TIDMFLTR
RNS Number : 1600I
Flutter Entertainment PLC
07 August 2019
7 August 2019
Flutter Entertainment plc - 2019 Interim Results
Growing a more diversified and sustainable business; Guidance in
line with market expectations
Flutter Entertainment plc (the "Group") announces interim
results for the six months ended 30 June 2019.
H1 H1 YoY % Adjusted
for tax
and regulatory
changes(4)
YoY %
2019 2018
GBPm GBPm
------ ------ ------
Group Revenue 1,020 867 +18% +19%
Underlying(1) EBITDA
(pre IFRS 16)(2) 196 217 -10% +15%
Profit before tax 81 106 -24%
Earnings per share 97.8p 103.7p -6%
Underlying(1) earnings
per share 148.0p 173.6p -15%
Dividends per share 67p 67p Flat
Financial and operational highlights (in constant currency(3)
):
-- Revenue +18% to GBP1,020m (+9% on a proforma(5) basis)
- Online +8%; continued growth in Paddy Power's recreational
customer base and roll-out of sportsbook country specific pricing
for Betfair, partially offset by unexpected international market
switch offs
- Australia +16%; strong customer growth with profitability
close to flat despite additional taxes
- US +148%; FanDuel continuing to lead the New Jersey market;
now live online in Pennsylvania
- Retail -4%; good growth in sports offset by reduction in
machine revenue post FOBT staking change
-- Underlying(1) EBITDA(2) of GBP196m
- GBP21m reduction on H1 2018 after an incremental GBP47m in
taxes and duties
- Excluding these taxes and duties, Group underlying(1)
EBITDA(2) grew 15%
-- Strong balance sheet with net debt of GBP356m at 30 June 2019 (31 December 2018: GBP162m)
- Equivalent to a net debt to EBITDA ratio of 0.8x
-- Continuing to prioritise sustainable growth through responsible play
- Currently trialling the second generation of our Customer
Activity Awareness Program (CAAP) model
- Announcement of a series of voluntary measures on safer
gambling with the UK's leading gaming operators
Outlook:
-- Guidance in line with market expectations
-- Full year 2019 underlying(1) EBITDA for Group (excluding the
US) expected to be between GBP420m and GBP440m on a pre IFRS 16
basis
-- In the US, customer acquisition investment likely to lead to
an expected EBITDA loss in 2019 of approximately GBP55m
Peter Jackson, Chief Executive, commented:
"We have had another productive six months at Flutter
Entertainment plc. All divisions are performing strongly on an
underlying basis and have responded well to the challenges faced.
We are pleased with the progress we are making to build a more
diversified and sustainable business.
In Europe, Paddy Power's recreational focus and great marketing
execution has helped deliver continued growth in customers. The
build out of functionality for Betfair continues to make good
progress, with sportsbook country specific pricing launched, along
with additional languages and currencies. The requirement to switch
off a number of international markets has illustrated how important
these initiatives are. We have started to trial the second
generation of our responsible gambling model and have been pleased
to work with the industry in making a number of commitments to
promote responsible gambling, which will improve the sustainability
of our industry, even if it impacts sector earnings in the short
term.
In Australia, Sportsbet's ongoing delivery of innovative
products, appealing marketing and recreational focus has led to
excellent performance. Our decision to increase investment ahead of
the introduction of point of consumption tax has been vindicated,
with Sportsbet's earnings close to flat despite this very
significant tax increase.
In the US, our FanDuel brand and product proposition enabled us
to take 50% of the sports-betting market in New Jersey in H1. We
are delighted with this performance and have been encouraged by the
regulatory momentum that has seen 10 states regulate online sports
betting since the repeal of PASPA. Cross-sell is an important
contributor to our success, with around half our customers in New
Jersey coming from our existing daily fantasy business, while
strong cross-sales have delivered 15% market share in online
casino. We have recently gone live in Pennsylvania, where we are
one of the first operators to launch online, and we hope to
replicate our success there too.
In summary, I am pleased with what we have achieved in the first
half and we are confident we can make further good progress in
H2."
Notes:
(1) The "underlying" measures exclude separately disclosed
items, that are not part of the usual business activity of the
Group, and have been therefore reported as "separately disclosed
items" (see note 5 to the financial statements).
(2) EBITDA is profit before interest, tax, depreciation and
amortisation expenses and is a non-GAAP measure. EBITDA throughout
this Operating and Financial Review excludes the impact of IFRS 16.
See Appendix 5 for a reconciliation to IFRS 16 compliant
numbers.
(3) Constant currency ("cc") growth throughout this Operating
& Financial Review is calculated by retranslating the
non-sterling denominated component of H1 2018 at H1 2019 exchange
rates (see Appendix 4).
(4) The impact of tax and regulatory change is calculated by
adjusting the prior year comparative to reflect the same regulatory
and tax rules that exist in the current period. This includes the
impact of changes to Australian point of consumption taxes and
product fees, UK machine staking limits, UK online remote gaming
duty and Irish betting duty.
(5) The Adjarabet and FanDuel transactions completed on 1
February 2019 and 10 July 2018 respectively. The 'Proforma' results
include the Adjarabet and FanDuel fantasy sports businesses as if
they had always been part of the Group, incorporating in addition
to the reported results, results from pre-acquisition periods in
2018 and 2019.
Analyst briefing:
The Group will host a presentation for institutional investors
and analysts this morning at 9:00am (IST/BST) at the London Stock
Exchange. The presentation will be webcast live on the Group's
corporate website (www.flutter.com) and a conference call facility
will also be available. To dial into the conference call,
participants should dial 0800 678 1161 or 01296 311 600 from the
UK, (01) 242 1074 from Ireland and +44 1296 311 600 from elsewhere.
The passcode is 665 826 55.
A presentation replay facility will be available later today on
our corporate website: https://www.Flutter.com/investors.
Contacts:
Liam Kealy / Ciara O'Mullane, Investor +353 87 665 2014 / +
Relations 353 87 947 7862
David Jennings, Corporate Finance &
Investor Relations +353 87 951 3560
+ 44 20 8834 6843 / +
James Midmer, Corporate Communications 353 1 903 9106
James Murgatroyd / Robert Allen, Finsbury + 44 20 7251 3801
Billy Murphy, Drury / Porter Novelli + 353 1 260 5000
Business Review
As part of our preliminary results announcement in March, we set
out our four-pillar strategy to create shareholder value. These
pillars were:
(i) To maximise profitable growth in our core markets;
(ii) To grow Betfair in the rest of the world;
(iii) To attain podium positions in additional regulated markets and;
(iv) To pursue the US opportunity rigorously.
Five months on, we provide an update on each below:
Pillar 1: To maximise profitable growth in core markets
Paddy Power (UK and Ireland)
The Paddy Power brand has maintained the good momentum it
enjoyed throughout 2018 following the completion of our European
platform integration. The rollout of new product and enhanced
generosity has been complemented by improved marketing execution,
with the brand's voice continuing to resonate strongly in the UK,
in what remains a very competitive market. The brand's focus
continues to be on the acquisition and retention of recreational
customers in the UK and Ireland and to this end, progress has
continued in the first half of 2019, with daily active customer
growth of 22% in Q1 and 16% in the pre-World Cup period of Q2.
In addition, Paddy Power is delivering improvements to
customers. Continued enhancements in the product have seen our net
promoter score increase materially since Q3 2018. We have
personalised our gaming product by introducing game recommendations
based on individual game play. New sign-ups for Paddy's Rewards
Club have more than doubled year on year following the success of
the Rhodri Giggs loyalty campaign and expansion into gaming.
Betfair (UK and Ireland)
The Betfair brand has a greater focus on core bettors, where we
are looking to leverage a combined exchange, sportsbook and gaming
proposition to offer customers an unparalleled betting and gaming
experience by more closely aligning the products over time.
To help us do this, we have launched My Betfair Rewards in
Ireland, a pricing scheme designed to personalise loyalty and
increase customer engagement. Upon qualification, customers can opt
for a no frills basic commission rate or opt to pay higher
commission but with access to other benefits such as cash back on
exchange losses, free spins on gaming or sportsbook free bets.
While it is early days since launch, we are pleased with the
increase in player engagement that we have seen so far.
In addition, we are expanding how we offer generosity on our
exchange, with a significant improvement in our free bet
capability. This will enable us to compete more directly with low
margin sportsbooks and address an historic weakness in the
perception of promotions for the brand. This promotion will appear
in net revenue rather than marketing.
Sportsbet (Australia)
The Australian sports betting market continues to be very
attractive for the Group, with structural growth in the online
fixed odds betting market playing to the strength of Sportsbet. The
Sportsbet brand continues to be the most distinctive in the
Australian market, scoring highly in customer surveys across
metrics such as innovation, fun and ease of use. This has resulted
in nearly half of customers using Sportsbet as their main betting
account, nearly double our nearest competitor. We believe that this
positions Sportsbet very well to deal with the regulatory and tax
changes occurring in the Australian market at present.
The first half saw a significant increase in gaming taxes (point
of consumption tax, "POC") for Australian online corporate
bookmakers, with the increases equating to an incremental charge
equivalent to circa 11% of total net revenue for Sportsbet. While
such a change impacts all corporate bookmakers, for businesses with
less scale than our own the impact is particularly pronounced. It
was therefore no surprise that ahead of the change, the market saw
significant consolidation in 2018 as competitors tried to achieve
greater scale through M&A.
In addition, we continue to observe closely how competitors
approach investment in a post-POC environment. While it is still
early days, we have been encouraged by signs that operators are
behaving rationally in the face of lower customer economic returns.
We are seeing signs of reduced costs across search marketing with
Google pay per click rates down year-to-date. We have also seen
competitors give up the rights to certain media assets, reflecting
our belief that there may be less discretionary spend in the market
overall.
While POC involves a step-change down in the profit margins for
our business, it has not adversely impacted the growth trajectory
of our business with Sportsbet delivering good growth in both
active customers and revenues in H1.
Retail
The landscape across both UK and Irish retail markets has
changed this year with the introduction of new staking limits on
machines in the UK from April 1 and a doubling of tax on
sports-betting stakes in Ireland from Jan 1. While both changes are
impacting the profitability of our estate, the strength of our
sports-led estate means we are confident we will continue to grow
our share in both markets as less profitable competitors start to
re-trench.
Our differentiated approach to pricing and customer service has
historically translated into:
-- Average EBITDA per shop that was nearly 1.5x greater than our
quoted competitors (2018 - GBP114k)
-- Average UK sportsbook stakes per shop 2x greater than our
quoted competitors (2018 - GBP1.9m)
This positions us well to take advantage of competitor flux in
both markets. We are starting to see announcements of shop closures
from competitors and anticipate that more will follow.
Pillar 2: To grow Betfair in the rest of the World
Investing to grow: We believe that we have a significant
opportunity to grow Betfair internationally. The Betfair brand
already operates in over 100 international markets, both regulated
and unregulated, but its product offering in these markets has
scope to be much improved. As such, our development teams are
continuing to work on improving the functionality of our
international offering to facilitate:
-- Country specific pricing
-- More languages over time
-- More currencies in which customers can transact with us
-- More payment methods
-- More localised content so that customers in various countries
get offered the sports and markets they are most likely to be
interested in
This work will take time but we are already starting to see some
of the benefits. For example, in H1 we rolled out sportsbook
country specific pricing across the business. This enables us to
offer different prices in different jurisdictions and provides us
with flexibility when it comes to choosing when and where we offer
enhanced value. The improved functionality also means that we are
able to adapt our pricing in markets where sports-betting taxes are
higher and where there is a need for higher over-rounds to cover
the additional charges, thus improving the contribution rates in
these markets.
In addition, significant back-end development work has taken
place to reduce the time required to offer international customers
localised content. We estimate that this work will ultimately
reduce the length of time it takes us to launch in a new
jurisdiction by up to 50%. As more of this functionality gets
rolled out, we will look to increase our marketing investment in
select international markets with the goal of accelerating
growth.
Market switch offs: At our full year results in March, we
detailed how the growth of the Betfair betting exchange had been
impacted in recent years by a variety of international market
switch offs. During 2019, and particularly towards the end of the
second quarter, we have seen an increase in the number of grey
market switch offs impacting our business. These markets included
Switzerland, Serbia, Slovakia and Albania.
While individually these markets represent a small fraction of
our total revenues, the combined impact of these market closures
will reduce Group revenue by approximately GBP14m this year, GBP10m
of which will be in the second half. The revenues we generate in
grey markets do not typically have gaming taxes or specific
marketing budgets associated with them and therefore the
contribution margin in these regions tends to be high. We estimate
that the EBITDA impact of switch offs will be approximately GBP11m
in 2019, of which GBP7m will be in the second half.
Pillar 3: Attain podium positions in additional regulated
markets
The Group is seeking to attain podium positions in more
regulated markets globally and aims to achieve this through a
combination of organic and acquisitive growth. In February 2019 the
Group acquired a controlling 51% stake in Adjarabet, the number one
online operator in Georgia (with a market share of circa 40%).
To date, the business is performing well, in line with our
expectations. Since acquisition, Adjarabet has benefited from
access to Group capabilities including benefitting from launching
proprietary Cayetano gaming content and through leveraging Group
marketing assets such as Betfair's partnership with FC
Barcelona.
The Group remains on the look-out for further M&A
opportunities that meet our strategic and financial objectives.
Pillar 4: Pursue US opportunity rigorously
We outlined at our Capital Markets Day in March how we believe
we are well positioned to succeed in the US. Our key assets
are:
-- An established sports--focused brand with high national awareness
-- An extensive and growing national customer base with over 8.5 million registered customers
-- Unique cross--sell opportunities across four distinct product verticals
-- Substantial scale, resources and operational expertise
already established in the US, supported by the Group's global
capabilities and financial strength
Our performance since March has continued to highlight how this
position translates to success. In New Jersey, FanDuel continues to
lead the market, accounting for 50% market share in sports-betting
in H1. Our New Jersey casino business is also growing significantly
following the launch of sports betting with sportsbook cross-sell
elevating our market share in H1 2019 to 15% from 10%-11% in
previous years.
We are looking forward to the start of the upcoming NFL season
and towards the end of July, we successfully launched our mobile
app in Pennsylvania, the first app to be live in the Apple app
store. We have seen early success in acquiring new customers there
and cross-selling to our circa 400,000 customers in the state.
In March, we outlined a credible path to how the overall US
sports betting market can evolve to circa 10 times the size of the
New Jersey market, equating to approximately $6bn of gross
revenues. Since PASPA was repealed, legislative momentum has been
encouraging with a total of 10 states having now passed legislation
enabling online sportsbetting. These 10 states represent circa 19%
of the US population (circa 6.7 times New Jersey). We see positive
signs of momentum in further states and look forward to more
progress in 2020.
Responsible gambling
We continue to refine our Customer Activity Awareness Program
(CAAP) model and we are currently trialling the second generation
of this proprietary algorithm. The updated model increases the
number of customer behaviours that are monitored for potential
harmful activity from 10 to 114. This monitoring is done on a daily
basis and tailored interventions are made immediately. These are
significant improvements on our existing model and
interventions.
Additionally, in conjunction with four of the UK's leading
gaming operators, we are pleased to have been able to announce a
series of voluntary measures to promote safer gambling and support
for problem gamblers, including:
-- A 10 fold increase in the financial support for safer
gambling measures over four years, with a focus on treatment, to 1%
of Gross Gambling Yield (GGY)
-- An increase in the amount of safer gambling messaging in
advertising as well as supporting dedicated campaigns
-- Use of technology, where possible, to keep advertising away from problem gamblers
-- Commitment to sharing data with other operators to protect problem gamblers
-- Working closely with a wider group of companies in the sector
to increase safer gambling and reduce gambling related harm
The five companies have agreed to report publicly on progress
against these commitments. We were encouraged to see the positive
response from across the political spectrum to the announcement of
these collaborative measures.
Globally, we remain committed to working with a number of
different organisations to fund research and support initiatives.
These include:
-- UK - GAMSTOP, Gamble Aware, YGAM, Senet Group, Association of
British Bookmakers and the Remote Gambling Association
-- Ireland - Dunlewy Addiction Services
-- Australia - Responsible Gambling Australia
-- US - National Council on Problem Gambling
-- International - Gambling Therapy and multiple local
organisations in our international markets
In June we launched a software trial with Gamban, which enables
customers who have self-excluded to block all online gambling sites
and apps worldwide. This service will be provided free of charge to
all of our customers who have chosen to self-exclude on both Paddy
Power and Betfair. We will be the first operator to enable our
customers to block our websites and apps across as many devices as
they wish.
Operating and Financial Review
Group
H1 H1 H1 Change Adjusted
for tax and
regulatory
changes(7)
YoY
2019 2019 2018
GBPm GBPm GBPm
(pre IFRS
16)
--------- ---------- ------- --------
Sports revenue 794 794 677 +17%
Gaming revenue 225 225 190 +19%
--------- ---------- ------- -------- ------------
Total revenue 1,020 1,020 867 +18%
Cost of sales (301) (301) (210) +44%
--------- ---------- ------- -------- ------------
Gross profit 719 719 657 +9%
Sales and marketing (214) (214) (187) +15%
Product and technology (81) (84) (67) +25%
Operations (181) (197) (160) +23%
Central costs (26) (28) (27) +5%
--------- ---------- ------- -------- ------------
Total operating costs (503) (523) (440) +19%
--------- ---------- ------- -------- ------------
Underlying EBITDA(1,2) 216 196 217 -10% +15%
Underlying EBITDA margin
% 21.2% 19.2% 25.0% -580bps
Depreciation and amortisation (69) (51) (43) +18%
--------- ---------- ------- -------- ------------
Underlying(1) operating
profit 147 145 174 -17% +14%
Underlying net interest
expense (7) (2) +323%(*)
Separately disclosed -11%
items (59) (66) (*)
-24%
Profit before tax 81 106 (*)
--------- ---------- ------- --------
Underlying(1) earnings
per share 148.0p 173.6p -15%(*)
Dividends per share 67p 67p Flat
Net (debt) / cash at GBP(356)m GBP148m
period end(4)
* Percentage growth shown on a post IFRS 16 basis.
Underlying EBITDA pre IFRS 16 was 10% lower than H1 2018. This
included a GBP47m adverse impact from changes to regulation and
taxes. On a like-for-like basis underlying EBITDA was 15%
higher.
-- Revenue increased by 18% to GBP1.02bn, benefitting from the
FanDuel acquisition in July 2018 and, to a lesser extent, the
acquisition of Adjarabet in February 2019. On a proforma(6) ,
constant currency(3) ("cc") basis, revenue grew 9% in the first
half, reflecting growth in our existing businesses
-- Overall, sports results were broadly in line with our expectations for the half
-- On a proforma(6) constant currency(3) basis, cost of sales
increased by 35% following the introduction of POC taxes and
incremental product fees in Australia, increased remote gaming duty
in the UK and increases in betting duty in Ireland
-- Total operating costs increased by 19%, or 7% on a
proforma(6) constant currency(3) basis, primarily reflecting the
investment in the nascent US sport-betting market
Depreciation and amortisation pre IFRS 16 increased by 18%,
reflecting ongoing product and platform development in Online and
Australia, combined with the investment in the US sportsbook. The
increase in net interest expense reflects the gross debt position
during the first half and the implementation of IFRS 16. Separately
disclosed items relate to the amortisation of acquisition related
intangible assets.
The application of IFRS 16 has increased EBITDA by GBP20m and
depreciation and amortisation by GBP19m. The Group's interest
charge has increased by circa GBP2m in H1 as a result. At a Group
level, PBT is therefore reduced by approximately GBP1m as a result
of the new accounting standard.
Online
Pre IFRS 16 adjustments H1 H1 Change
2019 2018
GBPm GBPm
----- -----
Sportsbook stakes 2,682 2,735 -2%
Sportsbook net revenue % 7.7% 7.5% +20bps
Sports revenue 334 335 Flat
Gaming revenue 163 127 +29%
----- ----- ------
Total revenue 497 462 +8%
Cost of sales (138) (109) +26%
----- ----- ------
Gross profit 359 353 +2%
Sales and marketing (128) (128) Flat
Product and technology (50) (47) +5%
Operations (42) (35) +18%
Total operating costs (220) (211) +4%
----- -----
Underlying EBITDA(1,2) 139 142 -2%
Depreciation and amortisation (22) (21) +4%
----- ----- ------
Underlying(1) operating
profit 118 121 -3%
The Online division includes the online brands of Paddy Power,
Betfair and Adjarabet, along with a number of B2B partnerships.
Total net revenue in our online division increased by 8% in H1
to GBP497m. Excluding Adjarabet, revenue increased by 1%. This
reflected a 1% decline in Q1 and 4% growth in Q2. In the Q2 period
prior to the World Cup, online revenue was up 10%.
Sports revenue was flat year on year, with sportsbook revenue
increasing by 1% and exchange and B2B revenues declining by 2%.
In sportsbook, net revenue margin was approximately 20 basis
points ahead of our expectations in H1 as customer friendly results
in February (racing) and March (football) were more than offset by
favourable results in the second quarter, particularly in UK
football. Sportsbook revenue for the Q2 period prior to the World
Cup grew by 22% year on year. Normalising for sports results, we
estimate that our underlying expected margin for the period was
7.5% versus 6.9% last year. This structural increase reflects
positive customer bet mix changes, the roll out of sportsbook
country specific pricing in international markets and an increase
in the size of our recreational customer base. International
revenues grew in H1, driven by the launch of sportsbook country
specific pricing. This change led to a significant reduction in low
value staking activity but as expected, this was more than offset
by an improvement in our net revenue margin in these markets.
Stripping out World Cup comparatives and the impact of market
switch offs, net revenue across Betfair's international sportsbook
grew 30%.
Exchange and B2B revenue declined by 2% in the period with an
increase of 1% in Q1 offset by a decline of 4% in Q2 due to World
Cup comparatives. Exchange and B2B revenues were flat year-on-year
in the Q2 period prior to the World Cup.
Gaming revenue was up 29% in H1, or 8% excluding Adjarabet. The
Paddy Power brand continues to enjoy good momentum in recreational
customer growth which has been a key driver of gaming revenue
growth. However, as we noted in our Q1 trading update, the
responsible gambling measures we are taking are having an impact on
higher value activity across both our UK facing brands and more
particularly Betfair. This is partially offsetting good mass market
growth. Gaming growth in Q2 was 27% or 3% excluding Adjarabet.
Adjarabet revenues are mainly derived from gaming and we are
very pleased with how the business is performing since acquisition
with proforma(6) gaming revenue up 25%, in constant currency, on
the prior comparative period.
Cost of sales was adversely affected by approximately GBP10m
from the increase in remote gaming duty on UK online gaming, the
Irish betting duty increase and other betting tax changes in Italy
and Romania. Total operating costs increased by 4% but were flat
excluding the impact of the Adjarabet acquisition. Accordingly,
underlying EBITDA for the division was down 2% year on year at
GBP139m or up 5% when the tax increases are stripped out.
In H2 we anticipate the revenue and EBITDA impact of market
switch offs to be approximately GBP10m and GBP7m respectively. Most
of this adjustment will come through the exchange. On an annualised
basis, this equates to GBP14m of EBITDA.
As expected, we anticipate marketing investment in H2 will
reduce by approximately GBP10m year-on-year, driven by a World Cup
saving compared with the prior period and the treatment of exchange
free bets referenced above. In addition, we expect benefits from
more efficient marketing across Online to offset the marketing
investment we are making in Adjarabet.
Australia(5)
Pre IFRS 16 adjustments H1 H1 Change Change
2019 2018 GBP A$
GBPm GBPm
----- ----- ------
Sportsbook stakes 2,114 1,935 +9% +12%
Sportsbook net revenue
% 9.8% 9.4% +40bps +40bps
Revenue 207 182 +14% +16%
Cost of sales (83) (51) +63% +67%
----- ----- ------ ------
Gross profit 124 131 -6% -3%
Sales and marketing (34) (40) -15% -13%
Product and technology (11) (11) +2% +4%
Operations (22) (21) +1% +4%
Total operating costs (67) (72) -8% -5%
----- ----- ------
Underlying EBITDA(1,2) 57 59 -3% -1%
Depreciation and amortisation (10) (8) +31% +35%
----- ----- ------ ------
Underlying(1) operating
profit 47 51 -8% -6%
Our Australian division operates under the Sportsbet brand.
Sportsbet delivered a strong first half with great momentum in
the business. Net revenue increased by 16% with the blended net
revenue margin of 9.8% matching the expected margin in the
half.
Underlying EBITDA was close to flat year-on-year despite a
GBP24m headwind from the introduction of POC in the majority of
states on January 1 as well as some additional product fee
increases. Excluding the additional cost relating to these items,
underlying EBITDA would have been up 64% in the period. This was a
function of the strong revenue growth as well as ongoing cost
discipline.
Operating costs, excluding marketing, increased by 4%
year-on-year. Sportsbet's H1 marketing spend was 13% lower, albeit
this reflected the additional investment we made in H1 last year
ahead of POC as well as some World Cup related spend in the
comparative period. We also made improvements to the efficiency of
our marketing spend in H1 while there have been some signs that
competition for marketing assets has moderated somewhat following
the tax increase. Taking all of this into account, we would
anticipate that sales and marketing as a percentage of revenues
will be similar in H2 to H1.
The strong performance of our business reflects the ongoing
benefits we are deriving from our investment in product and
brand;
-- Product: Our same game multis product is proving a hit with
Australian customers. 38% of our customers have tried the product
during the period.
-- Margin: Our expected margin grew 30bps on the same period
last year with improvement reflecting our ongoing focus on
refinement of pricing models and good discipline in managing margin
whilst still offering attractive prices.
-- Personalisation: We are increasing our level of
personalisation, particularly when it comes to offering customers
value. This shift to more targeted generosity means that we are
maintaining good customer engagement levels while avoiding mass
market bonusing that is not revenue enhancing.
US(5)
Reported Proforma(6) Basis
Pre IFRS 16 adjustments H1 H1 H1 H1 Change Change
2019 2018 2019 2018 GBP US$
GBPm GBPm GBPm GBPm
------------------------------ ----- ----- --- ----- ----- ------ ------
Sportsbook stakes 845 - 845 -
Sportsbook net revenue
% 4.1% - 4.1% -
Sports revenue 140 52 140 94 +49% +40%
Gaming revenue 20 9 20 9 +116% +103%
----- ----- --- ----- ----- ------ ------
Total revenue 160 61 160 103 +55% +46%
Cost of sales (44) (14) (44) (19) +139% +124%
----- ----- --- ----- ----- ------ ------
Gross Profit 116 47 116 85 +37% +29%
Sales & marketing (48) (15) (48) (33) +45% +37%
Product & technology (20) (6) (20) (15) +36% +28%
Operations (45) (17) (45) (27) +65% +56%
----- ----- --- ----- ----- ------ ------
Total operating costs (113) (38) (113) (75) +51% +42%
----- ----- --- ----- ----- ------ ------
Underlying EBITDA(1,2) 3 9 3 9 -73% -75%
Depreciation and amortisation (8) (4) (8) (6) +46% +37%
----- ----- --- ----- ----- ------ ------
Underlying(1) operating
(loss)/profit (6) 5 (6) 4 n/a n/a
------------------------------ ----- ----- --- ----- ----- ------ ------
Our US division is comprised of FanDuel, our US sportsbook and
daily fantasy businesses; TVG, our leading horseracing TV and
wagering network and Betfair Casino, our online casino brand in New
Jersey.
Proforma(6) revenue in our US division was 46% higher,
reflecting 5% revenue growth in our established sports businesses
(daily fantasy and TVG), strong growth in Casino gaming revenue and
GBP35m of sports betting net revenue.
The FanDuel sportsbook is the number one brand in New Jersey
with 50% share of H1 market revenues. This success reflects the
leadership position we have in product and brand which is
continuing to drive strong customer growth.
Betfair Casino revenue increased by 103% year on year,
benefitting materially from sportsbetting cross-sell as well as
ongoing successful direct customer acquisition.
Underlying EBITDA for the period was GBP3m with good
double-digit contribution growth across our non-sportsbook product
verticals. This first half profitability reflects the seasonality
of the US business where customer acquisition investment in both
fantasy and sportsbook is typically heavily weighted to the second
half of the year, with the key NFL season commencing in
September.
As per the guidance we provided at our US Capital Markets Day in
March, we expect the existing US businesses (horseracing, fantasy
and online casino) to generate double digit contribution growth in
2019. The operating cost base for these businesses is now also
supporting sports betting, with circa 50% of the ex-marketing
operating cost base being shared across all verticals. We continue
to expect operating costs (excluding marketing) to be between
GBP145m and GBP155m in 2019.
Retail
Pre IFRS 16 adjustments H1 H1 Change
2019 2018
GBPm GBPm
----- -----
Sportsbook stakes 907 875 +4%
Sportsbook net revenue % 12.5% 12.4% +10bps
Sports revenue 113 108 +5%
Machine gaming revenue 43 54 -21%
----- ----- ------
Total revenue 156 162 -4%
Cost of sales (36) (36) Flat
----- ----- ------
Gross profit 120 126 -5%
Sales and marketing (3) (3) +2%
Product and technology (3) (3) +5%
Operations (88) (86) +3%
Total operating costs (95) (92) +3%
----- -----
Underlying EBITDA(1,2) 26 34 -26%
Depreciation and amortisation (10) (10) +2%
----- ----- ------
Underlying(1) operating profit 15 24 -37%
----- ----- ------
Shops at period end 626 629 Flat
The Retail division operates 626 Paddy Power betting shops
across the UK and Ireland, the same number as at December 2018.
Revenues from UK shops decreased by 10% and Irish shop revenues
increased by 6% in local currency.
Sportsbook revenue grew 5%, driven by a 4% increase in
stakes.
Gaming revenue declined 21% in the half with Q2 revenues 44%
lower year on year. This followed the introduction of a new GBP2
staking limit on Fixed Odds Betting Terminals from April 1. Ahead
of the change we had forecasted that the impact would be a 33% to
43% decrease in our machine gaming revenue, before any mitigation
to other products or the spill-over benefit from competitor shop
closures. We have seen an improving trend month by month with
current trends within our forecasted range.
The decline in machine gaming revenues and the increase in Irish
betting duty have resulted in a 26% decline in underlying EBITDA
for the division to GBP26m.
Regulatory update
UK
On 1 April, the UK Government implemented a new stake limit for
UK retail gaming machines of GBP2. Separately in Online, the rate
of remote gaming duty on UK gaming revenues increased from 15% to
21% on 1 April.
Australia
From 1 January 2019, new POC came into effect in Victoria, New
South Wales, Western Australia and the Australian Capital
Territory. Queensland's new POC came into effect on 1 October 2018.
Changes to product fees payable to Racing Queensland also came into
effect during the period.
The new taxes and product fee changes are the key drivers behind
the 12.2 percentage point increase in cost of sales as a % of net
revenue in Australia, from 28.0% in H1 2018 to 40.2% in H1 2019,
with the percentage expected to be circa 43% in H2.
Ireland
From 1 January 2019, the betting duty payable by Irish customers
on sports betting stakes was increased from 1% to 2% while the duty
on betting exchange revenues increased from 15% to 25%. The recent
Tax Strategy Group's review of Irish Betting Duty proposes to
maintain the rate increase and provide relief to smaller bookmakers
by setting a de minimis threshold for payment.
The government is continuing to work towards introducing the
Gambling Control Bill. The bill seeks, among other matters, to
establish a dedicated regulator for the gambling sector in Ireland.
We remain supportive of the bill and its aim to introduce into
Irish legislation regulation in line with international best
practice.
Other regulated markets
In Italy, the Government introduced a ban on all
gambling-related advertising and sports sponsorship in July 2018
and this took effect in July 2019. From 1 January the online tax on
sports betting increased from 22% to 24% and from 20% to 25% on
online gaming.
In Sweden, the online market regulated with effect from 1
January 2019 with an 18% gambling tax. The Group obtained an
operating licence, and Betfair.se has been live throughout the
period.
Effective 1 January 2019, Romania introduced a new 2% tax on
deposits along with the 16% online revenue tax already payable.
Taxation
The Group's underlying effective tax rate in the period was
16.3% (H1 2018: 14.5%). The full-year 2019 underlying Group ex-US
effective tax rate is still expected to be between 12% and 14% (FY
2018: 13.7%).
Capital expenditure
The Group had GBP55m of capital expenditure in the period (H1
2018: GBP50m). Approximately 30% of the expenditure related to our
US business with the remainder relating to technology projects,
product development and capital expenditure in our Online, Retail
and Australian businesses. For the full year, we now expect total
capital expenditure to be between GBP120m - GBP130m.
Foreign Exchange
At current spot rates, the foreign exchange impact on H2 2019
EBITDA versus H2 2018 is a circa GBP4m headwind.
Outlook
Overall, the Group is continuing to perform well on an
underlying basis, in line with our expectations. As a result, we
now expect full year underlying(1) Group EBITDA (on a pre IFRS 16
basis), excluding the US, to be between GBP420m and GBP440m.
Our US business is entering the key seasonal period for customer
acquisition with the start of the NFL season in September. In H2,
we will therefore be investing heavily in sportsbook acquisition
together with continuing to grow our fantasy player base
nationally. Taking this investment into account, we currently
expect US underlying EBITDA losses for the year to be approximately
GBP55m (on a pre IFRS16 basis).
We are pleased with the progress achieved in H1 and the
underlying growth being delivered in all divisions and look forward
to making further progress in H2.
Cash flow and financial position
Pre IFRS 16 adjustments H1 H1
2019 2018
GBPm GBPm
-----
Underlying EBITDA(1,2) 196 217
Capex (55) (50)
Working capital 22 (42)
Corporation tax (22) (37)
----- -----
Underlying free cash flow 141 88
Cash flow from separately
disclosed items (2) 20
Free cash flow 139 108
Dividends paid (104) (114)
Share buyback (87) (87)
Adjarabet acquisition (102) -
Interest and other borrowing
costs (3) (2)
Legacy Greek and German tax (40) -
Net proceeds from issue of
new shares - 2
Other 2 -
Net (decrease) / increase
in cash (194) (93)
Net cash at start of period (162) 244
Foreign currency exchange
translation (1) (3)
Net (debt) / cash at period
end(4) (356) 148
----------------------------- ----- -----
As at 30 June 2019, the Group had net debt of GBP356m, excluding
customer balances. Working capital in 2019 was favourably affected
by both the timing of some H1 2019 costs paid in 2018 and the
unwinding of material prepayments in relation to European marketing
assets which were paid in H1 2018. Payment was made to the German
and Greek tax authorities relating to two contested legacy tax
issues. The Group remains confident in our grounds to appeal both
of these cases.
Dividend
The Board has declared an interim dividend of 67p per share
(2018: 67p per share), which equates to an expected total interim
dividend of GBP52m (2018: GBP55m). This will be paid on 9 October
2019 to shareholders on the register at the close of business on 6
September 2019.
______________________________________________________________________________________
(1) The "underlying" measures exclude separately disclosed
items, that are not part of the usual business activity of the
Group and have been therefore reported as "separately disclosed
items" (see note 5 to the financial statements).
(2) EBITDA is profit before interest, tax, depreciation and
amortisation expenses and is a non-GAAP measure. EBITDA throughout
this Operating and Financial Review excludes the impact of IFRS 16.
See Appendix 5 for a reconciliation to IFRS 16 compliant numbers.
It is defined as profit for the year before depreciation and
amortisation, financial income, financial expense and tax expense /
credit. The Group uses EBITDA, Underlying EBITDA and Underlying
operating profit to comment on its financial performance. These
measures are used internally to evaluate performance, to establish
strategic goals and to allocate resources. The directors also
consider that these are commonly reported and widely used by
investors as an indicator of operating performance and ability to
incur and service debt, and as a valuation metric. These are
non-GAAP financial measures and are not prepared in accordance with
IFRS and, as not uniformly defined terms, these may not be
comparable with measures used by other companies to the extent they
do not follow the same methodology used by the Group. Non-GAAP
measures should not be viewed in isolation, nor considered as a
substitute for measures reported in accordance with IFRS. All of
the adjustments shown have been taken from the financial
statements.
(3) Constant currency ("cc") growth throughout this Operating
& Financial Review is calculated by retranslating the
non-sterling denominated component of H1 2018 at H1 2019 exchange
rates (see Appendix 4)
(4) Net cash at 30 June 2019 is comprised of gross cash
excluding customer balances of GBP104m and borrowings of GBP460m.
The comparative balance shown as at 30 June 2018 is comprised of
gross cash excluding customer balances of GBP317m and borrowings of
GBP169m (see Appendix 3).
(5) Growth rates in the commentary are in local currency.
(6) The Adjarabet and FanDuel transactions completed on 1
February 2019 and 10 July 2018 respectively. The 'Proforma' results
include the Adjarabet and FanDuel fantasy sports businesses as if
it had always been part of the Group, incorporating in addition to
the reported results, results from pre-acquisition periods in 2018
and 2019.
(7) The impact of tax and regulatory change is calculated by
adjusting the prior year comparative to reflect the same regulatory
and tax rules that exist in the current period. This includes the
impact of changes to Australian point of consumption taxes and
product fees, UK machine staking limits, UK online remote gaming
duty and Irish betting duty.
Appendix 1: Divisional Key Performance Indicators
Half yearly
GBPm Online Australia Retail US Group
Pre IFRS 16 H1 H1 % H1 H1 % A$ % H1 H1 % H1 H1 % US$ H1 H1 % CC(1)
adjustments Change % Change %
2019 2018 Change 2019 2018 Change 2019 2018 Change 2019 2018 Change 2019 2018 Change Change
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ----------- -------
Sportsbook
stakes 2,682 2,735 -2% 2,114 1,935 +9% +12% 907 875 +4% 845 n/a n/a 6,548 5,544 +18% +19%
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ----------- -------
Sportsbook
net
revenue % 7.7% 7.5% +20bps 9.8% 9.4% +40bps +40bps 12.5% 12.4% +10bps 4.1% n/a n/a 8.6% 8.9% -30bps -30bps
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ----------- -------
Sports
revenue 334 335 Flat 207 182 +14% +16% 113 108 +5% 140 52 +172% +156% 794 677 +17% +18%
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ----------- -------
Gaming
revenue 163 127 +29% - - - - 43 54 -21% 20 9 +116% +103% 225 190 +19% +18%
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ----------- -------
Total revenue 497 462 +8% 207 182 +14% +16% 156 162 -4% 160 61 +163% +148% 1,020 867 +18% +18%
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ----------- -------
Cost of sales (138) (109) +26% (83) (51) +63% +67% (36) (36) Flat (44) (14) +225% +206% (301) (210) +44% +44%
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ----------- -------
Gross Profit 359 353 +2% 124 131 -6% -3% 120 126 -5% 116 47 +145% +131% 719 657 +9% +9%
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ----------- -------
Sales &
marketing (128) (128) Flat (34) (40) -15% -13% (3) (3) +2% (48) (15) +218% +200% (214) (187) +15% +15%
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ----------- -------
Product &
technology (50) (47) +5% (11) (11) +2% +4% (3) (3) +5% (20) (6) +243% +223% (84) (67) +25% +26%
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ----------- -------
Operations (42) (35) +18% (22) (21) +1% +4% (88) (86) +3% (45) (17) +163% +147% (197) (160) +23% +23%
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ----------- -------
Unallocated
central
costs (28) (27) +5% +5%
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ----------- -------
Operating
costs (220) (211) +4% (67) (72) -8% -5% (95) (92) +3% (113) (38) +197% +180% (523) (440) +19% +19%
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ----------- -------
Underlying
EBITDA 139 142 -2% 57 59 -3% -1% 26 34 -26% 3 9 -72% -74% 196 217 -10% -10%
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ----------- -------
Depreciation
&
amortisation (22) (21) +4% (10) (8) +31% +35% (10) (10) +2% (8) (4) +104% +92% (51) (43) +18% +18%
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ----------- -------
Underlying
operating
profit 118 121 -3% 47 51 -8% -6% 15 24 -37% (6) 5 n/a n/a 145 174 -17% -17%
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ----------- -------
(1) Constant currency ("cc") growth is calculated by
retranslating non-sterling denominated component of H1 2018 at H1
2019 exchange rates (see Appendix 4)
Appendix 2: Divisional Key Performance Indicators
Quarterly, unaudited
GBPm Online Australia Retail US Group
Q1 Q1 % Q1 Q1 % A$ % Q1 Q1 % Q1 Q1 % US$ Q1 Q1 % CC(1)
Change % Change %
2019 2018 Change 2019 2018 Change 2019 2018 Change 2019 2018 Change 2019 2018 Change Change
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ------- -------
Sportsbook
stakes 1,338 1,277 +5% 1,042 917 +14% +17% 434 415 +4% 459 n/a n/a 3,273 2,609 +25% +27%
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ------- -------
Sportsbook
net
revenue % 6.6% 7.6% -100bps 9.2% 9.0% +20bps +20bps 11.4% 12.5% -110bps 4.0% n/a n/a 7.7% 8.9% -120bps -120bps
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ------- -------
Sports
revenue 152 161 -6% 96 83 +16% +20% 50 52 -5% 69 23 +197% +178% 366 319 +15% +15%
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ------- -------
Gaming
revenue 76 58 +31% - - - - 27 27 +2% 9 5 +96% +83% 113 90 +26% +25%
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ------- -------
Total
revenue 228 219 +4% 96 83 +16% +20% 77 79 -2% 78 28 +180% +162% 478 408 +17% +18%
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ------- -------
GBPm Online Australia Retail US Group
Q2 Q2 % Q2 Q2 % A$ % Q2 Q2 % Q2 Q2 % US$ Q2 Q2 % CC(1)
Change % Change %
2019 2018 Change 2019 2018 Change 2019 2018 Change 2019 2018 Change 2019 2018 Change Change
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ------- -------
Sportsbook
stakes 1,344 1,458 -8% 1,072 1,018 +5% +8% 473 459 +3% 386 n/a n/a 3,275 2,935 +12% +12%
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ------- -------
Sportsbook
net
revenue % 8.8% 7.3% +150bps 10.3% 9.8% +50bps +50bps 13.5% 12.2% +130bps 4.3% n/a n/a 9.5% 8.9% +60bps +60bps
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ------- -------
Sports
revenue 183 174 +5% 111 99 +12% +14% 64 56 +14% 71 28 +151% +137% 429 358 +20% +20%
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ------- -------
Gaming
revenue 86 68 +27% - - - - 15 27 -44% 11 5 +136% +123% 113 100 +12% +12%
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ------- -------
Total
revenue 269 243 +11% 111 99 +12% +14% 79 84 -5% 82 33 +149% +135% 541 458 +18% +18%
----- ----- ------- ----- ----- ------- ------- ----- ----- ------- ----- ----- ------- -------- ----- ----- ------- -------
(1) Constant currency ("cc") growth is calculated by retranslating non-sterling denominated component
of Q1 2018 and Q2 2018 at Q1 2019 and Q2 2019 exchange rates, respectively
Appendix 3: Reconciliation of Presented cash flow to Reported
statutory cash flow
In the Operating and Financial Review the cash flow has been
presented on a net cash, pre-IFRS 16 basis. The difference between
this and the reported statutory cash flow is the inclusion of
borrowings to determine a net cash position and the use of
underlying EBITDA on a pre-IFRS 16 basis, as reconciled in the
table below.
GBPm Presented Adjustment Reported cash
cash flow to include flow
(pre IFRS borrowings
16 adjustments) and IFRS
16
H1 H1 H1 H1 2018 H1 H1
2019
2019 2018 2019 2018
---------- ------ ----- ------- ----------------- -----------------
Underlying EBITDA(1) 196 217 20 - 216 217
---------- ------ ----- ------- ----------------- -----------------
Capex(2) (55) (50) - - (55) (50)
---------- ------ ----- ------- ----------------- -----------------
Working capital(3) 22 (42) - - 22 (42)
---------- ------ ----- ------- ----------------- -----------------
Corporation tax (22) (37) - - (22) (37)
---------- ------ ----- ------- ----------------- -----------------
Underlying free cash flow 141 88 20 - 161 88
---------- ------ ----- ------- ----------------- -----------------
Cash flow from separately
disclosed items(4) (2) 20 - - (2) 20
---------- ------ ----- ------- ----------------- -----------------
Free cash flow 139 108 20 - 159 108
---------- ------ ----- ------- ----------------- -----------------
Dividends paid (104) (114) - - (104) (114)
---------- ------ ----- ------- ----------------- -----------------
Share buyback (87) (87) - - (87) (87)
---------- ------ ----- ------- ----------------- -----------------
Adjarabet acquisition (102) - - - (102) -
---------- ------ ----- ------- ----------------- -----------------
Lease liabilities paid - - (20) - (20) -
---------- ------ ----- ------- ----------------- -----------------
Interest and other borrowing
costs(5) (3) (2) - - (3) (2)
---------- ------ ----- ------- ----------------- -----------------
Legacy Greek and German tax
assessments (40) - - - (40) -
---------- ------ ----- ------- ----------------- -----------------
Net proceeds from issue of
new shares - 2 - - - 2
---------- ------ ----- ------- ----------------- -----------------
Other 2 - - - 2 -
---------- ------ ----- ------- ----------------- -----------------
Net amounts drawn down /
(repaid) on borrowings - - 174 108 174 108
---------- ------ ----- ------- ----------------- -----------------
Net increase / (decrease)
in cash (194) (93) 174 108 (20) 15
---------- ------ ----- ------- ----------------- -----------------
Net cash at start of the
period (162) 244 284 62 124 307
---------- ------ ----- ------- ----------------- -----------------
Foreign currency exchange
translation (1) (3) 1 (1) - (5)
---------- ------ ----- ------- ----------------- -----------------
Net (debt) / cash at period
end (356) 148 460 169 104 317
---------- ------ ----- ------- ----------------- -----------------
(1) Underlying EBITDA (pre IFRS 16) includes the following line
items in the statutory cash flow: Profit for the period, separately
disclosed items, tax expense before separately disclosed items,
financial income before separately disclosed items, financial
expense before separately disclosed items and depreciation and
amortisation before separately disclosed items. EBITDA throughout
this Operating and Financial Review excludes the impact of IFRS 16.
See Appendix 5 for a reconciliation to IFRS 16 compliant
numbers.
(2) Capex includes purchase of property, plant and equipment,
purchase of intangible assets, purchase of businesses net of cash
acquired (excluding Adjarabet acquisition shown separately in
presented cash flow), capitalised internal development expenditure,
payment of contingent deferred consideration and loss on disposal
of property, plant and equipment and intangible assets.
(3) Working capital includes increase in trade and other
receivables, increase / (decrease) in trade, other payables and
provisions, employee equity-settled share based payments expense
before separately disclosed items, and foreign currency exchange
loss / (gain).
(4) Cash flow from separately disclosed items includes proceeds
from the disposal of investment & restructuring and strategic
initiative costs paid.
(5) Interest and other borrowing costs includes interest paid,
interest received and fees in respect of borrowings facility.
Appendix 4: Reconciliation of growth rates to constant currency
growth rates
Constant currency ("cc") growth is calculated by retranslating
non-sterling denominated component of H1 2018 at H1 2019 exchange
rates as per the table below.
GBPm H1 H1 % H1 2018 H1 2018 CC%
Pre IFRS 16 adjustments 2019 2018 Change FX impact CC Change
Sports net revenue 794 677 +17% (2) 675 +18%
----- ----- ----------- ---------------- ------------ ----------
Gaming net revenue 225 190 +19% - 190 +18%
----- ----- ----------- ---------------- ------------ ----------
Total net revenue 1,020 867 +18% (1) 866 +18%
----- ----- ----------- ---------------- ------------ ----------
Cost of sales (301) (210) +44% 1 (209) +44%
----- ----- ----------- ---------------- ------------ ----------
Gross Profit 719 657 +9% - 657 +9%
----- ----- ----------- ---------------- ------------ ----------
Sales & marketing (214) (187) +15% - (187) +15%
----- ----- ----------- ---------------- ------------ ----------
Product & technology (84) (67) +25% - (67) +26%
----- ----- ----------- ---------------- ------------ ----------
Operations (197) (160) +23% - (160) +23%
----- ----- ----------- ---------------- ------------ ----------
Unallocated central
costs (28) (27) +5% - (27) +5%
----- ----- ----------- ---------------- ------------ ----------
Operating costs (523) (440) +19% - (440) +19%
----- ----- ----------- ---------------- ------------ ----------
Underlying EBITDA 196 217 -10% - 217 -10%
----- ----- ----------- ---------------- ------------ ----------
Depreciation & amortisation (51) (43) +18% - (43) +18%
----- ----- ----------- ---------------- ------------ ----------
Underlying operating
profit 145 174 -17% - 174 -17%
----- ----- ----------- ---------------- ------------ ----------
Revenue by division
----- ----- ----------- ---------------- ------------ ----------
Online 497 462 +8% - 462 +8%
----- ----- ----------- ---------------- ------------ ----------
Australia 207 182 +14% (4) 178 +16%
----- ----- ----------- ---------------- ------------ ----------
Retail 156 162 -4% - 162 -4%
----- ----- ----------- ---------------- ------------ ----------
US 160 61 +163% +4 65 +148%
----- ----- ----------- ---------------- ------------ ----------
Underlying EBITDA by
division
----- ----- ----------- ---------------- ------------ ----------
Online 139 142 -2% 1 143 -2%
----- ----- ----------- ---------------- ------------ ----------
Australia 57 59 -3% (2) 57 -1%
----- ----- ----------- ---------------- ------------ ----------
Retail 26 34 -26% - 34 -25%
----- ----- ----------- ---------------- ------------ ----------
US 3 9 -72% 1 10 -74%
----- ----- ----------- ---------------- ------------ ----------
Unallocated central
costs (28) (27) +5% - (27) +5%
----- ----- ----------- ---------------- ------------ ----------
Appendix 5: Reconciliation of underlying EBITDA and EBIT to
reported statutory EBIT by division
From 1 January 2019, IFRS 16 - Leases replaced IAS 17 - Leases.
This means for leases previously classified as operating leases, a
right of use asset and associated lease liability will be
recognised going forward. The nature of the operating lease expense
also changes as IFRS 16 replaces the previous operating lease
expense with a depreciation charge on the asset and an interest
expense on the liability. As a Group we have adopted the modified
retrospective approach by not restating the comparative period.
Therefore in the Operating and Financial Review, in order to
maintain comparability with the prior period, we have shown
underlying EBITDA on a consistent basis with the prior period, i.e.
on a pre- IFRS 16 basis with the relevant operating lease expense
included within EBITDA. The impact of IFRS 16 on Group profit
before tax was immaterial in the period.
GBPm Online Australia Retail US Group
Pre Pre Pre Pre Pre
IFRS IFRS IFRS IFRS IFRS
16 Reported 16 Reported 16 Reported 16 Reported 16 Reported
IFRS IFRS IFRS IFRS IFRS
H1 16 H1 H1 16 H1 H1 16 H1 H1 16 H1 H1 16 H1
2019 adjust-ment 2019 2019 adjust-ment 2019 2019 adjust-ment 2019 2019 adjust-ment 2019 2019 adjust-ment 2019
------- -------------- --------- ------- -------------- --------- ------- -------------- --------- ------- -------------- --------- ------- -------------- ---------
Total revenue 497 497 207 207 156 156 160 160 1,020 1,020
------- -------------- --------- ------- -------------- --------- ------- -------------- --------- ------- -------------- --------- ------- -------------- ---------
Cost of sales (138) (138) (83) (83) (36) (36) (44) (44) (301) (301)
------- -------------- --------- ------- -------------- --------- ------- -------------- --------- ------- -------------- --------- ------- -------------- ---------
Gross Profit 359 359 124 124 120 120 116 116 719 719
------- -------------- --------- ------- -------------- --------- ------- -------------- --------- ------- -------------- --------- ------- -------------- ---------
Operating
costs (220) 3 (217) (67) 2 (65) (95) 11 (83) (113) 2 (111) (523) 20 (503)
------- -------------- --------- ------- -------------- --------- ------- -------------- --------- ------- -------------- --------- ------- -------------- ---------
Underlying
EBITDA 139 3 142 57 2 58 26 11 37 3 2 4 196 20 216
------- -------------- --------- ------- -------------- --------- ------- -------------- --------- ------- -------------- --------- ------- -------------- ---------
Depreciation
&
amortisation (22) (2) (24) (10) (2) (12) (10) (11) (21) (8) (2) (10) (51) (19) (69)
------- -------------- --------- ------- -------------- --------- ------- -------------- --------- ------- -------------- --------- ------- -------------- ---------
Underlying
operating
profit 118 - 118 47 - 47 15 1 16 (6) - (6) 145 2 147
------- -------------- --------- ------- -------------- --------- ------- -------------- --------- ------- -------------- --------- ------- -------------- ---------
Underlying
net
interest
expense (5) (2) (7)
------- -------------- --------- ------- -------------- --------- ------- -------------- --------- ------- -------------- --------- ------- -------------- ---------
Separately
disclosed
items (59) - (59)
------- -------------- --------- ------- -------------- --------- ------- -------------- --------- ------- -------------- --------- ------- -------------- ---------
Profit before
tax 82 (1) 81
------- -------------- --------- ------- -------------- --------- ------- -------------- --------- ------- -------------- --------- ------- -------------- ---------
STATEMENT OF DIRECTORS RESPONSIBILITIES
For the six months ended 30 June 2019
The Directors are responsible for preparing this interim
management report in all material respects, in accordance with IAS
34 Interim Financial Reporting as adopted by the EU, the
Transparency (Directive 2004/109/EC) Regulations 2007
("Transparency Directive"), and the related Transparency Rules of
the Central Bank of Ireland.
In preparing the interim financial information, the directors
are required to:
-- prepare and present the interim financial information in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU, the Transparency (Directive 2004/109/EC) Regulations 2007
("Transparency Directive"), and the Transparency Rules of the
Central Bank of Ireland;
-- ensure the interim financial information has adequate disclosures;
-- select and apply appropriate accounting policies; and
-- make accounting estimates that are reasonable in the circumstances.
We confirm that to the best of our knowledge:
a) the condensed set of financial statements in the half-yearly
financial report of Flutter Entertainment plc ("the Company")
for the six months ended 30 June 2019 ("the interim financial
information") which comprises the condensed consolidated interim
income statement, the condensed consolidated interim statement
of other comprehensive income, the condensed consolidated interim
statement of financial position, the condensed consolidated
interim statement of cash flows, the condensed consolidated
interim statement of changes in equity and related explanatory
notes, have been presented and prepared in accordance with
International Accounting Standard 34, Interim Financial Reporting,
as adopted by the European Union.
b) the interim financial information presented, as required by
the Transparency (Directive 2004/109/EC) Regulations 2007,
includes:
i) an indication of important events that have occurred during
the first six months of the financial year, and their impact
on the condensed set of financial statements;
ii) a description of the principal risks and uncertainties for
the remaining six months of the financial year;
ii) related parties' transactions that have taken place in the
first six months of the current financial year and that
have materially affected the financial position or the performance
of the enterprise during that period; and
iv) any changes in the related parties' transactions described
in the last annual report that could have a material effect
on the financial position or performance of the enterprise
in the first six months of the current financial year.
c) the interim financial information also includes a fair review
of the information required by:
i) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules
of the London Stock Exchange, being an indication of important
events that have occurred during the first six months of
the financial year and their impact on the condensed set
of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of
the year; and
ii) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules
of the London Stock Exchange, being related party transactions
that have taken place in the first six months of the current
financial year and that have materially affected the financial
position or performance of the entity during that period;
and any changes in the related party transactions described
in the last annual report that could so.
On behalf of the Board of Directors
Peter Jackson Jonathan Hill
Chief Executive Officer Chief Financial Officer
6 August 2019
Understanding and managing our principal risks
The Board continuously assesses and monitors the key risks of
the business. The key risks that could affect the Group's
performance and the factors that mitigate those risks have not
significantly changed from those set out on pages 51-53 in the
Group's Annual Report and Accounts 2018 (which is available to
download at www.flutter.com). The principal risks facing the Group,
together with the Group's risk management process in relation to
these risks, continue to be monitored, reviewed and re-assessed. A
summary of the principal risks and uncertainties that are most
relevant to the remainder of the current financial year is included
below:
-- Regulation and licensing and regulatory compliance - The
regulatory, taxation, consumer protection or legislative
environment, including interpretations or practices, applicable to
the Group's activities in the various markets in which it operates,
including those markets where no regulatory framework exists, and
the related risks from limitation of business activities or
litigation by third parties can make it commercially challenging
for us to operate or restrict our ability to grow the business.
Breaches of regulations can damage our reputation as well as lead
to fines, investigations and affect future growth. We have
dedicated internal and external Legal, Compliance and Tax teams
with responsibility for advising business units in these matters
and through appropriate policies, processes and controls. Our
dedicated Regulatory and Compliance teams work with regulators and
governments in relation to proportionate and reasonable regulation.
As the first line, Management has ultimate accountability for
compliance, and training and communication strategies have focused
on ensuring appropriate awareness of requirements. A risk-based
approach is taken to key areas and there are appropriate second
line functions in the business who test the systems for compliance.
Management report periodically to the Audit Committee and the Risk
Committee on the application of various laws and regulations by the
relevant jurisdiction to ensure that they are appropriately
understood and managed. The Group's internal and external auditors
report the findings of their audit procedures to the Audit
Committee on relevant compliance matters.
-- Data management and cyber security - The inability to
adequately protect customer and other key data and information
could result in formal investigations and/or possible litigation
resulting in prosecution and damage to our brands. The Group
invests significantly in IT security resources and works with a
variety of external security specialists to ensure security
arrangements and systems are up-to-date with emerging threats. The
Group's Information Security team continuously assesses the risks
and controls around security and IT operations. We have in place a
number of data protection policies in order to protect the privacy
rights of individuals in accordance with the relevant data
protection legislation, including compliance with the new EU-wide
General Data Protection Regulation which came into force in May
2018. The Group's Legal and Compliance teams ensure that the
business is aware of, and adheres to, industry best practice
standards and relevant laws of data protection and privacy.
-- BREXIT - The high degree of uncertainty around the terms of
the UK's departure from the EU as a consequence of the BREXIT
referendum has resulted in business risk. The potential
implications of different BREXIT outcomes continue to be monitored
by members of senior management and internal and external advisors.
The Board continues to monitor BREXIT-related developments
particularly in the event of continued uncertainty and the
possibility of a "no deal" BREXIT. Specific impacted areas
considered include legislation and regulation, people, data
protection and tax. However, we are a global business,
geographically and product diversified, and licensed
country-by-country. This is a distinct advantage should data
protection conditions in one market change.
-- Market restrictions - Restrictions on new or existing markets
such as advertising bans or material taxation changes can impact
growth plans. Potential changes in regulatory environments are
monitored on an ongoing basis with a view to managing any changes
appropriately and cost efficiently. The Group continues to promote
transparent and effective regulations in all markets that create a
level playing field. A product prioritisation process ensures any
new regulations are complied with in a timely manner.
-- Technology infrastructure, systems stability and availability
- Our operations are dependent on technology and advanced IT
systems and any damage or failure to these could reduce revenue and
harm our business reputation. Reduced availability of our products
arising from software, infrastructure and system issues could
result in a poor customer experience and may have an impact on
customer loyalty affecting our ability to grow the business.
Further to the completion of the single technology platform,
customers are interfaced onto a single platform, which has
increased resilience. We continuously invest in a cost-effective
technology platform to ensure stability and availability, to
eliminate single points of failure and improve performance. Key
metrics are in place to monitor key systems and platforms and
identify potential emerging issues. There is a formal incident
management process for identifying, escalating and resolving issues
and a post incident process to ensure similar issues cannot happen
again. Robust development and change management processes help
reduce the risk of unplanned outages.
-- Business continuity planning and disaster recovery - The
ability of the Group to recover from severe disruption to our
technology systems and business operations is paramount. A
significant disruption to one of our data centres or offices can
cause reduction in revenue and loss of customers. Delays in
restoring services following a major disruption could result in
loss of customers and reputational damage. We regularly review our
Business Continuity Plans and our IT Disaster Recovery capability
and have in place service level agreements with third parties.
Where possible, we have fail safe solutions and seek to limit
single points of failure. The increase in extreme weather events
across the Group's locations have increased the need to better
manage this risk but we have in place continuity plans to manage
such events and these have been successfully tested.
-- Reliance on third parties and key supplier relationships - We
rely on third parties across our business. Managing relationships
with, and performance by, key suppliers, particularly those
supplying software platforms, payment processing and data to
support the Group's products is key to the Group's strategic
objectives. Where possible, we limit reliance on a single supplier
to reduce potential single points of failure. The Group has strong
commercial relationships with its key suppliers. Contracts and
service level agreements are in place and are regularly reviewed.
Proposed new contracts are passed through a procurement process to
ensure adequate protection for the Group. The Group monitors the
performance of third-party suppliers in order to ensure the
efficiency and quality of contract performance.
-- Key employees recruitment and retention - Continued success
and growth is dependent on the performance of Executive Directors,
senior management and other key employees. Retention and
recruitment of these individuals is a key component in securing the
ability to grow and develop the business. The Group's ability to
continue to attract, retain and motivate passionate and highly
skilled employees in an intensely competitive environment is key.
The Board reviews key positions and reward through the Nomination
and Remuneration Committees. The Executive Directors, senior
management and other key employees are part of medium or long term
incentive plans, which reward performance and loyalty. Our HR
function actively manages succession planning and the processes
that are in place throughout the business to identify key roles and
conduct regular appraisals, succession and talent reviews,
engagement surveys as well as career development opportunities. All
employees are subject to regular salary reviews, a comprehensive
benefit package and are able to join (subject to local
jurisdictional requirements) our all-employee save as you earn
share scheme, which provides an opportunity for them to participate
in the Group's performance.
-- Health and safety - A major health and safety incident in our
retail betting shops would have a material impact upon employees
and could lead to significant reputational damage as well as fines
and regulatory action. There are processes in place to manage the
risks in our retail betting shops, including health and safety
structures, single manning processes and loss prevention and
security measures. There are a number of risk assessments conducted
in our shops at various stages of their lifecycle. In addition, a
formal incident management process and follow up procedures reduce
the likelihood of repeat issues.
CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT
For the six months ended 30 June 2019
Before Separately Before Separately
separately disclosed separately disclosed
disclosed items disclosed items
items (Note 5) Total items (Note 5) Total
Six months Six months Six months Six months Six months Six months
ended ended ended ended ended ended
30 June 2019 30 June 2019 30 June 2019 30 June 2018 30 June 2018 30 June 2018
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Note GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ------- ------------- ------------- -------------- ------------- ------------- --------------
Continuing
operations
Revenue 4 1,019.9 - 1,019.9 866.7 - 866.7
Cost of sales (301.0) - (301.0) (209.6) - (209.6)
----------------- ------- ------------- ------------- -------------- ------------- ------------- --------------
Gross profit 718.9 - 718.9 657.1 - 657.1
Operating costs
excluding
depreciation,
amortisation
and impairment (503.1) - (503.1) (440.4) (12.5) (452.9)
----------------- ------- ------------- ------------- -------------- ------------- ------------- --------------
EBITDA (1) 215.8 - 215.8 216.7 (12.5) 204.2
Depreciation and
amortisation (69.3) (58.8) (128.1) (42.9) (44.2) (87.1)
Impairment - - - - (27.2) (27.2)
----------------- ------- ------------- ------------- -------------- ------------- ------------- --------------
Operating profit 146.5 (58.8) 87.7 173.8 (83.9) 89.9
----------------- ------- ------------- ------------- -------------- ------------- ------------- --------------
Financial income 0.4 - 0.4 0.9 17.7 18.6
Financial
expense (7.1) - (7.1) (2.5) - (2.5)
----------------- ------- ------------- ------------- -------------- ------------- ------------- --------------
Profit before
tax 139.8 (58.8) 81.0 172.2 (66.2) 106.0
----------------- ------- ------------- ------------- -------------- ------------- ------------- --------------
Tax (expense) /
credit 6 (22.8) 9.4 (13.4) (24.9) 6.9 (18.0)
----------------- ------- ------------- ------------- -------------- ------------- ------------- --------------
Profit for the
period 117.0 (49.4) 67.6 147.3 (59.3) 88.0
----------------- ------- ------------- ------------- -------------- ------------- ------------- --------------
Attributable to:
Equity holders
of the Company 116.3 (39.4) 76.9 147.3 (59.3) 88.0
Non-controlling
interest 0.7 (10.0) (9.3) - - -
----------------- ------- ------------- ------------- -------------- ------------- ------------- --------------
117.0 (49.4) 67.6 147.3 (59.3) 88.0
----------------- ------- ------------- ------------- -------------- ------------- ------------- --------------
Earnings per
share
Basic 7 GBP0.978 GBP1.037
Diluted 7 GBP0.975 GBP1.033
----------------- ------- ------------- ------------- -------------- ------------- ------------- --------------
1 EBITDA is defined as profit for the period before depreciation,
amortisation and impairment, financial income, financial expense
and tax expense / credit. It is considered by the Directors
to be a key measure of the Group's financial performance. Note
as a result of the adoption of IFRS 16 Leases from 1 January
2019, under the modified retrospective approach, the rent expense
which in 2018 was reflected in operating costs excluding depreciation,
amortisation and impairment, is no longer recorded as an expense
in 2019 but is replaced by a depreciation charge and finance
expense which are recorded after EBITDA. There is no restatement
of comparative information. See Note 2 for further detail on
the impact of IFRS 16.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF OTHER COMPREHENSIVE
INCOME
For the six months ended 30 June 2019
Six months Six months
ended ended
30 June 30 June
2019 2018
Note (unaudited) (unaudited)
GBPm GBPm
---------------------------------------------- ------- ------------- --------------
Profit for the period 67.6 88.0
------------------------------------------------------- ------------- --------------
Other comprehensive income
Items that are or may be reclassified subsequently
to profit or loss:
Foreign exchange gain on translation
of the net assets of foreign currency
denominated entities 2.0 7.3
Other comprehensive income 2.0 7.3
------------------------------------------------------- ------------- --------------
Total comprehensive income for the
period 69.6 95.3
------------------------------------------------------- ------------- --------------
Attributable to:
Equity holders of the Company 78.4 95.3
Non-controlling interest (8.8) -
---------------------------------------------- ------- ------------- --------------
69.6 95.3
------------------------------------------------------ ------------- --------------
CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL
POSITION
As at 30 June 2019
30 June 2019 31 December
2018 (1)
Note (unaudited) (audited)
GBPm GBPm
----------------------------------- ------------ -------------------------- ------------------------
Assets
Property, plant and equipment 2 260.5 130.4
Intangible assets 609.8 578.1
Goodwill 8 4,146.5 4,075.3
Deferred tax assets 12.9 10.7
Investments 0.1 2.4
Other receivables 10 46.5 8.9
----------------------------------- ------------ -------------------------- ------------------------
Total non-current assets 5,076.3 4,805.8
----------------------------------- ------------ -------------------------- ------------------------
Trade and other receivables 10 77.8 81.8
Financial assets - restricted
cash 11 152.8 167.2
Cash and cash equivalents 11 104.0 123.7
----------------------------------- ------------ -------------------------- ------------------------
Total current assets 334.6 372.7
----------------------------------- ------------ -------------------------- ------------------------
Total assets 5,410.9 5,178.5
----------------------------------- ------------ -------------------------- ------------------------
Equity
Issued share capital and share
premium 425.0 424.8
Treasury shares (40.7) (40.7)
Shares held by employee benefit
trust (8.4) (8.6)
Other reserves 16 94.7 92.4
Retained earnings 3,514.7 3,530.1
----------------------------------- ------------ -------------------------- ------------------------
Equity attributable to owners
of the parent 3,985.3 3,998.0
Non-controlling interest 236.1 213.3
----------------------------------- ------------ -------------------------- ------------------------
Total equity 4,221.4 4,211.3
----------------------------------- ------------ -------------------------- ------------------------
Liabilities
Trade and other payables 12 486.3 532.8
Derivative financial liabilities 12 13.5 20.1
Provisions 2.9 4.3
Current tax payable 24.6 20.8
Borrowings 14 0.5 0.4
Total current liabilities 527.8 578.4
----------------------------------- ------------ -------------------------- ------------------------
Trade and other payables 12 123.6 26.2
Derivative financial liabilities 12 0.7 0.9
Provisions 1.1 1.3
Deferred tax liabilities 78.2 77.4
Borrowings 14 458.1 283.0
----------------------------------- ------------ -------------------------- ------------------------
Total non-current liabilities 661.7 388.8
----------------------------------- ------------ -------------------------- ------------------------
Total liabilities 1,189.5 967.2
----------------------------------- ------------ -------------------------- ------------------------
Total equity and liabilities 5,410.9 5,178.5
----------------------------------- ------------ -------------------------- ------------------------
1 The Group has initially applied IFRS 16 at 1 January 2019,
using the modified retrospective approach. Under this approach,
comparative information is not restated and the cumulative
effect of initially applying IFRS 16 is recognised in retained
earnings at the date of initial application. See Note 2 for
further details.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
For the six months ended 30 June 2019
Six months Six months
ended ended
30 June 2019 30 June 2018
Note (unaudited) (unaudited)
GBPm GBPm
--------------------------------------------------------------------------- ------- -------------- --------------
Cash flows from operating activities
Profit for the period 67.6 88.0
Separately disclosed items 5 49.4 59.3
Tax expense before separately disclosed items 22.8 24.9
Financial income before separately disclosed items (0.4) (0.9)
Financial expense before separately disclosed items 7.1 2.5
Depreciation and amortisation before separately disclosed items 69.3 42.9
Employee equity-settled share-based payments expense before separately
disclosed items 12.7 13.9
Foreign currency exchange loss / (gain) 0.5 (0.8)
Loss on disposal of property, plant and equipment and intangible assets - 0.2
Cash from operations before changes in working capital 229.0 230.0
Increase in trade and other receivables (2.1) (52.2)
Increase / (decrease) in trade, other payables and provisions 11.2 (2.4)
--------------------------------------------------------------------------- ------- -------------- --------------
Cash generated from operations 238.1 175.4
Tax paid (21.9) (37.0)
--------------------------------------------------------------------------- ------- -------------- --------------
Net cash from operating activities before restructuring and strategic
initiative costs and
legacy tax assessments 216.2 138.4
Restructuring and strategic initiative costs paid (1.8) (2.3)
Amounts paid in respect of legacy Greek and German tax assessments
(39.6) -
--------------------------------------------------------------------------- ------- -------------- --------------
Net cash from operating activities 174.8 136.1
--------------------------------------------------------------------------- ------- -------------- --------------
Purchase of property, plant and equipment (9.9) (10.2)
Purchase of intangible assets (18.6) (26.2)
Proceeds from disposal of investment 2.3 21.9
Purchase of businesses 9 (102.0) (0.9)
Capitalised internal development expenditure (24.1) (11.8)
Cash acquired from acquisition of Adjarabet 9 0.2 -
Payment of contingent deferred consideration 9 (2.8) (1.5)
Interest received 0.4 0.8
--------------------------------------------------------------------------- ------- -------------- --------------
Net cash used in investing activities (154.5) (27.9)
--------------------------------------------------------------------------- ------- -------------- --------------
Proceeds from the issue of new shares 0.3 1.7
Dividends paid 15 (104.0) (114.0)
Payment of lease liabilities (20.0) -
Net amounts drawn down on borrowings facility 173.8 108.1
Interest paid (3.4) (0.6)
Fees in respect of borrowings facility (0.3) (1.7)
Purchase of own shares including direct purchase costs 16 (86.8) (86.5)
Net cash used in financing activities (40.4) (93.0)
--------------------------------------------------------------------------- ------- -------------- --------------
Net (decrease) / increase in cash and cash equivalents (20.1) 15.2
Cash and cash equivalents at start of period 123.7 306.6
Foreign currency exchange gain / (loss) on cash and cash equivalents 0.4 (4.8)
--------------------------------------------------------------------------- ------- -------------- --------------
Cash and cash equivalents at end of period 11 104.0 317.0
--------------------------------------------------------------------------- ------- -------------- --------------
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN
EQUITY
For the six months ended 30 June 2019
Attributable to equity holders of the Company
----------------
Issued Shares
Number share Foreign held by Share-
of capital exchange employee based Non-controlling
ordinary and translation Other Treasury benefit payment Retained Total interest Total
shares share reserve reserves shares trust reserve earnings equity GBPm equity
(unaudited) in premium GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
issue GBPm
millions
---------------- ---------- -------- ------------- ---------- ---------- --------- --------- ---------- ---------- ----------------- ----------
Balance at 1
January 2019 81.4 424.8 4.1 2.2 (40.7) (8.6) 86.1 3,530.1 3,998.0 213.3 4,211.3
Total comprehensive income
for the period
Profit for the
period - - - - - - - 76.9 76.9 (9.3) 67.6
Foreign
exchange
translation - - 1.5 - - - - - 1.5 0.5 2.0
Total
comprehensive
income for the
period - - 1.5 - - - - 76.9 78.4 (8.8) 69.6
---------- -------- ------------- ---------- ---------- --------- --------- ---------- ---------- ----------------- ----------
Transactions with owners of the
Company, recognised directly in
equity
Shares issued
(Note 16) 0.1 0.3 - - - - - - 0.3 - 0.3
Business
combinations
(Note 9) - - - - - - - - - 31.6 31.6
Own shares
acquired by
the Group
(Note 16) (1.4) (0.1) - 0.1 - - - - - - -
Equity-settled
transactions -
expense
recorded in
income
statement - - - - - - 12.7 - 12.7 - 12.7
Equity-settled
transactions -
vestings - - - - - 0.2 (0.2) - - - -
Tax on
share-based
payments - - - - - - - (0.1) (0.1) - (0.1)
Transfer to
retained
earnings on
exercise of
share options - - - - - - (11.8) 11.8 - - -
Dividends to
shareholders
(Note 15) - - - - - - - (104.0) (104.0) - (104.0)
Total
contributions
by and
distributions
to
owners of the
Company (1.3) 0.2 - 0.1 - 0.2 0.7 (92.3) (91.1) 31.6 (59.5)
---------------- ---------- -------- ------------- ---------- ---------- --------- --------- ---------- ---------- ----------------- ----------
Balance at 30
June 2019 80.1 425.0 5.6 2.3 (40.7) (8.4) 86.8 3,514.7 3,985.3 236.1 4,221.4
---------------- ---------- -------- ------------- ---------- ---------- --------- --------- ---------- ---------- ----------------- ----------
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN
EQUITY
For the six months ended 30 June 2018
Attributable to equity holders of the Company
----------------
Issued Shares
Number share Foreign held by Share-
of capital exchange employee based
ordinary and translation Other Treasury benefit payment Retained Total
shares share reserve reserves shares trust reserve earnings equity
(unaudited) in premium GBPm GBPm GBPm GBPm GBPm GBPm GBPm
issue GBPm
millions
---------------- ---------- -------- ------------- ---------- ---------- --------- --------- ---------- ----------
Balance at 1
January 2018 86.5 423.0 (13.8) 15.4 (40.7) (15.6) 112.9 3,914.2 4,395.4
Adoption of
IFRS 9 - - - (13.7) - - - 13.7 -
---------------- ---------- -------- ------------- ---------- ---------- --------- --------- ---------- ----------
Opening balance
as restated 86.5 423.0 (13.8) 1.7 (40.7) (15.6) 112.9 3,927.9 4,395.4
---------- -------- ------------- ---------- ---------- --------- --------- ---------- ----------
Total comprehensive income
for the period
Profit for the
period - - - - - - - 88.0 88.0
Foreign
exchange
translation - - 7.3 - - - - - 7.3
Total
comprehensive
income for the
period - - 7.3 - - - - 88.0 95.3
---------- -------- ------------- ---------- ---------- --------- --------- ---------- ----------
Transactions with owners of the
Company, recognised directly in
equity
Shares issued
(Note 16) 0.2 1.7 - - - - - - 1.7
Own shares
acquired by
the Group
(Note 16) (1.0) (0.1) - 0.1 - - - (202.0) (202.0)
Equity-settled
transactions -
expense
recorded in
income
statement - - - - - - 13.9 - 13.9
Equity-settled
transactions -
vestings - - - - - 2.8 (2.5) (0.1) 0.2
Tax on
share-based
payments - - - - - - - (1.2) (1.2)
Transfer to
retained
earnings on
exercise of
share options - - - - - - (12.2) 12.2 -
Dividends to
shareholders
(Note 15) - - - - - - - (114.0) (114.0)
Total
contributions
by and
distributions
to
owners of the
Company (0.8) 1.6 - 0.1 - 2.8 (0.8) (305.1) (301.4)
---------------- ---------- -------- ------------- ---------- ---------- --------- --------- ---------- ----------
Balance at 30
June 2018 85.7 424.6 (6.5) 1.8 (40.7) (12.8) 112.1 3,710.8 4,189.3
---------------- ---------- -------- ------------- ---------- ---------- --------- --------- ---------- ----------
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
1. General information
Flutter Entertainment plc (the "Company") formerly known as
Paddy Power Betfair plc is a company incorporated in the Republic
of Ireland. The condensed consolidated interim financial statements
of the Company for the six months ended 30 June 2019 comprise the
Company and its subsidiaries (together referred to as the "Group").
The condensed consolidated interim financial statements are
unaudited but have been reviewed by KPMG, the Group's auditor,
whose report is set out on the last page of this document.
The financial information presented herein does not comprise
full statutory financial statements and therefore does not include
all of the information required for full annual financial
statements. Full statutory financial statements for the year ended
31 December 2018, prepared in accordance with International
Financial Reporting Standards ("IFRSs") as adopted by the EU
together with an unqualified audit report thereon under Section 391
of the Irish Companies Act 2014, will be annexed to the annual
return and filed with the Registrar of Companies in Ireland.
The condensed consolidated interim financial statements were
approved for issue by the Board of Directors of Flutter
Entertainment plc on 6 August 2019.
2. Basis of preparation and accounting policies
The condensed consolidated interim financial statements have
been prepared in accordance with the Transparency (Directive
2004/109/EC) Regulations 2007, the Transparency Rules of the
Central Bank of Ireland and with IAS 34 'Interim Financial
Reporting' as adopted by the EU. The condensed consolidated interim
financial statements are prepared on the historical cost basis
except for betting transactions (which are recorded as derivative
financial instruments), equity securities, contingent deferred
consideration and certain share-based payments, all of which are
stated at fair value (grant date fair value in the case of
equity-settled share-based payments).
The financial information contained in the condensed
consolidated interim financial statements has been prepared in
accordance with the accounting policies set out in the Group's last
annual financial statements in respect of the year ended 31
December 2018, except as set out below.
Amendments to existing standards
The Group has adopted IFRS 16 Leases from 1 January 2019. A
number of other new standards are effective from 1 January 2019,
including IFRIC 23 Uncertainty over Income Tax Treatments, but they
do not have a material effect on the Group's financial
statements.
IFRS 16 introduced a single on-balance sheet accounting model
for lessees. As a result, the Group as a lessee has recognised
right-of-use assets representing its rights to use the underlying
assets and lease liabilities representing its obligations to make
lease payments.
The Group has applied IFRS 16 using the modified retrospective
approach, under which the cumulative effect of initial recognition
is recognised in retained earnings at 1 January 2019. Accordingly,
the comparative information presented for 2018 has not been
restated - i.e. it is presented as reported under IAS 17 and
related interpretations. The details of the changes in accounting
policies are discussed below.
As a lessee
As a lessee, the Group previously classified leases as operating
or finance leases based on its assessment of whether the lease
transferred substantially all of the risks and rewards of ownership
of the underlying asset. Under IFRS 16, the Group recognises right
of use assets and lease liabilities for most leases - i.e. these
leases are recorded on the statement of financial position.
However the Group has elected not to recognise the right-of-use
assets and lease liabilities for a small amount of leases of low
value assets (e.g office equipment). The Group recognises the lease
payments associated with these leases as an expense on a
straight-line basis over the lease term.
2. Basis of preparation and accounting policies (continued)
The carrying amount of right of use assets are as below:
Property
GBP'm
--------------------------- ---------
Balance at 1 January 2019 157.2
Balance at 30 June 2019 139.5
--------------------------- ---------
Significant accounting policies
The Group recognises a right of use asset and a lease liability
at the lease commencement date. The right of use asset is initially
measured at cost and subsequently at cost less any accumulated
depreciation and impairment losses and adjusted for certain
remeasurements of the lease liability. The right of use asset is
initially measured at cost and subsequently measured at fair value
in accordance with the Group's accounting policies.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if
that rate cannot be readily determined, the Group's incremental
borrowing rate. Generally, the Group uses its incremental borrowing
rate as the discount rate.
The lease liability is subsequently increased by the interest
cost on the lease liability and decreased by the lease payment
made. It is remeasured when there is a change in future lease
payments arising from a change in an index or a rate, a change in
the estimate of the amount expected to be payable under a residual
value guarantee, or as appropriate, changes in the assessment of
whether a purchase or extension option is reasonably certain to be
exercised or a termination option is reasonably certain not to be
exercised.
The Group has applied judgement to determine the lease term for
some lease contracts in which it is a lease that include renewal
options. The assessment of whether the Group is reasonably certain
to exercise such options impacts the lease term, which
significantly affects the amount of lease liabilities and right of
use assets recognised.
Transition
Previously, the Group classified property leases as operating
leases under IAS 17. The Group leases various licensed betting and
other offices under operating lease agreements. The leases have
varying terms, escalation clauses and renewal rights. The leases
have, on average, approximately five years left to run (if the
Group was to exercise available break options), with a right of
renewal after that date. Lease rentals are typically reviewed every
five years to reflect market rental rates or changes in general
inflation rates.
At transition, for leases classified as operating leases under
IAS 17, lease liabilities were measured at the present value of the
remaining lease payments discounted at the Group's incremental
borrowing rate at 1 January 2019. Right of use assets are measured
at either:
- their carrying amounts as if IFRS 16 had been applied since
the commencement date, discounted using the leases incremental
borrowing rate at the date of initial application.
- an amount equal to the lease liability, adjusted by the amount
of any prepaid or accrued lease payments.
The Group used the following practical expedients when applying
IFRS 16 to leases previously classified as operating leases under
IAS 17.
- Applied the exemption not to recognise right of use assets and
liabilities for leases with less than 12 months of lease term and
leases for which the underlying asset is of low value
- Applied portfolio level accounting for leases with similar characteristics
- Excluded initial direct costs from measuring the right of use
asset at the date of initial application
- Used hindsight when determining the lease term if the contract
contains options to extend or terminate the lease
As a lessor
The Group has a small number of properties that are sublet. The
accounting policies applicable to the Group as a lessor are not
different from those under IAS 17. However when the Group is an
intermediate lessor the sub leases are classified with reference to
the right of use asset arising from the head lease, not with
reference to the underlying asset.
2. Basis of preparation and accounting policies (continued)
Impact on financial statements
Impact on transition
On transition to IFRS 16, the Group recognised additional right
of use assets and additional lease liabilities. The impact on
transition is summarised below.
1 January
2019
GBP'm
--------------------------------------------------- ----------
Right of use assets 157.2
Provisions 1.2
Payables 7.6
Lease liabilities (162.3)
Trade and other receivables including prepayments (3.7)
--------------------------------------------------- ----------
When measuring leases liabilities for leases that were
classified as operating leases, the Group discounted lease payments
using its incremental borrowing rate at 1 January 2019. The
weighted average rate applied is 3%.
1 January
2019
GBP'm
------------------------------------------------------------- ----------
Operating lease commitments at 31 December 2018 as
disclosed in the Group's consolidated financial statements 182.1
Less payments not to be included within lease liability (2.5)
Discounted using the incremental borrowing rate at
1 January 2019 (17.3)
------------------------------------------------------------- ----------
Lease liabilities recognised at 1 January 2019 162.3
------------------------------------------------------------- ----------
Impacts for the period
As a result of initially applying IFRS 16 in relation to the
leases that were previously classified as operating leases, the
Group recognised GBP139.5m of right of use assets and GBP145.4m of
lease liabilities as at 30 June 2019.
Also in relation to those leases under IFRS 16, the Group has
recognised depreciation and interest costs instead of operating
lease expense. During the six months ended 30 June 2019, the Group
recognised GBP18.6m of depreciation charges and GBP2.2m of interest
costs from these leases.
3. Judgements and estimates
The preparation of interim financial statements in conformity
with IFRSs requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial
statements, the significant judgements with the exception of those
judgements in relation to IFRS 16 which are outlined in further
detail in Note 2 in applying the Group's accounting policies and
the key sources of estimation uncertainty were consistent with
those that applied to the consolidated financial statements as at
and for the year ended 31 December 2018 and are detailed below.
Valuation of tax provisions and liabilities and associated
receivables
Taxation within the group includes both Income Taxes and Gaming
Taxes. Judgement and estimation is required to interpret
international tax laws and the way these taxes interact within each
jurisdiction, to identify and value provisions in relation to
gaming and income taxes as applicable. The liabilities for
uncertain tax positions reflected within current tax payable and
provisions in the consolidated statement of financial position for
the six months ended 30 June 2019 are comprised of a number of
individual immaterial uncertain tax positions relating to the risks
assessed in various jurisdictions by Management. Uncertainties have
been measured using the best estimate of the likely outcome. This
assessment relies on estimates and assumptions and may involve a
series of judgements about future events. New information may
become available that causes the Group to change its judgement
regarding the adequacy of existing tax liabilities; such changes to
tax liabilities will impact the income tax or gaming tax expense in
the period in which such a determination is made. Management uses
in-house tax experts, professional firms and previous experience
when assessing tax risks and the Group believes that the accrual
for all tax liabilities at 30 June
3. Judgements and estimates (continued)
2019 is adequate for all uncertain tax positions based on its
assessment of the range of factors outlined above. Further
information in relation to the judgement relating to the disputed
legacy German and Greek tax assessments is outlined in Note 10.
Measurement of the recoverable amounts of cash generating units
containing goodwill and indefinite life licences and brands
intangible assets
The Group reviews the carrying value of goodwill for impairment
annually (or more frequently if there are indications that the
value of goodwill may be impaired) by comparing the carrying values
of these cash generating units with their recoverable amounts
(being the higher of value in use and fair value less costs to
sell).
The impairment review is performed on a "value-in-use" basis,
which requires estimation of future net operating cash flows, the
time period over which they will occur, an appropriate discount
rate and an appropriate growth rate. Certain of these estimates and
assumptions are subjective in nature.
4. Operating segments
Reportable business segment information
The Group's reportable segments are as follows:
* Online;
* Australia;
* US; and
* Retail.
The reportable segments reflect the way financial information is
reviewed by the Group's Chief Operating Decision Maker
("CODM").
The Online segment derives its revenues primarily from sports
betting (sportsbook and the exchange sports betting product) and /
or gaming (games, casino, bingo and poker) services in all
business-to-customer ("B2C") geographies that the Group operates in
except the US and Australia, and business-to-business ("B2B")
services globally. Online services are delivered primarily through
the internet with a small proportion delivered through the public
telephony system.
The Australia segment earns its revenues from sports betting
services provided to Australian customers using primarily the
internet with a small proportion using the public telephony
system.
The Retail segment derives its revenues from sports betting and
/ or gaming machine services delivered through licenced bookmaking
shop estates in the UK and Ireland.
The US segment earns its revenues from sports betting, daily
fantasy sports and gaming services provided to US customers using
primarily the internet with a proportion of US sports betting
services also provided through a small number of retail
outlets.
Corporate administrative costs (Board, Finance, Legal, Internal
Audit, HR, Property and other central functions) cannot be readily
allocated to individual operating segments and are not used by the
CODM for making operating and resource allocation decisions. These
are shown in the reconciliation of reportable segments to Group
totals.
The accounting policies in respect of operating segments
reporting are the same as those described in the basis of
preparation and summary of significant accounting policies set out
in the Company's last annual financial statements in respect of the
year ended 31 December 2018, except for leases.
The Group does not allocate income tax expense or interest to
reportable segments. Treasury management is centralised for the
Online, Australia, US and Retail segments.
Assets and liabilities information is reported internally in
total and not by reportable segment and, accordingly, no
information is provided in this note on assets and liabilities
split by reportable segment.
4. Operating segments (continued)
Reportable business segment information for the six months ended
30 June 2019:
Online Australia Retail US Corporate Total
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- -------- ---------- ------- -------- ---------- --------
Revenue from external customers 497.0 206.8 156.2 159.9 - 1,019.9
Cost of sales (137.7) (83.1) (35.9) (44.3) - (301.0)
-------- ---------- ------- -------- ---------- --------
Gross profit 359.3 123.7 120.3 115.6 - 718.9
Operating costs excluding
depreciation and amortisation (217.5) (65.2) (83.3) (111.2) (25.9) (503.1)
-------- ---------- ------- -------- ---------- --------
EBITDA (1) 141.8 58.5 37.0 4.4 (25.9) 215.8
Depreciation and amortisation (24.1) (11.6) (21.1) (10.1) (2.4) (69.3)
--------
Reportable segment profit
/ (loss) before separately
disclosed items 117.7 46.9 15.9 (5.7) (28.3) 146.5
Amortisation of acquisition
related intangible assets
(Note 5) (38.5) - - (20.3) - (58.8)
--------------------------------- -------- ---------- ------- -------- ---------- --------
Operating profit 79.2 46.9 15.9 (26.0) (28.3) 87.7
--------------------------------- -------- ---------- ------- -------- ---------- --------
Reportable business segment information for the six months ended
30 June 2018:
Online Australia Retail US Corporate Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- -------- ---------- ------- ------- ---------- --------
Revenue from external customers 461.6 182.1 162.3 60.7 - 866.7
Cost of sales (108.9) (51.0) (36.0) (13.7) - (209.6)
-------- ---------- ------- ------- ---------- --------
Gross profit 352.7 131.1 126.3 47.0 - 657.1
Operating costs excluding
depreciation, amortisation
and impairment (210.8) (72.4) (91.9) (38.0) (27.3) (440.4)
-------- ---------- ------- ------- ---------- --------
EBITDA (1) 141.9 58.7 34.4 9.0 (27.3) 216.7
Depreciation and amortisation (20.8) (7.8) (10.2) (4.1) - (42.9)
--------
Reportable segment profit
/ (loss) before separately
disclosed items 121.1 50.9 24.2 4.9 (27.3) 173.8
Amortisation of acquisition
related intangible assets
(Note 5) (42.2) - - (2.0) - (44.2)
Impairment of goodwill
and intangible assets (Note
5) - - - (27.2) - (27.2)
----------------------------------- -------- ---------- ------- ------- ---------- --------
Reportable segment profit
/ (loss) after amortisation
of acquisition related
intangible assets and impairment
of goodwill and intangible
assets 78.9 50.9 24.2 (24.3) (27.3) 102.4
----------------------------------- -------- ---------- ------- ------- ----------
Restructuring and strategic
initiatives (2) (Note 5) (12.5)
Operating profit 89.9
--------
1 EBITDA is defined as profit for the period before depreciation,
amortisation and impairment, financial income, financial expense
and tax expense / credit. It is considered by the Directors
to be a key measure of the Group's financial performance. Note
as a result of the adoption of IFRS 16 Leases from 1 January
2019, under the modified retrospective approach, the rent expense
which in 2018 was reflected in operating costs excluding depreciation,
amortisation and impairment, is no longer recorded as an expense
in 2019 but is replaced by a depreciation charge and finance
expense which are recorded after EBITDA. There is no restatement
of comparative information. See Note 2 for further detail on
the impact of IFRS 16.
2 The Group does not allocate restructuring and strategic initiative
costs to reportable segments.
4. Operating segments (continued)
Reconciliation of reportable segments to Group totals:
Six months Six months
ended ended
30 June 2019 30 June 2018
GBPm GBPm
----------------------------------------- -------------- --------------
Revenue
Total revenue from reportable segments,
being total Group revenue 1,019.9 866.7
----------------------------------------- -------------- --------------
Profit and loss
Operating profit 87.7 89.9
Unallocated amounts:
Financial income 0.4 18.6
Financial expense (7.1) (2.5)
Profit before tax 81.0 106.0
----------------------------------------- -------------- --------------
Disaggregation of revenue under IFRS 15
Group revenue disaggregated by product line for the six months
ended 30 June 2019:
Online Australia Retail US Total
GBPm GBPm GBPm GBPm GBPm
--------------------- ------- ---------- ------- ------ --------
Sports revenue(1) 334.2 206.8 113.4 140.0 794.4
Gaming revenue 162.8 - 42.8 19.9 225.5
--------------------- ------- ---------- ------- ------ --------
Total Group revenue 497.0 206.8 156.2 159.9 1,019.9
--------------------- ------- ---------- ------- ------ --------
Group revenue disaggregated by product line for the six months
ended 30 June 2018:
Online Australia Retail US Total
GBPm GBPm GBPm GBPm GBPm
--------------------- ------- ---------- ------- ----- ------
Sports revenue(1) 335.0 182.1 108.1 51.6 676.8
Gaming revenue 126.6 - 54.2 9.1 189.9
--------------------- ------- ---------- ------- ----- ------
Total Group revenue 461.6 182.1 162.3 60.7 866.7
--------------------- ------- ---------- ------- ----- ------
(1) Sports revenue comprises sportsbook, exchange sports
betting, daily fantasy sports and pari-mutuel betting.
Group revenue disaggregated by geographical market for the six
months ended 30 June 2019:
Online Australia Retail US Total
GBPm GBPm GBPm GBPm GBPm
--------------------- ------- ---------- ------- ------ --------
UK 334.3 - 87.2 - 421.5
Ireland 54.7 - 69.0 - 123.7
Australia - 206.8 - - 206.8
US - - - 159.9 159.9
Rest of World 108.0 - - - 108.0
--------------------- ------- ---------- ------- ------ --------
Total Group revenue 497.0 206.8 156.2 159.9 1,019.9
--------------------- ------- ---------- ------- ------ --------
Group revenue disaggregated by geographical market for the six
months ended 30 June 2018:
Online Australia Retail US Total
GBPm GBPm GBPm GBPm GBPm
--------------------- ------- ---------- ------- ----- ------
UK 329.5 - 96.6 - 426.1
Ireland 53.5 - 65.7 - 119.2
Australia - 182.1 - - 182.1
US - - - 60.7 60.7
Rest of World 78.6 - - - 78.6
--------------------- ------- ---------- ------- ----- ------
Total Group revenue 461.6 182.1 162.3 60.7 866.7
--------------------- ------- ---------- ------- ----- ------
Seasonality
The Group's sportsbook revenue is driven by a combination of the
timing of sporting and other events and the Group's results derived
from those events. Gaming and other revenue is not as dependent on
the sporting calendar.
5. Separately disclosed items
Six months Six months
ended ended
30 June 2019 30 June 2018
GBPm GBPm
Amortisation of acquisition related
intangible assets (58.8) (44.2)
Impairment of goodwill and intangible
assets - (27.2)
Gain on contingent consideration - 10.7
Restructuring and strategic initiatives - (12.5)
Profit on disposal of investment - 7.0
Operating profit impact of separately
disclosed items (58.8) (66.2)
------------------------------------------ -------------- --------------
Tax credit on separately disclosed items 9.4 6.9
Total separately disclosed items (49.4) (59.3)
------------------------------------------ -------------- --------------
Attributable to:
Equity holders of the Company (39.4) (59.3)
Non-controlling interest (10.0) -
------------------------------------------ -------------- --------------
(49.4) (59.3)
------------------------------------------ -------------- --------------
Amortisation of acquisition related intangible assets
Non-cash amortisation of GBP58.8m has been incurred in the
period (six months ended 30 June 2018: GBP44.2m) as a result of
intangible assets separately identified under IFRS 3 as a result of
the Merger with Betfair in 2016 and the acquisitions of FanDuel
Limited in 2018 and Adjarabet in 2019.
Impairment of goodwill and intangible assets
During the six months ended 30 June 2018, non-cash impairments
amounting to GBP27.2m in relation to primarily goodwill and
intangible assets associated with our DRAFT business were incurred
(see Note 8). There were no such impairments in the six months
ended 30 June 2019.
Gain on contingent consideration
The movement in the value of contingent consideration during the
six months ended 30 June 2018, relates to the contingent
consideration that the Group has deemed is no longer payable
arising in respect of the DRAFT acquisition. No such item was
incurred in 2019.
Restructuring and strategic initiatives
This relates to incremental, one-off costs incurred during the
six months ended 30 June 2018, as a result of significant
restructuring and strategic changes made following the appointment
of a new CEO, and transaction costs arising during the period from
the combination of Betfair US with FanDuel. No such costs were
incurred in 2019.
Profit on disposal of investment
In February 2018, the Group disposed of its remaining 31.4%
non-controlling interest in LMAX Limited for cash consideration
amounting to GBP21.9m to the existing majority LMAX shareholders
generating a profit of GBP7.0m.
Restructuring and strategic initiatives and replacement share
options are included in the condensed consolidated interim income
statement within operating costs excluding depreciation,
amortisation and impairment. Amortisation of acquisition related
intangible assets is included within depreciation and amortisation
and impairment of goodwill and intangible assets is included within
impairment. The profit on sale of investment and gain on contingent
consideration are included within financial income.
6. Tax expense
Tax is accrued for the interim reporting period using
management's best estimate of the weighted average tax rate that is
expected to be applicable to estimated total annual earnings. This
expected annual effective tax rate is applied to the taxable income
of the interim period.
The Group's underlying effective tax rate before separately
disclosed items for the period was 16.3% (six months ended 30 June
2018: 14.5%), which compares to the standard Irish corporation tax
rate of 12.5%. A tax credit on separately disclosed items amounting
to GBP9.4m was accounted for in the period ended 30 June 2019 (six
months ended 30 June 2018: GBP6.9m) (see Note 5).
7. Earnings per share
The Group presents basic and diluted earnings per share ("EPS")
data for its ordinary shares. Basic EPS is calculated by dividing
the profit or loss attributable to ordinary shareholders of the
Company by the weighted average number of ordinary shares
outstanding during the period. The weighted average number of
shares has been adjusted for amounts held as Treasury Shares and
amounts held by the Flutter Entertainment plc Employee Benefit
Trust ("EBT").
Diluted EPS is determined by adjusting the weighted average
number of ordinary shares outstanding for the effects of all
dilutive potential ordinary shares.
Adjusted EPS is determined by adjusting the profit attributable
to ordinary shareholders for the impact of separately disclosed
items.
The calculation of basic, diluted and adjusted EPS is as
follows:
Six months Six months
ended ended
30 June 30 June 2018
2019
---------------------------------------------- ----------- --------------
Numerator in respect of basic and diluted
earnings per share (GBPm):
Profit attributable to equity holders
of the Company 76.9 88.0
---------------------------------------------- ----------- --------------
Numerator in respect of adjusted earnings
per share (GBPm):
Profit attributable to equity holders
of the Company 76.9 88.0
Separately disclosed items (Note 5) 39.4 59.3
---------------------------------------------- ----------- --------------
Profit for adjusted earnings per share
calculation 116.3 147.3
Weighted average number of ordinary shares
in issue during the period (in '000s) 78,635 84,838
---------------------------------------------- ----------- --------------
Basic earnings per share GBP0.978 GBP1.037
---------------------------------------------- ----------- --------------
Adjusted basic earnings per share GBP1.480 GBP1.736
---------------------------------------------- ----------- --------------
Adjustments to derive denominator in respect of
diluted earnings per share (in '000s):
Weighted average number of ordinary shares
in issue during the period 78,635 84,838
Dilutive effect of share options and
awards on issue 218 339
---------------------------------------------- ----------- --------------
Adjusted weighted average number of ordinary
shares in issue during the period 78,853 85,177
---------------------------------------------- ----------- --------------
Diluted earnings per share GBP0.975 GBP1.033
---------------------------------------------- ----------- --------------
Adjusted diluted earnings per share GBP1.476 GBP1.729
---------------------------------------------- ----------- --------------
The average market value of the Company's shares of GBP60.15 (30
June 2018: GBP78.77) was used to calculate the dilutive effect of
share options based on the market value for the period that the
options were outstanding.
The number of options excluded from the diluted weighted average
number of ordinary shares calculation due to their effect being
anti-dilutive is 396,342 (30 June 2018: 354,049).
8. Goodwill
The following cash generating units, being the lowest level of
asset for which there are separately identifiable cash flows, have
the following carrying amounts of goodwill:
Online Australia US UK Retail Irish Total
GBPm GBPm GBPm GBPm Retail GBPm
GBPm
------------------------------ ------------- ------------- ------------- ---------- ----------- -------------
Balance at 1 January
2018 3,432.6 44.6 369.5 18.7 19.8 3,885.2
Arising on acquisitions
during the year - - 191.3 0.2 0.9 192.4
Impairment - - (26.5) - - (26.5)
Foreign currency translation
adjustment 0.1 (2.1) 26.2 - - 24.2
------------------------------ ------------- ------------- ------------- ---------- ----------- -------------
Balance at 31 December
2018 3,432.7 42.5 560.5 18.9 20.7 4,075.3
Arising on acquisitions
during the period
(Note 9) 69.1 - - - - 69.1
Foreign currency translation
adjustment (2.8) 0.1 4.8 - - 2.1
------------------------------ ------------- ------------- ------------- ---------- ----------- -------------
Balance at 30 June
2019 3,499.0 42.6 565.3 18.9 20.7 4,146.5
------------------------------ ------------- ------------- ------------- ---------- ----------- -------------
The Group reviews the carrying value of goodwill for impairment
annually (or more frequently if there are indications that the
value of goodwill may be impaired) by comparing the carrying values
of these cash generating units with their recoverable amounts
(being the higher of value in use and fair value less costs to
sell).
9. Business combinations
Six months ended 30 June 2019
Acquisition of Adjarabet
On 1 February 2019, the Group completed the acquisition of an
initial 51% controlling stake in Adjarabet, the market leader in
online betting and gaming in the regulated Georgian market. The
Group, through agreed option agreements, expects to acquire the
remaining 49% after three years.
In 2018, Adjarabet generated revenues (unaudited) of 215m
Georgian Lari (GEL) (GBP64m) and EBITDA (unaudited) of GEL68m
(GBP20m). The initial cash consideration being paid by the Group
for the 51% stake is GBP102m. A mechanism has also been agreed,
consisting of call and put options, which enables the Group to
acquire the remaining 49% after three years at a valuation
equivalent to 7 times 2021 EBITDA. The call/put option
consideration can be settled, at the Group's election, in cash or
shares.
Since the date of acquisition to 30 June 2019, Adjarabet
business has contributed GBP28.6m of revenue and GBP8.0m of
operating profit.
If the Adjarabet acquisition had occurred on 1 January 2019,
then their contribution to revenue and operating profit would have
been GBP33.5m and GBP8.7m respectively for the period ended 30 June
2019.
Details of the fair value of identifiable assets and liabilities
acquired, purchase consideration and goodwill are as follows:
Included within the intangible assets were GBP74.4m of
separately identifiable intangibles comprising brand and, customer
relations acquired as part of the acquisition, with the additional
effect of a deferred tax liability of GBP11.1m thereon. These
intangible assets are being amortised over their useful economic
lives of up to ten years. Receivables acquired amounted to GBP1.2m.
The book value equated to the fair value as all amounts are
expected to be received.
9. Business combinations (continued)
The main factors leading to the recognition of goodwill (none of
which is deductible for tax purposes) is growth by combining
business activities, a strong workforce, leveraging existing
products and synergy savings. The goodwill has been allocated to
the existing Online CGU and it has been deemed that a separate CGU
is not appropriate.
Provisional
fair values
as at
1 February 2019
GBPm
------------------------------------ -----------------
Assets
Property, plant and equipment 2.6
Intangible assets 75.6
------------------------------------ -----------------
Total non-current assets 78.2
------------------------------------ -----------------
Trade and other receivables 2.7
Financial assets - restricted cash 1.6
Cash and cash equivalents acquired 0.2
Total current assets 4.5
------------------------------------ -----------------
Total assets 82.7
------------------------------------ -----------------
Liabilities
Trade and other payables 4.8
Customer balances 1.6
Total current liabilities 6.4
------------------------------------ -----------------
Trade and other payables 0.7
Deferred tax liabilities 11.1
Total non-current liabilities 11.8
------------------------------------ -----------------
Total liabilities 18.2
------------------------------------ -----------------
Net assets acquired 64.5
Goodwill 69.1
Non-controlling interest measured
at the fair value of net assets
identified (31.6)
------------------------------------ -----------------
Consideration 102.0
------------------------------------ -----------------
The consideration is analysed as:
Consideration paid in cash 102.0
Consideration 102.0
------------------------------------ -----------------
9. Business combinations (continued)
Six months ended 30 June 2018
Shop property business acquisitions
In 2018, the Group, in the absence of available comparable sites
for organic shop openings, acquired a number of licensed bookmaking
businesses in Ireland and the UK.
Details of the net assets acquired and the goodwill arising on
these acquisitions under IFRS are as follows:
Fair values
30 June
2018
GBPm
------------------------------------------------ -------------
Goodwill arising on acquisition - Irish Retail
and UK Retail 1.0
------------------------------------------------ -------------
Consideration 1.0
------------------------------------------------ -------------
The consideration is analysed as:
Cash consideration 0.9
Deferred and contingent consideration 0.1
------------------------------------------------ -------------
Consideration 1.0
------------------------------------------------ -------------
The principal factors contributing to the Irish Retail and UK
Retail goodwill balance is the well-established nature of the
acquired businesses within the locations in which they operate and
the potential synergies, rebranding opportunities and operational
efficiencies achievable for the acquired businesses within the
group. Information in respect of revenue, operating profit and cash
flows for the acquired businesses in respect of the period from
acquisition and for the period ended 30 June 2018 has not been
presented on the basis of immateriality.
Net cash outflow from purchase of businesses
Six months Six months
ended ended
30 June 2019 30 June 2018
GBPm GBPm
---------------------------------------------- -------------- --------------
Cash consideration - acquisitions in
the period 102.0 0.9
Cash acquired - acquisitions in the (0.2) -
period
Cash consideration - acquisitions in
previous periods 2.8 1.5
104.6 2.4
---------------------------------------------- -------------- --------------
Analysed for the purposes of the statement
of cash flows as:
Purchase of businesses 102.0 0.9
Cash acquired - acquisitions in the (0.2) -
period
Payment of contingent deferred consideration 2.8 1.5
---------------------------------------------- -------------- --------------
104.6 2.4
---------------------------------------------- -------------- --------------
10. Trade and other receivables
Non-current assets
30 June 2019 31 December
GBPm 2018
GBPm
Other receivables
Prepayments 5.6 8.9
Amounts paid in respect of
legacy German and Greek tax 40.9 -
assessments (Note 1)
46.5 8.9
Current assets
30 June 2019 31 December
GBPm 2018
GBPm
Trade and other receivables
Trade receivables 6.7 5.1
Other receivables 8.8 6.9
Value-added tax and goods
and services tax 2.6 2.1
Prepayments 59.7 67.7
77.8 81.8
Note 1
On 13 February 2019, the Group provided an update on two
separate disputed legacy tax assessments. The first relates to the
Betfair Exchange in Germany, which operated there until November
2012, and the second relates to the paddypower.com business in
Greece.
The Hessen Fiscal Court provided the Group with its decision
relating to the Group's appeal of a 2012 German tax assessment
relating to the Betfair Exchange, which operated in Germany until
November 2012. The Fiscal Court found against the Group and deemed
that a tax liability of approximately EUR40m (GBP36m) is payable
(including accrued interest). This represents a multiple of the
revenues generated by the Exchange during the assessment
period.
Separately, the Group was recently issued with a Greek tax
assessment for financial years 2012, 2013 and 2014, relating to
paddypower.com's Greek interim licence. This assessment concluded
that the Group is liable to pay EUR15.0m in taxes including
penalties and interest. This is substantially higher (by multiples)
than the total cumulative revenues ever generated by paddypower.com
in Greece.
The Group strongly disputes the basis of these assessments, and
in line with the legal and tax advice we have received, is
confident in our grounds to appeal. We therefore intend to do so.
Accordingly, we have not provided for these amounts in our
financial statements. Pending the outcome of these appeals, we paid
the total Greek liability in 2019 and EUR30.6m of the German tax
liability with the remainder to be paid in the second half of
2019.
11. Financial assets and cash and cash equivalents
30 June 2019 31 December
GBPm 2018
GBPm
Financial assets - restricted cash 152.8 167.2
Cash and cash equivalents 104.0 123.7
256.8 290.9
Included in financial assets - restricted cash at 31 December
2018 are bank deposits which were either (1) restricted at that
date, as they represented customer funds balances securing player
funds held by the Group or (2) required to be held to guarantee
third party letter of credit facilities. These customer funds that
are not held in trust are matched by liabilities of equal
value.
As at 30 June 2019, GBP391.1m (31 December 2018: GBP368.4m) was
held in trust in The Sporting Exchange (Clients) Limited on behalf
of the Group's customers and is equal to the amounts deposited into
customer accounts. Neither cash and cash equivalents or restricted
cash include these balances on the basis that they are held on
trust for customers and do not belong to and are not at the
disposal of the Group.
12. Trade and other payables and derivative financial
liabilities
Current liabilities
30 June 2019 31 December
GBPm 2018
GBPm
Trade and other payables
Trade payables 18.0 21.3
Liability to purchase own
shares - 86.8
Lease liabilities 35.4 -
Accruals and other payables 432.9 424.7
486.3 532.8
Derivative financial liabilities
Sports betting open positions 13.5 20.1
Non-current liabilities
30 June 2019 31 December
GBPm 2018
GBPm
Trade and other payables
Lease liabilities 110.0 -
Accruals and other payables 13.6 26.2
123.6 26.2
Derivative financial liabilities
Sports betting open positions 0.7 0.9
The liability to purchase own shares at 31 December 2018 relates
to an obligation arising under a buyback agreement for the purchase
of the Company's own shares (see Note 16). The share buyback was
completed in full in 2019.
Included in non-current accruals and other payables at 30 June
2019 is deferred and contingent consideration of GBP13.3m (31
December 2018: GBP17.0m) due to Betfair's historical acquisition of
HRTV, a horseracing television network based in the United States.
The amount payable at 30 June 2019 amounted to GBP20.3m (31
December 2018: GBP21.5m), with GBP7.0m due within one year (31
December 2018: GBP4.5m) and GBP13.3m due after one year from the
reporting date (31 December 2018: GBP17.0m).
13. Financial instruments
Carrying amounts versus fair values
There are no differences between the fair values of financial
assets and financial liabilities at 30 June 2019 or 31 December
2018 and their respective carrying amounts in the consolidated
statement of financial position. It has been determined for
financial instruments carried at amortised cost, that the carrying
amount represents a reasonable approximation of fair value.
Financial instruments carried at fair value
Fair value hierarchy
The table below analyses recurring fair value measurements for
financial assets and financial liabilities. These fair value
measurements are categorised into different levels in the fair
value hierarchy based on the inputs to the valuation method used.
The different levels are defined as follows:
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities that the Group can access
at the measurement date;
-- Level 2: inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly
or indirectly; and
-- Level 3: unobservable inputs for the asset or liability.
13. Financial instruments (continued)
30 June 2019
Level 1 Level 2 Level 3 Total
GBPm GBPm GBPm GBPm
Investments - - 0.1 0.1
Derivative financial liabilities - - (14.2) (14.2)
Non-derivative financial
liabilities - - (20.5) (20.5)
Total - - (34.7) (34.7)
31 December 2018
Level 1 Level 2 Level 3 Total
GBPm GBPm GBPm GBPm
Investments - - 2.4 2.4
Derivative financial liabilities - - (21.0) (21.0)
Non-derivative financial
liabilities - - (21.8) (21.8)
Total - - (42.8) (42.8)
Basis for determining fair values
The following are the significant methods and assumptions used
to estimate the fair values of the financial instruments carried at
fair value:
Investments (Level 3)
The fair value of investments is based on a discounted cash flow
model. The significant unobservable inputs are the future cash
flows of the business including a terminal growth rate, the
discount rate and also discounts for lack of marketability and lack
of control that pertains to the minority stake held by the
Group.
Derivative financial liabilities (Level 3)
Derivative financial liabilities comprise sports betting open
positions. The fair value of open sports bets at the period end has
been calculated using the latest available prices on relevant
sporting events.
It is primarily based on expectations as to the results of
sporting and other events on which bets are placed. Changes in
those expectations and ultimately the actual results when the
events occur will result in changes in fair value. There are no
reasonably probable changes to assumptions and inputs that would
lead to material changes in the fair value methodology although
final value will be determined by future sporting results.
Non-derivative financial liabilities (Level 3)
Non-derivative financial liabilities includes contingent
consideration. The contingent consideration payable is determined
with reference to forecast performance for the acquired businesses
during the relevant time periods and the amounts to be paid in such
scenarios. The fair value was estimated by assigning probabilities
to the potential payout scenarios. The significant unobservable
inputs are forecast performance for the acquired businesses.
The fair value of contingent consideration is primarily
dependent on forecast performance for the acquired businesses
against predetermined targets. An increase and decrease of 10% in
forecast performance for the acquired businesses during the
relevant time periods would increase and decrease the value of
contingent consideration at 30 June 2019 by GBP0.9m and GBP0.9m
respectively (31 December 2018: GBP0.9m and GBP0.9m).
Financial risk management - credit risk of trade and other
receivables
The Group's financial risk management objectives and policies
are consistent with those disclosed in the consolidated financial
statements for the year ended 31 December 2018.
14. Borrowings
Current liabilities
30 June 2019 31 December
GBPm 2018
GBPm
Accrued interest on borrowings 0.5 0.4
Non-current liabilities
30 June 2019 31 December
GBPm 2018
GBPm
Revolving credit facility 210.3 285.0
Term Loan facility 250.0 -
Less: expenses relating to revolving
credit and term facilities (2.2) (2.0)
458.1 283.0
In 2015, the Group secured a committed revolving credit bank
loan facility ("RCF") of EUR300m provided by a syndicate of banks
which was scheduled to expire in May 2020. In 2018, the RCF was
amended to an amount of GBP450m and was extended to expire in April
2023. In May 2019, the RCF was amended to update the financial
covenants and margin grid, as per those outlined below. In May
2019, the Group also secured a term loan facility of GBP250m
provided by a syndicate of banks. The term loan facility is for an
initial period of 18 months with an option to extend further by up
to 12 months.
At 30 June 2019, GBP170m and EUR45m, totalling to GBP210.3m (31
December 2018: GBP285m) of the RCF was drawn down.
Borrowings under the RCF and the term loan facility are
unsecured but are guaranteed by the Company and certain of its
operating subsidiaries. Borrowings under the RCF incur interest at
LIBOR (for borrowings denominated in pounds sterling) and EURIBOR
(for borrowings denominated in euro) plus a margin of between 1.10%
and 2.50%. A commitment fee, equivalent to 35% of the margin, is
payable in respect of available but undrawn borrowings. Borrowings
under the term loan facility incur interest at LIBOR plus a margin
of between 0.60% and 2.40%.
It is the Directors' opinion that due to the Group's bank
borrowings being subject to floating interest rates and the proven
cash generation capability of the Group, there is no significant
difference between the book value and fair value of the Group's
borrowings.
Under the terms of the both the RCF and term loan facility, the
Group is required to comply with the following financial covenants
on a semi-annual basis.
-- Net Leverage Ratio: Consolidated net borrowings shall not be
more than 3.5 times underlying consolidated EBITDA (with
acquisition spikes in the event of material acquisitions, to 4.0
times for a period of six months, stepping back to 3.75 times for
the subsequent six months, before returning to 3.5 times).
-- Interest Cover Ratio: Underlying consolidated EBITDA shall
not be less than 4.0 times net finance charges.
During the period ended 30 June 2019, all covenants have been
complied with.
15. Dividends paid on ordinary shares
Six months Six months
ended ended
30 June 2019 30 June 2018
GBPm GBPm
Ordinary shares:
* final dividend of GBP1.33 per share for the year
ended 31 December 2018 (31 December 2017: GBP1.35) 104.0 114.0
The Directors have proposed an interim dividend of 67.0 pence
per share which will be paid on 9 October 2019 to shareholders on
the Company's register of members at the close of business on the
record date of 6 September 2019. This dividend, which amounts to
approximately GBP52m, has not been included as a liability at 30
June 2019.
The interim dividend for the period ended 30 June 2018 was 67.0
pence per share, amounting in total to GBP55.0m.
16. Changes in equity
During the six month period ended 30 June 2019, 132,966 ordinary
shares (six months ended 30 June 2018: 174,864) were issued as a
result of the exercise of share options, giving rise to a share
premium of GBP0.3m (six months ended 30 June 2018: GBP1.7m).
The GBP500m share buyback programme, which commenced on 29 May
2018 completed in February 2019. Under this programme, the Company
repurchased for cancellation 6,993,308 ordinary shares for a total
consideration of approximately GBP500m. This consisted of a GBP200m
share buyback programme announced on 29 May 2018 which was
completed in August 2018 and in August 2018, the Group commenced a
second buyback programme of GBP300m which was ongoing at 31
December 2018. Overall in 2018 cash payments of GBP413.7m had been
made in respect of the repurchases and a further GBP1.3m for other
transaction related costs were made. Between 31 December 2018 and 6
February 2019 further payments of GBP86.4m in respect of share
purchases and GBP0.4m for other transaction related costs were
made. The nominal value of the shares cancelled during the six
months ending 30 June 2019 was GBP0.1m.
As at 30 June 2019, 1,965,600 ordinary shares were held in
treasury (30 June 2018: 1,965,600). All rights (including voting
rights and the right to receive dividends) in the shares held in
treasury are suspended until such time as the shares are reissued.
The Group's distributable reserves are restricted by the value of
the treasury shares, which amounted to GBP40.7m as of 30 June 2019
(30 June 2018: GBP40.7m).
At 30 June 2019, the Flutter Entertainment plc Employee Benefit
Trust (the "EBT") held a further 97,948 (30 June 2018: 154,284
shares) of Flutter Entertainment plc shares in respect of potential
future awards relating to the Group's employee share plans, which
were acquired at a total cost of GBP8.4m (30 June 2018: GBP12.8m).
The Group's distributable reserves at 30 June 2019 are further
restricted by this cost amount.
As detailed in the condensed consolidated interim statement of
changes in equity during the six month period ended 30 June 2019,
the movement in the share-based payment reserve and in the shares
held by the EBT is due to the equity-settled share-based payments
charge and the vesting and exercising of share-based payments
awards. A total of 2,124 shares in respect of share-based payments
awards and related dividends were vested from the EBT to certain
staff during the six months ended 30 June 2019 (six months ended 30
June 2018: 46,689 shares).
The movement in the foreign exchange translation reserve in the
six months to 30 June 2019 reflects the strengthening of USD
against GBP in the period, partially offset by the weakening of GEL
against GBP in the period.
At 30 June 2019, other reserves comprise undenominated capital
and a net wealth tax reserve.
17. Contingent liabilities
The Group operates in an uncertain marketplace where many
governments are either introducing or contemplating new regulatory
or fiscal arrangements.
The Board monitors legal and regulatory developments and their
potential impact on the business, however given the lack of a
harmonised regulatory environment, the value and timing of any
obligations in this regard are subject to a high degree of
uncertainty and cannot always be reliably predicted. See Note 10
for details of legacy German and Greek tax assessments.
As mentioned in Note 14, borrowings under the RCF are unsecured
but are guaranteed by the Company and certain of its operating
subsidiaries.
18. Related parties
There were no material transactions with related parties during
the six months ended 30 June 2019 or 30 June 2018 or the year ended
31 December 2018.
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
19. Events after the reporting date
Dividend
In respect of the current period, the Directors propose that an
interim dividend of 67.0 pence per ordinary share of EUR 0.09 each
(2018: 67.0 pence per share) be paid to shareholders on 9 October
2019. This dividend has not been included as a liability in these
condensed consolidated interim financial statements. The proposed
dividend is payable to all shareholders on the register of members
on 6 September 2019. The total estimated dividend to be paid
amounts to GBP52m (2018: GBP55m).
INDEPENT REVIEW REPORT TO FLUTTER ENTERTAINMENT PLC
Introduction
We have been engaged by Flutter Entertainment plc ('the
Company') to review the condensed set of financial statements in
the half-yearly financial report for the six months ended 30 June
2019 which comprises the condensed consolidated interim income
statement, the condensed consolidated interim statement of other
comprehensive income, the condensed consolidated interim statement
of financial position, the condensed consolidated interim statement
of cash flows, the condensed consolidated interim statement of
changes in equity and the related explanatory notes. Our review was
conducted having regard to the Financial Reporting Council's
("FRCs") International Standard on Review Engagements ("ISRE") (UK
and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity'.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly report for the six months ended 30 June 2019 is
not prepared, in all material respects, in accordance with IAS 34
'Interim Financial Reporting' as adopted by the EU, the
Transparency (Directive 2004/109/EC) Regulations 2007, and the
Transparency Rules of the Central Bank of Ireland.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Transparency Directive and the Transparency Rules of the
Central Bank of Ireland.
As disclosed in Note 1, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The directors are
responsible for ensuring that the condensed set of financial
statements included in the half-yearly financial report in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review having regard to the Financial Reporting
Council's International Standard on Review Engagements (UK and
Ireland) 2410 Review of Interim Financial Information Performed by
the Independent Auditor of the Entity. A review of interim
financial information consists of making enquiries, primarily of
persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (Ireland) and consequently
does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
We read the other information contained in the half-yearly
financial report to identify material inconsistencies with the
information in the condensed set of financial statements and to
identify any information that is apparently materially incorrect
based on, or materially inconsistent, the knowledge acquired by us
in the course of performing the review. If we become aware of any
apparent material misstatements or inconsistencies we consider the
implications for our report.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Company in meeting the
requirements of the Transparency Directive and the Transparency
Rules of the Central Bank of Ireland. Our review has been
undertaken so that we might state to the Company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our
review work, for this report, or for the conclusions we have
reached.
Cliona Mullen 6 August 2019
for and on behalf of KPMG
Chartered Accountants
1 Stokes Place
St. Stephen's Green
Dublin 2
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BRGDICBGBGCL
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