REG - Paddy Power plc - 2014 Interim Results Announcement <Origin Href="QuoteRef">PAP.I</Origin> - Part 2
29/10/2014 15:47
- Part 2: For the preceding part double click ID:nRSb1654Qa
periods following the replacement of
the VAT and Amusement Machine
License Duty regime with Machine
Gaming Duty ('MGD') from February
2013, prior period amounts for
January 2013 within UK Retail have
been restated. VAT costs which were
previously recorded as a deduction
when arriving at amounts staked and
net revenue are now included within
cost of sales, consistent with where
MGD is expensed. This restatement
has no impact on gross and operating
profits.
(vi) For ease of reference/comparison, a
sportsbook net revenue % is
calculated including the cost of all
cash and free bet offers (calculated
excluding foreign exchange hedging
gains/losses from net revenue and
including stakes from freebets
within turnover).
(vii) Active customers are defined as
those who have deposited real money
and have bet in the reporting
period, excluding indirect B2B
customers.
(viii) New customers are defined as those
who have deposited real money and
have bet for the first time in the
reporting period.
(ix) Total online marketing costs
includes all marketing costs within
operating costs and affiliate
commissions and other marketing
related costs reported within cost
of sales.
Directors' Responsibility Statement in respect of the Half Yearly Financial Report
For the six months ended 30 June 2014
Each of the directors, whose names and functions are listed in the 2013 Annual Report, confirm our responsibility for
preparing the half yearly financial report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007,
the Transparency Rules of the Central Bank of Ireland and the Disclosure and Transparency Rules of the UK FCA and with IAS
34 'Interim Financial Reporting' as adopted by the EU, and that to the best of our knowledge:
a) the condensed consolidated interim financial statements comprising the condensed consolidated interim income statement, the condensed consolidated interim statement of 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 Notes 1 to 18 have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU.
b) the interim management report includes a fair review of the information required by:
i) Regulation 8(2) of the Transparency (Directive 2004/109/EC) Regulations 2007, being 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; and a description of the principal risks and uncertainties for the remaining six months of the year; and
ii) Regulation 8(3) of the Transparency (Directive 2004/109/EC) Regulations 2007, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last Annual Report that could do so.
On behalf of the Board
Patrick Kennedy Cormac McCarthy
Chief Executive Chief Financial Officer
27 August 2014
Condensed Consolidated Interim Income Statement
For the six months ended 30 June 2014
Six months ended 30 June 2014 (unaudited) Six months ended 30 June 2013 (unaudited)
Note E'000 E'000
Sportsbook amounts staked 3,422,019 2,998,837
Continuing operations
Income 396,492 379,827
Direct betting costs 5 (75,895) (62,632)
Gross profit 320,597 317,195
Employee expenses (113,826) (112,998)
Property expenses (27,377) (23,499)
Marketing expenses (53,803) (40,144)
Technology and communications expenses (25,533) (22,583)
Depreciation and amortisation (23,675) (19,842)
Other expenses, net (16,327) (22,744)
Total operating expenses (260,541) (241,810)
Operating profit 60,056 75,385
Financial income 6 1,630 1,799
Financial expense 6 (62) (179)
Profit before tax 61,624 77,005
Income tax expense 7 (8,011) (10,010)
Profit for the period - all attributable to equity holders of the Company 53,613 66,995
Earnings per share
Basic 8 E1.113 E1.394
Diluted 8 E1.106 E1.371
Condensed Consolidated Interim Statement of Comprehensive Income
For the six months ended 30 June 2014
Six months ended 30 June 2014 (unaudited) Six months ended 30 June 2013 (unaudited)
Note E'000 E'000
Profit for the period - all attributable to equity
holders of the Company 53,613 66,995
Other comprehensive income / (expense)
Items that are or may be reclassified subsequently to profit or loss:
Effective portion of changes in fair value of cash flow hedges 6 (3,160) 4,943
Fair value of foreign exchange cash flow hedges transferred to income statement 6 1,996 (3,337)
Foreign exchange gain / (loss) on translation of the net assets of foreign currency denominated subsidiaries 6 7,758 (13,451)
Deferred tax on fair value of cash flow hedges 146 (201)
Other comprehensive income / (expense) 6,740 (12,046)
Total comprehensive incomefor the period - allattributable to equity holders of the Company 60,353 54,949
Condensed Consolidated Interim Statement of Financial Position
As at 30 June 2014
30 June 2014 (unaudited) 30 June 2013 (unaudited) 31 December 2013 (audited)
Note E'000 E'000 E'000
Assets
Property, plant and equipment 124,993 108,189 116,216
Intangible assets 73,545 63,982 69,185
Goodwill 9 101,827 92,528 92,554
Financial assets - restricted cash 11 - 993 993
Deferred tax assets 8,683 6,846 8,002
Trade and other receivables 1,685 3,403 2,903
Total non-current assets 310,733 275,941 289,853
Trade and other receivables 37,879 36,540 29,262
Derivative financial assets - 2,121 -
Financial assets - restricted cash 11 53,541 33,084 52,806
Financial assets - deposits 11 - 37,919 13,686
Cash and cash equivalents 11 190,865 142,466 161,359
Total current assets 282,285 252,130 257,113
Total assets 593,018 528,071 546,966
Equity
Issued share capital 15 5,103 5,086 5,098
Share premium 43,180 40,150 41,646
Treasury shares (34,177) (34,177) (34,177)
Shares held by long term incentive plan trust (61,454) (59,780) (71,736)
Other reserves including foreign currency translation, cash flow hedge and share-based payment reserves 21,792 25,998 23,406
Retained earnings 353,625 311,707 346,765
Total equity - attributable to equity holders of the Company 328,069 288,984 311,002
Liabilities
Trade and other payables 12 207,928 181,733 180,973
Derivative financial liabilities 12 26,943 12,989 17,048
Provisions 543 621 515
Current tax payable 16,906 17,150 20,462
Total current liabilities 252,320 212,493 218,998
Trade and other payables 12 7,056 21,166 12,289
Derivative financial liabilities 12 403 110 270
Provisions 1,152 1,229 1,115
Deferred tax liabilities 4,018 4,089 3,292
Total non-current liabilities 12,629 26,594 16,966
Total liabilities 264,949 239,087 235,964
Total equity and liabilities 593,018 528,071 546,966
Condensed Consolidated Interim Statement of Cash Flows
For the six months ended 30 June 2014
Six months ended 30 June 2014 (unaudited) Six months ended 30 June 2013 (unaudited)
Note E'000 E'000
Cash flows from operating activities
Profit for the period - all attributable to equity holders of the Company 53,613 66,995
Income tax expense 8,011 10,010
Financial income 6 (1,630) (1,799)
Financial expense 6 62 179
Depreciation and amortisation 23,675 19,842
Employee equity-settled share-based payments expense 3,371 8,145
Foreign currency exchange (gain) / loss (810) 1,022
(Profit) / loss on disposal of property, plant and equipment and intangible assets (8) 13
Cash from operations before changes in working capital 86,284 104,407
Increase in trade and other receivables (6,710) (10,987)
Increase in trade and other payables and provisions 26,032 15,059
Cash generated from operations 105,606 108,479
Income taxes paid (12,182) (10,841)
Net cash from operating activities 93,424 97,638
Cash flows from investing activities
Purchase of property, plant and equipment (20,392) (16,535)
Purchase of intangible assets (13,794) (11,929)
Purchase of businesses 10 (6,177) (2,415)
Payment of contingent deferred consideration 10 (8) (88)
Proceeds from disposal of property, plant and equipment and intangible assets 29 45
Transfers from financial assets - deposits 13,781 3,701
Interest received 1,533 1,708
Net cash used in investing activities (25,028) (25,513)
Cash flows from financing activities
Proceeds from the issue of new shares 1,540 113
Purchase of shares by long term incentive plan trust (3,883) (12,264)
Dividends paid 14 (44,392) (39,803)
Movements in current and non-current restricted cash balances 1,773 3,315
Interest paid (166) (258)
Net cash used in financing activities (45,128) (48,897)
Net increase in cash and cash equivalents 23,268 23,228
Cash and cash equivalents at start of period 161,359 129,004
Foreign currency exchange gain / (loss) on cash and cash equivalents 6,238 (9,766)
Cash and cash equivalents at end of period 11 190,865 142,466
Condensed Consolidated Interim Statement of Changes in Equity
For the six months ended 30 June 2014
Attributable to equity holders of the Company
(unaudited) Number of ordinary shares in issue Issued share capitalE'000 SharepremiumE'000 Foreign exchange translation reserveE'000 Cash flow hedge reserveE'000 Other reservesE'000 Treasury sharesE'000 Shares held by long term incentive plan trustE'000 Share-based payment reserveE'000 Retained earningsE'000 TotalE'000
Balance at 1 January 2014 50,977,085 5,098 41,646 (7,664) (1,283) 1,240 (34,177) (71,736) 31,113 346,765 311,002
Total comprehensive income / (expense) for the period
Profit - - - - - - - - - 53,613 53,613
Foreign exchange translation - - - 7,758 - - - - - - 7,758
Net change in fair value of cash flow hedge reserve - - - - (1,164) - - - - - (1,164)
Deferred tax on cash flow hedges - - - - 146 - - - - - 146
Total comprehensive income / (expense) for the period - - - 7,758 (1,018) - - - - 53,613 60,353
Transactions with owners of the Company, recognised directly in equity
Shares issued (Note 15) 56,982 5 1,534 - - - - - - - 1,539
Own shares acquired by the long term incentive plan trust - 70,400 ordinary shares (Note 15) - - - - - - - (3,883) - - (3,883)
Equity-settled transactions - expense recorded in income statement - - - - - - - - 3,371 - 3,371
Equity-settled transactions - vestings - - - - - - - 14,165 (11,547) (2,010) 608
Deferred tax on share-based payments - - - - - - - - - (529) (529)
Transfer to retained earnings on exercise of share options (Note 15) - - - - - - - - (178) 178 -
Dividends to shareholders (Note 14) - - - - - - - - - (44,392) (44,392)
Total contributions by and distributions to owners of the Company 56,982 5 1,534 - - - - 10,282 (8,354) (46,753) (43,286)
Balance at 30 June 2014 51,034,067 5,103 43,180 94 (2,301) 1,240 (34,177) (61,454) 22,759 353,625 328,069
Condensed Consolidated Interim Statement of Changes in Equity (continued)
For the six months ended 30 June 2013
Attributable to equity holders of the Company
(unaudited) Number of ordinary shares in issue Issued share capitalE'000 Share premiumE'000 Foreign exchange translation reserveE'000 Cash flow hedge reserveE'000 Other reservesE'000 Treasury sharesE'000 Shares held by long term incentive plan trustE'000 Share-based payment reserveE'000 Retained earningsE'000 TotalE'000
Balance at 1 January 2013 50,850,848 5,085 40,038 14,110 451 1,240 (34,177) (56,191) 22,792 284,308 277,656
Total comprehensive income / (expense) for the period
Profit - - - - - - - - - 66,995 66,995
Foreign exchange translation - - - (13,451) - - - - - - (13,451)
Net change in fair value of cash flow hedge reserve - - - - 1,606 - - - - - 1,606
Deferred tax on cash flow hedges - - - - (201) - - - - - (201)
Total comprehensive income / (expense) for the period - - - (13,451) 1,405 - - - - 66,995 54,949
Transactions with owners of the Company, recognised directly in equity
Shares issued - exercise of share options (Note 15) 7,627 1 112 - - - - - - - 113
Own shares acquired by the long term incentive plan trust - 185,000 ordinary shares (Note 15) - - - - - - - (12,264) - - (12,264)
Equity-settled transactions - expense recorded in income statement - - - - - - - - 8,145 - 8,145
Equity-settled transactions - vestings - - - - - - - 8,675 (8,652) 246 269
Deferred tax on share-based payments - - - - - - - - - (81) (81)
Transfer to retained earnings on exercise of share options (Note 15) - - - - - - - - (42) 42 -
Dividends to shareholders (Note 14) - - - - - - - - - (39,803) (39,803)
Total contributions by and distributions to owners of the Company 7,627 1 112 - - - - (3,589) (549) (39,596) (43,621)
Balance at 30 June 2013 50,858,475 5,086 40,150 659 1,856 1,240 (34,177) (59,780) 22,243 311,707 288,984
Notes to the Condensed Consolidated Interim Financial Statements
1. General information
Paddy Power plc ('the Company') is a company incorporated in the Republic of Ireland. The condensed consolidated interim
financial statements of the Company for the six months ended 30 June 2014 comprise the Company and its subsidiaries
(together referred to as 'the Group'). The condensed consolidated interim financial statements are unaudited but have been
reviewed by the 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 2013, prepared in accordance with International Financial Reporting Standards ('IFRSs') as adopted
by the EU together with an unqualified audit report thereon and no emphasis of matter under Section 193 of the Companies
Act 1990, will be annexed to the annual return and filed with the Registrar of Companies. They are available from the
Company, from the website www.paddypowerplc.com and, when filed, from the Registrar of Companies.
The condensed consolidated interim financial statements were approved by the Board of Directors of Paddy Power plc on 27
August 2014.
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 Republic of Ireland's Financial Regulator 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 betting transactions and forward foreign exchange contracts (which are recorded as
derivative financial instruments), contingent deferred consideration and certain 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 Euro, the Company's functional currency, rounded to the nearest
thousand.
The financial information contained in the 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 2013, except as set out below.
The Group has adopted the following accounting policies, standards and interpretations during the period ended 30 June
2014:
IFRS 10, 'Consolidated Financial Statements'
IFRS 11, 'Joint Arrangements'
IFRS 12, 'Disclosure of Interests in Other Entities'
IAS 27 (2011), 'Separate Financial Statements'
IAS 28 (2011), 'Investments in Associates'
IFRIC 21, 'Levies'
The adoption of the above new standards and interpretations did not have a significant impact on the Group's consolidated
financial statements.
Amendments to existing standards
During the period, a number of amendments to existing accounting standards became effective. These have been considered by
the directors and have not had a significant impact on the Group's consolidated financial statements.
3. Judgements and estimates
The preparation of interim financial statements in conformity with IFRSs requires management to make judgements, estimates
and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities,
income and expenses. Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial statements, the significant judgements made by management 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 2013.
4. Operating segments
The Group's reportable segments are divisions that are managed separately, due to a combination of factors including method
of service delivery (online, retail shops, telephone), geographical location and the different services provided.
(a) Reportable business segment information
The Group considers that its reportable segments are as follows:
- Online (ex Australia);
- Online Australia;
- UK Retail;
- Irish Retail; and
- Telephone.
The Online (ex Australia), UK Retail, Irish Retail and Telephone segments derive their revenues primarily from sports
betting and/or gaming (gaming machines, games, casino, bingo and poker) and business to business ('B2B') services. Online
(ex Australia) services are delivered primarily through the internet, Telephone through the public telephony system and UK
and Irish Retail through licensed bookmaking shop estates. The Online (ex Australia) and Telephone segments derive their
revenues primarily from the UK and Ireland, the UK Retail segment from retail outlets in Great Britain and Northern Ireland
and Irish Retail from retail outlets in the Republic of Ireland. The Online Australia segment earns its revenues from
sports betting services provided to Australian customers using primarily the internet with a small proportion using the
public telephony system.
The accounting policies in respect of operating segments reporting are the same as those described in the summary of
significant accounting policies set out in the Company's last annual financial statements in respect of the year ended 31
December 2013. There was no inter-segment trading in the six months ended 30 June 2014. Central operating expenses are
allocated to reportable segments based on internal management allocation methodologies. Any expenses that are not directly
allocated to reportable segments in internal management reports are shown in the reconciliation of reportable segments to
Group totals. The Group does not allocate income tax expense or interest to reportable segments. Treasury management is
centralised for the Online (ex Australia), UK Retail, Irish Retail and Telephone segments. The Online Australia segment
manages its own treasury function under Group Treasury oversight. 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.
Reportable business segment information for the six months ended 30 June 2014:
Online (ex Australia) Online Australia UK Retail Irish Retail Telephone Total reportable segments
E`000 E`000 E`000 E`000 E`000 E`000
Income from external customers 147,866 98,624 79,630 62,409 7,963 396,492
Total income 147,866 98,624 79,630 62,409 7,963 396,492
Direct betting costs (26,293) (23,125) (20,203) (6,208) (66) (75,895)
Gross profit 121,573 75,499 59,427 56,201 7,897 320,597
Depreciation and amortisation (9,142) (4,171) (5,418) (4,362) (582) (23,675)
Other operating expenses (90,420) (49,523) (44,495) (43,241) (9,187) (236,866)
Reportable segment profit 22,011 21,805 9,514 8,598 (1,872) 60,056
56,201
7,897
320,597
Depreciation and amortisation
(9,142)
(4,171)
(5,418)
(4,362)
(582)
(23,675)
Other operating expenses
(90,420)
(49,523)
(44,495)
(43,241)
(9,187)
(236,866)
Reportable segment profit
22,011
21,805
9,514
8,598
(1,872)
60,056
4. Operating segments (continued)
Reportable business segment information for the six months ended 30 June 2013:
Online Online UK Retail Irish Retail Telephone Total
(ex Australia) Australia reportable
segments
E`000 E`000 E`000 E`000 E`000 E`000
Income from external customers 161,383 86,495 61,701 58,242 12,006 379,827
Inter-segment trading - - (62) (246) 308 -
Total income 161,383 86,495 61,639 57,996 12,314 379,827
Direct betting costs (20,806) (21,259) (14,856) (5,531) (180) (62,632)
Gross profit 140,577 65,236 46,783 52,465 12,134 317,195
Depreciation and amortisation (7,165) (4,406) (4,072) (3,623) (576) (19,842)
Other operating expenses (91,444) (44,334) (34,883) (41,250) (10,057) (221,968)
Reportable segment profit 41,968 16,496 7,828 7,592 1,501 75,385
Reconciliation of reportable segments to Group totals
Six months ended 30 June 2014 Six months
ended
30 June 2013
E`000 E`000
Income
Total income from reportable segments, being total 396,492 379,827
Group income
Profit and loss
Total profit from reportable segments 60,056 75,385
Unallocated amounts:
Financial income - non-Online Australia (1) 223 346
Financial income - Online Australia 1,407 1,453
Financial expense - non-Online Australia (1) (11) (154)
Financial expense - Online Australia (51) (25)
Profit before tax 61,624 77,005
Financial expense - Online Australia
(51)
(25)
Profit before tax
61,624
77,005
(1) The non-Online Australia segments comprise the Online (ex Australia), UK Retail, Irish Retail and Telephone operating
segments. Financial expense relating to these segments is primarily in respect of guarantee and facility fees, other
interest amounts payable and the unwinding of discounts on provisions and other non-current liabilities.
(b) Geographical segment information
The Group considers that its primary geographic segments are 'UK', 'Australia' and 'Ireland and rest of world'. The UK
geographic segment consists of the UK Retail bookmaking business, online and telephone sports betting from UK customers and
online gaming from UK customers. The Australia geographic segment consists primarily of online sports betting, plus a
small proportion of telephone sports betting, from Australian customers. The Ireland and rest of world geographic segment
is composed of the Irish Retail bookmaking business, online and telephone sports betting from Irish and rest of world
customers, online gaming from Irish and rest of world customers and B2B services provided to rest of world customers.
Revenues from customers outside the UK, Australia and Ireland are not considered sufficiently significant to warrant
separate reporting.
4. Operating segments (continued)
Group revenues by geographical segment are as follows:
Income
Six months ended 30 June 2014 Six months ended 30 June 2013
E'000 E'000
UK 191,536 187,157
Australia 98,624 86,495
Ireland and rest of world 106,332 106,175
Total 396,492 379,827
(a) Revenues are attributed to geographical location on the basis of the customer's location.
Non-current assets (excluding financial assets and deferred tax assets) by geographical segment are as follows:
Non-current assets
30 June 2014 30 June 2013 31 December 2013
E`000 E`000 E`000
UK 138,374 112,522 128,586
Australia 82,080 81,722 77,386
Ireland and rest of world 81,596 73,858 74,886
Total 302,050 268,102 280,858
302,050
268,102
280,858
Seasonality
The Group's sportsbook income is driven by a combination of the timing of sporting and other events and the Group's results
derived from those events. Gaming and other income is not as dependent on the sporting calendar.
5. Direct betting costs
Direct betting costs comprise:
Six months ended 30 June 2014 Six months ended 30 June 2013
E'000 E'000
Betting taxes 32,238 25,272
Software supplier costs 14,885 11,787
Other direct betting costs 28,772 25,573
75,895 62,632
Betting taxes comprise betting taxes levied on gross win and amounts staked, Machine Gaming
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