REG - Playtech PLC - Half-year Report
22/09/2022 07:00
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RNS Number : 2777A Playtech PLC 22 September 2022
Playtech plc
("Playtech", the "Company", or the "Group")
Results for the six months ended 30 June 2022
Excellent H1 performance, momentum continuing into H2
Playtech (LSE: PTEC) today announces its results for the six months ended 30
June 2022.
Financial summary (continuing operations)(1 )
H1 2022 H1 2021 Change Change (const.
(reported) currency)(4)
Revenue €792.3m €457.4m 73% 71%
Adjusted EBITDA(2) €203.8m €124.1m 64% 60%
Adjusted post-tax profit(3) €94.3m €54.6m 73% 41%
Reported post-tax profit(3) €71.4m €401.9m -82% -85%
Adjusted diluted EPS 30.2 €c 17.4 €c 74% 42%
Reported diluted EPS 22.9 €c 128.0 €c -82% -85%
Summary
· Excellent H1 2022 performance driven by regulated B2B markets,
and Snaitech.
· Financial performance ahead of previous expectations with
Adjusted EBITDA of €203.8 million, up 64% vs. H1 2021.
· Regulated markets powered B2B performance with Americas growing
50% (+37% cc) and Europe ex-UK increasing 39% (+39% cc), driving impressive
B2B revenue growth of 17% (+13% cc).
· Strong B2C performance driven by Snaitech's online business
continuing to deliver an excellent performance despite the reopening of retail
sites, which together led to Adjusted EBITDA growth of 143%.
· Reported profit of €71.4 million compared to €401.9 million
in H1 2021, which included a significant gain realised on options embedded in
the Company's agreements in the Americas.
· Sale of Finalto was completed in July 2022; RCF now fully repaid.
· Strong cash generation in H1; refinancing process underway for
RCF and October 2023 bond.
· New medium term Adjusted EBITDA target for Snaitech of €300 -
350 million.
· In spite of the broader macroeconomic and geopolitical
uncertainty, the Group is well placed to continue to deliver against its
stated strategy.
Divisional highlights
B2B Gambling
· Very strong growth within regulated markets helped to deliver B2B
revenue of €312.0 million in the first half of the year, growing 17% (13% at
constant currency).
· B2B Adjusted EBITDA was €77.2 million compared to €72.1
million in H1 2021.
· Within regulated markets, Europe ex-UK and the Americas were the
standout performers.
· Europe ex-UK grew 39% at constant currency to €92.2 million
driven primarily by an impressive start at Holland Casino within the newly
regulated Netherlands market.
· Americas continued to perform well with revenues of €69.8
million and 37% constant currency revenue growth.
· Caliente in Mexico remains a key driver for strong revenue growth
in the Americas; soon to be regulated Brazil market offers significant
opportunity going forward.
· Significant progress made executing the US strategy:
- Launched the IMS platform with Parx Casino in Pennsylvania, involving a
complex migration off a competitor's platform
- Signed several significant new deals including Golden Nugget, WynnBET,
Resorts and 888 which are expected to go live in the coming months
- Licence granted in Pennsylvania. Now licenced in 6 states with further
applications progressing.
· Launched with NorthStar in recently regulated Ontario, Canada,
along with Bet365 and 888.
· Live Casino continued to see good revenue growth; strategically
important facility opened in Peru in H1 that will help continue to drive
future growth in the region.
· Continued diversification of B2B business with over 50 further
brands added to SaaS offering, bringing total to over 300.
· Asia revenue declined 22% (26% at constant currency) due to
competitive pressures and the impact of lockdowns in parts of the region in
the period, while the Company incurred a bad debt provision of €15.4 million
in H1 due to collection delays.
B2C Gambling
· Total B2C revenue (including Snaitech and white-label) of
€487.3 million (H1 2021: €196.6 million) and Adjusted EBITDA of €126.6
million (H1 2021: €52.0 million).
· Snaitech Adjusted EBITDA grew 154% to €131.7 million (H1 2021:
€51.8 million) driven by retail sites reopening at the end of June 2021
post-pandemic.
· Snaitech's online business was ahead of expectations with only
modest revenue declines of 5% versus H1 2021, despite the reopening of retail
sites. Adjusted EBITDA margins remained high at 57% in H1 2022 versus 59% in
H1 2021.
· Snaitech maintained its number one position by brand across
retail and online sports betting in Italy in the half.
· Snaitech's retail betting licences in Italy have been extended
for two years until June 2024 at a total cost of €23.0 million, while Gaming
Machines rights have been extended at no cost until June 2023.
· HAPPYBET, now integrated into Snaitech's operations, remained
loss-making but strategic and operational measures have been taken.
· White Label (including Sun Bingo) saw 3% constant currency
revenue growth to €31.7 million while Adjusted EBITDA fell to €0.1
million. Reported EBITDA includes a €10.4 million payment to terminate an
onerous contract. The termination of the agreement will improve the
profitability of the business going forward.
Corporate Activity
· Sale of Finalto was completed in July 2022, marking a significant
step in Playtech's stated strategic objective to simplify the Group.
· Given capital market conditions, the SPAC transaction in relation
to Caliente in the US is no longer being pursued in the same manner.
Alternative approaches to facilitate Caliente entering the US market are being
evaluated.
Current trading and outlook
· Excellent performance from H1 has continued into H2 2022 albeit
with normal seasonal trends.
· Managing impact from Ukraine invasion, however risk of disruption
as war continues.
· The macroeconomic outlook remains uncertain given geopolitical
and inflationary pressures.
· Given the strong performance so far in 2022 and momentum within
the business, the Board remains confident of Playtech's future prospects.
Mor Weizer, CEO, commented:
"I am delighted with the positive start that the Group has made in the first
half of 2022, delivering a financial performance ahead of our expectations
with significant strategic and operational progress made against our
objectives.
"Our success in the period was powered by our B2B business in the Americas and
Europe, alongside yet another excellent contribution from Snaitech. We
continue to make great strides in executing our US strategy, launching with
Parx Casino in Pennsylvania, signing several exciting deals with leading
Global and US brands, and progressing additional licence applications. The
Americas remain one of the Group's biggest growth drivers, with continued
strong revenue growth in Mexico as well as Brazil complemented by new launches
and partnerships in the US, Canada and Peru.
"The sale of Finalto was completed in July 2022, representing a significant
step in our stated strategy to simplify the Group and focus our efforts on the
high-growth B2B and B2C gambling markets. We remain well placed to capitalise
on the exciting market opportunities ahead, driving sustainable growth for the
benefit of all our stakeholders.
"We have navigated significant disruption and uncertainty in the period due to
well-reported geopolitical tensions and inflationary pressures. For this, I
would like to extend my sincere thanks to all of my Playtech colleagues for
their hard work in the face of adversity. Throughout 2022, we have gone to
great lengths to support our Ukrainian colleagues and their families through
the tragic events which continue to unfold in the country. We remain in close
contact with our employees in Ukraine and will continue to do everything we
can to ensure their safety and that of their families.
"The macroeconomic outlook remains uncertain given geopolitical tensions and
inflationary pressures, however we have seen our excellent performance in H1
continue into H2 and expect to see continued strong results from both our B2B
and B2C businesses. As such, we are confident about Playtech's prospects for
the remainder of 2022 and beyond."
- Ends -
For further information contact:
Playtech plc +44 (0) 20 3805 4822
Mor Weizer, Chief Executive Officer
Andrew Smith, Chief Financial Officer
c/o Headland
Chris McGinnis, Deputy CFO and Director of Investor Relations +44 (0) 20 3805 4822
Headland (PR adviser to Playtech) +44 (0) 20 3805 4822
Lucy Legh, Stephen Malthouse, 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 represent more closely the
consistent trading performance of the business. A full reconciliation between
the actual and adjusted results is provided in Note 9 of the financial
statements.
(3)Adjusted Profit refers to post-tax Profit from continuing operations
attributable to the owners of the Company after the relevant adjustments as
detailed above. Reported Profit refers to post-tax Profit from continuing
operations attributable to the owners of the Company before adjustments.
(4)Constant currency numbers exclude the exchange rate impact on the results
by using previous period relevant exchange rate and exclude the total
cost/income of exchange rate differences recognised in the period.
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/632973c679e5831200053b17/wppa
(https://www.investis-live.com/playtech/632973c679e5831200053b17/wppa)
Analysts and investors can also dial into the call using the following
details:
United Kingdom: 0800 640 6441
USA: 1 855 9796 654
USA (Local): 1 646 664 1960
All other locations: +44 20 3936 2999
Access code: 499605
There will also be a replay available after the live conference call at:
UK: 020 3936 3001
USA (Local): 1 845 709 8569
All other locations: +44 20 3936 3001
Access Code: 822402
A Snaitech Investor Event will be held today at 10.30 am via a live audio
webcast accessible using this link:
https://www.investis-live.com/playtech/632976635f6f080c00140f60/wppb
(https://www.investis-live.com/playtech/632976635f6f080c00140f60/wppb)
Analysts and investors can also dial into the call using the following
details:
United Kingdom: 0800 640 6441
USA: 1 855 9796 654
USA (Local): 1 646 664 1960
All other locations: +44 20 3936 2999
Access code: 004897
There will also be a replay available after the live conference call at:
UK: 020 3936 3001
USA (Local): 1 845 709 8569
All other locations: +44 20 3936 3001
Access Code: 207546
The presentation slides will be available today from 8.30 am at:
http://www.investors.playtech.com/results-centre.aspx
(http://www.investors.playtech.com/results-centre.aspx)
Forward looking statements
This announcement includes statements that are, or may be deemed to be,
"forward-looking statements". By their nature, forward-looking statements
involve risk and uncertainty since they relate to future events and
circumstances. Actual results may, and often do, differ materially from any
forward-looking statements.
Any forward-looking statements in this announcement reflect Playtech's view
with respect to future events as at the date of this announcement. Save as
required by law or by the Listing Rules of the UK Listing Authority, Playtech
undertakes no obligation to publicly revise any forward-looking statements in
this announcement following any change in its expectations or to reflect
events or circumstances after the date of this announcement.
About Playtech
Founded in 1999 and premium listed on the Main Market of the London Stock
Exchange, Playtech is a technology leader in the gambling and financial
trading industries with over 6,700 employees across 26 countries.
Playtech is the gambling industry's leading technology company delivering
business intelligence driven gambling software, services, content and platform
technology across the industry's most popular product verticals, including,
casino, live casino, sports betting, virtual sports, bingo and poker. It is
the pioneer of omni-channel gambling technology through its integrated
platform technology, Playtech ONE. Playtech ONE delivers data-driven marketing
expertise, single wallet functionality, CRM and responsible gambling solutions
across one single platform across product verticals and across retail and
online.
Playtech partners with and invests in the leading brands in regulated and
newly regulated markets to deliver its data-driven gambling technology across
the retail and online value chain. Playtech provides its technology on a B2B
basis to the industry's leading retail and online operators, land-based casino
groups and government sponsored entities such as lotteries. Playtech directly
owns and operates Snai, the leading sports betting and gaming brand across
online and retail in Italy.
Chief Executive Officer's Review
Overview
Playtech continued to make strong progress on its strategic priorities in the
first half of 2022 across both the B2B and B2C businesses, leaving the Group
well-positioned to capture the exciting market opportunity ahead.
The strategic focus of Playtech's B2B Gambling business remains on
opportunities in regulated or soon to be regulated markets. There is a
particular emphasis on high-growth markets including the US, Latin America and
certain parts of Europe, and these regions helped the B2B segment to deliver
revenue growth of 17% (+13% on a constant currency basis) in H1 2022. B2B
Adjusted EBITDA was €77.2 million compared to €72.1 million in H1 2021.
In the US, Playtech continued to build momentum and is well placed to take
advantage of the significant long-term opportunity across its full product
suite. During the period, Playtech expanded its footprint with Parx, launching
its IMS platform in Pennsylvania. This involved a complex migration off the
platform of one of the Company's major competitors, work that can be leveraged
in future deals. Several new deals were also signed in the period in the US.
Golden Nugget was signed for Casino and Live in New Jersey and Michigan,
WynnBET penned a multi-state deal to launch Live and Casino, while Resorts and
888 have signed up for Casino and Live in New Jersey.
In Latin America, Playtech continued to see excellent growth from Caliente
which continues to outperform. Wplay also performed well in the period and is
ideally positioned to capitalise on the exciting opportunity in Colombia in
the years ahead while the Company is well positioned in the exciting, soon to
be regulated Brazil market. Playtech opened a new Live Casino facility in Peru
as it continues to extend its presence across the region. Initial demand has
been strong, which bodes well for the future.
In Europe ex-UK, B2B revenue growth of 39% at constant currency was driven by
a strong performance in several countries, most notably the newly regulated
Netherlands market. Having signed a strategic agreement with Playtech across
its full suite of products, and launched in October 2021, Holland Casino is
off to an impressive start. It was the biggest driver of revenue growth in
Europe in the first half of 2022, illustrating the significant growth
opportunities of newly regulated markets. To continue diversifying its B2B
division, Playtech progressed discussions on further new strategic agreements
and joint ventures, while also adding over 50 new brands to its SaaS offering.
Playtech has now added over 300 new brands since launching the SaaS offering
back in 2019.
Snaitech revenue saw significant growth in H1 2022, up 182% compared to the
same period in the prior year, while Adjusted EBITDA grew 154% versus H1 2021.
This strong performance was primarily driven by the reopening of retail sites
in Italy, which occurred at the end of June 2021 and have since remained open.
The online segment has maintained its strong performance, indicating that the
addressable market has expanded post-pandemic. Snai maintained its number one
market share position (retail and online combined measured by GGR) across
Italian sports betting brands in H1 2022, demonstrating its consistent
operational and brand strength, whilst also being the fastest growing player
in Italy in the online sector when measured by GGR. Finally, retail betting
licences in Italy have been extended for two years until June 2024 at a total
cost of €23 million, while Gaming Machines rights have been extended at no
cost until June 2023.
As has been previously disclosed, Playtech had been exploring a possible
transaction with Caliente which would allow Caliplay to penetrate the US
market with Caliplay being acquired by a US listed special purpose acquisition
company ("SPAC"). Given the deteriorating capital market conditions, the SPAC
transaction in relation to Caliente in the US is no longer being pursued in
the same manner. However, the Company continues to explore alternative
opportunities with Caliplay management to build a standalone US gaming
business under the Caliente brand, focused on the Hispanic community in the
US.
As part of the Group's simplification strategy, Playtech completed the sale of
Finalto in July 2022, allowing it to focus on the attractive markets of B2B
Gambling and B2C Gambling.
Playtech's employees are at the heart of its success and have remained
cohesive and collaborative despite the significant corporate activity during
the period. The hard work and commitment of Playtech's people has contributed
significantly to this positive trading performance.
Ukraine crisis
Playtech has over 700 employees based in Ukraine. In response to the crisis,
Playtech built an organisational structure to support the employees including
24/7 transportation services, accommodation support for those displaced,
emergency supplies and shelter, logistical assistance, a 24/7 communication
hotline as well as mental health and wellbeing support. Hundreds of volunteers
across the company offered their help, including by keeping in continuous
contact with their colleagues. The Group continues to support its employees,
ensuring their safety where possible via the HR and Site Operations team,
while financial support has been provided for those forced to leave their
homes in Ukraine.
Playtech has robust business continuity plans which were activated immediately
to minimise disruption to the business. The B2B business has employees from a
variety of functions based in Ukraine but none of those functions are wholly
run from the country, while any critical infrastructure in Ukraine was
relocated prior to the crisis as part of our risk management process. In
addition, a new development site in Warsaw, Poland is due to be opened that
will act as an extension of the Kyiv site to ensure business continuity.
B2B Gambling
Core B2B Gambling
Regulated markets
The strategic focus of Playtech's B2B Gambling business continues to be on
opportunities in regulated or soon to be regulated markets, with a focus on
high-growth markets such as the US, Latin America and certain parts of Europe.
Regulated markets saw revenue growth of 31% (27% on constant currency basis)
compared to H1 2021, driven by continued strong revenue growth from Caliente
in Mexico, an excellent start from Holland Casino in the Netherlands as well
as strong growth in other regulated markets such as Ireland, UK, Poland and
Spain.
The Americas
Revenue from the Americas continued to grow impressively, with H1 2022 revenue
up 50% (37% at constant currency) compared to H1 2021, powered by outstanding
growth from Caliente as well as increasing contributions from other customers.
In the US, Playtech has shown excellent progress as it looks to capitalise on
an increasingly favourable regulatory environment. During the period, Playtech
expanded its footprint with Parx, launching its IMS platform in Pennsylvania.
This involved a complex migration off the platform of one of the Company's
major competitors, work that can be leveraged in future deals. In addition,
Playtech launched its IMS, Casino and POP products in New Jersey and now has a
presence with Parx in Michigan, Pennsylvania and New Jersey. Further product
launches in additional states with Parx are expected going forward.
Several new deals were also signed in the period in the US. Golden Nugget
(recently acquired by Draft Kings) has signed up for Casino and Live in New
Jersey and Michigan. Rush Street Interactive signed a multi-state deal for
Casino. WynnBET has penned a multi-state deal to launch Casino and Live, while
Resorts and 888 have signed up for Casino and Live in New Jersey.
Solid progress was also made in product launches, particularly in Canada where
recent legislation saw Ontario become the first province in Canada to regulate
online gambling. NorthStar (backed by TorStar) launched the IMS platform,
Casino and Live products in Ontario, while Bet365 and 888 all went live in the
province for Casino and Live on the first day the market became regulated.
With physical expansion of the Company's infrastructure being a key part of
its strategy, further expansion continues to progress in New Jersey and
another Live facility is under construction in Pennsylvania. The Company has
significantly expanded its sales, operational and back-office teams in the US
in order to accelerate its presence in the region.
The regulatory landscape in the US is ever progressing. 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. In early 2022, Playtech
received a license for Pennsylvania. Legislation authorising mobile sports
betting has been sent to the governor of Maine for her approval, while
legislation allowing for online betting recently passed Missouri's House of
Representatives and is awaiting a vote in the Senate.
Online casino, which was not subject to PASPA, is allowed at the discretion of
individual states. In 2021, The Mohegan Tribe and the Mashantucket Pequot
Tribe of Connecticut received federal approval to operate online casino games,
while Michigan launched in 2021, joining New Jersey, Pennsylvania, Delaware,
and West Virginia, while Nevada allows online poker only. No new states have
authorised Online casino in 2022 thus far, although legislation to regulate
Online casino is working its way through New York's legislature.
In Latin America, Playtech has continued to see excellent growth from Caliente
which continues to outperform. Wplay also saw very strong growth in H1 2022
and is well-positioned to continue its growth and capitalise on the exciting
opportunity in Colombia in the years ahead. During the year, Playtech
continued to execute on other strategic agreements in Latin America.
Playtech opened a new Live Casino facility in Peru as it continues to extend
its presence across the region. Coupled with the recent news that Peru has
enacted legislation allowing online gaming and sports betting, and retail
sports betting, Playtech is well positioned to serve its existing clients in
Latin America and take advantage of continued favourable regulation and strong
growth expected in the region in the years ahead. Several customers, such as
Wplay and bet365, have launched tables in the new Live facility with demand
strong so far.
Elsewhere in Latin America, sports betting legislation has been passed in
Brazil, which is expected to be implemented in the near future. Brazil is
anticipated to be a significant market given the large population and love of
sports. The Company has an exciting strategic agreement in place with
Galerabet, with economics similar to its other arrangements in Latin America,
in anticipation of regulation in this market.
Europe
In Europe ex-UK, B2B revenue growth of 39% (39% at constant currency) was
driven by strong growth in several countries including Netherlands, Ireland,
Poland and Spain.
Regulation in Europe continues to evolve and regulated markets in the region
represent significant growth opportunities. During 2021, Playtech signed a
new, expanded long-term strategic software and services agreement with Holland
Casino, the state-owned land-based casino operator in the Netherlands, a
top-10 market in Europe that regulated on 1 October 2021. Playtech now
supplies Holland Casino with a full turnkey multi-channel technology package,
as well as certain ancillary services. The agreement includes the IMS
platform, Sports betting, Online Casino, Live Casino, Poker and Bingo
products, plus selected operational and marketing services. Having launched in
October 2021, Holland Casino is off to an impressive start given its first
mover advantage and was the biggest driver of revenue growth in Europe in the
first half of 2022, illustrating the significant growth opportunities of newly
regulated markets. This agreement, as well as the launch of Casino and Poker
with Bet365 in the Netherlands in early 2022, means Playtech is well
positioned to capitalise on the newly regulated Netherlands market.
After many years of uncertainty for online gambling in Germany, the Interstate
Treaty became effective on 1 July 2021 and now paves the way for licence
holders to offer online slots, online poker and sports betting. The main
impacts of the Treaty included switching off casino table games (Blackjack and
Roulette) until the individual Länder chooses to issue licences under the
Treaty, deposit limits of €1,000 per month, €1 maximum stakes per spin on
online slots, 5-second minimum duration of slot spins and certain advertising
restrictions, while operators could begin applying for licenses. In H1 2022,
Playtech generated a minimal amount of revenue from Germany, down from €8
million in H1 2021. We were able to partially mitigate this through €5
million of cost savings.
Elsewhere in Europe, the Company expanded its Live Casino facility in Romania,
adding another floor, demonstrating the significant physical expansion of its
Live Casino infrastructure across Europe, while the Live Casino business
launched with, among others, Betsson in Italy and Pokerstars in Greece.
Playtech's Casino business saw several launches with existing customers in
expanded territories such as Pokerstars and Betsson in Greece, 888 in Italy
and Stoiximan in The Czech Republic, demonstrating the scalability of
Playtech's business model.
UK
UK revenues saw growth of 7% (4% on a constant currency basis) compared to H1
2021, where the positive impact of the reopening of retail stores from
mid-April 2021 was partially offset by a slowdown in the online business
caused by the uncertain regulatory climate.
Retail closures, which were in place for the majority of H1 2021,
significantly impacted Playtech's B2B sports business in the comparative
period which is heavily weighted towards retail via its self-service betting
terminals (SSBTs). Activity levels continued to gradually improve following
reopening as various lockdown restrictions were eased and the momentum
continued into H2 2021 and H1 2022.
The UK Government is currently undertaking a review into existing gambling
laws in the UK. In response, several operators are taking pre-emptive measures
such as stake limits and affordability checks in an attempt to show regulators
that the industry is able to self-regulate. In addition, there is likely to
have been an impact on the online business as customers, driven to use online
channels due to retail site closures due to COVID-19, returned to retail
outlets as they reopened.
In December 2020, the UK Government announced a call for evidence to review
the existing gambling laws in the UK. Since the initial 16-week call for
evidence which ended on 31 March 2021, the Government has been assessing the
evidence presented, alongside other data, with the aim of setting out
conclusions and any proposals for reform in a White Paper in 2022. Playtech
submitted data and evidence relating to the call and will support this
wherever possible going forward. The White Paper was due to be published in
July 2022, but media reports suggest it has been delayed until the Autumn
given the recent change in Prime Minister.
The UK remains a key regulated market for Playtech given its longstanding
relationships with major operators. Playtech has been actively involved in
discussions around safer game design and online advertising and, through the
industry trade body the Betting and Gaming Council (BGC), is co-leading a
working group on the subject. Playtech expects that its commitment to safer
gambling and its use of technology and data to support its licensees in this
area will see it remain the go-to platform for regulated markets including the
UK.
Other unregulated (excl. Asia)
The Group's strategy to focus on both regulated and regulating markets
includes unregulated markets which are likely to regulate in the future. Some
of these are classified in the 'Unregulated excl. Asia' line within B2B
Gambling. These unregulated markets (excluding Asia) were flat year on year at
constant currency versus H1 2021, driven by markets such as Brazil and Canada,
offset in part by a decline in Germany which saw regulatory changes during the
year.
Following the progress in the US, regulation advanced in Canada as parliament
approved an amendment to Canadian law to allow single-game sports betting at
the discretion of individual provinces. In August 2021, seven provinces
including the country's largest province, Ontario, began allowing bets to be
placed on single-game sporting events. In a further milestone, as of 4 April
2022, Ontario became the first fully regulated online gambling market in
Canada with iGaming launched.
As regulation progresses across Canada, it will continue to add to the size of
the North America market opportunity. In line with the Company's strategy to
target newly regulating markets, Playtech signed a strategic agreement with
NorthStar Gaming, which saw the Group launch its IMS platform, Casino, Live
Casino, Poker and Bingo technology in Canada in H1 2022.
Unregulated Asia
Unregulated Asia saw revenue decline 22% compared to H1 2021. The decline was
partly due to the impact of further lockdowns in China and Malaysia during the
period. In addition, the Company's largest distributor in the region lost
market share in the period while the new distributor the Company added in 2020
continued to grow its business, albeit from a much smaller base. Reflecting
the actions taken over recent periods, the Asia business is now more
diversified in terms of both distributors as well as geographically compared
to recent years. The Company incurred a bad debt provision of €15.4 million
in H1 following continued collection delays in the region.
B2B - Product Developments
In order to diversify its B2B Gambling division, the Group continued to add
customers depending on commercial suitability and market dynamics, including
attracting new customers in both regulated and regulating markets, progressing
discussions on new strategic agreements and joint ventures, as well as adding
new brands using its SaaS offering. Playtech has now added over 300 new brands
since the launch of its SaaS model in 2019. Over 100 of those new brands were
added during 2021, including 888, Kindred and Novibet.
In 2021, Playtech signed the exclusive rights to hit TV show, The Walking
Dead, for Online Casino. In order to continue to take advantage of this
agreement, Playtech launched a new title The Walking Dead™ 2 in August 2022
and is planning to launch a second title by the end of the year, both of which
are expected to engage and retain a large audience.
The Live Casino team launched Safari Riches Live, a live casino slot game
created exclusively for 888, a milestone as it represents the first time a
slot brand developed by 888 has been transformed into a bespoke live casino
game, while Live has also signed up the exclusive global rights to Jumanji
including the US, and plans to launch a game next year.
B2C Gambling
Playtech's B2C business includes Snaitech (including HAPPYBET), and the White
Label operations which is primarily Sun Bingo. Overall B2C revenues grew 147%
compared to H1 2021 at constant currency while Adjusted EBITDA grew 143%.
Snaitech
Italy
Snaitech revenue saw significant growth in H1 2022, up 182% compared to the
same period in the prior year, while Adjusted EBITDA grew 154% versus H1 2021.
This strong performance was primarily driven by the reopening of retail sites
in Italy, which occurred at the end of June 2021 and have since remained open.
Retail sales grew significantly in the period due to the reopening of retail
sites, and are now close to returning to pre-pandemic levels, an impressive
performance given a small proportion of franchise retail shops closed
permanently, some customers permanently shifted to the online channel and the
introduction in January 2020 of the requirement of ID cards to enter retail
shops. At the EBITDA level, the retail segment returned to profit with EBITDA
margins surpassing pre-pandemic levels.
The online business remained broadly stable with revenue declining only 5% in
H1 2022 versus H1 2021 despite retail shops being reopened during H1 2022.
This suggests that the growth of the online business during the pandemic was
not just driven by the shift from retail to online, but also by new customers
being onboarded via the online channel. Adjusted EBITDA margins remained high
at 57% in H1 2022 versus 59% in H1 2021.
Following the regulatory approval to move the racetrack to the San Siro
racecourse, Snaitech has begun the formal sales process of La Maura Racetrack
in Italy, first disclosed at the FY2021 results. €1 million was received on
signing in July 2021, with the remaining €19 million expected to be received
in instalments in 2023.
Furthermore, Snai maintained its number one market share position (retail and
online combined measured by GGR) across Italian sports betting brands in H1
2022, demonstrating its consistent operational and brand strength, while also
being the fastest growing player in Italy in the online sector when measured
by GGR.
Finally, retail betting licenses in Italy have been extended for two years
until June 2024 at a total cost of €23 million, while Gaming Machines rights
have been extended at no cost until June 2023.
Germany & Austria
HAPPYBET (now reported as part of Snaitech) revenues were up 26% in H1 22
compared to H1 2021, driven by the reopening of retail sites while the
business remains loss making at the EBITDA level.
Snaitech management have recently taken over the operations of HAPPYBET and
have already begun to implement a plan to improve the business's performance.
The retail store footprint has been rationalised, optimising for an
accelerated shift to online due to the pandemic.
During the retail closures due to governmental lockdowns, management upgraded
the technology infrastructure in this business with a view to both drive
retail performance and improve online performance in the future. The Group is
confident of its prospects going forward.
As discussed in the B2B section above, Germany's Interstate Treaty regulated
online slots, online poker and sports betting from 1 July 2021. Playtech has
been awarded one of the few available online sports betting licenses in
Germany through its B2C division HAPPYBET, and as a result, launched an online
offering.
White Label (including Sun Bingo)
White Label (including Sun Bingo) saw 3% constant currency revenue growth to
€31.7 million (H1 2021: €30.2 million) while Adjusted EBITDA fell to
€0.1 million from €5.4 million in H1 2021. Reported EBITDA includes a
€10.4 million payment to terminate an onerous contract with a former service
provider. The termination of the agreement will improve the profitability of
the business going forward.
Safer gambling and sustainability
During the first half of 2022, Playtech continued to make progress with
delivering its sustainability strategy and commitments.
ESG Governance and Engagement
Playtech officially formed its Sustainability and Public Policy Board
Committee in 2021, with the first meeting in November 2021. Since then, this
Committee has carried out its commitment to Playtech's Sustainable Success
strategy, ensuring the right measures are in place to implement ambitious and
achievable targets and actions to meet the Company's overall Sustainable
Success goals. This Committee has met five times since the start of 2022, to
discuss progress made on diversity and inclusion, climate change, procurement,
human rights, and linking ESG performance to remuneration. The Committee
oversees the Company's key non-financial commitments, strategy, targets, and
reporting from Board level. Following the four successful panel sessions from
2021, which allowed Playtech to draw on a wide range of knowledge, insights,
and experiences, the Company has decided to continue its engagement with
external topic experts in 2022.
Enhancing Playtech Protect and Safer Gambling Standards
Playtech continued to grow its Playtech Protect offering across research,
partnerships, and innovation and expanded its support for its licensees.
Playtech published research papers on stake limits, gambling digital tools,
and tools and strategies used by layers to manage their gambling.
Carbon Reduction
Playtech submitted its commitment letter to the Science Based Target
Initiative (SBTi) to set both near-term and net zero targets. The Company
continues to strengthen its data disclosure and reporting, as well as approach
to carbon reduction through the environmental working group in order to
identify carbon reduction opportunities and engaging suppliers to reduce its
supply chain emissions.
Diverse and Inclusive Culture
At the end of 2021, Playtech has set a target to strengthen female
representation in its leadership roles, including executive and senior
management by 2025. The Company's focus remains on accelerating progress on
gender diversity in leadership levels of the organisation.
Employee Welfare Fund (Ukraine appeal)
Playtech has set up an Employee Welfare Fund to provide long term assistance
for Playtech employees and their families. The Welfare Fund will provide
employees with the opportunity to contribute funds that will go directly to
helping the relocation and long-term welfare needs for Ukrainian employees
impacted by the war.
Corporate activity
Completion of Finalto sale
In July 2022, Playtech completed the sale of Finalto to Gopher Investments for
an enterprise value of US$250 million, although this amount is expected to be
lowered by US$15-20 million based on the performance of Finalto from 1 January
2021 to completion. Completion of the Transaction has also triggered payment
of a break fee of US$8.8 million which Playtech is required to pay to the
Consortium that had previously agreed to acquire Finalto.
The completion of the Transaction is a significant step in Playtech's stated
strategy to simplify the group and to focus on its technology led offering as
a pureplay business in the high growth B2B and B2C gambling markets. The sale
proceeds were partly used to repay the outstanding balance on its revolving
credit facility with the remainder of proceeds used for general corporate
purposes.
Caliente
As has been previously disclosed, Playtech has been exploring a possible
transaction regarding an agreement with Caliente which would allow Caliplay to
penetrate the US market with Caliplay being acquired by a US listed special
purpose acquisition company ("SPAC"). Capital market conditions have
deteriorated significantly since the transaction was initially contemplated
and, accordingly, this transaction is no longer being pursued in the same
manner.
However, the Company continues to explore alternative opportunities with
Caliplay management to build a standalone US gaming business under the
Caliente brand focused on the Hispanic community in the US. Both parties also
continue to have discussions with the SPAC and its associates regarding this
alternative opportunity.
Chief Financial Officer's Review(1)
Overview
Group performance
Overall, Playtech had a very strong H1 2022, with Adjusted EBITDA of €203.8
million (H1 2021: €124.1 million), an increase of 64% (60% on a constant
currency basis) compared to H1 2021. Similarly, reported EBITDA increased by
€68.8 million to €178.6 million (H1 2021: €109.8 million). Total
reported revenue from continuing operations was €792.3 million (H1 2021:
€457.4 million), representing a 73% increase (71% on a constant currency
basis) compared to H1 2021. The excellent overall results in H1 2022 were
driven by continued strength in the Company's online businesses as well as
retail reopening following pandemic-related closures in H1 2021 in many of the
Group's markets, including Italy.
The strong performance in the half was driven by both the B2C and B2B
divisions. In B2C, Snaitech had an excellent H1 2022 performance as the strong
results in its online business continued and its retail shops were open for
the entirety of H1 2022, following the pandemic related closures for most of
H1 2021. This led to B2C Adjusted EBITDA of €126.6 million, an increase of
143% compared to H1 2021.
In B2B, the results were driven by strong growth in regulated markets
(revenues increased by 31% year-on-year), led by Caliente in the Americas and
Holland Casino in Europe (excluding the UK), validating the strategy of
focusing on opportunities in regulated and soon to be regulated markets.
Reported and Adjusted Profit
Adjusted profit before tax from continuing operations increased by 353% to
€122.3 million (H1 2021: €27.0 million), driven by the rise in Adjusted
EBITDA, decrease in depreciation and amortisation and increase in finance
income due to favourable EUR/USD FX movements.
Reported profit before tax from continuing operations decreased to €103.7
million (H1 2021: €278.1 million), mainly due to the €299.9 million of
unrealised fair value gains on derivative financial assets recognised in the
prior period with the current period fair value changes being only €48.5
million.
This led to a total post-tax reported profit from continuing operations of
€71.4 million (H1 2021: €401.9 million).
Balance sheet, liquidity and financing
The Group continues to maintain a strong balance sheet with Adjusted gross
cash, which excludes the cash held on behalf of clients, progressive jackpots
and security deposits, increasing to €545.6 million as at 30 June 2022 (31
December 2021: €434.3 million), due to the solid performance of the Group
during H1 2022. This enabled the Group to reduce leverage with net debt
decreasing by €113.3 million to €494.5 million as at 30 June 2022 (31
December 2021: €607.8 million). Net debt / Adjusted EBITDA was 1.2x as at
the period end, which falls further when taking into account proceeds from the
sale of Finalto, which completed in July 2022.
Finalto sale
The sale of the Finalto division to Gopher Investments completed post period
end on 11 July 2022. The proceeds from the disposal were $219.3 million, which
includes an enterprise value of US$250 million offset by a completion accounts
adjustment and a break fee, which the Group is required to pay to the
Consortium that had previously agreed to acquire Finalto, as announced in May
2021.
Playtech used part of these proceeds to repay its Revolving Credit Facility
("RCF") in full in July 2022.
Group Summary (continuing operations)(3)
H1 H1
2022 2021
€'m €'m
B2B Gambling 312.0 267.2
B2C Gambling 487.3 196.6
Intercompany (7.0) (6.4)
Total Group Revenue from continuing operations 792.3 457.4
Adjusted costs (588.5) (333.3)
Adjusted EBITDA from continuing operations 203.8 124.1
Reconciliation from EBITDA to Adjusted EBITDA:
EBITDA 178.6 109.8
Employee stock option expenses 4.6 7.0
Professional fees 10.1 2.2
Fair value change and finance cost on redemption liability (1.8) 0.9
Special site costs 1.9 -
Onerous contract 10.4 -
Charitable donation - 1.9
Settlement of legal matter - 2.3
Adjusted EBITDA 203.8 124.1
Adjusted EBITDA margin 26% 27%
Overall, the Group's total revenue from continuing operations increased by 73%
to €792.3 million (H1 2021: €457.4 million), mostly driven by retail
reopening following COVID-19 related restrictions which impacted H1 2021 in
many of the Company's main markets, including Italy.
In B2B, revenue increased by 17% from €267.2 million in H1 2021 to €312.0
million in H1 2022, driven by Mexico, where Caliente continued its strong
growth, as well as increases seen in other countries such as the Netherlands,
Poland, Brazil and Ireland partly offset by a decrease in Germany due to
regulatory changes, as well as a decline in Asia.
The Group's total reported revenues from its B2C operations increased by 148%
to €487.3 million (H1 2021: €196.6 million). Snaitech had an excellent H1
2022 performance as the strong results in its online business continued and
its retail shops were open for the entirety of H1 2022, following the
pandemic- related closures for most of H1 2021.
The Group's Adjusted EBITDA from continuing operations increased to €203.8
million (H1 2021: €124.1 million), representing a 64% and 60% increase on an
actual and constant currency basis, respectively. Adjusted EBITDA margin
decreased by 140bps in H1 2022 versus H1 2021 due to a change in channel mix,
with the return of the lower margin retail segment compared to online in H1
2022, as well as increased bad debt provision in the B2B business in Asia.
The Group's total reported EBITDA increased by 63% to €178.6 million (H1
2021: €109.8 million).
Divisional performance
B2B Gambling
B2B Gambling Revenue
H1 2022 H1 2021 Change Constant currency
€'m €'m % %
Regulated - Americas 69.8 46.4 50% 37%
Regulated - Europe (excluding UK) 92.2 66.5 39% 39%
Regulated - UK 63.9 59.6 7% 4%
Regulated - Rest of the World 2.9 1.9 53% 53%
Total Regulated B2B revenue 228.8 174.4 31% 27%
Unregulated excluding Asia 49.2 49.0 0% 0%
Total Core B2B revenue 278.0 223.4 24% 21%
Asia 34.0 43.8 -22% -26%
Total B2B Gambling revenue 312.0 267.2 17% 13%
Overall, B2B Gambling revenues increased by 17% (13% on a constant currency
basis), largely due to an increase in the regulated B2B business.
Core B2B Gambling revenues(2) increased by 24%, driven by an increase in
regulated markets in the Americas and Europe (excluding the UK) of 50% and 39%
respectively (37% and 39% on a constant currency basis) and a 7% increase in
revenues from UK (4% on a constant currency basis). This was offset by
unregulated markets excluding Asia which was flat year on year.
The increase in both Americas and Europe (excluding the UK) was primarily
driven by Mexico, due to revenue growth from Caliente, as well as in
Netherlands, Poland and Ireland. The increase in Netherlands was driven by the
expanded long-term strategic software and services agreement with Holland
Casino, which successfully launched in October 2021 and exceeded expectations.
In unregulated markets excluding Asia, growth in Brazil was offset by the
impact of Germany and the Netherlands regulating. Asia revenue decreased by
22% mainly due to the lockdowns in China and other parts of Asia in the
period.
B2B Gambling Costs and Margins
In order to better reflect the way we manage the business, we have split out
those costs which are charged through to licensees with an insignificant or no
margin and the related revenues. Furthermore, the revenue and costs associated
with retail hardware sales, where the margins significantly vary with each
transaction and therefore distort the margin of the rest of the B2B business,
were also split out.
H1 2022 B2B Underlying Live dedicated tables, dedicated teams, hosting, B2B white label and hardware Total
sales
€'m
€'m
€'m
Revenue 267.5 44.5 312.0
Costs 195.6 39.2 234.8
Adjusted EBITDA 71.9 5.3 77.2
Margin 27% 12% 25%
H1 2021 B2B Underlying Live dedicated tables, dedicated teams, hosting, B2B white label and hardware Total
sales
€'m
€'m
€'m
Revenue 222.9 44.3 267.2
Costs 154.2 40.9 195.1
Adjusted EBITDA 68.7 3.4 72.1
Margin 31% 8% 27%
In addition to this, the underlying B2B costs were split into categories that
best reflect how these costs are managed, specifically showing the strategic
expenditure which relate to the Latin America expansion, live operations and
ongoing entry costs into the US.
H1 H1 H1 2022 to H1 2021 %
2022 2021
€'m €'m
Revenue and costs relating to live dedicated tables, dedicated teams, hosting,
B2B white label and hardware sales
Revenue 44.5 44.3 0%
Costs 39.2 40.9 -4%
Adjusted EBITDA 5.3 3.4 56%
Margin 12% 8%
B2B Underlying Gambling Revenue and Costs
B2B Underlying Gambling Revenue* 267.5 222.9 20%
Research and Development 38.5 36.1 7%
General and Administrative 33.4 30.3 10%
Sales and marketing 8.0 5.8 38%
Operations 43.9 28.5 54%
Total costs (excluding Asia and strategic expenditure) 123.8 100.7 23%
Asia related costs 30.8 25.2 22%
Strategic expenditure 41.0 28.3 45%
B2B Underlying Gambling Costs 195.6 154.2 27%
B2B Underlying Gambling Adjusted EBITDA 71.9 68.7 5%
Margin 27% 31%
Total B2B Revenue and Costs
B2B revenue 312.0 267.2 17%
B2B Costs 234.8 195.1 20%
Total B2B Adjusted EBITDA 77.2 72.1 7%
Margin 25% 27%
* To reflect the underlying activity of the B2B Gambling division, B2B
revenues include the software and services charges generated from the relevant
B2C activity with fellow Group companies, which is then eliminated to show the
consolidated gambling division revenues.
Revenue and Costs excluded from Underlying EBITDA
The costs being excluded from underlying EBITDA include costs which are passed
directly to licensee at a small margin or no margin at all, such as live
dedicated tables, dedicated teams and hosting fees, as well as the cost of
retail hardware sales, where margins can fluctuate significantly depending on
each deal. The margins increased from 8% to 12% due to costs decreasing by 4%
while revenues were flat. The decrease in costs was driven by a fall in online
marketing partially offset by an increase in dedicated teams, live dedicated
tables and retail hardware.
B2B Underlying Gambling costs
B2B Underlying Gambling costs increased by 27%, driven by the increase in
operations and strategic expenditure costs. Respective revenues increased by
20%, decreasing the margins from 31% to 27%. Those underlying gambling costs
are all further discussed below.
Research and Development ("R&D") costs include, among others,
employee-related costs and proportional office expenses. Expensed R&D
costs increased by 7% to €38.5 million (H1 2021: €36.1 million), driven by
the increase in employee-related costs. Capitalised development costs were 38%
of total B2B R&D costs in the period, compared to 39% in H1 2021.
General and Administrative costs include employee-related costs, proportion of
office expenses, consulting and legal fees, and corporate costs such as audit
and tax fees and listing expenses. These costs increased by 10% to €33.4
million (H1 2021: €30.3 million), due to a new bonus scheme provision for
employee retention and higher bonus payment.
Sales and Marketing costs increased by 38% to €8.0 million (H1 2021: €5.8
million), mainly due to increased marketing activity following the end of
the COVID-19 crisis and higher bonuses provisions.
Operations costs include costs relating to infrastructure and other
operational projects, IT and security and general day to day operational
costs, including employee and office-apportioned costs and branded content
fees. These costs increased by 54% to €43.9 million (H1 2021: €28.5
million), driven mainly by an increase in employee related costs and Sport
operational costs, which were lower last year due to COVID-19.
Asia costs increased by 22% to €30.8 million (H1 2021: €25.2 million)
mainly due to a €15.4 million doubtful debt provision which was partially
offset by lower revenue-driven costs following a decline in revenue from
Asia-based licensees.
Strategic expenditure includes revenue-driven costs relating to structured
agreements, US expansion costs, and all costs relating to live operations
(excluding live dedicated table costs). These costs have increased by 45% to
€41.0 million (H1 2021: €28.3 million), driven by an increase in
revenue-driven costs related to structured agreements, which is in line with
the respective revenue increase. In addition, further investment in the US is
ongoing, as well as an increase in employee costs within the live division due
to studio expansion.
B2B Adjusted EBITDA
Total B2B Adjusted EBITDA increased by 7% to €77.2 million (H1 2021: €72.1
million), while EBITDA margin decreased to 25% (H1 2021: 27%). The B2B
Underlying Gambling Adjusted EBITDA has increased by 5% to €71.9 million (H1
2021: €68.7 million). The B2B Adjusted EBITDA in the period was impacted by
the €15.4 million doubtful debt provision in Asia.
B2C Gambling
H1 2022 H1 2021 Change
€'m €'m
Snaitech
Gambling Revenue* 446.0 158.1 182%
Gambling Costs 314.3 106.3 196%
Adjusted EBITDA 131.7 51.8 154%
Margin 30% 33%
White Label (incl. Sun Bingo)
Gambling Revenue 31.7 30.2 5%
Gambling Costs 31.6 24.8 27%
Adjusted EBITDA 0.1 5.4 -98%
Margin 0% 18%
Sport B2C
Gambling Revenue 10.7 8.5 26%
Gambling Costs** 15.9 13.7 16%
Adjusted EBITDA (5.2) (5.2) 0%
Margin NA NA
B2C Adjusted EBITDA 126.6 52.0 143%
Margin 26% 26%
* Includes intercompany revenue from Sports B2C of €1.1million (H1 2021:
€0.2 million)
** Includes intercompany costs from Snaitech of €1.1m (H1 2021: €0.2
million)
Snaitech
Snaitech revenues increased 182% from the prior period to €446.0 million (H1
2021: €158.1 million), with operating costs seeing a similar increase of
196% to €314.3 million (H1 2021: €106.3 million). The retail network in
Italy was shut for almost the entire period of H1 2021 owing to the effects of
the COVID-19 pandemic, resulting in online activity making up the majority of
Snaitech's performance in the prior period. The relaxing of restrictions due
to COVID-19 at the end of June 2021 enabled retail sites to reopen, which
drove the increase in revenues and costs in H1 2022.
Snaitech's Adjusted EBITDA increased by 154%, while revenue increased 182%. As
a result, Snaitech's Adjusted EBITDA margin decreased 300 bps to 30% (H1 2021:
33%), due to the return of the lower margin retail business.
White label (including Sun Bingo)
White Label is now almost entirely comprised of Sun Bingo. Revenue from the
white label business increased by 5% to €31.7 million (H1 2021: €30.2
million). However, operating costs within Sun Bingo increased by 27% to
€31.6 million (H1 2021: €24.8 million). The main reason for the increase
is that following the commencement of the new contract with News UK, the cost
structure of the business changed. From July 2021, Playtech incurs the
marketing costs (previously they were recharged to News UK) and furthermore,
there is now a brand fee being charged by News UK (previously this was covered
by the minimum guarantee).
This led to Adjusted EBITDA of €0.1 million (H1 2021: €5.5 million).
Adjusted EBITDA still includes the unwinding of the minimum guarantee
prepayment 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 to
terminate an onerous contract with a service provider. The termination of the
agreement will improve the profitability of the business going forward.
Other White label has now completely ceased operations which, as previously
mentioned, was part of an ongoing effort to stop these operations in their
entirety. Adjusted EBITDA for the period is Nil (H1 2021: loss of €0.1
million).
Sport B2C
The Sport B2C business, which is under the Snaitech management team, is still
undergoing some operational changes, therefore, period on period growth was
below expectations. Revenues increased by 26% to €10.7 million (H1 2021:
€8.5 million), with costs increasing 16%. The business remains loss making,
with Adjusted EBITDA loss in the current period of €5.2 million (H1 2021:
loss of €5.2 million).
Below EBITDA items
Depreciation and amortisation
Reported and Adjusted depreciation decreased by 6% to €20.6 million (H1
2021: €21.8 million). After deducting amortisation of acquired intangibles
of €21.9 million (H1 2021: €18.9 million), Adjusted amortisation decreased
by 19% to €28.9 million (H1 2021: €35.5 million) as the Italian gaming
machine licences useful life has been extended. The renewal of these licences
was expected in 2022, however the government has provided a grace period for
operators with renewal now expected in 2023. The remainder of the balance
under depreciation and amortisation of €9.0 million (H1 2021: €7.8
million) relates to IFRS 16 Leases and the recognition of the right-of-use
asset amortisation.
Impairment of tangible and intangible assets
The reported impairment of tangible and intangible assets of €20.6 million
(H1 2021: €15.1 million) relates to:
· The impairment of the Eyecon cash generating unit of €13.6
million, mainly driven by the overexposure of its activities to a specific
market;
· The impairment of the Quickspin cash generating unit of €7.0
million, mainly driven by the increase in the risk premium given the unit's
exposure to revenue from areas of geopolitical tension.
The prior period impairment of €12.3 million mainly relates to the disposal
of real estate in Milan. The recoverable amount (being net sales proceeds as
per the binding sale agreement) was compared to the property's net book value,
leading to the impairment.
Finance income and finance costs
Reported and adjusted finance income of €11.7 million (H1 2021: €0.4
million) mainly relates to a €10.5 million foreign exchange gain, driven
primarily by the favourable movement in the USD to EUR rate during H1 2022. In
the prior period, this was an overall loss of €1.7 million and hence
included in finance costs. The remainder of the finance income is interest
received.
Reported finance costs includes interest payable on the bonds and other
borrowings, bank facility fees, bank charges, interest expense on lease
liabilities and the movement in contingent consideration and redemption
liabilities. It also includes net foreign exchange losses. Reported finance
costs decreased by 7% to €31.6 million (H1 2021: €33.8 million), mainly
due to a net foreign exchange gain in the current period which was recognised
in finance income as opposed to a net foreign exchange loss recognised as
finance costs in the prior period. Adjusted finance costs decreased by 3% to
€31.5 million (H1 2021: €32.5 million). The difference between adjusted
and reported finance costs is the movement in contingent consideration and
redemption liability of €0.1 million (H1 2021: €1.3 million).
Unrealised fair value changes in derivative financial assets
The unrealised fair value changes to derivative financial assets of €48.5
million (H1 2021: €299.9 million) is due to the recognition of the fair
value of the various call options held by the Group in Latin America which
fall under the definition of derivatives within IFRS 9 Financial Instruments.
Of the €48.5 million, €43.3 million relates to foreign exchange
differences due to the favourable movement in the USD to EUR foreign exchange
rate.
Taxation
A reported tax expense from continuing operations of €32.3 million (H1 2021:
tax credit of €123.8 million) arises on a profit before tax of €103.7
million (H1 2021: €278.1 million) compared to an expected charge of €19.7
million based on the UK statutory rate of 19%. The key item for which the
reported tax charge has been adjusted is the provision of €8.5 million in
respect to open enquiries by overseas tax authorities.
The total adjusted tax expense is €28.0 million (H1 2021: tax credit of
€27.6 million) of which a tax charge of €10.9 million (H1 2021: tax charge
of €6.4 million) relates to income tax expenses and a deferred tax expense
of €17.1 million (H1 2021: deferred tax credit of €34.0 million). The
total adjusted deferred tax expense mainly consists of a deferred tax expense
of €23.7 million relating to the Snaitech group including the use of
Snaitech tax losses and a credit of €18.0 million relating to UK tax losses
for which a tax benefit is recognised in the current year.
The Group's effective adjusted tax rate for the current period is 22.9%. This
rate is higher than the UK statutory rate of 19%, as there are profits within
subsidiaries located in territories where the tax rate is higher than the UK
statutory tax rate.
Discontinued operations
Casual and Social Gaming segment
On 11 January 2021, the Group entered into an agreement for the disposal of
the remainder of the business, namely "YoYo", for a total consideration of
$9.5 million resulting in a profit on disposal of €7.6 million. This
business has now been fully disposed.
The Adjusted EBITDA relating to the Casual and Social Gaming business was Nil
in both periods being presented as operations were completely wound down in
2020. Reported profit after tax of €7.6 million in H1 2021 was simply the
aforementioned profit on disposal with Nil profit in the current period.
Finalto (formerly TradeTech Group)
The assets and liabilities of the division continue to be shown as held for
sale at 30 June 2022 and the financial results of this division in both
periods being presented are included in discontinued operations. Following a
review of the net assets of the unit at 30 June 2021, when compared to the
expected proceeds, €2.0 million of the previously recognised impairment was
reversed in the prior period.
Finalto was disposed of in July 2022 with net proceeds of $219.3 million (net
of break fees of $8.8 million related to the previously agreed transaction)
resulting in an estimated profit on disposal of €8.3 million.
In terms of performance, revenue increased by 134% to €74.5 million (H1
2021: €31.9 million) due to higher market volatility during the current
period, which in turn increased both Reported and Adjusted EBITDA to €31.5
million (H1 2021: loss of €0.5 million) and €33.8 million (H1 2021: loss
of €0.1 million), respectively.
Adjusted profit
H1 2022 H1 2021
€'m €'m
Reported profit from continuing operations attributable to the owners of the 71.4 401.9
Company
Employee stock option expenses 4.6 7.0
Professional fees 10.1 2.2
Fair value change and finance cost on redemption liability and contingent (1.7) 2.2
consideration
Special site costs 1.9 -
Onerous contract 10.4 -
Charitable donation - 1.9
Settlement of legal matter - 2.3
Fair value change of equity investments (0.7) (0.8)
Fair value change of derivative financial assets (48.5) (299.9)
Amortisation of intangibles on acquisitions 21.9 18.9
Impairment of tangible and intangible assets 20.6 15.1
Deferred tax on acquisitions (4.2) (5.9)
Deferred tax on reorganisation - (90.3)
Tax related to uncertain positions 8.5 -
Adjusted Profit from continuing operations attributable to the owners of the 94.3 54.6
Company
The reconciling items in the table above are further explained in Note 9 of
the financial statements. Reported profit before tax from continuing
operations was €103.7 million (H1 2021: €278.1 million), mainly due to the
€299.9 million of unrealised fair value gains on derivative financial assets
recognised in the prior period with the current period movement being only
€48.5 million.
Adjusted EPS (in Euro cents)
H2 H1 2021
2022 €'m
€'m
Adjusted basic EPS from continuing operations 31.5 18.3
Adjusted diluted EPS from continuing operations 30.2 17.4
Basic EPS from profit attributable to owners of the Company 36.8 139.3
Diluted EPS from profit attributable to owners of the Company 35.4 132.2
Basic EPS from profit attributable to the owners of the Company from 23.8 134.9
continuing operations
Diluted EPS from profit attributable to the owners of the Company from 22.9 128.0
continuing operations
Basic EPS is calculated using the weighted average number of equity shares in
issue during H1 2022 of 299.6 million (H1 2021: 297.9 million). Diluted EPS
also includes the dilutive impact of share options and is calculated using the
weighted average number of shares in issue during H1 2022 of 312.2 million (H1
2021: 314.0 million).
Cashflow
Cash conversion (including discontinued operations)
Playtech continues to be cash generative and delivered operating cash flows of
€237.2 million (H1 2021: €128.3 million after adjusting for the €89.6
million deferred payment of gaming duties in Italy). The increase is primarily
due to Snaitech retail locations being fully operational in H1 2022 as opposed
to the prior period where COVID-19 related restrictions meant retail sites
were closed for most of H1 2021, as well as a better performance from the rest
of the business, including Finalto, compared to the prior period.
H1 H1
2022 2021
€'m €'m
Adjusted EBITDA 237.6 124.0
Net cash provided by operating activities 237.2 38.7
Deferred payment of gaming duties - 89.6
Net cash provided by operating activities after deferred payment of gaming 237.2 128.3
duties
Cash conversion 100% 103%
Change in jackpot balances 1.3 (4.7)
Change in client deposits and client funds 28.9 (6.1)
Professional expenses 11.7 2.2
ADM security deposit (0.5) (10.7)
Adjusted net cash provided by operating activities 278.6 109.0
Adjusted cash conversion 117% 88%
Adjusted cash conversion at 117% (H1 2021: 88%) is shown after adjusting for
the deferred payment of gaming duties in the prior period, as well as
jackpots, security deposits and client equity and professional costs on
acquisitions.
Adjusting for the above cash fluctuations is essential in order to truly
reflect the quality of revenue and cash collection. This is because the timing
of cash inflows and outflows for gaming tax duties in Italy, jackpots,
security deposits and client equity only impacts the reported operating
cashflow and not Adjusted EBITDA, while professional expenses and costs
relating to reorganisation and acquisitions are excluded from Adjusted EBITDA
but impact operating cashflow.
Cash conversion (excluding discontinued operations)
H1 H1
2022 2021
€'m €'m
Adjusted EBITDA 203.8 124.1
Net cash provided by operating activities 200.3 22.7
Deferred payment of gaming duties - 89.6
Net cash provided by operating activities after deferred payment of gaming 200.3 112.3
duties
Cash conversion 98% 91%
Change in jackpot balances 1.3 (4.7)
Change in client deposits and client equity 4.1 3.5
Professional expenses on acquisitions 11.7 2.2
ADM security deposit (0.5) (10.7)
Adjusted net cash provided by operating activities 216.9 102.6
Adjusted cash conversion 106% 83%
If we exclude the impact of Finalto cash flow, the adjusted cash conversion
reduces to 106% (H1 2021: 83%).
Cashflow statement analysis
Net cash outflows used in investing activities totalled €64.0 million (H1
2021: €45.7 million) of which:
· €12.5 million (H1 2021: €6.3 million) relates to loans
granted. Of the total granted in H1 2022, €8.6 million (H1 2021: €6.3
million), is related to the Galera Group which has a total loan facility of
$20 million (refer to Note 15);
· €17.6 million (H1 2021: €13.9 million) was used in the
acquisition of property, plant and equipment;
· €2.7 million (H1 2021: €2.2 million) was used in the
acquisition of intangible assets;
· €31.5 million (H1 2021: €27.8 million) was spent on
capitalised development costs;
· In H1 2021, €5.8 million relates to the part payment of the
call option held for Ocean 88 Holdings Ltd of €1.7 million and contingent
consideration paid to Wplay of €4.1 million (Refer to Note 15 of the
financial statements for more details);
· In H1 2021, €10.1 million (H1 2020: €14.1 million) is cash
received on the disposal of assets held for sale of which €7.5 million
relates to final proceeds from the disposal of the casual business in 2021 and
€2.2 million relates to the disposal of investment in associate: and
· The remainder relates to small amounts of proceeds from the
disposal of property, plant and equipment in both years.
Net cash outflows used in financing activities totalled €38.1 million (H1
2021: €134.9 million) of which:
· €19.5 million (H1 2021: €20.3 million) relates to interest
payments on bond loans and bank borrowings;
· €14.6 million (H1 2021: €13.8 million) is principal and
interest lease liability payments;
· €4.0 million (H1 2021: €0.8 million) are payments of
contingent consideration and redemption liability; and
· In H1 2021 €100.0 million related to the repayment of the RCF.
Balance sheet, liquidity and financing
30 31 December
June 2021
2022 €'m
€'m
Cash and cash equivalents 681.2 575.4
Cash held on behalf of clients, progressive jackpots and security deposits (135.6) (141.1)
Adjusted gross cash and cash equivalents (excluding assets and liabilities 545.6 434.3
held for sale)
Loans and borrowings (RCF) 164.1 167.1
Bonds 876.0 875.0
Gross debt (excluding liabilities held for sale) 1,040.1 1,042.1
Net debt (excluding assets and liabilities held for sale) 494.5 607.8
Last 12 months Adjusted EBITDA 396.8 317.1
Net debt/Adjusted EBITDA ratio 1.2 1.9
Cash
The Group continues to maintain a strong balance sheet with total cash and
cash equivalents, excluding cash held for sale, of €681.2 million at 30 June
2022 (31 December 2021: €575.4 million). Adjusted gross cash, which excludes
the cash held on behalf of clients, progressive jackpots and security
deposits, increased to €545.6 million as at 30 June 2022 (31 December 2021:
€434.3 million), due to the solid performance of the Group during H1 2022.
Financing
The Group's total gross debt was essentially flat at €1,040.1 million as at
30 June 2022 (31 December 2021: €1,042.1 million), with net debt, after
deducting Adjusted gross cash, decreasing to €494.5 million (31 December
2021: €607.8 million).
The Group issued a 5-year senior secured note of €530 million (3.75%
coupon), which was raised in October 2018 to support the acquisition of
Snaitech and is maturing in October 2023. The Group is currently evaluating
its options regarding refinancing.
The Group has also issued a 7-year senior secured note to the value of €350
million (4.25% coupon, maturity 2026), which was raised in March 2019. The net
proceeds of this bond were used to fully repay the €297 million convertible
bond which matured in H2 2019, and for general corporate purposes, including
payment of contingent consideration.
Finally, the Group also has an RCF facility of €317.0 million ending in
November 2023. The RCF balance at 30 June 2022 was €164.1 million (31
December 2021: €167.1 million). This was fully repaid in July 2022.
Net debt
Net debt decreased in the period by €113.3 million to €494.5 million as at
30 June 2022 (31 December 2021: €607.8 million), while net debt / Adjusted
EBITDA was 1.2x as at the period end, which falls further after taking into
account proceeds from the Finalto sale in July 2022.
Finalto sale
The sale of the Finalto division to Gopher Investments, which was first
presented by the Group under discontinued operations at 31 December 2020,
completed post period end on 11 July 2022. The net proceeds from the disposal
was $219.3 million, which includes an enterprise value of US$250 million,
offset by a completion accounts adjustment and a break fee which the Group is
required to pay to the Consortium that had previously agreed to acquire
Finalto, as announced in May 2021.
Playtech used part of these proceeds to repay its Revolving Credit Facility
("RCF") in full in July 2022.
Contingent consideration
Contingent consideration and redemption liability decreased to €6.1 million
(31 December 2021: €11.0 million) mostly due to the completed payment
relating to Eyecon Limited. The existing liability as at 30 June 2022
comprised the following:
Acquisition Maximum payable earnout (per terms of acquisition) Contingent consideration and redemption liability as at 30 June 2022 Payment date
(based on maximum payable earnout)
Wplay €1.0 million €1.0 million Q1 2023
Statscore €15.0 million €4.3 million €5.0 million Q1 2023
€10.0 million in Q1 2026
Other €0.8 million €0.8 million Various
Total €16.8 million €6.1 million -
Going concern
In adopting the going concern basis in the preparation of the interim
financial statements, the Group has considered the current trading
performance, financial position and liquidity of the Group, the principal
risks and uncertainties together with scenario planning and reverse stress
tests completed for a period of no less than 12 months from the approval of
these interim financial statements.
At 30 June 2022, the Group held total cash (excluding cash included in assets
held for sale) of €681.2 million (31 December 2021: €575.4 million) and
Adjusted gross cash, which excludes the cash held on behalf of clients,
progressive jackpots and security deposits, of €545.6 million (31 December
2021: €434.3 million).
Further, the Group has long-term debt facilities totalling €1,040.1 million
(31 December 2021: €1,042.1 million). Following the completion of the
disposal of Finalto on 11 July 2022, the Group received cash of €229.3
million ($233.5 million; excludes break fee and final consideration
adjustment) used to repay in full the RCF credit facility amounting to
€164.1 million. The Directors are confident the bond will be refinanced on
acceptable terms, given the latest dialogue with its banks. The current
expectation of the Directors is that the refinancing will be completed during
the fourth quarter of 2022. While the Group's revolving credit facility (RCF)
was fully repaid on the 15 July 2022, it remains available to the Company, if
needed. The Company is also currently in discussions with its banks regarding
the RCF and this facility is currently also expected to be renewed in Q4
2022.
Management concluded that the risk of a covenant breach over the next
twelve-month period from the date of releasing this report is low and as such,
has a reasonable expectation that the Group will have adequate financial
resources to continue in operational existence.
(1)Adjusted numbers relate to certain non-cash and one-off items. 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 9 of the financial
statements.
(2)Core B2B Gambling refers to the Company's B2B Gambling business excluding
unregulated Asia.
3Totals in tables throughout this statement may not exactly equal the
components of the total due to rounding.
Directors' responsibilities
The Directors of Playtech plc confirm that, to the best of their knowledge:
· the unaudited condensed consolidated financial statements have
been prepared in accordance with IAS 34 as adopted by the United Kingdom; and
· the interim management report as required by rules 4.2.7 and
4.2.8 of the Disclosure Guidance and Transparency Rules, includes a fair
review of:
o important events during the six months ended 30 June 2022 and their impact
on the condensed consolidated financial statements;
o a description of the principal risks and uncertainties for the second half
of the year; and
o related parties' transactions and changes therein.
The names and functions of the Directors of Playtech plc are available on the
Group's website: http://www.investors.playtech.com/
(http://www.investors.playtech.com/)
INDEPENDENT REVIEW REPORT TO PLAYTECH PLC
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2022 is not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2022 which comprises ended 30 June 2022 which comprises the consolidated
statement of comprehensive income, the consolidated statement of changes in
equity, the consolidated balance sheet, the consolidated statement of cash
flows and the related notes.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410, however future events or conditions may cause the group to
cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statement in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority and for
no other purpose. No person is entitled to rely on this report unless such a
person is a person entitled to rely upon this report by virtue of and for the
purpose of our terms of engagement or has been expressly authorised to do so
by our prior written consent. Save as above, we do not accept responsibility
for this report to any other person or for any other purpose and we hereby
expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
55 Baker Street, London, W1U 7EU, UK
21 September 2021
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended Six months ended
30 June 2022 30 June 2021
Note Actual Adjusted* Actual Adjusted*
€'m €'m €'m €'m
Continuing operations
Revenue 8 792.3 792.3 457.4 457.4
Distribution costs before depreciation and amortization (531.7) (519.0) (284.9) (281.4)
Administrative expenses before depreciation and amortization (65.5) (53.0) (56.6) (45.8)
Impairment of financial assets (16.5) (16.5) (6.1) (6.1)
EBITDA 9 178.6 203.8 109.8 124.1
Depreciation and amortisation (80.5) (58.6) (84.0) (65.1)
Impairment of tangible and intangible assets 10 (20.6) - (15.1) -
Finance income 11 11.7 11.7 0.4 0.4
Finance costs 11 (31.6) (31.5) (33.8) (32.5)
Share of (loss)/profit from joint ventures and associates 15A (3.1) (3.1) 0.1 0.1
Unrealised fair value changes on equity investments 15B 0.7 - 0.8 -
Unrealised fair value changes of derivative financial assets 15C 48.5 - 299.9 -
Profit before taxation 103.7 122.3 278.1 27.0
Income tax (expense)/credit 12 (32.3) (28.0) 123.8 27.6
Profit from continuing operations 9 71.4 94.3 401.9 54.6
Discontinued operations
Profit from discontinued operations, net of tax 7 38.9 41.2 13.2 4.0
Profit for the period - total 110.3 135.5 415.1 58.6
Other comprehensive income
Items that are or may be classified subsequently to profit or loss
Exchange gain/(loss) arising on translation of foreign operations 3.8 3.8 (0.5) (0.5)
Items that will not be classified to profit or loss
Gain on re-measurement of employee termination indemnities 0.7 0.7 0.2 0.2
Other comprehensive income/(loss) for the period 4.5 4.5 (0.3) (0.3)
Total comprehensive income for the period 114.8 140.0 414.8 58.3
Profit attributable to:
Owners of the Company 110.3 135.5 415.1 58.6
Non-controlling interests - - - -
110.3 135.5 415.1 58.6
Total comprehensive income attributable to:
Owners of the Company 114.8 140.0 414.8 58.3
Non-controlling interests - - - -
114.8 140.0 414.8 58.3
Earnings per share attributable to the ordinary shareholders of the Company
Profit or loss - total
Basic (cents) 13 36.8 45.2 139.3 19.7
Diluted (cents) 13 35.4 43.4 132.2 18.6
Profit or loss from continuing operations
Basic (cents) 13 23.8 31.5 134.9 18.3
Diluted (cents) 13 22.9 30.2 128.0 17.4
*Adjusted numbers relate to certain non-cash and one-off items and material
reorganisation and acquisition related 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 9.
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Additional paid in capital Employee termination indemnities Retained earnings Employee benefit trust Call/Put options reserve Foreign exchange reserve Total attributable to equity holders of the Company Non-controlling interests Total equity
€'m €'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
Total comprehensive income for the period
Profit for the period - - 110.3 - - - 110.3 - 110.3
Other comprehensive income for the period - 0.7 - - - 3.8 4.5 - 4.5
Total comprehensive income for the period - 0.7 110.3 - - 3.8 114.8 - 114.8
Transactions with the owners of the Company
Contributions and distributions
Exercise of options - - (2.3) 2.3 - - - - -
Employee stock option scheme - - 4.9 - - - 4.9 - 4.9
Total contributions and distributions - - 2.6 2.3 - - 4.9 - 4.9
Total transactions with owners of the Company - - 2.6 2.3 - - 4.9 - 4.9
Balance at 30 June 2022 606.0 0.2 1,137.9 (20.9) (3.7) (18.9) 1,700.6 0.3 1,700.9
Additional paid in capital Employee termination indemnities Retained earnings Employee benefit trust Call/Put options reserve Foreign exchange reserve Total attributable to equity holders of the Company Non-controlling interests Total equity
€'m €'m €'m €'m €'m €'m €'m €'m €'m
Balance at 1 January 2021 as restated 1 592.1 (0.4) 343.7 (14.4) (3.7) (21.3) 896.0 0.3 896.3
Total comprehensive income for the period
Profit for the period - - 415.1 - - - 415.1 - 415.1
Other comprehensive income/(loss) for the period - 0.2 - - - (0.5) (0.3) - (0.3)
Total comprehensive income / (loss) for the period - 0.2 415.1 - - (0.5) 414.8 - 414.8
Transactions with the owners of the Company
Contributions and distributions
Exercise of options - - (4.7) 4.6 - - (0.1) - (0.1)
Employee stock option scheme - - 7.4 - - - 7.4 - 7.4
Transfer from treasury shares to employee benefit trust 13.9 - 8.7 (22.6) - - - - -
Total contributions and distributions 13.9 - 11.4 (18.0) - - 7.3 - 7.3
Total transactions with owners of the Company 13.9 - 11.4 (18.0) - - 7.3 - 7.3
Balance at 30 June 2021 606.0 (0.2) 770.2 (32.4) (3.7) (21.8) 1,318.1 0.3 1,318.4
( 1 ) In the preparation of the last annual financial statements, the Group identified an error in respect of the original acquisition of Snai in 2018 which impacted the opening retained earnings by €3.7 million. Please refer to Note 40 of the last annual financial statements for further details.
UNAUDITED CONSOLIDATED BALANCE SHEET
At 30 June 2022 At 31 December 2021
Note €'m €'m
(Audited)
ASSETS
Property, plant and equipment 325.9 329.7
Right of use of assets 67.9 73.8
Intangible assets 14 1,005.9 1,046.1
Investments 15A, 15B 10.9 13.3
Derivative financial assets 15C 680.7 622.2
Trade receivables 1.6 6.6
Deferred tax asset 16 109.2 102.9
Other non-current assets 108.8 104.4
Non-current assets 2,310.9 2,299.0
Trade receivables 154.6 178.5
Other receivables 86.1 87.1
Inventories 4.0 4.9
Cash and cash equivalents 681.2 575.4
925.9 845.9
Assets classified as held for sale 17 543.9 507.4
Current assets 1,469.8 1,353.3
TOTAL ASSETS 3,780.7 3,652.3
EQUITY
Additional paid in capital 606.0 606.0
Employee termination indemnities 0.2 (0.5)
Employee benefit trust (20.9) (23.2)
Put/Call options reserve (3.7) (3.7)
Foreign exchange reserve (18.9) (22.7)
Retained earnings 1,137.9 1,025.0
Equity attributable to equity holders of the Company 1,700.6 1,580.9
Non-controlling interests 0.3 0.3
TOTAL EQUITY 18 1,700.9 1,581.2
LIABILITIES
Loans and borrowings 19 164.1 167.1
Bonds 20 876.0 875.0
Lease liability 54.9 69.8
Deferred revenues 1.5 2.9
Deferred tax liability 16 108.5 88.9
Contingent consideration and redemption liability 21 4.5 6.0
Provisions for risks and charges 22 11.1 13.5
Other non-current liabilities 10.0 12.8
Non-current liabilities 1,230.6 1,236.0
Trade payables 35.0 41.3
Lease liability 28.4 20.3
Progressive operators' jackpots, security deposits 109.4 110.7
Client funds 26.2 30.4
Income tax payable 17.9 2.6
Gaming and other taxes payable 114.4 105.4
Deferred revenues 4.7 5.2
Contingent consideration and redemption liability 21 1.6 5.0
Provisions for risks and charges 22 5.2 3.2
Other payables 165.9 166.2
508.7 490.3
Liabilities directly associated with assets classified as held for sale 17 340.5 344.8
Current liabilities 849.2 835.1
TOTAL LIABILITIES 2,079.8 2,071.1
TOTAL EQUITY AND LIABILITIES 3,780.7 3,652.3
The condensed consolidated interim financial statements were approved by the
Board and authorised for issue on 21 September 2022.
Mor Weizer Andrew Smith
Chief Executive Officer Chief Financial Officer
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Note Six months ended 30 June 2022 Six months ended 30 June 2021
€'m €'m
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the period 110.3 415.1
Adjustment to reconcile net income to net cash provided by operating 132.5 (361.4)
activities (see below)
Net taxes paid (5.6) (15.0)
Net cash from operating activities 237.2 38.7
CASH FLOWS FROM INVESTING ACTIVITIES
Loans granted (12.5) (6.3)
Acquisition of property, plant and equipment (17.6) (13.9)
Acquisition of intangible assets (2.7) (2.2)
Capitalised development costs (31.5) (27.8)
Investment in other investments and derivative assets 15 - (5.8)
Proceeds from sale of property, plant and equipment 0.3 0.2
Proceeds from sale of discontinued operations and assets held for sale, net of 17 - 10.1
cash disposed
Net cash used in investing activities (64.0) (45.7)
CASH FLOWS FROM FINANCING ACTIVITIES
Interest paid on bonds and loans and borrowings (19.5) (20.3)
Repayment of loans and borrowings - (100.0)
Payment of contingent consideration and redemption liability (4.0) (0.8)
Principal paid on lease liability (11.7) (11.1)
Interest paid on lease liability (2.9) (2.7)
Net cash used in financing activities (38.1) (134.9)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 135.1 (141.9)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 941.5 1,060.6
Exchange (loss)/gain on cash and cash equivalents (3.3) 2.7
CASH AND CASH EQUIVALENTS AT END OF PERIOD 1,073.3 921.4
Cash and cash equivalent consist of:
Cash and cash equivalent - continuing operations 681.2 540.8
Cash and cash equivalent treated as held for sale 17C 392.1 380.6
1,073.3 921.4
ADJUSTMENT TO RECONCILE NET INCOME TO NET CASH FROM OPERATING ACTIVITIES
Six months ended 30 June 2022 Six months ended 30 June 2021
€'m €'m
Income and expenses not affecting operating cash flows:
Depreciation of property, plant and equipment 20.6 21.8
Amortisation of intangible assets 14 50.9 54.4
Amortisation of right of use assets 10.5 9.5
Capitalization of amortisation of right of use assets (1.0) (1.1)
Gain on early termination of lease contracts (0.5) (0.5)
Impairment of property, plant and equipment 10 - 12.5
Impairment of intangible assets 10 20.6 2.6
Reversal of impairment of asset held for sale 17C - (2.0)
Profit on disposal of discontinued operations 17B - (7.6)
Share of loss/(profit) from joint ventures and associates 15A 3.1 (0.1)
Changes in fair value change of equity investments 15B (0.7) (0.8)
Changes in fair value change of derivative financial assets 15C (48.5) (299.9)
Interest on bonds and loans and borrowings 20.3 21.0
Interest on lease liability 2.9 2.7
Interest income on loans receivable (0.6) -
Income tax expense/(credit) 36.0 (122.4)
Employee stock option plan expenses 4.9 7.4
Movement in contingent consideration and redemption liability (1.7) 2.2
Unrealised exchange (gain)/loss (5.7) 4.5
Other 0.3 0.2
Changes in operating assets and liabilities:
Change in trade receivables 22.2 (4.6)
Change in other receivables 19.5 (4.7)
Change in inventories 0.9 (0.8)
Change in trade payables (5.4) (9.0)
Change in progressive, operators jackpot and security deposits (1.3) 4.7
Change in client funds (28.9) 6.1
Change in other payables 16.4 (53.6)
Change in provisions (0.4) (0.5)
Change in deferred revenues (1.9) (3.4)
132.5 (361.4)
NOTE 1 - REPORTING ENTITY
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. The Group implemented a restructuring in January 2021, which resulted
in Playtech plc migrating its tax residency to the United Kingdom.
These are the condensed consolidated interim financial statements ("interim
financial statements") for the six months ended 30 June 2022 comprising the
Company and its subsidiaries (together referred as "the Group").
NOTE 2 - BASIS OF PREPARATION
These interim financial statements for the six months ended 30 June 2022 have
been prepared in accordance with UK adopted IAS 34,"Interim Financial
Reporting", and should be read in conjunction with the Group's last annual
consolidated financial statements for the year ended 31 December 2021 ("last
annual financial statements"). They do not include all the information
required for a complete set of financial statements prepared in accordance
with the IFRS Standards. However, selected explanatory notes are included to
explain events and transactions that are significant to the understanding of
the changes in the Group's financial position and performance since the last
annual financial statements.
These interim financial statements were authorised for issue by the Company's
Board of Directors on 21 September 2022.
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 risks and
uncertainties together with scenario planning and reverse stress tests. The
Directors have assessed going concern over a 12-month period to 30 September
2023.
30 31
June December
2022 2021
€'m €'m
Cash and cash equivalents 681.2 575.4
Cash held on behalf of clients, progressive jackpots and security deposits (135.6) (141.1)
Adjusted gross cash and cash equivalents (excluding assets and liabilities 545.6 434.3
held for sale)
The Group continues to hold a strong liquidity position with adjusted gross
cash excluding assets held for sale of €545.6 million (31 December 2021:
€434.3 million), with the increase from 31 December 2021 being driven by the
Group's strong trading performance. Following the completion of the disposal
of its Financial segment on 11(th) of July 2022, the Group received cash of
€229.3 million ($233.5 million; excludes break fee and final consideration
adjustment) used to fund the repayment in full of the RCF credit facility
drawn amounting to €164.1 million. This further enhanced the strong cash
position of the Group.
The Directors have reviewed liquidity and covenant forecasts for the Group,
which assume that there will be no further lockdowns on a global scale. The
Directors have also considered sensitivities in respect of potential downside
scenarios, reverse stress tests and the mitigating actions available to
management.
The modelling of downside scenarios assessed if there was a significant risk
to the Group's liquidity and covenant compliance position. This includes risks
such as not realising budget/forecasts across certain markets and any
potential implications of changes in tax and other regulations, as well as the
impact on cashflow should the share buyback scheme and other shareholder
return options resume.
The Group's principal financing arrangements are the revolving credit facility
("RCF") up to €317.0 million which expires in November 2023, the 2018 Bond
amounting to €530.0 million and the 2019 Bond amounting to €350.0 million
which are repayable in October 2023 and March 2026 respectively. Although
the €530.0 million bond that matures in October 2023 is outside the going
concern period, the Directors are confident the bond will be refinanced on
acceptable terms, given the latest dialogue with its banks. The current
expectation of the Directors is that the refinancing will be completed during
the fourth quarter of 2022. While the Group's revolving credit facility (RCF)
was fully repaid on the 15th of July 2022, it remains available to the Company
if needed. The Company is also currently in discussions with its banks
regarding the RCF and this facility is currently also expected to be renewed
in Q4 2022.
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 19 and 20. As at 30
June 2022, which is the last point in time that these need to be tested since
the RCF was subsequently fully repaid in July 2022, the Group comfortably met
its covenants which were as follows:
· Leverage: Net Debt/Adjusted EBITDA to be less than 3:1 for the
twelve months ended 30 June 2022
· Interest cover: Adjusted EBITDA/Interest to be over 4:1 for the
twelve months ended 30 June 2022
The Bonds only have one financial covenant, being the Fixed Charge Coverage
Ratio (same as the Interest cover ratio for the RCF), which should equal or be
greater than 2:1.
If the Group's results are in line with its base case projections as approved
by the Board it would not be in breach of the financial covenants for a period
of no less than 12 months from approval of these interim financial statements
("the relevant going concern period"). This period covers the bank reporting
requirements for December 2022 and June 2023.
Stress test
The stress test assumes a worst-case scenario for the entire Group which
includes additional sensitivities around Italy, US and Asia, but with
mitigations similar to the ones taken in 2020 and 2021 (including salary and
capital expenditure reductions). It also assumed for the first time the
impact of cashflow should the share buyback scheme commence again, as well as
other shareholder return options. Under this scenario Adjusted EBITDA would
fall on average by 11% per month compared to the base case over the relevant
going concern period, but the Group would not breach its covenants.
Reverse stress test
The reverse stress test was used to identify the reduction in Adjusted EBITDA
required that result in either a liquidity event or breach of the bond
covenant.
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 followings:
• Current trading is performing above the base case;
• Adjusted EBITDA would have to fall by 160% in the second half of
2022 and 82% in the last 12 months to June 2023 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
the 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 - NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS ADOPTED BY THE GROUP
The accounting policies adopted in the preparation of the interim financial
statements are consistent with those followed in the preparation of the
Group's consolidated financial statements for the year ended 31 December 2021.
The Group has not early adopted any standard, interpretation or amendment that
has been issued but is not yet effective.
Several amendments and interpretations apply for the first time in 2022, but
do not have a material impact on the interim financial statements of the
Group.
NOTE 4 - FUNCTIONAL AND PRESENTATION CURRENCY
These interim financial statements are presented in Euro, which is the
Company's functional currency. The functional currency for subsidiaries
includes Euro, United States Dollar and British Pounds. All amounts have been
rounded to the nearest million, unless otherwise indicated.
NOTE 5 - CRITICAL JUDGEMENTS AND ESTIMATES
In preparing these interim 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 for these estimates.
The significant judgements made by management in applying the Group's
accounting policies and key sources of estimation and uncertainty were the
same as those described in the last annual financial statements, except as
described below.
Judgments
· Classification of assets as held for sale
The definition of assets held for sale involves a significant degree of
judgement given that in order for an asset to be classified as held for sale,
it must be available for immediate sale in its present condition and its sale
must be highly probable. The meaning of 'highly probable' is judgmental and
therefore IFRS 5 sets out criteria for the sale to be considered as a highly
probable as follows:
§ Management must be committed to a plan to sell the asset;
§ An active program to find a buyer must be initiated;
§ The asset must be actively marketed for sale at a price that is reasonable
to its current fair value;
§ The sale must be completed within one year from the date of classification;
§ Significant changes to be made to the plan must be unlikely.
The Board of Directors made a decision to dispose of the Financial segment
during 2020. As disclosed in Note 17, the Group entered into a sale and
purchase agreement for the disposal of the Financial segment. The transaction
was approved by the shareholders at the Annual General Meeting held on 1
December 2021. The transaction was completed in July 2022.
· Classification of equity call options
Background
In addition to the provision of software related solutions as a B2B product,
the Group also offers to certain customers a form of product (and related
services) which is termed as "structured agreement". Structured agreements are
with customers who have a gaming license, are retail/land based driven and
wish to build an online B2C business - these customers require initial support
beyond the provision of the Group's standard B2B software technology. With
this product Playtech offers additional services to support the customer's B2C
activities over and above the B2B software solution products.
Playtech generates revenues from the structured agreements as follows:
· the standard operator revenue (B2B licensee fee); and
· revenue based on predefined revenue generated by each operator
under the structured agreement which is 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).
Under these agreements, Playtech typically has a call option to acquire equity
in the operating entities. Typically, 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 no longer receive
the related additional B2B services fee. This mechanism is not designed as a
control feature but instead to protect Playtech's position should the customer
be subject to a transaction. Playtech is therefore able to benefit from any
value appreciation in the operation and could also potentially exit the
relationship should it choose to do so dependent on who the acquiror is.
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 15 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 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;
· intercharge 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 judgment and concluded that these profits 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 profit. 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.
In determining whether or not the option is exercisable, we apply paragraphs
12 and 13 of IAS 28. Paragraph 12 states that when derivatives containing
potential voting rights exist, an entity'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.
However, there is an exception if paragraph 13 applies which states that in
some circumstances, an entity has, in substance, an existing ownership 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.
Paragraph 12 essentially applies to those equity call options that the Group
currently holds whereby certain conditions have to be met before they become
exercisable, therefore the Group does not have existing ownerhisp and
therefore access to returns. The exemption under paragraph 13 applies to
certain of the equity call options held by the Group whereby there are no
conditions of exercise and as such we deem we have an existing ownership (even
though the option is not yet exercised) and therefore current access to
returns.
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 was 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 subcontractor agreements in relation to their
servicing part of the Playtech obligations under their various structured
agreements. Under these arrangements, the subcontractors have certain rights
to equity. In order for these rights to crystallise, the Group must first
exercise their 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
§ Impairment of non financial assets
Impairment exists when the carrying value of an asset or cash generating unit
exceeds its recoverable amount, which is the higher of its fair value less
costs of disposal and its value in use. The value in use calculation is based
on a discounted cash flow model ("DCF"). The cash flows are derived from the
budget for the next five years and do not include restructuring activities
that the Group is not yet committed to or significant future investments that
may enhance the performance of the assets of the CGU being tested. The
recoverable amount is sensitive to the discount rate used for the DCF model as
well as the expected future cash-inflows and the growth rate used for
extrapolation purposes. These estimates are most relevant to goodwill and
other intangibles with indefinite useful lives recognised by the Group. The
key assumptions used to determine the recoverable amount of the different CGUs
with the lower headroom, including a sensitivity analysis, are disclosed and
further explained in Note 14.
§ 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 Notes 9, 12 and 22.
§ Deferred tax asset
In evaluating the Group's ability to recover our deferred tax assets in the
jurisdiction from which they arise, management considers all available
positive and negative evidence, projected future taxable income, tax-planning
strategies and results of recent operations. Deferred tax asset is recognised
to the extent that it is probable that future taxable profit will be available
against which the temporary differences can be utilised. Judgement is required
in determining the initial recognition and the subsequent carrying value of
the deferred tax assets. Deferred tax asset is only able to be recognised to
the extent that utilisation is considered probable. It is possible that a
change in profit forecasts or risk factors could result in a material change
to the income tax expense and deferred tax assets in future periods.
Deferred tax asset in the UK
As a result of the Group's internal restructuring in January 2021, the Group
is entitled to UK tax deductions in respect of certain goodwill and intangible
assets. A deferred tax asset was recognized as the tax base of the goodwill
and intangible assets is in excess of the book value base of those assets. At
the beginning of the period, the net recognized deferred tax asset amounted to
€63.6 million. As at 30 June 2022, an additional deferred tax asset of
€2.6 million was recognized. This additional deferred tax asset has been
recognized as the Group's management has concluded that it is probable for the
UK entities to continue to generate taxable profits in the future against
which the Group can utilise the tax deductions for goodwill and intangible
assets giving a tax benefit of €66.2 million. This represents the benefit of
the deductions against forecast profits for the next 5 years. During the year,
€6.0 million has been utilized and the net recognized deferred tax asset as
at 30 June 2022 amounts to €60.2 million. In addition, a total of €39.6
million of deferred tax asset has not been recognised in respect of the
benefit of future tax deductions expected to arise after the next 5 years for
the remaining useful economic life of the goodwill and intangible assets.
The Group reviewed the latest forecasts for the UK companies for the next 5
years, including their ability to continue to generate income beyond the
forecast period under the tax laws substantively enacted at the balance sheet
date. Based on this, the Group's management concludes that it is probable that
the UK companies will continue to generate taxable income in the future. Any
future changes in the tax law or the structure of the Group could have a
significant effect on the use of the tax deductions, including the period over
which the deductions can be utilised.
The Group has recognised a deferred tax asset of €18.0 million in respect of
tax losses and excess interest in the UK which are available to offset against
the future profits of the UK Group companies. Based on the current forecasts,
these losses will be fully utilised over the next 5 years.
Deferred tax assets in Italy
The Group has recognised a deferred tax asset of €56.6 million in respect of
tax losses in Italy which are available to offset against the future profits
of the Italian Group companies. Based on the current forecasts, these losses
will be fully utilised within the next 5 years.
The Group reviewed the latest forecasts for the Italian companies for the next
5 years, including their ability to continue to generate income beyond the
forecast period under the tax laws substantively enacted at the balance sheet
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 ("ECL"). The review considered
the macroeconomic outlook, customer credit quality, exposure at default, and
the 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
receivables and cash and cash equivalents. ECL on cash balances was considered
and calculated by reference to Moody's credit rating for each financial
institution, while ECL on trade receivables was based on past default
experience and an assessment of the future economic environment. ECL and
specific provisions are considered and calculated with reference to the ageing
and risk profile of the balances. A reasonable movement in the inputs to the
ECL calculation does not materially change the ECL to be recognised.
In respect of the Group's Asian licensees' business model an additional ECL
risk was identified due to increase in collection days and uncertainty over
timing of receipt of funds, this resulted in an additional provision for bad
debts of €15.4 million (30 June 2021: €5.0 million) recognised in the
profit or loss in the period ended 30 June 2022.
· Measurement of fair values of equity investments and equity call
options
The Group's equity investments and, where applicable (based on the judgements
applied above), equity call options held by the Group, are measured at fair
value for financial reporting purposes. The Group has an established control
framework with respect to the measurement of fair value.
In estimating the fair value of an asset and liability, the Group uses
market-observable data to the extent it is available. Where level 1 inputs are
not available, the Group engages third party qualified valuers to perform the
valuation. The Group works closely with the qualified valuers to establish the
appropriate valuation techniques and inputs to the model.
As mentioned in Note 15, 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 and loss under IFRS 9
• Derivative financial assets (call options in
instruments containing potential voting rights), which are accounted at fair
value through profit and loss under IFRS 9
The fair value of the equity investments that are not listed and of the
derivative financial assets, rely on non-observable inputs that require a
higher level of management judgement to calculate a fair value than those
based wholly on observable inputs. Valuation techniques are used to calculate
fair values include comparisons with similar financial instruments for which
market observable prices exist, discounted cash flow analysis and other
valuation techniques commonly used by market participants. Upon the use of DCF
method, the Group assumes that the expected cash flows are based on the
EBITDA.
The Group only uses models with unobservable inputs for the valuation of
certain unquoted equity investments. In these cases, estimates are made to
reflect uncertainties in fair values resulting from a lack of market data
inputs, for example, as a result of illiquidity in the market. Inputs into
valuations based on unobservable data are inherently uncertain because there
is little or no current market data available from which to determine the
level at which an arm's length transaction would occur under normal business
conditions. Unobservable inputs are determined based on the best information
available. Further details on the fair value of assets are disclosed in Note
15.
The following table shows the carrying amount and fair value of non-current
assets, as disclosed in Note 15, including their levels in the fair value
hierarchy.
Carrying amount Fair value
30 June 2022 Level 1 Level 2 Level 3
€'m €'m €'m €'m
Non current assets
Other investments (Note 15B) 8.8 2.3 - 6.5
Derivative financial assets (Note 15C) 680.7 - - 680.7
689.5 2.3 - 687.2
Carrying amount Fair value
31 December 2021 Level 1 Level 2 Level 3
€'m €'m €'m €'m
Non current assets
Other investments (Note 15B) 8.1 1.6 - 6.5
Derivative financial assets (Note 15C) 622.2 - - 622.2
630.3 1.6 - 628.7
NOTE 6 - SEGMENT INFORMATION
The Group's reportable segments are strategic business units that offer
different products and services.
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision-maker has been identified as the management team including the Chief
Executive Officer and the Chief Financial Officer.
The operating segments identified are:
§ B2B: including Casino, Services, Sport, Bingo, Poker and Other
§ B2C: Snaitech, Sun Bingo and Other B2C and Sport B2C
§ Financial: including B2C and B2B CFD (discontinued operations)
The Group-wide profit measures are Adjusted EBITDA and Adjusted Profit (see
Note 9).
Six months ended 30 June 2022
Core B2B Asia B2B Total B2B B2C - continuing operations Intercompany Total Gaming - continuing operations Financial - Discontinued operations Total
€'m €'m €'m €'m €'m €'m €'m €'m
Revenue 278.0 34.0 312.0 487.3 (7.0) 792.3 74.5 866.8
Adjusted EBITDA - - 77.2 126.6 - 203.8 33.8 237.6
Adjusted Profit attributable to the owners of the Company - - 28.8 65.5 - 94.3 41.2 135.5
Total assets - - 2,011.7 1,245.1 - 3,256.8 523.9 3,780.7
Total liabilities - - 841.2 899.1 - 1,740.3 339.5 2,079.8
Six months ended 30 June 2021
Core B2B Asia B2B Total B2B B2C - continuing operations Intercompany Total Gaming - continuing operations Financial - Discontinued operations Total
€'m €'m €'m €'m €'m €'m €'m €'m
Revenue 223.4 43.8 267.2 196.6 (6.4) 457.4 31.9 489.3
Adjusted EBITDA - - 72.1 52.0 - 124.1 (0.1) 124.0
Adjusted Profit attributable to the owners of the Company - - 14.7 39.9 - 54.6 4.0 58.6
Total assets - - 1,675.7 1,141.5 - 2,817.2 480.1 3,297.3
Total liabilities - - 838.7 818.7 - 1,657.4 317.9 1,975.3
NOTE 7 - DISCONTINUED OPERATION
As explained in Note 17, the Group has classified its Casual and Social Gaming
Business and Financial segment as assets held for sale with their results
shown under discontinued operations in the consolidated statement of
comprehensive income.
On 11 January 2021, the Group entered into an agreement for the disposal of
the remainder of the business, namely "YoYo", for a total consideration of
$9.5 million resulting in a profit on disposal of €7.6 million.
The results of the Financial segment for the period are presented below:
Six months ended 30 June 2022 Six months ended 30 June 2021
Actual Adjusted Actual Adjusted
€'m €'m €'m €'m
Revenue 74.5 74.5 31.9 31.9
Distribution costs before depreciation and amortisation (34.9) (34.8) (25.5) (25.4)
Administrative expenses before depreciation and amortisation (6.2) (4.0) (4.6) (4.3)
Impairment of financial assets (1.9) (1.9) (2.3) (2.3)
EBITDA 31.5 33.8 (0.5) (0.1)
Reversal of impairment of assets held for sale - - 2.0 -
Finance income 11.6 11.6 5.9 5.9
Finance costs (0.5) (0.5) (0.4) (0.4)
Profit before taxation 42.6 44.9 7.0 5.4
Income tax expense (3.7) (3.7) (1.4) (1.4)
Profit from Financial segment, net of tax 38.9 41.2 5.6 4.0
The results of the discontinued operations for the period are presented below:
Six months ended 30 June 2022 Six months ended 30 June 2021
Actual Adjusted Actual Adjusted
€'m €'m €'m €'m
Revenue 74.5 74.5 31.9 31.9
Distribution costs before depreciation and amortisation (34.9) (34.8) (25.5) (25.4)
Administrative expenses before depreciation and amortisation (6.2) (4.0) (4.6) (4.3)
Impairment of financial assets (1.9) (1.9) (2.3) (2.3)
EBITDA 31.5 33.8 (0.5) (0.1)
Reversal of impairment of assets held for sale - - 2.0 -
Finance income 11.6 11.6 5.9 5.9
Finance costs (0.5) (0.5) (0.4) (0.4)
Profit on disposal of discontinued operations (Note 17B) - - 7.6 -
Profit before taxation 42.6 44.9 14.6 5.4
Income tax expense (3.7) (3.7) (1.4) (1.4)
Profit from discontinued operations, net of tax 38.9 41.2 13.2 4.0
The following tables provide a full reconciliation between adjusted and actual
results from discontinued operations:
For the year ended 30 June 2022 Revenue EBITDA Profit from discontinued operations attributable to the owners of the Company
€'m €'m €'m
Reported as actual 74.5 31.5 38.9
Employee stock option expenses - 0.3 0.3
Professional fees - 2.0 2.0
Adjusted measure 74.5 33.8 41.2
For the year ended 30 June 2021 Revenue EBITDA Profit from discontinued operations attributable to the owners of the Company
€'m €'m €'m
Reported as actual 31.9 (0.5) 13.2
Employee stock option expenses - 0.4 0.4
Reversal of impairment of asset held for sale - - (2.0)
Profit on disposal of discontinued operations - - (7.6)
Adjusted measure 31.9 (0.1) 4.0
Earnings per share from discontinued operations
Basic (cents) 13.0 13.7 4.4 1.4
Diluted (cents) 12.5 13.2 4.2 1.2
The net cash flows incurred by the Financial segment in the period, are as
follows:
Six months ended 30 June 2022 Six months ended 30 June 2021
€'m €'m
Operating 36.9 16.0
Investing (3.8) (3.7)
Financing (1.1) (1.0)
Net cash inflow 32.0 11.3
NOTE 8 - REVENUE FROM CONTRACTS WITH CUSTOMERS
The Group has disaggregated revenue into various categories in the following
table which is intended to:
· Depict how the nature, amount, timing and uncertainty of revenue
and cash flows are affected by recognition date; and
· Enable users to understand the relationship with revenue
segmental information provided in the segmental information note.
Set out below is the disaggregation of the Group's revenue:
Revenue analysis by geographical location of licensee, product type and timing
of transfer of performance obligations
The revenues from B2B, B2C and Financials are described in Note 5D in the last
annual financial statements.
Six months ended 30 June 2022
B2B B2C Intercompany Total Gaming - continuing operations Financial - discontinued operations Total
Primary Geographic Markets €'m €'m €'m €'m €'m €'m
Italy 16.6 444.9 (4.8) 456.7 1.3 458.0
United Kingdom 64.1 31.7 (2.2) 93.6 34.1 127.7
Mexico 60.5 - - 60.5 0.3 60.8
Malta 26.7 - - 26.7 0.1 26.8
Philippines 26.0 - - 26.0 - 26.0
British Virgin Islands - - - - 16.0 16.0
Spain 13.6 - - 13.6 1.0 14.6
Netherlands 12.4 - - 12.4 1.0 13.4
Gibraltar 13.2 - - 13.2 - 13.2
Germany 0.4 9.2 - 9.6 1.0 10.6
Poland 9.7 - - 9.7 0.1 9.8
Greece 9.5 - - 9.5 0.3 9.8
Curacao 9.3 - - 9.3 - 9.3
Ireland 6.5 - - 6.5 0.3 6.8
Colombia 5.5 - - 5.5 0.4 5.9
Other 38.0 1.5 - 39.5 18.6 58.1
312.0 487.3 (7.0) 792.3 74.5 866.8
B2B B2C Intercompany Total Gaming - continuing operations Financial - discontinued operations Total
Product type €'m €'m €'m €'m €'m €'m
B2B licensee fee 220.1 - (6.1) 214.0 - 214.0
B2B fixed-fee income 22.2 - (0.2) 22.0 - 22.0
B2B cost-based revenue 28.5 - (0.7) 27.8 - 27.8
B2B revenue received from the sale of hardware 6.8 - - 6.8 - 6.8
Additional B2B services fee 34.4 - - 34.4 - 34.4
Total B2B 312.0 - (7.0) 305.0 - 305.0
Snaitech - 446.0 - 446.0 - 446.0
Sun Bingo and Other B2C - 31.7 - 31.7 - 31.7
Sport B2C - 10.7 - 10.7 - 10.7
Intercompany - (1.1) - (1.1) - (1.1)
Total B2C - 487.3 - 487.3 - 487.3
Financial - - - - 74.5 74.5
312.0 487.3 (7.0) 792.3 74.5 866.8
B2B B2C Intercompany Total Gaming - continuing operations Financial - discontinued operations Total
Timing of transfer of performance obligations €'m €'m €'m €'m €'m €'m
Recognised over time 305.2 487.3 (7.0) 785.5 74.5 860.0
Recognised at the point in time (hardware sales) 6.8 - - 6.8 - 6.8
312.0 487.3 (7.0) 792.3 74.5 866.8
€'m
Regulated - Americas 69.8
Regulated - Europe (excluding UK) 92.2
Regulated - UK 63.9
Regulated - Rest of the World 2.9
Total Regulated B2B revenue 228.8
Unregulated excluding Asia 49.2
Total Core B2B revenue 278.0
Asia 34.0
Total B2B Gambling revenue 312.0
Six months ended 30 June 2021
B2B B2C Intercompany Total Gaming - continuing operations Financial - discontinued operations Total
Primary Geographic Markets €'m €'m €'m €'m €'m €'m
Italy 15.8 157.9 (3.5) 170.2 0.4 170.6
United Kingdom 59.8 30.2 (1.9) 88.1 11.6 99.7
Mexico 40.9 - - 40.9 0.1 41.0
Philippines 38.0 - - 38.0 - 38.0
Malta 27.6 - - 27.6 0.2 27.8
Gibraltar 13.2 - - 13.2 - 13.2
Spain 10.7 - - 10.7 0.4 11.1
Germany 0.8 8.3 (0.8) 8.3 2.4 10.7
Greece 8.0 - - 8.0 0.7 8.7
Poland 6.3 - - 6.3 0.1 6.4
Curacao 5.7 - - 5.7 0.1 5.8
Colombia 4.3 - - 4.3 - 4.3
Switzerland 2.8 - - 2.8 0.2 3.0
Norway 2.8 - - 2.8 0.2 3.0
Romania 2.8 - - 2.8 - 2.8
Other 27.7 0.2 (0.2) 27.7 15.5 43.2
267.2 196.6 (6.4) 457.4 31.9 489.3
B2B B2C Intercompany Total Gaming - continuing operations Financial - discontinued operations Total
Product type €'m €'m €'m €'m €'m €'m
B2B licensee fee 200.6 (5.5) 195.1 - 195.1
B2B fixed-fee income 19.6 (0.2) 19.4 - 19.4
B2B cost-based revenue 20.7 (0.7) 20.0 - 20.0
B2B revenue received from the sale of hardware 4.0 - 4.0 - 4.0
Additional B2B services fee 22.3 - 22.3 - 22.3
Total B2B 267.2 - (6.4) 260.8 - 260.8
Snaitech - 158.1 - 158.1 - 158.1
Sun Bingo and Other B2C - 30.2 - 30.2 - 30.2
Sport B2C - 8.5 - 8.5 - 8.5
Intercompany - (0.2) - (0.2) - (0.2)
Total B2C - 196.6 - 196.6 - 196.6
Financial - - - - 31.9 31.9
267.2 196.6 (6.4) 457.4 31.9 489.3
B2B B2C Intercompany Total Gaming - continuing operations Financial - discontinued operations Total
Timing of transfer of performance obligations €'m €'m €'m €'m €'m €'m
Recognised over time 263.2 196.6 (6.4) 453.4 31.9 485.3
Recognised at the point in time (hardware sales) 4.0 - - 4.0 - 4.0
267.2 196.6 (6.4) 457.4 31.9 489.3
€'m
Regulated - Americas 46.4
Regulated - Europe (excluding UK) 66.5
Regulated - UK 59.6
Regulated - Rest of the World 1.9
Total Regulated B2B revenue 174.4
Unregulated excluding Asia 49.0
Total Core B2B revenue 223.4
Asia 43.8
Total B2B Gambling revenue 267.2
There were no changes in the Group's revenue measurement policies and
procedures. The vast majority of the Group's B2B contracts are for the
delivery of services within the next 12 months.
The Group's contract liabilities, in other words deferred income, primarily
include advance payment for hardware and services, and also include the set-up
fees paid by the licensee at the beginning of the contract. These are included
in deferred income at the total amount of €6.2 million (31 December 2021:
€8.1 million).
NOTE 9 - 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 (Adjusted post-tax profit),
which management considers, are relevant in understanding the Group's
financial performance.
As these are not a defined performance measure in IFRS and are not intended as
a substitute for those measures, the Group's definition of adjusted items may
not be comparable with similarly titled performance measures or disclosures by
other entities.
The following tables give a full reconciliation between adjusted and actual
results:
Six months ended 30 June 2022
Revenue EBITDA - B2B EBITDA - B2C EBITDA Profit - B2B Profit -B2C Profit from continuing operations attributable to the owners of the Company Profit before tax from continuing operations
€'m €'m €'m €'m €'m €'m €'m €'m
Reported as actual 792.3 62.9 115.7 178.6 28.7 42.7 71.4 103.7
Employee stock option expenses 1 - 4.1 0.5 4.6 4.1 0.5 4.6 4.6
Professional fees 2 - 10.1 - 10.1 10.1 - 10.1 10.1
Fair value change and finance cost on redemption liability 3 - (1.8) - (1.8) (1.7) - (1.7) (1.7)
Special site costs 4 - 1.9 - 1.9 1.9 - 1.9 1.9
Onerous contract 5 - - 10.4 10.4 - 10.4 10.4 10.4
Fair value change of equity investments 6 - - - - (0.7) - (0.7) (0.7)
Fair value change of derivative financial assets 6 - - - - (48.5) - (48.5) (48.5)
Impairment of intangible assets 7 - - - - 20.6 - 20.6 20.6
Amortisation of intangible assets on acquisitions 8 - - - - 6.7 15.2 21.9 21.9
Tax related to uncertain positions 9 - - - - 8.5 - 8.5 -
Deferred tax on acquisitions - - - - (0.9) (3.3) (4.2) -
Adjusted measure 792.3 77.2 126.6 203.8 28.8 65.5 94.3 122.3
Constant currency impact (10.5) - - (5.0) - - (15.0) -
Adjusted result on constant currency basis 781.8 - - 198.8 - - 79.3 -
Six months ended 30 June 2021
Revenue EBITDA - B2B EBITDA - B2C EBITDA Profit - B2B Profit -B2C Profit from continuing operations attributable to the owners of the Company Profit before tax from continuing operations
€'m €'m €'m €'m €'m €'m €'m €'m
Reported as actual 457.4 58.5 51.3 109.8 380.4 21.5 401.9 278.1
Employee stock option expenses 11 - 6.3 0.7 7.0 6.3 0.7 7.0 7.0
Professional fees 12 - 2.2 - 2.2 2.2 - 2.2 2.2
Fair value change and finance cost on redemption liability 13 - 0.9 - 0.9 0.9 - 0.9 0.9
Charitable donations 14 1.9 - 1.9 1.9 - 1.9 1.9
Settlement of legal matter 15 2.3 - 2.3 2.3 - 2.3 2.3
Fair value change and finance cost on contingent consideration - - - 1.3 - 1.3 1.3
Fair value change of equity investments 16 - - - (0.8) - (0.8) (0.8)
Fair value change of derivative financial assets 16 - - - (299.9) - (299.9) (299.9)
Impairment of property, plant and equipment and intangible assets 17 - - - - 2.8 12.3 15.1 15.1
Amortisation of intangible assets on acquisitions 18 - - - 8.7 10.2 18.9 18.9
Deferred tax on acquisitions - - - (1.1) (4.8) (5.9) -
Deferred tax 19 - - - (90.3) - (90.3) -
Adjusted measure 457.4 72.1 52.0 124.1 14.7 39.9 54.6 27.0
Constant currency impact - - - - - - 1.7 -
Adjusted result on constant currency basis 457.4 - - 124.1 - - 56.3 -
The following table provides a full reconciliation between adjusted and actual
tax from continuing operations:
Six months ended Six months ended
30 June 2022 30 June 2021
€'m €'m
Tax on profit or loss for the year 32.3 (123.8)
Adjusted for:
Deferred tax on intangible assets on acquisitions 4.2 5.9
Deferred tax (Refer to footnote 9 above) - 90.3
Tax related to uncertain positions (8.5) -
Adjusted tax 28.0 (27.6)
NOTE 10 - IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS
Six months ended Six months ended
30 June 2022 30 June 2021
€'m €'m
Impairment of tangible assets - 12.5
Impairment of intangible assets 20.6 2.6
20.6 15.1
Out of the total impairment of tangible assets of €12.5 million in H1 2021,
an amount of €12.3 million relates to land classified as held for sale.
Refer to Note 17A.
Impairment of intangible assets for H1 2021 relates to the impairment of
capitalised development costs. Based on the assessment performed at the
reporting date, several projects will not be recoverable.
Impairment of intangible assets for H1 2022 relates to the impairment of
Eyecon €13.6 million and Quickspin of €7.0 million. Refer to Note 14.
NOTE 11 - FINANCE INCOME AND COSTS
Six months ended Six months ended
30 June 2022 30 June 2021
€'m €'m
A. Finance income
Interest income 1.2 0.4
Net foreign exchange gain 10.5 -
11.7 0.4
B. Finance costs
Interest on bonds (18.2) (18.2)
Interest on lease liability (2.7) (2.6)
Interest on loans and borrowings and other (2.8) (3.2)
Bank facility fees (1.0) (0.7)
Bank charges (6.8) (6.1)
Movement in contingent consideration and redemption liability (0.1) (1.3)
Net foreign exchange loss - (1.7)
(31.6) (33.8)
Net financing costs (19.9) (33.4)
NOTE 12 - INCOME TAX EXPENSE/(CREDIT)
Six months ended Six months ended
30 June 2022 30 June 2021
€'m €'m
Income tax expense for the current period 9.1 4.2
Income tax relating to prior periods 10.1 2.1
Withholding tax 0.2 0.1
Deferred tax 12.9 (130.2)
32.3 (123.8)
Reported Tax Charge/(Credit)
A reported tax expense from continuing operations of €32.3 million (30 June
2021: tax credit of €123.8 million) arises on a profit before tax of
€103.7 million (30 June 2021: €278.1 million) compared to an expected
charge of €19.7 million. The reported tax expense includes an additional
provision of €8.5 million in respect of overseas tax audits and a change in
estimates related to uncertain overseas tax positions in respect of prior
years.
The Group's effective tax rate for the current period is 21.6%. This was
higher than the UK statutory rate of 19%, due mainly to the following factors:
· Profits of subsidiaries located in territories where the tax rate
is higher than the UK statutory tax rate.
· The Group's internal restructuring resulted with the Group
becoming entitled to deductions for UK tax purposes in respect of certain
internally generated goodwill and intangible assets, for which no intangible
asset exists on the Group balance sheet. An additional deferred tax asset
amounting to €2.6 million was recognised in respect of future tax deductions
due to a change in the tax base of the Group's intangible assets resulting
from the restructuring (this has no impact on the book value of the intangible
assets reported in these financial statements).
· Non-taxable fair value movements on call options of €48.5
million (30 June 2021: €299.9 million). Deferred tax should be recognised
based on the expected manner of recovery at the balance sheet date. Due to the
nature of the options and the underlying assets, no tax is expected to arise
while the options are held or when the options are exercised. As the Group
intends to recover the value of the options either by continuing to hold them
or by exercising the option to convert into shares, and these will have no tax
effects, no deferred tax is recorded in respect of the options.
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 13 - EARNINGS PER SHARE
The calculation of basic earnings per share ("EPS") has been based on the
following profit attributable to the owners of the Company and
weighted-average number of ordinary shares outstanding.
Six months ended Six months ended
30 June 2022 30 June 2021
Actual Adjusted Actual Adjusted
€'m €'m €'m €'m
Profit attributable to owners of the Company 110.3 135.5 415.1 58.6
Basic (cents) 36.8 45.2 139.3 19.7
Diluted (cents) 35.4 43.4 132.2 18.6
Six months ended Six months ended
30 June 2022 30 June 2021
Actual Adjusted Actual Adjusted
€'m €'m €'m €'m
Profit attributable to owners of the Company from continuing operations 71.4 94.3 401.9 54.6
Basic (cents) 23.8 31.5 134.9 18.3
Diluted (cents) 22.9 30.2 128.0 17.4
Six months ended Six months ended
30 June 2022 30 June 2021
Actual Adjusted Actual Adjusted
Number Number Number Number
Denominator - basic
Weighted average number of equity shares 299,621,116 299,621,116 297,920,422 297,920,422
Denominator - diluted
Weighted average number of equity shares 299,621,116 299,621,116 297,920,422 297,920,422
Weighted average number of share options 12,597,744 12,597,744 16,086,406 16,086,406
Weighted average number of shares 312,218,860 312,218,860 314,006,828 314,006,828
The calculation of diluted EPS has been based on the above profit attributable
to the owners of the Company and weighted-average number of ordinary shares
outstanding after adjusting for the effects of all dilutive potential ordinary
shares.
EPS for discontinued operations is disclosed in Note 7.
NOTE 14 - INTANGIBLE ASSETS
Following is the reconciliation of the changes in the intangible assets:
€'m
Net book value of intangible assets at 1 January 2022 1,046.1
Additions 31.3
Impairment (Note 10) (20.6)
Amortisation charge for the period (50.9)
Net book value of intangible assets at 30 June 2022 1,005.9
Out of the total amortisation charge of €50.9 million (30 June 2021: €54.4
million), an amount of €21.9 million (30 June 2021: €18.9 million) relates
to the intangible assets acquired through acquisitions.
In accordance with IAS 36, the Group regularly monitors the carrying value of
its intangible assets, including goodwill. Goodwill is allocated to fifteen
cash generating units ("CGU") (31 December 2021: fifteen), out of which two
CGUs are under held for sale.
The allocation of the goodwill in CGUs (excluding CGUs held for sale) is as
follows:
30 June 2022 31 December 2021
€'m €'m
Snai 259.6 258.7
Sports B2B 132.5 132.5
Services 109.9 109.9
Casino 50.8 50.8
Quickspin 19.8 26.8
Eyecon 3.0 16.6
Poker 15.6 15.6
Statscore 12.4 12.4
Bingo retail 9.5 9.5
Bingo VF 7.4 7.4
Videobet retail 4.6 4.6
IGS 3.7 3.7
628.8 648.5
Management reviews CGUs for impairment bi-annually, or on the occurrence of an
impairment indicator. With the exception of the Financial segment, which is
included in held for sale, the recoverable amount of each CGU has been
determined from value in use calculations based on cash flow projections
covering 5 years plus a terminal value which have been adjusted to take into
account each CGUs' major events as expected in future periods.
Management has considered the ongoing economic uncertainty caused by the
Russian invasion in Ukraine and the Global pandemic with a resulting higher
level of judgement and uncertainty in forecasts. A potential risk for future
impairment exists should there be a significant change in the economic
outlook, versus those trends management anticipates in its forecasts due to
the occurrence of these events.
With the exception of CGUs which have been fully impaired to date and CGUs
deemed sensitive to impairment from a reasonably possible change in key
assumptions as reviewed in further detail below, management has calculated the
growth estimates for years 1-5 applying an average annual growth rate for
revenue based on the underlying economic environment in which the CGU operates
and the expected performance over that period. Beyond this period, management
has applied an annual growth rate of 2%. Management has included appropriate
capital expenditure requirements to support the forecast growth and assumed
the maintenance of the current level of licenses. Management has also applied
post tax discount rates to the cash flow projections as summarized in the
table below:
Average revenue growth rate H2 2022-H1 2027 Discount Rate applied
Snai 2.6% 17.0%
Sports B2B 12.8% 14.9%
Sports B2C 31.6% 15.2%
Services 12.1% 15.8%
Casino 6.5% 14.0%
Poker 3.4% 16.8%
VB Retail 10.4% 13.3%
IGS 34.8% 14.1%
Certain CGUs which are referred to below are considered sensitive to changes
in assumptions used for the calculation of value in use.
The recoverable amount of the Eyecon CGU, with carrying value equal to €29.5
million, has been determined using a cashflow forecast that includes annual
revenue growth rates between 1.1% to 10.0% over the 1-5 year forecast period,
2% long term growth rate and a post tax discount rate of 16.0%. The CGU has
shown signs of underperformance mainly due to the overfocusing in a specific
market and as a result the recoverable amount does not cover the carrying
value, with an impairment loss of €13.6 million recognized in the
consolidated statement of comprehensive income for the period ended 30 June
2022. In case the revenue growth rate per annum is lower by 1%, then an
additional impairment of €2.0 million would be recognised. The same case
applies if the discount rate increases by 1% to a post-tax discount rate of
17.0%, which would again result in an impairment of €1.2 million.
The recoverable amount of the Bingo VF CGU, with carrying value of €21.0
million, has been determined using a cashflow forecast that includes annual
revenue growth rates between 0% to 8% over the 1-5 year forecast period, 2%
long term growth rate and a post tax discount rate of 17.0%. The recoverable
amount would equal the carrying value of the CGU if the discount rate applied
was higher by 18.5% i.e., reaching a post-tax discount rate of 20.2%. Same
case applies, if the revenue growth was lower by 1.5% when compared to the
forecasted average 5-year growth.
The recoverable amount of the Bingo Retail CGU, with carrying value of €22.2
million, has been significantly impacted by COVID-19. The recoverable amount
of the Bingo Retail CGU has been determined using a cashflow forecast that
includes annual revenue growth rates between 1% to 5% over the 1-5 year
forecast period, 2% long term growth rate and a post tax discount rate of
15.0%. The recoverable amount would equal the carrying value of the CGU if the
discount rate applied was higher by 15.6% i.e., reaching a post-tax discount
rate of 17.4%. Same case applies, if the revenue growth was lower by 1.5% when
compared to the forecasted average 5-year growth.
The recoverable amount of the Quickspin CGU, with carrying value equal to
€59.5 million, has been determined using a cashflow forecast that includes
annual revenue growth rates between 6.0% to 8.9% over the 1-5 year forecast
period, 2% long term growth rate and a post tax discount rate of 12.9%. Given
the risk the CGU bears from the current proportion of revenues being generated
from B2B customers operating in areas with geopolitical tension, a 5% risk
premium has been applied on those revenues which approximates an overall 1%
increase on the post tax discount rate of the CGU. As a result of the above
and also the decrease in the CGU performance which is going through
organizational updates, an impairment loss of €7.0 million has been
recognized in the consolidated statement of comprehensive income for the
period ended 30 June 2022. In case the revenue growth rate per annum is lower
by 1%, then an additional impairment of €4.4 million would be recognised.
The same case applies if the discount rate increases by 1% to a post-tax
discount rate of 13.9%, which would again result in an impairment of €4.5
million.
The Statscore CGU with carrying value equal to €12.8 million has been deemed
as a sensitive CGU due to the startup activities of the unit and first two
years of performance as part of the Group. The recoverable amount of the
Statscore CGU has been determined using a cashflow forecast that includes
annual revenue growth rates between 33% to 65% over the 1-5 year forecasts
period, 2% long term growth rate and a post tax discount rate of 24.6%. The
recoverable amount would equal the carrying value of the CGU if the discount
rate applied was higher by 33.3% i.e., reaching a post-tax discount rate of
32.8%. Same case applies, if the revenue growth was lower by 9.7% when
compared to the forecasted average 5-year growth.
NOTE 15 - INVESTMENTS AND DERIVATIVE FINANCIAL ASSETS
Below is a breakdown of the relevant assets at 30 June 2022 and 31 December
2021 per the consolidated balance sheet:
30 June 2022 31 December 2021
€'m €'m
A. Investment in associates 2.1 5.2
B. Other investments 8.8 8.1
C. Derivative financial assets 680.7 622.2
691.6 635.5
The following are the amounts recognised in the consolidated statement of
comprehensive income:
30 June 2022 30 June 2021
€'m €'m
Statement of comprehensive income
A. Share of (loss)/profit from associates (3.1) 0.1
B. Unrealised fair value changes on equity investments 0.7 0.8
C. Unrealised fair value changes on derivative financial assets 48.5 299.9
Other comprehensive income
Foreign exchange movement from the derivative call options held in non-Euro 10.0 -
functional currency subsidiaries
56.1 300.8
Where the underlying derivative call option is held in a non-Euro functional
currency entity, the foreign exchange movement is recorded through other
comprehensive income. As at 30 June 2022, the foreign exchange movement of the
derivative call option held in Caliplay is recorded in the consolidated
statement of comprehensive income as the derivative call option is held in a
Euro functional currency entity. The foreign exchange movement of the
derivative call option held in Wplay, Onjoc and Tenbet are recorded through
other comprehensive income as the derivative call option is held in a USD
functional currency entity.
The recognition and valuation methodologies for each category are explained in
each of the relevant sections below, including key judgements made under each
arrangement as described in Note 5.
A. Investment in associates
Balance sheet 30 June 2022 31 December 2021
€'m €'m
Caliplay - -
Alfea S.p.a 1.7 1.6
Galera 0.4 3.6
Total investment in equity accounted associates 2.1 5.2
Profit and loss impact 30 June 2022 30 June 2021
€'m €'m
Share of profit in Alfea Spa 0.1 0.1
Share of loss in Galera (3.2) -
Total profit and loss impact (3.1) 0.1
Caliplay
Background
During 2014 the Group entered into an agreement with Turística Akalli, S. A.
de C.V which has since changed its name to Corporacion Caliente SAPI
("Caliente"), the majority owner of Tecnologia en Entretenimiento Caliplay, S.
de R.L. de C.V ("Caliplay"), which is a leading betting and gaming operator
which operates the "Caliente" brand in Mexico.
Playtech 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 ("Playtech Call
Option").
During 2021 September Holding's 49% shareholding in Caliplay was transferred
to Caliente and 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 Playtech which allowed Playtech 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
30 June 2022 ("Playtech M&A Call Option"); and
· Caliente received a put option which would require Playtech to
acquire September Holdings BV for a nominal amount ("September Put Option").
Playtech has no equity holding in Caliplay or Caliente and is currently
providing services to Caliplay including technical and general strategic
support services for which it receives income (including additional B2B
services fee as per Note 8). If 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 the related
services) which for the period ended 30 June 2022 was €34.4 million (Six
months ended 30 June 2021: €22.3 million). In addition, for 45 days after
the finalisation of Caliplay's 2021 accounts, Caliente also had an option to
redeem Playtech's additional B2B services fee or (if the Playtech Call Option
had been exercised at that time) acquire Playtech's 49% stake in Caliplay (the
"Caliente Call Option"). This option was not exercised and has therefore
lapsed.
Assessment of control and significant influence
As at 30 June 2022, 31 December 2021 and 30 June 2021 it was assessed that the
Group did not have control over Caliplay, because it does not meet the
criteria of IFRS 10 Consolidated Financial Statements, paragraph 7 due to the
following:
· Despite Playtech having a director on the Caliplay Board in 2020
and Playtech having a veto on a limited number of decisions (a veto that has
never been used in practice), there is no ability to control the relevant
activities due to the Chairman (who is appointed by the 100% shareholder)
having the casting vote; The director was removed from the Caliplay Board in
2021.
· Whilst they are not members of the Board, Playtech has the
ability to appoint and change both the Chief Operating Officer ("COO") and
Chief Marketing Officer ("CMO") who form part of the management team (albeit
this right has never been exercised). The COO and the CMO form part of the
wider management team but not the board and therefore are unable to control
the relevant activities of Caliplay;
· The option, if exercised, would result in Playtech having up to
49% of the voting rights and would not result in Playtech having control; and
· Whilst Playtech 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 30 June 2022, 31 December 2021 and 30 June 2021, the Group has
significant influence over Caliplay because it meets one or more of the
criteria under IAS 28, paragraph 6 as follows:
· Playtech has the ability to appoint key members of the Caliplay
management team;
· The standard operator revenue by itself is not considered to give
rise to significant influence, however, when combined with the additional B2B
services fee, this is an indicator of significant influence; and
· The material transaction of the historic loan funding is also an
indicator of significant influence.
Accounting for each of the options
The Playtech Call Option was exercisable at 30 June 2022, 31 December 2021 and
30 June 2021, although it still has not been exercised. As the Group has
significant influence and the option is exercisable, the investment is
recognised as an investment in associate using the equity accounting method
which includes having current access to profits and losses. The cost of the
investment was 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.
The Caliente Call Option has been treated as part of the Playtech Call Option,
as in substance these options are related. The Caliente Call Option would
merely serve to limit the value of the Playtech Call Option and therefore has
not been considered separately. Furthermore, the termination fee that would be
paid by Caliente upon exercise of the option was not recognised by the Group
as it did not meet any recognition criteria; it's upon Caliente's discretion
as to whether or not to exercise this option.
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 5, 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.
Investment in Alfea S.p.a
The Group has held 30.7% equity shares in Alfea S.p.a since June 2018. At 30
June 2022 the Group's value of the Investment in Alfea S.p.a was €1.7
million (31 December 2021: €1.6 million). A share of profit of €0.1
million was recognised in the consolidated statement of comprehensive income
for the six months ended 30 June 2022 (Six months ended 30 June 2021: €0.1
million).
Investment in Galera
In June 2021, the Group entered into an agreement with Ocean 88 Holdings Ltd
(Galera Group) which is the sole holder of Galera Gaming Group, a company
registered in Brazil. Galera offer and operate online and mobile sports
betting and gaming (poker, casino etc.) in Brazil under a foreign regulatory
license. They will continue to do so under the local regulatory license, when
this becomes available, and will expand to other gaming and gambling products
based on the local license conditions.
The Group's total consideration paid for the investment in Galera was $5.0
million (€4.2 million) as at 31 December 2021, which was the consideration
for the option to subscribe and purchase from Galera Group an amount of shares
equal to 40% in Galera Group at nominal price.
In addition to the investment amount paid, Playtech made available to the
Galera Group a line of credit up to $20.0 million. As at 30 June 2022, an
amount of €18.1 million, which is included in loans receivable under other
non-current assets (refer to Note 23) has been withdrawn (31 December 2021:
€8.3 million). An amount of €8.6 million has been loaned in the six months
ended 30 June 2022.The loan is required to be repaid to Playtech prior to any
dividend distribution to the current shareholders of Galera.
Playtech has assessed whether it holds power to control the investee and it
was concluded that this is not the case. Even if the option is exercised, it
would only result in a 40% voting right over the operating entity and
therefore no control.
Under the agreement in place:
· the standard operator income to be generated from services
provided to Galera when combined with the additional B2B services fee, the
loan and certain other contractual rights, are all indicators of significant
influence; and
· the Group provides standard B2B services (similar to services
provided to other B2B customers) as well as additional services to Galera that
Galera requires to assist it in successfully running its operations which
could be considered essential technical information.
Considering the above factors, the Group has significant influence under IAS
28, paragraph 6 over Galera.
As the option is currently exercisable and gives Playtech access to the
returns associated with the ownership interest, the investment is treated as
an investment in associate. Playtech's interest in Galera is accounted for
using the equity method in the consolidated financial statements. Galera is
still considered a start-up and therefore is currently loss making. If the
call option is exercised by Playtech the Group will no longer provide certain
services and as such will no longer be entitled to the additional B2B service
fee. The additional B2B services fee was €Nil in the six months ended 30
June 2022 (six months ended 30 June 2021: €Nil).
The cost of the investment was deemed to be the price paid for the option of
$5.0 million (€4.2 million). A share of the loss of €3.2 million was
recognised in the consolidated statement of comprehensive income in the six
month period ended 30 June 2022 (Six months ended 30 June 2021: €Nil) with
the resulting value of the investment at 30 June 2022 being €0.4 million (31
December 2021: €3.6 million).
Other investment in associates that are fair valued under IAS 28 para 14
The following are also investment 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)
· Onjoc (Panama)
The financial information required for investments in associates, other than
Caliplay, have not been included here as from a Group perspective we do not
consider them to have a material impact jointly or separately.
B. Other investments
Balance sheet 30 June 2022 31 December 2021
€'m €'m
Listed investment - PhilWeb 2.1 0.8
Listed investment - Torque Esports Corp 0.2 0.8
Investment in Tenlot Guatemala 4.4 4.4
Investment in Tentech Costa Rica 2.1 2.1
Total other investments 8.8 8.1
Profit and loss impact 30 June 2022 30 June 2021
€'m €'m
Change in fair value of listed securities - PhilWeb 1.3 (0.2)
Change in fair value of listed securities - Torque Esports Corp (0.6) 1.0
Total profit and loss impact 0.7 0.8
Listed investments
The Group has shares in listed securities in PhilWeb and Torque Esports Corp.
The fair values of these equity shares are determined by reference to
published price quotations in an active market. For the six month period ended
30 June 2022, the fair value of each of these listed securities increased by
€1.3 million and decreased by €0.6 million respectively. The total fair
value of the shareholding in the listed investments as at 30 June 2022 is
€2.3 million (31 December 2021: €1.6 million).
Investment in Tenlot Guatemala
In 2020, the Group entered into an agreement with Tenlot Guatemala, a member
of the Tenlot Group. Tenlot Guatemala commenced its activity in 2018 and it is
currently growing its lottery business in Guatemala, expanding its
distribution network and game offering.
The Group has acquired a 10% equity holding in Tenlot Guatemala for a total
consideration of $5.0 million (€4.4 million) in 2020, which has been
accounted at fair value through profit and loss under IFRS 9.
The fair value of the equity holding as at 30 June 2022 is $5.0 million
(€4.4 million) with no movement in fair value from the prior period.
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 in the six months ended 30 June 2022 (six months ended 30 June
2021: €Nil). There are no conditions attached to the exercise of the option.
The right of exercising the call option at any time and the acquisition of the
additional 80% in Super Sports S.A., gives 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 30 June 2022 Super Sport 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 and loss under IFRS 9.
The fair value of the equity holding as at 30 June 2022 is $2.5 million
(€2.1 million) with no movement in fair value from the prior period.
C. Derivative financial assets
Balance sheet 30 June 2022 31 December 2021
€'m €'m
Playtech M&A Call Option 544.9 506.7
Wplay 117.3 97.2
Onjoc 8.7 6.9
Tenbet 9.8 11.4
Total derivative financial assets 680.7 622.2
Comprehensive income impact 30 June 2022 30 June 2021
€'m €'m
Caliplay
Fair value change of Playtech M&A Call Option (5.1) 285.0
Playtech Call Option - (16.8)
Foreign exchange movement to profit and loss 43.3 -
Wplay
Fair value change in Wplay 11.6 26.7
Foreign exchange movement to other comprehensive income 8.5 -
Onjoc
Fair value change in Onjoc 1.2 1.8
Foreign exchange movement to other comprehensive income 0.6 -
Tenbet
Fair value change in Tenbet (2.5) 3.2
Foreign exchange movement to other comprehensive income 0.9 -
Total comprehensive income impact 58.5 299.9
Caliplay
As already disclosed in section A of this note, the Playtech M&A call
option is not currently exercisable and therefore in accordance with IAS 28,
paragraph 14 has been recognised as a derivative financial asset and fair
valued under IFRS 9.
As at 31 December 2021, Caliplay was actively negotiating a merger with a US
listed Special Purpose Acquisition Corporation ("SPAC"), which in turn was
expected to enter into a long-term commercial agreement with a leading media
partner. As part of the transaction, the media partner and certain of its
shareholders would also invest a cash amount in the SPAC in exchange for
shares and warrants issued by the SPAC, which is expected to result in them
together holding a material minority equity interest.
As at 30 June 2022, a transaction with the SPAC was still under consideration
but with the probability of a transaction proceeding being lower than at 31
December 2021. Furthermore and as per the announcement made on 29 July 2022,
with capital market conditions having deteriorated significantly since the
transaction was initially contemplated, the transaction was no longer being
pursued in the same manner, although the Group would continue to explore
alternative opportunities with Caliplay management to build a standalone US
gaming business under the Caliente brand focused on the Hispanic community in
the US.
For this reason, a decision was taken to change the valuation methodology used
as at 30 June 2022 for the Playtech M&A Call option to that of a DCF
approach with a market exit multiple assumption (whereas at 31 December 2021,
the Group has assessed the fair value of the Playtech M&A Call option
based on the proposed term of the expected merger with the SPAC, including the
transaction value).
Valuation
The Group has assessed the fair value of the derivative financial asset as at
30 June 2022 using a discounted cash flow ("DCF") approach with a market exit
multiple assumption. The Group used a discount rate of 16% reflecting the cash
flow risks given the high growth rates in place, as well as a discount for
illiquidity and control until the expected Playtech exit date. The Group also
made assumptions on the probability of a possible transaction that may be
completed on a number of exit date scenarios over a 3 year period, until June
2025. The Group used a compound annual growth rate of 20.7% over the
forecasted cash flow period, an average Adjusted EBITDA margin of 22.6% and an
exit multiple of 9.7x. Furthermore, Playtech's share in Caliplay was adjusted
to reflect the rights to shares under certain Playtech subcontractor
agreements.
As at 30 June 2022, the fair value of the option in Caliplay was $569.4
million (31 December 2021: $574.7 million) which converted to €544.9 million
(31 December 2021: €506.7 million). The difference of €38.2 million
between the fair value at 31 December 2021 and the fair value at 30 June 2022,
which is mostly attributable to the favorable movement in the USD to EUR
foreign exchange rate, has been recognised in the consolidated statement of
comprehensive income in the six month period ended 30 June 2022. Despite the
change in valuation approach, the Group considers it reasonable that the value
of the call option is broadly unchanged given the developments in Caliplay and
the broader market context. As at 31 December 2021 the fair value of the
option in Caliplay was determined using a potential transaction price where,
due to incoming shareholders, Playtech's share in Caliplay was being diluted
down to 36%. As at 30 June 2022, a discounted cash flow valuation method is
used with no dilution in shareholding, meaning Playtech's share in Caliplay
remains at 49% post exercise.
Sensitivity analysis
The assumptions and judgements made in the valuation of the derivative
financial asset as at 30 June 2022 include the following sensitivities, noting
that factors and circumstances may arise that are outside the Group's control
which could impact the option value:
· A different discount rate within the range of 11% to 20% will
result in a fair value of the derivative financial asset in the range of
€493.1 million - €623.7 million.
· A 5% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €516.7
million - €573.1 million.
· A 10% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €488.5
million - €601.3 million.
· A 5% fluctuation in the revenue growth rate will result in a fair
value of the derivative financial asset within the range of €525.9 million -
€564.4 million.
· A 10% fluctuation in the revenue growth rate will result in a
fair value of the derivative financial asset within the range of €507.3
million - €584.3 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 €492.6
million - €597.2 million.
Wplay
In August 2019, Playtech entered into a structured agreement with Aquila
Global Group SAS ("Wplay"), which had the license to operate online gaming
activities in Colombia. Under the agreement the Group provides Wplay its
technology products, where it receives standard operator revenue and
additional B2B services fee as per Note 8. The Group has no shareholding in
Wplay.
The agreement with Wplay was accounted for as a joint venture at inception due
to the terms in place giving the Group joint control. During 2020, the
contract was renegotiated resulting in the Group having significant influence
(refer to assessment below). Playtech has a call option to acquire a 49.9%
equity holding in the Wplay business. As at 31 December 2021 this option was
exercisable in August 2022, however during 2022, the parties agreed to defer
the Group's ability to exercise this option to August 2023. If the call option
is exercised by Playtech, the Group would no longer provide certain services
and as such will no longer be entitled to the additional B2B services fee. The
additional B2B services fee was €Nil in the six months ended 30 June 2022
(six months ended 30 June 2021: €Nil).
The payment of €22.4 million made to Wplay in 2019 and 2020 was considered
to be the payment made for the option in Wplay. The amendments to the
structured agreement in 2021 confirmed that these are the full and final
payments for the Wplay option with no additional amounts payable on the
exercise of the option. Under the existing agreements with Wplay, the Group
had contingent commitments totaling $6.0 million, of which $5.0 million was
paid in June 2021 and $1.0 million is payable on certain performance
milestones in future periods (refer to Note 21).
Assessment of control and significant influence
The Group assessed whether it holds power over the investee (in accordance
with IFRS 10, paragraph 7) with the following considerations:
· Playtech does not have the ability to direct Wplay's activities
as it has no voting representation on the Executive Committee or members of
the Executive committee;
· Whilst they are not members of the Executive Committee, Playtech
has the ability to appoint and change both the COO and CMO who form part of
the management team (albeit this right has never been exercised). The COO and
the CMO are part of the wider management team but would not be able to control
the relevant activities of Wplay; and
· If the option is exercised it would result in Playtech acquiring
49.9% of the voting rights of the operating entity and therefore would not
result in having control. Furthermore, as at 30 June 2022 the option is not
exercisable and therefore can be disregarded in the assessment of power.
Per the above assessment Playtech does not hold power over the investee and as
such does not have control.
With regards to the assessment of significant influence, the following facts
were considered:
· Playtech has the right to appoint and remove the COO and CMO
which are potential indicators of significant influence given their relative
positions and the involvement in 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; and
· the Group provides additional services to Wplay which Wplay
requires to assist it in successfully running its operations which could be
considered essential technical information
The Group therefore has significant influence under IAS 28, paragraph 6 over
Wplay. However, as the option is not currently exercisable, we have an
investment in associate but with no access to profits. As such the option is
fair valued as per paragraph 14 of IAS 28 and shown as a derivative financial
asset in accordance with IFRS 9.
The Group has given an interest bearing loan of $1.7 million (€1.6 million)
to Wplay, which is due for repayment in December 2022 and is included in loans
receivable from related parties (refer to Note 23).
Valuation
The fair value of the option at 30 June 2022 has been estimated using a DCF
approach with a market exit multiple assumption. The Group used a discount
rate of 23% (December 2021: 22.3%, June 2021: 30%) reflecting the cash flow
risks given the high growth rates in place and the relative early stages of
the business, as well as a discount for illiquidity and control until the
expected Playtech exit date of December 2026. The Group used a compound annual
growth rate of 25.7% over the forecasted cash flow period and an average
Adjusted EBITDA margin of 20.6%. 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 Wplay was adjusted to reflect the
rights to shares under certain Playtech subcontractor agreements.
As at 30 June 2022, the fair value of the Wplay derivative financial asset is
€117.3 million. The difference of €20.1 million between the fair value at
31 December 2021 of €97.2 million and the fair value at 30 June 2022 has
been recognised as follows:
a. €11.6 million derived from the fair value increase of the derivative
call option calculated using the DCF model in the consolidated statement of
comprehensive income in the six month period ended 30 June 2022.
b. €8.5 million derived from in the fair value increase due to the
exchange rate fluctuation of USD to EUR (as the derivative call option is
under a foreign subsidiary of the Group whose functional currency is USD)
under the other comprehensive income in the six month period ended 30 June
2022.
Sensitivity analysis
The assumptions and judgements made in the valuation of the derivative
financial asset as at 30 June 2022 include the following sensitivities, noting
that factors and circumstances may arise that are outside the Group's control
which could impact the option value:
· A different discount rate within the range of 20% to 30% will
result in a fair value of the derivative financial asset in the range of
€91.2 million - €131.4 million.
· A 5% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €111.8
million - €122.9 million.
· A 10% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €106.2
million - €128.4 million.
· A 5% fluctuation in the revenue growth rate will result in a fair
value of the derivative financial asset within the range of €110.6 million -
€124.3 million.
· A 10% fluctuation in the revenue growth rate will result in a
fair value of the derivative financial asset within the range of €104.3
million - €131.7 million.
· If the assumed exit date is pushed out to the first available
date outside the lock-in period, then the valuation of the derivative
financial asset will be €109.8 million.
Onjoc
In June 2020, Playtech entered into a framework agreement with ONJOC CORP.
("Onjoc"), which holds a license to operate online sports betting, gaming and
gambling activities in Panama.- The Group has no equity holding in Onjoc but
has an option to acquire 50%. Under the agreement the Group provides Onjoc its
technology products, where it receives standard operator revenue and
additional B2B services fee as per Note 8. 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 six months ended 30 June 2022 (six months ended 30 June
2021: €Nil). The option can be exercised any time subject to Onjoc having
$15.0 million of Gross Gaming Revenue (''GGR'') over a consecutive 12-month
period.
Assessment of control and significant influence
The Group assessed whether it holds power over Onjoc (in accordance with IFRS
10, paragraph 7) with the following considerations:
· Playtech can propose an independent member to the Board of
Directors, who has to be independent to both Playtech and Onjoc, and as such
does not have the ability to direct Onjoc's activities as it has no voting
representation on the Board;
· Playtech has the right to appoint and remove the COO, CTO and
CMO, which although would form part of the wider management team, would not be
able to control the relevant activities of Onjoc by themselves; and
· If the option is exercised it would result in Playtech acquiring
50% of the voting rights of the operating entity and therefore would not
result in having control. Furthermore, as at 30 June 2022 the option is not
exercisable and therefore can be disregarded in the assessment of power.
Per the above assessment Playtech does not hold power over the investee and as
such does not have control.
With regards to the assessment of significant influence, the following facts
were considered:
· Playtech can propose an independent member to the Board of
Directors and has the right to appoint and remove the COO, CTO and CMO which
are potential indicators of significant influence given their relative
positions and the involvement in day-to-day operations of Onjoc;
· The standard operator revenue is not considered to give rise to
significant influence. However, when combined with the additional B2B services
fee, this is an indicator of significant influence; and
· the Group provides additional services to Onjoc which Onjoc
requires to assist it in successfully running its operations which could be
considered essential technical information.
The Group therefore has significant influence under IAS 28, paragraph 6 over
Onjoc. However, as the option is not currently exercisable, we have an
investment in associate but with no access to profits. As such the option is
fair valued as per paragraph 14 of IAS 28 and shown as a derivative financial
asset in accordance with IFRS 9.
The Group has given an interest bearing loan to Onjoc of €1.4 million (31
December 2021: €1.1 million) which is due for repayment in October 2025 and
is included in loans receivable from related parties (refer to Note 23).
Valuation
The fair value of the option at 30 June 2022 has been estimated using a DCF
approach with a market exit multiple assumption. The Group used a discount
rate of 31% (December 2021: 30.5%, June 2021: 40%) 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. The Group used a compound annual growth
rate of 100.5% over the forecasted cash flow period and an average Adjusted
EBITDA margin of 18%. 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 Onjoc was adjusted to reflect the rights to
shares under certain Playtech subcontractor agreements.
As at 30 June 2022, the fair value of the Onjoc derivative financial asset is
€8.7 million. The difference of €1.8 million between the fair value at 31
December 2021 of €6.9 million and the fair value at 30 June 2022 has been
recognised as follows:
a. €1.2 million derived from the fair value increase of the derivative
call option calculated using the DCF model in the consolidated statement of
comprehensive income in the six month period ended 30 June 2022.
b. €0.6 million derived in the fair value increase from the exchange
rate fluctuation of USD to EUR as the derivative call option is under a
foreign subsidiary of the group whose functional currency is USD; under the
other comprehensive income in the six month period ended 30 June 2022.
Sensitivity analysis
The assumptions and judgements made in the valuation of the derivative
financial asset as at 30 June 2022 include the following sensitivities, noting
that factors and circumstances may arise that are outside the Group's control
which could impact the option value:
· A different discount rate within the range of 27% to 37% will
result in a fair value of the derivative financial asset in the range of
€6.8 million - €10.3 million.
· A 5% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €8.2
million - €9.2 million.
· A 10% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €7.8
million - €9.8 million.
· A 5% fluctuation in the revenue growth rate will result in a fair
value of the derivative financial asset within the range of €7.8 million -
€9.7 million.
· A 10% fluctuation in the revenue growth rate will result in a
fair value of the derivative financial asset within the range of €7.0
million - €10.7 million.
· If the assumed exit date is pushed out to the first available
date outside the lock-in period, then the valuation of the derivative
financial asset will be €8.1 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 six months ended 30 June 2022 (six months
ended 30 June 2021: €Nil). In H1 2022, the Group signed an amendment to the
Tenbet agreement in which the option can be exercised at any time from the end
of 35 months (previously 18 months) of Tenbet going live. The call option to
acquire 81% equity holding in Tenbet is exercisable from July 2023 (previously
February 2022).
Under the existing agreements, the Group has provided Tenbet with a credit
facility of €2.2 million out of which €1.8 million had been drawn down as
at 30 June 2022 (31 December 2021: €1.1 million).
Assessment of control and significant influence
The Group assessed whether it holds power over Tenbet (in accordance with IFRS
10, paragraph 7) with the following considerations:
· Playtech does not have the ability to direct Tenbet's activities
as it has no voting representation on the Board of Directors (or equivalent)
or people in managerial positions;
· Playtech has neither the ability to appoint or change any members
of the Board of Tenbet; and
· As at 30 June 2022 the option is not exercisable and therefore
can be disregarded in the assessment of power.
Per the above assessment Playtech does not hold power over the investee and as
such does not have control.
With regards to the assessment of significant influence, the standard operator
revenue alone is not considered to give rise to significant influence.
However, when combined with the additional B2B services fee, this is an
indicator of significant influence. Furthermore, the Group provides additional
services to Tenbet which Tenbet requires to assist it in successfully running
its operations which could be considered essential technical information.
Playtech therefore has significant influence under IAS 28, paragraph 6 over
Tenbet. However, as the option is not currently exercisable, we have an
investment in associate but with no access to profits. As such the option is
fair valued as per paragraph 14 of IAS 28 and shown as a derivative financial
asset in accordance with IFRS 9.
Valuation
The fair value of the option at 30 June 2022 has been estimated using a DCF
approach with a market exit multiple assumption. The Group used a discount
rate of 34% (December 2021: 32.7%, June 2021: 40%) 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. The Group used a compound annual growth
rate of 64% over the forecasted cash flow period and an average Adjusted
EBITDA margin of -10%. 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 under certain Playtech subcontractor agreements.
As at 30 June 2022, the fair value of the Tenbet derivative financial asset is
€9.8 million. The difference of €1.6 million between the fair value at 31
December 2021 of €11.4 million and the fair value at 30 June 2022 has been
recognised as follows:
a. €2.5 million derived from the fair value decrease of the derivative
call option calculated using the DCF model in the consolidated statement of
comprehensive income in the six month period ended 30 June 2022.
b. €0.9 million derived in the fair value increase from the exchange
rate fluctuation of USD to EUR as the derivative call option is under a
foreign subsidiary of the group whose functional currency is USD; under the
other comprehensive income in the six month period ended 30 June 2022.
Sensitivity analysis
The assumptions and judgements made in the valuation of the derivative
financial asset as at 30 June 2022 include the following sensitivities, noting
that factors and circumstances may arise that are outside the Group's control
which could impact the option value:
· A different discount rate within the range of 30% to 40% will
result in a fair value of the derivative financial asset in the range of
€7.5 million - €11.6 million.
· A 5% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €9.3
million - €10.1 million.
· A 10% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €8.8
million - €10.6 million.
· A 5% fluctuation in the revenue growth rate will result in a fair
value of the derivative financial asset within the range of €9.0 million -
€10.6 million.
· A 10% fluctuation in the revenue growth rate will result in a
fair value of the derivative financial asset within the range of €8.1
million - €11.6 million.
· If the assumed exit date is pushed out to the first available
date outside the lock-in period, then the valuation of the derivative
financial asset will be €9.1 million.
NOTE 16 - DEFERRED TAX
The movement on the deferred tax is as shown below:
€'m
Balance at 1 January 2022 14.0
Charge to profit or loss (Note 12) (12.9)
Exchange differences (0.4)
Balance at 30 June 2022 0.7
30 June 2022 31 December 2021
€'m €'m
Split as:
Deferred tax liability on acquisitions 93.0 97.2
Deferred tax liability 20.0 0.4
Deferred tax asset (set off with deferred tax liability) (4.5) (8.7)
Deferred tax liability 108.5 88.9
Deferred tax asset 109.2 102.9
Deferred tax assets and liabilities are offset only when there is a legal
enforceable right of offset, in accordance with IAS 12.
On 31 December 2021, the Directors continued to recognise deferred tax assets
arising from temporary differences and tax losses carried forward with the
latter only to the extent that it is probable that future taxable profit will
be available against which the unused tax losses can be utilised. Please refer
to Note 12 for the assesment performed on the recognition of deferred tax in
the period.
Details of the deferred tax asset outstanding as at 30 June 2022 and 31
December 2021 are as follows:
30 June 2022 31 December 2021
€'m €'m
Deferred tax recognised on group restructuring 60.2 63.6
Tax losses 82.0 36.9
Other temporary and deductible differences (33.0) 2.4
Total 109.2 102.9
Details of the deferred tax amounts recognised in profit or loss are as
follows:
Six months ended Six months ended
30 June 2022 30 June 2021
€'m €'m
Accelerated capital allowances 0.3 98.1
Employee pension liabilities (0.3) (0.1)
Other temporary and deductible differences (15.0) (5.1)
Tax losses 2.1 37.3
Total (12.9) 130.2
NOTE 17 - ASSETS CLASSIFIED AS HELD FOR SALE
30 June 2022 30 December 2021
€'m €'m
A. Property, plant and equipment 20.0 20.0
B. Casuals CGU - -
C. Financial CGU 523.9 487.4
D. Investment in associates - -
543.9 507.4
A. During the period ended 30 June 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, out of which €1.0 million was received
during the year ended 31 December 2021. The advances received classified as
part of the liabilities directly associated with assets were classified as
held for sale. Accordingly, the real estate has been classified as held for
sale. At the date of the transfer to asset held for sale, an impairment review
has been performed against the fair value less expected selling costs. The
carrying value of the land is higher than the fair value less expected selling
costs and therefore an impairment of €12.3 million has been recognised in
the consolidated statement of comprehensive income for period ended 30 June
2021. In addition, €1.8 million deferred tax liability related to the
subject land was recognised to the statement of comprehensive income for the
year ended 31 December 2021. The Group decided to sell the asset and the
prospective buyer was interested in the land and not the buildings which lead
to this impairment. The transaction is subject to obtaining the formal
approval by the Ministry (MIPAAF) and is expected to be finalized in 2023.
B. Following the decision made by the Group in 2019 to dispose the Casual
and Social Gaming Businesses, the value of the divisions was classified as
held for sale and the results included in the discontinued operations.
On 29 June 2020, the Group entered into an agreement for the partial disposal
of "FTX" included in this division, for a total consideration of $1.0
million. As a result of this transaction, the Group realised a profit of
€0.6 million in the consolidated statement of comprehensive income for the
period ended 30 June 2020.
Furthermore, on 11 January 2021, the Group entered into an agreement for the
disposal of "Yoyo", also included in this division, for a total consideration
of $9.5 million. As a result of this transaction, the Group realised a profit
of €7.6 million in the consolidated statement of comprehensive income for
the period ended 30 June 2021, included within the total profit from
discontinued operations (refer to Note 7).
As a result of the above transactions, the Social and Casual Gaming CGU is now
fully disposed.
C. Following the decision made by the Board of Directors in 2020 to
dispose the Financial segment, the value of the division was classified as
held for sale and its results included in discontinued operations.
On 26 May 2021, the Group entered into an agreement for the disposal of its
Financial segment for a cash consideration up to $210.0 million. The
shareholders voted against the transaction.
On 29 September 2021, the Group entered into an agreement for a cash
consideration of $250.0 million. The final consideration is subject to a
completion accounts adjustment of up to $25.0 million in either direction,
which is determined by the financial performance of the Financial segment from
1 January 2021 to the completion date.
The transaction was approved by the shareholders at the Annual General Meeting
held on 1 December 2021 and was completed on 11 July 2022. On that day, the
Group received a consideration of $233.5 million. The consideration is subject
to change and there will be a post completion process to determine the final
amount based on the actual results of the Financial segment up to 11 July
2022. As part of the completion process, both parties agreed that the Group
should pay the Buyer an additional amount related to the completion adjustment
of $5.4 million. As a result, the total consideration for the disposal of the
Financial segment is $228.1 million.
On the completion of the transaction, the Group proceeded with the payment of
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.
At 31 December 2020 an impairment charge of €221.2 million was recognised
against this CGU as a result of comparing its carrying value to expected
proceeds from the disposal, less expected costs to sell. Following a review of
the net assets of the unit at 30 June 2021, when compared to the expected
proceeds, €2.0 million of the previously recognised impairment was reversed.
The impairment loss allocated against goodwill cannot be reversed.
The major class of assets and liabilities of the disposal group classified as
held for sale, are as follows:
30 June 2022 31 December 2021
€'m €'m
Assets
Property, plant and equipment 4.3 3.6
Right of use assets 6.3 5.5
Intangible assets 98.0 86.6
Trade and other receivables 23.2 25.6
Cash and cash equivalents 392.1 366.1
Assets classified as held for sale 523.9 487.4
Liabilities
Deferred tax liability 7.1 6.5
Trade payables and other payables 24.9 14.9
Client deposits 144.7 138.5
Client funds 147.1 170.3
Income tax payable 11.2 8.4
Lease liability 4.5 5.2
Liabilities directly associated with the asset classified as held for sale 339.5 343.8
D. In H2 2020, the Board of Directors made a decision to dispose of its
shareholding in two associates and as such their value of €2.2 million was
transferred to assets held for sale. In H1 2021, the Group entered into an
agreement for the disposal of these associates for a total consideration of
€2.2 million.
NOTE 18 - SHAREHOLDERS' EQUITY
A. Share Capital
Share capital is comprised of no par value shares as follows:
Number of Shares
30 June 2022 31 December 2021
Authorised N/A* N/A*
Issued and paid up 309,294,243 309,294,243
* The Company has no authorised share capital but it is authorised to issue
up to 1,000,000,000 shares of no par value.
The table below shows the movement of the shares:
Shares in issue/circulation Treasury shares Shares held by 2014 EBT Shares held by 2021 EBT Total
Number of Shares Number of Shares Number of Shares Number of Shares Number of Shares
At 1 January 2021 297,603,815 9,965,889 1,724,539 - 309,294,243
Transfer to EBT - (7,028,339) - 7,028,339 -
Exercise of options 545,406 - (545,406) - -
At 30 June 2021 298,149,221 2,937,550 1,179,133 7,028,339 309,294,243
Exercise of options 1,095,105 - (1,095,105) - -
At 31 December 2021/1 January 2022 299,244,326 2,937,550 84,028 7,028,339 309,294,243
Exercise of options 598,666 - (84,028) (514,638) -
At 30 June 2022 299,842,992 2,937,550 - 6,513,701 309,294,243
B. Employee Benefit Trust
In 2014, the Group established an Employee Benefit Trust ("2014 EBT") by
acquiring 5,517,241 shares for a total of €48.5 million. During the period
ended 30 June 2022, 84,028 shares (six months to 30 June 2021: 545,406 shares)
were issued to executive management after meeting the performance/service
conditions at a cost of €0.6 million (Six months to 30 June 2021: €4.6
million). As at 30 June 2022, no shares outstanding under the 2014 EBT.
As noted above, in 2021 the Company transferred 7,028,339 shares held by the
Company in treasury to the Employee Benefit Trust ("2021 EBT") for a total of
€22.6 million. During the period ended 30 June 2022, 514,638 shares (six
months to 30 June 2021: Nil) were issued at a cost of €1.7 million (Six
months to 30 June 2021: €Nil). As at 30 June 2022, a balance of 6,513,701
shares (30 June 2021: 7,028,339 shares) remains in the 2021 EBT with a cost of
€20.9 million.
C. Share options
During the period, 633,570 share options were exercised (Six months to 30 June
2021: 577,028), of which 34,904 were cash settled (Six months to 30 June 2021:
31,622).
D. Distribution of dividend
During 2022, the Group did not pay any dividends.
E. Reserves
The following describes the nature and purpose of each reserve within owner's
equity:
Reserve Description and purpose
Additional paid in capital Share premium (i.e. amount subscribed for share capital in excess of nominal
value)
Employee Benefit Trust Cost of own shares held in treasury by the Trust
Put/Call options reserve Fair value of put/call options as part of business acquisition
Foreign exchange reserve Gains/losses arising on re-translating the net assets of overseas operations
Employee termination indemnities Gains/losses arising from the actuarial re-measurement of the employee
termination indemnities
Non-controlling interests 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 19 - LOANS AND BORROWINGS
The main credit facility of the Group is a revolving credit facility ("RCF")
up to €317.0 million available until November 2023. Interest payable on the
loan is based on a Euro Libor and Libor rates based on the currency of each
withdrawal up to 31 December 2021. Following the announcement of the UK
Financial Conduct Authority (FCA) as to the future cessation or loss of
representativeness of the 35 Libor benchmark, as from 1 January 2022 Libor
rates replaced with the SONIA daily rate (sterling overnight index average).
As at the reporting date the credit facility drawn amounted to €164.1
million (31 December 2021: €167.1 million).
Under the RCF, the covenants are monitored on a regular basis by the finance
department, including modelling future projected cash flows under a number of
scenarios to stress-test any risk of covenant breaches, the results of which
are reported to management and the Board of Directors. The covenants are as
follows:
• Leverage: Net Debt/Adjusted EBITDA 3:1
• Interest cover: Adjusted EBITDA/Interest 4:1
As at 30 June 2022 and 31 December 2021 the Group met these financial
covenants.
NOTE 20 - BONDS
2018 Bond 2019 Bond Total
€'m €'m €'m
As at 1 January 2021 526.3 346.8 873.1
Notional interest on bonds 0.7 0.3 1.0
As at 30 June 2021 527.0 347.1 874.1
Notional interest on bonds 0.6 0.3 0.9
As at 31 December 2021 527.6 347.4 875.0
Notional interest on bonds 0.7 0.3 1.0
As at 30 June 2022 528.3 347.7 876.0
2018 Bond
On 12 October 2018, the Group issued €530 million of senior secured notes
('2018 Bond') due 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 bond.
The issue price was 100% of its principal amount and bears interest from 12
October 2018 at the rate of 3.75% per annum payable semi-annually, in arrears,
on 12 April and 12 October commencing on 12 April 2019.
The fair value of the liability component of the bond at 30 June 2022 was
€522.7 million (31 December 2021: €536.1 million).
2019 Bond
On 7 March 2019, the Group issued €350 million of senior secured notes
('2019 Bond') due in March 2026. The net proceeds of issuing the 2019 Bond
after deducting commissions and other direct costs of issue, totalled €345.7
million. Commissions and other direct costs of issue have been offset against
the principal balance and are amortised over the period of the bond.
The issue price is 100% of its principal amount and bears interest from 7
March 2019 at a rate of 4.25% per annum payable semi-annually, in arrears, on
7 September and 7 March commencing on 7 September 2019.
The fair value of the liability component of the bond at 30 June 2022 was
€336.6 million (31 December 2021: €358.3 million).
As at 30 June 2022, the Group met the required interest cover financial
covenant of 2:1 Adjusted EBITDA/Interest ratio, for the combined 2018 and 2019
Bonds.
NOTE 21 -CONTINGENT CONSIDERATION AND REDEMPTION LIABILITY
30 June 2022 31 December 2021
€'m €'m
Non-current redemption liability consists:
Acquisition of Statscore SP Z.O.O. 4.3 6.0
Current contingent consideration consists:
Other acquisitions 0.2 -
Total non current redemption liability and contingent consideration 4.5 6.0
Current contingent consideration consists:
Acquisition of Eyecon Limited - 3.6
Amount payable to Aquila Global Group SAS ("Wplay") (Note 15C) 1.0 0.8
Other acquisitions 0.6 0.6
Total current redemption liability and contingent consideration 1.6 5.0
The maximum contingent consideration and redemption liability payable is as
follows:
30 June 2022 31 December 2021
€'m €'m
Acquisition of Eyecon Limited - 3.6
Acquisition of HPYBET Austria GmbH - 15.0
Acquisition of Statscore SP Z.O.O 15.0 15.0
Interest in Aquila Global Group SAS ("Wplay") 1.0 0.9
Other acquisitions 0.8 6.8
16.8 41.3
NOTE 22 - PROVISIONS FOR RISKS AND CHARGES
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 Director's assessment of the progress and probabilities of success of
each case at each reporting date.
Movement of the provisions outstanding are shown below:
Legal and regulatory Contractual Other Total
€'m €'m €'m €'m
Balance at 31 December 2021 6.9 6.7 3.1 16.7
Provisions made during the period 0.3 2.0 0.3 2.6
Provisions used during the period (0.1) - (0.1) (0.2)
Provisions reversed during the period (0.5) (1.2) (1.1) (2.8)
Balance at 30 June 2022 6.6 7.5 2.2 16.3
Legal and regulatory Contractual Other Total
€'m €'m €'m €'m
31 December 2021
Non current liabilities 6.9 3.5 3.1 13.5
Current liabilities - 3.2 - 3.2
6.9 6.7 3.1 16.7
30 June 2022
Non current liabilities 6.6 2.3 2.2 11.1
Current liabilities - 5.2 - 5.2
6.6 7.5 2.2 16.3
Provision for legal and regulatory issues
The Group is subject to proceedings and potential claims regarding complex
legal matters (including those related to previous acquisitions), which are
subject to a different degree of uncertainty. Provisions are held for various
legal and regulatory issues that relate to matters arising in the normal
course of business, including in particular various disputes that arose in
relation to the operation of the various licenses held by the Group's
subsidiary Snaitech. The uncertainty is due to complex legislative and
licensing frameworks in the various territories in which the Group operates.
The Group also operates in certain jurisdictions where legal and regulatory
matters can take considerable time for the required local processes to be
completed and the matters to be resolved.
Contractual claims
The Group is subject to historic claims relating to contractual matters that
arise with customers in the normal course of business. The Group believes they
have a robust defense to the claims raised and has provided for the likely
settlement where an outflow of funds is probable. The uncertainty relates to
complex contractual dealings with a wide range of customers in various
jurisdictions, and because as noted above, the Group operates in certain
jurisdictions where contractual disputes can take considerable time to be
resolved in the local legal system.
Given the uncertainties inherent, it is difficult to predict with certainty
the outlay (or the timing thereof) which will derive from these matters. It is
therefore possible that the value of the provisions may vary further to future
developments. The Group monitors the status of these matters and consults with
its advisors and experts on legal and tax-related matters in arriving at the
provisions recorded. The provisions included represent the Directors' best
estimate of the potential outlay and none of the matters provided for are
individually material to the financial statements.
Accounting for uncertain tax positions
The Group is subject to various forms of tax in a number of jurisdictions.
Given the nature of the industry and the jurisdictions within which the Group
operates, the tax, legal and regulatory regimes are continuously changing and
subject to differing interpretations. As such the Group is exposed to a small
number of uncertain tax positions and open audits / enquiries. Judgement is
applied in order to adequately provide for uncertain tax positions where it is
believed that it is more likely than not that an economic outflow will arise.
The Group has provided for uncertain tax positions which meet the recognition
threshold and these positions are included within tax liabilities. There is a
risk that additional liabilities could arise. Given the uncertainty and the
complexity of application of international tax in the sector, it is not
feasible to accurately quantify any possible range of liability or exposure,
and this has therefore not been disclosed.
NOTE 23 - 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 six months ended 30 June, the Group companies entered into the
following transactions with related parties who are not members of the Group:
Six months ended Six months ended
30 June 2022 30 June 2021
€'m €'m
Revenue
Associates and structured agreements 63.4 43.7
Operating expenses
Associates and structured agreements 0.1 -
Interest income
Associates and structured agreements 0.3 -
Share of (loss)/profit from associates and joint ventures (3.1) 0.1
The following amounts were outstanding at the reporting date:
30 June 2022 31 December 2021
€'m €'m
Trade receivables
Associates and structured agreements 12.7 16.5
Loans and interest receivable - current
Associates and structured agreements 3.0 2.4
Loans and interest receivable - non current
Associates and structured agreements 19.9 9.5
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 €4.5 million (30 June 2021: €1.5 million).
NOTE 24 - CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
Liabilities
Loans and borrowings Bonds Interest on loans and borrowings and bonds Contingent consideration and redemption liability Lease liabilities Total
€'m €'m €'m €'m €'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 paid on bonds and loans and borrowings - - (19.5) - - (19.5)
Payment of contingent consideration and redemption liability - - - (4.0) - (4.0)
Principal paid on lease liability - - - - (11.7) (11.7)
Interest paid on lease liability - - - - (2.9) (2.9)
Total changes from financing cash flows - - (19.5) (4.0) (14.6) (38.1)
Other changes
Liability related
New leases - - - - 4.4 4.4
On acquisitions - - - 0.7 - 0.7
Interest on bonds, bank borrowings and other borrowings - 1.0 19.3 - - 20.3
Interest on lease liability - - - - 2.9 2.9
Movement in deferred and contingent consideration and redemption liability - - - (1.7) - (1.7)
Foreign exchange difference (3.0) - - 0.1 (0.2) (3.1)
Total liability related other changes (3.0) 1.0 19.3 (0.9) 7.1 23.5
Balance at 30 June 2022 164.1 876.0 10.2 6.1 87.8 1,144.2
Liabilities
Loans and borrowings Bonds Interest on loans and borrowings and bonds Contingent consideration and redemption liability Lease liabilities Total
€'m €'m €'m €'m €'m €'m
Balance at 1 January 2021 308.9 873.1 10.5 9.7 88.3 1,290.5
Changes from financing cash flows
Interest paid on bonds and loans and borrowings - - (20.3) - - (20.3)
Repayment of loans and borrowings (100.0) - - - - (100.0)
Payment of contingent consideration and redemption liability - - - (0.8) - (0.8)
Principal paid on lease liability - - - - (11.1) (11.1)
Interest paid on lease liability - - - - (2.7) (2.7)
Total changes from financing cash flows (100.0) - (20.3) (0.8) (13.8) (134.9)
Other changes
Liability related
New leases - - - - 2.4 2.4
Interest on bonds, bank borrowings and other borrowings - 1.0 20.0 - - 21.0
Interest on lease liability - - - - 2.7 2.7
Movement in deferred and contingent consideration and redemption liability - - - 2.2 - 2.2
Payment of contingent consideration related to investments - - - (4.0) - (4.0)
Foreign exchange difference 5.4 - - - 1.7 7.1
Total liability related other changes 5.4 1.0 20.0 (1.8) 6.8 31.4
Balance at 30 June 2021 214.3 874.1 10.2 7.1 81.3 1,187.0
NOTE 25 - EVENTS AFTER THE REPORTING DATE
The disposal of the Financial segment was completed on 11 July 2022 for a
total consideration of $219.3 million (net off of break fee of $8.8 million
and the final consideration adjustment of $5.4 million), resulting in an
estimated profit of €8.3 million.
On 15 July 2022, the Group repaid the outstanding balance of the RCF.
As disclosed in Note 15, the Group has been exploring a possible transaction
regarding an agreement with Caliente which would allow Caliplay to penetrate
the US market with Caliplay being acquired by a US listed special purpose
acquisition company ("SPAC"). Capital market conditions have deteriorated
significantly since the transaction was initially contemplated and,
accordingly, this transaction is no longer being pursued in the same manner.
However, the Group continues to explore alternative opportunities with
Caliplay management to build a standalone US gaming business under the
Caliente brand focused on the Hispanic community in the US. Both parties also
continue to have discussions with the SPAC and its associates regarding this
alternative opportunity. Discussions are at an early stage and further updates
will be made if appropriate.
1 Employee stock option expenses relate to non cash expenses of the Group
and differ from year to year based on the share price and the number of
options granted.
2 Professional fees incurred for: (a) the potential reorganization of the
Group following the exercise of Playtech M&A Call Option (Note 15) and (b)
the potential sale of the Group. These expenses are not considered ongoing
costs of operations and therefore are excluded.
3 Fair value change and finance costs on redemption liability 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 Ukraine employees. These expenses are
not considered ongoing costs of operations and therefore are excluded.
5 Payment to terminate an onerous contract with a former service provider.
This expense is not considered ongoing costs of operations and therefore is
excluded.
6 Fair value change of equity investments and derivative financial assets.
These are excluded from the results as they relate to unrealised profit/loss.
Refer to Note 15.
(#_ftnref8)
7 Impairment of intangible assets relates to the impairment of Eyecon and
Quickspin CGU. Refer to Note 14.
8 Amortisation and deferred tax on intangible assets acquired through
business combinations in prior years. Costs directly related to acquisitions
are not considered ongoing costs of operations and therefore
are excluded.
9 Change in estimates related to uncertain overseas tax positions in respect
of prior years.
11 Employee stock option expenses relate to non cash expenses of the Group
and differ from year to year based on the share price and the number of
options granted.
12 Professional fees incurred for: (a) the reorganization of the Group
following the potential exercise of Playtech M&A Call Option (Note 15) and
(b) the potential sale of the Group. These expenses are not considered ongoing
costs of operations and therefore are excluded.
13 Fair value change and finance costs on redemption liability and
contingent consideration related to the acquisition of Statscore and the
contingent commitments of Wplay as discussed in Note 15. These expenses are
not considered ongoing costs of operations and therefore are excluded.
14 In 2020, the Board of Directors approved a £3.0 million COVID-19
Recovery and Resilience Fund. Out of which £1.9 million was spent in the
period ended 30 June 2021. This is a one-off payment and therefore is
excluded.
15 Settlement of legal matter which is not considered a recurring cost and
therefore is excluded.
16 Fair value change of equity investments and derivative financial assets.
These are excluded from the results as they relate to unrealised profit/loss.
(#_ftnref18)
17 Impairment of tangible and intangible assets mainly relates to the
impairment of land before the classification as held for sale
18 Amortisation and deferred tax on intangible assets acquired through
business combinations in prior years. Costs directly related to acquisitions
are not considered ongoing costs of operations and therefore are excluded.
19 The recognition of €90.3 million of deferred tax asset relates to the
special project the Group completed on 1 January 2021 to move the tax
residency of a number of companies from the Isle of Man to the UK. Please
refer
to Note 12 for further details.
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