TIDMPTEC
RNS Number : 9885T
Playtech PLC
23 March 2023
Playtech plc
("Playtech", the "Company", or the "Group")
Excellent FY 2022 performance; well placed for FY 2023
Playtech (LSE: PTEC), the leading platform, content and services
provider in the online gambling industry, today announces its final
results for the year ended 31 December 2022.
Financial summary (continuing operations)(1)
Change Change (const.
FY 2022 FY 2021 (reported) currency)(4)
---------------------------- ------------ ----------- ----------- --------------
Revenue EUR1,601.8m EUR1,205.4m 33% 31%
Adjusted EBITDA(2) EUR405.6m EUR317.1m 28% 22%
Adjusted post-tax profit(3) EUR160.5m EUR127.6m 26% 4%
Reported post-tax profit(3) EUR40.6m EUR686.7m -94% -96%
Adjusted diluted EPS 51.5 EURc 40.9 EURc 26% 4%
220.1
Reported diluted EPS 13.0 EURc EURc -94% -96%
Summary
-- Excellent FY 2022 driven by continued strength in regulated B2B markets, and Snaitech.
-- Record Adjusted EBITDA of EUR405.6 million, up 28% vs. 2021.
-- Landmark agreement signed with Hard Rock Digital in Q1 2023,
accelerating the US strategy and providing growth opportunities
globally.
-- Ahead of its B2B investor event later today, Playtech is
pleased to announce a new medium term Adjusted EBITDA target for
B2B of EUR200 - 250 million.
-- Strong start to 2023 in spite of the broader macroeconomic and geopolitical uncertainty.
Divisional highlights
B2B Gambling
-- Very strong growth within regulated markets helped to deliver
total B2B revenue of EUR632.4 million in 2022, growing 14% (+11% at
constant currency).
-- B2B Adjusted EBITDA was EUR160.2 million compared to EUR139.2
million in 2021, achieved against the backdrop of the war in
Ukraine where we employ over 700 colleagues (c.10% of our
workforce).
-- Europe ex-UK grew 31% at constant currency to EUR184.6
million driven primarily by Netherlands with strong contributions
from Poland, Spain and Ireland.
-- Americas continued to perform well with revenues of EUR144.7
million and 27% constant currency revenue growth. Caliente in
Mexico remained a key driver of strong revenue growth while the
Brazil market also performed very well in 2022 and offers
significant opportunity going forward, as this market moves towards
regulation.
-- Significant progress made executing the US strategy:
- Landmark agreement signed with Hard Rock Digital in early
2023.
- Launched the IMS platform with Parx Casino in Pennsylvania,
involving a complex migration off a competitor's platform.
- Signed several new deals including Golden Nugget, WynnBET,
Resorts and 888 which are expected to go live in the coming
months.
- Licences granted in Pennsylvania and Colorado in 2022. Ohio
and Maryland licences granted in early 2023. Now licensed in 9
states with further applications progressing.
-- Launched with NorthStar in recently regulated Ontario, Canada
in early 2022; recently announced an extension of the relationship
and a strategic investment in NorthStar to ensure we are well
positioned to benefit from the attractive Canadian market.
-- 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.
-- The higher margin SaaS offering continues to gain traction
with over 100 further brands added in 2022, bringing the total to
over 350.
-- Asia revenue declined 18% (-21% 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 due to collection delays, recognised
in H1.
B2C Gambling
-- Total B2C revenue (including Snaitech and white-label) grew
48% year on year to EUR983.1 million (2021: EUR663.7 million).
Adjusted EBITDA was EUR245.4 million compared to EUR177.9 million
in 2021.
-- Snaitech Adjusted EBITDA grew 39% to EUR254.2 million (2021:
EUR182.6 million) driven by retail sites reopening at the end of
June 2021 post-pandemic.
-- Snaitech's online business performed ahead of expectations
with revenue growth of +2% versus 2021, despite the reopening of
retail sites. The second half saw revenue growth of +10% v H2 2021,
as Playtech continues to leverage the structural shift to online.
Adjusted EBITDA margins remained high at 56% in 2022 versus 59% in
2021.
-- Snaitech maintained its number one position by brand across
retail and online sports betting in Italy in 2022.
-- HAPPYBET, now integrated into Snaitech's operations, remained
loss-making, with EBITDA of EUR-10.8 million (FY21: EUR- 11.4
million) but strategic and operational measures have been taken
such as upgrading HAPPYBET's technology infrastructure.
-- Sun Bingo White Label saw 5% revenue growth to EUR65.3
million while Adjusted EBITDA fell to EUR2.0 million (2021: EUR6.7
million). Reported EBITDA includes a EUR10.4 million charge in H1
to terminate an onerous contract. The termination of the agreement
will positively impact the profitability of the business going
forward.
Financial and corporate highlights
-- Strong cash generation in 2022, with adjusted operating cashflow (5) of EUR397 million.
-- October 2023 bond partly repaid generating significant cash
interest savings; additional refinancing options being considered
for remaining EUR200 million October 2023 bond.
-- Sale of Finalto for cash consideration of $228.1 million was
completed in July 2022 with a profit on disposal of EUR15.1
million, marking a significant step in Playtech's stated strategic
objective to simplify the Group.
-- Disposal of 100% of Statscore to LSports, and simultaneously
acquiring a 30.89% stake in LSports, a provider of data to
sportsbooks and media companies to increase our footprint in the
growing sports data market.
-- In 2023, Playtech announced an equity investment in
NorthStar, the proceeds of which will be used to accelerate the
growth of NorthStar's footprint across Ontario and future regulated
markets across Canada.
-- Landmark agreement signed with Hard Rock Digital in early
2023. As part of the agreement, Playtech has also invested $85
million (c.EUR80 million) in exchange for a low single digit %
minority equity ownership stake.
-- Reported profit of EUR40.6 million (2021: EUR686.7 million).
Prior year included a significant gain on equity call options
embedded in the Company's agreements in the Americas.
Current trading and outlook
-- The macroeconomic outlook remains uncertain given geopolitical and inflationary pressures.
-- Despite this, Playtech has had a strong start to 2023, driven
by Snaitech and Caliente and highlighting the resilience of
Playtech's increasingly diversified portfolio.
-- Playtech has announced a new medium term Adjusted EBITDA
target for B2B of EUR200 - 250 million.
-- Snaitech medium term Adjusted EBITDA guidance maintained at EUR300 - 350 million.
-- Strength of balance sheet further improved by strong gash
generation and proceeds from sale of Finalto; financial position
gives flexibility for future shareholder distributions and
M&A.
-- Given the strong performance in 2022, and momentum within the
business, the Board remains confident in Playtech's ability to
execute on growth opportunities across both B2B and B2C
divisions.
Mor Weizer, CEO, commented:
"2022 was a year of considerable strength for Playtech, in which
we delivered record revenues and EBITDA, ahead of market
expectations. All parts of the business contributed to this
performance, with B2B powered by Europe (ex-UK) and the Americas,
and B2C's impressive performance underpinned by Snaitech's
continued strength in the Italian market in both retail and
online.
"Strategically we have also continued to deliver, executing the
successful sale of Finalto continuing our simplification strategy,
and making great progress in North America with the launch of the
IMS platform with Parx Casino in Pennsylvania and having signed
several significant new deals including Golden Nugget, WynnBET,
Resorts and 888.
"We have started the new financial year well and announced the
signing of the landmark transaction with Hard Rock Digital, and in
spite of the continued macro-economic and political uncertainty,
remain confident in our future prospects, as well as our ability to
deliver value to all our stakeholders in a sustainable and
responsible way. I would like to take this opportunity to thank my
colleagues and partners for their continued dedication and support.
In particular, I'd like to acknowledge the bravery of our
colleagues in the Ukraine and praise the work of our crisis
management team, who have worked tirelessly to support our
Ukrainian colleagues and their families."
- Ends -
For further information contact:
+44 (0) 20 3805
4822
Playtech
Mor Weizer, Chief Executive Officer
Chris McGinnis, Chief Financial Officer
c/o Headland
+44 (0) 20 3805
Sandeep Gandhi, Head of Investor Relations 4822
Headland (PR adviser to Playtech) +44 (0) 20 3805
Lucy Legh, 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, as well as material reorganisation and acquisition-related
costs. The Board of Directors believes that the adjusted results
more closely represent the consistent trading performance of the
business. A full reconciliation between the actual and adjusted
results is provided in Note 10.
(3) Adjusted Profit refers to post-tax Profit from continuing
operations attributable to the owners of the Company after the
relevant adjustments as detailed above. Reported Profit refers to
post-tax Profit from continuing operations attributable to the
owners of the Company before adjustments.
(4) 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.
(5) Adjusted operating cash flow refers to net cash provided by
operating activities from continuing operations after adjusting for
change in jackpot balances, client deposits, professional fees and
ADM security deposit.
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/6411733233aa1a12000ef0a9/ngfsw
Analysts and investors can also dial into the call using the
following details:
United Kingdom (Local): +44 20 3936 2999
United Kingdom (Toll-Free): +44 808 189 0158
Global Dial-In Numbers
Access Code: 125238
The presentation slides will be available today from 8.30am
at:
http://www.investors.playtech.com/results-centre/presentations/2022.aspx
A B2B Investor Event will be held today at 10.30am via a live
audio webcast accessible using this link:
https://www.investis-live.com/playtech/6411c9e74aa86d150020ab23/tyen
Analysts and investors can also dial into the call using the
following details:
United Kingdom (Local): +44 20 3936 2999
United Kingdom (Toll-Free): +44 808 189 0158
Global Dial-In Numbers
Access Code: 054134
The presentation slides will be available today from 10am
at:
http://www.investors.playtech.com/results-centre/presentations/2022.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 7,000 employees
across 20 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.
Chairman's statement
I am delighted to report another highly successful year for
Playtech, albeit one in which we had to contend with a challenging
economic backdrop and significant disruption from the war in
Ukraine.
Despite these circumstances, we delivered strong growth and made
significant progress against our strategy. This underlines both the
resilience of our business model as well as the ability, commitment
and dedication shown across all levels of the business.
I would like to thank my Board colleagues, the Executive
Management and the wider team, together with our advisers, who have
worked tirelessly to deliver these excellent financial, operational
and strategic results against a challenging backdrop. Their efforts
have been the foundation of our success this year.
Strong progress from all corners of the business
Playtech made significant progress throughout 2022 across both
the B2B and B2C businesses, further diversifying its portfolio and
positioning the Group to capitalise on the exciting opportunities
ahead:
-- In the US, Playtech expanded its footprint with Parx,
launching its IMS platform in Pennsylvania. In early 2023, Playtech
also signed a landmark agreement with Hard Rock Digital that
accelerates our US strategy and provides significant growth
opportunities globally.
-- Good progress was made in Canada, with Playtech signing an
agreement with NorthStar to launch a broad suite of products in
this newly regulated market, along with extending the relationship
further and taking an equity investment in NorthStar in early 2023,
incorporating elements of the strategic agreement model employed
successfully in other markets.
-- In Latin America, Playtech's presence continues to go from
strength to strength, with existing agreements in Mexico and
Colombia seeing excellent growth in the period. Playtech is ideally
positioned to benefit from growth in the soon to be regulated
Brazil market. Playtech opened a new Live Casino facility in Peru
as it continues to expand its presence across the region.
-- Snaitech has continued to exceed expectations with the online
segment proving resilient despite the reopening of retail sites,
while it also maintained its number one position by brand across
retail and online sports betting in Italy. Fabio Schiavolin, CEO of
Snaitech, discussed the opportunity for the business at an investor
event hosted in September 2022.
Corporate Activity
The impressive performance delivered in 2022 is all the more
notable given the intensity of the corporate activity that Playtech
has been involved in. Taken together, this activity shone a
spotlight on the quality of Playtech's strategy, operations,
technology, and people, whose commitment and expertise continue to
drive Playtech from strength to strength.
Offer and further approach for Playtech
In October 2021, the Board recommended an all-cash offer from
Aristocrat at a 58% premium to the prevailing share price.
Ultimately, at the Court and General Meetings held on 2 February
2022, Aristocrat's proposal did not achieve the requisite 75% level
of shareholder approval needed for its offer to progress.
Shortly after Aristocrat's proposal lapsed, Playtech received an
approach by an investor group formed and advised by TTB Partners
Limited. On 14 July 2022, TTB Partners advised that it did not
intend to make an offer for the Company due to challenging
underlying market conditions.
Finalto Sale Completed
We were delighted to complete the sale of Finalto in July 2022.
This represented a significant step in our stated strategy to
simplify the Group and focus our efforts on the high-growth B2B and
B2C gambling markets.
Board changes
As our Company evolves, so too does its Board. After five years
as Chief Financial Officer (CFO), Andrew Smith stepped down from
the Board in November 2022. Andrew contributed significantly to
Playtech's strategy and helped guide the business through a period
of substantial transformation. We wish him all the best in his
future endeavours.
It's a testament to the succession planning work of the
Nomination Committee and the Board that we've had such a seamless
transition with Chris McGinnis becoming our new CFO. Chris has done
a superb job as Deputy CFO and Director of Investor Relations, and
I believe that his deep knowledge of Playtech will be invaluable in
the years ahead.
Since the start of the new year, we have also welcomed Samy Reeb
to the Board as a Non-Executive Director. We are already reaping
the benefits of his broad skillset and extensive experience of
working with global businesses.
One of my highest priorities when joining Playtech was to
address the balance of the Board. While we have made good progress
towards improving the Board's gender diversity, there is still work
to be done and we are actively focused on taking further steps
towards meeting our ambition of having a more diverse Board.
Sustainability
Following an intense period of corporate activity last year, we
enter 2023 with a renewed focus on issues around the environment,
sustainability, and our wider contribution to communities and
society. Our Sustainable Success strategy is central to this and
sets out an ambitious plan for how we intend to bring the
principles of sustainability and responsible business into
everything we do.
Despite the competing priorities of a busy year, our newly
formed Sustainability and Public Policy Board Committee met
regularly to review, monitor and advise on Playtech's
sustainability, responsible business and public policy matters. The
Committee also ensures the continued effectiveness of Playtech's
ESG strategy, ensuring that we remain truly forward looking and
progressive in our plans.
Ukraine/People
The backdrop of the war in Ukraine has put a significant strain
on our people and on the communities in which we operate. While we
took quick and decisive action to minimise disruption to our
business, we are mindful that our colleagues and their families who
remain in Ukraine continue to face very real and dangerous
challenges every day as the war continues. I'm proud of the
response from our people who have maintained contact with those
colleagues in Ukraine, assisted with relocation efforts and
provided emergency supplies. We remain committed to doing
everything we can to ensure their safety during these difficult
times.
Our people are our greatest asset and I want to thank everyone
for their hard work in helping us to navigate the challenges of the
past year and deliver such a strong set of results.
Looking forward
Whilst we anticipate many of the challenges faced last year to
continue into 2023, I am confident that Playtech's clear and proven
strategy across both the B2B and B2C divisions positions us well to
build on our progress and deliver another outstanding performance
in the year ahead.
Chief Executive Officer's Review
Overview
Playtech made excellent progress on its strategic priorities
throughout 2022, with growth in both the B2B and B2C businesses. As
a result, the Group enters 2023 well-positioned to execute on
compelling market opportunities across both B2B and B2C.
Playtech's B2B Gambling business remains focused on
opportunities in regulated or soon to be regulated markets. The
Group continues to target high-growth markets including the US,
Latin America and certain parts of Europe. In addition to growing
in the attractive Live market, Playtech continues to expand its
portfolio of strategic agreements. These helped the B2B segment to
deliver revenue growth of 14% (+11% on a constant currency basis)
in 2022. At the profit level, B2B Adjusted EBITDA grew a healthy
15% to EUR160.2 million in 2022 compared to EUR139.2 million in
2021.
In the US & Canada, Playtech made great strides to establish
itself as one of the key players in this market. The long-term
opportunity across Playtech's full product suite remains
significant. In early 2023, a landmark agreement was signed with
Hard Rock Digital to provide Casino and Live, amongst other
content, in North America , accelerating our US strategy. In
addition, having signed with Parx Casino in 2021 in the US,
Playtech grew its footprint with Parx by launching its IMS platform
in Pennsylvania and entered Ohio and Maryland in 2023.
Playtech also signed several new deals in the period, including
Golden Nugget (for Casino and Live in New Jersey and Michigan),
WynnBET (multi-state deal to launch Live and Casino), while 888 and
Resorts Digital Gaming (both signed up for Casino and Live in New
Jersey). Good progress was also made in Canada where Ontario became
the first province in Canada to regulate online gambling. This has
continued into 2023 with Playtech announcing in February that it
has taken an equity investment in NorthStar and extended the scope
of its relationship.
Playtech's presence in Latin America continues to go from
strength to strength as existing agreements with Caliente in Mexico
and Wplay in Colombia continue to perform well. Playtech also
opened a new Live Casino facility in Peru as it continues to extend
its presence across the region. Looking ahead, the Company is
looking forward to growing our presence in the exciting, soon to be
regulated Brazil market.
Playtech remains committed to diversifying its B2B division by
bringing on new brands and licensees. As well as making progress
with new strategic agreements and joint ventures, Playtech also
maintained its track record of attracting new brands to its SaaS
offering. Playtech launched over 100 brands in the period, with
more than 350 new brands now live since launching the SaaS offering
back in 2019.
Playtech's B2C Gambling business, Snaitech, recorded another
remarkable performance as revenue grew 54% compared to 2022.
Adjusted EBITDA, meanwhile, was 39% higher than the previous year,
benefitting from retail sites in Italy remaining open throughout
the year as well as the strength of online. The online segment
continues to see impressive growth, 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 2022, cementing its
reputation for consistent operational and brand strength, whilst
also being a fast-growing player in Italy in the online sector when
measured by GGR.
The sale of Finalto was completed in July 2022 for cash proceeds
of $228.1 million resulting in a profit on disposal of EUR15.1
million and represents a significant step forward in the Group's
strategy to simplify the Group, allowing it to focus on the
high-growth B2B Gambling B2C Gambling markets.
Playtech's strong performance in 2022 was underpinned by the
energy, enthusiasm and professionalism of the Company's employees.
They are the lifeblood of the business and do an outstanding job
supporting the Group's customers.
Supporting the Playtech family in Ukraine
It has been more than a year since Russia's invasion of Ukraine
and unfortunately the conflict continues to have a devastating
impact. While the Group's continuity plans mean that Playtech has
experienced minimal disruption to its business activities, the 700
employees based in Ukraine remain front of mind. Playtech is
committed to doing everything it can to ensure the safety of them
and their families.
The Board and management team continue to be moved by the
generosity and support that the Group's colleagues have
demonstrated in maintaining contact with those who remain in
Ukraine. Despite the other pressures facing the business last year
- including significant corporate activity - they have constantly
sought to do whatever they can to provide assistance in the form of
ongoing communications, logistics and financial support.
B2B Gambling
Core B2B Gambling
Regulated markets
Playtech's B2B Gambling business remains focused on
opportunities in regulated or soon to be regulated markets. The
Group continues to target high-growth markets, including the US,
Latin America and certain parts of Europe.
Regulated markets delivered revenue growth of 22% (+18% on
constant currency basis) compared to FY 2021, driven by strong
revenue growth from the Group's partners in Latin America, Holland
Casino in the Netherlands as well as strong growth in other
regulated markets such as Poland, Spain and Ireland.
The Americas
The Americas is at the centre of our strategy for Core B2B
Gambling. The region maintained its impressive record of growth,
with FY 2022 revenue up 43% (+27% at constant currency) compared to
FY 2021. This was powered by strong growth from Caliente as well as
increasing contributions from other customers including Parx in the
US.
Accelerating the Group's presence in the US remains a key
strategic priority for Playtech, as proven by the strides taken
last year to capitalise on the favourable regulatory environment.
Having signed a strategic agreement with Parx Casino in 2021,
Playtech has been increasing its footprint with Parx and this is
starting to translate into greater revenue contribution. In 2022,
Parx launched its IMS platform in Pennsylvania, which involved a
complex migration, and will serve as a useful blueprint for future
deals. In addition, Playtech launched its IMS, Casino and POP
products in New Jersey, while in 2023, the IMS was rolled out in
Ohio and Maryland. Playtech now has a presence with Parx in
Michigan, Pennsylvania, New Jersey, Ohio and Maryland. Further
product launches in additional states with Parx are expected going
forward. Pokerstars also launched the Casino product in New Jersey,
while 888 launched Live Casino in Michigan in 2023.
Several new deals were also signed in the US, including Golden
Nugget (Casino and Live in New Jersey and Michigan), Rush Street
Interactive (multi-state deal for Casino), WynnBET (multi-state
deal to launch Casino and Live), while 888 and Resorts Digital
Gaming both signed up for Casino and Live in New Jersey.
In March 2023, Playtech signed a landmark agreement with Hard
Rock Digital, the exclusive, global vehicle for online for Hard
Rock International, to provide Casino and Live amongst other
content, in North America. These products will also be supplied
outside of North America in addition to the IMS and services
including marketing and operations. As part of the agreement,
Playtech has also invested EUR80 million in exchange for a low
single digit % minority equity ownership stake, the proceeds of
which will be used to help fund Hard Rock Digital continued global
expansion.
Meanwhile, Playtech delivered several significant product
launches across core markets. In the newly regulated Canadian
province of Ontario, NorthStar launched multiple products. In
addition, Bet365 and 888 both went live in Ontario with Casino and
Live on the first day the market became regulated. Towards the end
of 2022, Fanduel, Mansion and Casumo all launched the Casino and
Live products.
In February 2023, Playtech announced an expansion of its
partnership with NorthStar. Playtech has taken an equity investment
in NorthStar. The proceeds of this investment will be used to
accelerate the growth of NorthStar's footprint across Ontario and
future regulated markets across Canada. The agreement also expands
the scope of Playtech's offering to NorthStar to include
operational and marketing services, in addition to the IMS
platform, Casino, Live, Poker and Bingo solutions already
launched.
Playtech delivered against its commitment to further expand its
infrastructure in high-growth markets, such as the US. Having
already opened Live studios in New Jersey and Michigan, another
Live facility is under construction in Pennsylvania and is expected
to open in 2023. Behind the Company's growing physical presence are
an increasing number of employees focused on sales, operations and
back-office functions, taking head count to more than 130 at the
end of 2022.
Following the repeal of PASPA in 2018, each year that passes has
seen a growing number of states approve legislation to legalise
sports betting. While 2022 saw further progress, California was
notable in voting to reject the legalisation of online sports
betting and in-person sports betting at tribal casinos and private
horse tracks. This may delay legislation in states that have yet to
approve sports betting, but the expectation remains that these
states will eventually look to approve legislation. In 2022,
Playtech received licences for Pennsylvania, Colorado and Ohio with
Maryland received in 2023, taking the total number of US states
where Playtech has a licence to 9.
Online casino is allowed at the discretion of individual states.
No new states have authorised Online casino in 2022, although there
are several states where iGaming legislation is being
considered.
Playtech's presence in Latin America continues to go from
strength to strength with existing agreements with Caliente in
Mexico and Wplay in Colombia continuing to perform well. Looking
further ahead, Playtech is well-positioned to continue its growth
and capitalise on other strategic agreements in Latin America in
the years ahead.
Playtech also opened a new Live Casino facility in Peru, giving
the Company a strong base from which to serve both its existing
clients in Latin America and prospective clients in newly regulated
markets in the region. Several customers, such as Wplay, bet365 and
BetVictor, have launched tables in the new Live facility with
demand proving strong so far. Given the success of legislation in
markets like Colombia, Playtech anticipates continued favourable
regulation and strong growth in the region in the years to
come.
One example of this is in Brazil, where sports betting
legislation has been passed and 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 ex-UK
2022 B2B revenue growth in Europe ex-UK of 31% (+31% at constant
currency) was driven by strong growth across several countries,
including Netherlands, Spain, Poland and Ireland.
The move towards greater regulation in Europe continues to
represent significant growth opportunities. The first full year of
Playtech's new, expanded long-term strategic software and services
agreement with Holland Casino has seen an impressive start.
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. While growth rates moderated as
the year went on, the partnership is continuing to see the benefits
of its first mover advantage. It was a key driver of revenue growth
in Europe in 2022, illustrating the significant growth
opportunities of newly regulated markets. This agreement, as well
as the launch of Casino and Poker with Bet365 and Unibet in the
Netherlands in 2022, means Playtech is well positioned to
capitalise on the newly regulated Netherlands market.
Elsewhere in Europe, the Company invested in its physical
infrastructure by expanding its Live facility in Romania. The
facility now also includes Blackjack and Poker studios, enabling
Playtech to serve its customers with an even wider and more diverse
suite of products. In terms of new customers, the Live business
launched with, among others, Betsson in Italy and Pokerstars in
Greece.
Playtech's Casino business made great progress opening up new
territories with its existing customer base, such as Pokerstars and
Betsson in Greece, Leo Vegas in Spain, Betway and 888 in Italy,
Stoiximan in The Czech Republic, Betano in Bulgaria and Fortuna in
Slovakia. This clearly demonstrates the scalability of Playtech's
business model.
UK
The UK saw revenue decline 4% (-5% on a constant currency basis)
compared to FY 2021, where the positive impact of the reopening of
retail stores from mid-April 2021 was more than offset by a decline
in revenue from Entain in addition to a slowdown in the online
business caused by the uncertain regulatory climate.
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 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. 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
2022, but this has been delayed with media reports suggesting it is
due to be published imminently.
Playtech remains committed to the UK market and will actively
support its customers in implementing any necessary changes
following the White Paper's expected publication. Playtech has been
actively involved in discussions around safer game design and
online advertising for some time. By using its technology and data
to support its licensees in safer gambling, the Company is
confident that it will 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 expected to regulate
in the near future. These are classified in the 'Unregulated excl.
Asia' line within B2B Gambling. These unregulated markets
(excluding Asia) were up 11% year on year (+10% at constant
currency) versus 2021, primarily driven by very strong growth in
Brazil, offset in part by a decline in Germany, which saw
regulatory changes, and Netherlands moving to a regulated market in
2021.
In Canada, recent legislation means that single-game sports
betting is now allowed at the discretion of individual provinces.
Seven provinces, including the country's largest province, Ontario,
began allowing bets to be placed on single-game sporting events.
Since then, as of 4 April 2022, Ontario has become the first fully
regulated online gambling market in Canada, with iGaming launched
as well.
As other provinces across Canada introduce sports betting and
iGaming, the market opportunity in North America will continue to
grow. In line with the Company's strategy to target newly
regulating markets, Playtech signed a strategic agreement with
NorthStar Gaming in January 2022.
The Company also took steps to establish its presence in South
Africa, a nascent but fast-growing market, which permits sports
betting and Live casino. Towards the end of 2022, Playtech launched
Casino and Live products with TsogoSun.
Unregulated Asia
Revenue from the Unregulated Asia business declined 18% (-21% on
a constant currency basis) compared to 2021. The decline was
largely the result of further lockdowns in China during the year.
As it stands today, the Asia business is much more diversified in
terms of both distributors as well as geographies compared to
recent years. The Company incurred a bad debt provision of EUR15.4
million in H1 22 following continued collection delays in the
region.
B2B - Product Developments
Playtech remains committed to diversifying its B2B Gambling
division by bringing on new brands and licensees. As well as making
progress with new strategic agreements and joint ventures, Playtech
also maintained its track record of attracting new customers in
both regulated and regulating markets to its SaaS offering.
Playtech launched over 100 brands in the period, with more than 350
now live since the launch of its SaaS model in 2019.
In August 2022, Playtech launched new title The Walking Dead(TM)
2, taking advantage of the exclusive rights it acquired for Online
Casino in 2021. A second title is planned to launch in 2023, with
both expected to engage and retain a large audience. Alongside
partnerships with major licenced brands, Playtech's Casino content
strategy continues to focus on the development of original brand
suites, known as Playtech power suites, with the likes of Age of
the Gods(TM) and Fire Blaze(TM) producing some of Playtech's most
popular slots. Leprechaun's Luck became Playtech's top-performing
new game of 2022 and was shortlisted for Game of the Year in the
2022 EGR awards.
In terms of other notable product developments, the Live team
launched Safari Riches Live, a live casino slot game created
exclusively for 888. This marks a major milestone as it represents
the first time a slot brand developed by 888 has been transformed
into a bespoke live casino game. Elsewhere, the Live team also
signed up the exclusive global rights to Jumanji, including for the
US, and plans to launch a game in 2023. Other highlights include
Everybody's Jackpot and The Greatest Card Show, which have both
broken new ground technologically. Everybody's Jackpot features
first of its kind "Unreal engine" Metaverse technology, while The
Greatest Card Show's augmented reality and horizontal wheel - a
Live sector first - makes it one of Playtech's most sophisticated
games yet.
B2C Gambling
Playtech's B2C business consists of Snaitech (including
HAPPYBET) and the White Label operations, which is primarily Sun
Bingo. Overall B2C revenues grew 48% compared to FY 2021 at
constant currency, while Adjusted EBITDA grew 38%.
Snaitech
Italy
Snaitech delivered another year of significant growth in FY
2022, with revenue up 54% compared to the prior year, while
Adjusted EBITDA grew 39% versus FY 2021. This exceptional
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.
As a result, retail sales grew significantly in the period and
are within 10% of pre-pandemic levels. This is a good performance
given a small proportion of franchise retail shops closed
permanently, some customers permanently transitioned to the online
channel and new legislation - introduced in January 2020 - that
requires customers to present ID card to enter retail shops. At the
EBITDA level, the retail segment has now surpassed 2019
pre-pandemic levels on an absolute basis, while EBITDA margins are
also higher than 2019 levels driven by an increasing proportion of
revenue generated from the higher margin sports betting segment and
a lower retail sports pay out in 2022 compared to 2019.
The online business grew 2% in 2022 versus 2021 despite retail
shops being reopened in June 2021, suggesting a combination of a
proportion of existing retail customers permanently shifting to
online in conjunction with new customers being onboarded via the
online channel. Adjusted EBITDA margins remained high at 56% in
2022 versus 59% in 2021.
As disclosed at the HY 2022 results last year, Snaitech has
begun the formal sale process of La Maura Racetrack in Italy. EUR1
million was received on signing in July 2021, with the remaining
EUR19 million expected to be received in instalments in 2024. We
have now received EUR56 million from the sale of 'non-core' land
since the acquisition of Snaitech in 2018.
Snai maintained its number one market share position (retail and
online combined measured by GGR) across Italian sports betting
brands in 2022, cementing its reputation for consistent operational
and brand strength, whilst also being one of the fastest growing
players in Italy in the online sector when measured by GGR.
Finally, the 2023 budget law postponed the expiration of all
concessions such that all licenses in Italy, including online and
retail, have been extended until December 2024 at a total cost of
EUR24 million in 2023 and EUR34 million in 2024. Beyond 2024, talks
are continuing to find an agreement with local authorities on a
common and homogeneous set of rules.
Germany & Austria
HAPPYBET (now reported as part of Snaitech) saw revenue growth
of 10% in 2022 compared to 2021. This was primarily driven by the
reopening of retail sites and early progress after the Snaitech
management team took control of HAPPYBET's operations. The business
remains loss making with EBITDA of EUR-10.8 million in 2022 (2021:
EUR-11. 4 million), but strategic and operational measures have
been taken.
In 2022, the team at Snaitech have already made good progress
upgrading HAPPYBET's technology infrastructure, enhancement of the
product and services offering, deployment of new marketing
strategies and activities to increase brand awareness and realising
costs synergies between HAPPYBET and Snaitech. This will in time
drive the performance of both retail and online. Germany's
Interstate Treaty regulated online slots, online poker and sports
betting. Playtech has been awarded one of the few available online
sports betting licenses in Germany through HAPPYBET and has already
launched an online offering. With structural growth drivers and a
turnaround strategy being implemented by a strong management team,
the Group is confident of its prospects going forward.
Sun Bingo White Label
Sun Bingo White Label saw 5% revenue growth to EUR65.3 million
(2021: EUR6 1 . 9 million) while Adjusted EBITDA was EUR2.0
million, down from EUR6.7 million in 2021. As disclosed at H1 2022
results, reported EBITDA includes a EUR10.4 million payment to
terminate an onerous contract with a former service provider. The
termination of the agreement has positively impacted the
profitability of the business.
Safer gambling and sustainability
As a technology leader in the gambling sector, we are committed
to growing our business sustainably and in a way that builds long
term value for our stakeholders. To meet this ambition we have set
out a five-year strategy that sets out a roadmap that moves us
towards fully integrating sustainability and responsible business
into our culture, strategy and operations.
As I reflect on our sustainability journey over this past year,
I am most proud of our efforts to safeguard and support our
Ukrainian colleagues and their families. The strength and character
shown by our people is truly humbling and inspiring. As the war
continues, we remain steadfast in our support to our affected
colleagues and their families - continuing to assist them in
confronting the ongoing challenges they face in whatever way we
can, as well as providing ongoing humanitarian aid across the
country.
I am also pleased that we have continued to make progress in all
areas relating to sustainability including safer gambling,
diversity and climate change. We have taken significant steps to
strengthen sustainability governance and accountability, as well as
further enhancing our commitments on climate change and gender
diversity. Highlights include:
-- Strengthening governance with frequent engagement with the
Board Sustainability and Public Policy Committee in addition to
engagement with our external stakeholder advisory panel.
-- Enhancing accountability by extending the application of
sustainability-linked remuneration to executive management and
selected leaders, focusing on delivery around safer gambling,
reducing our environmental impact and diversity and inclusion.
-- Expanding our engagement and partnership with our licensees
and other partners on safer gambling technology solutions through
Playtech Protect whilst also advocating for strong safer gambling
policy and standards across regulated and emerging markets.
-- Progressing towards our aspiration for workplace equality
with female representation within our leadership population
increasing to 26%.
-- Reinforcing our commitment to contribute to a low carbon
future with a significant shift to renewable energy and a formal
commitment to the Science Based Target Initiative (SBTi) to set
both near-term and net zero targets.
As we look to 2023, we will focus on further embedding
sustainability into our culture and key decision-making
processes.
Corporate activity
Completion of Finalto sale
Having completed the sale of Finalto to Gopher Investments in
July 2022, Playtech has taken a significant step towards
simplifying 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 was agreed for an enterprise value of $250
million, although this amount was reduced to $228.1 million based
on the performance of Finalto from 1 January 2021 to completion.
Completion of the transaction also triggered payment of a break fee
of $8.8 million which Playtech is required to pay to the Consortium
that had previously agreed to acquire Finalto, while profit on
disposal of Finalto amounted to EUR15.1 million. The sale proceeds
were partly used to repay the outstanding balance on Playtech's
revolving credit facility with the remainder of proceeds used for
general corporate purposes.
Chief Financial Officer's Review(1)
Overview
Group performance
Overall, Playtech had an excellent 2022, with Adjusted EBITDA of
EUR405.6 million (2021: EUR317.1 million), an increase of 28% (22%
on a constant currency basis) compared to 2021. Similarly, reported
EBITDA increased by EUR91.2 million to EUR372.5 million (2021:
EUR281.3 million). Total reported revenue from continuing
operations was EUR1,601.8 million (2021: EUR1,205.4 million),
representing a 33% increase (31% on a constant currency basis)
compared to 2021. The excellent overall results in 2022 were driven
by continued strength in the Group's online businesses as well as
retail reopening following pandemic-related closures in parts of
2021 in many of the Group's markets.
The strong performance was driven by both the B2C and B2B
divisions. In B2C, Snaitech had an excellent 2022 performance as
the strong results in its online business continued and its retail
shops were open for the entirety of 2022, following the pandemic
related closures for most of H1 2021. This led to B2C Adjusted
EBITDA of EUR245.4 million, an increase of 38% compared to
2021.
In B2B, the results were driven by strong growth in regulated
markets, with revenues growing by 22% from EUR378.7 million to
EUR461.6 million (18% on a constant currency basis), led by
Caliente in the Americas and Holland Casino in Europe, 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 79% to EUR215.4 million (2021: EUR120.4 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 EUR95.6 million (2021: EUR605.0 million), mainly due to the
EUR583.2 million of unrealised fair value gains on derivative
financial assets recognised in the prior year with the current year
fair value gain being only EUR6.0 million.
This led to a total post-tax reported profit from continuing
operations of EUR40.6 million (2021: EUR686.7 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, of EUR272.4
million as at 31 December 2022 (31 December 2021: EUR434.3
million). The decrease is a result of fully paying down the
outstanding Revolving Credit Facility (RCF) balance of EUR166.1
million in July 2022, as well as the EUR330.0 million part
repayment of the 2018 Bond, offset by the EUR223.9 million cash
consideration received on the disposal of Finalto and the positive
cash generation due to the performance of the Group during the
year. The Group now has a reduced leverage position with net debt
decreasing by EUR332.6 million to EUR275.2 million as at 31
December 2022 (31 December 2021: EUR607.8 million). Net debt /
Adjusted EBITDA was 0.7x as at the year end, a significant
improvement to the ratio at 31 December 2021 of 1.9x.
Finalto sale
The sale of the Finalto division to Gopher Investments completed
in July 2022. The final cash proceeds from the disposal were $228.1
million (EUR223.9 million), which includes an enterprise value of
US$250 million offset by a completion accounts adjustment.
Playtech used part of these proceeds to repay its RCF in full in
July 2022 with the remainder used for general corporate
purposes.
Group Summary (continuing operations) (3)
2022 2021
EUR'm EUR'm
B2B Gambling 632.4 554.3
B2C Gambling 983.1 663.7
Intercompany (13.7) (12.6)
----------------------------------------------- --------- -------
Total Group Revenue from continuing operations 1,601.8 1,205.4
Adjusted costs (1,196.2) (888.3)
----------------------------------------------- --------- -------
Adjusted EBITDA from continuing operations 405.6 317.1
----------------------------------------------- --------- -------
Reconciliation from EBITDA to Adjusted EBITDA:
EBITDA 372.5 281.3
Employee stock option expenses 8.0 13.1
Professional fees 15.7 14.4
Fair value change of redemption liability (4.3) 1.3
Ukraine employee support costs 3.3 -
Onerous contract 10.4 -
Provision for other receivables - 1.2
Charitable donation - 3.5
Settlement of legal matter - 2.3
Adjusted EBITDA 405.6 317.1
----------------------------------------------- --------- -------
Adjusted EBITDA margin 25% 26%
----------------------------------------------- --------- -------
Overall, the Group's total revenue from continuing operations
increased by 33% to EUR1,601.8 million (2021: EUR1,205.4 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, as well as its continued growth in
regulated B2B markets.
In B2B, revenue increased by 14% from EUR554.3 million in 2021
to EUR632.4 million in 2022, driven by Mexico, where Caliente
continued its strong growth, as well as increases seen in other
countries such as the Netherlands, Poland and Brazil, partly offset
by a decrease in the UK and Asia.
The Group's total reported revenues from its B2C operations
increased by 48% to EUR983.1 million (2021: EUR663.7 million).
Snaitech had an excellent performance as the strong results in its
online business continued and its retail shops were open for the
entirety of 2022, following the pandemic-related closures for most
of H1 2021.
The Group's Adjusted EBITDA from continuing operations increased
to EUR405.6 million (2021: EUR317.1 million), representing a 28%
and 22% increase on an actual and constant currency basis,
respectively. Adjusted EBITDA margin decreased by only 90bps in
2022 versus 2021 due to a change in channel mix, with the return of
the lower margin retail segment for the full year 2022, versus
closures during the first half of 2021 due to COVID-19, as well as
increased bad debt provision in the B2B business in Asia,
recognised in H1 2022.
The Group's total reported EBITDA increased by 32% to EUR372.5
million (2021: EUR281.3 million). The adjusted items between
reported and Adjusted EBITDA are explained in Note 10 of the
financial statements.
Divisional performance
B2B Gambling
B2B Gambling Revenue
Constant
2022 2021 Change currency
EUR'm EUR'm % %
------------------------------ ------ ------ ------ ---------
Regulated - Americas 144.7 101.3 43% 27%
Regulated - Europe (excluding
UK) 184.6 141.4 31% 31%
Regulated - UK 126.7 132.1 -4% -5%
Regulated - Rest of the
World 5.6 3.9 44% 44%
------------------------------ ------ ------ ------ ---------
Total Regulated B2B revenue 461.6 378.7 22% 18%
Unregulated excluding
Asia 103.6 93.7 11% 10%
Total Core B2B revenue 565.2 472.4 20% 16%
Asia 67.2 81.9 -18% -21%
------------------------------ ------ ------ ------ ---------
Total B2B Gambling revenue 632.4 554.3 14% 11%
------------------------------ ------ ------ ------ ---------
Overall, B2B Gambling revenues increased by 14% (11% on a
constant currency basis), largely due to an increase in the
regulated B2B business.
Core B2B Gambling revenues(2) increased by 20%, driven by an
increase in regulated markets in the Americas and Europe (excluding
the UK), as well as unregulated markets (excluding Asia) of 43 %,
31 % and 11% respectively ( 27 %, 31% and 10% respectively on a
constant currency basis). This was offset by a 4% decrease in
revenues from UK (5% on a constant currency basis), and an 18% (21%
on constant currency basis) decline in revenues from Asia.
The increase in the Americas was primarily driven by Mexico, due
to revenue growth from Caliente while in Europe (excluding the UK)
the growth was driven by the Netherlands, Poland, Spain and
Ireland. The increase in the Netherlands was driven by the expanded
long-term strategic software and services agreement with Holland
Casino, which successfully launched in October 2021. In unregulated
markets excluding Asia, the increase was driven by very strong
growth in Brazil, offset in part by a decline in Germany, which saw
regulatory changes during the year, and the Netherlands moving to a
regulated market. Asia revenue decreased mainly due to the
lockdowns in China and other parts of Asia in the period, whereas
in the UK our partnership with Entain continues to reduce in
scope.
B2B Gambling Costs
2022 2021 Change
EUR'm EUR'm %
---------------------------- ------- ------- ------
Research and Development 87.5 78.2 12%
General and Administrative 82.6 67.2 23%
Sales and Marketing 16.8 13.5 24%
Operations 285.3 256.2 11%
---------------------------- ------- ------- ------
Total B2B Costs 472.2 415.1 14%
Total B2B Revenue and Costs
B2B revenue 632.4 554.3 14%
B2B Costs (472.2) (415.1) 14%
---------------------------- ------- ------- ------
Total B2B Adjusted EBITDA 160.2 139.2 15%
Margin 25% 25%
---------------------------- ------- ------- ------
Research and Development ("R&D") costs include, among
others, employee-related costs and proportional office expenses.
Expensed R&D costs increased by 12% to EUR87.5 million (2021:
EUR78.2 million), driven by the increase in employee-related costs.
Capitalised development costs were 39% of total B2B R&D costs
in 2022, which is in line with the prior year.
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 23% to EUR82.6 million (2021: EUR67.2
million), due to a new bonus scheme provision for employee
retention, increase in consulting fees and post COVID-19 costs.
Sales and Marketing costs increased by 24% to EUR16.8 million
(2021: EUR13.5 million), mainly due to increased marketing activity
following the end of the COVID-19 crisis as well as higher bonus
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 11% to EUR285.3
million (2021: EUR256.2 million), driven mainly by an increase in
employee related costs relating to live operations and the
provision of additional B2B services, mainly under the Group's
structured agreement arrangements, as well as sport hardware
costs.
B2B Adjusted EBITDA
Total B2B Adjusted EBITDA increased by 15% to EUR160.2 million
(2021: EUR139.2 million), while EBITDA margin remained steady at
25% (2021: 25%). The B2B Adjusted EBITDA in the period was impacted
by the EUR15.4 million doubtful debt provision in Asia recognized
in H1 2022 (2021: EUR7.5 million), which was offset by the increase
in performance from Brazil and Mexico and more generally the sports
product.
B2C Gambling
2022 2021
EUR'm EUR'm Change
------------------------------- ------- ------- -------
Snaitech
Gambling Revenue* 899.8 584.7 54%
Gambling Costs 645.6 402.1 61%
Adjusted EBITDA 254.2 182.6 39%
Margin 28% 31%
------------------------------- ------- ------- -------
White Label (incl. Sun Bingo)
Gambling Revenue 65.3 61.9 5%
Gambling Costs 63.3 55.2 15%
Adjusted EBITDA 2.0 6.7 -70%
Margin 3% 11%
------------------------------- ------- ------- -------
HAPPYBET
Gambling Revenue 20.1 18.2 10%
Gambling Costs** 30.9 29.6 4%
Adjusted EBITDA (10.8) (11.4) 5%
Margin NA NA
------------------------------- ------- ------- -------
B2C Adjusted EBITDA 245.4 177.9 38%
Margin 25% 27%
------------------------------- ------- ------- -------
* Includes intercompany revenue from HAPPYBET of EUR2.1 million
(2021: EUR1.1 million)
** Includes intercompany costs from Snaitech of EUR2.1 million
(2021: EUR1.1 million)
Snaitech
Snaitech revenues increased 54% from the prior year to EUR899.8
million (2021: EUR584.7 million), with operating costs seeing a
similar increase of 61% to EUR645.6 million (2021: EUR402.1
million). The retail network in Italy was shut for almost the
entirety of H1 2021 due to the COVID-19 pandemic. The relaxing of
COVID-19 restrictions at the end of June 2021 enabled retail sites
to reopen, which drove the increase in revenues and costs in 2022.
The online segment continues to see impressive growth, indicating
that the addressable market has expanded post-pandemic.
Snaitech's Adjusted EBITDA increased by 39%, while revenue
increased 54%. As a result, Snaitech's Adjusted EBITDA margin
decreased 300 bps to 28% (2021: 31%), due to the return of the
lower margin retail business.
Sun Bingo white label
Revenue from the Sun Bingo business increased by 5% to EUR65.3
million (2021: EUR61.9 million). However, operating costs within
Sun Bingo increased by 15% to EUR63.3 million (2021: EUR55.2
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 EUR2.0 million (2021: EUR6.7
million). Adjusted EBITDA still includes the unwinding of the
minimum guarantee prepayment of EUR5.4 million in the current year
(2021: EUR11.9 million) 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 in H1 2022 to terminate an onerous contract with a service
provider. The termination of the agreement will improve the
profitability of the business going forward.
HAPPYBET
The Sport B2C business, saw year-on-year revenue growth of 10%
to EUR20.1 million (2021: EUR18.2 million), with costs increasing
by 4%. The business remains loss making, with Adjusted EBITDA loss
in the current period of EUR10.8 million (2021: loss of EUR11.4
million). The small improvement is primarily driven by the
reopening of retail sites and early progress after the Snaitech
management team took control of HAPPYBET's operations.
Below EBITDA items
Depreciation and amortisation
Reported and Adjusted depreciation decreased by 3% to EUR41.5
million (2021: EUR42.9 million). After deducting amortisation of
acquired intangibles of EUR42.0 million (2021: EUR34.8 million),
Adjusted amortisation decreased by 9% to EUR67.8 million (2021:
EUR74.5 million) as the Italian gaming machine licences useful life
has been extended to June 2023 at no cost. The remainder of the
balance under depreciation and amortisation of EUR18.8 million
(2021: EUR16.9 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
EUR38.5 million (2021: EUR21.6 million) mostly relates to:
-- The impairment of the Eyecon cash generating unit (CGU) of
EUR13.6 million, driven by the fact that its operations are highly
concentrated in the UK online market which has seen a slowdown due
to the uncertain regulatory climate.
-- The impairment of the Quickspin CGU of EUR7.0 million, given
the risk the CGU bore from the proportion of revenues being
generated from the Group's B2B customers choosing to operate in
areas with geopolitical tension, and the resulting 1% increase on
the post-tax discount rate of the CGU to mitigate that factor.
-- The impairment of the Bingo VF CGU of EUR12.5 million (2021:
EUR6.4 million) due to slower than expected growth in the business,
following plans to recover from the termination of a significant
licensee in the prior year; and
-- The impairment of the IGS CGU of EUR5.6 million, which was
severely affected by COVID-19 and until recently had not managed to
bring revenue up to pre-COVID-19 levels with the business suffering
from cancelled or postponed projects.
The prior period impairment of EUR21.6 million mainly relates
to:
-- EUR12.3 million impairment resulting from the disposal of
some 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 which led to the impairment;
-- EUR6.4 million impairment in the Bingo VF cash generating
unit mainly driven by the termination of one of the biggest
customer contracts; and
-- EUR2.7 million of development workforce aborted projects.
Finance income and finance costs
Reported and adjusted finance income of EUR11.6 million (2021:
EUR1.1 million) mainly relates to a EUR9.2 million foreign exchange
gain, driven primarily by the favourable movement in the USD to EUR
rate during 2022. In the prior year, this was an overall loss of
EUR0.5 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, the movement in contingent
consideration and redemption liabilities, fair value loss of
convertible loans and expected credit losses on loan receivables.
Reported finance costs increased by 8% to EUR73.0 million (2021:
EUR67.7 million), mainly due to the EUR3.0 million (2021: EURNil)
fair value loss on the GameCo convertible loan immediately before
it was converted to equity and the first time recognition of EUR1.6
million of expected credit losses on the loans receivable. This was
offset by a reduction in the movement in contingent consideration
and redemption liability to EUR0.1 million (2021: EUR4.8 million).
Adjusted finance costs increased by 11% to EUR69.9 million (2021:
EUR62.9 million). The difference between adjusted and reported
finance costs is the movement in contingent consideration and
redemption liability of EUR0.1 million (2021: EUR4.8 million) and
fair value loss of the GameCo convertible loan of EUR3.0
million.
Unrealised fair value changes in derivative financial assets
The unrealised fair value changes in derivative financial assets
of EUR6.0 million (2021: EUR583.2 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. Further details on
the fair value of the various call options are disclosed in Note
20, which includes a significant judgement made in relation to the
valuation of the Playtech M&A Call Option.
Taxation
A reported tax expense from continuing operations of EUR55.0
million (2021: tax credit of EUR81.7 million) arises on a profit
before tax of EUR95.6 million (2021: EUR605.0 million) compared to
an expected charge of EUR18.2 million based on the UK statutory
rate of 19%. The key items for which the reported tax charge has
been adjusted are the provision of EUR8.4 million in respect of
overseas tax audits and the reversal of deferred tax liabilities of
EUR8.3 million in respect of intangibles assets acquired through
business combinations.
The Group's reported effective tax rate for the current period
is 39.5%. This rate is higher than the UK statutory rate of 19%.
The key reasons for the differences are profits of subsidiaries
located in territories where the tax rate is higher than the UK
statutory tax rate (which predominately relates to Snaitech based
in Italy) and expenses not deductible for tax purposes including
professional fees, impairment of intangible assets and loss on
disposal of subsidiaries.
The total adjusted tax expense is EUR54.9 million (2021: tax
credit of EUR7.2 million) which arises on an adjusted profit before
tax of EUR215.4 million (2021: EUR120.4 million). The total
adjusted tax expense of EUR54.9 million consists of an income tax
expense of EUR20.4 million (2021: tax charge of EUR14.6 million)
and a deferred tax expense of EUR34.5 million (2021: deferred tax
credit of EUR21.8 million). The total adjusted deferred tax expense
mainly consists of a deferred tax expense of EUR44.7 million
relating to the Snaitech group including the use of Snaitech tax
losses and a credit of EUR16.7 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 25.5%. 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 (which
predominately relates to Snaitech based in Italy).
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 EURNil in both periods being presented as operations
were completely wound down in 2020.
Finalto (formerly TradeTech Group)
Finalto was disposed of in July 2022 with cash proceeds of
$228.1 million (EUR223.9 million) and transaction costs of EUR1.6
million resulting in a profit on disposal of EUR15.1 million.
In terms of performance, revenue up until the point of disposal
was EUR74.5 million (2021 full year revenue: EUR46.6 million). The
improved performance was due to higher market volatility during
2022, which in turn increased both Reported and Adjusted EBITDA to
EUR24.4 million for the period up to the point of disposal (2021
full year loss: EUR30.9 million) and EUR33.8 million (2021 full
year loss: EUR23.0 million), respectively.
Adjusted Profit
2022 2021
EUR'm EUR'm
-------------------------------------------------- ------- --------
Reported profit from continuing operations
attributable to the owners of the Company 40.6 686.7
Employee stock option expenses 8.0 13.1
Professional fees 15.7 14.4
Fair value change and finance cost on redemption
liability and contingent consideration (4.2) 6.1
Ukraine employee support costs 3.3 -
Onerous contract 10.4 -
Charitable donation - 3.5
Settlement of legal matter - 2.3
Provision for other receivables - 1.2
Fair value change of equity instruments 0.3 1.6
Fair value change of derivative financial assets (6.0) (583.2)
Fair value loss on convertible loans 3.0 -
Amortisation of intangibles on acquisitions 42.0 34.8
Impairment of tangible and intangible assets 38.5 21.6
Loss on disposal of subsidiary 8.8 -
Deferred tax on acquisitions (8.3) (9.1)
Deferred tax on reorganisation - (63.6)
Deferred tax on asset held for sale - (1.8)
Tax related to uncertain positions 8.4 -
Adjusted Profit from continuing operations
attributable to the owners of the Company 160.5 127.6
-------------------------------------------------- ------- --------
The reconciling items in the table above are further explained
in Note 10 of the financial statements. Reported profit before tax
from continuing operations was EUR95.6 million (2021: EUR605.0
million), mainly due to the EUR583.2 million of unrealised fair
value gains on derivative financial assets recognised in the prior
year with the current year gain being only EUR6.0 million.
Adjusted EPS (in Euro cents)
2022 2021
EUR'm EUR'm
--------------------------------------------------- ------ ------
Adjusted basic EPS from continuing operations 53.5 42.8
Adjusted diluted EPS from continuing operations 51.5 40.9
--------------------------------------------------- ------ ------
Basic EPS from profit attributable to owners of
the Company 29.2 226.3
Diluted EPS from profit attributable to owners
of the Company 28.1 216.2
--------------------------------------------------- ------ ------
Basic EPS from profit attributable to the owners
of the Company from continuing operations 13.5 230.3
Diluted EPS from profit attributable to the owners
of the Company from continuing operations 13.0 220.1
--------------------------------------------------- ------ ------
Basic EPS is calculated using the weighted average number of
equity shares in issue during 2022 of 300.1 million (2021: 298.2
million). Diluted EPS also includes the dilutive impact of share
options and is calculated using the weighted average number of
shares in issue during 2022 of 311.9 million (2021: 312.1
million).
Cashflow
Cash conversion (including discontinued operations)
Playtech continues to be cash generative and delivered operating
cash flows of EUR410.9 million (2021: EUR314.6 million after
adjusting for the EUR89.6 million deferred payment of gaming duties
in Italy). The increase is primarily due to Snaitech's retail
locations being fully operational in 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
year.
2022 2021
EUR'm EUR'm
----------------------------------------------------- ------- -------
Adjusted EBITDA (including discontinued operations) 439.4 294.1
----------------------------------------------------- ------- -------
Net cash provided by operating activities 410.9 225.0
Deferred payment of gaming duties - 89.6
----------------------------------------------------- ------- -------
Net cash provided by operating activities after
deferred payment of gaming duties 410.9 314.6
Cash conversion 94% 107%
----------------------------------------------------- ------- -------
Change in jackpot balances and security deposits (3.6) (10.5)
Change in client deposits and client funds 15.3 (21.7)
Professional fees 24.4 21.5
ADM security deposit (Italian Regulator) 11.5 (1.7)
Adjusted net cash provided by operating activities 458.5 302.2
----------------------------------------------------- ------- -------
Adjusted cash conversion 104% 103%
----------------------------------------------------- ------- -------
Adjusted cash conversion at 104% (2021: 103%) is shown after
adjusting for the deferred payment of gaming duties in the prior
year, as well as jackpots, security deposits, client deposits and
client funds, professional fees and ADM security deposit.
Adjusting for the above cash fluctuations is essential in order
to truly reflect the quality of revenue and cash collection. This
is because the timing of cash inflows and outflows for gaming tax
duties in Italy, jackpots, security deposits and client funds only
impact the reported operating cashflow and not Adjusted EBITDA,
while professional fees are excluded from Adjusted EBITDA but
impact operating cashflow.
Cash conversion (excluding discontinued operations)
2022 2021
EUR'm EUR'm
---------------------------------------------------- ------- -------
Adjusted EBITDA 405.6 317.1
---------------------------------------------------- ------- -------
Net cash provided by operating activities 382.7 227.6
Deferred payment of gaming duties - 89.6
---------------------------------------------------- ------- -------
Net cash provided by operating activities after
deferred payment of gaming duties 382.7 317.2
Cash conversion 94% 100%
----------------------------------------------------
Change in jackpot balances and security deposits (3.6) (10.5)
Change in client funds (9.4) (1.5)
Professional fees 15.7 14.4
ADM security deposit (Italian Regulator) 11.5 (1.7)
Adjusted net cash provided by operating activities 396.9 317.9
---------------------------------------------------- ------- -------
Adjusted cash conversion 98% 100%
---------------------------------------------------- ------- -------
If we exclude the impact of Finalto cash flow, the adjusted cash
conversion reduces to 98% (2021: 100%).
Cashflow statement analysis
Net cash outflows used in investing activities totalled EUR
358.3 million (2021: EUR 127.6 million) of which:
-- EUR30.4 million (2021: EUR16.7 million) relates to loans
granted. Of the total granted in 2022, EUR18.0 million (2021:
EUR8.1 million), relates to the Galera Group which has a total loan
facility of $45 million (refer to Note 20) and EUR8.4 is related to
NorthStar;
-- EUR54.0 million (2021: EUR49.6 million) was used in the
acquisition of property, plant and equipment;
-- EUR10.1 million (2021: EUR7.2 million) was used in the acquisition of intangible assets;
-- EUR61.3 million (2021: EUR57.4 million) was spent on capitalised development costs;
-- EUR29.2 million relates to the payment for the acquisition of
LSports (Note 20A) and contingent consideration paid to Wplay of
EUR1.0 million (2021: EUR4.2 million relates to the payment of the
call option held for Ocean Holdings Ltd and contingent
consideration paid to Wplay of EUR4.1 million); and
-- Net cash outflow in relation to the Financial segment
disposal of EUR169.8 million (2021: Cash inflow of EUR10.7 million
mostly relating the disposal of the casual business).
Net cash outflows used in financing activities totalled EUR566.9
million (2021: EUR218.4 million) of which:
-- EUR36.7 million (2021: EUR39.4 million) relates to interest
payments on bond loans and bank borrowings;
-- EUR166.1 million (2021: EUR150.0 million) related to the repayment of the RCF;
-- In 2022 EUR330.0 million related to the part repayment of the 2018 Bond;
-- EUR5.9 million (2021: EUR0.7 million) are payments of
contingent consideration and redemption liability; and
-- EUR28.2 million (2021: EUR28.3 million) is principal and interest lease liability payments.
Balance sheet, liquidity and financing
2022 2021
EUR'm EUR'm
--------------------------------------------- -------- --------
Cash and cash equivalents 426.5 575.4
Cash held on behalf of clients, progressive
jackpots and security deposits (154.1) (141.1)
Adjusted gross cash and cash equivalents
(excluding assets and liabilities held for
sale) 272.4 434.3
--------------------------------------------- -------- --------
Loans and borrowings (RCF) - 167.1
Bonds 547.6 875.0
--------------------------------------------- -------- --------
Gross debt (excluding liabilities held
for sale) 547.6 1,042.1
--------------------------------------------- -------- --------
Net debt (excluding assets and liabilities
held for sale) 275.2 607.8
--------------------------------------------- -------- --------
Adjusted EBITDA 405.6 317.1
--------------------------------------------- -------- --------
Net debt/Adjusted EBITDA ratio 0.7 1.9
--------------------------------------------- -------- --------
Cash
The Group continues to maintain a strong balance sheet with
total cash and cash equivalents, excluding cash held for sale, of
EUR426.5 million at 31 December 2022 (2021: EUR575.4 million).
Adjusted gross cash, which excludes the cash held on behalf of
clients, progressive jackpots and security deposits, decreased to
EUR272.4 million as at 31 December 2022 (2021: EUR434.3 million),
due to the EUR166.1 million RCF repayment, EUR330.0 million part
repayment of the 2018 Bond, both offset by the net proceeds from
the Finalto disposal as well as the solid performance of the Group
during 2022.
Financing
The Group's total gross debt decreased to EUR547.6 million as at
31 December 2022 (2021: EUR1,042.1 million), with net debt, after
deducting Adjusted gross cash, decreasing to EUR275.2 million
(2021: EUR607.8 million).
The Group issued a 5-year senior secured note of EUR530.0
million (3.75% coupon), which was raised in October 2018 to support
the acquisition of Snaitech and is maturing in October 2023. During
the year, the Group made a EUR330.0 million partial repayment of
the 2018 Bond. The remaining outstanding balance of EUR200.0
million is expected to be repaid through cash resources and/or
proceeds from the Group's RCF and/or new financing.
The Group has also issued a 7-year senior secured note to the
value of EUR350.0 million (4.25% coupon, maturity 2026), which was
raised in March 2019.
Finally, the Group also has an RCF which has been restructured
during the year. The revised facility is now EUR277.0 million
(previously EUR317.0 million) and is available until October 2025,
with an option to extend by twelve months. As at the reporting date
the credit facility drawn amounted to EURNil (2021: EUR167.1
million).
Net debt
Net debt decreased in the period by EUR332.6 million to EUR275.2
million as at 31 December 2022 (2021: EUR607.8 million), while net
debt / Adjusted EBITDA was 0.7x (31 December 2021: 1.9x)
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 in July 2022. The cash proceeds from
the disposal were $228.1 million (EUR223.9 million), which includes
an enterprise value of US$250 million, offset by a completion
accounts adjustment.
Playtech used part of these proceeds to repay its RCF in full in
July 2022.
Contingent consideration
Contingent consideration and redemption liability decreased to
EUR2.9 million (2021: EUR11.0 million) mostly due to the completed
payment relating to Eyecon Limited, Wplay and Statscore. The
existing liability as at 31 December 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 31 December
2022
AUS GMTC PTY Ltd EUR46.7 million EUR2.1 million Q4 2025
------------------- ------------------------ ------------------
Other EUR0.8 million EUR0.8 million Various
------------------- ------------------------ ------------------
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 15 months from the approval of these financial statements.
At 31 December 2022, the Group held total cash (excluding cash
included in assets held for sale) of EUR426.5 million (2021:
EUR575.4 million) and Adjusted gross cash, which excludes the cash
held on behalf of clients, progressive jackpots and security
deposits, of EUR272.4 million (2021: EUR434.3 million).
Furthermore, the Group has reduced its total debt to EUR547.6
million (2021: EUR1,042.1 million), as a result of using the
Finalto proceeds to fully repay its RCF (31 December 2021: EUR167.1
million), and a EUR330.0 million partial repayment of its 2018
Bond. The rest of the 2018 Bond of EUR200.0 million is repayable in
October 2023, and the Directors are confident that the company will
be able to settle this amount. During 2022, the RCF was
restructured with a new facility of EUR277.0 million being
available until October 2025, with an option to extend by twelve
months. As at 31 December 2022 the RCF is fully undrawn.
The payment related to the renewal of the Italian concessions is
expected to be incurred in 2025 and therefore is outside of the
going concern period.
Management concluded that the risk of a covenant breach over the
next fifteen-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, as well as material reorganisation and acquisition related
costs. The Board of Directors believes that the adjusted results
represent more closely the consistent trading performance of the
business. A full reconciliation between the actual and adjusted
results is provided in Note 10 of the financial statements.
(2) Core B2B 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.
Consolidated statement of comprehensive income
For the year ended 31 December 2022
2022 2021
--------- -------------------- -------------------
Adjusted
Actual EUR'm Actual Adjusted
Note EUR'm (1) EUR'm EUR'm (1)
-------------------------------------------- --------- --------- --------- ------- ----------
Continuing operations
Revenue 9 1,601.8 1,601.8 1,205.4 1,205.4
Distribution costs before depreciation
and amortisation (1,067.3) (1,063.3) (794.5) (788.8)
Administrative expenses before depreciation
and amortisation (147.3) (118.2) (127.4) (98.5)
Impairment of financial assets (14.7) (14.7) (2.2) (1.0)
-------------------------------------------- --------- --------- --------- ------- ----------
EBITDA 10 372.5 405.6 281.3 317.1
Depreciation and amortisation (170.1) (128.1) (169.1) (134.3)
Impairment of tangible and intangible
assets 12 (38.5) - (21.6) -
Finance income 13A 11.6 11.6 1.1 1.1
Finance costs 13B (73.0) (69.9) (67.7) (62.9)
Share of loss from associates 20A (3.8) (3.8) (0.6) (0.6)
Unrealised fair value changes of equity
investments 20B (0.3) - (1.6) -
Unrealised fair value changes of derivative
financial assets 20C 6.0 - 583.2 -
Loss on disposal of subsidiary 20A (8.8) - - -
-------------------------------------------- --------- --------- --------- ------- ----------
Profit before taxation 10 95.6 215.4 605.0 120.4
-------------------------------------------- --------- --------- --------- ------- ----------
Income tax (expense)/credit 10,14 (55.0) (54.9) 81.7 7.2
-------------------------------------------- --------- --------- --------- ------- ----------
Profit from continuing operations 10 40.6 160.5 686.7 127.6
-------------------------------------------- --------- --------- --------- ------- ----------
Discontinued operation
Profit/(loss) from discontinued operation,
net of tax 8 47.0 41.2 (12.1) (13.8)
-------------------------------------------- --------- --------- --------- ------- ----------
Profit for the year - total 87.6 201.7 674.6 113.8
-------------------------------------------- --------- --------- --------- ------- ----------
Other comprehensive loss:
Items that are or may be classified
subsequently to profit or loss:
Exchange loss arising on translation
of foreign operations (0.2) (0.2) (1.4) (1.4)
Recycling of foreign exchange loss
on disposal of foreign discontinued
operations 23.2 23.2 - -
Items that will not be classified
to profit or loss:
Gain/(loss) on remeasurement of employee
termination indemnities 0.9 0.9 (0.1) (0.1)
-------------------------------------------- --------- --------- --------- ------- ----------
Other comprehensive income/(loss)
for the year 23.9 23.9 (1.5) (1.5)
-------------------------------------------- --------- --------- --------- ------- ----------
Total comprehensive income for the
year 111.5 225.6 673.1 112.3
-------------------------------------------- --------- --------- --------- ------- ----------
Profit for the year attributable to
the owners of the Company 87.6 201.7 674.6 113.8
-------------------------------------------- --------- --------- --------- ------- ----------
Total comprehensive income attributable
to the owners of the Company 111.5 225.6 673.1 112.3
-------------------------------------------- --------- --------- --------- ------- ----------
Earnings per share attributable to
the ordinary equity holders of the
Company
Profit or loss - total
Basic (cents) 15 29.2 67.2 226.3 38.2
Diluted (cents) 15 28.1 64.7 216.2 36.5
-------------------------------------------- --------- --------- --------- ------- ----------
Profit or loss from continuing operations
Basic (cents) 15 13.5 53.5 230.3 42.8
Diluted (cents) 15 13.0 51.5 220.1 40.9
-------------------------------------------- --------- --------- --------- ------- ----------
1 Adjusted numbers relate to certain non-cash and one-off items,
as well as material reorganisation and acquisition-related costs.
The Board of Directors believes that the adjusted results more
closely represent the consistent trading performance of the
business. A full reconciliation between the actual and adjusted
results is provided in Note 10.
Consolidated statement of changes in equity
For the year ended 31 December 2022
Total
attributable
Additional to
paid Employee Employee Put/call Foreign equity Non-
in termination Retained Benefit options exchange holders controlling Total
capital indemnities earnings Trust reserve reserve of Company interests equity
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 year
Profit for the
year - - 87.6 - - - 87.6 - 87.6
Other
comprehensive
income
for the year - 0.9 - - - 23.0 23.9 - 23.9
---------------- ---------- ------------ -------- -------- -------- -------- ------------ ----------- -------
Total
comprehensive
income
for the year - 0.9 87.6 - - 23.0 111.5 - 111.5
---------------- ---------- ------------ -------- -------- -------- -------- ------------ ----------- -------
Transactions
with the owners
of the Company
Contributions
and
distributions
Exercise of
options - - (6.0) 6.0 - - - - -
Employee stock
option scheme - - 8.3 - - - 8.3 - 8.3
---------------- ---------- ------------ -------- -------- -------- -------- ------------ ----------- -------
Total
contributions
and
distributions - - 2.3 6.0 - - 8.3 - 8.3
---------------- ---------- ------------ -------- -------- -------- -------- ------------ ----------- -------
Changes in
ownership
interests
---------------- ---------- ------------ -------- -------- -------- -------- ------------ ----------- -------
Acquisition of
non-controlling
interest
without change
in control - - (3.4) - 3.7 - 0.3 (0.3) -
---------------- ---------- ------------ -------- -------- -------- -------- ------------ ----------- -------
Total changes in
ownership
interests - - (3.4) - 3.7 - 0.3 (0.3) -
---------------- ---------- ------------ -------- -------- -------- -------- ------------ ----------- -------
Total
transactions
with
owners of the
Company - - (1.1) 6.0 3.7 - 8.6 (0.3) 8.3
---------------- ---------- ------------ -------- -------- -------- -------- ------------ ----------- -------
Balance at 31
December 2022 606.0 0.4 1,111.5 (17.2) - 0.3 1,701.0 - 1,701.0
---------------- ---------- ------------ -------- -------- -------- -------- ------------ ----------- -------
Balance at 1
January 2021 592.1 (0.4) 343.7 (14.5) (3.7) (21.3) 895.9 0.3 896.2
---------------- ---------- ------------ -------- -------- -------- -------- ------------ ----------- -------
Total
comprehensive
income
for the year
Profit for the
year - - 674.6 - - - 674.6 - 674.6
Other
comprehensive
loss
for the year - (0.1) - - - (1.4) (1.5) - (1.5)
---------------- ---------- ------------ -------- -------- -------- -------- ------------ ----------- -------
Total
comprehensive
income
for the year - (0.1) 674.6 - - (1.4) 673.1 - 673.1
---------------- ---------- ------------ -------- -------- -------- -------- ------------ ----------- -------
Transactions
with the owners
of the Company
Contributions
and
distributions
Exercise of
options - - (13.9) 13.9 - - - - -
Employee stock
option scheme - - 11.9 - - - 11.9 - 11.9
Transfer from
treasury shares
to Employee
Benefit Trust 13.9 - 8.7 (22.6) - - - - -
---------------- ---------- ------------ -------- -------- -------- -------- ------------ ----------- -------
Total
contributions
and
distributions 13.9 - 6.7 (8.7) - - 11.9 - 11.9
---------------- ---------- ------------ -------- -------- -------- -------- ------------ ----------- -------
Total
transactions
with
owners of the
Company 13.9 - 6.7 (8.7) - - 11.9 - 11.9
---------------- ---------- ------------ -------- -------- -------- -------- ------------ ----------- -------
Balance at 31
December 2021 606.0 (0.5) 1,025.0 (23.2) (3.7) (22.7) 1,580.9 0.3 1,581.2
---------------- ---------- ------------ -------- -------- -------- -------- ------------ ----------- -------
Consolidated balance sheet
As at 31 December 2022
2022 2021
Note EUR'm EUR'm
--------------------------------------------- ------ ------- -------
ASSETS
Property, plant and equipment 17 341.4 329.7
Right of use assets 18 71.6 73.8
Intangible assets 19 980.9 1,046.1
Investments in associates 20A 36.6 5.2
Other investments 20B 9.2 8.1
Derivative financial assets 20C 636.4 622.2
Trade receivables 22 1.1 6.6
Deferred tax asset 32 112.5 102.9
Other non-current assets 21 109.6 104.4
--------------------------------------------- ------ ------- -------
Non-current assets 2,299.3 2,299.0
--------------------------------------------- ------ ------- -------
Trade receivables 22 163.9 178.5
Other receivables 23 107.6 87.1
Inventories 5.5 4.9
Cash and cash equivalents 24 426.5 575.4
--------------------------------------------- ------ ------- -------
703.5 845.9
Assets classified as held for sale 25 19.6 507.4
--------------------------------------------- ------ ------- -------
Current assets 723.1 1,353.3
--------------------------------------------- ------ ------- -------
TOTAL ASSETS 3,022.4 3,652.3
--------------------------------------------- ------ ------- -------
EQUITY
Additional paid in capital 606.0 606.0
Employee termination indemnities 0.4 (0.5)
Employee Benefit Trust (17.2) (23.2)
Put/call options reserve - (3.7)
Foreign exchange reserve 0.3 (22.7)
Retained earnings 1,111.5 1,025.0
--------------------------------------------- ------ ------- -------
Equity attributable to equity holders of
the Company 1,701.0 1,580.9
Non-controlling interests - 0.3
--------------------------------------------- ------ ------- -------
TOTAL EQUITY 26 1,701.0 1,581.2
--------------------------------------------- ------ ------- -------
LIABILITIES
Loans and borrowings 27 - 167.1
Bonds 28 348.0 875.0
Lease liability 18 54.0 69.8
Deferred revenues 1.0 2.9
Deferred tax liability 32 124.8 88.9
Contingent consideration and redemption
liability 30 2.3 6.0
Provisions for risks and charges 29 10.0 13.5
Other non-current liabilities 33 24.9 12.8
--------------------------------------------- ------ ------- -------
Non-current liabilities 565.0 1,236.0
--------------------------------------------- ------ ------- -------
Bonds 28 199.6 -
Trade payables 31 61.2 41.3
Lease liability 18 31.8 20.3
Progressive operators' jackpots and security
deposits 24 114.3 110.7
Client funds 24 39.8 30.4
Income tax payable 17.3 2.6
Gaming and other taxes payable 34 112.8 105.4
Deferred revenues 5.0 5.2
Contingent consideration and redemption
liability 30 0.6 5.0
Provisions for risks and charges 29 3.9 3.2
Other payables 33 169.1 166.2
--------------------------------------------- ------ ------- -------
755.4 490.3
--------------------------------------------- ------ ------- -------
Liabilities directly associated with assets
classified as held for sale 25 1.0 344.8
--------------------------------------------- ------ ------- -------
Current liabilities 756.4 835.1
--------------------------------------------- ------ ------- -------
TOTAL LIABILITIES 1,321.4 2,071.1
--------------------------------------------- ------ ------- -------
TOTAL EQUITY AND LIABILITIES 3,022.4 3,652.3
--------------------------------------------- ------ ------- -------
The consolidated financial statements were approved by the Board
and authorised for issue on 23 March 2023.
Mor Weizer Chris McGinnis
Chief Executive Officer Chief Financial Officer
Consolidated statement of cash flows
For the year ended 31 December 2022
2022 2021
Note EUR'm EUR'm
-------------------------------------------------------- ------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the year 87.6 674.6
Adjustment to reconcile net income to net cash provided
by operating activities (see below) 337.1 (419.0)
Net taxes paid (13.8) (30.6)
-------------------------------------------------------- ------- ------- -------
Net cash from operating activities 410.9 225.0
-------------------------------------------------------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans granted (30.4) (16.7)
Acquisition of assets under business combinations 35 (2.9) -
Acquisition of property, plant and equipment (54.0) (49.6)
Acquisition of intangible assets (10.1) (7.2)
Capitalised development costs (61.3) (57.4)
Acquisition of investment in associates 20A/B (30.2) (8.1)
Proceeds from the sale of property, plant and equipment 0.8 0.7
Disposal of Financial segment/casual and social
gaming, net of cash disposed 25C/25B (169.8) 10.7
Disposal of subsidiary, net of cash disposed 20A (0.4) -
-------------------------------------------------------- ------- ------- -------
Net cash used in investing activities (358.3) (127.6)
-------------------------------------------------------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Interest paid on bonds and loans and borrowings (36.7) (39.4)
Repayment of loans and borrowings (166.1) (150.0)
Repayment of bonds 28 (330.0) -
Payment of contingent consideration and redemption
liability (see below) (5.9) (0.7)
Principal paid on lease liability (22.5) (22.7)
Interest paid on lease liability (5.7) (5.6)
-------------------------------------------------------- ------- ------- -------
Net cash used in financing activities (566.9) (218.4)
-------------------------------------------------------- ------- ------- -------
DECREASE IN CASH AND CASH EQUIVALENTS (514.3) (121.0)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 942.1 1,061.2
Exchange (loss)/gain on cash and cash equivalents (0.9) 1.9
-------------------------------------------------------- ------- ------- -------
CASH AND CASH EQUIVALENTS AT OF YEAR 426.9 942.1
-------------------------------------------------------- ------- ------- -------
Cash and cash equivalents consists of:
Cash and cash equivalents - continuing operations 24 426.9 576.0
Cash and cash equivalents treated as held for sale 24 - 366.1
-------------------------------------------------------- ------- ------- -------
426.9 942.1
Less: expected credit loss on cash and cash equivalents 24 (0.4) (0.6)
-------------------------------------------------------- ------- ------- -------
426.5 941.5
-------------------------------------------------------- ------- ------- -------
2022 2021
Note EUR'm EUR'm
---------------------------------------------------------- ------- ------ -------
ADJUSTMENT TO RECONCILE NET INCOME TO NET CASH PROVIDED
FROM OPERATING ACTIVITIES
Income and expenses not affecting operating cash flows:
Depreciation on property, plant and equipment 17 41.5 42.9
Amortisation of intangible assets 19 109.8 109.3
Amortisation of right of use assets 18 21.5 20.2
Capitalisation of amortisation of right of use assets (1.9) (2.1)
Gain on early termination of lease contracts 18 (0.7) (1.2)
Share of loss from associates 20A 3.8 0.6
Impairment of other receivables - 1.2
(Reversal of)/impairment of property, plant and equipment 17 (0.2) 12.5
Impairment of intangible assets 19 38.7 9.1
Reversal of impairment of asset classified as held
for sale 25C - (2.0)
Profit on disposal of financial segment/casual and
social gaming 25C/25B (15.1) (7.6)
Loss on disposal of subsidiary 20A 8.8 -
Changes in fair value of equity investments 20B 0.3 1.6
Changes in fair value of derivative financial assets 20C (6.0) (583.2)
Fair value loss on convertible loans 3.0 -
Interest on bonds and loans and borrowings 36.2 41.2
Interest on lease liability 5.7 5.6
Interest income on loans receivable (1.3) (0.5)
Income tax expense/(credit) 58.5 (79.8)
Changes in equity settled share based payments 8.3 13.8
Movement in contingent consideration and redemption
liability (4.3) 6.2
Expected credit loss on cash and cash equivalents (0.2) -
Expected credit loss on loans receivable 1.6 -
Unrealised exchange loss (4.4) 8.7
Other 0.2 0.4
Changes in operating assets and liabilities:
Change in trade receivables 13.0 (5.9)
Change in other receivables 3.5 (28.0)
Change in inventories (0.6) (0.2)
Change in trade payables 20.4 (7.9)
Change in progressive operators, jackpots and security
deposits 3.6 10.5
Change in client funds and deposits (15.3) 21.7
Change in other payables 13.6 1.8
Change in provisions for risks and charges (2.8) (4.2)
Change in deferred revenues (2.1) (3.7)
---------------------------------------------------------- ------- ------ -------
337.1 (419.0)
---------------------------------------------------------- ------- ------ -------
Payment of contingent consideration and redemption liabilities
on previous acquisitions
2022 2021
EUR'm EUR'm
-------------------------------------------------------- ------ ------
A. Acquisition of Eyecon Limited 3.6 -
B. Acquisition of non-controlling interest of Statscore
SP Z.O.O. 1.6 -
C. Other acquisitions 0.7 0.7
--------------------------------------------------------- ------ ------
5.9 0.7
-------------------------------------------------------- ------ ------
Notes to the financial statements
Note 1 - General
Playtech plc (the "Company") is an Isle of Man company. The
registered office is located at St George's Court, Upper Church
Street, Douglas, Isle of Man IM1 1EE.
These consolidated financial statements comprise the Company and
its subsidiaries (together referred to as the "Group").
Note 2 - Basis of preparation
This financial information does not constitute the Group or
company's statutory accounts for the years ended 31 December 2022
or 2021 but is derived from those accounts. The auditor has
reported on those accounts; their reports were (i) unqualified and
(ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their
report.
The financial information has been prepared in accordance with
the UK adopted International Accounting Standards (IAS). They were
authorised for issue by the Company's Board of Directors on 23
March 2023.Details of the Group's accounting policies are included
in Note 5.
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 and emerging risks and uncertainties together with
scenario planning and reverse stress tests. The Directors have
assessed going concern over a 15-month period to 30 June 2024 which
aligns with the six-monthly covenant measurement period.
31 December 31 December
2022 2021
EUR'm EUR'm
----------------------------------------------------------- ----------- -----------
Cash and cash equivalents 426.5 575.4
Cash held on behalf of clients, progressive jackpots and
security deposits (154.1) (141.1)
----------------------------------------------------------- ----------- -----------
Adjusted gross cash and cash equivalents (excluding assets
and liabilities held for sale) 272.4 434.3
----------------------------------------------------------- ----------- -----------
Despite the decline in adjusted gross cash and cash equivalents
from EUR434.3 million at 31 December 2021 to EUR272.4 million at 31
December 2022, the Group continues to hold a strong liquidity
position. The decline from the prior year is explained by the full
repayment of the revolving credit facility ("RCF") drawn amounting
to EUR166.1 million, as well as the EUR330.0 million partial
repayment of the 2018 Bond, both offset by the cash proceeds from
disposal of the Financial segment of EUR223.9 million (refer to
Note 25), as well as the Group's strong performance during the
year.
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 include an RCF up
to EUR277.0 million, the 2018 Bond amounting to EUR200.0 million
post partial repayment and the 2019 Bond amounting to EUR350.0
million which are repayable in October 2023 and March 2026
respectively. The RCF has been restructured during the year
reducing the credit line from EUR317.0 million to EUR277.0 million
and is available until October 2025, with the Group having the
option to extend by twelve months. The remaining EUR200.0 million
balance of the 2018 Bond will be due upon expiration in October
2023, with the current plan assuming this will be paid through cash
reserves, rather than refinanced.
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 27 and 28. As at 31 December 2022, the Group comfortably met
its covenants which were as follows:
-- Leverage: Net Debt/Adjusted EBITDA to be less than 3.5:1 for
the twelve months ended 31 December 2022 (12 months ended 31
December 2021: 3:1)
-- Interest cover: Adjusted EBITDA/Interest to be over 4:1 for
the twelve months ended 31 December 2022 (12 months ended 31
December 2021: 4:1)
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 15 months from
approval of these financial statements (the "relevant going concern
period"). This period covers the bank reporting requirements for
June 2023, December 2023 and June 2024 and is the main reason why
the Directors selected a 15-month period of assessment.
Stress test
The stress test assumes a worst-case scenario for the entire
Group which includes additional sensitivities around Italy, the
Americas and Asia, but with mitigations similar to the ones taken
in 2020 and 2021 (including salary and capital expenditure
reductions). It also considers the impact of 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 7% 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 could result in either a liquidity
event or breach of the RCF and bond covenants.
As a result of completing this assessment, without considering
further mitigating actions, management considered the likelihood of
the reverse stress test scenario arising to be remote. In reaching
this conclusion management considered the following:
-- Current trading is performing above the base case;
-- Adjusted EBITDA would have to fall by 87% in the year ending
31 December 2023 and 88% in the 12 months to June 2024 compared to
the base case, to cause a breach of covenants; and
-- In the event that revenues decline to this point to drive the
decrease in Adjusted EBITDA, additional mitigating actions are
available to management which have not been factored into the
reverse stress test scenario.
As such, the Directors have a reasonable expectation that the
Group will have adequate financial resources to continue in
operational existence over the relevant going concern period and
have therefore considered it appropriate to adopt the going concern
basis of preparation in the financial statements.
Note 3 - Functional and presentation currency
These consolidated 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
Pound. All amounts have been rounded to the nearest million, unless
otherwise indicated.
Note 4 - New standards, interpretations and amendments adopted
by the Group
New standards, interpretations and amendments adopted from 1
January 2022
The Group applied for the first time certain standards and
amendments, which are effective for annual periods beginning on or
after 1 January 2022, but do not have a material impact on the
consolidated financial statements of the Group.
New standards, interpretations and amendments not yet
effective
There a number of standards, amendments to standards, and
interpretations which have been issued by the IASB that are
effective in future accounting periods that the Group has decided
not to adopt early.
The amendments are applied retrospectively for annual periods on
or after 1 January 2023:
-- Amendments to IAS 1 Presentation of Financial Statements and
IFRS Practice Statement 2 Disclosure of Accounting Policies.
The amendments change the requirements in IAS 1 with regard to
disclosure of accounting policies. The amendments replace all
instances of the term "significant accounting policies" with
"material accounting policy information". Accounting policy
information is material if, when considered together with other
information included in an entity's financial statements, it can
reasonably be expected to influence decisions that the primary
users of general purpose financial statements make on the basis of
those financial statements.
The supporting paragraphs in IAS 1 are also amended to clarify
that accounting policy information that relates to immaterial
transactions, other events or conditions is immaterial and need not
be disclosed. Accounting policy information may be material because
of the nature of the related transactions, other events or
conditions, even if the amounts are immaterial. However, not all
accounting policy information relating to material transactions,
other events or conditions is itself material.
The amendments to IAS 1 are effective for annual periods
beginning on or after 1 January 2023, with earlier application
permitted, and are applied prospectively. The amendments to IFRS
Practice Statement 2 do not contain an effective date or transition
requirements.
-- Amendments to IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors: Definition of Accounting
Estimates.
The amendments replace the definition of a change in accounting
estimates with a definition of accounting estimates. Under the new
definition, accounting estimates are "monetary amounts in financial
statements that are subject to measurement uncertainty".
The definition of a change in accounting estimates was deleted.
However, the Board retained the concept of changes in accounting
estimates in the standard with the following clarifications:
-- A change in accounting estimate that results from new
information or new developments is not the correction of an
error.
-- The effects of a change in an input or a measurement
technique used to develop an accounting estimate are changes in
accounting estimates if they do not result from the correction of
prior period errors.
The amendments are effective for annual periods beginning on or
after 1 January 2023 to changes in accounting policies and changes
in accounting estimates that occur on or after the beginning of
that period, with earlier application permitted.
The Group does not expect any other standards issued by the
IASB, but not yet effective, to have a material impact on the
Group.
The following amendments are effective for the period beginning
1 January 2024:
-- Amendments to IAS 1 Presentation of Financial Statements:
Classification of Liabilities as Current or Non-current and
Classification of Liabilities as Current or Non-current - deferral
of effective date.
The amendments affect only the presentation of liabilities as
current or non-current in the statement of financial position and
not the amount of timing of recognition of any asset, income or
expenses, or the information disclosed about those items.
The amendments clarify that the classification of liabilities as
current or non-current is based on the rights that are in existence
at the end of the reporting period, specify that the classification
is unaffected by expectations about whether an entity will exercise
its right to defer settlement of a liability, explain the rights
that are in existence if covenants are complied with at the end of
the reporting period, and introduce a definition of "settlement" to
make clear that settlement refers to the transfer to the
counterparty of cash, equity instruments, other assets or
services.
Note 5 - Significant accounting policies
The Group has consistently applied the following accounting
policies to all periods presented in the consolidated financial
statements, except if mentioned otherwise.
A. Basis of consolidation
(i) Business combinations
The Group accounts for business combinations using the
acquisition method when the acquired set of activities and assets
meets the definition of a business and control is transferred to
the Group. In determining whether a particular set of activities
and assets is a business, the Group assesses whether the set of
assets and activities acquired includes, at a minimum, an input and
substantive process and whether the acquired set has the ability to
produce outputs.
The consideration transferred in the acquisition is generally
measured at fair value, as are the identifiable net assets
acquired. Any goodwill arising is tested semi-annually for
impairment. Any gain on a bargain purchase is recognised in the
profit or loss immediately. Transaction costs are expensed as
incurred, except if related to the issue of debt or equity
securities.
Any contingent consideration is measured at fair value at the
date of acquisition. If an obligation to pay contingent
consideration that meets the definition of a financial instrument
is classified as equity, then it is not remeasured, and settlement
is accounted for within equity. Otherwise, other contingent
consideration is remeasured at fair value at each reporting date
and subsequent changes in the fair value of the contingent
consideration are recognised in the profit or loss. A contingent
consideration in which the contingent payments are forfeited if
employment is terminated is compensation for the post-combination
services and is not be included in the calculation of the
consideration and recognised as employee-related costs.
Cash payments arising from settlement of contingent
consideration and redemption liability are disclosed in financing
activities in the consolidated statement of cash flows.
When a business combination is achieved in stages, the Group's
previously held interests in the acquired entity are remeasured to
its acquisition-date fair value and the resulting gain or loss, if
any, is recognised in the profit or loss. Amounts arising from
interests in the acquiree prior to the acquisition date that have
previously been recognised in other comprehensive income are
reclassified to the profit or loss, where such treatment would be
appropriate if that interest were disposed of.
(ii) Subsidiaries
Subsidiaries are entities controlled by the Group. Control is
achieved when the Group:
-- has the power over the entity;
-- is exposed, or has rights, to variable return from its involvement with the entity; and
-- has the ability to use its power over the entity to affect its returns.
The Group reassesses whether or not it controls an entity if
facts and circumstances indicate that there are changes to one or
more of the three elements of control listed above.
When the Group has less than a majority of the voting rights of
an investee, it considers that it has power over the investee when
the voting rights are sufficient to give it the practical ability
to direct the relevant activities of the investee unilaterally. The
Group considers all relevant facts and circumstances in assessing
whether or not the Company's voting rights in an investee are
sufficient to give it power, including:
-- the size of the Group's holding of voting rights relative to
the size and dispersion of holdings of the other vote holders;
-- potential voting rights held by the Company, other vote holders or other parties;
-- rights arising from other contractual arrangements; and
-- any additional facts and circumstances that indicate that the
Group has, or does not have, the current ability to direct the
relevant activities at the time that decisions need to be made,
including voting patterns at previous shareholders' meetings.
Where the Group holds a currently exercisable call option, the
rights arising as a result of the exercise of the call option are
included in the assessment above of whether the Group has
control.
The financial statements of subsidiaries are included in the
consolidated financial statements from the date on which control
commences until the date on which control ceases.
(iii) Non-controlling interests (NCI)
NCI are measured initially at their proportionate share of the
acquiree's identifiable net assets at the date of acquisition.
Changes in the Group's interest in a subsidiary that do not
result in a change of control are accounted for as equity
transactions. The difference between the consideration and the
carrying value of the NCI is recognised as profit/loss in the
retained earnings.
(iv) Loss of control
When the Group loses control over a subsidiary it derecognises
the assets and liabilities of the subsidiary and any related NCI
and other components of equity. Any resulting gain or loss is
recognised in the profit or loss.
(v) Investments in associates and equity call options
An associate is an entity over which the Group has significant
influence and that is neither a subsidiary nor an interest in a
joint venture. Significant influence is the power to participate in
the financial and operating policy decisions of the investee but is
not control or joint control over those policies.
The considerations made in determining significant influence or
joint control are similar to those necessary to determine control
over subsidiaries. In the consolidated financial statements, the
Group's investments in associates are accounted for using the
equity method of accounting.
Under the equity method, the investment in an associate or a
joint venture is carried in the consolidated balance sheet at cost
plus post-acquisition changes in the Group's share of the net
assets of the associate. The Group's share of the results of the
associate is included in the profit or loss. Losses of the
associate or joint venture in excess of the Group's cost of the
investment are recognised as a liability only when the Group has
incurred obligations on behalf of the associate.
On acquisition of the investment, any difference between the
cost of the investment and share of the associate's identifiable
assets and liabilities is accounted for as follows:
-- Any premium paid is capitalised and included in the carrying amount of the associate.
-- Any excess of the share of the net fair value of the
associate's identifiable assets and liabilities over the cost of
the investment is included as income in the determination of the
share of the associate's profit or loss in the period in which the
investment is acquired.
Any intangibles identified and included as part of the
investment are amortized over their assumed useful economic life.
Where there is objective evidence that the investment in an
associate may be impaired the carrying amount of the investment is
tested for impairment in the same way as other non-financial
assets.
The aggregate of the Group's share of profit or loss of an
associate is shown on the face of the profit or loss outside
operating profit and represents profit or loss before tax. The
associated tax charge is disclosed in income tax.
The Group recognises its share of any changes in the equity of
the associate through the consolidated statement of changes in
equity. Profits and losses resulting from transactions between the
Group and the associate are eliminated to the extent of the Group's
interest in the associate.
The Group applies equity accounting only up to the date an
investment in associate meets the criteria for classification as
held for sale. From then onwards, the investment is measured at the
lower of its carrying amount and fair value less costs to sell.
When potential voting rights or other derivatives containing
potential voting rights exist, the Group'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 and other derivative instruments unless
there is an existing ownership interest 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. When instruments containing potential voting rights
in substance currently give access to the returns associated with
an ownership interest in an associate or a joint venture, the
instruments are not subject to IFRS 9 and equity accounting is
applied. In all other cases, instruments containing potential
voting rights in an associate or a joint venture are accounted for
in accordance with IFRS 9.
A derivative financial asset is measured under fair value under
IFRS 9. In the case where there is significant influence, but the
option is not currently exercisable, there is still an investment
in associate but as there is no current access to profits, the
option is fair valued instead.
Derivatives are recorded at fair value and classified as assets
when their fair value is positive and as liabilities when their
fair value is negative. Subsequently, derivatives are measured at
fair value.
(vi) Equity investments held at fair value
All equity investments in scope of IFRS 9 are measured at fair
value in the balance sheet. Fair value changes are recognised in
the profit or loss. Fair value is based on quoted market prices
(Level 1). Where this is not possible, fair value is assessed based
on alternative methods (Level 3).
(vii) Transactions eliminated on consolidation
Intra-group balances and transactions are eliminated. Unrealised
gains arising from transactions with equity-accounted investees are
eliminated against the investment to the extent of the Group's
interest in the investee. Unrealised losses are eliminated in the
same way as unrealised gains, but only to the extent that there is
no evidence of impairment.
B. Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated into the
respective functional currencies of Group companies at the exchange
rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency at the
exchange rate at the reporting date. Non-monetary assets and
liabilities that are measured at fair value in a foreign currency
are translated into the functional currency at the exchange rate
when the fair value was determined. Non-monetary items that are
measured based on historical cost in a foreign currency are
translated at the exchange rate at the date of the transaction.
Foreign currency differences are generally recognised in the profit
or loss and presented within finance costs.
(ii) Foreign operations
On consolidation, the assets and liabilities of foreign
operations, including goodwill and fair value adjustments arising
on acquisition, are translated into Euro at the exchange rates at
the reporting date and their statements of profit or loss are
translated into Euro at the end of each month at the average
exchange rate for the month which approximates the exchange rates
at the date of the transactions.
The exchange differences arising on the translation for
consolidation are recognised in other comprehensive income (OCI)
and accumulated in the foreign exchange reserve.
When a foreign operation is disposed of in its entirety or
partially such that control, significant influence or joint control
is lost, the cumulative amount in the foreign exchange reserve
relating to the foreign operation is reclassified to the profit or
loss as part of the gain or loss on disposal.
C. Discontinued operation
A discontinued operation is a component of the Group's business,
the operations and cash flows of which can be clearly distinguished
from the rest of the Group and which:
-- represents a separate major line of business or geographical area of operations;
-- is part of a single co-ordinated plan to dispose of a
separate major line of business or geographical area of operations;
or
-- is a subsidiary acquired exclusively with a view to resale.
Classification as a discontinued operation occurs at the earlier
of disposal or when the operation meets the criteria to be
classified as held for sale.
When an operation is classified as a discontinued operation, the
comparative statement of comprehensive income is re-presented as if
the operation had been discontinued from the start of the
comparative year.
D. Revenue recognition
The majority of the Group's revenue is derived from selling
services with revenue recognised when services have been delivered
to the customer. Revenue comprises the fair value of the
consideration received or receivable for the supply of services in
the ordinary course of the Group's activities. Revenue is
recognised when economic benefits are expected to flow to the
Group. Specific criteria and performance obligations are described
below for each of the Group's material revenue streams.
Type of income Nature, timing of satisfaction of performance obligations
and significant payment terms
--------------------- -----------------------------------------------------------------
B2B licensee fee Licensee fee is the standard operator income of the Group
which relates to licensed technology and the provision
of certain services provided via various distribution channels
(online, mobile or land-based interfaces).
Licensee fee is based on the underlying gaming revenue
earned by our licensees calculated using the contractual
terms in place. Revenue is recognised when performance
obligation is met which is when the gaming transaction
occurs. The payment terms of the B2B licensee fee is on
average 30 days from the invoice date.
--------------------- -----------------------------------------------------------------
B2B fixed-fee income Fixed-fee income is the standard operator income of the
Group which includes revenue derived from the provision
of certain services and licensed technology for which charges
are based on a fixed fee and/or stepped according to the
monthly usage of the service/technology. The usage measurement
is typically reset on a monthly basis.
The performance obligation is met and revenue is recognised
once the obligations under the contracts have been met
which is when the services have been provided.
Services provided and fees for:
a. minimum revenue guarantee: the additional balance billed
by the Group on a monthly basis for the difference in the
minimum guarantee per licensee contract and actual performance;
and
b. other: hosting, live, set-up, content delivery network
and maintenance fees. The fees charge to licensees for
these services are fixed per month.
The amounts for the above are recognised over the life
of the contracts and are typically charged on a fixed percentage
and stepped according to the monthly usage of the service
depending on the type of service. Set-up fees are recognised
over the whole period of the contract, with an average
period of 36 months. The revenue is recognised monthly
over the period of the contract and the payment terms of
the B2B fixed fee income is on average 30 days from the
invoice date.
--------------------- -----------------------------------------------------------------
B2B cost-based Cost-based revenue is the standard operator income of the
revenue Group which is made of the total revenue charged to the
licensee based on the development costs needed to satisfy
the contract with the licensee.
The largest type of service included in cost-based revenue
is the dedicated team costs. Dedicated team employees are
charged back to the client based on time spent on each
product.
Cost-based revenues are recognised on a monthly basis based
on the contract in place of licensee with Playtech and
any additional services needed on development are charged
to the licensee upon delivery of the service. The payment
terms of the B2B cost-based revenue is on average 30 days
from the invoice date.
--------------------- -----------------------------------------------------------------
B2B revenue received Revenue received from the sale of hardware is the total
from the sale of revenue charged to customers upon the sale of each hardware
hardware product. The performance obligation is met and revenue
is recognised on delivery of the hardware and acceptance
by the customer.
Revenue received from future sale of hardware is recognised
as deferred revenue. Once the obligation for the future
sale is met, revenue is then recognised in profit or loss.
The payment terms of the B2B revenue received from the
sale of hardware is on average 30 days from the invoice
date.
--------------------- -----------------------------------------------------------------
Additional B2B This income is calculated based on the profit and/or net
services fee revenues generated by the customer in return for the additional
services provided to them by the Group. This is typically
charged on a monthly basis and is measured using a predetermined
percentage set in each licensee arrangement. The revenue
is only recognised when the customer's activities go live
and the revenue from the additional B2B services is recognised
only once the Group is unconditionally contractually entitled
to it. The Directors have determined that this is when
the customer starts generating profits which is later than
when the customer goes live with its B2C operations. The
Directors rationale is that there is uncertainty that the
Group will collect the consideration to which it is entitled
before the customer starts generating profits and therefore,
the revenue is wholly variable. The payment terms of the
additional B2B services fees is on average 30 days from
the invoice date.
--------------------- -----------------------------------------------------------------
B2C revenue In respect of B2C Snaitech revenues, the Group acts as
principal with the end customer, with specific revenue
policies as follows:
* The revenues from land-based gaming machines are
recognised net of the winnings, jackpots and certain
flat-rate gaming tax.
* The revenue from online gaming (games of
skill/casino/bingo) are recognised net of the
winnings, jackpots, bonuses and certain flat-rate
gaming tax. In respect of Casino and Bingo, revenue
is recognised at the conclusion of the bet. Revenue
from games of skill is recognised at the conclusion
of the bet.
* The revenues related to the acceptance of fixed odds
bets are considered financial instruments under IFRS
9 and are recognised net of certain flat-rate gaming
tax, winnings, bonuses and the fair value of open
bets.
-- Revenues related to fixed odds bets are recognised at
the conclusion of the event.
* Poker revenues in the form of commission (i.e. rake)
is recognised at the conclusion of each poker hand.
The performance obligation is the provision of the
poker games to the players.
* All the revenues from gaming machines are recorded
net of players' winnings and certain gaming taxes
while the concession fees payable to the regulator
and the compensation of operators, franchisees and
platform providers are accounted as expenses. Revenue
is recognised at the time of the bet.
Where the gaming tax incurred is directly measured by reference
to the individual customer transaction and related to the
stake (described as "flat-rate tax" above), this is deducted
from revenue.
Where the tax incurred is measured by reference to the
Group's net result from betting and gaming activity, this
is not deducted from revenue and is recognised as an expense.
In respect of Sun Bingo and B2C Sport revenue, the Group
acts as principal with the end customer, with revenue being
recognised at the conclusion of the event, net of winnings,
jackpots and bonuses.
--------------------- -----------------------------------------------------------------
Financial trading Financial trading income represents gains (including commission)
income (discontinued and losses arising on client trading activity, primarily
operations) in contracts for difference on shares, indexes, commodities
and foreign exchange.
Open client positions are carried at fair market value
and gains and losses arising on this valuation are recognised
in revenue as well as gains and losses realised on positions
that have closed.
The performance obligation is met in the accounting periods
in which the trading transaction occurs and is concluded.
--------------------- -----------------------------------------------------------------
Based on the services provided by the Group, excluding certain
rebates provided to customers in the Financial division, no return,
refund and other similar obligations exist. Moreover, no warranties
and related obligations exist.
E. Share-based payments
Certain employees participate in the Group's share option plans.
Following the 2012 LTIP employees are granted cash-settled options
and equity-settled options. The Remuneration Committee has the
option to determine if the option will be settled in cash or
equity, a decision that is made at grant date. The fair value of
the equity-settled options granted is charged to the profit or loss
on a straight-line basis over the vesting period and the credit is
taken to equity, based on the Group's estimate of shares that will
eventually vest. Fair value is determined by the Black-Scholes,
Monte Carlo or binomial valuation model, as appropriate. The
cash-settled options are presented as a liability. The liability is
remeasured at each reporting date and settlement date so that the
ultimate liability equals the cash payment on settlement date.
Remeasurements of the fair value of the liability are recognised in
profit or loss.
The Group has also granted awards to be distributed from the
Group's Employee Benefit Trust. The fair value of these awards is
based on the market price at the date of the grant; some of the
grants have performance conditions. The performance conditions are
for the Executive Management and include targets based on growth in
earnings per share and total shareholder return over a specific
period compared to other competitors. The fair value of the awards
with market performance conditions is factored into the overall
fair value and determined using a Monte Carlo method. Where these
options lapse due to not meeting market performance conditions the
share option charge is not reversed.
F. Income tax
The income tax expense represents the sum of the tax currently
payable and deferred tax.
(i) Current tax
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in profit
or loss because it excludes items of income or expense that are
taxable or deductible in other years and it further excludes items
that are never taxable or deductible. The Group's liability for
current tax is calculated using tax rates that have been enacted or
substantively enacted by the end of the reporting period.
A provision is recognised for those matters for which the tax
determination is uncertain, but it is considered probable that
there will be a future outflow of funds to a tax authority. The
provisions are measured at the best estimate of the amount expected
to become payable. The assessment is based on the judgement of tax
professionals within the Company supported by previous experience
in respect of such activities and in certain cases based on
specialist tax advice.
(ii) Deferred tax
Deferred tax is provided using the liability method on temporary
differences between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes at the
reporting date.
Deferred tax liabilities are recognised for all taxable
temporary differences, except:
-- when the deferred tax liability arises from the initial
recognition of goodwill or an asset or liability in a transaction
that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable
profit or loss; and
-- in respect of taxable temporary differences associated with
investments in subsidiaries, associates and interests in joint
ventures, when the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary
differences, the carry forward of unused tax credits and any unused
tax losses. Deferred tax assets are recognised in the period in
which the deductible temporary differences arise when there are
sufficient taxable temporary differences relating to the same
taxation authority and the same taxable entity which are expected
to reverse, or where it is probable that taxable profit will be
available against which a deductible temporary difference can be
utilised..
Deferred tax assets are recognised to the extent that it is
probable that taxable profit will be available against which the
deductible temporary differences, and the carry forward of unused
tax credits and unused tax losses can be utilised, except:
-- when the deferred tax asset relating to the deductible
temporary difference arises from the initial recognition of an
asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss; and
-- in respect of deductible temporary differences associated
with investments in subsidiaries, associates and interests in joint
ventures, deferred tax assets are recognised only to the extent
that it is probable that the temporary differences will reverse in
the foreseeable future and taxable profit will be available against
which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow
all or part of the deferred tax asset to be utilised. Unrecognised
deferred tax assets are reassessed at each reporting date and are
recognised to the extent that it has become probable that future
taxable profits will allow the deferred tax asset to be
recovered.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the year when 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
reporting date.
Deferred tax relating to items recognised outside the profit or
loss is recognised outside the profit or loss. Deferred tax items
are recognised in correlation to the underlying transaction either
in OCI or directly in equity.
Tax benefits acquired as part of a business combination, but not
satisfying the criteria for separate recognition at that date, are
recognised subsequently, if new information about facts and
circumstances change. The adjustment is either treated as a
reduction in goodwill (as long as it does not exceed goodwill) if
it was recognised during the measurement period or is otherwise
recognised in profit or loss.
The Group offsets deferred tax assets and deferred tax
liabilities if and only if it has a legally enforceable right to
set off current tax assets and current tax liabilities and the
deferred tax assets and deferred tax liabilities relate to income
taxes levied by the same taxation authority on either the same
taxable entity or different taxable entities which intend either to
settle current tax liabilities and assets on a net basis, or to
realise the assets and settle the liabilities simultaneously, in
each future period in which significant amounts of deferred tax
liabilities or assets are expected to be settled or recovered.
The tax base of assets and liabilities is assessed at each
reporting date, and changes in the tax base that result from
internal reorganisations, changes in the expected manner of
recovery or changes in tax law are reflected in the calculation of
deductible and taxable temporary differences.
G. Finance expense
Finance expense arising on interest bearing financial
instruments carried at amortised cost are recognised in the profit
or loss using the effective interest rate method. Finance expense
includes the amortisation of fees that are an integral part of the
effective finance cost of a financial instrument, including issue
costs, and the amortisation of any other differences between the
amount initially recognised and the redemption price. All finance
expenses are recognised over the availability period.
Interest expense arising on the above during the period is
disclosed under the financing activities in the consolidated
statement of cash flows.
H. Inventories
Inventories are initially recognised at cost, and subsequently
at the lower of cost and net realisable value. Cost comprises all
costs of purchase, costs of conversion and other costs incurred in
bringing the inventories to their present location and
condition.
I. Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less
accumulated depreciation and any accumulated impairment losses.
If significant parts of an item of property, plant and equipment
have different useful lives, then they are accounted for as
separate items (major components) of property, plant and
equipment.
Any gain or loss on disposal of an item of property, plant and
equipment is recognised in profit or loss.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable
that the future economic benefits associated with the expenditure
will flow to the Group.
(iii) Depreciation
Depreciation is calculated to write off the cost of items of
property, plant and equipment less their estimated residual values
using the straight-line method over their estimated useful lives,
and is generally recognised in profit or loss. Land is not
depreciated.
The estimated useful lives of property, plant and equipment for
current and comparative periods are as follows:
%
-------------------------------------------------- ------------------------
Computers and gaming machines 20-33
Office furniture and equipment 7-33
3-20, or over the length
Freehold and leasehold buildings and improvements of the lease
-------------------------------------------------- ------------------------
Depreciation methods, useful lives and residual values are
reviewed at each reporting date and adjusted if appropriate.
J. Intangible assets and goodwill
(i) Recognition and measurement
Goodwill
Goodwill represents the excess of the cost of a business
combination over the Group's interest in the fair value of
identifiable assets, liabilities and contingent liabilities
acquired. Cost comprises the fair value of assets given,
liabilities assumed and equity instruments issued, plus the amount
of any non-controlling interests in the acquiree plus, if the
business combination is achieved in stages, the fair value of the
existing equity interest in the acquiree. Contingent consideration
is included in cost at its acquisition date fair value and, in the
case of contingent consideration classified as a financial
liability, remeasured subsequently through profit or loss. Direct
costs of acquisition are recognised immediately as an expense.
Goodwill is capitalised as an intangible asset with any impairment
in carrying value being charged to the profit or loss. Where the
fair value of identifiable assets, liabilities and contingent
liabilities exceed the fair value of consideration paid, the excess
is credited in full to the profit or loss on the acquisition date
as a gain on bargain purchase.
Externally acquired intangible assets
Other intangible assets that are acquired by the Group and have
finite useful lives are measured at cost less accumulated
amortisation and any accumulated impairment losses.
Business combinations
Intangible assets are recognised on business combinations if
they are separable from the acquired entity or give rise to other
contractual/legal rights. The amounts ascribed to such intangibles
are arrived at by using appropriate valuation techniques.
Internally generated intangible assets (development costs)
Development costs that are directly attributable to the design
and testing of identifiable and unique software products controlled
by the Group are recognised as intangible assets where the
following criteria are met:
-- it is technically feasible to complete the software so that it will be available for use;
-- management intends to complete the software and use or sell it;
-- there is an ability to use or sell the software;
-- it can be demonstrated how the software will generate probable future economic benefits;
-- adequate technical, financial and other resources to complete
the development and to use or sell the software are available;
and
-- the expenditure attributable to the software during its
development can be reliably measured.
The amount initially recognised for internally generated
intangible assets is the sum of the expenditure incurred from the
date when the intangible asset first meets the recognition criteria
listed above. Expenditure includes salaries, wages and other
employee-related costs directly engaged in generating the assets
and any other expenditure that is directly attributable to
generating the assets (i.e. certifications and amortisation of
right of use assets). Where no internally generated intangible
asset can be recognised, development expenditure is recognised in
profit or loss in the period in which it is incurred.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the
future economic benefits embodied in the specific asset to which it
relates. All other expenditure, including expenditure on internally
generated goodwill and brands, is recognised in the profit or loss
as incurred.
(iii) Amortisation
Amortisation is calculated to write off the cost of intangible
assets less their estimated residual values using the straight-line
method over their estimated useful lives and is generally
recognised in the profit or loss. Goodwill is not amortised.
The estimated useful lives for current and comparative periods
are as follows:
%
--------------------------------------------------- ------------------------
Domain names Nil
Internally generated capitalised development costs 20-33
Technology IP 13-33
In line with projected
Customer lists cash flows or 7-20
Affiliate contracts 5-12.5
10-33 or over the period
Patents and licences of the licence
--------------------------------------------------- ------------------------
Amortisation methods, useful lives and residual values are
reviewed at each reporting date and adjusted if appropriate.
K. Assets held for sale
Non-current assets, or disposal groups comprising assets and
liabilities, are classified as held for sale if it is highly
probable that they will be recovered primarily through sale rather
than through continuing use.
The criteria for held for sale classification is regarded as met
only when the sale is highly probable, and the asset or disposal
group is available for immediate sale in its present condition.
Actions required to complete the sale should indicate that it is
unlikely that significant changes to the sale will be made or that
the decision to sell will be withdrawn. Management must be
committed to the plan to sell the asset and the sale expected to be
completed within one year from the date of the classification.
Such assets, or disposal groups, are measured at the lower of
their carrying amount and fair value less costs to sell. Any
impairment loss on a disposal group is allocated first to goodwill,
and then to the remaining assets on a pro rata basis, except that
no loss is allocated to inventories, financial assets or deferred
tax assets, which continue to be measured in accordance with the
Group's other accounting policies. Impairment losses on initial
classification as held for sale or held for distribution and
subsequent gains and losses on remeasurement are recognised in the
profit or loss.
Once classified as held for sale, intangible assets and
property, plant and equipment are no longer amortised or
depreciated.
L. Financial instruments
Initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
(i) Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as
subsequently measured at amortised cost, fair value through other
comprehensive income and fair value through profit or loss.
The classification of financial assets at initial recognition
depends on the financial asset's contractual cash flow
characteristics and the Group's business model for managing them.
With the exception of trade receivables that do not contain a
significant financing component or for which the Group has applied
the practical expedient, the Group initially measures a financial
asset at its fair value plus, in the case of a financial asset not
at fair value through profit or loss, transaction costs. Trade
receivables that do not contain a significant financing component
or for which the Group has applied the practical expedient are
measured at the transaction price. In order for a financial asset
to be classified and measured at amortised cost or fair value
through OCI, it needs to give rise to cash flows that are "solely
payments of principal and interest (SPPI)" on the principal amount
outstanding. This assessment is referred to as the SPPI test and is
performed at an instrument level. Financial assets with cash flows
that are not SPPI are classified and measured at fair value through
profit or loss, irrespective of the business model.
Subsequent measurement
For purposes of subsequent measurement, financial assets are
classified in four categories:
-- financial assets at amortised cost (debt instruments);
-- financial assets at fair value through other comprehensive
income with recycling of cumulative gains and losses (debt
instruments);
-- financial assets designated at fair value through other
comprehensive income with no recycling of cumulative gains and
losses upon derecognition (equity instruments); and
-- financial assets at fair value through profit or loss.
Financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured
using the effective interest (EIR) method and are subject to
impairment. Gains and losses are recognised in the profit or loss
when the asset is derecognised, modified or impaired. The Group's
financial assets at amortised cost include trade receivables, loans
receivable and cash and cash equivalents.
Cash and cash equivalents consist of cash at bank and in hand,
short-term deposits with an original maturity of less than three
months and customer balances.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are
carried in the balance sheet at fair value with net changes in fair
value recognised in the profit or loss. This category includes
listed equity investments which the Group had not irrevocably
elected to classify at fair value through OCI.
The Group recognizes a debt financial instrument with an
embedded conversion option, such as a loan convertible into
ordinary shares of an entity, as a financial asset in the balance
sheet. On initial recognition, the convertible loan is measured at
fair value with any gain or loss arising on subsequent measurement
until conversion recognized in profit or loss. On conversion of a
convertible instrument, the Group derecognizes the financial asset
component and recognizes it as an investment (equity interest,
associate, joint venture or subsidiary) depending on the results of
the assessment performed under the relevant standards.
At every reporting date, the Group evaluates whether the debt
instrument is considered to have low credit risk using all
reasonable and supportable information that is available without
undue cost or effort. In making that evaluation, the Group
reassesses the internal credit rating of the debt instrument. In
addition, the Group considers whether there has been a significant
increase in credit risk depending on the characteristics of each
debt instrument.
Derecognition
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is primarily
derecognised (i.e. removed from the Group's consolidated balance
sheet) when:
-- the rights to receive cash flows from the asset have expired; or
-- the Group has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the received
cash flows in full without material delay to a third party under a
"pass-through" arrangement, and either (a) the Group has
transferred substantially all the risks and rewards of the asset;
or (b) the Group has neither transferred nor retained substantially
all the risks and rewards of the asset, but has transferred control
of the asset.
When the Group has transferred its rights to receive cash flows
from an asset or has entered into a passthrough arrangement, it
evaluates if, and to what extent, it has retained the risks and
rewards of ownership. When it has neither: transferred nor retained
substantially all of the risks and rewards of the asset, nor
transferred control of the asset, the Group continues to recognise
the transferred asset to the extent of its continuing involvement.
In that case, the Group also recognises an associated liability.
The transferred asset and the associated liability are measured on
a basis that reflects the rights and obligations that the Group has
retained.
Continuing involvement that takes the form of a guarantee over
the transferred asset is measured at the lower of the original
carrying amount of the asset and the maximum amount of
consideration that the Group could be required to repay.
Impairment
The Group recognises an allowance for expected credit losses
(ECLs) for all debt instruments not held at fair value through
profit or loss. ECLs are based on the difference between the
contractual cash flows due in accordance with the contract and all
the cash flows that the Group expects to receive, discounted at an
approximation of the original effective interest rate. The expected
cash flows will include cash flows from the sale of collateral held
or other credit enhancements that are integral to the contractual
terms.
ECLs are recognised in two stages. For credit exposures for
which there has not been a significant increase in credit risk
since initial recognition, ECLs are provided for credit losses that
result from default events that are possible within the next 12
months (a 12-month ECL). For those credit exposures for which there
has been a significant increase in credit risk since initial
recognition, a loss allowance is required for credit losses
expected over the remaining life of the exposure, irrespective of
the timing of the default (a lifetime ECL).
For trade receivables, the Group applies a simplified approach
in calculating ECLs. Therefore, the Group does not track changes in
credit risk, but instead recognises a loss allowance based on
lifetime ECLs at each reporting date. The Group has established a
provision matrix that is based on its historical credit loss
experience, adjusted for forward-looking factors specific to the
debtors and the economic environment.
(ii) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans
and borrowings, payables, or; derivatives designated as hedging
instruments in an effective hedge, as appropriate. All financial
liabilities are recognised initially at fair value and, in the case
of loans and borrowings and payables, net of directly attributable
transaction costs. The Group's financial liabilities include trade
and other payables, loans and borrowings including bank overdrafts,
and derivative financial instruments.
Subsequent measurement
For purposes of subsequent measurement, financial liabilities
are classified in two categories:
-- financial liabilities at fair value through profit or loss; and
-- financial liabilities at amortised cost (loans and borrowings and bonds).
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss
include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair value
through profit or loss.
Financial liabilities at amortised cost
This is the category most relevant to the Group. After initial
recognition, interest-bearing loans and borrowings are subsequently
measured at amortised cost using the effective interest rate (EIR)
method. Gains and losses are recognised in the profit or loss when
the liabilities are derecognised as well as through the EIR
amortisation process. Amortised cost is calculated by taking into
account any discount or premium on acquisition and fees or costs
that are an integral part of the EIR. The EIR amortisation is
included as finance costs in the profit or loss.
Derecognition
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in the profit or
loss.
(iii) Offsetting
Financial assets and financial liabilities are offset and the
net amount is reported in the balance sheet if there is a currently
enforceable legal right to offset the recognised amounts and there
is an intention to settle on a net basis, to realise the assets and
settle the liabilities simultaneously.
M. Share capital
Ordinary shares are classified as equity and are stated at the
proceeds received net of direct issue costs.
N. Share buyback
Consideration paid for the share buyback is recognised against
the additional paid in capital. Any excess of the consideration
paid over the weighted average price of shares in issue is debited
to the retained earnings.
O. Employee Benefit Trust
Consideration paid/received for the purchase/sale of shares
subsequently put in the Employee Benefit Trust, which is controlled
by the Company, is recognised directly in equity. The cost of
shares held is presented as a separate reserve (the "Employee
Benefit Trust reserve"). Any excess of the consideration received
on the sale of treasury shares over the weighted average cost of
the shares sold is credited to retained earnings.
P. Dividends
Dividends are recognised when they become legally due. In the
case of interim dividends to equity shareholders, this is when paid
by the Directors. In the case of final dividends, this is when they
are declared and approved by the shareholders at the AGM.
Q. Impairment of non-financial assets
At each reporting date, the Group reviews the carrying amounts
of its non-financial assets (other than inventories and deferred
tax assets) to determine whether there is any indication of
impairment. If any such indication exists, then the asset's
recoverable amount is estimated. Goodwill is tested semi-annually
for impairment.
For impairment testing, assets are grouped together into the
smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of
other assets or CGUs. Goodwill arising from a business combination
is allocated to CGUs that are expected to benefit from the
synergies of the combination.
The recoverable amount of an asset or CGU is the greater of its
value in use and its fair value less costs of disposal. Value in
use is based on the estimated future cash flows, discounted to
their present value using a post-tax discount rate that reflects
current market assessments of the time value of money and the risks
specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an
asset or CGU exceeds its recoverable amount.
Impairment losses are recognised in the profit or loss. They are
allocated first to reduce the carrying amount of any goodwill
allocated to the CGU, and then to reduce the carrying amounts of
the other assets in the CGU on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. For
other assets, an impairment loss is reversed only to the extent
that the asset's carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
R. Provisions
Provisions for legal claims are recognised when the Group has a
present legal or constructive obligation as a result of past
events, it is probable that an outflow of resources will be
required to settle the obligation, and the amount can be reliably
estimated. Provisions are not recognised for future operating
losses.
Where there are a number of similar obligations, the likelihood
that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow with respect to any
one item included in the same class of obligations may be
minimum.
Provisions are measured at the present value of management's
best estimate of the expenditure required to settle the present
obligation at the end of the reporting period. The discount rate
used to determine the present value is a pre-tax rate that reflects
current market assessments of the time value of money and the risks
specific to the liability.
S. Leases
At inception of a contract, the Group assesses whether a
contract is, or contains, a lease. A contract is, or contains, a
lease if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration.
Group as a lessee
The Group applies a single recognition and measurement approach
for all leases, except for short-term leases and leases of
low-value assets. The Group recognises lease liabilities to make
lease payments and right of use assets representing the right to
use the underlying assets.
(i) Right of use assets
The Group recognises right of use assets at the commencement
date of the lease (i.e. the date the underlying asset is available
for use). Right-of-use assets are measured at cost, less any
accumulated amortisation and impairment losses and adjusted for any
remeasurement of lease liabilities. The cost of right of use assets
includes the amount of lease liabilities recognised, initial direct
costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. Right of use
assets are amortised on a straight-line basis over the shorter of
the lease term and the estimated useful lives of the assets.
(ii) Lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed
payments (including in-substance fixed payments) less any lease
incentives receivable, variable lease payments that depend on an
index or a rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the exercise
price of a purchase option reasonably certain to be exercised by
the Group and payments of penalties for terminating the lease, if
the lease term reflects the Group exercising the option to
terminate.
Variable lease payments that do not depend on an index or a rate
are recognised as expenses in the period in which the event or
condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group
uses its incremental borrowing rate at the lease commencement date
because the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of interest and
reduced for the lease payments made.
In addition, the carrying amount of lease liabilities is
remeasured if there is a modification, a change in the lease term,
a change in the lease payments (e.g. changes to future payments
resulting from a change in an index or rate used to determine such
lease payments) or a change in the assessment of an option to
purchase the underlying asset. When the lease liability is
remeasured in this way, a corresponding adjustment is made to the
carrying amount of the right of use asset or is recorded in the
profit or loss if the carrying amount of the right of use asset has
been reduced to zero.
The cash payments made in relation to long term leases is split
between principal and interest paid on lease liability and
disclosed within financing activities in the consolidated statement
of cash flows.
(iii) Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to
its short-term leases (i.e. those leases that have a lease term of
12 months or less from the commencement date and do not contain a
purchase option). It also applies the lease of low-value assets
recognition exemption to leases that are considered to be low
value. Lease payments on short-term leases and leases of low-value
assets are recognised as expense on a straight-line basis over the
lease term and included within financing activities in the
consolidated statement of cash flows.
T. Fair value measurement
"Fair value" is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to
sell the asset or transfer the liability takes place either: (a) in
the principal market for the asset or liability; or (b) in the
absence of a principal market, in the most advantageous market for
the asset or liability.
The fair value of an asset or a liability is measured using the
assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their
economic best interest.
The Group uses valuation techniques that are appropriate in the
circumstances and for which sufficient data is available to measure
fair value, maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or
disclosed in the financial statements are categorised within the
fair value hierarchy, described as follows, based on the lowest
level input that is significant to the fair value measurement as a
whole:
-- Level 1 - quoted (unadjusted) market prices in active markets
for identical assets or liabilities.
-- Level 2 - valuation techniques for which the lowest level
input that is significant to the fair value measurement is directly
or indirectly observable.
-- Level 3 - valuation techniques for which the lowest level
input that is significant to the fair value measurement is
unobservable.
U. Adjusted results
The Group discloses EBITDA, being the profit before interest,
taxes, depreciation and amortisation. EBITDA is a measure of the
Group's overall financial performance and profitability which the
Directors consider useful to reflect the underlying performance of
the business.
The Board of Directors believes that in order to best represent
the trading performance and results of the Group, the reported
numbers should exclude certain non-cash items, one-off items and
the impact of substantial reorganisations and acquisition-related
items.
Adjusted EBITDA and Adjusted Profit/loss after making these
exclusions are therefore presented alongside the reported EBITDA
and reported Profit/loss in the consolidated statement of
comprehensive income.
The Directors use the Adjusted EBITDA and Adjusted Profit/loss
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.
Furthermore, compensation of the executives is based in part on the
performance of the business based on Adjusted EBITDA.
Adjusted results exclude the following items:
-- Material non-cash items: these items are excluded to better
analyse the underlying cash transactions of the business as the
management regularly monitors the operating cash conversion to
Adjusted EBITDA.
-- Material one-off items: there items are excluded to get
normalised results that are distorted by unusual or infrequent
items unusual or infrequent items that are excluded to get
normalised results that were previously distorted by these items.
Unusual items include highly abnormal, one-off and only
incidentally relating to the ordinary activities of the Group.
Infrequent items are those which are not reasonably expected to
recur in the foreseeable future given the environment in which the
Group operates.
-- Material reorganisations and acquisition-related items: these
items are excluded as they are not considered related to the
ordinary activities of the business and are not considered to be
ongoing costs of the operations of the business.
In addition, management presents underlying adjusted results and
constant currency adjusted results to the Board of Directors.
Underlying adjusted results are presented as an alternative
performance measure to exclude the impact of acquisitions made in
the period or in the comparable period in order to present a more
accurate "like-for-like" comparison over the comparable period.
Constant currency adjusted results are presented in order to try
and present measures that exclude the effect of currency
fluctuations. In view of the fact that the Group has transactions
in foreign currencies and may be affected from the fluctuations of
the currencies, all transactions in foreign currencies are
converted to Euro using the exchange rate of the comparable
period.
As these are non-GAAP measures, they should not be considered as
replacements for IFRS measures. The Group's definition of these
non-GAAP measures may not be comparable to other similarly titled
measures reported by other companies. A full reconciliation of
adjustments is included in Note 10.
Note 6 - Significant accounting judgements, estimates and
assumptions
In preparing these consolidated 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 from
these estimates.
Judgements
In the process of applying the Group's accounting policies
management has made the following judgements, which have the most
significant effect on the amounts recognised in the consolidated
financial statements.
Revenue from contracts with customers
The Group applies judgement in determining whether it is acting
as a principal or an agent specifically on the revenue earned under
the B2B licensee fee stream. This income falls within the scope of
IFRS 15 Revenue from Contracts with Customers. In making these
judgements, the Group considers, by examining each contract with
its customers, which party has the primary responsibility for
providing the services and is exposed to the majority of the risks
and rewards associated with providing the services, as well as if
it has latitude in establishing prices, either directly or
indirectly. The business model of this division is predominantly a
revenue share model which is based on royalties earned from B2C
business partners' revenue.
IFRS 15, paragraph B37 describes indicators that an entity
controls the specified good or service before it is transferred to
a customer and therefore acts as the principal. Based on this
assessment it was concluded that Playtech is acting as an agent
under the B2B licensee fee stream due to the three indicators under
B37 which are not satisfied as follows:
-- Playtech is responsible in fulfilling the contract to the
operator, principally in respect of the software solutions, and not
to the end customer which is the responsibility of the
operator;
-- there is no inventory risk as Playtech does not have the
ability to direct the use of, and obtain substantially all of the
remaining benefits from the good or service before it is
transferred to the end customer; and
-- Playtech does not have any discretion in establishing prices
set by the operator to third parties.
Based on the above it was determined that the Group was acting
as agent and revenue is recognised as the net amount of B2B
licensee fees received. The majority of this B2B revenue is
recognised when the gaming or betting activity used as the basis
for the revenue share calculation takes place, and furthermore is
only recognised when collection is virtually certain with a legally
enforceable right to collect.
Internally generated intangible assets
The Group capitalises costs for product development projects.
Expenditure on internally developed products is capitalised when it
meets the following criteria:
-- adequate resources are available to complete and sell the product;
-- the Group is able to sell the product;
-- sale of the product will generate future economic benefits; and
-- expenditure on the project can be measured reliably.
Initial capitalisation of cost is based on the management's
judgement that the technological and economic feasibility is
confirmed, usually when product development has reached a defined
milestone and future economic benefits are expected to be realised
according to an established project management model. Following
capitalisation, an assessment is performed in regard to project
recoverability which is based on the actual return of the project.
During the year, the Group capitalised EUR57.5 million (2021:
EUR51.3 million) and the carrying amount of capitalised development
costs as at 31 December 2022 was EUR123.2 million (2021: EUR122.3
million).
Adjusted performance measures
As noted in Note 5, paragraph U, the Group presents adjusted
performance measures which differ from statutory measures due to
exclusion of certain non-cash and one-off items and material
reorganisation and acquisition-related items from the actual
results. The determination of whether non-cash and one-off items
and material reorganisation and acquisition-related items should
form part of the adjusted results is a matter of judgement and is
based on whether the inclusion/exclusion from the results represent
more closely the consistent trading performance of the business.
The items excluded from the adjusted measures are described in
further detail in Note 10.
Provision for risks and charges and potential liabilities
The Group operates in a number of regulated markets and is
subject to lawsuits and potential lawsuits regarding complex legal
matters, which are subject to a different degree of uncertainty in
different jurisdictions and under different laws. For all material
ongoing and potential legal and regulatory claims against the
Group, an assessment is performed to consider whether an obligation
or possible obligation exists and to determine the probability of
any potential outflow to determine whether a claim results in the
recognition of a provision or disclosure of a contingent liability.
The timing of payment of provisions is subject to uncertainty and
may have an effect on the presentation of the provisions as current
and non-current liabilities in the balance sheet. Expected timing
of payment and classification of provision is determined by the
management based on the latest information available at the
reporting date. See Note 29 for further details.
Classification of equity call options
Background
In addition to the provision of software-related solutions as a
B2B product, the Group also offers certain customers a form of
offering (which includes software and related services) which is
termed a "structured agreement". Structured agreements are
customarily with customers which have a gaming licence and are
retail/land based operators that are looking to establish their
online B2C businesses - these customers require initial support
beyond the provision of the Group's standard B2B software
technology. With this product offering, 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 income as per Note 5D); and
-- revenue based on predefined revenue generated by each
customer under the structured agreement which is typically 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 as per
Note 5D).
Under these agreements, Playtech typically has a call option to
acquire equity in the operating entities. 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 would no longer receive the related
additional B2B services fee. This mechanism is not designed as a
control feature but mainly to protect Playtech's position should
the customer be subject to an exit transaction. Playtech is
therefore able to benefit from any value appreciation in the
operation and could also potentially cease to provide the
additional B2B services should it choose to do so dependent on the
nature of the exit transaction.
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 20 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 annual 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;
-- interchange 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 judgement and concluded that
Playtech's share of profits (were the option to be exercised)
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 these
profits. 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.
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 is 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 agreements in relation to the
provision of services by service providers in connection with
certain of the Group's obligations under their various structured
agreements. Under these arrangements, the service providers have
certain rights to equity. In order for these rights to crystallise,
the Group must first exercise the relevant 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
The key assumptions concerning the future and other key sources
of estimation uncertainty at the reporting date, which have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are described below. The Group based its assumptions and estimates
on parameters available when the consolidated financial statements
were prepared. Existing circumstances and assumptions about future
developments may change due to market changes or circumstances
arising that are beyond the control of the Group. Such changes are
reflected in the assumptions when they occur.
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, are disclosed and further explained in Note 19,
including a sensitivity analysis for the CGUs with lower
headroom.
Income taxes
The Group is subject to income tax in several jurisdictions and
significant judgement is required in determining the provision for
income taxes. During the ordinary course of business, there are
transactions and calculations for which the ultimate tax
determination is uncertain. As a result, the Group recognises tax
liabilities based on estimates of whether additional taxes and
interest will be due. These tax liabilities are recognised when,
despite the Group's belief that its tax return positions are
supportable, the Group believes it is more likely than not that a
taxation authority would not accept its filing position. In these
cases, the Group records its tax balances based on either the most
likely amount or the expected value, which weights multiple
potential scenarios. The Group believes that its accruals for tax
liabilities are adequate for all open audit years based on its
assessment of many factors including past experience and
interpretations of tax law. This assessment relies on estimates and
assumptions and may involve a series of complex judgements about
future events. To the extent that the final tax outcome of these
matters is different than the amounts recorded, such differences
will impact income tax expense in the period in which such
determination is made. Where management conclude that it is not
probable that the taxation authority will accept an uncertain tax
treatment, they calculate the effect of uncertainty in determining
the related taxable profit (tax loss), tax bases, unused tax
losses, unused tax, credits or tax rates. The effect of uncertainty
for each uncertain tax treatment is reflected by using the expected
value - the sum of the probabilities and the weighted amounts in a
range of possible outcomes. More details are included in Note
14.
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 asset in future periods.
Deferred tax asset in the UK
As a result of the Group's internal restructuring in January
2021, the Group is entitled to UK tax deductions in respect of
certain goodwill and intangible assets. A deferred tax asset was
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 3 1 December 2022, an additional deferred
tax asset of EUR5.2 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 EUR68.8 million. This represents the
benefit of the deductions against forecast profits for the next 5
years. During the year, EUR12.0 million has been utilized and the
net recognized deferred tax asset as at 31 December 2022 amounts to
EUR56.8 million. In addition, a total of EUR37.0 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 reporting 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 EUR 60.4
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 EUR 23.1
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 reporting date. Based on this, the
Group management concludes that it is probable that the Italian
Group companies will continue to generate taxable income in the
future against which the losses can be utilised. Any future changes
in the tax law or the structure of the Group could have a
significant effect on the use of the tax deductions, including the
period over which the deductions can be utilised.
Impairment of financial assets
The Group undertook a review of trade receivables and other
financial assets, as applicable, and their expected credit losses
(ECLs). The review considered the macroeconomic outlook, customer
credit quality, exposure at default, and effect of payment deferral
options as at the reporting date. The ECL methodology and
definition of default remained consistent with prior periods. The
model inputs, including forward-looking information, scenarios and
associated weightings, together with the determination of the
staging of exposures, were revised. The Group's financial assets
consist of trade and loans receivables and cash and cash
equivalents. ECL on cash balances was considered and calculated by
reference to Moody's credit rating for each financial institution,
while ECL on trade and loans receivables was based on past default
experience and an assessment of the future economic environment.
More details are included in Note 38.
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 (2021:
EUR7.5 million) recognised in the profit or loss in H1 2022 with
nothing further recognized in H2 2022.
Sun Bingo agreement
Background
The News UK contract commenced in 2016 and was originally set
for a five-year period to June 2021. Both parties have obligations
under the contract, which include News UK providing access to brand
and related materials as well as other services. Playtech has the
primary responsibility for the operation of the arrangement, but
both parties have contractual responsibilities.
The related brands are used in Playtech's B2C service, where the
Group acts as the principal, meaning that in the Group's
consolidated statement of comprehensive income:
-- revenue from B2C customers is recognised as income; and
-- the fees paid to News UK for use of the brands are an expense
as they are effectively a supplier.
In the original contract, the fees payable were subject to a
predetermined annual minimum guarantee (MG) which Playtech had to
pay to News UK.
During the period from 2016 to 2018, performance was not in line
with expectations, and as such, the MG made this operation
significantly loss making for the Group. This opened the
negotiations with News UK for certain amendments to the contract,
which were agreed and signed in February 2019 as follows:
-- the MG was still payable up until the end of the original
contract period, being June 2021, with no MG payable after that;
and
-- the contract term was extended to permit Playtech access to
News UK's brands and other related materials and other services,
for a longer period, to allow Playtech to recover its MG payments
and to make a commercial return as was always envisaged. The term
of the contract was extended to end at the earlier of: a) five
years from the date when Playtech had fully recovered all MG
payments made; or b) 15 years from the renegotiation (i.e. June
2036).
Judgements made on recognition and measurement
The annual MG paid to News UK was recognised in Playtech's
profit or loss up until February 2019, essentially being expensed
over the original term of the contract. However, from the point at
which the amended contract became effective, the timing of the MG
paid (being based on the original terms) no longer reflected the
period over which Playtech was consuming the use of the News UK
brands and other related services from them. As such, a prepayment
was recorded to reflect the amount that had been paid, as at each
period end, which related to the future use of the brands and
services. IFRS do not have a specific standard that deals with
accounting for prepayments; however, the asset recognised as a
prepayment is in accordance with IAS 1 Presentation of Financial
Statements.
At the commencement of the agreement and on renegotiation of the
contract, the Directors considered whether the nature of the
arrangement gave rise to any intangible assets. At contract
inception the Directors concluded that there were no such assets to
recognise as both parties had contractual obligations under the
agreement to deliver services, as explained above. Post the
contract renegotiation, the amounts to be paid in the remainder of
the initial period were considered to be advanced payments in
respect of amounts to be earned by News UK over the remainder of
the extended contract period. Consequently, the Directors did not
believe that there was a fundamental change in the nature of the
arrangements and it was considered most appropriate to categorise
the amounts paid as operating expense prepayments.
As noted above, the term of this renegotiated contract is
dependent on the future profitability of the contract, and it was
expected that the future profitability would mean the contract
would finish before the end of the fixed term period. For this
reason, it was considered appropriate that the prepayment
recognised should be released to the profit or loss in line with
this expected profitability, rather than on a straight--line
basis.
The amounts held in non-current and current assets of EUR63.4
million and EUR3.6 million in Notes 21 and 23, respectively, are
the difference between the MG actually paid to News UK from
February 2019 to June 2021 and the amounts recognised in the
Group's profit or loss from February 2019 to December 2022.
There is always a risk with any budgeting process that the plan
may not be realised. This risk increases the longer the period for
which the budget covers and in this instance the period is
potentially up to 15 years. When producing the budget management
applies reasonable assumptions based on known factors, but
sometimes and outside of management's control, these factors may
vary. However, management also reviews these forecasts at each
reporting period and more regularly internally and adjusts the
expense released accordingly. Based on the most recent forecasts
and current profitability and the fact that the Group had been
running the operation since 2016 and therefore has significant
experience of the level of profitability that can be derived from
the operation, it is confident that the performance of the business
will allow the full recovery of this asset, before the contract
ends.
Calculation of legal provisions
The Group ascertains a liability in the presence of legal
disputes or ongoing lawsuits when it believes it is probable that a
financial outlay will take place and when the amount of the losses
can be reasonably estimated. The Group is subject to lawsuits
regarding complex legal problems, which are subject to a differing
degree of uncertainty (also due to a complex legislative
framework), including the facts and the circumstances inherent to
each case, the jurisdiction and the different laws applicable.
Given the uncertainties inherent to these problems, it is difficult
to predict with certainty the outlay which will derive from these
disputes and it is therefore possible that the value of the
provisions for legal proceedings and disputes may vary depending on
future developments in the proceedings underway. The Group monitors
the status of the disputes underway and consults with its legal
advisers and experts on legal and tax-related matters. More details
are included in Note 29.
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 20, the Group has:
-- Investments in listed securities where the fair values of
these equity shares are determined by reference to published price
quotations in an active market
-- Equity investments in entities that are not listed, accounted
at fair value through profit or loss under IFRS 9
-- Derivative financial assets (call options in instruments
containing potential voting rights), which are accounted at fair
value through profit or loss under IFRS 9
The fair value of the equity investments that are not listed and
of the derivative financial assets, rely on non-observable inputs
that require a higher level of management judgement to calculate a
fair value than those based wholly on observable inputs. Valuation
techniques are used to calculate fair values include comparisons
with similar financial instruments for which market observable
prices exist, discounted cash flow analysis and other valuation
techniques commonly used by market participants. Upon the use of
DCF method, the Group assumes that the expected cash flows are
based on the EBITDA.
The Group only uses models with unobservable inputs for the
valuation of certain unquoted equity investments. In these cases,
estimates are made to reflect uncertainties in fair values
resulting from a lack of market data inputs, for example, as a
result of illiquidity in the market. Inputs into valuations based
on unobservable data are inherently uncertain because there is
little or no current market data available from which to determine
the level at which an arm's length transaction would occur under
normal business conditions. Unobservable inputs are determined
based on the best information available. Further details on the
fair value of assets are disclosed in Note 20, which includes a
significant judgement relating to the public announcement made by
the Group on 6 February 2023 where Playech plc is seeking a
declaration from the English Courts to obtain clarification on a
point of disagreement between the Group and Caliplay.
The following table shows the carrying amount and fair value of
non-current assets, as disclosed in Note 20, including their levels
in the fair value hierarchy.
Carrying amount Fair value
------------------ -------------------------
2022 Level 1 Level 2 Level 3
EUR'm EUR'm EUR'm EUR'm
-------------------------------------- ------------------ ------- ------- -------
Non-current assets
Other investments (Note 20B) 9.2 1.4 - 7.8
Derivative financial assets (Note 20C) 636.4 - - 636.4
--------------------------------------------- ----------- ------- ------- -------
645.6 1.4 - 644.2
--------------------------------------------- ----------- ------- ------- -------
Carrying
amount Fair value
-------- -------------------------
2021 Level 1 Level 2 Level 3
EUR'm EUR'm EUR'm EUR'm
--------------------------------------- -------- ------- ------- -------
Non-current assets
Other investments (Note 20B) 8.1 1.6 - 6.5
Derivative financial assets (Note 20C) 622.2 - - 622.2
--------------------------------------- -------- ------- ------- -------
630.3 1.6 - 628.7
--------------------------------------- -------- ------- ------- -------
Note 7 - Segment information
The Group's reportable segments are strategic business units
that offer different products and services.
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker.
The chief operating decision maker has been identified as the
management team including the Chief Executive Officer and the Chief
Financial Officer.
The operating segments identified are:
-- B2B: including Casino, Services, Sport, Bingo, Poker and Other;
-- B2C: including Snaitech, Sun Bingo and Other B2C and HAPPYBET; and
-- Financial: including B2C and B2B CFD (discontinued operations).
The Group-wide profit measures are Adjusted EBITDA and Adjusted
Profit (see Note 10).
Sun Total
Bingo Gaming Financial
and - -
Year ended other Intercompany Total continuing discontinued
31 December B2B Snaitech B2C HAPPYBET B2C B2C Intercompany operations operations Total
2022 EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
------------- ------- -------- ----- --------- ------------ ------- ------------ ---------- ------------ -------
Revenue 632.4 899.8 65.3 20.1 (2.1) 983.1 (13.7) 1,601.8 74.5 1,676.3
Adjusted
EBITDA 160.2 254.2 2.0 (10.8) - 245.4 - 405.6 33.8 439.4
Adjusted
Profit
attributable
to the
owners
of the
Company 43.8 127.4 1.1 (11.8) - 116.7 - 160.5 41.2 201.7
Total assets 1,853.2 1,070.4 89.7 9.1 - 1,169.2 - 3,022.4 - 3,022.4
Total
liabilities 697.2 603.2 14.6 6.4 - 624.2 - 1,321.4 - 1,321.4
------------- ------- -------- ----- --------- ------------ ------- ------------ ---------- ------------ -------
Year ended B2B Snaitech Sun HAPPYBET Intercompany Total Intercompany Total Financial Total
31 December Bingo B2C B2C Gaming discontinued
2021 and continuing operations
other operations
EUR'm EUR'm B2C EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
EUR'm
EUR'm
-------------- ------- -------- ----- --------- ------------ ------- ------------ ---------- ------------ -------
Revenue 554.3 584.7 61.9 18.2 (1.1) 663.7 (12.6) 1,205.4 46.6 1,252.0
Adjusted
EBITDA 139.2 182.6 6.7 (11.4) - 177.9 - 317.1 (23.0) 294.1
Adjusted
Profit/(Loss)
attributable
to the owners
of the
Company 45.9 83.2 10.3 (11.8) - 81.7 - 127.6 (13.8) 113.8
Total assets 1,911.1 1,154.7 92.9 6.2 - 1,253.8 - 3,164.9 487.4 3,652.3
Total
liabilities 842.7 867.3 11.4 5.9 - 884.6 - 1,727.3 343.8 2,071.1
-------------- ------- -------- ----- --------- ------------ ------- ------------ ---------- ------------ -------
Geographical analysis of non-current assets
The Group's information about its non-current assets by location
is detailed below:
2022 2021
EUR'm EUR'm
----------------------- ------- -------
Italy 746.1 755.5
UK 328.4 332.6
Austria 131.5 132.8
Alderney 75.9 100.0
Sweden 59.9 70.2
Gibraltar 27.9 37.7
Cyprus 22.0 25.6
Latvia 15.5 15.9
Australia 18.8 15.1
Ukraine 8.8 11.3
Estonia 7.8 9.4
British Virgin Islands 8.2 8.0
Rest of World 59.7 27.5
----------------------- ------- -------
1,510.5 1,541.6
----------------------- ------- -------
Note 8 - Discontinued operation
The results of the discontinued operations for the year are
presented below:
2022 2021
---------------- ----------------
Actual Adjusted Actual Adjusted
EUR'm EUR'm EUR'm EUR'm
---------------------------------------------- ------ -------- ------ --------
Revenue 74.5 74.5 46.6 46.6
Distribution costs before depreciation
and amortisation (34.9) (34.8) (56.9) (56.4)
Administrative expenses before depreciation
and amortisation (13.3) (4.0) (15.9) (8.5)
Impairment of financial assets (1.9) (1.9) (4.7) (4.7)
---------------------------------------------- ------ -------- ------ --------
EBITDA 24.4 33.8 (30.9) (23.0)
Reversal of impairment of asset held for
sale - - 2.0 -
Finance income 11.6 11.6 12.0 12.0
Finance costs (0.5) (0.5) (0.9) (0.9)
Profit on disposal of discontinued operations
(Note 25C/25B) 15.1 - 7.6 -
---------------------------------------------- ------ -------- ------ --------
Profit/(loss) before taxation 50.6 44.9 (10.2) (11.9)
Tax expense (3.6) (3.7) (1.9) (1.9)
---------------------------------------------- ------ -------- ------ --------
Profit/(loss) from discontinued operations,
net of tax 47.0 41.2 (12.1) (13.8)
---------------------------------------------- ------ -------- ------ --------
All of the profit from discontinued operations, net of tax in
the year ended 31 December 2022 relates to the Financial segment,
which was disposed during the current year (refer to Note 25C).
Included in the loss from discontinued operations, net of tax, in
the prior year is a profit on disposal of EUR7.6 million relating
to the "YoYo" business, which was part of the Group's Casual and
Social Gaming business, all fully disposed during 2021. The
remainder of the 2021 results included in the loss from
discontinued operations, net of tax, all relate to the Financials
segment.
The following tables provide a full reconciliation between
adjusted and actual results from discontinued operations:
Profit
from
discontinued
operations
attributable
to
the owners
of the
Revenue EBITDA Company
For the year ended 31 December 2022 EUR'm EUR'm EUR'm
---------------------------------------------------- ------- ------ -------------
Reported as actual 74.5 24.4 47.0
Employee stock option expenses - 0.3 0.2
Professional fees1 - 9.1 9.1
Profit on disposal of discontinued operations (Note
25C) - - (15.1)
---------------------------------------------------- ------- ------ -------------
Adjusted measure 74.5 33.8 41.2
---------------------------------------------------- ------- ------ -------------
1 On the completion of the transaction 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 was triggered and
therefore paid. This is included in professional fees.
Loss from
discontinued
operations
attributable
to
the owners
of the
Revenue EBITDA Company
For the year ended 31 December 2021 EUR'm EUR'm EUR'm
---------------------------------------------------- ------- ------ -------------
Reported as actual 46.6 (30.9) (12.1)
Employee stock option expenses - 0.8 0.8
Professional fees - 7.1 7.1
Reversal of impairment of asset held for sale (Note
25C) - - (2.0)
Profit on disposal of discontinued operations (Note
25B) - - (7.6)
---------------------------------------------------- ------- ------ -------------
Adjusted measure 46.6 (23.0) (13.8)
---------------------------------------------------- ------- ------ -------------
Earnings per share from discontinued operations
2022 2021
---------------- ----------------
Actual Adjusted Actual Adjusted
---------------- ------ -------- ------ --------
Basic (cents) 15.7 13.7 (4.0) (4.6)
---------------- ------ -------- ------ --------
Diluted (cents) 15.1 13.2 (4.0) (4.6)
---------------- ------ -------- ------ --------
The net cash flows incurred by the Financial segment in the
period are as follows:
2022 2021
EUR'm EUR'm
-------------------------- ------ ------
Operating 28.2 (2.6)
Investing (3.8) (6.9)
Financing (1.1) (2.2)
-------------------------- ------ ------
Net cash inflow/(outflow) 23.3 (11.7)
-------------------------- ------ ------
The above net cash inflows/(outflow) does not include the
disposal proceeds.
Note 9 - Revenue from contracts with customers
The Group has disaggregated revenue into various categories in
the following table which is intended to:
-- depict how the nature, amount, timing and uncertainty of
revenue and cash flows are affected by recognition date; and
-- enable users to understand the relationship with revenue
segment information provided in the segmental information note.
Set out below is the disaggregation of the Group's revenue:
Revenue analysis by geographical location of licensee, product
type, timing of transfer of performance obligations and regulated
vs unregulated by geographical major markets
The revenues from B2B (consisting of licensee fee, fixed-fee
income, revenue received from the sale of hardware, cost-based
revenue and additional B2B services fee), B2C and Financials are
described in Note 5D.
For the year ended 31 December 2022
Total Gaming Financial
- continuing - discontinued
B2B B2C Intercompany operations operations Total
Primary geographic markets EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
--------------------------- ------ ------ ------------ ------------- --------------- -------
Italy 35.1 897.7 (10.0) 922.8 1.3 924.1
UK 127.0 65.2 (3.7) 188.5 34.1 222.6
Mexico 123.7 - - 123.7 0.3 124.0
Malta 55.7 - - 55.7 0.1 55.8
Philippines 51.2 - - 51.2 - 51.2
Spain 27.7 - - 27.7 1.0 28.7
Gibraltar 24.9 - - 24.9 - 24.9
Poland 21.9 - - 21.9 0.1 22.0
Netherlands 20.2 - - 20.2 1.0 21.2
Greece 20.5 - - 20.5 0.3 20.8
Curacao 20.2 - - 20.2 - 20.2
Germany 0.8 16.8 - 17.6 1.0 18.6
British Virgin Islands - - - - 16.0 16.0
Ireland 10.0 - - 10.0 0.3 10.3
Colombia 9.1 - - 9.1 0.4 9.5
Rest of World 84.4 3.4 - 87.8 18.6 106.4
--------------------------- ------ ------ ------------ ------------- --------------- -------
632.4 983.1 (13.7) 1,601.8 74.5 1,676.3
--------------------------- ------ ------ ------------ ------------- --------------- -------
Total Gaming Financial
- continuing - discontinued
B2B B2C Intercompany operations operations Total
Product type EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
---------------------------- ------ ------ ------------ ------------- --------------- -------
B2B licensee fee 451.7 - - 451.7 - 451.7
B2B fixed-fee income 42.1 - - 42.1 - 42.1
B2B costs-based revenue 59.9 - - 59.9 - 59.9
B2B revenue received from
the sale of hardware 13.2 - - 13.2 - 13.2
Additional B2B services fee 65.5 - - 65.5 - 65.5
---------------------------- ------ ------ ------------ ------------- --------------- -------
Total B2B 632.4 - - 632.4 - 632.4
---------------------------- ------ ------ ------------ ------------- --------------- -------
Snaitech - 899.8 - 899.8 - 899.8
Sun Bingo and Other B2C - 65.3 - 65.3 - 65.3
HAPPYBET - 20.1 - 20.1 - 20.1
Intercompany - (2.1) - (2.1) - (2.1)
---------------------------- ------ ------ ------------ ------------- --------------- -------
Total B2C - 983.1 - 983.1 - 983.1
---------------------------- ------ ------ ------------ ------------- --------------- -------
Intercompany - - (13.7) (13.7) - (13.7)
---------------------------- ------ ------ ------------ ------------- --------------- -------
Total intercompany - - (13.7) (13.7) - (13.7)
---------------------------- ------ ------ ------------ ------------- --------------- -------
Financial - - - - 74.5 74.5
---------------------------- ------ ------ ------------ ------------- --------------- -------
632.4 983.1 (13.7) 1,601.8 74.5 1,676.3
---------------------------- ------ ------ ------------ ------------- --------------- -------
Total Gaming Financial
- continuing - discontinued
Timing of transfer of performance B2B B2C Intercompany operations operations Total
obligations EUR'm EUR'm* EUR'm EUR'm EUR'm EUR'm
---------------------------------- ------ ------- ------------ ------------- --------------- -------
Recognised over time 619.2 28.4 (13.7) 633.9 74.5 708.4
Recognised at the point
in time 13.2 954.7 - 967.9 - 967.9
---------------------------------- ------ ------- ------------ ------------- --------------- -------
632.4 983.1 (13.7) 1,601.8 74.5 1,676.3
---------------------------------- ------ ------- ------------ ------------- --------------- -------
*B2C revenue recognised at the point in time is recorded under
IFRS9.
2022
EUR'm
---------------------------------- ------
Regulated - Americas 144.7
Regulated - Europe (excluding UK) 184.6
Regulated - UK 126.7
Regulated - Rest of World 5.6
---------------------------------- ------
Total regulated B2B revenue 461.6
Unregulated excluding Asia 103.6
---------------------------------- ------
Total core B2B revenue 565.2
Asia 67.2
---------------------------------- ------
Total B2B Gambling revenue 632.4
---------------------------------- ------
For the year ended 31 December 2021
Total Gaming Financial
- continuing - discontinued
B2B B2C Intercompany operations operations Total
Primary geographic markets EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
--------------------------- ------ ------ ------------ ------------- --------------- -------
Italy 30.7 583.6 (7.6) 606.7 1.2 607.9
UK 132.2 61.9 (4.1) 190.0 14.1 204.1
Mexico 90.3 - - 90.3 0.3 90.6
Philippines 67.6 - - 67.6 - 67.6
Malta 52.3 - - 52.3 0.5 52.8
Gibraltar 27.9 - - 27.9 - 27.9
Spain 21.7 - - 21.7 1.7 23.4
Germany 1.2 16.4 (0.8) 16.8 2.3 19.1
Greece 16.8 - - 16.8 1.5 18.3
Poland 14.4 - - 14.4 0.1 14.5
Curacao 12.2 - - 12.2 0.1 12.3
Netherlands 7.2 - - 7.2 3.2 10.4
Colombia 8.5 - - 8.5 (0.2) 8.3
Romania 5.7 - - 5.7 0.2 5.9
Norway 5.4 - - 5.4 0.3 5.7
Rest of World 60.2 1.8 (0.1) 61.9 21.3 83.2
--------------------------- ------ ------ ------------ ------------- --------------- -------
554.3 663.7 (12.6) 1,205.4 46.6 1,252.0
--------------------------- ------ ------ ------------ ------------- --------------- -------
Total Gaming Financial
- continuing - discontinued
B2B B2C Intercompany operations operations Total
Product type EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
---------------------------- ------ ------ ------------ ------------- --------------- -------
Total Gaming Financial
- continuing - discontinued
B2B B2C Intercompany operations operations Total
Product type EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
---------------------------- ------ ------ ------------ ------------- --------------- -------
B2B licensee fee 404.0 - - 404.0 - 404.0
B2B fixed-fee income 48.5 - - 48.5 - 48.5
B2B costs-based revenue 45.3 - - 45.3 - 45.3
B2B revenue received from
the sale of hardware 7.1 - - 7.1 - 7.1
Additional B2B services fee 49.4 - - 49.4 - 49.4
---------------------------- ------ ------ ------------ ------------- --------------- -------
Total B2B 554.3 - - 554.3 - 554.3
---------------------------- ------ ------ ------------ ------------- --------------- -------
Snaitech - 584.7 - 584.7 - 584.7
Sun Bingo and Other B2C - 61.9 - 61.9 - 61.9
HAPPYBET - 18.2 - 18.2 - 18.2
Intercompany - (1.1) - (1.1) - (1.1)
---------------------------- ------ ------ ------------ ------------- --------------- -------
Total B2C - 663.7 - 663.7 - 663.7
---------------------------- ------ ------ ------------ ------------- --------------- -------
Intercompany - - (12.6) (12.6) - (12.6)
---------------------------- ------ ------ ------------ ------------- --------------- -------
Total intercompany - - (12.6) (12.6) - (12.6)
---------------------------- ------ ------ ------------ ------------- --------------- -------
Financial - - - - 46.6 46.6
---------------------------- ------ ------ ------------ ------------- --------------- -------
554.3 663.7 (12.6) 1,205.4 46.6 1,252.0
---------------------------- ------ ------ ------------ ------------- --------------- -------
Total Gaming Financial
- continuing - discontinued
Timing of transfer of performance B2B B2C Intercompany operations operations Total
obligations EUR'm EUR'm* EUR'm EUR'm EUR'm EUR'm
---------------------------------- ------ ------- ------------ ------------- --------------- -------
Recognised over time 547.2 22.2 (12.6) 556.8 46.6 603.4
Recognised at the point
in time 7.1 641.5 - 648.6 - 648.6
---------------------------------- ------ ------- ------------ ------------- --------------- -------
554.3 663.7 (12.6) 1,205.4 46.6 1,252.0
---------------------------------- ------ ------- ------------ ------------- --------------- -------
*B2C revenue recognised at the point in time is recorded under
IFRS9.
2021
EUR'm
---------------------------------- ------
Regulated - Americas 101.3
Regulated - Europe (excluding UK) 141.4
Regulated - UK 132.1
Regulated - Rest of World 3.9
---------------------------------- ------
Total regulated B2B revenue 378.7
Unregulated excluding Asia 93.7
---------------------------------- ------
Total core B2B revenue 472.4
Asia 81.9
---------------------------------- ------
Total B2B Gambling revenue 554.3
---------------------------------- ------
There were no changes in the Group's revenue measurement
policies and procedures in 2021 and 2022. The vast majority of the
Group's B2B contracts are for the delivery of services within the
next 12 months. Furthermore, no individual licensee in 2022 and
2021 accounted for more than 10% of the total gaming revenue and
the total revenue of the Group.
The Group's contract liabilities, in other words deferred
income, primarily include advance payment for hardware and services
and also include certain fixed fees paid by the licensee in the
beginning of the contract. Deferred income as at 31 December 2022
was EUR6.0 million (2021: EUR8.1 million).
The movement in contract liabilities during the year was the
following:
2022 2021
EUR'm EUR'm
------------------------------- ------ ------
Balance at 1 January 8.1 11.8
Recognised during the year 8.4 7.0
Realised in the profit or loss (10.5) (10.7)
------------------------------- ------ ------
Balance at 31 December 6.0 8.1
------------------------------- ------ ------
Note 10 - Adjusted items
Management regularly uses adjusted financial measures internally
to understand, manage and evaluate the business and make operating
decisions. These adjusted measures are among the primary factors
management uses in planning for and forecasting future periods. The
primary adjusted financial measures are Adjusted EBITDA and
Adjusted Profit, which management considers are relevant in
understanding the Group's financial performance. The definitions of
adjusted items and underlying adjusted results are disclosed in
Note 5.
As these are not a defined performance measure under IFRS, the
Group's definition of adjusted items may not be comparable with
similarly titled performance measures or disclosures by other
entities.
The following tables provide a full reconciliation between
adjusted and actual results from continuing operations:
Profit
from
continuing
operations Profit
attributable before
to the tax
EBITDA EBITDA (Loss)/Profit owners from
- - - Profit- of the continuing
For the year ended 31 December Revenue B2B B2C EBITDA B2B B2C Company operations
2022 EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
--------------------------------- ------- ------ ------ ------ ------------- ------- ------------- -----------
Reported as actual 1,601.8 138.4 234.1 372.5 (42.8) 83.4 40.6 95.6
Employee stock option expenses1 - 7.1 0.9 8.0 7.1 0.9 8.0 8.0
Professional fees2 - 15.7 - 15.7 15.7 - 15.7 15.7
Fair value change and finance
cost on contingent consideration
and redemption liability3 - (4.3) - (4.3) (4.2) - (4.2) (4.2)
Ukraine employee support costs4 - 3.3 - 3.3 3.3 - 3.3 3.3
Onerous contract5 - - 10.4 10.4 - 10.4 10.4 10.4
Fair value change of equity
instruments6 - - - - 0.3 - 0.3 0.3
Fair value change of derivative
financial assets6 - - - - (6.0) - (6.0) (6.0)
Fair value loss on convertible
loans(7) - - - - 3.0 - 3.0 3.0
Amortisation of intangibles on
acquisitions(8) - - - - 13.2 28.8 42.0 42.0
Impairment of tangible and
intangible
assets(9) - - - - 38.7 (0.2) 38.5 38.5
Loss on disposal of
subsidiary(10) - - - - 8.8 - 8.8 8.8
Deferred tax on acquisitions8 - - - - (1.7) (6.6) (8.3) -
Tax related to uncertain
positions11 - - - - 8.4 - 8.4 -
--------------------------------- ------- ------ ------ ------ ------------- ------- ------------- -----------
Adjusted measure 1,601.8 160.2 245.4 405.6 43.8 116.7 160.5 215.4
Constant currency impact (19.8) - - (17.9) - - (27.1) -
--------------------------------- ------- ------ ------ ------ ------------- ------- ------------- -----------
Underlying adjusted result on
constant currency basis 1,582.0 - - 387.7 - - 133.4 -
--------------------------------- ------- ------ ------ ------ ------------- ------- ------------- -----------
1 Employee stock option expenses relate to non-cash expenses of
the Group and differ from year to year based on share price and the
number of options granted.
2 The vast majority of the professional fees relate to 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 employees based in Ukraine.
These expenses are not considered ongoing costs of operations and
therefore are excluded.
5 One off payment to terminate an onerous contract with a former
service provider made in H1 2022. This expense is not considered an
ongoing cost of operations and therefore is excluded.
6 Fair value change of equity instruments and derivative
financial assets. These are excluded from the results as they
relate to unrealised profit/loss.
7 Fair value loss on convertible loans relates to Gameco. This
write off is not considered an ongoing cost of operations and is
excluded. Refer to Note 20B.
8 Amortisation and deferred tax on intangible assets acquired
through business combinations. Costs directly related to
acquisitions are not considered ongoing costs of operations and
therefore are excluded.
9 Impairment of tangible and intangible assets mainly relates to
the impairment of Eyecon EUR13.6 million, Quickspin EUR7.0 million,
Bingo VF EUR12.5 million and IGS EUR5.6 million. Refer to Note
19.
10 Loss arising on the disposal of Statscore, previously a
subsidiary of the Group. Even though, Statscore was a separate CGU
which was tested for impairment biannually up to the date of
disposal, it didn't meet the criteria of IFRS5 Non-current Assets
Held for Sale and Discontinued Operations of being a separate major
line of business for the Group. As such it was not presented
separately as discontinued operations as at 31 December 2022. This
loss is not considered an ongoing cost of operations and therefore
is excluded. Refer to Note 20A.
11 Change in estimates related to uncertain overseas tax positions in respect of prior years.
Profit
from
continuing
operations
attributable Profit
to the before
EBITDA EBITDA Profit owners tax from
- - - Profit- of the continuing
For the year ended 31 December Revenue B2B B2C EBITDA B2B B2C Company operations
2021 EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
--------------------------------------- ------- ------ ------ ------ ------- ------- ------------- -----------
Reported as actual 1,205.4 105.5 175.8 281.3 629.2 57.5 686.7 605.0
Employee stock option expenses1 - 11.5 1.6 13.1 11.5 1.6 13.1 13.1
Professional fees2 - 13.9 0.5 14.4 13.9 0.5 14.4 14.4
Fair value change and finance
cost on redemption liability3 - 1.3 - 1.3 1.4 - 1.4 1.4
Charitable donation4 - 3.5 - 3.5 3.5 - 3.5 3.5
Provision for other receivables5 - 1.2 - 1.2 1.2 - 1.2 1.2
Settlement of legal matter6 - 2.3 - 2.3 2.3 - 2.3 2.3
Fair value change and finance
cost on contingent consideration3 - - - - 4.4 0.3 4.7 4.7
Fair value change of equity
instruments7 - - - - 1.6 - 1.6 1.6
Fair value change of derivative
financial assets7 - - - - (583.2) - (583.2) (583.2)
Amortisation of intangibles on
acquisitions8 - - - - 16.9 17.9 34.8 34.8
Impairment of tangible and intangible
assets9 - - - - 9.3 12.3 21.6 21.6
Deferred tax on acquisitions8 - - - - (2.5) (6.6) (9.1) -
Deferred tax on asset held for
sale10 - - - - - (1.8) (1.8) -
Deferred tax11 - - - - (63.6) - (63.6) -
--------------------------------------- ------- ------ ------ ------ ------- ------- ------------- -----------
Adjusted measure 1,205.4 139.2 177.9 317.1 45.9 81.7 127.6 120.4
Constant currency impact - - - - - - 0.5 -
--------------------------------------- ------- ------ ------ ------ ------- ------- ------------- -----------
Underlying adjusted result on
constant currency basis 1,205.4 - - 317.1 - - 128.1 -
--------------------------------------- ------- ------ ------ ------ ------- ------- ------------- -----------
1 Employee stock option expenses relate to non-cash expenses of
the Group and differ from year to year based on share price and the
number of options granted.
2 The majority of the professional fees equally relate to: (a)
work completed in relation to the potential exercise of Playtech
M&A Call Option (Note 20A); 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
and contingent consideration related to the acquisition of
Statscore, Eyecon and Wplay. These expenses are not considered
ongoing costs of operations.
4 In 2020, the Board of Directors approved a GBP3.0 million
COVID-19 Recovery and Resilience Fund which was paid in the year
ended 31 December 2021. This is a one-off payment and therefore is
excluded.
5 Provision against loan receivables that do not relate to the
ordinary operations of the Group.
6 Settlement of legal matter which is not considered a recurring
cost and therefore is excluded.
7 Fair value change of equity instruments and derivative
financial assets. These are excluded from the results as they
relate to unrealised profit/loss.
8 Amortisation and deferred tax on intangible assets acquired
through business combinations. Costs directly related to
acquisitions are not considered ongoing costs of operations and
therefore are excluded.
9 Impairment of tangible and intangible assets mainly relates to
the impairment of land before the classification as held for sale
(Refer to Note 25A) and impairment of Bingo VF and several
capitalization costs (Refer to Note 12).
10 Deferred tax recognised in respect of the assets classified
as held for sale during the year. Please refer to Note 25A for
further details.
11 The recognition of EUR63.6 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.
The following table provides a full reconciliation between
adjusted and actual tax from continuing operations:
2022 2021
EUR'm EUR'm
-------------------------------------------------- ------ ------
Tax on profit or loss for the year 55.0 (81.7)
Adjusted for:
Deferred tax on intangible assets on acquisitions 8.3 9.1
Deferred tax (refer to footnote 11 above) - 63.6
Tax on disposal of asset held for sale - 1.8
Tax related to uncertain positions (8.4) -
-------------------------------------------------- ------ ------
Adjusted tax 54.9 (7.2)
-------------------------------------------------- ------ ------
Note 11 - Auditor's remuneration
2022 2021
EUR'm EUR'm
---------------------------------------------------------- ------ ------
Group audit and Parent Company (BDO) 2.3 1.5
Audit of subsidiaries (BDO) 1.4 1.4
Audit of subsidiaries (non-BDO) 0.3 0.3
---------------------------------------------------------- ------ ------
Total audit fees 4.0 3.2
---------------------------------------------------------- ------ ------
Non-audit services provided by parent Company auditor and
its international member firms
Other non-audit services 0.9 0.5
---------------------------------------------------------- ------ ------
Total non-audit fees 0.9 0.5
---------------------------------------------------------- ------ ------
Note 12 - Impairment of tangible and intangible assets
2022 2021
EUR'm EUR'm
---------------------------------------------------------- ------ ------
(Reversal of)/Impairment of property, plant and equipment
(Note 17) (0.2) 12.5
Impairment of intangible assets (Note 19) 38.7 9.1
---------------------------------------------------------- ------ ------
38.5 21.6
---------------------------------------------------------- ------ ------
Impairment of intangibles assets for 2022 relates to the
impairment of Eyecon EUR13.6 million, Quickspin EUR7.0 million,
Bingo VF EUR12.5 million and IGS EUR5.6 million. Refer to Note
19.
Of the total impairment of property, plant and equipment of
EUR12.5 million in 2021, an amount of EUR12.3 million relates to
land classified as held for sale. Refer to Note 25A.
Out of the total of EUR9.1 million in 2021, an amount of EUR6.4
million relates to the impairment of Bingo VF. The remaining
relates to the impairment of capitalised development costs. Based
on the assessment performed at the reporting date, several projects
will not be recoverable.
Note 13 - Finance income and costs
A. Finance income
2022 2021
EUR'm EUR'm
-------------------------- ------ ------
Interest income 2.4 1.1
-------------------------- ------ ------
Net foreign exchange gain 9.2 -
-------------------------- ------ ------
11.6 1.1
-------------------------- ------ ------
B. Finance costs
Net foreign exchange loss - (0.5)
Interest on bonds (35.7) (36.7)
Interest on lease liability (5.5) (5.3)
Interest on loans and borrowings and other (6.0) (5.6)
Bank facility fees (7.0) (1.8)
Bank charges (14.1) (13.0)
Movement in contingent consideration and redemption liability (0.1) (4.8)
Fair value loss on convertible loans (3.0) -
Expected credit loss on loans receivable (1.6) -
-------------------------------------------------------------- ------ ------
(73.0) (67.7)
-------------------------------------------------------------- ------ ------
Net finance costs (61.4) (66.6)
-------------------------------------------------------------- ------ ------
Note 14 - Tax expense/(credit)
2022 2021
EUR'm EUR'm
------------------------------------------------------ ------ ------
Current tax expense
Income tax expense for the current year 19.3 10.8
Income tax relating to prior years 9.1 3.4
Withholding tax 0.3 0.4
------------------------------------------------------ ------ ------
Total current tax expense 28.7 14.6
------------------------------------------------------ ------ ------
Deferred tax
Origination and reversal of temporary differences 23.5 (78.8)
Deferred tax movements relating to prior years 8.1 -
Impact of changes in tax rates (5.3) (17.5)
------------------------------------------------------ ------ ------
Total deferred tax expense/(credit) 26.3 (96.3)
------------------------------------------------------ ------ ------
Total tax expense/(credit) from continuing operations 55.0 (81.7)
------------------------------------------------------ ------ ------
A reconciliation of the reported income tax charge of EUR55.0
million (2021: tax credit of EUR81.7 million) applicable to profit
before tax of EUR95.6 million (2021: profit before tax of EUR605.0
million) at the UK statutory income tax rate of 19% is as
follows:
2022 2021
EUR'm EUR'm
---------------------------------------------------------- ------ -------
Profit for the year 40.6 686.7
Income tax expense/(credit) 55.0 (81.7)
---------------------------------------------------------- ------ -------
Profit before income tax 95.6 605.0
---------------------------------------------------------- ------ -------
Tax using the Company's domestic tax rate (19% in 2021
and 2022) 18.2 115.0
Tax effect of:
Non-taxable fair value movements on call options (1.1) (110.9)
Tax exempt income (4.3) (7.5)
Non-deductible expenses 19.8 2.3
Deferred tax asset recognised on Group restructuring (5.4) (75.2)
Difference in tax rates applied in overseas jurisdictions 13.8 (3.6)
Impact of changes in tax rates (5.3) (5.5)
Increase in unrecognised tax losses 2.1 2.3
Adjustment in respect of previous years
- Deferred tax asset 8.0 (2.0)
- Tax asset not provided for 9.2 3.4
---------------------------------------------------------- ------ -------
Total tax expense/(credit) 55.0 (81.7)
---------------------------------------------------------- ------ -------
Reported tax charge/(credit)
A reported tax charge of EUR55.0 million from continuing
operations arises on a profit before income tax of EUR95.6 million
compared to an expected charge of EUR18.2 million (2021: a tax
credit of EUR81.7 million on profit before income tax of EUR605.0
million). The reported tax expense includes adjustments in respect
of prior years relating to current tax and deferred tax. The prior
year adjustment in respect of current tax of EUR9.2 million
includes an additional provision of EUR8.4 million relating to
uncertain overseas tax positions in respect of prior years. The
prior year adjustment relating to deferred tax of EUR8.1 million
relates to the overprovision of deferred tax assets and an
underprovision for deferred tax liabilities in respect of
goodwill.
The Group's effective tax rate for the current period is 39.5%.
The key reasons for the differences are:
-- Profits of subsidiaries located in territories where the tax
rate is higher than the UK statutory tax rate, this includes
Snaitech profits in Italy.
-- Expenses not deductible for tax purposes including
professional fees, impairment of intangible assets and loss on
disposal of subsidiaries.
Changes in tax rates and factors affecting the future tax
charge
The most significant elements of the Group's income arise in the
UK where the tax rate for the current period is 19%. It should be
noted that the UK tax rate is set to increase to 25% from 1 April
2023. As such, the UK statutory headline rate of corporation tax is
the basis on which the applicable tax rate is computed.
In December 2022, European Union (EU) Member States unanimously
adopted the Minimum Tax Directive via written procedure ensuring a
global minimum level of taxation (set at 15%) for multinational
enterprise groups. GLoBE Model rules were released in March 2022
and broadly EU Member States have until 31 December 2023 to
transpose the Directive into national legislation with the rules to
be applicable for fiscal years starting on or after 31 December
2023. None of the countries in which the Group operates has enacted
or substantively enacted Pillar Two Model Rules as part of their
national laws as of 31 December 2022. Whilst consultation on a
number of areas remains ongoing, the Group will continue to closely
monitor developments.
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 15 - Earnings per share
The calculation of basic earnings per share (EPS) has been based
on the following profit attributable to ordinary shareholders and
weighted average number of ordinary shares outstanding.
2022 2021
---------------- ----------------
Actual Adjusted Actual Adjusted
EUR'm EUR'm EUR'm EUR'm
--------------------------------------------- ------ -------- ------ --------
Profit attributable to owners of the Company 87.6 201.7 674.6 113.8
--------------------------------------------- ------ -------- ------ --------
Basic (cents) 29.2 67.2 226.3 38.2
Diluted (cents) 28.1 64.7 216.2 36.5
--------------------------------------------- ------ -------- ------ --------
2022 2021
---------------- ----------------
Actual Adjusted Actual Adjusted
EUR'm EUR'm EUR'm EUR'm
----------------------------------------- ------ -------- ------ --------
Profit attributable to the owners of the
Company from continuing operations 40.6 160.5 686.7 127.6
----------------------------------------- ------ -------- ------ --------
Basic (cents) 13.5 53.5 230.3 42.8
Diluted (cents) 13.0 51.5 220.1 40.9
----------------------------------------- ------ -------- ------ --------
2022 2021
------------------------ ------------------------
Actual Adjusted Actual Adjusted
Number Number Number Number
----------------------------------------- ----------- ----------- ----------- -----------
Denominator - basic
Weighted average number of equity shares 300,059,994 300,059,994 298,229,795 298,229,795
----------------------------------------- ----------- ----------- ----------- -----------
Denominator - diluted
Weighted average number of equity shares 300,059,994 300,059,994 298,229,795 298,229,795
Weighted average number of option shares 11,792,385 11,792,385 13,882,774 13,882,774
----------------------------------------- ----------- ----------- ----------- -----------
Weighted average number of shares 311,852,379 311,852,379 312,112,569 312,112,569
----------------------------------------- ----------- ----------- ----------- -----------
The calculation of diluted EPS has been based on the above
profit attributable to ordinary shareholders and weighted average
number of ordinary shares outstanding after adjustment for the
effects of all dilutive potential ordinary shares. The effects of
the anti-dilutive potential ordinary shares are ignored in
calculating diluted EPS.
EPS for discontinued operations is disclosed in Note 8.
Note 16 - Employee benefits
Total staff costs comprise the following:
2022 2021
EUR'm EUR'm
------------------------------------- ------ ------
Salaries and personnel-related costs 427.0 367.4
Cash-settled share-based payments (0.3) 3.4
Equity-settled share-based payments 8.3 13.8
------------------------------------- ------ ------
435.0 384.6
------------------------------------- ------ ------
Average number of personnel:
Distribution 6,269 6,259
General and administration 538 650
------------------------------------- ------ ------
6,807 6,909
------------------------------------- ------ ------
The Group has the following employee share option plans (ESOP)
for the granting of non-transferable options to certain
employees:
-- the GTS 2010 Company Share Option Plan (CSOP). Options
granted under these plan vest on the first day on which they become
exercisable which is three years after grant date;
-- the Long Term Incentive Plan 2012 (LTIP). Awards (options,
conditional awards, cash-settled awards, or a forfeitable share
award) granted under this plan vest on the first day on which they
become exercisable which is typically between 18 and 36 months
after grant date; and
-- the Long Term Incentive Plan 2022 (LTIP22). Awards (options,
conditional Share awards, Restricted shares, cash-settled awards)
granted under this plan vest on the first day on which they become
exercisable which is typically after 36 months.
The overall term of the ESOP is ten years. These options are
settled in equity or cash once exercised. Option prices are
denominated in GBP.
During 2022 the Group granted the following under its
LTIP22:
-- 492,765 nil cost awards subject to EPS growth, relative total
shareholder return (TSR) against constituents of the FTSE 250 but
excluding the investment trusts index, and relative TSR against a
sector comparator group of peer companies. The fair value per share
according to the Monte Carlo simulation model is between GBP2.71
and GBP4.58. Inputs used were as follows:
Share price Projection
at Dividend Risk period
Expected life (years) grant date yield free rate (years) Volatility
--------------------- ----------- -------- ---------- ---------- ----------
3 GBP4.582 Nil 2.34% 3 41%-49%
--------------------- ----------- -------- ---------- ---------- ----------
There were no grants during 2021.
At 31 December 2022 and 2021 the following options were
outstanding:
2022 2021
Number Number
---------------------------------------------------------- ---------- ----------
Shares vested on 1 March 2018 at nil cost 72,596 102,844
Shares vested between 1 September 2016 and 1 March 2018
at nil cost 20,890 23,112
Shares vested on 1 March 2019 at nil cost 21,820 31,972
Shares vested between 1 September 2017 and 1 March 2019
at nil cost 39,021 50,742
Shares vested on 21 December 2019 at nil cost 9,779 12,870
Shares vested between 1 September 2017 and 1 April 2019
at nil cost - 21,187
Shares vested on 1 March 2020 at nil cost 98,444 112,369
Shares vested on 1 March 2021 at nil cost 1,047,782 1,347,475
Shares vested between 1 March 2022 and 1 August 2022 at
nil cost 2,218,735 3,499,954
Shares will vest by 19 December 2024 at nil cost 1,900,000 1,900,000
Shares will vest between 1 March 2023 and 26 October 2023
at nil cost 6,392,073 6,780,249
Shares will vest by August 18 2025 at nil cost 351,724 -
---------------------------------------------------------- ---------- ----------
12,172,864 13,882,774
---------------------------------------------------------- ---------- ----------
The total number of shares exercisable as of 31 December 2022 is
4,729,067 (2021: 2,402,571).
The total number of outstanding shares that will be cash settled
is 561,385 (2021: 630,923). The total liability outstanding for the
cash-settled options is EUR3.1 million (2021: EUR3.8 million).
The following table illustrates the number and weighted average
exercise prices of share options for the ESOP.
2022 2021
Weighted Weighted
2022 2021 average average
Number Number exercise exercise
of options of options price price
----------------------------------------- ----------- ----------- --------- ---------
Outstanding at the beginning of the year 13,882,774 16,886,778 - GBP0.03
Granted 492,765 - - -
Forfeited (408,237) (1,130,697) - -
Exercised (1,794,438) (1,873,307) - GBP0.05
----------------------------------------- ----------- ----------- --------- ---------
Outstanding at the end of the year 12,172,864 13,882,774 - -
----------------------------------------- ----------- ----------- --------- ---------
Included in the number of options exercised during the year are
50,448 options (2021: 232,796) which were cash settled.
The weighted average share price at the date of exercise of
options was GBP5.302 (2021: GBP6.506).
Share options outstanding at the end of the year have the
following exercise prices:
2022 2021
Expiry date Exercise price Number Number
----------------------------------------- --------------- ---------- ----------
21 December 2025 Nil 93,486 125,956
Between 21 December 2026 and 31 December
2026 Nil 70,620 116,771
Between 1 March 2027 and 28 June 2027 Nil 98,444 112,369
23 July 2028 Nil 1,044,771 1,344,464
Between 27 February 2029 and 19 December
2029 Nil 4,121,746 5,402,965
Between 17 July 2030 and 26 October 2030 Nil 6,392,073 6,780,249
August 18 2032 Nil 351,724 -
----------------------------------------- --------------- ---------- ----------
12,172,864 13,882,774
--------------------------------------------------------- ---------- ----------
Note 17 - Property, plant and equipment
Buildings,
leasehold
Computer Office buildings
software Gaming furniture and
and hardware machines and equipment improvements Total
EUR'm EUR'm EUR'm EUR'm EUR'm
---------------------------------------- ------------- --------- -------------- ------------- ------
Cost
At 1 January 2022 132.1 96.2 41.1 270.1 539.5
Additions 19.8 15.8 8.8 9.2 53.6
Disposals (6.3) (2.3) (2.0) (3.8) (14.4)
Reclassifications (0.3) - - 0.3 -
---------------------------------------- ------------- --------- -------------- ------------- ------
At 31 December 2022 145.3 109.7 47.9 275.8 578.7
---------------------------------------- ------------- --------- -------------- ------------- ------
Accumulated depreciation and impairment
losses
At 1 January 2022 95.3 61.4 24.5 28.6 209.8
Charge 16.0 14.5 5.4 5.6 41.5
Impairment loss - - (0.2) - (0.2)
Disposals (6.1) (2.0) (1.9) (3.8) (13.8)
---------------------------------------- ------------- --------- -------------- ------------- ------
At 31 December 2022 105.2 73.9 27.8 30.4 237.3
---------------------------------------- ------------- --------- -------------- ------------- ------
Net book value
At 31 December 2022 40.1 35.8 20.1 245.4 341.4
---------------------------------------- ------------- --------- -------------- ------------- ------
At 1 January 2022 36.8 34.8 16.6 241.5 329.7
---------------------------------------- ------------- --------- -------------- ------------- ------
Buildings,
leasehold
Computer Office buildings
software Gaming furniture and
and hardware machines and equipment improvements Total
EUR'm EUR'm EUR'm EUR'm EUR'm
---------------------------------------- ------------- --------- -------------- ------------- ------
Cost
At 1 January 2021 115.1 86.6 34.7 302.8 539.2
Additions 24.2 10.7 7.8 6.0 48.7
Disposals (7.2) (1.1) (1.4) (2.9) (12.6)
Transfer to held for sale - - - (35.8) (35.8)
---------------------------------------- ------------- --------- -------------- ------------- ------
At 31 December 2021 132.1 96.2 41.1 270.1 539.5
---------------------------------------- ------------- --------- -------------- ------------- ------
Accumulated depreciation and impairment
losses
At 1 January 2021 87.5 44.4 21.0 29.2 182.1
Charge 14.8 17.7 4.8 5.6 42.9
Impairment loss - - - 12.5 12.5
Disposals (7.0) (0.7) (1.3) (2.9) (11.9)
Transfer to held for sale - - - (15.8) (15.8)
---------------------------------------- ------------- --------- -------------- ------------- ------
At 31 December 2021 95.3 61.4 24.5 28.6 209.8
---------------------------------------- ------------- --------- -------------- ------------- ------
Net book value
At 31 December 2021 36.8 34.8 16.6 241.5 329.7
---------------------------------------- ------------- --------- -------------- ------------- ------
At 1 January 2021 27.6 42.2 13.7 273.6 357.1
---------------------------------------- ------------- --------- -------------- ------------- ------
Note 18 - Leases
Set out below are the carrying amounts of right of use assets
recognised and the movements during the year:
Office
leases Hosting Total
EUR'm EUR'm EUR'm
------------------------ ------- ------- ------
At 1 January 2022 67.8 6.0 73.8
Additions/modifications 7.4 12.1 19.5
Disposal of subsidiary (0.2) - (0.2)
Amortisation charge (14.5) (7.0) (21.5)
------------------------ ------- ------- ------
At 31 December 2022 60.5 11.1 71.6
------------------------ ------- ------- ------
Office
leases Hosting Total
EUR'm EUR'm EUR'm
------------------------ ------- ------- ------
At 1 January 2021 60.1 6.6 66.7
Additions/modifications 22.5 4.8 27.3
Amortisation charge (14.8) (5.4) (20.2)
------------------------ ------- ------- ------
At 31 December 2021 67.8 6.0 73.8
------------------------ ------- ------- ------
Set out below are the carrying amounts of lease liabilities and
the movements during the year:
2022 2021
EUR'm EUR'm
------------------------------------- ------ ------
At 1 January 90.1 82.5
Additions/modifications 18.8 26.1
Disposal of subsidiary (0.2) -
Accretion of interest 5.5 5.3
Payments (27.1) (26.2)
Effect of movement in exchange rates (1.3) 2.4
------------------------------------- ------ ------
At 31 December 85.8 90.1
------------------------------------- ------ ------
Current 31.8 20.3
Non-current 54.0 69.8
------------------------------------- ------ ------
85.8 90.1
------------------------------------- ------ ------
The maturity analysis of lease liabilities is disclosed in Note
38B.
The following are the amounts recognised in the profit or
loss:
2022 2021
EUR'm EUR'm
--------------------------------------------------------- ------ ------
Amortisation expense of right of use assets 21.5 20.2
Interest expense on lease liabilities 5.5 5.3
Impact of early termination of lease contracts (0.7) (1.2)
Variable lease payments (included in distribution costs) 0.1 1.0
--------------------------------------------------------- ------ ------
26.4 25.3
--------------------------------------------------------- ------ ------
Rent concessions have been provided to the Group companies as a
result of the COVID-19 pandemic. The Group elected to account for
qualifying rent concessions in the same way as they would if they
were not lease modifications, resulting in accounting for the
concession as a variable lease payment. The amount recognised in
the profit or loss to reflect changes in lease payments that arose
from rent concessions to which the Group has applied the practical
expedient is EUR0.1 million (2021: EUR1.0 million).
Note 19 - Intangible assets
Patents,
domain Customer
names Technology Development list and
and licence IP costs affiliates Goodwill Total
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
--------------------------------- ------------ ---------- ----------- ----------- -------- -------
Cost
At 1 January 2022 191.4 86.5 363.6 526.9 773.6 1,942.0
Additions 32.2 - 59.4 - - 91.6
Assets acquired through business
combinations - 2.9 - - 5.4 8.3
Disposal of subsidiary - (3.0) (1.4) (0.5) (12.4) (17.3)
Write offs - (1.8) (4.3) - - (6.1)
--------------------------------- ------------ ---------- ----------- ----------- -------- -------
At 31 December 2022 223.6 84.6 417.3 526.4 766.6 2,018.5
--------------------------------- ------------ ---------- ----------- ----------- -------- -------
Accumulated amortisation
and impairment losses
At 1 January 2022 110.6 72.7 241.3 346.2 125.1 895.9
Charge 24.3 2.9 49.7 32.9 - 109.8
Impairment loss - - 7.0 - 31.7 38.7
Disposal of subsidiary - (0.9) - (0.2) - (1.1)
Write offs - (1.8) (3.9) - - (5.7)
--------------------------------- ------------ ---------- ----------- ----------- -------- -------
At 31 December 2022 134.9 72.9 294.1 378.9 156.8 1,037.6
--------------------------------- ------------ ---------- ----------- ----------- -------- -------
Net book value
At 31 December 2022 88.7 11.7 123.2 147.5 609.8 980.9
--------------------------------- ------------ ---------- ----------- ----------- -------- -------
At 1 January 2022 80.8 13.8 122.3 180.7 648.5 1,046.1
--------------------------------- ------------ ---------- ----------- ----------- -------- -------
Patents,
domain Customer
names and Technology Development list and
licence IP costs affiliates Goodwill Total
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
------------------------- ---------- ---------- ----------- ----------- -------- -------
Cost
At 1 January 2021 185.7 84.9 316.8 526.9 773.6 1,887.9
Additions 5.7 1.6 53.4 - - 60.7
Write offs - - (6.6) - - (6.6)
------------------------- ---------- ---------- ----------- ----------- -------- -------
At 31 December 2021 191.4 86.5 363.6 526.9 773.6 1,942.0
------------------------- ---------- ---------- ----------- ----------- -------- -------
Accumulated amortisation
and impairment losses
At 1 January 2021 91.6 65.5 198.3 310.1 118.3 783.8
Charge 19.0 7.2 47.0 36.1 - 109.3
Impairment loss - - 2.3 - 6.8 9.1
Write offs - - (6.3) - - (6.3)
------------------------- ---------- ---------- ----------- ----------- -------- -------
At 31 December 2021 110.6 72.7 241.3 346.2 125.1 895.9
------------------------- ---------- ---------- ----------- ----------- -------- -------
Net book value
At 31 December 2021 80.8 13.8 122.3 180.7 648.5 1,046.1
------------------------- ---------- ---------- ----------- ----------- -------- -------
At 1 January 2021 94.1 19.4 118.5 216.8 655.3 1,104.1
------------------------- ---------- ---------- ----------- ----------- -------- -------
During the year, the research and development costs net of
capitalised development costs were EUR88.3 million (2021: EUR80.1
million). The internal capitalisation for the year was EUR57.5
million (2021: EUR51.3 million).
Out of the total amortisation charge of EUR109.8 million (2021:
EUR109.3 million), an amount of EUR42.0 million (2021: EUR34.8
million) relates to the intangible assets acquired through business
combinations.
In accordance with IAS 36, the Group regularly monitors the
carrying value of its intangible assets, including goodwill.
Goodwill is allocated to thirteen cash-generating units (CGUs)
(2021: fifteen out of which two CGUs were under held for sale).
The allocation of the goodwill in CGUs (excluding CGUs held for
sale) is as follows:
2022 2021
EUR'm EUR'm
------------- ------ ------
Snai 259.7 258.7
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
Bingo retail 9.5 9.5
Bingo VF - 7.4
VB retail 4.6 4.6
IGS - 3.7
AUS GMTC 4.4 -
------------- ------ ------
609.8 648.5
------------- ------ ------
Management reviews CGUs for impairment bi-annually, or on the
occurrence of an impairment indicator. The recoverable amount of
each CGU has been determined from value in use calculations based
on cash flow projections covering five years plus a terminal value
which have been adjusted to take into account each CGU's major
events as expected in future periods.
Management has considered the ongoing economic uncertainty
caused by the Russian invasion in Ukraine and the overall global
recessionary pressures, with a higher level of judgement and
uncertainty implemented in the forecasts. A potential risk for
future impairment exists should there be a significant change in
the economic outlook, versus those trends management anticipates in
its forecasts due to the occurrence of these events.
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 one
to five by applying an average annual growth rate for revenue based
on the underlying economic environment in which the CGU operates
and the expected performance over that period. Beyond this period,
management has applied an annual growth rate of 2%. Management has
included appropriate capital expenditure requirements to support
the forecast growth and assumed the maintenance of the current
level of licences. Management has also applied post-tax discount
rates to the cash flow projections as summarised below.
2022 CGUs not sensitive to changes in assumptions:
Average
revenue
growth
rate Discount
2023-2027 rate applied
---------- ---------- -------------
Snai 9.4% 17.3%
Services 22.2% 16.2%
Casino 5.5% 13.9%
Poker 6.2% 17.4%
VB retail 10.0% 12.4%
---------- ---------- -------------
2021 CGUs not sensitive to changes in assumptions:
Average
revenue
growth
rate Discount
2022-2026 rate applied
----------- ---------- -------------
Snai 9.9% 15.0%
Sports B2B 23.7% 13.9%
Services 10.3% 14.2%
Casino 6.0% 12.9%
Poker 2.2% 14.7%
IGS 24.0% 12.9%
VB retail 18.0% 11.2%
----------- ---------- -------------
In relation to the Bingo VF, Eyecon, Quickspin and IGS CGUs,
following impairment tests completed as at 31 December 2022,
partial impairments have been recognised as disclosed below.
Certain other CGUs, which are specifically referred to below but
not impaired, are considered sensitive to changes in assumptions
used for the calculation of value in use.
Bingo VF CGU
The recoverable amount of the Bingo VF CGU of EUR4.8 million,
with carrying value of EUR21.1 million, has been determined using a
cash flow forecast that includes annual revenue growth rates
between negative 1% and 10% over the one to five-year forecast
period, a 2% long-term growth rate and a post-tax discount rate of
15.8%. Following the contract termination of a significant
licensee, the CGU is currently making considerable efforts to
recover through new geographical expansion and organic growth.
However, growth is slower than expected, with new business planned
in new territories being delayed given the overall recessionary
pressures worldwide. The impairment recognised in the current year
was EUR12.5 million which impairs the assets down to the
recoverable amount.
Eyecon CGU
The recoverable amount of the Eyecon CGU showed signs of
underperformance during H1 2022, mainly due to the fact that its
operations are highly concentrated in the UK online market which
has seen a slowdown due to uncertain regulatory climate and as a
result the recoverable amount did not cover the carrying value,
with an impairment loss of EUR13.6 million recognized in the profit
or loss for the period ended 30 June 2022. No further impairment
has been recognised in the year. The recoverable amount of this CGU
of EUR16.9 million, with a carrying value equal to EUR16.1 million
at 31 December 2022, was determined using a cashflow forecast that
includes annual revenue growth rates between 0% to 10.0% over the
1-5 year forecast period, 2% long term growth rate and a post-tax
discount rate of 15.6%. The recoverable amount would equal the
carrying value of the CGU if:
-- the discount rate applied was higher by 4.8%, i.e. reaching a
post-tax discount rate of 15.6%; or
-- the revenue growth was lower by 0.2% when compared to the
forecasted average five-year growth.
Quickspin CGU
The recoverable amount of the Quickspin CGU was impaired during
H1 2022, given the risk the CGU bore from the proportion of
revenues being generated from Group's B2B customers choosing to
operate in areas with geopolitical tension, and the resulting 1%
increase on the post-tax discount rate of the CGU to mitigate for
that factor. As a result of the above and also the decrease in the
CGU performance which went through organizational updates, an
impairment loss of EUR7.0 million was recognized in the profit or
loss for the period ended 30 June 2022. No further impairment was
recognised in the year. The recoverable amount of this CGU of
EUR56.2 million, with a carrying value of EUR46.2 million at 31
December 2022, has been determined using a cashflow forecast that
includes annual revenue growth rates between 5.0% to 15.1% over the
1-5 year forecast period, 2% long term growth rate and a post-tax
discount rate of 12.1%. The recoverable amount would equal the
carrying value of the CGU if:
-- the discount rate applied was higher by 18.3%, i.e., reaching
a post-tax discount rate of 14.3%; or
-- the revenue growth was lower by 2% when compared to the
forecasted average five-year growth.
IGS CGU
The recoverable amount of the IGS CGU of EUR1.1 million, with
carrying value of EUR6.7 million, has been determined using a cash
flow forecast that includes annual revenue growth rates between
10.0% and 77.0% over the one to five-year forecast period, a 2%
long-term growth rate and a post-tax discount rate of 22.0%. The
unit was severely affected by COVID-19 and until recently it had
not managed to bring revenue up to pre-COVID levels with the
business suffering from cancelled or postponed projects. As a
result, the recoverable amount does not cover the carrying value,
with an impairment loss of EUR5.6 million recognised in the profit
or loss.
If the revenue growth rate per annum is lower by 1%, then an
additional impairment of EUR1.1 million would be recognised.
Similarly, if the discount rate increases by 1% to a post-tax
discount rate of 23.0%, this would result in a further impairment
of EUR0.4 million.
Bingo retail CGU
The recoverable amount of the Bingo retail CGU, with carrying
value of EUR24.9 million, which has not been impaired, has been
determined using a cash flow forecast that includes annual revenue
growth rates of 2% over the one to five-year forecast period, a 2%
long-term growth rate and a post-tax discount rate of 14.4%. The
recoverable amount would equal the carrying value of the CGU
if:
-- the discount rate applied was higher by 8.1%, i.e. reaching a
post-tax discount rate of 15.6%; or
-- the revenue growth was lower by 1.0% when compared to the
forecasted average five-year growth.
Sports B2B CGU
The recoverable amount of the Sports B2B CGU, with carrying
value of EUR232.9 million, which has not been impaired, has been
determined using a cash flow forecast that includes annual revenue
growth rates of 9.2% over the one to five-year forecast period, a
2% long-term growth rate and a post-tax discount rate of 14.9%. The
recoverable amount would equal the carrying value of the CGU
if:
-- the discount rate applied was higher by 7.6%, i.e. reaching a
post-tax discount rate of 16.0%; or
-- the revenue growth was lower by 0.5% when compared to the
forecasted average five-year growth.
Note 20 - Investments and derivative financial assets
Introduction
Below is a breakdown of the relevant assets at 31 December 2022
and 2021 per the consolidated balance sheet:
2022 2021
EUR'm EUR'm
------------------------------- ------ ------
A. Investments in associates 36.6 5.2
B. Other investments 9.2 8.1
C. Derivative financial assets 636.4 622.2
------------------------------- ------ ------
682.2 635.5
------------------------------- ------ ------
The following are the amounts recognised in the profit or
loss:
2022 2021
EUR'm EUR'm
----------------------------------------------------------- ------ ------
Statement of Comprehensive income
----------------------------------------------------------- ------ ------
A. Share of loss from associates (3.8) (0.6)
B. Unrealised fair value changes of equity investments (0.3) (1.6)
C. Unrealised fair value changes of derivative financial
assets 6.0 583.2
Other comprehensive income
Foreign exchange movement from the derivative call options
held in non-Euro functional currency subsidiaries 6.8 -
----------------------------------------------------------- ------ ------
8.7 581.0
----------------------------------------------------------- ------ ------
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 31 December
2022, the foreign exchange movement of the derivative call option
held in Caliplay (Note 20C) is recorded in the profit or loss 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 6.
8. Investments in associates
Balance sheet
2022 2021
EUR'm EUR'm
------------------------------------------------ ------ ------
Caliplay - -
ALFEA SPA 1.7 1.6
Galera - 3.6
LSports 34.9 -
------------------------------------------------ ------ ------
Total investment in equity accounted associates 36.6 5.2
------------------------------------------------ ------ ------
Profit and loss impact
2022 2021
EUR'm EUR'm
----------------------------- ------ ------
Share of profit in ALFEA SPA 0.1 -
Share of loss in Galera (3.6) (0.6)
Share of loss in Lsports (0.3) -
----------------------------- ------ ------
Total profit and loss impact (3.8) (0.6)
----------------------------- ------ ------
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 in
Mexico which operates the "Caliente" brand in Mexico.
The Group 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 (the "Playtech Call Option").
During 2021 Caliplay redeemed its share at par from September
Holdings, which resulted in Caliente becoming the sole shareholder
in Caliplay. The terms of the existing structured agreement were
varied, with the following key changes:
-- A new additional option (in addition to the Playtech Call
Option) was granted to the Group which allowed the Group to take up
to a 49% equity interest in a new acquisition vehicle should
Caliplay be subject to a corporate transaction - this additional
option is only exercisable in connection with a corporate
transaction and therefore was not exercisable at 31 December 2021
or 31 December 2022 (the "Playtech M&A Call Option").
-- Caliente received a put option which would require Playtech
to acquire September Holding Company B.V. for a nominal amount (the
"September Put Option"). This option has been exercised and the
parties are in the process of transferring legal ownership of
September Holding Company B.V. to the Group.
The Group has no equity holding in Caliplay or Caliente and is
currently providing services to Caliplay including technical and
general strategic support services for which it receives income
(including an additional B2B services fee as described in Note 5).
If the Playtech Call Option or the Playtech M&A Call Option are
exercised, the Group would no longer be entitled to receive the
additional B2B services fee (and will cease to provide the related
services) which for the year ended 31 December 2022 was EUR66.3
million (2021: EUR49.4 million). In addition, for 45 days after the
finalisation of Caliplay's 2021 accounts, Caliplay also had an
option to redeem the Group's additional B2B services fee or (if the
Playtech Call Option had been exercised at that time) Caliente
would have the option to acquire Playtech's 49% stake in Caliplay
(together the "Caliente Call Option").
As per the public announcement made by the Group on 6 February
2023, Playtech Plc is seeking a declaration from the English Courts
to obtain clarification on a point of disagreement between the
parties in relation to the Caliente Call Option. The Group believes
the Caliente Call Option has expired and referred to its expiry
having taken place in its interim report for the six-month period
ended 30 June 2022, which was published on 22 September 2022. If
the Caliente Call Option was declared as being exercisable and was
exercised, this would extinguish the Playtech Call Option and the
Playtech M&A Call Option.
In addition to the above, from 1 January 2025, if there is a
change of control of Caliplay or any member of the Caliente group
which holds a regulatory permit under which Caliplay operates, each
of the Group and Caliente shall be entitled (but not obligated),
within 60 days of the time of such change of control, to require
that the Caliente group redeems the Group's additional B2B services
fee or (if the Playtech Call Option had been exercised at that
time) acquires Playtech's 49% stake in Caliplay. If such change of
control were to take place and the right to redeem/acquire were to
occur, this would extinguish the Playtech Call Option (to the
extent not exercised prior thereto) and the Playtech M&A Call
Option. In respect of this change of control arrangement the Group
has made a judgement that as at 31 December 2022 this has no impact
on the fair value calculation of the Playtech M&A Call
Option.
Assessment of control and significant influence
As at 31 December 2022 and 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 the Group previously having a nominated director on
the Caliplay Board in 2020 and having consent rights on certain
decisions (in each case, removed in 2021), there was no ability to
control the relevant activities;
-- Whilst they are not members of the Board, the Group has the
ability to appoint and change both the Chief Operating Officer
("COO") and Chief Marketing Officer ("CMO") who form part of the
management team. The COO and the CMO form part of the wider
management team but not the board and therefore are unable to
control the relevant activities of Caliplay;
-- The Playtech Call Option or the Playtech M&A Call Option,
if exercised, would result in Playtech having up to 49% of the
voting rights and would not result in Playtech having control;
and
-- Whilst the Group does receive variable returns from its
structured agreement, it does not have the power to direct relevant
activities so any variation cannot arise from such a power.
As at 31 December 2022 and 2021, the Group has significant
influence over Caliplay because it meets one or more of the
criteria under IAS 28, paragraph 6 as follows:
-- It has the ability to appoint key members of the Caliplay management team;
-- The standard operator revenue by itself is not considered to
give rise to significant influence; however, when combined with the
additional B2B services fee, this is an indicator of significant
influence; and
-- The material transaction of the historical loan funding is
also an indicator of significant influence.
Accounting for each of the options
The Playtech Call Option was exercisable at 31 December 2022 and
31 December 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 previously
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.
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 6, the Group did not consider it
appropriate to equity account for the share of profits as the
current 100% shareholder is entitled to any undistributed
profits.
Below is the financial information of Caliplay:
2022* 2021*
EUR'm EUR'm
----------------------------------------------- ------ -------
Current assets 96.7 62.9
Non-current assets 30.3 20.2
Current liabilities (78.1) (67.5)
Non-current liabilities - -
----------------------------------------------- ------ -------
Equity 48.9 15.6
----------------------------------------------- ------ -------
Revenue 532.1 372.3
----------------------------------------------- ------ -------
Profit from continuing operations 30.4 23.3
Other comprehensive income /(loss), net of tax 2.5 (1.0)
----------------------------------------------- ------ -------
Total comprehensive income 32.9 22.3
----------------------------------------------- ------ -------
* The 2021 balances above have been extracted from Caliplay's
audited 2021 financial statements whereas the 2022 balances have
been extracted from the draft unaudited Caliplay financial
statements.
Investment in ALFEA SPA
The Group has held 30.7% equity shares in ALFEA SPA since June
2018. At 31 December 2022 the Group's value of the investment in
ALFEA SPA was EUR1.7 million (2021: EUR1.6 million). A share of
profit of EUR0.1 million was recognised in the profit or loss for
the year ended 31 December 2022 (2021: EURNil million).
Investment in Galera
In June 2021, the Group entered into an agreement with Ocean 88
Holdings Ltd which is the sole holder of Galera Gaming Group
(together "Galera"), a company registered in Brazil. Galera offers
and operates online and mobile sports betting and gaming (poker,
casino, etc.) in Brazil. They will continue to do so under the
local regulatory license, when this becomes available, and will
expand to other gaming and gambling products based on the local
license conditions.
The Group's total consideration paid for the investment in
Galera was $5.0 million (EUR4.2 million) in the year ended 31
December 2021, which was the consideration for the option to
subscribe and purchase from Galera an amount of shares equal to 40%
in Galera at nominal price.
In addition to the investment amount paid, Playtech made
available to Galera a line of credit up to $20.0 million. In 2022,
an amendment was signed to the original framework agreement to
increase the credit line to $45.0 million. As at 31 December 2022,
an amount of EUR26.9 million, which is included in loans receivable
under other non-current assets (refer to Note 36) has been drawn
down (2021: EUR8.1 million). An amount of EUR18.0 million has been
loaned in the year ended 31 December 2022. The loan is required to
be repaid to Playtech prior to any dividend distribution to the
current shareholders of Galera. The Group recognized an allowance
for expected credit losses for the loan to Galera of EUR1.1 million
as at 31 December 2022 (2021: EURNil).
In respect of the loan receivable from Galera even though the
framework agreement does not state a set repayment term, management
has assessed that this should still be recognised as a loan as
opposed to part of the overall investment in associate in line with
IAS 28. The Directors have made a judgement that the loan will be
settled from operational cashflows as opposed to being settled as
part of an overall transaction. If the Group had determined that
the loan was part of the overall investment in associate an
additional EUR3.6 million share of loss of associate would have
been recorded in the profit and loss. The EUR3.6 million has not
been recognised as the investment in associate has been reduced to
EURNil (see below).
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
year ended 31 December 2022 (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
EUR3.6 million was recognised in the profit or loss in the year
ended 31 December 2022 (31 December 2021: EUR0.6 million) making
the resulting value of the investment at 31 December 2022 EURNil
(31 December 2021: EUR3.6 million). The total share of loss from
Galera was EUR7.2 million as at 31 December 2022 but is capped at
EUR3.6 million to bring the cost of the investment to EURNil.
Investment in Lsports
Background
In November 2022, the Group entered into the following
transactions :
-- Acquisition of 15% of Statscore for a total consideration of
EUR1.8 million. As a result of this transaction Statscore became a
100% subsidiary of the Group;
-- Disposal of 100% of Statscore to Lsports Data Ltd ("Lsports")
for a total consideration of EUR7.5 million (settled through the
acquisition of Lsports in shares) less a novated inter-company loan
of EUR1.6 million, therefore a non-cash net consideration of EUR5.9
million; and
-- Acquisition of 30.89% of Lsports for a total consideration of
EUR36.7 million, which also included an option to acquire further
shares (up to 18.11%) in Lsports. Of the total consideration,
EUR29.2 million was paid in cash with the balance offset against
the disposal proceeds of Statscore as per the above.
As a result of the disposal of 100% of Statscore, the Group
realised a loss of EUR8.8 million which has been recognized in the
profit or loss for the year ended 31 December 2022 and is made up
as follows:
2022
EUR'm
Net asset position as at the date of the disposal
including goodwill of EUR12.4 million 14.7
Net consideration (5.9)
-------------------------------------------------- ------
Loss on disposal 8.8
-------------------------------------------------- ------
Furthermore, the Group has an option to acquire up to 49% (so an
additional 18.11%) of the equity of Lsports ("Lsports Option").
The LSports Option is exercisable under the following
conditions:
-- Within 90 days from the date of receipt of the LSports
audited financial statements for each of the years ending 31
December 2024, 2025 and 2026; or
-- At any time until 31 December 2026 subject and immediately
prior to the consummation of an Initial Public Offering or Merger
& Acquisition event of LSports.
The fair value of the option acquired was EUR1.4 million which
was part of the total consideration EUR36.7 million. Refer to part
of Note 20C; there is no movement on the fair value between
acquisition and year-end.
LSports is a company whose principal activity is to empower
sportsbooks and media companies with the highest quality sports
data on a wide range of events, so they can build the best product
possible for their business. The company is based in Israel. The
principal reason of the acquisition is the attractive opportunity
considered by Playtech to increase its footprint in the growing
sports data market segment.
Assessment of control and significant influence
As at date of acquisition and 31 December 2022 it was assessed
that the Group did not have control over LSports, because it does
not meet the criteria of IFRS 10 Consolidated Financial Statements,
paragraph 7 due to the following:
-- Despite Playtech having the right to appoint a director on
the LSports Board, as at 31 December 2022, one had not yet been
appointed. Moreover, once Playtech appoints a director, there is
still no ability to control the relevant activities, as the total
number of directors including potentially one Playtech appointed
director will be 5;
-- Playtech has neither the ability to change any members of the
Board or of the management of LSports; and
-- As at 31 December 2022 the option is not exercisable and
therefore can be disregarded in the assessment of power.
Per the above assessment Playtech does not hold power over the
investee and as such does not have control.
As at 31 December 2022, the Group has significant influence over
LSports because it meets one or more of the criteria under IAS 28,
paragraph 6, the main one being Playtech having the ability to
appoint a member on the board of LSports enabling it to therefore
participate in policy-making processes, including decisions about
dividends and/or other distributions. As a result of this
assessment LSports has been recognised as an investment in
associate.
The LSports option, which is not currently exercisable, is fair
valued as per paragraph 14 of IAS 28 and shown as a derivative
financial asset in accordance with IFRS 9 and disclosed separately
under part C of this note.
Purchase Price Allocation ("PPA")
The Group has prepared a PPA following the acquisition of the
investment, where any difference between the cost of the investment
and Playtech's share of the net fair value of the LSports'
identifiable assets and liabilities results in goodwill.
Details of the provisional fair value of identifiable assets and
liabilities acquired, investment consideration and goodwill are as
follows:
Playtech's share of net fair
value of the identifiable
assets and liabilities acquired
2022
EUR'm
Net book value of liabilities acquired (1.3)
Fair value of customer contracts and relationships 7.8
Fair value of technology - internally developed 11.5
Fair value of brand 1.6
Deferred tax arising on acquisition (2.3)
--------------------------------------------------- ----------------------------------------
Total net assets 17.3
--------------------------------------------------- ----------------------------------------
Total consideration 35.3
--------------------------------------------------- ----------------------------------------
Goodwill 18.0
--------------------------------------------------- ----------------------------------------
A total of EUR0.4 million and EUR0.1 million was recognised in
relation to the amortisation of intangibles and the release of the
deferred tax liability respectively, arising on acquisition in the
profit or loss for the year ended 31 December 2022, with a
corresponding entry against the investment in associate. The net
effect of EUR0.3 million is recognised in share of loss in profit
or loss as at 31 December 2022. No share of profit was recognised
as this amount is negligible.
Other investment in associates that are fair valued under IAS
28, paragraph 14
The following are also investments in associates where the Group
has significant influence but where the option is not currently
exercisable. As there is no current access to profits, the relevant
option is fair valued under IFRS 9, and disclosed as derivative
financial assets under part C of this note:
-- Wplay;
-- Tenbet (Costa Rica); and
-- Onjoc (Panama).
The financial information required for investments in
associates, other than Caliplay, have not been included here as
from a Group perspective the Directors do not consider them to have
a material impact jointly or separately.
B. Other investments
Balance sheet
2022 2021
EUR'm EUR'm
---------------------------------------- ------ ------
Listed investment - PhilWeb 1.1 0.8
Listed investment - Torque Esports Corp 0.3 0.8
Investment in Tenlot Guatemala 4.4 4.4
Investment in Tentech Costa Rica 2.1 2.1
Investment in Gameco 1.3 -
---------------------------------------- ------ ------
Total other investments 9.2 8.1
---------------------------------------- ------ ------
Profit and loss impact
2022 2021
EUR'm EUR'm
----------------------------------------------------------- ------ ------
Change of fair value of listed securities - PhilWeb 0.2 (0.4)
Change in fair value of listed securities - Torque Esports
Corp (0.5) (1.2)
----------------------------------------------------------- ------ ------
Total profit and loss impact (0.3) (1.6)
----------------------------------------------------------- ------ ------
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 year ended 31 December 2022, the fair value of PhilWeb
increased by EUR0.2 million (2021: decrease of EUR0.4 million). For
the year ended 31 December 2022, the fair value of Torque Esports
Corp decreased by EUR0.5 million (2021: decrease of EUR1.2
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 or loss under
IFRS 9.
The fair value of the equity holding as at 31 December 2022 is
$5.0 million (EUR4.4 million) with no movement in fair value from
the prior year.
In addition, the Group was granted a 10% equity holding in Super
Sports S.A. at no additional cost. The Group also has an option to
acquire an additional 80% equity holding in Super Sports S.A. If
the option is exercised, the Group would no longer provide certain
services and, as such, would no longer be entitled to the
additional B2B services fee. The additional B2B services fee was
EURNil for the year ended 31 December 2022 (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. give
Playtech:
-- power over the investee;
-- exposure, or rights, to variable returns from its involvement with the investee; and
-- the ability to use its power over the investee to affect the
amount of the investor's returns.
It therefore satisfies all the criteria of control under IFRS
10, paragraph 7 and, as such, at 31 December 2022 Super Sports S.A.
has been consolidated in the consolidated financial statements of
the Group, noting that this is not material from a Group
perspective.
Investment in Tentech Costa Rica
In 2020, the Group entered into an agreement in Costa Rica with
the Tenlot Group. The Group acquired a 6% equity holding in Tentech
CR S.A., a member of the Tenlot Group, for a total consideration of
$2.5 million (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 or loss under IFRS 9.
The fair value of the equity holding as at 31 December 2022 is
$2.5 million (EUR2.1 million) with no movement in fair value from
the prior year.
Investment in Gameco
In 2021, the Group entered into a convertible loan agreement
with GameCo LLC ("GameCo"), where it provided $4.0 million in the
form of a debt security with 8% interest (31 December 2021: EUR3.8
million). As at 31 December 2021 the receivable was included in
loans receivable in Note 21. In December 2022, Gameco acquired
Green Jade Games and subsequently, the Playtech debt was converted
into equity shares, representing a 7.1% into the newly formed
group. Immediately prior to the conversion, the loan was impaired
by EUR3.0 million and this has been recognised in the profit or
loss in the current year.
The 7.1% equity holding in the newly formed group is accounted
at fair value through profit or loss under IFRS 9. The fair value
of the equity holding as at 31 December 2022 is EUR1.3 million.
C. Derivative financial assets
Balance sheet
2022 2021
EUR'm EUR'm
------------------------------------ ------ ------
Playtech M&A Call Option (Caliplay) 524.0 506.7
Wplay 93.5 97.2
Onjoc 8.6 6.9
Tenbet 8.9 11.4
LSports (Note 20A) 1.4 -
------------------------------------ ------ ------
Total derivative financial assets 636.4 622.2
------------------------------------ ------ ------
Statement of Comprehensive Income impact
2022 2021
EUR'm EUR'm
------------------------------------------------------------ ------ ------
Caliplay
Fair value change of Playtech M&A Call Option (13.3) 506.7
Playtech Call Option - (16.6)
Foreign exchange movement to profit or loss 30.6 -
Wplay
Fair value change in Wplay (9.4) 74.8
Foreign exchange movement recognised in other comprehensive
income 5.7 -
Onjoc
Fair value change in Onjoc 1.3 6.9
Foreign exchange movement recognised in other comprehensive
income 0.4 -
Tenbet
Fair value change in Tenbet (3.2) 11.4
Foreign exchange movement recognised in other comprehensive
income 0.7
Total comprehensive income impact 12.8 583.2
------------------------------------------------------------ ------ ------
Caliplay
As already disclosed in section A of this note, the Playtech
M&A Call Option is not currently exercisable and therefore in
accordance with IAS 28, paragraph 14 has been recognised as a
derivative financial asset and fair valued under IFRS 9.
As at 31 December 2021, Caliplay was actively negotiating a
merger with a US listed special purpose acquisition corporation
(SPAC), which in turn was expected to enter into a long-term
commercial agreement with a leading media partner. As part of the
transaction, the media partner and certain of its shareholders were
expected to invest a cash amount in the SPAC in exchange for shares
and warrants issued by the SPAC, which was expected to result in
them together holding a material minority equity interest.
Further attempts were made to complete the SPAC transaction
during the year, however as per the announcement made on 29 July
2022, with capital market conditions having deteriorated
significantly since the transaction was initially contemplated, the
transaction was no longer being pursued.
For this reason, a decision was taken to change the valuation
methodology used as at 31 December 2022 for the Playtech M&A
Call option to that of a DCF approach with a market exit multiple
assumption, as opposed to 31 December 2021, where the Group has
assessed the fair value of the Playtech M&A Call option based
on the proposed term of the expected merger with the SPAC,
including the transaction value.
As already mentioned in part A of Note 20 the Group is seeking a
declaration from the English Courts to obtain clarification on a
point of disagreement between the parties in relation to the
Caliente Call Option and in particular, whether Caliplay still
holds this option which permits it to redeem the additional B2B
services fee element. Should it be declared that Caliplay still has
the Caliente Call Option and Caliplay then exercises said option,
this would cancel both the Playtech M&A Call Option and the
Playtech Call Option.
The Group believes the Caliente Call Option has expired and
whilst Caliplay has not sought to exercise the option to date,
Caliplay has made it clear that it considers the option has not yet
expired.
In arriving at the fair value of the Playtech M&A Call
Option, the Group has made a judgement that the Caliente Call
Option has expired and therefore no probability weighted scenarios
have been modelled that include an assumption that the Caliente
Call Option is exercisable. Should the English Courts determine
that the option is exercisable and Caliplay chooses to exercise the
option, the amount payable by Caliplay to the Group upon exercise
would either be agreed between the parties or, failing which,
determined by an independent investment bank valuing the Group's
remaining entitlement to receive the additional B2B services fee
until 31 December 2034. There is therefore the potential that,
should the Caliente Call Option be exercisable and then
subsequently exercised, the proceeds received by the Group may be
materially different (positive or adverse) to the fair value of the
Playtech M&A Call Option recorded as at 31 December 2022.
Valuation
The Group has assessed the fair value of the Playtech M&A
Option of the derivative financial asset as at 31 December 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 Group exit date. The Group also made assumptions on the
probability of a possible transaction that may be completed on a
number of exit date scenarios over a 4-year period, until December
2026. The Group used a compound annual growth rate of 17.2% over
the forecasted cash flow period, an average Adjusted EBITDA margin
of 26.3% and an exit multiple of 9.6x. Due to the uncertainty as to
how the exercise of the Playtech M&A Call Option may occur and
the potential for the shares held to not be immediately realisable,
the Group included an additional discount for lack of marketability
(DLOM) for two years of 13.8%. Furthermore, Playtech's share in
Caliplay was adjusted to reflect the rights to Caliplay shares that
a service provider has under its services agreement with the
Group.
As at 31 December 2022, the fair value of the Playtech M&A
Call Option was $560.6 million (2021: $574.7 million) which
converted to EUR524.0 million (2021: EUR506.7 million). The
year-on-year movement of EUR17.3 million recognised in the profit
or loss is attributable to the favourable movement in the USD to
EUR foreign exchange rate of EUR30.6 million, offset by EUR13.3
million unfavourable movement in the fair value arising from the
change in a number of variables including exit dates and loss of
transaction synergies which impacted cashflows that were only
partly offset by the increase in the shareholding as discussed
below.
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 31 December 2022, a discounted cash flow
valuation method is used with a dilution in shareholding down only
to 45.8% reflecting the expected rights to Caliplay shares to be
allocated to a service provider under its services agreement with
the Group. These rights were reduced following the exercise of a
redemption option post year end as disclosed in Note 40, noting
that the Group had assumed this option would be exercised for the
purposes of the valuation performed at 31 December 2022. Despite
the change in valuation approach, the Group considers it reasonable
that the value of the Playtech M&A Call Option is broadly
unchanged given the continued strong operational results of
Caliplay for 2022.
Sensitivity analysis
The assumptions and judgements made in the valuation of the
derivative financial asset as at 31 December 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 14% to 18% will
result in a fair value of the derivative financial asset in the
range of EUR484.2 million - EUR568.3 million.
-- A 5% fluctuation in the Adjusted EBITDA margin will result in
a fair value of the derivative financial asset within the range of
EUR494.5 million - EUR553.3 million.
-- A 10% fluctuation in the Adjusted EBITDA margin will result
in a fair value of the derivative financial asset within the range
of EUR464.6 million - EUR583.3 million.
-- A 5% fluctuation in the revenue growth rate will result in a
fair value of the derivative financial asset within the range of
EUR487.0 million - EUR561.8 million.
-- A 10% fluctuation in the revenue growth rate will result in a
fair value of the derivative financial asset within the range of
EUR450.5 million - EUR601.0 million.
-- A 1.0 fluctuation on the market exit multiple will result in
a fair value of the derivative financial asset within the range of
EUR473.9 million - EUR573.9 million.
-- If the 13.8% DLOM applied for two-year period post exercise
of the Playtech M&A option was removed (i.e. in the event that
an M&A transaction included the acquisition of Playtech's
shares immediately post exercise) the fair value of the derivative
financial asset would increase to EUR607.6 million. Conversely, if
we double the applied DLOM to 27.6% the fair value of the
derivative financial asset would decrease to EUR440.2 million.
Wplay
In August 2019, Playtech entered into a structured agreement
with Aquila Global Group SAS ("Wplay"), which has a license to
operate online gaming activities in Colombia. Under the agreement
the Group provides Wplay its technology products, where it receives
standard operator revenue and additional B2B services fee as per
Note 5. The Group has no shareholding in Wplay.
Playtech has a call option to acquire a 49.9% equity holding in
the Wplay business. As at 31 December 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 for the year ended 31 December 2022 (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
Group had contingent commitments totalling $6.0 million, of which
$5.0 million was paid in June 2021 and $1.0 million was paid in
October 2022.
Assessment of control and significant influence
The Group assessed whether it holds power over the investee (in
accordance with IFRS 10, paragraph 7) with the following
considerations:
-- Playtech does not have the ability to direct Wplay's
activities as it has no voting representation on the executive
committee or members of the executive committee.
-- Whilst they are not members of the Executive Committee,
Playtech has the ability to appoint and change both the COO and CMO
who form part of the management team (albeit this right has never
been exercised). The COO and the CMO are part of the wider
management team but would not be able to control the relevant
activities of Wplay; 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 31
December 2022 the option is not exercisable and therefore can be
disregarded in the assessment of power.
Per the above assessment Playtech does not hold power over the
investee and as such does not have control.
With regards to the assessment of significant influence, the
following facts were considered:
-- Playtech has the right to appoint and remove the COO and CMO
which is a potential indicator of significant influence given their
relative positions and involvement in the day-to-day operations of
Wplay.
-- The standard operator revenue is not considered to give rise
to significant influence. However, when combined with the
additional B2B services fee, this is an indicator of significant
influence.
-- The Group provides additional services to Wplay which Wplay
requires to assist it in successfully running its operations, which
could be considered essential technical information.
The Group therefore has significant influence under IAS 28,
paragraph 6 over Wplay. However, as the option is not currently
exercisable, we have an investment in associate but with no access
to profits. As such the option is fair valued as per paragraph 14
of IAS 28 and shown as a derivative financial asset in accordance
with IFRS 9.
The Group has given an interest-bearing loan of $1.7 million
(EUR1.6 million) to Wplay, which is due for repayment in December
2023 and is included in loans receivable from related parties
(refer to Note 36).
Valuation
The fair value of the option at 31 December 2022 has been
estimated using a DCF approach with a market exit multiple
assumption. The Group used a discount rate of 25% (2021: 23%)
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 (2021: expected exit date of December
2026). The Group used a compound annual growth rate of 24.7% (2021:
27.2%) over the forecasted cash flow period, an average Adjusted
EBITDA margin of 20.6% (2021: 17.5%) and an exit multiple of 9.6x
(2021:9.8x). As part of the agreement, there is a lock-in mechanism
that contractually might prevent Playtech from selling the
resulting shares, however an assumption was made that if the exit
date assumed in the model is earlier, then both parties would be in
agreement to this earlier exit point, therefore no further
discounts were applied post transaction. Furthermore, Playtech's
share in Wplay was adjusted to reflect the rights to shares that a
service provider has under its services agreement with the
Group.
As at 31 December 2022, the fair value of the Wplay derivative
financial asset is EUR93.5 million. The difference of EUR3.7
million between the fair value at 31 December 2021 of EUR97.2
million and the fair value at 31 December 2022 has been recognised
as follows:
a. EUR9.4 million derived from the fair value decrease of the derivative call option calculated using the DCF model in the profit or loss for the year ended 31 December 2022.
b. EUR5.7 million derived from 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) in other comprehensive income for the year ended
31 December 2022.
Sensitivity analysis
The assumptions and judgements made in the valuation of the
derivative financial asset as at 31 December 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 EUR79.5 million - EUR111.0 million.
-- A 5% fluctuation in the Adjusted EBITDA margin will result in
a fair value of the derivative financial asset within the range of
EUR89.0 million - EUR98.1 million.
-- A 10% fluctuation in the Adjusted EBITDA margin will result
in a fair value of the derivative financial asset within the range
of EUR84.4 million - EUR102.6 million.
-- A 5% fluctuation in the revenue growth rate will result in a
fair value of the derivative financial asset within the range of
EUR90.1 million - EUR97.1 million.
-- A 10% fluctuation in the revenue growth rate will result in a
fair value of the derivative financial asset within the range of
EUR86.7 million - EUR100.8 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
EUR85.8 million - EUR101.2 million.
-- If the expected Playtech exit date fluctuates by one year
later or earlier, the fair value of the derivative financial asset
will change to EUR87.8 million and EUR99.5 million
respectively.
Onjoc
In June 2020, Playtech entered into a framework agreement with
ONJOC CORP. ("Onjoc"), which holds a license to operate online
sports betting, gaming and gambling activities in Panama. The Group
has no equity holding in Onjoc but has an option to acquire 50%.
Under the agreement the Group provides Onjoc its technology
products, where it receives standard operator revenue and
additional B2B services fee as per Note 5. 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 year ended
31 December 2022 (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 performed an analysis for Onjoc to assess whether it
holds power over Onjoc (in accordance with IFRS 10, paragraph 7)
with the following considerations:
-- Playtech can propose an independent member to the Board of
Directors, who has to be independent to both Playtech and Onjoc,
and as such does not have the ability to direct Onjoc's activities
as it has no voting representation on the Board;
-- Playtech has the right to appoint and remove the COO, CTO and
CMO, which although would form part of the wider management team,
would not be able to control the relevant activities of Onjoc by
themselves; and
-- If the option is exercised it would result in Playtech
acquiring 50% of the voting rights of the operating entity and
therefore would not result in having control. Furthermore, as at 31
December 2022 the option is not exercisable and therefore can be
disregarded in the assessment of power.
Per the above assessment Playtech does not hold power over the
investee and as such does not have control.
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 EUR1.8
million (2021: EUR1.1 million) which is due for repayment in
October 2025 and is included in loans receivable from related
parties (refer to Note 36).
Valuation
The fair value of the option at 31 December 2022 has been
estimated using a DCF approach with a market exit multiple
assumption. The Group used a discount rate of 33% (2021: 31%)
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 (2021: expected exit date of December 2027). The
Group used a compound annual growth rate of 60.1% (2021: 89.3%)
over the forecasted cash flow period and an average Adjusted EBITDA
margin of 20.4% (2021: 3.7%). As part of the agreement, there is a
lock-in mechanism that contractually might prevent Playtech from
selling the resulting shares, however an assumption was made that
if the exit date assumed in the model is earlier, then both parties
would be in agreement to this earlier exit point, therefore no
further discounts applied post transaction. Furthermore, Playtech's
share in Onjoc was adjusted to reflect the rights to shares that a
service provider has under its services agreement with the
Group.
As at 31 December 2022, the fair value of the Onjoc derivative
financial asset is EUR8.6 million. The difference of EUR1.7 million
between the fair value at 31 December 2021 of EUR6.9 million and
the fair value at 31 December 2022 has been recognised as
follows:
a. EUR1.3 million derived from the fair value increase of the
derivative call option calculated using the DCF model in the profit
or loss in the year ended 31 December 2022.
b. EUR0.4 million derived from 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) in other comprehensive income in the year ended 31
December 2022.
Sensitivity analysis
The assumptions and judgements made in the valuation of the
derivative financial asset as at 31 December 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 28% to 38% will
result in a fair value of the derivative financial asset in the
range of EUR7.1 million - EUR10.5 million.
-- A 5% fluctuation in the Adjusted EBITDA margin will result in
a fair value of the derivative financial asset within the range of
EUR8.1 million - EUR9.1 million.
-- A 10% fluctuation in the Adjusted EBITDA margin will result
in a fair value of the derivative financial asset within the range
of EUR7.7 million - EUR9.5 million.
-- A 5% fluctuation in the revenue growth rate will result in a
fair value of the derivative financial asset within the range of
EUR7.9 million - EUR9.3 million.
-- A 10% fluctuation in the revenue growth rate will result in a
fair value of the derivative financial asset within the range of
EUR7.3 million - EUR10.1 million.
-- A 1.0 fluctuation on the market exit multiple will result in
a fair value of the derivative financial asset within the range of
EUR7.6 million - EUR9.7 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
year ended 31 December 2022 (31 December 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 EUR2.7 million out of which EUR2.1
million had been drawn down as at 31 December 2022 (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 31 December 2022 the option is not exercisable and
therefore can be disregarded in the assessment of power.
Per the above assessment Playtech does not hold power over the
investee and as such does not have control.
With regards to the assessment of significant influence, the
standard operator revenue alone is not considered to give rise to
significant influence. However, when combined with the additional
B2B services fee, this is an indicator of significant influence.
Furthermore, the Group provides additional services to Tenbet which
Tenbet requires to assist it in successfully running its operations
that could be considered essential technical information. Playtech
therefore has significant influence under IAS 28, paragraph 6 over
Tenbet. However, as the option is not currently exercisable, we
have an investment in associate but with no access to profits. As
such the option is fair valued as per paragraph 14 of IAS 28 and
shown as a derivative financial asset in accordance with IFRS
9.
Valuation
The fair value of the option at 31 December 2022 has been
estimated using a DCF approach with a market exit multiple
assumption. The Group used a discount rate of 35% (2021: 33%)
reflecting the cash flow risk given the high growth rates in place
and the early stages of the business, as well as a discount for
illiquidity and control until the expected Playtech exit date of
December 2027 (2021: expected exit date of December 2027. The Group
used a compound annual growth rate of 135% (2021: 64.2%) over the
forecasted cash flow period and an average Adjusted EBITDA margin
within the range of - 335% to 31% in years 1-5 with an average of
-59.8% (2021: Average of -10.1%). As part of the agreement, there
is a lock-in mechanism that contractually might prevent Playtech
from selling the resulting shares, however an assumption was made
that if the exit date assumed in the model is earlier, then both
parties would be in agreement to this earlier exit point.
Furthermore, Playtech's share in Tenbet was adjusted to reflect the
rights to shares that a service provider has under its services
agreement with the Group.
As at 31 December 2022, the fair value of the Tenbet derivative
financial asset is EUR8.9 million. The difference of EUR2.5 million
between the fair value at 31 December 2021 of EUR11.4 million and
the fair value at 31 December 2022 has been recognised as
follows:
a. EUR3.2 million derived from the fair value decrease of the
derivative call option calculated using the DCF model in the profit
or loss in the year ended 31 December 2022.
b. EUR0.7 million derived from 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) in other comprehensive income in the year ended 31
December 2022.
Sensitivity analysis
The assumptions and judgements made in the valuation of the
derivative financial asset as at 31 December 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 EUR7.2 million - EUR11.0 million.
-- A 5% fluctuation in the Adjusted EBITDA margin will result in
a fair value of the derivative financial asset within the range of
EUR8.5 million - EUR9.3 million.
-- A 10% fluctuation in the Adjusted EBITDA margin will result
in a fair value of the derivative financial asset within the range
of EUR8.0 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
EUR7.9 million - EUR10.0 million.
-- A 10% fluctuation in the revenue growth rate will result in a
fair value of the derivative financial asset within the range of
EUR6.9 million - EUR11.2 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
EUR7.7 million - EUR10.2 million.
Note 21 - Other non-current assets
2022 2021
EUR'm EUR'm
--------------------------------------------------------- ------ ------
Security deposits 3.3 3.3
Guarantee for gaming licences 2.2 2.6
Prepaid costs relating to Sun Bingo contract 63.4 71.7
Loans receivable (net of ECL) 1.7 8.1
Loans receivable from related parties (net of ECL) (Note
36) 27.9 9.5
Other receivables 11.1 9.2
--------------------------------------------------------- ------ ------
109.6 104.4
--------------------------------------------------------- ------ ------
Note 22 - Trade receivables
2022 2021
EUR'm EUR'm
-------------------------- ------ ------
Trade receivables 144.5 168.6
Related parties (Note 36) 20.5 16.5
-------------------------- ------ ------
Trade receivables - net 165.0 185.1
-------------------------- ------ ------
Split to:
Non-current assets 1.1 6.6
Current assets 163.9 178.5
-------------------------- ------ ------
165.0 185.1
-------------------------- ------ ------
Note 23 - Other receivables
2022 2021
EUR'm EUR'm
--------------------------------------------------------- ------ ------
Prepaid expenses 23.4 25.9
VAT and other taxes 13.6 14.1
Security deposits for regulators 24.2 13.1
Prepaid costs relating to Sun Bingo contract 3.6 4.3
Receivable for legal proceedings and disputes1 16.4 16.4
Loans receivable2 (Net of ECL) 13.0 2.1
Loans receivable from related parties (Net of ECL) (Note
36) 3.3 2.4
Other receivables 10.1 8.8
--------------------------------------------------------- ------ ------
107.6 87.1
--------------------------------------------------------- ------ ------
1 Receivable for legal proceedings and disputes relates to funds
held in escrow, in relation to a historical and ongoing legal
matter. The corresponding liability is included under gaming and
other taxes. The funds will be released when the case is finally
settled, in accordance with the escrow agreement.
2 Included in loans receivable above, is a convertible debenture
of C$12.25 million (EUR8.3 million net of ECL) issued to NorthStar
Gaming Inc in December 2022 that will convert into equity and
warrants in connection with NorthStar's proposed reverse takeover
(the "RTO") of Baden Resources Inc. The fair value of the
convertible debenture was assessed as being materially in line with
its face value at 31 December 2022. Refer to Note 40.
Note 24 - Cash and cash equivalents
Cash and cash equivalents for the purposes of the statement of
cash flows comprises:
2022 2021
EUR'm EUR'm
--------------------------------------------------------- ------ ------
Continuing operations
Cash at bank 426.8 572.4
Deposits 0.1 3.6
--------------------------------------------------------- ------ ------
426.9 576.0
Less: expected credit loss (Note 38A) (0.4) (0.6)
--------------------------------------------------------- ------ ------
426.5 575.4
--------------------------------------------------------- ------ ------
Treated as held for sale
Cash at bank - 71.2
Cash at brokers - 293.4
Deposits - 1.5
--------------------------------------------------------- ------ ------
- 366.1
--------------------------------------------------------- ------ ------
Cash and cash equivalents in the statement of cash flows 426.9 942.1
Less: expected credit loss (Note 38A) (0.4) (0.6)
--------------------------------------------------------- ------ ------
426.5 941.5
--------------------------------------------------------- ------ ------
Out of the total cash at bank, an amount of EUR6.8 million were
held by payment processors as at 31 December 2022 (2021: EUR6.9
million).
The Group holds cash balances on behalf of operators in respect
of their jackpot games and poker and casino operations, as well as
client funds with respect to B2C. Furthermore, and up to the point
of the Financial segment disposal, the Group held CFD and client
deposits in relation to liquidity and clearing activities. All of
these are included in current liabilities.
2022 2021
EUR'm EUR'm
-------------------------------------- ------ ------
Continuing operations
Funds attributed to jackpots 84.7 82.2
Security deposits 29.6 28.5
Players' balances 39.8 30.4
-------------------------------------- ------ ------
154.1 141.1
-------------------------------------- ------ ------
Included in liabilities held for sale
Client deposits - 138.5
Client funds - 170.3
-------------------------------------- ------ ------
- 308.8
-------------------------------------- ------ ------
Note 25 - Assets held for sale
2022 2021
EUR'm EUR'm
--------------------------------- ------ ------
Assets
A. Property, plant and equipment 19.6 20.0
B. Casual CGU - -
C. Financials CGU - 487.4
D. Investment in associates - -
--------------------------------- ------ ------
19.6 507.4
--------------------------------- ------ ------
A. During 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. Accordingly, the real estate was
classified as held for sale.
Of the total consideration, EUR1.0 million was received during
the year ended 31 December 2021. The advance received was
classified as part of the liabilities directly associated with
assets classified as held for sale.
At the date of the transfer to assets held for sale, an
impairment review was performed, where the carrying amount was
compared to the fair value less expected disposal costs. The
carrying value of the land was higher than the fair value less
expected selling costs and therefore an impairment of EUR12.3
million was recognised in the profit or loss in the year ended 31
December 2021. In addition, EUR1.8 million of deferred tax
liability relating to the land was recognised in the profit or loss
in the prior year. It was the Group's decision to sell the asset,
and subsequently the prospective buyer was only interested in the
land and not the buildings, which led to this impairment.
The sale has been finalised but the disposal is expected to
complete in 2024 with the movement of the trot track from La Maura
area to San Siro (previously it was expected that the sale would
complete during 2022).
B. Following the decision made by the Group in 2019 to dispose
the Casual and Social Gaming businesses, the value of the divisions
were classified as held for sale and the results were included in
discontinued operations.
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 profit or loss for
the year ended 31 December 2021, included within the total profit
from discontinued operations (refer to Note 8).
The Social and Casual Gaming CGU is now fully disposed.
C. Following the decision made by the Board of Directors in 2020
to dispose of the Financial segment, the division was classified as
held for sale and its results included in discontinued
operations.
In September 2021, the Group entered into an agreement to sell
this division for a cash consideration of $250.0 million, with the
final consideration being subject to a completion accounts
adjustment of up to $25.0 million in either direction, to be
determined by the financial performance of the Financial segment
from 1 January 2021 to the completion date.
The disposal was completed in July 2022, with cash consideration
after this adjustment of $228.1 million (EUR223.9 million).
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 31
December 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 profit on disposal of Financial segment was determined as
follows:
EUR'm
-------------------------------------------------------- -------
Cash consideration received 223.9
Transaction costs paid (1.6)
Cash disposed off (392.1)
-------------------------------------------------------- -------
Net cash outflow on disposal of Financial segment (169.8)
-------------------------------------------------------- -------
Net assets disposed (other than cash):
Property, plant and equipment (4.3)
Right of use assets (6.3)
Intangible assets (98.0)
Trade and other receivables (13.9)
Deferred tax liability 7.0
Trade payables and other payables 24.8
Client deposits 144.5
Client funds 147.1
Income tax payable 2.7
Lease liability 4.5
-------------------------------------------------------- -------
Net liability position on disposal of Financial segment 208.1
-------------------------------------------------------- -------
Net cash outflow (169.8)
Net liability position disposed 208.1
Recycling of foreign exchange reserve related to the foreign
discontinued operations (23.2)
------------------------------------------------------------- -------
Profit on disposal 15.1
------------------------------------------------------------- -------
D. In 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. During
2021, the Group entered into an agreement for the disposal of these
associates for a total consideration of EUR2.2 million.
Note 26 - Shareholders' equity
A. Share capital
Share capital is comprised of no par value shares as
follows:
2022 2021
Number Number
of shares of shares
------------------- ----------- -----------
Authorised1 N/A N/A
Issued and paid up 309,294,243 309,294,243
------------------- ----------- -----------
1 The Company has no authorised share capital, but it is
authorised to issue up to 1,000,000,000 shares of no par value.
The table below shows the movement of the shares:
Shares
in issue/
circulation Shares Shares
Number Treasury held by held by
of shares shares 2014 EBT 2021 EBT Total
----------------------------------- ------------ ----------- ----------- ----------- -----------
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 1,640,511 - (1,640,511) - -
----------------------------------- ------------ ----------- ----------- ----------- -----------
At 31 December 2021/1 January 2022 299,244,326 2,937,550 84,028 7,028,339 309,294,243
Exercise of options 1,743,990 - (84,028) (1,659,962) -
----------------------------------- ------------ ----------- ----------- ----------- -----------
At 31 December 2022 300,988,316 2,937,550 - 5,368,377 309,294,243
----------------------------------- ------------ ----------- ----------- ----------- -----------
B. Employee Benefit Trust
2014 EBT
In 2014, the Group established an Employee Benefit Trust ("2014
EBT") by acquiring 5,517,241 shares for a total of EUR48.5 million
During the year ended 31 December 2022, 84,028 shares (2021:
1,640,511 shares) were issued at a cost of EUR0.6 million (2021:
EUR13.9 million).
2021 EBT
In 2021 the Company transferred 7,028,339 shares held by the
Company in treasury to the Employee Benefit Trust ("2021 EBT") for
a total of EUR22.6 million. During the year ended 31 December 2022,
1,659,962 shares (2021: Nil) were issued at a cost of EUR5.4
million (2021: EURNil). As at 31 December 2022, a balance of
5,368,377 shares (2021: 7,028,339 shares) remains in the 2021 EBT
with a cost of EUR17.2 million (2021: EUR22.6 million).
C. Share options exercised
During the year 1,794,438 (2021:1,873,307) share options were
exercised, of which 50,448 were cash settled (2021: 232,796).
D. Distribution of dividends
During 2022 the Group did not pay any dividends.
E. Reserves
The following describes the nature and purpose of each reserve
within owners' equity:
Reserve Description and purpose
-------------------------- -----------------------------------------------------
Additional paid in capital Share premium (i.e., amount subscribed for share
capital in excess of nominal value)
Employee Benefit Trust Cost of own shares held in treasury by the trust
Put/call options reserve Fair value of put/call options as part of business
acquisition
Foreign exchange reserve Gains/losses arising on retranslating the net assets
of overseas operations
Employee termination Gains/losses arising from the actuarial remeasurement
indemnities of the employee termination indemnities
Non-controlling interest The portion of equity ownership in a subsidiary not
attributable to the owners of the Company
Retained earnings Cumulative net gains and losses recognised in the
consolidated statement of comprehensive income
-------------------------- -----------------------------------------------------
Note 27 - Loans and borrowings
The credit facility of the Group is a revolving credit facility
(RCF) which has been restructured during the year. The facility has
been reduced from EUR317.0 million to EUR277.0 million and is
available until October 2025, with an option to extend by twelve
months. Interest payable on the loan is based on SONIA rates
(replacing Euro Libor and Libor rates) based on the currency of
each withdrawal. Following the announcement of the UK Financial
Conduct Authority (FCA) as to the future cessation or loss of
representativeness of the 35 Libor benchmark, effective from 1
January 2022, Libor rates were replaced with the SONIA daily rate
(sterling overnight index average). As at the reporting date the
credit facility drawn amounted to EURNil (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 3.5:1 (2021: 3:1)
-- Interest cover: Adjusted EBITDA/Interest 4:1 (2021: 4:1)
As at 31 December 2022 and 2021 the Group met these financial
covenants.
Note 28 - Bonds
2018 Bond 2019 Bond Total
EUR'm EUR'm EUR'm
----------------------------------- --------- --------- -------
At 1 January 2021 526.3 346.8 873.1
Release of capitalised expenses 1.3 0.6 1.9
----------------------------------- --------- --------- -------
At 31 December 2021/1 January 2022 527.6 347.4 875.0
Repayment of bonds (330.0) - (330.0)
----------------------------------- --------- --------- -------
Release of capitalised expenses 2.0 0.6 2.6
----------------------------------- --------- --------- -------
At 31 December 2022 199.6 348.0 547.6
----------------------------------- --------- --------- -------
2022 2021
EUR'm EUR'm
Split to:
Non-current 348.0 875.0
Current 199.6 -
------------ ----- -----
547.6 875.0
------------ ----- -----
Bonds
(a) 2018 Bond
On 12 October 2018, the Group issued EUR530 million of senior
secured notes (the "2018 Bond") maturing in October 2023. During
the year, the Group partially repaid the 2018 Bond by EUR330
million. 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 Bond as Level 1 at 31 December 2022 was
EUR198.8 million (31 December 2021: EUR536.1 million).
(b) 2019 Bond
On 7 March 2019, the Group issued EUR350 million of senior
secured notes (the "2019 Bond") maturing in March 2026. The net
proceeds of issuing the 2019 Bond after deducting commissions and
other direct costs of issue totalled 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 Bond as Level 1 at 31 December 2022 was
EUR331.6 million (31 December 2021: EUR358.3 million).
As at 31 December 2022 and 2021 the Group met the required
interest cover financial covenant of 2:1 Adjusted EBITDA/interest
ratio, for the combined 2018 and 2019 Bonds.
Note 29 - Provisions for risks and charges, litigation and
contingent liabilities
The Group is involved in proceedings before civil and
administrative courts, and other legal or potential legal actions
related to its business, including certain matters related to
previous acquisitions. Based on the information currently
available, and taking into consideration the existing provisions
for risks, the Group currently considers that such proceedings and
potential actions will not result in an adverse effect upon the
financial statements; however, where this is not considered to be
remote, they have been disclosed as contingent liabilities.
All the matters were subject to a review and estimate by the
Board of Directors based on the information available at the date
of preparation of these financial statements and, where
appropriate, supported by updated legal opinions from independent
professionals. These provisions are classified based on the
Directors' assessment of the progress and probabilities of success
of each case at each reporting date.
Movements of the provisions outstanding as at 31 December 2022
are shown below:
Legal and
regulatory Contractual Other Total
EUR'm EUR'm EUR'm EUR'm
------------------------------------ ----------- ----------- ------ ------
Balance at 1 January 2022 6.9 6.7 3.1 16.7
Provisions made during the year 1.0 - 0.9 1.9
Provisions used during the year (0.1) (0.5) (0.4) (1.0)
Provisions reversed during the year (0.5) (2.0) (1.2) (3.7)
------------------------------------ ----------- ----------- ------ ------
Balance at 31 December 2022 7.3 4.2 2.4 13.9
------------------------------------ ----------- ----------- ------ ------
Legal and
regulatory Contractual Other Total
EUR'm EUR'm EUR'm EUR'm
------------ ----------- ----------- ------ ------
2021
Non-current 6.9 3.5 3.1 13.5
Current - 3.2 - 3.2
------------ ----------- ----------- ------ ------
6.9 6.7 3.1 16.7
------------ ----------- ----------- ------ ------
2022
Non-current 7.3 0.3 2.4 10.0
Current - 3.9 - 3.9
------------ ----------- ----------- ------ ------
7.3 4.2 2.4 13.9
------------ ----------- ----------- ------ ------
Provision for legal and regulatory issues
The Group is subject to proceedings and potential claims
regarding complex legal matters (including those related to
previous acquisitions), which are subject to a different degree of
uncertainty. Provisions are held for various legal and regulatory
issues that relate to matters arising in the normal course of
business, including in particular various disputes that arose in
relation to the operation of the various licenses held by the
Group's subsidiary Snaitech. The uncertainty is due to complex
legislative and licensing frameworks in the various territories in
which the Group operates. The Group also operates in certain
jurisdictions where legal and regulatory matters can take
considerable time for the required local processes to be completed
and the matters to be resolved.
Contractual claims
The Group is subject to historic claims relating to contractual
matters that arise with customers in the normal course of business.
The Group believes they have a robust defence to the claims raised
and has provided for the likely settlement where an outflow of
funds is probable. The uncertainty relates to complex contractual
dealings with a wide range of customers in various jurisdictions,
and because as noted above, the Group operates in certain
jurisdictions where contractual disputes can take considerable time
to be resolved in the local legal system.
Given the uncertainties inherent, it is difficult to predict
with certainty the outlay (or the timing thereof) which will derive
from these matters. It is therefore possible that the value of the
provisions may vary further to future developments. The Group
monitors the status of these matters and consults with its 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 30 - Contingent consideration and redemption liability
2022 2021
EUR'm EUR'm
-------------------------------------------------------------- ------ ------
Non-current contingent consideration and redemption liability
consists of:
Non-current redemption liability
Acquisition of Statscore SP Z.O.O. - 6.0
-------------------------------------------------------------- ------ ------
Non-current contingent consideration
Acquisition of Aus GMTC PTY Ltd 2.1 -
Others 0.2 -
-------------------------------------------------------------- ------ ------
Total non-current contingent consideration and redemption
liability 2.3 6.0
-------------------------------------------------------------- ------ ------
Current contingent consideration consists of:
Acquisition of Eyecon Limited - 3.6
Amount payable to Aquila Global Group SAS ("Wplay") (Note
20) - 0.8
Other acquisitions 0.6 0.6
-------------------------------------------------------------- ------ ------
Total current contingent consideration 0.6 5.0
-------------------------------------------------------------- ------ ------
Total contingent consideration and redemption liability 2.9 11.0
-------------------------------------------------------------- ------ ------
The maximum contingent consideration and redemption liability
payable is as follows:
2022 2021
EUR'm EUR'm
---------------------------------------------- ------ ------
Acquisition of Eyecon Limited - 3.6
Acquisition of HPYBET Austria GmbH - 15.0
Interest in Aquila Global Group SAS ("Wplay") - 0.9
Acquisition of Statscore SP Z.O.O. - 15.0
Acquisition of Aus GMTC PTY Ltd 46.7 -
Other acquisitions 0.8 6.8
---------------------------------------------- ------ ------
47.5 41.3
---------------------------------------------- ------ ------
Note 31 - Trade payables
2022 2021
EUR'm EUR'm
--------------------- ------ ------
Suppliers 47.0 33.5
Customer liabilities 14.2 7.8
--------------------- ------ ------
61.2 41.3
--------------------- ------ ------
Note 32 - Deferred tax
The movement on the deferred tax is as shown below:
2022 2021
EUR'm EUR'm
----------------------------------- ------ ------
Balance at 1 January 14.0 (82.5)
Charge to profit or loss (Note 14) (26.3) 96.3
Exchange differences - 0.2
----------------------------------- ------ ------
At 31 December (12.3) 14.0
----------------------------------- ------ ------
2022 2021
EUR'm EUR'm
----------------------- ------- ------
Split as:
Deferred tax liability (124.8) (88.9)
Deferred tax asset 112.5 102.9
----------------------- ------- ------
(12.3) 14.0
----------------------- ------- ------
Deferred tax assets and liabilities are offset only when there
is a legally enforceable right of offset, in accordance with IAS
12.
As at 31 December 2022, 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
14 for the assessment performed on the recognition of deferred tax
in the period.
Details of the deferred tax outstanding as at 31 December 2022
and 2021 are as follows:
2022 2021
EUR'm EUR'm
----------------------------------------------- ------- -------
Deferred tax recognised on Group restructuring 56.8 63.6
Tax losses 75.9 74.1
Other temporary and deductible differences (145.0) (123.7)
----------------------------------------------- ------- -------
Total (12.3) 14.0
----------------------------------------------- ------- -------
Details of the deferred tax, amounts recognised in profit or
loss are as follows:
2022 2021
EUR'm EUR'm
------------------------------------------- ------ ------
Accelerated capital allowances (1.3) 76.8
Employee pension liabilities (0.3) 0.1
Other temporary and deductible differences (26.6) (15.5)
Leases (0.1) -
Tax losses 2.0 34.9
------------------------------------------- ------ ------
Total (26.3) 96.3
------------------------------------------- ------ ------
Note 33 - Other payables
2022 2021
EUR'm EUR'm
----------------------------- ------ ------
Non-current liabilities
Payroll and related expenses 23.9 10.8
Other 1.0 2.0
----------------------------- ------ ------
24.9 12.8
----------------------------- ------ ------
Current liabilities
Payroll and related expenses 96.5 81.7
Accrued expenses 48.2 67.4
VAT payable 3.0 3.8
Interest payable 7.4 10.4
Other payables 14.0 2.9
----------------------------- ------ ------
169.1 166.2
----------------------------- ------ ------
Note 34 - Gaming and other taxes payable
2022 2021
EUR'm EUR'm
----------- ------ ------
Gaming tax 112.5 105.3
Other 0.3 0.1
----------- ------ ------
112.8 105.4
----------- ------ ------
Note 35 - Acquisitions during the year
On 30 August 2022, the Group acquired 100% of the share capital
of Aus GMTC PTY Ltd ("Aus GMTC") which creates content and online
games.
The Group paid a total cash consideration of EUR2.9 million
(US$3.0 million), with an additional consideration (capped at US$50
million) in cash payable in 2025 based on a pre-defined EBITDA
calculation resulting from the performance of the developed games
active during the year ending 30 September 2025. The consideration
is calculated based on four times the pre-defined EBITDA for that
year, less the cash consideration already paid, plus the EUR1.8
million loan provided to the acquired company pre-acquisition.
Details of the fair value of identifiable assets and liabilities
acquired, purchase consideration and goodwill, are as follows:
Fair value of the identifiable
assets, liabilities and
goodwill acquired
2022
EUR'm
Net book value of liabilities acquired (0.5)
Fair value of IP Technology acquired 2.9
--------------------------------------- ----------------------------------------
Total net assets acquired 2.4
Fair value of consideration 6.8
--------------------------------------- ----------------------------------------
Goodwill arising on acquisition 4.4
--------------------------------------- ----------------------------------------
Fair value of consideration
paid and payable
2022
EUR'm
Cash Consideration 2.9
Non-current contingent consideration 3.9
Fair value of consideration 6.8
------------------------------------- ---------------------------
Adjustments to fair value include the following:
Amount Amortisation
EUR'm %
--------------- ------- -------------
IP Technology 2.9 33.3
The main factor leading to the recognition of goodwill is the
future games to be developed by the studio and the assembled work
force who have significant experience in the field of game design
and development. The resulting goodwill is not deductible for tax
purposes. The acquisition represents its own CGU and in accordance
with IAS36, the Group will regularly monitor the carrying value of
the this.
Management has used the replacement cost methodology in
determining the fair value of the IP Technology acquired.
The future consideration is EUR3.9 million, discounted at 35%
based on Damodaran's Target Rates of Return - Stage in Life Cycle,
and is calculated based on the estimated future EBITDA of the
studio. The EUR1.8 million loan provided to the company
pre-acquisition has been deducted against the future consideration
in Note 30.
Management has not disclosed Aus GMTC's contribution to the
Group profit since the acquisition nor the impact the acquisition
would have had on the Group's revenue and profits if it had
occurred on 1 January 2022, because the amounts are negligible.
Note 36 - 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 year, Group companies entered into the following
transactions with related parties which are not members of the
Group:
2022 2021
EUR'm EUR'm
-------------------------- ------ ------
Revenue
Investments in associates 132.7 95.0
-------------------------- ------ ------
Interest income
Investments in associates 0.8 0.1
-------------------------- ------ ------
The revenue from investments in associates includes income from
Caliplay, Galera, Wplay, Onjoc and Tenbet. The interest income
relates to the same companies except Caliplay.
The following amounts were outstanding at the reporting
date:
2022 2021
EUR'm EUR'm
------------------------------------------------------ ------ ------
Trade receivables (Note 22)
Associates 20.5 16.5
------------------------------------------------------ ------ ------
Loans and interest receivable - current (Note 23)
Associates 3.4 2.4
------------------------------------------------------ ------ ------
Loans and interest receivable - non-current (Note 21)
Associates 29.0 9.5
------------------------------------------------------ ------ ------
The loans and interest receivables above do not include the
expected credit losses. For the year ended 31 December 2022, the
Group recognised a provision for expected credit losses of EUR0.1
million relating to amounts owed by related parties in less than
one year (2021: Nil) and EUR1.1 million for more than one year.
The loans due from related parties are further disclosed in Note
20.
Key management personnel compensation which includes the Board
members (Executive and Non-executive Directors) and senior
management personnel comprised the following:
2022 2021
EUR'm EUR'm
----------------------------- ------ ------
Short-term employee benefits 13.6 14.2
Post-employment benefits 0.1 0.1
Termination benefits 1.2 0.1
Share-based payments 2.2 4.3
----------------------------- ------ ------
17.1 18.7
----------------------------- ------ ------
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 EUR5.9 million
(2021: EUR3.0 million).
Note 37- Subsidiaries
Details of the Group's principal subsidiaries as at the end of
the year are set out below:
Proportion
of voting
rights
and ordinary
Country of share capital
Name incorporation held Nature of business
--------------------------- -------------------- -------------- -------------------------------------------
Playtech Holdings Limited Isle of Man 100% Main trading company of the Group
up to December 2020, owns the intellectual
property rights and licenses the
software to customers. From January
2021 onwards, the principal activity
is the holding of investment in
subsidiaries
--------------------------- -------------------- -------------- -------------------------------------------
Playtech Software Limited United Kingdom 100% Main trading company from 2021
onwards, owns the intellectual
property rights and licenses the
software to customers
--------------------------- -------------------- -------------- -------------------------------------------
Video B Holding Limited British Virgin 100% Trading company for the Videobet
Islands software, owns the intellectual
property rights of Videobet and
licenses it to customers. From
January 2021 onwards, the principal
activity is the holding of investment
in subsidiaries
--------------------------- -------------------- -------------- -------------------------------------------
Playtech Services (Cyprus) Cyprus 100% Activates the iPoker Network in
Limited regulated markets. Owns the intellectual
property of the GTS, Ash and Geneity
businesses
--------------------------- -------------------- -------------- -------------------------------------------
VB (Video) Cyprus Limited Cyprus 100% Trading company for the Videobet
product to Romanian companies
--------------------------- -------------------- -------------- -------------------------------------------
Virtue Fusion (Alderney) Alderney 100% Online bingo and casino software
Limited provider
--------------------------- -------------------- -------------- -------------------------------------------
Intelligent Gaming Systems UK 100% Casino management systems to land-based
Limited businesses
--------------------------- -------------------- -------------- -------------------------------------------
VF 2011 Limited Alderney 100% Holds licence in Alderney for online
gaming and Bingo B2C operations
--------------------------- -------------------- -------------- -------------------------------------------
PT Turnkey Services Limited Isle of Man 100% Holding company of the Turnkey
Services group
--------------------------- -------------------- -------------- -------------------------------------------
PT Entertenimiento Online Bulgaria 100% Poker and Bingo network for Spain
EAD
--------------------------- -------------------- -------------- -------------------------------------------
PT Marketing Services British Virgin 100% Marketing services to online gaming
Limited Islands operators
--------------------------- -------------------- -------------- -------------------------------------------
PT Operational Services British Virgin 100% Operational and hosting services
Limited Islands to online gaming operators
--------------------------- -------------------- -------------- -------------------------------------------
S-Tech Limited British Virgin 100% Previously, live game services
Islands and to Asia. Currently a dormant company
branch office
in the Philippines
--------------------------- -------------------- -------------- -------------------------------------------
PT Network Management British Virgin 100% Manages the iPoker Network
Limited Islands
--------------------------- -------------------- -------------- -------------------------------------------
Videobet Interactive Sweden 100% Trading company for the Aristocrat
Sweden AB Lotteries VLTs
--------------------------- -------------------- -------------- -------------------------------------------
V.B. Video (Italia) S.r.l. Italy 100% Trading company for the Aristocrat
Lotteries VLTs
--------------------------- -------------------- -------------- -------------------------------------------
Quickspin AB Sweden 100% Owns video slots intellectual property
--------------------------- -------------------- -------------- -------------------------------------------
Best Gaming Technology Austria 100% Trading company for sports betting
GmbH
--------------------------- -------------------- -------------- -------------------------------------------
Playtech BGT Sports Limited Cyprus 100% Owns sports betting intellectual
property solutions and trading
company for sports betting
--------------------------- -------------------- -------------- -------------------------------------------
ECM Systems Ltd UK 100% Owns bingo software intellectual
property and bingo hardware
--------------------------- -------------------- -------------- -------------------------------------------
Eyecon Limited Alderney 100% Develops and provides online gaming
slots
--------------------------- -------------------- -------------- -------------------------------------------
Rarestone Gaming PTY Australia 100% Development company
Ltd
--------------------------- -------------------- -------------- -------------------------------------------
HPYBET Austria GmbH Austria 100% Operating shops in Austria
--------------------------- -------------------- -------------- -------------------------------------------
Snaitech SPA Italy 100% Italian retail betting market and
gaming machine market
--------------------------- -------------------- -------------- -------------------------------------------
OU Playtech (Estonia) Estonia 100% Designs, develops and manufactures
online software
--------------------------- -------------------- -------------- -------------------------------------------
Techplay Marketing Limited Israel 100% Marketing and advertising
--------------------------- -------------------- -------------- -------------------------------------------
OU Videobet Estonia 100% Develops software for fixed odds
betting terminals and casino machines
(as opposed to online software)
--------------------------- -------------------- -------------- -------------------------------------------
Playtech Bulgaria Bulgaria 100% Designs, develops and manufactures
online software
--------------------------- -------------------- -------------- -------------------------------------------
PTVB Management Limited Isle of Man 100% Management company
--------------------------- -------------------- -------------- -------------------------------------------
Techplay S.A. Software Israel 100% Develops online software
Limited
--------------------------- -------------------- -------------- -------------------------------------------
CSMS Limited Bulgaria 100% Consulting and online technical
support, data mining processing
and advertising services to Parent
Company
--------------------------- -------------------- -------------- -------------------------------------------
Mobenga AB Limited Sweden 100% Mobile sportsbook betting platform
developer
--------------------------- -------------------- -------------- -------------------------------------------
PokerStrategy Ltd Gibraltar 100% Operates poker community business
--------------------------- -------------------- -------------- -------------------------------------------
Snai Rete Italia S.r.l. Italy 100% Italian retail betting market
--------------------------- -------------------- -------------- -------------------------------------------
PT Services UA LTD Ukraine 100% Designs, develops and manufactures
software
--------------------------- -------------------- -------------- -------------------------------------------
Trinity Bet Operations Malta 100% Retail and Digital Sports Betting
Ltd
--------------------------- -------------------- -------------- -------------------------------------------
Euro live Technologies Latvia 100% Global broadcaster providing innovative
SIA video stream services for users
worldwide
--------------------------- -------------------- -------------- -------------------------------------------
Gaming Technology Solutions UK 100% Provision of B2B services within
Limited Bingo, Virtual Sports, Sports Betting
and Games Development
--------------------------- -------------------- -------------- -------------------------------------------
Note 38 - Financial instruments and risk management
The Group has exposure to the following risks arising from
financial instruments:
-- Credit risk;
-- Liquidity risk; and
-- Market risk.
There have been no substantive changes in the Group's exposure
to financial instrument risks, its objectives, policies and
processes for managing those risks or the methods used to measure
them from previous periods unless otherwise stated in this
note.
The principal financial instruments of the Group, from which
financial instrument risks arises, are as follows:
-- Trade receivables;
-- Loans receivable
-- Convertible loans
-- Cash and cash equivalents;
-- Investments in equity securities;
-- Derivative financial assets;
-- Trade payables;
-- Bonds;
-- Loans and borrowings; and
-- Contingent consideration and redemption liability.
Financial instrument by category
The following table shows the carrying amounts and fair values
of financial assets and financial liabilities, including their
levels in the fair value hierarchy.
Measurement Carrying
category amount Fair value
---- ----------- -------- ----------------------
Note Level Level Level
2022 1 2 3
EUR'm EUR'm EUR'm EUR'm
-------------------------- ---- ----------- -------- ------ ------ --------
31 December 2022
Continuing operations
Non-current financial
assets
Equity investments 20B FVTPL 9.2 1.4 - 7.8
Derivative financial
assets 20C FVTPL 636.4 - - 636.4
Amortised
Trade receivables 22 cost 1.1 - - -
Amortised
Loans receivable 21 cost 29.6 - - -
-------------------------- ---- ----------- -------- ------ ------ --------
Current financial
assets
Amortised
Trade receivables 22 cost 163.9 - - -
Convertible loans 23 FVTPL 8.3 - - 8.3
Amortised
Loans receivables 23 cost 8.0 - - -
Amortised
Cash and cash equivalents 24 cost 426.5 - - -
-------------------------- ---- ----------- -------- ------ ------ --------
Non-current liabilities
Amortised
Bonds 28 cost 348.0 - - -
Amortised
Lease liability 18 cost 54.0 - - -
Contingent consideration
and redemption liability 30 FVTPL 2.3 - - 2.3
-------------------------- ---- ----------- -------- ------ ------ --------
Current liabilities
Amortised
Bonds 28 cost 199.6 - - -
Amortised
Trade payables 31 cost 61.2 - - -
Amortised
Lease liability 18 cost 31.8 - - -
Progressive operators'
jackpots and security Amortised
deposits 24 cost 114.3 - - -
Amortised
Client funds 24 cost 39.8 - - -
Contingent consideration
and redemption liability 30 FVTPL 0.6 - - 0.6
Amortised
Interest payable 33 cost 7.4 - - -
Measurement Carrying
category amount Fair value
----- ----------- -------- ----------------------
Note Level Level Level
2021 1 2 3
EUR'm EUR'm EUR'm EUR'm
-------------------------------- ----- ----------- -------- ------ ------ ------
31 December 2021
Continuing operations
Non-current financial assets
Equity investments 20B FVTPL 8.1 1.6 - 6.5
Derivative financial assets 20C FVTPL 622.2 - - 622.2
Amortised
Trade receivables 22 cost 6.6 - - -
Convertible loans 21 FVTPL 3.7 - - 3.7
Amortised
Loans receivable 21 cost 13.9 - - -
-------------------------------- ----- ----------- -------- ------ ------ ------
Current financial assets
Amortised
Trade receivables 22 cost 178.5 - - -
Amortised
Loans receivables 21 cost 4.5 - - -
Amortised
Cash and cash equivalents 24 cost 575.4 - - -
-------------------------------- ----- ----------- -------- ------ ------ ------
Non-current liabilities
Amortised
Bonds 28 cost 875.0 - - -
Amortised
Loans and borrowings 27 cost 167.1 - - -
Amortised
Lease liability 18 cost 69.8 - - -
Contingent consideration and
redemption liability 30 FVTPL 6.0 - - 6.0
-------------------------------- ----- ----------- -------- ------ ------ ------
Current liabilities
Amortised
Trade payables 31 cost 41.3 - - -
Amortised
Lease liability 18 cost 20.3 - - -
Progressive operators' jackpots Amortised
and security deposits 24 cost 110.7 - - -
Amortised
Client funds 24 cost 30.4 - - -
Contingent consideration and
redemption liability 30 FVTPL 5.0 - - 5.0
Amortised
Interest payable 33 cost 10.4 - - -
-------------------------------- ----- ----------- -------- ------ ------ ------
Treated as held for sale
Current financial assets
Amortised
Cash and cash equivalents cost 366.1 - - -
Current liabilities
Amortised
Trade payables cost 0.4 - - -
Amortised
Lease liability cost 5.2 - - -
Amortised
Client deposits cost 138.5 - - -
Amortised
Client funds cost 170.3 - - -
-------------------------------- ----- ----------- -------- ------ ------ ------
The fair value of the contingent consideration and redemption
liability is calculated by discounting the estimated cash flows.
The valuation model considers the present value of the expected
future payments, discounted using a risk adjusted discount
rate.
For details of the fair value hierarchy, valuation techniques
and significant unobservable inputs relating to determining the
fair value of derivative financial assets, which are classified as
Level 3 of the fair value hierarchy, refer to Note 20C.
The carrying amount does not materially differ from the fair
value of the financial assets and liabilities.
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies and, whilst
retaining ultimate responsibility for them, it has delegated the
authority for designing and operating processes that ensure the
effective implementation of the objectives and policies to the
Group's Finance function. The overall objective of the Board is to
set policies that seek to reduce risk as far as possible without
unduly affecting the Group's competitiveness and flexibility.
Further details regarding these policies are set out below.
A. Credit risk
Credit risk is the risk that a counterparty will not meet its
obligations under a financial instrument or customer contract,
leading to a financial loss. The Group is exposed to credit risk
from its operating activities (primarily trade receivables), its
investing activities through loans made and from its financing
activities, including deposits with banks and financial
institutions. After the impairment analysis performed at the
reporting date, the expected credit losses (ECLs) are EUR4.9
million (2021: EUR7.4 million).
Cash and cash equivalents
The Group held cash and cash equivalents (before ECL) of
EUR426.9 million as at 31 December 2022 (2021: EUR576.0 million).
The cash and cash equivalents are held with bank and financial
institution counterparties, which are rated from Caa- to AA+, based
on Moody's ratings.
Impairment on cash and cash equivalents has been measured on a
12-month expected credit loss basis and reflects the short
maturities of the exposures. The Group considers that its cash and
cash equivalents have low credit risk based on the external credit
ratings of the counterparties. The Group uses a similar approach
for assessment of ECLs for cash and cash equivalents to those used
for trade receivables. The ECL on cash balances as at 31 December
2022 is EUR0.4 million (2021: EUR0.6 million).
A reasonable movement in the inputs of the ECL calculation of
cash and cash equivalents does not materially change the ECL to be
recognised.
Financial
Financial institutions
institutions with below
with A- and A- rating
Total above rating and no rating
EUR'm EUR'm EUR'm
------------------------- ------ ------------- --------------
Continuing operations
At 31 December 2022 426.9 214.2 212.7
At 31 December 2021 576.0 291.7 284.3
------------------------- ------ ------------- --------------
Treated as held for sale
At 31 December 2022 - - -
At 31 December 2021 366.1 291.9 74.2
------------------------- ------ ------------- --------------
Trade receivables
The Group's exposure to credit risk is influenced mainly by the
individual characteristics of each customer. However, management
also considers the factors that may influence the credit risk of
its customer base, including the default risk associated with the
industry and country in which customers operate.
As at 31 December 2022, the Group has trade receivables of
EUR165.0 million (2021: EUR185.1 million) which is net of an
allowance for ECL of EUR4.5 million (2021: EUR6.8 million).
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade receivables. To measure the ECL, trade
receivables have been grouped based on shared credit risk
characteristics and the days past due. The expected loss rates are
calculated based on past default experience and an assessment of
the future economic environment. The ECL is calculated with
reference to the ageing and risk profile of the balances.
The carrying amounts of financial assets represent the maximum
credit exposure.
Set out below is the movement in the allowance for expected
credit losses of trade receivables:
More than
Not past 1-2 months 2 months
Total due overdue past due
31 December 2022 EUR'm EUR'm EUR'm EUR'm
-------------------------- ------ -------- ---------- ---------
Expected credit loss rate 2.7% 3.0% 1.1% 2.9%
Gross carrying amount 169.5 124.9 27.2 17.5
Expected credit loss (4.5) (3.7) (0.3) (0.5)
-------------------------- ------ -------- ---------- ---------
Trade receivables - net 165.0 121.2 26.9 17.0
-------------------------- ------ -------- ---------- ---------
More than
Not past 1-2 months 2 months
Total due overdue past due
31 December 2021 EUR'm EUR'm EUR'm EUR'm
-------------------------- ------ -------- ---------- ---------
Expected credit loss rate 3.5% 4.2% 1.6% 1.9%
Gross carrying amount 191.9 139.6 32.6 19.7
Expected credit loss (6.8) (5.9) (0.5) (0.4)
-------------------------- ------ -------- ---------- ---------
Trade receivables - net 185.1 133.7 32.1 19.3
-------------------------- ------ -------- ---------- ---------
A reasonable movement in the inputs of the ECL calculation of
trade receivables does not materially change the ECL to be
recognised.
Impairment losses on trade receivables and contract assets are
presented as net impairment losses within the impairment of
financial assets. Subsequent recoveries of amounts previously
written off are credited against the same line item.
The movement in the ECL in respect of trade receivables during
the year was as follows:
2022 2021
EUR'm EUR'm
-------------------------- ------ ------
Balance at 1 January 6.8 21.7
Charged to profit or loss (2.3) (14.9)
-------------------------- ------ ------
Balance at 31 December 4.5 6.8
-------------------------- ------ ------
Loans receivable
The Group recognised an allowance for expected credit losses for
all debt instruments given to 3(rd) parties based on past default
experience and assessment of the future economic environment. For
the year ended 31 December 2022, the Group recognised provision for
expected credit losses of EUR1.6 million in the profit or loss
relating to loans receivable (2021: Nil).
2022 2021
EUR'm EUR'm
-------------------------- ------ ------
Balance at 1 January - -
Charged to profit or loss 1.6 -
-------------------------- ------ ------
Balance at 31 December 1.6 -
-------------------------- ------ ------
Furthermore, EUR3.0 million of an existing loan to Gameco was
impaired as at 31 December 2022 (refer to Note 20B) At 31 December
2021, there was a loan impairment of EUR1.2 million relating to
BGO.
B. Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another
financial asset. The Group's objective when managing liquidity is
to ensure, as far as possible, that it will have sufficient
liquidity to meet its liabilities when they are due, under both
normal and stressed conditions, without incurring unacceptable
losses or risking damage to the Group's reputation.
The following are the remaining contractual maturities of
financial liabilities at the reporting date. The amounts are gross
and undiscounted and include contractual interest payments.
Balances due within one year equal their carrying balances as the
impact of discounting is not significant.
Contractual cash flows
-------- -------------------------------------
Carrying Within More than
amount Total 1 year 1-5 years 5 years
2022 EUR'm EUR'm EUR'm EUR'm EUR'm
---------------------------------------- -------- ------ ------- --------- ---------
Bonds 547.6 604.6 221.1 383.5 -
Lease liability 85.8 110.2 34.1 43.1 33.0
Contingent consideration and redemption
liability 2.9 7.9 0.2 7.7 -
Trade payables 61.2 61.2 61.2 - -
Progressive and other operators'
jackpots 114.3 114.3 114.3 - -
Client funds 39.8 39.8 39.8 - -
Interest payable 7.4 7.4 7.4 - -
Provisions for risks and charges 13.9 13.9 3.9 10.0 -
---------------------------------------- -------- ------ ------- --------- ---------
872.9 959.3 482.0 444.3 33.0
---------------------------------------- -------- ------ ------- --------- ---------
2021
---------------------------------------- ------- ------- ----- ------- ----
Loans and borrowings 167.1 173.8 3.3 170.5 -
Bonds 875.0 979.7 34.8 944.9 -
Lease liability 90.1 107.1 22.3 59.7 25.1
Contingent consideration and redemption
liability 11.0 11.6 5.1 6.5 -
Trade payables 41.3 41.3 41.3 - -
Progressive and other operators'
jackpots 110.7 110.7 110.7 - -
Client funds 30.4 30.4 30.4 - -
Interest payable 10.4 10.4 10.4 - -
Provisions for risks and charges 16.7 16.7 3.2 13.5 -
---------------------------------------- ------- ------- ----- ------- ----
1,352.7 1,481.7 261.5 1,195.1 25.1
---------------------------------------- ------- ------- ----- ------- ----
C. Market risk
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices, will
affect the Group's income or the value of its holding of financial
instruments.
The objective of market risk management is to manage and control
market risk exposures within acceptable parameters while optimising
the return.
Currency risk
Currency risk is the risk that the value of financial
instruments will fluctuate due to changes in foreign exchange
rates.
Foreign exchange risk arises because the Group has operations
located in various parts of the world. However, the functional
currency of those operations is the same as the Group's primary
currency (Euro) and the Group is not substantially exposed to
fluctuations in exchange rates in respect of assets held
overseas.
Foreign exchange risk also arises when the Group operations
enters into foreign transactions, and when the Group holds cash
balances, in currencies denominated in a currency other than the
functional currency.
In other
In EUR In USD In GBP currencies Total
31 December 2022 EUR'm EUR'm EUR'm EUR'm EUR'm
-------------------------------------- ------- ------ ------ ----------- -------
Continuing operations
Cash and cash equivalents 338.5 5.8 60.2 22.4 426.9
Progressive operators' jackpots and
security deposits (139.0) (0.2) (14.9) - (154.1)
-------------------------------------- ------- ------ ------ ----------- -------
Cash and cash equivalents less client
funds 199.5 5.6 45.3 22.4 272.8
-------------------------------------- ------- ------ ------ ----------- -------
In other
In EUR In USD In GBP currencies Total
31 December 2021 EUR'm EUR'm EUR'm EUR'm EUR'm
-------------------------------------- ------- ------ ------ ----------- -------
Continuing operations
Cash and cash equivalents 477.4 34.9 41.5 22.2 576.0
Progressive operators' jackpots and
security deposits (126.6) (0.1) (14.4) - (141.1)
-------------------------------------- ------- ------ ------ ----------- -------
Cash and cash equivalents less client
funds 350.8 34.8 27.1 22.2 434.9
-------------------------------------- ------- ------ ------ ----------- -------
In other
In EUR In USD In GBP currencies Total
31 December 2021 EUR'm EUR'm EUR'm EUR'm EUR'm
-------------------------------------- ------ ------- ------ ----------- -------
Treated as held for sale
Cash and cash equivalents 85.1 211.1 44.4 25.5 366.1
Client funds and client deposits (63.7) (208.6) (12.1) (24.4) (308.8)
-------------------------------------- ------ ------- ------ ----------- -------
Cash and cash equivalents less client
funds 21.4 2.5 32.3 1.1 57.3
-------------------------------------- ------ ------- ------ ----------- -------
The Group's policy is not to enter into any currency hedging
transactions.
Interest rate risk
Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate due to changes
in market interest rates. The Group's exposure to the risk of
changes in market interest rates relates primarily to the Group's
long-term debt obligations with floating interest rates. The Group
manages its interest rate risk by having a balanced portfolio of
fixed and variable rate bonds and loans and borrowings. At 31
December 2022, none of the Group's borrowings are at a variable
rate of interest (2021:16%).
Any reasonably possible change to the interest rate would have
an immaterial effect on the interest payable.
Equity price risk
The Group is exposed to market risk by way of holding some
investments in other companies on a short-term basis. Variations in
market value over the life of these investments will have an
immaterial impact on the balance sheet and the statement of
comprehensive income.
Note 39 - Reconciliation of movement of liabilities to cash
flows arising from financing activities
Liabilities
-------------------------------------------------------------------------
Interest
on Contingent
loans and consideration
Loans and borrowings and redemption Lease
borrowings Bonds and bonds liability liabilities Total
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 payable on bonds
and loans and borrowings - - (36.7) - - (36.7)
Repayment of loans and borrowings (166.1) - - - - (166.1)
Repayment of bonds - (330.0) - - - (330.0)
Payment of contingent consideration
and redemption liability - - - (5.9) - (5.9)
Principal paid on lease liability - - - - (22.5) (22.5)
Interest paid on lease liability - - - - (5.7) (5.7)
------------------------------------ ----------- ------- ----------- --------------- ------------ -------
Total changes from financing
cash flows (166.1) (330.0) (36.7) (5.9) (28.2) (566.9)
------------------------------------ ----------- ------- ----------- --------------- ------------ -------
Other changes
Liability related
New leases - - - - 19.0 19.0
Interest on bonds, bank borrowings
and other borrowings - 2.6 33.6 - - 36.2
Interest on lease liability - - - - 5.7 5.7
Movement in deferred and
contingent consideration
and redemption liability - - - (4.3) (4.3)
Payment of contingent consideration
related to investments - - - (1.0) - (1.0)
Additional contingent consideration - - - 2.9 - 2.9
Disposal of subsidiary/discontinued
operations - - - - (4.7) (4.7)
Foreign exchange difference (1.0) - - 0.2 (1.3) (2.1)
------------------------------------ ----------- ------- ----------- --------------- ------------ -------
Total liability-related other
changes (1.0) 2.6 33.6 (2.2) 18.7 51.7
------------------------------------ ----------- ------- ----------- --------------- ------------ -------
Balance at 31 December 2022 - 547.6 7.3 2.9 85.8 643.6
------------------------------------ ----------- ------- ----------- --------------- ------------ -------
Liabilities
-------------------------------------------------------------------------
Interest
on Contingent
loans and consideration
Loans and borrowings and redemption Lease
borrowings Bonds and bonds liability liabilities Total
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 payable on bonds
and loans and borrowings - - (39.4) - - (39.4)
Repayment of loans and borrowings (150.0) - - - - (150.0)
Payment of contingent consideration
and redemption liability - - - (0.7) - (0.7)
Principal paid on lease liability - - - - (22.7) (22.7)
Interest paid on lease liability - - - - (5.6) (5.6)
------------------------------------ ----------- ------- ----------- --------------- ------------ -------
Total changes from financing
cash flows (150.0) - (39.4) (0.7) (28.3) (218.4)
------------------------------------ ----------- ------- ----------- --------------- ------------ -------
Other changes
Liability related
New leases - - - - 26.8 26.8
Interest on bonds, bank borrowings
and other borrowings - 1.9 39.3 - - 41.2
Interest on lease liability - - - - 5.6 5.6
Movement in deferred and
contingent consideration
and redemption liability - - - 6.2 - 6.2
Payment of contingent consideration
related to investments - - - (4.1) - (4.1)
Foreign exchange difference 8.2 - - (0.1) 2.9 11.0
------------------------------------ ----------- ------- ----------- --------------- ------------ -------
Total liability-related other
changes 8.2 1.9 39.3 2.0 35.3 86.7
------------------------------------ ----------- ------- ----------- --------------- ------------ -------
Balance at 31 December 2021 167.1 875.0 10.4 11.0 95.3 1,158.8
------------------------------------ ----------- ------- ----------- --------------- ------------ -------
Note 40 - Events after the reporting date
Post year end, 50% of the service fee entitlement of a
third-party service provider of the Group in connection with one of
the Group's structured agreements was redeemed pursuant to the
exercise of an option. A redemption payment of EUR41.3 million was
made to the service provider in March 2023.
Post year end, the RTO explained in Note 23 completed, resulting
in the Group owning 16% of the issued and outstanding common shares
of Baden Resources Inc (now renamed to NorthStar Gaming Holdings
Inc.), as well as warrants giving the Group the right to further
increase its stake potentially beyond 20% of the issued and
outstanding common shares.
In March 2023 the Group announced a strategic partnership with
Hard Rock Digital ("HRD"), the exclusive, global vehicle for
interactive gaming and sports betting for Hard Rock International
and Seminole Gaming, to supply its products and services
predominantly under long-term commercial agreements. Alongside
these commercial arrangements, the Group has also invested $85
million (c. EUR80 million) in exchange for a low single digit
percentage minority equity ownership stake in HRD.
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