REG - Playtech PLC - Final Results
27/03/2024 07:00
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RNS Number : 4823I Playtech PLC 27 March 2024
Playtech plc
("Playtech", the "Company" or the "Group")
Results for the year ended 31 December 2023
Significant strategic and operational progress
FY 2023 performance ahead of expectations; on track to meet medium-term
targets
Playtech (LSE: PTEC), the leading platform, content and services provider to
the gambling industry, today announces its final results for the year ended 31
December 2023.
Financial summary (continuing operations)(1 )
( )
Reported Adjusted(2)
FY 23 FY 22(5) FY 23 FY 22(5)
€'m €'m Change % €'m €'m Change %
Revenue 1,706.7 1,601.8 7% 1,706.7 1,601.8 7%
EBITDA 406.5 362.3 12% 432.3 395.4 9%
Post-tax profit(3) 105.1 40.6 159% 156.8 160.5 -2%
Diluted EPS 33.7 13.0 159% 50.2 51.5 -3%
Net debt(6) 282.8 275.2 3%
( )
Summary
· Strong overall performance with FY 2023 Adjusted EBITDA up 9% to
€432.3 million (FY 2022: €395.4 million), ahead of previously raised
expectations.
· Solid performances across both B2B and B2C.
· Landmark strategic partnership signed with Hard Rock Digital.
· Three US Live Casino facilities now operational; licensed in 11
US states.
· Resilient balance sheet, with leverage of 0.7x as at end of FY
2023, despite impact from Caliplay
· Medium-term adjusted EBITDA guidance across both B2B (€200 -
€250 million) and B2C (€300 - €350 million) maintained.
Divisional highlights
B2B
· Healthy performance in regulated markets drove FY 2023 revenue
growth of 8% to €684.1 million (FY 2022: €632.4 million).
· Strong operating leverage supported margin expansion, with B2B
Adjusted EBITDA increasing 14% to €182.0 million (FY 2022: €160.2
million).
· The Americas was the biggest driver of growth, with revenue up 46%
to €211.9 million (FY 2022: €144.7 million).
· In Latin America, Caliplay in Mexico remains the key driver, with
Wplay an increasingly large contributor. The early performance of Galerabet
was encouraging, as Brazil takes further steps towards regulating.
· Well positioned to take advantage of significant growth opportunities
in the US, with several operators launched in the year across multiple states,
a third Live Casino facility opened in Pennsylvania and licensed in 11 states.
· Excellent start to the expanded relationship with NorthStar in
Canada, which saw strong growth.
· Live Casino continued to see good revenue growth; the Company
remains focused on regulated markets, which saw revenue growth of 24% in FY
2023 versus FY 2022.
· On course to achieve the medium-term SaaS revenue target of €60
million - €80 million, with SaaS revenues growing more than 50% in FY 2023
to €50 million (FY 2022: €32 million)
· Launched BetBuddy, part of Playtech's safer gambling technology,
with six new brands in FY 2023, bringing the total to 16 brands in nine
jurisdictions.
B2C
· Good B2C performance with revenue up 5% to €1,037.0 million (FY
2022: €983.1 million). Adjusted EBITDA increased 6% to €250.3 million (FY
2022: €235.2 million).
· Snaitech revenue grew 5% to €946.6 million (FY 2022: €899.8
million) and Adjusted EBITDA increased 5% to €256.1 million (FY 2022:
€244.0 million), driven by growth across retail and online.
· The Snai brand maintained its number one market share position
(retail and online combined measured by GGR) across Italian sports betting
brands in FY 2023.
· HAPPYBET reported Adjusted EBITDA of €-11.8 million (FY 2022:
€-10.8 million), although 2023 includes a €2 million historical litigation
settlement expense. Losses are expected to narrow as we move through FY 2024.
· Sun Bingo and Other B2C saw Adjusted EBITDA grow to €6.0
million (FY 2022: €2.0 million), driven by more effective marketing spend
and higher retention of customers due to improved user experience.
Update on Caliplay (please refer to Note 7 for further details)
· Playtech is seeking to clarify a point of disagreement in
relation to the Caliente Call Option, which is due to be heard in Court in
October 2024.
· The dispute with Caliplay now also includes a dispute in relation
to fees payable by Caliplay to the Group, principally B2B licence fees and the
additional B2B services fees.
· Caliplay has not paid B2B license fee amounts due from August 2023
and additional B2B services fee amounts due from July 2023. However, the Group
has recognised the outstanding amount of €86.5 million within revenue for
the year as it has assessed that it is highly probable that the cash will be
collected in full in subsequent periods.
· Caliplay remains a highly important customer and Playtech is
committed to continuing to maintain its open dialogue with Caliplay to discuss
a path forward.
Financial highlights
· Reported post-tax profit increased significantly to €105.1 million
(FY 2022: €40.6 million) as a result of an increase in EBITDA and in the
fair value of the Playtech M&A call option related to Caliplay, partly
offset by an impairment to the Sports division within B2B.
· Group leverage remained flat at 0.7x in FY 2023 compared to FY 2022.
Excluding the impact of Caliplay, leverage was 0.5x at the end of FY 2023.
· Strengthened balance sheet following issuance of €300 million
bond due 2028.
Outlook
· Solid start to trading in 2024, reflecting strong underlying growth
trends in B2B across regulated markets including the Americas, and B2C.
· B2B medium term Adjusted EBITDA target of €200 - 250 million and
B2C medium-term Adjusted EBITDA target of €300 - 350 million maintained.
· Strength of balance sheet gives flexibility to pursue both organic
and inorganic growth opportunities.
· The Board remains confident in Playtech's ability to execute on
growth opportunities across both the B2B and B2C divisions.
Mor Weizer, CEO, said:
"Playtech performed very strongly over the year and delivered Adjusted EBITDA
up 9% to €432 million, ahead of previously raised expectations. As well as
delivering excellent financial results, the Group made important strategic and
operational progress, including our expansion across the US, opening a third
Live Casino facility in Pennsylvania and taking the number of licenses granted
to 11 with further applications pending. Our B2C division delivered revenues
exceeding €1 billion for the first time, and Snaitech remains well
positioned to benefit from the under-penetration of the online segment, given
the strength of the brand, the continuous improvements to apps and technology,
and a broadening of its content offering.
"Underpinning this performance are our c.7,700 talented colleagues around the
world. Despite the significant disruption from geopolitical conflict during
the year, they have continued to deliver for our customers and we are truly
grateful to them all.
"With regards to outlook, we are well set to achieve our medium-term targets
for both B2B and B2C divisions and have a high-quality balance sheet giving us
the flexibility to pursue both organic and inorganic growth opportunities.
"In summary, we remain very confident in our ability to execute our strategy
and to continue delivering value for our shareholders."
- Ends -
For further information contact:
Playtech plc +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. 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 11.
(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)Adjusted operating cash flow refers to net cash provided by operating
activities from continuing operations after adjusting for changes in jackpot
balances, client deposits, professional fees and the ADM security deposit in
Italy.
(5)FY 2022 numbers have been restated to reflect Snaitech's online bank
charges, which are now being recognised within EBITDA. Refer to Note 4C for
more detail.
(6)Net debt is defined as being gross debt less cash and cash equivalents
excluding cash held on behalf of clients, progressive jackpots and security
deposits.
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/65d378846195a512002c757f/gkar
(https://www.investis-live.com/playtech/65d378846195a512002c757f/gkar)
Analysts and investors can also dial into the call using the following
details:
United Kingdom (Local): +44 20 3936 2999
United Kingdom (Toll-Free): +44 800 358 1035
Global Dial-In Numbers
(https://www.netroadshow.com/conferencing/global-numbers?confId=54777)
Access Code: 195869
The presentation slides will be available today from 8.30 am at:
https://www.investors.playtech.com/results-and-presentations
(https://www.investors.playtech.com/results-and-presentations)
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 industry with over
7,700 employees across 19 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 Snaitech, the leading sports betting and gaming company in
online and retail in Italy.
Chairman's statement
I am pleased to be writing to you after another successful year for Playtech.
The Company has built on the strong strategic and operational progress of
recent years, and continues to cement its leadership across both B2B and B2C.
I would like to take this opportunity to thank the Executive Management team,
who continue to demonstrate their agility and resilience in navigating a
challenging external backdrop, given the ongoing wars in Ukraine and the
Middle-East. I would also like to highlight our professional and hardworking
colleagues around the world, who remain committed to supporting all our
customers and growing our business. Finally, I would like to acknowledge the
support of the Non-executive Directors, who have worked tirelessly in
supporting the Group's strategy and ambitions.
2023 in review
While there were many challenges in 2023, the consistent quality at the core
of our business meant that we were able to upgrade our expectations during the
year and deliver a strong financial performance. This result was underpinned
by good contributions from both the B2B and B2C businesses, and ensures we are
firmly on track to meet our medium-term Adjusted EBITDA targets.
B2B
Our B2B performance was powered by our continued strength in regulated and
soon-to-be-regulated markets:
- We have laid the groundwork for future growth in the US; we signed a
landmark strategic partnership with Hard Rock Digital, have three US Live
Casino facilities operational and are now licensed in 11 US states.
- In Latin America, we further cemented our leadership position with
Caliplay in Mexico, as well as our position with Galerabet in Brazil. We are
currently working to resolve a disagreement with Caliplay, the online casino
and sports betting arm of Caliente. Caliplay remains a highly important
customer for Playtech, and we are committed to continuing to maintain an open
dialogue with Caliplay to discuss a path forward.
- Live Casino remains an attractive product vertical and we are
continuing to invest in both physical infrastructure and content to capitalise
on this exciting opportunity.
B2C
Our B2C operations continue to go from strength to strength, with Snaitech
extending its reputation for excellent performance across both retail and
online:
- The management team at Snaitech continue to deliver superb results,
underlined by the Snai brand maintaining its number one market share position
across Italian sports betting brands for retail and online combined.
- The retail betting division delivered a record performance, with
revenues c.20% above the pre-pandemic levels achieved in 2019, illustrating
the strength of the Snai brand. Online continues to perform well, benefitting
from the brand awareness provided by the retail business.
- We remain very optimistic about the prospects for B2C, and are
actively looking to accelerate the division's growth through targeted M&A
and by optimising HAPPYBET's online offering.
Corporate activity
Hard Rock Digital
As announced in March 2023, Playtech signed a landmark strategic agreement
with Hard Rock Digital, the interactive gaming and sports betting division of
Hard Rock International. Partnering with such an iconic brand with a proven
management team will significantly strengthen Playtech's position in North
America and is very much in line with the Group's B2B strategy. As part of the
agreement, Playtech has also invested $85m in exchange for a minority stake in
Hard Rock Digital.
The momentum across our business and the Group's healthy balance sheet has
meant that we have been able to be active in reviewing potential acquisition
opportunities during 2023, and submitted offers for assets in the B2C segment
and for bolt-on acquisitions within B2B. We expect to continue to be open to
any opportunities in the coming year, but will also remain very disciplined on
price and in assessing the potential for acquisitions to add value for our
shareholders.
Refinancing
The refinancing at the end of June 2023 strengthened our balance sheet, giving
us the flexibility to invest in our business as well as pursue inorganic
opportunities. The new €300 million bond enabled us to redeem all of the
outstanding notes due in 2023 and to repay outstanding debt under the existing
revolving credit facility, which is now wholly undrawn.
Board changes
At the start of the year, we welcomed Samy Reeb to the Board as a new
independent Non-executive Director, bringing his extensive experience of
working with global businesses across wealth and tax advisory. We are already
benefitting from the additional depth he brings to the Board and will continue
to draw on his expertise in the years to come.
A big priority of mine has been to improve the diversity of the Board, and the
appointment of Ruby Yam as an Independent Non-executive Director in June 2023
moved us in the right direction. While it was unfortunate that she stepped
down the following month for personal reasons, we continue to be actively
focused on achieving our ambition of having a more diverse Board.
We said goodbye to John Krumins following our interim results in September
2023. John's contribution was invaluable during a period of significant change
for the Company. We wish him all the best for the future.
Over the year, we have also made changes to the composition of the Board
committees to ensure that we are making the most of the skills available to
us.
Sustainability
Our performance in 2023 was underpinned by our sustainability strategy, which
is central to how we operate and serve our customers. As an organisation, we
are committed to using technology to advance safer gambling. I am really
pleased with the positive steps we have taken in this area, including bringing
BetBuddy - our player protection tool - to more brands in more geographies.
2023 also saw Playtech receive recognition for our efforts to reduce our
carbon footprint against our targets and an improvement in gender diversity
within our leadership ranks. These are both areas I personally feel very
strongly about, and we will not be complacent, but will continue to invest
time and resources in marching towards the targets that we have set ourselves.
Israel and Ukraine
As has unfortunately become necessary in recent years, we have to remain
mindful of geopolitical tensions around the world. It can be easy for some to
forget that the war in Ukraine rages on, but it remains front of mind for all
of us at Playtech given the number of employees we have there. As has been the
case since the start of the war, our colleagues continue to go above and
beyond in providing support to those who remain on the ground in Ukraine.
We are also deeply saddened by the devastation and death toll caused by the
ongoing Israel-Hamas war. Following the initial terrorist attack on 7 October
2023, our priority was to ensure the safety of our colleagues in the region
and ensure they had whatever is needed to support them and their families. It
goes without saying that as an organisation, we strongly oppose all forms of
hate and we hope for a resolution in the near future. Until then, we will
continue to offer assistance to the communities we operate in wherever
possible.
Another exciting year ahead
We remain as confident as ever in the opportunity ahead of us for our business
and the industry we operate in. We have a clear and proven strategy across
both B2B and B2C, driven by outstanding colleagues in some of the most
exciting and fastest growing markets worldwide. We are well on track to meet
our medium-term expectations, and look forward to continuing to deliver strong
returns for all of our stakeholders.
Thank you for your continued support of Playtech.
Chief Executive Officer's Review
Overview
2023 was a year of significant progress across Playtech. We delivered an
excellent financial performance, with strong contributions from both the B2B
and B2C businesses. We also remain firmly on track to meet our medium-term
Adjusted EBITDA targets for B2B (€200 - €250 million) and B2C (€300 -
€350 million), while we see further long-term upside given the favourable
market dynamics and our competitive advantages.
Playtech's B2B business remains focused on regulated or soon-to-be-regulated
markets. The division benefits from its exposure to high-growth markets across
the Americas and Europe, which helped the B2B segment to deliver revenue
growth of 8% (+6% on a constant currency basis) to €684 million (FY 2022:
€632 million). Strong operating leverage ensured Adjusted EBITDA margin
expanded 130 bps, helping to deliver a 14% increase in B2B Adjusted EBITDA to
€182 million (FY 2022: €160 million). Whilst being mindful that revenue
has been recognised in full from Caliplay despite a large debtor balance at
year end (see note 7 for more detail), this performance reflected broad-based
growth across our portfolio of leading products and services.
The opportunity in the US is significant and we have worked hard to position
Playtech as a leading technology partner of choice to operators. Playtech now
holds licences in 11 US states, which include recent licence approvals in
Maryland, West Virginia and Delaware, with applications underway in further
states. Having signed deals with multiple operators in 2022, 2023 saw a shift
in focus as we looked to execute on launching with these operators across
multiple states. In 2023, we launched with Rush Street Interactive and
PokerStars, while also expanding our presence with BetMGM and BetParx.
Playtech also signed a Player Account Management + (PAM+), Casino and Live
Casino deal with Ocean Resort and Casino in New Jersey. As our presence grows,
so does our team and our physical footprint. We now have over 200 colleagues
in the US, and were pleased to open our third Live facility in the US in
Pennsylvania at the end of 2023, adding to our New Jersey and Michigan
facilities.
We remain optimistic about the potential of our landmark agreement with Hard
Rock Digital to provide Casino and Live, amongst other content, in North
America. We finished 2023 by completing the first delivery milestone,
launching Casino slots and table and Live dealer games in New Jersey. 2024
will see us make further progress in rolling out Playtech's high-quality
offering across North America. Under the terms of the agreement, Playtech has
also invested $85 million (€79.8 million) in exchange for a small minority
stake in Hard Rock Digital.
Playtech is well-positioned in Latin America, with established strategic
agreements in Mexico and Colombia, which continue to show strong growth. At
the same time, we have moved quickly to take advantage of newly regulated
markets, such as Brazil. New legislation for sports betting and iGaming has
now been signed into law by the President, and we have been encouraged by the
early performance of our strategic agreement with Galerabet.
Within our medium-term guidance for B2B, we have set a medium-term SaaS
revenue target of €60 million - €80 million. In 2023, we added over 100
new brands and grew revenue by over 50% to €50m (FY 2022: €32m), meaning
we remain on track to meet this target. Attracting new brands through our SaaS
business model is a key component of our strategy, helping to diversify our
customer base and take advantage of the business model's inherent high
operating leverage.
Snaitech powered the B2C business to another excellent performance in 2023.
Revenues across the B2C division rose 5% to €1,037.0 million (2022: €983.1
million), exceeding €1 billion for the first time. Adjusted EBITDA
increased 6% to €250.3 million (2022: €235.2 million). While Snaitech
delivered another strong overall performance, the dynamics within 2023 were
varied. In the first half of the year, within the betting segment, sales were
up significantly across both retail and online due to pent-up demand after the
football World Cup (given Italy was absent from the tournament). This was
partly offset in the second half of the year due to the impact of
customer-friendly sporting results in September and October, as has been
well-flagged by peers across the industry. The online segment continues to see
good growth, with Snaitech well-placed to benefit given the strength of the
brand, the continuous improvements to apps and technology and a broadening of
its content offering. The under-penetration of this segment continues to be a
structural tailwind for the business.
Underpinning this performance are our talented colleagues around the world.
Despite the significant disruption from geopolitical conflict during the year,
they have continued to deliver for our customers and we are truly grateful to
them all.
Israel and Ukraine
Many of our colleagues continue to be affected by the Israel-Hamas war and war
in Ukraine. Our number one priority has been the safety and security of our
colleagues and their families, and we are assisting them with a range of
support measures. In Israel, as was the case in Ukraine, we have extended
support to aid local response efforts with in-kind donations and volunteering
as well as donations to hospitals and charities. We are also providing
colleagues and their families with mental health and trauma services, as well
as, where appropriate, financial assistance. Finally, I want to extend my
appreciation to those who have been volunteering and supporting our
colleagues, friends and their families affected by these tragic events.
B2B
Core B2B
Regulated markets
Playtech's B2B business is one of the leading platform, content and services
providers in regulated and soon-to-be-regulated markets. The majority of these
are high-growth markets such as the US, Latin America and certain European
countries.
Revenue from regulated markets grew by 18% (15% on a constant currency basis)
in 2023, primarily driven by a very strong performance from Caliplay in
Mexico, albeit with a large outstanding debtor balance (see note 7 for more
details). There was also good growth from other regulated markets such as
Poland, Spain and Canada.
The Americas
The Americas saw rapid growth once again, with 2023 revenue up 46% (35% on a
constant currency basis) compared to 2022. This was largely driven by another
strong performance from Caliplay as well as growing contributions from other
customers, including NorthStar in Canada and Wplay in Colombia.
US
We have dedicated significant resources to establishing and growing the
Group's presence in the US and we are pleased with the progress to date. The
Group has taken significant steps to capitalise on the favourable regulatory
environment in the US, and there remain multiple opportunities ahead. Having
signed deals with multiple operators in 2022, 2023 was a year where Playtech
shifted its focus to executing on those agreements.
In 2023, we launched with several operators across multiple states. Rush
Street Interactive with its Betrivers brand went live in Michigan in addition
to its Sugarhouse brand in New Jersey, both for Casino. Furthermore, we
expanded our partnership with BetMGM with the launch of Casino in Michigan and
launched with PokerStars in Michigan for both Casino and Live.
In partnership with Aristocrat, Playtech introduced Class II mobile-on-premise
gaming at WinStar World Casino and Resort in Oklahoma with the Chickasaw
Nation, while also signing a PAM+ deal with Ocean Resort and Casino in New
Jersey, to relaunch its site as BetOcean.com.
Our relationship with BetParx has gone from strength to strength. In 2023, we
successfully launched Live in our newest US studio in Pennsylvania, in
addition to New Jersey, featuring Adventures Beyond Wonderland(TM). We also
launched the PAM+ in Ohio and Maryland, giving Playtech a presence with
BetParx in five states: Michigan, Pennsylvania, New Jersey, Ohio and Maryland.
Further product launches in additional states with BetParx are expected going
forward.
One year on from signing a landmark strategic agreement with Hard Rock Digital
(HRD), the exclusive Hard Rock International and Seminole Gaming vehicle for
interactive gaming and sports betting on a global basis, we remain very
optimistic about its potential to grow our presence in both the US and other
markets. As part of the partnership, in the US and Canada, HRD's customers
will enjoy a variety of Playtech's iGaming content offering including slots,
RNG and live dealer table games through HRD's existing proprietary platform
and technology offering. These products will also be supplied outside of North
America in addition to PAM+ and services including marketing and operations.
As part of establishing our agreement with HRD, Playtech invested $85 million
(€79.8 million) in exchange for a small minority equity ownership stake in
HRD. In December 2023, Playtech completed the first delivery milestone, after
launching online Casino slots and table and live dealer games in New Jersey.
During the course of last year, the Company also made good progress bringing
its suite of innovative content to even more states. Adventures Beyond
Wonderland(TM) for Live Casino was launched in the New Jersey facility in July
2023, delivering the first true game show experience to the American market
and won the Gaming Product of the Year award in the 2023 American Gambling
Awards. Mega Fire Blaze(TM) Roulette, a Playtech Live Casino hit in multiple
countries, has opened in Michigan, while the Buffalo Blitz(TM) Live slot game
has also launched in the US in Michigan. In addition, at the end of 2023, we
launched a new Casino slot game in the US called Gold Rush: Cash Collect(TM),
based on the popular Discovery Channel reality TV show. Gold Rush: Cash
Collect(TM) has already launched in multiple European jurisdictions, proving
successful.
Entry into new markets and high demand for Live Casino content has led the
Group to expand its physical footprint considerably in recent years. We were
pleased to announce that our third Live facility in the US was opened at the
end of 2023 in Pennsylvania adding to our New Jersey and Michigan facilities,
positioning us well for Live in all three major iGaming states. Behind the
Company's growing physical presence are an increasing number of employees
focused on sales, operations and back-office functions, taking total headcount
in the US to more than 200 at the end of 2023.
The evolution of the regulatory landscape in the US continues apace. Since the
repeal of PASPA in 2018, numerous states have approved legislation to legalise
sports betting. Many of these markets have already launched in both online and
retail channels, with others expected to launch soon, while in Florida,
progress is being made in relation to mobile sports betting.
Online casino, which was not subject to PASPA, is allowed at the discretion of
individual states. In 2023, Rhode Island was the only state to authorise
online casino taking the total number of regulated iGaming states to eight
including Nevada (poker only). However, there are several states where iGaming
legislation is being considered.
Playtech now holds licences in 11 US states which include recent license
approvals in Maryland, West Virginia, and Delaware.
Canada
We are delighted with the positive start to our expanded partnership with
NorthStar, which saw strong revenue growth in 2023, albeit from a low base.
The Company also made an investment, initially by way of a convertible
debenture in December 2022, which subsequently was converted into equity in H1
23. The agreement also expands the scope of Playtech's offering to NorthStar
to include operational and marketing services, in addition to PAM+, Casino,
Live, Poker and Bingo solutions already launched. NorthStar has since acquired
Slapshot Media Inc. to open up the Canadian market to the NorthStar brand
beyond Ontario, and raised additional capital in H2 2023 from Playtech and
other investors to accelerate the growth of NorthStar's footprint across
Canada. Aside from NorthStar, Playtech has further exposure to the Canadian
market with more than 10 other operators and launched with FanDuel, Entain via
its SIA brand and Jumpman, all for Casino and Live in Ontario.
Latin America
Latin America remains a hugely important market and will be a key driver of
growth for the foreseeable future. Whilst there is a large outstanding debtor
balance, Caliplay in Mexico continues to grow strongly.
As detailed at the interim results, revenue from Wplay was impacted by certain
activities in the first half of the year. However, the second half of the year
saw very strong growth in Colombia, and we remain excited about the
opportunity afforded by the Colombian market, with Wplay well-positioned to
grow its presence there further in the years ahead.
Having seen strong demand since opening our first Live Casino facility in Peru
in 2022, last year we built and opened a second studio in Lima. This second
facility will ensure we have the capacity to take advantage of further
favourable regulation and strong growth in the region, such as in Brazil, in
the years to come. Several customers, such as Wplay and Betano, have launched
tables in the new Live facility with positive results so far.
We continue to see a shift towards regulation across Latin America, including
in Brazil. 2023 saw the country take a crucial step with the President signing
into law new legislation for online and retail sports betting and online
casino at the end of 2023, and industry expectations are for a launch at some
point in 2024.
Brazil is anticipated to be a significant, high-growth market given its large
population and love of sports. Playtech is well positioned to benefit given
its exciting strategic agreement with Galerabet, which migrated its Sports
product onto Playtech's platform in 2023. In addition to Galerabet, Playtech
also has exposure to Brazil via its other B2B partners in the country and
launched with DoradoBet for both Casino and Live in H2 2023.
Peru has recently enacted legislation and published online gambling
regulations for sports betting and online gambling, which are expected to come
into effect in 2024, and Playtech is well positioned, launching with Atlantic
City for Casino at the end of 2023.
Europe ex-UK
In Europe ex-UK, B2B revenue growth of 8% (8% on a constant currency basis)
was driven by strong performances in several countries including Poland, Spain
and the Czech Republic. This was partly offset by lower revenue from the
Netherlands due to increased competition and a strict regulatory environment,
and the loss of two retail sports contracts in the year.
Elsewhere in Europe, there were several exciting launches in both Spain and
Italy. In Spain, we saw Juegging and DAZNBET both go live with Casino and
Live, KirolBet with Live, and both Luckia and Platin Casino with Casino. In
Italy, Leo Vegas and StarVegas launched Casino and Live products and Betway
launched Live in the year. Playtech also launched with Betway in the UK for
Casino. This demonstrates the versatility and scalability of Playtech's
business model and the trend to grow customer relationships over time.
We were pleased to extend our contract with the Polish state operator,
Totalizator, following a competitive public tender in 2023. The contract,
which sees PAM+ extended for multiple years, illustrates the strength of
Playtech's offering and our successful strategy of partnering with leading
brands and institutions in newly regulated online markets. In February 2024,
Playtech also announced that it won the tender via a rigorous public
procurement process to become the partner for Live Casino for Veikkaus, the
Finnish state-owned and monopoly operator.
We are also growing our Live Casino infrastructure in Europe. Extensions to
facilities in Romania and the Netherlands were completed in 2023, with the Les
Ambassadeurs casino extension in the UK completed in early 2024, illustrating
the growing demand across the segment.
France saw regulatory developments in 2023, with discussions about the
regulation of the online casino market taking place with various key French
stakeholders. At present, only poker, sports betting and horse race betting
are regulated within the online sector, so the regulation of online casino
would be a positive for Playtech, particularly as we have multiple customers
already taking our poker product.
UK
UK revenue in 2023 was flat (+1% growth on a constant currency basis) compared
to 2022 despite the impact of increased regulation.
Having called for evidence as part of its review into existing gambling laws,
the UK Government set out its conclusions and proposals for reform in a White
Paper, published in April 2023.
Currently, there is still some uncertainty about the impact of each of the
Government's proposals on the industry. Whilst the Government has announced
the introduction of stake limits for online slot games (£2 maximum stake for
18-24 year olds and £5 for all other customers), several other proposals are
still subject to consultation or pending the publication of consultation
responses. The introduction of Financial Risk Assessments (often referred to
as 'affordability checks') which must be completed once customers have reached
a defined loss level, are subject to the most uncertainty in terms of impact.
Until the specifics of any measures that will be implemented and the precise
mechanics required to adhere to them are known, it is difficult to assess the
overall impact.
The UK remains an important market for Playtech and its customers, as well as
being one of the largest and most mature regulated markets in the world.
Playtech is already working with customers that took pre-emptive measures in
advance of the publication of the White Paper and is committed to supporting
its remaining clients as the proposals come into force.
Playtech is uniquely advantaged given its market-leading technology and data,
which put safety and responsible gambling at the centre of everything. The
Company remains heavily involved in discussions around safer game design and
will continue to be following this next wave of regulation. This should
further cement Playtech's reputation as the go-to platform for regulated
markets.
Unregulated
The Group's strategy to focus on both regulated and regulating markets
includes unregulated markets which are likely to regulate in the future.
Revenue from these unregulated markets was down 19% (-17% on a constant
currency basis) versus 2022, with underlying growth in Brazil more than offset
by a decline in Asia, Canada and South Africa.
Asia saw revenue declines compared to 2022 due to continued pressures in the
region. In Canada, Ontario transitioned to being regulated, and as a result,
some revenue has shifted to regulated markets while other operators have
reduced their exposure to the Canadian market. As regulation progresses across
Canada, it will continue to add to the size of the North American market
opportunity.
The Company is also excited about the potential of the South African market as
it takes steps towards regulating. At present, it is a nascent but
fast-growing market, which permits sports betting and live casino and Playtech
launched Casino and Live products with TsogoSun at the end of 2022.
B2B - driving growth through innovation
SaaS
As part of our strategy to grow B2B revenue by €200 - €250 million in the
medium-term, Playtech is also looking to diversify its revenue base through
the SaaS business model, which targets the long tail of providers that don't
have access to PAM+. At the FY 2022 results, we announced a medium-term SaaS
revenue target of €60 million - €80 million, and we are pleased to report
that we are making very good progress towards achieving this target, with the
SaaS business seeing revenue growth of more than 50% in 2023 versus 2022.
We target growth by looking to increase our wallet share with existing brands
on our SaaS platform, as well as attracting new customers in both regulated
and regulating markets. Playtech launched over 100 brands in the period, with
notable progress in the US as Rush Street Interactive launched in Michigan and
New Jersey. We now have more than 450 brands live since the launch of our SaaS
model in 2019.
As the SaaS model provides a low friction method of exposing operators to
Playtech's content, we have the ability to cross and upsell other Playtech
products over time. Meanwhile, a broad range of customers from multiple
countries across different product sets means our revenue base is more
diversified, ensuring our B2B revenues are more resilient to any changes in
our operating environment.
Product developments
Online gaming has undergone significant change in recent years. The
combination of Playtech's strong technology, content offering and market
leading position means we are well-placed to cater to the ever-increasing
demand to deliver new, engaging and immersive entertainment experiences for
consumers. In August 2023, Playtech announced the launch of Jumanji The Bonus
Level, a new game within Live that combines cutting-edge technology with the
cinematic qualities of the famous movie. Following a complex development
process, Jumanji The Bonus Level is the first-ever Live game inspired by a
Hollywood blockbuster, marking a key milestone in the gaming industry.
Playtech has a long history of launching branded content, and the continued
demand for themed games inspired the launch of Breaking Bad: Cash Collect
& Link in December 2023 within Casino. The game features all the show's
key talent and is part of Playtech's award-winning Cash Collect™ suite.
Another exclusively licensed branded game from the Cash Collect power suite is
Gold Rush, which has been particularly noteworthy as it achieved the fastest
return on investment in the history of Playtech Casino for branded games,
breaking even just two months after launch.
In July 2023, Playtech also announced the launch of Big Bad Wolf Live, an
innovative experience that combines a slot game with elements of a Live
experience, released from Quickspin Live, the RNG arm of our Live division.
The game, which stands apart due to its artwork and unique features, sets a
new industry standard for Live Casino gaming. Having signed the exclusive US
rights to Family Feud, one of US television's longest-running and highest
rated gameshows, Playtech expects to launch a Game Show next year. Within
Live, there were also developments rolled out to update the in-house video
technology.
Finally, we were delighted that Playtech's Live product was recognised as a
leading solution in the industry, winning the EGR Live supplier of the year
for 2023, acknowledging the achievements of its extremely talented team.
B2C
Playtech's B2C business spans Snaitech, HAPPYBET, and Sun Bingo and Other B2C
operations. Overall B2C revenues grew 5% to €1,037.0 million (2022: €983.1
million). Adjusted EBITDA grew 6%, rising to €250.3 million (2022: €235.2
million).
Snaitech
Revenue from Snaitech in Italy increased by 5% compared to 2022, while
Adjusted EBITDA also grew 5% versus 2022. This overall performance saw
differing dynamics across the period, with a very strong start to the year
driven by pent up demand following the football World Cup, whilst being partly
offset by customer-friendly sporting results in the second half of the year.
The retail segment saw revenue and Adjusted EBITDA growth of 4% and 6% versus
2022, respectively, and the online business which saw revenue and Adjusted
EBITDA growth of 8% and 4% versus 2022, respectively.
Retail betting sales were up 15% versus 2022, driven by a strong performance
in the first half of the year as customers returned to betting shops after the
football World Cup in the final quarter of 2022 (Italy was absent from the
tournament). This was partly offset in the second half of the year due to the
impact of customer-friendly sporting results in September and October, as has
been well-flagged by peers across the industry. Gaming Machines revenue was
flat versus 2022 as this business normalises post-pandemic. At the Adjusted
EBITDA level, retail margins expanded 30 bps versus 2022, with operating
leverage on strong revenue growth in H1 2023, partly offset by the impact of
customer-friendly sporting results in H2 2023.
The online business followed a similar pattern, seeing strong growth in the
first half of the year led by good performances across sports betting and
casino. The second half of the year saw customer-friendly sporting results
impact both revenues and EBITDA margins. The underlying performance of the
online segment remains healthy. The under-penetration of this segment
continues to be a structural tailwind for the business, with Snaitech
well-placed to benefit given the strength of the brand, the continuous
improvements to apps and technology, and a broadening of its content offering.
As announced at the time of our Interim results in September 2023, Snaitech
last year acquired Giove Group, a well-established betting operator in the
Puglia region (southern Italy), the integration of which has now been
completed. Giove holds licences for both retail betting and online and
directly manages 18 betting shops. The acquisition, while small, illustrates
the appetite to grow the Snaitech business in Italy.
In 2023, the Snai brand was ranked number one in sports betting (retail and
online combined, as measured by GGR), which is a testament to its consistently
strong operational performance and unique brand identity.
HAPPYBET
HAPPYBET revenues were down 9% in 2023 compared to 2022, driven by a
rationalisation of retail sites in Germany. Adjusted EBITDA losses narrowed to
€9.8 million in 2023, when excluding a €2 million historical litigation
settlement expense. Including the historical litigation settlement, Adjusted
EBITDA saw a loss of €11.8 million (2022: €-10.8 million).
The Snaitech management team have taken on responsibility for HAPPYBET and we
are seeing early signs of improvement across the retail and the online
segments. Within retail, less profitable stores have been rationalised in
Germany with plans to open new shops in 2024 underway. In online, work on
optimisation of the player bonus policy and improvements in the approach to
risk and trading around the sportsbook are ongoing.
Sun Bingo and Other B2C
Sun Bingo and Other B2C saw 12% revenue growth in 2023 to reach €73.4
million (2022: €65.3 million) while Adjusted EBITDA grew to €6.0 million,
up from €2.0 million in 2022. The primary reasons for the improvement in
performance was the increased marketing spend at the end of 2022 around the
time of the football World Cup, resulting in higher revenue growth in 2023 at
a high contribution margin, in addition to more effective marketing spend
throughout 2023 and higher retention of customers due to improved product user
experience.
Responsible Business and Sustainability
In 2023, we continued to execute against our five-year sustainability
strategy. I am both proud and pleased to be able to report progress across all
our commitments.
· We strengthened our portfolio of safer gambling technology and
solutions under Playtech Protect with the development of personalised
responsible gambling journeys to help operators enhance safer gambling
interactions with their players. Playtech was also awarded the Advanced Level
Three of the GamCare B2B Safer Gambling Standard - the highest possible level
of award.
· In 2023, Playtech also made progress against its global target to
reach 35% female representation in leadership positions by 2025. At the end of
the year, Playtech reached 30% female representation amongst leadership
positions as compared to 26% in 2022. In 2024, Playtech will continue to
refine its understanding of gaps in female talent across the Group and take
action to increase female retention.
· We initiated our net zero by 2040 plan, and in early 2024, the
Science-Based Targets initiative (SBTi) approved Playtech's near-term
science-based emissions target, a 50.4% reduction in its scope 1, 2 and 3
emissions by 2032. Playtech has also committed to set long-term emissions
reduction targets with SBTi in line with reaching net zero by 2040.
· We supported a wide range of charitable and volunteering
activities, exceeding our community target set for 2025 by the end of 2023,
with over 160,000 people engaged through community investment and mental
health programmes over the past three years.
· We are honoured to be included in the S&P Global
Sustainability Yearbook 2024 for our sustainability efforts. By championing
sustainability and operating responsibly, we continually strive to make a
positive impact on our customers, colleagues, communities and the environment.
· In August 2023, we established a Global Employee Benevolent Fund to
provide support to colleagues and their immediate families who may encounter
unforeseen, severe life-changing challenges.
Chief Financial Officer's review
Overview
Group performance
Overall, Playtech delivered strong financial results in 2023, with Adjusted
EBITDA(1) of €432.3 million (2022: €395.4 million), growing 9% compared
to 2022. Total reported revenue from continuing operations was €1,706.7
million (2022: €1,601.8 million), representing a 7% increase compared to
2022.
The strong performance was driven by both the B2C and B2B divisions. In B2C,
Snaitech had a solid 2023 performance driven by growth across both the online
and retail divisions. This drove B2C Adjusted EBITDA of €250.3 million, an
increase of 6% compared to 2022. The overall growth was a combination of a
very strong start to the year, partly driven by pent-up demand post the 2022
Football World Cup and partly offset by customer-friendly sporting results in
the second half of the year.
In B2B, the results were driven by strong growth in regulated markets, with
revenues growing by 8% from €632.4 million in 2022 to €684.1 million in
2023 and Adjusted EBITDA increasing by 14% from €160.2 million in 2022 to
€182.0 million in 2023. With strong growth seen in the Americas and Europe
ex-UK, the good performance reflects the Group's strategy of focusing on
opportunities in regulated and soon to be regulated markets and is further
analysed in this report.
In March 2023, the Group invested $85.0 million (€79.8 million) in Hard Rock
Digital in exchange for a small minority interest in a combination of equity
shares and warrants. This investment forms part of the Group's strategy to
expand its presence in the US, in addition to providing growth opportunities
globally.
The Group has been dealing with the ongoing Caliplay disputes and in
particular in relation to the unpaid B2B licence fees and additional B2B
services fee in respect of FY2023 (€32.3 million outstanding for the period
August 2023 to December 2023 and €54.2 million outstanding for the period
July 2023 to December 2023 respectively). The Group has recognised the full
outstanding amount within its total revenue for the year and in line with its
revenue accounting policies. In recognising the entire amount, Playtech has
assessed that it is highly probable that there will not be a significant
reversal of this revenue in a subsequent period and the receivable is fully
recoverable as further explained in Note 7 of the financial statements.
Reported and Adjusted Profit
Adjusted Profit before tax from continuing operations grew by 16% to €250.5
million (2022: €215.4 million), driven mainly by the rise in Adjusted EBITDA
and decrease in financing costs, partly offset by the increase in amortisation
and depreciation.
Reported profit before tax from continuing operations increased to €235.8
million (2022: €95.6 million) which, in addition to the above, also includes
the increase in the unrealised fair value of derivative financial assets,
which was partly offset by higher goodwill and intangible impairments compared
to 2022. Total post-tax reported profit from continuing operations was
€105.1 million (2022: €40.6 million), with the movement in tax explained
further in this report.
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 €363.3 million as at 31 December 2023 (2022:
€272.4 million). The increase is a result of the new €300.0 million bond
issue which took place in June 2023 (see below) and the continued strong
performance of the Group throughout the year, partly offset by the €200.0
million repayment of the 2018 Bond and the uncollected €86.5 million
Caliplay debt. Net debt increased slightly to €282.8 million as at 31
December 2023 (2022: €275.2 million), while net debt/Adjusted EBITDA
remained flat at 0.7x (2022: 0.7x).
Playtech has taken a proactive approach to managing its balance sheet. In June
2023, the Company acted quickly to take advantage of a window of relative
market calm and secure favourable interest rates, issuing €300.0 million of
senior secured notes due 2028 at an interest rate of 5.875%. Part of the
proceeds were used to redeem all of the outstanding €200.0 million 3.75%
senior secured notes due in October 2023. The Company also used the proceeds
to repay the outstanding debt under its existing revolving credit facility in
July 2023, which remains available and undrawn today.
Group summary (continuing operations)(3)
2023 2022
€'m €'m
B2B 684.1 632.4
B2C 1,037.0 983.1
B2B License fee - intercompany* (14.4) (13.7)
Total Group revenue from continuing operations 1,706.7 1,601.8
Adjusted costs(4) (1,274.4) (1,206.4)
Adjusted EBITDA from continuing operations 432.3 395.4
Reconciliation from EBITDA to Adjusted EBITDA:
EBITDA 406.5 362.3
Employee stock option expenses 6.3 8.0
Professional fees 14.4 15.7
Ukraine employee support costs - 3.3
Onerous contract - 10.4
Fair value change of redemption liability - (4.3)
Impairment of investment and receivables 5.1 -
Adjusted EBITDA 432.3 395.4
Adjusted EBITDA margin 25% 25%
* These are the B2B license fees paid from the B2C divisions to B2B
The Group's total reported EBITDA increased by 12% to €406.5 million (2022:
€362.3 million). The adjusted items between reported and Adjusted EBITDA are
explained in Note 11 of the financial statements.
Divisional performance
B2B
B2B revenue
2023 2022 Change Constant
€'m €'m % currency
%
Americas 211.9 144.7 46% 35%
- USA and Canada 13.2 7.6 74% 82%
- Latin America 198.7 137.1 45% 32%
Europe excluding UK 200.1 184.6 8% 8%
UK 126.1 126.7 0% 1%
Rest of the World 7.0 5.6 25% 25%
Total regulated B2B revenue 545.1 461.6 18% 15%
Unregulated 139.0 170.8 -19% -17%
Total B2B revenue 684.1 632.4 8% 6%
Overall, B2B revenues increased by 8% (6% on a constant currency basis),
largely due to an increase in the regulated B2B business.
Regulated B2B revenues(2) increased by 18%, driven by an increase in regulated
markets in the Americas and Europe (excluding the UK) of 46% and 8%
respectively (35% and 8% respectively on a constant currency basis), partly
offset by a decline in unregulated revenues.
The increase in the Americas was primarily driven by Mexico, due to revenue
growth from Caliplay (albeit it there remains a large outstanding receivable
balance - see Note 7 of the financial statements), with increasing
contributions from other countries such as the US through Parx, Canada via
NorthStar and other licensees, and Colombia via Wplay. In Europe (excluding
the UK) growth was driven by several countries including Poland, Czech
Republic and Spain, although this growth was partly offset by the loss of two
retail sports contracts. The increase in Poland was driven by Playtech's
partnership with Polish state operator, Totalizator, which is going from
strength to strength, whereas in Spain, there were several new launches during
2023.
The small decline seen across the UK market was due to the continued impact of
the uncertain regulatory climate. The majority of the decline in unregulated
markets is due to revenue moving to the regulated category, as areas such as
Ontario in Canada regulate, as well as further declines in revenue in Asia.
B2B costs
2023 2022 Change
€'m €'m %
Research and Development 100.2 87.5 15%
General and Administrative 85.5 82.6 4%
Sales and Marketing 19.5 16.8 16%
Operations 296.9 285.3 4%
Total B2B Costs 502.1 472.2 6%
Total B2B Revenue and Costs
B2B revenue 684.1 632.4 8%
B2B costs (502.1) (472.2) 6%
Total B2B Adjusted EBITDA 182.0 160.2 14%
Margin 27% 25%
Research and Development ("R&D") costs include, among others,
employee-related costs, and proportional office expenses. Expensed R&D
costs grew by 15% to €100.2 million (2022: €87.5 million), driven by the
increase in employee-related costs, including inflationary salary rises from
higher investment in the core gaming development team (Casino, Live and IMS).
Capitalised development costs were 35.3% of total B2B R&D costs in 2023
(2022: 38.7%).
General and Administrative costs include employee-related costs, proportional
office expenses, consulting and legal fees, and corporate costs such as audit
and tax fees and listing expenses. These costs increased by 4% to €85.5
million (2022: €82.6 million), mainly due to increases in professional fees
and other administration costs.
Sales and Marketing costs increased by 16% to €19.5 million (2022: €16.8
million), mainly due to the full return of marketing and exhibition activities
to pre-COVID-19 levels.
Operations 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 4% to €296.9 million (2022: €285.3 million), driven mainly by
Playtech's expanding Live operations in Peru, US and Romania, as well as an
increase in costs to support Playtech's structured agreements.
B2B Adjusted EBITDA
Total B2B Adjusted EBITDA increased by 14% to €182.0 million (2022: €160.2
million), while EBITDA margin increased to 27% from 25% in 2022, driven by the
movement in revenue and costs, as described above.
B2C
2023 2022 Change
€'m €'m
Snaitech
Revenue(*) 946.6 899.8 5%
Costs 690.5 655.8 5%
Adjusted EBITDA 256.1 244.0 5%
Margin 27% 27%
Sun Bingo and Other B2C
Revenue 73.4 65.3 12%
Costs 67.4 63.3 6%
Adjusted EBITDA 6.0 2.0 200%
Margin 8% 3%
HAPPYBET
Revenue 18.2 20.1 -9%
Costs(**) 30.0 30.9 -3%
Adjusted EBITDA (11.8) (10.8)
Margin NA NA
B2C Adjusted EBITDA 250.3 235.2 6%
Margin 24% 24%
* Includes intercompany revenue from HAPPYBET of €1.2 million (2022:
€2.1 million).
** Includes intercompany costs from Snaitech of €1.2 million (2022:
€2.1 million).
Snaitech
Snaitech revenues increased 5% from the prior year to €946.6 million (2022:
€899.8 million), with operating costs seeing the same 5% increase to
€690.5 million (2022: €655.8 million). These results were driven by good
growth across both the retail and online segments, although there were
differing dynamics across the period. The first half saw a very strong start
driven by pent-up demand post the football World Cup. This was partly offset
by customer-friendly sporting results in the second half of the year.
As a result of Snaitech's movement in revenue and costs, Adjusted EBITDA
increased by 5%, while the respective margin remained stable at 27% (2022:
27%).
Sun Bingo and Other B2C
Revenue from the Sun Bingo business increased by 12% to €73.4 million
(2022: €65.3 million). Operating costs within Sun Bingo increased by 6% to
€67.4 million (2022: €63.3 million), leading to an Adjusted EBITDA of
€6.0 million (2022: €2.0 million). The increase in Adjusted EBITDA was due
to the increase in marketing spend towards the end of 2022 during the football
World Cup, resulting in higher revenue growth in 2023 at a high contribution
margin. Furthermore, during 2023, the division saw improvements in its return
on investment from more effective marketing and stronger retention rates.
Adjusted EBITDA still includes the unwinding of the minimum guarantee
prepayment of €5.2 million in the current year (2022: €5.4 million),
recognised as an expense 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
2022 to terminate an onerous contract with a service provider.
HAPPYBET
Revenue from HAPPYBET decreased by 9% to €18.2 million (2022: €20.1
million), with costs decreasing by 3%. The business remains loss-making, with
Adjusted EBITDA loss in the current year of €11.8 million (2022: loss of
€10.8 million), albeit 2023 includes a €2.0 million expense relating to a
litigation settlement.
Below EBITDA items
Depreciation and amortisation
Reported and adjusted depreciation increased by 12% to €46.5 million (2022:
€41.5 million). After deducting amortisation of acquired intangibles of
€42.6 million (2022: €42.0 million), adjusted amortisation increased by
24% to €84.1 million (2022: €67.8 million) after the renewal of certain
licences in Snaitech during H2 2022, which were previously extended for free
until June 2022 meaning there was no corresponding amortisation in H1 2022.
The remainder of the balance under depreciation and amortisation of €21.2
million (2022: €18.9 million) relates to IFRS 16 Leases and the recognition
of the right-of-use asset amortisation.
Impairment of intangible assets
The reported impairment of intangible assets of €89.8 million (2022: €38.5
million) mainly relates to:
• The impairment of the Eyecon cash generating unit (CGU) of €7.8 million
(2022: €13.6 million), driven by underperformance due to the increasingly
competitive UK online market.
• The impairment of the Quickspin CGU of €9.6 million (2022: €7.0
million), as the business goes through a transitional period, resulting in a
decline in revenue, but shows signs of recovering following an internal
realignment whereby it is now under management of the Live business unit.
• The impairment of the Sport B2B CGU of €72.2 million (2022: €Nil) due
to the loss of two significant retail contracts in the year.
The prior year impairment of €38.7 million related to the impairments of the
Eyecon CGU of €13.6 million, Quickspin CGU of €7.0 million, Bingo VF CGU
of €12.5 million and IGS CGU of €5.6 million.
Finance income and finance costs
The reported and adjusted finance income of €12.3 million (2022: €11.6
million) mainly relates to net foreign exchange gain of €2.2 million (2022:
€9.2 million) and interest received of €10.0 million (2022: €2.4
million).
Reported finance costs include interest payable on bonds and other borrowings,
bank facility fees, bank charges, interest expense on lease liabilities and
expected credit losses on loan receivables. Reported finance costs decreased
by 26% to €46.2 million (2022: €62.8 million), mainly due to the repayment
of the 2018 Bond in H2 2023. The difference between adjusted and reported
finance costs is the movement in contingent consideration of €3.3 million
(2022: €0.1 million) relating to the acquisition of AUS GMTC PTY Ltd.
Unrealised fair value changes in derivative financial assets
The unrealised fair value increase in derivative financial assets of
€153.4 million (2022: €6.0 million) is due to the movement of the fair
value of the various call options held by the Group which fall under the
definition of derivatives within IFRS 9 Financial Instruments, with the most
significant increase being as a result of the uplift in the fair value of the
Playtech M&A Call Option. Further details on the fair value of the various
call options are disclosed in Note 21C of the financial statements.
Taxation
A reported tax expense from continuing operations of €130.7 million (2022:
€55.0 million) arises on a reported profit before tax of €235.8 million
(2022: €95.6 million) compared to an expected charge of €55.4 million
based on the UK headline rate of tax for the period of 23.5%. The key item for
which the reported tax charge has been adjusted are UK tax losses on which a
deferred tax asset of €37.2 million was derecognised as expected utilization
would fall outside the forecasting period and therefore there is not
sufficient certainty they will be recovered.
The total adjusted tax expense is €93.7 million (2022: €54.9 million)
which arises on an Adjusted Profit before tax of €250.5 million (2022:
€215.4 million). The total adjusted tax expense of €93.7 million consists
of an income tax expense of €35.3 million (2022: €20.4 million) and a
deferred tax expense of €58.4 million (2022: €34.5 million). The total
adjusted deferred tax expense mainly consists of a deferred tax expense of
€42.2 million relating to the Snaitech group including the use of Snaitech
tax losses and excess interest expense.
The Group's effective adjusted tax rate for the current period is 37.4%. This
rate is higher than the UK headline rate for the period of 23.5%. The key
reasons for the differences are a mix of profits including subsidiaries
located in territories where the tax rate is higher than the UK statutory tax
rate (which predominately relates to Snaitech based in Italy), current year
tax losses not recognised for deferred tax purposes and expenses not
deductible for tax purposes which includes impairment of intangibles.
Discontinued operations
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.
Adjusted Profit
2023 2022
€'m €'m
Reported profit from continuing operations 105.1 40.6
Employee stock option expenses 6.3 8.0
Professional fees 14.4 15.7
Fair value change and finance costs on contingent consideration and redemption 3.3 (4.2)
liability
Ukraine employee support costs - 3.3
Onerous contract - 10.4
Impairment of investment and receivables 5.1 -
Fair value changes of equity instruments 6.6 0.3
Fair value changes of derivative financial assets (153.4) (6.0)
Fair value loss on convertible loans - 3.0
Loss on disposal of subsidiary - 8.8
Amortisation of intangible assets on acquisitions 42.6 42.0
Impairment of property plant and equipment and intangible assets 89.8 38.5
Deferred tax on acquisitions (8.2) (8.3)
Derecognition of brought forward deferred tax asset 37.2 -
Tax related to uncertain provision 8.0 8.4
Adjusted Profit from continuing operations 156.8 160.5
The reconciling items in the table above are further explained in Note 11 of
the financial statements. Reported profit post tax from continuing operations
was €105.1 million (2022: €40.6 million), mainly due to the increase in
the fair value of the derivative financial assets, partly offset by an
increase in CGU impairments and the derecognition of brought forward deferred
tax asset.
Adjusted EPS (in Euro cents)
2023 2022
Adjusted basic EPS from continuing operations 51.7 53.5
Adjusted diluted EPS from continuing operations 50.2 51.5
Basic EPS from profit attributable to the owners of the Company 34.7 29.2
Diluted EPS from profit attributable to the owners of the Company 33.7 28.1
Basic EPS from profit attributable to the owners of the Company from 34.7 13.5
continuing operations
Diluted EPS from profit attributable to the owners of the Company from 33.7 13.0
continuing operations
Basic EPS is calculated using the weighted average number of equity shares in
issue during 2023 of 303.3 million (2022: 300.1 million). Diluted EPS also
includes the dilutive impact of share options and is calculated using the
weighted average number of shares in issue during 2023 of 311.9 million (2022:
311.9 million).
Cash flow
Cash conversion
Playtech continues to be cash generative and delivered operating cash flows of
€366.9 million (2022: €410.9 million) including cash from discontinued
operations which only impacts H1 2022.
2023 2022
€'m €'m
Adjusted EBITDA 432.3 429.2
Net cash provided by operating activities 366.9 410.9
Cash conversion 85% 96%
Change in jackpot balances 3.3 (3.6)
Change in client funds and security deposits (2.1) 15.3
Professional fees 14.4 24.4
ADM security deposit (Italian Regulator) 0.7 11.5
Adjusted net cash provided by operating activities 383.2 458.5
Adjusted cash conversion 89% 107%
Excluding the impact of discontinued operations, operating cashflows decreased
from €382.7 million in the prior year to €366.9 million in 2023, with the
decline driven by the outstanding Caliplay receivable as further explained in
Note 7 of the financial statements.
2023 2022
€'m €'m
Adjusted EBITDA 432.3 395.4
Net cash provided by operating activities 366.9 382.7
Cash conversion 85% 97%
Change in jackpot balances 3.3 (3.6)
Change in client funds (2.1) (9.4)
Professional fees 14.4 15.7
ADM security deposit (Italian Regulator) 0.7 11.5
Adjusted net cash provided by operating activities 383.2 396.9
Adjusted cash conversion 89% 100%
Adjusted cash conversion of 89% (2022: 100%) is shown after adjusting for
jackpot balances, 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 jackpots, security deposits and client funds
only impact the reported operating cash flow and not Adjusted EBITDA, while
professional fees are excluded from Adjusted EBITDA but impact operating cash
flow.
Cash flow statement analysis
Net cash outflows used in investing activities totalled €317.6 million
(2022: €358.3 million), key items of which include:
· €79.8 million for the acquisition of a small minority interest
in Hard Rock Digital (refer to Note 21B);
· €41.3 million cash payment in relation to a subcontractor
option redemption (refer to Note 21C); and
· €150.0 million (2022: €125.4 million) used in the acquisition
of property plant and equipment, intangibles and capitalised development
costs.
Net cash inflows from financing activities totalled €39.9 million (2022:
outflow of €566.9 million), key movements of which include:
· Redemption of the outstanding €200.0 million Bond due 2023; and
· Net proceeds of €297.2 million received from the new Bond
issued in 2023.
Balance sheet, liquidity and financing
2023 2022
€'m €'m
Cash and cash equivalents (net of ECL) 516.2 426.5
Cash held on behalf of clients, progressive jackpots and security deposits (152.9) (154.1)
Adjusted gross cash and cash equivalents 363.3 272.4
Bonds 646.1 547.6
Gross debt 646.1 547.6
Net debt 282.8 275.2
Adjusted EBITDA 432.3 395.4
Net debt/Adjusted EBITDA ratio 0.7 0.7
Cash
The Group continues to maintain a strong balance sheet with total cash and
cash equivalents of €516.2 million at 31 December 2023 (2022: €426.5
million). Adjusted gross cash, which excludes the cash held on behalf of
clients, progressive jackpots and security deposits, increased to
€363.3 million as at 31 December 2023 (2022: €272.4 million), a result
of the new €300.0 million bond issue (see below) and the continued strong
performance of the Group throughout the year, offset by the repayment of the
outstanding €200.0 million bond due 2023 (the "2018 Bond") and the Caliplay
outstanding debt of €86.5 million.
Financing and net debt
As at 31 December 2023, the Group had the following borrowing facilities:
· €350.0 million 2019 Bond (31 December 2022: €350.0 million)
(4.25% coupon, maturity 2026) which was raised in March 2019;
· Undrawn €277.0 million revolving credit facility (2022:
Undrawn); This facility is available until October 2025, with an option to
extend by 12 months; and
· €300.0 million 2023 Bond issued in June 2023, as further
discussed below.
Playtech has taken a proactive approach to managing its balance sheet. In June
2023, the Company acted quickly to take advantage of a window of relative
market calm and secure favourable interest rates. Playtech issued €300.0
million of senior secured notes due 2028 at an interest rate of 5.875% (2023
Bond). The 2023 Bond has been assigned a rating of BB by S&P Global
Ratings UK Limited and Ba2 by Moody's Investors Service Ltd upon issue. In
July 2023, part of the proceeds of the bond were used to redeem all of the
outstanding 2018 Bond of €200.0 million 3.75% due in H2 2023 and to repay
the outstanding debt under its existing revolving credit facility, which
remains available and undrawn today. The remaining amount, after payment of
transaction-related expenses, will be used for general corporate purposes.
Net debt, after deducting Adjusted gross cash, increased slightly to €282.8
million (2022: €275.2 million), while net debt/Adjusted EBITDA remained
stable at 0.7x (2022: 0.7x).
Contingent consideration
Contingent consideration increased to €6.2 million (2022: €2.9 million)
mostly due to the fair value movement in the contingent consideration related
to Aus GMTC PTY Ltd acquisition. The existing liability as at 31 December 2023
comprised the following:
Acquisition Maximum payable earnout Contingent consideration as at 31 December 2023 Payment date (based on
(per terms of acquisition) maximum payable earnout)
Aus GMTC PTY Ltd €45.3 million €5.4 million Q4 2025
Other €0.8 million €0.8 million Various
Going concern and viability assessment
In adopting the going concern basis in the preparation of the 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 2023, the Group held total cash of €516.2 million (2022:
€426.5 million) and Adjusted gross cash, which excludes the cash held on
behalf of clients, progressive jackpots and security deposits, of €363.3
million (2022: €272.4 million). Net debt, which is gross debt after
deducting Adjusted gross cash, increased slightly to €282.8 million
(2022: €275.2 million).
The financing and net debt position has been reported and analysed in the
relevant section above. As at the date of this report (26 March 2024) the
Group's facilities include the 2019 Bond of €350.0 million and the 2023 Bond
of €300.0 million, both of which are long term borrowings due in 2026 and
2028 respectively, as well as the fully undrawn RCF of €277.0 million.
As per the going concern assessment under Note 2, under its base case scenario
management, 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.
While the base case cash flow forecasts have assumed full recovery of the
Caliplay outstanding amounts within the going concern period of assessment,
there is a remote risk that no cash will be received depending on the progress
of the legal dispute, and hence this was modelled in the stress test scenario.
Even under this scenario the Group still has sufficient headroom on its
covenants and liquidity and hence the Directors still have a reasonable
expectation that the Group will continue as a going concern over the relevant
going concern period. This remote scenario was also modelled in the viability
assessment which covers a period of three years and concludes that there is a
reasonable expectation that the Group will be able to continue in operation
and meet its liabilities as they fall due over the three-year period to 31
December 2026.
1 Adjusted numbers throughout relate to certain non-cash and one-off
items. 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 11
of the financial statements.
2 Core B2B refers to the Company's B2B business excluding
unregulated Asia.
3 Totals in tables throughout this statement may not exactly equal the
components of the total due to rounding.
4 Comparative information throughout has been re-stated due to change
in accounting policy. Further details are provided in Note 4C of the financial
statements.
Consolidated statement of comprehensive income
For the year ended 31 December 2023
Note 2023 2022
Actual Adjusted Actual Adjusted
€'m €'m1 €'m2 €'m1, 2
Continuing operations
Revenue 10 1,706.7 1,706.7 1,601.8 1,601.8
Distribution costs before depreciation and amortisation (1,147.1) (1,145.1) (1,077.5) (1,073.5)
Administrative expenses before depreciation and amortisation (146.7) (124.3) (147.3) (118.2)
Impairment of financial assets (6.4) (5.0) (14.7) (14.7)
EBITDA 11 406.5 432.3 362.3 395.4
Depreciation and amortisation (194.4) (151.8) (170.1) (128.1)
Impairment of property, plant and equipment and intangible assets 13 (89.8) - (38.5) -
Profit on disposal of property, plant and equipment and intangible assets 1.4 1.4 - -
Finance income 14A 12.3 12.3 11.6 11.6
Finance costs 14B (46.2) (42.9) (62.8) (59.7)
Share of loss from associates 21A (0.8) (0.8) (3.8) (3.8)
Unrealised fair value changes of equity investments 21B (6.6) - (0.3) -
Unrealised fair value changes of derivative financial assets 21C 153.4 - 6.0 -
Loss on disposal of subsidiary 21A - - (8.8) -
Profit before taxation 11 235.8 250.5 95.6 215.4
Income tax expense 11,15 (130.7) (93.7) (55.0) (54.9)
Profit from continuing operations 11 105.1 156.8 40.6 160.5
Profit from discontinued operations, net of tax 9 - - 47.0 41.2
Profit for the year - total 105.1 156.8 87.6 201.7
Other comprehensive loss:
Items that are or may be classified subsequently to profit or loss:
Exchange loss arising on translation of foreign operations (7.7) (7.7) (0.2) (0.2)
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 on remeasurement of employee termination indemnities - - 0.9 0.9
Other comprehensive (loss)/income for the year (7.7) (7.7) 23.9 23.9
Total comprehensive income for the year 97.4 149.1 111.5 225.6
Profit for the year attributable to the owners of the Company 105.1 156.8 87.6 201.7
Total comprehensive income attributable to the owners of the Company 97.4 149.1 111.5 225.6
Earnings per share attributable to the ordinary equity holders of the Company
Profit or loss - total
Basic (cents) 16 34.7 51.7 29.2 67.2
Diluted (cents) 16 33.7 50.2 28.1 64.7
Profit or loss from continuing operations
Basic (cents) 16 34.7 51.7 13.5 53.5
Diluted (cents) 16 33.7 50.2 13.0 51.5
1 Adjusted numbers relate to certain non-cash and one-off items. 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 11.
2 Comparative information has been re-stated due to change in
accounting policy. Further details are provided in Note 4C.
Consolidated statement of changes in equity
For the year ended 31 December 2023
Additional Employee Retained Employee Put/call Foreign Total Non- Total
paid in termination earnings Benefit options exchange attributable to equity holders of controlling equity
capital indemnities €'m Trust reserve reserve Company interests €'m
€'m €'m €'m €'m €'m €'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
Adjustment on initial recognition of IAS 12 amendment (Note 4A) - - 1.5 - - - 1.5 - 1.5
Adjusted balance at 1 January 2022 606.0 (0.5) 1,026.5 (23.2) (3.7) (22.7) 1,582.4 0.3 1,582.7
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 - - - - -
Equity-settled share-based payment charge - - 8.3 - - - 8.3 - 8.3
Total contributions and distributions - - 2.3 6.0 - - 8.3 - 8.3
Change 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 / 1 January 2023 606.0 0.4 1,113.0 (17.2) - 0.3 1,702.5 - 1,702.5
Total comprehensive income for the year
Profit for the year - - 105.1 - - - 105.1 - 105.1
Other comprehensive loss for the year - - - - - (7.7) (7.7) - (7.7)
Total comprehensive income for the year - - 105.1 - - (7.7) 97.4 - 97.4
Transactions with the owners of the Company
Contributions and distributions
Exercise of options - - (11.9) 11.9 - - - - -
Equity-settled share-based payment charge - - 6.3 - - - 6.3 - 6.3
Transfer from treasury shares to Employee Benefit Trust 5.8 - 6.7 (12.5) - - - - -
Total contributions and distributions 5.8 - 1.1 (0.6) - - 6.3 - 6.3
Total transactions with owners of the Company 5.8 - 1.1 (0.6) - - 6.3 - 6.3
Balance at 31 December 2023 611.8 0.4 1,219.2 (17.8) - (7.4) 1,806.2 - 1,806.2
Consolidated balance sheet
As at 31 December 2023
2023 2022 2021
Note €'m €'m1 €'m1
ASSETS
Property, plant and equipment 18 350.2 341.4 329.7
Right of use assets 19 71.0 71.6 73.8
Intangible assets 20 881.2 980.9 1,046.1
Investments in associates 21A 51.5 36.6 5.2
Other investments 21B 92.8 9.2 8.1
Derivative financial assets 21C 827.8 636.4 622.2
Trade receivables 23 1.9 1.1 6.6
Deferred tax asset 33 62.5 114.0 104.4
Other non-current assets 22 137.0 109.6 104.4
Non-current assets 2,475.9 2,300.8 2,300.5
Trade receivables 23 207.1 163.9 178.5
Other receivables 24 100.5 107.6 87.1
Inventories 6.8 5.5 4.9
Cash and cash equivalents 25 516.2 426.5 575.4
830.6 703.5 845.9
Assets classified as held for sale 26 19.3 19.6 507.4
Current assets 849.9 723.1 1,353.3
TOTAL ASSETS 3,325.8 3,023.9 3,653.8
EQUITY
Additional paid in capital 611.8 606.0 606.0
Employee termination indemnities 0.4 0.4 (0.5)
Employee Benefit Trust (17.8) (17.2) (23.2)
Put/call options reserve - - (3.7)
Foreign exchange reserve (7.4) 0.3 (22.7)
Retained earnings 1,219.2 1,113.0 1,026.5
Equity attributable to equity holders of the Company 1,806.2 1,702.5 1,582.4
Non-controlling interests - - 0.3
TOTAL EQUITY 27 1,806.2 1,702.5 1,582.7
LIABILITIES
Loans and borrowings 28 - - 167.1
Bonds 29 646.1 348.0 875.0
Lease liability 19 61.9 54.0 69.8
Deferred revenues 1.8 1.0 2.9
Deferred tax liability 33 161.6 124.8 88.9
Contingent consideration 31 5.8 2.3 6.0
Provisions for risks and charges 30 8.9 10.0 13.5
Other non-current liabilities 34 34.8 24.9 12.8
Non-current liabilities 920.9 565.0 1,236.0
Bonds 29 - 199.6 -
Trade payables 32 66.9 61.2 41.3
Lease liability 19 24.9 31.8 20.3
Progressive operators' jackpots and security deposits 25 111.0 114.3 110.7
Client funds 25 41.9 39.8 30.4
Income tax payable 14.0 17.3 2.6
Gaming and other taxes payable 35 116.1 112.8 105.4
Deferred revenues 4.4 5.0 5.2
Contingent consideration 31 0.4 0.6 5.0
Provisions for risks and charges 30 0.6 3.9 3.2
Other payables 34 217.5 169.1 166.2
597.7 755.4 490.3
Liabilities directly associated with assets classified as held for sale 26 1.0 1.0 344.8
Current liabilities 598.7 756.4 835.1
TOTAL LIABILITIES 1,519.6 1,321.4 2,071.1
TOTAL EQUITY AND LIABILITIES 3,325.8 3,023.9 3,653.8
The consolidated financial statements were approved by the Board and
authorised for issue on 26 March 2024.
Mor Weizer Chris McGinnis
Chief Executive Officer Chief Financial Officer
1 Comparative information has been re-stated due to change in
accounting policy. Further details are provided in Note 4A.
Consolidated statement of cash flows
For the year ended 31 December 2023
Note 2023 2022
€'m €'m
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the year 105.1 87.6
Adjustments to reconcile net income to net cash provided by operating 307.7 337.1
activities (see below)
Net taxes paid (45.9) (13.8)
Net cash from operating activities 366.9 410.9
CASH FLOWS FROM INVESTING ACTIVITIES
Net loans granted/repaid 22 (23.4) (30.4)
Dividend income 1.5 -
Acquisition of subsidiaries/assets under business combinations, net of cash (3.6) (2.9)
acquired
Acquisition of property, plant and equipment (57.6) (54.0)
Acquisition of intangible assets (35.7) (10.1)
Capitalised development costs (56.7) (61.3)
Acquisition of investment in associates 21A (9.2) (30.2)
Acquisition of investments at fair value through profit or loss 21B (94.1) -
Subcontractor option redemption 21C (41.3) -
Proceeds from the sale of property, plant and equipment and intangible assets 2.5 0.8
Disposal of Financial segment, net of cash disposed - (169.8)
Disposal of subsidiary, net of cash disposed - (0.4)
Net cash used in investing activities (317.6) (358.3)
CASH FLOWS FROM FINANCING ACTIVITIES
Interest paid on bonds and loans and borrowings (31.3) (36.7)
Repayment of loans and borrowings (77.4) (166.1)
Proceeds from loans and borrowings 79.9 -
Proceeds from the issuance of 2023 Bond, net of issue costs 29 297.2 -
Repayment of 2018 Bonds 29 (200.0) (330.0)
Payment of contingent consideration and redemption liability (see below) (0.2) (5.9)
Principal paid on lease liability (23.1) (22.5)
Interest paid on lease liability (5.2) (5.7)
Net cash from/(used in) financing activities 39.9 (566.9)
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 89.2 (514.3)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 426.9 942.1
Exchange gain/(loss) on cash and cash equivalents 0.5 (0.9)
CASH AND CASH EQUIVALENTS AT END OF YEAR 25 516.6 426.9
Note 2023 2022
€'m €'m
ADJUSTMENTS 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 18 46.5 41.5
Amortisation of intangible assets 20 126.7 109.8
Amortisation of right of use assets 19 23.3 21.5
Capitalisation of amortisation of right of use assets (1.7) (1.9)
Impact on early termination of lease contracts 19 (0.4) (0.7)
Share of loss from associates 21A 0.8 3.8
Impairment and expected credit losses on loans receivable 22 2.4 1.6
Impairment of investment 21B 1.3 -
Impairment of other receivables 2.2 -
Reversal of impairment of property, plant and equipment 18 - (0.2)
Impairment of intangible assets 20 89.8 38.7
Profit on disposal of Financial segment 9 - (15.1)
Loss on disposal of subsidiary 21A - 8.8
Changes in fair value of equity investments 21B 6.6 0.3
Changes in fair value of derivative financial assets 21C (153.4) (6.0)
Fair value loss on convertible loans - 3.0
Interest on bonds and loans and borrowings 30.9 36.2
Interest on lease liability 5.2 5.7
Interest income on loans receivable 22 (1.9) (1.3)
Income tax expense 130.7 58.5
Changes in equity-settled share-based payment 6.3 8.3
Movement in contingent consideration and redemption liability 3.3 (4.3)
Expected credit loss on cash and cash equivalents - (0.2)
Unrealised exchange gain (2.9) (4.4)
(Profit)/loss on disposal of property, plant and equipment and intangible (1.4) 0.2
assets
Changes in operating assets and liabilities:
Change in trade receivables (47.9) 13.0
Change in other receivables (0.4) 3.5
Change in inventories (1.3) (0.6)
Change in trade payables 4.5 20.4
Change in progressive operators, jackpots and security deposits (3.3) 3.6
Change in client funds 2.0 (15.3)
Change in other payables 44.1 13.6
Change in provisions for risks and charges (4.6) (2.8)
Change in deferred revenues 0.3 (2.1)
307.7 337.1
Payment of contingent consideration and redemption liabilities on previous
acquisitions
2023 2022
€'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 0.2 0.7
0.2 5.9
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. Playtech plc is managed and controlled in the UK and, as a result, is UK
tax resident.
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 2023 or 2022 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 26 March
2024. Details of the Group's accounting policies are included in Note 6.
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 2025 which aligns with the six-monthly covenant measurement period.
31 December 31 December
2023 2022
€'m €'m
Cash and cash equivalents 516.2 426.5
Cash held on behalf of clients, progressive jackpots and security deposits (152.9) (154.1)
Adjusted gross cash and cash equivalents 363.3 272.4
The increase in adjusted gross cash and cash equivalents from €272.4 million
at 31 December 2022 to €363.3 million at 31 December 2023 is mainly the
result of the new €300.0 million bond issued and continued strong
performance of the Group throughout the year, partially offset by the
repayment of the €200.0 million 2018 Bond, the acquisition of a small
minority interest in Hard Rock (Note 21B) in March 2023 and the amounts
currently in dispute due from Caliplay (Note 7).
The Directors have reviewed liquidity and covenant forecasts for the Group and
have also considered sensitivities in respect of potential downside scenarios,
reverse stress tests and the mitigating actions available to management.
The modelling of downside stress test 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 remote probability that no further cash is
received from Caliplay in respect of the dispute.
In June 2023, the Group successfully issued new €300.0 million senior
secured notes at a rate of 5.875% repayable in June 2028 which were partially
used to repay in full the balance of the €200.0 million bond (initial
€530.0 million of senior secured notes bond) issued in October 2018.
The Group's principal financing arrangements as at 31 December 2023 include a
revolving credit facility (RCF) up to €277.0 million (which as at 31
December 2023 remains fully undrawn), the 2019 Bond amounting to €350.0
million and the new 2023 Bond amounting to €300.0 million, which are
repayable March 2026 and June 2028 respectively. The RCF, which was
restructured in October 2022, has been reduced from €317.0 million to
€277.0 million and is available until October 2025, with the Group having
the option to extend by 12 months.
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 28 and 29. As at 31
December 2023, the Group comfortably met its covenants, which were as follows:
• Leverage: Net Debt/Adjusted EBITDA to be less than 3.5:1 for the
12 months ended 31 December 2023 (2022: less than 3.5:1).
• Interest cover: Adjusted EBITDA/Interest to be over 4:1 for the 12
months ended 31 December 2023 (2022: over 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 and cash flows 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 2024, December 2024 and June
2025 and is the main reason why the Directors selected a 15-month period of
assessment. Under the base case scenario, the Group would not need to utilise
its RCF facility over the going concern period.
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 available (including salary and capital expenditure
reductions) if needed. It also includes the remote probability that no further
cash is received from Caliplay in the going concern period to 30 June 2025.
The outstanding amount at 31 December 2023 is €86.5 million (Note 7), with
further invoices totalling €35.8 million in relation to B2B licence fees and
additional B2B services fee for January and February 2024 issued and which
remain unpaid (Note 41). Under this scenario, Adjusted EBITDA would fall on
average by 31% per month compared to the base case over the relevant going
concern period, but the Group would still comfortably meet its covenants. From
a liquidity perspective the Group still would not need to utilise the RCF.
The Group has also considered any matters outside of the going concern period
such as the renewal of the Italian licences which will result in a material
cash outflow. This is currently expected to fall outside of the going concern
period; however, should payment be required in the going concern period or
shortly after, this does not give rise to any concerns over liquidity or
covenant compliance.
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 85% in the year ending 31
December 2024 and 85% in the 12 months to June 2025, 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 main functional currencies for subsidiaries
includes Euro, United States Dollar and British Pound. All amounts have been
rounded to the nearest million, unless otherwise indicated.
Note 4 - Changes in material accounting policies
A. Deferred tax related to assets and liabilities arising from a single
transaction
The Group has adopted Deferred Tax related to Assets and Liabilities arising
from a Single Transaction - Amendments to IAS 12 effective from 1 January
2023. The amendments narrow the scope of the initial recognition exemption to
exclude transactions that give rise to equal and offsetting temporary
differences, e.g. leases and decommissioning liabilities. For leases and
decommissioning liabilities, an entity is required to recognise the associated
deferred tax assets and liabilities from the beginning of the earliest
comparative period presented, with any cumulative effect recognised as an
adjustment to retained earnings or other components of equity at that date.
Following the change to the initial recognition exemption, the Group has
recognised a separate deferred tax asset in relation to its lease liabilities
and a deferred tax liability in relation to its right of use assets.
The table below presents the cumulative effects of the items affected by the
initial application on the consolidated balance sheet as at 1 January 2022 and
31 December 2022:
€'m
Assets
Deferred tax asset 1.5
Equity
Retained earnings 1.5
B. Material accounting policy information
The Group also adopted the Disclosure of Accounting Policies (Amendments to
IAS 1 and IFRS Practice Statement 2) from 1 January 2023. Although the
amendments did not result in any changes to the accounting policies
themselves, they impacted the accounting policy information disclosed in the
financial statements.
The amendments require the disclosure of "material", rather than
"significant", accounting policies. The amendments also provide guidance on
the application of materiality to disclosure of accounting policies, assisting
entities to provide useful, entity-specific accounting policy information that
users need to understand other information in the financial statements.
Management reviewed the accounting policies and made updates to the
information disclosed in Note 6 Material accounting policies (2022:
Significant accounting policies) in certain instances in line with the new
amendments.
C. Reclassification of bank charges in the profit or loss
Effective 1 January 2023, the Group changed its accounting policy to recognise
certain costs within distribution costs, previously recognised within finance
costs. Management believes that the classification as distribution costs is
more in line with the nature of the cost, being banking charges relating to
players' transaction processing within the B2C business segment.
Below is a summary of the impact of the change in accounting policy for the
previous period:
Year ended 31 December 2022 As previously reported Adjustments As restated
€'m €'m €'m
Distribution costs before depreciation and amortisation 1,067.3 10.2 1,077.5
Finance costs 73.0 (10.2) 62.8
Adjusted EBITDA and reported EBITDA for the year ended 31 December 2022
decreased by €10.2 million to €395.4 million and €362.3 million
respectively. There was no impact to the profit before tax.
Note 5 - Accounting standards issued but not yet effective
A number of new standards are effective for annual periods beginning after 1
January 2023 and earlier application is permitted. However, the Group has not
early adopted the following new or amended accounting standards in preparing
these consolidated financial statements.
• Amendments to IAS 1 Presentation of Financial Statements:
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.
• Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7
In May 2023, the IASB issued amendments to IAS 7 Statement of Cash Flows and
IFRS 7 Financial Instruments: Disclosures to clarify the characteristics of
supplier finance arrangements and require additional disclosure of such
arrangements. The disclosure requirements in the amendments are intended to
assist users of financial statements in understanding the effects of supplier
finance arrangements on an entity's liabilities, cash flows and exposure to
liquidity risk.
Note 6 - Material 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 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 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 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 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) 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
amortised 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 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 per IFRS 9. In the
case where there is significant influence over the investment under which
Playtech holds the derivative financial asset, it should be accounted for
under IAS 28 Investment in Associate. However, if the option is not currently
exercisable and there is no current access to profits, the option is fair
valued without applying equity accounting to the investment in associate.
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.
(iv) 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 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).
(v) 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 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 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 using the exchange rates at the reporting date and the statements of
profit or loss items 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 and
is net of refunds, concessions and discounts provided to certain licensees.
The payment terms of the B2B licensee fee are 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 revenue recognised by the Group
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 charged 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 are 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 between each licensee and 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 are 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 are 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 are 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; revenues are
recognised at the time of the bet.
· The revenues from online gaming (games of skill/casino/bingo) are
recognised net of the winnings, jackpots, bonuses and certain flat-rate gaming
tax 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 at the conclusion of the event.
· Poker revenues in the form of commission (i.e. rake) are
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.
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 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
The Group adopted the amendments to IAS 12 issued in May 2023, which provide a
temporary mandatory exception from the requirement to recognise and disclose
deferred taxes arising from enacted tax law that implements the Pillar Two
model rules, including tax law that implements qualified domestic minimum
top-up taxes described in those rules. Under these amendments, any Pillar Two
taxes incurred by the Group will be accounted for as current taxes from 1
January 2024.
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 does not give rise to
equal taxable and deductible temporary differences; 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 does not give rise to equal taxable and deductible temporary differences;
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 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 is 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 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 expenditures, including expenditures on internally generated goodwill
and brands, are 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 are 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 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.
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.
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
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 recognises 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 recognised in profit or loss. On conversion of a
convertible instrument, the Group derecognises the financial asset component
and recognises it as an investment (equity interest, associate, joint venture
or subsidiary) depending on the results of the assessment performed under the
relevant standards.
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,
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 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 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. For
goodwill in particular, the Group is required to test annually and also when
impairment indicators arise, whether goodwill and indefinite life assets have
suffered any 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 are 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 an 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 performance measures (APMs)
In the reporting of financial information, the Directors use various APMs. The
Directors use the APMs to understand, manage and evaluate the business and
make operating decisions. These APMs are among the primary factors management
uses in planning for and forecasting future periods.
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.
The following are the definitions and purposes of the APMs used:
APM Closest equivalent IFRS measure Reconciling items to statutory measure Definition and purpose
Adjusted EBITDA and Adjusted Profit Operating profit and Profit before tax Note 11
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 management
regularly monitors the operating cash conversion to Adjusted EBITDA.
· Material one-off items: these items are excluded to get
normalised results that are distorted by unusual or infrequent 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.
· Investment/acquisition-related items: these items are excluded as
they are not related to the ordinary activities of the business and therefore
are not considered to be ongoing costs of the operations of the business.
These APMs provide a consistent measure of the performance of the Group from
period to period by removing items that are considered to be either non-cash ,
one-off or investment/acquisition related items. This is a key management
incentive metric.
Adjusted gross cash and cash equivalents Cash and cash equivalents Chief Financial Officer's statement
Adjusted gross cash and cash equivalents is defined as the cash and cash
equivalents after deducting the cash balances held on behalf of operators in
respect of operators' jackpot games and poker and casino operations as well as
client funds with respect to B2C.
Net debt None Chief Financial Officer's statement
Net debt is defined as the Adjusted gross cash and cash equivalents after
deducting loans and borrowings and bonds. Used to show level of net debt in
the Group and movement from period to period.
Adjusted net cash provided by operating activities Net cash provided by operating activities Chief Financial Officer's statement
Net cash provided by operating activities after adjusting for jackpots and
client funds, professional fees and ADM (Italian regulator) 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 jackpots, security deposits and client funds
only impact the reported operating cash flow and not Adjusted EBITDA, while
professional fees are excluded from Adjusted EBITDA but impact operating cash
flow.
Cash conversion None Chief Financial Officer's statement
Cash conversion is defined as cash generated from operations as a percentage
of Adjusted EBITDA.
Adjusted cash conversion None Chief Financial Officer's statement
Adjusted cash conversion is defined as Adjusted net cash provided by operating
activities as a percentage of Adjusted EBITDA.
Adjusted EPS EPS Note 16 The calculation of Adjusted EPS is based on the Adjusted Profit and weighted
average number of ordinary shares outstanding.
Adjusted diluted EPS Diluted EPS Note 16 The calculation of Adjusted diluted EPS is based on the Adjusted Profit and
weighted average number of ordinary shares outstanding after adjusting for the
effects of all dilutive potential ordinary shares.
Adjusted tax Tax expense Note 11
Adjusted tax is defined as the tax charge for the period after deducting tax
charges related to uncertain tax positions relating to prior years, deferred
tax on acquisition and the write down of deferred tax assets in respect of tax
losses arising in prior years. As these items either do not relate to the
current year or are adjusted in arriving at the Adjusted Profit, they distort
the effective tax rate for the period.
V. Onerous contracts
Present obligations arising under onerous contracts are recognised and
measured as provisions. An onerous contract is considered to exist where the
Group has a contract under which the unavoidable costs of meeting the
obligations under the contract exceed the economic benefits expected to be
received under it.
Note 7 - 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.
Impact of Caliplay dispute
Background
As per the public announcement released by Playtech on 6 February 2023, the
Group, through its subsidiary, PT Services Malta Limited ("PT Malta"), is
seeking a declaration from the English Courts to obtain clarification on a
point of disagreement between Tecnologia en Entretenimiento Caliplay, S.A.P.I.
("Caliplay") and PT Malta in relation to the Caliente Call Option. The
Caliente Call Option is an option held by Caliplay where, for 45 days after
the finalisation of Caliplay's 2021 accounts, Caliplay could redeem PT Malta's
additional B2B services fee or (if the Playtech Call Option had been exercised
at that time) Caliente would have the option to acquire PT Malta's 49% stake
in Caliplay. The Group believes the Caliente Call Option has expired and first
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.
The Group has not changed its position with regards expiry at both 31 December
2022 and 2023. The matter is still unresolved and it is currently due to be
heard in English Court in October 2024.
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 (refer to Note 21A for details on these option
arrangements).
The dispute with Caliplay now also includes a litigation in relation to the
B2B licensee fees and additional B2B services fees owed by Caliplay to
Playtech under the terms of the Group's licence agreement. The dispute relates
to amounts that date back to July 2023.
The Group became aware in early October 2023 that, in August 2023, without
prior notice, Caliplay commenced proceedings in Mexico against the Group
seeking (amongst other things) to invalidate the licence agreement between
Caliplay and PT Malta (and the associated framework agreement which also
includes the Playtech Call Option and the Playtech M&A Call Option). From
that point, Caliplay has declined to pay nearly all monthly sums due under the
licence agreement (for B2B licensee fee amounts due from August 2023 and
additional B2B services fee amounts due from July 2023). Those Mexican
proceedings have since been withdrawn by Caliplay, having been ordered to do
so by the English Courts, but the amounts due to PT Malta remain unpaid.
PT Malta has therefore amended its case in the English Courts to include a
debt claim for monies owed by Caliplay under the licence agreement for sums
due as B2B licensee fees and additional B2B services fees. Caliplay has denied
in its defence that these fees are outstanding or otherwise payable.
As regards the B2B licensee fees, Caliplay has made a counterclaim relating to
alleged complaints about the quality of certain software licensed to it by PT
Malta. Caliplay alleges that the difference in value provided to it by the
software, as compared with the B2B licensee fees invoiced by PT Malta,
entitles Caliplay to reduce the B2B licensee fees. Caliplay has also claimed
that amounts invoiced by PT Malta in respect of the B2B licensee fees are in
excess of those allowed by the contractual terms.
As regards the monthly additional B2B services fees, Caliplay has alleged that
on 3 January 2024 it recorded a significant provision for the months of July
to November 2023 and argues that, because of this provision, Caliplay's
profits for Q3 2023 stand to be retrospectively adjusted downwards to zero,
with the effect that all of the additional B2B services fees (which are
calculated based on predefined percentage of revenue generated by Caliplay
with a profit-linked cap (as provided for in the agreement)) for Q3 2023 also
stand to be retrospectively adjusted downwards to zero. Caliplay also alleges,
as a result of the significant provision, that it does not have sufficient
working capital (after taking account of this provision) to pay these
additional B2B services fees.
The monthly additional B2B services fees in respect of Q4 2023 have also not
been paid. PT Malta is still to formally amend its claim to include these
amounts and Caliplay has therefore not yet pleaded any defence as to the basis
of its non-payment. However, the Group anticipates that Caliplay will seek to
rely on substantially the same bases for non-payment of these fees as are
relied upon in respect of Q3 2023.
Impact on revenue recognition and recovery of receivable
At 31 December 2023, the outstanding amount of the B2B licensee fee was
€32.3 million and the outstanding amount of the additional B2B services fee
was €54.2 million.
The Group has recognised the full outstanding amount above of €86.5 million
within its total revenue for the year and in line with its revenue accounting
policies as per Note 6D. In recognising the entire amount, the Group has
assessed that it is highly probable that there will not be a significant
reversal of this revenue in a subsequent period. This was principally
supported by the following:
In relation to the monthly B2B licensee fees, the Group believes that
Caliplay's counterclaim is unlikely to succeed and that Caliplay will also not
be entitled to set it off against the B2B licensee fees owed. PT Malta's legal
position is that Caliplay's interpretation of the licence agreement is not
correct and that Caliplay will not be legally entitled, even if it did have a
valid counterclaim, to set it off against the B2B licensee fees owed or to
claim an alleged difference in value between the software provided and the B2B
licensee fees invoiced.
The Group also does not accept the factual allegations which Caliplay has made
about its software, considers that Caliplay's case does not accurately reflect
the contractual obligations which relate to the Group's software, and in any
event firmly believes that it has met its performance obligations under the
agreement and therefore is entitled to the full revenue. The Group's software
has helped to deliver considerable year-on-year revenue growth for Caliplay;
the Group believes that growth is inconsistent with the allegations which
Caliplay is now making about the quality of software and services delivered.
In relation to the monthly additional B2B services fees, the Group believes
that Caliplay is unlikely to convince the English Courts on its current case
that the provision is valid and has any effect on the amounts due to the Group
(through PT Malta). This is principally for the following reasons:
• Caliplay has provided very little information
about the basis and nature of the provision, despite requests, and the Group
believes that Caliplay's pleading is defective.
• There is no contractual mechanism under the
licence agreement to retrospectively adjust the additional B2B services fees.
• Caliplay's case on working capital does not
make any reference to the timeframe in which the alleged provision would
theoretically be paid, and therefore based on the information provided this
provision has no bearing on any working capital requirements.
The Adjusted EBITDA recorded for the year ended 31 December 2023 is therefore
exposed to the outstanding invoices of €86.5 million should the Group not
recover the debt. This is reduced by certain subcontractor payments linked to
the revenue recognised which per the agreement would only be made when the
debt is received by the Group.
In addition, there is potentially a risk that if the English Court orders the
immediate payment of all outstanding fees, Caliplay may still refuse to pay
under the relevant settlement agreement and/or court order. However, the Group
considers that this probability is unlikely based on current information.
Not complying with an English Court order carries significant reputational
risks for Caliplay and the potentially adverse impact upon its external
relationships. Furthermore, we are not aware of any current risk of
non-compliance. Instead, so far Caliplay has complied with the two court
orders in PT Malta's favour in relation to the order to withdraw the
proceedings in Mexico and not to litigate there further (granted by Mr Justice
Foxton in October 2023 and Mr Justice Bright in December 2023 respectively).
In the unlikely event that Caliplay refuses to pay the Group in circumstances
where Playtech has the benefit of an English Court judgment ordering Caliplay
to do so, Playtech will take all steps available to seek immediate enforcement
of the order in Mexico by way of recognition of the English judgment under the
appropriate bi-lateral enforcement treaty, and continue to demand the
outstanding fees from Caliplay.
Impact on Playtech M&A Call Option valuation
The Playtech M&A Option is further described in Note 21A of the financial
statements, with the valuation methodology and assumptions covered in Note
21C.
The Group's view of a reasonable market participant base discount rate for the
31 December 2023 valuation is unchanged since last year. However, due to the
ongoing legal proceedings and the disputes with Caliplay, the Group has
adjusted the fair value of the Playtech M&A Call Option to reflect this
risk, by including an additional company-specific risk premium in the discount
rate, which overall increased it to 20% (31 December 2022: 16%). The impact of
the increase in discount rate is to reduce the fair value of the option from
€846.0 million to €730.2 million.
Furthermore, although we do not believe the significant provision made by
Caliplay is valid, were this to be included in the valuation of the Playtech
M&A Call Option as an adjustment to net debt, this would have a material
impact on the value of the Playtech M&A Call Option.
Impact on CGU impairment reviews and recoverability of deferred tax assets
Whilst our current contract with Caliplay under which we are entitled to
receive our fees (including the B2B licensee fees and the additional B2B
services fees) is expiring in 2034, and this was our base assumption in the
CGU impairment reviews and deferred tax asset recoverability assessment,
should there be material changes to the cash flows arising from the contract
this could potentially lead to impairments in certain CGUs of the Group
including Casino, Sports B2B, Services, Quickspin and Eyecon (Note 20).
Similarly, this could also affect the recoverability assessment of the
deferred tax asset, due to the reduction in profits against which the deferred
tax asset is able to be utilised, as well as impacting the carrying value of
the Parent Company investment in subsidiary.
Given the current uncertainty, the Group is not able to materially estimate
the effect of this and in any event considers it highly unlikely that there
will be material changes to the cash flows such that the assets referred to
above are materially impacted.
Impact on going concern and viability statement assessment
As per the going concern assessment under Note 2, while in the base case cash
flow forecasts the Group has assumed full recovery of the outstanding amounts
within the going concern period of assessment, there is a remote risk
depending on the progress of the legal dispute that no cash will be received
in the going concern period to 30 June 2025 and hence this was modelled in the
stress test scenario.
Even under this scenario the Group still has sufficient headroom on its
covenants and liquidity and hence the Directors still have a reasonable
expectation that the Group will continue as a going concern over the relevant
going concern period.
This remote scenario was also modelled in the viability assessment which
covers a period of three years, with the conclusion being that there is a
reasonable expectation that the Group will be able to continue in operation
and meet its liabilities as they fall due over the three-year period to 31
December 2026.
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
software fees 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.
The Group applied judgement in determining whether price concessions in
respect of ongoing negotiations and contract modifications should be accounted
for as variable consideration in revenue. Once there is a valid expectation
that the concession of the variable consideration is highly probable, the
Group accounts for it under IFRS 15 paragraph 52.
IFRS 15, paragraph 52 describes that in addition to the terms of the contract,
the promised consideration is variable if either of the following
circumstances exists:
· The operator has a valid expectation arising from Playtech's
customary business practices, published policies or specific statements that
Playtech will accept an amount of consideration that is less than the price
stated in the contract, that is, it is expected that Playtech will offer a
price concession. Depending on the jurisdiction, industry or customer this
offer may be referred to as a discount, rebate, refund or credit.
· Other facts and circumstances indicate that Playtech's intention,
when entering into the contract with the operator, is to offer a price
concession to the operator.
The Group has estimated the variable consideration based on the best estimates
of future outcomes to determine the most likely amount of consideration to be
received.
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 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 €56.7 million (2022: €57.5 million) and the
carrying amount of capitalised development costs as at 31 December 2023 was
€133.5 million (2022 restated: €128.1 million).
Adjusted performance measures
As noted in Note 6, paragraph U, the Group presents adjusted performance
measures which differ from statutory measures due to exclusion of certain
non-cash and one-off items from the actual results. The determination of
whether these items should form part of the adjusted results is a matter of
judgement as management assess whether these items meet the definition
disclosed in Note 6, paragraph U. The items excluded from the adjusted
measures are described in further detail in Note 11.
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 management based on the latest information available at the
reporting date. See Note 30 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 that 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:
• B2B licensee fee income (as per Note 6D); and
• revenue based on predefined revenue generated by each customer
under each 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 6D).
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 21 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
Cash-generating units
Impairment exists when the carrying value of an asset or cash-generating unit
(CGU) exceeds its recoverable amount, which is the higher of its fair value
less costs to sell 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
three-year budget, with CGU-specific assumptions for the subsequent two years.
They 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 rates used in years four and five and 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 20, including a sensitivity
analysis for the CGUs that have lower headroom.
Investment in associates
In assessing impairment of investments in associates, management utilises
various assumptions and estimates that include projections of future cash
flows generated by the associate, determination of appropriate discount rates
reflecting the risks associated with the investment, and consideration of
market conditions relevant to the investee's industry. The Group exercises
judgement in evaluating impairment indicators and determining the amount of
impairment loss, if any. This involves assessing the recoverable amount of the
investment based on available information and making decisions regarding the
appropriateness of key assumptions used in impairment testing.
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 15.
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 asset. 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 recognised 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 recognised deferred tax asset amounted to
€56.8 million. As at 31 December 2023, an additional deferred tax asset of
€5.2 million was recognised. This additional deferred tax asset has been
recognised 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. During the year, €14.8 million has been utilised and the net
recognised deferred tax asset as at 31 December 2023 amounts to €47.2
million. In addition, a total of €31.8 million of deferred tax asset has not
been recognised in respect of the benefit of future tax deductions related to
the goodwill and intangible assets which will arise more than five years after
the balance sheet date.
Deferred tax assets are reviewed at each reporting date. In considering their
recoverability, the Group assesses the likelihood of their being recovered
within a reasonably foreseeable timeframe, which is broadly in line with our
viability assessment and the cash flow forecasts period used in our CGU
impairment assessment. The Group updated its forecasts, following changes in
assumptions made to the forecasts during 2023, due to certain changes in the
current period to the expected profit profile within its UK business unit that
carries significant losses. This forms a change in accounting estimate and
resulted in a reversal of €37.2 million in the current year of previously
recognised deferred tax assets in respect of UK tax losses and tax attributes
relating to excess interest expense brought forward.
As at 31 December 2023, a deferred tax asset of €27.2 million has been
recognised in respect of UK tax losses (2022: €64.4 million). Based on the
current forecasts, these losses will be fully utilised over the forecast
period. Remaining UK tax losses and excess interest expense of €268.3
million (2022: €Nil) have not been recognised as at 31 December 2023 as
expected utilisation would fall outside the forecasting period and therefore
there is not sufficient certainty they will be recovered.
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.
Deferred tax assets in Italy
The Group has recognised a deferred tax asset of €2.1 million (2022: €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 year.
The Group reviewed the latest forecasts for the Italian companies for the next
five 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 ratings 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 39.
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. An additional provision was made in the year ended
31 December 2023 of €3.4 million (2022: €15.4 million).
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
includes 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 €58.7 million (2022:
€63.4 million) and €4.4 million (2022: €3.6 million) in Notes 22 and 24,
respectively, are the differences 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.
As with any budgeting process, there is always a risk 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 13 years from 31
December 2023. 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 30.
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 assist in
performing 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 21, 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; and
• 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 values 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 used to calculate fair
values include comparisons with similar financial instruments for which market
observable prices exist, DCF 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
21.
The following table shows the carrying amount and fair value of non-current
assets, as disclosed in Note 21, including their levels in the fair value
hierarchy.
Carrying amount Fair value
2023 Level 1 Level 2 Level 3
€'m €'m €'m €'m
Non-current assets
Other investments (Note 21B) 92.8 15.8 - 77.0
Derivative financial assets (Note 21C) 827.8 - - 827.8
920.6 15.8 - 904.8
Carrying amount Fair value
2022 Level 1 Level 2 Level 3
€'m €'m €'m €'m
Non-current assets
Other investments (Note 21B) 9.2 1.4 - 7.8
Derivative financial assets (Note 21C) 636.4 - - 636.4
645.6 1.4 - 644.2
Note 8 - 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 Board including the Chief Executive
Officer and the Chief Financial Officer.
The operating segments identified are:
• B2B: Providing technology to gambling operators globally through a
revenue share model and, in certain agreements, taking a higher share in
exchange for additional services;
• B2C - Snaitech: Acting directly as an operator in Italy and
generating revenues from online gambling, gaming machines and retail betting;
• B2C - Sun Bingo and Other B2C: Acting directly as an operator in
the UK market and generating revenues from online gambling;
• B2C - HAPPYBET: Acting directly as an operator in Germany and
Austria and generating revenues from online gambling and retail betting; and
• Financial - including B2C and B2B CFD (discontinued operations):
Online CFDs, broker and trading platform provider, operating a number of
brands across numerous countries. This division was disposed in the year ended
31 December 2022.
The Group-wide profit measure is Adjusted EBITDA (see Note 11).
Year ended B2B Snaitech Sun Bingo HAPPYBET Intercompany Total B2C Intercompany Total
31 December 2023
€'m €'m and Other €'m B2C €'m €'m €'m
B2C €'m
€'m
Revenue 684.1 946.6 73.4 18.2 (1.2) 1,037.0 (14.4) 1,706.7
Adjusted EBITDA 182.0 256.1 6.0 (11.8) - 250.3 - 432.3
Total assets 2,102.4 1,115.5 90.6 17.3 - 1,223.4 - 3,325.8
Total liabilities 1,018.6 469.4 26.0 5.6 - 501.0 - 1,519.6
Year ended B2B Snaitech Sun Bingo HAPPYBET Intercompany Total B2C Intercompany Total Financial - Total
31 December 2022
€'m €'m and Other €'m B2C €'m €'m Gaming - discontinued €'m
B2C €'m continuing operations
€'m 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 160.2 244.0 2.0 (10.8) - 235.2 - 395.4 33.8 429.2
Total assets 1,854.1 1,070.8 89.7 9.3 - 1,169.8 - 3,023.9 - 3,023.9
Total liabilities 697.2 603.2 14.6 6.4 - 624.2 - 1,321.4 - 1,321.4
Geographical analysis of non-current assets
The Group's information about its non-current assets by location is detailed
below:
2023 2022
€'m €'m
Italy 750.3 746.1
UK 332.9 328.4
Austria 54.8 131.5
Alderney 63.9 75.9
Sweden 48.7 59.9
Gibraltar 27.8 27.9
Cyprus 19.4 22.0
Latvia 17.5 15.5
Australia 17.3 18.8
Ukraine 4.0 8.8
Estonia 8.6 7.8
British Virgin Islands 7.5 8.2
Rest of World 76.6 59.7
1,429.3 1,510.5
The segment assets and liabilities are not provided to the chief operating
decision maker.
Note 9 - Discontinued operations
The results of the discontinued operations for the year are presented below:
2023 2022
Actual Adjusted Actual Adjusted
€'m €'m €'m €'m
Revenue - - 74.5 74.5
Distribution costs before depreciation and amortisation - - (34.9) (34.8)
Administrative expenses before depreciation and amortisation - - (13.3) (4.0)
Impairment of financial assets - - (1.9) (1.9)
EBITDA - - 24.4 33.8
Finance income - - 11.6 11.6
Finance costs - - (0.5) (0.5)
Profit on disposal of discontinued operations - - 15.1 -
Profit before taxation - - 50.6 44.9
Tax expense - - (3.6) (3.7)
Profit from discontinued operations, net of tax - - 47.0 41.2
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 in July
2022 for a cash consideration of $228.1 million (€223.9 million).
The following table provides 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 - - (15.1)
Adjusted measure 74.5 33.8 41.2
1 On the completion of the disposal, 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.
Earnings per share from discontinued operations
2023 2022
Actual Adjusted Actual Adjusted
Basic (cents) - - 15.7 13.7
Diluted (cents) - - 15.1 13.2
The net cash flows incurred by the Financial segment in the period are as
follows:
2023 2022
€'m €'m
Operating - 28.2
Investing - (3.8)
Financing - (1.1)
Net cash inflow - 23.3
The above net cash inflow does not include the disposal proceeds.
Note 10 - Revenue from contracts with customers
The Group has disaggregated revenue into various categories in the following
tables 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.
Revenue analysis by geographical location of licensee, product type 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) and B2C are described in Note 6D.
Upon signing a software licence agreement with a new licensee, the Group
verifies its gambling licence (jurisdiction) and registers it accordingly to
the Group's database. The table below shows the revenues generated from the
jurisdictions of the licensee.
Playtech has disclosed jurisdictions with revenue greater than 10% of the
total Group revenue separately and categorised the remaining revenue by wider
jurisdictions, being Rest of Europe, Latin America (LATAM) and Rest of World.
For the year ended 31 December 2023
Primary geographic markets B2B HAPPYBET Intercompany B2C Intercompany Total
€'m €'m €'m €'m €'m
Sun Bingo and Other B2C
Snaitech €'m Total B2C
€'m €'m
Italy 36.9 945.4 - - - 945.4 (10.6) 971.7
UK 127.0 - 73.4 - - 73.4 (3.8) 196.6
Mexico 183.0 - - - - - - 183.0
Rest of Europe 232.4 - 18.2 (1.2) 18.2 - 250.6
1.2
LATAM 44.8 - - - - - 44.8
-
Rest of World 60.0 - - - - - 60.0
-
684.1 946.6 73.4 18.2 (1.2) 1,037.0 (14.4) 1,706.7
Product type B2B B2C Intercompany Total
€'m €'m €'m €'m
B2B licensee fee 467.2 - (12.6) 454.6
B2B fixed-fee income 32.8 - (0.8) 32.0
B2B cost-based revenue 57.4 - (1.0) 56.4
B2B revenue received from the sale of hardware 13.8 - - 13.8
Additional B2B services fee 112.9 - - 112.9
Total B2B 684.1 - (14.4) 669.7
Snaitech - 946.6 - 946.6
Sun Bingo and Other B2C - 73.4 - 73.4
HAPPYBET - 18.2 - 18.2
Intercompany - (1.2) - (1.2)
Total B2C - 1,037.0 - 1,037.0
Total 684.1 1,037.0 (14.4) 1,706.7
2023
€'m
Regulated - Americas
- US and Canada 13.2
- Latin America 198.7
Regulated - Europe (excluding UK) 200.1
Regulated - UK 126.1
Regulated - Rest of World 7.0
Total regulated B2B revenue 545.1
Unregulated 139.0
Total B2B Gambling revenue 684.1
For the year ended 31 December 2022
Primary geographic markets B2B HAPPYBET Intercompany B2C Total B2C Intercompany Total Gaming Financial Total
€'m €'m €'m €'m €'m - continuing - discontinued €'m
operations operations
€'m €'m
Sun Bingo and Other B2C
€'m
Snaitech
€'m
Italy 35.1 897.7 - - - 897.7 (10.0) 922.8 1.3 924.1
UK 127.0 - 65.2 - - 65.2 (3.7) 188.5 34.1 222.6
Rest of Europe 233.3 2.1 0.1 20.1 (2.1) 20.2 - 253.5 10.4 263.9
LATAM 160.7 - - - - - - 160.7 18.6 179.3
Rest of World 76.3 - - - - - - 76.3 10.1 86.4
632.4 899.8 65.3 20.1 (2.1) 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 - (12.4) 439.3 - 439.3
B2B fixed-fee income 42.1 - (0.6) 41.5 - 41.5
B2B cost-based revenue 59.9 - (0.7) 59.2 - 59.2
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 - (13.7) 618.7 - 618.7
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
Financial - - - - 74.5 74.5
Total 632.4 983.1 (13.7) 1,601.8 74.5 1,676.3
2022
€'m
Regulated - Americas
- US and Canada 7.6
- Latin America 137.1
Regulated - Europe (excluding UK) 184.6
Regulated - UK 126.7
Regulated - Rest of World 5.6
Total regulated B2B revenue 461.6
Unregulated 170.8
Total B2B Gambling revenue 632.4
There were no changes in the Group's revenue measurement policies and
procedures in 2023 and 2022. The vast majority of the Group's B2B contracts
are for the delivery of services within the next 12 months. For the year ended
31 December 2023, Playtech recognised revenue from a single customer totalling
approximately 10.3% of the Group's total revenue (2022: no single customer
accounted for over 10%).
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 2023 was €6.2 million (2022: €6.0 million).
The movement in contract liabilities during the year was as follows:
2023 2022
€'m €'m
Balance at 1 January 6.0 8.1
Recognised during the year 8.0 8.4
Realised in the profit or loss (7.8) (10.5)
Balance at 31 December 6.2 6.0
Note 11 - 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 6 paragraph U.
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 2023 Revenue EBITDA - EBITDA - EBITDA Profit
€'m B2B B2C €'m from
€'m €'m Profit continuing
before operations
tax from attributable
continuing to the
operations owners
€'m of the
Company
€'m
Reported as actual 1,706.7 157.9 248.6 406.5 235.8 105.1
Employee stock option expenses1 - 5.6 0.7 6.3 6.3 6.3
Professional fees2 - 13.4 1.0 14.4 14.4 14.4
Impairment of investment and receivables3 - 5.1 - 5.1 5.1 5.1
Fair value changes and finance costs on contingent consideration4 - - - - 3.3 3.3
Fair value changes of equity instruments5 - - - - 6.6 6.6
Fair value change of derivative financial assets5 - - - - (153.4) (153.4)
Amortisation of intangible assets on acquisitions6 - - - - 42.6 42.6
Impairment of intangible assets7 - - - - 89.8 89.8
Deferred tax on acquisitions6 - - - - - (8.2)
Derecognition of brought forward deferred tax asset8 - - - - - 37.2
Tax related to uncertain positions9 - - - - - 8.0
Adjusted measure 1,706.7 182.0 250.3 432.3 250.5 156.8
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 acquisition
of Hard Rock Digital (Note 21B) and the Caliplay disputes (Note 7). These
expenses are not considered ongoing costs of operations and therefore are
excluded.
3 Provision against investments and other receivables that do not
relate to the ordinary operations of the Group.
4 Fair value change and finance costs on contingent consideration
mostly related to the acquisition of AUS GMTC. These expenses are not
considered ongoing costs of operations and therefore are excluded.
5 Fair value changes of equity instruments and derivative financial
assets. These are excluded from the results as they relate to unrealised
profit/loss.
6 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.
7 Impairment of intangible assets mainly relates to the impairment of
Eyecon €7.8 million, Quickspin €9.6 million and Sports B2B €72.2
million. Refer to Note 20.
8 The reported tax expense has been adjusted for the derecognition of
a deferred tax asset of €37.2 million relating to UK tax losses. This was
adjusted because the losses in relation to the derecognised amount were
generated over a number of years and therefore distorts the effective tax rate
for the year. Refer to Notes 7, 15 and 33.
9 Change in estimates related to uncertain overseas tax positions in
respect of prior years which have now been settled with the relevant tax
authority.
For the year ended 31 December 2022 Revenue EBITDA - EBITDA - EBITDA Profit
€'m B2B B2C €'m from
€'m €'m continuing
operations
Profit attributable
before to the
tax from owners
continuing of the
operations Company
€'m €'m
Reported as actual 1,601.8 138.4 223.9 362.3 95.6 40.6
Employee stock option expenses1 - 7.1 0.9 8.0 8.0 8.0
Professional fees2 - 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)
liability3
Ukraine employee support costs4 - 3.3 - 3.3 3.3 3.3
Onerous contract5 - - 10.4 10.4 10.4 10.4
Fair value changes of equity instruments6 - - - - 0.3 0.3
Fair value changes of derivative financial assets6 - - - - (6.0) (6.0)
Fair value loss on convertible loans7 - - - - 3.0 3.0
Amortisation of intangible assets on acquisitions8 - - - - 42.0 42.0
Impairment of property, plant and equipment and intangible assets9 - - - - 38.5 38.5
Loss on disposal of subsidiary10 - - - - 8.8 8.8
Deferred tax on acquisitions8 - - - - - (8.3)
Tax related to uncertain positions11 - - - - - 8.4
Adjusted measure 1,601.8 160.2 235.2 395.4 215.4 160.5
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 changes 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 21B.
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 property, plant and equipment 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.
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 IFRS 5 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 21A.
11 Change in estimates related to uncertain overseas tax positions in
respect of prior years.
The following table provides a full reconciliation between adjusted and actual
tax from continuing operations:
2023 2022
€'m €'m
Tax on profit or loss for the year 130.7 55.0
Adjusted for:
Deferred tax on intangible assets on acquisitions 8.2 8.3
Derecognition of brought forward deferred tax asset (37.2) -
Tax related to uncertain positions (8.0) (8.4)
Adjusted tax 93.7 54.9
Note 12 - Auditor's remuneration
2023 2022
€'m €'m
Group audit and Parent Company (BDO) 3.0 2.3
Audit of subsidiaries (BDO) 1.4 1.4
Audit of subsidiaries (non-BDO) 0.2 0.3
Total audit fees 4.6 4.0
Non-audit services provided by Parent Company auditor and its international
member firms
Other non-audit services 0.9 0.9
Total non-audit fees 0.9 0.9
Note 13 - Impairment of property, plant and equipment and intangible assets
2023 2022
€'m €'m
Reversal of impairment of property, plant and equipment (Note 18) - (0.2)
Impairment of intangible assets (Note 20) 89.8 38.7
89.8 38.5
Impairment of intangible assets for 2023 mainly relates to the impairment of
Eyecon €7.8 million, Quickspin €9.6 million and Sports B2B €72.2
million. Refer to Note 20.
Impairment of intangible 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.
Note 14 - Finance income and costs
A. Finance income
2023 2022
€'m €'m
Interest income 10.0 2.4
Dividend income 0.1 -
Net foreign exchange gain 2.2 9.2
12.3 11.6
B. Finance costs
2023 2022
€'m €'m
Interest on bonds (29.5) (35.7)
Interest on lease liability (5.2) (5.5)
Interest on loans and borrowings and other (2.2) (6.0)
Bank facility fees (2.3) (7.0)
Bank charges (2.8) (3.9)
Movement in contingent consideration (3.3) (0.1)
Fair value loss on convertible loans - (3.0)
Expected credit loss on loans receivable (0.9) (1.6)
(46.2) (62.8)
Net finance costs (33.9) (51.2)
Note 15 - Tax expense
2023 2022
€'m €'m
Current tax expense
Income tax expense for the current year 26.4 19.3
Income tax relating to prior years(1) 16.1 9.1
Withholding tax 0.8 0.3
Total current tax expense 43.3 28.7
Deferred tax
Origination and reversal of temporary differences 85.4 23.5
Deferred tax movements relating to prior years 1.8 8.1
Impact of changes in tax rates 0.2 (5.3)
Total deferred tax expense 87.4 26.3
Total tax expense from continuing operations 130.7 55.0
(1) The majority of this relates to charges arising from the change in
estimate of income tax in relation to prior years.
A reconciliation of the reported income tax charge of €130.7 million (2022:
€55.0 million) applicable to profit before tax of €235.8 million (2022:
€95.6 million) at the UK statutory income tax rate of 23.5% is as follows:
2023 2022
€'m €'m
Profit for the year 105.1 40.6
Income tax expense 130.7 55.0
Profit before income tax 235.8 95.6
Tax using the Company's domestic tax rate (23.5% in 2023 and 19% in 2022) 55.4 18.2
Tax effect of:
Non-taxable fair value movements on call options (36.1) (1.1)
Tax exempt income - (4.3)
Non-deductible expenses 35.6 19.8
Deferred tax asset in respect of Group restructuring (5.2) (5.4)
Difference in tax rates applied in overseas jurisdictions 1.2 13.8
Impact of changes in tax rates 0.2 (5.3)
Increase in unrecognised tax losses 24.5 2.1
Write-down of previously recognised deferred tax assets 37.2 -
Adjustment in respect of previous years:
- Deferred tax 1.8 8.0
- Income tax 16.1 9.2
Total tax expense 130.7 55.0
Reported tax charge
A reported tax charge of €130.7 million from continuing operations arises on
a profit before income tax of €235.8 million compared to an expected charge
of €55.4 million (2022: a tax charge of €55.0 million on profit before
income tax of €95.6 million). The reported tax expense includes adjustments
in respect of prior years relating to current tax and deferred tax of €17.9
million. The prior year adjustment in respect of current tax of €16.1
million includes an additional provision of €5.6 million relating to
uncertain overseas tax positions in respect of prior years which have now been
settled with the tax authorities.
The Group's effective tax rate for the current period is 55.4%. 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.
• The write-down of a deferred tax asset of €37.2 million in
respect of UK tax attributes. Further details of this write-down are included
in Note 7.
• Current year tax losses and excess interest not recognised for
deferred tax purposes. The tax losses and excess interest mainly relate to the
UK Group companies and amount to €108.3 million.
• Expenses not deductible for tax purposes including professional
fees and impairment of intangible assets.
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 23.5%. Legislation was enacted in the UK
which increased the standard rate of UK corporation tax from 19% to 25% from 1
April 2023. Deferred tax balances have been calculated using the tax rates
upon which the balance is expected to unwind.
The Group adopted the amendments to IAS 12 issued in May 2023, which provide a
temporary mandatory exception from the requirement to recognise and disclose
deferred taxes arising from enacted tax law that implements the Pillar Two
model rules, including tax law that implements qualified domestic minimum
top-up taxes described in those rules. Under these amendments, any Pillar Two
taxes incurred by the Group will be accounted for as current taxes from 1
January 2024. Based on an initial analysis of the current year financial data,
most territories in which the Group operates are expected to qualify for one
of the safe harbour exemptions such that top-up taxes should not apply. In
territories where this is not the case, there is the potential for Pillar Two
taxes to apply; however, based on an initial assessment these are not expected
to be significant. The Group continues to refine this assessment and analyse
the future consequences of these rules and, in particular, in relation to the
fair value movements as to how future fair value movements, should these
arise, may impact the tax charge.
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 16 - 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.
2023 2022
Actual Adjusted Actual Adjusted
€'m €'m €'m €'m
Profit attributable to the owners of the Company 105.1 156.8 87.6 201.7
Basic (cents) 34.7 51.7 29.2 67.2
Diluted (cents) 33.7 50.2 28.1 64.7
2023 2022
Actual Adjusted Actual Adjusted
€'m €'m €'m €'m
Profit attributable to the owners of the Company from continuing operations 105.1 156.8 40.6 160.5
Basic (cents) 34.7 51.7 13.5 53.5
Diluted (cents) 33.7 50.2 13.0 51.5
2023 2022
Actual Adjusted Actual Adjusted
Number Number Number Number
Denominator - basic
Weighted average number of equity shares 303,279,998 303,279,998 300,059,994 300,059,994
Denominator - diluted
Weighted average number of equity shares 303,279,998 303,279,998 300,059,994 300,059,994
Weighted average number of option shares 8,647,771 8,647,771 11,792,385 11,792,385
Weighted average number of shares 311,927,769 311,927,769 311,852,379 311,852,379
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 9.
Note 17 - Employee benefits
Total staff costs comprise the following:
2023 2022
€'m €'m
Salaries and personnel-related costs 438.2 427.0
Cash-settled share-based payments 0.2 (0.3)
Equity-settled share-based payments 6.3 8.3
444.7 435.0
Average number of personnel:
Distribution 6,868 6,269
General and administration 582 538
7,450 6,807
The Group has the following employee share option plans (ESOP) for the
granting of non-transferable options to certain employees:
• the Long Term Incentive Plan 2012 (LTIP). Awards (options,
conditional share 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 2023 the Group granted 3,023,945 nil cost options under its LTIP22
which are 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 £3.84 and £5.85. Inputs used were as follows:
Expected life (years) Share price at Dividend Risk-free rate Projection Volatility
grant date yield period
(years)
3 £5.85 Nil 3.78% 3 36%-46%
During 2022 the Group granted 492,765 nil cost options under its LTIP22 which
are 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-free rate Projection Volatility
grant date yield period
(years)
3 £4.58 Nil 2.34% 3 41%-49%
At 31 December 2023 and 2022 the following options were outstanding:
2023 2022
Number Number
Shares vested on 1 March 2018 at nil cost 72,596 72,596
Shares vested between 1 September 2016 and 1 March 2018 at nil cost 12,411 20,890
Shares vested on 1 March 2019 at nil cost 21,820 21,820
Shares vested between 1 September 2017 and 1 March 2019 at nil cost 23,344 39,021
Shares vested on 21 December 2019 at nil cost 9,779 9,779
Shares vested on 1 March 2020 at nil cost 77,326 98,444
Shares vested on 1 March 2021 at nil cost 612,618 1,047,782
Shares vested between 1 March 2022 and 1 August 2022 at nil cost 1,260,489 2,218,735
Shares will vest by 19 December 2024 at nil cost 1,400,000 1,900,000
Shares vested between 1 March 2023 and 26 October 2023 at nil cost 3,323,693 6,392,073
Shares will vest by 18 August 2025 at nil cost 351,724 351,724
Shares will vest by 5 May 2026 at nil cost 3,012,659 -
10,178,459 12,172,864
The total number of shares exercisable as of 31 December 2023 is 6,114,076
(2022: 4,729,067).
The total number of outstanding shares that will be cash settled is 570,545
(2022: 561,385). The total liability outstanding for the cash-settled options
is €2.2 million (2022: €3.1 million).
The following table illustrates the number and weighted average exercise
prices of share options for the ESOP.
2023 2022 2023 2022
Number Number Weighted average Weighted average
of options of options exercise price exercise price
Outstanding at the beginning of the year 12,172,864 13,882,774 - -
Granted 3,023,945 492,765 - -
Forfeited (1,137,717) (408,237) - -
Exercised (3,880,633) (1,794,438) - -
Outstanding at the end of the year 10,178,459 12,172,864 - -
Included in the number of options exercised during the year are 176,142
options (2022: 50,448) which were cash settled.
The weighted average share price at the date of exercise of options was £5.39
(2022: £5.30).
Share options outstanding at the end of the year have the following exercise
prices:
Expiry date Exercise price 2023 2022
Number Number
21 December 2025 Nil 85,007 93,486
Between 21 December 2026 and 31 December 2026 Nil 54,943 70,620
Between 1 March 2027 and 28 June 2027 Nil 77,326 98,444
23 July 2028 Nil 609,607 1,044,771
Between 27 February 2029 and 19 December 2029 Nil 2,663,500 4,121,746
Between 17 July 2030 and 26 October 2030 Nil 3,323,693 6,392,073
18 August 2032 Nil 351,724 351,724
5 May 2033 Nil 3,012,659 -
10,178,459 12,172,864
Note 18 - 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 2023 142.5 115.2 49.0 274.4 581.1
Additions 19.5 23.1 6.2 8.8 57.6
Acquisitions through business combinations - 0.1 0.1 - 0.2
Disposals (6.2) (2.8) (1.1) (3.8) (13.9)
Reclassifications - 1.9 (1.9) - -
Foreign exchange movement (2.4) - (0.9) (0.7) (4.0)
At 31 December 2023 153.4 137.5 51.4 278.7 621.0
Accumulated depreciation and impairment losses
At 1 January 2023 104.1 78.0 28.2 29.4 239.7
Charge 17.5 16.1 6.1 6.8 46.5
Disposals (6.1) (2.6) (0.7) (3.6) (13.0)
Reclassifications - 1.9 (1.9) - -
Foreign exchange movement (1.4) - (0.4) (0.6) (2.4)
At 31 December 2023 114.1 93.4 31.3 32.0 270.8
Net book value
At 31 December 2023 39.3 44.1 20.1 246.7 350.2
At 1 January 2023 38.4 37.2 20.8 245.0 341.4
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
Prior year adjustment (2.8) 5.5 1.1 (1.4) 2.4
Adjusted balance at 1 January 2022(1) 129.3 101.7 42.2 268.7 541.9
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 142.5 115.2 49.0 274.4 581.1
Accumulated depreciation and impairment losses
At 1 January 2022 95.3 61.4 24.5 28.6 209.8
Prior year adjustment (1.1) 4.1 0.4 (1.0) 2.4
Adjusted balance at 1 January 2022(1) 94.2 65.5 24.9 27.6 212.2
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 104.1 78.0 28.2 29.4 239.7
Net book value
At 31 December 2022 38.4 37.2 20.8 245.0 341.4
At 1 January 2022(1) 35.1 36.2 17.3 241.1 329.7
1 The comparative opening cost and accumulated depreciation at 1 January 2022
on each class of property, plant and equipment were restated to correct legacy
classification errors. The overall correction resulted in a total increase in
the opening cost of property, plant and equipment of €2.4 million, with the
same increase in total accumulated depreciation on 1 January 2022. There was
no impact to the total net book value of the property, plant and equipment
both at 1 January 2022 and 31 December 2022.
Note 19 - Leases
Set out below are the carrying amounts of right of use assets recognised and
the movements during the year:
Office leases Hosting Machinery rentals Total
€'m €'m €'m €'m
At 1 January 2023 60.5 11.1 - 71.6
Additions/modifications 14.2 6.8 1.4 22.4
On business combinations 1.9 - - 1.9
Amortisation charge (15.1) (7.8) (0.4) (23.3)
Foreign exchange movement (1.6) - - (1.6)
At 31 December 2023 59.9 10.1 1.0 71.0
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
Set out below are the carrying amounts of lease liabilities and the movements
during the year:
2023 2022
€'m €'m
At 1 January 85.8 90.1
Additions/modifications 22.0 18.8
On business combinations 1.9 -
Disposal of subsidiary - (0.2)
Accretion of interest 5.2 5.5
Payments (28.3) (27.1)
Foreign exchange movement 0.2 (1.3)
At 31 December 86.8 85.8
Current 24.9 31.8
Non-current 61.9 54.0
86.8 85.8
The maturity analysis of lease liabilities is disclosed in Note 39B.
The following are the amounts recognised in profit or loss:
2023 2022
€'m €'m
Amortisation expense of right of use assets 23.3 21.5
Interest expense on lease liabilities 5.2 5.5
Impact of early termination of lease contracts (0.4) (0.7)
Variable lease payments (included in distribution costs) - 0.1
28.1 26.4
Note 20 - 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 2023 222.4 79.7 428.4 523.5 676.6 1,930.6
Additions 51.0 - 58.4 - - 109.4
Assets acquired through business combinations(1) 0.4 - - 3.0 4.2 7.6
Disposal (0.2) - (3.4) - (0.4) (4.0)
Foreign exchange movement (0.4) - - - - (0.4)
At 31 December 2023 273.2 79.7 483.4 526.5 680.4 2,043.2
Accumulated amortisation and impairment losses
At 1 January 2023 133.8 72.4 300.3 376.4 66.8 949.7
Charge 43.5 3.0 49.4 30.8 - 126.7
Impairment loss 0.4 - 3.6 0.8 85.0 89.8
Disposals - - (3.4) - (0.4) (3.8)
Foreign exchange movement (0.4) - - - - (0.4)
At 31 December 2023 177.3 75.4 349.9 408.0 151.4 1,162.0
Net book value
At 31 December 2023 95.9 4.3 133.5 118.5 529.0 881.2
At 1 January 2023 88.6 7.3 128.1 147.1 609.8 980.9
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
Prior year adjustment(2) (1.2) (4.9) 11.1 (2.9) (90.0) (87.9)
Adjusted balance at 1 January 2022 190.2 81.6 374.7 524.0 683.6 1,854.1
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 222.4 79.7 428.4 523.5 676.6 1,930.6
Accumulated amortisation and impairment losses
At 1 January 2022 110.6 72.7 241.3 346.2 125.1 895.9
Prior year adjustment(2) (1.1) (0.5) 6.2 (2.5) (90.0) (87.9)
Adjusted balance at 1 January 2022 109.5 72.2 247.5 343.7 35.1 808.0
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 133.8 72.4 300.3 376.4 66.8 949.7
Net book value
At 31 December 2022 88.6 7.3 128.1 147.1 609.8 980.9
At 1 January 2022(2) 80.7 9.4 127.2 180.3 648.5 1,046.1
1 During the year, the Group acquired the Giove group for a total
consideration of €6.0 million. As a result of this transaction, the Group
recognised €7.3 million as the fair value of the intangible assets, of which
€3.9 million is goodwill.
2 The comparative opening cost and accumulated amortisation at 1 January 2022
on each class of intangible assets were restated to correct legacy errors
principally arising on disposal of the Financials CGU, when it was
reclassified as held for sale in the year ended 31 December 2020. There was no
impact to the net book value of the intangible assets both at 1 January 2022
and 31 December 2022.
During the year, the research and development costs net of capitalised
development costs were €101.2 million (2022: €88.3 million). The internal
capitalisation for the year was €56.7 million (2022: €57.5 million).
Out of the total amortisation charge of €126.7 million (2022: €109.8
million), an amount of €42.6 million (2022: €42.0 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 13
cash-generating units (CGUs) (2022: 13).
The allocation of the goodwill to CGUs is as follows:
2023 2022
€'m €'m
Snai 263.4 259.7
AUS GMTC 4.4 4.4
Bingo retail 9.5 9.5
Casino 50.8 50.8
Poker 15.6 15.6
Eyecon - 3.0
Quickspin 10.2 19.8
Sports B2B 60.3 132.5
VB retail 4.6 4.6
Services 109.9 109.9
Sports B2C 0.3 -
529.0 609.8
Management reviews CGUs for impairment bi-annually with a detailed assessment
of each CGU carried out annually and whenever there is an indication that a
unit may be impaired. During the annual detailed review, the recoverable
amount of each CGU is determined from value in use calculations based on cash
flow projections covering five years (using the Board approved three year plan
along with a remaining two-year forecasted period) plus a terminal value which
have been adjusted to take into account each CGU's major events as expected in
future periods. 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 used the
Group's three-year plan, however extended it to five years and 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 2.0%. 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.
2023 CGUs not sensitive to changes in assumptions:
Average revenue Discount
growth rate rate applied
2024-2028
Snai 3.1% 15.2%
AUS GMTC 15.8% 13.1%
Bingo retail 4.9% 13.8%
Casino 4.7% 13.1%
Poker 4.0% 14.9%
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%
In relation to the Eyecon, Quickspin and Sports B2B CGUs, following impairment
tests completed as at 31 December 2023, 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.
Eyecon CGU
The Eyecon CGU underperformed in 2022, mainly due to the fact that its
operations are highly concentrated in the UK online market which has seen a
slowdown due to the uncertain regulatory climate, with an impairment loss of
€13.6 million recognised in the year ended 31 December 2022. Even though the
unit is making considerable efforts to expand to new markets, this has yet to
take effect. As a result, it continues to see declining revenues and has been
unable to meet budgets set, which led to a further impairment of €7.8
million recognised in the current year, which impairs the assets down to the
recoverable amount. The impairment is writing down €3.0 million of goodwill,
€0.4 million of brands, €0.8 million of customer lists and €3.6 million
of development costs. The recoverable amount of this CGU of €9.7 million,
with a carrying value equal to €17.5 million (pre-impairment) at 31 December
2023, was determined using a cash flow forecast that includes annual revenue
growth rates between 2% and 11.0% over the one to five-year forecast period
(2022: annual revenue growth rates between 0% and 10.0%), 2.0% long-term
growth rate (2022: 2.0% long-term growth rate) and a post-tax discount rate of
15.1% (2022: post-tax discount rate of 15.6%). Following the impairment
posted, all assets have been impaired down to the recoverable amount.
Quickspin CGU
The recoverable amount of the Quickspin CGU was impaired in 2022 by €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 overall decrease in the CGU performance which
went through organisational updates. The unit is still going through a
transitional period and has seen a decline in revenue in the last three years,
which led to an additional €9.6 million impairment being recognised in the
current year. The recoverable amount of this CGU of €32.1 million, with a
carrying value of €41.7 million (pre-impairment) at 31 December 2023, has
been determined using a cash flow forecast that includes annual revenue growth
rates between 5.0% and 7.2% over the one to five-year forecast period (2022:
annual revenue growth rates between 5.0% and 15.1%), 2.0% long-term growth
rate (2022: 2.0% long-term growth rate) and a post-tax discount rate of 12.4%
(2022: post-tax discount rate of 12.1%).
If the revenue growth rate per annum is lower by 1%, then an additional
impairment of €6.2 million would be recognised. Similarly, if the discount
rate increases by 1% to a post-tax discount rate of 13.4%, this would result
in a further impairment of €2.9 million.
Sports B2B CGU
The recoverable amount of the Sports B2B CGU, with a carrying value of
€236.2 million, has been determined using a cash flow forecast that includes
annual revenue growth rates ranging from a decline of 20.0% to an increase of
15.0%, over the one to five-year forecast period (2022: annual revenue growth
rates between negative 6.1% and 20% positive), a 2.0% long-term growth rate
(2022: 2.0% long-term growth rate) and a post-tax discount rate of 13.7%
(2022: post-tax discount rate of 14.9%). As a result of two major retail
licensees terminating their contracts during the current year, the recoverable
amount of €164.0 million does not exceed the carrying value as stated above
(pre-impairment) and therefore an impairment loss of €72.2 million was
recognised in the year ended 31 December 2023.
If the revenue growth rate per annum is lower by 1.0%, then an additional
impairment of €20.2 million would be recognised. Similarly, if the discount
rate increases by 1.0% to a post-tax discount rate of 14.7%, this would result
in a further impairment of €16.4 million.
Bingo VF CGU
The recoverable amount of the Bingo VF CGU was impaired by €12.5 million
during the year ended 31 December 2022 as a result of a contract termination
with a significant licensee and also the decrease in the CGU's performance.
Since last year the CGU has started to generate organic growth by expanding
into new geographies. No further impairment has been recognised in the current
year. The recoverable amount of the CGU of €12.9 million, with a carrying
value of €12.6 million, has been determined using a cash flow forecast that
includes annual revenue growth rates between 9.0% and 10.0% over the one to
five-year forecast period (2022: annual revenue growth rates between negative
1.0% and positive 10.0%), a 2.0% long-term growth rate (2022: 2.0% long-term
growth rate) and a post-tax discount rate of 15.1% (2022: post-tax discount
rate of 15.8%). The recoverable amount would equal the carrying value of the
CGU if:
• the discount rate applied reached a post-tax discount rate of
15.4%. If the discount rate increases by 1.0% to a post-tax discount rate of
16.1%, this would result in an impairment of €0.9 million; or
• the revenue growth was lower by 0.1% when compared to the
forecasted average five-year growth. If the revenue growth was lower by 1%
when compared to the forecasted average five-year growth, this would cause an
impairment of €4.1 million.
VB Retail CGU
The recoverable amount of the VB Retail CGU showed signs of underperformance
during H1 2023, mainly due to the cancellation of an important licensee deal
that had been expected to launch in early 2023. Given that new opportunities
are arising through the US business, no impairment has been recognised as at
31 December 2023. The recoverable amount of this CGU of €31.9 million, with
a carrying value of €25.2 million at 31 December 2023, has been determined
using a cash flow forecast that includes annual revenue growth rates between
8.0% and 13.0% over the one to five-year forecast period (2022: annual revenue
growth rates between 8.0% and 18.0%), 2.0% long-term growth rate (2022: 2.0%
long-term growth rate) and a post-tax discount rate of 12.7% (2022: post-tax
discount rate of 12.4%). The recoverable amount would equal the carrying value
of the CGU if:
• the discount rate applied was higher by 20.7%, i.e. reaching a post-tax
discount rate of 15.3%; or
• the revenue growth was lower by 2.2% when compared to the forecasted
average five-year growth.
Services CGU
The recoverable amount of the Services CGU, with a carrying value of €283.9
million, which has not been impaired, has been determined using a cash flow
forecast that includes annual revenue growth rates ranging from negative 7.0%
and positive 6.2% over the one to five-year forecast period (2022: annual
revenue growth rates between 5.0% and 38.0%), a 2.0% long-term growth rate
(2022: 2.0% long-term growth rate) and a post-tax discount rate of 18.3%
(2022: post-tax discount rate of 16.2%).
The recoverable amount would equal the carrying value of the CGU if:
• the discount rate applied was higher by 41.4%, i.e. reaching a
post-tax discount rate of 25.9%; or
• the revenue growth was lower by 4.5% when compared to the
forecasted average five-year growth.
General
Whilst our current contract with Caliplay under which we are entitled to
receive our fees (including the B2B licensee fees and the additional B2B
services fees) is expiring in 2034, and this was our base assumption in our
CGU impairment reviews, should there be material changes to the cash flows
arising from the contract this could potentially lead to impairments in
certain CGUs of the Group including Casino, Sports B2B, Services, Quickspin
and Eyecon. However, given the headroom in the Casino CGU and relatively low
levels of goodwill, there would need to be a number of other factors impacting
the CGU before an impairment is apparent, and hence it is not considered
sensitive and the additional disclosures given for the other more sensitive
CGUs are not required for this CGU.
Note 21 - Investments and derivative financial assets
Introduction
Below is a breakdown of the relevant assets at 31 December 2023 and 2022 per
the consolidated balance sheet:
2023 2022
€'m €'m
A. Investments in associates 51.5 36.6
B. Other investments 92.8 9.2
C. Derivative financial assets 827.8 636.4
972.1 682.2
The following are the amounts recognised in the statement of comprehensive
income:
2023 2022
€'m €'m
Profit or loss
A. Share of loss from associates (0.8) (3.8)
B. Unrealised fair value changes of equity investments (6.6) (0.3)
C. Unrealised fair value changes of derivative financial assets 153.4 6.0
Other comprehensive income
Foreign exchange movement from the derivative call options and equity (5.9) 6.8
investments held in non-Euro functional currency subsidiaries
140.1 8.7
Where the underlying derivative call option and equity investments are held in
a non-Euro functional currency entity, the foreign exchange movement is
recorded through other comprehensive income. As at 31 December 2023, the
foreign exchange movement of the derivative call options held in Caliplay,
LSports and NorthStar (Note 21C) is recorded in profit or loss as these
options are held in Euro functional currency entities. The foreign exchange
movement of the derivative call options held in Wplay, Onjoc and Tenbet and
the small minority equity investment in Hard Rock Digital are recorded through
other comprehensive income as these are held in USD functional currency
entities.
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 7.
A. Investments in associates
Balance sheet
2023 2022
€'m €'m
Caliplay - -
ALFEA SPA 1.7 1.7
Galera - -
LSports 35.2 34.9
Stats International - -
NorthStar 9.0 -
Sporting News Holdings Limited 5.6 -
Total investment in equity accounted associates 51.5 36.6
Profit and loss impact
2023 2022
€'m €'m
Share of profit in ALFEA SPA 0.1 0.1
Share of loss in Galera - (3.6)
Share of profit/(loss) in LSports 2.1 (0.3)
Share of loss in NorthStar (2.8) -
Share of loss in Sporting News Holdings Limited (0.2) -
Total profit and loss impact (0.8) (3.8)
Movement on the balance sheet
Sporting News Holdings Limited
ALFEA SPA LSports NorthStar Total
€'m €'m €'m €'m €'m
Balance as at 31 December 2022 / 1 January 2023 1.7 34.9 - - 36.6
Additions - - 3.4 5.8 9.2
Conversion of convertible loan to shares - - 8.4 - 8.4
Share of profit/(loss) 0.1 2.1 (2.8) (0.2) (0.8)
Dividend income (0.1) (1.8) - - (1.9)
Balance as at 31 December 2023 1.7 35.2 9.0 5.6 51.5
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 S.A. de C.V.
("Caliente"), the majority owner of Tecnologia en Entretenimiento Caliplay,
S.A.P.I. de C.V ("Caliplay"), which is a leading online 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 owning substantially all of the shares 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 2023 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 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 10). If either the Playtech Call Option or the
Playtech M&A Call Option is exercised, the Group would no longer be
entitled to receive the additional B2B services fee (and will cease to provide
certain related services) which for the year ended 31 December 2023 was
€111.7 million (2022: €66.3 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, 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. 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. The Group has not changed its position with regard to this assumption
and the matter is still unresolved with the English litigation still ongoing.
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 (together the "COC Option''). 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. As regards the
COC Option, the Group made a judgement that as at 31 December 2022 this had no
impact on the fair value calculation of the Playtech M&A Call Option (i.e.
allocated a 0% probability that Playtech would realise any value from the
exercise of the COC Option). As at 31 December 2023, the Group allocated a low
probability that it would realise value from this option, instead of the
Playtech M&A Call Option. This is discussed further in part C of this
note.
Assessment of control and significant influence
As at 31 December 2023 and 2022 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.
• 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.
• 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 2023 and 2022, the Group has significant influence over
Caliplay because it meets one or more of the criteria under IAS 28, paragraph
6 as follows:
• 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.
• 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 2023 and 2022,
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 7, 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:
31 December 20221,2
€'m
Current assets 96.7
Non-current assets 30.3
Current liabilities (78.1)
Non-current liabilities -
Equity 48.9
Revenue 532.1
Profit from continuing operations 30.4
Other comprehensive income, net of tax 2.5
Total comprehensive income 32.9
1 The 2022 balances above have been extracted from Caliplay's draft
2022 financial statements.
2 The Group has been unable to obtain the full 2023 financial
information from Caliplay. However, based on information provided by Caliplay,
the estimated revenue is €700.4 million and estimated profit from continuing
operations before tax (which takes account of the deduction of the Group's
unpaid B2B licensee fees and additional B2B services fees) is €80.0 million.
Investment in ALFEA SPA
The Group has held 30.7% equity shares in ALFEA SPA since June 2018. At 31
December 2023, the Group's value of the investment in ALFEA SPA was €1.7
million (2022: €1.7 million). A share of profit of €0.1 million was
recognised in profit or loss for the year ended 31 December 2023 (2022: a
share of profit of €0.1 million was recognised in the profit or loss).
Investment in Galera
In June 2021, the Group entered into an agreement with Ocean 88 Holdings Ltd
(Ocean 88) 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 licence, when this becomes
available, and will expand to other gaming and gambling products based on the
local licence 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 2023, an amount of €39.2 million, which is included in loans
receivable under other non-current assets (refer to Note 22), has been drawn
down (2022: €26.9 million). An amount of €12.3 million has been loaned in
the year ended 31 December 2023. The loan is required to be repaid to Playtech
prior to any dividend distribution to the current shareholders of Galera. The
Group recognised an allowance for expected credit losses for the loan to
Galera of €1.6 million at 31 December 2023 (2022: €1.1 million).
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 cash flows 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 cumulative €17.3 million share of loss of associate would have
been recorded in retained earnings since the investment was made, of which
€3.6 million would have been recognised in 2023 in the profit or loss (2022:
if the Group had determined that the loan was part of the overall investment
in associate, an additional cumulative €13.7 million share of loss of
associate would have been recorded in retained earnings since the investment
was made, of which €11.6 million would have been recognised in 2022 in the
profit or loss).
On 31 October 2023, Ocean 88 acquired 60% of F12.bet. Playtech has loaned
Ocean 88 the amount of $10.1 million (€9.5 million) for the acquisition of
F12.bet which is included in loans receivable from related parties (refer to
Note 22). The loan is repayable within five years from the disbursement date.
The Group recognised an allowance for expected credit losses for the
additional loan to Galera of €0.4 million as at 31 December 2023 (2022:
€Nil).
Playtech has assessed whether it holds power to control Galera 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
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 services fee. The additional B2B services fee was €Nil
in the year ended 31 December 2023 (2022: €Nil).
The cost of the investment was deemed to be the price paid for the option of
$5.0 million (€4.2 million), which was reduced to €Nil through the
recognition of the Group's share of losses.
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 31% 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 recognised in 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%) 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 exercise price of the option will be equal to the product of:
i. the % of the aggregate shares purchased upon exercise of the PT option out
of all shares of the company multiplied by
ii. the greater of either:
a. LSports EBITDA preceding the time of exercise as reflected in the
company's annual audited financial statements for that year, multiplied by a
factor of 7; or
b. €115 million.
The fair value of the option acquired was €1.4 million, which was part of
the total consideration of €36.7 million. As at 31 December 2023, the fair
value of the LSports derivative financial asset increased to €4.8 million.
The difference of €3.4 million between the fair value at 31 December 2023
and the fair value at 31 December 2022 has been recognised in profit or loss
for the year ended 31 December 2023 (refer to part of Note 21C).
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 the date of acquisition, 31 December 2023 and 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 the appointment and representation on the board of
directors by a Playtech employee as at 31 December 2023, there is still no
ability to control the relevant activities, as the total number of directors
including the Playtech appointed director is five;
• Playtech has neither the ability to change any members of the
board nor of the management of LSports; and
• as at 31 December 2023 and 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 2023 and 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 the Playtech employee appointed 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 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
Goodwill is not recognised separately but is included as part of the carrying
amount of the investment in associate. The total share of profit recognised in
profit or loss in the year ended 31 December 2023 from the investment is
LSports was €2.1 million (2022: €0.3 million). This includes the
amortisation of intangibles and the release of the deferred tax liability,
arising on acquisition, and the share of the LSports profits, with a
corresponding entry against the investment in associate.
During 2023, the Group received a dividend of €1.8 million from LSports
(2022: €Nil), which reduced the investment in associate value in the
consolidated balance sheet.
Investment in Stats International
Background
In January 2022, the Group provided a $2.3 million loan to Stats International
Limited ("Stats"), at an interest rate of 3.5% and a repayment date of 30 June
2024. As at 31 December 2023 and 2022, the carrying value of the loan was
€2.2 million (Note 22). The Stats group's business activities are focused on
securing rights in connection with sporting competitions and the exploitation
of the same, typically in exchange for the payment of certain fees and
provision of analytical and statistical services by the Stats group to the
relevant rightsholder. The initial focus of the Stats group is on Brazilian
sports competitions.
In May 2023, the Group and Stats signed an amended loan agreement which,
amongst other things, changed the repayment obligations such that the final
repayment date will be 31 December 2026 and the loan agreement will be novated
from Stats to Jewelrock (Stats' sole shareholder) in consideration of $1.
Moreover, a framework agreement was signed between Stats and Playtech whereby
Playtech, for a €1 consideration, has been granted the option to acquire
from Jewelrock 36% of the issued share capital of Stats.
Finally, Playtech entered into a service agreement whereby Playtech provides
Stats its business development and knowledge-sharing services in connection
with the operational and industry standard procedures of Stats in exchange for
additional B2B services fee as per Note 10. As the business is still a
start-up, the additional B2B services fee as at 31 December 2023 was €Nil
(2022: €Nil). Once 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 option may be exercised at any time but prior to the termination of all
sporting rights agreements. It shall also lapse on the expiry or termination
of the Playtech service agreement in accordance with its terms or at the
written election of Playtech.
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 36% voting right over the operating entity and
therefore no control.
However, Playtech has assessed whether the Group has significant influence
over Stats and due to the existence of the service agreement whereby Playtech
would be assisting a start-up business by providing knowledge-sharing
services, these could be considered essential technical information.
Considering this, it was concluded that the Group has significant influence
under IAS 28, paragraph 6, over Stats.
The cost of the option, which was considered to be the inherent value of
Playtech allowing the loan repayment date to be extended, is considered
negligible. No share of profits/losses have been recognised as at 31 December
2023 in profit or loss as these were immaterial.
Investment in NorthStar
Background
NorthStar Gaming Inc. is a Canadian gaming brand which was incorporated under
the laws of Ontario in Q4 2021. In Q2 2022, NorthStar Gaming Inc. received its
licence from the Alcohol and Gaming Commission of Ontario (AGCO) and launched
its online gaming site www.northstarbets.ca which offers access to regulated
sports betting markets, and a robust and curated casino offering, including
the most popular slot offerings and live dealer games. The principal reason of
the acquisition is the attractive opportunity considered by Playtech to
increase its footprint in the growing Canadian betting data market segment.
In December 2022, the Group issued NorthStar Gaming Inc. a convertible loan of
CAD 12.25 million with conditions being that upon the completion of a reverse
takeover (RTO) transaction the loan could be converted into common shares, A
warrants and B warrants of the post-RTO consolidated entity. Baden Resources,
a company which was listed on the TSX, entered into a conditional agreement to
acquire NorthStar Gaming Inc. for shares (i.e. complete an RTO of NorthStar
Gaming Inc.). The fair value of the loan as at 31 December 2022 was €8.4
million.
In March 2023, the RTO was completed and Baden Resources changed its name to
NorthStar Gaming Holdings ("NorthStar"). These events triggered the automatic
conversion of the Group's convertible loan into common shares in NorthStar
Gaming Inc. (effective immediately prior to closing) and then immediately
thereafter on closing those shares were exchanged for NorthStar common shares.
When the loan was converted into NorthStar common shares the Group also became
the holder of NorthStar Warrants (half of which are exercisable at CAD 0.85
per share and the other half at CAD 0.90 per share) which, if exercised, would
result in the Group further increasing its shareholding in NorthStar. These
warrants expire on the fifth anniversary of their issue.
In September 2023, the Group entered into a subscription agreement with
NorthStar whereby additional shares and warrants (half of which are
exercisable at CAD 0.36 per share and the other half at CAD 0.40 per share, in
each case expiring on the fifth anniversary of their issue) were acquired for
CAD 5.0 million. At the time of this investment, which closed in October 2023,
Playtech also loaned NorthStar an 8% senior convertible debenture for CAD 5.0
million.
After the additional investment in October 2023, Playtech owns approximately
27.5% of the issued and outstanding common shares of NorthStar. If the
convertible debenture were to be converted into common shares and all of the
Group's warrants were to be exercised, the Group could potentially further
increase its stake beyond 40% of the issued and outstanding common shares.
The Group's convertible debenture has been classified at fair value through
profit or loss based on IFRS 9 criteria. As at 31 December 2023, an amount of
CAD 5.0 million (€3.5 million), which is included in loans receivable from
related parties (refer to Note 22), has been drawn down (2022: €Nil). The
loan is required to be repaid to Playtech by October 2026 or upon conversion
(to the extent not fully converted) once conversion criteria are met.
The fair value of all of Playtech's warrants is €Nil as at 31 December 2023
(refer Note 21C).
Assessment of control and significant influence
As at the date of acquisition and 31 December 2023, it was assessed that the
Group did not have control over NorthStar, because it does not meet the
criteria of IFRS 10 Consolidated Financial Statements, paragraph 7 due to the
following:
• despite representation on the NorthStar board of directors by
Playtech's CFO from the initial investment and later on, with the additional
investment made, a further Playtech employee also being appointed, there is
still no ability to control the relevant activities, as the total number of
directors is eight; and
• Playtech has neither the ability to change any other members of
the NorthStar board nor the management of NorthStar.
Per the above assessment, Playtech does not hold power over the investee and
as such does not have control.
As at 31 December 2023, the Group has significant influence over NorthStar
because it meets one or more of the criteria under IAS 28, paragraph 6, the
main one being that it has two appointed members sitting on the board of
NorthStar, enabling it to therefore participate in policy-making processes,
including decisions about dividends and/or other distributions. As a result of
this assessment NorthStar has been recognised as an investment in associate.
The NorthStar warrants are fair valued as per paragraph 14 of IAS 28 and shown
as a derivative financial asset in accordance with IFRS 9 (refer to Note 21C).
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 NorthStar's 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
2023
€'m
Net book value of assets acquired 0.4
Fair value of customer contracts and relationships 1.0
Fair value of brand 0.9
Total net assets 2.3
Total consideration 8.4
Goodwill 6.1
Goodwill is not recognised separately but is included as part of the carrying
amount of the investment in associate. Up until October 2023, Playtech's
shareholding was diluted to 15% due to NorthStar issuing more shares as part
of an acquisition they completed in May 2023. Playtech's shareholding for
November and December 2023 was 27.5%. The total share of loss recognised in
profit or loss in the year ended 31 December 2023 from the investment in
NorthStar was €2.8 million (2022: €Nil). This includes the amortisation of
intangibles, arising on acquisition, and the share of NorthStar's losses, with
a corresponding entry against the investment in associate.
Investment in Sporting News Holdings Limited
Background
In August 2023, the Group acquired 12.6% of Sporting News Holdings Limited
("TSN"), for a total consideration of $6.3 million (€5.8 million).
TSN's principal activities are the sale of digital advertising and the
offering of media services, the provision of multimedia sports content across
internet-enabled digital platforms and the distribution directly to customers
and business clients around the world. The company is incorporated in the Isle
of Man. The principal reason of the acquisition is the attractive opportunity
considered by Playtech to increase its footprint in the growing sports and
media market segment.
Assessment of control and significant influence
As at the date of acquisition and at 31 December 2023 it was assessed that the
Group did not have control over TSN, 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 TSN
board, as at 31 December 2023, one had not yet been appointed. Playtech has
preferred to only appoint an observer to the board. 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 five; and
• Playtech has neither the ability to change any members of the
board nor of the management of TSN;
Per the above assessment, Playtech does not hold power over the investee and
as such does not have control.
As at 31 December 2023, the Group has significant influence over TSN 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 TSN,
enabling it to therefore participate in policy-making processes, including
decisions about dividends and/or other distributions. As a result of this
assessment TSN has been recognised as an investment in associate.
The cost of the investment was deemed to be the consideration paid for the
shares of $6.3 million (€5.8 million), which was reduced by €0.2 million
on 31 December 2023 through the recognition of the Group's share of losses.
Other investments in associates that are fair valued under IFRS9 per 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, has 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
2023 2022
€'m €'m
Listed investments 15.8 1.4
Investment in Tenlot Guatemala - 4.4
Investment in Tentech Costa Rica - 2.1
Investment in Gameco - 1.3
Investment in Hard Rock Digital 77.0 -
Total other investments 92.8 9.2
Statement of comprehensive income
2023 2022
€'m €'m
Profit and loss
Change in fair value of equity investments (6.6) (0.3)
Impairment of investment in Gameco (included in the impairment of financial (1.3) -
assets)
(7.9) (0.3)
Other comprehensive income
Foreign exchange movement from equity investments held in a non-Euro (2.6) -
functional subsidiary
Listed investments
The Group has shares in listed securities, noting that new shares in listed
securities were purchased during the year for €14.3 million. 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 2023, the fair
values of these listed securities have increased by €0.1 million (2022:
decrease of €0.3 million).
Investment in Tenlot Guatemala
In 2020, the Group entered into an agreement with Tenlot Guatemala, a member
of the Tenlot Group. Tenlot Guatemala, which is in the lottery business in
Guatemala, commenced its activity in 2018.
The Group 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 2023 was reduced to
€Nil because of changes to market conditions which led to changes in its
original business plans (2022: €4.4 million). The fair value of the equity
holding has decreased by €4.4 million in the year ended 31 December 2023.
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 2023 (2022: €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 2023 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 2023 was reduced to
€Nil (2022: €2.1 million) because of changes to market conditions which
led to changes in its original business plans. The fair value of the equity
holding has decreased by €2.3 million in the year ended 31 December 2023.
Investment in Gameco
In 2021, the Group entered into a convertible loan agreement with GameCo LLC
("Gameco"), where it provided $4.0 million (€3.8 million) in the form of a
debt security with 8% interest. In December 2022, Gameco acquired Green Jade
Games and, subsequently, the Playtech debt was converted into equity shares,
representing a 7.1% interest in the newly formed group. Immediately prior to
the conversion, the loan was impaired by €3.0 million, and this has been
recognised in profit or loss in the prior year.
The 7.1% equity holding in the newly formed group was accounted at fair value
through profit or loss under IFRS 9 at 31 December 2022. As at 31 December
2023, the fair value of the equity holding has been impaired down to €Nil
(2022: €1.3 million).
Investment in Hard Rock Digital
On 14 March 2023, the Group invested $85.0 million (€79.8 million) in Hard
Rock Digital (HRD) in exchange for a small minority interest in a combination
of equity shares and warrants. HRD is the exclusive Hard Rock International
and Seminole Gaming vehicle for interactive gaming and sports betting on a
global basis.
The Group assessed whether the warrants meet the definition of a separate
derivative as per IFRS 9. A financial instrument or other contract should have
all three of the following characteristics:
· its value changes in response to the change in a specified
interest rate, financial instrument price, commodity price, foreign exchange
rate, index of prices or rates, credit rating or credit index, or other
variable, provided, in the case of a non-financial variable, that the variable
is not specific to a party to the contract (sometimes called the
"underlying");
· it requires no initial net investment or an initial net
investment that is smaller than would be required for other types of contracts
that would be expected to have a similar response to changes in market
factors; and
· it is settled at a future date.
Management made a judgement that the warrants do not meet the definition of a
separate derivative asset as: (i) the value of the warrants is part of the
total investment and cannot be distinguished between the two and therefore the
value of the warrants was deemed to be equal to the equity shares value; and
(ii) the consideration was paid at the time of the transaction.
The equity investment in HRD does not meet the definition of held for trading,
as the investment was acquired for long-term investment purposes and with no
current intention for sale. In this respect, the investment will be classified
as an investment at fair value through profit or loss with initial and
subsequent recognition at fair value. Any subsequent gain/loss will be
recognised in profit or loss.
Since the date the investment was made until 31 December 2023, there have been
no changes in the operations of HRD that would indicate that the fair value of
the investment would be different to the original arm's length price paid of
$85.0 million (€79.8 million). This continues to be the case, despite the
positive outcome of the federal appeals court overturning a ruling that
prevented HRD from relaunching its operations in support of The Seminole Tribe
of Florida's mobile and retail sports books in Florida, a decision that is
currently being appealed.
The foreign exchange movement of the investment held in HRD is recorded
through other comprehensive income as the investment is held in a USD
functional currency entity. The impact of the foreign exchange movement of the
investment is a loss of €2.8 million in other comprehensive income for the
year ended 31 December 2023.
C. Derivative financial assets
Balance sheet
2023 2022
€'m €'m
Playtech M&A Call Option (Caliplay) 730.2 524.0
Wplay 88.0 93.5
Onjoc 3.1 8.6
Tenbet 1.7 8.9
NorthStar warrants (Note 21A) - -
LSports (Note 21A) 4.8 1.4
Total derivative financial assets 827.8 636.4
Statement of comprehensive income impact
2023 2022
€'m €'m
Caliplay
Fair value change of Playtech M&A Call Option 180.9 (13.3)
Playtech Call Option - -
Foreign exchange movement to profit or loss (16.0) 30.6
Wplay
Fair value change in Wplay (2.7) (9.4)
Foreign exchange movement recognised in other comprehensive income (2.8) 5.7
Onjoc
Fair value change in Onjoc (5.3) 1.3
Foreign exchange movement recognised in other comprehensive income (0.2) 0.4
Tenbet
Fair value change in Tenbet (6.9) (3.2)
Foreign exchange movement recognised in other comprehensive income (0.3) 0.7
LSports
Fair value change of call option (Note 21A) 3.4 -
Total comprehensive income impact 150.1 12.8
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 2023 and 2022, the valuation methodology used for the
Playtech M&A Call Option was that of a discounted cash flow (DCF) approach
with a market exit multiple assumption.
As already mentioned in part A of Note 21, 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 2023 and 31 December 2022.
Furthermore, and as disclosed in further detail under Note 7, the disputes
with Caliplay now also include a dispute in relation to the additional B2B
services fees and B2B licensee fees. The dispute relates to amounts that date
back to the summer of 2023 and remain outstanding from Caliplay today. The
impact of this dispute has been considered below by including a higher
specific risk premium in the discount rate used for the DCF, to reflect what a
willing third-party buyer would pay for the rights to this option, as things
stand with the ongoing dispute.
Valuation
The Group has assessed the fair value of the Playtech M&A Option as at 31
December 2023 using a DCF approach with a market exit multiple assumption.
The Group's view of a reasonable market participant base discount rate for the
31 December 2023 valuation is unchanged since last year. However, due to the
ongoing legal proceedings and the dispute with Caliplay as described above,
the Group has adjusted the fair value of the Playtech M&A Call Option to
reflect this risk, by including an additional company-specific risk premium in
the discount rate, which overall increased it to 20% (2022: 16%).
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 five-year
period, until December 2028. Management did not model a scenario of no exit
as this is considered highly remote. The Group used a compound annual growth
rate of 17.0% (2022: 17.2%) on revenue over the forecasted cash flow period,
an average Adjusted EBITDA margin of 31.3% (2022: 26.3%) and an exit multiple
of 7.7x (2022: 9.6x). The decrease in the exit EBITDA multiple is supported by
the observed median EV/EBITDA multiple of the publicly listed peers as at 31
December 2023 and share price declines. 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 10.0%
(2022: 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. Finally, taking account of matters arising
in the period, Playtech has included some probability weighted scenarios to
consider the impact of the COC Option as explained in part A of this Note,
noting that the probabilities assigned to this scenario are above zero but
low, as compared to the 31 December 2022 valuation where it was assumed that
there was no impact (i.e. 0% probability scenarios).
As at 31 December 2023, the fair value of the Playtech M&A Call Option was
$805.8 million (2022: $560.6 million) which converted to €730.2 million
(2022: €524.0 million). The period-on-period change in the fair value of the
Playtech M&A call option is a combination of an uplift:
· in the forecasts which consider Caliplay's strong 2023
performance which exceeded previous expectations; and
· following the reduction of the right to Caliplay shares that a
service provider of Playtech had under its services agreement which was partly
redeemed during the period through a €41.3 million redemption payment (the
value of such right being previously deducted from the fair value of the
Playtech M&A Call Option).
These were partially offset by:
· the reduction in the exit multiple as explained above;
· the increase in the discount rate to reflect the ongoing
litigation risk;
· unfavourable movement in the USD to EUR foreign exchange rate;
and
· the impact of including scenarios whereby there is a small
probability that the COC Option will be exercised.
Sensitivity analysis
The assumptions and judgements made in the valuation of the derivative
financial asset as at 31 December 2023 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 18% to 22% will
result in a fair value of the derivative financial asset in the range of
€679.6 million - €785.6 million.
• A 5% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €691.3
million - €769.3 million.
• A 10% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €652.4
million - €808.2 million.
• A 5% fluctuation in the revenue growth rate will result in a fair
value of the derivative financial asset within the range of €598.9 million -
€885.3 million.
• A 10% fluctuation in the revenue growth rate will result in a fair
value of the derivative financial asset within the range of €487.5 million -
€1,066.5 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 €666.9
million - €793.7 million.
• If the 10% DLOM applied for the two-year period post exercise of
the Playtech M&A Option fluctuates by 5% (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 be
within the range of €694.1 million - €766.6 million.
• If the incremental annual DLOM on option fluctuates by 2.5% (to
2.5% and 7.5% instead of 5%) this will result in a fair value of the
derivative financial asset within the range of €690.4 million - €769.3
million.
• If the M&A call option weighted at 100% probability of
exercise relative to the standalone COC option payment, regardless of the exit
date scenario, the fair value of the derivative financial asset would be
€811.0 million.
• If the M&A call option weighted at even 50% between the
probability of exercise of the standalone Playtech M&A Call Option and the
standalone COC option payment, the fair value of the derivative financial
asset would be €621.6 million.
Wplay
In August 2019, Playtech entered into a structured agreement with Aquila
Global Group SAS ("Wplay"), which has a licence to operate online gaming
products and services 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 10. 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 2022 this option was exercisable in August 2023.
In 2023, the option exercise date was deferred to February 2024, however
management was in active discussions with Wplay to further extend the option
exercise date pre-year end. The extension was signed in February 2024, and the
option exercise date was deferred to February 2025, or earlier if an M&A
event takes place. For the call option valuation as at 31 December 2023,
Playtech assumed that the call option cannot be exercised any date before
February 2025. 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 €1.2
million for the year ended 31 December 2023 (2022: €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.
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 on 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.
• 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 2023, 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 regard 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, the Group has 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 two loans to Wplay, an interest-bearing and a
non-interest-bearing one, of $1.7 million (€1.6 million) and $0.5 million
(€0.5 million) respectively. The combined outstanding balance as at 31
December 2023 is $1.3 million (€1.3 million) and is due for repayment within
the next 12 months. The loans are included in loans receivable from related
parties (refer to Note 24).
Valuation
The fair value of the option at 31 December 2023 has been estimated using a
DCF approach with a market exit multiple assumption. The Group used a discount
rate of 22% (2022: 25%), the decrease reflecting the maturity stage of the
Wplay business, as well as a discount for illiquidity and control until the
expected Playtech exit date of February 2025 (2022: expected exit date of
December 2026). The Group used a compound annual growth rate of 8.2% (2022:
24.7%) over the forecasted cash flow period, an average Adjusted EBITDA margin
of 28.5% (2022: 20.6%) and an exit multiple of 10.2x (2022: 9.6x). 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 2023, the fair value of the Wplay derivative financial asset
is €88.0 million. The difference of €5.5 million between the fair value at
31 December 2022 of €93.5 million and the fair value at 31 December 2023 has
been recognised as follows:
a. €2.7 million derived from the fair value decrease of the derivative
call option calculated using the DCF model in profit or loss for the year
ended 31 December 2023. The decrease was due to downgrading the forecasts
because of the new marketing regulations becoming effective in Colombia from
January 2024, which restrict the amounts that can be spent on marketing each
year by operators, and offset by the decrease in the discount rate and the
increase in the exit multiple.
b. €2.8 million derived from the fair value decrease 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 2023.
Sensitivity analysis
The assumptions and judgements made in the valuation of the derivative
financial asset as at 31 December 2023 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 17% to 27% will
result in a fair value of the derivative financial asset in the range of
€74.3 million - €105.1 million.
• A 5% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €83.6
million - €92.4 million.
• A 10% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €79.2
million - €96.8 million.
• A 5% fluctuation in the revenue growth rate will result in a fair
value of the derivative financial asset within the range of €83.1 million -
€93.0 million.
• A 10% fluctuation in the revenue growth rate will result in a fair
value of the derivative financial asset within the range of €78.3 million -
€98.0 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 €81.2
million - €94.9 million.
• If the expected Playtech exit date is extended by one year, the
fair value of the derivative financial asset will decrease to €82.9 million.
Onjoc
In June 2020, Playtech entered into a framework agreement with ONJOC CORP.
("Onjoc"), which holds a licence 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 10. 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 2023 (2022: €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 propose 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 2023, 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 regard 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 propose 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, the Group has 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 €2.3 million (2022:
€1.8 million) which is due for repayment in October 2025 and is included in
loans receivable from related parties (refer to Note 22).
Valuation
The fair value of the option at 31 December 2023 has been estimated using a
DCF approach with a market exit multiple assumption. The Group used a discount
rate of 32% (2022: 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
(2022: expected exit date of December 2027). The Group used a compound annual
growth rate of 49.2% (2022: 60.1%) over the forecasted cash flow period and an
average Adjusted EBITDA margin of 24.2% (2022: 20.4%). 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 2023, the fair value of the Onjoc derivative financial asset
is €3.1 million. The difference of €5.5 million between the fair value at
31 December 2022 of €8.6 million and the fair value at 31 December 2023 has
been recognised as follows:
a. €5.3 million derived from the fair value decrease of the derivative
call option calculated using the DCF model in profit or loss in the year ended
31 December 2023. This decrease is mostly due to the revised cash flow
forecasts used in the valuation which have been downgraded based on Onjoc's
current performance.
b. €0.2 million derived from the fair value decrease 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 2023.
Sensitivity analysis
The assumptions and judgements made in the valuation of the derivative
financial asset as at 31 December 2023 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 27% to 37% will
result in a fair value of the derivative financial asset in the range of
€2.4 million - €4.0 million.
• A 5% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €2.9
million - €3.3 million.
• A 10% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €2.7
million - €3.6 million.
• A 5% fluctuation in the revenue growth rate will result in a fair
value of the derivative financial asset within the range of €2.2 million -
€4.1 million.
• A 10% fluctuation in the revenue growth rate will result in a fair
value of the derivative financial asset within the range of €1.3 million -
€5.1 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 €2.5
million - €3.7 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 2023 (2022: €Nil).
In H1 2023, the Group signed an amendment to the Tenbet agreement in which the
option can be exercised at any time from July 2024 (previously 35 months of
Tenbet going live). In H2 2023, the Group signed an amendment to the Tenbet
agreement in which the option can be exercised at any time from 1 January 2025
based on the condition that Tenbet has generated at least once, prior to the
exercise, accumulative GGR (as defined in the agreement) of at least $10.0
million, in a consecutive 12-month period.
Under the existing agreements, the Group has provided Tenbet with a credit
facility of €4.5 million, out of which €4.2 million (Note 22) had been
drawn down as at 31 December 2023 (2022: €2.1 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, nor change, any
members of the board of Tenbet; and
• as at 31 December 2023, 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 regard 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, the Group has 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 2023 has been estimated using a
DCF approach with a market exit multiple assumption. The Group used a discount
rate of 33% (2022: 35%) 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 2028
(2022: expected exit date of December 2027). The Group used a compound annual
growth rate of 96.2% (2022: 135%) over the forecasted cash flow period and an
average Adjusted EBITDA margin of 0.9% (2022: average of -59.8%). 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 2023, the fair value of the Tenbet derivative financial
asset is €1.7 million. The difference of €7.2 million between the fair
value at 31 December 2022 of €8.9 million and the fair value at 31 December
2023 has been recognised as follows:
a. €6.9 million derived from the fair value decrease of the derivative
call option calculated using the DCF model in profit or loss in the year ended
31 December 2023. This decrease is mostly due to the revised cash flow
forecasts used in the valuation which have been downgraded based on Tenbet's
current performance.
b. €0.3 million derived from the fair value decrease 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 2023.
Sensitivity analysis
The assumptions and judgements made in the valuation of the derivative
financial asset as at 31 December 2023 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
€1.0 million - €2.6 million.
• A 5% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €1.4
million - €2.0 million.
• A 10% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €1.2
million - €2.2 million.
• A 5% fluctuation in the revenue growth rate will result in a fair
value of the derivative financial asset within the range of €Nil - €3.9
million.
• A 10% fluctuation in the revenue growth rate will result in a fair
value of the derivative financial asset within the range of €Nil - €6.3
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 €1.1
million - €2.3 million.
Note 22 - Other non-current assets
2023 2022
€'m €'m
Security deposits 4.3 3.3
Guarantee for gaming licences 2.2 2.2
Prepaid costs relating to Sun Bingo contract 58.7 63.4
Loans receivable (net of ECL) 3.1 1.7
Loans receivable from related parties (net of ECL) (Note 37) 58.5 27.9
Other receivables 10.2 11.1
137.0 109.6
The movement of loans and interest receivable is as follows:
€'m
Balance as at 1 January 2023 45.9
Net loans granted/repaid 23.4
Non-cash loans granted (transfer from trade receivables) 4.5
Non-cash loans repayment (transfer from trade payables) (0.3)
Conversion of loan to equity investment (Note 21A) (8.4)
Interest charge for the year 1.9
ECL (0.9)
Impairment of loans receivable (1.5)
Foreign exchange movements (1.3)
Balance as at 31 December 2023 63.3
Split to:
Non-current assets 61.6
Current assets (Note 24) 1.7
63.3
Note 23 - Trade receivables
2023 2022
€'m €'m
Trade receivables 109.9 144.5
Related parties (Note 37) 99.1 20.5
Trade receivables - net 209.0 165.0
Split to:
Non-current assets 1.9 1.1
Current assets 207.1 163.9
209.0 165.0
Note 24 - Other receivables
2023 2022
€'m €'m
Prepaid expenses 23.3 23.4
VAT and other taxes 14.8 13.6
Security deposits for regulators 24.4 24.2
Prepaid costs relating to Sun Bingo contract 4.4 3.6
Receivable for legal proceedings and disputes1 16.4 16.4
Loans receivable (net of ECL) 0.5 13.0
Loans receivable from related parties (net of ECL) (Note 37) 1.2 3.3
Other receivables from related parties (Note 37) 0.3 -
Other receivables 15.2 10.1
100.5 107.6
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.
Note 25 - Cash and cash equivalents
Cash and cash equivalents for the purposes of the statement of cash flows
comprises:
2023 2022
€'m €'m
Continuing operations
Cash at bank 516.6 426.8
Deposits - 0.1
Cash and cash equivalents in the statement of cash flows 516.6 426.9
Less: expected credit loss (Note 39A) (0.4) (0.4)
516.2 426.5
Out of the total cash at bank, an amount of €9.4 million was held by payment
processors as at 31 December 2023 (2022: €6.8 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.
2023 2022
€'m €'m
Continuing operations
Funds attributed to jackpots 81.1 84.7
Security deposits 29.9 29.6
Players' balances 41.9 39.8
152.9 154.1
Note 26 - Assets held for sale
2023 2022
€'m €'m
Assets
Property, plant and equipment 19.3 19.6
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.
The sale has been finalised but the disposal is expected to complete in H1
2025 with the movement of the trot track from La Maura area to San Siro
(previously it was expected that the sale would be completed during 2024).
Note 27 - Shareholders' equity
A. Share capital
Share capital is comprised of no par value shares as follows:
2023 2022
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 the Directors are
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 Total
circulation EBT
Number of shares
At 1 January 2022 299,244,326 2,937,550 7,112,367 309,294,243
Exercise of options 1,743,990 - (1,743,990) -
At 31 December 2022 / 1 January 2023 300,988,316 2,937,550 5,368,377 309,294,243
Transfer from treasury shares to EBT - (2,937,550) 2,937,550 -
Exercise of options 3,704,491 - (3,704,491) -
At 31 December 2023 304,692,807 - 4,601,436 309,294,243
B. Employee Benefit Trust
In 2014, the Group established an Employee Benefit Trust by acquiring
5,517,241 shares for a total of €48.5 million.
In 2021, the Company transferred 7,028,339 shares held by the Company in
treasury to the Employee Benefit Trust for a total of €22.6 million.
In 2023, the Company transferred 2,937,550 shares held by the Company in
treasury to the Employee Benefit Trust for a total of €12.5 million.
During the year ended 31 December 2023, 3,704,491 shares (2022: 1,743,990)
were issued at a cost of €11.9 million (2022: €6.0 million). As at 31
December 2023, a balance of 4,601,436 shares (2022: 5,368,377 shares) remains
in the EBT with a cost of €17.8 million (2022: €17.2 million).
C. Share options exercised
During the year 3,880,633 (2022: 1,794,438) share options were exercised, of
which 176,142 were cash settled (2022: 50,448).
D. Distribution of dividends
During 2023 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
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 28 - Loans and borrowings
The main credit facility of the Group is a revolving credit facility (RCF) up
to €277.0 million and is available until October 2025, with an option to
extend by 12 months. Interest payable on the loan is based on SONIA depending
on the currency of each withdrawal. As at the reporting date the credit
facility drawn amounted to €Nil (2022: €Nil).
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 to be less than 3.5:1 for the
year ended 31 December 2023 (2022: less than 3.5:1).
· Interest cover: Adjusted EBITDA/Interest to be over 4:1 for the
year ended 31 December 2023 (2022: over 4:1).
As at 31 December 2023 and 2022 the Group met these financial covenants.
Note 29 - Bonds
2018 Bond 2019 Bond 2023 Bond Total
€'m €'m €'m €'m
At 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 / 1 January 2023 199.6 348.0 - 547.6
Repayment of bonds (200.0) - - (200.0)
Issue of new bond - - 297.2 297.2
Release of capitalised expenses 0.4 0.6 0.3 1.3
At 31 December 2023 - 348.6 297.5 646.1
2023 2022
€'m €'m
Split to:
Non-current 646.1 348.0
Current - 199.6
646.1 547.6
Bonds
(a) 2018 Bond
On 12 October 2018, the Group issued €530.0 million of senior secured notes
(the "2018 Bond") maturing in October 2023. 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 2018 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.
During the year ended 31 December 2022, the Group made a partial repayment
towards the 2018 Bond of €330.0 million. It was then fully repaid in 2023.
(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 2019 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.
(c) 2023 Bond
On 28 June 2023, the Group issued €300.0 million of senior secured notes
(the "2023 Bond") maturing in June 2028. The net proceeds of issuing the 2023
Bond after deducting commissions and other direct costs of issue totalled
€297.2 million.
Commissions and other direct costs of issue have been offset against the
principal balance and are amortised over the period of the 2023 Bond.
The issue price is 100% of its principal amount and bears interest from 28
June 2023 at a rate of 5.875% per annum payable semi-annually, in arrears, on
28 December and 28 June commencing on 28 December 2023.
As at 31 December 2023 and 2022, the Group met the required interest cover
financial covenant of 2:1 Adjusted EBITDA/Interest ratio, for the combined
2018, 2019 and 2023 Bonds.
Note 30 - 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 2023 are shown
below:
Legal and Contractual Other Total
regulatory €'m €'m €'m
€'m
Balance at 1 January 2023 7.3 4.2 2.4 13.9
Provisions made during the year 0.6 1.9 0.9 3.4
Provisions used during the year (1.1) (3.7) (0.2) (5.0)
Provisions reversed during the year (1.1) (1.6) (0.1) (2.8)
Balance at 31 December 2023 5.7 0.8 3.0 9.5
Legal and Contractual Other Total
regulatory €'m €'m €'m
€'m
2022
Non-current 7.3 0.3 2.4 10.0
Current - 3.9 - 3.9
7.3 4.2 2.4 13.9
2023
Non-current 5.7 0.3 2.9 8.9
Current - 0.5 0.1 0.6
5.7 0.8 3.0 9.5
Provision for legal and regulatory issues
The Group is subject to proceedings and potential claims regarding complex
legal matters 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
licences 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 based on
future developments. The Group monitors the status of these matters and
consults with its advisers 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 31 - Contingent consideration
2023 2022
€'m €'m
Non-current contingent consideration
Acquisition of Aus GMTC PTY Ltd 5.4 2.1
Others 0.4 0.2
Total non-current contingent consideration 5.8 2.3
Current contingent consideration consists of:
Other acquisitions 0.4 0.6
Total current contingent consideration 0.4 0.6
Total contingent consideration 6.2 2.9
The maximum contingent consideration payable is as follows:
2023 2022
€'m €'m
Acquisition of Aus GMTC PTY Ltd 45.3 46.7
Other acquisitions 0.8 0.8
46.1 47.5
Note 32 - Trade payables
2023 2022
€'m €'m
Suppliers 46.0 47.0
Customer liabilities 20.9 14.2
66.9 61.2
Note 33 - Deferred tax
The movement on the deferred tax is as shown below:
2023 2022
€'m €'m
Balance at 1 January (10.8) 14.0
Adjustment on initial recognition of IAS 12 amendment (restated Note 4A) - 1.5
Balance at 1 January (restated) (10.8) 15.5
Charge to profit or loss (Note 15) (87.4) (26.3)
On business combinations (0.9) -
At 31 December (99.1) (10.8)
2023 2022
€'m €'m
Split as:
Deferred tax liability (161.6) (124.8)
Deferred tax asset 62.5 114.0
(99.1) (10.8)
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 2023, 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 Notes 7 and 15 for the assessment performed on the recognition of
deferred tax in the period.
Details of the deferred tax outstanding as at 31 December 2023 and 2022 are as
follows:
2023 2022
€'m €'m
Deferred tax recognised on Group restructuring 47.2 56.8
Tax losses 29.7 75.9
Other temporary and deductible differences (6.4) 30.3
Deferred tax on acquisitions (81.2) (88.4)
Intangible assets (88.4) (85.4)
Total (99.1) (10.8)
Details of the deferred tax, amounts recognised in profit or loss are as
follows:
2023 2022
€'m €'m
Accelerated capital allowances (2.0) (1.3)
Employee pension liabilities - (0.3)
Other temporary and deductible differences (39.4) (26.6)
Leases 0.1 (0.1)
Tax losses (46.1) 2.0
Total (87.4) (26.3)
Note 34 - Other payables
2023 2022
€'m €'m
Non-current liabilities
Payroll and related expenses 30.6 23.9
Other 4.2 1.0
34.8 24.9
Current liabilities
Payroll and related expenses 99.8 99.7
Accrued expenses 76.0 48.2
VAT payable 2.7 3.0
Interest payable 5.9 7.4
Other payables 33.1 10.8
217.5 169.1
Note 35 - Gaming and other taxes payable
2023 2022
€'m €'m
Gaming tax 116.1 112.5
Other - 0.3
116.1 112.8
Note 36 - Acquisitions during prior 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 ($3.0 million),
with an additional consideration (capped at $50.0 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.
Note 37 - 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:
2023 2022
€'m €'m
Revenue
Investments in associates 193.4 132.7
Interest income
Investments in associates 1.7 0.8
Operating expenses
Investments in associates 0.7 -
Dividend income
Investments in associates 2.0 -
The revenue from investments in associates includes income from Caliplay,
Galera, Wplay, Onjoc, Tenbet and NorthStar. The interest income relates to the
same companies except Caliplay and including Stats.
The following amounts were outstanding at the reporting date:
2023 2022
€'m €'m
Trade receivables (Note 23)
Associates 99.1 20.5
Other receivables (Note 24)
Associates 0.3 -
Loans and interest receivable - current (Note 24)
Associates 1.3 3.4
Loans and interest receivable - non-current (Note 22)
Associates 60.9 29.0
The loans and interest receivables above do not include the expected credit
losses. For the year ended 31 December 2023, 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 (2022: €0.1 million) and €2.4
million for more than one year (2022: €1.2 million).
The loans due from related parties are further disclosed in Note 21.
Key management personnel compensation, which includes the Board members
(Executive and Non-executive Directors) and senior management personnel,
comprised the following:
2023 2022
€'m €'m
Short-term employee benefits 16.5 13.6
Post-employment benefits 0.1 0.1
Termination benefits 0.1 1.2
Share-based payments 2.8 2.2
19.5 17.1
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 €12.5 million (2022: €5.9 million).
Note 38 - 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, which owned the
intellectual property rights and licensed the software to customers. From
January 2021 onwards, following the transfer of intellectual property rights
to Playtech Software Limited, the principal activity of this company 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% Manages the iPoker Network in regulated markets and is a main holding company
of the Group
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 United Kingdom 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% Holding company
PT Operational Services Limited British Virgin Islands 100% Holding company
PT Network Management Limited British Virgin Islands 100% Holding company
Videobet Interactive Sweden AB Sweden 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% Trading company for sports betting and provider of development services
ECM Systems Ltd United Kingdom 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% Provider of marketing support services, software development and support
services
OU Videobet Estonia 100% Develops software for fixed odds betting terminals and casino machines (as
opposed to online software)
Playtech Bulgaria EOOD Bulgaria 100% Designs, develops and manufactures online software
PTVB Management Limited Isle of Man 100% Management services company
Techplay S.A. Software Limited Israel 100% Software development and operational support services
CSMS Limited Bulgaria 100% Consulting and online technical support, data mining processing and
advertising services to Group companies
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% Provider of live services to Group companies
Note 39 - 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.
Carrying amount Fair value
Note Measurement 2023 Level 1 Level 2 Level 3
category €'m €'m €'m €'m
31 December 2023
Continuing operations
Non-current financial assets
Equity investments 21B FVTPL 92.8 15.8 - 77.0
Derivative financial assets 21C FVTPL 827.8 - - 827.8
Convertible loans 22 FVTPL 3.5 - - 3.5
Trade receivables 23 Amortised cost 1.9 - - -
Loans receivable 22 Amortised cost 58.1 - - -
Current financial assets
Trade receivables 23 Amortised cost 207.1 - - -
Loans receivables 24 Amortised cost 1.7 - - -
Cash and cash equivalents 25 Amortised cost 516.2 - - -
Non-current liabilities
Bonds 29 Amortised cost 646.1 - - -
Lease liability 19 Amortised cost 61.9 - - -
Contingent consideration 31 FVTPL 5.8 - - 5.8
Current liabilities
Trade payables 32 Amortised cost 66.9 - - -
Lease liability 19 Amortised cost 24.9 - - -
Progressive operators' jackpots and security deposits 25 Amortised cost 111.0 - - -
Client funds 25 Amortised cost 41.9 - - -
Contingent consideration 31 FVTPL 0.4 - - 0.4
Interest payable 34 Amortised cost 5.9 - - -
Carrying amount Fair value
Note Measurement 2022 Level 1 Level 2 Level 3
category €'m €'m €'m €'m
31 December 2022
Continuing operations
Non-current financial assets
Equity investments 21B FVTPL 9.2 1.4 - 7.8
Derivative financial assets 21C FVTPL 636.4 - - 636.4
Trade receivables 23 Amortised cost 1.1 - - -
Loans receivable 22 Amortised cost 29.6 - - -
Current financial assets
Trade receivables 23 Amortised cost 163.9 - - -
Convertible loans 24 FVTPL 8.3 - - 8.3
Loans receivables 24 Amortised cost 8.0 - - -
Cash and cash equivalents 25 Amortised cost 426.5 - - -
Non-current liabilities
Bonds 29 Amortised cost 348.0 - - -
Lease liability 19 Amortised cost 54.0 - - -
Contingent consideration 31 FVTPL 2.3 - - 2.3
Current liabilities
Bonds 29 Amortised cost 199.6 - - -
Trade payables 32 Amortised cost 61.2 - - -
Lease liability 19 Amortised cost 31.8 - - -
Progressive operators' jackpots and security deposits 25 Amortised cost 114.3 - - -
Client funds 25 Amortised cost 39.8 - - -
Contingent consideration 31 FVTPL 0.6 - - 0.6
Interest payable 34 Amortised cost 7.4 - - -
The fair value of the contingent consideration 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 21C.
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 €9.7 million (2022: €6.5 million).
As at 31 December 2023, two customers had combined loans and receivables
outstanding of €139.7 million.
Cash and cash equivalents
The Group held cash and cash equivalents (before ECL) of €516.6 million as
at 31 December 2023 (2022: €426.9 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 2023 is
€0.4 million (2022: €0.4 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
At 31 December 2023 516.6 337.0 179.6
At 31 December 2022 426.9 214.2 212.7
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.
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 trade balances
from related parties have also been included in the ECL assessment. 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.
As at 31 December 2023, the Group has trade receivables of €209.0 million
(2022: €165.0 million) which is net of an allowance for ECL of €6.8
million (2022: €4.5 million).
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 2023 Total Not past due 1-2 months More than
€'m €'m overdue 2 months
€'m past due
€'m
Expected credit loss rate 3.2% 4.8% 1.0% 2.1%
Gross carrying amount 215.8 109.3 62.9 43.6
Expected credit loss (6.8) (5.3) (0.6) (0.9)
Trade receivables - net 209.0 104.0 62.3 42.7
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 169.5 124.8 27.2 17.5
Expected credit loss (4.5) (3.7) (0.3) (0.5)
Trade receivables - net 165.0 121.1 26.9 17.0
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:
2023 2022
€'m €'m
Balance at 1 January 4.5 6.8
Charged to profit or loss 2.3 (2.3)
Balance at 31 December 6.8 4.5
As of 31 December 2023, the Group has a significant concentration of trade
receivables from a related party. The balance outstanding from this related
party represents 41% of the net trade receivable balance. This concentration
of receivables from a related party exposes the Group to concentration risk,
as any adverse financial performance or inability of the related party to
fulfil its obligations could have a material adverse impact on the Group's
financial position, results of operations and cash flows. The Group believes
that this amount is recoverable and expects timely payment (refer to Note 7
for significant judgement made).
Loans receivable
The Group recognised an allowance for expected credit losses for all debt
instruments given to third parties based on past default experience and
assessment of the future economic environment. For the year ended 31 December
2023, the Group recognised provision for expected credit losses of €2.5
million in profit or loss relating to loans receivable (2022: €1.6 million).
2023 2022
€'m €'m
Balance at 1 January 1.6 -
Charged to profit or loss 0.9 1.6
Balance at 31 December 2.5 1.6
Furthermore, €3.0 million of an existing loan to Gameco was impaired during
the year ended 31 December 2022 (refer to Note 21B).
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
2023 Carrying amount Total Within 1 year 1-5 years More than 5 years
€'m €'m €'m €'m €'m
Bonds 646.1 762.8 32.5 730.3 -
Lease liability 86.8 96.8 26.7 53.5 16.6
Contingent consideration 6.2 7.8 0.4 7.4 -
Trade payables 66.9 66.9 66.9 - -
Progressive operators' jackpots and security deposits 111.0 111.0 111.0 - -
Client funds 41.9 41.9 41.9 - -
Interest payable 5.9 5.9 5.9 - -
Provisions for risks and charges 9.5 9.5 9.5 - -
974.3 1,102.6 294.8 791.2 16.6
2022
Bonds 547.6 604.6 221.1 383.5 -
Lease liability 85.8 110.2 34.1 43.1 33.0
Contingent consideration 2.9 7.9 0.2 7.7 -
Trade payables 61.2 61.2 61.2 - -
Progressive operators' jackpots and security deposits 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
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 enter into foreign
transactions, and when the Group holds cash balances, in currencies
denominated in a currency other than the functional currency.
31 December 2023 In EUR In USD In GBP In other Total
€'m €'m €'m currencies €'m
€'m
Cash and cash equivalents 418.7 11.2 69.7 17.0 516.6
Progressive operators' jackpots and security deposits (140.3) (0.4) (12.2) - (152.9)
Cash and cash equivalents less client funds 278.4 10.8 57.5 17.0 363.7
31 December 2022 In EUR In USD In GBP In other Total
€'m €'m €'m currencies €'m
€'m
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
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
2023, none of the Group's borrowings are at a variable rate of interest (2022:
Nil%).
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 40 - 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 2023 - 547.6 7.3 2.9 85.8 643.6
Changes from financing cash flows
Interest payable on bonds and loans and borrowings - - (31.3) - - (31.3)
Repayment of loans and borrowings (77.4) - - - - (77.4)
Proceeds from loans and borrowings 79.9 - - - - 79.9
Proceeds from the issuance of bonds - 297.2 - - - 297.2
Repayment of bonds - (200.0) - - - (200.0)
Payment of contingent consideration - - - (0.2) - (0.2)
Principal paid on lease liability - - - - (23.1) (23.1)
Interest paid on lease liability - - - - (5.2) (5.2)
Total changes from financing cash flows 2.5 97.2 (31.3) (0.2) (28.3) 39.9
Other changes
Liability related
New leases - - - - 22.0 22.0
On business combinations - - - 0.4 1.9 2.3
Interest on bonds and loans and borrowings - 1.3 29.6 - - 30.9
Interest on lease liability - - - - 5.2 5.2
Movement in contingent consideration - - - 3.3 - 3.3
Foreign exchange difference (2.5) - 0.3 (0.2) 0.2 (2.2)
Total liability-related other changes (2.5) 1.3 29.9 3.5 29.3 61.5
Balance at 31 December 2023 - 646.1 5.9 6.2 86.8 745.0
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
Note 41 - Events after the reporting date
Post year end, the Group entered into a new structured agreement with Tenlot
El Salvador S.A. de C.V. ("Tenlot El Salvador"), which has a licence to
operate online betting and gaming on behalf of the national lottery of El
Salvador. Under the agreement, the Group will provide Tenlot El Salvador its
technological platform, the operational services and related services, where
it will receive in return standard operator revenue and additional B2B
services fee as per Note 10. The Group has no shareholding in Tenlot El
Salvador. Playtech has paid Tenlot El Salvador an amount of $2.3 million and
will pay an additional $2.5 million upon certain conditions in exchange for an
option to acquire 70% of the shares in Tenlot El Salvador. The option has
certain exercise conditions. Playtech also made available to Tenlot El
Salvador a $5.5 million line of credit. As of the date of this report this
amount remains undrawn.
Post year end, the Group formally concluded the extension of the exercise date
in respect of the Wplay option (see Note 21C) to any date after 22 February
2025.
Post year end, the receivable in Note 7 in relation to Caliplay remains
unpaid. In addition, further invoices totalling €35.8 million in relation to
B2B licensee fees and additional B2B services fee for January and February
2024 have been issued and remain unpaid.
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