TIDMPTEC
RNS Number : 8419O
Playtech PLC
24 August 2017
Playtech plc
("Playtech," or the "Company," or the "Group")
Results for the six months ended 30 June 2017
A proven platform for growth: strong H1 driven by underlying
growth and recent acquisitions
Playtech (LSE: PTEC) today announces its results for the six
months ended 30 June 2017, together with a trading update for the
period to 22 August 2017.
Financial summary
H1 2017 H1 2016 Change Change
(reported) (const.
currency)(3)
-------------------- ---------- ---------- ------------ --------------
Revenues EUR421.6m EUR337.7m 25% 30%
Adjusted EBITDA(1) EUR170.9m EUR143.8m 19% 24%
Adjusted Net
Profit(2) EUR125.5m EUR78.3m 60% 20%
Reported Net
Profit(2) EUR89.6m EUR48.8m 84% 21%
Adjusted diluted
EPS 36.2 EURc 22.6 EURc 60% 21%
Total dividend
per share 12.1 EURc 11.0 EURc 10% NA
Group financial highlights
-- Total revenues up 25% vs H1 2016 on a reported basis:
- 30% revenue growth at constant currency
- 10% revenue growth excluding acquisitions and at constant
currency
-- 50% of Group revenues were regulated in H1 2017 (FY 2016:
48%)
-- Adjusted EBITDA up 19% on a reported basis and 24% at
constant currency
-- Adjusted Group EBITDA margin of 40.5% (H1 2016: 42.6%)
- in line with guidance given at FY 2016 results
- "core" Gaming margin (excluding acquisitions / white-label /
Casual) of 51% (H1 2016: 49%)
-- Adjusted diluted EPS up 21% at constant currency
-- Gross cash at period end of EUR536 million (December 2016:
EUR545 million) and EUR376 million when adjusted(4) (December 2016:
EUR392 million)
-- Interim dividend per share up 10%
Operational highlights
Gaming Division
-- Strong revenue performance with 28% growth at constant
currency led by flagship Casino offering
- double-digit underlying growth, with a particularly strong
performance in Asia
- recent acquisitions integrated and performing in line with
expectations
-- Regulated Gaming revenues of 44% (H1 2016: 39%)
-- Online software revenues from mobile of 38% in H1 2017 (H1
2016: 29%)
-- Significant contracts renewed including with Paddy Power
Betfair, Sky Bet and Betfred in H1 2017
-- Landmark Sports contract signed with Greek operator OPAP
-- Industry leading LIVE offering launched with world's largest
Live Casino in Riga
-- Sun Bingo contract remains challenging
-- Pipeline of new licensees focussed on large, high-quality
omni-channel opportunities
Financials Division
-- Momentum from 2016 continued into H1 with strong performance
and improved KPIs
-- B2B offering further enhanced with acquisition of Alpha
Capital Markets assets post period end
-- TradeTech Group brand launched to reflect the full B2B and
B2C capabilities of the Financials Division
Current trading and outlook
-- Management is confident of a strong performance in 2017
driven by both organic growth and the acquisitions made in 2016 and
2017, albeit with normalised levels of growth in the second half
from Asia following unusually high levels of activity in the first
half
-- Average daily revenue in the Gaming Division for the first 53
days of Q3 2017, traditionally the slowest part of the year, was up
1% on Q3 2016 (6% at constant currency) and down 9% on an unusually
strong Q2 2017 (down 6% at constant currency)
-- Excluding acquisitions, average daily revenue in the Gaming
Division for the first 53 days of Q3 2017 was down by 1% on Q3
2016, increasing 3% at constant currency
-- The Financials Division is trading in line with
expectations
Alan Jackson, Chairman of Playtech, commented:
"The proven strength of the Playtech model was once again
demonstrated with a strong H1 performance driven by both underlying
growth and recent acquisitions. As always, Playtech's performance
has been converted into strong cash generation enabling a 10%
increase in the interim dividend, in line with the progressive
dividend policy.
"The first half of the year saw Playtech's Gaming Division
deliver strong growth with double-digit underlying growth and
recent acquisitions integrated and performing in line with
expectations. Playtech has also continued to execute on its
industry leading omni-channel solution by deepening its offering in
key verticals with the integration of Playtech BGT Sports creating
a fully integrated best-in-class sports technology solution and the
launch of the world's largest Live Casino studio in Latvia,
revolutionising the offering in a growing and dynamic channel.
"As with the Gaming Division, momentum in the Financials
Division continued with improvements across all KPIs. The announced
acquisition of assets from Alpha brings an important new B2B
revenue stream and the creation of TradeTech Group as our operating
and corporate brand for the business is an important milestone and
better reflects the broadening of the division's offering towards a
full turnkey B2B financial trading solution.
"Taken all together, this proven platform for growth across the
business has again delivered a strong performance and management
remain confident of further strategic progress in the second half
of 2017."
- Ends -
(1) Adjusted numbers relate to certain non-cash and one-off
items including amortisation of intangibles on acquisitions,
professional costs on acquisitions, finance costs on acquisitions,
deferred tax on acquisitions and additional various non-cash
charges. The Directors believe that the adjusted profit measures
represent more closely the consistent trading performance of the
business. A full reconciliation between the actual and adjusted
results is provided in Note 4 of the financial statements
(2) Attributable to the owners
(3) Constant currency numbers exclude the exchange rate impact
on the results by using previous period relevant exchange rate and
exclude the total cost/income of exchange rate differences
recognised in the period
(4) Adjusted gross cash is net of cash held on behalf of
clients, progressive jackpots and security deposits
Presentation and live webcast
A presentation for analysts and investors will be held today at
9.00 am in the offices of UBS, 5 Broadgate, London, EC2M 2QS.
The presentation will be webcast live and on-demand at the
following website:
http://www.investis-live.com/playtech/595f4b299a0fb30c00d755fb/ruhf
The presentation will also be accessible via a live conference
call:
Dial-in no: + 44 (0)20 3059 8125
Conference password: Playtech
There will also be a replay available for one week:
Dial-in no for UK and other locations: +44 (0)121 260 4861
Dial-in no for US: +1 844 2308 058
Conference reference number: 6632999#
For further information contact:
Playtech plc
Mor Weizer, Chief Executive
Officer
Andrew Smith, Chief +44 (0)20 3772 2500
Financial Officer
c/o Bell Pottinger
James Newman, Head of
Investor Relations +44 (0)1624 645954
Bell Pottinger
David Rydell, Jonathan
Hodgkinson, Laura Jaques,
Ed Brown +44 (0)20 3772 2500
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
Forward looking statements
This announcement includes statements that are, or may be deemed
to be, "forward-looking statements". By their nature,
forward-looking statements involve risk and uncertainty since they
relate to future events and circumstances. Actual results may, and
often do, differ materially from any forward-looking
statements.
Any forward-looking statements in this announcement reflect
Playtech's view with respect to future events as at the date of
this announcement. Save as required by law or by the Listing Rules
of the UK Listing Authority, Playtech undertakes no obligation to
publicly revise any forward-looking statements in this announcement
following any change in its expectations or to reflect events or
circumstances after the date of this announcement.
About Playtech
Playtech is a market leader in the gambling and financial
trading industries. Founded in 1999 and listed on the Main Market
of the London Stock Exchange (LEI code: 21380068TTB6Z9ZEU548),
Playtech has c. 5,000 employees in 17 countries.
Playtech is the gambling industry's leading software and
services supplier with more than 130 licensees globally, including
many of the world's leading regulated online, retail and mobile
operators, land-based casino groups, government sponsored entities
such as lotteries, and new entrants opening operations in
newly-regulated markets. Its business intelligence-driven gambling
software offering includes casino, live casino, bingo, poker and
sports betting.
It is the pioneer of omni-channel gambling which, through
Playtech ONE, offers operators and their customers, a seamless,
anytime, anywhere experience across any product, any channel
(online, mobile, retail) and any device using a single account and
single wallet. It provides marketing expertise, sophisticated CRM
solutions and other services for operators seeking a full turnkey
solution. Playtech's Financials Division, named TradeTech Group,
operates both on a B2C and B2B basis. Its B2C focused offering is
an established and growing online CFDs broker, operating the brand
markets.com. Its B2B offering includes the division's proprietary
trading platform, CRM and back-office systems, as well as its
liquidity technology platform which provides retail brokers with
multi-asset execution, prime brokerage services, liquidity and
complementary risk management tools.
Chairman's statement
The first half of 2017 once again demonstrated the proven
strength of the Playtech model as the Group delivered an impressive
operational and financial performance driven by both underlying
growth and recent acquisitions.
Importantly the results in the period continue to evidence
Playtech's ability to achieve significant strategic milestones
alongside delivering double-digit organic growth. Not only did the
strategic acquisitions achieved in 2016 augment organic growth but
significantly the integration of those acquisitions, coupled with
the contract renewals in the period, will deliver a platform for
future prospects.
I am also pleased to report that the trend in long term contract
renewals reported in 2016 continued into the first half of 2017.
Key licensees Paddy Power Betfair, Sky Bet and Betfred all renewed
long-term agreements during the period, a clear testament to
Playtech's industry leading offering. Important strategic
milestones were also achieved in the continued execution of
Playtech's industry leading omni-channel solution with the
deepening of its offering in key verticals. The integration of
Playtech BGT Sports has created a fully integrated best-in-class
sports technology solution and in the burgeoning Live Casino
vertical the launch of the world's largest Live studio in Latvia is
revolutionising Playtech's offering and the wider Casino
industry.
As with the Gaming Division, momentum in the Financials Division
continued with improvements across all KPIs and further strategic
achievements. The acquisition of assets from Alpha Capital Markets
represent a significant milestone in the evolution of the B2B
offering for the division. The addition of the B2B assets follow
the creation of the brand TradeTech Group, which better reflects
the broad offering across the B2B and B2C value chain.
To reflect the Board's confidence in the growth and cash
generation of the business Playtech adopted a progressive dividend
policy in 2016. One of the pillars of the Playtech model is its
ability to convert its operational performance into strong cash
generation and this has allowed a 10% increase in the interim
dividend per share in the first half of 2017.
Taken all together, this proven platform for growth across the
business has again delivered a strong performance and management
remains confident of further strategic progress in the second half
of 2017.
Chief Executive's review
Overview: Proven strategy provides platform for growth
I am pleased to report that the first half of 2017 saw Playtech
achieve significant strategic milestones to augment the
double-digit organic growth delivered by our proven model.
The strong growth reported in the Gaming Division in 2016 has
continued into the first half of 2017 with recent acquisitions in
2016 and the beginning of 2017 contributing to growth. Progress
continued into 2017 with long term contract renewals which will
also 'lock-in' future growth.
Moreover, the Gaming Division achieved strategic progress in H1
2017 with the continued execution of its industry leading
omni-channel strategy, Playtech ONE. Key strategic milestones in
Casino, including Live Casino, and Sports have deepened our
omni-channel offering and created a platform for future
evolution.
Momentum in the Financials Division remained strong with
impressive KPIs in the first half of the year. The creation of the
TradeTech brand and the continued evolution of the B2B offering
with the acquisition of sophisticated risk and trading
capabilities, represents further significant milestones for the
Group.
Gaming Division
Overview
The Gaming Division delivered another strong year achieving 28%
reported revenue growth at constant currency, with a healthy blend
of underlying growth and contribution from acquisitions.
Customer Concentration
H1 2017 saw revenue from the top ten licensees stand at 57%
compared to 60% in the comparable period in H1 2016. This
represented a marginal increase on the FY 2016 level when the top
ten licensees represented 54% of Group revenue. Revenue from the
top five licensees also decreased on a like for like basis with 39%
of revenue coming from the top five compared to 44% in H1 2016.
Again, this represented a slight increase on FY 2016 numbers when
36% of revenue came from the top ten.
The marginal increase was due to a combination of factors. This
was the first reporting period where the consolidation, and
ultimately increased scale and growth, of key licensees such as
Ladbrokes Coral was fully counted. In addition, this was the first
full reporting period where the large revenue contributing Sun
Bingo related white-label contract was counted.
Mobile
Following the pattern set out in previous results reports,
mobile continues to be a key driver of increased player activity
across all verticals. Revenues from mobile accounted for 38% of
overall software revenue, increasing from 29% in the same period in
2016.
Sports was the only vertical to see a decrease in mobile
penetration as the integration of BGT into Playtech BGT Sports
skews the vertical to a large retail channel exposure. Excluding
the acquisition of BGT total Sport penetration in H1 2017 was 68%
compared to 75% in H1 2016 reflecting the previously disclosed loss
of certain Mobenga contracts compared to the comparative
period.
The UK gaming market, given its maturity and the quality of its
mobile networks, still leads the penetration levels with mobile
accounting for 56% of software revenues. However, there is
evidently a sustained increase in mobile penetration as the
percentage of software revenue from mobile grew to 33% in the rest
of the world in H1 from 18% in H1 2016. This highlights the
significant opportunity in other parts of the world for Playtech's
mobile developed products and software as well as underlining the
strong position and the continued growth in the different
verticals.
Native apps
Playtech operates a dual approach to mobile, believing that
products should be offered in both HTML5 and native apps and we
invest into each product area to ensure this is the case. The
importance of native apps is becoming more and more pronounced in
the industry given significant increase in quality and user
experience. This has also been seen in the changing attitude of
some of the marketing and distribution channels such as Google and
Apple in regulated markets that now allow registering the native
apps in the store.
Regulated Markets
Growing regulated markets revenue remains a strategic objective
for Playtech and in the first half of 2017 regulated revenues in
the Gaming Division rose to 44% compared to 39% in the first half
of 2016. This figure was boosted by acquisitions made in 2016 along
with the Sun Bingo contract which began in H2 2016. At Group level,
regulated revenue reached 50% of total H1 2017 revenue, (H1 2016
48%).
During the period, we continued to strengthen our position and
extend our reach in regulated markets by supporting the organic
growth of our customers in the UK, Italy, Spain, Finland, Denmark,
Mexico and Romania. Moreover, our strategy of partnering with the
leading retail brands in newly regulated markets also continued as
we became the first supplier to launch online casino in the Czech
Republic with the expanding Fortuna brand.
Acquisitions made in 2016 and early 2017 continued to augment
the growth of regulated revenues across the Group in line with our
strategy. The acquisition of the sports retail software provider
BGT 2016 allowed for the creation of the Playtech BGT Sports (PBS)
division in H1 2017. PBS affords Playtech a strategic advantage in
newly regulating and yet to be regulated online markets as Sports
is often the first vertical to regulate and PBS' retail offering
allows Playtech to partner in advance with the established local
retail brands.
M&A
M&A remains a central part of Playtech's strategy. As
demonstrated in FY 2016, Playtech's M&A strategy is to add
regulated revenues through the acquisition of complimentary
technology, services and additional offering deepening content. The
M&A pipeline remains strong and we will continue to execute on
value accretive M&A that strengthens Playtech's omni-channel
offering, strengthen our position in existing product verticals or
extend to new adjacent verticals in our industry.
In February 2017 Playtech completed the acquisition of Eyecon, a
specialist supplier of online gaming soft slots and a bingo slots
specialist software for an initial consideration of GBP25 million
(EUR29 million). The acquisition of Eyecon is a further example of
Playtech executing its omni-channel solution through earnings
accretive M&A. Eyecon is a soft casino slot provider
specialising in games for the Bingo market. Eyecon deepens the
content offering in the Bingo vertical ultimately helping to drive
revenue across verticals as well as allow us to also extend to
retail. The acquisition strengthens Playtech's Bingo distribution
network whilst offering industry leading slots content such as the
Fluffy Favorites game and others which will all be available to
Playtech bingo licensees.
Playtech ONE: Industry leading omni-channel offering
Playtech ONE is the industry's only true integrated omni-channel
offering. Playtech ONE allows operators to develop a seamless
inclusive approach to channels, products and platforms.
Although multi-channel approaches in the industry are common
(same content across web, mobile and retail), Playtech's approach
to omni-channel is very different as our single CRM allows for a
single customer profile regardless of channel or vertical. We
believe that omni-channel offerings act as an eco-system that
incentivise the players to remain loyal to the operators and their
brands. Playtech ONE provides operators with the tools to keep
customers within this eco-system regardless of channel and through
different brands, verticals and products. Our single CRM and
infrastructure provides operators with a single customer view
allowing them to appropriately target and incentivise customers -
delivering a seamless experience and improving the customer
journey.
Playtech ONE's ability to shape the user experience seamlessly
across different channels and verticals is becoming central to
operators' strategy to increase player value and player brand
loyalty. Playtech is working tirelessly to ensure that it has
industry leading and engaging content and experiences across all
channels and verticals.
The completion of the launch of Playtech's new Live Casino
studio in Riga has revolutionised Playtech's offering in the
vertical and the completion of the migration of all the dedicated
licensee tables is continuing to revolutionise how operators and
players think about Live Casino. It is fully integrated into our
casino offering and based on our same single omni-channel
infrastructure.
The creation of Playtech BGT Sports (PBS) is also a significant
step in the execution of our omni-channel strategy. Firstly, the
popularity of the Sports vertical means it is a key customer
acquisition channel for operators and as indicated many times is
the most effective customer acquisition channel that acts as the
gateway into higher margin gaming verticals. It is also the
vertical that operators' brands are most associated with and the
touch point for the brand that many players return to. Unifying all
sports divisions together with BGT into one division - PBS, has
entrenched the powerful retail channel in Playtech ONE. The
integration of all sports assets into a single unique omni-channel
based solution is underway and we expect it to be concluded in
2018.
Similarly to BGT in Sports, the integration of ECM, the Bingo
retail software provider, has allowed Playtech to capture retail
traffic and seamlessly offer them online content and vice versa,
all on a fully integrated basis. ECM, which provides digital
platform and products for retail bingo environments, is an integral
part of our omni-channel approach and allows us to enlarge the
eco-system Playtech ONE creates on a larger basis. The acquisitions
of Eyecon in H1 2017 and Quickspin in 2016 further enhance the
premium content available across Playtech's games portfolios as
well as broadening the offering to different target demographics
and further strengthen the depth and the breadth of our
omni-channel Playtech ONE approach.
Gaming Division performance by vertical
Casino
Casino, Playtech's flagship offering, continues to go from
strength to strength, with revenue increasing 26% on a constant
currency basis in the first half of 2017. This exceptional
performance was driven by the combination of the growth of existing
licensees, particularly in Asia, the contribution from the key
acquisitions made in 2016 and early 2017, and the contribution of
new customers won throughout 2016 as underlying Casino revenue grew
by a 22%.
Technology & Platform stability
Central to the success of Playtech's success and the success of
our licensees and customers is the stability of our Casino
platform. Playtech provides its customers with mission critical
software and content and we are continuously working on the
robustness and stability of our platform. To continue our work in
this area, during the first half of 2017 our technology engineers
'de-coupled' our Casino games from the platform. This will make our
platform even more agile and adaptable whilst also allowing for
greater freedom in the development of new content and planning new
releases.
As indicated previously, Playtech is in the process of revamping
its entire gaming platform. One of the elements of the new platform
is a new gaming development platform which simplifies and
streamlines games development across mobile, retail and web. The
first milestone was met earlier in the year as a number of games
driven by the new gaming development platform were launched
successfully with some licensees. The new revamped gaming
development platform is currently still under development and will
deliver our licensees with new models to accelerate the deployment
of games developed by Playtech, third party content providers and
also the licensees themselves. The new platform is utilising the
most advanced technologies and methodologies, along with future
regulatory requirements and an improved front end solution - all
providing them more ways to differentiate and compete.
Player engagement
At Playtech, we are cognisant that our licensees come to us to
develop unique customer offerings that cater to their target
demographics and customer bases. Player data and intelligence
collated via the IMS is being utilised in an anti-churn model to
extend player lifetime values. As the market continues to mature
the focus for operators in developed markets such as the UK is
moving beyond player acquisition to also focus on player retention
and ultimately increasing player life time value. The platform
allows for industry standard bonusing, together with more
sophisticated mechanics, including automated cashback, free-spins,
golden chip for table and card games and other types of bonuses.
All these promotional methods can be controlled and configured by
the operator, allowing for stringent liability and monetary
control.
To illustrate the platform's sophistication, gameplay bonuses
allow the operator to incentivise players based on the outcome of a
specific hand of black jack or spin of a roulette wheel. All
promotional types can be triggered by a player event, but Playtech
has also developed the ability to automate some of the player
journeys by developing real time algorithms to trigger the
qualification of such incentives. Game advisor is a real-time
driven recommendation engine based on sophisticated real time
algorithms that suggests other games the player might be interested
in with high probability, dependent on many game-specific
variables, including volatility, win hit frequency and win
distribution.
Content & Studios
Playtech now operates ten games studios worldwide, all with
proven pedigrees and collectively providing unparalleled knowledge
and experience in online casino games creation. In the period work
continued to unify the studios in using our agile games development
platform, allowing them to develop higher quality games faster and
more cost-effectively than before. The studios are now applying the
new Playtech content pillars to game production; Signature
(individual style of the studio), Reach (relevance to market),
Reliability (stable games and publication dates) and Value (largest
Jackpots, bonusing tools, engagement tools). This unified approach
to rapid omni-channel game deployment enables operators seeking
differentiation and customisation to integrate bespoke games in
record time and under budget.
The first half of 2017 saw Playtech sign an industry first
agreement with DC Comics to provide a full suite of DC branded
games including the Man of Steel, Classic Superman and Batman and
Suicide Squad slot titles. The DC agreement was the culmination of
strategic project in the second half of 2016 designed to replace
the Marvel studios content in the Playtech portfolio. Playtech had
a long and successful relationship with Marvel studios and this
ended in 2016 following Marvel's acquisition by Disney and a change
of licensing approach from the acquirer.
Given the size and scale of Playtech's distribution platform we
are in an unrivalled position to be able to develop and distribute
such high profile branded content. Looking forward to the second
half of 2017 Playtech will deliver another industry first with the
first slot game launch to be synchronised with a Hollywood
blockbuster film launch. During the period Playtech further grew
its portfolio of branded games by launching the American Dad,
RoboCop, Monty Python's Holy Grail and Dirty Dancing titles.
Playtech's own Age of the Gods suite of games continues to go
from strength to strength with its games titles in the top rankings
of popular games for all our licensees. The latest game in the
series God of Storms has experienced a highly successful launch in
H1. The Age of the Gods suite is the end result of thorough
research that was based on big data analysis designed to improve
the probability of success of the games. The ability to utilise
large amounts of data as part of the games development process
leading to a successful suite of games is a major milestone that we
intend to replicate, improving the probability of new additional
games being successful.
Live Casino
A key focus in the period has been the extension of Playtech's
Live Casino offering. At the full year 2016 results we reported the
completion of two new studios, the world's largest in Riga Latvia
and a state-of the art Eastern European focused studio in Romania.
The new facilities have enabled Playtech to drive product
innovation in Live with new concepts, games and features. Driven by
the powerful Playtech IMS player management platform and
data-driven business intelligence technology, Playtech casino
delivers industry leading in-house and premium branded games.
Built on top of the city's fortified 16th century walls in the
heart of Riga Old Town in Latvia, the 8,500-square metre capacity
studio dwarfs any existing live casino area in the market today.
Technology has been at the heart of the development with hundreds
of state-of-the-art cameras, catering for hundreds more custom-made
tables and gaming areas, an advanced control and monitoring center
and large-scale dealer campus that will be used to train and
develop all Playtech Live's staff.
An important part of Sky Bet's long term multi-product deal with
Playtech was the renewal and extension of its Live Casino services
agreement. This included the launch of Live Casino on Sky's 'Sky
Italy' gaming sites during the period. The sophistication and
success of the new Live offering was reflected with Sky's success
in winning the eGaming Review Innovation in Casino award for its
new Playtech supplied Live Casino. Sky went live with its new state
of the art dedicated Live Casino environment in April 2017 and won
the award for offering players an enhanced omni-channel experience,
product enhancements and richer gameplay.
As with all verticals across the Group, Playtech ONE enables us
to offer unrivalled scale and cross-vertical experiences. Playtech
Live can offer seamless promotional events such as progressive slot
jackpots linked to Live Casino games or allow for targeted
marketing and customer acquisition around events, such as Live
draws or branded Live Casino games around racing at Cheltenham or
Premier League derbies.
Playtech BGT Sports
Revenue in Sports for the first half of 2017 was up 108% at
constant currency when compared to Sports revenue in the first half
of 2016. This was due to the contribution from BGT, the retail
Sports software provider acquired by Playtech in November 2016.
Underlying revenue at constant currency declined compared to H1
2016 mainly due to the absence the Mobenga contracts which came
into effect at the end of H1 2016.
A key strategic achievement in the first half of 2017 has been
the integration and launch of Playtech BGT Sports (PBS). PBS brings
together Playtech Sports companies BGT, Geneity, Mobenga, Unilogic
and Playtech's internal Sports Trading team and contains more than
600 employees. PBS will provide a 'bricks-to-clicks' fully
integrated sports betting technology solution based on Playtech ONE
the unique omni-channel platform. The integration project is
ongoing although I am delighted to report that PBS will launch the
first consolidated web and mobile sportsbook project later in the
year and a fully omni-channel including retail in H1 2018. The main
commercial objective of the project is to create a consolidated
sportsbook product which will provide operators with a full,
omni-channel solution allowing them to offer their customers a
single-betting account which can be used across the web, mobile,
self-service betting terminals (SSBTs) and over the counter (OTC)
in retail betting shops.
In H1 2017 PBS continued to focus on the opportunity to grow its
retail customer base in Europe. Early in the period PBS announced a
three-year agreement with OPAP, the leading Greek betting and
lottery operator, for the supply of SSBTs, relevant software and
services, and the introduction of an OTC sports betting solution.
In addition to OPAP, H1 2017 also saw PBS launch SSBTs with
customers in Malta, Romania, Spain, Czech Republic and Germany. PBS
believes there is significant opportunity for SSBT growth in this
market and, once the integration is complete this growth markets
can benefit from Playtech's omni-channel customer offering. As
outlined at the FY 2016 results, alongside Europe a key focus for
the PBS SSBT product was growth in Latin America. H2 2017 will see
PBS install a first phase SSBT programme in Columbia with two
customers. In addition, PBS has been able to leverage the existing
relationships across the Playtech Group and the first phase of
SSBTs will be installed with some of Playtech's existing customers
later in 2017 and into 2018.
Key contracts have been renewed with Betfred and Paddy Power
Betfair with both secured until at least 2020 and with Betfred
taking another 500 terminals and Paddy Power shops installing a
minimum of 800 new terminals over the next 12 months. In addition
to these headline customers, PBS is key strategic partner for the
independent bookmakers in the UK and Ireland and all key
independents have renewed their agreements until 2021.
Playtech's strategy in Sports is to continue to drive product
development to retain operator and customer engagement with retail.
In H1 2017, PBS launched its revolutionary Retail Mobile App named
'Bet Tracker'. Bet Tracker went live with Betfred in August 2017
and Jennings Bet, Boyles and Plucks will also follow in the second
half of the year. The Bet Tracker product is leading the
digitilisation of the retail sports experience, allowing customers
to track their bets placed in store on their mobile phones without
already having a mobile account, giving operators increased touch
points with their customers.
Services
Services experienced a marginal decline in the first half of the
year. Revenues were down 6% on a constant currency basis
predominantly due to key white-label contracts in the second half
of 2016 and first half of this year and continued proactive
departure from unregulated markets moving our focus on regulated
markets. This is in line with the guidance given in the AGM
statement on 17 May 2017. The increase in contribution from the
white-label offering meant the transition in services from dot com
to regulated revenue streams continued in the period resulting in a
higher proportion of regulated revenues for this vertical.
As stated in the 2016 annual results, Services revenue was
expected to be broadly flat with increased white-label revenues,
predominantly from the Sun Bingo contract, offsetting a decline in
other Services including contract and market changes. H1 2017
results have been 6% lower than H1 2016 primarily due to lower than
expected revenues from the Sun Bingo contract.
Bingo
Following the acquisition of Bingo software and services
supplier ECM in October 2016 the Bingo vertical saw a 70% increase
in revenue at constant currency in the first half of 2017.
Importantly, Bingo also experienced underlying growth with revenue
increasing by 3% excluding acquisitions. This was in line with
guidance given at the full year where we expected to see Bingo
return to underlying growth.
The Bingo vertical continues to experience high levels of
activity at the operator level. The industry wide strategy to
utilise bingo as an acquisition channel, and predominantly
cross-sell into Casino has also continued. We believe this approach
will continue to strengthen Playtech's position as our Playtech ONE
omni-channel offering will allow operators to successfully
cross-sell across all products and all verticals. Through Playtech
ONE the acquisition of Eyecon will enable the Fluffy Favorites
title to be rolled out across the retail estate in H2 2017 and
hybrid game Fluffy Bingo is also in development to allow Playtech
and licensees to offer attractive gaming content across all
verticals.
The integration of retail software and services supplier ECM
onto the Playtech Bingo platform has increased the opportunities to
create an eco-system keep the players loyal regardless of channels
and also drive player traffic to other verticals and roll out
Playtech ONE content, such as Tiki Paradise, which was designed
with our omni-channel approach in mind and includes cross channel
features across the ECM estate. Leading Playtech ONE title Tiki
Paradise is performing well on the Bingo platform further
demonstrating the appetite for players for a seamless experience
across Bingo and Casino slots.
Poker
The online Poker market remains challenging with revenues in H1
down 5% at constant currency when compared with the same period in
2016. The 5% fall compares favourably to the declines seen in
recent years. Playtech remains dedicated to the Poker product, and
we believe Poker remains an important part of the full product
offering of Playtech ONE. Playtech offers the largest open and
'tappable' poker network.
Other
The 'Other' revenue lines includes IGS land-based Casino
systems, sale of Videobet machines and revenue from Casual games.
Other revenues grew to EUR25.3 million revenue in the first half of
the year, an increase of 146% compared to H1 2016. The significant
increase was mainly due to Casual games revenues which continued to
enjoy revenue growth driven by the success of the Narcos branded
game.
TradeTech Group - Financials Division
Strong momentum in the Financials Division continued into the
first half of 2017. In line with the execution of our strategy at
Group level, H1 2017 saw us achieve key milestones in the
Financials Division, culminating in the branding of the division as
TradeTech Group. The brand TradeTech Group is more representative
of the breadth of operations across the division, from pure B2B
services to our customer facing brand Markets.com.
TradeTech Group:
-- Markets.com, a brand operated by Safecap as
a provider of CFD and FX trading platforms
-- CFH, providing tier 1 liquidity services and
multi-asset execution through its best of breed
proprietary brokerage technology
-- TradeTech Alpha, created in August 2017 as part
of the acquisition of assets from Alpha Capital
Markets, delivering a dedicated, industry leading,
professional bespoke trade execution, and risk
services
TradeTech's strategy is to continue to build its capabilities
across the entire value chain in the financial trading sector. In
August, post-period end, we took another significant step in this
strategy with the acquisition of assets from Alpha Capital Markets
Group Limited (known in the industry as "Alpha") for an initial
consideration of $5 million (total potential maximum consideration
of $150 million). Alpha is a UK based B2B market maker, dealer and
broker focusing on delivering bespoke risk management and trading
services to institutional and professional clients. As part of this
transaction, TradeTech Group is acquiring intellectual property,
trading technology, business teams and international clients from
Alpha and is now able to offer industry leading B2B risk management
and trading services to the industry under the brand TradeTech
Alpha.
Predominately, B2C brokers in the financial trading industry
operate a marketing driven model that is dependent on third party
technology and services. Following the integration of CFH at the
end of 2016 and now the addition of B2B risk management
capabilities, TradeTech Group has taken a significant step in
providing a full turnkey B2B solution to brokers. TradeTech is now
able to cover the entire lifecycle of a trade, from front end
technology to CRM and platform management, to liquidity services,
and now risk management and professional trading services.
Markets.com activity continued to improve, with the number of
active customers up by 24% to approximately 19,400 and first time
depositors up 94% to approximately 10,500 compared to the first
half of 2016. These improved metrics derive from an improved cost
per acquisition which caters for higher profitability for our B2C
segment, despite the new leverage limitation implemented in the
beginning of the year following Cysec's new guidance on default
leverage, which naturally impacts volumes and revenues.
Similarly to Playtech's core Gaming vertical, TradeTech Group
operates in a sector driven by dynamic regulation. As outlined at
the full year results, 2016 was a transformational year for the
Financials Division. Our experience of new regulatory frameworks
learned in the Gaming Division prompted TradeTech to be an early
adopter of new regulation, such as tighter on-boarding controls;
greater restrictions on marketing and promotions; enhanced AML
procedures and new leverage limitations. The steps taken in 2016 to
deliver an efficient, compliant and competitive business model are
bearing fruit now in 2017 with TradeTech reporting improvement 44%
revenue and a 173% increase in EBITDA to EUR16.1m in H1 2017.
Current trading and outlook
Management is confident of a strong performance in 2017 driven
by both organic growth and the acquisitions made in 2016 and 2017,
albeit with normalised levels of growth in the second half from
Asia following unusually high levels of activity in the first
half.
Average daily revenue in the Gaming Division for the first 53
days of Q3 2017, traditionally the slowest part of the year, was up
1% on Q3 2016 (6% at constant currency) and down 9% on an unusually
strong Q2 2017 (down 6% at constant currency).
Excluding acquisitions, average daily revenue in the Gaming
Division for the first 53 days of Q3 2017 was down by 1% on Q3
2016, increasing 3% at constant currency.
I am pleased to report the Financials Division is trading in
line with expectations.
Finally, it is worth noting that since the start of the year,
the Euro has strengthened significantly against many currencies. By
taking Playtech's budget at the start of the year and applying the
impact of actual currency rates to date, then applying today's spot
rates from now until the end of the year on remainder of the
budget, the impact on our budgeted reported EBITDA is well into
double-digit millions.
Chief Financial Officer's review
Presentation of results
The Directors believe that in order to best represent the
trading performance and results of the Group, the reported numbers
should exclude certain non-cash and one-off items including
amortisation of intangibles on acquisitions, professional costs on
acquisitions, finance costs on acquisitions, deferred tax on
acquisitions and additional various non-cash charges.
The Directors believe therefore that Adjusted EBITDA and
Adjusted Net Profit more accurately represent the trading
performance of the business and are the key performance metrics
used by the Board when assessing the Group's financial performance.
A full reconciliation between the actual and adjusted results is
provided in Note 4 of the financial statements below.
Given the significant fluctuations in exchange rates in the
period, the underlying results are presented in respect of the
above measures after excluding acquisitions and on a constant
currency basis to best represent the trading performance and
results of the Group.
Overview
The first half of 2017 has seen Playtech again deliver a strong
financial performance driven by a combination of underlying growth
and from the acquisitions made in 2016 and at the start of
2017.
Total reported revenue and Adjusted EBITDA increased 25% and 19%
respectively compared to the first half of 2016. Reported Adjusted
Net Profit increased 60% in the half due to significant
fluctuations in currency exchange rates, mainly in Sterling,
impacting H1 2016 reported Adjusted Net Profit leading to high
growth from H1 2016 to H1 2017.
On a constant currency basis, revenue, Adjusted EBITDA and
Adjusted Net Profit, increased by 30%, 24% and 20% respectively.
When further excluding the effect of acquisitions, reflecting the
underlying performance of the business, revenue, Adjusted EBITDA
and Adjusted Net Profit increased by 10%, 11% and 10%
respectively.
In line with the guidance provided at the 2016 full year
results, the Group Adjusted EBITDA margin fell from 43% in H1 2016
to 41% in H1 2017. However, when adjusting for revenues and EBITDA
from Playtech's inherently lower margin white-label / B2C business
as well as from Casual, the Group Adjusted EBITDA margin increased.
When further adjusting for acquisitions (in addition to adjusting
for white-label / B2C / Casual) the adjusted Group Adjusted EBITDA
margin increased by 4% points to 53%.
Playtech continues to be highly cash generative and delivered
net cash from operations up 48% to EUR147.3 million compared to
EUR99.5m in H1 2016, representing 79% cash conversion from Adjusted
EBITDA when excluding cash movements, which are not reflected in
Adjusted EBITDA, such as movements in jackpot liabilities, customer
security deposits and changes in client equity.
Playtech has a very strong balance sheet with cash and cash
equivalents of EUR536 million at the end of the half year, or
Adjusted Gross cash of EUR376 million (Dec 2016: EUR392 million)
net of cash held on behalf of client funds, progressive jackpot and
security deposits. Together with the available-for-sale
investments, which stood at EUR242 million at period end, Playtech
has considerable available resources to execute its strategy.
Revenue
Total revenue increased by 25% to EUR421.6 million (2016:
EUR337.7 million) and by 30% on a constant currency basis, with
underlying growth of 10% (after excluding acquisitions at constant
currency).
H1 2017 H1 2016 Change Constant
EURm EURm Currency
Change
--------------------- -------- -------- ------- ----------
Casino 225.9 186.7 21% 26%
Services 69.0 76.5 -10% -6%
Sport 37.7 19.0 98% 108%
Bingo 14.0 9.0 56% 70%
Poker 4.7 5.0 -6% -5%
Other 25.3 10.3 146% 148%
Gaming Division 376.5 306.5 23% 28%
Financials Division 45.1 31.3 44% 43%
-------- ------- ----------
Total revenue 421.6 337.7 25% 30%
The new presentation of Gaming revenue by vertical, which was
announced at the 2016 year-end results, removes the Land-based
vertical to better reflect the true omni-channel nature of the
business. Revenue previously referred to as 'land-based' has now
been allocated to the relevant product verticals.
The revenue from Land-based was allocated as follows:
- Videobet and Videobet interactive to Casino;
- retail sport revenue, which are mainly BGT, to Sports;
- retail bingo revenue, generated by ECM to Bingo; and
- IGS, including other sale of machines, to Other.
Casino remains the biggest product vertical, increasing by
EUR39.2 million of revenue in the period, taking total Casino
revenue to EUR225.9 million, with growth of 26% at constant
currency and 22% when excluding acquisitions. The growth in Casino
is predominantly from core casino activity, such as online slots
and roulette, driven by Mobile casino revenue which grew by 84%
over H1 2016, increasing mobile penetration to 35% compared to 23%
in the comparable period. The main growth in total casino and
mobile casino was driven by growth in UK mobile revenue, growth in
non-UK Europe and from growth in Asia. Asia more than doubled its
mobile penetration compared to H1 2016 with the UK reaching more
than 50% in penetration and the growth in non-UK Europe mobile
penetration increased to 27%.
Services revenue decreased by 6% on a constant currency basis,
whilst decreasing by 10% on a reported basis. The decrease on a
reported basis is mainly due to a faster decline in .com revenue,
mostly reflected in marketing services revenue, than the increase
in regulated revenue together with loss of contracts in
Pokerstrategy. The increase in regulated services revenue was
mainly generated from the addition of the Sun white-label
operations revenue and from structured agreements, such as Caliente
and Marca.
Sport revenue increased in H1 2017 by 108% on a constant
currency basis and by 98% on a reported basis. The increase is due
to the acquisition of BGT, as Sport revenue, when excluding
acquisitions, on a constant currency basis, decrease by 28%. The
decrease, as previously indicated, is mainly due to the loss of
three Mobenga contracts with UK licensees.
Bingo revenue increased by 70% on a constant currency basis and
by 56% on a reported basis. When excluding the increase in revenue
generated by the acquisition of ECM, Bingo revenue on a constant
currency basis were up 3% compared to H1 2016. KPIs, such as active
players per week, bets per week and gross gaming win per week,
continue to increase and are at an all-time high.
Poker reported revenue has decreased by 6% compared to H1 2016,
as the entire market continues to be challenging. Poker is still an
important vertical in the operators' offering and Playtech remains
dedicated to the product.
Other revenue grew by 146% mainly due to Casual games revenue
which enjoyed a significant uplift in the second half of 2016
following the launch of the Narcos branded game.
Revenue in Financials Division
For the first half of 2017 revenue in the Financials Division
was EUR45.1m, up 44% versus H1 2016. When excluding the revenue
generated by CFH, which was acquired at the end of November 2016,
financial revenue increased 4% to EUR32.6m.
Looking at the top line performance of the division, the
momentum reported at the full year 2016 results has continued into
the first half of 2017. The steps taken in 2016 to deliver an
efficient, compliant, competitive and sustainable business model
are bearing fruit in 2017, with the improvement in revenue and a
173% increase in Adjusted EBITDA to EUR16.1m in H1 2017.
Adjusted EBITDA & Adjusted EBITDA margin
H1 2017 H1 2016
EUR'000 EUR'000
----------------------------------------------- --------- ----------
EBITDA 164,548 137,277
Employee stock option expenses 5,210 5,371
Professional expenses on acquisitions 786 1,156
Cost of business reorganisation 380 -
Adjusted EBITDA 170,924 143,804
Adjusted EBITDA margin 40.5% 42.6%
Adjusted EBITDA on a constant currency basis 177,933 143,804
Adjusted EBITDA margin on a constant currency
basis 40.7% 42.6%
EBITDA related to acquisitions at constant
currency (17,882) 9
Underlying Adjusted EBITDA 160,051 143,813
Underlying Adjusted EBITDA margin 43.1% 42.7%
Underlying adjusted EBITDA increased by 11% compared to H1 2016.
Adjusted EBITDA for the Financials Division was EUR16.1 million,
against an adjusted EBITDA of EUR5.9 million in H1 2016.
As we have stated previously, going forward we would expect
Group EBITDA margin percentage to be a less relevant KPI for the
Group given the different margin profiles across the business. We
further outlined at the FY 2016 results that 2017 Group EBITDA
margin would be around the level of the 2015 margin, following the
higher percentage contribution from lower margin parts of the
business including white-label, specifically from the full year
contribution from Sun Bingo, the Financials Division and from
Casual.
Group EBITDA margin in H1 2017 was therefore much in line with
what we expected at 41% with a significant increase in the margin
of the Financials Division, up from 19% to 36%.
Cost of operations
H1 2017 H1 2016*
EUR'000 EUR'000
----------------------------- --------- ---- --------- ----
Adjusted operating expenses 250,656 193,926
Less revenue-driven costs 53,256 18,052
Adjusted operating expenses
excluding revenue-driven
costs 197,400 175,874
Employee-related costs 105,927 54% 96,034 54%
Cost of service 27,499 14% 23,050 13%
Operational marketing
costs 21,177 11% 20,516 12%
Admin and office costs 18,337 9% 16,935 10%
Other costs 14,794 7% 12,245 7%
Travel, exhibition and
marketing costs 9,666 5% 7,094 4%
Adjusted operating expenses
excluding revenue-driven
costs 197,400 175,874
* Direct marketing costs relating both to the Gaming Services
division and the Financials Division were reallocated to
Operational marketing costs in the comparative figures of 2016.
Adjusted operating expenses increased by 29%, from EUR193.9
million to EUR250.7 million in H1 2017 and by 34% on a constant
currency basis.
Revenue-driven costs as a proportion of total revenue increased
from 5% in H1 2016 to 13% in H1 2017, mainly due to additional cost
related to Sun Bingo which was launched in September 2016. The
increase in revenue-driven costs comprises mainly white-label
related costs, such as brand fees, gaming taxes, processing fees,
fees paid to sales agents and license fees paid to third parties
(including games developers), and branded content. These fees are
typically calculated as a share of the licensee revenue generated
but are accounted for differently in white-label contracts.
Employee-related costs increased by 10%, and decreased by 6%
after excluding acquisitions. The decrease is mainly due to a cost
reduction plan that was executed towards the end of the first half
of 2016, which resulted in a decrease of c. 400 employees when
comparing the headcount at the end of H1 2017 to the end of H1
2016, (excluding acquisitions made during the year). Capitalised
development costs as a percentage of total employee related costs
remained at 15%, consistent with H1 2016, and in Euro increased to
EUR18.3 million (2016: EUR16.9 million), reflecting 38% and 35% out
of R&D related costs in 2017 and 2016 respectively. The
increase in the capitalisation rate is mainly due the development
of the Sportsbook system, including BGT.
Cost of service comprises mainly of dedicated development teams
cost, charged back to licensees, hosting, feeds costs, and software
license cost. During 2016 B2B marketing cost was reclassified from
cost of service to operational marketing cost. Cost of service
increased 19% on reported basis mainly due to additional feeds
cost, hosting and terminal maintenance from BGT and at only 5%
excluding acquisitions.
Admin and office costs increased by 8%, decreasing 5% excluding
acquisitions, mainly as a result of the redundancy plan mentioned
in the Employee-related costs section. As a proportion of adjusted
non-revenue-related costs of operation remained broadly at the same
level as in 2016.
Operational marketing costs include marketing costs for B2B and
white-label activity of the Gaming Division together with B2C
marketing costs in the Financials Division. These costs were
reclassified from revenue driven costs and cost of service in 2016
to better reflect the operational marketing costs of the business.
In 2017 there was a 3% increase including acquisitions, and a 20%
decrease when excluding acquisitions.
Finance income, financial cost and tax
Adjusted net finance cost was EUR12.4 million in the period
compared to EUR35.6 million in H1 2016. The decrease is
predominantly due to lower foreign exchange rate losses of EUR13.0
million during H1 2017, compared to a EUR42.6 million loss in H1
2016. This was offset by lower total dividends from the available
for sale investment from Ladbrokes of EUR3.0 million (H1 2016:
EUR2.5 million) and nil from Plus500 (with the dividend of EUR6.5
million received on 3 July 2017) compared to EUR6.4 million in H1
2016.
The Company is tax registered, managed and controlled from the
Isle of Man, where the corporate tax rate is set at zero. The
Group's main trading subsidiaries are registered either in the Isle
of Man, Alderney or Cyprus, where effective tax rates are low or
set at zero. Other subsidiaries, related to the Group's development
centers are located in other jurisdictions and operate on a
cost-plus basis, and are taxed on their residual profits. The tax
charge in H1 2017 was EUR2.3 million (H1 2016: EUR2.4 million).
Adjusted profit and Adjusted EPS
2017 2016
EUR'000 EUR'000
------------------------------------- ------------ ----------
Profit attributable to owners
of the parent 89,647 48,772
Amortisation on acquisitions 25,341 19,733
Non-cash accrued bond interest 5,056 4,869
Employee stock option expenses 5,210 5,371
Professional costs on acquisitions 786 1,156
Cost of fundamental business
reorganization 380 -
Movement in deferred and contingent
consideration 1,689 (390)
Deferred tax on acquisition (2,628) (1,182)
Adjusted profit attributable
to owners of the parent 125,481 78,329
Adjusted basic EPS (in Euro
cents) 39.9 24.6
Adjusted diluted EPS (in Euro
cents) 36.2 22.6
Constant currency impact 20,018 42,567
Adjusted profit for the year
attributable to owners of
parent on constant currency 145,499 120,896
Adjusted Net Profit on constant
currency related to acquisitions (12,103) 39
Underlying adjusted profit
for the year - attributable
to owners of the parent 133,396 120,935
Underlying adjusted profit increased by 10% compared to H1 2016
in line with the increase in the underlying adjusted EBITDA.
Adjusted diluted EPS was up 60% and the Adjusted diluted EPS on
a constant currency basis excluding acquisition was up 11%,
slightly impacted by the 5.2 million share buyback executed in
December 2016. Adjusted diluted EPS is calculated on the basis of a
weighted average number of shares in issue during 2017 of 349.2
million which includes the shares underlying the convertible bond
issued in November 2014.
Total amortisation in the period was EUR41.7 million (2016:
EUR35.2million), an increase generated mainly by new acquisitions.
When excluding acquisitions, amortization decreased by a marginal
1%.
Cashflow
Playtech continues to be highly cash generative and once again
delivered strong operating cashflows of EUR147.3 million.
Cash conversion
2017 2016
EUR'000 EUR'000
------------------------------------------- ---------- ----------
Adjusted EBITDA 170,924 143,804
Net cash provided by operating activities 147,321 99,469
---------- ----------
Cash conversion 86% 69%
Decrease /(Increase) in Progressive,
operators' jackpots, security deposits (11,029) 3,149
Decrease /(Increase) in Client equity (761) 10,093
Adjusted net cash provided by operating
activities 135,531 112,711
---------- ----------
Adjusted Cash conversion 79% 78%
Operating cash conversion from Adjusted EBITDA remained at the
same level as in H1 2016 when adjusted for jackpots, security
deposits and client equity. Since the timing of cash inflows and
outflows for jackpots, security deposits and client equity only
affects operating cashflow for technical accounting reasons, and
not EBITDA, adjusting these cash fluctuations is essential to truly
reflect the quality of revenue and cash collection.
Net cash outflows from investing activities totalled EUR73.7
million in the period. EUR36.2 million which mainly relates to the
Eyecon acquisition in the period and payments for previous years
acquisitions. Cash outflows from financing activities included
EUR68.4 million of annual dividend payment.
Balance sheet and financing
As at 30 June 2017, cash and cash equivalents amounted to
EUR536.4 million, a slight decrease of EUR8.4 million compared to
the end of 2016, following the annual dividend payment of EUR68.4
million and consideration on acquisitions of EUR36.2 million.
Progressive, operators' jackpots and security deposits increased
by EUR11.0 million to EUR57.8 million and client funds and deposits
decreased by EUR3.1 million, to EUR103.0 million, from the end of
2016. Cash and cash equivalents net of cash held on behalf of
client funds, progressive jackpot and security deposit is EUR375.7
million.
Total available-for-sale investments were EUR241.8 million, an
increase compared to the end of 2016, mainly due to an appreciation
in value of holdings in Plus500 netted of by the depreciation in
value of holdings in Ladbrokes and the exchange rate losses in
total of EUR11.5 million.
Contingent and deferred consideration liability decreased to
EUR205.0 million, mainly due to earn-out payments, and comprise
of:
Acquisition Contingent consideration Maximum payable
and redemption liability earnout
as of 30.06.17
--------------------- -------------------------- ----------------
Markets EUR139.6 million EUR250 million
--------------------- -------------------------- ----------------
Quicksipin EUR24.2 million EUR26 million
--------------------- -------------------------- ----------------
Best Gaming
Technology EUR21.8 million EUR60 million
--------------------- -------------------------- ----------------
Consolidated
Financial Holdings EUR16.0 million $76.6 million
--------------------- -------------------------- ----------------
ECM EUR1.2 million GBP1.1 million
--------------------- -------------------------- ----------------
Eyecon EUR1.3 million GBP25.0 million
--------------------- -------------------------- ----------------
Others EUR1.0 million
--------------------- -------------------------- ----------------
Dividend
To provide greater certainty and consistency of dividend
payments, the Board adopted a progressive dividend policy in 2016
which allows the Board to reflect its confidence in the growth and
cash generation of the business without being tied to a fixed
percentage payout as one-off items can impact results, such as the
impact from foreign exchange which we saw in 2016 and 2017.
Playtech's intention is to grow dividends from the current level
in line with the underlying performance of the business on a
smoothed basis and to continue to pay the dividend split
approximately one-third as an interim dividend and two-thirds as a
final dividend.
Accordingly, the Board has declared an interim dividend of 12.1
EURcents per share (2016: 11.0 EURcents), an increase of 10% over
2016's interim dividend.
For those shareholders wishing to receive their dividends in
Sterling the last date for currency elections is 29 September
2017.
Dividend timetable:
Ex-dividend Thursday 21 September 2017
date:
Record date Friday 22 September 2017
for dividend:
Currency election Friday 29 September 2017
date:
Payment date: Tuesday 24 October 2017
Principal risks and uncertainties
Risks relating to both the Gaming division and Financials
division
-- Regulation - licensing requirements
The Group holds a number of licences for its activities from
regulators. Loss of all or any of these licences may adversely
impact on the revenues and/or reputation of the Group.
-- Regulation - Local requirements
New licensing regimes may impose conditions. For example,
introduction of a requirement to locate significant technical
infrastructure within the relevant territory or to establish and
maintain real-time data interfaces with the regulator. Such
conditions present operational challenges and may prohibit the
ability of licensees to offer the full range of the Group's
products.
-- Taxation
Given the environment in which the Group operates, the business
is exposed to continuously evolving rules and practices governing
the taxation of e-commerce activity in various jurisdictions.
Adverse changes to tax rules and changes may increase the Group's
underlying effective tax rate and reduce profits available for
distribution.
-- Economic Environment
A downturn in consumer discretionary spend or macroeconomic
factors outside of Playtech's control could result in reduced spend
by consumers on gambling and financial trading and the Group's
revenues would fall.
-- Cash Management - Acquisitions
Playtech have significant cash balances, which may be used to
acquire other businesses. Such acquisitions may not deliver the
expected synergies and/or benefits and may destroy shareholder
value.
-- Cash Management - Cash Balances
Foreign exchange volatility could impact the Group's financial
position.
-- Key Employees
The Group's future success depends in large part on the
continued service of a broad leadership team including executive
Directors, senior managers and key personnel. The development and
retention of these employees along with the attraction and
integration of new talent cannot be guaranteed.
-- IT Security
The risk of impairment to our operations for example through
cyber and distributed denial of service (DDoS) attacks, technology
failure or terrorist attack continues to be one that the Group
considers to be significant. System failure could significantly
affect the services offered to our licensees.
-- Regulatory - Data Protection
The requirements of the new EU General Data Protection
Regulations (GDPR) will come into force in May 2018. This places
onerous responsibilities on data controllers and processors who
have users in the EU regardless of where the data is held or
processed.
-- Regulatory - Preventing Financial Crime
New regulations requiring companies to take action in preventing
financial crime are being developed. These include a new Anti-Money
Laundering (AML) directive coming into force on 26th June 2017 and
calls for improved Anti-Bribery and Corruption (ABC)
regulations.
-- Intellectual Property Rights
The Group's primary commercial activity is as a licensor of
gambling software. The Group predominantly owns the intellectual
property (IP) rights in that gambling software, including the IMS
which is key to maintaining our competitive advantage. Any claim
that the Group doesn't own its IP (by a licensee or a third party),
or any copying of the Group's IP by a third party, could have a
significant effect on revenues. In addition, the Group licenses
intellectual property from third parties, including creation of
very successful branded games. Any loss of such IP rights could
lead to a decline in casino revenues.
-- Business Continuity Planning
Loss of revenue, reputational damage or breach of regulatory
requirements may occur as a result of a business or location
disruptive event.
Additional risks relating to the Gaming division
-- Regulatory - Responsible Gambling
Responsible gambling is a material concern to society as well as
a regulatory priority. Licensing requirements are regularly updated
to ensure that companies in the sector provide a safe environment
for consumers. Recent trends have seen an additional regulatory
focus on treating customers fairly and conducting marketing and
advertising in a responsible manner.
Additional risks relating to the Financials division
-- Market exposure
The fair value of financial assets and financial liabilities
could adversely fluctuate due to movements in market prices of
foreign exchange rates, commodity prices, equity and index
prices.
-- Regulatory - Capital Adequacy
The requirement to maintain adequate regulatory capital may
affect the Group's ability to conduct its business and may reduce
profitability.
-- Trading volume
Low volatility within foreign exchange rates, commodity prices,
equity and index prices may reduce profitability.
Directors' responsibility statement
We confirm to the best of our knowledge;
-- The Group and Company financial statements, which have been
prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union and Article 4 of
the IAS Regulation, give a true and fair view of the assets,
liabilities, financial position and profit of the Group and
Company; and
-- The Annual Report includes a fair review of the development
and performance of the business and the financial position of the
Group and Company, together with a description of the principal
risks and uncertainties that they face.
A list of current directors is maintained on Playtech's website,
www.playtech.com
By order of the Board,
Mor Weizer Andrew Smith
Chief Executive Officer Chief Financial Officer
23 August 2017 23 August 2017
INDEPENT REVIEW REPORT TO PLAYTECH PLC
Introduction
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2017 which comprises the consolidated
income statement, the consolidated balance sheet, the consolidated
statement of changes in equity, the consolidated statement of cash
flows and the related notes.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
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 Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union. The
condensed set of financial statements included in this half-yearly
financial report has been prepared in accordance with International
Accounting Standard 34, "Interim Financial Reporting", as adopted
by the European Union.
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.
Our report has been prepared in accordance with the terms of our
engagement to assist the company in meeting its responsibilities in
respect of half-yearly financial reporting in accordance with the
Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority and for no other purpose. No person is entitled
to rely on this report unless such a person is a person entitled to
rely upon this report by virtue of and for the purpose of our terms
of engagement or has been expressly authorised to do so by our
prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
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 for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and 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.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2017 is not prepared, in all material respects, in accordance
with International Accounting Standard 34, as adopted by the
European Union, and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority
BDO LLP
Chartered Accountants and Registered Auditors
London, United Kingdom
23 August 2017
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended Six months ended
30 June 2017 30 June 2016
Note Actual Adjusted Actual Adjusted
EUR'000 EUR'000 EUR'000 EUR'000
--------------------------------------------------------------- ----- ---------- ---------- ---------- ----------
Revenue 3 421,580 421,580 337,730 337,730
Distribution costs before depreciation and amortisation (210,438) (208,289) (171,008) (169,337)
Administrative expenses before depreciation and amortisation (46,594) (42,367) (29,445) (24,589)
EBITDA 164,548 170,924 137,277 143,804
Depreciation and amortisation (54,688) (29,347) (44,235) (24,502)
Finance income 5 3,305 3,305 9,689 9,689
Finance cost 5 (22,466) (15,721) (49,743) (45,264)
Share of profit from joint ventures 263 263 81 81
Share of profit (loss) from associates 389 389 (1,720) (1,720)
Profit before taxation 91,351 129,813 51,349 82,088
Tax expenses (2,322) (4,950) (2,368) (3,550)
Profit for the period 89,029 124,863 48,981 78,538
Other comprehensive income for the period:
Items that may be classified to profit or loss:
Change in fair value of available for sale equity instruments 8 15,563 15,563 (1,778) (1,778)
Exchange gains arising on translation of foreign operations (32,436) (32,436) (5,746) (5,746)
Total items that will be classified to profit or loss (16,873) (16,873) (7,524) (7,524)
Total comprehensive income for the period 72,156 107,990 41,457 71,014
Profit for the period attributable to:
Owners of the parent 89,647 125,481 48,772 78,329
Non-controlling interest (618) (618) 209 209
89,029 124,863 48,981 78,538
Total comprehensive income attributable to:
Owners of the parent 74,159 109,993 40,984 70,541
Non-controlling interest (2,003) (2,003) 473 473
72,156 107,990 41,457 71,014
Earnings per share for profit attributable to the owners of
the parent during the period:
Basic (cents) 6 28.5 39.9 15.3 24.6
Diluted (cents) 6 27.3 36.2 15.3 22.6
* Adjusted numbers relate to certain non-cash and one-off items
including amortisation of intangibles on acquisitions, professional
costs on acquisitions, finance costs on acquisitions, deferred tax
on acquisitions, change in fair value of available-for-sale
investments in the income statement, non-cash accrued bond interest
and additional various non-cash charges. The directors believe that
the adjusted profit represents more closely the consistent trading
performance of the business. A full reconciliation between the
actual and adjusted results is provided in Note 4.
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Additional Available Retained Employee Convertible Call/Put Foreign Total Non-controlling Total
paid in for sale earnings benefit bond option options exchange attributable interest equity
capital reserve trust reserve reserve reserve to equity
holders of
parent
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
--------------- ----------- ---------- --------- --------- ------------ --------- --------- ------------- ---------------- ----------
Balance at 1
Jan 2017 627,764 (51,057) 498,864 (25,417) 45,392 (34,341) 16,800 1,078,005 21,714 1,099,719
Changes in
equity for the
period
Total
comprehensive
income for
the period - 14,405 89,647 - - - (29,893) 74,159 (2,003) 72,156
Dividend paid - - (68,404) - - - - (68,404) - (68,404)
Exercise of
options - (810) 1,599 - - - 789 - 789
Employee stock
option scheme - - 5,103 - - - - 5,103 38 5,141
Acquisition of
minority
interest - - (498) - - - - (498) (586) (1,084)
Minority
interest
acquired on
business
combination - - - - - (252) - (252) 105 (147)
Balance at 30
June 2017 627,764 (36,652) 523,902 (23,818) 45,392 (34,593) (13,093) 1,088,902 19,268 1,108,170
Balance at 1
Jan 2016 638,209 1,964 592,051 (27,495) 45,392 - 3,266 1,253,387 7,308 1,260,695
Changes in
equity for the
period
Total
comprehensive
income for
the period - (3,012) 48,772 - - - (4,776) 40,984 473 41,457
Dividend paid - - (60,811) - - - - (60,811) - (60,811)
Exercise of
options - (214) 324 - - - 110 5 115
Employee stock
option scheme - - 5,288 - - - - 5,288 83 5,371
Acquisition of
minority
interest - - (6,702) - - - - (6,702) (1,356) (8,058)
Minority
interest
acquired on
business
combination - - - - - - - - 329 329
Balance at 30
June 2016 638,209 (1,048) 578,384 (27,171) 45,392 - (1,510) 1,232,256 6,842 1,239,098
UNAUDITED CONSOLIDATED BALANCE SHEET
At 30 June 2017 At 30 June 2016 At 31 December 2016
Note EUR'000 EUR'000 EUR'000
(Audited)
----------------------------------------------------- ----- ---------------- ---------------- --------------------
NON-CURRENT ASSETS
Property, plant and equipment 78,075 52,965 72,893
Intangible assets 993,254 807,213 1,014,635
Investments in equity accounted associates & joint
ventures 38,836 47,455 39,026
Available for sale investments 8 241,759 234,388 230,278
Other non-current assets 29,299 24,452 26,861
1,381,223 1,166,473 1,383,693
----------------------------------------------------- ----- ---------------- ---------------- --------------------
CURRENT ASSETS
Trade receivables 99,003 98,540 73,744
Other receivables 78,438 30,037 73,966
Cash and cash equivalents 536,434 777,576 544,843
713,875 906,153 692,553
----------------------------------------------------- ----- ---------------- ---------------- --------------------
TOTAL ASSETS 2,095,098 2,072,626 2,076,246
EQUITY
Additional paid in capital 627,764 638,209 627,764
Available-for-sale reserve (36,652) (1,048) (51,057)
Employee Benefit Trust (23,818) (27,171) (25,417)
Convertible bonds option reserve 45,392 45,392 45,392
Put/Call options reserve (34,593) - (34,341)
Foreign exchange reserve (13,093) (1,510) 16,800
Retained earnings 523,902 578,384 498,864
Equity attributable to equity holders of the parent 1,088,902 1,232,256 1,078,005
----------------------------------------------------- ----- ---------------- ---------------- --------------------
Non-controlling interest 19,268 6,842 21,714
TOTAL EQUITY 1,108,170 1,239,098 1,099,719
----------------------------------------------------- ----- ---------------- ---------------- --------------------
NON CURRENT LIABILITIES
Loans and borrowings - 200,000 200,000
Convertible bonds 271,286 261,298 266,230
Deferred revenues 4,104 4,630 3,454
Deferred tax liability 36,798 19,606 40,443
Contingent consideration and redemption liability 9 50,498 164,361 204,550
Other non-current liabilities 1,829 1,029 1,627
364,515 650,924 716,304
CURRENT LIABILITIES
Loans and borrowings 200,000 - -
Trade payables 21,634 14,428 28,171
Progressive operators' jackpots, security deposits 57,788 60,191 46,759
Client deposits 74,120 - 76,229
Client funds 28,858 33,668 29,863
Tax liabilities 9,972 5,752 9,731
Deferred revenues 10,047 3,880 4,456
Contingent consideration 9 154,505 4,008 4,577
Other payables 65,489 60,677 60,437
622,413 182,604 260,223
TOTAL EQUITY AND LIABILITIES 2,095,098 2,072,626 2,076,246
The financial statements were approved by the Board and
authorised for issue on 23 August 2017.
Mor Weizer Andrew Smith
Chief Executive Officer Chief Financial Officer
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended 30 June 2017 Six months ended 30 June 2016
EUR'000 EUR'000
------------------------------------------ ------------------------------ ------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Profit after tax 89,029 48,981
Adjustments to reconcile net income to
net cash provided by operating
activities (see below) 62,254 54,885
Income taxes paid (3,962) (4,397)
Net cash provided by operating activities 147,321 99,469
------------------------------------------ ------------------------------ ------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Long-term deposits and loan advances (2,427) (3,622)
Acquisition of property, plant and
equipment (18,387) (10,524)
Return on investment in joint ventures 644 748
Acquisition of intangible assets (55) (12,321)
Acquisition of subsidiaries (36,240) (41,739)
Cash of subsidiaries on acquisition 326 1,581
Capitalised development costs (18,872) (17,693)
Investment in equity-accounted associates (622) (500)
Return on available for sale investments 2,976 8,919
Proceeds from sale of property, plant and
equipment 41 60
Acquisition of minority interest (1,084) -
Net cash used in investing activities (73,700) (75,091)
------------------------------------------ ------------------------------ ------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid to the holders of the
parent (68,404) (60,811)
Interest payable on loans and bank
borrowings (1,408) (1,437)
Exercise of options 767 115
Net cash used in financing activities (69,045) (62,133)
------------------------------------------ ------------------------------ ------------------------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 4,576 (37,755)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 544,843 857,898
Exchange losses on cash and cash
equivalents (12,985) (42,567)
CASH AND CASH EQUIVALENTS AT OF
PERIOD 536,434 777,576
------------------------------------------ ------------------------------ ------------------------------
Six months ended 30 Six months ended 30 June 2016
June 2017
EUR'000 EUR'000
----------------------------------------- ------------------------------ --------------------------------
ADJUSTMENT TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING
ACTIVITIES
Income and expenses not affecting
operating cash flows:
Depreciation 13,030 9,037
Amortisation 41,658 35,198
Share of profit in joint ventures (263) (81)
Share of loss/(profit) in associates (389) 1,720
Interest expenses on convertible bonds 5,056 4,869
Income tax expense 2,322 2,368
Employee stock option plan expenses 5,211 5,371
Movement in deferred and contingent
consideration 1,689 (390)
Exchange losses on cash and cash
equivalents 12,985 42,567
Return on available for sale investments (2,976) (8,919)
Other (31) 84
Changes in operating assets and
liabilities:
Increase in trade receivables (23,991) (22,962)
Increase in other receivables (4,370) (3,794)
Decrease in trade payables (6,622) (3,409)
Increase/(decrease) in progressive,
operators jackpot and security deposits 11,029 (3,149)
Increase/(decrease) in client funds 761 (10,093)
Increase in other payables 990 5,965
Decrease in deferred revenues 6,165 503
62,254 54,885
------------------------------------------ ------------------------------ --------------------------------
Acquisition of subsidiaries
Six months ended 30 June 2017 Six months ended 30 June 2016
Note EUR'000 EUR'000
----------------------------------------------- ----- ------------------------------ ------------------------------
Acquisitions in the period
A. Acquisition of Eyecon Limited 10a 27,735 -
B. Other acquisitions 10b 1,050 -
Acquisitions in previous years
A. Acquisition of Quickspin AB 11a - 24,461
B. Acquisition of ECM Systems Holdings Ltd 3,061 -
C. Acquisition of Patelle Limited 2,016 -
C. Acquisition of Yoyo Games Limited - 1,372
B. Acquisition of Consolidated Financial 336 -
Holdings AB
C. Other acquisitions 2,042 15,906
36,240 41,739
----------------------------------------------- ----- ------------------------------ ------------------------------
NOTE 1 - GENERAL
A. Playtech plc (the 'Company') is a company domiciled in the Isle of Man.
Playtech and its subsidiaries ('the Group') develop unified
software platforms for the online and land based gambling industry,
targeting online and land based operators. Since May 2015 the Group
is also offered an online trading platform to retail customer which
enables them to trade CFD (Contracts For Differences) on a variety
instruments which fall under the general categories of Foreign
exchanges, Commodities, Equities and indices. In the context of
this activity, the Group acts as a market-maker in a predominantly
B2C environment. Following the acquisition of CFH in November 2016,
the Group also provides B2B clients with technology for liquidity
and clearing. Playtech's gaming applications - online casino, poker
and other P2P games, bingo, mobile, live gaming, land-based kiosk
networks, land based terminal and fixed-odds games - are fully
inter-compatible and can be freely incorporated as stand-alone
applications, accessed and funded by the operators' players through
the same user account and managed by the operator by means of a
single, powerful management interface.
B. The interim financial statements as at 30 June 2017 and 30
June 2016 and the six months then ended, respectively, have been
reviewed by the Group's external auditors.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The annual financial statements of the Group were prepared in
accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union.
These consolidated financial statements have been prepared in
accordance with IAS 34,
"Interim Financial Reporting", as adopted by the European Union.
They do not include all disclosures that would otherwise be
required in a complete set of financial statements and should be
read in conjunction with the 2016 Annual Report.
The same accounting policies, presentation and methods of
computation are followed in these consolidated financial statements
as were applied in the Group's latest annual audited financial
statements.
The comparative period income statement adjusted results have
been restated to reflect the impact of adjusting for deferred tax
on acquisitions. This results in an increase in the adjusted tax
charge and decrease in the resulting adjusted profit and total
comprehensive income of EUR1.2 million. Actual results are
unaffected. The comparative statements of financial position were
restated to reclassify indirect tax liabilities from the tax
liabilities heading to the other payables heading, this did not
impact net assets or other totals.
New standards, interpretations and amendments effective from 1
January 2017
There are no new standards, interpretations or amendments which
are effective for periods beginning on or before 1 January 2017
which have a material effect on the Group's financial
information.
The directors are still considering the potential impact of IFRS
15: Revenue from contracts with customers, and IFRS 9: Financial
Instruments, but do not expect these standards to have a material
effect on the Group's future financial information. The directors
are still considering the potential impact of IFRS 16: Leases but
expect a material adjustment to arise on transition as the Group
has material lease commitments. Other than as noted, the directors
do not expect that any other new standards, interpretations and
amendments which are effective for periods beginning after 1
January 2017 to have a material effect on the Group's future
financial information
The comparative financial information for period ended 31
December 2016 included within this report does not constitute the
full statutory accounts for that period. The Independent Auditors'
Report on the Annual Report for the year ended 31 December 2016 was
unqualified, and did not draw attention to any matters by way of
emphasis.
The directors have a reasonable expectation that the Company and
the Group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to
adopt the going concern basis in preparing the half-yearly
consolidated financial statements.
Significant judgements and estimates
There has been no change in the nature of the critical
accounting estimates and judgements as set out in Note 3 to the
Group's audited financial statements for the year ended 31 December
2016.
NOTE 3 - SEGMENT INFORMATION
The Group's reportable segments are strategic business units
that offer different products and services.
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision maker has been identified as the
management team including the Chief Executive Officer and the Chief
Financial Officer.
The operating segments identified are:
-- Gaming: including Casino, Services, Sport, Bingo and
Poker
-- Financial: including B2C and B2B CFD
The Group-wide profit measures are adjusted EBITDA and adjusted
net profit (see Note 4). Management believes the adjusted profit
measures represent more closely the underlying trading performance
of the business. No other differences exist between the basis of
preparation of the performance measures used by management and the
figures in the Group financial information.
There is no allocation of operating expenses, profit measures,
assets and liabilities to individual products within the segments
as of 30 June 2017.
Six months ended 30 June 2017
Total Total
Casino Services Sport Bingo Poker Other Gaming Financial Consolidated
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
------------- --------- ---------- -------- -------- -------- -------- ---------- ---------- ----------------
Total
revenue 225,874 68,996 37,727 13,962 4,707 25,258 376,524 45,056 421,580
Adjusted
EBITDA 154,864 16,060 170,924
Adjusted net
profit 115,553 9,310 124,863
Total assets 1,769,398 325,700 2,095,098
Total
liabilities 655,890 331,038 986,928
Six months ended 30 June 2016
Total Total
Casino Services Sport Bingo Poker Other Gaming Financial Consolidated
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
------------- --------- ---------- -------- -------- -------- -------- ----------- ---------- ----------------
Total
revenue 186,658 76,475 18,967 8,970 5,043 10,339 306,452 31,278 337,730
Adjusted
EBITDA 137,919 5,885 143,804
Adjusted net
profit 65,447 13,091 78,538
Total assets 1,862,183 210,443 2,072,626
Total
liabilities 669,207 164,321 833,528
As disclosed in the 2016 annual report, the 2016 revenues by
product have been restated to combine 'land based' into the other
headings to reflect the current internal reporting by management.
Total revenue remains unchanged.
NOTE 4 - ADJUSTED ITEMS
The following tables give a full reconciliation between adjusted
and actual results:
Six months ended 30 June 2017 Six months ended 30 June 2016
EUR'000 EUR'000
------------------------------------------------------ ------------------------------ ------------------------------
Distribution costs before depreciation and
amortisation 210,438 171,008
Employee stock option expenses (2,149) (1,671)
Adjusted distribution costs before depreciation and
amortisation 208,289 169,337
------------------------------ ------------------------------
Administrative expenses before depreciation and
amortisation 46,594 29,445
Employee stock option expenses (3,061) (3,700)
Professional fees on acquisitions (786) (1,156)
Cost of fundamental business reorganization (380) -
Total adjusted items (4,227) (4,856)
------------------------------ ------------------------------
Adjusted administrative expenses before depreciation
and amortisation 42,367 24,589
------------------------------ ------------------------------
Depreciation - distribution costs 9,034 8,015
Depreciation - administrative costs 3,996 1,022
Amortisation - distribution costs 41,658 35,198
------------------------------ ------------------------------
Total depreciation and amortisation 54,688 44,235
Amortisation of intangibles on acquisitions -
distribution costs (25,341) (19,733)
Adjusted depreciation and amortisation 29,347 24,502
------------------------------ ------------------------------
Tax expenses 2,322 2,368
Deferred tax on acquisition 2,628 1,182
------------------------------ ------------------------------
Corporate tax 4,950 3,550
------------------------------ ------------------------------
EBITDA 164,548 137,277
Employee stock option expenses 5,210 5,371
Professional expenses on acquisitions 786 1,156
Cost of fundamental business reorganization 380 -
--------- --------
Adjusted EBITDA 170,924 143,804
--------- --------
Constant currency impact 7,009 -
--------
Adjusted EBITDA on constant currency basis 177,933 143,804
--------
EBITDA related to acquisitions on constant currency basis (17,882) 9
Underlying adjusted EBITDA 160,051 143,813
--------- --------
Profit for the period- attributable to owners of parent 89,647 48,772
Amortisation of intangibles on acquisitions 25,341 19,733
Employee stock option expenses 5,210 5,371
Professional expenses on acquisitions 786 1,156
Cost of fundamental business reorganization 380 -
Non-cash accrued bond interest 5,056 4,869
Movement in deferred and contingent consideration 1,689 (390)
Deferred tax on acquisition (2,628) (1,182)
--------- --------
Adjusted profit for the period - attributable to owners of the parent 125,481 78,329
--------- --------
Constant currency impact 20,018 42,567
Adjusted profit for the period - attributable to owners of the parent on constant currency
basis 145,499 120,896
--------- --------
Adjusted net loss/(profit) related to acquisitions on constant currency basis (12,103) 39
Underlying adjusted profit for the period - attributable to owners of the parent on constant
currency basis 133,396 120,935
--------- --------
NOTE 5 - FINANCING INCOME AND COSTS
Six months Six months
ended ended
30 June 30 June
2017 2016
EUR'000 EUR'000
-------------------------------------------- ----------------- -----------------
A. Finance income
Interest received 329 770
Dividends received from available-for-sale
investments 2,976 8,919
3,305 9,689
----------------- -----------------
B. Finance cost
Finance cost - movement in contingent
consideration (1,689) 390
Interest expenses on convertible
bonds (5,798) (5,612)
Bank charges and interest paid (1,994) (1,954)
Exchange differences (12,985) (42,567)
(22,466) (49,743)
----------------- -----------------
Net financing income (19,161) (40,054)
----------------- -----------------
NOTE 6 - EARNINGS PER SHARE
Earnings per share have been calculated using the weighted
average number of shares in issue during the relevant financial
periods. The weighted average number of equity shares in issue and
the earnings, being profit after tax, is listed below. In addition,
adjusted earnings per share have been disclosed as the directors
believe that the adjusted profit represents more closely the
underlying trading performance of the business. The adjusted items
are included in Note 4.
Six months ended Six months ended Six months ended Six months ended
30 June 2017 30 June 2016
Actual Adjusted Actual Adjusted
EUR'000 EUR'000 EUR'000 EUR'000
------------------------------------------ ----------------- ----------------- ----------------- -----------------
Profit for the year attributable to
owners of the parent 89,647 125,481 48,772 78,329
Add interest on convertible bond 5,798 743 n/a 743
----------------- ----------------- ----------------- -----------------
Earnings used in diluted EPS 95,445 126,224 48,772 79,072
Basic (cents) 28.5 39.9 15.3 24.6
Diluted (cents) 27.3 36.2 15.3 22.6
Six months ended Six months ended Six months ended Six months ended
30 June 2017 30 June 2016
Actual Adjusted Actual Adjusted
Number Number Number Number
Denominator - basic
Weighted average number of equity
shares 314,392,086 314,392,086 318,495,749 318,495,749
Denominator - diluted
Weighted average number of equity
shares 314,392,086 314,392,086 318,495,749 318,495,749
Weighted average number of option
shares 1,614,569 1,614,569 1,064,964 1,064,964
Weighted average number of
convertible bonds 33,157,683 33,157,683 - 30,737,705
----------------- ----------------- ----------------- -------------------
Weighted average number of shares 349,164,338 349,164,338 319,560,713 350,298,418
NOTE 7 - SHAREHOLDERS' EQUITY
A. Share Capital
Share capital is comprised of no par value shares as
follows:
Number of Shares
30 June 2017 30 June
201
-------------------- ------------- ------------
Authorised N/A* N/A*
Issued and paid up 317,344,603 322,624,603
* The Group has no authorised share capital but is authorized
under its memorandum and article of association to issue up to
1,000,000,000 shares of no par value.
B. Employee Benefit trust
During 2013 the Group established an Employee benefit trust by
acquiring 5,517,241 shares for a total of EUR48.5 million. During
the period 190,950 shares were sold with a cost of EUR0.3 million
(Six months to 30 June 2016: 36,062 shares with a cost of EUR0.3
million), and as of 30 June 2017, a balance of 3,035,673 (2016:
3,244,027) shares remains in the trust with a cost of EUR23.8
million (2016: EUR27.2 million).
C. Share options exercised
During the period 193,120 (Six months to 30 June 2016: nil)
share options were exercised.
D. Distribution of Dividend
In June 2017, the Group distributed EUR68,404,085 as a final
dividend for the year ended 31 December 2016. (2016:
EUR60,810,670).
NOTE 8 - AVAILABLE-FOR-SALE INVESTMENTS
30 June 2017 30 June 2016
EUR'000 EUR'000
----------------------------------------------------------- ---------------- -----------------
Investment in available-for-sale investments at 1 January 230,280 237,100
Unrealised valuation movement recognised in equity 15,563 (1,778)
Translation (4,084) (934)
Investment in available-for-sale investments at 30 June 241,759 234,388
---------------- -----------------
The fair value of quoted investments is based on published
market prices (level one).
30 June 2017 30 June 2016
EUR'000 EUR'000
------------------------------------------------------------ --------------- ---------------
Available-for-sale financial assets include the following:
Quoted:
Equity securities- UK 237,168 222,859
Equity securities- Asia 4,589 11,529
241,757 234,388
--------------- ---------------
NOTE 9 -CONTINGENT CONSIDERATION
Six months ended Six months ended
30 June 2017 30 June 2016
--------------------------------------------------------------------- ----------------- ------------------
Non-Current contingent consideration consists:
Acquisition of TradeFX Group - 138,664
Acquisition of Quickspin AB 14,722 24,104
Acquisition of Eyecon Limited 1,296 -
Other acquisitions 148 1,593
16,166 164,361
----------------- ------------------
Non-Current redemption liability consists:
Acquisition of Consolidated Financial Holdings 16,022 -
Acquisition of Patelle Limited 16,890 -
Acquisition of ECM Systems Holdings Limited 1,162 -
Other acquisition 258 -
----------------- ------------------
34,332 -
----------------- ------------------
Total Non-Current contingent consideration and redemption liability 50,498 164,361
----------------- ------------------
Current contingent consideration consists:
Acquisition of TradeFX Group 139,597 -
Acquisition of Quickspin AB 9,485 -
Acquisition of Patelle Limited 4,875 -
Acquisition of Yoyo Games Limited - 455
Other acquisitions 548 3,553
154,505 4,008
----------------- ------------------
Contingent consideration arising on the acquisition of TradeFX
Group (now Markets) in 2015 is payable in 2018 based on an EBITDA
multiple, less initial consideration and capped at EUR250 million.
The liability above reflects managements discounted anticipated
contingent consideration liability due.
NOTE 10 - ACQUISITIONS DURING THE PERIOD
A. Acquisition of Eyecon Limited and Eyecon PTY
On 7 February 2017, the Group acquired 100% of the shares of
Eyecon Limited and Eyecon PTY (together "Eyecon"), an Australian
specialist supplier of online gaming slots software.
The Group paid total cash consideration of EUR27.7 million (GBP
23.7 million) and additional consideration capped at EUR29.0
million (GBP 25.0 million) in cash will be payable based on an
EBITDA multiple less initial consideration paid, and is payable in
2020.
Details of the fair value of identifiable assets and liabilities
acquired, purchase consideration and goodwill, are as follows:
Fair value on acquisition
EUR'000
------------------------------- ---------------------------
Property, plant and equipment 77
Intangible assets 12,990
Trade and other receivables 1,361
Cash and cash equivalent 575
Trade payables (2,834)
Net identified assets 12,169
---------------------------
Goodwill 16,859
Fair value of consideration 29,028
---------------------------
EUR'000
----------------------
Cash consideration 27,735
Non-current contingent consideration 1,486
Finance cost arising on discounting of contingent consideration (193)
----------------------
Fair value of consideration 29,028
----------------------
Cash purchased (575)
Net cash payable 28,453
----------------------
Adjustments to fair value include the following:
Amount Amortisation
EUR'000 %
------------------------ --------------- -------------
IP Technology 9,279 16.7-33
Customer relationships 2,436 10
Brand 1,275 10
The main factor leading to the recognition of goodwill is the
revenue stream from new games and new licensees, assembled work
force with vast experience and strong records and cost synergies.
In accordance with IAS36, the Group will regularly monitor the
carrying value of its interest in Eyecon.
The key assumptions used by management to determine the value in
use of the Customer relationships within Eyecon are as follows:
-- The MPEEM income approach.
-- The discount rate assumed is equivalent to the WACC for the
Customer relationship.
-- The growth rates and attrition rates were based on market
analysis.
The key assumptions used by management to determine the value in
use of the Brand within Eyecon are as follows:
-- The relief from royalty approach.
-- The royalty rate was based on a third party market
participant assumption for the use of the Brand.
-- The discount rate assumed is equivalent to the WACC for the
Brand.
-- The growth rates and attrition rates were based on market
analysis.
The key assumptions used by management to determine the value in
use of the IP Technology within Eyecon are as follows:
-- The with and without model, taking into account the time and
additional expenses required to recreate the IP Technology and the
level of lost cash flows in the period.
-- The discount rate assumed is equivalent to the WACC for the
IP Technology.
-- The growth rates and attrition rates were based on market
analysis.
Management has not disclosed Eyecon contribution to the Group
profit since the acquisition nor has the impact the acquisition
would have had on the Group's revenue and profits if it had
occurred on 1 January 2017 been disclosed, because the amounts are
not material.
B. Other acquisitions
During the period, the Group acquired a further 45% of the
shares of a games studio in steps for a consideration of EUR1.2m,
with previous consideration of EUR0.8 million paid to acquire the
previously recognized 35% interest in associate. A fair value
movement was required on conversion to a subsidiary of EUR0.1m.
Details of the fair value of identifiable assets and liabilities
acquired, purchase consideration and goodwill, are as follows:
Fair value on acquisition
EUR000
----------------------------------- --------------------------
Net identified assets 525
Goodwill 1,593
Non-controlling interest (105)
Total fair value of consideration 2,013
--------------------------
EUR'000
------------------------
Cash consideration 1,050
Deferred consideration 144
Conversion of previously recognized associate 819
Fair value of consideration 2,013
------------------------
Cash purchased 249
Net cash payable 2,262
------------------------
Adjustments to fair value include the following:
Amount Amortisation
EUR'000 %
--------------------------------- ----------------- -------------
IP Technology 640 25-50
The main factor leading to the recognition of goodwill is the
frontend framework and its games integration, unique workforce and
future revenue and cost synergies. In accordance with IAS36, the
Group will regularly monitor the carrying value of its interest in
these acquisitions.
The key assumptions used by management to determine the value in
use of the IP Technology within these acquisitions are as
follows:
-- The income approach, in particular, the MPEEM method and the
with and without models.
-- The discount rate assumed is equivalent to the WACC for the
IP Technology.
-- The growth rates and attrition rates were based on market
analysis.
Management has not disclosed other acquisitions' contribution to
the Group profit since these acquisitions nor has the impact the
acquisition would have had on the Group's revenue and profits if it
had occurred on 1 January 2017 been disclosed, because the amounts
are not material.
NOTE 11 - ACQUISITIONS IN PREVIOUS PERIOD
A. Acquisition of Quickspin AB
On 24 May 2016, the Group acquired 100% of the shares of
Quickspin AB ("Quickspin"). Quickspin is a Swedish games studio
that develops and supplies high quality video slots to operators,
both in online real money gambling as well as in the social gaming
market.
The Group paid total cash consideration of EUR24.5 million (SEK
228.4 million) and additional consideration capped at EUR26.0
million (SEK 242.9 million) in cash will be payable subject to
achieving target EBITDA.
B. Other acquisitions
During the prior period, the Group acquired the shares of
various companies for a total consideration of EUR12.3 million. One
of these subsidiaries was acquired in steps, with previous
consideration of EUR2.4 million paid to acquire the previously
recognized associate. There was no fair value movement required on
conversion to a subsidiary.
NOTE 12 - RELATED PARTIES AND SHAREHOLDERS
Parties are considered to be related if one party has the
ability to control the other party or exercise significant
influence over the other party's making of financial or operational
decisions, or if both parties are controlled by the same third
party. Also, a party is considered to be related if a member of the
key management personnel has the ability to control the other
party.
On 27 June 2017, Brickington Trading Limited ("Brickington")
decreased its holding to 6.3% (30 June 2016: 33.61%) of Playtech
plc shares and the relationship agreement terminated. From this
date Brickington no longer meets the definition of a related party.
Accordingly, the following companies are not accounted as related
parties from the same date:
Skywind Holdings Limited ("Skywind"), SafeCharge Limited,
Crossrider Technologies Ltd ("Crossrider"), Royalfield Limited,
Easydock Investments Ltd. (Easydock), Selfmade Holdings, Glispa
GmbH ("Glispa"), Anise Development Limited and Anise Residential
Limited (together "Anise").
Mr Teddy Sagi, the ultimate beneficiary of Brickington, provides
advisory services to the Group for a total annual consideration of
EUR1.
The joint ventures and the structured agreements are associates
of the Group by virtue of the Group's significant influence over
those arrangements.
The following transactions arose with related parties:
Six months ended Six months ended
30 June 2017 30 June 2016
----------------- -----------------
EUR'000 EUR'000
----------------------------------------- ----------------- -----------------
Revenue including income from associate
Skywind 720 987
Structured agreements 8,970 22,992
----------------- -----------------
Share of profit in joint ventures 263 81
Share of profit/(loss) in associates 389 (1,720)
----------------- -----------------
Operating expenses
SafeCharge Limited 3,612 3,121
Crossrider 1,314 1,308
Structured agreements 6 625
Anise 518 539
Skywind, net of capitalised cost 334 132
Glispa 165 15
Selfmade Holdings - 10
Royalfield Limited - 4
Easydock - 1
----------------- -----------------
Interest income
Structured agreements 49 -
----------------- -----------------
NOTE 13 - CONTINGENT LIABILITIES
As part of the Board's ongoing regulatory compliance process,
the Board continues to monitor legal and regulatory developments
and their potential impact on the Group.
Management is not aware of any contingencies that may have a
significant impact on the financial position of the Group.
Note 14 - Post balance sheet events
Acquisition of ACM Group Limited assets
On 23 August 2017, the Group agreed to acquire technology,
intellectual property and certain customer assets (together 'the
acquisition') from ACM Group Limited. Consideration for the
acquisition comprises an initial up-front payment of $5 million in
cash, and additional contingent consideration of up to $145 million
is payable in cash based on 5.2 x the 2019 EBITDA. As of the
approval date of the financial statements by the Board and due to
the proximity to the reporting date, the Group had not completed
the valuation of the fair value of the intangible assets and
liabilities acquired and accordingly these disclosures are not
provided in the financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR PGUMURUPMPWW
(END) Dow Jones Newswires
August 24, 2017 02:00 ET (06:00 GMT)
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