TIDMPPB
RNS Number : 3401N
Paddy Power Betfair plc
08 August 2017
8 August 2017
Paddy Power Betfair plc - 2017 Interim Results
Paddy Power Betfair plc (the "Group") announces interim results
for the six months ended 30 June 2017.
Underlying(4) proforma(2) Statutory
results results
GBPm H1 2017 H1 2016 Change H1 2017 H1
GBPm GBPm %(1) GBPm 2016
GBPm
---------------- --------------- -------------- ------------ ------- -------
Revenue 827 759 +9% 827 709
EBITDA(3) 220 181 +21% 215 70
Operating
profit/(loss) 180 148 +22% 104 (44)
Earnings/(loss)
per share 181.1p 147.0p +23% 102.9p (67.7)p
Dividends
per share(5) 65p 52p +25% 65p 40p
-- H1 highlights(1) :
- Revenue up 9% to GBP827m, driven by good stakes growth (Online
up 10%, or 15% excluding Euro 2016, and Australia up 16%(6) ) and
foreign exchange, partially offset by increased investment in
pricing and promotions
- Strong Q1 growth driven by more favourable Cheltenham results,
with Q2 affected by the absence of a major football tournament and
adverse sports results
- Underlying EBITDA(3,4) up 21% to GBP220m with EBITDA margin up
3 percentage points to 27%
- Continued strong cash conversion with underlying free cash
flow of GBP172m representing 113% of underlying profit after tax in
the period
- Entry into the daily fantasy sports market in the USA with the
acquisition of Draft an early-stage operator
-- Outlook:
- Full year underlying EBITDA, including GBP15m of losses in
DRAFT, expected to be between GBP445m and GBP465m
Breon Corcoran, Chief Executive, commented:
"We continue to make substantial investments to position Paddy
Power Betfair as a structural winner in a dynamic and highly
competitive market. The focus of this investment is to use
technology to improve efficiency and minimise the cost of servicing
our customers and to further enhance our customer proposition.
The integration of our technology platforms is on track for
completion by the end of the year and will bring significant
benefits including increased quantity and pace of new product
development in 2018 and beyond.
Ahead of that, our customers and shareholders are already seeing
benefits from efficiencies and investments. In the first half
alone, customers enjoyed approximately GBP30m of extra value
through better odds, more generous offers and new loyalty
benefits.
Operating efficiency and the annualisation of merger-related
cost savings resulted in strong operating leverage in the period,
with operating profit up 22%."
Notes:
(1) Growth rates are shown on a proforma(2) basis.
(2) The merger of Paddy Power plc ("Paddy Power") and Betfair
Group plc ("Betfair") completed on 2 February 2016 and is accounted
for as an acquisition of Betfair by Paddy Power on that date. The
reported statutory comparative period results for six months ended
30 June 2016 reflect this accounting treatment in accordance with
generally accepted accounting principles (GAAP) and only include
Betfair results since the merger completion on 2 February 2016.
This announcement includes comparative period results prepared on a
"Proforma" basis (non-GAAP basis) for the Group as if Paddy Power
and Betfair had always been merged, which combine the full six
month results of Paddy Power and Betfair for 30 June 2016. The
directors consider that comparing the reported 2017 results against
the proforma comparative period is the most appropriate information
for understanding and analysing the performance of the Group and
accordingly, in the narrative, the year-on-year results are
discussed versus the proforma comparatives. A reconciliation
between the statutory and the non-GAAP proforma underlying
comparative financials is included in Appendix 2 (page 17)
(3) EBITDA is profit before interest, tax, depreciation and
amortisation expenses and is a non-GAAP measure (see Appendix 2 on
page 17).
(4) The "underlying" measures remove the effects of the Merger
exceptional costs that are not part of the usual business activity
of the Group and are also excluded when internally evaluating
performance, which have been therefore reported as "separately
disclosed items" (see note 5 and page 33 to the financial
statements and Appendix 2 on page 17)
-(5) The comparative period proforma(2) interim dividend
includes closing dividends paid on merger relating to January 2016
equating to 12 pence per share and the interim dividend paid in
September 2016 of 40 pence per share
(6) Growth rates in the commentary are in local currency
Analyst briefing:
The Group will host a presentation for institutional investors
and analysts this morning at 10:00am (IST/BST). The presentation
will be webcast live on the Group's corporate website
(www.paddypowerbetfair.com) and a conference call facility will
also be available. To dial into the conference call, participants
should dial 0800 783 0906 or 01296 480 100 from the UK, (01) 242
1074 from Ireland and +44 1296 480 100 from elsewhere. The passcode
is 950 626 62.
A presentation replay facility will be available later today on
our corporate website:
https://www.paddypowerbetfair.com/investor-relations/results-centre/2017.
Contacts:
+ 44 20 8834 6139
Paul Rushton, Investor Relations / + 353 1 903 9105
+ 44 20 8834 6843
James Midmer, Corporate Communications / + 353 1 903 9106
Billy Murphy, Drury / Porter
Novelli + 353 1 260 5000
Rob Greening / Simon Compton,
Powerscourt + 44 20 7250 1446
Business Review
Paddy Power Betfair's competitive advantage lies in its
substantial global and local online scale; its leading capabilities
in the areas of scalable proprietary technology, digital marketing,
in-house product development and proprietary risk & trading
operations; its portfolio of distinctive sports-led brands; and its
differentiated products.
In the first half, we have continued to invest to build on these
foundations to position the Group as a long-term structural winner.
The focus is on further increasing efficiency and competitiveness
through investing in both our capabilities and in our customer
proposition.
We believe that this approach will enable us to sustainably
generate profits from our key existing markets over the long-term,
which will then drive both investment in new growth opportunities
(either organically or via acquisition) and deliver shareholder
returns.
Investing in capabilities
Proprietary technology is used across the Group to deliver
product differentiation, increased reach and relevance of digital
marketing and risk and trading excellence.
Technology platform
The integration of our technology platforms continued to be our
priority in H1 and remains on track for completion in the final
quarter of 2017. The migration of Paddy Power customers to the
integrated platform will commence in the coming weeks and will be
phased to manage risk.
Completion of this project will both enhance efficiency and
facilitate investment in our customer proposition. Key benefits
include increased pace of development and faster roll out of new
product to all our customers, together with less development work
being required to add new brands or enter new markets. The platform
will enable us to build product once for deployment across multiple
brands, channels and jurisdictions and the higher return on
investment will enable more development resources to be deployed.
Furthermore, the use of in-house development lowers the cost and
facilitates differentiation and retention of IP.
Digital marketing
We now operate on a global marketing technology stack, and share
development and expertise across all the Group's divisions and over
200 marketing professionals. Key marketing tools include a recently
launched data management platform and marketing automation engine.
This proprietary technology is delivering efficiency benefits
through increased levels of automation and driving increased reach
and relevance to our digital marketing. Building and operating
these technologies in-house helps IP retention and secures data
integrity, and we are already seeing evidence that they can drive
incremental activity. For example, the use of these technologies
for Betfair's Cheltenham reactivation campaigns, drove a 5%
increase in overall activity from reactivated customers, when
compared with our control groups.
Automated, customised content is now being delivered to
customers across eight distinct marketing channels compared with
four previously, following the addition of browser push, display,
social and rich push notifications to our CRM platform, materially
increasing the reach of our targeted messaging.
Examples of automated, customised content include (i) 'best
odds' messaging, which uses channels such as display, email, search
and social media to highlight when we have the best prices on key
events and compares our live odds to those of key competitors; and
(ii) personalised content, for example highlighting that previously
backed winners are running in upcoming races, branded as Betfair's
'Golden Horses' or Sportsbet's 'Giddy Up Alerts'.
Risk and trading
The performance of our global risk and trading operations is
also dependent on ongoing investment in proprietary
technologies.
Following substantial historical investment in pricing and
trading algorithms, 19 sports are currently traded using
proprietary models and we are continuing to invest to improve
existing algorithms and cover additional sports. This both enhances
customer experience (for example, greater range of markets, reduced
bet delay times and reduced market suspension rates) and improves
efficiency through better pricing accuracy, which increases gross
win margins. It also results in greater automation, which allows
individual traders to manage more events simultaneously.
Recent model releases illustrate some of these benefits: (i) a
new football model, launched in January, is improving the in-play
betting experience, with a 97% reduction in the bet failure rate to
less than 0.1% of in-play bets and a 90% reduction in the amount of
time that betting is suspended, to less than one minute per match;
and (ii) a new basketball model has led to a three-fold increase in
the number of pre-match markets available on the NBA finals,
resulting in strong growth in betting volumes on the event. A
further six models are currently under development, including an
updated tennis model and a new NFL model.
In addition to the development of pricing algorithms, investment
in risk management models is also driving improved efficiency and
pricing accuracy. For example, we are investing in machine learning
to better automate our sportsbook customer analytics. Furthermore,
our proprietary racing risk management model automatically feeds
into our pricing algorithms and we are now developing similar
capabilities for football and tennis.
Investing in our customer proposition
We continually strive to improve our competitive position
through investment in products, pricing and promotions, and
brands.
Product
To ensure we are best positioned for long-term growth, our
technology resources have been focused on the platform integration
work described above, which at times utilised over 70% of our
European technology resources. With residual resources largely
working on operational projects, new product development in our
Online division has, accordingly, been limited over the past 18
months. The short-term impact of this has been fewer updates and
new features on our European sportsbooks and a lack of capacity to
address gaming product weaknesses. It has also restricted our
ability to offer some or all of our products in certain
international markets due to requisite, and jurisdictional
specific, development work conflicting with the integration
work.
While it will be primarily from 2018 and beyond that customers
will begin to see the benefits of an increased quantity and pace of
new product development facilitated by the enhanced platform, there
are some immediate benefits arising from the integration work. For
example, Betfair customers are already seeing additional product
and improved pricing following access to Paddy Power's proprietary
risk and trading models. Once they have been migrated, Paddy Power
customers will see immediate product benefits, including a faster
sports app, new gaming apps, a new proprietary sportsbook desktop
that is more consistent with the mobile app experience, a much
improved cash out product and greater promotional flexibility.
Pricing & promotions
Competitive pricing and promotions are essential factors behind
attracting and retaining customers. Accordingly, in recent months
we have increased our investment across all our online brands,
providing customers with approximately GBP30m of additional value
in H1 alone. Recognising that different customers are attracted to
different value drivers, this investment has encompassed a number
of different approaches.
For our Sportsbet and Paddy Power brands, increased investment
has focussed on headline offers, including the "2 up - You Win" and
"24 Up - You win" promotions which trigger early payouts on
football and AFL, combined with loyalty rewards such as Paddy
Power's "VIPP club" and Sportsbet's "Power Play".
For Betfair our investment has centred on sportsbook pricing to
re-emphasise the brand's strong value proposition as underpinned by
its exchange heritage. A reduction in football overrounds to market
leading levels is being valued by customers, with market research
indicating that football bettors increasingly associate Betfair as
offering the best odds.
Brand
This enhanced value proposition is being supported by continued
investment in our brands across traditional media and digital
channels.
In the UK, we have increased our share of voice for both our
brands on TV this year, using our scale and dual branding to
maximise the efficiency of this spend. In Australia, we commenced
new marketing partnerships, meaning that Sportsbet now has key
marketing assets across all major sports.
Our distinctive, modern brands are strongly positioned to
leverage social and digital channels. In the UK our share of
engagement within the betting category across Facebook and Twitter
is over 60% and, in Australia, Sportsbet's share is almost 50%,
reflecting our brands' unique ability to engage in rich, valuable
and fun sports themed conversations. We are also increasingly
looking at ways to innovatively leverage this position to drive
engagement, such as socially driven pricing (Paddy Power's "Crowd
Powered Price" and Sportsbet's "Mates Rates") or customer driven
betting markets ("#whatoddspaddy and #BYOsocceroos).
Investing in new growth opportunities
DRAFT acquisition
In May, we entered the daily fantasy sports market in the United
States with the acquisition of an early-stage operator, DRAFT
(www.playdraft.com). The acquisition provides the Group with
exposure to a fast-growing market (c.90% CAGR between 2014 and 2016
to over $300m of revenues) and complements our other businesses in
the United States.
DRAFT is mobile-led and has a differentiated product that we
believe is better positioned to target recreational players than
the incumbent leading daily fantasy operators. The business
continues to be run by its existing management team and will now
have access to the Group's marketing and technology
capabilities.
The initial cash consideration paid on completion was $19m.
Further cash consideration of up to $29m will become payable over
the next four years depending on the business' performance. To
maximise the growth opportunity, substantial marketing investment
in the business is envisaged in the next few years, with an EBITDA
loss of approximately $20m expected in 2017.
Outlook
Our industry remains highly competitive and exposed to external
factors including the economic and regulatory environments.
However, we believe that the investments we are making, as well as
our scale, market positions and leading capabilities, position us
well for sustainable profitable growth.
The second half of the year has started in line with our
expectations and full year 2017 underlying EBITDA, including the
impact of the DRAFT acquisition, is expected to be between GBP445m
and GBP465m.
Operating and Financial Review
Note this Operating and Financial Review presents the
comparative period and corresponding year-on-year growth rates on a
"Proforma" (non-GAAP) basis. As the merger of Paddy Power and
Betfair completed on 2 February 2016 the reported statutory
comparative period results only include Betfair results post 2
February 2016. The "Proforma" basis is prepared as if Paddy Power
and Betfair had always been merged, and combines the full six month
results of Paddy Power and Betfair for the period ended 30 June
2016. The directors consider that comparing the reported 2017
results against the proforma comparative period is the most
appropriate information for understanding and analysing the
performance of the Group. A reconciliation between the statutory
comparatives and the non-GAAP proforma, underlying comparative
financials is included on page 17.
Group(1)
Proforma(2)
GBPm H1 H1 Change Constant
Currency(7)
Change
%
2017 2016 %
GBPm GBPm
------------------------------ ------ ------ ------ ------------
Sportsbook stakes 5,594 4,810 +16% +9%
Sportsbook net revenue
% 8.3% 8.5% -0.2% -0.2%
Sports revenue 646 582 +11% +4%
Gaming revenue 181 177 +2% +2%
------ ------ ------ ------------
Total revenue 827 759 +9% +3%
Cost of sales (189) (175) +8% +2%
------ ------ ------ ------------
Gross profit 638 584 +9% +4%
Sales and marketing (166) (156) +7% Flat
Product and technology (66) (75) -12% -19%
Operations (160) (144) +11% +3%
Central costs (27) (28) -4% -8%
------ ------ ------ ------------
Total operating costs (419) (403) +4% -3%
------ ------ ------ ------------
Underlying EBITDA(3,4) 220 181 +21% +20%
Underlying EBITDA
margin % 26.6% 23.8% +2.8% +3.7%
Depreciation and amortisation (40) (33) +20% +10%
------ ------ ------ ------------
Underlying(4) operating
profit 180 148 +22% +22%
Separately disclosed
items (75) (195) n/a n/a
------ ------ ------ ------------
Operating profit 104 (48) n/a n/a
------ ------ ------ ------------
Underlying(4) earnings
per share 181.1p 147.0p +23%
Dividends per share(5) 65p 52p +25%
Net cash at period GBP87m GBP2m
end(8)
Group revenue increased 9% to GBP827m, with sports revenues up
11% and gaming revenues up 2%. Revenue growth included a GBP40m
benefit from the translation of non-UK revenues due to the weakness
of sterling versus the prior year. Conversely, year-on-year growth
was affected by the lack of a major international football
tournament in the year, with Euro 2016 contributing GBP22m of
revenue in the comparative period.
This revenue growth comprised of 23% growth (constant currency,
"cc", 15%) in the first quarter, partially offset by a 2% decline
(cc -6%) in second quarter revenues. Whilst revenue growth in the
first quarter benefitted from more favourable sports results this
year (most notably at Cheltenham), revenue growth in the second
quarter was impacted by a 1.5% decline in the sportsbook net
revenue margin as well Euro 2016 falling in the prior year.
The decline in sportsbook net revenue margin in the second
quarter was driven both by the strategic decision to increase our
investment in pricing and promotions and by less favourable sports
results this year. The year-on-year swing in sports results (c.1.1%
impact on margin) was primarily due to results in April and May
2017 favouring customers at key events such as Premier League and
Champions League football, the Grand National and the US Masters,
along with the benefit to the prior year of a strong margin at Euro
2016.
Revenue from regulated markets represented 95% of total revenues
in the period.
Revenue growth combined with operating efficiencies led to a 21%
increase in underlying EBITDA to GBP220m (H1 2016: GBP181m),
representing an EBITDA margin of 27% (H1 2016: 24%). Underlying
operating profit increased by 22% to GBP180m (H1 2016: GBP148m).
Underlying EBITDA included an GBP2m foreign exchange translation
benefit and increased by 20% on a constant currency basis.
Total operating costs increased by 4%, or a decrease of 3% on a
constant currency basis. Within this, sales and marketing spend, on
a constant currency basis, was flat year-on-year, or up 10%
excluding Euro 2016 spend. Other operating costs, which benefitted
from the annualisation of merger synergies, continued operating
efficiencies and a reduction in certain other employee related
expenses, decreased by 5% in constant currency.
After separately disclosed items, which in the period consisted
entirely of non-cash merger related items, the Group recorded an
operating profit of GBP104m (H1 2016: operating loss of
GBP44m).
Online(1)
Proforma(2)
GBPm H1 H1 Change
2017 2016 %
GBPm GBPm
------------------------------ ----- ----- ------
Online sportsbook
stakes 2,780 2,481 +12%
Dial-a-bet sportsbook
stakes 182 219 -17%
----- ----- ------
Total Sportsbook stakes 2,962 2,700 +10%
Sportsbook net revenue
% 6.2% 6.7% -0.5%
Sports revenue 318 316 +1%
Gaming revenue 120 124 -3%
----- ----- ------
Total revenue 439 440 Flat
Cost of sales (97) (100) -4%
----- ----- ------
Gross profit 342 339 +1%
Sales and marketing (113) (108) +4%
Product and technology (46) (58) -20%
Operations (35) (33) +6%
Total operating costs (194) (199) -2%
----- ----- ------
Underlying EBITDA(3,4) 148 140 +6%
Depreciation and amortisation (19) (17) +11%
----- ----- ------
Underlying(4) operating
profit 129 123 +5%
----- ----- ------
Active customers (000's)(11) 2,788 3,061 -9%
The Online division includes the online brands of Paddy Power
and Betfair, the Paddy Power telephone based sportsbook, as well as
a number of B2B partnerships.
Revenue of GBP439m was flat year-on-year or down 2% in constant
currency. Sports revenue increased by 1% to GBP318m, comprised of a
1% decrease in sportsbook revenues, driven by a lower net revenue
margin, and 3% growth in exchange and B2B revenues.
Sportsbook stakes increased by 10% in total, with 12% growth in
online staking partially offset by a decline in the Paddy Power
'Dial-a-bet' business. The online staking growth was comprised of
13% growth in the first quarter and 11% growth in the second
quarter, notwithstanding the impact from Euro 2016 which
contributed 9% of stakes in the comparative quarter.
The net revenue margin decline, whilst driven by more customer
friendly sports results this year, also reflected increased
investment in pricing and promotions. This investment included
improved odds for Betfair customers including a reduction in
football overrounds to market leading levels, and enhanced value to
Paddy Power customer's through our headline "2 up - You Win" offer
and "VIPP Club" loyalty benefits.
Gaming revenues decreased 3% to GBP120m. As we highlighted in
recent trading updates, gaming performance has been weak since the
fourth quarter of 2016. We are continuing to focus on operational
improvements but recognise that to achieve market growth rates we
need to invest in our gaming product, post completion of our
ongoing technology platform integration work, to address gaps in
our product versus our competitors. While Paddy Power customers
will see some immediate improvements with enhanced gaming apps on
migration to the integrated platform, it will be 2018 before
material new additional product updates will begin to be developed
for release across both our brands.
Underlying EBITDA increased by 6% to GBP148m or by 9% excluding
the GBP5m adverse impact from foreign exchange translation. Total
operating costs decreased by 2%, reflecting both the annualisation
of merger synergies and continued underlying operating
efficiencies.
Australia(6)
GBPm H1 H1 Change Change
2017 2016 % %
GBPm GBPm GBP A$
----------------------- ----- ----- ------ ------
Sportsbook stakes 1,699 1,259 +35% +16%
Sportsbook net
revenue % 10.2% 10.3% -0.1% -0.1%
Revenue 173 129 +34% +15%
Cost of sales (46) (32) +43% +23%
----- ----- ------ ------
Gross profit 127 97 +31% +13%
Sales and marketing (38) (34) +10% -5%
Product and technology (13) (12) +5% -9%
Operations (23) (20) +15% -2%
Total operating
costs (73) (66) +11% -5%
----- ----- ------ ------
Underlying EBITDA(3,4) 54 30 +77% +52%
Depreciation and
amortisation (7) (4) +73% +48%
----- ----- ------ ------
Underlying(4)
operating profit 46 26 +78% +52%
----- ----- ------ ------
Active customers
(000's)(11) 688 610 +13%
The Australia division operates under the Sportsbet brand and is
the market leader in the Australian online betting market.
Revenue increased by 15% to GBP173 million, driven by a 16%
increase in total stakes. This growth was notwithstanding a reduced
contribution from in-play betting, which represented 8% of stakes
and 3% of revenues in the period, versus 15% and 8%, respectively,
in the comparative period when our 'Bet Live' product was available
to customers.
During the period we continued to invest in Sportsbet's
promotions, product and marketing to maintain our online market
leadership position. Key elements of an increased year-on-year
investment in promotions included 'Power Play' (which encourages
customer loyalty by allowing them to trigger a daily power play
that increases the odds on their selection), "24-up You Win" (which
is the equivalent of Paddy Power's headline football offer applied
to AFL), and increased racing generosity via our "Saturday - 3 Big
Tracks" money-back specials.
Key recent product releases included the release of a new
android app, significant upgrades to our racing form content and
'Same Game Multi', which facilitates accumulator betting and is
proving very popular with AFL and NRL customers, driving
incremental accumulator staking.
Our marketing, such as the controversial 'Putting the roid in
Android' ad, continues to focus on highlighting our key products
and leading promotions while deepening the distinctive position of
Sportsbet. We commenced key marketing partnerships in recent
months, including sponsorship of free-to-air TV coverage of AFL to
complement our continued sponsorship of the equivalent NRL coverage
and a new Racing.com partnership. This means that Sportsbet now
benefits from key marketing assets in all major sports.
Underlying EBITDA increased by 52% to GBP54m. Total operating
costs decreased by 5%, reflecting continued operating
efficiencies.
Retail
GBPm H1 H1 Change
2017 2016 %
GBPm GBPm
------------------------------ ----- ----- ------
Sportsbook stakes 934 851 +10%
Sportsbook net revenue
% 11.6% 11.6% Flat
Sports revenue 108 100 +9%
Machine gaming revenue 52 47 +10%
----- ----- ------
Total revenue 160 147 +9%
Cost of sales (34) (32) +5%
----- ----- ------
Gross profit 126 115 +10%
Sales and marketing (3) (4) -16%
Product and technology (3) (3) -5%
Operations (83) (77) +8%
Total operating costs (89) (84) +6%
----- ----- ------
Underlying EBITDA(3,4) 37 31 +20%
Depreciation and amortisation (9) (8) +14%
----- ----- ------
Underlying(4) operating
profit 28 23 +23%
----- ----- ------
Shops at period end 620 603 +3%
The Retail division operates 620 Paddy Power betting shops
across the UK and Ireland. The business continues to take market
share, leading to revenue growth of 9% to GBP160m (cc +5%). This,
along with careful cost control, drove a 23% increase in underlying
operating profit to GBP28m (cc +19%).
Revenues from UK shops increased by 6% and Irish shop revenues
were up 3% in local currency. Excluding the impact of new shops and
year-on-year currency movements, like-for-like(9) revenues
increased by 3% and operating costs increased by 1%. The
like-for-like(9) revenue growth was comprised of a 2% increase in
both sportsbook stakes and revenues, and a 7% increase in machine
gaming growth, primarily driven by growth from B3 slots
content.
Our high quality retail estate has been built around providing a
fun, social environment focused around live sport and we are
continually investing in further improving the leading experience
offered customers. For example, in May we launched our Paddy Power
TV channels that enable us to control and showcase our leading
content. In addition, Betfair customers can deposit funds into
their accounts at Paddy Power shops, a facility that has proved
popular for Paddy Power online customers for a number of years.
During the first half we were able to selectively identify
additional shop locations which could further enhance the quality
and coverage of our estate and we opened five new shops in the UK
and two in Ireland.
US(1,6)
Proforma(2)
GBPm H1 H1 Change Change
2017 2016 % %
GBPm GBPm GBP US$
------------------------------ ----- ------- ------ ------
Sports revenue 46 38 +21% +6%
Gaming revenue 9 5 +66% +46%
----- ------- ------ ------
Total revenue 55 43 +26% +11%
Cost of sales (12) (10) +22% +7%
----- ------- ------ ------
Gross profit 43 33 +28% +12%
Sales and marketing (12) (9) +33% +18%
Product and technology (5) (3) +48% +31%
Operations (18) (14) +31% +16%
Total operating costs (35) (27) +34% +19%
----- ------- ------ ------
Underlying EBITDA(3,4) 7.2 6.9 +5% -11%
Depreciation and amortisation (4.7) (4.0) +18% +4%
----- ------- ------ ------
Underlying(4) operating
profit 2.5 2.9 -13% -30%
----- ------- ------ ------
Active customers (000's)(11) 136 118 +15%
The US division combines TVG, America's leading horseracing TV
and wagering network (operating in over 30 states); Betfair Casino,
an online casino in New Jersey; the Betfair New Jersey Exchange;
and as of May 2017, DRAFT, an early-stage operator in daily fantasy
sports.
Revenue increased by 11% to GBP55m, driven by a 6% increase in
TVG revenues and strong revenue growth at the Betfair New Jersey
business, which is now operating at breakeven EBITDA.
EBITDA decreased by 11% to GBP7 million net of the impact of
GBP1 million losses from DRAFT incurred post its acquisition in
May.
Regulatory update
UK
From 25 April 2017, the statutory Horserace Betting Levy was
extended to cover online betting at a rate of 10% of gross winnings
from all customers in Great Britain betting on British racing. The
net incremental impact of the new scheme for the Group on an
annualised basis is approximately GBP10m.
From 1 August 2017, the changes to the treatment of free bets
for online gaming point of consumption tax announced in the
Government's March 2016 budget came into effect. We estimate the
annualised impact of this change to the Group is approximately
GBP6m.
The Government's Review of Gaming Machines and Social
Responsibility Measures is ongoing. This is reviewing the maximum
stakes and prizes for, and the number and location of, gaming
machines across all licensed premises (including licensed betting
offices) and social responsibility measures to protect players from
gambling-related harm, including reviewing restrictions around
gambling advertising.
In June 2016, the UK Competition and Markets Authority ("CMA")
announced an update on its investigation into UK online gambling
operators, indicating that they are taking enforcement action
against several online gambling firms. The Group was not one of the
companies subject to this enforcement action. The CMA also extended
their investigation to include a new line of enquiry looking
further into obstacles that consumers may face when they try to
withdraw their money after gaming or betting online. The CMA have
indicated that they will be providing a further update in December
2017.
Australia
From July 2017, the State of South Australia (which represents
approximately 7% of our total Australia revenues) introduced a
place of consumption state tax at 15% of gross revenue. At current
revenue levels, the additional cost would be approximately GBP4m
per annum.
In March 2017, the Federal Treasurer announced that a nationally
consistent approach to a point of consumption tax on online
gambling will be considered, along with potential federal
regulation. In May and June, the governments in Victoria and New
South Wales committed to work on a national wagering tax solution.
No expected timelines or details of any potential changes in
taxation have been announced.
In June 2017, the House of Representatives of the Federal
Government approved the Interactive Gambling Amendment Bill which
will prohibit credit betting and introduce a series of measures to
enhance consumer protection and to reduce wagering with offshore
operators. The Bill will now go to the Senate of the Federal
Government for their approval prior to being implemented. We do not
expect the prohibition of credit betting to have a material impact
on our Australian division and we welcome the move to reduce the
activity of illegal offshore operators.
From March 2018, gambling advertising during live sports
programs on television, radio and online platforms will be
prohibited from five minutes before the commencement of play, until
five minutes after the conclusion of play, between 5:00am and
8:30pm.
The Federal Government is working with State and Territory
Governments on the design of a National Consumer Protection
Framework for online wagering. Measures being considered include
the establishment of a national self-exclusion register and
nationally consistent standards with regards a variety of areas
including pre-commitment, activity statements and sign-up offers.
Outcomes are expected to be announced later in the year.
Ireland
On 19 May 2017, the Government announced the launch of the
Betting Tax Review. It will review the roll out of the betting
regime to remote bookmakers and betting exchanges in 2015, as well
as looking at the likely impact of an increase in the rates of
betting duty on both exchequer revenues and the bookmaking
industry.
Responsible gambling
Operating responsibly is crucial to the sustainability of our
business. All our customers, across all of our brands and regions,
must be able to bet in a safe and enjoyable manner and have access
to tools and information that reduce the risk of harm. Since the
merger, we have standardised our player protection systems and have
taken a best of both approach. Since January 2017, any customer
self-excluding on either Paddy Power or Betfair is now
automatically excluded from the other brand.
We also continue to play a leading role within a wide range of
industry and government initiatives to further evolve the culture
of responsible gambling. We participate in the SENET group, whose
recent activity includes TV advertising and further commitments
around responsible gambling messages on social media. Further to
this we are members of the task group for the National Online Self
Exclusion Scheme (recently rebranded to GamSTOP), which is due to
launch next year and complements the Multi Operator Self Exclusion
Scheme ("MOSES") used in the retail sector.
In Australia, Sportsbet is a leading member of Responsible
Wagering Australia, which has worked closely with the Government to
introduce a comprehensive package of reforms that will reduce the
exposure of children to gambling advertising.
Separately disclosed items
GBPm H1 Proforma(2)
2017 H1
GBPm 2016
GBPm
---------------------------------------- ----- -----------
Merger deal expenses - (50)
Merger integration expenses - (49)
Non-cash merger related items:
Intangible asset amortisation (70) (79)
Fair value adjustment for replacement
share-based payment awards (5) (13)
Impairment of assets - (4)
----- -----------
Total separately disclosed items (75) (195)
All the separately disclosed items relate specifically to the
merger and therefore are excluded from underlying profits. In 2017
all the items are non-cash charges, comprising the amortisation of
intangible assets recognised on accounting for the merger (GBP70m)
and a fair value adjustment on the replacement of legacy Betfair
share-based payment awards for equivalent awards in the Group on
completion (GBP5m).
Taxation
The Group's underlying effective tax rate in the period was
14.4% (proforma(2) H1 2016: 16.0%). The full-year 2017 effective
tax rate is now expected to be between 13% and 15% (proforma(2) FY
2016: 15.5%).
Capital expenditure
The Group had GBP50m of capital expenditure in the period (H1
2016: GBP34m(10) ). Approximately 13% of the expenditure related to
our retail business with the remainder primarily related to
technology projects and product development. For the full year we
now expect total capital expenditure to be approximately
GBP90m.
Cash flow and financial position
GBPm H1 Proforma(2)
2017 H1
GBPm 2016
GBPm
-------------------------- ----- -----------
Underlying EBITDA(2,
3) 220 181
Capex(10) (50) (34)
Working capital and
tax 3 (7)
----- -----------
Underlying free cash
flow 172 140
Cash flow from separately
disclosed items (8) (63)
Free cash flow 164 77
Dividends paid (95) (145)
DRAFT acquisition (14) -
Interest (0) (1)
Proceeds from issue
of new shares 2 1
Net increase/(decrease)
in cash 57 (69)
Net cash at start of
period 36 84
Foreign currency exchange
translation (6) (13)
Net cash at period
end(8) 87 2
-------------------------- ----- -----------
The Group's profits convert strongly into cash flow, with
underlying free cash flow of GBP172m representing 113% of
underlying profit after tax in the period.
As at 30 June 2017, the Group had net cash of GBP87m, excluding
customer balances.
Dividend and capital structure
The Board continues to target a pay-out ratio for the Group's
dividend of approximately 50% of underlying profits after tax. The
Board has declared an interim dividend of 65p per share (2016: 40p
per share, or 52p including the pre-merger stub dividend). This
will be paid on 22 September 2017 to shareholders on the register
at the close of business on 25 August 2017.
The efficiency of the Group's capital structure is kept under
regular review by the Board. Relevant considerations include the
Group's strong cash flow generation, its investment plans and
general capital market conditions.
______________________________________________________________________________________
(1) Growth rates are shown on a proforma(2) basis.
(2) The merger of Paddy Power plc ("Paddy Power") and Betfair
Group plc ("Betfair") completed on 2 February 2016 and is accounted
for as an acquisition of Betfair by Paddy Power on that date. The
reported statutory comparative period results for six months ended
30 June 2016 reflect this accounting treatment in accordance with
generally accepted accounting principles (GAAP) and only include
Betfair results since the merger completion on 2 February 2016.
This announcement includes comparative period results prepared on a
"Proforma" basis (non-GAAP basis) for the Group as if Paddy Power
and Betfair had always been merged, which combine the full six
month results of Paddy Power and Betfair for 30 June 2016. The
directors consider that comparing the reported 2017 results against
the proforma comparative period is the most appropriate information
for understanding and analysing the performance of the Group and
accordingly, in the narrative, the year-on-year results are
discussed versus the proforma comparatives. A reconciliation
between the statutory and the non-GAAP proforma, underlying
comparative financials is included in Appendix 2 (page 17)
(3) EBITDA is profit before interest, tax, depreciation and
amortisation expenses and is a non-GAAP measure (see Appendix 2 on
page 17).
(4) The "underlying" measures remove the effects of the Merger
exceptional costs that are not part of the usual business activity
of the Group and are also excluded when internally evaluating
performance, which have been therefore reported as "separately
disclosed items" (see note 5 and page 33 to the financial
statements and Appendix 2 on page 17)
-(5) The comparative period proforma(2) interim dividend
includes closing dividends paid on merger relating to January 2016
equating to 12 pence per share and the interim dividend paid in
September 2016 of 40 pence per share
(6) Growth rates in the commentary are in local currency
(7) Constant currency ("cc") growth throughout this Operating
& Financial Review is calculated by retranslating non-sterling
denominated component of H1 2016 at H1 2017 exchange rates (see
Appendix 4)
(8) Net cash at 30 June 2017 is comprised of gross cash
excluding customer balances of GBP232m and borrowings of GBP145m.
The comparative balance shown as at 30 June 2016 is comprised of
gross cash excluding customer balances of GBP213m and borrowings of
GBP211m (see Appendix 3)
(9) Like-for-like growth rates are in constant currency(7) and
are calculated by only including in the H1 2017 results, financial
results from shops open prior to 2016 plus the financial results
from shops opened during 2016 only from the anniversary of their
opening date
(10) Capital expenditure for the H1 2016 comparative is on a
proforma(2) basis and excludes the intangible assets which were
recognised under the accounting for the Merger
(11) Active customers throughout this statement are defined as
those who have deposited real money and have bet in the reporting
period, excluding indirect B2B customers. Note that the Online
active customer numbers have not been adjusted for customers who
were active on both the Paddy Power and Betfair brands.
Appendix 1: Divisional Key Performance Indicators
Half yearly, H1 2016 is proforma
GBPm Online Australia Retail US Group
------------- --------------------- -------------------------------- --------------------- --------------------------- ----------------------------------
H1 H1 % H1 H1 % A$ H1 H1 % H1 H1 % US$ H1 H1 % CC(1)
2017 2016 2017 2016 % Change 2017 2016 2017 2016 % 2016 %
Change
Change Change Change Change 2017 Change Change
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
Sportsbook
stakes 2,962 2,700 +10% 1,699 1,259 +35% +16% 934 851 +10% 5,594 4,810 +16% +9%
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
- Online 2,780 2,481 +12% 1,546 1,053 +47% +26% 4,326 3,533 +22% +15%
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
- Dial-a-bet
/ Phone 182 219 -17% 152 207 -26% -37% 335 426 -21% -28%
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
- Retail 934 851 +10% 934 851 +10% +4%
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
Sportsbook
net rev % 6.2% 6.7% -0.5% 10.2% 10.3% -0.1% -0.1% 11.6% 11.6% Flat 8.3% 8.5% -0.2% -0.2%
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
Sports
revenue 318 316 +1% 173 129 +34% +15% 108 100 +9% 46 38 +21% +6% 646 582 +11% +4%
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
Gaming
revenue 120 124 -3% - - - - 52 47 +10% 9 5 +66% +46% 181 177 +2% +2%
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
Total revenue 439 440 Flat 173 129 +34% +15% 160 147 +9% 55 43 +26% +11% 827 759 +9% +3%
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
Regulated
markets 399 404 -1% 173 129 +34% +15% 160 147 +9% 55 43 +26% +11% 787 723 9% +3%
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
Unregulated
markets 40 36 +11% - - - - - - - - - - - 40 36 +11% +4%
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
Total revenue 439 440 Flat 173 129 +34% +15% 160 147 +9% 55 43 +26% +11% 827 759 +9% +3%
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
Cost of sales (97) (100) -4% (46) (32) +43% +23% (34) (32) +5% (12) (10) +22% +7% (189) (175) +8% +2%
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
Gross Profit 342 339 +1% 127 97 +31% +13% 126 115 +10% 43 33 +28% +12% 638 584 +9% +4%
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
Sales &
marketing (113) (108) +4% (38) (34) +10% -5% (3) (4) -16% (12) (9) +33% +18% (166) (156) +7% Flat
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
Product &
technology (46) (58) -20% (13) (12) +5% -9% (3) (3) -5% (5) (3) +48% +31% (66) (75) -12% -19%
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
Operations (35) (33) +6% (23) (20) +15% -2% (83) (77) +8% (18) (14) +31% +16% (160) (144) +11% +3%
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
Unallocated
central
costs (27) (28) -4% -8%
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
Operating
costs (194) (199) -2% (73) (66) +11% -5% (89) (84) +6% (35) (27) +34% +19% (419) (403) +4% -3%
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
Underlying
EBITDA 148 140 +6% 54 30 +77% +52% 37 31 +20% 7 7 +5% -11% 220 181 +21% +20%
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
Depreciation
&
amortisation (19) (17) +11% (7) (4) +73% +48% (9) (8) +14% (5) (4) +18% +4% (40) (33) +20% +10%
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
Underlying
operating
profit 129 123 +5% 46 26 +78% +52% 28 23 +23% 3 3 -13% -30% 180 148 +22% +22%
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
Separately
disclosed
items (75) (195) n/a n/a
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
Operating
profit 104 (48) n/a n/a
------------- ----- ----- ------- ----- ----- ------- --------- ----- ----- ------- ---- ---- ------- ------ ----- ----- ----------- -------
(1) Constant currency ("cc") growth is calculated by
retranslating non-sterling denominated component of H1 2016 at H1
2017 exchange rates (see Appendix 4)
Notes:
* Sportsbook stakes includes amounts staked via SSBTs
and excludes the exchange, gaming, US advance deposit
wagering and business-to-business activities.
* Sportsbook net revenue % is calculated after
deduction of costs for customer promotions and
bonuses.
* Sports net revenue includes sportsbook net revenues,
exchange and US advance deposit wagering commissions
and revenues from business-to-business activities.
* 'Online' segment includes UK/Ireland telephone business.
* Regulated markets currently include UK, Australia,
Ireland, US, Italy, Bulgaria, Denmark, Gibraltar,
Malta, Romania, Spain and business-to-business
activities.
Appendix 1: Divisional Key Performance Indicators (continued)
Quarterly, unaudited, Q1 2016 is proforma
GBPm Online Australia Retail US Group
------------ ----------------------------- ---------------------------------------- ---------------------------- ------------------------------------ ------------------------------------
Q1 Q1 % Q1 Q1 % A$ Q1 Q1 % Q1 Q1 % US$ Q1 Q1 % CC1
2017 2016 Change 2017 2016 Change % Change 2017 2016 Change 2017 2016 Change % 2017 2016 Change %
Change Change
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
Sportsbook +12%
stakes: 1,424 1,305 +9% 819 577 +42% +17% 456 407 +12% 2,699 2,289 +18% +9%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
- Online 1,337 1,186 +13% 742 486 +53% +26% 2,079 1,672 +24% +15%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
- Dial-a-bet
/ Phone 88 119 -27% 77 92 -16% -31% 164 211 -22% -29%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
- Retail 456 407 +12% 456 407 +12% +5%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
Sportsbook
net rev % 6.7% 5.4% +1.3% 10.4% 10.0% +0.4% +0.4% 12.4% 10.7% +1.7% 8.8% 7.5% +1.3% +1.3%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
Sports
revenue 163 135 +21% 85 58 +47% +21% 57 44 +30% 21 17 +21% +5% 326 254 +28% +18%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
Gaming
revenue 61 60 +2% - - - - 25 23 +10% 4 2 +95% +68% 90 85 +6% +6%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
Total
revenue 224 195 +15% 85 58 +47% +21% 82 67 +23% 25 20 +29% +12% 416 339 +23% +15%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
Regulated
markets 205 177 +15% 85 58 +47% +21% 82 67 +23% 25 20 +29% +12% 397 321 +24% +16%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
Unregulated
markets 19 17 +9% - - - - - - - - - - - 19 17 +9% -3%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
Total
revenue 224 195 +15% 85 58 +47% +21% 82 67 +23% 25 20 +29% +12% 416 339 +23% +15%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
Underlying
EBITDA 111 59 +87% +83%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
Underlying
operating
profit 91 42 +114% +117%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
GBPm Online Australia Retail US Group
------------ ----------------------------- ---------------------------------------- ---------------------------- ------------------------------------ ------------------------------------
Q2 Q2 % Q2 Q2 % A$ Q2 Q2 % Q2 Q2 % US$ Q2 Q2 % CC1
2017 2016 Change 2017 2016 Change % Change 2017 2016 Change 2017 2016 Change % 2017 2016 Change %
Change Change
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
Sportsbook +8%
stakes: 1,538 1,395 +10% 8801 682 +29% +14% 478 443 +12% 2,895 2,521 +15% +9%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
- Online 1,443 1,295 +11% 804 567 +42% +26% 2,247 1,862 +21% +14%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
- Dial-a-bet
/ Phone 95 100 -5% 76 115 -34% -42% 170 215 -21% -26%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
- Retail 478 443 +8% 478 443 +8% +2%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
Sportsbook
net rev % 5.7% 7.9% -2.2% 10.1% 10.5% -0.4% -0.4% 10.9% 12.6% -1.7% 7.9% 9.4% -1.5% -1.5%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
Sports
revenue 155 180 -14% 89 71 +24% +10% 52 56 -7% 25 21 +21% +8% 321 328 -2% -7%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
Gaming
revenue 60 65 -8% - - - - 26 24 +9% 4 3 +44% +29% 90 92 -2% -2%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
Total
revenue 215 245 -12% 89 71 +24% +10% 78 80 -2% 29 24 +24% +11% 411 420 -2% -6%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
Regulated
markets 194 227 -14% 89 71 +24% +10% 78 80 -2% 29 24 +24% +11% 390 402 -3% -7%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
Unregulated
markets 21 18 +13% - - - - - - - - - - - 21 18 +13% +11%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
Total
revenue 215 245 -12% 89 71 +24% +10% 78 80 -2% 29 24 +24% +11% 411 420 -2% -6%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
Underlying
EBITDA 109 122 -11% -11%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
Underlying
operating
profit 89 105 -16% -15%
------------ -------- -------- --------- -------- -------- ------ ------------ --------- --------- ------ -------- -------- ------ -------- --------- -------- ------ -------
1 Constant currency ('CC'), with non-sterling denominated component in Q1 2016
and Q2 2016 retranslated at Q1 2017 and Q2 2017 exchange rates, respectively
Appendix 2: Reconciliation of Proforma comparative results to
Statutory comparative results
The merger of Paddy Power plc ("Paddy Power") and Betfair Group
plc ("Betfair") completed on 2 February 2016, with the merger
accounted for as an acquisition of Betfair by Paddy Power on that
date. The Statutory comparative results reflect this accounting
treatment. Proforma comparative results for the Group are prepared
as if Paddy Power and Betfair had always been merged and are
included in these results, as comparing the report results against
these comparatives best depicts the underlying performance of the
Group. The difference between the Statutory comparative results and
Proforma comparative results is the results of Betfair in the
period prior to completion as per the table below.
GBPm H1 2016 Comparatives
---------------------------- --------------------------------
Proforma Betfair Statutory
results results results
pre-merger
completion
---------------------------- -------- ----------- ---------
Revenue 759 50 709
---------------------------- -------- ----------- ---------
Cost of sales (175) (11) (164)
---------------------------- -------- ----------- ---------
Gross Profit 584 39 545
---------------------------- -------- ----------- ---------
Operating costs (403) (26) (377)
---------------------------- -------- ----------- ---------
Underlying EBITDA 180.9 13.1 167.8
---------------------------- -------- ----------- ---------
Depreciation & amortisation (33.3) (1.9) (31.4)
---------------------------- -------- ----------- ---------
Underlying operating
profit 147.6 11.2 136.4
---------------------------- -------- ----------- ---------
Net interest expense (1.8) (0.4) (1.5)
---------------------------- -------- ----------- ---------
Underlying profit
before tax 145.8 10.8 134.9
---------------------------- -------- ----------- ---------
Underlying taxation (23.3) (1.7) (21.6)
---------------------------- -------- ----------- ---------
Underlying profit
for the year 122.4 9.1 113.3
---------------------------- -------- ----------- ---------
Underlying basic
earnings per share
(pence)(1) 147.0 n/a 148.5
---------------------------- -------- ----------- ---------
Underlying operating
profit 147.6 11.2 136.4
---------------------------- -------- ----------- ---------
Separately disclosed
items (195.1) (14.3) (180.8)
---------------------------- -------- ----------- ---------
Operating loss (47.5) (3.1) (44.4)
---------------------------- -------- ----------- ---------
Net interest expense (1.8) (0.4) (1.5)
---------------------------- -------- ----------- ---------
Loss before tax (49.3) (3.5) (45.9)
---------------------------- -------- ----------- ---------
Taxation (7.5) (1.7) (5.8)
---------------------------- -------- ----------- ---------
Loss for the year (56.9) (5.2) (51.7)
---------------------------- -------- ----------- ---------
Basic loss per share
(pence)(1) (68.3) n/a (67.7)
---------------------------- -------- ----------- ---------
Revenue by operating
segment
---------------------------- -------- ----------- ---------
Online 440 44 396
---------------------------- -------- ----------- ---------
Australia 129 - 129
---------------------------- -------- ----------- ---------
Retail 147 - 147
---------------------------- -------- ----------- ---------
US 43 6 37
---------------------------- -------- ----------- ---------
Gross Profit by operating
segment
---------------------------- -------- ----------- ---------
Online 339 34 305
---------------------------- -------- ----------- ---------
Australia 97 - 97
---------------------------- -------- ----------- ---------
Retail 115 - 115
---------------------------- -------- ----------- ---------
US 33 4 29
---------------------------- -------- ----------- ---------
(1) In the Proforma comparative results, in H1 2016 the weighted
average number of shares is taken for the period from merger
completion, 2 February 2016, to the end of the period, 30 June 2016
(83.3 million shares).
EBITDA is defined as profit for the period before depreciation
and amortisation, financial income, financial expense and tax
expense / credit. The Group uses EBITDA, Underlying EBITDA and
Underlying operating profit to comment on its financial
performance. These measures are used internally to evaluate
performance, to establish strategic goals and to allocate
resources. The directors also consider that these are commonly
reported and widely used by investors as an indicator of operating
performance and ability to incur and service debt, and as a
valuation metric. These are non-GAAP financial measures and are not
prepared in accordance with IFRS and, as not uniformly defined
terms, these may not be comparable with measures used by other
companies to the extent they do not follow the same methodology
used by the Group. Non-GAAP measures should not be viewed in
isolation, nor considered as a substitute for measures reported in
accordance with IFRS. All of the adjustments shown have been taken
from the audited financial statements.
Appendix 3: Reconciliation of Presented cash flow to Reported
statutory cash flow
In the Operating and Financial Review the cash flow has been
presented on a net cash basis. The difference between this and the
reported statutory cash flow is the inclusion of deposits and
borrowings to determine a net cash position, as reconciled in the
table below. The merger of Paddy Power plc ("Paddy Power") and
Betfair Group plc ("Betfair") completed on 2 February 2016, with
the merger accounted for as an acquisition of Betfair by Paddy
Power on that date. The Statutory comparative cash flow reflects
this accounting treatment. The Proforma comparative cash flow for
the Group is prepared as if Paddy Power and Betfair had always been
merged and is included in the presented cash flow with the
Operating and Financial Review, as it best depicts the underlying
performance of the Group. The difference between the Statutory
comparative cash flow and Proforma comparative cash flow is the
cash flow of Betfair in the period prior to completion, as per the
table below.
GBPm Presented Adjustment Adjustment Reported
cash flow to comparative to include cash flow
to exclude borrowings
Betfair
pre-merger
completion
cash
flow
-------------------------- ---------------- --------------- ------------- ------------
H1 H1 2016 H1 H1 H1 H1 H1
2017 2017 2016 2017
Proforma 2016 2016
-------------------------- ----- --------- --------------- ------ ----- ----- -----
Underlying EBITDA
(1) 220 181 (13) - - 220 168
-------------------------- ----- --------- --------------- ------ ----- ----- -----
Capex(2) (50) (34) 1 - - (50) (33)
-------------------------- ----- --------- --------------- ------ ----- ----- -----
Working capital &
tax (3) 3 (7) 141 - - 3 134
-------------------------- ----- --------- --------------- ------ ----- ----- -----
Underlying free cash
flow 172 140 129 - - 172 269
-------------------------- ----- --------- --------------- ------ ----- ----- -----
Cash flow from separately
disclosed items (8) (63) - - - (8) (63)
-------------------------- ----- --------- --------------- ------ ----- ----- -----
Free cash flow 164 77 129 - - 164 206
-------------------------- ----- --------- --------------- ------ ----- ----- -----
Dividends paid (95) (145) 14 - - (95) (131)
-------------------------- ----- --------- --------------- ------ ----- ----- -----
DRAFT acquisition (14) - - - - (14) -
-------------------------- ----- --------- --------------- ------ ----- ----- -----
Interest(4) (0) (1) - - - (0) (1)
-------------------------- ----- --------- --------------- ------ ----- ----- -----
Proceeds from issue
of new shares 2 1 - - - 2 1
-------------------------- ----- --------- --------------- ------ ----- ----- -----
Net amounts drawn
down on borrowings - - - (73) 48 (73) 48
-------------------------- ----- --------- --------------- ------ ----- ----- -----
Net increase / (decrease)
in cash 57 (69) 143 (73) 48 (16) 122
-------------------------- ----- --------- --------------- ------ ----- ----- -----
Net cash at start
of the period 36 84 (141) 214 143 250 86
-------------------------- ----- --------- --------------- ------ ----- ----- -----
Foreign currency
exchange translation (6) (13) (2) 4 20 (2) 5
-------------------------- ----- --------- --------------- ------ ----- ----- -----
Net cash at period
end 87 2 - 145 211 232 213
-------------------------- ----- --------- --------------- ------ ----- ----- -----
(1) Underlying EBITDA includes the following line items in the
statutory cash flow: Profit / (loss) for the period, separately
disclosed items, tax expense before separately disclosed items,
financial income, financial expense, and depreciation and
amortisation before separately disclosed items.
(2) Capex includes loss on disposal of property, plant and
equipment and intangible assets, purchase of property, plant and
equipment, purchase of intangible assets, purchase of businesses
net of cash acquired (excluding DRAFT acquisition shown separately
in presented cash flow), capitalised internal development
expenditure and payment of contingent deferred consideration.
(3) Working capital & tax includes increase in trade and
other receivables, increase in trade, other payables and
provisions, tax paid, cash acquired from merger with Betfair,
employee equity-settled share based payments expense before
separately disclosed items, and foreign currency exchange (loss) /
gain. Note the H1 2016 adjustment to exclude Betfair pre-merger
completion cash flow includes GBP147.5m of Betfair cash acquired on
completion.
(4) Interest includes interest paid and interest received.
Appendix 4: Reconciliation of proforma growth rates to proforma
constant currency growth rates
Constant currency ("cc") growth is calculated by retranslating
non-sterling denominated component of H1 2016 at H1 2017 exchange
rates as per the table below.
Proforma
-----------------------------------------------
GBPm H1 H1 % H1 H1 CC%
2016 2016 2016
FX CC
impact
2017 Change Change
--------------------- ----- ----- ----------- -------- -------- -------
Sportsbook stakes 5,594 4,810 +16% 334 5,144 +9%
--------------------- ----- ----- ----------- -------- -------- -------
- Online 4,326 3,533 +22% 245 3,778 +15%
--------------------- ----- ----- ----------- -------- -------- -------
- Dial-a-bet
/ Phone 335 426 -21% 38 464 -28%
--------------------- ----- ----- ----------- -------- -------- -------
- Retail 934 851 +10% 51 902 +4%
--------------------- ----- ----- ----------- -------- -------- -------
Sportsbook net
rev % 8.3% 8.5% -0.2% - 8.5% -0.2%
--------------------- ----- ----- ----------- -------- -------- -------
Sports net revenue 646 582 +11% 40 622 +4%
--------------------- ----- ----- ----------- -------- -------- -------
Gaming net revenue 181 177 +2% - 177 +2%
--------------------- ----- ----- ----------- -------- -------- -------
Total net revenue 827 759 +9% 40 799 +3%
--------------------- ----- ----- ----------- -------- -------- -------
Regulated markets 787 723 9% 38 761 +3%
--------------------- ----- ----- ----------- -------- -------- -------
Unregulated
markets 40 36 +11% 2 38 +4%
--------------------- ----- ----- ----------- -------- -------- -------
Total net revenue 827 759 +9% 40 799 +3%
--------------------- ----- ----- ----------- -------- -------- -------
Cost of sales (189) (175) +8% (10) (185) +2%
--------------------- ----- ----- ----------- -------- -------- -------
Gross Profit 638 584 +9% 30 614 +4%
--------------------- ----- ----- ----------- -------- -------- -------
Sales & marketing (166) (156) +7% (10) (166) Flat
--------------------- ----- ----- ----------- -------- -------- -------
Product & technology (66) (75) -12% (6) (81) -19%
--------------------- ----- ----- ----------- -------- -------- -------
Operations (160) (144) +11% (11) (155) +3%
--------------------- ----- ----- ----------- -------- -------- -------
Unallocated
central costs (27) (28) -4% (1) (29) -8%
--------------------- ----- ----- ----------- -------- -------- -------
Operating costs (419) (403) +4% (28) (431) -3%
--------------------- ----- ----- ----------- -------- -------- -------
Underlying EBITDA 220 181 +21% 2 183 +20%
--------------------- ----- ----- ----------- -------- -------- -------
Depreciation
& amortisation (40) (33) +20% (3) (36) +10%
--------------------- ----- ----- ----------- -------- -------- -------
Underlying operating
profit 180 148 +22% (1) 147 +22%
--------------------- ----- ----- ----------- -------- -------- -------
Revenue by division
--------------------- ----- ----- ----------- -------- -------- -------
Online 439 440 Flat 7 447 -2%
--------------------- ----- ----- ----------- -------- -------- -------
Australia 173 129 +34% 22 151 +15%
--------------------- ----- ----- ----------- -------- -------- -------
Retail 160 147 +9% 6 153 +5%
--------------------- ----- ----- ----------- -------- -------- -------
US 55 43 +26% 6 49 +11%
--------------------- ----- ----- ----------- -------- -------- -------
Underlying EBITDA
by division
--------------------- ----- ----- ----------- -------- -------- -------
Online 148 140 +6% (5) 136 +9%
--------------------- ----- ----- ----------- -------- -------- -------
Australia 54 30 +77% 5 35 +52%
--------------------- ----- ----- ----------- -------- -------- -------
Retail 37 31 +20% 2 33 +15%
--------------------- ----- ----- ----------- -------- -------- -------
US 7 7 +5% 1 8 -11%
--------------------- ----- ----- ----------- -------- -------- -------
Unallocated
central costs (27) (28) -4% (1) (29) -8%
--------------------- ----- ----- ----------- -------- -------- -------
DIRECTORS' RESPONSIBILITY STATEMENT IN RESPECT OF THE HALF
YEARLY FINANCIAL REPORT
For the six months ended 30 June 2017
Each of the Directors confirm their responsibility for preparing
the half yearly financial report in accordance with the
Transparency (Directive 2004/109/EC) Regulations 2007, the
Transparency Rules of the Central Bank of Ireland and the
Disclosure Guidance and Transparency Rules of the UK Financial
Conduct Authority ("FCA") and with IAS 34 'Interim Financial
Reporting' as adopted by the EU, and that to the best of our
knowledge:
a) the condensed consolidated interim financial
statements comprising the condensed consolidated
interim income statement, the condensed consolidated
interim statement of comprehensive income, the
condensed consolidated interim statement of financial
position, the condensed consolidated interim
statement of cash flows, the condensed consolidated
interim statement of changes in equity and related
Notes 1 to 18 have been prepared in accordance
with IAS 34 'Interim Financial Reporting' as
adopted by the EU.
b) the interim management report includes a fair
review of the information required by:
i) Regulation 8(2) of the Transparency (Directive
2004/109/EC) Regulations 2007 and the Disclosure
Guidance and Transparency Rules of the UK
FCA, being an indication of important events
that have occurred during the first six months
of the financial year and their impact on
the condensed set of financial statements;
and a description of the principal risks and
uncertainties for the remaining six months
of the year; and
ii) Regulation 8(3) of the Transparency (Directive
2004/109/EC) Regulations 2007 and the Disclosure
Guidance and Transparency Rules of the UK
FCA, being related party transactions that
have taken place in the first six months of
the current financial year and that have materially
affected the financial position or performance
of the entity during that period; and any
changes in the related party transactions
described in the 2016 Annual Report that could
do so.
The Directors are satisfied that the Group has adequate
resources to continue in business for the foreseeable future, a
period of not less than twelve months from the date of this report.
For this reason, they continue to adopt the going concern basis in
preparing the condensed consolidated interim financial
statements.
On behalf of the Board
Breon Corcoran Alex Gersh
Chief Executive Officer Chief Financial Officer
8 August 2017
Understanding and managing our principal risks
The Board continuously assesses and monitors the key risks of
the business. The key risks that could affect the Group's
performance and the factors that mitigate those risks have not
significantly changed from those set out on pages 56 to 59 in the
Group's Annual Report and Accounts 2016 (which is available to
download at www.paddypowerbetfair.com). The principal risks facing
the Group, together with the Group's risk management process in
relation to these risks, continue to be monitored, reviewed and
re-assessed. A summary of the principal risks and uncertainties
that are most relevant to the remainder of the current financial
year is included below:
-- Regulation and Licensing and Regulatory Compliance - The
regulatory, consumer protection or legislative environment,
including interpretations or practices, applicable to the Group's
activities in the various markets in which the Group operates
including those markets where no regulatory framework exists and
the related risks from limitation of business activities or
litigation by third parties can make it commercially challenging
for us to operate or restrict our ability to grow the business.
Breaches of regulations can damage reputations as well as lead to
fines, investigation and affect future growth. We have dedicated
internal and external Legal, Compliance and Tax teams with
responsibility for advising businesses units in these matters and
through appropriate policies, processes and controls. Our dedicated
Regulatory and Compliance teams work with regulators and
governments in relation to proportionate and reasonable regulation
which they have responsibility for guiding business units in their
management of compliance matters. Management reports periodically
to the Audit Committee and the Risk Committee on the application of
various laws and regulations by relevant jurisdiction to ensure
they are appropriately understood and managed. The Group's internal
and external auditors report the findings of their audit procedures
to the Audit Committee on relevant compliance matters.
-- Technology infrastructure, systems stability and availability
- Our operations are dependent on technology and advanced IT
systems and any damage or failure to these could reduce revenue and
harm our business reputation. Reduced availability of our products
arising through software, infrastructure and system issues could
result in a poor customer experience and may impact customer
loyalty impacting our ability to grow the business. We continuously
invest in a cost-effective technology platform to ensure stability
and availability, to eliminate single points of failure and improve
performance. Robust development and change management processes
help reduce the risk of unplanned outages.
-- Competition /Brand - The intensity of competition in the
Group's markets and the Group's ability to successfully compete can
impact revenue or margins. The Group has a programme of brand
investment and corporate communications to maintain and enhance its
market position. The Group also develops products with an emphasis
on mobile products and innovative features and acquisition through
marketing.
-- Data security - The inability to adequately protect customer
and other key data and information could result in formal
investigations and / or possible litigation resulting in
prosecution and damage to our brands. The Group has made
significant investment in IT security resources and partners with a
variety of external security specialists to ensure security
arrangements and systems are up to date with emerging threats. The
Group's Information and Security function continuously assesses the
risks and controls around security and IT operations. We have a
number of data protection policies in place in order to protect the
privacy rights of individuals in accordance with the relevant data
protection legislation including working towards the new EU-wide
General Data Protection Regulation which comes into force in 2018.
The Group's Legal and Compliance teams ensure the business adheres
to industry best practice standards and relevant laws of data
protection compliance.
-- Reliance on third parties and key supplier relationships -
Managing relationships with and performance by key suppliers,
particularly those supplying software platforms, payment processing
and data to support the Group's products is key to the Group's
strategic objectives. Where possible we limit reliance on a single
supplier to reduce potential single points of failure. The Group
has strong commercial relationships with its key suppliers.
Contracts and service level agreements are in place and are
regularly reviewed. Proposed new contracts are passed through a
procurement process to ensure the Group is protected. The Group
monitors the performance of third party suppliers in order to
ensure the efficiency and quality of contract performance.
-- Business continuity planning and disaster recovery - The
ability of the Group to maintain, develop and avoid disruption to
its key information technology systems. A significant outage or
unavailability of any of our products can cause reduction in
revenue and loss of customers. We regularly review our Business
Continuity Plans and our IT Disaster Recovery capability and have
in place service level agreements with third parties. Where
possible we have failover solutions and seek to limit single points
of failure.
-- Key employees recruitment and retention - The ability of the
Group to attract, retain and motivate passionate and highly skilled
employees post-Merger in an intensely competitive environment is
key. The Board reviews key positions through the Remuneration and
Nominations Committees. The Executive Directors and key employees
are part of medium or long term incentive plans which reward
performance and loyalty. All employees are subject to regular
salary review, a comprehensive benefit package and are afforded the
opportunity to join (subject to local requirements) our employee
save as you earn share scheme which provides an opportunity for
them to participate in the Group's performance. Our HR function
actively manages succession planning and the processes that are in
place throughout the business to identify key roles and conduct
regular appraisals, succession and talent reviews as well as career
development opportunities.
-- Financial exposure and financial reporting - Instances of
fraud, error or misstatement in financial reporting statements
could have a material impact on the Group and be damaging to our
reputation. The Merger transaction was a complex, significant and
highly material transaction involving valuation, taxation and
accounting expertise to complete. Appropriate accounting for this
transaction is critical in ensuring the Financial Statements are
free from material misstatement. There are standard processes and
controls in place to detect and prevent any attempted fraud or
material financial errors. Both during and post the Merger
professional advice was sought from a variety of advisers to ensure
appropriate actions were taken. The Board and Committees received
various presentations from relevant teams to gain assurance that a
robust process was undertaken. The External Auditor has performed
appropriate procedures to conclude on the accuracy of the
valuation, taxation and accountancy work and the appropriateness of
the associated disclosures.
-- Health and Safety - A major health and safety incident in our
retail betting shops would have a material impact upon staff and
could lead to significant reputational damage as well as fines and
regulatory actions. There are processes in place to manage the
risks in our retail betting shops including health and safety
structures, staffing rules and loss prevention and security
measures. There are a number of risk assessments conducted in shops
at various stages of the lifecycle. In addition, a formal incident
management process and follow up procedures reduce the likelihood
of repeat issues.
CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT
For the six months ended 30 June 2017
Before Separately Before Separately
separately disclosed separately disclosed
disclosed items disclosed items
items (Note 5) Total items (Note 5) Total
Six months Six months Six months Six months Six months Six months
ended ended ended ended ended ended
30 June 30 June 2017 30 June 30 June 2016 30 June 2016 30 June 2016
2017 (unaudited) 2017 (unaudited) (unaudited) (unaudited)
Note (unaudited) GBPm (unaudited) GBPm GBPm GBPm
GBPm GBPm
--------------- ------- ------------ ------------- ------------- ------------- ------------- ------------------
Continuing
operations
Revenue 4 827.0 - 827.0 708.8 - 708.8
Cost of sales (188.7) - (188.7) (164.0) - (164.0)
--------------- ------- ------------ ------------- ------------- ------------- ------------- ------------------
Gross profit 638.3 - 638.3 544.8 - 544.8
Operating
costs
excluding
depreciation
and
amortisation (418.6) (5.2) (423.8) (377.0) (97.9) (474.9)
--------------- ------- ------------ ------------- ------------- ------------- ------------- ------------------
EBITDA (1) 219.7 (5.2) 214.5 167.8 (97.9) 69.9
Depreciation
and
amortisation (40.1) (70.1) (110.2) (31.4) (82.9) (114.3)
--------------- ------- ------------ ------------- ------------- ------------- ------------- ------------------
Operating
profit /
(loss) 179.6 (75.3) 104.3 136.4 (180.8) (44.4)
--------------- ------- ------------ ------------- ------------- ------------- ------------- ------------------
Financial
income 0.7 - 0.7 0.8 - 0.8
Financial
expense (2.7) - (2.7) (2.3) - (2.3)
--------------- ------- ------------ ------------- ------------- ------------- ------------- ------------------
Profit /
(loss) before
tax 177.6 (75.3) 102.3 134.9 (180.8) (45.9)
--------------- ------- ------------ ------------- ------------- ------------- ------------- ------------------
Tax (expense)
/ credit 6 (25.6) 9.7 (15.9) (21.6) 15.8 (5.8)
--------------- ------- ------------ ------------- ------------- ------------- ------------- ------------------
Profit /
(loss) for
the period -
all
attributable
to equity
holders of
the Company 152.0 (65.6) 86.4 113.3 (165.0) (51.7)
--------------- ------- ------------ ------------- ------------- ------------- ------------- ------------------
Earnings /
(loss) per
share
Basic 7 GBP1.029 (GBP0.677)
Diluted (2) 7 GBP1.020 (GBP0.677)
--------------- ------- ------------ ------------- ------------- ------------- ------------- ------------------
1 EBITDA is defined as profit for the period before
depreciation and amortisation, financial income,
financial expense and income tax expense / credit.
It is considered by the Directors to be a key
measure of the Group's financial performance.
2 Where any potential ordinary shares would have
the effect of decreasing a loss per share, they
have not been treated as dilutive.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE
INCOME
For the six months ended 30 June 2017
Six months Six months
ended ended
30 June 30 June
2017 2016
Note (unaudited) (unaudited)
GBPm GBPm
--------------------------------- ------- ------------- -----------------
Profit / (loss) for the period
- all attributable to equity
holders of the Company 86.4 (51.7)
------------------------------------------ ------------- -----------------
Other comprehensive income
/ (loss)
Items that are or may be reclassified
subsequently to profit or loss:
Effective portion of changes
in fair value of cash flow
hedges - 6.7
Fair value of foreign exchange
cash flow hedges transferred
to income statement - (4.5)
Foreign exchange (loss) /
gain on translation of the
net assets of foreign currency
denominated entities (24.4) 15.4
Deferred tax on fair value
of cash flow hedges - (0.3)
Other comprehensive (loss)
/ income (24.4) 17.3
Total comprehensive income
/ (loss) for the period -
all attributable to equity
holders of the Company 62.0 (34.4)
------------------------------------------ ------------- -----------------
CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL
POSITION
As at 30 June 2017
30 June 31 December
2017 2016
Note (unaudited) (audited)
GBPm GBPm
-------------------------------- ------ ------------- ------------
Assets
Property, plant and
equipment 140.8 134.0
Intangible assets 509.0 581.2
Goodwill 8 3,900.8 3,891.1
Deferred tax assets 10.0 8.6
Investments 0.1 0.1
Available-for-sale financial
assets 1.3 1.3
Trade and other receivables 5.4 5.8
-------------------------------- ------ ------------- ------------
Total non-current assets 4,567.4 4,622.1
-------------------------------- ------ ------------- ------------
Trade and other receivables 60.5 55.2
Financial assets - restricted
cash 10 74.1 64.8
Cash and cash equivalents 10 232.0 249.9
-------------------------------- ------ ------------- ------------
Total current assets 366.6 369.9
-------------------------------- ------ ------------- ------------
Total assets 4,934.0 4,992.0
-------------------------------- ------ ------------- ------------
Equity
Issued share capital
and share premium 419.5 417.2
Treasury shares (40.7) (40.7)
Shares held by employee
benefit trust (19.2) (30.9)
Other reserves 127.9 173.0
Retained earnings 3,821.9 3,798.0
-------------------------------- ------ ------------- ------------
Total equity attributable
to equity holders of
the Company 4,309.4 4,316.6
Liabilities
Trade and other payables 11 326.5 320.6
Derivative financial
liabilities 11 15.6 8.6
Provisions 3.2 4.6
Current tax payable 40.4 38.8
Borrowings 13 0.1 0.2
-------------------------------- ------ ------------- ------------
Total current liabilities 385.8 372.8
-------------------------------- ------ ------------- ------------
Trade and other payables 11 38.3 26.9
Provisions 1.1 1.1
Deferred tax liabilities 54.3 61.0
Borrowings 13 145.1 213.6
-------------------------------- ------ ------------- ------------
Total non-current liabilities 238.8 302.6
-------------------------------- ------ ------------- ------------
Total liabilities 624.6 675.4
-------------------------------- ------ ------------- ------------
Total equity and liabilities 4,934.0 4,992.0
-------------------------------- ------ ------------- ------------
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
For the six months ended 30 June 2017
Six months Six months
ended ended
30 June 2017 30 June 2016
Note (unaudited) (unaudited)
GBPm GBPm
--------------------------------------------------------------------------- ------- -------------- --------------
Cash flows from operating activities
Profit / (loss) for the period - all attributable to equity holders of the
Company 86.4 (51.7)
Separately disclosed items 5 65.6 165.0
Tax expense before separately disclosed items 25.6 21.6
Financial income (0.7) (0.8)
Financial expense 2.7 2.3
Depreciation and amortisation before separately disclosed items 40.1 31.4
Employee equity-settled share-based payments expense before separately
disclosed items 15.4 9.5
Foreign currency exchange loss / (gain) 0.8 (0.9)
Loss on disposal of property, plant and equipment and intangible assets - 0.2
Cash from operations before changes in working capital 235.9 176.6
Increase in trade and other receivables (5.2) (8.9)
Increase in trade, other payables and provisions 14.0 5.4
--------------------------------------------------------------------------- ------- -------------- --------------
Cash generated from operations 244.7 173.1
Tax paid (22.1) (18.8)
--------------------------------------------------------------------------- ------- -------------- --------------
Net cash from operating activities before merger fees and integration and
restructuring costs 222.6 154.3
Merger fees and integration and restructuring costs paid (7.7) (62.9)
--------------------------------------------------------------------------- ------- -------------- --------------
Net cash from operating activities 214.9 91.4
--------------------------------------------------------------------------- ------- -------------- --------------
Purchase of property, plant and equipment (12.5) (12.9)
Purchase of intangible assets (27.5) (16.4)
Cash acquired from merger with Betfair Group plc - 147.5
Purchase of businesses, net of cash acquired 9 (14.4) (0.1)
Capitalised internal development expenditure (9.0) (2.1)
Payment of contingent deferred consideration 9 (1.4) (1.3)
Interest received 0.7 0.7
--------------------------------------------------------------------------- ------- -------------- --------------
Net cash (used in) / from investing activities (64.1) 115.4
--------------------------------------------------------------------------- ------- -------------- --------------
Proceeds from the issue of new shares 2.2 0.8
Dividends paid 14 (94.7) (108.8)
Net amounts (repaid) / drawn down on borrowings facility (73.1) 47.9
Interest paid (0.9) (1.7)
Betfair Group plc closing dividend 14 - (22.6)
Net cash used in financing activities (166.5) (84.4)
--------------------------------------------------------------------------- ------- -------------- --------------
Net (decrease) / increase in cash and cash equivalents (15.7) 122.4
Cash and cash equivalents at start of period 249.9 86.1
Foreign currency exchange (loss) / gain on cash and cash equivalents (2.2) 4.7
--------------------------------------------------------------------------- ------- -------------- --------------
Cash and cash equivalents at end of period 10 232.0 213.2
--------------------------------------------------------------------------- ------- -------------- --------------
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN
EQUITY
For the six months ended 30 June 2017
Attributable to equity holders of the Company
---------------- ---------------------------------------------------------------------------------------------------------
Issued Shares
Number share Foreign held by Share-
of capital exchange employee based
ordinary and translation Other Treasury benefit payment Retained Total
shares share reserve reserves shares trust reserve earnings equity
(unaudited) in premium GBPm GBPm GBPm GBPm GBPm GBPm GBPm
issue GBPm
millions
---------------- ---------- -------- ------------- ---------- ---------- --------- --------- ---------- ----------
Balance at 1
January 2017 86.0 417.2 29.5 1.7 (40.7) (30.9) 141.8 3,798.0 4,316.6
---------- -------- ------------- ---------- ---------- --------- --------- ---------- ----------
Total comprehensive income
/ (loss) for the period
Profit for the
period - - - - - - - 86.4 86.4
Foreign
exchange
translation - - (24.4) - - - - - (24.4)
Total
comprehensive
(loss) /
income for the
period - - (24.4) - - - - 86.4 62.0
---------- -------- ------------- ---------- ---------- --------- --------- ---------- ----------
Transactions with owners of the
Company, recognised directly in
equity
Shares issued
(Note 15) 0.3 2.3 - - - - - - 2.3
Equity-settled
transactions -
expense
recorded in
income
statement - - - - - - 15.4 - 15.4
Equity-settled
transactions -
vestings - - - - - 11.7 (10.2) 0.4 1.9
Tax on
share-based
payments - - - - - - - 0.7 0.7
Transfer to
retained
earnings on
exercise of
share options - - - - - - (31.1) 31.1 -
Dividends to
shareholders
(Note 14) - - - - - - - (94.7) (94.7)
Replacement
share options
- expense
recorded in
income
statement
(Note 5) - - - - - - 5.2 - 5.2
---------------- ---------- -------- ------------- ---------- ---------- --------- --------- ---------- ----------
Total
contributions
by and
distributions
to
owners of the
Company 0.3 2.3 - - - 11.7 (20.7) (62.5) (69.2)
---------------- ---------- -------- ------------- ---------- ---------- --------- --------- ---------- ----------
Balance at 30
June 2017 86.3 419.5 5.1 1.7 (40.7) (19.2) 121.1 3,821.9 4,309.4
---------------- ---------- -------- ------------- ---------- ---------- --------- --------- ---------- ----------
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN
EQUITY
For the six months ended 30 June 2016
Attributable to equity holders of the Company
-------------------- -------------------------------------------------------------------------------------------------------------------------
Restated Restated
Issued Restated Restated Shares Restated
Number share Foreign Cash held by Share-
of capital exchange flow Restated Restated employee based Restated Restated
ordinary and share translation hedge Other Treasury benefit payment Retained Total
shares premium reserve reserve reserves shares trust reserve earnings equity
(unaudited) in GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
issue
millions
-------------------- ---------- ---------- ------------- ---------- ---------- ---------- --------- ---------- ---------- -----------
Balance at 1
January 2016 46.0 8.7 (20.2) 1.5 1.7 (40.7) (49.2) 25.5 123.6 50.9
---------- ---------- ------------- ---------- ---------- ---------- --------- ---------- ---------- -----------
Total comprehensive income / (loss) for the period
Loss for the period - - - - - - - - (51.7) (51.7)
Foreign exchange
translation - - 15.4 - - - - - - 15.4
Net change in fair
value of cash flow
hedge reserve - - - 2.2 - - - - - 2.2
Deferred tax on
cash flow hedges - - - (0.3) - - - - - (0.3)
Total comprehensive
income / (loss)
for the period - - 15.4 1.9 - - - - (51.7) (34.4)
---------- ---------- ------------- ---------- ---------- ---------- --------- ---------- ---------- -----------
Transactions with owners of the Company, recognised directly in equity
Shares issued (Note
15) 0.1 0.8 - - - - - - - 0.8
Equity-settled
transactions -
expense
recorded in income
statement - - - - - - - 16.6 - 16.6
Equity-settled
transactions -
vestings - - - - - - 11.9 (13.3) 1.7 0.3
Deferred tax on
share based
payments - - - - - - - - (1.3) (1.3)
Transfer to
retained earnings
on exercise of
share options - - - - - - - (0.2) 0.2 -
Shares issued as
consideration for
acquisition of
Betfair Group plc
(Note 15) 39.6 4,202.3 - - - - - - - 4,202.3
Capital reduction
(Note 15) - (3,796.3) - - - - - - 3,796.3 -
Dividends to
shareholders (Note
14) - - - - - - - - (108.8) (108.8)
Issue of
replacement share
options (Note 9) - - - - - - - 111.4 - 111.4
Replacement share
options - expense
recorded in income
statement (Note 5) - - - - - - - 13.4 - 13.4
Total contributions
by and
distributions to
owners of the
Company 39.7 406.8 - - - - 11.9 127.9 3,688.1 4,234.7
-------------------- ---------- ---------- ------------- ---------- ---------- ---------- --------- ---------- ---------- -----------
Balance at 30
June 2016 85.7 415.5 (4.8) 3.4 1.7 (40.7) (37.3) 153.4 3,760.0 4,251.2
-------------------- ---------- ---------- ------------- ---------- ---------- ---------- --------- ---------- ---------- -----------
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
1. General information
Paddy Power Betfair plc (the "Company") is a company
incorporated in the Republic of Ireland. The condensed consolidated
interim financial statements of the Company for the six months
ended 30 June 2017 comprise the Company and its subsidiaries
(together referred to as the "Group"). The condensed consolidated
interim financial statements are unaudited but have been reviewed
by KPMG LLP, the Group's auditor, whose report is set out on the
last page of this document.
The financial information presented herein does not comprise
full statutory financial statements and therefore does not include
all of the information required for full annual financial
statements. Full statutory financial statements for the year ended
31 December 2016, prepared in accordance with International
Financial Reporting Standards ("IFRSs") as adopted by the EU
together with an unqualified audit report thereon under Section 391
of the Irish Companies Act 2014, will be annexed to the annual
return and filed with the Registrar of Companies in Ireland.
The condensed consolidated interim financial statements were
approved for issue by the Board of Directors of Paddy Power Betfair
plc on 8 August 2017.
2. Basis of preparation and accounting policies
The condensed consolidated interim financial statements have
been prepared in accordance with the Transparency (Directive
2004/109/EC) Regulations 2007, the Transparency Rules of the
Republic of Ireland's Financial Regulator and with IAS 34 'Interim
Financial Reporting' as adopted by the EU. The condensed
consolidated interim financial statements are prepared on the
historical cost basis except for betting transactions and forward
foreign exchange contracts (which are recorded as derivative
financial instruments), assets available-for-sale, contingent
deferred consideration and certain share-based payments, all of
which are stated at fair value (grant date fair value in the case
of equity-settled share-based payments).
The financial information contained in the condensed
consolidated interim financial statements has been prepared in
accordance with the accounting policies set out in the Group's last
annual financial statements in respect of the year ended 31
December 2016.
Amendments to existing standards
During the period, a number of amendments to existing accounting
standards became effective. These have been considered by the
directors and have not had a significant impact on the Group's
consolidated financial statements.
3. Judgements and estimates
The preparation of interim financial statements in conformity
with IFRSs requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and
expenses. Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial
statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were consistent with those that applied to
the consolidated financial statements as at and for the year ended
31 December 2016.
4. Operating segments
The Group's reportable segments are divisions that are managed
separately, due to a combination of factors including method of
service delivery, geographical location and the different services
provided.
Reportable business segment information
The Group's reportable segments are as follows:
* Online;
* Australia;
* US;
* Retail.
The reportable segments reflect the way financial information is
reviewed by the Group's Chief Operating Decision Maker
("CODM").
The Online segment derives its revenues primarily from sports
betting (sportsbook and the exchange sports betting product) and /
or gaming (games, casino, bingo and poker) services in all
business-to-customer ("B2C") geographies that the Group operates in
except the US and Australia, and business-to-business ("B2B")
services globally. Online services are delivered primarily through
the internet with a small proportion delivered through the public
telephony system.
The Australia segment earns its revenues from sports betting
services provided to Australian customers using primarily the
internet with a small proportion using the public telephony
system.
The Retail segment derives its revenues from sports betting and
/ or gaming machine services delivered through licenced bookmaking
shop estates in the UK and Ireland.
The US segment earns its revenues from sports betting (including
the exchange sports betting product) and gaming services provided
to US customers via the internet.
Corporate administrative costs (Board, Finance, Legal, Internal
Audit, HR, Property and other central functions) cannot be readily
allocated to individual operating segments and are not used by the
CODM for making operating and resource allocation decisions. These
are shown in the reconciliation of reportable segments to Group
totals.
The accounting policies in respect of operating segments
reporting are the same as those described in the basis of
preparation and summary of significant accounting policies set out
in the Company's last annual financial statements in respect of the
year ended 31 December 2016.
The Group does not allocate income tax expense or interest to
reportable segments. Treasury management is centralised for the
Online, US and Retail segments. The Australian segment manages its
own treasury function under Group Treasury oversight.
4. Operating segments (continued)
Assets and liabilities information is reported internally in
total and not by reportable segment and, accordingly, no
information is provided in this note on assets and liabilities
split by reportable segment.
Reportable business segment information for the six months ended
30 June 2017:
Online Australia Retail US Corporate Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------------------------- -------- ---------- ------- ------- ---------- --------
Revenue from external
customers 438.8 173.4 160.2 54.6 - 827.0
Cost of sales (96.5) (46.4) (33.8) (12.0) - (188.7)
-------- ---------- ------- ------- ---------- --------
Gross profit 342.3 127.0 126.4 42.6 - 638.3
Operating costs
excluding depreciation
and amortisation (194.4) (73.3) (89.0) (35.4) (26.5) (418.6)
-------- ---------- ------- ------- ---------- --------
EBITDA (1) 147.9 53.7 37.4 7.2 (26.5) 219.7
Depreciation and
amortisation (18.8) (7.3) (9.3) (4.7) - (40.1)
Reportable segment
profit / (loss)
before separately
disclosed items 129.1 46.4 28.1 2.5 (26.5) 179.6
-------------------------------------------------------- -------- ---------- ------- ------- ---------- --------
Separately disclosed
items (Note 5):
* Amortisation of merger related intangible assets (70.1)
* Replacement share options (5.2)
Operating profit 104.3
--------
Reportable business segment information for the six months ended
30 June 2016:
Online Australia Retail US Corporate Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------------------------- -------- ---------- ------- ------- ---------- --------
Revenue from external
customers 395.9 129.0 146.8 37.1 - 708.8
Cost of sales (91.1) (32.5) (32.0) (8.4) - (164.0)
-------- ---------- ------- ------- ---------- --------
Gross profit 304.8 96.5 114.8 28.7 - 544.8
Operating costs
excluding depreciation
and amortisation (180.0) (66.2) (83.6) (22.9) (24.3) (377.0)
-------- ---------- ------- ------- ---------- --------
EBITDA (1) 124.8 30.3 31.2 5.8 (24.3) 167.8
Depreciation and
amortisation (15.7) (4.2) (8.2) (3.3) - (31.4)
Reportable segment
profit / (loss)
before separately
disclosed items 109.1 26.1 23.0 2.5 (24.3) 136.4
-------------------------------------------------------- -------- ---------- ------- ------- ---------- --------
Separately disclosed
items (Note 5):
* Merger fees and associated costs (35.5)
* Integration and restructuring costs (49.0)
* Amortisation of merger related intangible assets (78.9)
* Replacement share options (13.4)
* Impairment of property, plant and equipment and
intangible assets (4.0)
--------
Operating loss (44.4)
--------
1 EBITDA is defined as profit for the period before
depreciation and amortisation, financial income,
financial expense and income tax expense / credit.
It is considered by the Directors to be a key
measure of the Group's financial performance.
4. Operating segments (continued)
Reconciliation of reportable segments to Group totals:
Six months Six months
ended ended
30 June 30 June
2017 2016
GBPm GBPm
----------------------------------- ----------- -----------
Revenue
Total revenue from reportable
segments, being total Group
revenue 827.0 708.8
----------------------------------- -----------
Profit and loss
Operating profit / (loss) 104.3 (44.4)
Unallocated amounts:
Financial income - non-Australia
(1) 0.2 0.4
Financial income - Australia 0.5 0.4
Financial expense - non-Australia
(1) (2.6) (2.3)
Financial expense - Australia (0.1) -
-----------------------------------
Profit / (loss) before tax 102.3 (45.9)
----------------------------------- ----------- -----------
1 Non-Australia above comprises the Online, Retail
and US operating segments and Corporate. Financial
expense relating to these segments is primarily
in respect of interest on borrowings, guarantee
and facility fees payable, other interest amounts
payable, and the unwinding of discounts on provisions
and other non-current liabilities.
Seasonality
The Group's sportsbook revenue is driven by a combination of the
timing of sporting and other events and the Group's results derived
from those events. Gaming and other revenue is not as dependent on
the sporting calendar.
5. Separately disclosed items
Six months Six months
ended ended
30 June 30 June
2017 2016
GBPm GBPm
Merger fees and associated
costs - (35.5)
Integration and restructuring
costs - (49.0)
Amortisation of merger related
intangible assets (70.1) (78.9)
Replacement share options (5.2) (13.4)
Impairment of property, plant
and equipment and intangible
assets - (4.0)
Operating profit / (loss) impact
of separately disclosed items (75.3) (180.8)
------------------------------------ ----------- -----------
Tax credit on separately disclosed
items 9.7 15.8
Total separately disclosed
items (65.6) (165.0)
------------------------------------ ----------- -----------
Merger fees and associated costs
Merger fees and associated costs in 2016 relate to costs
incurred directly as a result of the Merger. This includes stamp
duty of GBP20.7m and professional fees of GBP14.8m which were
subject to completion of the Merger. This does not include any
professional fees incurred by Betfair Group plc and its
subsidiaries prior to the Merger. No such fees were incurred in
2017.
Integration and restructuring costs
Integration and restructuring costs in 2016 relate to
incremental, one-off costs incurred post-Merger as a result of
integration and restructuring related activities. No such costs
were incurred in 2017.
Amortisation of merger related intangible assets
Non-cash amortisation of GBP70.1m has been incurred in the
period (six months ended 30 June 2016: GBP78.9m) primarily as a
result of intangible assets separately identified under IFRS 3 as a
result of the Merger.
Replacement share options
Under the terms of the Merger, outstanding unvested share option
awards granted under the Betfair Long Term Incentive Plan in
2013/14, 2014/15 and 2015/16 and the Betfair Sharesave Plans would
not vest on completion but would be replaced by share option awards
over an equivalent number of ordinary shares in the Company,
calculated by reference to the exchange ratio of 0.4254. Whilst the
awards will vest in line with their previous terms, the replacement
of the options, under IFRS 3, requires them to be accounted for at
fair value on acquisition. As a result, non-cash accounting charges
of GBP5.2m were incurred in the period (six months ended 30 June
2016: GBP13.4m).
Impairment of property, plant and equipment and intangible
assets
In 2016, non-cash impairments amounting to GBP4.0m in relation
to certain property, plant and equipment and intangible assets were
incurred in light of integration related activities post-Merger.
There were no such impairments in the six months ended 30 June
2017.
Merger fees and associated costs, integration and restructuring
costs and replacement share options are included in the Condensed
Consolidated Interim Income Statement within operating costs
excluding depreciation and amortisation. Amortisation of merger
related intangible assets and impairment of property, plant and
equipment and intangible assets are included in the Condensed
Consolidated Interim Income Statement within depreciation and
amortisation.
6. Tax expense
Tax is accrued for the interim reporting period using
management's best estimate of the weighted average tax rate that is
expected to be applicable to estimated total annual earnings. This
expected annual effective tax rate is applied to the taxable income
of the interim period.
The Group's underlying effective tax rate for the period was
14.4% (six months ended 30 June 2016: 16.0%), which compares to the
standard Irish corporation tax rate of 12.5%. A tax credit on
separately disclosed items amounting to GBP9.7m was accounted for
in the period ended 30 June 2017 (six months ended 30 June 2016:
GBP15.8m) (see Note 5).
7. Earnings per share
The Group presents basic and diluted earnings per share ("EPS")
data for its ordinary shares. Basic EPS is calculated by dividing
the profit or loss attributable to ordinary shareholders of the
Company by the weighted average number of ordinary shares
outstanding during the period. The weighted average number of
shares has been adjusted for amounts held as Treasury Shares and
amounts held by the Group's Employee Benefit Trust ("EBT").
Diluted EPS is determined by adjusting the profit or loss
attributable to ordinary shareholders and the weighted average
number of ordinary shares outstanding for the effects of all
dilutive potential ordinary shares.
The calculation of basic and diluted EPS is as follows:
Six months Six months
ended ended
30 June 30 June
2017 2016
------------------------------------- ----------- -------------
Numerator in respect of basic
and diluted earnings per share
(GBPm):
Profit / (loss) attributable
to equity holders of the Company 86.4 (51.7)
------------------------------------- ----------- -------------
Numerator in respect of adjusted
earnings per share (GBPm):
Profit / (loss) attributable
to equity holders of the Company 86.4 (51.7)
Separately disclosed items (Note
5) 65.6 165.0
------------------------------------- ----------- -------------
Profit for adjusted earnings
per share calculation 152.0 113.3
Weighted average number of ordinary
shares in issue during the period
(in '000s) 83,925 76,275
------------------------------------- ----------- -------------
Basic earnings / (loss) per GBP1.029 (GBP0.677)
share
------------------------------------- ----------- -------------
Adjusted basic earnings per GBP1.811 GBP1.485
share
------------------------------------- ----------- -------------
Adjustments to derive denominator in
respect of diluted earnings per share
(in '000s):
Weighted average number of ordinary
shares in issue during the period 83,925 76,275
Dilutive effect of share options 805 -
and awards on issue
------------------------------------- ----------- -------------
Adjusted weighted average number
of ordinary shares in issue
during the period 84,730 76,275
------------------------------------- ----------- -------------
Diluted earnings / (loss) per GBP1.020 (GBP0.677)
share
------------------------------------- ----------- -------------
Adjusted diluted earnings per GBP1.794 GBP1.485
share
------------------------------------- ----------- -------------
The average market value of the Company's shares of GBP85.22 (30
June 2016: GBP93.16) was used to calculate the dilutive effect of
share options based on the market value for the period that the
options were outstanding.
Where any potential ordinary shares would have the effect of
decreasing a loss per share, they have not been treated as
dilutive.
8. Goodwill
The following cash generating units, being the lowest level of
asset for which there are separately identifiable cash flows, have
the following carrying amounts of goodwill:
Online Australia US UK Retail Irish Total
GBPm GBPm GBPm GBPm Retail GBPm
GBPm
------------------------- --------------- ----------- -------------- ----------- ----------- ---------------
Balance at 1
January 2016 9.8 38.0 - 16.2 15.9 79.9
Arising on acquisitions
during the period
(Note 9) 3,420.9 - 324.5 0.1 0.1 3,745.6
Foreign currency
translation adjustment 1.6 7.2 52.5 1.6 2.7 65.6
------------------------- --------------- ----------- -------------- ----------- ----------- ---------------
Balance at 31
December 2016 3,432.3 45.2 377.0 17.9 18.7 3,891.1
Arising on acquisitions
during the period
(Note 9) - - 27.3 - 0.2 27.5
Foreign currency
translation adjustment 0.3 0.5 (19.5) 0.2 0.7 (17.8)
------------------------- --------------- ----------- -------------- ----------- ----------- ---------------
Balance at 30
June 2017 3,432.6 45.7 384.8 18.1 19.6 3,900.8
------------------------- --------------- ----------- -------------- ----------- ----------- ---------------
The Group reviews the carrying value of goodwill for impairment
annually (or more frequently if there are indications that the
value of goodwill may be impaired) by comparing the carrying values
of these cash generating units with their recoverable amounts
(being the higher of value in use and fair value less costs to
sell).
9. Business combinations
Six months ended 30 June 2017
Acquisition of DRAFT
In May 2017, the Group acquired DRAFT, an early stage operator
in the daily fantasy sports market in the United States. The
acquisition provides the Group with exposure to a fast-growing
market and complements our other businesses in the United States.
The initial cash consideration paid on completion was $19m with
further cash consideration of up to $29m payable over the next four
years.
The total fair value of further cash consideration at the
acquisition date is estimated to be GBP13m (after discounting at
8%, consistent with other US operations), with the final amount due
dependent on future performance over the next four years.
Details of the provisional fair values of the net assets
acquired and the goodwill arising on this acquisition under IFRS
are as follows:
As at
10 May
2017
GBPm
--------------------------------------- --------
Net liabilities acquired (0.3)
Goodwill arising on acquisition - US 27.3
--------------------------------------- --------
Consideration 27.0
--------------------------------------- --------
The consideration is analysed as:
Cash consideration 14.3
Deferred and contingent consideration 12.7
--------------------------------------- --------
Consideration 27.0
--------------------------------------- --------
The principal factors contributing to the goodwill relate to the
differentiated product, the strong management team and the
marketing and technology expertise that can be provided by the rest
of the Group. Information in respect of revenue, operating profit
and cash flows for the acquired business in respect of the period
from acquisition and for the period ended 30 June 2017 has not been
presented on the basis of immateriality.
9. Business combinations (continued)
Shop property business acquisitions
In 2017, the Group, in the absence of available comparable sites
for organic shop openings, acquired a licensed bookmaking business
in Ireland.
Details of the net assets acquired and the goodwill arising on
this acquisition under IFRS are as follows:
Provisional
fair
values
30 June
2017
GBPm
----------------------------------------- ------------
Goodwill arising on acquisition - Irish
Retail 0.2
----------------------------------------- ------------
Consideration 0.2
----------------------------------------- ------------
The consideration is analysed as:
Cash consideration 0.1
Deferred and contingent consideration 0.1
----------------------------------------- ------------
Consideration 0.2
----------------------------------------- ------------
The principal factors contributing to the Irish Retail goodwill
balance is the well-established nature of the acquired business
within the location in which it operates and the potential
synergies, rebranding opportunities and operational efficiencies
achievable for the acquired business within the group. Information
in respect of revenue, operating profit and cash flows for the
acquired business in respect of the period from acquisition and for
the period ended 30 June 2017 has not been presented on the basis
of immateriality.
Six months ended 30 June 2016
Acquisition of Betfair Group plc
On 2 February 2016, Paddy Power plc completed an all share
merger with Betfair Group plc (the "Merger") resulting in Paddy
Power plc shareholders owning 52% and Betfair Group plc
shareholders owning 48% of Paddy Power Betfair plc (previously
Paddy Power plc) (the "Company", together with its subsidiaries,
the "Group"), on a fully diluted basis taking into account existing
share options and award schemes for both companies as at the date
of the Rule 2.7 announcement in relation to the agreement of the
terms of the Merger (8 September 2015). Post-merger, the Company is
the Ultimate Parent of Betfair Group Limited (previously Betfair
Group plc).
Under the terms of the Merger, holders of Betfair Group plc
shares received 0.4254 ordinary shares with nominal value of EUR
0.09 each in the Company ("ordinary shares") in exchange for one
ordinary share of 0.095 pence each held in Betfair Group plc
("Exchange Ratio"). Accordingly, the Company issued a total of
39,590,574 ordinary shares in exchange for 93,066,700 shares in
Betfair Group plc, in addition to replacement share option awards
in lieu of outstanding unvested share option awards granted under
the Betfair Long Term Incentive Plan in 2013/14, 2014/15 and
2015/16 and the Betfair Sharesave Plans. The consideration was
GBP4.3bn based on the value of the Company's shares issued to
Betfair Group plc's shareholders and the fair value of the
replacement share options. No cash consideration was
transferred.
Betfair is an innovative online betting and gaming operator
which pioneered the betting exchange in 2000, changing the
landscape of the sports betting industry. The main drivers for the
merger include increased scale driving growth and creating greater
returns on product and marketing investment; highly complementary
products and geographies; distinct brands with strong online
capabilities; and a stronger combined group with market-leading
talent, technology and operations.
Details of the fair value of identifiable assets and liabilities
acquired, purchase consideration and goodwill are as follows:
9. Business combinations (continued)
As at
2 February
2016
GBPm
------------------------------- ------------
Assets
Property, plant and equipment 18.8
Intangible assets 680.5
Available-for-sale financial
asset and Investments 1.4
Total non-current assets 700.7
------------------------------- ------------
Trade and other receivables 22.9
Financial assets - restricted
cash 17.1
Cash and cash equivalents 147.5
------------------------------- ------------
Total current assets 187.5
------------------------------- ------------
Total assets 888.2
------------------------------- ------------
Liabilities
Trade and other payables 184.9
Provisions 4.3
Current tax payable 33.2
Total current liabilities 222.4
------------------------------- ------------
Trade and other payables 20.9
Deferred tax liabilities 76.6
Total non-current liabilities 97.5
------------------------------- ------------
Total liabilities 319.9
------------------------------- ------------
Net assets acquired 568.3
------------------------------- ------------
Goodwill 3,745.4
------------------------------- ------------
Consideration 4,313.7
------------------------------- ------------
The consideration is
analysed as:
Issue of 39,590,574 PPB
plc ordinary shares 4,202.3
Issue of replacement
share options 111.4
------------------------------- ------------
Consideration 4,313.7
------------------------------- ------------
Included within the intangible assets were GBP627.6m of
separately identifiable intangibles comprising brands, customer
relations, technology and licences acquired as part of the
acquisition, with the additional effect of a deferred tax liability
of GBP95.0m thereon. These intangible assets are being amortised
over their useful economic lives of up to eight years.
The main factors leading to the recognition of goodwill (none of
which is deductible for tax purposes) is growth by combining
business activities, a strong workforce, leveraging existing
products and synergy cost savings of the merged operations.
Receivables acquired amounted to GBP22.9m. The book value
equated to the fair value as all amounts are expected to be
received. The Group also acquired GBP250.1m of cash and cash
equivalents held on trust in The Sporting Exchange (Clients)
Limited, on behalf of the customers of Betfair Group plc and its
subsidiaries (the "Betfair Group"), and is equal to amounts
deposited into customer accounts. These balances are not
consolidated and not reported in the condensed consolidated
statement of financial position for the Group.
9. Business combinations (continued)
The Betfair Group operates in an uncertain marketplace where
many governments are either introducing or contemplating new
regulatory or fiscal arrangements. Given the lack of a harmonised
regulatory environment, the value and timing of any obligations in
this regard are subject to a high degree of uncertainty and cannot
always be reliably predicted. No contingent liabilities have been
booked on acquisition. Merger and acquisition costs in respect of
this acquisition can be found in Note 5.
Shop property business acquisitions
In 2016, the Group, in the absence of available comparable sites
for organic shop openings, acquired a licensed bookmaking business
in the UK.
Details of the net assets acquired and the goodwill arising on
this acquisition under IFRS are as follows:
Fair values
30 June
2016
GBPm
-------------------------------------- ------------
Goodwill arising on acquisition - UK
Retail 0.1
-------------------------------------- ------------
Consideration 0.1
-------------------------------------- ------------
The consideration is analysed as:
Cash consideration 0.1
-------------------------------------- ------------
The principal factors contributing to the UK Retail goodwill
balance is the well-established nature of the acquired business
within the location in which it operates and the potential
synergies, rebranding opportunities and operational efficiencies
achievable for the acquired business within the group. Information
in respect of revenue, operating profit and cash flows for the
acquired businesses in respect of the period from acquisition and
for the period ended 30 June 2016 has not been presented on the
basis of immateriality.
Net cash outflow / (inflow) from purchase of businesses
Six months Six months
ended ended
30 June 30 June
2017 2016
GBPm GBPm
----------------------------------- ----------- -------------
Cash consideration - acquisitions
in the period 14.4 0.1
Cash consideration - acquisitions
in previous periods 1.4 1.3
Cash and cash equivalents
acquired - (147.5)
----------------------------------- -----------
15.8 (146.1)
----------------------------------- ----------- -------------
Analysed for the purposes
of the statement of cash flows
as:
Cash acquired from merger
with Betfair Group plc - (147.5)
Purchase of businesses, net
of cash acquired 14.4 0.1
Payment of contingent deferred
consideration 1.4 1.3
----------------------------------- ----------- -------------
15.8 (146.1)
----------------------------------- ----------- -------------
10. Financial assets and cash and cash equivalents
30 June 31 December
2017 2016
GBPm GBPm
------------------------------- ----------- ------------
Financial assets - restricted
cash 74.1 64.8
Cash and cash equivalents 232.0 249.9
------------------------------- ----------- ------------
306.1 314.7
------------------------------- ----------- ------------
Included in financial assets - restricted cash at 30 June 2017
are bank deposits which were either (1) restricted at that date, as
they represented customer funds balances securing player funds held
by the Group or (2) required to be held to guarantee third party
letter of credit facilities. These customer funds that are not held
in trust are matched by liabilities of equal value.
As at 30 June 2017, GBP341.8m (31 December 2016: GBP349.2m) was
held in trust in The Sporting Exchange (Clients) Limited on behalf
of the Group's customers and is equal to the amounts deposited into
customer accounts. These balances are not consolidated and not
reported in the condensed consolidated statement of financial
position for the Group.
11. Trade and other payables and derivative financial
liabilities
Current liabilities
30 June 31 December
2017 2016
GBPm GBPm
-------------------------- -------- ------------
Trade and other payables
Trade payables 12.6 9.8
Accruals and other
payables 313.9 310.8
-------------------------- -------- ------------
326.5 320.6
-------------------------- -------- ------------
Derivative financial
liabilities
Sports betting open
positions 15.6 8.6
-------------------------- -------- ------------
Non-current liabilities
30 June 31 December
2017 2016
GBPm GBPm
-------------------------- -------- ------------
Trade and other payables
Accruals and other
payables 38.3 26.9
-------------------------- -------- ------------
Included in non-current accruals and other payables is deferred
and contingent consideration of GBP31.8m due to Betfair's
historical acquisition of HRTV, a horseracing television network
based in the United States, and Paddy Power Betfair's acquisition
of DRAFT in 2017, a daily fantasy sports operator in the United
States. The amount payable at 30 June 2017 amounted to GBP35.5m,
with GBP31.8m due after one year from the reporting date.
12. Financial instruments
Carrying amounts versus fair values
There are no differences between the fair values of financial
assets and financial liabilities at 30 June 2017 or 31 December
2016 and their respective carrying amounts in the consolidated
statement of financial position. It has been determined for
financial instruments carried at amortised cost, that the carrying
amount represents a reasonable approximation of fair value.
Financial instruments carried at fair value
Fair value hierarchy
The table below analyses recurring fair value measurements for
financial assets and financial liabilities. These fair value
measurements are categorised into different levels in the fair
value hierarchy based on the inputs to the valuation method used.
The different levels are defined as follows:
-- Level 1: quoted prices (unadjusted) in active
markets for identical assets or liabilities
that the Group can access at the measurement
date;
-- Level 2: inputs other than quoted prices included
within Level 1 that are observable for the
asset or liability, either directly or indirectly;
and
-- Level 3: unobservable inputs for the asset
or liability.
30 June 2017
Level Level Level Total
1 2 3
GBPm GBPm GBPm GBPm
-------------------------- ----------- ---------- ------------ ------------
Available-for-sale
financial assets - 1.3 - 1.3
Derivative financial
liabilities - - (15.6) (15.6)
Non-derivative financial
liabilities - - (35.5) (35.5)
-------------------------- ----------- ---------- ------------ ------------
Total - 1.3 (51.1) (49.8)
-------------------------- ----------- ---------- ------------ ------------
31 December 2016
Level Level Level Total
1 2 3
GBPm GBPm GBPm GBPm
-------------------------- ------------ ----------- ------------ ------------
Available-for-sale
financial assets - 1.3 - 1.3
Derivative financial
liabilities - - (8.6) (8.6)
Non-derivative financial
liabilities - - (24.1) (24.1)
-------------------------- ------------ ----------- ------------ ------------
Total - 1.3 (32.7) (31.4)
-------------------------- ------------ ----------- ------------ ------------
12. Financial instruments (continued)
Basis for determining fair values
The following are the significant methods and assumptions used
to estimate the fair values of the financial instruments carried at
fair value:
Available-for-sale financial assets
The fair value of available-for-sale financial assets is valued
by reference to valuation techniques using observable inputs other
than quoted prices included within Level 1.
Derivative financial liabilities
Derivative financial liabilities comprise sports betting open
positions. The fair value of open sports bets at the period end has
been calculated using the latest available prices on relevant
sporting events. The fair value calculation also includes the
impact of any hedging activities in relation to these open
positions.
It is primarily based on expectations as to the results of
sporting and other events on which bets are placed. Changes in
those expectations and ultimately the actual results when the
events occur will result in changes in fair value. There are no
reasonably probable changes to assumptions and inputs that would
lead to material changes in the fair value methodology although
final value will be determined by future sporting results.
Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is
calculated based on the present value of future principal and
interest cash flows, discounted at the market rate of interest at
the reporting date. The contingent deferred consideration payable
balance represents management's best estimate of the fair value of
the amounts that will be payable discounted as appropriate, using a
market interest rate. The fair value was estimated by assigning
probabilities, based on management's current expectations, to the
potential payout scenarios. The significant unobservable inputs are
the performance of the acquired businesses.
The fair value of contingent deferred consideration is primarily
dependent on the future performance of both the acquired businesses
and the Group against predetermined targets and on management's
current expectations thereof. The amount payable at the period end
amounted to GBP35.5m, with GBP31.8m due after one year from the
reporting date. There are no reasonably probable changes to
assumptions and inputs that would lead to a material change in the
fair value of the total amount payable.
Financial risk management - credit risk of trade and other
receivables
The Group's financial risk management objectives and policies
are consistent with those disclosed in the consolidated financial
statements for the year ended 31 December 2016.
13. Borrowings
Current liabilities
30 June 31 December
2017 2016
GBPm GBPm
-------------------------------- -------- ------------
Accrued interest on borrowings 0.1 0.2
-------------------------------- -------- ------------
Non-current liabilities
-------------------------------- -------- ------------
30 June 31 December
2017 2016
GBPm GBPm
-------------------------------- -------- ------------
Revolving credit facility 145.1 214.0
Less: expenses relating
to revolving credit facility - (0.4)
-------------------------------- -------- ------------
145.1 213.6
-------------------------------- -------- ------------
In 2015, the Group secured a committed revolving credit bank
loan facility ("RCF") of EUR300 million provided by a syndicate of
banks which expires in May 2020. At 30 June 2017, EUR165m
(GBP145.1m) (31 December 2016: EUR250m (GBP214.0m)) of the RCF was
drawn down.
Borrowings under the RCF are unsecured but are guaranteed by the
Company and certain of its operating subsidiaries. Borrowings under
the RCF incur interest at EURIBOR plus a margin of between 1.10%
and 1.95%. A commitment fee, equivalent to 35% of the margin, is
payable in respect of available but undrawn borrowings.
It is the Directors' opinion that due to the Group's bank
borrowings being subject to floating interest rates and the proven
cash generation capability of the Group, there is no significant
difference between the book value and fair value of the Group's
borrowings.
Under the terms of the RCF, the Group is required to comply with
the following financial covenants on a semi-annual basis.
-- Net Leverage Ratio: Consolidated net borrowings shall not be
more than 3.0 times underlying consolidated EBITDA.
-- Interest Cover Ratio: Underlying consolidated EBITDA shall
not be less than 4.0 times net finance charges.
During the period ended 30 June 2017, all covenants have been
complied with.
14. Dividends paid on ordinary shares
Six months Six months
ended ended
30 June 30 June
2017 2016
GBPm GBPm
---------------------------------------------------------- ----------- -----------
Ordinary shares:
* final dividend of GBP1.13 per share for the year
ended 31 December 2016 (31 December 2015: EUR1.20
(GBP0.933)) 94.7 40.8
* special dividend of EUR1.814 (GBP1.411) per share - 61.9
* Paddy Power plc closing dividend of EUR0.18
(GBP0.140) per share - 6.1
94.7 108.8
---------------------------------------------------------- ----------- -----------
The Directors have proposed an interim dividend of 65.0 pence
per share which will be paid on 22 September 2017 to shareholders
on the Company's register of members at the close of business on
the record date of 25 August 2017. This dividend, which amounts to
approximately GBP55m, has not been included as a liability at 30
June 2017.
The interim dividend for the period ended 30 June 2016 was 40.0
pence per share, amounting in total to GBP33.5m.
The pre-Merger Paddy Power plc closing dividend as paid to Paddy
Power plc shareholders for the period from 1 January 2016 to 1
February 2016 (inclusive).
During the period ended 30 June 2016, the Group paid the Betfair
Group plc closing dividend amounting to GBP22.6m, which represented
the period prior to Merger completion.
15. Changes in equity
During the six month period ended 30 June 2017, 341,093 ordinary
shares (six months ended 30 June 2016: 79,435) were issued as a
result of the exercise of share options, giving rise to a share
premium of GBP2.3m (six months ended 30 June 2016: GBP0.8m).
On 2 February 2016, the Company completed an all-share merger
with Betfair Group plc. The Merger resulted in the holders of Paddy
Power plc shares owning 52% of the Company, and the holders of
Betfair Group plc shares owning 48% of the Company, on a fully
diluted basis taking into account existing share options and award
schemes for both companies as at the date of the Rule 2.7
announcement in relation to the agreement of the terms of the
Merger (8 September 2015).
Under the terms of the Merger, holders of Betfair Group plc
shares received 0.4254 ordinary shares of EUR 0.09 each ("ordinary
shares") in the Company in exchange for each Betfair Group plc
ordinary share of 0.095 pence each. The Company issued 39,590,574
ordinary shares in exchange for 93,066,700 shares in Betfair Group
plc giving rise to a share premium of GBP4.2bn.
In 2016, following shareholder approval at an Extraordinary
General Meeting on 21 December 2015 and court approval on 28 April
2016, the Company cancelled a portion of its share premium account
transferring GBP3.8bn (EUR4.9bn) to the retained earnings account
within reserves.
A total of 1,965,600 ordinary shares were held in treasury as of
30 June 2017 and 30 June 2016. All rights (including voting rights
and the right to receive dividends) in the shares held in treasury
are suspended until such time as the shares are reissued. The
Group's distributable reserves are restricted by the value of the
treasury shares, which amounted to GBP40.7m as of 30 June 2017 (30
June 2016: GBP40.7m). At 30 June 2017, the Paddy Power Betfair plc
Employee Benefit Trust (the "EBT") held a further 276,504 of its
own shares (30 June 2016: 601,769 shares), in respect of potential
future awards relating to the Group's employee share plans. The
Group's distributable reserves at 30 June 2017 and 30 June 2016 are
further restricted by these respective amounts.
15. Changes in equity (continued)
As detailed in the condensed consolidated interim statement of
changes in equity during the six month period ended 30 June 2017,
the movement in the share-based payment reserve and in the shares
held by the EBT is due to the equity-settled share-based payments
charge and the vesting and exercising of share-based payments
awards. A total of 201,888 shares in respect of share-based
payments awards and related dividends were vested from the EBT to
certain staff during the six months ended 30 June 2017 (six months
ended 30 June 2016: 273,121 shares).
The movement in the foreign exchange translation reserve in the
six months to 30 June 2017 reflects the weakening of USD against
GBP in the period, partially offset by the strengthening of AUD and
EUR against GBP in the period.
The cash flow hedge reserve represents the effective portion of
the cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions that had not yet
occurred at that date. The Group entered into foreign exchange
forward contracts to hedge a portion of GBP exposures in Euro
companies expected to arise from GBP denominated revenue in the
second half of 2016. The fair value gain of GBP3.4m at 30 June 2016
(which is stated after applicable deferred taxation of GBP0.5m
arises as the applicable forward contract EUR-GBP rates were
stronger than the relevant forward foreign exchange rate ruling at
30 June 2016). No such contracts were outstanding at 30 June
2017.
Other reserves comprise a capital redemption reserve fund, a
capital conversion reserve fund and a net wealth tax reserve.
16. Contingent liabilities
The Group operates in an uncertain marketplace where many
governments are either introducing or contemplating new regulatory
or fiscal arrangements.
The Board monitors legal and regulatory developments and their
potential impact on the business, however given the lack of a
harmonised regulatory environment, the value and timing of any
obligations in this regard are subject to a high degree of
uncertainty and cannot always be reliably predicted.
As mentioned in Note 13, borrowings under the RCF are unsecured
but are guaranteed by the Company and certain of its operating
subsidiaries.
17. Related parties
There were no material transactions with related parties during
the six months ended 30 June 2017 or 30 June 2016 or the year ended
31 December 2016.
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
18. Events after the reporting date
Dividend
In respect of the current period, the Directors propose that an
interim dividend of 65.0 pence per ordinary share of EUR 0.09 each
(2016: 40.0 pence per share) be paid to shareholders on 22
September 2017. This dividend has not been included as a liability
in these condensed consolidated interim financial statements. The
proposed dividend is payable to all shareholders on the register of
members on 25 August 2017. The total estimated dividend to be paid
amounts to GBP55m (2016: GBP33.5m).
INDEPENDENT REVIEW REPORT TO PADDY POWER BETFAIR PLC
Conclusion
We have been engaged by Paddy Power Betfair plc ('the Company')
to review the condensed set of financial statements in the
half-yearly financial report for the six months ended 30 June 2017
which comprises the condensed consolidated interim income
statement, the condensed consolidated interim statement of
comprehensive income, the condensed consolidated interim statement
of financial position, the condensed consolidated interim statement
of cash flows, the condensed consolidated interim statement of
changes in equity and the related explanatory notes.
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 2017 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU, the
TD regulations and the Transparency Rules of the Central Bank of
Ireland and the Disclosure Guidance and Transparency Rules ("the
DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board. 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. We
read the other information contained in the half-yearly financial
report and consider whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed
set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK and
Ireland) 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.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the TD Regulations and the Transparency Rules of the Central Bank
of Ireland and the DTR of the UK FCA.
As disclosed in Note 1, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS
34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Company in meeting the
requirements of the Transparency (Directive 2004/109/EC)
Regulations 2007 ('the TD Regulations') and The Transparency Rules
of the Central Bank of Ireland and the DTR of the UK FCA. Our
review has been undertaken so that we might state to the Company
those matters we are required to state to it in this report and for
no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company
for our review work, for this report, or for the conclusions we
have reached.
Michael Harper
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
8 August 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FDLLBDVFLBBD
(END) Dow Jones Newswires
August 08, 2017 02:01 ET (06:01 GMT)
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