REG - Playtech PLC - Half-year Report <Origin Href="QuoteRef">PTEC.L</Origin> - Part 3
24/08/2017 07:06
- Part 3: For the preceding part double click ID:nRSX8419Ob
Profit for the period- attributable to owners of parent 89,647 48,772
Amortisation of intangibles on acquisitions 25,341 19,733
Employee stock option expenses 5,210 5,371
Professional expenses on acquisitions 786 1,156
Cost of fundamental business reorganization 380 -
Non-cash accrued bond interest 5,056 4,869
Movement in deferred and contingent consideration 1,689 (390)
Deferred tax on acquisition (2,628) (1,182)
Adjusted profit for the period - attributable to owners of the parent 125,481 78,329
Constant currency impact 20,018 42,567
Adjusted profit for the period - attributable to owners of the parent on constant currency basis 145,499 120,896
Adjusted net loss/(profit) related to acquisitions on constant currency basis (12,103) 39
Underlying adjusted profit for the period - attributable to owners of the parent on constant currency basis 133,396 120,935
NOTE 5 - FINANCING INCOME AND COSTS
Six months ended Six months ended
30 June 2017 30 June 2016
E'000 E'000
A. Finance income
Interest received 329 770
Dividends received from available-for-sale investments 2,976 8,919
3,305 9,689
B. Finance cost
Finance cost - movement in contingent consideration (1,689) 390
Interest expenses on convertible bonds (5,798) (5,612)
Bank charges and interest paid (1,994) (1,954)
Exchange differences (12,985) (42,567)
(22,466) (49,743)
Net financing income (19,161) (40,054)
NOTE 6 - EARNINGS PER SHARE
Earnings per share have been calculated using the weighted average number of
shares in issue during the relevant financial periods. The weighted average
number of equity shares in issue and the earnings, being profit after tax, is
listed below. In addition, adjusted earnings per share have been disclosed as
the directors believe that the adjusted profit represents more closely the
underlying trading performance of the business. The adjusted items are
included in Note 4.
Six months ended Six months ended Six months ended Six months ended
30 June 2017 30 June 2016
Actual Adjusted Actual Adjusted
E'000 E'000 E'000 E'000
Profit for the year attributable to owners of the parent 89,647 125,481 48,772 78,329
Add interest on convertible bond 5,798 743 n/a 743
Earnings used in diluted EPS 95,445 126,224 48,772 79,072
Basic (cents) 28.5 39.9 15.3 24.6
Diluted (cents) 27.3 36.2 15.3 22.6
Six months ended Six months ended Six months ended Six months ended
30 June 2017 30 June 2016
Actual Adjusted Actual Adjusted
Number Number Number Number
Denominator - basic
Weighted average number of equity shares 314,392,086 314,392,086 318,495,749 318,495,749
Denominator - diluted
Weighted average number of equity shares 314,392,086 314,392,086 318,495,749 318,495,749
Weighted average number of option shares 1,614,569 1,614,569 1,064,964 1,064,964
Weighted average number of convertible bonds 33,157,683 33,157,683 - 30,737,705
Weighted average number of shares 349,164,338 349,164,338 319,560,713 350,298,418
NOTE 7 - SHAREHOLDERS' EQUITY
A. Share Capital
Share capital is comprised of no par value shares as follows:
Number of Shares
30 June 2017 30 June 201
Authorised N/A* N/A*
Issued and paid up 317,344,603 322,624,603
* The Group has no authorised share capital but is authorized under its
memorandum and article of association to issue up to 1,000,000,000 shares of
no par value.
B. Employee Benefit trust
During 2013 the Group established an Employee benefit trust by acquiring
5,517,241 shares for a total of E48.5 million. During the period 190,950
shares were sold with a cost of E0.3 million (Six months to 30 June 2016:
36,062 shares with a cost of E0.3 million), and as of 30 June 2017, a balance
of 3,035,673 (2016: 3,244,027) shares remains in the trust with a cost of
E23.8 million (2016: E27.2 million).
C. Share options exercised
During the period 193,120 (Six months to 30 June 2016: nil) share options were
exercised.
D. Distribution of Dividend
In June 2017, the Group distributed E68,404,085 as a final dividend for the
year ended 31 December 2016. (2016: E60,810,670).
NOTE 8 - AVAILABLE-FOR-SALE INVESTMENTS
30 June 2017 30 June 2016
E'000 E'000
Investment in available-for-sale investments at 1 January 230,280 237,100
Unrealised valuation movement recognised in equity 15,563 (1,778)
Translation (4,084) (934)
Investment in available-for-sale investments at 30 June 241,759 234,388
The fair value of quoted investments is based on published market prices
(level one).
30 June 2017 30 June 2016
E'000 E'000
Available-for-sale financial assets include the following:
Quoted:
Equity securities- UK 237,168 222,859
Equity securities- Asia 4,589 11,529
241,757 234,388
NOTE 9 -CONTINGENT CONSIDERATION
Six months ended Six months ended
30 June 2017 30 June 2016
Non-Current contingent consideration consists:
Acquisition of TradeFX Group - 138,664
Acquisition of Quickspin AB 14,722 24,104
Acquisition of Eyecon Limited 1,296 -
Other acquisitions 148 1,593
16,166 164,361
Non-Current redemption liability consists:
Acquisition of Consolidated Financial Holdings 16,022 -
Acquisition of Patelle Limited 16,890 -
Acquisition of ECM Systems Holdings Limited 1,162 -
Other acquisition 258 -
34,332 -
Total Non-Current contingent consideration and redemption liability 50,498 164,361
Current contingent consideration consists:
Acquisition of TradeFX Group 139,597 -
Acquisition of Quickspin AB 9,485 -
Acquisition of Patelle Limited 4,875 -
Acquisition of Yoyo Games Limited - 455
Other acquisitions 548 3,553
154,505 4,008
Contingent consideration arising on the acquisition of TradeFX Group (now
Markets) in 2015 is payable in 2018 based on an EBITDA multiple, less initial
consideration and capped at E250 million. The liability above reflects
managements discounted anticipated contingent consideration liability due.
NOTE 10 - ACQUISITIONS DURING THE PERIOD
A. Acquisition of Eyecon Limited and Eyecon PTY
On 7 February 2017, the Group acquired 100% of the shares of Eyecon Limited
and Eyecon PTY (together "Eyecon"), an Australian specialist supplier of
online gaming slots software.
The Group paid total cash consideration of E27.7 million (GBP 23.7 million)
and additional consideration capped at E29.0 million (GBP 25.0 million) in
cash will be payable based on an EBITDA multiple less initial consideration
paid, and is payable in 2020.
Details of the fair value of identifiable assets and liabilities acquired,
purchase consideration and goodwill, are as follows:
Fair value on acquisition
E'000
Property, plant and equipment 77
Intangible assets 12,990
Trade and other receivables 1,361
Cash and cash equivalent 575
Trade payables (2,834)
Net identified assets 12,169
Goodwill 16,859
Fair value of consideration 29,028
E'000
Cash consideration 27,735
Non-current contingent consideration 1,486
Finance cost arising on discounting of contingent consideration (193)
Fair value of consideration 29,028
Cash purchased (575)
Net cash payable 28,453
Adjustments to fair value include the following:
Amount Amortisation
E'000 %
IP Technology 9,279 16.7-33
Customer relationships 2,436 10
Brand 1,275 10
The main factor leading to the recognition of goodwill is the revenue stream
from new games and new licensees, assembled work force with vast experience
and strong records and cost synergies. In accordance with IAS36, the Group
will regularly monitor the carrying value of its interest in Eyecon.
The key assumptions used by management to determine the value in use of the
Customer relationships within Eyecon are as follows:
§ The MPEEM income approach.
§ The discount rate assumed is equivalent to the WACC for the Customer
relationship.
§ The growth rates and attrition rates were based on market analysis.
The key assumptions used by management to determine the value in use of the
Brand within Eyecon are as follows:
§ The relief from royalty approach.
§ The royalty rate was based on a third party market participant assumption
for the use of the Brand.
§ The discount rate assumed is equivalent to the WACC for the Brand.
§ The growth rates and attrition rates were based on market analysis.
The key assumptions used by management to determine the value in use of the IP
Technology within Eyecon are as follows:
§ The with and without model, taking into account the time and additional
expenses required to recreate the IP Technology and the level of lost cash
flows in the period.
§ The discount rate assumed is equivalent to the WACC for the IP Technology.
§ The growth rates and attrition rates were based on market analysis.
Management has not disclosed Eyecon contribution to the Group profit since the
acquisition nor has the impact the acquisition would have had on the Group's
revenue and profits if it had occurred on 1 January 2017 been disclosed,
because the amounts are not material.
B. Other acquisitions
During the period, the Group acquired a further 45% of the shares of a games
studio in steps for a consideration of E1.2m, with previous consideration of
E0.8 million paid to acquire the previously recognized 35% interest in
associate. A fair value movement was required on conversion to a subsidiary of
E0.1m.
Details of the fair value of identifiable assets and liabilities acquired,
purchase consideration and goodwill, are as follows:
Fair value on acquisition
E000
Net identified assets 525
Goodwill 1,593
Non-controlling interest (105)
Total fair value of consideration 2,013
E'000
Cash consideration 1,050
Deferred consideration 144
Conversion of previously recognized associate 819
Fair value of consideration 2,013
Cash purchased 249
Net cash payable 2,262
Adjustments to fair value include the following:
Amount Amortisation
E'000 %
IP Technology 640 25-50
The main factor leading to the recognition of goodwill is the frontend
framework and its games integration, unique workforce and future revenue and
cost synergies. In accordance with IAS36, the Group will regularly monitor the
carrying value of its interest in these acquisitions.
The key assumptions used by management to determine the value in use of the IP
Technology within these acquisitions are as follows:
§ The income approach, in particular, the MPEEM method and the with and
without models.
§ The discount rate assumed is equivalent to the WACC for the IP Technology.
§ The growth rates and attrition rates were based on market analysis.
Management has not disclosed other acquisitions' contribution to the Group
profit since these acquisitions nor has the impact the acquisition would have
had on the Group's revenue and profits if it had occurred on 1 January 2017
been disclosed, because the amounts are not material.
NOTE 11 - ACQUISITIONS IN PREVIOUS PERIOD
A. Acquisition of Quickspin AB
On 24 May 2016, the Group acquired 100% of the shares of Quickspin AB
("Quickspin"). Quickspin is a Swedish games studio that develops and supplies
high quality video slots to operators, both in online real money gambling as
well as in the social gaming market.
The Group paid total cash consideration of E24.5 million (SEK 228.4 million)
and additional consideration capped at E26.0 million (SEK 242.9 million) in
cash will be payable subject to achieving target EBITDA.
B. Other acquisitions
During the prior period, the Group acquired the shares of various companies
for a total consideration of E12.3 million. One of these subsidiaries was
acquired in steps, with previous consideration of E2.4 million paid to acquire
the previously recognized associate. There was no fair value movement required
on conversion to a subsidiary.
NOTE 12 - RELATED PARTIES AND SHAREHOLDERS
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.
On 27 June 2017, Brickington Trading Limited ("Brickington") decreased its
holding to 6.3% (30 June 2016: 33.61%) of Playtech plc shares and the
relationship agreement terminated. From this date Brickington no longer meets
the definition of a related party. Accordingly, the following companies are
not accounted as related parties from the same date:
Skywind Holdings Limited ("Skywind"), SafeCharge Limited, Crossrider
Technologies Ltd ("Crossrider"), Royalfield Limited, Easydock Investments Ltd.
(Easydock), Selfmade Holdings, Glispa GmbH ("Glispa"), Anise Development
Limited and Anise Residential Limited (together "Anise").
Mr Teddy Sagi, the ultimate beneficiary of Brickington, provides advisory
services to the Group for a total annual consideration of E1.
The joint ventures and the structured agreements are associates of the Group
by virtue of the Group's significant influence over those arrangements.
The following transactions arose with related parties:
Six months ended Six months ended
30 June 2017 30 June 2016
E'000 E'000
Revenue including income from associate
Skywind 720 987
Structured agreements 8,970 22,992
Share of profit in joint ventures 263 81
Share of profit/(loss) in associates 389 (1,720)
Operating expenses
SafeCharge Limited 3,612 3,121
Crossrider 1,314 1,308
Structured agreements 6 625
Anise 518 539
Skywind, net of capitalised cost 334 132
Glispa 165 15
Selfmade Holdings - 10
Royalfield Limited - 4
Easydock - 1
Interest income
Structured agreements 49 -
NOTE 13 - CONTINGENT LIABILITIES
As part of the Board's ongoing regulatory compliance process, the Board
continues to monitor legal and regulatory developments and their potential
impact on the Group.
Management is not aware of any contingencies that may have a significant
impact on the financial position of the Group.
Note 14 - Post balance sheet events
Acquisition of ACM Group Limited assets
On 23 August 2017, the Group agreed to acquire technology, intellectual
property and certain customer assets (together 'the acquisition') from ACM
Group Limited. Consideration for the acquisition comprises an initial
up-front payment of $5 million in cash, and additional contingent
consideration of up to $145 million is payable in cash based on 5.2 x the 2019
EBITDA. As of the approval date of the financial statements by the Board and
due to the proximity to the reporting date, the Group had not completed the
valuation of the fair value of the intangible assets and liabilities acquired
and accordingly these disclosures are not provided in the financial
statements.
This information is provided by RNS
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