TIDMFLTR

RNS Number : 7834V

Flutter Entertainment PLC

12 August 2022

12 August 2022

Flutter Entertainment plc - 2022 Interim Results

Strong recreational player growth; US profitable in Q2; Group in line with expectations

Flutter Entertainment plc (the "Group") announces interim results for six months ended 30 June 2022.

 
                                   Reported(1)                Adjusted(2) 
                               H1       H1             H1      H1 
                              2022     2021           2022    2021          CC(3) 
                              GBPm     GBPm    YoY %  GBPm    GBPm   YoY %  YoY % 
---------------------------  -------  -------  -----  -----  ------  -----  ----- 
Average monthly players(4) 
 ('000s)                                              8,716  7,625   +14% 
                                                             ------ 
Group Revenue                 3,388    3,053   +11%   3,388  3,053   +11%    +9% 
Group EBITDA(5)                434      562    -23%    476    597    -20%   -19% 
                                                             ------ 
Group EBITDA excluding 
 US                                                    608    684    -11%   -10% 
                                                             ------ 
(Loss)/Profit after 
 tax                          (112)    (86)            177    306    -42% 
                                                             ------ 
(Loss)/Earnings per 
 share (pence)               (64.7p)  (50.4p)         97.2p  171.1p  -43% 
                                                                            ----- 
Net Debt at period end(6)     3,004    2,682 
---------------------------  -------  -------  -----  -----  ------  -----  ----- 
 

Operational Highlights:

   --     Group: Positive revenue momentum of +9% driven by recreational player growth 
   -     Average monthly players ('AMPs') 1.1m or 14% higher at 8.7m 
   --     US: Adjusted EBITDA positive in Q2 

- Sports betting market share accelerated to 51%(7) in Q2 driven by FanDuel's superior product, efficient customer acquisition and strong operational execution

- Increasingly profitable player base underpinning confidence in full year 2023 EBITDA profit(8)

   --     Group ex-US: 

- UK & Ireland: H1 performance reflects safer gambling initiatives and prior year Covid frequency benefit; product improvements delivered in H1 support expected return to revenue growth in H2

   -     Australia: AMPs 10% higher with strong customer retention driving revenue growth 

- International: Investments in high growth markets generating strong returns, partially offsetting known headwinds; Acquisition of Sisal completed on 4th August 2022

- Three-year compound growth in revenue of 10% and in Adjusted EBITDA of 6% demonstrating growth through regulatory change, driven by operational execution, scale and diversification

-- Sustainability: Positive Impact Plan launched in March; Safer gambling tool usage at 34.8% of online customers, two percentage points up from December 2021(9)

Financial Highlights:

   --     Adjusted EBITDA of GBP476m (Reported EBITDA of GBP434m), in line with expectations 

- Increased US investment as the business scales and builds towards full year profitability in 2023(8)

- Proactive safer gambling initiatives and International regulatory changes improved sustainability of Group

-- Reported loss after tax of GBP112m (2021: GBP86m) after GBP286m charge for amortisation of acquired intangibles

-- Net debt increased GBP322m year-on-year to GBP3,004m at 30 June 2022 including H1 completion of Tombola acquisition. Leverage ratio of 3.4 times(6) (June 2021: 2.3 times), or 2.6 times excluding US losses

Outlook:

-- H2 has started in line with expectations. No discernible signs of a consumer slow down currently, but we are closely monitoring key spend indicators given the uncertain macro economic outlook. Assuming normalised sports results, we anticipate full year EBITDA to be in line with market expectations:

- US: Net revenue ahead of expectations at between GBP2.3bn and GBP2.5bn ($2.85bn - $3.1bn) and Adjusted EBITDA loss of between GBP225m and GBP275m

- Group ex-US : Adjusted EBITDA of between GBP1,290m and GBP1,390m including a five-month contribution from Sisal (completed 4 August)

   --     Hosting an investor day on our US business on 16 November 2022 

Peter Jackson, Chief Executive, commented:

"The first half of 2022 was positive for the Group with significant progress made against the strategic objectives we outlined in March. We expanded our recreational customer base by over one million players in the half and increased the proportion of customers using safer gambling tools to over one third.

We are particularly pleased with momentum in the US where we extended our leadership in online sports betting with FanDuel claiming a 51% share of the market and number one position in 13 of 15 states, helping contribute to positive earnings in Q2. We remain firmly on the path to profitability in 2023, driven by our compelling customer economics and disciplined investment.

Outside of the US, the business remains well positioned thanks to its leadership positions in its mature markets and the investment we are making in attractive, high growth markets such as India, Canada and Brazil. In the UK, while the delay in publishing the Gambling Act Review White Paper has been disappointing, we are confident that the safer gambling changes we have already made to date position us well for the future. In Australia, we delivered another excellent performance with revenue and players continuing to grow. We were also delighted to welcome Sisal to the Group earlier this month, a business that performed strongly during H1.

The second half of the year has started well and we look forward to the start of the football seasons in both the US and Europe. Being part of the Flutter Group provides unique strategic advantages to our portfolio of brands, giving access to expertise, technology and resources to drive performance and capitalise on further growth opportunities we see ahead."

 
Analyst briefing: 
 The Group will host a questions and answers call for institutional 
 investors and analysts this morning at 9:30am (BST). Ahead of that 
 call, a pre-recorded presentation will be made available on the Group's 
 corporate website ( www.flutter.com/investors ) from 8:00am. To dial 
 into the conference call, participants need to register here where 
 they will be provided with the dial in details to access the call. 
 
Contacts: 
 
Investor Relations: 
Paul Tymms, Group Director of Investor 
 Relations and FP&A                                    + 44 75 5715 5768 
Ciara O'Mullane, Director of Investor 
 Relations                                             + 353 87 947 7862 
Liam Kealy, Director of Investor Relations             + 353 87 665 2014 
 
Press: 
Kate Delahunty, Group Director of Corporate 
 Communications                                        + 44 78 1077 0165 
Lindsay Dunford, Group Head of Corporate 
 Affairs                                               + 44 79 3197 2959 
Rob Allen, Group Head of Corporate Campaigns           + 44 75 5444 1363 
Billy Murphy, Drury Communications                     + 353 1 260 5000 
James Murgatroyd, Finsbury                             + 44 20 7251 3801 
-----------------------------------------------------  -------------------- 
 

Business review (2-5)

The scale and diversification of the Group have been transformed during the last three years with the US accounting for over one third of Group revenue in Q2. FanDuel has strengthened its clear leadership position in US online sports betting, gaining market share through a combination of superior product, efficient customer acquisition and strong operational execution. Our US business was profitable during Q2 (GBP16m/$22m) and remains firmly on track to be EBITDA positive for the full year 2023(8) .

During the same period the Group's ex-US business has also grown and been reshaped. We have expanded our gold medal positions in the UK&I and Australia. With the recent acquisition of Sisal in Italy providing another number one position in one of the world's largest regulated markets, our International division is on a more sustainable footing with 86% of revenue from regulated or regulating markets(10) . These strong podium positions are combined with high growth opportunities in a number of markets that have significant long term market potential. The Group's track record of operational execution, combined with its scale and diversification give us confidence that the ex-US Group can continue to outgrow regulatory headwinds.

Being part of the Flutter Group provides unique strategic advantages to our portfolio of brands, driving both revenue growth and operating efficiencies. Our people have industry leading sports betting and gaming expertise, with high levels of talent and idea sharing in the Group. Our products enable the broadest and deepest range of options for local hero brands, while our technology stack delivers scalable, reliable platforms for growth. Our strong cash generation profile allows us to allocate resources to power the 'flywheel' at a local market level.

In March, we launched our sustainability strategy, the Positive Impact Plan. Good progress has been made in the half with (i) Safer gambling tool usage two percentage points higher at 34.8%(9) of AMPs, (ii) the launch of global advocacy and Pride groups and (iii) significant time (nearly 2,200 hours) and monetary (GBP1.1m) donations as we continue to contribute positively to the communities in which we operate.

H1 2022 review

The Group delivered positive top line momentum with revenue growth of 9% driven by a 14% increase in our recreational player base. Adjusted EBITDA of GBP476m included a GBP132m investment loss from our US division. The Group ex-US had Adjusted EBITDA of GBP608m, a 10% decline on the prior year, with continued growth in Australia, offset by our proactive safer gambling initiatives in the UK&I and regulatory changes in International markets, all as previously guided. Excluding these guided items, Group ex-US Adjusted EBITDA was 4% higher year-on-year.

US

Our US division delivered another excellent performance during H1. Quarterly revenue exceeded $750m for the first time in Q2 with positive Adjusted EBITDA of $22m in the same period. We expanded our clear number one position in the market, growing online sports betting market share(7) to 51% in Q2 and an overall combined online share of 36%(7) , clearly demonstrating our significant operational and structural advantages over the rest of the market. This competitive lead is delivered by winning in two key areas: (i) customer acquisition and (ii) product.

Customer acquisition: The strength of the FanDuel brand, coupled with strategic partnerships including Turner Sports and Pat McAfee, have ensured we are accessing the broader population of sports bettors more quickly, leading to faster adoption curves as each state launches. In the four years since launch, FanDuel has refined its state launch 'play book', converting customers from our daily fantasy sports database at a faster rate with each new state. Combined with a disciplined and efficient approach to marketing investment, FanDuel's cost per acquisition(11) has remained attractive at under $300.

Product: FanDuel has the best sports betting product in the market, benefitting from Flutter's global pricing and risk management capabilities. We are continually improving, with incremental features such as 'Same Game Parlay+', helping FanDuel fortify its sportsbook leadership position and maintain its competitive edge. Penetration of higher margin parlay products was over 80% of customers in Q2 and is a major factor in FanDuel's superior monetisation of customers. Retention rates also remain strong as customers favour FanDuel's market leading product. US customer cohorts are exhibiting reassuringly familiar characteristics to those in our existing established businesses, with each cohort's revenue growing year-on-year as the customer base matures.

We continue to improve our iGaming proposition, with the launch of FanDuel branded live dealer tables in the first half as well as adding new content to our platform. Through leveraging our market leading gaming capabilities in the Group, we are focusing on growing our market share in our existing five iGaming states and ensuring we are well positioned to leverage our sportsbook penetration as future states regulate.

Execution across customer acquisition and product continues to deliver attractive customer economics with payback periods of 12-18 months. As noted at our preliminary results announcement dated 1 March 2022, customer acquisition is now being funded by profits from existing customers. As the existing customers continue to become an increasingly large proportion of our total customer base, profits will increase, delivering an expected EBITDA profit for the full year 2023(8) . This pattern can be evidenced in H1, where sportsbook and iGaming contribution was more than three times greater than for the entire year in 2021.

In states that launched before 2021, bonus and marketing spend is reducing toward levels observed in existing businesses and profit margins are increasing. Operating leverage is also clearly evident as we have grown revenue more than twice as fast as other operating costs since H1 2019, with further operating efficiency expected as our US footprint expands. We estimate that New Jersey EBITDA margin is already 17%(12) despite the early stage of the market and continued disciplined investment behind the strong customer economics we see.

Group excluding the US

UK & Ireland

Revenue declined 4% as a result of our proactive safer gambling actions and the prior year Covid-related increase in player days, which has now moderated towards pre-Covid levels. The significant actions taken in 2021 to improve the sustainability of our business in advance of the Government's review of the Gambling Act had an annualised revenue impact of GBP48m during H1, in line with previous guidance. While the delay to the publication of the UK Gambling Act Review White Paper has been disappointing, our proactive safer gambling actions position us well for the future. In Ireland, we welcome and fully support the recent progress towards regulation, and we are meaningfully contributing to the legislative process.

Online performance has improved sequentially with Q2 just 4% lower versus 20% lower in Q1. This included a return to year-on-year gaming revenue growth in June 2022 as we lapped the introduction of some of these safer gambling measures, giving us confidence of delivering growth in H2. This growth will be driven by continued expansion of our recreational customer base, which has increased at a compound rate of 13% since 2019. Combined with our safer gambling initiatives just 5% of revenue, excluding Tombola, came from the highest value tier in H1. The proportion of revenue from our lowest value tier has increased by 14% percentage points since H1 2019 to 43%.

In H1, Sky Bet released a number of improvements to its pre-game sports betting product, including the launch of 'BuildABet', which has already been used by nearly one-third of football customers. Further enhancements are planned for H2. On the gaming side, Paddy Power continues to innovate its offering with branded slots content and free-to-play initiatives proving popular with direct gaming customers. Over 80% of customers are playing with our daily engagement tool 'Wonder Wheel', which is powering record gaming customer volumes and retention levels.

As we further integrate the businesses, we have also identified a range of efficiency initiatives:

-- Optimising the efficiency of marketing and promotional spend by delivering more value to the right customers at the right time and a greater allocation of spend to our more recreational brands

   --     Integrating more of the SBG technology stack onto proprietary platforms 
   --     Removing team structure complexity 

These initiatives will both help offset the current high inflationary headwinds we are seeing, and ensure the UK&I division is well-placed ahead of the pending Gambling Act Review.

Australia

Sportsbet delivered another strong performance, once again demonstrating excellent execution across product, value and brand. Following significant retail restrictions in H2 2021, we focused on retaining customers through targeted generosity initiatives ahead of the new AFL and NRL season in H1. As a result AMPs were 10% higher year-on-year, driving revenue growth of 5% despite the adverse impact of year-on-year sports results. Penetration of our long-established Same Game Multi product continues to increase and a number of new product features were rolled out during Q2, helping to drive player engagement levels. 'Same Game Multi Cash Out' and 'Same Game Multi Bet Tracker' have proven very popular with punters, further enhancing our market leading product.

We remain well positioned to capitalise on the recent Point of Consumption ('POC') tax changes announced in Queensland, New South Wales and the Australian Capital Territory which will cost an estimated GBP22m in 2022 with an annualised impact in 2023 of GBP73m (AUD $125m). Sportsbet has a strong track record of managing regulatory risk, having taken meaningful market share and grown profits after the initial implementation of POC taxes in 2019.

International

In our International division, we continue to refine our approach to the diverse range of markets we operate in. This consists of four categories where we will:

-- Consolidate our existing #1 positions and drive market share growth across Italy, Georgia, Armenia and Spain. Following the Sisal acquisition, Italy now accounts for approximately 50% of the division's EBITDA

-- Invest for leadership in the high growth regulated and regulating markets including Canada, Brazil and India. We will continue to innovate with PokerStars virtual reality poker and casino products, a top five experience in the Oculus app store and the highest revenue generating freemium product on the market

-- Optimise return on investment in key regulated markets by supporting the liquidity they provide with targeted marketing spend. While these markets have some attractive qualities, our current lack of scale limits the returns from increasing investment. This covers several, mostly European, regulated markets

-- Maintain existing position in the tail of remaining unregulated or non-regulating markets, which now make up 14% of revenue for the International division, of which the largest market is 0.3% of Flutter Group revenue(10)

The acquisition of Junglee in January 2021 is a great example of our investment in a high growth market. India is one of the fastest growing gaming market globally powered by both a doubling of India's internet and smartphone penetration, and a 45% increase in disposable income over the last five years. The online gaming market is expected to reach GBP4.2bn by 2026, from GBP1.4bn in 2021, of which rummy is the fastest growing segment, accounting for 57% of revenue(13) . Junglee is the fastest growing rummy brand and now number two in the rummy market. Product leadership and increased investment in player acquisition has resulted in compound growth of 73% in gross gaming revenue and 112% in players since H1 2019. Since acquisition, Flutter has added its global gaming product expertise and sophisticated marketing capabilities to accelerate Junglee's growth, in tandem with excellent execution from the local team.

Capital structure and balance sheet update(6)

The Group had gross debt of GBP3,785m(14) at 30 June 2022 and a net debt position of GBP3,004m (30 June 2021: GBP2,682m) which represents a leverage ratio of 3.4x. During the period the Group acquired Tombola for a cash cost of GBP410m in January and post period end the Group completed the acquisition of Sisal on 4 August 2022 utilising existing debt facilities.

This acquisition will result in an increased leverage ratio in the near term of 4.1 times or 3.3 times excluding US losses. As previously highlighted, the Group continues to generate significant free cash flow which will facilitate de-levering quickly. In addition, as the US business becomes profitable this will transform the earnings and debt profile of the Group.

The Group remains committed to its medium-term leverage target of 1-2 times at which point the Board will review the Group's dividend policy.

Other updates

As previously disclosed, the Group is in a legal arbitration process with FOX Corporation with respect to its option to acquire an 18.6% stake in FanDuel and related issues. The arbitration hearing commenced in June and, should the parties not reach a negotiated agreement in the interim, we expect a binding decision from the arbitrator in October 2022. The Group continues to vigorously defend its position.

Current trading/outlook

In the first 5 weeks to 7 August, Group revenue was in line with our expectations. We currently see no discernible signs of a consumer slow down and resultant reduced spending levels across our businesses. However, we will continue to closely monitor key spend indicators as we move through H2 given the uncertain macro economic outlook. Assuming normalised sport results for the remainder of the year, the Group anticipates:

-- US revenue of between GBP2.3bn - GBP2.5bn ($2.85bn - $3.1bn) and an Adjusted EBITDA loss of between GBP225m - GBP275m. This assumes we launch online in Kansas in Q4 2022

-- Group ex-US Adjusted EBITDA in line with market expectations of between GBP1,290m - GBP1,390m, including a five-month contribution from Sisal, which completed on 4 August 2022, and Australian point of consumption tax changes

The Group also anticipates for 2022:

-- An effective Group ex-US corporate tax rate for the full year of between 22% - 24% including Sisal

   --     Capital expenditure of between GBP360m - GBP390m including Sisal 
   --     A weighted average cost of debt for H2 of 3.4% 

Operating and financial review(1-6)

Group

 
 
                                           H1       H1                CC 
                                         2022     2021   Change   Change 
Unaudited Adjusted                       GBPm     GBPm        %        % 
------------------------------------  -------  -------  -------  ------- 
Average monthly players ('000s)         8,716    7,625     +14% 
 
Sports revenue                          2,118    1,894     +12%     +10% 
Gaming revenue                          1,270    1,159     +10%      +8% 
                                      -------  -------  -------  ------- 
Total revenue                           3,388    3,053     +11%      +9% 
 
Cost of sales                         (1,353)  (1,109)     +22%     +20% 
Cost of sales as a % of net revenue     39.9%    36.3%  +360bps  +350bps 
                                      -------  -------  -------  ------- 
 
Gross profit                            2,036    1,944      +5%      +3% 
 
Sales and marketing                     (819)    (728)     +12%      +9% 
                                      -------  -------  -------  ------- 
Contribution                            1,216    1,215       -%      -1% 
 
Other operating costs                   (686)    (563)     +22%     +19% 
Corporate costs                          (55)     (55)      -1%      -6% 
                                      -------  -------  -------  ------- 
 
Adjusted EBITDA(2,5)                      476      597     -20%     -19% 
Adjusted EBITDA margin %                14.1%    19.6%  -550bps  -500bps 
 
Depreciation and amortisation           (143)    (125)     +14%     +11% 
                                      -------  -------  -------  ------- 
Adjusted operating profit                 334      472     -29%     -28% 
 
Net finance expense                      (57)     (74)     -23% 
                                      -------  -------  -------  ------- 
Adjusted profit before tax                277      398     -30% 
 
Taxation                                (100)     (91)     +10% 
                                      -------  -------  -------  ------- 
Adjusted profit for the period            177      307     -42% 
 
Adjusted basic earnings per share       97.2p   171.1p     -43% 
 
Net debt(6) at period end               3,004    2,682     +12% 
------------------------------------  -------  -------  -------  ------- 
 

Note: Junglee, acquired in January 2021, Singular, acquired in September 2021 and Tombola, acquired in January 2022, have been included on a reported basis due to materiality. A full analysis of the Group's reported performance can be found at pages 16-17. A reconciliation to the Group's consolidated income statement is included in Appendix 2.

During the half we increased our recreational customer base by over one million monthly players to 8.7m, 14% higher than the prior year. The rapid expansion of our US business has been key to this growth, along with good underlying player momentum in the UK&I and Australia. This resulted in revenue growth of 9% to GBP3.4bn, including a 50% increase in the US. Outside of the US, the increase in revenue as a result of strong customer retention in Australia and the addition of Tombola was offset by regulatory changes in International markets and our proactive safer gambling initiatives in the UK&I, both of which put our business on a more sustainable footing for growth.

Cost of sales as a percentage of net revenue increased by 350 basis points to 39.9% with a greater proportion of revenue coming from higher direct cost markets.

Sales and marketing costs increased by 9% in line with revenue growth. Marketing spend in the US increased 29% as we acquired large volumes of new players but reduced as a percentage of revenue, declining by 620 basis points. Other operating costs increased 19% or 9% for Group ex-US where the return of retail and addition of Tombola more than offset synergies and cost efficiencies in the UK&I. Corporate costs remain tightly controlled.

Adjusted EBITDA was GBP476m with the US investment-led loss increasing by GBP46m to GBP132m, despite being profitable in Q2. As expected, Group ex-US Adjusted EBITDA was 10% lower due to the regulatory changes and safer gambling initiatives noted above. Excluding these headwinds, Adjusted EBITDA increased 4% in H1.

The Group's Adjusted effective tax rate in the period was 36.2% (HY 2021: 22.9%), primarily driven by the changing mix of taxable earnings across geographies. The Group ex-US effective tax rate in the period was 22% with the full-year 2022 adjusted Group ex-US effective tax rate expected to be between 22% and 24% (FY2021: 18.5%). This includes Sisal and reflects upward pressure due to profits earned in higher tax geographies.

Adjusted basic earnings per share reduced from 171p to 97p reflecting the lower Adjusted EBITDA and the increased tax charge in the current period.

Net debt at 30 June 2022 was GBP3,004m, a GBP322m increase on prior year, primarily due to the acquisition of Tombola in January 2022 and settlement of a historic legal case with the state of Kentucky offsetting the free cash flow generated by the operating activities of the Group.

A full analysis of the Group's reported performance can be found at pages 16-17.

US(3)

 
                                           H1       H1                CC 
                                         2022     2021   Change   Change 
Unaudited Adjusted                       GBPm     GBPm        %      US$ 
------------------------------------  -------  -------  -------  ------- 
Average monthly players ('000s)         2,188    1,470     +49% 
 
Sportsbook stakes                      10,911    5,072    +115%    +102% 
Sportsbook net revenue margin            6.0%     6.2%   -20bps   -20bps 
 
Sports revenue                            770      452     +70%     +58% 
Gaming revenue                            281      200     +41%     +31% 
                                      -------  -------  -------  ------- 
Total revenue                           1,051      652     +61%     +50% 
 
Cost of sales                           (544)    (293)     +86%     +73% 
Cost of sales as a % of net revenue     51.8%    44.9%  +680bps  +700bps 
                                      -------  -------  -------  ------- 
Gross profit                              507      359     +41%     +31% 
 
Sales and marketing                     (399)    (292)     +37%     +29% 
                                      -------  -------  -------  ------- 
Contribution                              108       67     +60%     +38% 
 
Other operating costs                   (240)    (154)     +56%     +46% 
                                      -------  -------  -------  ------- 
Adjusted EBITDA(2,5)                    (132)     (87)     +52%     +53% 
Adjusted EBITDA margin                (12.5%)  (13.3%)   +70bps   -30bps 
 
Depreciation and amortisation            (31)     (22)     +39%     +29% 
                                      -------  -------  -------  ------- 
Adjusted operating profit               (162)    (108)     +50%     +48% 
------------------------------------  -------  -------  -------  ------- 
 

The US division includes FanDuel, FOXBet, TVG, PokerStars and Stardust brands, offering regulated real money and free-to-play sports betting, casino, poker, daily fantasy sports and online racing wagering products to customers across various states in the US and in Canada.

Revenue grew 50% to GBP1.1bn ($1.4bn) in H1 with an Adjusted EBITDA loss of GBP132m ($176m). This was driven by efficient customer acquisition in new and existing states, our superior product driving strong customer economics and good operating efficiencies, offset by the cost of our sportsbook launch in New York where tax rates are higher. Within this performance FanDuel Group represented 97% of revenue and 80% of Adjusted EBITDA loss.

Sports revenue grew 58% with sportsbook revenue increasing by 91%. This was driven by staking growth which more than doubled year-on-year to over GBP10.9bn ($14.2bn). Our continued sportsbook expansion aided growth, with five new US states as well as Ontario, Canada added to our offering since H1 last year (Arizona in Q3 2021, Connecticut in Q4 2021 and New York, Louisiana and Wyoming in Q1 2022). A full six-month of revenues from Michigan and Virginia, which launched part way during Q1 2021 also provided a benefit to growth.

Net revenue margin of 6.0% was 40 basis points below expectations (GBP41m) due to a run of adverse sports results in Q1. Excluding this impact, net revenue margin would have been broadly flat year-on-year. Our improving product mix and superior pricing and risk management capabilities funded additional promotional generosity to acquire customers in the period in both new and existing states and also offset the impact of GBP63m in favourable sports results in the prior year.

Gaming revenue was 31% higher driven by an increase in AMPs of 40% and the full six months of revenue from the three additional gaming states launched in the prior year; Michigan (Q1 2021), West Virginia (Q2 2021) and Connecticut (Q4 2021).

Cost of sales as a percentage of net revenue increased by seven percentage points primarily reflecting the launch of the FanDuel sportsbook in New York, where the gaming tax rate is 51%, materially higher than in other states.

Sales and marketing increased by 29% as we continued to invest in customer acquisition both in new and existing states. As a proportion of revenue, sales and marketing declined by 620 basis points as our business continues to scale and acquisition investment in existing states, which are an increasingly large proportion of our business, reduces.

Other operating costs increased 46%. Adjusting for the year-on-year impact of sports results, operating costs would have declined by around four percentage points as a proportion of revenue demonstrating operating leverage. This is despite the business still being at a relatively early stage in its expansion.

UK & Ireland

 
                                    UK & Ireland           UK & Ireland          UK & Ireland Retail 
                                        Total                  Online 
                                ---------------------  --------------------- 
                                   H1     H1              H1     H1              H1       H1 
                                 2022   2021   Change   2022   2021   Change   2022     2021      Change 
------------------------------ 
Unaudited Adjusted               GBPm   GBPm        %   GBPm   GBPm%           GBPm     GBPm           % 
------------------------------  -----  -----  -------  -----  -----   ------  -----  -------  ---------- 
Average monthly players 
 ('000s)                                               3,704  3,303     +12% 
 
Sportsbook stakes               5,185  6,091     -15%  4,494  5,885     -24%    691      207       +234% 
Sportsbook net revenue 
 margin                         10.9%  10.7%   +20bps  10.6%  10.6%     0bps  13.2%    12.5%      +70bps 
 
Sports revenue                    630    738     -15%    538    712     -24%     92       26       +253% 
Gaming revenue                    462    397     +16%    418    382     +10%     44       16       +183% 
                                -----  -----  -------  -----  -----  -------  -----  -------  ---------- 
Total revenue                   1,092  1,135      -4%    956  1,094     -13%    136       41       +227% 
 
Cost of sales                   (335)  (342)      -2%  (304)  (332)      -8%   (31)     (10)       +218% 
Cost of sales as 
 a % of net revenue             30.7%  30.1%   +60bps  31.8%  30.4%  +140bps  22.8%    23.4%      -70bps 
                                -----  -----  -------  -----  -----  -------  -----  -------  ---------- 
Gross profit                      757    793      -5%    652    762     -14%    105       32       +230% 
 
Sales and marketing             (197)  (207)      -5%  (194)  (204)      -5%    (3)      (3)        +13% 
                                -----  -----  -------  -----  -----  -------  -----  -------  ---------- 
Contribution                      559    587      -5%    458    558     -18%    101       29       +251% 
 
Other operating costs           (239)  (227)      +5%  (155)  (160)      -3%   (83)     (68)        +23% 
                                -----  -----  -------  -----  -----  -------  -----  -------  ---------- 
Adjusted EBITDA(2,5)              321    359     -11%    303    398     -24%     18     (39)       -147% 
Adjusted EBITDA margin          29.4%  31.6%  -220bps  31.6%  36.4%  -470bps  13.5%  (93.6%)  +10,710bps 
 
Depreciation and amortisation    (63)   (63)      +1%   (44)   (42)      +5%   (19)     (21)         -7% 
                                -----  -----  -------  -----  -----  -------  -----  -------  ---------- 
Adjusted operating 
 profit                           258    297     -13%    259    356     -27%    (1)     (59)        -98% 
------------------------------  -----  -----  -------  -----  -----  -------  -----  -------  ---------- 
 

The UK & Ireland division operates Paddy Power, Betfair, Sky Betting & Gaming and Tombola brands online, as well as retail operations in the UK and Ireland.

Revenue declined by 4% and Adjusted EBITDA was GBP38m lower at GBP321m. The Covid-related restrictions in the prior year result in complex year-on-year comparatives in our online and retail businesses.

UK & Ireland Online

Revenue was 13% lower in H1, sequentially improving from -20% in Q1 to -4% in Q2, due to the:

-- Annualisation of our proactive safer gambling measures introduced across 2021 reducing revenue by GBP48m

-- Peak in Covid related player engagement during H1 2021, with average player days down 10% in H1 2022

-- Benefit of the European football championships in June 2021, generating revenue of GBP43m in H1 2021

-- Addition of Tombola in January 2022 which added eight percentage points of growth (pro forma including Tombola H1 -19%, Q2 -11%)

The relative impact of these factors by product is reflected in the 24% decline of sports revenue compared to 10% growth in gaming revenue. Sportsbook net revenue margin was in line year-on-year, with both periods benefitting from approximately 100 basis points in favourable sports results.

AMPs grew 12% (flat including Tombola's highly recreational customer base on a pro forma basis) with strong acquisition and retention of gaming customers in Paddy Power being offset by the factors above.

Cost of sales as a percentage of revenue increased by 140 basis points to 31.8% reflecting higher transaction fees and streaming costs.

Sales and marketing decreased by 5% (pro forma including Tombola -13%) reflecting the European football championships investment in the prior year. Sales and marketing was 20.3% of revenue in H1, in line with the prior full year. Other operating costs were 3% lower in H1 (pro forma including Tombola -11%) with synergies and cost efficiencies offsetting the inflationary increases in employee pay and data.

Online Adjusted EBITDA declined GBP95m year-on-year to GBP303m.

UK & Ireland Retail

Retail revenue more than trebled in the half, with our estate open for all of H1. In the prior year, our shops were closed from January to April in the UK and to May in Ireland due to Covid-related restrictions. In the UK estate, both sports and gaming revenue has returned to 2019 levels while in our Ireland estate revenue is at 69% of H1 2019, reflecting the slower return of retail footfall in Ireland.

Other operating costs increased by 23% reflecting our shops being open across the half. The business generated GBP18m of Adjusted EBITDA in H1.

Currently, we have 614 (June 2021: 624) retail outlets with 362 in the UK and 252 in Ireland. Since June 2021 we have opened 5 shops in the UK and closed 15 shops in Ireland as part of normal business practice.

Australia (3)

 
                                         H1     H1                CC 
                                       2022   2021   Change   Change 
Unaudited Adjusted                     GBPm   GBPm        %       A$ 
------------------------------------  -----  -----  -------  ------- 
Average monthly players ('000s)         993    906     +10% 
 
Sportsbook stakes                     5,209  5,000      +4%      +4% 
Sportsbook net revenue margin         11.8%  11.7%   +10bps   +10bps 
 
Total revenue                           612    585      +5%      +5% 
 
Cost of sales                         (290)  (275)      +5%      +5% 
Cost of sales as a % of net revenue   47.3%  47.0%   +30bps   +30bps 
                                      -----  -----  -------  ------- 
Gross profit                            322    310      +4%      +4% 
 
Sales and marketing                    (54)   (59)      -9%     -10% 
                                      -----  -----  -------  ------- 
Contribution                            269    252      +7%      +7% 
 
Other operating costs                  (50)   (51)      -2%      -3% 
                                      -----  -----  -------  ------- 
Adjusted EBITDA(2,5)                    219    201      +9%     +10% 
Adjusted EBITDA margin                35.8%  34.3%  +150bps  +180bps 
 
Depreciation and amortisation          (14)   (13)      +4%      +5% 
                                      -----  -----  -------  ------- 
Adjusted operating profit               206    188      +9%     +11% 
------------------------------------  -----  -----  -------  ------- 
 

The division encompasses Sportsbet, which offers online sports betting in the Australian market.

Sportsbet delivered another excellent performance during H1 as Adjusted EBITDA increased by 10% to GBP219m. This was driven by a combination of a 10% increase in the player base leading to good top line momentum as well as continued operating leverage improving EBITDA margins by 180 basis points.

Customer growth was aided by strong retention of players who migrated online during H2 2021 when Covid restrictions were at their peak. Staking growth of 4% and an increase in net revenue margin of 10 basis points to 11.8%, delivered revenue growth of 5% in the period. Sports results represented a headwind year-on-year with 50 basis points of favourable results in H1 2022 compared to a 140 basis point benefit in H1 2021. This headwind, along with a further step up in promotional generosity spend was more than offset by structural margin improvements due to increased penetration of higher margin products and improvements to pricing and risk management capabilities.

Our continued focus on a personalised approach to promotional spend and generosity led to an increase in cost of sales by 30 basis points as a percentage of revenue as taxes are levied on gross gaming revenue, resulting in a higher effective tax rate. Sales and marketing also reflected this dynamic, declining by 10% primarily driven by promotional spend shifting to within our net revenue margin of 11.8%.

Other operating costs were roughly flat year-on-year with Adjusted EBITDA of GBP219m.

International(3)

 
                                         H1     H1                CC 
                                       2022   2021   Change   Change 
Unaudited Adjusted                     GBPm   GBPm        %        % 
------------------------------------  -----  -----  -------  ------- 
Average monthly players ('000s)       1,831  1,945      -6% 
 
Sportsbook stakes                       710    871     -18%     -18% 
Sportsbook net revenue margin          9.0%   9.1%   -10bps   -10bps 
 
Sports revenue                          106    118     -10%     -10% 
Gaming revenue                          527    562      -6%      -7% 
                                      -----  -----  -------  ------- 
Total revenue                           633    680      -7%      -8% 
 
Cost of sales                         (184)  (199)      -8%      -8% 
Cost of sales as a % of net revenue   29.1%  29.3%   -20bps   -20bps 
                                      -----  -----  -------  ------- 
Gross profit                            449    481      -7%      -7% 
 
Sales and marketing                   (169)  (171)      -1%      -3% 
                                      -----  -----  -------  ------- 
Contribution                            280    310     -10%     -10% 
 
Other operating costs                 (158)  (131)     +20%     +18% 
                                      -----  -----  -------  ------- 
Adjusted EBITDA(2,5)                    122    179     -32%     -31% 
Adjusted EBITDA margin                19.3%  26.3%  -700bps  -630bps 
 
Depreciation and amortisation          (33)   (25)     +31%     +22% 
                                      -----  -----  -------  ------- 
Adjusted operating profit                89    154     -42%     -40% 
------------------------------------  -----  -----  -------  ------- 
 

International includes PokerStars, Adjarabet, Betfair and Junglee brands which offer online poker, casino, sports betting, rummy and daily fantasy products. Excludes PokerStars US business and Betfair UK and Ireland operations.

Strong revenue growth in our 'consolidate and invest' markets including India, Brazil, Georgia, Armenia and Canada was offset by the previously guided impact of regulatory changes and the challenging Covid-related comparatives. Adjusted EBITDA of GBP122m, a decline of GBP57m, reflects a GBP98m Adjusted EBITDA impact from these known headwinds:

-- Combined impact of market exits in the Netherlands (GBP20m) and Russia/Ukraine (GBP20m), along with a gaming tax change in Germany (GBP20m) of GBP60m

   --     Covid restrictions boosted online activity by an estimated GBP38m in the prior period 

Revenue in H1 of GBP633m, a decline of 8%, reflected these headwinds. Excluding market exits and tax changes, revenue increased by 4%. Revenue growth in our 'consolidate and invest' markets was 14% and these markets represented 56% of the International division in H1 (72% including Sisal on a pro forma basis). This growth was largely offset by the unwind of the prior year Covid-related boost to revenue in our remaining markets.

Cost of sales as a % of net revenue is broadly in line year-on-year at 29.1%.

Sales and marketing declined by 3% in H1 reflecting the ongoing investment in our 'consolidate and invest' markets offset by savings elsewhere. Other operating costs increased by 18% in H1. This partly reflects the annualisation of the increased resources put into the business to stabilise and improve our capabilities across product, technology and customer operations, along with the expansion of Junglee in India. We continue to monitor opportunities for improved operational efficiencies as we further integrate our International businesses.

Statutory review(1)

Group

 
                                           H1       H1 
------------------------------------  -------  ------- 
                                         2022     2021           Change 
------------------------------------  -------  -------  --------------- 
Unaudited                                GBPm     GBPm                % 
------------------------------------  -------  -------  --------------- 
Sports revenue                          2,118    1,894             +12% 
Gaming revenue                          1,270    1,159             +10% 
                                      -------  -------  --------------- 
Total revenue                           3,388    3,053             +11% 
 
Cost of sales                         (1,353)  (1,122)             +21% 
Cost of sales as a % of net revenue     39.9%    36.8%         +310 bps 
 
Gross profit                            2,036    1,931              +5% 
 
Operating costs                       (1,602)  (1,368)             +17% 
                                      -------  -------  --------------- 
 
EBITDA                                    434      562             -23% 
EBITDA margin %                         12.8%    18.4%         -560 bps 
 
Amortisation of acquisition related 
 intangibles                            (286)    (276)              +4% 
Depreciation and amortisation           (145)    (125)             +16% 
Gain on disposal                            2        -            +100% 
                                      -------  -------  --------------- 
Operating profit                            5      162             -97% 
 
Net finance expense                      (57)     (85)             -33% 
                                      -------  -------  --------------- 
(Loss)/ profit before tax                (51)       77 
 
Taxation                                 (61)    (163)             -63% 
                                      -------  -------  --------------- 
Loss after tax                          (112)     (86) 
                                      -------  -------  --------------- 
 
Basic loss per share                  (64.7p)  (50.4p) 
Diluted loss per share                (64.7p)  (50.4p) 
 
Net current liabilities                 (439)    (327) 
Net assets                             10,226   10,724 
 
Net cash from operating activities        264      427             -38% 
------------------------------------  -------  -------  --------------- 
 

Note: A full analysis of the Group's adjusted performance can be found at pages 8-15. A reconciliation of the Group's adjusted performance to the Group's consolidated income statement is included in Appendix 2.

H1 revenue grew 11% to GBP3.4bn driven by the rapid expansion of our US business, where revenue was 50% higher, strong customer retention in Australia and the addition of Tombola.

Cost of sales as a percentage of net revenue increased by 310 basis points to 39.9% with a greater proportion of revenue coming from higher direct cost markets.

Operating costs were 17% higher in H1 driven by the US, where we increased marketing investment to acquire large volumes of new customers and scaled up our operational capabilities.

Reported EBITDA was GBP128m lower at GBP434m due to the increased US investment-led loss, regulatory changes in International markets and proactive safer gambling initiatives in the UK&I.

A reduced tax charge in the period of GBP61m resulted in a loss after tax of GBP112m, GBP26m higher than H1 2021. The lower tax charge was primarily due to a one off deferred tax charge of GBP105m in the prior year relating to the UK's main corporate tax rate change from 19% to 25% applicable from 1 April 2023. Loss per share of 64.7p decreased in line with the movement in the loss after tax.

Net current liabilities increased from GBP112m at 31 December 2021 to GBP439m at 30 June 2022 mainly due to the purchase of Tombola in January 2022 for GBP410m which was financed from the Group's cash resources. As in previous years, the Group regularly operates in a net current liability position due to the Group's operating model whereby it receives payments for nearly all revenues in advance with material cost items paid in arrears.

Net assets reduced in the period from GBP10.3bn at 31 December 2021 to GBP10.2bn due to a reported loss after tax of GBP112m and the recognition of a GBP204m liability relating to the exercise of the Adjarabet put option. This was partially offset by the foreign currency translation impact relating to goodwill and intangible assets.

Net cash flow from operating activities reduced from GBP427m to GBP264m mainly due to EBITDA reducing by GBP128m. Other factors included a higher working capital outflow compared to the prior year period and higher tax payments. These were partially offset by amounts paid in respect of the Kentucky litigation in the prior year period.

A full analysis of the Group's Adjusted performance can be found at pages 8-15.

Separately disclosed items

 
                                                           H1     H1 
                                                         2022   2021 
Unaudited                                                GBPm   GBPm 
------------------------------------------------------  -----  ----- 
Amortisation of acquisition related intangible assets   (286)  (276) 
Transaction fees and associated costs                    (10)      - 
Restructuring and integration initiatives                (32)   (22) 
Greece tax expense                                          -   (13) 
------------------------------------------------------  -----  ----- 
Operating loss impact of separately disclosed items     (328)  (310) 
 
Financial expense                                           -   (11) 
------------------------------------------------------  -----  ----- 
Loss before tax impact of separately disclosed items    (328)  (321) 
 
Tax credit / (charge) on separately disclosed items        39   (72) 
------------------------------------------------------  -----  ----- 
Total separately disclosed items                        (289)  (392) 
------------------------------------------------------  -----  ----- 
 

Separately disclosed items do not relate to business as usual activity of the Group, are items that are volatile in nature or non-cash purchase price accounting amortisation and therefore are excluded from Adjusted profits.

Amortisation of acquisition related intangible assets increased GBP10m to GBP286m in H1. The current period will include a charge for Tombola, which was acquired in January 2022.

Transaction and associated costs of GBP10m were incurred for the acquisition of Tombola and Sisal, along with legal fees for the FOX arbitration.

Restructuring and integration costs primarily relate to the integration with TSG.

The tax credit of GBP39m primarily relates to a deferred tax credit in respect of the amortisation of acquisition-related intangibles.

Cash flow and financial position

 
                                                                             H1                    H1 
                                                                           2022                  2021 
Unaudited                                                                  GBPm                  GBPm 
---------------------------------------------------------  --------------------  -------------------- 
Adjusted EBITDA                                                             476                   597 
Capex                                                                     (156)                 (138) 
Working capital                                                            (41)                    18 
Corporation tax                                                           (132)                  (92) 
Lease liabilities paid                                                     (21)                  (27) 
                                                           --------------------  -------------------- 
Adjusted free cash flow                                                     127                   358 
 
Cash flow from separately disclosed items                                  (39)                  (24) 
                                                           --------------------  -------------------- 
Free cash flow                                                               87                   333 
 
Interest cost                                                              (46)                  (70) 
Other borrowing costs                                                       (2)                   (5) 
Amounts paid in respect of Kentucky settlement                                -                  (71) 
Purchase of shares by the Employee Benefit Trust ("EBT")                      -                  (89) 
Acquisitions and disposals                                                (410)                  (51) 
Cash transferred in acquisitions/ disposals                                  15                    18 
Other                                                                       (3)                   (4) 
                                                           --------------------  -------------------- 
Net (decrease)/increase in cash                                           (360)                    61 
                                                           --------------------  -------------------- 
 
Net debt(6) at start of year                                            (2,647)               (2,814) 
Foreign currency exchange translation                                     (241)                    26 
Change in fair value of hedging derivatives                                 244                    45 
                                                           --------------------  -------------------- 
Net debt as at 30 June                                                  (3,004)               (2,682) 
---------------------------------------------------------  --------------------  -------------------- 
 

Note: Prepared on a net cash/debt basis including borrowings, debt related derivatives and cash and cash equivalents - available for corporate use but excluding cash and cash equivalents - customer balances. A reconciliation to the Group's consolidated statement of cash flows is included in Appendix 4.

Adjusted free cash flow of GBP127m in H1 compared with GBP358m in the prior year. This reduction reflects:

-- Capital expenditure of GBP156m which was GBP18m higher, primarily driven by continued investment in product and technology in the US

-- Corporate tax payments increased by GBP40m reflecting the change in the geographic mix of profits in H1 as a greater proportion of profits were earned in jurisdictions with higher tax rates, as well as the timing of payments and refunds in the period

-- A working capital outflow due to an unwind of accruals at 31 December 2021 and the prepayment of some US marketing assets during H1 when compared with a working capital benefit in the prior year

Cash flow from separately disclosed items of GBP39m principally relates to restructuring and integration costs in relation to the combination with TSG.

Interest costs were GBP24m lower than in the prior year due to the debt refinancing in July 2021 which significantly reduced the effective cost of debt for the Group.

The acquisition of Tombola in January resulted in a cash outflow of GBP410m.

As at 30 June 2022, the Group had net debt of GBP3,004m, excluding customer balances, representing a leverage ratio of 3.4x times(6) . The Group continues to hedge the impact of currency fluctuations on its leverage ratio through cross currency swap agreements. Changes in the fair value of these hedging derivatives are reflected in net debt.

Notes:

(1) Reported figures represent the IFRS reported statutory numbers. Where amounts have been normalised for separately disclosed items they are noted as Adjusted.

(2) "Adjusted" measures exclude items that are separately disclosed as they are: (i) not part of the usual business activity of the Group (ii) items that are volatile in nature and (iii) purchase price accounting amortisation of acquired intangibles (non-cash). Therefore, they have been reported as "separately disclosed items (SDIs)" (see note 5 to the financial statements).

(3) Growth rates in the commentary are in local or constant currency(15) except reported numbers which are in nominal currency.

(4) Average Monthly Players represent the average number of players who have placed and/or wagered a stake and/or contributed to rake or tournament fees during the month in the reporting period.

(5) EBITDA is defined as profit for the period before depreciation, amortisation, impairment, gain on disposal, financial income, financial expense and taxation and is a non-GAAP measure. This measure is used internally to evaluate performance, to establish strategic goals and to allocate resources. The directors also consider the measure to be 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. It is a non-GAAP financial measure and is not prepared in accordance with IFRS and, as not uniformly defined terms, it 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.

(6) Net debt is the principal amount of borrowings plus associated accrued interest, minus available cash & cash equivalents plus/minus carrying value of debt related derivatives. Leverage is calculated using Adjusted EBITDA for the appropriate 12-month period.

(7) Online sportsbook market share is the GGR market share of FanDuel and FOXBet for Q2 2022 in the states in which FanDuel was live based on published gaming regulator reports in those states. During Q2 2022 FanDuel was live in 15 states; Arizona (AZ), Colorado (CO), Connecticut (CT), Illinois (IL), Indiana (IN), Iowa (IA), Louisiana (LA), Michigan (MI), New Jersey (NJ), New York (NY), Pennsylvania (PA), Tennessee (TN), Virginia (VA), West Virginia (WV) and Wyoming (WY). During Q2 2022 FOXBet was live in 4 states; CO, NJ, MI and PA. Market share does not include AZ and IL for June as the data has yet to be released. Combined online market share is the GGR online sportsbook market share above plus the combined CT, MI, NJ, PA and WV market share of our gaming brands.

(8) 2023 profit projection is for full year 2023 including share based compensation and FOXBet. Projections are based on our current expectation of the timing of regulatory developments and new state launches in 2022 and 2023, and excludes California.

(9) Global Play Well goal now measured as the 12 month rolling average % of AMPs who use a safer gambling (Play Well) tool in the specified reporting period. A safer gambling tool is any tool that a customer has used (or Flutter has applied to a customer) in the reporting period that helps to promote safer gambling. During H1, Flutter strengthened the measurement of this metric including a change to measure AMPs instead of active customers, apply more consistent tool usage definitions across the Group as well as including Adjarabet, Junglee and Tombola.

(10) Includes Sisal revenue for H1 of GBP402m.

(11) Cost per acquisition is the cumulative cost per acquisition for FanDuel sportsbook and iGaming and represents the total media and digital marketing spend per acquired customer including those cross-sold from daily fantasy sports.

(12) The US business is not managed to EBITDA on a state by state or product basis given its shared cost base. For the purposes of illustrating FanDuel online sportsbook and iGaming state EBITDA, operating costs have been allocated to US product verticals on a GGR basis with an allocation to online sportsbook/casino business of each state based on the population of that state

(13) Source: Redseer Strategy Consultants.

(14) Includes the gross value of derivatives.

(15) Constant currency ("CC") growth is calculated by retranslating the non-sterling denominated component of H1 2021 at H1 2022 exchange rates (see Appendix 3).

Appendix 1: Divisional Key Performance Indicators H1 2022

Unaudited adjusted

 
                           US                  UK & Ireland             Australia            International                Group 
                                    CC(1)                  CC(1)                  CC(1)                  CC(1)                      CC(1) 
                     H1       H1        %     H1     H1        %     H1     H1        %     H1     H1        %       H1       H1        % 
GBPm               2022     2021   Change   2022   2021   Change   2022   2021   Change   2022   2021   Change     2022     2021   Change 
--------------  -------  -------  -------  -----  -----  -------  -----  -----  -------  -----  -----  -------  -------  -------  ------- 
Average 
 monthly 
 players(2) 
 (000's)          2,188    1,470     +49%  3,704  3,303     +12%    993    906     +10%  1,831  1,945      -6%    8,716    7,625     +14% 
Sportsbook 
 stakes          10,911    5,072    +102%  5,185  6,091     -15%  5,209  5,000      +4%    710    871     -18%   22,015   17,034     +27% 
Sportsbook net 
 revenue 
 margin            6.0%     6.2%   -20bps  10.9%  10.7%   +20bps  11.8%  11.7%   +10bps   9.0%   9.1%   -10bps     8.6%     9.6%  -100bps 
 
Sports revenue      770      452     +58%    630    738     -14%    612    585      +5%    106    118     -10%    2,118    1,894     +10% 
Gaming revenue      281      200     +31%    462    397     +16%      0      0       0%    527    562      -7%    1,270    1,159      +8% 
                -------  -------  -------  -----  -----  -------  -----  -----  -------  -----  -----  -------  -------  -------  ------- 
Total revenue     1,051      652     +50%  1,092  1,135      -4%    612    585      +5%    633    680      -8%    3,388    3,053      +9% 
 
Cost of Sales     (544)    (293)     +73%  (335)  (342)      -2%  (290)  (275)      +5%  (184)  (199)      -8%  (1,353)  (1,109)     +20% 
Cost of sales 
 as % 
 of net 
 revenue          51.8%    44.9%  +700bps  30.7%  30.1%   +50bps  47.3%  47.0%   +30bps  29.1%  29.3%   -20bps    39.9%    36.3%  +350bps 
 
Gross Profit        507      359     +31%    757    793      -4%    322    310      +4%    449    481      -7%    2,036    1,944      +3% 
 
Sales & 
 marketing        (399)    (292)     +29%  (197)  (207)      -4%   (54)   (59)     -10%  (169)  (171)      -3%    (819)    (728)      +9% 
                -------  -------  -------  -----  -----  -------  -----  -----  -------  -----  -----  -------  -------  -------  ------- 
Contribution        108       67     +38%    559    587      -4%    269    252      +7%    280    310     -10%    1,216    1,215      -1% 
 
Other 
 operating 
 costs            (240)    (154)     +46%  (239)  (227)      +6%   (50)   (51)      -3%  (158)  (131)     +18%    (686)    (563)     +19% 
Corporate 
 costs                0        0       0%      0      0       0%      0      0       0%      0      0       0%     (55)     (55)      -6% 
                -------  -------  -------  -----  -----  -------  -----  -----  -------  -----  -----  -------  -------  -------  ------- 
Adjusted 
 EBITDA           (132)     (87)     +53%    321    359     -11%    219    201     +10%    122    179     -31%      476      597     -19% 
Adjusted 
 EBITDA margin  (12.5%)  (13.3%)   -30bps  29.4%  31.6%  -240bps  35.8%  34.3%  +180bps  19.3%  26.3%  -630bps    14.1%    19.6%  -500bps 
 
Depreciation & 
 amortisation      (31)     (22)     +29%   (63)   (63)      +1%   (14)   (13)      +5%   (33)   (25)     +22%    (143)    (125)     +11% 
                -------  -------  -------  -----  -----  -------  -----  -----  -------  -----  -----  -------  -------  -------  ------- 
Adjusted 
 operating 
 profit/(loss)    (162)    (108)     +48%    258    297     -13%    206    188     +11%     89    154     -40%      334      472     -28% 
--------------  -------  -------  -------  -----  -----  -------  -----  -----  -------  -----  -----  -------  -------  -------  ------- 
 

(1) Constant currency ("CC") growth is calculated by retranslating the non-sterling denominated component of H1 2021 at H1 2022 exchange rates (see Appendix 3).

(2) Average Monthly Players represent the average number of players who have placed and/or wagered a stake and/or contributed to rake or tournament fees during the month in the reporting period.

Appendix 2: Reconciliation of Adjusted to statutory results

In the operating and financial review the Group's financial performance has been presented on an Adjusted and reported basis. The difference between the Adjusted and reported information relates to the inclusion of separately disclosed items. The impact of same on the income statement and earnings per share is set out below.

 
                                        Adjusted       Separately      Statutory 
                                         results        disclosed        results 
                                                        items(1) 
                                    ----------------  ------------ 
                                         H1       H1     H1     H1       H1       H1 
GBPm unaudited                         2022     2021   2022   2021     2022     2021 
----------------------------------  -------  -------  -----  -----  -------  ------- 
Sports revenue                        2,118    1,894                  2,118    1,894 
Gaming revenue                        1,270    1,159                  1,270    1,159 
                                    -------  -------  -----  -----  -------  ------- 
Total revenue                         3,388    3,053      -      -    3,388    3,053 
 
Cost of sales                       (1,353)  (1,109)          (13)  (1,353)  (1,122) 
Cost of sales as a % of net 
 revenue                              39.9%    36.3%                  39.9%    36.8% 
Gross profit                          2,036    1,944      -   (13)    2,036    1,931 
 
Sales and marketing                   (819)    (728)                  (819)    (728) 
Contribution                          1,216    1,215      -   (13)    1,216    1,202 
 
Other operating costs                 (686)    (563)                  (686)    (563) 
Corporate costs                        (55)     (55)   (42)   (22)     (97)     (77) 
                                    -------  -------  -----  -----  -------  ------- 
EBITDA                                  476      597   (42)   (35)      434      562 
EBITDA margin                         14.1%    19.6%                  12.8%    18.4% 
 
Depreciation and amortisation         (143)    (125)  (286)  (276)    (429)    (401) 
                                    -------  -------  -----  -----  -------  ------- 
Operating profit                        334      472  (328)  (310)        5      162 
 
Net finance expense                    (57)     (74)      -   (11)     (57)     (85) 
                                    -------  -------  -----  -----  -------  ------- 
Profit/ (loss) before tax               277      398  (328)  (321)     (51)       77 
 
Taxation                              (100)     (91)     39   (72)     (61)    (163) 
                                    -------  -------  -----  -----  -------  ------- 
Profit/ (loss) for the period           177      306  (289)  (392)    (112)     (86) 
 
Profit/ (loss) attributable 
 to non controlling interest            (5)      (5)      3      3      (2)      (3) 
                                    -------  -------  -----  -----  -------  ------- 
Profit/ (loss) attributable 
 to equity holders                      172      301  (286)  (389)    (114)     (89) 
 
Weighted average number of shares 
 ('000s)                            176,658  175,893                176,658  175,893 
Adjusted basic EPS (pence)            97.2p   171.1p                (64.7p)  (50.4p) 
 
 

(1) See note 5 of the financial statements.

Appendix 3: Reconciliation to constant currency growth rates

Constant currency ("cc") growth is calculated by retranslating non-sterling denominated component of H1 2021 at H1 2022 exchange rates as per the table below.

 
                                                                  H1       H1 
                                     H1       H1        %       2021     2021     CC % 
GBPm unaudited                     2022     2021   Change  FX impact       CC   Change 
------------------------------  -------  -------  -------  ---------  -------  ------- 
Sports revenue                    2,118    1,894     +12%         33    1,927     +10% 
Gaming revenue                    1,270    1,159     +10%         21    1,179      +8% 
                                -------  -------  -------  ---------  -------  ------- 
Total revenue                     3,388    3,053     +11%         54    3,106      +9% 
 
Cost of sales                   (1,353)  (1,109)     +22%       (23)  (1,132)     +20% 
Cost of sales as 
 a % of net revenue               39.9%    36.3%  +360bps               36.4%  +350bps 
Gross profit                      2,036    1,944      +5%         31    1,975      +3% 
 
Sales and marketing               (819)    (728)     +12%       (23)    (751)      +9% 
Contribution                      1,216    1,215       0%          8    1,224      -1% 
 
Other operating costs             (686)    (563)     +22%       (12)    (575)     +19% 
Corporate costs                    (55)     (55)      -1%        (3)     (58)      -6% 
                                -------  -------  -------  ---------  -------  ------- 
Adjusted EBITDA                     476      597     -20%        (6)      591     -19% 
Adjusted EBITDA margin            14.1%    19.6%  -550bps               19.0%  -500bps 
 
Depreciation and amortisation     (143)    (125)     +14%        (3)    (128)     +11% 
Adjusted operating 
 profit                             334      472     -29%        (9)      463     -28% 
 
Revenue by division 
UK & Ireland                      1,092    1,135      -4%        (2)    1,133      -4% 
Australia                           612      585      +5%          0      585      +5% 
International                       633      680      -7%          7      687      -8% 
US                                1,051      652     +61%         50      702     +50% 
 
Adjusted EBITDA by 
 division 
UK & Ireland                        321      359     -11%          1      360     -11% 
Australia                           219      201      +9%        (2)      199     +10% 
International                       122      179     -32%        (3)      176     -31% 
US                                (132)     (87)     +52%          1     (86)     +53% 
Corporate costs                    (55)     (55)      -1%        (3)     (58)      -6% 
------------------------------  -------  -------  -------  ---------  -------  ------- 
 

Appendix 4: Reconciliation of Adjusted cash flow to reported statutory cash flow

In the operating and financial review the cash flow has been presented on a net cash basis. The difference between the net cash basis and the reported cash flow is the inclusion of borrowings, debt related derivatives and cash and cash equivalents - available for corporate use but excluding cash and cash equivalents - customer balances to determine a net cash position.

 
                                                  Adjusted            Debt and         Statutory 
                                                  cash flow       customer balances     cash flow 
                                                                     adjustments 
                                              ----------------  -------------------- 
GBPm unaudited                                   2022     2021       2022       2021   2022   2021 
--------------------------------------------  -------  -------  ---------  ---------  ----- 
Adjusted EBITDA(1)                                476      597                          476    597 
Capex(2)                                        (156)    (138)                        (156)  (138) 
Working capital(3)                               (41)       18                         (41)     18 
Corporation tax                                 (132)     (92)                        (132)   (92) 
Lease liabilities paid                           (21)     (27)                         (21)   (27) 
                                              -------  -------  ---------  ---------  -----  ----- 
Adjusted free cash flow                           127      358          -          -    127    358 
 
Cash flow from separately disclosed 
 items(4)                                        (39)     (24)                         (39)   (24) 
                                              -------  -------  ---------  ---------  -----  ----- 
Free cash flow                                     87      333          -          -     87    333 
 
Interest cost(5)                                 (46)     (70)                         (46)   (70) 
Other borrowing costs(5)                          (2)      (5)                          (2)    (5) 
Amounts paid in respect of Kentucky 
 settlement                                         -     (71)                            -   (71) 
Purchase of shares by the EBT                       -     (89)                            -   (89) 
Acquisitions and disposals(6)                   (410)     (51)                        (410)   (51) 
Cash acquired in business combinations(6)          15       18                           15     18 
Other(7)                                          (3)      (4)                          (3)    (4) 
Movement in cash and cash equivalents 
 - customer balances                                -        -         44       (34)     44   (34) 
Net amounts repaid on borrowings(8)                 -        -        178       (13)    178   (13) 
                                              -------  -------  ---------  ---------  -----  ----- 
Net (decrease)/increase in cash                 (360)       61        222       (46)  (137)     15 
                                              -------  -------  ---------  ---------  -----  ----- 
 
Net (debt)/cash at start of year(9)           (2,647)  (2,814)      4,276      4,005  1,629  1,191 
Foreign currency exchange translation           (241)       26        252       (44)     11   (18) 
Change in fair value of hedging derivatives       244       45      (244)       (45)      -      - 
Net (debt)/cash as at 30 June(9)              (3,004)  (2,682)      4,507      3,870  1,503  1,188 
--------------------------------------------  -------  -------  ---------  ---------  -----  ----- 
 

(1) Adjusted EBITDA includes the following line items in the statutory cash flow: Profit for the period, separately disclosed items, tax expense, financial income, financial expense and depreciation and amortisation.

(2) Capex includes purchase of property, plant and equipment, purchase of intangible assets, capitalised internal development expenditure, lease incentive received and payment of contingent deferred consideration.

(3) Working capital includes (increase)/decrease in trade and other receivables, increase in trade, other payables and provisions, employee equity-settled share-based payments expense before separately disclosed items and investments and foreign currency exchange loss/(gain).

(4) Cash flow from separately disclosed items relates to transaction fees, along with restructuring and integration costs.

(5) Interest and other borrowing costs includes interest paid, interest received and fees in respect of borrowing facilities.

(6) The combination of acquisition and disposals of (GBP410m) and cash acquired in business combinations (GBP15m) reconciles to the statutory cash flow amounts for purchase of businesses net of cash acquired (GBP395m).

(7) Other includes proceeds from the disposal of assets, proceeds from the issue of shares on exercise of employee options, dividends paid to non-controlling interest, lease interest paid and other.

(8) Net amounts repaid on borrowings includes principle repayments on USD First Lien Term Loan B and additional draw downs and repayments on the GBP Revolving Credit Facilities.

(9) Net (debt)/cash comprises principal outstanding balance of borrowings, accrued interest on those borrowings, derivatives held for hedging debt instruments, cash and cash equivalents - available for corporate use and cash and cash equivalents - customer balances.

STATEMENT OF DIRECTORS RESPONSIBILITIES

For the half-year ended 30 June 2022

The Directors are responsible for preparing the half-yearly financial report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007 ("Transparency Directive"), and the Transparency Rules of the Central Bank of Ireland.

In preparing the condensed set of financial statements included within the half-yearly financial report, the Directors are required to:

-- prepare and present the condensed set of 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; the Transparency Directive and the Transparency Rules of the Central Bank of Ireland;

   --      ensure the condensed set of financial information has adequate disclosures; 
   --      select and apply appropriate accounting policies; and 
   --      make accounting estimates that are reasonable in the circumstances. 

The Directors are responsible for designing, implementing and maintaining such internal controls as they determine is necessary to enable the preparation of the condensed set of financial statements that is free from material misstatement whether due to fraud or error.

We confirm that to the best of our knowledge:

1) the condensed set of consolidated financial statements in the half-yearly financial report of Flutter Entertainment plc for the six months ended 30 June 2022 ("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 EU, the Transparency Directive and Transparency Rules of the Central Bank of Ireland.

1) the interim financial information presented, as required by the Transparency Directive, includes:

a) 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;

b) a description of the principal risks and uncertainties for the remaining six months of the financial year;

c) 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

d) 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.

On behalf of the board

 
 Peter Jackson             Jonathan Hill 
 Chief Executive Officer   Chief Financial Officer 
 11 August 2022 
 

Principal risks

The principal risks and uncertainties which are considered to have a material impact on the Group's future performance and strategic objectives are set out on the following pages. The principal risks and uncertainties are consistent with those defined in the Group's Annual Report & Accounts 2021, available at www.flutter.com.

This is not intended to be an exhaustive and extensive analysis of all risks which may affect the Group. Additional risks and uncertainties currently deemed to be less material, or not presently known to Management, may also have an adverse effect on the performance and strategic objectives of the Group.

 
 Changes to Legal, Regulatory and Licensing landscape 
 Why we need to manage          How we manage and mitigate the risk 
  this 
 The complex and constantly 
  evolving regulatory              *    We have dedicated internal and external Legal, 
  environments in which                 Regulatory, Compliance and Tax teams covering all 
  we operate, in terms                  regions with responsibility for working with, and 
  of multiple jurisdictions,            advising management on any upcoming regulatory 
  tax regimes and licensing             changes, to set appropriate policies, processes and 
  obligations, can make                 controls to adapt and ensure compliance. 
  it commercially challenging 
  for the us to operate, 
  or impact our ability            *    We are improving our regulatory profile with an 
  to grow at pace.                      increased proportion of revenues coming from 
                                        regulated markets and a continuous focus on reducing 
                                        exposure to higher risk jurisdictions. 
 
 
                                   *    For material markets, we invest significantly in 
                                        external counsel advice to conduct ongoing monitoring 
                                        and to guide and support strategic decision making 
                                        and planning associated with these markets. 
 
 
                                   *    We invest continuously in the flexibility of our 
                                        in-house technology which is key for entering or 
                                        remaining in markets and allowing for adaptability 
                                        and flexibility of our products as market conditions 
                                        and obligations change. 
 
 
                                   *    Flutter and its divisions have dedicated Corporate 
                                        Affairs teams, and hold memberships with relevant 
                                        associations and industry groups working with 
                                        regulators and governments to influence and drive 
                                        proportionate, transparent and reasonable regulation 
                                        and taxation in all markets. 
 Cyber Resilience and Protection of Data 
 Why we need to manage          How we manage and mitigate the risk 
  this 
 We are dependent on 
  technology to support            *    We invest significantly in cyber security resources, 
  our products, business                capabilities, and technologies, and work with a 
  activities and customer               variety of external security specialists to ensure 
  operations. Cyber maturity            security arrangements and systems are appropriate for 
  and capabilities across               our evolving threat and continue to follow leading 
  our expanding Group                   practice. 
  vary and may increase 
  the number of potential 
  attack vectors or internal       *    The Group Chief Information Security Officer works 
  threats, which could                  with the Group and divisional information security 
  lead to financial loss,               teams to devise and advance our strategy for cyber 
  data breaches, regulatory             security, enhance our control assurance capabilities 
  action and reputational               and governance. 
  damage. 
 
                                   *    The Flutter cyber security team owns and reports on 
                                        the Group-wide cyber policy detailing our key cyber 
                                        topics and control standards, with periodic review 
                                        and approval, in addition to internal and external 
                                        annual assessment of security maturity. 
 
 
                                   *    Flutter cyber assurance framework has been 
                                        established, with risk assessments ongoing to provide 
                                        assurance that security controls implemented protect 
                                        against key risk topics. 
 
 
 US growth execution and competition 
 Why we need to manage             How we manage and mitigate the risk 
  this 
 The successful execution 
  of our commercial and               *    We continue to establish and maintain strong 
  growth strategy for the                  commercial relationships with our market access 
  US business across its                   partners and strategic media partners to secure 
  brands and partnerships                  access to new markets and maintain growth. 
  is critical to our long-term 
  ambitions. 
                                      *    We continue to invest in people, product and brands 
                                           to acquire further market share and to maintain the 
                                           agility, scalability and leading market positions for 
                                           our products. 
 
 
                                      *    In addition, we also have dedicated external advisers, 
                                           internal expertise and resources to support with the 
                                           monitoring and assessment of the US competitive 
                                           landscape to take appropriate actions. 
 
 
                                      *    We continue to develop our in-house technology stack, 
                                           including the adoption of our proprietary global 
                                           betting platform for the provision of sports betting, 
                                           to continuously improve our offering and meet 
                                           evolving stakeholder needs. 
 
 
                                      *    Our dedicated US Legal, Risk and Compliance teams 
                                           work closely with the business teams to monitor 
                                           ongoing compliance across multiple jurisdictions to 
                                           continuously improve our processes and controls to 
                                           ensure compliance with our federal and state 
                                           obligations. 
 International technology transformation 
 Why we need to manage           How we manage and mitigate the risk 
  this 
 Challenges to transform, 
  expand and scale our              *    Full restructure by CIO and key new leadership roles 
  capabilities, given                    in International Technology function, recruiting 
  variances in legacy                    externally and leveraging internal talent from other 
  entities, which may                    brands and divisions. 
  lead to lower than desired 
  resilience, reliability 
  and product agility.              *    Full review of the International division's 
                                         technology risk profile with clear plans and 
                                         structures in place to improve, using a risk-based 
                                         approach. 
 
 
                                    *    Our revised technology strategy has been defined to 
                                         support significant market growth and expansion. 
 
 
                                    *    We continue to invest in resources, software and 
                                         hardware to address themed strategic initiatives, 
                                         which address stability, process, people and 
                                         technology. 
 
 
                                    *    Focused support from external advisers, strategic 
                                         partners and experts to support with technology 
                                         transformation delivery. 
 Global talent acquisition 
 Why we need to manage           How we manage and mitigate the risk 
  this 
 Acquisition of key talent, 
  senior management and             *    Our employee value proposition has been amplified for 
  leadership positions                   all our divisions to attract the right talent, with 
  across the Group, and                  the skills, capabilities and experience for Flutter. 
  their successful retention, 
  to satisfy the needs 
  of our growing organisation       *    Dedicated workstreams led by the Group CPO function 
  is critical to achieving               to align processes and identify talent acquisition 
  our strategic objectives.              partners to support internal teams to build a 
                                         pipeline and attract the best talent for the Group 
                                         going forward. 
 
 
                                    *    Flutter launched its vision, purpose and values, in 
                                         alignment with divisional perspectives, supported by 
                                         playbooks, talkshops and toolkits. Surveys continue 
                                         to be conducted to listen and learn from employees 
                                         and understand colleague engagement levels Group 
                                         wide. 
 
 
                                    *    We conduct extensive market research and benchmarking 
                                         to ensure that the Group maintains an attractive 
                                         employee value proposition. 
 
 
                                    *    The Group and divisional CPOs address our talent 
                                         matters in a prioritised manner and build capability 
                                         to address gaps and facilitate talent mobility. 
 
 
 
 Compliance with existing legal, regulatory and licensing landscape 
 Why we need to manage              How we manage and mitigate the risk 
  this 
 The interpretation and 
  ongoing compliance with              *    For the jurisdictions in which we hold a licence, 
  complex and multiple                      dedicated Divisional Compliance teams work closely 
  regulatory and legislative                with the business teams to monitor ongoing compliance 
  requirements applicable                   and continuously enhance our processes and controls 
  to the Group's activities                 to ensure compliance with regulatory frameworks and 
  in the markets in which                   licence requirements. 
  it operates underpins 
  the sustainability and 
  reputation of our business.          *    We have a number of Group-led overarching policies 
                                            and compliance programmes to govern processes across 
                                            divisions and thereby ensure compliance with 
                                            applicable laws and regulations. 
 
 
                                       *    Detailed policy and procedures across each division 
                                            ensure local regulatory requirements are documented, 
                                            monitored and reviewed periodically. 
 
 
                                       *    Annual compliance training, including Anti-Bribery 
                                            and Corruption ("ABC"), Data Protection ("DP") and 
                                            Anti-Money Laundering ("AML"), is mandatory for all 
                                            staff, as well as regular, targeted training and 
                                            awareness sessions. 
 
 
                                       *    Divisional and Group management provide periodic 
                                            legal and regulatory updates through established 
                                            governance forums at both divisional and Group level 
                                            Committees. 
 Global talent management and retention 
 Why we need to manage                 How we manage and mitigate the risk 
  this 
 The people who work within 
  Flutter are key to our                 *    Flutter Workforce Engagement Committee established to 
  success. Insufficient                       ensure the Group has a culture that underpins its 
  management and retention                    vision, values and strategy, and to provide an 
  of key individuals may                      employee voice to the Board. 
  impact our ability to 
  deliver on our strategic 
  and operational objectives.            *    The Remuneration Committee and wider reward 
                                              programmes review the structures in place for our 
                                              people with the objective to incentivise, motivate 
                                              and retain talent to support the delivery of the 
                                              Group's long-term strategy. 
 
 
                                         *    We communicate through different platforms to 
                                              underscore key career development opportunities, 
                                              highlight employee recognition programmes and bring 
                                              attention to strategic programmes such as DEI. 
 
 
                                         *    Regular engagement surveys take place for all 
                                              colleagues to ensure we understand the values and 
                                              behaviours that are important to staff and the brands 
                                              they support. 
 
 
                                         *    The Group and divisional CPO functions continue to 
                                              drive health and wellbeing initiatives as part of our 
                                              dynamic Future Ways of Working approach. 
 Third parties and key suppliers 
 Why we need to manage                How we manage and mitigate the risk 
  this 
 Across our divisions 
  and Group, we place reliance           *    Strategic and critical suppliers are subject to 
  upon certain critical                       regular business and quality reviews to ensure 
  suppliers of technology,                    ongoing relationship and performance management. 
  marketing, sports content 
  and media which are fundamental 
  to our business and product            *    The Group Procurement and Third Party Assurance 
  offerings. The effective                    functions maintain a Risk Heatmap to monitor 
  management of critical                      strategic and critical suppliers and ensure 
  third party relationships,                  continuity of critical services. 
  performance and regulatory 
  expectations is key to 
  our strategic objectives.              *    As part of our procurement processes, we employ 
                                              dedicated resources supplemented by subject matter 
                                              expertise within risk, compliance, legal and 
                                              technology assurance to protect and enhance value, 
                                              demonstrate our high standards of corporate integrity, 
                                              and reinforce organisational resilience. 
 
 
                                         *    Where possible, we limit reliance on a single 
                                              supplier to reduce potential single point of failure. 
 
 
 
 Safer gambling strategy 
 Why we need to manage             How we manage and mitigate the risk 
  this 
 Safer Gambling underpins 
  every element of the                *    Group Safer Gambling strategy is embedded into our 
  Group's strategy, and                    businesses from how we identify and interact with 
  is a key pillar of our                   at-risk customers through to how we communicate to a 
  Positive Impact Plan.                    broad group of stakeholders and how we encourage 
  We want to demonstrate                   Safer Gambling tool usage. 
  consistency and global 
  alignment with our Safer 
  Gambling strategy to                *    We leverage and share policies, processes and 
  protect our customers                    practices across the Group to enhance the strategic 
  who are at risk of the                   approach to Safer Gambling and demonstrate our 
  potential negative effects               serious commitment to ESG. 
  of gambling and to ensure 
  we grow our business 
  sustainably.                        *    A leading range of tools are provided on all our 
                                           brand sites to support customers in managing their 
                                           spend and play, and the Group and its brands are 
                                           continually working to improve and enhance our tools 
                                           and site content to enable us to identify and 
                                           interact with at-risk customers. 
 
 
                                      *    The Group works closely with leading external third 
                                           parties to facilitate internal teams to enhance our 
                                           understanding, and capabilities in relation to 
                                           identification of problem gambling through the use of 
                                           artificial intelligence. 
 
 
                                      *    The Group continues to invest significantly in 
                                           improvements for tackling the problem through 
                                           donations to research, treatment, education 
                                           initiatives, as well as through driving collaboration 
                                           across the industry with other operators, charities 
                                           and regulatory bodies. 
 Technology resilience - availability and stability 
 Why we need to manage             How we manage and mitigate the risk 
  this 
 We have a critical dependency 
  on our in-house technology,         *    We invest in our proprietary technology and resources 
  and on certain material                  to improve IT resilience, eliminate single points of 
  third parties, to maintain               failure and drive better performance. 
  the stability and availability 
  of our customer-facing 
  products, as well as                *    We have established a standard scale to better 
  the ability to recover                   compare the IT disaster recovery resilience levels in 
  in a timely manner from                  each division and ensure adequate improvement plans 
  severe disruption with                   are developed and tracked to mitigate any material 
  minimal impact on our                    risks. 
  customers, data and 
  products. 
                                      *    We have dedicated resources to develop, enhance and 
                                           test our disaster recovery capability for our key 
                                           products across all our brands of the Group. 
 
 
                                      *    Key global metrics on critical systems and platforms 
                                           which are regularly monitored and reported on 
                                           identify any potential emerging issues on our brands 
                                           or customer-facing technologies. 
 
 
                                      *    We have a defined formal incident management process 
                                           in place for identifying, escalating and resolving 
                                           issues and a post-incident process to ensure we 
                                           continuously improve our proprietary technology. 
 

Consolidated Interim Income Statement

For the six months ended 30 June 2022

 
                                                                            2022                                  2021 
Unaudited                             Note                                  GBPm                                  GBPm 
------------------------------------  ----  ------------------------------------  ------------------------------------ 
Continuing operations 
 
Revenue                                4                                 3,388.2                               3,052.5 
Cost of sales                                                          (1,352.6)                             (1,121.9) 
------------------------------------  ----  ------------------------------------  ------------------------------------ 
Gross profit                                                             2,035.6                               1,930.6 
 
Operating costs excluding 
 depreciation, 
 amortisation and gain on disposal                                     (1,601.5)                             (1,368.2) 
------------------------------------  ----  ------------------------------------  ------------------------------------ 
EBITDA(1)                                                                  434.1                                 562.4 
 
Amortisation of acquisition-related 
 intangible assets                                                       (286.1)                               (275.5) 
Depreciation and amortisation of 
 other assets                                                            (144.6)                               (125.0) 
Gain on disposal                                                             1.9                                     - 
------------------------------------  ----  ------------------------------------  ------------------------------------ 
Operating profit                                                             5.3                                 161.9 
 
Financial income                       6                                     0.7                                     - 
Financial expense                      6                                  (57.4)                                (84.9) 
------------------------------------  ----  ------------------------------------  ------------------------------------ 
(Loss) / profit before tax                                                (51.4)                                  77.0 
 
Tax expense                            7                                  (60.8)                               (163.0) 
------------------------------------  ----  ------------------------------------  ------------------------------------ 
Loss for the period                                                      (112.2)                                (86.0) 
------------------------------------  ----  ------------------------------------  ------------------------------------ 
 
Attributable to: 
Equity holders of the Company                                            (114.3)                                (88.6) 
Non-controlling interest                                                     2.1                                   2.6 
------------------------------------  ----  ------------------------------------  ------------------------------------ 
                                                                         (112.2)                                (86.0) 
------------------------------------  ----  ------------------------------------  ------------------------------------ 
 
Earnings per share 
Basic                                  8                              (GBP0.647)                            (GBP0.504) 
Diluted                                8                              (GBP0.647)                            (GBP0.504) 
------------------------------------  ----  ------------------------------------  ------------------------------------ 
 

1 EBITDA is defined as profit for the period before depreciation, amortisation, impairment, gain on disposal, 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.

Notes 1 to 20 on pages 36 to 58 form an integral part of these condensed consolidated financial statements.

Consolidated Interim Statement of Other Comprehensive Income

For the six months ended 30 June 2022

 
                                                                              2022                              2021 
Unaudited                                                                     GBPm                              GBPm 
----------------------------------------------   ---------------------------------  -------------------------------- 
 
Loss for the period                                                        (112.2)                            (86.0) 
-----------------------------------------------  ---------------------------------  -------------------------------- 
 
Other comprehensive income / (loss): 
Items that are or may be reclassified 
 subsequently to profit or loss: 
Effective portion of changes in fair 
 value of cash flow hedges                                                   269.7                           (156.0) 
Fair value of cash flow hedges transferred 
 to the income statement                                                   (244.2)                             164.7 
Foreign exchange loss on net investment 
 hedges, net of tax(1)                                                      (41.0)                            (56.3) 
Foreign exchange gain / (loss) on translation 
 of the net assets of foreign currency 
 denominated entities                                                        222.4                           (105.5) 
Debt instruments at FVOCI                                                    (2.3)                             (0.6) 
-----------------------------------------------  ---------------------------------  -------------------------------- 
Other comprehensive income / (loss)                                          204.6                           (153.7) 
-----------------------------------------------  ---------------------------------  -------------------------------- 
Total comprehensive income / (loss) 
 for the period                                                               92.4                           (239.7) 
-----------------------------------------------  ---------------------------------  -------------------------------- 
 
Attributable to: 
Equity holders of the Company                                                 86.2                           (242.5) 
Non-controlling interest                                                       6.2                               2.8 
-----------------------------------------------  ---------------------------------  -------------------------------- 
Total comprehensive income / (loss) 
 for the period                                                               92.4                           (239.7) 
-----------------------------------------------  ---------------------------------  -------------------------------- 
 

1 Foreign exchange loss on net investment hedges is presented including an income tax charge of GBP4.7m (six months ended 30 June 2021: GBP1.7m) which relates to the tax effect of the Group's hedging activities.

Notes 1 to 20 on pages 36 to 58 form an integral part of these condensed consolidated financial statements.

Consolidated Interim Statement of Financial Position

As at 30 June 2022

 
                                                                      30 June 2022                         31 December 
                                                                                                                  2021 
                                                                         Unaudited                             Audited 
                                        Note                                  GBPm                                GBPm 
--------------------------------------  ----  ------------------------------------  ---------------------------------- 
Assets 
Property, plant and equipment                                                478.8                               451.4 
Intangible assets                                                          4,959.6                             4,875.6 
Goodwill                                 9                                 9,706.3                             9,346.8 
Deferred tax assets                                                            7.5                                 8.2 
Non-current tax receivable                                                    32.9                                21.5 
Investments                              11                                    6.0                                 5.5 
Derivative financial assets              15                                  275.5                                68.0 
Financial assets - restricted cash                                             7.6                                 7.4 
Other receivables                        11                                   28.3                                29.3 
--------------------------------------  ----  ------------------------------------  ---------------------------------- 
Total non-current assets                                                  15,502.5                            14,813.7 
Trade and other receivables              11                                  250.5                               203.9 
Cash and cash equivalents - customer 
 balances                                                                    721.7                               677.6 
Cash and cash equivalents - available 
 for corporate use                                                           781.2                               951.7 
Current investments at FVOCI - 
 customer 
 deposits                                                                     89.0                                83.0 
Current tax receivable                                                        54.4                                45.6 
Total current assets                                                       1,896.8                             1,961.8 
--------------------------------------  ----  ------------------------------------  ---------------------------------- 
Total assets                                                              17,399.3                            16,775.5 
--------------------------------------  ----  ------------------------------------  ---------------------------------- 
 
Equity 
Issued share capital and share premium                                       480.7                               477.6 
Shares held by Employee Benefit 
 Trust                                   16                                  (4.0)                               (4.0) 
Cash flow hedge reserve                  16                                   48.2                                22.7 
Other reserves                                                               151.7                              (61.7) 
Retained earnings                                                          9,544.9                             9,816.3 
--------------------------------------  ----  ------------------------------------  ---------------------------------- 
Total equity attributable to equity 
 holders of the Parent                                                    10,221.5                            10,250.9 
Non-controlling interest                                                       4.1                                37.5 
--------------------------------------  ----  ------------------------------------  ---------------------------------- 
Total equity                                                              10,225.6                            10,288.4 
Liabilities 
Trade and other payables                 12                                1,317.0                             1,096.4 
Customer balances                                                            775.1                               721.0 
Derivative financial liabilities         15                                   50.1                                74.0 
Provisions                               13                                   71.9                                71.3 
Current tax payable                                                           45.5                                42.3 
Lease liability                                                               51.9                                47.0 
Borrowings                               14                                   24.2                                22.1 
--------------------------------------  ----  ------------------------------------  ---------------------------------- 
Total current liabilities                                                  2,335.7                             2,074.1 
Trade and other payables                 12                                   21.9                                19.8 
Derivative financial liabilities         15                                   16.5                                55.1 
Provisions                               13                                   49.5                                47.8 
Deferred tax liabilities                                                     518.3                               498.0 
Non-current tax payable                                                       10.7                                25.2 
Lease liability                                                              239.2                               217.4 
Borrowings                               14                                3,981.9                             3,549.7 
--------------------------------------  ----  ------------------------------------  ---------------------------------- 
Total non-current liabilities                                              4,838.0                             4,413.0 
--------------------------------------  ----  ------------------------------------  ---------------------------------- 
Total liabilities                                                          7,173.7                             6,487.1 
--------------------------------------  ----  ------------------------------------  ---------------------------------- 
Total equity and liabilities                                              17,399.3                            16,775.5 
--------------------------------------  ----  ------------------------------------  ---------------------------------- 
 

Notes 1 to 20 on pages 36 to 58 form an integral part of these condensed consolidated financial statements.

On behalf of the Board

 
Peter Jackson             Jonathan Hill 
 Chief Executive Officer   Chief Financial Officer 
 

11 August 2022

Consolidated Interim Statement of Cash Flows

For the six months ended 30 June 2022

 
                                                                                2022                2021 Restated 
                                                                                                              (1) 
Unaudited                                          Note                         GBPm                         GBPm 
------------------------------------------------  -----  ---------------------------  --------------------------- 
Cash flows from operating activities 
Loss for the period                                                          (112.2)                       (86.0) 
Tax expense                                                                     60.8                        163.0 
Financial income                                                               (0.7)                            - 
Financial expense                                                               57.4                         84.9 
Amortisation of acquisition related intangible 
 assets                                                                        286.1                        275.5 
Depreciation and amortisation of other 
 assets                                                                        144.6                        125.0 
Gain on disposal                                                               (1.9)                            - 
Separately disclosed items included within 
 EBITDA                                             5                           42.2                         34.6 
Employee equity-settled share-based payments 
 expense                                           16                           50.1                         35.5 
Foreign currency exchange gain                                                (16.1)                       (11.8) 
------------------------------------------------  -----  ---------------------------  --------------------------- 
Cash from operations before changes in 
 working capital                                                               510.3                        620.7 
Increase in trade and other receivables                                       (38.6)                       (36.5) 
(Decrease) / increase in trade, other payables 
 and provisions                                                               (36.6)                         30.3 
------------------------------------------------  -----  ---------------------------  --------------------------- 
Cash generated from operating activities                                       435.1                        614.5 
Taxes paid                                                                   (131.7)                       (92.0) 
------------------------------------------------  -----  ---------------------------  --------------------------- 
Cash generated from operations, net of 
 taxes paid                                                                    303.4                        522.5 
Transaction fees, restructuring and integration 
 costs paid                                         5                         (39.3)                       (24.5) 
Amounts paid in respect of Kentucky litigation                                     -                       (71.1) 
------------------------------------------------  -----  ---------------------------  --------------------------- 
Net cash from operating activities                                             264.1                        426.9 
------------------------------------------------  -----  ---------------------------  --------------------------- 
Cash flows from investing activities: 
Purchase of property, plant and equipment                                     (26.6)                       (33.4) 
Purchase of intangible assets                                                 (20.8)                       (23.9) 
Capitalised internal development expenditure                                  (93.1)                       (66.4) 
Purchase of businesses net of cash acquired        10                        (395.2)                       (33.7) 
Payment of contingent deferred consideration       10                         (15.3)                       (19.0) 
Proceeds from disposal of assets                                                 3.8                            - 
Interest received                                                                0.7                            - 
Movement in cash and cash equivalent - 
 customer balances                                                              44.1                       (33.6) 
Other                                                                          (0.3)                        (2.6) 
------------------------------------------------  -----  ---------------------------  --------------------------- 
Net cash used in investing activities                                        (502.7)                      (212.6) 
------------------------------------------------  -----  ---------------------------  --------------------------- 
Cash flows from financing activities: 
Proceeds from the issue of shares on exercise 
 of employee options                               16                            3.1                          8.0 
Dividend paid to non-controlling interest          16                          (5.4)                        (5.1) 
Payment of lease liabilities                                                  (20.9)                       (26.8) 
Payment of lease interest                                                      (4.7)                        (3.9) 
Lease incentive received                                                           -                          4.8 
Proceeds from borrowings                           14                          275.0                            - 
Repayment of borrowings                            14                         (96.6)                       (12.9) 
Interest paid                                      14                         (46.8)                       (70.0) 
Financing fees paid in respect of borrowing 
 facilities                                                                    (2.3)                        (4.6) 
Ordinary shares of the Company acquired 
 by the Employee Benefit Trust                     16                              -                       (89.0) 
------------------------------------------------  -----  ---------------------------  --------------------------- 
Net cash from / (used in) financing activities                                 101.4                      (199.5) 
------------------------------------------------  -----  ---------------------------  --------------------------- 
Net (decrease)/increase in cash and cash 
 equivalents                                                                 (137.2)                         14.8 
Cash and cash equivalents at start of period                                 1,629.3                      1,191.3 
Foreign currency exchange gain/(loss) on 
 cash and cash equivalents                                                      10.8                       (18.1) 
------------------------------------------------  -----  ---------------------------  --------------------------- 
Cash and cash equivalents at end of period                                   1,502.9                      1,188.0 
 
Presented on the Statement of Financial 
 Position within: 
Cash and cash equivalents - customer balances                                  721.7                        554.3 
Cash and cash equivalents - available for 
 corporate use                                                                 781.2                        623.1 
Assets held for sale                                                               -                         10.6 
------------------------------------------------  -----  ---------------------------  --------------------------- 
                                                                             1,502.9                      1,188.0 
------------------------------------------------  -----  ---------------------------  --------------------------- 
 

(1) See Note 2 for details of restatement.

Notes 1 to 20 on page 36 to 58 form an integral part of these condensed consolidated financial statements.

Consolidated Interim Statement of Changes in Equity

For the six months ended 30 June 2022

 
                                                                                                                                                                                                                                                                                          Total 
                                                                Issued                     Shares                                                                                                                                                                                        equity 
                                     Number                      share                    held by                                                                          Foreign                                                                                                 attributable 
                                of ordinary                    capital                   Employee                       Cash                       Fair                   exchange                                           Share-based                                        to shareholders 
                                     shares                  and share                    Benefit                 flow hedge                      value                translation                      Other                    payment                   Retained                      of the            Non-controlling                       Total 
                                   in issue                    premium                      Trust                    reserve                 reserve(1)                 reserve(1)                reserves(1)                 reserve(1)                   earnings                     Company                   interest                      equity 
Unaudited                                 m                       GBPm                       GBPm                       GBPm                       GBPm                       GBPm                       GBPm                       GBPm                       GBPm                        GBPm                       GBPm                        GBPm 
----------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  --------------------------  -------------------------  -------------------------- 
Balance at 1 
 January 
 2022                                 175.6                      477.6                      (4.0)                       22.7                      (1.7)                    (194.2)                        2.5                      131.7                    9,816.3                    10,250.9                       37.5                    10,288.4 
Total comprehensive income / (loss) 
 for the year 
Loss for the 
 period                                   -                          -                          -                          -                          -                          -                          -                          -                    (114.3)                     (114.3)                        2.1                     (112.2) 
Foreign exchange 
 translation 
 including net 
 investment 
 hedges                                   -                          -                          -                          -                          -                      182.0                          -                          -                          -                       182.0                        4.1                       186.1 
Effective 
 portion of 
 changes in fair 
 value 
 of cash flow 
 hedges                                   -                          -                          -                      269.7                          -                          -                          -                          -                          -                       269.7                          -                       269.7 
Fair value of 
 cash flow 
 hedges 
 transferred to 
 the income 
 statement                                -                          -                          -                    (244.2)                          -                          -                          -                          -                          -                     (244.2)                          -                     (244.2) 
Financial assets 
 at 
 FVOCI                                    -                          -                          -                          -                      (2.3)                          -                          -                          -                          -                       (2.3)                          -                       (2.3) 
Tax on foreign 
 exchange 
 hedging                                  -                          -                          -                          -                          -                      (4.7)                          -                          -                          -                       (4.7)                          -                       (4.7) 
----------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  --------------------------  -------------------------  -------------------------- 
Total 
 comprehensive 
 income / (loss) 
 for 
 the period                               -                          -                          -                       25.5                      (2.3)                      177.3                          -                          -                    (114.3)                        86.2                        6.2                        92.4 
----------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  --------------------------  -------------------------  -------------------------- 
Transactions with owners of the Company, 
 recognised directly in equity 
Shares issued on 
 exercise 
 of employee 
 share options 
 (Note 16)                              0.2                        3.1                          -                          -                          -                          -                          -                          -                          -                         3.1                          -                         3.1 
Liability 
 recognised 
 on put option 
 (Note 
 12)                                      -                          -                          -                          -                          -                          -                          -                          -                    (169.8)                     (169.8)                     (34.2)                     (204.0) 
Equity-settled 
 transactions 
 - expense 
 recorded in 
 the income 
 statement                                -                          -                          -                          -                          -                          -                          -                       50.1                          -                        50.1                          -                        50.1 
Tax on 
 share-based 
 payments                                 -                          -                          -                          -                          -                          -                          -                          -                        1.0                         1.0                          -                         1.0 
Exercise of 
 share options                            -                          -                          -                          -                          -                          -                          -                     (11.7)                       11.7                           -                          -                           - 
Dividend paid to 
 non-controlling 
 interest (Note 
 16)                                      -                          -                          -                          -                          -                          -                          -                          -                          -                           -                      (5.4)                       (5.4) 
Total 
 contributions 
 by and 
 distributions 
 to owners of 
 the Company                            0.2                        3.1                          -                          -                          -                          -                          -                       38.4                    (157.1)                     (115.6)                     (39.6)                     (155.2) 
----------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  --------------------------  -------------------------  -------------------------- 
Balance at 30 
 June 
 2022                                 175.8                      480.7                      (4.0)                       48.2                      (4.0)                     (16.9)                        2.5                      170.1                    9,544.9                    10,221.5                        4.1                    10,225.6 
----------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  -------------------------  --------------------------  -------------------------  -------------------------- 
 

(1) Included in other reserves in the Statement of Financial Position.

Notes 1 to 20 on pages 36 to 58 form an integral part of these condensed consolidated financial statements.

Consolidated Interim Statement of Changes in Equity

For the six months ended 30 June 2021

 
                                                                                                                                                                                                                                                                                                 Total 
                                                        Issued                                                               Shares                                                                                                                                                             equity 
                                 Number                  share                                                                 held                   Cash                                       Foreign                                                                                  attributable 
                            of ordinary                capital                                                          by Employee                   flow                   Fair               exchange                                Share-based                                    to shareholders 
                                 shares              and share                 Merger               Treasury                Benefit                  hedge                  value            translation                  Other             payment               Retained                      of the        Non-controlling                  Total 
                               in issue                premium                reserve                 shares                  Trust                reserve                reserve                reserve               reserves             reserve               earnings                     Company               interest                 equity 
Unaudited                             m                   GBPm                   GBPm                   GBPm                   GBPm                   GBPm                   GBPm                   GBPm                   GBPm                GBPm                   GBPm                        GBPm                   GBPm                   GBPm 
----------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ------------------  ---------------------  --------------------------  ---------------------  --------------------- 
Balance at 1 
 January 
 2021                             177.0                2,481.7                7,982.9                 (40.7)                  (5.8)                 (10.3)                  (0.4)                   49.6                    2.3               100.8                  405.0                    10,965.1                   30.8               10,995.9 
Total comprehensive income 
 / (loss) for the year 
Loss for the 
 period                               -                      -                      -                      -                      -                      -                      -                      -                      -                   -                 (88.6)                      (88.6)                    2.6                 (86.0) 
Foreign exchange 
 translation 
 including net 
 investment 
 hedges                               -                      -                      -                      -                      -                      -                      -                (160.3)                      -                   -                      -                     (160.3)                    0.2                (160.1) 
Tax on foreign 
 exchange 
 hedging                              -                      -                      -                      -                      -                      -                      -                  (1.7)                      -                   -                      -                       (1.7)                      -                  (1.7) 
Effective 
 portion of 
 changes in fair 
 value 
 of cash flow 
 hedges                               -                      -                      -                      -                      -                (156.0)                      -                      -                      -                   -                      -                     (156.0)                      -                (156.0) 
Fair value of 
 cash 
 flow hedges 
 transferred 
 to the income 
 statement                            -                      -                      -                      -                      -                  164.7                      -                      -                      -                   -                      -                       164.7                      -                  164.7 
Debt Instruments 
 at 
 FVOCI                                -                      -                      -                      -                      -                      -                  (0.6)                      -                      -                   -                      -                       (0.6)                      -                  (0.6) 
----------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ------------------  ---------------------  --------------------------  ---------------------  --------------------- 
Total 
 comprehensive 
 income / (loss) 
 for 
 the period                           -                      -                      -                      -                      -                    8.7                  (0.6)                (162.0)                      -                   -                 (88.6)                     (242.5)                    2.8                (239.7) 
----------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ------------------  ---------------------  --------------------------  ---------------------  --------------------- 
Transactions with owners of the Company, 
 recognised directly in equity 
Shares issued on 
 exercise 
 of employee 
 share options 
 (Note 16)                          0.3                    8.0                      -                      -                      -                      -                      -                      -                      -                   -                      -                         8.0                      -                    8.0 
Business 
 combinations 
 (Note 10)                            -                      -                      -                      -                      -                      -                      -                      -                      -                   -                      -                           -                   16.2                   16.2 
Ordinary shares 
 of 
 the Company 
 acquired 
 by the Employee 
 Benefit 
 Trust (Note 10)                      -                      -                      -                      -                 (89.0)                      -                      -                      -                      -                   -                      -                      (89.0)                      -                 (89.0) 
Equity-settled 
 transactions 
 - expense 
 recorded 
 in income 
 statement                            -                      -                      -                      -                      -                      -                      -                      -                      -                36.6                      -                        36.6                      -                   36.6 
Tax on 
 share-based 
 payments                             -                      -                      -                      -                      -                      -                      -                      -                      -                   -                    1.1                         1.1                      -                    1.1 
Transfer to 
 retained 
 earnings on 
 exercise 
 of share 
 options and 
 vesting of 
 share awards                         -                      -                      -                      -                      -                      -                      -                      -                      -              (16.4)                   16.4                           -                      -                      - 
Dividend paid to 
 non-controlling 
 interest                             -                      -                      -                      -                      -                      -                      -                      -                      -                   -                      -                           -                  (5.1)                  (5.1) 
Total 
 contributions 
 by and 
 distributions 
 to owners of 
 the Company                        0.3                    8.0                      -                      -                 (89.0)                      -                      -                      -                      -                20.2                   17.5                      (43.3)                   11.1                 (32.2) 
----------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ------------------  ---------------------  --------------------------  ---------------------  --------------------- 
Balance at 30 
 June 
 2021                             177.3                2,489.7                7,982.9                 (40.7)                 (94.8)                  (1.6)                  (1.0)                (112.4)                    2.3               121.0                  333.9                    10,679.3                   44.7               10,724.0 
----------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------  ------------------  ---------------------  --------------------------  ---------------------  --------------------- 
 

Notes 1 to 20 on pages 36 to 58 form an integral part of these condensed consolidated financial statements.

Notes to the Condensed Consolidated Interim Financial Statements

1. General information

Flutter Entertainment plc (the "Company") is a company incorporated in the Republic of Ireland. The Condensed Consolidated Financial Statements of the Company for the six months ended 30 June 2022 comprise the Company and its subsidiaries (together referred to as the "Group"). These 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 2021, 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.

These Condensed Consolidated Interim Financial Statements were approved for issue by the Board of Directors of Flutter Entertainment plc on 11 August 2022.

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 derivative financial instruments (which include betting transactions), equity securities, certain financial assets which have been designated as FVOCI, contingent deferred consideration and 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 Condensed Consolidated Interim Financial Statements are presented in pounds sterling and are rounded to the nearest GBP0.1 million.

Going concern

The Group reported EBITDA of GBP434.1m and a loss after tax of GBP112.2m for the six months ended 30 June 2022. This includes GBP430.7m of depreciation and amortisation charged against profit in the period. The net cash generated from operating activities during the period ended 30 June 2022 was GBP264.1m. The balance sheet at 30 June 2022 reported a net current liability position of GBP438.9m. During the six months ended 30 June 2022, the Group is in compliance with all covenants related to its lending arrangements.

The Directors have considered the available financial resources which include, at 30 June 2022, GBP781.2m of cash and cash equivalents and a GBP482.0m Revolving Credit Facility with undrawn capacity of GBP277.0m. Whilst there are certain loan repayments due within the next 12 months of GBP24.2m, the Group's lending facilities primarily fall due in 2026 as set out in more detail in Note 14. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully. See 'Principal Risks and Uncertainties' in this report for more detail.

The Group's forecasts to the next 12 months indicate that it will continue to have significant financial resources, continue to settle its debts as they fall due and operate well within its banking covenants as outlined in Note 14 for at least a period of 12 months from the date of the approval of these consolidated financial statements. 12 months from the date of the approval of these consolidated financial statements was selected as the going concern period as it represents the period in which the Group has prepared detailed forecasts for a proportion of the period and it also reduces the degree of judgement and estimation uncertainty involved in both the forecasts and the downside scenarios.

When preparing the forecasts, the Group has included the cash outflows and related financing associated with the Sisal acquisition as detailed in Note 20. Various downside scenarios over and above those already included in the base case model on the potential impact of further reductions to cash flows due to reduced customer discretionary income, changes in the legal, regulatory and licencing landscape and the Group's cyber and IT resilience have been considered in respect of these forecasts. The impact of these items involves significant judgement and estimation uncertainty.

In the event that it were necessary to draw down additional debt funding, the Directors have a reasonable expectation that this could be achieved within the confines of its existing debt facilities and financial covenant requirements.

Accounting policies

The financial information contained in these 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 2021 except as set out below.

2. Basis of preparation and accounting policies (continued)

In April 2022, the IFRS Interpretations Committee issued an agenda decision clarifying the definition of cash and cash equivalents in the statement of cash flows stating that cash amounts that are only restricted by an obligation to a third party meet the definition of cash under IAS 7 Statement of Cash Flows. The title of the agenda decision is Demand Deposits with Restrictions on Use arising from a Contract with a Third Party (IAS 7 Statement of Cash Flow).

Prior to this clarification, the Group had not treated cash amounts that were restricted due to, for example gaming regulatory requirements to hold cash to match customer liabilities, as cash and cash equivalents in the statement of cash flows and had instead classified these balances as financial assets - restricted cash.

The Group considers these cash balances to not be available to the Group and will disaggregate these cash balances from the cash balances that are available to the Group, for general corporate purposes in accordance with IAS 1 paragraph 55.

In accordance with this clarification, the Group has made a voluntary change in accounting policy and has presented cash and cash equivalents for the purpose of its cash flow including these restricted balances and has restated the prior period accordingly as follows.

 
                31 December       31 December    31 December        30 June           30 June        30 June    31 December       31 December    31 December 
                       2021              2021           2021           2021              2021           2021           2020              2020           2020 
                 Originally  Reclassification       Restated     Originally  Reclassification       Restated     Originally  Reclassification       Restated 
                   reported                                        reported                                        reported 
------------  -------------  ----------------  -------------  -------------  ----------------  -------------  -------------  ----------------  ------------- 
 
Financial 
 asset - 
 restricted 
 cash                 677.6           (677.6)              -          554.3           (554.3)              -          587.9           (587.9)              - 
------------  -------------  ----------------  -------------  -------------  ----------------  -------------  -------------  ----------------  ------------- 
 
Cash and 
 cash 
 equivalents 
 - customer 
 balances                 -             677.6          677.6              -             554.3          554.3              -             587.9          587.9 
Cash and 
 cash 
 equivalents 
 - available 
 for 
 corporate 
 use                  951.7                 -          951.7          623.1                 -          623.1          603.4                 -          603.4 
Assets held 
 for sale                 -                 -              -           10.6                 -           10.6              -                 -              - 
------------  -------------  ----------------  -------------  -------------  ----------------  -------------  -------------  ----------------  ------------- 
Cash and 
 cash 
 equivalents          951.7             677.6        1,629.3          633.7             554.3        1,188.0          603.4             587.9        1,191.3 
------------  -------------  ----------------  -------------  -------------  ----------------  -------------  -------------  ----------------  ------------- 
 

The change in the classification for the purpose of statement of cash flows did not impact the Statement of Financial Position other than to rename the captions.

3. Judgements and estimates

The preparation of interim financial statements in conformity with IFRS 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.

Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Judgements

In preparing these Condensed Consolidated Financial Statements, the significant judgements 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 2021 and are detailed below:

Valuation of tax assets and liabilities

Whilst we maintain good communication with key tax authorities, given the global nature of our business and the complex international tax landscape, there remain areas of tax uncertainty and therefore there is a level of uncertainty with regards to the measurement of our tax assets and liabilities. 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.

3. Judgements and estimates (continued)

Where uncertain tax treatments exist, the Group assesses whether it is probable that a tax authority will accept the uncertain tax treatment applied or proposed to be applied in its tax filings. The Group assesses each uncertain tax treatment as to whether it should be considered independently or whether some tax treatments should be considered collectively based on what the Group believes provides a better estimate of the resolution of the uncertainty. The Group considers whether it is probable that the relevant authority will accept each uncertain tax treatment, or group of uncertain tax treatments, assuming that the taxation authority will have full knowledge of all relevant information when doing so. The key judgements include the valuation of tax assets and liabilities

New information may become available that causes the Group to change its judgement regarding the adequacy of existing tax assets and liabilities; such changes to tax assets and liabilities will impact the income tax 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 position for all tax assets and liabilities at 30 June 2022 is adequate based on its assessment of the range of factors outlined above but given the inherent uncertainty, it is possible that resolution of tax uncertainties may differ from the amounts provided for.

FOX Corporation

As announced on 2 October 2019, in order to achieve economic alignment of Flutter's and TSG's strategic third party relationships across their respective US businesses, concurrent with the Combination with TSG, the Group entered into an arrangement with FOX, pursuant to which FSG Services, a wholly-owned subsidiary of FOX, had an option to acquire an 18.6% equity interest in FanDuel Group at its fair market value in July 2021. Under the terms of the agreement an arbitration mechanism was put in place in the event of a disagreement between the two parties relating to the option.

In April 2021, FOX filed an arbitration claim against the Group with respect to its option to acquire an 18.6% equity interest in FanDuel seeking the same price that the Group paid for the acquisition of 37.2% of FanDuel from Fastball Holdings LLC in December 2020, based on an $11.2 billion valuation for FanDuel. In the Group's opinion this valuation would be materially favourable for FOX compared to the fair market valuation as of July 2021. Arbitration proceedings remain ongoing and a ruling in the arbitration is expected in late Quarter 3, 2022 or Quarter 4 2022.

The fair market value of the call option as at 30 June 2022 is required to reflect the value that a market participant would have paid for such an option, with the option exercise price, reflecting the conditions that would have existed at 30 June 2022. Given the market assessment of comparable US assets, it is management's view that there has been no increase in the market value of FanDuel since the valuation date of the option, and therefore it is determined that the value of the option is out of the money for FOX and the derivative has close to nominal value at 30 June 2022.

Estimates

Determining the fair value of some assets and liabilities requires estimation of the effects of uncertain future events on those assets and liabilities at the end of the reporting period. The following discussion sets forth key sources of estimation uncertainty at the end of the reporting period that management believes have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Measurement of the recoverable amounts of cash generating units containing goodwill, indefinite life licences and 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.

The Group has reviewed the performance in the first half of 2022, in the UK&I Online, Retail, International, Australia and US CGUs and based on this and in conjunction with the headroom that existed at 31 December 2021, is satisfied that no impairment has arisen during the six months ended 30 June 2022.

4. Operating segments

Reportable business segment information

The Group's four reportable segments are:

   --      UK & Ireland; 
   --      Australia; 
   --      International; and 
   --      US. 

UK & Ireland

The UK & Ireland ("UK&I") segment is comprised of the operations of Sky Betting & Gaming, Paddy Power, Betfair and from January 2022, Tombola (see Note 10). Revenues are earned from sports betting (sportsbook and the exchange sports betting product) and gaming services (games, casino, bingo and poker). Until August 2021, this segment also included the results of Oddschecker (odds comparison website) at which point the business was disposed. Services are provided primarily via the internet but also through licensed bookmaking shop estates.

Australia

The Australia segment is comprised of the operations of the Sportsbet brand and earns its revenues from sports betting services provided to Australian customers using primarily the internet.

International

The International segment is comprised of PokerStars, Betfair International, Adjarabet and Junglee Games. The International segment earns most of its revenues from poker, casino, rummy and sports betting through various brands and mainly via the internet.

US

The US segment is comprised of the FanDuel, TVG, FOX Bet, Stardust and PokerStars brands' and earns its revenues from sports betting, daily fantasy sports and gaming services (casino and poker) provided to customers, using primarily the internet, with a proportion of US sports betting services also provided through a small number of retail outlets.

Corporate

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 2021.

The Group does not allocate income tax expense or financing income and expenses to reportable segments. Treasury management is centralised for the UK&I, Australia, International and US 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.

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. The Covid pandemic caused some postponement and cancellation of sporting events across the world and skewed results for the comparative period in particular. Gaming and other revenue is not as dependent on the sporting calendar.

4. Operating segments (continued)

Reportable business segment information for the six months ended 30 June 2022:

 
                                   UK&I          Australia           International            US           Corporate               Total 
                                   GBPm               GBPm                    GBPm          GBPm                GBPm                GBPm 
--------------------  -----------------  -----------------  ----------------------  ------------  ------------------  ------------------ 
Revenue from 
 external 
 customers                      1,091.8              612.1                   633.6       1,050.7                   -             3,388.2 
Cost of sales                   (335.0)            (289.7)                 (184.0)       (543.9)                   -           (1,352.6) 
--------------------  -----------------  -----------------  ----------------------  ------------  ------------------  ------------------ 
Gross profit                      756.8              322.4                   449.6         506.8                   -             2,035.6 
Operating costs 
 excluding 
 depreciation and 
 amortisation 
 before separately 
 disclosed 
 items                          (436.3)            (103.1)                 (327.1)       (638.6)              (54.2)           (1,559.3) 
--------------------  -----------------  -----------------  ----------------------  ------------  ------------------  ------------------ 
Adjusted EBITDA(1) 
 before separately 
 disclosed 
 items                            320.5              219.3                   122.5       (131.8)              (54.2)               476.3 
Depreciation and 
 amortisation 
 before separately 
 disclosed 
 items                           (63.4)             (13.7)                  (32.8)        (31.8)               (2.9)             (144.6) 
Profit on disposal 
 before 
 separately 
 disclosed 
 items                              0.2                  -                       -           1.2                 0.5                 1.9 
--------------------  -----------------  -----------------  ----------------------  ------------  ------------------  ------------------ 
Reportable segment 
 profit / (loss) 
 before 
 separately 
 disclosed 
 items                            257.3              205.6                    89.7       (162.4)              (56.6)               333.6 
Amortisation of 
 acquisition-related 
 intangible assets 
 (Note 
 5)                             (135.7)             (11.4)                 (130.1)         (8.9)                   -             (286.1) 
Reportable segment 
 profit / (loss) 
 after 
 amortisation of 
 acquisition-related 
 intangibles                      121.6              194.2                  (40.4)       (171.3)              (56.6)                47.5 
Transaction fees and 
 associated costs(2)                                                                                                               (9.9) 
Restructuring and 
 integration 
 costs(2)                                                                                                                         (32.3) 
                                                                                                                      ------------------ 
Operating profit                                                                                                                     5.3 
--------------------  -----------------  -----------------  ----------------------  ------------  ------------------  ------------------ 
 

Reportable business segment information for the six months ended 30 June 2021:

 
                                 UK&I           Australia              International         US             Corporate            Total 
                                 GBPm                GBPm                       GBPm       GBPm                  GBPm             GBPm 
--------------------  ---------------  ------------------  -------------------------  ---------  --------------------  --------------- 
Revenue from 
 external 
 customers                    1,135.2               585.4                      679.9      652.0                     -          3,052.5 
Cost of sales before 
 separately 
 disclosed 
 items                        (341.8)             (275.2)                    (199.3)    (292.7)                     -        (1,109.0) 
--------------------  ---------------  ------------------  -------------------------  ---------  --------------------  --------------- 
Gross profit before 
 separately 
 disclosed 
 items                          793.4               310.2                      480.6      359.3                     -          1,943.5 
Operating costs 
 excluding 
 depreciation and 
 amortisation 
 before separately 
 disclosed 
 items                        (434.3)             (109.3)                    (301.9)    (445.8)                (55.2)        (1,346.5) 
--------------------  ---------------  ------------------  -------------------------  ---------  --------------------  --------------- 
Adjusted EBITDA(1)              359.1               200.9                      178.7     (86.5)                (55.2)            597.0 
Depreciation and 
 amortisation 
 before separately 
 disclosed 
 items                         (62.6)              (13.1)                     (25.1)     (21.9)                 (2.3)          (125.0) 
--------------------  ---------------  ------------------  -------------------------  ---------  --------------------  --------------- 
Reportable segment 
 profit / (loss) 
 before 
 separately 
 disclosed 
 items                          296.5               187.8                      153.6    (108.4)                (57.5)            472.0 
Greece Tax Expense                  -                   -                     (12.9)          -                     -           (12.9) 
Amortisation of 
 acquisition-related 
 intangible assets 
 (Note 
 5)                           (112.8)              (10.6)                    (138.8)     (13.3)                     -          (275.5) 
Reportable segment 
 profit / (loss) 
 after 
 amortisation of 
 acquisition-related 
 intangibles and 
 Greece 
 tax expense                    183.7               177.2                        1.9    (121.7)                (57.5)            183.6 
Restructuring and 
 integration 
 costs(2)                                                                                                                       (21.7) 
                                                                                                                       --------------- 
Operating profit                                                                                                                 161.9 
--------------------  ---------------  ------------------  -------------------------  ---------  --------------------  --------------- 
 

1 Adjusted EBITDA which is a non-GAAP measure in the above segment note is defined as profit for the six months before separately disclosed items, depreciation, amortisation, impairment, gain on disposal, 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.

2 The Group does not allocate transaction fees and restructuring and integration costs to reportable segments.

4. Operating segments (continued)

Reconciliation of reportable segment information to Group totals:

 
                                            2022                                                        2021 
--------------  ------------------------------------------------------------  --------------------------------------------------------- 
                             Before                                                       Before 
                         separately          Separately                               separately          Separately 
                          disclosed           disclosed                                disclosed           disclosed 
                              items               items                Total               items               items              Total 
                               GBPm                GBPm                 GBPm                GBPm                GBPm               GBPm 
Gross profit                2,035.6                   -              2,035.6             1,943.5              (12.9)            1,930.6 
Operating 
 costs 
 excluding 
 depreciation, 
 amortisation 
 and gain on 
 disposal                 (1,559.3)              (42.2)            (1,601.5)           (1,346.5)              (21.7)          (1,368.2) 
--------------  -------------------  ------------------  -------------------  ------------------  ------------------  ----------------- 
EBITDA(1)                     476.3              (42.2)                434.1               597.0              (34.6)              562.4 
Depreciation 
 and 
 amortisation               (144.6)             (286.1)              (430.7)             (125.0)             (275.5)            (400.5) 
Gain on 
 disposal                       1.9                   -                  1.9                   -                   -                  - 
Operating 
 profit                       333.6             (328.3)                  5.3               472.0             (310.1)              161.9 
Net finance 
 costs                       (56.7)                   -               (56.7)              (74.2)              (10.7)             (84.9) 
Profit / 
 (loss) 
 before tax                   276.9             (328.3)               (51.4)               397.8             (320.8)               77.0 
Tax expense                 (100.3)                39.5               (60.8)              (91.4)              (71.6)            (163.0) 
--------------  -------------------  ------------------  -------------------  ------------------  ------------------  ----------------- 
Profit / 
 (loss) 
 for the 
 period                       176.6             (288.8)              (112.2)               306.4             (392.4)             (86.0) 
--------------  -------------------  ------------------  -------------------  ------------------  ------------------  ----------------- 
 

1 EBITDA is defined as profit for the six months before depreciation, amortisation, impairment, gain on disposal, 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.

See Note 5 for further detail on separately disclosed items.

Disaggregation of revenue under IFRS 15:

Group revenue disaggregated by product line for the six months ended 30 June 2022:

 
                                UK&I                 Australia           International                      US                  Total 
                                GBPm                      GBPm                    GBPm                    GBPm                   GBPm 
-----------  -----------------------  ------------------------  ----------------------  ----------------------  --------------------- 
Sports 
 revenue(1)                    629.7                     612.1                   106.4                   770.1                2,118.3 
Gaming 
 revenue(2)                    462.1                         -                   527.2                   280.6                1,269.9 
-----------  -----------------------  ------------------------  ----------------------  ----------------------  --------------------- 
Total Group 
 revenue                     1,091.8                     612.1                   633.6                 1,050.7                3,388.2 
-----------  -----------------------  ------------------------  ----------------------  ----------------------  --------------------- 
 

Group revenue disaggregated by product line for the six months ended 30 June 2021(:)

 
                               UK&I                 Australia           International                      US                  Total 
                               GBPm                      GBPm                    GBPm                    GBPm                   GBPm 
-----------  ----------------------  ------------------------  ----------------------  ----------------------  --------------------- 
Sports 
 revenue(1)                   737.9                     585.4                   118.1                   452.5                1,893.9 
Gaming 
 revenue(2)                   397.3                         -                   561.8                   199.5                1,158.6 
-----------  ----------------------  ------------------------  ----------------------  ----------------------  --------------------- 
Total Group 
 revenue                    1,135.2                     585.4                   679.9                   652.0                3,052.5 
-----------  ----------------------  ------------------------  ----------------------  ----------------------  --------------------- 
 

1 Sports revenue comprises sportsbook, exchange sports betting, daily fantasy sports and pari-mutuel betting.

2 Gaming revenue includes Games, Poker, Casino, Rummy and Bingo.

Geographical information

Group revenue disaggregated by geographical market for the six months ended 30 June 2022:

 
                                   UK&I                     Australia                 International                      US                 Total 
                                   GBPm                          GBPm                          GBPm                    GBPm                  GBPm 
------------  -------------------------  ----------------------------  ----------------------------  ----------------------  -------------------- 
US                                    -                             -                             -                 1,054.4               1,054.4 
UK                                952.5                             -                          31.5                       -                 984.0 
Australia                             -                         612.1                             -                       -                 612.1 
Rest of 
 World(1)                           1.6                             -                         318.5                   (3.7)                 316.4 
EU (excl. 
 Ireland)(2)                       22.0                             -                         281.1                       -                 303.1 
Ireland                           115.7                             -                           2.5                       -                 118.2 
------------  -------------------------  ----------------------------  ----------------------------  ----------------------  -------------------- 
Total Group 
 revenue                        1,091.8                         612.1                         633.6                 1,050.7               3,388.2 
------------  -------------------------  ----------------------------  ----------------------------  ----------------------  -------------------- 
 

1 The Rest of World category includes multiple countries, that individually represent less than 2% of total Group revenue.

2 The EU (excl. Ireland) category includes multiple countries, that individually represent less than 4% of total Group revenue.

4. Operating segments (continued)

Group revenue disaggregated by geographical market for the six months ended 30 June 2021:

 
                                   UK&I                     Australia                  International                      US                    Total 
                                   GBPm                          GBPm                           GBPm                    GBPm                     GBPm 
------------  -------------------------  ----------------------------  -----------------------------  ----------------------  ----------------------- 
 
US                                    -                             -                              -                   652.0                    652.0 
UK                              1,037.2                             -                           42.3                       -                  1,079.5 
Australia                             -                         585.4                              -                       -                    585.4 
Rest of 
 World(1)                           7.1                             -                          265.3                       -                    272.4 
EU (excl. 
 Ireland)(2)                          -                             -                          368.4                       -                    368.4 
Ireland                            90.9                             -                            3.9                       -                     94.8 
------------  -------------------------  ----------------------------  -----------------------------  ----------------------  ----------------------- 
Total Group 
 revenue                        1,135.2                         585.4                          679.9                   652.0                  3,052.5 
------------  -------------------------  ----------------------------  -----------------------------  ----------------------  ----------------------- 
 

1 The Rest of World category includes multiple countries that individually represent less than 2% of total Group revenue.

2 The EU (excl. Ireland) category includes multiple countries that individually represent less than 4% of total Group revenue.

Revenues are attributable to geographical location on the basis of the customers location.

5. Separately disclosed items

The separately disclosed items noted in Note 4 above are comprised as follows:

 
                                                                             2022                                 2021 
                                                                             GBPm                                 GBPm 
--------------------------------------------  -----------------------------------  ----------------------------------- 
Greece tax expense                                                              -                               (12.9) 
Transaction fees and associated costs                                       (9.9)                                    - 
Restructuring and integration costs                                        (32.3)                               (21.7) 
EBITDA                                                                     (42.2)                               (34.6) 
Amortisation of acquisition-related 
 intangible 
 assets                                                                   (286.1)                              (275.5) 
Operating loss impact of separately 
 disclosed 
 items                                                                    (328.3)                              (310.1) 
Financial expense                                                               -                               (10.7) 
--------------------------------------------  -----------------------------------  ----------------------------------- 
Loss before tax impact of separately 
 disclosed items                                                          (328.3)                              (320.8) 
--------------------------------------------  -----------------------------------  ----------------------------------- 
Tax credit / (charge) on separately 
 disclosed 
 items                                                                       39.5                               (71.6) 
--------------------------------------------  -----------------------------------  ----------------------------------- 
Total separately disclosed items                                          (288.8)                              (392.4) 
--------------------------------------------  -----------------------------------  ----------------------------------- 
 
Attributable to: 
Equity holders of the Company                                             (286.0)                              (389.5) 
Non-controlling interest                                                    (2.8)                                (2.9) 
--------------------------------------------  -----------------------------------  ----------------------------------- 
                                                                          (288.8)                              (392.4) 
--------------------------------------------  -----------------------------------  ----------------------------------- 
 
 

Amortisation of acquisition-related intangible assets

Amortisation of GBP286.1m has been incurred in the period (six months ended 30 June 2021: GBP275.5m) as a result of intangible assets separately identified under IFRS 3 as a result of the merger with Betfair in 2016, the acquisitions of FanDuel Limited in 2018 and Adjarabet in 2019, the Combination with TSG in 2020, the acquisitions of Junglee and Singular in 2021 and the acquisition of Tombola in 2022.

Transaction fees and associated costs

During the six months ended 30 June 2022, GBP9.9m of costs were incurred relating to various acquisitions and the FOX option (see Note 3). The costs were included as separately disclosed items as they have not been incurred in the ordinary course of business.

Restructuring and integration costs

During the six months ended 30 June 2022 costs of GBP32.3m (six months ended 30 June 2021: GBP21.7m) relating to incremental, one-off costs, were incurred by the Group as a result of significant restructuring and integration initiatives following the Combination with TSG.

5. Separately disclosed items (continued)

Greece tax expense

In 2019, the Group was 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. Pending the outcome of its appeal, in 2019 the Group paid the total Greek tax assessment (including the penalties and interest) of EUR15.0m.

In June 2021, the Athens Administrative Court of Appeal dismissed the Group's judicial recourses. While the Group has further appealed to the Greek Supreme Administrative Court, based on the nature of the decision received and the points of law which can be appealed, and in line with legal and tax advice it has received, it decided to recognise the amount of the Greek assessment, of EUR15.0m (GBP12.9m) as an expense in profit or loss during the six months ended 30 June 2021.

The Group considered these cost as one-off costs and not as part of ongoing operations in the period.

Financial expense

During the six months ended 30 June 2022 there were no foreign exchange losses on financial instruments that required separate disclosure, (six months ended 30 June 2021: GBP10.7m)

Tax credit on separately disclosed items

The tax credit of GBP39.5m has arisen primarily in resp ect of a deferred tax credit of GBP36.2m in respect of the amortisation of acquisition-related intangibles and GBP3.3m in respect of the tax effect of other separately identifiable items.

6. Financial income and expense

Recognised in profit or loss

 
                                                                        Six months                         Six months 
                                                                             ended                              ended 
                                                                      30 June 2022                       30 June 2021 
                                                                              GBPm                               GBPm 
-----------------------------------------------  ---------------------------------  --------------------------------- 
Financial income: 
On financial assets at amortised cost: 
Interest income                                                                0.7                                  - 
-----------------------------------------------  ---------------------------------  --------------------------------- 
Total                                                                          0.7                                  - 
-----------------------------------------------  ---------------------------------  --------------------------------- 
 
Financial expense: 
Foreign exchange loss on financing instruments 
 associated with financing activities (Note 
 5)                                                                            0.2                               10.7 
On financial liabilities at amortised 
 cost: 
Interest on borrowings, bank guarantees 
 and bank facilities                                                          48.5                               62.4 
Interest on lease liabilities                                                  4.7                                3.9 
Other interest                                                                 4.0                                7.9 
-----------------------------------------------  ---------------------------------  --------------------------------- 
Total                                                                         57.4                               84.9 
-----------------------------------------------  ---------------------------------  --------------------------------- 
 

Recognised in other comprehensive income / (loss):

 
                                                                              2022                                2021 
                                                                              GBPm                                GBPm 
----------------------------------------------  ----------------------------------  ---------------------------------- 
Recognised in other comprehensive income 
 / (loss): 
Effective portion of changes in fair value 
 of cash flow hedges                                                         269.7                             (156.0) 
Fair value of cash flow hedges transferred 
 to income statement                                                       (244.2)                               164.7 
----------------------------------------------  ----------------------------------  ---------------------------------- 
Net change in fair value of cash flow hedge 
 reserve                                                                      25.5                                 8.7 
Debt instruments at FVOCI                                                    (2.3)                               (0.6) 
Foreign exchange loss on net investment 
 hedges                                                                     (41.0)                              (56.3) 
Foreign exchange gain / (loss) on translation 
 of the net assets of foreign currency 
 denominated 
 entities                                                                    222.4                             (105.5) 
----------------------------------------------  ----------------------------------  ---------------------------------- 
Total                                                                        204.6                             (153.7) 
----------------------------------------------  ----------------------------------  ---------------------------------- 
 

A charge of GBP1.0m was recorded in the income statement in respect of ineffective cash flow hedges in the six months ended 30 June 2022 (2021: charge of GBP3.4m).

7. 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 which may be adjusted for any significant non-recurring events. This expected annual effective tax rate is applied to the taxable income of the interim period.

The Group's adjusted effective tax rate before separately disclosed items for the period was 36.2% (six months ended 30 June 2021: 22.9%), which compares to the standard Irish tax rate of 12.5%. A tax credit on separately disclosed items amounting to GBP39.5m was recorded during the six months ended 30 June 2022 (six months ended 30 June 2021: charge of GBP71.6m) (see Note 5).

The future effective tax rate of the Group will be principally affected by the ongoing OECD initiative in relation to Base Erosion and Profit Shifting. On 8 October 2021, 136 out of the 140 countries of the OECD Inclusive Framework on Base Erosion and Profit Shifting ('IF') have politically committed to fundamental changes to the international corporate tax system including the proposed introduction of a global minimum corporation tax rate of 15%. The proposed rules in relation to the operation of the global minimum corporation tax rate were published by the OECD in December 2021 followed by the publication of related commentary also published in March 2022. While consultation in relation to the rules and implementation issues remains ongoing, both at the OECD and individual region/country level, the implementation date has been delayed until 1 January 2024 at the earliest. We will continue to monitor developments closely, but it is likely that this will lead to an increase in the effective tax rate of the Group (as well as an increase in ongoing compliance obligations) from as early as 2024 onwards.

8. 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 Paddy Power Betfair 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:

 
                                                                           2022                               2021 
---------------------------------------------  --------------------------------  --------------------------------- 
Numerator in respect of basic and diluted 
 earnings per share (GBPm): 
Loss attributable to equity holders of 
 the Company                                                            (114.3)                             (88.6) 
---------------------------------------------  --------------------------------  --------------------------------- 
Numerator in respect of adjusted earnings 
 per share (GBPm): 
Loss attributable to equity holders of 
 the Company                                                            (114.3)                             (88.6) 
Separately disclosed items (Note 5)                                       286.0                              389.5 
---------------------------------------------  --------------------------------  --------------------------------- 
Profit for adjusted earnings per share 
 calculation                                                              171.7                              300.9 
---------------------------------------------  --------------------------------  --------------------------------- 
Weighted average number of ordinary shares 
 in issue during the period (in '000s)(1)                               176,658                            175,893 
---------------------------------------------  --------------------------------  --------------------------------- 
Basic earnings per share                                             (GBP0.647)                         (GBP0.504) 
---------------------------------------------  --------------------------------  --------------------------------- 
Adjusted basic earnings per share                                      GBP0.972                           GBP1.711 
---------------------------------------------  --------------------------------  --------------------------------- 
Adjustments to derive denominator in respect 
 of diluted earnings per share (in '000s): 
--------------------------------------------- 
Weighted average number of ordinary shares 
 in issue during the period                                             176,658                            175,893 
Diluted earnings per share                                           (GBP0.647)                         (GBP0.504) 
---------------------------------------------  --------------------------------  --------------------------------- 
 

1 Where any potential ordinary shares would have the effect of decreasing a loss per share, they have not been treated as dilutive. The number of options excluded from the diluted weighted average number of ordinary shares calculation due to their effect being anti-dilutive is 2,187,856 (2021: 2,939,416).

The average market value of the Company's shares of GBP94.53 (30 June 2021: GBP144.90) was used to calculate the dilutive effect of share options based on the market value for the period that the options were outstanding.

9. Goodwill

The following CGUs, being the lowest level of asset for which there are separately identifiable cash flows, have the following carrying amounts of goodwill:

 
                       UK&I                        Irish 
                     Online      UK Retail        Retail          International       Australia           US         Total 
                       GBPm           GBPm          GBPm                   GBPm            GBPm         GBPm          GBPm 
Balance at 1 
 January 
 2022               5,766.9           18.9          20.7                2,490.3           482.4        567.6       9,346.8 
Arising on 
 acquisitions 
 during the 
 period (Note 
 10)                  208.7              -             -                      -               -            -         208.7 
Foreign 
 currency 
 translation 
 adjustment             0.1              -             -                   59.7            26.8         64.2         150.8 
-------------  ------------  -------------  ------------  ---------------------  --------------  -----------  ------------ 
Balance at 30 
 June 
 2022               5,975.7           18.9          20.7                2,550.0           509.2        631.8       9,706.3 
-------------  ------------  -------------  ------------  ---------------------  --------------  -----------  ------------ 
 

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 CGUs with their recoverable amounts (being the higher of value in use and fair value less costs to sell).

The Group has reviewed the performance in the first half of 2022, in the UK&I Online, Retail, International, Australia and US CGUs and based on this and, in conjunction with the headroom that existed at 31 December 2021, is satisfied that no impairment has arisen during the six months ended 30 June 2022.

10. Business combinations and disposals

Six months ended 30 June 2022

Acquisition of Tombola

On 10 January 2022, the Group completed the acquisition of a 100% stake in Tombola, the UK market's leading online bingo operator. Tombola is a successful bingo-led gaming company with an emphasis on providing a low staking bingo proposition to a highly engaged customer base. The purchase comprised of a cash payment of GBP409.9m.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:

 
                                                                     Provisional fair 
                                                                         values as at 
                                                                      10 January 2022 
                                                                                 GBPm 
----------------------------------  ------------------------------------------------- 
Assets 
Property, plant and equipment                                                    11.4 
Intangible assets                                                               249.0 
----------------------------------  ------------------------------------------------- 
Total non-current assets                                                        260.4 
----------------------------------  ------------------------------------------------- 
Trade and other receivables                                                      25.3 
Cash and cash equivalents                                                        14.7 
----------------------------------  ------------------------------------------------- 
Total current assets                                                             40.0 
----------------------------------  ------------------------------------------------- 
Total assets                                                                    300.4 
----------------------------------  ------------------------------------------------- 
Liabilities 
Trade and other payables                                                         42.4 
Total current liabilities                                                        42.4 
Deferred tax liabilities                                                         56.8 
----------------------------------  ------------------------------------------------- 
Total non-current liabilities                                                    56.8 
----------------------------------  ------------------------------------------------- 
Total liabilities                                                                99.2 
----------------------------------  ------------------------------------------------- 
Net assets acquired                                                             201.2 
Goodwill                                                                        208.7 
----------------------------------  ------------------------------------------------- 
Consideration                                                                   409.9 
----------------------------------  ------------------------------------------------- 
The consideration is analysed as: 
Consideration satisfied by cash                                                 409.9 
----------------------------------  ------------------------------------------------- 
Consideration                                                                   409.9 
----------------------------------  ------------------------------------------------- 
 

Included within the intangible assets were GBP249.0m of separately identifiable intangibles comprising brand, customer relations and technology acquired as part of the acquisition, with the additional effect of a deferred tax liability of GBP56.8m thereon. These intangible assets are being amortised over their useful economic lives of up to 20 years. The book value equated to the fair value on the remaining assets as all amounts are expected to be received.

10. Business combinations and disposals (continued)

The main factors leading to the recognition of goodwill (none of which is deductible for tax purposes) are the expansion of the Group's position in online bingo and the addition of further product capabilities and expertise to leverage across the business. The goodwill has been allocated to the existing UK&I Online CGU.

Since the date of acquisition to 30 June 2022, Tombola has contributed revenue of GBP85.3m and GBP2.1m of profit after tax to the results of the Group. There is no significant difference between these amounts and the amounts if the acquisition had occurred on 1 January 2022.

The acquisition accounting remains provisional for one year from the acquisition date and may change if new information is obtained relating to conditions that existed at the acquisition date.

Six months ended 30 June 2021

Acquisition of Junglee Games

On 28 January 2021, the Group completed the acquisition of an initial 50.1% stake in Junglee Games ("Junglee"), an Indian online rummy operator, for US$67.3m (GBP49.3m), with US$63.5m (GBP46.5m) paid in cash and the remainder recorded as deferred consideration and paid subsequently in 2021. On the same date the Group entered into call and put options which would enable the Group to acquire an additional 7.2% stake in Junglee in exchange for cash consideration. In June 2021, these options were exercised and the Group acquired the additional 7.2% stake in Junglee in exchange for cash consideration of US$7.5m (GBP5.5m) with US$7.0m (GBP5.1m) paid in cash and the remainder recorded as deferred consideration and paid subsequently in 2021. This has been accounted under the anticipated acquisition method, with the combined 57.3% recognised as acquired from 28 January 2021.

Junglee is a top three player in the legal Indian online rummy market. The Group sees good potential to further develop Junglee's product offering, including its recently launched daily fantasy sports product, leveraging the Group's capabilities in this area. The Group has put in place arrangements, consisting of call and put options that could see its ownership in the business increase to 100% in 2025. The call and put options consideration can be settled, at the Group's election, in cash or shares. As a consequence of both the call and put options being only exercisable at fair value being the future EBITDA and revenue multiple, which are considered to be two key inputs into valuing the option, it was determined that the fair value of the call and put options was not material and was close to nominal value.

Included within the intangible assets were GBP42.9m of separately identifiable intangibles comprising brand, technology and customer relations acquired as part of the acquisition, with the additional effect of a deferred tax liability of GBP10.8m thereon. These intangible assets are being amortised over their useful economic lives of up to 10 years. The book value equated to the fair value on the remaining assets and liabilities as all amounts are expected to be received.

The main factors leading to the recognition of goodwill (none of which is deductible for tax purposes) is growth by combining the Group's significant operating experience in other markets with the local market knowledge and skills of the management team in Junglee, driving revenue synergies over time. The goodwill has been allocated to the existing International CGU and it has been deemed that a separate CGU is not appropriate.

10. Business combinations and disposals (continued)

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:

 
                                                                                             Fair values as 
                                                                                                         at 
                                                                                            28 January 2021 
                                                                                                       GBPm 
-------------------------------------------------------  -------------------------------------------------- 
Assets 
Property, plant and equipment                                                                           0.2 
Intangible assets                                                                                      42.9 
-------------------------------------------------------  -------------------------------------------------- 
Total non-current assets                                                                               43.1 
-------------------------------------------------------  -------------------------------------------------- 
Trade and other receivables                                                                             3.8 
Cash and cash equivalents                                                                              17.7 
-------------------------------------------------------  -------------------------------------------------- 
Total current assets                                                                                   21.5 
-------------------------------------------------------  -------------------------------------------------- 
Total assets                                                                                           64.6 
-------------------------------------------------------  -------------------------------------------------- 
Liabilities 
Trade and other payables                                                                               13.1 
Total current liabilities                                                                              13.1 
Deferred tax liabilities                                                                               10.8 
-------------------------------------------------------  -------------------------------------------------- 
Total non-current liabilities                                                                          10.8 
-------------------------------------------------------  -------------------------------------------------- 
Total liabilities                                                                                      23.9 
-------------------------------------------------------  -------------------------------------------------- 
Net assets acquired                                                                                    40.7 
Goodwill                                                                                               31.2 
Non-controlling interest measured at the proportionate 
 interest method                                                                                     (17.1) 
-------------------------------------------------------  -------------------------------------------------- 
Consideration                                                                                          54.8 
-------------------------------------------------------  -------------------------------------------------- 
The consideration is analysed as: 
Consideration satisfied by cash                                                                        46.5 
Put option satisfied by cash                                                                            5.1 
Deferred consideration                                                                                  2.8 
Put option deferred consideration                                                                       0.4 
-------------------------------------------------------  -------------------------------------------------- 
Consideration                                                                                          54.8 
-------------------------------------------------------  -------------------------------------------------- 
 

Cash (outflows) / inflows from business combinations:

 
                                                                       Six months                          Six months 
                                                                            ended                               ended 
                                                                     30 June 2022                        30 June 2021 
                                                                             GBPm                                GBPm 
----------------------------------------------  ---------------------------------  ---------------------------------- 
Cash consideration paid for acquisitions 
 in the period                                                            (409.9)                              (46.5) 
Cash consideration paid for put option 
 exercised in the period                                                        -                               (5.1) 
Cash acquired from acquisitions in the 
 period                                                                      14.7                                17.8 
Cash consideration - acquisitions in previous 
 periods                                                                   (15.3)                              (19.0) 
----------------------------------------------  ---------------------------------  ---------------------------------- 
 
As presented in the statement of cash 
 flows: 
Purchase of businesses net of cash acquired                               (395.2)                              (33.7) 
Payment of contingent deferred consideration                               (15.3)                              (19.0) 
----------------------------------------------  ---------------------------------  ---------------------------------- 
 

During the period the Group settled in cash, deferred consideration liabilities of GBP15.3m in relation to Betfair's historical acquisition of HRTV, a horseracing television network based in the US. No further payments are due in respect of this acquisition.

11. Investments and trade and other receivables

Non-current assets

 
                                           30 June 2022                         31 December 
                                                                                       2021 
                                                   GBPm                                GBPm 
--------------------  ---------------------------------  ---------------------------------- 
Investments - FVTPL                                 6.0                                 5.5 
--------------------  ---------------------------------  ---------------------------------- 
 

Investments relate to a small number of individually immaterial equity investments in various companies.

 
                                                                    30 June 2022                         31 December 
                                                                                                                2021 
                                                                            GBPm                                GBPm 
---------------------------------------------  ---------------------------------  ---------------------------------- 
Other receivables 
Other receivables                                                           11.4                                11.8 
Prepayments                                                                 12.7                                13.8 
Value-added tax and goods and services 
 tax                                                                         1.1                                   - 
Deferred financing costs on Revolving Credit 
 Facility (see Note 14)                                                      3.1                                 3.7 
Total                                                                       28.3                                29.3 
---------------------------------------------  ---------------------------------  ---------------------------------- 
 

Other receivables

Other receivables are comprised primarily of deposits for licences and property.

Deferred financing costs on Revolving Credit Facility

In May 2020, the Group entered into a new Revolving Credit Facility agreement as part of its financing agreements. The Group incurred GBP5.3m of transaction costs and fees relating to the Revolving Credit Facility, which have been capitalised and included within non-current receivables, net of accretion of GBP3.1m (2021: GBP3.7m), on the Consolidated Statement of Financial Position and are recorded as financial expense over the term of the Revolving Credit Facility agreement using the effective interest rate method. As at 30 June 2022, GBP190.0m was drawn under the Revolving Credit Facility (31 December 2021: nil).

Current assets

 
                                                              30 June 2022                         31 December 
                                                                                                          2021 
                                                                      GBPm                                GBPm 
---------------------------------------  ---------------------------------  ---------------------------------- 
Trade and other receivables 
Trade receivables                                                     42.7                                39.5 
Other receivables                                                     35.5                                34.4 
Value-added tax and goods and services 
 tax                                                                   2.3                                 5.1 
Prepayments                                                          170.0                               124.9 
---------------------------------------  ---------------------------------  ---------------------------------- 
Total                                                                250.5                               203.9 
---------------------------------------  ---------------------------------  ---------------------------------- 
 

12. Trade and other payables

Current liabilities

 
                                                                                                           31 December 
                                                                      30 June 2022                                2021 
                                                                              GBPm                                GBPm 
----------------------------------------------  ----------------------------------  ---------------------------------- 
Trade and other payables 
Trade payables                                                               104.1                                74.2 
PAYE and social security                                                      21.5                                19.7 
Value-added tax, goods and services tax, 
 betting duties, data rights, and product 
 and racefield fees                                                          239.4                               220.7 
Employee benefits                                                            113.1                               156.1 
Contingent deferred consideration - business 
 combinations                                                                  5.9                                21.0 
Deferred consideration - business combinations                               204.1                                   - 
Accruals and other liabilities                                               628.9                               604.7 
----------------------------------------------  ----------------------------------  ---------------------------------- 
Total                                                                      1,317.0                             1,096.4 
----------------------------------------------  ----------------------------------  ---------------------------------- 
 

12. Trade and other payables (continued)

Non-current liabilities

 
                                                                     30 June 2022                          31 December 
                                                                                                                  2021 
                                                                             GBPm                                 GBPm 
---------------------------------------------  ----------------------------------  ----------------------------------- 
Trade and other payables 
Employee benefits                                                             1.9                                  2.1 
Contingent deferred consideration - business 
 combinations                                                                17.3                                 16.9 
Accruals and other payables                                                   2.7                                  0.8 
---------------------------------------------  ----------------------------------  ----------------------------------- 
Total                                                                        21.9                                 19.8 
---------------------------------------------  ----------------------------------  ----------------------------------- 
 

Contingent deferred consideration - business combinations

The Group's contingent deferred consideration liabilities amounted to GBP23.2m at 30 June 2022 (31 December 2021: GBP37.9m) and relate to the following:

-- GBP5.2m (31 December 2021: GBP4.7m) deferred consideration in respect of Diamond Game Enterprises, assumed as part of the Combination with TSG; and

   --      GBP18.0m (31 December 2021: GBP17.8m) relating to the acquisition of Singular in 2021. 

Deferred consideration - business combinations

On 1 July 2022, the Group completed the acquisition of the remaining 49% outstanding shares of Adjarabet for a cash payment of EUR238.0m (GBP204.1m). This acquisition brings the Group's holding in Adjarabet to 100% up from the previous controlling interest of 51%.

As outlined in previous financial statements, as part of the acquisition of Adjarabet in 2019, a mechanism was agreed, consisting of call and put options, which enabled the Group to acquire the remaining 49% after three years at a valuation equivalent to seven times the 2021 EBITDA. The call/put option consideration can be settled, at the Group's election, in cash or shares. As a consequence of both the put and call options being only exercisable at fair value being the future EBITDA and earnings multiple which are considered to be two key inputs into valuing the option, it was determined that the fair value was not material and was close to nominal value. During the six months ended 30 June 2022, the non-controlling interest elected to exercise the put option and the Group entered into an arrangement with the seller to acquire the remaining shares for a cash payment of EUR238.0m in line with the terms of the original agreement. Upon the signing of this agreement on 20 June 2022, the Group recognised a liability of EUR238.0m (GBP204.1m). This liability has been recorded as a current liability as at 30 June 2022.

Amounts held in Trust

As at 30 June 2022, GBP348.6m (31 December 2021: GBP355.6m) 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.

13. Provisions

Provisions balances at 30 June 2022 and 31 December 2021 and movements during the six months ended 30 June 2022 are outlined below:

 
 
                        Employee 
                        benefits 
                           (long 
                         service             Onerous              Gaming               Other 
                          leave)           contracts                 tax               legal               Other               Total 
                            GBPm                GBPm                GBPm                GBPm                GBPm                GBPm 
------------  ------------------  ------------------  ------------------  ------------------  ------------------  ------------------ 
Balance at 
 31 December 
 2021                        3.5                13.7                22.4                72.0                 7.5               119.1 
Additional 
 provisions 
 recognised                  0.5               (0.1)                 2.9                   -                   -                 3.3 
Amounts used 
 during 
 the year                  (0.4)               (3.0)               (3.3)               (1.4)               (1.0)               (9.1) 
Foreign 
 currency 
 translation                 0.2                 1.2                 1.1                 5.3                 0.3                 8.1 
Balance at 
 30 June 
 2022                        3.8                11.8                23.1                75.9                 6.8               121.4 
Presented 
in: 
Balance at 
31 December 
2021: 
Current                      2.2                 6.6                22.4                34.5                 5.6                71.3 
Non-current                  1.3                 7.1                   -                37.5                 1.9                47.8 
Total                        3.5                13.7                22.4                72.0                 7.5               119.1 
Balance at 
30 June 
2022: 
Current                      2.5                 6.9                23.1                34.5                 4.9                71.9 
Non-current                  1.3                 4.9                   -                41.4                 1.9                49.5 
Total                        3.8                11.8                23.1                75.9                 6.8               121.4 
 

13. Provisions (continued)

Employee benefits (long service leave)

The timing and amount of long service leave cash outflows are primarily dependent on when staff employed at the reporting date avail of their entitlement to leave and their expected salaries at that time. As of 30 June 2022 and 31 December 2021, it was expected that cash outflows would occur primarily within the following five years.

Onerous contracts

The onerous contracts provision at 30 June 2022 relates to various marketing and minimum guarantee contracts where the cost of fulfilling these contracts exceeds the expected economic benefits to be received from them.

Gaming tax

These are gaming tax provisions relating to amounts provided for taxes in certain jurisdictions where the interpretation of tax legislation is uncertain. When the Group disagrees with the application of unclear tax legislation, for example when it is applied retrospectively and / or results in a one-off disproportionate tax equivalent to many times the profit derived by the Group from its historic activities in that jurisdiction, the Group continues to challenge these interpretations.

Whilst the maximum potential obligation for all ongoing cases could be greater than the recognised provision, and the outcomes may not be known for some time, a liability has been recorded for the Directors' best estimate of the cash outflows that will ultimately be required in respect of each claim. Management has not provided a sensitivity for this provision as the range is not considered to be material. Management notes this is a key estimate; however, it is not a key judgement that will have a material impact in the coming year.

Other legal

Other legal provisions generally consist of payments for various future legal settlements where, based on all available information, management believes it is probable that there will be a future outflow.

These provisions comprise a number of different legal cases, the majority of which are immaterial. The most significant relates to the foreign payments contingent liabilities outlined in more detail in Note 18. Further disclosure in respect of these provisions has not been provided as such information would be expected to be prejudicial to the Group's position in such matters.

Whilst the maximum potential obligation for all ongoing cases could be greater than the recognised provision, and the outcomes may not be known for some time, a liability has been recorded for the Directors' best estimate of the cash outflows that will ultimately be required in respect of each claim. Management has not provided a sensitivity for this provision as the range is not considered to be material. Management notes this is a key estimate; however, it is not a key judgement that will have a material impact in the coming year.

Other

Other provisions primarily comprise a number of different regulatory provisions.

14. Borrowings

The following is a summary of borrowings, including accrued interest, outstanding as at 30 June 2022 and 31 December 2021:

 
                                             30 June 2022                                     31 December 2021 
                                         Principal                                          Principal 
                                       outstanding                 Carrying               outstanding 
               Contractual                 balance        amount (including                   balance                  Carrying 
                  interest             in currency                  accrued               in currency         amount (including 
                      rate            of borrowing             interest)(1)              of borrowing         accrued interest) 
                                    Local currency                                     Local currency 
                         %                     (m)                     GBPm                       (m)                      GBPm 
GBP First 
 Lien Term 
 Loan A               2.80              GBP1,017.9                  1,010.7                GBP1,017.9                   1,009.6 
USD First 
 Lien Term 
 Loan B               3.30                $2,916.3                  2,375.1                  $2,931.0                   2,142.6 
EUR First 
 Lien Term 
 Loan B               2.50                EUR507.2                    430.3                  EUR507.2                     419.6 
GBP 
 Revolving 
 Credit 
 Facility             2.80                GBP190.0                    190.0                      GBP-                         - 
Total 
 borrowings                                                         4,006.1                                             3,571.8 
Presented 
in: 
Current 
 portion                                                               24.2                                                22.1 
Non-current 
 portion                                                            3,981.9                                             3,549.7 
Total 
 borrowings                                                         4,006.1                                             3,571.8 
 

1 The carrying amounts at 30 June 2022 includes accrued interest of nil (31 December 2021: GBP0.4m) presented within the current portion of borrowings above.

14. Borrowings (continued)

During the six months ended 30 June 2022, the Group incurred the following interest on its then outstanding borrowings:

 
                   Effective 
                    interest                                                 Interest 
                     rate(1)                 Interest(2)                    accretion                   Total interest 
                           %                        GBPm                         GBPm                             GBPm 
GBP First Lien 
 Term Loan 
 A                      3.10                        11.9                          1.5                             13.4 
USD First Lien 
 Term Loan 
 B                      3.60                        32.7                          2.7                             35.4 
EUR First Lien 
 Term Loan 
 B                      2.90                         5.4                          0.7                              6.1 
GBP Revolving 
 Credit 
 Facility               3.10                         0.2                            -                              0.2 
Total                                               50.2                          4.9                             55.1 
 

1 The effective interest rate calculation excludes the impact of the Swap Agreements (as defined below).

2 In addition to the amount included above, the Group incurred GBP1.5m of interest expense relating to commitment, utilisation, and fronting fees associated with its Revolving Credit Facility.

The Group's change in borrowings during the six months ended 30 June 2022 was as follows:

 
                          Balance                                                                                                   Balance 
                         at 1 Jan                                 Principal              Interest                                 at 30 Jun 
                             2022             New debt             payments          accretion(2)       FX translation                 2022 
                             GBPm                 GBPm                 GBPm                  GBPm                 GBPm                 GBPm 
GBP First 
 Lien 
 Term Loan 
 A                        1,009.2                    -                    -                   1.5                    -              1,010.7 
USD First 
 Lien 
 Term Loan 
 B                        2,142.6                    -               (11.6)                   2.7                241.4              2,375.1 
EUR First 
 Lien 
 Term Loan 
 B                          419.6                    -                    -                   0.7                 10.0                430.3 
GBP 
 Revolving 
 Credit 
 Facility                       -                275.0               (85.0)                     -                    -                190.0 
Total                     3,571.4                275.0               (96.6)                   4.9                251.4              4,006.1 
Accrued 
interest                      0.4                                                                                                         - 
Total 
 borrowings               3,571.8                                                                                                   4,006.1 
 

(1) Adjustments to amortised costs include transaction costs and fees incurred in respect of the refinancing and additional debt drawdown noted below.

(2) Interest accretion represents interest expense calculated at the effective interest rate less interest expense calculated at the contractual interest rate and is recorded in financial expenses in the consolidated income statement.

Revolving Credit Facility and First Lien Term Loans

Each of the Group's facilities are discussed below.

TLA Agreement - GBP First Lien Term Loan A

In May 2020, the Group, Flutter Entertainment Plc, PPB Financing Unlimited Company and PPB Treasury Unlimited Company as borrowers, entered into a Term Loan A and Revolving Credit Facility Agreement (the "TLA Agreement") comprising a term loan and revolving credit facility totalling GBP1.4bn. In December 2021, an additional lender was added to the facility increasing the overall TLA Agreement by GBP100m bringing the total to GBP1.5bn. Subsequently in December 2021, the Group completed an additional drawdown of GBP68m under the TLA agreement and its existing terms. The TLA Agreement described above provides a term loan facility in an aggregate amount of GBP1,017.9m (2021: GBP1,017.9m) priced at SONIA plus CSA plus a margin of 1.75% (the "GBP First Lien Term Loan A"), with a maturity date of 5 May 2025 and a SONIA floor of 0%. On 5 March 2021, the UK's Financial Conduct Authority ("FCA") formally announced the cessation of all GBP London Interbank Offered Rate ("LIBOR") benchmark settings currently published by ICE Benchmark Administration ("IBA") immediately after 31 December 2021. In response, the Company entered into agreements with its lenders that amended the benchmark rate referenced in the Term Loan A agreement from GBP LIBOR to SONIA for interest periods commencing on or after January 2022. There is no amortisation on the GBP First Lien Term Loan A and the principal is due at maturity. The Group incurred GBP11.9m of initial transaction costs and fees on drawdown which have been capitalised against the principal of the debt and are recorded as financial expense over the term of the debt using the effective

interest rate method.

14. Borrowings (continued)

TLA Agreement - Revolving Credit Facility

The TLA Agreement described above provides a multi-currency revolving credit facility in an aggregate amount of GBP482.0m (2021: GBP482.0m) (the "Revolving Credit Facility"). Maturing on 5 May 2025, the Revolving Credit Facility includes a margin of 1.75% over SONIA for borrowings with a 0% interest rate floor as well as a utilisation fee ranging from 0.1% to 0.4% based on the proportion of drawings to the total commitment. The commitment fee on the Revolving Credit Facility is 35% of the margin and is payable in respect of available but undrawn borrowings. The Revolving Credit Facility is available for general corporate purposes including the refinancing of existing borrowings. The Group incurred GBP5.3m of transaction costs and fees in 2020 which have been capitalised and are recorded as financial expense over the life of the facility using the straight-line method. These capitalised costs have been included within non-current receivables on the consolidated statement of financial position. During the six month period ending 30 June 2022 the Group has drawn down GBP275.0m of its facility and repaid GBP85.0m leaving an outstanding principal of GBP190.0m (2021:nil). The Group has an undrawn capacity of GBP277m (2021: GBP467m) on the Revolving Credit Facility with GBP15m (2021: GBP15m) of capacity reserved for the issuance of Group guarantees as of 30 June 2022.

The terms of the TLA Agreement limit the Group's ability to, among other things: (i) incur additional debt (ii) grant additional liens on their assets and equity (iii) distribute equity interests and/or distribute any assets to third parties (iv) make certain loans or investments (including acquisitions) (v) consolidate, merge, sell or otherwise dispose of all or substantially all assets (vi) pay dividends on or make distributions in respect of capital stock or make restricted payments, and (vii) modify the terms of certain debt or organisational documents, in each case subject to certain permitted exceptions. During the six months ended 30 June 2022, the Group is in compliance with all covenants related to its First Lien Term Loan A.

First Lien Term Loan B's

The Group holds USD term loans with an outstanding principal balance of $2,916.3m (2021: $2,931.0m) priced at USD-LIBOR plus 2.25% (2021: 2.25%) (the "USD First Lien Term Loan B") and an EUR first lien term loan with an outstanding principal balance of EUR507.2m (2021: EUR507.2m) priced at EURIBOR plus 2.5% (2021: 2.5%) (the "EUR First Lien Term Loan B" and, together with the USD First Lien Term Loan, the "First Lien Term Loan B"), each with a maturity date of 21 July 2026 and a LIBOR and EURIBOR floor, as applicable, of 0%. The USD First Lien Term Loan B requires scheduled quarterly principal payments in amounts equal to 0.25% of the initial aggregate principal amount of the USD First Lien Term Loan B of $2,938m (2021: $2,938m), with the balance due at maturity. There is no amortisation on the EUR First Lien Term Loan B and the principal is due at maturity.

The First Lien Term Loan B's are governed by the "Syndicated Facility Agreement". The Syndicated Facility Agreement limits Stars Group Holdings B.V. and Flutter Financing B.V, as borrowers, and its subsidiaries' ability to, among other things, (i) incur additional debt (ii) grant additional liens on their assets and equity (iii) distribute equity interests and/or distribute any assets to third parties (iv) make certain loans or investments (including acquisitions), (v) consolidate, merge, sell or otherwise dispose of all or substantially all assets (vi) pay dividends on or make distributions in respect of capital stock or make restricted payments (vii) enter into certain transactions with affiliates (viii) change lines of business and (ix) modify the terms of certain debt or organisational documents, in each case subject to certain permitted exceptions. The agreement also provides for customary mandatory prepayments, including a customary excess cash flow sweep if certain conditions are met. During the six months ended 30 June 2022, the Group is in compliance with all covenants related to its First Lien Term Loan B's.

Reconciliation to Statement of Cash Flows:

Reconciliation of movements in borrowings to the Statement of Cash Flows:

 
                                                        2022                               2021 
                                                        GBPm                               GBPm 
-------------------------  ---------------------------------  --------------------------------- 
Financing activities: 
Proceeds from borrowings                               275.0                                  - 
Repayment of borrowings                               (96.6)                             (12.9) 
Interest paid                                         (46.8)                             (70.0) 
 

15. Derivatives

Derivatives and hedge accounting

The Group uses derivative financial instruments for risk management and risk mitigation purposes. As such, any change in cash flows associated with derivative instruments are expected to be offset by changes in cash flows related to the hedged item. The Group's derivatives are discussed below.

Swap agreements

The Group has executed cross-currency interest rate swaps which swap the profile of the USD First Lien Term Loan B in its entirety into EUR and GBP. In 2021 as part of the refinance, the Group amended the terms of the existing trades to reflect the repriced TLB USD and executed new cross-currency interest rate swaps on the additional drawn-down debt in line with the hedging policy to cover exposure to foreign currencies. From an accounting and risk management perspective, these hedging instruments consist of: (i) USD-EUR amortising cross-currency interest rate swap agreements (the "EUR Cross-Currency Interest Rate Swaps") with a remaining notional amount of EUR1,481m (31 December 2021: EUR1,488m), which fix the USD to EUR exchange rate at 1.173 and fix the euro interest payments at an average interest rate of 1.7% (31 December 2021: 1.7%) and (ii) USD-GBP amortising cross-currency interest rate swap agreements (the "GBP Cross-Currency Interest Rate Swaps") with a remaining notional amount of GBP890m (31 December 2021: GBP895m), which fix the EUR to GBP exchange rate at 0.889 and fix the GBP interest payments at an average interest rate of 2.5% (31 December 2021: 2.5%). The EUR Cross-Currency Interest Rate Swaps and GBP Cross-Currency Interest Rate Swaps are in hedging relationships with and have a profile that amortises in line with the USD First Lien Term Loan B. The EUR Cross-Currency Interest Rate Swaps and GBP Cross-Currency Interest Rate Swaps have a maturity date of July 2023.

Sports betting open positions

Amounts received from customers on sportsbook events that have not occurred by the balance sheet date are derivative financial instruments and have been designated by the Group on initial recognition as financial liabilities at fair value through profit or loss.

The fair value of open sports bets at 30 June 2022 and 31 December 2021 has been calculated using the latest available prices on relevant sporting events. The carrying amount of the liabilities is not significantly different from the amount that the Group is expected to pay out at maturity of the financial instruments. Sports bets are non-interest bearing. There is no interest rate or credit risk associated with open sports bets.

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.

The following table summarises the fair value of derivatives as at 30 June 2022 and 31 December 2021:

 
                                            30 June 2022                                31 December 2021 
                                           Assets            Liabilities                Assets             Liabilities 
                                             GBPm                   GBPm                  GBPm                    GBPm 
Derivatives held for 
hedging 
Derivatives designated as 
cash 
flow hedges: 
Cross-currency interest 
 rate 
 swaps - non-current                        260.0                      -                  31.7                  (54.6) 
Total derivatives 
 designated 
 as cash flow hedges                        260.0                      -                  31.7                  (54.6) 
 
Derivatives designated as 
net 
investment hedges: 
Cross-currency interest 
 rate 
 swaps - non-current                         15.5                 (16.0)                  36.3                       - 
Total derivatives 
 designated 
 as net investment hedges                    15.5                 (16.0)                  36.3                       - 
Total derivatives held for 
 hedging                                    275.5                 (16.0)                  68.0                  (54.6) 
 
Derivatives held for risk 
management 
and other purposes not 
designated 
as hedges 
Sports betting open 
 positions 
 - current                                      -                 (50.1)                     -                  (74.0) 
Sports betting open 
 positions 
 - non-current                                  -                  (0.5)                     -                   (0.5) 
Total derivatives held for 
 risk 
 management and other 
 purposes 
 not designated as hedges                       -                 (50.6)                     -                  (74.5) 
 
 

16. Share capital and reserves

Share capital

Transactions during the six months ended 30 June 2022:

-- A total of 192,342 ordinary shares were issued as a result of the exercise of employee share options, giving rise to share capital and share premium of GBP3.1m;

Transactions during the six months ended 30 June 2021:

-- A total of 262,910 ordinary shares were issued as a result of the exercise of employee share options, giving rise to share capital and share premium of GBP8.0m;

Equity reserves

Equity reserves at 30 June 2022 include the following classes of reserves:

Shares held by Employee Benefit Trust

At 30 June 2022, the Paddy Power Betfair plc Employee Benefit Trust ("EBT") held 33,158 (31 December 2021: 33,158) of the Company's own shares, which were acquired at a total cumulative cost of GBP4.0m (31 December 2021: GBP4.0m) in respect of potential future awards relating to the Group's employee share plans.

Cash flow hedge reserve

The cash flow hedge reserve represents the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that had not yet occurred at that date.

Foreign exchange translation reserve

The foreign exchange translation reserve at 30 June 2022 amounted to a debit balance of GBP16.9m (31 December 2021: debit balance of GBP194.2m) and arose from the retranslation of the Group's net investment in primarily EUR, AUD and USD functional currency companies. The movement in the foreign exchange translation reserve for the six month period ended 30 June 2022, reflects mainly the strengthening of EUR and USD against GBP in the period.

Other reserves

Other reserves comprise undenominated capital. Undenominated capital at 30 June 2022 of GBP2.5m (31 December 2021 of GBP2.5m) relates to the nominal value of shares in the Company acquired by the Company of GBP2.3m (31 December 2021: GBP2.3m) and subsequently cancelled, and an amount of GBP0.2m (31 December 2021: GBP0.2m) which arose on the redenomination of the ordinary share capital of the Company at the time of conversion from Irish pounds to Euro.

Share-based payment reserve

During the six months ended 30 June 2022, an amount of GBP50.1m was expensed in the Consolidated Income Statement with respect to share based payments (six month period ended 30 June 2021: GBP36.6m) and an amount of GBP11.7m (six month period ended 30 June 2021: GBP16.4m) in respect of share options exercised during the period was transferred from the share-based payment reserve to retained earnings.

An amount of GBP0.8m of deferred tax relating primarily to the Group's share-based payments was credited to retained earnings in the six months ended 30 June 2022 (six month period ended 30 June 2021: credit of GBP0.5m). An amount of GBP0.2m of current tax relating to the Group's share-based payments was credited to retained earnings in six months ended 30 June 2022 (six month period ended 30 June 2021: credit of GBP0.6m).

Non-controlling interest

During the six month period ended 30 June 2022 the Group paid dividends totalling GBP5.4m to the non-controlling interest in Adjarabet (six months ended 30 June 2021: GBP5.1m).

As outlined in more detail in Note 12, as a result of the exercise of the put option held by the Adjarabet non-controlling interest and the agreement to settle in cash for EUR238.0m (GBP204m), an amount of GBP34.2m was recorded in non-controlling interest with the remaining amount of GBP169.8m booked to retained earnings.

17. Fair values

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. 

17. Fair values (continued)

 
                                                              30 June 2022 
                                  Level 1                   Level 2                   Level 3                     Total 
                 ------------------------ 
                                     GBPm                      GBPm                      GBPm                      GBPm 
                 ------------------------  ------------------------  ------------------------  ------------------------ 
 
Bonds - FVOCI                        60.6                      28.4                         -                      89.0 
Investments - 
 FVTPL                                  -                         -                       6.0                       6.0 
Derivatives                             -                     275.5                         -                     275.5 
Total financial 
 assets                              60.6                     303.9                       6.0                     370.5 
 
Derivative 
 financial 
 liabilities                            -                    (16.0)                    (50.6)                    (66.6) 
Non-derivative 
 financial 
 liabilities                      (204.1)                         -                    (23.2)                   (227.3) 
Total financial 
 liabilities                      (204.1)                    (16.0)                    (73.8)                   (293.9) 
 
 
                                                               31 December 2021 
                                  Level 1                   Level 2                   Level 3                     Total 
                 ------------------------ 
                                     GBPm                      GBPm                      GBPm                      GBPm 
                 ------------------------  ------------------------  ------------------------  ------------------------ 
Bonds - FVOCI                        58.2                      24.8                         -                      83.0 
Investments - 
 FVTPL                                  -                         -                       5.5                       5.5 
Derivatives                             -                      68.0                         -                      68.0 
Total financial 
 assets                              58.2                      92.8                       5.5                     156.5 
 
Derivative 
 financial 
 liabilities                            -                    (54.6)                    (74.5)                   (129.1) 
Non-derivative 
 financial 
 liabilities                            -                         -                    (37.9)                    (37.9) 
Total financial 
 liabilities                            -                    (54.6)                   (112.4)                   (167.0) 
 

As part of its periodic review of fair values, the Group recognises transfers, if any, between levels of the fair value hierarchy at the end of the reporting period during which the transfer occurred. There were no transfers between levels of the fair value hierarchy during the periods ended 30 June 2022 or 31 December 2021.

Valuation of Level 2 financial instruments

Bonds - FVOCI

The Group has determined that the carrying value of the bonds approximates their fair value which is determined by using observable quoted prices or observable input parameters derived from comparable bonds/markets. Although the Group has determined that a number of the bonds fall within Level 1 of the fair value hierarchy, there are a class of bonds which have been classified as Level 2 due to the existence of relatively inactive trading markets for those bonds.

Derivative financial instruments

Swap agreements

The Group uses derivative financial instruments to manage its interest rate and foreign currency risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis of the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, such as yield curves, spot and forward FX rates.

To comply with the provisions of IFRS 13, Fair Value Measurement, the Group incorporates credit valuation adjustments to appropriately reflect both its own non-performance risk and the applicable counterparty's non-performance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of non-performance risk, the Group has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees.

Although the Group has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilise Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. At both 30 June 2022 and 31 December 2021, the Group assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions, determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Group determined that its valuations of its derivatives in their entirety are classified in Level 2 of the fair value hierarchy.

Level 3 fair values

Derivatives (Level 3)

Some of the Group's financial assets and liabilities are classified as Level 3 of the fair value hierarchy because the respective fair value determinations use inputs that are not based on observable market data. As at 30 June 2022, the valuation techniques and key inputs used by the Group for each Level 3 asset or liability were as follows:

17. Fair values (continued)

Sports betting open positions (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. Changes in the fair value of the unsettled bets are recorded in revenue in the consolidated income statement.

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 instruments (Level 3)

Investments

The Group valued its equity investments in private companies with reference to earnings measures from similar businesses in the same or similar industry and adjusts for any significant changes in the earnings multiple and the valuation. A reasonable change in assumptions would not have a material impact on fair value. Changes in the fair value of equity in private companies are recorded in financial income or financial expense in the consolidated income statement.

Contingent deferred consideration (Level 3)

Non-derivative financial liabilities include contingent consideration. The contingent consideration payable is primarily 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 in excess of a predetermined base target. An increase and decrease of 10% in the excess over the predetermined base target during the relevant time periods would increase and decrease the value of contingent consideration at 30 June 2022 by GBP1.1m and GBP1.9m respectively (31 December 2021: GBP1.2m and GBP2.2m).

FOX Corporation

As announced on 2 October 2019, in order to achieve economic alignment of Flutter's and TSG's strategic third party relationships across their respective US businesses, the Group entered into an arrangement with FOX, pursuant to which FSG Services, a wholly-owned subsidiary of FOX, had an option to acquire an 18.6% equity interest in FanDuel Group at its fair market value in July 2021. As a consequence of there being no increase in the market value of FanDuel since the valuation date of the option, it is determined that the value of the option is not material and has close to nominal value at 30 June 2022.

Non-controlling interest agreements

Adjarabet (Level 1)

As part of the acquisition of Adjarabet in 2019, a mechanism was agreed, consisting of call and put options, which enables the Group to acquire the remaining 49% after three years at a valuation equivalent to seven times the 2021 EBITDA. The call/put option consideration can be settled, at the Group's election, in cash or shares. During the six months ended 30 June 2022, the non-controlling interest elected to exercise the put option and the Group entered into an arrangement with the seller to acquire the remaining shares for a cash payment of EUR238.0m in line with the terms of the original agreement. Upon the signing of this agreement on 20 June 2022, the Group recognised a liability of EUR238.0m (GBP204.1m). This liability has been recorded as a current liability as at 30 June 2022.

Boyd

A mechanism has been agreed with Boyd who hold a non-controlling interest in FanDuel Group, consisting of call and put options, which enables the Group to acquire the remaining 5% at prevailing market valuations in 2028. The call/put option consideration can be settled, at the Group's election, in cash or shares. As a consequence of both the put and call options being only exercisable at fair value based on the market value of FanDuel at the date of exercise of the options, it was determined that the fair value was not material and was close to nominal value.

As announced on 2 October 2019, in order to achieve economic alignment of Flutter's and TSG's strategic third-party relationships across their respective US businesses, the Group entered into arrangements conditional on completion of the Combination with Boyd pursuant to which Boyd would receive a total payment of the 1.5% of the increase in Fox Bet's market value between completion of the Combination and July 2023 (subject to a carrying value adjustment). Any payment due to Boyd in respect of this is not expected to be significant.

On 22 October 2021, FanDuel Group Parent LLC ("FanDuel") and Boyd Interactive Holdings LLC ("Boyd") entered into an arrangement where Boyd contributed 91,828 Investor Units equivalent to 0.5% of FanDuel's total Investor Units in exchange for 91,828 warrants to acquire Investor Units of FanDuel. The aggregate exercise price of the warrants is $1.00 and are exercisable at any time within the next 10 years. If the warrants remain outstanding after 10 years, they will be automatically converted into the number of Investor Units for which such warrants are exercisable. As this transaction involves the exchange of one form of fixed equity instrument for another fixed instrument with a non-controlling interest for no additional consideration, no further accounting is required.

17. Fair values (continued)

Junglee

As part of the acquisition of Junglee, the Group has put in place arrangements, consisting of call and put options, that could see its ownership in the business increase to 100% in 2025. The call/put option consideration can be settled, at the Group's election, in cash or shares. As a consequence of both the put and call options being only exercisable at fair value being the future EBITDA and revenue multiple which are considered to be two key inputs into valuing the option, it was determined that the fair value was not material and was close to nominal value.

18. Commitments and contingencies

Guarantees

The Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within the Group. The Company considers these to be insurance arrangements and accounts for them as such. The Company treats the guarantee contract as a contingent liability until such time as it becomes probable that the Company will be required to make a payment under the guarantee.

The Group has uncommitted working capital overdraft facilities of GBP16.2m (31 December 2021: GBP16.2m) with Allied Irish Banks p.l.c. These facilities are secured by a Letter of Guarantee from Flutter Entertainment plc.

The Group has bank guarantees: (i) in favour of certain gaming regulatory authorities to guarantee the payment of player funds, player prizes, and certain taxes and fees due by a number of Group companies; and (ii) in respect of certain third-party rental and other property commitments, merchant facilities and third party letter of credit facilities. The maximum amount of the guarantees at 30 June 2022 was GBP32.8m (31 December 2021: GBP44.4m). No claims had been made against the guarantees as of 30 June 2022 (31 December 2021: GBPNil). The guarantees are secured by counter indemnities from Flutter Entertainment plc and certain of its subsidiary companies. The value of cash deposits over which the guaranteeing banks hold security was GBP11.3m at 30 June 2022 (31 December 2021: GBP17.5m).

As mentioned in Note 14, borrowings under the TLA Agreement and Syndicated Facility Agreement are guaranteed by the Company and certain of its operating subsidiaries.

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.

Prior to the Combination, the Board of TSG became aware of the possibility of improper foreign payments by TSG or its subsidiaries in certain jurisdictions outside of Canada and the United States relating to its historical B2B business (which was never profitable and effectively ceased operations in 2014). When this matter arose, TSG contacted the relevant authorities in the United States and Canada with respect to these matters and, following the Combination, the Group continues to co-operate with the United States and Canada governmental authorities in respect of all inquiries. Based on its review to date, the Board of Flutter has not identified issues that it believes would have a significant adverse effect on the Group's financial position or business operations.

The Group has seen a number of player claims in Austria for reimbursement of historic gaming losses. We have provided our remote services in Austria on the basis of multi-jurisdictional Maltese licences and EU law, however the Austrian Courts consider that our services are contrary to local law.

Together with its legal advisers, the Group is currently reviewing its position and strongly disputes the basis of these judgements. It is not possible at this stage to provide a reasonable estimate of the contingent liability as the matter is still at an early stage and unlikely to be fully resolved in the short term.

19. Related parties

There were no material transactions with related parties during the six months ended 30 June 2022, the six months ended 30 June 2021 or the year ended 31 December 2021.

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

20. Events after the reporting date

Acquisition of Sisal

On 23 December 2021, the Group announced the acquisition of Sisal, Italy's leading retail and online gaming operator, from CVC Capital Partners Fund VI for announced consideration of EUR1.91bn/GBP1.62bn subject to merger control clearance and customary gaming and foreign investment consents. This acquisition fully aligns with the Group's strategy of investing to build leadership positions in regulated markets globally.

The transaction completed on 4 August 2022. The acquisition date fair value accounting had not been completed as at 11 August 2022.

Borrowings

On 2 August 2022, the Group entered into the Third Amendment of the Syndicated Facility Agreement receiving a principal balance of EUR2.0bn first lien term loan priced at EURIBOR plus 3%, with a maturity date in 2028. The funds were used for the acquisition of Sisal.

In July and August 2022, the Group drew down an additional GBP151.0m under the GBP Revolving Credit Facility.

Acquisition of remaining 49% shares of Adjarabet

On 1 July 2022, as outlined in more detail in Note 12, the Group made a cash payment of EUR238.0m (GBP204m) in respect of the acquisition of the remaining 49% outstanding shares of Adjarabet. This acquisition brings the Group's holding in Adjarabet to 100% up from the previous controlling interest of 51%. This liability has been recorded as a current liability as at 30 June 2022.

INDEPENDENT REVIEW REPORT TO FLUTTER ENTERTAINMENT PLC

Conclusion

We have been engaged by Flutter Entertainment plc ('the Company') to review the condensed consolidated set of financial statements in the half-yearly financial report for the six months ended 30 June 2022 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, a summary of significant accounting policies and other explanatory notes.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of consolidated financial statements in the half-yearly financial report for the six months ended 30 June 2022 is not prepared, in all material respects in accordance with International Accounting Standard 34 Interim Financial Reporting ("IAS 34") as adopted by the EU and the Transparency (Directive 2004/109/EC) Regulations 2007 ("Transparency Directive"), and the Central Bank (Investment Market Conduct) Rules 2019 ("Transparency Rules of the Central Bank of Ireland).

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity ("ISRE (Ireland) 2410") issued for use in Ireland. 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 consolidated financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, 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.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention that causes us to believe that the Directors have inappropriately adopted the going concern basis of accounting, or that the Directors have identified material uncertainties relating to going concern that have not been appropriately disclosed .

This conclusion is based on the review procedures performed in accordance with ISRE (Ireland) 2410. However, future events or conditions may cause the Company to cease to continue as a going concern, and the above conclusions are not a guarantee that the Company will continue in operation .

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.

The Directors are responsible for preparing the condensed set of consolidated financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.

As disclosed in Note 1, the annual financial statements of the Group for the year ended 31 December 2021 are prepared in accordance with International Financial Reporting Standards as adopted by the EU.

In preparing the condensed set of consolidated financial statements, the Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Our conclusion, including our conclusions relating to going concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion section of this 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.

11 August 2022

KPMG

Chartered Accountants

1 Stokes Place

St. Stephen's Green

Dublin 2

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(END) Dow Jones Newswires

August 12, 2022 02:00 ET (06:00 GMT)

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