        0%         0       0       0%         0      0      0%         0      0      0%         (55)     (55)     -6%
 Adjusted EBITDA                     (132)    (87)     +53%       321     359     -11%       219    201    +10%       122    179    -31%       476      597      -19%
 Adjusted EBITDA margin              (12.5%)  (13.3%)  -30bps     29.4%   31.6%   -240bps    35.8%  34.3%  +180bps    19.3%  26.3%  -630bps    14.1%    19.6%    -500bps

 Depreciation & amortisation         (31)     (22)     +29%       (63)    (63)    +1%        (14)   (13)   +5%        (33)   (25)   +22%       (143)    (125)    +11%
 Adjusted operating profit/(loss)    (162)    (108)    +48%       258     297     -13%       206    188    +11%       89     154    -40%       334      472      -28%

(1) Constant currency ("CC") growth is calculated by retranslating the
non-sterling denominated component of H1 2021 at H1 2022 exchange rates (see
Appendix 3).

(2) Average Monthly Players represent the average number of players who have
placed and/or wagered a stake and/or contributed to rake or tournament fees
during the month in the reporting period.

( )

(
)

Appendix 2: Reconciliation of Adjusted to statutory results

In the operating and financial review the Group's financial performance has
been presented on an Adjusted and reported basis. The difference between the
Adjusted and reported information relates to the inclusion of separately
disclosed items. The impact of same on the income statement and earnings per
share is set out below.

                                                          Adjusted results        Separately disclosed items(1)       Statutory results
                                                          H1         H1           H1               H1                 H1         H1
 £m unaudited                                             2022       2021         2022             2021               2022       2021
 Sports revenue                                           2,118      1,894                                            2,118      1,894
 Gaming revenue                                           1,270      1,159                                            1,270      1,159
 Total revenue                                            3,388      3,053        -                -                  3,388      3,053

 Cost of sales                                            (1,353)    (1,109)                       (13)               (1,353)    (1,122)
 Cost of sales as a % of net revenue                      39.9%      36.3%                                            39.9%      36.8%
 Gross profit                                             2,036      1,944        -                (13)               2,036      1,931

 Sales and marketing                                      (819)      (728)                                            (819)      (728)
 Contribution                                             1,216      1,215        -                (13)               1,216      1,202

 Other operating costs                                    (686)      (563)                                            (686)      (563)
 Corporate costs                                          (55)       (55)         (42)             (22)               (97)       (77)
 EBITDA                                                   476        597          (42)             (35)               434        562
 EBITDA margin                                            14.1%      19.6%                                            12.8%      18.4%

 Depreciation and amortisation                            (143)      (125)        (286)            (276)              (429)      (401)
 Operating profit                                         334        472          (328)            (310)              5          162

 Net finance expense                                      (57)       (74)         -                (11)               (57)       (85)
 Profit/ (loss) before tax                                277        398          (328)            (321)              (51)       77

 Taxation                                                 (100)      (91)         39               (72)               (61)       (163)
 Profit/ (loss) for the period                            177        306          (289)            (392)              (112)      (86)

 Profit/ (loss) attributable to non controlling interest  (5)        (5)          3                3                  (2)        (3)
 Profit/ (loss) attributable to equity holders            172        301          (286)            (389)              (114)      (89)

 Weighted average number of shares ('000s)                176,658    175,893                                          176,658    175,893
 Adjusted basic EPS (pence)                               97.2p      171.1p                                           (64.7p)    (50.4p)

(1) See note 5 of the financial statements.

 

Appendix 3: Reconciliation to constant currency growth rates

Constant currency ("cc") growth is calculated by retranslating non-sterling
denominated component of H1 2021 at H1 2022 exchange rates as per the table
below.

                                                                 H1         H1
                                      H1       H1       %        2021       2021     CC %
 £m unaudited                         2022     2021     Change   FX impact  CC       Change
 Sports revenue                       2,118    1,894    +12%     33         1,927    +10%
 Gaming revenue                       1,270    1,159    +10%     21         1,179    +8%
 Total revenue                        3,388    3,053    +11%     54         3,106    +9%

 Cost of sales                        (1,353)  (1,109)  +22%     (23)       (1,132)  +20%
 Cost of sales as a % of net revenue  39.9%    36.3%    +360bps             36.4%    +350bps
 Gross profit                         2,036    1,944    +5%      31         1,975    +3%

 Sales and marketing                  (819)    (728)    +12%     (23)       (751)    +9%
 Contribution                         1,216    1,215    0%       8          1,224    -1%

 Other operating costs                (686)    (563)    +22%     (12)       (575)    +19%
 Corporate costs                      (55)     (55)     -1%      (3)        (58)     -6%
 Adjusted EBITDA                      476      597      -20%     (6)        591      -19%
 Adjusted EBITDA margin               14.1%    19.6%    -550bps             19.0%    -500bps

 Depreciation and amortisation        (143)    (125)    +14%     (3)        (128)    +11%
 Adjusted operating profit            334      472      -29%     (9)        463      -28%

 Revenue by division
 UK & Ireland                         1,092    1,135    -4%      (2)        1,133    -4%
 Australia                            612      585      +5%      0          585      +5%
 International                        633      680      -7%      7          687      -8%
 US                                   1,051    652      +61%     50         702      +50%

 Adjusted EBITDA by division
 UK & Ireland                         321      359      -11%     1          360      -11%
 Australia                            219      201      +9%      (2)        199      +10%
 International                        122      179      -32%     (3)        176      -31%
 US                                   (132)    (87)     +52%     1          (86)     +53%
 Corporate costs                      (55)     (55)     -1%      (3)        (58)     -6%

 

Appendix 4: Reconciliation of Adjusted cash flow to reported statutory cash
flow

In the operating and financial review the cash flow has been presented on a
net cash basis. The difference between the net cash basis and the reported
cash flow is the inclusion of borrowings, debt related derivatives and cash
and cash equivalents - available for corporate use but excluding cash and cash
equivalents - customer balances to determine a net cash position.

                                                            Adjusted cash flow        Debt and customer balances adjustments        Statutory cash flow
 £m unaudited                                               2022        2021          2022                  2021                    2022        2021
 Adjusted EBITDA(1)                                         476         597                                                         476         597
 Capex(2)                                                   (156)       (138)                                                       (156)       (138)
 Working capital(3)                                         (41)        18                                                          (41)        18
 Corporation tax                                            (132)       (92)                                                        (132)       (92)
 Lease liabilities paid                                     (21)        (27)                                                        (21)        (27)
 Adjusted free cash flow                                    127         358           -                     -                       127         358

 Cash flow from separately disclosed items(4)               (39)        (24)                                                        (39)        (24)
 Free cash flow                                             87          333           -                     -                       87          333

 Interest cost(5)                                           (46)        (70)                                                        (46)        (70)
 Other borrowing costs(5)                                   (2)         (5)                                                         (2)         (5)
 Amounts paid in respect of Kentucky settlement             -           (71)                                                        -           (71)
 Purchase of shares by the EBT                              -           (89)                                                        -           (89)
 Acquisitions and disposals(6)                              (410)       (51)                                                        (410)       (51)
 Cash acquired in business combinations(6)                  15          18                                                          15          18
 Other(7)                                                   (3)         (4)                                                         (3)         (4)
 Movement in cash and cash equivalents - customer balances  -           -             44                    (34)                    44          (34)
 Net amounts repaid on borrowings(8)                        -           -             178                   (13)                    178         (13)
 Net (decrease)/increase in cash                            (360)       61            222                   (46)                    (137)       15

 Net (debt)/cash at start of year(9)                        (2,647)     (2,814)       4,276                 4,005                   1,629       1,191
 Foreign currency exchange translation                      (241)       26            252                   (44)                    11          (18)
 Change in fair value of hedging derivatives                244         45            (244)                 (45)                    -           -
 Net (debt)/cash as at 30 June(9)                           (3,004)     (2,682)       4,507                 3,870                   1,503       1,188

(1) Adjusted EBITDA includes the following line items in the statutory cash
flow: Profit for the period, separately disclosed items, tax expense,
financial income, financial expense and depreciation and amortisation.

(2) Capex includes purchase of property, plant and equipment, purchase of
intangible assets, capitalised internal development expenditure, lease
incentive received and payment of contingent deferred consideration.

(3) Working capital includes (increase)/decrease in trade and other
receivables, increase in trade, other payables and provisions, employee
equity-settled share-based payments expense before separately disclosed items
and investments and foreign currency exchange loss/(gain).

(4) Cash flow from separately disclosed items relates to transaction fees,
along with restructuring and integration costs.

(5) Interest and other borrowing costs includes interest paid, interest
received and fees in respect of borrowing facilities.

(6) The combination of acquisition and disposals of (£410m) and cash acquired
in business combinations (£15m) reconciles to the statutory cash flow amounts
for purchase of businesses net of cash acquired (£395m).

(7) Other includes proceeds from the disposal of assets, proceeds from the
issue of shares on exercise of employee options, dividends paid to
non-controlling interest, lease interest paid and other.

(8) Net amounts repaid on borrowings includes principle repayments on USD
First Lien Term Loan B and additional draw downs and repayments on the GBP
Revolving Credit Facilities.

(9) Net (debt)/cash comprises principal outstanding balance of borrowings,
accrued interest on those borrowings, derivatives held for hedging debt
instruments, cash and cash equivalents - available for corporate use and cash
and cash equivalents - customer balances.

STATEMENT OF DIRECTORS RESPONSIBILITIES

For the half-year ended 30 June 2022

 

The Directors are responsible for preparing the half-yearly financial report
in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007
("Transparency Directive"), and the Transparency Rules of the Central Bank of
Ireland.

In preparing the condensed set of financial statements included within the
half-yearly financial report, the Directors are required to:

 

·    prepare and present the condensed set of financial information in
accordance with IAS 34 Interim Financial Reporting as adopted by the EU, the
Transparency (Directive 2004/109/EC) Regulations 2007 ("Transparency
Directive"), and the Transparency Rules of the Central Bank of Ireland; the
Transparency Directive and the Transparency Rules of the Central Bank of
Ireland;

·      ensure the condensed set of financial information has adequate
disclosures;

·      select and apply appropriate accounting policies; and

·      make accounting estimates that are reasonable in the
circumstances.

 

The Directors are responsible for designing, implementing and maintaining such
internal controls as they determine is necessary to enable the preparation of
the condensed set of financial statements that is free from material
misstatement whether due to fraud or error.

We confirm that to the best of our knowledge:

 

1)    the condensed set of consolidated financial statements in the
half-yearly financial report of Flutter Entertainment plc for the six months
ended 30 June 2022 ("the interim financial information") which comprises the
Condensed Consolidated Interim Income Statement, the Condensed Consolidated
Interim Statement of Other Comprehensive Income, the Condensed Consolidated
Interim Statement of Financial Position, the Condensed Consolidated Interim
Statement of Cash Flows, the Condensed Consolidated Interim Statement of
Changes in Equity and related explanatory notes, have been presented and
prepared in accordance with International Accounting Standard 34, Interim
Financial Reporting, as adopted by the EU, the Transparency Directive and
Transparency Rules of the Central Bank of Ireland.

 

1)    the interim financial information presented, as required by the
Transparency Directive, includes:

 

a)     an indication of important events that have occurred during the
first six months of the financial year, and their impact on the condensed set
of financial statements;

b)    a description of the principal risks and uncertainties for the
remaining six months of the financial year;

c)     related parties' transactions that have taken place in the first
six months of the current financial year and that have materially affected the
financial position or the performance of the enterprise during that period;
and

d)    any changes in the related parties' transactions described in the
last annual report that could have a material effect on the financial position
or performance of the enterprise in the first six months of the current
financial year.

 

On behalf of the board

 

 Peter Jackson            Jonathan Hill
 Chief Executive Officer  Chief Financial Officer
 11 August 2022

 

Principal risks

The principal risks and uncertainties which are considered to have a material
impact on the Group's future performance and strategic objectives are set out
on the following pages. The principal risks and uncertainties are consistent
with those defined in the Group's Annual Report & Accounts 2021, available
at www.flutter.com.

This is not intended to be an exhaustive and extensive analysis of all risks
which may affect the Group. Additional risks and uncertainties currently
deemed to be less material, or not presently known to Management, may also
have an adverse effect on the performance and strategic objectives of the
Group.

 

 Changes to Legal, Regulatory and Licensing landscape
 Why we need to manage this                                                      How we manage and mitigate the risk
 The complex and constantly evolving regulatory environments in which we         •           We have dedicated internal and external Legal,
 operate, in terms of multiple jurisdictions, tax regimes and licensing          Regulatory, Compliance and Tax teams covering all regions with responsibility
 obligations, can make it commercially challenging for the us to operate, or     for working with, and advising management on any upcoming regulatory changes,
 impact our ability to grow at pace.                                             to set appropriate policies, processes and controls to adapt and ensure
                                                                                 compliance.

                                                                                 •           We are improving our regulatory profile with an
                                                                                 increased proportion of revenues coming from regulated markets and a
                                                                                 continuous focus on reducing exposure to higher risk jurisdictions.

                                                                                 •           For material markets, we invest significantly in
                                                                                 external counsel advice to conduct ongoing monitoring and to guide and support
                                                                                 strategic decision making and planning associated with these markets.

                                                                                 •           We invest continuously in the flexibility of our
                                                                                 in-house technology which is key for entering or remaining in markets and
                                                                                 allowing for adaptability and flexibility of our products as market
                                                                                 conditions and obligations change.

                                                                                 •           Flutter and its divisions have dedicated Corporate
                                                                                 Affairs teams, and hold memberships with relevant associations and industry
                                                                                 groups working with regulators and governments to influence and drive
                                                                                 proportionate, transparent and reasonable regulation and taxation in all
                                                                                 markets.
 Cyber Resilience and Protection of Data
 Why we need to manage this                                                      How we manage and mitigate the risk
 We are dependent on technology to support our products, business activities     •           We invest significantly in cyber security resources,
 and customer operations. Cyber maturity and capabilities across our expanding   capabilities, and technologies, and work with a variety of external security
 Group vary and may increase the number of potential attack vectors or           specialists to ensure security arrangements and systems are appropriate for
 internal threats, which could lead to financial loss, data breaches,            our evolving threat and continue to follow leading practice.
 regulatory action and reputational damage.

                                                                                 •           The Group Chief Information Security Officer works
                                                                                 with the Group and divisional information security teams to devise and advance
                                                                                 our strategy for cyber security, enhance our control assurance capabilities
                                                                                 and governance.

                                                                                 •           The Flutter cyber security team owns and reports on
                                                                                 the Group-wide cyber policy detailing our key cyber topics and control
                                                                                 standards, with periodic review and approval, in addition to internal and
                                                                                 external annual assessment of security maturity.

                                                                                 •           Flutter cyber assurance framework has been
                                                                                 established, with risk assessments ongoing to provide assurance that security
                                                                                 controls implemented protect against key risk topics.

 

 

 

 US growth execution and competition
 Why we need to manage this                                                                                                 How we manage and mitigate the risk
 The successful execution of our commercial and growth strategy for the US                                                  •           We continue to establish and maintain strong
 business across its brands and partnerships is critical to our                                                             commercial relationships with our market access partners and strategic media
 long-term ambitions.                                                                                                       partners to secure access to new markets and maintain growth.

                                                                                                                            •           We continue to invest in people, product and brands to
                                                                                                                            acquire further market share and to maintain the agility, scalability and
                                                                                                                            leading market positions for our products.

                                                                                                                            •           In addition, we also have dedicated external advisers,
                                                                                                                            internal expertise and resources to support with the monitoring and assessment
                                                                                                                            of the US competitive landscape to take appropriate actions.

                                                                                                                            •           We continue to develop our in-house technology stack,
                                                                                                                            including the adoption of our proprietary global betting platform for the
                                                                                                                            provision of sports betting, to continuously improve our offering and meet
                                                                                                                            evolving stakeholder needs.

                                                                                                                            •           Our dedicated US Legal, Risk and Compliance teams work
                                                                                                                            closely with the business teams to monitor ongoing compliance across multiple
                                                                                                                            jurisdictions to continuously improve our processes and controls to ensure
                                                                                                                            compliance with our federal and state obligations.
 International technology transformation
 Why we need to manage this                                                       How we manage and mitigate the risk
 Challenges to transform, expand and scale our capabilities, given variances in   •           Full restructure by CIO and key new leadership roles
 legacy entities, which may lead to lower than desired resilience, reliability    in International Technology function, recruiting externally and leveraging
 and product agility.                                                             internal talent from other brands and divisions.

                                                                                  •           Full review of the International division's technology
                                                                                  risk profile with clear plans and structures in place to improve, using a
                                                                                  risk-based approach.

                                                                                  •           Our revised technology strategy has been defined to
                                                                                  support significant market growth and expansion.

                                                                                  •           We continue to invest in resources, software and
                                                                                  hardware to address themed strategic initiatives, which address stability,
                                                                                  process, people and technology.

                                                                                  •           Focused support from external advisers, strategic
                                                                                  partners and experts to support with technology transformation delivery.
 Global talent acquisition
 Why we need to manage this                                                       How we manage and mitigate the risk
 Acquisition of key talent, senior management and leadership positions across     •           Our employee value proposition has been amplified for
 the Group, and their successful retention, to satisfy the needs of our growing   all our divisions to attract the right talent, with the skills, capabilities
 organisation is critical to achieving our strategic objectives.                  and experience for Flutter.

                                                                                  •           Dedicated workstreams led by the Group CPO function to
                                                                                  align processes and identify talent acquisition partners to support internal
                                                                                  teams to build a pipeline and attract the best talent for the Group going
                                                                                  forward.

                                                                                  •           Flutter launched its vision, purpose and values, in
                                                                                  alignment with divisional perspectives, supported by playbooks, talkshops and
                                                                                  toolkits. Surveys continue to be conducted to listen and learn from employees
                                                                                  and understand colleague engagement levels Group wide.

                                                                                  •           We conduct extensive market research and benchmarking
                                                                                  to ensure that the Group maintains an attractive employee value proposition.

                                                                                  •           The Group and divisional CPOs address our talent
                                                                                  matters in a prioritised manner and build capability to address gaps and
                                                                                  facilitate talent mobility.

 

 

 

 Compliance with existing legal, regulatory and licensing landscape
 Why we need to manage this                                                      How we manage and mitigate the risk
 The interpretation and ongoing compliance with complex and multiple regulatory  •           For the jurisdictions in which we hold a licence,
 and legislative requirements applicable to the Group's activities in the        dedicated Divisional Compliance teams work closely with the business teams to
 markets in which it operates underpins the sustainability and reputation of     monitor ongoing compliance and continuously enhance our processes and controls
 our business.                                                                   to ensure compliance with regulatory frameworks and licence requirements.

                                                                                 •           We have a number of Group-led overarching policies and
                                                                                 compliance programmes to govern processes across divisions and thereby ensure
                                                                                 compliance with applicable laws and regulations.

                                                                                 •           Detailed policy and procedures across each division
                                                                                 ensure local regulatory requirements are documented, monitored and reviewed
                                                                                 periodically.

                                                                                 •           Annual compliance training, including Anti-Bribery and
                                                                                 Corruption ("ABC"), Data Protection ("DP") and Anti-Money Laundering ("AML"),
                                                                                 is mandatory for all staff, as well as regular, targeted training and
                                                                                 awareness sessions.

                                                                                 •           Divisional and Group management provide periodic legal
                                                                                 and regulatory updates through established governance forums at both
                                                                                 divisional and Group level Committees.
 Global talent management and retention
 Why we need to manage this                                                                                                How we manage and mitigate the risk
 The people who work within Flutter are key to our success. Insufficient                                                   •           Flutter Workforce Engagement Committee established to
 management and retention of key individuals may impact our ability to deliver                                             ensure the Group has a culture that underpins its vision, values and strategy,
 on our strategic and operational objectives.                                                                              and to provide an employee voice to the Board.

                                                                                                                           •           The Remuneration Committee and wider reward programmes
                                                                                                                           review the structures in place for our people with the objective to
                                                                                                                           incentivise, motivate and retain talent to support the delivery of the Group's
                                                                                                                           long-term strategy.

                                                                                                                           •           We communicate through different platforms to
                                                                                                                           underscore key career development opportunities, highlight employee
                                                                                                                           recognition programmes and bring attention to strategic programmes such as
                                                                                                                           DEI.

                                                                                                                           •           Regular engagement surveys take place for all
                                                                                                                           colleagues to ensure we understand the values and behaviours that are
                                                                                                                           important to staff and the brands they support.

                                                                                                                           •           The Group and divisional CPO functions continue to
                                                                                                                           drive health and wellbeing initiatives as part of our dynamic Future Ways of
                                                                                                                           Working approach.
 Third parties and key suppliers
 Why we need to manage this                                                                                                How we manage and mitigate the risk
 Across our divisions and Group, we place reliance upon certain critical                                                   •           Strategic and critical suppliers are subject to
 suppliers of technology, marketing, sports content and media which are                                                    regular business and quality reviews to ensure ongoing relationship and
 fundamental to our business and product offerings. The effective management of                                            performance management.
 critical third party relationships, performance and regulatory expectations is

 key to our strategic objectives.                                                                                          •           The Group Procurement and Third Party Assurance
                                                                                                                           functions maintain a Risk Heatmap to monitor strategic and critical suppliers
                                                                                                                           and ensure continuity of critical services.

                                                                                                                           •           As part of our procurement processes, we employ
                                                                                                                           dedicated resources supplemented by subject matter expertise within risk,
                                                                                                                           compliance, legal and technology assurance to protect and enhance value,
                                                                                                                           demonstrate our high standards of corporate integrity, and reinforce
                                                                                                                           organisational resilience.

                                                                                                                           •           Where possible, we limit reliance on a single supplier
                                                                                                                           to reduce potential single point of failure.

 

 

 

 Safer gambling strategy
 Why we need to manage this                                                       How we manage and mitigate the risk
 Safer Gambling underpins every element of the Group's strategy, and is a key     •           Group Safer Gambling strategy is embedded into our
 pillar of our Positive Impact Plan. We want to demonstrate consistency and       businesses from how we identify and interact with at-risk customers through to
 global alignment with our Safer Gambling strategy to protect our customers who   how we communicate to a broad group of stakeholders and how we encourage Safer
 are at risk of the potential negative effects of gambling and to ensure we       Gambling tool usage.
 grow our business sustainably.

                                                                                  •           We leverage and share policies, processes and
                                                                                  practices across the Group to enhance the strategic approach to Safer Gambling
                                                                                  and demonstrate our serious commitment to ESG.

                                                                                  •           A leading range of tools are provided on all our brand
                                                                                  sites to  support customers in managing their spend and play, and the Group
                                                                                  and its brands are continually working to improve and enhance our tools and
                                                                                  site content to enable us to identify and interact with at-risk customers.

                                                                                  •           The Group works closely with leading external third
                                                                                  parties to facilitate internal teams to enhance our understanding, and
                                                                                  capabilities in relation to identification of problem gambling through the use
                                                                                  of artificial intelligence.

                                                                                  •           The Group continues to invest significantly in
                                                                                  improvements for tackling the problem through donations to research,
                                                                                  treatment, education initiatives, as well as through driving collaboration
                                                                                  across the industry with other operators, charities and regulatory bodies.
 Technology resilience - availability and stability
 Why we need to manage this                                                       How we manage and mitigate the risk
 We have a critical dependency on our in-house technology, and on certain         •           We invest in our proprietary technology and resources
 material third parties, to maintain the stability and availability of our        to improve IT resilience, eliminate single points of failure and drive better
 customer-facing products, as well as the ability to recover in a timely manner   performance.
 from severe disruption with minimal impact on our customers, data

 and products.                                                                    •           We have established a standard scale to better compare
                                                                                  the IT disaster recovery resilience levels in each division and ensure
                                                                                  adequate improvement plans are developed and tracked to mitigate any material
                                                                                  risks.

                                                                                  •           We have dedicated resources to develop, enhance and
                                                                                  test our disaster recovery capability for our key products across all our
                                                                                  brands of the Group.

                                                                                  •           Key global metrics on critical systems and platforms
                                                                                  which are regularly monitored and reported on identify any potential emerging
                                                                                  issues on our brands or customer-facing technologies.

                                                                                  •           We have a defined formal incident management process
                                                                                  in place for identifying, escalating and resolving issues
                                                                                  and a post-incident process to ensure we continuously improve our
                                                                                  proprietary technology.

 

Consolidated Interim Income Statement

For the six months ended 30 June 2022

 

                                                                                        2022                                                                    2021
 Unaudited                                                                  Note        £m                                                                      £m
 Continuing operations

 Revenue                                                                    4                                     3,388.2                                                                 3,052.5
 Cost of sales                                                                                                   (1,352.6)                                                               (1,121.9)
 Gross profit                                                                                                     2,035.6                                                                 1,930.6

 Operating costs excluding depreciation, amortisation and gain on disposal                                       (1,601.5)                                                               (1,368.2)
 EBITDA(1)                                                                                                            434.1                                                                   562.4

 Amortisation of acquisition-related intangible assets                                                              (286.1)                                                                 (275.5)
 Depreciation and amortisation of other assets                                                                      (144.6)                                                                 (125.0)
 Gain on disposal                                                                                                         1.9                                                                       -
 Operating profit                                                                                                         5.3                                                                 161.9

 Financial income                                                           6                                             0.7                                                                       -
 Financial expense                                                          6                                         (57.4)                                                                   (84.9)
 (Loss) / profit before tax                                                                                           (51.4)                                                                    77.0

 Tax expense                                                                7                                         (60.8)                                                                (163.0)
 Loss for the period                                                                                                (112.2)                                                                    (86.0)

 Attributable to:
 Equity holders of the Company                                                                                      (114.3)                                                                    (88.6)
 Non-controlling interest                                                                                                 2.1                                                                     2.6
                                                                                                                    (112.2)                                                                    (86.0)

 Earnings per share
 Basic                                                                      8                                     (£0.647)                                                                (£0.504)
 Diluted                                                                    8                                     (£0.647)                                                                (£0.504)

1 EBITDA is defined as profit for the period before depreciation,
amortisation, impairment, gain on disposal, financial income, financial
expense and tax expense / credit. It is considered by the Directors to be a
key measure of the Group's financial performance.

 

Notes 1 to 20 on pages 36 to 58 form an integral part of these condensed
consolidated financial statements.

 

Consolidated Interim Statement of Other Comprehensive Income

For the six months ended 30 June 2022

 

                                                                               2022                                                            2021
 Unaudited                                                                     £m                                                              £m

 Loss for the period                                                                                   (112.2)                                                           (86.0)

 Other comprehensive income / (loss):
 Items that are or may be reclassified subsequently to profit or loss:
 Effective portion of changes in fair value of cash flow hedges                                          269.7                                                         (156.0)
 Fair value of cash flow hedges transferred to the income statement                                    (244.2)                                                          164.7
 Foreign exchange loss on net investment hedges, net of tax(1)                                           (41.0)                                                          (56.3)
 Foreign exchange gain / (loss) on translation of the net assets of foreign                              222.4                                                         (105.5)
 currency denominated entities
 Debt instruments at FVOCI                                                                                  (2.3)                                                          (0.6)
 Other comprehensive income / (loss)                                                                     204.6                                                         (153.7)
 Total comprehensive income / (loss) for the period                                                        92.4                                                        (239.7)

 Attributable to:
 Equity holders of the Company                                                                             86.2                                                        (242.5)
 Non-controlling interest                                                                                    6.2                                                             2.8
 Total comprehensive income / (loss) for the period                                                        92.4                                                        (239.7)

1 Foreign exchange loss on net investment hedges is presented including an
income tax charge of £4.7m (six months ended 30 June 2021: £1.7m) which
relates to the tax effect of the Group's hedging activities.

Notes 1 to 20 on pages 36 to 58 form an integral part of these condensed
consolidated financial statements.

Consolidated Interim Statement of Financial Position

As at 30 June 2022

 

                                                                  30 June 2022                                                            31 December 2021
                                                                  Unaudited                                                               Audited
                                                            Note  £m                                                                      £m
 Assets
 Property, plant and equipment                                                                 478.8                                                                 451.4
 Intangible assets                                                                          4,959.6                                                               4,875.6
 Goodwill                                                   9                               9,706.3                                                               9,346.8
 Deferred tax assets                                                                                7.5                                                                   8.2
 Non-current tax receivable                                                                       32.9                                                                 21.5
 Investments                                                11                                      6.0                                                                   5.5
 Derivative financial assets                                15                                 275.5                                                                   68.0
 Financial assets - restricted cash                                                                 7.6                                                                   7.4
 Other receivables                                          11                                    28.3                                                                 29.3
 Total non-current assets                                                                 15,502.5                                                             14,813.7
 Trade and other receivables                                11                                 250.5                                                                 203.9
 Cash and cash equivalents - customer balances                                                 721.7                                                                 677.6
 Cash and cash equivalents - available for corporate use                                       781.2                                                                 951.7
 Current investments at FVOCI - customer deposits                                                 89.0                                                                 83.0
 Current tax receivable                                                                           54.4                                                                 45.6
 Total current assets                                                                       1,896.8                                                               1,961.8
 Total assets                                                                             17,399.3                                                             16,775.5

 Equity
 Issued share capital and share premium                                                        480.7                                                                 477.6
 Shares held by Employee Benefit Trust                      16                                    (4.0)                                                                 (4.0)
 Cash flow hedge reserve                                    16                                    48.2                                                                 22.7
 Other reserves                                                                                151.7                                                                  (61.7)
 Retained earnings                                                                          9,544.9                                                               9,816.3
 Total equity attributable to equity holders of the Parent                                10,221.5                                                             10,250.9
 Non-controlling interest                                                                           4.1                                                                37.5
 Total equity                                                                             10,225.6                                                             10,288.4
 Liabilities
 Trade and other payables                                   12                              1,317.0                                                               1,096.4
 Customer balances                                                                             775.1                                                                 721.0
 Derivative financial liabilities                           15                                    50.1                                                                 74.0
 Provisions                                                 13                                    71.9                                                                 71.3
 Current tax payable                                                                              45.5                                                                 42.3
 Lease liability                                                                                  51.9                                                                 47.0
 Borrowings                                                 14                                    24.2                                                                 22.1
 Total current liabilities                                                                  2,335.7                                                               2,074.1
 Trade and other payables                                   12                                    21.9                                                                 19.8
 Derivative financial liabilities                           15                                    16.5                                                                 55.1
 Provisions                                                 13                                    49.5                                                                 47.8
 Deferred tax liabilities                                                                      518.3                                                                 498.0
 Non-current tax payable                                                                          10.7                                                                 25.2
 Lease liability                                                                               239.2                                                                 217.4
 Borrowings                                                 14                              3,981.9                                                               3,549.7
 Total non-current liabilities                                                              4,838.0                                                               4,413.0
 Total liabilities                                                                          7,173.7                                                               6,487.1
 Total equity and liabilities                                                             17,399.3                                                             16,775.5

Notes 1 to 20 on pages 36 to 58 form an integral part of these condensed
consolidated financial statements.

On behalf of the Board

 

 

 Peter Jackson             Jonathan Hill

 Chief Executive Officer   Chief Financial Officer

11 August 2022

Consolidated Interim Statement of Cash Flows

For the six months ended 30 June 2022

                                                                                2022                                                  2021 Restated ((1))
 Unaudited                                                               Note   £m                                                    £m
 Cash flows from operating activities
 Loss for the period                                                                               (112.2)                                                 (86.0)
 Tax expense                                                                                          60.8                                                163.0
 Financial income                                                                                      (0.7)                                                    -
 Financial expense                                                                                    57.4                                                  84.9
 Amortisation of acquisition related intangible assets                                              286.1                                                 275.5
 Depreciation and amortisation of other assets                                                      144.6                                                 125.0
 Gain on disposal                                                                                      (1.9)                                                    -
 Separately disclosed items included within EBITDA                      5                             42.2                                                  34.6
 Employee equity-settled share-based payments expense                   16                            50.1                                                  35.5
 Foreign currency exchange gain                                                                      (16.1)                                                (11.8)
 Cash from operations before changes in working capital                                             510.3                                                 620.7
 Increase in trade and other receivables                                                             (38.6)                                                (36.5)
 (Decrease) / increase in trade, other payables and provisions                                       (36.6)                                                 30.3
 Cash generated from operating activities                                                           435.1                                                 614.5
 Taxes paid                                                                                        (131.7)                                                 (92.0)
 Cash generated from operations, net of taxes paid                                                  303.4                                                 522.5
 Transaction fees, restructuring and integration costs paid             5                            (39.3)                                                (24.5)
 Amounts paid in respect of Kentucky litigation                                                           -                                                (71.1)
 Net cash from operating activities                                                                 264.1                                                 426.9
 Cash flows from investing activities:
 Purchase of property, plant and equipment                                                           (26.6)                                                (33.4)
 Purchase of intangible assets                                                                       (20.8)                                                (23.9)
 Capitalised internal development expenditure                                                        (93.1)                                                (66.4)
 Purchase of businesses net of cash acquired                            10                         (395.2)                                                 (33.7)
 Payment of contingent deferred consideration                           10                           (15.3)                                                (19.0)
 Proceeds from disposal of assets                                                                       3.8                                                     -
 Interest received                                                                                      0.7                                                     -
 Movement in cash and cash equivalent - customer balances                                             44.1                                                 (33.6)
 Other                                                                                                 (0.3)                                                 (2.6)
 Net cash used in investing activities                                                             (502.7)                                               (212.6)
 Cash flows from financing activities:
 Proceeds from the issue of shares on exercise of employee options      16                              3.1                                                    8.0
 Dividend paid to non-controlling interest                              16                             (5.4)                                                 (5.1)
 Payment of lease liabilities                                                                        (20.9)                                                (26.8)
 Payment of lease interest                                                                             (4.7)                                                 (3.9)
 Lease incentive received                                                                                 -                                                    4.8
 Proceeds from borrowings                                               14                          275.0                                                       -
 Repayment of borrowings                                                14                           (96.6)                                                (12.9)
 Interest paid                                                          14                           (46.8)                                                (70.0)
 Financing fees paid in respect of borrowing facilities                                                (2.3)                                                 (4.6)
 Ordinary shares of the Company acquired by the Employee Benefit Trust  16                                -                                                (89.0)
 Net cash from / (used in) financing activities                                                     101.4                                                (199.5)
 Net (decrease)/increase in cash and cash equivalents                                              (137.2)                                                  14.8
 Cash and cash equivalents at start of period                                                    1,629.3                                               1,191.3
 Foreign currency exchange gain/(loss) on cash and cash equivalents                                   10.8                                                 (18.1)
 Cash and cash equivalents at end of period                                                      1,502.9                                               1,188.0

 Presented on the Statement of Financial Position within:
 Cash and cash equivalents - customer balances                                                      721.7                                                 554.3
 Cash and cash equivalents - available for corporate use                                            781.2                                                 623.1
 Assets held for sale                                                                                     -                                                 10.6
                                                                                                 1,502.9                                               1,188.0

 

(1) See Note 2 for details of restatement.

Notes 1 to 20 on page 36 to 58 form an integral part of these condensed
consolidated financial statements.

Consolidated Interim Statement of Changes in Equity

For the six months ended 30 June 2022

 

                                                     Number of ordinary shares in issue                  Issued share capital and share premium              Shares held by Employee Benefit Trust               Cash flow hedge reserve                             Fair value reserve(1)                               Foreign exchange translation reserve(1)             Other reserves(1)                                   Share-based payment reserve(1)                      Retained earnings                                   Total equity attributable to shareholders of the    Non-controlling interest                            Total equity
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         Company
 Unaudited                                           m                                                   £m                                                  £m                                                  £m                                                  £m                                                  £m                                                  £m                                                  £m                                                  £m                                                  £m                                                  £m                                                  £m
 Balance at 1 January 2022                                            175.6                                               477.6                                                   (4.0)                                              22.7                                                 (1.7)                                         (194.2)                                                     2.5                                           131.7                                          9,816.3                                            10,250.9                                                     37.5                                       10,288.4
 Total comprehensive income / (loss) for the year
 Loss for the period                                                          -                                                   -                                                   -                                                   -                                                   -                                                   -                                                   -                                                   -                                         (114.3)                                              (114.3)                                                    2.1                                          (112.2)
 Foreign exchange translation including net                                   -                                                   -                                                   -                                                   -                                                   -                                           182.0                                                       -                                                   -                                                   -                                            182.0                                                    4.1                                            186.1
 investment hedges
 Effective portion of changes in fair value of cash                           -                                                   -                                                   -                                           269.7                                                       -                                                   -                                                   -                                                   -                                                   -                                            269.7                                                      -                                            269.7
 flow hedges
 Fair value of cash flow hedges transferred to the                            -                                                   -                                                   -                                         (244.2)                                                       -                                                   -                                                   -                                                   -                                                   -                                          (244.2)                                                      -                                          (244.2)
 income statement
 Financial assets at FVOCI                                                    -                                                   -                                                   -                                                   -                                               (2.3)                                                   -                                                   -                                                   -                                                   -                                                (2.3)                                                  -                                                (2.3)
 Tax on foreign exchange hedging                                              -                                                   -                                                   -                                                   -                                                   -                                               (4.7)                                                   -                                                   -                                                   -                                                (4.7)                                                  -                                                (4.7)
 Total comprehensive income / (loss) for the period                           -                                                   -                                                   -                                              25.5                                                 (2.3)                                           177.3                                                       -                                                   -                                         (114.3)                                                   86.2                                                  6.2                                               92.4
 Transactions with owners of the Company, recognised directly in equity
 Shares issued on exercise of employee share options                        0.2                                                 3.1                                                   -                                                   -                                                   -                                                   -                                                   -                                                   -                                                   -                                                  3.1                                                  -                                                  3.1
 (Note 16)
 Liability recognised on put option (Note 12)                                 -                                                   -                                                   -                                                   -                                                   -                                                   -                                                   -                                                   -                                         (169.8)                                              (169.8)                                               (34.2)                                            (204.0)
 Equity-settled transactions - expense recorded in                            -                                                   -                                                   -                                                   -                                                   -                                                   -                                                   -                                              50.1                                                     -                                               50.1                                                    -                                               50.1
 the income statement
 Tax on share-based payments                                                  -                                                   -                                                   -                                                   -                                                   -                                                   -                                                   -                                                   -                                                 1.0                                                  1.0                                                  -                                                  1.0
 Exercise of share options                                                    -                                                   -                                                   -                                                   -                                                   -                                                   -                                                   -                                            (11.7)                                                11.7                                                      -                                                  -                                                    -
 Dividend paid to non-controlling interest (Note 16)                          -                                                   -                                                   -                                                   -                                                   -                                                   -                                                   -                                                   -                                                   -                                                    -                                              (5.4)                                                (5.4)
 Total contributions by and distributions to owners                         0.2                                                 3.1                                                   -                                                   -                                                   -                                                   -                                                   -                                              38.4                                           (157.1)                                              (115.6)                                               (39.6)                                            (155.2)
 of the Company
 Balance at 30 June 2022                                              175.8                                               480.7                                                   (4.0)                                              48.2                                                 (4.0)                                            (16.9)                                                   2.5                                           170.1                                          9,544.9                                            10,221.5                                                        4.1                                     10,225.6

(1) Included in other reserves in the Statement of Financial Position.

Notes 1 to 20 on pages 36 to 58 form an integral part of these condensed
consolidated financial statements.

 

Consolidated Interim Statement of Changes in Equity

For the six months ended 30 June 2021

                                              Number of ordinary shares in issue           Issued share capital and share premium       Merger reserve                               Treasury shares                              Shares held by Employee Benefit Trust        Cash flow hedge reserve           Fair value  reserve                           Foreign exchange translation reserve          Other reserves                                Share-based payment reserve             Retained earnings                             Total equity attributable to shareholders of  Non-controlling interest                      Total equity
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 the Company
 Unaudited                                    m                                            £m                                           £m                                           £m                                           £m                                           £m                                £m                                            £m                                            £m                                            £m                                      £m                                            £m                                            £m                                            £m
 Balance at 1 January 2021                                 177.0                                    2,481.7                                      7,982.9                                           (40.7)                                          (5.8)                                     (10.3)                               (0.4)                                        49.6                                             2.3                                  100.8                                      405.0                                       10,965.1                                           30.8                                10,995.9
 Total comprehensive income / (loss) for the year
 Loss for the period                                               -                                            -                                            -                                            -                                            -                                            -                                 -                                             -                                             -                                          -                                   (88.6)                                             (88.6)                                        2.6                                      (86.0)
 Foreign exchange translation including net                        -                                            -                                            -                                            -                                            -                                            -                                 -                                   (160.3)                                                 -                                          -                                          -                                        (160.3)                                          0.2                                   (160.1)
 investment hedges
 Tax on foreign exchange hedging                                   -                                            -                                            -                                            -                                            -                                            -                                 -                                         (1.7)                                             -                                          -                                          -                                              (1.7)                                        -                                         (1.7)
 Effective portion of changes in fair value of                      -                                            -                                            -                                            -                                            -                                  (156.0)                                     -                                             -                                             -                                          -                                          -                                        (156.0)                                            -                                   (156.0)
 cash flow hedges
 Fair value of cash flow hedges transferred to                      -                                            -                                            -                                            -                                            -                                    164.7                                     -                                             -                                             -                                          -                                          -                                          164.7                                            -                                     164.7
 the income statement
 Debt Instruments at FVOCI                                         -                                            -                                            -                                            -                                            -                                            -                             (0.6)                                             -                                             -                                          -                                          -                                              (0.6)                                        -                                         (0.6)
 Total comprehensive income / (loss) for the                       -                                            -                                            -                                            -                                            -                                          8.7                             (0.6)                                   (162.0)                                                 -                                          -                                   (88.6)                                          (242.5)                                          2.8                                   (239.7)
 period
 Transactions with owners of the Company, recognised directly in equity
 Shares issued on exercise of employee share                     0.3                                          8.0                                            -                                            -                                            -                                            -                                 -                                             -                                             -                                          -                                          -                                                8.0                                        -                                           8.0
 options (Note 16)
 Business combinations (Note 10)                                   -                                            -                                            -                                            -                                            -                                            -                                 -                                             -                                             -                                          -                                          -                                                  -                                   16.2                                          16.2
 Ordinary shares of the Company acquired by                        -                                            -                                            -                                            -                                     (89.0)                                              -                                 -                                             -                                             -                                          -                                          -                                           (89.0)                                          -                                      (89.0)
 the Employee Benefit Trust (Note
 10)
 Equity-settled transactions - expense                             -                                            -                                            -                                            -                                            -                                            -                                 -                                             -                                             -                                     36.6                                            -                                             36.6                                          -                                        36.6
 recorded in income statement
 Tax on share-based payments                                       -                                            -                                            -                                            -                                            -                                            -                                 -                                             -                                             -                                          -                                        1.1                                                1.1                                        -                                           1.1
 Transfer to retained earnings on exercise of                      -                                            -                                            -                                            -                                            -                                            -                                 -                                             -                                             -                                    (16.4)                                      16.4                                                    -                                        -                                             -
 share options and vesting of
 share awards
 Dividend paid to non-controlling interest                         -                                            -                                            -                                            -                                            -                                            -                                 -                                             -                                             -                                          -                                          -                                                  -                                    (5.1)                                         (5.1)
 Total contributions by and distributions to                     0.3                                          8.0                                            -                                            -                                     (89.0)                                              -                                 -                                             -                                             -                                     20.2                                       17.5                                             (43.3)                                     11.1                                        (32.2)
 owners of the Company
 Balance at 30 June 2021                                   177.3                                    2,489.7                                      7,982.9                                           (40.7)                                       (94.8)                                          (1.6)                             (1.0)                                   (112.4)                                               2.3                                  121.0                                      333.9                                       10,679.3                                           44.7                                10,724.0

Notes 1 to 20 on pages 36 to 58 form an integral part of these condensed
consolidated financial statements.

Notes to the Condensed Consolidated Interim Financial Statements

 

1. General information

Flutter Entertainment plc (the "Company") is a company incorporated in the
Republic of Ireland. The Condensed Consolidated Financial Statements of the
Company for the six months ended 30 June 2022 comprise the Company and its
subsidiaries (together referred to as the "Group"). These Condensed
Consolidated Interim Financial Statements are unaudited but have been reviewed
by KPMG, the Group's auditor, whose report is set out on the last page of this
document.

The financial information presented herein does not comprise full statutory
financial statements and therefore does not include all of the information
required for full annual financial statements. Full statutory financial
statements for the year ended 31 December 2021, prepared in accordance with
International Financial Reporting Standards ("IFRSs") as adopted by the EU
together with an unqualified audit report thereon under Section 391 of the
Irish Companies Act 2014, will be annexed to the annual return and filed with
the Registrar of Companies in Ireland.

These Condensed Consolidated Interim Financial Statements were approved for
issue by the Board of Directors of Flutter Entertainment plc on 11 August
2022.

2. Basis of preparation and accounting policies

The Condensed Consolidated Interim Financial Statements have been prepared in
accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, the
Transparency Rules of the Central Bank of Ireland and with IAS 34 'Interim
Financial Reporting' as adopted by the EU.

The Condensed Consolidated Interim Financial Statements are prepared on the
historical cost basis except for derivative financial instruments (which
include betting transactions), equity securities, certain financial assets
which have been designated as FVOCI, contingent deferred consideration and
share-based payments, all of which are stated at fair value (grant date fair
value in the case of equity-settled share-based payments).  The Condensed
Consolidated Interim Financial Statements are presented in pounds sterling and
are rounded to the nearest £0.1 million.

Going concern

The Group reported EBITDA of £434.1m and a loss after tax of £112.2m for the
six months ended 30 June 2022. This includes £430.7m of depreciation and
amortisation charged against profit in the period.  The net cash generated
from operating activities during the period ended 30 June 2022 was £264.1m.
The balance sheet at 30 June 2022 reported a net current liability position
of £438.9m. During the six months ended 30 June 2022, the Group is in
compliance with all covenants related to its lending arrangements.

The Directors have considered the available financial resources which include,
at 30 June 2022, £781.2m of cash and cash equivalents and a £482.0m
Revolving Credit Facility with undrawn capacity of £277.0m. Whilst there are
certain loan repayments due within the next 12 months of £24.2m, the Group's
lending facilities primarily fall due in 2026 as set out in more detail in
Note 14. As a consequence, the Directors believe that the Group is well placed
to manage its business risks successfully. See 'Principal Risks and
Uncertainties' in this report for more detail.

The Group's forecasts to the next 12 months indicate that it will continue to
have significant financial resources, continue to settle its debts as they
fall due and operate well within its banking covenants as outlined in Note 14
for at least a period of 12 months from the date of the approval of these
consolidated financial statements. 12 months from the date of the approval of
these consolidated financial statements was selected as the going concern
period as it represents the period in which the Group has prepared detailed
forecasts for a proportion of the period and it also reduces the degree of
judgement and estimation uncertainty involved in both the forecasts and the
downside scenarios.

When preparing the forecasts, the Group has included the cash outflows and
related financing associated with the Sisal acquisition as detailed in Note
20. Various downside scenarios over and above those already included in the
base case model on the potential impact of further reductions to cash flows
due to reduced customer discretionary income, changes in the legal, regulatory
and licencing landscape and the Group's cyber and IT resilience have been
considered in respect of these forecasts. The impact of these items involves
significant judgement and estimation uncertainty.

In the event that it were necessary to draw down additional debt funding, the
Directors have a reasonable expectation that this could be achieved within the
confines of its existing debt facilities and financial covenant requirements.

Accounting policies

The financial information contained in these Condensed Consolidated Interim
Financial Statements has been prepared in accordance with the accounting
policies set out in the Group's last annual financial statements in respect of
the year ended 31 December 2021 except as set out below.

 

2. Basis of preparation and accounting policies (continued)

In April 2022, the IFRS Interpretations Committee issued an agenda decision
clarifying the definition of cash and cash equivalents in the statement of
cash flows stating that cash amounts that are only restricted by an obligation
to a third party meet the definition of cash under IAS 7 Statement of Cash
Flows. The title of the agenda decision is Demand Deposits with Restrictions
on Use arising from a Contract with a Third Party (IAS 7 Statement of Cash
Flow).

Prior to this clarification, the Group had not treated cash amounts that were
restricted due to, for example gaming regulatory requirements to hold cash to
match customer liabilities, as cash and cash equivalents in the statement of
cash flows and had instead classified these balances as financial assets -
restricted cash.

The Group considers these cash balances to not be available to the Group and
will disaggregate these cash balances from the cash balances that are
available to the Group, for general corporate purposes in accordance with IAS
1 paragraph 55.

In accordance with this clarification, the Group has made a voluntary change
in accounting policy and has presented  cash and cash equivalents for the
purpose of its cash flow including these restricted balances and has restated
the prior period accordingly as follows.

                                                          31 December 2021            31 December 2021            31 December 2021            30 June 2021                30 June 2021                30 June 2021                31 December 2020            31 December 2020            31 December 2020
                                                          Originally reported         Reclassification            Restated                    Originally reported         Reclassification            Restated                    Originally reported         Reclassification            Restated

 Financial asset - restricted cash                               677.6                      (677.6)                            -                     554.3                      (554.3)                            -                     587.9                      (587.9)                            -

 Cash and cash equivalents - customer balances                         -                     677.6                       677.6                             -                     554.3                       554.3                             -                     587.9                       587.9
 Cash and cash equivalents - available for corporate use         951.7                             -                     951.7                       623.1                             -                     623.1                       603.4                             -                     603.4
 Assets held for sale                                                  -                           -                           -                       10.6                            -                       10.6                            -                           -                           -
 Cash and cash equivalents                                951.7                       677.6                       1,629.3                     633.7                       554.3                       1,188.0                     603.4                       587.9                       1,191.3

The change in the classification for the purpose of statement of cash flows
did not impact the Statement of Financial Position other than to rename the
captions.

3. Judgements and estimates

The preparation of interim financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from these
estimates.

Estimates and underlying assumptions are reviewed on an on-going basis.
Revisions to accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected.

Judgements

In preparing these Condensed Consolidated Financial Statements, the
significant judgements in applying the Group's accounting policies and the key
sources of estimation uncertainty were consistent with those that applied to
the Consolidated Financial Statements as at and for the year ended
31 December 2021 and are detailed below:

Valuation of tax assets and liabilities

Whilst we maintain good communication with key tax authorities, given the
global nature of our business and the complex international tax landscape,
there remain areas of tax uncertainty and therefore there is a level of
uncertainty with regards to the measurement of our tax assets and liabilities.
Uncertainties have been measured using the best estimate of the likely
outcome. This assessment relies on estimates and assumptions and may involve a
series of judgements about future events.

3. Judgements and estimates (continued)

Where uncertain tax treatments exist, the Group assesses whether it is
probable that a tax authority will accept the uncertain tax treatment applied
or proposed to be applied in its tax filings. The Group assesses each
uncertain tax treatment as to whether it should be considered independently or
whether some tax treatments should be considered collectively based on what
the Group believes provides a better estimate of the resolution of the
uncertainty. The Group considers whether it is probable that the relevant
authority will accept each uncertain tax treatment, or group of uncertain tax
treatments, assuming that the taxation authority will have full knowledge of
all relevant information when doing so. The key judgements include the
valuation of tax assets and liabilities

New information may become available that causes the Group to change its
judgement regarding the adequacy of existing tax assets and liabilities; such
changes to tax assets and liabilities will impact the income tax in the period
in which such a determination is made. Management uses in-house tax experts,
professional firms and previous experience when assessing tax risks and the
Group believes that the position for all tax assets and liabilities at
30 June 2022 is adequate based on its assessment of the range of factors
outlined above but given the inherent uncertainty, it is possible that
resolution of tax uncertainties may differ from the amounts provided for.

FOX Corporation

As announced on 2 October 2019, in order to achieve economic alignment of
Flutter's and TSG's strategic third party relationships across their
respective US businesses, concurrent with the Combination with TSG, the Group
entered into an arrangement with FOX, pursuant to which FSG Services, a
wholly-owned subsidiary of FOX, had an option to acquire an 18.6% equity
interest in FanDuel Group at its fair market value in July 2021. Under the
terms of the agreement an arbitration mechanism was put in place in the event
of a disagreement between the two parties relating to the option.

In April 2021, FOX filed an arbitration claim against the Group with respect
to its option to acquire an 18.6% equity interest in FanDuel seeking the same
price that the Group paid for the acquisition of 37.2% of FanDuel from
Fastball Holdings LLC in December 2020, based on an $11.2 billion valuation
for FanDuel. In the Group's opinion this valuation would be materially
favourable for FOX compared to the fair market valuation as of July 2021.
Arbitration proceedings remain ongoing and a ruling in the arbitration is
expected in late Quarter 3, 2022 or Quarter 4 2022.

The fair market value of the call option as at 30 June 2022 is required to
reflect the value that a market participant would have paid for such an
option, with the option exercise price, reflecting the conditions that would
have existed at 30 June 2022. Given the market assessment of comparable US
assets, it is management's view that there has been no increase in the market
value of FanDuel since the valuation date of the option, and therefore it is
determined that the value of the option is out of the money for FOX and the
derivative has close to nominal value at 30 June 2022.

Estimates

Determining the fair value of some assets and liabilities requires estimation
of the effects of uncertain future events on those assets and liabilities at
the end of the reporting period. The following discussion sets forth key
sources of estimation uncertainty at the end of the reporting period that
management believes have a significant risk of resulting in a material
adjustment to the carrying amounts of assets and liabilities within the next
financial year.

Measurement of the recoverable amounts of cash generating units containing
goodwill, indefinite life licences and intangible assets

The Group reviews the carrying value of goodwill for impairment annually (or
more frequently if there are indications that the value of goodwill may be
impaired) by comparing the carrying values of these cash generating units with
their recoverable amounts (being the higher of value in use and fair value
less costs to sell). The impairment review is performed on a "value-in-use"
basis, which requires estimation of future net operating cash flows, the time
period over which they will occur, an appropriate discount rate and an
appropriate growth rate. Certain of these estimates and assumptions are
subjective in nature.

The Group has reviewed the performance in the first half of 2022, in the
UK&I Online, Retail, International, Australia and US CGUs and based on
this and in conjunction with the headroom that existed at 31 December 2021, is
satisfied that no impairment has arisen during the six months ended 30 June
2022.

 

4. Operating segments

Reportable business segment information

The Group's four reportable segments are:

•      UK & Ireland;

•      Australia;

•      International; and

•      US.

UK & Ireland

The UK & Ireland ("UK&I") segment is comprised of the operations of
Sky Betting & Gaming, Paddy Power, Betfair and from January 2022, Tombola
(see Note 10). Revenues are earned from sports betting (sportsbook and the
exchange sports betting product) and gaming services (games, casino, bingo and
poker). Until August 2021, this segment also included the results of
Oddschecker (odds comparison website) at which point the business was
disposed. Services are provided primarily via the internet but also through
licensed bookmaking shop estates.

Australia

The Australia segment is comprised of the operations of the Sportsbet brand
and earns its revenues from sports betting services provided to Australian
customers using primarily the internet.

International

The International segment is comprised of PokerStars, Betfair International,
Adjarabet and Junglee Games. The International segment earns most of its
revenues from poker, casino, rummy and sports betting through various brands
and mainly via the internet.

US

The US segment is comprised of the FanDuel, TVG, FOX Bet, Stardust and
PokerStars brands' and earns its revenues from sports betting, daily fantasy
sports and gaming services (casino and poker) provided to customers, using
primarily the internet, with a proportion of US sports betting services also
provided through a small number of retail outlets.

Corporate

Corporate administrative costs (Board, Finance, Legal, Internal Audit, HR,
Property and other central functions) cannot be readily allocated to
individual operating segments and are not used by the CODM for making
operating and resource allocation decisions. These are shown in the
reconciliation of reportable segments to Group totals.

The accounting policies in respect of operating segments reporting are the
same as those described in the basis of preparation and summary of significant
accounting policies set out in the Company's last annual financial statements
in respect of the year ended 31 December 2021.

The Group does not allocate income tax expense or financing income and
expenses to reportable segments. Treasury management is centralised for the
UK&I, Australia, International and US segments.

Assets and liabilities information is reported internally in total and not by
reportable segment and, accordingly, no information is provided in this note
on assets and liabilities split by reportable segment.

Seasonality

The Group's sportsbook revenue is driven by a combination of the timing of
sporting and other events and the Group's results derived from those events.
The Covid pandemic caused some postponement and cancellation of sporting
events across the world and skewed results for the comparative period in
particular. Gaming and other revenue is not as dependent on the sporting
calendar.

4. Operating segments (continued)

Reportable business segment information for the six months ended 30 June
2022:

                                                                               UK&I                              Australia                           International                                 US                      Corporate                           Total
                                                                               £m                                £m                                  £m                                            £m                      £m                                  £m
 Revenue from external customers                                                      1,091.8                               612.1                                    633.6                           1,050.7                                -                         3,388.2
 Cost of sales                                                                          (335.0)                           (289.7)                                   (184.0)                            (543.9)                              -                        (1,352.6)
 Gross profit                                                                             756.8                             322.4                                    449.6                              506.8                               -                         2,035.6
 Operating costs excluding depreciation and amortisation                                (436.3)                           (103.1)                                   (327.1)                            (638.6)                        (54.2)                         (1,559.3)

 before separately disclosed items
 Adjusted EBITDA(1)  before separately disclosed items                                    320.5                             219.3                                    122.5                             (131.8)                        (54.2)                              476.3
 Depreciation and amortisation                                                            (63.4)                            (13.7)                                    (32.8)                             (31.8)                          (2.9)                          (144.6)

 before separately disclosed items
 Profit on disposal before separately disclosed items                                         0.2                                 -                                        -                                 1.2                          0.5                                 1.9
 Reportable segment profit / (loss) before separately disclosed items                     257.3                             205.6                                      89.7                            (162.4)                        (56.6)                              333.6
 Amortisation of acquisition-related intangible assets (Note 5)                         (135.7)                             (11.4)                                  (130.1)                                (8.9)                            -                           (286.1)
 Reportable segment profit / (loss) after amortisation of acquisition-related             121.6                             194.2                                     (40.4)                           (171.3)                        (56.6)                                47.5
 intangibles
 Transaction fees and associated costs(2)                                                                                                                                                                                                                                    (9.9)
 Restructuring and integration costs(2)                                                                                                                                                                                                                                   (32.3)
 Operating profit                                                                                                                                                                                                                                                             5.3

Reportable business segment information for the six months ended 30 June
2021:

                                                                               UK&I                            Australia                             International                                     US                  Corporate                             Total
                                                                               £m                              £m                                    £m                                                £m                  £m                                    £m
 Revenue from external customers                                                     1,135.2                               585.4                                        679.9                             652.0                              -                         3,052.5
 Cost of sales before separately disclosed items                                       (341.8)                            (275.2)                                     (199.3)                            (292.7)                             -                        (1,109.0)
 Gross profit  before separately disclosed items                                        793.4                              310.2                                        480.6                             359.3                              -                         1,943.5
 Operating costs excluding depreciation and amortisation                               (434.3)                            (109.3)                                     (301.9)                            (445.8)                        (55.2)                        (1,346.5)

 before separately disclosed items
 Adjusted EBITDA(1)                                                                     359.1                              200.9                                        178.7                              (86.5)                       (55.2)                            597.0
 Depreciation and amortisation  before separately disclosed items                        (62.6)                             (13.1)                                       (25.1)                            (21.9)                          (2.3)                         (125.0)
 Reportable segment profit / (loss) before separately disclosed items                   296.5                              187.8                                        153.6                            (108.4)                        (57.5)                            472.0
 Greece Tax Expense                                                                           -                                  -                                       (12.9)                                 -                            -                             (12.9)
 Amortisation of acquisition-related intangible assets (Note 5)                        (112.8)                              (10.6)                                    (138.8)                              (13.3)                            -                           (275.5)
 Reportable segment profit / (loss) after amortisation of acquisition-related           183.7                              177.2                                            1.9                          (121.7)                        (57.5)                            183.6
 intangibles and Greece tax expense
 Restructuring and integration costs(2)                                                                                                                                                                                                                                    (21.7)
 Operating profit                                                                                                                                                                                                                                                         161.9

1 Adjusted EBITDA which is a non-GAAP measure in the above segment note is
defined as profit for the six months before separately disclosed items,
depreciation, amortisation, impairment, gain on disposal, financial income,
financial expense and tax expense / credit. It is considered by the Directors
to be a key measure of the Group's financial performance.

2 The Group does not allocate transaction fees and restructuring and
integration costs to reportable segments.

 

4. Operating segments (continued)

Reconciliation of reportable segment information to Group totals:

                                                                            2022                                                                                                              2021
                                                                            Before                                Separately disclosed                  Total                                 Before                                Separately disclosed                  Total

                                                                            separately disclosed                  items                                                                       separately disclosed                  items

                                                                            items                                                                                                             items
                                                                            £m                                    £m                                    £m                                    £m                                    £m                                    £m
 Gross profit                                                                        2,035.6                                        -                            2,035.6                               1,943.5                                   (12.9)                           1,930.6
 Operating costs excluding depreciation, amortisation and gain on disposal          (1,559.3)                                  (42.2)                           (1,601.5)                             (1,346.5)                                  (21.7)                          (1,368.2)
 EBITDA(1)                                                                              476.3                                  (42.2)                               434.1                                 597.0                                  (34.6)                              562.4
 Depreciation and amortisation                                                         (144.6)                               (286.1)                               (430.7)                               (125.0)                               (275.5)                              (400.5)
 Gain on disposal                                                                            1.9                                    -                                    1.9                                    -                                     -                                    -
 Operating profit                                                                       333.6                                (328.3)                                     5.3                              472.0                                (310.1)                               161.9
 Net finance costs                                                                       (56.7)                                     -                                (56.7)                                (74.2)                                (10.7)                               (84.9)
 Profit / (loss) before tax                                                             276.9                                (328.3)                                 (51.4)                               397.8                                (320.8)                                  77.0
 Tax expense                                                                           (100.3)                                   39.5                                (60.8)                                (91.4)                                (71.6)                             (163.0)
 Profit / (loss) for the period                                                         176.6                                (288.8)                               (112.2)                                306.4                                (392.4)                                (86.0)

1 EBITDA is defined as profit for the six months before depreciation,
amortisation, impairment, gain on disposal, financial income, financial
expense and tax expense / credit. It is considered by the Directors to be a
key measure of the Group's financial performance.

See Note 5 for further detail on separately disclosed items.

Disaggregation of revenue under IFRS 15:

Group revenue disaggregated by product line for the six months ended 30 June
2022:

                      UK&I                                        Australia                                         International                             US                                        Total
                      £m                                          £m                                                £m                                        £m                                        £m
 Sports revenue(1)                       629.7                                      612.1                                             106.4                                     770.1                                  2,118.3
 Gaming revenue(2)                       462.1                                            -                                           527.2                                     280.6                                  1,269.9
 Total Group revenue                 1,091.8                                        612.1                                             633.6                                  1,050.7                                   3,388.2

Group revenue disaggregated by product line for the six months ended 30 June
2021(:)

                      UK&I                                      Australia                                         International                             US                                        Total
                      £m                                        £m                                                £m                                        £m                                        £m
 Sports revenue(1)                      737.9                                     585.4                                             118.1                                     452.5                                  1,893.9
 Gaming revenue(2)                      397.3                                           -                                           561.8                                     199.5                                  1,158.6
 Total Group revenue                 1,135.2                                      585.4                                             679.9                                     652.0                                  3,052.5

1 Sports revenue comprises sportsbook, exchange sports betting, daily fantasy
sports and pari-mutuel betting.

2 Gaming revenue includes Games, Poker, Casino, Rummy and Bingo.

Geographical information

Group revenue disaggregated by geographical market for the six months ended
30 June 2022:

                        UK&I                                                Australia                                                 International                                           US                                          Total
                        £m                                                  £m                                                        £m                                                      £m                                          £m
 US                                              -                                                      -                                                        -                                        1,054.4                                     1,054.4
 UK                                        952.5                                                        -                                                     31.5                                                 -                                      984.0
 Australia                                       -                                                612.1                                                          -                                                 -                                      612.1
 Rest of World(1)                              1.6                                                      -                                                  318.5                                                (3.7)                                     316.4
 EU (excl. Ireland)(2)                       22.0                                                       -                                                  281.1                                                   -                                      303.1
 Ireland                                   115.7                                                        -                                                       2.5                                                -                                      118.2
 Total Group revenue                   1,091.8                                                    612.1                                                    633.6                                          1,050.7                                     3,388.2

1 The Rest of World category includes multiple countries, that individually
represent less than 2% of total Group revenue.

2 The EU (excl. Ireland) category includes multiple countries, that
individually represent less than 4% of total Group revenue.

4. Operating segments (continued)

Group revenue disaggregated by geographical market for the six months ended
30 June 2021:

                        UK&I                                                Australia                                                 International                                             US                                            Total
                        £m                                                  £m                                                        £m                                                        £m                                            £m

 US                                              -                                                      -                                                         -                                             652.0                                           652.0
 UK                                    1,037.2                                                          -                                                     42.3                                                    -                                     1,079.5
 Australia                                       -                                                585.4                                                           -                                                   -                                         585.4
 Rest of World(1)                              7.1                                                      -                                                   265.3                                                     -                                         272.4
 EU (excl. Ireland)(2)                           -                                                      -                                                   368.4                                                     -                                         368.4
 Ireland                                     90.9                                                       -                                                        3.9                                                  -                                           94.8
 Total Group revenue                   1,135.2                                                    585.4                                                     679.9                                               652.0                                       3,052.5

1 The Rest of World category includes multiple countries that individually
represent less than 2% of total Group revenue.

2 The EU (excl. Ireland) category includes multiple countries that
individually represent less than 4% of total Group revenue.

Revenues are attributable to geographical location on the basis of the
customers location.

5. Separately disclosed items

The separately disclosed items noted in Note 4 above are comprised as follows:

                                                        2022                                                                  2021
                                                        £m                                                                    £m
 Greece tax expense                                                                       -                                                                (12.9)
 Transaction fees and associated costs                                                 (9.9)                                                                    -
 Restructuring and integration costs                                                 (32.3)                                                                (21.7)
 EBITDA                                                                              (42.2)                                                                (34.6)
 Amortisation of acquisition-related intangible assets                             (286.1)                                                               (275.5)
 Operating loss impact of separately disclosed items                               (328.3)                                                               (310.1)
 Financial expense                                                                        -                                                                (10.7)
 Loss before tax impact of separately disclosed items                              (328.3)                                                               (320.8)
 Tax credit / (charge) on separately disclosed items                                  39.5                                                                 (71.6)
 Total separately disclosed items                                                  (288.8)                                                               (392.4)

 Attributable to:
 Equity holders of the Company                                                     (286.0)                                                               (389.5)
 Non-controlling interest                                                              (2.8)                                                                 (2.9)
                                                                                   (288.8)                                                               (392.4)

Amortisation of acquisition-related intangible assets

Amortisation of £286.1m has been incurred in the period (six months ended
30 June 2021: £275.5m) as a result of intangible assets separately
identified under IFRS 3 as a result of the merger with Betfair in 2016, the
acquisitions of FanDuel Limited in 2018 and Adjarabet in 2019, the Combination
with TSG in 2020, the acquisitions of Junglee and Singular in 2021 and the
acquisition of Tombola in 2022.

Transaction fees and associated costs

During the six months ended 30 June 2022, £9.9m of costs were incurred
relating to various acquisitions and the FOX option (see Note 3). The costs
were included as separately disclosed items as they have not been incurred in
the ordinary course of business.

Restructuring and integration costs

During the six months ended 30 June 2022 costs of £32.3m (six months ended
30 June 2021: £21.7m) relating to incremental, one-off costs, were incurred
by the Group as a result of significant restructuring and integration
initiatives following the Combination with TSG.

 

5. Separately disclosed items (continued)

Greece tax expense

In 2019, the Group was issued with a Greek tax assessment for financial years
2012, 2013 and 2014, relating to paddypower.com's Greek interim licence. This
assessment concluded that the Group is liable to pay €15.0m in taxes
including penalties and interest. This is substantially higher (by multiples)
than the total cumulative revenues ever generated by paddypower.com in
Greece.  Pending the outcome of its appeal, in 2019 the Group paid the total
Greek tax assessment (including the penalties and interest) of €15.0m.

In June 2021, the Athens Administrative Court of Appeal dismissed the Group's
judicial recourses. While the Group has further appealed to the Greek Supreme
Administrative Court, based on the nature of the decision received and the
points of law which can be appealed, and in line with legal and tax advice it
has received, it decided to recognise the amount of the Greek assessment, of
€15.0m (£12.9m) as an expense in profit or loss during the six months ended
30 June 2021.

The Group considered these cost as one-off costs and not as part of ongoing
operations in the period.

Financial expense

During the six months ended 30 June 2022 there were no foreign exchange
losses on financial instruments that required separate disclosure, (six months
ended 30 June 2021: £10.7m)

Tax credit on separately disclosed items

The tax credit of £39.5m has arisen primarily in respect of a deferred tax
credit of £36.2m in respect of the amortisation of acquisition-related
intangibles and £3.3m in respect of the tax effect of other separately
identifiable items.

6. Financial income and expense

Recognised in profit or loss

                                                                           Six months ended                                                  Six months ended
                                                                           30 June 2022                                                      30 June 2021
                                                                           £m                                                                £m
 Financial income:
 On financial assets at amortised cost:
 Interest income                                                                                          0.7                                                                 -
 Total                                                                                                    0.7                                                                 -

 Financial expense:
 Foreign exchange loss on financing instruments associated with financing                                 0.2                                                             10.7
 activities (Note 5)
 On financial liabilities at amortised cost:
 Interest on borrowings, bank guarantees and bank facilities                                            48.5                                                              62.4
 Interest on lease liabilities                                                                            4.7                                                               3.9
 Other interest                                                                                           4.0                                                               7.9
 Total                                                                                                  57.4                                                              84.9

Recognised in other comprehensive income / (loss):

                                                                             2022                                                              2021
                                                                             £m                                                                £m
 Recognised in other comprehensive income / (loss):
 Effective portion of changes in fair value of cash flow hedges                                         269.7                                                            (156.0)
 Fair value of cash flow hedges transferred to income statement                                        (244.2)                                                            164.7
 Net change in fair value of cash flow hedge reserve                                                      25.5                                                                 8.7
 Debt instruments at FVOCI                                                                                 (2.3)                                                             (0.6)
 Foreign exchange loss on net investment hedges                                                          (41.0)                                                            (56.3)
 Foreign exchange gain / (loss) on translation of the net assets of foreign                             222.4                                                            (105.5)
 currency denominated entities
 Total                                                                                                  204.6                                                            (153.7)

A charge of £1.0m was recorded in the income statement in respect of
ineffective cash flow hedges in the six months ended 30 June 2022 (2021:
charge of £3.4m).

 

7. Tax expense

Tax is accrued for the interim reporting period using Management's best
estimate of the weighted average tax rate that is expected to be applicable to
estimated total annual earnings which may be adjusted for any significant
non-recurring events. This expected annual effective tax rate is applied to
the taxable income of the interim period.

The Group's adjusted effective tax rate before separately disclosed items for
the period was 36.2% (six months ended 30 June 2021: 22.9%), which compares
to the standard Irish tax rate of 12.5%. A tax credit on separately disclosed
items amounting to £39.5m was recorded during the six months ended 30 June
2022 (six months ended 30 June 2021: charge of £71.6m) (see Note 5).

The future effective tax rate of the Group will be principally affected by the
ongoing OECD initiative in relation to Base Erosion and Profit Shifting. On 8
October 2021, 136 out of the 140 countries of the OECD Inclusive Framework on
Base Erosion and Profit Shifting ('IF') have politically committed to
fundamental changes to the international corporate tax system including the
proposed introduction of a global minimum corporation tax rate of 15%. The
proposed rules in relation to the operation of the global minimum corporation
tax rate were published by the OECD in December 2021 followed by the
publication of related commentary also published in March 2022. While
consultation in relation to the rules and implementation issues remains
ongoing, both at the OECD and individual region/country level, the
implementation date has been delayed until 1 January 2024 at the earliest. We
will continue to monitor developments closely, but it is likely that this will
lead to an increase in the effective tax rate of the Group (as well as an
increase in ongoing compliance obligations) from as early as 2024 onwards.

8. Earnings per share

The Group presents basic and diluted earnings per share ("EPS") data for its
ordinary shares.

Basic EPS is calculated by dividing the profit or loss attributable to
ordinary shareholders of the Company by the weighted average number of
ordinary shares outstanding during the period. The weighted average number of
shares has been adjusted for amounts held as treasury shares and amounts held
by the Paddy Power Betfair plc Employee Benefit Trust ("EBT").

Diluted EPS is determined by adjusting the weighted average number of ordinary
shares outstanding for the effects of all dilutive potential ordinary shares.

Adjusted EPS is determined by adjusting the profit attributable to ordinary
shareholders for the impact of separately disclosed items.

The calculation of basic, diluted and adjusted EPS is as follows:

                                                                                 2022                                                        2021
 Numerator in respect of basic and diluted earnings per share (£m):
 Loss attributable to equity holders of the Company                                                       (114.3)                                                        (88.6)
 Numerator in respect of adjusted earnings per share (£m):
 Loss attributable to equity holders of the Company                                                       (114.3)                                                        (88.6)
 Separately disclosed items (Note 5)                                                                        286.0                                                       389.5
 Profit for adjusted earnings per share calculation                                                         171.7                                                       300.9
 Weighted average number of ordinary shares in issue during the period (in                             176,658                                                     175,893
 '000s)(1)
 Basic earnings per share                                                                               (£0.647)                                                    (£0.504)
 Adjusted basic earnings per share                                                                       £0.972                                                      £1.711
 Adjustments to derive denominator in respect of diluted earnings per share (in
 '000s):
 Weighted average number of ordinary shares in issue during the period                                 176,658                                                     175,893
 Diluted earnings per share                                                                             (£0.647)                                                    (£0.504)

1 Where any potential ordinary shares would have the effect of decreasing a
loss per share, they have not been treated as dilutive. The number of options
excluded from the diluted weighted average number of ordinary shares
calculation due to their effect being anti-dilutive is 2,187,856 (2021:
2,939,416).

The average market value of the Company's shares of £94.53 (30 June 2021:
£144.90) was used to calculate the dilutive effect of share options based on
the market value for the period that the options were outstanding.

 

9. Goodwill

The following CGUs, being the lowest level of asset for which there are
separately identifiable cash flows, have the following carrying amounts of
goodwill:

                                                      UK&I Online             UK Retail                   Irish Retail              International                               Australia                     US                      Total
                                                      £m                      £m                          £m                        £m                                          £m                            £m                      £m
 Balance at 1 January 2022                              5,766.9                        18.9                       20.7                          2,490.3                                 482.4                      567.6                   9,346.8
 Arising on acquisitions during the period (Note 10)       208.7                           -                          -                                  -                                    -                          -                    208.7
 Foreign currency translation adjustment                        0.1                        -                          -                               59.7                                26.8                        64.2                    150.8
 Balance at 30 June 2022                                5,975.7                        18.9                       20.7                          2,550.0                                 509.2                      631.8                   9,706.3

The Group reviews the carrying value of goodwill for impairment annually (or
more frequently if there are indications that the value of goodwill may be
impaired) by comparing the carrying values of these CGUs with their
recoverable amounts (being the higher of value in use and fair value less
costs to sell).

The Group has reviewed the performance in the first half of 2022, in the
UK&I Online, Retail, International, Australia and US CGUs and based on
this and, in conjunction with the headroom that existed at 31 December 2021,
is satisfied that no impairment has arisen during the six months ended
30 June 2022.

10. Business combinations and disposals

Six months ended 30 June 2022

Acquisition of Tombola

On 10 January 2022, the Group completed the acquisition of a 100% stake in
Tombola, the UK market's leading online bingo operator. Tombola is a
successful bingo-led gaming company with an emphasis on providing a low
staking bingo proposition to a highly engaged customer base. The purchase
comprised of a cash payment of £409.9m.

Details of the fair value of identifiable assets and liabilities acquired,
purchase consideration and goodwill are as follows:

                                    Provisional fair values as at
                                    10 January 2022
                                    £m
 Assets
 Property, plant and equipment
                                    11.4
 Intangible assets
                                    249.0
 Total non-current assets
                                    260.4
 Trade and other receivables
                                    25.3
 Cash and cash equivalents
                                    14.7
 Total current assets
                                    40.0
 Total assets
                                    300.4
 Liabilities
 Trade and other payables
                                    42.4
 Total current liabilities
                                    42.4
 Deferred tax liabilities
                                    56.8
 Total non-current liabilities
                                    56.8
 Total liabilities
                                    99.2
 Net assets acquired
                                    201.2
 Goodwill
                                    208.7
 Consideration
                                    409.9
 The consideration is analysed as:
 Consideration satisfied by cash
                                    409.9
 Consideration
                                    409.9

Included within the intangible assets were £249.0m of separately identifiable
intangibles comprising brand, customer relations and technology acquired as
part of the acquisition, with the additional effect of a deferred tax
liability of £56.8m thereon. These intangible assets are being amortised over
their useful economic lives of up to 20 years. The book value equated to the
fair value on the remaining assets as all amounts are expected to be received.

 

10. Business combinations and disposals (continued)

The main factors leading to the recognition of goodwill (none of which is
deductible for tax purposes) are the expansion of the Group's position in
online bingo and the addition of further product capabilities and expertise to
leverage across the business. The goodwill has been allocated to the existing
UK&I Online CGU.

Since the date of acquisition to 30 June 2022, Tombola has contributed
revenue of £85.3m and £2.1m of profit after tax to the results of the Group.
There is no significant difference between these amounts and the amounts if
the acquisition had occurred on 1 January 2022.

The acquisition accounting remains provisional for one year from the
acquisition date and may change if new information is obtained relating to
conditions that existed at the acquisition date.

Six months ended 30 June 2021

Acquisition of Junglee Games

On 28 January 2021, the Group completed the acquisition of an initial 50.1%
stake in Junglee Games ("Junglee"), an Indian online rummy operator, for
US$67.3m (£49.3m), with US$63.5m (£46.5m) paid in cash and the remainder
recorded as deferred consideration and paid subsequently in 2021. On the same
date the Group entered into call and put options which would enable the Group
to acquire an additional 7.2% stake in Junglee in exchange for cash
consideration. In June 2021, these options were exercised and the Group
acquired the additional 7.2% stake in Junglee in exchange for cash
consideration of US$7.5m (£5.5m) with US$7.0m (£5.1m) paid in cash and the
remainder recorded as deferred consideration and paid subsequently in 2021.
This has been accounted under the anticipated acquisition method, with the
combined 57.3% recognised as acquired from 28 January 2021.

Junglee is a top three player in the legal Indian online rummy market. The
Group sees good potential to further develop Junglee's product offering,
including its recently launched daily fantasy sports product, leveraging the
Group's capabilities in this area. The Group has put in place arrangements,
consisting of call and put options that could see its ownership in the
business increase to 100% in 2025.  The call and put options consideration
can be settled, at the Group's election, in cash or shares. As a consequence
of both the call and put options being only exercisable at fair value being
the future EBITDA and revenue multiple, which are considered to be two key
inputs into valuing the option, it was determined that the fair value of the
call and put options was not material and was close to nominal value.

Included within the intangible assets were £42.9m of separately identifiable
intangibles comprising brand, technology and customer relations acquired as
part of the acquisition, with the additional effect of a deferred tax
liability of £10.8m thereon. These intangible assets are being amortised over
their useful economic lives of up to 10 years. The book value equated to the
fair value on the remaining assets and liabilities as all amounts are expected
to be received.

The main factors leading to the recognition of goodwill (none of which is
deductible for tax purposes) is growth by combining the Group's significant
operating experience in other markets with the local market knowledge and
skills of the management team in Junglee, driving revenue synergies over time.
The goodwill has been allocated to the existing International CGU and it has
been deemed that a separate CGU is not appropriate.

10. Business combinations and disposals (continued)

Details of the fair value of identifiable assets and liabilities acquired,
purchase consideration and goodwill are as follows:

                                                                         Fair values as at
                                                                         28 January 2021
                                                                         £m
 Assets
 Property, plant and equipment
                                                                         0.2
 Intangible assets
                                                                         42.9
 Total non-current assets
                                                                         43.1
 Trade and other receivables
                                                                         3.8
 Cash and cash equivalents
                                                                         17.7
 Total current assets
                                                                         21.5
 Total assets
                                                                         64.6
 Liabilities
 Trade and other payables
                                                                         13.1
 Total current liabilities
                                                                         13.1
 Deferred tax liabilities
                                                                         10.8
 Total non-current liabilities
                                                                         10.8
 Total liabilities
                                                                         23.9
 Net assets acquired
                                                                         40.7
 Goodwill
                                                                         31.2
 Non-controlling interest measured at the proportionate interest method
                                                                         (17.1)
 Consideration
                                                                         54.8
 The consideration is analysed as:
 Consideration satisfied by cash
                                                                         46.5
 Put option satisfied by cash
                                                                         5.1
 Deferred consideration
                                                                         2.8
 Put option deferred consideration
                                                                         0.4
 Consideration
                                                                         54.8

 

Cash (outflows) / inflows from business combinations:

                                                                 Six months ended                                                    Six months ended
                                                                 30 June 2022                                                        30 June 2021
                                                                 £m                                                                  £m
 Cash consideration paid for acquisitions in the period                                    (409.9)                                                               (46.5)
 Cash consideration paid for put option exercised in the period                                   -                                                                (5.1)
 Cash acquired from acquisitions in the period                                                14.7                                                                17.8
 Cash consideration - acquisitions in previous periods                                       (15.3)                                                              (19.0)

 As presented in the statement of cash flows:
 Purchase of businesses net of cash acquired                                               (395.2)                                                               (33.7)
 Payment of contingent deferred consideration                                                (15.3)                                                              (19.0)

During the period the Group settled in cash, deferred consideration
liabilities of £15.3m in relation to Betfair's historical acquisition of
HRTV, a horseracing television network based in the US. No further payments
are due in respect of this acquisition.

 

11. Investments and trade and other receivables

Non-current assets

                      30 June 2022                                                      31 December 2021
                      £m                                                                £m
 Investments - FVTPL                                 6.0                                                                5.5

Investments relate to a small number of individually immaterial equity
investments in various companies.

                                                                      30 June 2022                                                      31 December 2021
                                                                      £m                                                                £m
 Other receivables
 Other receivables                                                                                 11.4                                                              11.8
 Prepayments                                                                                       12.7                                                              13.8
 Value-added tax and goods and services tax                                                          1.1                                                                 -
 Deferred financing costs on Revolving Credit Facility (see Note 14)                                 3.1                                                                3.7
 Total                                                                                             28.3                                                              29.3

Other receivables

Other receivables are comprised primarily of deposits for licences and
property.

Deferred financing costs on Revolving Credit Facility

In May 2020, the Group entered into a new Revolving Credit Facility agreement
as part of its financing agreements. The Group incurred £5.3m of transaction
costs and fees relating to the Revolving Credit Facility, which have been
capitalised and included within non-current receivables, net of accretion of
£3.1m (2021: £3.7m), on the Consolidated Statement of Financial Position and
are recorded as financial expense over the term of the Revolving Credit
Facility agreement using the effective interest rate method. As at 30 June
2022, £190.0m was drawn under the Revolving Credit Facility (31 December
2021: nil).

Current assets

                                             30 June 2022                                                      31 December 2021
                                             £m                                                                £m
 Trade and other receivables
 Trade receivables                                                        42.7                                                              39.5
 Other receivables                                                        35.5                                                              34.4
 Value-added tax and goods and services tax                                 2.3                                                                5.1
 Prepayments                                                            170.0                                                             124.9
 Total                                                                  250.5                                                             203.9

 

12. Trade and other payables

Current liabilities

                                                                            30 June 2022                                                        31 December 2021
                                                                            £m                                                                  £m
 Trade and other payables
 Trade payables                                                                                         104.1                                                                 74.2
 PAYE and social security                                                                                 21.5                                                                19.7
 Value-added tax, goods and services tax, betting duties, data rights, and                              239.4                                                               220.7
 product and racefield fees
 Employee benefits                                                                                      113.1                                                               156.1
 Contingent deferred consideration - business combinations                                                  5.9                                                               21.0
 Deferred consideration - business combinations                                                         204.1                                                                     -
 Accruals and other liabilities                                                                         628.9                                                               604.7
 Total                                                                                               1,317.0                                                             1,096.4

12. Trade and other payables (continued)

Non-current liabilities

                                                            30 June 2022                                                        31 December 2021
                                                            £m                                                                  £m
 Trade and other payables
 Employee benefits                                                                          1.9                                                                  2.1
 Contingent deferred consideration - business combinations                                17.3                                                                16.9
 Accruals and other payables                                                                2.7                                                                  0.8
 Total                                                                                    21.9                                                                19.8

Contingent deferred consideration - business combinations

The Group's contingent deferred consideration liabilities amounted to £23.2m
at 30 June 2022 (31 December 2021: £37.9m) and relate to the following:

•      £5.2m (31 December 2021: £4.7m) deferred consideration in
respect of Diamond Game Enterprises, assumed as part of the Combination with
TSG; and

•      £18.0m (31 December 2021: £17.8m) relating to the acquisition
of Singular in 2021.

Deferred consideration - business combinations

On 1 July 2022, the Group completed the acquisition of the remaining 49%
outstanding shares of Adjarabet for a cash payment of €238.0m (£204.1m).
This acquisition brings the Group's holding in Adjarabet to 100% up from the
previous controlling interest of 51%.

As outlined in previous financial statements, as part of the acquisition of
Adjarabet in 2019, a mechanism was agreed, consisting of call and put options,
which enabled the Group to acquire the remaining 49% after three years at a
valuation equivalent to seven times the 2021 EBITDA. The call/put option
consideration can be settled, at the Group's election, in cash or shares. As a
consequence of both the put and call options being only exercisable at fair
value being the future EBITDA and earnings multiple which are considered to be
two key inputs into valuing the option, it was determined that the fair value
was not material and was close to nominal value. During the six months ended
30 June 2022, the non-controlling interest elected to exercise the put option
and the Group entered into an arrangement with the seller to acquire the
remaining shares for a cash payment of €238.0m in line with the terms of the
original agreement. Upon the signing of this agreement on 20 June 2022, the
Group recognised a liability of €238.0m (£204.1m). This liability has been
recorded as a current liability as at 30 June 2022.

Amounts held in Trust

As at 30 June 2022, £348.6m (31 December 2021: £355.6m) was held in trust
in The Sporting Exchange (Clients) Limited on behalf of the Group's customers
and is equal to the amounts deposited into customer accounts. Neither cash and
cash equivalents or restricted cash include these balances on the basis that
they are held on trust for customers and do not belong to and are not at the
disposal of the Group.

13. Provisions

Provisions balances at 30 June 2022 and 31 December 2021 and movements
during the six months ended 30 June 2022 are outlined below:

                                   Employee benefits (long service leave)  Onerous contracts                   Gaming tax                          Other legal                         Other                               Total

                                   £m                                      £m                                  £m                                  £m                                  £m                                  £m
 Balance at 31 December 2021                       3.5                                   13.7                                22.4                                72.0                                  7.5                            119.1
 Additional provisions recognised                  0.5                                   (0.1)                                 2.9                                  -                                   -                                  3.3
 Amounts used during the year                    (0.4)                                   (3.0)                               (3.3)                               (1.4)                               (1.0)                               (9.1)
 Foreign currency translation                      0.2                                     1.2                                 1.1                                 5.3                                 0.3                                 8.1
 Balance at 30 June 2022                           3.8                                   11.8                                23.1                                75.9                                  6.8                            121.4
 Presented in:
 Balance at 31 December 2021:
 Current                                           2.2                                     6.6                               22.4                                34.5                                  5.6                               71.3
 Non-current                                       1.3                                     7.1                                  -                                37.5                                  1.9                               47.8
 Total                                             3.5                                   13.7                                22.4                                72.0                                  7.5                            119.1
 Balance at 30 June 2022:
 Current                                           2.5                                     6.9                               23.1                                34.5                                  4.9                               71.9
 Non-current                                       1.3                                     4.9                                  -                                41.4                                  1.9                               49.5
 Total                                             3.8                                   11.8                                23.1                                75.9                                  6.8                            121.4

 

13. Provisions (continued)

Employee benefits (long service leave)

The timing and amount of long service leave cash outflows are primarily
dependent on when staff employed at the reporting date avail of their
entitlement to leave and their expected salaries at that time. As of 30 June
2022 and 31 December 2021, it was expected that cash outflows would occur
primarily within the following five years.

Onerous contracts

The onerous contracts provision at 30 June 2022 relates to various marketing
and minimum guarantee contracts where the cost of fulfilling these contracts
exceeds the expected economic benefits to be received from them.

Gaming tax

These are gaming tax provisions relating to amounts provided for taxes in
certain jurisdictions where the interpretation of tax legislation is
uncertain. When the Group disagrees with the application of unclear tax
legislation, for example when it is applied retrospectively and / or results
in a one-off disproportionate tax equivalent to many times the profit derived
by the Group from its historic activities in that jurisdiction, the Group
continues to challenge these interpretations.

Whilst the maximum potential obligation for all ongoing cases could be greater
than the recognised provision, and the outcomes may not be known for some
time, a liability has been recorded for the Directors' best estimate of the
cash outflows that will ultimately be required in respect of each claim.
Management has not provided a sensitivity for this provision as the range is
not considered to be material.  Management notes this is a key estimate;
however, it is not a key judgement that will have a material impact in the
coming year.

Other legal

Other legal provisions generally consist of payments for various future legal
settlements where, based on all available information, management believes it
is probable that there will be a future outflow.

These provisions comprise a number of different legal cases, the majority of
which are immaterial. The most significant relates to the foreign payments
contingent liabilities outlined in more detail in Note 18. Further disclosure
in respect of these provisions has not been provided as such information would
be expected to be prejudicial to the Group's position in such matters.

Whilst the maximum potential obligation for all ongoing cases could be greater
than the recognised provision, and the outcomes may not be known for some
time, a liability has been recorded for the Directors' best estimate of the
cash outflows that will ultimately be required in respect of each claim.
Management has not provided a sensitivity for this provision as the range is
not considered to be material.  Management notes this is a key estimate;
however, it is not a key judgement that will have a material impact in the
coming year.

Other

Other provisions primarily comprise a number of different regulatory
provisions.

14. Borrowings

The following is a summary of borrowings, including accrued interest,
outstanding as at 30 June 2022 and 31 December 2021:

                                                                       30 June 2022                                                                                                             31 December 2021
                                Contractual interest rate              Principal   outstanding   balance in   currency of borrowing        Carrying   amount (including accrued interest)(1)    Principal   outstanding   balance in   currency of borrowing        Carrying   amount (including accrued interest)
                                %                                      Local currency (m)                                                  £m                                                   Local currency (m)                                                  £m
 GBP First Lien Term Loan A              2.80                                      £1,017.9                                                              1,010.7                                            £1,017.9                                                               1,009.6
 USD First Lien Term Loan B              3.30                                      $2,916.3                                                              2,375.1                                            $2,931.0                                                               2,142.6
 EUR First Lien Term Loan B              2.50                                         €507.2                                                                430.3                                              €507.2                                                                 419.6
 GBP Revolving Credit Facility           2.80                                         £190.0                                                                190.0                                                    £-                                                                     -
 Total borrowings                                                                                                                                        4,006.1                                                                                                                   3,571.8
 Presented in:
 Current portion                                                                                                                                               24.2                                                                                                                      22.1
 Non-current portion                                                                                                                                     3,981.9                                                                                                                   3,549.7
 Total borrowings                                                                                                                                        4,006.1                                                                                                                   3,571.8

1 The carrying amounts at 30 June 2022 includes accrued interest of nil
(31 December 2021: £0.4m) presented within the current portion of borrowings
above.

 

14. Borrowings (continued)

During the six months ended 30 June 2022, the Group incurred the following
interest on its then outstanding borrowings:

                                Effective interest rate(1)                         Interest(2)                                        Interest accretion                                      Total interest
                                %                                                  £m                                                 £m                                                      £m
 GBP First Lien Term Loan A              3.10                                      11.9                                               1.5                                                                                13.4
 USD First Lien Term Loan B              3.60                                      32.7                                               2.7                                                                                35.4
 EUR First Lien Term Loan B              2.90                                      5.4                                                0.7                                                                                  6.1
 GBP Revolving Credit Facility           3.10                                      0.2                                                                           -                                                         0.2
 Total                                                                                                    50.2                                                 4.9                                                       55.1

1 The effective interest rate calculation excludes the impact of the Swap
Agreements (as defined below).

2 In addition to the amount included above, the Group incurred £1.5m of
interest expense relating to commitment, utilisation, and fronting fees
associated with its Revolving Credit Facility.

The Group's change in borrowings during the six months ended 30 June 2022 was
as follows:

                                Balance at 1 Jan 2022                   New debt                                Principal payments                      Interest accretion(2)                   FX translation                          Balance at 30 Jun 2022
                                £m                                      £m                                      £m                                      £m                                      £m                                      £m
 GBP First Lien Term Loan A               1,009.2                                          -                                       -                                      1.5                                      -                              1,010.7
 USD First Lien Term Loan B               2,142.6                                          -                                  (11.6)                                      2.7                                241.4                                2,375.1
 EUR First Lien Term Loan B                  419.6                                         -                                       -                                      0.7                                   10.0                                 430.3
 GBP Revolving Credit Facility                     -                                 275.0                                    (85.0)                                       -                                       -                                 190.0
 Total                                    3,571.4                                    275.0                                    (96.6)                                      4.9                                251.4                                4,006.1
 Accrued interest                                 0.4                                                                                                                                                                                                      -
 Total borrowings                         3,571.8                                                                                                                                                                                                 4,006.1

(1) Adjustments to amortised costs include transaction costs and fees incurred
in respect of the refinancing and additional debt drawdown noted below.

(2) Interest accretion represents interest expense calculated at the effective
interest rate less interest expense calculated at the contractual interest
rate and is recorded in financial expenses in the consolidated income
statement.

Revolving Credit Facility and First Lien Term Loans

Each of the Group's facilities are discussed below.

TLA Agreement - GBP First Lien Term Loan A

In May 2020, the Group, Flutter Entertainment Plc, PPB Financing Unlimited
Company and PPB Treasury Unlimited Company as borrowers, entered into a Term
Loan A and Revolving Credit Facility Agreement (the "TLA Agreement")
comprising a term loan and revolving credit facility totalling £1.4bn. In
December 2021, an additional lender was added to the facility increasing the
overall TLA Agreement by £100m bringing the total to £1.5bn. Subsequently in
December 2021, the Group completed an additional drawdown of £68m under the
TLA agreement and its existing terms.  The TLA Agreement described above
provides a term loan facility in an aggregate amount of £1,017.9m (2021:
£1,017.9m) priced at SONIA plus CSA plus a margin of 1.75% (the "GBP First
Lien Term Loan A"), with a maturity date of 5 May 2025 and a SONIA floor of
0%. On 5 March 2021, the UK's Financial Conduct Authority ("FCA") formally
announced the cessation of all GBP London Interbank Offered Rate ("LIBOR")
benchmark settings currently published by ICE Benchmark Administration ("IBA")
immediately after 31 December 2021. In response, the Company entered into
agreements with its lenders that amended the benchmark rate referenced in the
Term Loan A agreement from GBP LIBOR to SONIA for interest periods commencing
on or after January 2022. There is no amortisation on the GBP First Lien Term
Loan A and the principal is due at maturity. The Group incurred £11.9m of
initial transaction costs and fees on drawdown which have been capitalised
against the principal of the debt and are recorded as financial expense over
the term of the debt using the effective interest rate method.

 

14. Borrowings (continued)

TLA Agreement - Revolving Credit Facility

The TLA Agreement described above provides a multi-currency revolving credit
facility in an aggregate amount of £482.0m (2021: £482.0m) (the "Revolving
Credit Facility"). Maturing on 5 May 2025, the Revolving Credit Facility
includes a margin of 1.75% over SONIA for borrowings with a 0% interest rate
floor as well as a utilisation fee ranging from 0.1% to 0.4% based on the
proportion of drawings to the total commitment. The commitment fee on the
Revolving Credit Facility is 35% of the margin and is payable in respect of
available but undrawn borrowings. The Revolving Credit Facility is available
for general corporate purposes including the refinancing of existing
borrowings. The Group incurred £5.3m of transaction costs and fees in 2020
which have been capitalised and are recorded as financial expense over the
life of the facility using the straight-line method. These capitalised costs
have been included within non-current receivables on the consolidated
statement of financial position. During the six month period ending 30 June
2022 the Group has drawn down £275.0m of its facility and repaid £85.0m
leaving an outstanding principal of £190.0m (2021:nil). The Group has an
undrawn capacity of £277m (2021: £467m) on the Revolving Credit Facility
with £15m (2021: £15m) of capacity reserved for the issuance of Group
guarantees as of 30 June 2022.

The terms of the TLA Agreement limit the Group's ability to, among other
things: (i) incur additional debt (ii) grant additional liens on their assets
and equity (iii) distribute equity interests and/or distribute any assets to
third parties (iv) make certain loans or investments (including acquisitions)
(v) consolidate, merge, sell or otherwise dispose of all or substantially all
assets (vi) pay dividends on or make distributions in respect of capital stock
or make restricted payments, and (vii) modify the terms of certain debt or
organisational documents, in each case subject to certain permitted
exceptions. During the six months ended 30 June 2022, the Group is in
compliance with all covenants related to its First Lien Term Loan A.

First Lien Term Loan B's

The Group holds USD term loans with an outstanding principal balance of
$2,916.3m (2021: $2,931.0m) priced at USD-LIBOR plus 2.25% (2021: 2.25%) (the
"USD First Lien Term Loan B") and an EUR first lien term loan with an
outstanding principal balance of €507.2m (2021: €507.2m) priced at EURIBOR
plus 2.5% (2021: 2.5%) (the "EUR First Lien Term Loan B" and, together with
the USD First Lien Term Loan, the "First Lien Term Loan B"), each with a
maturity date of 21 July 2026 and a LIBOR and EURIBOR floor, as applicable, of
0%. The USD First Lien Term Loan B requires scheduled quarterly principal
payments in amounts equal to 0.25% of the initial aggregate principal amount
of the USD First Lien Term Loan B of $2,938m (2021: $2,938m), with the balance
due at maturity. There is no amortisation on the EUR First Lien Term Loan B
and the principal is due at maturity.

The First Lien Term Loan B's are governed by the "Syndicated Facility
Agreement". The Syndicated Facility Agreement limits Stars Group Holdings B.V.
and Flutter Financing B.V, as borrowers, and its subsidiaries' ability to,
among other things, (i) incur additional debt (ii) grant additional liens on
their assets and equity (iii) distribute equity interests and/or distribute
any assets to third parties (iv) make certain loans or investments (including
acquisitions), (v) consolidate, merge, sell or otherwise dispose of all or
substantially all assets (vi) pay dividends on or make distributions in
respect of capital stock or make restricted payments (vii) enter into certain
transactions with affiliates (viii) change lines of business and (ix) modify
the terms of certain debt or organisational documents, in each case subject to
certain permitted exceptions. The agreement also provides for customary
mandatory prepayments, including a customary excess cash flow sweep if certain
conditions are met. During the six months ended 30 June 2022, the Group is in
compliance with all covenants related to its First Lien Term Loan B's.

Reconciliation to Statement of Cash Flows:

Reconciliation of movements in borrowings to the Statement of Cash Flows:

                           2022                                                           2021
                           £m                                                             £m
 Financing activities:
 Proceeds from borrowings                             275.0                                                                -
 Repayment of borrowings                               (96.6)                                                         (12.9)
 Interest paid                                         (46.8)                                                         (70.0)

 

 

15. Derivatives

Derivatives and hedge accounting

The Group uses derivative financial instruments for risk management and risk
mitigation purposes. As such, any change in cash flows associated with
derivative instruments are expected to be offset by changes in cash flows
related to the hedged item. The Group's derivatives are discussed below.

Swap agreements

The Group has executed cross-currency interest rate swaps which swap the
profile of the USD First Lien Term Loan B in its entirety into EUR and GBP. In
2021 as part of the refinance, the Group amended the terms of the existing
trades to reflect the repriced TLB USD and executed new cross-currency
interest rate swaps on the additional drawn-down debt in line with the hedging
policy to cover exposure to foreign currencies. From an accounting and risk
management perspective, these hedging instruments consist of: (i) USD-EUR
amortising cross-currency interest rate swap agreements (the "EUR
Cross-Currency Interest Rate Swaps") with a remaining notional amount of
€1,481m (31 December 2021: €1,488m), which fix the USD to EUR exchange
rate at 1.173 and fix the euro interest payments at an average interest rate
of 1.7% (31 December 2021: 1.7%) and (ii) USD-GBP amortising cross-currency
interest rate swap agreements (the "GBP Cross-Currency Interest Rate Swaps")
with a remaining notional amount of £890m (31 December 2021: £895m), which
fix the EUR to GBP exchange rate at 0.889 and fix the GBP interest payments at
an average interest rate of 2.5% (31 December 2021: 2.5%). The EUR
Cross-Currency Interest Rate Swaps and GBP Cross-Currency Interest Rate Swaps
are in hedging relationships with and have a profile that amortises in line
with the USD First Lien Term Loan B. The EUR Cross-Currency Interest Rate
Swaps and GBP Cross-Currency Interest Rate Swaps have a maturity date of July
2023.

Sports betting open positions

Amounts received from customers on sportsbook events that have not occurred by
the balance sheet date are derivative financial instruments and have been
designated by the Group on initial recognition as financial liabilities at
fair value through profit or loss.

The fair value of open sports bets at 30 June 2022 and 31 December 2021 has
been calculated using the latest available prices on relevant sporting events.
The carrying amount of the liabilities is not significantly different from the
amount that the Group is expected to pay out at maturity of the financial
instruments. Sports bets are non-interest bearing. There is no interest rate
or credit risk associated with open sports bets.

It is primarily based on expectations as to the results of sporting and other
events on which bets are placed. Changes in those expectations and ultimately
the actual results when the events occur will result in changes in fair value.

There are no reasonably probable changes to assumptions and inputs that would
lead to material changes in the fair value methodology, although final value
will be determined by future sporting results.

The following table summarises the fair value of derivatives as at 30 June
2022 and 31 December 2021:

                                                                               30 June 2022                                                                        31 December 2021
                                                                               Assets                                    Liabilities                               Assets                                    Liabilities
                                                                               £m                                        £m                                        £m                                        £m
 Derivatives held for hedging
 Derivatives designated as cash flow hedges:
 Cross-currency interest rate swaps - non-current                                            260.0                                           -                                      31.7                                    (54.6)
 Total derivatives designated as cash flow hedges                                            260.0                                           -                                      31.7                                    (54.6)

 Derivatives designated as net investment hedges:
 Cross-currency interest rate swaps - non-current                                               15.5                                    (16.0)                                      36.3                                         -
 Total derivatives designated as net investment hedges                                          15.5                                    (16.0)                                      36.3                                         -
 Total derivatives held for hedging                                                          275.5                                      (16.0)                                      68.0                                    (54.6)

 Derivatives held for risk management and other purposes not designated as
 hedges
 Sports betting open positions - current                                                           -                                    (50.1)                                         -                                    (74.0)
 Sports betting open positions - non-current                                                       -                                      (0.5)                                        -                                       (0.5)
 Total derivatives held for risk management and other purposes not designated                      -                                    (50.6)                                         -                                    (74.5)
 as hedges

 

 

16. Share capital and reserves

Share capital

Transactions during the six months ended 30 June 2022:

•      A total of 192,342 ordinary shares were issued as a result of
the exercise of employee share options, giving rise to share capital and share
premium of £3.1m;

Transactions during the six months ended 30 June 2021:

•      A total of 262,910 ordinary shares were issued as a result of
the exercise of employee share options, giving rise to share capital and share
premium of £8.0m;

Equity reserves

Equity reserves at 30 June 2022 include the following classes of reserves:

Shares held by Employee Benefit Trust

At 30 June 2022, the Paddy Power Betfair plc Employee Benefit Trust ("EBT")
held 33,158 (31 December 2021: 33,158) of the Company's own shares, which
were acquired at a total cumulative cost of £4.0m (31 December 2021: £4.0m)
in respect of potential future awards relating to the Group's employee share
plans.

Cash flow hedge reserve

The cash flow hedge reserve represents the effective portion of the cumulative
net change in the fair value of cash flow hedging instruments related to
hedged transactions that had not yet occurred at that date.

Foreign exchange translation reserve

The foreign exchange translation reserve at 30 June 2022 amounted to a debit
balance of £16.9m (31 December 2021: debit balance of £194.2m) and arose
from the retranslation of the Group's net investment in primarily EUR, AUD and
USD functional currency companies. The movement in the foreign exchange
translation reserve for the six month period ended 30 June 2022, reflects
mainly the strengthening of EUR and USD against GBP in the period.

Other reserves

Other reserves comprise undenominated capital. Undenominated capital at
30 June 2022 of £2.5m (31 December 2021 of £2.5m) relates to the nominal
value of shares in the Company acquired by the Company of £2.3m (31 December
2021: £2.3m) and subsequently cancelled, and an amount of £0.2m
(31 December 2021: £0.2m) which arose on the redenomination of the ordinary
share capital of the Company at the time of conversion from Irish pounds to
Euro.

Share-based payment reserve

During the six months ended 30 June 2022, an amount of £50.1m was expensed
in the Consolidated Income Statement with respect to share based payments (six
month period ended 30 June 2021: £36.6m) and an amount of £11.7m (six month
period ended 30 June 2021: £16.4m) in respect of share options exercised
during the period was transferred from the share-based payment reserve to
retained earnings.

An amount of £0.8m of deferred tax relating primarily to the Group's
share-based payments was credited to retained earnings in the six months ended
30 June 2022 (six month period ended 30 June 2021: credit of £0.5m).  An
amount of £0.2m of current tax relating to the Group's share-based payments
was credited to retained earnings in six months ended 30 June 2022 (six month
period ended 30 June 2021: credit of £0.6m).

Non-controlling interest

During the six month period ended 30 June 2022 the Group paid dividends
totalling £5.4m to the non-controlling interest in Adjarabet (six months
ended 30 June 2021: £5.1m).

As outlined in more detail in Note 12, as a result of the exercise of the put
option held by the Adjarabet non-controlling interest and the agreement to
settle in cash for €238.0m (£204m), an amount of £34.2m was recorded in
non-controlling interest with the remaining amount of £169.8m booked to
retained earnings.

17. Fair values

Financial instruments carried at fair value

Fair value hierarchy

The table below analyses recurring fair value measurements for financial
assets and financial liabilities. These fair value measurements are
categorised into different levels in the fair value hierarchy based on the
inputs to the valuation method used. The different levels are defined as
follows:

•      Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities that the Group can access at the measurement
date;

•      Level 2: inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly or indirectly;
and

•      Level 3: unobservable inputs for the asset or liability.

17. Fair values (continued)

                                       30 June 2022
                                       Level 1                                           Level 2                                           Level 3                                           Total
                                       £m                                                £m                                                £m                                                £m

 Bonds - FVOCI                                             60.6                                              28.4                                                  -                                             89.0
 Investments - FVTPL                                           -                                                 -                                               6.0                                               6.0
 Derivatives                                                   -                                           275.5                                                   -                                           275.5
 Total financial assets                                    60.6                                            303.9                                                 6.0                                           370.5

 Derivative financial liabilities                              -                                           (16.0)                                            (50.6)                                            (66.6)
 Non-derivative financial liabilities                  (204.1)                                                   -                                           (23.2)                                          (227.3)
 Total financial liabilities                           (204.1)                                             (16.0)                                            (73.8)                                          (293.9)

 

                                       31 December 2021
                                       Level 1                                           Level 2                                           Level 3                                           Total
                                       £m                                                £m                                                £m                                                £m
 Bonds - FVOCI                                             58.2                                              24.8                                                  -                                             83.0
 Investments - FVTPL                                           -                                                 -                                               5.5                                               5.5
 Derivatives                                                   -                                             68.0                                                  -                                             68.0
 Total financial assets                                    58.2                                              92.8                                                5.5                                           156.5

 Derivative financial liabilities                              -                                            (54.6)                                            (74.5)                                         (129.1)
 Non-derivative financial liabilities                          -                                                 -                                            (37.9)                                            (37.9)
 Total financial liabilities                                   -                                            (54.6)                                         (112.4)                                           (167.0)

As part of its periodic review of fair values, the Group recognises transfers,
if any, between levels of the fair value hierarchy at the end of the reporting
period during which the transfer occurred. There were no transfers between
levels of the fair value hierarchy during the periods ended 30 June 2022 or
31 December 2021.

Valuation of Level 2 financial instruments

Bonds - FVOCI

The Group has determined that the carrying value of the bonds approximates
their fair value which is determined by using observable quoted prices or
observable input parameters derived from comparable bonds/markets. Although
the Group has determined that a number of the bonds fall within Level 1 of the
fair value hierarchy, there are a class of bonds which have been classified as
Level 2 due to the existence of relatively inactive trading markets for those
bonds.

Derivative financial instruments

Swap agreements

The Group uses derivative financial instruments to manage its interest rate
and foreign currency risk. The valuation of these instruments is determined
using widely accepted valuation techniques including discounted cash flow
analysis of the expected cash flows of each derivative. This analysis reflects
the contractual terms of the derivatives, including the period to maturity,
and uses observable market-based inputs, such as yield curves, spot and
forward FX rates.

To comply with the provisions of IFRS 13, Fair Value Measurement, the Group
incorporates credit valuation adjustments to appropriately reflect both its
own non-performance risk and the applicable counterparty's non-performance
risk in the fair value measurements. In adjusting the fair value of its
derivative contracts for the effect of non-performance risk, the Group has
considered the impact of netting and any applicable credit enhancements, such
as collateral postings, thresholds, mutual puts and guarantees.

Although the Group has determined that the majority of the inputs used to
value its derivatives fall within Level 2 of the fair value hierarchy, the
credit valuation adjustments associated with its derivatives utilise Level 3
inputs, such as estimates of current credit spreads to evaluate the likelihood
of default by itself and its counterparties. At both 30 June 2022 and
31 December 2021, the Group assessed the significance of the impact of the
credit valuation adjustments on the overall valuation of its derivative
positions, determined that the credit valuation adjustments are not
significant to the overall valuation of its derivatives. As a result, the
Group determined that its valuations of its derivatives in their entirety are
classified in Level 2 of the fair value hierarchy.

Level 3 fair values

Derivatives (Level 3)

Some of the Group's financial assets and liabilities are classified as Level 3
of the fair value hierarchy because the respective fair value determinations
use inputs that are not based on observable market data. As at 30 June 2022,
the valuation techniques and key inputs used by the Group for each Level 3
asset or liability were as follows:

17. Fair values (continued)

Sports betting open positions (Level 3)

Derivative financial liabilities comprise sports betting open positions. The
fair value of open sports bets at the period end has been calculated using the
latest available prices on relevant sporting events. Changes in the fair value
of the unsettled bets are recorded in revenue in the consolidated income
statement.

It is primarily based on expectations as to the results of sporting and other
events on which bets are placed. Changes in those expectations and ultimately
the actual results when the events occur will result in changes in fair value.

There are no reasonably probable changes to assumptions and inputs that would
lead to material changes in the fair value methodology although final value
will be determined by future sporting results.

Non-derivative financial instruments (Level 3)

Investments

The Group valued its equity investments in private companies with reference to
earnings measures from similar businesses in the same or similar industry and
adjusts for any significant changes in the earnings multiple and the
valuation. A reasonable change in assumptions would not have a material impact
on fair value. Changes in the fair value of equity in private companies are
recorded in financial income or financial expense in the consolidated income
statement.

Contingent deferred consideration (Level 3)

Non-derivative financial liabilities include contingent consideration. The
contingent consideration payable is primarily determined with reference to
forecast performance for the acquired businesses during the relevant time
periods and the amounts to be paid in such scenarios. The fair value was
estimated by assigning probabilities to the potential payout scenarios. The
significant unobservable inputs are forecast performance for the acquired
businesses.

The fair value of contingent consideration is primarily dependent on forecast
performance for the acquired businesses in excess of a predetermined base
target. An increase and decrease of 10% in the excess over the predetermined
base target during the relevant time periods would increase and decrease the
value of contingent consideration at 30 June 2022 by £1.1m and £1.9m
respectively (31 December 2021: £1.2m and £2.2m).

FOX Corporation

As announced on 2 October 2019, in order to achieve economic alignment of
Flutter's and TSG's strategic third party relationships across their
respective US businesses, the Group entered into an arrangement with FOX,
pursuant to which FSG Services, a wholly-owned subsidiary of FOX, had an
option to acquire an 18.6% equity interest in FanDuel Group at its fair market
value in July 2021. As a consequence of there being no increase in the market
value of FanDuel since the valuation date of the option, it is determined that
the value of the option is not material and has close to nominal value at
30 June 2022.

Non-controlling interest agreements

Adjarabet (Level 1)

As part of the acquisition of Adjarabet in 2019, a mechanism was agreed,
consisting of call and put options, which enables the Group to acquire the
remaining 49% after three years at a valuation equivalent to seven times the
2021 EBITDA. The call/put option consideration can be settled, at the Group's
election, in cash or shares. During the six months ended 30 June 2022, the
non-controlling interest elected to exercise the put option and the Group
entered into an arrangement with the seller to acquire the remaining shares
for a cash payment of €238.0m in line with the terms of the original
agreement. Upon the signing of this agreement on 20 June 2022, the Group
recognised a liability of €238.0m (£204.1m). This liability has been
recorded as a current liability as at 30 June 2022.

Boyd

A mechanism has been agreed with Boyd who hold a non-controlling interest in
FanDuel Group, consisting of call and put options, which enables the Group to
acquire the remaining 5% at prevailing market valuations in 2028. The call/put
option consideration can be settled, at the Group's election, in cash or
shares. As a consequence of both the put and call options being only
exercisable at fair value based on the market value of FanDuel at the date of
exercise of the options, it was determined that the fair value was not
material and was close to nominal value.

As announced on 2 October 2019, in order to achieve economic alignment of
Flutter's and TSG's strategic third-party relationships across their
respective US businesses, the Group entered into arrangements conditional on
completion of the Combination with Boyd pursuant to which Boyd would receive a
total payment of the 1.5% of the increase in Fox Bet's market value between
completion of the Combination and July 2023 (subject to a carrying value
adjustment). Any payment due to Boyd in respect of this is not expected to be
significant.

On 22 October 2021, FanDuel Group Parent LLC ("FanDuel") and Boyd Interactive
Holdings LLC ("Boyd") entered into an arrangement where Boyd contributed
91,828 Investor Units equivalent to 0.5% of FanDuel's total Investor Units in
exchange for 91,828 warrants to acquire Investor Units of FanDuel.  The
aggregate exercise price of the warrants is $1.00 and are exercisable at any
time within the next 10 years. If the warrants remain outstanding after 10
years, they will be automatically converted into the number of Investor Units
for which such warrants are exercisable. As this transaction involves the
exchange of one form of fixed equity instrument for another fixed instrument
with a non-controlling interest for no additional consideration, no further
accounting is required.

 

17. Fair values (continued)

Junglee

As part of the acquisition of Junglee, the Group has put in place
arrangements, consisting of call and put options, that could see its ownership
in the business increase to 100% in 2025.  The call/put option consideration
can be settled, at the Group's election, in cash or shares. As a consequence
of both the put and call options being only exercisable at fair value being
the future EBITDA and revenue multiple which are considered to be two key
inputs into valuing the option, it was determined that the fair value was not
material and was close to nominal value.

18. Commitments and contingencies

Guarantees

The Company enters into financial guarantee contracts to guarantee the
indebtedness of other companies within the Group.  The Company considers
these to be insurance arrangements and accounts for them as such.  The
Company treats the guarantee contract as a contingent liability until such
time as it becomes probable that the Company will be required to make a
payment under the guarantee.

The Group has uncommitted working capital overdraft facilities of £16.2m
(31 December 2021: £16.2m) with Allied Irish Banks p.l.c.  These facilities
are secured by a Letter of Guarantee from Flutter Entertainment plc.

The Group has bank guarantees: (i) in favour of certain gaming regulatory
authorities to guarantee the payment of player funds, player prizes, and
certain taxes and fees due by a number of Group companies; and (ii) in respect
of certain third-party rental and other property commitments, merchant
facilities and third party letter of credit facilities.  The maximum amount
of the guarantees at 30 June 2022 was £32.8m (31 December 2021: £44.4m).
No claims had been made against the guarantees as of 30 June 2022
(31 December 2021: £Nil).  The guarantees are secured by counter
indemnities from Flutter Entertainment plc and certain of its subsidiary
companies. The value of cash deposits over which the guaranteeing banks hold
security was £11.3m at 30 June 2022 (31 December 2021: £17.5m).

As mentioned in Note 14, borrowings under the TLA Agreement and Syndicated
Facility Agreement are guaranteed by the Company and certain of its operating
subsidiaries.

Contingent liabilities

The Group operates in an uncertain marketplace where many governments are
either introducing or contemplating new regulatory or fiscal arrangements.

The Board monitors legal and regulatory developments and their potential
impact on the business, however, given the lack of a harmonised regulatory
environment, the value and timing of any obligations in this regard are
subject to a high degree of uncertainty and cannot always be reliably
predicted.

Prior to the Combination, the Board of TSG became aware of the possibility of
improper foreign payments by TSG or its subsidiaries in certain jurisdictions
outside of Canada and the United States relating to its historical B2B
business (which was never profitable and effectively ceased operations in
2014). When this matter arose, TSG contacted the relevant authorities in the
United States and Canada with respect to these matters and, following the
Combination, the Group continues to co-operate with the United States and
Canada governmental authorities in respect of all inquiries. Based on its
review to date, the Board of Flutter has not identified issues that it
believes would have a significant adverse effect on the Group's financial
position or business operations.

The Group has seen a number of player claims in Austria for reimbursement of
historic gaming losses. We have provided our remote services in Austria on the
basis of multi-jurisdictional Maltese licences and EU law, however the
Austrian Courts consider that our services are contrary to local law.

 

Together with its legal advisers, the Group is currently reviewing its
position and strongly disputes the basis of these judgements. It is not
possible at this stage to provide a reasonable estimate of the contingent
liability as the matter is still at an early stage and unlikely to be fully
resolved in the short term.

 

19. Related parties

There were no material transactions with related parties during the six months
ended 30 June 2022, the six months ended 30 June 2021 or the year ended
31 December 2021.

Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note.

 

20. Events after the reporting date

Acquisition of Sisal

On 23 December 2021, the Group announced the acquisition of Sisal, Italy's
leading retail and online gaming operator, from CVC Capital Partners Fund VI
for announced consideration of €1.91bn/£1.62bn subject to merger control
clearance and customary gaming and foreign investment consents. This
acquisition fully aligns with the Group's strategy of investing to build
leadership positions in regulated markets globally.

The transaction completed on 4 August 2022. The acquisition date fair value
accounting had not been completed as at 11 August 2022.

Borrowings

On 2 August 2022, the Group entered into the Third Amendment of the Syndicated
Facility Agreement receiving a principal balance of €2.0bn first lien term
loan priced at EURIBOR plus 3%, with a maturity date in 2028. The funds were
used for the acquisition of Sisal.

In July and August 2022, the Group drew down an additional £151.0m under the
GBP Revolving Credit Facility.

Acquisition of remaining 49% shares of Adjarabet

On 1 July 2022, as outlined in more detail in Note 12, the Group made a cash
payment of €238.0m (£204m) in respect of the acquisition of the remaining
49% outstanding shares of Adjarabet. This acquisition brings the Group's
holding in Adjarabet to 100% up from the previous controlling interest of 51%.
This liability has been recorded as a current liability as at 30 June 2022.

 

 

 

INDEPENDENT REVIEW REPORT TO FLUTTER ENTERTAINMENT PLC

 

Conclusion

We have been engaged by Flutter Entertainment plc ('the Company') to review
the condensed consolidated set of financial statements in the half-yearly
financial report for the six months ended 30 June 2022 which comprises the
Condensed Consolidated Interim Income Statement, the Condensed Consolidated
Interim Statement of Other Comprehensive Income, the Condensed Consolidated
Interim Statement of Financial Position, the Condensed Consolidated Interim
Statement of Cash Flows, the Condensed Consolidated Interim Statement of
Changes in Equity, a summary of significant accounting policies and other
explanatory notes.

Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of consolidated financial statements in the
half-yearly financial report for the six months ended 30 June 2022 is not
prepared, in all material respects in accordance with International Accounting
Standard 34 Interim Financial Reporting ("IAS 34") as adopted by the EU and
the Transparency (Directive 2004/109/EC) Regulations 2007 ("Transparency
Directive"), and the Central Bank (Investment Market Conduct) Rules 2019
("Transparency Rules of the Central Bank of Ireland).

 

Basis for conclusion

We conducted our review in accordance with International Standard on Review
Engagements (Ireland) 2410 Review of Interim Financial Information Performed
by the Independent Auditor of the Entity ("ISRE (Ireland) 2410") issued for
use in Ireland. 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 (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.

We read the other information contained in the half-yearly financial report to
identify material inconsistencies with the information in the condensed set of
consolidated financial statements and to identify any information that is
apparently materially incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing the review. If we become
aware of any apparent material misstatements or inconsistencies we consider
the implications for our report.

 

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention that causes us to believe that the Directors
have inappropriately adopted the going concern basis of accounting, or that
the Directors have identified material uncertainties relating to going concern
that have not been appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with
ISRE (Ireland) 2410. However, future events or conditions may cause the
Company to cease to continue as a going concern, and the above conclusions are
not a guarantee that the Company will continue in operation.

 

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 Transparency Directive and
the Transparency Rules of the Central Bank of Ireland.

The Directors are responsible for preparing the condensed set of consolidated
financial statements included in the half-yearly financial report in
accordance with IAS 34 as adopted by the EU.

As disclosed in Note 1, the annual financial statements of the Group for the
year ended 31 December 2021 are prepared in accordance with International
Financial Reporting Standards as adopted by the EU.

In preparing the condensed set of consolidated financial statements, the
Directors are responsible for assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either intend
to liquidate the Company or to cease operations, or have no realistic
alternative but to do so.

 

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.

Our conclusion, including our conclusions relating to going concern, are based
on procedures that are less extensive than audit procedures, as described in
the Basis for conclusion section of this report.

 

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
Transparency Directive and the Transparency Rules of the Central Bank of
Ireland. Our review has been undertaken so that we might state to the Company
those matters we are required to state to it in this 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 conclusions we have reached.

 

11 August 2022

KPMG

Chartered Accountants

1 Stokes Place

St. Stephen's Green

Dublin 2

 

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