REG - Playtech PLC - Results for the year ended 31 December 2017 <Origin Href="QuoteRef">PTEC.L</Origin> - Part 4
22/02/2018 07:05
- Part 4: For the preceding part double click ID:nRSV6181Fc
- (415) (1,785) (3,810)
Foreign exchange Movements (175) (5) (74) (2) (256)
At 31 December 2017 97,307 27,036 14,944 35,401 174,688
Accumulated depreciation
At 1 January 2017 55,864 2,787 5,409 6,963 71,023
Charge 14,842 5,835 2,764 3,103 26,544
Disposals (1,490) 66 (251) (1,351) (3,026)
Foreign exchange Movements 90 3 36 2 131
At 31 December 2017 69,306 8,691 7,958 8,717 94,672
Net Book Value
At 31 December 2017 28,001 18,345 6,986 26,684 80,016
NOTE 12 - INTANGIBLE ASSETS
Patents, domain names and license Technology IP Development costs Customer Goodwill Total
list & Affiliates
€'000 €'000 €'000 €'000 €'000 €'000
Cost
As of 1 January 2016 62,891 43,182 122,510 309,151 469,213 1,006,947
Additions 1,305 11,714 35,649 - - 48,668
Disposals - - - - (5,312) (5,312)
Assets acquired on business combinations 13,536 38,560 - 79,261 158,992 290,349
Impairment of intangible assets - - - - (12,335) (12,335)
Foreign exchange Movements 1,391 527 574 3,344 9,699 15,535
As of 31 December, 2016 79,123 93,983 158,733 391,756 620,257 1,343,852
Accumulated amortisation
As of 1 January 2016 14,381 17,054 64,625 160,015 - 256,075
Provision 5,901 8,872 22,818 34,273 - 71,864
Foreign exchange Movements 157 167 214 740 - 1,278
As of 31 December 2016 20,439 26,093 87,657 195,028 - 329,217
Net Book Value
As of 31 December 2016 58,684 67,890 71,076 196,728 620,257 1,014,635
As of 31 December 2015 48,510 26,128 57,885 149,136 469,213 750,872
Patents, domain names & License Technology IP Development costs Customer Goodwill Total
list & Affiliates
€'000 €'000 €'000 €'000 €'000 €'000
Cost
As of 1 January 2017 79,123 93,983 158,733 391,756 620,257 1,343,852
Additions 1,601 - 50,683 1,460 - 53,744
Disposals (2,838) - (2,349) (28) - (5,215)
Assets acquired on business combinations 1,289 9,389 3,336 15,623 98,940 128,577
Assets acquired on business combinations in prior year 2,017 2,017
Impairment of intangible asset - - - - (7,845) (7,845)
Foreign exchange Movements (4,595) (2,619) (2,137) (12,216) (33,793) (55,360)
As of 31 December, 2017 74,580 100,753 208,266 396,595 679,576 1,459,770
Accumulated amortisation
As of 1 January 2017 20,439 26,093 87,657 195,028 - 329,217
Provision 7,909 16,101 27,976 35,001 - 86,987
Disposals - - (2,349) (28) - (2,377)
Foreign exchange Movements (627) (779) (822) (3,061) - (5,289)
As of 31 December 2017 27,721 41,415 112,462 226,940 - 408,538
Net Book Value
As of 31 December 2017 46,859 59,338 95,804 169,655 679,576 1,051,232
In 2016 amortisation included €3.3 million in relation to the release of the
buyout of reseller agreement.
In accordance with IAS 36, the Group regularly monitors the carrying value of
its intangible assets, including goodwill. Goodwill is allocated to thirteen
(2016: eleven) cash generating units ("CGU"). Following the restructure of the
Sports division, the previous CGU's of Mobenga, Geneity, BGT and other
acquisitions were combined to form the Sports CGU. Also, Quickspin and other
gaming studios were combined with the Casino product in accordance with IAS
36. Management determines which of those CGU's are significant in relation to
the total carrying value of goodwill as follows:
· Carrying value exceeds 10% of total goodwill; or
· Acquisition during the year; or
· Contingent consideration exists at the balance sheet date.
Based on the above criteria in respect of the goodwill, management has
concluded that the following are significant:
· Markets, with a carrying value of $265.3 million, €221.5
million (2016: $265.3 million, €252.3 million)
· Services, with a carrying value of €95.2 million (2016:
€100.0 million);
· Sport, with a carrying value of €132.5 million (2016: €126.1
million, BGT €88.3 million);
· Casino product, with a carrying value of €81.8 million (2016:
current presentation €67.1 million, previous presentation €34.0 million,
Quickspin €26.8 million, Other acquisitions €6.3 million);
· Tradetech Alpha, with a carrying value of €63.5 million (2016:
€0.9 million);
The recoverable amounts of all the CGUs have been determined from value in use
calculations based on cash flow projections from formally approved budgets
covering one year period to 31 December 2018 in addition to 2-3 years
forecasts. Beyond this period, management has applied an annual growth rate of
between 2% and 5% based on the underlying economic environment in which the
CGU operates. Management has applied discount rates to the cash flow
projections between 10.53% and 24.53% (2016: between 11.9% and 13.9%).
In 2017 the results of the review indicated that there was an impairment of
goodwill of the 1 CGU in a total amount of €7.8 million (2016: €12.3
million) which has been charged to the income statement.
The directors' sensitivity analysis does not result in an impairment charge of
any other CGU and, given the level of headroom in value in use they show, the
directors do not envisage reasonably possible changes to the key assumptions
would be sufficient to cause an impairment at this time.
Management has also reviewed the key assumptions and forecasts for the
customer lists, brands and affiliates, applying the above same key
assumptions. The results of the reviews indicated there was no impairment of
the intangible assets at 31 December 2017.
NOTE 13 - INVESTMENTS IN EQUITY ACCOUNTED ASSOCIATES & JOINT VENTURES
2017 2016
€'000 €'000
Investment in joint ventures comprise:
A. Investment in joint ventures 1,255 2,091
Investment in equity accounted associates:
B. Investment in associates 17,400 11,612
C. Investment in structured agreements 18,561 25,323
37,216 39,026
A. Investment in joint ventures
Investment in International Terminal Leasing
On 8 March 2011, the Group entered into an agreement with Scientific Games to
form a partnership called International Terminal Leasing ("ITL"), which
relates to the strategic partnership with Scientific Games Corporation.
The Group's future profit share from this joint venture varies depending on
the commercial arrangements in which ITL and its partners enter into with
third parties. However, the group's share of profit is expected to be between
20%-50%.
The Group received a return on investments of €1.4 million during the year
(2016: €1.4 million).
Other individually immaterial investments in joint venture
During the year the Group paid €0.1 million consideration to other joint
venture.
Movements in the carrying value of the investment during the year are as
follows:
€'000
Investment in joint venture at 1 January 2017 2,091
Share of profit in joint venture 464
Investment in joint venture in the year 100
Return of investment (1,400)
Investment in joint venture at 31 December 2017 1,255
B. Investment in associates
Investment in BGO
In August 2014, the Group acquired 33.33% of the shares of BGO Limited for a
total consideration of £10 million (€12.5 million). In 2015 the Group
invested additional £0.7 million (€0.9 million).
The purpose of this investment is to further enhance BGO gaming applications
on the Group's platform and to enable BGO to further invest in its successful
brands and grow into international markets. At the reporting date the Groups
NBV of investment in BGO totals €7.9 million (2016 €7.0).
Aggregated amounts relating to BGO Limited are as follows:
2017 2016
€'000 €'000
Total non-current assets 124 77
Total current assets 9,581 5,958
Total non-current liabilities (3,417) (3,521)
Total current liabilities (5,568) (4,475)
Revenues 39,401 40,609
Profit/(loss) 3,128 (3,484)
Other individually immaterial investments
During the year the Group paid €7.3 million consideration to non-controlling
investments (2016: €0.2 million additional consideration to non-controlling
investments acquired in previous years). At the reporting date the Groups NBV
of the other investments totals €9.5 million (2016 €4.6).
Total associates:
€'000
Investment in associates at 1 January 2017 11,612
Share of loss (662)
Investment in associates in the year 7,269
Subsidiary acquired in steps (819)
Investment in associates at 31 December 2017 17,400
C. Investment in structured agreements
During the year the Group invested additional €0.7 million in an existing
agreement (2016: The Group entered into two agreements with a Nil initial cost
and additional €1.4 million invested in existing agreements). These
structured agreements are individually immaterial. During the year the Group
impaired €7.5 million of structured agreements (2016: €1.6 million).
Movement in structured agreements:
€'000
Investment in structured agreements at 1 January 2017 25,323
Additional investment in structured agreements in the year 698
Impairment of investment in structured agreements (7,460)
Investment in structured agreements at 31 December 2017 18,561
Ladbrokes software and services agreement
In 2013, the Group entered into a landmark transaction with Ladbrokes plc
("Ladbrokes"), which includes three significant agreements covering software
licensing, marketing and advisory services.
As part of the advisory services agreement, the Group through its marketing
division will have significant influence over the financial and operational
decision making of the Ladbrokes digital business. The Group will receive a
share of profit based on the EBITDA performance of the Ladbrokes digital
business in the financial year ended 31 December 2017 over and above that
achieved in the financial year ended 31 December 2012, as adjusted (the "Base
EBITDA").
On 27 July 2015, the Group agreed to an early settlement of its marketing
services subject to the completion of the merger between Ladbrokes and Coral.
On 1 November 2016, the merger was completed. The Group received €44.5
million (£40 million) satisfied by way of the issue of shares in Ladbrokes
Coral plc. A further £35 million in cash is to be received upon delivery
of key operational milestones by the Group but, in any event, within 42 months
following completion of the merger.
Upon completion the Group disposed of the investments relating to the
Ladbrokes software and services agreements. Profit on disposal was calculated
as follows:
Profit on disposal of investment of associate 2016
€'000
Ladbrokes Coral plc shares fair value as at 1 November 2016 44,477
Present value of cash receivable (using a 5.0% discount rate) 38,100
Cost related to the software and services agreement (9,639)
Disposal of investment in associate (6,893)
Profit on disposal of investment of associate 66,045
Impairment of investment in associate (note 13b) (1,586)
Net profit on disposal of investment of associate 64,459
NOTE 14 - AVAILABLE-FOR-SALE INVESTMENTS
2017 2016
€'000 €'000
Investment in available-for-sale investments at 1 January 230,278 237,100
Investment in the year (Note 13c) - 44,477
Decline in fair value of available-for-sale investment recognised in income (467) -
statement
Unrealised valuation movement recognised in equity 157,809 (53,868)
Foreign exchange Movements (6,274) 2,569
Investment in available-for-sale investments at 31 December 381,346 230,278
2017 2016
€'000 €'000
Available-for-sale financial assets include the following:
Quoted:
Equity securities - UK 378,210 225,280
Equity securities - Asia 3,136 4,998
381,346 230,278
The fair value of quoted investments is based on published market prices
(level one).
The maximum exposure of the available for sale financial assets to credit risk
at the reporting date is the carrying value of the financial assets classified
as available-for-sale.
NOTE 15 - OTHER NON-CURRENT ASSETS
2017 2016
€'000 €'000
Loans to customers - 7,293
Loan to affiliate 2,208 4,382
Rent and car lease deposits 3,779 3,758
Guarantee for gaming licenses 2,000 2,000
Related parties (Note 28) - 5,050
Deferred tax 2,775 2,025
Non-current prepayments 600 740
Other 8,631 1,613
19,993 26,861
NOTE 16 - TRADE RECEIVABLES
2017 2016
€'000 €'000
Customers 102,253 71,506
Related parties (Note 28) 4,912 2,238
107,165 73,744
NOTE 17 - OTHER RECEIVABLES
2017 2016
€'000 €'000
Prepaid expenses 18,857 17,054
VAT and other taxes 11,326 9,675
Advances to suppliers 158 2,141
Proceeds from disposal of investment (note 13c) 39,426 39,865
Related parties (Note 28) 190 228
Loans to associates (Note 28) 6,334 -
Other receivables 17,031 5,003
93,322 73,966
NOTE 18 - CASH AND CASH EQUIVALENTS
2017 2016
€'000 €'000
Cash at bank 558,527 409,158
Cash at brokers 17,771 -
Deposits 7,659 135,685
583,957 544,843
The Group held cash balances which include monies held on behalf of operators
in respect of operators' jackpot games and poker and casino operations and
client funds with respect to CFD and client deposits in respect of liquidity
and clearing activity.
2017 2016
€'000 €'000
Funds attributed to jackpots 46,870 31,587
Security deposits 15,805 15,172
Client deposits 71,628 76,229
Client funds 37,074 29,863
171,377 152,851
NOTE 19 - SHAREHOLDERS' EQUITY
A. Share Capital
Share capital is comprised of no par value shares as follows:
2017 2016
Number of Shares Number of Shares
Authorised* N/A N/A
Issued and paid up 317,344,603 317,344,603
* The Group has no authorised share capital but is authorised under its
memorandum and article of association to issue up to 1,000,000,000 shares of
no par value.
In 2016 the Group cancelled 5,280,000 shares as part of share buy back for a
total consideration of €49,829,000.
B. Employee Benefit Trust
In 2014 the Group established an Employee Benefit Trust by acquiring 5,517,241
shares for a total consideration of €48.5 million. During the year 450,110
shares (2016: 244,416) were issued as a settlement for employee share option
exercises with a cost of €3.8 million (2016: €2.1 million), and as of 31
December 2017, a balance of 2,585,563 (2016: 3,035,673) shares remains in the
trust with a cost of €21.6 million (2016: €25.4 million).
C. Share options exercised
During the year 479,799 (2016: 258,477) share options were exercised. The
Group cash-settled 29,689 share options during the year (2016: 14,061).
D. Distribution of Dividend
In June 2017, the Group distributed €68,404,085 as a final dividend for the
year ended 31 December 2016 (21.7 € cents per share).
In October 2017, the Group distributed €36,251,442 as an interim dividend in
respect of the period ended 30 June 2017 (12.1 € cents per share).
E. Reserves
The following describes the nature and purpose of each reserve within owner's
equity:
Reserve Description and purpose
Additional paid in capital Share premium (i.e. amount subscribed for share capital in excess of nominal
value)
Available-for-sale reserve Changes in fair value of available-for-sale investments (Note 14)
Employee Benefit Trust Cost of own shares held in treasury by the trust
Put/Call options reserve reserve Fair value of put options as part of business acquisition
Foreign exchange reserve Gains/losses arising on retranslating the net assets of overseas operations
Convertible bond option reserve Amount of proceeds on issue of convertible debt relating to the equity
component (i.e. option to convert the debt into share capital)
Retained earnings Cumulative net gains and losses recognised in the consolidated statement of
comprehensive income
NOTE 20 - LOANS AND BORROWINGS
The loan balance as of 31 December 2017 is €200 million (2016: €200 million). The loan is a revolving credit facility available until June 2018. Interest payable on the loan is based on a margin on Euro Libor rates.
NOTE 21 - CONVERTIBLE BONDS
On 12 November 2014 the Group issued €297.0 million of senior, unsecured
convertible bonds due 2019 and convertible into fully paid Ordinary Shares of
Playtech plc (the "Bonds"). The net proceeds of issuing the Bonds, after
deducting commissions and other direct costs of issue, totaled €291.1
million.
The Bonds were issued at par and will be redeemed (if not converted before) on
19 November 2019 at their principal amount. The Bonds bear interest at 0.5%
per annum, payable annually in arrears on 19 November.
Upon conversion, Bondholders are entitled to receive Ordinary Shares at the
conversion price of €8.8542 per Ordinary Share, subject to adjustment in
respect of (i) any dividend or distribution by the Company, (ii) a change of
control and (iii) customary anti-dilution adjustments for, inter alia, share
consolidations, share splits and rights issues.
The fair value of the liability component, included in non-current borrowings,
at inception was calculated using a market interest rate for an equivalent
instrument without conversion option of 4%.
The fair value of the liability component of the bond at 31 December 2017 was
€342.4 million (2016: €341.3 million), based on readily available quoted
prices.
The amortised cost of the liability component of the Bonds (including accrued
interest) at 31 December 2017 amounted to €276.6 million (2016: €266.2
million), which was calculated using cash flow projections discounted at 4%.
The fair value at inception of the equity component of the bonds at 31
December 2017 was €45.4 million (2016: €45.4 million).
NOTE 22 -CONTINGENT CONSIDERATION AND REDEMPTION LIABILITIES
2017 2016
€'000 €'000
Non-Current contingent consideration consists:
Acquisition of Tradetech Markets Limited - 139,133
Acquisition of ACM Group (Note 26b) 66,791 -
Acquisition of Quickspin AB (Note 27a) 14,670 24,143
Acquisition of Eyecon Limited (Note 26a) 1,315
Acquisition of Playtech BGT Sports Limited (Note 27b) - 4,792
Other acquisitions (Note 26c) 4,518 1,645
87,294 169,713
Non-Current redemption liability consists:
Acquisition of Consolidated Financial Holdings A/S (Note 27d) 22,398 17,102
Acquisition of Playtech BGT Sports Limited (Note 27b) 25,934 16,593
Acquisition of ECM Systems Holdings Limited (Note 27c) 1,190 1,142
Other acquisitions 264 -
49,786 34,837
Total Non-Current contingent consideration and redemption liability 137,080 204,550
Current contingent consideration consists:
Acquisition of ACM Group (Note 26b) 4,601 -
Acquisition of Quickspin AB (Note 27a) 9,440 -
Acquisition of Playtech BGT Sports Limited (Note 27b) 4,958 -
Acquisition of ECM Systems Holdings Limited (Note 27c) - 3,061
Acquisition of Consolidated Financial Holdings A/S (Note 27d) - 336
Other acquisitions 1,593 1,180
20,592 4,577
On 8 May 2015, the Group acquired 95.05% of the shares of Tradetech Markets Limited (previously named TradeFX), 91.1% on fully diluted basis. The Group paid total cash consideration of €208 million and additional cash consideration, capped at €250 million, was to be payable based on 2017 EBITDA multiple, less initial consideration. Following the completion of the 2017 results, which were negatively impacted by one-sided crypto currency trading in the final quarter of 2017, compounded by a lack of volatility in other asset classes for the majority of the second half of 2017, the directors calculate that there is no further consideration payable and so the contingent consideration liability was released to the income statement.
NOTE 23 - TRADE PAYABLES
2017 2016
€'000 €'000
Suppliers 30,554 23,235
Fair value of open B2B financial trading positions 25,739 -
Customer liabilities 5,091 3,932
Related parties (Note 28) - 573
Other 585 431
61,969 28,171
NOTE 24 - DEFERRED TAX LIABILITY
The deferred tax liability is due to temporary differences on the acquisition
of certain businesses.
The movement on the deferred tax liability is as shown below:
2017 2016
€'000 €'000
At the beginning of the year 40,443 14,049
Arising on the acquisitions during the year (Note 26) 781 29,743
Reversal of temporary differences, recognised in the consolidated statement of (4,592) (3,349)
comprehensive income (Note 8)
Reversal of deferred tax upon sale of intangible asset recognised in the (3,824) -
consolidated statement of comprehensive income
Foreign exchange Movements (1,525) -
31,283 40,443
NOTE 25 - OTHER PAYABLES
2017 2016
€'000 €'000
Payroll and related expenses 41,322 37,626
Accrued expenses 17,923 16,328
Related parties (Note 28) 402 1,309
Other payables 4,151 3,173
63,798 58,436
NOTE 26 - ACQUISITIONS DURING THE YEAR
A. Acquisition of Eyecon Limited and Eyecon PTY
On 7 February 2017, the Group acquired 100% of the shares of Eyecon Limited
and Eyecon PTY (together "Eyecon"), an Australian specialist supplier of
online gaming slots software.
The Group paid total cash consideration of €27.7 million (GBP 23.7 million)
and additional consideration capped at €29.0 million (GBP 25.0 million) in
cash will be payable based on an EBITDA multiple less initial consideration
paid and is payable in 2020.
Details of the fair value of identifiable assets and liabilities acquired,
purchase consideration and goodwill, are as follows:
Fair value on acquisition
€'000
Property, plant and equipment 77
Intangible assets 12,990
Trade and other receivables 1,361
Cash and cash equivalent 575
Trade payables (2,834)
Net identified assets 12,169
Goodwill 16,859
Fair value of consideration 29,028
€'000
Cash consideration 27,735
Non-current contingent consideration 1,486
Finance cost arising on discounting of contingent consideration (193)
Fair value of consideration 29,028
Cash purchased (575)
Net cash payable 28,453
Adjustments to fair value include the following:
Amount Amortisation
€'000 %
IP Technology 9,279 16.7-33
Customer relationships 2,436 10
Brand 1,275 10
The main factor leading to the recognition of goodwill is the revenue stream
from new games and new licensees, assembled work force with vast experience
and strong records and cost synergies. In accordance with IAS36, the Group
will regularly monitors the carrying value of its interest in Eyecon.
The key assumptions used by management to determine the value in use of the
Customer relationships within Eyecon are as follows:
§ The MPEEM income approach.
§ The discount rate assumed is equivalent to the WACC for the Customer
relationships.
§ The growth rates and attrition rates were based on market analysis.
The key assumptions used by management to determine the value in use of the
Brand within Eyecon are as follows:
§ The relief from royalty approach.
§ The royalty rate was based on a third party market participant assumption
for the use of the Brand.
§ The discount rate assumed is equivalent to the WACC for the Brand.
§ The growth rates and attrition rates were based on market analysis.
The key assumptions used by management to determine the value in use of the IP
Technology within Eyecon are as follows:
§ The with and without model, taking into account the time and additional
expenses required to recreate the IP Technology and the level of lost cash
flows in the period.
§ The discount rate assumed is equivalent to the WACC for the IP Technology.
§ The growth rates and attrition rates were based on market analysis.
Management has not disclosed Eyecon contribution to the Group profit since the
acquisition nor has the impact the acquisition would have had on the Group's
revenue and profits if it had occurred on 1 January 2017 been disclosed,
because the amounts are not material.
B. Acquisition of ACM Group assets
On 1 October 2017, the Group acquired technology, Intellectual property and
certain customer assets (together "the assets") from ACM Group Limited to
enhance its Financials Division's B2B offering and to deliver a bespoke risk
management and trading solution to B2B customers.
The Group paid total cash consideration of €4.2 million ($5.0 million) and
additional consideration capped at €122.7 million ($145.0 million) in cash
will be payable based on 2017, 2018 and 2019 EBITDA multiple and is payable
annually over the term.
Details of the fair value of identifiable assets and liabilities acquired,
purchase consideration and goodwill, are as follows:
Fair value on acquisition
€'000
Intangible assets 12,602
Goodwill 62,573
Fair value of consideration 75,175
€'000
Cash consideration 4,233
Non-current contingent consideration 69,621
Current contingent consideration 4,984
Finance cost arising on discounting of contingent consideration (3,663)
Fair value of consideration 75,175
The fair value of the assets acquired:
Amount Amortisation
€'000 %
Customer relationships 12,602 7
The main factor leading to the recognition of goodwill is ACM's well-known
brand and market in the CFD industry with strong customer relationship,
key personnel and future revenue and cost synergies. In accordance with IAS36,
the Group will regularly monitor the carrying value of its interest in ACM
Group assets.
The key assumptions used by management to determine the value in use of the
Customer relationships within ACM Group assets are as follows:
§ The MPEEM income approach.
§ The discount rate assumed is equivalent to the WACC for the Customer
relationships.
§ The growth rates and attrition rates were based on market analysis.
Management has not disclosed ACM contribution to the Group profit since the
acquisition, because the amounts are not material. The combined Group revenue
as if ACM acquisition had occurred on 1 January 2017 would have been higher by
€9.2 million, the combined Group adjusted EBITDA and adjusted net profit
would have been higher by €2.1 million.
C. Other acquisitions
During the period, the Group acquired the shares of various companies for a
total consideration of €14.4 million. One of these subsidiaries was acquired
in steps, additional 45% acquired in the year and previous consideration of
€0.8 million paid to acquire the previously recognized 35% interest in
associate. A fair value movement was required on conversion to a subsidiary of
€0.1m.
Details of the fair value of identifiable assets and liabilities acquired,
purchase consideration and goodwill, are as follows:
Fair value on acquisition
€000
Intangible assets 3,812
Trade and other receivables 897
Loans acquired (8,629)
Cash and cash equivalent 1,386
Trade and other liabilities (1,912)
Deferred tax liability (781)
Net identified assets (5,227)
Non-controlling interest (117)
Goodwill 19,741
Total fair value of consideration 14,397
€'000
Cash consideration 8,582
Deferred consideration 144
Non-current contingent consideration 4,749
Current contingent consideration 557
Finance cost arising on discounting of contingent consideration (454)
Conversion of previously recognised associate 819
Fair value of consideration 14,397
Cash purchased (1,386)
Net cash payable 13,011
Adjustments to fair value include the following:
Amount Amortisation
€'000 %
IP Technology 2,345 12.5-50
Customer relationships 353 12.5
The main factor leading to the recognition of goodwill is the frontend
framework and its software integration, unique workforce and future revenue
and cost synergies. In accordance with IAS36, the Group will regularly monitor
the carrying value of its interest in these acquisitions.
The key assumptions used by management to determine the value in use of the IP
Technology and Customers relationship within these acquisitions are as
follows:
§ The income approach, in particular, the MPEEM method and the with and
without models.
§ The discount rate assumed is equivalent to the WACC for the IP Technology
and the Customer relationship.
§ The growth rates and attrition rates were based on market analysis.
Management has not disclosed other acquisitions contribution to the Group
profit since these acquisitions nor has the impact the acquisition would have
had on the Group's revenue and profits if it had occurred on 1 January 2017
been disclosed, because the amounts are not material.
NOTE 27 - ACQUISITIONS IN PRIOR YEAR
A. Acquisition of Quickspin AB
On 24 May 2016, the Group acquired 100% of the shares of Quickspin
AB ("Quickspin"). Quickspin is a Swedish games studio that develops and
supplies high quality video slots to operators, both in online real money
gambling as well as in the social gaming market.
The Group paid total cash consideration of €24.5 million (SEK 228.4 million)
and additional consideration capped at €26.0 million (SEK 242.9 million) in
cash will be payable subject to achieving target EBITDA.
B. Acquisition of Playtech BGT Sports Limited (previously named Patelle
Limited)
On 13 July 2016, the Group acquired 90% of the shares of Patelle Limited.
Patelle owns 100% of Best Gaming Technology GmbH ("BGT"). BGT is an Austrian
leading provider of sports betting software and solutions for gaming and
sports betting operators. The remaining 10% of the shares are held by the
founder and CEO of BGT.
The Group paid total cash consideration of €138.5 million.
The Group has a call option to purchase the remaining 10% of BGT at a
valuation of 6 times 2019 EBITDA capped at €55.0 million. The founder and
CEO of BGT has certain put options over his 10% holding at the same valuation.
In December 2017 the Group announced the internal re-organisation of the
Playtech BGT Sports division ("PBS"). As part of the re-organisation the basis
for the consideration payable on the put/call was revised, which will result
in Dr. Segeder will be rewarded for the incremental growth of the non-BGT
business in addition to the BGT standalone business. The maximum amount
payable pursuant to the revised arrangements was increased to €95.0 million.
The increase in the liability fair value as a result of the revised put/call
option terms was recognised as employment cost in the income statement and
non-current liability. The fair value of the put/call option liability as of
31 December 2017 was €25.9 million.
The founder and CEO of BGT may also be entitled to an additional payment of
€5.0 million subject to the achievement of certain operational milestones.
Total payments in the current year are €2.0 million.
C. Acquisition of ECM Systems Holdings Ltd
On 20 October 2016, the Group acquired 90% of the shares of ECM Systems
Holdings Limited ("ECM"). ECM is a bingo software and hardware solutions
provider to the UK retail bingo market. The remaining 10% of the shares are
held by the founder and CEO of ECM.
The Group paid total cash consideration of €25.0 million (£22.4 million).
The company paid €3.1 million (£2.7 million) as additional working capital
adjustment in the beginning of 2017.
The Group has a call option to purchase the remaining 10% of ECM at a
valuation of 6 times 2019 EBITDA capped at £1.1 million (€1.2 million). The
CEO of ECM have certain put options over his 10% holding at the same
valuation. The fair value of this option was recognised as non current
liability and reflected in the Groups' statement of changes in equity. The
fair value as of 31 December 2017 was €1.1 million. The Group paid to an
escrow account the fair value of the option.
D. Acquisition of Consolidated Financial Holdings A/S
On 30 November 2016, the Group acquired 70% of the shares of Consolidated
Financial Holdings A/S ("CFH"). CFH is a technology company with products
including a Straight Through Processing brokerage which provides retail
brokers with multi-asset execution, prime brokerage services, liquidity and
complementary risk management tools. The remaining 30% of the shares are held
by the founder and CEO of ECM.
The Group paid total cash consideration of €38.6 million ($41.0 million).
The company paid €0.3 million ($0.3 million) as additional working capital
adjustment in the beginning of 2017.
The Group has a call option to purchase the remaining 30% of CFH at a
valuation of 6 times 2018 EBITDA capped at a total consideration of $76.6
million less the initial consideration. The founder and CEO of CFH have
certain put options over his 30% holding at the same valuation. The fair value
of this option was recognised as a non-current liability and reflected in the
Groups' statement of changes in equity. In 2017 the Group acquired 5.83% of
minority shares for a total consideration of €3.07 million. Accordingly, the
proportional part of the redemption liability and the put/call option capital
reserve of a total €3.3 million was removed. The fair value as of 31
December 2017 of the put/call option to purchase/sale the remaining 24.17%
shares was €22.4 million.
E. Other acquisitions
During the period, the Group acquired the shares of various companies for a
total consideration of €13.1 million. One of these subsidiaries was
acquired in steps, with previous consideration of €2.4 million paid to
acquire the previously recognised associate.
NOTE 28 - RELATED PARTIES AND SHAREHOLDERS
Parties are considered to be related if one party has the ability to control
the other party or exercise significant influence over the other party's
making of financial or operational decisions, or if both parties are
controlled by the same third party. Also, a party is considered to be related
if a member of the key management personnel has the ability to control the
other party.
On 27 June 2017, Brickington Trading Limited ("Brickington") decreased its
holding to 6.3% (31 Decemebr 2016: 21.93%) of Playtech plc shares and the
relationship agreement terminated. From this date Brickington no longer meets
the definition of a related party. Accordingly, the following companies are
not accounted as related parties from the same date:
Skywind Holdings Limited ("Skywind"), SafeCharge Limited, Crossrider
Technologies Ltd ("Crossrider"), Royalfield Limited, Easydock Investments
Ltd. (Easydock), Selfmade Holdings, Glispa GmbH ("Glispa"), Anise Development
Limited and Anise Residential Limited (together "Anise").
The transaction amounts with the abovementioned companies reflects the period
ended 27 June 2017, when they ceased to be related parties.
Mr Teddy Sagi, the ultimate beneficiary of Brickington, provides advisory
services to the Group for a total annual consideration of €1.
The joint ventures and the structured agreements are associates of the Group
by virtue of the Group's significant influence over those arrangements.
The following transactions arose with related parties:
2017 2016
€'000 €'000
Revenue including revenue from associates
Skywind 720 1,683
Structured agreements and associates 21,294 12,904
Share of profit in joint venture 464 146
Share of loss in associates (662) (693)
Operating expenses
SafeCharge Limited 3,612 6,150
Crossrider 1,314 2,615
Structured agreements 9 1,309
Anise 518 1,037
Skywind, net of capiltalised cost 334 82
Glispa GmbH 165 28
Selfmade Holdings - 11
Royalfield Limited - 4
Easydock - 1
Interest income
Structured agreements 85 -
The following are year-end balances:
Intangible assets
Skywind - 4,128
Cash and cash equivalent
Safecharge Limited - 2,968
Structured agreements and associates - 5,050
Total non-current related party receivables - 5,050
Structured agreements and associates 11,246 1,971
Skywind - 267
Crossrider - 228
Associates and joint ventures 190 -
Total current related party receivables 11,436 2,466
SafeCharge Limited - 200
Structured agreements 402 1,682
Total related party payables 402 1,882
The details of key management compensation (being the remuneration of the
directors) are set out in Note 6.
NOTE 29 - SUBSIDIARIES
Details of the Group's principal subsidiaries as at the end of the year are set out below:
Name Country of incorporation Proportion of voting rights and ordinary share capital held Nature of business
Playtech Software Limited Isle of Man 100% Main trading company of the Group, owns the intellectual property rights and
licenses the software to customers.
OU Playtech (Estonia) Estonia 100% Designs, develops and manufactures online software
Techplay Marketing Limited Israel 100% Marketing and advertising
Video B Holding Limited British Virgin Islands 100% Trading company for the Videobet software, owns the intellectual property
rights of Videobet and licenses it to customers.
OU Videobet Estonia 100% Develops software for fixed odds betting terminals and casino machines (as
opposed to online software)
Playtech Bulgaria Bulgaria 100% Designs, develops and manufactures online software
PTVB Management Limited Isle of Man 100% Management
Evermore Trading Limited British Virgin Islands 100% Holding company
Playtech Services (Cyprus) Limited Cyprus 100% Activates the ipoker Network in regulated markets. Owns the intellectual
property of GTS, Ash and Geneity businesses
VB (Video) Cyprus Limited Cyprus 100% Trading company for the Videobet product to Romanian companies
Techplay S.A. Software Limited Israel 100% Develops online software
Technology Trading IOM Limited Isle of Man Owns the intellectual property rights of Virtue Fusion business
100%
Gaming Technology Solutions Limited UK 100% Holding company of VS Gaming and VS Technology
Virtue Fusion (Alderney) Limited Alderney 100% Online bingo and casino software provider
Virtue Fusion CM Limited UK 100% Chat moderation services provider to end users of VF licensees
Playtech Software (Alderney) Limited Alderney 100% To hold the company's Alderney Gaming license
Intelligent Gaming Systems Limited UK 100% Casino management systems to land based businesses
VF 2011 Limited Alderney 100% Holds license in Alderney for online gaming and Bingo B2C operations
PT Turnkey Services Limited British Virgin Islands 100% Holding company of the Turnkey Services group
PT Turnkey EU Services Limited Cyprus 100% Turnkey services for EU online gaming operators
PT Entertenimiento Online EAD Bulgaria 100% Poker & Bingo network for Spain
PT Marketing Services Limited British Virgin Islands 100% Marketing services to online gaming operators
PT Operational Services Limited British Virgin Islands 100% Operational & hosting services to online gaming operators
Tech Hosting Limited Alderney 100% Alderney Hosting services
Paragon International Customer Care Limited British Virgin Island & branch office in the Philippines 100% English Customer support, chat, fraud, finance, dedicated employees services
to parent company
CSMS Limited Bulgaria 100% Consulting and online technical support, data mining processing and
advertising services to parent company
TCSP Limited Serbia 100% Operational services for Serbia
S-Tech Limited British Virgin Islands & branch office in the Philippines 100% Live games services to Asia
PT Advisory Services Limited British Virgin Islands 100% Holds PT Processing Advisory Ltd
PT Processing Advisory Limited British Virgin Islands 100% Advisory services for processing & cashier to online gaming operators
PT Processing EU Advisory Limited Cyprus 100% Advisory services for processing & cashier for EU online gaming operators
PT Network Management Limited British Virgin Islands 100% Manages the ipoker network
Playtech Mobile (Cyprus) Limited Cyprus 100% Holds the IP of Mobenga AB
Playtech Holding Sweden AB Limited Sweden 100% Holding company of Mobenga AB
Mobenga AB Limited Sweden 100% Mobile sportsbook betting platform developer
Ash Gaming Limited UK 100% Develops interactive gambling and betting games
Geneity Limited UK 100% Develops Sportsbook and Lottery software
Factime Limited Cyprus 100% Holding company of Juego
Juego Online EAD Bulgaria 100% Gaming operator. Holds a license in Spain.
PlayLot Limited British Virgin Islands 100% Distributing lottery software
PokerStrategy Ltd. Gibraltar 100% Operates poker community business
- More to follow, for following part double click ID:nRSV6181Fe
As of 1 January 2016 62,891 43,182 122,510 309,151 469,213 1,006,947
Additions 1,305 11,714 35,649 - - 48,668
Disposals - - - - (5,312) (5,312)
Assets acquired on business combinations 13,536 38,560 - 79,261 158,992 290,349
Impairment of intangible assets - - - - (12,335) (12,335)
Foreign exchange Movements 1,391 527 574 3,344 9,699 15,535
As of 31 December, 2016 79,123 93,983 158,733 391,756 620,257 1,343,852
Accumulated amortisation
As of 1 January 2016 14,381 17,054 64,625 160,015 - 256,075
Provision 5,901 8,872 22,818 34,273 - 71,864
Foreign exchange Movements 157 167 214 740 - 1,278
As of 31 December 2016 20,439 26,093 87,657 195,028 - 329,217
Net Book Value
As of 31 December 2016 58,684 67,890 71,076 196,728 620,257 1,014,635
As of 31 December 2015 48,510 26,128 57,885 149,136 469,213 750,872
Patents, domain names & License Technology IP Development costs Customerlist & Affiliates Goodwill Total
E'000 E'000 E'000 E'000 E'000 E'000
Cost
As of 1 January 2017 79,123 93,983 158,733 391,756 620,257 1,343,852
Additions 1,601 - 50,683 1,460 - 53,744
Disposals (2,838) - (2,349) (28) - (5,215)
Assets acquired on business combinations 1,289 9,389 3,336 15,623 98,940 128,577
Assets acquired on business combinations in prior year 2,017 2,017
Impairment of intangible asset - - - - (7,845) (7,845)
Foreign exchange Movements (4,595) (2,619) (2,137) (12,216) (33,793) (55,360)
As of 31 December, 2017 74,580 100,753 208,266 396,595 679,576 1,459,770
Accumulated amortisation
As of 1 January 2017 20,439 26,093 87,657 195,028 - 329,217
Provision 7,909 16,101 27,976 35,001 - 86,987
Disposals - - (2,349) (28) - (2,377)
Foreign exchange Movements (627) (779) (822) (3,061) - (5,289)
As of 31 December 2017 27,721 41,415 112,462 226,940 - 408,538
Net Book Value
As of 31 December 2017 46,859 59,338 95,804 169,655 679,576 1,051,232
In 2016 amortisation included E3.3 million in relation to the release of the buyout of reseller agreement.
In accordance with IAS 36, the Group regularly monitors the carrying value of its intangible assets, including goodwill.
Goodwill is allocated to thirteen (2016: eleven) cash generating units ("CGU"). Following the restructure of the Sports
division, the previous CGU's of Mobenga, Geneity, BGT and other acquisitions were combined to form the Sports CGU. Also,
Quickspin and other gaming studios were combined with the Casino product in accordance with IAS 36. Management determines
which of those CGU's are significant in relation to the total carrying value of goodwill as follows:
· Carrying value exceeds 10% of total goodwill; or
· Acquisition during the year; or
· Contingent consideration exists at the balance sheet date.
Based on the above criteria in respect of the goodwill, management has concluded that the following are significant:
· Markets, with a carrying value of $265.3 million, E221.5 million (2016: $265.3 million, E252.3 million)
· Services, with a carrying value of E95.2 million (2016: E100.0 million);
· Sport, with a carrying value of E132.5 million (2016: E126.1 million, BGT E88.3 million);
· Casino product, with a carrying value of E81.8 million (2016: current presentation E67.1 million, previous
presentation E34.0 million, Quickspin E26.8 million, Other acquisitions E6.3 million);
· Tradetech Alpha, with a carrying value of E63.5 million (2016: E0.9 million);
The recoverable amounts of all the CGUs have been determined from value in use calculations based on cash flow projections
from formally approved budgets covering one year period to 31 December 2018 in addition to 2-3 years forecasts. Beyond this
period, management has applied an annual growth rate of between 2% and 5% based on the underlying economic environment in
which the CGU operates. Management has applied discount rates to the cash flow projections between 10.53% and 24.53%
(2016: between 11.9% and 13.9%).
In 2017 the results of the review indicated that there was an impairment of goodwill of the 1 CGU in a total amount of E7.8
million (2016: E12.3 million) which has been charged to the income statement.
The directors' sensitivity analysis does not result in an impairment charge of any other CGU and, given the level of
headroom in value in use they show, the directors do not envisage reasonably possible changes to the key assumptions would
be sufficient to cause an impairment at this time.
Management has also reviewed the key assumptions and forecasts for the customer lists, brands and affiliates, applying the
above same key assumptions. The results of the reviews indicated there was no impairment of the intangible assets at 31
December 2017.
NOTE 13 - INVESTMENTS IN EQUITY ACCOUNTED ASSOCIATES & JOINT VENTURES
2017 2016
E'000 E'000
Investment in joint ventures comprise:
A. Investment in joint ventures 1,255 2,091
Investment in equity accounted associates:
B. Investment in associates 17,400 11,612
C. Investment in structured agreements 18,561 25,323
37,216 39,026
A. Investment in joint ventures
Investment in International Terminal Leasing
On 8 March 2011, the Group entered into an agreement with Scientific Games to form a partnership called International
Terminal Leasing ("ITL"), which relates to the strategic partnership with Scientific Games Corporation.
The Group's future profit share from this joint venture varies depending on the commercial arrangements in which ITL and
its partners enter into with third parties. However, the group's share of profit is expected to be between 20%-50%.
The Group received a return on investments of E1.4 million during the year (2016: E1.4 million).
Other individually immaterial investments in joint venture
During the year the Group paid E0.1 million consideration to other joint venture.
Movements in the carrying value of the investment during the year are as follows:
E'000
Investment in joint venture at 1 January 2017 2,091
Share of profit in joint venture 464
Investment in joint venture in the year 100
Return of investment (1,400)
Investment in joint venture at 31 December 2017 1,255
B. Investment in associates
Investment in BGO
In August 2014, the Group acquired 33.33% of the shares of BGO Limited for a total consideration of £10 million (E12.5
million). In 2015 the Group invested additional £0.7 million (E0.9 million).
The purpose of this investment is to further enhance BGO gaming applications on the Group's platform and to enable BGO to
further invest in its successful brands and grow into international markets. At the reporting date the Groups NBV of
investment in BGO totals E7.9 million (2016 E7.0).
Aggregated amounts relating to BGO Limited are as follows:
2017 2016
E'000 E'000
Total non-current assets 124 77
Total current assets 9,581 5,958
Total non-current liabilities (3,417) (3,521)
Total current liabilities (5,568) (4,475)
Revenues 39,401 40,609
Profit/(loss) 3,128 (3,484)
Other individually immaterial investments
During the year the Group paid E7.3 million consideration to non-controlling investments (2016: E0.2 million additional
consideration to non-controlling investments acquired in previous years). At the reporting date the Groups NBV of the other
investments totals E9.5 million (2016 E4.6).
Total associates:
E'000
Investment in associates at 1 January 2017 11,612
Share of loss (662)
Investment in associates in the year 7,269
Subsidiary acquired in steps (819)
Investment in associates at 31 December 2017 17,400
C. Investment in structured agreements
During the year the Group invested additional E0.7 million in an existing agreement (2016: The Group entered into two
agreements with a Nil initial cost and additional E1.4 million invested in existing agreements). These structured
agreements are individually immaterial. During the year the Group impaired E7.5 million of structured agreements (2016:
E1.6 million).
Movement in structured agreements:
E'000
Investment in structured agreements at 1 January 2017 25,323
Additional investment in structured agreements in the year 698
Impairment of investment in structured agreements (7,460)
Investment in structured agreements at 31 December 2017 18,561
Ladbrokes software and services agreement
In 2013, the Group entered into a landmark transaction with Ladbrokes plc ("Ladbrokes"), which includes three significant
agreements covering software licensing, marketing and advisory services.
As part of the advisory services agreement, the Group through its marketing division will have significant influence over
the financial and operational decision making of the Ladbrokes digital business. The Group will receive a share of profit
based on the EBITDA performance of the Ladbrokes digital business in the financial year ended 31 December 2017 over and
above that achieved in the financial year ended 31 December 2012, as adjusted (the "Base EBITDA").
On 27 July 2015, the Group agreed to an early settlement of its marketing services subject to the completion of the merger
between Ladbrokes and Coral.
On 1 November 2016, the merger was completed. The Group received E44.5 million (£40 million) satisfied by way of the issue
of shares in Ladbrokes Coral plc. A further £35 million in cash is to be received upon delivery of key operational
milestones by the Group but, in any event, within 42 months following completion of the merger.
Upon completion the Group disposed of the investments relating to the Ladbrokes software and services agreements. Profit on
disposal was calculated as follows:
Profit on disposal of investment of associate 2016
E'000
Ladbrokes Coral plc shares fair value as at 1 November 2016 44,477
Present value of cash receivable (using a 5.0% discount rate) 38,100
Cost related to the software and services agreement (9,639)
Disposal of investment in associate (6,893)
Profit on disposal of investment of associate 66,045
Impairment of investment in associate (note 13b) (1,586)
Net profit on disposal of investment of associate 64,459
NOTE 14 - AVAILABLE-FOR-SALE INVESTMENTS
2017 2016
E'000 E'000
Investment in available-for-sale investments at 1 January 230,278 237,100
Investment in the year (Note 13c) - 44,477
Decline in fair value of available-for-sale investment recognised in income statement (467) -
Unrealised valuation movement recognised in equity 157,809 (53,868)
Foreign exchange Movements (6,274) 2,569
Investment in available-for-sale investments at 31 December 381,346 230,278
2017 2016
E'000 E'000
Available-for-sale financial assets include the following:
Quoted:
Equity securities - UK 378,210 225,280
Equity securities - Asia 3,136 4,998
381,346 230,278
The fair value of quoted investments is based on published market prices (level one).
The maximum exposure of the available for sale financial assets to credit risk at the reporting date is the carrying value
of the financial assets classified as available-for-sale.
NOTE 15 - OTHER NON-CURRENT ASSETS
2017 2016
E'000 E'000
Loans to customers - 7,293
Loan to affiliate 2,208 4,382
Rent and car lease deposits 3,779 3,758
Guarantee for gaming licenses 2,000 2,000
Related parties (Note 28) - 5,050
Deferred tax 2,775 2,025
Non-current prepayments 600 740
Other 8,631 1,613
19,993 26,861
NOTE 16 - TRADE RECEIVABLES
2017 2016
E'000 E'000
Customers 102,253 71,506
Related parties (Note 28) 4,912 2,238
107,165 73,744
NOTE 17 - OTHER RECEIVABLES
2017 2016
E'000 E'000
Prepaid expenses 18,857 17,054
VAT and other taxes 11,326 9,675
Advances to suppliers 158 2,141
Proceeds from disposal of investment (note 13c) 39,426 39,865
Related parties (Note 28) 190 228
Loans to associates (Note 28) 6,334 -
Other receivables 17,031 5,003
93,322 73,966
NOTE 18 - CASH AND CASH EQUIVALENTS
2017 2016
E'000 E'000
Cash at bank 558,527 409,158
Cash at brokers 17,771 -
Deposits 7,659 135,685
583,957 544,843
The Group held cash balances which include monies held on behalf of operators in respect of operators' jackpot games and
poker and casino operations and client funds with respect to CFD and client deposits in respect of liquidity and clearing
activity.
2017 2016
E'000 E'000
Funds attributed to jackpots 46,870 31,587
Security deposits 15,805 15,172
Client deposits 71,628 76,229
Client funds 37,074 29,863
171,377 152,851
NOTE 19 - SHAREHOLDERS' EQUITY
A. Share Capital
Share capital is comprised of no par value shares as follows:
2017 2016
Number of Shares Number of Shares
Authorised* N/A N/A
Issued and paid up 317,344,603 317,344,603
* The Group has no authorised share capital but is authorised under its memorandum and article of association to issue up
to 1,000,000,000 shares of no par value.
In 2016 the Group cancelled 5,280,000 shares as part of share buy back for a total consideration of E49,829,000.
B. Employee Benefit Trust
In 2014 the Group established an Employee Benefit Trust by acquiring 5,517,241 shares for a total consideration of E48.5
million. During the year 450,110 shares (2016: 244,416) were issued as a settlement for employee share option exercises
with a cost of E3.8 million (2016: E2.1 million), and as of 31 December 2017, a balance of 2,585,563 (2016: 3,035,673)
shares remains in the trust with a cost of E21.6 million (2016: E25.4 million).
C. Share options exercised
During the year 479,799 (2016: 258,477) share options were exercised. The Group cash-settled 29,689 share options during
the year (2016: 14,061).
D. Distribution of Dividend
In June 2017, the Group distributed E68,404,085 as a final dividend for the year ended 31 December 2016 (21.7 E cents per
share).
In October 2017, the Group distributed E36,251,442 as an interim dividend in respect of the period ended 30 June 2017 (12.1
E cents per share).
E. Reserves
The following describes the nature and purpose of each reserve within owner's equity:
Reserve Description and purpose
Additional paid in capital Share premium (i.e. amount subscribed for share capital in excess of nominal value)
Available-for-sale reserve Changes in fair value of available-for-sale investments (Note 14)
Employee Benefit Trust Cost of own shares held in treasury by the trust
Put/Call options reserve reserve Fair value of put options as part of business acquisition
Foreign exchange reserve Gains/losses arising on retranslating the net assets of overseas operations
Convertible bond option reserve Amount of proceeds on issue of convertible debt relating to the equity component (i.e. option to convert the debt into share capital)
Retained earnings Cumulative net gains and losses recognised in the consolidated statement of comprehensive income
NOTE 20 - LOANS AND BORROWINGS
The loan balance as of 31 December 2017 is E200 million (2016: E200 million). The loan is a revolving credit facility
available until June 2018. Interest payable on the loan is based on a margin on Euro Libor rates.
NOTE 21 - CONVERTIBLE BONDS
On 12 November 2014 the Group issued E297.0 million of senior, unsecured convertible bonds due 2019 and convertible into
fully paid Ordinary Shares of Playtech plc (the "Bonds"). The net proceeds of issuing the Bonds, after deducting
commissions and other direct costs of issue, totaled E291.1 million.
The Bonds were issued at par and will be redeemed (if not converted before) on 19 November 2019 at their principal amount.
The Bonds bear interest at 0.5% per annum, payable annually in arrears on 19 November.
Upon conversion, Bondholders are entitled to receive Ordinary Shares at the conversion price of E8.8542 per Ordinary Share,
subject to adjustment in respect of (i) any dividend or distribution by the Company, (ii) a change of control and (iii)
customary anti-dilution adjustments for, inter alia, share consolidations, share splits and rights issues.
The fair value of the liability component, included in non-current borrowings, at inception was calculated using a market
interest rate for an equivalent instrument without conversion option of 4%.
The fair value of the liability component of the bond at 31 December 2017 was E342.4 million (2016: E341.3 million), based
on readily available quoted prices.
The amortised cost of the liability component of the Bonds (including accrued interest) at 31 December 2017 amounted to
E276.6 million (2016: E266.2 million), which was calculated using cash flow projections discounted at 4%.
The fair value at inception of the equity component of the bonds at 31 December 2017 was E45.4 million (2016: E45.4
million).
NOTE 22 -CONTINGENT CONSIDERATION AND REDEMPTION LIABILITIES
2017 2016
E'000 E'000
Non-Current contingent consideration consists:
Acquisition of Tradetech Markets Limited - 139,133
Acquisition of ACM Group (Note 26b) 66,791 -
Acquisition of Quickspin AB (Note 27a) 14,670 24,143
Acquisition of Eyecon Limited (Note 26a) 1,315
Acquisition of Playtech BGT Sports Limited (Note 27b) - 4,792
Other acquisitions (Note 26c) 4,518 1,645
87,294 169,713
Non-Current redemption liability consists:
Acquisition of Consolidated Financial Holdings A/S (Note 27d) 22,398 17,102
Acquisition of Playtech BGT Sports Limited (Note 27b) 25,934 16,593
Acquisition of ECM Systems Holdings Limited (Note 27c) 1,190 1,142
Other acquisitions 264 -
49,786 34,837
Total Non-Current contingent consideration and redemption liability 137,080 204,550
Current contingent consideration consists:
Acquisition of ACM Group (Note 26b) 4,601 -
Acquisition of Quickspin AB (Note 27a) 9,440 -
Acquisition of Playtech BGT Sports Limited (Note 27b) 4,958 -
Acquisition of ECM Systems Holdings Limited (Note 27c) - 3,061
Acquisition of Consolidated Financial Holdings A/S (Note 27d) - 336
Other acquisitions 1,593 1,180
20,592 4,577
On 8 May 2015, the Group acquired 95.05% of the shares of Tradetech Markets Limited (previously named TradeFX), 91.1% on
fully diluted basis. The Group paid total cash consideration of E208 million and additional cash consideration, capped at
E250 million, was to be payable based on 2017 EBITDA multiple, less initial consideration. Following the completion of the
2017 results, which were negatively impacted by one-sided crypto currency trading in the final quarter of 2017, compounded
by a lack of volatility in other asset classes for the majority of the second half of 2017, the directors calculate that
there is no further consideration payable and so the contingent consideration liability was released to the income
statement.
NOTE 23 - TRADE PAYABLES
2017 2016
E'000 E'000
Suppliers 30,554 23,235
Fair value of open B2B financial trading positions 25,739 -
Customer liabilities 5,091 3,932
Related parties (Note 28) - 573
Other 585 431
61,969 28,171
NOTE 24 - DEFERRED TAX LIABILITY
The deferred tax liability is due to temporary differences on the acquisition of certain businesses.
The movement on the deferred tax liability is as shown below:
2017 2016
E'000 E'000
At the beginning of the year 40,443 14,049
Arising on the acquisitions during the year (Note 26) 781 29,743
Reversal of temporary differences, recognised in the consolidated statement of comprehensive income (Note 8) (4,592) (3,349)
Reversal of deferred tax upon sale of intangible asset recognised in the consolidated statement of comprehensive income (3,824) -
Foreign exchange Movements (1,525) -
31,283 40,443
NOTE 25 - OTHER PAYABLES
2017 2016
E'000 E'000
Payroll and related expenses 41,322 37,626
Accrued expenses 17,923 16,328
Related parties (Note 28) 402 1,309
Other payables 4,151 3,173
63,798 58,436
NOTE 26 - ACQUISITIONS DURING THE YEAR
A. Acquisition of Eyecon Limited and Eyecon PTY
On 7 February 2017, the Group acquired 100% of the shares of Eyecon Limited and Eyecon PTY (together "Eyecon"), an
Australian specialist supplier of online gaming slots software.
The Group paid total cash consideration of E27.7 million (GBP 23.7 million) and additional consideration capped at E29.0
million (GBP 25.0 million) in cash will be payable based on an EBITDA multiple less initial consideration paid and is
payable in 2020.
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill, are as
follows:
Fair value on acquisition
E'000
Property, plant and equipment 77
Intangible assets 12,990
Trade and other receivables 1,361
Cash and cash equivalent 575
Trade payables (2,834)
Net identified assets 12,169
Goodwill 16,859
Fair value of consideration 29,028
E'000
Cash consideration 27,735
Non-current contingent consideration 1,486
Finance cost arising on discounting of contingent consideration (193)
Fair value of consideration 29,028
Cash purchased (575)
Net cash payable 28,453
Adjustments to fair value include the following:
Amount Amortisation
E'000 %
IP Technology 9,279 16.7-33
Customer relationships 2,436 10
Brand 1,275 10
The main factor leading to the recognition of goodwill is the revenue stream from new games and new licensees, assembled
work force with vast experience and strong records and cost synergies. In accordance with IAS36, the Group will regularly
monitors the carrying value of its interest in Eyecon.
The key assumptions used by management to determine the value in use of the Customer relationships within Eyecon are as
follows:
§ The MPEEM income approach.
§ The discount rate assumed is equivalent to the WACC for the Customer relationships.
§ The growth rates and attrition rates were based on market analysis.
The key assumptions used by management to determine the value in use of the Brand within Eyecon are as follows:
§ The relief from royalty approach.
§ The royalty rate was based on a third party market participant assumption for the use of the Brand.
§ The discount rate assumed is equivalent to the WACC for the Brand.
§ The growth rates and attrition rates were based on market analysis.
The key assumptions used by management to determine the value in use of the IP Technology within Eyecon are as follows:
§ The with and without model, taking into account the time and additional expenses required to recreate the IP Technology
and the level of lost cash flows in the period.
§ The discount rate assumed is equivalent to the WACC for the IP Technology.
§ The growth rates and attrition rates were based on market analysis.
Management has not disclosed Eyecon contribution to the Group profit since the acquisition nor has the impact the
acquisition would have had on the Group's revenue and profits if it had occurred on 1 January 2017 been disclosed, because
the amounts are not material.
B. Acquisition of ACM Group assets
On 1 October 2017, the Group acquired technology, Intellectual property and certain customer assets (together "the assets")
from ACM Group Limited to enhance its Financials Division's B2B offering and to deliver a bespoke risk management and
trading solution to B2B customers.
The Group paid total cash consideration of E4.2 million ($5.0 million) and additional consideration capped at E122.7
million ($145.0 million) in cash will be payable based on 2017, 2018 and 2019 EBITDA multiple and is payable annually over
the term.
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill, are as
follows:
Fair value on acquisition
E'000
Intangible assets 12,602
Goodwill 62,573
Fair value of consideration 75,175
E'000
Cash consideration 4,233
Non-current contingent consideration 69,621
Current contingent consideration 4,984
Finance cost arising on discounting of contingent consideration (3,663)
Fair value of consideration 75,175
75,175
The fair value of the assets acquired:
Amount Amortisation
E'000 %
Customer relationships 12,602 7
The main factor leading to the recognition of goodwill is ACM's well-known brand and market in the CFD industry with strong
customer relationship, key personnel and future revenue and cost synergies. In accordance with IAS36, the Group will
regularly monitor the carrying value of its interest in ACM Group assets.
The key assumptions used by management to determine the value in use of the Customer relationships within ACM Group assets
are as follows:
§ The MPEEM income approach.
§ The discount rate assumed is equivalent to the WACC for the Customer relationships.
§ The growth rates and attrition rates were based on market analysis.
Management has not disclosed ACM contribution to the Group profit since the acquisition, because the amounts are not
material. The combined Group revenue as if ACM acquisition had occurred on 1 January 2017 would have been higher by E9.2
million, the combined Group adjusted EBITDA and adjusted net profit would have been higher by E2.1 million.
C. Other acquisitions
During the period, the Group acquired the shares of various companies for a total consideration of E14.4 million. One of
these subsidiaries was acquired in steps, additional 45% acquired in the year and previous consideration of E0.8 million
paid to acquire the previously recognized 35% interest in associate. A fair value movement was required on conversion to a
subsidiary of E0.1m.
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill, are as
follows:
Fair value on acquisition
E000
Intangible assets 3,812
Trade and other receivables 897
Loans acquired (8,629)
Cash and cash equivalent 1,386
Trade and other liabilities (1,912)
Deferred tax liability (781)
Net identified assets (5,227)
Non-controlling interest (117)
Goodwill 19,741
Total fair value of consideration 14,397
E'000
Cash consideration 8,582
Deferred consideration 144
Non-current contingent consideration 4,749
Current contingent consideration 557
Finance cost arising on discounting of contingent consideration (454)
Conversion of previously recognised associate 819
Fair value of consideration 14,397
Cash purchased (1,386)
Net cash payable 13,011
Adjustments to fair value include the following:
Amount Amortisation
E'000 %
IP Technology 2,345 12.5-50
Customer relationships 353 12.5
The main factor leading to the recognition of goodwill is the frontend framework and its software integration, unique
workforce and future revenue and cost synergies. In accordance with IAS36, the Group will regularly monitor the carrying
value of its interest in these acquisitions.
The key assumptions used by management to determine the value in use of the IP Technology and Customers relationship within
these acquisitions are as follows:
§ The income approach, in particular, the MPEEM method and the with and without models.
§ The discount rate assumed is equivalent to the WACC for the IP Technology and the Customer relationship.
§ The growth rates and attrition rates were based on market analysis.
Management has not disclosed other acquisitions contribution to the Group profit since these acquisitions nor has the
impact the acquisition would have had on the Group's revenue and profits if it had occurred on 1 January 2017 been
disclosed, because the amounts are not material.
NOTE 27 - ACQUISITIONS IN PRIOR YEAR
A. Acquisition of Quickspin AB
On 24 May 2016, the Group acquired 100% of the shares of Quickspin AB ("Quickspin"). Quickspin is a Swedish games studio
that develops and supplies high quality video slots to operators, both in online real money gambling as well as in the
social gaming market.
The Group paid total cash consideration of E24.5 million (SEK 228.4 million) and additional consideration capped at E26.0
million (SEK 242.9 million) in cash will be payable subject to achieving target EBITDA.
B. Acquisition of Playtech BGT Sports Limited (previously named Patelle Limited)
On 13 July 2016, the Group acquired 90% of the shares of Patelle Limited. Patelle owns 100% of Best Gaming Technology GmbH
("BGT"). BGT is an Austrian leading provider of sports betting software and solutions for gaming and sports betting
operators. The remaining 10% of the shares are held by the founder and CEO of BGT.
The Group paid total cash consideration of E138.5 million.
The Group has a call option to purchase the remaining 10% of BGT at a valuation of 6 times 2019 EBITDA capped at E55.0
million. The founder and CEO of BGT has certain put options over his 10% holding at the same valuation.
In December 2017 the Group announced the internal re-organisation of the Playtech BGT Sports division ("PBS"). As part of
the re-organisation the basis for the consideration payable on the put/call was revised, which will result in Dr. Segeder
will be rewarded for the incremental growth of the non-BGT business in addition to the BGT standalone business. The maximum
amount payable pursuant to the revised arrangements was increased to E95.0 million.
The increase in the liability fair value as a result of the revised put/call option terms was recognised as employment cost
in the income statement and non-current liability. The fair value of the put/call option liability as of 31 December 2017
was E25.9 million.
The founder and CEO of BGT may also be entitled to an additional payment of E5.0 million subject to the achievement of
certain operational milestones. Total payments in the current year are E2.0 million.
C. Acquisition of ECM Systems Holdings Ltd
On 20 October 2016, the Group acquired 90% of the shares of ECM Systems Holdings Limited ("ECM"). ECM is a bingo software
and hardware solutions provider to the UK retail bingo market. The remaining 10% of the shares are held by the founder and
CEO of ECM.
The Group paid total cash consideration of E25.0 million (£22.4 million). The company paid E3.1 million (£2.7 million) as
additional working capital adjustment in the beginning of 2017.
The Group has a call option to purchase the remaining 10% of ECM at a valuation of 6 times 2019 EBITDA capped at £1.1
million (E1.2 million). The CEO of ECM have certain put options over his 10% holding at the same valuation. The fair value
of this option was recognised as non current liability and reflected in the Groups' statement of changes in equity. The
fair value as of 31 December 2017 was E1.1 million. The Group paid to an escrow account the fair value of the option.
D. Acquisition of Consolidated Financial Holdings A/S
On 30 November 2016, the Group acquired 70% of the shares of Consolidated Financial Holdings A/S ("CFH"). CFH is a
technology company with products including a Straight Through Processing brokerage which provides retail brokers with
multi-asset execution, prime brokerage services, liquidity and complementary risk management tools. The remaining 30% of
the shares are held by the founder and CEO of ECM.
The Group paid total cash consideration of E38.6 million ($41.0 million). The company paid E0.3 million ($0.3 million) as
additional working capital adjustment in the beginning of 2017.
The Group has a call option to purchase the remaining 30% of CFH at a valuation of 6 times 2018 EBITDA capped at a total
consideration of $76.6 million less the initial consideration. The founder and CEO of CFH have certain put options over his
30% holding at the same valuation. The fair value of this option was recognised as a non-current liability and reflected in
the Groups' statement of changes in equity. In 2017 the Group acquired 5.83% of minority shares for a total consideration
of E3.07 million. Accordingly, the proportional part of the redemption liability and the put/call option capital reserve of
a total E3.3 million was removed. The fair value as of 31 December 2017 of the put/call option to purchase/sale the
remaining 24.17% shares was E22.4 million.
E. Other acquisitions
During the period, the Group acquired the shares of various companies for a total consideration of E13.1 million. One of
these subsidiaries was acquired in steps, with previous consideration of E2.4 million paid to acquire the previously
recognised associate.
NOTE 28 - RELATED PARTIES AND SHAREHOLDERS
Parties are considered to be related if one party has the ability to control the other party or exercise significant
influence over the other party's making of financial or operational decisions, or if both parties are controlled by the
same third party. Also, a party is considered to be related if a member of the key management personnel has the ability to
control the other party.
On 27 June 2017, Brickington Trading Limited ("Brickington") decreased its holding to 6.3% (31 Decemebr 2016: 21.93%) of
Playtech plc shares and the relationship agreement terminated. From this date Brickington no longer meets the definition of
a related party. Accordingly, the following companies are not accounted as related parties from the same date:
Skywind Holdings Limited ("Skywind"), SafeCharge Limited, Crossrider Technologies Ltd ("Crossrider"), Royalfield Limited,
Easydock Investments Ltd. (Easydock), Selfmade Holdings, Glispa GmbH ("Glispa"), Anise Development Limited and Anise
Residential Limited (together "Anise").
The transaction amounts with the abovementioned companies reflects the period ended 27 June 2017, when they ceased to be
related parties.
Mr Teddy Sagi, the ultimate beneficiary of Brickington, provides advisory services to the Group for a total annual
consideration of E1.
The joint ventures and the structured agreements are associates of the Group by virtue of the Group's significant influence
over those arrangements.
The following transactions arose with related parties:
2017 2016
E'000 E'000
Revenue including revenue from associates
Skywind 720 1,683
Structured agreements and associates 21,294 12,904
Share of profit in joint venture 464 146
Share of loss in associates (662) (693)
Operating expenses
SafeCharge Limited 3,612 6,150
Crossrider 1,314 2,615
Structured agreements 9 1,309
Anise 518 1,037
Skywind, net of capiltalised cost 334 82
Glispa GmbH 165 28
Selfmade Holdings - 11
Royalfield Limited - 4
Easydock - 1
Interest income
Structured agreements 85 -
The following are year-end balances:
Intangible assets
Skywind - 4,128
Cash and cash equivalent
Safecharge Limited - 2,968
Structured agreements and associates - 5,050
Total non-current related party receivables - 5,050
Structured agreements and associates 11,246 1,971
Skywind - 267
Crossrider - 228
Associates and joint ventures 190 -
Total current related party receivables 11,436 2,466
SafeCharge Limited - 200
Structured agreements 402 1,682
Total related party payables 402 1,882
The details of key management compensation (being the remuneration of the directors) are set out in Note 6.
NOTE 29 - SUBSIDIARIES
Details of the Group's principal subsidiaries as at the end of the year are set out below:
Playtech Software Limited Isle of Man 100% Main trading company of the Group, owns the intellectual property rights and licenses the software to customers.
OU Playtech (Estonia) Estonia 100% Designs, develops and manufactures online software
Techplay Marketing Limited Israel 100% Marketing and
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