REG - Playtech PLC - Final Results
23/03/2023 07:15
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RNS Number : 9885T Playtech PLC 23 March 2023
Playtech plc
("Playtech", the "Company", or the "Group")
Excellent FY 2022 performance; well placed for FY 2023
Playtech (LSE: PTEC), the leading platform, content and services provider in
the online gambling industry, today announces its final results for the year
ended 31 December 2022.
Financial summary (continuing operations)(1 )
FY 2022 FY 2021 Change Change (const.
(reported) currency)(4)
Revenue €1,601.8m €1,205.4m 33% 31%
Adjusted EBITDA(2) €405.6m €317.1m 28% 22%
Adjusted post-tax profit(3) €160.5m €127.6m 26% 4%
Reported post-tax profit(3) €40.6m €686.7m -94% -96%
Adjusted diluted EPS 51.5 €c 40.9 €c 26% 4%
Reported diluted EPS 13.0 €c 220.1 €c -94% -96%
Summary
· Excellent FY 2022 driven by continued strength in regulated B2B
markets, and Snaitech.
· Record Adjusted EBITDA of €405.6 million, up 28% vs. 2021.
· Landmark agreement signed with Hard Rock Digital in Q1 2023,
accelerating the US strategy and providing growth opportunities globally.
· Ahead of its B2B investor event later today, Playtech is pleased to
announce a new medium term Adjusted EBITDA target for B2B of €200 - 250
million.
· Strong start to 2023 in spite of the broader macroeconomic and
geopolitical uncertainty.
Divisional highlights
B2B Gambling
· Very strong growth within regulated markets helped to deliver total
B2B revenue of €632.4 million in 2022, growing 14% (+11% at constant
currency).
· B2B Adjusted EBITDA was €160.2 million compared to €139.2
million in 2021, achieved against the backdrop of the war in Ukraine where we
employ over 700 colleagues (c.10% of our workforce).
· Europe ex-UK grew 31% at constant currency to €184.6 million driven
primarily by Netherlands with strong contributions from Poland, Spain and
Ireland.
· Americas continued to perform well with revenues of €144.7 million
and 27% constant currency revenue growth. Caliente in Mexico remained a key
driver of strong revenue growth while the Brazil market also performed very
well in 2022 and offers significant opportunity going forward, as this market
moves towards regulation.
· Significant progress made executing the US strategy:
- Landmark agreement signed with Hard Rock Digital in early 2023.
- Launched the IMS platform with Parx Casino in Pennsylvania, involving a
complex migration off a competitor's platform.
- Signed several new deals including Golden Nugget, WynnBET, Resorts and 888
which are expected to go live in the coming months.
- Licences granted in Pennsylvania and Colorado in 2022. Ohio and Maryland
licences granted in early 2023. Now licensed in 9 states with further
applications progressing.
· Launched with NorthStar in recently regulated Ontario, Canada in
early 2022; recently announced an extension of the relationship and a
strategic investment in NorthStar to ensure we are well positioned to benefit
from the attractive Canadian market.
· Live Casino continued to see good revenue growth; strategically
important facility opened in Peru in H1 that will help continue to drive
future growth in the region.
· The higher margin SaaS offering continues to gain traction with over
100 further brands added in 2022, bringing the total to over 350.
· Asia revenue declined 18% (-21% at constant currency) due to
competitive pressures and the impact of lockdowns in parts of the region in
the period, while the Company incurred a bad debt provision of €15.4 million
due to collection delays, recognised in H1.
B2C Gambling
· Total B2C revenue (including Snaitech and white-label) grew 48% year
on year to €983.1 million (2021: €663.7 million). Adjusted EBITDA was
€245.4 million compared to €177.9 million in 2021.
· Snaitech Adjusted EBITDA grew 39% to €254.2 million (2021:
€182.6 million) driven by retail sites reopening at the end of June 2021
post-pandemic.
· Snaitech's online business performed ahead of expectations with
revenue growth of +2% versus 2021, despite the reopening of retail sites. The
second half saw revenue growth of +10% v H2 2021, as Playtech continues to
leverage the structural shift to online. Adjusted EBITDA margins remained high
at 56% in 2022 versus 59% in 2021.
· Snaitech maintained its number one position by brand across
retail and online sports betting in Italy in 2022.
· HAPPYBET, now integrated into Snaitech's operations, remained
loss-making, with EBITDA of €-10.8 million (FY21: €-11.4 million) but
strategic and operational measures have been taken such as upgrading
HAPPYBET's technology infrastructure.
· Sun Bingo White Label saw 5% revenue growth to €65.3 million while
Adjusted EBITDA fell to €2.0 million (2021: €6.7 million). Reported EBITDA
includes a €10.4 million charge in H1 to terminate an onerous contract. The
termination of the agreement will positively impact the profitability of the
business going forward.
Financial and corporate highlights
· Strong cash generation in 2022, with adjusted operating
cashflow(5) of €397 million.
· October 2023 bond partly repaid generating significant cash interest
savings; additional refinancing options being considered for remaining €200
million October 2023 bond.
· Sale of Finalto for cash consideration of $228.1 million was
completed in July 2022 with a profit on disposal of €15.1 million, marking a
significant step in Playtech's stated strategic objective to simplify the
Group.
· Disposal of 100% of Statscore to LSports, and simultaneously
acquiring a 30.89% stake in LSports, a provider of data to sportsbooks and
media companies to increase our footprint in the growing sports data market.
· In 2023, Playtech announced an equity investment in NorthStar, the
proceeds of which will be used to accelerate the growth of NorthStar's
footprint across Ontario and future regulated markets across Canada.
· Landmark agreement signed with Hard Rock Digital in early 2023.
As part of the agreement, Playtech has also invested $85 million (c.€80
million) in exchange for a low single digit % minority equity ownership stake.
· Reported profit of €40.6 million (2021: €686.7 million). Prior
year included a significant gain on equity call options embedded in the
Company's agreements in the Americas.
Current trading and outlook
· The macroeconomic outlook remains uncertain given geopolitical
and inflationary pressures.
· Despite this, Playtech has had a strong start to 2023, driven by
Snaitech and Caliente and highlighting the resilience of Playtech's
increasingly diversified portfolio.
· Playtech has announced a new medium term Adjusted EBITDA target
for B2B of €200 - 250 million.
· Snaitech medium term Adjusted EBITDA guidance maintained at
€300 - 350 million.
· Strength of balance sheet further improved by strong gash generation
and proceeds from sale of Finalto; financial position gives flexibility for
future shareholder distributions and M&A.
· Given the strong performance in 2022, and momentum within the
business, the Board remains confident in Playtech's ability to execute on
growth opportunities across both B2B and B2C divisions.
Mor Weizer, CEO, commented:
"2022 was a year of considerable strength for Playtech, in which we delivered
record revenues and EBITDA, ahead of market expectations. All parts of the
business contributed to this performance, with B2B powered by Europe (ex-UK)
and the Americas, and B2C's impressive performance underpinned by Snaitech's
continued strength in the Italian market in both retail and online.
"Strategically we have also continued to deliver, executing the successful
sale of Finalto continuing our simplification strategy, and making great
progress in North America with the launch of the IMS platform with Parx Casino
in Pennsylvania and having signed several significant new deals including
Golden Nugget, WynnBET, Resorts and 888.
"We have started the new financial year well and announced the signing of the
landmark transaction with Hard Rock Digital, and in spite of the continued
macro-economic and political uncertainty, remain confident in our future
prospects, as well as our ability to deliver value to all our stakeholders in
a sustainable and responsible way. I would like to take this opportunity to
thank my colleagues and partners for their continued dedication and support.
In particular, I'd like to acknowledge the bravery of our colleagues in the
Ukraine and praise the work of our crisis management team, who have worked
tirelessly to support our Ukrainian colleagues and their families."
- Ends -
For further information contact:
Playtech +44 (0) 20 3805 4822
Mor Weizer, Chief Executive Officer
Chris McGinnis, Chief Financial Officer
c/o Headland
Sandeep Gandhi, Head of Investor Relations +44 (0) 20 3805 4822
Headland (PR adviser to Playtech) +44 (0) 20 3805 4822
Lucy Legh, Jack Gault
(1)Totals in tables throughout this statement may not exactly equal the
components of the total due to rounding.
(2)Adjusted numbers relate to certain non-cash and one-off items, as well as
material reorganisation and acquisition-related costs. The Board of Directors
believes that the adjusted results more closely represent the consistent
trading performance of the business. A full reconciliation between the actual
and adjusted results is provided in Note 10.
(3)Adjusted Profit refers to post-tax Profit from continuing operations
attributable to the owners of the Company after the relevant adjustments as
detailed above. Reported Profit refers to post-tax Profit from continuing
operations attributable to the owners of the Company before adjustments.
(4)Constant currency numbers exclude the exchange rate impact on the results
by using previous period relevant exchange rate and exclude the total
cost/income of exchange rate differences recognised in the period.
(5) Adjusted operating cash flow refers to net cash provided by operating
activities from continuing operations after adjusting for change in jackpot
balances, client deposits, professional fees and ADM security deposit.
Conference call and presentation
A presentation on the earnings will be held today at 9.00 am via a live audio
webcast accessible using this link:
https://www.investis-live.com/playtech/6411733233aa1a12000ef0a9/ngfsw
(https://www.investis-live.com/playtech/6411733233aa1a12000ef0a9/ngfsw)
Analysts and investors can also dial into the call using the following
details:
United Kingdom (Local): +44 20 3936 2999
United Kingdom (Toll-Free): +44 808 189 0158
Global Dial-In Numbers
Access Code: 125238
The presentation slides will be available today from 8.30am at:
http://www.investors.playtech.com/results-centre/presentations/2022.aspx
(http://www.investors.playtech.com/results-centre/presentations/2022.aspx)
A B2B Investor Event will be held today at 10.30am via a live audio webcast
accessible using this link:
https://www.investis-live.com/playtech/6411c9e74aa86d150020ab23/tyen
(https://www.investis-live.com/playtech/6411c9e74aa86d150020ab23/tyen)
Analysts and investors can also dial into the call using the following
details:
United Kingdom (Local): +44 20 3936 2999
United Kingdom (Toll-Free): +44 808 189 0158
Global Dial-In Numbers
Access Code: 054134
The presentation slides will be available today from 10am at:
http://www.investors.playtech.com/results-centre/presentations/2022.aspx
(http://www.investors.playtech.com/results-centre/presentations/2022.aspx)
Forward looking statements
This announcement includes statements that are, or may be deemed to be,
"forward-looking statements". By their nature, forward-looking statements
involve risk and uncertainty since they relate to future events and
circumstances. Actual results may, and often do, differ materially from any
forward-looking statements.
Any forward-looking statements in this announcement reflect Playtech's view
with respect to future events as at the date of this announcement. Save as
required by law or by the Listing Rules of the UK Listing Authority, Playtech
undertakes no obligation to publicly revise any forward-looking statements in
this announcement following any change in its expectations or to reflect
events or circumstances after the date of this announcement.
About Playtech
Founded in 1999 and premium listed on the Main Market of the London Stock
Exchange, Playtech is a technology leader in the gambling and financial
trading industries with over 7,000 employees across 20 countries.
Playtech is the gambling industry's leading technology company delivering
business intelligence driven gambling software, services, content and platform
technology across the industry's most popular product verticals, including,
casino, live casino, sports betting, virtual sports, bingo and poker. It is
the pioneer of omni-channel gambling technology through its integrated
platform technology, Playtech ONE. Playtech ONE delivers data-driven marketing
expertise, single wallet functionality, CRM and responsible gambling solutions
across one single platform across product verticals and across retail and
online.
Playtech partners with and invests in the leading brands in regulated and
newly regulated markets to deliver its data-driven gambling technology across
the retail and online value chain. Playtech provides its technology on a B2B
basis to the industry's leading retail and online operators, land-based casino
groups and government sponsored entities such as lotteries. Playtech directly
owns and operates Snai, the leading sports betting and gaming brand across
online and retail in Italy.
Chairman's statement
I am delighted to report another highly successful year for Playtech, albeit
one in which we had to contend with a challenging economic backdrop and
significant disruption from the war in Ukraine.
Despite these circumstances, we delivered strong growth and made significant
progress against our strategy. This underlines both the resilience of our
business model as well as the ability, commitment and dedication shown across
all levels of the business.
I would like to thank my Board colleagues, the Executive Management and the
wider team, together with our advisers, who have worked tirelessly to deliver
these excellent financial, operational and strategic results against a
challenging backdrop. Their efforts have been the foundation of our success
this year.
Strong progress from all corners of the business
Playtech made significant progress throughout 2022 across both the B2B and B2C
businesses, further diversifying its portfolio and positioning the Group to
capitalise on the exciting opportunities ahead:
· In the US, Playtech expanded its footprint with Parx, launching
its IMS platform in Pennsylvania. In early 2023, Playtech also signed a
landmark agreement with Hard Rock Digital that accelerates our US strategy and
provides significant growth opportunities globally.
· Good progress was made in Canada, with Playtech signing an
agreement with NorthStar to launch a broad suite of products in this newly
regulated market, along with extending the relationship further and taking an
equity investment in NorthStar in early 2023, incorporating elements of the
strategic agreement model employed successfully in other markets.
· In Latin America, Playtech's presence continues to go from
strength to strength, with existing agreements in Mexico and Colombia seeing
excellent growth in the period. Playtech is ideally positioned to benefit from
growth in the soon to be regulated Brazil market. Playtech opened a new Live
Casino facility in Peru as it continues to expand its presence across the
region.
· Snaitech has continued to exceed expectations with the online
segment proving resilient despite the reopening of retail sites, while it also
maintained its number one position by brand across retail and online sports
betting in Italy. Fabio Schiavolin, CEO of Snaitech, discussed the opportunity
for the business at an investor event hosted in September 2022.
Corporate Activity
The impressive performance delivered in 2022 is all the more notable given the
intensity of the corporate activity that Playtech has been involved in. Taken
together, this activity shone a spotlight on the quality of Playtech's
strategy, operations, technology, and people, whose commitment and expertise
continue to drive Playtech from strength to strength.
Offer and further approach for Playtech
In October 2021, the Board recommended an all-cash offer from Aristocrat at a
58% premium to the prevailing share price. Ultimately, at the Court and
General Meetings held on 2 February 2022, Aristocrat's proposal did not
achieve the requisite 75% level of shareholder approval needed for its offer
to progress.
Shortly after Aristocrat's proposal lapsed, Playtech received an approach by
an investor group formed and advised by TTB Partners Limited. On 14 July 2022,
TTB Partners advised that it did not intend to make an offer for the Company
due to challenging underlying market conditions.
Finalto Sale Completed
We were delighted to complete the sale of Finalto in July 2022. This
represented a significant step in our stated strategy to simplify the Group
and focus our efforts on the high-growth B2B and B2C gambling markets.
Board changes
As our Company evolves, so too does its Board. After five years as Chief
Financial Officer (CFO), Andrew Smith stepped down from the Board in November
2022. Andrew contributed significantly to Playtech's strategy and helped guide
the business through a period of substantial transformation. We wish him all
the best in his future endeavours.
It's a testament to the succession planning work of the Nomination Committee
and the Board that we've had such a seamless transition with Chris McGinnis
becoming our new CFO. Chris has done a superb job as Deputy CFO and Director
of Investor Relations, and I believe that his deep knowledge of Playtech will
be invaluable in the years ahead.
Since the start of the new year, we have also welcomed Samy Reeb to the Board
as a Non-Executive Director. We are already reaping the benefits of his broad
skillset and extensive experience of working with global businesses.
One of my highest priorities when joining Playtech was to address the balance
of the Board. While we have made good progress towards improving the Board's
gender diversity, there is still work to be done and we are actively focused
on taking further steps towards meeting our ambition of having a more diverse
Board.
Sustainability
Following an intense period of corporate activity last year, we enter 2023
with a renewed focus on issues around the environment, sustainability, and our
wider contribution to communities and society. Our Sustainable Success
strategy is central to this and sets out an ambitious plan for how we intend
to bring the principles of sustainability and responsible business into
everything we do.
Despite the competing priorities of a busy year, our newly formed
Sustainability and Public Policy Board Committee met regularly to review,
monitor and advise on Playtech's sustainability, responsible business and
public policy matters. The Committee also ensures the continued effectiveness
of Playtech's ESG strategy, ensuring that we remain truly forward looking and
progressive in our plans.
Ukraine/People
The backdrop of the war in Ukraine has put a significant strain on our people
and on the communities in which we operate. While we took quick and decisive
action to minimise disruption to our business, we are mindful that our
colleagues and their families who remain in Ukraine continue to face very real
and dangerous challenges every day as the war continues. I'm proud of the
response from our people who have maintained contact with those colleagues in
Ukraine, assisted with relocation efforts and provided emergency supplies. We
remain committed to doing everything we can to ensure their safety during
these difficult times.
Our people are our greatest asset and I want to thank everyone for their hard
work in helping us to navigate the challenges of the past year and deliver
such a strong set of results.
Looking forward
Whilst we anticipate many of the challenges faced last year to continue into
2023, I am confident that Playtech's clear and proven strategy across both the
B2B and B2C divisions positions us well to build on our progress and deliver
another outstanding performance in the year ahead.
Chief Executive Officer's Review
Overview
Playtech made excellent progress on its strategic priorities throughout 2022,
with growth in both the B2B and B2C businesses. As a result, the Group enters
2023 well-positioned to execute on compelling market opportunities across both
B2B and B2C.
Playtech's B2B Gambling business remains focused on opportunities in regulated
or soon to be regulated markets. The Group continues to target high-growth
markets including the US, Latin America and certain parts of Europe. In
addition to growing in the attractive Live market, Playtech continues to
expand its portfolio of strategic agreements. These helped the B2B segment to
deliver revenue growth of 14% (+11% on a constant currency basis) in 2022. At
the profit level, B2B Adjusted EBITDA grew a healthy 15% to €160.2 million
in 2022 compared to €139.2 million in 2021.
In the US & Canada, Playtech made great strides to establish itself as one
of the key players in this market. The long-term opportunity across Playtech's
full product suite remains significant. In early 2023, a landmark agreement
was signed with Hard Rock Digital to provide Casino and Live, amongst other
content, in North America, accelerating our US strategy. In addition, having
signed with Parx Casino in 2021 in the US, Playtech grew its footprint with
Parx by launching its IMS platform in Pennsylvania and entered Ohio and
Maryland in 2023.
Playtech also signed several new deals in the period, including Golden Nugget
(for Casino and Live in New Jersey and Michigan), WynnBET (multi-state deal to
launch Live and Casino), while 888 and Resorts Digital Gaming (both signed up
for Casino and Live in New Jersey). Good progress was also made in Canada
where Ontario became the first province in Canada to regulate online gambling.
This has continued into 2023 with Playtech announcing in February that it has
taken an equity investment in NorthStar and extended the scope of its
relationship.
Playtech's presence in Latin America continues to go from strength to strength
as existing agreements with Caliente in Mexico and Wplay in Colombia continue
to perform well. Playtech also opened a new Live Casino facility in Peru as it
continues to extend its presence across the region. Looking ahead, the Company
is looking forward to growing our presence in the exciting, soon to be
regulated Brazil market.
Playtech remains committed to diversifying its B2B division by bringing on new
brands and licensees. As well as making progress with new strategic agreements
and joint ventures, Playtech also maintained its track record of attracting
new brands to its SaaS offering. Playtech launched over 100 brands in the
period, with more than 350 new brands now live since launching the SaaS
offering back in 2019.
Playtech's B2C Gambling business, Snaitech, recorded another remarkable
performance as revenue grew 54% compared to 2022. Adjusted EBITDA, meanwhile,
was 39% higher than the previous year, benefitting from retail sites in Italy
remaining open throughout the year as well as the strength of online. The
online segment continues to see impressive growth, indicating that the
addressable market has expanded post-pandemic. Snai maintained its number one
market share position (retail and online combined measured by GGR) across
Italian sports betting brands in 2022, cementing its reputation for consistent
operational and brand strength, whilst also being a fast-growing player in
Italy in the online sector when measured by GGR.
The sale of Finalto was completed in July 2022 for cash proceeds of $228.1
million resulting in a profit on disposal of €15.1 million and represents a
significant step forward in the Group's strategy to simplify the Group,
allowing it to focus on the high-growth B2B Gambling B2C Gambling markets.
Playtech's strong performance in 2022 was underpinned by the energy,
enthusiasm and professionalism of the Company's employees. They are the
lifeblood of the business and do an outstanding job supporting the Group's
customers.
Supporting the Playtech family in Ukraine
It has been more than a year since Russia's invasion of Ukraine and
unfortunately the conflict continues to have a devastating impact. While the
Group's continuity plans mean that Playtech has experienced minimal disruption
to its business activities, the 700 employees based in Ukraine remain front of
mind. Playtech is committed to doing everything it can to ensure the safety of
them and their families.
The Board and management team continue to be moved by the generosity and
support that the Group's colleagues have demonstrated in maintaining contact
with those who remain in Ukraine. Despite the other pressures facing the
business last year - including significant corporate activity - they have
constantly sought to do whatever they can to provide assistance in the form of
ongoing communications, logistics and financial support.
B2B Gambling
Core B2B Gambling
Regulated markets
Playtech's B2B Gambling business remains focused on opportunities in regulated
or soon to be regulated markets. The Group continues to target high-growth
markets, including the US, Latin America and certain parts of Europe.
Regulated markets delivered revenue growth of 22% (+18% on constant currency
basis) compared to FY 2021, driven by strong revenue growth from the Group's
partners in Latin America, Holland Casino in the Netherlands as well as strong
growth in other regulated markets such as Poland, Spain and Ireland.
The Americas
The Americas is at the centre of our strategy for Core B2B Gambling. The
region maintained its impressive record of growth, with FY 2022 revenue up 43%
(+27% at constant currency) compared to FY 2021. This was powered by strong
growth from Caliente as well as increasing contributions from other
customers including Parx in the US.
Accelerating the Group's presence in the US remains a key strategic priority
for Playtech, as proven by the strides taken last year to capitalise on the
favourable regulatory environment. Having signed a strategic agreement with
Parx Casino in 2021, Playtech has been increasing its footprint with Parx and
this is starting to translate into greater revenue contribution. In 2022, Parx
launched its IMS platform in Pennsylvania, which involved a complex migration,
and will serve as a useful blueprint for future deals. In addition, Playtech
launched its IMS, Casino and POP products in New Jersey, while in 2023, the
IMS was rolled out in Ohio and Maryland. Playtech now has a presence with Parx
in Michigan, Pennsylvania, New Jersey, Ohio and Maryland. Further product
launches in additional states with Parx are expected going forward. Pokerstars
also launched the Casino product in New Jersey, while 888 launched Live Casino
in Michigan in 2023.
Several new deals were also signed in the US, including Golden Nugget (Casino
and Live in New Jersey and Michigan), Rush Street Interactive (multi-state
deal for Casino), WynnBET (multi-state deal to launch Casino and Live), while
888 and Resorts Digital Gaming both signed up for Casino and Live in New
Jersey.
In March 2023, Playtech signed a landmark agreement with Hard Rock Digital,
the exclusive, global vehicle for online for Hard Rock International, to
provide Casino and Live amongst other content, in North America. These
products will also be supplied outside of North America in addition to the IMS
and services including marketing and operations. As part of the agreement,
Playtech has also invested €80 million in exchange for a low single digit %
minority equity ownership stake, the proceeds of which will be used to help
fund Hard Rock Digital continued global expansion.
Meanwhile, Playtech delivered several significant product launches across core
markets. In the newly regulated Canadian province of Ontario, NorthStar
launched multiple products. In addition, Bet365 and 888 both went live in
Ontario with Casino and Live on the first day the market became regulated.
Towards the end of 2022, Fanduel, Mansion and Casumo all launched the Casino
and Live products.
In February 2023, Playtech announced an expansion of its partnership with
NorthStar. Playtech has taken an equity investment in NorthStar. The proceeds
of this investment will be used to accelerate the growth of NorthStar's
footprint across Ontario and future regulated markets across Canada. The
agreement also expands the scope of Playtech's offering to NorthStar to
include operational and marketing services, in addition to the IMS platform,
Casino, Live, Poker and Bingo solutions already launched.
Playtech delivered against its commitment to further expand its infrastructure
in high-growth markets, such as the US. Having already opened Live studios in
New Jersey and Michigan, another Live facility is under construction in
Pennsylvania and is expected to open in 2023. Behind the Company's growing
physical presence are an increasing number of employees focused on sales,
operations and back-office functions, taking head count to more than 130 at
the end of 2022.
Following the repeal of PASPA in 2018, each year that passes has seen a
growing number of states approve legislation to legalise sports betting.
While 2022 saw further progress, California was notable in voting to reject
the legalisation of online sports betting and in-person sports betting at
tribal casinos and private horse tracks. This may delay legislation in states
that have yet to approve sports betting, but the expectation remains that
these states will eventually look to approve legislation. In 2022, Playtech
received licences for Pennsylvania, Colorado and Ohio with Maryland received
in 2023, taking the total number of US states where Playtech has a licence to
9.
Online casino is allowed at the discretion of individual states. No new states
have authorised Online casino in 2022, although there are several states where
iGaming legislation is being considered.
Playtech's presence in Latin America continues to go from strength to strength
with existing agreements with Caliente in Mexico and Wplay in Colombia
continuing to perform well. Looking further ahead, Playtech is well-positioned
to continue its growth and capitalise on other strategic agreements in Latin
America in the years ahead.
Playtech also opened a new Live Casino facility in Peru, giving the Company a
strong base from which to serve both its existing clients in Latin America and
prospective clients in newly regulated markets in the region. Several
customers, such as Wplay, bet365 and BetVictor, have launched tables in the
new Live facility with demand proving strong so far. Given the success of
legislation in markets like Colombia, Playtech anticipates continued
favourable regulation and strong growth in the region in the years to come.
One example of this is in Brazil, where sports betting legislation has been
passed and is expected to be implemented in the near future. Brazil is
anticipated to be a significant market given the large population and love of
sports. The Company has an exciting strategic agreement in place with
Galerabet, with economics similar to its other arrangements in Latin America,
in anticipation of regulation in this market.
Europe ex-UK
2022 B2B revenue growth in Europe ex-UK of 31% (+31% at constant currency) was
driven by strong growth across several countries, including Netherlands,
Spain, Poland and Ireland.
The move towards greater regulation in Europe continues to represent
significant growth opportunities. The first full year of Playtech's new,
expanded long-term strategic software and services agreement with Holland
Casino has seen an impressive start. Playtech now supplies Holland Casino with
a full turnkey multi-channel technology package, as well as certain ancillary
services. The agreement includes the IMS platform, Sports betting, Online
Casino, Live Casino, Poker and Bingo products, plus selected operational and
marketing services. While growth rates moderated as the year went on, the
partnership is continuing to see the benefits of its first mover advantage. It
was a key driver of revenue growth in Europe in 2022, illustrating the
significant growth opportunities of newly regulated markets. This agreement,
as well as the launch of Casino and Poker with Bet365 and Unibet in the
Netherlands in 2022, means Playtech is well positioned to capitalise on the
newly regulated Netherlands market.
Elsewhere in Europe, the Company invested in its physical infrastructure by
expanding its Live facility in Romania. The facility now also includes
Blackjack and Poker studios, enabling Playtech to serve its customers with an
even wider and more diverse suite of products. In terms of new customers, the
Live business launched with, among others, Betsson in Italy and Pokerstars in
Greece.
Playtech's Casino business made great progress opening up new territories with
its existing customer base, such as Pokerstars and Betsson in Greece, Leo
Vegas in Spain, Betway and 888 in Italy, Stoiximan in The Czech Republic,
Betano in Bulgaria and Fortuna in Slovakia. This clearly demonstrates the
scalability of Playtech's business model.
UK
The UK saw revenue decline 4% (-5% on a constant currency basis) compared to
FY 2021, where the positive impact of the reopening of retail stores from
mid-April 2021 was more than offset by a decline in revenue from Entain in
addition to a slowdown in the online business caused by the uncertain
regulatory climate.
The UK Government is currently undertaking a review into existing gambling
laws in the UK. In response, several operators are taking pre-emptive measures
such as stake limits and affordability checks in an attempt to show regulators
that the industry is able to self-regulate.
In December 2020, the UK Government announced a call for evidence to review
the existing gambling laws in the UK. Since the initial 16-week call for
evidence, which ended on 31 March 2021, the Government has been assessing the
evidence presented, alongside other data, with the aim of setting out
conclusions and any proposals for reform in a White Paper. Playtech submitted
data and evidence relating to the call and will support this wherever possible
going forward. The White Paper was due to be published in 2022, but this has
been delayed with media reports suggesting it is due to be published
imminently.
Playtech remains committed to the UK market and will actively support its
customers in implementing any necessary changes following the White Paper's
expected publication. Playtech has been actively involved in discussions
around safer game design and online advertising for some time. By using its
technology and data to support its licensees in safer gambling, the Company is
confident that it will remain the go-to platform for regulated markets
including the UK.
Other unregulated (excl. Asia)
The Group's strategy to focus on both regulated and regulating markets
includes unregulated markets which are expected to regulate in the near
future. These are classified in the 'Unregulated excl. Asia' line within B2B
Gambling. These unregulated markets (excluding Asia) were up 11% year on year
(+10% at constant currency) versus 2021, primarily driven by very strong
growth in Brazil, offset in part by a decline in Germany, which saw regulatory
changes, and Netherlands moving to a regulated market in 2021.
In Canada, recent legislation means that single-game sports betting is now
allowed at the discretion of individual provinces. Seven provinces, including
the country's largest province, Ontario, began allowing bets to be placed on
single-game sporting events. Since then, as of 4 April 2022, Ontario has
become the first fully regulated online gambling market in Canada, with
iGaming launched as well.
As other provinces across Canada introduce sports betting and iGaming, the
market opportunity in North America will continue to grow. In line with the
Company's strategy to target newly regulating markets, Playtech signed a
strategic agreement with NorthStar Gaming in January 2022.
The Company also took steps to establish its presence in South Africa, a
nascent but fast-growing market, which permits sports betting and Live casino.
Towards the end of 2022, Playtech launched Casino and Live products with
TsogoSun.
Unregulated Asia
Revenue from the Unregulated Asia business declined 18% (-21% on a constant
currency basis) compared to 2021. The decline was largely the result of
further lockdowns in China during the year. As it stands today, the Asia
business is much more diversified in terms of both distributors as well as
geographies compared to recent years. The Company incurred a bad debt
provision of €15.4 million in H1 22 following continued collection delays in
the region.
B2B - Product Developments
Playtech remains committed to diversifying its B2B Gambling division by
bringing on new brands and licensees. As well as making progress with new
strategic agreements and joint ventures, Playtech also maintained its track
record of attracting new customers in both regulated and regulating markets to
its SaaS offering. Playtech launched over 100 brands in the period, with more
than 350 now live since the launch of its SaaS model in 2019.
In August 2022, Playtech launched new title The Walking Dead™ 2, taking
advantage of the exclusive rights it acquired for Online Casino in 2021. A
second title is planned to launch in 2023, with both expected to engage and
retain a large audience. Alongside partnerships with major licenced brands,
Playtech's Casino content strategy continues to focus on the development of
original brand suites, known as Playtech power suites, with the likes of Age
of the Gods™ and Fire Blaze™ producing some of Playtech's most popular
slots. Leprechaun's Luck became Playtech's top-performing new game of 2022 and
was shortlisted for Game of the Year in the 2022 EGR awards.
In terms of other notable product developments, the Live team launched Safari
Riches Live, a live casino slot game created exclusively for 888. This marks a
major milestone as it represents the first time a slot brand developed by 888
has been transformed into a bespoke live casino game. Elsewhere, the Live team
also signed up the exclusive global rights to Jumanji, including for the US,
and plans to launch a game in 2023. Other highlights include Everybody's
Jackpot and The Greatest Card Show, which have both broken new ground
technologically. Everybody's Jackpot features first of its kind "Unreal
engine" Metaverse technology, while The Greatest Card Show's augmented reality
and horizontal wheel - a Live sector first - makes it one of Playtech's most
sophisticated games yet.
B2C Gambling
Playtech's B2C business consists of Snaitech (including HAPPYBET) and the
White Label operations, which is primarily Sun Bingo. Overall B2C revenues
grew 48% compared to FY 2021 at constant currency, while Adjusted EBITDA grew
38%.
Snaitech
Italy
Snaitech delivered another year of significant growth in FY 2022, with revenue
up 54% compared to the prior year, while Adjusted EBITDA grew 39% versus FY
2021. This exceptional performance was primarily driven by the reopening of
retail sites in Italy, which occurred at the end of June 2021 and have since
remained open.
As a result, retail sales grew significantly in the period and are within 10%
of pre-pandemic levels. This is a good performance given a small proportion of
franchise retail shops closed permanently, some customers permanently
transitioned to the online channel and new legislation - introduced in January
2020 - that requires customers to present ID card to enter retail shops. At
the EBITDA level, the retail segment has now surpassed 2019 pre-pandemic
levels on an absolute basis, while EBITDA margins are also higher than 2019
levels driven by an increasing proportion of revenue generated from the higher
margin sports betting segment and a lower retail sports pay out in 2022
compared to 2019.
The online business grew 2% in 2022 versus 2021 despite retail shops being
reopened in June 2021, suggesting a combination of a proportion of existing
retail customers permanently shifting to online in conjunction with new
customers being onboarded via the online channel. Adjusted EBITDA margins
remained high at 56% in 2022 versus 59% in 2021.
As disclosed at the HY 2022 results last year, Snaitech has begun the formal
sale process of La Maura Racetrack in Italy. €1 million was received on
signing in July 2021, with the remaining €19 million expected to be received
in instalments in 2024. We have now received €56 million from the sale of
'non-core' land since the acquisition of Snaitech in 2018.
Snai maintained its number one market share position (retail and online
combined measured by GGR) across Italian sports betting brands in 2022,
cementing its reputation for consistent operational and brand strength, whilst
also being one of the fastest growing players in Italy in the online sector
when measured by GGR.
Finally, the 2023 budget law postponed the expiration of all concessions such
that all licenses in Italy, including online and retail, have been extended
until December 2024 at a total cost of €24 million in 2023 and €34 million
in 2024. Beyond 2024, talks are continuing to find an agreement with local
authorities on a common and homogeneous set of rules.
Germany & Austria
HAPPYBET (now reported as part of Snaitech) saw revenue growth of 10% in 2022
compared to 2021. This was primarily driven by the reopening of retail sites
and early progress after the Snaitech management team took control of
HAPPYBET's operations. The business remains loss making with EBITDA of
€-10.8 million in 2022 (2021: €-11.4 million), but strategic and
operational measures have been taken.
In 2022, the team at Snaitech have already made good progress upgrading
HAPPYBET's technology infrastructure, enhancement of the product and services
offering, deployment of new marketing strategies and activities to increase
brand awareness and realising costs synergies between HAPPYBET and Snaitech.
This will in time drive the performance of both retail and online. Germany's
Interstate Treaty regulated online slots, online poker and sports betting.
Playtech has been awarded one of the few available online sports betting
licenses in Germany through HAPPYBET and has already launched an online
offering. With structural growth drivers and a turnaround strategy being
implemented by a strong management team, the Group is confident of its
prospects going forward.
Sun Bingo White Label
Sun Bingo White Label saw 5% revenue growth to €65.3 million (2021: €61.9
million) while Adjusted EBITDA was €2.0 million, down from €6.7 million in
2021. As disclosed at H1 2022 results, reported EBITDA includes a €10.4
million payment to terminate an onerous contract with a former service
provider. The termination of the agreement has positively impacted the
profitability of the business.
Safer gambling and sustainability
As a technology leader in the gambling sector, we are committed to growing our
business sustainably and in a way that builds long term value for our
stakeholders. To meet this ambition we have set out a five-year strategy that
sets out a roadmap that moves us towards fully integrating sustainability and
responsible business into our culture, strategy and operations.
As I reflect on our sustainability journey over this past year, I am most
proud of our efforts to safeguard and support our Ukrainian colleagues and
their families. The strength and character shown by our people is truly
humbling and inspiring. As the war continues, we remain steadfast in our
support to our affected colleagues and their families - continuing to assist
them in confronting the ongoing challenges they face in whatever way we can,
as well as providing ongoing humanitarian aid across the country.
I am also pleased that we have continued to make progress in all areas
relating to sustainability including safer gambling, diversity and climate
change. We have taken significant steps to strengthen sustainability
governance and accountability, as well as further enhancing our commitments on
climate change and gender diversity. Highlights include:
• Strengthening governance with frequent engagement with
the Board Sustainability and Public Policy Committee in addition to engagement
with our external stakeholder advisory panel.
• Enhancing accountability by extending the application
of sustainability-linked remuneration to executive management and selected
leaders, focusing on delivery around safer gambling, reducing our
environmental impact and diversity and inclusion.
• Expanding our engagement and partnership with our
licensees and other partners on safer gambling technology solutions through
Playtech Protect whilst also advocating for strong safer gambling policy and
standards across regulated and emerging markets.
• Progressing towards our aspiration for workplace
equality with female representation within our leadership population
increasing to 26%.
• Reinforcing our commitment to contribute to a low
carbon future with a significant shift to renewable energy and a formal
commitment to the Science Based Target Initiative (SBTi) to set both near-term
and net zero targets.
As we look to 2023, we will focus on further embedding sustainability into our
culture and key decision-making processes.
Corporate activity
Completion of Finalto sale
Having completed the sale of Finalto to Gopher Investments in July 2022,
Playtech has taken a significant step towards simplifying the Group and to
focus on its technology-led offering as a pureplay business in the high-growth
B2B and B2C gambling markets. The sale was agreed for an enterprise value of
$250 million, although this amount was reduced to $228.1 million based on the
performance of Finalto from 1 January 2021 to completion. Completion of the
transaction also triggered payment of a break fee of $8.8 million which
Playtech is required to pay to the Consortium that had previously agreed to
acquire Finalto, while profit on disposal of Finalto amounted to €15.1
million. The sale proceeds were partly used to repay the outstanding balance
on Playtech's revolving credit facility with the remainder of proceeds used
for general corporate purposes.
Chief Financial Officer's Review(1)
Overview
Group performance
Overall, Playtech had an excellent 2022, with Adjusted EBITDA of €405.6
million (2021: €317.1 million), an increase of 28% (22% on a constant
currency basis) compared to 2021. Similarly, reported EBITDA increased by
€91.2 million to €372.5 million (2021: €281.3 million). Total reported
revenue from continuing operations was €1,601.8 million (2021: €1,205.4
million), representing a 33% increase (31% on a constant currency basis)
compared to 2021. The excellent overall results in 2022 were driven by
continued strength in the Group's online businesses as well as retail
reopening following pandemic-related closures in parts of 2021 in many of the
Group's markets.
The strong performance was driven by both the B2C and B2B divisions. In B2C,
Snaitech had an excellent 2022 performance as the strong results in its online
business continued and its retail shops were open for the entirety of 2022,
following the pandemic related closures for most of H1 2021. This led to B2C
Adjusted EBITDA of €245.4 million, an increase of 38% compared to 2021.
In B2B, the results were driven by strong growth in regulated markets, with
revenues growing by 22% from €378.7 million to €461.6 million (18% on a
constant currency basis), led by Caliente in the Americas and Holland Casino
in Europe, validating the strategy of focusing on opportunities in regulated
and soon to be regulated markets.
Reported and Adjusted Profit
Adjusted profit before tax from continuing operations increased by 79% to
€215.4 million (2021: €120.4 million), driven by the rise in Adjusted
EBITDA, decrease in depreciation and amortisation and increase in finance
income due to favourable EUR/USD FX movements.
Reported profit before tax from continuing operations decreased to €95.6
million (2021: €605.0 million), mainly due to the €583.2 million of
unrealised fair value gains on derivative financial assets recognised in the
prior year with the current year fair value gain being only €6.0 million.
This led to a total post-tax reported profit from continuing operations of
€40.6 million (2021: €686.7 million).
Balance sheet, liquidity and financing
The Group continues to maintain a strong balance sheet with Adjusted gross
cash, which excludes the cash held on behalf of clients, progressive jackpots
and security deposits, of €272.4 million as at 31 December 2022 (31 December
2021: €434.3 million). The decrease is a result of fully paying down the
outstanding Revolving Credit Facility (RCF) balance of €166.1 million in
July 2022, as well as the €330.0 million part repayment of the 2018 Bond,
offset by the €223.9 million cash consideration received on the disposal of
Finalto and the positive cash generation due to the performance of the Group
during the year. The Group now has a reduced leverage position with net debt
decreasing by €332.6 million to €275.2 million as at 31 December 2022 (31
December 2021: €607.8 million). Net debt / Adjusted EBITDA was 0.7x as at
the year end, a significant improvement to the ratio at 31 December 2021 of
1.9x.
Finalto sale
The sale of the Finalto division to Gopher Investments completed in July 2022.
The final cash proceeds from the disposal were $228.1 million (€223.9
million), which includes an enterprise value of US$250 million offset by a
completion accounts adjustment.
Playtech used part of these proceeds to repay its RCF in full in July 2022
with the remainder used for general corporate purposes.
Group Summary (continuing operations)(3)
2022 2021
€'m €'m
B2B Gambling 632.4 554.3
B2C Gambling 983.1 663.7
Intercompany (13.7) (12.6)
Total Group Revenue from continuing operations 1,601.8 1,205.4
Adjusted costs (1,196.2) (888.3)
Adjusted EBITDA from continuing operations 405.6 317.1
Reconciliation from EBITDA to Adjusted EBITDA:
EBITDA 372.5 281.3
Employee stock option expenses 8.0 13.1
Professional fees 15.7 14.4
Fair value change of redemption liability (4.3) 1.3
Ukraine employee support costs 3.3 -
Onerous contract 10.4 -
Provision for other receivables - 1.2
Charitable donation - 3.5
Settlement of legal matter - 2.3
Adjusted EBITDA 405.6 317.1
Adjusted EBITDA margin 25% 26%
Overall, the Group's total revenue from continuing operations increased by 33%
to €1,601.8 million (2021: €1,205.4 million), mostly driven by retail
reopening following COVID-19 related restrictions which impacted H1 2021 in
many of the Company's main markets, including Italy, as well as its continued
growth in regulated B2B markets.
In B2B, revenue increased by 14% from €554.3 million in 2021 to €632.4
million in 2022, driven by Mexico, where Caliente continued its strong growth,
as well as increases seen in other countries such as the Netherlands, Poland
and Brazil, partly offset by a decrease in the UK and Asia.
The Group's total reported revenues from its B2C operations increased by 48%
to €983.1 million (2021: €663.7 million). Snaitech had an excellent
performance as the strong results in its online business continued and its
retail shops were open for the entirety of 2022, following the
pandemic-related closures for most of H1 2021.
The Group's Adjusted EBITDA from continuing operations increased to €405.6
million (2021: €317.1 million), representing a 28% and 22% increase on an
actual and constant currency basis, respectively. Adjusted EBITDA margin
decreased by only 90bps in 2022 versus 2021 due to a change in channel mix,
with the return of the lower margin retail segment for the full year 2022,
versus closures during the first half of 2021 due to COVID-19, as well as
increased bad debt provision in the B2B business in Asia, recognised in H1
2022.
The Group's total reported EBITDA increased by 32% to €372.5 million (2021:
€281.3 million). The adjusted items between reported and Adjusted EBITDA are
explained in Note 10 of the financial statements.
Divisional performance
B2B Gambling
B2B Gambling Revenue
2022 2021 Change Constant currency
€'m €'m % %
Regulated - Americas 144.7 101.3 43% 27%
Regulated - Europe (excluding UK) 184.6 141.4 31% 31%
Regulated - UK 126.7 132.1 -4% -5%
Regulated - Rest of the World 5.6 3.9 44% 44%
Total Regulated B2B revenue 461.6 378.7 22% 18%
Unregulated excluding Asia 103.6 93.7 11% 10%
Total Core B2B revenue 565.2 472.4 20% 16%
Asia 67.2 81.9 -18% -21%
Total B2B Gambling revenue 632.4 554.3 14% 11%
Overall, B2B Gambling revenues increased by 14% (11% on a constant currency
basis), largely due to an increase in the regulated B2B business.
Core B2B Gambling revenues(2) increased by 20%, driven by an increase in
regulated markets in the Americas and Europe (excluding the UK), as well as
unregulated markets (excluding Asia) of 43%, 31% and 11% respectively (27%,
31% and 10% respectively on a constant currency basis). This was offset by a
4% decrease in revenues from UK (5% on a constant currency basis), and an 18%
(21% on constant currency basis) decline in revenues from Asia.
The increase in the Americas was primarily driven by Mexico, due to revenue
growth from Caliente while in Europe (excluding the UK) the growth was driven
by the Netherlands, Poland, Spain and Ireland. The increase in the Netherlands
was driven by the expanded long-term strategic software and services agreement
with Holland Casino, which successfully launched in October 2021. In
unregulated markets excluding Asia, the increase was driven by very strong
growth in Brazil, offset in part by a decline in Germany, which saw regulatory
changes during the year, and the Netherlands moving to a regulated market.
Asia revenue decreased mainly due to the lockdowns in China and other parts of
Asia in the period, whereas in the UK our partnership with Entain continues to
reduce in scope.
B2B Gambling Costs
2022 2021 Change
€'m €'m %
Research and Development 87.5 78.2 12%
General and Administrative 82.6 67.2 23%
Sales and Marketing 16.8 13.5 24%
Operations 285.3 256.2 11%
Total B2B Costs 472.2 415.1 14%
Total B2B Revenue and Costs
B2B revenue 632.4 554.3 14%
B2B Costs (472.2) (415.1) 14%
Total B2B Adjusted EBITDA 160.2 139.2 15%
Margin 25% 25%
Research and Development ("R&D") costs include, among others,
employee-related costs and proportional office expenses. Expensed R&D
costs increased by 12% to €87.5 million (2021: €78.2 million), driven by
the increase in employee-related costs. Capitalised development costs were 39%
of total B2B R&D costs in 2022, which is in line with the prior year.
General and Administrative costs include employee-related costs, proportion of
office expenses, consulting and legal fees, and corporate costs such as audit
and tax fees and listing expenses. These costs increased by 23% to €82.6
million (2021: €67.2 million), due to a new bonus scheme provision for
employee retention, increase in consulting fees and post COVID-19 costs.
Sales and Marketing costs increased by 24% to €16.8 million (2021: €13.5
million), mainly due to increased marketing activity following the end of the
COVID-19 crisis as well as higher bonus provisions.
Operations costs include costs relating to infrastructure and other
operational projects, IT and security and general day-to-day operational
costs, including employee and office-apportioned costs and branded content
fees. These costs increased by 11% to €285.3 million (2021: €256.2
million), driven mainly by an increase in employee related costs relating to
live operations and the provision of additional B2B services, mainly under the
Group's structured agreement arrangements, as well as sport hardware costs.
B2B Adjusted EBITDA
Total B2B Adjusted EBITDA increased by 15% to €160.2 million (2021: €139.2
million), while EBITDA margin remained steady at 25% (2021: 25%). The B2B
Adjusted EBITDA in the period was impacted by the €15.4 million doubtful
debt provision in Asia recognized in H1 2022 (2021: €7.5 million), which was
offset by the increase in performance from Brazil and Mexico and more
generally the sports product.
B2C Gambling
2022 2021 Change
€'m €'m
Snaitech
Gambling Revenue* 899.8 584.7 54%
Gambling Costs 645.6 402.1 61%
Adjusted EBITDA 254.2 182.6 39%
Margin 28% 31%
White Label (incl. Sun Bingo)
Gambling Revenue 65.3 61.9 5%
Gambling Costs 63.3 55.2 15%
Adjusted EBITDA 2.0 6.7 -70%
Margin 3% 11%
HAPPYBET
Gambling Revenue 20.1 18.2 10%
Gambling Costs** 30.9 29.6 4%
Adjusted EBITDA (10.8) (11.4) 5%
Margin NA NA
B2C Adjusted EBITDA 245.4 177.9 38%
Margin 25% 27%
* Includes intercompany revenue from HAPPYBET of €2.1 million (2021: €1.1
million)
** Includes intercompany costs from Snaitech of €2.1 million (2021: €1.1
million)
Snaitech
Snaitech revenues increased 54% from the prior year to €899.8 million (2021:
€584.7 million), with operating costs seeing a similar increase of 61% to
€645.6 million (2021: €402.1 million). The retail network in Italy was
shut for almost the entirety of H1 2021 due to the COVID-19 pandemic. The
relaxing of COVID-19 restrictions at the end of June 2021 enabled retail sites
to reopen, which drove the increase in revenues and costs in 2022. The online
segment continues to see impressive growth, indicating that the addressable
market has expanded post-pandemic.
Snaitech's Adjusted EBITDA increased by 39%, while revenue increased 54%. As a
result, Snaitech's Adjusted EBITDA margin decreased 300 bps to 28% (2021:
31%), due to the return of the lower margin retail business.
Sun Bingo white label
Revenue from the Sun Bingo business increased by 5% to €65.3 million (2021:
€61.9 million). However, operating costs within Sun Bingo increased by 15%
to €63.3 million (2021: €55.2 million). The main reason for the increase
is that, following the commencement of the new contract with News UK, the cost
structure of the business changed. From July 2021, Playtech incurs the
marketing costs (previously they were recharged to News UK) and furthermore,
there is now a brand fee being charged by News UK (previously this was covered
by the minimum guarantee).
This led to Adjusted EBITDA of €2.0 million (2021: €6.7 million). Adjusted
EBITDA still includes the unwinding of the minimum guarantee prepayment of
€5.4 million in the current year (2021: €11.9 million) over the new period
of the contract which was renegotiated in 2019.
On a reported basis Playtech incurred a one-off cost of €10.4 million in H1
2022 to terminate an onerous contract with a service provider. The termination
of the agreement will improve the profitability of the business going forward.
HAPPYBET
The Sport B2C business, saw year-on-year revenue growth of 10% to €20.1
million (2021: €18.2 million), with costs increasing by 4%. The business
remains loss making, with Adjusted EBITDA loss in the current period of
€10.8 million (2021: loss of €11.4 million). The small improvement is
primarily driven by the reopening of retail sites and early progress after the
Snaitech management team took control of HAPPYBET's operations.
Below EBITDA items
Depreciation and amortisation
Reported and Adjusted depreciation decreased by 3% to €41.5 million (2021:
€42.9 million). After deducting amortisation of acquired intangibles of
€42.0 million (2021: €34.8 million), Adjusted amortisation decreased by 9%
to €67.8 million (2021: €74.5 million) as the Italian gaming machine
licences useful life has been extended to June 2023 at no cost. The remainder
of the balance under depreciation and amortisation of €18.8 million (2021:
€16.9 million) relates to IFRS 16 Leases and the recognition of the
right-of-use asset amortisation.
Impairment of tangible and intangible assets
The reported impairment of tangible and intangible assets of €38.5 million
(2021: €21.6 million) mostly relates to:
· The impairment of the Eyecon cash generating unit (CGU) of
€13.6 million, driven by the fact that its operations are highly
concentrated in the UK online market which has seen a slowdown due to the
uncertain regulatory climate.
· The impairment of the Quickspin CGU of €7.0 million, given the
risk the CGU bore from the proportion of revenues being generated from the
Group's B2B customers choosing to operate in areas with geopolitical tension,
and the resulting 1% increase on the post-tax discount rate of the CGU to
mitigate that factor.
· The impairment of the Bingo VF CGU of €12.5 million (2021:
€6.4 million) due to slower than expected growth in the business, following
plans to recover from the termination of a significant licensee in the prior
year; and
· The impairment of the IGS CGU of €5.6 million, which was
severely affected by COVID-19 and until recently had not managed to bring
revenue up to pre-COVID-19 levels with the business suffering from cancelled
or postponed projects.
The prior period impairment of €21.6 million mainly relates to:
· €12.3 million impairment resulting from the disposal of some
real estate in Milan. The recoverable amount (being net sales proceeds as per
the binding sale agreement) was compared to the property's net book value
which led to the impairment;
· €6.4 million impairment in the Bingo VF cash generating unit
mainly driven by the termination of one of the biggest customer contracts; and
· €2.7 million of development workforce aborted projects.
Finance income and finance costs
Reported and adjusted finance income of €11.6 million (2021: €1.1 million)
mainly relates to a €9.2 million foreign exchange gain, driven primarily by
the favourable movement in the USD to EUR rate during 2022. In the prior year,
this was an overall loss of €0.5 million and hence included in finance
costs. The remainder of the finance income is interest received.
Reported finance costs includes interest payable on the bonds and other
borrowings, bank facility fees, bank charges, interest expense on lease
liabilities, the movement in contingent consideration and redemption
liabilities, fair value loss of convertible loans and expected credit losses
on loan receivables. Reported finance costs increased by 8% to €73.0 million
(2021: €67.7 million), mainly due to the €3.0 million (2021: €Nil) fair
value loss on the GameCo convertible loan immediately before it was converted
to equity and the first time recognition of €1.6 million of expected credit
losses on the loans receivable. This was offset by a reduction in the movement
in contingent consideration and redemption liability to €0.1 million (2021:
€4.8 million). Adjusted finance costs increased by 11% to €69.9 million
(2021: €62.9 million). The difference between adjusted and reported finance
costs is the movement in contingent consideration and redemption liability of
€0.1 million (2021: €4.8 million) and fair value loss of the GameCo
convertible loan of €3.0 million.
Unrealised fair value changes in derivative financial assets
The unrealised fair value changes in derivative financial assets of €6.0
million (2021: €583.2 million) is due to the recognition of the fair value
of the various call options held by the Group in Latin America which fall
under the definition of derivatives within IFRS 9 Financial Instruments.
Further details on the fair value of the various call options are disclosed in
Note 20, which includes a significant judgement made in relation to the
valuation of the Playtech M&A Call Option.
Taxation
A reported tax expense from continuing operations of €55.0 million (2021:
tax credit of €81.7 million) arises on a profit before tax of €95.6
million (2021: €605.0 million) compared to an expected charge of €18.2
million based on the UK statutory rate of 19%. The key items for which the
reported tax charge has been adjusted are the provision of €8.4 million in
respect of overseas tax audits and the reversal of deferred tax liabilities of
€8.3 million in respect of intangibles assets acquired through business
combinations.
The Group's reported effective tax rate for the current period is 39.5%. This
rate is higher than the UK statutory rate of 19%. The key reasons for the
differences are profits of subsidiaries located in territories where the tax
rate is higher than the UK statutory tax rate (which predominately relates to
Snaitech based in Italy) and expenses not deductible for tax purposes
including professional fees, impairment of intangible assets and loss on
disposal of subsidiaries.
The total adjusted tax expense is €54.9 million (2021: tax credit of €7.2
million) which arises on an adjusted profit before tax of €215.4 million
(2021: €120.4 million). The total adjusted tax expense of €54.9 million
consists of an income tax expense of €20.4 million (2021: tax charge of
€14.6 million) and a deferred tax expense of €34.5 million (2021: deferred
tax credit of €21.8 million). The total adjusted deferred tax expense mainly
consists of a deferred tax expense of €44.7 million relating to the Snaitech
group including the use of Snaitech tax losses and a credit of €16.7 million
relating to UK tax losses for which a tax benefit is recognised in the current
year.
The Group's effective adjusted tax rate for the current period is 25.5%. This
rate is higher than the UK statutory rate of 19% as there are profits within
subsidiaries located in territories where the tax rate is higher than the UK
statutory tax rate (which predominately relates to Snaitech based in Italy).
Discontinued operations
Casual and Social Gaming segment
On 11 January 2021, the Group entered into an agreement for the disposal of
the remainder of the business, namely "YoYo", for a total consideration of
$9.5 million resulting in a profit on disposal of €7.6 million. This
business has now been fully disposed.
The Adjusted EBITDA relating to the Casual and Social Gaming business was
€Nil in both periods being presented as operations were completely wound
down in 2020.
Finalto (formerly TradeTech Group)
Finalto was disposed of in July 2022 with cash proceeds of $228.1 million
(€223.9 million) and transaction costs of €1.6 million resulting in a
profit on disposal of €15.1 million.
In terms of performance, revenue up until the point of disposal was €74.5
million (2021 full year revenue: €46.6 million). The improved performance
was due to higher market volatility during 2022, which in turn increased both
Reported and Adjusted EBITDA to €24.4 million for the period up to the point
of disposal (2021 full year loss: €30.9 million) and €33.8 million (2021
full year loss: €23.0 million), respectively.
Adjusted Profit
2022 2021
€'m €'m
Reported profit from continuing operations attributable to the owners of the 40.6 686.7
Company
Employee stock option expenses 8.0 13.1
Professional fees 15.7 14.4
Fair value change and finance cost on redemption liability and contingent (4.2) 6.1
consideration
Ukraine employee support costs 3.3 -
Onerous contract 10.4 -
Charitable donation - 3.5
Settlement of legal matter - 2.3
Provision for other receivables - 1.2
Fair value change of equity instruments 0.3 1.6
Fair value change of derivative financial assets (6.0) (583.2)
Fair value loss on convertible loans 3.0 -
Amortisation of intangibles on acquisitions 42.0 34.8
Impairment of tangible and intangible assets 38.5 21.6
Loss on disposal of subsidiary 8.8 -
Deferred tax on acquisitions (8.3) (9.1)
Deferred tax on reorganisation - (63.6)
Deferred tax on asset held for sale - (1.8)
Tax related to uncertain positions 8.4 -
Adjusted Profit from continuing operations attributable to the owners of the 160.5 127.6
Company
The reconciling items in the table above are further explained in Note 10 of
the financial statements. Reported profit before tax from continuing
operations was €95.6 million (2021: €605.0 million), mainly due to the
€583.2 million of unrealised fair value gains on derivative financial assets
recognised in the prior year with the current year gain being only €6.0
million.
Adjusted EPS (in Euro cents)
2022 2021
€'m €'m
Adjusted basic EPS from continuing operations 53.5 42.8
Adjusted diluted EPS from continuing operations 51.5 40.9
Basic EPS from profit attributable to owners of the Company 29.2 226.3
Diluted EPS from profit attributable to owners of the Company 28.1 216.2
Basic EPS from profit attributable to the owners of the Company from 13.5 230.3
continuing operations
Diluted EPS from profit attributable to the owners of the Company from 13.0 220.1
continuing operations
Basic EPS is calculated using the weighted average number of equity shares in
issue during 2022 of 300.1 million (2021: 298.2 million). Diluted EPS also
includes the dilutive impact of share options and is calculated using the
weighted average number of shares in issue during 2022 of 311.9 million (2021:
312.1 million).
Cashflow
Cash conversion (including discontinued operations)
Playtech continues to be cash generative and delivered operating cash flows of
€410.9 million (2021: €314.6 million after adjusting for the €89.6
million deferred payment of gaming duties in Italy). The increase is primarily
due to Snaitech's retail locations being fully operational in 2022 as opposed
to the prior period where COVID-19 related restrictions meant retail sites
were closed for most of H1 2021, as well as a better performance from the rest
of the business, including Finalto, compared to the prior year.
2022 2021
€'m €'m
Adjusted EBITDA (including discontinued operations) 439.4 294.1
Net cash provided by operating activities 410.9 225.0
Deferred payment of gaming duties - 89.6
Net cash provided by operating activities after deferred payment of gaming 410.9 314.6
duties
Cash conversion 94% 107%
Change in jackpot balances and security deposits (3.6) (10.5)
Change in client deposits and client funds 15.3 (21.7)
Professional fees 24.4 21.5
ADM security deposit (Italian Regulator) 11.5 (1.7)
Adjusted net cash provided by operating activities 458.5 302.2
Adjusted cash conversion 104% 103%
Adjusted cash conversion at 104% (2021: 103%) is shown after adjusting for the
deferred payment of gaming duties in the prior year, as well as jackpots,
security deposits, client deposits and client funds, professional fees and ADM
security deposit.
Adjusting for the above cash fluctuations is essential in order to truly
reflect the quality of revenue and cash collection. This is because the timing
of cash inflows and outflows for gaming tax duties in Italy, jackpots,
security deposits and client funds only impact the reported operating cashflow
and not Adjusted EBITDA, while professional fees are excluded from Adjusted
EBITDA but impact operating cashflow.
Cash conversion (excluding discontinued operations)
2022 2021
€'m €'m
Adjusted EBITDA 405.6 317.1
Net cash provided by operating activities 382.7 227.6
Deferred payment of gaming duties - 89.6
Net cash provided by operating activities after deferred payment of gaming 382.7 317.2
duties
Cash conversion 94% 100%
Change in jackpot balances and security deposits (3.6) (10.5)
Change in client funds (9.4) (1.5)
Professional fees 15.7 14.4
ADM security deposit (Italian Regulator) 11.5 (1.7)
Adjusted net cash provided by operating activities 396.9 317.9
Adjusted cash conversion 98% 100%
If we exclude the impact of Finalto cash flow, the adjusted cash conversion
reduces to 98% (2021: 100%).
Cashflow statement analysis
Net cash outflows used in investing activities totalled €358.3 million
(2021: €127.6 million) of which:
· €30.4 million (2021: €16.7 million) relates to loans granted.
Of the total granted in 2022, €18.0 million (2021: €8.1 million), relates
to the Galera Group which has a total loan facility of $45 million (refer to
Note 20) and €8.4 is related to NorthStar;
· €54.0 million (2021: €49.6 million) was used in the
acquisition of property, plant and equipment;
· €10.1 million (2021: €7.2 million) was used in the
acquisition of intangible assets;
· €61.3 million (2021: €57.4 million) was spent on capitalised
development costs;
· €29.2 million relates to the payment for the acquisition of
LSports (Note 20A) and contingent consideration paid to Wplay of €1.0
million (2021: €4.2 million relates to the payment of the call option held
for Ocean Holdings Ltd and contingent consideration paid to Wplay of €4.1
million); and
· Net cash outflow in relation to the Financial segment disposal of
€169.8 million (2021: Cash inflow of €10.7 million mostly relating the
disposal of the casual business).
Net cash outflows used in financing activities totalled €566.9 million
(2021: €218.4 million) of which:
· €36.7 million (2021: €39.4 million) relates to interest
payments on bond loans and bank borrowings;
· €166.1 million (2021: €150.0 million) related to the
repayment of the RCF;
· In 2022 €330.0 million related to the part repayment of the
2018 Bond;
· €5.9 million (2021: €0.7 million) are payments of contingent
consideration and redemption liability; and
· €28.2 million (2021: €28.3 million) is principal and interest
lease liability payments.
Balance sheet, liquidity and financing
2022 2021
€'m €'m
Cash and cash equivalents 426.5 575.4
Cash held on behalf of clients, progressive jackpots and security deposits (154.1) (141.1)
Adjusted gross cash and cash equivalents (excluding assets and liabilities 272.4 434.3
held for sale)
Loans and borrowings (RCF) - 167.1
Bonds 547.6 875.0
Gross debt (excluding liabilities held for sale) 547.6 1,042.1
Net debt (excluding assets and liabilities held for sale) 275.2 607.8
Adjusted EBITDA 405.6 317.1
Net debt/Adjusted EBITDA ratio 0.7 1.9
Cash
The Group continues to maintain a strong balance sheet with total cash and
cash equivalents, excluding cash held for sale, of €426.5 million at 31
December 2022 (2021: €575.4 million). Adjusted gross cash, which excludes
the cash held on behalf of clients, progressive jackpots and security
deposits, decreased to €272.4 million as at 31 December 2022 (2021: €434.3
million), due to the €166.1 million RCF repayment, €330.0 million part
repayment of the 2018 Bond, both offset by the net proceeds from the Finalto
disposal as well as the solid performance of the Group during 2022.
Financing
The Group's total gross debt decreased to €547.6 million as at 31 December
2022 (2021: €1,042.1 million), with net debt, after deducting Adjusted gross
cash, decreasing to €275.2 million (2021: €607.8 million).
The Group issued a 5-year senior secured note of €530.0 million (3.75%
coupon), which was raised in October 2018 to support the acquisition of
Snaitech and is maturing in October 2023. During the year, the Group made a
€330.0 million partial repayment of the 2018 Bond. The remaining outstanding
balance of €200.0 million is expected to be repaid through cash resources
and/or proceeds from the Group's RCF and/or new financing.
The Group has also issued a 7-year senior secured note to the value of
€350.0 million (4.25% coupon, maturity 2026), which was raised in March
2019.
Finally, the Group also has an RCF which has been restructured during the
year. The revised facility is now €277.0 million (previously €317.0
million) and is available until October 2025, with an option to extend by
twelve months. As at the reporting date the credit facility drawn amounted to
€Nil (2021: €167.1 million).
Net debt
Net debt decreased in the period by €332.6 million to €275.2 million as at
31 December 2022 (2021: €607.8 million), while net debt / Adjusted EBITDA
was 0.7x (31 December 2021: 1.9x)
Finalto sale
The sale of the Finalto division to Gopher Investments, which was first
presented by the Group under discontinued operations at 31 December 2020,
completed in July 2022. The cash proceeds from the disposal were $228.1
million (€223.9 million), which includes an enterprise value of US$250
million, offset by a completion accounts adjustment.
Playtech used part of these proceeds to repay its RCF in full in July 2022.
Contingent consideration
Contingent consideration and redemption liability decreased to €2.9 million
(2021: €11.0 million) mostly due to the completed payment relating to Eyecon
Limited, Wplay and Statscore. The existing liability as at 31 December 2022
comprised the following:
Acquisition Maximum payable earnout (per terms of acquisition) Contingent consideration and redemption liability as at 31 December 2022 Payment date
(based on maximum payable earnout)
AUS GMTC PTY Ltd €46.7 million €2.1 million Q4 2025
Other €0.8 million €0.8 million Various
Going concern
In adopting the going concern basis in the preparation of the interim
financial statements, the Group has considered the current trading
performance, financial position and liquidity of the Group, the principal
risks and uncertainties together with scenario planning and reverse stress
tests completed for a period of no less than 15 months from the approval of
these financial statements.
At 31 December 2022, the Group held total cash (excluding cash included in
assets held for sale) of €426.5 million (2021: €575.4 million) and
Adjusted gross cash, which excludes the cash held on behalf of clients,
progressive jackpots and security deposits, of €272.4 million (2021:
€434.3 million).
Furthermore, the Group has reduced its total debt to €547.6 million (2021:
€1,042.1 million), as a result of using the Finalto proceeds to fully repay
its RCF (31 December 2021: €167.1 million), and a €330.0 million partial
repayment of its 2018 Bond. The rest of the 2018 Bond of €200.0 million is
repayable in October 2023, and the Directors are confident that the company
will be able to settle this amount. During 2022, the RCF was restructured with
a new facility of €277.0 million being available until October 2025, with an
option to extend by twelve months. As at 31 December 2022 the RCF is fully
undrawn.
The payment related to the renewal of the Italian concessions is expected to
be incurred in 2025 and therefore is outside of the going concern period.
Management concluded that the risk of a covenant breach over the next
fifteen-month period from the date of releasing this report is low and as
such, has a reasonable expectation that the Group will have adequate financial
resources to continue in operational existence.
(1)Adjusted numbers relate to certain non-cash and one-off items, as well as
material reorganisation and acquisition related costs. The Board of Directors
believes that the adjusted results represent more closely the consistent
trading performance of the business. A full reconciliation between the actual
and adjusted results is provided in Note 10 of the financial statements.
(2)Core B2B Gambling refers to the Company's B2B Gambling business excluding
unregulated Asia.
3Totals in tables throughout this statement may not exactly equal the
components of the total due to rounding.
Consolidated statement of comprehensive income
For the year ended 31 December 2022
Note 2022 2021
Actual Adjusted Actual Adjusted
€'m €'m( 1) €'m €'m ( 1)
Continuing operations
Revenue 9 1,601.8 1,601.8 1,205.4 1,205.4
Distribution costs before depreciation and amortisation (1,067.3) (1,063.3) (794.5) (788.8)
Administrative expenses before depreciation and amortisation (147.3) (118.2) (127.4) (98.5)
Impairment of financial assets (14.7) (14.7) (2.2) (1.0)
EBITDA 10 372.5 405.6 281.3 317.1
Depreciation and amortisation (170.1) (128.1) (169.1) (134.3)
Impairment of tangible and intangible assets 12 (38.5) - (21.6) -
Finance income 13A 11.6 11.6 1.1 1.1
Finance costs 13B (73.0) (69.9) (67.7) (62.9)
Share of loss from associates 20A (3.8) (3.8) (0.6) (0.6)
Unrealised fair value changes of equity investments 20B (0.3) - (1.6) -
Unrealised fair value changes of derivative financial assets 20C 6.0 - 583.2 -
Loss on disposal of subsidiary 20A (8.8) - - -
Profit before taxation 10 95.6 215.4 605.0 120.4
Income tax (expense)/credit 10,14 (55.0) (54.9) 81.7 7.2
Profit from continuing operations 10 40.6 160.5 686.7 127.6
Discontinued operation
Profit/(loss) from discontinued operation, net of tax 8 47.0 41.2 (12.1) (13.8)
Profit for the year - total 87.6 201.7 674.6 113.8
Other comprehensive loss:
Items that are or may be classified subsequently to profit or loss:
Exchange loss arising on translation of foreign operations (0.2) (0.2) (1.4) (1.4)
Recycling of foreign exchange loss on disposal of foreign discontinued 23.2 23.2 - -
operations
Items that will not be classified to profit or loss:
Gain/(loss) on remeasurement of employee termination indemnities
0.9 0.9 (0.1) (0.1)
Other comprehensive income/(loss) for the year 23.9 23.9 (1.5) (1.5)
Total comprehensive income for the year 111.5 225.6 673.1 112.3
87.6 201.7 674.6 113.8
Profit for the year attributable to the owners of the Company
Total comprehensive income attributable to the owners of the Company 111.5 225.6 673.1 112.3
Earnings per share attributable to the ordinary equity holders of the Company
Profit or loss - total
Basic (cents) 15 29.2 67.2 226.3 38.2
Diluted (cents) 15 28.1 64.7 216.2 36.5
Profit or loss from continuing operations
Basic (cents) 15 13.5 53.5 230.3 42.8
Diluted (cents) 15 13.0 51.5 220.1 40.9
1 Adjusted numbers relate to certain non-cash and one-off items, as
well as material reorganisation and acquisition-related costs. The Board of
Directors believes that the adjusted results more closely represent the
consistent trading performance of the business. A full reconciliation between
the actual and adjusted results is provided in Note 10.
Consolidated statement of changes in equity
For the year ended 31 December 2022
Additional Employee Retained Employee Put/call Foreign Total Non- Total
paid in termination earnings Benefit options exchange attributable to controlling equity
capital indemnities €'m Trust reserve reserve equity holders interests €'m
€'m €'m €'m €'m €'m of Company €'m
€'m
Balance at 1 January 2022 606.0 (0.5) 1,025.0 (23.2) (3.7) (22.7) 1,580.9 0.3 1,581.2
Total comprehensive income for the year
Profit for the year - - 87.6 - - - 87.6 - 87.6
Other comprehensive income for the year - 0.9 - - - 23.0 23.9 - 23.9
Total comprehensive income for the year - 0.9 87.6 - - 23.0 111.5 - 111.5
Transactions with the owners of the Company
Contributions and distributions
Exercise of options - - (6.0) 6.0 - - - - -
Employee stock option scheme - - 8.3 - - - 8.3 - 8.3
Total contributions and distributions - - 2.3 6.0 - - 8.3 - 8.3
Changes in ownership interests
Acquisition of non-controlling interest without change in control - - (3.4) - 3.7 - 0.3 (0.3) -
Total changes in ownership interests - - (3.4) - 3.7 - 0.3 (0.3) -
Total transactions with owners of the Company - - (1.1) 6.0 3.7 - 8.6 (0.3) 8.3
Balance at 31 December 2022 606.0 0.4 1,111.5 (17.2) - 0.3 1,701.0 - 1,701.0
Balance at 1 January 2021 592.1 (0.4) 343.7 (14.5) (3.7) (21.3) 895.9 0.3 896.2
Total comprehensive income for the year
Profit for the year - - 674.6 - - - 674.6 - 674.6
Other comprehensive loss for the year - (0.1) - - - (1.4) (1.5) - (1.5)
Total comprehensive income for the year - (0.1) 674.6 - - (1.4) 673.1 - 673.1
Transactions with the owners of the Company
Contributions and distributions
Exercise of options - - (13.9) 13.9 - - - - -
Employee stock option scheme - - 11.9 - - - 11.9 - 11.9
Transfer from treasury shares to Employee Benefit Trust 13.9 - 8.7 (22.6) - - - - -
Total contributions and distributions 13.9 - 6.7 (8.7) - - 11.9 - 11.9
Total transactions with owners of the Company 13.9 - 6.7 (8.7) - - 11.9 - 11.9
Balance at 31 December 2021 606.0 (0.5) 1,025.0 (23.2) (3.7) (22.7) 1,580.9 0.3 1,581.2
Consolidated balance sheet
As at 31 December 2022
2022 2021
Note €'m €'m
ASSETS
Property, plant and equipment 17 341.4 329.7
Right of use assets 18 71.6 73.8
Intangible assets 19 980.9 1,046.1
Investments in associates 20A 36.6 5.2
Other investments 20B 9.2 8.1
Derivative financial assets 20C 636.4 622.2
Trade receivables 22 1.1 6.6
Deferred tax asset 32 112.5 102.9
Other non-current assets 21 109.6 104.4
Non-current assets 2,299.3 2,299.0
Trade receivables 22 163.9 178.5
Other receivables 23 107.6 87.1
Inventories 5.5 4.9
Cash and cash equivalents 24 426.5 575.4
703.5 845.9
Assets classified as held for sale 25 19.6 507.4
Current assets 723.1 1,353.3
TOTAL ASSETS 3,022.4 3,652.3
EQUITY
Additional paid in capital 606.0 606.0
Employee termination indemnities 0.4 (0.5)
Employee Benefit Trust (17.2) (23.2)
Put/call options reserve - (3.7)
Foreign exchange reserve 0.3 (22.7)
Retained earnings 1,111.5 1,025.0
Equity attributable to equity holders of the Company 1,701.0 1,580.9
Non-controlling interests - 0.3
TOTAL EQUITY 26 1,701.0 1,581.2
LIABILITIES
Loans and borrowings 27 - 167.1
Bonds 28 348.0 875.0
Lease liability 18 54.0 69.8
Deferred revenues 1.0 2.9
Deferred tax liability 32 124.8 88.9
Contingent consideration and redemption liability 30 2.3 6.0
Provisions for risks and charges 29 10.0 13.5
Other non-current liabilities 33 24.9 12.8
Non-current liabilities 565.0 1,236.0
Bonds 28 199.6 -
Trade payables 31 61.2 41.3
Lease liability 18 31.8 20.3
Progressive operators' jackpots and security deposits 24 114.3 110.7
Client funds 24 39.8 30.4
Income tax payable 17.3 2.6
Gaming and other taxes payable 34 112.8 105.4
Deferred revenues 5.0 5.2
Contingent consideration and redemption liability 30 0.6 5.0
Provisions for risks and charges 29 3.9 3.2
Other payables 33 169.1 166.2
755.4 490.3
Liabilities directly associated with assets classified as held for sale 25 1.0 344.8
Current liabilities 756.4 835.1
TOTAL LIABILITIES 1,321.4 2,071.1
TOTAL EQUITY AND LIABILITIES 3,022.4 3,652.3
The consolidated financial statements were approved by the Board and
authorised for issue on 23 March 2023.
Mor Weizer Chris McGinnis
Chief Executive Officer Chief Financial Officer
Consolidated statement of cash flows
For the year ended 31 December 2022
Note 2022 2021
€'m €'m
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the year 87.6 674.6
Adjustment to reconcile net income to net cash provided by operating 337.1 (419.0)
activities (see below)
Net taxes paid (13.8) (30.6)
Net cash from operating activities 410.9 225.0
CASH FLOWS FROM INVESTING ACTIVITIES
Loans granted (30.4) (16.7)
Acquisition of assets under business combinations 35 (2.9) -
Acquisition of property, plant and equipment (54.0) (49.6)
Acquisition of intangible assets (10.1) (7.2)
Capitalised development costs (61.3) (57.4)
Acquisition of investment in associates 20A/B (30.2) (8.1)
Proceeds from the sale of property, plant and equipment 0.8 0.7
Disposal of Financial segment/casual and social gaming, net of cash disposed 25C/25B (169.8) 10.7
Disposal of subsidiary, net of cash disposed 20A (0.4) -
Net cash used in investing activities (358.3) (127.6)
CASH FLOWS FROM FINANCING ACTIVITIES
Interest paid on bonds and loans and borrowings (36.7) (39.4)
Repayment of loans and borrowings (166.1) (150.0)
Repayment of bonds 28 (330.0) -
Payment of contingent consideration and redemption liability (see below) (5.9) (0.7)
Principal paid on lease liability (22.5) (22.7)
Interest paid on lease liability (5.7) (5.6)
Net cash used in financing activities (566.9) (218.4)
DECREASE IN CASH AND CASH EQUIVALENTS (514.3) (121.0)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 942.1 1,061.2
Exchange (loss)/gain on cash and cash equivalents (0.9) 1.9
CASH AND CASH EQUIVALENTS AT END OF YEAR 426.9 942.1
Cash and cash equivalents consists of:
Cash and cash equivalents - continuing operations 24 426.9 576.0
Cash and cash equivalents treated as held for sale 24 - 366.1
426.9 942.1
Less: expected credit loss on cash and cash equivalents 24 (0.4) (0.6)
426.5 941.5
Note 2022 2021
€'m €'m
ADJUSTMENT TO RECONCILE NET INCOME TO NET CASH PROVIDED FROM OPERATING
ACTIVITIES
Income and expenses not affecting operating cash flows:
Depreciation on property, plant and equipment 17 41.5 42.9
Amortisation of intangible assets 19 109.8 109.3
Amortisation of right of use assets 18 21.5 20.2
Capitalisation of amortisation of right of use assets (1.9) (2.1)
Gain on early termination of lease contracts 18 (0.7) (1.2)
Share of loss from associates 20A 3.8 0.6
Impairment of other receivables - 1.2
(Reversal of)/impairment of property, plant and equipment 17 (0.2) 12.5
Impairment of intangible assets 19 38.7 9.1
Reversal of impairment of asset classified as held for sale 25C - (2.0)
Profit on disposal of financial segment/casual and social gaming 25C/25B (15.1) (7.6)
Loss on disposal of subsidiary 20A 8.8 -
Changes in fair value of equity investments 20B 0.3 1.6
Changes in fair value of derivative financial assets 20C (6.0) (583.2)
Fair value loss on convertible loans 3.0 -
Interest on bonds and loans and borrowings 36.2 41.2
Interest on lease liability 5.7 5.6
Interest income on loans receivable (1.3) (0.5)
Income tax expense/(credit) 58.5 (79.8)
Changes in equity settled share based payments 8.3 13.8
Movement in contingent consideration and redemption liability (4.3) 6.2
Expected credit loss on cash and cash equivalents (0.2) -
Expected credit loss on loans receivable 1.6 -
Unrealised exchange loss (4.4) 8.7
Other 0.2 0.4
Changes in operating assets and liabilities:
Change in trade receivables 13.0 (5.9)
Change in other receivables 3.5 (28.0)
Change in inventories (0.6) (0.2)
Change in trade payables 20.4 (7.9)
Change in progressive operators, jackpots and security deposits 3.6 10.5
Change in client funds and deposits (15.3) 21.7
Change in other payables 13.6 1.8
Change in provisions for risks and charges (2.8) (4.2)
Change in deferred revenues (2.1) (3.7)
337.1 (419.0)
Payment of contingent consideration and redemption liabilities on previous
acquisitions
2022 2021
€'m €'m
A. Acquisition of Eyecon Limited 3.6 -
B. Acquisition of non-controlling interest of Statscore SP Z.O.O. 1.6 -
C. Other acquisitions 0.7 0.7
5.9 0.7
Notes to the financial statements
Note 1 - General
Playtech plc (the "Company") is an Isle of Man company. The registered office
is located at St George's Court, Upper Church Street, Douglas, Isle of Man IM1
1EE.
These consolidated financial statements comprise the Company and its
subsidiaries (together referred to as the "Group").
Note 2 - Basis of preparation
This financial information does not constitute the Group or company's
statutory accounts for the years ended 31 December 2022 or 2021 but is derived
from those accounts. The auditor has reported on those accounts; their
reports were (i) unqualified and (ii) did not include a reference to any
matters to which the auditor drew attention by way of emphasis without
qualifying their report.
The financial information has been prepared in accordance with the UK adopted
International Accounting Standards (IAS). They were authorised for issue by
the Company's Board of Directors on 23 March 2023.Details of the Group's
accounting policies are included in Note 5.
Going concern basis
In adopting the going concern basis in the preparation of the financial
statements, the Directors have considered the current trading performance,
financial position and liquidity of the Group, the principal and emerging
risks and uncertainties together with scenario planning and reverse stress
tests. The Directors have assessed going concern over a 15-month period to 30
June 2024 which aligns with the six-monthly covenant measurement period.
31 December 31 December
2022 2021
€'m €'m
Cash and cash equivalents 426.5 575.4
Cash held on behalf of clients, progressive jackpots and security deposits (154.1) (141.1)
Adjusted gross cash and cash equivalents (excluding assets and liabilities 272.4 434.3
held for sale)
Despite the decline in adjusted gross cash and cash equivalents from €434.3
million at 31 December 2021 to €272.4 million at 31 December 2022, the Group
continues to hold a strong liquidity position. The decline from the prior year
is explained by the full repayment of the revolving credit facility ("RCF")
drawn amounting to €166.1 million, as well as the €330.0 million partial
repayment of the 2018 Bond, both offset by the cash proceeds from disposal of
the Financial segment of €223.9 million (refer to Note 25), as well as the
Group's strong performance during the year.
The Directors have reviewed liquidity and covenant forecasts for the Group,
which assume that there will be no further lockdowns on a global scale. The
Directors have also considered sensitivities in respect of potential downside
scenarios, reverse stress tests and the mitigating actions available to
management.
The modelling of downside scenarios assessed if there was a significant risk
to the Group's liquidity and covenant compliance position. This includes risks
such as not realising budget/forecasts across certain markets and any
potential implications of changes in tax and other regulations, as well as the
impact on cashflow should the share buyback scheme and other shareholder
return options resume.
The Group's principal financing arrangements include an RCF up to €277.0
million, the 2018 Bond amounting to €200.0 million post partial repayment
and the 2019 Bond amounting to €350.0 million which are repayable in October
2023 and March 2026 respectively. The RCF has been restructured during the
year reducing the credit line from €317.0 million to €277.0 million and is
available until October 2025, with the Group having the option to extend by
twelve months. The remaining €200.0 million balance of the 2018 Bond will be
due upon expiration in October 2023, with the current plan assuming this will
be paid through cash reserves, rather than refinanced.
The RCF is subject to certain financial covenants which are tested every six
months on a rolling 12-month basis, as set out in Notes 27 and 28. As at 31
December 2022, the Group comfortably met its covenants which were as follows:
• Leverage: Net Debt/Adjusted EBITDA to be less than 3.5:1 for the
twelve months ended 31 December 2022 (12 months ended 31 December 2021: 3:1)
• Interest cover: Adjusted EBITDA/Interest to be over 4:1 for the
twelve months ended 31 December 2022 (12 months ended 31 December 2021: 4:1)
The Bonds only have one financial covenant, being the Fixed Charge Coverage
Ratio (same as the Interest cover ratio for the RCF), which should equal or be
greater than 2:1.
If the Group's results are in line with its base case projections as approved
by the Board it would not be in breach of the financial covenants for a period
of no less than 15 months from approval of these financial statements (the
"relevant going concern period"). This period covers the bank reporting
requirements for June 2023, December 2023 and June 2024 and is the main reason
why the Directors selected a 15-month period of assessment.
Stress test
The stress test assumes a worst-case scenario for the entire Group which
includes additional sensitivities around Italy, the Americas and Asia, but
with mitigations similar to the ones taken in 2020 and 2021 (including salary
and capital expenditure reductions). It also considers the impact of cashflow
should the share buyback scheme commence again, as well as other shareholder
return options. Under this scenario Adjusted EBITDA would fall on average by
7% per month compared to the base case over the relevant going concern period,
but the Group would not breach its covenants.
Reverse stress test
The reverse stress test was used to identify the reduction in Adjusted EBITDA
required that could result in either a liquidity event or breach of the RCF
and bond covenants.
As a result of completing this assessment, without considering further
mitigating actions, management considered the likelihood of the reverse stress
test scenario arising to be remote. In reaching this conclusion management
considered the following:
• Current trading is performing above the base case;
• Adjusted EBITDA would have to fall by 87% in the year ending 31
December 2023 and 88% in the 12 months to June 2024 compared to the base case,
to cause a breach of covenants; and
• In the event that revenues decline to this point to drive the
decrease in Adjusted EBITDA, additional mitigating actions are available to
management which have not been factored into the reverse stress test scenario.
As such, the Directors have a reasonable expectation that the Group will have
adequate financial resources to continue in operational existence over the
relevant going concern period and have therefore considered it appropriate to
adopt the going concern basis of preparation in the financial statements.
Note 3 - Functional and presentation currency
These consolidated financial statements are presented in Euro, which is the
Company's functional currency. The functional currency for subsidiaries
includes Euro, United States Dollar and British Pound. All amounts have been
rounded to the nearest million, unless otherwise indicated.
Note 4 - New standards, interpretations and amendments adopted by the Group
New standards, interpretations and amendments adopted from 1 January 2022
The Group applied for the first time certain standards and amendments, which
are effective for annual periods beginning on or after 1 January 2022, but do
not have a material impact on the consolidated financial statements of the
Group.
New standards, interpretations and amendments not yet effective
There a number of standards, amendments to standards, and interpretations
which have been issued by the IASB that are effective in future accounting
periods that the Group has decided not to adopt early.
The amendments are applied retrospectively for annual periods on or after 1
January 2023:
· Amendments to IAS 1 Presentation of Financial Statements and IFRS
Practice Statement 2 Disclosure of Accounting Policies.
The amendments change the requirements in IAS 1 with regard to disclosure of
accounting policies. The amendments replace all instances of the term
"significant accounting policies" with "material accounting policy
information". Accounting policy information is material if, when considered
together with other information included in an entity's financial statements,
it can reasonably be expected to influence decisions that the primary users of
general purpose financial statements make on the basis of those financial
statements.
The supporting paragraphs in IAS 1 are also amended to clarify that accounting
policy information that relates to immaterial transactions, other events or
conditions is immaterial and need not be disclosed. Accounting policy
information may be material because of the nature of the related transactions,
other events or conditions, even if the amounts are immaterial. However, not
all accounting policy information relating to material transactions, other
events or conditions is itself material.
The amendments to IAS 1 are effective for annual periods beginning on or after
1 January 2023, with earlier application permitted, and are applied
prospectively. The amendments to IFRS Practice Statement 2 do not contain an
effective date or transition requirements.
· Amendments to IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors: Definition of Accounting Estimates.
The amendments replace the definition of a change in accounting estimates with
a definition of accounting estimates. Under the new definition, accounting
estimates are "monetary amounts in financial statements that are subject to
measurement uncertainty".
The definition of a change in accounting estimates was deleted. However, the
Board retained the concept of changes in accounting estimates in the standard
with the following clarifications:
• A change in accounting estimate that results from new information
or new developments is not the correction of an error.
• The effects of a change in an input or a measurement technique
used to develop an accounting estimate are changes in accounting estimates if
they do not result from the correction of prior period errors.
The amendments are effective for annual periods beginning on or after 1
January 2023 to changes in accounting policies and changes in accounting
estimates that occur on or after the beginning of that period, with earlier
application permitted.
The Group does not expect any other standards issued by the IASB, but not yet
effective, to have a material impact on the Group.
The following amendments are effective for the period beginning 1 January
2024:
· Amendments to IAS 1 Presentation of Financial Statements:
Classification of Liabilities as Current or Non-current and Classification of
Liabilities as Current or Non-current - deferral of effective date.
The amendments affect only the presentation of liabilities as current or
non-current in the statement of financial position and not the amount of
timing of recognition of any asset, income or expenses, or the information
disclosed about those items.
The amendments clarify that the classification of liabilities as current or
non-current is based on the rights that are in existence at the end of the
reporting period, specify that the classification is unaffected by
expectations about whether an entity will exercise its right to defer
settlement of a liability, explain the rights that are in existence if
covenants are complied with at the end of the reporting period, and introduce
a definition of "settlement" to make clear that settlement refers to the
transfer to the counterparty of cash, equity instruments, other assets or
services.
Note 5 - Significant accounting policies
The Group has consistently applied the following accounting policies to all
periods presented in the consolidated financial statements, except if
mentioned otherwise.
A. Basis of consolidation
(i) Business combinations
The Group accounts for business combinations using the acquisition method when
the acquired set of activities and assets meets the definition of a business
and control is transferred to the Group. In determining whether a particular
set of activities and assets is a business, the Group assesses whether the set
of assets and activities acquired includes, at a minimum, an input and
substantive process and whether the acquired set has the ability to produce
outputs.
The consideration transferred in the acquisition is generally measured at fair
value, as are the identifiable net assets acquired. Any goodwill arising is
tested semi-annually for impairment. Any gain on a bargain purchase is
recognised in the profit or loss immediately. Transaction costs are expensed
as incurred, except if related to the issue of debt or equity securities.
Any contingent consideration is measured at fair value at the date of
acquisition. If an obligation to pay contingent consideration that meets the
definition of a financial instrument is classified as equity, then it is not
remeasured, and settlement is accounted for within equity. Otherwise, other
contingent consideration is remeasured at fair value at each reporting date
and subsequent changes in the fair value of the contingent consideration are
recognised in the profit or loss. A contingent consideration in which the
contingent payments are forfeited if employment is terminated is compensation
for the post-combination services and is not be included in the calculation of
the consideration and recognised as employee-related costs.
Cash payments arising from settlement of contingent consideration and
redemption liability are disclosed in financing activities in the consolidated
statement of cash flows.
When a business combination is achieved in stages, the Group's previously held
interests in the acquired entity are remeasured to its acquisition-date fair
value and the resulting gain or loss, if any, is recognised in the profit or
loss. Amounts arising from interests in the acquiree prior to the acquisition
date that have previously been recognised in other comprehensive income are
reclassified to the profit or loss, where such treatment would be appropriate
if that interest were disposed of.
(ii) Subsidiaries
Subsidiaries are entities controlled by the Group. Control is achieved when
the Group:
• has the power over the entity;
• is exposed, or has rights, to variable return from its involvement
with the entity; and
• has the ability to use its power over the entity to affect its
returns.
The Group reassesses whether or not it controls an entity if facts and
circumstances indicate that there are changes to one or more of the three
elements of control listed above.
When the Group has less than a majority of the voting rights of an investee,
it considers that it has power over the investee when the voting rights are
sufficient to give it the practical ability to direct the relevant activities
of the investee unilaterally. The Group considers all relevant facts and
circumstances in assessing whether or not the Company's voting rights in an
investee are sufficient to give it power, including:
• the size of the Group's holding of voting rights relative to the
size and dispersion of holdings of the other vote holders;
• potential voting rights held by the Company, other vote holders or
other parties;
• rights arising from other contractual arrangements; and
• any additional facts and circumstances that indicate that the
Group has, or does not have, the current ability to direct the relevant
activities at the time that decisions need to be made, including voting
patterns at previous shareholders' meetings.
Where the Group holds a currently exercisable call option, the rights arising
as a result of the exercise of the call option are included in the
assessment above of whether the Group has control.
The financial statements of subsidiaries are included in the consolidated
financial statements from the date on which control commences until the date
on which control ceases.
(iii) Non-controlling interests (NCI)
NCI are measured initially at their proportionate share of the acquiree's
identifiable net assets at the date of acquisition.
Changes in the Group's interest in a subsidiary that do not result in a change
of control are accounted for as equity transactions. The difference between
the consideration and the carrying value of the NCI is recognised as
profit/loss in the retained earnings.
(iv) Loss of control
When the Group loses control over a subsidiary it derecognises the assets and
liabilities of the subsidiary and any related NCI and other components of
equity. Any resulting gain or loss is recognised in the profit or loss.
(v) Investments in associates and equity call options
An associate is an entity over which the Group has significant influence and
that is neither a subsidiary nor an interest in a joint venture. Significant
influence is the power to participate in the financial and operating policy
decisions of the investee but is not control or joint control over those
policies.
The considerations made in determining significant influence or joint control
are similar to those necessary to determine control over subsidiaries. In the
consolidated financial statements, the Group's investments in associates are
accounted for using the equity method of accounting.
Under the equity method, the investment in an associate or a joint venture is
carried in the consolidated balance sheet at cost plus post-acquisition
changes in the Group's share of the net assets of the associate. The Group's
share of the results of the associate is included in the profit or loss.
Losses of the associate or joint venture in excess of the Group's cost of the
investment are recognised as a liability only when the Group has incurred
obligations on behalf of the associate.
On acquisition of the investment, any difference between the cost of the
investment and share of the associate's identifiable assets and liabilities is
accounted for as follows:
• Any premium paid is capitalised and included in the carrying
amount of the associate.
• Any excess of the share of the net fair value of the associate's
identifiable assets and liabilities over the cost of the investment is
included as income in the determination of the share of the associate's profit
or loss in the period in which the investment is acquired.
Any intangibles identified and included as part of the investment are
amortized over their assumed useful economic life. Where there is objective
evidence that the investment in an associate may be impaired the carrying
amount of the investment is tested for impairment in the same way as other
non-financial assets.
The aggregate of the Group's share of profit or loss of an associate is shown
on the face of the profit or loss outside operating profit and represents
profit or loss before tax. The associated tax charge is disclosed in income
tax.
The Group recognises its share of any changes in the equity of the associate
through the consolidated statement of changes in equity. Profits and losses
resulting from transactions between the Group and the associate are eliminated
to the extent of the Group's interest in the associate.
The Group applies equity accounting only up to the date an investment in
associate meets the criteria for classification as held for sale. From then
onwards, the investment is measured at the lower of its carrying amount and
fair value less costs to sell.
When potential voting rights or other derivatives containing potential voting
rights exist, the Group's interest in an associate is determined solely on the
basis of existing ownership interests and does not reflect the possible
exercise or conversion of potential voting rights and other derivative
instruments unless there is an existing ownership interest as a result of a
transaction that currently gives it access to the returns associated with an
ownership interest. In such circumstances, the proportion allocated to the
entity is determined by taking into account the eventual exercise of those
potential voting rights and other derivative instruments that currently give
the entity access to the returns. When instruments containing potential voting
rights in substance currently give access to the returns associated with an
ownership interest in an associate or a joint venture, the instruments are not
subject to IFRS 9 and equity accounting is applied. In all other cases,
instruments containing potential voting rights in an associate or a joint
venture are accounted for in accordance with IFRS 9.
A derivative financial asset is measured under fair value under IFRS 9. In the
case where there is significant influence, but the option is not currently
exercisable, there is still an investment in associate but as there is no
current access to profits, the option is fair valued instead.
Derivatives are recorded at fair value and classified as assets when their
fair value is positive and as liabilities when their fair value is negative.
Subsequently, derivatives are measured at fair value.
(vi) Equity investments held at fair value
All equity investments in scope of IFRS 9 are measured at fair value in the
balance sheet. Fair value changes are recognised in the profit or loss. Fair
value is based on quoted market prices (Level 1). Where this is not possible,
fair value is assessed based on alternative methods (Level 3).
(vii) Transactions eliminated on consolidation
Intra-group balances and transactions are eliminated. Unrealised gains arising
from transactions with equity-accounted investees are eliminated against the
investment to the extent of the Group's interest in the investee. Unrealised
losses are eliminated in the same way as unrealised gains, but only to the
extent that there is no evidence of impairment.
B. Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated into the respective
functional currencies of Group companies at the exchange rates at the dates of
the transactions.
Monetary assets and liabilities denominated in foreign currencies are
translated into the functional currency at the exchange rate at the reporting
date. Non-monetary assets and liabilities that are measured at fair value in a
foreign currency are translated into the functional currency at the exchange
rate when the fair value was determined. Non-monetary items that are measured
based on historical cost in a foreign currency are translated at the exchange
rate at the date of the transaction. Foreign currency differences are
generally recognised in the profit or loss and presented within finance costs.
(ii) Foreign operations
On consolidation, the assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on acquisition, are translated
into Euro at the exchange rates at the reporting date and their statements of
profit or loss are translated into Euro at the end of each month at the
average exchange rate for the month which approximates the exchange rates at
the date of the transactions.
The exchange differences arising on the translation for consolidation are
recognised in other comprehensive income (OCI) and accumulated in the foreign
exchange reserve.
When a foreign operation is disposed of in its entirety or partially such that
control, significant influence or joint control is lost, the cumulative amount
in the foreign exchange reserve relating to the foreign operation is
reclassified to the profit or loss as part of the gain or loss on disposal.
C. Discontinued operation
A discontinued operation is a component of the Group's business, the
operations and cash flows of which can be clearly distinguished from the rest
of the Group and which:
• represents a separate major line of business or geographical area
of operations;
• is part of a single co-ordinated plan to dispose of a separate
major line of business or geographical area of operations; or
• is a subsidiary acquired exclusively with a view to resale.
Classification as a discontinued operation occurs at the earlier of disposal
or when the operation meets the criteria to be classified as held for sale.
When an operation is classified as a discontinued operation, the comparative
statement of comprehensive income is re-presented as if the operation had been
discontinued from the start of the comparative year.
D. Revenue recognition
The majority of the Group's revenue is derived from selling services with
revenue recognised when services have been delivered to the customer. Revenue
comprises the fair value of the consideration received or receivable for the
supply of services in the ordinary course of the Group's activities. Revenue
is recognised when economic benefits are expected to flow to the Group.
Specific criteria and performance obligations are described below for each of
the Group's material revenue streams.
Type of income Nature, timing of satisfaction of performance obligations and significant
payment terms
B2B licensee fee Licensee fee is the standard operator income of the Group which relates to
licensed technology and the provision of certain services provided via various
distribution channels (online, mobile or land-based interfaces).
Licensee fee is based on the underlying gaming revenue earned by our licensees
calculated using the contractual terms in place. Revenue is recognised when
performance obligation is met which is when the gaming transaction occurs. The
payment terms of the B2B licensee fee is on average 30 days from the invoice
date.
B2B fixed-fee income Fixed-fee income is the standard operator income of the Group which includes
revenue derived from the provision of certain services and licensed technology
for which charges are based on a fixed fee and/or stepped according to the
monthly usage of the service/technology. The usage measurement is typically
reset on a monthly basis.
The performance obligation is met and revenue is recognised once the
obligations under the contracts have been met which is when the services have
been provided.
Services provided and fees for:
a. minimum revenue guarantee: the additional balance billed by the Group on
a monthly basis for the difference in the minimum guarantee per licensee
contract and actual performance; and
b. other: hosting, live, set-up, content delivery network and maintenance
fees. The fees charge to licensees for these services are fixed per month.
The amounts for the above are recognised over the life of the contracts and
are typically charged on a fixed percentage and stepped according to the
monthly usage of the service depending on the type of service. Set-up fees are
recognised over the whole period of the contract, with an average period of 36
months. The revenue is recognised monthly over the period of the contract and
the payment terms of the B2B fixed fee income is on average 30 days from the
invoice date.
B2B cost-based revenue Cost-based revenue is the standard operator income of the Group which is made
of the total revenue charged to the licensee based on the development costs
needed to satisfy the contract with the licensee.
The largest type of service included in cost-based revenue is the dedicated
team costs. Dedicated team employees are charged back to the client based on
time spent on each product.
Cost-based revenues are recognised on a monthly basis based on the contract in
place of licensee with Playtech and any additional services needed on
development are charged to the licensee upon delivery of the service. The
payment terms of the B2B cost-based revenue is on average 30 days from the
invoice date.
B2B revenue received from the sale of hardware Revenue received from the sale of hardware is the total revenue charged to
customers upon the sale of each hardware product. The performance obligation
is met and revenue is recognised on delivery of the hardware and acceptance by
the customer.
Revenue received from future sale of hardware is recognised as deferred
revenue. Once the obligation for the future sale is met, revenue is then
recognised in profit or loss. The payment terms of the B2B revenue received
from the sale of hardware is on average 30 days from the invoice date.
Additional B2B services fee This income is calculated based on the profit and/or net revenues generated by
the customer in return for the additional services provided to them by the
Group. This is typically charged on a monthly basis and is measured using a
predetermined percentage set in each licensee arrangement. The revenue is
only recognised when the customer's activities go live and the revenue from
the additional B2B services is recognised only once the Group is
unconditionally contractually entitled to it. The Directors have determined
that this is when the customer starts generating profits which is later than
when the customer goes live with its B2C operations. The Directors rationale
is that there is uncertainty that the Group will collect the consideration to
which it is entitled before the customer starts generating profits and
therefore, the revenue is wholly variable. The payment terms of the additional
B2B services fees is on average 30 days from the invoice date.
B2C revenue In respect of B2C Snaitech revenues, the Group acts as principal with the end
customer, with specific revenue policies as follows:
• The revenues from land-based gaming machines are recognised net of
the winnings, jackpots and certain flat-rate gaming tax.
• The revenue from online gaming (games of skill/casino/bingo) are
recognised net of the winnings, jackpots, bonuses and certain flat-rate gaming
tax. In respect of Casino and Bingo, revenue is recognised at the conclusion
of the bet. Revenue from games of skill is recognised at the conclusion of the
bet.
• The revenues related to the acceptance of fixed odds bets are
considered financial instruments under IFRS 9 and are recognised net of
certain flat-rate gaming tax, winnings, bonuses and the fair value of open
bets.
• Revenues related to fixed odds bets are recognised at the conclusion
of the event.
• Poker revenues in the form of commission (i.e. rake) is recognised
at the conclusion of each poker hand. The performance obligation is the
provision of the poker games to the players.
• All the revenues from gaming machines are recorded net of players'
winnings and certain gaming taxes while the concession fees payable to the
regulator and the compensation of operators, franchisees and platform
providers are accounted as expenses. Revenue is recognised at the time of the
bet.
Where the gaming tax incurred is directly measured by reference to the
individual customer transaction and related to the stake (described as
"flat-rate tax" above), this is deducted from revenue.
Where the tax incurred is measured by reference to the Group's net result from
betting and gaming activity, this is not deducted from revenue and is
recognised as an expense.
In respect of Sun Bingo and B2C Sport revenue, the Group acts as principal
with the end customer, with revenue being recognised at the conclusion of the
event, net of winnings, jackpots and bonuses.
Financial trading income (discontinued operations) Financial trading income represents gains (including commission) and losses
arising on client trading activity, primarily in contracts for difference on
shares, indexes, commodities and foreign exchange.
Open client positions are carried at fair market value and gains and losses
arising on this valuation are recognised in revenue as well as gains and
losses realised on positions that have closed.
The performance obligation is met in the accounting periods in which the
trading transaction occurs and is concluded.
Based on the services provided by the Group, excluding certain rebates
provided to customers in the Financial division, no return, refund and other
similar obligations exist. Moreover, no warranties and related obligations
exist.
E. Share-based payments
Certain employees participate in the Group's share option plans. Following the
2012 LTIP employees are granted cash-settled options and equity-settled
options. The Remuneration Committee has the option to determine if the option
will be settled in cash or equity, a decision that is made at grant date. The
fair value of the equity-settled options granted is charged to the profit or
loss on a straight-line basis over the vesting period and the credit is taken
to equity, based on the Group's estimate of shares that will eventually vest.
Fair value is determined by the Black-Scholes, Monte Carlo or binomial
valuation model, as appropriate. The cash-settled options are presented as a
liability. The liability is remeasured at each reporting date and settlement
date so that the ultimate liability equals the cash payment on settlement
date. Remeasurements of the fair value of the liability are recognised in
profit or loss.
The Group has also granted awards to be distributed from the Group's Employee
Benefit Trust. The fair value of these awards is based on the market price at
the date of the grant; some of the grants have performance conditions. The
performance conditions are for the Executive Management and include targets
based on growth in earnings per share and total shareholder return over a
specific period compared to other competitors. The fair value of the awards
with market performance conditions is factored into the overall fair value and
determined using a Monte Carlo method. Where these options lapse due to not
meeting market performance conditions the share option charge is not reversed.
F. Income tax
The income tax expense represents the sum of the tax currently payable and
deferred tax.
(i) Current tax
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in profit or loss because it
excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the end of the reporting period.
A provision is recognised for those matters for which the tax determination is
uncertain, but it is considered probable that there will be a future outflow
of funds to a tax authority. The provisions are measured at the best estimate
of the amount expected to become payable. The assessment is based on the
judgement of tax professionals within the Company supported by previous
experience in respect of such activities and in certain cases based on
specialist tax advice.
(ii) Deferred tax
Deferred tax is provided using the liability method on temporary differences
between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences,
except:
• when the deferred tax liability arises from the initial
recognition of goodwill or an asset or liability in a transaction that is not
a business combination and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss; and
• in respect of taxable temporary differences associated with
investments in subsidiaries, associates and interests in joint ventures, when
the timing of the reversal of the temporary differences can be controlled and
it is probable that the temporary differences will not reverse in the
foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences,
the carry forward of unused tax credits and any unused tax losses. Deferred
tax assets are recognised in the period in which the deductible temporary
differences arise when there are sufficient taxable temporary differences
relating to the same taxation authority and the same taxable entity which are
expected to reverse, or where it is probable that taxable profit will be
available against which a deductible temporary difference can be utilised..
Deferred tax assets are recognised to the extent that it is probable that
taxable profit will be available against which the deductible temporary
differences, and the carry forward of unused tax credits and unused tax losses
can be utilised, except:
• when the deferred tax asset relating to the deductible temporary
difference arises from the initial recognition of an asset or liability in a
transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss;
and
• in respect of deductible temporary differences associated with
investments in subsidiaries, associates and interests in joint ventures,
deferred tax assets are recognised only to the extent that it is probable that
the temporary differences will reverse in the foreseeable future and taxable
profit will be available against which the temporary differences can be
utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date
and reduced to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the deferred tax
asset to be utilised. Unrecognised deferred tax assets are reassessed at each
reporting date and are recognised to the extent that it has become probable
that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply in the year when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Deferred tax relating to items recognised outside the profit or loss is
recognised outside the profit or loss. Deferred tax items are recognised in
correlation to the underlying transaction either in OCI or directly in equity.
Tax benefits acquired as part of a business combination, but not satisfying
the criteria for separate recognition at that date, are recognised
subsequently, if new information about facts and circumstances change. The
adjustment is either treated as a reduction in goodwill (as long as it does
not exceed goodwill) if it was recognised during the measurement period or is
otherwise recognised in profit or loss.
The Group offsets deferred tax assets and deferred tax liabilities if and only
if it has a legally enforceable right to set off current tax assets and
current tax liabilities and the deferred tax assets and deferred tax
liabilities relate to income taxes levied by the same taxation authority on
either the same taxable entity or different taxable entities which intend
either to settle current tax liabilities and assets on a net basis, or to
realise the assets and settle the liabilities simultaneously, in each future
period in which significant amounts of deferred tax liabilities or assets are
expected to be settled or recovered.
The tax base of assets and liabilities is assessed at each reporting date, and
changes in the tax base that result from internal reorganisations, changes in
the expected manner of recovery or changes in tax law are reflected in the
calculation of deductible and taxable temporary differences.
G. Finance expense
Finance expense arising on interest bearing financial instruments carried at
amortised cost are recognised in the profit or loss using the effective
interest rate method. Finance expense includes the amortisation of fees that
are an integral part of the effective finance cost of a financial instrument,
including issue costs, and the amortisation of any other differences between
the amount initially recognised and the redemption price. All finance expenses
are recognised over the availability period.
Interest expense arising on the above during the period is disclosed under the
financing activities in the consolidated statement of cash flows.
H. Inventories
Inventories are initially recognised at cost, and subsequently at the lower of
cost and net realisable value. Cost comprises all costs of purchase, costs of
conversion and other costs incurred in bringing the inventories to their
present location and condition.
I. Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated
depreciation and any accumulated impairment losses.
If significant parts of an item of property, plant and equipment have
different useful lives, then they are accounted for as separate items (major
components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment is
recognised in profit or loss.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that the future
economic benefits associated with the expenditure will flow to the Group.
(iii) Depreciation
Depreciation is calculated to write off the cost of items of property, plant
and equipment less their estimated residual values using the straight-line
method over their estimated useful lives, and is generally recognised in
profit or loss. Land is not depreciated.
The estimated useful lives of property, plant and equipment for current and
comparative periods are as follows:
%
Computers and gaming machines 20-33
Office furniture and equipment 7-33
Freehold and leasehold buildings and improvements 3-20, or over the length of the lease
Depreciation methods, useful lives and residual values are reviewed at each
reporting date and adjusted if appropriate.
J. Intangible assets and goodwill
(i) Recognition and measurement
Goodwill
Goodwill represents the excess of the cost of a business combination over the
Group's interest in the fair value of identifiable assets, liabilities and
contingent liabilities acquired. Cost comprises the fair value of assets
given, liabilities assumed and equity instruments issued, plus the amount of
any non-controlling interests in the acquiree plus, if the business
combination is achieved in stages, the fair value of the existing equity
interest in the acquiree. Contingent consideration is included in cost at its
acquisition date fair value and, in the case of contingent consideration
classified as a financial liability, remeasured subsequently through profit or
loss. Direct costs of acquisition are recognised immediately as an expense.
Goodwill is capitalised as an intangible asset with any impairment in carrying
value being charged to the profit or loss. Where the fair value of
identifiable assets, liabilities and contingent liabilities exceed the fair
value of consideration paid, the excess is credited in full to the profit or
loss on the acquisition date as a gain on bargain purchase.
Externally acquired intangible assets
Other intangible assets that are acquired by the Group and have finite useful
lives are measured at cost less accumulated amortisation and any accumulated
impairment losses.
Business combinations
Intangible assets are recognised on business combinations if they are
separable from the acquired entity or give rise to other contractual/legal
rights. The amounts ascribed to such intangibles are arrived at by using
appropriate valuation techniques.
Internally generated intangible assets (development costs)
Development costs that are directly attributable to the design and testing of
identifiable and unique software products controlled by the Group are
recognised as intangible assets where the following criteria are met:
• it is technically feasible to complete the software so that it
will be available for use;
• management intends to complete the software and use or sell it;
• there is an ability to use or sell the software;
• it can be demonstrated how the software will generate probable
future economic benefits;
• adequate technical, financial and other resources to complete the
development and to use or sell the software are available; and
• the expenditure attributable to the software during its
development can be reliably measured.
The amount initially recognised for internally generated intangible assets is
the sum of the expenditure incurred from the date when the intangible asset
first meets the recognition criteria listed above. Expenditure includes
salaries, wages and other employee-related costs directly engaged in
generating the assets and any other expenditure that is directly attributable
to generating the assets (i.e. certifications and amortisation of right of use
assets). Where no internally generated intangible asset can be recognised,
development expenditure is recognised in profit or loss in the period in which
it is incurred.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future
economic benefits embodied in the specific asset to which it relates. All
other expenditure, including expenditure on internally generated goodwill and
brands, is recognised in the profit or loss as incurred.
(iii) Amortisation
Amortisation is calculated to write off the cost of intangible assets less
their estimated residual values using the straight-line method over their
estimated useful lives and is generally recognised in the profit or loss.
Goodwill is not amortised.
The estimated useful lives for current and comparative periods are as follows:
%
Domain names Nil
Internally generated capitalised development costs 20-33
Technology IP 13-33
Customer lists In line with projected cash flows or 7-20
Affiliate contracts 5-12.5
Patents and licences 10-33 or over the period of the licence
Amortisation methods, useful lives and residual values are reviewed at each
reporting date and adjusted if appropriate.
K. Assets held for sale
Non-current assets, or disposal groups comprising assets and liabilities, are
classified as held for sale if it is highly probable that they will be
recovered primarily through sale rather than through continuing use.
The criteria for held for sale classification is regarded as met only when the
sale is highly probable, and the asset or disposal group is available for
immediate sale in its present condition. Actions required to complete the sale
should indicate that it is unlikely that significant changes to the sale will
be made or that the decision to sell will be withdrawn. Management must be
committed to the plan to sell the asset and the sale expected to be completed
within one year from the date of the classification.
Such assets, or disposal groups, are measured at the lower of their carrying
amount and fair value less costs to sell. Any impairment loss on a disposal
group is allocated first to goodwill, and then to the remaining assets on a
pro rata basis, except that no loss is allocated to inventories, financial
assets or deferred tax assets, which continue to be measured in accordance
with the Group's other accounting policies. Impairment losses on initial
classification as held for sale or held for distribution and subsequent gains
and losses on remeasurement are recognised in the profit or loss.
Once classified as held for sale, intangible assets and property, plant and
equipment are no longer amortised or depreciated.
L. Financial instruments
Initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a financial asset of
one entity and a financial liability or equity instrument of another entity.
(i) Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently
measured at amortised cost, fair value through other comprehensive income and
fair value through profit or loss.
The classification of financial assets at initial recognition depends on the
financial asset's contractual cash flow characteristics and the Group's
business model for managing them. With the exception of trade receivables that
do not contain a significant financing component or for which the Group has
applied the practical expedient, the Group initially measures a financial
asset at its fair value plus, in the case of a financial asset not at fair
value through profit or loss, transaction costs. Trade receivables that do not
contain a significant financing component or for which the Group has applied
the practical expedient are measured at the transaction price. In order for a
financial asset to be classified and measured at amortised cost or fair value
through OCI, it needs to give rise to cash flows that are "solely payments of
principal and interest (SPPI)" on the principal amount outstanding. This
assessment is referred to as the SPPI test and is performed at an instrument
level. Financial assets with cash flows that are not SPPI are classified and
measured at fair value through profit or loss, irrespective of the business
model.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in
four categories:
• financial assets at amortised cost (debt instruments);
• financial assets at fair value through other comprehensive income
with recycling of cumulative gains and losses (debt instruments);
• financial assets designated at fair value through other
comprehensive income with no recycling of cumulative gains and losses upon
derecognition (equity instruments); and
• financial assets at fair value through profit or loss.
Financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured using the
effective interest (EIR) method and are subject to impairment. Gains and
losses are recognised in the profit or loss when the asset is derecognised,
modified or impaired. The Group's financial assets at amortised cost include
trade receivables, loans receivable and cash and cash equivalents.
Cash and cash equivalents consist of cash at bank and in hand, short-term
deposits with an original maturity of less than three months and customer
balances.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are carried in the
balance sheet at fair value with net changes in fair value recognised in the
profit or loss. This category includes listed equity investments which the
Group had not irrevocably elected to classify at fair value through OCI.
The Group recognizes a debt financial instrument with an embedded conversion
option, such as a loan convertible into ordinary shares of an entity, as a
financial asset in the balance sheet. On initial recognition, the convertible
loan is measured at fair value with any gain or loss arising on subsequent
measurement until conversion recognized in profit or loss. On conversion of
a convertible instrument, the Group derecognizes the financial asset component
and recognizes it as an investment (equity interest, associate, joint venture
or subsidiary) depending on the results of the assessment performed under the
relevant standards.
At every reporting date, the Group evaluates whether the debt instrument is
considered to have low credit risk using all reasonable and supportable
information that is available without undue cost or effort. In making that
evaluation, the Group reassesses the internal credit rating of the debt
instrument. In addition, the Group considers whether there has been a
significant increase in credit risk depending on the characteristics of each
debt instrument.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part
of a group of similar financial assets) is primarily derecognised (i.e.
removed from the Group's consolidated balance sheet) when:
• the rights to receive cash flows from the asset have expired; or
• the Group has transferred its rights to receive cash flows from
the asset or has assumed an obligation to pay the received cash flows in full
without material delay to a third party under a "pass-through" arrangement,
and either (a) the Group has transferred substantially all the risks and
rewards of the asset; or (b) the Group has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred
control of the asset.
When the Group has transferred its rights to receive cash flows from an asset
or has entered into a passthrough arrangement, it evaluates if, and to what
extent, it has retained the risks and rewards of ownership. When it has
neither: transferred nor retained substantially all of the risks and rewards
of the asset, nor transferred control of the asset, the Group continues to
recognise the transferred asset to the extent of its continuing involvement.
In that case, the Group also recognises an associated liability. The
transferred asset and the associated liability are measured on a basis that
reflects the rights and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred
asset is measured at the lower of the original carrying amount of the asset
and the maximum amount of consideration that the Group could be required to
repay.
Impairment
The Group recognises an allowance for expected credit losses (ECLs) for all
debt instruments not held at fair value through profit or loss. ECLs are based
on the difference between the contractual cash flows due in accordance with
the contract and all the cash flows that the Group expects to receive,
discounted at an approximation of the original effective interest rate. The
expected cash flows will include cash flows from the sale of collateral held
or other credit enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has
not been a significant increase in credit risk since initial recognition, ECLs
are provided for credit losses that result from default events that are
possible within the next 12 months (a 12-month ECL). For those credit
exposures for which there has been a significant increase in credit risk since
initial recognition, a loss allowance is required for credit losses expected
over the remaining life of the exposure, irrespective of the timing of the
default (a lifetime ECL).
For trade receivables, the Group applies a simplified approach in calculating
ECLs. Therefore, the Group does not track changes in credit risk, but instead
recognises a loss allowance based on lifetime ECLs at each reporting date. The
Group has established a provision matrix that is based on its historical
credit loss experience, adjusted for forward-looking factors specific to the
debtors and the economic environment.
(ii) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial
liabilities at fair value through profit or loss, loans and borrowings,
payables, or; derivatives designated as hedging instruments in an effective
hedge, as appropriate. All financial liabilities are recognised initially at
fair value and, in the case of loans and borrowings and payables, net of
directly attributable transaction costs. The Group's financial liabilities
include trade and other payables, loans and borrowings including bank
overdrafts, and derivative financial instruments.
Subsequent measurement
For purposes of subsequent measurement, financial liabilities are classified
in two categories:
• financial liabilities at fair value through profit or loss; and
• financial liabilities at amortised cost (loans and borrowings and
bonds).
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial
liabilities held for trading and financial liabilities designated upon initial
recognition as at fair value through profit or loss.
Financial liabilities at amortised cost
This is the category most relevant to the Group. After initial recognition,
interest-bearing loans and borrowings are subsequently measured at amortised
cost using the effective interest rate (EIR) method. Gains and losses are
recognised in the profit or loss when the liabilities are derecognised as well
as through the EIR amortisation process. Amortised cost is calculated by
taking into account any discount or premium on acquisition and fees or costs
that are an integral part of the EIR. The EIR amortisation is included as
finance costs in the profit or loss.
Derecognition
A financial liability is derecognised when the obligation under the liability
is discharged or cancelled or expires. When an existing financial liability is
replaced by another from the same lender on substantially different terms, or
the terms of an existing liability are substantially modified, such an
exchange or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in the
respective carrying amounts is recognised in the profit or loss.
(iii) Offsetting
Financial assets and financial liabilities are offset and the net amount is
reported in the balance sheet if there is a currently enforceable legal right
to offset the recognised amounts and there is an intention to settle on a net
basis, to realise the assets and settle the liabilities simultaneously.
M. Share capital
Ordinary shares are classified as equity and are stated at the proceeds
received net of direct issue costs.
N. Share buyback
Consideration paid for the share buyback is recognised against the additional
paid in capital. Any excess of the consideration paid over the weighted
average price of shares in issue is debited to the retained earnings.
O. Employee Benefit Trust
Consideration paid/received for the purchase/sale of shares subsequently put
in the Employee Benefit Trust, which is controlled by the Company, is
recognised directly in equity. The cost of shares held is presented as a
separate reserve (the "Employee Benefit Trust reserve"). Any excess of the
consideration received on the sale of treasury shares over the weighted
average cost of the shares sold is credited to retained earnings.
P. Dividends
Dividends are recognised when they become legally due. In the case of interim
dividends to equity shareholders, this is when paid by the Directors. In the
case of final dividends, this is when they are declared and approved by the
shareholders at the AGM.
Q. Impairment of non-financial assets
At each reporting date, the Group reviews the carrying amounts of its
non-financial assets (other than inventories and deferred tax assets) to
determine whether there is any indication of impairment. If any such
indication exists, then the asset's recoverable amount is estimated. Goodwill
is tested semi-annually for impairment.
For impairment testing, assets are grouped together into the smallest group of
assets that generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or CGUs. Goodwill arising from
a business combination is allocated to CGUs that are expected to benefit from
the synergies of the combination.
The recoverable amount of an asset or CGU is the greater of its value in use
and its fair value less costs of disposal. Value in use is based on the
estimated future cash flows, discounted to their present value using a
post-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an asset or CGU
exceeds its recoverable amount.
Impairment losses are recognised in the profit or loss. They are allocated
first to reduce the carrying amount of any goodwill allocated to the CGU, and
then to reduce the carrying amounts of the other assets in the CGU on a pro
rata basis.
An impairment loss in respect of goodwill is not reversed. For other assets,
an impairment loss is reversed only to the extent that the asset's carrying
amount does not exceed the carrying amount that would have been determined,
net of depreciation or amortisation, if no impairment loss had
been recognised.
R. Provisions
Provisions for legal claims are recognised when the Group has a present legal
or constructive obligation as a result of past events, it is probable that an
outflow of resources will be required to settle the obligation, and the amount
can be reliably estimated. Provisions are not recognised for future operating
losses.
Where there are a number of similar obligations, the likelihood that an
outflow will be required in settlement is determined by considering the class
of obligations as a whole. A provision is recognised even if the likelihood of
an outflow with respect to any one item included in the same class of
obligations may be minimum.
Provisions are measured at the present value of management's best estimate of
the expenditure required to settle the present obligation at the end of the
reporting period. The discount rate used to determine the present value is a
pre-tax rate that reflects current market assessments of the time value of
money and the risks specific to the liability.
S. Leases
At inception of a contract, the Group assesses whether a contract is, or
contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in
exchange for consideration.
Group as a lessee
The Group applies a single recognition and measurement approach for all
leases, except for short-term leases and leases of low-value assets. The Group
recognises lease liabilities to make lease payments and right of use assets
representing the right to use the underlying assets.
(i) Right of use assets
The Group recognises right of use assets at the commencement date of the lease
(i.e. the date the underlying asset is available for use). Right-of-use assets
are measured at cost, less any accumulated amortisation and impairment losses
and adjusted for any remeasurement of lease liabilities. The cost of right of
use assets includes the amount of lease liabilities recognised, initial direct
costs incurred, and lease payments made at or before the commencement date
less any lease incentives received. Right of use assets are amortised on a
straight-line basis over the shorter of the lease term and the estimated
useful lives of the assets.
(ii) Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities
measured at the present value of lease payments to be made over the lease
term. The lease payments include fixed payments (including in-substance fixed
payments) less any lease incentives receivable, variable lease payments that
depend on an index or a rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the exercise price of a
purchase option reasonably certain to be exercised by the Group and payments
of penalties for terminating the lease, if the lease term reflects the Group
exercising the option to terminate.
Variable lease payments that do not depend on an index or a rate are
recognised as expenses in the period in which the event or condition that
triggers the payment occurs.
In calculating the present value of lease payments, the Group uses its
incremental borrowing rate at the lease commencement date because the interest
rate implicit in the lease is not readily determinable. After the commencement
date, the amount of lease liabilities is increased to reflect the accretion of
interest and reduced for the lease payments made.
In addition, the carrying amount of lease liabilities is remeasured if there
is a modification, a change in the lease term, a change in the lease payments
(e.g. changes to future payments resulting from a change in an index or rate
used to determine such lease payments) or a change in the assessment of an
option to purchase the underlying asset. When the lease liability is
remeasured in this way, a corresponding adjustment is made to the carrying
amount of the right of use asset or is recorded in the profit or loss if the
carrying amount of the right of use asset has been reduced to zero.
The cash payments made in relation to long term leases is split between
principal and interest paid on lease liability and disclosed within financing
activities in the consolidated statement of cash flows.
(iii) Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term
leases (i.e. those leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option). It also applies the
lease of low-value assets recognition exemption to leases that are considered
to be low value. Lease payments on short-term leases and leases of low-value
assets are recognised as expense on a straight-line basis over the lease term
and included within financing activities in the consolidated statement of cash
flows.
T. Fair value measurement
"Fair value" is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the liability takes place
either: (a) in the principal market for the asset or liability; or (b) in the
absence of a principal market, in the most advantageous market for the asset
or liability.
The fair value of an asset or a liability is measured using the assumptions
that market participants would use when pricing the asset or liability,
assuming that market participants act in their economic best interest.
The Group uses valuation techniques that are appropriate in the circumstances
and for which sufficient data is available to measure fair value, maximising
the use of relevant observable inputs and minimising the use of unobservable
inputs.
All assets and liabilities for which fair value is measured or disclosed in
the financial statements are categorised within the fair value hierarchy,
described as follows, based on the lowest level input that is significant to
the fair value measurement as a whole:
• Level 1 - quoted (unadjusted) market prices in active markets for
identical assets or liabilities.
• Level 2 - valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly or indirectly
observable.
• Level 3 - valuation techniques for which the lowest level input
that is significant to the fair value measurement is unobservable.
U. Adjusted results
The Group discloses EBITDA, being the profit before interest, taxes,
depreciation and amortisation. EBITDA is a measure of the Group's overall
financial performance and profitability which the Directors consider useful to
reflect the underlying performance of the business.
The Board of Directors believes that in order to best represent the trading
performance and results of the Group, the reported numbers should exclude
certain non-cash items, one-off items and the impact of substantial
reorganisations and acquisition-related items.
Adjusted EBITDA and Adjusted Profit/loss after making these exclusions are
therefore presented alongside the reported EBITDA and reported Profit/loss in
the consolidated statement of comprehensive income.
The Directors use the Adjusted EBITDA and Adjusted Profit/loss to understand,
manage and evaluate the business and make operating decisions. These adjusted
measures are among the primary factors management uses in planning for and
forecasting future periods. Furthermore, compensation of the executives is
based in part on the performance of the business based on Adjusted EBITDA.
Adjusted results exclude the following items:
• Material non-cash items: these items are excluded to better
analyse the underlying cash transactions of the business as the management
regularly monitors the operating cash conversion to Adjusted EBITDA.
• Material one-off items: there items are excluded to get normalised
results that are distorted by unusual or infrequent items unusual or
infrequent items that are excluded to get normalised results that were
previously distorted by these items. Unusual items include highly abnormal,
one-off and only incidentally relating to the ordinary activities of the
Group. Infrequent items are those which are not reasonably expected to recur
in the foreseeable future given the environment in which the Group operates.
• Material reorganisations and acquisition-related items: these
items are excluded as they are not considered related to the ordinary
activities of the business and are not considered to be ongoing costs of the
operations of the business.
In addition, management presents underlying adjusted results and constant
currency adjusted results to the Board of Directors.
Underlying adjusted results are presented as an alternative performance
measure to exclude the impact of acquisitions made in the period or in the
comparable period in order to present a more accurate "like-for-like"
comparison over the comparable period.
Constant currency adjusted results are presented in order to try and present
measures that exclude the effect of currency fluctuations. In view of the fact
that the Group has transactions in foreign currencies and may be affected from
the fluctuations of the currencies, all transactions in foreign currencies are
converted to Euro using the exchange rate of the comparable period.
As these are non-GAAP measures, they should not be considered as replacements
for IFRS measures. The Group's definition of these non-GAAP measures may not
be comparable to other similarly titled measures reported by other companies.
A full reconciliation of adjustments is included in Note 10.
Note 6 - Significant accounting judgements, estimates and assumptions
In preparing these consolidated financial statements, management has made
judgements and estimates that affect the application of the Group's accounting
policies and the reported amounts of assets, liabilities, income and expenses.
Actual events may differ from these estimates.
Judgements
In the process of applying the Group's accounting policies management has made
the following judgements, which have the most significant effect on the
amounts recognised in the consolidated financial statements.
Revenue from contracts with customers
The Group applies judgement in determining whether it is acting as a principal
or an agent specifically on the revenue earned under the B2B licensee fee
stream. This income falls within the scope of IFRS 15 Revenue from Contracts
with Customers. In making these judgements, the Group considers, by examining
each contract with its customers, which party has the primary responsibility
for providing the services and is exposed to the majority of the risks and
rewards associated with providing the services, as well as if it has latitude
in establishing prices, either directly or indirectly. The business model of
this division is predominantly a revenue share model which is based on
royalties earned from B2C business partners' revenue.
IFRS 15, paragraph B37 describes indicators that an entity controls the
specified good or service before it is transferred to a customer and therefore
acts as the principal. Based on this assessment it was concluded that Playtech
is acting as an agent under the B2B licensee fee stream due to the three
indicators under B37 which are not satisfied as follows:
• Playtech is responsible in fulfilling the contract to the
operator, principally in respect of the software solutions, and not to the end
customer which is the responsibility of the operator;
• there is no inventory risk as Playtech does not have the ability
to direct the use of, and obtain substantially all of the remaining benefits
from the good or service before it is transferred to the end customer; and
• Playtech does not have any discretion in establishing prices set
by the operator to third parties.
Based on the above it was determined that the Group was acting as agent and
revenue is recognised as the net amount of B2B licensee fees received. The
majority of this B2B revenue is recognised when the gaming or betting activity
used as the basis for the revenue share calculation takes place, and
furthermore is only recognised when collection is virtually certain with a
legally enforceable right to collect.
Internally generated intangible assets
The Group capitalises costs for product development projects. Expenditure on
internally developed products is capitalised when it meets the following
criteria:
• adequate resources are available to complete and sell the product;
• the Group is able to sell the product;
• sale of the product will generate future economic benefits; and
• expenditure on the project can be measured reliably.
Initial capitalisation of cost is based on the management's judgement that the
technological and economic feasibility is confirmed, usually when product
development has reached a defined milestone and future economic benefits are
expected to be realised according to an established project management model.
Following capitalisation, an assessment is performed in regard to project
recoverability which is based on the actual return of the project. During the
year, the Group capitalised €57.5 million (2021: €51.3 million) and the
carrying amount of capitalised development costs as at 31 December 2022 was
€123.2 million (2021: €122.3 million).
Adjusted performance measures
As noted in Note 5, paragraph U, the Group presents adjusted performance
measures which differ from statutory measures due to exclusion of certain
non-cash and one-off items and material reorganisation and acquisition-related
items from the actual results. The determination of whether non-cash and
one-off items and material reorganisation and acquisition-related items should
form part of the adjusted results is a matter of judgement and is based on
whether the inclusion/exclusion from the results represent more closely the
consistent trading performance of the business. The items excluded from the
adjusted measures are described in further detail in Note 10.
Provision for risks and charges and potential liabilities
The Group operates in a number of regulated markets and is subject to lawsuits
and potential lawsuits regarding complex legal matters, which are subject to a
different degree of uncertainty in different jurisdictions and under different
laws. For all material ongoing and potential legal and regulatory claims
against the Group, an assessment is performed to consider whether an
obligation or possible obligation exists and to determine the probability of
any potential outflow to determine whether a claim results in the recognition
of a provision or disclosure of a contingent liability. The timing of payment
of provisions is subject to uncertainty and may have an effect on the
presentation of the provisions as current and non-current liabilities in the
balance sheet. Expected timing of payment and classification of provision is
determined by the management based on the latest information available at the
reporting date. See Note 29 for further details.
Classification of equity call options
Background
In addition to the provision of software-related solutions as a B2B product,
the Group also offers certain customers a form of offering (which includes
software and related services) which is termed a "structured agreement".
Structured agreements are customarily with customers which have a gaming
licence and are retail/land based operators that are looking to establish
their online B2C businesses - these customers require initial support beyond
the provision of the Group's standard B2B software technology. With this
product offering, Playtech offers additional services to support the
customer's B2C activities over and above the B2B software solution products.
Playtech generates revenues from the structured agreements as follows:
• the standard operator revenue (B2B licensee fee income as per Note
5D); and
• revenue based on predefined revenue generated by each customer
under the structured agreement which is typically capped at a percentage of
the profit (also defined in each agreement) generated by the customer, which
compensates Playtech for the additional services provided (additional B2B
services fee as per Note 5D).
Under these agreements, Playtech typically has a call option to acquire equity
in the operating entities. If the call option is exercised by Playtech, the
Group would no longer provide certain services (which generally include
technical and general strategic support services) and would no longer receive
the related additional B2B services fee. This mechanism is not designed as a
control feature but mainly to protect Playtech's position should the customer
be subject to an exit transaction. Playtech is therefore able to benefit from
any value appreciation in the operation and could also potentially cease to
provide the additional B2B services should it choose to do so dependent on the
nature of the exit transaction.
Judgement applied
In respect of each of the structured agreements where the Group holds equity
call options, management applies judgement to assess whether the Group has
control or significant influence. For each of the Group's structured
agreements an assessment was completed in Note 20 using the below guidance.
The existence of control by an entity is evidenced if all of the below are met
in accordance with IFRS 10 Consolidated Financial Statements, paragraph 7:
• power over the investee;
• exposure, or rights, to variable returns from its involvement with
the investee; and
• the ability to use its power over the investee to affect the
amount of the investor's returns.
In the cases where the Group assessed that it exercises control over these
arrangements, then the company is consolidated in the Group's annual results
in accordance with IFRS 10.
The existence of significant influence by an entity is usually evidenced in
one or more of the following ways in accordance with IAS 28 Investment in
Associates and Joint Ventures, paragraph 6:
• representation on the board of directors or equivalent governing
body of the investee;
• participation in policy-making processes, including participation
in decisions about dividends or other distributions;
• material transactions between the entity and its investee;
• interchange of managerial personnel; or
• provision of essential technical information.
If the conclusion is that the Group has significant influence, the next
consideration made is whether there is current access to net profits and
losses of the underlying associate. This is determined by the exercise
conditions of each relevant equity call option and in particular whether the
options are exercisable at the end of each reporting period.
If the option is exercisable then the investment is accounted for using the
equity accounting method. However, in the cases where the company over which
the Group has a current exercisable option generates profits, management made
a judgement and concluded that Playtech's share of profits (were the option to
be exercised) should not be recognised as it is unlikely that the profits will
be realised as the existing shareholder has the right, and is entitled, to
extract distributable profits. As such management did not consider it
appropriate to recognise any share of these profits. However, in the cases
where the associate has generated losses, the Group's percentage share is
recognised and deducted from the carrying value of the investment in
associate.
Management has made a further judgement that if the equity call option is not
exercisable at the end of the reporting period, then the option is recorded at
fair value as per IAS 28, paragraph 14 and recognised as a derivative
financial asset as per IFRS 9 Financial Instruments.
Furthermore, under some of these arrangements the Group has provided loan
advances. In such instances a judgement was made as to whether these amounts
form part of the Group's investment in the associate as per IAS 28, paragraph
38, with a key consideration being whether the Group expects settlement to
occur in the foreseeable future. In the case where this is not expected and
there is no set repayment term, then it is concluded that in substance these
loans are extensions of the entity's investment in the associate and therefore
would form part of the cost of the investment.
Finally, the Group has certain agreements in relation to the provision of
services by service providers in connection with certain of the Group's
obligations under their various structured agreements. Under these
arrangements, the service providers have certain rights to equity. In order
for these rights to crystallise, the Group must first exercise the relevant
option. A judgement was therefore made that no current liability exists under
IAS 32, until the point when Playtech exercises the option.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date, which have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are described below. The Group based its assumptions
and estimates on parameters available when the consolidated financial
statements were prepared. Existing circumstances and assumptions about future
developments may change due to market changes or circumstances arising that
are beyond the control of the Group. Such changes are reflected in the
assumptions when they occur.
Impairment of non-financial assets
Impairment exists when the carrying value of an asset or cash-generating unit
exceeds its recoverable amount, which is the higher of its fair value less
costs of disposal and its value in use. The value in use calculation is based
on a discounted cash flow model (DCF). The cash flows are derived from the
budget for the next five years and do not include restructuring activities
that the Group is not yet committed to or significant future investments that
may enhance the performance of the assets of the CGU being tested. The
recoverable amount is sensitive to the discount rate used for the DCF model as
well as the expected future cash inflows and the growth rate used for
extrapolation purposes. These estimates are most relevant to goodwill and
other intangibles with indefinite useful lives recognised by the Group. The
key assumptions used to determine the recoverable amount of the different
CGUs, are disclosed and further explained in Note 19, including a sensitivity
analysis for the CGUs with lower headroom.
Income taxes
The Group is subject to income tax in several jurisdictions and significant
judgement is required in determining the provision for income taxes. During
the ordinary course of business, there are transactions and calculations for
which the ultimate tax determination is uncertain. As a result, the Group
recognises tax liabilities based on estimates of whether additional taxes and
interest will be due. These tax liabilities are recognised when, despite the
Group's belief that its tax return positions are supportable, the Group
believes it is more likely than not that a taxation authority would not accept
its filing position. In these cases, the Group records its tax balances based
on either the most likely amount or the expected value, which weights multiple
potential scenarios. The Group believes that its accruals for tax liabilities
are adequate for all open audit years based on its assessment of many factors
including past experience and interpretations of tax law. This assessment
relies on estimates and assumptions and may involve a series of complex
judgements about future events. To the extent that the final tax outcome of
these matters is different than the amounts recorded, such differences will
impact income tax expense in the period in which such determination is made.
Where management conclude that it is not probable that the taxation authority
will accept an uncertain tax treatment, they calculate the effect of
uncertainty in determining the related taxable profit (tax loss), tax bases,
unused tax losses, unused tax, credits or tax rates. The effect of uncertainty
for each uncertain tax treatment is reflected by using the expected value -
the sum of the probabilities and the weighted amounts in a range of possible
outcomes. More details are included in Note 14.
Deferred tax asset
In evaluating the Group's ability to recover our deferred tax assets in the
jurisdiction from which they arise, management considers all available
positive and negative evidence, projected future taxable income, tax-planning
strategies and results of recent operations. Deferred tax asset is recognised
to the extent that it is probable that future taxable profit will be available
against which the temporary differences can be utilised. Judgement is required
in determining the initial recognition and the subsequent carrying value of
the deferred tax assets. Deferred tax asset is only able to be recognised to
the extent that utilisation is considered probable. It is possible that a
change in profit forecasts or risk factors could result in a material change
to the income tax expense and deferred tax asset in future periods.
Deferred tax asset in the UK
As a result of the Group's internal restructuring in January 2021, the Group
is entitled to UK tax deductions in respect of certain goodwill and intangible
assets. A deferred tax asset was recognized as the tax base of the goodwill
and intangible assets is in excess of the book value base of those assets. At
the beginning of the period, the net recognized deferred tax asset amounted to
€63.6 million. As at 31 December 2022, an additional deferred tax asset of
€5.2 million was recognized. This additional deferred tax asset has been
recognized as the Group's management has concluded that it is probable for the
UK entities to continue to generate taxable profits in the future against
which the Group can utilise the tax deductions for goodwill and intangible
assets giving a tax benefit of €68.8 million. This represents the benefit of
the deductions against forecast profits for the next 5 years. During the year,
€12.0 million has been utilized and the net recognized deferred tax asset as
at 31 December 2022 amounts to €56.8 million. In addition, a total of
€37.0 million of deferred tax asset has not been recognised in respect of
the benefit of future tax deductions expected to arise after the next 5 years
for the remaining useful economic life of the goodwill and intangible assets.
The Group reviewed the latest forecasts for the UK companies for the next 5
years, including their ability to continue to generate income beyond the
forecast period under the tax laws substantively enacted at the reporting
date. Based on this, the Group's management concludes that it is probable that
the UK companies will continue to generate taxable income in the future. Any
future changes in the tax law or the structure of the Group could have a
significant effect on the use of the tax deductions, including the period over
which the deductions can be utilised.
The Group has recognised a deferred tax asset of €60.4 million in respect of
tax losses and excess interest in the UK which are available to offset against
the future profits of the UK Group companies. Based on the current forecasts,
these losses will be fully utilised over the next 5 years.
Deferred tax assets in Italy
The Group has recognised a deferred tax asset of €23.1 million in respect of
tax losses in Italy which are available to offset against the future profits
of the Italian Group companies. Based on the current forecasts, these losses
will be fully utilised within the next 5 years.
The Group reviewed the latest forecasts for the Italian companies for the next
5 years, including their ability to continue to generate income beyond the
forecast period under the tax laws substantively enacted at the reporting
date. Based on this, the Group management concludes that it is probable that
the Italian Group companies will continue to generate taxable income in the
future against which the losses can be utilised. Any future changes in the tax
law or the structure of the Group could have a significant effect on the use
of the tax deductions, including the period over which the deductions can be
utilised.
Impairment of financial assets
The Group undertook a review of trade receivables and other financial assets,
as applicable, and their expected credit losses (ECLs). The review considered
the macroeconomic outlook, customer credit quality, exposure at default, and
effect of payment deferral options as at the reporting date. The ECL
methodology and definition of default remained consistent with prior periods.
The model inputs, including forward-looking information, scenarios and
associated weightings, together with the determination of the staging of
exposures, were revised. The Group's financial assets consist of trade and
loans receivables and cash and cash equivalents. ECL on cash balances was
considered and calculated by reference to Moody's credit rating for each
financial institution, while ECL on trade and loans receivables was based on
past default experience and an assessment of the future economic environment.
More details are included in Note 38.
In respect of the Group's Asian licensees' business model an additional ECL
risk was identified due to increase in collection days and uncertainty over
timing of receipt of funds. This resulted in an additional provision for bad
debts of €15.4 million (2021: €7.5 million) recognised in the profit or
loss in H1 2022 with nothing further recognized in H2 2022.
Sun Bingo agreement
Background
The News UK contract commenced in 2016 and was originally set for a five-year
period to June 2021. Both parties have obligations under the contract, which
include News UK providing access to brand and related materials as well as
other services. Playtech has the primary responsibility for the operation of
the arrangement, but both parties have contractual responsibilities.
The related brands are used in Playtech's B2C service, where the Group acts as
the principal, meaning that in the Group's consolidated statement of
comprehensive income:
• revenue from B2C customers is recognised as income; and
• the fees paid to News UK for use of the brands are an expense as
they are effectively a supplier.
In the original contract, the fees payable were subject to a predetermined
annual minimum guarantee (MG) which Playtech had to pay to News UK.
During the period from 2016 to 2018, performance was not in line with
expectations, and as such, the MG made this operation significantly loss
making for the Group. This opened the negotiations with News UK for certain
amendments to the contract, which were agreed and signed in February 2019 as
follows:
• the MG was still payable up until the end of the original contract
period, being June 2021, with no MG payable after that; and
• the contract term was extended to permit Playtech access to News
UK's brands and other related materials and other services, for a longer
period, to allow Playtech to recover its MG payments and to make a commercial
return as was always envisaged. The term of the contract was extended to end
at the earlier of: a) five years from the date when Playtech had fully
recovered all MG payments made; or b) 15 years from the renegotiation (i.e.
June 2036).
Judgements made on recognition and measurement
The annual MG paid to News UK was recognised in Playtech's profit or loss up
until February 2019, essentially being expensed over the original term of the
contract. However, from the point at which the amended contract became
effective, the timing of the MG paid (being based on the original terms) no
longer reflected the period over which Playtech was consuming the use of the
News UK brands and other related services from them. As such, a prepayment was
recorded to reflect the amount that had been paid, as at each period end,
which related to the future use of the brands and services. IFRS do not have a
specific standard that deals with accounting for prepayments; however, the
asset recognised as a prepayment is in accordance with IAS 1 Presentation of
Financial Statements.
At the commencement of the agreement and on renegotiation of the contract, the
Directors considered whether the nature of the arrangement gave rise to any
intangible assets. At contract inception the Directors concluded that there
were no such assets to recognise as both parties had contractual obligations
under the agreement to deliver services, as explained above. Post the contract
renegotiation, the amounts to be paid in the remainder of the initial period
were considered to be advanced payments in respect of amounts to be earned by
News UK over the remainder of the extended contract period. Consequently, the
Directors did not believe that there was a fundamental change in the nature of
the arrangements and it was considered most appropriate to categorise the
amounts paid as operating expense prepayments.
As noted above, the term of this renegotiated contract is dependent on the
future profitability of the contract, and it was expected that the future
profitability would mean the contract would finish before the end of the fixed
term period. For this reason, it was considered appropriate that the
prepayment recognised should be released to the profit or loss in line with
this expected profitability, rather than on a straight‑line basis.
The amounts held in non-current and current assets of €63.4 million and
€3.6 million in Notes 21 and 23, respectively, are the difference between
the MG actually paid to News UK from February 2019 to June 2021 and the
amounts recognised in the Group's profit or loss from February 2019 to
December 2022.
There is always a risk with any budgeting process that the plan may not be
realised. This risk increases the longer the period for which the budget
covers and in this instance the period is potentially up to 15 years. When
producing the budget management applies reasonable assumptions based on known
factors, but sometimes and outside of management's control, these factors may
vary. However, management also reviews these forecasts at each reporting
period and more regularly internally and adjusts the expense released
accordingly. Based on the most recent forecasts and current profitability and
the fact that the Group had been running the operation since 2016 and
therefore has significant experience of the level of profitability that can be
derived from the operation, it is confident that the performance of the
business will allow the full recovery of this asset, before the contract ends.
Calculation of legal provisions
The Group ascertains a liability in the presence of legal disputes or ongoing
lawsuits when it believes it is probable that a financial outlay will take
place and when the amount of the losses can be reasonably estimated. The Group
is subject to lawsuits regarding complex legal problems, which are subject to
a differing degree of uncertainty (also due to a complex legislative
framework), including the facts and the circumstances inherent to each case,
the jurisdiction and the different laws applicable. Given the uncertainties
inherent to these problems, it is difficult to predict with certainty the
outlay which will derive from these disputes and it is therefore possible that
the value of the provisions for legal proceedings and disputes may vary
depending on future developments in the proceedings underway. The Group
monitors the status of the disputes underway and consults with its legal
advisers and experts on legal and tax-related matters. More details are
included in Note 29.
Measurement of fair values of equity investments and equity call options
The Group's equity investments and, where applicable (based on the judgements
applied above), equity call options held by the Group, are measured at fair
value for financial reporting purposes. The Group has an established control
framework with respect to the measurement of fair value.
In estimating the fair value of an asset and liability, the Group uses
market-observable data to the extent it is available. Where level 1 inputs are
not available, the Group engages third party qualified valuers to perform the
valuation. The Group works closely with the qualified valuers to establish the
appropriate valuation techniques and inputs to the model.
As mentioned in Note 20, the Group has:
• Investments in listed securities where the fair values of these
equity shares are determined by reference to published price quotations in an
active market
• Equity investments in entities that are not listed, accounted at
fair value through profit or loss under IFRS 9
• Derivative financial assets (call options in instruments
containing potential voting rights), which are accounted at fair value through
profit or loss under IFRS 9
The fair value of the equity investments that are not listed and of the
derivative financial assets, rely on non-observable inputs that require a
higher level of management judgement to calculate a fair value than those
based wholly on observable inputs. Valuation techniques are used to calculate
fair values include comparisons with similar financial instruments for which
market observable prices exist, discounted cash flow analysis and other
valuation techniques commonly used by market participants. Upon the use of DCF
method, the Group assumes that the expected cash flows are based on the
EBITDA.
The Group only uses models with unobservable inputs for the valuation of
certain unquoted equity investments. In these cases, estimates are made to
reflect uncertainties in fair values resulting from a lack of market data
inputs, for example, as a result of illiquidity in the market. Inputs into
valuations based on unobservable data are inherently uncertain because there
is little or no current market data available from which to determine the
level at which an arm's length transaction would occur under normal business
conditions. Unobservable inputs are determined based on the best information
available. Further details on the fair value of assets are disclosed in Note
20, which includes a significant judgement relating to the public announcement
made by the Group on 6 February 2023 where Playech plc is seeking a
declaration from the English Courts to obtain clarification on a point of
disagreement between the Group and Caliplay.
The following table shows the carrying amount and fair value of non-current
assets, as disclosed in Note 20, including their levels in the fair value
hierarchy.
Carrying amount Fair value
2022 Level 1 Level 2 Level 3
€'m €'m €'m €'m
Non-current assets
Other investments (Note 20B) 9.2 1.4 - 7.8
Derivative financial assets (Note 20C) 636.4 - - 636.4
645.6 1.4 - 644.2
Carrying amount Fair value
2021 Level 1 Level 2 Level 3
€'m €'m €'m €'m
Non-current assets
Other investments (Note 20B) 8.1 1.6 - 6.5
Derivative financial assets (Note 20C) 622.2 - - 622.2
630.3 1.6 - 628.7
Note 7 - Segment information
The Group's reportable segments are strategic business units that offer
different products and services.
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision maker. The chief operating
decision maker has been identified as the management team including the Chief
Executive Officer and the Chief Financial Officer.
The operating segments identified are:
• B2B: including Casino, Services, Sport, Bingo, Poker and Other;
• B2C: including Snaitech, Sun Bingo and Other B2C and HAPPYBET; and
• Financial: including B2C and B2B CFD (discontinued operations).
The Group-wide profit measures are Adjusted EBITDA and Adjusted Profit (see
Note 10).
Year ended B2B Snaitech Sun Bingo and other B2C HAPPYBET Intercompany B2C Total B2C Intercompany Total Financial - Total
31 December 2022
€'m €'m €'m €'m €'m €'m €'m Gaming - discontinued €'m
continuing operations
operations €'m
€'m
Revenue 632.4 899.8 65.3 20.1 (2.1) 983.1 (13.7) 1,601.8 74.5 1,676.3
Adjusted EBITDA 160.2 254.2 2.0 (10.8) - 245.4 - 405.6 33.8 439.4
Adjusted Profit attributable to the owners of the Company 43.8 127.4 1.1 (11.8) - 116.7 - 160.5 41.2 201.7
Total assets 1,853.2 1,070.4 89.7 9.1 - 1,169.2 - 3,022.4 - 3,022.4
Total liabilities 697.2 603.2 14.6 6.4 - 624.2 - 1,321.4 - 1,321.4
Year ended B2B Snaitech Sun Bingo and other B2C HAPPYBET Intercompany B2C Total B2C Intercompany Total Financial Total
31 December 2021
Gaming discontinued
€'m continuing operations
€'m operations
€'m €'m €'m €'m €'m €'m €'m €'m
Revenue 554.3 584.7 61.9 18.2 (1.1) 663.7 (12.6) 1,205.4 46.6 1,252.0
Adjusted EBITDA 139.2 182.6 6.7 (11.4) - 177.9 - 317.1 (23.0) 294.1
Adjusted Profit/(Loss) attributable to the owners of the Company 45.9 83.2 10.3 (11.8) - 81.7 - 127.6 (13.8) 113.8
Total assets 1,911.1 1,154.7 92.9 6.2 - 1,253.8 - 3,164.9 487.4 3,652.3
Total liabilities 842.7 867.3 11.4 5.9 - 884.6 - 1,727.3 343.8 2,071.1
Geographical analysis of non-current assets
The Group's information about its non-current assets by location is detailed
below:
2022 2021
€'m €'m
Italy 746.1 755.5
UK 328.4 332.6
Austria 131.5 132.8
Alderney 75.9 100.0
Sweden 59.9 70.2
Gibraltar 27.9 37.7
Cyprus 22.0 25.6
Latvia 15.5 15.9
Australia 18.8 15.1
Ukraine 8.8 11.3
Estonia 7.8 9.4
British Virgin Islands 8.2 8.0
Rest of World 59.7 27.5
1,510.5 1,541.6
Note 8 - Discontinued operation
The results of the discontinued operations for the year are presented below:
2022 2021
Actual Adjusted Actual Adjusted
€'m €'m €'m €'m
Revenue 74.5 74.5 46.6 46.6
Distribution costs before depreciation and amortisation (34.9) (34.8) (56.9) (56.4)
Administrative expenses before depreciation and amortisation (13.3) (4.0) (15.9) (8.5)
Impairment of financial assets (1.9) (1.9) (4.7) (4.7)
EBITDA 24.4 33.8 (30.9) (23.0)
Reversal of impairment of asset held for sale - - 2.0 -
Finance income 11.6 11.6 12.0 12.0
Finance costs (0.5) (0.5) (0.9) (0.9)
Profit on disposal of discontinued operations (Note 25C/25B) 15.1 - 7.6 -
Profit/(loss) before taxation 50.6 44.9 (10.2) (11.9)
Tax expense (3.6) (3.7) (1.9) (1.9)
Profit/(loss) from discontinued operations, net of tax 47.0 41.2 (12.1) (13.8)
All of the profit from discontinued operations, net of tax in the year ended
31 December 2022 relates to the Financial segment, which was disposed during
the current year (refer to Note 25C). Included in the loss from discontinued
operations, net of tax, in the prior year is a profit on disposal of €7.6
million relating to the "YoYo" business, which was part of the Group's Casual
and Social Gaming business, all fully disposed during 2021. The remainder of
the 2021 results included in the loss from discontinued operations, net of
tax, all relate to the Financials segment.
The following tables provide a full reconciliation between adjusted and actual
results from discontinued operations:
For the year ended 31 December 2022 Revenue EBITDA Profit from
€'m €'m discontinued
operations
attributable to
the owners of the
Company
€'m
Reported as actual 74.5 24.4 47.0
Employee stock option expenses - 0.3 0.2
Professional fees1 - 9.1 9.1
Profit on disposal of discontinued operations (Note 25C) - - (15.1)
Adjusted measure 74.5 33.8 41.2
1On the completion of the transaction the break fee of US$8.8 million to the
Consortium that had previously agreed to acquire the Financial segment, as
announced in May 2021 was triggered and therefore paid. This is included in
professional fees.
For the year ended 31 December 2021 Revenue EBITDA Loss from
€'m €'m discontinued
operations
attributable to
the owners of the
Company
€'m
Reported as actual 46.6 (30.9) (12.1)
Employee stock option expenses - 0.8 0.8
Professional fees - 7.1 7.1
Reversal of impairment of asset held for sale (Note 25C) - - (2.0)
Profit on disposal of discontinued operations (Note 25B) - - (7.6)
Adjusted measure 46.6 (23.0) (13.8)
Earnings per share from discontinued operations
2022 2021
Actual Adjusted Actual Adjusted
Basic (cents) 15.7 13.7 (4.0) (4.6)
Diluted (cents) 15.1 13.2 (4.0) (4.6)
The net cash flows incurred by the Financial segment in the period are as
follows:
2022 2021
€'m €'m
Operating 28.2 (2.6)
Investing (3.8) (6.9)
Financing (1.1) (2.2)
Net cash inflow/(outflow) 23.3 (11.7)
The above net cash inflows/(outflow) does not include the disposal proceeds.
Note 9 - Revenue from contracts with customers
The Group has disaggregated revenue into various categories in the following
table which is intended to:
• depict how the nature, amount, timing and uncertainty of revenue
and cash flows are affected by recognition date; and
• enable users to understand the relationship with revenue segment
information provided in the segmental information note.
Set out below is the disaggregation of the Group's revenue:
Revenue analysis by geographical location of licensee, product type, timing of
transfer of performance obligations and regulated vs unregulated by
geographical major markets
The revenues from B2B (consisting of licensee fee, fixed-fee income, revenue
received from the sale of hardware, cost-based revenue and additional B2B
services fee), B2C and Financials are described in Note 5D.
For the year ended 31 December 2022
Primary geographic markets B2B B2C Intercompany Total Gaming Financial Total
€'m €'m €'m - continuing - discontinued €'m
operations operations
€'m €'m
Italy 35.1 897.7 (10.0) 922.8 1.3 924.1
UK 127.0 65.2 (3.7) 188.5 34.1 222.6
Mexico 123.7 - - 123.7 0.3 124.0
Malta 55.7 - - 55.7 0.1 55.8
Philippines 51.2 - - 51.2 - 51.2
Spain 27.7 - - 27.7 1.0 28.7
Gibraltar 24.9 - - 24.9 - 24.9
Poland 21.9 - - 21.9 0.1 22.0
Netherlands 20.2 - - 20.2 1.0 21.2
Greece 20.5 - - 20.5 0.3 20.8
Curacao 20.2 - - 20.2 - 20.2
Germany 0.8 16.8 - 17.6 1.0 18.6
British Virgin Islands - - - - 16.0 16.0
Ireland 10.0 - - 10.0 0.3 10.3
Colombia 9.1 - - 9.1 0.4 9.5
Rest of World 84.4 3.4 - 87.8 18.6 106.4
632.4 983.1 (13.7) 1,601.8 74.5 1,676.3
Product type B2B B2C Intercompany Total Gaming Financial Total
€'m €'m €'m - continuing - discontinued €'m
operations operations
€'m €'m
B2B licensee fee 451.7 - - 451.7 - 451.7
B2B fixed-fee income 42.1 - - 42.1 - 42.1
B2B costs-based revenue 59.9 - - 59.9 - 59.9
B2B revenue received from the sale of hardware 13.2 - - 13.2 - 13.2
Additional B2B services fee 65.5 - - 65.5 - 65.5
Total B2B 632.4 - - 632.4 - 632.4
Snaitech - 899.8 - 899.8 - 899.8
Sun Bingo and Other B2C - 65.3 - 65.3 - 65.3
HAPPYBET - 20.1 - 20.1 - 20.1
Intercompany - (2.1) - (2.1) - (2.1)
Total B2C - 983.1 - 983.1 - 983.1
Intercompany - - (13.7) (13.7) - (13.7)
Total intercompany - - (13.7) (13.7) - (13.7)
Financial - - - - 74.5 74.5
632.4 983.1 (13.7) 1,601.8 74.5 1,676.3
Timing of transfer of performance obligations B2B B2C Intercompany Total Gaming Financial Total
€'m €'m* €'m - continuing - discontinued €'m
operations operations
€'m €'m
Recognised over time 619.2 28.4 (13.7) 633.9 74.5 708.4
Recognised at the point 13.2 954.7 - 967.9 - 967.9
in time
632.4 983.1 (13.7) 1,601.8 74.5 1,676.3
*B2C revenue recognised at the point in time is recorded under IFRS9.
2022
€'m
Regulated - Americas 144.7
Regulated - Europe (excluding UK) 184.6
Regulated - UK 126.7
Regulated - Rest of World 5.6
Total regulated B2B revenue 461.6
Unregulated excluding Asia 103.6
Total core B2B revenue 565.2
Asia 67.2
Total B2B Gambling revenue 632.4
For the year ended 31 December 2021
Primary geographic markets B2B B2C Intercompany Total Gaming Financial Total
€'m €'m €'m - continuing - discontinued €'m
operations operations
€'m €'m
Italy 30.7 583.6 (7.6) 606.7 1.2 607.9
UK 132.2 61.9 (4.1) 190.0 14.1 204.1
Mexico 90.3 - - 90.3 0.3 90.6
Philippines 67.6 - - 67.6 - 67.6
Malta 52.3 - - 52.3 0.5 52.8
Gibraltar 27.9 - - 27.9 - 27.9
Spain 21.7 - - 21.7 1.7 23.4
Germany 1.2 16.4 (0.8) 16.8 2.3 19.1
Greece 16.8 - - 16.8 1.5 18.3
Poland 14.4 - - 14.4 0.1 14.5
Curacao 12.2 - - 12.2 0.1 12.3
Netherlands 7.2 - - 7.2 3.2 10.4
Colombia 8.5 - - 8.5 (0.2) 8.3
Romania 5.7 - - 5.7 0.2 5.9
Norway 5.4 - - 5.4 0.3 5.7
Rest of World 60.2 1.8 (0.1) 61.9 21.3 83.2
554.3 663.7 (12.6) 1,205.4 46.6 1,252.0
Product type B2B B2C Intercompany Total Gaming Financial Total
€'m €'m €'m - continuing - discontinued €'m
operations operations
€'m €'m
Product type B2B B2C Intercompany Total Gaming Financial Total
€'m €'m €'m - continuing - discontinued €'m
operations operations
€'m €'m
B2B licensee fee 404.0 - - 404.0 - 404.0
B2B fixed-fee income 48.5 - - 48.5 - 48.5
B2B costs-based revenue 45.3 - - 45.3 - 45.3
B2B revenue received from the sale of hardware 7.1 - - 7.1 - 7.1
Additional B2B services fee 49.4 - - 49.4 - 49.4
Total B2B 554.3 - - 554.3 - 554.3
Snaitech - 584.7 - 584.7 - 584.7
Sun Bingo and Other B2C - 61.9 - 61.9 - 61.9
HAPPYBET - 18.2 - 18.2 - 18.2
Intercompany - (1.1) - (1.1) - (1.1)
Total B2C - 663.7 - 663.7 - 663.7
Intercompany - - (12.6) (12.6) - (12.6)
Total intercompany - - (12.6) (12.6) - (12.6)
Financial - - - - 46.6 46.6
554.3 663.7 (12.6) 1,205.4 46.6 1,252.0
Timing of transfer of performance obligations B2B B2C Intercompany Total Gaming Financial Total
€'m €'m* €'m - continuing - discontinued €'m
operations operations
€'m €'m
Recognised over time 547.2 22.2 (12.6) 556.8 46.6 603.4
Recognised at the point 7.1 641.5 - 648.6 - 648.6
in time
554.3 663.7 (12.6) 1,205.4 46.6 1,252.0
*B2C revenue recognised at the point in time is recorded under IFRS9.
2021
€'m
Regulated - Americas 101.3
Regulated - Europe (excluding UK) 141.4
Regulated - UK 132.1
Regulated - Rest of World 3.9
Total regulated B2B revenue 378.7
Unregulated excluding Asia 93.7
Total core B2B revenue 472.4
Asia 81.9
Total B2B Gambling revenue 554.3
There were no changes in the Group's revenue measurement policies and
procedures in 2021 and 2022. The vast majority of the Group's B2B contracts
are for the delivery of services within the next 12 months. Furthermore, no
individual licensee in 2022 and 2021 accounted for more than 10% of the total
gaming revenue and the total revenue of the Group.
The Group's contract liabilities, in other words deferred income, primarily
include advance payment for hardware and services and also include certain
fixed fees paid by the licensee in the beginning of the contract. Deferred
income as at 31 December 2022 was €6.0 million (2021: €8.1 million).
The movement in contract liabilities during the year was the following:
2022 2021
€'m €'m
Balance at 1 January 8.1 11.8
Recognised during the year 8.4 7.0
Realised in the profit or loss (10.5) (10.7)
Balance at 31 December 6.0 8.1
Note 10 - Adjusted items
Management regularly uses adjusted financial measures internally to
understand, manage and evaluate the business and make operating decisions.
These adjusted measures are among the primary factors management uses in
planning for and forecasting future periods. The primary adjusted financial
measures are Adjusted EBITDA and Adjusted Profit, which management considers
are relevant in understanding the Group's financial performance.
The definitions of adjusted items and underlying adjusted results are
disclosed in Note 5.
As these are not a defined performance measure under IFRS, the Group's
definition of adjusted items may not be comparable with similarly titled
performance measures or disclosures by other entities.
The following tables provide a full reconciliation between adjusted and actual
results from continuing operations:
For the year ended 31 December 2022 Revenue EBITDA - EBITDA - EBITDA (Loss)/Profit - Profit- Profit Profit
€'m B2B B2C €'m B2B B2C from before
€'m €'m €'m €'m continuing tax from
operations attributable continuing
to the operations
owners €'m
of the
Company
€'m
Reported as actual 1,601.8 138.4 234.1 372.5 (42.8) 83.4 40.6 95.6
Employee stock option expenses1 - 7.1 0.9 8.0 7.1 0.9 8.0 8.0
Professional fees2 - 15.7 - 15.7 15.7 - 15.7 15.7
Fair value change and finance cost on contingent consideration and redemption - (4.3) - (4.3) (4.2) - (4.2) (4.2)
liability3
Ukraine employee support costs4 - 3.3 - 3.3 3.3 - 3.3 3.3
Onerous contract5 - - 10.4 10.4 - 10.4 10.4 10.4
Fair value change of equity instruments6 - - - - 0.3 - 0.3 0.3
Fair value change of derivative financial assets6 - - - - (6.0) - (6.0) (6.0)
Fair value loss on convertible loans(7) - - - - 3.0 - 3.0 3.0
Amortisation of intangibles on acquisitions(8) - - - - 13.2 28.8 42.0 42.0
Impairment of tangible and intangible assets(9) - - - - 38.7 (0.2) 38.5 38.5
Loss on disposal of subsidiary(10) - - - - 8.8 - 8.8 8.8
Deferred tax on acquisitions8 - - - - (1.7) (6.6) (8.3) -
Tax related to uncertain positions11 - - - - 8.4 - 8.4 -
Adjusted measure 1,601.8 160.2 245.4 405.6 43.8 116.7 160.5 215.4
Constant currency impact (19.8) - - (17.9) - - (27.1) -
Underlying adjusted result on constant currency basis 1,582.0 - - 387.7 - - 133.4 -
1 Employee stock option expenses relate to non-cash expenses of the
Group and differ from year to year based on share price and the number of
options granted.
2 The vast majority of the professional fees relate to the potential
sale of the Group. These expenses are not considered ongoing costs of
operations and therefore are excluded.
3 Fair value change and finance costs on redemption liability related
to the acquisition of Statscore. These expenses are not considered ongoing
costs of operations and therefore are excluded.
4 Financial support provided to the employees based in Ukraine. These
expenses are not considered ongoing costs of operations and therefore are
excluded.
5 One off payment to terminate an onerous contract with a former
service provider made in H1 2022. This expense is not considered an ongoing
cost of operations and therefore is excluded.
6 Fair value change of equity instruments and derivative financial
assets. These are excluded from the results as they relate to unrealised
profit/loss.
7 Fair value loss on convertible loans relates to Gameco. This write
off is not considered an ongoing cost of operations and is excluded. Refer to
Note 20B.
8 Amortisation and deferred tax on intangible assets acquired through
business combinations. Costs directly related to acquisitions are not
considered ongoing costs of operations and therefore are excluded.
9 Impairment of tangible and intangible assets mainly relates to the
impairment of Eyecon €13.6 million, Quickspin €7.0 million, Bingo VF
€12.5 million and IGS €5.6 million. Refer to Note 19.
10 Loss arising on the disposal of Statscore, previously a subsidiary of
the Group. Even though, Statscore was a separate CGU which was tested for
impairment biannually up to the date of disposal, it didn't meet the criteria
of IFRS5 Non-current Assets Held for Sale and Discontinued Operations of being
a separate major line of business for the Group. As such it was not presented
separately as discontinued operations as at 31 December 2022. This loss is not
considered an ongoing cost of operations and therefore is excluded. Refer to
Note 20A.
11 Change in estimates related to uncertain overseas tax positions in
respect of prior years.
For the year ended 31 December 2021 Revenue EBITDA - EBITDA - EBITDA Profit - Profit- Profit Profit
€'m B2B B2C €'m B2B B2C from before
€'m €'m €'m €'m continuing tax from
operations continuing
attributable operations
to the €'m
owners
of the
Company
€'m
Reported as actual 1,205.4 105.5 175.8 281.3 629.2 57.5 686.7 605.0
Employee stock option expenses1 - 11.5 1.6 13.1 11.5 1.6 13.1 13.1
Professional fees2 - 13.9 0.5 14.4 13.9 0.5 14.4 14.4
Fair value change and finance cost on redemption liability3 - 1.3 - 1.3 1.4 - 1.4 1.4
Charitable donation4 - 3.5 - 3.5 3.5 - 3.5 3.5
Provision for other receivables5 - 1.2 - 1.2 1.2 - 1.2 1.2
Settlement of legal matter6 - 2.3 - 2.3 2.3 - 2.3 2.3
Fair value change and finance cost on contingent consideration3 - - - - 4.4 0.3 4.7 4.7
Fair value change of equity instruments7 - - - - 1.6 - 1.6 1.6
Fair value change of derivative financial assets7 - - - - (583.2) - (583.2) (583.2)
Amortisation of intangibles on acquisitions8 - - - - 16.9 17.9 34.8 34.8
Impairment of tangible and intangible assets9 - - - - 9.3 12.3 21.6 21.6
Deferred tax on acquisitions8 - - - - (2.5) (6.6) (9.1) -
Deferred tax on asset held for sale10 - - - - - (1.8) (1.8) -
Deferred tax11 - - - - (63.6) - (63.6) -
Adjusted measure 1,205.4 139.2 177.9 317.1 45.9 81.7 127.6 120.4
Constant currency impact - - - - - - 0.5 -
Underlying adjusted result on constant currency basis 1,205.4 - - 317.1 - - 128.1 -
1 Employee stock option expenses relate to non-cash expenses of the
Group and differ from year to year based on share price and the number of
options granted.
2 The majority of the professional fees equally relate to: (a) work
completed in relation to the potential exercise of Playtech M&A Call
Option (Note 20A); and (b) the potential sale of the Group. These expenses are
not considered ongoing costs of operations and therefore are excluded.
3 Fair value change and finance costs on redemption liability and
contingent consideration related to the acquisition of Statscore, Eyecon and
Wplay. These expenses are not considered ongoing costs of operations.
4 In 2020, the Board of Directors approved a £3.0 million COVID-19
Recovery and Resilience Fund which was paid in the year ended 31 December
2021. This is a one-off payment and therefore is excluded.
5 Provision against loan receivables that do not relate to the
ordinary operations of the Group.
6 Settlement of legal matter which is not considered a recurring cost
and therefore is excluded.
7 Fair value change of equity instruments and derivative financial
assets. These are excluded from the results as they relate to unrealised
profit/loss.
8 Amortisation and deferred tax on intangible assets acquired through
business combinations. Costs directly related to acquisitions are not
considered ongoing costs of operations and therefore are excluded.
9 Impairment of tangible and intangible assets mainly relates to the
impairment of land before the classification as held for sale (Refer to Note
25A) and impairment of Bingo VF and several capitalization costs (Refer to
Note 12).
10 Deferred tax recognised in respect of the assets classified as held for
sale during the year. Please refer to Note 25A for further details.
11 The recognition of €63.6 million of deferred tax asset relates to the
special project the Group completed on 1 January 2021 to move the tax
residency of a number of companies from the Isle of Man to the UK.
The following table provides a full reconciliation between adjusted and actual
tax from continuing operations:
2022 2021
€'m €'m
Tax on profit or loss for the year 55.0 (81.7)
Adjusted for:
Deferred tax on intangible assets on acquisitions 8.3 9.1
Deferred tax (refer to footnote 11 above) - 63.6
Tax on disposal of asset held for sale - 1.8
Tax related to uncertain positions (8.4) -
Adjusted tax 54.9 (7.2)
Note 11 - Auditor's remuneration
2022 2021
€'m €'m
Group audit and Parent Company (BDO) 2.3 1.5
Audit of subsidiaries (BDO) 1.4 1.4
Audit of subsidiaries (non-BDO) 0.3 0.3
Total audit fees 4.0 3.2
Non-audit services provided by parent Company auditor and its international
member firms
Other non-audit services 0.9 0.5
Total non-audit fees 0.9 0.5
Note 12 - Impairment of tangible and intangible assets
2022 2021
€'m €'m
(Reversal of)/Impairment of property, plant and equipment (Note 17) (0.2) 12.5
Impairment of intangible assets (Note 19) 38.7 9.1
38.5 21.6
Impairment of intangibles assets for 2022 relates to the impairment of Eyecon
€13.6 million, Quickspin €7.0 million, Bingo VF €12.5 million and IGS
€5.6 million. Refer to Note 19.
Of the total impairment of property, plant and equipment of €12.5 million in
2021, an amount of €12.3 million relates to land classified as held for
sale. Refer to Note 25A.
Out of the total of €9.1 million in 2021, an amount of €6.4 million
relates to the impairment of Bingo VF. The remaining relates to the impairment
of capitalised development costs. Based on the assessment performed at the
reporting date, several projects will not be recoverable.
Note 13 - Finance income and costs
A. Finance income
2022 2021
€'m €'m
Interest income 2.4 1.1
Net foreign exchange gain 9.2 -
11.6 1.1
B. Finance costs
Net foreign exchange loss - (0.5)
Interest on bonds (35.7) (36.7)
Interest on lease liability (5.5) (5.3)
Interest on loans and borrowings and other (6.0) (5.6)
Bank facility fees (7.0) (1.8)
Bank charges (14.1) (13.0)
Movement in contingent consideration and redemption liability (0.1) (4.8)
Fair value loss on convertible loans (3.0) -
Expected credit loss on loans receivable (1.6) -
(73.0) (67.7)
Net finance costs (61.4) (66.6)
Note 14 - Tax expense/(credit)
2022 2021
€'m €'m
Current tax expense
Income tax expense for the current year 19.3 10.8
Income tax relating to prior years 9.1 3.4
Withholding tax 0.3 0.4
Total current tax expense 28.7 14.6
Deferred tax
Origination and reversal of temporary differences 23.5 (78.8)
Deferred tax movements relating to prior years 8.1 -
Impact of changes in tax rates (5.3) (17.5)
Total deferred tax expense/(credit) 26.3 (96.3)
Total tax expense/(credit) from continuing operations 55.0 (81.7)
A reconciliation of the reported income tax charge of €55.0 million (2021:
tax credit of €81.7 million) applicable to profit before tax of €95.6
million (2021: profit before tax of €605.0 million) at the UK statutory
income tax rate of 19% is as follows:
2022 2021
€'m €'m
Profit for the year 40.6 686.7
Income tax expense/(credit) 55.0 (81.7)
Profit before income tax 95.6 605.0
Tax using the Company's domestic tax rate (19% in 2021 and 2022) 18.2 115.0
Tax effect of:
Non-taxable fair value movements on call options (1.1) (110.9)
Tax exempt income (4.3) (7.5)
Non-deductible expenses 19.8 2.3
Deferred tax asset recognised on Group restructuring (5.4) (75.2)
Difference in tax rates applied in overseas jurisdictions 13.8 (3.6)
Impact of changes in tax rates (5.3) (5.5)
Increase in unrecognised tax losses 2.1 2.3
Adjustment in respect of previous years
- Deferred tax asset 8.0 (2.0)
- Tax asset not provided for 9.2 3.4
Total tax expense/(credit) 55.0 (81.7)
Reported tax charge/(credit)
A reported tax charge of €55.0 million from continuing operations arises on
a profit before income tax of €95.6 million compared to an expected charge
of €18.2 million (2021: a tax credit of €81.7 million on profit before
income tax of €605.0 million). The reported tax expense includes adjustments
in respect of prior years relating to current tax and deferred tax. The prior
year adjustment in respect of current tax of €9.2 million includes an
additional provision of €8.4 million relating to uncertain overseas tax
positions in respect of prior years. The prior year adjustment relating to
deferred tax of €8.1 million relates to the overprovision of deferred tax
assets and an underprovision for deferred tax liabilities in respect of
goodwill.
The Group's effective tax rate for the current period is 39.5%. The key
reasons for the differences are:
· Profits of subsidiaries located in territories where the tax rate
is higher than the UK statutory tax rate, this includes Snaitech profits in
Italy.
· Expenses not deductible for tax purposes including professional
fees, impairment of intangible assets and loss on disposal of subsidiaries.
Changes in tax rates and factors affecting the future tax charge
The most significant elements of the Group's income arise in the UK where the
tax rate for the current period is 19%. It should be noted that the UK tax
rate is set to increase to 25% from 1 April 2023. As such, the UK statutory
headline rate of corporation tax is the basis on which the applicable tax rate
is computed.
In December 2022, European Union (EU) Member States unanimously adopted the
Minimum Tax Directive via written procedure ensuring a global minimum level of
taxation (set at 15%) for multinational enterprise groups. GLoBE Model rules
were released in March 2022 and broadly EU Member States have until 31
December 2023 to transpose the Directive into national legislation with the
rules to be applicable for fiscal years starting on or after 31 December 2023.
None of the countries in which the Group operates has enacted or substantively
enacted Pillar Two Model Rules as part of their national laws as of 31
December 2022. Whilst consultation on a number of areas remains ongoing, the
Group will continue to closely monitor developments.
Deferred Tax
The deferred tax asset and liability are measured at the enacted or
substantively enacted tax rates of the respective territories which are
expected to apply to the year in which the asset is realised or the liability
is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the balance sheet date. The deferred tax balances
within the financial statements reflect the increase in the UK's main
corporation tax rate from 19% to 25% from 1 April 2023.
Note 15 - Earnings per share
The calculation of basic earnings per share (EPS) has been based on the
following profit attributable to ordinary shareholders and weighted average
number of ordinary shares outstanding.
2022 2021
Actual Adjusted Actual Adjusted
€'m €'m €'m €'m
Profit attributable to owners of the Company 87.6 201.7 674.6 113.8
Basic (cents) 29.2 67.2 226.3 38.2
Diluted (cents) 28.1 64.7 216.2 36.5
2022 2021
Actual Adjusted Actual Adjusted
€'m €'m €'m €'m
Profit attributable to the owners of the Company from continuing operations 40.6 160.5 686.7 127.6
Basic (cents) 13.5 53.5 230.3 42.8
Diluted (cents) 13.0 51.5 220.1 40.9
2022 2021
Actual Adjusted Actual Adjusted
Number Number Number Number
Denominator - basic
Weighted average number of equity shares 300,059,994 300,059,994 298,229,795 298,229,795
Denominator - diluted
Weighted average number of equity shares 300,059,994 300,059,994 298,229,795 298,229,795
Weighted average number of option shares 11,792,385 11,792,385 13,882,774 13,882,774
Weighted average number of shares 311,852,379 311,852,379 312,112,569 312,112,569
The calculation of diluted EPS has been based on the above profit attributable
to ordinary shareholders and weighted average number of ordinary shares
outstanding after adjustment for the effects of all dilutive potential
ordinary shares. The effects of the anti-dilutive potential ordinary shares
are ignored in calculating diluted EPS.
EPS for discontinued operations is disclosed in Note 8.
Note 16 - Employee benefits
Total staff costs comprise the following:
2022 2021
€'m €'m
Salaries and personnel-related costs 427.0 367.4
Cash-settled share-based payments (0.3) 3.4
Equity-settled share-based payments 8.3 13.8
435.0 384.6
Average number of personnel:
Distribution 6,269 6,259
General and administration 538 650
6,807 6,909
The Group has the following employee share option plans (ESOP) for the
granting of non-transferable options to certain employees:
• the GTS 2010 Company Share Option Plan (CSOP). Options granted
under these plan vest on the first day on which they become exercisable which
is three years after grant date;
• the Long Term Incentive Plan 2012 (LTIP). Awards (options,
conditional awards, cash-settled awards, or a forfeitable share award) granted
under this plan vest on the first day on which they become exercisable which
is typically between 18 and 36 months after grant date; and
• the Long Term Incentive Plan 2022 (LTIP22). Awards (options,
conditional Share awards, Restricted shares, cash-settled awards) granted
under this plan vest on the first day on which they become exercisable which
is typically after 36 months.
The overall term of the ESOP is ten years. These options are settled in equity
or cash once exercised. Option prices are denominated in GBP.
During 2022 the Group granted the following under its LTIP22:
• 492,765 nil cost awards subject to EPS growth, relative total
shareholder return (TSR) against constituents of the FTSE 250 but excluding
the investment trusts index, and relative TSR against a sector comparator
group of peer companies. The fair value per share according to the Monte Carlo
simulation model is between £2.71 and £4.58. Inputs used were as follows:
Expected life (years) Share price at Dividend Risk Projection Volatility
grant date yield free rate period
(years)
3 £4.582 Nil 2.34% 3 41%-49%
There were no grants during 2021.
At 31 December 2022 and 2021 the following options were outstanding:
2022 2021
Number Number
Shares vested on 1 March 2018 at nil cost 72,596 102,844
Shares vested between 1 September 2016 and 1 March 2018 at nil cost 20,890 23,112
Shares vested on 1 March 2019 at nil cost 21,820 31,972
Shares vested between 1 September 2017 and 1 March 2019 at nil cost 39,021 50,742
Shares vested on 21 December 2019 at nil cost 9,779 12,870
Shares vested between 1 September 2017 and 1 April 2019 at nil cost - 21,187
Shares vested on 1 March 2020 at nil cost 98,444 112,369
Shares vested on 1 March 2021 at nil cost 1,047,782 1,347,475
Shares vested between 1 March 2022 and 1 August 2022 at nil cost 2,218,735 3,499,954
Shares will vest by 19 December 2024 at nil cost 1,900,000 1,900,000
Shares will vest between 1 March 2023 and 26 October 2023 at nil cost 6,392,073 6,780,249
Shares will vest by August 18 2025 at nil cost 351,724 -
12,172,864 13,882,774
The total number of shares exercisable as of 31 December 2022 is 4,729,067
(2021: 2,402,571).
The total number of outstanding shares that will be cash settled is 561,385
(2021: 630,923). The total liability outstanding for the cash-settled options
is €3.1 million (2021: €3.8 million).
The following table illustrates the number and weighted average exercise
prices of share options for the ESOP.
2022 2021 2022 2021
Number Number Weighted average Weighted average
of options of options exercise price exercise price
Outstanding at the beginning of the year 13,882,774 16,886,778 - £0.03
Granted 492,765 - - -
Forfeited (408,237) (1,130,697) - -
Exercised (1,794,438) (1,873,307) - £0.05
Outstanding at the end of the year 12,172,864 13,882,774 - -
Included in the number of options exercised during the year are 50,448 options
(2021: 232,796) which were cash settled.
The weighted average share price at the date of exercise of options was
£5.302 (2021: £6.506).
Share options outstanding at the end of the year have the following exercise
prices:
Expiry date Exercise price 2022 2021
Number Number
21 December 2025 Nil 93,486 125,956
Between 21 December 2026 and 31 December 2026 Nil 70,620 116,771
Between 1 March 2027 and 28 June 2027 Nil 98,444 112,369
23 July 2028 Nil 1,044,771 1,344,464
Between 27 February 2029 and 19 December 2029 Nil 4,121,746 5,402,965
Between 17 July 2030 and 26 October 2030 Nil 6,392,073 6,780,249
August 18 2032 Nil 351,724 -
12,172,864 13,882,774
Note 17 - Property, plant and equipment
Computer Gaming Office furniture Buildings, Total
software machines and equipment leasehold €'m
and hardware €'m €'m buildings and
€'m improvements
€'m
Cost
At 1 January 2022 132.1 96.2 41.1 270.1 539.5
Additions 19.8 15.8 8.8 9.2 53.6
Disposals (6.3) (2.3) (2.0) (3.8) (14.4)
Reclassifications (0.3) - - 0.3 -
At 31 December 2022 145.3 109.7 47.9 275.8 578.7
Accumulated depreciation and impairment losses
At 1 January 2022 95.3 61.4 24.5 28.6 209.8
Charge 16.0 14.5 5.4 5.6 41.5
Impairment loss - - (0.2) - (0.2)
Disposals (6.1) (2.0) (1.9) (3.8) (13.8)
At 31 December 2022 105.2 73.9 27.8 30.4 237.3
Net book value
At 31 December 2022 40.1 35.8 20.1 245.4 341.4
At 1 January 2022 36.8 34.8 16.6 241.5 329.7
Computer Gaming Office furniture Buildings, Total
software machines and equipment leasehold €'m
and hardware €'m €'m buildings and
€'m improvements
€'m
Cost
At 1 January 2021 115.1 86.6 34.7 302.8 539.2
Additions 24.2 10.7 7.8 6.0 48.7
Disposals (7.2) (1.1) (1.4) (2.9) (12.6)
Transfer to held for sale - - - (35.8) (35.8)
At 31 December 2021 132.1 96.2 41.1 270.1 539.5
Accumulated depreciation and impairment losses
At 1 January 2021 87.5 44.4 21.0 29.2 182.1
Charge 14.8 17.7 4.8 5.6 42.9
Impairment loss - - - 12.5 12.5
Disposals (7.0) (0.7) (1.3) (2.9) (11.9)
Transfer to held for sale - - - (15.8) (15.8)
At 31 December 2021 95.3 61.4 24.5 28.6 209.8
Net book value
At 31 December 2021 36.8 34.8 16.6 241.5 329.7
At 1 January 2021 27.6 42.2 13.7 273.6 357.1
Note 18 - Leases
Set out below are the carrying amounts of right of use assets recognised and
the movements during the year:
Office leases Hosting Total
€'m €'m €'m
At 1 January 2022 67.8 6.0 73.8
Additions/modifications 7.4 12.1 19.5
Disposal of subsidiary (0.2) - (0.2)
Amortisation charge (14.5) (7.0) (21.5)
At 31 December 2022 60.5 11.1 71.6
Office leases Hosting Total
€'m €'m €'m
At 1 January 2021 60.1 6.6 66.7
Additions/modifications 22.5 4.8 27.3
Amortisation charge (14.8) (5.4) (20.2)
At 31 December 2021 67.8 6.0 73.8
Set out below are the carrying amounts of lease liabilities and the movements
during the year:
2022 2021
€'m €'m
At 1 January 90.1 82.5
Additions/modifications 18.8 26.1
Disposal of subsidiary (0.2) -
Accretion of interest 5.5 5.3
Payments (27.1) (26.2)
Effect of movement in exchange rates (1.3) 2.4
At 31 December 85.8 90.1
Current 31.8 20.3
Non-current 54.0 69.8
85.8 90.1
The maturity analysis of lease liabilities is disclosed in Note 38B.
The following are the amounts recognised in the profit or loss:
2022 2021
€'m €'m
Amortisation expense of right of use assets 21.5 20.2
Interest expense on lease liabilities 5.5 5.3
Impact of early termination of lease contracts (0.7) (1.2)
Variable lease payments (included in distribution costs) 0.1 1.0
26.4 25.3
Rent concessions have been provided to the Group companies as a result of the
COVID-19 pandemic. The Group elected to account for qualifying rent
concessions in the same way as they would if they were not lease
modifications, resulting in accounting for the concession as a variable lease
payment. The amount recognised in the profit or loss to reflect changes in
lease payments that arose from rent concessions to which the Group has applied
the practical expedient is €0.1 million (2021: €1.0 million).
Note 19 - Intangible assets
Patents, domain Technology IP Development Customer Goodwill Total
names and licence €'m costs list and affiliates €'m €'m
€'m €'m €'m
Cost
At 1 January 2022 191.4 86.5 363.6 526.9 773.6 1,942.0
Additions 32.2 - 59.4 - - 91.6
Assets acquired through business combinations - 2.9 - - 5.4 8.3
Disposal of subsidiary - (3.0) (1.4) (0.5) (12.4) (17.3)
Write offs - (1.8) (4.3) - - (6.1)
At 31 December 2022 223.6 84.6 417.3 526.4 766.6 2,018.5
Accumulated amortisation and impairment losses
At 1 January 2022 110.6 72.7 241.3 346.2 125.1 895.9
Charge 24.3 2.9 49.7 32.9 - 109.8
Impairment loss - - 7.0 - 31.7 38.7
Disposal of subsidiary - (0.9) - (0.2) - (1.1)
Write offs - (1.8) (3.9) - - (5.7)
At 31 December 2022 134.9 72.9 294.1 378.9 156.8 1,037.6
Net book value
At 31 December 2022 88.7 11.7 123.2 147.5 609.8 980.9
At 1 January 2022 80.8 13.8 122.3 180.7 648.5 1,046.1
Patents, domain Technology IP Development Customer Goodwill Total
names and licence €'m costs list and affiliates €'m €'m
€'m €'m €'m
Cost
At 1 January 2021 185.7 84.9 316.8 526.9 773.6 1,887.9
Additions 5.7 1.6 53.4 - - 60.7
Write offs - - (6.6) - - (6.6)
At 31 December 2021 191.4 86.5 363.6 526.9 773.6 1,942.0
Accumulated amortisation and impairment losses
At 1 January 2021 91.6 65.5 198.3 310.1 118.3 783.8
Charge 19.0 7.2 47.0 36.1 - 109.3
Impairment loss - - 2.3 - 6.8 9.1
Write offs - - (6.3) - - (6.3)
At 31 December 2021 110.6 72.7 241.3 346.2 125.1 895.9
Net book value
At 31 December 2021 80.8 13.8 122.3 180.7 648.5 1,046.1
At 1 January 2021 94.1 19.4 118.5 216.8 655.3 1,104.1
During the year, the research and development costs net of capitalised
development costs were €88.3 million (2021: €80.1 million). The internal
capitalisation for the year was €57.5 million (2021: €51.3 million).
Out of the total amortisation charge of €109.8 million (2021: €109.3
million), an amount of €42.0 million (2021: €34.8 million) relates to the
intangible assets acquired through business combinations.
In accordance with IAS 36, the Group regularly monitors the carrying value of
its intangible assets, including goodwill. Goodwill is allocated to thirteen
cash-generating units (CGUs) (2021: fifteen out of which two CGUs were under
held for sale).
The allocation of the goodwill in CGUs (excluding CGUs held for sale) is as
follows:
2022 2021
€'m €'m
Snai 259.7 258.7
Sports B2B 132.5 132.5
Services 109.9 109.9
Casino 50.8 50.8
Quickspin 19.8 26.8
Eyecon 3.0 16.6
Poker 15.6 15.6
Statscore - 12.4
Bingo retail 9.5 9.5
Bingo VF - 7.4
VB retail 4.6 4.6
IGS - 3.7
AUS GMTC 4.4 -
609.8 648.5
Management reviews CGUs for impairment bi-annually, or on the occurrence of an
impairment indicator. The recoverable amount of each CGU has been determined
from value in use calculations based on cash flow projections covering five
years plus a terminal value which have been adjusted to take into account each
CGU's major events as expected in future periods.
Management has considered the ongoing economic uncertainty caused by the
Russian invasion in Ukraine and the overall global recessionary pressures,
with a higher level of judgement and uncertainty implemented in the forecasts.
A potential risk for future impairment exists should there be a significant
change in the economic outlook, versus those trends management anticipates in
its forecasts due to the occurrence of these events.
With the exception of CGUs which have been fully impaired to date and CGUs
deemed sensitive to impairment from a reasonably possible change in key
assumptions as reviewed in further detail below, management has calculated the
growth estimates for years one to five by applying an average annual growth
rate for revenue based on the underlying economic environment in which the CGU
operates and the expected performance over that period. Beyond this period,
management has applied an annual growth rate of 2%. Management has included
appropriate capital expenditure requirements to support the forecast growth
and assumed the maintenance of the current level of licences. Management has
also applied post-tax discount rates to the cash flow projections as
summarised below.
2022 CGUs not sensitive to changes in assumptions:
Average revenue Discount
growth rate rate applied
2023-2027
Snai 9.4% 17.3%
Services 22.2% 16.2%
Casino 5.5% 13.9%
Poker 6.2% 17.4%
VB retail 10.0% 12.4%
2021 CGUs not sensitive to changes in assumptions:
Average revenue Discount
growth rate rate applied
2022-2026
Snai 9.9% 15.0%
Sports B2B 23.7% 13.9%
Services 10.3% 14.2%
Casino 6.0% 12.9%
Poker 2.2% 14.7%
IGS 24.0% 12.9%
VB retail 18.0% 11.2%
In relation to the Bingo VF, Eyecon, Quickspin and IGS CGUs, following
impairment tests completed as at 31 December 2022, partial impairments have
been recognised as disclosed below. Certain other CGUs, which are specifically
referred to below but not impaired, are considered sensitive to changes in
assumptions used for the calculation of value in use.
Bingo VF CGU
The recoverable amount of the Bingo VF CGU of €4.8 million, with carrying
value of €21.1 million, has been determined using a cash flow forecast that
includes annual revenue growth rates between negative 1% and 10% over the one
to five-year forecast period, a 2% long-term growth rate and a post-tax
discount rate of 15.8%. Following the contract termination of a significant
licensee, the CGU is currently making considerable efforts to recover through
new geographical expansion and organic growth. However, growth is slower than
expected, with new business planned in new territories being delayed given the
overall recessionary pressures worldwide. The impairment recognised in the
current year was €12.5 million which impairs the assets down to the
recoverable amount.
Eyecon CGU
The recoverable amount of the Eyecon CGU showed signs of underperformance
during H1 2022, mainly due to the fact that its operations are highly
concentrated in the UK online market which has seen a slowdown due to
uncertain regulatory climate and as a result the recoverable amount did not
cover the carrying value, with an impairment loss of €13.6 million
recognized in the profit or loss for the period ended 30 June 2022. No further
impairment has been recognised in the year. The recoverable amount of this CGU
of €16.9 million, with a carrying value equal to €16.1 million at 31
December 2022, was determined using a cashflow forecast that includes annual
revenue growth rates between 0% to 10.0% over the 1-5 year forecast period, 2%
long term growth rate and a post-tax discount rate of 15.6%. The recoverable
amount would equal the carrying value of the CGU if:
· the discount rate applied was higher by 4.8%, i.e. reaching a
post-tax discount rate of 15.6%; or
· the revenue growth was lower by 0.2% when compared to the
forecasted average five-year growth.
Quickspin CGU
The recoverable amount of the Quickspin CGU was impaired during H1 2022, given
the risk the CGU bore from the proportion of revenues being generated from
Group's B2B customers choosing to operate in areas with geopolitical tension,
and the resulting 1% increase on the post-tax discount rate of the CGU to
mitigate for that factor. As a result of the above and also the decrease in
the CGU performance which went through organizational updates, an impairment
loss of €7.0 million was recognized in the profit or loss for the period
ended 30 June 2022. No further impairment was recognised in the year. The
recoverable amount of this CGU of €56.2 million, with a carrying value of
€46.2 million at 31 December 2022, has been determined using a cashflow
forecast that includes annual revenue growth rates between 5.0% to 15.1% over
the 1-5 year forecast period, 2% long term growth rate and a post-tax discount
rate of 12.1%. The recoverable amount would equal the carrying value of the
CGU if:
· the discount rate applied was higher by 18.3%, i.e., reaching a
post-tax discount rate of 14.3%; or
· the revenue growth was lower by 2% when compared to the
forecasted average five-year growth.
IGS CGU
The recoverable amount of the IGS CGU of €1.1 million, with carrying value
of €6.7 million, has been determined using a cash flow forecast that
includes annual revenue growth rates between 10.0% and 77.0% over the one to
five-year forecast period, a 2% long-term growth rate and a post-tax discount
rate of 22.0%. The unit was severely affected by COVID-19 and until recently
it had not managed to bring revenue up to pre-COVID levels with the business
suffering from cancelled or postponed projects. As a result, the recoverable
amount does not cover the carrying value, with an impairment loss of €5.6
million recognised in the profit or loss.
If the revenue growth rate per annum is lower by 1%, then an additional
impairment of €1.1 million would be recognised. Similarly, if the discount
rate increases by 1% to a post-tax discount rate of 23.0%, this would result
in a further impairment of €0.4 million.
Bingo retail CGU
The recoverable amount of the Bingo retail CGU, with carrying value of €24.9
million, which has not been impaired, has been determined using a cash flow
forecast that includes annual revenue growth rates of 2% over the one to
five-year forecast period, a 2% long-term growth rate and a post-tax discount
rate of 14.4%. The recoverable amount would equal the carrying value of the
CGU if:
· the discount rate applied was higher by 8.1%, i.e. reaching a
post-tax discount rate of 15.6%; or
· the revenue growth was lower by 1.0% when compared to the
forecasted average five-year growth.
Sports B2B CGU
The recoverable amount of the Sports B2B CGU, with carrying value of €232.9
million, which has not been impaired, has been determined using a cash flow
forecast that includes annual revenue growth rates of 9.2% over the one to
five-year forecast period, a 2% long-term growth rate and a post-tax discount
rate of 14.9%. The recoverable amount would equal the carrying value of the
CGU if:
· the discount rate applied was higher by 7.6%, i.e. reaching a
post-tax discount rate of 16.0%; or
· the revenue growth was lower by 0.5% when compared to the
forecasted average five-year growth.
Note 20 - Investments and derivative financial assets
Introduction
Below is a breakdown of the relevant assets at 31 December 2022 and 2021 per
the consolidated balance sheet:
2022 2021
€'m €'m
A. Investments in associates 36.6 5.2
B. Other investments 9.2 8.1
C. Derivative financial assets 636.4 622.2
682.2 635.5
The following are the amounts recognised in the profit or loss:
2022 2021
€'m €'m
Statement of Comprehensive income
A. Share of loss from associates (3.8) (0.6)
B. Unrealised fair value changes of equity investments (0.3) (1.6)
C. Unrealised fair value changes of derivative financial assets 6.0 583.2
Other comprehensive income
Foreign exchange movement from the derivative call options held in non-Euro 6.8 -
functional currency subsidiaries
8.7 581.0
Where the underlying derivative call option is held in a non-Euro functional
currency entity, the foreign exchange movement is recorded through other
comprehensive income. As at 31 December 2022, the foreign exchange movement of
the derivative call option held in Caliplay (Note 20C) is recorded in the
profit or loss as the derivative call option is held in a Euro functional
currency entity. The foreign exchange movement of the derivative call option
held in Wplay, Onjoc and Tenbet are recorded through other comprehensive
income as the derivative call option is held in a USD functional currency
entity.
The recognition and valuation methodologies for each category are explained in
each of the relevant sections below, including key judgements made under each
arrangement as described in Note 6.
8. Investments in associates
Balance sheet
2022 2021
€'m €'m
Caliplay - -
ALFEA SPA 1.7 1.6
Galera - 3.6
LSports 34.9 -
Total investment in equity accounted associates 36.6 5.2
Profit and loss impact
2022 2021
€'m €'m
Share of profit in ALFEA SPA 0.1 -
Share of loss in Galera (3.6) (0.6)
Share of loss in Lsports (0.3) -
Total profit and loss impact (3.8) (0.6)
Caliplay
Background
During 2014 the Group entered into an agreement with Turística Akalli, S. A.
de C.V, which has since changed its name to Corporacion Caliente SAPI
("Caliente"), the majority owner of Tecnologia en Entretenimiento Caliplay, S.
de R.L. de C.V ("Caliplay"), which is a leading betting and gaming operator in
Mexico which operates the "Caliente" brand in Mexico.
The Group made a €16.8 million loan to September Holdings B.V (previously
the 49% shareholder of Caliplay), a company which is 100% owned by Caliente,
in return for a call option that would grant the Group the right to acquire
49% of the economic interest of Caliplay for a nominal amount (the "Playtech
Call Option").
During 2021 Caliplay redeemed its share at par from September Holdings, which
resulted in Caliente becoming the sole shareholder in Caliplay. The terms of
the existing structured agreement were varied, with the following key changes:
• A new additional option (in addition to the Playtech Call Option)
was granted to the Group which allowed the Group to take up to a 49% equity
interest in a new acquisition vehicle should Caliplay be subject to a
corporate transaction - this additional option is only exercisable in
connection with a corporate transaction and therefore was not exercisable at
31 December 2021 or 31 December 2022 (the "Playtech M&A Call Option").
• Caliente received a put option which would require Playtech to
acquire September Holding Company B.V. for a nominal amount (the "September
Put Option"). This option has been exercised and the parties are in the
process of transferring legal ownership of September Holding Company B.V. to
the Group.
The Group has no equity holding in Caliplay or Caliente and is currently
providing services to Caliplay including technical and general strategic
support services for which it receives income (including an additional B2B
services fee as described in Note 5). If the Playtech Call Option or the
Playtech M&A Call Option are exercised, the Group would no longer be
entitled to receive the additional B2B services fee (and will cease to provide
the related services) which for the year ended 31 December 2022 was €66.3
million (2021: €49.4 million). In addition, for 45 days after the
finalisation of Caliplay's 2021 accounts, Caliplay also had an option to
redeem the Group's additional B2B services fee or (if the Playtech Call Option
had been exercised at that time) Caliente would have the option to acquire
Playtech's 49% stake in Caliplay (together the "Caliente Call Option").
As per the public announcement made by the Group on 6 February 2023, Playtech
Plc is seeking a declaration from the English Courts to obtain clarification
on a point of disagreement between the parties in relation to the Caliente
Call Option. The Group believes the Caliente Call Option has expired and
referred to its expiry having taken place in its interim report for the
six-month period ended 30 June 2022, which was published on 22 September 2022.
If the Caliente Call Option was declared as being exercisable and was
exercised, this would extinguish the Playtech Call Option and the Playtech
M&A Call Option.
In addition to the above, from 1 January 2025, if there is a change of control
of Caliplay or any member of the Caliente group which holds a regulatory
permit under which Caliplay operates, each of the Group and Caliente shall be
entitled (but not obligated), within 60 days of the time of such change of
control, to require that the Caliente group redeems the Group's additional B2B
services fee or (if the Playtech Call Option had been exercised at that time)
acquires Playtech's 49% stake in Caliplay. If such change of control were to
take place and the right to redeem/acquire were to occur, this would
extinguish the Playtech Call Option (to the extent not exercised prior
thereto) and the Playtech M&A Call Option. In respect of this change of
control arrangement the Group has made a judgement that as at 31 December 2022
this has no impact on the fair value calculation of the Playtech M&A Call
Option.
Assessment of control and significant influence
As at 31 December 2022 and 2021 it was assessed that the Group did not have
control over Caliplay, because it does not meet the criteria of IFRS 10
Consolidated Financial Statements, paragraph 7 due to the following:
• Despite the Group previously having a nominated director on
the Caliplay Board in 2020 and having consent rights on certain decisions (in
each case, removed in 2021), there was no ability to control the relevant
activities;
• Whilst they are not members of the Board, the Group has the
ability to appoint and change both the Chief Operating Officer ("COO") and
Chief Marketing Officer ("CMO") who form part of the management team. The COO
and the CMO form part of the wider management team but not the board and
therefore are unable to control the relevant activities of Caliplay;
• The Playtech Call Option or the Playtech M&A Call Option,
if exercised, would result in Playtech having up to 49% of the voting rights
and would not result in Playtech having control; and
• Whilst the Group does receive variable returns from its
structured agreement, it does not have the power to direct relevant activities
so any variation cannot arise from such a power.
As at 31 December 2022 and 2021, the Group has significant influence over
Caliplay because it meets one or more of the criteria under IAS 28, paragraph
6 as follows:
• It has the ability to appoint key members of the Caliplay
management team;
• The standard operator revenue by itself is not considered to give
rise to significant influence; however, when combined with the additional B2B
services fee, this is an indicator of significant influence; and
• The material transaction of the historical loan funding is also an
indicator of significant influence.
Accounting for each of the options
The Playtech Call Option was exercisable at 31 December 2022 and 31 December
2021, although it still has not been exercised. As the Group has significant
influence and the option is exercisable, the investment is recognised as an
investment in associate using the equity accounting method which includes
having current access to profits and losses. The cost of the investment was
previously deemed to be the loan given through September Holdings of €16.8
million, which at the time was assessed under IAS 28, paragraph 38 as not
recoverable for the foreseeable future and part of the overall investment in
the entity.
In 2021, with the introduction of the September Put Option the investment in
associate relating to the original Playtech Call Option was reduced to zero
and the €16.8 million original loan amount was determined by management to
be the cost of the new Playtech M&A Call option and therefore fully offset
the balance of €16.8 million against the overall fair value movement of the
Playtech M&A Call Option (refer to part C of this note).
The Playtech M&A Call Option is not currently exercisable and therefore in
accordance with IAS 28, paragraph 14 has been recognised as derivative
financial asset, and disclosed separately under part C of this note.
As per the judgement in Note 6, the Group did not consider it appropriate to
equity account for the share of profits as the current 100% shareholder is
entitled to any undistributed profits.
Below is the financial information of Caliplay:
2022* 2021*
€'m €'m
Current assets 96.7 62.9
Non-current assets 30.3 20.2
Current liabilities (78.1) (67.5)
Non-current liabilities - -
Equity 48.9 15.6
Revenue 532.1 372.3
Profit from continuing operations 30.4 23.3
Other comprehensive income /(loss), net of tax 2.5 (1.0)
Total comprehensive income 32.9 22.3
* The 2021 balances above have been extracted from Caliplay's
audited 2021 financial statements whereas the 2022 balances have been
extracted from the draft unaudited Caliplay financial statements.
Investment in ALFEA SPA
The Group has held 30.7% equity shares in ALFEA SPA since June 2018. At 31
December 2022 the Group's value of the investment in ALFEA SPA was
€1.7 million (2021: €1.6 million). A share of profit of €0.1 million
was recognised in the profit or loss for the year ended 31 December 2022
(2021: €Nil million).
Investment in Galera
In June 2021, the Group entered into an agreement with Ocean 88 Holdings Ltd
which is the sole holder of Galera Gaming Group (together "Galera"), a company
registered in Brazil. Galera offers and operates online and mobile sports
betting and gaming (poker, casino, etc.) in Brazil. They will continue to do
so under the local regulatory license, when this becomes available, and will
expand to other gaming and gambling products based on the local license
conditions.
The Group's total consideration paid for the investment in Galera was $5.0
million (€4.2 million) in the year ended 31 December 2021, which was the
consideration for the option to subscribe and purchase from Galera an amount
of shares equal to 40% in Galera at nominal price.
In addition to the investment amount paid, Playtech made available to Galera a
line of credit up to $20.0 million. In 2022, an amendment was signed to the
original framework agreement to increase the credit line to $45.0 million. As
at 31 December 2022, an amount of €26.9 million, which is included in loans
receivable under other non-current assets (refer to Note 36) has been drawn
down (2021: €8.1 million). An amount of €18.0 million has been loaned in
the year ended 31 December 2022. The loan is required to be repaid to Playtech
prior to any dividend distribution to the current shareholders of Galera. The
Group recognized an allowance for expected credit losses for the loan to
Galera of €1.1 million as at 31 December 2022 (2021: €Nil).
In respect of the loan receivable from Galera even though the framework
agreement does not state a set repayment term, management has assessed that
this should still be recognised as a loan as opposed to part of the overall
investment in associate in line with IAS 28. The Directors have made a
judgement that the loan will be settled from operational cashflows as opposed
to being settled as part of an overall transaction. If the Group had
determined that the loan was part of the overall investment in associate an
additional €3.6 million share of loss of associate would have been recorded
in the profit and loss. The €3.6 million has not been recognised as the
investment in associate has been reduced to €Nil (see below).
Playtech has assessed whether it holds power to control the investee and it
was concluded that this is not the case. Even if the option is exercised, it
would only result in a 40% voting right over the operating entity and
therefore no control.
Under the agreement in place:
· the standard operator income to be generated from services
provided to Galera when combined with the additional B2B services fee, the
loan and certain other contractual rights, are all indicators of significant
influence; and
· the Group provides standard B2B services (similar to services
provided to other B2B customers) as well as additional services to Galera that
Galera requires to assist it in successfully running its operations which
could be considered essential technical information.
Considering the above factors, the Group has significant influence under IAS
28, paragraph 6 over Galera.
As the option is currently exercisable and gives Playtech access to the
returns associated with the ownership interest, the investment is treated as
an investment in associate. Playtech's interest in Galera is accounted for
using the equity method in the consolidated financial statements. Galera is
still considered a start-up and therefore is currently loss making. If the
call option is exercised by Playtech the Group will no longer provide certain
services and as such will no longer be entitled to the additional B2B service
fee. The additional B2B services fee was €Nil in the year ended 31 December
2022 (2021: €Nil).
The cost of the investment was deemed to be the price paid for the option of
$5.0 million (€4.2 million). A share of the loss of €3.6 million was
recognised in the profit or loss in the year ended 31 December 2022 (31
December 2021: €0.6 million) making the resulting value of the investment at
31 December 2022 €Nil (31 December 2021: €3.6 million). The total share
of loss from Galera was €7.2 million as at 31 December 2022 but is capped at
€3.6 million to bring the cost of the investment to €Nil.
Investment in Lsports
Background
In November 2022, the Group entered into the following transactions:
• Acquisition of 15% of Statscore for a total consideration of
€1.8 million. As a result of this transaction Statscore became a 100%
subsidiary of the Group;
• Disposal of 100% of Statscore to Lsports Data Ltd ("Lsports")
for a total consideration of €7.5 million (settled through the acquisition
of Lsports in shares) less a novated inter-company loan of €1.6 million,
therefore a non-cash net consideration of €5.9 million; and
• Acquisition of 30.89% of Lsports for a total consideration of
€36.7 million, which also included an option to acquire further shares (up
to 18.11%) in Lsports. Of the total consideration, €29.2 million was paid in
cash with the balance offset against the disposal proceeds of Statscore as per
the above.
As a result of the disposal of 100% of Statscore, the Group realised a loss of
€8.8 million which has been recognized in the profit or loss for the year
ended 31 December 2022 and is made up as follows:
2022
€'m
Net asset position as at the date of the disposal including goodwill of 14.7
€12.4 million
Net consideration (5.9)
Loss on disposal 8.8
Furthermore, the Group has an option to acquire up to 49% (so an additional
18.11%) of the equity of Lsports ("Lsports Option").
The LSports Option is exercisable under the following conditions:
• Within 90 days from the date of receipt of the LSports audited
financial statements for each of the years ending 31 December 2024, 2025 and
2026; or
• At any time until 31 December 2026 subject and immediately prior
to the consummation of an Initial Public Offering or Merger & Acquisition
event of LSports.
The fair value of the option acquired was €1.4 million which was part of the
total consideration €36.7 million. Refer to part of Note 20C; there is no
movement on the fair value between acquisition and year-end.
LSports is a company whose principal activity is to empower sportsbooks and
media companies with the highest quality sports data on a wide range of
events, so they can build the best product possible for their business. The
company is based in Israel. The principal reason of the acquisition is the
attractive opportunity considered by Playtech to increase its footprint in the
growing sports data market segment.
Assessment of control and significant influence
As at date of acquisition and 31 December 2022 it was assessed that the Group
did not have control over LSports, because it does not meet the criteria of
IFRS 10 Consolidated Financial Statements, paragraph 7 due to the following:
• Despite Playtech having the right to appoint a director on the
LSports Board, as at 31 December 2022, one had not yet been appointed.
Moreover, once Playtech appoints a director, there is still no ability to
control the relevant activities, as the total number of directors including
potentially one Playtech appointed director will be 5;
• Playtech has neither the ability to change any members of the
Board or of the management of LSports; and
• As at 31 December 2022 the option is not exercisable and
therefore can be disregarded in the assessment of power.
Per the above assessment Playtech does not hold power over the investee and as
such does not have control.
As at 31 December 2022, the Group has significant influence over LSports
because it meets one or more of the criteria under IAS 28, paragraph 6, the
main one being Playtech having the ability to appoint a member on the board of
LSports enabling it to therefore participate in policy-making processes,
including decisions about dividends and/or other distributions. As a result of
this assessment LSports has been recognised as an investment in associate.
The LSports option, which is not currently exercisable, is fair valued as per
paragraph 14 of IAS 28 and shown as a derivative financial asset in accordance
with IFRS 9 and disclosed separately under part C of this note.
Purchase Price Allocation ("PPA")
The Group has prepared a PPA following the acquisition of the investment,
where any difference between the cost of the investment and Playtech's share
of the net fair value of the LSports' identifiable assets and liabilities
results in goodwill.
Details of the provisional fair value of identifiable assets and liabilities
acquired, investment consideration and goodwill are as follows:
Playtech's share of net fair value of the identifiable assets and liabilities
acquired
2022
€'m
Net book value of liabilities acquired (1.3)
Fair value of customer contracts and relationships 7.8
Fair value of technology - internally developed 11.5
Fair value of brand 1.6
Deferred tax arising on acquisition (2.3)
Total net assets 17.3
Total consideration 35.3
Goodwill 18.0
A total of €0.4 million and €0.1 million was recognised in relation to the
amortisation of intangibles and the release of the deferred tax liability
respectively, arising on acquisition in the profit or loss for the year ended
31 December 2022, with a corresponding entry against the investment in
associate. The net effect of €0.3 million is recognised in share of loss in
profit or loss as at 31 December 2022. No share of profit was recognised as
this amount is negligible.
Other investment in associates that are fair valued under IAS 28, paragraph 14
The following are also investments in associates where the Group has
significant influence but where the option is not currently exercisable. As
there is no current access to profits, the relevant option is fair valued
under IFRS 9, and disclosed as derivative financial assets under part C of
this note:
• Wplay;
• Tenbet (Costa Rica); and
• Onjoc (Panama).
The financial information required for investments in associates, other than
Caliplay, have not been included here as from a Group perspective the
Directors do not consider them to have a material impact jointly or
separately.
B. Other investments
Balance sheet
2022 2021
€'m €'m
Listed investment - PhilWeb 1.1 0.8
Listed investment - Torque Esports Corp 0.3 0.8
Investment in Tenlot Guatemala 4.4 4.4
Investment in Tentech Costa Rica 2.1 2.1
Investment in Gameco 1.3 -
Total other investments 9.2 8.1
Profit and loss impact
2022 2021
€'m €'m
Change of fair value of listed securities - PhilWeb 0.2 (0.4)
Change in fair value of listed securities - Torque Esports Corp (0.5) (1.2)
Total profit and loss impact (0.3) (1.6)
Listed investments
The Group has shares in listed securities in PhilWeb and Torque Esports Corp.
The fair values of these equity shares are determined by reference to
published price quotations in an active market. For the year ended 31 December
2022, the fair value of PhilWeb increased by €0.2 million (2021: decrease of
€0.4 million). For the year ended 31 December 2022, the fair value of Torque
Esports Corp decreased by €0.5 million (2021: decrease of €1.2 million).
Investment in Tenlot Guatemala
In 2020, the Group entered into an agreement with Tenlot Guatemala, a member
of the Tenlot Group. Tenlot Guatemala commenced its activity in 2018 and it is
currently growing its lottery business in Guatemala, expanding its
distribution network and game offering.
The Group has acquired a 10% equity holding in Tenlot Guatemala for a total
consideration of $5.0 million (€4.4 million) in 2020, which has been
accounted at fair value through profit or loss under IFRS 9.
The fair value of the equity holding as at 31 December 2022 is $5.0 million
(€4.4 million) with no movement in fair value from the prior year.
In addition, the Group was granted a 10% equity holding in Super Sports S.A.
at no additional cost. The Group also has an option to acquire an additional
80% equity holding in Super Sports S.A. If the option is exercised, the Group
would no longer provide certain services and, as such, would no longer be
entitled to the additional B2B services fee. The additional B2B services fee
was €Nil for the year ended 31 December 2022 (2021: €Nil). There are no
conditions attached to the exercise of the option.
The right of exercising the call option at any time and the acquisition of the
additional 80% in Super Sports S.A. give Playtech:
• power over the investee;
• exposure, or rights, to variable returns from its involvement with
the investee; and
• the ability to use its power over the investee to affect the
amount of the investor's returns.
It therefore satisfies all the criteria of control under IFRS 10, paragraph 7
and, as such, at 31 December 2022 Super Sports S.A. has been consolidated in
the consolidated financial statements of the Group, noting that this is not
material from a Group perspective.
Investment in Tentech Costa Rica
In 2020, the Group entered into an agreement in Costa Rica with the Tenlot
Group. The Group acquired a 6% equity holding in Tentech CR S.A., a member of
the Tenlot Group, for a total consideration of $2.5 million (€2.1 million).
Tentech CR S.A. sells printed bingo cards in accordance with article 29 of the
Law of Raffles and Lotteries of Costa Rica ("CRC - Costa Rican Red Cross
Association'').
The 6% equity holding in Tentech CR S.A. is accounted at fair value through
profit or loss under IFRS 9.
The fair value of the equity holding as at 31 December 2022 is $2.5 million
(€2.1 million) with no movement in fair value from the prior year.
Investment in Gameco
In 2021, the Group entered into a convertible loan agreement with GameCo LLC
("GameCo"), where it provided $4.0 million in the form of a debt security with
8% interest (31 December 2021: €3.8 million). As at 31 December 2021 the
receivable was included in loans receivable in Note 21. In December 2022,
Gameco acquired Green Jade Games and subsequently, the Playtech debt was
converted into equity shares, representing a 7.1% into the newly formed group.
Immediately prior to the conversion, the loan was impaired by €3.0 million
and this has been recognised in the profit or loss in the current year.
The 7.1% equity holding in the newly formed group is accounted at fair value
through profit or loss under IFRS 9. The fair value of the equity holding as
at 31 December 2022 is €1.3 million.
C. Derivative financial assets
Balance sheet
2022 2021
€'m €'m
Playtech M&A Call Option (Caliplay) 524.0 506.7
Wplay 93.5 97.2
Onjoc 8.6 6.9
Tenbet 8.9 11.4
LSports (Note 20A) 1.4 -
Total derivative financial assets 636.4 622.2
Statement of Comprehensive Income impact
2022 2021
€'m €'m
Caliplay
Fair value change of Playtech M&A Call Option (13.3) 506.7
Playtech Call Option - (16.6)
Foreign exchange movement to profit or loss 30.6 -
Wplay
Fair value change in Wplay (9.4) 74.8
Foreign exchange movement recognised in other comprehensive income 5.7 -
Onjoc
Fair value change in Onjoc 1.3 6.9
Foreign exchange movement recognised in other comprehensive income 0.4 -
Tenbet
Fair value change in Tenbet (3.2) 11.4
Foreign exchange movement recognised in other comprehensive income 0.7
Total comprehensive income impact 12.8 583.2
Caliplay
As already disclosed in section A of this note, the Playtech M&A Call
Option is not currently exercisable and therefore in accordance with IAS 28,
paragraph 14 has been recognised as a derivative financial asset and fair
valued under IFRS 9.
As at 31 December 2021, Caliplay was actively negotiating a merger with a US
listed special purpose acquisition corporation (SPAC), which in turn was
expected to enter into a long-term commercial agreement with a leading media
partner. As part of the transaction, the media partner and certain of its
shareholders were expected to invest a cash amount in the SPAC in exchange for
shares and warrants issued by the SPAC, which was expected to result in them
together holding a material minority equity interest.
Further attempts were made to complete the SPAC transaction during the year,
however as per the announcement made on 29 July 2022, with capital market
conditions having deteriorated significantly since the transaction was
initially contemplated, the transaction was no longer being pursued.
For this reason, a decision was taken to change the valuation methodology used
as at 31 December 2022 for the Playtech M&A Call option to that of a DCF
approach with a market exit multiple assumption, as opposed to 31 December
2021, where the Group has assessed the fair value of the Playtech M&A Call
option based on the proposed term of the expected merger with the SPAC,
including the transaction value.
As already mentioned in part A of Note 20 the Group is seeking a declaration
from the English Courts to obtain clarification on a point of disagreement
between the parties in relation to the Caliente Call Option and in particular,
whether Caliplay still holds this option which permits it to redeem the
additional B2B services fee element. Should it be declared that Caliplay still
has the Caliente Call Option and Caliplay then exercises said option, this
would cancel both the Playtech M&A Call Option and the Playtech Call
Option.
The Group believes the Caliente Call Option has expired and whilst Caliplay
has not sought to exercise the option to date, Caliplay has made it clear that
it considers the option has not yet expired.
In arriving at the fair value of the Playtech M&A Call Option, the Group
has made a judgement that the Caliente Call Option has expired and therefore
no probability weighted scenarios have been modelled that include an
assumption that the Caliente Call Option is exercisable. Should the English
Courts determine that the option is exercisable and Caliplay chooses to
exercise the option, the amount payable by Caliplay to the Group upon exercise
would either be agreed between the parties or, failing which, determined by an
independent investment bank valuing the Group's remaining entitlement to
receive the additional B2B services fee until 31 December 2034. There is
therefore the potential that, should the Caliente Call Option be exercisable
and then subsequently exercised, the proceeds received by the Group may be
materially different (positive or adverse) to the fair value of the Playtech
M&A Call Option recorded as at 31 December 2022.
Valuation
The Group has assessed the fair value of the Playtech M&A Option of the
derivative financial asset as at 31 December 2022 using a discounted cash flow
("DCF") approach with a market exit multiple assumption. The Group used a
discount rate of 16% reflecting the cash flow risks given the high growth
rates in place, as well as a discount for illiquidity and control until the
expected Group exit date. The Group also made assumptions on the probability
of a possible transaction that may be completed on a number of exit date
scenarios over a 4-year period, until December 2026. The Group used a compound
annual growth rate of 17.2% over the forecasted cash flow period, an average
Adjusted EBITDA margin of 26.3% and an exit multiple of 9.6x. Due to the
uncertainty as to how the exercise of the Playtech M&A Call Option may
occur and the potential for the shares held to not be immediately realisable,
the Group included an additional discount for lack of marketability (DLOM) for
two years of 13.8%. Furthermore, Playtech's share in Caliplay was adjusted
to reflect the rights to Caliplay shares that a service provider has under its
services agreement with the Group.
As at 31 December 2022, the fair value of the Playtech M&A Call Option was
$560.6 million (2021: $574.7 million) which converted to €524.0 million
(2021: €506.7 million). The year-on-year movement of €17.3 million
recognised in the profit or loss is attributable to the favourable movement in
the USD to EUR foreign exchange rate of €30.6 million, offset by €13.3
million unfavourable movement in the fair value arising from the change in a
number of variables including exit dates and loss of transaction synergies
which impacted cashflows that were only partly offset by the increase in the
shareholding as discussed below.
As at 31 December 2021 the fair value of the option in Caliplay was determined
using a potential transaction price where, due to incoming shareholders,
Playtech's share in Caliplay was being diluted down to 36%. As at 31 December
2022, a discounted cash flow valuation method is used with a dilution in
shareholding down only to 45.8% reflecting the expected rights to Caliplay
shares to be allocated to a service provider under its services agreement with
the Group. These rights were reduced following the exercise of a redemption
option post year end as disclosed in Note 40, noting that the Group had
assumed this option would be exercised for the purposes of the valuation
performed at 31 December 2022. Despite the change in valuation approach, the
Group considers it reasonable that the value of the Playtech M&A Call
Option is broadly unchanged given the continued strong operational results of
Caliplay for 2022.
Sensitivity analysis
The assumptions and judgements made in the valuation of the derivative
financial asset as at 31 December 2022 include the following sensitivities,
noting that factors and circumstances may arise that are outside the Group's
control which could impact the option value:
· A different discount rate within the range of 14% to 18% will
result in a fair value of the derivative financial asset in the range of
€484.2 million - €568.3 million.
· A 5% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €494.5
million - €553.3 million.
· A 10% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €464.6
million - €583.3 million.
· A 5% fluctuation in the revenue growth rate will result in a fair
value of the derivative financial asset within the range of €487.0 million -
€561.8 million.
· A 10% fluctuation in the revenue growth rate will result in a
fair value of the derivative financial asset within the range of €450.5
million - €601.0 million.
· A 1.0 fluctuation on the market exit multiple will result in a
fair value of the derivative financial asset within the range of €473.9
million - €573.9 million.
· If the 13.8% DLOM applied for two-year period post exercise of
the Playtech M&A option was removed (i.e. in the event that an M&A
transaction included the acquisition of Playtech's shares immediately post
exercise) the fair value of the derivative financial asset would increase to
€607.6 million. Conversely, if we double the applied DLOM to 27.6% the fair
value of the derivative financial asset would decrease to €440.2 million.
Wplay
In August 2019, Playtech entered into a structured agreement with Aquila
Global Group SAS ("Wplay"), which has a license to operate online gaming
activities in Colombia. Under the agreement the Group provides Wplay its
technology products, where it receives standard operator revenue and
additional B2B services fee as per Note 5. The Group has no shareholding in
Wplay.
Playtech has a call option to acquire a 49.9% equity holding in the Wplay
business. As at 31 December 2021 this option was exercisable in August 2022,
however during 2022, the parties agreed to defer the Group's ability to
exercise this option to August 2023. If the call option is exercised by
Playtech, the Group would no longer provide certain services and as such will
no longer be entitled to the additional B2B services fee. The additional B2B
services fee was €Nil for the year ended 31 December 2022 (2021: €Nil).
The payment of €22.4 million made to Wplay in 2019 and 2020 was considered
to be the payment made for the option in Wplay. The Group had contingent
commitments totalling $6.0 million, of which $5.0 million was paid in June
2021 and $1.0 million was paid in October 2022.
Assessment of control and significant influence
The Group assessed whether it holds power over the investee (in accordance
with IFRS 10, paragraph 7) with the following considerations:
• Playtech does not have the ability to direct Wplay's activities as
it has no voting representation on the executive committee or members of the
executive committee.
• Whilst they are not members of the Executive Committee, Playtech
has the ability to appoint and change both the COO and CMO who form part of
the management team (albeit this right has never been exercised). The COO and
the CMO are part of the wider management team but would not be able to control
the relevant activities of Wplay; and
• If the option is exercised it would result in Playtech acquiring
49.9% of the voting rights of the operating entity and therefore would not
result in having control. Furthermore, as at 31 December 2022 the option is
not exercisable and therefore can be disregarded in the assessment of power.
Per the above assessment Playtech does not hold power over the investee and as
such does not have control.
With regards to the assessment of significant influence, the following facts
were considered:
• Playtech has the right to appoint and remove the COO and CMO which
is a potential indicator of significant influence given their relative
positions and involvement in the day-to-day operations of Wplay.
• The standard operator revenue is not considered to give rise to
significant influence. However, when combined with the additional B2B services
fee, this is an indicator of significant influence.
• The Group provides additional services to Wplay which Wplay
requires to assist it in successfully running its operations, which could be
considered essential technical information.
The Group therefore has significant influence under IAS 28, paragraph 6 over
Wplay. However, as the option is not currently exercisable, we have an
investment in associate but with no access to profits. As such the option is
fair valued as per paragraph 14 of IAS 28 and shown as a derivative financial
asset in accordance with IFRS 9.
The Group has given an interest-bearing loan of $1.7 million (€1.6 million)
to Wplay, which is due for repayment in December 2023 and is included in loans
receivable from related parties (refer to Note 36).
Valuation
The fair value of the option at 31 December 2022 has been estimated using a
DCF approach with a market exit multiple assumption. The Group used a discount
rate of 25% (2021: 23%) reflecting the cash flow risks given the high growth
rates in place and the relative early stages of the business, as well as a
discount for illiquidity and control until the expected Playtech exit date of
December 2026 (2021: expected exit date of December 2026). The Group used a
compound annual growth rate of 24.7% (2021: 27.2%) over the forecasted cash
flow period, an average Adjusted EBITDA margin of 20.6% (2021: 17.5%) and an
exit multiple of 9.6x (2021:9.8x). As part of the agreement, there is a
lock-in mechanism that contractually might prevent Playtech from selling the
resulting shares, however an assumption was made that if the exit date assumed
in the model is earlier, then both parties would be in agreement to this
earlier exit point, therefore no further discounts were applied post
transaction. Furthermore, Playtech's share in Wplay was adjusted to reflect
the rights to shares that a service provider has under its services agreement
with the Group.
As at 31 December 2022, the fair value of the Wplay derivative financial asset
is €93.5 million. The difference of €3.7 million between the fair value at
31 December 2021 of €97.2 million and the fair value at 31 December 2022 has
been recognised as follows:
a. €9.4 million derived from the fair value decrease
of the derivative call option calculated using the DCF model in the profit or
loss for the year ended 31 December 2022.
b. €5.7 million derived from the fair value increase
due to the exchange rate fluctuation of USD to EUR (as the derivative call
option is under a foreign subsidiary of the Group whose functional currency is
USD) in other comprehensive income for the year ended 31 December 2022.
Sensitivity analysis
The assumptions and judgements made in the valuation of the derivative
financial asset as at 31 December 2022 include the following sensitivities,
noting that factors and circumstances may arise that are outside the Group's
control which could impact the option value:
• A different discount rate within the range of
20% to 30% will result in a fair value of the derivative financial asset in
the range of €79.5 million - €111.0 million.
• A 5% fluctuation in the Adjusted EBITDA margin
will result in a fair value of the derivative financial asset within the range
of €89.0 million - €98.1 million.
• A 10% fluctuation in the Adjusted EBITDA
margin will result in a fair value of the derivative financial asset within
the range of €84.4 million - €102.6 million.
• A 5% fluctuation in the revenue growth rate
will result in a fair value of the derivative financial asset within the range
of €90.1 million - €97.1 million.
• A 10% fluctuation in the revenue growth rate
will result in a fair value of the derivative financial asset within the range
of €86.7 million - €100.8 million.
• A 1.0 fluctuation on the market exit multiple
will result in a fair value of the derivative financial asset within the range
of €85.8 million - €101.2 million.
• If the expected Playtech exit date fluctuates
by one year later or earlier, the fair value of the derivative financial asset
will change to €87.8 million and €99.5 million respectively.
Onjoc
In June 2020, Playtech entered into a framework agreement with ONJOC CORP.
("Onjoc"), which holds a license to operate online sports betting, gaming and
gambling activities in Panama. The Group has no equity holding in Onjoc but
has an option to acquire 50%. Under the agreement the Group provides Onjoc its
technology products, where it receives standard operator revenue and
additional B2B services fee as per Note 5. If the option is exercised, the
Group would no longer provide certain services and, as such, would no longer
be entitled to the additional B2B services fee. The additional B2B services
fee was €Nil in the year ended 31 December 2022 (2021: €Nil). The option
can be exercised any time subject to Onjoc having $15.0 million of Gross
Gaming Revenue (''GGR'') over a consecutive 12-month period.
Assessment of control and significant influence
The Group performed an analysis for Onjoc to assess whether it holds power
over Onjoc (in accordance with IFRS 10, paragraph 7) with the following
considerations:
• Playtech can propose an independent member to the Board of
Directors, who has to be independent to both Playtech and Onjoc, and as such
does not have the ability to direct Onjoc's activities as it has no voting
representation on the Board;
• Playtech has the right to appoint and remove the COO, CTO and CMO,
which although would form part of the wider management team, would not be able
to control the relevant activities of Onjoc by themselves; and
• If the option is exercised it would result in Playtech acquiring
50% of the voting rights of the operating entity and therefore would not
result in having control. Furthermore, as at 31 December 2022 the option is
not exercisable and therefore can be disregarded in the assessment of power.
Per the above assessment Playtech does not hold power over the investee and as
such does not have control.
With regards to the assessment of significant influence, the following facts
were considered:
• Playtech can propose an independent member to the Board of
Directors and has the right to appoint and remove the COO, CTO and CMO which
are potential indicators of significant influence given their relative
positions and the involvement in day-to-day operations of Onjoc;
• The standard operator revenue is not considered to give rise to
significant influence. However, when combined with the additional B2B services
fee, this is an indicator of significant influence; and
• the Group provides additional services to Onjoc which Onjoc
requires to assist it in successfully running its operations which could be
considered essential technical information.
The Group therefore has significant influence under IAS 28, paragraph 6 over
Onjoc. However, as the option is not currently exercisable, we have an
investment in associate but with no access to profits. As such the option is
fair valued as per paragraph 14 of IAS 28 and shown as a derivative financial
asset in accordance with IFRS 9.
The Group has given an interest-bearing loan to Onjoc of €1.8 million (2021:
€1.1 million) which is due for repayment in October 2025 and is included in
loans receivable from related parties (refer to Note 36).
Valuation
The fair value of the option at 31 December 2022 has been estimated using a
DCF approach with a market exit multiple assumption. The Group used a discount
rate of 33% (2021: 31%) reflecting the cash flow risk given the high growth
rates in place and the early stages of the business, as well as a discount for
illiquidity and control until the expected Playtech exit date of December 2027
(2021: expected exit date of December 2027). The Group used a compound annual
growth rate of 60.1% (2021: 89.3%) over the forecasted cash flow period and an
average Adjusted EBITDA margin of 20.4% (2021: 3.7%). As part of the
agreement, there is a lock-in mechanism that contractually might prevent
Playtech from selling the resulting shares, however an assumption was made
that if the exit date assumed in the model is earlier, then both parties would
be in agreement to this earlier exit point, therefore no further discounts
applied post transaction. Furthermore, Playtech's share in Onjoc was
adjusted to reflect the rights to shares that a service provider has under its
services agreement with the Group.
As at 31 December 2022, the fair value of the Onjoc derivative financial asset
is €8.6 million. The difference of €1.7 million between the fair value at
31 December 2021 of €6.9 million and the fair value at 31 December 2022 has
been recognised as follows:
a. €1.3 million derived from the fair value increase of the
derivative call option calculated using the DCF model in the profit or loss in
the year ended 31 December 2022.
b. €0.4 million derived from the fair value increase from the exchange
rate fluctuation of USD to EUR (as the derivative call option is under a
foreign subsidiary of the Group whose functional currency is USD) in other
comprehensive income in the year ended 31 December 2022.
Sensitivity analysis
The assumptions and judgements made in the valuation of the derivative
financial asset as at 31 December 2022 include the following sensitivities,
noting that factors and circumstances may arise that are outside the Group's
control which could impact the option value:
• A different discount rate within the range of
28% to 38% will result in a fair value of the derivative financial asset in
the range of €7.1 million - €10.5 million.
• A 5% fluctuation in the Adjusted EBITDA margin
will result in a fair value of the derivative financial asset within the range
of €8.1 million - €9.1 million.
• A 10% fluctuation in the Adjusted EBITDA
margin will result in a fair value of the derivative financial asset within
the range of €7.7 million - €9.5 million.
• A 5% fluctuation in the revenue growth rate
will result in a fair value of the derivative financial asset within the range
of €7.9 million - €9.3 million.
• A 10% fluctuation in the revenue growth rate
will result in a fair value of the derivative financial asset within the range
of €7.3 million - €10.1 million.
• A 1.0 fluctuation on the market exit multiple will result in a
fair value of the derivative financial asset within the range of €7.6
million - €9.7 million.
Tenbet Costa Rica
In addition to the 6% equity holding in Tentech CR S.A as per section B of
this note, the Group has an option to acquire 81% equity holding in Tenbet.
Tenbet which is another member of the Tenlot Group, operates online bingo
games and casino side games. Playtech provides certain services to Tenbet in
return for its additional B2B services fee. The Group has no equity holding
in Tenbet but has an option to acquire 81% equity. If the option is exercised,
the Group would no longer provide certain services to Tenbet and, as such,
would no longer be entitled to the additional B2B services fee. The additional
B2B services fee was €Nil in the year ended 31 December 2022 (31 December
2021: €Nil). In H1 2022, the Group signed an amendment to the Tenbet
agreement in which the option can be exercised at any time from the end of 35
months (previously 18 months) of Tenbet going live. The call option to acquire
81% equity holding in Tenbet is exercisable from July 2023 (previously
February 2022).
Under the existing agreements, the Group has provided Tenbet with a credit
facility of €2.7 million out of which €2.1 million had been drawn down as
at 31 December 2022 (2021: €1.1 million).
Assessment of control and significant influence
The Group assessed whether it holds power over Tenbet (in accordance with IFRS
10, paragraph 7) with the following considerations:
• Playtech does not have the ability to direct
Tenbet's activities as it has no voting representation on the Board of
Directors (or equivalent) or people in managerial positions;
• Playtech has neither the ability to appoint,
or change any members of the Board of Tenbet; and
• As at 31 December 2022 the option is not
exercisable and therefore can be disregarded in the assessment of power.
Per the above assessment Playtech does not hold power over the investee and as
such does not have control.
With regards to the assessment of significant influence, the standard operator
revenue alone is not considered to give rise to significant influence.
However, when combined with the additional B2B services fee, this is an
indicator of significant influence. Furthermore, the Group provides additional
services to Tenbet which Tenbet requires to assist it in successfully running
its operations that could be considered essential technical information.
Playtech therefore has significant influence under IAS 28, paragraph 6 over
Tenbet. However, as the option is not currently exercisable, we have an
investment in associate but with no access to profits. As such the option is
fair valued as per paragraph 14 of IAS 28 and shown as a derivative financial
asset in accordance with IFRS 9.
Valuation
The fair value of the option at 31 December 2022 has been estimated using a
DCF approach with a market exit multiple assumption. The Group used a discount
rate of 35% (2021: 33%) reflecting the cash flow risk given the high growth
rates in place and the early stages of the business, as well as a discount for
illiquidity and control until the expected Playtech exit date of December 2027
(2021: expected exit date of December 2027. The Group used a compound annual
growth rate of 135% (2021: 64.2%) over the forecasted cash flow period and an
average Adjusted EBITDA margin within the range of - 335% to 31% in years 1-5
with an average of -59.8% (2021: Average of -10.1%). As part of the
agreement, there is a lock-in mechanism that contractually might prevent
Playtech from selling the resulting shares, however an assumption was made
that if the exit date assumed in the model is earlier, then both parties would
be in agreement to this earlier exit point. Furthermore, Playtech's share in
Tenbet was adjusted to reflect the rights to shares that a service provider
has under its services agreement with the Group.
As at 31 December 2022, the fair value of the Tenbet derivative financial
asset is €8.9 million. The difference of €2.5 million between the fair
value at 31 December 2021 of €11.4 million and the fair value at 31 December
2022 has been recognised as follows:
a. €3.2 million derived from the fair value decrease of the derivative
call option calculated using the DCF model in the profit or loss in the year
ended 31 December 2022.
b. €0.7 million derived from the fair value increase from the exchange
rate fluctuation of USD to EUR (as the derivative call option is under a
foreign subsidiary of the Group whose functional currency is USD) in other
comprehensive income in the year ended 31 December 2022.
Sensitivity analysis
The assumptions and judgements made in the valuation of the derivative
financial asset as at 31 December 2022 include the following sensitivities,
noting that factors and circumstances may arise that are outside the Group's
control which could impact the option value:
• A different discount rate within the range of
30% to 40% will result in a fair value of the derivative financial asset in
the range of €7.2 million - €11.0 million.
• A 5% fluctuation in the Adjusted EBITDA margin
will result in a fair value of the derivative financial asset within the range
of €8.5 million - €9.3 million.
• A 10% fluctuation in the Adjusted EBITDA
margin will result in a fair value of the derivative financial asset within
the range of €8.0 million - €9.8 million.
• A 5% fluctuation in the revenue growth rate
will result in a fair value of the derivative financial asset within the range
of €7.9 million - €10.0 million.
• A 10% fluctuation in the revenue growth rate
will result in a fair value of the derivative financial asset within the range
of €6.9 million - €11.2 million.
• A 1.0 fluctuation on the market exit multiple will
result in a fair value of the derivative financial asset within the range of
€7.7 million - €10.2 million.
Note 21 - Other non-current assets
2022 2021
€'m €'m
Security deposits 3.3 3.3
Guarantee for gaming licences 2.2 2.6
Prepaid costs relating to Sun Bingo contract 63.4 71.7
Loans receivable (net of ECL) 1.7 8.1
Loans receivable from related parties (net of ECL) (Note 36) 27.9 9.5
Other receivables 11.1 9.2
109.6 104.4
Note 22 - Trade receivables
2022 2021
€'m €'m
Trade receivables 144.5 168.6
Related parties (Note 36) 20.5 16.5
Trade receivables - net 165.0 185.1
Split to:
Non-current assets 1.1 6.6
Current assets 163.9 178.5
165.0 185.1
Note 23 - Other receivables
2022 2021
€'m €'m
Prepaid expenses 23.4 25.9
VAT and other taxes 13.6 14.1
Security deposits for regulators 24.2 13.1
Prepaid costs relating to Sun Bingo contract 3.6 4.3
Receivable for legal proceedings and disputes1 16.4 16.4
Loans receivable2 (Net of ECL) 13.0 2.1
Loans receivable from related parties (Net of ECL) (Note 36) 3.3 2.4
Other receivables 10.1 8.8
107.6 87.1
1 Receivable for legal proceedings and disputes relates to funds held
in escrow, in relation to a historical and ongoing legal matter. The
corresponding liability is included under gaming and other taxes. The funds
will be released when the case is finally settled, in accordance with the
escrow agreement.
2 Included in loans receivable above, is a convertible debenture of
C$12.25 million (€8.3 million net of ECL) issued to NorthStar Gaming Inc in
December 2022 that will convert into equity and warrants in connection with
NorthStar's proposed reverse takeover (the "RTO") of Baden Resources Inc. The
fair value of the convertible debenture was assessed as being materially in
line with its face value at 31 December 2022. Refer to Note 40.
Note 24 - Cash and cash equivalents
Cash and cash equivalents for the purposes of the statement of cash flows
comprises:
2022 2021
€'m €'m
Continuing operations
Cash at bank 426.8 572.4
Deposits 0.1 3.6
426.9 576.0
Less: expected credit loss (Note 38A) (0.4) (0.6)
426.5 575.4
Treated as held for sale
Cash at bank - 71.2
Cash at brokers - 293.4
Deposits - 1.5
- 366.1
Cash and cash equivalents in the statement of cash flows 426.9 942.1
Less: expected credit loss (Note 38A) (0.4) (0.6)
426.5 941.5
Out of the total cash at bank, an amount of €6.8 million were held by
payment processors as at 31 December 2022 (2021: €6.9 million).
The Group holds cash balances on behalf of operators in respect of their
jackpot games and poker and casino operations, as well as client funds with
respect to B2C. Furthermore, and up to the point of the Financial segment
disposal, the Group held CFD and client deposits in relation to liquidity and
clearing activities. All of these are included in current liabilities.
2022 2021
€'m €'m
Continuing operations
Funds attributed to jackpots 84.7 82.2
Security deposits 29.6 28.5
Players' balances 39.8 30.4
154.1 141.1
Included in liabilities held for sale
Client deposits - 138.5
Client funds - 170.3
- 308.8
Note 25 - Assets held for sale
2022 2021
€'m €'m
Assets
A. Property, plant and equipment 19.6 20.0
B. Casual CGU - -
C. Financials CGU - 487.4
D. Investment in associates - -
19.6 507.4
A. During 2021, the Group entered into a binding agreement for the
disposal of a real estate area in Milan for a total consideration of €20.0
million. Accordingly, the real estate was classified as held for sale.
Of the total consideration, €1.0 million was received during
the year ended 31 December 2021. The advance received was classified as part
of the liabilities directly associated with assets classified as held for
sale.
At the date of the transfer to assets held for sale, an
impairment review was performed, where the carrying amount was compared to the
fair value less expected disposal costs. The carrying value of the land was
higher than the fair value less expected selling costs and therefore an
impairment of €12.3 million was recognised in the profit or loss in the year
ended 31 December 2021. In addition, €1.8 million of deferred tax liability
relating to the land was recognised in the profit or loss in the prior year.
It was the Group's decision to sell the asset, and subsequently the
prospective buyer was only interested in the land and not the buildings,
which led to this impairment.
The sale has been finalised but the disposal is expected to
complete in 2024 with the movement of the trot track from La Maura area to
San Siro (previously it was expected that the sale would complete during
2022).
B. Following the decision made by the Group in 2019 to dispose the Casual
and Social Gaming businesses, the value of the divisions were classified
as held for sale and the results were included in discontinued operations.
On 11 January 2021, the Group entered into an agreement for the disposal of
"YoYo", also included in this division, for a total consideration of $9.5
million. As a result of this transaction, the Group realised a profit of
€7.6 million in the profit or loss for the year ended 31 December 2021,
included within the total profit from discontinued operations (refer to Note
8).
The Social and Casual Gaming CGU is now fully disposed.
C. Following the decision made by the Board of Directors in 2020 to
dispose of the Financial segment, the division was classified as held for sale
and its results included in discontinued operations.
In September 2021, the Group entered into an agreement to sell this division
for a cash consideration of $250.0 million, with the final consideration being
subject to a completion accounts adjustment of up to $25.0 million in either
direction, to be determined by the financial performance of the Financial
segment from 1 January 2021 to the completion date.
The disposal was completed in July 2022, with cash consideration after this
adjustment of $228.1 million (€223.9 million).
At 31 December 2020 an impairment charge of €221.2 million was recognised
against this CGU as a result of comparing its carrying value to expected
proceeds from the disposal, less expected costs to sell. Following a review of
the net assets of the unit at 31 December 2021, when compared to the expected
proceeds, €2.0 million of the previously recognised impairment was reversed.
The impairment loss allocated against goodwill cannot be reversed.
The profit on disposal of Financial segment was determined as
follows:
€'m
Cash consideration received 223.9
Transaction costs paid (1.6)
Cash disposed off (392.1)
Net cash outflow on disposal of Financial segment (169.8)
Net assets disposed (other than cash):
Property, plant and equipment (4.3)
Right of use assets (6.3)
Intangible assets (98.0)
Trade and other receivables (13.9)
Deferred tax liability 7.0
Trade payables and other payables 24.8
Client deposits 144.5
Client funds 147.1
Income tax payable 2.7
Lease liability 4.5
Net liability position on disposal of Financial segment 208.1
Net cash outflow (169.8)
Net liability position disposed 208.1
Recycling of foreign exchange reserve related to the foreign discontinued (23.2)
operations
Profit on disposal 15.1
D. In 2020, the Board of Directors made a decision to dispose of its
shareholding in two associates and as such their value of €2.2 million was
transferred to assets held for sale. During 2021, the Group entered into an
agreement for the disposal of these associates for a total consideration of
€2.2 million.
Note 26 - Shareholders' equity
A. Share capital
Share capital is comprised of no par value shares as follows:
2022 2021
Number Number
of shares of shares
Authorised1 N/A N/A
Issued and paid up 309,294,243 309,294,243
1 The Company has no authorised share capital, but it is authorised to
issue up to 1,000,000,000 shares of no par value.
The table below shows the movement of the shares:
Shares in issue/ Treasury shares Shares held by 2014 EBT Shares held by 2021 EBT Total
circulation
Number of shares
At 1 January 2021 297,603,815 9,965,889 1,724,539 - 309,294,243
Transfer to EBT - (7,028,339) - 7,028,339 -
Exercise of options 1,640,511 - (1,640,511) - -
At 31 December 2021/1 January 2022 299,244,326 2,937,550 84,028 7,028,339 309,294,243
Exercise of options 1,743,990 - (84,028) (1,659,962) -
At 31 December 2022 300,988,316 2,937,550 - 5,368,377 309,294,243
B. Employee Benefit Trust
2014 EBT
In 2014, the Group established an Employee Benefit Trust ("2014 EBT") by
acquiring 5,517,241 shares for a total of €48.5 million During the year
ended 31 December 2022, 84,028 shares (2021: 1,640,511 shares) were issued at
a cost of €0.6 million (2021: €13.9 million).
2021 EBT
In 2021 the Company transferred 7,028,339 shares held by the Company in
treasury to the Employee Benefit Trust ("2021 EBT") for a total of €22.6
million. During the year ended 31 December 2022, 1,659,962 shares (2021: Nil)
were issued at a cost of €5.4 million (2021: €Nil). As at 31 December
2022, a balance of 5,368,377 shares (2021: 7,028,339 shares) remains in the
2021 EBT with a cost of €17.2 million (2021: €22.6 million).
C. Share options exercised
During the year 1,794,438 (2021:1,873,307) share options were exercised, of
which 50,448 were cash settled (2021: 232,796).
D. Distribution of dividends
During 2022 the Group did not pay any dividends.
E. Reserves
The following describes the nature and purpose of each reserve within owners'
equity:
Reserve Description and purpose
Additional paid in capital Share premium (i.e., amount subscribed for share capital in excess of nominal
value)
Employee Benefit Trust Cost of own shares held in treasury by the trust
Put/call options reserve Fair value of put/call options as part of business acquisition
Foreign exchange reserve Gains/losses arising on retranslating the net assets of overseas operations
Employee termination indemnities Gains/losses arising from the actuarial remeasurement of the employee
termination indemnities
Non-controlling interest The portion of equity ownership in a subsidiary not attributable to the owners
of the Company
Retained earnings Cumulative net gains and losses recognised in the consolidated statement of
comprehensive income
Note 27 - Loans and borrowings
The credit facility of the Group is a revolving credit facility (RCF) which
has been restructured during the year. The facility has been reduced from
€317.0 million to €277.0 million and is available until October 2025, with
an option to extend by twelve months. Interest payable on the loan is based on
SONIA rates (replacing Euro Libor and Libor rates) based on the currency of
each withdrawal. Following the announcement of the UK Financial Conduct
Authority (FCA) as to the future cessation or loss of representativeness of
the 35 Libor benchmark, effective from 1 January 2022, Libor rates were
replaced with the SONIA daily rate (sterling overnight index average). As at
the reporting date the credit facility drawn amounted to €Nil (2021:
€167.1 million).
Under the RCF, the covenants are monitored on a regular basis by the finance
department, including modelling future projected cash flows under a number of
scenarios to stress-test any risk of covenant breaches, the results of which
are reported to management and the Board of Directors. The covenants are as
follows:
• Leverage: Net Debt/Adjusted EBITDA 3.5:1
(2021: 3:1)
• Interest cover: Adjusted EBITDA/Interest 4:1
(2021: 4:1)
As at 31 December 2022 and 2021 the Group met these financial covenants.
Note 28 - Bonds
2018 Bond 2019 Bond Total
€'m €'m €'m
At 1 January 2021 526.3 346.8 873.1
Release of capitalised expenses 1.3 0.6 1.9
At 31 December 2021/1 January 2022 527.6 347.4 875.0
Repayment of bonds (330.0) - (330.0)
Release of capitalised expenses 2.0 0.6 2.6
At 31 December 2022 199.6 348.0 547.6
2022 2021
€'m €'m
Split to:
Non-current 348.0 875.0
Current 199.6 -
547.6 875.0
Bonds
(a) 2018 Bond
On 12 October 2018, the Group issued €530 million of senior secured notes
(the "2018 Bond") maturing in October 2023. During the year, the Group
partially repaid the 2018 Bond by €330 million. The net proceeds of issuing
the 2018 Bond after deducting commissions and other direct costs of issue
totalled €523.4 million. Commissions and other direct costs of issue have
been offset against the principal balance and are amortised over the period of
the Bond.
The issue price was 100% of its principal amount and bears interest from 12
October 2018 at the rate of 3.75% per annum payable semi-annually, in arrears,
on 12 April and 12 October commencing on 12 April 2019.
The fair value of the Bond as Level 1 at 31 December 2022 was €198.8 million
(31 December 2021: €536.1 million).
(b) 2019 Bond
On 7 March 2019, the Group issued €350 million of senior secured notes (the
"2019 Bond") maturing in March 2026. The net proceeds of issuing the 2019 Bond
after deducting commissions and other direct costs of issue totalled €345.7
million. Commissions and other direct costs of issue have been offset against
the principal balance and are amortised over the period of the Bond.
The issue price is 100% of its principal amount and bears interest from 7
March 2019 at a rate of 4.25% per annum payable semi-annually, in arrears,
on 7 September and 7 March commencing on 7 September 2019.
The fair value of the Bond as Level 1 at 31 December 2022 was €331.6 million
(31 December 2021: €358.3 million).
As at 31 December 2022 and 2021 the Group met the required interest cover
financial covenant of 2:1 Adjusted EBITDA/interest ratio, for the combined
2018 and 2019 Bonds.
Note 29 - Provisions for risks and charges, litigation and contingent
liabilities
The Group is involved in proceedings before civil and administrative courts,
and other legal or potential legal actions related to its business, including
certain matters related to previous acquisitions. Based on the information
currently available, and taking into consideration the existing provisions for
risks, the Group currently considers that such proceedings and potential
actions will not result in an adverse effect upon the financial statements;
however, where this is not considered to be remote, they have been disclosed
as contingent liabilities.
All the matters were subject to a review and estimate by the Board of
Directors based on the information available at the date of preparation of
these financial statements and, where appropriate, supported by updated legal
opinions from independent professionals. These provisions are classified based
on the Directors' assessment of the progress and probabilities of success of
each case at each reporting date.
Movements of the provisions outstanding as at 31 December 2022 are shown
below:
Legal and Contractual Other Total
regulatory €'m €'m €'m
€'m
Balance at 1 January 2022 6.9 6.7 3.1 16.7
Provisions made during the year 1.0 - 0.9 1.9
Provisions used during the year (0.1) (0.5) (0.4) (1.0)
Provisions reversed during the year (0.5) (2.0) (1.2) (3.7)
Balance at 31 December 2022 7.3 4.2 2.4 13.9
Legal and Contractual Other Total
regulatory €'m €'m €'m
€'m
2021
Non-current 6.9 3.5 3.1 13.5
Current - 3.2 - 3.2
6.9 6.7 3.1 16.7
2022
Non-current 7.3 0.3 2.4 10.0
Current - 3.9 - 3.9
7.3 4.2 2.4 13.9
Provision for legal and regulatory issues
The Group is subject to proceedings and potential claims regarding complex
legal matters (including those related to previous acquisitions), which are
subject to a different degree of uncertainty. Provisions are held for various
legal and regulatory issues that relate to matters arising in the normal
course of business, including in particular various disputes that arose in
relation to the operation of the various licenses held by the Group's
subsidiary Snaitech. The uncertainty is due to complex legislative and
licensing frameworks in the various territories in which the Group operates.
The Group also operates in certain jurisdictions where legal and regulatory
matters can take considerable time for the required local processes to be
completed and the matters to be resolved.
Contractual claims
The Group is subject to historic claims relating to contractual matters that
arise with customers in the normal course of business. The Group believes they
have a robust defence to the claims raised and has provided for the likely
settlement where an outflow of funds is probable. The uncertainty relates to
complex contractual dealings with a wide range of customers in various
jurisdictions, and because as noted above, the Group operates in certain
jurisdictions where contractual disputes can take considerable time to be
resolved in the local legal system.
Given the uncertainties inherent, it is difficult to predict with certainty
the outlay (or the timing thereof) which will derive from these matters. It is
therefore possible that the value of the provisions may vary further to future
developments. The Group monitors the status of these matters and consults with
its advisors and experts on legal and tax-related matters in arriving at the
provisions recorded. The provisions included represent the Directors' best
estimate of the potential outlay and none of the matters provided for are
individually material to the financial statements.
Accounting for uncertain tax positions
The Group is subject to various forms of tax in a number of jurisdictions.
Given the nature of the industry and the jurisdictions within which the Group
operates, the tax, legal and regulatory regimes are continuously changing and
subject to differing interpretations. As such the Group is exposed to a small
number of uncertain tax positions and open audits / enquiries. Judgement is
applied in order to adequately provide for uncertain tax positions where it is
believed that it is more likely than not that an economic outflow will
arise. The Group has provided for uncertain tax positions which meet the
recognition threshold and these positions are included within tax liabilities.
There is a risk that additional liabilities could arise. Given the uncertainty
and the complexity of application of international tax in the sector, it is
not feasible to accurately quantify any possible range of liability or
exposure, and this has therefore not been disclosed.
Note 30 - Contingent consideration and redemption liability
2022 2021
€'m €'m
Non-current contingent consideration and redemption liability consists of:
Non-current redemption liability
Acquisition of Statscore SP Z.O.O. - 6.0
Non-current contingent consideration
Acquisition of Aus GMTC PTY Ltd 2.1 -
Others 0.2 -
Total non-current contingent consideration and redemption liability 2.3 6.0
Current contingent consideration consists of:
Acquisition of Eyecon Limited - 3.6
Amount payable to Aquila Global Group SAS ("Wplay") (Note 20) - 0.8
Other acquisitions 0.6 0.6
Total current contingent consideration 0.6 5.0
Total contingent consideration and redemption liability 2.9 11.0
The maximum contingent consideration and redemption liability payable is as
follows:
2022 2021
€'m €'m
Acquisition of Eyecon Limited - 3.6
Acquisition of HPYBET Austria GmbH - 15.0
Interest in Aquila Global Group SAS ("Wplay") - 0.9
Acquisition of Statscore SP Z.O.O. - 15.0
Acquisition of Aus GMTC PTY Ltd 46.7 -
Other acquisitions 0.8 6.8
47.5 41.3
Note 31 - Trade payables
2022 2021
€'m €'m
Suppliers 47.0 33.5
Customer liabilities 14.2 7.8
61.2 41.3
Note 32 - Deferred tax
The movement on the deferred tax is as shown below:
2022 2021
€'m €'m
Balance at 1 January 14.0 (82.5)
Charge to profit or loss (Note 14) (26.3) 96.3
Exchange differences - 0.2
At 31 December (12.3) 14.0
2022 2021
€'m €'m
Split as:
Deferred tax liability (124.8) (88.9)
Deferred tax asset 112.5 102.9
(12.3) 14.0
Deferred tax assets and liabilities are offset only when there is a legally
enforceable right of offset, in accordance with IAS 12.
As at 31 December 2022, the Directors continued to recognise deferred tax
assets arising from temporary differences and tax losses carried forward, with
the latter only to the extent that it is probable that future taxable profit
will be available against which the unused tax losses can be utilised. Please
refer to Note 14 for the assessment performed on the recognition of deferred
tax in the period.
Details of the deferred tax outstanding as at 31 December 2022 and 2021 are as
follows:
2022 2021
€'m €'m
Deferred tax recognised on Group restructuring 56.8 63.6
Tax losses 75.9 74.1
Other temporary and deductible differences (145.0) (123.7)
Total (12.3) 14.0
Details of the deferred tax, amounts recognised in profit or loss are as
follows:
2022 2021
€'m €'m
Accelerated capital allowances (1.3) 76.8
Employee pension liabilities (0.3) 0.1
Other temporary and deductible differences (26.6) (15.5)
Leases (0.1) -
Tax losses 2.0 34.9
Total (26.3) 96.3
Note 33 - Other payables
2022 2021
€'m €'m
Non-current liabilities
Payroll and related expenses 23.9 10.8
Other 1.0 2.0
24.9 12.8
Current liabilities
Payroll and related expenses 96.5 81.7
Accrued expenses 48.2 67.4
VAT payable 3.0 3.8
Interest payable 7.4 10.4
Other payables 14.0 2.9
169.1 166.2
Note 34 - Gaming and other taxes payable
2022 2021
€'m €'m
Gaming tax 112.5 105.3
Other 0.3 0.1
112.8 105.4
Note 35 - Acquisitions during the year
On 30 August 2022, the Group acquired 100% of the share capital of Aus GMTC
PTY Ltd ("Aus GMTC") which creates content and online games.
The Group paid a total cash consideration of €2.9 million (US$3.0 million),
with an additional consideration (capped at US$50 million) in cash payable in
2025 based on a pre-defined EBITDA calculation resulting from the performance
of the developed games active during the year ending 30 September 2025. The
consideration is calculated based on four times the pre-defined EBITDA for
that year, less the cash consideration already paid, plus the €1.8 million
loan provided to the acquired company pre-acquisition.
Details of the fair value of identifiable assets and liabilities acquired,
purchase consideration and goodwill, are as follows:
Fair value of the identifiable assets, liabilities and goodwill acquired
2022
€'m
Net book value of liabilities acquired (0.5)
Fair value of IP Technology acquired 2.9
Total net assets acquired 2.4
Fair value of consideration 6.8
Goodwill arising on acquisition 4.4
Fair value of consideration paid and payable
2022
€'m
Cash Consideration 2.9
Non-current contingent consideration 3.9
Fair value of consideration 6.8
Adjustments to fair value include the following:
Amount Amortisation
€'m %
IP Technology 2.9 33.3
The main factor leading to the recognition of goodwill is the future games to
be developed by the studio and the assembled work force who have significant
experience in the field of game design and development. The resulting goodwill
is not deductible for tax purposes. The acquisition represents its own CGU and
in accordance with IAS36, the Group will regularly monitor the carrying value
of the this.
Management has used the replacement cost methodology in determining the fair
value of the IP Technology acquired.
The future consideration is €3.9 million, discounted at 35% based on
Damodaran's Target Rates of Return - Stage in Life Cycle, and is calculated
based on the estimated future EBITDA of the studio. The €1.8 million loan
provided to the company pre-acquisition has been deducted against the future
consideration in Note 30.
Management has not disclosed Aus GMTC's contribution to the Group profit since
the acquisition nor the impact the acquisition would have had on the Group's
revenue and profits if it had occurred on 1 January 2022, because the amounts
are negligible.
Note 36 - Related parties
Parties are considered to be related if one party has the ability to control
the other party or exercise significant influence over the other party's
making of financial or operational decisions, or if both parties are
controlled by the same third party. Also, a party is considered to be related
if a member of the key management personnel has the ability to control the
other party.
During the year, Group companies entered into the following transactions with
related parties which are not members of the Group:
2022 2021
€'m €'m
Revenue
Investments in associates 132.7 95.0
Interest income
Investments in associates 0.8 0.1
The revenue from investments in associates includes income from Caliplay,
Galera, Wplay, Onjoc and Tenbet. The interest income relates to the same
companies except Caliplay.
The following amounts were outstanding at the reporting date:
2022 2021
€'m €'m
Trade receivables (Note 22)
Associates 20.5 16.5
Loans and interest receivable - current (Note 23)
Associates 3.4 2.4
Loans and interest receivable - non-current (Note 21)
Associates 29.0 9.5
The loans and interest receivables above do not include the expected credit
losses. For the year ended 31 December 2022, the Group recognised a provision
for expected credit losses of €0.1 million relating to amounts owed by
related parties in less than one year (2021: Nil) and €1.1 million for more
than one year.
The loans due from related parties are further disclosed in Note 20.
Key management personnel compensation which includes the Board members
(Executive and Non-executive Directors) and senior management personnel
comprised the following:
2022 2021
€'m €'m
Short-term employee benefits 13.6 14.2
Post-employment benefits 0.1 0.1
Termination benefits 1.2 0.1
Share-based payments 2.2 4.3
17.1 18.7
The Group is aware that a partnership in which a member of key management
personnel (who is not a Board member) has a non-controlling interest provides
certain advisory and consulting services to third-party service providers of
the Group in connection with certain of the Group's structured and other
commercial agreements. The partnership contracts with and is compensated by
the third-party service providers, and the Group has no direct arrangement
with the partnership. The total paid to this partnership by the third-party
service providers was €5.9 million (2021: €3.0 million).
Note 37- Subsidiaries
Details of the Group's principal subsidiaries as at the end of the year are
set out below:
Name Country of incorporation Proportion of voting rights and ordinary share capital held Nature of business
Playtech Holdings Limited Isle of Man 100% Main trading company of the Group up to December 2020, owns the intellectual
property rights and licenses the software to customers. From January 2021
onwards, the principal activity is the holding of investment in subsidiaries
Playtech Software Limited United Kingdom 100% Main trading company from 2021 onwards, owns the intellectual property rights
and licenses the software to customers
Video B Holding Limited British Virgin Islands 100% Trading company for the Videobet software, owns the intellectual property
rights of Videobet and licenses it to customers. From January 2021 onwards,
the principal activity is the holding of investment in subsidiaries
Playtech Services (Cyprus) Limited Cyprus 100% Activates the iPoker Network in regulated markets. Owns the intellectual
property of the GTS, Ash and Geneity businesses
VB (Video) Cyprus Limited Cyprus 100% Trading company for the Videobet product to Romanian companies
Virtue Fusion (Alderney) Limited Alderney 100% Online bingo and casino software provider
Intelligent Gaming Systems Limited UK 100% Casino management systems to land-based businesses
VF 2011 Limited Alderney 100% Holds licence in Alderney for online gaming and Bingo B2C operations
PT Turnkey Services Limited Isle of Man 100% Holding company of the Turnkey Services group
PT Entertenimiento Online EAD Bulgaria 100% Poker and Bingo network for Spain
PT Marketing Services Limited British Virgin Islands 100% Marketing services to online gaming operators
PT Operational Services Limited British Virgin Islands 100% Operational and hosting services to online gaming operators
100% Previously, live game services to Asia. Currently a dormant company
S-Tech Limited British Virgin Islands and branch office in the Philippines
PT Network Management Limited British Virgin Islands 100% Manages the iPoker Network
Videobet Interactive Sweden AB Sweden 100% Trading company for the Aristocrat Lotteries VLTs
V.B. Video (Italia) S.r.l. Italy 100% Trading company for the Aristocrat Lotteries VLTs
Quickspin AB Sweden 100% Owns video slots intellectual property
Best Gaming Technology GmbH Austria 100% Trading company for sports betting
Playtech BGT Sports Limited Cyprus 100% Owns sports betting intellectual property solutions and trading company for
sports betting
ECM Systems Ltd UK 100% Owns bingo software intellectual property and bingo hardware
Eyecon Limited Alderney 100% Develops and provides online gaming slots
Rarestone Gaming PTY Ltd Australia 100% Development company
HPYBET Austria GmbH Austria 100% Operating shops in Austria
Snaitech SPA Italy 100% Italian retail betting market and gaming machine market
OU Playtech (Estonia) Estonia 100% Designs, develops and manufactures online software
Techplay Marketing Limited Israel 100% Marketing and advertising
OU Videobet Estonia 100% Develops software for fixed odds betting terminals and casino machines (as
opposed to online software)
Playtech Bulgaria Bulgaria 100% Designs, develops and manufactures online software
PTVB Management Limited Isle of Man 100% Management company
Techplay S.A. Software Limited Israel 100% Develops online software
CSMS Limited Bulgaria 100% Consulting and online technical support, data mining processing
and advertising services to Parent Company
Mobenga AB Limited Sweden 100% Mobile sportsbook betting platform developer
PokerStrategy Ltd Gibraltar 100% Operates poker community business
Snai Rete Italia S.r.l. Italy 100% Italian retail betting market
PT Services UA LTD Ukraine 100% Designs, develops and manufactures software
Trinity Bet Operations Ltd Malta 100% Retail and Digital Sports Betting
Euro live Technologies SIA Latvia 100% Global broadcaster providing innovative video stream services for users
worldwide
Gaming Technology Solutions Limited UK 100% Provision of B2B services within Bingo, Virtual Sports, Sports Betting and
Games Development
Note 38 - Financial instruments and risk management
The Group has exposure to the following risks arising from financial
instruments:
• Credit risk;
• Liquidity risk; and
• Market risk.
There have been no substantive changes in the Group's exposure to financial
instrument risks, its objectives, policies and processes for managing those
risks or the methods used to measure them from previous periods unless
otherwise stated in this note.
The principal financial instruments of the Group, from which financial
instrument risks arises, are as follows:
• Trade receivables;
• Loans receivable
• Convertible loans
• Cash and cash equivalents;
• Investments in equity securities;
• Derivative financial assets;
• Trade payables;
• Bonds;
• Loans and borrowings; and
• Contingent consideration and redemption liability.
Financial instrument by category
The following table shows the carrying amounts and fair values of financial
assets and financial liabilities, including their levels in the fair value
hierarchy.
Measurement Carrying amount Fair value
category
Note 2022 Level 1 Level 2 Level 3
€'m €'m €'m €'m
31 December 2022
Continuing operations
Non-current financial assets
Equity investments 20B FVTPL 9.2 1.4 - 7.8
Derivative financial assets 20C FVTPL 636.4 - - 636.4
Trade receivables 22 Amortised cost 1.1 - - -
Loans receivable Amortised cost
21 29.6 - - -
Current financial assets
Trade receivables 22 Amortised cost 163.9 - - -
Convertible loans 23 FVTPL 8.3 - - 8.3
Loans receivables 23 Amortised cost 8.0 - - -
Cash and cash equivalents Amortised cost
24 426.5 - - -
Non-current liabilities
Bonds 28 Amortised cost 348.0 - - -
Lease liability 18 Amortised cost 54.0 - - -
Contingent consideration and redemption liability
30 FVTPL 2.3 - - 2.3
Current liabilities
Bonds 28 Amortised cost 199.6 - - -
Trade payables 31 Amortised cost 61.2 - - -
Lease liability 18 Amortised cost 31.8 - - -
Progressive operators' jackpots and security deposits 24 Amortised cost 114.3 - - -
Client funds 24 Amortised cost 39.8 - - -
Contingent consideration and redemption liability 30 FVTPL 0.6 - - 0.6
Interest payable 33 Amortised cost 7.4 - - -
Measurement Carrying amount Fair value
category
2021 Level 1 Level 2 Level 3
Note €'m €'m €'m €'m
31 December 2021
Continuing operations
Non-current financial assets
Equity investments 20B FVTPL 8.1 1.6 - 6.5
Derivative financial assets 20C FVTPL 622.2 - - 622.2
Trade receivables 22 Amortised cost 6.6 - - -
Convertible loans 21 FVTPL 3.7 - - 3.7
Loans receivable 21 Amortised cost 13.9 - - -
Current financial assets
Trade receivables 22 Amortised cost 178.5 - - -
Loans receivables 21 Amortised cost 4.5 - - -
Cash and cash equivalents 24 Amortised cost 575.4 - - -
Non-current liabilities
Bonds 28 Amortised cost 875.0 - - -
Loans and borrowings 27 Amortised cost 167.1 - - -
Lease liability 18 Amortised cost 69.8 - - -
Contingent consideration and redemption liability 30 FVTPL 6.0 - - 6.0
Current liabilities
Trade payables 31 Amortised cost 41.3 - - -
Lease liability 18 Amortised cost 20.3 - - -
Progressive operators' jackpots and security deposits 24 Amortised cost 110.7 - - -
Client funds 24 Amortised cost 30.4 - - -
Contingent consideration and redemption liability 30 FVTPL 5.0 - - 5.0
Interest payable 33 Amortised cost 10.4 - - -
Treated as held for sale
Current financial assets
Cash and cash equivalents Amortised cost 366.1 - - -
Current liabilities
Trade payables Amortised cost 0.4 - - -
Lease liability Amortised cost 5.2 - - -
Client deposits Amortised cost 138.5 - - -
Client funds Amortised cost 170.3 - - -
The fair value of the contingent consideration and redemption liability is
calculated by discounting the estimated cash flows. The valuation model
considers the present value of the expected future payments, discounted using
a risk adjusted discount rate.
For details of the fair value hierarchy, valuation techniques and significant
unobservable inputs relating to determining the fair value of derivative
financial assets, which are classified as Level 3 of the fair value hierarchy,
refer to Note 20C.
The carrying amount does not materially differ from the fair value of the
financial assets and liabilities.
The Board has overall responsibility for the determination of the Group's risk
management objectives and policies and, whilst retaining ultimate
responsibility for them, it has delegated the authority for designing and
operating processes that ensure the effective implementation of the objectives
and policies to the Group's Finance function. The overall objective of the
Board is to set policies that seek to reduce risk as far as possible without
unduly affecting the Group's competitiveness and flexibility.
Further details regarding these policies are set out below.
A. Credit risk
Credit risk is the risk that a counterparty will not meet its obligations
under a financial instrument or customer contract, leading to a financial
loss. The Group is exposed to credit risk from its operating activities
(primarily trade receivables), its investing activities through loans made and
from its financing activities, including deposits with banks and financial
institutions. After the impairment analysis performed at the reporting date,
the expected credit losses (ECLs) are €4.9 million (2021: €7.4 million).
Cash and cash equivalents
The Group held cash and cash equivalents (before ECL) of €426.9 million as
at 31 December 2022 (2021: €576.0 million). The cash and cash equivalents
are held with bank and financial institution counterparties, which are rated
from Caa- to AA+, based on Moody's ratings.
Impairment on cash and cash equivalents has been measured on a 12-month
expected credit loss basis and reflects the short maturities of the exposures.
The Group considers that its cash and cash equivalents have low credit risk
based on the external credit ratings of the counterparties. The Group uses a
similar approach for assessment of ECLs for cash and cash equivalents to those
used for trade receivables. The ECL on cash balances as at 31 December 2022 is
€0.4 million (2021: €0.6 million).
A reasonable movement in the inputs of the ECL calculation of cash and cash
equivalents does not materially change the ECL to be recognised.
Total Financial institutions Financial institutions
€'m with A- and with below A- rating
above rating and no rating
€'m €'m
Continuing operations
At 31 December 2022 426.9 214.2 212.7
At 31 December 2021 576.0 291.7 284.3
Treated as held for sale
At 31 December 2022 - - -
At 31 December 2021 366.1 291.9 74.2
Trade receivables
The Group's exposure to credit risk is influenced mainly by the individual
characteristics of each customer. However, management also considers the
factors that may influence the credit risk of its customer base, including the
default risk associated with the industry and country in which customers
operate.
As at 31 December 2022, the Group has trade receivables of €165.0 million
(2021: €185.1 million) which is net of an allowance for ECL of €4.5
million (2021: €6.8 million).
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses which uses a lifetime expected loss allowance for all trade
receivables. To measure the ECL, trade receivables have been grouped based on
shared credit risk characteristics and the days past due. The expected loss
rates are calculated based on past default experience and an assessment of the
future economic environment. The ECL is calculated with reference to the
ageing and risk profile of the balances.
The carrying amounts of financial assets represent the maximum credit
exposure.
Set out below is the movement in the allowance for expected credit losses of
trade receivables:
31 December 2022 Total Not past due 1-2 months More than
€'m €'m overdue 2 months
€'m past due
€'m
Expected credit loss rate 2.7% 3.0% 1.1% 2.9%
Gross carrying amount 169.5 124.9 27.2 17.5
Expected credit loss (4.5) (3.7) (0.3) (0.5)
Trade receivables - net 165.0 121.2 26.9 17.0
31 December 2021 Total Not past due 1-2 months More than
€'m €'m overdue 2 months
€'m past due
€'m
Expected credit loss rate 3.5% 4.2% 1.6% 1.9%
Gross carrying amount 191.9 139.6 32.6 19.7
Expected credit loss (6.8) (5.9) (0.5) (0.4)
Trade receivables - net 185.1 133.7 32.1 19.3
A reasonable movement in the inputs of the ECL calculation of trade
receivables does not materially change the ECL to be recognised.
Impairment losses on trade receivables and contract assets are presented as
net impairment losses within the impairment of financial assets. Subsequent
recoveries of amounts previously written off are credited against the same
line item.
The movement in the ECL in respect of trade receivables during the year was as
follows:
2022 2021
€'m €'m
Balance at 1 January 6.8 21.7
Charged to profit or loss (2.3) (14.9)
Balance at 31 December 4.5 6.8
Loans receivable
The Group recognised an allowance for expected credit losses for all debt
instruments given to 3(rd) parties based on past default experience and
assessment of the future economic environment. For the year ended 31 December
2022, the Group recognised provision for expected credit losses of €1.6
million in the profit or loss relating to loans receivable (2021: Nil).
2022 2021
€'m €'m
Balance at 1 January - -
Charged to profit or loss 1.6 -
Balance at 31 December 1.6 -
Furthermore, €3.0 million of an existing loan to Gameco was impaired as at
31 December 2022 (refer to Note 20B) At 31 December 2021, there was a loan
impairment of €1.2 million relating to BGO.
B. Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting
the obligations associated with its financial liabilities that are settled by
delivering cash or another financial asset. The Group's objective when
managing liquidity is to ensure, as far as possible, that it will have
sufficient liquidity to meet its liabilities when they are due, under both
normal and stressed conditions, without incurring unacceptable losses or
risking damage to the Group's reputation.
The following are the remaining contractual maturities of financial
liabilities at the reporting date. The amounts are gross and undiscounted and
include contractual interest payments. Balances due within one year equal
their carrying balances as the impact of discounting is not significant.
Contractual cash flows
2022 Carrying amount Total Within 1 year 1-5 years More than 5 years
€'m €'m €'m €'m €'m
Bonds 547.6 604.6 221.1 383.5 -
Lease liability 85.8 110.2 34.1 43.1 33.0
Contingent consideration and redemption liability 2.9 7.9 0.2 7.7 -
Trade payables 61.2 61.2 61.2 - -
Progressive and other operators' jackpots 114.3 114.3 114.3 - -
Client funds 39.8 39.8 39.8 - -
Interest payable 7.4 7.4 7.4 - -
Provisions for risks and charges 13.9 13.9 3.9 10.0 -
872.9 959.3 482.0 444.3 33.0
2021
Loans and borrowings 167.1 173.8 3.3 170.5 -
Bonds 875.0 979.7 34.8 944.9 -
Lease liability 90.1 107.1 22.3 59.7 25.1
Contingent consideration and redemption liability 11.0 11.6 5.1 6.5 -
Trade payables 41.3 41.3 41.3 - -
Progressive and other operators' jackpots 110.7 110.7 110.7 - -
Client funds 30.4 30.4 30.4 - -
Interest payable 10.4 10.4 10.4 - -
Provisions for risks and charges 16.7 16.7 3.2 13.5 -
1,352.7 1,481.7 261.5 1,195.1 25.1
C. Market risk
Market risk is the risk that changes in market prices, such as foreign
exchange rates, interest rates and equity prices, will affect the Group's
income or the value of its holding of financial instruments.
The objective of market risk management is to manage and control market risk
exposures within acceptable parameters while optimising the return.
Currency risk
Currency risk is the risk that the value of financial instruments will
fluctuate due to changes in foreign exchange rates.
Foreign exchange risk arises because the Group has operations located in
various parts of the world. However, the functional currency of those
operations is the same as the Group's primary currency (Euro) and the Group is
not substantially exposed to fluctuations in exchange rates in respect of
assets held overseas.
Foreign exchange risk also arises when the Group operations enters into
foreign transactions, and when the Group holds cash balances, in currencies
denominated in a currency other than the functional currency.
31 December 2022 In EUR In USD In GBP In other Total
€'m €'m €'m currencies €'m
€'m
Continuing operations
Cash and cash equivalents 338.5 5.8 60.2 22.4 426.9
Progressive operators' jackpots and security deposits (139.0) (0.2) (14.9) - (154.1)
Cash and cash equivalents less client funds 199.5 5.6 45.3 22.4 272.8
31 December 2021 In EUR In USD In GBP In other Total
€'m €'m €'m currencies €'m
€'m
Continuing operations
Cash and cash equivalents 477.4 34.9 41.5 22.2 576.0
Progressive operators' jackpots and security deposits (126.6) (0.1) (14.4) - (141.1)
Cash and cash equivalents less client funds 350.8 34.8 27.1 22.2 434.9
31 December 2021 In EUR In USD In GBP In other Total
€'m €'m €'m currencies €'m
€'m
Treated as held for sale
Cash and cash equivalents 85.1 211.1 44.4 25.5 366.1
Client funds and client deposits (63.7) (208.6) (12.1) (24.4) (308.8)
Cash and cash equivalents less client funds 21.4 2.5 32.3 1.1 57.3
The Group's policy is not to enter into any currency hedging transactions.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate due to changes in market interest rates.
The Group's exposure to the risk of changes in market interest rates relates
primarily to the Group's long-term debt obligations with floating interest
rates. The Group manages its interest rate risk by having a balanced portfolio
of fixed and variable rate bonds and loans and borrowings. At 31 December
2022, none of the Group's borrowings are at a variable rate of interest
(2021:16%).
Any reasonably possible change to the interest rate would have an immaterial
effect on the interest payable.
Equity price risk
The Group is exposed to market risk by way of holding some investments in
other companies on a short-term basis. Variations in market value over the
life of these investments will have an immaterial impact on the balance sheet
and the statement of comprehensive income.
Note 39 - Reconciliation of movement of liabilities to cash flows arising from
financing activities
Liabilities
Loans and Bonds Interest on Contingent Lease Total
borrowings €'m loans and consideration liabilities €'m
€'m borrowings and redemption €'m
and bonds liability
€'m €'m
Balance at 1 January 2022 167.1 875.0 10.4 11.0 95.3 1,158.8
Changes from financing cash flows
Interest payable on bonds and loans and borrowings - - (36.7) - - (36.7)
Repayment of loans and borrowings (166.1) - - - - (166.1)
Repayment of bonds - (330.0) - - - (330.0)
Payment of contingent consideration and redemption liability - - - (5.9) - (5.9)
Principal paid on lease liability - - - - (22.5) (22.5)
Interest paid on lease liability - - - - (5.7) (5.7)
Total changes from financing cash flows (166.1) (330.0) (36.7) (5.9) (28.2) (566.9)
Other changes
Liability related
New leases - - - - 19.0 19.0
Interest on bonds, bank borrowings and other borrowings - 2.6 33.6 - - 36.2
Interest on lease liability - - - - 5.7 5.7
Movement in deferred and contingent consideration and redemption liability - - - (4.3) (4.3)
Payment of contingent consideration related to investments - - - (1.0) - (1.0)
Additional contingent consideration - - - 2.9 - 2.9
Disposal of subsidiary/discontinued operations - - - - (4.7) (4.7)
Foreign exchange difference (1.0) - - 0.2 (1.3) (2.1)
Total liability-related other changes (1.0) 2.6 33.6 (2.2) 18.7 51.7
Balance at 31 December 2022 - 547.6 7.3 2.9 85.8 643.6
Liabilities
Loans and Bonds Interest on Contingent Lease Total
borrowings €'m loans and consideration liabilities €'m
€'m borrowings and redemption €'m
and bonds liability
€'m €'m
Balance at 1 January 2021 308.9 873.1 10.5 9.7 88.3 1,290.5
Changes from financing cash flows
Interest payable on bonds and loans and borrowings - - (39.4) - - (39.4)
Repayment of loans and borrowings (150.0) - - - - (150.0)
Payment of contingent consideration and redemption liability - - - (0.7) - (0.7)
Principal paid on lease liability - - - - (22.7) (22.7)
Interest paid on lease liability - - - - (5.6) (5.6)
Total changes from financing cash flows (150.0) - (39.4) (0.7) (28.3) (218.4)
Other changes
Liability related
New leases - - - - 26.8 26.8
Interest on bonds, bank borrowings and other borrowings - 1.9 39.3 - - 41.2
Interest on lease liability - - - - 5.6 5.6
Movement in deferred and contingent consideration and redemption liability - - - 6.2 - 6.2
Payment of contingent consideration related to investments - - - (4.1) - (4.1)
Foreign exchange difference 8.2 - - (0.1) 2.9 11.0
Total liability-related other changes 8.2 1.9 39.3 2.0 35.3 86.7
Balance at 31 December 2021 167.1 875.0 10.4 11.0 95.3 1,158.8
Note 40 - Events after the reporting date
Post year end, 50% of the service fee entitlement of a third-party service
provider of the Group in connection with one of the Group's structured
agreements was redeemed pursuant to the exercise of an option. A redemption
payment of €41.3 million was made to the service provider in March 2023.
Post year end, the RTO explained in Note 23 completed, resulting in the Group
owning 16% of the issued and outstanding common shares of Baden Resources Inc
(now renamed to NorthStar Gaming Holdings Inc.), as well as warrants giving
the Group the right to further increase its stake potentially beyond 20% of
the issued and outstanding common shares.
In March 2023 the Group announced a strategic partnership with Hard Rock
Digital ("HRD"), the exclusive, global vehicle for interactive gaming and
sports betting for Hard Rock International and Seminole Gaming, to supply its
products and services predominantly under long-term commercial agreements.
Alongside these commercial arrangements, the Group has also invested $85
million (c. €80 million) in exchange for a low single digit percentage
minority equity ownership stake in HRD.
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