REG - Playtech PLC - Interim Results
07/09/2023 07:00
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RNS Number : 6384L Playtech PLC 07 September 2023
Playtech plc
("Playtech", the "Company", or the "Group")
Results for the six months ended 30 June 2023
Strong EBITDA growth in H1; FY23 on track to be slightly ahead of expectations
Playtech (LSE: PTEC), the leading platform, content and services provider in
the online gambling industry, today announces its results for the six months
to 30 June 2023.
Financial summary (continuing operations)(1 )
( )
Reported Adjusted(2)
H1 23 H1 22(5) H1 23 H1 22(5)
€'m €'m Change % €'m €'m Change %
Revenue 859.6 792.3 8% 859.6 792.3 8%
EBITDA 207.3 173.9 19% 219.9 199.1 10%
Post-tax profit(3) 3.1 71.4 -96% 85.7 94.3 -9%
Diluted EPS 1.0 €c 22.9 €c -96% 27.5 €c 30.2 €c -9%
Net debt 248.2 494.5 -50%
( )
Summary
· Record H1 23 performance with H1 Adjusted EBITDA up 10% to
€219.9 million.
· Continued strength seen across regulated B2B markets and
Snaitech.
· Comprehensive partnership signed with Hard Rock Digital in Q1 23,
establishing Playtech in key US states and with international expansion to
follow.
· The Group is on course to deliver FY23 Adjusted EBITDA slightly
ahead of current expectations.
Divisional highlights
B2B
· Strong performance from B2B, with H1 23 revenue up 7% to €334.5
million versus H1 22. B2B Adjusted EBITDA increased 5% to €81.3 million (H1
22: €77.2 million).
· The Americas was the standout region during the period, with
revenue growth of 43% to €99.7 million. Caliente remains the key driver of
this growth. Brazil continues to grow strongly as it moves towards regulating,
and the early performance of Galera.bet is encouraging.
· Significant progress made on executing the US strategy:
- Landmark agreement signed with Hard Rock Digital in early 2023, including
an $85 million (€79.8 million) investment in exchange for a small minority
equity ownership stake.
- Ohio, Maryland and West Virginia licences granted so far in 2023, and
Playtech is now licensed in 10 states with further applications progressing.
- Launched with several operators across multiple states, including 888,
Rush Street Interactive and PokerStars, and expanded our relationships with
BetMGM and BetParx as they launch in further states.
· Announced an extension of the partnership with NorthStar, alongside a
strategic investment to ensure Playtech is well-positioned to benefit from the
regulation of the Canadian market.
· Europe ex-UK revenue grew 5% to €96.6 million, with growth seen
across multiple countries including Poland and Spain.
· Live Casino continued to see healthy revenue growth; the Company
remains focused on regulated markets which saw revenue growth of 24% in H1 23
versus H1 22.
· SaaS revenues grew more than 50% in H1 23 versus H1 22, illustrating our
excellent progress towards achieving the medium-term SaaS revenue target of
€60 million - €80 million.
· Launched BetBuddy, part of Playtech's safer gambling technology, with
five new brands in H1 23, bringing the total to 15 brands in eight
jurisdictions.
B2C
· Solid B2C performance (including Snaitech, HAPPYBET and Sun Bingo
& Other B2C) with revenue up 9% to €532.1 million (H1 22: €487.3
million). Adjusted EBITDA up 14% to €138.6 million (H1 22: €121.9
million).
· Snaitech Adjusted EBITDA increased 12% to €141.9 million (H1 22:
€127.0 million) driven by growth across both retail and online, as well as
pent-up demand following the World Cup.
- Retail Adjusted EBITDA up 13% to €73.2 million (H1 22: €64.7 million)
- Online Adjusted EBITDA up 10% to €68.7 million (H1 22: €62.3 million)
· The Snai brand maintained its number one market share position
(retail and online combined measured by GGR) across Italian sports betting
brands in H1 2023.
· HAPPYBET, now integrated into Snaitech's operations, reported
Adjusted EBITDA of €-6.1 million (H1 22: €-5.2 million), although the
current period includes a €2 million historical litigation settlement
expense. Strategic and operational measures have been taken across both retail
and online, with leading KPIs showing improvement.
· Sun Bingo and Other B2C saw 8% revenue growth to €34.1 million
(H1 22: €31.7 million) while Adjusted EBITDA grew to €2.8 million, up from
€0.1 million in H1 22.
Financial and corporate activity
· Reported post-tax profit of €3.1 million in H1 23, was down from
€71.4 million in H1 22, due to an overall reduction in the fair value of the
derivative financial assets recognised in the income statement, and the
derecognition of brought forward deferred tax assets.
· Strong cash generation in H1 23, with adjusted operating
cashflow(4) of €232.8 million.
· Group net debt as at 30 June 2023 was €248.2 million, resulting in
leverage of 0.6x.
· Robust balance sheet following the issuance of a €300 million bond
due 2028. In July 2023, part of the proceeds were used to redeem all of the
outstanding €200 million notes due 2023, and also to repay outstanding debt
under Playtech's revolving credit facility, such that this facility is now
fully undrawn.
Corporate governance
As announced on 17 May 2023, John Krumins advised the Board that he wished to
step down from the Board. At the request of the Chairman, John agreed to
remain as a Non-executive Director of the Company and Chairman of the Audit
Committee until after the publication of the Group's interim results, ensuring
a smooth transition to his successor as Chairman of the Audit Committee.
Playtech now confirms John Krumins will be stepping down on 29 September 2023.
Playtech has also made the following changes to the Committees of the Board,
effective from 29 September 2023:
· Ian Penrose will assume the Chair of the Audit Committee and is
appointed to the Nominations Committee, while stepping down from the ESG
Committee.
· Samy Reeb is appointed to the Audit and ESG Committees along with
assuming the Chair of the Risk Committee, replacing Anna Massion.
· Anna Massion will become the Chair of the Remuneration Committee,
replacing Ian Penrose and is also appointed to the ESG Committee.
Current trading and outlook
· Following a strong H1 performance, H2 has started well with
normal seasonality.
· On track to deliver FY 2023 Adjusted EBITDA slightly ahead of
current expectations.
· B2B medium term Adjusted EBITDA target of €200 - 250 million and
B2C medium-term Adjusted EBITDA target of €300 - 350 million maintained.
· Strength of balance sheet further improved by strong cash generation
and bond issuance, giving flexibility to pursue both organic and inorganic
growth opportunities.
· The Board remains confident in Playtech's ability to execute on
growth opportunities across both B2B and B2C divisions.
Mor Weizer, CEO, said:
"We delivered our highest ever Adjusted EBITDA in the first half of 2023,
demonstrating the benefits of the continued strategic and operational progress
made in recent years. I would like to thank all our colleagues for their hard
work and support in making this possible.
"Our success in the period was driven by our diversified portfolio, spanning
B2B and B2C, in some of the fastest-growing regulated markets around the
world. Having laid the groundwork in the US, we are growing our offering
across multiple states and are confident in our future prospects following the
landmark agreement with Hard Rock Digital. Additionally, we further cemented
our leadership in LatAm with Caliente in Mexico and Galera.bet in Brazil.
Snaitech in Italy enjoyed another strong period, with the management team
continuing to leverage their retail presence to grow the online business.
"We have started the second half of the year well and are on track to deliver
FY23 Adjusted EBITDA slightly ahead of current expectations. With our proven
strategy, robust balance sheet and our operational expertise, we are confident
in our ability to capitalise on the many growth opportunities we have
ahead."
- Ends -
For further information contact:
Playtech plc +44 (0) 20 3805 4822
Mor Weizer, Chief Executive Officer
Chris McGinnis, Chief Financial Officer
c/o Headland
Sandeep Gandhi, Head of Investor Relations +44 (0) 20 3805 4822
Headland (PR adviser to Playtech) +44 (0) 20 3805 4822
Lucy Legh, Jack Gault
(1)Totals in tables throughout this statement may not exactly equal the
components of the total due to rounding.
(2)Adjusted numbers relate to certain non-cash and one-off items, as well as
material reorganisation and acquisition-related costs. The Board of Directors
believes that the adjusted results more closely represent the consistent
trading performance of the business. A full reconciliation between the actual
and adjusted results is provided in Note 10.
(3)Adjusted Profit refers to post-tax Profit from continuing operations
attributable to the owners of the Company after the relevant adjustments as
detailed above. Reported Profit refers to post-tax Profit from continuing
operations attributable to the owners of the Company before adjustments.
(4)Adjusted operating cash flow refers to net cash provided by operating
activities from continuing operations after adjusting for changes in jackpot
balances, client funds, professional fees and the ADM security deposit in
Italy.
(5)H1 2022 numbers have been restated to reflect Snaitech's online bank
charges, which are now being recognised within EBITDA. Refer to Note 4B for
more details.
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/64e31fc09b8a600d00eba947/melgkr
(https://www.investis-live.com/playtech/64e31fc09b8a600d00eba947/melgkr)
Analysts and investors can also dial into the call using the following
details:
United Kingdom (Local): +44 20 4587 0498
United Kingdom (Toll-Free): +44 800 358 1035
Global Dial-In Numbers
(https://www.netroadshow.com/conferencing/global-numbers?confId=54777)
Access Code: 303420
The presentation slides will be available today from 8.30 am at:
http://www.investors.playtech.com/results-centre/presentations.aspx
(http://www.investors.playtech.com/results-centre/presentations.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 industry with over
7,300 employees across 19 countries.
Playtech is the gambling industry's leading technology company delivering
business intelligence driven gambling software, services, content and platform
technology across the industry's most popular product verticals, including,
casino, live casino, sports betting, virtual sports, bingo and poker. It is
the pioneer of omni-channel gambling technology through its integrated
platform technology, Playtech ONE. Playtech ONE delivers data driven marketing
expertise, single wallet functionality, CRM and responsible gambling solutions
across one single platform across product verticals and across retail and
online.
Playtech partners with and invests in the leading brands in regulated and
newly regulated markets to deliver its data driven gambling technology across
the retail and online value chain. Playtech provides its technology on a B2B
basis to the industry's leading retail and online operators, land-based casino
groups and government sponsored entities such as lotteries. Playtech directly
owns and operates Snaitech, the leading sports betting and gaming company in
online and retail in Italy.
Chief Executive Officer's Review
Overview
Playtech has continued to make good progress on its strategic priorities in
the first half of 2023. We delivered record Adjusted EBITDA in the period,
driven by strong performances from both the B2B and B2C businesses. The growth
achieved in the first half of the financial year gives the Board further
confidence in achieving Playtech's medium-term Adjusted EBITDA targets for B2B
(€200 - €250 million) and B2C (€300 - €350 million), while taking
further strides to capture the exciting market opportunities ahead.
The strategic focus of Playtech's B2B business remains on opportunities in
regulated or soon to be regulated markets. There is a particular emphasis on
high-growth markets including the US and Canada, Latin America and certain
European markets. These regions helped the B2B segment to deliver revenue
growth of 7% (+5% on a constant currency basis) to €334.5 million (H1 2022:
€312.0 million). B2B Adjusted EBITDA increased 5% to €81.3 million (H1
2022: €77.2 million). This B2B performance absorbed marketing activities in
the period to further promote Playtech's products, and thus, excluding the
impact of these, growth would have been higher.
Accelerating the Group's presence in the US remains a key strategic priority
for Playtech. In 2022, we laid the groundwork by signing deals with multiple
operators. 2023 is a year where we are focused on execution and rolling out
those deals to multiple states. In the first half of 2023, we launched with
several operators across multiple states, including 888, PokerStars and Rush
Street Interactive, while also expanding our presence with BetParx and BetMGM.
In early 2023, we signed a landmark agreement with Hard Rock Digital to
provide Casino and Live, amongst other content, in North America. Playtech has
also invested $85 million (€79.8 million) in exchange for a small minority
stake in Hard Rock Digital.
In Latin America, Playtech has continued to see excellent growth from
Caliente, which further cemented its leadership position in Mexico. Our other
strategic agreements in Latin America also performed well. Sports betting has
now been regulated in Brazil, subject to Congress approval, and Playtech is
well positioned to capitalise on the opportunity given its exciting strategic
agreement with Galera.bet.
In Europe ex-UK, B2B revenue was driven by strong performances across several
countries, including most notably Poland and Spain.
Playtech remains committed to diversifying its B2B division by driving growth
through our SaaS business model. At the FY 2022 results, we announced a
medium-term SaaS revenue target of €60 million - €80 million, and we are
pleased to report that we are making excellent progress towards achieving this
target, with the SaaS business delivering revenue of €23 million in H1 23,
up more than 50% versus H1 22. We continued to see strong customer acquisition
with more than 50 further brands added, bringing the total to over 400.
B2C revenues rose 9% to €532.1 million (H1 2022: €487.3 million) and
Adjusted EBITDA increased 14% to €138.6 million (H1 2022: €121.9 million),
as Snaitech delivered another excellent performance. Both retail betting,
which benefitted from pent-up demand after the football World Cup (given Italy
was absent from the tournament), and the online business performed well. The
latter benefitted from strong brand loyalty, continuous improvements to apps
and technology, and a broadening of its content offering.
None of this would have been possible without our colleagues around the world,
and I would like to thank them for their hard work and commitment to deliver
first-class customer service to all of our clients. They are our greatest
asset and are the key force behind the results published today.
B2B
Core B2B
Regulated markets
Playtech's B2B business remains focused on opportunities in regulated and soon
to be regulated markets. The majority of these are high-growth markets such as
the US, Latin America and certain European countries.
Regulated markets saw revenue growth of 15% (11% on a constant currency basis)
compared to H1 2022, with strong contributions from Caliente in Mexico and
other regulated markets such as Poland, Spain, Italy and Canada.
The Americas
The Americas continues to grow rapidly, with H1 2023 revenue up 43% (29% on a
constant currency basis) compared to H1 2022. This was largely driven by
another strong performance from Caliente as well as growing contributions from
other customers, including NorthStar in Canada and Wplay in Colombia.
US
Accelerating the Group's presence in the US remains a key strategic priority.
While the Group has taken significant steps to capitalise on the favourable
regulatory environment in the US, there remains multiple opportunities ahead.
Having signed deals with multiple operators in 2022, the first half of 2023
has seen Playtech shift its focus to executing on those agreements.
In the first six months of the year, we launched with several operators across
multiple states. 888 with its SI Casino brand and PokerStars were launched in
Michigan for both Casino and Live. Rush Street Interactive with its Betrivers
brand went live in Michigan in addition to its Sugarhouse brand in New Jersey,
both for Casino. Furthermore, we expanded our partnership with BetMGM with the
launch of Casino in Michigan, while successfully rolling out Sports SSBTs for
the first time in the state of Ohio.
We continue to expand our presence with BetParx. We successfully launched Live
in New Jersey, featuring 'Adventures Beyond Wonderland', while also launching
the IMS in Ohio and Maryland. This gives Playtech a presence with BetParx in
five states: Michigan, Pennsylvania, New Jersey, Ohio and Maryland. Further
product launches in additional states with BetParx are expected going
forward.
As announced in March 2023, Playtech signed a landmark strategic agreement
with Hard Rock Digital (HRD), the interactive gaming and sports betting
division of Hard Rock International. As part of the partnership, in the US and
Canada, HRD's customers will enjoy a variety of Playtech's iGaming content
offering including slots, RNG and live dealer table games through HRD's
existing proprietary platform and technology offering. These products will
also be supplied outside of North America in addition to the IMS and services
including marketing and operations. Playtech has also invested $85 million
(€79.8 million) in exchange for a small minority equity ownership stake in
HRD.
Aside from launching with multiple operators in several states, the Company is
also rolling out its suite of innovative content. Adventures Beyond Wonderland
for Live Casino was launched in the New Jersey facility in July 2023,
delivering the first true game show experience to the American market. Mega
Fire Blaze Roulette, a Playtech Live Casino hit in multiple countries, has
opened in Michigan, while the Buffalo Blitz Live slot game has also launched
in the US in Michigan. In addition, we will be launching a new Casino slot
game in the US called, 'Gold Rush: Cash Collect', based on the popular
Discovery Channel reality TV show. Gold Rush: Cash Collect has already
launched in multiple European jurisdictions, proving successful.
Playtech remains committed to further expanding its physical footprint in the
US and other high-growth markets. In addition to the existing Live studios in
New Jersey and Michigan, construction on another Live facility in Pennsylvania
is well underway and is expected to open before the end of 2023. Behind the
Company's growing physical presence are an increasing number of employees
focused on sales, operations and back-office functions, taking total headcount
in the US to more than 150 at the end of H1 2023.
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.
Online casino, which was not subject to PASPA, is allowed at the discretion of
individual states. No new states have authorised Online casino in 2023 thus
far, although there are several states where iGaming legislation is being
considered.
In 2023, Playtech received licences for Ohio, Maryland and West Virginia,
taking the total number of US states where Playtech has a licence to 10.
Canada
In early 2023, Playtech announced an expansion of its partnership with
NorthStar. The Company also made an investment, initially by way of a
convertible debenture in December 2022, which subsequently was converted into
equity in H1 23. The agreement also expands the scope of Playtech's offering
to NorthStar to include operational and marketing services, in addition to the
IMS platform, Casino, Live, Poker and Bingo solutions already launched.
NorthStar has since acquired Slapshot Media Inc. to open up the Canadian
market to the NorthStar brand beyond Ontario, and is in the process of raising
additional capital from Playtech and other investors to accelerate the growth
of NorthStar's footprint across Canada. Aside from NorthStar, Playtech has
further exposure to the Canadian market with more than 10 other operators and
launched with Fan Duel for Casino and Live in Ontario.
Latin America
In Latin America, Playtech continues to see excellent growth from Caliente in
Mexico. Revenue from Wplay was impacted by certain activities in the half.
Underlying revenues from Wplay continued its strong performance, and Wplay
remains well-positioned to grow its presence there further in the years ahead.
In 2022, Playtech opened a new Live Casino facility in Peru as it continues to
extend its presence across the region. Several customers, such as Wplay and
Betano, have launched tables in the new Live facility with positive results so
far. Given the strong demand, we are building a second studio in Lima which is
expected to open in the coming months. This will help ensure we have the
capacity to take advantage of further favourable regulation and strong growth
in the region, such as in Brazil in the years to come.
Sports betting has now been regulated in Brazil with the President signing a
Provisional Measure, which is subject to the approval of Congress. Brazil is
anticipated to be a significant, high-growth market given the large population
and love of sports. Playtech is well positioned to benefit given its exciting
strategic agreement with Galera.bet, which migrated its Sports product onto
Playtech's platform at the end of H1 23. In addition to Galera.bet, Playtech
also has exposure to Brazil via its other B2B partners in the country.
Europe
In Europe ex-UK, B2B revenue growth of 5% (5% on a constant currency basis)
was driven by strong performances in several countries including Poland and
Spain. This was partly offset by lower revenue from the Netherlands due to
increased competition and a strict regulatory environment.
There were several launches in Spain in the half, including DAZNBET going live
with Casino and Live, KirolBet with Live, and both Luckia and Platin Casino
with Casino. Playtech saw several launches with existing customers in expanded
territories, such as Leo Vegas in Italy launching Casino and Live products and
Unibet launching in Romania with Casino. This demonstrates the versatility and
scalability of Playtech's business model and the trend to grow customer
relationships over time.
Following another competitive public tender in 2023, Playtech's contract with
Polish state operator, Totalizator, for the IMS platform was extended for
multiple years, illustrating the strength of Playtech's offering and our
successful strategy of partnering with leading brands and institutions in
newly regulated online markets.
Elsewhere in Europe, the Company continues to expand its Live Casino
infrastructure with extensions to facilities in Latvia, Romania, the
Netherlands and the UK ongoing, illustrating the growing demand across the
segment.
France saw positive regulatory developments in the first half. In May 2023,
the French government introduced a bill that set out proposals to regulate the
online casino market. A key part of the bill is for a five-year moratorium,
whereby online casino would be regulated until January 2030, but only for
existing land-based casino licensees. Following this, additional players could
enter the market. At present, in the online segment, only poker, sports
betting and horse race betting are regulated through approved operators. While
it is still early days, Playtech is well positioned should France regulate the
online casino segment, with multiple B2B customers. Overall B2B revenue from
France grew healthily in the first half of the year.
UK
UK revenues saw declines of 2% (2% growth on a constant currency basis)
compared to H1 2022, where the regulatory climate continues to have an impact.
In December 2020, the UK Government announced a call for evidence to review
the existing gambling laws in Great Britain. Following the initial call for
evidence, which closed on 31 March 2021, the Government assessed the evidence
presented, alongside other data, and set out its conclusions and proposals for
reform in a White Paper, published in April 2023.
At this point in time, there is still some uncertainty around the impact of
the White Paper on the industry. The proposals have not resulted in changes to
legislation or regulation just yet, and are subject to consultation with
various stakeholders, the timing of which is unclear. With affordability
checks the area where any impact is most uncertain, the White Paper's message
that it recommends these checks be frictionless is positive. However, until
the specifics of any measures that will be implemented and the precise
mechanics required to adhere to them are known, it is difficult to assess the
overall impact. In response to the UK Government review, several operators
have been taking pre-emptive measures in an attempt to show regulators that
the industry is able to self-regulate. So while part of the impact of the
White Paper has already been felt across the industry in the UK, the full
extent of the impact is hard to quantify.
As one of the largest regulated markets in the world, the UK remains an
important market for Playtech and its customers. Playtech is already working
with customers that took pre-emptive measures in advance of the publication of
the White Paper and is committed to supporting its remaining clients as the
proposals come into force. Playtech is uniquely advantaged given its
market-leading technology and data, which put safety and responsible gambling
at the centre of everything. The Company remains heavily involved in
discussions around safer game design and will continue to be following this
next wave of regulation. This should further cement Playtech's reputation as
the go-to platform for regulated markets.
Unregulated (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.
Revenue from these unregulated markets (excluding Asia) was down 13% (-14% on
a constant currency basis) versus H1 2022, with underlying growth in Brazil
more than offset by a decline in South Africa and Canada. In Canada, Ontario
transitioned to being regulated, and as a result, some revenue has shifted to
regulated operators while other operators have reduced their exposure to the
Canadian market. As regulation progresses across Canada, it will continue to
add to the size of the North America market opportunity.
In line with the Company's strategy to target newly regulating markets through
strategic agreements, Playtech announced at the start of 2023 that it had
reached an agreement to expand its offering to NorthStar in Canada. Playtech
now provides strategic advice, most notably in online operations, managed
services and market expansion in addition to the IMS platform, Casino, Live
Casino, Poker and Bingo technology it already supplied as part of the software
and services agreement agreed in December 2021. This agreement also extended
the existing arrangement with NorthStar for 10 more years, and gives Playtech
the right to expand its existing arrangement beyond Ontario and across the
entire Canadian market.
The Company is also excited about the potential of the South African market as
it takes steps towards regulating. At present, it is a nascent but
fast-growing market, which permits sports betting and Live Casino. Towards the
end of 2022, Playtech launched Casino and Live products with TsogoSun.
Unregulated Asia
Unregulated Asia saw revenue decline 14% (-10% on a constant currency basis)
compared to H1 2022 due to continued pressures in the region.
B2B - driving growth through innovation
SaaS
Playtech is committed to diversifying its B2B division by driving growth
through our SaaS business model, which targets the long tail of providers that
don't have access to our IMS platform. At the FY 2022 results, we announced a
medium-term SaaS revenue target of €60 million - €80 million, and we are
pleased to report that we are making good progress towards achieving this
target, with the SaaS business seeing revenue growth of more than 50% in H1
2023 versus H1 2022.
While we continue to focus on increasing our wallet share with existing brands
on our SaaS platform, we have also made progress in attracting new customers
in both regulated and regulating markets to the SaaS offering. Playtech
launched over 50 brands in the period, with notable progress in the US as Rush
Street Interactive launched in Michigan and New Jersey. We now have more than
400 brands live since the launch of our SaaS model in 2019.
As the SaaS model provides a low friction method of exposing operators to
Playtech's content, we have the ability to cross and upsell other Playtech
products over time. Meanwhile, a broad range of customers from multiple
countries across different product sets means our revenue base is more
diversified, ensuring our B2B revenues are more resilient to any changes in
our operating environment.
Product developments
As the online gaming world expands, there is ever increasing demand to deliver
new, engaging and immersive entertainment experiences for consumers. In August
2023, Playtech announced the launch of Jumanji The Bonus Level, a new game
within Live that combines cutting-edge technology with the cinematic qualities
of the famous movie. Following a complex development process, Jumanji The
Bonus Level is the first-ever Live game inspired by a Hollywood blockbuster,
marking a key milestone in the gaming industry. This game is housed in a
studio designed to immerse players in the world of Jumanji. The studio's
attention to detail ensures that the game replicates the authenticity of the
original movie, delivering a 24/7 theme park-like experience.
In July 2023, Playtech also announced the launch of Big Bad Wolf Live, an
innovative experience that combines a slot game with elements of a Live
experience, released from Quickspin Live, the RNG arm of our Live division.
The game, which stands apart due to its artwork and unique features, sets a
new industry standard for Live Casino gaming.
Playtech continues to invest in branded IP. In the half, the Company signed
the exclusive US rights to Family Feud, one of US television's longest-running
and highest rated gameshows, and expects to launch a Game Show next year.
Finally, Playtech's Live product has been recognised as a leading solution in
the industry, winning the EGR Live supplier of the year for 2023,
acknowledging the achievements of its extremely talented team.
B2C
Playtech's B2C business includes Snaitech, HAPPYBET, and Sun Bingo and Other
B2C operations. Overall B2C revenues grew 9% (9% on a constant currency basis)
to €532.1 million (H1 22: €487.3 million). Adjusted EBITDA also grew 14%,
rising to €138.6 million (H1 22: €121.9 million).
Snaitech
Snaitech revenue saw good growth in H1 2023, up 10% compared to the same
period in the prior year, while Adjusted EBITDA grew 12% versus H1 2022. This
strong performance was driven by both the retail segment which saw revenue and
Adjusted EBITDA growth of 9% and 13% versus H1 22, respectively, and the
online business which saw revenue and Adjusted EBITDA growth of 12% and 10%
versus H1 22, respectively.
Within the retail segment, retail betting sales were up 24% versus H1 22 due
to pent-up demand after the football World Cup (given Italy was absent from
the tournament). Gaming Machines revenue was up 3% versus H1 22 as this
business normalises post-pandemic, with the growth being driven mainly by the
video lottery terminal business. At the Adjusted EBITDA level, retail margins
expanded 80 bps versus H1 22, driven by operating leverage on strong revenue
growth.
The online business saw strong growth, with both sports betting and casino
performing well. The under-penetration of this segment continues to be a
structural tailwind for the business, with Snaitech well-placed to benefit
given the strength of the brand, the continuous improvements to apps and
technology, and a broadening of its content offering. Adjusted EBITDA
margins remained high at 52% in H1 2023 versus 53% in H1 2022.
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 now expected to be
received in H1 2025.
In March 2023, Snaitech acquired Giove Group for a total consideration of
€6.0 million. Giove Group is a well-established betting operator in the
Puglia region (southern Italy), and holds licences for both retail betting and
online, directly managing 18 betting shops.
Snai maintained its number one market share position (retail and online
combined measured by GGR) across Italian sports betting brands in H1 2023,
cementing its reputation for consistent operational and brand strength.
HAPPYBET
HAPPYBET revenues were down 4% in H1 2023 compared to H1 2022, driven by a
rationalisation of retail sites in Germany, while Adjusted EBITDA losses
expanded to €6.1 million in H1 2023, versus a loss of €5.2 million in H1
2022. Excluding a €2 million expense related to an historical litigation
settlement, Adjusted EBITDA losses narrowed to €4.1 million in H1 2023.
Since the Snaitech management have taken over the operations of HAPPYBET, they
have been implementing a plan to improve the business's performance in retail
and optimise the online segment.
A process is currently underway to modify the retail footprint in Germany,
improving the quality of their locations. Less profitable retail stores have
been rationalised, while there are plans to open several retail shops in more
attractive areas in 2024, with local licences currently being applied for. The
closure of retail sites in Germany, coupled with new retail shops yet to be
opened is the primary cause of the decline in revenues in HAPPYBET during the
half.
In Austria, revenue increased in H1 2023, partly offsetting the decline in
Germany, due to the expansion in the number of retail sites in the most
profitable federal states of Tyrol and Vienna. Adjusted EBITDA margins
improved as some directly managed shops transitioned to a franchise model.
The strategy of optimising HAPPYBET's online business has so far focused on
two main areas: optimising the player bonus policy and implementing a new
approach to risk and trading around the sportsbook. There are signs that the
measures put in place are having a positive impact, with better payouts being
seen in Q2 2023 versus Q1 2023, lower bonus to GGR ratios in H1 23 v H1 22 and
a positive trend in revenues, albeit from a low base.
Sun Bingo and Other B2C
Sun Bingo and Other B2C saw 8% revenue growth to €34.1 million (H1 2022:
€31.7 million) while Adjusted EBITDA grew to €2.8 million up from €0.1
million in H1 2022. The primary reason for the improvement in performance was
the increased marketing spend at the end of 2022 around the time of the
football World Cup, resulting in higher revenue growth in H1 2023 at a high
contribution margin.
Safer gambling and sustainability
As a business, the most impactful contribution that Playtech can make to the
industry and in society is through the provision of technology to advance
safer gambling and player protection. We are committed to supporting our
licensees in this journey while growing our business sustainably and in a way
that builds long term value for all our stakeholders. To meet this ambition we
have set out a five-year strategy and roadmap that moves us towards fully
integrating sustainability and responsible business into our culture, strategy
and operations.
It is easy to forget that the war in Ukraine continues to rage on, causing
untold devastation for countless people. Ukraine remains front and centre for
all of us, not least given the number of employees we have there. I would like
to say a huge thank you to our colleagues who have devoted significant amounts
of time and resources to maintain contact with those on the ground in Ukraine
and those who have been forced out of their homes.
We remain firmly committed to making progress on all areas relating to
sustainability, including safer gambling, diversity and climate change. In the
first half of the year, we have continued to take positive steps towards the
targets that we set out under our sustainability framework. Highlights
include:
Safer Gambling
· Launched BetBuddy, part of Playtech's safer gambling technology,
with five new brands in H1 23, bringing the total to 15 brands in eight
jurisdictions.
· Achieved GamCare B2B Safer Gambling Standard at Provisional
Advanced Level 3, the highest award possible.
· Published and presented two new research papers providing
insights on data analytics for harm prevention and gambling product risk at
the UNLV International Conference on Gambling & Risk Taking in May.
Climate Change
· Launched a new, global partnership with the environmental
non-profit, Hubbub, to support employee engagement and action on climate
change.
· Secured inclusion in the FT Europe Climate Leaders 2023 listing,
published in April 2023.
Diversity and Inclusion
· Increased female representation amongst our senior leadership
population with females representing 28% as of 30 June 2023 (FY 2022: 26%).
· Recognised for our progress on diversity by winning the Company
of the Year award at the gambling industry's Women in Gaming Awards.
Chief Financial Officer's review
Overview
Group performance
Overall, Playtech had a strong H1 2023 performance, with Adjusted EBITDA(1)
of €219.9 million (H1 2022: €199.1 million), an increase of 10% compared
to H1 2022. Total reported revenue from continuing operations was €859.6
million (H1 2022: €792.3 million), representing an 8% increase compared to
H1 2022.
The strong performance was driven by both the B2C and B2B divisions. In B2C,
Snaitech had an excellent H1 2023 performance driven by growth across both
online and retail divisions, with B2C Adjusted EBITDA of €138.6 million, an
increase of 14% compared to H1 2022.
In B2B, the results were driven by strong growth in regulated markets, with
B2B revenues growing by 7% from €312.0 million to €334.5 and Adjusted
EBITDA increasing by 5% from €77.2 million in H1 2022 to €81.3 million.
This B2B performance absorbed marketing activities in the period to promote
the Playtech products, and thus, excluding the impact of these, B2B growth
would have been higher. Notwithstanding this, the performance is in line with
the Group's strategy of focusing on opportunities in regulated and soon to be
regulated markets and is further analysed in this report.
In March 2023, the Group invested $85.0 million (€79.8 million) in Hard Rock
Digital in exchange for a small minority interest in a combination of equity
shares and warrants. This investment forms part of the Group's strategy to
expand its presence in the US, in addition to providing growth opportunities
globally.
Reported and adjusted profit
Adjusted profit before tax from continuing operations grew by 14% to €139.3
million (H1 2022: €122.3 million), driven mainly by the rise in Adjusted
EBITDA and decrease in financing costs, offset partly by the increase in
amortisation and depreciation.
Reported profit before tax from continuing operations decreased to €79.6
million (H1 2022: €103.7 million) which in addition to the above also
includes the decrease in the unrealised fair value changes of derivative
financial assets. Total post-tax reported profit from continuing operations
was €3.1 million (H1 2022: €71.4 million), with the movement in tax
explained further in this report.
Balance sheet, liquidity and financing
The Group continues to maintain a strong balance sheet with Adjusted gross
cash, which excludes the cash held on behalf of clients, progressive jackpots
and security deposits, of €643.2 million as at 30 June 2023 (31 December
2022: €272.4 million). The increase is a result of the new €300.0 million
bond issue which took place in June 2023 (see below), as well as the continued
strong performance of the Group throughout the period. Net debt decreased to
€248.2 million as at 30 June 2023 (31 December 2022: €275.2 million),
while net debt/Adjusted EBITDA (last 12 months) improved slightly at 0.6x (31
December 2022: 0.7x).
Playtech has taken a proactive approach to managing its balance sheet so far
this year. In June 2023, the Company acted quickly to take advantage of a
window of relative market calm and secure favourable interest rates, issuing
€300 million of senior secured notes due in 2028 at an interest rate of
5.875%. Part of the proceeds were used post-period end to redeem all of the
outstanding €200.0 million 3.75% senior secured notes due in October 2023.
The Company also used the proceeds to repay outstanding debt under its
existing revolving credit facility in July 2023, which remains available and
undrawn today.
Group summary (continuing operations)(3)
H1 2023 H1 2022
€'m €'m
B2B 334.5 312.0
B2C 532.1 487.3
Intercompany (7.0) (7.0)
Total Group revenue from continuing operations 859.6 792.3
Adjusted costs(4) (639.7) (593.2)
Adjusted EBITDA from continuing operations 219.9 199.1
Reconciliation from EBITDA to Adjusted EBITDA:
EBITDA 207.3 173.9
Employee stock option expenses 2.9 4.6
Professional fees 4.6 10.1
Ukraine employee support costs - 1.9
Onerous contract - 10.4
Fair value change of redemption liability - (1.8)
Impairment of investment and receivables 5.1 -
Adjusted EBITDA 219.9 199.1
Adjusted EBITDA margin 26% 25%
The Group's total reported EBITDA increased by 19% to €207.3 million (H1
2022: €173.9 million). The adjusted items between reported and Adjusted
EBITDA are explained in Note 10 of the interim financial statements.
Divisional performance
B2B
B2B revenue
H1 2023 H1 2022 Change Constant
€'m €'m % currency
%
Regulated - Americas 99.7 69.8 43% 29%
Regulated - Europe (excluding UK) 96.6 92.2 5% 5%
Regulated - UK 62.9 63.9 -2% 2%
Regulated - Rest of the world 3.3 2.9 14% 14%
Total regulated B2B revenue 262.5 228.8 15% 11%
Unregulated excluding Asia 42.6 49.2 -13% -14%
Total core B2B revenue 305.1 278.0 10% 7%
Asia 29.4 34.0 -14% -10%
Total B2Brevenue 334.5 312.0 7% 5%
Overall, B2B revenues increased by 7% (5% on a constant currency basis),
largely due to an increase in the regulated B2B business.
Core B2B revenues(2) increased by 10%, driven by an increase in regulated
markets in the Americas and Europe (excluding the UK) of 43% and 5%
respectively (29% and 5% respectively on a constant currency basis), partly
offset by declines in revenues from the UK and unregulated excluding Asia.
The increase in the Americas was primarily driven by Mexico, due to revenue
growth from Caliente while in Europe (excluding the UK) growth was driven by
several countries including Poland and Spain. The increase in Poland was
driven by Playtech's partnership with Polish state operator, Totalizator,
which is going from strength to strength, whereas in Spain there were several
new launches during H1 2023.
The small decline seen across the UK market was due to the continued impact of
the uncertain regulatory climate, as well as the marketing activities to push
promotion of Playtech products further. In unregulated markets excluding Asia,
most of the decline is due to revenue shifting from this category to
regulated, as areas such as Ontario in Canada move to a regulated environment.
The revenue from Asia declined by 14% and 10% on an actual and constant
currency basis respectively, due to the continued pressures in the region.
B2B costs
H1 2023 H1 2022 Change
€'m €'m %
Research and Development 51.6 42.9 20%
General and Administrative 42.6 37.4 14%
Sales and Marketing 10.4 8.4 24%
Operations 148.6 146.1 2%
Total B2B Costs 253.2 234.8 8%
Total B2B Revenue and Costs
B2B revenue 334.5 312.0 7%
B2B costs (253.2) (234.8) 8%
Total B2B Adjusted EBITDA 81.3 77.2 5%
Margin 24% 25%
Research and Development ("R&D") costs include, among others,
employee-related costs, and proportional office expenses. Expensed R&D
costs grew by 20% to €51.6 million (H1 2022: €42.9 million), driven by the
increase in employee-related costs, due to inflationary rises. Capitalised
development costs were 35% of total B2B R&D costs in H1 2023 (H1 2022:
38%).
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 14% to €42.6
million (H1 2022: €37.4 million), mainly due to increases in consulting fees
and other administration costs.
Sales and Marketing costs increased by 24% to €10.4 million (H1 2022: €8.4
million), mainly due to the full return of marketing and exhibition activities
to pre-COVID-19 levels.
Operations include costs relating to infrastructure and other operational
projects, IT and security and general day to day operational costs, including
employee and office-apportioned costs and branded content fees. These costs
increased by 2% to €148.6 million (H1 2022: €146.1 million), driven mainly
by an increase in employee-related costs mostly due to Playtech's expanding
Live and US operations, as well as increase in costs to support Playtech's
structured agreements. H1 2022 included a provision for bad debt for Asia with
no further provision in H1 2023.
B2B Adjusted EBITDA
Total B2B Adjusted EBITDA increased by 5% to €81.3 million (H1 2022: €77.2
million), while EBITDA margin dropped slightly to 24% from 25% in H1 2022,
driven by the above period on period movement in revenue and costs.
B2C
H1 2023 H1 2022 Change
€'m €'m
Snaitech
Revenue(*) 488.4 446.0 10%
Costs 346.5 319.0 9%
Adjusted EBITDA 141.9 127.0 12%
Margin 29% 28%
Sun Bingo and Other B2C
Revenue 34.1 31.7 8%
Costs 31.3 31.6 -1%
Adjusted EBITDA 2.8 0.1 NA
Margin 8% 0%
HAPPYBET
Revenue 10.3 10.7 -4%
Costs(**) 16.4 15.9 3%
Adjusted EBITDA (6.1) (5.2) 17%
Margin NA NA
B2C Adjusted EBITDA 138.6 121.9 14%
Margin 26% 25%
* Includes intercompany revenue from HAPPYBET of €0.7 million (H1
2022: €1.1 million).
** Includes intercompany costs from Snaitech of €0.7 million (H1 2022:
€1.1 million).
Snaitech
Snaitech revenues increased 10% from the prior period to €488.4 million (H1
2022: €446.0 million), with operating costs seeing a similar increase of 9%
to €346.5 million (H1 2022: €319.0 million). These results were driven by
both the retail and online segments, with the former as a result of pent-up
demand following the football World Cup (due to Italy not being a
participant). The online segment continues to see impressive growth.
Snaitech's Adjusted EBITDA increased by 12%, while revenue increased by 10%.
As a result, Snaitech's Adjusted EBITDA margin increased to 29% (H1 2022:
28%), mostly due to retail margins by achieving operating leverage on the very
strong revenue growth.
Sun Bingo and Other B2C
Revenue from the Sun Bingo business increased by 8% to €34.1 million (H1
2022: €31.7 million). Operating costs within Sun Bingo decreased by 1% to
€31.3 million (H1 2022: €31.6 million), leading to an Adjusted EBITDA of
€2.8 million (H1 2022: €0.1 million). The increase in Adjusted EBITDA was
as a result of the increase in marketing spend towards the end of 2022 during
the football World Cup, resulting in higher revenue growth in H1 2023 at a
high contribution margin.. Adjusted EBITDA still includes the unwinding of the
minimum guarantee prepayment of €2.5 million in the current year (H1 2022:
€2.7 million) recognised as an expense over the new period of the contract
which was renegotiated in 2019.
On a reported basis Playtech incurred a one-off cost of €10.4 million in H1
2022 to terminate an onerous contract with a service provider.
HAPPYBET
Revenue from HAPPYBET decreased by 4% to €10.3 million (H1 2022: €10.7
million), with costs increasing by 3%. The business remains loss making, with
Adjusted EBITDA loss in the current period of €6.1 million (H1 2022: loss of
€5.2 million), albeit H1 2023 includes a €2.0 million expense relating to
a litigation settlement.
Below EBITDA items
Depreciation and amortisation
Reported and adjusted depreciation increased by 7% to €22.1 million (H1
2022: €20.6 million). After deducting amortisation of acquired intangibles
of €20.6 million (H1 2022: €21.9 million), adjusted amortisation increased
by 27% to €36.9 million (H1 2022: €29.0 million) after renewal of certain
licenses in Snaitech during H2 2022, which were previously extended for free
until June 2022 (therefore no corresponding amortisation in H1 2022). The
remainder of the balance under depreciation and amortisation of €10.1
million (H1 2022: €9.0 million) relates to IFRS 16 Leases and the
recognition of the right-of-use asset amortisation.
Impairment of intangible assets
The prior period impairment of €20.6 million related to the impairments of
the Eyecon cash-generating unit (CGU) of €13.6 million and Quickspin CGU of
€7.0 million. There was no impairment on any of the Group's CGUs in the
current period.
Finance income and finance costs
The reported and adjusted finance income of €6.0 million (H1 2022: €11.7
million) relates to foreign exchange gain of €3.0 million (H1 2022: €10.5
million) and interest received of €3.0 million (H1 2022: €1.2 million).
Reported finance costs include interest payable on the bonds and other
borrowings, bank facility fees, bank charges, interest expense on lease
liabilities and expected credit losses on loan receivables. Reported finance
costs decreased by 25% to €20.2 million (H1 2022: €26.9 million), mainly
due to the partial repayment of the 2018 Bond in H2 2022. The difference
between adjusted and reported finance costs is the movement in contingent
consideration of €1.3 million (H1 2022: €0.1 million) relating to the
acquisition of AUS GMTC PTY Ltd.
Unrealised fair value changes of derivative financial assets
The unrealised fair value decrease in derivative financial assets of
€25.5 million (H1 2022: increase of €48.5 million) is due to the movement
of the fair value of the various call options held by the Group which fall
under the definition of derivatives within IFRS 9 Financial Instruments.
Further details on the fair value of the various call options are disclosed in
Note 16C.
Taxation
A reported tax expense from continuing operations of €76.5 million (H1 2022:
€32.3 million) arises on a reported profit before tax of €79.6 million
(H1 2022: €103.7 million) compared to an expected charge of €18.7 million
based on the UK headline rate of tax for the period of 23.5%. The key items
for which the reported tax charge has been adjusted are UK tax losses on which
a deferred tax asset of €23.4 million was derecognised as expected
utilization would fall outside the forecasting period and therefore there is
not sufficient certainty they will be recovered.
The total adjusted tax expense is €53.6 million (H1 2022: €28.0 million)
which arises on an adjusted profit before tax of €139.3 million (H1 2022:
€122.3 million). The total adjusted tax expense of €53.6 million consists
of an income tax expense of €21.4 million (H1 2022: €10.9 million) and a
deferred tax expense of €32.2 million (H1 2022: €17.1 million). The total
adjusted deferred tax expense mainly consists of a deferred tax expense of
€25.1 million relating to the Snaitech group including the use of Snaitech
tax losses and excess interest expense.
The Group's effective adjusted tax rate for the current period is 38.5%. This
rate is higher than the UK headline rate for the period of 23.5%. The key
reasons for the differences are a mix of profits including subsidiaries
located in territories where the tax rate is higher than the UK statutory tax
rate (which predominately relates to Snaitech based in Italy) and expenses not
deductible for tax purposes including unrealised fair value changes of
derivative financial instruments.
Discontinued operations
Finalto (formerly TradeTech Group)
Finalto was disposed of in July 2022 with cash proceeds of $228.1 million
(€223.9 million) and transaction costs of €1.6 million resulting in a
profit on disposal of €15.1 million.
Adjusted profit
H1 2023 H1 2022
€'m €'m
Reported profit from continuing operations attributable to the owners of the 3.1 71.4
Company
Employee stock option expenses 2.9 4.6
Professional fees 4.6 10.1
Fair value change and finance cost on contingent consideration and redemption 1.3 (1.7)
liability
Ukraine employee support costs - 1.9
Onerous contract - 10.4
Impairment of investment and receivables 5.1 -
Fair value change of equity instruments (0.3) (0.7)
Fair value change of derivative financial assets 25.5 (48.5)
Amortisation of intangibles arising on acquisitions 20.6 21.9
Impairment of intangible assets - 20.6
Deferred tax on acquisitions (4.0) (4.2)
Deferred tax reversal 23.4 -
Tax related to uncertain provision 3.5 8.5
Adjusted Profit from continuing operations attributable to the owners of the 85.7 94.3
Company
The reconciling items in the table above are further explained in Note 10 of
the interim financial statements. Reported profit post tax from continuing
operations was €3.1 million (H1 2022: €71.4 million), due to an overall
reduction in the fair value of the derivatives financial assets and the
derecognition of brought forward deferred tax.
Adjusted EPS (in Euro cents)
H1 2023 H1 2022
Adjusted basic EPS from continuing operations 28.4 31.5
Adjusted diluted EPS from continuing operations 27.5 30.2
Basic EPS from profit attributable to the owners of the Company 1.0 36.8
Diluted EPS from profit attributable to the owners of the Company 1.0 35.4
Basic EPS from profit attributable to the owners of the Company from 1.0 23.8
continuing operations
Diluted EPS from profit attributable to the owners of the Company from 1.0 22.9
continuing operations
Basic EPS is calculated using the weighted average number of equity shares in
issue during H1 2023 of 302.3 million (H1 2022: 299.6 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 2023 of 311.3 million (H1
2022: 312.2 million).
Cash flow
Cash conversion
Playtech continues to be cash generative and delivered operating cash flows of
€228.1 million (H1 2022: €237.2 million) including cash from discontinued
operations which impacts only H1 2022.
H1 2023 H1 2022
€'m €'m
Adjusted EBITDA 219.9 232.9
Net cash provided by operating activities 228.1 237.2
Cash conversion 104% 102%
Change in jackpot balances 0.3 1.3
Change in client funds and security deposits 11.0 28.9
Professional fees 4.6 11.7
ADM security deposit (Italian Regulator) (11.2) (0.5)
Adjusted net cash provided by operating activities 232.8 278.6
Adjusted cash conversion 106% 120%
Excluding the impact of discontinued operations, operating cashflows increase
from €200.3 million in the prior period to €228.1 million in H1 2023.
H1 2023 H1 2022
€'m €'m
Adjusted EBITDA 219.9 199.1
Net cash provided by operating activities 228.1 200.3
Cash conversion 104% 101%
Change in jackpot balances 0.3 1.3
Change in client funds 11.0 4.1
Professional fees 4.6 11.7
ADM security deposit (Italian Regulator) (11.2) (0.5)
Adjusted net cash provided by operating activities 232.8 216.9
Adjusted cash conversion 106% 109%
Adjusted cash conversion of 106% (H1 2022: 109%) is shown after adjusting for
jackpot balances, client funds, professional fees and ADM security deposit.
Adjusting for the above cash fluctuations is essential in order to truly
reflect the quality of revenue and cash collection. This is because the timing
of cash inflows and outflows for jackpots, security deposits and client funds
only impact the reported operating cash flow and not Adjusted EBITDA, while
professional fees are excluded from Adjusted EBITDA but impact operating cash
flow.
Cash flow statement analysis
Net cash outflows used in investing activities totalled €189.1 million (H1
2022: €64.0 million) of which key items include:
· €79.8 million for the acquisition of a small minority interest
in Hard Rock Digital (refer to Note 16B);
· €41.3 million cash payment in relation to a subcontractor
option redemption (refer to Note 16C); and
· €57.3 million (H1 2022: €51.8 million) used in the
acquisition of property plant and equipment, intangibles and capitalised
development costs.
Net cash inflows from financing activities totalled €318.9 million (H1 2022:
outflow of €38.1 million) of which key movements include:
· Net RCF withdrawal of €48.0 million; and
· Net proceeds received on the new 2023 Bond issued of €297.3
million.
Balance sheet, liquidity and financing
H1 2023 2022
€'m €'m
Cash and cash equivalents 786.0 426.5
Cash held on behalf of clients, progressive jackpots and security deposits (142.8) (154.1)
Adjusted gross cash and cash equivalents 643.2 272.4
Loans and borrowings (RCF) 45.9 -
Bonds 845.5 547.6
Gross debt 891.4 547.6
Net debt 248.2 275.2
Last 12 months Adjusted EBITDA 416.2 395.4
Net debt/Adjusted EBITDA ratio 0.6 0.7
Cash
The Group continues to maintain a strong balance sheet with total cash and
cash equivalents of €786.0 million at 30 June 2023 (31 December 2022:
€426.5 million). Adjusted gross cash, which excludes the cash held on behalf
of clients, progressive jackpots and security deposits, increased to
€643.2 million as at 30 June 2023 (31 December 2022: €272.4 million), a
result of the new €300.0 million bond issue (see below) and the continued
strong performance of the Group throughout the period.
Financing and net debt
As at 30 June 2023 the Group had the following borrowing facilities:
· €200.0 million 2018 Bond (31 December 2022: €200.0 million),
initially issued as a five-year senior secured note of €530 million (3.75%
coupon), of which €330.0 million was repaid in H2 2022, with the rest due in
H2 2023 and repaid in July 2023;
· €350.0 million 2019 Bond (31 December 2022: €350.0 million)
(4.25% coupon, maturity 2026) which was raised in March 2019;
· €45.9 million withdrawn from its €277.0 million revolving
credit facility (31 December 2022: €Nil); This facility is available until
October 2025, with an option to extend by 12 months; and
· €300.0 million 2023 Bond issued in June 2023, as further
discussed below.
Playtech has taken a proactive approach to managing its balance sheet so far
this year. In June 2023, the Company acted quickly to take advantage of a
window of relative market calm and secure favourable interest rates. Playtech
issued €300.0 million of senior secured notes due 2028 at an interest rate
of 5.875% (2023 Bond). The 2023 Bond has been assigned a rating of BB by
S&P Global Ratings UK Limited and Ba2 by Moody's Investors Service Ltd
upon issue. In July 2023, part of the proceeds of the bond were used to redeem
all of the outstanding 2018 Bond of €200.0 million 3.75% due in H2 2023 and
to repay the outstanding debt under its existing revolving credit facility,
which remains available and undrawn today. The remaining amount, after payment
of transaction-related expenses, will be used for general corporate purposes.
As a result of timing between the Group receiving the proceeds of the 2023
Bond (June 2023) and settling outstanding debt (July 2023) total gross debt
increased to €891.4 million as at 30 June 2023 (31 December 2022: €547.6
million). Net debt, after deducting Adjusted gross cash, decreased to €248.2
million (31 December 2022: €275.2 million), while net debt/Adjusted EBITDA
(last 12 months) decreased slightly to 0.6x (31 December 2022: 0.7x).
Contingent consideration
Contingent consideration increased to €4.5 million (31 December 2022: €2.9
million) mostly due to the fair value movement in the contingent consideration
related to Aus GMTC PTY Ltd acquisition. The existing liability as at 30 June
2023 comprised the following:
Acquisition Maximum payable earnout Contingent consideration as at 30 June 2023 Payment date (based on
(per terms of acquisition) maximum payable earnout)
Aus GMTC PTY Ltd €45.9 million €3.4 million Q4 2025
Other €1.1 million €1.1 million Various
Going concern
In adopting the going concern basis in the preparation of the financial
statements, the Group has considered the current trading performance,
financial position and liquidity of the Group, the principal risks and
uncertainties together with scenario planning and reverse stress tests
completed for a period of no less than 12 months from the approval of these
interim financial statements.
At 30 June 2023, the Group held total cash of €786.0 million (31 December
2022: €426.5 million) and Adjusted gross cash, which excludes the cash held
on behalf of clients, progressive jackpots and security deposits, of €643.2
million (31 December 2022: €272.4 million). Net debt, which is debt after
deducting Adjusted gross cash, decreased to €248.2 million (31 December
2022: €275.2 million).
The financing and net debt position has been reported and analysed in the
relevant section above. As at the date of this report (7 September 2023) the
Group's facilities include the 2019 Bond of €350.0 million and the 2023 Bond
of €300.0 million, which are both long term borrowings due in 2026 and 2028
respectively, as well as the fully undrawn RCF of €277.0 million.
As disclosed in Note 2 of the interim financial statements, management
concluded that the risk of a covenant breach over the next 12-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 throughout relate to certain non-cash and one-off
items, as well as material reorganisation and acquisition related costs. The
Board of Directors believes that the adjusted results represent more closely
the consistent trading performance of the business. A full reconciliation
between the actual and adjusted results is provided in Note 10 of the
financial statements.
2 Core B2B refers to the Company's B2B business excluding
unregulated Asia.
3 Totals in tables throughout this statement may not exactly equal the
components of the total due to rounding.
4 Comparative information throughout has been re-stated due to change
in accounting policy. Further details are provided in Note 4B of the financial
statements.
Chris McGinnis
Chief Financial Officer
6 September 2023
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 2023 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 2023 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 2023 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
06 September 2023
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
Unaudited consolidated statement of comprehensive income
Note Six months ended 30 June 2023 Six months ended 30 June 2022
Actual Adjusted Actual Adjusted
€'m €'m 1 €'m 2 €'m 1,2
Continuing operations
Revenue 9 859.6 859.6 792.3 792.3
Distribution costs before depreciation and amortisation (576.8) (574.8) (536.4) (523.7)
Administrative expenses before depreciation and amortisation (72.3) (63.0) (65.5) (53.0)
Impairment of financial assets (3.2) (1.9) (16.5) (16.5)
EBITDA 10 207.3 219.9 173.9 199.1
Depreciation and amortisation (89.7) (69.1) (80.5) (58.6)
Impairment of intangible assets 11 - - (20.6) -
Profit on disposal of property, plant and equipment 1.7 1.7 - -
Finance income 12A 6.0 6.0 11.7 11.7
Finance costs 12B (20.2) (18.9) (26.9) (26.8)
Share of loss from associates 16A (0.3) (0.3) (3.1) (3.1)
Unrealised fair value changes of equity investments 16B 0.3 - 0.7 -
Unrealised fair value changes of derivative financial assets 16C (25.5) - 48.5 -
Profit before taxation 79.6 139.3 103.7 122.3
Income tax expense 10,13 (76.5) (53.6) (32.3) (28.0)
Profit from continuing operations 3.1 85.7 71.4 94.3
Discontinued operation
Profit from discontinued operation, net of tax 8 - - 38.9 41.2
Profit for the period - total 3.1 85.7 110.3 135.5
Other comprehensive income:
Items that are or may be classified subsequently to profit or loss:
Exchange (loss)/gain arising on translation of foreign operations (5.0) (5.0) 3.8 3.8
Items that will not be classified to profit or loss:
Gain on remeasurement of employee termination indemnities - - 0.7 0.7
Other comprehensive (loss)/income for the period (5.0) (5.0) 4.5 4.5
Total comprehensive (loss)/income for the period (1.9) 80.7 114.8 140.0
Profit for the period attributable to the owners of the Company 3.1 85.7 110.3 135.5
Total comprehensive (loss)/income attributable to the owners of the Company (1.9) 80.7 114.8 140.0
Earnings per share attributable to the ordinary equity holders of the Company
Profit or loss - total
Basic (cents) 14 1.0 28.4 36.8 45.2
Diluted (cents) 14 1.0 27.5 35.4 43.4
Profit or loss from continuing operations
Basic (cents) 14 1.0 28.4 23.8 31.5
Diluted (cents) 14 1.0 27.5 22.9 30.2
1 Adjusted numbers relate to certain non-cash and one-off items, as
well as certain reorganisation and acquisition-related costs. The Board of
Directors believe that the adjusted results more closely represent the
consistent trading performance of the business. A full reconciliation between
the actual and adjusted results is provided in Note 10.
2 Comparative information has been re-stated due to change in
accounting policy. Further details are provided in Note 4B.
Unaudited consolidated statement of changes in equity
Additional Employee Retained Employee Put/call Foreign Total Non- Total
paid in termination earnings Benefit options exchange attributable to equity holders of controlling equity
capital indemnities €'m Trust reserve reserve Company interests €'m
€'m €'m €'m €'m €'m €'m €'m
Balance at 1 January 2023 606.0 0.4 1,113.0 (17.2) - 0.3 1,702.5 - 1,702.5
Total comprehensive income for the period
Profit for the period - - 3.1 - - - 3.1 - 3.1
Other comprehensive loss for the period - - - - - (5.0) (5.0) - (5.0)
Total comprehensive income/(loss) for the period - - 3.1 - - (5.0) (1.9) - (1.9)
Transactions with the owners of the Company
Contributions and distributions
Exercise of options - - (9.4) 9.4 - - - - -
Equity settled share-based payment charge - - 2.9 - - - 2.9 - 2.9
Transfer from treasury shares to Employee Benefit Trust 5.8 - 6.7 (12.5) - - - - -
Total contributions and distributions 5.8 - 0.2 (3.1) - - 2.9 - 2.9
Total transactions with owners of the Company 5.8 - 0.2 (3.1) - - 2.9 - 2.9
Balance at 30 June 2023 611.8 0.4 1,116.3 (20.3) - (4.7) 1,703.5 - 1,703.5
Balance at 1 January 2022 606.0 (0.5) 1,025.0 (23.2) (3.7) (22.7) 1,580.9 0.3 1,581.2
Adjustment on initial recognition of IAS 12 (Note 4A) - - 1.5 - - - 1.5 - 1.5
Adjusted balance at 1 January 2022 606.0 (0.5) 1,026.5 (23.2) (3.7) (22.7) 1,582.4 0.3 1,582.7
Total comprehensive income for the 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 - - - - -
Equity settled share-based payment charge - - 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 1,139.4 (20.9) (3.7) (18.9) 1,702.1 0.3 1,702.4
Unaudited consolidated balance sheet
At 30 June At 31 December 2022
Note 2023 €'m 1
€'m
ASSETS
Property, plant and equipment 335.3 341.4
Right of use assets 68.4 71.6
Intangible assets 15 965.7 980.9
Investments in associates 16A 43.8 36.6
Other investments 16B 86.4 9.2
Derivative financial assets 16C 650.3 636.4
Trade receivables 0.7 1.1
Deferred tax asset 23 83.0 114.0
Other non-current assets 122.5 109.6
Non-current assets 2,356.1 2,300.8
Trade receivables 149.5 163.9
Other receivables 90.8 107.6
Inventories 6.3 5.5
Cash and cash equivalents 786.0 426.5
1,032.6 703.5
Assets classified as held for sale 17 19.4 19.6
Current assets 1,052.0 723.1
TOTAL ASSETS 3,408.1 3,023.9
EQUITY
Additional paid in capital 611.8 606.0
Employee termination indemnities 0.4 0.4
Employee Benefit Trust (20.3) (17.2)
Foreign exchange reserve (4.7) 0.3
Retained earnings 1,116.3 1,113.0
Equity attributable to equity holders of the Company 18 1,703.5 1,702.5
Non-controlling interests - -
TOTAL EQUITY 1,703.5 1,702.5
LIABILITIES
Loans and borrowings 19 45.9 -
Bonds 20 645.6 348.0
Lease liability 45.4 54.0
Deferred revenue 0.8 1.0
Deferred tax liability 23 146.2 124.8
Contingent consideration 22 3.8 2.3
Provisions for risks and charges 21 9.0 10.0
Other non-current liabilities 26.4 24.9
Non-current liabilities 923.1 565.0
Bonds 20 199.9 199.6
Trade payables 58.1 61.2
Lease liability 38.2 31.8
Progressive operators' jackpots and security deposits 114.0 114.3
Client funds 28.8 39.8
Income tax payable 26.5 17.3
Gaming and other taxes payable 125.4 112.8
Deferred revenue 4.5 5.0
Contingent consideration 22 0.7 0.6
Provisions for risks and charges 21 6.2 3.9
Other payables 178.2 169.1
780.5 755.4
Liabilities directly associated with assets classified as held for sale 17 1.0 1.0
Current liabilities 781.5 756.4
TOTAL LIABILITIES 1,704.6 1,321.4
TOTAL EQUITY AND LIABILITIES 3,408.1 3,023.9
The condensed consolidated interim financial statements were approved by the
Board and authorised for issue on 6 September 2023.
Mor Weizer Chris McGinnis
Chief Executive Officer Chief Financial Officer
1 Comparative information has been re-stated due to change in
accounting policy. Further details are provided in Note 4B.
Unaudited consolidated statement of cash flows
Note Six months ended 30 June 2023 Six
€'m months ended 30 June 2022
€'m
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the period 3.1 110.3
Adjustment to reconcile net income to net cash provided by operating 240.8 132.5
activities (see below)
Net taxes paid (15.8) (5.6)
Net cash from operating activities 228.1 237.2
CASH FLOWS FROM INVESTING ACTIVITIES
Loans granted (9.1) (12.5)
Acquisition of subsidiaries, net of cash acquired (3.9) -
Acquisition of property, plant and equipment (17.8) (17.6)
Acquisition of intangible assets (11.1) (2.7)
Capitalised development costs (28.4) (31.5)
Subcontractor option redemption 16C (41.3) -
Acquisition of investments at fair value through profit or loss 16B (79.8) -
Proceeds from the sale of property, plant and equipment 2.3 0.3
Net cash used in investing activities (189.1) (64.0)
CASH FLOWS FROM FINANCING ACTIVITIES
Interest paid on bonds and loans and borrowings (12.4) (19.5)
Proceeds from loans and borrowings 48.0 -
Proceeds from the issuance of 2023 Bond 20 297.3 -
Payment of contingent consideration (0.1) (4.0)
Principal paid on lease liability (11.4) (11.7)
Interest paid on lease liability (2.5) (2.9)
Net cash from/(used in) financing activities 318.9 (38.1)
INCREASE IN CASH AND CASH EQUIVALENTS 357.9 135.1
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 426.5 941.5
Exchange gain/(loss) on cash and cash equivalents 1.6 (3.3)
CASH AND CASH EQUIVALENTS AT END OF PERIOD 786.0 1,073.3
Cash and cash equivalents consist of:
Cash and cash equivalents - continuing operations 786.0 681.2
Cash and cash equivalents treated as held for sale - 392.1
786.0 1,073.3
Note Six months ended 30 June 2023 Six months ended 30 June 2022
€'m €'m
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED FROM OPERATING
ACTIVITIES
Income and expenses not affecting operating cash flows:
Depreciation of property, plant and equipment 22.1 20.6
Amortisation of intangible assets 15 57.5 50.9
Amortisation of right of use assets 11.4 10.5
Capitalisation of amortisation of right of use assets (0.8) (1.0)
Gain on early termination of lease contracts (0.3) (0.5)
Impairment of intangible assets 11 - 20.6
Impairment of loan receivable 1.5 -
Impairment of investment 1.3 -
Share of loss from associates 16A 0.3 3.1
Changes in fair value of equity investments 16B (0.3) (0.7)
Changes in fair value of derivative financial assets 16C 25.5 (48.5)
Interest on bonds and loans and borrowings 13.0 20.3
Interest on lease liability 2.5 2.9
Interest income on loans receivable (0.8) (0.6)
Income tax expense 76.5 36.0
Equity settled share-based payment charge 2.9 4.9
Movement in contingent consideration and redemption liability 1.3 (1.7)
Expected credit loss on trade receivables 0.4 -
Unrealised exchange gain (2.9) (5.7)
(Profit)/loss on disposal of property, plant and equipment (1.7) 0.3
Changes in operating assets and liabilities:
Change in trade receivables 12.9 22.2
Change in other receivables 7.2 19.5
Change in inventories (0.8) 0.9
Change in trade payables (4.6) (5.4)
Change in progressive operators, jackpots and security deposits (0.3) (1.3)
Change in client funds (11.0) (28.9)
Change in other payables 27.4 16.4
Change in provisions for risks and charges 1.2 (0.4)
Change in deferred revenues (0.6) (1.9)
240.8 132.5
Notes to the financial statements
Note 1 - General
Playtech plc (the "Company") is an Isle of Man company. The registered office
is located at St George's Court, Upper Church Street, Douglas, Isle of Man IM1
1EE.
These are the condensed consolidated interim financial statements ("interim
financial statements") for the six months ended 30 June 2023 comprising the
Company and its subsidiaries (together referred to as the "Group").
Note 2 - Basis of preparation
These interim financial statements for the six months ended 30 June 2023 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 2022 ("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 6 September 2023.
Going concern basis
In adopting the going concern basis in the preparation of the interim
financial statements, the Directors have considered the current trading
performance, financial position and liquidity of the Group, the principal and
emerging risks and uncertainties together with scenario planning and reverse
stress tests. The Directors have assessed going concern over a 12-month period
to 30 September 2024.
30 June 31 December
2023 2022
€'m €'m
Cash and cash equivalents 786.0 426.5
Cash held on behalf of clients, progressive jackpots and security deposits (142.8) (154.1)
Adjusted gross cash and cash equivalents 643.2 272.4
Loans and borrowings (RCF) 45.9 -
Bonds 845.5 547.6
Gross debt 891.4 547.6
Net debt 248.2 275.2
The increase in adjusted gross cash and cash equivalents from €272.4 million
at 31 December 2022 to €643.2 million at 30 June 2023 is mainly the result
of the new €300.0 million bond issue and continued strong performance of the
Group throughout the period.
The Directors have 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 cash flow should the share buyback
scheme and other shareholder return options resume.
In June 2023, the Company announced that it successfully issued new €300.0
million senior secured notes at a rate of 5.875% repayable in June 2028 (the
"2023 Bond"). The 2023 Bond has been assigned a rating of BB by S&P Global
Ratings UK Limited and Ba2 by Moody's investors Services Ltd upon issue.
Playtech has served notice and subsequently redeemed at par the outstanding
2018 Bond with a €200.0 million balance in July 2023.
Other than the newly raised €300.0 million 2023 Bond, the Group's principal
financing arrangements also include an RCF up to €277.0 million, out of
which €45.9 has been drawn as at 30 June 2023, the balance of the 2018 Bond
amounting to €200.0 million, which has been repaid post period end as per
the above, and the 2019 Bond amounting to €350.0 million, which is repayable
in March 2026. The RCF was restructured in October 2022, reducing the credit
line from €317.0 million to €277.0 million and is available until October
2025, with the Group having the option to extend by 12 months. The RCF amount
of €45.9 million outstanding at 30 June 2023 was also repaid in July 2023.
The RCF is subject to certain financial covenants which are tested every six
months on a rolling 12-month basis, as set out in Note 19. As at 30 June 2023,
the Group comfortably met its covenants which were as follows:
• Leverage: Net Debt/Adjusted EBITDA to be less than 3.5:1 for the
12 months ended 30 June 2023 (12 months ended 31 December 2022: less than
3.5:1).
• Interest cover: Adjusted EBITDA/Interest to be over 4:1 for the 12
months ended 30 June 2023 (12 months ended 31 December 2022: over 4:1).
The 2018, 2019 and 2023 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 financial statements (the
"relevant going concern period").
Stress test
The stress test assumes a worst-case scenario for the entire Group which
includes additional sensitivities around Italy, the Americas and Asia, but
with mitigations similar to the ones taken in 2020 and 2021 (including salary
and capital expenditure reductions). It also considers the impact of cash flow
should the share buyback scheme commence again, as well as other shareholder
return options. Under this scenario Adjusted EBITDA could fall on average by
13% per month compared to the base case over the relevant going concern
period, and the Group would not breach its covenants.
Reverse stress test
The reverse stress test was used to identify the reduction in Adjusted EBITDA
required that could result in either a liquidity event or breach of the RCF
and bond covenants.
As a result of completing this assessment, without considering further
mitigating actions, management considered the likelihood of the reverse stress
test scenario arising to be remote. In reaching this conclusion management
considered the following:
• current trading is performing in line with the base case;
• Adjusted EBITDA would have to fall by 84% in the year ending 31
December 2023 and 85% in the 12 months to September 2024 compared to the base
case, to cause a breach of covenants; and
• in the event that revenues decline to this point to drive the
decrease in Adjusted EBITDA, additional mitigating actions are available to
management which have not been factored into the reverse stress test scenario.
As such, the Directors have a reasonable expectation that the Group will have
adequate financial resources to continue in operational existence over the
relevant going concern period and have therefore considered it appropriate to
adopt the going concern basis of preparation in these interim financial
statements.
Note 3 - Functional and presentation currency
These consolidated financial statements are presented in Euro, which is the
Company's functional currency. The main functional currencies for subsidiaries
are Euro, United States Dollar, Great British Pound and Ukraine Hryvnia. All
amounts have been rounded to the nearest million, unless otherwise indicated.
Note 4 - Change in accounting policy
Except as described below, the accounting policies applied in these interim
financial statements are the same as those applied in the Group's consolidated
financial statements for the year ended 31 December 2022.
A. Deferred tax related to assets and liabilities arising from a single
transaction
The Group has adopted Deferred Tax related to assets and liabilities arising
from a Single Transaction - Amendments to IAS 12 effective from 1 January
2023. The amendments narrow the scope of the initial recognition exemption to
exclude transactions that give rise to equal and offsetting temporary
differences e.g., leases and decommissioning liabilities. For leases and
decommissioning liabilities, an entity is required to recognise the associated
deferred tax assets and liabilities from the beginning of the earliest
comparative period presented, with any cumulative effect recognised as an
adjustment to retained earnings or other components of equity at that date.
Following the change to the initial recognition exemption, the Group has
recognised a separate deferred tax asset in relation to its lease liabilities
and a deferred tax liability in relation to its right-of-use assets.
The table below presents the cumulative effects of the items affected by the
initial application on the consolidated balance sheet as at 1 January 2022 and
31 December 2022:
€'m
Assets
Deferred tax asset 1.5
Equity
Retained earnings 1.5
B. Reclassification of bank charges in the profit or loss
Effective 1 January 2023, the Group changed its accounting policy to recognise
certain costs within distribution costs, previously recognised within finance
costs. Management believes that the classification as distribution costs is
more in line with the nature of the cost, being banking charges relating to
players' transaction processing within the B2C business segment.
Below is a summary of the impact of the change in accounting policy for the
previous period:
Six months ended 30 June 2022 As previously reported Adjustments As restated
€'m €'m €'m
Distribution costs before depreciation and amortisation (531.7) (4.7) (536.4)
Finance costs (31.6) 4.7 (26.9)
Note 5 - Accounting standards issued but not yet effective
A number of new accounting standards and amendments to accounting standards
are effective for annual periods beginning after 1 January 2023 and earlier
application is permitted. The Group has not early adopted any of the
forthcoming new or amended accounting standards in preparing these condensed
consolidated interim financial statements.
Note 6 - Significant accounting judgements, estimates and assumptions
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.
Estimates and assumptions
Impairment of non-financial assets
The Group is required to test annually and when an impairment indicator
arises, whether goodwill and indefinite life assets have suffered any
impairment. 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. CGUs with an indication of impairment as
at 30 June 2023 are disclosed and further explained in Note 15, including a
sensitivity analysis.
Income taxes
The Group is subject to income tax in several jurisdictions and significant
judgement is required in determining the provision for income taxes. During
the ordinary course of business, there are transactions and calculations for
which the ultimate tax determination is uncertain. As a result, the Group
recognises tax liabilities based on estimates of whether additional taxes and
interest will be due. These tax liabilities are recognised when, despite the
Group's belief that its tax return positions are supportable, the Group
believes it is more likely than not that a taxation authority would not accept
its filing position. In these cases, the Group records its tax balances based
on either the most likely amount or the expected value, which weights multiple
potential scenarios. The Group believes that its accruals for tax liabilities
are adequate for all open audit years based on its assessment of many factors
including past experience and interpretations of tax law. This assessment
relies on estimates and assumptions and may involve a series of complex
judgements about future events. To the extent that the final tax outcome of
these matters is different than the amounts recorded, such differences will
impact income tax expense in the period in which such determination is made.
Where management conclude that it is not probable that the taxation authority
will accept an uncertain tax treatment, they calculate the effect of
uncertainty in determining the related taxable profit (tax loss), tax bases,
unused tax losses, unused tax, credits or tax rates. The effect of uncertainty
for each uncertain tax treatment is reflected by using the expected value -
the sum of the probabilities and the weighted amounts in a range of possible
outcomes. More details are included in Note 13.
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 assets are
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 assets are
only able to be recognised to the extent that utilisation is considered
probable. It is possible that a change in profit forecasts or risk factors
could result in a material change to the income tax expense and deferred tax
asset in future periods.
Deferred tax asset in the UK
As a result of the Group's internal restructuring in January 2021, the Group
is entitled to UK tax deductions in respect of certain goodwill and intangible
assets. A deferred tax asset was recognised as the tax base of the goodwill
and intangible assets is in excess of the book value base of those assets. At
the beginning of the period, the recognised deferred tax asset amounted to
€56.8 million. As at 30 June 2023, an additional deferred tax asset of
€2.6 million was recognised. This additional deferred tax asset has been
recognised as the Group's management has concluded that it is probable the UK
entities will generate taxable profits in the future against which the Group
can utilise the tax deductions for goodwill and intangible assets. During the
period, €7.4 million has been utilised and the recognised deferred tax asset
as at 30 June 2023 amounts to €52.0 million. In addition, a total of
€34.4 million of deferred tax asset has not been recognised in respect of
the benefit of future tax deductions related to the goodwill and intangible
assets which will arise more than five years after the balance sheet date.
Deferred tax asset is reviewed at each reporting date. In considering their
recoverability, the Group assesses the likelihood of their being recovered
within a reasonably foreseeable timeframe, which is broadly in line with our
viability assessment and the cash flow forecasts period used in our CGU
impairment assessment. The Group updated its forecasts, following changes in
assumptions made to the forecasts during the period to 30 June 2023, due to
certain changes in the current period to the expected profit profile within
its UK business unit that carries significant losses. This forms a change in
accounting estimate and resulted in a reversal of €23.4 million in the
current period of previously recognised deferred tax assets in respect of UK
tax losses and tax attributes relating to excess interest expense brought
forward.
A deferred tax asset of €41.1 million has been recognised in respect of UK
tax losses of €164.4 million (2022: €41.1 million) carried forward at 30
June 2023. Based on the current forecasts, these losses will be fully utilised
over the forecast period. Remaining UK tax losses and excess interest expense
of €162.6 million (2022: Nil) have not been recognised as at 30 June 2023 as
expected utilization would fall outside the forecasting period and therefore
there is not sufficient certainty they will be recovered.
Any future changes in the tax law or the structure of the Group could have a
significant effect on the use of the tax deductions, including the period over
which the deductions can be utilised.
Deferred tax assets in Italy
The Group has recognised a deferred tax asset of €18.0 million in respect of
tax losses and excess interest expense 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 five
years.
The Group reviewed the latest forecasts for the Italian companies for the next
five years, including their ability to continue to generate income beyond the
forecast period under the tax laws substantively enacted at the reporting
date. Based on this, the Group management concludes that it is probable that
the Italian Group companies will continue to generate taxable income in the
future against which the losses can be utilised. Any future changes in the tax
law or the structure of the Group could have a significant effect on the use
of the tax deductions, including the period over which the deductions can be
utilised.
Impairment of financial assets
The Group undertook a review of trade receivables and other financial assets,
as applicable, and their expected credit losses (ECLs). The review considered
the macroeconomic outlook, customer credit quality, exposure at default, and
effect of payment deferral options as at the reporting date. The ECL
methodology and definition of default remained consistent with prior periods.
The model inputs, including forward-looking information, scenarios and
associated weightings, together with the determination of the staging of
exposures, were revised. The Group's financial assets consist of trade and
loans receivables and cash and cash equivalents. ECL on cash balances was
considered and calculated by reference to Moody's credit rating for each
financial institution, while ECL on trade and loans receivables was based on
past default experience and an assessment of the future economic environment.
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. No additional provision was made in the period
ended 30 June 2023 (H1 2022: €15.4 million).
Measurement of fair values of equity investments and equity call options
The Group's equity investments and, where applicable 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 16, the Group has:
• investments in listed securities where the fair values of these
equity shares are determined by reference to published price quotations in an
active market;
• equity investments in entities that are not listed, accounted at
fair value through profit or loss under IFRS 9; and
• derivative financial assets (call options in instruments
containing potential voting rights and warrants in entities that are not
listed), which are accounted at fair value through profit or loss under IFRS
9.
The fair value of the equity investments that are not listed and of the
derivative financial assets, rely on non-observable inputs that require a
higher level of management judgement to calculate a fair value than those
based wholly on observable inputs. Valuation techniques are used to calculate
fair values include comparisons with similar financial instruments for which
market observable prices exist, discounted cash flow analysis and other
valuation techniques commonly used by market participants. Upon the use of DCF
method, the Group assumes that the expected cash flows are based on the
EBITDA.
The Group only uses models with unobservable inputs for the valuation of
certain unquoted equity investments. In these cases, estimates are made to
reflect uncertainties in fair values resulting from a lack of market data
inputs, for example, as a result of illiquidity in the market. Inputs into
valuations based on unobservable data are inherently uncertain because there
is little or no current market data available from which to determine the
level at which an arm's length transaction would occur under normal business
conditions. Unobservable inputs are determined based on the best information
available. Further details on the fair value of assets are disclosed in Note
16, which includes a significant judgement relating to the public announcement
made by the Group on 6 February 2023 where Playtech plc is seeking a
declaration from the English Courts to obtain clarification on a point of
disagreement between the Group and Caliplay.
The following table shows the carrying amount and fair value of non-current
assets, as disclosed in Note 16, including their levels in the fair value
hierarchy.
Carrying amount Fair value
30 June 2023 Level 1 Level 2 Level 3
€'m €'m €'m €'m
Non-current assets
Other investments (Note 16B) 86.4 1.6 - 84.8
Derivative financial assets (Note 16C) 650.3 - - 650.3
736.7 1.6 - 735.1
Carrying amount Fair value
31 December 2022 Level 1 Level 2 Level 3
€'m €'m €'m €'m
Non-current assets
Other investments (Note 16B) 9.2 1.4 - 7.8
Derivative financial assets (Note 16C) 636.4 - - 636.4
645.6 1.4 - 644.2
Note 7 - Segment information
The Group's reportable segments are strategic business units that offer
different products and services.
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision maker. The chief operating
decision maker has been identified as the management team including the Chief
Executive Officer and the Chief Financial Officer.
The operating segments identified are:
• B2B: including Casino, Services, Sport, Bingo, Poker and Other;
• B2C: including Snaitech, HAPPYBET and Sun Bingo and Other B2C; and
• Financial: including B2C and B2B CFD (discontinued operations).
The Group-wide profit measures are Adjusted EBITDA and Adjusted Profit (see
Note 10).
Six months ended B2B Snaitech Sun Bingo and Other B2C HAPPYBET Intercompany Total B2C Intercompany Total
30 June 2023
€'m €'m €'m €'m B2C €'m €'m €'m
€'m
Revenue 334.5 488.4 34.1 10.3 (0.7) 532.1 (7.0) 859.6
Adjusted EBITDA 81.3 141.9 2.8 (6.1) - 138.6 - 219.9
Total assets 2,266.4 1,044.2 97.7 8.7 - 1,150.6 - 3,417.0
Total liabilities 1,064.5 625.7 16.2 7.1 - 649.0 - 1,713.5
Six months ended B2B Snaitech Sun Bingo and Other B2C HAPPYBET Intercompany Total B2C Intercompany Total Financial - Total
30 June 2022
€'m €'m €'m €'m B2C €'m €'m Gaming - discontinued €'m
€'m continuing operations
operations €'m
€'m
Revenue 312.0 446.0 31.7 10.7 (1.1) 487.3 (7.0) 792.3 74.5 866.8
Adjusted EBITDA 77.2 127.0 0.1 (5.2) - 121.9 - 199.1 33.8 232.9
Total assets 2,011.7 1,144.5 91.2 9.4 - 1,245.1 - 3,256.8 523.9 3,780.7
Total liabilities 841.2 880.5 12.8 5.8 - 899.1 - 1,740.3 339.5 2,079.8
Note 8 - Discontinued operation
The results of the discontinued operations for the period are presented below:
Six months ended 30 June 2023 Six months ended 30 June 2022
Actual Adjusted Actual Adjusted
€'m €'m €'m €'m
Revenue - - 74.5 74.5
Distribution costs before depreciation and amortisation - - (34.9) (34.8)
Administrative expenses before depreciation and amortisation - - (6.2) (4.0)
Impairment of financial assets - - (1.9) (1.9)
EBITDA - - 31.5 33.8
Finance income - - 11.6 11.6
Finance costs - - (0.5) (0.5)
Profit before taxation - - 42.6 44.9
Tax expense - - (3.7) (3.7)
Profit from discontinued operations, net of tax - - 38.9 41.2
All of the profit from discontinued operations, net of tax in the period ended
30 June 2022 relates to the Financial segment, which was disposed in July
2022, for a cash consideration of $228.1 million (€223.9 million).
The following tables provide a full reconciliation between adjusted and actual
results from discontinued operations:
Six months ended 30 June 2022 Revenue EBITDA Profit from
€'m €'m discontinued
operations
attributable to
the owners of
the Company
€'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
Earnings per share from discontinued operations
Six months ended 30 June 2023 Six months ended 30 June 2022
Actual Adjusted Actual Adjusted
Basic (cents) - - 13.0 13.7
Diluted (cents) - - 12.5 13.2
The net cash flows incurred by the Financial segment in the prior period are
as follows:
Six months ended 30 June 2023 Six months
€'m ended 30 June 2022
€'m
Operating - 36.9
Investing - (3.8)
Financing - (1.1)
Net cash inflow - 32.0
Note 9 - Revenue from contracts with customers
The Group has disaggregated revenue into various categories in the following
table which is intended to:
• depict how the nature, amount, timing and uncertainty of revenue
and cash flows are affected by recognition date; and
• enable users to understand the relationship with revenue 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, timing of
transfer of performance obligations and regulated vs unregulated by
geographical major markets
The revenues from B2B (consisting of licensee fee, fixed-fee income, revenue
received from the sale of hardware, cost-based revenue and additional B2B
services fee), B2C and Financials are described in Note 5D in the last annual
financial statements.
Six months ended 30 June 2023
Primary geographic markets B2B B2C Intercompany Total
€'m €'m €'m €'m
Italy 17.5 487.7 (5.3) 499.9
UK 63.3 34.1 (1.7) 95.6
Mexico 89.3 - - 89.3
Malta 24.7 - - 24.7
Philippines 21.3 - - 21.3
Spain 15.9 - - 15.9
Poland 14.9 - - 14.9
Curacao 14.1 - - 14.1
Gibraltar 11.2 - - 11.2
Greece 10.7 - - 10.7
Netherlands 8.9 - - 8.9
Germany 0.3 8.3 - 8.6
Colombia 4.2 - - 4.2
Romania 3.2 - - 3.2
Ireland 3.1 - - 3.1
Rest of World 31.9 2.0 - 34.0
334.5 532.1 (7.0) 859.6
Product type B2B B2C Intercompany Total
€'m €'m €'m €'m
B2B licensee fee 235.9 - - 235.9
B2B fixed-fee income 6.7 - - 6.7
B2B cost-based revenue 28.1 - - 28.1
B2B revenue received from the sale of hardware 6.5 - - 6.5
Additional B2B services fee 57.3 - - 57.3
Total B2B (1) 334.5 - - 334.5
Snaitech - 488.4 - 488.4
Sun Bingo and Other B2C - 34.1 - 34.1
HAPPYBET - 10.3 - 10.3
Intercompany - (0.7) - (0.7)
Total B2C - 532.1 - 532.1
Intercompany - - (7.0) (7.0)
334.5 532.1 (7.0) 859.6
Timing of transfer of performance obligations B2B B2C Intercompany Total
€'m €'m 2 €'m €'m
Recognised over time 328.0 13.5 (7.0) 334.5
Recognised at the point in time 6.5 518.6 - 525.1
334.5 532.1 (7.0) 859.6
1 SaaS revenue of €22.9 million (H1 2022: €14.1 million) is
included in revenue earned under B2B licensee fee, B2B fixed-fee income and
B2B cost-based revenue categories above and below.
2 B2C revenue recognised at the point in time is recorded under IFRS
9.
Six months ended 30 June 2023
€'m
Regulated - Americas 99.7
Regulated - Europe (excluding UK) 96.6
Regulated - UK 62.9
Regulated - Rest of World 3.3
Total regulated B2B revenue 262.5
Unregulated excluding Asia 42.6
Total core B2B revenue 305.1
Asia 29.4
Total B2B Gambling revenue 334.5
Six months ended 30 June 2022
Primary geographic markets B2B B2C Intercompany Total Gaming Financial Total
€'m €'m €'m - continuing - discontinued €'m
operations operations
€'m €'m
Italy 16.6 444.9 (4.8) 456.7 1.3 458.0
UK 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
Rest of World 38.0 1.5 - 39.5 18.6 58.1
312.0 487.3 (7.0) 792.3 74.5 866.8
Product type B2B B2C Intercompany Total Gaming Financial Total
€'m €'m €'m - continuing - discontinued €'m
operations operations
€'m €'m
B2B licensee fee 220.1 - - 220.1 - 220.1
B2B fixed-fee income 22.2 - - 22.2 - 22.2
B2B cost-based revenue 28.5 - - 28.5 - 28.5
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 - - 312.0 - 312.0
Snaitech - 446.0 - 446.0 - 446.0
Sun Bingo and Other B2C - 31.7 - 31.7 - 31.7
HAPPYBET - 10.7 - 10.7 - 10.7
Intercompany - (1.1) - (1.1) - (1.1)
Total B2C - 487.3 - 487.3 - 487.3
Intercompany - - (7.0) (7.0) - (7.0)
Financial - - - - 74.5 74.5
312.0 487.3 (7.0) 792.3 74.5 866.8
Timing of transfer of performance obligations B2B B2C Intercompany Total Gaming Financial Total
€'m €'m 1 €'m - continuing - discontinued €'m
operations operations
€'m €'m
Recognised over time 305.2 14.7 (7.0) 312.9 74.5 387.4
Recognised at the point in time 6.8 472.6 - 479.4 - 479.4
312.0 487.3 (7.0) 792.3 74.5 866.8
1 B2C revenue recognised at the point in time is recorded under IFRS
9.
Six months ended 30 June 2022
€'m
Regulated - Americas 69.8
Regulated - Europe (excluding UK) 92.2
Regulated - UK 63.9
Regulated - Rest of 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
There were no changes in the Group's revenue measurement policies and
procedures in 2022 and 2023. 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 certain
fixed fees paid by the licensee in the beginning of the contract. Deferred
revenue as at 30 June 2023 was €5.3 million (31 December 2022: €6.0
million).
Note 10 - Adjusted items
Management regularly uses adjusted financial measures internally to
understand, manage and evaluate the business and make operating decisions.
These adjusted measures are among the primary factors management uses in
planning for and forecasting future periods. The primary adjusted financial
measures are Adjusted EBITDA and Adjusted Profit, which management considers
are relevant in understanding the Group's financial performance.
As these are not a defined performance measure under IFRS, the Group's
definition of adjusted items may not be comparable with similarly titled
performance measures or disclosures by other entities.
The following tables provide a full reconciliation between adjusted and actual
results from continuing operations:
Six months ended 30 June 2023 Revenue EBITDA - EBITDA - EBITDA Profit Profit
€'m B2B B2C €'m from before
€'m €'m continuing tax from
operations continuing
attributable operations
to the €'m
owners
of the
Company
€'m
Reported as actual 859.6 69.0 138.3 207.3 3.1 79.6
Employee stock option expenses1 - 2.6 0.3 2.9 2.9 2.9
Professional fees2 - 4.6 - 4.6 4.6 4.6
Impairment of investment and receivables3 - 5.1 - 5.1 5.1 5.1
Fair value change and finance cost on contingent consideration4 - - - - 1.3 1.3
Fair value change of equity instruments5 - - - - (0.3) (0.3)
Fair value change of derivative financial assets5 - - - - 25.5 25.5
Amortisation of intangibles arising on acquisitions6 - - - - 20.6 20.6
Deferred tax on acquisitions6 - - - - (4.0) -
Deferred tax reversal7 - - - - 23.4 -
Tax related to uncertain provision8 - - - - 3.5 -
Adjusted measure 859.6 81.3 138.6 219.9 85.7 139.3
1 Employee stock option expenses relate to non-cash expenses of the
Group and differ from year to year based on share price and the number of
options granted.
2 The majority of the professional fees relate to the acquisition of
Hard Rock Digital (Note 16B). These expenses are not considered ongoing costs
of operations and therefore are excluded.
3 Provision against other receivables and investments that do not
relate to the ordinary operations of the Group.
4 Fair value change and finance costs on contingent consideration
related to the acquisition of Aus GMTC. These expenses are not considered
ongoing costs of operations and therefore are excluded.
5 Fair value change of equity instruments and derivative financial
assets. These are excluded from the results as they relate to unrealised
profit/loss.
6 Amortisation and deferred tax on intangible assets acquired through
business combinations. Costs directly related to acquisitions are not
considered ongoing costs of operations and therefore are excluded.
7 The reported tax expense has been adjusted for UK tax losses on
which a deferred tax asset of €23.4 million. Refer to Notes 6 and 13. This
was adjusted because the losses in relation to the derecognised amount were
generated over a number of years and therefore distorts the effective tax rate
for the period.
8 Change in estimates related to uncertain overseas tax positions in
respect of prior years.
Six months ended 30 June 2022 Revenue EBITDA - EBITDA - EBITDA Profit Profit
€'m B2B B2C (Rested)€'m from before
€'m €'m continuing tax from
operations continuing
attributable operations
to the €'m
owners
of the
Company
€'m
Reported as actual 792.3 62.9 111.0 173.9 71.4 103.7
Employee stock option expenses1 - 4.1 0.5 4.6 4.6 4.6
Professional fees2 - 10.1 - 10.1 10.1 10.1
Fair value change and finance cost on contingent consideration and redemption - (1.8) - (1.8) (1.7) (1.7)
liability3
Ukraine employee support costs4 - 1.9 - 1.9 1.9 1.9
Onerous contract5 - - 10.4 10.4 10.4 10.4
Fair value change of equity instruments6 - - - - (0.7) (0.7)
Fair value change of derivative financial assets6 - - - - (48.5) (48.5)
Impairment of tangible and intangible assets7 - - - - 20.6 20.6
Amortisation of intangibles on acquisitions8 - - - - 21.9 21.9
Deferred tax on acquisitions8 - - - - (4.2) -
Tax related to uncertain positions9 - - - - 8.5 -
Adjusted measure 792.3 77.2 121.9 199.1 94.3 122.3
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 16) and
(b) the potential sale of the Group. These expenses are not considered ongoing
costs of operations.
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 16.
7 Impairment of intangible assets relates to the impairment of Eyecon
and Quickspin CGU.
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.
The following table provides a full reconciliation between adjusted and actual
tax from continuing operations:
Six months ended 30 June 2023 Six months
€'m ended 30 June 2022
€'m
Tax on profit or loss for the period 76.5 32.3
Adjusted for:
Deferred tax on acquisitions 4.0 4.2
Deferred tax reversal (23.4) -
Tax related to uncertain positions (3.5) (8.5)
Adjusted tax 53.6 28.0
Note 11 - Impairment of intangible assets
Six months ended 30 June 2023 Six months
€'m ended 30 June 2022
€'m
Impairment of intangible assets - 20.6
Impairment of intangible assets for H1 2022 relates to the impairments of
Eyecon and Quickspin CGUs of €13.6 million and €7.0 million respectively.
Note 12 - Finance income and costs
A. Finance income
Six months ended 30 June 2023 Six months
€'m ended 30 June 2022
€'m
Interest income 3.0 1.2
Net foreign exchange gain 3.0 10.5
6.0 11.7
B. Finance costs
Six months ended 30 June 2023 Six months
€'m ended 30 June 2022
€'m
(Restated)
Interest on bonds (11.7) (18.2)
Interest on lease liability (2.5) (2.7)
Interest on loans and borrowings and other (1.9) (2.8)
Bank facility fees (1.1) (1.0)
Bank charges (1.3) (2.1)
Movement in contingent consideration (1.3) (0.1)
Expected credit loss on loans receivable (0.4) -
(20.2) (26.9)
Net finance costs (14.2) (15.2)
Note 13 - Tax expense
Six months ended 30 June 2023 Six months ended 30 June 2022
€'m €'m
Current tax expense
Income tax expense for the current period 13.5 9.1
Income tax relating to prior years 11.1 10.1
Withholding tax 0.3 0.2
Total current tax expense 24.9 19.4
Deferred tax
Origination and reversal of temporary differences 28.2 12.9
Write down of a deferred tax asset in respect of UK tax losses 23.4 -
Total deferred tax expense 51.6 12.9
Total tax expense from continuing operations 76.5 32.3
Reported tax charge
A reported tax charge of €76.5 million from continuing operations arises on
a profit before income tax of €79.6 million compared to an expected charge
of €18.7 million (2022: a tax charge of €32.3 million on profit before
income tax of €103.7 million). The reported tax expense includes adjustments
in respect of prior years relating to current tax of €13.1 million, which
includes an additional provision of €3.5 million relating to uncertain
overseas tax positions in respect of prior years.
The Group's effective tax rate for the current period is 96.1%. This is higher
than the UK headline rate of tax for the period of 23.5%, due mainly to the
following factors:
· Profits of subsidiaries located in territories where the tax rate
is higher than the UK statutory tax rate, this includes Snaitech profits in
Italy.
· The write down of a deferred tax asset of €23.4 million in
respect of UK tax attributes. Further details of this write down are included
in Note 6.
· Current year tax losses not recognised for deferred tax purposes.
The tax losses mainly relate to the UK group companies and amount to €51.3
million.
· Unrealised fair value changes of derivative financial assets of
€25.5 million which are not deductible for tax purposes. 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.
Changes in tax rates and factors affecting the future tax charge
The most significant elements of the Group's income arise in the UK where the
tax rate for the current period is 23.5%. Legislation, which has been enacted
at the balance sheet date, increases the standard rate of UK corporation tax
from 19% to 25% from 1 April 2023. Deferred tax balances have been calculated
using the tax rates upon which the balance is expected to unwind.
On 20 June 2023, Finance (No.2) Act 2023 was substantively enacted in the UK,
introducing a global minimum effective tax rate of 15%. The legislation
implements a domestic top-up tax and a multinational top-up tax, effective for
accounting periods starting on or after 31 December 2023. The Group has
applied the exception allowed by an amendment to IAS 12 to recognising and
disclosing information about deferred tax assets and liabilities related to
top-up income taxes.
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 14 - Earnings per share
The calculation of basic earnings per share (EPS) has been based on the
following profit attributable to ordinary shareholders and weighted average
number of ordinary shares outstanding.
Six months ended 30 June 2023 Six months ended 30 June 2022
Actual Adjusted Actual Adjusted
€'m €'m €'m €'m
Profit attributable to the owners of the Company 3.1 85.7 110.3 135.5
Basic (cents) 1.0 28.4 36.8 45.2
Diluted (cents) 1.0 27.5 35.4 43.4
Six months ended 30 June 2023 Six months ended 30 June 2022
Actual Adjusted Actual Adjusted
€'m €'m €'m €'m
Profit attributable to the owners of the Company from continuing operations 3.1 85.7 71.4 94.3
Basic (cents) 1.0 28.4 23.8 31.5
Diluted (cents) 1.0 27.5 22.9 30.2
Six months ended 30 June 2023 Six months ended 30 June 2022
Actual Adjusted Actual Adjusted
Number Number Number Number
Denominator - basic
Weighted average number of equity shares 302,327,498 302,327,498 299,621,116 299,621,116
Denominator - diluted
Weighted average number of equity shares 302,327,498 302,327,498 299,621,116 299,621,116
Weighted average number of option shares 9,013,439 9,013,439 12,597,744 12,597,744
Weighted average number of shares 311,340,937 311,340,937 312,218,860 312,218,860
The calculation of diluted EPS has been based on the above profit attributable
to ordinary shareholders and weighted average number of ordinary shares
outstanding after adjusting for the effects of all dilutive potential ordinary
shares. The effects of the anti-dilutive potential ordinary shares are ignored
in calculating diluted EPS.
EPS for discontinued operations is disclosed in Note 8.
Note 15 - Intangible assets
Total
€'m
Net book value at 1 January 2023 980.9
Additions 34.5
Assets acquired through business combinations 7.8
Amortisation charge for the period (57.5)
Net book value at 30 June 2023 965.7
In accordance with IAS 36, the Group regularly monitors the carrying value of
its intangible assets, including goodwill. Goodwill is allocated to thirteen
cash-generating units (CGUs) (31 December 2022: thirteen).
The allocation of the goodwill in CGUs (excluding CGUs held for sale) is as
follows:
30 June 31 December 2022
2023 €'m
€'m
Snai(1) 264.1 259.7
Sports B2B 132.5 132.5
Services 109.9 109.9
Casino 50.8 50.8
Quickspin 19.8 19.8
Eyecon 3.0 3.0
Poker 15.6 15.6
Bingo retail 9.5 9.5
Bingo VF - -
VB retail 4.6 4.6
IGS - -
AUS GMTC 4.4 4.4
614.2 609.8
(1)During the period, the Group acquired the Giove group for a total
consideration of €6.0 million. The Group has prepared a purchase price
allocation and any difference between the cost of the investment and the
identifiable assets and liabilities was recognised as goodwill (€4.4
million).
Management reviews CGUs for impairment bi-annually with a detailed assessment
of each CGU carried out annually and whenever there is an indication that a
unit may be impaired. For the units which management assesses their results
are not in line with expectations, outside of the yearly review, a detailed
assessment is also carried out to ensure that appropriate actions are taken by
management and relevant impairment amounts are recognised, if any.
A comparison of the year-to-date June 2023 results against the 2023 budget has
been carried out for all units and a further comparison of the 2023 forecast
(year to date June 2023 actuals with July-December 2023 forecast) to 2023
budget, has also been reviewed, to enable further conclusions to be drawn on
the actual and forecasted performance of each unit.
As a result of the above reviews, management has performed a detailed
assessment on only two units that are behind budget.
The recoverable amounts of these two CGUs have been determined from value in
use calculations based on cash flow projections covering five years plus a
terminal value which have been adjusted to take into account each CGU's major
events as expected in future periods.
Management has also considered the ongoing economic uncertainty caused by the
Russian invasion in Ukraine and the overall global recessionary pressures,
with a higher level of judgement and uncertainty implemented in the forecasts.
A potential risk for future impairment exists should there be a significant
change in the economic outlook, versus those trends management anticipates in
its forecasts due to the occurrence of these events.
Management calculated the growth estimates for years one to five by applying
an average annual growth rate for revenue based on the underlying economic
environment in which the CGU operates and the expected performance over that
period. Beyond this period, management has applied an annual growth rate of
2%. Management has included appropriate capital expenditure requirements to
support the forecast growth and assumed the maintenance of the current level
of licences. Finally post-tax discount rates were applied to the cash flow
projections as summarised below.
30 June 2023 CGUs with an indication of impairment
VB Retail CGU
The recoverable amount of the VB Retail CGU showed signs of underperformance
during H1 2023, mainly due to the cancellation of an important licensee deal
planned for launch in early 2023. Given that new opportunities are arising
through the US business, no impairment has been recognised during H1 2023. The
recoverable amount of this CGU of €28.8 million, with a carrying value equal
to €20.2 million at 30 June 2023, has been determined using a cash flow
forecast that includes annual revenue growth rates between 6.0% to 8.0% over
the 1-5 year forecast period, 2% long-term growth rate and a post-tax discount
rate of 11.8%. The recoverable amount would equal the carrying value of the
CGU if:
• the discount rate applied was higher by 32.4%, i.e. reaching a
post-tax discount rate of 15.6%; or
• the revenue growth was lower by 1.4% when compared to the
forecasted average five-year growth.
Quickspin CGU
Quickspin CGU suffered an impairment loss of €7.0 million during H1 2022,
given the risk the CGU bore from the proportion of revenues being generated
from the CGU's customers choosing to operate in areas with geopolitical
tension, and the resulting 1% increase on the post-tax discount rate of the
CGU to mitigate for that factor. During H1 2023, the CGU which is still
finalising its restructuring process, has seen lower performance across a few
licensees and negative foreign exchange impact on the revenue from non-EUR
countries. However, given the planned growth expected through the release of
new games, no further impairment has been recognised for H1 2023. The
recoverable amount of this CGU of €53.2 million, with a carrying value of
€41.3 million at 30 June 2023, has been determined using a cash flow
forecast that includes annual revenue growth rates between 5.0% to 6.9% over
the 1-5 year forecast period, 2% long-term growth rate and a post-tax discount
rate of 11.4%. The recoverable amount would equal the carrying value of the
CGU if:
• the discount rate applied was higher by 24.4%, i.e., reaching a
post-tax discount rate of 14.2%; or
• the revenue growth was lower by 2.8% when compared to the
forecasted average five-year growth.
Note 16 - Investments and derivative financial assets
Introduction
Below is a breakdown of the relevant assets at 30 June 2023 and 31 December
2022 per the consolidated balance sheet:
30 June 31 December 2022
2023 €'m
€'m
A. Investments in associates 43.8 36.6
B. Other investments 86.4 9.2
C. Derivative financial assets 650.3 636.4
780.5 682.2
The following are the amounts recognised in the statement of comprehensive
income:
Six months ended 30 June 2023 Six months
€'m ended 30 June 2022
€'m
Profit or Loss
A. Share of loss from associates (0.3) (3.1)
B. Unrealised fair value changes of equity investments 0.3 0.7
C. Unrealised fair value changes of derivative financial assets (25.5) 48.5
Other comprehensive income
Foreign exchange movement from the derivative call options and equity (3.6) 10.0
investments held in non-Euro functional currency subsidiaries
(29.1) 56.1
Where the underlying derivative call option and equity investments are held in
a non-Euro functional currency entity, the foreign exchange movement is
recorded through other comprehensive income. As at 30 June 2023, the foreign
exchange movement of the derivative call options held in Caliplay, LSports and
NorthStar (Note 16C) are recorded in the profit or loss as the derivative call
options are held in a Euro functional currency entities. The foreign exchange
movement of the derivative call options held in Wplay, Onjoc and Tenbet and
equity investment in Hard Rock Digital are recorded through other
comprehensive income as the derivative call options and equity investment are
held in a USD functional currency entities.
A. Investments in associates
Balance sheet
30 June 31 December 2022
2023 €'m
€'m
Caliplay - -
ALFEA SPA 1.7 1.7
Galera - -
Stats International - -
LSports 34.8 34.9
NorthStar 7.3 -
Total investment in equity accounted associates 43.8 36.6
Profit or loss impact
Six months ended 30 June 2023 Six months
€'m ended 30 June 2022
€'m
Share of profit in ALFEA SPA - 0.1
Share of loss in Galera - (3.2)
Share of loss in NorthStar (1.1) -
Share of profit in LSports 0.8 -
Total profit and loss impact (0.3) (3.1)
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"), a leading betting and gaming operator in Mexico
which operates the "Caliente" brand in Mexico.
The Group made a €16.8 million loan to September Holdings B.V (previously
the 49% shareholder of Caliplay), a company which is 100% owned by Caliente,
in return for a call option that would grant the Group the right to acquire
49% of the economic interest of Caliplay for a nominal amount (the "Playtech
Call Option").
During 2021 Caliplay redeemed its share at par from September Holdings, which
resulted in Caliente becoming the sole shareholder in Caliplay. The terms of
the existing structured agreement were varied, with the following key changes:
• A new additional option (in addition to the Playtech Call Option)
was granted to the Group which allowed the Group to take up to a 49% equity
interest in a new acquisition vehicle should Caliplay be subject to a
corporate transaction - this additional option is only exercisable in
connection with a corporate transaction and therefore was not exercisable at
30 June 2023 or 31 December 2022 (the "Playtech M&A Call Option").
• Caliente received a put option which would require Playtech to
acquire September Holding Company B.V. for a nominal amount (the "September
Put Option"). This option has been exercised and the parties are in the
process of transferring legal ownership of September Holding Company B.V. to
the Group.
The Group has no equity holding in Caliplay or Caliente and is currently
providing services to Caliplay including technical and general strategic
support services for which it receives income (including an additional B2B
services fee). If the Playtech Call Option or the Playtech M&A Call Option
are exercised, the Group would no longer be entitled to receive the additional
B2B services fee (and will cease to provide the related services) which for
the period ended 30 June 2023 was €57.3 million (H1 2022: €34.4 million).
In addition, for 45 days after the finalisation of Caliplay's 2021 accounts,
Caliplay also had an option to redeem the Group's additional B2B services fee
or (if the Playtech Call Option had been exercised at that time) Caliente
would have the option to acquire Playtech's 49% stake in Caliplay (together
the "Caliente Call Option").
As per the public announcement made by the Group on 6 February 2023, Playtech
plc is seeking a declaration from the English Courts to obtain clarification
on a point of disagreement between the parties in relation to the Caliente
Call Option. The Group believes the Caliente Call Option has expired and
referred to its expiry having taken place in its interim report for the
six-month period ended 30 June 2022, which was published on 22 September 2022.
If the Caliente Call Option was declared as being exercisable and was
exercised, this would extinguish the Playtech Call Option and the Playtech
M&A Call Option. The Group has not changed its position with regards to
this assumption and the matter is still unresolved.
In addition to the above, from 1 January 2025, if there is a change of control
of Caliplay or any member of the Caliente group which holds a regulatory
permit under which Caliplay operates, each of the Group and Caliente shall be
entitled (but not obligated), within 60 days of the time of such change of
control, to require that the Caliente group redeems the Group's additional B2B
services fee or (if the Playtech Call Option had been exercised at that time)
acquires Playtech's 49% stake in Caliplay (together the ''COC Option''). If
such change of control were to take place and the right to redeem/acquire were
to occur, this would extinguish the Playtech Call Option (to the extent not
exercised prior thereto) and the Playtech M&A Call Option. As regards the
COC Option, the Group made a judgement that as at 31 December 2022 this had no
impact on the fair value calculation of the Playtech M&A Call Option (i.e.
allocated a 0% probability that Playtech would realise any value from the
exercise of the COC Option). As at 30 June 2023, the Group allocated a low
probability that it would realise value from this option, instead of the
Playtech M&A Call Option. This is discussed further in part C of this
note.
Assessment of control and significant influence
As at 30 June 2023 and 31 December 2022 it was assessed that the Group did not
have control over Caliplay, because it does not meet the criteria of IFRS 10
Consolidated Financial Statements, paragraph 7 due to the following:
• Despite the Group previously having a nominated director on the
Caliplay board in 2020 and having consent rights on certain decisions (in each
case, removed in 2021), there was no ability to control the relevant
activities.
• Whilst they are not members of the board, the Group has the
ability to appoint and change both the Chief Operating Officer (COO) and Chief
Marketing Officer (CMO) who form part of the management team. The COO and the
CMO form part of the wider management team but not the board and therefore are
unable to control the relevant activities of Caliplay.
• The Playtech Call Option or the Playtech M&A Call Option, if
exercised, would result in Playtech having up to 49% of the voting rights and
would not result in Playtech having control.
• Whilst the Group does receive variable returns from its structured
agreement, it does not have the power to direct relevant activities so any
variation cannot arise from such a power.
As at 30 June 2023 and 31 December 2022, the Group has significant influence
over Caliplay because it meets one or more of the criteria under IAS 28,
paragraph 6 as follows:
• It has the ability to appoint key members of the Caliplay
management team.
• The standard operator revenue by itself is not considered to give
rise to significant influence; however, when combined with the additional B2B
services fee, this is an indicator of significant influence.
• The material transaction of the historical loan funding is also an
indicator of significant influence.
Accounting for each of the options
The Playtech Call Option was exercisable at 30 June 2023 and 31 December 2022,
although it still has not been exercised. As the Group has significant
influence and the option is exercisable, the investment is recognised as an
investment in associate using the equity accounting method which includes
having current access to profits and losses. The cost of the investment was
previously deemed to be the loan given through September Holdings of €16.8
million, which at the time was assessed under IAS 28, paragraph 38 as not
recoverable for the foreseeable future and part of the overall investment in
the entity.
In 2021, with the introduction of the September Put Option, the investment in
associate relating to the original Playtech Call Option was reduced to zero
and the €16.8 million original loan amount was determined by management to
be the cost of the new Playtech M&A Call option and therefore fully offset
the balance of €16.8 million against the overall fair value movement of the
Playtech M&A Call Option (refer to part C of this note).
The Playtech M&A Call Option is not currently exercisable and therefore in
accordance with IAS 28, paragraph 14 has been recognised as derivative
financial asset, and disclosed separately under part C of this note.
As per the judgement in Note 6 of the last annual financial statements, the
Group did not consider it appropriate to equity account for the share of
profits as the current 100% shareholder is entitled to any undistributed
profits.
Below is the financial information of Caliplay:
30 June 31 December 2022 1
2023 1 €'m
€'m
Current assets 183.5 96.7
Non-current assets 26.5 30.3
Current liabilities (123.9) (78.1)
Non-current liabilities - -
Equity 86.1 48.9
Revenue 362.8 532.1
Profit from continuing operations 29.5 30.4
Other comprehensive income, net of tax 8.7 2.5
Total comprehensive income 38.2 32.9
1 The 2022 balances above have been extracted from Caliplay's audited
2022 financial statements whereas the 2023 balances have been from Caliplay's
unaudited management accounts.
Investment in ALFEA SPA
The Group has held 30.7% equity shares in ALFEA SPA since June 2018. At 30
June 2023 the Group's value of the investment in ALFEA SPA was €1.7 million
(31 December 2022: €1.7 million). No share of profit was recognised in the
profit or loss for the period ended 30 June 2023 (H1 2022: €0.1 million).
Investment in Galera
In June 2021, the Group entered into an agreement with Ocean 88 Holdings Ltd
which is the sole holder of Galera Gaming Group (together "Galera"), a company
registered in Brazil. Galera offers and operates online and mobile sports
betting and gaming (poker, casino, etc.) in Brazil. They will continue to do
so under the local regulatory license, when this becomes available, and will
expand to other gaming and gambling products based on the local license
conditions.
The Group's total consideration paid for the investment in Galera was $5.0
million (€4.2 million) in the year ended 31 December 2021, which was the
consideration for the option to subscribe and purchase from Galera an amount
of shares equal to 40% in Galera at nominal price.
In addition to the investment amount paid, Playtech made available to Galera a
line of credit up to $20.0 million. In 2022, an amendment was signed to the
original framework agreement to increase the credit line to $45.0 million. As
at 30 June 2023, an amount of €37.5 million (including interest accrued),
which is included in loans receivable under other non-current assets (refer to
Note 24) has been drawn down (31 December 2022: €26.9 million). An amount of
€10.6 million has been loaned in the six month period ended 30 June 2023.
The loan is required to be repaid to Playtech prior to any dividend
distribution to the current shareholders of Galera. The Group recognised an
allowance for expected credit losses for the loan to Galera of €1.6 million
as at 30 June 2023 (H1 2022: €1.1 million).
In respect of the loan receivable from Galera even though the framework
agreement does not state a set repayment term, management has assessed that
this should still be recognised as a loan as opposed to part of the overall
investment in associate in line with IAS 28. The Directors have made a
judgement that the loan will be settled from operational cash flows as opposed
to being settled as part of an overall transaction. If the Group had
determined that the loan was part of the overall investment in associate, an
additional cumulative €11.3 million share of loss of associate would have
been recorded in retained earnings since the investment was made of which,
€1.9 million would have been recognised in H1 2023 in the profit or loss.
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 month period ended
30 June 2023 (H1 2022: €Nil).
The cost of the investment was deemed to be the price paid for the option of
$5.0 million (€4.2 million), which was reduce to €Nil at 31 December 2022
through the recognition of the Group's share of losses. The total
unrecognised share of loss from Galera was €1.9 million in the six months
ended 30 June 2023.
Investment in Stats International
Background
In January 2022, the Group provided a $2.3 million loan to Stats International
Limited (Stats), at an interest rate of 3.5% and a repayment date of 30 June
2024. As at 31 December 2022, the carrying value of the loan was €2.2
million (Note 24). The Stats group's business activities are focused on
securing rights in connection with sporting competitions and the exploitation
of the same, typically in exchange for the payment of certain fees and
provision of analytical and statistical services by the Stats group to the
relevant rightsholder. The initial focus of the Stats group is on Brazilian
sports competitions.
In May 2023, the Group and Stats signed an amended loan agreement whereas
amongst other things, changed the repayment obligations such that the final
repayment date will be 31 December 2026 and the loan agreement to be novated
from Stats to Jewelrock (Stats sole shareholder) in consideration of $1.
Moreover, a framework agreement was signed between Stats and Playtech whereby
Playtech, for a €1 consideration has been granted the option to acquire from
Jewelrock 36% of the issued share capital of Stats.
Finally, Playtech entered into a service agreement whereby Playtech provides
Stats its business development and knowledge sharing services in connection
with the operational and industry standard procedures of Stats in exchange for
additional B2B services fee as per Note 9. As the business is still a start-up
the additional B2B service fee as at 30 June 2023 was €Nil. Once the option
is exercised, the Group would no longer provide certain services and, as such,
would no longer be entitled to the additional B2B services fee.
The option may be exercised at any time but prior to the termination of all
sporting rights agreements. It shall also lapse on the expiry or termination
of the Playtech service agreement in accordance with its terms or at the
written election of Playtech.
Playtech has assessed whether it holds power to control the investee and it
was concluded that this is not the case. Even if the option is exercised, it
would only result in a 36% voting right over the operating entity and
therefore no control.
However, Playtech has assessed whether the Group has significant influence
over Stats and due to the existence of the service agreement whereby Playtech
would be assisting a startup business by providing knowledge sharing services,
these could be considered essential technical information. Considering this,
it was concluded that the Group has significant influence under IAS 28,
paragraph 6, over Stats.
The cost of the option, which was considered to be the inherent value of
Playtech allowing the loan repayment date to be extended, is considered
negligible. No share of profits/losses have been recognised as at 30 June 2023
in the profit or loss as these were immaterial.
Investment in LSports
Background
In November 2022, the Group entered into the following transactions:
• acquisition of 15% of Statscore for a total consideration of
€1.8 million. As a result of this transaction Statscore became a 100%
subsidiary of the Group;
• disposal of 100% of Statscore to LSports Data Ltd ("LSports") for
a total consideration of €7.5 million (settled through the acquisition of
LSports in shares) less a novated inter-company loan of €1.6 million,
therefore a non-cash net consideration of €5.9 million; and
• acquisition of 31% (on a fully dilutive basis) of LSports for a
total consideration of €36.7 million, which also included an option to
acquire further shares (up to 18.11%) in LSports. Of the total consideration,
€29.2 million was paid in cash with the balance offset against the disposal
proceeds of Statscore as per the above.
As a result of the disposal of 100% of Statscore, the Group realised a loss of
€8.8 million which has been recognised in the profit or loss for the year
ended 31 December 2022 and is made up as follows:
2022
€'m
Net asset position as at the date of the disposal (including goodwill of 14.7
€12.4 million)
Net consideration (5.9)
Loss on disposal 8.8
Furthermore, the Group has an option to acquire up to 49% (so an additional
18.11%) of the equity of LSports ("LSports Option"). The LSports Option is
exercisable under the following conditions:
• within 90 days from the date of receipt of the LSports audited
financial statements for each of the years ending 31 December 2024, 2025 and
2026; or
• at any time until 31 December 2026 subject and immediately prior
to the consummation of an Initial Public Offering or Merger & Acquisition
event of LSports.
The fair value of the option acquired at 31 December 2022 was €1.4 million
which was part of the total consideration of €36.7 million (refer to part of
Note 16C). The fair value of the derivative remained unchanged as at 30 June
2023.
LSports is a company whose principal activity is to empower sportsbooks and
media companies with the highest quality sports data on a wide range of
events, so they can build the best product possible for their business. The
company is based in Israel. The principal reason of the acquisition is the
attractive opportunity considered by Playtech to increase its footprint in the
growing sports data market segment.
Assessment of control and significant influence
As at the date of acquisition, 31 December 2022 and 30 June 2023, it was
assessed that the Group did not have control over Lsports, because it does not
meet the criteria of IFRS 10 Consolidated Financial Statements, paragraph 7
due to the following:
• Despite the appointment and representation on the board of
Directors by a Playtech employee as at 30 June 2023, there is still no ability
to control the relevant activities, as the total number of directors including
the Playtech appointed director is five;
• Playtech does not have the ability to change any members of the
board or management of LSports; and
• as at 30 June 2023 and 31 December 2022 the option is not
exercisable and therefore can be disregarded in the assessment of power.
Per the above assessment Playtech does not hold power over the investee and as
such does not have control.
As at 30 June 2023 and 31 December 2022, the Group has significant influence
over LSports because it meets one or more of the criteria under IAS 28,
paragraph 6, the main one being the Playtech employee appointed on the board
of LSports enabling it to therefore participate in policy-making processes,
including decisions about dividends and/or other distributions. As a result of
this assessment LSports has been recognised as an investment in associate.
The LSports option, which is not currently exercisable, is fair valued as per
paragraph 14 of IAS 28 and shown as a derivative financial asset in accordance
with IFRS 9 and disclosed separately under part C of this note.
Purchase Price Allocation (PPA)
The Group has prepared a PPA following the acquisition of the investment,
where any difference between the cost of the investment and Playtech's share
of the net fair value of the LSports' identifiable assets and liabilities
results in goodwill.
Details of the provisional fair value of identifiable assets and liabilities
acquired, investment consideration and goodwill are as follows:
Playtech's share
of net fair value
of the identifiable
assets and
liabilities acquired
2022
€'m
Net book value of liabilities acquired (1.3)
Fair value of customer contracts and relationships 7.8
Fair value of technology - internally developed 11.5
Fair value of brand 1.6
Deferred tax arising on acquisition (2.3)
Total net assets 17.3
Total consideration 35.3
Goodwill 18.0
Goodwill is not recognised separately but is included as part of the carrying
amount of the investment in associate. A total of €1.2 million and €0.2
million was recognised in relation to the amortisation of intangibles and the
release of the deferred tax liability, arising on acquisition respectively, in
the profit or loss for the period ended 30 June 2023, with a corresponding
entry against the investment in associate. Furthermore, €1.8 million share
of profit is recognised as at 30 June 2023 (H1 2022: €Nil).
Finally, during H1 2023, the Group received a dividend of €0.9 million from
LSports.
Investment in NorthStar
Background
NorthStar Gaming Inc. (NorthStar) is a Canadian gaming brand which was
incorporated under the laws of Ontario in Q3 2021. In Q1 2022, the Company
received its license from the Alcohol and Gaming Commission of Ontario
("AGCO") and it launched its online gaming site www.northstarbets.ca
(http://www.northstarbets.ca) which offers access to regulated sports
betting markets, and a robust and curated casino offering, including the most
popular slot offerings and live dealer games. The principal reason of the
acquisition is the attractive opportunity considered by Playtech to increase
its footprint in the Canadian growing betting data market segment.
In December 2022, the Group issued NorthStar a convertible loan of CAD 12.3
million with conditions being that upon the completion of a reverse takeover
(RTO) transaction the loan could be converted into common shares, A warrants
and B warrants of the post- RTO consolidated entity. Baden Resources, a
company which was listed on the TSX entered into a conditional agreement to
acquire NorthStar for shares (i.e. complete an RTO of NorthStar). The fair
value of the loan as at 31 December 2022 was €8.4 million.
In March 2023, the RTO was completed and Baden Resources changed its name to
NorthStar Gaming Holdings (NGH). These events triggered the automatic
conversion of the Group's convertible loan into common shares in NorthStar
(effective immediately prior to closing) and then immediately on closing (i.e.
a second later) those shares were exchanged for NGH shares.
When the loan was converted into equity, the Group received shares and
warrants, resulting in a shareholding of 16% in NorthStar.
Furthermore, the Group has an option to further increase its stake potentially
beyond 20% of the issued and outstanding common shares. The holders may
exercise the warrants once the share price is higher than CAD 0.85 for A
warrants and 0.90 for B warrants. Both warrants would expire on the fifth
anniversary of their issue. A warrants and B warrants can each be exercised
for one common share.
The fair value of A and B warrants are €0.1 million as at 30 June 2023. The
Group realised a profit of €0.1 million which has been recognised in the
profit or loss for the six month period ended 30 June 2023. Refer to Note 16C.
Assessment of control and significant influence
As at the date of acquisition and 30 June 2023, it was assessed that the Group
did not have control over NorthStar, because it does not meet the criteria of
IFRS 10 Consolidated Financial Statements, paragraph 7 due to the following:
• Despite the representation on the board of Directors by Playtech
CFO, there is still no ability to control the relevant activities, as the
total number of directors are eight; and
• Playtech has neither the ability to change any members of the
board or the management of NorthStar.
Per the above assessment Playtech does not hold power over the investee and as
such does not have control.
As at 30 June 2023, the Group has significant influence over NorthStar because
it meets one or more of the criteria under IAS 28, paragraph 6, the main one
being Playtech's CFO sitting on the board of NorthStar enabling it to
therefore participate in policy-making processes, including decisions about
dividends and/or other distributions. As a result of this assessment NorthStar
has been recognised as an investment in associate.
The NorthStar warrants are fair valued as per paragraph 14 of IAS 28 and shown
as a derivative financial asset in accordance with IFRS 9 and disclosed
separately under part C of this note.
Purchase Price Allocation (PPA)
The Group has prepared a PPA following the acquisition of the investment,
where any difference between the cost of the investment and Playtech's share
of the net fair value of NorthStar's identifiable assets and liabilities
results in goodwill.
Details of the provisional fair value of identifiable assets and liabilities
acquired investment consideration and goodwill are as follows:
Playtech's share
of net fair value
of the identifiable
assets and
liabilities acquired
2023
€'m
Net book value of assets acquired 0.4
Fair value of customer contracts and relationships 1.0
Fair value of brand 0.9
Total net assets 2.3
Total consideration 8.4
Goodwill 6.1
Goodwill is not recognised separately but is included as part of the carrying
amount of the investment in associate. A total of €0.1 million was
recognised in relation to the amortisation of intangibles on acquisition in
the profit or loss for the six month period ended 30 June 2023, with a
corresponding entry against the investment in associate. As at 30 June 2023,
Playtech was diluted to 15% due to NorthStar issuing more shares as part of an
acquisition they completed in May 2023. A share of loss of €1.0 million is
recognised in profit or loss for the period ended 30 June 2023.
Other investment in associates that are fair valued under IAS 28, paragraph 14
The following are also investments in associates where the Group has
significant influence but where the option is not currently exercisable. As
there is no current access to profits, the relevant option is fair valued
under IFRS 9, and disclosed as derivative financial assets under part C of
this note:
• Wplay;
• Tenbet (Costa Rica); and
• Onjoc (Panama).
The financial information required for investments in associates, other than
Caliplay, have not been included here as from a Group perspective the
Directors do not consider them to have a material impact jointly or
separately.
B. Other investments
Balance sheet
30 June 31 December 2022
2023 €'m
€'m
Listed investments 1.6 1.4
Investment in Tenlot Guatemala 4.4 4.4
Investment in Tentech Costa Rica 2.3 2.1
Investment in Gameco - 1.3
Investment Hard Rock Digital 78.1 -
Total other investments 86.4 9.2
Statement of comprehensive income impact
Six months ended 30 June 2023 Six months
€'m ended 30 June 2022
€'m
Profit or loss
Change in fair value of equity investments 0.3 0.7
Impairment of the investment in Gameco (included in the impairment of 1.3 -
financial assets)
Total profit or loss impact 1.6 0.7
Other comprehensive income
Foreign exchange movement from equity investment held in a non-Euro functional (1.7) -
currency subsidiary
Listed investments
The Group has shares in listed securities. 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 2023, the fair value of these
listed securities have increased by €0.3 million (H1 2022: increase of
€0.7 million).
Investment in Tenlot Guatemala
In 2020, the Group entered into an agreement with Tenlot Guatemala, a member
of the Tenlot Group. Tenlot Guatemala commenced its activity in 2018 and it is
currently growing its lottery business in Guatemala, expanding its
distribution network and game offering.
The Group has acquired a 10% equity holding in Tenlot Guatemala for a total
consideration of $5.0 million (€4.4 million) in 2020, which has been
accounted at fair value through profit or loss under IFRS 9.
The fair value of the equity holding as at 30 June 2023 is $5.0 million
(€4.4 million) with no movement in fair value from the prior year.
In addition, the Group was granted a 10% equity holding in Super Sports S.A.
at no additional cost. The Group also has an option to acquire an additional
80% equity holding in Super Sports S.A. If the option is exercised, the Group
would no longer provide certain services and, as such, would no longer be
entitled to the additional B2B services fee. The additional B2B services fee
was €Nil for the period ended 30 June 2023 (31 December 2022: €Nil). There
are no conditions attached to the exercise of the option.
The right of exercising the call option at any time and the acquisition of the
additional 80% in Super Sports S.A. give Playtech:
• power over the investee;
• exposure, or rights, to variable returns from its involvement with
the investee; and
• the ability to use its power over the investee to affect the
amount of the investor's returns.
It therefore satisfies all the criteria of control under IFRS 10, paragraph 7
and, as such, at 30 June 2023, Super Sports S.A. has been consolidated in the
consolidated financial statements of the Group, noting that this is not
material from a Group perspective.
Investment in Tentech Costa Rica
In 2020, the Group entered into an agreement in Costa Rica with the Tenlot
Group. The Group acquired a 6% equity holding in Tentech CR S.A., a member of
the Tenlot Group, for a total consideration of $2.5 million (€2.1 million).
Tentech CR S.A. sells printed bingo cards in accordance with article 29 of the
Law of Raffles and Lotteries of Costa Rica (CRC - Costa Rican Red Cross
Association).
The 6% equity holding in Tentech CR S.A. is accounted at fair value through
profit or loss under IFRS 9.
The fair value of the equity holding as at 30 June 2023 is $2.5 million
(€2.3 million) with no movement in fair value from the prior year in the
profit or loss.
The foreign exchange movement of the investment held in Tentech Costa Rica is
recorded through other comprehensive income as the investment is held in a USD
functional currency entity. The impact of the foreign exchange movement of the
investment is a profit of €0.2 million in other comprehensive income as at
30 June 2023 (31 December 2022: €Nil).
Investment in Gameco
In 2021, the Group entered into a convertible loan agreement with GameCo LLC
("GameCo"), where it provided $4.0 million in the form of a debt security with
8% interest (2021: €3.8 million). In December 2022, Gameco acquired Green
Jade Games and subsequently, the Playtech debt was converted into equity
shares, representing a 7.1% into the newly formed group. Immediately prior to
the conversion, the loan was impaired by €3.0 million and this has been
recognised in the profit or loss as at 31 December 2022.
The 7.1% equity holding in the newly formed group is accounted at fair value
through profit or loss under IFRS 9. As at 30 June 2023, the fair value of the
equity holding has been impaired down to €Nil (31 December 2022: €1.3
million).
Investment in Hard Rock Digital
On 14 March 2023, the Group invested $85.0 million (€79.8 million) in Hard
Rock Digital ("HRD") in exchange for a small minority interest in a
combination of equity shares and warrants. HRD is a global vehicle for
interactive gaming and sports betting for Hard Rock International and Seminole
Gaming.
The Group assessed whether the warrants meet the definition of a separate
derivative as per IFRS9. A financial instrument or other contract should have
all three of the following characteristics:
· its value changes in response to the change in a specified
interest rate, financial instrument price, commodity price, foreign exchange
rate, index of prices or rates, credit rating or credit index, or other
variable, provided in the case of a non-financial variable that the variable
is not specific to a party to the contract (sometimes called the
'underlying'),
· it requires no initial net investment or an initial net
investment that is smaller than would be required for other types of contracts
that would be expected to have a similar response to changes in market
factors; and
· it is settled at a future date.
Management made a judgement that the warrants do not meet the definition of a
separate derivative asset as: (i) the value of the warrants is part of the
total investment and cannot be distinguished between the two and therefore the
value of the warrants were deemed to be equal to the equity shares value and
(ii) the consideration was paid at the time of the transaction.
The equity investment in HRD does not meet the definition of held for trading,
as the investment was acquired for long term investment purposes and with no
current intention for sale. In this respect, the investments will be
classified as an investment at fair value through profit or loss with initial
and subsequent recognition at fair value. Any subsequent gain/loss will be
recognised in profit or loss.
Since the date the investment was made until 30 June 2023, there have been no
changes in the operations of HRD that would indicate that the fair value of
the investment would be different to the original arm's length price paid of
$85 million (€78.1 million). Despite the positive outcome of the federal
appeals court overturning a ruling that prevented HRD from relaunching its
operations in support of The Seminole Tribe of Florida's mobile and retail
sports books in Florida, that decision is currently being appealed and,
accordingly, it is still too early to assess the impact to the fair value of
the small minority interest Playtech holds at 30 June 2023.
The foreign exchange movement of the investment held in HRD is recorded
through other comprehensive income as the investment is held in a USD
functional currency entity. The impact of the foreign exchange movement of the
investment is a loss of €1.7 million in the statement of other comprehensive
income as at 30 June 2023.
C. Derivative financial assets
Balance sheet
30 June 31 December 2022
2023 €'m
€'m
Playtech M&A Call Option (Caliplay) 533.8 524.0
Wplay 99.1 93.5
Onjoc 8.8 8.6
Tenbet 7.1 8.9
NorthStar (Note 16B) 0.1 -
LSports (Note 16B) 1.4 1.4
Total derivative financial assets 650.3 636.4
Statement of comprehensive income impact
Six months ended 30 June 2023 Six months
€'m ended 30 June 2022
€'m
Caliplay
Fair value change of Playtech M&A Call Option (22.5) (5.1)
Foreign exchange movement to profit or loss (9.0) 43.3
Wplay
Fair value change in Wplay 7.2 11.6
Foreign exchange movement recognised in other comprehensive income (1.6) 8.5
Onjoc
Fair value change in Onjoc 0.3 1.2
Foreign exchange movement recognised in other comprehensive income (0.1) 0.6
Tenbet
Fair value change in Tenbet (1.6) (2.5)
Foreign exchange movement recognised in other comprehensive income (0.2) 0.9
NorthStar
Fair value change of Warrants in NorthStar 0.1 -
Total comprehensive income impact (27.4) 58.5
Caliplay
As already disclosed in section A of this note, the Playtech M&A Call
Option is not currently exercisable and therefore in accordance with IAS 28,
paragraph 14 has been recognised as a derivative financial asset and fair
valued under IFRS 9.
As at 31 December 2021, Caliplay was actively negotiating a merger with a US
listed special purpose acquisition corporation (SPAC), which in turn was
expected to enter into a long-term commercial agreement with a leading media
partner. As part of the transaction, the media partner and certain of its
shareholders were expected to invest a cash amount in the SPAC in exchange for
shares and warrants issued by the SPAC, which was expected to result in them
together holding a material minority equity interest.
Further attempts were made to complete the SPAC transaction during 2022,
however as per the announcement made on 29 July 2022, with capital market
conditions having deteriorated significantly since the transaction was
initially contemplated, the transaction was no longer being pursued.
For this reason, a decision was taken to change the valuation methodology used
as at 30 June 2023 and 31 December 2022 for the Playtech M&A Call Option
to that of a DCF approach with a market exit multiple assumption, as opposed
to 31 December 2021, where the Group has assessed the fair value of the
Playtech M&A Call Option based on the proposed term of the expected merger
with the SPAC, including the transaction value.
As already mentioned in part A of Note 16 the Group is seeking a declaration
from the English Courts to obtain clarification on a point of disagreement
between the parties in relation to the Caliente Call Option and in particular,
whether Caliplay still holds this option which permits it to redeem the
additional B2B services fee element. Should it be declared that Caliplay still
has the Caliente Call Option and Caliplay then exercises said option, this
would cancel both the Playtech M&A Call Option and the Playtech Call
Option.
The Group believes the Caliente Call Option has expired and whilst Caliplay
has not sought to exercise the option to date, Caliplay has made it clear that
it considers the option has not yet expired.
In arriving at the fair value of the Playtech M&A Call Option, the Group
has made a judgement that the Caliente Call Option has expired and therefore
no probability weighted scenarios have been modelled that include an
assumption that the Caliente Call Option is exercisable. Should the English
Courts determine that the option is exercisable and Caliplay chooses to
exercise the option, the amount payable by Caliplay to the Group upon exercise
would either be agreed between the parties or, failing which, determined by an
independent investment bank valuing the Group's remaining entitlement to
receive the additional B2B services fee until 31 December 2034. There is
therefore the potential that, should the Caliente Call Option be exercisable
and then subsequently exercised, the proceeds received by the Group may be
materially different (positive or adverse) to the fair value of the Playtech
M&A Call Option recorded as at 30 June 2023 and 31 December 2022.
Valuation
The Group has assessed the fair value of the Playtech M&A Option of the
derivative financial asset as at 30 June 2023 using a discounted cash flow
(DCF) approach with a market exit multiple assumption. The Group used a
discount rate of 16% (31 December 2022: 16%) reflecting the cash flow risks
given the high growth rates in place, as well as a discount for illiquidity
and control until the expected Group exit date. The Group also made
assumptions on the probability of a possible transaction that may be completed
on a number of exit date scenarios over a four-year period, until December
2027. The Group used a compound annual growth rate of 17.0% (31 December 2022:
17.2%) over the forecasted cash flow period, an average Adjusted EBITDA margin
of 27.8% (31 December 2022: 26.3%) and an exit multiple of 8.6x (31 December
2022: 9.6x). Due to the uncertainty as to how the exercise of the Playtech
M&A Call Option may occur and the potential for the shares held to not be
immediately realisable, the Group included an additional discount for lack of
marketability (DLOM) for two years of 13.8% (31 December 2022: 13.8%).
Furthermore, Playtech's share in Caliplay was adjusted to reflect the rights
to Caliplay shares that a service provider has under its services agreement
with the Group. Finally, taking account of matters arising in the period,
Playtech has included some probability weighted scenarios to consider the
impact of the COC Option as explained in part A of this Note, noting that the
probabilities assigned to this scenario are above zero but low, as compared to
the 31 December 2022 valuation where it was assumed that there was no impact
(i.e. 0% probability scenarios).
As at 30 June 2023, the fair value of the Playtech M&A Call Option was
$581.0 million (31 December 2022: $560.6 million) which converted to €533.8
million (31 December 2022: €524.0 million). The period-on-period change in
the fair value of the Playtech M&A call option is a combination of an
uplift:
· due to Caliplay's H1 2023 performance which exceeded forecasts;
and
· following the reduction of the right to Caliplay shares that a
service provider of Playtech had under its services agreement which was partly
redeemed during the period through a €41.3 million redemption payment (the
value of such right being deducted from the fair value of the Playtech M&A
Call Option).
These were partially offset by:
· the reduction in the exit multiple described above;
· unfavourable movement in the USD to EUR foreign exchange rate;
and
· the impact of including scenarios whereby there is a small
probability that the COC Option will be exercised.
Sensitivity analysis
The assumptions and judgements made in the valuation of the derivative
financial asset as at 30 June 2023 include the following sensitivities, noting
that factors and circumstances may arise that are outside the Group's control
which could impact the option value:
• A different discount rate within the range of 14% to 18% will
result in a fair value of the derivative financial asset in the range of
€497.0 million - €574.2 million.
• A 5% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €506.2
million - €566.0 million.
• A 10% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €475.9
million - €595.4 million.
• A 5% fluctuation in the revenue growth rate will result in a fair
value of the derivative financial asset within the range of €432.7 million -
€634.9 million.
• A 10% fluctuation in the revenue growth rate will result in a fair
value of the derivative financial asset within the range of €332.6 million -
€735.0 million.
• A 1.0 fluctuation on the market exit multiple will result in a
fair value of the derivative financial asset within the range of €475.0
million - €592.6 million.
• If the 13.8% DLOM applied for two-year period post exercise of the
Playtech M&A option was removed (i.e. in the event that an M&A
transaction included the acquisition of Playtech's shares immediately post
exercise) the fair value of the derivative financial asset would increase to
€626.6 million. Conversely, if we double the applied DLOM to 27.6% the fair
value of the derivative financial asset would decrease to €441.0 million.
Wplay
In August 2019, Playtech entered into a structured agreement with Aquila
Global Group SAS ("Wplay"), which has a license to operate online gaming
activities in Colombia. Under the agreement the Group provides Wplay its
technology products, where it receives standard operator revenue and
additional B2B services fee as per Note 9. The Group has no shareholding in
Wplay.
Playtech has a call option to acquire a 49.9% equity holding in the Wplay
business. As at 31 December 2022 this option was exercisable in August 2023.
In 2023, the option exercise date was deferred to February 2024. If the call
option is exercised by Playtech, the Group would no longer provide certain
services and as such will no longer be entitled to the additional B2B services
fee. The additional B2B services fee was €Nil for the six month period ended
30 June 2023 (H1 2022: €Nil).
The payment of €22.4 million made to Wplay in 2019 and 2020 was considered
to be the payment made for the option in Wplay. The Group had contingent
commitments totalling $6.0 million, of which $5.0 million was paid in June
2021 and $1.0 million was paid in October 2022.
Assessment of control and significant influence
The Group assessed whether it holds power over the investee (in accordance
with IFRS 10, paragraph 7) with the following considerations:
• Playtech does not have the ability to direct Wplay's activities as
it has no voting representation on the executive committee or members of the
executive committee.
• Whilst they are not members of the executive committee, Playtech
has the ability to appoint and change both the COO and CMO who form part of
the management team (albeit this right has never been exercised). The COO and
the CMO are part of the wider management team but would not be able to control
the relevant activities of Wplay.
• 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 2023 the option is not
exercisable and therefore can be disregarded in the assessment of power.
Per the above assessment Playtech does not hold power over the investee and as
such does not have control.
With regards to the assessment of significant influence, the following facts
were considered:
• Playtech has the right to appoint and remove the COO and CMO which
is a potential indicator of significant influence given their relative
positions and involvement in the day-to-day operations of Wplay.
• The standard operator revenue is not considered to give rise to
significant influence. However, when combined with the additional B2B services
fee, this is an indicator of significant influence.
• The Group provides additional services to Wplay which Wplay
requires to assist it in successfully running its operations, which could be
considered essential technical information.
The Group therefore has significant influence under IAS 28, paragraph 6 over
Wplay. However, as the option is not currently exercisable, we have an
investment in associate but with no access to profits. As such the option is
fair valued as per paragraph 14 of IAS 28 and shown as a derivative financial
asset in accordance with IFRS 9.
The Group has given two loans to Wplay, an interest-bearing and a non
interest-bearing one of $1.7 million (€1.6 million) and $0.5 million (€0.5
million) respectively. The loans are due for repayment in December 2023 and
December 2024 and their combined outstanding balance as at 30 June 2023 is
$1.3 million (€1.2 million). The loans are included in loans receivable from
related parties (refer to Note 24).
Valuation
The fair value of the option at 30 June 2023 has been estimated using a DCF
approach with a market exit multiple assumption. The Group used a discount
rate of 26% (31 December 2022: 25%) 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 (31 December 2022: expected exit date of December
2026). The Group used a compound annual growth rate of 22.7% (31 December
2022: 24.7%) over the forecasted cash flow period, an average Adjusted EBITDA
margin of 19.1% (31 December 2022: 20.6%) and an exit multiple of 9.6x (31
December 2022: 9.6x). As part of the agreement, there is a lock-in mechanism
that contractually might prevent Playtech from selling the resulting shares,
however an assumption was made that if the exit date assumed in the model is
earlier, then both parties would be in agreement to this earlier exit point,
therefore no further discounts were applied post transaction. Furthermore,
Playtech's share in Wplay was adjusted to reflect the rights to shares that a
service provider has under its services agreement with the Group.
As at 30 June 2023, the fair value of the Wplay derivative financial asset is
€99.1 million. The difference of €5.6 million between the fair value at 31
December 2022 of €93.5 million and the fair value at 30 June 2023 has been
recognised as follows:
a. €7.2 million derived from the fair value increase of the derivative
call option calculated using the DCF model in the profit or loss for the six
month period ended 30 June 2023.
b. €1.6 million derived from the fair value decrease due to the
exchange rate fluctuation of USD to EUR (as the derivative call option is
under a foreign subsidiary of the Group whose functional currency is USD) in
other comprehensive income for the six month period ended 30 June 2023.
Sensitivity analysis
The assumptions and judgements made in the valuation of the derivative
financial asset as at 30 June 2023 include the following sensitivities, noting
that factors and circumstances may arise that are outside the Group's control
which could impact the option value:
• A different discount rate within the range of 20% to 30% will
result in a fair value of the derivative financial asset in the range of
€88.1 million - €119.1 million.
• A 5% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €94.1
million - €104.1 million.
• A 10% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €89.2
million - €109.0 million.
• A 5% fluctuation in the revenue growth rate will result in a fair
value of the derivative financial asset within the range of €81.0 million -
€117.9 million.
• A 10% fluctuation in the revenue growth rate will result in a fair
value of the derivative financial asset within the range of €63.4 million -
€137.4 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 €90.7
million - €107.5 million.
• If the expected Playtech exit date fluctuates by one year later or
earlier, the fair value of the derivative financial asset will change to
€98.5 million and €99.7 million respectively.
Onjoc
In June 2020, Playtech entered into a framework agreement with ONJOC CORP.
("Onjoc"), which holds a license to operate online sports betting, gaming and
gambling activities in Panama. The Group has no equity holding in Onjoc but
has an option to acquire 50%. Under the agreement the Group provides Onjoc its
technology products, where it receives standard operator revenue and
additional B2B services fee as per Note 9. 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 period ended 30 June 2023 (H1 2022: €Nil). The option
can be exercised any time subject to Onjoc having $15.0 million of Gross
Gaming Revenue (GGR) over a consecutive 12-month period.
Assessment of control and significant influence
The Group performed an analysis for Onjoc to assess whether it holds power
over Onjoc (in accordance with IFRS 10, paragraph 7) with the following
considerations:
• Playtech can propose an independent member to the board of
directors, who has to be independent to both Playtech and Onjoc, and as such
does not have the ability to direct Onjoc's activities as it has no voting
representation on the board;
• Playtech has the right to 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 2023 the option is not
exercisable and therefore can be disregarded in the assessment of power.
Per the above assessment Playtech does not hold power over the investee and as
such does not have control.
With 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 €1.9 million (31
December 2022: €1.8 million) which is due for repayment in October 2025 and
is included in loans receivable from related parties (refer to Note 24).
Valuation
The fair value of the option at 30 June 2023 has been estimated using a DCF
approach with a market exit multiple assumption. The Group used a discount
rate of 32% (31 December 2022: 33%) reflecting the cash flow risk given the
high growth rates in place and the early stages of the business, as well as a
discount for illiquidity and control until the expected Playtech exit date of
December 2027 (31 December 2022: expected exit date of December 2027). The
Group used a compound annual growth rate of 74.3% (31 December 2022: 60.1%)
over the forecasted cash flow period and an average Adjusted EBITDA margin of
15.7% (31 December 2022: 20.4%). As part of the agreement, there is a lock-in
mechanism that contractually might prevent Playtech from selling the resulting
shares, however an assumption was made that if the exit date assumed in the
model is earlier, then both parties would be in agreement to this earlier exit
point, therefore no further discounts applied post transaction. Furthermore,
Playtech's share in Onjoc was adjusted to reflect the rights to shares that a
service provider has under its services agreement with the Group.
As at 30 June 2023, the fair value of the Onjoc derivative financial asset is
€8.8 million. The difference of €0.2 million between the fair value at 31
December 2022 of €8.6 million and the fair value at 30 June 2023 has been
recognised as follows:
a. €0.3 million derived from the fair value increase of the derivative
call option calculated using the DCF model in the profit or loss for the
period ended 30 June 2023.
b. €0.1 million derived from the fair value decrease due to the
exchange rate fluctuation of USD to EUR (as the derivative call option is
under a foreign subsidiary of the Group whose functional currency is USD) in
other comprehensive income for the period ended 30 June 2023.Sensitivity
analysis
The assumptions and judgements made in the valuation of the derivative
financial asset as at 30 June 2023 include the following sensitivities, noting
that factors and circumstances may arise that are outside the Group's control
which could impact the option value:
• A different discount rate within the range of 28% to 38% will
result in a fair value of the derivative financial asset in the range of
€7.1 million - €10.1 million.
• A 5% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €8.3
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 - €9.7 million.
• A 5% fluctuation in the revenue growth rate will result in a fair
value of the derivative financial asset within the range of €6.4 million -
€11.3 million.
• A 10% fluctuation in the revenue growth rate will result in a fair
value of the derivative financial asset within the range of €4.2 million -
€14.1 million.
• A 1.0 fluctuation on the market exit multiple will result in a
fair value of the derivative financial asset within the range of €7.6
million - €9.9 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 period ended 30 June 2023 (31 December
2022: €Nil). In H1 2023, the Group signed an amendment to the Tenbet
agreement in which the option can be exercised at any time from July 2024
(previously 35 months of Tenbet going live). The call option to acquire 81%
equity holding in Tenbet is exercisable from July 2024 (previously July 2023).
Under the existing agreements, the Group has provided Tenbet with a credit
facility of €3.9 million out of which €3.6 million (Note 24) had been
drawn down as at 30 June 2023 (31 December 2022: €2.1 million).
Assessment of control and significant influence
The Group assessed whether it holds power over Tenbet (in accordance with IFRS
10, paragraph 7) with the following considerations:
• Playtech does not have the ability to direct Tenbet's activities
as it has no voting representation on the Board of Directors (or equivalent)
or people in managerial positions;
• Playtech has neither the ability to appoint, or change any members
of the Board of Tenbet; and
• as at 30 June 2023 the option is not exercisable and therefore can
be disregarded in the assessment of power.
Per the above assessment, Playtech does not hold power over the investee and
as such does not have control.
With regards to the assessment of significant influence, the standard operator
revenue alone is not considered to give rise to significant influence.
However, when combined with the additional B2B services fee, this is an
indicator of significant influence. Furthermore, the Group provides additional
services to Tenbet which Tenbet requires to assist it in successfully running
its operations that could be considered essential technical information.
Playtech therefore has significant influence under IAS 28, paragraph 6 over
Tenbet. However, as the option is not currently exercisable, we have an
investment in associate but with no access to profits. As such the option is
fair valued as per paragraph 14 of IAS 28 and shown as a derivative financial
asset in accordance with IFRS 9.
Valuation
The fair value of the option at 30 June 2023 has been estimated using a DCF
approach with a market exit multiple assumption. The Group used a discount
rate of 34% (31 December 2022: 35%) reflecting the cash flow risk given the
high growth rates in place and the early stages of the business, as well as a
discount for illiquidity and control until the expected Playtech exit date of
December 2027 (31 December 2022: expected exit date of December 2027). The
Group used a compound annual growth rate of 261% (31 December 2022: 135%) over
the forecasted cash flow period and an average Adjusted EBITDA margin within
the range of - 335% to 28% in years 1-5 with an average of -70.6% (31 December
2022: average of -59.8%). As part of the agreement, there is a lock-in
mechanism that contractually might prevent Playtech from selling the resulting
shares, however an assumption was made that if the exit date assumed in the
model is earlier, then both parties would be in agreement to this earlier exit
point. Furthermore, Playtech's share in Tenbet was adjusted to reflect the
rights to shares that a service provider has under its services agreement with
the Group.
As at 30 June 2023, the fair value of the Tenbet derivative financial asset is
€7.1 million. The difference of €1.8 million between the fair value at 31
December 2022 of €8.9 million and the fair value at 30 June 2023 has been
recognised as follows:
a. €1.6 million derived from the fair value decrease of the derivative
call option calculated using the DCF model in the profit or loss in the period
ended 30 June 2023.
b. €0.2 million derived from the fair value decrease from the exchange
rate fluctuation of USD to EUR (as the derivative call option is under a
foreign subsidiary of the Group whose functional currency is USD) in other
comprehensive income in the period ended 30 June 2023.
Sensitivity analysis
The assumptions and judgements made in the valuation of the derivative
financial asset as at 30 June 2023 include the following sensitivities, noting
that factors and circumstances may arise that are outside the Group's control
which could impact the option value:
• A different discount rate within the range of 30% to 40% will
result in a fair value of the derivative financial asset in the range of
€5.5 million - €8.5 million.
• A 5% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €6.7
million - €7.6 million.
• A 10% fluctuation in the Adjusted EBITDA margin will result in a
fair value of the derivative financial asset within the range of €6.3
million - €8.0 million.
• A 5% fluctuation in the revenue growth rate will result in a fair
value of the derivative financial asset within the range of €1.1 million -
€13.5 million.
• A 10% fluctuation in the revenue growth rate will result in a fair
value of the derivative financial asset within the range of €Nil - €20.3
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 €7.6
million - €9.9 million.
Note 17 - Assets classified as held for sale
30 June 2023 31 December 2022
€'m €'m
Assets
Property, plant and equipment 19.4 19.6
During 2021, the Group entered into a binding agreement for the
disposal of a real estate area in Milan for a total consideration of €20.0
million. Accordingly, the real estate was classified as held for sale. Of the
total consideration, €1.0 million was received during the year ended 31
December 2021. The advance received was classified as part of the liabilities
directly associated with assets classified as held for sale.
The sale has been finalised but the disposal is expected to complete in H1
2025 with the movement of the trot track from La Maura area to San Siro
(previously it was expected that the sale would be completed during 2024).
Note 18 - Shareholders' equity
A. Share capital
Share capital is comprised of no par value shares as follows:
30 June 2023 31 December 2022
Number Number
of shares of shares
Authorised1 N/A N/A
Issued and paid up 309,294,243 309,294,243
1 The Company has no authorised share capital, but it is authorised to
issue up to 1,000,000,000 shares of no par value.
The table below shows the movement of the shares:
Shares in issue/ Treasury shares Shares held by Shares held by Total
circulation 2014 EBT 2021 EBT
Number of shares
At 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
Exercise of options 1,145,324 - - (1,145,324) -
At 31 December 2022 300,988,316 2,937,550 - 5,368,377 309,294,243
Transfer of shares - (2,937,550) - 2,937,550 -
Exercise of options 2,915,544 - - (2,915,544) -
At 30 June 2023 303,903,860 - - 5,390,383 309,294,243
B. Employee Benefit Trust
2014 EBT
In 2014, the Group established an Employee Benefit Trust (2014 EBT) by
acquiring 5,517,241 shares for a total of €48.5 million. As at 30 June 2023,
no shares were outstanding under the 2014 EBT.
2021 EBT
In 2021 the Company transferred 7,028,339 shares held by the Company in
treasury to the Employee Benefit Trust (2021 EBT) for a total of €22.6
million. In 2023 the Company transferred 2,937,550 shares held by the Company
in treasury to the 2021 EBT for a total of €12.5 million.
During the six month period ended 30 June 2023, 2,915,544 shares were issued
at a cost of €9.4 million. As at 30 June 2023, a balance of 5,390,383 shares
remains in the 2021 EBT with a cost of €20.3 million.
C. Share options exercised
During the period 3,058,590 share options were exercised, of which 143,046
were cash settled (six months ended 2022: 34,904).
D. Distribution of dividends
During 2023 the Group did not pay any dividends.
E. Reserves
The following describes the nature and purpose of each reserve within owners'
equity:
Reserve Description and purpose
Additional paid in capital Share premium (i.e. amount subscribed for share capital in excess of nominal
value)
Employee Benefit Trust Cost of own shares held in treasury by the trust
Put/call options reserve Fair value of put/call options as part of business acquisition
Foreign exchange reserve Gains/losses arising on retranslating the net assets of overseas operations
Employee termination indemnities Gains/losses arising from the actuarial remeasurement of the employee
termination indemnities
Non-controlling interest The portion of equity ownership in a subsidiary not attributable to the owners
of the Company
Retained earnings Cumulative net gains and losses recognised in the consolidated statement of
comprehensive income
Note 19 - Loans and borrowings
The main credit facility of the Group is a revolving credit facility (RCF) up
to €277.0 million and is available until October 2025, with an option to
extend by 12 months. Interest payable on the loan is based on SONIA based on
the currency of each withdrawal. As at the reporting date the credit facility
drawn amounted to €45.9 million (31 December 2022: €Nil).
Under the RCF, the covenants are monitored on a regular basis by the finance
department, including modelling future projected cash flows under a number of
scenarios to stress-test any risk of covenant breaches, the results of which
are reported to management and the Board of Directors. The covenants are as
follows:
· Leverage: Net Debt/Adjusted EBITDA to be less than 3.5:1 for the
12 months ended 30 June 2023 (12 months ended 31 December 2022: less than
3.5:1).
· Interest cover: Adjusted EBITDA/Interest to be over 4:1 for the
12 months ended 30 June 2023 (12 months ended 31 December 2022: over 4:1).
As at 30 June 2023 and 31 December 2022 the Group met these financial
covenants.
Note 20 - Bonds
2018 Bond 2019 Bond 2023 Bond Total
€'m €'m €'m €'m
At 1 January 2022 527.6 347.4 - 875.0
Release of capitalised expenses 0.7 0.3 - 1.0
At 30 June 2022 528.3 347.7 - 876.0
Repayment of bonds (330.0) - - (330.0)
Release of capitalised expenses 1.3 0.3 - 1.6
At 31 December 2022 199.6 348.0 - 547.6
Issue of new bond - - 297.3 297.3
Release of capitalised expenses 0.3 0.3 - 0.6
At 30 June 2023 199.9 348.3 297.3 845.5
30 June 2023 31 December 2022
€'m €'m
Split to:
Non-current 645.6 348.0
Current 199.9 199.6
845.5 547.6
Bonds
(a) 2018 Bond
On 12 October 2018, the Group issued €530.0 million of senior secured notes
(the "2018 Bond") maturing in October 2023. The net proceeds of issuing the
2018 Bond after deducting commissions and other direct costs of issue totalled
€523.4 million. Commissions and other direct costs of issue have been offset
against the principal balance and are amortised over the period of the 2018
Bond.
The issue price was 100% of its principal amount and bears interest from 12
October 2018 at the rate of 3.75% per annum payable semi-annually, in arrears,
on 12 April and 12 October commencing on 12 April 2019.
During the year ended 31 December 2022, the Group partially repaid the 2018
Bond by €330 million. Playtech has served notice and subsequently redeemed
at par the outstanding 2018 Bond with a €200.0 million balance in July 2023.
(b) 2019 Bond
On 7 March 2019, the Group issued €350.0 million of senior secured notes
(the "2019 Bond") maturing in March 2026. The net proceeds of issuing the 2019
Bond after deducting commissions and other direct costs of issue totalled
€345.7 million. Commissions and other direct costs of issue have been offset
against the principal balance and are amortised over the period of the 2019
Bond.
The issue price is 100% of its principal amount and bears interest from 7
March 2019 at a rate of 4.25% per annum payable semi-annually, in arrears, on
7 September and 7 March commencing on 7 September 2019.
(c) 2023 Bond
On 28 June 2023, the Group issued €300.0 million of senior secured notes
(the "2023 Bond") maturing in June 2028. The net proceeds of issuing the 2023
Bond after deducting commissions and other direct costs of issue totalled
€297.3 million. Commissions and other direct costs of issue have been offset
against the principal balance and are amortised over the period of the 2023
Bond.
The issue price is 100% of its principal amount and bears interest from 28
June 2023 at a rate of 5.875% per annum payable semi-annually, in arrears, on
28 December and 28 June commencing on 28 December 2023.
As at 30 June 2023 and 31 December 2022, the Group met the required interest
cover financial covenant of 2:1 Adjusted EBITDA/interest ratio, for the
combined 2018, 2019 and 2023 Bonds.
Note 21 - Provisions for risks and charges, litigation and contingent
liabilities
The Group is involved in proceedings before civil and administrative courts,
and other legal or potential legal actions related to its business, including
certain matters related to previous acquisitions. Based on the information
currently available, and taking into consideration the existing provisions for
risks, the Group currently considers that such proceedings and potential
actions will not result in an adverse effect upon the financial statements;
however, where this is not considered to be remote, they have been disclosed
as contingent liabilities.
All the matters were subject to a review and estimate by the Board of
Directors based on the information available at the date of preparation of
these financial statements and, where appropriate, supported by updated legal
opinions from independent professionals. These provisions are classified based
on the Directors' assessment of the progress and probabilities of success of
each case at each reporting date.
Movements of the provisions outstanding as at 30 June 2023 are shown below:
Legal and Contractual Other Total
regulatory €'m €'m €'m
€'m
Balance at 1 January 2023 7.3 4.2 2.4 13.9
Provisions made during the period 0.2 2.2 0.4 2.8
Provisions used during the period (0.2) - (0.2) (0.4)
Provisions reversed during the period (1.1) - - (1.1)
Balance at 30 June 2023 6.2 6.4 2.6 15.2
Legal and Contractual Other Total
regulatory €'m €'m €'m
€'m
31 December 2022
Non-current 7.3 0.3 2.4 10.0
Current - 3.9 - 3.9
7.3 4.2 2.4 13.9
30 June 2023
Non-current 6.2 0.3 2.5 9.0
Current - 6.1 0.1 6.2
6.2 6.4 2.6 15.2
Provision for legal and regulatory issues
The Group is subject to proceedings and potential claims regarding complex
legal matters (including those related to previous acquisitions), which are
subject to a different degree of uncertainty. Provisions are held for various
legal and regulatory issues that relate to matters arising in the normal
course of business, including in particular various disputes that arose in
relation to the operation of the various licenses held by the Group's
subsidiary Snaitech. The uncertainty is due to complex legislative and
licensing frameworks in the various territories in which the Group operates.
The Group also operates in certain jurisdictions where legal and regulatory
matters can take considerable time for the required local processes to be
completed and the matters to be resolved.
Contractual claims
The Group is subject to historic claims relating to contractual matters that
arise with customers in the normal course of business. The Group believes they
have a robust defence to the claims raised and has provided for the likely
settlement where an outflow of funds is probable. The uncertainty relates to
complex contractual dealings with a wide range of customers in various
jurisdictions, and because as noted above, the Group operates in certain
jurisdictions where contractual disputes can take considerable time to be
resolved in the local legal system.
Given the uncertainties inherent, it is difficult to predict with certainty
the outlay (or the timing thereof) which will derive from these matters. It is
therefore possible that the value of the provisions may vary further to future
developments. The Group monitors the status of these matters and consults with
its advisers and experts on legal and tax-related matters in arriving at the
provisions recorded. The provisions included represent the Directors' best
estimate of the potential outlay and none of the matters provided for are
individually material to the financial statements.
Accounting for uncertain tax positions
The Group is subject to various forms of tax in a number of jurisdictions.
Given the nature of the industry and the jurisdictions within which the Group
operates, the tax, legal and regulatory regimes are continuously changing and
subject to differing interpretations. As such, the Group is exposed to a small
number of uncertain tax positions and open audits/enquiries. Judgement is
applied in order to adequately provide for uncertain tax positions where it is
believed that it is more likely than not that an economic outflow will arise.
The Group has provided for uncertain tax positions which meet the recognition
threshold and these positions are included within tax liabilities. There is a
risk that additional liabilities could arise. Given the uncertainty and the
complexity of application of international tax in the sector, it is not
feasible to accurately quantify any possible range of liability or exposure,
and this has therefore not been disclosed.
Note 22 - Contingent consideration
30 June 2023 31 December 2022
€'m €'m
Non-current contingent consideration
Acquisition of Aus GMTC PTY Ltd 3.4 2.1
Other acquisitions 0.4 0.2
Total non-current contingent consideration 3.8 2.3
Current contingent consideration
Other acquisitions 0.7 0.6
Total current contingent consideration 0.7 0.6
Total contingent consideration 4.5 2.9
The maximum contingent consideration payable is as follows:
30 June 2023 31 December 2022
€'m €'m
Acquisition of Aus GMTC PTY Ltd 45.9 46.7
Other acquisitions 1.1 0.8
47.0 47.5
Note 23 - Deferred tax
The movement on the deferred tax is as shown below:
€'m
Balance at 1 January 2023 (12.3)
Adjustment on initial recognition IAS 12 (Restated - Note 4A) 1.5
Balance at 1 January 2023 - as restated (10.8)
On business combinations (0.8)
Charge to profit or loss (Note 13) (51.6)
At 30 June 2023 (63.2)
30 June 31 December 2022
2023 €'m
€'m
Split as:
Deferred tax liability (146.2) (124.8)
Deferred tax asset 83.0 114.0
(63.2) (10.8)
Deferred tax assets and liabilities are offset only when there is a legally
enforceable right of offset, in accordance with IAS 12.
As at 30 June 2023, the Directors continued to recognise deferred tax assets
arising from temporary differences and tax losses carried forward, with the
latter only to the extent that it is probable that future taxable profit will
be available against which the unused tax losses can be utilised. Please refer
to Notes 6 and 13 for the assessment performed on the recognition of deferred
tax in the period.
Details of the deferred tax outstanding as at 30 June 2023 and 31 December
2022 are as follows:
30 June 2023 31 December 2022
€'m €'m
Deferred tax recognised on Group restructuring 52.0 56.8
Tax losses 51.6 75.9
Other temporary and deductible differences (166.8) (143.5)
Total (63.2) (10.8)
Details of the deferred tax, amounts recognised in profit or loss are as
follows:
Six months ended 30 June 2023 Six months ended 30 June 2022
€'m €'m
Accelerated capital allowances (0.8) 0.3
Employee pension liabilities - (0.3)
Other temporary and deductible differences (26.7) (14.9)
Leases - (0.1)
Tax losses (24.1) 2.1
Total (51.6) (12.9)
Note 24 - 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 period, Group companies entered into the following transactions
with related parties which are not members of the Group:
Six months ended 30 June 2023 Six months
€'m ended 30 June 2022
€'m
Revenue
Investments in associates 96.4 63.4
Interest income
Investments in associates 0.7 0.3
Dividend income
Investments in associates 0.9 -
Operating expenses
Investments in associates 0.6 0.1
The revenue from investments in associates includes income from Caliplay,
Galera, Wplay, Onjoc and Tenbet. The interest income relates to the same
companies except Caliplay.
The following amounts were outstanding at the reporting date:
30 June 2023 31 December 2022
€'m €'m
Trade receivables
Associates 37.3 20.5
Loans and interest receivable - current
Associates 1.2 3.4
Loans and interest receivable - non-current
Associates 45.2 29.0
Trade payables
Associates 0.1 -
The loans and interest receivables above do not include the expected credit
losses. For the period ended 30 June 2023, the Group recognised a provision
for expected credit losses of €0.1 million relating to amounts owed by
related parties in less than one year (31 December 2022: €0.1 million) and
€1.8 million (31 December 2022: €1.1 million) for more than one year.
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 €11.2 million (H1 2022: €4.5 million).
Note 25 - Reconciliation of movement of liabilities to cash flows arising from
financing activities
Liabilities
Loans and Bonds Interest on Contingent Lease Total
borrowings €'m loans and consideration liabilities €'m
€'m borrowings and redemption €'m
and bonds liability
€'m €'m
Balance at 1 January 2023 - 547.6 7.3 2.9 85.8 643.6
Changes from financing cash flows
Interest paid on bonds and loans and borrowings - - (12.4) - - (12.4)
Proceeds from loans and borrowings 48.0 - - - - 48.0
Proceeds from the issuance of bonds - 297.3 - - - 297.3
Payment of contingent consideration - - - (0.1) - (0.1)
Principal paid on lease liability - - - - (11.4) (11.4)
Interest paid on lease liability - - - - (2.5) (2.5)
Total changes from financing cash flows
48.0 297.3 (12.4) (0.1) (13.9) 318.9
Other changes
Liability related
New leases - - - - 7.2 7.2
Interest on bonds and loans and borrowings - 0.6 12.4 - - 13.0
Interest on lease liability - - - - 2.5 2.5
Movement in contingent consideration - - - 1.3 - 1.3
On business combinations - - - 0.4 1.9 2.3
Foreign exchange difference (2.1) - - - 0.1 (2.0)
Total liability-related other changes (2.1) 0.6 12.4 1.7 11.7 24.3
Balance at 30 June 2023 45.9 845.5 7.3 4.5 83.6 986.8
Liabilities
Loans and Bonds Interest on Contingent Lease Total
borrowings €'m loans and consideration liabilities €'m
€'m borrowings and redemption €'m
and bonds liability
€'m €'m
Balance at 1 January 2022 167.1 875.0 10.4 11.0 95.3 1,158.8
Changes from financing cash flows
Interest payable on bonds and loans and borrowings - - (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
Note 26 - Events after the reporting date
In July 2023, the net proceeds from the issue of the 2023 Bond were used for
the repayment of the outstanding RCF amount of €45.6 million and the 2018
Bond amount to €200.0 million.
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