TIDMPTEC
RNS Number : 2777A
Playtech PLC
22 September 2022
Playtech plc
("Playtech", the "Company", or the "Group")
Results for the six months ended 30 June 2022
Excellent H1 performance, momentum continuing into H2
Playtech (LSE: PTEC) today announces its results for the six
months ended 30 June 2022.
Financial summary (continuing operations)(1)
H1 2022 H1 2021 Change Change (const.
(reported) currency)(4)
----------------------------- ----------- ----------- ------------ ---------------
Revenue EUR792.3m EUR457.4m 73% 71%
Adjusted EBITDA(2) EUR203.8m EUR124.1m 64% 60%
Adjusted post-tax profit(3) EUR94.3m EUR54.6m 73% 41%
Reported post-tax profit(3) EUR71.4m EUR401.9m -82% -85%
17.4
Adjusted diluted EPS 30.2 EURc EURc 74% 42%
128.0
Reported diluted EPS 22.9 EURc EURc -82% -85%
Summary
-- Excellent H1 2022 performance driven by regulated B2B markets, and Snaitech.
-- Financial performance ahead of previous expectations with
Adjusted EBITDA of EUR203.8 million, up 64% vs. H1 2021.
-- Regulated markets powered B2B performance with Americas
growing 50% (+37% cc) and Europe ex-UK increasing 39% (+39% cc),
driving impressive B2B revenue growth of 17% (+13% cc).
-- Strong B2C performance driven by Snaitech's online business
continuing to deliver an excellent performance despite the
reopening of retail sites, which together led to Adjusted EBITDA
growth of 143%.
-- Reported profit of EUR71.4 million compared to EUR401.9
million in H1 2021, which included a significant gain realised on
options embedded in the Company's agreements in the Americas.
-- Sale of Finalto was completed in July 2022; RCF now fully repaid.
-- Strong cash generation in H1; refinancing process underway for RCF and October 2023 bond.
-- New medium term Adjusted EBITDA target for Snaitech of EUR300 - 350 million.
-- In spite of the broader macroeconomic and geopolitical
uncertainty, the Group is well placed to continue to deliver
against its stated strategy.
Divisional highlights
B2B Gambling
-- Very strong growth within regulated markets helped to deliver
B2B revenue of EUR312.0 million in the first half of the year,
growing 17% (13% at constant currency).
-- B2B Adjusted EBITDA was EUR77.2 million compared to EUR72.1 million in H1 2021.
-- Within regulated markets, Europe ex-UK and the Americas were the standout performers.
-- Europe ex-UK grew 39% at constant currency to EUR92.2 million
driven primarily by an impressive start at Holland Casino within
the newly regulated Netherlands market.
-- Americas continued to perform well with revenues of EUR69.8
million and 37% constant currency revenue growth.
-- Caliente in Mexico remains a key driver for strong revenue
growth in the Americas; soon to be regulated Brazil market offers
significant opportunity going forward.
-- Significant progress made executing the US strategy:
- Launched the IMS platform with Parx Casino in Pennsylvania,
involving a complex migration off a competitor's platform
- Signed several significant new deals including Golden Nugget,
WynnBET, Resorts and 888 which are expected to go live in the
coming months
- Licence granted in Pennsylvania. Now licenced in 6 states with
further applications progressing.
-- Launched with NorthStar in recently regulated Ontario, Canada, along with Bet365 and 888.
-- Live Casino continued to see good revenue growth;
strategically important facility opened in Peru in H1 that will
help continue to drive future growth in the region.
-- Continued diversification of B2B business with over 50
further brands added to SaaS offering, bringing total to over
300.
-- Asia revenue declined 22% (26% at constant currency) due to
competitive pressures and the impact of lockdowns in parts of the
region in the period, while the Company incurred a bad debt
provision of EUR15.4 million in H1 due to collection delays.
B2C Gambling
-- Total B2C revenue (including Snaitech and white-label) of
EUR487.3 million (H1 2021: EUR196.6 million) and Adjusted EBITDA of
EUR126.6 million (H1 2021: EUR52.0 million).
-- Snaitech Adjusted EBITDA grew 154% to EUR131.7 million (H1
2021: EUR51.8 million) driven by retail sites reopening at the end
of June 2021 post-pandemic.
-- Snaitech's online business was ahead of expectations with
only modest revenue declines of 5% versus H1 2021, despite the
reopening of retail sites. Adjusted EBITDA margins remained high at
57% in H1 2022 versus 59% in H1 2021.
-- Snaitech maintained its number one position by brand across
retail and online sports betting in Italy in the half.
-- Snaitech's retail betting licences in Italy have been
extended for two years until June 2024 at a total cost of EUR23.0
million, while Gaming Machines rights have been extended at no cost
until June 2023.
-- HAPPYBET, now integrated into Snaitech's operations, remained
loss-making but strategic and operational measures have been
taken.
-- White Label (including Sun Bingo) saw 3% constant currency
revenue growth to EUR31.7 million while Adjusted EBITDA fell to
EUR0.1 million. Reported EBITDA includes a EUR10.4 million payment
to terminate an onerous contract. The termination of the agreement
will improve the profitability of the business going forward.
Corporate Activity
-- Sale of Finalto was completed in July 2022, marking a
significant step in Playtech's stated strategic objective to
simplify the Group.
-- Given capital market conditions, the SPAC transaction in
relation to Caliente in the US is no longer being pursued in the
same manner. Alternative approaches to facilitate Caliente entering
the US market are being evaluated.
Current trading and outlook
-- Excellent performance from H1 has continued into H2 2022
albeit with normal seasonal trends.
-- Managing impact from Ukraine invasion, however risk of disruption as war continues.
-- The macroeconomic outlook remains uncertain given geopolitical and inflationary pressures.
-- Given the strong performance so far in 2022 and momentum
within the business, the Board remains confident of Playtech's
future prospects.
Mor Weizer, CEO, commented:
"I am delighted with the positive start that the Group has made
in the first half of 2022, delivering a financial performance ahead
of our expectations with significant strategic and operational
progress made against our objectives.
"Our success in the period was powered by our B2B business in
the Americas and Europe, alongside yet another excellent
contribution from Snaitech. We continue to make great strides in
executing our US strategy, launching with Parx Casino in
Pennsylvania, signing several exciting deals with leading Global
and US brands, and progressing additional licence applications. The
Americas remain one of the Group's biggest growth drivers, with
continued strong revenue growth in Mexico as well as Brazil
complemented by new launches and partnerships in the US, Canada and
Peru.
"The sale of Finalto was completed in July 2022, representing a
significant step in our stated strategy to simplify the Group and
focus our efforts on the high-growth B2B and B2C gambling markets.
We remain well placed to capitalise on the exciting market
opportunities ahead, driving sustainable growth for the benefit of
all our stakeholders.
"We have navigated significant disruption and uncertainty in the
period due to well-reported geopolitical tensions and inflationary
pressures. For this, I would like to extend my sincere thanks to
all of my Playtech colleagues for their hard work in the face of
adversity. Throughout 2022, we have gone to great lengths to
support our Ukrainian colleagues and their families through the
tragic events which continue to unfold in the country. We remain in
close contact with our employees in Ukraine and will continue to do
everything we can to ensure their safety and that of their
families.
"The macroeconomic outlook remains uncertain given geopolitical
tensions and inflationary pressures, however we have seen our
excellent performance in H1 continue into H2 and expect to see
continued strong results from both our B2B and B2C businesses. As
such, we are confident about Playtech's prospects for the remainder
of 2022 and beyond."
- Ends -
For further information contact:
+44 (0) 20 3805
Playtech plc 4822
Mor Weizer, Chief Executive Officer
Andrew Smith, Chief Financial Officer
c/o Headland
Chris McGinnis, Deputy CFO and Director of +44 (0) 20 3805
Investor Relations 4822
Headland (PR adviser to Playtech) +44 (0) 20 3805
Lucy Legh, Stephen Malthouse, Jack Gault 4822
----------------------------
(1) Totals in tables throughout this statement may not exactly
equal the components of the total due to rounding.
(2) Adjusted numbers relate to certain non-cash and one-off
items. The Board of Directors believes that the adjusted results
represent more closely the consistent trading performance of the
business. A full reconciliation between the actual and adjusted
results is provided in Note 9 of the financial statements.
(3) Adjusted Profit refers to post-tax Profit from continuing
operations attributable to the owners of the Company after the
relevant adjustments as detailed above. Reported Profit refers to
post-tax Profit from continuing operations attributable to the
owners of the Company before adjustments.
(4) Constant currency numbers exclude the exchange rate impact
on the results by using previous period relevant exchange rate and
exclude the total cost/income of exchange rate differences
recognised in the period.
Conference call and presentation
A presentation on the earnings will be held today at 9.00 am via
a live audio webcast accessible using this link:
https://www.investis-live.com/playtech/632973c679e5831200053b17/wppa
Analysts and investors can also dial into the call using the
following details:
United Kingdom: 0800 640 6441
USA: 1 855 9796 654
USA (Local): 1 646 664 1960
All other locations: +44 20 3936 2999
Access code: 499605
There will also be a replay available after the live conference
call at:
UK: 020 3936 3001
USA (Local): 1 845 709 8569
All other locations: +44 20 3936 3001
Access Code: 822402
A Snaitech Investor Event will be held today at 10.30 am via a
live audio webcast accessible using this link:
https://www.investis-live.com/playtech/632976635f6f080c00140f60/wppb
Analysts and investors can also dial into the call using the
following details:
United Kingdom: 0800 640 6441
USA: 1 855 9796 654
USA (Local): 1 646 664 1960
All other locations: +44 20 3936 2999
Access code: 004897
There will also be a replay available after the live conference
call at:
UK: 020 3936 3001
USA (Local): 1 845 709 8569
All other locations: +44 20 3936 3001
Access Code: 207546
The presentation slides will be available today from 8.30 am at:
http://www.investors.playtech.com/results-centre.aspx
Forward looking statements
This announcement includes statements that are, or may be deemed
to be, "forward-looking statements". By their nature,
forward-looking statements involve risk and uncertainty since they
relate to future events and circumstances. Actual results may, and
often do, differ materially from any forward-looking
statements.
Any forward-looking statements in this announcement reflect
Playtech's view with respect to future events as at the date of
this announcement. Save as required by law or by the Listing Rules
of the UK Listing Authority, Playtech undertakes no obligation to
publicly revise any forward-looking statements in this announcement
following any change in its expectations or to reflect events or
circumstances after the date of this announcement.
About Playtech
Founded in 1999 and premium listed on the Main Market of the
London Stock Exchange, Playtech is a technology leader in the
gambling and financial trading industries with over 6,700 employees
across 26 countries.
Playtech is the gambling industry's leading technology company
delivering business intelligence driven gambling software,
services, content and platform technology across the industry's
most popular product verticals, including, casino, live casino,
sports betting, virtual sports, bingo and poker. It is the pioneer
of omni-channel gambling technology through its integrated platform
technology, Playtech ONE. Playtech ONE delivers data-driven
marketing expertise, single wallet functionality, CRM and
responsible gambling solutions across one single platform across
product verticals and across retail and online.
Playtech partners with and invests in the leading brands in
regulated and newly regulated markets to deliver its data-driven
gambling technology across the retail and online value chain.
Playtech provides its technology on a B2B basis to the industry's
leading retail and online operators, land-based casino groups and
government sponsored entities such as lotteries. Playtech directly
owns and operates Snai, the leading sports betting and gaming brand
across online and retail in Italy.
Chief Executive Officer's Review
Overview
Playtech continued to make strong progress on its strategic
priorities in the first half of 2022 across both the B2B and B2C
businesses, leaving the Group well-positioned to capture the
exciting market opportunity ahead.
The strategic focus of Playtech's B2B Gambling business remains
on opportunities in regulated or soon to be regulated markets.
There is a particular emphasis on high-growth markets including the
US, Latin America and certain parts of Europe, and these regions
helped the B2B segment to deliver revenue growth of 17% (+13% on a
constant currency basis) in H1 2022. B2B Adjusted EBITDA was
EUR77.2 million compared to EUR72.1 million in H1 2021.
In the US, Playtech continued to build momentum and is well
placed to take advantage of the significant long-term opportunity
across its full product suite. During the period, Playtech expanded
its footprint with Parx, launching its IMS platform in
Pennsylvania. This involved a complex migration off the platform of
one of the Company's major competitors, work that can be leveraged
in future deals. Several new deals were also signed in the period
in the US. Golden Nugget was signed for Casino and Live in New
Jersey and Michigan, WynnBET penned a multi-state deal to launch
Live and Casino, while Resorts and 888 have signed up for Casino
and Live in New Jersey.
In Latin America, Playtech continued to see excellent growth
from Caliente which continues to outperform. Wplay also performed
well in the period and is ideally positioned to capitalise on the
exciting opportunity in Colombia in the years ahead while the
Company is well positioned in the exciting, soon to be regulated
Brazil market. Playtech opened a new Live Casino facility in Peru
as it continues to extend its presence across the region. Initial
demand has been strong, which bodes well for the future.
In Europe ex-UK, B2B revenue growth of 39% at constant currency
was driven by a strong performance in several countries, most
notably the newly regulated Netherlands market. Having signed a
strategic agreement with Playtech across its full suite of
products, and launched in October 2021, Holland Casino is off to an
impressive start. It was the biggest driver of revenue growth in
Europe in the first half of 2022, illustrating the significant
growth opportunities of newly regulated markets. To continue
diversifying its B2B division, Playtech progressed discussions on
further new strategic agreements and joint ventures, while also
adding over 50 new brands to its SaaS offering. Playtech has now
added over 300 new brands since launching the SaaS offering back in
2019.
Snaitech revenue saw significant growth in H1 2022, up 182%
compared to the same period in the prior year, while Adjusted
EBITDA grew 154% versus H1 2021. This strong performance was
primarily driven by the reopening of retail sites in Italy, which
occurred at the end of June 2021 and have since remained open. The
online segment has maintained its strong performance, indicating
that the addressable market has expanded post-pandemic. Snai
maintained its number one market share position (retail and online
combined measured by GGR) across Italian sports betting brands in
H1 2022, demonstrating its consistent operational and brand
strength, whilst also being the fastest growing player in Italy in
the online sector when measured by GGR. Finally, retail betting
licences in Italy have been extended for two years until June 2024
at a total cost of EUR23 million, while Gaming Machines rights have
been extended at no cost until June 2023.
As has been previously disclosed, Playtech had been exploring a
possible transaction with Caliente which would allow Caliplay to
penetrate the US market with Caliplay being acquired by a US listed
special purpose acquisition company ("SPAC"). Given the
deteriorating capital market conditions, the SPAC transaction in
relation to Caliente in the US is no longer being pursued in the
same manner. However, the Company continues to explore alternative
opportunities with Caliplay management to build a standalone US
gaming business under the Caliente brand, focused on the Hispanic
community in the US.
As part of the Group's simplification strategy, Playtech
completed the sale of Finalto in July 2022, allowing it to focus on
the attractive markets of B2B Gambling and B2C Gambling.
Playtech's employees are at the heart of its success and have
remained cohesive and collaborative despite the significant
corporate activity during the period. The hard work and commitment
of Playtech's people has contributed significantly to this positive
trading performance.
Ukraine crisis
Playtech has over 700 employees based in Ukraine. In response to
the crisis, Playtech built an organisational structure to support
the employees including 24/7 transportation services, accommodation
support for those displaced, emergency supplies and shelter,
logistical assistance, a 24/7 communication hotline as well as
mental health and wellbeing support. Hundreds of volunteers across
the company offered their help, including by keeping in continuous
contact with their colleagues. The Group continues to support its
employees, ensuring their safety where possible via the HR and Site
Operations team, while financial support has been provided for
those forced to leave their homes in Ukraine.
Playtech has robust business continuity plans which were
activated immediately to minimise disruption to the business. The
B2B business has employees from a variety of functions based in
Ukraine but none of those functions are wholly run from the
country, while any critical infrastructure in Ukraine was relocated
prior to the crisis as part of our risk management process. In
addition, a new development site in Warsaw, Poland is due to be
opened that will act as an extension of the Kyiv site to ensure
business continuity.
B2B Gambling
Core B2B Gambling
Regulated markets
The strategic focus of Playtech's B2B Gambling business
continues to be on opportunities in regulated or soon to be
regulated markets, with a focus on high-growth markets such as the
US, Latin America and certain parts of Europe.
Regulated markets saw revenue growth of 31% (27% on constant
currency basis) compared to H1 2021, driven by continued strong
revenue growth from Caliente in Mexico, an excellent start from
Holland Casino in the Netherlands as well as strong growth in other
regulated markets such as Ireland, UK, Poland and Spain.
The Americas
Revenue from the Americas continued to grow impressively, with
H1 2022 revenue up 50% (37% at constant currency) compared to H1
2021, powered by outstanding growth from Caliente as well as
increasing contributions from other customers.
In the US, Playtech has shown excellent progress as it looks to
capitalise on an increasingly favourable regulatory environment.
During the period, Playtech expanded its footprint with Parx,
launching its IMS platform in Pennsylvania. This involved a complex
migration off the platform of one of the Company's major
competitors, work that can be leveraged in future deals. In
addition, Playtech launched its IMS, Casino and POP products in New
Jersey and now has a presence with Parx in Michigan, Pennsylvania
and New Jersey. Further product launches in additional states with
Parx are expected going forward.
Several new deals were also signed in the period in the US.
Golden Nugget (recently acquired by Draft Kings) has signed up for
Casino and Live in New Jersey and Michigan. Rush Street Interactive
signed a multi-state deal for Casino. WynnBET has penned a
multi-state deal to launch Casino and Live, while Resorts and 888
have signed up for Casino and Live in New Jersey.
Solid progress was also made in product launches, particularly
in Canada where recent legislation saw Ontario become the first
province in Canada to regulate online gambling. NorthStar (backed
by TorStar) launched the IMS platform, Casino and Live products in
Ontario, while Bet365 and 888 all went live in the province for
Casino and Live on the first day the market became regulated.
With physical expansion of the Company's infrastructure being a
key part of its strategy, further expansion continues to progress
in New Jersey and another Live facility is under construction in
Pennsylvania. The Company has significantly expanded its sales,
operational and back-office teams in the US in order to accelerate
its presence in the region.
The regulatory landscape in the US is ever progressing. Since
the repeal of PASPA in 2018, numerous states have approved
legislation to legalise sports betting. Many of these markets have
already launched in both online and retail channels, with others
expected to launch soon. In early 2022, Playtech received a license
for Pennsylvania. Legislation authorising mobile sports betting has
been sent to the governor of Maine for her approval, while
legislation allowing for online betting recently passed Missouri's
House of Representatives and is awaiting a vote in the Senate.
Online casino, which was not subject to PASPA, is allowed at the
discretion of individual states. In 2021, The Mohegan Tribe and the
Mashantucket Pequot Tribe of Connecticut received federal approval
to operate online casino games, while Michigan launched in 2021,
joining New Jersey, Pennsylvania, Delaware, and West Virginia,
while Nevada allows online poker only. No new states have
authorised Online casino in 2022 thus far, although legislation to
regulate Online casino is working its way through New York's
legislature.
In Latin America, Playtech has continued to see excellent growth
from Caliente which continues to outperform. Wplay also saw very
strong growth in H1 2022 and is well-positioned to continue its
growth and capitalise on the exciting opportunity in Colombia in
the years ahead. During the year, Playtech continued to execute on
other strategic agreements in Latin America.
Playtech opened a new Live Casino facility in Peru as it
continues to extend its presence across the region. Coupled with
the recent news that Peru has enacted legislation allowing online
gaming and sports betting, and retail sports betting, Playtech is
well positioned to serve its existing clients in Latin America and
take advantage of continued favourable regulation and strong growth
expected in the region in the years ahead. Several customers, such
as Wplay and bet365, have launched tables in the new Live facility
with demand strong so far.
Elsewhere in Latin America, sports betting legislation has been
passed in Brazil, which is expected to be implemented in the near
future. Brazil is anticipated to be a significant market given the
large population and love of sports. The Company has an exciting
strategic agreement in place with Galerabet, with economics similar
to its other arrangements in Latin America, in anticipation of
regulation in this market.
Europe
In Europe ex-UK, B2B revenue growth of 39% (39% at constant
currency) was driven by strong growth in several countries
including Netherlands, Ireland, Poland and Spain.
Regulation in Europe continues to evolve and regulated markets
in the region represent significant growth opportunities. During
2021, Playtech signed a new, expanded long-term strategic software
and services agreement with Holland Casino, the state-owned
land-based casino operator in the Netherlands, a top-10 market in
Europe that regulated on 1 October 2021. Playtech now supplies
Holland Casino with a full turnkey multi-channel technology
package, as well as certain ancillary services. The agreement
includes the IMS platform, Sports betting, Online Casino, Live
Casino, Poker and Bingo products, plus selected operational and
marketing services. Having launched in October 2021, Holland Casino
is off to an impressive start given its first mover advantage and
was the biggest driver of revenue growth in Europe in the first
half of 2022, illustrating the significant growth opportunities of
newly regulated markets. This agreement, as well as the launch of
Casino and Poker with Bet365 in the Netherlands in early 2022,
means Playtech is well positioned to capitalise on the newly
regulated Netherlands market.
After many years of uncertainty for online gambling in Germany,
the Interstate Treaty became effective on 1 July 2021 and now paves
the way for licence holders to offer online slots, online poker and
sports betting. The main impacts of the Treaty included switching
off casino table games (Blackjack and Roulette) until the
individual Länder chooses to issue licences under the Treaty,
deposit limits of EUR1,000 per month, EUR1 maximum stakes per spin
on online slots, 5-second minimum duration of slot spins and
certain advertising restrictions, while operators could begin
applying for licenses. In H1 2022, Playtech generated a minimal
amount of revenue from Germany, down from EUR8 million in H1 2021 .
We were able to partially mitigate this through EUR5 million of
cost savings.
Elsewhere in Europe, the Company expanded its Live Casino
facility in Romania, adding another floor, demonstrating the
significant physical expansion of its Live Casino infrastructure
across Europe, while the Live Casino business launched with, among
others, Betsson in Italy and Pokerstars in Greece.
Playtech's Casino business saw several launches with existing
customers in expanded territories such as Pokerstars and Betsson in
Greece, 888 in Italy and Stoiximan in The Czech Republic,
demonstrating the scalability of Playtech's business model.
UK
UK revenues saw growth of 7% (4% on a constant currency basis)
compared to H1 2021, where the positive impact of the reopening of
retail stores from mid-April 2021 was partially offset by a
slowdown in the online business caused by the uncertain regulatory
climate.
Retail closures, which were in place for the majority of H1
2021, significantly impacted Playtech's B2B sports business in the
comparative period which is heavily weighted towards retail via its
self-service betting terminals (SSBTs). Activity levels continued
to gradually improve following reopening as various lockdown
restrictions were eased and the momentum continued into H2 2021 and
H1 2022.
The UK Government is currently undertaking a review into
existing gambling laws in the UK. In response, several operators
are taking pre-emptive measures such as stake limits and
affordability checks in an attempt to show regulators that the
industry is able to self-regulate. In addition, there is likely to
have been an impact on the online business as customers, driven to
use online channels due to retail site closures due to COVID-19,
returned to retail outlets as they reopened.
In December 2020, the UK Government announced a call for
evidence to review the existing gambling laws in the UK. Since the
initial 16-week call for evidence which ended on 31 March 2021, the
Government has been assessing the evidence presented, alongside
other data, with the aim of setting out conclusions and any
proposals for reform in a White Paper in 2022. Playtech submitted
data and evidence relating to the call and will support this
wherever possible going forward. The White Paper was due to be
published in July 2022, but media reports suggest it has been
delayed until the Autumn given the recent change in Prime
Minister.
The UK remains a key regulated market for Playtech given its
longstanding relationships with major operators. Playtech has been
actively involved in discussions around safer game design and
online advertising and, through the industry trade body the Betting
and Gaming Council (BGC), is co-leading a working group on the
subject. Playtech expects that its commitment to safer gambling and
its use of technology and data to support its licensees in this
area will see it remain the go-to platform for regulated markets
including the UK.
Other unregulated (excl. Asia)
The Group's strategy to focus on both regulated and regulating
markets includes unregulated markets which are likely to regulate
in the future. Some of these are classified in the 'Unregulated
excl. Asia' line within B2B Gambling. These unregulated markets
(excluding Asia) were flat year on year at constant currency versus
H1 2021, driven by markets such as Brazil and Canada, offset in
part by a decline in Germany which saw regulatory changes during
the year.
Following the progress in the US, regulation advanced in Canada
as parliament approved an amendment to Canadian law to allow
single-game sports betting at the discretion of individual
provinces. In August 2021, seven provinces including the country's
largest province, Ontario, began allowing bets to be placed on
single-game sporting events. In a further milestone, as of 4 April
2022, Ontario became the first fully regulated online gambling
market in Canada with iGaming launched.
As regulation progresses across Canada, it will continue to add
to the size of the North America market opportunity. In line with
the Company's strategy to target newly regulating markets, Playtech
signed a strategic agreement with NorthStar Gaming, which saw the
Group launch its IMS platform, Casino, Live Casino, Poker and Bingo
technology in Canada in H1 2022.
Unregulated Asia
Unregulated Asia saw revenue decline 22% compared to H1 2021.
The decline was partly due to the impact of further lockdowns in
China and Malaysia during the period. In addition, the Company's
largest distributor in the region lost market share in the period
while the new distributor the Company added in 2020 continued to
grow its business, albeit from a much smaller base. Reflecting the
actions taken over recent periods, the Asia business is now more
diversified in terms of both distributors as well as geographically
compared to recent years. The Company incurred a bad debt provision
of EUR15.4 million in H1 following continued collection delays in
the region.
B2B - Product Developments
In order to diversify its B2B Gambling division, the Group
continued to add customers depending on commercial suitability and
market dynamics, including attracting new customers in both
regulated and regulating markets, progressing discussions on new
strategic agreements and joint ventures, as well as adding new
brands using its SaaS offering. Playtech has now added over 300 new
brands since the launch of its SaaS model in 2019. Over 100 of
those new brands were added during 2021, including 888, Kindred and
Novibet.
In 2021, Playtech signed the exclusive rights to hit TV show,
The Walking Dead, for Online Casino. In order to continue to take
advantage of this agreement, Playtech launched a new title The
Walking Dead(TM) 2 in August 2022 and is planning to launch a
second title by the end of the year, both of which are expected to
engage and retain a large audience.
The Live Casino team launched Safari Riches Live, a live casino
slot game created exclusively for 888, a milestone as it represents
the first time a slot brand developed by 888 has been transformed
into a bespoke live casino game, while Live has also signed up the
exclusive global rights to Jumanji including the US, and plans to
launch a game next year.
B2C Gambling
Playtech's B2C business includes Snaitech (including HAPPYBET),
and the White Label operations which is primarily Sun Bingo.
Overall B2C revenues grew 147% compared to H1 2021 at constant
currency while Adjusted EBITDA grew 143%.
Snaitech
Italy
Snaitech revenue saw significant growth in H1 2022, up 182%
compared to the same period in the prior year, while Adjusted
EBITDA grew 154% versus H1 2021. This strong performance was
primarily driven by the reopening of retail sites in Italy, which
occurred at the end of June 2021 and have since remained open.
Retail sales grew significantly in the period due to the
reopening of retail sites, and are now close to returning to
pre-pandemic levels, an impressive performance given a small
proportion of franchise retail shops closed permanently, some
customers permanently shifted to the online channel and the
introduction in January 2020 of the requirement of ID cards to
enter retail shops. At the EBITDA level, the retail segment
returned to profit with EBITDA margins surpassing pre-pandemic
levels.
The online business remained broadly stable with revenue
declining only 5% in H1 2022 versus H1 2021 despite retail shops
being reopened during H1 2022. This suggests that the growth of the
online business during the pandemic was not just driven by the
shift from retail to online, but also by new customers being
onboarded via the online channel. Adjusted EBITDA margins remained
high at 57% in H1 2022 versus 59% in H1 2021.
Following the regulatory approval to move the racetrack to the
San Siro racecourse, Snaitech has begun the formal sales process of
La Maura Racetrack in Italy, first disclosed at the FY2021 results.
EUR1 million was received on signing in July 2021, with the
remaining EUR19 million expected to be received in instalments in
2023.
Furthermore, Snai maintained its number one market share
position (retail and online combined measured by GGR) across
Italian sports betting brands in H1 2022, demonstrating its
consistent operational and brand strength, while also being the
fastest growing player in Italy in the online sector when measured
by GGR.
Finally, retail betting licenses in Italy have been extended for
two years until June 2024 at a total cost of EUR23 million, while
Gaming Machines rights have been extended at no cost until June
2023.
Germany & Austria
HAPPYBET (now reported as part of Snaitech) revenues were up 26%
in H1 22 compared to H1 2021, driven by the reopening of retail
sites while the business remains loss making at the EBITDA
level.
Snaitech management have recently taken over the operations of
HAPPYBET and have already begun to implement a plan to improve the
business's performance. The retail store footprint has been
rationalised, optimising for an accelerated shift to online due to
the pandemic.
During the retail closures due to governmental lockdowns,
management upgraded the technology infrastructure in this business
with a view to both drive retail performance and improve online
performance in the future. The Group is confident of its prospects
going forward.
As discussed in the B2B section above, Germany's Interstate
Treaty regulated online slots, online poker and sports betting from
1 July 2021. Playtech has been awarded one of the few available
online sports betting licenses in Germany through its B2C division
HAPPYBET, and as a result, launched an online offering.
White Label (including Sun Bingo)
White Label (including Sun Bingo) saw 3% constant currency
revenue growth to EUR31.7 million (H1 2021: EUR30.2 million) while
Adjusted EBITDA fell to EUR0.1 million from EUR5.4 million in H1
2021. Reported EBITDA includes a EUR10.4 million payment to
terminate an onerous contract with a former service provider. The
termination of the agreement will improve the profitability of the
business going forward.
Safer gambling and sustainability
During the first half of 2022, Playtech continued to make
progress with delivering its sustainability strategy and
commitments.
ESG Governance and Engagement
Playtech officially formed its Sustainability and Public Policy
Board Committee in 2021, with the first meeting in November 2021.
Since then, this Committee has carried out its commitment to
Playtech's Sustainable Success strategy, ensuring the right
measures are in place to implement ambitious and achievable targets
and actions to meet the Company's overall Sustainable Success
goals. This Committee has met five times since the start of 2022,
to discuss progress made on diversity and inclusion, climate
change, procurement, human rights, and linking ESG performance to
remuneration. The Committee oversees the Company's key
non-financial commitments, strategy, targets, and reporting from
Board level. Following the four successful panel sessions from
2021, which allowed Playtech to draw on a wide range of knowledge,
insights, and experiences, the Company has decided to continue its
engagement with external topic experts in 2022.
Enhancing Playtech Protect and Safer Gambling Standards
Playtech continued to grow its Playtech Protect offering across
research, partnerships, and innovation and expanded its support for
its licensees. Playtech published research papers on stake limits,
gambling digital tools, and tools and strategies used by layers to
manage their gambling.
Carbon Reduction
Playtech submitted its commitment letter to the Science Based
Target Initiative (SBTi) to set both near-term and net zero
targets. The Company continues to strengthen its data disclosure
and reporting, as well as approach to carbon reduction through the
environmental working group in order to identify carbon reduction
opportunities and engaging suppliers to reduce its supply chain
emissions.
Diverse and Inclusive Culture
At the end of 2021, Playtech has set a target to strengthen
female representation in its leadership roles, including executive
and senior management by 2025. The Company's focus remains on
accelerating progress on gender diversity in leadership levels of
the organisation.
Employee Welfare Fund (Ukraine appeal)
Playtech has set up an Employee Welfare Fund to provide long
term assistance for Playtech employees and their families. The
Welfare Fund will provide employees with the opportunity to
contribute funds that will go directly to helping the relocation
and long-term welfare needs for Ukrainian employees impacted by the
war.
Corporate activity
Completion of Finalto sale
In July 2022, Playtech completed the sale of Finalto to Gopher
Investments for an enterprise value of US$250 million, although
this amount is expected to be lowered by US$15-20 million based on
the performance of Finalto from 1 January 2021 to completion.
Completion of the Transaction has also triggered payment of a break
fee of US$8.8 million which Playtech is required to pay to the
Consortium that had previously agreed to acquire Finalto.
The completion of the Transaction is a significant step in
Playtech's stated strategy to simplify the group and to focus on
its technology led offering as a pureplay business in the high
growth B2B and B2C gambling markets. The sale proceeds were partly
used to repay the outstanding balance on its revolving credit
facility with the remainder of proceeds used for general corporate
purposes.
Caliente
As has been previously disclosed, Playtech has been exploring a
possible transaction regarding an agreement with Caliente which
would allow Caliplay to penetrate the US market with Caliplay being
acquired by a US listed special purpose acquisition company
("SPAC"). Capital market conditions have deteriorated significantly
since the transaction was initially contemplated and, accordingly,
this transaction is no longer being pursued in the same manner.
However, the Company continues to explore alternative
opportunities with Caliplay management to build a standalone US
gaming business under the Caliente brand focused on the Hispanic
community in the US. Both parties also continue to have discussions
with the SPAC and its associates regarding this alternative
opportunity.
Chief Financial Officer's Review(1)
Overview
Group performance
Overall, Playtech had a very strong H1 2022, with Adjusted
EBITDA of EUR203.8 million (H1 2021: EUR124.1 million), an increase
of 64% (60% on a constant currency basis) compared to H1 2021.
Similarly, reported EBITDA increased by EUR68.8 million to EUR178.6
million (H1 2021: EUR109.8 million). Total reported revenue from
continuing operations was EUR792.3 million (H1 2021: EUR457.4
million), representing a 73% increase (71% on a constant currency
basis) compared to H1 2021. The excellent overall results in H1
2022 were driven by continued strength in the Company's online
businesses as well as retail reopening following pandemic-related
closures in H1 2021 in many of the Group's markets, including
Italy.
The strong performance in the half was driven by both the B2C
and B2B divisions. In B2C, Snaitech had an excellent H1 2022
performance as the strong results in its online business continued
and its retail shops were open for the entirety of H1 2022,
following the pandemic related closures for most of H1 2021. This
led to B2C Adjusted EBITDA of EUR126.6 million, an increase of 143%
compared to H1 2021.
In B2B, the results were driven by strong growth in regulated
markets (revenues increased by 31% year-on-year), led by Caliente
in the Americas and Holland Casino in Europe (excluding the UK),
validating the strategy of focusing on opportunities in regulated
and soon to be regulated markets.
Reported and Adjusted Profit
Adjusted profit before tax from continuing operations increased
by 353% to EUR122.3 million (H1 2021: EUR27.0 million), driven by
the rise in Adjusted EBITDA, decrease in depreciation and
amortisation and increase in finance income due to favourable
EUR/USD FX movements.
Reported profit before tax from continuing operations decreased
to EUR103.7 million (H1 2021: EUR278.1 million), mainly due to the
EUR299.9 million of unrealised fair value gains on derivative
financial assets recognised in the prior period with the current
period fair value changes being only EUR48.5 million.
This led to a total post-tax reported profit from continuing
operations of EUR71.4 million (H1 2021: EUR401.9 million).
Balance sheet, liquidity and financing
The Group continues to maintain a strong balance sheet with
Adjusted gross cash, which excludes the cash held on behalf of
clients, progressive jackpots and security deposits, increasing to
EUR545.6 million as at 30 June 2022 (31 December 2021: EUR434.3
million), due to the solid performance of the Group during H1 2022.
This enabled the Group to reduce leverage with net debt decreasing
by EUR113.3 million to EUR494.5 million as at 30 June 2022 (31
December 2021: EUR607.8 million). Net debt / Adjusted EBITDA was
1.2x as at the period end, which falls further when taking into
account proceeds from the sale of Finalto, which completed in July
2022.
Finalto sale
The sale of the Finalto division to Gopher Investments completed
post period end on 11 July 2022. The proceeds from the disposal
were $219.3 million, which includes an enterprise value of US$250
million offset by a completion accounts adjustment and a break fee,
which the Group is required to pay to the Consortium that had
previously agreed to acquire Finalto, as announced in May 2021.
Playtech used part of these proceeds to repay its Revolving
Credit Facility ("RCF") in full in July 2022.
Group Summary (continuing operations) (3)
H1 H1
2022 2021
EUR'm EUR'm
B2B Gambling 312.0 267.2
B2C Gambling 487.3 196.6
Intercompany (7.0) (6.4)
-------------------------------------------------- -------- --------
Total Group Revenue from continuing operations 792.3 457.4
Adjusted costs (588.5) (333.3)
-------------------------------------------------- -------- --------
Adjusted EBITDA from continuing operations 203.8 124.1
-------------------------------------------------- -------- --------
Reconciliation from EBITDA to Adjusted
EBITDA:
EBITDA 178.6 109.8
Employee stock option expenses 4.6 7.0
Professional fees 10.1 2.2
Fair value change and finance cost on redemption
liability (1.8) 0.9
Special site costs 1.9 -
Onerous contract 10.4 -
Charitable donation - 1.9
Settlement of legal matter - 2.3
Adjusted EBITDA 203.8 124.1
-------------------------------------------------- -------- --------
Adjusted EBITDA margin 26% 27%
-------------------------------------------------- -------- --------
Overall, the Group's total revenue from continuing operations
increased by 73% to EUR792.3 million (H1 2021: EUR457.4 million),
mostly driven by retail reopening following COVID-19 related
restrictions which impacted H1 2021 in many of the Company's main
markets, including Italy.
In B2B, revenue increased by 17% from EUR267.2 million in H1
2021 to EUR312.0 million in H1 2022, driven by Mexico, where
Caliente continued its strong growth, as well as increases seen in
other countries such as the Netherlands, Poland, Brazil and Ireland
partly offset by a decrease in Germany due to regulatory changes,
as well as a decline in Asia.
The Group's total reported revenues from its B2C operations
increased by 148% to EUR487.3 million (H1 2021: EUR196.6 million).
Snaitech had an excellent H1 2022 performance as the strong results
in its online business continued and its retail shops were open for
the entirety of H1 2022, following the pandemic- related closures
for most of H1 2021.
The Group's Adjusted EBITDA from continuing operations increased
to EUR203.8 million (H1 2021: EUR124.1 million), representing a 64%
and 60% increase on an actual and constant currency basis,
respectively. Adjusted EBITDA margin decreased by 140bps in H1 2022
versus H1 2021 due to a change in channel mix, with the return of
the lower margin retail segment compared to online in H1 2022, as
well as increased bad debt provision in the B2B business in
Asia.
The Group's total reported EBITDA increased by 63% to EUR178.6
million (H1 2021: EUR109.8 million).
Divisional performance
B2B Gambling
B2B Gambling Revenue
H1 2022 H1 2021 Change Constant
EUR'm EUR'm % currency
%
------------------------------- -------- -------- ------- ----------
Regulated - Americas 69.8 46.4 50% 37%
Regulated - Europe (excluding
UK) 92.2 66.5 39% 39%
Regulated - UK 63.9 59.6 7% 4%
Regulated - Rest of
the World 2.9 1.9 53% 53%
------------------------------- -------- -------- ------- ----------
Total Regulated B2B
revenue 228.8 174.4 31% 27%
Unregulated excluding
Asia 49.2 49.0 0% 0%
Total Core B2B revenue 278.0 223.4 24% 21%
Asia 34.0 43.8 -22% -26%
------------------------------- -------- -------- ------- ----------
Total B2B Gambling
revenue 312.0 267.2 17% 13%
------------------------------- -------- -------- ------- ----------
Overall, B2B Gambling revenues increased by 17% (13% on a
constant currency basis), largely due to an increase in the
regulated B2B business.
Core B2B Gambling revenues(2) increased by 24%, driven by an
increase in regulated markets in the Americas and Europe (excluding
the UK) of 50 % and 39 % respectively ( 37 % and 39% on a constant
currency basis) and a 7% increase in revenues from UK (4% on a
constant currency basis). This was offset by unregulated markets
excluding Asia which was flat year on year.
The increase in both Americas and Europe (excluding the UK) was
primarily driven by Mexico, due to revenue growth from Caliente, as
well as in Netherlands, Poland and Ireland. The increase in
Netherlands was driven by the expanded long-term strategic software
and services agreement with Holland Casino, which successfully
launched in October 2021 and exceeded expectations. In unregulated
markets excluding Asia, growth in Brazil was offset by the impact
of Germany and the Netherlands regulating. Asia revenue decreased
by 22% mainly due to the lockdowns in China and other parts of Asia
in the period.
B2B Gambling Costs and Margins
In order to better reflect the way we manage the business, we
have split out those costs which are charged through to licensees
with an insignificant or no margin and the related revenues.
Furthermore, the revenue and costs associated with retail hardware
sales, where the margins significantly vary with each transaction
and therefore distort the margin of the rest of the B2B business,
were also split out.
H1 2022 B2B Underlying Live dedicated tables, Total
EUR'm dedicated teams, hosting, EUR'm
B2B white label and
hardware sales
EUR'm
----------------- --------------- --------------------------- -------
Revenue 267.5 44.5 312.0
Costs 195.6 39.2 234.8
----------------- --------------- --------------------------- -------
Adjusted EBITDA 71.9 5.3 77.2
Margin 27% 12% 25%
----------------- --------------- --------------------------- -------
H1 2021 B2B Underlying Live dedicated tables, Total
EUR'm dedicated teams, hosting, EUR'm
B2B white label and
hardware sales
EUR'm
----------------- --------------- --------------------------- -------
Revenue 222.9 44.3 267.2
Costs 154.2 40.9 195.1
----------------- --------------- --------------------------- -------
Adjusted EBITDA 68.7 3.4 72.1
Margin 31% 8% 27%
----------------- --------------- --------------------------- -------
In addition to this, the underlying B2B costs were split into
categories that best reflect how these costs are managed,
specifically showing the strategic expenditure which relate to the
Latin America expansion, live operations and ongoing entry costs
into the US.
H1 H1 H1 2022
to H1
2021
%
2022 2021
EUR'm EUR'm
----------------------------------- -------- -------- ---------
Revenue and costs relating to
live dedicated tables, dedicated
teams, hosting, B2B white label
and hardware sales
Revenue 44.5 44.3 0%
Costs 39.2 40.9 -4%
----------------------------------- -------- -------- ---------
Adjusted EBITDA 5.3 3.4 56%
Margin 12% 8%
----------------------------------- -------- -------- ---------
B2B Underlying Gambling Revenue
and Costs
B2B Underlying Gambling Revenue* 267.5 222.9 20%
----------------------------------- -------- -------- ---------
Research and Development 38.5 36.1 7%
General and Administrative 33.4 30.3 10%
Sales and marketing 8.0 5.8 38%
Operations 43.9 28.5 54%
----------------------------------- -------- -------- ---------
Total costs (excluding Asia and
strategic expenditure) 123.8 100.7 23%
Asia related costs 30.8 25.2 22%
Strategic expenditure 41.0 28.3 45%
B2B Underlying Gambling Costs 195.6 154.2 27%
----------------------------------- -------- -------- ---------
B2B Underlying Gambling Adjusted
EBITDA 71.9 68.7 5%
Margin 27% 31%
----------------------------------- -------- -------- ---------
Total B2B Revenue and Costs
B2B revenue 312.0 267.2 17%
B2B Costs 234.8 195.1 20%
----------------------------------- -------- -------- ---------
Total B2B Adjusted EBITDA 77.2 72.1 7%
Margin 25% 27%
----------------------------------- -------- -------- ---------
* To reflect the underlying activity of the B2B Gambling
division, B2B revenues include the software and services charges
generated from the relevant B2C activity with fellow Group
companies, which is then eliminated to show the consolidated
gambling division revenues.
Revenue and Costs excluded from Underlying EBITDA
The costs being excluded from underlying EBITDA include costs
which are passed directly to licensee at a small margin or no
margin at all, such as live dedicated tables, dedicated teams and
hosting fees, as well as the cost of retail hardware sales, where
margins can fluctuate significantly depending on each deal. The
margins increased from 8% to 12% due to costs decreasing by 4%
while revenues were flat. The decrease in costs was driven by a
fall in online marketing partially offset by an increase in
dedicated teams, live dedicated tables and retail hardware.
B2B Underlying Gambling costs
B2B Underlying Gambling costs increased by 27%, driven by the
increase in operations and strategic expenditure costs. Respective
revenues increased by 20%, decreasing the margins from 31% to 27%.
Those underlying gambling costs are all further discussed
below.
Research and Development ("R&D") costs include, among
others, employee-related costs and proportional office expenses.
Expensed R&D costs increased by 7% to EUR38.5 million (H1 2021:
EUR36.1 million), driven by the increase in employee-related costs.
Capitalised development costs were 38% of total B2B R&D costs
in the period, compared to 39% in H1 2021.
General and Administrative costs include employee-related costs,
proportion of office expenses, consulting and legal fees, and
corporate costs such as audit and tax fees and listing expenses.
These costs increased by 10% to EUR33.4 million (H1 2021: EUR30.3
million), due to a new bonus scheme provision for employee
retention and higher bonus payment.
Sales and Marketing costs increased by 38% to EUR8.0 million (H1
2021: EUR5.8 million), mainly due to increased marketing activity
following the end of the COVID-19 crisis and higher bonuses
provisions.
Operations costs include costs relating to infrastructure and
other operational projects, IT and security and general day to day
operational costs, including employee and office-apportioned costs
and branded content fees. These costs increased by 54% to EUR43.9
million (H1 2021: EUR28.5 million), driven mainly by an increase in
employee related costs and Sport operational costs, which were
lower last year due to COVID-19.
Asia costs increased by 22% to EUR30.8 million (H1 2021: EUR25.2
million) mainly due to a EUR15.4 million doubtful debt provision
which was partially offset by lower revenue-driven costs following
a decline in revenue from Asia-based licensees.
Strategic expenditure includes revenue-driven costs relating to
structured agreements, US expansion costs, and all costs relating
to live operations (excluding live dedicated table costs). These
costs have increased by 45% to EUR41.0 million (H1 2021: EUR28.3
million), driven by an increase in revenue-driven costs related to
structured agreements, which is in line with the respective revenue
increase. In addition, further investment in the US is ongoing, as
well as an increase in employee costs within the live division due
to studio expansion.
B2B Adjusted EBITDA
Total B2B Adjusted EBITDA increased by 7% to EUR77.2 million (H1
2021: EUR72.1 million), while EBITDA margin decreased to 25% (H1
2021: 27%). The B2B Underlying Gambling Adjusted EBITDA has
increased by 5% to EUR71.9 million (H1 2021: EUR68.7 million). The
B2B Adjusted EBITDA in the period was impacted by the EUR15.4
million doubtful debt provision in Asia.
B2C Gambling
H1 2022 H1 2021 Change
EUR'm EUR'm
------------------------------- -------- -------- -------
Snaitech
Gambling Revenue* 446.0 158.1 182%
Gambling Costs 314.3 106.3 196%
Adjusted EBITDA 131.7 51.8 154%
Margin 30% 33%
------------------------------- -------- -------- -------
White Label (incl. Sun Bingo)
Gambling Revenue 31.7 30.2 5%
Gambling Costs 31.6 24.8 27%
Adjusted EBITDA 0.1 5.4 -98%
Margin 0% 18%
------------------------------- -------- -------- -------
Sport B2C
Gambling Revenue 10.7 8.5 26%
Gambling Costs** 15.9 13.7 16%
Adjusted EBITDA (5.2) (5.2) 0%
Margin NA NA
------------------------------- -------- -------- -------
B2C Adjusted EBITDA 126.6 52.0 143%
Margin 26% 26%
------------------------------- -------- -------- -------
* Includes intercompany revenue from Sports B2C of EUR1.1million
(H1 2021: EUR0.2 million)
** Includes intercompany costs from Snaitech of EUR1.1m (H1
2021: EUR0.2 million)
Snaitech
Snaitech revenues increased 182% from the prior period to
EUR446.0 million (H1 2021: EUR158.1 million), with operating costs
seeing a similar increase of 196% to EUR314.3 million (H1 2021:
EUR106.3 million). The retail network in Italy was shut for almost
the entire period of H1 2021 owing to the effects of the COVID-19
pandemic, resulting in online activity making up the majority of
Snaitech's performance in the prior period. The relaxing of
restrictions due to COVID-19 at the end of June 2021 enabled retail
sites to reopen, which drove the increase in revenues and costs in
H1 2022.
Snaitech's Adjusted EBITDA increased by 154%, while revenue
increased 182%. As a result, Snaitech's Adjusted EBITDA margin
decreased 300 bps to 30% (H1 2021: 33%), due to the return of the
lower margin retail business.
White label (including Sun Bingo)
White Label is now almost entirely comprised of Sun Bingo.
Revenue from the white label business increased by 5% to EUR31.7
million (H1 2021: EUR30.2 million). However, operating costs within
Sun Bingo increased by 27% to EUR31.6 million (H1 2021: EUR24.8
million). The main reason for the increase is that following the
commencement of the new contract with News UK, the cost structure
of the business changed. From July 2021, Playtech incurs the
marketing costs (previously they were recharged to News UK) and
furthermore, there is now a brand fee being charged by News UK
(previously this was covered by the minimum guarantee).
This led to Adjusted EBITDA of EUR0.1 million (H1 2021: EUR5.5
million). Adjusted EBITDA still includes the unwinding of the
minimum guarantee prepayment over the new period of the contract
which was renegotiated in 2019.
On a reported basis Playtech incurred a one off cost of EUR10.4
million to terminate an onerous contract with a service provider.
The termination of the agreement will improve the profitability of
the business going forward.
Other White label has now completely ceased operations which, as
previously mentioned, was part of an ongoing effort to stop these
operations in their entirety. Adjusted EBITDA for the period is Nil
(H1 2021: loss of EUR0.1 million).
Sport B2C
The Sport B2C business, which is under the Snaitech management
team, is still undergoing some operational changes, therefore,
period on period growth was below expectations. Revenues increased
by 26% to EUR10.7 million (H1 2021: EUR8.5 million), with costs
increasing 16%. The business remains loss making, with Adjusted
EBITDA loss in the current period of EUR5.2 million (H1 2021: loss
of EUR5.2 million).
Below EBITDA items
Depreciation and amortisation
Reported and Adjusted depreciation decreased by 6% to EUR20.6
million (H1 2021: EUR21.8 million). After deducting amortisation of
acquired intangibles of EUR21.9 million (H1 2021: EUR18.9 million),
Adjusted amortisation decreased by 19% to EUR28.9 million (H1 2021:
EUR35.5 million) as the Italian gaming machine licences useful life
has been extended. The renewal of these licences was expected in
2022, however the government has provided a grace period for
operators with renewal now expected in 2023. The remainder of the
balance under depreciation and amortisation of EUR9.0 million (H1
2021: EUR7.8 million) relates to IFRS 16 Leases and the recognition
of the right-of-use asset amortisation.
Impairment of tangible and intangible assets
The reported impairment of tangible and intangible assets of
EUR20.6 million (H1 2021: EUR15.1 million) relates to:
-- The impairment of the Eyecon cash generating unit of EUR13.6
million, mainly driven by the overexposure of its activities to a
specific market;
-- The impairment of the Quickspin cash generating unit of
EUR7.0 million, mainly driven by the increase in the risk premium
given the unit's exposure to revenue from areas of geopolitical
tension.
The prior period impairment of EUR12.3 million mainly relates to
the disposal of real estate in Milan. The recoverable amount (being
net sales proceeds as per the binding sale agreement) was compared
to the property's net book value, leading to the impairment.
Finance income and finance costs
Reported and adjusted finance income of EUR11.7 million (H1
2021: EUR0.4 million) mainly relates to a EUR10.5 million foreign
exchange gain, driven primarily by the favourable movement in the
USD to EUR rate during H1 2022. In the prior period, this was an
overall loss of EUR1.7 million and hence included in finance costs.
The remainder of the finance income is interest received.
Reported finance costs includes interest payable on the bonds
and other borrowings, bank facility fees, bank charges, interest
expense on lease liabilities and the movement in contingent
consideration and redemption liabilities. It also includes net
foreign exchange losses. Reported finance costs decreased by 7% to
EUR31.6 million (H1 2021: EUR33.8 million), mainly due to a net
foreign exchange gain in the current period which was recognised in
finance income as opposed to a net foreign exchange loss recognised
as finance costs in the prior period. Adjusted finance costs
decreased by 3% to EUR31.5 million (H1 2021: EUR32.5 million). The
difference between adjusted and reported finance costs is the
movement in contingent consideration and redemption liability of
EUR0.1 million (H1 2021: EUR1.3 million).
Unrealised fair value changes in derivative financial assets
The unrealised fair value changes to derivative financial assets
of EUR48.5 million (H1 2021: EUR299.9 million) is due to the
recognition of the fair value of the various call options held by
the Group in Latin America which fall under the definition of
derivatives within IFRS 9 Financial Instruments. Of the EUR48.5
million, EUR43.3 million relates to foreign exchange differences
due to the favourable movement in the USD to EUR foreign exchange
rate.
Taxation
A reported tax expense from continuing operations of EUR32.3
million (H1 2021: tax credit of EUR123.8 million) arises on a
profit before tax of EUR103.7 million (H1 2021: EUR278.1 million)
compared to an expected charge of EUR19.7 million based on the UK
statutory rate of 19%. The key item for which the reported tax
charge has been adjusted is the provision of EUR8.5 million in
respect to open enquiries by overseas tax authorities.
The total adjusted tax expense is EUR28.0 million (H1 2021: tax
credit of EUR27.6 million) of which a tax charge of EUR10.9 million
(H1 2021: tax charge of EUR6.4 million) relates to income tax
expenses and a deferred tax expense of EUR17.1 million (H1 2021:
deferred tax credit of EUR34.0 million). The total adjusted
deferred tax expense mainly consists of a deferred tax expense of
EUR23.7 million relating to the Snaitech group including the use of
Snaitech tax losses and a credit of EUR18.0 million relating to UK
tax losses for which a tax benefit is recognised in the current
year.
The Group's effective adjusted tax rate for the current period
is 22.9%. This rate is higher than the UK statutory rate of 19%, as
there are profits within subsidiaries located in territories where
the tax rate is higher than the UK statutory tax rate.
Discontinued operations
Casual and Social Gaming segment
On 11 January 2021, the Group entered into an agreement for the
disposal of the remainder of the business, namely "YoYo", for a
total consideration of $ 9.5 million resulting in a profit on
disposal of EUR7.6 million. This business has now been fully
disposed.
The Adjusted EBITDA relating to the Casual and Social Gaming
business was Nil in both periods being presented as operations were
completely wound down in 2020. Reported profit after tax of EUR7.6
million in H1 2021 was simply the aforementioned profit on disposal
with Nil profit in the current period.
Finalto (formerly TradeTech Group)
T he assets and liabilities of the division continue to be shown
as held for sale at 30 June 2022 and the financial results of this
division in both periods being presented are included in
discontinued operations. Following a review of the net assets of
the unit at 30 June 2021, when compared to the expected proceeds,
EUR2.0 million of the previously recognised impairment was reversed
in the prior period.
Finalto was disposed of in July 2022 with net proceeds of $219.3
million (net of break fees of $8.8 million related to the
previously agreed transaction) resulting in an estimated profit on
disposal of EUR8.3 million.
In terms of performance, revenue increased by 134% to EUR74.5
million (H1 2021: EUR31.9 million) due to higher market volatility
during the current period, which in turn increased both Reported
and Adjusted EBITDA to EUR31.5 million (H1 2021: loss of EUR0.5
million) and EUR33.8 million (H1 2021: loss of EUR0.1 million),
respectively.
Adjusted profit
H1 2022 H1 2021
EUR'm EUR'm
--------------------------------------------------------- -------- --------
Reported profit from continuing operations attributable
to the owners of the Company 71.4 401.9
Employee stock option expenses 4.6 7.0
Professional fees 10.1 2.2
Fair value change and finance cost on redemption
liability and contingent consideration (1.7) 2.2
Special site costs 1.9 -
Onerous contract 10.4 -
Charitable donation - 1.9
Settlement of legal matter - 2.3
Fair value change of equity investments (0.7) (0.8)
Fair value change of derivative financial assets (48.5) (299.9)
Amortisation of intangibles on acquisitions 21.9 18.9
Impairment of tangible and intangible assets 20.6 15.1
Deferred tax on acquisitions (4.2) (5.9)
Deferred tax on reorganisation - (90.3)
Tax related to uncertain positions 8.5 -
Adjusted Profit from continuing operations attributable
to the owners of the Company 94.3 54.6
--------------------------------------------------------- -------- --------
The reconciling items in the table above are further explained
in Note 9 of the financial statements. Reported profit before tax
from continuing operations was EUR103.7 million (H1 2021: EUR278.1
million), mainly due to the EUR299.9 million of unrealised fair
value gains on derivative financial assets recognised in the prior
period with the current period movement being only EUR48.5
million.
Adjusted EPS (in Euro cents)
H2 H1
2021
2022 EUR'm
EUR'm
---------------------------------------------------- -------- --------
Adjusted basic EPS from continuing operations 31.5 18.3
Adjusted diluted EPS from continuing operations 30.2 17.4
---------------------------------------------------- -------- --------
Basic EPS from profit attributable to owners of
the Company 36.8 139.3
Diluted EPS from profit attributable to owners
of the Company 35.4 132.2
---------------------------------------------------- -------- --------
Basic EPS from profit attributable to the owners
of the Company from continuing operations 23.8 134.9
Diluted EPS from profit attributable to the owners
of the Company from continuing operations 22.9 128.0
---------------------------------------------------- -------- --------
Basic EPS is calculated using the weighted average number of
equity shares in issue during H1 2022 of 299.6 million (H1 2021:
297.9 million). Diluted EPS also includes the dilutive impact of
share options and is calculated using the weighted average number
of shares in issue during H1 2022 of 312.2 million (H1 2021: 314.0
million).
Cashflow
Cash conversion (including discontinued operations)
Playtech continues to be cash generative and delivered operating
cash flows of EUR237.2 million (H1 2021: EUR128.3 million after
adjusting for the EUR89.6 million deferred payment of gaming duties
in Italy). The increase is primarily due to Snaitech retail
locations being fully operational in H1 2022 as opposed to the
prior period where COVID-19 related restrictions meant retail sites
were closed for most of H1 2021, as well as a better performance
from the rest of the business, including Finalto, compared to the
prior period.
H1 H1
2022 2021
EUR'm EUR'm
---------------------------------------------------- -------- --------
Adjusted EBITDA 237.6 124.0
---------------------------------------------------- -------- --------
Net cash provided by operating activities 237.2 38.7
Deferred payment of gaming duties - 89.6
---------------------------------------------------- -------- --------
Net cash provided by operating activities after
deferred payment of gaming duties 237.2 128.3
Cash conversion 100% 103%
---------------------------------------------------- -------- --------
Change in jackpot balances 1.3 (4.7)
Change in client deposits and client funds 28.9 (6.1)
Professional expenses 11.7 2.2
ADM security deposit (0.5) (10.7)
Adjusted net cash provided by operating activities 278.6 109.0
---------------------------------------------------- -------- --------
Adjusted cash conversion 117% 88%
---------------------------------------------------- -------- --------
Adjusted cash conversion at 117% (H1 2021: 88%) is shown after
adjusting for the deferred payment of gaming duties in the prior
period, as well as jackpots, security deposits and client equity
and professional costs on acquisitions.
Adjusting for the above cash fluctuations is essential in order
to truly reflect the quality of revenue and cash collection. This
is because the timing of cash inflows and outflows for gaming tax
duties in Italy, jackpots, security deposits and client equity only
impacts the reported operating cashflow and not Adjusted EBITDA,
while professional expenses and costs relating to reorganisation
and acquisitions are excluded from Adjusted EBITDA but impact
operating cashflow.
Cash conversion (excluding discontinued operations)
H1 H1
2022 2021
EUR'm EUR'm
---------------------------------------------------- -------- --------
Adjusted EBITDA 203.8 124.1
---------------------------------------------------- -------- --------
Net cash provided by operating activities 200.3 22.7
Deferred payment of gaming duties - 89.6
---------------------------------------------------- -------- --------
Net cash provided by operating activities after
deferred payment of gaming duties 200.3 112.3
Cash conversion 98% 91%
----------------------------------------------------
Change in jackpot balances 1.3 (4.7)
Change in client deposits and client equity 4.1 3.5
Professional expenses on acquisitions 11.7 2.2
ADM security deposit (0.5) (10.7)
Adjusted net cash provided by operating activities 216.9 102.6
---------------------------------------------------- -------- --------
Adjusted cash conversion 106% 83%
---------------------------------------------------- -------- --------
If we exclude the impact of Finalto cash flow, the adjusted cash
conversion reduces to 106% (H1 2021: 83%).
Cashflow statement analysis
Net cash outflows used in investing activities totalled EUR 64.0
million (H1 2021: EUR 45.7 million) of which:
-- EUR12.5 million (H1 2021: EUR6.3 million) relates to loans
granted. Of the total granted in H1 2022, EUR8.6 million (H1 2021:
EUR6.3 million), is related to the Galera Group which has a total
loan facility of $20 million (refer to Note 15);
-- EUR17.6 million (H1 2021: EUR13.9 million) was used in the
acquisition of property, plant and equipment;
-- EUR2.7 million (H1 2021: EUR2.2 million) was used in the acquisition of intangible assets;
-- EUR31.5 million (H1 2021: EUR27.8 million) was spent on capitalised development costs;
-- In H1 2021, EUR5.8 million relates to the part payment of the
call option held for Ocean 88 Holdings Ltd of EUR1.7 million and
contingent consideration paid to Wplay of EUR4.1 million (Refer to
Note 15 of the financial statements for more details);
-- In H1 2021, EUR10.1 million (H1 2020: EUR14.1 million) is
cash received on the disposal of assets held for sale of which
EUR7.5 million relates to final proceeds from the disposal of the
casual business in 2021 and EUR2.2 million relates to the disposal
of investment in associate: and
-- The remainder relates to small amounts of proceeds from the
disposal of property, plant and equipment in both years.
Net cash outflows used in financing activities totalled EUR38.1
million (H1 2021: EUR134.9 million) of which:
-- EUR19.5 million (H1 2021: EUR20.3 million) relates to
interest payments on bond loans and bank borrowings;
-- EUR14.6 million (H1 2021: EUR13.8 million) is principal and
interest lease liability payments;
-- EUR4.0 million (H1 2021: EUR0.8 million) are payments of
contingent consideration and redemption liability; and
-- In H1 2021 EUR100.0 million related to the repayment of the RCF.
Balance sheet, liquidity and financing
30 31 December
June 2021
2022 EUR'm
EUR'm
--------------------------------------------- -------- ------------
Cash and cash equivalents 681.2 575.4
Cash held on behalf of clients, progressive
jackpots and security deposits (135.6) (141.1)
Adjusted gross cash and cash equivalents
(excluding assets and liabilities held for
sale) 545.6 434.3
--------------------------------------------- -------- ------------
Loans and borrowings (RCF) 164.1 167.1
Bonds 876.0 875.0
--------------------------------------------- -------- ------------
Gross debt (excluding liabilities held
for sale) 1,040.1 1,042.1
--------------------------------------------- -------- ------------
Net debt (excluding assets and liabilities
held for sale) 494.5 607.8
--------------------------------------------- -------- ------------
Last 12 months Adjusted EBITDA 396.8 317.1
--------------------------------------------- -------- ------------
Net debt/Adjusted EBITDA ratio 1.2 1.9
--------------------------------------------- -------- ------------
Cash
The Group continues to maintain a strong balance sheet with
total cash and cash equivalents, excluding cash held for sale, of
EUR681.2 million at 30 June 2022 (31 December 2021: EUR575.4
million). Adjusted gross cash, which excludes the cash held on
behalf of clients, progressive jackpots and security deposits,
increased to EUR545.6 million as at 30 June 2022 (31 December 2021:
EUR434.3 million), due to the solid performance of the Group during
H1 2022.
Financing
The Group's total gross debt was essentially flat at EUR1,040.1
million as at 30 June 2022 (31 December 2021: EUR1,042.1 million),
with net debt, after deducting Adjusted gross cash, decreasing to
EUR494.5 million (31 December 2021: EUR607.8 million).
The Group issued a 5-year senior secured note of EUR530 million
(3.75% coupon), which was raised in October 2018 to support the
acquisition of Snaitech and is maturing in October 2023. The Group
is currently evaluating its options regarding refinancing.
The Group has also issued a 7-year senior secured note to the
value of EUR350 million (4.25% coupon, maturity 2026), which was
raised in March 2019. The net proceeds of this bond were used to
fully repay the EUR297 million convertible bond which matured in H2
2019, and for general corporate purposes, including payment of
contingent consideration.
Finally, the Group also has an RCF facility of EUR317.0 million
ending in November 2023. The RCF balance at 30 June 2022 was
EUR164.1 million (31 December 2021: EUR167.1 million). This was
fully repaid in July 2022.
Net debt
Net debt decreased in the period by EUR113.3 million to EUR494.5
million as at 30 June 2022 (31 December 2021: EUR607.8 million),
while net debt / Adjusted EBITDA was 1.2x as at the period end,
which falls further after taking into account proceeds from the
Finalto sale in July 2022.
Finalto sale
The sale of the Finalto division to Gopher Investments, which
was first presented by the Group under discontinued operations at
31 December 2020, completed post period end on 11 July 2022. The
net proceeds from the disposal was $219.3 million, which includes
an enterprise value of US$250 million, offset by a completion
accounts adjustment and a break fee which the Group is required to
pay to the Consortium that had previously agreed to acquire
Finalto, as announced in May 2021.
Playtech used part of these proceeds to repay its Revolving
Credit Facility ("RCF") in full in July 2022.
Contingent consideration
Contingent consideration and redemption liability decreased to
EUR6.1 million (31 December 2021: EUR11.0 million) mostly due to
the completed payment relating to Eyecon Limited. The existing
liability as at 30 June 2022 comprised the following:
Acquisition Maximum payable Contingent consideration Payment date
earnout (per terms and redemption (based on maximum
of acquisition) liability as payable earnout)
at 30 June 2022
Wplay EUR1.0 million EUR1.0 million Q1 2023
------------------- ------------------------ ------------------
EUR5.0 million
Q1 2023
EUR10.0 million
Statscore EUR15.0 million EUR4.3 million in Q1 2026
------------------- ------------------------ ------------------
Other EUR0.8 million EUR0.8 million Various
------------------- ------------------------ ------------------
Total EUR16.8 million EUR6.1 million -
------------------- ------------------------ ------------------
Going concern
In adopting the going concern basis in the preparation of the
interim financial statements, the Group has considered the current
trading performance, financial position and liquidity of the Group,
the principal risks and uncertainties together with scenario
planning and reverse stress tests completed for a period of no less
than 12 months from the approval of these interim financial
statements.
At 30 June 2022, the Group held total cash (excluding cash
included in assets held for sale) of EUR681.2 million (31 December
2021: EUR575.4 million) and Adjusted gross cash, which excludes the
cash held on behalf of clients, progressive jackpots and security
deposits, of EUR545.6 million (31 December 2021: EUR434.3
million).
Further, the Group has long-term debt facilities totalling
EUR1,040.1 million (31 December 2021: EUR1,042.1 million).
Following the completion of the disposal of Finalto on 11 July
2022, the Group received cash of EUR229.3 million ($233.5 million;
excludes break fee and final consideration adjustment) used to
repay in full the RCF credit facility amounting to EUR164.1
million. The Directors are confident the bond will be refinanced on
acceptable terms, given the latest dialogue with its banks. The
current expectation of the Directors is that the refinancing will
be completed during the fourth quarter of 2022. While the Group's
revolving credit facility (RCF) was fully repaid on the 15 July
2022, it remains available to the Company, if needed. The Company
is also currently in discussions with its banks regarding the RCF
and this facility is currently also expected to be renewed in Q4
2022.
Management concluded that the risk of a covenant breach over the
next twelve-month period from the date of releasing this report is
low and as such, has a reasonable expectation that the Group will
have adequate financial resources to continue in operational
existence.
(1) Adjusted numbers relate to certain non-cash and one-off
items. The Board of Directors believes that the adjusted results
represent more closely the consistent trading performance of the
business. A full reconciliation between the actual and adjusted
results is provided in Note 9 of the financial statements.
(2) Core B2B Gambling refers to the Company's B2B Gambling
business excluding unregulated Asia.
3 Totals in tables throughout this statement may not exactly
equal the components of the total due to rounding.
Directors' responsibilities
The Directors of Playtech plc confirm that, to the best of their
knowledge:
-- the unaudited condensed consolidated financial statements
have been prepared in accordance with IAS 34 as adopted by the
United Kingdom; and
-- the interim management report as required by rules 4.2.7 and
4.2.8 of the Disclosure Guidance and Transparency Rules, includes a
fair review of:
o important events during the six months ended 30 June 2022 and
their impact on the condensed consolidated financial
statements;
o a description of the principal risks and uncertainties for the
second half of the year; and
o related parties' transactions and changes therein.
The names and functions of the Directors of Playtech plc are
available on the Group's website:
http://www.investors.playtech.com/
INDEPENT REVIEW REPORT TO PLAYTECH PLC
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2022 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2022 which comprises ended 30 June 2022
which comprises the consolidated statement of comprehensive income,
the consolidated statement of changes in equity, the consolidated
balance sheet, the consolidated statement of cash flows and the
related notes.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410, however future events or conditions
may cause the group to cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the
Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statement in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
55 Baker Street, London, W1U 7EU, UK
21 September 2021
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended Six months ended
30 June 2022 30 June 2021
Note Actual Adjusted* Actual Adjusted*
EUR'm EUR'm EUR'm EUR'm
Continuing operations
Revenue 8 792.3 792.3 457.4 457.4
Distribution costs before depreciation and amortization (531.7) (519.0) (284.9) (281.4)
Administrative expenses before depreciation and amortization (65.5) (53.0) (56.6) (45.8)
Impairment of financial assets (16.5) (16.5) (6.1) (6.1)
EBITDA 9 178.6 203.8 109.8 124.1
Depreciation and amortisation (80.5) (58.6) (84.0) (65.1)
Impairment of tangible and intangible assets 10 (20.6) - (15.1) -
Finance income 11 11.7 11.7 0.4 0.4
Finance costs 11 (31.6) (31.5) (33.8) (32.5)
Share of (loss)/profit from joint ventures and associates 15A (3.1) (3.1) 0.1 0.1
Unrealised fair value changes on equity investments 15B 0.7 - 0.8 -
Unrealised fair value changes of derivative financial assets 15C 48.5 - 299.9 -
Profit before taxation 103.7 122.3 278.1 27.0
Income tax (expense)/credit 12 (32.3) (28.0) 123.8 27.6
Profit from continuing operations 9 71.4 94.3 401.9 54.6
Discontinued operations
Profit from discontinued operations, net of tax 7 38.9 41.2 13.2 4.0
Profit for the period - total 110.3 135.5 415.1 58.6
Other comprehensive income
Items that are or may be classified subsequently to profit or loss
Exchange gain/(loss) arising on translation of foreign operations 3.8 3.8 (0.5) (0.5)
Items that will not be classified to profit or loss
Gain on re-measurement of employee termination indemnities 0.7 0.7 0.2 0.2
Other comprehensive income/(loss) for the period 4.5 4.5 (0.3) (0.3)
Total comprehensive income for the period 114.8 140.0 414.8 58.3
Profit attributable to:
Owners of the Company 110.3 135.5 415.1 58.6
Non-controlling interests - - - -
110.3 135.5 415.1 58.6
Total comprehensive income attributable to:
Owners of the Company 114.8 140.0 414.8 58.3
Non-controlling interests - - - -
114.8 140.0 414.8 58.3
Earnings per share attributable to the ordinary shareholders of
the Company
Profit or loss - total
Basic (cents) 13 36.8 45.2 139.3 19.7
Diluted (cents) 13 35.4 43.4 132.2 18.6
----- -------- ---------- -------- ----------
Profit or loss from continuing operations
Basic (cents) 13 23.8 31.5 134.9 18.3
Diluted (cents) 13 22.9 30.2 128.0 17.4
----- -------- ---------- -------- ----------
*Adjusted numbers relate to certain non-cash and one-off items
and material reorganisation and acquisition related items. The
Board of Directors believes that the adjusted results represent
more closely the consistent trading performance of the business. A
full reconciliation between the actual and adjusted results is
provided in Note 9.
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Additional Employee Retained Employee Call/Put Foreign Total Non-controlling Total
paid in termination earnings benefit options exchange attributable interests equity
capital indemnities trust reserve reserve to equity
holders of
the Company
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
--------------- ----------- ------------ --------- --------- --------- --------- ------------- ---------------- --------
Balance at 1
January 2022 606.0 (0.5) 1,025.0 (23.2) (3.7) (22.7) 1,580.9 0.3 1,581.2
Total
comprehensive
income for the
period
Profit for the
period - - 110.3 - - - 110.3 - 110.3
Other
comprehensive
income for
the period - 0.7 - - - 3.8 4.5 - 4.5
----------- ------------ --------- --------- --------- --------- ------------- ---------------- --------
Total
comprehensive
income for
the period - 0.7 110.3 - - 3.8 114.8 - 114.8
----------- ------------ --------- --------- --------- --------- ------------- ---------------- --------
Transactions
with the
owners of the
Company
Contributions
and
distributions
Exercise of
options - - (2.3) 2.3 - - - - -
Employee stock
option scheme - - 4.9 - - - 4.9 - 4.9
Total
contributions
and
distributions - - 2.6 2.3 - - 4.9 - 4.9
----------- ------------ --------- --------- --------- --------- ------------- ---------------- --------
Total
transactions
with owners
of the
Company - - 2.6 2.3 - - 4.9 - 4.9
----------- ------------ --------- --------- --------- --------- ------------- ---------------- --------
Balance at 30
June 2022 606.0 0.2 1,137.9 (20.9) (3.7) (18.9) 1,700.6 0.3 1,700.9
----------- ------------ --------- --------- --------- --------- ------------- ---------------- --------
Additional Employee Retained Employee Call/Put Foreign Total Non-controlling Total
paid in termination earnings benefit options exchange attributable interests equity
capital indemnities trust reserve reserve to equity
holders of
the Company
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
--------------- ----------- ------------ --------- --------- --------- --------- ------------- ---------------- --------
Balance at 1
January 2021
as
restated[1] 592.1 (0.4) 343.7 (14.4) (3.7) (21.3) 896.0 0.3 896.3
Total
comprehensive
income for the
period
Profit for the
period - - 415.1 - - - 415.1 - 415.1
Other
comprehensive
income/(loss)
for the
period - 0.2 - - - (0.5) (0.3) - (0.3)
----------- ------------ --------- --------- --------- --------- ------------- ---------------- --------
Total
comprehensive
income /
(loss) for
the period - 0.2 415.1 - - (0.5) 414.8 - 414.8
----------- ------------ --------- --------- --------- --------- ------------- ---------------- --------
Transactions
with the
owners of the
Company
Contributions
and
distributions
Exercise of
options - - (4.7) 4.6 - - (0.1) - (0.1)
Employee stock
option scheme - - 7.4 - - - 7.4 - 7.4
Transfer from
treasury
shares to
employee
benefit trust 13.9 - 8.7 (22.6) - - - - -
Total
contributions
and
distributions 13.9 - 11.4 (18.0) - - 7.3 - 7.3
----------- ------------ --------- --------- --------- --------- ------------- ---------------- --------
Total
transactions
with owners
of the
Company 13.9 - 11.4 (18.0) - - 7.3 - 7.3
----------- ------------ --------- --------- --------- --------- ------------- ---------------- --------
Balance at 30
June 2021 606.0 (0.2) 770.2 (32.4) (3.7) (21.8) 1,318.1 0.3 1,318.4
----------- ------------ --------- --------- --------- --------- ------------- ---------------- --------
([1]) In the preparation of the last annual financial statements, the Group identified an error in respect of the original acquisition of Snai in 2018 which impacted the opening retained earnings by EUR3.7 million. Please refer to Note 40 of the last annual financial statements for further details.
UNAUDITED CONSOLIDATED BALANCE SHEET
At 30 June 2022 At 31 December 2021
Note EUR'm EUR'm
(Audited)
------------------------------------------------------------------- --------- ---------------- --------------------
ASSETS
Property, plant and equipment 325.9 329.7
Right of use of assets 67.9 73.8
Intangible assets 14 1,005.9 1,046.1
Investments 15A, 15B 10.9 13.3
Derivative financial assets 15C 680.7 622.2
Trade receivables 1.6 6.6
Deferred tax asset 16 109.2 102.9
Other non-current assets 108.8 104.4
------------------------------------------------------------------- --------- ---------------- --------------------
Non-current assets 2,310.9 2,299.0
------------------------------------------------------------------- --------- ---------------- --------------------
Trade receivables 154.6 178.5
Other receivables 86.1 87.1
Inventories 4.0 4.9
Cash and cash equivalents 681.2 575.4
------------------------------------------------------------------- --------- ---------------- --------------------
925.9 845.9
Assets classified as held for sale 17 543.9 507.4
------------------------------------------------------------------- --------- ---------------- --------------------
Current assets 1,469.8 1,353.3
------------------------------------------------------------------- --------- ---------------- --------------------
TOTAL ASSETS 3,780.7 3,652.3
EQUITY
Additional paid in capital 606.0 606.0
Employee termination indemnities 0.2 (0.5)
Employee benefit trust (20.9) (23.2)
Put/Call options reserve (3.7) (3.7)
Foreign exchange reserve (18.9) (22.7)
Retained earnings 1,137.9 1,025.0
Equity attributable to equity holders of the Company 1,700.6 1,580.9
Non-controlling interests 0.3 0.3
TOTAL EQUITY 18 1,700.9 1,581.2
------------------------------------------------------------------- --------- ---------------- --------------------
LIABILITIES
Loans and borrowings 19 164.1 167.1
Bonds 20 876.0 875.0
Lease liability 54.9 69.8
Deferred revenues 1.5 2.9
Deferred tax liability 16 108.5 88.9
Contingent consideration and redemption liability 21 4.5 6.0
Provisions for risks and charges 22 11.1 13.5
Other non-current liabilities 10.0 12.8
------------------------------------------------------------------- --------- ---------------- --------------------
Non-current liabilities 1,230.6 1,236.0
------------------------------------------------------------------- --------- ---------------- --------------------
Trade payables 35.0 41.3
Lease liability 28.4 20.3
Progressive operators' jackpots, security deposits 109.4 110.7
Client funds 26.2 30.4
Income tax payable 17.9 2.6
Gaming and other taxes payable 114.4 105.4
Deferred revenues 4.7 5.2
Contingent consideration and redemption liability 21 1.6 5.0
Provisions for risks and charges 22 5.2 3.2
Other payables 165.9 166.2
------------------------------------------------------------------- --------- ---------------- --------------------
508.7 490.3
Liabilities directly associated with assets classified as held for
sale 17 340.5 344.8
------------------------------------------------------------------- --------- ---------------- --------------------
Current liabilities 849.2 835.1
------------------------------------------------------------------- --------- ---------------- --------------------
TOTAL LIABILITIES 2,079.8 2,071.1
TOTAL EQUITY AND LIABILITIES 3,780.7 3,652.3
The condensed consolidated interim financial statements were
approved by the Board and authorised for issue on 21 September
2022.
Mor Weizer Andrew Smith
Chief Executive Officer Chief Financial Officer
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Note Six months ended 30 June 2022 Six months ended 30 June 2021
EUR'm EUR'm
--------------------------------------------- ----- ------------------------------ ------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the period 110.3 415.1
Adjustment to reconcile net income to net
cash provided by operating activities (see
below) 132.5 (361.4)
Net taxes paid (5.6) (15.0)
Net cash from operating activities 237.2 38.7
--------------------------------------------- ----- ------------------------------ ------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans granted (12.5) (6.3)
Acquisition of property, plant and equipment (17.6) (13.9)
Acquisition of intangible assets (2.7) (2.2)
Capitalised development costs (31.5) (27.8)
Investment in other investments and
derivative assets 15 - (5.8)
Proceeds from sale of property, plant and
equipment 0.3 0.2
Proceeds from sale of discontinued
operations and assets held for sale, net of
cash disposed 17 - 10.1
Net cash used in investing activities (64.0) (45.7)
--------------------------------------------- ----- ------------------------------ ------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Interest paid on bonds and loans and
borrowings (19.5) (20.3)
Repayment of loans and borrowings - (100.0)
Payment of contingent consideration and
redemption liability (4.0) (0.8)
Principal paid on lease liability (11.7) (11.1)
Interest paid on lease liability (2.9) (2.7)
Net cash used in financing activities (38.1) (134.9)
--------------------------------------------- ----- ------------------------------ ------------------------------
NET INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS 135.1 (141.9)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 941.5 1,060.6
Exchange (loss)/gain on cash and cash
equivalents (3.3) 2.7
--------------------------------------------- ----- ------------------------------ ------------------------------
CASH AND CASH EQUIVALENTS AT OF PERIOD 1,073.3 921.4
--------------------------------------------- ----- ------------------------------ ------------------------------
Cash and cash equivalent consist of:
Cash and cash equivalent - continuing
operations 681.2 540.8
Cash and cash equivalent treated as held for
sale 17C 392.1 380.6
--------------------------------------------- ----- ------------------------------ ------------------------------
1,073.3 921.4
--------------------------------------------- ----- ------------------------------ ------------------------------
ADJUSTMENT TO RECONCILE NET INCOME TO NET CASH FROM OPERATING ACTIVITIES
Six months ended 30 June 2022 Six months ended 30 June 2021
EUR'm EUR'm
Income and expenses not affecting operating
cash flows:
Depreciation of property, plant and
equipment 20.6 21.8
Amortisation of intangible assets 14 50.9 54.4
Amortisation of right of use assets 10.5 9.5
Capitalization of amortisation of right of
use assets (1.0) (1.1)
Gain on early termination of lease contracts (0.5) (0.5)
Impairment of property, plant and equipment 10 - 12.5
Impairment of intangible assets 10 20.6 2.6
Reversal of impairment of asset held for
sale 17C - (2.0)
Profit on disposal of discontinued
operations 17B - (7.6)
Share of loss/(profit) from joint ventures
and associates 15A 3.1 (0.1)
Changes in fair value change of equity
investments 15B (0.7) (0.8)
Changes in fair value change of derivative
financial assets 15C (48.5) (299.9)
Interest on bonds and loans and borrowings 20.3 21.0
Interest on lease liability 2.9 2.7
Interest income on loans receivable (0.6) -
Income tax expense/(credit) 36.0 (122.4)
Employee stock option plan expenses 4.9 7.4
Movement in contingent consideration and
redemption liability (1.7) 2.2
Unrealised exchange (gain)/loss (5.7) 4.5
Other 0.3 0.2
Changes in operating assets and liabilities:
Change in trade receivables 22.2 (4.6)
Change in other receivables 19.5 (4.7)
Change in inventories 0.9 (0.8)
Change in trade payables (5.4) (9.0)
Change in progressive, operators jackpot and
security deposits (1.3) 4.7
Change in client funds (28.9) 6.1
Change in other payables 16.4 (53.6)
Change in provisions (0.4) (0.5)
Change in deferred revenues (1.9) (3.4)
132.5 (361.4)
--------------------------------------------- ----- ------------------------------ ------------------------------
NOTE 1 - REPORTING ENTITY
Playtech plc (the "Company") is an Isle of Man company. The
registered office is located at St George's Court, Upper Church
Street, Douglas, Isle of Man, IM1 1EE. The Group implemented a
restructuring in January 2021, which resulted in Playtech plc
migrating its tax residency to the United Kingdom.
These are the condensed consolidated interim financial
statements ("interim financial statements") for the six months
ended 30 June 2022 comprising the Company and its subsidiaries
(together referred as "the Group").
NOTE 2 - BASIS OF PREPARATION
These interim financial statements for the six months ended 30
June 2022 have been prepared in accordance with UK adopted IAS
34,"Interim Financial Reporting", and should be read in conjunction
with the Group's last annual consolidated financial statements for
the year ended 31 December 2021 ("last annual financial
statements"). They do not include all the information required for
a complete set of financial statements prepared in accordance with
the IFRS Standards. However, selected explanatory notes are
included to explain events and transactions that are significant to
the understanding of the changes in the Group's financial position
and performance since the last annual financial statements.
These interim financial statements were authorised for issue by
the Company's Board of Directors on 21 September 2022.
Going concern basis
In adopting the going concern basis in the preparation of the
financial statements, the Directors have considered the current
trading performance, financial position and liquidity of the Group,
the principal risks and uncertainties together with scenario
planning and reverse stress tests. The Directors have assessed
going concern over a 12-month period to 30 September 2023.
30 31
June December
2022 2021
EUR'm EUR'm
--------------------------------------------- -------- ----------
Cash and cash equivalents 681.2 575.4
Cash held on behalf of clients, progressive
jackpots and security deposits (135.6) (141.1)
Adjusted gross cash and cash equivalents
(excluding assets and liabilities held for
sale) 545.6 434.3
--------------------------------------------- -------- ----------
The Group continues to hold a strong liquidity position with
adjusted gross cash excluding assets held for sale of EUR545.6
million (31 December 2021: EUR434.3 million), with the increase
from 31 December 2021 being driven by the Group's strong trading
performance. Following the completion of the disposal of its
Financial segment on 11(th) of July 2022, the Group received cash
of EUR229.3 million ($233.5 million; excludes break fee and final
consideration adjustment) used to fund the repayment in full of the
RCF credit facility drawn amounting to EUR164.1 million. This
further enhanced the strong cash position of the Group.
The Directors have reviewed liquidity and covenant forecasts for
the Group, which assume that there will be no further lockdowns on
a global scale. The Directors have also considered sensitivities in
respect of potential downside scenarios, reverse stress tests and
the mitigating actions available to management.
The modelling of downside scenarios assessed if there was a
significant risk to the Group's liquidity and covenant compliance
position. This includes risks such as not realising
budget/forecasts across certain markets and any potential
implications of changes in tax and other regulations, as well as
the impact on cashflow should the share buyback scheme and other
shareholder return options resume.
The Group's principal financing arrangements are the revolving
credit facility ("RCF") up to EUR317.0 million which expires in
November 2023, the 2018 Bond amounting to EUR530.0 million and the
2019 Bond amounting to EUR350.0 million which are repayable in
October 2023 and March 2026 respectively. Although the EUR530.0
million bond that matures in October 2023 is outside the going
concern period, the Directors are confident the bond will be
refinanced on acceptable terms, given the latest dialogue with its
banks. The current expectation of the Directors is that the
refinancing will be completed during the fourth quarter of 2022.
While the Group's revolving credit facility (RCF) was fully repaid
on the 15th of July 2022, it remains available to the Company if
needed. The Company is also currently in discussions with its banks
regarding the RCF and this facility is currently also expected to
be renewed in Q4 2022.
The RCF is subject to certain financial covenants which are
tested every six months on a rolling 12-month basis, as set out in
Notes 19 and 20. As at 30 June 2022, which is the last point in
time that these need to be tested since the RCF was subsequently
fully repaid in July 2022, the Group comfortably met its covenants
which were as follows:
-- Leverage: Net Debt/Adjusted EBITDA to be less than 3:1 for
the twelve months ended 30 June 2022
-- Interest cover: Adjusted EBITDA/Interest to be over 4:1 for
the twelve months ended 30 June 2022
The Bonds only have one financial covenant, being the Fixed
Charge Coverage Ratio (same as the Interest cover ratio for the
RCF), which should equal or be greater than 2:1.
If the Group's results are in line with its base case
projections as approved by the Board it would not be in breach of
the financial covenants for a period of no less than 12 months from
approval of these interim financial statements ("the relevant going
concern period"). This period covers the bank reporting
requirements for December 2022 and June 2023.
Stress test
The stress test assumes a worst-case scenario for the entire
Group which includes additional sensitivities around Italy, US and
Asia, but with mitigations similar to the ones taken in 2020 and
2021 (including salary and capital expenditure reductions). It also
assumed for the first time the impact of cashflow should the share
buyback scheme commence again, as well as other shareholder return
options. Under this scenario Adjusted EBITDA would fall on average
by 11% per month compared to the base case over the relevant going
concern period, but the Group would not breach its covenants.
Reverse stress test
The reverse stress test was used to identify the reduction in
Adjusted EBITDA required that result in either a liquidity event or
breach of the bond covenant.
As a result of completing this assessment, without considering
further mitigating actions, management considered the likelihood of
the reverse stress test scenario arising to be remote. In reaching
this conclusion management considered the followings:
-- Current trading is performing above the base case;
-- Adjusted EBITDA would have to fall by 160% in the second half
of 2022 and 82% in the last 12 months to June 2023 compared to the
base case, to cause a breach of covenants; and
-- In the event that revenues decline to this point to drive the
decrease in Adjusted EBITDA, additional mitigating actions are
available to the management which have not been factored into the
reverse stress test scenario.
As such, the Directors have a reasonable expectation that the
Group will have adequate financial resources to continue in
operational existence over the relevant going concern period and
have therefore considered it appropriate to adopt the going concern
basis of preparation in the financial statements.
NOTE 3 - NEW STANDARDS, INTERPRETATIONS AND AMMENTS ADOPTED BY
THE GROUP
The accounting policies adopted in the preparation of the
interim financial statements are consistent with those followed in
the preparation of the Group's consolidated financial statements
for the year ended 31 December 2021. The Group has not early
adopted any standard, interpretation or amendment that has been
issued but is not yet effective.
Several amendments and interpretations apply for the first time
in 2022, but do not have a material impact on the interim financial
statements of the Group.
NOTE 4 - FUNCTIONAL AND PRESENTATION CURRENCY
These interim financial statements are presented in Euro, which
is the Company's functional currency. The functional currency for
subsidiaries includes Euro, United States Dollar and British
Pounds. All amounts have been rounded to the nearest million,
unless otherwise indicated.
NOTE 5 - CRITICAL JUDGEMENTS AND ESTIMATES
In preparing these interim financial statements, management has
made judgements and estimates that affect the application of the
Group's accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual events may differ for
these estimates.
The significant judgements made by management in applying the
Group's accounting policies and key sources of estimation and
uncertainty were the same as those described in the last annual
financial statements, except as described below.
Judgments
-- Classification of assets as held for sale
The definition of assets held for sale involves a significant
degree of judgement given that in order for an asset to be
classified as held for sale, it must be available for immediate
sale in its present condition and its sale must be highly probable.
The meaning of 'highly probable' is judgmental and therefore IFRS 5
sets out criteria for the sale to be considered as a highly
probable as follows:
-- Management must be committed to a plan to sell the asset;
-- An active program to find a buyer must be initiated;
-- The asset must be actively marketed for sale at a price that
is reasonable to its current fair value;
-- The sale must be completed within one year from the date of
classification;
-- Significant changes to be made to the plan must be
unlikely.
The Board of Directors made a decision to dispose of the
Financial segment during 2020. As disclosed in Note 17, the Group
entered into a sale and purchase agreement for the disposal of the
Financial segment. The transaction was approved by the shareholders
at the Annual General Meeting held on 1 December 2021. The
transaction was completed in July 2022.
-- Classification of equity call options
Background
In addition to the provision of software related solutions as a
B2B product, the Group also offers to certain customers a form of
product (and related services) which is termed as "structured
agreement". Structured agreements are with customers who have a
gaming license, are retail/land based driven and wish to build an
online B2C business - these customers require initial support
beyond the provision of the Group's standard B2B software
technology. With this product Playtech offers additional services
to support the customer's B2C activities over and above the B2B
software solution products.
Playtech generates revenues from the structured agreements as
follows:
-- the standard operator revenue (B2B licensee fee); and
-- revenue based on predefined revenue generated by each
operator under the structured agreement which is capped at a
percentage of the profit (also defined in each agreement) generated
by the customer, which compensates Playtech for the additional
services provided (additional B2B services fee).
Under these agreements, Playtech typically has a call option to
acquire equity in the operating entities. Typically, if the call
option is exercised by Playtech, the Group would no longer provide
certain services which generally include technical and general
strategic support services and no longer receive the related
additional B2B services fee. This mechanism is not designed as a
control feature but instead to protect Playtech's position should
the customer be subject to a transaction. Playtech is therefore
able to benefit from any value appreciation in the operation and
could also potentially exit the relationship should it choose to do
so dependent on who the acquiror is.
Judgement applied
In respect of each of the structured agreements where the Group
holds equity call options, management applies judgement to assess
whether the Group has control or significant influence. For each of
the Group's structured agreements an assessment was completed in
Note 15 using the below guidance.
The existence of control by an entity is evidenced if all of the
below are met in accordance with IFRS 10 Consolidated Financial
Statements, paragraph 7:
-- power over the investee;
-- exposure, or rights, to variable returns from its involvement with the investee; and
-- the ability to use its power over the investee to affect the
amount of the investor's returns.
In the cases where the Group assessed that it exercises control
over these arrangements, then the company is consolidated in the
Group's results in accordance with IFRS 10.
The existence of significant influence by an entity is usually
evidenced in one or more of the following ways in accordance with
IAS 28 Investment in Associates and Joint Ventures, paragraph
6:
-- representation on the board of directors or equivalent governing body of the investee;
-- participation in policy-making processes, including
participation in decisions about dividends or other
distributions;
-- material transactions between the entity and its investee;
-- intercharge of managerial personnel; or
-- provision of essential technical information.
If the conclusion is that the Group has significant influence,
the next consideration made is whether there is current access to
net profits and losses of the underlying associate. This is
determined by the exercise conditions of each relevant equity call
option and in particular whether the options are exercisable at the
end of each reporting period.
If the option is exercisable then the investment is accounted
for using the equity accounting method. However, in the cases where
the company over which the Group has a current exercisable option
generates profits, management made a judgment and concluded that
these profits should not be recognised as it is unlikely that the
profits will be realised as the existing shareholder has the right,
and is entitled, to extract distributable profits. As such
management did not consider it appropriate to recognise any share
of profit. However, in the cases where the associate has generated
losses, the Group's percentage share is recognised and deducted
from the carrying value of the investment in associate.
Management has made a further judgement that if the equity call
option is not exercisable at the end of the reporting period, then
the option is recorded at fair value as per IAS 28 paragraph 14 and
recognised as a derivative financial asset as per IFRS 9 Financial
Instruments.
In determining whether or not the option is exercisable, we
apply paragraphs 12 and 13 of IAS 28. Paragraph 12 states that when
derivatives containing potential voting rights exist, an entity's
interest in an associate is determined solely on the basis of
existing ownership interests and does not reflect the possible
exercise or conversion of potential voting rights. However, there
is an exception if paragraph 13 applies which states that in some
circumstances, an entity has, in substance, an existing ownership
as a result of a transaction that currently gives it access to the
returns associated with an ownership interest. In such
circumstances, the proportion allocated to the entity is determined
by taking into account the eventual exercise of those potential
voting rights and other derivative instruments that currently give
the entity access to the returns.
Paragraph 12 essentially applies to those equity call options
that the Group currently holds whereby certain conditions have to
be met before they become exercisable, therefore the Group does not
have existing ownerhisp and therefore access to returns. The
exemption under paragraph 13 applies to certain of the equity call
options held by the Group whereby there are no conditions of
exercise and as such we deem we have an existing ownership (even
though the option is not yet exercised) and therefore current
access to returns.
Furthermore, under some of these arrangements the Group has
provided loan advances. In such instances a judgement was made as
to whether these amounts form part of the Group's investment in the
associate as per IAS 28 paragraph 38, with a key consideration
being whether the Group expects settlement to occur in the
foreseeable future. In the case where this is not expected and
there is no set repayment term, then it was concluded that in
substance these loans are extensions of the entity's investment in
the associate and therefore would form part of the cost of the
investment.
Finally, the Group has certain subcontractor agreements in
relation to their servicing part of the Playtech obligations under
their various structured agreements. Under these arrangements, the
subcontractors have certain rights to equity. In order for these
rights to crystallise, the Group must first exercise their option.
A judgement was therefore made that no current liability exists
under IAS 32, until the point when Playtech exercises the
option.
Estimates and assumptions
-- Impairment of non financial assets
Impairment exists when the carrying value of an asset or cash
generating unit exceeds its recoverable amount, which is the higher
of its fair value less costs of disposal and its value in use. The
value in use calculation is based on a discounted cash flow model
("DCF"). The cash flows are derived from the budget for the next
five years and do not include restructuring activities that the
Group is not yet committed to or significant future investments
that may enhance the performance of the assets of the CGU being
tested. The recoverable amount is sensitive to the discount rate
used for the DCF model as well as the expected future cash-inflows
and the growth rate used for extrapolation purposes. These
estimates are most relevant to goodwill and other intangibles with
indefinite useful lives recognised by the Group. The key
assumptions used to determine the recoverable amount of the
different CGUs with the lower headroom, including a sensitivity
analysis, are disclosed and further explained in Note 14.
-- Income taxes
The Group is subject to income tax in several jurisdictions and
significant judgement is required in determining the provision for
income taxes. During the ordinary course of business, there are
transactions and calculations for which the ultimate tax
determination is uncertain. As a result, the Group recognises tax
liabilities based on estimates of whether additional taxes and
interest will be due. These tax liabilities are recognised when,
despite the Group's belief that its tax return positions are
supportable, the Group believes it is more likely than not that a
taxation authority would not accept its filing position. In these
cases, the Group records its tax balances based on either the most
likely amount or the expected value, which weights multiple
potential scenarios. The Group believes that its accruals for tax
liabilities are adequate for all open audit years based on its
assessment of many factors including past experience and
interpretations of tax law. This assessment relies on estimates and
assumptions and may involve a series of complex judgements about
future events. To the extent that the final tax outcome of these
matters is different than the amounts recorded, such differences
will impact income tax expense in the period in which such
determination is made. Where management conclude that it is not
probable that the taxation authority will accept an uncertain tax
treatment, they calculate the effect of uncertainty in determining
the related taxable profit (tax loss), tax bases, unused tax
losses, unused tax, credits or tax rates. The effect of uncertainty
for each uncertain tax treatment is reflected by using the expected
value - the sum of the probabilities and the weighted amounts in a
range of possible outcomes. More details are included in Notes 9,
12 and 22.
-- Deferred tax asset
In evaluating the Group's ability to recover our deferred tax
assets in the jurisdiction from which they arise, management
considers all available positive and negative evidence, projected
future taxable income, tax-planning strategies and results of
recent operations. Deferred tax asset is recognised to the extent
that it is probable that future taxable profit will be available
against which the temporary differences can be utilised. Judgement
is required in determining the initial recognition and the
subsequent carrying value of the deferred tax assets. Deferred tax
asset is only able to be recognised to the extent that utilisation
is considered probable. It is possible that a change in profit
forecasts or risk factors could result in a material change to the
income tax expense and deferred tax assets in future periods.
Deferred tax asset in the UK
As a result of the Group's internal restructuring in January
2021, the Group is entitled to UK tax deductions in respect of
certain goodwill and intangible assets. A deferred tax asset was
recognized as the tax base of the goodwill and intangible assets is
in excess of the book value base of those assets. At the beginning
of the period, the net recognized deferred tax asset amounted to
EUR63.6 million. As at 30 June 2022, an additional deferred tax
asset of EUR2.6 million was recognized. This additional deferred
tax asset has been recognized as the Group's management has
concluded that it is probable for the UK entities to continue to
generate taxable profits in the future against which the Group can
utilise the tax deductions for goodwill and intangible assets
giving a tax benefit of EUR66.2 million. This represents the
benefit of the deductions against forecast profits for the next 5
years. During the year, EUR6.0 million has been utilized and the
net recognized deferred tax asset as at 30 June 2022 amounts to
EUR60.2 million. In addition, a total of EUR39.6 million of
deferred tax asset has not been recognised in respect of the
benefit of future tax deductions expected to arise after the next 5
years for the remaining useful economic life of the goodwill and
intangible assets.
The Group reviewed the latest forecasts for the UK companies for
the next 5 years, including their ability to continue to generate
income beyond the forecast period under the tax laws substantively
enacted at the balance sheet date. Based on this, the Group's
management concludes that it is probable that the UK companies will
continue to generate taxable income in the future. Any future
changes in the tax law or the structure of the Group could have a
significant effect on the use of the tax deductions, including the
period over which the deductions can be utilised.
The Group has recognised a deferred tax asset of EUR18.0 million
in respect of tax losses and excess interest in the UK which are
available to offset against the future profits of the UK Group
companies. Based on the current forecasts, these losses will be
fully utilised over the next 5 years.
Deferred tax assets in Italy
The Group has recognised a deferred tax asset of EUR56.6 million
in respect of tax losses in Italy which are available to offset
against the future profits of the Italian Group companies. Based on
the current forecasts, these losses will be fully utilised within
the next 5 years.
The Group reviewed the latest forecasts for the Italian
companies for the next 5 years, including their ability to continue
to generate income beyond the forecast period under the tax laws
substantively enacted at the balance sheet date. Based on this, the
Group management concludes that it is probable that the Italian
Group companies will continue to generate taxable income in the
future against which the losses can be utilised. Any future changes
in the tax law or the structure of the Group could have a
significant effect on the use of the tax deductions, including the
period over which the deductions can be utilised.
-- Impairment of financial assets
The Group undertook a review of trade receivables and other
financial assets, as applicable, and their Expected Credit Losses
("ECL"). The review considered the macroeconomic outlook, customer
credit quality, exposure at default, and the effect of payment
deferral options as at the reporting date. The ECL methodology and
definition of default remained consistent with prior periods. The
model inputs, including forward-looking information, scenarios and
associated weightings, together with the determination of the
staging of exposures were revised. The Group's financial assets
consist of trade receivables and cash and cash equivalents. ECL on
cash balances was considered and calculated by reference to Moody's
credit rating for each financial institution, while ECL on trade
receivables was based on past default experience and an assessment
of the future economic environment. ECL and specific provisions are
considered and calculated with reference to the ageing and risk
profile of the balances. A reasonable movement in the inputs to the
ECL calculation does not materially change the ECL to be
recognised.
In respect of the Group's Asian licensees' business model an
additional ECL risk was identified due to increase in collection
days and uncertainty over timing of receipt of funds, this resulted
in an additional provision for bad debts of EUR15.4 million (30
June 2021: EUR5.0 million) recognised in the profit or loss in the
period ended 30 June 2022.
-- Measurement of fair values of equity investments and equity call options
The Group's equity investments and, where applicable (based on
the judgements applied above), equity call options held by the
Group, are measured at fair value for financial reporting purposes.
The Group has an established control framework with respect to the
measurement of fair value.
In estimating the fair value of an asset and liability, the
Group uses market-observable data to the extent it is available.
Where level 1 inputs are not available, the Group engages third
party qualified valuers to perform the valuation. The Group works
closely with the qualified valuers to establish the appropriate
valuation techniques and inputs to the model.
As mentioned in Note 15, the Group has:
-- Investments in listed securities where the fair values of
these equity shares are determined by reference to published price
quotations in an active market
-- Equity investments in entities that are not listed, accounted
at fair value through profit and loss under IFRS 9
-- Derivative financial assets (call options in instruments
containing potential voting rights), which are accounted at fair
value through profit and loss under IFRS 9
The fair value of the equity investments that are not listed and
of the derivative financial assets, rely on non-observable inputs
that require a higher level of management judgement to calculate a
fair value than those based wholly on observable inputs. Valuation
techniques are used to calculate fair values include comparisons
with similar financial instruments for which market observable
prices exist, discounted cash flow analysis and other valuation
techniques commonly used by market participants. Upon the use of
DCF method, the Group assumes that the expected cash flows are
based on the EBITDA.
The Group only uses models with unobservable inputs for the
valuation of certain unquoted equity investments. In these cases,
estimates are made to reflect uncertainties in fair values
resulting from a lack of market data inputs, for example, as a
result of illiquidity in the market. Inputs into valuations based
on unobservable data are inherently uncertain because there is
little or no current market data available from which to determine
the level at which an arm's length transaction would occur under
normal business conditions. Unobservable inputs are determined
based on the best information available. Further details on the
fair value of assets are disclosed in Note 15.
The following table shows the carrying amount and fair value of
non-current assets, as disclosed in Note 15, including their levels
in the fair value hierarchy.
Carrying Fair value
amount
------------------------------ ---------- --------------------------
30 June Level 1 Level 2 Level
2022 3
------------------------------ ---------- -------- -------- ------
EUR'm EUR'm EUR'm EUR'm
------------------------------ ---------- -------- -------- ------
Non current assets
Other investments (Note
15B) 8.8 2.3 - 6.5
Derivative financial assets
(Note 15C) 680.7 - - 680.7
---------- -------- -------- ------
689.5 2.3 - 687.2
---------- -------- -------- ------
Carrying Fair value
amount
------------------------------ ------------- --------------------------
31 December Level 1 Level 2 Level
2021 3
------------------------------ ------------- -------- -------- ------
EUR'm EUR'm EUR'm EUR'm
------------------------------ ------------- -------- -------- ------
Non current assets
Other investments (Note
15B) 8.1 1.6 - 6.5
Derivative financial assets
(Note 15C) 622.2 - - 622.2
------------- -------- -------- ------
630.3 1.6 - 628.7
------------- -------- -------- ------
NOTE 6 - SEGMENT INFORMATION
The Group's reportable segments are strategic business units
that offer different products and services.
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker has been identified as the
management team including the Chief Executive Officer and the Chief
Financial Officer.
The operating segments identified are:
-- B2B: including Casino, Services, Sport, Bingo, Poker and
Other
-- B2C: Snaitech, Sun Bingo and Other B2C and Sport B2C
-- Financial: including B2C and B2B CFD (discontinued
operations)
The Group-wide profit measures are Adjusted EBITDA and Adjusted
Profit (see Note 9).
Six months ended 30 June 2022
B2C - Total Gaming Financial -
continuing - continuing Discontinued
Core B2B Asia B2B Total B2B operations Intercompany operations operations Total
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
Revenue 278.0 34.0 312.0 487.3 (7.0) 792.3 74.5 866.8
Adjusted
EBITDA - - 77.2 126.6 - 203.8 33.8 237.6
Adjusted
Profit
attributable
to the
owners of
the Company - - 28.8 65.5 - 94.3 41.2 135.5
Total assets - - 2,011.7 1,245.1 - 3,256.8 523.9 3,780.7
Total
liabilities - - 841.2 899.1 - 1,740.3 339.5 2,079.8
Six months ended 30 June 2021
B2C - Total Gaming Financial -
continuing - continuing Discontinued
Core B2B Asia B2B Total B2B operations Intercompany operations operations Total
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
Revenue 223.4 43.8 267.2 196.6 (6.4) 457.4 31.9 489.3
Adjusted
EBITDA - - 72.1 52.0 - 124.1 (0.1) 124.0
Adjusted
Profit
attributable
to the
owners of
the Company - - 14.7 39.9 - 54.6 4.0 58.6
Total assets - - 1,675.7 1,141.5 - 2,817.2 480.1 3,297.3
Total
liabilities - - 838.7 818.7 - 1,657.4 317.9 1,975.3
NOTE 7 - DISCONTINUED OPERATION
As explained in Note 17, the Group has classified its Casual and
Social Gaming Business and Financial segment as assets held for
sale with their results shown under discontinued operations in the
consolidated statement of comprehensive income.
On 11 January 2021, the Group entered into an agreement for the
disposal of the remainder of the business, namely "YoYo", for a
total consideration of $9.5 million resulting in a profit on
disposal of EUR7.6 million.
The results of the Financial segment for the period are
presented below:
Six months ended 30 June 2022 Six months ended 30 June 2021
Actual Adjusted Actual Adjusted
EUR'm EUR'm EUR'm EUR'm
------------------------------------ ------- ------------------------------ ------- ------------------------------
Revenue 74.5 74.5 31.9 31.9
Distribution costs before
depreciation and amortisation (34.9) (34.8) (25.5) (25.4)
Administrative expenses before
depreciation and amortisation (6.2) (4.0) (4.6) (4.3)
Impairment of financial assets (1.9) (1.9) (2.3) (2.3)
------- ------------------------------ ------- ------------------------------
EBITDA 31.5 33.8 (0.5) (0.1)
Reversal of impairment of assets - - 2.0 -
held for sale
Finance income 11.6 11.6 5.9 5.9
Finance costs (0.5) (0.5) (0.4) (0.4)
Profit before taxation 42.6 44.9 7.0 5.4
Income tax expense (3.7) (3.7) (1.4) (1.4)
------- ------------------------------ ------- ------------------------------
Profit from Financial segment, net
of tax 38.9 41.2 5.6 4.0
------- ------------------------------ ------- ------------------------------
The results of the discontinued operations for the period are
presented below:
Six months ended 30 June 2022 Six months ended 30 June 2021
Actual Adjusted Actual Adjusted
EUR'm EUR'm EUR'm EUR'm
------------------------------------ ------- ------------------------------ ------- ------------------------------
Revenue 74.5 74.5 31.9 31.9
Distribution costs before
depreciation and amortisation (34.9) (34.8) (25.5) (25.4)
Administrative expenses before
depreciation and amortisation (6.2) (4.0) (4.6) (4.3)
Impairment of financial assets (1.9) (1.9) (2.3) (2.3)
------- ------------------------------ ------- ------------------------------
EBITDA 31.5 33.8 (0.5) (0.1)
Reversal of impairment of assets - - 2.0 -
held for sale
Finance income 11.6 11.6 5.9 5.9
Finance costs (0.5) (0.5) (0.4) (0.4)
Profit on disposal of discontinued - - 7.6 -
operations (Note 17B)
Profit before taxation 42.6 44.9 14.6 5.4
Income tax expense (3.7) (3.7) (1.4) (1.4)
------- ------------------------------ ------- ------------------------------
Profit from discontinued
operations, net of tax 38.9 41.2 13.2 4.0
------- ------------------------------ ------- ------------------------------
The following tables provide a full reconciliation between
adjusted and actual results from discontinued operations:
Profit from discontinued
operations attributable
to the owners of
For the year ended 30 June 2022 Revenue EBITDA the Company
EUR'm EUR'm EUR'm
------------------------------------ -------- ------- -------------------------
Reported as actual 74.5 31.5 38.9
Employee stock option expenses - 0.3 0.3
Professional fees - 2.0 2.0
Adjusted measure 74.5 33.8 41.2
-------- ------- -------------------------
Profit from discontinued
operations attributable
to the owners of
For the year ended 30 June 2021 Revenue EBITDA the Company
EUR'm EUR'm EUR'm
------------------------------------ -------- ------- -------------------------
Reported as actual 31.9 (0.5) 13.2
Employee stock option expenses - 0.4 0.4
Reversal of impairment of asset
held for sale - - (2.0)
Profit on disposal of discontinued
operations - - (7.6)
-------- ------- -------------------------
Adjusted measure 31.9 (0.1) 4.0
-------- ------- -------------------------
Earnings per share from discontinued operations
Basic (cents) 13.0 13.7 4.4 1.4
Diluted (cents) 12.5 13.2 4.2 1.2
The net cash flows incurred by the Financial segment in the
period, are as follows:
Six months ended 30 June 2022 Six months ended 30 June 2021
EUR'm EUR'm
Operating 36.9 16.0
Investing (3.8) (3.7)
Financing (1.1) (1.0)
------------------------------ ------------------------------
Net cash inflow 32.0 11.3
------------------------------ ------------------------------
NOTE 8 - REVENUE FROM CONTRACTS WITH CUSTOMERS
The Group has disaggregated revenue into various categories in
the following table which is intended to:
-- Depict how the nature, amount, timing and uncertainty of
revenue and cash flows are affected by recognition date; and
-- Enable users to understand the relationship with revenue
segmental information provided in the segmental information
note.
Set out below is the disaggregation of the Group's revenue:
Revenue analysis by geographical location of licensee, product
type and timing of transfer of performance obligations
The revenues from B2B, B2C and Financials are described in Note
5D in the last annual financial statements.
Six months ended 30 June 2022
Total Gaming
- continuing Financial - discontinued
B2B B2C Intercompany operations operations Total
Primary Geographic
Markets EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
-------------------- ------ ------ ------------- -------------- ------------------------- ------
Italy 16.6 444.9 (4.8) 456.7 1.3 458.0
United Kingdom 64.1 31.7 (2.2) 93.6 34.1 127.7
Mexico 60.5 - - 60.5 0.3 60.8
Malta 26.7 - - 26.7 0.1 26.8
Philippines 26.0 - - 26.0 - 26.0
British Virgin
Islands - - - - 16.0 16.0
Spain 13.6 - - 13.6 1.0 14.6
Netherlands 12.4 - - 12.4 1.0 13.4
Gibraltar 13.2 - - 13.2 - 13.2
Germany 0.4 9.2 - 9.6 1.0 10.6
Poland 9.7 - - 9.7 0.1 9.8
Greece 9.5 - - 9.5 0.3 9.8
Curacao 9.3 - - 9.3 - 9.3
Ireland 6.5 - - 6.5 0.3 6.8
Colombia 5.5 - - 5.5 0.4 5.9
Other 38.0 1.5 - 39.5 18.6 58.1
312.0 487.3 (7.0) 792.3 74.5 866.8
------ ------ ------------- -------------- ------------------------- ------
Total Gaming
- continuing Financial - discontinued
B2B B2C Intercompany operations operations Total
Product type EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
---------------------- ------ ------ ------------- -------------- ------------------------- ------
B2B licensee fee 220.1 - (6.1) 214.0 - 214.0
B2B fixed-fee
income 22.2 - (0.2) 22.0 - 22.0
B2B cost-based
revenue 28.5 - (0.7) 27.8 - 27.8
B2B revenue received
from the sale
of hardware 6.8 - - 6.8 - 6.8
Additional B2B
services fee 34.4 - - 34.4 - 34.4
------ ------ ------------- -------------- ------------------------- ------
Total B2B 312.0 - (7.0) 305.0 - 305.0
------ ------ ------------- -------------- ------------------------- ------
Snaitech - 446.0 - 446.0 - 446.0
Sun Bingo and
Other B2C - 31.7 - 31.7 - 31.7
Sport B2C - 10.7 - 10.7 - 10.7
Intercompany - (1.1) - (1.1) - (1.1)
------ ------ ------------- -------------- ------------------------- ------
Total B2C - 487.3 - 487.3 - 487.3
------ ------ ------------- -------------- ------------------------- ------
Financial - - - - 74.5 74.5
------ ------ ------------- -------------- ------------------------- ------
312.0 487.3 (7.0) 792.3 74.5 866.8
------ ------ ------------- -------------- ------------------------- ------
Total Gaming Financial
- continuing - discontinued
B2B B2C Intercompany operations operations Total
Timing of transfer
of performance
obligations EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
-------------------- ------ ------ ------------- -------------- ---------------- ------
Recognised over
time 305.2 487.3 (7.0) 785.5 74.5 860.0
Recognised at
the point in time
(hardware sales) 6.8 - - 6.8 - 6.8
312.0 487.3 (7.0) 792.3 74.5 866.8
------ ------ ------------- -------------- ---------------- ------
EUR'm
----------------------------------- ------
Regulated - Americas 69.8
Regulated - Europe (excluding UK) 92.2
Regulated - UK 63.9
Regulated - Rest of the World 2.9
Total Regulated B2B revenue 228.8
Unregulated excluding Asia 49.2
Total Core B2B revenue 278.0
Asia 34.0
----------------------------------- ------
Total B2B Gambling revenue 312.0
----------------------------------- ------
Six months ended 30 June 2021
Total Gaming
- continuing Financial - discontinued
B2B B2C Intercompany operations operations Total
Primary Geographic
Markets EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
-------------------- ------ ------ ------------- -------------- ------------------------- ------
Italy 15.8 157.9 (3.5) 170.2 0.4 170.6
United Kingdom 59.8 30.2 (1.9) 88.1 11.6 99.7
Mexico 40.9 - - 40.9 0.1 41.0
Philippines 38.0 - - 38.0 - 38.0
Malta 27.6 - - 27.6 0.2 27.8
Gibraltar 13.2 - - 13.2 - 13.2
Spain 10.7 - - 10.7 0.4 11.1
Germany 0.8 8.3 (0.8) 8.3 2.4 10.7
Greece 8.0 - - 8.0 0.7 8.7
Poland 6.3 - - 6.3 0.1 6.4
Curacao 5.7 - - 5.7 0.1 5.8
Colombia 4.3 - - 4.3 - 4.3
Switzerland 2.8 - - 2.8 0.2 3.0
Norway 2.8 - - 2.8 0.2 3.0
Romania 2.8 - - 2.8 - 2.8
Other 27.7 0.2 (0.2) 27.7 15.5 43.2
267.2 196.6 (6.4) 457.4 31.9 489.3
------ ------ ------------- -------------- ------------------------- ------
Total Gaming
- continuing Financial - discontinued
B2B B2C Intercompany operations operations Total
Product type EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
---------------------- ------ ------ ------------- -------------- ------------------------- ------
B2B licensee
fee 200.6 (5.5) 195.1 - 195.1
B2B fixed-fee
income 19.6 (0.2) 19.4 - 19.4
B2B cost-based
revenue 20.7 (0.7) 20.0 - 20.0
B2B revenue received
from the sale
of hardware 4.0 - 4.0 - 4.0
Additional B2B
services fee 22.3 - 22.3 - 22.3
------ ------ ------------- -------------- ------------------------- ------
Total B2B 267.2 - (6.4) 260.8 - 260.8
------ ------ ------------- -------------- ------------------------- ------
Snaitech - 158.1 - 158.1 - 158.1
Sun Bingo and
Other B2C - 30.2 - 30.2 - 30.2
Sport B2C - 8.5 - 8.5 - 8.5
Intercompany - (0.2) - (0.2) - (0.2)
------ ------ ------------- -------------- ------------------------- ------
Total B2C - 196.6 - 196.6 - 196.6
------ ------ ------------- -------------- ------------------------- ------
Financial - - - - 31.9 31.9
------ ------ ------------- -------------- ------------------------- ------
267.2 196.6 (6.4) 457.4 31.9 489.3
------ ------ ------------- -------------- ------------------------- ------
Total Gaming Financial
- continuing - discontinued
B2B B2C Intercompany operations operations Total
Timing of transfer
of performance
obligations EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
-------------------- ------ ------ ------------- -------------- ---------------- ------
Recognised over
time 263.2 196.6 (6.4) 453.4 31.9 485.3
Recognised at
the point in time
(hardware sales) 4.0 - - 4.0 - 4.0
267.2 196.6 (6.4) 457.4 31.9 489.3
------ ------ ------------- -------------- ---------------- ------
EUR'm
----------------------------------- ------
Regulated - Americas 46.4
Regulated - Europe (excluding UK) 66.5
Regulated - UK 59.6
Regulated - Rest of the World 1.9
----------------------------------- ------
Total Regulated B2B revenue 174.4
Unregulated excluding Asia 49.0
Total Core B2B revenue 223.4
Asia 43.8
----------------------------------- ------
Total B2B Gambling revenue 267.2
----------------------------------- ------
There were no changes in the Group's revenue measurement
policies and procedures. The vast majority of the Group's B2B
contracts are for the delivery of services within the next 12
months.
The Group's contract liabilities, in other words deferred
income, primarily include advance payment for hardware and
services, and also include the set-up fees paid by the licensee at
the beginning of the contract. These are included in deferred
income at the total amount of EUR6.2 million (31 December 2021:
EUR8.1 million).
NOTE 9 - ADJUSTED ITEMS
Management regularly uses adjusted financial measures internally
to understand, manage and evaluate the business and make operating
decisions. These adjusted measures are among the primary factors
management uses in planning for and forecasting future periods. The
primary adjusted financial measures are Adjusted EBITDA and
Adjusted Profit (Adjusted post-tax profit), which management
considers, are relevant in understanding the Group's financial
performance.
As these are not a defined performance measure in IFRS and are
not intended as a substitute for those measures, the Group's
definition of adjusted items may not be comparable with similarly
titled performance measures or disclosures by other entities.
The following tables give a full reconciliation between adjusted
and actual results:
Six months ended 30 June 2022
Profit
from
continuing
operations
attributable
to the Profit
owners before tax
EBITDA Profit Profit of the from continuing
Revenue EBITDA - B2B - B2C EBITDA - B2B -B2C Company operations
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
---------------------- -------- ------------- ------- ------- ------- ------- -------------- -----------------
Reported as actual 792.3 62.9 115.7 178.6 28.7 42.7 71.4 103.7
Employee stock option
expenses[1] - 4.1 0.5 4.6 4.1 0.5 4.6 4.6
Professional fees[2] - 10.1 - 10.1 10.1 - 10.1 10.1
Fair value change and
finance cost on
redemption
liability[3] - (1.8) - (1.8) (1.7) - (1.7) (1.7)
Special site costs[4] - 1.9 - 1.9 1.9 - 1.9 1.9
Onerous contract[5] - - 10.4 10.4 - 10.4 10.4 10.4
Fair value change of
equity
investments[6] - - - - (0.7) - (0.7) (0.7)
Fair value change of
derivative financial
assets[6] - - - - (48.5) - (48.5) (48.5)
Impairment of
intangible
assets[7] - - - - 20.6 - 20.6 20.6
Amortisation of
intangible
assets on
acquisitions[8] - - - - 6.7 15.2 21.9 21.9
Tax related to
uncertain
positions[9] - - - - 8.5 - 8.5 -
Deferred tax on
acquisitions - - - - (0.9) (3.3) (4.2) -
Adjusted measure 792.3 77.2 126.6 203.8 28.8 65.5 94.3 122.3
Constant currency
impact (10.5) - - (5.0) - - (15.0) -
-------- ------------- ------- ------- ------- ------- -------------- -----------------
Adjusted result on
constant
currency basis 781.8 - - 198.8 - - 79.3 -
-------- ------------- ------- ------- ------- ------- -------------- -----------------
Six months ended 30 June 2021
Profit
from continuing
operations
attributable
to the Profit
owners before tax
EBITDA EBITDA Profit - Profit of the from continuing
Revenue - B2B - B2C EBITDA B2B -B2C Company operations
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
----------------------- -------- ------- ------- ------- --------- ------- ----------------- -----------------
Reported as actual 457.4 58.5 51.3 109.8 380.4 21.5 401.9 278.1
Employee stock option
expenses[11] - 6.3 0.7 7.0 6.3 0.7 7.0 7.0
Professional fees[12] - 2.2 - 2.2 2.2 - 2.2 2.2
Fair value change and
finance cost on
redemption
liability[13] - 0.9 - 0.9 0.9 - 0.9 0.9
Charitable
donations[14] 1.9 - 1.9 1.9 - 1.9 1.9
Settlement of legal
matter[15] 2.3 - 2.3 2.3 - 2.3 2.3
Fair value change and
finance cost on
contingent
consideration - - - 1.3 - 1.3 1.3
Fair value change of
equity
investments[16] - - - (0.8) - (0.8) (0.8)
Fair value change of
derivative
financial assets[16] - - - (299.9) - (299.9) (299.9)
Impairment of
property,
plant and equipment
and
intangible assets[17] - - - - 2.8 12.3 15.1 15.1
Amortisation of
intangible
assets on
acquisitions[18] - - - 8.7 10.2 18.9 18.9
Deferred tax on
acquisitions - - - (1.1) (4.8) (5.9) -
Deferred tax[19] - - - (90.3) - (90.3) -
-------- ------- ------- ------- --------- ------- ----------------- -----------------
Adjusted measure 457.4 72.1 52.0 124.1 14.7 39.9 54.6 27.0
Constant currency - - - - - - 1.7 -
impact
-------- ------- ------- ------- --------- ------- ----------------- -----------------
Adjusted result on
constant
currency basis 457.4 - - 124.1 - - 56.3 -
The following table provides a full reconciliation between
adjusted and actual tax from continuing operations:
Six months Six months
ended ended
30 June 30 June
2022 2021
EUR'm EUR'm
--------------------------------------------------- ----------- -----------
Tax on profit or loss for the year 32.3 (123.8)
Adjusted for:
Deferred tax on intangible assets on acquisitions 4.2 5.9
Deferred tax (Refer to footnote 9 above) - 90.3
Tax related to uncertain positions (8.5) -
Adjusted tax 28.0 (27.6)
NOTE 10 - IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS
Six months Six months
ended ended
30 June 30 June
2022 2021
EUR'm EUR'm
Impairment of tangible assets - 12.5
Impairment of intangible assets 20.6 2.6
20.6 15.1
Out of the total impairment of tangible assets of EUR 12.5
million in H1 2021, an amount of EUR12.3 million relates to land
classified as held for sale. Refer to Note 17A.
Impairment of intangible assets for H1 2021 relates to the
impairment of capitalised development costs. Based on the
assessment performed at the reporting date, several projects will
not be recoverable.
Impairment of intangible assets for H1 2022 relates to the
impairment of Eyecon EUR 13.6 million and Quickspin of EUR 7.0
million. Refer to Note 14.
NOTE 11 - FINANCE INCOME AND COSTS
Six months Six months
ended ended
30 June 30 June
2022 2021
EUR'm EUR'm
A. Finance income
Interest income 1.2 0.4
Net foreign exchange gain 10.5 -
11.7 0.4
B. Finance costs
Interest on bonds (18.2) (18.2)
Interest on lease liability (2.7) (2.6)
Interest on loans and borrowings and other (2.8) (3.2)
Bank facility fees (1.0) (0.7)
Bank charges (6.8) (6.1)
Movement in contingent consideration and
redemption liability (0.1) (1.3)
Net foreign exchange loss - (1.7)
(31.6) (33.8)
Net financing costs (19.9) (33.4)
NOTE 12 - INCOME TAX EXPENSE/(CREDIT)
Six months Six months
ended ended
30 June 30 June
2022 2021
EUR'm EUR'm
Income tax expense for the current period 9.1 4.2
Income tax relating to prior periods 10.1 2.1
Withholding tax 0.2 0.1
Deferred tax 12.9 (130.2)
32.3 (123.8)
Reported Tax Charge/(Credit)
A reported tax expense from continuing operations of EUR32.3
million (30 June 2021: tax credit of EUR123.8 million) arises on a
profit before tax of EUR103.7 million (30 June 2021: EUR278.1
million) compared to an expected charge of EUR19.7 million. The
reported tax expense includes an additional provision of EUR8.5
million in respect of overseas tax audits and a change in estimates
related to uncertain overseas tax positions in respect of prior
years.
The Group's effective tax rate for the current period is 21.6%.
This was higher than the UK statutory rate of 19%, due mainly to
the following factors:
-- Profits of subsidiaries located in territories where the tax
rate is higher than the UK statutory tax rate.
-- The Group's internal restructuring resulted with the Group
becoming entitled to deductions for UK tax purposes in respect of
certain internally generated goodwill and intangible assets, for
which no intangible asset exists on the Group balance sheet. An
additional deferred tax asset amounting to EUR2.6 million was
recognised in respect of future tax deductions due to a change in
the tax base of the Group's intangible assets resulting from the
restructuring (this has no impact on the book value of the
intangible assets reported in these financial statements).
-- Non-taxable fair value movements on call options of EUR48.5
million (30 June 2021: EUR299.9 million). Deferred tax should be
recognised based on the expected manner of recovery at the balance
sheet date. Due to the nature of the options and the underlying
assets, no tax is expected to arise while the options are held or
when the options are exercised. As the Group intends to recover the
value of the options either by continuing to hold them or by
exercising the option to convert into shares, and these will have
no tax effects, no deferred tax is recorded in respect of the
options.
Deferred Tax
The deferred tax asset and liability are measured at the enacted
or substantively enacted tax rates of the respective territories
which are expected to apply to the year in which the asset is
realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the
balance sheet date. The deferred tax balances within the financial
statements reflect the increase in the UK's main corporation tax
rate from 19% to 25% from 1 April 2023.
NOTE 13 - EARNINGS PER SHARE
The calculation of basic earnings per share ("EPS") has been
based on the following profit attributable to the owners of the
Company and weighted-average number of ordinary shares
outstanding.
Six months ended Six months ended
30 June 2022 30 June 2021
Actual Adjusted Actual Adjusted
EUR'm EUR'm EUR'm EUR'm
Profit attributable to owners of the Company 110.3 135.5 415.1 58.6
Basic (cents) 36.8 45.2 139.3 19.7
Diluted (cents) 35.4 43.4 132.2 18.6
Six months ended Six months ended
30 June 2022 30 June 2021
Actual Adjusted Actual Adjusted
EUR'm EUR'm EUR'm EUR'm
Profit attributable to owners of the Company
from continuing operations 71.4 94.3 401.9 54.6
Basic (cents) 23.8 31.5 134.9 18.3
Diluted (cents) 22.9 30.2 128.0 17.4
Six months ended Six months ended
30 June 2022 30 June 2021
Actual Adjusted Actual Adjusted
Number Number Number Number
Denominator - basic
Weighted average number of equity shares 299,621,116 299,621,116 297,920,422 297,920,422
Denominator - diluted
Weighted average number of equity shares 299,621,116 299,621,116 297,920,422 297,920,422
Weighted average number of share options 12,597,744 12,597,744 16,086,406 16,086,406
Weighted average number of shares 312,218,860 312,218,860 314,006,828 314,006,828
The calculation of diluted EPS has been based on the above
profit attributable to the owners of the Company and
weighted-average number of ordinary shares outstanding after
adjusting for the effects of all dilutive potential ordinary
shares.
EPS for discontinued operations is disclosed in Note 7.
NOTE 14 - INTANGIBLE ASSETS
Following is the reconciliation of the changes in the intangible
assets:
EUR'm
Net book value of intangible assets at 1 January 2022 1,046.1
Additions 31.3
Impairment (Note 10) (20.6)
Amortisation charge for the period (50.9)
Net book value of intangible assets at 30 June 2022 1,005.9
Out of the total amortisation charge of EUR50.9 million (30 June
2021: EUR54.4 million), an amount of EUR21.9 million (30 June 2021:
EUR18.9 million) relates to the intangible assets acquired through
acquisitions.
In accordance with IAS 36, the Group regularly monitors the
carrying value of its intangible assets, including goodwill.
Goodwill is allocated to fifteen cash generating units ("CGU") (31
December 2021: fifteen), out of which two CGUs are under held for
sale.
The allocation of the goodwill in CGUs (excluding CGUs held for
sale) is as follows:
30 June 31 December
2022 2021
EUR'm EUR'm
Snai 259.6 258.7
Sports B2B 132.5 132.5
Services 109.9 109.9
Casino 50.8 50.8
Quickspin 19.8 26.8
Eyecon 3.0 16.6
Poker 15.6 15.6
Statscore 12.4 12.4
Bingo retail 9.5 9.5
Bingo VF 7.4 7.4
Videobet retail 4.6 4.6
IGS 3.7 3.7
628.8 648.5
Management reviews CGUs for impairment bi-annually, or on the
occurrence of an impairment indicator. With the exception of the
Financial segment, which is included in held for sale, the
recoverable amount of each CGU has been determined from value in
use calculations based on cash flow projections covering 5 years
plus a terminal value which have been adjusted to take into account
each CGUs' major events as expected in future periods.
Management has considered the ongoing economic uncertainty
caused by the Russian invasion in Ukraine and the Global pandemic
with a resulting higher level of judgement and uncertainty in
forecasts. A potential risk for future impairment exists should
there be a significant change in the economic outlook, versus those
trends management anticipates in its forecasts due to the
occurrence of these events.
With the exception of CGUs which have been fully impaired to
date and CGUs deemed sensitive to impairment from a reasonably
possible change in key assumptions as reviewed in further detail
below, management has calculated the growth estimates for years 1-5
applying an average annual growth rate for revenue based on the
underlying economic environment in which the CGU operates and the
expected performance over that period. Beyond this period,
management has applied an annual growth rate of 2%. Management has
included appropriate capital expenditure requirements to support
the forecast growth and assumed the maintenance of the current
level of licenses. Management has also applied post tax discount
rates to the cash flow projections as summarized in the table
below:
Average revenue Discount
growth rate Rate applied
H2 2022-H1
2027
Snai 2.6% 17.0%
Sports B2B 12.8% 14.9%
Sports B2C 31.6% 15.2%
Services 12.1% 15.8%
Casino 6.5% 14.0%
Poker 3.4% 16.8%
VB Retail 10.4% 13.3%
IGS 34.8% 14.1%
Certain CGUs which are referred to below are considered
sensitive to changes in assumptions used for the calculation of
value in use.
The recoverable amount of the Eyecon CGU, with carrying value
equal to EUR29.5 million, has been determined using a cashflow
forecast that includes annual revenue growth rates between 1.1% to
10.0% over the 1-5 year forecast period, 2% long term growth rate
and a post tax discount rate of 16.0%. The CGU has shown signs of
underperformance mainly due to the overfocusing in a specific
market and as a result the recoverable amount does not cover the
carrying value, with an impairment loss of EUR13.6 million
recognized in the consolidated statement of comprehensive income
for the period ended 30 June 2022. In case the revenue growth rate
per annum is lower by 1%, then an additional impairment of EUR2.0
million would be recognised. The same case applies if the discount
rate increases by 1% to a post-tax discount rate of 17.0%, which
would again result in an impairment of EUR1.2 million.
The recoverable amount of the Bingo VF CGU, with carrying value
of EUR21.0 million, has been determined using a cashflow forecast
that includes annual revenue growth rates between 0% to 8% over the
1-5 year forecast period, 2% long term growth rate and a post tax
discount rate of 17.0%. The recoverable amount would equal the
carrying value of the CGU if the discount rate applied was higher
by 18.5% i.e., reaching a post-tax discount rate of 20.2%. Same
case applies, if the revenue growth was lower by 1.5% when compared
to the forecasted average 5-year growth.
The recoverable amount of the Bingo Retail CGU, with carrying
value of EUR22.2 million, has been significantly impacted by
COVID-19. The recoverable amount of the Bingo Retail CGU has been
determined using a cashflow forecast that includes annual revenue
growth rates between 1% to 5% over the 1-5 year forecast period, 2%
long term growth rate and a post tax discount rate of 15.0%. The
recoverable amount would equal the carrying value of the CGU if the
discount rate applied was higher by 15.6% i.e., reaching a post-tax
discount rate of 17.4%. Same case applies, if the revenue growth
was lower by 1.5% when compared to the forecasted average 5-year
growth.
The recoverable amount of the Quickspin CGU, with carrying value
equal to EUR59.5 million, has been determined using a cashflow
forecast that includes annual revenue growth rates between 6.0% to
8.9% over the 1-5 year forecast period, 2% long term growth rate
and a post tax discount rate of 12.9%. Given the risk the CGU bears
from the current proportion of revenues being generated from B2B
customers operating in areas with geopolitical tension, a 5% risk
premium has been applied on those revenues which approximates an
overall 1% increase on the post tax discount rate of the CGU. As a
result of the above and also the decrease in the CGU performance
which is going through organizational updates, an impairment loss
of EUR7.0 million has been recognized in the consolidated statement
of comprehensive income for the period ended 30 June 2022. In case
the revenue growth rate per annum is lower by 1%, then an
additional impairment of EUR4.4 million would be recognised. The
same case applies if the discount rate increases by 1% to a
post-tax discount rate of 13.9%, which would again result in an
impairment of EUR4.5 million.
The Statscore CGU with carrying value equal to EUR12.8 million
has been deemed as a sensitive CGU due to the startup activities of
the unit and first two years of performance as part of the Group.
The recoverable amount of the Statscore CGU has been determined
using a cashflow forecast that includes annual revenue growth rates
between 33% to 65% over the 1-5 year forecasts period, 2% long term
growth rate and a post tax discount rate of 24.6%. The recoverable
amount would equal the carrying value of the CGU if the discount
rate applied was higher by 33.3% i.e., reaching a post-tax discount
rate of 32.8%. Same case applies, if the revenue growth was lower
by 9.7% when compared to the forecasted average 5-year growth.
NOTE 15 - INVESTMENTS AND DERIVATIVE FINANCIAL ASSETS
Below is a breakdown of the relevant assets at 30 June 2022 and
31 December 2021 per the consolidated balance sheet:
30 June 31 December
2022 2021
EUR'm EUR'm
A. Investment in associates 2.1 5.2
B. Other investments 8.8 8.1
C. Derivative financial assets 680.7 622.2
691.6 635.5
The following are the amounts recognised in the consolidated
statement of comprehensive income:
30 June
2022 30 June 2021
EUR'm EUR'm
Statement of comprehensive income
A. Share of (loss)/profit from associates (3.1) 0.1
B. Unrealised fair value changes on
equity investments 0.7 0.8
C. Unrealised fair value changes on
derivative financial assets 48.5 299.9
Other comprehensive income
Foreign exchange movement from the
derivative call options held in non-Euro
functional currency subsidiaries 10.0 -
56.1 300.8
Where the underlying derivative call option is held in a
non-Euro functional currency entity, the foreign exchange movement
is recorded through other comprehensive income. As at 30 June 2022,
the foreign exchange movement of the derivative call option held in
Caliplay is recorded in the consolidated statement of comprehensive
income as the derivative call option is held in a Euro functional
currency entity. The foreign exchange movement of the derivative
call option held in Wplay, Onjoc and Tenbet are recorded through
other comprehensive income as the derivative call option is held in
a USD functional currency entity.
The recognition and valuation methodologies for each category
are explained in each of the relevant sections below, including key
judgements made under each arrangement as described in Note 5.
A. Investment in associates
30 June 31 December
Balance sheet 2022 2021
EUR'm EUR'm
Caliplay - -
Alfea S.p.a 1.7 1.6
Galera 0.4 3.6
Total investment in equity accounted associates 2.1 5.2
30 June 30 June
Profit and loss impact 2022 2021
EUR'm EUR'm
Share of profit in Alfea Spa 0.1 0.1
Share of loss in Galera (3.2) -
Total profit and loss impact (3.1) 0.1
Caliplay
Background
During 2014 the Group entered into an agreement with TurÃstica
Akalli, S. A. de C.V which has since changed its name to
Corporacion Caliente SAPI ("Caliente"), the majority owner of
Tecnologia en Entretenimiento Caliplay, S. de R.L. de C.V
("Caliplay"), which is a leading betting and gaming operator which
operates the "Caliente" brand in Mexico.
Playtech made a EUR16.8 million loan to September Holdings B.V
(previously the 49% shareholder of Caliplay), a company which is
100% owned by Caliente, in return for a call option that would
grant the Group the right to acquire 49% of the economic interest
of Caliplay for a nominal amount ("Playtech Call Option").
During 2021 September Holding's 49% shareholding in Caliplay was
transferred to Caliente and the terms of the existing structured
agreement were varied, with the following key changes:
-- A new additional option (in addition to the Playtech Call
Option) was granted to Playtech which allowed Playtech to take up
to a 49% equity interest in a new acquisition vehicle should
Caliplay be subject to a corporate transaction - this additional
option is only exercisable in connection with a corporate
transaction and therefore was not exercisable at 30 June 2022
("Playtech M&A Call Option"); and
-- Caliente received a put option which would require Playtech
to acquire September Holdings BV for a nominal amount ("September
Put Option").
Playtech has no equity holding in Caliplay or Caliente and is
currently providing services to Caliplay including technical and
general strategic support services for which it receives income
(including additional B2B services fee as per Note 8). If the
Playtech Call Option or the Playtech M&A Call Option is
exercised, the Group would no longer be entitled to receive the
additional B2B services fee (and will cease to provide the related
services) which for the period ended 30 June 2022 was EUR34.4
million (Six months ended 30 June 2021: EUR22.3 million). In
addition, for 45 days after the finalisation of Caliplay's 2021
accounts, Caliente also had an option to redeem Playtech's
additional B2B services fee or (if the Playtech Call Option had
been exercised at that time) acquire Playtech's 49% stake in
Caliplay (the "Caliente Call Option"). This option was not
exercised and has therefore lapsed.
Assessment of control and significant influence
As at 30 June 2022, 31 December 2021 and 30 June 2021 it was
assessed that the Group did not have control over Caliplay, because
it does not meet the criteria of IFRS 10 Consolidated Financial
Statements, paragraph 7 due to the following:
-- Despite Playtech having a director on the Caliplay Board in
2020 and Playtech having a veto on a limited number of decisions (a
veto that has never been used in practice), there is no ability to
control the relevant activities due to the Chairman (who is
appointed by the 100% shareholder) having the casting vote; The
director was removed from the Caliplay Board in 2021.
-- Whilst they are not members of the Board, Playtech has the
ability to appoint and change both the Chief Operating Officer
("COO") and Chief Marketing Officer ("CMO") who form part of the
management team (albeit this right has never been exercised). The
COO and the CMO form part of the wider management team but not the
board and therefore are unable to control the relevant activities
of Caliplay;
-- The option, if exercised, would result in Playtech having up
to 49% of the voting rights and would not result in Playtech having
control; and
-- Whilst Playtech does receive variable returns from its
structured agreement, it does not have the power to direct relevant
activities so any variation cannot arise from such a power.
As at 30 June 2022, 31 December 2021 and 30 June 2021, the Group
has significant influence over Caliplay because it meets one or
more of the criteria under IAS 28, paragraph 6 as follows:
-- Playtech has the ability to appoint key members of the Caliplay management team;
-- The standard operator revenue by itself is not considered to
give rise to significant influence, however, when combined with the
additional B2B services fee, this is an indicator of significant
influence; and
-- The material transaction of the historic loan funding is also
an indicator of significant influence.
Accounting for each of the options
The Playtech Call Option was exercisable at 30 June 2022, 31
December 2021 and 30 June 2021, although it still has not been
exercised. As the Group has significant influence and the option is
exercisable, the investment is recognised as an investment in
associate using the equity accounting method which includes having
current access to profits and losses. The cost of the investment
was deemed to be the loan given through September Holdings of
EUR16.8 million, which at the time was assessed under IAS 28,
paragraph 38 as not recoverable for the foreseeable future and part
of the overall investment in the entity.
The Caliente Call Option has been treated as part of the
Playtech Call Option, as in substance these options are related.
The Caliente Call Option would merely serve to limit the value of
the Playtech Call Option and therefore has not been considered
separately. Furthermore, t he termination fee that would be paid by
Caliente upon exercise of the option was not recognised by the
Group as it did not meet any recognition criteria; it's upon
Caliente's discretion as to whether or not to exercise this
option.
In 2021, with the introduction of the September Put Option the
investment in associate relating to the original Playtech Call
option was reduced to zero and the EUR16.8 million original loan
amount was determined by management to be the cost of the new
Playtech M&A Call option and therefore fully offset the balance
of EUR16.8 million against the overall fair value movement of the
Playtech M&A Call Option (refer to part C of this note).
The Playtech M&A Call Option is not currently exercisable
and therefore in accordance with IAS 28, paragraph 14 has been
recognised as derivative financial asset, and disclosed separately
under part C of this note.
As per the judgement in Note 5, the Group did not consider it
appropriate to equity account for the share of profits as the
current 100% shareholder is entitled to any undistributed
profits.
Investment in Alfea S.p.a
The Group has held 30.7% equity shares in Alfea S.p.a since June
2018. At 30 June 2022 the Group's value of the Investment in Alfea
S.p.a was EUR1.7 million (31 December 2021: EUR1.6 million). A
share of profit of EUR0.1 million was recognised in the
consolidated statement of comprehensive income for the six months
ended 30 June 2022 (Six months ended 30 June 2021: EUR0.1
million).
Investment in Galera
In June 2021, the Group entered into an agreement with Ocean 88
Holdings Ltd (Galera Group) which is the sole holder of Galera
Gaming Group, a company registered in Brazil. Galera offer and
operate online and mobile sports betting and gaming (poker, casino
etc.) in Brazil under a foreign regulatory license. They will
continue to do so under the local regulatory license, when this
becomes available, and will expand to other gaming and gambling
products based on the local license conditions.
The Group's total consideration paid for the investment in
Galera was $5.0 million (EUR4.2 million) as at 31 December 2021,
which was the consideration for the option to subscribe and
purchase from Galera Group an amount of shares equal to 40% in
Galera Group at nominal price.
In addition to the investment amount paid, Playtech made
available to the Galera Group a line of credit up to $20.0 million.
As at 30 June 2022, an amount of EUR18.1 million, which is included
in loans receivable under other non-current assets (refer to Note
23) has been withdrawn (31 December 2021: EUR8.3 million). An
amount of EUR8.6 million has been loaned in the six months ended 30
June 2022.The loan is required to be repaid to Playtech prior to
any dividend distribution to the current shareholders of
Galera.
Playtech has assessed whether it holds power to control the
investee and it was concluded that this is not the case. Even if
the option is exercised, it would only result in a 40% voting right
over the operating entity and therefore no control.
Under the agreement in place:
-- the standard operator income to be generated from services
provided to Galera when combined with the additional B2B services
fee, the loan and certain other contractual rights, are all
indicators of significant influence; and
-- the Group provides standard B2B services (similar to services
provided to other B2B customers) as well as additional services to
Galera that Galera requires to assist it in successfully running
its operations which could be considered essential technical
information.
Considering the above factors, the Group has significant
influence under IAS 28, paragraph 6 over Galera.
As the option is currently exercisable and gives Playtech access
to the returns associated with the ownership interest, the
investment is treated as an investment in associate. Playtech's
interest in Galera is accounted for using the equity method in the
consolidated financial statements. Galera is still considered a
start-up and therefore is currently loss making. If the call option
is exercised by Playtech the Group will no longer provide certain
services and as such will no longer be entitled to the additional
B2B service fee. The additional B2B services fee was EURNil in the
six months ended 30 June 2022 (six months ended 30 June 2021:
EURNil).
The cost of the investment was deemed to be the price paid for
the option of $5.0 million (EUR4.2 million). A share of the loss of
EUR3.2 million was recognised in the consolidated statement of
comprehensive income in the six month period ended 30 June 2022
(Six months ended 30 June 2021: EURNil) with the resulting value of
the investment at 30 June 2022 being EUR0.4 million (31 December
2021: EUR3.6 million).
Other investment in associates that are fair valued under IAS 28
para 14
The following are also investment in associates where the Group
has significant influence but where the option is not currently
exercisable. As there is no current access to profits the relevant
option is fair valued under IFRS 9, and disclosed as derivative
financial assets under part C of this note:
-- Wplay
-- Tenbet (Costa Rica)
-- Onjoc (Panama)
The financial information required for investments in
associates, other than Caliplay, have not been included here as
from a Group perspective we do not consider them to have a material
impact jointly or separately.
B. Other investments
Balance sheet 30 June 31 December
2022 2021
EUR'm EUR'm
Listed investment - PhilWeb 2.1 0.8
Listed investment - Torque Esports Corp 0.2 0.8
Investment in Tenlot Guatemala 4.4 4.4
Investment in Tentech Costa Rica 2.1 2.1
Total other investments 8.8 8.1
Profit and loss impact 30 June 30 June
2022 2021
EUR'm EUR'm
Change in fair value of listed securities
- PhilWeb 1.3 (0.2)
Change in fair value of listed securities
- Torque Esports Corp (0.6) 1.0
Total profit and loss impact 0.7 0.8
Listed investments
The Group has shares in listed securities in PhilWeb and Torque
Esports Corp. The fair values of these equity shares are determined
by reference to published price quotations in an active market. For
the six month period ended 30 June 2022, the fair value of each of
these listed securities increased by EUR1.3 million and decreased
by EUR0.6 million respectively. The total fair value of the
shareholding in the listed investments as at 30 June 2022 is EUR2.3
million (31 December 2021: EUR1.6 million).
Investment in Tenlot Guatemala
In 2020, the Group entered into an agreement with Tenlot
Guatemala, a member of the Tenlot Group. Tenlot Guatemala commenced
its activity in 2018 and it is currently growing its lottery
business in Guatemala, expanding its distribution network and game
offering.
The Group has acquired a 10% equity holding in Tenlot Guatemala
for a total consideration of $5.0 million (EUR4.4 million) in 2020,
which has been accounted at fair value through profit and loss
under IFRS 9.
The fair value of the equity holding as at 30 June 2022 is $5.0
million (EUR4.4 million) with no movement in fair value from the
prior period.
In addition, the Group was granted a 10% equity holding in Super
Sports S.A. at no additional cost. The Group also has an option to
acquire an additional 80% equity holding in Super Sports S.A.. If
the option is exercised, the Group would no longer provide certain
services and, as such, would no longer be entitled to the
additional B2B services fee. The additional B2B services fee was
EURNil in the six months ended 30 June 2022 (six months ended 30
June 2021: EURNil). There are no conditions attached to the
exercise of the option.
The right of exercising the call option at any time and the
acquisition of the additional 80% in Super Sports S.A., gives
Playtech:
-- power over the investee;
-- exposure, or rights, to variable returns from its involvement with the investee; and
-- the ability to use its power over the investee to affect the
amount of the investor's returns.
It therefore satisfies all the criteria of control under IFRS
10, paragraph 7 and as such at 30 June 2022 Super Sport S.A has
been consolidated in the consolidated financial statements of the
Group, noting that this is not material from a Group
perspective.
Investment in Tentech Costa Rica
In 2020, the Group entered into an agreement in Costa Rica with
the Tenlot Group. The Group acquired a 6% equity holding in Tentech
CR S.A., a member of the Tenlot Group, for a total consideration of
$2.5 million (EUR2.1 million). Tentech CR S.A. sells printed bingo
cards in accordance with article 29 of the Law of Raffles and
Lotteries of Costa Rica ("CRC- Costa Rican Red Cross
Association").
The 6% equity holding in Tentech CR S.A is accounted at fair
value through profit and loss under IFRS 9.
The fair value of the equity holding as at 30 June 2022 is $2.5
million (EUR2.1 million) with no movement in fair value from the
prior period.
C. Derivative financial assets
Balance sheet 31 December
30 June 2022 2021
EUR'm EUR'm
Playtech M&A Call Option 544.9 506.7
Wplay 117.3 97.2
Onjoc 8.7 6.9
Tenbet 9.8 11.4
Total derivative financial assets 680.7 622.2
Comprehensive income impact 30 June 2022 30 June 2021
EUR'm EUR'm
Caliplay
Fair value change of Playtech M&A
Call Option (5.1) 285.0
Playtech Call Option - (16.8)
Foreign exchange movement to profit
and loss 43.3 -
Wplay
Fair value change in Wplay 11.6 26.7
Foreign exchange movement to other
comprehensive income 8.5 -
Onjoc
Fair value change in Onjoc 1.2 1.8
Foreign exchange movement to other
comprehensive income 0.6 -
Tenbet
Fair value change in Tenbet (2.5) 3.2
Foreign exchange movement to other
comprehensive income 0.9 -
Total comprehensive income impact 58.5 299.9
Caliplay
As already disclosed in section A of this note, the Playtech
M&A call option is not currently exercisable and therefore in
accordance with IAS 28, paragraph 14 has been recognised as a
derivative financial asset and fair valued under IFRS 9.
As at 31 December 2021, Caliplay was actively negotiating a
merger with a US listed Special Purpose Acquisition Corporation
("SPAC"), which in turn was expected to enter into a long-term
commercial agreement with a leading media partner. As part of the
transaction, the media partner and certain of its shareholders
would also invest a cash amount in the SPAC in exchange for shares
and warrants issued by the SPAC, which is expected to result in
them together holding a material minority equity interest.
As at 30 June 2022, a transaction with the SPAC was still under
consideration but with the probability of a transaction proceeding
being lower than at 31 December 2021. Furthermore and as per the
announcement made on 29 July 2022, with capital market conditions
having deteriorated significantly since the transaction was
initially contemplated, the transaction was no longer being pursued
in the same manner, although the Group would continue to explore
alternative opportunities with Caliplay management to build a
standalone US gaming business under the Caliente brand focused on
the Hispanic community in the US.
For this reason, a decision was taken to change the valuation
methodology used as at 30 June 2022 for the Playtech M&A Call
option to that of a DCF approach with a market exit multiple
assumption (whereas at 31 December 2021, the Group has assessed the
fair value of the Playtech M&A Call option based on the
proposed term of the expected merger with the SPAC, including the
transaction value).
Valuation
The Group has assessed the fair value of the derivative
financial asset as at 30 June 2022 using a discounted cash flow
("DCF") approach with a market exit multiple assumption. The Group
used a discount rate of 16% reflecting the cash flow risks given
the high growth rates in place, as well as a discount for
illiquidity and control until the expected Playtech exit date. The
Group also made assumptions on the probability of a possible
transaction that may be completed on a number of exit date
scenarios over a 3 year period, until June 2025. The Group used a
compound annual growth rate of 20.7% over the forecasted cash flow
period, an average Adjusted EBITDA margin of 22.6% and an exit
multiple of 9.7x. Furthermore, Playtech's share in Caliplay was
adjusted to reflect the rights to shares under certain Playtech
subcontractor agreements.
As at 30 June 2022, the fair value of the option in Caliplay was
$569.4 million (31 December 2021: $574.7 million) which converted
to EUR544.9 million (31 December 2021: EUR506.7 million). The
difference of EUR38.2 million between the fair value at 31 December
2021 and the fair value at 30 June 2022, which is mostly
attributable to the favorable movement in the USD to EUR foreign
exchange rate, has been recognised in the consolidated statement of
comprehensive income in the six month period ended 30 June 2022.
Despite the change in valuation approach, the Group considers it
reasonable that the value of the call option is broadly unchanged
given the developments in Caliplay and the broader market context.
As at 31 December 2021 the fair value of the option in Caliplay was
determined using a potential transaction price where, due to
incoming shareholders, Playtech's share in Caliplay was being
diluted down to 36%. As at 30 June 2022, a discounted cash flow
valuation method is used with no dilution in shareholding, meaning
Playtech's share in Caliplay remains at 49% post exercise.
Sensitivity analysis
The assumptions and judgements made in the valuation of the
derivative financial asset as at 30 June 2022 include the following
sensitivities, noting that factors and circumstances may arise that
are outside the Group's control which could impact the option
value:
-- A different discount rate within the range of 11% to 20% will
result in a fair value of the derivative financial asset in the
range of EUR493.1 million - EUR623.7 million.
-- A 5% fluctuation in the Adjusted EBITDA margin will result in
a fair value of the derivative financial asset within the range of
EUR516.7 million - EUR573.1 million.
-- A 10% fluctuation in the Adjusted EBITDA margin will result
in a fair value of the derivative financial asset within the range
of EUR488.5 million - EUR601.3 million.
-- A 5% fluctuation in the revenue growth rate will result in a
fair value of the derivative financial asset within the range of
EUR525.9 million - EUR564.4 million.
-- A 10% fluctuation in the revenue growth rate will result in a
fair value of the derivative financial asset within the range of
EUR507.3 million - EUR584.3 million.
-- A 1.0 fluctuation on the market exit multiple will result in
a fair value of the derivative financial asset within the range of
EUR492.6 million - EUR597.2 million.
Wplay
In August 2019, Playtech entered into a structured agreement
with Aquila Global Group SAS ("Wplay"), which had the license to
operate online gaming activities in Colombia. Under the agreement
the Group provides Wplay its technology products, where it receives
standard operator revenue and additional B2B services fee as per
Note 8. The Group has no shareholding in Wplay.
The agreement with Wplay was accounted for as a joint venture at
inception due to the terms in place giving the Group joint control.
During 2020, the contract was renegotiated resulting in the Group
having significant influence (refer to assessment below). Playtech
has a call option to acquire a 49.9% equity holding in the Wplay
business. As at 31 December 2021 this option was exercisable in
August 2022, however during 2022 , the parties agreed to defer the
Group's ability to exercise this option to August 2023. If the call
option is exercised by Playtech, the Group would no longer provide
certain services and as such will no longer be entitled to the
additional B2B services fee. The additional B2B services fee was
EURNil in the six months ended 30 June 2022 (six months ended 30
June 2021: EURNil).
The payment of EUR22.4 million made to Wplay in 2019 and 2020
was considered to be the payment made for the option in Wplay. The
amendments to the structured agreement in 2021 confirmed that these
are the full and final payments for the Wplay option with no
additional amounts payable on the exercise of the option. Under the
existing agreements with Wplay, the Group had contingent
commitments totaling $6.0 million, of which $5.0 million was paid
in June 2021 and $1.0 million is payable on certain performance
milestones in future periods (refer to Note 21).
Assessment of control and significant influence
The Group assessed whether it holds power over the investee (in
accordance with IFRS 10, paragraph 7) with the following
considerations:
-- Playtech does not have the ability to direct Wplay's
activities as it has no voting representation on the Executive
Committee or members of the Executive committee;
-- Whilst they are not members of the Executive Committee,
Playtech has the ability to appoint and change both the COO and CMO
who form part of the management team (albeit this right has never
been exercised). The COO and the CMO are part of the wider
management team but would not be able to control the relevant
activities of Wplay; and
-- If the option is exercised it would result in Playtech
acquiring 49.9% of the voting rights of the operating entity and
therefore would not result in having control. Furthermore, as at 30
June 2022 the option is not exercisable and therefore can be
disregarded in the assessment of power.
Per the above assessment Playtech does not hold power over the
investee and as such does not have control.
With regards to the assessment of significant influence, the
following facts were considered:
-- Playtech has the right to appoint and remove the COO and CMO
which are potential indicators of significant influence given their
relative positions and the involvement in day-to-day operations of
Wplay;
-- The standard operator revenue is not considered to give rise
to significant influence. However, when combined with the
additional B2B services fee , this is an indicator of significant
influence; and
-- the Group provides additional services to Wplay which Wplay
requires to assist it in successfully running its operations which
could be considered essential technical information
The Group therefore has significant influence under IAS 28,
paragraph 6 over Wplay. However, as the option is not currently
exercisable, we have an investment in associate but with no access
to profits. As such the option is fair valued as per paragraph 14
of IAS 28 and shown as a derivative financial asset in accordance
with IFRS 9.
The Group has given an interest bearing loan of $1.7 million
(EUR1.6 million) to Wplay, which is due for repayment in December
2022 and is included in loans receivable from related parties
(refer to Note 23).
Valuation
The fair value of the option at 30 June 2022 has been estimated
using a DCF approach with a market exit multiple assumption. The
Group used a discount rate of 23% (December 2021: 22.3%, June 2021:
30%) reflecting the cash flow risks given the high growth rates in
place and the relative early stages of the business, as well as a
discount for illiquidity and control until the expected Playtech
exit date of December 2026. The Group used a compound annual growth
rate of 25.7% over the forecasted cash flow period and an average
Adjusted EBITDA margin of 20.6%. As part of the agreement, there is
a lock-in mechanism that contractually might prevent Playtech from
selling the resulting shares, however an assumption was made that
if the exit date assumed in the model is earlier, then both parties
would be in agreement to this earlier exit point. Furthermore,
Playtech's share in Wplay was adjusted to reflect the rights to
shares under certain Playtech subcontractor agreements.
As at 30 June 2022, the fair value of the Wplay derivative
financial asset is EUR117.3 million. The difference of EUR20.1
million between the fair value at 31 December 2021 of EUR97.2
million and the fair value at 30 June 2022 has been recognised as
follows:
a. EUR11.6 million derived from the fair value increase of the
derivative call option calculated using the DCF model in the
consolidated statement of comprehensive income in the six month
period ended 30 June 2022.
b. EUR8.5 million derived from in the fair value increase due to
the exchange rate fluctuation of USD to EUR (as the derivative call
option is under a foreign subsidiary of the Group whose functional
currency is USD) under the other comprehensive income in the six
month period ended 30 June 2022.
Sensitivity analysis
The assumptions and judgements made in the valuation of the
derivative financial asset as at 30 June 2022 include the following
sensitivities, noting that factors and circumstances may arise that
are outside the Group's control which could impact the option
value:
-- A different discount rate within the range of 20% to 30% will
result in a fair value of the derivative financial asset in the
range of EUR91.2 million - EUR131.4 million.
-- A 5% fluctuation in the Adjusted EBITDA margin will result in
a fair value of the derivative financial asset within the range of
EUR111.8 million - EUR122.9 million.
-- A 10% fluctuation in the Adjusted EBITDA margin will result
in a fair value of the derivative financial asset within the range
of EUR106.2 million - EUR128.4 million.
-- A 5% fluctuation in the revenue growth rate will result in a
fair value of the derivative financial asset within the range of
EUR110.6 million - EUR124.3 million.
-- A 10% fluctuation in the revenue growth rate will result in a
fair value of the derivative financial asset within the range of
EUR104.3 million - EUR131.7 million.
-- If the assumed exit date is pushed out to the first available
date outside the lock-in period, then the valuation of the
derivative financial asset will be EUR109.8 million.
Onjoc
In June 2020, Playtech entered into a framework agreement with
ONJOC CORP. ("Onjoc"), which holds a license to operate online
sports betting, gaming and gambling activities in Panama.- The
Group has no equity holding in Onjoc but has an option to acquire
50%. Under the agreement the Group provides Onjoc its technology
products, where it receives standard operator revenue and
additional B2B services fee as per Note 8. If the option is
exercised, the Group would no longer provide certain services and,
as such, would no longer be entitled to the additional B2B services
fee. The additional B2B services fee was EURNil in the six months
ended 30 June 2022 (six months ended 30 June 2021: EURNil). The
option can be exercised any time subject to Onjoc having $15.0
million of Gross Gaming Revenue ("GGR") over a consecutive 12-month
period.
Assessment of control and significant influence
The Group assessed whether it holds power over Onjoc (in
accordance with IFRS 10, paragraph 7) with the following
considerations:
-- Playtech can propose an independent member to the Board of
Directors, who has to be independent to both Playtech and Onjoc,
and as such does not have the ability to direct Onjoc's activities
as it has no voting representation on the Board;
-- Playtech has the right to appoint and remove the COO, CTO and
CMO, which although would form part of the wider management team,
would not be able to control the relevant activities of Onjoc by
themselves; and
-- If the option is exercised it would result in Playtech
acquiring 50% of the voting rights of the operating entity and
therefore would not result in having control. Furthermore, as at 30
June 2022 the option is not exercisable and therefore can be
disregarded in the assessment of power.
Per the above assessment Playtech does not hold power over the
investee and as such does not have control.
With regards to the assessment of significant influence, the
following facts were considered:
-- Playtech can propose an independent member to the Board of
Directors and has the right to appoint and remove the COO, CTO and
CMO which are potential indicators of significant influence given
their relative positions and the involvement in day-to-day
operations of Onjoc;
-- The standard operator revenue is not considered to give rise
to significant influence. However, when combined with the
additional B2B services fee , this is an indicator of significant
influence; and
-- the Group provides additional services to Onjoc which Onjoc
requires to assist it in successfully running its operations which
could be considered essential technical information.
The Group therefore has significant influence under IAS 28,
paragraph 6 over Onjoc. However, as the option is not currently
exercisable, we have an investment in associate but with no access
to profits. As such the option is fair valued as per paragraph 14
of IAS 28 and shown as a derivative financial asset in accordance
with IFRS 9.
The Group has given an interest bearing loan to Onjoc of EUR1.4
million (31 December 2021: EUR1.1 million) which is due for
repayment in October 2025 and is included in loans receivable from
related parties (refer to Note 23).
Valuation
The fair value of the option at 30 June 2022 has been estimated
using a DCF approach with a market exit multiple assumption. The
Group used a discount rate of 31% (December 2021: 30.5%, June 2021:
40%) reflecting the cash flow risk given the high growth rates in
place and the early stages of the business, as well as a discount
for illiquidity and control until the expected Playtech exit date
of December 2027. The Group used a compound annual growth rate of
100.5% over the forecasted cash flow period and an average Adjusted
EBITDA margin of 18%. As part of the agreement, there is a lock-in
mechanism that contractually might prevent Playtech from selling
the resulting shares, however an assumption was made that if the
exit date assumed in the model is earlier, then both parties would
be in agreement to this earlier exit point. Furthermore, Playtech's
share in Onjoc was adjusted to reflect the rights to shares under
certain Playtech subcontractor agreements.
As at 30 June 2022, the fair value of the Onjoc derivative
financial asset is EUR8.7 million. The difference of EUR1.8 million
between the fair value at 31 December 2021 of EUR6.9 million and
the fair value at 30 June 2022 has been recognised as follows:
a. EUR1.2 million derived from the fair value increase of the
derivative call option calculated using the DCF model in the
consolidated statement of comprehensive income in the six month
period ended 30 June 2022.
b. EUR0.6 million derived in the fair value increase from the
exchange rate fluctuation of USD to EUR as the derivative call
option is under a foreign subsidiary of the group whose functional
currency is USD; under the other comprehensive income in the six
month period ended 30 June 2022.
Sensitivity analysis
The assumptions and judgements made in the valuation of the
derivative financial asset as at 30 June 2022 include the following
sensitivities, noting that factors and circumstances may arise that
are outside the Group's control which could impact the option
value:
-- A different discount rate within the range of 27% to 37% will
result in a fair value of the derivative financial asset in the
range of EUR6.8 million - EUR10.3 million.
-- A 5% fluctuation in the Adjusted EBITDA margin will result in
a fair value of the derivative financial asset within the range of
EUR8.2 million - EUR9.2 million.
-- A 10% fluctuation in the Adjusted EBITDA margin will result
in a fair value of the derivative financial asset within the range
of EUR7.8 million - EUR9.8 million.
-- A 5% fluctuation in the revenue growth rate will result in a
fair value of the derivative financial asset within the range of
EUR7.8 million - EUR9.7 million.
-- A 10% fluctuation in the revenue growth rate will result in a
fair value of the derivative financial asset within the range of
EUR7.0 million - EUR10.7 million.
-- If the assumed exit date is pushed out to the first available
date outside the lock-in period, then the valuation of the
derivative financial asset will be EUR8.1 million.
Tenbet Costa Rica
In addition to the 6% equity holding in Tentech CR S.A as per
section B of this note, the Group has an option to acquire 81%
equity holding in Tenbet. Tenbet which is another member of the
Tenlot Group, operates online bingo games and casino side games.
Playtech provides certain services to Tenbet in return for its
additional B2B services fee. The Group has no equity holding in
Tenbet but has an option to acquire 81% equity. If the option is
exercised, the Group would no longer provide certain services to
Tenbet and, as such, would no longer be entitled to the additional
B2B services fee. The additional B2B services fee was EURNil in the
six months ended 30 June 2022 (six months ended 30 June 2021:
EURNil). In H1 2022, the Group signed an amendment to the Tenbet
agreement in which the option can be exercised at any time from the
end of 35 months (previously 18 months) of Tenbet going live. The
call option to acquire 81% equity holding in Tenbet is exercisable
from July 2023 (previously February 2022).
Under the existing agreements, the Group has provided Tenbet
with a credit facility of EUR2.2 million out of which EUR1.8
million had been drawn down as at 30 June 2022 (31 December 2021:
EUR1.1 million).
Assessment of control and significant influence
The Group assessed whether it holds power over Tenbet (in
accordance with IFRS 10, paragraph 7) with the following
considerations:
-- Playtech does not have the ability to direct Tenbet's
activities as it has no voting representation on the Board of
Directors (or equivalent) or people in managerial positions;
-- Playtech has neither the ability to appoint or change any
members of the Board of Tenbet; and
-- As at 30 June 2022 the option is not exercisable and
therefore can be disregarded in the assessment of power.
Per the above assessment Playtech does not hold power over the
investee and as such does not have control.
With regards to the assessment of significant influence, the
standard operator revenue alone is not considered to give rise to
significant influence. However, when combined with the additional
B2B services fee , this is an indicator of significant influence.
Furthermore, the Group provides additional services to Tenbet which
Tenbet requires to assist it in successfully running its operations
which could be considered essential technical information. Playtech
therefore has significant influence under IAS 28, paragraph 6 over
Tenbet. However, as the option is not currently exercisable, we
have an investment in associate but with no access to profits. As
such the option is fair valued as per paragraph 14 of IAS 28 and
shown as a derivative financial asset in accordance with IFRS
9.
Valuation
The fair value of the option at 30 June 2022 has been estimated
using a DCF approach with a market exit multiple assumption. The
Group used a discount rate of 34% (December 2021: 32.7%, June 2021:
40%) reflecting the cash flow risk given the high growth rates in
place and the early stages of the business, as well as a discount
for illiquidity and control until the expected Playtech exit date
of December 2027. The Group used a compound annual growth rate of
64% over the forecasted cash flow period and an average Adjusted
EBITDA margin of -10%. As part of the agreement, there is a lock-in
mechanism that contractually might prevent Playtech from selling
the resulting shares, however an assumption was made that if the
exit date assumed in the model is earlier, then both parties would
be in agreement to this earlier exit point. Furthermore, Playtech's
share in Tenbet was adjusted to reflect the rights to shares under
certain Playtech subcontractor agreements.
As at 30 June 2022, the fair value of the Tenbet derivative
financial asset is EUR9.8 million. The difference of EUR1.6 million
between the fair value at 31 December 2021 of EUR11.4 million and
the fair value at 30 June 2022 has been recognised as follows:
a. EUR2.5 million derived from the fair value decrease of the
derivative call option calculated using the DCF model in the
consolidated statement of comprehensive income in the six month
period ended 30 June 2022.
b. EUR0.9 million derived in the fair value increase from the
exchange rate fluctuation of USD to EUR as the derivative call
option is under a foreign subsidiary of the group whose functional
currency is USD; under the other comprehensive income in the six
month period ended 30 June 2022.
Sensitivity analysis
The assumptions and judgements made in the valuation of the
derivative financial asset as at 30 June 2022 include the following
sensitivities, noting that factors and circumstances may arise that
are outside the Group's control which could impact the option
value:
-- A different discount rate within the range of 30% to 40% will
result in a fair value of the derivative financial asset in the
range of EUR7.5 million - EUR11.6 million.
-- A 5% fluctuation in the Adjusted EBITDA margin will result in
a fair value of the derivative financial asset within the range of
EUR9.3 million - EUR10.1 million.
-- A 10% fluctuation in the Adjusted EBITDA margin will result
in a fair value of the derivative financial asset within the range
of EUR8.8 million - EUR10.6 million.
-- A 5% fluctuation in the revenue growth rate will result in a
fair value of the derivative financial asset within the range of
EUR9.0 million - EUR10.6 million.
-- A 10% fluctuation in the revenue growth rate will result in a
fair value of the derivative financial asset within the range of
EUR8.1 million - EUR11.6 million.
-- If the assumed exit date is pushed out to the first available
date outside the lock-in period, then the valuation of the
derivative financial asset will be EUR9.1 million.
NOTE 16 - DEFERRED TAX
The movement on the deferred tax is as shown below:
EUR'm
Balance at 1 January 2022 14.0
Charge to profit or loss (Note 12) (12.9)
Exchange differences (0.4)
Balance at 30 June 2022 0.7
30 June 31 December
2022 2021
EUR'm EUR'm
Split as:
Deferred tax liability on acquisitions 93.0 97.2
Deferred tax liability 20.0 0.4
Deferred tax asset (set off with deferred
tax liability) (4.5) (8.7)
Deferred tax liability 108.5 88.9
Deferred tax asset 109.2 102.9
Deferred tax assets and liabilities are offset only when there
is a legal enforceable right of offset, in accordance with IAS
12.
On 31 December 2021, the Directors continued to recognise
deferred tax assets arising from temporary differences and tax
losses carried forward with the latter only to the extent that it
is probable that future taxable profit will be available against
which the unused tax losses can be utilised. Please refer to Note
12 for the assesment performed on the recognition of deferred tax
in the period.
Details of the deferred tax asset outstanding as at 30 June 2022
and 31 December 2021 are as follows:
30 June 31 December
2022 2021
EUR'm EUR'm
Deferred tax recognised on group restructuring 60.2 63.6
Tax losses 82.0 36.9
Other temporary and deductible differences (33.0) 2.4
Total 109.2 102.9
Details of the deferred tax amounts recognised in profit or loss
are as follows:
Six months Six months
ended ended
30 June 30 June
2022 2021
EUR'm EUR'm
Accelerated capital allowances 0.3 98.1
Employee pension liabilities (0.3) (0.1)
Other temporary and deductible differences (15.0) (5.1)
Tax losses 2.1 37.3
Total (12.9) 130.2
NOTE 17 - ASSETS CLASSIFIED AS HELD FOR SALE
30 June 2022 30 December 2021
EUR'm EUR'm
A. Property, plant and equipment 20.0 20.0
B. Casuals CGU - -
C. Financial CGU 523.9 487.4
D. Investment in associates - -
543.9 507.4
A. During the period ended 30 June 2021, the Group entered into
a binding agreement for the disposal of a real estate area in Milan
for a total consideration of EUR20.0 million, out of which EUR1.0
million was received during the year ended 31 December 2021. The
advances received classified as part of the liabilities directly
associated with assets were classified as held for sale.
Accordingly, the real estate has been classified as held for sale.
At the date of the transfer to asset held for sale, an impairment
review has been performed against the fair value less expected
selling costs. The carrying value of the land is higher than the
fair value less expected selling costs and therefore an impairment
of EUR12.3 million has been recognised in the consolidated
statement of comprehensive income for period ended 30 June 2021. In
addition, EUR1.8 million deferred tax liability related to the
subject land was recognised to the statement of comprehensive
income for the year ended 31 December 2021. The Group decided to
sell the asset and the prospective buyer was interested in the land
and not the buildings which lead to this impairment. The
transaction is subject to obtaining the formal approval by the
Ministry (MIPAAF) and is expected to be finalized in 2023.
B. Following the decision made by the Group in 2019 to dispose
the Casual and Social Gaming Businesses, the value of the divisions
was classified as held for sale and the results included in the
discontinued operations.
On 29 June 2020, the Group entered into an agreement for the
partial disposal of "FTX" included in this division, for a total
consideration of $1.0 million. As a result of this transaction, the
Group realised a profit of EUR0.6 million in the consolidated
statement of comprehensive income for the period ended 30 June
2020.
Furthermore, on 11 January 2021, the Group entered into an
agreement for the disposal of "Yoyo", also included in this
division, for a total consideration of $9.5 million. As a result of
this transaction, the Group realised a profit of EUR7.6 million in
the consolidated statement of comprehensive income for the period
ended 30 June 2021, included within the total profit from
discontinued operations (refer to Note 7).
As a result of the above transactions, the Social and Casual
Gaming CGU is now fully disposed.
C. Following the decision made by the Board of Directors in 2020
to dispose the Financial segment, the value of the division was
classified as held for sale and its results included in
discontinued operations.
On 26 May 2021, the Group entered into an agreement for the
disposal of its Financial segment for a cash consideration up to
$210.0 million. The shareholders voted against the transaction.
On 29 September 2021, the Group entered into an agreement for a
cash consideration of $250.0 million. The final consideration is
subject to a completion accounts adjustment of up to $25.0 million
in either direction, which is determined by the financial
performance of the Financial segment from 1 January 2021 to the
completion date.
The transaction was approved by the shareholders at the Annual
General Meeting held on 1 December 2021 and was completed on 11
July 2022. On that day, the Group received a consideration of
$233.5 million. The consideration is subject to change and there
will be a post completion process to determine the final amount
based on the actual results of the Financial segment up to 11 July
2022. As part of the completion process, both parties agreed that
the Group should pay the Buyer an additional amount related to the
completion adjustment of $5.4 million. As a result, the total
consideration for the disposal of the Financial segment is $228.1
million.
On the completion of the transaction, the Group proceeded with
the payment of the break fee of US$8.8 million to the Consortium
that had previously agreed to acquire the Financial segment, as
announced in May 2021.
At 31 December 2020 an impairment charge of EUR221.2 million was
recognised against this CGU as a result of comparing its carrying
value to expected proceeds from the disposal, less expected costs
to sell. Following a review of the net assets of the unit at 30
June 2021, when compared to the expected proceeds, EUR2.0 million
of the previously recognised impairment was reversed. The
impairment loss allocated against goodwill cannot be reversed.
The major class of assets and liabilities of the disposal group
classified as held for sale, are as follows:
30 June 2022 31 December
2021
EUR'm EUR'm
Assets
Property, plant and equipment 4.3 3.6
Right of use assets 6.3 5.5
Intangible assets 98.0 86.6
Trade and other receivables 23.2 25.6
Cash and cash equivalents 392.1 366.1
Assets classified as held for sale 523.9 487.4
Liabilities
Deferred tax liability 7.1 6.5
Trade payables and other payables 24.9 14.9
Client deposits 144.7 138.5
Client funds 147.1 170.3
Income tax payable 11.2 8.4
Lease liability 4.5 5.2
Liabilities directly associated with
the asset classified as held for sale 339.5 343.8
D. In H2 2020, the Board of Directors made a decision to dispose
of its shareholding in two associates and as such their value of
EUR2.2 million was transferred to assets held for sale. In H1 2021,
the Group entered into an agreement for the disposal of these
associates for a total consideration of EUR2.2 million.
NOTE 18 - SHAREHOLDERS' EQUITY
A. Share Capital
Share capital is comprised of no par value shares as
follows:
Number of Shares
30 June 2022 31 December
2021
Authorised N/A* N/A*
Issued and paid up 309,294,243 309,294,243
* The Company has no authorised share capital but it is
authorised to issue up to 1,000,000,000 shares of no par value.
The table below shows the movement of the shares:
Shares in Treasury Shares Shares Total
issue/circulation shares held by held by
2014 EBT 2021 EBT
Number of Number of Number Number Number
Shares Shares of Shares of Shares of Shares
At 1 January
2021 297,603,815 9,965,889 1,724,539 - 309,294,243
Transfer to
EBT - (7,028,339) - 7,028,339 -
Exercise of
options 545,406 - (545,406) - -
At 30 June 2021 298,149,221 2,937,550 1,179,133 7,028,339 309,294,243
Exercise of
options 1,095,105 - (1,095,105) - -
At 31 December
2021/1 January
2022 299,244,326 2,937,550 84,028 7,028,339 309,294,243
Exercise of
options 598,666 - (84,028) (514,638) -
At 30 June 2022 299,842,992 2,937,550 - 6,513,701 309,294,243
B. Employee Benefit Trust
In 2014, the Group established an Employee Benefit Trust ("2014
EBT") by acquiring 5,517,241 shares for a total of EUR48.5 million.
During the period ended 30 June 2022, 84,028 shares (six months to
30 June 2021: 545,406 shares) were issued to executive management
after meeting the performance/service conditions at a cost of
EUR0.6 million (Six months to 30 June 2021: EUR4.6 million). As at
30 June 2022, no shares outstanding under the 2014 EBT.
As noted above, in 2021 the Company transferred 7,028,339 shares
held by the Company in treasury to the Employee Benefit Trust
("2021 EBT") for a total of EUR22.6 million. During the period
ended 30 June 2022, 514,638 shares (six months to 30 June 2021:
Nil) were issued at a cost of EUR1.7 million (Six months to 30 June
2021: EURNil). As at 30 June 2022, a balance of 6,513,701 shares
(30 June 2021: 7,028,339 shares) remains in the 2021 EBT with a
cost of EUR20.9 million.
C. Share options
During the period, 633,570 share options were exercised (Six
months to 30 June 2021: 577,028), of which 34,904 were cash settled
(Six months to 30 June 2021: 31,622).
D. Distribution of dividend
During 2022, the Group did not pay any dividends.
E. Reserves
The following describes the nature and purpose of each reserve
within owner's equity:
Reserve Description and purpose
Additional paid Share premium (i.e. amount subscribed for
in capital share capital in excess of nominal value)
Employee Benefit Cost of own shares held in treasury by the
Trust Trust
Put/Call options Fair value of put/call options as part of
reserve business acquisition
Foreign exchange Gains/losses arising on re-translating the
reserve net assets of overseas operations
Employee termination Gains/losses arising from the actuarial re-measurement
indemnities of the employee termination indemnities
Non-controlling The portion of equity ownership in a subsidiary
interests not attributable to the owners of the Company
Retained earnings Cumulative net gains and losses recognised
in the consolidated statement of comprehensive
income
NOTE 19 - LOANS AND BORROWINGS
The main credit facility of the Group is a revolving credit
facility ("RCF") up to EUR317.0 million available until November
2023. Interest payable on the loan is based on a Euro Libor and
Libor rates based on the currency of each withdrawal up to 31
December 2021. Following the announcement of the UK Financial
Conduct Authority (FCA) as to the future cessation or loss of
representativeness of the 35 Libor benchmark, as from 1 January
2022 Libor rates replaced with the SONIA daily rate (sterling
overnight index average). As at the reporting date the credit
facility drawn amounted to EUR164.1 million (31 December 2021:
EUR167.1 million).
Under the RCF, the covenants are monitored on a regular basis by
the finance department, including modelling future projected cash
flows under a number of scenarios to stress-test any risk of
covenant breaches, the results of which are reported to management
and the Board of Directors. The covenants are as follows:
-- Leverage: Net Debt/Adjusted EBITDA 3:1
-- Interest cover: Adjusted EBITDA/Interest 4:1
As at 30 June 2022 and 31 December 2021 the Group met these
financial covenants.
NOTE 20 - BONDS
2018 Bond 2019 Bond Total
EUR'm EUR'm EUR'm
As at 1 January 2021 526.3 346.8 873.1
Notional interest on bonds 0.7 0.3 1.0
As at 30 June 2021 527.0 347.1 874.1
Notional interest on bonds 0.6 0.3 0.9
As at 31 December 2021 527.6 347.4 875.0
Notional interest on bonds 0.7 0.3 1.0
As at 30 June 2022 528.3 347.7 876.0
2018 Bond
On 12 October 2018, the Group issued EUR530 million of senior
secured notes ('2018 Bond') due in October 2023. The net proceeds
of issuing the 2018 Bond after deducting commissions and other
direct costs of issue, totalled EUR523.4 million. Commissions and
other direct costs of issue have been offset against the principal
balance and are amortised over the period of the bond.
The issue price was 100% of its principal amount and bears
interest from 12 October 2018 at the rate of 3.75% per annum
payable semi-annually, in arrears, on 12 April and 12 October
commencing on 12 April 2019.
The fair value of the liability component of the bond at 30 June
2022 was EUR522.7 million (31 December 2021: EUR536.1 million).
2019 Bond
On 7 March 2019, the Group issued EUR350 million of senior
secured notes ('2019 Bond') due in March 2026. The net proceeds of
issuing the 2019 Bond after deducting commissions and other direct
costs of issue, totalled EUR345.7 million. Commissions and other
direct costs of issue have been offset against the principal
balance and are amortised over the period of the bond.
The issue price is 100% of its principal amount and bears
interest from 7 March 2019 at a rate of 4.25% per annum payable
semi-annually, in arrears, on 7 September and 7 March commencing on
7 September 2019.
The fair value of the liability component of the bond at 30 June
2022 was EUR336.6 million (31 December 2021: EUR358.3 million).
As at 30 June 2022, the Group met the required interest cover
financial covenant of 2:1 Adjusted EBITDA/Interest ratio, for the
combined 2018 and 2019 Bonds.
NOTE 21 -CONTINGENT CONSIDERATION AND REDEMPTION LIABILITY
30 June 2022 31 December
2021
EUR'm EUR'm
Non-current redemption liability consists:
Acquisition of Statscore SP Z.O.O. 4.3 6.0
Current contingent consideration consists:
Other acquisitions 0.2 -
Total non current redemption liability
and contingent consideration 4.5 6.0
Current contingent consideration consists:
Acquisition of Eyecon Limited - 3.6
Amount payable to Aquila Global Group
SAS ("Wplay") (Note 15C) 1.0 0.8
Other acquisitions 0.6 0.6
Total current redemption liability and
contingent consideration 1.6 5.0
The maximum contingent consideration and redemption liability
payable is as follows:
30 June 2022 31 December 2021
EUR'm EUR'm
Acquisition of Eyecon Limited - 3.6
Acquisition of HPYBET Austria GmbH - 15.0
Acquisition of Statscore SP Z.O.O 15.0 15.0
Interest in Aquila Global Group SAS ("Wplay") 1.0 0.9
Other acquisitions 0.8 6.8
16.8 41.3
NOTE 22 - PROVISIONS FOR RISKS AND CHARGES
The Group is involved in proceedings before civil and
administrative courts, and other legal or potential legal actions
related to its business, including certain matters related to
previous acquisitions. Based on the information currently
available, and taking into consideration the existing provisions
for risks, the Group currently considers that such proceedings and
potential actions will not result in an adverse effect upon the
financial statements; however, where this is not considered to be
remote, they have been disclosed as contingent liabilities.
All the matters were subject to a review and estimate by the
Board of Directors based on the information available at the date
of preparation of these financial statements and, where
appropriate, supported by updated legal opinions from independent
professionals. These provisions are classified based on the
Director's assessment of the progress and probabilities of success
of each case at each reporting date.
Movement of the provisions outstanding are shown below:
Legal
and regulatory Contractual Other Total
EUR'm EUR'm EUR'm EUR'm
Balance at 31 December
2021 6.9 6.7 3.1 16.7
Provisions made during
the period 0.3 2.0 0.3 2.6
Provisions used during
the period (0.1) - (0.1) (0.2)
Provisions reversed during
the period (0.5) (1.2) (1.1) (2.8)
Balance at 30 June 2022 6.6 7.5 2.2 16.3
Legal Contractual Other Total
and regulatory
EUR'm EUR'm EUR'm EUR'm
31 December 2021
Non current liabilities 6.9 3.5 3.1 13.5
Current liabilities - 3.2 - 3.2
6.9 6.7 3.1 16.7
30 June 2022
Non current liabilities 6.6 2.3 2.2 11.1
Current liabilities - 5.2 - 5.2
6.6 7.5 2.2 16.3
Provision for legal and regulatory issues
The Group is subject to proceedings and potential claims
regarding complex legal matters (including those related to
previous acquisitions), which are subject to a different degree of
uncertainty. Provisions are held for various legal and regulatory
issues that relate to matters arising in the normal course of
business, including in particular various disputes that arose in
relation to the operation of the various licenses held by the
Group's subsidiary Snaitech. The uncertainty is due to complex
legislative and licensing frameworks in the various territories in
which the Group operates. The Group also operates in certain
jurisdictions where legal and regulatory matters can take
considerable time for the required local processes to be completed
and the matters to be resolved.
Contractual claims
The Group is subject to historic claims relating to contractual
matters that arise with customers in the normal course of business.
The Group believes they have a robust defense to the claims raised
and has provided for the likely settlement where an outflow of
funds is probable. The uncertainty relates to complex contractual
dealings with a wide range of customers in various jurisdictions,
and because as noted above, the Group operates in certain
jurisdictions where contractual disputes can take considerable time
to be resolved in the local legal system.
Given the uncertainties inherent, it is difficult to predict
with certainty the outlay (or the timing thereof) which will derive
from these matters. It is therefore possible that the value of the
provisions may vary further to future developments. The Group
monitors the status of these matters and consults with its advisors
and experts on legal and tax-related matters in arriving at the
provisions recorded. The provisions included represent the
Directors' best estimate of the potential outlay and none of the
matters provided for are individually material to the financial
statements.
Accounting for uncertain tax positions
The Group is subject to various forms of tax in a number of
jurisdictions. Given the nature of the industry and the
jurisdictions within which the Group operates, the tax, legal and
regulatory regimes are continuously changing and subject to
differing interpretations. As such the Group is exposed to a small
number of uncertain tax positions and open audits / enquiries.
Judgement is applied in order to adequately provide for uncertain
tax positions where it is believed that it is more likely than not
that an economic outflow will arise. The Group has provided for
uncertain tax positions which meet the recognition threshold and
these positions are included within tax liabilities. There is a
risk that additional liabilities could arise. Given the uncertainty
and the complexity of application of international tax in the
sector, it is not feasible to accurately quantify any possible
range of liability or exposure, and this has therefore not been
disclosed.
NOTE 23 - RELATED PARTIES
Parties are considered to be related if one party has the
ability to control the other party or exercise significant
influence over the other party's making of financial or operational
decisions, or if both parties are controlled by the same third
party. Also, a party is considered to be related if a member of the
key management personnel has the ability to control the other
party.
During the six months ended 30 June, the Group companies entered
into the following transactions with related parties who are not
members of the Group:
Six months ended Six months ended
30 June 2022 30 June 2021
EUR'm EUR'm
Revenue
Associates and structured agreements 63.4 43.7
Operating expenses
Associates and structured agreements 0.1 -
Interest income
Associates and structured agreements 0.3 -
Share of (loss)/profit from associates and joint ventures (3.1) 0.1
The following amounts were outstanding at the reporting
date:
30 June 2022 31 December 2021
EUR'm EUR'm
Trade receivables
Associates and structured agreements 12.7 16.5
Loans and interest receivable - current
Associates and structured agreements 3.0 2.4
Loans and interest receivable - non current
Associates and structured agreements 19.9 9.5
The Group is aware that a partnership in which a member of key
management personnel (who is not a Board Member) has a
non-controlling interest, provides certain advisory and consulting
services to third party service providers of the Group in
connection with certain of the Group's structured and other
commercial agreements. The partnership contracts with and is
compensated by the third-party service providers, and the Group has
no direct arrangement with the partnership. The total paid to this
partnership by the third-party service providers was EUR4.5 million
(30 June 2021: EUR1.5 million).
NOTE 24 - CHANGES IN LIABILITIES ARISING FROM FINANCING
ACTIVITIES
Liabilities
Loans and Bonds Interest Contingent Lease Total
borrowings on loans and consideration liabilities
borrowings and redemption
and bonds liability
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
Balance at 1 January 2022 167.1 875.0 10.4 11.0 95.3 1,158.8
Changes from financing cash
flows
Interest paid on bonds and
loans and borrowings - - (19.5) - - (19.5)
Payment of contingent consideration
and redemption liability - - - (4.0) - (4.0)
Principal paid on lease liability - - - - (11.7) (11.7)
Interest paid on lease liability - - - - (2.9) (2.9)
Total changes from financing
cash flows - - (19.5) (4.0) (14.6) (38.1)
Other changes
Liability related
New leases - - - - 4.4 4.4
On acquisitions - - - 0.7 - 0.7
Interest on bonds, bank borrowings
and other borrowings - 1.0 19.3 - - 20.3
Interest on lease liability - - - - 2.9 2.9
Movement in deferred and contingent
consideration and redemption
liability - - - (1.7) - (1.7)
Foreign exchange difference (3.0) - - 0.1 (0.2) (3.1)
Total liability related other
changes (3.0) 1.0 19.3 (0.9) 7.1 23.5
Balance at 30 June 2022 164.1 876.0 10.2 6.1 87.8 1,144.2
Liabilities
Loans and Bonds Interest Contingent Lease Total
borrowings on loans and consideration liabilities
borrowings and redemption
and bonds liability
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
Balance at 1 January 2021 308.9 873.1 10.5 9.7 88.3 1,290.5
Changes from financing cash
flows
Interest paid on bonds and
loans and borrowings - - (20.3) - - (20.3)
Repayment of loans and borrowings (100.0) - - - - (100.0)
Payment of contingent consideration
and redemption liability - - - (0.8) - (0.8)
Principal paid on lease liability - - - - (11.1) (11.1)
Interest paid on lease liability - - - - (2.7) (2.7)
Total changes from financing
cash flows (100.0) - (20.3) (0.8) (13.8) (134.9)
Other changes
Liability related
New leases - - - - 2.4 2.4
Interest on bonds, bank borrowings
and other borrowings - 1.0 20.0 - - 21.0
Interest on lease liability - - - - 2.7 2.7
Movement in deferred and contingent
consideration and redemption
liability - - - 2.2 - 2.2
Payment of contingent consideration
related to investments - - - (4.0) - (4.0)
Foreign exchange difference 5.4 - - - 1.7 7.1
Total liability related other
changes 5.4 1.0 20.0 (1.8) 6.8 31.4
Balance at 30 June 2021 214.3 874.1 10.2 7.1 81.3 1,187.0
NOTE 25 - EVENTS AFTER THE REPORTING DATE
The disposal of the Financial segment was completed on 11 July
2022 for a total consideration of $219.3 million (net off of break
fee of $8.8 million and the final consideration adjustment of $5.4
million), resulting in an estimated profit of EUR8.3 million.
On 15 July 2022, the Group repaid the outstanding balance of the
RCF.
As disclosed in Note 15, the Group has been exploring a possible
transaction regarding an agreement with Caliente which would allow
Caliplay to penetrate the US market with Caliplay being acquired by
a US listed special purpose acquisition company ("SPAC"). Capital
market conditions have deteriorated significantly since the
transaction was initially contemplated and, accordingly, this
transaction is no longer being pursued in the same manner. However,
the Group continues to explore alternative opportunities with
Caliplay management to build a standalone US gaming business under
the Caliente brand focused on the Hispanic community in the US.
Both parties also continue to have discussions with the SPAC and
its associates regarding this alternative opportunity. Discussions
are at an early stage and further updates will be made if
appropriate.
[1] Employee stock option expenses relate to non cash expenses
of the Group and differ from year to year based on the share price
and the number of options granted.
[2] Professional fees incurred for: (a) the potential
reorganization of the Group following the exercise of Playtech
M&A Call Option (Note 15) and (b) the potential sale of the
Group. These expenses are not considered ongoing costs of
operations and therefore are excluded.
[3] Fair value change and finance costs on redemption liability
related to the acquisition of Statscore. These expenses are not
considered ongoing costs of operations and therefore are
excluded.
[4] Financial support provided to the Ukraine employees. These
expenses are not considered ongoing costs of operations and
therefore are excluded.
[5] Payment to terminate an onerous contract with a former
service provider. This expense is not considered ongoing costs of
operations and therefore is excluded.
[6] Fair value change of equity investments and derivative
financial assets. These are excluded from the results as they
relate to unrealised profit/loss. Refer to Note 15.
[7] Impairment of intangible assets relates to the impairment of
Eyecon and Quickspin CGU. Refer to Note 14.
[8] Amortisation and deferred tax on intangible assets acquired
through business combinations in prior years. Costs directly
related to acquisitions are not considered ongoing costs of
operations and therefore
are excluded.
[9] Change in estimates related to uncertain overseas tax
positions in respect of prior years.
[11] Employee stock option expenses relate to non cash expenses
of the Group and differ from year to year based on the share price
and the number of options granted.
[12] Professional fees incurred for: (a) the reorganization of
the Group following the potential exercise of Playtech M&A Call
Option (Note 15) and (b) the potential sale of the Group. These
expenses are not considered ongoing costs of operations and
therefore are excluded.
[13] Fair value change and finance costs on redemption liability
and contingent consideration related to the acquisition of
Statscore and the contingent commitments of Wplay as discussed in
Note 15. These expenses are not considered ongoing costs of
operations and therefore are excluded.
[14] In 2020, the Board of Directors approved a GBP3.0 million
COVID-19 Recovery and Resilience Fund. Out of which GBP1.9 million
was spent in the period ended 30 June 2021. This is a one-off
payment and therefore is excluded.
[15] Settlement of legal matter which is not considered a
recurring cost and therefore is excluded.
[16] Fair value change of equity investments and derivative
financial assets. These are excluded from the results as they
relate to unrealised profit/loss.
[17] Impairment of tangible and intangible assets mainly relates
to the impairment of land before the classification as held for
sale
[18] Amortisation and deferred tax on intangible assets acquired
through business combinations in prior years. Costs directly
related to acquisitions are not considered ongoing costs of
operations and therefore are excluded.
[19] The recognition of EUR90.3 million of deferred tax asset
relates to the special project the Group completed on 1 January
2021 to move the tax residency of a number of companies from the
Isle of Man to the UK. Please refer
to Note 12 for further details.
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END
IR PPUCABUPPUCP
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